<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. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
SERVICE CORPORATION INTERNATIONAL
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(l) and
0-11.
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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<PAGE> 2
SERVICE CORPORATION INTERNATIONAL
1929 ALLEN PARKWAY, P.O. BOX 130548
HOUSTON, TEXAS 77219-0548
----------------------
PROXY STATEMENT AND
1998 ANNUAL MEETING
NOTICE
----------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 14, 1998
TO OUR SHAREHOLDERS:
The Annual Meeting of Shareholders of Service Corporation International
will be held in the Chase Auditorium, First Floor, Chase Center, 601 Travis,
Houston, Texas, on Thursday, May 14, 1998, at 10:00 a.m., Houston time, for the
following purposes:
(1) To elect two 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 26, 1998 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 8, 1998
<PAGE> 3
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 Chase Auditorium, First Floor, Chase Center, 601
Travis, Houston, Texas, on Thursday, May 14, 1998, 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 8, 1998. A
copy of the Annual Report to Shareholders of the Company for the fiscal year
ended December 31, 1997, including the consolidated financial statements, is
being mailed with this proxy statement to all shareholders entitled to vote at
the Annual Meeting.
At March 26, 1998, the Company had outstanding and entitled to vote
255,840,952 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 (cumulative voting is not permitted). A majority of the votes
entitled to be cast must be represented at the Annual Meeting, in person or by
proxy, for a quorum to be present for the transaction of business. Only
shareholders of record at the close of business on March 26, 1998 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 its voting 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 his or her shares for as many persons as there are directors to be
elected. 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 count toward a quorum as to
that matter.
ELECTION OF DIRECTORS
The Board of Directors is divided into three classes, each with staggered
terms of three years. Two directors whose terms expire at this Annual Meeting
have been renominated for three-year terms expiring at the 2001 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 1999 and 2000.
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 nominee will
be unable or unwilling to serve, if such a situation arises, the proxies that do
not withhold authority to vote for directors will be voted for a substitute
nominee(s) chosen by the Board.
<PAGE> 4
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 current principal occupation and the year
in which such person was first elected a director of the Company.
<TABLE>
<CAPTION>
DIRECTOR DIRECTOR
NAME PRINCIPAL OCCUPATION SINCE AGE
-------- -------------------- -------- ---
<S> <C> <C> <C>
DIRECTOR NOMINEES FOR TERMS EXPIRING AT THE 2001 ANNUAL MEETING:
B. D. Hunter(1).................. Chairman of the Board and Chief Executive 1986 68
Officer of Huntco, Inc. (intermediate steel
processor)
John W. Mecom, Jr.(2)............ Chairman of the Board of The John W. Mecom 1983 58
Co. (personal and family investments)
DIRECTORS WHOSE TERMS EXPIRE AT THE 1999 ANNUAL MEETING:
Jack Finkelstein(1)(3)(4)........ Personal and family trust investments 1965 70
James H. Greer(2)................ Chairman of the Board of Shelton W. Greer 1978 71
Co., Inc. (engineering, manufacturing,
fabrication and installation of building
specialty products)
L. William President and Chief Operating Officer of 1975 56
Heiligbrodt(1)(4)(5)........... the Company
Clifton H. Morris, Jr.(3)........ Chairman of the Board and Chief Executive 1990 62
Officer of AmeriCredit Corp. (financing of
automotive vehicles)
W. Blair Waltrip(1)(4)(5)........ Executive Vice President Operations of the 1986 43
Company
DIRECTORS WHOSE TERMS EXPIRE AT THE 2000 ANNUAL MEETING:
Anthony L. Coelho................ Consultant 1991 55
A. J. Foyt, Jr................... President of A. J. Foyt Enterprises, Inc. 1974 63
(designer, manufacturer, and exhibitor of
high-speed engines and racing vehicles and
marketer of automotive vehicles)
E. H. Thornton, Jr.(1)(2)(3)..... Attorney with Thornton & Burnett, Attorneys 1962 88
at Law
R. L. Waltrip(1)(4)(5)........... Chairman of the Board and Chief Executive 1962 67
Officer of the Company
Edward E. Williams(1)(3)(4)...... Henry Gardiner Symonds Professor and 1991 52
Director of the Entrepreneurship Program at
the Jesse H. Jones Graduate School of
Management at Rice University
</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
Each director has been engaged in his current principal occupation set
forth in the table during the last five years except as indicated below. Also
set forth below are certain other directorships held by directors.
