11-K 1 h97971e11vk.txt SERVICE CORPORATION INTERNATIONAL - 12/31/2001 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. FORM 11-K ( X ) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 30, 2001 or ( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO -------------- ------------------- COMMISSION FILE NUMBER 1-6402-1 ---------- THE SCI 401(k) RETIREMENT SAVINGS PLAN (Full title of the plan) SERVICE CORPORATION INTERNATIONAL (Name of issuer of the securities held pursuant to the plan) 1929 ALLEN PARKWAY HOUSTON, TEXAS 77019 (Address of the plan and address of issuer's principal executive offices) THE SCI 401(k) RETIREMENT SAVINGS PLAN INDEX Financial Statements Independent Auditor's Report............................................ 3 Statements of Net Assets Available for Benefits as of December 30, 2001 and 2000............................................ 4 Statement of Changes in Net Assets Available for Benefits for the Year Ended December 30, 2001.................................. 5 Notes to Financial Statements........................................... 6-8 Supplemental Schedules Schedule of Assets (Held at End of Year)................................ 9 Schedule of Reportable Transactions..................................... 10 Other Information Signature................................................................ 11 Independent Auditor's Consent
2 INDEPENDENT AUDITOR'S REPORT To the Administrative Committee The SCI 401(k) Retirement Savings Plan Houston, Texas We have audited the accompanying Statements of Net Assets Available for Benefits of The SCI 401(k) Retirement Savings Plan as of December 30, 2001 and 2000 and the related Statement of Changes in Net Assets Available for Benefits for the year ended December 30, 2001. These financial statements are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of The SCI 401(k) Retirement Savings Plan as of December 30, 2001 and 2000 and the changes in net assets available for benefits for the year ended December 30, 2001 in conformity with generally accepted accounting principles in the United States of America. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The Supplemental Schedules of Assets (Held at End of Year) and Reportable Transactions are presented for purposes of complying with the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974 and are not a required part of the basic financial statements. The supplemental schedules have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. HARPER & PEARSON COMPANY Houston, Texas June 14, 2002 3 THE SCI 401(k) RETIREMENT SAVINGS PLAN STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 30, ------------------------- 2001 2000 ----------- ----------- Investments: Pooled separate accounts .............. $22,346,589 $ 5,211,681 SCI common stock ...................... 14,054,306 825,839 Interest bearing cash ................. 336,808 -- Participant loans ..................... 827,027 23,021 ----------- ----------- Total assets .............................. 37,564,730 6,060,541 ----------- ----------- Net assets available for benefits ......... $37,564,730 $ 6,060,541 =========== ===========
See notes to financial statements. 4 THE SCI 401(k) RETIREMENT SAVINGS PLAN STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year ended December 30, 2001 ----------------- Additions to net assets attributed to: Contributions: Employer .......................................................... $13,122,247 Participants ...................................................... 19,093,306 Rollovers from other qualified plans .............................. 407,580 ----------- Total contributions ............................................ 32,623,133 ----------- Investment income: Interest income ................................................... 31,745 Net depreciation in the fair value of pooled separate accounts .... (640,273) Net appreciation in the fair value of Company stock ............... 505,249 Realized gain on sale of Company stock ............................ 455,916 ----------- Total investment income ........................................... 352,637 ----------- Total additions ................................................ 32,975,770 ----------- Deductions to net assets attributed to: Distributions to participants ........................................ 1,404,713 Administrative expenses .............................................. 66,868 ----------- Total deductions ................................................. 1,471,581 ----------- Net increase ............................................................. 31,504,189 Net assets available for benefits: Beginning of period .................................................. 6,060,541 ----------- End of period ........................................................ $37,564,730 ===========
