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OMB APPROVAL |
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OMB Number:
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3235-0059 |
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Expires:
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February 28, 2006 |
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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Filed by the Registrant
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Filed by a Party other than the Registrant
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Check the appropriate box: |
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o Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2)) |
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x Definitive Proxy Statement |
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o Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
Service Corporation
International
(Name
of Registrant as Specified In Its Charter)
(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
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x No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11. |
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1) Title of each class of securities to which transaction applies: |
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2) Aggregate number of securities to which transaction applies: |
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): |
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4) Proposed maximum aggregate value of transaction: |
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o Fee paid previously with preliminary materials. |
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o Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing. |
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1) Amount Previously Paid: |
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2) Form, Schedule or Registration Statement No.: |
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SEC 1913 (02-02) |
Persons who are to respond to the collection of information
contained in this form are not required to respond unless the form displays a currently valid
OMB control number. |
Service Corporation International
Proxy Statement and 2005 Annual Meeting Notice
2005 Annual Meeting
Date: Thursday, May 12, 2005
Time: 10:00 a.m. Houston time
Place: Newmark Group Auditorium
American Funeral Service Training Center
415 Barren Springs Drive
Houston, Texas 77090
Service Corporation International
1929 Allen Parkway, P.O. Box 130548
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Houston, Texas 77219-0548 |
April 18, 2005 |
Dear Shareholder,
As the owner of shares of Service Corporation International,
please accept my invitation to attend the Companys Annual
Meeting. It is scheduled for Thursday, May 12, 2005, at
10:00 a.m. Houston time in the auditorium of the American
Funeral Service Training Center, 415 Barren Springs Drive,
Houston, Texas. During the meeting, we will report on how our
Company performed for its shareholders during 2004 and share
with you our plans for the future. You will have an opportunity
to ask questions, express your views, and meet members of
SCIs executive team and Board of Directors.
As we approach this years annual meeting, I would like to
pay special tribute to Jack Finkelstein and James H. Greer, two
valued members of our Board of Directors who are retiring as
their latest terms of service come to a close. Jack Finkelstein
has been associated with SCI from the earliest days of our
founding, and his friendship and guidance have been invaluable
to the Companys growth and development. Jim Greer has been
a respected member of the Board since 1978, and we have
benefited greatly from his ongoing wisdom and counsel. I know
that their colleagues on the Board join me in thanking them for
their many years of participation, and we wish them well in all
of their future endeavors.
I would also like to add my deep personal appreciation for the
contribution of B.D. Hunter who, although he has retired from
the Board, will stay involved with SCI on a consulting basis.
Bud has been involved with the Company in numerous capacities
since the 1960s, has served on the Board since the 1980s, and
has provided invaluable support and expertise over the past few
years in the role of Vice Chairman. We will continue to rely on
his vision and talent as we move forward.
On behalf of the Board and our employees, I would like to
express our appreciation for your continuing support. I look
forward to greeting in person all shareholders who are able to
attend our annual meeting.
Sincerely,
R. L. Waltrip
Chairman of the Board
Service Corporation International
1929 Allen Parkway, P.O. Box 130548
Houston, Texas 77219-0548
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 12, 2005
To Our Shareholders:
The Annual Meeting of Shareholders of Service Corporation
International (SCI or the Company) will
be held in the Newmark Group Auditorium, American Funeral
Service Training Center, 415 Barren Springs Drive, Houston,
Texas at 10:00 a.m. Houston time on May 12, 2005 for
the following purposes:
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To elect four nominees to the Board of Directors. |
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To approve the appointment of PricewaterhouseCoopers LLP as
SCIs independent accountants for the 2005 fiscal year. |
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To transact such other business that may properly come before
the meeting. |
Only shareholders of record at the close of business on
March 22, 2005 are entitled to notice of and to vote at the
Annual Meeting. A majority of the outstanding shares entitled to
vote is required for a quorum.
It is important that your shares be represented at the Annual
Meeting regardless of the size of your holdings. Whether or not
you expect to attend the Annual Meeting in person, we urge
you to vote your shares at your earliest convenience in order to
ensure a quorum at the meeting. You can vote by signing,
dating and returning the proxy card in the enclosed stamped
envelope for which no additional postage is required if mailed
in the United States. Submitting your proxy now will not prevent
you from voting your shares at the meeting if you desire to do
so, as your proxy is revocable at your option.
By Order of the Board of Directors,
James M. Shelger
Senior Vice President, General Counsel and Secretary
Houston, Texas
April 18, 2005
(SERVICE CORPORATION INTERNATIONAL(R) LOGO)
Service Corporation International
1929 Allen Parkway
P.O. Box 130548
Houston, Texas 77219-0548
PROXY STATEMENT
Proxy Voting: Questions & Answers
Q: Who is entitled to vote?
A: Shareholders of record who held common stock of SCI at
the close of business on March 22, 2005 are entitled to
vote at the 2005 Annual Meeting. As of the close of business on
that date, there were outstanding 310,161,861 shares of SCI
common stock, $1.00 par value (Common Stock).
Q: What are shareholders being asked to vote on?
A: Shareholders are being asked to vote on the following
items at the 2005 Annual Meeting:
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Election of four nominees to the Board of Directors; and |
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Approval of PricewaterhouseCoopers LLP as SCIs independent
accountants for the fiscal year 2005. |
The Company will also transact such other business as may
properly come before the meeting. The affirmative vote of a
majority of the total shares represented in person or by proxy
and entitled to vote at the 2005 Annual Meeting is required for
approval of each of the proposals.
Q: How do I vote my shares?
A: If you held Common Stock as a registered shareholder
at the close of business on March 22, 2005, you can either
vote by mail or in person at the Annual Meeting.
Q: What if I want to vote in person at the Annual Meeting?
A: The Notice of Meeting provides details of the date,
time and place of the 2005 Annual Meeting, if you wish to vote
in person.
Q: What if Id rather vote by mail?
A: If you wish to vote by mail, simply sign and date the
enclosed proxy and return it in the pre-stamped envelope
provided. Each valid proxy received by the close of business on
May 11, 2005 will be voted at the Annual Meeting by the
persons named on the proxy card and in accordance with your
instructions. If you complete and submit a proxy card without
giving voting instructions, your shares will be voted as
recommended by the Board of Directors.
Q: How does the Board of Directors recommend voting?
A: The Board of Directors recommends voting:
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FOR each of the four nominees to the Board of Directors.
Biographical information for each nominee is outlined in this
Proxy Statement under Election of Directors; and |
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FOR approval of PricewaterhouseCoopers LLP as SCIs
independent accountants for the fiscal year 2005. |
1
Although the Board of Directors does not contemplate that any
nominee will be unable or unwilling to serve, if such a
situation arises, the proxies that do not withhold authority to
vote for directors will be voted for a substitute nominee(s)
chosen by the Board.
Q: If I give my proxy, how will my stock be voted on other
business brought up at the Annual Meeting?
A: By submitting your proxy card, you authorize the
persons named on the proxy card to use their discretion in
voting on any other matter properly brought before the Annual
Meeting. At the date hereof, SCI does not know of any other
business to be considered at the Annual Meeting.
Q: Why is it important to send in my proxy card so that it is
received on or before May 11, 2005?
A: The Company cannot conduct business at the Annual
Meeting unless a quorum is present. A quorum will only be
present if a majority of the outstanding shares of SCI common
stock as of March 22, 2005 is present at the meeting in
person or by proxy. It is for this reason that we urge you to
send in your completed proxy card(s) as soon as possible, so
that your shares can be voted even if you cannot attend the
meeting.
Q: Can I revoke my proxy once I have given it?
A: Yes. The enclosed proxy, even though executed and
returned, may be revoked any time prior to the time that it is
voted at the Annual Meeting by a later-dated proxy or by written
notice of revocation filed with the Secretary, James M. Shelger.
Alternatively, you can attend the Annual Meeting, revoke your
proxy in person, and vote at the meeting itself.
Q: How will the votes be counted?
A: Each properly executed proxy received in time for the
2005 Annual Meeting will be voted as specified therein, or if a
shareholder does not specify how the shares represented by his
or her proxy are to be voted, such shares shall be voted for the
nominees listed therein (or for other nominees as provided
above), and for approval of the selection of
PricewaterhouseCoopers LLP as the Companys independent
accountants. Holders of SCI common stock are entitled to one
vote per share on each matter considered at the Annual Meeting.
In the election of directors, a shareholder has the right to
vote the number of his or her shares for as many persons as
there are to be elected as directors. Shareholders do not have
the right to cumulate votes in the election of directors.
Abstentions are counted towards the calculation of a quorum. An
abstention has the same effect as a vote against a proposal, or
in the case of the election of directors, as shares to which
voting power has been withheld.
Q: What if my SCI shares are held through a bank or
broker?
A: If your shares are held through a broker or bank, you
will receive voting instructions from your bank or broker
describing how to vote your stock. A broker non-vote
refers to a proxy that votes on one matter, but indicates that
the holder does not have the authority to vote on other matters.
Broker non-votes will have the following effects at our Annual
Meeting: for purposes of determining whether a quorum is
present, a broker non-vote is deemed to be present at the
meeting; for purposes of the election of directors and other
matters to be voted on at the meeting, a broker non-vote will
not be counted.
Q: How does a shareholder communicate with the Board of
Directors, committees or individual directors?
A: Any shareholder may communicate with the Board of
Directors, any committee of the Board, the non-management
directors as a group or any director, by sending written
communications addressed to the Board of Directors of Service
Corporation International, a Board committee or such individual
director or directors, c/o Corporate Secretary, Service
Corporation International, 1929 Allen Parkway, Houston, TX
77019. All communications will be compiled by the Secretary of
the Company and submitted to the Board of Directors (or other
addressee) at the next regular Board meeting.
Q: What is the Companys Web address?
A: The SCI home page is www.sci-corp.com. At the website,
the following information is available for viewing. This
information is also available in print to any shareholder who
requests it.
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Bylaws of SCI |
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Charters of the Audit Committee, the Compensation Committee and
the Nominating and Corporate Governance Committee |
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Corporate Governance Guidelines |
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Principles of Conduct and Ethics for the Board of Directors |
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Code of Conduct and Ethics for Officers and Employees |
This Proxy Statement, the Notice of Annual Meeting of
Shareholders and the enclosed proxy card are first being mailed
to shareholders beginning on or about April 18, 2005.
