-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GJJBY33oWjyk2hRIwXS/bTRPP9v+QcP9S4931VYTg8wKS74pgQwsRyQUztPZhJmF Hoatc41EfCSeNtVsfucnrg== 0000950129-96-000511.txt : 19960401 0000950129-96-000511.hdr.sgml : 19960401 ACCESSION NUMBER: 0000950129-96-000511 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960329 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: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06402 FILM NUMBER: 96541758 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 10-K 1 SERVICE CORPORATION INTERNATIONAL 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------------ FORM 10-K ------------------------ /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) FOR THE TRANSITION PERIOD FROM TO COMMISSION FILE NUMBER 1-6402-1 ------------------------ SERVICE CORPORATION INTERNATIONAL (Exact name of registrant as specified in its charter) TEXAS 74-1488375 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification No.) 1929 ALLEN PARKWAY 77019 HOUSTON, TEXAS (Zip code) (Address of principal executive offices)
Registrant's telephone number, including area code: 713/522-5141 ------------------------ SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED - -------------------------------------------- -------------------------------------------- Common Stock ($1 par value) New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange $3.125 Term Convertible Shares, New York Stock Exchange Series A, of SCI Finance LLC, a subsidiary of the registrant 10% Subordinated Debentures due 2000 American Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / The aggregate market value of the common stock held by non-affiliates of the registrant (assuming that the registrant's only affiliates are its officers and directors) is $5,500,814,304 based upon a closing market price of $48.00 on March 22, 1996 of a share of common stock as reported on the New York Stock Exchange -- Composite Transactions Tape. The number of shares outstanding of the registrant's common stock as of March 22, 1996 was 117,482,046 (excluding treasury shares). DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Proxy Statement in connection with its 1996 Annual Meeting of Shareholders (Part III) ================================================================================ 2 PART I ITEM 1. BUSINESS. Service Corporation International was incorporated in Texas on July 5, 1962. The term "Company" or "SCI" includes the registrant and its subsidiaries, unless the context indicates otherwise. The Company is the largest provider of death care services in the world. At December 31, 1995, the Company operated 2,739 funeral service locations, 318 cemeteries and 139 crematoria located in North America, Europe and Australia. In addition, the Company provides capital financing to independent funeral home and cemetery operators. The Company has continued to expand through the acquisition of funeral service locations, cemeteries and crematoria, both domestically and internationally. In 1995, the Company acquired two French companies that the Company believes together constitute the largest funeral service organization in Europe. Also in 1995, the Company acquired the fourth largest funeral service organization in North America. Including these acquisitions, the Company in 1995 acquired 1,263 funeral service locations, 99 cemeteries and 30 crematoria. The Company has acquired most of its present operations through acquisitions. For information regarding acquisitions, see Note 3 to the consolidated financial statements in Item 8 of this Form 10-K. For financial information about the Company's industry segments, including the identifiable assets of the Company by industry segments, see Note 13 to the consolidated financial statements in Item 8 of this Form 10-K. FUNERAL AND CEMETERY OPERATIONS The Funeral and Cemetery Operations consist of the Company's funeral service locations, cemeteries and related businesses. The operations are organized into five North American divisions covering the United States and Canada, a European division which includes the Company's French and United Kingdom operations, and an Australian division. Each division is under the direction of divisional executive management with substantial industry experience. Local funeral service location and cemetery managers, under the direction of the divisional management, receive support and resources from SCI's headquarters in Houston, Texas and have substantial autonomy with respect to the manner in which services are conducted. The majority of the Company's funeral service locations and cemeteries are managed in groups called clusters. Clusters are established primarily in metropolitan areas to take advantage of operational efficiencies, including the sharing of service personnel, vehicles, preparation services, clerical staff and certain building facility costs. Funeral Service Locations. The funeral service locations provide all professional services relating to funerals, including the use of funeral facilities and motor vehicles. Funeral service locations sell caskets, coffins, burial vaults, cremation receptacles, flowers and burial garments, and certain funeral service locations also operate crematoria. The Company owns 126 funeral service location/cemetery combinations and operates 60 flower shops engaged principally in the design and sale of funeral floral arrangements. These flower shops provide floral arrangements to some of the Company's funeral homes and cemeteries. In addition to selling its services and products to client families at the time of need, the Company also sells prearranged funeral services in most of its service markets, including foreign markets. Funeral prearrangement is a means through which a customer contractually agrees to the terms of a funeral to be performed in the future. The funds collected from prearranged funeral contracts are generally held in trust, are used to purchase life insurance or annuity contracts from third party insurers or, with respect to French contracts, are held in the Company's French insurance subsidiary. This French insurance subsidiary sells prearranged funeral insurance contracts primarily in connection with the Company's French funeral service operations. Funds paid on prearranged funerals may not be withdrawn until the funeral is performed or until cancellation by the customer. At December 31, 1995, the Company's unfulfilled prearranged funeral contracts, including accumulated trust fund earnings and increased benefits on insurance products, amounted to $2,362 million of which $219 million is estimated, based on actuarial assumptions, to be fulfilled in 1996. The 1 3 unfulfilled prearranged funeral contracts at December 31, 1994 were $1,520 million. For additional information concerning prearranged funeral activities, see Notes 4 and 8 to the consolidated financial statements in Item 8 of this Form 10-K. The Company has multiple funeral service locations and cemeteries in a number of metropolitan areas. Within individual metropolitan areas, the funeral service locations and cemeteries operate under various names because most operations were acquired as existing businesses and generally continue to be operated under the same name as before acquisition. The death rate tends to be somewhat higher in the winter months and the Company's funeral service locations generally experience a higher volume of business during those months. Since 1984, the Company has operated under the Federal Trade Commission's ("FTC") comprehensive trade regulation rule for the funeral industry. The rule contains minimum guidelines for funeral industry practices, requires extensive price and other affirmative disclosures and imposes mandatory itemization of funeral goods and services. From time to time in connection with acquisitions, the Company has entered into consent orders with the FTC that have required the Company to dispose of certain operations to proceed with acquisitions or have limited the Company's ability to make acquisitions in specified areas. The trade regulation rule and the various consent orders have not had a materially adverse effect on the Company's operations. Cemeteries. The Company's cemeteries sell cemetery interment rights (including mausoleum spaces and lawn crypts) and certain merchandise including stone and bronze memorials and burial vaults. The Company's cemeteries also perform interment services and provide management and maintenance of cemetery grounds. Certain cemeteries also operate crematoria. Cemetery sales are often made on a preneed basis pursuant to installment contracts providing for monthly payments. A portion of the proceeds from cemetery sales is generally required by law to be paid into perpetual care trust funds. Earnings of perpetual care trust funds are used to defray the maintenance cost of cemeteries. In addition, all or a portion of the proceeds from the sale of preneed cemetery merchandise may be required by law to be paid into trust until the merchandise is purchased on behalf of the customer. For additional information regarding cemetery trust funds, see Note 2 to the consolidated financial statements in Item 8 of this Form 10-K. Death Care Industry. The funeral industry is characterized by a large number of locally owned, independent operations. The Company believes that based on the total number of funeral services performed in 1995, the Company, including companies acquired by it, performed approximately 9%, 29%, 14% and 24% of the funeral services in the North America, France, the United Kingdom and Australia, respectively. To compete successfully, the Company's funeral service locations must maintain competitive prices, attractive, well-maintained and conveniently located facilities, a good reputation and high professional standards. In addition, heritage and tradition can provide an established funeral home with the opportunity for repeat business from client families. Furthermore, an established firm can generate future volume and revenues by marketing prearranged funeral services. The cemetery industry is also characterized by a large number of locally owned independent operations. The Company's cemetery properties compete with other cemeteries in the same general area. To compete successfully, the Company's cemeteries must maintain competitive prices, attractive and well-maintained properties, a good reputation, an effective sales force and high professional standards. FINANCIAL SERVICES OPERATION Since 1988, the Company's wholly owned subsidiary, Provident Services, Inc. ("Provident"), has provided secured financing to independent funeral home and cemetery operators. The majority of Provident's loans are made to clients seeking to finance funeral home or cemetery acquisitions. Additionally, Provident provides construction loans for funeral home or cemetery improvement and expansion. Loan packages take traditional forms of secured financing comparable to arrangements offered by leading commercial banks. Provident's loans are generally made at interest rates which float with the prime lending rate. 2 4 Provident had $214 million in loans outstanding at December 31, 1995 and unfunded loan commitments amounting to $28 million. Such loans outstanding increased from $209 million in loans outstanding at December 31, 1994. Provident obtains its funds primarily from the Company's variable interest rate bank borrowings. Provident is in competition with banks and other lending institutions, many of which have substantially greater resources than Provident. However, Provident believes that its knowledge of the death care industry provides it with the ability to make more accurate assessments of funeral home and cemetery loans, thereby providing Provident a competitive advantage in making such loans. EMPLOYEES At December 31, 1995, the Company employed 19,824 (12,191 in the United States) persons on a full time basis and 9,237 (6,012 in the United States) persons on a part time basis. Of the full time employees, 19,342 were in the Funeral and Cemetery Operations, eight were in Financial Services and 474 were in corporate services. All of the Company's eligible United States employees who so elect are covered by the Company's group health and life insurance plans, and all eligible United States employees are participants in retirement plans of the Company or various subsidiaries. Although labor disputes are experienced from time to time, in general, relations with employees are considered satisfactory. REGULATION The Company's various operations are subject to regulations, supervision and licensing under various federal, state, local and Australian, Canadian, French, United Kingdom and other foreign statutes, ordinances and regulations. The Company believes that it is in substantial compliance with the significant provisions of such statutes, ordinances and regulations. See discussion of FTC funeral industry trade regulation and consent orders in "Funeral Service Locations" above. In May 1995, the Monopolies and Mergers Commission (the "Commission") of the United Kingdom issued a report with respect to SCI's 1994 acquisition of Plantsbrook Group plc that recommended that SCI divest of certain operations in ten localities to achieve a competitive balance satisfactory to the Commission. SCI is in negotiations with the Commission to settle the number of locations to be divested. The Company believes compliance with such settlement will not have a materially adverse effect on the Company's operations in the United Kingdom. The French funeral services industry is currently undergoing significant regulatory change. Historically, the French funeral services industry has been controlled, as provided by national legislation, either (i) directly by municipalities through municipality-operated funeral establishments ("Municipal Monopoly"), or (ii) indirectly by the remaining municipalities that have contracted for funeral service activities with third party providers, such as SCI's French operations ("Exclusive Municipal Authority"). Legislation has been passed that will generally end municipal control of the French funeral service business and will allow the public to choose their funeral service provider. Under such legislation, the Exclusive Municipal Authority was abolished in January 1996, and the Municipal Monopolies will be eliminated by January 1998. Cemeteries in France, however, are and will continue to be controlled by municipalities and religious organizations, with third parties, such as SCI, providing cemetery merchandise such as markers and monuments. ITEM 2. PROPERTIES. The Company's executive headquarters are located at 1929 Allen Parkway, Houston, Texas 77019, in a 12-story office building. A wholly owned subsidiary of the Company owns an undivided one-half interest in the building and its parking garage. The property consists of approximately 1.3 acres, 250,000 square feet of office space in the building and 160,000 square feet of parking space in the garage. The Company leases all of the office space in the building pursuant to a lease that expires June 30, 2005 providing for monthly rent of $43,000 through July 2000 and $59,000 thereafter. The Company pays all operating expenses. One half of the rent is paid to the wholly owned subsidiary and the other half is paid to the owners of the remaining undivided one-half interest. The Company owns and utilizes a three-story building at 1919 Allen Parkway, Houston, 3 5 Texas 77019 containing 43,000 square feet of office space. The Company also owns the facilities of certain closed casket manufacturing operations. At December 31, 1995, the Company owned the real estate and buildings of 2,380 of its funeral service and cemetery locations and leased facilities in connection with 816 of such operations. In addition, the Company leased five aircraft pursuant to cancelable leases. At December 31, 1995, the Company operated 10,425 vehicles, of which 7,882 were owned and 2,543 were leased. For additional information regarding leases, see Note 9 to the consolidated financial statements in Item 8 of this Form 10-K. The Company's 318 cemeteries contain an aggregate of approximately 22,639 acres, of which approximately 55% are developed. The specialized nature of the Company's businesses requires that its facilities be well maintained and kept in good condition. Management believes that these standards are met. ITEM 3. LEGAL PROCEEDINGS. Although the Company is involved in legal proceedings, the Company does not believe that any of the proceedings is material pursuant to the standards set forth in Item 103 of Regulation S-K promulgated under the Securities Exchange Act of 1934. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. 4 6 EXECUTIVE OFFICERS OF THE COMPANY Pursuant to General Instruction G to Form 10-K, the information regarding executive officers of the Company called for by Item 401 of Regulation S-K is hereby included in Part I of this report. The following table sets forth as of March 22, 1996 the name and age of each executive officer of the Company, the office held, and the date first elected an officer.
YEAR FIRST BECAME OFFICER NAME AGE POSITION OFFICER(1) - --------------------------------------- ---- -------------------------------------- ---------- R. L. Waltrip.......................... (65) Chairman of the Board and Chief 1962 Executive Officer L. William Heiligbrodt................. (54) President and Chief Operating Officer 1988 W. Blair Waltrip....................... (41) Executive Vice President Operations 1980 John W. Morrow, Jr. ................... (60) Executive Vice President 1989 Corporate Development Jerald L. Pullins...................... (54) Executive Vice President 1992 European Operations George R. Champagne.................... (42) Senior Vice President 1989 Chief Financial Officer Glenn G. McMillen...................... (53) Senior Vice President Operations 1993 Richard T. Sells....................... (56) Senior Vice President Prearranged 1987 Sales James M. Shelger....................... (46) Senior Vice President General Counsel 1987 and Secretary Jack L. Stoner......................... (50) Senior Vice President Administration 1992 T. Craig Benson........................ (34) Vice President Operations; 1990 President -- Investment Capital Corporation, a subsidiary of the Company Gregory L. Cauthen..................... (38) Vice President Treasurer 1995 W. Mark Hamilton....................... (31) Vice President Finance 1996 European Operations Lowell A. Kirkpatrick, Jr. ............ (37) Vice President Corporate Development 1994 Vincent L. Visosky..................... (48) Vice President Operational Controller 1989 Henry M. Nelly, III.................... (51) President -- Provident Services, Inc., 1989 a subsidiary of the Company
- --------------- (1) Indicates the year a person was first elected as an officer although there were subsequent periods when certain persons ceased being officers of the Company. Unless otherwise indicated below, the persons listed above have been executive officers or employees for more than five years. Mr. Pullins joined the Company in September 1991, was elected Senior Vice President Corporate Development in February 1992 and was promoted to his present position in November 1994. Prior thereto from January 1987 through August 1991, Mr. Pullins was President, Chief Executive Officer and Chief Operating Officer of Sentinel Group, Inc., a funeral service company. Mr. Stoner joined the Company in September 1991, was elected Vice President Employee Services in August 1992, Vice President Administration in February 1993 and Senior Vice President Administration in August 1993. Prior thereto for more than five years, Mr. Stoner was a general partner and Director of Tax of Ernst & Young (formerly Arthur Young & Company), certified public accountants. 5 7 Mr. Cauthen joined the Company in February 1991 as Director/Taxation and was promoted in March 1993 to Managing Director/Taxation. Prior to joining the Company, Mr. Cauthen served as Vice President/ Taxes of First Interstate Bank of Texas, N.A. from August 1988 to February 1991. Each officer of the Company is elected by the Board of Directors and holds his office until his successor is elected and qualified or until his earlier death, resignation or removal in the manner prescribed in the Bylaws of the Company. Each officer of a subsidiary of the Company is elected by the subsidiary's board of directors and holds his office until his successor is elected and qualified or until his earlier death, resignation or removal in the manner prescribed in the bylaws of the subsidiary. There is no family relationship between any of the persons in the preceding table except that W. Blair Waltrip is a son of R. L. Waltrip, that T. Craig Benson is a son-in-law of R. L. Waltrip and that T. Craig Benson and W. Blair Waltrip are brothers-in-law. PART II ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. The Company's common stock has been traded on the New York Stock Exchange since May 14, 1974. On December 31, 1995, there were 8,492 holders of record of the Company's common stock. The Company has declared 91 consecutive quarterly dividends on its common stock since it began paying dividends in 1974. The dividend rate is currently $.12 per share per quarter, or an indicated annual rate of $.48 per share. For the three years ended December 31, 1995, dividends per share were $.44, $.42 and $.40, respectively. The table below shows the Company's quarterly high and low common stock prices:
YEARS ENDED DECEMBER 31, ------------------------------------------------- 1995 1994 1993 ------------- ------------- ------------- HIGH LOW HIGH LOW HIGH LOW ---- ---- ---- ---- ---- ---- First......................................... 29 1/8 26 1/4 28 24 3/4 21 5/8 17 7/8 Second........................................ 31 5/8 26 7/8 25 7/8 22 1/2 22 1/8 18 1/2 Third......................................... 39 1/2 30 3/8 26 5/8 24 7/8 25 1/4 20 3/4 Fourth........................................ 44 37 5/8 27 3/4 24 1/8 26 3/8 23 1/2
SRV is the New York Stock Exchange ticker symbol for the common stock of the Company. Options in the Company's common stock are traded on the Philadelphia Stock Exchange under the symbol SRV. 6 8 ITEM 6. SELECTED FINANCIAL DATA.
YEARS ENDED DECEMBER 31,* ------------------------------------------------------------- 1995 1994 1993 1992 1991 --------- --------- --------- --------- --------- (IN THOUSANDS, EXCEPT PER SHARE AND RATIO AMOUNTS) Revenues.......................... $1,652,126 $1,117,175 $ 899,178 $ 772,477 $ 643,248 Income before income taxes........ 294,211 219,021 173,492 139,336 108,872 Net income........................ 183,588 131,045 101,061 86,536 73,372 Earnings per share: Primary......................... 1.80 1.51 1.21 1.13 1.03 Fully diluted................... 1.70 1.43 1.17 1.07 1.00 Dividends per share............... .44 .42 .40 .39 .37 Total assets...................... 7,663,811 5,161,888 3,683,304 2,611,123 2,123,452 Long-term debt.................... 1,732,047 1,330,177 1,062,222 980,029 786,685 Convertible preferred securities of SCI Finance LLC.............. 172,500 172,500 -- -- -- Stockholders' equity.............. 1,975,345 1,196,622 884,513 683,097 615,776 Shares outstanding................ 117,271 94,857 84,859 76,905 75,981 Ratio of earnings to fixed charges**....................... 2.78 3.13 3.19 3.03 2.82
- --------------- * The year ended December 31, 1993 reflects a change in accounting principles adopted January 1, 1993. The two years ended December 31, 1992 reflect results as historically reported. ** For purposes of computing the ratio of earnings to fixed charges, earnings consist of income from continuing operations before income taxes, less undistributed income of equity investees which are less than 50% owned, plus the minority interest of majority-owned subsidiaries with fixed charges and plus fixed charges (excluding capitalized interest and dividends on preferred securities of SCI Finance LLC). Fixed charges consist of interest expense, whether capitalized or expensed, amortization of debt costs, dividends on preferred securities of SCI Finance LLC and one-third of rental expense which the Company considers representative of the interest factor in the rentals. SCI International Limited SCI International Limited ("International") is a wholly owned subsidiary of the Company. International, through wholly owned subsidiaries, began operations in mid-1993 and owns the Company's foreign operations. Set forth below is certain summary financial information for International.
YEARS ENDED DECEMBER 31, ------------------------------------- 1995 1994 1993 --------- ---------- -------- (DOLLARS IN THOUSANDS) Revenues................................................ $ 439,750 $ 99,033 $ 17,345 --------- ---------- -------- Gross profit............................................ $ 88,551 $ 30,068 $ 5,185 --------- ---------- -------- Net income.............................................. $ 21,163 $ 4,353 $ 2,806 --------- ---------- -------- Current assets.......................................... $ 207,411 $ 215,104 $ 8,746 Non-current assets...................................... 2,218,977 885,417 91,982 --------- ---------- -------- Total assets............................................ $2,426,388 $1,100,521 $100,728 --------- ---------- -------- Current liabilities..................................... $ 257,682 $ 258,723 $ 7,787 Non-current liabilities................................. 1,584,979 805,939 70,084 --------- ---------- -------- Total liabilities....................................... $1,842,661 $1,064,662 $ 77,871 --------- ---------- -------- Stockholder's equity.................................... $ 583,727 $ 35,859 $ 22,857 --------- ---------- --------
7 9 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION (DOLLARS IN THOUSANDS, EXCEPT AVERAGE SALES PRICES AND PER SHARE DATA) The majority of the Company's funeral service locations and cemeteries are managed in groups called clusters. Clusters are established primarily in metropolitan areas to take advantage of operational efficiencies, particularly the sharing of operating expenses such as service personnel, vehicles, preparation services, clerical staff and certain building facility costs. Personnel costs, the largest operating expense for the Company, is the cost component most beneficially affected by clustering. The sharing of employees, as well as the other costs mentioned, allow the Company to more efficiently utilize its operating facilities due to the traditional fluctuation in the number of funeral services and cemetery interments performed in a given period. The Company's acquisitions are primarily located within existing cluster areas or create new cluster area opportunities. The Company has successfully implemented the cluster strategy in its North American, United Kingdom and Australian operations and is proceeding with implementation in its recently acquired French operations. The Company acquired a French funeral service company in August 1995 -- see note three to the consolidated financial statements. The Company has approximately 269 clusters in North America, the United Kingdom and Australia, which range in size from two operations to 73 operations. There may be more than one cluster in a given metropolitan area, depending upon the level and degree of shared costs. RESULTS OF OPERATIONS: Year ended 1995 compared to 1994 Segment information for the Company's three lines of business was as follows:
YEARS ENDED DECEMBER 31, ------------------------------------------ PERCENTAGE 1995 1994 INCREASE INCREASE -------------------- ------------------- -------- ---------- Revenues: Funeral......................... $ 1,166,247 $ 754,408 $411,839 54.6% Cemetery........................ 463,754 343,521 120,233 35.0 Financial services.............. 22,125 19,246 2,879 15.0 ----------- ---------- -------- 1,652,126 1,117,175 534,951 47.9 Costs and expenses: Funeral......................... (871,096) (531,803) 339,293 63.8 Cemetery........................ (303,312) (233,295) 70,017 30.0 Financial services.............. (12,497) (10,882) 1,615 14.8 ----------- ---------- -------- (1,186,905) (775,980) 410,925 53.0 Gross profit margin and percentage: Funeral......................... 295,151 25.3% 222,605 29.5% 72,546 32.6 Cemetery........................ 160,442 34.6% 110,226 32.1% 50,216 45.6 Financial services.............. 9,628 43.5% 8,364 43.5% 1,264 15.1 ----------- ---------- -------- $ 465,221 28.2% $ 341,195 30.5% $124,026 36.4% ========== ========= ========
8 10 FUNERAL Funeral revenues were as follows:
YEARS ENDED DECEMBER 31, ------------------------ INCREASE PERCENTAGE 1995 1994 (DECREASE) INCREASE ---------- --------- ---------- ---------- Existing clusters: North America.................................. $ 756,043 $663,447 $ 92,596 14.0% Australia...................................... 48,006 38,288 9,718 25.4 ---------- -------- -------- ---- 804,049 701,735 102,314 14.6 New clusters:* North America.................................. 21,336 4,450 16,886 Australia...................................... 5,785 1,631 4,154 United Kingdom................................. 131,523 39,277 92,246 ---------- -------- -------- 158,644 45,358 113,286 ---------- -------- -------- ---- Total clusters......................... 962,693 747,093 215,600 28.9 France and other foreign......................... 198,018 -- 198,018 Non-cluster and disposed operations.............. 5,536 7,315 (1,779) ---------- -------- -------- ---- Total funeral revenues................. $1,166,247 $754,408 $ 411,839 54.6% ========== ======== ======== ====
The $102,314 increase in revenues at existing clusters was primarily the result of a 9.7% increase in North American funeral services performed (207,834 compared to 189,481) and a 3.9% higher average sales price ($3,638 compared to $3,501). Included in this increase were $77,434 in increased revenues from locations acquired since the beginning of 1994. The remaining revenue increase of $24,880 was contributed by operations acquired before 1994. The death rate in North America has remained relatively constant for several years and is expected to remain at this rate for at least the near future; however, due to the increasing proportion of people over age 65 in the North American population, demand for funeral services could increase in the decades to come. It is anticipated that the Company's near term revenue growth will continue to be primarily generated from acquired operations (added to existing clusters and the creation of new clusters) as well as from potentially higher average sales prices from improved merchandising of funeral services and products and periodic price increases. The Company anticipates continued growth through acquisitions is likely although the level of acquisitions is not likely to match the previous two years. The Company is the world's largest company in the funeral service industry and currently performs approximately 9%, 29%, 14% and 24% of the funeral services in North America, France, the United Kingdom and Australia, respectively. The Company believes that there are several thousand potential acquisition candidates in North America. Additionally, the Company's recent United Kingdom and French acquisitions demonstrate an increased focus on international acquisition opportunities. The France and other foreign operations represent approximately four months of Company ownership, while the 1994 United Kingdom operations represent approximately four months of Company ownership. During the year ended December 31, 1995, the Company sold approximately $371,000 of prearranged funeral services compared to approximately $245,000 for the same period in 1994. The Company also acquired approximately $508,000 of deferred revenues associated with prearranged funerals in the 1995 French acquisition. These prearranged funeral services are deferred and will be reflected in funeral revenues in the periods that the funeral services are performed. The current emphasis on sales of prearranged funerals is expected to continue. - --------------- * Represents new geographic cluster areas entered into since the beginning of 1994 for the period that those businesses were owned by the Company. 9 11 Funeral costs and expenses were as follows:
YEARS ENDED DECEMBER 31, ------------------------ INCREASE PERCENTAGE 1995 1994 (DECREASE) INCREASE --------- ----------- ---------- ---------- Existing clusters: North America................................. $496,893 $432,602 $ 64,291 14.9% Australia..................................... 31,325 25,786 5,539 21.5 -------- -------- -------- ----- 528,218 458,388 69,830 15.2 New clusters:* North America................................. 16,552 3,679 12,873 Australia..................................... 4,502 1,286 3,216 United Kingdom................................ 101,992 29,909 72,083 -------- -------- -------- 123,046.. 34,874 88,172 -------- -------- -------- ----- Total clusters................................ 651,264 493,262 158,002 32.0 France and other foreign........................ 173,437 -- 173,437 Non-cluster and disposed operations............. 8,663 9,733 (1,070) Administrative overhead......................... 37,732 28,808 8,924 31.0 -------- -------- -------- ----- Total funeral costs and expenses...... $871,096 $531,803 $ 339,293 63.8% ======== ======== ======== =====
The total gross profit for existing clusters increased to $275,831 in 1995 from $243,347 in 1994, while the related gross profit margin percentage for existing clusters declined slightly to 34.3% from 34.7% last year. Acquisitions since the beginning of 1994, included in existing clusters, accounted for $19,905 of the existing gross profit increase and were the primary reason for the existing cluster gross profit margin decline. Typically, acquisitions will temporarily exhibit slightly lower gross profit margins than those experienced by the Company's existing locations at least until such time as these locations are assimilated into the Company's cluster management strategy. This was especially noticeable given the large number of acquired operations incorporated into existing clusters in 1995 and 1994. The gross profit margin for those funeral operations in existing clusters that were acquired before 1994 increased to 36.0% in 1995 from 35.5% last year due to the increased revenues discussed above without a corresponding percentage increase in personnel and other operating costs. Contributing to the overall funeral gross profit margin decline (25.3% compared to 29.5% last year) were the Company's United Kingdom and French operations. The Company's United Kingdom operations had a gross profit margin of 22.5% for the year ended December 31, 1995, compared to 23.9% in 1994 (four months of ownership). French operations had a gross profit margin of 12.4% in 1995 (four months of ownership). These margins are consistent with the Company's expectations for its European funeral operations which have historically produced lower gross margins than the Company's operations in North America and Australia. Administrative overhead costs expressed as a percentage of revenues declined in 1995 to 3.2%, compared to 3.8% last year. - --------------- * Represents new geographic cluster areas entered into since the beginning of 1994 for the period that those businesses were owned by the Company. 10 12 CEMETERY Cemetery revenues were as follows:
YEARS ENDED DECEMBER 31, --------------------- PERCENTAGE 1995 1994 INCREASE INCREASE -------- -------- -------- ---------- Existing clusters: North America................................. $406,891 $321,586 $ 85,305 26.5% Australia..................................... 26,037 16,501 9,536 57.8 -------- -------- -------- ---- 432,928 338,087 94,841 28.1 New clusters:* North America................................. 14,148 -- 14,148 United Kingdom................................ 12,232 3,316 8,916 -------- -------- -------- 26,380 3,316 23,064 -------- -------- -------- ---- Total clusters........................ 459,308 341,403 117,905 34.5 Non-cluster and disposed operations............. 4,446 2,118 2,328 -------- -------- -------- ---- Total cemetery revenues............... $463,754 $343,521 $120,233 35.0% ======== ======== ======== ====
Revenues for existing clusters increased due to an increased volume of sales and higher average sales prices for property and merchandise. Included in the existing cluster increase were $38,157 in increased revenues from cemeteries acquired since the beginning of 1994. The Company plans to continue to emphasize the selling of preneed cemetery property and merchandise by maintaining an active and well-trained sales force. Additionally, future growth through acquisitions is considered likely. Cemetery costs and expenses were as follows:
YEARS ENDED DECEMBER 31, --------------------- PERCENTAGE 1995 1994 INCREASE INCREASE -------- -------- -------- ---------- Existing clusters: North America.................................. $252,125 $203,637 $ 48,488 23.8% Australia...................................... 12,652 7,659 4,993 65.2 -------- -------- ------- ---- 264,777 211,296 53,481 25.3 New clusters:* North America.................................. 10,438 -- 10,438 United Kingdom................................. 6,517 2,425 4,092 -------- -------- ------- 16,955 2,425 14,530 -------- -------- ------- ---- Total clusters......................... 281,732 213,721 68,011 31.8 Non-cluster and disposed operations.............. 3,744 2,045 1,699 Administrative overhead.......................... 17,836 17,529 307 1.8 -------- -------- ------- ---- Total cemetery costs and expenses...... $303,312 $233,295 $ 70,017 30.0% ======== ======== ======= ====
Costs at existing clusters increased $53,481 due primarily to an increase of $26,404 from cemeteries acquired since the beginning of 1994, while costs from existing cluster cemeteries acquired before 1994 increased $27,077. The overall cemetery gross profit margin increased to 34.6% in 1995 from 32.1% last year. This increase reflects strong growth in sales of preneed cemetery property and merchandise as well as continued cost control in all major expense categories. Administrative overhead costs have decreased to 3.8% of revenues this year compared to 5.1% last year. The Company believes that the overall cemetery gross profit margin may decline slightly in 1996 from the level reported in 1995, due primarily to the lower gross profit - --------------- * Represents new geographic cluster areas entered into since the beginning of 1994 for the period that those businesses were owned by the Company. 11 13 margins achieved by the large number of cemetery acquisitions late in 1995. Acquisitions typically have lower gross profit margins, at least until such time that they are assimilated into the Company's cluster management strategy and preneed selling programs are fully implemented. FINANCIAL SERVICES The Company's wholly-owned finance subsidiary, Provident Services, Inc. ("Provident") reported an improved interest rate spread offset by higher administrative expenses. The average outstanding loan portfolio during the current year was approximately $206,000 with an average interest rate spread of 3.7% compared to approximately $235,000 and 3.4%, respectively, last year. OTHER INCOME AND EXPENSES Expressed as a percentage of revenues, general and administrative expenses were 3.2% in 1995 compared to 4.6% last year. These expenses increased by $1,900 or 3.7% during the year primarily from corporate transportation and travel costs partially offset by decreased professional fees and other corporate expenses. Interest expense, which excludes the amount incurred through financial service operations, increased $38,025 or 47.5% during the current year primarily from incremental borrowings incurred to fund the Company's international acquisition program. Of the 1995 increase, approximately $27,000 is the result of financings for the United Kingdom acquisition and represents a full year of interest compared to only four months in 1994. Approximately $10,000 of the remaining increase is due to debt related to the French acquisition in late August 1995. The provision for income taxes reflected a 37.6% effective tax rate for 1995 as compared to a 40.2% effective tax rate in the prior year. The decrease in the effective tax rate is due primarily to lower taxes from international operations. RESULTS OF OPERATIONS: Year ended 1994 compared to 1993 Segment information for the Company's three lines of business was as follows:
YEARS ENDED DECEMBER 31, --------------------------------------------- PERCENTAGE 1994 1993 INCREASE INCREASE --------------------- -------------------- -------- ---------- Revenues: Funeral.................... $ 754,408 $ 603,099 $151,309 25.1% Cemetery................... 343,521 280,421 63,100 22.5 Financial services......... 19,246 15,658 3,588 22.9 ---------- -------- 1,117,175 899,178 217,997 24.2 Costs and expenses: Funeral.................... (531,803) (426,008) 105,795 24.8 Cemetery................... (233,295) (200,682) 32,613 16.3 Financial services......... (10,882) (9,168) 1,714 18.7 ---------- -------- (775,980) (635,858) 140,122 22.0 Gross profit margin and percentage: Funeral.................... 222,605 29.5% 177,091 29.4% 45,514 25.7 Cemetery................... 110,226 32.1% 79,739 28.4% 30,487 38.2 Financial services......... 8,364 43.5% 6,490 41.4% 1,874 28.9 ---------- -------- $ 341,195 30.5% $ 263,320 29.3% $ 77,875 29.6% ========== ========
12 14 FUNERAL Funeral revenues were as follows:
YEARS ENDED DECEMBER 31, --------------------- PERCENTAGE 1994 1993 INCREASE INCREASE -------- -------- -------- ---------- Existing clusters............................... $627,365 $562,231 $ 65,134 11.6% New clusters*................................... 58,419 15,162 43,257 ---------- --------- -------- ---- Total clusters............................. 685,784 577,393 108,391 18.8 United Kingdom.................................. 39,277 -- 39,277 Non-cluster and disposed operations............. 29,347 25,706 3,641 ---------- --------- -------- ---- Total funeral revenues..................... $754,408 $603,099 $151,309 25.1% ========== ========= ======== ====
The $65,134 increase in revenues at existing clusters was the result of an 8.0% increase in funeral services performed (175,284 compared to 162,287) and a 3.3% higher average sales price ($3,579 compared to $3,464). Included in this increase were $46,896 in increased revenues from locations acquired since the beginning of 1993. The majority of new cluster revenue represents the Company's Australian operations which contributed $29,042 of the increase. The Company began operations in Australia in the latter half of 1993. The United Kingdom operations represent approximately four months of Company ownership. During the year ended December 31, 1994, the Company sold approximately $245,000 of prearranged funeral services compared to approximately $159,000 for the same period in 1993. Funeral costs and expenses were as follows:
YEARS ENDED DECEMBER 31, --------------------- PERCENTAGE 1994 1993 INCREASE INCREASE -------- -------- -------- ---------- Existing clusters............................... $411,604 $367,285 $ 44,319 12.1% New clusters*................................... 41,353 11,326 30,027 -------- -------- -------- -------- Total clusters............................. 452,957 378,611 74,346 19.6 United Kingdom.................................. 29,909 -- 29,909 Non-cluster and disposed operations............. 20,129 18,916 1,213 Administrative overhead......................... 28,808 28,481 327 -------- -------- -------- -------- Total funeral costs and expenses........... $531,803 $426,008 $105,795 24.8% ======== ======== ======== ========
The gross profit margin for existing clusters declined to 34.4% from 34.7% in 1993. Acquisitions since the beginning of 1993, included in existing clusters, accounted for $37,580 of the existing cluster cost increase and were the reason for the existing cluster gross profit margin decline. The gross profit margin for those funeral operations in existing clusters that were acquired before 1993 increased to 35.6% in 1994 from 34.7% in 1993 due to the increased revenues discussed above without a corresponding percentage increase in personnel and other operating costs. The majority of new cluster costs represent the Company's Australian operations which contributed $19,544 of the increase. Contributing to the overall funeral gross profit margin improvement (29.5% compared to 29.4% last year) were reduced administrative overhead costs when expressed as a percentage of revenues. - --------------- * Represents new geographic cluster areas entered into since the beginning of 1993 for the period that those businesses were owned by the Company. 13 15 CEMETERY Cemetery revenues were as follows:
YEARS ENDED DECEMBER 31, ------------------------ PERCENTAGE 1994 1993 INCREASE INCREASE ---------- --------- -------- ---------- Existing clusters............................ $ 309,332 $ 262,643 $ 46,689 17.8% New clusters*................................ 19,775 7,633 12,142 -------- -------- -------- -------- Total clusters.......................... 329,107 270,276 58,831 21.8 United Kingdom............................... 3,316 -- 3,316 Non-cluster and disposed operations.......... 11,098 10,145 953 -------- -------- -------- -------- Total cemetery revenues................. $ 343,521 $ 280,421 $ 63,100 22.5% ======== ======== ======== ========
Revenues for existing clusters increased due to an increased volume of sales and higher average sales prices for property and merchandise. Included in the existing cluster increase were $16,395 in increased revenues from cemeteries acquired since the beginning of 1993. The majority of new cluster revenue represents the Company's Australian operations which contributed $10,033 of the increase. Cemetery costs and expenses were as follows:
YEARS ENDED DECEMBER 31, ------------------------ INCREASE PERCENTAGE 1994 1993 (DECREASE) INCREASE ---------- --------- -------- ---------- Existing clusters............................ $ 195,886 $ 172,147 $ 23,739 13.8% New clusters*................................ 9,706 3,962 5,744 -------- -------- -------- -------- Total clusters.......................... 205,592 176,109 29,483 16.7 United Kingdom............................... 2,425 -- 2,425 Non-cluster and disposed operations.......... 7,749 7,978 (229) Administrative overhead...................... 17,529 16,595 934 -------- -------- -------- -------- Total cemetery costs and expenses......................... $ 233,295 $ 200,682 $ 32,613 16.3% ======== ======== ======== ========
