SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
--------------------------------------
FORM 8-K
--------------------------------------
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 24, 2004
SERVICE CORPORATION INTERNATIONAL
(Exact name of registrant as specified in its charter)
TEXAS 1-6402-1 74-1488375
(State or other jurisdiction of (Commission file number) (I.R.S. employer identification
incorporation) number)
1929 ALLEN PARKWAY, HOUSTON, TEXAS 77019
(Address of principal executive offices) (Zip code)
Registrant's telephone numbers, including area code - (713) 522-5141
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On March 11, 2004, Service Corporation International (the "Company") completed
the sale of its funeral operations in France (hereafter referred to "joint
ventured") and then purchased a 25% equity interest in the acquiring company.
The joint venture transaction was consummated with an enterprise value of the
French business of EUR 300 million. In addition to maintaining a 25% share of
the total equity capital of the newly formed entity, the Company received net
cash proceeds of EUR 243 million, prior to transaction costs, and a note
receivable in the amount of EUR 10 million. The agreement related to the sale is
attached as Exhibit 2.1 to this report. The Company currently estimates that it
will recognize a pretax gain of between $10 to $20 million with respect to this
transaction during the first quarter of 2004.
The Company will recognize its 25% share of the income or loss of the newly
formed entity in accordance with the equity method of accounting beginning in
the first quarter of 2004.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro forma Financial Information
The following shows the unaudited pro forma consolidated balance sheet at
December 31, 2003 as if the disposition had taken place on that date. This
unaudited pro forma consolidated balance sheet should be read in conjunction
with the Company's Form 10-K.
SERVICE CORPORATION INTERNATIONAL
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
DECEMBER 31, 2003
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
FRENCH PRO FORMA
AS REPORTED OPERATIONS ADJUSTMENTS PRO FORMA
-------------- ------------- ------------- -------------
ASSETS
Current assets:
Cash and cash equivalents ....................... $ 239,431 $ -- $ 297,349 (1) $ 536,780
Receivables, net ................................ 233,935 (87,324) -- 146,611
Inventories ..................................... 137,121 (58,904) -- 78,217
Other ........................................... 62,837 (24,120) -- 38,717
------------ ------------ ------------ ------------
Total current assets ..................... 673,324 (170,348) 297,349 800,325
------------ ------------ ------------ ------------
Prearranged funeral contracts, net ................. 4,734,859 (1,516,287) -- 3,218,572
Preneed cemetery contracts, net .................... 1,084,636 -- -- 1,084,636
Cemetery property, at cost ......................... 1,524,545 -- -- 1,524,545
Property, plant and equipment, at cost, net ........ 1,250,632 (299,314) -- 951,318
Deferred charges and other assets .................. 739,250 (50,519) 25,720 (2) 714,451
Goodwill ........................................... 1,195,423 (24,140) -- 1,171,283
------------ ------------ ------------ ------------
$ 11,202,669 $ (2,060,608) $ 323,069 $ 9,465,130
============ ============ ============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities ....... $ 456,523 $ (113,967) $ -- $ 342,556
Current maturities of long-term debt ........... 182,682 (5,974) -- 176,708
Income taxes ................................... 29,742 (17,376) -- 12,366
------------ ------------ ------------ ------------
Total current liabilities ................ 668,947 (137,317) -- 531,630
------------ ------------ ------------ ------------
Long-term debt ..................................... 1,528,883 (18,221) -- 1,510,662
Deferred prearranged funeral contract revenues, net 5,117,442 (1,519,663) -- 3,597,779
Deferred cemetery contract revenues, net ........... 1,575,352 -- -- 1,575,352
Deferred income taxes .............................. 431,401 (17,218) (89,731)(3) 324,452
Other liabilities .................................. 353,686 (52,264) 35,768 (4) 337,190
Stockholders' equity:
Common stock, $1 per share par value, 500,000,000
shares authorized, 302,039,871 issued and
outstanding (net of 2,469,445 treasury shares
at par) ....................................... 302,040 (244,234) 244,234 302,040
Capital in excess of par value .................. 2,274,664 -- -- 2,274,664
Accumulated deficit ............................. (938,063) 17,732 28,621 (891,710)
Accumulated other comprehensive loss ............ (111,683) (89,423) 104,177 (5) (96,929)
------------ ------------ ------------ ------------
Total stockholders' equity ............... 1,526,958 (315,925) 377,032 1,588,065
------------ ------------ ------------ ------------
$ 11,202,669 $ (2,060,608) $ 323,069 $ 9,465,130
============ ============ ============ ============
2
The following shows the unaudited pro forma results of operations for the year
ended December 31, 2003 as if the disposition had taken place on January 1,
2003, excluding the gain on the sale. This unaudited pro forma consolidated
statement of operations should be read in conjunction with the Company's Form
10-K.
