<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
Service Corporation International
- --------------------------------------------------------------------------------
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<PAGE> 2
LOGO
SERVICE
CORPORATION
INTERNATIONAL
PROXY STATEMENT
AND 1997 ANNUAL MEETING NOTICE
<PAGE> 3
SERVICE CORPORATION INTERNATIONAL
1929 ALLEN PARKWAY, P.O. BOX 130548
HOUSTON, TEXAS 77219-0548
----------------------
PROXY STATEMENT AND
1997 ANNUAL MEETING
NOTICE
----------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 8, 1997
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Service Corporation International
will be held in the Texas Commerce Center Auditorium, First Floor, Texas
Commerce Center, 601 Travis, Houston, Texas, on Thursday, May 8, 1997, at 10:00
a.m., Houston time, for the following purposes:
(1) To elect five directors as members of the class of directors to
serve until the third succeeding Annual Meeting of Shareholders and until
their successors have been elected and qualified; and
(2) To act on such other business that may properly come before the
meeting or any adjournment(s) thereof.
The transfer books of the Company will not be closed, but only holders of
Common Stock of record at the close of business on March 21, 1997 will be
entitled to notice of and to vote at the Annual Meeting. A majority of the
outstanding stock entitled to vote is required for a quorum.
The management sincerely desires your presence at the meeting. However, so
that we may be sure that your vote will be included, please sign and date the
enclosed proxy and return it promptly in the enclosed stamped envelope. If you
attend the meeting, you may revoke your proxy and vote in person.
By Order of the Board of Directors
James M. Shelger, Secretary
Houston, Texas
April 11, 1997
<PAGE> 4
PROXY STATEMENT
SERVICE CORPORATION INTERNATIONAL
1929 ALLEN PARKWAY, P.O. BOX 130548 HOUSTON, TEXAS 77219-0548
SOLICITATION AND REVOCABILITY OF PROXIES
This proxy statement is furnished in connection with the solicitation by
the Board of Directors of Service Corporation International, a Texas corporation
("SCI" or the "Company"), of proxies to be used at the Annual Meeting of
Shareholders to be held in the Texas Commerce Center Auditorium, First Floor,
Texas Commerce Center, 601 Travis, Houston, Texas, on Thursday, May 8, 1997, at
10:00 a.m., Houston time, and at any recess or adjournments thereof. This proxy
statement and the accompanying proxy are being mailed to shareholders on or
about April 11, 1997. A copy of the Annual Report to Shareholders of the Company
for the fiscal year ended December 31, 1996, including the consolidated
financial statements, is being mailed with this proxy statement to all
shareholders entitled to vote at the Annual Meeting.
At March 21, 1997, the Company had outstanding and entitled to vote
238,757,934 shares of Common Stock, $1.00 par value ("Common Stock"). The
holders of Common Stock will be entitled to one vote per share on each matter
considered. A majority of the votes entitled to be cast must be represented at
the Annual Meeting, in person or by proxy, so that a quorum may be present for
the transaction of business. Only shareholders of record at the close of
business on March 21, 1997 will be entitled to vote at the Annual Meeting. The
affirmative vote of a majority of the total shares represented in person or by
proxy and entitled to vote at the Annual Meeting is required for (a) the
election of directors, and (b) the approval of such other matters as may
properly come before the meeting or any adjournment thereof.
The enclosed proxy, even though executed and returned, may be revoked at
any time prior to the voting of the proxy by a later dated proxy or by written
notice of revocation filed with the Secretary of the Company. Shareholders who
attend the Annual Meeting may revoke their proxies and vote in person.
In the election of directors, a shareholder has the right to vote the
number of shares owned by the shareholder for as many persons as there are
directors to be elected. The Company's articles of incorporation do not permit
cumulative voting. Abstentions are counted toward the calculation of a quorum.
An abstention has the same effect as a vote against the proposal or, in the case
of the election of directors, as shares to which voting power has been withheld.
Under Texas law, any unvoted position in a brokerage account with respect to any
matter will be considered as not voted and will not be counted toward
fulfillment of quorum requirements as to that matter.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes which have staggered
terms of three years each. The five directors whose terms expire at this Annual
Meeting have been renominated for three-year terms expiring at the 2000 Annual
Meeting of Shareholders. The terms of office of the directors in the other two
classes expire at the Annual Meetings of Shareholders to be held in 1998 and
1999.
The enclosed proxy provides a means for the holders of Common Stock to vote
for all of the nominees listed therein, to withhold authority to vote for one or
more of such nominees or to withhold authority to vote for all of such nominees.
Each properly executed proxy received in time for the Annual Meeting will be
voted as specified therein, or if a shareholder does not specify how the shares
represented by his or her proxy are to be voted, such shares shall be voted for
the nominees listed therein or for other nominees as provided below.
Although the Board of Directors does not contemplate that any of the
nominees will be unable to serve, if such a situation arises prior to the Annual
Meeting, the proxies that do not withhold authority to vote for directors will
be voted for a substitute nominee(s) chosen by the Board of Directors.
<PAGE> 5
With respect to the class of directors whose terms expire at the 1998
Annual Meeting, there is a vacancy occasioned by the resignation of a director
in October 1995. This vacancy has not been filled by the Board of Directors
although it may be filled in the future. Proxies cannot be voted on the election
of directors for a greater number of persons than five, which is the number of
nominees named herein.
The following table sets forth, as to each nominee for election and each
director whose term will continue, such person's name and age, the committees on
which such person serves, the person's principal position with the Company and
the year in which such person was first elected a director of the Company.
ELECTION OF DIRECTORS
<TABLE>
<CAPTION>
DIRECTOR
NAME PRINCIPAL POSITION WITH THE COMPANY SINCE AGE
---- ----------------------------------- -------- ---
<S> <C> <C> <C>
DIRECTOR NOMINEES FOR TERMS EXPIRING AT THE 2000 ANNUAL MEETING:
Anthony L. Coelho......................... Director 1991 54
A. J. Foyt, Jr............................ Director 1974 62
E. H. Thornton, Jr.(1)(2)(3).............. Director 1962 87
R. L. Waltrip(1)(4)(5).................... Chairman of the Board and Chief Executive
Officer 1962 66
Edward E. Williams(1)(3)(4)............... Director 1991 51
DIRECTORS WHOSE TERMS EXPIRE AT THE 1998 ANNUAL MEETING:
Douglas M. Conway(3)...................... Director 1981 76
James J. Gavin, Jr.(3).................... Director 1986 74
B. D. Hunter(1)........................... Director 1986 67
John W. Mecom, Jr.(2)..................... Director 1983 57
DIRECTORS WHOSE TERMS EXPIRE AT THE 1999 ANNUAL MEETING:
Jack Finkelstein(1)(3)(4)................. Director 1965 69
James H. Greer(2)......................... Director 1978 70
L. William Heiligbrodt(1)(4)(5)........... Director, President and Chief Operating
Officer 1975 55
Clifton H. Morris, Jr..................... Director 1990 61
W. Blair Waltrip(1)(4)(5)................. Director and Executive Vice President
Operations 1986 42
</TABLE>
- ---------------
(1) Member of Executive Committee
(2) Member of Compensation Committee
(3) Member of Audit Committee
(4) Member of Investment Committee
(5) Member of Directors Stock Committee and 1996 Nonqualified Incentive Plan
Stock Option Committee
Set forth below is each director's principal occupation and certain other
directorships, if any, held by such person. Unless otherwise indicated below,
each director has been engaged in his current principal occupation during the
last five years.
Anthony L. Coelho is Chairman and Chief Executive Officer of Coelho
Associates (investment consulting and brokerage firm) since July 1995 and of ETC
w/tci, Inc. (training and communication firm) since October 1995. Prior thereto,
from January 1990 to July 1995, he was President and Chief Executive Officer of
Wertheim Schroder Investment Services, Inc. (asset management firm) and from
October 1989 to July 1995, Managing Director, Wertheim Schroder & Co., Inc.
(investment banking firm). Mr. Coelho is a
2
<PAGE> 6
member of the Board of Directors of AutoLend Group, Inc., Cyberonics, Inc., ICF
Kaiser International, Inc., International Thoroughbred Breeders, Inc., TEI, Inc.
and Tele-Communications, Inc.
A. J. Foyt, Jr. is President of A. J. Foyt Enterprises, Inc. (designer,
manufacturer and exhibitor of high-speed engines and racing vehicles and
marketer of automotive vehicles).
E. H. Thornton, Jr. is an attorney with Thornton & Burnett, Attorneys at
Law.
R. L. Waltrip is the Chairman of the Board and Chief Executive Officer of
the Company. Mr. Waltrip is a member of the Board of Directors of TEI, Inc.