Costs at existing clusters increased $23,739 due to an increase of $12,296 from cemeteries acquired since the beginning of 1993. Costs from existing cluster cemeteries acquired before 1993 increased $11,443 due to the costs associated with the increased revenues discussed above. The majority of new cluster costs represent the Company's Australian operations which contributed $4,914 of the increase. The overall cemetery gross profit margin increase to 32.1% from 28.4% in 1993 reflects the strong revenue growth as well as continued cost control in all major expense categories. Administrative overhead costs have decreased to 5.1% of revenues in 1994 compared to 5.9% in 1993. FINANCIAL SERVICES Provident reported a slightly improved interest rate spread and reduced administrative expense, when expressed as a percentage of revenue, which increased the gross profit margin percentage to 43.5% in 1994 from 41.4% in 1993. The average outstanding loan portfolio during 1994 was approximately $235,000 with an average interest rate spread of 3.4% compared to approximately $216,000 and 3.3%, respectively, in 1993. OTHER INCOME AND EXPENSES Expressed as a percentage of revenues, general and administrative expenses were 4.6% in 1994 compared to 4.9% in 1993. These expenses increased by $7,994 or 18.3% during 1994. Of the increase, $2,811 was attributable to personnel expenses primarily relating to incentive compensation and retirement plan costs. - --------------- * Represents new geographic cluster areas entered into since the beginning of 1993 for the period that those businesses were owned by the Company. 14 16 Professional fees increased $3,817 in 1994 primarily from legal costs associated with the informal investigation of the Company by the Securities and Exchange Commission (the "SEC") relating to the Company's change of accountants in 1993 and the Company's Form 8-K dated March 31, 1993, as amended in April 1993, reporting such change. The remainder of the increase was derived primarily from corporate transportation and travel costs. Interest expense, which excludes the amount incurred through financial service operations, increased $20,492 or 34.4% during 1994 primarily from borrowings incurred to fund the Company's ongoing acquisition program. Increased borrowings and higher interest rates incurred under the existing lines of credit and commercial paper added $7,759. Also contributing to the increase was the recognition of $8,311 in interest expense associated with the 1994 acquisitions in the United Kingdom, $2,909 in increased interest expense from the Company's various debenture issues and $838 from the December 1994 issuance of $200,000 in 8.375% notes. Other income (expense) declined in 1994 primarily from fewer sales of excess real estate and businesses. The provision for income taxes reflected a 40.2% effective tax rate for 1994 as compared to a 40.6% effective tax rate in 1993. FINANCIAL CONDITION AND LIQUIDITY AT DECEMBER 31, 1995: GENERAL Historically, the Company has funded its working capital needs and capital expenditures primarily through cash provided by operating activities and borrowings under bank revolving credit agreements and commercial paper. Funding required for the Company's acquisition program has been generated through public and private offerings of debt and the issuance of equity securities supplemented by the Company's revolving credit agreements and additional securities registered with the SEC. The Company believes cash from operations, additional funds available under its revolving credit agreements, proceeds from offerings of securities and the other registered securities will be sufficient to continue its current acquisition program and operating policies. At December 31, 1995, the Company had net working capital of $45,527 and a current ratio of 1.08:1, compared to working capital of $120,246 and a current ratio of 1.25:1 at December 31, 1994. The cash balance at December 31, 1994 included net proceeds from the Company's December 1994 public offerings which were used in the first quarter of 1995 to repay bank debt associated with the 1994 United Kingdom acquisitions. OCTOBER 1995 PUBLIC OFFERINGS In October 1995, the Company issued 8,395,000 shares of common stock at a net offering price of $37.30 per share through an underwritten public offering. Also, in October 1995, the Company issued $300,000 of notes which were also sold through an underwritten public offering. These notes were issued in two tranches of $150,000 each with maturities in 2000 and 2007 and interest rates of 6.375% and 6.875%, respectively. All of these offerings were issued pursuant to a $1,000,000 shelf registration from September 1995. The net proceeds of approximately $613,000 from the October 1995 offerings were used primarily to repay amounts borrowed under the Company's French revolving credit agreement (such borrowings had been used to purchase the French funeral service operations) and the Company's other existing revolving credit agreements. REVOLVING CREDIT AGREEMENTS The Company's primary revolving credit agreement allows for borrowings of up to $800,000. One portion is a 364-day facility that allows for borrowings of up to $450,000, which is used to primarily support commercial paper. This facility expires June 28, 1996, but has provisions to be extended for 364-day terms. At the end of any term, the outstanding balance may be converted into a two year term loan at the Company's option. At December 31, 1995 there was $20,000 of commercial paper outstanding backed by this agreement. The second portion represents a multi-currency revolving credit agreement that allows borrowings of up to 15 17 $350,000, including up to $75,000 each in Pound Sterling, Canadian Dollar and Australian Dollar. This facility expires June 30, 2000, but has provisions to extend the termination date each year for 364-day periods. At December 31, 1995, $95,176 was outstanding under the multi-currency agreement. In August 1995, the Company entered into a French revolving credit agreement with a 364-day term which currently allows for borrowings up to $150,000. At December 31, 1995, $99,095 was outstanding under this agreement. DERIVATIVES The Company enters into derivatives in the form of interest rate swaps and cross-currency interest rate swaps in order to manage its mix of fixed and floating rate debt and to substantially hedge the Company's net investment in foreign assets. Accordingly, movements in currency rates that impact the swaps are generally offset by a corresponding movement in the value of the underlying assets being hedged and movements in interest rates that impact the fair value of the interest rate swaps are generally offset by a corresponding movement in the value of the underlying debt being hedged. Similarly, currency movements that impact foreign interest expense due under the cross-currency interest rate swaps are generally offset by a corresponding movement in the earnings of the foreign operation. In general, interest rates are managed such that up to 50% of the total debt (excluding debt which offsets the Provident loan receivable portfolio) is floating rate and thus is sensitive to interest rate fluctuations. After giving effect to the interest rate and cross-currency interest rate swaps discussed more fully in notes two and seven to the Company's consolidated financial statements, the Company's total debt has been converted into approximately $1,338,000 of fixed interest rate debt at a weighted average rate of 7.96% and approximately $516,000 of floating interest rate debt at a weighted average rate of 6.75%. Based on short-term rates at December 31, 1995 and the related debt or swaps outstanding subject thereto, a two percent increase in the various floating rate indices referenced in the debt and swaps would cause a $10,293 net increase in interest expense. This impact is mitigated by the Provident loan receivable portfolio which generally carries floating rates. Thus, the Company's overall sensitivity to floating interest rate fluctuations on amounts owed is offset by a corresponding higher interest rate on the receivables issued by Provident (approximately $214,000 in receivables at December 31, 1995). FOREIGN OPERATIONS The death care industries in countries where the Company has foreign operations are generally stable and have had predictable cash flows. In addition, those countries have not had highly inflationary economies. The Company believes, due to foreign currency hedges described above, that the effects of foreign currency translations have been mitigated. SOURCES AND USES OF CASH Cash Flows from Operating Activities: Net cash provided by operating activities was $90,704 for the year ended December 31, 1995, compared to $162,444 for the same period in 1994, a decrease of $71,740. This decrease was due partially to an increase in net receivables resulting from increased sales of funeral services and cemetery products and merchandise. Additionally, cash flows relating to prearranged funeral activities decreased due to the timing of cash payments and withdrawals to and from trusts and increased cash outlays on marketing efforts. These decreases were offset by improved operating results in 1995. Cash Flows from Investing Activities: Net cash used in investing activities was $844,341 for the year ended December 31, 1995, compared to $756,227 for the same period in 1994. This increase reflects the Company's aggressive acquisition of funeral service locations and cemeteries. During the year ended December 31, 1995, $693,627 of cash was used for acquisitions. The effect of acquisitions is detailed in note three to the consolidated financial statements. In addition to acquisitions, capital expenditures including new construction of facilities and major improvements to existing properties, continue to require significant amounts of cash. Cash used for capital expenditures was $125,231 during the year ended December 31, 1995. 16 18 Cash Flows from Financing Activities: Net cash provided by financing activities was $565,031 for the year ended December 31, 1995, compared to $791,302 for the same period in 1994. During 1995, cash inflows included $862,848 of proceeds from issuances of long-term debt (issued in public and private offerings) and $331,063 of proceeds from issuances of Company common stock compared to $562,226 of public offerings last year. In 1995, cash outflows included $179,636 of scheduled long-term debt payments and cash dividend payments compared to $67,909 last year. Other cash outflows during 1995 included a $453,959 net decrease in borrowings under the Company's revolving credit agreements. In 1994, the Company had a net increase of $295,570 from revolving credit agreements. See notes six and eleven to the consolidated financial statements. The Company believes that debt service has no adverse effect on its operations or financing activities at the current levels of debt outstanding. As of December 31, 1995, the Company's debt to capitalization ratio was 46.3% compared to 54.0% at December 31, 1994. The interest rate coverage ratio for the year ended December 31, 1995 was 3.11:1, compared to 3.42:1 for the same period in 1994. This interest rate coverage level has been relatively consistent, despite higher levels of debt outstanding, for several years. The Company believes that the acquisition of funeral and cemetery operations funded with debt or Company common stock is a prudent business strategy given the stable cash flow generated and the low failure rate exhibited by these types of businesses. The Company believes these acquired firms are capable of servicing the additional debt and providing a sufficient return on the Company's investment. The Company expects adequate sources of funds to be available to finance its future operations and acquisitions through internally generated funds, borrowings under credit facilities and the issuance of securities. At December 31, 1995, the Company had approximately $430,000 and $255,000 of available borrowings under its primary and multi-currency credit facilities, respectively. In addition, as of December 31, 1995, the Company had the ability to issue $387,000 in securities under the September 1995 shelf registration as well as 7,527,000 shares of common stock and a total of $34,753 of guaranteed promissory notes and convertible debentures registered with the SEC under a separate shelf registration to be used exclusively for future acquisitions. PREARRANGED FUNERAL SERVICES The Company has a marketing program to sell prearranged funeral contracts and the funds collected are generally held in trust or are used to purchase a life insurance or annuity contract. The principal amount of these prearranged funeral contracts will be received in cash by a Company funeral service location at the time the funeral is performed. Earnings on trust funds and increasing benefits under insurance funded contracts also increase the amount of cash to be received upon performance of the funeral and are intended to cover future increases in the cost of providing a price guaranteed funeral service. Marketing costs incurred with the sale of prearranged funeral contracts are a current use of cash which is partially offset with cash retained, pursuant to state laws, from amounts trusted and certain commissions earned by the Company for sales of insurance products issued by third party insurers. The Company sells prearranged funerals in most of its service markets including its foreign markets. Auxia, the Company's French life insurance subsidiary, primarily sells insurance products used to fund prearranged funerals to be performed at the Company's French funeral service locations. The Company believes prearrangements add stability to the funeral service industry and will stimulate future revenue growth. Prearranged funeral services fulfilled as a percent of the total North American funerals performed annually approximates 22% and is expected to grow, thereby making the total number of funerals performed more predictable. CREMATIONS In recent years there has been steady, gradual growth in the number of cremations that have been chosen as an alternative to traditional methods of disposal of human remains. According to industry studies, cremations currently account for approximately 20% of all dispositions in the United States. The Company's North American operations perform substantially more cremations than the national average. In 1995, slightly over 32% of all families served by the Company's North American funeral service locations selected the cremation alternative. The Company has a significant number of operating locations in Florida and the west coast of North America where the cremation alternative continues to gain acceptance. Based on industry 17 19 studies, the Company believes that cremations account for approximately 60-70% of all dispositions of human remains in Australia and the United Kingdom. It is estimated that cremations account for approximately 11% of all dispositions of human remains in France. Though a cremation typically results in less sales dollars than a traditional funeral service, the Company believes that funeral operations which are predominantly cremation businesses typically have higher gross profit margin percentages than those exhibited at traditional funeral operations. The Company believes that the memorialization of cremated remains represents a source of revenue growth. Since the number of cremations is increasing, the Company is emphasizing the marketing of memorialization alternatives. OTHER MATTERS The Company will adopt Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("FAS 121") in the first quarter of 1996. FAS 121 attempts to standardize methods used to determine whether the costs of long-lived assets will be recovered, and how such costs should be tested for value impairment. The Company has not experienced impairment of its assets, including names and reputations, in the past and does not anticipate that FAS 121 will have a material impact on the Company's financial position or results of operations in the future. In addition, in the first quarter of 1996, the Company plans to adopt the disclosure requirements of Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" ("FAS 123"). FAS 123 establishes financial accounting and reporting standards for stock-based employee compensation plans. 18 20 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO FINANCIAL STATEMENTS AND RELATED SCHEDULE
PAGE ---- Report of Independent Accountants..................................................... 20 Consolidated Statement of Income for the three years ended December 31, 1995.......... 21 Consolidated Balance Sheet as of December 31, 1995 and 1994........................... 22 Consolidated Statement of Cash Flows for the three years ended December 31, 1995...... 23 Consolidated Statement of Stockholders' Equity for the three years ended December 31, 1995................................................................................ 24 Notes to Consolidated Financial Statements............................................ 25 Financial Statement Schedule: II -- Valuation and Qualifying Accounts............................................... 47
All other schedules have been omitted because the required information is not applicable or is not present in amounts sufficient to require submission or because the information required is included in the consolidated financial statements or the related notes thereto. 19 21 REPORT OF INDEPENDENT ACCOUNTANTS To the Stockholders and Board of Directors of Service Corporation International We have audited the accompanying consolidated balance sheet of Service Corporation International as of December 31, 1995 and 1994, and the related consolidated statements of income, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1995. We have also audited the financial statement schedule for the three years ended December 31, 1995, listed in the index at item 8 of this Form 10-K. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits 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 audits provide 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 Service Corporation International as of December 31, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. As discussed in Note 15 to the consolidated financial statements, effective January 1, 1993, the Company changed its method of accounting for prearranged funeral contracts and cemetery sales. COOPERS & LYBRAND L.L.P. Houston, Texas March 11, 1996 20 22 SERVICE CORPORATION INTERNATIONAL CONSOLIDATED STATEMENT OF INCOME
YEARS ENDED DECEMBER 31, -------------------------------------- 1995 1994 1993 ---------- --------- --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Revenues............................................... $1,652,126 $1,117,175 $ 899,178 Costs and expenses..................................... (1,186,905) (775,980) (635,858) ----------- ---------- --------- Gross profit........................................... 465,221 341,195 263,320 General and administrative expenses.................... (53,600) (51,700) (43,706) ----------- ---------- --------- Income from operations................................. 411,621 289,495 219,614 Interest expense....................................... (118,148) (80,123) (59,631) Dividends on preferred securities of SCI Finance LLC... (10,781) (539) -- Other income........................................... 11,519 10,188 13,509 ----------- ---------- --------- (117,410) (70,474) (46,122) ----------- ---------- --------- Income before income taxes............................. 294,211 219,021 173,492 Provision for income taxes............................. (110,623) (87,976) (70,400) ----------- ---------- --------- Income before cumulative effect of change in accounting principles................................ 183,588 131,045 103,092 Cumulative effect of change in accounting principles (net of income tax).................................. -- -- (2,031) ----------- ---------- --------- Net income............................................. $ 183,588 $ 131,045 $ 101,061 =========== ========== ========= Earnings per share: Primary Income before cumulative effect of change in accounting principles........................... $ 1.80 $ 1.51 $ 1.24 Cumulative effect of change in accounting principles (net of income tax)............................. -- -- (.03) ----------- ---------- --------- Net income........................................... $ 1.80 $ 1.51 $ 1.21 =========== ========== ========= Fully diluted Income before cumulative effect of change in accounting principles............................. $ 1.70 $ 1.43 $ 1.19 Cumulative effect of change in accounting principles (net of income tax)............................... -- -- (.02) ----------- ---------- --------- Net income........................................... $ 1.70 $ 1.43 $ 1.17 =========== ========== ========= Weighted average number of shares and equivalents...... 102,074 86,926 83,372 =========== ========== =========
(See notes to consolidated financial statements) 21 23 SERVICE CORPORATION INTERNATIONAL CONSOLIDATED BALANCE SHEET ASSETS
DECEMBER 31, ----------------------- 1995 1994 --------- --------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Current assets: Cash and cash equivalents.......................................... $ 29,735 $ 218,341 Receivables, net of allowances..................................... 446,618 291,135 Inventories........................................................ 120,805 60,897 Other.............................................................. 32,371 21,436 ---------- ---------- Total current assets....................................... 629,529 591,809 ---------- ---------- Investments -- insurance subsidiary.................................. 557,335 -- Prearranged funeral contracts........................................ 1,816,466 1,418,104 Long-term receivables................................................ 759,935 529,843 Cemetery property, at cost........................................... 1,162,556 748,639 Property, plant and equipment, at cost (net)......................... 1,273,722 832,401 Deferred charges and other assets.................................... 312,053 230,336 Names and reputations (net).......................................... 1,152,215 810,756 ---------- ---------- $7,663,811 $5,161,888 ========== ========== LIABILITIES & STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities........................... $ 393,191 $ 154,770 Income taxes....................................................... 68,574 39,084 Current maturities of long-term debt............................... 122,237 277,709 ---------- ---------- Total current liabilities.................................. 584,002 471,563 ---------- ---------- Long-term debt....................................................... 1,732,047 1,330,177 Deferred income taxes................................................ 437,840 238,088 Other liabilities.................................................... 400,434 233,356 Deferred prearranged funeral contract revenues....................... 2,361,643 1,519,582 Commitments and contingencies........................................ -- -- Company obligated, mandatorily redeemable, convertible preferred securities of SCI Finance LLC, whose principal asset is a 6.25%, $216,315 note from the Company..................................... 172,500 172,500 Stockholders' equity: Common stock, $1 per share par value, 200,000,000 shares authorized, 117,271,086 and 94,857,060, respectively, issued and outstanding.......................................... 117,271 94,857 Capital in excess of par value..................................... 1,331,979 718,858 Retained earnings.................................................. 518,562 381,509 Foreign translation adjustment and other........................... 7,533 1,398 ---------- ---------- Total stockholders' equity................................. 1,975,345 1,196,622 ---------- ---------- $7,663,811 $5,161,888 ========== ==========
(See notes to consolidated financial statements) 22 24 SERVICE CORPORATION INTERNATIONAL CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, ------------------------------------- 1995 1994 1993 --------- --------- --------- (DOLLARS IN THOUSANDS) Cash flows from operating activities: Net income.............................................. $ 183,588 $ 131,045 $ 101,061 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization......................... 98,432 76,077 58,214 Provision for deferred income taxes................... 45,164 27,490 29,235 Gains from dispositions (net)......................... (1,024) (2,143) (7,076) Cumulative effect of change in accounting principles......................................... -- -- 2,031 Change in assets and liabilities net of effects from acquisitions: (Increase) in receivables.......................... (115,888) (103,935) (35,520) Change in prearranged funeral contracts and associated deferred revenues..................... (86,685) 42,446 (14,464) (Increase) decrease in other assets................ (36,496) (35,983) 1,967 Increase (decrease) in other liabilities........... 7,473 27,606 (9,826) Other.............................................. (3,860) (159) 5,332 --------- --------- --------- Net cash provided by operating activities............... 90,704 162,444 130,954 --------- --------- --------- Cash flows from investing activities: Capital expenditures.................................. (125,231) (81,090) (59,585) Proceeds from sales of property and equipment......... 12,655 13,294 24,006 Acquisitions, net of cash acquired.................... (693,627) (711,357) (175,753) Loans issued by finance subsidiary.................... (38,184) (48,320) (102,328) Principal payments received on loans by finance subsidiary......................................... 24,312 76,288 41,652 Change in investments and other....................... (24,266) (5,042) (2,367) --------- --------- --------- Net cash used in investing activities................... (844,341) (756,227) (274,375) --------- --------- --------- Cash flows from financing activities: Increase (decrease) in borrowings under revolving credit agreements.................................. (453,959) 295,570 37,500 Long-term debt issued................................. 862,848 200,000 150,000 Payments of debt...................................... (135,960) (31,896) (24,283) Convertible preferred shares of SCI Finance LLC issued............................................. -- 172,500 -- Common stock issued................................... 331,063 189,726 -- Repurchase of common stock............................ -- ...... -- (1,637) Dividends paid........................................ (43,676) (36,013) (32,887) Exercise of stock options and other................... 4,715 1,415 4,297 --------- --------- --------- Net cash provided by financing activities............... 565,031 791,302 132,990 --------- --------- --------- Net increase (decrease) in cash and cash equivalents.... (188,606) 197,519 (10,431) Cash and cash equivalents at beginning of year.......... 218,341 20,822 31,253 --------- --------- --------- Cash and cash equivalents at end of year................ $ 29,735 $ 218,341 $ 20,822 ========= ========= =========
(See notes to consolidated financial statements) 23 25 SERVICE CORPORATION INTERNATIONAL CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOREIGN CAPITAL IN TRANSLATION COMMON EXCESS OF RETAINED ADJUSTMENT STOCK PAR VALUE EARNINGS AND OTHER --------- ---------- -------- ----------- (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) Balance at December 31, 1992.................... $ 76,905 $ 389,238 $220,497 $(3,543) Add (deduct): Net income.................................... 101,061 Repurchase of common stock.................... (66) (388) (1,183) Common stock issued: Stock option exercises and stock grants.... 995 18,899 Acquisitions............................... 1,418 17,432 (1,422) Debenture conversion....................... 5,607 92,721 Dividends on common stock ($.40 per share).... (34,074) Unrealized appreciation of investments........ 1,254 Foreign translation adjustment................ (838) --------- ---------- -------- ------- Balance at December 31, 1993.................... 84,859 517,902 284,879 (3,127) Add (deduct): Net income.................................... 131,045 Retirement of common stock.................... (32) (773) Common stock issued: Common stock offering...................... 7,700 182,026 Stock option exercises and stock grants.... 226 3,675 Acquisitions............................... 2,033 7,458 2,729 Debenture conversion....................... 71 1,222 Dividends on common stock ($.42 per share).... (37,144) Foreign translation adjustment................ 4,525 Gain on sale of subsidiary stock and other.... 7,348 --------- ---------- -------- ------- Balance at December 31, 1994.................... 94,857 718,858 381,509 1,398 Add (deduct): Net income.................................... 183,588 Common stock issued: Common stock offerings..................... 9,175 321,888 Stock option exercises and stock grants.... 348 6,140 Acquisitions............................... 3,655 105,622 Debenture conversions...................... 9,236 179,471 Dividends on common stock ($.44 per share).... (46,535) Foreign translation adjustment and other...... 6,135 --------- ---------- -------- ------- Balance at December 31, 1995.................... $ 117,271 $1,331,979 $518,562 $ 7,533 ========= ========== ======== =======
(See notes to consolidated financial statements) 24 26 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) NOTE ONE NATURE OF OPERATIONS The Company is the largest provider of death care services in the world. At December 31, 1995, the Company operated 2,739 funeral service locations, 318 cemeteries and 139 crematoria located in North America, Europe and Australia. The funeral service locations and cemetery operations consist of the Company's funeral homes, cemeteries, crematoria and related businesses. The funeral service locations provide all professional services relating to funerals, including the use of funeral facilities and motor vehicles. Funeral homes sell funeral related merchandise and certain funeral service locations contain crematoria. The Company markets prearranged funeral services whereby a customer contractually agrees to the terms of a funeral to be performed in the future. The Company's cemeteries sell cemetery interment rights (including mausoleum spaces and lawn crypts) and certain merchandise including stone and bronze memorials and burial vaults. Cemeteries also perform interment services and provide management and maintenance of cemetery grounds. Certain cemeteries also operate crematoria. The Company's financial services operations consist of a finance subsidiary, Provident Services, Inc. ("Provident"). Provident provides capital financing to independent funeral home and cemetery operators. NOTE TWO SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation: The consolidated financial statements include the accounts of Service Corporation International and all majority-owned subsidiaries (the "Company"). Intercompany balances and transactions have been eliminated in consolidation. Certain reclassifications have been made to prior years to conform to current period presentation. Cash Equivalents: The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Inventories and Cemetery Property: Funeral merchandise and cemetery property and merchandise, are stated at cost, which is not in excess of market, determined using average cost. Depreciation and Amortization: Depreciation of property, plant and equipment is provided using the straight line method over the estimated useful lives of the various classes of assets. Property, plant and equipment are depreciated over a period ranging from seven to 50 years for property and plant while equipment is depreciated over a period from three to 20 years. For the three years ended December 31, 1995, depreciation expense was $52,828, $35,546 and $26,757, respectively. Maintenance and repairs are charged to expense whereas renewals and major replacements are capitalized. Prepaid management, consultative and non-competition agreements, primarily with former owners and key employees of businesses acquired are amortized over the lives of the respective contracts. Funeral Operations: Funeral revenue is recognized when the funeral service is performed. The Company's trade receivables consist primarily of funeral services already performed. An allowance for doubtful accounts has been provided based on historical experience. The Company sells price guaranteed prearranged funeral contracts through various programs providing for future funeral services at prices prevailing when the agreement is signed. Payments under these contracts are generally placed in trust (pursuant to state law) or are used to pay premiums on life insurance policies issued by third party insurers in North America, the United Kingdom and Australia or the Company's French prearranged funeral service life insurance subsidiary ("Auxia") which was acquired in the 1995 French 25 27 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) acquisition (see note three). Unperformed price guaranteed prearranged funeral contracts are included in the consolidated balance sheet as "prearranged funeral contracts" or, in the case of contracts funded by Auxia, "investments-insurance subsidiary". A corresponding credit is recorded to "deferred prearranged funeral contract revenues". Allowances for customer cancellations are provided at the date of sale. Prearranged funeral trust earnings and increasing insurance benefits are accrued and deferred until the service is performed and are intended to cover future increases in the cost of providing a price guaranteed funeral service. Included in deferred prearranged funeral contract revenues are net obtaining costs, including sales commissions and certain other direct marketing costs, applicable to prearranged funeral contracts which are deferred and will be expensed over a period representing the average life of the prearranged contract. The aggregate net costs deferred as of December 31, 1995 and 1994 were $87,638 and $53,962, respectively. Cemetery Operations: All cemetery interment right sales, together with associated merchandise, are recorded to income at the time contracts are signed. Costs related to the sales of interment rights include property and other costs related to cemetery development activities which are charged to operations using the specific identification method. Allowances for customer cancellations are provided at the date of sale based upon historical experience. Costs related to merchandise are based on actual costs incurred or estimates of future costs necessary to purchase the merchandise, including provisions for inflation when required. Pursuant to state law, all or a portion of the proceeds from the sale of cemetery merchandise may also be required to be paid into trust funds until such merchandise is purchased by the Company for the customer. Merchandise funds trusted at December 31, 1995 and 1994 were $314,400 and $176,071, respectively, which approximates fair value. The Company recognizes accrued trust income on these merchandise trusts in current cemetery revenues as trust earnings accrue to defray inflation costs recognized related to the unpurchased cemetery merchandise. Additionally, a portion of the proceeds from the sale of cemetery property is required by state law to be paid into perpetual care trust funds. Earnings from these trusts are recognized in current cemetery revenues and are intended to defray cemetery maintenance costs. Perpetual care funds trusted at December 31, 1995 and 1994 were $242,449 and $216,706, respectively, which approximates fair value. The principal of such perpetual care trust funds generally cannot be withdrawn by the Company and therefore is not included in the consolidated balance sheet. For the three years ended December 31, 1995, the earnings recognized from all cemetery trusts were $33,795, $24,456 and $23,721, respectively. Names and Reputations: The excess of purchase price over the fair value of identifiable net assets acquired in transactions accounted for as a purchase are included in "Names and reputations" and generally amortized on a straight line basis over 40 years which, in the opinion of management, is not necessarily the maximum period benefited. Fair values determined at the date of acquisition are determined by management or independent appraisals. Many of the Company's acquired funeral service locations have been providing high quality service to client families for many years. Such loyalty often forms the basic valuation of the funeral business. Additionally, the death care industry has historically exhibited stable cash flows as well as a low non-failure rate. The Company monitors the recoverability of names and reputations based on projections of future undiscounted cash flows of the acquired businesses. The amortization charged against income was $25,226, $15,495 and $10,339 for the three years ended December 31, 1995, respectively. Accumulated amortization of names and reputations as of December 31, 1995 and 1994 was $77,855 and $52,290, respectively. Derivatives: The Company enters into derivatives in the form of interest rate swaps and cross-currency interest rate swaps in order to manage its mix of fixed and floating rate debt and to substantially hedge the Company's net investments in foreign assets. The Company has procedures in place to monitor and control the use of derivatives and enters into transactions only with a limited group of credit worthy financial institutions. The Company does not engage in derivative transactions for speculative or trading purposes, nor is it a party to leveraged derivatives. In general, cross-currency swaps are entered into concurrently with significant foreign acquisitions and convert U.S. dollar debt into the respective foreign currency of the acquisitions. Such cross-currency swaps are 26 28 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) used in combination with local currency borrowings to substantially hedge the Company's net investment in foreign operations. The cross-currency swaps generally include interest rate provisions to enable the Company to additionally hedge a portion of the earnings of its foreign operations. Accordingly, movements in currency rates that impact the swap are generally offset by a corresponding movement in the value of the underlying assets being hedged. Similarly, currency movements that impact foreign expense due under the cross-currency interest rate swaps are generally offset by a corresponding movement in the earnings of the foreign operation (see note seven). Interest rate swap settlements are generally semi-annual and match the coupon settlements of the underlying debt being hedged or related intercompany loan payments from the foreign operation. Amounts to be paid or received under interest rate swaps, including the interest rate provisions of the cross-currency swaps, are recorded on the accrual basis over the life of the swap agreements as an adjustment to interest expense. The related net amounts payable to, or receivable from, the counterparties are included in accrued liabilities or current receivables, respectively. In the cross-currency swaps, the notional amount is exchangeable in accordance with the terms of the swaps: at maturity for non-amortizing swaps or according to a defined amortization table for swaps which are amortizing. Gains and losses resulting from currency movements on the cross-currency swaps that hedge the Company's net foreign investments are reflected in stockholders' equity, with the related net amounts due to, or from, the counterparties included in other liabilities, or other assets, respectively. Net deferred gains and losses on early termination of interest rate swaps are being amortized into interest expense over the remaining lives of the original agreements ($2,193 net unamortized loss at December 31, 1995). Use of Estimates in the Preparation of Financial Statements: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. NOTE THREE ACQUISITIONS On August 25, 1995, the Company acquired an approximate 51% interest in Omnium de Gestion et de Financement S.A. ("OGF"). OGF, in turn, owned approximately 65% of Pompes Funebres Generales S.A. ("PFG"). OGF and PFG, when combined, is the largest funeral service organization in Europe, operating 1,099 funeral service locations, 28 crematoria and Auxia which primarily sells insurance policies in connection with OGF/PFG's prearranged funeral business. On December 31, 1995, the Company owned shares representing over 98% of OGF and over 96% of PFG with the intent to acquire 100% of the outstanding shares of both companies. The total purchase price for OGF and the portion of PFG not owned by OGF is expected to be approximately $577,000 consisting of cash and debt assumed. Financing for this acquisition was initially provided by borrowings under a short-term French revolving credit facility, with permanent financing provided by issuances of notes and Company common stock in October 1995 (see notes six and eleven). OGF/PFG was accounted for as a purchase and the results of operations have been consolidated with the Company's since August 25, 1995. On October 11, 1995, the Company purchased Gibraltar Mausoleum Corporation ("Gibraltar"). Gibraltar, a private funeral and cemetery company based in Indianapolis, owned 23 funeral service locations and 54 cemeteries. The purchase price of approximately $267,000 was financed through the issuance of securities under the Company's acquisition shelf registration and borrowings under the Company's revolving credit facilities. 27 29 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In 1994 the Company acquired the two largest publicly-traded funeral service providers in the United Kingdom, Great Southern Group plc and Plantsbrook Group plc. These firms owned a combined 534 funeral service locations, 13 crematoria and two cemeteries. The purchase price of approximately $508,000 was primarily funded by borrowings under two short-term bank facilities in the United Kingdom (subsequently repaid or refinanced with long-term securities in early 1995), other revolving credit borrowings and debt assumed by the Company. Both acquisitions were accounted for as purchases and the results of operations have been consolidated with the Company since September 1, 1994. In addition to the acquisitions disclosed above, the Company has acquired certain other funeral and cemetery operations during the years ended December 31, 1995 and 1994. The operating results of all of these acquisitions have been included since their respective dates of acquisitions. The following table is a summary of the above acquisitions made during the two years ended December 31, 1995 accounted for as purchases:
1995 1994 --------- -------- Number acquired: Funeral service locations................................... 1,263 674 Cemeteries.................................................. 99 28 Crematoria.................................................. 30 24 Purchase price................................................ $1,145,777 $814,493
The purchase price in both years consisted primarily of combinations of cash, Company common stock, issued and assumed debt and the retirement of loans receivable issued by Provident. In addition on September 5, 1995, the Company acquired the shares of Service Corporation International (Canada) Limited ("SCIC") not already owned by the Company. This transaction eliminated the approximate 31% minority interest ownership of SCIC and made SCIC a wholly owned subsidiary of the Company. On that date SCIC owned 75 funeral service locations and three cemeteries. The purchase price of approximately $62,578 was financed through borrowings under the Company's existing revolving credit agreements, with permanent financing provided by the issuance of an amortizing note in December 1995. The effect of the above acquisitions on the consolidated balance sheet at December 31, was as follows:
1995 1994 --------- -------- Current assets................................................. $ 171,431 $ 43,754 Investments-insurance subsidiary............................... 541,784 -- Prearranged funeral contracts.................................. 132,158 126,721 Long-term receivables.......................................... 155,013 (9,363) Cemetery property.............................................. 423,852 323,633 Property, plant and equipment.................................. 379,616 195,289 Deferred charges and other assets.............................. 42,949 4,721 Names and reputations.......................................... 363,506 398,583 Current liabilities............................................ (320,158) (60,814) Long-term debt................................................. (89,724) (50,122) Deferred income taxes and other liabilities.................... (341,070) (104,935) Deferred prearranged funeral contract revenues................. (656,453) (143,890) Stockholders' equity........................................... (109,277) (12,220) --------- -------- Cash used for acquisitions................................... $ 693,627 $711,357 ========= ========
28 30 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following unaudited pro forma information assumes that the acquisition by the Company of all operations acquired during the years ended December 31, 1995 and 1994 took place on January 1, 1994 (1,937 funeral service locations, 127 cemeteries and 54 crematoria acquired in 158 separate transactions.) This information also assumes that the net proceeds from the Company's December 1994 public offerings of Company common stock, 8.375% notes and convertible preferred securities of SCI Finance LLC and October 1995 public offerings of notes and Company common stock (disclosed in notes six and eleven) were issued at the beginning of 1994. The net proceeds of the December 1994 public offerings were first applied toward the purchase price of the Company's September 1994 acquisitions in the United Kingdom, with the excess net proceeds used to repay amounts outstanding under the Company's existing revolving credit facilities. The net proceeds of the October 1995 public offerings were first applied toward the purchase price of OGF/PFG, with the excess net proceeds used to repay amounts outstanding under the Company's existing revolving credit facilities. This unaudited pro forma information may not be indicative of results that would have actually resulted if these transactions had occurred on the dates indicated or which may be obtained in the future.