2
<PAGE> 5
B. D. Hunter is a member of the Board of Directors of Cash America
International, Inc. and Celebrity, Inc.
James H. Greer is a member of the Board of Directors of AmeriCredit Corp.
and TEI, Inc.
L. William Heiligbrodt is a member of the Board of Directors of BJ Services
Company.
Since January 1990, W. Blair Waltrip also served as Chairman of the Board
and President of Service Corporation International (Canada) Limited, a Company
subsidiary which was 31% publicly owned until September 1995. Mr. W. Blair
Waltrip is a member of the Board of Directors of TEI, Inc. Mr. W. Blair Waltrip
is the son of Mr. R. L. Waltrip.
Since September 1997, Anthony L. Coelho has served as a consultant to
Telecommunications, Inc. From July 1995 to November 1997 Mr. Coelho served as
Chairman and Chief Executive Officer of Coelho Associates, L.L.C. (investment
consulting and brokerage firm) and served from October 1995 to September 1997 as
Chairman and Chief Executive Officer of ETC w/tci (training and communication
firm). Prior thereto, from January 1990 to June 1995, he was President and Chief
Executive Officer of Wertheim Schroder Investment Services, Inc. (asset
management firm) and from October 1989 to June 1995, Managing Director, Wertheim
Schroder & Co., Inc. (investment banking firm). Mr. Coelho is a member of the
Board of Directors of AutoLend Group, Inc., Cyberonics, Inc., ICF Kaiser
International, Inc., International Thoroughbred Breeders, Inc., ITT Educational
Services, Inc. and TEI, Inc.
R. L. Waltrip is a member of the Board of Directors of TEI, Inc.
Edward E. Williams is a member of the Board of Directors of Equus II
Incorporated.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors held four meetings during 1997. 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 between Board meetings, including selection on its own motion of nominees
for election to the Board. The Executive Committee held twelve meetings during
1997.
The primary function of the Audit Committee is 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 1997, the Audit
Committee held two meetings.
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 four meetings
during 1997.
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 1997, the Investment Committee
held four 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 1997.
During 1997, each incumbent director attended at least 75% of the total
number of meetings of the Board and committees on which he served.
3
<PAGE> 6
OVERVIEW OF EXECUTIVE COMPENSATION
During 1997, 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 1992 would have been worth
$430 by year-end 1997, producing a total shareholder return (assuming quarterly
reinvestment of dividends) of 330% 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 $252, which represents a 152% total return.
Thus, SCI's total shareholder return over the five-year period ended December
31, 1997 was more than two times the return generated by the broader market
index.
During 1997, the Company acquired 294 funeral service locations, 51
cemeteries and 19 crematoria. Including these acquisitions, the Company operated
3,127 funeral service locations, 392 cemeteries and 166 crematoria located in 17
countries on five continents as of the end of 1997.
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 1997.
4
<PAGE> 7
PERFORMANCE GRAPH
The following graph presents the Company's cumulative shareholder return
over the period from December 31, 1992 to December 31, 1997. 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, 1992 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
1992-1997
<TABLE>
<CAPTION>
Measurement Period S&P 500
(Fiscal Year Covered) SCI Index Peer Group
<S> <C> <C> <C>
1992 100 100 100
1993 147 110 109
1994 157 112 113
1995 253 153 136
1996 325 189 165
1997 430 252 196
</TABLE>
Peer Group companies are: Airtouch Communications Inc., American Greetings
Corp., Corning Inc., The Dial Corporation., Harcourt General, Inc., Harris
Corporation, Jostens Inc., Minnesota Mining & Manufacturing Co., Pioneer Hi-Bred
International, TRW Inc., Viad Corp., and Whitman Corporation. These companies
are the same companies that previously made up the S&P Miscellaneous Index, with
the addition of Viad Corp. The Dial Corporation split into two companies (The
Dial Corporation and Viad Corp.) in 1996, so Viad Corp. has been added to the
group. Standard & Poor's discontinued its S&P Miscellaneous Index after 1995.
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 1997
compensation determinations were made and further describes the components of
officer compensation programs for the Company.
5
<PAGE> 8
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. These programs include base salaries, annual performance-based incentives
and long-term incentives, all as further detailed below.