3
ELECTION OF DIRECTORS
After the 2005 Annual Meeting, the Board of Directors will
consist of eleven members and will be divided into three
classes, each with a staggered term of three years.
Messrs. Jack Finkelstein and James H. Greer are retiring
from the Board at the 2005 Annual Meeting and Mr. B. D.
Hunter retired from the Board in February 2005. At this
years Annual Meeting, shareholders will be asked to elect
four directors to the Board. These Directors will be elected for
three-year terms expiring in 2008. Set forth below are profiles
for each of the four candidates nominated by the Nominating and
Corporate Governance Committee of the Board of Directors for
election by shareholders at this years Annual Meeting.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
FOR THE FOLLOWING NOMINEES.
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Thomas L. Ryan
Age: 39 Director
Since: 2004 Term Expires:
2008
Mr. Ryan is President and Chief Executive Officer of
SCI. He joined the Company in June 1996 and subsequently served
in a variety of financial management roles until November 2000,
when he was promoted to Chief Executive Officer of European
Operations based in Paris, France. In July, 2002, Mr. Ryan
was appointed President and Chief Operating Officer. In February
2005, he was promoted to Chief Executive Officer. Prior to
joining SCI, Mr. Ryan was a certified public accountant
with Coopers & Lybrand L.L.P. for more than eight
years. Mr. Ryan holds a Bachelor of Business Administration
degree from the University of Texas- Austin, is a member of the
Young Presidents Organization and maintains his
accreditation as a certified public accountant.
SCI Common Shares Beneficially
Owned(1):
743,097
(2)
Other Directorships Currently Held: None |
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S. Malcolm Gillis
Age: 64 Director
Since: 2004 Term Expires:
2008
Malcolm Gillis, Ph.D., is a University Professor and
former President of Rice University, a position he held from
1993 to June 2004. He is an internationally respected
academician and widely published author in the field of
economics with major experience in fiscal reform and
environmental policy. Dr. Gillis has held professorships at
Harvard and Duke Universities, and has served as a consultant to
numerous U.S. agencies and foreign governments.
Additionally, he has held memberships in many national and
international committees, boards, and advisory councils. He
holds Bachelors and Masters degrees from the
University of Florida and a Doctorate from the University of
Illinois.
SCI Common Shares Beneficially Owned: 9,798
Other Directorships Currently Held: Introgen Therapeutics,
Inc. |
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(1) Details
are provided in the footnotes to the table of director and
officer shareholdings listed under Voting Securities and
Principal Holders.
(2) Includes
543,332 shares which may be acquired by Mr. Ryan upon
exercise of stock options exercisable within 60 days of
March 22, 2005.
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Clifton H. Morris,
Jr.
Age: 69 Director
Since: 1990 Term Expires:
2008
Mr. Morris has been Executive Chairman of AmeriCredit
Corp. (financing of automotive vehicles) since July 2000,
previously having served as Chief Executive Officer and
President of that company. Previously, he served as Chief
Financial Officer of Cash America International, prior to which
he owned his own public accounting firm. He is a certified
public accountant with 42 years of certification, a
Lifetime Member of the Texas Society of Certified Public
Accountants and an Honorary Member of the American Institute of
Certified Public Accountants. Mr. Morris was instrumental
in the early formulation and initial public offerings of SCI,
Cash America International and AmeriCredit Corp., all of which
are now listed on the New York Stock Exchange. From 1966 to
1971, he served as a Vice President in treasury or financial
positions at SCI, returning to serve on the Companys Board
of Directors in 1990. Mr. Morris was named 2001 Business
Executive of the Year by the Fort Worth Business Hall of
Fame. He is also an avid community volunteer, having served on
the Community Foundation of North Texas, Fort Worth Chamber
of Commerce and Fort Worth Country Day School.
SCI Common Shares Beneficially
Owned(1):
94,283
Other Directorships Currently Held: None |
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W. Blair Waltrip
Age: 50 Director
Since: 1986 Term Expires:
2008
Mr. Waltrip held various positions with SCI from 1977
to 2000, including serving as vice president of corporate
development, senior vice president of funeral operations,
executive vice president of SCIs real estate division,
Chairman and CEO of Service Corporation International (Canada)
Limited (a subsidiary taken public on The Toronto Stock
Exchange) and Executive Vice President of SCI.
Mr. Waltrips experience has provided him with
knowledge of almost all aspects of the Company and its industry
with specific expertise in North American funeral/cemetery
operations and real estate management. Since leaving SCI in
2000, Mr. Waltrip has been an independent investor,
primarily engaged in overseeing family and trust investments.
Mr. Waltrip is the son of SCIs founder, R. L.
Waltrip.
SCI Common Shares Beneficially
Owned(1):
2,526,258
(2)
Other Directorships Currently Held: Sanders Morris Harris
Group Inc. |
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(1) Details
are provided in the footnotes to the table of director and
officer shareholdings listed under Voting Securities and
Principal Holders.
(2) Includes
410,000 shares which may be acquired by Mr. W. Blair
Waltrip upon exercise of stock options exercisable within
60 days of March 22, 2005.
5
The following are profiles of the other continuing directors
currently serving on the Board of SCI:
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R. L. Waltrip
Age: 74 Director
Since: 1962 Term Expires:
2006
Mr. Waltrip is the founder and Chairman of the Board of
SCI. A licensed funeral director, Mr. Waltrip grew up in
his familys funeral business and assumed management of the
firm in the 1950s. He began buying additional funeral homes in
the 1960s, achieving cost efficiencies by pooling their
resources. Since that time, he has grown SCI to a network of
more than 1,600 funeral service locations, cemeteries and
crematoria now operating in five countries. Mr. Waltrip
took SCI public in 1969. He has provided leadership to the
Company for over 40 years.
SCI Common Shares Beneficially
Owned(1):
10,138,684
(2)
Other Directorships Currently Held: None |
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Alan R.
Buckwalter, III
Age: 58 Director
Since: 2003 Term Expires:
2007
Mr. Buckwalter retired in 2003 as Chairman of
J.P. Morgan Chase Bank, South Region after a career of over
30 years in banking that involved management of corporate,
commercial, capital markets, international, private banking and
retail departments. He served as head of the Banking Division
and Leveraged Finance Unit within the Banking and Corporate
Finance Group of Chemical Bank and Chairman and CEO of Chase
Bank of Texas. Mr. Buckwalter has attended executive
management programs at Harvard Business School and the Stanford
Executive Program at Stanford University. He is also an avid
community volunteer, serving on the Boards of Texas Medical
Center, the American Red Cross (Houston chapter), St.
Lukes Episcopal Health System and Baylor College of
Medicine.
SCI Common Shares Beneficially
Owned(1):
35,743
Other Directorships Currently Held: Plains Exploration and
Production Company and BCM Technologies, Inc. |
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Anthony L. Coelho
Age: 62 Director
Since: 1991 Term Expires:
2006
Mr. Coelho was a member of the U.S. House of
Representatives from 1978 to 1989. After leaving Congress, he
joined Wertheim Schroder & Company, an investment
banking firm in New York and became President and CEO of
Wertheim Schroder Financial Services. From October 1995 to
September 1997, he served as Chairman and CEO of ETC w/tci, an
education and training technology company that he established
and subsequently sold. He served as general chairman of the
presidential campaign of former Vice President Al Gore from
April 1999 until June 2000. Since 1997, Mr. Coelho has
worked independently as a business and political consultant.
Mr. Coelho also served as Chairman of the Presidents
Committee on Employment of People with Disabilities from 1994 to
2001.
SCI Common Shares Beneficially
Owned(1):
82,797
Other Directorships Currently Held: Cyberonics, Inc. and
Universal Access Global Holdings Inc. |
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(1) Details
are provided in the footnotes to the table of director and
officer shareholdings listed under Voting Securities and
Principal Holders.
(2) Includes
8,487,003 shares which may be acquired by
Mr. R. L. Waltrip upon exercise of stock options
exercisable within 60 days of March 22, 2005.
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A.J. Foyt, Jr.
Age: 70 Director
Since: 1974 Term Expires:
2006
Mr. Foyt achieved prominence as a racing driver who was
the first four-time winner of the Indianapolis 500. His racing
career spanned four decades and three continents
North America, Europe and Australia. Since his retirement from
racing in 1994, Mr. Foyt has engaged in a variety of
commercial and entrepreneurial ventures. He is the President and
owner of A. J. Foyt Enterprises, Inc. (assembly, exhibition and
competition with high-speed engines and racing vehicles), and
has owned and operated car dealerships that bear his name. He
has also been involved in a number of commercial real estate
investment and development projects, and has served as a
director of a Texas bank.
SCI Common Shares Beneficially
Owned(1):
119,684
Other Directorships Currently Held: None |
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Victor L. Lund
Age: 57 Director
Since: 2000 Term Expires:
2007
From May 2002 to December 2004, Mr. Lund served as
Chairman of the Board of Mariner Healthcare, Inc. From 1999 to
2002, he served as Vice Chairman of the Board of Albertsons,
Inc. prior to which he had a 22-year career with American Stores
Company in various positions, including Chairman of the Board
and Chief Executive Officer, Chief Financial Officer and
corporate controller. Prior to that time, Mr. Lund was a
practicing audit CPA for five years, held a CPA license and
received the highest score on the CPA exam in the State of Utah
in the year that he was licensed. He also holds an MBA and a BA
in Accounting.
SCI Common Shares Beneficially
Owned(1):
60,599
Other Directorships Currently Held: Borders Group Inc.,
Del Monte Foods Company and NCR Corporation |
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John W. Mecom, Jr.
Age: 65 Director
Since: 1983 Term Expires:
2007
Mr. Mecom has been involved in the purchase, management
and sale of business interests in a variety of industries. He
has owned and managed over 500,000 acres of surface and
mineral interests throughout the U.S. He has been involved
in the purchase, renovation, management and sale of luxury
hotels in the U.S., Peru and Mexico. He purchased the New
Orleans Saints NFL team in 1967 and sold his interest in 1985.
He is currently Chairman of the John W. Mecom Company, principal
owner of John Gardiners Tennis Ranch and Chairman of the
Board and principal owner of Rhino Pak (a contract blender and
packer for the petroleum industry).