Edward E. Williams is the Henry Gardiner Symonds Professor and Director of
the Entrepreneurship Program at the Jesse H. Jones Graduate School of
Administration at Rice University. He is also Managing Director of First Texas
Venture Capital (investment company). Dr. Williams is a member of the Board of
Directors of Equus II Incorporated.
Douglas M. Conway is retired.
James J. Gavin, Jr. is retired. Mr. Gavin is a member of the Board of
Directors of Huntco, Inc. and a Trustee of Benchmark Funds.
B. D. Hunter is Chairman of the Board and Chief Executive Officer of Huntco
Inc. (intermediate steel processor). Mr. Hunter is a member of the Board of
Directors of Mark Twain Bancshares, Inc., Cash America International, Inc. and
Celebrity, Inc.
John W. Mecom, Jr. is the Chairman of the Board of The John W. Mecom
Company (personal and family investments).
Jack Finkelstein is engaged in personal and family trust investments.
James H. Greer is Chairman of the Board of Shelton W. Greer Co., Inc.
(engineering, manufacturing, fabrication and installation of building specialty
products). Mr. Greer is a member of the Board of Directors of Cash America
International, Inc., AmeriCredit Corp. and TEI, Inc.
L. William Heiligbrodt is the President and Chief Operating Officer of the
Company. Mr. Heiligbrodt is a member of the Board of Directors of BJ Services
Company.
Clifton H. Morris, Jr. is the Chairman of the Board and Chief Executive
Officer of AmeriCredit Corp. (financing of automotive vehicles).
W. Blair Waltrip is the Executive Vice President Operations of the Company.
Since January 1990, Mr. Waltrip also served as Chairman of the Board and
President of Service Corporation International (Canada) Limited ("SCIC"), a
Company subsidiary which was 31% publicly owned until September 1995. Mr.
Waltrip is a member of the Board of Directors of TEI, Inc. Mr. W. Blair Waltrip
is the son of Mr. R. L. Waltrip.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held six meetings during 1996. Standing committees
of the Board include the Executive Committee, Audit Committee, Compensation
Committee, Investment Committee, Directors Stock Committee and 1996 Nonqualified
Incentive Plan Stock Option Committee.
The Executive Committee has authority to exercise many of the powers of the
Board, including selections made upon its own motion of nominees for election to
the Board, and generally acts during periods when there is no regular meeting of
the Board. The Executive Committee held twelve meetings during 1996.
The primary functions of the Audit Committee are to review the scope and
results of audits by the Company's independent and internal auditors, internal
accounting controls, non-audit services performed by the independent accountants
and the cost of all accounting and financial services. During 1996, the Audit
Committee held two meetings.
3
<PAGE> 7
The Compensation Committee, which has the general duty to review and
approve compensation for officers, including the granting of bonuses and the
administration of the Company's stock and stock option plans, held three
meetings during 1996.
The Investment Committee's primary functions are to establish overall
guidelines and review the transactions in the investment portfolios of
independent trusts which hold funds collected by the Company and required to be
held in trust under various state laws. During 1996, the Investment Committee
held ten meetings.
The Directors Stock Committee administers the 1995 Stock Plan For
Non-Employee Directors. The 1996 Nonqualified Incentive Plan Stock Option
Committee administers the 1996 Nonqualified Incentive Plan. These committees did
not hold any meetings in 1996.
During 1996, each incumbent director attended at least 75% of the total
number of meetings of the Board of Directors and committees on which he served.
OVERVIEW OF EXECUTIVE COMPENSATION
During 1996, SCI enjoyed increased revenues and net income. In management's
opinion, SCI has generated excellent returns for its shareholders. For example,
an investment of $100 in SCI's stock at the end of 1991 would have been worth
$337 by year-end 1996, producing a total shareholder return (assuming quarterly
reinvestment of dividends) of 237% for this period. During the same period, a
$100 investment in the S&P 500 Index (assuming quarterly reinvestment of
dividends) would have been worth $203, which represents a 103% total return.
Thus, SCI's total shareholder return over the five-year period ended December
31, 1996 was more than two times the return generated by the broader market
index.
During 1996, the Company acquired 210 funeral service locations, 35
cemeteries and nine crematoria. Including these acquisitions, the Company
operated 2,882 funeral service locations, 345 cemeteries and 150 crematoria
located in North America, Europe and the Pacific Rim as of the end of 1996.
SCI remains committed to a path of growth and continued focus on increasing
shareholder value. To achieve these aims, the Company's Board of Directors
believes that it is crucial to provide key employees with substantial incentive
compensation opportunities tied to performance. These incentive programs (which
are described in the Compensation Committee Report set forth below) are intended
to enable the Company to retain and attract the core talent needed to sustain
the results achieved over the last five years. The central focus of SCI's total
compensation program is intended to forge a direct link between the economic
interests of shareholders and management.
SCI's Board of Directors and employees are proud of the Company's
accomplishments in 1996.
4
<PAGE> 8
PERFORMANCE GRAPH
The following graph presents the Company's cumulative shareholder return
over the period from December 31, 1991 to December 31, 1996. The Company is
compared to the S&P 500 Index and to a Peer Group Index. Each Index assumes $100
invested at the close of trading on December 31, 1991 and is calculated assuming
quarterly reinvestment of dividends and quarterly weighting by market
capitalization.
The data source for the following graph is S&P Compustat Services.
COMPARISON OF CUMULATIVE SHAREHOLDER RETURN
1991-1996
<TABLE>
<CAPTION>
MEASUREMENT PERIOD S&P 500 PEER
(FISCAL YEAR COVERED) SCI INDEX GROUP
<S> <C> <C> <C>
1991 $100 $100 $100
1992 104 108 113
1993 152 118 123
1994 163 120 128
1995 262 165 153
1996 337 203 186
</TABLE>
Peer Group companies are: Airtouch Communications Inc., American Greetings,
Corning Inc., Dial Corp., Harcourt General Inc., Harris Corp., Jostens Inc.,
Minnesota Mining & Mfg. Co., Pioneer Hi-Bred International, TRW Inc., Viad
Corp., and Whitman Corp. These companies are the same companies that previously
made up the S&P Miscellaneous Index, with the addition of Viad Corp. Dial Corp.
split into two companies (Dial Corp. and Viad Corp.) in 1996, so Viad Corp. has
been added to the analysis. Standard & Poor's discontinued its S&P Miscellaneous
Index after 1995.
5
<PAGE> 9
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is a committee of
outside Directors chaired by Mr. E. H. Thornton, Jr. Other members are Mr. James
H. Greer and Mr. John W. Mecom, Jr. This Committee is responsible for reviewing
and approving all elements of the total compensation program for officers of the
Company, including long-term incentive arrangements. The Committee has ultimate
responsibility for aligning the Company's total compensation programs with its
business strategy and for assuring shareholders that pay delivery programs are
effective, responsible and competitive when compared to similarly situated
organizations. This Committee report documents the basis on which 1996
compensation determinations were made and further describes the components of
officer compensation programs for the Company.
COMPENSATION PHILOSOPHY AND OBJECTIVES OF EXECUTIVE COMPENSATION PROGRAMS
It is the philosophy of the Company and the Committee that all compensation
programs should (1) link pay and performance, and (2) attract, motivate, reward
and retain the broad-based management talent required to achieve corporate
objectives. The Company also focuses strongly on stock-based compensation, since
this form of compensation provides the clearest link to enhanced shareholder
value. From time to time, the Committee works with compensation consultants to
assist with the design, implementation and communication of various compensation
plans.
The Company's compensation programs for executives include base salaries,
annual performance-based incentives and long-term incentives. Each of these pay
delivery programs is further detailed below.
BASE SALARIES
Base salaries for the Company's officers in 1996 were reviewed through
comparisons with a group of approximately 83 companies of similar size (as
measured by revenues and level of earnings) across various industries (the
"Comparison Group"). The competitive pay data is not drawn from the entire group
of companies which comprise the Peer Group Index (formerly the S&P Miscellaneous
Index) reflected in the performance graph in this proxy statement, since the
Committee believes revenue size and earnings level comparisons are more
appropriate criteria for establishing base salary and annual incentive
compensation rates. There has been no attempt to tie together the performance
graph companies and the Comparison Group although there is some overlap between
the groups. The Committee does not consider any financial performance criteria
on a formula basis in determining salary increases. Rather, the Committee, using
its discretion, considers market base salary rates at the 75th percentile of
salaries of the Comparison Group, and considers earnings per share growth,
operating income growth, sales growth, and total shareholder return. The
Committee also makes a subjective review of individual performance in making
base salary decisions for officers. These criteria are assessed in a non-formula
fashion and are not weighted. All of the officers shown in the summary
compensation table (the "Named Executives") have employment agreements (see
"Executive Employment Agreements"). Under these agreements, the Committee has
the sole discretion for determining any increase in base salary; however, under
the agreements, base salaries may not be decreased. In 1996, the Named
Executives received salary increases averaging approximately eight percent over
the prior year. However, the size of increases ranged from a low of 2.8% to a
high of 15.6%. The current base salary levels for Named Executives are, overall,
consistent with the Company's philosophy of targeting the 75th percentile of
salaries of the Comparison Group. With respect to an item of compensation of an
executive, the term "75th percentile" means a level of compensation which is
greater than the compensation of peer executives at 75% of the companies in a
survey or selected group of companies.
