<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 25, 1995
SERVICE CORPORATION INTERNATIONAL
--------------------------------------------------
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C> <C>
TEXAS 1-6402-1 74-1488375
- --------------------------------------------------------------------------------------------------------------
(State or other jurisdiction of (Commission file (I. R. S. employer identification
incorporation or organization) number) number)
1929 ALLEN PARKWAY, HOUSTON, TEXAS 77019
- --------------------------------------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
</TABLE>
(713) 522-5141
----------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 25, 1995, Service Corporation International acquired a
controlling ownership interest in Omnium de Gestion et de Financement S.A.
which, in turn, owns a controlling ownership interest in Pompes Funebres
Generales S.A. In addition, the Company commenced public tender offers in
France for the remaining shares of both companies with the intent to acquire
100% of the outstanding shares of both companies. For a description of these
transactions, see the first paragraph under "Unaudited Pro Forma Combined
Financial Information" in "Item 7. Financial Statements and Exhibits" of this
report, which information is hereby incorporated by reference.
The term "Company" includes Service Corporation International and
its subsidiaries, unless the context indicates otherwise.
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
<TABLE>
<CAPTION>
Page
in this
Report
--------
<S> <C> <C>
(a) Pro forma financial information:
Unaudited Pro Forma Combined Financial
Information 4
--------
(b) Financial statements of businesses acquired:
Omnium de Gestion et de Financement S.A./
Pompes Funebres Generales S.A. (OGF/PFG
Group) separate company consolidated
financial statements 25
--------
Gibraltar Mausoleum Corporation separate
company consolidated financial statements 54
--------
(c) Exhibits:
2.1 - Memorandum of Understanding Relating to the
Transfer of Shares, dated July 10, 1995, and
Additional Memorandum of Understanding Relating to
the Transfer of Shares, dated July 12,
1995, each of which is between Service Corporation
International and Lyonnaise des Eaux.
23.1 - Consent of Barbier Frinault & Associes,
Membres d'Arthur Andersen & Co, SC and PGA.
23.2 - Consent of Ernst & Young LLP.
</TABLE>
3
<PAGE> 4
(a) Pro forma financial information
Unaudited Pro Forma Combined Financial Information
In July 1995, the Company entered into an agreement with Lyonnaise des
Eaux S.A. ("LDE"), a French company, to purchase LDE's funeral service
business. LDE's funeral service business is comprised of an approximate 51%
ownership interest in Omnium de Gestion et de Financement S.A. ("OGF") which,
in turn, owns approximately 65% of Pompes Funebres Generales S.A. ("PFG") and,
together with OGF, ("OGF/PFG"). On August 25, 1995, the Company acquired the
approximately 51% interest in OGF for US $233,358,000. The Company is making
public tender offers for the remaining shares of OGF and PFG with the intent to
acquire 100% of the outstanding shares of both companies. On August 30, 1995,
the Company owned shares representing 70.0% of OGF and 75.3% of PFG. OGF/PFG
is the largest funeral service organization in Europe. OGF/PFG operates over
950 funeral service locations that performed over 154,000 funerals throughout
France in 1994. OGF/PFG also operates funeral locations in Belgium, the Czech
Republic, Italy, Singapore and Switzerland that performed approximately 14,000
funerals in 1994. Included in OGF/PFG operations is a coffin manufacturing
business that sells the large majority of its product to OGF/PFG funeral
operations and a funeral insurance business whose primary activity involves
insurance policies sold in connection with OGF/PFG's prearranged funeral
business. The Company intends that OGF/PFG will continue to operate their
funeral service and related businesses. The total purchase price for OGF and
the portion of PFG not owned by OGF is expected to be approximately US
$607,206,000, based on a June 30, 1995 translation rate of US $.2062 to one
French franc, consisting of US $589,570,000 of cash, the assumption of US
$12,004,000 of OGF/PFG debt and associated expenses of US $5,632,000 (based on
an August 25, 1995 translation rate of US$.1969 to one French franc, the total
purchase price would be US$579,820,000. The net cost to the Company, taking
into account the estimated available excess cash balances of OGF/PFG, is
expected to be approximately US $424,026,000. In August 1995, the Company
entered a 364-day revolving credit agreement ("French Revolving Credit
Agreement") with Societe Generale, Southwest Agency, Credit Lyonnais Cayman
Island Branch and Banque Nationale de Paris, Houston Agency. The French
Revolving Credit Agreement allows for borrowings up to US $600,000,000 (which,
at the option of the Company, can be borrowed in French francs or US dollars)
to provide short-term financing for the purchase of OGF/PFG. The interest rate
currently in effect is based on PIBOR plus 25 basis points (5.98% at August 25,
1995).
In June 1995, the Company entered into an agreement to acquire
Gibraltar Mausoleum Corporation and four related Subchapter S Corporations
(collectively, "Gibraltar"). Gibraltar, a private funeral and cemetery company
based in Indianapolis, Indiana, owns and operates 23 funeral homes and 54
cemeteries. Subject to regulatory approval, the Company expects to complete the
Gibraltar transaction during the fourth quarter of 1995 for a purchase price of
approximately $268,895,000 consisting of 3,286,759 shares of Company common
stock (based on an average price of $35 per share on August 25, 1995),
$146,668,000 in cash, the assumption of $5,425,000 of Gibraltar debt and
associated expenses of $1,765,000. Such common stock of the Company is
registered with the Securities and Exchange Commission and will be issued under
the Company's existing shelf registration. The cash portion of the purchase
price will be borrowed under the Company's existing revolving credit facilities
(5.90% at August 25, 1995).
In July 1995, the Company entered into an agreement to acquire the
shares of Service Corporation International Canada ("SCIC") not already owned
by the Company. SCIC owns 74 funeral homes and three cemeteries in Canada. This
transaction will eliminate the approximate 31% minority ownership interest in
SCIC and will make SCIC a wholly owned subsidiary of the Company. This
transaction has been approved by the minority shareholders of SCIC and was
completed on September 5, 1995. The purchase price will be approximately US
$61,293,000 (based on a June 30, 1995 translation rate of US $.7287 to one
Canadian dollar) and will be financed through borrowings under the Company's
existing revolving credit facilities in Canadian dollars at an interest rate
based on a Canadian banker's acceptance rate plus 25 basis points (6.71% at
August 25, 1995).
4
<PAGE> 5
In the third quarter of 1994, the Company acquired the two largest
publicly traded funeral service providers in the United Kingdom, Great Southern
Group plc ("GSG") and Plantsbrook Group plc ("PG"). PG was an equity investee
of OGF before being purchased by the Company. GSG and PG owned a combined 534
funeral homes, 13 crematories and two cemeteries. The purchase price of
approximately US $508,000,000 was financed using a portion of the net proceeds
from the Company's December 1994 public offerings, consisting of common stock
(7,700,000 shares issued in December 1994 and 780,000 shares issued in January
1995 at a net price of $24.70 per share), $172,500,000 of preferred securities
of SCI Finance LLC (a wholly owned subsidiary of the Company) and $200,000,000
of 8.375% fixed rate notes due 2004, long-term fixed rate borrowings, other
revolving credit borrowings and debt assumed by the Company. Both GSG and PG
have been consolidated with the Company since September 1, 1994.
In addition to the acquisitions discussed above, during 1994 and the
six months ended June 30, 1995, the Company continued to acquire funeral and
cemetery operations in the United States, Australia, Canada and the United
Kingdom. During such period, the Company acquired 232 funeral homes and 52
cemeteries (the "1994 and 1995 Other Acquired Companies") in 120 separate
transactions for an aggregate purchase price of approximately US $515,000,000
in the form of combinations of cash, Company common stock, issued and assumed
debt, convertible debentures and retired loans receivable held by the Company's
finance subsidiary.
The following unaudited pro forma combined balance sheet as of June
30, 1995 has been prepared assuming the acquisitions by the Company of 100% of
the outstanding shares of OGF/PFG, Gibraltar and the minority interest of SCIC
took place on June 30, 1995. The unaudited pro forma combined statements of
income for the year ended December 31, 1994 and the six months ended June 30,
1995 have been prepared assuming the acquisitions by the Company of 100% of the
outstanding shares of OGF/PFG, Gibraltar, the minority interest of SCIC, GSG,
PG and the Other Acquired Companies took place at January 1, 1994. Such
acquisitions are being accounted for under the purchase method of accounting.
The historical revenues and expenses of GSG and PG and the Other Acquired
Companies represent amounts recorded by those businesses for the period that
they were not owned by the Company during the year ended December 31, 1994 and
the six months ended June 30, 1995, respectively. The unaudited pro forma
combined financial information may not be indicative of results that would
actually have been obtained if these transactions had occurred on the dates
indicated or which may be obtained in the future.
For purposes of this unaudited pro forma combined financial
information, it is assumed that the net proceeds of the Company's December
1994 public offerings were first applied toward the purchase price of GSG and
PG (US $508,000,000 less US $31,258,000 of GSG and PG debt assumed by the
Company) with the excess net proceeds (US $95,205,000) used to repay amounts
outstanding under the Company's revolving credit facilities and to retire
commercial paper. In addition, the unaudited pro forma combined financial
information assumes that the acquisition of OGF/PFG is to be financed with
borrowings under the French Revolving Credit Agreement.
5
<PAGE> 6
The historical financial statements of GSG and PG for the period not
owned by the Company in 1994 were prepared in UK pound sterling in accordance
with United Kingdom generally accepted accounting principles ("UK GAAP"). The
historical financial statements of OGF/PFG as of June 30, 1995 and for the year
ended December 31, 1994 and the six months ended June 30, 1995 were prepared in
French francs in accordance with French generally accepted accounting
practices ("F GAAP"). This information has been adjusted to present the
historical financial statements in accordance with United States generally
accepted accounting principles ("US GAAP") and translated into US dollars at
the June 30, 1995 exchange rate for the balance sheet (US $.2062 to one French
franc, US $.1969 at August 25, 1995) and at the average exchange rate for the
respective statement of income periods presented (US $.1802 and US $.1983 for
the year ended December 31, 1994 and six months ended June 30, 1995,
respectively). The Company has not completed all appraisals and evaluations
necessary to finalize OGF/PFG's or Gibraltar's purchase price allocation, and
accordingly, actual adjustments that reflect appraisals and other evaluations
of the purchased assets and assumed liabilities may differ from the pro forma
adjustments.
6
<PAGE> 7
Service Corporation International
Unaudited Pro Forma Combined Balance Sheet
June 30, 1995
(Thousands)
<TABLE>
<CAPTION>
Historical Pro Forma
---------------------------------------- -----------------------------
The Combined
Company OGF/PFG Gibraltar Adjustments Total
--------- --------- --------- ------------- -----------
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 20,251 $ 203,800 $ 1,276 $(183,180) (F11) $ 42,147
Receivables, net of allowances 347,790 59,013 67,021 (215) (G2) 435,758
(37,851) (G3)
Inventories 72,192 46,240 16,207 (13,776) (G4) 120,863
Other 7,814 33,171 - - 40,985
---------- ---------- -------- --------- ----------
Total current assets 448,047 342,224 84,504 (235,022) 639,753
Investments - insurance subsidiary - 531,726 - - 531,726
Prearranged funeral contracts 1,537,085 - 3,878 82,350 (G2) 1,623,313
Long-term receivables 615,355 - - 44,137 (G1) 701,372
37,851 (G3)
4,029 (G5)
Cemetery property, at cost 812,198 - 17,214 13,776 (G4) 1,142,675
286,987 (G10)
12,500 (C1)
Property, plant and equipment, at cost (net) 909,857 222,545 31,778 103,932 (F4) 1,268,112
Deferred charges and other assets 233,258 49,661 9,629 25,521 (F5) 298,660
(19,409) (F7)
Goodwill - 16,910 10,579 (10,579) (G13) -
(16,910) (F6)
Names and reputations (net) 888,975 - - 37,626 (C1) 1,043,833
117,232 (F9)
---------- ---------- -------- --------- ----------
Total assets $5,444,775 $1,163,066 $157,582 $ 484,021 $7,249,444
========== ========== ======== ========= ==========
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued liabilities $ 191,547 $ 132,802 $ 13,816 $ 1,765 (G11) $ 345,562
5,632 (F2)
Income taxes 32,351 6,700 - - 39,051
Current maturities of long-term debt 21,217 3,332 15,700 (15,700) (G9) 24,549
---------- ---------- -------- --------- ----------
Total current liabilities 245,115 142,834 29,516 (8,303) 409,162
Long-term debt 1,579,918 8,672 37,709 146,668 (G8) 2,208,366
(32,284) (G9)
61,293 (C1)
589,570 (F10)
(183,180) (F11)
Deferred income taxes 275,162 15,421 14,329 100,445 (G12) 442,268
5,500 (C1)
31,411 (F8)
Other liabilities 278,475 137,242 18,846 44,137 (G1) 388,492
4,029 (G5)
(16,667) (C1)
(79,107) (F3)
1,537 (F4)
Deferred prearranged funeral contracts 1,597,454 520,220 6,935 92,859 (G2) 2,217,468
Company obligated mandatorily redeemable preferred
securities of SCI Finance LLC 172,500 - - - 172,500
Stockholders' equity 1,296,151 338,677 50,247 (50,247) (G6) 1,411,188
115,037 (G7)
(338,677) (F1)
---------- ---------- -------- --------- ----------
Total liabilities and stockholders'
equity $5,444,775 $1,163,066 $157,582 $ 484,021 $7,249,444
========== ========== ======== ========= ==========
</TABLE>
7
<PAGE> 8
SERVICE CORPORATION INTERNATIONAL
NOTES TO THE UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1995
CANADA
(C1) To record the acquisition of the approximate 31% minority interest
of SCIC that the Company does not currently own. This includes
eliminating the minority interest, increasing long-term debt for
amounts assumed to be borrowed under the Company's existing
revolving credit facilities to finance this transaction, increasing
cemetery property to estimated fair value, recording deferred taxes
on the allocation of purchase price (at the Canadian statutory tax rate)
and allocating the excess of the purchase price over the estimated fair
value of SCIC net assets acquired to names and reputations.
GIBRALTAR
(G1) To record Gibraltar's cemetery merchandise and service receivable
balances and related liabilities in accordance with the Company's
accounting policies. These merchandise and service receivable balances
were not afforded balance sheet recognition by Gibraltar.
(G2) To record Gibraltar's prearranged funeral contracts outstanding and the
related deferred prearranged funeral contract revenues in accordance with
the Company's accounting policies. These prearranged funeral contracts
were not afforded balance sheet recognition by Gibraltar.
(G3) To reclassify Gibraltar's receivables not due within one year to
long-term receivables. This entry conforms Gibraltar's unclassified
balance sheet to the Company's classified balance sheet format.
(G4) To reclassify Gibraltar's cemetery inventories not expected to be sold
within one year to cemetery property. This entry conforms Gibraltar's
unclassified balance sheet to the Company's classified balance sheet
format.
(G5) To reclassify amounts held in trust by Gibraltar related to sales of
preconstruction mausoleums. Gibraltar netted the trust deposits against
the related liability; however under the Company's accounting policies
these amounts would be shown separately on the balance sheet.
(G6) To eliminate the historical stockholders' equity of Gibraltar.
(G7) To reflect the net proceeds from the issuance of 3,286,759 shares of
Company common stock issued in the Gibraltar transaction at an assumed
price of $35 per share (based on an average stock price on August 25,
1995).
(G8) To reflect borrowings under the Company's existing revolving credit
agreements and/or through the issuance of commercial paper to finance a
portion of the purchase price of Gibraltar ($98,684,000) and the assumed
repayment of a portion of Gibraltar debt ($47,984,000).
(G9) To reflect the assumed repayment of Gibraltar debt.
(G10) To increase Gibraltar's cemetery property to estimated fair value.
8
<PAGE> 9
(G11) To accrue costs anticipated to be incurred in connection with the
acquisition of Gibraltar.
(G12) To provide for additional deferred income taxes for Gibraltar (at the
Company's marginal tax rate) resulting from differences in the carrying
values of net assets for financial statement and tax purposes.
(G13) To eliminate previously recorded Gibraltar goodwill.
OGF/PFG
(F1) To eliminate the historical stockholders' equity of OGF/PFG.
(F2) To accrue estimated costs anticipated to be incurred in connection with
the acquisition of OGF/PFG.
(F3) To eliminate OGF's historical minority interest in PFG. These unaudited
pro forma combined financials assume 100% ownership of both OGF and PFG,
which is the intent of the Company.
(F4) To increase OGF/PFG's land and buildings to estimated fair value.
(F5) To record as an intangible asset the present value of future profits of
OGF/PFG's life insurance subsidiary with respect to existing insurance
contracts.
(F6) To eliminate the previously recorded OGF/PFG goodwill.
(F7) To eliminate the previously recorded deferred acquisition costs of
OGF/PFG's life insurance subsidiary.
(F8) To provide for additional deferred income taxes (at the French statutory
tax rate) for OGF/PFG resulting from differences in the carrying values
of net assets for financial statement and tax purposes.
(F9) To allocate the excess of the purchase price over the estimated fair
value of OGF/PFG's net assets acquired to names and reputations.
(F10) To reflect the borrowings under the French Revolving Credit Agreement
for the OGF/PFG purchase.
(F11) To reflect the partial repayment of amounts borrowed under the French
Revolving Credit Agreement from cash that was acquired in the acquisition
of OGF/PFG.
9
<PAGE> 10
(8)
The following adjustments were made to the historical financials of OGF/PFG in
order to restate historical financial statements to US GAAP:
<TABLE>
<CAPTION>
Historic Amounts As reported in Unaudited
Converted to US Dollars Adjustments to Pro Forma Combined
in F GAAP US GAAP Balance Sheet
----------------------- -------------- ------------------------
<S> <C> <C> <C>
Cash and cash equivalents . . . . . . . . . . $ 202,886 $ 416 (1) $ 203,800
498 (3)
Receivables, net of allowance . . . . . . . . 55,746 3,267 (3) 59,013
Inventories . . . . . . . . . . . . . . . . . 46,240 - 46,240
Other . . . . . . . . . . . . . . . . . . . . 21,895 836 (5) 33,171
577 (6)
9,863 (3)
-------------- ------------ ------------
Total current assets . . . . . . . . . . . 326,767 15,457 342,224
Investments for prearranged funerals . . . . - 531,726 (3) 531,726
Property, plant and equipment at cost (net) . 182,778 4,199 (2) 222,545
(4,319) (4)
39,887 (3)
Deferred charges and other assets . . . . . . 47,311 2,350 (3) 49,661
Names and reputations . . . . . . . . . . . . 16,910 - 16,910
-------------- ------------ ------------
Total assets . . . . . . . . . . . . . . . $ 573,766 $ 589,300 $ 1,163,066
============== ============ ============
Accounts payable and accrued liabilities . . $ 114,521 $ 10,594 (4) $ 132,802
879 (6)
6,808 (3)
Income taxes . . . . . . . . . . . . . . . . 6,559 141 (3) 6,700
Current maturities of long-term debt . . . . 3,043 289 (2) 3,332
-------------- ------------ ------------
Total current liabilities . . . . . . . . 124,123 18,711 142,834
Long-term debt . . . . . . . . . . . . . . . 5,217 3,455 (2) 8,672
Deferred income taxes . . . . . . . . . . . . 2,384 1,028 (5) 15,421
(3,505) (6)
15,514 (3)
Other liabilities . . . . . . . . . . . . . . 140,730 150 (1) 137,242
61 (2)
(14,913) (4)
120 (5)
9,380 (6)
1,714 (3)
Deferred prearranged funeral contracts . . . - 520,220 (3) 520,220
Stockholders' equity . . . . . . . . . . . . 301,312 266 (1) 338,677
394 (2)
43,193 (3)
(312) (5)
(6,176) (6)
-------------- ------------ ------------
Total liabilities and stockholders' equity. $ 573,766 $ 589,300 $ 1,163,066
============== ============ ============
</TABLE>
- -----------
*One French franc equivalent to $.2062, which represents the rate at June 30,
1995.