SCI Common Shares Beneficially
Owned(1):
50,255
Other Directorships Currently Held: None |
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Edward E. Williams
Age: 59 Director
Since: 1991 Term Expires:
2006
Dr. Williams holds the Henry Gardiner Symonds Chair (an
endowed professorship) and is Director of the Entrepreneurship
Program at the Jesse H. Jones Graduate School of Management at
Rice University, where he teaches classes on entrepreneurship,
value creation, venture capital investing, business valuations,
leveraged buyouts and the acquisition of existing concerns. He
has been involved in starting, buying and selling several
hundred companies. Dr. Williams has been named by Business
Week as the Number Two Entrepreneurship Professor in the United
States. Dr. Williams holds a PhD with specialization in
Finance, Accounting and Economics. He has taught finance,
accounting, economics and entrepreneurship at the graduate
level, has written numerous articles in finance, accounting,
economics and entrepreneurship journals, has taught courses in
financial statement analysis and continues to do academic
research in his areas of specialty. He is the author or
co-author of over 40 articles and nine books on business
planning, entrepreneurship, investment analysis, accounting and
finance.
SCI Common Shares Beneficially
Owned(1):
220,415
Other Directorships Currently Held: EQUUS II
Incorporated |
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(1) Details
are provided in the footnotes to the table of director and
officer shareholdings listed under Voting Securities and
Principal Holders.
7
Board Composition and Meetings
The Board of SCI is comprised of a majority of independent
directors. The Audit, Compensation and Nominating and Corporate
Governance Committees of the Board are all comprised entirely of
directors who are independent within the meaning of Securities
and Exchange Commission regulations and the listing standards of
the New York Stock Exchange. The Board of Directors held six
meetings in 2004. Each Board member attended at least 75% of the
total number of meetings of the Board and Board committees on
which he served. Although the Board does not have a policy on
director attendance at annual meetings, thirteen Board members
attended the Companys 2004 Annual Meeting of Shareholders.
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Consideration of Director Nominees |
The Nominating and Corporate Governance Committee considers
candidates for Board membership suggested by its members and
other Board members, as well as management and shareholders. The
Committee may also retain a third-party executive search firm to
identify candidates. A shareholder who wishes to recommend a
prospective nominee for the Board should notify the
Companys Corporate Secretary in writing with whatever
supporting material the shareholder considers appropriate. To be
considered, the written recommendation from a shareholder must
be received by the Companys Corporate Secretary at least
120 calendar days prior to the date of the Companys
Proxy Statement for the prior years Annual Meeting of
Shareholders.
Once the Nominating and Corporate Governance Committee has
identified a prospective nominee, the Committee will consider
the available information concerning the nominee, including the
Committees own knowledge of the prospective nominee, and
may seek additional information or an interview. If the
Committee determines that further consideration is warranted,
the Committee will then evaluate the prospective nominee against
the standards and qualifications set out in the Companys
Corporate Governance Guidelines, including:
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the prospective nominees integrity, character and
accountability; |
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the prospective nominees ability to provide wise and
thoughtful counsel on a broad range of issues; |
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the prospective nominees financial literacy and ability to
read and understand financial statements and other indices of
financial performance; |
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the prospective nominees ability to work effectively as
part of a team with mature confidence; |
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the prospective nominees ability to provide counsel to
management in developing creative solutions and in identifying
innovative opportunities; and |
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the commitment of the prospective nominee to prepare for and
attend meetings and to be accessible to management and other
directors. |
The Committee also considers such other relevant factors as it
deems appropriate, including the current composition of the
Board, the balance of management and independent directors, the
need for Audit Committee expertise and the evaluations of other
prospective nominees. After completing this process, the
Committee makes a recommendation to the full Board as to the
persons who should be nominated by the Board, and the Board
determines the nominees after considering the recommendation and
report of the Committee.
8
In August 2003, the Board adopted its Corporate Governance
Guidelines. The Guidelines incorporate the director independence
standards of the New York Stock Exchange. The portion of the
Guidelines addressing director independence is as follows:
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3.1 Board Independence |
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The majority of the Board of Directors of SCI will be comprised
of independent directors, meaning directors who have no material
relationship with SCI (either directly or as a partner,
shareholder, or officer of an organization that has a material
relationship with SCI). In addition, the Audit, Compensation,
and Nominating and Corporate Governance Committees of SCI will
be comprised entirely of independent directors. |
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The Nominating and Corporate Governance Committee of SCI will
review the independence of SCIs directors on an ongoing
basis to ensure that Board and Board committee composition is
consistent with these principles and with the rules of the New
York Stock Exchange and/or other applicable rules. |
|
Pursuant to the Guidelines, the Board undertook a review of
director independence in February 2005. For this review, the
Board considered the findings and recommendations of the
Nominating and Corporate Governance Committee. The Board and the
Committee considered transactions and relationships between each
director or any member of his immediate family and the Company
and its subsidiaries and affiliates, including those reported
under Certain Transactions below.
As a result of this review, the Board affirmatively determined
that all of the directors are independent of the Company and its
management under the standards set forth in the Guidelines, with
the exception of R. L. Waltrip, Thomas L. Ryan and
W. Blair Waltrip. Messrs. R. L. Waltrip and Ryan are
considered inside directors because of their employment as
senior executives of the Company. Mr. W. Blair Waltrip is
considered a non-independent director because he is the son of
an executive officer, Mr. R. L. Waltrip.
Board Committees
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Name of Committee |
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and Members |
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Functions of the Committee |
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Audit Committee
Victor L. Lund (Chair)
Alan R. Buckwalter, III
Jack Finkelstein
S. Malcolm Gillis
Edward E. Williams
Meetings In 2004
Nine |
|
Assists the Board of Directors in fulfilling its
oversight responsibilities to ensure the integrity of the
Companys financial statements, the Companys
compliance with legal and regulatory requirements, the
independent accountants qualifications, independence and
performance and the performance of the Companys internal
audit functions.
Reviews the annual audited financial statements with
SCI management and the independent accountants, including items
noted under Managements Discussion and Analysis of
Financial Condition and Results of Operations and any
major issues regarding accounting principles and practices. This
includes a review of analysis by management and by the
independent accountants of any significant financial reporting
issues and judgments made in the preparation of the financial
statements, including the effect of alternative GAAP methods. |
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Reviews SCIs quarterly financial statements
with management and the independent accountants prior to the
release of quarterly earnings and the filing of quarterly
reports with the SEC, including the results of the independent
accountants reviews of the quarterly financial statements. |
9
Board Committees (contd)
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Name of Committee |
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and Members |
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Functions of the Committee |
|
Audit Committee (Contd) |
|
Reviews with management and the independent
accountants the effect of any major changes to SCIs
accounting principles and practices, as well as the impact of
any regulatory and accounting initiatives on SCIs
financial statements. |
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Oversees and reviews the performance and
effectiveness of SCIs internal audit function. |
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Reviews the qualifications, independence and
performance of the independent accountants annually and
recommends the appointment or re-appointment of the independent
accountants. The Audit Committee is directly responsible for the
engagement, compensation and replacement, if appropriate, of the
independent accountants. |
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Meets regularly with the independent accountants
without SCI management present. Reviews with the independent
accountants any audit problems or difficulties and
managements responses to address these issues. |
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Meets with SCI management at least quarterly to
review any matters the Audit Committee believes should be
discussed. |
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Meets with SCI management and the independent
accountants to review SCIs significant financial risks and
steps management has taken to monitor and control such exposures. |
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Reviews with the Companys legal counsel any
legal matters that could have a significant impact on the
Companys financial statements. |
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Reviews and discusses summary reports from
SCIs Careline, a toll-free number available to Company
employees and customers to make anonymous reports of any
complaints or issues regarding infringements of ethical or
professional practice by any SCI employee regarding financial
matters; discusses with SCI management actions taken in response
to any significant issues arising from these summaries. |
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Beginning with fiscal year 2004, in accordance with
Section 404 of the Sarbanes-Oxley Act of 2002, the Audit
Committee also reviews reports relative to the effectiveness of
SCIs internal control over financial reporting, including
obtaining and reviewing a report by the independent accountants
regarding managements assertions on the effectiveness of
SCIs internal control over financial reporting. The Audit
Committee reviews any material issues raised by the most recent
assessment of the effectiveness of SCIs internal control
over financial reporting or by any inquiry or investigation
within the past five years, and any steps taken to deal with
such issues. |
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10
Board Committees (contd)
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Name of Committee |
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and Members |
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Functions of the Committee |
|
Nominating and Corporate
Governance Committee
Anthony L. Coelho (Chair)
Alan R. Buckwalter, III
Victor L. Lund
Clifton H. Morris, Jr.
Edward E. Williams
Meetings In 2004
Six |
|
Oversees the composition of the Board of Directors
of SCI and the Board committees, including the process for
identifying and recruiting new candidates for the Board,
developing a re-nomination review process for current Board
members and considering nominees recommended by shareholders in
accordance with the Companys bylaws.
Makes recommendations to the full Board with respect
to the nomination of candidates for Board membership and
committee assignments for Board members, including the
chairmanships of the Board committees.
Provides leadership to the Board in the development
of corporate governance principles and practices, including the
development of Corporate Governance Guidelines and a Code of
Business Conduct and Ethics. |
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In conjunction with the full Board, oversees CEO
succession planning and reviews succession plans for other SCI
executives, including the development of both short-term
(emergency) and long-term CEO succession plans, and leadership
development planning. Monitors progress against these plans and
reports to the full Board on this issue at least annually. |
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Develops and leads the annual Board evaluation of
the performance of the CEO and presents the results of this
evaluation to the full Board for discussion and approval. |
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With outside assistance, when needed, makes
recommendations to the full Board with respect to compensation
for Board members. |
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Oversees the development of orientation programs for
new Board members in conjunction with SCIs Chairman. |
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Oversees continuing education sessions for SCI
directors. This includes monitoring various director education
courses offered by universities and other institutions, making
recommendations to the Board as to which of these might be most
useful to attend, and developing other education initiatives
that may be practical and useful to Board members, including
development of a program for Board member visits to SCI sites
and facilities. |
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Oversees and implements the annual process for
assessment of the performance of SCIs Board as a whole and
of the Nominating and Corporate Governance Committee, and
coordinates the annual performance assessment of the Audit,
Compensation and Investment Committees. |
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The Committee Chair presides at executive sessions
of non-management directors held during every SCI Board meeting. |
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11
Board Committees (contd)
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Name of Committee |
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and Members |
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Functions of the Committee |
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Investment Committee
Edward E. Williams (Chair)
Jack Finkelstein
S. Malcolm Gillis
John W. Mecom, Jr.