ANNUAL INCENTIVE COMPENSATION
All of the Company's officers have a significant portion of their total
compensation at risk through annual incentive opportunities that are linked to
key financial and operational objectives for the Company on a consolidated
basis. The objective of this policy is to focus the Named Executives on the
attainment of objectives that the Committee believes are primary determinants of
share price over time. While the
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<PAGE> 10
Committee has discretion to consider other factors (including operating income
growth, sales growth and total shareholder return), the primary basis for
determining awards is earnings per share growth. Actual awards are
proportionately decreased or increased on the basis of the Company's earnings
per share growth compared to target, subject to maximum award amounts. Target
award levels are set at approximately the 75th percentile of annual incentive
compensation of the Comparison Group. Payments are generally made in cash and
are subject to the discretion of the Committee.
In the first quarter of 1996, the Committee established performance goals
for 1996. Annual incentive awards earned for 1996 performance were significantly
above target for the Named Executives because the Company's earnings per share
growth of 22% exceeded 1996 targeted levels of growth in earnings per share. No
corporate performance criterion or factor other than earnings per share growth
was considered for 1996.
LONG-TERM INCENTIVE COMPENSATION
In recent years, the Committee has placed significant emphasis on
stock-based compensation for officers. In 1996, new long-term incentive awards
for corporate officers were limited to four of the five Named Executives since
one of the Named Executives (Mr. Pullins) and all of the other officers had
previously received significant performance-based stock option awards in 1995.
The stock option awards made to Named Executives in 1996 (other than the Chief
Executive Officer ("CEO"), whose award is described below) were established
between the 75th and 90th percentiles of annual grant levels of long-term
incentive practices of a survey group of 26 companies (the "Survey Group")
having high earnings per share growth rates similar to the Company's. There has
been no attempt to tie together the performance graph companies and the Survey
Group, although there is overlap between companies in the S&P 500 Index and the
Survey Group. In determining the size of the 1996 option grants, the Committee
did not consider restricted stock grants made in prior years or the number and
value of stock options held by such executives. These stock options (other than
the CEO's) fully vest eight years after the grant date. However, vesting is
automatically accelerated if SCI's stock price per share reaches certain
pre-determined target prices within five years of the date of grant as follows:
<TABLE>
<CAPTION>
TARGET OPTION
SHARE PRICE VESTING
----------- -------
<S> <C>
$30...................................................... 20%
$35...................................................... 50%
$40...................................................... 100%
</TABLE>
These stock price targets must be sustained for 10 consecutive trading days
before vesting is accelerated.
Messrs. R. L. Waltrip, Heiligbrodt, W. Blair Waltrip and Morrow also
received accelerated payouts equal to the total value of the awards under the
1995 Long-Term Cash Performance Plan. Approximately 48% of these awards vested
for 1995 based on the attainment of pre-established earnings per share
objectives approved by the Committee at the plan's inception. However, the
Committee chose to accelerate in 1996 the payout of the remaining unvested
balances of the awards based on the Company's outstanding total shareholder
return results and a desire to focus ongoing long-term incentives on share price
improvement.
1996 CHIEF EXECUTIVE OFFICER PAY
As described above, the Company manages its pay for all executives,
including the CEO, considering both a pay-for-performance philosophy and market
rates of compensation for each executive position. Specific actions taken by the
Committee regarding the CEO's compensation are summarized below.
Base Salary
In 1996, Mr. R. L. Waltrip's salary was increased from $776,000 to
$798,000, a 2.8% increase. This base salary is consistent with the Company's
philosophy of targeting the 75th percentile of the salaries of the
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<PAGE> 11
Comparison Group. Mr. Waltrip's base salary increase was determined on the same
basis as salary increases for other officers.
Annual Incentive Compensation
The annual incentive earned by the CEO for 1996 performance was $2,170,500,
which was paid in cash. This annual incentive was calculated using a
performance/payout formula with earnings per share growth as the sole corporate
performance measure. The actual annual incentive award was above target since
the Company's earnings per share performance was well above target. While the
Committee had discretionary authority to make downward adjustments, the
Committee concluded the CEO's individual performance was at the same level as
the Company's earnings per share growth performance, so no downward adjustment
to the annual incentive calculation was made by the Committee.
Long-Term Incentive Compensation
The CEO received a grant of 440,000 stock options in 1996. These stock
options vest over two years, have a term of 10 years and were granted with an
option price equal to 100% of fair market value of the stock on the date of
grant. The size of the option award was established at the 90th percentile of
annual grant levels of long-term incentive practices of the Survey Group. The
performance sensitivity of this grant is built into the stock option concept,
since the executive receives no benefit from stock options unless the share
price rises.
In 1995, the CEO received a long-term cash performance award of $1,435,000
under the 1995 Long-Term Cash Performance Plan. Approximately 48% of this award
vested for 1995 based on the pre-established earnings per share objectives
approved by the Committee at the plan's inception. However, the Committee chose
to accelerate in 1996 the payout of the remaining $740,300 unvested balance of
the award based on the Company's outstanding total shareholder return results
and the desire to focus ongoing long-term incentive on share price improvement.
$590,000 of the award was deferred into 1997 to preserve tax deductibility of
the payouts for the Company. Further, the CEO receives interest accruals of
$60,000 on the deferred amount.
LIMITATION OF TAX DEDUCTION FOR EXECUTIVE COMPENSATION
Subject to certain exceptions, the Omnibus Budget Reconciliation Act of
1933 ("OBRA") prohibits publicly traded companies from receiving a tax deduction
on compensation paid to named executive officers in excess of $1 million
annually. The Committee has not adopted a policy relating to OBRA and believes
that compensation is more important than tax deductibility in focusing
management on its goal of increasing shareholder value. For 1996 compensation,
however, the Committee believes that there will be little if any impact from
OBRA to the Company due to various exceptions to the $1 million limitation.
COMPENSATION COMMITTEE:
E.H. Thornton, Jr., Chairman
James H. Greer
John W. Mecom, Jr.
8
<PAGE> 12
CERTAIN INFORMATION WITH RESPECT TO OFFICERS AND DIRECTORS
CASH COMPENSATION
The following table sets forth information for the three years ended
December 31, 1996 with respect to the Chief Executive Officer and the four other
most highly compensated executive officers of the Company. The determination as
to which executive officers were most highly compensated was made with reference
to the amounts required to be disclosed under the "Salary" and "Bonus" columns
in the table.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
LONG-TERM COMPENSATION
-------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
- ----------------------------------------------------------------------------------------------------------------------
NAME AND RESTRICTED LONG-TERM
PRINCIPAL POSITION OTHER ANNUAL STOCK STOCK INCENTIVE
------------------ YEAR SALARY(1) BONUS COMPENSATION(2) AWARD(3) OPTIONS PAYOUTS(4)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
R. L. Waltrip 1996 $844,000 $2,170,500 $ 266,976 $ 0 440,000 $740,300
Chairman and 1995 821,750 1,919,400 713,312 0 0 694,700
Chief Executive Officer 1994 794,500 1,250,100 1,105,555 0 227,500 0
L. William Heiligbrodt 1996 566,000 1,238,400 192,998 0 400,000 441,100
President and 1995 551,500 1,095,600 470,513 0 0 413,900
Chief Operating Officer 1994 531,250 761,400 855,043 0 172,500 0
W. Blair Waltrip 1996 416,000 800,800 125,090 0 200,000 234,700
Executive Vice President 1995 387,277 629,900 271,447 0 0 220,300
Operations 1994 372,827 450,900 399,192 0 155,000 0
John W. Morrow, Jr. 1996 318,000 580,800 90,758 0 130,000 208,900
Executive Vice President 1995 301,500 489,700 197,961 0 0 196,100
Corporate Development 1994 293,500 360,000 324,722 0 52,500 0
Jerald L. Pullins 1996 320,000 598,400 260,535 0 0 0
Executive Vice President 1995 290,000 436,500 95,800 170,625 400,000 0
European Operations 1994 260,000 284,900 66,758 94,281 30,000 0
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------- ---------------
- ----------------------------- ---------------
NAME AND
PRINCIPAL POSITION ALL OTHER
------------------ COMPENSATION(5)
- ----------------------------- ---------------
<S> <C>
R. L. Waltrip $272,234
Chairman and 78,580
Chief Executive Officer 78,410
L. William Heiligbrodt 69,846
President and 787
Chief Operating Officer 739
W. Blair Waltrip 41,238
Executive Vice President 830
Operations 830
John W. Morrow, Jr. 58,336
Executive Vice President 1,481
Corporate Development 1,360
Jerald L. Pullins 50,779
Executive Vice President 735
European Operations 639
- --------------------------------------------------------------
</TABLE>
(1) Salary includes director fees of $57,000 each for Messrs. R. L. Waltrip,
Heiligbrodt and W. Blair Waltrip.