10
<PAGE> 11
(1) To record the effect of Statement of Financial Accounting Standards
("FAS") No. 115 "Accounting for Certain Investments in Debt and Equity
Securities".
(2) To record capital leases to comply with FAS No. 13 "Accounting for
Leases".
(3) To consolidate OGF/PFG's wholly owned life insurance subsidiary, which
was recorded under the equity method of accounting by OGF/PFG, to comply
with FAS No. 94 "Consolidation of All Majority-Owned Subsidiaries", FAS
No. 60 "Accounting and Reporting by Insurance Enterprises" and FAS No. 97
"Accounting and Reporting by Insurance Enterprises for Certain
Long-Duration Contracts and for Realized Gains and Losses from the Sale
of Investments".
(4) To reclassify a portion of other liabilities to current liabilities and
eliminate negative goodwill in accordance with Accounting Principles
Board Opinion No. 16.
(5) To record FAS No. 109 "Accounting for Income Taxes".
(6) To record FAS No. 87 "Employers' Accounting for Pensions" and FAS No. 106
"Employers' Accounting for Post-retirement Benefits Other Than
Pensions".
11
<PAGE> 12
Service Corporation International
Unaudited Pro Forma Combined Statement of Income
Year Ended December 31, 1994
(Thousands, except per share amounts)
<TABLE>
<CAPTION>
1994 Transactions
-----------------------------------------------
1994 Historical Pro Forma
--------------- ----------------------------
The GSG & PG and 1994
Company Other Acquired Combined
Historical Companies Adjustments Subtotal
---------- -------------- ----------- ----------
<S> <C> <C> <C> <C>
Revenues $1,117,175 $135,008 $1,146 (A) $1,253,329
Costs and expenses (775,980) (113,145) (770) (A) (885,195)
3,918 (B)
3,757 (C)
(217) (D)
(4,685) (E)
2,502 (F)
(291) (G)
(284) (H)
---------- -------- ------- ----------
Gross profit 341,195 21,863 5,076 368,134
General and administrative expenses (51,700) - - (51,700)
---------- -------- ------- ----------
Income from operations 289,495 21,863 5,076 316,434
Interest expense (80,123) (2,588) (165) (A) (86,057)
(3,860) (B)
936 (I)
1,451 (J)
4,379 (K)
(15,354) (L)
2,414 (M)
6,853 (N)
Dividends on preferred securities
of SCI Finance LLC (539) - (10,242) (O) (10,781)
Other income (expense) 10,188 201 - 10,389
Gain on sale of subsidiaries - - - -
---------- -------- ------- ----------
Income before income taxes 219,021 19,476 (8,512) 229,985
Provision for income taxes (87,976) (7,240) 3,015 (P) (92,201)
---------- -------- ------- ----------
Net income $131,045 $12,236 $(5,497) $137,784
========== ======== ======= ==========
Earnings per share:
Primary $1.51 $1.44
========== ==========
Fully diluted $1.43 $1.36
========== ==========
1,073 (Q)
Primary weighted average shares 86,926 7,974 (R) 95,973
========== ==========
1,156 (Q)
Fully diluted weighted 7,974 (R)
average shares 97,408 5,450 (S) 111,988
========== ==========
<CAPTION>
1995 Transactions
-------------------------------------------------------------------------
1994 Historical Pro Forma
--------------------------------------- --------------------------
Other
Acquired Combined
OGF/PFG Gibraltar Companies Adjustments Total
-------- --------- --------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $509,141 $96,270 $73,505 $ (4,993)(G1) $1,924,574
(1,902)(G2)
(5,301)(G3)
4,525 (G4)
Costs and expenses (471,390) (81,785) (65,401) 4,993 (G1) (1,479,374)
830 (G2)
7,134 (G3)
(3,260)(G4)
2,038 (G5)
159 (G6)
(1,435)(G7)
1,221 (O1)
(941)(C1)
(63)(C2)
1,594 (F1)
(2,561)(F2)
22,253 (F3)
(10,547)(F4)
(51)(F5)
682 (F6)
2,351 (F7)
-------- ------- ------- -------- -----------
Gross profit 37,751 14,485 8,104 16,726 445,200
General and administrative expenses - - - - (51,700)
-------- ------- ------- -------- -----------
Income from operations 37,751 14,485 8,104 16,726 393,500
Interest expense (5,667) (3,279) (1,175) (620)(G4) (134,016)
3,465 (G8)
(6,747)(G9)
(8,742)(O1)
(3,530)(C3)
(31,429)(F8)
9,765 (F9)
Dividends on preferred securities
of SCI Finance LLC - - - - (10,781)
Other income (expense) (12,408) (83) - 2,227 (C4) 13,843
(6,681)(F10)
20,399 (F11)
Gain on sale of subsidiaries 57,474 - - (57,474)(F12)
-------- ------- ------- -------- -----------
Income before income taxes 77,150 11,123 6,929 (62,641) (262,546)
Provision for income taxes (21,176) (4,219) (2,702) 496 (G10) (104,613)
1,581 (C5)
2,933 (O2)
10,675 (F13)
-------- ------- ------- -------- -----------
Net income $55,974 $6,904 $4,227 $(46,956) $157,933
======== ======= ======= ======== ==========
Earnings per share:
Primary $1.59
===========
Fully diluted $1.50
===========
180 (O3)
Primary weighted average shares 3,287 (G11) 99,440
===========
Fully diluted weighted 194 (O3)
average shares 3,287 (G11) 115,469
===========
</TABLE>
12
<PAGE> 13
SERVICE CORPORATION INTERNATIONAL
NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
1994 TRANSACTIONS
(A) To record the acquisition of five separate businesses acquired at
various dates by PG between January 1, 1994 and August 31, 1994 as
if such acquisitions had occurred on January 1, 1994. Internally
generated funds were used for the purchase of these businesses;
however, for purposes of the unaudited pro forma combined statement
of income, imputed interest expense, calculated on the purchase
price, has been included at a rate of 6%, which approximated the
Company's UK borrowing rate for the year 1994.
(B) To record a reduction to costs and expenses for the 1994 Other
Acquired Companies based on results actually achieved by the Company
for the periods subsequent to acquisition in the amount of
$7,019,000 offset in part by additional costs and expenses of
$3,101,000 resulting from the effect of applying purchase accounting
adjustments, primarily amortization and depreciation.
Interest expense was added for debt and convertible debentures,
issued in the purchase of the 1994 Other Acquired Companies, at
stated rates. In addition, interest expense has been added for the
cash portion of the purchase price assumed to be borrowed by the
Company at the Company's weighted average borrowing rate of 4.60%
for the year ended December 31, 1994 under its existing revolving
credit facilities. At August 25, 1995, the borrowing rate was 5.90%.
(C) To eliminate corporate expenses, consisting primarily of duplicate
personnel expenses, related to the acquisitions of GSG and PG.
(D) To record the additional depreciation expense (based on 50 year
useful life and straight-line depreciation) on GSG's funeral home
buildings resulting from the estimated change in fair value over
historical cost.
(E) To record the amortization of names and reputations (based on 40
year straight-line amortization) created from the acquisition of PG
by the Company.
(F) To eliminate the historical GSG and PG goodwill amortization
expense.
(G) To record the additional cost of GSG's cemetery and cremation
memorialization interment rights sold.
(H) To record the estimated additional amortization expense
from the expenses associated with the December 1994 issuances
of preferred securities of SCI Finance LLC and $200,000,000 fixed rate
notes of the Company.
(I) To reverse imputed interest expense recorded in the Company's
historical financial statements, related to the acquisition of GSG
and PG, that would not have occurred if these acquisitions had been
completed on January 1, 1994.
13
<PAGE> 14
(J) To reverse interest expense recorded in the Company's historical
financial statements related to amounts borrowed under the Company's
revolving credit agreements to partially fund the acquisitions of
GSG and PG. This indebtedness would not have been necessary if the
acquisition of GSG and PG had been funded with proceeds from the
December 1994 public offerings.
(K) To record the estimated reduction in interest expense resulting from
the assumed partial repayment of $95,205,000 of indebtedness under
the Company's revolving credit agreements. Such repayment funds
were derived from the net proceeds of the December 1994 public
offerings available after the purchase of GSG and PG. The reduction
was calculated using the Company's weighted average borrowing rate
of 4.60% for the year ended December 31, 1994 under its revolving
credit agreements and commercial paper borrowings.
(L) To record approximately 11 months of additional interest expense on
the December 1994 $200,000,000 notes at annual interest rate of
8.375%.
(M) To record the estimated reduction in net interest expense achieved
from a cross currency hedging transaction entered into by the
Company in December 1994 as if such transaction had been entered
into on January 1, 1994. This transaction effectively converts
$272,500,000 of U.S. fixed rate indebtedness into floating rate UK
pound sterling indebtedness, raising SCI's total UK pound sterling
exposure to $472,500,000, which is comparable to the size of the
acquisitions of GSG and PG.
(N) To reverse interest expense recorded in the Company's historical
financial statements related to amounts borrowed under two bank
facilities secured to temporarily fund the GSG and PG acquisitions.
This indebtedness would not have been necessary if the acquisition
of GSG and PG had been funded with proceeds from the December 1994
public offerings.
(O) To record the additional dividends at 6.25% on the preferred securities
of SCI Finance LLC issued in December 1994 in order to present a full
year of dividends.
(P) To record the tax effect of the pro forma adjustments.
(Q) To give effect to the additional time period during which the
Company common stock (in the case of the primary and fully diluted
weighted average number of shares) and convertible debt (in the case
of the fully diluted weighted average number of shares) issued
during the period between January 1, 1994 and December 31, 1994 in
respect to the acquisition of the 1994 Other Acquired Companies
would have been outstanding if all of such acquisitions had occurred
as of January 1, 1994.
(R) To record the additional impact from the issuance of 7,700,000
shares in December 1994 and 780,000 shares in January 1995.
(S) To record the additional impact on the fully diluted weighted
average number of shares of the preferred securities of SCI Finance LLC
issued in December 1994.
14
<PAGE> 15
1995 TRANSACTIONS
1995 OTHER ACQUIRED COMPANIES
(O1) To record a reduction to costs and expenses for the 1995 Other Acquired
Companies based on results actually achieved by the Company for the
periods subsequent to acquisition in the amount of $3,983,000 offset in
part by additional costs and expenses of $2,762,000 resulting from the
effect of applying purchase accounting adjustments, primarily
amortization and depreciation.
Interest expense was added for debt and convertible debentures, issued in
the purchase of the 1995 Other Acquired Companies, at stated rates. In
addition, interest expense has been added for the cash portion of the
purchase price assumed to be borrowed by the Company at the Company's
weighted average borrowing rate of 4.60% for the year ended December 31,
1994 under its existing revolving credit facilities. At August 25, 1995,
the borrowing rate was 5.90%.
(O2) To record the tax effect for the 1995 Other Acquired Companies pro forma
adjustments.
(O3) To give effect to the additional time period during which the Company
common stock (in the case of the primary and fully diluted weighted
average number of shares) and convertible debt (in the case of the fully
diluted weighted average number of shares) issued during the period
between January 1, 1994 and December 31, 1994 in respect to the
acquisition of the 1995 Other Acquired Companies would have been
outstanding if all of such acquisitions had occurred as of January 1,
1994.
CANADA
(C1) To record the additional amortization of names and reputations (based on
40 year straight-line amortization) created from the acquisition of the
SCIC minority interest.
(C2) To record the additional cost of SCIC's cemetery interment rights sold.
(C3) To record the estimated interest expense for the purchase price of the
SCIC minority interest ($61,293,000) assumed to have been borrowed by the
Company under its existing revolving credit facilities. The calculation
was based on a weighted average annual three month Canadian banker's
acceptance borrowing rate plus 25 basis points for the year ended
December 31, 1994 (5.76%). At August 25, 1995, the borrowing rate was
6.71%.
(C4) To eliminate the 1994 SCIC minority interest charge.
(C5) To record the tax effect for SCIC's minority interest pro forma
adjustments.
GIBRALTAR
(G1) To eliminate Gibraltar intercompany revenues and costs relating to
cemetery construction activities.
15
<PAGE> 16
(G2) To conform Gibraltar's prearranged funeral accounting to the Company's.
The revenue adjustment includes $1,306,000 of revenue relating to
earnings on amounts held in trust which Gibraltar recognized currently
which would be deferred under the Company's accounting policies and
$596,000 of revenue recognized by Gibraltar relating to certain
prearranged funeral payments not required to be held in trust which would
also be deferred under the Company's accounting policies. The adjustment
to costs and expenses for $830,000 relates to prearranged funeral selling
expenses that would be capitalized under the Company's accounting
policies but were recognized currently by Gibraltar.
(G3) To conform Gibraltar's cemetery accounting to the Company's. This
includes an adjustment to reclassify $5,301,000 of revenues and costs and
expenses relating to contract cancellations. In addition, this adjustment
includes a reduction of Gibraltar historical costs and expenses for
$1,833,000, representing reduced cost accruals for certain cemetery
sales.
(G4) To record the acquisition of five separate businesses acquired at various
dates by Gibraltar between January 1, 1994 and December 31, 1994 as if
such acquisitions had occurred on January 1, 1994.
(G5) To eliminate Gibraltar corporate expenses consisting primarily of former
owner salaries and duplicate home office personnel expenses.
(G6) To eliminate the historical Gibraltar goodwill amortization expense.
(G7) To record the additional cost of Gibraltar's cemetery interment rights
sold.
(G8) To eliminate the interest expense on Gibraltar debt assumed to be repaid
by the Company.
(G9) To record additional interest expense for the cash portion of the
purchase price assumed to be borrowed by the Company under its existing
revolving credit facilities. The Company's weighted average borrowing
rate for such revolving credit facilities was 4.60% for the year ended
December 31, 1994. At August 25, 1995, the borrowing rate was 5.90%.
(G10) To record the tax effect of Gibraltar's pro forma adjustments.
(G11) To reflect the issuance of 3,286,759 shares in respect to the acquisition
of Gibraltar that would have been outstanding if the acquisition had
occurred on January 1, 1994. The shares were assumed to be issued at
$35 per share representing the average stock price on August 25, 1995.
OGF/PFG
(F1) To eliminate the historical OGF/PFG goodwill amortization expense.
(F2) To record the amortization of names and reputations (based on 40 year
straight-line amortization) created from the acquisition of OGF/PFG by
the Company.
(F3) To eliminate OGF/PFG's historical depreciation expense which was
calculated using shorter depreciable asset lives than does the Company
under its accounting policies. Additionally, OGF/PFG, for certain assets,
used accelerated depreciation
16
<PAGE> 17
methods. The Company uses a straight-line method of depreciation expense
recognition.
(F4) To record the depreciation expense on OGF/PFG's property, plant and
equipment using the Company's depreciation policies based on the current
fair value.
(F5) To record the amortization of the present value of future profits related
to OGF/PFG's life insurance subsidiary, net of the amount allocated to
policyholders, under French insurance regulations.
(F6) To eliminate the amortization of deferred acquisition costs related to
the life insurance subsidiary which were recorded in OGF/PFG's historical
income statement.
(F7) To eliminate historical OGF/PFG expenses that will not continue under the
Company's ownership. Such costs are primarily the result of OGF/PFG
personnel whose positions were permanently eliminated in anticipation of
the acquisition of OGF/PFG by the Company.
(F8) To record interest expense on amounts borrowed under the French Revolving
Credit Agreement ($589,570,000) at 6.10% which represents the weighted
average three month PIBOR borrowing rate plus 25 basis points for the
year ended December 31, 1994 applied to a French franc balance as of June
30, 1995 and translated at a weighted average exchange rate for the year
ended December 31, 1994. At August 25, 1995, the borrowing rate was
5.98%.
(F9) To eliminate interest expense on amounts borrowed under the French
Revolving Credit Agreement that the Company intends to repay with
$183,180,000 of OGF/PFG cash acquired. OGF/PFG received substantially
all of this cash from the sale, in 1994, of its investment in PG to the
Company. The reduction was calculated using a weighted average annual
interest rate of 6.10%, which represents the weighted average three
month PIBOR borrowing rate plus 25 basis points for the year ended
December 31, 1994 applied to a French franc balance as of June 30, 1995
and translated at the weighted average exchange rate for the year ended
December 31, 1994. At August 25, 1995, the borrowing rate was 5.98%.
(F10) To eliminate OGF/PFG historical interest income earned on OGF/PFG excess
cash ($183,180,000) that the Company intends to use to partially repay
borrowings under the French Revolving Credit Agreement.
(F11) To eliminate OGF's year ended 1994 charge for the minority interest in
PFG assuming acquisition of 100% of PFG by the Company.
(F12) To eliminate the gain on sale of PG. The Company purchased PG, which was
an equity investee of OGF, in 1994.
(F13) To record the tax effect of the OGF/PFG pro forma adjustments.
17
<PAGE> 18
The following adjustments were made to the historical financials of GSG and PG
in order to restate historical financial statements to US GAAP (included in the
unaudited pro forma combined statement of income for the year ended December
31, 1994 in the column captioned "1994 Historical - GSG & PG and Other Acquired
Companies"):
<TABLE>
<CAPTION>
Historic Amounts As reported in Unaudited
Converted to US Dollars Adjustments to Pro Forma Combined
in UK GAAP* US GAAP Statement of Income
----------------------- --------------------- ------------------------
GSG PG GSG PG GSG PG
--------- ---------- -------- ------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues . . . . . . . . . . $ 33,714 $ 52,484 $ - $ - $33,714 $ 52,484
Costs and expenses . . . . . (26,682) (40,365) (184)(1) (205)(1) (27,254) (42,684)
(388)(2) (2,114)(2)
Interest expense and other . . (731) (405) - - (731) (405)
Provision for income taxes . . (2,079) (3,689) 60 (1) 67 (1) (2,019) (3,622)
-------- -------- ------ ------- ------- ---------
Net income . . . . . . . . . $ 4,222 $ 8,025 $ (512) $(2,252) $ 3,710 $ 5,773
======== ======== ====== ======= ======= =========
</TABLE>
- ---------------
*One UK pound sterling equivalent to $1.52, which represents the average
exchange rate for the eight months ended August 31, 1994.
(1) To depreciate buildings straight-line over 50 years for GSG and PG.
(2) To amortize PG's historical goodwill balance straight-line over 40 years.
18
<PAGE> 19
The following adjustments were made to the historical financials of OGF/PFG
in order to restate historical financial statements to US GAAP:
<TABLE>
<CAPTION>
Historic Amounts As reported in Unaudited
Converted to US Dollars Adjustments to Pro Forma Combined
in F GAAP US GAAP Statement of Income
----------------------- -------------- ------------------------
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . $ 500,884 $ 8,257 (3) $ 509,141
Costs and expenses . . . . . . . . . . . . (467,825) 472 (2) (471,390)
18 (5)
(4,055) (3)
Other income (expense) . . . . . . . . . . (18,044) (129) (1) (18,075)
(384) (2)
136 (3)
350 (4)
(4) (5)
Gain on sale of subsidiaries. . . . . . . . 57,474 - 57,474
Provision for income taxes . . . . . . . . (18,927) (1,019) (4) (21,176)
(6) (5)
(1,224) (3)
-------------- ------------ ------------
Net income . . . . . . . . . . . . . . . . $ 53,562 $ 2,412 $ 55,974
============== ============ ============
</TABLE>
- ---------------
*One French franc equivalent to $.1802, which represents the average exchange
rate for the year ended December 31, 1994.
