-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, LXv5MjPmSLE7CC8ZTJfkUomgPlAseXPTvPw77BWr6oa2Twutb8hOCGdbCGE/G0QG gQtkE5LRQ1byVhKqUX55dg== 0000950129-95-001108.txt : 19950906 0000950129-95-001108.hdr.sgml : 19950906 ACCESSION NUMBER: 0000950129-95-001108 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950825 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19950905 SROS: AMEX SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SERVICE CORPORATION INTERNATIONAL CENTRAL INDEX KEY: 0000089089 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PERSONAL SERVICES [7200] IRS NUMBER: 741488375 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06402 FILM NUMBER: 95570275 BUSINESS ADDRESS: STREET 1: 1929 ALLEN PKWY STREET 2: P O BOX 130548 CITY: HOUSTON STATE: TX ZIP: 77219 BUSINESS PHONE: 7135225141 MAIL ADDRESS: STREET 1: P O BOX 130548 CITY: HOUSTON STATE: TX ZIP: 77219-0548 8-K 1 FORM 8-K DATED 08/25/95 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 8-K CURRENT REPORT Pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): AUGUST 25, 1995 SERVICE CORPORATION INTERNATIONAL -------------------------------------------------- (Exact name of registrant as specified in charter) TEXAS 1-6402-1 74-1488375 - -------------------------------------------------------------------------------------------------------------- (State or other jurisdiction of (Commission file (I. R. S. employer identification incorporation or organization) number) number) 1929 ALLEN PARKWAY, HOUSTON, TEXAS 77019 - -------------------------------------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code)
(713) 522-5141 ---------------------------------------------------- (Registrant's telephone number, including area code) 2 ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS On August 25, 1995, Service Corporation International acquired a controlling ownership interest in Omnium de Gestion et de Financement S.A. which, in turn, owns a controlling ownership interest in Pompes Funebres Generales S.A. In addition, the Company commenced public tender offers in France for the remaining shares of both companies with the intent to acquire 100% of the outstanding shares of both companies. For a description of these transactions, see the first paragraph under "Unaudited Pro Forma Combined Financial Information" in "Item 7. Financial Statements and Exhibits" of this report, which information is hereby incorporated by reference. The term "Company" includes Service Corporation International and its subsidiaries, unless the context indicates otherwise. 2 3 ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Page in this Report -------- (a) Pro forma financial information: Unaudited Pro Forma Combined Financial Information 4 -------- (b) Financial statements of businesses acquired: Omnium de Gestion et de Financement S.A./ Pompes Funebres Generales S.A. (OGF/PFG Group) separate company consolidated financial statements 25 -------- Gibraltar Mausoleum Corporation separate company consolidated financial statements 54 -------- (c) Exhibits: 2.1 - Memorandum of Understanding Relating to the Transfer of Shares, dated July 10, 1995, and Additional Memorandum of Understanding Relating to the Transfer of Shares, dated July 12, 1995, each of which is between Service Corporation International and Lyonnaise des Eaux. 23.1 - Consent of Barbier Frinault & Associes, Membres d'Arthur Andersen & Co, SC and PGA. 23.2 - Consent of Ernst & Young LLP.
3 4 (a) Pro forma financial information Unaudited Pro Forma Combined Financial Information In July 1995, the Company entered into an agreement with Lyonnaise des Eaux S.A. ("LDE"), a French company, to purchase LDE's funeral service business. LDE's funeral service business is comprised of an approximate 51% ownership interest in Omnium de Gestion et de Financement S.A. ("OGF") which, in turn, owns approximately 65% of Pompes Funebres Generales S.A. ("PFG") and, together with OGF, ("OGF/PFG"). On August 25, 1995, the Company acquired the approximately 51% interest in OGF for US $233,358,000. The Company is making public tender offers for the remaining shares of OGF and PFG with the intent to acquire 100% of the outstanding shares of both companies. On August 30, 1995, the Company owned shares representing 70.0% of OGF and 75.3% of PFG. OGF/PFG is the largest funeral service organization in Europe. OGF/PFG operates over 950 funeral service locations that performed over 154,000 funerals throughout France in 1994. OGF/PFG also operates funeral locations in Belgium, the Czech Republic, Italy, Singapore and Switzerland that performed approximately 14,000 funerals in 1994. Included in OGF/PFG operations is a coffin manufacturing business that sells the large majority of its product to OGF/PFG funeral operations and a funeral insurance business whose primary activity involves insurance policies sold in connection with OGF/PFG's prearranged funeral business. The Company intends that OGF/PFG will continue to operate their funeral service and related businesses. The total purchase price for OGF and the portion of PFG not owned by OGF is expected to be approximately US $607,206,000, based on a June 30, 1995 translation rate of US $.2062 to one French franc, consisting of US $589,570,000 of cash, the assumption of US $12,004,000 of OGF/PFG debt and associated expenses of US $5,632,000 (based on an August 25, 1995 translation rate of US$.1969 to one French franc, the total purchase price would be US$579,820,000. The net cost to the Company, taking into account the estimated available excess cash balances of OGF/PFG, is expected to be approximately US $424,026,000. In August 1995, the Company entered a 364-day revolving credit agreement ("French Revolving Credit Agreement") with Societe Generale, Southwest Agency, Credit Lyonnais Cayman Island Branch and Banque Nationale de Paris, Houston Agency. The French Revolving Credit Agreement allows for borrowings up to US $600,000,000 (which, at the option of the Company, can be borrowed in French francs or US dollars) to provide short-term financing for the purchase of OGF/PFG. The interest rate currently in effect is based on PIBOR plus 25 basis points (5.98% at August 25, 1995). In June 1995, the Company entered into an agreement to acquire Gibraltar Mausoleum Corporation and four related Subchapter S Corporations (collectively, "Gibraltar"). Gibraltar, a private funeral and cemetery company based in Indianapolis, Indiana, owns and operates 23 funeral homes and 54 cemeteries. Subject to regulatory approval, the Company expects to complete the Gibraltar transaction during the fourth quarter of 1995 for a purchase price of approximately $268,895,000 consisting of 3,286,759 shares of Company common stock (based on an average price of $35 per share on August 25, 1995), $146,668,000 in cash, the assumption of $5,425,000 of Gibraltar debt and associated expenses of $1,765,000. Such common stock of the Company is registered with the Securities and Exchange Commission and will be issued under the Company's existing shelf registration. The cash portion of the purchase price will be borrowed under the Company's existing revolving credit facilities (5.90% at August 25, 1995). In July 1995, the Company entered into an agreement to acquire the shares of Service Corporation International Canada ("SCIC") not already owned by the Company. SCIC owns 74 funeral homes and three cemeteries in Canada. This transaction will eliminate the approximate 31% minority ownership interest in SCIC and will make SCIC a wholly owned subsidiary of the Company. This transaction has been approved by the minority shareholders of SCIC and was completed on September 5, 1995. The purchase price will be approximately US $61,293,000 (based on a June 30, 1995 translation rate of US $.7287 to one Canadian dollar) and will be financed through borrowings under the Company's existing revolving credit facilities in Canadian dollars at an interest rate based on a Canadian banker's acceptance rate plus 25 basis points (6.71% at August 25, 1995). 4 5 In the third quarter of 1994, the Company acquired the two largest publicly traded funeral service providers in the United Kingdom, Great Southern Group plc ("GSG") and Plantsbrook Group plc ("PG"). PG was an equity investee of OGF before being purchased by the Company. GSG and PG owned a combined 534 funeral homes, 13 crematories and two cemeteries. The purchase price of approximately US $508,000,000 was financed using a portion of the net proceeds from the Company's December 1994 public offerings, consisting of common stock (7,700,000 shares issued in December 1994 and 780,000 shares issued in January 1995 at a net price of $24.70 per share), $172,500,000 of preferred securities of SCI Finance LLC (a wholly owned subsidiary of the Company) and $200,000,000 of 8.375% fixed rate notes due 2004, long-term fixed rate borrowings, other revolving credit borrowings and debt assumed by the Company. Both GSG and PG have been consolidated with the Company since September 1, 1994. In addition to the acquisitions discussed above, during 1994 and the six months ended June 30, 1995, the Company continued to acquire funeral and cemetery operations in the United States, Australia, Canada and the United Kingdom. During such period, the Company acquired 232 funeral homes and 52 cemeteries (the "1994 and 1995 Other Acquired Companies") in 120 separate transactions for an aggregate purchase price of approximately US $515,000,000 in the form of combinations of cash, Company common stock, issued and assumed debt, convertible debentures and retired loans receivable held by the Company's finance subsidiary. The following unaudited pro forma combined balance sheet as of June 30, 1995 has been prepared assuming the acquisitions by the Company of 100% of the outstanding shares of OGF/PFG, Gibraltar and the minority interest of SCIC took place on June 30, 1995. The unaudited pro forma combined statements of income for the year ended December 31, 1994 and the six months ended June 30, 1995 have been prepared assuming the acquisitions by the Company of 100% of the outstanding shares of OGF/PFG, Gibraltar, the minority interest of SCIC, GSG, PG and the Other Acquired Companies took place at January 1, 1994. Such acquisitions are being accounted for under the purchase method of accounting. The historical revenues and expenses of GSG and PG and the Other Acquired Companies represent amounts recorded by those businesses for the period that they were not owned by the Company during the year ended December 31, 1994 and the six months ended June 30, 1995, respectively. The unaudited pro forma combined financial information may not be indicative of results that would actually have been obtained if these transactions had occurred on the dates indicated or which may be obtained in the future. For purposes of this unaudited pro forma combined financial information, it is assumed that the net proceeds of the Company's December 1994 public offerings were first applied toward the purchase price of GSG and PG (US $508,000,000 less US $31,258,000 of GSG and PG debt assumed by the Company) with the excess net proceeds (US $95,205,000) used to repay amounts outstanding under the Company's revolving credit facilities and to retire commercial paper. In addition, the unaudited pro forma combined financial information assumes that the acquisition of OGF/PFG is to be financed with borrowings under the French Revolving Credit Agreement. 5 6 The historical financial statements of GSG and PG for the period not owned by the Company in 1994 were prepared in UK pound sterling in accordance with United Kingdom generally accepted accounting principles ("UK GAAP"). The historical financial statements of OGF/PFG as of June 30, 1995 and for the year ended December 31, 1994 and the six months ended June 30, 1995 were prepared in French francs in accordance with French generally accepted accounting practices ("F GAAP"). This information has been adjusted to present the historical financial statements in accordance with United States generally accepted accounting principles ("US GAAP") and translated into US dollars at the June 30, 1995 exchange rate for the balance sheet (US $.2062 to one French franc, US $.1969 at August 25, 1995) and at the average exchange rate for the respective statement of income periods presented (US $.1802 and US $.1983 for the year ended December 31, 1994 and six months ended June 30, 1995, respectively). The Company has not completed all appraisals and evaluations necessary to finalize OGF/PFG's or Gibraltar's purchase price allocation, and accordingly, actual adjustments that reflect appraisals and other evaluations of the purchased assets and assumed liabilities may differ from the pro forma adjustments. 6 7 Service Corporation International Unaudited Pro Forma Combined Balance Sheet June 30, 1995 (Thousands)
Historical Pro Forma ---------------------------------------- ----------------------------- The Combined Company OGF/PFG Gibraltar Adjustments Total --------- --------- --------- ------------- ----------- Assets Current assets: Cash and cash equivalents $ 20,251 $ 203,800 $ 1,276 $(183,180) (F11) $ 42,147 Receivables, net of allowances 347,790 59,013 67,021 (215) (G2) 435,758 (37,851) (G3) Inventories 72,192 46,240 16,207 (13,776) (G4) 120,863 Other 7,814 33,171 - - 40,985 ---------- ---------- -------- --------- ---------- Total current assets 448,047 342,224 84,504 (235,022) 639,753 Investments - insurance subsidiary - 531,726 - - 531,726 Prearranged funeral contracts 1,537,085 - 3,878 82,350 (G2) 1,623,313 Long-term receivables 615,355 - - 44,137 (G1) 701,372 37,851 (G3) 4,029 (G5) Cemetery property, at cost 812,198 - 17,214 13,776 (G4) 1,142,675 286,987 (G10) 12,500 (C1) Property, plant and equipment, at cost (net) 909,857 222,545 31,778 103,932 (F4) 1,268,112 Deferred charges and other assets 233,258 49,661 9,629 25,521 (F5) 298,660 (19,409) (F7) Goodwill - 16,910 10,579 (10,579) (G13) - (16,910) (F6) Names and reputations (net) 888,975 - - 37,626 (C1) 1,043,833 117,232 (F9) ---------- ---------- -------- --------- ---------- Total assets $5,444,775 $1,163,066 $157,582 $ 484,021 $7,249,444 ========== ========== ======== ========= ========== Liabilities and Stockholders' Equity Current Liabilities: Accounts payable and accrued liabilities $ 191,547 $ 132,802 $ 13,816 $ 1,765 (G11) $ 345,562 5,632 (F2) Income taxes 32,351 6,700 - - 39,051 Current maturities of long-term debt 21,217 3,332 15,700 (15,700) (G9) 24,549 ---------- ---------- -------- --------- ---------- Total current liabilities 245,115 142,834 29,516 (8,303) 409,162 Long-term debt 1,579,918 8,672 37,709 146,668 (G8) 2,208,366 (32,284) (G9) 61,293 (C1) 589,570 (F10) (183,180) (F11) Deferred income taxes 275,162 15,421 14,329 100,445 (G12) 442,268 5,500 (C1) 31,411 (F8) Other liabilities 278,475 137,242 18,846 44,137 (G1) 388,492 4,029 (G5) (16,667) (C1) (79,107) (F3) 1,537 (F4) Deferred prearranged funeral contracts 1,597,454 520,220 6,935 92,859 (G2) 2,217,468 Company obligated mandatorily redeemable preferred securities of SCI Finance LLC 172,500 - - - 172,500 Stockholders' equity 1,296,151 338,677 50,247 (50,247) (G6) 1,411,188 115,037 (G7) (338,677) (F1) ---------- ---------- -------- --------- ---------- Total liabilities and stockholders' equity $5,444,775 $1,163,066 $157,582 $ 484,021 $7,249,444 ========== ========== ======== ========= ==========
7 8 SERVICE CORPORATION INTERNATIONAL NOTES TO THE UNAUDITED PRO FORMA COMBINED BALANCE SHEET JUNE 30, 1995 CANADA (C1) To record the acquisition of the approximate 31% minority interest of SCIC that the Company does not currently own. This includes eliminating the minority interest, increasing long-term debt for amounts assumed to be borrowed under the Company's existing revolving credit facilities to finance this transaction, increasing cemetery property to estimated fair value, recording deferred taxes on the allocation of purchase price (at the Canadian statutory tax rate) and allocating the excess of the purchase price over the estimated fair value of SCIC net assets acquired to names and reputations. GIBRALTAR (G1) To record Gibraltar's cemetery merchandise and service receivable balances and related liabilities in accordance with the Company's accounting policies. These merchandise and service receivable balances were not afforded balance sheet recognition by Gibraltar. (G2) To record Gibraltar's prearranged funeral contracts outstanding and the related deferred prearranged funeral contract revenues in accordance with the Company's accounting policies. These prearranged funeral contracts were not afforded balance sheet recognition by Gibraltar. (G3) To reclassify Gibraltar's receivables not due within one year to long-term receivables. This entry conforms Gibraltar's unclassified balance sheet to the Company's classified balance sheet format. (G4) To reclassify Gibraltar's cemetery inventories not expected to be sold within one year to cemetery property. This entry conforms Gibraltar's unclassified balance sheet to the Company's classified balance sheet format. (G5) To reclassify amounts held in trust by Gibraltar related to sales of preconstruction mausoleums. Gibraltar netted the trust deposits against the related liability; however under the Company's accounting policies these amounts would be shown separately on the balance sheet. (G6) To eliminate the historical stockholders' equity of Gibraltar. (G7) To reflect the net proceeds from the issuance of 3,286,759 shares of Company common stock issued in the Gibraltar transaction at an assumed price of $35 per share (based on an average stock price on August 25, 1995). (G8) To reflect borrowings under the Company's existing revolving credit agreements and/or through the issuance of commercial paper to finance a portion of the purchase price of Gibraltar ($98,684,000) and the assumed repayment of a portion of Gibraltar debt ($47,984,000). (G9) To reflect the assumed repayment of Gibraltar debt. (G10) To increase Gibraltar's cemetery property to estimated fair value. 8 9 (G11) To accrue costs anticipated to be incurred in connection with the acquisition of Gibraltar. (G12) To provide for additional deferred income taxes for Gibraltar (at the Company's marginal tax rate) resulting from differences in the carrying values of net assets for financial statement and tax purposes. (G13) To eliminate previously recorded Gibraltar goodwill. OGF/PFG (F1) To eliminate the historical stockholders' equity of OGF/PFG. (F2) To accrue estimated costs anticipated to be incurred in connection with the acquisition of OGF/PFG. (F3) To eliminate OGF's historical minority interest in PFG. These unaudited pro forma combined financials assume 100% ownership of both OGF and PFG, which is the intent of the Company. (F4) To increase OGF/PFG's land and buildings to estimated fair value. (F5) To record as an intangible asset the present value of future profits of OGF/PFG's life insurance subsidiary with respect to existing insurance contracts. (F6) To eliminate the previously recorded OGF/PFG goodwill. (F7) To eliminate the previously recorded deferred acquisition costs of OGF/PFG's life insurance subsidiary. (F8) To provide for additional deferred income taxes (at the French statutory tax rate) for OGF/PFG resulting from differences in the carrying values of net assets for financial statement and tax purposes. (F9) To allocate the excess of the purchase price over the estimated fair value of OGF/PFG's net assets acquired to names and reputations. (F10) To reflect the borrowings under the French Revolving Credit Agreement for the OGF/PFG purchase. (F11) To reflect the partial repayment of amounts borrowed under the French Revolving Credit Agreement from cash that was acquired in the acquisition of OGF/PFG. 9 10 (8) The following adjustments were made to the historical financials of OGF/PFG in order to restate historical financial statements to US GAAP:
Historic Amounts As reported in Unaudited Converted to US Dollars Adjustments to Pro Forma Combined in F GAAP US GAAP Balance Sheet ----------------------- -------------- ------------------------ Cash and cash equivalents . . . . . . . . . . $ 202,886 $ 416 (1) $ 203,800 498 (3) Receivables, net of allowance . . . . . . . . 55,746 3,267 (3) 59,013 Inventories . . . . . . . . . . . . . . . . . 46,240 - 46,240 Other . . . . . . . . . . . . . . . . . . . . 21,895 836 (5) 33,171 577 (6) 9,863 (3) -------------- ------------ ------------ Total current assets . . . . . . . . . . . 326,767 15,457 342,224 Investments for prearranged funerals . . . . - 531,726 (3) 531,726 Property, plant and equipment at cost (net) . 182,778 4,199 (2) 222,545 (4,319) (4) 39,887 (3) Deferred charges and other assets . . . . . . 47,311 2,350 (3) 49,661 Names and reputations . . . . . . . . . . . . 16,910 - 16,910 -------------- ------------ ------------ Total assets . . . . . . . . . . . . . . . $ 573,766 $ 589,300 $ 1,163,066 ============== ============ ============ Accounts payable and accrued liabilities . . $ 114,521 $ 10,594 (4) $ 132,802 879 (6) 6,808 (3) Income taxes . . . . . . . . . . . . . . . . 6,559 141 (3) 6,700 Current maturities of long-term debt . . . . 3,043 289 (2) 3,332 -------------- ------------ ------------ Total current liabilities . . . . . . . . 124,123 18,711 142,834 Long-term debt . . . . . . . . . . . . . . . 5,217 3,455 (2) 8,672 Deferred income taxes . . . . . . . . . . . . 2,384 1,028 (5) 15,421 (3,505) (6) 15,514 (3) Other liabilities . . . . . . . . . . . . . . 140,730 150 (1) 137,242 61 (2) (14,913) (4) 120 (5) 9,380 (6) 1,714 (3) Deferred prearranged funeral contracts . . . - 520,220 (3) 520,220 Stockholders' equity . . . . . . . . . . . . 301,312 266 (1) 338,677 394 (2) 43,193 (3) (312) (5) (6,176) (6) -------------- ------------ ------------ Total liabilities and stockholders' equity. $ 573,766 $ 589,300 $ 1,163,066 ============== ============ ============