(2) Figures include tax gross-up payments on restricted stock award vestings
which are taken into consideration when determining the total value of each
award. Figures also include other executive perquisites and benefits,
including, for 1996, $110,500 for Interest Reimbursement for Mr. R. L.
Waltrip; $43,712 for use of aircraft and $65,000 for Interest Reimbursement
for Mr. Heiligbrodt; $31,933 for use of aircraft and $39,000 for Interest
Reimbursement for Mr. W. Blair Waltrip; $34,125 for Interest Reimbursement
for Mr. Morrow; and $75,939 for expatriate allowances for Mr. Pullins.
"Interest Reimbursement" means a payment to the individual as reimbursement
of interest paid by him on the loan from the Company described in the fifth
paragraph under "Certain Transactions."
(3) At December 31, 1996, the number and value of restricted stock holdings not
vested of the Named Executives were as set forth in the following table.
Dividends are paid on restricted shares.
<TABLE>
<CAPTION>
-----------------------------
SHARES VALUE
- ----------------------------------------------------------------------
<S> <C> <C>
Jerald L. Pullins 8,122 $227,416
- ----------------------------------------------------------------------
</TABLE>
(4) The amounts for 1995 vested and were paid pursuant to the earnings per share
objectives of the 1995 Long-Term Cash Performance Plan. The amounts for 1996
were accelerated as described in the Compensation Committee Report.
(5) Consists of the following for 1996: $270,014 for split dollar life insurance
and $2,220 for term life insurance for Mr. R. L. Waltrip; $68,970 for split
dollar life insurance and $876 for term life insurance for Mr. Heiligbrodt;
$40,433 for split dollar life insurance and $805 for term life insurance for
Mr. W. Blair Waltrip; $56,780 for split dollar life insurance and $1,556 for
term life insurance for Mr. Morrow; and $49,992 for split dollar life
insurance and $787 for term life insurance for Mr. Pullins.
9
<PAGE> 13
STOCK OPTIONS
Option Grants in 1996
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SCI SHARES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
GRANT OPTIONS EMPLOYEES PRICE PER EXPIRATION PRESENT
DATE GRANTED(1) IN 1996 SHARE(2) DATE VALUE(3)
-------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
R. L. Waltrip.................. 02/15/96 440,000 19.6% $22.6250 02/14/06 $4,695,856
L. William Heiligbrodt......... 02/15/96 400,000 17.9 22.6250 02/14/06 3,906,680
W. Blair Waltrip............... 02/15/96 200,000 8.9 22.6250 02/14/06 1,953,340
John W. Morrow, Jr............. 02/15/96 130,000 5.8 22.6250 02/14/06 1,269,671
</TABLE>
- ---------------
(1) The stock options granted to Mr. R. L. Waltrip vested 50% on February 15,
1997 and will vest 50% on February 15, 1998. The stock options granted to
Messrs. Heiligbrodt, W. Blair Waltrip and Morrow will vest upon the
occurrence of certain events, including vesting at 8 years after the date of
the grant, or earlier if the Common Stock meets certain target price levels
during the first 5 years from the date of the grant. If the market price of
the Common Stock exceeds or equals the following target price for 10
consecutive trading days, the stock options will vest as follows:
<TABLE>
<CAPTION>
TARGET OPTION
SHARE PRICE VESTING
----------- -------
<S> <C>
$30........................................ 20%
$35........................................ 50%
$40........................................ 100%
</TABLE>
Each option will also fully vest upon a change of control of the Company
(as defined in the plan).
(2) The exercise price for all grants is the average market price at the date of
grant.
(3) The present value of options is based on a present value model known as the
"Black-Scholes option pricing model" to arrive at the values shown. The
choice of such valuation method does not reflect any belief by SCI's
management that such a method, or any other valuation method, can accurately
assign a value to an option at the grant date. The assumptions used for
valuing the grants are: volatility rate of 27.19%; annual dividend yield of
1.00%; risk free interest rate of 7.46%; and adjustment for risk of
forfeiture is 3% per year for five years. An adjustment for the risk of
forfeiture is 3% per year for two years for the options granted to Mr. R. L.
Waltrip.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND DECEMBER 31, 1996
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
ACQUIRED AT DECEMBER 31, 1996 DECEMBER 31, 1996
ON VALUE --------------------------------- ---------------------------------
NAME EXERCISE REALIZED EXERCISABLE(1) UNEXERCISABLE(2) EXERCISABLE(1) UNEXERCISABLE(2)
---- ----------- -------- -------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
R. L. Waltrip............. 24,000 $423,751 105,000 3,592,500 $1,189,997 $49,847,498
L. William Heiligbrodt.... 21,000 408,188 75,000 2,337,500 849,998 31,312,499
W. Blair Waltrip.......... 21,000 370,782 50,000 1,325,000 566,665 17,995,833
John W. Morrow, Jr........ 0 0 35,000 1,097,500 396,666 15,265,833
Jerald L. Pullins......... 0 0 20,000 410,000 226,666 4,575,813
</TABLE>
- ---------------
(1) The amounts in the column are for exercisable options to acquire shares of
common stock of Equity Corporation International ("ECI").
(2) The amounts in the table include unexercisable options as follows:
R. L. Waltrip -- 52,500 shares of ECI valued at $594,998 at December 31,
1996.
L. William Heiligbrodt -- 37,500 shares of ECI valued at $424,998 at
December 31, 1996.
W. Blair Waltrip -- 25,000 shares of ECI valued at $283,332 at December 31,
1996.
John W. Morrow, Jr. -- 17,500 shares of ECI valued at $198,333 at December
31, 1996.
Jerald L. Pullins -- 10,000 shares of ECI valued at $113,333 at December 31,
1996.
10
<PAGE> 14
RETIREMENT PLANS
Cash Balance Plan
The SCI Cash Balance Plan is a defined benefit plan. Each participant in
the plan has an account, which will be credited, each year that a participant
qualifies, with a Company contribution (based on annual compensation and years
of benefit service) and interest. The chart below is the percentage applied to
total compensation for determining the Company contribution for each
participant.
<TABLE>
<CAPTION>
PERCENTAGE OF
YEARS OF BENEFIT SERVICE COMPENSATION
------------------------ -------------
<S> <C>
Less than six years......................................... 5.5%
Six to ten years............................................ 6.5%
Eleven or more years........................................ 8.0%
</TABLE>
The maximum compensation used in computing benefits under the SCI Cash
Balance Plan for 1996 was limited to $150,000.
For the period January 1, 1996 to December 31, 1996, interest for each
account was credited at the annual rate of 5.25%.
Estimated Annual Benefits Payable at Age 65
<TABLE>
<CAPTION>
NAME ANNUAL BENEFIT
---- --------------
<S> <C>
R. L. Waltrip............................................... $118,852*
L. William Heiligbrodt...................................... 28,819
W. Blair Waltrip............................................ 81,551
John W. Morrow, Jr.......................................... 15,502
Jerald L. Pullins........................................... 32,548
</TABLE>
- ---------------
* Currently being paid.
Normal Retirement Age is defined in the SCI Cash Balance Plan as (1) the
date upon which a member attains age 65 or (2) in the case of an employee who
becomes a member of the SCI Cash Balance Plan after the age of 60, it will be
the fifth anniversary of the date that such member became a participant.
The predecessor plan, the SCI Pension Plan, was restated and renamed the
SCI Cash Balance Plan effective October 1, 1993. The SCI Pension Plan, a defined
benefit plan, assumed employment continued to a normal retirement date of age
65. The annuity provided by the SCI Pension Plan, payable for life with 120
monthly payments certain, would provide a monthly benefit computed as follows:
40% of final average monthly compensation for the highest five consecutive years
multiplied by a fraction of which the numerator is the years of benefit service
(not to exceed 30) and the denominator is 30.
Employees at least age 60 years old with 10 years of benefit service on
September 30, 1993 will receive the greater of the benefit they would have
earned under the SCI Pension Plan or the benefit earned under the SCI Cash
Balance Plan.
The credited years of service under the SCI Cash Balance Plan as of
December 31, 1996, for the following named individuals are as follows: R. L.
Waltrip (40), L. William Heiligbrodt (9), W. Blair Waltrip (19), John W. Morrow,
Jr. (7) and Jerald L. Pullins (14).
Supplemental Executive Retirement Plan
for Senior Officers
The Supplemental Executive Retirement Plan for Senior Officers ("SERP for
Senior Officers") is a non-qualified plan which covers officers and subsidiary
operating presidents, including the Named Executives.