YEARS ENDED DECEMBER 31, ----------------------- 1995 1994 --------- --------- (UNAUDITED) Revenues..................................................... $2,127,459 $1,957,091 ========== ========== Net income................................................... $ 200,580 $ 168,457 ========== ========== Primary earnings per common share............................ $ 1.80 $ 1.56 ========== ==========
NOTE FOUR PREARRANGED FUNERAL CONTRACTS At December 31, 1995, amounts due from trust funded contracts ($866,829) and amounts due from third party insurance funded contracts ($949,637) will be available to the Company at the time the funeral services are performed and are shown net of estimated customer cancellations. The cancellation rate is based on historical experience equivalent to approximately 8% of the total balance. Accumulated earnings from trust funds and increasing insurance benefits have been included to the extent that they have accrued through December 31, 1995. The cumulative total has been reduced by allowable cash withdrawals for trust earnings and amounts retained by the Company pursuant to various state laws. 29 31 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE FIVE INCOME TAXES The provision for income taxes includes United States income taxes, determined on a consolidated return basis, foreign and state and local income taxes. Income before income taxes:
YEARS ENDED DECEMBER 31, ---------------------------------- 1995 1994 1993 -------- -------- -------- United States....................................... $257,318 $198,961 $157,004 Foreign............................................. 36,893 20,060 16,488 -------- -------- -------- $294,211 $219,021 $173,492 ======== ======== ======== Provision for income taxes: Current: United States..................................... $ 43,396 $ 43,290 $ 29,449 Foreign........................................... 12,949 9,443 6,083 State and local................................... 9,114 7,753 5,633 -------- -------- -------- 65,459 60,486 41,165 -------- -------- -------- Deferred: United States..................................... 39,767 25,282 26,245 Foreign........................................... (1,498) (219) (512) State and local................................... 6,895 2,427 3,502 -------- -------- -------- 45,164 27,490 29,235 -------- -------- -------- Total provision..................................... $110,623 $ 87,976 $ 70,400 ======== ======== ========
The differences between the U.S. federal statutory tax rate and the Company's effective rate are as follows:
YEARS ENDED DECEMBER 31, ---------------------------- 1995 1994 1993 -------- ------- ------- Computed tax provision at the applicable federal statutory income tax rate.............................. $102,974 $76,658 $60,722 State and local taxes, net of federal income tax benefits............................................... 10,406 6,617 5,930 Dividends received deduction and tax exempt interest..... (1,939) (1,425) (1,767) Amortization of names and reputations.................... 4,554 3,807 3,426 Enacted tax rate increase for deferred income taxes...... -- -- 2,431 Foreign tax rate difference.............................. (5,309) 2,144 (26) Other.................................................... (63) 175 (316) -------- -------- -------- Provision for income taxes............................. $110,623 $87,976 $70,400 ======== ======== ======== Total effective tax rate................................. 37.6% 40.2% 40.6% ======== ======== ========
30 32 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Deferred tax assets and liabilities as of December 31, were as follows:
1995 1994 -------- -------- Receivables, principally due to sales of cemetery interment rights and related products.................................. $128,755 $ 85,532 Inventories and cemetery property, principally due to purchase accounting adjustments....................................... 317,937 173,430 Property, plant and equipment, principally due to depreciation and to purchase accounting adjustments....................... 110,755 72,194 Other.......................................................... 5,519 -- -------- -------- Deferred tax liabilities..................................... 562,966 331,156 -------- -------- Deferred revenue on prearranged funeral contracts, principally due to earnings from trust funds............................. (49,889) (42,704) Accrued liabilities............................................ (20,273) (17,577) Carry-forwards and foreign tax credits......................... (10,888) (11,592) -------- -------- Deferred tax assets.......................................... (81,050) (71,873) -------- -------- Valuation allowance.......................................... 8,729 5,390 -------- -------- Net deferred income taxes.................................... $490,645 $264,673 ======== ========
During the three years ended December 31, 1995, tax expense resulting from allocating certain tax benefits directly to capital in excess of par totaled $1,165, $1,223 and $1,197, respectively. Current refundable income taxes and foreign current deferred tax assets are included in other current assets, with current taxes payable and current deferred taxes being reflected as "Income taxes" on the consolidated balance sheet. United States income taxes have not been provided on $87,912 of undistributed earnings of foreign subsidiaries since it is the Company's intention to reinvest such earnings indefinitely. As of December 31, 1995 the Company has United States foreign tax credit carry-forwards of $5,509 and worldwide net operating loss carry-forwards of $4,108 principally related to acquired subsidiaries which will expire in the years 1996 through 2010. Various subsidiaries have state operating loss carry-forwards of $30,825 with expiration dates through 2010. The Company believes that some uncertainty exists with respect to future realization of these tax credits and loss carry-forwards, therefore a valuation allowance has been established for the carry-forwards not expected to be realized. The increase in the valuation allowance is primarily attributable to the foreign tax credits. Actual cash disbursements for income taxes and other tax assessments during the three years ended December 31, 1995, totaled $65,859, $69,555 and $46,557, respectively. 31 33 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE SIX DEBT Debt at December 31, was as follows:
1995 1994 ---------- ---------- Bank revolving credit agreements and commercial paper....... $ 226,611 $ 680,570 6.375% notes due in 2000.................................... 150,000 -- 8.72% amortizing notes due in 2002.......................... 178,866 -- 8.375% notes due in 2004.................................... 200,000 200,000 6.875% notes due in 2007.................................... 150,000 -- 6.95% amortizing notes due in 2010.......................... 63,837 -- 7.875% debentures due in 2013............................... 150,000 150,000 7.0% notes due in 2015...................................... 300,000 -- Medium term notes, maturities through 2019, fixed average interest rate of 9.6%..................................... 186,040 234,700 6.5% convertible subordinated debentures, redeemed at $20.74 per common share in 1995.................................. -- 172,500 8% convertible debentures, redeemed at $18 per common share in 1995................................................... -- 14,939 5.0% convertible debentures, interest rates range from 5% -- 5.5%, due through 2005, conversion price ranges from $22.50 -- $48.81..................................... 27,090 25,618 Mortgage notes payable with maturities through 2013, average interest rate is 7.9%..................................... 99,025 69,684 Other....................................................... 122,815 59,875 ---------- ---------- Total debt.................................................. 1,854,284 1,607,886 Less current maturities..................................... (122,237) (277,709) ---------- ---------- Total long-term debt.............................. $1,732,047 $1,330,177 ========== ==========
The Company's primary revolving credit agreement provides for borrowings up to $800,000. The 364-day portion allows for borrowings up to $450,000, and is used primarily to support commercial paper. The agreement expires June 28, 1996, but has provisions to be extended for 364-day terms. At the end of any term, the outstanding balance may be converted into a two year term loan at the Company's option. Interest rates are based on various indices as determined by the Company. In addition, a facility fee ranging from .06% to .15% is paid quarterly on the total commitment amount. At December 31, 1995, there was $20,000 of commercial paper outstanding backed by this agreement at a weighted average interest rate of 5.98%. In addition, the Company has a multi-currency revolving credit agreement which allows for borrowings of up to $350,000, including up to $75,000 each in Pound Sterling, Canadian Dollar and Australian Dollar. This agreement expires June 30, 2000, but has provisions to extend the termination date each year for 364-day periods. Interest rates are based on various indices as determined by the Company. In addition, a facility fee ranging from .085% to .15% is paid quarterly on the total commitment amount. At December 31, 1995, there was $95,176 outstanding under this agreement at a weighted average interest rate of 7.12%. These credit agreements disclosed above contain financial compliance provisions that contain certain restrictions on levels of net worth, debt, equity, liens, letters of credit and guarantees. The Company's outstanding commercial paper and other borrowings under its various credit facilities at December 31, 1995 are classified as long-term debt. It is the Company's intent to refinance such borrowings through the use of its credit agreements or other long-term notes issued under the Company's shelf registration. 32 34 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) In August 1995, the Company entered into a French revolving credit agreement with a 364-day term which currently allows for borrowings, in French francs, up to $150,000. Borrowings under the facility were used to provide short term financing for the purchase of OGF/PFG. Interest rates are based on various indices as determined by the Company. In addition, a facility fee of .075% is paid quarterly on the total commitment amount. At December 31, 1995, $99,095 was outstanding under this agreement at a weighted average interest rate of 5.78%. The Company also has a bank line of credit for $100,000 (no borrowings outstanding at December 31, 1995) at rates similar to the primary revolving credit agreements. This line may be withdrawn at any time at the option of the bank. Additionally, the Company has approximately $64,000 in lines of credit with several international banks and at December 31, 1995, $12,340 was borrowed under these international lines of credit. All borrowings under the Company's various lines of credit are included in long-term debt. In October 1995, the Company issued $300,000 of notes which were sold through an underwritten public offering pursuant to the Company's $1,000,000 shelf registration that became effective in September 1995. These notes were issued in two tranches of $150,000 each with maturities in October 2000 and 2007 and interest rates of 6.375% and 6.875%, respectively. The net proceeds from this offering were used primarily to finance the Company's acquisition of OGF/PFG. In January 1995, the Company issued $199,011 of 8.72% fixed rate, seven year amortizing notes through a private offering. The net proceeds from this offering were used to finance the Company's 1994 United Kingdom acquisitions. In December 1994, the Company issued, through an underwritten public offering, $200,000 in 8.375% notes at an original discount price of 99.247%. The notes are considered senior debt and are not redeemable by the Company prior to maturity. The Company used the net proceeds of this issue to repay existing debt outstanding under the Company's bank revolving credit agreements. In December 1995, the Company issued $63,837 of 6.95% fixed rate, fifteen year amortizing notes through a private offering. The net proceeds from this offering were used to finance the Company's purchase of the minority interest of SCIC. The $150,000 of 7.875% debentures were issued in February 1993 and are considered senior debt and are not redeemable prior to maturity. In June 1995, the Company issued $300,000, 7% notes due in June 2015. The holders of the notes have the right to require the Company to redeem such notes, in whole or in part, on June 1, 2002 at a redemption price equal to 100% of the aggregate principal amount thereof plus accrued unpaid interest. The net proceeds of the notes were used to repay existing amounts outstanding under the Company's existing revolving credit facilities or to retire commercial paper backed by such facilities. The Company has outstanding $186,040 in medium term notes with maturities from two to 24 years which are not callable prior to maturity. The average remaining maturity for the notes is approximately 15 years. At December 31, 1995, other debt and current maturities include $53,500 of promissory notes issued in the Gibraltar purchase. These notes were repaid in January 1996. At December 31, 1994, current maturities include $204,759 (6.16% weighted average interest rate) of bank borrowings used in the United Kingdom acquisitions that were repaid during the first quarter of 1995. Some of the Company's facilities and cemetery properties are pledged as collateral for the mortgage notes. Additionally, at December 31, 1995, the Company had $40,519 letters of credit outstanding primarily to guarantee funding of certain insurance claims. 33 35 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The aggregate principal payments on debt for the five years subsequent to December 31, 1995, excluding amounts due to banks under revolving credit loan agreements are: 1996 -- $122,237; 1997 -- $76,149; 1998 -- $38,979; 1999 -- $41,519 and 2000 -- $201,069. Cash interest payments for the three years ended December 31, 1995 totaled $111,609, $77,334 and $61,062, respectively. In general, interest rates are managed such that up to 50% of the total debt (excluding debt which offsets the Provident loan receivable portfolio) is floating rate debt and therefore is sensitive to interest rate fluctuations. After giving effect to the interest rate and cross-currency interest rate swaps discussed in notes two and seven, the Company's total debt has been converted into approximately $1,338,000 of fixed rate debt at a weighted average rate of 7.96% and approximately $516,000 of floating rate debt at a weighted average rate of 6.75%. NOTE SEVEN CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS The Company has entered into various derivative financial instruments with major financial institutions to hedge fluctuation exposures in interest and foreign exchange rates (swap agreements). See note two. The following is a summary of these swap agreements at December 31, 1995:
WEIGHTED CARRYING AVERAGE INTEREST AMOUNT RATE NOTIONAL ASSET ------------------- AMOUNT (LIABILITY) MATURITY RECEIVE PAY ---------- ----------- --------- ------- ------- Interest Rate Swaps: US dollar fixed to US dollar floating............................ $ 75,000 $ -- 1999 5.36% 5.88% Canadian dollar floating to Canadian dollar fixed........................ 40,310 -- 1999 5.98 7.57 Cross-Currency Interest Rate Swaps: US dollar fixed to French franc fixed............................... 302,221 (2,221) 2000-2007 6.75 6.96 US dollar fixed to British pound fixed............................... 251,417 753 2002-2004 8.63 9.22 US dollar fixed to British pound floating............................ 207,812 916 2002-2004 8.35 6.85 US dollar floating to Australian dollar fixed............................... 73,395 (5,827) 1999-2000 5.56 7.03 US dollar floating to Australian dollar floating............................ 32,714 (3,278) 2000 5.56 7.35 US dollar fixed to Canadian dollar floating............................ 99,345 655 2010 6.95 6.58 ---------- ------- $1,082,214 $(9,002) ========== =======
The net fair value of the Company's various swap agreements at December 31, 1995 is $34,905. Fair values were obtained from counterparties to the agreements and represent their estimate of the amount the Company would receive to terminate the swap agreements based upon the existing terms and current market conditions. At December 31, 1994, the net fair value was a payable owed by the Company of $15,200. The fair value of the Company's swap agreements may vary substantially with changes in interest and currency rates. At December 31, 1995, the Company's credit exposure is limited to the sum of the fair value of positions that have become favorable to the Company and any accrued interest receivable due from counterparties. Potential credit exposure is dependent upon the maximum adverse impact of interest and currency movement. Such potential credit exposure is minimized by selection of counterparties from a limited group of high quality institutions and certain contract provisions. Management believes that any credit exposure with respect to this and other favorable positions is remote. 34 36 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Provident is a party to financial instruments with potential credit risk. The financial instruments result from loans made in the normal course of business to meet the financing needs of borrowers who are principally independent funeral and cemetery operators. These financial instruments also include loan commitments of $28,319 at December 31, 1995 ($10,068 at December 31, 1994) to extend credit. Provident's total loans outstanding at December 31, 1995 were approximately $214,000 and include a loan in the amount of $100,143 to one customer. Although this represents a concentration of credit risk, the Company believes no significant credit risk exists. Provident evaluates each borrower's credit worthiness and the amount loaned and collateral obtained, if any, is determined by this evaluation. The Company grants credit in the normal course of business and the credit risk with respect to these trade, cemetery and prearranged funeral receivables due from customers is generally considered minimal because of the wide dispersion of the customers served. Procedures are in effect to monitor the credit worthiness of customers and bad debts have not been significant in relation to the volume of revenues. Customer payments on prearranged funeral contracts that are placed in state regulated trusts or used to pay premiums on life insurance contracts generally do not subject the Company to collection risk. Insurance funded contracts are subject to supervision by state insurance departments and are protected in the majority of states by insurance guaranty acts. The following disclosure of the estimated fair value of financial instruments has been determined by the Company using available market information and appropriate valuation methodologies. The carrying amounts of cash and cash equivalents, trade receivables and accounts payable approximate fair values due to the short term maturities of these instruments. It is not practicable to estimate the fair value of receivables due on cemetery contracts without incurring excessive costs because of the large number of individual contracts with varying terms. The carrying amounts of prearranged funeral contracts and the related deferred prearranged funeral revenue approximate their fair value. The carrying amounts and fair values of the Company's fixed rate long-term obligations as of December 31, were as follows:
1995 1994 --------------------- --------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE -------- -------- -------- -------- 6.375% notes.............................. $150,000 $152,881 $ -- $ -- 8.72% amortizing notes.................... 178,866 206,904 -- -- 8.375% notes.............................. 200,000 228,155 200,000 197,319 6.875% notes.............................. 150,000 157,369 -- -- 6.95% amortizing notes.................... 63,837 66,944 -- -- 7.875% debentures......................... 150,000 165,799 150,000 137,663 7.0% notes................................ 300,000 305,149 -- -- Medium term notes......................... 186,040 224,053 234,700 244,692 5.0% convertible debentures............... 27,090 24,760 25,618 19,622 8.0% convertible debentures............... -- -- 14,939 14,305 Mortgage notes payable.................... 99,025 99,159 69,684 66,731 6.5% convertible preferred securities of SCI Finance LLC......................... 172,500 174,903 172,500 172,500
The fair value of the above long-term borrowings was estimated by discounting the future cash flows, including interest payments, using rates currently available for debt of similar terms and maturity, based on the Company's credit standing and other market factors. The carrying value of the revolving credit agreements approximate fair value because the rates on such agreements are variable, based on current market conditions. 35 37 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Substantially all of the Company's remaining long-term debt and receivables carry variable interest rates and their carrying amounts approximate fair value. NOTE EIGHT DEFERRED PREARRANGED FUNERAL CONTRACT REVENUES "Deferred prearranged funeral contract revenues" on the consolidated balance sheet includes the contract amount of all price guaranteed prearranged funeral service contracts as well as the accrued trust earnings and increasing insurance benefits earned through December 31, 1995. The Company will continue to defer additional accruals of trust earnings and insurance benefits as they are earned until the performance of the funeral service. Upon performance of the funeral service, the Company will recognize the fixed contract price as well as total accumulated trust earnings and increasing insurance benefits as funeral revenues. The recognition in future funeral revenues is estimated to occur in the following years based on actuarial assumptions as follows: 1996..................................................... $ 219,339 1997..................................................... 202,481 1998..................................................... 186,128 1999..................................................... 171,118 2000..................................................... 156,703 2001 through 2005........................................ 599,738 2006 and thereafter...................................... 826,136 -------- $2,361,643 ========
NOTE NINE COMMITMENTS The annual payments for operating leases (primarily for funeral home facilities and transportation equipment) are as follows: 1996....................................................... $44,228 1997....................................................... 39,405 1998....................................................... 32,468 1999....................................................... 23,536 2000....................................................... 15,204 Thereafter................................................. 73,817
The majority of these operating leases contain one of the following options: (a) purchase the property at the fair value at date of exercise, (b) purchase the property for a value determined at the inception of the lease or (c) renew for the fair rental value at the end of the primary term of the lease. Some of the equipment leases contain residual value exposures. For the three years ended December 31, 1995, rental expense was $47,848, $36,244 and $33,673, respectively. The Company has entered into management, consultative and noncompetition agreements (generally for five to 10 years) with certain officers of the Company and former owners and key employees of businesses acquired. During the three years ended December 31, 1995, $55,419, $48,053 and $36,138, respectively, was charged to expense. At December 31, 1995, the maximum estimated future expense under all agreements with a remaining term in excess of one year is $188,776, including $14,924 with certain officers of the Company. 36 38 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The Company has entered into a minimum purchase agreement with a major casket manufacturer. The agreement contains provisions to increase the minimum annual purchases for normal price increases and for the maintenance of product quality. The agreement expires in 1998 and contains a remaining purchase commitment of approximately $164,000. During the three years ended December 31, 1995, the Company purchased caskets for $48,828, $47,098 and $41,200, respectively, under this agreement. Included in the Company's acquisition of OGF/PFG is an eight year (beginning in January 1996) casket purchase agreement with a French casket manufacturer. The total value of merchandise to be purchased under the contract is approximately $28,000. NOTE TEN CONVERTIBLE PREFERRED SECURITIES OF SCI FINANCE LLC In December 1994 SCI Finance LLC, a subsidiary of the Company, issued, through an underwritten public offering, 3,450,000 shares of 6.25% convertible preferred shares. These shares are non-voting, carry a liquidation value of $50 per share and are convertible into Company common stock at a conversion price of $30.09 per share at any time unless previously redeemed. Liquidation may occur after December 5, 1999 unless earlier redemption is permitted based on Company common stock price performance. The proceeds from this offering were used in 1995 to repay bank debt incurred in connection with the United Kingdom acquisitions. NOTE ELEVEN STOCKHOLDERS' EQUITY The Company is authorized to issue 1,000,000 shares of preferred stock, $1 per share par value. No shares were issued as of December 31, 1995. At December 31, 1995, 200,000,000 common shares of one dollar par value were authorized, 117,271,086 shares were issued and outstanding (94,857,060 at December 31, 1994), net of 20,113 shares held, at cost, in treasury (16,875 at December 31, 1994). In October 1995, the Company issued 8,395,000 shares of common stock at a net price of $37.30 per share through an underwritten public offering pursuant to the Company's September 1995 $1,000,000 shelf registration. The net proceeds of approximately $313,000 from the offering were used primarily to finance the Company's worldwide acquisition program including OGF/PFG. In addition, on October 11, 1995, the Company completed the purchase of Gibraltar and issued 3,286,759 shares of Company common stock as part of the purchase price. During the fourth quarter of 1995, the Company redeemed the remaining outstanding 6.5% convertible subordinated debentures due in 2001. This redemption resulted in the issuance of 8,317,261 shares of Company common stock. In December 1994 and January 1995 the Company sold, through an underwritten public offering, 8,480,000 common shares at a net $24.70 per share. The net proceeds of approximately $209,000 were used to repay existing bank debt. The fully diluted earnings per share calculation assumes full conversion into common stock of the Company's various convertible securities. The Company has stockholder approved plans whereby shares of the Company's common stock may be issued pursuant to the exercise of stock options granted to officers and key employees. The plans allow for options to be granted as either non-qualified or incentive stock options. The options are granted with an exercise price equal to the then current market price of the Company's common stock. The options are generally exercisable at a rate of 33 1/3% each year unless, at the discretion of the Company's Compensation Committee of the Board of Directors, alternative vesting methods are allowed. At December 31, 1995, 37 39 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 4,617,500 options had been granted to officers and key employees of the Company which contain alternative vesting methods. Under the alternative vesting methods, partial or full accelerated vesting will occur when the price of Company common stock reaches pre-determined prices ($50 and $60 per share) and for certain of these options an additional earnings per share growth increase is required. If the pre-determined stock prices and earnings per share growth are not met in the required time period the options will fully vest in periods ranging from eight to 13 years from date of grant. At December 31, 1995 and 1994, 1,714,328 and 477,494 shares, respectively, were reserved for future option grants under all stock option plans. The following sets forth certain stock option information:
OPTION PRICE OPTIONS PER SHARE -------- ------------ Outstanding at December 31, 1992.................................... 1,265,594 $ 8.00-17.17 Granted........................................................... 267,250 14.17-26.00 Exercised......................................................... (401,387) 9.25-18.81 Cancelled......................................................... (25,002) 14.17-18.81 --------- ------------ Outstanding at December 31, 1993.................................... 1,106,455 8.00-26.00 --------- ------------ Granted........................................................... 4,285,750 10.08-26.94 Exercised......................................................... (171,202) 8.75-18.81 Cancelled......................................................... (33,977) 8.00-26.94 --------- ------------ Outstanding at December 31, 1994.................................... 5,187,026 9.25-26.94 --------- ------------ Granted........................................................... 1,427,000 27.81-40.19 Exercised......................................................... (334,276) 9.25-28.44 Cancelled......................................................... (488,834) 14.17-28.44 --------- ------------ Outstanding at December 31, 1995.................................... 5,790,916 $ 9.25-40.19 ========= ============ Exercisable at December 31, 1995.................................... 603,381 $ 9.25-26.94 ========= ============
At December 31, 1995, the Company has reserved 1,476,683 shares of its common stock under stockholder approved plans for restricted stock grants to be awarded to key employees and non-employee directors. These plans contain a restriction period of not less than six months and not more than 10 years, during which time the recipient will be prohibited from disposition of the awarded common stock and also a requirement that the employee recipient remain employed by the Company and the non-employee director continue to serve as a director prior to lapse of the restricted period. For the three years ended December 31, 1995, 64,300, 66,100 and 652,481 shares were awarded under these plans, respectively. In May 1996, subject to shareholder approval, the Company will initiate the 1996 Incentive Plan. This plan reserves 6,000,000 shares of common stock for future awards of stock options and/or restricted stock to officers and key employees of the Company and will replace all shares of common stock available for future grant under existing stock option and restricted stock plans. The Board of Directors has adopted a preferred share purchase rights plan and has declared a dividend of one preferred share purchase right for each share of common stock outstanding. The rights become exercisable in the event of certain attempts to acquire 20% or more of the common stock of the Company and entitle the rights holders to purchase certain securities of the Company or the acquiring company. The rights, which are redeemable by the Company for $.01 per right, expire in July 1998 unless extended. 38 40 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE TWELVE RETIREMENT PLANS The Company has a noncontributory defined benefit pension plan covering substantially all United States employees, a supplemental retirement plan for certain current and former key employees (SERP), a supplemental retirement plan for officers and certain key employees (Senior SERP), and a retirement plan for non-employee directors (Directors' Plan). For the pension plan, retirement benefits are generally based on years of service and compensation. The Company annually contributes to the pension plan an actuarially determined amount consistent with the funding requirements of the Employee Retirement Income Security Act of 1974. Assets of the pension plan consist primarily of bank money market funds, fixed income investments, marketable equity securities and mortgage notes. The marketable equity securities include shares of Company common stock with a value of $7,268 at December 31, 1995. Most foreign employees are covered by various foreign government mandated or defined contribution plans which are adequately funded and are not considered material to the financial condition or results of operations of the Company. The plans' liabilities and their related costs are computed in accordance with the laws of the individual countries and appropriate actuarial practices. Retirement benefits under the SERP are based on years of service and average monthly compensation, reduced by benefits under the pension plan and Social Security. The Senior SERP provides retirement benefits based on years of service and position. The Directors' Plan will provide an annual benefit to directors following their retirement, based on a vesting schedule. The Company purchased various life insurance policies on the participants in the SERP, Senior SERP and Directors' Plan with the intent to use the proceeds or any cash value buildup from such policies to assist in funding, at least to the extent of such assets, the plans' funding requirements. The net cost for the four defined plans described above were as follows:
YEARS ENDED DECEMBER 31, -------------------------------- 1995 1994 1993 -------- ------- ------- Service cost -- benefits earned during the period............ $ 6,996 $ 6,179 $ 6,719 Interest cost on projected benefit obligation................ 9,114 7,686 6,886 Return on plan assets........................................ (15,752) (5,252) (4,311) Net amortization and deferral of gain........................ 12,189 2,056 1,201 -------- ------- ------- $ 12,547 $10,669 $10,495 ======== ======= =======
39 41 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The plans' funded status at December 31, was as follows:
1995 1994 ---------------------- ---------------------- FUNDED NON-FUNDED FUNDED NON-FUNDED PLAN PLANS PLAN PLANS ------- ---------- ------- ---------- Vested benefit obligation........................ $75,586 $ 38,205 $64,022 $ 30,010 ======= ======= ======= ======== Accumulated benefit obligation................... $80,897 $ 38,308 $67,675 $ 30,128 ======= ======= ======= ======== Projected benefit obligation..................... $89,363 $ 38,341 $74,280 $ 30,144 Plans' assets at fair value...................... 91,058 -- 69,030 -- ------- ------- ------- -------- Plans' assets in excess (deficit) of projected benefit obligation............................. 1,695 (38,341) (5,250) (30,144) Unrecognized net loss from past experience and effects of changes in assumptions.............. 14,005 8,121 15,668 2,296 Prior service cost not yet recognized in net periodic pension cost.......................... (2,395) 12,345 (2,755) 13,940 ------- ------- ------- -------- Accrued pension cost............................. 13,305 (17,875) 7,663 (13,908) Adjustment for additional minimum liability...... -- (20,433) -- (16,220) ------- ------- ------- -------- Retirement plan asset (liability)................ $13,305 $(38,308) $ 7,663 $(30,128) ======= ======= ======= ========
The following assumed rates were used in the determination of the plans' funded status:
1995 1994 --------------------- --------------------- FUNDED NON-FUNDED FUNDED NON-FUNDED PLAN PLANS PLAN PLANS ------ ---------- ------ ---------- Discount rate used to determine obligations......... 7.25% 7.25% 8.5% 8.5% Assumed rate of compensation increase............... 5.5 5.5 5.5 5.5 Assumed rate of return on plan assets............... 8.0 -- 8.0 --
40 42 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE THIRTEEN MAJOR SEGMENTS OF BUSINESS The Company conducts funeral and cemetery operations principally in the United States, Australia, Canada, France and the United Kingdom and offers financial services in the United States.