(1) To record the effect of Statement of Financial Accounting Standards
("FAS") No. 115 "Accounting for Certain Investments in Debt and Equity
Securities".
(2) To record capital leases to comply with FAS No. 13 "Accounting for
Leases".
(3) To consolidate OGF/PFG's wholly owned life insurance subsidiary, which
was recorded under the equity method of accounting by OGF/PFG, to comply
with FAS No. 94 "Consolidation of All Majority-Owned Subsidiaries", FAS
No. 60 "Accounting and Reporting by Insurance Enterprises" and FAS No.
97 "Accounting and Reporting by Insurance Enterprises for Certain
Long-Duration Contracts and for Realized Gains and Losses from the Sale
of Investments".
(4) To record FAS No. 109 "Accounting for Income Taxes".
(5) To record FAS No. 87 "Employers' Accounting for Pension" and FAS No. 106
"Employers' Accounting for Post-retirement Benefits Other Than
Pensions".
19
<PAGE> 20
Service Corporation International
Unaudited Pro Forma Combined Statement of Income
Six Months Ended June 30, 1995
(Thousands, except per share amounts)
<TABLE>
<CAPTION>
Historical
-----------------------------------
The Other Pro Forma
Company Acquired Pro Forma Combined
Historical OGF/PFG Gibraltar Companies Adjustments Total
---------- ------- --------- --------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenues $701,762 $272,632 $45,556 $18,439 $ (843) (G1) $1,034,319
(3,227) (G2)
Costs and expenses (479,105) (257,606) (38,031) (16,370) 362 (G1) (778,180)
4,222 (G2)
1,019 (G3)
112 (G4)
(718) (G5)
479 (O1)
(470) (C1)
(32) (C2)
857 (F1)
(1,409) (F2)
12,670 (F3)
(6,822) (F4)
(52) (F5)
362 (F6)
2,352 (F7)
-------- -------- ------- ------- ------- ----------
Gross profit 222,657 15,026 7,525 2,069 8,862 256,139
General and administrative expenses (23,471) - - - - (23,471)
-------- -------- ------- ------- ------- ----------
Income from operations 199,186 15,026 7,525 2,069 8,862 232,668
Interest expense (52,809) (1,901) (2,361) (308) 2,144 (G6) (79,028)
(4,503) (G7)
(2,714) (O1)
(2,467) (C3)
(20,468) (F8)
6,359 (F9)
Dividends on preferred securities
of SCI Finance LLC (5,391) - - - - (5,391)
Other income (expense) 3,073 4,111 (47) - 1,451 (C4) 5,305
3,185 (F10)
(6,468)(F11)
-------- -------- ------- ------- ------- ----------
Income before income taxes 144,059 17,236 5,117 1,761 (14,619) 153,554
Provision for income taxes (56,039) (8,857) (2,121) (685) 872 (O2) (60,700)
1,100 (C5)
602 (G8)
4,428 (F12)
-------- -------- ------- ------- ------- ----------
Net income $88,020 $8,379 $2,996 $1,076 $(7,617) $ 92,854
======== ======== ======= ======= ======= ==========
Earnings per share:
Primary $0.91 $ 0.93
======== ==========
Fully diluted $0.85 $ 0.86
======== ==========
3,287 (G9)
Primary weighted average shares 96,729 147 (O3) 100,163
======== ==========
Fully diluted weighted average 3,287 (G9)
shares 112,611 147 (O3) 116,045
======== ==========
</TABLE>
- ----------------------
See note (F13) to this unaudited pro forma combined statement of income for
the six months ended June 30, 1995.
20
<PAGE> 21
SERVICE CORPORATION INTERNATIONAL
NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1995
1995 OTHER ACQUIRED COMPANIES
(O1) To record a reduction to costs and expenses for the 1995 Other Acquired
Companies based on results actually achieved by the Company for the
periods subsequent to acquisition in the amount of $1,860,000 offset in
part by additional costs and expenses of $1,381,000 resulting from the
effect of applying purchase accounting adjustments, primarily
amortization and depreciation.
Interest expense was added for debt and convertible debentures, issued in
the purchase of the 1995 Other Acquired Companies, at stated rates. In
addition, interest expense has been added for the cash portion of the
purchase price assumed to be borrowed by the Company at the Company's
weighted average borrowing rate of 6.14% for the six months ended June
30, 1995, under its existing revolving credit facilities. At August 25,
1995, the borrowing rate was 5.90%.
(O2) To record the tax effect for the 1995 Other Acquired Companies pro forma
adjustments.
(O3) To give effect to the additional time period during which the Company
common stock (in the case of the primary and fully diluted weighted
average number of shares) and convertible debt (in the case of the fully
diluted weighted average number of shares) issued during the period
between January 1, 1995 and June 30, 1995 in respect to the acquisition
of the 1995 Other Acquired Companies would have been outstanding for the
six months ended June 30, 1995 if all of such acquisitions had occurred
as of January 1, 1994.
CANADA
(C1) To record the additional amortization of names and reputations (based on
40 year straight-line amortization) created from the acquisition of the
SCIC minority interest.
(C2) To record the additional costs of SCIC's cemetery interment rights sold.
(C3) To record the estimated interest expense for the purchase price of the
SCIC minority interest ($61,293,000) assumed to have been borrowed by the
Company under its existing revolving credit facilities. The calculation
was based on a weighted average annual three month Canadian banker's
acceptance borrowing rate plus 25 basis points for the six months ended
June 30, 1995 (8.05%). At August 25, 1995, the borrowing rate was 6.71%.
(C4) To eliminate the 1995 SCIC minority interest charge.
(C5) To record the tax effect for SCIC's minority interest pro forma
adjustments.
21
<PAGE> 22
GIBRALTAR
(G1) To conform Gibraltar's prearranged funeral accounting to the Company's.
The revenue adjustment includes $604,000 of revenue relating to earnings
on amounts held in trust which Gibraltar recognized currently which would
be deferred under the Company's accounting policies and $239,000 of
revenue recognized by Gibraltar relating to certain prearranged funeral
payments not required to be held in trust which would also be deferred
under the Company's accounting policies. The adjustment to costs and
expenses for $362,000 relates to prearranged funeral selling expenses
that would be capitalized under the Company's accounting policies but
were recognized currently by Gibraltar.
(G2) To conform Gibraltar's cemetery accounting to the Company's. This
includes an adjustment to reclassify $3,227,000 of revenues and costs and
expenses relating to contract cancellations. In addition, this adjustment
includes a reduction of Gibraltar's historical costs and expenses for
$995,000, representing reduced cost accruals for certain cemetery sales.
(G3) To eliminate Gibraltar corporate expenses consisting primarily of
former owner salaries and duplicate home office personnel expenses.
(G4) To eliminate the historical Gibraltar goodwill amortization expense.
(G5) To record the additional cost of Gibraltar's cemetery interment rights
sold.
(G6) To eliminate the interest expense on Gibraltar debt assumed to be repaid
by the Company.
(G7) To record additional interest expense for the cash portion of the
purchase price assumed to be borrowed by the Company under its existing
revolving credit facilities. The Company's weighted average borrowing
rate for such revolving credit facilities was 6.14% for the six months
ended June 30, 1995. At August 25, 1995, the borrowing rate was 5.90%.
(G8) To record the tax effect of Gibraltar's pro forma adjustments.
(G9) To reflect the issuance of 3,286,759 shares in respect to the acquisition
of Gibraltar that would have been outstanding if the acquisition had
occurred as of January 1, 1995. The shares were assumed to be issued at
$35 per share representing the average stock price on August 25, 1995.
OGF/PFG
(F1) To eliminate the historical OGF/PFG goodwill amortization expense.
(F2) To record the amortization of names and reputations (based on 40 year
straight-line amortization) created from the acquisition of OGF/PFG by
the Company.
(F3) To eliminate OGF/PFG's historical depreciation expense which was
calculated using shorter depreciable asset lives than does the Company
under its accounting policies. Additionally, OGF/PFG, for certain assets,
used accelerated depreciation methods. The Company uses a straight-line
method of depreciation expense recognition.
22
<PAGE> 23
(F4) To record the depreciation expense on OGF/PFG's property, plant and
equipment using the Company's depreciation policies based on the current
fair value.
(F5) To record the amortization of the present value of future profits related
to OGF/PFG's life insurance subsidiary, net of the amount allocated to
policyholders, under French insurance regulations.
(F6) To eliminate the amortization of deferred acquisition costs related to
the life insurance subsidiary which were recorded in OGF/PFG's historical
income statement.
(F7) To eliminate historical OGF/PFG expenses that will not continue under the
Company's ownership. Such costs are primarily the result of OGF/PFG
personnel whose positions were permanently eliminated and professional
expenses incurred in anticipation of the acquisition of OGF/PFG by the
Company.
(F8) To record interest expense on amounts borrowed under the French Revolving
Credit Agreement ($589,570,000) at 7.22% which represents the weighted
average three month PIBOR borrowing rate plus 25 basis points for the six
months ended June 30, 1995 applied to a French franc balance as of June
30, 1995 and translated at the weighted average exchange rate for the six
months ended June 30, 1995. At August 25, 1995, the borrowing rate was
5.98%.
(F9) To eliminate interest expense on amounts borrowed under the French
Revolving Credit Agreement that the Company intends to repay with
$183,180,000 of OGF/PFG cash acquired. OGF/PFG received substantially all
of this cash from the sale, in 1994, of its investment in PG to the
Company. The reduction was calculated using a weighted average annual
interest rate of 7.22%, which represents the weighted average three
month PIBOR borrowing rate plus 25 basis points for the six months ended
June 30, 1995 applied to a French franc balance as of June 30, 1995 and
translated at the weighted average exchange rate for the six months
ended June 30, 1995. At August 25, 1995, the borrowing rate was 5.98%.
(F10) To eliminate OGF's six month charge for the minority interest in PFG
assuming acquisition of 100% of PFG by the Company.
(F11) To eliminate OGF/PFG historical interest income earned on OGF/PFG excess
cash ($183,180,000) that the Company intends to use to partially repay
borrowings under the French Revolving Credit Agreement.
(F12) To record the tax effect of the OGF/PFG pro forma adjustments.
(F13) The earnings of OGF/PGF's life insurance subsidiary for the six
months ended June 30, 1995 included realized losses on sales of portfolio
debt securities. The net effect of the debt security sales, after profit
participation by policyholders, was a loss before income taxes of
approximately US $7,950,000. On August 25, 1995, the Company adopted a
policy with respect to OGF/PFG's life insurance subsidiary to hold all
debt securities to maturity. Had the Company's investment policy been in
effect during the period, such security sales would not have occurred.
23
<PAGE> 24
The following adjustments were made to the historical financials of OGF/PFG
in order to restate historical financial statements to US GAAP:
<TABLE>
<CAPTION>
Historic Amounts As reported in Unaudited
Converted to US Dollars Adjustments to Pro Forma Combined
in F GAAP US GAAP Statement of Income
----------------------- -------------- ------------------------
<S> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . $ 275,318 $ 78 (1) $ 272,632
(2,764) (3)
Costs and expenses . . . . . . . . . . . . . (254,536) 260 (2) (257,606)
(755) (5)
(2,575) (3)
Other income (expense) . . . . . . . . . . . 3,901 (29) (1) 2,210
(200) (2)
(1,500) (3)
(133) (4)
171 (5)
Provision for income taxes . . . . . . . . . (9,020) (104) (4) (8,857)
267 (5)
-------------- ------------ ------------
Net income . . . . . . . . . . . . . . . . . $ 15,663 $ (7,284) $ 8,379
============== ============ ============
</TABLE>
- --------------
*One French franc equivalent to $.1983, which represents the average exchange
rate for the six months ended June 30, 1995.
(1) To record the effect of Statement of Financial Accounting Standards
("FAS") No. 115 "Accounting for Certain Investments in Debt and Equity
Securities".
(2) To record capital leases to comply with FAS No. 13 "Accounting for
Leases".
(3) To consolidate OGF/PFG's wholly owned life insurance subsidiary, which
was recorded under the equity method of accounting by OGF/PFG, to comply
with FAS No. 94 "Consolidation of All Majority-Owned Subsidiaries", FAS
No. 60 "Accounting and Reporting by Insurance Enterprises" and FAS No. 97
"Accounting and Reporting by Insurance Enterprises for Certain
Long-Duration Contracts and for Realized Gains and Losses from the Sale
of Investments". The earnings of OGF/PFG's life insurance subsidiary for
the six months ended June 30, 1995 included realized losses on sales of
debt securities. The net effect of the debt security sales, after profit
participation by policyholders, was a loss before income taxes of
approximately US $7,950,000.
(4) To record FAS No. 109 "Accounting for Income Taxes".
(5) To record FAS No. 87 "Employers' Accounting for Pension" and FAS No. 106
"Employers' Accounting for Post-retirement Benefits Other Than
Pensions".
24
<PAGE> 25
(b) Financial statement of businesses acquired
OGF/PFG GROUP (Presented in Accordance with French GAAP)
CONSOLIDATED BALANCE SHEET AS AT DECEMBER 31 1994 AND 1993
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
NOTE 1994 1993
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FIXED ASSETS
Intangible Assets 3 129,970 477,866
Tangible Assets 4 891,630 1,155,193
Investments 5 144,348 168,628
- ------------------------------------------------------------------------------------------
1,165,948 1,801,687
- ------------------------------------------------------------------------------------------
CURRENT ASSETS
Stocks 6 216,020 249,128
Debtors 7 382,030 460,595
Investments 8 47,928 50,532
Cash Investments 984,486 323,209
- ------------------------------------------------------------------------------------------
1,630,464 1,083,464
- ------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Bank loans and overdrafts 39,978 64,500
Other financial debt 1,739 78,482
Trade and other creditors 593,342 668,062
- ------------------------------------------------------------------------------------------
635,059 811,044
- ------------------------------------------------------------------------------------------
NET CURRENT ASSETS 995,405 272,420
- ------------------------------------------------------------------------------------------
Total assets less current liabilities 2,161,353 2,074,107
- ------------------------------------------------------------------------------------------
Long-term debt 12 132,967 321,782
- ------------------------------------------------------------------------------------------
Provisions for liabilities and charges 11 151,719 166,003
- ------------------------------------------------------------------------------------------
TOTAL ASSETS LESS LIABILITIES 1,876,667 1,586,322
- ------------------------------------------------------------------------------------------
</TABLE>
25
<PAGE> 26
OGF/PFG GROUP
CONSOLIDATED BALANCE SHEET AS AT DECEMBER 31 1994 AND 1993
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
NOTE 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
CAPITAL AND RESERVES
Called up share capital 243,483 243,373
Share premium account 255,914 255,749
Revaluation reserve 16,643 17,494
Other reserves 10 639,991 575,676
Profit and loss account 297,866 128,267
- --------------------------------------------------------------------------------
Total group's share 9 1,453,897 1,220,559
- --------------------------------------------------------------------------------
Minority interests 422,770 365,763
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY AND MINORITY INTERESTS 1,876,667 1,586,322
- --------------------------------------------------------------------------------
</TABLE>
26
<PAGE> 27
OGF/PFG GROUP
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEARS ENDED DECEMBER 31 1994 AND 1993
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
NOTE 1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C> <C>
TURNOVER 14 2,753,446 3,269,849
Other operating income 41,159 67,706
- -------------------------------------------------------------------------------------
2,794,605 3,337,555
- -------------------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES 15 (2,567,808) (3,003,782)
- -------------------------------------------------------------------------------------
OPERATING PROFIT 226,797 333,773
Share of profit of associated companies (1) 522 20,298
Financial income, net 16 21,138 371
- -------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES
BEFORE EXCEPTIONAL ITEMS AND TAXATION 248,457 354,442
Exceptional profit /loss (2) 272,333 (38,974)
- -------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 520,790 315,468
Taxation 17 (106,871) (121,410)
- -------------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES
AFTER TAXATION 413,919 194,058
Minority interests in profit (116,053) (65,791)
- -------------------------------------------------------------------------------------
Profit for the year 297,866 128,267
- -------------------------------------------------------------------------------------
(1) Companies consolidated by the equity method.
(2) Exceptional profit 299,016 17,616
Employees profit sharing (26,336) (37,897)
Amortization of goodwill (347) (18,693)
-------- --------
272,333 (38,974)
</TABLE>
27
<PAGE> 28
OGF/PFG GROUP
STATEMENT OF SOURCE AND APPLICATION OF FUNDS
FOR THE YEARS ENDED DECEMBER 31 1994 AND 1993
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
1994 1993
- -------------------------------------------------------------------------------------
<S> <C> <C>
SOURCE OF FUNDS FROM OPERATIONS 217,134 337,128
OTHER SOURCES:
Increase in capital 11,596 29,249
Disposals of fixed assets investments 704,932 16,669
Disposals of tangible and intangible fixed assets 30,434 71,583
Change in the number of consolidated companies
and effects of the restructuring - 201,805
Increase in long-term financial debt 1,098 15,117
Other, net 19,668 17,884
- -------------------------------------------------------------------------------------
TOTAL SOURCES OF FUNDS 984,862 689,435
- -------------------------------------------------------------------------------------
APPLICATION OF FUNDS :
Acquisition of tangible fixed assets 164,517 220,025
Acquisition of intangible fixed assets 9,054 24,184
Acquisition of long term investments 30,586 15,971
Dividends paid 64,493 57,406
Dividends paid to minority interests 14,435 30,060
Decrease in long term financial debt 58,555 183,790
Other, net (7,245) 151,578
- -------------------------------------------------------------------------------------
TOTAL APPLICATIONS OF FUNDS 334,395 683,014
- -------------------------------------------------------------------------------------
(DECREASE) INCREASE IN WORKING CAPITAL 650,467 6,421
- -------------------------------------------------------------------------------------
ARISING FROM MOVEMENTS IN:
Net liquid funds 687,239 68,122
Other current assets/liabilities (36,772) (61,701)
- -------------------------------------------------------------------------------------
</TABLE>
The 31 December 1994 statement of source and application of funds has been
prepared in accordance with French accounting principles; receivables and
payables are not classified according to their maturity (more or less than one
year) but in relation to their operating cycle.
28
<PAGE> 29
OGF/PFG GROUP
NOTES TO THE CONSOLIDATED ACCOUNTS
1. CONSOLIDATION PRINCIPLES AND ACCOUNTING POLICIES
1.1 1994 SIGNIFICANT EVENTS
The main event of 1994 has been the sale of Group interests in the
British funeral company "Plantsbrook" which has generated in the
consolidated accounts a total capital gain of 317.462 thousand French
francs (before tax effect). The global positive impact of this
operation on Group profit is 175.626 thousand French francs.
Pradel has sold its interests in Gemroc. The loss generated of 26.840
thousand French francs (of which 25.565 thousand French francs related
to the receivables and 1.275 thousand French francs to the shares) is
largely compensated by the recovery of the provision for liability on
subsidiaries of 32.000 thousand French francs. Taking into account
tax economies due to the tax integration of OGF and Pradel, this sale
generates an increase in Group profit of 15.997 thousand French
francs.
The conversion into shares of convertible bonds issued by PFG has
decreased the percentage of ownership of OGF in PFG from 66% to 65%.