11
<PAGE> 15
Benefits under the SERP for Senior Officers do not consist of compensation
deferred at the election of participants. The amounts of benefits under the plan
are set by the Compensation Committee from time to time. The Compensation
Committee has set current guidelines such that the annual benefits will
generally equal a percentage (75% for the Chairman and the President, and lesser
percentages for the other officers) of a participant's 1997 annual base salary
and target bonus, with the benefits being reduced to the extent of the
participant's benefits under Social Security and the SCI Cash Balance Plan. The
participant will be entitled at age 60 to the annual payment of the full amount
of his benefit; if his employment terminates earlier than age 60, he will be
entitled to the annual payment of the amount of his benefit multiplied by a
fraction of which the numerator is the participant's years of service and the
denominator is the number of years from the participant's hire date until he
reaches age 60. These guidelines will not be applied if the participant would
have been entitled to higher benefits under the Committee's previous guidelines.
Benefit payments will be made in the form of 180 monthly installments
commencing at the later of severance of employment or the attainment of age
fifty-five. Prior to retirement, if a participant dies or in the event of a
change of control of the Company (as defined in the SERP for Senior Officers),
the Company will promptly pay to each beneficiary or participant a lump sum
equal to the present value of the benefit that the participant would have been
entitled to receive if he had continued to accrue benefit service from the date
of death or the date of the change of control to the date of his 65th birthday.
Participants may elect to begin receiving monthly benefits at age 55, while
still employed, provided the participant gives written notice at least twelve
months prior to the attainment of age 55. Such installments will be reduced for
early commencement to reasonably reflect the time value of money.
The table below sets forth benefits for the Named Executives.
ANNUAL BENEFITS UNDER SERP FOR SENIOR OFFICERS
<TABLE>
<CAPTION>
ESTIMATED ANNUAL
BENEFIT AT AGE 60
-----------------
<S> <C>
R L. Waltrip................................................ $1,075,006(1)
L. William Heiligbrodt...................................... 655,021(2)
W. Blair Waltrip............................................ 574,580(2)
John W. Morrow, Jr.......................................... 255,750
Jerald L. Pullins........................................... 263,500
</TABLE>
- ---------------
(1) This is Mr. R. L. Waltrip's actual benefit which, pursuant to his election,
is being paid in the form of monthly installments beginning January 1, 1995.
(2) Current participants have the greater of the benefit they would have earned
under the previous guidelines or the amount provided by the current
guidelines. For Mr. Heiligbrodt and Mr. W. Blair Waltrip, the annual benefit
is the amount earned under the previous guidelines.
EXECUTIVE EMPLOYMENT AGREEMENTS
The Company has executive employment agreements with its executive
officers, including Messrs. R. L. Waltrip, Heiligbrodt, W. Blair Waltrip, Morrow
and Pullins. The agreements have an initial term of five years for Mr. R. L.
Waltrip, four years for Mr. Heiligbrodt and three years for each of Messrs. W.
Blair Waltrip, Morrow and Pullins. Upon annual authorization by the Board of
Directors, the terms are extended for an additional year unless notice of
nonrenewal is given by either party. If such notice is given by the Company or
if the Board of Directors does not authorize renewal, the employment period is
extended so as to terminate the same number of years after the date of such
notice as the original term of the agreement. The agreements provide for base
salaries, which may be increased by the Board of Directors, and the right to
participate in bonus and other compensation and benefit arrangements. As of
March 21, 1997, the base salaries for Messrs. R. L. Waltrip, Heiligbrodt, W.
Blair Waltrip, Morrow and Pullins were $798,000, $585,000, $385,000, $330,000
and $340,000, respectively.
12
<PAGE> 16
In the event of termination of employment due to disability or death, the
executive or his estate will be entitled to receive any accrued and unpaid
salary or other compensation, a pro rata portion (based on the portion of the
year elapsed at the date of termination) of the highest bonus the executive
received in the preceding three years and continuation of welfare plan benefits.
If an executive is terminated without cause, he will be entitled to continuation
of compensation and certain other benefits for the remaining term of his
employment agreement. In the event of a change of control of the Company (as
defined in the agreements), the executive will be entitled to terminate his
employment for certain specified reasons generally relating to a failure by the
Company to honor the terms of the employment agreement ("Good Reason"), or
without any reason during the 30-day period beginning one year after the change
of control (the "Window Period"), and receive a lump-sum payment equal to (a)
any accrued and unpaid salary or other compensation plus (b) a pro rata portion
(based on the portion of the year elapsed at the date of termination) of the
highest bonus the executive received in the preceding three years plus (c) a
multiple (equal to the number of years in the initial term) of both the
executive's base salary and his highest recent bonus.
Upon termination of his employment, each executive will be subject, at the
Company's option, to a non-competition obligation for a period equal to the
number of years in the executive's initial term (except for Mr. R. L. Waltrip,
who has a 10-year non-competition obligation). If the Company elects to have the
non-competition provisions apply, during the non-competition period the Company
will make payments to the executive (other than Mr. R. L. Waltrip) at a rate
equal to his base salary at the time of termination, unless such termination was
for cause or if the executive terminates his employment other than for Good
Reason or during the Window Period, in which case the executive will be bound by
the non-competition provisions without the Company making the corresponding
payments. Any payments relating to the non-competition provisions will be
reduced to the extent the executive has received a lump-sum payment in lieu of
salary and bonus after termination of employment.
If any payments under the executive employment agreement or under the
benefit plans of the Company (including the Amended 1987 Stock Plan, the SERP
for Senior Officers, the 1993 Long-Term Incentive Stock Option Plan, the 1995
Incentive Equity Plan and the 1996 Incentive Plan) would subject the executive
to any excise tax under the Internal Revenue Code, the executive will also be
entitled to receive an additional payment in an amount such that, after the
payment of all taxes (income and excise), the executive will be in the same
after-tax position as if no excise tax had been imposed.
OTHER COMPENSATION
The Named Executives and certain other officers participate in the Split
Dollar Life Insurance Plan, under which they are owners of life insurance
policies providing death benefits to the Named Executives as follows: $2,000,000
for Mr. R. L. Waltrip; $1,500,000 for Mr. Heiligbrodt; and $1,000,000 each for
Messrs. W. Blair Waltrip, Morrow and Pullins. SCI advances the annual premium on
each policy, with the executive paying income tax on the term cost of the death
benefit. Each executive collaterally assigned an interest in the policy to SCI
in an amount equal to its cumulative premiums paid. SCI will recover its
cumulative premiums paid at the earlier of 15 years or death.
DIRECTOR COMPENSATION
The current rates of directors' and committee fees are $5,250 quarterly
plus $6,000 for each meeting of the Board attended (payable to all directors),
and $1,500 for each committee meeting attended (payable to non-employee
directors only).
In addition, directors or directors emeritus who are not employees of the
Company or its subsidiaries automatically receive yearly awards of restricted
Common Stock through 2000 pursuant to the 1995 Stock Plan For Non-Employee
Directors. Each award will be made on the second Thursday of May for an amount
of 3,000 shares. Each award will have a restriction period which will lapse on
the second Thursday in May of the year following the year the award is granted.
If the director terminates service as a director for any reason other than
disability or death prior to the lapse of the restriction period, the restricted
shares shall be forfeited.
13
<PAGE> 17
The restrictions shall lapse upon the occurrence of death or total and permanent
disability of the director or upon a change of control of the Company (as
defined in the plan). While the restrictions are in effect, the shares cannot be
sold, pledged or transferred. Except for the restrictions described above, a
participant in the Plan who has been awarded shares of restricted Common Stock
has all the rights of a holder of Common Stock, including the right to receive
dividends paid on such shares and the right to vote such shares. In 1996, each
of the eleven directors who were not employees and the director emeritus
received an award of 3,000 shares under the plan.
The Company maintains a Retirement Plan for Non-Employee Directors. Under
this plan, each of the directors who is not an employee of the Company,
including the director emeritus, was designated as a plan participant and will
be entitled to receive annual retirement benefits of $42,500 for ten years,
subject to a vesting schedule. The retirement benefits will vest in 25%
increments at the end of five years, eight years, eleven years and fifteen years
of credited service, except that the benefits will automatically vest 100% in
the event of death while a director or in the event of a change in control of
the Company (as defined in the plan).
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In 1996, the members of the Compensation Committee of the Board of
Directors of the Company were Messrs. James H. Greer, John W. Mecom, Jr. and E.
H. Thornton, Jr. No member of the Compensation Committee was, during 1996, an
officer or employee of the Company or any of its subsidiaries, or was formerly
an officer of the Company or any of its subsidiaries or had any relationships
requiring disclosure by the Company.