FINANCIAL FUNERAL CEMETERY SERVICES CORPORATE CONSOLIDATED --------- --------- --------- --------- ------------ Revenues: 1995.............................. $1,166,247 $ 463,754 $ 22,125 $ -- $ 1,652,126 1994.............................. 754,408 343,521 19,246 -- 1,117,175 1993.............................. 603,099 280,421 15,658 -- 899,178 Income from operations: 1995.............................. $ 295,151 $ 160,442 $ 9,628 $ (53,600) $ 411,621 1994.............................. 222,605 110,226 8,364 (51,700) 289,495 1993.............................. 177,091 79,739 6,490 (43,706) 219,614 Identifiable assets: 1995.............................. $5,112,283 $2,152,627 $ 219,009 $ 179,892 $ 7,663,811 1994.............................. 3,115,053 1,417,081 213,257 416,497 5,161,888 1993.............................. 2,299,177 952,844 253,314 177,969 3,683,304 Depreciation and amortization: 1995.............................. $ 78,368 $ 11,772 $ 33 $ 8,259 $ 98,432 1994.............................. 54,028 9,969 120 11,960 76,077 1993.............................. 37,130 8,506 197 12,381 58,214 Capital expenditures:(1) 1995.............................. $ 442,227 $ 480,372 $ 10 $ 6,090 $ 928,699 1994.............................. 212,660 384,402 -- 2,950 600,012 1993.............................. 107,046 165,408 -- 5,241 277,695 Number of operating locations at year end: 1995.............................. 2,836 360 -- -- 3,196 1994.............................. 1,534 259 -- -- 1,793 1993.............................. 835 224 -- -- 1,059
- --------------- (1) Includes $803,468, $518,922 and $218,110 for the three years ended December 31, 1995, respectively, for purchases of property, plant, and equipment and cemetery property of acquired businesses. 41 43 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Geographic segment information was as follows:
UNITED OTHER OTHER STATES FRANCE* EUROPEAN* FOREIGN** CONSOLIDATED ---------- ---------- --------- -------- ------------ Revenues: 1995............................. $1,178,407 $ 188,844 $ 151,917 $132,958 $ 1,652,126 1994............................. 975,971 -- 42,613 98,591 1,117,175 1993............................. 848,534 -- -- 50,644 899,178 Income from operations: 1995............................. $ 314,698 $ 18,743 $ 34,214 $ 43,966 $ 411,621 1994............................. 245,230 -- 10,266 33,999 289,495 1993............................. 202,845 -- -- 16,769 219,614 Identifiable assets: 1995............................. $5,243,756 $1,169,484 $ 780,483 $470,088 $ 7,663,811 1994............................. 4,168,636 -- 683,612 309,640 5,161,888 1993............................. 3,495,056 -- -- 188,248 3,683,304 Number of operating locations at year end: 1995............................. 1,274 1,067 618 237 3,196 1994............................. 1,043 -- 549 201 1,793 1993............................. 920 -- -- 139 1,059
- --------------- * French operations began in September 1995, United Kingdom operations began in September 1994. ** Includes Canadian and Australian operations. 42 44 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE FOURTEEN SUPPLEMENTARY INFORMATION The detail of certain balance sheet accounts at December 31, was as follows:
1995 1994 -------- -------- Cash and cash equivalents: Cash.................................................................. $ 19,250 $ 24,976 Commercial paper and temporary investments............................ 10,485 193,365 -------- -------- $ 29,735 $218,341 ======== ======== Receivables and allowances: Current: Trade accounts..................................................... $242,268 $132,211 Cemetery contracts................................................. 193,768 124,873 Loans and other notes.............................................. 82,151 76,093 -------- -------- 518,187 333,177 Less: Allowance for contract cancellations and doubtful accounts......... 34,147 20,156 Unearned finance charges and valuation discounts................... 37,422 21,886 -------- -------- 71,569 42,042 -------- -------- $446,618 $291,135 ======== ======== Long-term: Cemetery contracts................................................. $255,297 $153,212 Loans and other notes.............................................. 257,415 245,017 Trusted cemetery merchandise sales................................. 314,400 176,071 -------- -------- 827,112 574,300 Less: Allowance for contract cancellations and doubtful accounts......... 23,298 16,086 Unearned finance charges and valuation discounts................... 43,879 28,371 -------- -------- 67,177 44,457 -------- -------- $759,935 $529,843 ======== ========
Interest rates on cemetery contracts and loans and other notes receivable range from 3.0% to 12.5% at December 31, 1995. Included in loans and other notes receivable are $15,390 in notes with officers and employees of the Company, the majority of which are collateralized by real estate, and $20,164 in notes with other related parties. 43 45 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, ------------------------ 1995 1994 --------- ---------- Cemetery property: Undeveloped land................................................... $ 839,797 $ 450,722 Developed land, lawn crypts and mausoleums......................... 322,759 297,917 ---------- -------- $1,162,556 $ 748,639 ========== ======== Property, plant and equipment: Land............................................................... $ 314,185 $ 245,285 Buildings and improvements......................................... 884,178 587,180 Operating equipment................................................ 279,560 173,369 Leasehold improvements............................................. 42,844 30,351 ---------- -------- 1,520,767.. 1,036,185 Less: accumulated depreciation..................................... (247,045) (203,784) ---------- -------- $1,273,722 $ 832,401 ========== ======== Accounts payable and accrued liabilities: Trade payables..................................................... $ 98,984 $ 25,988 Dividends.......................................................... 12,902 10,044 Payroll............................................................ 93,375 33,051 Unpaid acquisition cost............................................ 19,493 -- Interest........................................................... 24,633 22,706 Insurance.......................................................... 44,848 17,765 Other.............................................................. 98,956 45,216 ---------- -------- $ 393,191 $ 154,770 ========== ========
NON-CASH TRANSACTIONS
YEARS ENDED DECEMBER 31, -------------------------------- 1995 1994 1993 -------- ------- ------- Common stock issued under restricted stock plans.............. $ 1,868 $ 1,724 $14,393 Notes receivable exchanged for preferred stock investment..... -- -- 2,520 Minimum liability under retirement plans...................... 4,213 (382) 12,642 Debenture conversions to common stock......................... 188,707 1,293 97,164 Cumulative effect of change in accounting principles.......... -- -- 2,031 Property distributed from prearranged funeral trust........... -- 9,920 -- Common stock issued in acquisitions........................... 109,277 9,491 18,850 Debt issued in acquisitions................................... 114,609 36,567 20,651
44 46 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) NOTE FIFTEEN CHANGE IN ACCOUNTING PRINCIPLES Effective January 1, 1993, the Company changed the following accounting principles: (a) All price guaranteed prearranged funeral contracts are included in the consolidated balance sheet as a long-term asset with a corresponding credit to deferred prearranged funeral contract revenues. Insurance funded contracts were previously disclosed in a note to the consolidated financial statements and certain trust funded contracts were previously included under other captions in the consolidated balance sheet. This change had no effect on the existing policy of recognizing revenue until the funeral service is performed. (b) Prearranged funeral trust earnings previously recognized as current income are now deferred until the funeral service is performed. Increasing benefits under insurance funded contracts are now accrued and deferred until the funeral service is performed. (c) All sales of cemetery interment rights and other related products are recorded as revenues when customer contracts are signed with concurrent recognition of related costs. Allowances for customer cancellations are provided at the date of sale based upon historical experience. Previously, certain sales were generally deferred under accounting principles prescribed for sales of real estate. Under the Company's application of this method of accounting for sales of real estate, revenues and costs were deferred until 20% of the contract amount had been collected. (d) Funds held in perpetual care cemetery trusts were previously included on the consolidated balance sheet, whereas now such amounts are excluded. The cumulative effect of these changes resulted in an after tax charge of $2,031 or $.03 per share on January 1, 1993. NOTE SIXTEEN PROSPECTIVE ACCOUNTING CHANGES FAS 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" and FAS 123 "Accounting for Stock-Based Compensation" become effective in 1996. FAS 121 attempts to standardize methods used to determine whether the costs of long-lived assets will be recovered, and how such costs should be tested for value impairment. FAS 123 establishes financial accounting and reporting standards for stock based employee compensation plans. Adoption of these standards are not expected to materially affect the Company's financial position or results of operations. NOTE SEVENTEEN RELATED PARTY TRANSACTIONS As of February 1, 1996, subsidiaries of J. P. Morgan & Co. Incorporated ("Morgan") beneficially own approximately 8% of the Company's common stock. Morgan and the Company have entered into (and in certain instances, unwound) various foreign currency and/or interest rate swap agreements during 1995 and 1994. During 1995, Morgan participated as lead underwriter on the June 1995 and October 1995 public offerings of notes and the October 1995 public offering of common stock. Morgan acted as an advisor in the January 1995 private offering of debt related to the United Kingdom acquisitions and December 1995 private offering of debt related to the SCIC minority interest purchase. Morgan also acted as an advisor in the 1995 acquisition of OGF/PFG. During 1994, Morgan participated as lead underwriter in the December 1994 public offerings of common stock, notes and the convertible preferred securities of SCI Finance LLC. In the 1994 acquisition of one of the United Kingdom acquisitions, Morgan acted as an advisor and also provided a loan 45 47 SERVICE CORPORATION INTERNATIONAL NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) used by the Company (repaid in 1995) in the acquisitions of both United Kingdom acquisitions. For the years ended December 31, 1995 and 1994, Morgan received $14,062 and $10,747, respectively in fees from the Company. During the year ended December 31, 1993 Morgan paid the Company a net $2,551 primarily relating to payments received to unwind certain interest rate swap agreements. NOTE EIGHTEEN ACCOUNTING FOR INVESTMENTS As part of the Company's funding of prearranged funeral contracts, Auxia invests in securities which are considered as "available-for-sale" in accordance with the classification of investments defined in Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities." These securities are reported at fair value, with unrealized gains and losses excluded from earnings and reported net of income taxes in stockholders' equity. The cost, market value and unrealized gains or losses related to Auxia's investments as of December 31, 1995, were as follows:
UNREALIZED GAINS COST MARKET (LOSSES) -------- -------- ---------- Debt securities............................................. $294,572 $303,429 $ 8,857 Equity securities........................................... 69,835 67,699 (2,136) Mutual funds................................................ 155,506 157,921 2,415 -------- -------- -------- $519,913 $529,049 $ 9,136 ======== ======== ========
The contractual maturities of Auxia's debt securities as of December 31, 1995, were as follows: Within one year................................................................... $ 10,890 After one year through five years................................................. 71,035 After five years through ten years................................................ 211,913 After ten years................................................................... 9,591 -------- $303,429 ========
NOTE NINETEEN QUARTERLY FINANCIAL DATA (UNAUDITED)
FIRST SECOND THIRD FOURTH YEAR -------- -------- -------- -------- ---------- Revenues: 1995.................................. $348,113 $353,649 $403,491 $546,873 $1,652,126 1994.................................. 261,258 262,862 277,814 315,241 1,117,175 Gross profit: 1995.................................. 116,675 105,982 105,724 136,840 465,221 1994.................................. 89,542 76,741 76,914 97,998 341,195 Net income: 1995.................................. 47,380 40,640 39,136 56,432 183,588 1994.................................. 37,445 30,195 28,603 34,802 131,045 Primary earnings per common share: 1995.................................. .49 .42 .40 .49 1.80 1994.................................. .44 .35 .33 .39 1.51 Fully diluted earnings per share: 1995.................................. .46 .39 .37 .48 1.70 1994.................................. .41 .33 .32 .37 1.43
46 48 SERVICE CORPORATION INTERNATIONAL SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS THREE YEARS ENDED DECEMBER 31, 1995
BALANCE AT CHARGED TO CHARGED TO BALANCE BEGINNING COSTS AND OTHER AT END DESCRIPTION OF PERIOD EXPENSES ACCOUNTS(2) DEDUCTIONS(1) OF PERIOD - ------------------------------------- ---------- ---------- ----------- ------------- --------- (THOUSANDS) Current -- Allowance for contract cancellations and doubtful accounts: Year ended December 31, 1995.... $ 20,156 $8,853 $10,904 $(5,766) $ 34,147 Year ended December 31, 1994.... 14,786 7,658 4,155 (6,443) 20,156 Year ended December 31, 1993.... 7,778 9,983(3) 1,725 (4,700) 14,786 Due After One Year -- Allowance for contract cancellations and doubtful accounts: Year ended December 31, 1995.... $ 16,086 $2,999 $ 4,689 $ (476) $ 23,298 Year ended December 31, 1994.... 14,054 1,969 1,830 (1,767) 16,086 Year ended December 31, 1993.... 5,001 6,858(3) 3,935 (1,740) 14,054
- --------------- (1) Uncollected receivables written off, net of recoveries. (2) Primarily acquisitions and dispositions of operations. (3) Includes the cumulative effect of changing accounting principles effective January 1, 1993. 47 49 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. ITEM 11. EXECUTIVE COMPENSATION. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. Information called for by PART III (Items 10, 11, 12 and 13) has been omitted as the Company intends to file with the Commission not later than 120 days after the close of its fiscal year a definitive Proxy Statement pursuant to Regulation 14A. Such information is set forth in such Proxy Statement (i) with respect to Item 10 under the captions "Election of Directors" and "Compliance with Section 16(a) of the Exchange Act", (ii) with respect to Items 11 and 13 under the captions "Cash Compensation", "Stock Options", "Aggregated Option Exercises in Last Fiscal Year and December 31, 1995 Option Values", "Long-Term Incentive Plan", "Retirement Plans", "Executive Employment Agreements", "Other Compensation", "Director Compensation", "Compensation Committee Interlocks and Insider Participation" and "Certain Transactions" and (iii) with respect to Item 12 under the caption "Voting Securities and Principal Holders." The information as specified in the preceding sentence is incorporated herein by reference. Notwithstanding anything set forth in this Form 10-K, the information under the caption "Compensation Committee Report on Executive Compensation" and under the captions "Overview of Executive Compensation" and "Performance Graphs" in such Proxy Statement are not incorporated by reference into this Form 10-K. The information regarding the Company's executive officers called for by Item 401 of Regulation S-K has been included in PART I of this report. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K. (a)(1)-(2) Financial Statements and Schedules: The financial statements and schedules are listed in the accompanying Index to Financial Statements and Related Schedules at page 19 of this report. (3) Exhibits: The exhibits listed on the accompanying Exhibit Index at pages 50-53 are filed as part of this report. (b) Reports on Form 8-K: During the quarter ended December 31, 1995, the Company filed a Form 8-K dated December 4, 1995 reporting under "Item 5. Other Events" unaudited proforma combined financial information concerning, among other matters, the Company's acquisitions of OGF, PFG, Gibraltar and the minority interest of SCIC. (c) Included in (a) above. (d) Included in (a) above. 48 50 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant, Service Corporation International, has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SERVICE CORPORATION INTERNATIONAL Dated: March 29, 1996 By: JAMES M. SHELGER ---------------------------------- (James M. Shelger, Senior Vice President, General Counsel and Secretary) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
SIGNATURE TITLE DATE --------- ----- ---- R. L. WALTRIP* Chairman of the Board and Chief } (R. L. Waltrip) Executive Officer } } GEORGE R. CHAMPAGNE Senior Vice President Chief } - ------------------------------------------------- Financial Officer (Principal } (George R. Champagne) Financial Officer) } } WESLEY T. McRAE Managing Director -- Financial } - ------------------------------------------------- Reporting of SCI Management } (Wesley T. McRae) Corporation, a subsidiary of } the Registrant (Principal } Accounting Officer) } ANTHONY L. COELHO* } } (Anthony L. Coelho) } } } } DOUGLAS M. CONWAY* } } (Douglas M. Conway) } } } } JACK FINKELSTEIN* } } (Jack Finkelstein) } } } } A. J. FOYT, JR.* } } (A. J. Foyt, Jr.) } } } } JAMES J. GAVIN, JR.* } } March 29, 1996 (James J. Gavin, Jr.) } } } } JAMES H. GREER* } } (James H. Greer) } } } } L. WILLIAM HEILIGBRODT* } } (L. William Heiligbrodt) } Directors } } } B. D. HUNTER* } } (B. D. Hunter) } } } } JOHN W. MECOM, JR.* } } (John W. Mecom, Jr.) } } } } CLIFTON H. MORRIS, JR.* } } (Clifton H. Morris, Jr.) } } } } E. H. THORNTON, JR.* } } (E. H. Thornton, Jr.) } } } } W. BLAIR WALTRIP* } } (W. Blair Waltrip) } } } } EDWARD E. WILLIAMS* } } (Edward E. Williams) } } *By JAMES M. SHELGER - ------------------------------------------------- (James M. Shelger, as Attorney-In-Fact for each of the Persons indicated)
51 EXHIBIT INDEX PURSUANT TO ITEM 601 OF REG. S-K
EXHIBIT NO. DESCRIPTION - -------------------- ------------------------------------------------------------------------ 3.1 -- Restated Articles of Incorporation, as amended. (Incorporated by reference to Exhibit 3.1 to Registration Statement No. 2-50721 on Form S-1). 3.2 -- Articles of Amendment to Restated Articles of Incorporation. (Incorporated by reference to Exhibit (4)(i)l to Form 10-Q for the fiscal quarter ended July 31, 1982). 3.3 -- Articles of Amendment to Restated Articles of Incorporation. (Incorporated by reference to Exhibit 3.1 to Form 10-Q for the fiscal quarter ended July 31, 1983). 3.4 -- Articles of Amendment to Restated Articles of Incorporation. (Incorporated by reference to Exhibit 4.7 to Registration Statement No. 33-8727 on Form S-3). 3.5 -- Articles of Amendment to Restated Articles of Incorporation, dated September 11, 1987. (Incorporated by reference to Exhibit 4.1 to Amendment No. 3 to Registration Statement No. 33-16678 on Form S-4). 3.6 -- Statement of Resolution Establishing Series of Shares of Series C Junior Participating Preferred Stock, dated August 5, 1988. (Incorporated by reference to Exhibit 3.1 to Form 10-Q for the fiscal quarter ended July 31, 1988). 3.7 -- Articles of Amendment to Restated Articles of Incorporation. (Incorporated by reference to Exhibit 3.8 to Registration Statement No. 33-47097 on Form S-4). 3.8 -- Bylaws, as amended. (Incorporated by reference to Exhibit 3.7 to Form 10-K for the fiscal year ended December 31, 1991). 4.1 -- Rights Agreement dated as of July 18, 1988 between the Company and Texas Commerce Bank National Association. (Incorporated by reference to Exhibit 1 to Form 8-K dated July 18, 1988). 4.2 -- Amendment, dated as of May 10, 1990, to the Rights Agreement, dated as of July 18, 1988, between the Company and Texas Commerce Bank National Association. (Incorporated by reference to Exhibit 1 to Form 8-K dated May 10, 1990). 4.3 -- Agreement Appointing a Successor Rights Agent under Rights Agreement, dated as of June 1, 1990, by the Company and Ameritrust Company National Association. (Incorporated by reference to Exhibit 4.1 to Form 10-Q for the fiscal quarter ended June 30, 1990). 4.4 -- Undertaking to furnish instruments related to long-term debt. 10.1 -- Retirement Plan For Non-Employee Directors. (Incorporated by reference to Exhibit 10.1 to Form 10-K for the fiscal year ended December 31, 1991). 10.2 -- Supplemental Executive Retirement Plan, and form of Supplemental Executive Retirement Plan Trust. (Incorporated by reference to Exhibit 19.1 to Form 10-Q for the fiscal quarter ended March 31, 1989). 10.3 -- First Amendment to the Supplemental Executive Retirement Plan; Second Amendment to the Supplemental Executive Retirement Plan; and Third Amendment to the Supplemental Executive Retirement Plan. (Incorporated by reference to Exhibit 10.3 to Form 10-K for the fiscal year ended December 31, 1991). 10.4 -- Agreement dated May 14, 1992 between the Company, R. L. Waltrip and related parties relating to life insurance. (Incorporated by reference to Exhibit 10.4 to Form 10-K for the fiscal year ended December 31, 1992).
50 52
EXHIBIT NO. DESCRIPTION - -------------------- ------------------------------------------------------------------------ 10.5 -- Employment Agreement, dated November 11, 1991, as amended and restated as of August 12, 1992, and further amended as of May 12, 1993, between the Company and R. L. Waltrip. (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the fiscal quarter ended September 30, 1993). 10.6 -- Non-Competition Agreement and Amendment to Employment Agreement, dated November 11, 1991, among the Company, R. L. Waltrip and Claire Waltrip. (Incorporated by reference to Exhibit 10.9 to Form 10-K for the fiscal year ended December 31, 1992). 10.7 -- Employment Agreement, dated November 11, 1991, as amended and restated as of August 12, 1992, and further amended as of May 12, 1993, between the Company and L. William Heiligbrodt. (Incorporated by reference to Exhibit 10.2 to Form 10-Q for the fiscal quarter ended September 30, 1993). 10.8 -- Employment Agreement, dated November 11, 1991, as amended and restated as of August 12, 1992, and further amended as of May 12, 1993, between the Company and Samuel W. Rizzo. (Incorporated by reference to Exhibit 10.3 to Form 10-Q for the fiscal quarter ended September 30, 1993). 10.9 -- Supplemental Agreement, dated February 16, 1995, between the Company and Samuel W. Rizzo. (Incorporated by reference to Exhibit 10.9 to Form 10-K for the fiscal year ended December 31, 1994). 10.10 -- Termination Agreement, dated October 6, 1995, between the Company and Samuel W. Rizzo; Consultation Agreement, dated October 6, 1995, between the Company and Samuel W. Rizzo. 10.11 -- Employment Agreement, dated November 11, 1991, as amended and restated as of August 12, 1992, and further amended as of May 12, 1993, between the Company and W. Blair Waltrip. (Incorporated by reference to Exhibit 10.4 to Form 10-Q for the fiscal quarter ended September 30, 1993). 10.12 -- Employment Agreement, dated November 11, 1991, as amended and restated as of August 12, 1992, and further amended as of May 12, 1993, between the Company and John W. Morrow, Jr. (Incorporated by reference to Exhibit 10.5 to Form 10-Q for the fiscal quarter ended September 30, 1993). 10.13 -- Employment Agreement, dated December 1, 1991, as amended and restated as of August 12, 1992, and further amended as of May 12, 1993 and further amended and restated as of January 1, 1995, between the Company and Jerald L. Pullins. 10.14 -- Form of Employment Agreement pertaining to officers (other than the officers identified in the preceding exhibits). (Incorporated by reference to Exhibit 10.6 to Form 10-Q for the fiscal quarter ended September 30, 1993). 10.15 -- Salary Continuation Agreement dated April 1, 1991 between the Company and Robert L. Waltrip. (Incorporated by reference to Exhibit 10.17 to Form 10-K for the fiscal year ended December 31, 1991). 10.16 -- Forms of two Salary Continuation Agreements applicable to officers of the Company (other than the officer referenced in the preceding exhibit). (Incorporated by reference to Exhibit 10.19 to Form 10-K for the fiscal year ended December 31, 1991). 10.17 -- Form of First Amendment to Salary Continuation Agreement (amending the Salary Continuation Agreements of L. William Heiligbrodt, W. Blair Waltrip, Samuel W. Rizzo and John W. Morrow). (Incorporated by reference to Exhibit 10.2 to Form 10-Q for the fiscal quarter ended September 30, 1994).
51 53
EXHIBIT NO. DESCRIPTION - -------------------- ------------------------------------------------------------------------ 10.18 -- Form of 1986 Stock Option Plan. (Incorporated by reference to Exhibit 10.21 to Form 10-K for the fiscal year ended December 31, 1991). 10.19 -- Amended 1987 Stock Plan. (Incorporated by reference to Appendix A to Proxy Statement dated April 1, 1991). 10.20 -- First Amendment to Amended 1987 Stock Plan. (Incorporated by reference to Exhibit 10.23 to Form 10-K for the fiscal year ended December 31, 1993). 10.21 -- Service Corporation International (Canada) Limited Stock Option Plan. (Incorporated by reference to Exhibit 10.17 to Form 10-K for the fiscal year ended December 31, 1993). 10.22 -- 1993 Long-Term Incentive Stock Option Plan. (Incorporated by reference to Exhibit 4.12 to Registration Statement No. 333-00179 on Form S-8). 10.23 -- Service Corporation International ECI Stock Option Plan. (Incorporated by reference to Exhibit 10.1 to Form 10-Q for the fiscal quarter ended September 30, 1994). 10.24 -- 1995 Incentive Equity Plan. (Incorporated by reference to Annex B to Proxy Statement dated April 17, 1995). 10.25 -- 1995 Stock Plan for Non-Employee Directors. (Incorporated by reference to Annex A to Proxy Statement dated April 17, 1995). 10.26 -- Summary of 1995 Long Term Cash Performance Plan. (Incorporated by reference to Exhibit 10.22 to Form 10-K for the fiscal year ended December 31, 1994). 10.27 -- Agreement for Reorganization, dated August 15, 1989 among Morrow Partners, Inc., J.W. Morrow Investment Company, John W. Morrow, Jr., Billy Dee Davis and the Company; Agreement-Not-To-Compete, dated August 15, 1989, between John W. Morrow, Jr., Morrow Partners, Inc. and the Company, and; Lease dated August 15, 1989, by John W. Morrow, Jr. and Crawford-A. Crim Funeral Home, Inc. (Incorporated by reference to Exhibit 10.27 to Form 10-K for the fiscal year ended December 31, 1989). 10.28 -- Casket Supply and Requirements Agreement, dated October 31, 1990, between York Acquisition Corp. and SCI Funeral Services, Inc., and; First Amendment to Casket Supply and Requirements Agreement, dated December 30, 1992. (Incorporated by reference to Exhibit 10.27 to Form 10-K for the fiscal year ended December 31, 1992). 10.29 -- Supplemental Executive Retirement Plan for Senior Officers (as Amended and Restated Effective as of December 31, 1993). (Incorporated by reference to Exhibit 10.21 to Form 10-K for the fiscal year ended December 31, 1993). 10.30 -- First Amendment to Supplemental Executive Retirement Plan for Senior Officers. (Incorporated by reference to Exhibit 10.26 to Form 10-K for the fiscal year ended December 31, 1994). 10.31 -- ISDA Master Agreement dated February 4, 1993; Amendment to the Master Agreement dated August 12, 1993; Confirmation dated August 13, 1993; Confirmation dated November 1, 1993 and Notice of Exercise; all of which are between Morgan Guaranty Trust Company of New York ("Morgan") and the Company. (Incorporated by reference to Exhibit 10.22 to Form 10-K for the fiscal year ended December 31, 1993). 10.32 -- Sterling Note, dated September 2, 1994, issued by Service Corporation International plc to Morgan; guaranty, dated September 2, 1994, between the Company and Morgan. (Incorporated by reference to Exhibit 10.28 to Form 10-K for the fiscal year ended December 31, 1994).
52 54
EXHIBIT NO. DESCRIPTION - -------------------- ------------------------------------------------------------------------ 10.33 -- Letter, dated December 2, 1994 amending the ISDA Master Agreement (filed in Exhibit 10.31 above) and the Sterling Note and guaranty (filed as Exhibit 10.32 above), between the Company and Morgan; Letter dated December 13, 1994 regarding the ISDA Master Agreement (filed in Exhibit 10.31 above). (Incorporated by reference to Exhibit 10.29 to Form 10-K for the fiscal year ended December 31, 1994). 10.34 -- Confirmation dated May 18, 1995; Confirmation dated January 18, 1995; Confirmation dated January 18, 1995; Confirmation dated January 18, 1995; all of which are between Morgan and the Company. (Incorporated by reference to Exhibit 10.30 to Form 10-K for the fiscal year ended December 31, 1994). 10.35 -- Confirmation dated September 14, 1995; and Confirmation dated January 12, 1996, between Morgan and the Company; Confirmation dated January 18, 1996 between J P Morgan Canada and Service Corporation International (Canada) Limited. 10.36 -- Split Dollar Life Insurance Plan. 11.1 -- Computation of Earnings Per Share. 12.1 -- Ratio of Earnings to Fixed Charges. 21.1 -- Subsidiaries of the Company. 23.1 -- Consent of Independent Accountants (Coopers & Lybrand L.L.P.). 24.1 -- Directors' Powers of Attorney. 27.1 -- Financial Data Schedule.