- ----------- *One French franc equivalent to $.2062, which represents the rate at June 30, 1995. 10 11 (1) To record the effect of Statement of Financial Accounting Standards ("FAS") No. 115 "Accounting for Certain Investments in Debt and Equity Securities". (2) To record capital leases to comply with FAS No. 13 "Accounting for Leases". (3) To consolidate OGF/PFG's wholly owned life insurance subsidiary, which was recorded under the equity method of accounting by OGF/PFG, to comply with FAS No. 94 "Consolidation of All Majority-Owned Subsidiaries", FAS No. 60 "Accounting and Reporting by Insurance Enterprises" and FAS No. 97 "Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments". (4) To reclassify a portion of other liabilities to current liabilities and eliminate negative goodwill in accordance with Accounting Principles Board Opinion No. 16. (5) To record FAS No. 109 "Accounting for Income Taxes". (6) To record FAS No. 87 "Employers' Accounting for Pensions" and FAS No. 106 "Employers' Accounting for Post-retirement Benefits Other Than Pensions". 11 12 Service Corporation International Unaudited Pro Forma Combined Statement of Income Year Ended December 31, 1994 (Thousands, except per share amounts)
1994 Transactions ----------------------------------------------- 1994 Historical Pro Forma --------------- ---------------------------- The GSG & PG and 1994 Company Other Acquired Combined Historical Companies Adjustments Subtotal ---------- -------------- ----------- ---------- Revenues $1,117,175 $135,008 $1,146 (A) $1,253,329 Costs and expenses (775,980) (113,145) (770) (A) (885,195) 3,918 (B) 3,757 (C) (217) (D) (4,685) (E) 2,502 (F) (291) (G) (284) (H) ---------- -------- ------- ---------- Gross profit 341,195 21,863 5,076 368,134 General and administrative expenses (51,700) - - (51,700) ---------- -------- ------- ---------- Income from operations 289,495 21,863 5,076 316,434 Interest expense (80,123) (2,588) (165) (A) (86,057) (3,860) (B) 936 (I) 1,451 (J) 4,379 (K) (15,354) (L) 2,414 (M) 6,853 (N) Dividends on preferred securities of SCI Finance LLC (539) - (10,242) (O) (10,781) Other income (expense) 10,188 201 - 10,389 Gain on sale of subsidiaries - - - - ---------- -------- ------- ---------- Income before income taxes 219,021 19,476 (8,512) 229,985 Provision for income taxes (87,976) (7,240) 3,015 (P) (92,201) ---------- -------- ------- ---------- Net income $131,045 $12,236 $(5,497) $137,784 ========== ======== ======= ========== Earnings per share: Primary $1.51 $1.44 ========== ========== Fully diluted $1.43 $1.36 ========== ========== 1,073 (Q) Primary weighted average shares 86,926 7,974 (R) 95,973 ========== ========== 1,156 (Q) Fully diluted weighted 7,974 (R) average shares 97,408 5,450 (S) 111,988 ========== ========== 1995 Transactions ------------------------------------------------------------------------- 1994 Historical Pro Forma --------------------------------------- -------------------------- Other Acquired Combined OGF/PFG Gibraltar Companies Adjustments Total -------- --------- --------- ----------- ----------- Revenues $509,141 $96,270 $73,505 $ (4,993)(G1) $1,924,574 (1,902)(G2) (5,301)(G3) 4,525 (G4) Costs and expenses (471,390) (81,785) (65,401) 4,993 (G1) (1,479,374) 830 (G2) 7,134 (G3) (3,260)(G4) 2,038 (G5) 159 (G6) (1,435)(G7) 1,221 (O1) (941)(C1) (63)(C2) 1,594 (F1) (2,561)(F2) 22,253 (F3) (10,547)(F4) (51)(F5) 682 (F6) 2,351 (F7) -------- ------- ------- -------- ----------- Gross profit 37,751 14,485 8,104 16,726 445,200 General and administrative expenses - - - - (51,700) -------- ------- ------- -------- ----------- Income from operations 37,751 14,485 8,104 16,726 393,500 Interest expense (5,667) (3,279) (1,175) (620)(G4) (134,016) 3,465 (G8) (6,747)(G9) (8,742)(O1) (3,530)(C3) (31,429)(F8) 9,765 (F9) Dividends on preferred securities of SCI Finance LLC - - - - (10,781) Other income (expense) (12,408) (83) - 2,227 (C4) 13,843 (6,681)(F10) 20,399 (F11) Gain on sale of subsidiaries 57,474 - - (57,474)(F12) -------- ------- ------- -------- ----------- Income before income taxes 77,150 11,123 6,929 (62,641) (262,546) Provision for income taxes (21,176) (4,219) (2,702) 496 (G10) (104,613) 1,581 (C5) 2,933 (O2) 10,675 (F13) -------- ------- ------- -------- ----------- Net income $55,974 $6,904 $4,227 $(46,956) $157,933 ======== ======= ======= ======== ========== Earnings per share: Primary $1.59 =========== Fully diluted $1.50 =========== 180 (O3) Primary weighted average shares 3,287 (G11) 99,440 =========== Fully diluted weighted 194 (O3) average shares 3,287 (G11) 115,469 ===========
12 13 SERVICE CORPORATION INTERNATIONAL NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME YEAR ENDED DECEMBER 31, 1994 1994 TRANSACTIONS (A) To record the acquisition of five separate businesses acquired at various dates by PG between January 1, 1994 and August 31, 1994 as if such acquisitions had occurred on January 1, 1994. Internally generated funds were used for the purchase of these businesses; however, for purposes of the unaudited pro forma combined statement of income, imputed interest expense, calculated on the purchase price, has been included at a rate of 6%, which approximated the Company's UK borrowing rate for the year 1994. (B) To record a reduction to costs and expenses for the 1994 Other Acquired Companies based on results actually achieved by the Company for the periods subsequent to acquisition in the amount of $7,019,000 offset in part by additional costs and expenses of $3,101,000 resulting from the effect of applying purchase accounting adjustments, primarily amortization and depreciation. Interest expense was added for debt and convertible debentures, issued in the purchase of the 1994 Other Acquired Companies, at stated rates. In addition, interest expense has been added for the cash portion of the purchase price assumed to be borrowed by the Company at the Company's weighted average borrowing rate of 4.60% for the year ended December 31, 1994 under its existing revolving credit facilities. At August 25, 1995, the borrowing rate was 5.90%. (C) To eliminate corporate expenses, consisting primarily of duplicate personnel expenses, related to the acquisitions of GSG and PG. (D) To record the additional depreciation expense (based on 50 year useful life and straight-line depreciation) on GSG's funeral home buildings resulting from the estimated change in fair value over historical cost. (E) To record the amortization of names and reputations (based on 40 year straight-line amortization) created from the acquisition of PG by the Company. (F) To eliminate the historical GSG and PG goodwill amortization expense. (G) To record the additional cost of GSG's cemetery and cremation memorialization interment rights sold. (H) To record the estimated additional amortization expense from the expenses associated with the December 1994 issuances of preferred securities of SCI Finance LLC and $200,000,000 fixed rate notes of the Company. (I) To reverse imputed interest expense recorded in the Company's historical financial statements, related to the acquisition of GSG and PG, that would not have occurred if these acquisitions had been completed on January 1, 1994. 13 14 (J) To reverse interest expense recorded in the Company's historical financial statements related to amounts borrowed under the Company's revolving credit agreements to partially fund the acquisitions of GSG and PG. This indebtedness would not have been necessary if the acquisition of GSG and PG had been funded with proceeds from the December 1994 public offerings. (K) To record the estimated reduction in interest expense resulting from the assumed partial repayment of $95,205,000 of indebtedness under the Company's revolving credit agreements. Such repayment funds were derived from the net proceeds of the December 1994 public offerings available after the purchase of GSG and PG. The reduction was calculated using the Company's weighted average borrowing rate of 4.60% for the year ended December 31, 1994 under its revolving credit agreements and commercial paper borrowings. (L) To record approximately 11 months of additional interest expense on the December 1994 $200,000,000 notes at annual interest rate of 8.375%. (M) To record the estimated reduction in net interest expense achieved from a cross currency hedging transaction entered into by the Company in December 1994 as if such transaction had been entered into on January 1, 1994. This transaction effectively converts $272,500,000 of U.S. fixed rate indebtedness into floating rate UK pound sterling indebtedness, raising SCI's total UK pound sterling exposure to $472,500,000, which is comparable to the size of the acquisitions of GSG and PG. (N) To reverse interest expense recorded in the Company's historical financial statements related to amounts borrowed under two bank facilities secured to temporarily fund the GSG and PG acquisitions. This indebtedness would not have been necessary if the acquisition of GSG and PG had been funded with proceeds from the December 1994 public offerings. (O) To record the additional dividends at 6.25% on the preferred securities of SCI Finance LLC issued in December 1994 in order to present a full year of dividends. (P) To record the tax effect of the pro forma adjustments. (Q) To give effect to the additional time period during which the Company common stock (in the case of the primary and fully diluted weighted average number of shares) and convertible debt (in the case of the fully diluted weighted average number of shares) issued during the period between January 1, 1994 and December 31, 1994 in respect to the acquisition of the 1994 Other Acquired Companies would have been outstanding if all of such acquisitions had occurred as of January 1, 1994. (R) To record the additional impact from the issuance of 7,700,000 shares in December 1994 and 780,000 shares in January 1995. (S) To record the additional impact on the fully diluted weighted average number of shares of the preferred securities of SCI Finance LLC issued in December 1994. 14 15 1995 TRANSACTIONS 1995 OTHER ACQUIRED COMPANIES (O1) To record a reduction to costs and expenses for the 1995 Other Acquired Companies based on results actually achieved by the Company for the periods subsequent to acquisition in the amount of $3,983,000 offset in part by additional costs and expenses of $2,762,000 resulting from the effect of applying purchase accounting adjustments, primarily amortization and depreciation. Interest expense was added for debt and convertible debentures, issued in the purchase of the 1995 Other Acquired Companies, at stated rates. In addition, interest expense has been added for the cash portion of the purchase price assumed to be borrowed by the Company at the Company's weighted average borrowing rate of 4.60% for the year ended December 31, 1994 under its existing revolving credit facilities. At August 25, 1995, the borrowing rate was 5.90%. (O2) To record the tax effect for the 1995 Other Acquired Companies pro forma adjustments. (O3) To give effect to the additional time period during which the Company common stock (in the case of the primary and fully diluted weighted average number of shares) and convertible debt (in the case of the fully diluted weighted average number of shares) issued during the period between January 1, 1994 and December 31, 1994 in respect to the acquisition of the 1995 Other Acquired Companies would have been outstanding if all of such acquisitions had occurred as of January 1, 1994. CANADA (C1) To record the additional amortization of names and reputations (based on 40 year straight-line amortization) created from the acquisition of the SCIC minority interest. (C2) To record the additional cost of SCIC's cemetery interment rights sold. (C3) To record the estimated interest expense for the purchase price of the SCIC minority interest ($61,293,000) assumed to have been borrowed by the Company under its existing revolving credit facilities. The calculation was based on a weighted average annual three month Canadian banker's acceptance borrowing rate plus 25 basis points for the year ended December 31, 1994 (5.76%). At August 25, 1995, the borrowing rate was 6.71%. (C4) To eliminate the 1994 SCIC minority interest charge. (C5) To record the tax effect for SCIC's minority interest pro forma adjustments. GIBRALTAR (G1) To eliminate Gibraltar intercompany revenues and costs relating to cemetery construction activities. 15 16 (G2) To conform Gibraltar's prearranged funeral accounting to the Company's. The revenue adjustment includes $1,306,000 of revenue relating to earnings on amounts held in trust which Gibraltar recognized currently which would be deferred under the Company's accounting policies and $596,000 of revenue recognized by Gibraltar relating to certain prearranged funeral payments not required to be held in trust which would also be deferred under the Company's accounting policies. The adjustment to costs and expenses for $830,000 relates to prearranged funeral selling expenses that would be capitalized under the Company's accounting policies but were recognized currently by Gibraltar. (G3) To conform Gibraltar's cemetery accounting to the Company's. This includes an adjustment to reclassify $5,301,000 of revenues and costs and expenses relating to contract cancellations. In addition, this adjustment includes a reduction of Gibraltar historical costs and expenses for $1,833,000, representing reduced cost accruals for certain cemetery sales. (G4) To record the acquisition of five separate businesses acquired at various dates by Gibraltar between January 1, 1994 and December 31, 1994 as if such acquisitions had occurred on January 1, 1994. (G5) To eliminate Gibraltar corporate expenses consisting primarily of former owner salaries and duplicate home office personnel expenses. (G6) To eliminate the historical Gibraltar goodwill amortization expense. (G7) To record the additional cost of Gibraltar's cemetery interment rights sold. (G8) To eliminate the interest expense on Gibraltar debt assumed to be repaid by the Company. (G9) To record additional interest expense for the cash portion of the purchase price assumed to be borrowed by the Company under its existing revolving credit facilities. The Company's weighted average borrowing rate for such revolving credit facilities was 4.60% for the year ended December 31, 1994. At August 25, 1995, the borrowing rate was 5.90%. (G10) To record the tax effect of Gibraltar's pro forma adjustments. (G11) To reflect the issuance of 3,286,759 shares in respect to the acquisition of Gibraltar that would have been outstanding if the acquisition had occurred on January 1, 1994. The shares were assumed to be issued at $35 per share representing the average stock price on August 25, 1995. OGF/PFG (F1) To eliminate the historical OGF/PFG goodwill amortization expense. (F2) To record the amortization of names and reputations (based on 40 year straight-line amortization) created from the acquisition of OGF/PFG by the Company. (F3) To eliminate OGF/PFG's historical depreciation expense which was calculated using shorter depreciable asset lives than does the Company under its accounting policies. Additionally, OGF/PFG, for certain assets, used accelerated depreciation 16 17 methods. The Company uses a straight-line method of depreciation expense recognition. (F4) To record the depreciation expense on OGF/PFG's property, plant and equipment using the Company's depreciation policies based on the current fair value. (F5) To record the amortization of the present value of future profits related to OGF/PFG's life insurance subsidiary, net of the amount allocated to policyholders, under French insurance regulations. (F6) To eliminate the amortization of deferred acquisition costs related to the life insurance subsidiary which were recorded in OGF/PFG's historical income statement. (F7) To eliminate historical OGF/PFG expenses that will not continue under the Company's ownership. Such costs are primarily the result of OGF/PFG personnel whose positions were permanently eliminated in anticipation of the acquisition of OGF/PFG by the Company. (F8) To record interest expense on amounts borrowed under the French Revolving Credit Agreement ($589,570,000) at 6.10% which represents the weighted average three month PIBOR borrowing rate plus 25 basis points for the year ended December 31, 1994 applied to a French franc balance as of June 30, 1995 and translated at a weighted average exchange rate for the year ended December 31, 1994. At August 25, 1995, the borrowing rate was 5.98%. (F9) To eliminate interest expense on amounts borrowed under the French Revolving Credit Agreement that the Company intends to repay with $183,180,000 of OGF/PFG cash acquired. OGF/PFG received substantially all of this cash from the sale, in 1994, of its investment in PG to the Company. The reduction was calculated using a weighted average annual interest rate of 6.10%, which represents the weighted average three month PIBOR borrowing rate plus 25 basis points for the year ended December 31, 1994 applied to a French franc balance as of June 30, 1995 and translated at the weighted average exchange rate for the year ended December 31, 1994. At August 25, 1995, the borrowing rate was 5.98%. (F10) To eliminate OGF/PFG historical interest income earned on OGF/PFG excess cash ($183,180,000) that the Company intends to use to partially repay borrowings under the French Revolving Credit Agreement. (F11) To eliminate OGF's year ended 1994 charge for the minority interest in PFG assuming acquisition of 100% of PFG by the Company. (F12) To eliminate the gain on sale of PG. The Company purchased PG, which was an equity investee of OGF, in 1994. (F13) To record the tax effect of the OGF/PFG pro forma adjustments. 17 18 The following adjustments were made to the historical financials of GSG and PG in order to restate historical financial statements to US GAAP (included in the unaudited pro forma combined statement of income for the year ended December 31, 1994 in the column captioned "1994 Historical - GSG & PG and Other Acquired Companies"):
Historic Amounts As reported in Unaudited Converted to US Dollars Adjustments to Pro Forma Combined in UK GAAP* US GAAP Statement of Income ----------------------- --------------------- ------------------------ GSG PG GSG PG GSG PG --------- ---------- -------- ------- --------- ---------- Revenues . . . . . . . . . . $ 33,714 $ 52,484 $ - $ - $33,714 $ 52,484 Costs and expenses . . . . . (26,682) (40,365) (184)(1) (205)(1) (27,254) (42,684) (388)(2) (2,114)(2) Interest expense and other . . (731) (405) - - (731) (405) Provision for income taxes . . (2,079) (3,689) 60 (1) 67 (1) (2,019) (3,622) -------- -------- ------ ------- ------- --------- Net income . . . . . . . . . $ 4,222 $ 8,025 $ (512) $(2,252) $ 3,710 $ 5,773 ======== ======== ====== ======= ======= =========
- --------------- *One UK pound sterling equivalent to $1.52, which represents the average exchange rate for the eight months ended August 31, 1994. (1) To depreciate buildings straight-line over 50 years for GSG and PG. (2) To amortize PG's historical goodwill balance straight-line over 40 years. 18 19 The following adjustments were made to the historical financials of OGF/PFG in order to restate historical financial statements to US GAAP:
Historic Amounts As reported in Unaudited Converted to US Dollars Adjustments to Pro Forma Combined in F GAAP US GAAP Statement of Income ----------------------- -------------- ------------------------ Revenues . . . . . . . . . . . . . . . . . $ 500,884 $ 8,257 (3) $ 509,141 Costs and expenses . . . . . . . . . . . . (467,825) 472 (2) (471,390) 18 (5) (4,055) (3) Other income (expense) . . . . . . . . . . (18,044) (129) (1) (18,075) (384) (2) 136 (3) 350 (4) (4) (5) Gain on sale of subsidiaries. . . . . . . . 57,474 - 57,474 Provision for income taxes . . . . . . . . (18,927) (1,019) (4) (21,176) (6) (5) (1,224) (3) -------------- ------------ ------------ Net income . . . . . . . . . . . . . . . . $ 53,562 $ 2,412 $ 55,974 ============== ============ ============
- --------------- *One French franc equivalent to $.1802, which represents the average exchange rate for the year ended December 31, 1994. (1) To record the effect of Statement of Financial Accounting Standards ("FAS") No. 115 "Accounting for Certain Investments in Debt and Equity Securities". (2) To record capital leases to comply with FAS No. 13 "Accounting for Leases". (3) To consolidate OGF/PFG's wholly owned life insurance subsidiary, which was recorded under the equity method of accounting by OGF/PFG, to comply with FAS No. 94 "Consolidation of All Majority-Owned Subsidiaries", FAS No. 60 "Accounting and Reporting by Insurance Enterprises" and FAS No. 97 "Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments". (4) To record FAS No. 109 "Accounting for Income Taxes". (5) To record FAS No. 87 "Employers' Accounting for Pension" and FAS No. 106 "Employers' Accounting for Post-retirement Benefits Other Than Pensions". 19 20 Service Corporation International Unaudited Pro Forma Combined Statement of Income Six Months Ended June 30, 1995 (Thousands, except per share amounts)
Historical ----------------------------------- The Other Pro Forma Company Acquired Pro Forma Combined Historical OGF/PFG Gibraltar Companies Adjustments Total ---------- ------- --------- --------- ----------- -------- Revenues $701,762 $272,632 $45,556 $18,439 $ (843) (G1) $1,034,319 (3,227) (G2) Costs and expenses (479,105) (257,606) (38,031) (16,370) 362 (G1) (778,180) 4,222 (G2) 1,019 (G3) 112 (G4) (718) (G5) 479 (O1) (470) (C1) (32) (C2) 857 (F1) (1,409) (F2) 12,670 (F3) (6,822) (F4) (52) (F5) 362 (F6) 2,352 (F7) -------- -------- ------- ------- ------- ---------- Gross profit 222,657 15,026 7,525 2,069 8,862 256,139 General and administrative expenses (23,471) - - - - (23,471) -------- -------- ------- ------- ------- ---------- Income from operations 199,186 15,026 7,525 2,069 8,862 232,668 Interest expense (52,809) (1,901) (2,361) (308) 2,144 (G6) (79,028) (4,503) (G7) (2,714) (O1) (2,467) (C3) (20,468) (F8) 6,359 (F9) Dividends on preferred securities of SCI Finance LLC (5,391) - - - - (5,391) Other income (expense) 3,073 4,111 (47) - 1,451 (C4) 5,305 3,185 (F10) (6,468)(F11) -------- -------- ------- ------- ------- ---------- Income before income taxes 144,059 17,236 5,117 1,761 (14,619) 153,554 Provision for income taxes (56,039) (8,857) (2,121) (685) 872 (O2) (60,700) 1,100 (C5) 602 (G8) 4,428 (F12) -------- -------- ------- ------- ------- ---------- Net income $88,020 $8,379 $2,996 $1,076 $(7,617) $ 92,854 ======== ======== ======= ======= ======= ========== Earnings per share: Primary $0.91 $ 0.93 ======== ========== Fully diluted $0.85 $ 0.86 ======== ========== 3,287 (G9) Primary weighted average shares 96,729 147 (O3) 100,163 ======== ========== Fully diluted weighted average 3,287 (G9) shares 112,611 147 (O3) 116,045 ======== ==========