CERTAIN TRANSACTIONS
In August 1989, the Company acquired from J. W. Morrow Investment Company
its funeral home businesses located in Henderson, Texas and Charlotte, North
Carolina. John W. Morrow, Jr. was the primary shareholder of J. W. Morrow
Investment Company and was elected Executive Vice President of the Company in
August 1989. Mr. Morrow is currently the Executive Vice President Corporate
Development of the Company. In the August 1989 transaction, Mr. Morrow received
shares of Common Stock of the Company as his share of the acquisition price and,
in addition, entered a ten-year Agreement-Not-To-Compete with the Company. Under
the Agreement-Not-To-Compete, Mr. Morrow received a cash payment and monthly
payments scheduled to continue for a total of 96 months, which monthly payments
totaled $152,000 in 1996. Each of Mr. Morrow's adult children entered a ten year
Agreement-Not-To-Compete under which the Company is obligated to make monthly
payments for the term of such agreements. The Company paid $36,000 in 1996 under
the children's agreements.
In 1996, the Company provided salary and bonus of $413,200, relocation
expenses of $81,743 and other benefits of $179,709 and granted 6,000 shares of
restricted stock of the Company to T. Craig Benson, son-in-law of R. L. Waltrip,
in his capacity as a vice president of the Company.
In 1996, the Company paid $45,000 cash remuneration and awarded 3,000
restricted shares of Common Stock of the Company to Wanda A. McGee, mother of R.
L. Waltrip, in her capacity as director emeritus of the Company. Pursuant to a
resolution adopted by the Board in 1983, Ms. McGee is entitled as director
emeritus to receive such fees and other emoluments as may be paid or awarded to
directors of the Company.
In 1996, the Company leased vehicles to companies owned by Mr. R. L.
Waltrip and received rentals aggregating $50,527. The Company also leased
vehicles to a company owned by Mr. Heiligbrodt and received rentals aggregating
$61,390. All of the leases were entered at market rates and contain terms which,
in the opinion of management, are as favorable to the Company as could have been
negotiated with any third party.
In connection with grants of restricted stock under the Amended 1987 Stock
Plan, on August 19, 1993 the Company made loans of $1,700,000 to Mr. R. L.
Waltrip, $1,000,000 to Mr. Heiligbrodt, $600,000 to Mr. W. Blair Waltrip and
$525,000 to Mr. Morrow. The loans were made to enable such officers to pay the
14
<PAGE> 18
estimated federal income taxes resulting from their receipt of the restricted
stock grants. Each of the loans remained outstanding in 1996, is due August 10,
2003 and bears interest at 6 1/2% per annum, which interest is reimbursed by the
Company (together with a tax gross-up payment on the interest).
Provident Services, Inc. and its subsidiaries ("Provident") provide various
types of financing in the funeral and cemetery industry, including loans to
certain employees and directors of the Company. Provident Services, Inc. is a
subsidiary of the Company. During 1996, Provident had outstanding loans of
$60,000 or more to officers and directors as set forth below. All such loans are
secured and contain terms which, in the opinion of management, are as favorable
to Provident as could have been negotiated with any third party.
T. Craig Benson, Vice President International Operations of the Company,
has a loan to exercise stock options at the prime rate, of which the largest
balance in 1996 and the year end balance was $83,751.
Gregory L. Cauthen, Vice President Treasurer of the Company, has a mortgage
loan at 7.10% interest, of which the largest balance in 1996 was $185,693 and
the year end balance was $174,436.
George R. Champagne, Senior Vice President and Chief Financial Officer of
the Company, has a mortgage loan at 8.3% interest, of which the largest balance
in 1996 and the year end balance was $392,981. In addition, Mr. Champagne has a
loan for personal use at the prime rate, of which the largest balance in 1996
and the year end balance was $126,040.
Anthony L. Coelho, a member of the Board of Directors of the Company, has a
mortgage loan at 7.20% interest, of which the largest balance in 1996 was
$509,398 and the year end balance was $466,692.
W. Mark Hamilton, Vice President Finance European Operations of the
Company, has a loan for personal use at the prime rate, of which the largest
balance in 1996 was $120,000 and the year end balance was zero. In addition, Mr.
Hamilton has a loan for personal use at the prime rate, of which the largest
balance in 1996 and the year end balance was $96,306.
L. William Heiligbrodt, President and Chief Operating Officer of the
Company, has a mortgage loan at 7.70% interest, of which the largest balance in
1996 was $366,131 and the year end balance was $361,707. Mr. Heiligbrodt has a
mortgage loan at 7.60% interest, of which the largest balance in 1996 was
$96,951 and the year end balance was $95,806. Mr. Heiligbrodt has a mortgage
loan at 7.45% interest, of which the largest balance in 1996 was $129,538 and
the year end balance was $128,634. In addition, Mr. Heiligbrodt has from
Provident a loan for personal use at the prime rate, of which the largest
balance in 1996 and the year end balance was $259,082.
Lowell A. Kirkpatrick, Jr., Vice President Corporate Development of the
Company, has a mortgage loan at 6.50% interest, of which the largest balance in
1996 was $314,667 and the year end balance was $310,265. In addition, Mr.
Kirkpatrick has a loan for personal use at the prime rate, of which the largest
balance in 1996 and the year end balance was $98,031.
Todd A. Matherne, Vice President Investor Relations of the Company, has a
loan for personal use at the prime rate, of which the largest balance in 1996
and the year end balance was $98,031.
Glenn G. McMillen, Senior Vice President Operations of the Company, has a
mortgage loan at 7.60% interest, of which the largest balance in 1996 was
$238,669 and the year end balance was $229,580. In addition, Mr. McMillen has a
loan for personal use at the prime rate, of which the largest balance in 1996
and the year end balance was $126,040.
John W. Morrow, Jr., Executive Vice President Corporate Development of the
Company, has a loan for personal use at the prime rate, of which the largest
balance in 1996 and the year end balance was $151,388.
Henry M. Nelly, III, President of Provident Services, Inc., has a mortgage
loan at 9.10% interest, of which the largest balance in 1996 was $110,044 and
the year end balance was $102,500. Mr. Nelly has a loan to exercise stock
options at the prime rate, of which the largest balance in 1996 and the year end
balance was $104,375. In addition, Mr. Nelly has a loan for personal use at the
prime rate, of which the largest balance in 1996 and the year end balance was
$126,040.
15
<PAGE> 19
Jerald L. Pullins, Executive Vice President European Operations of the
Company, has a mortgage loan at 9.20% interest, of which the largest balance in
1996 was $380,577 and the year end balance was $378,575. In addition, Mr.
Pullins has a loan for personal use at the prime rate, of which the largest
balance in 1996 and the year end balance was $154,049.
Richard T. Sells, Senior Vice President Prearranged Sales of the Company,
has a mortgage loan at 7.80% interest, of which the largest balance in 1996 was
$238,571 and the year end balance was $225,296. Mr. Sells has a loan for
personal use at the prime rate, of which the largest balance in 1996 and the
year end balance was $130,000. In addition, Mr. Sells has an additional loan for
personal use at the prime rate, of which the largest balance in 1996 and the
year end balance was $126,040.
James M. Shelger, Senior Vice President General Counsel and Secretary of
the Company, has a loan for personal use at the prime rate, of which the largest
balance in 1996 and the year end balance was $126,040.
Jack L. Stoner, Senior Vice President Administration of the Company, has a
mortgage loan at 7.20% interest, of which the largest balance in 1996 was
$217,401 and the year end balance was $205,282.
Vincent L. Visosky, Vice President Operational Controller of the Company,
has a loan for personal use at the prime rate, of which the largest balance in
1996 and the year end balance was $84,026.
R. L. Waltrip, Chairman of the Board and Chief Executive Officer of the
Company, has a loan for personal use at the prime rate, of which the largest
balance in 1996 and the year end balance was $259,082.
W. Blair Waltrip, Executive Vice President Operations of the Company, has a
loan for personal use at the prime rate, of which the largest balance in 1996
was $151,338 and the year end balance was zero.
The Company has entered transactions with various subsidiaries of J.P.
Morgan & Co. Incorporated ("Morgan"), which held more than 5% of the outstanding
shares of Common Stock of the Company in 1996 until May 31, 1996, the date of a
filing in which Morgan reported that its ownership decreased to below 5%.
Accordingly, information concerning the Company's transactions with Morgan and
its subsidiaries is not provided for any period after May 31, 1996.
In connection with the Company's acquisition of an Australian company in
August 1993, the Company and a Morgan subsidiary entered a swap transaction
under which the Morgan subsidiary paid $110,000,000 Australian Dollars ("AUD")
in August 1993 to the Company and became obligated to pay the Company (i)
$73,590,000 US Dollars ("USD") in December 2000 and (ii) a variable rate of
interest on $73,590,000 USD that reprices to a floating LIBOR rate every six
months. In the transaction, the Company paid $73,590,000 USD in August 1993 to
the Morgan subsidiary and became obligated to pay the subsidiary (i)
$110,000,000 AUD in December 2000 and (ii) a fixed rate of 7.235% on $66,000,000
AUD and a variable rate of interest on $44,000,000 AUD that reprices every six
months to a Bank Bill rate. This transaction expires December 29, 2000. During
the five months ended May 31, 1996, no payments were made under this
transaction.