The loss of interest due to this dilution has been posted to
extraordinary income for 3.982 thousand French francs. During 1994 all
remaining convertible bonds have either been converted or reimbursed.
1.2 ACCOUNTING PRINCIPLES
As a French company, Omnium de Gestion et de Financement SA maintains
its accounting records and prepares its financial statements in
accordance with French law and generally accepted accounting practices
in France.
1.21 ACCOUNTING CONVENTION
The financial statements have been prepared under the historical
cost convention as modified by the revaluation of certain fixed
assets.
1.22 BASIS OF CONSOLIDATION
The consolidated financial statements have been prepared in
accordance with the recommendations of the French National
Accounting Committee, known as the Conseil National de la
Comptabilite.
29
<PAGE> 30
OGF/PFG GROUP
Companies which are consolidated must have a minimum net
shareholders equity of FRF 5 million and FRF 15 millions in
turnover.
These criteria do not apply to subsidiaries which are part of a
sub-consolidation which is then included in OGF Group's
consolidated accounts. The interest in consolidated net income is
computed on the basis of year end ownership percentage, except
for newly consolidated companies acquired during the year.
Companies over which the Group exercises legal or de facto
control are fully consolidated. Companies are accounted for under
the equity method when the Group's equity interest is less than
40% but more than 20%. The Auxia sub-group which is governed by
the French insurance law and which accounts are therefore
structurally different, is consolidated under the equity method.
The equity method is also used for the Hygeco sub-group since the
Group does not have effective control.
Consequently, for the year ended 31 December, 1994, 62 companies
are included in the Group's consolidated financial statements,
compared to 69 as of December 31, 1993:
o 48 fully consolidated
o 2 consolidated by the equity method: Auxia, and the Hygeco
Group which includes 13 companies.
Due to the buy out of COMIPAR, which is now 100% owned by the
Group, and is itself the parent company of the Italian sub-group
(COMIPAR, OFISA and OFT), this sub-consolidation is no longer
accounted for by proportional consolidation but is fully
consolidated as of December 31, 1994.
During 1994, 7 companies have been deconsolidated:
- the British group Plantsbrook (5 companies) was sold during
the second semester of 1994;
- the "Compagnie Generale des Pompes Funebres" has been absorbed
by AFM. The new entity is now known as "Compagnie Generale des
Pompes Funebres".
This merger has generated a profit of 779 thousand French francs
posted to extraordinary income.
- Gemroc was sold during the first semester of 1994.
Three companies previously non-consolidated have been absorbed:
- Ambulances Beaurepairoises absorbed by AFM;
- the Sainte Marguerite joint venture and the company A.
Barthelis absorbed by "Pompes Funebres du Sud-Est".
30
<PAGE> 31
OGF/PFG GROUP
As a general rule, companies which are consolidated have a 31
December year-end.
When provisional accounts are used for consolidation, the
difference between the provisional and the definitive accounts is
reintegrated in the following year's consolidation.
Inter-company balances and transactions between companies
included in the consolidation perimeter are eliminated for
consolidation purposes.
1.23 FIXED ASSETS
Fixed Assets reported in the consolidated financial statements
represent the amount of fixed assets of the consolidated
companies. For companies that have revalued their assets,
according to applicable legal factors, these assets have been
consolidated at the reevaluated value.
No restatement of amortizations has been made in the consolidated
accounts.
Differences resulting from the reevaluation of non-amortizable
fixed assets (reevaluation reserves) have been incorporated in
the calculation of net equity and minority interests.
1.24 INTANGIBLE FIXED ASSETS
For consolidation purposes, goodwill has been amortized using the
following rates:
o 10% for goodwill related to the funeral business,
o 5% for goodwill related to marble-working and sales of flowers.
Other intangible fixed assets are amortized on a straight-line
basis over the following estimated useful economic lives:
o software: 12 months prorata temporis
o patents: 5 and 20 years
o trademarks: 10 years
o usufruct reserve: 30 years
Until September 1, 1993, intangible assets acquired through a
transfer or a merger were accounted for their net value and
amortized over the remaining useful life.
For assets acquired after that date, their new owner has
accounted for the gross value and the accumulated depreciation
relating to these assets. The initial amortization plan is
maintained.
31
<PAGE> 32
OGF/PFG GROUP
1.25 TANGIBLE FIXED ASSETS
Tangible fixed assets are depreciated on a straight-line or an
accelerated method depending on tax advantages and according to
the following expected useful economic lives:
o 20 to 40 years for buildings
o 5 to 10 years for plants and machinery
o 5 to 10 years for fixtures and fittings
o 4 to 5 years for vehicles
o 4 to 10 years for office furniture and equipment
The method described above concerning intangible assets acquired
through a transfer or a merger from September 1, 1993 is also
used for tangible assets.
1.26 NON CONSOLIDATED INVESTMENTS
Investments in non consolidated subsidiaries and affiliates are
recorded at their book value for the parent company, i.e. cost of
acquisition reduced by a provision accrued in order to take into
account their year-end realizable value as considered necessary
by the Board of Directors.
1.27 STOCK AND WORK IN PROGRESS
Stock and work in progress are stated at the lower of either
purchase or production cost and net realizable value.
1.28 REGULATED PROVISIONS
Provisions relating to foreign exchange fluctuation, inflation
and depreciation accrued for under advantageous fiscal
situations, have been booked to consolidated shareholders'
equity. Corresponding movements appear in the consolidated profit
and loss account.
1.29 EMPLOYEE PROFIT SHARING
Provisions are made for employee profit sharing in the profit and
loss account for the year during which the employees acquire
these rights.
1.30 DEFERRED TAXATION
Provisions for deferred tax have been established in accordance
with the liability method, in order to record tax charges in the
relevant accounting period. This is done by taking into account
any timing differences which may exist between the date when
certain items are recorded in the income statement and the date
when they are included in taxable income. Deferred taxes are
calculated at each year end at current tax rates (any remaining
prior year deferred tax amounts are adjusted to take into account
new tax rates or legislation). The rates applied to calculate
deferred taxes as at December 31, 1994 were the corporate income
tax rates for 1994 (33 1/3% for operations taxable at the
standard rate and 19% for operations subject to the long term
capital gains (losses) rules).
32
<PAGE> 33
OGF/PFG GROUP
1.31 DIVIDEND DISTRIBUTION
Dividend tax withholdings are deducted from net income prior to
distribution.
1.32 GOODWILL ARISING ON CONSOLIDATION
Negative goodwill arising from the consolidation of companies
acquired several years ago is treated as consolidated reserves.
Positive goodwill has been booked as an asset and negative
goodwill as a liability ("Provisions for liabilities and
charges"). Goodwill is amortized over 20 years. Amortization of
goodwill is recorded on the last line of the profit and loss
account, as required by the COB.
1.33 MARKETABLE SECURITIES
In determining the provision for loss in value of marketable
securities to be included in the consolidated accounts,
unrealized losses have been offset against unrealized gains,
based on the market value of the securities.
1.34 TRANSLATION OF FOREIGN CURRENCY ITEMS
Foreign currency liabilities and receivables are translated at
December 31 exchange rates.
Provisions are accrued for any unrealized losses resulting from
foreign currency translation.
1.35 TRANSLATION OF FOREIGN COMPANIES' ACCOUNTS
International Accounting Standard IASC 21 is applied for the
translation of foreign companies' accounts:
o all balance sheet accounts are translated at year end exchange
rates, except for year end profit/loss which is translated at
the weighted annual average for the month end rates,
o all profit and loss items are translated at the weighted
annual average of the month end rates, except for calculated
expenses and disposals of assets, which are translated at year
end rates.
As of December 31, 1994 foreign currency translation of profit
and loss items implied a FRF 877 thousand income decrease.
The impact of translation of year-end profit/loss is taken into
account in shareholders' equity.
The translation difference of 3.803 thousand French francs,
corresponding to the Plantsbrook Group and posted at
shareholders' equity, has been reintegrated in the income
statement following the sale of this Group.
Translation of foreign currency assets and liabilities resulted
in a FRF 2.695 thousand increase in shareholders' equity.
33
<PAGE> 34
OGF/PFG GROUP
1.36 PROFIT INCLUDED IN STOCKS
The profit included in PFG Group coffins stocks received from
CGSM has not been eliminated since this restatement is not
significant.
1.37 PENSION AND RETIREMENT OBLIGATIONS
All French companies in the Group have subscribed an Auxia
contract covering their retirement obligations.
34
<PAGE> 35
OGF/PFG GROUP
2. SUMMARY OF DIFFERENCES BETWEEN FRENCH AND UNITED STATES
GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
The OGF Group financial statements comply with French generally accepted
accounting principles which differ in certain respects from those
applicable in the United States. The differences that may affect the
consolidated net income and stockholders' equity of OGF Group are described
below:
INVESTMENTS
Under French GAAP, debt securities held by the insurance company are valued
at amortized cost. A reserve is made for realized gains and losses in
proportion to the amount of gains and losses attributable to changes in
market rates. The reserve is not reversed unless it is extinguished,
whereby further declines are charged against income. Equity securities and
real estate owned by the insurance company are valued at the lower of cost
or market on a portfolio basis. Corporate investments of the OGF Group are
recorded at the lower of cost or market.
US GAAP requires debt securities to be clasified as either "trading",
"available-for-sale" or "held-to-maturity". Equity securities are classified
as either "available-for-sale" or "trading". Securities classified as
"held-to-maturity" are recorded at amortized cost; securities classified as
"available-for-sale" and "trading" are recorded at market value. Unrealized
gains and losses on "available-for-sale" and "trading" securities are
reflected in stockholders' equity and income, respectively. Real estate
investments are recorded at their depreciated cost.
INSURANCE REVENUES AND LIABILITIES
Under French GAAP, the insurance company accounts for its activities on a
statutorial basis. Mathematical reserves are made for contracts with
policyholders even if the contracts qualify as Investment deposits from
policyholders or insurance contracts. Acquisition costs are deducted from
the liability, the cash value of the contracts being reduced accordingly.
Mathematical reserves are computed using a legal rate of interest in effect
at the date the policy is subscribed (3.5/4.5%). Policyholders are legally
entitled to a policyholder participation equal to 90% of operating income
(excluding investment income) plus 85% of total investment income less
interest credited to the mathematical reserves. This participation is
attributable to the policyholders in proportion to a ratio equal to the
mathematical reserves on the total investments held by the Company.
US GAAP requires the insurance company's contracts to be accounted for as
either investment or long-duration contracts. Investment contracts are
accounted similar to interest-bearing or other financial instruments;
long-duration contracts are recognized in revenues and expenses over the
period that the benefits from such contracts are provided; revenues and
expenses are actuarially determined based on investment yields, mortality
and lapse rates, and expenses.
35
<PAGE> 36
OGF/PFG GROUP
FIXED ASSETS
Under French GAAP, certain fixed assets have been reevaluated. The
re-evaluation is not allowed under US GAAP.
DEFERRED TAXES
OGF's accounting policy for deferred taxes under French GAAP is similar
to US GAAP except for the following item:
- under French GAAP, OGF records deferred tax assets only when the
future realization is probable rather than "more likely than not".
PENSION OBLIGATION
Under French GAAP, pension cost relating to Supplementary Executive
Retirement Plans or to Severance Indemnities are recognized as expensed,
that is when payments are made to beneficiaries or to the wholly owned life
insurance company of the group. Compliance with US GAAP would require the
recognition of a pension cost in conformity with FAS 87 and the
recognition of an accrual or a prepaid for the difference between the fair
value of plan assets and the projected benefit obligation.
POSTRETIREMENT OBLIGATION
The companies of the group participate in medical coverage postretirement
plans in the form of contributions limited to certain amounts paid by the
employee to multi-employer and single employer plans. Those plans are
managed by trade union representatives. In French GAAP, a reserve is made
for future contributions to be paid for current retirees. Under US GAAP, a
supplementary reserve would be made for future retirees in proportion to
services already rendered by employees.
LEASES
French law does not require capitalization of leases for financial
reporting purposes. US GAAP required the capitalization of those leases in
which substantially all the risks and benefits of ownership are transferred
to the lessee.
36
<PAGE> 37
OGF/PFG GROUP
PRESENTATION
The classification of certain items in, and the format of OGF's
consolidated financial statements, vary to some extent from US GAAP. In
addition, US GAAP requires a consolidated statement of cash flow instead
of the consolidated statement of source and application of funds used by
the OGF.
The most significant reporting and presentation practices followed by the
OGF Group which differ from US GAAP are described below:
- AUXIA, the insurance group controlled by OGF, is accounted for by the
equity method. Under US GAAP, majority-owned insurance companies are
fully consolidated.
- The French definition of the term "extraordinary item" is broader than in
US GAAP. Also, under French GAAP, extraordinary items are not presented
net of tax in the income statement.
- Under French GAAP, negative goodwill can be classified as a liability.
Under US GAAP, negative goodwill is written off proportionately against
identifiable long-term assets acquired before a deferred credit for any
remaining negative goodwill can be recorded.
37
<PAGE> 38
OGF/PFG GROUP
3. - INTANGIBLE ASSETS:
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
NEWLY ACQUISITIONS MODIFICATION IN DISPOSALS
JANUARY 1, CONSOLIDATED NEW LOANS CONSOLIDATION AND OTHER DEC. 31
GROSS-VALUE 1994 COMPANIES ETC... PERIMETER REPAYMENTS VARIATIONS 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Concessions, patents, licences 8,258 40 (7,515) (673) 110
Commercial goodwill 161,747 538 7,603 (27,883) (8,619) 542 133,928
Goodwill 417,227 4,341 10,488 (396,133) 1,574 37,497
Other 13,900 863 1,411 (142) (508) 572 16,096
- ----------------------------------------------------------------------------------------------------------------------------------
601,132 5,742 19,542 (431,673) (9,127) 2,015 187,631
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
NEWLY MODIFICATION IN DISPOSALS
JANUARY 1, CONSOLIDATED CONSOLIDATION AND OTHER DEC. 31
AMORTIZATION 1994 COMPANIES AMORTIZATION PERIMETER REPAYMENTS DEDUCTIONS 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Concessions, patents, licences 2,552 32 (2,214) (338) 32
Commercial goodwill 38,785 8,474 (7,868) (2,847) (2) 36,542
Goodwill 71,197 334 2,363 (66,689) 96 7,301
Other 10,732 551 2,755 (55) (481) 284 13,786
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL 123,266 885 13,624 (76,826) (3,328) 40 57,661
- ----------------------------------------------------------------------------------------------------------------------------------
NET VALUE 477,866 4,857 5,918 (354,847) (5,799) 1,975 129,970
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
NEWLY ACQUISITIONS DISPOSALS
JANUARY 1, CONSOLIDATED NEW LOANS OTHER AND OTHER DEC. 31
GROSS VALUE 1993 COMPANIES ETC. ADDITIONS REPAYMENTS DEDUCTIONS 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Formation expenses 60 31 (60) (31) 0
Concessions, patents, licences 8,042 216 8,258
Commercial goodwill 130,186 18,432 20,923 619 (8,072) (341) 161,747
Goodwill 282,601 14,428 127,452(*) (6,377) (877) 417,227
Other 11,082 3,045 19 (131) (115) 13,900
- ----------------------------------------------------------------------------------------------------------------------------------
431,971 32,891 151,636 638 (14,640) (1,364) 601,132
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
NEWLY DISPOSALS
JANUARY 1, CONSOLIDATED OTHER AND OTHER DEC. 31
AMORTIZATION 1993 COMPANIES AMORTIZATION ADDITIONS REPAYMENTS DEDUCTIONS 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Formation expenses 60 7 371 (60) (378) 0
Concessions, patents, licences 1,523 1,028 1 2,552
Commercial goodwill 22,481 4,750 13,410 202 (2,056) (2) 38,785
Goodwill 51,914 19,283 71,197
Other 7,571 3,286 (85) (40) 10,732
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL 83,549 4,757 37,007 574 (2,201) (420) 123,266
- ----------------------------------------------------------------------------------------------------------------------------------
NET VALUE 348,422 28,134 114,629 64 (12,439) (944) 477,866
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(*) Includes 123,908 from the conversion of CPS owned by Plantsbrook.