W. Blair Waltrip
Meetings In 2004
Five |
|
Establishes guidelines and polices for the
investment of trust funds held by independent trusts (the
Trusts). The Trusts consist of funds collected by
SCI relating to preneed funeral sales, to preneed cemetery
merchandise and services sales and to cemetery perpetual care
collections, in accordance with applicable state laws. These
funds are then deposited with a financial institution
(Trustee) qualified to do business within that
states jurisdiction.
Oversees the Trustees and whether the Trusts
assets are prudently and effectively managed by the Trustees.
The Investment Committee may replace a Trustee if it determines
that the Trustee is not acting in the best interest of the Trust. |
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Works in conjunction with the Investment Operating
Committee of SCI, a committee comprised of senior SCI officers,
which supports the Investment Committee by providing day-to-day
oversight of the Trust funds. The Investment Committees
policies are implemented through the Investment Operating
Committee of SCI. |
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Appoints an investment consultant who reports
directly to the Investment Operating Committee of SCI and the
Trustees. The investment consultant screens and monitors
performance of the mutual funds and investment managers; and
makes recommendations to the Investment Operating Committee and
Trustees relative to the engagement of mutual fund and/or
investment managers. The investment consultant reviews the
investment portfolios with the Investment Committee at least
once a quarter. The information is then forwarded to the
Trustees for their review. |
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By law, the Trustees are ultimately responsible for
all investment decisions. However, the Investment Committee
recommends investment policies and guidelines, and the
Investment Operating Committee recommends mutual fund and
investment manager changes to the Trustees based on the advice
of the investment consultant. |
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|
Compensation Committee
Alan R. Buckwalter, III
(Chair)
Anthony L. Coelho
James H. Greer
John W. Mecom, Jr.
Meetings In 2004
Five |
|
Oversees the compensation program for SCIs
executive officers with a view to ensuring that such program
attracts, motivates and retains executive personnel and relates
directly to objectives of the Company and stockholders as well
as the operating performance of the Company.
Sets compensation for the CEO of SCI, and reviews
and approves compensation for all other SCI executive officers,
including base salaries, short and long-term incentive
compensation plans and awards and certain benefits.
Oversees the design and implementation of incentive
compensation and equity- based plans, including stock option and
restricted stock awards. Conducts regular reviews of incentive
compensation and equity-based plans, so as to create appropriate
incentives for the achievement of individual and Company
performance goals. |
12
Board Committees (contd)
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Name of Committee |
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and Members |
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Functions of the Committee |
|
Compensation Committee (Contd) |
|
Determines appropriate individual and Company
performance measures, including goals and objectives, to be used
in reviewing performance for the purposes of setting
compensation for the CEO and other executive officers as well as
appropriate peer group companies to review for comparative
purposes with respect to compensation decisions. |
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Presents recommendations to the Board with respect
to any executive employment contracts for SCIs officers,
including the Chairman and the CEO. |
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Retains, as appropriate, compensation consultants to
assist the Committee in fulfilling its responsibilities. The
consultants report directly to the Committee, which has sole
authority to approve the terms of their engagement, including
their fees. |
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Executive Committee
Robert L. Waltrip (Chair)
Anthony L. Coelho
Victor L. Lund
Clifton H. Morris, Jr.
Thomas L. Ryan
Meetings In 2004
None |
|
Has authority to exercise many of the powers of the
full Board between Board meetings.
Is available to meet in circumstances where it is
impractical to call a meeting of the full Board and there is
urgency for Board discussion and decision-making on a specific
issue. |
|
13
Director Compensation
In May 2003, the Board of Directors acted upon the
recommendation of the Nominating and Corporate Governance
Committee and eliminated the payment of director fees to
employee directors. For 2004, directors who are not employees
(outside directors) received the fees discussed below.
All outside directors receive an annual retainer of $70,000,
which is paid either in Common Stock of SCI or, at each
directors option, deferred Common Stock equivalents.
Common Stock is issued once a year on the date of the Annual
Meeting of Shareholders, such that the amount of Common Stock or
Common Stock equivalents issued on that day is equivalent to the
cash value of the annual retainer. Accordingly, each outside
director received 9,798 shares of Common Stock or deferred
Common Stock equivalents in May 2004.
In addition to the Annual Retainer, all outside directors
receive $10,000 for each Board meeting attended and receive a
further attendance fee for each Committee meeting attended as
follows: Audit Committee Chair $6,000, each other committee
chair $5,000, Audit Committee members $4,000, and each other
committee member $3,000. Directors may elect to defer all or any
of these fees.
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Directors Retirement Plan |
Effective January 1, 2001, the Non-Employee Directors
Retirement Plan was amended such that only years of service
prior to 2001 will be considered for vesting purposes.
Non-employee directors who served on the Board prior to that
time and were participants in the plan are entitled to receive
annual retirement benefits of $42,500 per year for ten
years, subject to a vesting schedule, based on their years of
Board service. Retirement benefits vest in 25% increments at the
end of five, eight, eleven and fifteen years of credited
service, except that the benefits vest completely in the event
of death while the participant is still a member of the Board or
in the event of a change of control of SCI (as defined in the
plan).
Each outside director is allowed to make personal use of two
aircraft leased by the Company under cancelable operating leases
for a maximum of 25 flight hours per year. The director must
reimburse the Company for any such usage at an hourly rate
pursuant to a time-sharing agreement governed by Federal
Aviation Regulations. The Company also values such usage on the
basis of IRS guidelines. To the extent that the IRS valuation
exceeds the amount reimbursed to the Company by the director,
the difference is treated as income imputed to the director,
which for 2004 amounted to: $38,130 for Mr. Buckwalter,
$10,955 for Mr. Coelho, $2,152 for Mr. Foyt, $14,135
for Mr. Greer, $9,858 for Mr. Lund, $15,555 for
Mr. Mecom, $6,863 for Mr. Morris and $12,220 for
Mr. W. Blair Waltrip.
14
PERFORMANCE GRAPH
The following graph presents the Companys cumulative
shareholder return over the period from December 31, 1999
to December 31, 2004. The Common Stock of the Company is
compared to the S&P 500 Index and to a peer group selected
by the Company (the Peer Group). The graph assumes
$100 is invested on December 31, 1999 in the Common Stock
of the Company, the S&P 500 Index and the Peer Group Index.
Investment is weighted on the basis of market capitalization.
Total return data assumes the reinvestment of dividends.
The data source for the following graph is
Standard & Poors.
Comparison of Cumulative Shareholder Return
1999-2004
TOTAL SHAREHOLDER RETURNS
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1999 | |
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2000 | |
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2001 | |
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2002 | |
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2003 | |
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2004 | |
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SCI
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100.00 |
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25.23 |
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71.93 |
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47.86 |
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77.69 |
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107.39 |
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S&P 500 Index
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100.00 |
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90.90 |
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80.09 |
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62.39 |
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80.29 |
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89.03 |
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Peer Group Index
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100.00 |
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135.53 |
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170.63 |
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142.90 |
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185.21 |
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189.74 |
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The Peer Group is comprised of Alderwoods Group, Inc.,
Carriage Services Inc., Hillenbrand Industries, Inc.,
Matthews International Corp., Rock of Ages Corporation and
Stewart Enterprises, Inc. Alderwoods Group, Inc. is
included from January 1, 2002, when it emerged from
bankruptcy.
15
REPORT OF THE COMPENSATION COMMITTEE
Compensation Philosophy and Objectives
SCIs compensation philosophy, and that of the Compensation
Committee, is that all compensation programs should serve to:
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link pay and performance; and |
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attract, motivate, reward and retain the broad-based management
talent required to achieve corporate objectives. |
Components of the compensation program for SCI executives
include base salaries, annual performance-based incentives and
long-term incentives, details of which are outlined below. In
2004, SCIs executive compensation program focused on
cash-based incentive awards linked to key performance measures
and equity-based incentives linked to share price growth and
implementation of strategic Company objectives.
Base Salaries
Base salaries of executive officers listed in the summary
compensation table in this proxy statement (the Named
Executive Officers) were not increased in 2004 other than
in situations where an officers base salary was judged to
need adjustment to move closer to market levels. The two Named
Executive Officers receiving such an adjustment were
Messrs. Ryan and Webb.
Base salaries of SCIs Named Executive Officers, as well as
other officers, were reviewed by means of comparisons with
published survey data representing companies of similar size to
SCI (by revenues) across various industries (the
Comparison Group). Regression analysis was used to
derive compensation data from over 700 participating companies
in the published survey. The Comparison Group used for
compensation review purposes differs from the peer group used in
the Performance Graph in this proxy statement. This is because
the peer group companies all operate within SCIs industry
but are either much smaller than SCI or are conglomerates with
varied business units, making direct comparisons for
compensation purposes impractical. While there is some overlap
between these groups, there has been no attempt to link them.
Based on this review, it was determined that the current salary
levels of incumbent Named Executive Officers fall between the
50th and 75th percentile levels of salaries of the Comparison
Group. As this level of pay is consistent with the
Committees target base salary levels for compensation for
all SCI executives, including the Named Executive Officers, we
felt that there was no need to adjust current salary levels
other than in instances where the executives base salary
needed to be raised to the approximate 50th percentile of
the Comparison Group.
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Other Factors in Determining Salary Adjustments for Named
Executive Officers |
In determining salary increases for the Named Executive
Officers, the Committee considers market salary data and annual
salary increases for executives with comparable positions within
the Comparison Group. In addition, we consider individual
performance of the Named Executive Officers. These criteria are
assessed in a non-formula fashion and are not weighted.
All of the Named Executive Officers have employment agreements
with SCI (see Executive Employment Agreements).
These agreements provide that the base salaries of the Named
Executive Officers cannot be decreased, but give the Committee
the sole discretion to determine any salary increases.
16
Annual Performance-Based Incentive Compensation
Annual incentive opportunities are linked to the achievement of
key financial and operational objectives for SCI on a
consolidated basis. The objective of this policy is to focus
SCIs executive officers on objectives that the Committee
believes are primary determinants of share price over time.
Target award levels for 2004 were set at approximately the 50th
percentile level of the Comparison Group for the Named Executive
Officers as a group. As such, if SCI achieved performance
against the key measures at target levels, executive officers
would receive incentive awards at this level. Actual awards are
proportionately decreased or increased on the basis of
SCIs performance relative to the targets, subject to
maximum award amounts.