In 1993, the Company and a Morgan subsidiary agreed to a swap transaction
effective February 1994 with respect to a notional amount of $150,000,000 USD,
which amount was reduced to $75,000,000 USD in 1994. Under the agreement, the
Morgan subsidiary is obligated to pay the Company a fixed rate of 5.36% on the
notional amount for five years and the Company is obligated to pay the Morgan
subsidiary a variable rate that reprices to a LIBOR rate every six months. This
transaction expires February 1, 1999. In the five months ended May 31, 1996, the
Company paid $2,252,083 USD to the Morgan subsidiary and received $2,010,000 USD
from the subsidiary under this transaction.
In December 1994, the Company and a Morgan subsidiary entered a swap
transaction under which the Morgan subsidiary paid L129,019,336 British Pounds
("GBP") to the Company in January 1995 and became obligated to pay the Company
(i) $200,000,000 USD in December 2004 and (ii) a fixed rate of 8.488% on
$200,000,000 USD. In the transaction, the Company paid $201,432,212 USD to the
Morgan subsidiary in January 1995 and became obligated to pay the subsidiary (i)
L128,139,416 GBP in December 2004 and (ii) a variable rate of interest on
L128,139,416 GBP that reprices to a pound sterling LIBOR rate plus .529% every
six months. In September 1995, this swap was amended and, instead of the Company
paying a variable rate of
16
<PAGE> 20
interest on L128,139,416 GBP, the Company is obligated to pay a fixed rate of
8.549% on L65,000,000 GBP and a variable rate of interest on L63,139,416 GBP
that reprices to a pound sterling LIBOR rate plus .529% every six months. This
transaction expires December 15, 2004. During the five months ended May 31,
1996, the Company paid L5,610,065 GBP to the Morgan subsidiary and received
$8,214,113 USD from the Morgan subsidiary under this transaction.
Additionally in December 1994, the Company and a Morgan subsidiary entered
a swap transaction under which the Morgan subsidiary paid L10,769,509 GBP to the
Company in January 1995 and became obligated to pay the Company (i) $72,500,000
USD in December 2004 and (ii) a fixed rate of 7.973% on $72,500,000 USD. In the
transaction, the Company paid $17,467,577 USD to the Morgan subsidiary in
January 1995 and became obligated to pay the subsidiary (i) L46,450,538 GBP in
December 2004 and (ii) a variable rate of interest on L46,450,538 GBP that
reprices to a pound sterling LIBOR rate every six months. This transaction
expires December 15, 2004. During the five months ended May 31, 1996, no
payments were made under this transaction.
In connection with a private debt offering, the Company and a Morgan
subsidiary entered a swap transaction under which the Morgan subsidiary paid
L127,712,273 GBP to the Company in January 1995 and became obligated to pay the
Company $19,290,647 every six months. In the transaction, the Company paid
$199,010,865 USD to the Morgan subsidiary in January 1995 and became obligated
to pay the subsidiary (i) L10,202,500 GBP every six months, (ii) scheduled
amounts every six months, which amounts vary from L1,319,735 GBP due July 27,
1995 to L2,433,361 GBP due January 2002, and (iii) a variable rate of interest
that reprices to a pound sterling LIBOR rate every six months, plus a spread of
0.685%, on scheduled notional amounts, which notional amounts decrease from
L25,542,455 GBP in January 1995 to L2,433,361 in July 2001. This transaction
expires January 27, 2002. During the five months ended May 31, 1996, no payments
were made under this transaction.
In connection with the Company's public offering of equity securities in
September 1995, Morgan subsidiaries, among others, were underwriters and
received in January 1996 $672,046 in discounts or fees for their underwriting
services.
In connection with a private debt offering, a Company subsidiary and a
Morgan subsidiary entered a swap transaction under which the Morgan subsidiary
paid $135,550,000 Canadian Dollars ("CAD") in November 1995 and became obligated
to pay the Company (i) $100,000,000 USD in November 2010, and (ii) a fixed rate
of 6.95% on $100,000,000 USD. In the transaction the Company paid $100,000,000
USD to the Morgan subsidiary in November 1995 and became obligated to pay the
subsidiary (i) $135,550,000 CAD in November 2010, and (ii) a variable rate
interest on $135,550,000 CAD that reprices to a Bankers' Acceptance rate every
three months. This transaction expires November 2010. During the five months
ended May 31, 1996, no payments were made under this transaction.
In January 1996, the Company and a Morgan subsidiary entered a swap
transaction under which the Morgan subsidiary became obligated to pay the
Company (i) $100,000,000 USD in January 1998, and (ii) a fixed rate of 5.37% on
$100,000,000 USD. The Company is obligated to pay the subsidiary 493,920,000
French Francs ("FRF") in January 1998, and (ii) a fixed rate of 5.0865% on
493,920,000 FRF. This transaction expires January 16, 1998.
The Company or its subsidiaries have entered a series of currency exchanges
with Morgan subsidiaries in December 1995 through January 1996. In these
exchanges, the Company and its subsidiaries have paid to Morgan subsidiaries
L8,785,486 GBP and $13,639,467 USD. In the exchanges, the Morgan subsidiaries
paid to the Company and its subsidiaries L8,785,486 GBP and $13,643,860 USD.
In March 1996 and as amended in May 1997, the Company and a Morgan
subsidiary entered a swap transaction with respect to a notional amount of
492,000,000 FRF. In the transaction, the Morgan subsidiary is obligated to pay
the Company in FRF a variable rate that reprices every three months to a PIBOR
rate, and the Company is obligated to pay in FRF a variable rate that reprices
every three months to a deutschemark LIBOR rate plus 23 basis points. This
transaction expires April 26, 2006.
17
<PAGE> 21
In March 1996, the Company and a Morgan subsidiary entered a swap
transaction with respect to a notional amount of 494,000,000 FRF. The Morgan
subsidiary is obligated to pay the Company in FRF (i) a fixed rate of 6.8% on
the notional amount until April 1998, and (ii) after April 1998, a variable rate
that reprices every three months to a PIBOR rate. The Company is obligated to
pay the Morgan subsidiary in FRF (i) a variable rate that reprices every three
months to a deutschemark LIBOR rate, plus 197 basis points, on the notional
amount until April 1998, and (ii) after April 1998, a variable rate that
reprices every three months to a deutschemark LIBOR rate. This transaction
expires April 1, 2006.
Also in March 1996, the Company and the Morgan subsidiary entered a swap
transaction with respect to a notional amount of 494,000,000 FRF. The Morgan
subsidiary is obligated to pay the Company in FRF a variable rate that reprices
every three months to a floating deutschemark LIBOR rate, plus 197 basis points,
on the notional amount. The Company is obligated to pay a fixed rate of 6.2% on
the notional amount. This transaction expires April 1, 1998.
In the five months ended May 31, 1996, the Company paid a Morgan subsidiary
fees of $175,000 for management of funds in the United Kingdom.
In the Company's public offering of debt securities completed in May 1996,
Morgan subsidiaries, among others, were underwriters and received underwriting
discounts or fees of $492,438.
In the five months ended May 31, 1996, the Company paid to Morgan
subsidiaries $62,500 for advisory services in connection with European
acquisition opportunities.
18
<PAGE> 22
VOTING SECURITIES AND PRINCIPAL HOLDERS
To the knowledge of the Company, no person beneficially owned more than
five percent of the issued and outstanding Common Stock of the Company as of
March 21, 1997.
The table below sets forth, as of March 21, 1997, the amount of the
Company's Common Stock beneficially owned by each executive officer named in the
Summary Compensation Table, each director and nominee for director, and all
directors and executive officers as a group, based upon information obtained
from such persons. Securities reported as beneficially owned include those for
which the persons listed have voting or investment power, unless otherwise
noted. Such persons have sole voting power and investment power unless otherwise
noted.