38
<PAGE> 39
OGF/PFG GROUP
4. - TANGIBLE ASSETS:
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
MODIFICATION
NEWLY ACQUISITIONS IN DISPOSALS
JANUARY 1, CONSOLIDATED NEW LOANS CONSOLIDATION AND OTHER DEC. 31
GROSS-VALUE 1994 COMPANIES ETC... PERIMETER REPAYMENTS VARIATIONS 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Land 137,757 2,170 (42,368) (2,756) 91 94,894
Buildings 882,518 14,653 46,477 (207,400) (11,304) 29,404 754,348
Installations 179,794 2,451 22,702 (140) (9,925) (8,618) 186,264
Other 658,153 6,302 56,748 (178,293) (26,184) 33,620 550,346
In progress 38,952 36,799 (53,254) 22,497
- ----------------------------------------------------------------------------------------------------------------------------------
1,897,174 23,406 164,896 (428,201) (50,169) 1,243 1,608,349
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
MODIFICATION
NEWLY IN DISPOSALS
JANUARY 1, CONSOLIDATED CONSOLIDATION AND OTHER DEC. 31
AMORTIZATION 1994 COMPANIES AMORTIZATION PERIMETER REPAYMENTS DEDUCTIONS 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Land 222 (60) (3) 159
Buildings 291,744 2,135 34,332 (22,718) (6,906) 441 299,028
Installations 113,093 1,392 19,670 (41) (7,270) (8,249) 118,595
Other 336,922 4,403 69,487 (98,486) (22,427) 9,038 298,937
In progress
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL 741,981 7,930 123,489 (121,305) (36,606) 1,230 716,719
- ----------------------------------------------------------------------------------------------------------------------------------
NET VALUE 1,155,193 15,476 41,407 (306,896) (13,563) 13 891,630
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
NEWLY ACQUISITIONS DISPOSALS
JANUARY 1, CONSOLIDATED NEW LOANS OTHER AND OTHER DEC, 31
GROSS VALUE 1993 COMPANIES ETC. ADDITIONS REPAYMENTS DEDUCTIONS 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Land 91,474 37,058 6,825 12,098 (9,490) (208) 137,757
Buildings 636,855 183,689 78,378 19,241 (31,340) (4,305) 882,518
Installations 166,615 794 16,821 1,801 (4,223) (2,014) 179,794
Other 408,729 163,738 114,393 18,698 (46,591) (814) 658,153
In progress 35,329 3,608 1,242 (1,227) 38,952
- ----------------------------------------------------------------------------------------------------------------------------------
1,339,002 385,279 220,025 53,080 (91,644) (8,568) 1,897,174
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
NEWLY DISPOSALS
JANUARY 1, CONSOLIDATED OTHER AND OTHER DEC. 31
AMORTIZATION 1993 COMPANIES AMORTIZATION ADDITIONS REPAYMENTS DEDUCTIONS 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Land 163 44 6 9 222
Buildings 244,130 16,715 39,116 2,777 (10,526) (468) 291,744
Installations 95,422 558 20,829 522 (3,427) (811) 113,093
Other 192,345 82,115 86,793 6,207 (29,821) (717) 336,922
In progress 0 0
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL 532,060 99,432 146,744 9,515 (43,774) (1,996) 741,981
- ----------------------------------------------------------------------------------------------------------------------------------
NET VALUE 806,942 285,847 73,281 43,565 (47,870) (6,572) 1,155,193
- ----------------------------------------------------------------------------------------------------------------------------------
39
</TABLE>
<PAGE> 40
OGF/PFG GROUP
5.- INVESTMENTS:
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
MODIFICATION
NEWLY ACQUISITIONS IN DISPOSALS
JANUARY 1, CONSOLIDATED NEW LOANS CONSOLIDATION AND OTHER DEC. 31
GROSS-VALUE 1994 COMPANIES ETC... PERIMETER REPAYMENTS VARIATIONS 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Non consolidated investments 77,419 12,327 5,920 (5,422) (16,934) 431 73,741
and related receivables
Companies consolidated by the 90,976 (15,694) 75,282
equity method
Loans 8,100 251 (815) (6,129) 21 1,428
Other 17,903 1,031 2,907 (513) (2,105) (746) 18,477
- ----------------------------------------------------------------------------------------------------------------------------------
194,398 13,358 9,078 (6,750) (25,168) (15,988) 168,928
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
MODIFICATION
NEWLY IN DISPOSALS
JANUARY 1, CONSOLIDATED CONSOLIDATION AND OTHER DEC. 31
PROVISIONS FOR LOSS IN VALUE 1994 COMPANIES AMORTIZATION PERIMETER REPAYMENTS DEDUCTIONS 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Non consolidated investments 24,619 2,883 (3,966) 23,536
and related receivables
Loans and other 1,151 365 (199) (273) 1,044
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL 25,770 3,248 (199) (4,239) 24,580
- ----------------------------------------------------------------------------------------------------------------------------------
NET VALUE 168,628 13,358 5,830 (6,551) (20,929) (15,988) 144,348
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
NEWLY ACQUISITIONS DISPOSALS
JANUARY 1, CONSOLIDATED NEW LOANS OTHER AND OTHER DEC. 31
GROSS VALUE 1993 COMPANIES ETC. ADDITIONS REPAYMENTS DEDUCTIONS 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Non consolidated investments
and related receivables 100,396 1,107 6,132 459 (11,431) (19,244) 77,419
Companies consolidated
by the equity method(*) 63,246 27,730 90,976
Loans 7,581 1,852 30 (1,095) (268) 8,100
Other 187,354 26 3,633 1,798 (3,352) (171,556) 17,903
- ----------------------------------------------------------------------------------------------------------------------------------
358,577 1,133 11,617 30,017 (15,878) (191,068) 194,398
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
NEWLY ACQUISITIONS DISPOSALS
PROVISIONS FOR JANUARY 1, CONSOLIDATED NEW LOANS OTHER AND OTHER DEC. 31
LOSS IN VALUE 1993 COMPANIES ETC. ADDITIONS REPAYMENTS DEDUCTIONS 1993
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Non consolidated investments
and related receivables 30,543 2,548 243 (8,715) 24,619
Loans and other 43,750 481 251 (43,307) (24) 1,151
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL 74,293 3,029 494 (52,022) (24) 25,770
- ----------------------------------------------------------------------------------------------------------------------------------
NET VALUE 284,284 1,133 8,588 29,523 36,144 (191,044) 168,628
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* The Plantsbrook Group is fully consolidated in 1993
40
<PAGE> 41
OGF.PFG GROUP
6.- STOCKS:
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
1994 1993
----------------------------------------------------------------------------------------
<S> <C> <C>
Raw materials and supplies 36,417 38,085
Production in progress 637 1,706
Intermediate and finished products 42,317 47,311
Goods for resale 148,614 180,112
----------------------------------------------------------------------------------------
TOTAL GROSS 227,985 267,214
PROVISIONS FOR LOSS OF VALUE (11,965) (18,086)
----------------------------------------------------------------------------------------
TOTAL NET 216,020 249,128
----------------------------------------------------------------------------------------
ANALYSIS BY SECTOR:
Funeral services 129,398 134,131
Woodworking 78,008 87,074
International activity 8,614 16,324
Miscellaneous activities - 11,599
----------------------------------------------------------------------------------------
TOTAL NET 216,020 249,128
----------------------------------------------------------------------------------------
</TABLE>
7.- DEBTORS:
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------
1994 1993
----------------------------------------------------------------------------------------
<S> <C> <C>
CUSTOMER ACCOUNTS BY SECTOR:
Funeral services 226,167 257,987
Woodworking 18,967 14,233
International activity 19,021 84,730
Miscellaneous activities - 6,887
----------------------------------------------------------------------------------------
Total net 264,155 363,837
Provisions for bad debt (25,922) (38,826)
----------------------------------------------------------------------------------------
Total customer accounts net 238,233 325,011
Other debtors 143,797 135,584
----------------------------------------------------------------------------------------
TOTAL DEBTORS 382,030 460,595
----------------------------------------------------------------------------------------
</TABLE>
41
<PAGE> 42
OGF/PFG GROUP
8.- SHORT-TERM INVESTMENTS:
(EXPRESSED IN MILLIONS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
1994 1993
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Investment funds representative of short-term cash
management and holdings in various shares and unit
trusts (total market value of FRF 49.1 millions for 1994
and FRF 51.9 millions for 1993) 47.9 50.5
- -----------------------------------------------------------------------------------------------
</TABLE>
42
<PAGE> 43
OGF/PFG GROUP
9.- MOVEMENTS IN CAPITAL AND RESERVES:
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
1994 1993
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
At beginning of year 1,220,559 1,116,205
Increase in capital (including issue premium) 275 29,249
Dividends paid (64,493) (57,406)
Group profit for year 297,866 128,267
Other (310) 4,244
----------------------------------------------------------------------------------------------------------------------
AT END OF YEAR 1,453,897 1,220,559
----------------------------------------------------------------------------------------------------------------------
</TABLE>
10.- OTHER RESERVES:
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1993
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Legal reserve 24,337 23,919
General reserves 55,694 45,694
Long-term capital gains 175,398 167,376
Capital reserves on consolidation 340,837 299,669
Other 43,725 39,018
----------------------------------------------------------------------------------------------------------------------
TOTAL 639,991 575,676
----------------------------------------------------------------------------------------------------------------------
</TABLE>
43
<PAGE> 44
OGF/PFG GROUP
11.- PROVISIONS FOR LIABILITIES AND CHARGES:
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1993
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PROVISIONS FOR LIABILITIES:
Provision for exchange rate losses on foreign
investments 1,496 2,352
Provision for Group reorganization 12,000 12,000
Provision for liability on subsidiaries (1) - 32,000
Provision for liabilities on employees 10,004 6,980
Other uncertainties (2) 47,061 28,149
Others 9,223 12,221
PROVISIONS FOR CHARGES:
Retirement benefits 17,236 17,113
Cash collected in advance from customers 13,806 12,901
Provision for Group reorganization 3,835 7,397
Other 15,135 10,982
----------------------------------------------------------------------------------------------------------------------
NEGATIVE GOODWILL 21,923 23,908
----------------------------------------------------------------------------------------------------------------------
TOTAL 151,719 166,003
----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The provision for liabilities on subsidiaries for 32.000 thousand
French francs accrued for in 1993 has been entirely recovered in 1994
to compensate for losses generated by the sale of Gemroc.
(2) The provision for other liabilities is principally aimed at covering
risks arising from competition as well as those that may arise due to
the tax review for the period 1991 to 1993 that is currently in
progress.
44
<PAGE> 45
OGF/PFG GROUP
12.- LONG TERM DEBTS:
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
A/ FINANCIAL DEBTS:
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1994 1993
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Bank loans and borrowings: 19,514 92,940
----------------------------------------------------------------------------------------------------------------------
Convertible bonds: - 1,256
----------------------------------------------------------------------------------------------------------------------
Other financial debt: 69,721 195,920
Deferred income taxes: 12,623 15,007
----------------------------------------------------------------------------------------------------------------------
101,858 305,123
B/ OTHER NON FINANCIAL: 31,109 16,659
-------------------
----------------------------------------------------------------------------------------------------------------------
TOTAL 132,967 321,782
----------------------------------------------------------------------------------------------------------------------
</TABLE>
13.- COMMITMENTS AND CONTINGENCIES:
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
DECEMBER 31, 1994
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Given:
Guarantees given to credit institutions FRF 23,6 million
Commitments under lease-purchase contracts FRF 65,9 million including
FRF 37,0 million relating to real estate
Retirement indemnities for OFISA and OFT who have not
subscribed an insurance contract FRF 3,8 million
Retirement indemnities for other companies in the group who have FRF 66,7 million
subscribed life insurance contracts with Auxia FRF 1,9 million concern 1994 payments
Received:
Usage value of leased assets FRF 54,5 million including
FRF 29,9 million relating to real estate
Warranties received (these mainly concern State contracts) FRF 5,1 million
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
</TABLE>
45
<PAGE> 46
OGF/PFG GROUP
14.- TURNOVER ANALYSIS BY ACTIVITY AND GEOGRAPHIC LOCATION:
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
1994 1993
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Funeral services France 2,525,679 2,601,030
Woodworking 86,137 78,981
Financial activity 42 472
International 141,588 554,282
Miscellaneous activities 35,084
-------------------------------------------------------------------------------------------------------
2,753,446 3,269,849
France 2,571,120 2,680,418
Europe except France 134,598 546,680
Outside Europe 47,728 42,751
2,753,446 3,269,849
-------------------------------------------------------------------------------------------------------
</TABLE>
15.- OPERATING COSTS AND EXPENSES:
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
1994 1993
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Consumption of materials or services purchased 1,138,447 1,389,836
Personnel cost 1,125,876 1,260,510
Taxes (other than income taxes) 125,372 144,126
Depreciation, amortization and provisions 158,616 196,469
Other 19,497 12,841
-------------------------------------------------------------------------------------------------------
2,567,808 3,003,782
-------------------------------------------------------------------------------------------------------
</TABLE>
46
<PAGE> 47
OGF/PFG GROUP
16.- FINANCIAL INCOME AND EXPENSES:
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
1994 1993
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dividends and interest income 4,351 3,214
Gains on sales of marketable securities
Other 40,936 39,377
-------------------------------------------------------------------------------------------------------
TOTAL FINANCIAL INCOME 45,287 42,591
-------------------------------------------------------------------------------------------------------
Interest expense 9,147 34,248
Losses on sales of marketable securities
Other 15,002 7,972
-------------------------------------------------------------------------------------------------------
TOTAL FINANCIAL EXPENSES 24,149 42,220
FINANCIAL INCOME NET 21,138 371
</TABLE>
47
<PAGE> 48
OGF/PFG GROUP
17.- TAXATION:
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
A/ PROFIT AND LOSS ACCOUNT 1994 1993
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Currently payable 108,417 118,196
Deferred (1,546) 3,214
-------------------------------------------------------------------------------------------------------
106,871 121,410
-------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
B/ DEFERRED INCOME TAXES DECEMBER 31, DECEMBER 31,
1994 1993
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets: 12,745 13,949
Liabilities: (12,623) (15,061)
-------------------------------------------------------------------------------------------------------
NET ASSET BALANCE (LIABILITY) 122 (1,112)
-------------------------------------------------------------------------------------------------------
</TABLE>
18.- PERSONNEL:
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------
DECEMBER 31 DECEMBER 31
1994 1993
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Funeral services 5,734 5,887
International activity 217 1,486
Coffins and Wood working 347 353
Property and finance 6 6
Miscellaneous activities - 15
-------------------------------------------------------------------------------------------------------
TOTAL 6,304 7,747
-------------------------------------------------------------------------------------------------------
</TABLE>
48
<PAGE> 49
BARBIER FRINAULT & ASSOCIES PGA
Membre d'Arthur Andersen & Co, SC Tour Franklin
Tour Gan - Cedex 13 101, Terrasse Boieldieu - Cedex 11
92082 Paris - La Defense 2 92082 Paris - La Defense 8
We have audited the accompanying consolidated balance sheets of O.G.F. Group
and subsidiaries as of December 31, 1994 and 1993 and the related consolidated
statements of profit and loss and source and application of funds for the years
then ended expressed in French francs.
Our audits were made in accordance with generally accepted auditing standards.
These 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 and related schedules.
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 aforementioned consolidated financial statements present
fairly the financial position of O.G.F. Group and subsidiaries as of December
31, 1994 and 1993 and the results of their operations for the years then ended
in conformity with French generally accepted accounting principles which differ
in certain respects from those followed in the United States (see note 2 to the
consolidated financial statements).
The accompanying consolidated financial statements have been translated from
those issued in French into the English language.
Paris - La Defense, France,
April 6, 1995.
/s/ CHRISTIAN CHOCHON /S/ BRUNO BIZET
- --------------------------- ---------------
BARBIER FRINAULT & ASSOCIES PGA
Christian CHOCHON Bruno BIZET
49
<PAGE> 50
OGF/PFG GROUP
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1995 (UNAUDITED)
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------
June 30,
1995
- ---------------------------------------------------------------
<S> <C>
FIXED ASSETS
Intangible Assets 127,045
Tangible Assets 886,410
Investments 163,418
- ---------------------------------------------------------------
1,176,873
- ---------------------------------------------------------------
CURRENT ASSETS
Stocks 224,250
Debtors 397,519
Investments 39,004
Cash Investments 944,926
- ---------------------------------------------------------------
1,605,699
- ---------------------------------------------------------------
CURRENT LIABILITIES
Bank loans and overdrafts 10,091
Other financial debt 4,665
Trade and other creditors 598,761
- ---------------------------------------------------------------
613,517
- ---------------------------------------------------------------
NET CURRENT ASSETS 992,182
- ---------------------------------------------------------------
Total assets less current liabilities 2,169,055
- ---------------------------------------------------------------
Long-term debt 123,241
- ---------------------------------------------------------------
Provisions for liabilities and charges 158,447
- ---------------------------------------------------------------
TOTAL ASSETS LESS LIABILITIES 1,887,367
- ---------------------------------------------------------------
</TABLE>
50
<PAGE> 51
OGF/PFG GROUP
CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1995 (UNAUDITED)
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
June 30,
1995
- -------------------------------------------------------------------
<S> <C>
CAPITAL AND RESERVES
Called up share capital 243,483
Share premium account 255,914
Revaluation reserve 16,643
Other reserves 867,368
Profit and loss account 77,852
- -------------------------------------------------------------------
Total group's share 1,461,260
- -------------------------------------------------------------------
Minority interests 426,107
- -------------------------------------------------------------------
- -------------------------------------------------------------------
Total stockholders' equity and minority interests 1,887,367
- -------------------------------------------------------------------
</TABLE>
51
<PAGE> 52
OGF/PFG GROUP
CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(Expressed in thousands of French Francs)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
June 30,
1995
- ---------------------------------------------------------------------------
<S> <C>
TURNOVER 1,387,595
Other operating income 4,491
- ---------------------------------------------------------------------------
1,392,086
- ---------------------------------------------------------------------------
OPERATING COSTS AND EXPENSES 1,276,995
- ---------------------------------------------------------------------------
OPERATING PROFIT 115,091
Share of profit of associated companies 8,531
Financial income, net 31,779
- ---------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES
BEFORE EXCEPTIONAL ITEMS AND TAXATION 155,401
Exceptional profit /loss (12,302)
- ---------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 143,099
Taxation 46,621
- ---------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES
AFTER TAXATION 96,478
Minority interests in profit 18,626
- ---------------------------------------------------------------------------
Profit for the year 77,852
- ---------------------------------------------------------------------------
</TABLE>
52
<PAGE> 53
OGF/PFG GROUP
STATEMENT OF SOURCE AND APPLICATION OF FUNDS (UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30, 1995
(EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
June 30,
1995
- -------------------------------------------------------------------------------------
<S> <C>
SOURCE OF FUNDS FROM OPERATIONS 157,612
OTHER SOURCES:
Disposals of fixed assets investments 1,437
Disposals of tangible and intangible fixed assets 31,690
Increase in long-term financial debt 1,445
Other, net 15,877
- -------------------------------------------------------------------------------------
TOTAL SOURCES OF FUNDS 208,061
- -------------------------------------------------------------------------------------
APPLICATION OF FUNDS :
Acquisition of tangible fixed assets 72,681
Acquisition of intangible fixed assets 4,142
Acquisition of long term investments 13,611
Dividends paid 71,827
Dividends paid to minority interests 15,790
Decrease in long term financial debt 6,180
Other, net 19,190
- -------------------------------------------------------------------------------------
TOTAL APPLICATIONS OF FUNDS 203,421
- -------------------------------------------------------------------------------------
(DECREASE) INCREASE IN WORKING CAPITAL 4,640
- -------------------------------------------------------------------------------------
ARISING FROM MOVEMENTS IN:
Net liquid funds (26,492)
Other current assets/liabilities 31,132
- -------------------------------------------------------------------------------------
</TABLE>
53
<PAGE> 54
CONSOLIDATED FINANCIAL STATEMENTS
GIBRALTAR MAUSOLEUM CORPORATION
AND SUBSIDIARIES
YEAR ENDED SEPTEMBER 30, 1994
WITH REPORT OF INDEPENDENT AUDITORS
54
<PAGE> 55
Gibraltar Mausoleum Corporation and Subsidiaries
Consolidated Financial Statements
Year Ended September 30, 1994
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . 56
Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . 57
Consolidated Statement of Income and Retained Earnings . . . . . . . 59
Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . 60
Notes to Consolidated Financial Statements . . . . . . . . . . . . . 61
</TABLE>
55
<PAGE> 56
Report of Independent Auditors
Board of Directors
Gibraltar Mausoleum Corporation
We have audited the accompanying consolidated balance sheet of Gibraltar
Mausoleum Corporation and subsidiaries as of September 30, 1994, and the
related consolidated statements of income and retained earnings and cash flows
for the year then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Gibraltar
Mausoleum Corporation and subsidiaries at September 30, 1994, and the
consolidated results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
December 22, 1994
56
<PAGE> 57
Gibraltar Mausoleum Corporation and Subsidiaries
Consolidated Balance Sheet
September 30, 1994
<TABLE>
<S> <C>
ASSETS
Cash $ 1,494,385
Receivables (Notes 4 and 6):
Installment contracts receivable for cemetery and
funeral home property and merchandise, less
unearned interest of $13,545,956 61,609,286
Commissions and management fees 1,907,627
Allowance for contract cancellations (5,364,020)
-------------
58,152,893
Construction billings receivable 1,512,554
Due from related parties 7,834,410
Other 2,052,566
-------------
69,552,423
Inventories:
Mausoleum spaces, cemetery lots and merchandise 12,035,595
Cost of mausoleums under construction 985,822
-------------
13,021,417
Costs and estimated earnings of uncompleted
mausoleum construction contracts in excess of
related billings 1,564,726
Investments and other assets:
Investment in undeveloped cemetery land 15,456,466
Funeral home trust acquisition costs, less accumulated
amortization of $1,104,346 1,542,139
Funeral home trust accumulated income 3,165,053
Amounts from shareholders, officers and employees 90,985
Intangible and other assets, less accumulated
amortization of $2,778,935 6,615,849
Refundable federal income taxes 1,040,439
Cost in excess of net assets acquired, less
accumulated amortization of $1,185,191 6,486,360
-------------
34,397,291
Property and equipment (Note 4):
Land and buildings 14,376,596
Cemetery improvements 6,335,887
Equipment 11,556,026
Funeral home construction in progress 1,668,124
Accumulated depreciation (11,517,573)
-------------
22,419,060
-------------
$ 142,449,302
=============
</TABLE>
57
<PAGE> 58
<TABLE>
<S> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Note and accounts payable and accrued expenses:
Payable to banks under revolving loan agreement
(Note 4) $ 17,200,000
Accounts payable 4,829,826
Accrued salaries, wages and commissions 2,740,192
Payroll taxes and amounts withheld from payroll 160,213
State and local taxes and interest 5,185,229
Deferred income on sales of preneed funeral services 6,184,608
Amounts due to shareholders, officers and
employees 6,488,236
Minority interest 169,319
------------
42,957,623
Billings of uncompleted mausoleum construction
contracts in excess of costs and estimated earnings 298,722
Estimated costs and deferred income for spaces sold in
mausoleums for which construction has not been
completed, less trust fund deposits of $3,547,741 (Note 7) 5,665,202
Deferred merchandise liability, less trust fund deposits
of $40,354,220 5,045,898
Amounts payable to perpetual care funds 5,095,445
Deferred income taxes (Note 3) 13,918,912
Long-term debt (Note 4) 23,062,590
Shareholders' equity (Notes 4 and 6):
Common Stock, par value $1 per share:
Class A (voting)--authorized 1,250,000 shares;
issued 79,325 shares 79,325
Class B (nonvoting)--authorized 3,750,000 shares;
issued 223,815 shares 223,815
Retained earnings 46,101,770
------------
46,404,910
------------
$142,449,302
============
</TABLE>
See accompanying notes.