BASE SALARIES
Base salaries for the Company's officers in 1997 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 1997, the Named
Executives received salary increases averaging approximately eight percent over
the prior year. However, the size of increases ranged from a low of 6% to a high
of 13%. 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 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 to make downward
adjustments.
In the first quarter of 1997, the Committee established performance goals
for 1997. Annual incentive awards earned for 1997 performance were significantly
above target for the Named Executives because the Company's earnings per share
growth of 21% exceeded 1997 targeted levels of growth in earnings per share. No
corporate performance criterion or factor other than earnings per share growth
was considered for 1997.
6
<PAGE> 9
LONG-TERM INCENTIVE COMPENSATION
In recent years, the Committee has placed significant emphasis on
stock-based compensation for officers. In 1997, new long-term incentive awards
were granted to the Named Executives and other officers on two separate
occasions. The initial awards were made in January 1997 in the form of stock
option grants established at approximately the 90th percentile of long-term
incentive awards of a survey group of 24 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. This grant was intended to represent a normal single-year option award
reflecting the Company's philosophy of focusing strongly on stock-based
compensation. For positions other than the Chief Executive Officer ("CEO"),
these stock options fully vest seven years after the grant date and have an
eight-year term. However, vesting is automatically accelerated if SCI's stock
price reaches certain pre-determined target levels within four years of the date
of grant as shown in the table below.
Following further analysis of marketplace pay levels for the Survey Group
and the Comparison Group and in light of the accelerated vesting of performance
options previously granted under the 1993 Long-Term Incentive Stock Option Plan,
the Committee chose to grant additional stock options in August 1997. In
determining the size of all 1997 option grants, the Committee did not consider
restricted stock and stock option grants made in prior periods or the number and
value of stock options held by such executives.
The January 1997 and August 1997 stock options were granted with exercise
prices equal to 100% of the fair market value of the Common Stock on the grant
dates. The terms and conditions of the August 1997 option grant were the same as
the January 1997 option grant (i.e., eight year term, seven year full vesting,
vesting acceleration for achievement of specified share price targets) except
that the share price targets were set at a higher level than the January grant.
The August 1997 option grants were made in amounts equal to approximately three
times the Survey Group's 75th to 90th percentile levels of annual long-term
incentive awards. The table below shows the stock price performance targets for
accelerated vesting under both 1997 stock option grants.
<TABLE>
<CAPTION>
TARGET SHARE PRICE
- ----------------------------
JANUARY GRANT AUGUST GRANT % OF EACH GRANT VESTING
- ------------- ------------ -----------------------
<S> <C> <C>
$45 $48 20%
$50 $56 50%
$55 $65 100%
</TABLE>
These stock price targets must be sustained for 10 consecutive trading days
within four years of the grant date before vesting is accelerated.
Certain officers other than the Named Executives also received grants of
restricted stock. The restricted stock grants were made to increase share
ownership levels of certain executives and to focus on total shareholder return
performance. The awards vest at a rate of 50% three years after grant, 25% four
years after grant, and 25% five years after grant.
1997 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 1997, Mr. R. L. Waltrip's salary was increased from $798,000 to
$870,000, a 9% increase. This base salary is consistent with the Company's
philosophy of targeting the 75th percentile of the salaries of the Comparison
Group. Mr. Waltrip's base salary increase was determined on the same basis as
salary increases for other officers.
7
<PAGE> 10
Annual Incentive Compensation
The annual incentive earned by the CEO for 1997 performance was $2,333,400,
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 365,500 stock options in January 1997. This
grant was equal to an annual grant at the 90th percentile of the Survey Group.
This award vests at a rate of 50% per year commencing one year after the grant
date. These stock options have an eight-year term and were granted with an
exercise price equal to 100% of fair market value of the Common Stock on the
grant date.
The CEO also received a second grant of 1.2 million stock options in August
1997. The grant is equal to three times a market 90th percentile annual award
for the Survey Group. These stock options have a term of eight years and were
granted with an exercise price equal to 100% of fair market value of the Common
Stock on the date of grant. The vesting of these stock options may be
accelerated based on the attainment of the August 1997 share price targets
discussed under the long-term incentive section of this report. The performance
sensitivity of this grant is built into the stock option concept, since the
executive receives no income from stock options unless the share price rises. It
is further enhanced by the feature that accelerates vesting based on the
achievement of significant increases in share price.