See notes to financial statements. 5 THE SCI 401(k) RETIREMENT SAVINGS PLAN NOTES TO FINANCIAL STATEMENTS 1. PLAN DESCRIPTION GENERAL The following description of The SCI 401(k) Retirement Savings Plan (the Plan) is provided for general information purposes only. Participants should refer to the Summary Plan Description or the Plan Document for a more complete description of the Plan's provisions. The Plan, established July 1, 2000, is a defined contribution plan for the exclusive benefit of Service Corporation International's (SCI or the Company) United States employees. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974 (ERISA). The Plan's assets are held by Massachusetts Mutual Life Insurance Company and participant accounts are maintained by MassMutual Retirement Services. Investors Bank & Trust Company serves as the trustee for the SCI Common Stock Fund. CONTRIBUTIONS Eligible employees can participate in the Plan after completing three months of service and attaining age 21. Employees covered by a collective bargaining agreement in which retirement benefits are provided are not eligible under the Plan. The election to contribute to the Plan is voluntary. Employees are initially enrolled in the Plan, after meeting eligibility requirements, to contribute 3% of pretax annual compensation, unless participation is specifically rejected. Participants may contribute from 1% to 15% of pretax annual compensation. Total individual participant contributions were limited to $10,500 in 2001. Subsequent to December 30, 2001, the Plan was amended to allow participant contributions up to 50% of annual pretax compensation. The Company contributes a matching amount up to 6% of the participant's pretax annual compensation, generally in Company common stock. The percentage of the match is based on years of service with the Company and ranges from 75% to 135% of the employee's eligible contribution. Additional amounts may be contributed at the Company's discretion. Company contributions were made in Company stock during the period ended December 30, 2001. There were no discretionary Company contributions in 2001. PARTICIPANT ACCOUNTS Participant account balances are valued based upon the number of units of each investment fund owned by the participants. Each participant's account is credited with the participant's contribution and allocations of the Company's contributions and plan earnings or losses. Forfeited balances of terminated participant's non-vested accounts are used to reduce administrative expenses and future Company contributions. Forfeited balances were $154,764 during the year ended December 30, 2001. 6 VESTING Participants are fully vested in their deferred salary and rollover contributions. Participants are fully vested in Company contributions after completing three years of vesting service with the Company. PARTICIPANT LOANS Participants may borrow from their accounts up to one half of the vested account balance to a maximum of $50,000. The minimum amount that may be borrowed is $1,000. Loans are to be repaid within five years, unless the loan is used to purchase a primary residence. The loans are secured by the balance in the participant's account and bear interest at 1% above the prime rate. A participant may have no more than two loans outstanding at any one time. PARTICIPANT DISTRIBUTIONS The Plan provides for several different types of participant withdrawals. Participants who have reached age 59 1/2 may make in-service withdrawals. Participants may make withdrawals before age 59 1/2 if they qualify for certain hardship withdrawals. Upon termination of service with the Company or death, the participant or beneficiary may receive a lump-sum amount equal to the vested amount in the participant's account. A participant whose account balance exceeds $5,000 may elect a deferred distribution up until age 70 1/2. As of December 30, 2001, total deferred vested benefits related to terminated employees were $414,930. PLAN TERMINATION The Company expects the Plan to continue indefinitely, however, it reserves the right to terminate or amend the Plan to eliminate future benefits. If the Plan is terminated, participants will become 100% vested and account balances will be distributed by a lump-sum payment. 2. SUMMARY OF ACCOUNTING POLICIES PRINCIPLES OF REPORTING The financial statements and schedules have been prepared in accordance with accounting principles generally accepted in the United States and the financial reporting requirements of ERISA and are maintained on an accrual basis except for participant distributions, which are reported when paid. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires Plan management to make estimates and assumptions that may affect the amounts reported in the financial statements and accompanying notes. As a result, actual results could differ from those estimates. INVESTMENTS Investments are stated at fair value, which is determined by quoted market prices. Participant loans are valued at their outstanding balances, which approximates fair value. Net appreciation (depreciation) in the fair value of the pooled separate accounts, which consists of net realized and unrealized appreciation (depreciation), is presented in the Statement of 7 Changes in Net Assets Available for Benefits. This appreciation (depreciation) is allocated to participants based upon their proportionate share of assets in each investment fund. RISKS AND UNCERTAINTIES The Plan provides for several investment options, which are exposed to various risks, such as interest rate risk, market risk and credit risk. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risks in the near term could materially affect participants' account balances and the amounts reported in the Statement of Net Assets Available for Benefits and the Statement of Changes in Net Assets Available for Benefits. 3. INVESTMENTS Investments that comprised 5% or more of the Plan's net assets available for benefits are as follows:
December 30, --------------------------------- 2001 2000 ----------- ---------- JCC Balanced Fund (Janus)........................................... $ 2,999,414 $ 931,030 MassMutual Small Cap Growth Fund.................................... 3,126,159 988,335 MassMutual International Equity Fund................................ 1,995,676 716,761 MassMutual Core Bond Fund........................................... 3,025,163 331,543 MassMutual Government Money Market.................................. 4,871,479 258,234 MassMutual Ultra Fund (American Century)............................ 3,326,862 1,113,203 MassMutual Large Cap Value Fund..................................... 3,001,836 872,575 SCI Common Stock(1)................................................. 14,054,306 825,839
(1) Includes both participant and non-participant directed common stock. 4. INCOME TAXES A determination letter is pending from the Internal Revenue Service declaring that the Plan qualifies under Section 401(a) of the Internal Revenue Code as exempt from income taxes. The Plan administrator believes the Plan is designed and being operating in compliance with the requirements of Section 401(a) of the Internal Revenue Code. 8 THE SCI 401(k) RETIREMENT SAVINGS PLAN SCHEDULE OF ASSETS (HELD AT END OF YEAR) DECEMBER 30, 2001 EIN: 74-1488375 PIN: 002
Identity of issue, borrower, lessor or similar party Description of investment Current value -------------------------------------- ------------------------- ------------- *Massachusetts Mutual Life Insurance Co.............................. JCC Balanced Fund (Janus) $2,999,414 *Massachusetts Mutual Life Insurance Co.............................. MassMutual Small Cap Growth Fund 3,126,159 *Massachusetts Mutual Life MassMutual Insurance Co.............................. International Equity Fund 1,995,676 *Massachusetts Mutual Life Insurance Co.............................. MassMutual Core Bond Fund 3,025,163 *Massachusetts Mutual Life MassMutual Insurance Co.............................. Government Money Market 4,871,479 *Massachusetts Mutual Life MassMutual Insurance Co.............................. Ultra Fund (American Century) 3,326,862 *Massachusetts Mutual Life Insurance Co.............................. MassMutual Large Cap Value Fund 3,001,836 *Service Corporation International............................. SCI Common Stock 14,054,306 *Investors Bank & Trust Company................................... Interest Bearing Cash 336,808 Loans with interest *Participant Loans............................ rates of 5.75% to 10.5% 827,027 ------------ $37,564,730
Cost value of SCI Common Stock and Interest Bearing Cash was $13,549,057 and $336,808, respectively, at December 30, 2001. *Denotes a party-in-interest as defined by ERISA. 9 THE SCI 401(k) RETIREMENT SAVINGS PLAN SCHEDULE OF REPORTABLE TRANSACTIONS FOR THE YEAR ENDED DECEMBER 30, 2001 EIN: 74-1488375 PIN: 002
(b) (a) Description of Assets (i) Identity of (Include Interest Rate and (c) (d) (g) Net Gain or Party Involved Maturity in Case of a Loan) Purchase Price Selling Price Cost of Asset (Loss) ---------------- ---------------------------- -------------- ------------- ------------- ------------ Series Transactions ------------------- (A) SCI Common Stock* $13,122,244 $ -- $13,122,244 $ --
A reportable transaction is any purchase or sale (or series of purchases or sales) of an investment security that exceeds 5% of net assets available for plan assets at the beginning of the plan year, excluding participant directed activity. *Identified party in interest transactions. (A) All transactions were with Investors Bank & Trust Company. 10 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the trustee (or other persons who administer the employee benefit plan) have duly caused this annual report to be signed by the undersigned here unto duly authorized. The SCI 401(k) Retirement Savings Plan Date: June 26, 2002 By: SCI Management L.P., a Delaware limited partnership (and administrator of the Plan) By: SCI Administrative Services, LLC, a Delaware limited liability company, General Partner to SCI Management L.P. By: /s/ Helen Dugand --------------------------------- Helen Dugand President of SCI Administrative Services, LLC 11 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------- ----------- 23.1 Independent Auditors Consent