- ---------------------- See note (F13) to this unaudited pro forma combined statement of income for the six months ended June 30, 1995. 20 21 SERVICE CORPORATION INTERNATIONAL NOTES TO THE UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME SIX MONTHS ENDED JUNE 30, 1995 1995 OTHER ACQUIRED COMPANIES (O1) To record a reduction to costs and expenses for the 1995 Other Acquired Companies based on results actually achieved by the Company for the periods subsequent to acquisition in the amount of $1,860,000 offset in part by additional costs and expenses of $1,381,000 resulting from the effect of applying purchase accounting adjustments, primarily amortization and depreciation. Interest expense was added for debt and convertible debentures, issued in the purchase of the 1995 Other Acquired Companies, at stated rates. In addition, interest expense has been added for the cash portion of the purchase price assumed to be borrowed by the Company at the Company's weighted average borrowing rate of 6.14% for the six months ended June 30, 1995, under its existing revolving credit facilities. At August 25, 1995, the borrowing rate was 5.90%. (O2) To record the tax effect for the 1995 Other Acquired Companies pro forma adjustments. (O3) To give effect to the additional time period during which the Company common stock (in the case of the primary and fully diluted weighted average number of shares) and convertible debt (in the case of the fully diluted weighted average number of shares) issued during the period between January 1, 1995 and June 30, 1995 in respect to the acquisition of the 1995 Other Acquired Companies would have been outstanding for the six months ended June 30, 1995 if all of such acquisitions had occurred as of January 1, 1994. CANADA (C1) To record the additional amortization of names and reputations (based on 40 year straight-line amortization) created from the acquisition of the SCIC minority interest. (C2) To record the additional costs of SCIC's cemetery interment rights sold. (C3) To record the estimated interest expense for the purchase price of the SCIC minority interest ($61,293,000) assumed to have been borrowed by the Company under its existing revolving credit facilities. The calculation was based on a weighted average annual three month Canadian banker's acceptance borrowing rate plus 25 basis points for the six months ended June 30, 1995 (8.05%). At August 25, 1995, the borrowing rate was 6.71%. (C4) To eliminate the 1995 SCIC minority interest charge. (C5) To record the tax effect for SCIC's minority interest pro forma adjustments. 21 22 GIBRALTAR (G1) To conform Gibraltar's prearranged funeral accounting to the Company's. The revenue adjustment includes $604,000 of revenue relating to earnings on amounts held in trust which Gibraltar recognized currently which would be deferred under the Company's accounting policies and $239,000 of revenue recognized by Gibraltar relating to certain prearranged funeral payments not required to be held in trust which would also be deferred under the Company's accounting policies. The adjustment to costs and expenses for $362,000 relates to prearranged funeral selling expenses that would be capitalized under the Company's accounting policies but were recognized currently by Gibraltar. (G2) To conform Gibraltar's cemetery accounting to the Company's. This includes an adjustment to reclassify $3,227,000 of revenues and costs and expenses relating to contract cancellations. In addition, this adjustment includes a reduction of Gibraltar's historical costs and expenses for $995,000, representing reduced cost accruals for certain cemetery sales. (G3) To eliminate Gibraltar corporate expenses consisting primarily of former owner salaries and duplicate home office personnel expenses. (G4) To eliminate the historical Gibraltar goodwill amortization expense. (G5) To record the additional cost of Gibraltar's cemetery interment rights sold. (G6) To eliminate the interest expense on Gibraltar debt assumed to be repaid by the Company. (G7) To record additional interest expense for the cash portion of the purchase price assumed to be borrowed by the Company under its existing revolving credit facilities. The Company's weighted average borrowing rate for such revolving credit facilities was 6.14% for the six months ended June 30, 1995. At August 25, 1995, the borrowing rate was 5.90%. (G8) To record the tax effect of Gibraltar's pro forma adjustments. (G9) To reflect the issuance of 3,286,759 shares in respect to the acquisition of Gibraltar that would have been outstanding if the acquisition had occurred as of January 1, 1995. The shares were assumed to be issued at $35 per share representing the average stock price on August 25, 1995. OGF/PFG (F1) To eliminate the historical OGF/PFG goodwill amortization expense. (F2) To record the amortization of names and reputations (based on 40 year straight-line amortization) created from the acquisition of OGF/PFG by the Company. (F3) To eliminate OGF/PFG's historical depreciation expense which was calculated using shorter depreciable asset lives than does the Company under its accounting policies. Additionally, OGF/PFG, for certain assets, used accelerated depreciation methods. The Company uses a straight-line method of depreciation expense recognition. 22 23 (F4) To record the depreciation expense on OGF/PFG's property, plant and equipment using the Company's depreciation policies based on the current fair value. (F5) To record the amortization of the present value of future profits related to OGF/PFG's life insurance subsidiary, net of the amount allocated to policyholders, under French insurance regulations. (F6) To eliminate the amortization of deferred acquisition costs related to the life insurance subsidiary which were recorded in OGF/PFG's historical income statement. (F7) To eliminate historical OGF/PFG expenses that will not continue under the Company's ownership. Such costs are primarily the result of OGF/PFG personnel whose positions were permanently eliminated and professional expenses incurred in anticipation of the acquisition of OGF/PFG by the Company. (F8) To record interest expense on amounts borrowed under the French Revolving Credit Agreement ($589,570,000) at 7.22% which represents the weighted average three month PIBOR borrowing rate plus 25 basis points for the six months ended June 30, 1995 applied to a French franc balance as of June 30, 1995 and translated at the weighted average exchange rate for the six months ended June 30, 1995. At August 25, 1995, the borrowing rate was 5.98%. (F9) To eliminate interest expense on amounts borrowed under the French Revolving Credit Agreement that the Company intends to repay with $183,180,000 of OGF/PFG cash acquired. OGF/PFG received substantially all of this cash from the sale, in 1994, of its investment in PG to the Company. The reduction was calculated using a weighted average annual interest rate of 7.22%, which represents the weighted average three month PIBOR borrowing rate plus 25 basis points for the six months ended June 30, 1995 applied to a French franc balance as of June 30, 1995 and translated at the weighted average exchange rate for the six months ended June 30, 1995. At August 25, 1995, the borrowing rate was 5.98%. (F10) To eliminate OGF's six month charge for the minority interest in PFG assuming acquisition of 100% of PFG by the Company. (F11) To eliminate OGF/PFG historical interest income earned on OGF/PFG excess cash ($183,180,000) that the Company intends to use to partially repay borrowings under the French Revolving Credit Agreement. (F12) To record the tax effect of the OGF/PFG pro forma adjustments. (F13) The earnings of OGF/PGF's life insurance subsidiary for the six months ended June 30, 1995 included realized losses on sales of portfolio debt securities. The net effect of the debt security sales, after profit participation by policyholders, was a loss before income taxes of approximately US $7,950,000. On August 25, 1995, the Company adopted a policy with respect to OGF/PFG's life insurance subsidiary to hold all debt securities to maturity. Had the Company's investment policy been in effect during the period, such security sales would not have occurred. 23 24 The following adjustments were made to the historical financials of OGF/PFG in order to restate historical financial statements to US GAAP:
Historic Amounts As reported in Unaudited Converted to US Dollars Adjustments to Pro Forma Combined in F GAAP US GAAP Statement of Income ----------------------- -------------- ------------------------ Revenues . . . . . . . . . . . . . . . . . . $ 275,318 $ 78 (1) $ 272,632 (2,764) (3) Costs and expenses . . . . . . . . . . . . . (254,536) 260 (2) (257,606) (755) (5) (2,575) (3) Other income (expense) . . . . . . . . . . . 3,901 (29) (1) 2,210 (200) (2) (1,500) (3) (133) (4) 171 (5) Provision for income taxes . . . . . . . . . (9,020) (104) (4) (8,857) 267 (5) -------------- ------------ ------------ Net income . . . . . . . . . . . . . . . . . $ 15,663 $ (7,284) $ 8,379 ============== ============ ============
- -------------- *One French franc equivalent to $.1983, which represents the average exchange rate for the six months ended June 30, 1995. (1) To record the effect of Statement of Financial Accounting Standards ("FAS") No. 115 "Accounting for Certain Investments in Debt and Equity Securities". (2) To record capital leases to comply with FAS No. 13 "Accounting for Leases". (3) To consolidate OGF/PFG's wholly owned life insurance subsidiary, which was recorded under the equity method of accounting by OGF/PFG, to comply with FAS No. 94 "Consolidation of All Majority-Owned Subsidiaries", FAS No. 60 "Accounting and Reporting by Insurance Enterprises" and FAS No. 97 "Accounting and Reporting by Insurance Enterprises for Certain Long-Duration Contracts and for Realized Gains and Losses from the Sale of Investments". The earnings of OGF/PFG's life insurance subsidiary for the six months ended June 30, 1995 included realized losses on sales of debt securities. The net effect of the debt security sales, after profit participation by policyholders, was a loss before income taxes of approximately US $7,950,000. (4) To record FAS No. 109 "Accounting for Income Taxes". (5) To record FAS No. 87 "Employers' Accounting for Pension" and FAS No. 106 "Employers' Accounting for Post-retirement Benefits Other Than Pensions". 24 25 (b) Financial statement of businesses acquired OGF/PFG GROUP (Presented in Accordance with French GAAP) CONSOLIDATED BALANCE SHEET AS AT DECEMBER 31 1994 AND 1993 (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
- ------------------------------------------------------------------------------------------ NOTE 1994 1993 - ------------------------------------------------------------------------------------------ FIXED ASSETS Intangible Assets 3 129,970 477,866 Tangible Assets 4 891,630 1,155,193 Investments 5 144,348 168,628 - ------------------------------------------------------------------------------------------ 1,165,948 1,801,687 - ------------------------------------------------------------------------------------------ CURRENT ASSETS Stocks 6 216,020 249,128 Debtors 7 382,030 460,595 Investments 8 47,928 50,532 Cash Investments 984,486 323,209 - ------------------------------------------------------------------------------------------ 1,630,464 1,083,464 - ------------------------------------------------------------------------------------------ CURRENT LIABILITIES Bank loans and overdrafts 39,978 64,500 Other financial debt 1,739 78,482 Trade and other creditors 593,342 668,062 - ------------------------------------------------------------------------------------------ 635,059 811,044 - ------------------------------------------------------------------------------------------ NET CURRENT ASSETS 995,405 272,420 - ------------------------------------------------------------------------------------------ Total assets less current liabilities 2,161,353 2,074,107 - ------------------------------------------------------------------------------------------ Long-term debt 12 132,967 321,782 - ------------------------------------------------------------------------------------------ Provisions for liabilities and charges 11 151,719 166,003 - ------------------------------------------------------------------------------------------ TOTAL ASSETS LESS LIABILITIES 1,876,667 1,586,322 - ------------------------------------------------------------------------------------------
25 26 OGF/PFG GROUP CONSOLIDATED BALANCE SHEET AS AT DECEMBER 31 1994 AND 1993 (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
NOTE 1994 1993 - -------------------------------------------------------------------------------- CAPITAL AND RESERVES Called up share capital 243,483 243,373 Share premium account 255,914 255,749 Revaluation reserve 16,643 17,494 Other reserves 10 639,991 575,676 Profit and loss account 297,866 128,267 - -------------------------------------------------------------------------------- Total group's share 9 1,453,897 1,220,559 - -------------------------------------------------------------------------------- Minority interests 422,770 365,763 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- TOTAL STOCKHOLDERS' EQUITY AND MINORITY INTERESTS 1,876,667 1,586,322 - --------------------------------------------------------------------------------
26 27 OGF/PFG GROUP CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEARS ENDED DECEMBER 31 1994 AND 1993 (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
- ------------------------------------------------------------------------------------- NOTE 1994 1993 - ------------------------------------------------------------------------------------- TURNOVER 14 2,753,446 3,269,849 Other operating income 41,159 67,706 - ------------------------------------------------------------------------------------- 2,794,605 3,337,555 - ------------------------------------------------------------------------------------- OPERATING COSTS AND EXPENSES 15 (2,567,808) (3,003,782) - ------------------------------------------------------------------------------------- OPERATING PROFIT 226,797 333,773 Share of profit of associated companies (1) 522 20,298 Financial income, net 16 21,138 371 - ------------------------------------------------------------------------------------- PROFIT ON ORDINARY ACTIVITIES BEFORE EXCEPTIONAL ITEMS AND TAXATION 248,457 354,442 Exceptional profit /loss (2) 272,333 (38,974) - ------------------------------------------------------------------------------------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 520,790 315,468 Taxation 17 (106,871) (121,410) - ------------------------------------------------------------------------------------- PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 413,919 194,058 Minority interests in profit (116,053) (65,791) - ------------------------------------------------------------------------------------- Profit for the year 297,866 128,267 - ------------------------------------------------------------------------------------- (1) Companies consolidated by the equity method. (2) Exceptional profit 299,016 17,616 Employees profit sharing (26,336) (37,897) Amortization of goodwill (347) (18,693) -------- -------- 272,333 (38,974)
27 28 OGF/PFG GROUP STATEMENT OF SOURCE AND APPLICATION OF FUNDS FOR THE YEARS ENDED DECEMBER 31 1994 AND 1993 (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
- ------------------------------------------------------------------------------------- 1994 1993 - ------------------------------------------------------------------------------------- SOURCE OF FUNDS FROM OPERATIONS 217,134 337,128 OTHER SOURCES: Increase in capital 11,596 29,249 Disposals of fixed assets investments 704,932 16,669 Disposals of tangible and intangible fixed assets 30,434 71,583 Change in the number of consolidated companies and effects of the restructuring - 201,805 Increase in long-term financial debt 1,098 15,117 Other, net 19,668 17,884 - ------------------------------------------------------------------------------------- TOTAL SOURCES OF FUNDS 984,862 689,435 - ------------------------------------------------------------------------------------- APPLICATION OF FUNDS : Acquisition of tangible fixed assets 164,517 220,025 Acquisition of intangible fixed assets 9,054 24,184 Acquisition of long term investments 30,586 15,971 Dividends paid 64,493 57,406 Dividends paid to minority interests 14,435 30,060 Decrease in long term financial debt 58,555 183,790 Other, net (7,245) 151,578 - ------------------------------------------------------------------------------------- TOTAL APPLICATIONS OF FUNDS 334,395 683,014 - ------------------------------------------------------------------------------------- (DECREASE) INCREASE IN WORKING CAPITAL 650,467 6,421 - ------------------------------------------------------------------------------------- ARISING FROM MOVEMENTS IN: Net liquid funds 687,239 68,122 Other current assets/liabilities (36,772) (61,701) - -------------------------------------------------------------------------------------
The 31 December 1994 statement of source and application of funds has been prepared in accordance with French accounting principles; receivables and payables are not classified according to their maturity (more or less than one year) but in relation to their operating cycle. 28 29 OGF/PFG GROUP NOTES TO THE CONSOLIDATED ACCOUNTS 1. CONSOLIDATION PRINCIPLES AND ACCOUNTING POLICIES 1.1 1994 SIGNIFICANT EVENTS The main event of 1994 has been the sale of Group interests in the British funeral company "Plantsbrook" which has generated in the consolidated accounts a total capital gain of 317.462 thousand French francs (before tax effect). The global positive impact of this operation on Group profit is 175.626 thousand French francs. Pradel has sold its interests in Gemroc. The loss generated of 26.840 thousand French francs (of which 25.565 thousand French francs related to the receivables and 1.275 thousand French francs to the shares) is largely compensated by the recovery of the provision for liability on subsidiaries of 32.000 thousand French francs. Taking into account tax economies due to the tax integration of OGF and Pradel, this sale generates an increase in Group profit of 15.997 thousand French francs. The conversion into shares of convertible bonds issued by PFG has decreased the percentage of ownership of OGF in PFG from 66% to 65%. The loss of interest due to this dilution has been posted to extraordinary income for 3.982 thousand French francs. During 1994 all remaining convertible bonds have either been converted or reimbursed. 1.2 ACCOUNTING PRINCIPLES As a French company, Omnium de Gestion et de Financement SA maintains its accounting records and prepares its financial statements in accordance with French law and generally accepted accounting practices in France. 1.21 ACCOUNTING CONVENTION The financial statements have been prepared under the historical cost convention as modified by the revaluation of certain fixed assets. 1.22 BASIS OF CONSOLIDATION The consolidated financial statements have been prepared in accordance with the recommendations of the French National Accounting Committee, known as the Conseil National de la Comptabilite. 29 30 OGF/PFG GROUP Companies which are consolidated must have a minimum net shareholders equity of FRF 5 million and FRF 15 millions in turnover. These criteria do not apply to subsidiaries which are part of a sub-consolidation which is then included in OGF Group's consolidated accounts. The interest in consolidated net income is computed on the basis of year end ownership percentage, except for newly consolidated companies acquired during the year. Companies over which the Group exercises legal or de facto control are fully consolidated. Companies are accounted for under the equity method when the Group's equity interest is less than 40% but more than 20%. The Auxia sub-group which is governed by the French insurance law and which accounts are therefore structurally different, is consolidated under the equity method. The equity method is also used for the Hygeco sub-group since the Group does not have effective control. Consequently, for the year ended 31 December, 1994, 62 companies are included in the Group's consolidated financial statements, compared to 69 as of December 31, 1993: o 48 fully consolidated o 2 consolidated by the equity method: Auxia, and the Hygeco Group which includes 13 companies. Due to the buy out of COMIPAR, which is now 100% owned by the Group, and is itself the parent company of the Italian sub-group (COMIPAR, OFISA and OFT), this sub-consolidation is no longer accounted for by proportional consolidation but is fully consolidated as of December 31, 1994. During 1994, 7 companies have been deconsolidated: - the British group Plantsbrook (5 companies) was sold during the second semester of 1994; - the "Compagnie Generale des Pompes Funebres" has been absorbed by AFM. The new entity is now known as "Compagnie Generale des Pompes Funebres". This merger has generated a profit of 779 thousand French francs posted to extraordinary income. - Gemroc was sold during the first semester of 1994. Three companies previously non-consolidated have been absorbed: - Ambulances Beaurepairoises absorbed by AFM; - the Sainte Marguerite joint venture and the company A. Barthelis absorbed by "Pompes Funebres du Sud-Est". 