LIMITATION OF TAX DEDUCTION FOR EXECUTIVE COMPENSATION
Subject to certain exceptions, the Omnibus Budget Reconciliation Act of
1993 ("OBRA") prohibits publicly traded companies from receiving a tax deduction
on compensation paid to named executive officers in excess of $1 million
annually. Although the Committee has not adopted a policy relating to OBRA, the
Committee considers the OBRA restrictions when structuring compensation
programs. However, the Committee believes that compensation is more important
than tax deductibility in focusing management on its goal of increasing
shareholder value.
COMPENSATION COMMITTEE:
E.H. Thornton, Jr., Chairman
James H. Greer
John W. Mecom, Jr.
8
<PAGE> 11
CERTAIN INFORMATION WITH RESPECT TO OFFICERS AND DIRECTORS
CASH COMPENSATION
The following table sets forth information for the three years ended
December 31, 1997 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
- ---------------------------------------------------------------------------------------------------------------------
RESTRICTED LONG-TERM
NAME AND OTHER ANNUAL STOCK STOCK INCENTIVE
PRINCIPAL POSITION YEAR SALARY(1) BONUS COMPENSATION(2) AWARD OPTIONS PAYOUTS
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
R. L. Waltrip 1997 $879,000 $2,333,400 $ 342,588 $ 0 1,565,500 $ 0
Chairman and 1996 844,000 2,170,500 266,976 0 440,000 740,300
Chief Executive Officer 1995 821,750 1,919,400 713,312 0 0 694,700
L. William Heiligbrodt 1997 660,000 1,729,900 195,720 0 1,204,500 0
President and 1996 566,000 1,238,400 192,998 0 400,000 441,100
Chief Operating Officer 1995 551,500 1,095,600 470,513 0 0 413,900
W. Blair Waltrip 1997 450,000 823,200 141,431 0 623,500 0
Executive Vice President 1996 416,000 800,800 125,090 0 200,000 234,700
Operations 1995 387,277 629,900 271,447 0 0 220,300
Jerald L. Pullins 1997 362,500 631,000 254,476 0 506,500 0
Executive Vice President 1996 320,000 598,400 260,535 0 0 0
International Operations 1995 290,000 436,500 95,800 170,625 400,000 0
John W. Morrow, Jr. 1997 340,000 573,700 97,723 0 356,500 0
Executive Vice President 1996 318,000 580,800 90,758 0 130,000 208,900
Special Services 1995 301,500 489,700 197,961 0 0 196,100
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
- --------------------------- ---------------
- --------------------------- ---------------
NAME AND ALL OTHER
PRINCIPAL POSITION COMPENSATION(3)
- --------------------------- ---------------
<S> <C>
R. L. Waltrip $284,126
Chairman and 272,234
Chief Executive Officer 78,580
L. William Heiligbrodt 74,451
President and 69,846
Chief Operating Officer 787
W. Blair Waltrip 42,252
Executive Vice President 41,238
Operations 830
Jerald L. Pullins 53,608
Executive Vice President 50,779
International Operations 735
John W. Morrow, Jr. 62,773
Executive Vice President 58,336
Special Services 1,481
- ------------------------------------------------------------
</TABLE>
(1) Salary includes director fees of $45,000 each for Messrs. R. L. Waltrip,
Heiligbrodt and W. Blair Waltrip for 1997.
(2) Figures include tax gross-up payments on restricted stock award vestings and
Interest Reimbursements. Figures also include other executive perquisites
and benefits, including, for 1997, $110,500 for Interest Reimbursement for
Mr. R. L. Waltrip; $43,890 for use of aircraft and $65,000 for Interest
Reimbursement for Mr. Heiligbrodt; $45,968 for use of aircraft and $39,000
for Interest Reimbursement for Mr. W. Blair Waltrip; $101,263 for expatriate
allowances for Mr. Pullins; and $34,125 for Interest Reimbursement for Mr.
Morrow. "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) Consists of the following for 1997: $281,790 for split dollar life insurance
and $2,336 for term life insurance for Mr. R. L. Waltrip; $73,514 for split
dollar life insurance and $937 for term life insurance for Mr. Heiligbrodt;
$41,486 for split dollar life insurance and $766 for term life insurance for
Mr. W. Blair Waltrip; $52,762 for split dollar life insurance and $846 for
term life insurance for Mr. Pullins; and $61,134 for split dollar life
insurance and $1,639 for term life insurance for Mr. Morrow.