58
<PAGE> 59
Gibraltar Mausoleum Corporation and Subsidiaries
Consolidated Statement of Income
and Retained Earnings
Year Ended September 30, 1994
<TABLE>
<S> <C>
Income:
Sales $ 58,230,821
Commissions and management fees (Note 6) 2,842,568
Interest and dividends 12,233,567
Revenues from construction contracts (Note 6) 13,107,933
Other operating income 7,146,803
-------------
93,561,692
Costs and expenses:
Cost of sales 16,324,017
Selling 24,449,548
Cemetery operations and maintenance 9,640,285
Cost of construction contracts (Note 6) 12,638,898
Administrative and general 13,429,653
Interest 3,097,284
Amortization 1,248,649
Depreciation 2,228,569
-------------
83,056,903
-------------
Income before income taxes 10,504,789
Income taxes (Note 3) 3,977,876
-------------
Net income 6,526,913
Retained earnings at beginning of year 43,850,791
Less retirement of Common Stock 4,275,934
-------------
Retained earnings at end of year $ 46,101,770
=============
</TABLE>
See accompanying notes.
59
<PAGE> 60
Gibraltar Mausoleum Corporation and Subsidiaries
Consolidated Statement of Cash Flows
Year Ended September 30, 1994
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income $ 6,526,913
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,477,218
Provision for contract cancellations 394,200
Deferred income taxes (476,261)
Gain on sale of equipment (392,122)
Changes in operating assets and liabilities
net of effects of acquisitions:
Receivables (6,293,652)
Inventories and other assets 2,573,457
Accounts payable and accrued expenses 3,305,325
Refundable federal income taxes (735,439)
-------------
Net cash provided by operating activities 8,379,639
INVESTING ACTIVITIES
Purchase of property and equipment (5,973,115)
Net cash paid for purchase of businesses (2,902,213)
Proceeds from sale of property and equipment 3,077,151
-------------
Net cash used in investing activities (5,798,177)
FINANCING ACTIVITIES
Proceeds from shareholders, officers and
employee advances 4,059,570
Net proceeds on revolving line of credit 2,100,000
Proceeds from long-term borrowings 238,711
Payments on long-term borrowings (7,205,434)
Purchase of Common Stock (1,877,428)
-------------
Net cash used in financing activities (2,684,581)
-------------
Decrease in cash (103,119)
Cash at beginning of year 1,597,504
-------------
Cash at end of year $ 1,494,385
=============
</TABLE>
See accompanying notes.
60
<PAGE> 61
Gibraltar Mausoleum Corporation and Subsidiaries
Notes to Consolidated Financial Statements
September 30, 1994
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Gibraltar
Mausoleum Corporation and Subsidiaries (Gibraltar) after elimination of
intercompany accounts and transactions.
RECEIVABLES
Installment contracts receivable, arising primarily from the preneed sales of
cemetery property and merchandise, are generally due in monthly installments
over periods of one to six years. The contracts require a cash down payment and
generally include simple interest, computed at rates ranging from 9 3/4% to
13 3/4% per annum, which is transferred to income principally on the
sum-of-the-years-digits method. The allowance for contract cancellations is
computed primarily on the basis of historical experience.
INVENTORIES, ESTIMATED COSTS AND DEFERRED INCOME ON MAUSOLEUM CONSTRUCTION
Inventories of mausoleum spaces, cemetery lots and merchandise are recorded
principally at average cost which is not in excess of market.
Estimated costs and deferred construction income for spaces sold in mausoleums
for which construction has not been completed are computed based upon costs
incurred and to be incurred as estimated in the year of the first crypt sale
and recorded as a liability. Unsold crypts are transferred to inventory at cost
when construction is completed. Construction of mausoleums generally commences
two to four years from the date of the first crypt sale.
CONSTRUCTION CONTRACTS
Income from mausoleum construction contracts is recorded on the percentage-of-
completion method. Under this method, income is recognized as work on the
contract progresses. The normal construction period for a mausoleum is 3-12
months.
61
<PAGE> 62
Gibraltar Mausoleum Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS
Intangible assets have arisen in connection with the acquisition of various
companies. These assets are being amortized using the straight-line method over
their estimated useful lives ranging from 5 to 13 years.
COST IN EXCESS OF NET ASSETS ACQUIRED
Cost in excess of net assets acquired is being amortized on a straight-line
basis over a forty-year period.
PRENEED FUNERAL SALES
Sales of preneed funeral services and certain funeral merchandise and the
receivables related thereto are not recorded until the service and merchandise
are provided. State laws require that 70% to 100% of amounts received be
deposited into trust funds for the purchase of the merchandise and services.
The funds are withdrawn from the trust at the time the merchandise and services
are provided and the sale is recognized.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation of buildings and
equipment is provided on a straight-line basis over the expected useful lives
of the respective assets.
DEFERRED MERCHANDISE LIABILITY
Cemetery merchandise and services may be sold on a preneed basis. At the time
of sale and receipt of the down payment, the balance of the contract is
recorded as a receivable and the selling price is recorded as a sale. The
estimated cost of merchandise and services which have been sold but not
delivered is charged to cost of sales and recorded as a liability. Certain
states require the deposit of a portion of the cash received into an escrow
fund. The funds are withdrawn at the time the merchandise is purchased or the
services are performed. These deposits have been offset against the related
liabilities, as they are restricted in usage to satisfaction of these
liabilities.
62
<PAGE> 63
Gibraltar Mausoleum Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
AMOUNTS PAYABLE TO PERPETUAL CARE FUNDS
Amounts due to perpetual care funds are recorded on the accrual basis. Deposits
are made periodically to the funds as collections are received on the
installment contracts. The perpetual care funds are irrevocably set aside for
the benefit of lot and crypt owners to insure the maintenance of each cemetery.
The funds are invested by the respective trustees and investment advisors who
periodically remit the income of the funds to each cemetery for its cost of
operation and maintenance. The market value of such funds was $36,374,000 at
September 30, 1994. Perpetual care trust funds are not included in the
consolidated financial statements.
2. ACQUISITIONS
Gibraltar purchased (for cash and notes aggregating $5,600,000) the following
operating cemeteries and funeral homes:
<TABLE>
<CAPTION>
DATE NAME LOCATION TYPE
- ----------------- ------------------------ -------------------- ------------
<S> <C> <C> <C>
August 29, 1994 Greenlawn Memory Gardens N. Kingsville, OH Cemetery
August 29, 1994 Knollwood Cemetery Mayfield Heights, OH Combinations
March 23, 1994 Palms Memorial Park Sarasota, FL Cemetery
</TABLE>
In connection with the acquisitions, Gibraltar acquired assets with fair values
aggregating approximately $8,575,000 and assumed liabilities of $2,975,000.
All acquisitions have been accounted for using the purchase method of
accounting. The results of operations for all acquisitions since the dates of
acquisition have been included in the consolidated results of operations. The
following represents the unaudited pro forma results of operations for the year
ended September 30, 1994 as if the business combinations had occurred as of
October 1, 1993:
<TABLE>
<S> <C>
Sales $61,075,228
===========
Net income $ 6,503,616
===========
</TABLE>
The pro forma results do not purport to present the Company's actual operating
results had the acquisitions been made at the beginning of 1994, or the results
that may be expected in the future.
63
<PAGE> 64
Gibraltar Mausoleum Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. INCOME TAXES
Gibraltar accounts for income taxes using the liability method. Deferred income
taxes reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Significant components of the deferred
tax assets and liabilities as of September 30, 1994 are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Preneed funeral services $ 6,284,533
Contract cancellation reserve 1,541,865
Other 2,989,783
-----------
10,816,181
Deferred tax liabilities:
Deferred revenue 17,776,710
Undeveloped cemetery land 1,146,291
Depreciation 1,263,725
Other 4,548,367
-----------
24,735,093
-----------
Net deferred tax liability $13,918,912
===========
</TABLE>
64
<PAGE> 65
Gibraltar Mausoleum Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
3. INCOME TAXES (CONTINUED)
The following is a summary of the components of the provision for income taxes
as of September 30, 1994:
<TABLE>
<S> <C>
Federal:
Current $3,807,176
Deferred (476,261)
State 646,961
----------
$3,977,876
==========
</TABLE>
The following is a reconciliation of income tax computed at the U.S. statutory
tax rate to income tax expense for the year ended September 30, 1994.
<TABLE>
<CAPTION>
AMOUNT PERCENTAGE
---------- ----------
<S> <C> <C>
Federal income tax at the statutory rate $3,676,676 35.0%
Tax exempt interest and dividend exclusion (368,996) (3.5)
State taxes, net of effect of federal income taxes 420,524 4.0
Other, net 249,672 2.4
---------- ----
Income tax expense $3,977,876 37.9%
========== ====
</TABLE>
Gibraltar made income tax payments in the amount of $6,112,438 in 1994.
4. DEBT ARRANGEMENTS
Under the terms of a revolving loan agreement with its major banks, Gibraltar
may borrow up to $25,000,000 at a variable rate (6.75% at September 30, 1994).
The maturity date of the revolving loan agreement is February 28, 1996. This
revolving loan agreement has a 3/8% annual facility fee. The loan agreement
contains, among other terms, various requirements which include the maintenance
of the net worth of Gibraltar above stated minimums. The agreement is
collateralized by a pledge of certain receivables, assignment of certain
management agreements, several funeral homes, assignment of common stock of
some subsidiaries and the assignment of life insurance carried on the lives of
two officers. Borrowings under the revolving loan total $17,200,000 at
September 30, 1994.
65
<PAGE> 66
Gibraltar Mausoleum Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
4. DEBT ARRANGEMENTS (CONTINUED)
Long-term debt of Gibraltar and its subsidiaries as of September 30, 1994 is
summarized as follows:
<TABLE>
<S> <C>
Floating Rate Option Note Issue payable $769,000
semi-annually, plus interest and fees at variable rates
(5.18% at September 30, 1994). This loan expires and the
remaining principal is due January 5, 1996, but may
be extended at the lender's discretion. $17,692,000
7.5% notes payable to sellers incurred in the
acquisition of cemeteries or funeral homes 2,983,139
Thirty other notes, with varying interest rates, payable
over various terms, certain notes collateralized with
common stock of subsidiaries and real and personal
property. 2,387,451
-----------
$23,062,590
===========
</TABLE>
Maturities on long-term debt for the five fiscal years subsequent to September
30, 1994 are: 1995, $2,162,548; 1996, $2,169,242; 1997, $2,153,101; 1998,
$2,094,266, 1999, $2,088,624.
Interest paid during 1994 was $2,791,893.
66
<PAGE> 67
Gibraltar Mausoleum Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
5. PREARRANGED FUNERAL TRUSTS
The following summary reflects cumulative prearranged funeral and cremation
services and merchandise sold but not fulfilled which are not included in the
consolidated financial statements as of September 30, 1994.
<TABLE>
<S> <C>
Net services and merchandise sold but not fulfilled $ 66,985,000
Less amounts not collected 21,177,000
Less amounts collected not required to be trusted 6,185,000
------------
Trust fund amounts (at cost) $ 39,623,000
============
</TABLE>
Amounts trusted are invested primarily in debt securities, equity securities
and limited partnerships. Such investments are subject to the risk that the
current market value could fall below the net book value. At September 30,
1994, the aggregate market value of these investments was $39,364,000.
6. RELATED PARTY TRANSACTIONS
Gibraltar participates in management and sales agreements with several
non-owned cemeteries for which certain officers of Gibraltar serve as officers
and directors. As part of these agreements, Gibraltar maintains the financial
records of these cemeteries and performs all administrative and sales duties.
Gibraltar earned net management fee and commission income of approximately
$1,495,000 in 1994, resulting from transactions with the non-owned cemeteries.
Amounts receivable from these entities at September 30, 1994 totaled $3,378,000.
Gibraltar has made net cash advances to other businesses in which certain
officers and directors of Gibraltar have ownership interests and affiliated
real estate partnerships which are classified in other accounts and notes
receivable. Amounts receivable for these advances were $6,335,000 at September
30, 1994. Gibraltar has also guaranteed the repayment of a $2,000,000 mortgage
loan for one of these businesses. Amounts due directly to/from shareholders,
officers and employees are classified separately in the balance sheet.
Gibraltar purchased and retired 4,000 shares of Class A common stock and 26,160
shares of Class B common stock for cash and notes totalling $4,306,094 during
1994.
67
<PAGE> 68
Gibraltar Mausoleum Corporation and Subsidiaries
Notes to Consolidated Financial Statements (continued)
6. RELATED PARTY TRANSACTIONS (CONTINUED)
Gibraltar constructs mausoleums and funeral homes for its owned and managed
cemeteries as well as for several cemeteries owned by certain officers and
directors of Gibraltar. In 1994, revenues from construction contracts with
these cemeteries were $5,914,000, and cost of construction contracts includes
costs associated with these contracts in the amount of $5,615,000.
7. COMMITMENTS
Gibraltar has accrued estimated costs for lawn crypts and crypts sold in
mausoleums for which construction has not been completed. These estimated costs
will be financed by existing receivables and collections from new sales
contracts.
8. EMPLOYEES' PROFIT SHARING-SAVINGS PLANS
The Company maintains defined contribution profit sharing-savings plans for all
full-time employees who are at least 21 years of age and have been employed for
one or more years.
Participating employees may elect to redirect salary from 1% to 20% of the
participant's eligible earnings before income taxes and contribute that amount
to the Plans on behalf of the participant. The Company will make a matching
contribution into the Plans in an amount equal to 40 percent of the first 2
percent and 25 percent of the next 2 percent of salary redirection. In
addition, the Company may, by action of the Board of Directors, authorize
profit sharing contributions to the Plans out of net profits. Gibraltar has
recorded expense related to these plans amounting to $283,000 for 1994.
9. EVENT (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT
AUDITOR'S REPORT.
On June 7, 1995 Service Corporation International entered into an agreement to
purchase Gibraltar, subject to approval by various government and regulatory
agencies.
68
<PAGE> 69
Unaudited Consolidated Financial Statements
Gibraltar Mausoleum Corporation
and Subsidiaries
Six Months Ended March 31, 1995
69
<PAGE> 70
GIBRALTAR MAUSOLEUM CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED MARCH 31, 1995
CONTENTS
<TABLE>
<S> <C>
Consolidated Balance Sheet............................................ 71
Consolidated Statement of Income...................................... 73
Consolidated Statement of Cash Flows.................................. 74
</TABLE>
70
<PAGE> 71
GIBRALTAR MAUSOLEUM CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEET
March 31, 1995
(Thousands)
<TABLE>
<S> <C>
ASSETS
Cash............................................................... $ 1,110
Receivables:
Installments contracts receivable for cemetery and
funeral home property and merchandise, less unearned
interest and allowance for contract cancellations.............. 59,458
Construction billings receivable................................. 1,273
Other accounts and notes receivable.............................. 6,266
--------
66,997
Inventories:
Mausoleum spaces, cemetery lots and merchandise.................. 12,153
Cost of mausoleums under construction............................ 2,565
--------
14,718
Costs and estimated earnings of uncompleted
mausoleum construction contracts in excess of
related billings................................................. 424
Investments and other assets:
Investment in undeveloped cemetery land.......................... 15,396
Funeral home trust acquisition costs, less amoritization......... 1,171
Funeral home trust accumulated income............................ 3,878
Intangible and other assets, less amortization................... 7,364
Costs in excess of net assets acquired, less
accumulated amortization....................................... 9,900
--------
37,709
Property and equipment, less accumulated depreciation.............. 22,367
--------
$143,325
========
</TABLE>
71
<PAGE> 72
<TABLE>
<S> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Note and accounts payable and accrued expenses:
Payable to banks under revolving loan agreement.................... $ 15,700
Accounts payable and accrued liabilities........................... 10,755
Deferred income on sales of preneed funeral services............... 6,935
Amounts due to shareholders, officers and employees................ 2,406
Minority interest.................................................. 225
--------
36,021
Billings of uncompleted mausoleum construction
contracts in excess of costs and estimated earnings................ -
Estimated costs and deferred income for spaces sold in
mausoleums for which construction has not been
completed, less trust fund deposits................................ 6,518
Deferred merchandise liability, less trust fund deposits............. 5,590
Amounts payable to perpetual care funds.............................. 5,640
Deferred income taxes................................................ 14,329
Long-term debt....................................................... 26,220
Shareholders' equity................................................. 49,007
--------
$143,325
========
</TABLE>
72
<PAGE> 73
GIBRALTAR MAUSOLEUM CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF INCOME
For the Six Months Ended March 31, 1995
(Thousands)
<TABLE>
<S> <C>
Income:
Sales $29,723
Commissions and management fees 1,354
Interest and dividends 5,231
Net revenues from construction contracts 289
Other operating income 4,844
-------
41,441
Costs and expenses:
Cost of sales 8,700
Selling 13,140
Cemetery operations and maintenance 4,797
Administrative and general 6,844
Interest 1,909
Depreciation and amortization 1,561
-------
36,951
-------
Income before income taxes 4,490
Income taxes 1,876
-------
Net income $ 2,614
=======
</TABLE>
73
<PAGE> 74
GIBRALTAR MAUSOLEUM CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Six Months Ended March 31, 1995
(Thousands)
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net income $ 2,614
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,561
Provision for contract cancellations 463
Deferred income taxes 1,039
Gain on sale of equipment (349)
Changes in operating assets and liabilities
net of effects of acquisitions:
Receivables 2,935
Inventories and other assets (5,843)
Accounts payable and accrued expenses 602
--------
Net cash provided by operating activities 3,022
INVESTING ACTIVITIES
Net change in property and equipment (954)
--------
Net cash used in investing activities (954)
FINANCING ACTIVITIES
Payments to shareholders, officers and
employee advances (731)
Net payments on revolving line of credit (1,500)
Proceeds from long-term borrowings 991
Payments on long-term borrowings (1,200)
Purchase of Common Stock (12)
--------
Net cash used in financing activities (2,452)
--------
(Decrease) in cash (384)
Cash at beginning of period 1,494
--------
Cash at end of period $ 1,110
========
</TABLE>
74
<PAGE> 75
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
September 5, 1995
SERVICE CORPORATION INTERNATIONAL
/s/ George R. Champagne
--------------------------------------
George R. Champagne
Senior Vice President
Chief Financial Officer
(Principal Financial Officer)
75
<PAGE> 76
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
-------- -----------
<S> <C>
2.1 - Memorandum of Understanding Relating to the
Transfer of Shares, dated July 10, 1995, and
Additional Memorandum of Understanding Relating to
the Transfer of Shares, dated July 12,
1995, each of which is between Service Corporation
International and Lyonnaise des Eaux.