For 2004, two performance measures were used for the Named
Executive Officers: free cash flow and earnings per share, in
each case as defined in the plan. Each of these measures was
weighted equally at target levels and assessed relative to
SCIs 2004 business plan. Performance targets based on
these measures were established by the Committee during the
first quarter of 2004 for the performance period of January 1
through December 31, 2004. For operating officers, the two
performance measures used were operating profit (75% weighting)
and free cash flow (25% weighting).
For 2004, SCIs actual performance on the performance
measures was below target for earnings per share and slightly
below target for free cash flow. Therefore, the actual bonuses
shown in the summary compensation table were below target.
Long-Term Incentive Compensation
In 2004, we modified the long-term incentive compensation
program to provide a greater balance and focus for the Named
Executive Officers. The program consists of equal value
delivered for long-term incentives in the form of stock options,
restricted stock and performance units to ensure appropriate
focus is given to (i) driving the Companys stock
price appreciation, (ii) managing the ongoing operations
and strategy implementation and (iii) outperforming the
total shareholder return of the Value Lines Diversified
Industry Classification, a measurement utilized in our
performance units.
To more timely communicate to shareholders the most recent
grants to the Named Executive Officers, we have included the
February 2005 grants of stock options, restricted stock and/ or
performance units in the 2004 Summary Compensation Table, the
Stock Options Granted table, the Aggregated Option Exercises in
Last Fiscal Year and December 31, 2004 Option Values table
and the Long-Term Incentive Plan: Performance Units table. The
following charts represent the most recent grants in 2005 and
2004 to Named Executive Officers, consistent with the balanced
approach to long-term incentive awards as detailed above.
17
The actual awards for the total 2005 grants ranged from
approximately the 40th to the 50th percentile of the Comparison
Group. The actual awards for the total 2004 grants were made at
approximately the 50th percentile of the Comparison Group.
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2005 Grants for 2004 Performance | |
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Stock Options | |
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Restricted Stock | |
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Performance Units | |
Name |
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Grant (Shares) | |
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Grant (Shares) | |
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Grant (Units) | |
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R. L. Waltrip
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150,200 |
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72,000 |
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562,500 |
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B. D. Hunter*
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0 |
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0 |
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0 |
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Thomas L. Ryan
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177,000 |
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84,800 |
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662,900 |
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Michael R. Webb
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101,900 |
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48,800 |
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381,700 |
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Jeffrey E. Curtiss
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48,300 |
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23,100 |
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180,800 |
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* |
In anticipation of Mr. Hunters resignation in
February 2005, the Committee elected not to grant him long term
incentives. The increased grants for Mr. Ryan, in his role
as President and Chief Executive Officer, and Mr. Webb, in
his role as Chief Operating Officer, were based on market
competitive grants. |
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2004 Grants for 2003 Performance | |
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Stock Options | |
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Restricted Stock | |
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Performance Units | |
Name |
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Grant (Shares) | |
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Grant (Shares) | |
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Grant (Units) | |
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R. L. Waltrip
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102,000 |
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88,000 |
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626,000 |
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B. D. Hunter
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63,500 |
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55,000 |
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391,500 |
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Thomas L. Ryan
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57,500 |
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49,500 |
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352,000 |
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Michael R. Webb
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46,000 |
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40,000 |
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283,500 |
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Jeffrey E. Curtiss
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25,500 |
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22,000 |
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156,500 |
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The options were granted at exercise prices equal to 100% of the
fair market value of SCI Common Stock on the grant date. They
vest at a rate of one-third per year and have an eight year
term. The restricted stock grants vest at a rate of one-third
per year. Our performance unit plan provides for units that are
payable in cash at the end of the three year performance period
beginning in the year granted. Each performance unit is valued
at $1.00 and the actual payout may vary by a range of up to 200%
of the amounts shown in the tables.
Retention of Compensation Consultants
From time to time, we work with compensation consultants who
assist in the design of various compensation plans and in the
review of compensation levels and programs. Any compensation
consultants retained for this purpose report directly to the
Committee, which has the authority to approve the
consultants fees and any other terms of engagement.
Limitation of Tax Deduction for Executive Compensation
Subject to certain exceptions, the Omnibus Budget Reconciliation
Act of 1993 (OBRA) prohibits publicly traded
companies from receiving a tax deduction on compensation paid to
Named Executive Officers in excess of $1,000,000 annually. The
Committee has not adopted a specific policy relating to OBRA. We
consider the OBRA restrictions when structuring executive
compensation programs. However, we believe that tax
deductibility should not be the sole consideration in setting
appropriate compensation for SCIs senior management and
maintaining managements focus on the goal of increasing
shareholder value. As such, we view OBRA as one of a number of
factors that we consider in making compensation decisions.
2004 Chief Executive Officer Compensation
Mr. R. L. Waltrip received no base salary increase in 2004.
The slight increase in salary for 2004 reflected in the Summary
Compensation Table results from an extra payroll period
occurring in 2004.
18
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Annual Performance-Based Incentive Compensation |
Mr. Waltrip received an annual incentive for 2004 of
$492,860, which was 64.8% of the target established by the
Committee. The award was determined using the same factors used
to award annual incentives for other Named Executive Officers,
as described above. Mr. Waltrips target annual
incentive was set slightly below the 50th percentile of target
annual incentives of the Comparison Group.
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Long-Term Incentive Compensation |
In February 2005, Mr. Waltrip received long-term incentive
awards for 2004 performance as follows: 72,000 shares of
restricted stock, stock options for 150,200 shares and
562,500 performance units. In February 2004, Mr. Waltrip
received long-term incentive awards for 2003 performance as
follows: 88,000 shares of restricted stock, stock options
for 102,000 shares and 626,000 performance units. For each
year, his target awards were established at approximately the
Comparison Group 50th percentile.
COMPENSATION COMMITTEE
Alan R. Buckwalter, III (Chair)
Anthony L. Coelho
James H. Greer
John W. Mecom, Jr.
19
CERTAIN INFORMATION WITH RESPECT TO OFFICERS AND DIRECTORS
Cash Compensation
The following table sets forth information for the three years
ended December 31, 2004 with respect to the Chief Executive
Officer and the four other most highly compensated executive
officers of the Company. The determination as to which executive
officers were most highly compensated was made with reference to
the amounts required to be disclosed under the
Salary and Bonus columns in the table.
Summary Compensation Table
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Long-Term Compensation |
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Annual Compensation |
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Awards(5) |
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Payouts |
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|
|
|
Securities |
|
|
|
|
|
|
|
|
|
|
Restricted |
|
Underlying |
|
|
Long-Term |
|
|
|
Name and |
|
|
Other Annual |
|
Stock |
|
Stock |
|
|
Incentive |
|
All Other |
|
Principal Position |
|
Year |
|
Salary |
|
Bonus |
|
Compensation(1) |
|
Award(2)(3) |
|
Options(2) |
|
|
Payouts |
|
Compensation(4) |
|
|
|
|
|
|
|
|
|
|
R. L. Waltrip
|
|
|
2004 |
|
|
$ |
986,538 |
|
|
$ |
492,860 |
|
|
$ |
65,573 |
|
|
$ |
498,960 |
|
|
|
150,200 |
|
|
|
|
0 |
|
|
$ |
428,759 |
|
|
Chairman of the Board
|
|
|
2003 |
|
|
|
980,269 |
|
|
|
1,581,750 |
|
|
|
230,968 |
|
|
|
597,520 |
|
|
|
102,000 |
|
|
|
|
0 |
|
|
|
41,747 |
|
|
|
|
|
2002 |
|
|
|
995,000 |
|
|
|
593,750 |
|
|
|
240,302 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
0 |
|
|
|
60,552 |
|
|
B. D. Hunter(6)
|
|
|
2004 |
|
|
|
623,077 |
|
|
|
311,280 |
|
|
|
24,525 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
0 |
|
|
|
27,783 |
|
|
Former Vice Chairman
|
|
|
2003 |
|
|
|
600,461 |
|
|
|
799,200 |
|
|
|
9,032 |
|
|
|
373,450 |
|
|
|
63,500 |
|
|
|
|
0 |
|
|
|
26,127 |
|
|
|
|
|
2002 |
|
|
|
645,000 |
|
|
|
300,000 |
|
|
|
19,933 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
0 |
|
|
|
11,220 |
|
|
Thomas L. Ryan
|
|
|
2004 |
|
|
|
541,440 |
|
|
|
272,370 |
|
|
|
23,651 |
|
|
|
587,664 |
|
|
|
177,000 |
|
|
|
|
0 |
|
|
|
14,058 |
|
|
President and Chief
|
|
|
2003 |
|
|
|
440,673 |
|
|
|
599,400 |
|
|
|
14,019 |
|
|
|
336,105 |
|
|
|
57,500 |
|
|
|
|
0 |
|
|
|
12,402 |
|
|
Executive Officer
|
|
|
2002 |
|
|
|
305,250 |
|
|
|
212,500 |
|
|
|
10,123 |
|
|
|
0 |
|
|
|
100,000 |
|
|
|
|
0 |
|
|
|
11,379 |
|
|
Michael R. Webb
|
|
|
2004 |
|
|
|
466,058 |
|
|
|
233,460 |
|
|
|
21,199 |
|
|
|
338,184 |
|
|
|
101,900 |
|
|
|
|
0 |
|
|
|
18,000 |
|
|
Executive Vice President
|
|
|
2003 |
|
|
|
416,153 |
|
|
|
566,100 |
|
|
|
25,900 |
|
|
|
271,600 |
|
|
|
46,000 |
|
|
|
|
0 |
|
|
|
15,925 |
|
|
and Chief Operating Officer
|
|
|
2002 |
|
|
|
316,500 |
|
|
|
200,000 |
|
|
|
12,457 |
|
|
|
0 |
|
|
|
100,000 |
|
|
|
|
0 |
|
|
|
15,527 |
|
|
Jeffrey E. Curtiss
|
|
|
2004 |
|
|
|
415,385 |
|
|
|
155,640 |
|
|
|
16,245 |
|
|
|
160,083 |
|
|
|
48,300 |
|
|
|
|
0 |
|
|
|
11,585 |
|
|
Senior Vice President
|
|
|
2003 |
|
|
|
392,308 |
|
|
|
466,200 |
|
|
|
14,343 |
|
|
|
149,380 |
|
|
|
25,500 |
|
|
|
|
0 |
|
|
|
10,456 |
|
|
Chief Financial Officer
|
|
|
2002 |
|
|
|
400,000 |
|
|
|
175,000 |
|
|
|
27,200 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
0 |
|
|
|
10,235 |
|
|
Treasurer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
Figures include executive perquisites and benefits, including,
for 2004, $24,562 for personal use of automobile and $24,000 for
tax and financial planning for Mr. R. L. Waltrip. For each
of the other Named Executive Officers, the aggregate of the
executives perquisites and benefits in 2004 did not exceed
the lesser of $50,000 or 10 percent of the total of the
executives annual salary and bonus. |
|
(2) |
Beginning in this Proxy Statement, we have changed our method
for presenting grants of restricted stock and stock options to
more timely present these types of compensation. As a result of
this change, awards of restricted stock and stock options set
forth in the table for 2004, 2003 and 2002 reflect awards
granted, respectively, in February 2005, February 2004 and
August 2002. The table does not show the following stock option
grants of February 2002 for 2001 performance:
Mr. Waltrip options for 1,000,000 shares,
Mr. Hunter options for 600,000 shares,
Mr. Ryan options for 100,000 shares,
Mr. Webb options for 100,000 shares, and
Mr. Curtiss options for 250,000 shares. |
|
(3) |
At December 31, 2004, the number and value of unvested
restricted stock holdings (including restricted stock awards
made in February 2005) of the listed executives were as follows:
Mr. R. L. Waltrip: 160,000 shares ($1,192,000);
Mr. Hunter 55,000 shares ($409,750); Mr. Ryan:
134,300 shares ($1,000,535); Mr. Webb:
88,800 shares ($661,560); and Mr. Curtiss:
45,100 shares ($335,995). Dividends paid on SCI common
stock will also be paid on restricted shares. The restricted
shares vest 1/3 on each anniversary of the grant date and will
vest 100% in the event of certain terminations or a change of
control (as defined in the Amended 1996 Incentive Plan).