9
<PAGE> 12
STOCK OPTIONS
OPTION GRANTS IN 1997
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SCI SHARES OPTIONS
UNDERLYING GRANTED TO EXERCISE GRANT DATE
OPTIONS EMPLOYEES PRICE PER EXPIRATION PRESENT
GRANT DATE GRANTED(1) IN 1997 SHARE(2) DATE VALUE(3)
---------- ---------- ----------- --------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
R. L. Waltrip................... 01/02/97 365,500 5.1% $27.625 01/02/05 $ 4,219,076
08/12/97 1,200,000 16.8% 31.75 08/12/05 15,855,720
L. W. Heiligbrodt............... 01/02/97 304,500 4.3% 27.625 01/02/05 3,514,935
08/12/97 900,000 12.6% 31.75 08/12/05 11,891,790
W. Blair Waltrip................ 01/02/97 198,500 2.8% 27.625 01/02/05 2,291,345
08/12/97 425,000 5.9% 31.75 08/12/05 5,615,568
Jerald L. Pullins............... 01/02/97 106,500 1.5% 27.625 01/02/05 1,229,361
08/12/97 400,000 5.6% 31.75 08/12/05 5,285,240
John W. Morrow, Jr.............. 01/02/97 106,500 1.5% 27.625 01/02/05 1,229,361
08/12/97 250,000 3.5% 31.75 08/12/05 3,303,275
</TABLE>
- ---------------
(1) The stock options granted to Mr. R. L. Waltrip on January 2, 1997, vested
50% on January 2, 1998 and will vest 50% on January 2, 1999. The stock
options granted to R.L. Waltrip on August 12, 1997 and all stock options
granted to Messrs. Heiligbrodt, W. Blair Waltrip, Jerald L. Pullins and John
W. Morrow will vest upon the occurrence of certain events, including vesting
at seven years after the date of the grant, or earlier if the Common Stock
exceeds or equals certain target price levels during the first four years
from the date of 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>
1/2/97 GRANT 8/12/97 GRANT
TARGET SHARE PRICE TARGET SHARE PRICE OPTION VESTING
------------------ -------------------- --------------
<S> <C> <C>
$45 $48 20%
$50 $56 50%
$55 $65 100%
</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 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 the Company
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
1/2/97 and 8/12/97 grants are: volatility rate of 26.8%; annual dividend
yield of 1.0%; and risk free interest rate of 6.6% and 6.5%, respectively.
10
<PAGE> 13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND DECEMBER 31, 1997
OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS AT
ACQUIRED AT DECEMBER 31, 1997 DECEMBER 31, 1997
ON VALUE ------------------------------ ---------------------------
NAME EXERCISE(1) REALIZED(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ------------ -------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
R. L. Waltrip.............. 157,500 $1,666,870 3,320,000 1,785,500 $77,740,950 $12,777,469
L. William Heiligbrodt..... 112,500 1,190,621 2,100,000 1,404,500 48,580,300 10,366,906
W. Blair Waltrip........... 75,000 793,748 1,200,000 723,500 27,899,450 5,484,469
Jerald L. Pullins.......... 30,000 317,500 157,010 749,490 3,162,135 7,949,349
John W. Morrow, Jr......... 182,500 3,082,433 885,000 421,500 20,661,153 3,218,969
</TABLE>
- ---------------
(1) The amounts in the column represent shares of common stock of Equity
Corporation International ("ECI") for which options were held, except that
the amount for John W. Morrow, Jr. also includes 130,000 SCI shares acquired
on exercise of options. During 1997, the Company sold all of its shares of
common stock of ECI, and in connection therewith, the Company accelerated
the vesting of ECI stock options and allowed a cash-out by the option
holders in an amount equal to the stock appreciation over the exercise price
for the options held.
(2) The amounts in the column represent the amounts received by the option
holders upon cash-out of the ECI options by the Company, except that the
amount for John W. Morrow, Jr. also includes the value realized on the
exercise of options for 130,000 SCI shares.
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 1997 was limited to $160,000.