23.1 - Consent of Barbier Frinault & Associes,
Membres d'Arthur Andersen & Co, SC and PGA.
23.2 - Consent of Ernst & Young LLP.
</TABLE>
<PAGE> 1
EXHIBIT 2.1
Translation
Original in French
July 10, 1995
MEMORANDUM OF UNDERSTANDING
RELATING TO
THE TRANSFER OF SHARES
BETWEEN
LYONNAISE DES EAUX
AND
________________
(Purchaser)
_______________, 1995
<PAGE> 2
MEMORANDUM OF UNDERSTANDING
RELATING TO
THE TRANSFER OF SHARES
BY AND BETWEEN THE UNDERSIGNED:
LYONNAISE DE EAUX S.A., a societe anonyme [share corporation] with a registered
capital of FRF 3,407,276,100, having its registered office at 72, avenue de la
Liberte, 92000 Nanterre, registered in the Nanterre Commercial Registry under
Number B 542 062 559, and represented by Mr. Philippe Brongniart,
hereinafter referred to as "LDE"),
Party of the first part
AND
SERVICE CORPORATION INTERNATIONAL, a Company registered under the Law of
Texas, with a registered capital of $200,000,000, having its registered office
at 1929 Allen Parkway, Houston, Texas 77019, PO Box 130548, or any affiliate it
may substitute and represented by Mr. Robert L. Waltrip, the Chairman of the
Board and Chief Executive Officer.
hereinafter referred to as "Purchaser"),
Party of the second part
RECITALS
Whereas, LDE holds 1,247,439 shares (hereinafter, the "Shares") representing
approximately 51.23% of the capital of Omnium de Gestion et de Financement, a
societe anonyme with a registered capital of 243,483,100 [French] francs,
having its registered office at 66, boulevard Richard Lenoir, 75011 Paris,
registered in the Paris Commercial Registry under Number 542 076 799 ("OGF")
and whose shares are listed on the second market of the Paris Bourse;
Whereas, OGF holds 1,224,626 shares representing approximately 64.98% of the
capital of Pompes Funebres Generales, a societe anonyme with a registered
capital of 94,220,300 [French] francs, having its registered office at 66,
boulevard Richard Lenoir, 75011 Paris,
2
<PAGE> 3
registered in the Paris Commercial Registry under Number 542 065 792 ("PFG")
and whose shares are listed on the over the counter market of the Paris
Bourse;
Whereas, OGF and PFG hold certain assets and equity interests related to the
operation of funeral services in France and abroad;
And Whereas, Purchaser has informed LDE that it is interested in acquiring the
totality of the Shares, and the Parties have entered into this Memorandum of
Understanding in order to determine their respective commitments regarding the
sale and purchase of the Shares.
NOW, THEREFORE, IT HAS BEEN AGREED AS FOLLOWS:
ARTICLE 1 - COMMITMENTS
1.1 COMMITMENTS OF THE PURCHASER
The Purchaser undertakes to file a proposed tender offer for the totality of
the equity securities in OGF ("OGF Tender Offer") according to Articles 5.2.1
and seq. of the General Regulations of the Conseil des Bourses de Valeurs
(CBV), subject to the fulfillment of the conditions set forth in Article 2
below.
The Purchaser reserves, in application of Article 5.2.5 of the General
Regulations of the CBV, the right to withdraw its offer in the case where the
number of the OGF securities tendered in response to said offer represents
less than 66.67% of the voting rights of OGF.
The opening and the implementation of the OGF Tender Offer is subordinated
to the fulfillment of the conditions precedent set forth in Article 2 below.
Purchaser shall be fully responsible for the statutory and regulatory
obligations resulting for Purchaser from this tender offer, pursuant, inter
alia, to the General Rules of the Conseil des Bourses de Valeurs [Securities
Exchange Board, a self-regulatory organization overseeing French Bourses].
Purchaser here and now agrees to fully satisfy such obligations and in
particular to file a tender offer on PFG's shares.
1.2 COMMITMENTS OF LDE
LDE undertakes irrevocably and unconditionally, to tender the totality of the
equity securities of OGF which it holds (the "Shares") to the OGF Tender
Offer filed by the Purchaser and such, in the case where one or several
competing tender offer have been declared acceptable by the CBV as long as
the Purchaser shall make a higher bid than such competing offers.
3
<PAGE> 4
LDE undertakes to provide to the Purchaser all necessary assistance with
relevant administrative authorities for the implementation of the entire
transaction and to assist Purchaser in securing the tender of a many shares of
OGF and PFG so that the Purchaser may, to the maximum extent possible, acquire
more than 95 percent of the voting rights thereof.
LDE undertakes that its representatives at the Board of Directors of OGF shall
issue a favorable recommendation on the OGF Tender Offer initiated by the
Purchaser and LDE will make its best efforts that the other members issue a
similar recommendation;
LDE undertakes that the representatives of OGF at the Board of Directors of
PFG shall issue a favorable recommendation on the PFG Tender Offer initiated
by the Purchaser and will make its best effort that the other members issue a
similar recommendation. LDE undertakes that OGF shall not tender the PGF
securities that it holds, to the OGF Tender Offer.
LDE undertakes to obtain from one or several PFG shareholders other than OGF,
that they tender a number of PFG shares to the public offer initiated by the
Purchaser in application of Article 5-3-7 of the General Rules of the CBV in
order that the Purchaser holds at least 66.67% of the voting rights of PFG.
LDE undertakes that the Purchaser will have the ability to meet with the
management of the Companies when this agreement will be disclosed to the
public.
LDE undertakes that the Purchaser shall have the ability to make site visits
to different operational locations that the Purchaser will choose in
consultation with LDE.
LDE will ensure to that the auditors of OGF and PFG agree to co-operate with
the Purchaser and its auditors as soon as possible on the preparation of
financial statements required by the Purchaser to be filed with the Security
Exchange Commission.
1.3 PRICE
The price offered will be 950 French francs per OGF share.
1.4 PRIOR TRANSFER OF SHAREHOLDINGS HELD BY OGF IN THE COMPANIES OF THE LDE
GROUP.
The parties agree, at the latest, on the settlement date for the delivery
of the securities tendered to the OGF Public Offer (hereinafter the "Transfer
Date"), that the Shareholdings held by OGF in companies directly or
indirectly controlled by LDE as indicated in Appendix 1.4, will be
transferred to LDE or any other company that will be substituted for LDE, at
a price equal to their net accounting value as set forth in OGF's financial
statements for the 1994 fiscal year, as indicated in Appendix 1.4 and with
respect to the 9,090 Metropole Television (M6) shares held by OGF at a price
equal to
4
<PAGE> 5
the average first trading price of the M6 shares during the previous 30
trading days (and including) the Transfer Date.
ARTICLE 2 - CONTRIBUTION OF SUPPLEMENTAL SHARES AND CONDITIONS PRECEDENT
The opening and the execution of the OGF Tender Offer are subject to the
following conditions precedent being fulfilled on or before November 15,
1995:
(i) approval decision from the Insurance Department of the Ministry of
Economic Affairs and Finance regarding the indirect change of control
of Groupe Auxia, a societe anonyme governed by the Insurance Code and
having its registered office at 18, allee Darius Milhaud, 75019 Paris;
and
(ii) explicit or tacit approval of the contemplated transfer from the
Treasury Department of the Ministry of Economic Affairs and Finance
under direct foreign investments in France.
(iii) the approval of the OGF Tender Offer filed by the Purchaser on the
terms and conditions mentioned on this agreement from the Conseil des
Bourses de Valeurs (CBV).
ARTICLE 3 - REPRESENTATIONS AND WARRANTIES BY LDE
LDE hereby represents and warrants that at the date hereof:
3.1 EXISTENCE, LEGAL CAPACITY, POWER
OGF and PFG (hereinafter [collectively] referred to as the "COMPANIES") as
well as their main subsidiaries listed in Appendix B hereto (the "MAIN
SUBSIDIARIES") are duly organized and existing under the laws and regulations
applicable to them and are in good standing in regard to such laws and
regulations.
The Companies and Main Subsidiaries possess all necessary powers and the full
requisite legal capacity to conduct their activities in the manner in which
they are currently conducted.
The Companies and Subsidiaries, other than those stated in Appendix B, are
not parties to any shareholders agreement, voting rights agreement, joint
venture agreement or any agreement with competitors in order to affect the
competition.
5
<PAGE> 6
3.2 CAPITAL STRUCTURE
The shares of the Companies and of the Main Subsidiaries were validly issued
and are fully paid-up, freely transferable, and free of any security
interests, prior claims, pledges, escrow agreements, charges, options, liens,
or other rights in favor of third parties, whether written or oral.
Apart from 42,363 certificates of deposit and certificates of voting rights
issued by OGF and currently valid, the Companies and Main Subsidiaries have
neither issued nor put into circulation any shares, ordinary bonds, bonds
convertible into or redeemable by shares or other securities of the Companies
and Subsidiaries.
Except for the stock option plans described in Appendix 3.2, the Companies or
Main Subsidiaries have not granted any option or other title confering the
right to subscribe for, purchase, or acquire any shares, ordinary bonds,
convertible bonds, or bonds capable of being redeemed in, or exchanged for,
shares or other securities of the Companies or Main Subsidiaries.
3.3 TRANSFER OF THE SHARES
The Shares represent approximately 51.23% of the capital of OGF and 59.98% of
the voting rights therein. LDE owns the Shares and has the right to transfer
them without any restriction whatsoever and possesses full power and
authority to execute and perform this Memorandum of Understanding and all
other deeds and instruments relating hereto.
For the Purchaser, the transfer of the Shares to Purchaser shall not entail
any other responsibilities or obligations to the other shareholders of OGF or
to the shareholders of PFG than those resulting from application of the stock
exchange regulations in force as of the Transfer Date.
3.4 FINANCIAL STATEMENTS
The consolidated income statements and balance sheets and accounts (and notes
thereto) of the Companies and Main Subsidiaries for the fiscal years ended
December 31, 1992, 1993, and 1994 (hereinafter collectively referred to as
the "FINANCIAL STATEMENTS") have been published and certified by the
statutory auditors of each of the Companies and Main Subsidiaries concerned.
LDE represents that The Financial Statements for 1994 are complete and
accurate, and faithfully reflect the financial position of the Companies and
the Main Subsidiaries. The same rules and accounting methods have been
applied during the above-mentioned three fiscal years with the exception of
the modification provided in Appendix 3.4.
The operating results at the date of April 30, 1995 is profitable.
6
<PAGE> 7
The Companies and Subsidiaries have made no off balance sheet commitments not
included in the notes to the accounts described in this Article or in
Appendix 3.4bis.
On June 30, 1995 OGF had at its disposal a net cash position as defined in
Appendix 3.4ter of an amount in excess of FF 780 million.
The need of the consolidated net working capital as defined in Appendix 3.4
quater, on June 1995, will not have varied since December 31, 1994 as a
result of actions the sole purpose of which would have been to artifically
increase the cash position.
3.5 NO MAJOR CHANGES
Between December 31, 1994 and the Date of this agreement, the Companies and
Main Subsidiaries have been managed under normal conditions and, consistent
with their practices during the last three fiscal years, and, specifically
have not undertaken any disposition or acquisition of any significant
tangible or intangible assets for an amount in excess of FF2 million except
as stated in Appendix 3.5, have not accorded any salary increases and have
not taken any measures beyond the normal course of the companies' business as
conducted during the said fiscal years. Furthermore, the Companies and the
Main Subsidiaries shall not have decided to distribute and have not
distributed dividends for 1994 and 1995 fiscal years other than those shown
in Appendix 3.5bis.
3.6 TAXES AND SOCIAL SECURITY CHARGES
Subject to the exceptions stated in the Financial Statements and subject to
the Tax and Social Security reassessments which the Companies and Main
Subsidiaries have been the subject of since January 1, 1992 as described in
Appendix 3.6:
(i) the Companies and Main Subsidiaries have filed all requisite tax
returns and customs declarations with the proper government authorities
in the prescribed form and in a timely manner, and have filed all
declarations and schedules required by the social security bodies; and
certify the exactitude of their contents and in full accordance with the
legislation and regulations in force;
(ii) the Companies and Main Subsidiaries have paid, in a timely manner, all
taxes, levies, and contributions owed by them, or have booked
appropriate provisions in that respect according to rules of prudence
and pursuant to custom;
3.7 INSOLVENCY
None of the Companies or Main Subsidiaries has suspended payments or entered
into a scheme of conciliation with its creditors, nor is any of them in
judicial reorganization, or liquidation, or is threatened with becoming the
object of such proceedings.
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<PAGE> 8
3.8 ASSETS
The Companies and Main Subsidiaries have good title to all of the assets
shown in their accounts. Each asset of which the amount is in excess of FF1
million, is not encumbered by any pledge, guarantee, security or other charge
except for the financing for the acquisition of certain assets as stated in
Appendix 3.8.
3.8.1 REAL ESTATE ASSETS
The Real Estate Operating Assets, as listed in Appendix 3.8.1, and the other
properties directly or indirectly owned by the Companies and Main
Subsidiaries, or which they are entitled to acquire (pursuant to leasing
agreements or undertakings to sell) or are under an obligation to acquire
(pursuant to undertakings to purchase), as listed in Appendix 3.8.1 bis,
(i) are suitable for the uses for which they are intended, and (ii) are not
the subject of, nor threatened with being the subject of, any expropriation
proceeding or any zoning plan that could in any way restrict their use except
as stated in Appendix 3.8.1ter.
3.8.2 TRADEMARKS AND OTHER INDUSTRIAL PROPERTY RIGHTS
The Companies and Main Subsidiaries own, or are duly licensed to use
exclusively all of the main trademarks, designs, patents, manufacturing
processes and any other property rights used by them, as listed in Appendix
3.8.2.
All of the trademarks and other industrial property rights held by the
Companies and the Main Subsidiaries are now, and at the Transfer Date shall
be, duly protected according to the regulations in force. Neither the
Companies nor the Main Subsidiaries are susceptible to infringe any
third-party industrial or intellectual property rights.
3.9 LITIGATION
Save as stated in Appendix 3.9, no judicial, administrative, or arbitration
proceedings, claim, investigation, or any injunction, in which the amount
claimed in any one proceeding exceeds two hundred thousand (200,000) [French]
francs have been initiated against the Companies or Main Subsidiaries, and no
such proceedings are threatened inter alia on the basis of similar facts for
which proceedings are pending, against the Companies or Main Subsidiaries.
3.10 COMPLIANCE WITH REGULATIONS AND CONTRACTS
The Companies and Main Subsidiaries: can validly engage in and pursue their
business activities, without restriction;
They comply, with all laws and regulations applicable to their business
activities and specifically in environmental matters; and hold all licenses,
permits, and authorizations required for the conduct of their business
activities except as stated in Appendix 3.10.
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<PAGE> 9
Such licenses, permits, and authorizations are in full force and effect and
no proceedings to revoke or restrict any of them are pending or threatened.
The Companies and Main Subsidiaries have carried out all publicity,
declarations, registrations, filings, and other formalities required under
the applicable regulations for the conduct and continuation of their
activities.
No main agreement concluded by the Companies or the Main Subsidiaries may be
fully terminated for reason of a change in control of the Companies or the
Main Subsidiaries.
LDE represents that there are no contracts or agreements directly or
indirectly binding LDE to the Companies or Main Subsidiaries, except as
stated in Appendix 3.10.3. Such agreements or contracts shall be terminated
without any compensation or maintained in force under the same terms and
conditions except for the agreements stated in Appendix 3.10-2 which could be
fully terminated at the Transfer Date, both at the exclusive request of the
Purchaser, the Companies or Main Subsidiaries. Furthermore, any receivables
or other obligations owed by LDE or any company within the LDE group are
repayable on demand from the Companies or the Main Subsidiaries.
3.11 WAGES AND SALARIES
The Companies and the Main Subsidiaries have not entered into any contract
with any of their employees and/or legal representatives which, in the event
of termination, provides for a longer notice period or for greater
compensation [severance pay] than the notice period or compensation
[severance pay] provided for by law or by the applicable collective
bargaining agreements, save as stated in Appendix 3.11.
LDE undertakes to bear all the compensation which would be paid by the
Companies should the current OGF Chairman leave OGF.
3.12 LOANS AND GUARANTEES
Neither the Companies nor their Main Subsidiaries have granted any loan,
advance, suretyship, endorsement, or guarantee, in any form whatsoever, to
any director, officer, employee, or shareholder of the Companies or Main
Subsidiaries except as stated in Appendix 3.12.
3.13 INSURANCE
Each of the Companies and Main Subsidiaries is adequately insured for all its
property and operations. The insurance policies taken out are consistent with
those usually taken out in the relevant business sector.
Since January 1, 1992, no premium has been increased because of any loss
sustained by each of the Companies or Subsidiaries in respect of their
activities.
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<PAGE> 10
3.14 MANAGEMENT UNTIL THE TRANSFER DATE
Until the date of publication of the notice issued by the Societe des Bourses
Francaises announcing the result of the OGF Tender Offer (the "Transfer
Date"), LDE agrees that the Companies and Main Subsidiaries shall be managed
with due care and diligence and in the normal course of business and that the
Companies and Main Subsidiaries shall not make any investment or disinvestment
out of the normal course of business and for an amount in excess of FF2
million.
LDE undertakes that the OGF management do their best efforts for filing in due
time with the State Representative accreditation's applications required by
Law number 93-23 of January 8, 1993 relating to the operations of external
funeral services and its Decrees with the relevant authorities.
LDE declares that the Companies meet all the necessary criterion as are
required by Law to obtain the proper accreditations.
ARTICLE 4 - IMPLEMENTATION
4.1 INDEMNIFICATION
A. In addition to the commitment stated in Article 3.11, LDE agrees to
indemnify Purchaser, according to the terms hereinafter defined, for any
loss sustained by Purchaser as a result of, for each of the Companies and/or
the Main Subsidiaries, (i) any supplementary liabilities or any deficiency
of assets having an origin or cause prior to December 31, 1994 that should
be triggered by a third party claim and (ii) any inaccuracy in any of the
representations and warranties made under Article 3 hereof, such
representations and warranties being considered as extended until the
Transfer Date.
B. The following provisions shall be taken into account in determining the
amount of any compensation payable by LDE:
(a) The amount of the sums due shall be based on the liabilities actually
remaining for the account of the Companies after taking into
consideration the actual decrease of taxes on the Companies due for the
current fiscal year for which the supplementary liabilities or
insufficiency of assets will have been accounted for.
Any tax adjustments of whatever nature which translate into a mere
time-lag in assessment (or which result in a mere transfer of profit
from one fiscal year to another) are excluded from the scope of this
Contract insofar as they do not translate into a definitive charge in
principal, only the penalties, or late-payment interest would result in
indemnification.
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(b) The indemnification shall be reduced by any amount of the reserves
shown on the Financial Statement for 1994 other than the reserves for
contengencies shown under the Headings "aleas divers" (in the amount of
FF 47,061,000), which shall have become without any object. The amount
of the reduction related to the reserves shown under the headings
"Provisions pour impots et cotisations latents" (in the amount of FF
4,592,000) shall be determined by taking into account the amount of
percentage of OGF's capital transferred by LDE.