30 31 OGF/PFG GROUP As a general rule, companies which are consolidated have a 31 December year-end. When provisional accounts are used for consolidation, the difference between the provisional and the definitive accounts is reintegrated in the following year's consolidation. Inter-company balances and transactions between companies included in the consolidation perimeter are eliminated for consolidation purposes. 1.23 FIXED ASSETS Fixed Assets reported in the consolidated financial statements represent the amount of fixed assets of the consolidated companies. For companies that have revalued their assets, according to applicable legal factors, these assets have been consolidated at the reevaluated value. No restatement of amortizations has been made in the consolidated accounts. Differences resulting from the reevaluation of non-amortizable fixed assets (reevaluation reserves) have been incorporated in the calculation of net equity and minority interests. 1.24 INTANGIBLE FIXED ASSETS For consolidation purposes, goodwill has been amortized using the following rates: o 10% for goodwill related to the funeral business, o 5% for goodwill related to marble-working and sales of flowers. Other intangible fixed assets are amortized on a straight-line basis over the following estimated useful economic lives: o software: 12 months prorata temporis o patents: 5 and 20 years o trademarks: 10 years o usufruct reserve: 30 years Until September 1, 1993, intangible assets acquired through a transfer or a merger were accounted for their net value and amortized over the remaining useful life. For assets acquired after that date, their new owner has accounted for the gross value and the accumulated depreciation relating to these assets. The initial amortization plan is maintained. 31 32 OGF/PFG GROUP 1.25 TANGIBLE FIXED ASSETS Tangible fixed assets are depreciated on a straight-line or an accelerated method depending on tax advantages and according to the following expected useful economic lives: o 20 to 40 years for buildings o 5 to 10 years for plants and machinery o 5 to 10 years for fixtures and fittings o 4 to 5 years for vehicles o 4 to 10 years for office furniture and equipment The method described above concerning intangible assets acquired through a transfer or a merger from September 1, 1993 is also used for tangible assets. 1.26 NON CONSOLIDATED INVESTMENTS Investments in non consolidated subsidiaries and affiliates are recorded at their book value for the parent company, i.e. cost of acquisition reduced by a provision accrued in order to take into account their year-end realizable value as considered necessary by the Board of Directors. 1.27 STOCK AND WORK IN PROGRESS Stock and work in progress are stated at the lower of either purchase or production cost and net realizable value. 1.28 REGULATED PROVISIONS Provisions relating to foreign exchange fluctuation, inflation and depreciation accrued for under advantageous fiscal situations, have been booked to consolidated shareholders' equity. Corresponding movements appear in the consolidated profit and loss account. 1.29 EMPLOYEE PROFIT SHARING Provisions are made for employee profit sharing in the profit and loss account for the year during which the employees acquire these rights. 1.30 DEFERRED TAXATION Provisions for deferred tax have been established in accordance with the liability method, in order to record tax charges in the relevant accounting period. This is done by taking into account any timing differences which may exist between the date when certain items are recorded in the income statement and the date when they are included in taxable income. Deferred taxes are calculated at each year end at current tax rates (any remaining prior year deferred tax amounts are adjusted to take into account new tax rates or legislation). The rates applied to calculate deferred taxes as at December 31, 1994 were the corporate income tax rates for 1994 (33 1/3% for operations taxable at the standard rate and 19% for operations subject to the long term capital gains (losses) rules). 32 33 OGF/PFG GROUP 1.31 DIVIDEND DISTRIBUTION Dividend tax withholdings are deducted from net income prior to distribution. 1.32 GOODWILL ARISING ON CONSOLIDATION Negative goodwill arising from the consolidation of companies acquired several years ago is treated as consolidated reserves. Positive goodwill has been booked as an asset and negative goodwill as a liability ("Provisions for liabilities and charges"). Goodwill is amortized over 20 years. Amortization of goodwill is recorded on the last line of the profit and loss account, as required by the COB. 1.33 MARKETABLE SECURITIES In determining the provision for loss in value of marketable securities to be included in the consolidated accounts, unrealized losses have been offset against unrealized gains, based on the market value of the securities. 1.34 TRANSLATION OF FOREIGN CURRENCY ITEMS Foreign currency liabilities and receivables are translated at December 31 exchange rates. Provisions are accrued for any unrealized losses resulting from foreign currency translation. 1.35 TRANSLATION OF FOREIGN COMPANIES' ACCOUNTS International Accounting Standard IASC 21 is applied for the translation of foreign companies' accounts: o all balance sheet accounts are translated at year end exchange rates, except for year end profit/loss which is translated at the weighted annual average for the month end rates, o all profit and loss items are translated at the weighted annual average of the month end rates, except for calculated expenses and disposals of assets, which are translated at year end rates. As of December 31, 1994 foreign currency translation of profit and loss items implied a FRF 877 thousand income decrease. The impact of translation of year-end profit/loss is taken into account in shareholders' equity. The translation difference of 3.803 thousand French francs, corresponding to the Plantsbrook Group and posted at shareholders' equity, has been reintegrated in the income statement following the sale of this Group. Translation of foreign currency assets and liabilities resulted in a FRF 2.695 thousand increase in shareholders' equity. 33 34 OGF/PFG GROUP 1.36 PROFIT INCLUDED IN STOCKS The profit included in PFG Group coffins stocks received from CGSM has not been eliminated since this restatement is not significant. 1.37 PENSION AND RETIREMENT OBLIGATIONS All French companies in the Group have subscribed an Auxia contract covering their retirement obligations. 34 35 OGF/PFG GROUP 2. SUMMARY OF DIFFERENCES BETWEEN FRENCH AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES The OGF Group financial statements comply with French generally accepted accounting principles which differ in certain respects from those applicable in the United States. The differences that may affect the consolidated net income and stockholders' equity of OGF Group are described below: INVESTMENTS Under French GAAP, debt securities held by the insurance company are valued at amortized cost. A reserve is made for realized gains and losses in proportion to the amount of gains and losses attributable to changes in market rates. The reserve is not reversed unless it is extinguished, whereby further declines are charged against income. Equity securities and real estate owned by the insurance company are valued at the lower of cost or market on a portfolio basis. Corporate investments of the OGF Group are recorded at the lower of cost or market. US GAAP requires debt securities to be clasified as either "trading", "available-for-sale" or "held-to-maturity". Equity securities are classified as either "available-for-sale" or "trading". Securities classified as "held-to-maturity" are recorded at amortized cost; securities classified as "available-for-sale" and "trading" are recorded at market value. Unrealized gains and losses on "available-for-sale" and "trading" securities are reflected in stockholders' equity and income, respectively. Real estate investments are recorded at their depreciated cost. INSURANCE REVENUES AND LIABILITIES Under French GAAP, the insurance company accounts for its activities on a statutorial basis. Mathematical reserves are made for contracts with policyholders even if the contracts qualify as Investment deposits from policyholders or insurance contracts. Acquisition costs are deducted from the liability, the cash value of the contracts being reduced accordingly. Mathematical reserves are computed using a legal rate of interest in effect at the date the policy is subscribed (3.5/4.5%). Policyholders are legally entitled to a policyholder participation equal to 90% of operating income (excluding investment income) plus 85% of total investment income less interest credited to the mathematical reserves. This participation is attributable to the policyholders in proportion to a ratio equal to the mathematical reserves on the total investments held by the Company. US GAAP requires the insurance company's contracts to be accounted for as either investment or long-duration contracts. Investment contracts are accounted similar to interest-bearing or other financial instruments; long-duration contracts are recognized in revenues and expenses over the period that the benefits from such contracts are provided; revenues and expenses are actuarially determined based on investment yields, mortality and lapse rates, and expenses. 35 36 OGF/PFG GROUP FIXED ASSETS Under French GAAP, certain fixed assets have been reevaluated. The re-evaluation is not allowed under US GAAP. DEFERRED TAXES OGF's accounting policy for deferred taxes under French GAAP is similar to US GAAP except for the following item: - under French GAAP, OGF records deferred tax assets only when the future realization is probable rather than "more likely than not". PENSION OBLIGATION Under French GAAP, pension cost relating to Supplementary Executive Retirement Plans or to Severance Indemnities are recognized as expensed, that is when payments are made to beneficiaries or to the wholly owned life insurance company of the group. Compliance with US GAAP would require the recognition of a pension cost in conformity with FAS 87 and the recognition of an accrual or a prepaid for the difference between the fair value of plan assets and the projected benefit obligation. POSTRETIREMENT OBLIGATION The companies of the group participate in medical coverage postretirement plans in the form of contributions limited to certain amounts paid by the employee to multi-employer and single employer plans. Those plans are managed by trade union representatives. In French GAAP, a reserve is made for future contributions to be paid for current retirees. Under US GAAP, a supplementary reserve would be made for future retirees in proportion to services already rendered by employees. LEASES French law does not require capitalization of leases for financial reporting purposes. US GAAP required the capitalization of those leases in which substantially all the risks and benefits of ownership are transferred to the lessee. 36 37 OGF/PFG GROUP PRESENTATION The classification of certain items in, and the format of OGF's consolidated financial statements, vary to some extent from US GAAP. In addition, US GAAP requires a consolidated statement of cash flow instead of the consolidated statement of source and application of funds used by the OGF. The most significant reporting and presentation practices followed by the OGF Group which differ from US GAAP are described below: - AUXIA, the insurance group controlled by OGF, is accounted for by the equity method. Under US GAAP, majority-owned insurance companies are fully consolidated. - The French definition of the term "extraordinary item" is broader than in US GAAP. Also, under French GAAP, extraordinary items are not presented net of tax in the income statement. - Under French GAAP, negative goodwill can be classified as a liability. Under US GAAP, negative goodwill is written off proportionately against identifiable long-term assets acquired before a deferred credit for any remaining negative goodwill can be recorded. 37 38 OGF/PFG GROUP 3. - INTANGIBLE ASSETS: (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
- ---------------------------------------------------------------------------------------------------------------------------------- NEWLY ACQUISITIONS MODIFICATION IN DISPOSALS JANUARY 1, CONSOLIDATED NEW LOANS CONSOLIDATION AND OTHER DEC. 31 GROSS-VALUE 1994 COMPANIES ETC... PERIMETER REPAYMENTS VARIATIONS 1994 - ---------------------------------------------------------------------------------------------------------------------------------- Concessions, patents, licences 8,258 40 (7,515) (673) 110 Commercial goodwill 161,747 538 7,603 (27,883) (8,619) 542 133,928 Goodwill 417,227 4,341 10,488 (396,133) 1,574 37,497 Other 13,900 863 1,411 (142) (508) 572 16,096 - ---------------------------------------------------------------------------------------------------------------------------------- 601,132 5,742 19,542 (431,673) (9,127) 2,015 187,631 - ----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------- NEWLY MODIFICATION IN DISPOSALS JANUARY 1, CONSOLIDATED CONSOLIDATION AND OTHER DEC. 31 AMORTIZATION 1994 COMPANIES AMORTIZATION PERIMETER REPAYMENTS DEDUCTIONS 1994 - ---------------------------------------------------------------------------------------------------------------------------------- Concessions, patents, licences 2,552 32 (2,214) (338) 32 Commercial goodwill 38,785 8,474 (7,868) (2,847) (2) 36,542 Goodwill 71,197 334 2,363 (66,689) 96 7,301 Other 10,732 551 2,755 (55) (481) 284 13,786 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL 123,266 885 13,624 (76,826) (3,328) 40 57,661 - ---------------------------------------------------------------------------------------------------------------------------------- NET VALUE 477,866 4,857 5,918 (354,847) (5,799) 1,975 129,970 - ----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------- NEWLY ACQUISITIONS DISPOSALS JANUARY 1, CONSOLIDATED NEW LOANS OTHER AND OTHER DEC. 31 GROSS VALUE 1993 COMPANIES ETC. ADDITIONS REPAYMENTS DEDUCTIONS 1993 - ---------------------------------------------------------------------------------------------------------------------------------- Formation expenses 60 31 (60) (31) 0 Concessions, patents, licences 8,042 216 8,258 Commercial goodwill 130,186 18,432 20,923 619 (8,072) (341) 161,747 Goodwill 282,601 14,428 127,452(*) (6,377) (877) 417,227 Other 11,082 3,045 19 (131) (115) 13,900 - ---------------------------------------------------------------------------------------------------------------------------------- 431,971 32,891 151,636 638 (14,640) (1,364) 601,132 - ----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------- NEWLY DISPOSALS JANUARY 1, CONSOLIDATED OTHER AND OTHER DEC. 31 AMORTIZATION 1993 COMPANIES AMORTIZATION ADDITIONS REPAYMENTS DEDUCTIONS 1993 - ---------------------------------------------------------------------------------------------------------------------------------- Formation expenses 60 7 371 (60) (378) 0 Concessions, patents, licences 1,523 1,028 1 2,552 Commercial goodwill 22,481 4,750 13,410 202 (2,056) (2) 38,785 Goodwill 51,914 19,283 71,197 Other 7,571 3,286 (85) (40) 10,732 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL 83,549 4,757 37,007 574 (2,201) (420) 123,266 - ---------------------------------------------------------------------------------------------------------------------------------- NET VALUE 348,422 28,134 114,629 64 (12,439) (944) 477,866 - ----------------------------------------------------------------------------------------------------------------------------------
(*) Includes 123,908 from the conversion of CPS owned by Plantsbrook. 38 39 OGF/PFG GROUP 4. - TANGIBLE ASSETS: (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
- ---------------------------------------------------------------------------------------------------------------------------------- MODIFICATION NEWLY ACQUISITIONS IN DISPOSALS JANUARY 1, CONSOLIDATED NEW LOANS CONSOLIDATION AND OTHER DEC. 31 GROSS-VALUE 1994 COMPANIES ETC... PERIMETER REPAYMENTS VARIATIONS 1994 - ---------------------------------------------------------------------------------------------------------------------------------- Land 137,757 2,170 (42,368) (2,756) 91 94,894 Buildings 882,518 14,653 46,477 (207,400) (11,304) 29,404 754,348 Installations 179,794 2,451 22,702 (140) (9,925) (8,618) 186,264 Other 658,153 6,302 56,748 (178,293) (26,184) 33,620 550,346 In progress 38,952 36,799 (53,254) 22,497 - ---------------------------------------------------------------------------------------------------------------------------------- 1,897,174 23,406 164,896 (428,201) (50,169) 1,243 1,608,349 - ----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------- MODIFICATION NEWLY IN DISPOSALS JANUARY 1, CONSOLIDATED CONSOLIDATION AND OTHER DEC. 31 AMORTIZATION 1994 COMPANIES AMORTIZATION PERIMETER REPAYMENTS DEDUCTIONS 1994 - ---------------------------------------------------------------------------------------------------------------------------------- Land 222 (60) (3) 159 Buildings 291,744 2,135 34,332 (22,718) (6,906) 441 299,028 Installations 113,093 1,392 19,670 (41) (7,270) (8,249) 118,595 Other 336,922 4,403 69,487 (98,486) (22,427) 9,038 298,937 In progress - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL 741,981 7,930 123,489 (121,305) (36,606) 1,230 716,719 - ---------------------------------------------------------------------------------------------------------------------------------- NET VALUE 1,155,193 15,476 41,407 (306,896) (13,563) 13 891,630 - ----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------- NEWLY ACQUISITIONS DISPOSALS JANUARY 1, CONSOLIDATED NEW LOANS OTHER AND OTHER DEC, 31 GROSS VALUE 1993 COMPANIES ETC. ADDITIONS REPAYMENTS DEDUCTIONS 1993 - ---------------------------------------------------------------------------------------------------------------------------------- Land 91,474 37,058 6,825 12,098 (9,490) (208) 137,757 Buildings 636,855 183,689 78,378 19,241 (31,340) (4,305) 882,518 Installations 166,615 794 16,821 1,801 (4,223) (2,014) 179,794 Other 408,729 163,738 114,393 18,698 (46,591) (814) 658,153 In progress 35,329 3,608 1,242 (1,227) 38,952 - ---------------------------------------------------------------------------------------------------------------------------------- 1,339,002 385,279 220,025 53,080 (91,644) (8,568) 1,897,174 - ----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------- NEWLY DISPOSALS JANUARY 1, CONSOLIDATED OTHER AND OTHER DEC. 31 AMORTIZATION 1993 COMPANIES AMORTIZATION ADDITIONS REPAYMENTS DEDUCTIONS 1993 - ---------------------------------------------------------------------------------------------------------------------------------- Land 163 44 6 9 222 Buildings 244,130 16,715 39,116 2,777 (10,526) (468) 291,744 Installations 95,422 558 20,829 522 (3,427) (811) 113,093 Other 192,345 82,115 86,793 6,207 (29,821) (717) 336,922 In progress 0 0 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL 532,060 99,432 146,744 9,515 (43,774) (1,996) 741,981 - ---------------------------------------------------------------------------------------------------------------------------------- NET VALUE 806,942 285,847 73,281 43,565 (47,870) (6,572) 1,155,193 - ---------------------------------------------------------------------------------------------------------------------------------- 39
40 OGF/PFG GROUP 5.- INVESTMENTS: (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
- ---------------------------------------------------------------------------------------------------------------------------------- MODIFICATION NEWLY ACQUISITIONS IN DISPOSALS JANUARY 1, CONSOLIDATED NEW LOANS CONSOLIDATION AND OTHER DEC. 31 GROSS-VALUE 1994 COMPANIES ETC... PERIMETER REPAYMENTS VARIATIONS 1994 - ---------------------------------------------------------------------------------------------------------------------------------- Non consolidated investments 77,419 12,327 5,920 (5,422) (16,934) 431 73,741 and related receivables Companies consolidated by the 90,976 (15,694) 75,282 equity method Loans 8,100 251 (815) (6,129) 21 1,428 Other 17,903 1,031 2,907 (513) (2,105) (746) 18,477 - ---------------------------------------------------------------------------------------------------------------------------------- 194,398 13,358 9,078 (6,750) (25,168) (15,988) 168,928 - ----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------- MODIFICATION NEWLY IN DISPOSALS JANUARY 1, CONSOLIDATED CONSOLIDATION AND OTHER DEC. 31 PROVISIONS FOR LOSS IN VALUE 1994 COMPANIES AMORTIZATION PERIMETER REPAYMENTS DEDUCTIONS 1994 - ---------------------------------------------------------------------------------------------------------------------------------- Non consolidated investments 24,619 2,883 (3,966) 23,536 and related receivables Loans and other 1,151 365 (199) (273) 1,044 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL 25,770 3,248 (199) (4,239) 24,580 - ---------------------------------------------------------------------------------------------------------------------------------- NET VALUE 168,628 13,358 5,830 (6,551) (20,929) (15,988) 144,348 - ----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------- NEWLY ACQUISITIONS DISPOSALS JANUARY 1, CONSOLIDATED NEW LOANS OTHER AND OTHER DEC. 31 GROSS VALUE 1993 COMPANIES ETC. ADDITIONS REPAYMENTS DEDUCTIONS 1993 - ---------------------------------------------------------------------------------------------------------------------------------- Non consolidated investments and related receivables 100,396 1,107 6,132 459 (11,431) (19,244) 77,419 Companies consolidated by the equity method(*) 63,246 27,730 90,976 Loans 7,581 1,852 30 (1,095) (268) 8,100 Other 187,354 26 3,633 1,798 (3,352) (171,556) 17,903 - ---------------------------------------------------------------------------------------------------------------------------------- 358,577 1,133 11,617 30,017 (15,878) (191,068) 194,398 - ----------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------- NEWLY ACQUISITIONS DISPOSALS PROVISIONS FOR JANUARY 1, CONSOLIDATED NEW LOANS OTHER AND OTHER DEC. 31 LOSS IN VALUE 1993 COMPANIES ETC. ADDITIONS REPAYMENTS DEDUCTIONS 1993 - ---------------------------------------------------------------------------------------------------------------------------------- Non consolidated investments and related receivables 30,543 2,548 243 (8,715) 24,619 Loans and other 43,750 481 251 (43,307) (24) 1,151 - ---------------------------------------------------------------------------------------------------------------------------------- TOTAL 74,293 3,029 494 (52,022) (24) 25,770 - ---------------------------------------------------------------------------------------------------------------------------------- NET VALUE 284,284 1,133 8,588 29,523 36,144 (191,044) 168,628 - ----------------------------------------------------------------------------------------------------------------------------------