Mr. Hunters 55,000 restricted shares vested 100% upon
his resignation on February 9, 2005. |
|
(4) |
Consists of the following for 2004: $410,026 for reimbursement
of life insurance premium and related taxes (as described in
Other Compensation below), $2,533 for term life
insurance and $16,200 for Company contributions to the
Companys 401(k) plan for Mr. R. L. Waltrip; $14,583
for term life insurance and $13,200 for Company contributions to
the Companys 401(k) plan for Mr. Hunter; $858 for
term life insurance and $13,200 for Company contributions to the
Companys 401(k) plan for Mr. Ryan; $1,800 for term
life insurance and $16,200 for Company contributions to the
Companys 401(k) plan for Mr. Webb; and $2,585 for
term life insurance and $9,000 for Company contributions to the
Companys 401(k) plan for Mr. Curtiss. |
20
|
|
(5) |
In 2004 and 2005, long-term incentives awarded by the Committee
included cash performance units as described on page 22
under the caption Long-Term Incentive Plan: Performance
Units. Any payout of such units will not occur until after
the respective three year performance periods end. |
|
(6) |
Mr. Hunter resigned as an officer and director of the
Company on February 9, 2005. See the last paragraph under
the subcaption Executive Employment Agreements below. |
Stock Options Granted
The following table sets forth stock options granted in February
2005 for 2004 performance and in February 2004 for 2003
performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total | |
|
|
|
|
|
|
|
|
|
|
Number of | |
|
Options | |
|
|
|
|
|
|
|
|
|
|
SCI Shares | |
|
Granted to | |
|
|
|
|
|
|
|
|
|
|
Underlying | |
|
Employees | |
|
|
|
|
|
Grant Date | |
|
|
|
|
Options | |
|
in Year | |
|
Price Per | |
|
Expiration | |
|
Present | |
Name |
|
Grant Date(1) | |
|
Granted(1) | |
|
of Grant | |
|
Share(2) | |
|
Date | |
|
Value(3) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
R. L. Waltrip
|
|
|
02/08/05 |
|
|
|
150,200 |
|
|
|
12.87 |
% |
|
$ |
6.900 |
|
|
|
02/08/13 |
|
|
$ |
620,626 |
|
|
|
|
02/10/04 |
|
|
|
102,000 |
|
|
|
15.49 |
% |
|
$ |
6.805 |
|
|
|
02/10/12 |
|
|
|
477,299 |
|
B.D. Hunter
|
|
|
02/10/04 |
|
|
|
63,500 |
|
|
|
9.64 |
% |
|
$ |
6.805 |
|
|
|
02/10/12 |
|
|
|
297,142 |
|
Thomas L. Ryan
|
|
|
02/08/05 |
|
|
|
177,000 |
|
|
|
15.16 |
% |
|
$ |
6.900 |
|
|
|
02/08/13 |
|
|
|
731,364 |
|
|
|
|
02/10/04 |
|
|
|
57,500 |
|
|
|
8.73 |
% |
|
$ |
6.805 |
|
|
|
02/10/12 |
|
|
|
269,066 |
|
Michael R. Webb
|
|
|
02/08/05 |
|
|
|
101,900 |
|
|
|
8.73 |
% |
|
$ |
6.900 |
|
|
|
02/08/13 |
|
|
|
421,051 |
|
|
|
|
02/10/04 |
|
|
|
46,000 |
|
|
|
6.98 |
% |
|
$ |
6.805 |
|
|
|
02/10/12 |
|
|
|
215,252 |
|
Jeffrey E. Curtiss
|
|
|
02/08/05 |
|
|
|
48,300 |
|
|
|
4.14 |
% |
|
$ |
6.900 |
|
|
|
02/08/13 |
|
|
|
199,576 |
|
|
|
|
02/10/04 |
|
|
|
25,500 |
|
|
|
3.87 |
% |
|
$ |
6.805 |
|
|
|
02/10/12 |
|
|
|
119,325 |
|
|
|
(1) |
The stock options vest one-third on each anniversary of the
grant date. Each option will also fully vest upon a change of
control of the Company (as defined in the Amended 1996 Incentive
Plan). |
|
(2) |
The exercise price for all grants is the market price at the
date of grant. |
|
(3) |
The present value of the options is based on a present value
model known as the Black-Scholes option pricing
model. The choice of such valuation method does not
reflect any belief by the Company that such a method, or any
other valuation method, can accurately assign a value to an
option at the grant date. The assumptions used for valuing the
2005 grants are: volatility rate of 63.68%; annual dividend
yield of 1.5%; turnover rate of 3%; and risk free interest rate
of 4.50%. The assumptions used for valuing the 2004 grants are:
volatility rate of 63.82%; annual dividend yield of 0%; turnover
rate of 3%; and risk free interest rate of 3.98%. |
Aggregated Option Exercises in Last Fiscal Year and
December 31, 2004 Option Values
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares | |
|
|
|
|
|
|
|
|
Underlying Unexercised | |
|
Value of Unexercised | |
|
|
Shares | |
|
|
|
Options at | |
|
In-The-Money Options at | |
|
|
Acquired | |
|
|
|
December 31, 2004 | |
|
December 31, 2004 | |
|
|
on | |
|
Value | |
|
| |
|
| |
Name |
|
Exercise | |
|
Realized | |
|
Exercisable | |
|
Unexercisable(1) | |
|
Exercisable | |
|
Unexercisable(1) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
R. L. Waltrip
|
|
|
0 |
|
|
|
NA |
|
|
|
8,485,169 |
|
|
|
585,534 |
|
|
$ |
9,180,625 |
|
|
$ |
896,559 |
|
B. D. Hunter(2)
|
|
|
0 |
|
|
|
NA |
|
|
|
2,400,000 |
|
|
|
263,500 |
|
|
|
6,836,220 |
|
|
|
496,878 |
|
Thomas L. Ryan
|
|
|
0 |
|
|
|
NA |
|
|
|
475,832 |
|
|
|
316,168 |
|
|
|
1,415,836 |
|
|
|
340,682 |
|
Michael R. Webb
|
|
|
0 |
|
|
|
NA |
|
|
|
526,832 |
|
|
|
234,568 |
|
|
|
1,415,836 |
|
|
|
298,888 |
|
Jeffrey E. Curtiss(3)
|
|
|
0 |
|
|
|
NA |
|
|
|
866,666 |
|
|
|
157,134 |
|
|
|
2,476,405 |
|
|
|
229,193 |
|
|
|
(1) |
Includes stock options granted in February 2005. |
|
(2) |
Mr. Hunters stock options vested 100% upon his
resignation on February 9, 2005. |
|
(3) |
The options reported above for Mr. Curtiss include an
option for 100,000 shares that Mr. Curtiss transferred
to trusts for the benefit of certain family members, of which
options Mr. Curtiss disclaims beneficial ownership. |
21
Long-Term Incentive Plan: Performance Units
The following table shows information regarding cash performance
units awarded the Named Executive Officers in February 2005 for
2004 performance, in February 2004 for 2003 performance and in
February 2003 for 2002 performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Future Payouts | |
|
|
|
|
|
|
Under Non-Stock Price Based Plan(2) | |
|
|
|
|
|
|
| |
|
|
Number of | |
|
|
|
Threshold | |
|
Target | |
|
Maximum | |
Name |
|
Units(1) | |
|
Performance Period | |
|
($) | |
|
($) | |
|
($) | |
|
|
| |
|
| |
|
| |
|
| |
|
| |
R. L. Waltrip
|
|
|
562,500 |
|
|
|
1/1/05-12/31/07 |
|
|
$ |
106,875 |
|
|
$ |
562,500 |
|
|
$ |
1,125,000 |
|
|
|
|
626,000 |
|
|
|
1/1/04-12/31/06 |
|
|
|
118,940 |
|
|
|
626,000 |
|
|
|
1,252,000 |
|
|
|
|
2,000,000 |
|
|
|
1/1/03-12/31/05 |
|
|
|
380,000 |
|
|
|
2,000,000 |
|
|
|
3,000,000 |
|
B. D. Hunter
|
|
|
391,500 |
|
|
|
1/1/04-12/31/06 |
|
|
|
74,385 |
|
|
|
391,500 |
|
|
|
783,000 |
|
|
|
|
1,000,000 |
|
|
|
1/1/03-12/31/05 |
|
|
|
190,000 |
|
|
|
1,000,000 |
|
|
|
2,000,000 |
|
Thomas L. Ryan
|
|
|
662,900 |
|
|
|
1/1/05-12/31/07 |
|
|
|
125,951 |
|
|
|
662,900 |
|
|
|
1,325,800 |
|
|
|
|
352,000 |
|
|
|
1/1/04-12/31/06 |
|
|
|
66,880 |
|
|
|
352,000 |
|
|
|
704,000 |
|
|
|
|
1,100,000 |
|
|
|
1/1/03-12/31/05 |
|
|
|
209,000 |
|
|
|
1,100,000 |
|
|
|
2,200,000 |
|
Michael R. Webb
|
|
|
381,700 |
|
|
|
1/1/05-12/31/07 |
|
|
|
72,523 |
|
|
|
381,700 |
|
|
|
763,400 |
|
|
|
|
283,500 |
|
|
|
1/1/04-12/31/06 |
|
|
|
53,865 |
|
|
|
283,500 |
|
|
|
567,000 |
|
|
|
|
900,000 |
|
|
|
1/1/03-12/31/05 |
|
|
|
171,000 |
|
|
|
900,000 |
|
|
|
1,800,000 |
|
Jeffrey E. Curtiss
|
|
|
180,800 |
|
|
|
1/1/05-12/31/07 |
|
|
|
34,352 |
|
|
|
180,800 |
|
|
|
361,600 |
|
|
|
|
156,500 |
|
|
|
1/1/04-12/31/06 |
|
|
|
29,735 |
|
|
|
156,500 |
|
|
|
313,000 |
|
|
|
|
500,000 |
|
|
|
1/1/03-12/31/05 |
|
|
|
95,000 |
|
|
|
500,000 |
|
|
|
1,000,000 |
|
|
|
(1) |
Each unit is valued at $1.00. |
|
(2) |
Actual payouts are a function of relative Total Shareholder
Return (TSR) of SCI compared to TSR of a comparison
group at the end of the three year period. The absolute TSR of
SCI must be greater than zero to trigger a payout. If a payout
is triggered, the minimum amount payable is set forth in the
threshold column. If TSR of SCI is less than 15%, the maximum
payout is target level. If TSR of SCI is greater than 15% but
less than 30% the maximum payout is 150% of target. If TSR of
SCI is 30% or greater the maximum award is 200% of target
provided that no individual payout may exceed $3 million. |
Retirement Plans
The SCI Cash Balance Plan is a defined benefit plan which was
amended effective January 1, 2001 such that the Company
would not make any further contributions under the plan after
2000. Each participant in the plan has an account which, until
December 31, 2000, was credited each year that a
participant qualified with a Company contribution (based on
annual compensation and years of benefit service) and interest.