(c) The indemnification of the Purchaser shall be entire irrespective of
the percentage of OGF's capital transferred by LDE and the percentage
of PFG's capital held by OGF as of the Transfer Date except for the tax
reassessments for which the indemnification shall be determined by
taking into account the percentage of the OGF's capital transferred by
LDE.
C. LDE's indemnification obligation shall be limited to FF100,000,000 and
shall become effective only if the cumulated amount of the sums, computed
as provided hereinabove, exceeds 60 million francs and for the portion of
the amount in excess of the latter sum; provided further, only those claims
which individually give rise to a right to indemnification in excess of
FF100,000 shall be taken into account.
D. As soon as Purchaser becomes aware of the existence of any event or claim
capable of bringing this warranty into play, Purchaser shall inform LDE
thereof, by registered letter with return receipt requested sent to LDE or
to such person as LDE may designate for such purpose, so that LDE may take
action to defend its interests; generally, Purchaser shall forward as
soon as possible all correspondence and documents relating to such claims
to LDE and inform it of all telephone conservations or communications, and,
more generally, do whatever is required to place LDE in a position to
usefully defend its interests.
E. More specifically, should Purchaser receive notice of a tax or social
security audit, Purchaser shall inform LDE thereof, by registered letter
with return receipt requested, within 15 days of receipt of the notice, and
shall obtain LDE's opinion and/or arguments prior to any communication
with the administrative authority. In such case, LDE shall be entitled to
be assisted, at its own expense, by such adviser as it may select, in
order to follow the proceedings in progress.
F. Generally, Purchaser - acting in its own name and on behalf of the
companies and the Main Subsidiaries, in respect of whose actions Purchaser
gives its personal guarantee - agrees not to compromise, settle, or submit
to arbitration, any matters capable of involving LDE's liability under
this warranty, without having obtained LDE's liability under this warranty,
without having obtained LDE's prior consent; similarly, Purchaser agrees to
initiate or defend, or cause those Companies and Main Subsidiaries
concerned to initiate or defend, all judicial or administrative
proceedings, and to continue such proceedings to their end if LDE so
requires, and even without being so required, in the event of emergency, in
order to avoid being barred or
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pre-empted, so as to reserve at all times LDE's rights and limit LDE's
exposure to liability, including indirect liability.
In exercising the rights expressly conferred on it under this paragraph, LDE
shall take the corporate interests of the Companies and the Main Subsidiaries
into account. In the event of any disagreement as to the pursuit of
proceedings, LDE shall advance such sums to the Companies and Main
Subsidiaries as are required by the latter to continue the said judicial or
administrative proceedings.
G. In the event that Purchaser breaches the obligations set forth in paragraphs
D, E, and F hereinabove, this warranty shall ipso facto become invalid as
far as the claim or litigation capable of being covered by this warranty is
concerned. This invalidity shall not be against the Purchaser unless LDE
establishes that the failure of the above-mentioned obligations by the
Purchaser have caused it prejudiced LDE interests damage.
4.2 PERIOD
Calls under this warranty may be made:
- for amounts payable in respect of tax, customs, or social security
liabilities: for a period that will end six months after expiration of the
tax, customs, and social security limitation periods;
- for the payment of all other amounts that may prove owing: until
December 31, 1996.
Any claims received after expiration of the above time periods shall be
ineffectual.
4.3 ASSIGNMENT
The rights and obligations provided for herein cannot be assigned, delegated,
or transferred, in any way whatsoever, by either Party to a third party
without the express prior written consent of the other Party.
ARTICLE 5 - MISCELLANEOUS
5.1 NOTICES
All notices, claims, demands, and other communications under or in connection
with this Agreement shall be sent by registered letter with return receipt
requested, or by facsimile or telex confirmed by registered letter with
return receipt requested, to the following addresses:
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<PAGE> 13
If to Purchaser:
Attention:
JP MORGAN & Cie
Directeur du Departement Juridique
21 Place du Marche St Honore
75001 Paris
If to LDE:
Attention: __________________
Lyonnaise des Eaux
72, avenue de la Liberte
92000 Nanterre
The date of the receipt of the notice or communication shall be the date of
receipt of the registered letter with return receipt requested.
5.2 APPENDICES AND RECITALS
All of the Appendices and Recitals are an integral part of this Agreement,
with which they form a single and indivisible whole.
5.3 SEVERABILITY
Should any court or authority of any branch declare any provision of this
Agreement to be illegal, void, or unenforceable, such provision shall be
ineffective before the said court of authority but shall not affect the
remaining clauses [hereof] or the legality or enforceability [of this
Agreement].
5.4 ENTIRE AGREEMENT
This Agreement constitutes the entire and sole agreement of the Parties as to
the subject-matter hereof. Consequently, it supersedes all prior contracts,
agreements, exchanges of letters, or verbal agreements, if any, between the
Parties relating to the same subject-matter. No amendment or modificiation to
this Agreement shall be valid unless in writing and signed by [both] Parties.
5.5 GOVERNING LAW - DISPUTES
This Agreement shall be governed by and construed in accordance with French
law.
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<PAGE> 14
All disputes arising from the validity, interpretation, performance, and/or
non-performance of this Agreement shall be submitted to the exclusive
jurisdiction of the Paris Commercial Court.
Executed at _______________,
this _____________ day of _______________, 19___,
in _____________ counterparts.
LDE Purchaser
_____________________ ______________________
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APPENDICES
TO THE MEMORANDUM OF UNDERSTANDING
RELATING TO THE TRANSFER OF SHARES
---------------------------------------------
Appendix 0 Powers of attorney of Mr. Philippe Brongniart and
Mr. Robert L. Waltrip for signature of the
Memorandum of Understanding relating to the
Transfer of shares
Appendix 1.4 List and net accounting values as set forth in
OGF's financial statements for the 1994 fiscal year
of the shareholdings held by OGF to be transferred
to LDE prior to the Transfer Date.
Appendix A List of OGF's subsidiaries and consolidated and
non-consolidated shareholdings, including:
- List of consolidated companies
- List of non-consolidated shareholdings
- List of companies consolidated by equivalence
- List of subsidiaries and shareholdings
Appendix B List of Main Subsidiaries of the OGF/PFG Group.
Appendix 3.1 List of Shareholders Agreements, Voting Rights
Agreements, Joint Venture Agreements or any
Agreements with Competitors limiting their
activities, concluded by the Companies and the Main
Subsidiaries.
Appendix 3.2 Stock Option plans for OGF and PFG shares of the
Companies and Main Subsidiaries.
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Appendix 3.4 Changes in the Accounting Methods of the Companies
intervening during the 1992, 1993 and 1994 fiscal
years.
Appendix 3.4 bis Off balance sheet commitments not included in the
appendix of the Financial Statements.
Appendix 3.4 ter Definition of a consolidated net cash position.
Appendix 3.4 quater Definition of the need of the net working capital
Appendix 3.5 List of investments for an individual amount greater
than 2 million French Francs carried out by the
Main Companies and Subsidiaries during the first semester
of 1995 and the measures beyond the normal course of
the Companies and Main Subsidiaries business.
Appendix 3.5 bis Dividends for which distribution has been decided or
which have been distributed during the 1994 fiscal
year to the benefit of persons other than the
Companies or Main Subsidiaries.
Appendix 3.6 Exceptions to the compliance with tax declarations
payments and social security declarations, including
a recapitulative note related to tax controls dated
June 8, 1995 and a recapitulative note (included in
Appendix 1) related to social security (URSSAF)
reassessments, dated January 2, 1995.
Appendix 3.8.1 List of real estate operating assets owned by the
Companies or Main Subsidiaries.
Appendix 3.8.1 bis Follow-up of Real Estate purchases.
Appendix 3.8.1. ter Limitations to the use of real estate operating
assets by the Companies and Main Subsidiaries.
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Appendix 3.8.2 List of the main trademarks, designs, patents and
manufacturing processes used by the Companies and the
Main Subsidiaries.
Appendix 3.9 Judicial, administrative or arbitration proceedings,
claims, investigations in which the amount claimed is
greater than 200,000 French Francs.
- Claims before the Labor Court (Conseil des
Prud'hommes) in which the risk incurred is greater
than 200,000 French Francs.
- Summarized presentation of CGSM operation.
- SFEC - OGF deal.
- Competition claims for which the risk is greater
than 200,000 French Francs
- DEMEMORIS - LESCARCELLE deal
- Note dated June 12, 1995 and table dated December
19, 1994 on the procedure in progress before the
Competition Council and concerning the Companies of
the PFG group.
- Tax proceedings, claims and investigations (see
Appendix 3.6).
Appendix 3.10 Specific information on the compliance by Companies
and Main Subsidiaries of applicable laws and
regulations (see Appendix 3.9).
Appendix 3.11 List of contracts for an employee and/or legal
representative which provides for a longer notice
period and for greater compensation [severance pay]
in the event of termination than that provided for by
law or by the applicable bargaining agreement.
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Including, Amendments dated October 25, 1994 to the
employment contracts of:
Mr. Thierry Hernandez (Financial Director)
Mr. Bruno Grison (International Director)
Mr. Jean-Michel Debono (OGF General Manager)
Mr. Louis-Charles Galle (General Secretary)
Mr. Claude Hosten (Director of Human Resources)
Mr. Michel Penon (General Director of Auxia)
Mr. Maxime Dubois-Violette (General Director of
Logistics)
Mr. Bernard Bouleau (President and General Director of
PF South East)
Appendix 3.12 List of Loans, advances, suretyships, endorsements or
guarantees granted by the Companies or Main
Subsidiaries to directors, officers, employees or
shareholders of the Companies or Main Subsidiaries.
18
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Translation
Original in French
ADDITIONAL MEMORANDUM OF UNDERSTANDING
RELATING TO THE TRANSFER OF SHARES
BETWEEN
LYONNAISE DES EAUX
AND
SERVICE CORPORATION INTERNATIONAL
(Purchaser)
July 12, 1995
19
<PAGE> 20
ADDITIONAL MEMORANDUM OF UNDERSTANDING
RELATING TO THE TRANSFER OF SHARES
BY AND BETWEEN THE UNDERSIGNED:
LYONNAISE DE EAUX S.A., a societe anonyme [share corporation] with a registered
capital of FRF 3,407,276,100, having its registered office at 72, avenue de la
Liberte, 92000 Nanterre, registered in the Nanterre Commercial Registry under N
degrees B 542 062 559, and represented by Mr. Philippe Brongniart, duly
authorized,
hereinafter referred to as "LDE").
Party of the first part
AND
SERVICE CORPORATION INTERNATIONAL, a Company registered under the Law of Texas,
with a registered capital of $200,000,000, having its registered office at 1929
Allen Parkway, Houston, Texas 77019, PO Box 130548, or any affiliate it may
substitute and represented by Mr. Robert T. Waltrip, the Chairman of the Board
and Chief Executive Officer, duly authorized.
hereinafter referred to as "PURCHASER"),
Party of the second part
RECITALS
Whereas, LDE holds 1,247,439 shares (hereinafter, the "SHARES") representing
approximately 51.23% of the capital of Omnium de Gestion et de Financement, a
societe anonyme with a registered capital of 243,483,100 [French] francs,
having its registered office at 66, boulevard Richard Lenoir, 75011 Paris,
registered in the Paris Commercial Registry under N degrees 542 076 799 ("OGF")
and whose shares are listed on the second market of the Paris Bourse;
Whereas, OGF holds 1,224,626 shares representing approximately 64.98% of the
capital of Pompes Funebres Generales, a societe anonyme with a registered
capital of 94,220,300 [French] francs, having its registered office at 66,
boulevard Richard Lenoir, 75011 Paris, registered in the Paris Commercial
Registry under N degrees 542 065 792 ("PFG") and whose shares are listed on the
over the counter market of the Paris Bourse;
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<PAGE> 21
Whereas, OGF and PFG hold certain assets and equity interests related to the
operation of funeral services in France and abroad;
And Whereas, Purchaser has informed LDE that it is interested in acquiring the
totality of the Shares, and the Parties have entered into a Memorandum of
Understanding dated on July 10, 1995 (the "Agreement") in order to determine
their respective commitments regarding the sale and purchase of the Shares.
Since July 10, 1995, the Parties have met together and the Purchaser has
informed LDS that it is interested in acquiring the block of control
representing all the Shares (hereinafter "OGF Block of Control") as soon as the
Purchaser will have obtained the authorizations mentioned in article 2 below,
and in any event, at the time of the opening of the simplified tender offer
implemented by the price guarantee procedure [garantie de cours] on the OGF
equity-securities initiated by the Purchaser (hereinafter "OGF Tender Offer").
The Agreement is supplemented and/or modified by the following provisions, the
other provisions of the Agreement remaining valid.
NOW, THEREFORE, IT HAS BEEN AGREED AS FOLLOWS:
ARTICLE 1 - COMMITMENTS
1.1 COMMITMENTS OF THE PURCHASER
The Purchaser undertakes to acquire from LDE, the OGF Block of Control subject
to the fulfilment of the conditions set forth in Article 2 below.
Purchaser shall be fully responsible for the statutory and regulatory
obligations resulting for Purchaser from this acquisition of the OGF Block of
Control, pursuant, inter alia, to the General Rules of the Conseil des Bourses
de Valeurs [Securities Exchange Board, a self-regulatory organization
overseeing French Bourses]. Purchaser here and now agrees to fully satisfy
such obligations and in particular to file a proposed simplified tender offer
implemented by the price guarantee procedure on OGF's shares in deleting the
withdrawal condition of obtaining more than two-thirds of the voting rights of
OGF provided in the Agreement, and on PFG's shares.
1.2 COMMITMENTS OF LDE
LDE undertakes to sell to the Purchaser the OGF Block of Control subject to
the fulfilment of the conditions set forth in Article 2 below.
LDE undertakes that a Board of Directors of OGF and PFG will be convened in
order that such meetings may take place immediately following the trading of
the Block of Control
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<PAGE> 22
which is to be completed on the Transfer Date as defined in Article 1.4
below, and the respective agendas of both meetings of the Board of Directors
of OGF and PFG will provide on one hand, of the resignation of the following
OGF Directors (Mr. Philippe Brongniart, Claude Gaudin, Claude-Pierre
Brossolette, Bernard Prades in the official capacity of representing LDE and
Mr. Claude Vincent in the official capacity of representing SSIMI) and on the
other hand, of the resignation of the following PFG Directors (Mr. Philippe
Brongniart, Claude Gaudin, Bernard Prades and Jean-Michel Debono), and the
adoptation of five (5) Directors proposed by the Purchaser for OGF and four
(4) Directors proposed by the Purchaser for PFG.
1.3 PRICE
The Price at which the OGF Block of Control will be sold from LDE to the
Purchaser will be 950 French francs per OGF share.
The buying order and the selling order shall be placed by the same
Stockbroker firm chosen conjointly in order that the delivery of the shares
occurs outside of the RELIT System.
The above mentioned amount shall be payed in full in exchange for the
delivery of the shares immediately after its trading.
Each of the parties shall bear the respective cost for the sale and purchase
of the OGF Block of Control.
1.4 TRANSFER DATE
The Transfer of the OGF Block of Control shall take place at the date
determined by the Societe des Bourses Francaises (SBF) after obtaining the
authorizations mentioned in Article 2 below (hereinafter the "Transfer
Date"). The Transfer Date as determined in this agreement nullifies and or
substitutes the one defined in Article 1.4 of the Agreement.
ARTICLE 2 - CONDITIONS PRECEDENT
The Transfer of the OGF Block of Control is subject to the following
conditions precedent being fulfilled on or before November 15, 1995:
(i) approval decision from the Insurance Department of the Ministry of
Economic Affairs and Finance regarding the indirect change of control of
Groupe Auxia, a societe anonyme governed by the Issurance Code and having
its registered office at 18, allee Darius Milbaud, 75019 Paris; and
(ii) explicit or tacit approval of the contemplated transfer from the
Treasury Department of the Ministry of Economic Affairs and Finance
under direct foreign investments in France.
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ARTICLE 3 -- MISCELLANEOUS
3.1 NOTICES
All notices, claims, demands, and other communications under or in connection
with this Agreement shall be sent by registered letter with return receipt
requested, or by facsimile or telex confirmed by registered letter with
return receipt requested, to the following addresses:
If to Purchaser:
Attention:
JP MORGAN & Cie
Directeur du Departement Juridique
21 Place du Marche St Honore
75001 Paris
If to LDE:
Attention: Monsieur le Secretaire General
Lyonnaise des Eaux
72, avenue de la Liberte
92000 Nanterre
The date of receipt of the notice or communication shall be the date of
receipt of the registered letter with return receipt requested.
3.2 RECITALS
The Recitals are an integral part of this Agreement, with which they form a
single and indivisible whole.
3.3 SEVERABILITY
Should any court or authority of any branch declare any provision of this
Agreement to be illegal, void, or unenforceable, such provision shall be
ineffective before the said court of authority but shall not affect the
remaining clauses [hereof] or the legality or enforceability [of this
Agreement].
23
<PAGE> 24
3.4 GOVERNING LAW - DISPUTES
This Agreement shall be governed by and construed in accordance with French
law.
All disputes arising from the validity, interpretation, performance, and/or
non-performance of this Agreement shall be submitted to the exclusive
jurisdiction of the Paris Commericial Court.
Executed at Paris,
this 12th day of July, 1995,
in two counterparts.
LDE Purchaser
____________________ ____________________
24
<PAGE> 1
EXHIBIT 23.1
BARBIER FRINAULT & ASSOCIES PGA
Membre d'Arthur Andersen & Co, SC Tour Franklin
Tour Gan - Cedex 13 101, Terrasse Boieldieu - Cedex 11
92082 Paris-La Defense 2 92082 Paris-La Defense 8
As independant accountants, we hereby consent to the incorporation by
reference in the registration statement of Service Corporation International,
on Form S-3 (File Nos 33-60683, 33-56069), Form S-4 (File No 33-54996), Form
S-8 (File Nos 33-9790, 33-17982, 33-54401, 33-50987) of our report dated April
6, 1995, on our audits of the consolidated financial statemnts of Omnium de
Gestion et de Financement S.A. as of December 31, 1994 and 1993, and for the
two years then ended, which report is included in Form 8-K dated September 1,
1995. We also consent to the reference to our firm under the caption "Experts".
Paris-La Defense, France,
September 1, 1995
/s/ CHRISTIAN CHOCHON /s/ BRUNO BIZET
- ----------------------------- -------------------------------
BARBIER FRINAULT & ASSOCIES PGA
Christian Chochon Bruno Bizet
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in
Registration Statement No. 33-60683, filed June 28, 1995, on Form S-3 of
Service Corporation International and in the related Prospectus and to the
incorporation by reference therein of our report dated December 22, 1994, with
respect to the consolidated financial statements of Gibraltar Mausoleum
Corporation and subsidiaries for the year ended September 30, 1994 included in
this Form 8-K.
We also consent to the incorporation by reference in the following Registration
Statements of Service Corporation International: No. 33-56069 on Form S-3,
filed November 1, 1994, No. 33-54401 on Form S-8, filed July 1, 1994, No.
33-50987 on Form S-8, filed November 10, 1993, No. 33-54996 on Form S-4, filed
November 25, 1992, No. 33-17982 on Form S-8, filed October 20, 1987, and No.
33-9790 on Form S-8, filed November 4, 1986 of our report dated December 22,
1994, with respect to the consolidated financial statements of Gibraltar
Mausoleum Corporation and subsidiaries for the year ended September 30, 1994
included in this Form 8-K.
/s/ ERNST & YOUNG LLP
August 31, 1995
Indianapolis, Indiana