* The Plantsbrook Group is fully consolidated in 1993 40 41 OGF.PFG GROUP 6.- STOCKS: (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
---------------------------------------------------------------------------------------- 1994 1993 ---------------------------------------------------------------------------------------- Raw materials and supplies 36,417 38,085 Production in progress 637 1,706 Intermediate and finished products 42,317 47,311 Goods for resale 148,614 180,112 ---------------------------------------------------------------------------------------- TOTAL GROSS 227,985 267,214 PROVISIONS FOR LOSS OF VALUE (11,965) (18,086) ---------------------------------------------------------------------------------------- TOTAL NET 216,020 249,128 ---------------------------------------------------------------------------------------- ANALYSIS BY SECTOR: Funeral services 129,398 134,131 Woodworking 78,008 87,074 International activity 8,614 16,324 Miscellaneous activities - 11,599 ---------------------------------------------------------------------------------------- TOTAL NET 216,020 249,128 ----------------------------------------------------------------------------------------
7.- DEBTORS: (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
---------------------------------------------------------------------------------------- 1994 1993 ---------------------------------------------------------------------------------------- CUSTOMER ACCOUNTS BY SECTOR: Funeral services 226,167 257,987 Woodworking 18,967 14,233 International activity 19,021 84,730 Miscellaneous activities - 6,887 ---------------------------------------------------------------------------------------- Total net 264,155 363,837 Provisions for bad debt (25,922) (38,826) ---------------------------------------------------------------------------------------- Total customer accounts net 238,233 325,011 Other debtors 143,797 135,584 ---------------------------------------------------------------------------------------- TOTAL DEBTORS 382,030 460,595 ----------------------------------------------------------------------------------------
41 42 OGF/PFG GROUP 8.- SHORT-TERM INVESTMENTS: (EXPRESSED IN MILLIONS OF FRENCH FRANCS)
- ----------------------------------------------------------------------------------------------- 1994 1993 - ----------------------------------------------------------------------------------------------- Investment funds representative of short-term cash management and holdings in various shares and unit trusts (total market value of FRF 49.1 millions for 1994 and FRF 51.9 millions for 1993) 47.9 50.5 - -----------------------------------------------------------------------------------------------
42 43 OGF/PFG GROUP 9.- MOVEMENTS IN CAPITAL AND RESERVES: (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
1994 1993 ---------------------------------------------------------------------------------------------------------------------- At beginning of year 1,220,559 1,116,205 Increase in capital (including issue premium) 275 29,249 Dividends paid (64,493) (57,406) Group profit for year 297,866 128,267 Other (310) 4,244 ---------------------------------------------------------------------------------------------------------------------- AT END OF YEAR 1,453,897 1,220,559 ----------------------------------------------------------------------------------------------------------------------
10.- OTHER RESERVES: (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
DECEMBER 31, DECEMBER 31, 1994 1993 ---------------------------------------------------------------------------------------------------------------------- Legal reserve 24,337 23,919 General reserves 55,694 45,694 Long-term capital gains 175,398 167,376 Capital reserves on consolidation 340,837 299,669 Other 43,725 39,018 ---------------------------------------------------------------------------------------------------------------------- TOTAL 639,991 575,676 ----------------------------------------------------------------------------------------------------------------------
43 44 OGF/PFG GROUP 11.- PROVISIONS FOR LIABILITIES AND CHARGES: (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
DECEMBER 31, DECEMBER 31, 1994 1993 ---------------------------------------------------------------------------------------------------------------------- PROVISIONS FOR LIABILITIES: Provision for exchange rate losses on foreign investments 1,496 2,352 Provision for Group reorganization 12,000 12,000 Provision for liability on subsidiaries (1) - 32,000 Provision for liabilities on employees 10,004 6,980 Other uncertainties (2) 47,061 28,149 Others 9,223 12,221 PROVISIONS FOR CHARGES: Retirement benefits 17,236 17,113 Cash collected in advance from customers 13,806 12,901 Provision for Group reorganization 3,835 7,397 Other 15,135 10,982 ---------------------------------------------------------------------------------------------------------------------- NEGATIVE GOODWILL 21,923 23,908 ---------------------------------------------------------------------------------------------------------------------- TOTAL 151,719 166,003 ----------------------------------------------------------------------------------------------------------------------
(1) The provision for liabilities on subsidiaries for 32.000 thousand French francs accrued for in 1993 has been entirely recovered in 1994 to compensate for losses generated by the sale of Gemroc. (2) The provision for other liabilities is principally aimed at covering risks arising from competition as well as those that may arise due to the tax review for the period 1991 to 1993 that is currently in progress. 44 45 OGF/PFG GROUP 12.- LONG TERM DEBTS: (EXPRESSED IN THOUSANDS OF FRENCH FRANCS) A/ FINANCIAL DEBTS:
DECEMBER 31, DECEMBER 31, 1994 1993 ---------------------------------------------------------------------------------------------------------------------- Bank loans and borrowings: 19,514 92,940 ---------------------------------------------------------------------------------------------------------------------- Convertible bonds: - 1,256 ---------------------------------------------------------------------------------------------------------------------- Other financial debt: 69,721 195,920 Deferred income taxes: 12,623 15,007 ---------------------------------------------------------------------------------------------------------------------- 101,858 305,123 B/ OTHER NON FINANCIAL: 31,109 16,659 ------------------- ---------------------------------------------------------------------------------------------------------------------- TOTAL 132,967 321,782 ----------------------------------------------------------------------------------------------------------------------
13.- COMMITMENTS AND CONTINGENCIES: (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
---------------------------------------------------------------------------------------------------------------------- DECEMBER 31, 1994 ---------------------------------------------------------------------------------------------------------------------- Given: Guarantees given to credit institutions FRF 23,6 million Commitments under lease-purchase contracts FRF 65,9 million including FRF 37,0 million relating to real estate Retirement indemnities for OFISA and OFT who have not subscribed an insurance contract FRF 3,8 million Retirement indemnities for other companies in the group who have FRF 66,7 million subscribed life insurance contracts with Auxia FRF 1,9 million concern 1994 payments Received: Usage value of leased assets FRF 54,5 million including FRF 29,9 million relating to real estate Warranties received (these mainly concern State contracts) FRF 5,1 million ---------------------------------------------------------------------------------------------------------------------- ----------------------------------------------------------------------------------------------------------------------
45 46 OGF/PFG GROUP 14.- TURNOVER ANALYSIS BY ACTIVITY AND GEOGRAPHIC LOCATION: (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
------------------------------------------------------------------------------------------------------- 1994 1993 ------------------------------------------------------------------------------------------------------- Funeral services France 2,525,679 2,601,030 Woodworking 86,137 78,981 Financial activity 42 472 International 141,588 554,282 Miscellaneous activities 35,084 ------------------------------------------------------------------------------------------------------- 2,753,446 3,269,849 France 2,571,120 2,680,418 Europe except France 134,598 546,680 Outside Europe 47,728 42,751 2,753,446 3,269,849 -------------------------------------------------------------------------------------------------------
15.- OPERATING COSTS AND EXPENSES: (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
------------------------------------------------------------------------------------------------------- 1994 1993 ------------------------------------------------------------------------------------------------------- Consumption of materials or services purchased 1,138,447 1,389,836 Personnel cost 1,125,876 1,260,510 Taxes (other than income taxes) 125,372 144,126 Depreciation, amortization and provisions 158,616 196,469 Other 19,497 12,841 ------------------------------------------------------------------------------------------------------- 2,567,808 3,003,782 -------------------------------------------------------------------------------------------------------
46 47 OGF/PFG GROUP 16.- FINANCIAL INCOME AND EXPENSES: (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
1994 1993 ------------------------------------------------------------------------------------------------------- Dividends and interest income 4,351 3,214 Gains on sales of marketable securities Other 40,936 39,377 ------------------------------------------------------------------------------------------------------- TOTAL FINANCIAL INCOME 45,287 42,591 ------------------------------------------------------------------------------------------------------- Interest expense 9,147 34,248 Losses on sales of marketable securities Other 15,002 7,972 ------------------------------------------------------------------------------------------------------- TOTAL FINANCIAL EXPENSES 24,149 42,220 FINANCIAL INCOME NET 21,138 371
47 48 OGF/PFG GROUP 17.- TAXATION: (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
A/ PROFIT AND LOSS ACCOUNT 1994 1993 ------------------------------------------------------------------------------------------------------- Currently payable 108,417 118,196 Deferred (1,546) 3,214 ------------------------------------------------------------------------------------------------------- 106,871 121,410 -------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------- B/ DEFERRED INCOME TAXES DECEMBER 31, DECEMBER 31, 1994 1993 ------------------------------------------------------------------------------------------------------- Assets: 12,745 13,949 Liabilities: (12,623) (15,061) ------------------------------------------------------------------------------------------------------- NET ASSET BALANCE (LIABILITY) 122 (1,112) -------------------------------------------------------------------------------------------------------
18.- PERSONNEL:
------------------------------------------------------------------------------------------------------- DECEMBER 31 DECEMBER 31 1994 1993 ------------------------------------------------------------------------------------------------------- Funeral services 5,734 5,887 International activity 217 1,486 Coffins and Wood working 347 353 Property and finance 6 6 Miscellaneous activities - 15 ------------------------------------------------------------------------------------------------------- TOTAL 6,304 7,747 -------------------------------------------------------------------------------------------------------
48 49 BARBIER FRINAULT & ASSOCIES PGA Membre d'Arthur Andersen & Co, SC Tour Franklin Tour Gan - Cedex 13 101, Terrasse Boieldieu - Cedex 11 92082 Paris - La Defense 2 92082 Paris - La Defense 8 We have audited the accompanying consolidated balance sheets of O.G.F. Group and subsidiaries as of December 31, 1994 and 1993 and the related consolidated statements of profit and loss and source and application of funds for the years then ended expressed in French francs. Our audits were made in accordance with generally accepted auditing standards. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and related schedules. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the aforementioned consolidated financial statements present fairly the financial position of O.G.F. Group and subsidiaries as of December 31, 1994 and 1993 and the results of their operations for the years then ended in conformity with French generally accepted accounting principles which differ in certain respects from those followed in the United States (see note 2 to the consolidated financial statements). The accompanying consolidated financial statements have been translated from those issued in French into the English language. Paris - La Defense, France, April 6, 1995. /s/ CHRISTIAN CHOCHON /S/ BRUNO BIZET - --------------------------- --------------- BARBIER FRINAULT & ASSOCIES PGA Christian CHOCHON Bruno BIZET 49 50 OGF/PFG GROUP CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1995 (UNAUDITED) (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
- --------------------------------------------------------------- June 30, 1995 - --------------------------------------------------------------- FIXED ASSETS Intangible Assets 127,045 Tangible Assets 886,410 Investments 163,418 - --------------------------------------------------------------- 1,176,873 - --------------------------------------------------------------- CURRENT ASSETS Stocks 224,250 Debtors 397,519 Investments 39,004 Cash Investments 944,926 - --------------------------------------------------------------- 1,605,699 - --------------------------------------------------------------- CURRENT LIABILITIES Bank loans and overdrafts 10,091 Other financial debt 4,665 Trade and other creditors 598,761 - --------------------------------------------------------------- 613,517 - --------------------------------------------------------------- NET CURRENT ASSETS 992,182 - --------------------------------------------------------------- Total assets less current liabilities 2,169,055 - --------------------------------------------------------------- Long-term debt 123,241 - --------------------------------------------------------------- Provisions for liabilities and charges 158,447 - --------------------------------------------------------------- TOTAL ASSETS LESS LIABILITIES 1,887,367 - ---------------------------------------------------------------
50 51 OGF/PFG GROUP CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1995 (UNAUDITED) (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
June 30, 1995 - ------------------------------------------------------------------- CAPITAL AND RESERVES Called up share capital 243,483 Share premium account 255,914 Revaluation reserve 16,643 Other reserves 867,368 Profit and loss account 77,852 - ------------------------------------------------------------------- Total group's share 1,461,260 - ------------------------------------------------------------------- Minority interests 426,107 - ------------------------------------------------------------------- - ------------------------------------------------------------------- Total stockholders' equity and minority interests 1,887,367 - -------------------------------------------------------------------
51 52 OGF/PFG GROUP CONSOLIDATED PROFIT AND LOSS ACCOUNT (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 1995 (Expressed in thousands of French Francs)
- --------------------------------------------------------------------------- June 30, 1995 - --------------------------------------------------------------------------- TURNOVER 1,387,595 Other operating income 4,491 - --------------------------------------------------------------------------- 1,392,086 - --------------------------------------------------------------------------- OPERATING COSTS AND EXPENSES 1,276,995 - --------------------------------------------------------------------------- OPERATING PROFIT 115,091 Share of profit of associated companies 8,531 Financial income, net 31,779 - --------------------------------------------------------------------------- PROFIT ON ORDINARY ACTIVITIES BEFORE EXCEPTIONAL ITEMS AND TAXATION 155,401 Exceptional profit /loss (12,302) - --------------------------------------------------------------------------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 143,099 Taxation 46,621 - --------------------------------------------------------------------------- PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 96,478 Minority interests in profit 18,626 - --------------------------------------------------------------------------- Profit for the year 77,852 - ---------------------------------------------------------------------------
52 53 OGF/PFG GROUP STATEMENT OF SOURCE AND APPLICATION OF FUNDS (UNAUDITED) FOR THE SIX MONTHS ENDED JUNE 30, 1995 (EXPRESSED IN THOUSANDS OF FRENCH FRANCS)
- ------------------------------------------------------------------------------------- June 30, 1995 - ------------------------------------------------------------------------------------- SOURCE OF FUNDS FROM OPERATIONS 157,612 OTHER SOURCES: Disposals of fixed assets investments 1,437 Disposals of tangible and intangible fixed assets 31,690 Increase in long-term financial debt 1,445 Other, net 15,877 - ------------------------------------------------------------------------------------- TOTAL SOURCES OF FUNDS 208,061 - ------------------------------------------------------------------------------------- APPLICATION OF FUNDS : Acquisition of tangible fixed assets 72,681 Acquisition of intangible fixed assets 4,142 Acquisition of long term investments 13,611 Dividends paid 71,827 Dividends paid to minority interests 15,790 Decrease in long term financial debt 6,180 Other, net 19,190 - ------------------------------------------------------------------------------------- TOTAL APPLICATIONS OF FUNDS 203,421 - ------------------------------------------------------------------------------------- (DECREASE) INCREASE IN WORKING CAPITAL 4,640 - ------------------------------------------------------------------------------------- ARISING FROM MOVEMENTS IN: Net liquid funds (26,492) Other current assets/liabilities 31,132 - -------------------------------------------------------------------------------------
53 54 CONSOLIDATED FINANCIAL STATEMENTS GIBRALTAR MAUSOLEUM CORPORATION AND SUBSIDIARIES YEAR ENDED SEPTEMBER 30, 1994 WITH REPORT OF INDEPENDENT AUDITORS 54 55 Gibraltar Mausoleum Corporation and Subsidiaries Consolidated Financial Statements Year Ended September 30, 1994 CONTENTS Report of Independent Auditors . . . . . . . . . . . . . . . . . . . 56 Consolidated Balance Sheet . . . . . . . . . . . . . . . . . . . . . 57 Consolidated Statement of Income and Retained Earnings . . . . . . . 59 Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . 60 Notes to Consolidated Financial Statements . . . . . . . . . . . . . 61
55 56 Report of Independent Auditors Board of Directors Gibraltar Mausoleum Corporation We have audited the accompanying consolidated balance sheet of Gibraltar Mausoleum Corporation and subsidiaries as of September 30, 1994, and the related consolidated statements of income and retained earnings and cash flows for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Gibraltar Mausoleum Corporation and subsidiaries at September 30, 1994, and the consolidated results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ ERNST & YOUNG LLP December 22, 1994 56 57 Gibraltar Mausoleum Corporation and Subsidiaries Consolidated Balance Sheet September 30, 1994 ASSETS Cash $ 1,494,385 Receivables (Notes 4 and 6): Installment contracts receivable for cemetery and funeral home property and merchandise, less unearned interest of $13,545,956 61,609,286 Commissions and management fees 1,907,627 Allowance for contract cancellations (5,364,020) ------------- 58,152,893 Construction billings receivable 1,512,554 Due from related parties 7,834,410 Other 2,052,566 ------------- 69,552,423 Inventories: Mausoleum spaces, cemetery lots and merchandise 12,035,595 Cost of mausoleums under construction 985,822 ------------- 13,021,417 Costs and estimated earnings of uncompleted mausoleum construction contracts in excess of related billings 1,564,726 Investments and other assets: Investment in undeveloped cemetery land 15,456,466 Funeral home trust acquisition costs, less accumulated amortization of $1,104,346 1,542,139 Funeral home trust accumulated income 3,165,053 Amounts from shareholders, officers and employees 90,985 Intangible and other assets, less accumulated amortization of $2,778,935 6,615,849 Refundable federal income taxes 1,040,439 Cost in excess of net assets acquired, less accumulated amortization of $1,185,191 6,486,360 ------------- 34,397,291 Property and equipment (Note 4): Land and buildings 14,376,596 Cemetery improvements 6,335,887 Equipment 11,556,026 Funeral home construction in progress 1,668,124 Accumulated depreciation (11,517,573) ------------- 22,419,060 ------------- $ 142,449,302 =============