Plan accounts continue to accrue interest and, for 2004,
interest for each account was credited at the annual rate of
2.31%.
|
|
|
Estimated Annual Benefits Payable at Age 65 |
|
|
|
|
|
Name |
|
Annual Benefit | |
|
|
| |
R. L. Waltrip
|
|
$ |
118,852 |
(1) |
B. D. Hunter
|
|
|
28,884 |
(1) |
Thomas L. Ryan
|
|
|
9,157 |
(2) |
Michael R. Webb
|
|
|
21,168 |
(2) |
Jeffrey E. Curtiss
|
|
|
0 |
|
22
|
|
(1) |
Currently being paid. |
|
(2) |
The estimated annual benefit amount assumes no contributions
being made to the plan after December 31, 2000 and assumes
interest being credited only until age 65. |
At retirement or termination, the participant may elect to
receive his or her vested benefit as a lump sum distribution, a
monthly payout or a rollover to an IRA or other tax qualified
plan. Normal Retirement Age is defined in the SCI Cash Balance
Plan as (1) the date upon which a member attains
age 65 or (2) in the case of an employee who becomes a
member of the SCI Cash Balance Plan after the age of 60, it will
be the fifth anniversary of the date that such member became a
participant.
|
|
|
Supplemental Executive Retirement Plan for Senior Officers |
In 2000, the Company amended the Supplemental Executive
Retirement Plan for Senior Officers (SERP for Senior
Officers) effective January 1, 2001. Under the
amendment, no additional benefits will accrue and no employees
shall become eligible to participate in the plan after 2000.
The SERP for Senior Officers is a non-qualified plan which
covers executive officers and certain regional operating
officers, including the Named Executive Officers. Benefits under
the SERP for Senior Officers do not consist of compensation
deferred at the election of participants. The amounts of
benefits under the plan were previously set by the Compensation
Committee from time to time. The Compensation Committee
previously set guidelines such that the annual benefits would
generally equal a percentage (75% for the CEO and lesser
percentages for the other officers) of a participants 1997
annual base salary and target bonus, with the benefits being
reduced to the extent of the participants benefits under
Social Security and the SCI Cash Balance Plan. The participant
will be entitled at age 60 to the annual payment of the
full amount of his benefit; if his employment terminates earlier
than age 60, he will be entitled to the annual payment of
the amount of his benefit multiplied by a fraction of which the
numerator is the participants years of service and the
denominator is the number of years from the participants
hire date until he reaches age 60.
Benefit payments will be made in the form of 180 monthly
installments commencing at the later of severance of employment
or the attainment of age 55. Prior to retirement, if a
participant dies or in the event of a change of control of the
Company (as defined in the SERP for Senior Officers), the
Company will promptly pay to each beneficiary or participant a
lump sum equal to the present value of the benefit that the
participant would have been entitled to receive if he had
continued to accrue benefit service from the date of death or
the date of the change of control to the date of his 65th
birthday. Participants may elect to begin receiving monthly
benefits at age 55, while still employed, provided the
participant gives written notice at least twelve months prior to
the attainment of age 55. Such installments will be reduced
for early commencement to reasonably reflect the time value of
money.
The table below sets forth benefits for the Named Executive
Officers.
Annual Benefits under SERP for Senior Officers
|
|
|
|
|
|
|
Estimated | |
|
|
Annual Benefit | |
|
|
at Age 60 | |
|
|
| |
R. L. Waltrip
|
|
$ |
1,110,773 |
(1) |
B. D. Hunter
|
|
|
0 |
|
Thomas L. Ryan
|
|
|
18,968 |
|
Michael R. Webb
|
|
|
42,725 |
|
Jeffrey E. Curtiss
|
|
|
22,977 |
|
|
|
(1) |
This is Mr. R. L. Waltrips actual benefit which,
pursuant to his election, is being paid in the form of monthly
installments since January 1, 1995. During 2003, the
Company prepaid to Mr. Waltrip the last 36 payments due to
him under the plan. |
23
The Compensation Committee is considering the addition of a
supplemental retirement and deferred compensation plan for the
Named Executive Officers and other officers for the purpose of
providing a more competitive compensation package to be used for
retention and recruitment of executive level talent. We
anticipate that the plan will include annual contributions by
the Company as well as allow for individual deferrals.
Executive Employment Agreements
|
|
|
Employment Agreement with the Chairman of the Board |
The Company has an executive employment agreement with
Mr. R. L. Waltrip which expires December 31, 2006. The
agreement provides for a base salary, which cannot be decreased
but may be increased by the Compensation Committee in its sole
discretion. As of March 22, 2005, the base salary for
Mr. R. L. Waltrip was $950,000. The terms of the agreement
also provide that Mr. R. L. Waltrip shall have the right to
participate in bonus and other compensation and benefit
arrangements.
In the event of termination of employment due to disability or
death, Mr. R. L. Waltrip or his estate will be entitled to
receive any accrued and unpaid salary or other compensation, a
pro rata portion (based on the portion of the year elapsed at
the date of termination) of the highest bonus he received in the
preceding three years and continuation of welfare plan benefits
for five years. If he is terminated without cause or he
voluntarily terminates for specified reasons generally relating
to a failure by the Company to honor the terms of the employment
agreement (Good Reason), he will be entitled to
continuation of compensation and certain other benefits for the
remaining term of his employment agreement. In the event of a
change of control of the Company (as defined in the agreement),
Mr. R. L. Waltrip will be entitled to terminate his
employment for Good Reason, or without any reason during the
30-day period beginning one year after the change of control
(the Window Period), and receive a lump-sum payment
equal to (a) any accrued and unpaid salary or other
compensation plus (b) a pro rata portion (based on the
portion of the year elapsed at the date of termination) of the
highest bonus he received in the preceding three years plus
(c) an amount equal to five times his base salary plus his
highest recent bonus; further, he will be entitled to
continuation of welfare plan benefits for the remaining term of
his employment agreement. Upon termination of Mr. R. L.
Waltrips employment, he will be subject to a 10 year
non-competition obligation; however, the Company will not be
required to make any further payments to Mr. Waltrip for
the non-competition obligation. If any payments under the
executive employment agreement or under the benefit plans of the
Company would subject Mr. R. L. Waltrip to any excise tax
under the Internal Revenue Code, he will also be entitled to
receive an additional payment in an amount such that, after the
payment of all taxes (income and excise), he will be in the same
after-tax position as if no excise tax had been imposed.
|
|
|
Other Named Executive Officers |
The Company also has employment agreements with
Messrs. Thomas L. Ryan, Michael R. Webb and Jeffrey E.
Curtiss. These agreements have current terms expiring
December 31, 2005. Annually, the Company may extend each
agreement for an additional year unless notice of nonrenewal is
given by either party. If such notice of nonrenewal is given by
the Company or if notice is not given of the Companys
decision to authorize renewal, the employment agreement will not
be extended.
These agreements provide for base salaries, which cannot be
decreased but may be increased by the Compensation Committee,
and the right to participate in bonus and other compensation and
benefit arrangements. As of March 22, 2005, the base
salaries for Messrs. Ryan, Webb and Curtiss were $800,000,
$575,000 and $400,000, respectively.
In the event of termination of employment due to disability or
death, the executive or his estate will be entitled to receive
(i) his salary through the end of his employment term, and
(ii) a pro rata portion (based on the portion of the year
elapsed at the date of termination) of the bonus the executive
would have received if he had remained an employee through his
employment term (Pro Rated Bonus). In the event of
termination by the Company without cause, the executive will be
entitled to receive two years salary, Pro Rated Bonus and
continuation of health benefits for two years. In the event of a
change of control of the Company (as defined in
24
the agreements), the executive will be entitled to terminate his
employment for certain specified reasons during the two years
following the change of control, and receive (i) a lump-sum
payment equal to three times the sum of his annual salary plus
his target bonus, (ii) a prorated target bonus, and
(iii) continuation of health benefits for three years. If
any payments under the employment agreement or under the benefit
plans of the Company would subject the executive to any excise
tax under the Internal Revenue Code, the executive will also be
entitled to receive an additional payment in an amount such
that, after the payment of all taxes (income and excise), he
will be in the same after-tax position as if no excise tax had
been imposed.