In the above list, the management contracts or compensatory plans or arrangements are set forth in Exhibits 10.1 through 10.26, 10.29, 10.30 and 10.36. 53 EX-4.4 2 INSTRUMENTS WITH RESPECT TO LTD 1 EXHIBIT 4.4 AGREEMENT TO FURNISH INSTRUMENTS WITH RESPECT TO LONG-TERM DEBT Pursuant to Item 601(b)(4) of Regulation S-K, there is not filed with this report certain instruments with respect to long-term debt under which the total amount of securities authorized thereunder does not exceed 10 per cent of the total assets of Registrant and its subsidiaries on a consolidated basis. Registrant agrees to furnish a copy of any such instrument to the Commission upon request. SERVICE CORPORATION INTERNATIONAL By: James M. Shelger --------------------------------- James M. Shelger Senior Vice President Date: March 29, 1996 EX-10.10 3 TERMINATION AGREEMENT - SAMUEL W. RIZZO 1 Exhibit 10.10 TERMINATION AGREEMENT TERMINATION AGREEMENT made and entered into effective as of the 6th day of October, 1995, between Service Corporation International, a Texas corporation (the "Company"), and Samuel W. Rizzo ("Rizzo"); WHEREAS, the Company and Rizzo are currently parties to an Employment Agreement dated November 11, 1991, and amended and restated as of August 12, 1992 and as further amended as of May 12, 1993 (the "1991 Agreement"), and a Supplemental Agreement effective as of February 16, 1995 (the "Supplemental Agreement") WHEREAS, the Company and Rizzo desire to enter into certain agreements regarding the relationship between the Company and Rizzo and the expiration of the 1991 Agreement and the Supplemental Agreement; NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the Company and Rizzo agree as follows: 1. Consideration. On the date hereof, the Company will pay Rizzo a bonus of $19,500. 2. Options. The outstanding stock options held by Rizzo to purchase shares of common stock of the Company (under the Company's 1986 Stock Option Plan, as amended and restated) and Equity Corporation International ("ECI") on the date hereof have been or are fully vested hereby as of this date and shall be exercisable by Rizzo for three months from the date of this Agreement, which three month period shall end on January 6, 1996. The number of shares and the exercise prices are set forth on Exhibit A. Rizzo also acknowledges that the Company may defer delivery of the ECI common stock under Section 4 of the Option Agreement dated October 19, 1994 (the "ECI Agreement") between the Company and Rizzo and that the resale of such stock may be restricted; provided, however, if Rizzo exercises his option under the ECI Agreement, the Company shall immediately seek to have ECI issue a certificate to Rizzo for the shares to which he is entitled because of such exercise and shall deliver such certificate (which may have a legend reflecting such restrictions) to Rizzo promptly upon the issuance thereof by ECI. A copy of the ECI Agreement and the Company's ECI Stock Option Plan are attached hereto as Exhibit B. Prior to the date hereof, Rizzo has exercised his options to purchase shares of common stock of Service Corporation International (Canada) Limited. 3. Release. On the date hereof, Rizzo agrees to deliver to the Company a Release in the form attached hereto as Exhibit C. 2 4. Termination of 1991 Agreement and the Supplemental Agreement. The Company and Rizzo hereby agree and acknowledge that the 1991 Agreement shall terminate on the date hereof, except for Sections 9, 11, 12 and 14 thereof, and that Rizzo shall cease to be an employee of the Company as of this date. The Company and Rizzo hereby agree and acknowledge that the Supplemental Agreement shall terminate on the date hereof, except for Section 4 and the first sentence of Section 2 thereof. 5. Consultation Agreement. On the date hereof, the Company and Rizzo are entering into the Consultation Agreement in the form attached hereto as Exhibit D. 6. Senior Executive Retirement Plan (the "Plan"). Pursuant to the Plan, Rizzo (or in the event of his death his estate or heirs) shall receive monthly payments of $15,828 for 15 years (total payments of $2,849,040). Such payments shall be payable on the date hereof and on the first day of each month hereafter through September 1, 2010. A copy of the Plan is attached hereto as Exhibit E. 7. Cash Balance Plan ("Cash Plan"). As of December 31, 1994, Rizzo's account balance under the Cash Plan was $127,084.89, and his account under the Cash Plan shall receive a service credit and interest through October 6, 1995. Rizzo shall be entitled to have his entire account balance in the Cash Plan paid in accordance with the terms of the Cash Plan. A copy of the Cash Plan is attached hereto as Exhibit F. 8. Termination of Certain Benefits. Effective on the date hereof, except as provided herein, Rizzo's participation in all Company benefit plans will terminate, including, without limitation, the Employee's participation in the following benefits: (a) All awards and vesting under the 1993 Long-Term Incentive Stock Option Plan (b) All unvested restricted stock awards and vesting under the Company's Amended 1987 Stock Plan (c) Accrual of further benefits under the Company's cash balance plan (d) Business travel insurance (e) Financial/tax planning reimbursement (f) Company automobile (g) Office space and secretary support (h) Aviation benefits 9. Promissory Note. On the date hereof, Rizzo will pay the $525,000 unpaid principal amount of the Promissory Noted dated August 19, 1993, of Rizzo payable to the Company. A copy of such Note marked "Paid" is attached hereto as Exhibit G. The original of such Note is being delivered to Rizzo at the time of execution of this Agreement. 10. Expenses. After the date hereof, Rizzo will pay to the Company any amounts owing by him as of October 6, 1995, and the Company will reimburse Rizzo for -2- 3 any reimbursable business expenses incurred by him as an employee of the Company which have not previously been reimbursed by the Company. 11. Other Benefits. The following benefits provided by the Company to Rizzo prior to the date hereof shall continue as set forth below: (a) Group Health and life insurance will continue to February 16, 1998, with the Company paying the employer portion of the premium and Rizzo paying the balance of the premium. (b) Executive medical reimbursement will continue to February 16, 1998, at the Company's expense. (c) The Salary Continuation Agreement dated August 21, 1990, as amended by the First Amendment dated as of August 10, 1994, remains in effect in accordance with its terms. (d) Rizzo may continue executive carve out insurance at his expense under policy no. 2003297 with Security Life of Denver. (e) Rizzo may continue individual disability insurance at his expense. After February 16, 1998, Rizzo will have all rights then provided by law to continue the insurance referred to in clauses (a) and (b) above at his expense. 12. Legal Proceedings. Rizzo agrees that he will cooperate with the Company in defense of all litigation involving Rizzo as a party or in legal proceedings involving the Company or its subsidiaries or affiliates in matters in which Rizzo's testimony shall be required. The Company agrees to hold Rizzo harmless from judgments in any amounts taken against Rizzo in all litigation where Rizzo is a defendant because of acts of commission or omission during the performance of his duties as an officer and employee of the Company except those acts (if any) by Rizzo that constituted actual fraud against or that were intentionally and wilfully taken to cause material harm to the Company or its subsidiaries or affiliates. The Company and its subsidiaries and affiliates shall not bring any third party action against Rizzo, or seek any contribution from Rizzo, on account of any litigation or threatened litigation against the Company, its subsidiaries or affiliates. The Company agrees to promptly pay the reasonable attorney's fees and other expenses of Rizzo to defend him in any litigation or threatened litigation in which Rizzo is or may be a defendant with the Company, its subsidiaries or affiliates or in which Rizzo's testimony is required, and Rizzo shall select his attorneys for all such matters, subject to the prior written approval by the Company, which approval shall not be unreasonably withheld. The provisions of this section apply to all types of proceedings in all courts of competent jurisdiction involving administrative trials, civil trials and criminal trials. The Company and Rizzo agree and stipulate that the obligations under this section shall not -3- 4 in any way influence or be construed to influence Rizzo as to the content of any testimony or other evidence that Rizzo may provide in any proceedings. The obligations of the Company set forth in this section shall be conditioned upon and subject to Rizzo providing written notice to the Company within ten days of his becoming aware of any claim, demand, action, cost or other occurrence which could give rise to Rizzo's rights under this section. 13. Employment. Nothing in this Agreement shall prevent Rizzo from obtaining employment with any other entity while serving as a consultant to the Company so long as Rizzo complies with the provisions of Sections 9, 11, 12 and 14 of the 1991 Agreement and Section III of the Consultation Agreement. Any remuneration and other benefits received by Rizzo in such employment shall not reduce the remuneration and other benefits to be provided to Rizzo pursuant to the provisions hereof. 14. Notices. All notices, requests, consents and other communications under this Agreement shall be in writing and shall be deemed to have been delivered on the date personally delivered or on the date mailed, postage prepaid, by certified mail, return receipt requested, or telegraphed and confirmed if addressed to the respective parties as follows: If to Rizzo: Samuel W. Rizzo 7619 Del Monte Houston, Texas 77063 If to the Company: Service Corporation International 1929 Allen Parkway Houston, Texas 77019 Attention: General Counsel Either party hereto may designate a different address by providing written notice of such new address to the other party hereto. 15. Legal Fees and Expenses. The Company agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which Rizzo may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, Rizzo or others of the validity or enforceability of, or liability under, any provision of this Agreement, providing the issue or dispute, with respect to which such fees and expenses relate arises prior to February 16, 1998. 16. Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law but if any -4- 5 provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 17. Assignment. This Agreement may not be assigned by Rizzo. Neither Rizzo, his spouse nor estate shall have any right to commute, encumber or dispose of any right to receive payments hereunder, it being that such payments and the right thereto are nonassignable and nontransferable. 18. Binding Effect. Subject to the provisions of Section 17 of this Agreement, this Agreement shall be binding upon and inure to the benefit of the parties hereto, Rizzo's heirs and personal representatives, and the successors and assigns of the Company. 19. Captions. The section and paragraph headings in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 20. Governing Law. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Texas. 21. Counterparts. This Agreement may be executed in multiple original counterparts, each of which shall be deemed an original, but all of which together shall constitute the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement in Houston, Texas, as of the date and year first above written. SERVICE CORPORATION INTERNATIONAL By: /s/ JAMES M. SHELGER ------------------------------------- Senior Vice President General Counsel /s/ SAMUEL W. RIZZO ---------------------------------------- Samuel W. Rizzo -5- 6 CONSULTATION AGREEMENT THIS AGREEMENT made this 6th day of October, 1995, between Service Corporation International, a Texas corporation (the "Company"), and Samuel W. Rizzo (the "Consultant"); W I T N E S S E T H: ARTICLE I CONSULTATION 1.1 Term and Duties. The Company hereby retains the Consultant to serve the Company as a general advisor and consultant to management on all matters pertaining to the business of the Company as may be requested from time to time by the Chief Executive Officer of the Company and the Consultant agrees to render to the Company such services of an advisory or consultative nature upon the terms and conditions hereinafter set forth. The Consultant shall be available to advise and consult with the Chairman of the Board and Chief Executive Officer of the Company concerning matters the Consultant was involved in as Chief Financial Officer of the Company or as a member of the Company's Board of Directors or any Committee thereof, including, without limitation, financing arrangements, acquisitions, financial reporting issues and corporate planning. The Consultant shall make himself available for the required consulting upon request by the Chairman of the Board or Chief Executive Officer of the Company at least 24 hours in advance of the intended time of the commencement of the requested consulting services and the Consultant shall be available to provide such requested consulting services at least ten hours per week, but not more than 40 hours per month, on a non- cumulative basis. The Consultant's duties will commence on the date of this Agreement and terminate on October 6, 2005. 1.2 Compensation. In consideration for the Consultant's services, covenant not to compete and other obligations hereunder, the Company will pay the Consultant monthly installments of $31,667. Such installments shall be payable on the date hereof and on the first day of each month hereafter until the date on which the payments made hereunder aggregate $4,325,000. A prepayment of $525,000 of such aggregate amount is being made on the date hereof and, on January 2, 1996, an additional prepayment of $835,000 shall be made by the Company to the Consultant. Such payment shall be paid to Consultant on said date notwithstanding the notice and grace period described in Section 4.3 herein. The amount of the monthly installments hereunder has been computed based on the aggregate payments due hereunder reduced by the prepayment made on the date hereof ($3,800,000). The prepayment to be made on January 2, 1996 shall be applied to reduce the monthly installments otherwise due hereunder in the 7 inverse order of their maturities. The Consultant shall have the right to designate the person or entity to which such payments are to be made in the event of the Consultant's death prior to the final payment hereunder, and the Consultant shall have the right to change from time to time his designation of the person(s) or entity(s) who is to receive the payments the Consultant would have received thereunder had he not died, and such designations shall be in writing and given to the Company; provided, however, if there is no such designation in effect at the time of Consultant's death, the payments that would have been made to the Consultant hereunder shall instead be made to the personal representative of his estate. 1.3 Expenses, Space and Support. During the term of this Agreement, the Consultant shall be entitled to receive prompt reimbursement for reasonable expenses incurred in performing his duties hereunder in accordance with the policies, practices and procedures of the Company from time to time in effect. The Company will provide, at its offices, the Consultant with any space and support necessary for him to perform his duties hereunder. ARTICLE II DISCLOSURES OF INFORMATION The Consultant acknowledges that in the course of his previous employment, and of his engagement hereunder, by the Company he has received and will receive certain trade secrets, programs, lists of customers and other confidential information and knowledge concerning the business of the Company (hereinafter collectively referred to as "Information") which the Company desires to protect. The Consultant understands that the Information is confidential and he agrees not to reveal the Information to anyone outside the Company so long as the confidential or secret nature of the Information shall continue. The Consultant further agrees that he will at no time use the Information in competing with the Company. Upon termination of this Agreement, the Consultant shall surrender to the Company all papers, documents, writings and other property produced by him or coming into his possession by or through his previous employment and his engagement hereunder or relating to the Information and the Consultant agrees that all such materials will at all times remain the property of the Company. ARTICLE III NONCOMPETITION During the term of this agreement, the Consultant agrees he will not, as principal, agent, trustee or through the agency of any corporation, partnership, association or agent or agency engage in any business which conducts a business in competition with the Company or any affiliated corporation, and shall not be the owner of more than 1% of the outstanding capital stock of any corporation, or an officer, director or employee of any corporation (other than the Company or a corporation affiliated with the Company), or a member or employee of any partnership, or an owner or employee of any other business, -2- 8 which conducts a business in competition with the Company or any affiliated corporation. In the event that the provisions of Article III should ever be deemed to exceed the time, geographic or occupational limitations permitted by applicable laws, then such provisions shall be reformed to the maximum time, geographic or occupational limitations permitted by applicable law. ARTICLE IV MISCELLANEOUS 4.1 Notices. All notices, requests, consents and other communications under this Agreement shall be in writing and shall be deemed to have been delivered on the date personally delivered or on the date mailed, postage prepaid, by certified mail, return receipt requested, or telegraphed and confirmed if addressed to the respective parties as follows: If to the Consultant: Samuel W. Rizzo 7619 Del Monte Houston, Texas 77063 If to the Company: Service Corporation International 1929 Allen Parkway Houston, Texas 77019 Attention: General Counsel Either party hereto may designate a different address by providing written notice of such new address to the other party hereto. 4.2 Legal Proceedings. The Consultant agrees that he will cooperate with the Company in defense of all litigation involving the Consultant as a party or in legal proceedings involving the Company or it subsidiaries or affiliates in matters in which the Consultant's testimony shall be required. The Company agrees to hold the Consultant harmless from judgments in any amounts taken against the Consultant in all litigation where the Consultant is a defendant because of acts of commission or omission during the performance of this duties as a consultant to the Company except those acts (if any) by the Consultant that constituted actual fraud against or that were intentionally and wilfully taken by the Consultant to cause material harm to the Company or its subsidiaries and affiliates. The Company and its subsidiaries and affiliates shall not bring any third party action against the Consultant, or seek any contribution from the Consultant, on account of any litigation or threatened litigation against the Company, its subsidiaries or affiliates. The Company agrees to promptly pay the reasonable attorney's fees and other expenses of the Consultant to defend him in any litigation or threatened litigation in which -3- 9 the Consultant is or may be a defendant with the Company, its subsidiaries or affiliates or in which the Consultant's testimony is required, and the Consultant shall select his attorneys for all such matters, subject to the prior written approval by the Company, which approval shall not be unreasonably withheld. The provisions of this section apply to all types of proceedings in all courts of competent jurisdiction involving administrative trials, civil trials and criminal trials. The Company and the Consultant agree and stipulate that the obligations under this section shall not in any way influence or be construed to influence the Consultant as to the content of any testimony or other evidence that that Consultant may provide in any proceeding. The obligations of the Company set forth in this section shall be conditioned upon and subject to the Consultant providing written notice to the Company within ten days of his becoming aware of any claim, demand, action, cost or other occurrence which could give rise to the Consultant's rights under this section. 4.3 Interest. If the Consultant does not receive from the Company any payment provided for under this Agreement at the time called for hereunder, the Consultant shall give the Company written notice that said payment was not received and the Company shall have five days grace period to remit such payment to the Consultant. In the event the Company fails to make payment to the Consultant after receipt of such notice and the expiration of the grace period, the Consultant shall be entitled to recover such payment plus interest thereof at the rate of 10% per annum from the due date hereof until received. 4.4 Notice and Opportunity to Cure. The Consultant shall not be considered to have violated any obligation, duty or covenant (each referred to herein as "duty") under this Agreement unless and until (a) the Company first gives the Consultant written notice stating (i) specifically what the Company alleges the Consultant has done or failed to do in violation of a duty under this Agreement, and (ii) a reasonable period (which shall be not less than 15 days if the alleged violation concerns a duty under Article I of this Agreement, or shall be not less than five days if it concerns a duty under Article II or Article III of this Agreement) after the Consultant's receipt of such written notice within which to cure such alleged violation, and (b) the Consultant fails to cure such alleged violation within such cure period to the reasonable satisfaction of the Company. In the case of the Consultant's duties under Article I of this Agreement, the Company and the Consultant agree that if after consultation services are requested by the Company's Chairman of the Board or Chief Executive Officer and before the end of the cure period for any alleged violation of the Consultant's duty to provide such requested consulting services the Consultant dies or, due to physical or mental illness or infirmity, becomes unable to consult with the Company's Chairman of the Board or Chief Executive Officer, the Consultant shall be deemed to have cured such alleged violation for all purposes of this Agreement so that this failure to actually provide such requested consulting services shall not constitute a violation of his duties under Article I of this Agreement and, further, after the Consultant's death and throughout any period while the Consultant is unable to provide consulting services due to physical or mental illness or injury, the Consultant shall never be considered to have violated any duty under Article I of this Agreement. The Company shall not be considered to have violated any duty under this Agreement unless and until (x) the Consultant first gives the Company written notice stating (i) specifically -4- 10 what the Consultant believes the Company has done or failed to do in violation of a duty under this Agreement, and (ii) a reasonable period (which shall be five days if the alleged violation concerns a duty of the Company to make a payment to the Consultant or to his named beneficiary if he is deceased, or shall be not less than five days if the alleged violation concerns any other duty of the Company under this Agreement) after the Company's receipt of such written notice within which to cure the alleged violation, and (y) the Company fails to cure such alleged violation within such cure period. If either party receives a notice under this section from the other and fails to cure the alleged violation within the cure period, the party asserting such violation may pursue any legal or equitable remedies available to such party against the other on account of the alleged violation stated in such notice, including specific performance; provided, however, if the Consultant is deceased the Company may not withhold any payment scheduled to be paid after the Consultant's death under this Agreement to the beneficiary named by the Consultant as an offset against or otherwise as a means of obtaining any damages the Company alleges it has sustained due to an alleged violation by the Consultant before his death of any duty under this Agreement. 4.5 Legal Fees and Expenses. The Company agrees to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which Consultant may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, Consultant or others of the validity or enforceability of, or liability under, any provision of this Agreement, providing the issue or dispute, with respect to which such fees and expenses relate arises prior to February 16, 1998. 4.6 Specific Performance. The Consultant acknowledges that a remedy at law for any breach or attempted breach of Article II or Article III of this Agreement, and any failure to be available for, or non-performance or inadequate performance of consulting services required under Section 1.1, will be inadequate, agrees that the Company shall be entitled to specific performance and injunctive and other equitable relief in case of any such breach or attempted breach, and further agrees to waive any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or any other equitable relief. 4.7 Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. 4.8 Assignment. Except as provided in Article 1.2 (concerning the payment after the Consultant's death of payments to person(s) or entity(s) designated by him or to the personal representative of his estate), this Agreement may not be assigned by the Consultant. Neither the Consultant, his spouse nor estate shall have any right to commute, encumber or dispose of any right to receive payments hereunder, it being agreed that such payments and the right thereto are nonassignable and nontransferable. -5- 11 4.9 Binding Effect. Subject to the provisions of Section 4.8 of this Agreement, this Agreement shall be binding upon and inure to the benefit of the parties hereto, the Consultant's heirs and personal representatives, and the successors and assigns of the Company. 4.10 Captions. The section and paragraph headings in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 4.11 Governing Law. This Agreement shall be construed and enforced in accordance with and governed by the laws of the State of Texas. 4.12 Counterparts. This Agreement may be executed in multiple original counterparts, each of which shall be deemed an original, but all of which together shall constitute the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement in Houston, Texas as of the date and year first above written. SERVICE CORPORATION INTERNATIONAL By /s/ JAMES M. SHELGER ---------------------------------- Senior Vice President General Counsel /s/ SAMUEL W. RIZZO ------------------------------------ Samuel W. Rizzo -6- EX-10.13 4 EMPLOYMENT AGREEMENT - JERALD L. PULLINS 1 Exhibit 10.13 EMPLOYMENT AGREEMENT EMPLOYMENT AGREEMENT made and entered into as of this 1st day of December, 1991, amended and restated as of August 12, 1992, further amended as of May 12, 1993 and further amended and restated as of January 1, 1995 by and between SERVICE CORPORATION INTERNATIONAL, a Texas corporation (the "Company") and JERALD L. PULLINS (the "Employee"); WHEREAS, Employee is employed by the Company in an executive capacity, has extraordinary access to the Company's confidential business information, and has significant duties and responsibilities in connection with the conduct of the Company's business which places Employee in a special and uncommon classification of employees; WHEREAS, attendant to Employee's employment by the Company, the Company and Employee wish for there to be a complete understanding and agreement between the Company and Employee with respect to the fiduciary duties owed by Employee to the Company; Employee's obligation to avoid conflicts of interest, disclose pertinent information to the Company, and refrain from using or disclosing the Company's information; the term of employment and conditions for or upon termination thereof; the compensation and benefits owed to Employee; and the post-employment obligations Employee owes to the Company; and WHEREAS, but for Employee's agreement to the covenants and conditions of this Agreement, particularly the conflict of interest provisions, the provisions with respect to confidentiality of information and the ownership of intellectual property, and the post-employment obligations of Employee, the Company would not have entered into this Agreement; NOW, THEREFORE, in consideration of Employee's continued employment by the Company and the mutual promises and covenants contained herein, the receipt and sufficiency of such consideration being hereby acknowledged, the Company and Employee agree as follows: 1. Employment and Term. The Company agrees to employ the Employee and the Employee agrees to remain in the employ of the Company, in accordance with the terms and provisions of this Agreement, for the period beginning on the date of this Agreement and ending as of the close of business on the third (3rd) anniversary of the date hereof (such period together with all extensions thereof, including any Change of Control Period (as defined in Section 16(b) below), are referred to hereinafter as the "Employment Period"); provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as a "Renewal Date") the Employment Period shall be automatically extended so as to terminate three (3) 2 years from such Renewal Date, unless at least 60 days prior to the Renewal Date either the Company or the Employee gives the other written notice that the Employment Period shall not be so extended. 2. Duties and Powers of Employee. (a) Position; Location. During the Employment Period, the Employee shall be employed as Executive Vice President European Operations of the Company. In such employment, the Employee's duties and powers shall include, but not be limited to, all of the duties and powers of holding the offices described above pursuant to the Bylaws of the Company, as in effect on the date hereof, or as designated by the Board of Directors of the Company (the "Board") or any duly authorized committee thereof in connection with the execution of this Agreement. The Employee's services shall be performed at the location where the Employee is currently employed or any office which is the headquarters of the Company and is less than 50 miles from such location. During the Change of Control Period, the Employee's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 90-day period immediately preceding the Change of Control Date. (b) Duties. During the Employment Period, and excluding any periods of vacation and sick leave to which the Employee is entitled, the Employee agrees to devote his attention and time during normal business hours to the business and affairs of the Company and to use the Employee's best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Employee to (i) serve on corporate, civic or charitable boards or committees, (ii) deliver lectures, fulfill speaking engagements or teach at educational institutions and (iii) manage personal investments, so long as such activities do not significantly interfere with the performance of the Employee's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Employee prior to the date of this Agreement or subsequent thereto consistent with this Section 2(b), the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) shall not thereafter be deemed to interfere with the performance of the Employee's responsibilities to the Company. (c) Employee agrees and acknowledges that he owes, and will comply with, a fiduciary duty of loyalty, fidelity or allegiance to act at all times in the best interests of the Company and to take no action or fail to take action if such action or failure to act would injure the Company's business, its interests or its reputation. -2- 3 3. Compensation. The Employee shall receive the following compensation for his services: (a) Salary. During the Employment Period, he shall be paid an annual base salary ("Annual Base Salary") at the rate of not less than $280,000 per year, in substantially equal bi-weekly installments, and subject to any and all required withholdings and deductions for Social Security, income taxes and the like. The Board may from time to time direct such upward adjustments to Annual Base Salary as the Board deems to be appropriate or desirable; provided, however, that during the Change of Control Period, the Annual Base Salary shall be reviewed at least annually and shall be increased at any time and from time to time as shall be substantially consistent with increases in base salary generally awarded in the ordinary course of business to other peer executives of the Company and its affiliated companies (as defined in Section 16(d) below). Annual Base Salary shall not be reduced after any increase thereof pursuant to this Section 3(a). Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation of the Company under this Agreement. (b) Incentive Cash Compensation. During the Employment Period, he shall be eligible annually for a cash bonus at the discretion of the Compensation Committee of the Board (such aggregate awards for each year are hereinafter referred to as the "Annual Bonus") and at the discretion of the Board to receive awards from any plan of the Company or any of its affiliated companies providing for the payment of bonuses in cash to employees of the Company or its affiliated companies having rank comparable to that of the Employee (such plans being referred to herein collectively as the "Cash Bonus Plans") in accordance with the terms thereof; provided, however, that, during the Change of Control Period, the Employee shall be awarded, for each fiscal year ending during the Change of Control Period, an Annual Bonus at least equal to the Highest Recent Bonus (as defined in Section 16(e) below). Each Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Employee shall elect to defer the receipt of such Annual Bonus. (c) Incentive and Savings and Retirement Plans. During the Employment Period, the Employee shall be entitled to participate in all incentive and savings (in addition to the Cash Bonus Plans) and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies. (d) Welfare Benefit Plans. During the Employment Period, the Employee and/or the Employee's family, as the case may be, shall be eligible for participation in all welfare benefit -3- 4 plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, salary continuance, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies. (e) Expenses. During the Employment Period and for so long as the Employee is employed by the Company, he shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Employee in accordance with the policies, practices and procedures of the Company and its affiliated companies from time to time in effect. (f) Fringe Benefits. During the Employment Period, the Employee shall be entitled to fringe benefits in accordance with the plans, practices, programs and policies of the Company and its affiliated companies from time to time in effect, commensurate with his position and on a basis at least comparable to those received by other peer executives of the Company and its affiliated companies. (g) Office and Support Staff. During the Employment Period, the Employee shall be entitled to an office or offices of a size and with furnishings and other appointments, and to exclusive personal secretarial and other assistance, commensurate with his position and on a basis at least comparable to those received by other peer executives of the Company and its affiliated companies. (h) Vacation and Other Absences. During the Employment Period, the Employee shall be entitled to paid vacation and such other paid absences whether for holidays, illness, personal time or any similar purposes, in accordance with the plans, policies, programs and practices of the Company and its affiliated companies in effect from time to time, commensurate with his position and on a basis at least comparable to those received by other peer executives of the Company and its affiliated companies. (i) During the Change of Control Period, the Employee's benefits listed under Sections 3(c), 3(d), 3(e), 3(f), 3(g) and 3(h) above shall be at least commensurate in all material respects with the most valuable and favorable of those received by the Employee at any time during the 90-day period immediately preceding the Change of Control Date. 4. Termination of Employment. (a) Death or Disability. The Employment Period shall terminate automatically upon the Employee's death during the Employment Period. If the Company determines in good faith that the Disability of the Employee has -4- 5 occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Employee written notice in accordance with Section 18(b) of its intention to terminate the Employment Period. In such event, the Employment Period shall terminate effective on the 30th day after receipt of such notice by the Employee (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Employee shall not have returned to full-time performance of the Employee's duties. For purposes of this Agreement, "Disability" shall mean the inability of the Employee to perform the Employee's duties with the Company on a full-time basis as a result of incapacity due to mental or physical illness which continues for more than one year after the commencement of such incapacity, such incapacity to be determined by a physician selected by the Company or its insurers and acceptable to the Employee or the Employee's legal representative (such agreement as to acceptability not to be withheld unreasonably). (b) Cause. The Company may terminate the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean (i) a material breach by the Employee of Section 9 which is willful on the Employee's part or which is committed in bad faith or without reasonable belief that such breach is in the best interests of the Company and its affiliated companies, or (ii) a material breach by the Employee of the Employee's obligations under Section 2 (other than a breach of the Employee's obligations under Section 2 arising from the failure of the Employee to work as a result of incapacity due to physical or mental illness) or any material breach by the Employee of Section 10, 11 or 12 of this Agreement which in either case is willful on the Employee's part, which is committed in bad faith or without reasonable belief that such breach is in the best interests of the Company and its affiliated companies and which is not remedied in a reasonable period of time after receipt of written notice from the Company specifying such breach, or (iii) the conviction of the Employee of a felony involving malice which conviction has been affirmed on appeal or as to which the period in which an appeal can be taken has lapsed. (c) Good Reason; Window Period. The Employee's employment may be terminated (i) by the Employee for Good Reason (as defined below) or (ii) during the Window Period (as defined below) by the Employee without any reason. For purposes of this Agreement, the "Window Period" shall mean the 30-day period immediately following the first anniversary of the Change of Control Date. For purposes of this Agreement, "Good Reason" shall mean (i) the assignment to the Employee of any duties inconsistent in any respect with the Employee's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 2 or any other action by the Company which results in -5- 6 a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated and insubstantial action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Employee; (ii) any failure by the Company to comply with any of the provisions of Section 3, other than an isolated and insubstantial failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Employee; (iii) the Company's requiring the Employee to be based at any office or location other than that described in Section 2(a); (iv) any purported termination by the Company of the Employee's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 16(c), provided that the successor referred to in Section 16(c) has received at least ten days prior written notice from the Company or the Employee of the requirements of Section 16(c). For purposes of this Section 4(c), during the Change of Control Period, any good faith determination of "Good Reason" made by the Employee shall be conclusive. (d) Notice of Termination. Any termination by the Company for Cause or by the Employee without any reason during the Window Period or for Good Reason shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 18(b). For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Employment Period under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than 15 days after the giving of such notice). The failure by the Employee or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Employee or the Company hereunder or preclude the Employee or the Company from asserting such fact or circumstance in enforcing the Employee's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the Employee's employment is terminated by the Company for Cause, or by the Employee during the Window Period or for Good -6- 7 Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Employee's employment is terminated by the Company other than for Cause or Disability, or by the Employee other than for Good Reason or during the Window Period, the Date of Termination shall be the date on which the Company or the Employee, as the case may be, notifies the other of such termination and (iii) if the Employee's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Employee or the Disability Effective Date, as the case may be. 5. Obligations of the Company Upon Termination. (a) Certain Terminations Prior to Change of Control Date. If, during the Employment Period prior to any Change of Control Date, the employment of the Employee with the Company shall be terminated (i) by the Company other than for Cause, death or Disability or (ii) by the Employee for Good Reason, then, in lieu of the obligations of the Company under Section 3, (i) the Company shall pay to the Employee in a lump sum in cash within 30 days after the Date of Termination all Unpaid Agreement Amounts (as defined in Section 5(b)(i)(A) below) and (ii) notwithstanding any other provision hereunder, for the longer of (A) the remainder of the Employment Period or (B) to the extent compensation and/or benefits are provided under any plan, program, practice or policy, such longer period, if any, as such plan, program, practice or policy may provide, the Company shall continue to provide to the Employee the compensation and benefits provided in Sections 3(a), 3(c) and 3(d). (b) Certain Terminations After Change of Control Date. If, during the Change of Control Period, the employment of the Employee with the Company shall be terminated (i) by the Company other than for Cause, death or Disability or (ii) by the Employee either for Good Reason or without any reason during the Window Period, then, in lieu of the