57 58 LIABILITIES AND SHAREHOLDERS' EQUITY Note and accounts payable and accrued expenses: Payable to banks under revolving loan agreement (Note 4) $ 17,200,000 Accounts payable 4,829,826 Accrued salaries, wages and commissions 2,740,192 Payroll taxes and amounts withheld from payroll 160,213 State and local taxes and interest 5,185,229 Deferred income on sales of preneed funeral services 6,184,608 Amounts due to shareholders, officers and employees 6,488,236 Minority interest 169,319 ------------ 42,957,623 Billings of uncompleted mausoleum construction contracts in excess of costs and estimated earnings 298,722 Estimated costs and deferred income for spaces sold in mausoleums for which construction has not been completed, less trust fund deposits of $3,547,741 (Note 7) 5,665,202 Deferred merchandise liability, less trust fund deposits of $40,354,220 5,045,898 Amounts payable to perpetual care funds 5,095,445 Deferred income taxes (Note 3) 13,918,912 Long-term debt (Note 4) 23,062,590 Shareholders' equity (Notes 4 and 6): Common Stock, par value $1 per share: Class A (voting)--authorized 1,250,000 shares; issued 79,325 shares 79,325 Class B (nonvoting)--authorized 3,750,000 shares; issued 223,815 shares 223,815 Retained earnings 46,101,770 ------------ 46,404,910 ------------ $142,449,302 ============
See accompanying notes. 58 59 Gibraltar Mausoleum Corporation and Subsidiaries Consolidated Statement of Income and Retained Earnings Year Ended September 30, 1994 Income: Sales $ 58,230,821 Commissions and management fees (Note 6) 2,842,568 Interest and dividends 12,233,567 Revenues from construction contracts (Note 6) 13,107,933 Other operating income 7,146,803 ------------- 93,561,692 Costs and expenses: Cost of sales 16,324,017 Selling 24,449,548 Cemetery operations and maintenance 9,640,285 Cost of construction contracts (Note 6) 12,638,898 Administrative and general 13,429,653 Interest 3,097,284 Amortization 1,248,649 Depreciation 2,228,569 ------------- 83,056,903 ------------- Income before income taxes 10,504,789 Income taxes (Note 3) 3,977,876 ------------- Net income 6,526,913 Retained earnings at beginning of year 43,850,791 Less retirement of Common Stock 4,275,934 ------------- Retained earnings at end of year $ 46,101,770 =============
See accompanying notes. 59 60 Gibraltar Mausoleum Corporation and Subsidiaries Consolidated Statement of Cash Flows Year Ended September 30, 1994 OPERATING ACTIVITIES Net income $ 6,526,913 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,477,218 Provision for contract cancellations 394,200 Deferred income taxes (476,261) Gain on sale of equipment (392,122) Changes in operating assets and liabilities net of effects of acquisitions: Receivables (6,293,652) Inventories and other assets 2,573,457 Accounts payable and accrued expenses 3,305,325 Refundable federal income taxes (735,439) ------------- Net cash provided by operating activities 8,379,639 INVESTING ACTIVITIES Purchase of property and equipment (5,973,115) Net cash paid for purchase of businesses (2,902,213) Proceeds from sale of property and equipment 3,077,151 ------------- Net cash used in investing activities (5,798,177) FINANCING ACTIVITIES Proceeds from shareholders, officers and employee advances 4,059,570 Net proceeds on revolving line of credit 2,100,000 Proceeds from long-term borrowings 238,711 Payments on long-term borrowings (7,205,434) Purchase of Common Stock (1,877,428) ------------- Net cash used in financing activities (2,684,581) ------------- Decrease in cash (103,119) Cash at beginning of year 1,597,504 ------------- Cash at end of year $ 1,494,385 =============
See accompanying notes. 60 61 Gibraltar Mausoleum Corporation and Subsidiaries Notes to Consolidated Financial Statements September 30, 1994 1. SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION The consolidated financial statements include the accounts of Gibraltar Mausoleum Corporation and Subsidiaries (Gibraltar) after elimination of intercompany accounts and transactions. RECEIVABLES Installment contracts receivable, arising primarily from the preneed sales of cemetery property and merchandise, are generally due in monthly installments over periods of one to six years. The contracts require a cash down payment and generally include simple interest, computed at rates ranging from 9 3/4% to 13 3/4% per annum, which is transferred to income principally on the sum-of-the-years-digits method. The allowance for contract cancellations is computed primarily on the basis of historical experience. INVENTORIES, ESTIMATED COSTS AND DEFERRED INCOME ON MAUSOLEUM CONSTRUCTION Inventories of mausoleum spaces, cemetery lots and merchandise are recorded principally at average cost which is not in excess of market. Estimated costs and deferred construction income for spaces sold in mausoleums for which construction has not been completed are computed based upon costs incurred and to be incurred as estimated in the year of the first crypt sale and recorded as a liability. Unsold crypts are transferred to inventory at cost when construction is completed. Construction of mausoleums generally commences two to four years from the date of the first crypt sale. CONSTRUCTION CONTRACTS Income from mausoleum construction contracts is recorded on the percentage-of- completion method. Under this method, income is recognized as work on the contract progresses. The normal construction period for a mausoleum is 3-12 months. 61 62 Gibraltar Mausoleum Corporation and Subsidiaries Notes to Consolidated Financial Statements (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INTANGIBLE ASSETS Intangible assets have arisen in connection with the acquisition of various companies. These assets are being amortized using the straight-line method over their estimated useful lives ranging from 5 to 13 years. COST IN EXCESS OF NET ASSETS ACQUIRED Cost in excess of net assets acquired is being amortized on a straight-line basis over a forty-year period. PRENEED FUNERAL SALES Sales of preneed funeral services and certain funeral merchandise and the receivables related thereto are not recorded until the service and merchandise are provided. State laws require that 70% to 100% of amounts received be deposited into trust funds for the purchase of the merchandise and services. The funds are withdrawn from the trust at the time the merchandise and services are provided and the sale is recognized. PROPERTY AND EQUIPMENT Property and equipment are recorded at cost. Depreciation of buildings and equipment is provided on a straight-line basis over the expected useful lives of the respective assets. DEFERRED MERCHANDISE LIABILITY Cemetery merchandise and services may be sold on a preneed basis. At the time of sale and receipt of the down payment, the balance of the contract is recorded as a receivable and the selling price is recorded as a sale. The estimated cost of merchandise and services which have been sold but not delivered is charged to cost of sales and recorded as a liability. Certain states require the deposit of a portion of the cash received into an escrow fund. The funds are withdrawn at the time the merchandise is purchased or the services are performed. These deposits have been offset against the related liabilities, as they are restricted in usage to satisfaction of these liabilities. 62 63 Gibraltar Mausoleum Corporation and Subsidiaries Notes to Consolidated Financial Statements (continued) 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) AMOUNTS PAYABLE TO PERPETUAL CARE FUNDS Amounts due to perpetual care funds are recorded on the accrual basis. Deposits are made periodically to the funds as collections are received on the installment contracts. The perpetual care funds are irrevocably set aside for the benefit of lot and crypt owners to insure the maintenance of each cemetery. The funds are invested by the respective trustees and investment advisors who periodically remit the income of the funds to each cemetery for its cost of operation and maintenance. The market value of such funds was $36,374,000 at September 30, 1994. Perpetual care trust funds are not included in the consolidated financial statements. 2. ACQUISITIONS Gibraltar purchased (for cash and notes aggregating $5,600,000) the following operating cemeteries and funeral homes:
DATE NAME LOCATION TYPE - ----------------- ------------------------ -------------------- ------------ August 29, 1994 Greenlawn Memory Gardens N. Kingsville, OH Cemetery August 29, 1994 Knollwood Cemetery Mayfield Heights, OH Combinations March 23, 1994 Palms Memorial Park Sarasota, FL Cemetery
In connection with the acquisitions, Gibraltar acquired assets with fair values aggregating approximately $8,575,000 and assumed liabilities of $2,975,000. All acquisitions have been accounted for using the purchase method of accounting. The results of operations for all acquisitions since the dates of acquisition have been included in the consolidated results of operations. The following represents the unaudited pro forma results of operations for the year ended September 30, 1994 as if the business combinations had occurred as of October 1, 1993: Sales $61,075,228 =========== Net income $ 6,503,616 ===========
The pro forma results do not purport to present the Company's actual operating results had the acquisitions been made at the beginning of 1994, or the results that may be expected in the future. 63 64 Gibraltar Mausoleum Corporation and Subsidiaries Notes to Consolidated Financial Statements (continued) 3. INCOME TAXES Gibraltar accounts for income taxes using the liability method. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the deferred tax assets and liabilities as of September 30, 1994 are as follows: Deferred tax assets: Preneed funeral services $ 6,284,533 Contract cancellation reserve 1,541,865 Other 2,989,783 ----------- 10,816,181 Deferred tax liabilities: Deferred revenue 17,776,710 Undeveloped cemetery land 1,146,291 Depreciation 1,263,725 Other 4,548,367 ----------- 24,735,093 ----------- Net deferred tax liability $13,918,912 ===========
64 65 Gibraltar Mausoleum Corporation and Subsidiaries Notes to Consolidated Financial Statements (continued) 3. INCOME TAXES (CONTINUED) The following is a summary of the components of the provision for income taxes as of September 30, 1994: Federal: Current $3,807,176 Deferred (476,261) State 646,961 ---------- $3,977,876 ==========
The following is a reconciliation of income tax computed at the U.S. statutory tax rate to income tax expense for the year ended September 30, 1994.
AMOUNT PERCENTAGE ---------- ---------- Federal income tax at the statutory rate $3,676,676 35.0% Tax exempt interest and dividend exclusion (368,996) (3.5) State taxes, net of effect of federal income taxes 420,524 4.0 Other, net 249,672 2.4 ---------- ---- Income tax expense $3,977,876 37.9% ========== ====
Gibraltar made income tax payments in the amount of $6,112,438 in 1994. 4. DEBT ARRANGEMENTS Under the terms of a revolving loan agreement with its major banks, Gibraltar may borrow up to $25,000,000 at a variable rate (6.75% at September 30, 1994). The maturity date of the revolving loan agreement is February 28, 1996. This revolving loan agreement has a 3/8% annual facility fee. The loan agreement contains, among other terms, various requirements which include the maintenance of the net worth of Gibraltar above stated minimums. The agreement is collateralized by a pledge of certain receivables, assignment of certain management agreements, several funeral homes, assignment of common stock of some subsidiaries and the assignment of life insurance carried on the lives of two officers. Borrowings under the revolving loan total $17,200,000 at September 30, 1994. 65 66 Gibraltar Mausoleum Corporation and Subsidiaries Notes to Consolidated Financial Statements (continued) 4. DEBT ARRANGEMENTS (CONTINUED) Long-term debt of Gibraltar and its subsidiaries as of September 30, 1994 is summarized as follows: Floating Rate Option Note Issue payable $769,000 semi-annually, plus interest and fees at variable rates (5.18% at September 30, 1994). This loan expires and the remaining principal is due January 5, 1996, but may be extended at the lender's discretion. $17,692,000 7.5% notes payable to sellers incurred in the acquisition of cemeteries or funeral homes 2,983,139 Thirty other notes, with varying interest rates, payable over various terms, certain notes collateralized with common stock of subsidiaries and real and personal property. 2,387,451 ----------- $23,062,590 ===========
Maturities on long-term debt for the five fiscal years subsequent to September 30, 1994 are: 1995, $2,162,548; 1996, $2,169,242; 1997, $2,153,101; 1998, $2,094,266, 1999, $2,088,624. Interest paid during 1994 was $2,791,893. 66 67 Gibraltar Mausoleum Corporation and Subsidiaries Notes to Consolidated Financial Statements (continued) 5. PREARRANGED FUNERAL TRUSTS The following summary reflects cumulative prearranged funeral and cremation services and merchandise sold but not fulfilled which are not included in the consolidated financial statements as of September 30, 1994. Net services and merchandise sold but not fulfilled $ 66,985,000 Less amounts not collected 21,177,000 Less amounts collected not required to be trusted 6,185,000 ------------ Trust fund amounts (at cost) $ 39,623,000 ============
Amounts trusted are invested primarily in debt securities, equity securities and limited partnerships. Such investments are subject to the risk that the current market value could fall below the net book value. At September 30, 1994, the aggregate market value of these investments was $39,364,000. 6. RELATED PARTY TRANSACTIONS Gibraltar participates in management and sales agreements with several non-owned cemeteries for which certain officers of Gibraltar serve as officers and directors. As part of these agreements, Gibraltar maintains the financial records of these cemeteries and performs all administrative and sales duties. Gibraltar earned net management fee and commission income of approximately $1,495,000 in 1994, resulting from transactions with the non-owned cemeteries. Amounts receivable from these entities at September 30, 1994 totaled $3,378,000. Gibraltar has made net cash advances to other businesses in which certain officers and directors of Gibraltar have ownership interests and affiliated real estate partnerships which are classified in other accounts and notes receivable. Amounts receivable for these advances were $6,335,000 at September 30, 1994. Gibraltar has also guaranteed the repayment of a $2,000,000 mortgage loan for one of these businesses. Amounts due directly to/from shareholders, officers and employees are classified separately in the balance sheet. Gibraltar purchased and retired 4,000 shares of Class A common stock and 26,160 shares of Class B common stock for cash and notes totalling $4,306,094 during 1994. 67 68 Gibraltar Mausoleum Corporation and Subsidiaries Notes to Consolidated Financial Statements (continued) 6. RELATED PARTY TRANSACTIONS (CONTINUED) Gibraltar constructs mausoleums and funeral homes for its owned and managed cemeteries as well as for several cemeteries owned by certain officers and directors of Gibraltar. In 1994, revenues from construction contracts with these cemeteries were $5,914,000, and cost of construction contracts includes costs associated with these contracts in the amount of $5,615,000. 7. COMMITMENTS Gibraltar has accrued estimated costs for lawn crypts and crypts sold in mausoleums for which construction has not been completed. These estimated costs will be financed by existing receivables and collections from new sales contracts. 8. EMPLOYEES' PROFIT SHARING-SAVINGS PLANS The Company maintains defined contribution profit sharing-savings plans for all full-time employees who are at least 21 years of age and have been employed for one or more years. Participating employees may elect to redirect salary from 1% to 20% of the participant's eligible earnings before income taxes and contribute that amount to the Plans on behalf of the participant. The Company will make a matching contribution into the Plans in an amount equal to 40 percent of the first 2 percent and 25 percent of the next 2 percent of salary redirection. In addition, the Company may, by action of the Board of Directors, authorize profit sharing contributions to the Plans out of net profits. Gibraltar has recorded expense related to these plans amounting to $283,000 for 1994. 9. EVENT (UNAUDITED) SUBSEQUENT TO THE DATE OF THE INDEPENDENT AUDITOR'S REPORT. On June 7, 1995 Service Corporation International entered into an agreement to purchase Gibraltar, subject to approval by various government and regulatory agencies. 68 69 Unaudited Consolidated Financial Statements Gibraltar Mausoleum Corporation and Subsidiaries Six Months Ended March 31, 1995 69 70 GIBRALTAR MAUSOLEUM CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS SIX MONTHS ENDED MARCH 31, 1995 CONTENTS Consolidated Balance Sheet............................................ 71 Consolidated Statement of Income...................................... 73 Consolidated Statement of Cash Flows.................................. 74
70 71 GIBRALTAR MAUSOLEUM CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED BALANCE SHEET March 31, 1995 (Thousands) ASSETS Cash............................................................... $ 1,110 Receivables: Installments contracts receivable for cemetery and funeral home property and merchandise, less unearned interest and allowance for contract cancellations.............. 59,458 Construction billings receivable................................. 1,273 Other accounts and notes receivable.............................. 6,266 -------- 66,997 Inventories: Mausoleum spaces, cemetery lots and merchandise.................. 12,153 Cost of mausoleums under construction............................ 2,565 -------- 14,718 Costs and estimated earnings of uncompleted mausoleum construction contracts in excess of related billings................................................. 424 Investments and other assets: Investment in undeveloped cemetery land.......................... 15,396 Funeral home trust acquisition costs, less amoritization......... 1,171 Funeral home trust accumulated income............................ 3,878 Intangible and other assets, less amortization................... 7,364 Costs in excess of net assets acquired, less accumulated amortization....................................... 9,900 -------- 37,709 Property and equipment, less accumulated depreciation.............. 22,367 -------- $143,325 ========
71 72 LIABILITIES AND SHAREHOLDERS' EQUITY Note and accounts payable and accrued expenses: Payable to banks under revolving loan agreement.................... $ 15,700 Accounts payable and accrued liabilities........................... 10,755 Deferred income on sales of preneed funeral services............... 6,935 Amounts due to shareholders, officers and employees................ 2,406 Minority interest.................................................. 225 -------- 36,021 Billings of uncompleted mausoleum construction contracts in excess of costs and estimated earnings................ - Estimated costs and deferred income for spaces sold in mausoleums for which construction has not been completed, less trust fund deposits................................ 6,518 Deferred merchandise liability, less trust fund deposits............. 5,590 Amounts payable to perpetual care funds.............................. 5,640 Deferred income taxes................................................ 14,329 Long-term debt....................................................... 26,220 Shareholders' equity................................................. 49,007 -------- $143,325 ========
72 73 GIBRALTAR MAUSOLEUM CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENT OF INCOME For the Six Months Ended March 31, 1995 (Thousands) Income: Sales $29,723 Commissions and management fees 1,354 Interest and dividends 5,231 Net revenues from construction contracts 289 Other operating income 4,844 ------- 41,441 Costs and expenses: Cost of sales 8,700 Selling 13,140 Cemetery operations and maintenance 4,797 Administrative and general 6,844 Interest 1,909 Depreciation and amortization 1,561 ------- 36,951 ------- Income before income taxes 4,490 Income taxes 1,876 ------- Net income $ 2,614 =======
73 74 GIBRALTAR MAUSOLEUM CORPORATION AND SUBSIDIARIES UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS For the Six Months Ended March 31, 1995 (Thousands) OPERATING ACTIVITIES Net income $ 2,614 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,561 Provision for contract cancellations 463 Deferred income taxes 1,039 Gain on sale of equipment (349) Changes in operating assets and liabilities net of effects of acquisitions: Receivables 2,935 Inventories and other assets (5,843) Accounts payable and accrued expenses 602 -------- Net cash provided by operating activities 3,022 INVESTING ACTIVITIES Net change in property and equipment (954) -------- Net cash used in investing activities (954) FINANCING ACTIVITIES Payments to shareholders, officers and employee advances (731) Net payments on revolving line of credit (1,500) Proceeds from long-term borrowings 991 Payments on long-term borrowings (1,200) Purchase of Common Stock (12) -------- Net cash used in financing activities (2,452) -------- (Decrease) in cash (384) Cash at beginning of period 1,494 -------- Cash at end of period $ 1,110 ========
74 75 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. September 5, 1995 SERVICE CORPORATION INTERNATIONAL /s/ George R. Champagne -------------------------------------- George R. Champagne Senior Vice President Chief Financial Officer (Principal Financial Officer) 75 76 INDEX TO EXHIBITS
EXHIBIT DESCRIPTION -------- ----------- 2.1 - Memorandum of Understanding Relating to the Transfer of Shares, dated July 10, 1995, and Additional Memorandum of Understanding Relating to the Transfer of Shares, dated July 12, 1995, each of which is between Service Corporation International and Lyonnaise des Eaux. 23.1 - Consent of Barbier Frinault & Associes, Membres d'Arthur Andersen & Co, SC and PGA. 23.2 - Consent of Ernst & Young LLP.