<TABLE>
<CAPTION>
AMOUNT
BENEFICIALLY PERCENT
NAME OF INDIVIDUAL OR GROUP OWNED(1) OF CLASS
--------------------------- ------------ --------
<S> <C> <C>
R. L. Waltrip............................................... 1,314,818(2) *
L. William Heiligbrodt...................................... 590,404(3) *
W. Blair Waltrip............................................ 1,851,594(4) *
John W. Morrow, Jr. ........................................ 281,972(5) *
Jerald L. Pullins........................................... 272,918(6) *
Anthony L. Coelho........................................... 27,250 *
Douglas M. Conway........................................... 176,826(7) *
Jack Finkelstein............................................ 529,382(8) *
A. J. Foyt, Jr. ............................................ 37,800(9) *
James J. Gavin, Jr. ........................................ 81,452(10) *
James H. Greer.............................................. 25,274 *
B. D. Hunter................................................ 132,634(11) *
John W. Mecom, Jr. ......................................... 20,000 *
Clifton H. Morris, Jr. ..................................... 28,034(12) *
E. H. Thornton, Jr. ........................................ 114,900 *
Edward E. Williams.......................................... 26,716 *
Executive Officers and Directors
as a Group (29 persons)................................... 6,160,070(13) 2.6%
</TABLE>
- ---------------
* Less than one percent
(1) For each of Messrs. Coelho, Conway, Finkelstein, Foyt, Gavin, Greer,
Hunter, Mecom, Morris, Thornton and Williams, the amounts include 3,000
shares held under the 1995 Stock Plan for Non-Employee Directors, and each
such director has sole voting and shared investment power with respect to
such shares.
(2) Includes 468,384 shares held in two trusts (under one of which trusts Mr.
R. L. Waltrip's wife is a beneficiary) under which Mr. R. L. Waltrip's
three children, as trustees, either share or have sole voting and
investment powers. These shares are also included in the shares owned by
Mr. W. Blair Waltrip. See Footnote (4). The information herein regarding
ownership of equity securities by the trusts is for informational purposes
only and is not to be construed as a statement that Mr. R. L. Waltrip is a
beneficial owner of any such securities, as any beneficial ownership
thereof is expressly disclaimed by Mr. R. L. Waltrip. Also includes 220,000
shares which may be acquired upon exercise of stock options exercisable
within 60 days.
(3) Includes 6,750 shares and 1,460 shares held in two trusts for which Mr.
Heiligbrodt is trustee and 5,830 shares owned by Mr. Heiligbrodt's wife,
daughter, or son, of which shares Mr. Heiligbrodt disclaims beneficial
ownership.
(4) Includes 127,204 shares held in a trust for the benefit of Mr. W. Blair
Waltrip, 1,072,224 shares held in three trusts under which Mr. W. Blair
Waltrip, his brother and his sister are trustees and have either shared or
sole voting and investment power and 26,566 shares held in other family
trusts. Of the shares
19
<PAGE> 23
attributable to the trusts, 468,384 shares are also included in the shares
owned by Mr. R. L. Waltrip. See Footnote (2).
(5) Includes 20,000 shares held by a charitable foundation of which Mr. Morrow
is a director. Mr. Morrow has shared voting and investment power for such
shares and disclaims beneficial ownership of such shares.
(6) Includes 15,160 shares held by a trust of which Mr. Pullins' wife is
trustee for the benefit of Mr. Pullins' children. Mr. Pullins disclaims
beneficial ownership of such shares.
(7) Includes 173,826 shares held by a family trust of which Mr. Conway is a
trustee and as to which he shares voting and investment power.
(8) Includes 482,708 shares held in five trusts for the benefit of other family
members and/or himself, and 2,010 shares held by a charitable foundation of
which Mr. Finkelstein is President. As trustee, Mr. Finkelstein has sole
voting and investment power with respect to 316,574 shares and shares
voting and investment power with respect to 168,144 shares. Mr. Finkelstein
disclaims beneficial ownership as to 168,144 shares held in such trusts and
by the foundation. Also includes 13,292 shares which may be acquired
through conversion of preferred stock of a subsidiary, of which shares Mr.
Finkelstein disclaims beneficial ownership.
(9) Includes 8,800 shares held by Mr. Foyt as custodian for family members. Mr.
Foyt has sole voting and investment power for such shares and disclaims
beneficial ownership of such shares.
(10) Includes 37,884 shares held by a charitable foundation of which Mr. Gavin
is President, of which shares Mr. Gavin disclaims beneficial ownership.
(11) Includes 22,484 shares held directly by Mr. Hunter, 38,408 shares
indirectly controlled by Mr. Hunter (of which Mr. Hunter disclaims
beneficial ownership) and 71,742 shares held by Mr. Hunter's Individual
Retirement Account.
(12) Includes 4,034 shares owned by Mr. Morris' wife. Mr. Morris disclaims
beneficial ownership of such shares.
(13) Includes 33,000 shares held under the 1995 Stock Plan for Non-Employee
Directors and 6,000 restricted shares held under Company stock plans, for
all of which restricted shares one individual has sole voting and shared
investment power, as well as 312,947 shares which may be acquired upon
exercise of stock options exercisable within 60 days.
INDEPENDENT ACCOUNTANTS
The Board of Directors of the Company has selected Coopers & Lybrand
L.L.P., Certified Public Accountants ("Coopers"), to serve as the independent
accountants for the Company for the fiscal year ending December 31, 1997.
Coopers has audited the Company's accounts since 1993. A representative of
Coopers is expected to be present at the Annual Meeting of Shareholders, will
have the opportunity to make a statement if he or she desires to do so and will
be available to respond to appropriate questions at such meeting.
20
<PAGE> 24
OTHER MATTERS
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Based solely upon a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year and Forms 5 and
amendments thereto furnished to the Company with respect to its most recent
fiscal year, and written representations from reporting persons that no Form 5
was required, the Company believes that A. J. Foyt Jr., a director, filed late
one Form 4 reporting one transaction.
PROXY SOLICITATION
In addition to solicitation by mail, further solicitation of proxies may be
made by telephone, telegraph or oral communication following the original
solicitation by directors, officers and regular employees of the Company who
will not be additionally compensated therefor, or by its transfer agent. The
expense of such solicitation will be borne by the Company and will include
reimbursement paid to brokerage firms and other custodians, nominees and
fiduciaries for their expenses in forwarding solicitation material regarding the
meeting to beneficial owners. In addition, the Company has retained Kissel-Blake
Inc. to aid in the solicitation of proxies from shareholders generally in
connection with the Annual Meeting of Shareholders. Such solicitations may be by
mail, facsimile, telephone, telegraph or personal interview. The fee of such
firm is not expected to exceed $12,000 plus reimbursement for reasonable
expenses.
OTHER BUSINESS
The Board of Directors of the Company is not aware of other matters to be
presented for action at the meeting; however, if any such matters are presented
for action, it is the intention of the persons named in the enclosed form of
proxy to vote in accordance with their judgment.
SUBMISSION OF SHAREHOLDER PROPOSALS
Any proposal to be presented by a shareholder at the Company's 1998 Annual
Meeting of Shareholders scheduled to be held on May 14, 1998 must be received by
the Company by December 12, 1997, so that it may be considered by the Company
for inclusion in its proxy statement relating to that meeting.
It is important that proxies be returned to avoid unnecessary expense.
Therefore, shareholders are urged, regardless of the number of shares of stock
owned, to date, sign and return the enclosed proxy in the enclosed business
reply envelope.
Service Corporation International
1929 Allen Parkway,
P.O. Box 130548
Houston, Texas 77219-0548
April 11, 1997
21
<PAGE> 25
[SCI LOGO]
Service Corporation International
1929 Allen Parkway
P.O. Box 130548
Houston, Texas 77219-0548
<PAGE> 26
PROXY PROXY
SERVICE CORPORATION INTERNATIONAL
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS--MAY 8, 1997
The undersigned hereby appoints ROBERT L. WALTRIP, L. WILLIAM HEILIGBRODT,
GEORGE R. CHAMPAGNE and JAMES M. SHELGER and each or any of them as attorneys,
agents and proxies of the undersigned with full power of substitution, for and
in the name, place and stead of the undersigned, to attend the annual meeting of
shareholders of Service Corporation International (the "Company") to be held in
the Texas Commerce Center Auditorium, First Floor, Texas Commerce Center, 601
Travis, Houston, Texas on Thursday, May 8, 1997, at 10:00 a.m., Houston time,
and any adjournment(s) thereof, and to vote thereat the number of shares of
Common Stock of the Company which the undersigned would be entitled to vote if
personally present as indicated below and on the reverse side hereof and, in
their discretion, upon any other business which may properly come before said
meeting. This Proxy when properly executed will be voted in accordance with your
indicated directions. If no direction is made, this proxy will be voted FOR the
election of directors.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
<PAGE> 27
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. [||]
[ ]
1. Election of Directors -- For Withheld For All
Nominees: Anthony L. Coelho, A. J. Foyt, Jr., All All Except
E. H. Thornton, Jr., R. L. Waltrip and
Edward E. Williams [ ] [ ] [ ]
_________________________________
(Except nominee(s) written above)
The undersigned acknowledges receipt of
the Notice of Annual Meeting of
Shareholders and of the Proxy Statement.
Dated: ___________, 1997
Signature(s) __________________________
_______________________________________
Please sign exactly as your name
appears. Joint owners should each sign
personally. Where applicable, indicate
your official position or
representation capacity.