For 1997, 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...................................... 31,781
W. Blair Waltrip............................................ 89,317
Jerald L. Pullins........................................... 35,874
John W. Morrow, Jr.......................................... 17,143
</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.
11
<PAGE> 14
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, 1997, for the following named individuals are as follows: R. L.
Waltrip (41), L. William Heiligbrodt (10), W. Blair Waltrip (20), Jerald L.
Pullins (15) and John W. Morrow, Jr. (8).
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. 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............................................... $1,093,281(1)
L. William Heiligbrodt...................................... 655,021(2)
W. Blair Waltrip............................................ 574,580(2)
Jerald L. Pullins........................................... 267,980
John W. Morrow, Jr. ........................................ 260,098
</TABLE>
12
<PAGE> 15
- ---------------
(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,
Pullins and Morrow. 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, Pullins and Morrow. The terms of the agreements for Messrs.
R.L. Waltrip and Pullins are automatically extended annually for an additional
year unless notice of nonrenewal is given by either party. Upon annual
authorization by the Compensation Committee of the Board of Directors, the terms
of the agreements for Messrs. Heiligbrodt, W. Blair Waltrip and Morrow are
extended for an additional year unless notice of nonrenewal is given by either
party. If such notice of nonrenewal is given by the Company or if notice is not
given of the Compensation Committee's decision to 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 26, 1998, the base salaries for Messrs. R. L. Waltrip,
Heiligbrodt, W. Blair Waltrip, Pullins and Morrow were $870,000, $645,000,
$425,000, $385,000 and $350,000, respectively.
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 or by the executive for certain
specified reasons generally relating to a failure by the Company to honor the
terms of the employment agreement ("Good Reason"), 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 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
13
<PAGE> 16
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, Pullins and Morrow. 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. 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 1997, 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 1997, 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 1997, 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.
14
<PAGE> 17
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 Special
Services 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
were completed and totaled $101,333 in 1997. 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 1997 under the children's agreements.
In 1997, the Company provided salary and bonus of $441,900, relocation
expenses of $41,321 and other benefits of $209,242 and granted stock options for
90,000 shares of Common Stock to T. Craig Benson, son-in-law of R. L. Waltrip,
in his capacity as a vice president of the Company.
In 1997, 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 1997, the Company leased vehicles to companies owned by Mr. R. L.
Waltrip and received rentals aggregating $45,788. The Company also leased
vehicles to a company owned by Mr. Heiligbrodt and received rentals aggregating
$51,852. 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
estimated federal income taxes resulting from their receipt of the restricted
stock grants. Each of the loans remained outstanding in 1997, 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 1997, 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 1997 was $83,751 and the year end balance was $73,751.
Gregory L. Cauthen, Vice President Treasurer of the Company, has a mortgage
loan at 7.10% interest, of which the largest balance in 1997 was $174,436 and
the year end balance was $162,389.
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 1997 was $475,000 and the year end balance was $467,615. In addition, Mr.
Champagne paid off in 1997 a loan for personal use at the prime rate, of which
the largest balance in 1997 was $134,206.
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 1997 was
$466,692 and the year end balance was $418,922.
J. Daniel Garrison, Vice President-International Operations of the Company,
has a mortgage loan at 6.95% interest, of which the largest balance in 1997 was
$157,239 and the year end balance was $147,632.
15
<PAGE> 18
W. Mark Hamilton, Vice President Prearranged Funeral Services of the
Company, paid off in 1997 a loan for personal use at the prime rate, of which
the largest balance in 1997 was $104,375.
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
1997 was $361,707 and the year end balance was $357,007. Mr. Heiligbrodt has a
mortgage loan at 7.60% interest, of which the largest balance in 1997 was
$95,806 and the year end balance was $94,565. Mr. Heiligbrodt has a mortgage
loan at 7.45% interest, of which the largest balance in 1997 was $128,634 and
the year end balance was $126,767. In addition, Mr. Heiligbrodt paid off in 1997
a loan for personal use at the prime rate, of which the largest balance in 1997
was $275,868.
Lowell A. Kirkpatrick, Jr., Vice President Operations, Finance and
Development of the Company, has a mortgage loan at 6.50% interest, of which the
largest balance in 1997 was $310,265 and the year end balance was $305,625. In
addition, Mr. Kirkpatrick paid off in 1997 a loan for personal use at the prime
rate, of which the largest balance in 1997 was $104,383.