EX-2.1 2 MEMORANDUM OF UNDERSTANDING 1 EXHIBIT 2.1 Translation Original in French July 10, 1995 MEMORANDUM OF UNDERSTANDING RELATING TO THE TRANSFER OF SHARES BETWEEN LYONNAISE DES EAUX AND ________________ (Purchaser) _______________, 1995 2 MEMORANDUM OF UNDERSTANDING RELATING TO THE TRANSFER OF SHARES BY AND BETWEEN THE UNDERSIGNED: LYONNAISE DE EAUX S.A., a societe anonyme [share corporation] with a registered capital of FRF 3,407,276,100, having its registered office at 72, avenue de la Liberte, 92000 Nanterre, registered in the Nanterre Commercial Registry under Number B 542 062 559, and represented by Mr. Philippe Brongniart, hereinafter referred to as "LDE"), Party of the first part AND SERVICE CORPORATION INTERNATIONAL, a Company registered under the Law of Texas, with a registered capital of $200,000,000, having its registered office at 1929 Allen Parkway, Houston, Texas 77019, PO Box 130548, or any affiliate it may substitute and represented by Mr. Robert L. Waltrip, the Chairman of the Board and Chief Executive Officer. hereinafter referred to as "Purchaser"), Party of the second part RECITALS Whereas, LDE holds 1,247,439 shares (hereinafter, the "Shares") representing approximately 51.23% of the capital of Omnium de Gestion et de Financement, a societe anonyme with a registered capital of 243,483,100 [French] francs, having its registered office at 66, boulevard Richard Lenoir, 75011 Paris, registered in the Paris Commercial Registry under Number 542 076 799 ("OGF") and whose shares are listed on the second market of the Paris Bourse; Whereas, OGF holds 1,224,626 shares representing approximately 64.98% of the capital of Pompes Funebres Generales, a societe anonyme with a registered capital of 94,220,300 [French] francs, having its registered office at 66, boulevard Richard Lenoir, 75011 Paris, 2 3 registered in the Paris Commercial Registry under Number 542 065 792 ("PFG") and whose shares are listed on the over the counter market of the Paris Bourse; Whereas, OGF and PFG hold certain assets and equity interests related to the operation of funeral services in France and abroad; And Whereas, Purchaser has informed LDE that it is interested in acquiring the totality of the Shares, and the Parties have entered into this Memorandum of Understanding in order to determine their respective commitments regarding the sale and purchase of the Shares. NOW, THEREFORE, IT HAS BEEN AGREED AS FOLLOWS: ARTICLE 1 - COMMITMENTS 1.1 COMMITMENTS OF THE PURCHASER The Purchaser undertakes to file a proposed tender offer for the totality of the equity securities in OGF ("OGF Tender Offer") according to Articles 5.2.1 and seq. of the General Regulations of the Conseil des Bourses de Valeurs (CBV), subject to the fulfillment of the conditions set forth in Article 2 below. The Purchaser reserves, in application of Article 5.2.5 of the General Regulations of the CBV, the right to withdraw its offer in the case where the number of the OGF securities tendered in response to said offer represents less than 66.67% of the voting rights of OGF. The opening and the implementation of the OGF Tender Offer is subordinated to the fulfillment of the conditions precedent set forth in Article 2 below. Purchaser shall be fully responsible for the statutory and regulatory obligations resulting for Purchaser from this tender offer, pursuant, inter alia, to the General Rules of the Conseil des Bourses de Valeurs [Securities Exchange Board, a self-regulatory organization overseeing French Bourses]. Purchaser here and now agrees to fully satisfy such obligations and in particular to file a tender offer on PFG's shares. 1.2 COMMITMENTS OF LDE LDE undertakes irrevocably and unconditionally, to tender the totality of the equity securities of OGF which it holds (the "Shares") to the OGF Tender Offer filed by the Purchaser and such, in the case where one or several competing tender offer have been declared acceptable by the CBV as long as the Purchaser shall make a higher bid than such competing offers. 3 4 LDE undertakes to provide to the Purchaser all necessary assistance with relevant administrative authorities for the implementation of the entire transaction and to assist Purchaser in securing the tender of a many shares of OGF and PFG so that the Purchaser may, to the maximum extent possible, acquire more than 95 percent of the voting rights thereof. LDE undertakes that its representatives at the Board of Directors of OGF shall issue a favorable recommendation on the OGF Tender Offer initiated by the Purchaser and LDE will make its best efforts that the other members issue a similar recommendation; LDE undertakes that the representatives of OGF at the Board of Directors of PFG shall issue a favorable recommendation on the PFG Tender Offer initiated by the Purchaser and will make its best effort that the other members issue a similar recommendation. LDE undertakes that OGF shall not tender the PGF securities that it holds, to the OGF Tender Offer. LDE undertakes to obtain from one or several PFG shareholders other than OGF, that they tender a number of PFG shares to the public offer initiated by the Purchaser in application of Article 5-3-7 of the General Rules of the CBV in order that the Purchaser holds at least 66.67% of the voting rights of PFG. LDE undertakes that the Purchaser will have the ability to meet with the management of the Companies when this agreement will be disclosed to the public. LDE undertakes that the Purchaser shall have the ability to make site visits to different operational locations that the Purchaser will choose in consultation with LDE. LDE will ensure to that the auditors of OGF and PFG agree to co-operate with the Purchaser and its auditors as soon as possible on the preparation of financial statements required by the Purchaser to be filed with the Security Exchange Commission. 1.3 PRICE The price offered will be 950 French francs per OGF share. 1.4 PRIOR TRANSFER OF SHAREHOLDINGS HELD BY OGF IN THE COMPANIES OF THE LDE GROUP. The parties agree, at the latest, on the settlement date for the delivery of the securities tendered to the OGF Public Offer (hereinafter the "Transfer Date"), that the Shareholdings held by OGF in companies directly or indirectly controlled by LDE as indicated in Appendix 1.4, will be transferred to LDE or any other company that will be substituted for LDE, at a price equal to their net accounting value as set forth in OGF's financial statements for the 1994 fiscal year, as indicated in Appendix 1.4 and with respect to the 9,090 Metropole Television (M6) shares held by OGF at a price equal to 4 5 the average first trading price of the M6 shares during the previous 30 trading days (and including) the Transfer Date. ARTICLE 2 - CONTRIBUTION OF SUPPLEMENTAL SHARES AND CONDITIONS PRECEDENT The opening and the execution of the OGF Tender Offer are subject to the following conditions precedent being fulfilled on or before November 15, 1995: (i) approval decision from the Insurance Department of the Ministry of Economic Affairs and Finance regarding the indirect change of control of Groupe Auxia, a societe anonyme governed by the Insurance Code and having its registered office at 18, allee Darius Milhaud, 75019 Paris; and (ii) explicit or tacit approval of the contemplated transfer from the Treasury Department of the Ministry of Economic Affairs and Finance under direct foreign investments in France. (iii) the approval of the OGF Tender Offer filed by the Purchaser on the terms and conditions mentioned on this agreement from the Conseil des Bourses de Valeurs (CBV). ARTICLE 3 - REPRESENTATIONS AND WARRANTIES BY LDE LDE hereby represents and warrants that at the date hereof: 3.1 EXISTENCE, LEGAL CAPACITY, POWER OGF and PFG (hereinafter [collectively] referred to as the "COMPANIES") as well as their main subsidiaries listed in Appendix B hereto (the "MAIN SUBSIDIARIES") are duly organized and existing under the laws and regulations applicable to them and are in good standing in regard to such laws and regulations. The Companies and Main Subsidiaries possess all necessary powers and the full requisite legal capacity to conduct their activities in the manner in which they are currently conducted. The Companies and Subsidiaries, other than those stated in Appendix B, are not parties to any shareholders agreement, voting rights agreement, joint venture agreement or any agreement with competitors in order to affect the competition. 5 6 3.2 CAPITAL STRUCTURE The shares of the Companies and of the Main Subsidiaries were validly issued and are fully paid-up, freely transferable, and free of any security interests, prior claims, pledges, escrow agreements, charges, options, liens, or other rights in favor of third parties, whether written or oral. Apart from 42,363 certificates of deposit and certificates of voting rights issued by OGF and currently valid, the Companies and Main Subsidiaries have neither issued nor put into circulation any shares, ordinary bonds, bonds convertible into or redeemable by shares or other securities of the Companies and Subsidiaries. Except for the stock option plans described in Appendix 3.2, the Companies or Main Subsidiaries have not granted any option or other title confering the right to subscribe for, purchase, or acquire any shares, ordinary bonds, convertible bonds, or bonds capable of being redeemed in, or exchanged for, shares or other securities of the Companies or Main Subsidiaries. 3.3 TRANSFER OF THE SHARES The Shares represent approximately 51.23% of the capital of OGF and 59.98% of the voting rights therein. LDE owns the Shares and has the right to transfer them without any restriction whatsoever and possesses full power and authority to execute and perform this Memorandum of Understanding and all other deeds and instruments relating hereto. For the Purchaser, the transfer of the Shares to Purchaser shall not entail any other responsibilities or obligations to the other shareholders of OGF or to the shareholders of PFG than those resulting from application of the stock exchange regulations in force as of the Transfer Date. 3.4 FINANCIAL STATEMENTS The consolidated income statements and balance sheets and accounts (and notes thereto) of the Companies and Main Subsidiaries for the fiscal years ended December 31, 1992, 1993, and 1994 (hereinafter collectively referred to as the "FINANCIAL STATEMENTS") have been published and certified by the statutory auditors of each of the Companies and Main Subsidiaries concerned. LDE represents that The Financial Statements for 1994 are complete and accurate, and faithfully reflect the financial position of the Companies and the Main Subsidiaries. The same rules and accounting methods have been applied during the above-mentioned three fiscal years with the exception of the modification provided in Appendix 3.4. The operating results at the date of April 30, 1995 is profitable. 6 7 The Companies and Subsidiaries have made no off balance sheet commitments not included in the notes to the accounts described in this Article or in Appendix 3.4bis. On June 30, 1995 OGF had at its disposal a net cash position as defined in Appendix 3.4ter of an amount in excess of FF 780 million. The need of the consolidated net working capital as defined in Appendix 3.4 quater, on June 1995, will not have varied since December 31, 1994 as a result of actions the sole purpose of which would have been to artifically increase the cash position. 3.5 NO MAJOR CHANGES Between December 31, 1994 and the Date of this agreement, the Companies and Main Subsidiaries have been managed under normal conditions and, consistent with their practices during the last three fiscal years, and, specifically have not undertaken any disposition or acquisition of any significant tangible or intangible assets for an amount in excess of FF2 million except as stated in Appendix 3.5, have not accorded any salary increases and have not taken any measures beyond the normal course of the companies' business as conducted during the said fiscal years. Furthermore, the Companies and the Main Subsidiaries shall not have decided to distribute and have not distributed dividends for 1994 and 1995 fiscal years other than those shown in Appendix 3.5bis. 3.6 TAXES AND SOCIAL SECURITY CHARGES Subject to the exceptions stated in the Financial Statements and subject to the Tax and Social Security reassessments which the Companies and Main Subsidiaries have been the subject of since January 1, 1992 as described in Appendix 3.6: (i) the Companies and Main Subsidiaries have filed all requisite tax returns and customs declarations with the proper government authorities in the prescribed form and in a timely manner, and have filed all declarations and schedules required by the social security bodies; and certify the exactitude of their contents and in full accordance with the legislation and regulations in force; (ii) the Companies and Main Subsidiaries have paid, in a timely manner, all taxes, levies, and contributions owed by them, or have booked appropriate provisions in that respect according to rules of prudence and pursuant to custom; 3.7 INSOLVENCY None of the Companies or Main Subsidiaries has suspended payments or entered into a scheme of conciliation with its creditors, nor is any of them in judicial reorganization, or liquidation, or is threatened with becoming the object of such proceedings. 7 8 3.8 ASSETS The Companies and Main Subsidiaries have good title to all of the assets shown in their accounts. Each asset of which the amount is in excess of FF1 million, is not encumbered by any pledge, guarantee, security or other charge except for the financing for the acquisition of certain assets as stated in Appendix 3.8. 3.8.1 REAL ESTATE ASSETS The Real Estate Operating Assets, as listed in Appendix 3.8.1, and the other properties directly or indirectly owned by the Companies and Main Subsidiaries, or which they are entitled to acquire (pursuant to leasing agreements or undertakings to sell) or are under an obligation to acquire (pursuant to undertakings to purchase), as listed in Appendix 3.8.1 bis, (i) are suitable for the uses for which they are intended, and (ii) are not the subject of, nor threatened with being the subject of, any expropriation proceeding or any zoning plan that could in any way restrict their use except as stated in Appendix 3.8.1ter. 3.8.2 TRADEMARKS AND OTHER INDUSTRIAL PROPERTY RIGHTS The Companies and Main Subsidiaries own, or are duly licensed to use exclusively all of the main trademarks, designs, patents, manufacturing processes and any other property rights used by them, as listed in Appendix 3.8.2. All of the trademarks and other industrial property rights held by the Companies and the Main Subsidiaries are now, and at the Transfer Date shall be, duly protected according to the regulations in force. Neither the Companies nor the Main Subsidiaries are susceptible to infringe any third-party industrial or intellectual property rights. 3.9 LITIGATION Save as stated in Appendix 3.9, no judicial, administrative, or arbitration proceedings, claim, investigation, or any injunction, in which the amount claimed in any one proceeding exceeds two hundred thousand (200,000) [French] francs have been initiated against the Companies or Main Subsidiaries, and no such proceedings are threatened inter alia on the basis of similar facts for which proceedings are pending, against the Companies or Main Subsidiaries. 3.10 COMPLIANCE WITH REGULATIONS AND CONTRACTS The Companies and Main Subsidiaries: can validly engage in and pursue their business activities, without restriction; They comply, with all laws and regulations applicable to their business activities and specifically in environmental matters; and hold all licenses, permits, and authorizations required for the conduct of their business activities except as stated in Appendix 3.10. 8 9 Such licenses, permits, and authorizations are in full force and effect and no proceedings to revoke or restrict any of them are pending or threatened. The Companies and Main Subsidiaries have carried out all publicity, declarations, registrations, filings, and other formalities required under the applicable regulations for the conduct and continuation of their activities. No main agreement concluded by the Companies or the Main Subsidiaries may be fully terminated for reason of a change in control of the Companies or the Main Subsidiaries. LDE represents that there are no contracts or agreements directly or indirectly binding LDE to the Companies or Main Subsidiaries, except as stated in Appendix 3.10.3. Such agreements or contracts shall be terminated without any compensation or maintained in force under the same terms and conditions except for the agreements stated in Appendix 3.10-2 which could be fully terminated at the Transfer Date, both at the exclusive request of the Purchaser, the Companies or Main Subsidiaries. Furthermore, any receivables or other obligations owed by LDE or any company within the LDE group are repayable on demand from the Companies or the Main Subsidiaries. 3.11 WAGES AND SALARIES The Companies and the Main Subsidiaries have not entered into any contract with any of their employees and/or legal representatives which, in the event of termination, provides for a longer notice period or for greater compensation [severance pay] than the notice period or compensation [severance pay] provided for by law or by the applicable collective bargaining agreements, save as stated in Appendix 3.11. LDE undertakes to bear all the compensation which would be paid by the Companies should the current OGF Chairman leave OGF. 3.12 LOANS AND GUARANTEES Neither the Companies nor their Main Subsidiaries have granted any loan, advance, suretyship, endorsement, or guarantee, in any form whatsoever, to any director, officer, employee, or shareholder of the Companies or Main Subsidiaries except as stated in Appendix 3.12. 3.13 INSURANCE Each of the Companies and Main Subsidiaries is adequately insured for all its property and operations. The insurance policies taken out are consistent with those usually taken out in the relevant business sector. Since January 1, 1992, no premium has been increased because of any loss sustained by each of the Companies or Subsidiaries in respect of their activities. 9 10 3.14 MANAGEMENT UNTIL THE TRANSFER DATE Until the date of publication of the notice issued by the Societe des Bourses Francaises announcing the result of the OGF Tender Offer (the "Transfer Date"), LDE agrees that the Companies and Main Subsidiaries shall be managed with due care and diligence and in the normal course of business and that the Companies and Main Subsidiaries shall not make any investment or disinvestment out of the normal course of business and for an amount in excess of FF2 million. LDE undertakes that the OGF management do their best efforts for filing in due time with the State Representative accreditation's applications required by Law number 93-23 of January 8, 1993 relating to the operations of external funeral services and its Decrees with the relevant authorities. LDE declares that the Companies meet all the necessary criterion as are required by Law to obtain the proper accreditations. ARTICLE 4 - IMPLEMENTATION 4.1 INDEMNIFICATION A. In addition to the commitment stated in Article 3.11, LDE agrees to indemnify Purchaser, according to the terms hereinafter defined, for any loss sustained by Purchaser as a result of, for each of the Companies and/or the Main Subsidiaries, (i) any supplementary liabilities or any deficiency of assets having an origin or cause prior to December 31, 1994 that should be triggered by a third party claim and (ii) any inaccuracy in any of the representations and warranties made under Article 3 hereof, such representations and warranties being considered as extended until the Transfer Date. B. The following provisions shall be taken into account in determining the amount of any compensation payable by LDE: (a) The amount of the sums due shall be based on the liabilities actually remaining for the account of the Companies after taking into consideration the actual decrease of taxes on the Companies due for the current fiscal year for which the supplementary liabilities or insufficiency of assets will have been accounted for. Any tax adjustments of whatever nature which translate into a mere time-lag in assessment (or which result in a mere transfer of profit from one fiscal year to another) are excluded from the scope of this Contract insofar as they do not translate into a definitive charge in principal, only the penalties, or late-payment interest would result in indemnification. 