obligations of the Company under Section 3 and notwithstanding any other provision hereunder: (i) the Company shall pay to the Employee in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: (A) the sum of (1) all unpaid amounts due to the Employee under Section 3 through the Date of Termination, including without limitation, the Employee's Annual Base Salary and any accrued vacation pay, (2) the product of (x) the Highest Recent Bonus and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365 and (3) any compensation previously deferred by the Employee (together with any accrued interest or earnings thereon) to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2) and (3) shall be hereinafter referred to -7- 8 as the "Accrued Obligations" and the sum of the amounts described in clauses (1) and (3) shall be hereinafter referred to as the "Unpaid Agreement Amounts"); and (B) the amount (such amount shall be hereinafter referred to as the "Severance Amount") equal to the sum of (1) Three (3) multiplied by the Employee's Annual Base Salary, plus (2) Three (3) multiplied by the Employee's Highest Recent Bonus; and (ii) for the longer of (A) the remainder of the Employment Period or (B) to the extent benefits are provided under any plan, program, practice or policy, such longer period as such plan, program, practice or policy may provide, the Company shall continue benefits to the Employee and/or the Employee's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3(d) if the Employee's employment had not been terminated, in accordance with the most favorable plans, practices, programs or policies of the Company and its affiliated companies as in effect and applicable generally to other peer executives and their families during the 90-day period immediately preceding the Change of Control Date or, if more favorable to the Employee, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families; provided, however, that if the Employee becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be required only to the extent not provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility of the Employee for retiree benefits pursuant to such plans, practices, programs and policies, the Employee shall be considered to have remained employed until the end of the Employment Period and to have retired on the last day of such period; and (iii) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Employee and/or the Employee's family for the remainder of the Employment Period any other amounts or benefits required to be paid or provided or which the Employee and/or the Employee's family is eligible to receive pursuant to this Agreement and under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies as in effect and applicable generally to other peer executives of the Company and its affiliated companies and their families during the 90-day period immediately preceding the Change of Control Date or, if more favorable to the Employee, as in effect generally -8- 9 thereafter with respect to other peer executives of the Company and its affiliated companies and their families. Such amounts received under this Section 5(b) shall be in lieu of any other amount of severance relating to salary or bonus continuation to be received by the Employee upon termination of employment of the Employee under any severance plan, policy or arrangement of the Company. (c) Termination as a Result of Death. If the Employee's employment is terminated by reason of the Employee's death during the Employment Period, in lieu of the obligations of the Company under Section 3, the Company shall pay or provide to the Employee's estate (i) all Accrued Obligations (which shall be paid in a lump sum in cash within 30 days after the Date of Termination) and the timely payment or provision of the Welfare Benefit Continuation (as defined below) and the Other Benefits (as defined below) and (ii) any cash amount to be received by the Employee or the Employee's family as a death benefit pursuant to the terms of any plan, policy or arrangement of the Company and its affiliated companies. Welfare Continuation Benefits shall mean the continuation of benefits to the Employee and/or the Employee's family for the longer of (i) three (3) years from the Date of Termination or (ii) the period provided by the plans, programs, policies or practices described in Section 3(d) in which the Employee participates as of the Date of Termination, such benefits to be at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 3(d) if the Employee's employment had not been terminated, in accordance with the most favorable plans, practices, programs or policies of the Company and its affiliated companies as in effect and applicable generally to other peer executives and their families on the Date of Termination or, if the Date of Termination occurs after the Change of Control Date, during the 90-day period immediately preceding the Change of Control Date or, if more favorable to the Employee, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families. Other Benefits shall mean the timely payment or provision to the Employee and/or the Employee's family of any other amounts or benefits required to be paid or provided or which the Employee and/or the Employee's family is eligible to receive pursuant to this Agreement and under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies as in effect and applicable generally to other peer executives and their families on the Date of Termination or, if the Date of Termination occurs after the Change of Control Date, during the 90-day period immediately preceding the Change of Control Date or, if more favorable to the Employee, as in effect generally thereafter with respect to other peer executives of the Company and its affiliated companies and their families. -9- 10 (d) Termination as a Result of Disability. If the Employee's employment is terminated by reason of the Employee's Disability during the Employment Period, in lieu of the obligations of the Company under Section 3, the Company shall pay or provide to the Employee (i) all Accrued Obligations which shall be paid in a lump sum in cash within 30 days after the Date of Termination and the timely payment or provision of the Welfare Benefit Continuation and the Other Benefits, provided, however, that if the Employee becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the Welfare Benefit Continuation shall be required only to the extent not provided under such other plan during such applicable period of eligibility, and (ii) any cash amount to be received by the Employee as a disability benefit pursuant to the terms of any plan, policy or arrangement of the Company and its affiliated companies. (e) Cause; Other than for Good Reason. If the Employee's employment shall be terminated during the Employment Period by the Company for Cause or by the Employee other than during the Window Period and other than for Good Reason, in lieu of the obligations of the Company under Section 3, the Company shall pay to the Employee in a lump sum in cash within 30 days after the Date of Termination all Unpaid Agreement Amounts. 6. Non-exclusivity of Rights. Except as provided in Sections 5(a), 5(b)(i)(B), 5(b)(ii), 5(c) and 5(d), nothing in this Agreement shall prevent or limit the Employee's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Employee may qualify, nor shall anything herein limit or otherwise affect such rights as the Employee may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Employee is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 7. Full Settlement; Resolution of Disputes. (a) The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Employee or others. In no event shall the Employee be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Employee under any of the provisions of this Agreement and, except as provided in Sections 5(b)(ii) and 5(d), such amounts shall not be reduced whether or not the Employee obtains other employment. The Company agrees -10- 11 to pay promptly as incurred, to the full extent permitted by law, all legal fees and expenses which the Employee may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Employee or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Employee about the amount of any payment pursuant to this Agreement), plus in each case interest on any payment required to be made under this Agreement but not timely paid at the rate provided for in Section 280G(d)(4) of the Internal Revenue Code of 1986, as amended (the "Code"). (b) If there shall be any dispute between the Company and the Employee (i) in the event of any termination of the Employee's employment by the Company, whether such termination was for Cause, or (ii) in the event of any termination of employment by the Employee, whether Good Reason existed, then, unless and until there is a final, nonappealable judgment by a court of competent jurisdiction declaring that such termination was for Cause or that the determination by the Employee of the existence of Good Reason was not made in good faith, the Company shall pay all amounts, and provide all benefits, to the Employee and/or the Employee's family or other beneficiaries, as the case may be, that the Company would be required to pay or provide pursuant to Section 5(a) or 5(b) as though such termination were by the Company without Cause or by the Employee with Good Reason. The Employee hereby undertakes to repay to the Company all such amounts to which the Employee is ultimately adjudged by such court not to be entitled. 8. Certain Additional Payments by the Company. (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Employee (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 8) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Employee with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Employee shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Employee of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Employee retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 8(c), all determinations required to be made under this Section 8, including whether and when a Gross-Up Payment is required and the amount of -11- 12 such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ernst & Young (the "Accounting Firm"), which shall provide detailed supporting calculations both to the Company and the Employee within 15 business days of the receipt of notice from the Employee that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving (or has served within the three years preceding the Change of Control Date) as accountant or auditor for the individual, entity or group effecting the Change of Control, or is unwilling or unable to perform its obligations pursuant to this Section 8, the Employee shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 8, shall be paid by the Company to the Employee within five days of the receipt of the Accounting Firm's determination. If the Accounting Firm determines that no Excise Tax is payable by the Employee, it shall furnish the Employee with a written opinion that failure to report the Excise Tax on the Employee's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Employee. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 8(c) and the Employee thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Employee. (c) The Employee shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Employee is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Employee shall not pay such claim prior to the expiration of the 30-day period following the date on which the Employee gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Employee in writing prior to the expiration of such period that it desires to contest such claim, the Company, subject to the provisions of this Section 8(c), shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with -12- 13 the taxing authority in respect of such claim and may, at its sole option, either direct the Employee to pay the tax claimed and sue for a refund or contest the claim in any permissible manner. In this connection, the Employee agrees, subject to the provisions of this Section 8(c), to (i) prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine, (ii) give the Company any information reasonably requested by the Company relating to such claim, (iii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iv) cooperate with the Company in good faith in order effectively to contest such claim and (v) permit the Company to participate in any proceedings relating to such claim. The foregoing is subject, however, to the following: (A) the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Employee harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed in connection therewith and the payment of costs and expenses in such connection, (B) if the Company directs the Employee to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Employee, on an interest-free basis, and shall indemnify and hold the Employee harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance, (C) any extension of the statute of limitations relating to payment of taxes for the taxable year of the Employee with respect to which such contested amount is claimed to be due shall be limited solely to such contested amount and (D) the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Employee shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 8(c), the Employee becomes entitled to receive any refund with respect to such claim, the Employee shall (subject to the Company's complying with the requirements of Section 8(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Employee of an amount advanced by the Company pursuant to Section 8(c), a determination is made that the Employee shall not be entitled to any refund with respect to such claim and the Company does not notify the Employee in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance -13- 14 shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 9. Confidential Information. The Employee shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Employee during the Employee's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Employee or representatives of the Employee in violation of this Agreement). After termination of the Employee's employment with the Company or any of its affiliated companies, the Employee shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 9 constitute a basis for deferring or withholding any amounts otherwise payable to the Employee under this Agreement. Subject to the previous sentence, nothing herein shall be construed as prohibiting the Company from pursuing any other remedies available to it for such breach or threatened breach, including the recovery of damages from the Employee. 10. Employee's Obligation to Avoid Conflicts of Interest. (a) In keeping with Employee's fiduciary duties to the Company, Employee agrees that he shall not knowingly become involved in circumstances constituting a conflict of interest with such duties, or upon discovery thereof, allow such a conflict to continue. Moreover, Employee agrees that he shall disclose to the Secretary of the Company any facts which might involve a conflict of interest that has not been approved by the Company's Compensation Committee. The Board hereby acknowledges and agrees that the activities of Employee listed on Schedule A hereto do not, and the continuation of such activities will not, constitute a conflict of interest for purposes of this Section 10. (b) In this connection, it is agreed that any direct interest in, connection with, or benefit from any outside activities, particularly commercial activities, which might in any way adversely affect the Company or any of its affiliated companies, involves a possible conflict of interest. Circumstances in which a conflict of interest on the part of Employee would or might arise, and which should be reported immediately to the Company, include, but are not limited to, the following: (i) Ownership of a material interest in any lender, supplier, contractor, customer or other entity with which the Company or any of its affiliated companies does business; -14- 15 (ii) Acting in any capacity, including director, officer, partner, consultant, employee, distributor, agent or the like, for lenders, suppliers, contractors, subcontractors, customers or other entities with which the Company or any of its affiliated companies does business; (iii) Acceptance, directly or indirectly, of payments, services or loans from a lender, supplier, contractor, subcontractor, customer or other entity with which the Company or any of its affiliated companies does business, including but not limited to, gifts, trips, entertainment, or other favors of more than a nominal value, but excluding loans from publicly held insurance companies and commercial or savings banks at normal rates of interest; (iv) Misuse of information or facilities to which Employee has access in a manner which will be detrimental to the Company's or any of its affiliated companies' interest, such as utilization for Employee's own benefit of know-how or information developed through the Company's or any of its affiliated companies' business activities; (v) Disclosure or other misuse of information of any kind obtained through Employee's connection with the Company or any of its affiliated companies; or (vi) Acquiring or trading in, directly or indirectly, other properties or interests connected with the design or marketing of products or services designed or marketed by the Company or any of its affiliated companies. (c) In the event that the Company determines, in the exercise of its reasonable judgment, that a conflict of interest exists between the Employee and the Company or any of its affiliated companies, the Company shall notify the Employee in writing in accordance with Section 17(b) hereof, providing reasonably detailed information identifying the source of the conflict of interest. Within the 60-day period following receipt of such notice, the Employee shall take action satisfactory to the Company to eliminate the conflict of interest. Failure of the Employee to take such action within such 60-day period shall constitute "Cause" under Section 4(b) hereof. 11. Disclosure of Information, Ideas, Concepts, Improvements, Discoveries and Inventions. As part of Employee's -15- 16 fiduciary duties to the Company, Employee agrees that during the Employment Period, and for a period of six (6) months after the Date of Termination, Employee shall promptly disclose in writing to the Company all information, ideas, concepts, improvements, discoveries and inventions, whether patentable or not, and whether or not reduced to practice, which are conceived, developed, made or acquired by Employee, either individually or jointly with others, and which relate to the business, products or services of the Company or any of its affiliated companies, irrespective of whether Employee utilized the Company's or any of its affiliated companies' time or facilities and irrespective of whether such information, idea, concept, improvement, discovery or invention was conceived, developed, discovered or acquired by Employee on the job, at home, or elsewhere. This obligation extends to all types of information, ideas and concepts, including information, ideas and concepts relating to new types of services, corporate opportunities, acquisition prospects, the identity of key representatives within acquisition prospect organizations, prospective names or service marks for the Company's or any of its affiliated companies' business activities, and the like. 12. Ownership of Information, Ideas, Concepts, Improvements, Discoveries and Inventions and all Original Works of Authorship. (a) All information, ideas, concepts, improvements, discoveries and inventions, whether patentable or not, which are conceived, made, developed or acquired by Employee or which are disclosed or made known to Employee, individually or in conjunction with others, during Employee's employment by the Company or any of its affiliated companies and which relate to the Company's or any of its affiliated companies' business, products or services (including all such information relating to corporate opportunities, research, financial and sales data, pricing and trading terms, evaluations, opinions, interpretations, acquisition prospects, the identity of customers or their requirements, the identity of key contacts within the customer's organizations or within the organization of acquisition prospects, or marketing and merchandising techniques, prospective names and marks) are and shall be the sole and exclusive property of the Company. Moreover, all drawings, memoranda, notes, records, files, correspondence, manuals, models, specifications, computer programs, maps and all other writings or materials of any type embodying any of such information, ideas, concepts, improvements, discoveries and inventions are and shall be the sole and exclusive property of the Company. (b) In particular, Employee hereby specifically sells, assigns and transfers to the Company all of his worldwide right, title and interest in and to all such information, ideas, concepts, improvements, discoveries or inventions, and any United States or foreign applications for patents, inventor's certificates or other industrial rights that may be filed thereon, including divisions, continuations, continuations-in-part, reissues and/or extensions -16- 17 thereof, and applications for registration of such names and marks. Both during the period of Employee's employment by the Company or any of its affiliated companies and thereafter, Employee shall assist the Company and its nominee at all times in the protection of such information, ideas, concepts, improvements, discoveries or inventions, both in the United States and all foreign countries, including but not limited to, the execution of all lawful oaths and all assignment documents requested by the Company or its nominee in connection with the preparation, prosecution, issuance or enforcement of any applications for United States or foreign letters patent, including divisions, continuations, continuations-in-part, reissues, and/or extensions thereof, and any application for the registration of such names and marks. (c) Moreover, if during Employee's employment by the Company or any of its affiliated companies, Employee creates any original work of authorship fixed in any tangible medium of expression which is the subject matter of copyright (such as videotapes, written presentations on acquisitions, computer programs, drawings, maps, architectural renditions, models, manuals, brochures or the like) relating to the Company's or any of its affiliated companies' business, products, or services, whether such work is created solely by Employee or jointly with others, the Company shall be deemed the author of such work if the work is prepared by Employee in the scope of his or her employment; or, if the work is not prepared by Employee within the scope of his or her employment but is specially ordered by the Company as a contribution to a collective work, as a part of a motion picture or other audiovisual work, as a translation, as a supplementary work, as a compilation or as an instrumental text, then the work shall be considered to be work made for hire and the Company shall be the author of the work. In the event such work is neither prepared by the Employee within the scope of his or her employment or is not a work specially ordered and deemed to be a work made for hire, then Employee hereby agrees to assign, and by these presents does assign, to the Company all of Employee's worldwide right, title and interest in and to such work and all rights of copyright therein. Both during the period of Employee's employment by the Company or any of its affiliated companies and thereafter, Employee agrees to assist the Company and its nominee, at any time, in the protection of the Company's worldwide right, title and interest in and to the work and all rights of copyright therein, including but not limited to, the execution of all formal assignment documents requested by the Company or its nominee and the execution of all lawful oaths and applications for registration of copyright in the United States and foreign countries. 13. Employee's Post-Employment Non-Competition Obligations: In Certain Situations such Obligations Apply only if the Company opts to Continue Employee's Salary Payment. (a) During the Employment Period and, subject to the conditions of Sections 13(b) and 13(c), for a period of three (3) years -17- 18 thereafter (the "Non-Competition Period") provided, however, that the Non-Competition Period shall not exceed three (3) years from the Date of Termination, Employee shall not, acting alone or in conjunction with others, directly or indirectly, in any of the business territories in which the Company or any of its affiliated companies is presently or at the time of termination of employment conducting business, engage in any business in competition with the business conducted by the Company or any of its affiliated companies at the time of the termination of the employment relationship, whether for his own account or by soliciting, canvassing or accepting any business or transaction for or from any other company or business in competition with such business of the Company or any of its affiliated companies. (b) If Employee has been terminated for Cause (Section 4(b)) or if Employee terminates his employment for any reason other than for Good Reason or other than during the Window Period (Section 4(c)), Employee shall be bound by the obligations of Section 13(a) and the Company shall have no obligation to make the Non-Competition Payments (as defined in Section 13(c) below). However, if the employment relationship is terminated by any other circumstance or for any other reason, Employee's post-employment non-competition obligations required by Section 13(a) shall be subject to the Company's obligation to make the Non-Competition Payments specified in Section 13(c). (c) Notwithstanding the provisions of Section 4 of this Agreement, whenever the employment relationship is terminated due to the expiration of its term because the Company or Employee timely gave written notice of termination (Section 1), or due to Employee's Disability (Section 4(a)), or by the Company without Cause (Section 4(b)), unless the Company exercises its option as hereinafter provided, Employee shall be entitled to continue to receive payments (the "Non-Competition Payments") equal to his then current Annual Base Salary (as of the Date of Termination) during the Non-Competition Period. During the Non-Competition Period, the Employee shall not, however, be deemed to be an employee of the Company or be entitled to continue to receive any other employee benefits other than as set forth in Section 5 or Section 8. Moreover, the Non-Competition Payments shall be reduced to the extent Employee has already received lump-sum payments in lieu of salary and bonus pursuant to Section 5. The Company shall have the option, exercisable at any time within one (1) month after Employee's Date of Termination, to cancel Employee's post-employment non-competition obligations under Section 13(a) and the Company's corresponding obligation to make the Non-Competition Payments. Such option shall be exercised by the Company mailing a written notice thereof to Employee in accordance with Section 18(b); if the Company does not send such notice within the prescribed one-month time, the Company shall remain obligated to make the Non-Competition Payments and Employee shall remain obligated to comply with the provisions of Section 13(a). The purpose of this paragraph is to make the non-competition -18- 19 obligations of Employee more reasonable from the Employee's point of view. The amounts to be paid by the Company are not intended to be liquidated damages or an estimate of the actual damages that would be sustained by the Company if Employee breaches his post-employment non-competition obligations. If Employee breaches his post-employment non-competition obligations, the Company shall be entitled to cease making the Non-Competition Payments and shall be entitled to all of its remedies at law or in equity for damages and injunctive relief. 14. Obligations to Refrain From Competing Unfairly. In addition to the other obligations agreed to by Employee in this Agreement, Employee agrees that during the Employment Period and for three (3) years following the Date of Termination, he shall not at any time, directly or indirectly for the benefit of any other party than the Company or any of its affiliated companies, (a) induce, entice, or solicit any employee of the Company or any of its affiliated companies to leave his employment, or (b) contact, communicate or solicit any customer of the Company or any of its affiliated companies derived from any customer list, customer lead, mail, printed matter or other information secured from the Company or any of its affiliated companies or their present or past employees, or (c) in any other manner use any customer lists or customer leads, mail, telephone numbers, printed material or material of the Company or any of its affiliated companies relating thereto. 15. Successors. This Agreement is personal to the Employee and without the prior written consent of the Company shall not be assignable by the Employee otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Employee's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company or the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 16. Certain Definitions. The following defined terms used in this Agreement shall have the meanings indicated: -19- 20 (a) The "Change of Control Date" shall mean the first date on which a Change of Control occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Employee's employment with the Company is terminated or the Employee ceases to have the position with the Company, as set forth in Section 2(a), which the Employee had prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Employee that such termination or cessation (i) was at the request of a third party who has taken steps reasonably calculated to effect the Change of Control or (ii) otherwise arose in connection with or anticipation of the Change of Control, then, for all purposes of this Agreement, the "Change of Control Date" shall mean the date immediately prior to the date of such termination or cessation. (b) The "Change of Control Period" shall mean the period commencing on the Change of Control Date and ending on the last day of the Employment Period. (c) "Change of Control" shall mean: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended the "Exchange Act") (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (A) the then outstanding shares of Common Stock of the Company (the "Outstanding Company Common Stock") or (B) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company (excluding an acquisition by virtue of the exercise of a conversion privilege), (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition by any corporation pursuant to a reorganization, merger or consolidation, if, following such reorganization, merger or consolidation, the conditions described in clauses (A), (B) and (C) of subsection (iii) of this definition of "Change of Control" are satisfied; or (ii) Individuals who, as of the effective date hereof, constitute the Board of the Company (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of the Company; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by (A) a vote of at least a majority of the directors then comprising the Incumbent Board of the Company, or (B) a vote of at least a majority of the directors -20- 21 then comprising the Executive Committee of the Board at a time when such committee was comprised of at least five members and all members of such committee were either members of the Incumbent Board or considered as being members of the Incumbent Board pursuant to clause (A) of this subsection (ii), shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened election contest (as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of the Company; or (iii) Approval by the shareholders of the Company of a reorganization, merger or consolidation, in each case, unless, following such reorganization, merger or consolidation, (A) more than 60% of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such organization, merger or consolidation in substantially the same proportions as their ownership, immediately prior to such reorganization, merger or consolidation, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding the Company, any employee benefit plan or related trust of the Company or such corporation resulting from such reorganization, merger or consolidation and any Person beneficially owning, immediately prior to such reorganization, merger or consolidation, directly or indirectly, 20% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such reorganization, merger or consolidation or the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the board of directors of the corporation resulting from such reorganization, merger or consolidation were members of the Incumbent Board at the time of the execution of the initial agreement providing for such reorganization, merger or consolidation; or (iv) Approval by the shareholders of the Company of (A) a complete liquidation or dissolution of the Company or (B) the sale or other disposition of all or substantially all of -21- 22 the assets of the Company, other than to a corporation, with respect to which following such sale or other disposition, (A) more than 60% of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such sale or other disposition in substantially the same proportion as their ownership, immediately prior to such sale or other disposition, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding the Company and any employee benefit plan or related trust of the Company or such corporation and any Person beneficially owning, immediately prior to such sale or other disposition, directly or indirectly, 20% or more of the Outstanding Company Common Stock or Outstanding Company Voting Securities, as the case may be) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors and (C) at least a majority of the members of the Board of Directors of such corporation were members of the Incumbent Board at the time of the execution of the initial agreement or action of the Board of the Company providing for such sale or other disposition of assets of the Company. (d) The term "affiliated company" shall mean any company controlled by, controlling or under common control with the Company. (e) The term "Highest Recent Bonus" shall mean the highest Annual Bonus (annualized for any fiscal year consisting of less than twelve full months) paid or payable, including by reason of any deferral, to the Employee by the Company and its affiliated companies in respect of the three most recent full fiscal years ending on or prior to, (i) if prior to a Change of Control, the Date of Termination, or (ii) if after a Change of Control, the Change of Control Date. 17. Miscellaneous. (a) This Agreement replaces and merges all previous agreements and discussions relating to the same or similar subject matters between Employee and the Company and shall be governed by and construed in accordance with the laws of the State of Texas, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended, modified, repealed, waived, extended -22- 23 or discharged except by an agreement in writing signed by the party against whom enforcement of such amendment, modification, repeal, waiver, extension or discharge is sought. No person, other than pursuant to a resolution of the Board or a duly authorized committee thereof, shall have authority on behalf of the Company to agree to amend, modify, repeal, waive, extend or discharge any provision of this Agreement or anything in reference thereto. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Employee: Jerald L. Pullins 99 Brookwood Lane New Canaan, Connecticut 06840 If to the Company: Service Corporation International 1929 Allen Parkway Houston, Texas 77019 Attention: Corporate Secretary or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such federal, state or local taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Employee's or the Company's failure to insist upon strict compliance with any provision hereof or any other provision of this Agreement or the failure to assert any right the Employee or the Company may have hereunder, including, without limitation, the right of the Employee to terminate employment for Good Reason pursuant to Section 4(c) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. -23- 24 (f) No breach, whether actual or alleged, of this Agreement by the Employee shall constitute grounds for the Company to withhold or offset any payment or benefit due to the Employee under any other agreement, contract, plan, program, policy or practice of the Company. 18. Other Provisions. The Company acknowledges that Employee was an employee of the Company or one of its affiliates from December 1, 1969 until April 4, 1979 ("Prior Employment Period"), and Employee was a participant in a company pension plan which required five (5) years of Vesting Service to fully vest. The Company acknowledges that under applicable law and under Section 7.03 of the current SCI Pension Plan that the Prior Employment Period must be credited together with all subsequent years of employment of the same employer or an affiliate thereof for computation of Benefit Service under the SCI Pension Plan and SCI Supplemental Executive Retirement Plan. By confirmation of dates of employment hereof the Company does not change, add or incur additional expenses or liabilities for the payment of benefits that may be due or become due to Employee pursuant to applicable statutes and the SCI Pension Plan. IN WITNESS WHEREOF, the Employee and, pursuant to due authorization from the Board of Directors of the Company, the Company have caused this Agreement to be executed as of the day and year first above written. JERALD L. PULLINS Jerald L. Pullins ----------------------------------- SERVICE CORPORATION INTERNATIONAL By: James M. Shelger ------------------------------- James M. Shelger Senior Vice President and General Counsel -24- EX-10.35 5 CONFIRMATION BETWEEN MORGAN AND THE COMPANY 1 EXHIBIT 10.35 JP MORGAN Transaction Attn: GREG CAUTHEN SERVICE CORPORATION INTERNATIONAL HOUSTON, TEXAS Fax: 7135257710 From: RAJAN KUNDRA J P MORGAN SECURITIES INCORPORATED As Agent for MORGAN GUARANTY TRUST COMPANY OF NEW YORK Date: 14 September 1995 The purpose of this letter agreement is to confirm the terms and conditions of the Transaction entered into between us on the Trade Date specified below (the 'Transaction'). This letter agreement constitutes a 'Confirmation' as referred to in the ISDA Master Agreement specified below. The definitions and provisions contained in the 1991 ISDA Definitions are incorporated into this Confirmation. In the vent of any inconsistency between those definitions and provisions and this Confirmation, this Confirmation will govern. This Confirmation represents an amendment and restatement of any prior documents or other confirming communications between the parties with respect to this Transaction. Morgan is, together with other United Kingdom listed institutions, subject to the Bank of England's Code of Conduct. In connection therewith, this and certain future wholesale money market transactions will be outside the Financial Services Act, but you will have the benefit of the Code of Conduct. 1. This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement dated as of 4 February 1993, as amended and supplemented from time to time (the 'Agreement'), between MORGAN GUARANTY TRUST COMPANY OF NEW YORK ('Morgan') and SERVICE CORPORATION INTERNATIONAL (the 'Counterparty'). All provisions contained in the Agreement govern this Confirmation except as expressly modified below. 