SERVICE CORPORATION INTERNATIONAL
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FRENCH
AS REPORTED OPERATIONS PRO FORMA
----------- ----------- -----------
Revenues ....................................................... $ 2,341,651 $ 584,636 $ 1,757,015
Costs and expenses ............................................. (1,975,853) (516,362) (1,459,491)
----------- ----------- -----------
Gross profits ............................................. 365,798 68,274 297,524
General and administrative expenses ............................ (178,101) 1,344 (179,445)
Gains and impairment (losses) on dispositions, net ............. 50,350 (734) 51,084
Other operating expenses ....................................... (9,004) -- (9,004)
----------- ----------- -----------
Operating income .......................................... 229,043 68,884 160,159
Interest expense ............................................... (143,426) (2,105) (141,321)
Other income, net .............................................. 28,716 208 28,508
----------- ----------- -----------
Income before income taxes ................................ 114,333 66,987 47,346
Provision for income taxes ..................................... (29,251) (24,551) (4,700)
----------- ----------- -----------
Net income ................................................ $ 85,082 $ 42,436 $ 42,646
=========== =========== ===========
Basic net income per share ..................................... $ .28 $ .14 $ .14
=========== =========== ===========
Basic weighted average shares outstanding ...................... 299,801 299,801 299,801
=========== =========== ===========
Diluted net income per share ................................... $ .28 $ .14 $ .14
=========== =========== ===========
Diluted weighted average shares outstanding .................... 300,790 300,790 300,790
=========== =========== ===========
3
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
On March 11, 2004, Service Corporation International (the "Company") completed
the sale of its funeral operations in France and then purchased a 25% equity
interest in the acquiring company. The joint venture transaction was consummated
with an enterprise value of the French business of EUR 300 million. In addition
to maintaining a 25% share of the total equity capital of the newly formed
entity, the Company received net cash proceeds of EUR 243 million, prior to
transaction costs, and a note receivable in the amount of EUR 10 million. The
agreement related to the sale is attached as Exhibit 2.1 to this report.
The unaudited pro forma consolidated statement of operations and balance sheet
include adjustments necessary to reflect the sale of the transaction as if it
had occurred on January 1, 2003 and December 31, 2003 respectively. Such
adjustments include the receipt of consideration and the elimination of revenue
and expenses as well as the assets and liabilities of the French operations.
The unaudited pro forma consolidated statement of operations and balance sheet
have been prepared on the basis of preliminary estimates, which are subject to
possible adjustment. The unaudited pro forma results may not be indicative of
the results that actually would have been achieved if the sale transaction had
been effected on the dates indicated above, or the results that will be achieved
in the future.
2. Summary of Pro Forma Adjustments
(1) Represents the cash proceeds from the sale of the French funeral
operations offset by related transaction fees.
(2) Represents the 25% equity interest in the newly formed entity; a
EUR 10 million note receivable from the acquiring entity; offset by
disposition costs incurred prior to the date of sale.
(3) Represents the estimated tax benefit on the transaction and the deferred
tax impact related to the recognition of gains and losses on hedges of the
Company's net foreign investment in the French funeral operations recorded
in accumulated other comprehensive income.
(4) Represents indemnifications and other representations and warranties
assumed by the Company upon completion of the transaction.
(5) Represents the deferred tax impact related to the recognition of gains and
losses on hedges of the Company's net foreign investment in the French
funeral operations and previously unrecognized foreign exchange rate gains
and losses on hedging activities.
4
(c) Exhibits
EXHIBIT NO. EXHIBIT
----------- -------
2.1 Share purchase agreement relating to the sale and
purchase of part of the issued share capital of
Service Corporation International - Europe
Continentale. The copy filed does not include the
Schedules one to nineteen of the agreement. The
Company hereby undertakes to supplementally furnish a
copy of any omitted schedules to the Commission upon
request.
5
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
March 24, 2004 SERVICE CORPORATION INTERNATIONAL
By: /s/ Eric D. Tanzberger
------------------------------------
Eric D. Tanzberger
Vice President and Corporate Controller
6
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
2.1 Share purchase agreement relating to the sale and
purchase of part of the issued share capital of
Service Corporation International - Europe
Continentale. The copy filed does not include the
Schedules one to nineteen of the agreement. The
Company hereby undertakes to supplementally furnish a
copy of any omitted schedules to the Commission upon
request.
7