10 11 (b) The indemnification shall be reduced by any amount of the reserves shown on the Financial Statement for 1994 other than the reserves for contengencies shown under the Headings "aleas divers" (in the amount of FF 47,061,000), which shall have become without any object. The amount of the reduction related to the reserves shown under the headings "Provisions pour impots et cotisations latents" (in the amount of FF 4,592,000) shall be determined by taking into account the amount of percentage of OGF's capital transferred by LDE. (c) The indemnification of the Purchaser shall be entire irrespective of the percentage of OGF's capital transferred by LDE and the percentage of PFG's capital held by OGF as of the Transfer Date except for the tax reassessments for which the indemnification shall be determined by taking into account the percentage of the OGF's capital transferred by LDE. C. LDE's indemnification obligation shall be limited to FF100,000,000 and shall become effective only if the cumulated amount of the sums, computed as provided hereinabove, exceeds 60 million francs and for the portion of the amount in excess of the latter sum; provided further, only those claims which individually give rise to a right to indemnification in excess of FF100,000 shall be taken into account. D. As soon as Purchaser becomes aware of the existence of any event or claim capable of bringing this warranty into play, Purchaser shall inform LDE thereof, by registered letter with return receipt requested sent to LDE or to such person as LDE may designate for such purpose, so that LDE may take action to defend its interests; generally, Purchaser shall forward as soon as possible all correspondence and documents relating to such claims to LDE and inform it of all telephone conservations or communications, and, more generally, do whatever is required to place LDE in a position to usefully defend its interests. E. More specifically, should Purchaser receive notice of a tax or social security audit, Purchaser shall inform LDE thereof, by registered letter with return receipt requested, within 15 days of receipt of the notice, and shall obtain LDE's opinion and/or arguments prior to any communication with the administrative authority. In such case, LDE shall be entitled to be assisted, at its own expense, by such adviser as it may select, in order to follow the proceedings in progress. F. Generally, Purchaser - acting in its own name and on behalf of the companies and the Main Subsidiaries, in respect of whose actions Purchaser gives its personal guarantee - agrees not to compromise, settle, or submit to arbitration, any matters capable of involving LDE's liability under this warranty, without having obtained LDE's liability under this warranty, without having obtained LDE's prior consent; similarly, Purchaser agrees to initiate or defend, or cause those Companies and Main Subsidiaries concerned to initiate or defend, all judicial or administrative proceedings, and to continue such proceedings to their end if LDE so requires, and even without being so required, in the event of emergency, in order to avoid being barred or 11 12 pre-empted, so as to reserve at all times LDE's rights and limit LDE's exposure to liability, including indirect liability. In exercising the rights expressly conferred on it under this paragraph, LDE shall take the corporate interests of the Companies and the Main Subsidiaries into account. In the event of any disagreement as to the pursuit of proceedings, LDE shall advance such sums to the Companies and Main Subsidiaries as are required by the latter to continue the said judicial or administrative proceedings. G. In the event that Purchaser breaches the obligations set forth in paragraphs D, E, and F hereinabove, this warranty shall ipso facto become invalid as far as the claim or litigation capable of being covered by this warranty is concerned. This invalidity shall not be against the Purchaser unless LDE establishes that the failure of the above-mentioned obligations by the Purchaser have caused it prejudiced LDE interests damage. 4.2 PERIOD Calls under this warranty may be made: - for amounts payable in respect of tax, customs, or social security liabilities: for a period that will end six months after expiration of the tax, customs, and social security limitation periods; - for the payment of all other amounts that may prove owing: until December 31, 1996. Any claims received after expiration of the above time periods shall be ineffectual. 4.3 ASSIGNMENT The rights and obligations provided for herein cannot be assigned, delegated, or transferred, in any way whatsoever, by either Party to a third party without the express prior written consent of the other Party. ARTICLE 5 - MISCELLANEOUS 5.1 NOTICES All notices, claims, demands, and other communications under or in connection with this Agreement shall be sent by registered letter with return receipt requested, or by facsimile or telex confirmed by registered letter with return receipt requested, to the following addresses: 12 13 If to Purchaser: Attention: JP MORGAN & Cie Directeur du Departement Juridique 21 Place du Marche St Honore 75001 Paris If to LDE: Attention: __________________ Lyonnaise des Eaux 72, avenue de la Liberte 92000 Nanterre The date of the receipt of the notice or communication shall be the date of receipt of the registered letter with return receipt requested. 5.2 APPENDICES AND RECITALS All of the Appendices and Recitals are an integral part of this Agreement, with which they form a single and indivisible whole. 5.3 SEVERABILITY Should any court or authority of any branch declare any provision of this Agreement to be illegal, void, or unenforceable, such provision shall be ineffective before the said court of authority but shall not affect the remaining clauses [hereof] or the legality or enforceability [of this Agreement]. 5.4 ENTIRE AGREEMENT This Agreement constitutes the entire and sole agreement of the Parties as to the subject-matter hereof. Consequently, it supersedes all prior contracts, agreements, exchanges of letters, or verbal agreements, if any, between the Parties relating to the same subject-matter. No amendment or modificiation to this Agreement shall be valid unless in writing and signed by [both] Parties. 5.5 GOVERNING LAW - DISPUTES This Agreement shall be governed by and construed in accordance with French law. 13 14 All disputes arising from the validity, interpretation, performance, and/or non-performance of this Agreement shall be submitted to the exclusive jurisdiction of the Paris Commercial Court. Executed at _______________, this _____________ day of _______________, 19___, in _____________ counterparts. LDE Purchaser _____________________ ______________________ 14 15 APPENDICES TO THE MEMORANDUM OF UNDERSTANDING RELATING TO THE TRANSFER OF SHARES --------------------------------------------- Appendix 0 Powers of attorney of Mr. Philippe Brongniart and Mr. Robert L. Waltrip for signature of the Memorandum of Understanding relating to the Transfer of shares Appendix 1.4 List and net accounting values as set forth in OGF's financial statements for the 1994 fiscal year of the shareholdings held by OGF to be transferred to LDE prior to the Transfer Date. Appendix A List of OGF's subsidiaries and consolidated and non-consolidated shareholdings, including: - List of consolidated companies - List of non-consolidated shareholdings - List of companies consolidated by equivalence - List of subsidiaries and shareholdings Appendix B List of Main Subsidiaries of the OGF/PFG Group. Appendix 3.1 List of Shareholders Agreements, Voting Rights Agreements, Joint Venture Agreements or any Agreements with Competitors limiting their activities, concluded by the Companies and the Main Subsidiaries. Appendix 3.2 Stock Option plans for OGF and PFG shares of the Companies and Main Subsidiaries. 15 16 Appendix 3.4 Changes in the Accounting Methods of the Companies intervening during the 1992, 1993 and 1994 fiscal years. Appendix 3.4 bis Off balance sheet commitments not included in the appendix of the Financial Statements. Appendix 3.4 ter Definition of a consolidated net cash position. Appendix 3.4 quater Definition of the need of the net working capital Appendix 3.5 List of investments for an individual amount greater than 2 million French Francs carried out by the Main Companies and Subsidiaries during the first semester of 1995 and the measures beyond the normal course of the Companies and Main Subsidiaries business. Appendix 3.5 bis Dividends for which distribution has been decided or which have been distributed during the 1994 fiscal year to the benefit of persons other than the Companies or Main Subsidiaries. Appendix 3.6 Exceptions to the compliance with tax declarations payments and social security declarations, including a recapitulative note related to tax controls dated June 8, 1995 and a recapitulative note (included in Appendix 1) related to social security (URSSAF) reassessments, dated January 2, 1995. Appendix 3.8.1 List of real estate operating assets owned by the Companies or Main Subsidiaries. Appendix 3.8.1 bis Follow-up of Real Estate purchases. Appendix 3.8.1. ter Limitations to the use of real estate operating assets by the Companies and Main Subsidiaries. 16 17 Appendix 3.8.2 List of the main trademarks, designs, patents and manufacturing processes used by the Companies and the Main Subsidiaries. Appendix 3.9 Judicial, administrative or arbitration proceedings, claims, investigations in which the amount claimed is greater than 200,000 French Francs. - Claims before the Labor Court (Conseil des Prud'hommes) in which the risk incurred is greater than 200,000 French Francs. - Summarized presentation of CGSM operation. - SFEC - OGF deal. - Competition claims for which the risk is greater than 200,000 French Francs - DEMEMORIS - LESCARCELLE deal - Note dated June 12, 1995 and table dated December 19, 1994 on the procedure in progress before the Competition Council and concerning the Companies of the PFG group. - Tax proceedings, claims and investigations (see Appendix 3.6). Appendix 3.10 Specific information on the compliance by Companies and Main Subsidiaries of applicable laws and regulations (see Appendix 3.9). Appendix 3.11 List of contracts for an employee and/or legal representative which provides for a longer notice period and for greater compensation [severance pay] in the event of termination than that provided for by law or by the applicable bargaining agreement. 17 18 Including, Amendments dated October 25, 1994 to the employment contracts of: Mr. Thierry Hernandez (Financial Director) Mr. Bruno Grison (International Director) Mr. Jean-Michel Debono (OGF General Manager) Mr. Louis-Charles Galle (General Secretary) Mr. Claude Hosten (Director of Human Resources) Mr. Michel Penon (General Director of Auxia) Mr. Maxime Dubois-Violette (General Director of Logistics) Mr. Bernard Bouleau (President and General Director of PF South East) Appendix 3.12 List of Loans, advances, suretyships, endorsements or guarantees granted by the Companies or Main Subsidiaries to directors, officers, employees or shareholders of the Companies or Main Subsidiaries. 18 19 Translation Original in French ADDITIONAL MEMORANDUM OF UNDERSTANDING RELATING TO THE TRANSFER OF SHARES BETWEEN LYONNAISE DES EAUX AND SERVICE CORPORATION INTERNATIONAL (Purchaser) July 12, 1995 19 20 ADDITIONAL MEMORANDUM OF UNDERSTANDING RELATING TO THE TRANSFER OF SHARES BY AND BETWEEN THE UNDERSIGNED: LYONNAISE DE EAUX S.A., a societe anonyme [share corporation] with a registered capital of FRF 3,407,276,100, having its registered office at 72, avenue de la Liberte, 92000 Nanterre, registered in the Nanterre Commercial Registry under N degrees B 542 062 559, and represented by Mr. Philippe Brongniart, duly authorized, hereinafter referred to as "LDE"). Party of the first part AND SERVICE CORPORATION INTERNATIONAL, a Company registered under the Law of Texas, with a registered capital of $200,000,000, having its registered office at 1929 Allen Parkway, Houston, Texas 77019, PO Box 130548, or any affiliate it may substitute and represented by Mr. Robert T. Waltrip, the Chairman of the Board and Chief Executive Officer, duly authorized. hereinafter referred to as "PURCHASER"), Party of the second part RECITALS Whereas, LDE holds 1,247,439 shares (hereinafter, the "SHARES") representing approximately 51.23% of the capital of Omnium de Gestion et de Financement, a societe anonyme with a registered capital of 243,483,100 [French] francs, having its registered office at 66, boulevard Richard Lenoir, 75011 Paris, registered in the Paris Commercial Registry under N degrees 542 076 799 ("OGF") and whose shares are listed on the second market of the Paris Bourse; Whereas, OGF holds 1,224,626 shares representing approximately 64.98% of the capital of Pompes Funebres Generales, a societe anonyme with a registered capital of 94,220,300 [French] francs, having its registered office at 66, boulevard Richard Lenoir, 75011 Paris, registered in the Paris Commercial Registry under N degrees 542 065 792 ("PFG") and whose shares are listed on the over the counter market of the Paris Bourse; 20 21 Whereas, OGF and PFG hold certain assets and equity interests related to the operation of funeral services in France and abroad; And Whereas, Purchaser has informed LDE that it is interested in acquiring the totality of the Shares, and the Parties have entered into a Memorandum of Understanding dated on July 10, 1995 (the "Agreement") in order to determine their respective commitments regarding the sale and purchase of the Shares. Since July 10, 1995, the Parties have met together and the Purchaser has informed LDS that it is interested in acquiring the block of control representing all the Shares (hereinafter "OGF Block of Control") as soon as the Purchaser will have obtained the authorizations mentioned in article 2 below, and in any event, at the time of the opening of the simplified tender offer implemented by the price guarantee procedure [garantie de cours] on the OGF equity-securities initiated by the Purchaser (hereinafter "OGF Tender Offer"). The Agreement is supplemented and/or modified by the following provisions, the other provisions of the Agreement remaining valid. NOW, THEREFORE, IT HAS BEEN AGREED AS FOLLOWS: ARTICLE 1 - COMMITMENTS 1.1 COMMITMENTS OF THE PURCHASER The Purchaser undertakes to acquire from LDE, the OGF Block of Control subject to the fulfilment of the conditions set forth in Article 2 below. Purchaser shall be fully responsible for the statutory and regulatory obligations resulting for Purchaser from this acquisition of the OGF Block of Control, pursuant, inter alia, to the General Rules of the Conseil des Bourses de Valeurs [Securities Exchange Board, a self-regulatory organization overseeing French Bourses]. Purchaser here and now agrees to fully satisfy such obligations and in particular to file a proposed simplified tender offer implemented by the price guarantee procedure on OGF's shares in deleting the withdrawal condition of obtaining more than two-thirds of the voting rights of OGF provided in the Agreement, and on PFG's shares. 1.2 COMMITMENTS OF LDE LDE undertakes to sell to the Purchaser the OGF Block of Control subject to the fulfilment of the conditions set forth in Article 2 below. LDE undertakes that a Board of Directors of OGF and PFG will be convened in order that such meetings may take place immediately following the trading of the Block of Control 21 22 which is to be completed on the Transfer Date as defined in Article 1.4 below, and the respective agendas of both meetings of the Board of Directors of OGF and PFG will provide on one hand, of the resignation of the following OGF Directors (Mr. Philippe Brongniart, Claude Gaudin, Claude-Pierre Brossolette, Bernard Prades in the official capacity of representing LDE and Mr. Claude Vincent in the official capacity of representing SSIMI) and on the other hand, of the resignation of the following PFG Directors (Mr. Philippe Brongniart, Claude Gaudin, Bernard Prades and Jean-Michel Debono), and the adoptation of five (5) Directors proposed by the Purchaser for OGF and four (4) Directors proposed by the Purchaser for PFG. 1.3 PRICE The Price at which the OGF Block of Control will be sold from LDE to the Purchaser will be 950 French francs per OGF share. The buying order and the selling order shall be placed by the same Stockbroker firm chosen conjointly in order that the delivery of the shares occurs outside of the RELIT System. The above mentioned amount shall be payed in full in exchange for the delivery of the shares immediately after its trading. Each of the parties shall bear the respective cost for the sale and purchase of the OGF Block of Control. 1.4 TRANSFER DATE The Transfer of the OGF Block of Control shall take place at the date determined by the Societe des Bourses Francaises (SBF) after obtaining the authorizations mentioned in Article 2 below (hereinafter the "Transfer Date"). The Transfer Date as determined in this agreement nullifies and or substitutes the one defined in Article 1.4 of the Agreement. ARTICLE 2 - CONDITIONS PRECEDENT The Transfer of the OGF Block of Control is subject to the following conditions precedent being fulfilled on or before November 15, 1995: (i) approval decision from the Insurance Department of the Ministry of Economic Affairs and Finance regarding the indirect change of control of Groupe Auxia, a societe anonyme governed by the Issurance Code and having its registered office at 18, allee Darius Milbaud, 75019 Paris; and (ii) explicit or tacit approval of the contemplated transfer from the Treasury Department of the Ministry of Economic Affairs and Finance under direct foreign investments in France. 22 23 ARTICLE 3 -- MISCELLANEOUS 3.1 NOTICES All notices, claims, demands, and other communications under or in connection with this Agreement shall be sent by registered letter with return receipt requested, or by facsimile or telex confirmed by registered letter with return receipt requested, to the following addresses: If to Purchaser: Attention: JP MORGAN & Cie Directeur du Departement Juridique 21 Place du Marche St Honore 75001 Paris If to LDE: Attention: Monsieur le Secretaire General Lyonnaise des Eaux 72, avenue de la Liberte 92000 Nanterre The date of receipt of the notice or communication shall be the date of receipt of the registered letter with return receipt requested. 3.2 RECITALS The Recitals are an integral part of this Agreement, with which they form a single and indivisible whole. 3.3 SEVERABILITY Should any court or authority of any branch declare any provision of this Agreement to be illegal, void, or unenforceable, such provision shall be ineffective before the said court of authority but shall not affect the remaining clauses [hereof] or the legality or enforceability [of this Agreement]. 23 24 3.4 GOVERNING LAW - DISPUTES This Agreement shall be governed by and construed in accordance with French law. All disputes arising from the validity, interpretation, performance, and/or non-performance of this Agreement shall be submitted to the exclusive jurisdiction of the Paris Commericial Court. Executed at Paris, this 12th day of July, 1995, in two counterparts. LDE Purchaser ____________________ ____________________ 24 EX-23.1 3 CONSENT 1 EXHIBIT 23.1 BARBIER FRINAULT & ASSOCIES PGA Membre d'Arthur Andersen & Co, SC Tour Franklin Tour Gan - Cedex 13 101, Terrasse Boieldieu - Cedex 11 92082 Paris-La Defense 2 92082 Paris-La Defense 8 As independant accountants, we hereby consent to the incorporation by reference in the registration statement of Service Corporation International, on Form S-3 (File Nos 33-60683, 33-56069), Form S-4 (File No 33-54996), Form S-8 (File Nos 33-9790, 33-17982, 33-54401, 33-50987) of our report dated April 6, 1995, on our audits of the consolidated financial statemnts of Omnium de Gestion et de Financement S.A. as of December 31, 1994 and 1993, and for the two years then ended, which report is included in Form 8-K dated September 1, 1995. We also consent to the reference to our firm under the caption "Experts". Paris-La Defense, France, September 1, 1995 /s/ CHRISTIAN CHOCHON /s/ BRUNO BIZET - ----------------------------- ------------------------------- BARBIER FRINAULT & ASSOCIES PGA Christian Chochon Bruno Bizet EX-23.2 4 CONSENT 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" in Registration Statement No. 33-60683, filed June 28, 1995, on Form S-3 of Service Corporation International and in the related Prospectus and to the incorporation by reference therein of our report dated December 22, 1994, with respect to the consolidated financial statements of Gibraltar Mausoleum Corporation and subsidiaries for the year ended September 30, 1994 included in this Form 8-K. We also consent to the incorporation by reference in the following Registration Statements of Service Corporation International: No. 33-56069 on Form S-3, filed November 1, 1994, No. 33-54401 on Form S-8, filed July 1, 1994, No. 33-50987 on Form S-8, filed November 10, 1993, No. 33-54996 on Form S-4, filed November 25, 1992, No. 33-17982 on Form S-8, filed October 20, 1987, and No. 33-9790 on Form S-8, filed November 4, 1986 of our report dated December 22, 1994, with respect to the consolidated financial statements of Gibraltar Mausoleum Corporation and subsidiaries for the year ended September 30, 1994 included in this Form 8-K. /s/ ERNST & YOUNG LLP August 31, 1995 Indianapolis, Indiana -----END PRIVACY-ENHANCED MESSAGE-----