2 2. The terms of the particular Transaction to which this Confirmation relates are as follows: Morgan Deal Number: 030000117056 Trade Date: 13 September 1995 Effective Date: 13 December 1994 Termination Date: 15 December 2004 Fixed Amounts: Fixed Rate Payer: Morgan Notional Amount: 200,000,000.00 USD Fixed Rate Payer Payment Dates: Each 15 June, 15 December starting with 15 June 1995 up to, and including, 15 December 2004, subject to adjustment in accordance with the Modified Following Business Day Convention and there will be an adjustment to the Calculation Period. Fixed Rate: 8.48800 percent Fixed Rate Day Count Fraction: 30/360 Initial Stub Payment: From: 13 December 1994 To: 15 June 1995 Morgan Fixed Rate: 8.48800 percent 3 Floating Rate Payer: Counterparty Notional Amount: 128,139,416.00 GBP Floating Rate Payer Payment Dates: 15 June 1995, subject to adjustment in accordance with the Modified Following Business Day Convention and there will be an adjustment to the Calculation Period. Floating Rate Option: GBP-LIBOR-BBA Designated Maturity: 1 Month Spread: Plus 0.52900 percent Floating Rate Day County Fraction: Actual/365 (Fixed) Reset Dates: Monthly on day 15 Compounding: Applicable Method of Compounding: Flat Compounding Dates: Monthly on day 15 Initial Stub Period: From 13 December 1994 To 15 January 1995 Counterparty Floating Rate GBP-LIBOR-BBA Option: Initial Rate: Interpolated between the 1 and 2 month Libor rate Fixed Amounts: Fixed Rate Payer: Counterparty Notional Amount: 65,000,000.00 GBP 4 Fixed Rate Payer Payment Dates: Each 15 December, 15 June starting 15 December 995 up to, and including, 15 December 2004, subject to adjustment in accordance with the Modified Following Business Day Convention and there will be an adjustment to the Calculation Period. Fixed Rate: 8.54900 percent Fixed Rate Day Count Fraction: Actual/365 (Fixed) Floating Rate Payer: Counterparty Notional Amount: 63,139,416.00 GBP Floating Rate Payer Payment Dates: Each 15 December, 15 June starting with 15 December 1995 up to, and including, 15 December 2004, subject to adjustment in accordance with the modified Following Business Day Convention and there will be an adjustment to the Calculation Period. Floating Rate Option: GBP-LIBOR-BBA Designated Maturity: 6 Month Spread: Plus 0.52900 percent Floating Rate Day Count Fraction: Actual/365 (Fixed) Reset Dates: The first day of each Calculation Period. Business Day Locations for Counterparty: New York, London Business Day Locations for Morgan: New York, London Payments will be: Gross 5 Fee Payable to Counterparty: 129,019,336.00 GBP Fee Type: Principal Exchange Due Date: 27 January 1995 Fee Payable to Morgan: 128,139,416.00 GBP Fee Type: Principal Exchange Due Date: 15 December 2004 Fee Payable to Morgan: 201,432,212.00 USD Fee Type: Principal Exchange Due Date: 27 January 1995 Fee Payable to Counterparty: 200,000,000.00 USD Fee Type: Principal Exchange Due Date: 15 December 2004 4. Account Details Payments to Morgan: Account for payments in GBP: Morgan Guaranty Trust Co., London Direct S/D 165580 Favour: For the account of Morgan Guaranty Trust Company, London Account No.: Reference: Further Credit to Swaps Group Account: 10005051 Please sent MT100 cover cable to MGT London Account for payments USD: Morgan Guaranty Trust Co of New York New York, New York Favour: Morgan Guaranty Trust Co of New York - London Office ABA/Bank No.: 021000238 Account No.: 670 07 054 Reference: Further Credit to Swaps Group Account: 10005035 Please sent MT100 cover cable to MGT London 6 Payments to Counterparty: Account for payments in GBP: Favour: SERVICE CORPORATION INTERNATIONAL Account No.: Reference: Account for payments in USD: Favour: SERVICE CORPORATION INTERNATIONAL ABA/Bank No.: Account No.: Reference: 5. Offices (a) The Office of Morgan for the Swap Transaction is LONDON; and All enquiries regarding payments and/or rate resettings only should be sent to: Morgan Guaranty Trust Company of New York 60 Victoria Embankment London, EC4Y OJP Attention: Joanne Case Telephone: 44 1 71 325 3783 Facsimile: 44 1 71 325 3862/3863 Telex: 896631 MGT G Cable: Morganbank Please quote the Morgan Deal Number indicated above. All enquiries regarding confirmations should be sent to: Morgan Guaranty Trust Company of New York 60 Wall Street New York, New York 10260 Attention: Wendy Webbe Documentation Control Group Telephone: 1-212-468-2991 7 Facsimile: 1-212-648-5117 Please quote the Morgan Dean Number indicated above. (b) The Office of the Counterparty for the Swap Transaction is HOUSTON. J P MORGAN SECURITIES INCORPORATED is acting solely as agent for Morgan and will have no obligations under this Transaction. Each party represents that (i) it is entering into the transaction evidenced hereby as principal (and not as agent or in any other capacity); (ii) the other party is not acting as a fiduciary for it; (iii) it is not relying upon any representations except those expressly set forth in the Agreement or this Confirmation; (iv) it has consulted with its own legal, regulatory, tax, business, investment, financial, and accounting advisors to the extent it has deemed necessary, and it has made its own investment, hedging, and trading decisions based upon its own judgment and upon any advice from such advisors as it has deemed necessary and not upon any view expressed by the other party; and (v) it is entering into this transaction with a full understanding of the terms, conditions and risks thereof and it is capable of and willing to assume those risks. Please confirm that the foregoing correctly sets forth the terms of our agreement by executing a copy of this Confirmation and returning it to us or by sending to us a letter, telex or facsimile substantially similar to this letter, which letter, telex or facsimile sets forth the material terms of the Transaction to which this Confirmation relates and indicates agreement to those terms. When referring to this Confirmation, please indicate: Morgan Deal Number: 030000117056. Yours sincerely, J P MORGAN SECURITIES INCORPORATED, as Agent for and signing on behalf of: MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Timothy Dowling ----------------------------------- Name: Timothy Dowling Title: Vice President 8 Confirmed as of the date first above written: SERVICE CORPORATION INTERNATIONAL By: /s/ Gregory L. Cauthen ----------------------------------- Name: Gregory L. Cauthen Title: Vice President/Treasurer 9 J P MORGAN Transaction Date: 12 January 1996 The purpose of this letter agreement is to confirm the terms and conditions of the Transaction entered into between: MORGAN GUARANTY TRUST COMPANY OF NEW YORK and SERVICE CORPORATION INTERNATIONAL on the Trade Date and identified by the Morgan Deal Number specified below (the 'Transaction'). This letter agreement constitutes a 'Confirmation' as referred to in the ISDA Master Agreement specified below: The definitions and provisions contained in the 1991 ISDA Definitions (as published by the International Swap Dealers Association, Inc.) are incorporated into this Confirmation. In the event of any inconsistency between these definitions and provisions and this Confirmation, this Confirmation will govern. Morgan Guaranty Trust Company of New York is, together with other United Kingdom listed institutions, subject to the Bank of England's Code of Conduct. In connection therewith, this and certain future wholesale money transactions will be outside the Financial Services Act, but you will have the benefit of the Code of Conduct. 1. This Confirmation supplements, forms part of, and is subject to, the ISDA Master Agreement dated as of 4 February 1993, as amended and supplemented from time to time (the 'Agreement'), between MORGAN GUARANTY TRUST COMPANY OF NEW YORK ('Morgan') and SERVICE CORPORATION INTERNATIONAL (the 'Counterparty'). All provisions contained in the Agreement govern this Confirmation except as expressly modified below. 2. The terms of the particular Transaction to which this Confirmation relates are as follows: Morgan Deal Number: 145556 Trade Date: 11 January 1996 Effective Date: 16 January 1996 Termination Date: 16 January 1998 Fixed Amounts: Fixed Rate Payer: Counterparty Notional Amount: 493,920,000.00 FRF 10 J P MORGAN Fixed Rate Payer Payment Dates: 16 January 1998, subject to adjustment in accordance with the Modified Following Business Day Convention and there will be no adjustment to the Calculation Period. Fixed Rate: 5.08650 percent Compounding: Applicable Compounding Dates: Each 16 January, 16 July Fixed Rate Day Count Fraction: 30/360 Fixed Amounts: Fixed Rate Payer: Morgan Notional Amount: 100,000,000.00 USD Fixed Rate Payer Payment Dates: 16 January 1998, subject to adjustment in accordance with the Modified Following Business Day Convention and there will be no adjustment to the Calculation Period. Fixed Rate: 5.37000 percent Compounding: Applicable Compounding Dates: Each 16 January, 16 July Fixed Rate Day Count Fraction: 30/360 Final Exchange: Final Exchange Date: 16 January 1998, subject to adjustment in accordance with the Modified Following Business Day Convention. Morgan Pays Final Exchange: 100,000,000.00 USD Counterparty Pays Final Exchange: 493,920,000.00 FRF Business Day Locations for Counterparty: Paris, New York, London Business Day Locations for Morgan: Paris, New York, London Payments will be: Gross 11 J P MORGAN 3. Account Details Payments to Morgan: Account for payments in FRF: Morgan Bank Paris 14 Place Vendome 75001 Paris France Favour: Morgan Guaranty Trust Co of New York- London Office Account No.: 43504300G0090 Reference: Further Credit to Swaps Group Account: 10004942 Please send MT100 cover cable to MGT London Payments to Counterparty: Account for payments in USD: Texas Commerce Bank, Houston, TX Favour: Service Corporation International ABA/Bank No.: 1130-0060-9 Account No.: 0010-126-6337 Reference: JPM Swap 145556 4. Offices (a) The Office of Morgan for the Swap Transaction in LONDON; and (b) The Office of the Counterparty for the Swap Transaction is HOUSTON. All enquiries regarding payments and/or rate resettings only should be sent to: Morgan Guaranty Trust Company of New York 60 Victoria Embankment London EC4Y OJP Attention: Joanne Case Telephone: 44 1 71 325 3783 Facsimile: 44 1 71 325 3862/3863 Telex: 896631 MGT G Cable: Morganbank Please quote the Morgan Deal Number indicated above. All enquiries regarding confirmations should be sent to: Morgan Guaranty Trust Company of New York 60 Wall Street New York, New York 10260 12 J P MORGAN Attention: Wendy Webbe Documentation Control Group Telephone: 1-212-648-2991 Facsimile: 1-212-648-5117 Please quote the Morgan Deal Number indicated above. JP MORGAN SECURITIES INCORPORATED is acting solely as agent for Morgan and will have no obligations under this Transaction. Each party represents that (i) it is entering into the transaction evidenced hereby as principal (and not as agent or in any other capacity); (ii) the other party is not acting as a fiduciary for it; (iii) it is not relying upon any representations except these expressly set forth in the Agreement or this Confirmation; (iv) it has consulted with its own legal, regulatory, tax, business, investment, financial, and accounting advisors to the extent it deemed necessary, and it has made its own investment, hedging, and trading decisions based upon its own judgment and upon any advice from such advisers as it has deemed necessary and not upon any view expressed by the other party; and (v) it is entering into this transaction with a full understanding of the terms, conditions and risks thereof and it is capable of and willing to assume these risks. Please confirm that the foregoing expressly sets forth the terms of our agreement by executing a copy of this Confirmation and returning it to us or by sending to us a letter, telex or facsimile substantially similar to this letter, which letter, telex or facsimile sets forth the material terms of the Transaction to which this Confirmation relates and indicates agreement to those terms. When referring to this Confirmation, please indicate: Morgan Deal Number: 145556. Yours truly, J P MORGAN SECURITIES INCORPORATED, as Agent for and signing on behalf of: MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: /s/ Rajan Kundra ---------------------------------- Name: Rajan Kundra Title: Associate Confirmed as of the Date first above written: SERVICE CORPORATION INTERNATIONAL By: /s/ Gregory L. Cauthen ----------------------------------- Name: Gregory L. Cauthen Title: Vice President/Treasurer 13 J P MORGAN SWAP TRANSACTION Date: 18 January 1996 The purpose of this letter agreement is to confirm the terms and conditions of the Swap Transaction entered into between: J P MORGAN CANADA and SERVICE CORPORATION INTERNATIONAL (CANADA) LIMITED on the Trade Date and Identified by the Morgan Deal Number specified below (the 'Swap Transaction'). This letter agreement constitutes a 'Confirmation' as referred to in the agreement specified below. The definitions and provisions contained in the 1991 ISDA Definitions (as published by the International Swap Dealers Association, Inc.) are incorporated into this Confirmation. In the event of any inconsistency between these definitions and provisions and this Confirmation, this Confirmation will govern. 1. If J P MORGAN CANADA ('Morgan') and SERVICE CORPORATION INTERNATIONAL (CANADA) LIMITED (the 'Counterparty') are parties to a Master Agreement, Interest Rate and Currency Exchange Agreement or other similar Agreement (a 'Swap Agreement'), this Confirmation supplements, forms a party of, and is subject to such Swap Agreement. In the event that Morgan and the Counterparty are parties to more than one Swap Agreement, this Confirmation supplements, forms a part of, and is subject to the Swap Agreement most recently executed between the parties. If Morgan and the Counterparty are not yet parties to a Swap Agreement, the parties agree that this Transaction will be documented under a master agreement to be entered into as on the basis of the printed form of Master Agreement (Multicurrency-Cross Border) published by the International Swaps and Derivatives Associates, Inc., together with such changes as shall be agreed between the parties (the 'Master Agreement'). Upon execution and delivery by the parties of the Master Agreement, this Confirmation shall supplement, form a part of, and be subject to such Master Agreement. Until the parties execute and deliver the Master Agreement, this Confirmation shall supplement, form a part of, and be subject to the printed form of Master Agreement published by ISDA, as if the parties had executed that agreement (but without any Schedule thereto) on the Trade Date of this Transaction. 2. The terms of this particular Swap Transaction to which this Confirmation relates are as follows: 14 J P MORGAN Morgan Deal Number 141468 Trade Date: 15 November 1995 Effective Date: 29 November 1995 Termination Dates: 29 November 2010 Fixed Amounts: Fixed Rate Payer: Morgan Fixed Rate Payer Payment Dates: Each 29 May, 29 November starting with 29 May 1996 up to, and including, the Termination Date, subject to adjustment in accordance with the Following Business Day Convention And there will be no adjustment to the Calculation Period. Fixed Rate: 6.95000 percent Fixed Rate Day Count Fractions: 30/360 Floating Amounts: Floating Rate Payer: Counterparty Notional Amount: 135,550,000.00 CAD Fixed Rate Payer Payment Dates: Each 29 May, 29 November starting with 29 May 1996 up to, and including, the Termination Date, subject to adjustment in accordance with the Following Business Day Convention And there will be no adjustment to the Calculation Period. Floating Rate Options: CAD-BA-CDOR Designated Maturity: 3 Month Spread: Plus 0.59900 percent Floating Rate Day Count Fraction: Actual/365 (Fixed) Reset Dates: Each 29 November, 29 February, 29 May, 29 August Compounding: Applicable 15 J P MORGAN Method of Compounding: Flat Compounding Dates: Each 29 February, 29 May, 29 August, 29 November Initial Exchange: 29 November 1995, subject to adjustment in accordance with the Following Business Day Convention Morgan Pays Initial Exchange: 135,550,000.00 CAD Counterparty Pays Initial Exchange: 100,000,000.00 USD Final Exchanges: Final Exchange Dates: 29 November 2010, subject to adjustment in accordance with the Following Business Day Convention Morgan Pays Final Exchange: 100,000,000.00 USD Counterparty Pays Final Exchange: 135,550,000.00 CAD Business Day Locations for Counterparty: Toronto, London, New York Business Day Locations for Morgan: Toronto, London, New York Payments will be: Gross Credit Support: The Company agrees to provide to Morgan the following Credit Support Document. Guarantee for all amounts owed to Morgan under the Swap Agreement issued by Service Corporation International, Houston, Texas (the "Guarantor"). The Company shall enter a Credit Support Annex and provide Collateral thereunder on terms consistent with the terms of the collateral agreement between Service Corporation International, Houston, Texas and Morgan Guaranty Trust Company of New York ("Morgan New York") in connection with the ISDA Master Agreement between the Guarantor and Morgan Guaranty Trust Company of New York. Credit Support: Morgan agrees to provide to the Company the following Credit Support Document: Guarantee for all amounts owed by J P Morgan Canada under this Swap Agreement issued by Morgan Guaranty Trust Company of New York (the "Guarantor"). 16 J P MORGAN J P Morgan Canada shall enter a Credit Support Annex and provide Collateral thereunder on terms consistent with the terms of the collateral agreement between Service Corporation International, Houston, Texas and Morgan Guaranty Trust Company of New York ("Morgan New York") in connection with the ISDA Master Agreement between the Guarantor and Service Corporation International. The Credit Support documents will be governed by the same credit enhancement provisions (including any amendments after the Trade Date of this Transaction) as govern Transactions between the Credit Support Providers. 3. Account Details Payments to Morgan: Account for payments in CAD: Royal Bank of Canada Toronto Favour: Morgan Bank of Canada, Toronto Account No.: 234-230-9 Reference: Swap Operations Account for payments in USD: Morgan Guaranty Trust Co of New York New York Favour: Morgan Bank of Canada, Toronto ABA/Bank No.: Account No.: 611-45-517 Reference: Swap Operations Payments to Counterparty: Account for payments in CAD: Favour: SERVICE CORPORATION INTERNATIONAL (CANADA) LIMITED Account No.: Reference: Account for payments in USD: Favour: SERVICE CORPORATION INTERNATIONAL (CANADA) LIMITED ABA/Bank No.: Account No.: Reference: 4. Offices (a) The Office of Morgan for the Swap Transaction is TORONTO; and (b) The Office of the Counterparty for the Swap Transaction is VANCOUVER. 17 J P MORGAN All enquiries regarding confirmations should be sent to: Morgan Guaranty Trust Company of New York 60 Wall Street New York, New York 10260 Attention: Wendy Webbe Documentation Control Group Telephone: 1-212-648-2991 Facsimile: 1-212-648-5117 Please quote the Morgan Deal Number indicated above. J P MORGAN SECURITIES INCORPORATED is acting solely as agent for Morgan and will have no obligations under this Swap Transaction. Each party represents that (i) it is the entering into the transaction evidenced hereby as principal (and not as agent or in any other capacity), (ii) the other party is not acting as a fiduciary for it; (iii) it is not relying upon any representations except those expressly not set forth in the Agreement or this Conformation; (iv) it has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisers to the extent it has deemed necessary and it has made its own investment, hedging and trading decisions based upon its own judgment and upon any advice from such advisers as it has deemed necessary and not upon any view expressed by the other party; and (v) it is entering into this transaction with a full understanding of the terms, conditions and risks thereof and it is capable of and willing to assume those risks. 18 J P MORGAN Please confirm that the foregoing correctly sets forth the terms of our agreement by executing a copy of this Confirmation and returning it to us or by sending to us a letter, telex or facsimile substantially similar to this letter, which letter, telex or facsimile sets forth the material terms of the Swap Transaction to which the Confirmation relates and indicates agreement to those terms. When referring to the Confirmation, please indicate: Morgan Deal Number: 141468. Yours sincerely, J P MORGAN SECURITIES INCORPORATED, as Agent for and signing on behalf of: J P MORGAN CANADA By: /s/ Robert L. Rossman ---------------------------------- Name: Robert L. Rossman Title: MD Confirmed as of the date first above written: SERVICE CORPORATION INTERNATIONAL (CANADA) LIMITED By: /s/ John H. Lohman, Jr. ----------------------------------- Name: John H. Lohman, Jr. Title: Vice President EX-10.36 6 SPLIT DOLLAR LIFE INSURANCE PLAN 1 EXHIBIT 10.36 SERVICE CORPORATION INTERNATIONAL SPLIT DOLLAR LIFE INSURANCE PLAN ARTICLE I Establishment and Purpose This Plan is established for the benefit of selected key Employees and shall be known as the "Service Corporation International Split Dollar Life Insurance Plan." The purpose of the Plan is to provide Company sponsored split dollar life insurance benefits in order to recruit and to retain selected key Employees for the Company. ARTICLE II Definitions The following words and phrases as used in the Plan have the following meanings: 2.1 "Agreement" means a Split Dollar Insurance Agreement in the form approved by the Company. 2.2 "Board" (or "Board of Directors") means the present and any succeeding Board of Directors of the Company or the Compensation Committee of said Board which shall have the authority of said Board with respect to the Plan. 2.3 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 2.4 "Company" means Service Corporation International, a Texas corporation, which has its principal place of business in Houston, Texas and any organization that is a successor thereto. 2.5 "Employee" means an employee of the Company or a Participating Company (a) who is designated in writing by the Plan Administrator to participate in the Plan and (b) on whose life the Company is able to purchase a Policy on terms and at a cost that are acceptable to the Company in its sole discretion. 2.6 "Participation" means either an Employee or, if the Employee so elects and the Company consents, the trustee or trustees of a trust established by the Employee. 2.7 "Participating Company" means an entity designated as such in writing by the Plan Committee. 2 2.8 "Plan" means the "Service Corporation International Split Dollar Life Insurance Plan" as set forth herein and as amended from time to time. 2.9 "Plan Administrator" means the Company, provided, however, that the Company may delegate its administrative duties under the Plan to the Plan Committee. 2.10 "Plan Committee" means the Committee appointed by the Board for the purpose of administering the Plan. 2.11 "Plan Year" means the calendar year, provided that records with respect to each individual policy under the Plan shall be maintained on the basis of the applicable policy year. 2.12 "Policy" means a life insurance policy issued by an insurance company designated by the Company on the life of the Employee or a joint life insurance policy on the life of the Employee and another individual designated by the Employee and approved by the Company. ARTICLE III Eligibility and Participation 3.1 Eligibility. An Employee or Participant shall be eligible to participate in the Plan upon written designation of the Plan Administrator. 3.2 Agreements. In order to participate in the Plan, a Participant shall enter into an Agreement with the Company and, where appropriate, execute an assignment of the Policy as collateral (the "Collateral Assignment") in favor of the Company on such terms as shall be determined by the Company in its sole discretion. The Agreement and where appropriate, the Collateral Assignment are hereby incorporated into and made a part of the Plan. The Participant's participation shall be conditioned on the Employee's effective waiver of certain Company provided welfare benefits. 3.3 Policy. Each Agreement shall provide for the purchase of a Policy from an insurance company and/or the use of an existing Policy. Both the identity of the insurance company and the terms of the Policy shall be determined by the Company in its sole discretion. 3.4 Benefits. All benefits paid under the Plan in respect of a Participant shall be determined by the terms of the applicable Agreement. 3.5 Multiple Agreements. The Company and a Participant may enter into more than one Agreement pursuant to the Plan and any such Agreement may cover one or more Policies. 2 Service Corporation International Split Dollar Life Insurance Plan 3 ARTICLE IV Administration 4.1 In General. The Plan shall be administered by the Plan Administrator, who shall be the Plan's named fiduciary and shall have authority to delegate administrative duties and powers to the Plan Committee. 4.2 Expenses. The expenses incident to the operation of the Plan, including the compensating of attorneys, advisors, actuaries, and other such persons providing technical and clerical assistance to the Company as may be required, shall be paid by the Company. 4.3 Powers of the Plan Administrator. In addition to any implied powers and duties that may be needed to carry out the provisions of the Plan, the Agreement and, where appropriate, the Collateral Assignment, the Plan Administrator, acting itself or through the Plan Committee, shall have the following specific powers and duties in its sole discretion. (a) To make and enforce such rules and regulations as it shall deem necessary or proper for the efficient administration of the Plan; (b) To interpret the Plan and to decide any and all matters arising hereunder, including the right to remedy possible ambiguities, inconsistencies, or omissions; provided that all such interpretations and decisions shall be applied in a uniform and nondiscriminatory manner to all persons similarly situated. (c) To compute the amount of benefits that shall be payable to any Participant in accordance with the provisions of the Plan; (d) To appoint other persons to carry out such ministerial responsibilities under the Plan as it may determine; and (e) To employ one or more persons to render advice with respect to any of its responsibilities under the Plan. 4.4 Finality. To the extent permitted by applicable law, determinations by the Plan Administrator or the Plan Committee and any interpretation, rule or decision adopted by the Plan Administrator or the Plan Committee under the Plan, the Agreement; or the Collateral Assignment or in carrying out or administering the Plan shall be final and binding for all purposes and upon all interested persons, their heirs and personal representatives. 4.5 Benefit Claims Procedure. A claim for a benefit under the Plan by any person shall be filed in the manner and governed by the procedures set forth in the Agreement. 3 Service Corporation International Split Dollar Life Insurance Plan 4 ARTICLE V Amendments 5.1 Amendment and Termination. The Company may, by action of the Plan Committee set forth in writing, modify, amend, suspend or terminate the Plan at any time. Provided, however, no such modification, amendment, suspension or termination shall affect any Agreement executed pursuant to this Plan. Any such Agreement may be amended or terminated only in accordance with its terms. 5.2 Merger or Consolidation. In the event of a merger or a consolidation by Service Corporation International with another corporation, or the acquisition of substantially all of the assets or outstanding stock of Service Corporation International by another corporation, then and in such event the obligations and responsibilities of Service Corporation International under this Plan and any Agreement shall be assumed by any such successor or acquiring corporation, and all of the rights, privileges and benefits of the Participant under this Plan and any Agreement shall continue. ARTICLE VI Miscellaneous 6.1 Incapacity. If the Plan Administrator acting itself or through the Plan Committee determines that any person entitled to benefits hereunder is unable to care for his affairs because of illness or accident, any payment due (unless a duly qualified guardian or other legal representative has been appointed) may be paid for the benefit of such person to his spouse, parent, brother, sister or other party deemed by the Plan Administrator to have incurred expenses for such person. 6.2 Required Information. Any person eligible to receive benefits hereunder shall furnish to the Plan Administrator any information or proof requested by the Plan Administrator and reasonably required for the proper administration of the Plan. Failure on the part of any person to person to comply with any such request within a reasonable period of time shall be sufficient grounds for delay in the payment of any benefits due under the Plan until such information or proof is received by the Plan Administrator. If any person claiming benefits under the Plan makes a false statement that is material to such person's claim for benefits, the Company may offset against future payments any amount paid to such person to which such person was not entitled under the provisions of the Plan. 6.3 Policy Claims. Any claim for benefits under a Policy shall be subject to and governed by the terms of the Policy. 4 Service Corporation International Split Dollar Life Insurance Plan 5 6.4 No Right to Employment. Nothing in this Plan or any Agreement shall be deemed to constitute a contract of employment or to give any Employee the right to be retained in the service of the Company or a Participating Company or to interfere with the right of the Company or a Participating Company to discharge any Employee at any time without regard to the effects that such discharge may have upon the Employee under the Plan. 6.5 Withholding Taxes. The Plan Administrator may make any appropriate arrangements to deduct from all amounts paid under the Plan any taxes required to be withheld by any government or governmental agency. The Employee shall pay all taxes resulting from the Employee's participation in the Plan and the benefits provided under the Plan to the extent that no taxes are withheld, irrespective of whether withholding is required. 6.6 Indemnification of Plan Committee. The Company shall indemnify, to the full extent permitted by law, each person made or threatened to be made a party to any civil or criminal action or proceeding by reasons of the fact that he, or his testator or intestate, is or was a member of the Plan Committee. 6.7 Gender and Number. In order to shorten and to improve the understandability of the Plan document by eliminating usage of such phrases as "his or her" and "Participating Company," any masculine terminology herein shall also include the feminine and neuter, and the definition of any term herein in the singular shall also include the plural, except when otherwise indicated by the context. 6.8 Headings. Any headings used in this instrument are for convenience of reference only and are to be ignored in the construction of any provision hereof. 6.9 Severability. If any provision of the Plan shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if such illegal or invalid provision had never been inserted herein. 6.10 Governing Law. The Plan shall be construed, administered and regulated in accordance with the laws of the State of Texas, except to the extent that such laws are preempted by Federal law. 6.11 Effective Date. The Plan shall be effective as of December 1, 1995. 5 Service Corporation International Split Dollar Life Insurance Plan 6 SERVICE CORPORATION INTERNATIONAL Date: 12/13/95 -------------------- By: /s/ Jack L. Stoner --------------------------------- [Corporate Seal] Attest: By: ----------------------------------- Secretary EX-11.1 7 COMPUATION OF EARNINGS PER SHARE 1 Exhibit 11.1 SERVICE CORPORATION INTERNATIONAL COMPUTATION OF EARNINGS PER SHARE
Years Ended December 31, 1995 1994 1993 - ---------------------------------------------------------------------------------------------------------------------------------- (Thousands, except per share amounts) PRIMARY: Income before cumulative effect of changes in accounting principles . . . . . $ 183,588 $ 131,045 $ 103,092 Cumulative effect of change in accounting principles (net of tax) . . . . . . - - (2,031) ------------- ------------- ----------- $ 183,588 $ 131,045 $ 101,061 ============= ============= =========== Average number of common shares outstanding . . . . . . . . . . . . . . . . . 100,799 86,509 82,992 Common stock equivalents applicable to options outstanding resulting from application of the "treasury stock method" using average stock price . . . . . . . . . 1,275 417 380 ------------ ------------- ----------- Average common and common equivalent shares used in earnings per share . . . . . . . . . . . . . . . . . . . . . 102,074 86,926 83,372 ============ ============= =========== Primary Earnings Per Common Share: Income before cumulative effect of change in accounting principles . . . . . $ 1.80 $ 1.51 $ 1.24 Cumulative effect of change in accounting principles (net of tax) . . . . . . - - (.03) ------------ ------------- ----------- Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.80 $ 1.51 $ 1.21 ============ ============= =========== FULLY DILUTED: Income before cumulative effect of change in accounting principles . . . . . $ 183,588 $ 131,045 $ 103,092 Add after tax interest expense applicable to convertible debentures . . . . . 13,548 8,501 8,412 ------------ ------------- ----------- Income as adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197,136 139,546 111,504 Cumulative effect of change in accounting principles (net of tax) . . . . . . - - (2,031) ------------ ------------- ----------- $ 197,136 $ 139,546 $ 109,473 ============ ============= =========== Average number of common shares outstanding . . . . . . . . . . . . . . . . . 100,799 86,509 82,992 Common stock equivalents applicable to options outstanding resulting from application of the "treasury stock method" using end of period stock price (if greater than average stock price for period) . . . . . . . . . . . . . . . . 1,519 492 401 Assuming conversion of convertible debentures . . . . . . . . . . . . . . . . 13,335 10,407 10,485 ------------ ------------- ----------- Average shares used in fully diluted earnings per share . . . . . . . . . . . 115,653 97,408 93,878 ============ ============= =========== Fully Diluted Earnings Per Common Share: Income before cumulative effect of change in accounting principles . . . . . $ 1.70 $ 1.43 $ 1.19 Cumulative effect of change in accounting principles (net of tax) . . . . . . - - (.02) ------------ ------------- ----------- Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.70 $ 1.43 $ 1.17 ============ ============= ===========
EX-12.1 8 RATIO OF EARNINGS TO FIXED CHARGES 1 Exhibit 12.1 SERVICE CORPORATION INTERNATIONAL RATIO OF EARNINGS TO FIXED CHARGES (Thousands, except ratio amounts)
YEARS ENDED DECEMBER 31, 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------------------------------------------------ Pretax income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 294,211 $ 219,021 $ 173,492 $ 139,336 $ 108,872 Undistributed income of less than 50% owned equity investees . . . (3,847) (1,019) (325) (718) (252) Minority interest in income of majority owned subsidiaries with fixed charges . . . . . . . . . . . . . . . . . . . . . . . 1,878 2,234 1,938 1,798 1,752 Add fixed charges as adjusted (from below) . . . . . . . . . . . . 144,771 101,831 78,841 68,584 59,508 ---------- ---------- ----------- ---------- ---------- $ 437,013 $ 322,067 $ 253,946 $ 209,000 $ 169,880 ---------- ---------- ----------- ---------- ---------- Fixed charges: Interest expense: Corporate . . . . . . . . . . . . . . . . . . . . . . . . . . $ 118,148 $ 80,123 $ 59,631 $ 53,902 $ 42,429 Financial services . . . . . . . . . . . . . . . . . . . . . 10,782 9,912 7,725 5,826 9,453 Capitalized . . . . . . . . . . . . . . . . . . . . . . . . . 1,865 584 705 481 701 Amortization of debt costs . . . . . . . . . . . . . . . . . . . 1,093 311 288 328 116 1/3 of rental expense . . . . . . . . . . . . . . . . . . . . . 14,748 11,485 11,197 8,528 7,510 Dividends on preferred securities of SCI Finance LLC . . . . . . 10,781 539 - - - ---------- ---------- ----------- ---------- ---------- Fixed charges . . . . . . . . . . . . . . . . . . . . . . . . . . . 157,417 102,954 79,546 69,065 60,209 Fixed charges as adjusted: Less: Capitalized interest . . . . . . . . . . . . . . . . . . . (1,865) (584) (705) (481) (701) Dividends on preferred securities of SCI Finance LLC . . . (10,781) (539) - - - ---------- ---------- ----------- ---------- ---------- Fixed charges as adjusted . . . . . . . . . . . . . . . . . . . . . $ 144,771 $ 101,831 $ 78,841 $ 68,584 $ 59,508 ---------- ---------- ----------- ---------- ---------- Ratio (earnings divided by fixed charges) . . . . . . . . . . . . . 2.78 3.13 3.19 3.03 2.82 ========== ========== =========== ========== ==========
EX-21.1 9 SUBSIDIARIES OF THE COMPANY 1 Exhibit 21.1 ALABAMA - ------- SCI Funeral Services, Inc. (Iowa Corp) Alabama subsidiary SCI Alabama Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% EC Land Company, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% ALASKA - ------ SCI Funeral Services, Inc. (Iowa Corp.) Alaska subsidiary Alaskan Memorial Parks, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Alaska Memorial Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Moll Enterprises, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Alaska Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% ARIZONA - ------- SCI Funeral Services, Inc. (Iowa Corp.) National Cremation Society, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Arizona Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Sunland Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% ARKANSAS - -------- SCI Funeral Services, Inc. (Iowa Corp) SCI Arkansas Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% The East Funeral Benefit Assurance Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% CALIFORNIA - ---------- SCI Funeral Services, Inc. (Iowa Corp.) California subsidiaries Eternal Hills Cemetery Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Fremont Cemetery Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Greenwood Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Hong Kong Funeral Homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% International Funeral Parlours . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Lima-Salmon-Erickson, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Maridon, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Mish Acquisition Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Mt. View Cemetery of San Bernardino . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Green Acres Memorial Park and Mortuary . . . . . . . . . . . . . . . . . . . . . . . . . 100% Oak Hill Improvement Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Ocean View Cemetery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Redding Memorial Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Pierce Brothers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Pierce Brothers Crematorium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Pierce Holdings (California), Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Ted M. Mayr Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI California Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Acheson & Graham Mortuary, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% CWFD, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Joshua Memorial Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% LaFamCo, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Malinow & Silverman, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Miller Enterprises, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Mount Vernon Memorial Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Western Region, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% *Sierra View Memorial Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- World Funeral Home . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Turner & Stevens Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% COLORADO - -------- SCI Funeral Services, Inc. (Iowa Corp.) Colorado subsidiary SCI Colorado Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Northwest Region, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% CONNECTICUT - ----------- SCI Funeral Services, Inc. (Iowa Corp.) Connecticut subsidiary SCI Connecticut Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100% DELAWARE - -------- *Hillcrest Memorial Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- Provident Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Franklin Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Provident Credit Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Aviation, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Finance Management Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Funeral Services, Inc. (Iowa Corp.) Delaware subsidiaries First Memorial Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Gibraltar Mausoleum Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Gibraltar Mausoleum Construction Company, Inc. . . . . . . . . . . . . . . . . . . . . . 100% Rose Hill Securities Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% IFC-Boyertown, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Memorial Guardian Plans, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
* State Law Not-For-Profit-Corporation - No stock issued ** State Law Not-For-Profit-Corporation - See Legal Database 1 2 SCI International Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Georgia Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCIT Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Missouri Funeral Services, Inc. (Missouri Corp.) Delaware subsidiary IFC-York, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Funeral Services of New York, Inc. (New York Corp.) Delaware subsidiary Community Funeral Management Corporation . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI International Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Capital Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70% SCI Financing Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Special, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Capital Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Investment Capital Corporation (Texas Corp.) Delaware subsidiary Equity Corporation International . . . . . . . . . . . . . . . . . . . . . . . . . 40% IF-CYP, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Management Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% International Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 100% DISTRICT OF COLUMBIA - -------------------- SCI Funeral Services, Inc. (Iowa Corp.) DC subsidiary Joseph Gawler's Sons, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% FLORIDA - ------- SCI Funeral Services, Inc. (Iowa Corp) Florida subsidiaries Gibraltar Mausoleum Corporation (DE Corp.) Florida subsidiaries Brevard Memorial Park Association, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100% Florida Memorial Cemetery, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Fort Myers Memorial Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Fountainhead Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Gibraltar Mausoleum of Florida, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Gulf Pines Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Hillsboro Memorial Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Lakeview Memorial Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Manasota Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Mansion Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Sunset Memory Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Funeral Services of Florida, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Dorsey Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% I. J. Morris of Florida, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Woodlawn Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% GEORGIA - ------- SCI Funeral Services, Inc. (Iowa corp.) Georgia subsidiaries SCI Georgia Funeral Services, Inc. (Delaware Corp.) Georgia subsidiary H.M. Patterson & Son, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Jennings Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Georgia Land, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Southeast Region, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Striffler-Hamby Mortuary, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% HAWAII - ------ SCI Funeral Services, Inc. (Iowa Corp.) Hawaii subsidiaries SCI Hawaii Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% *Hawaiian Memorial Park Cemetery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- Garden Life Plan, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50% Hawaiian Memorial Life Plan, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . 100% IDAHO - ----- NO SUBSIDIARIES ILLINOIS - -------- SCI Funeral Services, Inc. (Iowa Corp.) Illinois subsidiaries Rosehill Memorials, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Illinois Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% IFS Illinois, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Leo V. Hennessy Funeral Homes, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% M&SFH, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Martin Funeral Home, Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Roselawn Memory Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Great Lakes Region, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Vault Company of Illinois, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