Todd A. Matherne, Vice President Operations, Finance and Development of the
Company, paid off in 1997 a loan for personal use at the prime rate, of which
the largest balance in 1997 was $104,383.
Glenn G. McMillen, Senior Vice President Operations of the Company, has a
mortgage loan at 7.60% interest, of which the largest balance in 1997 was
$229,580 and the year end balance was $219,826. In addition, Mr. McMillen paid
off in 1997 a loan for personal use at the prime rate, of which the largest
balance in 1997 was $134,206.
John W. Morrow, Jr., Executive Vice President Special Services of the
Company, paid off in 1997 a loan for personal use at the prime rate, of which
the largest balance in 1997 was $151,338.
Henry M. Nelly, III, President of Provident Services, Inc., paid off in
1997 a mortgage loan at 9.10% interest, of which the largest balance in 1997 was
$102,500. Mr. Nelly paid off in 1997 a loan to exercise stock options at the
prime rate, of which the largest balance in 1997 was $104,375. Mr. Nelly paid
off in 1997 a loan for personal use at the prime rate, of which the largest
balance in 1997 was $134,206. In addition, Mr. Nelly paid off in 1997 a mortgage
loan at 7.75% interest, of which the largest balance in 1997 was $516,250.
Jerald L. Pullins, Executive Vice President-International Operations of the
Company, has a mortgage loan at 9.20% interest, of which the largest balance in
1997 was $378,575 and the year end balance was $354,541. In addition, Mr.
Pullins paid off a loan for personal use at the prime rate, of which the largest
balance in 1997 was $164,030.
Richard T. Sells, Senior Vice President Preneed Sales of the Company, paid
off in 1997 a mortgage loan at 7.80% interest, of which the largest balance in
1997 was $225,296. Mr. Sells paid off in 1997 a loan for personal use at the
prime rate, of which the largest balance in 1997 was $130,000. In addition, Mr.
Sells paid off in 1997 a loan for personal use at the prime rate, of which the
largest balance in 1997 was $134,206.
James M. Shelger, Senior Vice President General Counsel and Secretary of
the Company, paid off in 1997 a loan for personal use at the prime rate, of
which the largest balance in 1997 was $134,206.
Jack L. Stoner, Senior Vice President Administration of the Company, has a
mortgage loan at 7.20% interest, of which the largest balance in 1997 was
$205,282 and the year end balance was $192,305.
Vincent L. Visosky, Vice President Operational Controller of the Company,
paid off in 1997 a loan for personal use at the prime rate, of which the largest
balance in 1997 was $89,471.
R. L. Waltrip, Chairman of the Board and Chief Executive Officer of the
Company, paid off in 1997 a loan for personal use at the prime rate, of which
the largest balance in 1997 was $275,868.
Michael R. Webb, Vice President-International Corporate Development of the
Company, has a mortgage loan at 8.10% interest, of which the largest balance in
1997 was $299,175 and the year end balance was $296,714.
16
<PAGE> 19
VOTING SECURITIES AND PRINCIPAL HOLDERS
The table below sets forth information with respect to any person who is
known to the Company as of March 26, 1998 to be the beneficial owner of more
than five percent of the Company's Common Stock.
<TABLE>
<CAPTION>
SHARES
NAME AND ADDRESS BENEFICIALLY PERCENT
OF BENEFICIAL OWNER OWNED OF CLASS
------------------- ------------ ---------
<S> <C> <C>
AMVESCAP PLC, AVZ, Inc., AIM Management Group Inc., AMVESCAP
Group Services, Inc., INVESCO, Inc., INVESCO North
American Holdings, Inc., INVESCO Capital Management, Inc.,
INVESCO Funds Group, Inc., INVESCO Management & Research,
Inc. and INVESCO Realty Advisers, Inc. ................... 13,823,997(1) 5.4%
11 Devonshire Square
London EC2M 4YR
England
</TABLE>
- ---------------
(1) Based on a filing dated February 9, 1998, which reported shared voting and
dispositive power by the listed firms. The ultimate parent of the listed
companies is AMVESCAP PLC.