* State Law Not-For-Profit-Corporation - No stock issued ** State Law Not-For-Profit-Corporation - See Legal Database 2 3 INDIANA - ------- SCI Funeral Services, Inc. (Iowa Corp.) Indiana subsidiaries Gibraltar Mausoleum Corporation (DE Corp.) Indiana subsidiaries Alpha Services Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Evergreen Sales Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Gibraltar Mausoleum of Indiana, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Gibraltar Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Gold Crusader Insurance Agency, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 100% *Graceland Cemetery Association, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . -0- *Sunset Memory Garden Cemetery, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- SCI Indiana Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Central Region, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% IOWA - ---- SCI Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Bunker's Eden Vale, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Iowa Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% KANSAS - ------ SCI Funeral Services, Inc. (Iowa Corp.) Kansas subsidiaries SCI Kansas Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Services of Kansas, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% KENTUCKY - -------- SCI Funeral Services, Inc. (Iowa Corp) Kentucky subsidiaries Gibraltar Mausoleum Corporation (DE Corp.) Kentucky subsidiaries *Evergreen Cemetery Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- Kentucky Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Kentucky Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99% Resthaven Memorial Cemetery, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% *Resthaven Memorial Park and Cemetery Association . . . . . . . . . . . . . . . . . . . . -0- LOUISIANA - --------- SCI Funeral Services, Inc. (Iowa Corp) Louisiana subsidiary SCI Louisiana Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Banner, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% MAINE - ----- SCI Funeral Services, Inc. (Iowa Corp) Maine subsidiary SCI Maine Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% MARYLAND - -------- SCI Funeral Services, Inc. (Iowa Corp.) Maryland subsidiaries Gibraltar Mausoleum Corporation (DE Corp.) Maryland subsidiaries Holly Hill Memorial Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% ABCEL, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Witzke, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Hubbard Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Bradley-Ashton Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Danzansky-Goldberg Memorial Chapels, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 100% Gary L. Kaufman Funeral Home at Meadowridge Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100% Gary L. Kaufman Funeral Home of Elkridge, Inc. . . . . . . . . . . . . . . . . . . . . . 100% Gary L. Kaufman Funeral Home Southwest, Inc. . . . . . . . . . . . . . . . . . . . . . . 100% George A. Weber and Sons, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% John C. Miller, Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Moran-Ashton Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Sterling-Ashton Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% MASSACHUSETTS - ------------- Provident Services, Inc. (Delaware Corp.) Massachusetts subsidiary PSI Massachusetts, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Funeral Services, Inc. (Iowa Corp.) Massachusetts subsidiary MFS Holding Company, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Perlman Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40% Stanetsky Memorial Chapels, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40% MICHIGAN - -------- SCI Funeral Services, Inc. (Iowa Corp) Michigan subsidiaries Gibraltar Mausoleum Corporation (DE Corp.) Michigan subsidiaries Mount Ever-Rest Memorial Park . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Michigan Cemeteries, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Michigan Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
* State Law Not-For-Profit-Corporation - No stock issued ** State Law Not-For-Profit-Corporation - See Legal Database 3 4 MINNESOTA - --------- SCI Funeral Services, Inc. (Iowa Corp.) Minnesota subsidiary SCI Minnesota Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Burnsville Memorial Chapel, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Crystal Lake Cemetery Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Crystal Lake Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% The Crawford Mortuary, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Thomson Brothers, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% MISSISSIPPI - ----------- SCI Funeral Services, Inc. (Iowa Corp.) Mississippi subsidiary SCI Mississippi Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% MISSOURI - -------- SCI Funeral Services, Inc. (Iowa Corp) Missouri subsidiary SCI Missouri Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Calcaterra Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Memorial Guardian Plans, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% MONTANA - ------- NO SUBSIDIARIES NEBRASKA - -------- SCI Funeral Services, Inc. (Iowa Corp) Nebraska subsidiary SCI Nebraska Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% NEVADA - ------ SCI Funeral Services, Inc. (Iowa Corp) Nevada subsidiary Ross, Burke & Knobel Mortuary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% NEW HAMPSHIRE - ------------- NO SUBSIDIARIES NEW JERSEY - ---------- SCI Funeral Services, Inc. (Iowa Corp) New Jersey subsidiary SCIT Holdings, Inc. (Delaware Corp.) New Jersey subsidiaries SCI New Jersey Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Garden State Crematory, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 100% NEW MEXICO - ---------- SCI Funeral Services, Inc. (Iowa Corp) New Mexico subsidiaries Memorial Guardian Plans, Inc. (Delaware Corp) New Mexico subsidiary Ensure Agency of New Mexico, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI New Mexico Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Alameda Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Garcia Mortuary, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Lawn Haven Memorial Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Pecos Valley Cemetery Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% NEW YORK - -------- SCI Funeral Services, Inc. (Iowa Corp) New York subsidiary SCI Funeral Services of New York, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Bagozzi Twins Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Community Funeral Management Corporation (Delaware Corp.) New York subsidiaries Regan & Denny Funeral Service, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100% The Urban Funeral Homes of Greater Buffalo, Inc. . . . . . . . . . . . . . . . . 100% Chas. Peter Nagel Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Frederick Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Funeral Corporation New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% I. J. Morris, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% John J. McManus and Sons, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Kirschenbaum Bros. Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Monuments by I. J. Morris Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Pirro & Sons Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Eastern Region, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Thomas M. Quinn & Sons, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80% George Werst, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Werst Realty Co. Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Walter B. Cooke, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Whalen & Ball Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Services of New York, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% *The Acacia Park Cemetery Association, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100% NORTH CAROLINA - -------------- SCI Funeral Services, Inc. (Iowa Corp) North Carolina subsidiary SCI North Carolina Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Forsyth Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Oaklawn Memorial Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% The P.E. Moody Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Townson-Rose Funeral Homes, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Wayne Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
* State Law Not-For-Profit-Corporation - No stock issued ** State Law Not-For-Profit-Corporation - See Legal Database 4 5 NORTH DAKOTA - ------------ SCI Funeral Services, Inc. (Iowa Corp) North Dakota subsidiary Memorial Guardian Plans, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% OHIO - ---- SCI Funeral Services, Inc. (Iowa Corp.) Ohio subsidiaries Gibraltar Mausoleum Corporation (DE Corp.) Ohio subsidiaries Burton Funeral Home-Greenlawn Chapel, Inc. . . . . . . . . . . . . . . . . . . . . . . . 90% Ciriello Funeral Home - Rose Hill Chapel, Inc. . . . . . . . . . . . . . . . . . . . . . . . 90% *Crown Hill Burial Park Association . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- *Greenlawn Memorial Gardens Association, Inc. . . . . . . . . . . . . . . . . . . . . . . -0- *Highland Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- *The Ottawa Hills Memorial Park Association . . . . . . . . . . . . . . . . . . . . . . . -0- *Rose Hill Burial Park Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- *Rose Hill Burial Park Association, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . -0- Selby-Cole Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85% *The Knollwood Cemetery Association . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- The Knollwood Cemetery Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% *Whitehaven Park Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- Memorial Guardian Plans, Inc. (Delaware Corp.) Ohio subsidiary Ensure Agency of Ohio, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Ohio Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90% Berkowitz-Kumin-Bookatz, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% BKB Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90% Miller-Deutsch Memorial Chapel, Inc. . . . . . . . . . . . . . . . . . . . . . . 100% M-D Memorial Chapel, Inc. . . . . . . . . . . . . . . . . . . . . . . . 90% Jackson Lytle & Ingling Williams, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100% JLIW Funeral Homes, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90% Karlo & Sons Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% K & S Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90% *Miami Valley Memory Gardens Association, Inc. . . . . . . . . . . . . . . . . . . . . . . -0- *Sunset Hills Burial Park Association . . . . . . . . . . . . . . . . . . . . . . . . . . -0- Walter-Schoedinger Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Wood-Kortright Funeral Homes, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% W-K Funeral Homes, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90% OKLAHOMA - -------- SCI Funeral Services, Inc. (Iowa Corp.) Oklahoma subsidiaries AED, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Memorial Gardens Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% RMG Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Resthaven Memory Gardens of Oklahoma City Trust . . . . . . . . . . . . . . . . . 100% Rose Hill Burial Park, a Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90% IFC-YP, Inc. (Delaware Corp) Oklahoma subsidiary IFC-Amedco, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Oklahoma Funeral Services, Inc. 100% Clagg Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Memory Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SSP Limited Liability Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50% SSP Insurance Agency, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Sunset Memorial Park Cemetery, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Sunset Memorial Park Cemetery Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Woodland Memorial Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Sentinel Security Plans, Inc.(Virginia Corp.) Oklahoma Subsidiary SSP Limited Liability Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50% OREGON - ------ SCI Funeral Services, Inc. (Iowa Corp) Oregon subsidiaries Lincoln Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Oregon Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% All Coast Cremation Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Restlawn Mortuary Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% South Coast Funeral Directors, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Uniservice Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% PENNSYLVANIA - ------------ SCI Funeral Services, Inc. (Iowa Corp) Pennsylvania subsidiaries Gibraltar Mausoleum Corporation (DE Corp.) Pennsylvania subsidiaries Forest Lawn Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50% Speer-Anthony Kaprive Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . 50% **Grandview Cemetery Association . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ** Harold B. Mulligan Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Harold B. Mulligan, Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Remembrance Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Memorial Guardian Plans, Inc.( Delaware Corp) Pennsylvania subsidiary Ensure Agency of Pennsylvania, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
* State Law Not-For-Profit-Corporation - No stock issued ** State Law Not-For-Profit-Corporation - See Legal Database 5 6 SCI Pennsylvania Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Auman Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Ed Melenyzer Co. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Funeral Corporation Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Linwood W. Ott Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 100% Rohland Funeral Home . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Hamilton World Crypts, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Lawn-Garden Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Rest Haven Cemetery Company of Hanover, Pennsylvania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Noah's Garden Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Theo. C. Auman, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Auman's, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Forest Hills Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 100% Francis F. Seidel, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Memorial Services Planning Corporation . . . . . . . . . . . . . . . . . . . . . 100% Whitemarsh Memorial Park Cemeteries Company . . . . . . . . . . . . . . . . . . . . . . . 100% RHODE ISLAND - ------------ NO SUBSIDIARIES SOUTH CAROLINA - -------------- SCI Funeral Services, Inc. (Iowa corp.) South Carolina subsidiary SCI South Carolina Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Greenville Vault Co., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SOUTH DAKOTA - ------------ NO SUBSIDIARIES TENNESSEE - --------- SCI Funeral Services, Inc. (Iowa Corp) Tennessee subsidiaries *New Gray Cemetery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- SCI Tennessee Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Crest Lawn Memorial Cemetery, Incorporated . . . . . . . . . . . . . . . . . . . . . . . 100% Forest Lawn Funeral Home of Nashville, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100% George A. Smith and Sons, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Hamilton Memorial Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Legram, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Lily of the Valley, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Lynnhurst Cemetery, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Memorial Guardian Plans, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Memphis Memory Gardens, Inc.- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Sherwood Memorial Gardens, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Woodlawn East, Incorporated . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Woodlawn Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Woodlawn Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% TEXAS - ----- *American Funeral Service Museum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- *Commonwealth Institute of Funeral Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -0- RMP Acquisition Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Finance LLC-(TX limited liability company) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Funeral Services, Inc. (Iowa Corp) Texas subsidiaries Gibraltar Mausoleum Corporation (DE Corp.) Texas subsidiary Gibraltar Mausoleum of Texas, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCIT Holdings, Inc. (Delaware Corp.) Texas subsidiaries Moore & Sons Funeral Home and Cemetery, Inc. . . . . . . . . . . . . . . . . . . . . . . 100% SCI Texas Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Carroll-Wallace Funeral Directors, Inc. . . . . . . . . . . . . . . . . . . . . . 100% EFH, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Hernandez & Martinez, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Jack H. Rowe Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100% Martinez Funeral Home of Pecos, Inc. . . . . . . . . . . . . . . . . . . . . . . 100% Pharr Memorial Ass'n., Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Restlawn Cemetery Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Restwood Memorial Park, Incorporated . . . . . . . . . . . . . . . . . . . . . . 100% SCI Gulf Region, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Holdings of Texas, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Stillbrooke Corporation of Texas . . . . . . . . . . . . . . . . . . . . . . . . 100% The New Rose Hill Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . 100% Zoeller Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Stillbrooke Corporation of Tennessee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI International Limited (Delaware Corp.) Service Corporation International PLC (UK Corp.) SCI Capital LLC-(TX limited liability company) . . . . . . . . . . . . . . . . . . . . . 100% SCI Special, Inc. (Delaware Corp.) SCI Capital Corporation (Delaware Corp.) Texas subsidiaries Great Lakes, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Investment Capital Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
* State Law Not-For-Profit-Corporation - No stock issued ** State Law Not-For-Profit-Corporation - See Legal Database 6 7 UTAH - ---- SCI Funeral Services, Inc. (Iowa Corp.) Utah subsidiary SCI Utah Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% VERMONT - ------- NO SUBSIDIARIES VIRGINIA - -------- SCI Funeral Services, Inc. (Iowa Corp.) Virginia subsidiaries Gibraltar Mausoleum Corporation (DE Corp.) Virginia subsidiary Kellum Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Memorial Guardian Plans, Inc. (Delaware Corp) Sentinel Security Plans, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCI Virginia Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% National Mausoleum Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Reid Funeral Home, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% WASHINGTON - ---------- SCI Funeral Services, Inc. (Iowa Corp.) Washington subsidiary SCI Washington Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% SHM Acquisition Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% WEST VIRGINIA - ------------- SCI Funeral Services, Inc. (Iowa Corp.) West Virginia subsidiary Gibraltar Mausoleum Corporation (DE Corp.) WV subsidiary Gibraltar Mausoleum of West Virginia, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100% SCI West Virginia Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% WISCONSIN - --------- SCI Funeral Services, Inc. (Iowa Corp.) Wisconsin subsidiaries Cemetery Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% **Appleton Highland Memorial Park, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . ** *Nicolet Memorial Gardens Association . . . . . . . . . . . . . . . . . . . . . . . . . . -0- SCI Wisconsin Funeral Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% FJB Acquisition Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% F. J. Borgwardt Sons Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% WYOMING - ------- SCI Funeral Services, Inc. (Iowa Corp.) Wyoming subsidiary Memorial Guardian Plans, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100%
* State Law Not-For-Profit-Corporation - No stock issued ** State Law Not-For-Profit-Corporation - See Legal Database 7 8 AUSTRALIA - --------- SCI International Limited (Delaware Corp.) Australia subsidiary Service Corporation International Australia Pty., Ltd. . . . . . . . . . . . . . . . . . . . . . . 100% Australian Cremation Society Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . 100% John Hansen Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Hansen Funeral Services Pty Limited . . . . . . . . . . . . . . . . . . . . . . . 100% Lakeside Memorial Park & Crematorium . . . . . . . . . . . . . . . . . . .006% Lakeside Memorial Park & Crematorium . . . . . . . . . . . . . . . . . . . . . 49.997% Kitleaf Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Labor Funerals Contribution Fund Pty Limited . . . . . . . . . . . . . . . . . . . . . . 100% Lakeside Memorial Park & Crematorium . . . . . . . . . . . . . . . . . . . . . . . . . 49.997% LePine Holdings Pty. Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% E Taylor & Sons Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Garnar & Son Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% J Ferguson & Son Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . 100% LePine Funeral Services Pty Limited . . . . . . . . . . . . . . . . . . . . . . . 100% LePine Timbercraft Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . 100% LPH Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Mulqueen Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% W.G. Apps & Sons Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Memorial Guardian Plan Pty Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Metro. Burial & Cremation Society Funeral Cont. Fund . . . . . . . . . . . . . . . . . . 100% New South Wales Cremation Company Pty., Ltd. . . . . . . . . . . . . . . . . . . . . . . 100% Peter Woodward Funeral Services Pty Limited . . . . . . . . . . . . . . . . . . . . . . . 100% Pine Grove Forest Lawn Funeral Benefit Co. Pty Limited . . . . . . . . . . . . . . . . . 100% Purslowe Funeral Homes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Mareena Purslowe & Associates . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Tweed Crematorium Pty Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% CANADA - ------ S.C.I.C. Holdings Ltd.-(Federal) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Service Corporation International (Canada) Limited-(Federal) . . . . . . . . . . . . . . . . . . . 70% Barthel Funeral Home Ltd.-(Ontario) . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Can Ensure Group, Inc.-(Federal) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Day's Garden Holdings Ltd.- (B.C.) . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Funeraire Beauchamp Ltee-(Quebec) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Hetherington and Deans Limited-(Ontario) . . . . . . . . . . . . . . . . . . . . . . . . 100% Hong Kong Funeral Homes B.C. Ltd-(British Columbia) . . . . . . . . . . . . . . . . . . . 100% International Funeral Parlours B.C. Ltd-(B.C.) . . . . . . . . . . . . . . . . . . . . . 100% Kaye Funeral Home Limited-(Ontario) . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% McEvoy-Shields Funeral Homes Ltd.-(Ontario) . . . . . . . . . . . . . . . . . . . . . . . 100% Placements Darche, Inc.-(Quebec) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% P.M. & D. Berube & Fils, Inc.-(Quebec) . . . . . . . . . . . . . . . . . . . . . . . . . 100% SCIC Acquisition, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% S.C.I.C. (B.C.) Holdings Limited-(British Columbia) . . . . . . . . . . . . . . . . . . . 100% S.C.I.C. (Quebec) Holdings Limited-(Quebec) . . . . . . . . . . . . . . . . . . . . . . . 100% 611102 Saskatchewan Ltd.-(Saskatchewan) . . . . . . . . . . . . . . . . . . . . . . . . . 100% Sycamore Properties Limited (British Columbia) . . . . . . . . . . . . . . . . . . . . . 100% The Markey Family Funeral Homes Limited-(Ontario) . . . . . . . . . . . . . . . . . . . . 100% The Thorpe Brothers Funeral Home Co. Limited-(Ontario) . . . . . . . . . . . . . . . . . 100% World Funeral Home B.C. Ltd.-(British Columbia) . . . . . . . . . . . . . . . . . . . . . 100% UNITED KINGDOM - -------------- SCI International Limited (Delaware Corp.) United Kingdom subsidiary Service Corporation International PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Carrwood (Funeral Supplies) Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Chosen Heritage Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50% Demetriou and English Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Dignity Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95% Great Southern Group PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% The Crematorium Company Limited . . . . . . . . . . . . . . . . . . . . . . . . . 100% TJ Davies & Sons Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% White Lady Funerals Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Family Funeral Directors Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Funeral Services London . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Kenyon Air Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% JD Fields & Sons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Monumental Masons Ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Plantsbrook Group PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Hodgson Holdings PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Kenyon Securities PLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Pitcher and LeQuesne Limited . . . . . . . . . . . . . . . . . . . . . . 100% SCI Capital LLC-(TX limited liability company) . . . . . . . . . . . . . . . . . . . . . 100%
* State Law Not-For-Profit-Corporation - No stock issued ** State Law Not-For-Profit-Corporation - See Legal Database 8 9 FRANCE - ------ SCI International Limited (Delaware Corp.) French subsidiary Service Corporation International France (France) . . . . . . . . . . . . . . . . . . . . . . . . 100% Omnium De Gestion Et De Financement (France) . . . . . . . . . . . . . . . . . . . . . . 100% Groupe Auxia (France) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99% Funeral International Services (Netherlands) . . . . . . . . . . . . . . 4.9% FUBUS Handels-und Verwaltungsgesellschaft mbH (Germany) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% FUNERAL SA (Belgium) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Pompes Funebres Generales (France) . . . . . . . . . . . . . . . . . . . . . . . 97% Compania General de Servicios Funerarios (Spain) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26% Funeral International Services (Netherlands) . . . . . . . . . . . . . . 90.2% Bahau Funeral Services SDN BHD (Malaysia) . . . . . . . . . . . . . . . . . . . . . . . . . 33.33% Bahau Memorial Park SDN BHD (Malaysia) . . . . . . . . . . . . . 16.7% Compagnia Internazionale Partecipazioni (Italy) . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% Organizzazione Funeraria Italiana (Italy) . . . . . . . . . . . . . . . . . . . . . . 98.76% Onoranze Funebri Toscane Srl (Italy) . . . . . . . . . . . . . . . . . . 72.47% Agenzia Funebre Lucchese Franceschini srl (Italy) . . . . . . . . . . . . . 91.72% Organizzazione Funeraria Italiana (Italy) . . . . . . . . . . 1.24% Societa Imprese Funebri Empolesi srl (Italy) . . . . . . . 72.75% Pompes Funebres Michel SA (Belgium) . . . . . . . . . . . . . . 5% OSEFI Holding SA (Switzerland) . . . . . . . . . . . . . . . . . . . . . 100% PAX (Czech Republic) . . . . . . . . . . . . . . . . . . . . . . . . . 57.97% PFG Lausanne SA (Switzerland) . . . . . . . . . . . . . . . . . . . . . 100% Funeral International Services (Netherlands) . . . . . . . . . . . . . . . . . . . . . . . . 4.9% Pompes Funebres Reunies (Belgium) 100% Malibran SA (Belgium) . . . . . . . . . . . . . . . . . . . . . 100% Societe D'Etude Et De Service Pour La Cremation (Belgium) . . . . . . . . . . . . . . . . . 35% Societe De Cremation De Charleroi (Belgium) . . . . . . . . . . . . . . . . . . 90% Pompes Funebres Michel SA (Belgium) . . . . . . . . . . . . . . 5% Singapore Casket Company PLC (Singapore) . . . . . . . . . . . . . . . . . . . 67.57% Bahau Funeral Services SDN BHD (Malaysia) . . . . . . . . . . . . . . 33.33% Bahau Memorial Park SDN BHD (Malaysia) . . . . . . . . . . . . . . . . . 16.7% Bahau Funeral Services SDN BHD (Malaysia) . . . . . . . . . . . . . . . . . . . . . . . . . 33.33% Casket Palace Company PLC (Singapore) . . . . . . . . . . . . . . . . . 100%
* State Law Not-For-Profit-Corporation - No stock issued ** State Law Not-For-Profit-Corporation - See Legal Database 9 EX-23.1 10 CONSENT OF COOPERS & LYBRAND L.L.P. 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of Service Corporation International on Form S-3 (File No. 33-60683), Form S-4 (File Nos. 333-01857 and 33-54996) and Form S-8 (File Nos. 333-00177, 333-00179, 33-9790, 33-17982, 33-54401 and 33-50987) of our report, which includes an explanatory paragraph pertaining to accounting changes, dated March 11, 1996, on our audits of the consolidated financial statements and financial statement schedule of Service Corporation International as of December 31, 1995 and 1994, and for each of the three years in the period ended December 31, 1995, which report is included in this Annual Report on Form 10-K. Coopers & Lybrand, L.L.P. Houston, Texas March 29, 1996 EX-24.1 11 DIRECTORS' POWERS OF ATTORNEY 1 Exhibit 24.1 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or director or both, of Service Corporation International, a Texas corporation (the "Company"), does hereby constitute and appoint George R. Champagne and James M. Shelger his true and lawful attorneys and agents (each with authority to act alone), with power and authority to sign for and on behalf of the undersigned the name of the undersigned as officer or director, or both, of the Company to the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year of the Company ending December 31, 1995 and to any amendments thereto filed with the Securities and Exchange Commission, and to any instrument or document filed as a part of, as an exhibit to or in connection with said Report or amendments; and the undersigned does hereby ratify and confirm as his own act and deed all that said attorney and agent shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 15th day of February, 1996. R. L. Waltrip ------------------------- R. L. Waltrip 2 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or director or both, of Service Corporation International, a Texas corporation (the "Company"), does hereby constitute and appoint George R. Champagne and James M. Shelger his true and lawful attorneys and agents (each with authority to act alone), with power and authority to sign for and on behalf of the undersigned the name of the undersigned as officer or director, or both, of the Company to the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year of the Company ending December 31, 1995 and to any amendments thereto filed with the Securities and Exchange Commission, and to any instrument or document filed as a part of, as an exhibit to or in connection with said Report or amendments; and the undersigned does hereby ratify and confirm as his own act and deed all that said attorney and agent shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 15th day of February, 1996. Anthony L. Coelho ------------------------- Anthony L. Coelho 3 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or director or both, of Service Corporation International, a Texas corporation (the "Company"), does hereby constitute and appoint George R. Champagne and James M. Shelger his true and lawful attorneys and agents (each with authority to act alone), with power and authority to sign for and on behalf of the undersigned the name of the undersigned as officer or director, or both, of the Company to the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year of the Company ending December 31, 1995 and to any amendments thereto filed with the Securities and Exchange Commission, and to any instrument or document filed as a part of, as an exhibit to or in connection with said Report or amendments; and the undersigned does hereby ratify and confirm as his own act and deed all that said attorney and agent shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 15th day of February, 1996. Douglas M. Conway ------------------------- Douglas M. Conway 4 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or director or both, of Service Corporation International, a Texas corporation (the "Company"), does hereby constitute and appoint George R. Champagne and James M. Shelger his true and lawful attorneys and agents (each with authority to act alone), with power and authority to sign for and on behalf of the undersigned the name of the undersigned as officer or director, or both, of the Company to the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year of the Company ending December 31, 1995 and to any amendments thereto filed with the Securities and Exchange Commission, and to any instrument or document filed as a part of, as an exhibit to or in connection with said Report or amendments; and the undersigned does hereby ratify and confirm as his own act and deed all that said attorney and agent shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 15th day of February, 1996. Jack Finkelstein ------------------------- Jack Finkelstein 5 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or director or both, of Service Corporation International, a Texas corporation (the "Company"), does hereby constitute and appoint George R. Champagne and James M. Shelger his true and lawful attorneys and agents (each with authority to act alone), with power and authority to sign for and on behalf of the undersigned the name of the undersigned as officer or director, or both, of the Company to the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year of the Company ending December 31, 1995 and to any amendments thereto filed with the Securities and Exchange Commission, and to any instrument or document filed as a part of, as an exhibit to or in connection with said Report or amendments; and the undersigned does hereby ratify and confirm as his own act and deed all that said attorney and agent shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 15th day of February, 1996. A. J. Foyt, Jr. ------------------------- A. J. Foyt, Jr. 6 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or director or both, of Service Corporation International, a Texas corporation (the "Company"), does hereby constitute and appoint George R. Champagne and James M. Shelger his true and lawful attorneys and agents (each with authority to act alone), with power and authority to sign for and on behalf of the undersigned the name of the undersigned as officer or director, or both, of the Company to the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year of the Company ending December 31, 1995 and to any amendments thereto filed with the Securities and Exchange Commission, and to any instrument or document filed as a part of, as an exhibit to or in connection with said Report or amendments; and the undersigned does hereby ratify and confirm as his own act and deed all that said attorney and agent shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 15th day of February, 1996. James J. Gavin, Jr. ------------------------- James J. Gavin, Jr. 7 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or director or both, of Service Corporation International, a Texas corporation (the "Company"), does hereby constitute and appoint George R. Champagne and James M. Shelger his true and lawful attorneys and agents (each with authority to act alone), with power and authority to sign for and on behalf of the undersigned the name of the undersigned as officer or director, or both, of the Company to the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year of the Company ending December 31, 1995 and to any amendments thereto filed with the Securities and Exchange Commission, and to any instrument or document filed as a part of, as an exhibit to or in connection with said Report or amendments; and the undersigned does hereby ratify and confirm as his own act and deed all that said attorney and agent shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 15th day of February, 1996. James H. Greer ------------------------- James H. Greer 8 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or director or both, of Service Corporation International, a Texas corporation (the "Company"), does hereby constitute and appoint George R. Champagne and James M. Shelger his true and lawful attorneys and agents (each with authority to act alone), with power and authority to sign for and on behalf of the undersigned the name of the undersigned as officer or director, or both, of the Company to the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year of the Company ending December 31, 1995 and to any amendments thereto filed with the Securities and Exchange Commission, and to any instrument or document filed as a part of, as an exhibit to or in connection with said Report or amendments; and the undersigned does hereby ratify and confirm as his own act and deed all that said attorney and agent shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 15th day of February, 1996. L. William Heiligbrodt ------------------------- L. William Heiligbrodt 9 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or director or both, of Service Corporation International, a Texas corporation (the "Company"), does hereby constitute and appoint George R. Champagne and James M. Shelger his true and lawful attorneys and agents (each with authority to act alone), with power and authority to sign for and on behalf of the undersigned the name of the undersigned as officer or director, or both, of the Company to the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year of the Company ending December 31, 1995 and to any amendments thereto filed with the Securities and Exchange Commission, and to any instrument or document filed as a part of, as an exhibit to or in connection with said Report or amendments; and the undersigned does hereby ratify and confirm as his own act and deed all that said attorney and agent shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 15th day of February, 1996. B. D. Hunter ------------------------- B. D. Hunter 10 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or director or both, of Service Corporation International, a Texas corporation (the "Company"), does hereby constitute and appoint George R. Champagne and James M. Shelger his true and lawful attorneys and agents (each with authority to act alone), with power and authority to sign for and on behalf of the undersigned the name of the undersigned as officer or director, or both, of the Company to the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year of the Company ending December 31, 1995 and to any amendments thereto filed with the Securities and Exchange Commission, and to any instrument or document filed as a part of, as an exhibit to or in connection with said Report or amendments; and the undersigned does hereby ratify and confirm as his own act and deed all that said attorney and agent shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 15th day of February, 1996. John W. Mecom, Jr. ------------------------- John W. Mecom, Jr. 11 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or director or both, of Service Corporation International, a Texas corporation (the "Company"), does hereby constitute and appoint George R. Champagne and James M. Shelger his true and lawful attorneys and agents (each with authority to act alone), with power and authority to sign for and on behalf of the undersigned the name of the undersigned as officer or director, or both, of the Company to the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year of the Company ending December 31, 1995 and to any amendments thereto filed with the Securities and Exchange Commission, and to any instrument or document filed as a part of, as an exhibit to or in connection with said Report or amendments; and the undersigned does hereby ratify and confirm as his own act and deed all that said attorney and agent shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 15th day of February, 1996. Clifton H. Morris, Jr. ------------------------- Clifton H. Morris, Jr. 12 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or director or both, of Service Corporation International, a Texas corporation (the "Company"), does hereby constitute and appoint George R. Champagne and James M. Shelger his true and lawful attorneys and agents (each with authority to act alone), with power and authority to sign for and on behalf of the undersigned the name of the undersigned as officer or director, or both, of the Company to the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year of the Company ending December 31, 1995 and to any amendments thereto filed with the Securities and Exchange Commission, and to any instrument or document filed as a part of, as an exhibit to or in connection with said Report or amendments; and the undersigned does hereby ratify and confirm as his own act and deed all that said attorney and agent shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 15th day of February, 1996. E. H. Thornton, Jr. ------------------------- E. H. Thornton, Jr. 13 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or director or both, of Service Corporation International, a Texas corporation (the "Company"), does hereby constitute and appoint George R. Champagne and James M. Shelger his true and lawful attorneys and agents (each with authority to act alone), with power and authority to sign for and on behalf of the undersigned the name of the undersigned as officer or director, or both, of the Company to the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year of the Company ending December 31, 1995 and to any amendments thereto filed with the Securities and Exchange Commission, and to any instrument or document filed as a part of, as an exhibit to or in connection with said Report or amendments; and the undersigned does hereby ratify and confirm as his own act and deed all that said attorney and agent shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 15th day of February, 1996. W. Blair Waltrip ------------------------- W. Blair Waltrip 14 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer or director or both, of Service Corporation International, a Texas corporation (the "Company"), does hereby constitute and appoint George R. Champagne and James M. Shelger his true and lawful attorneys and agents (each with authority to act alone), with power and authority to sign for and on behalf of the undersigned the name of the undersigned as officer or director, or both, of the Company to the Company's Annual Report to the Securities and Exchange Commission on Form 10-K for the fiscal year of the Company ending December 31, 1995 and to any amendments thereto filed with the Securities and Exchange Commission, and to any instrument or document filed as a part of, as an exhibit to or in connection with said Report or amendments; and the undersigned does hereby ratify and confirm as his own act and deed all that said attorney and agent shall do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has subscribed these presents this 15th day of February, 1996. Edward E. Williams ------------------------- Edward E. Williams EX-27 12 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS DEC-31-1995 DEC-31-1995 29,735 517,630 834,708 57,445 120,805 629,529 1,548,764 275,042 7,663,811 584,002 1,732,047 117,271 0 0 1,858,074 7,663,811 1,566,292 1,652,126 1,174,408 1,186,905 55,315 11,852 131,888 294,211 110,623 183,588 0 0 0 183,588 1.80 1.70
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