The table below sets forth, as of March 26, 1998, 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............................................ 3,310,398(2) 1.3%
L. William Heiligbrodt................................... 1,923,856(3) *
W. Blair Waltrip......................................... 2,486,846(4) *
Jerald L. Pullins........................................ 411,088(5) *
John W. Morrow, Jr ...................................... 756,223(6) *
Anthony L. Coelho........................................ 30,250 *
Douglas M. Conway........................................ 143,506(7) *
Jack Finkelstein......................................... 481,290(8) *
A. J. Foyt, Jr .......................................... 35,800(9) *
James J. Gavin, Jr ...................................... 84,452(10) *
James H. Greer........................................... 28,274 *
B. D. Hunter............................................. 135,634(11) *
John W. Mecom, Jr ....................................... 8,000 *
Clifton H. Morris, Jr ................................... 29,034(12) *
E. H. Thornton, Jr ...................................... 112,575 *
Edward E. Williams....................................... 30,316 *
Executive Officers and Directors as a Group (32
persons)............................................... 11,134,608(1)(13) 4.3%
</TABLE>
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* 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 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, share voting and investment
17
<PAGE> 20
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 2,235,753 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 trusts for which Mr.
Heiligbrodt is trustee and 5,830 shares owned by Mr. Heiligbrodt's wife,
daughter, or son, all of which shares Mr. Heiligbrodt disclaims beneficial
ownership. Also includes 1,333,452 shares which may be acquired upon
exercise of stock options exercisable within 60 days.
(4) Includes 127,204 shares held in a trust for the benefit of Mr. W. Blair
Waltrip, 1,072,224 shares held in trusts under which Mr. W. Blair Waltrip,
his brother and his sister are trustees and have shared voting and
investment power and for which Mr. W. Blair Waltrip disclaims 2/3
beneficial ownership. Also includes 31,636 shares held by other family
members or trusts, of which Mr. W. Blair Waltrip disclaims beneficial
ownership of 27,136 shares. Of the shares attributable to the trusts,
468,384 shares are also included in the shares owned by Mr. R. L. Waltrip.
See Footnote (2). Also includes 630,852 shares which may be acquired upon
exercise of stock options exercisable within 60 days.
(5) 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. Also includes 157,010 shares which may
be acquired upon exercise of stock options exercisable within 60 days.
(6) Includes 578,251 shares which may be acquired upon exercise of stock
options exercisable within 60 days.
(7) Includes 137,506 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 459,308 shares held in trusts for the benefit of other family
members and/or himself, and 8,600 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 286,574 shares and shares
voting and investment power with respect to 181,334 shares. Mr. Finkelstein
disclaims beneficial ownership as to 181,334 shares held in such trusts and
by the foundation.
(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 25,484 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 31,000 restricted shares held by six persons under Company stock
plans, as well as 5,105,802 shares which may be acquired upon exercise of
stock options exercisable within 60 days.
18
<PAGE> 21
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, 1998.
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.
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 James M. Shelger, Senior Vice President,
General Counsel and Secretary, and Edward E. Williams, a director, each filed
late one Form 4 reporting one transaction.
PROXY SOLICITATION
In addition to solicitation by mail, further solicitation of proxies may be
made by mail, facsimile, 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 1999 Annual
Meeting of Shareholders scheduled to be held on May 13, 1999 must be received by
the Company by December 9, 1998, 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 8, 1998
19
<PAGE> 22
PROXY PROXY
SERVICE CORPORATION INTERNATIONAL
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS--MAY 14, 1998
The undersigned hereby appoints ROBERT L. WALTRIP, L. WILLIAM HEILIGBRODT,
GEORGE R. CHAMPAGNE and JAMES M. SHELGER and each of 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 Chase Auditorium, First Floor, Chase Center, 601
Travis, Houston, Texas, on Thursday, May 14, 1998, 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> 23
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. /X/
<TABLE>
<S> <C> <C>
[ ]
FOR AGAINST FOR ALL
1. Election of Directors -- ALL ALL EXCEPT
Nominees: B. D. Hunter and John W. Mecom, Jr. [ ] [ ] [ ]
---------------------------------- The undersigned acknowledges receipt of the Notice of
(Except nominees(s) written above) Annual Meeting of Shareholders and of the Proxy
Statement.
Dated: 1998
----------------,
Signature(s)
--------------------------------------------
--------------------------------------------------------
Please sign exactly as your name appears. Joint owners
should each sign personally. Where applicable, indicate
your official position or representation capacity.
</TABLE>