Upon termination of his employment, each executive will be
subject, at the Companys option, to a non-competition
obligation for a period of one year which the Company may extend
for one additional year. If the Company elects to have the
non-competition provisions apply, the Company will make payments
to the executive during the non-competition period at a rate
equal to his base salary at the time of termination, unless such
termination was for cause or the executive terminates his
employment (other than within twenty-four months after a change
of control for certain specified reasons), in which case the
executive will be bound by the non-competition provisions
without the Company making the corresponding payments.
At the date of his resignation as an officer and director on
February 9, 2005, Mr. B. D. Hunter had an employment
agreement containing the terms outlined above. In connection
with the resignation, Company subsidiaries, Mr. Hunter and
a company of which Mr. Hunter is a principal (the Hunter
company) agreed, among other things, that (i) his
employment agreement was terminated, (ii) his stock options
would continue in accordance with their terms, (iii) his
restricted stock grant became vested in accordance with its
terms, (iv) his units under the Companys 2003 and
2004 performance unit plans became vested on a pro rata basis in
accordance with their terms, and (v) he remained a
participant in the Company cash bonus incentive plan for 2004.
In addition, it was agreed, among other things, that the Hunter
company will provide Mr. Hunters consulting services
for a five year term during which the Hunter company will be
paid $91,667 per month during the first thirty-six months
and $50,000 per month during the remaining twenty-four
months. In the last twenty-four month period, Mr. Hunter is
not required to devote more that 20 hours per week
performing consulting services. The consulting period may be
extended up to three additional one-year periods at the option
of the Company. During the consulting period, Mr. Hunter
and the Hunter company are subject to non-competition
obligations. Mr. Hunter will be reimbursed for all
reasonable expenses in connection with his consulting services.
Other Compensation
Mr. R. L. Waltrip and certain other officers participate in
the Split Dollar Life Insurance Plan, under which they are
owners of life insurance policies. Mr. R. L. Waltrips
policy provides a death benefit of $2,000,000. In December of
2003, the Split Dollar Life Insurance policies of
Mr. Waltrip and certain other officers were changed to an
arrangement whereby the individuals now pay the premiums and the
Company provides a bonus to offset the premiums and related
taxes. As part of the conversion to the Company bonus plan, the
policies were restructured and allow the Company to receive its
interest in the policies (representing the cumulative premiums
paid by the Company prior to July 31, 2002).
Compensation of Directors
The compensation of directors is described under Election
of Directors Director Compensation herein
above.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
Board members who served on the Compensation Committee during
2004 were Messrs. Alan R. Buckwalter, III, Anthony L.
Coelho, James H. Greer, and John W. Mecom, Jr. No member of
the Compensation Committee in 2004 or at present was or is an
officer or employee of the Company or any of its subsidiaries,
or was formerly an officer of the Company or any of its
subsidiaries or had any relationships requiring disclosure by
the Company.
25
CERTAIN TRANSACTIONS
For 2004, SCI paid $132,435 in compensation to Mr. Kevin
Mack in his capacity as an employee of the Company.
Mr. Mack is the brother of Mr. Stephen M. Mack, Senior
Vice President Middle Market Operations of the Company.
For 2004, SCI paid $151,954 in compensation to Mr. David
Warren in his capacity as an employee of the Company.
Mr. Warren is the stepson of Dr. Edward E. Williams, a
director of the Company.
At the date of his resignation as Executive Vice President of
the Company on January 18, 2000, Mr. W. Blair Waltrip
had a three year employment agreement with the Company. In
connection with the resignation, SCI modified Mr. W. Blair
Waltrips employment agreement and agreed to provide
Mr. W. Blair Waltrip, among other things, continuation of
his Company stock options in accordance with their terms. In
connection with the modification of the employment agreement,
the Company elected to enforce Mr. W. Blair Waltrips
post-employment non-competition obligations for the period from
January 1, 2003 until December 31, 2005, during which
the Company has and will make non-competition payments of
$475,000 per year. Pursuant to the foregoing, the Company
paid for or to Mr. W. Blair Waltrip $475,000 for 2004.
Additionally, Mr. W. Blair Waltrip receives remuneration as
a director of the Company.
In 1996, the family of Mr. Sumner James Waring, III,
Vice President Major Market Operations, sold its business to
SCI. In the transaction, Mr. Warings father entered a
noncompetition agreement under which the Company pays him
$100,000 per year for ten years. Mr. Warings
father also has a Consulting Agreement expiring in 2005 under
which the Company paid him fees (and an automobile allowance) of
$88,500 for 2004. In addition, Mr. Warings father and
mother own a company that leases an office building to SCI under
a lease expiring in 2005 and providing for rent of $63,600 in
2004 and $65,400 in 2005. Mr. Warings father and
mother also own a company that leases funeral homes to SCI under
a lease expiring in 2016, for which the Company paid rent of
$200,000 in 2004. In August 2004, Mr. Waring relocated from
California to Houston at the Companys request, and the
Company reimbursed him $27,799 for relocation expenses.
Barrow, Hanley, Mewhinney & Strauss, Inc.
(BHMS) is a holder of more than 5% of the
outstanding shares of Common Stock of the Company. During 2004,
BHMS was one of the investment managers of portfolios of
independent trusts which hold funds collected from consumers in
connection with preneed funeral sales and preneed cemetery
sales. The process by which such portfolio managers are chosen
and overseen is outlined above under the section entitled
Board of Directors Board
Committees Investment Committee. During 2004,
BHMS managed on average approximately $97,263,000 for such
trusts and was managing approximately $100,907,000 at the end of
2004. Such trusts are prohibited from investing in SCI stock or
other SCI securities. For such services, the trusts paid fees of
$319,519 to BHMS for 2004. It is expected that BHMS will
continue to act as an investment manager for such trusts during
2005.
Marsh & McLennan Companies, Inc. (MMC) is a
holder of more than 5% of the outstanding shares of Common Stock
of the Company. In 2004, Marsh Inc., a subsidiary of MMC, acted
as agent for the Company in its purchase of (i) aviation
insurance at a gross premium of $160,480, from which MMC
received a commission of $24,072, and (ii) surety bonds
relating to preneed sales in the Companys funeral home and
cemetery businesses for a gross premium of $45,524, from which
MMC received a commission of $1,592. Further in 2004, the
Company paid $34,060 to a subsidiary of MMC for quality
assurance software and support. In addition, Mercer Delta,
another subsidiary of MMC, provided consulting services to SCI
and to the Companys Board of Directors on various
corporate governance initiatives for which MMC received
consulting fees of $41,032 in 2004. It is expected that MMC
subsidiaries will continue to provide services in 2004.
26
VOTING SECURITIES AND PRINCIPAL HOLDERS
The table below sets forth information with respect to any
person who is known to the Company as of March 22, 2005 to
be the beneficial owner of more than five percent of the
Companys Common Stock.
|
|
|
|
|
|
|
|
|
|
|
|
Amount | |
|
|
Name and Address |
|
Beneficially | |
|
Percent | |
of Beneficial Owner |
|
Owned | |
|
of Class | |
|
|
| |
|
| |
Barrow, Hanley, Mewhinney & Strauss, Inc.
|
|
|
31,954,200 |
(1) |
|
|
10.3 |
% |
|
One McKinney Plaza
|
|
|
|
|
|
|
|
|
|
3232 McKinney Avenue, 15th Floor
|
|
|
|
|
|
|
|
|
|
Dallas, Texas 75204-2429
|
|
|
|
|
|
|
|
|
|
Brandes Investment Partners LP, Brandes Investment Partners,
Inc.,
|
|
|
|
|
|
|
|
|
|
Brandes Worldwide Holdings, L.P., Charles H. Brandes, Glenn R.
Carlson and
|
|
|
|
|
|
|
|
|
|
Jeffrey A. Busby
|
|
|
24,724,393 |
(2) |
|
|
8.0 |
% |
|
11988 El Camino Real, Suite 500
|
|
|
|
|
|
|
|
|
|
San Diego, California 92130
|
|
|
|
|
|
|
|
|
|
Putnam, LLC., Marsh & McLennan Companies, Inc., Putnam
Investment
|
|
|
|
|
|
|
|
|
|
Management, LLC and The Putnam Advisory Company, LLC
|
|
|
25,802,074 |
(3) |
|
|
8.3 |
% |
|
One Post Office Square
|
|
|
|
|
|
|
|
|
|
Boston, Massachusetts 02109
|
|
|
|
|
|
|
|
|
|
Vanguard Windsor Funds Vanguard Windsor II
(Windsor)
|
|
|
26,080,100 |
(4) |
|
|
8.4 |
% |
|
100 Vanguard Blvd
|
|
|
|
|
|
|
|
|
|
Malvern, Pennsylvania 19355
|
|
|
|
|
|
|
|
|
|
|
(1) |
Based on a filing made by Barrow, Hanley, Mewhinney &
Strauss, Inc. on February 8, 2005, which reported sole
voting power for 78,800 shares, shared voting power for
31,875,400 shares, sole investment power for
31,954,200 shares and shared investment power for no
shares. BHMS has informed the Company that the shares reported
in the table as beneficially owned by BHMS include all
26,080,100 shares reported in the table as beneficially
owned by Windsor, for whom BHMS is an investment manager. |
|
(2) |
Based on a filing made by the named companies and persons on
February 14, 2005, which reported sole voting power for no
shares, shared voting power for 17,703,310 shares, sole
investment power for no shares and shared investment power for
24,724,393 shares. |
|
(3) |
Based on filings made by the named companies on
February 11, 2005, which reported sole voting power for no
shares, shared voting power for 842,371 shares, sole
investment power for no shares and shared investment power for
25,802,074 shares. |
|
(4) |
Based on a filing made by Vanguard Windsor Funds
Vanguard Windsor II on February 10, 2005, which
reported sole voting power for 26,080,100 shares, shared
voting power for no shares, sole investment power for no shares
and shared investment power for 26,080,100 shares. BHMS has
informed the Company that the shares reported in the table as
beneficially owned by BHMS include all 26,080,100 shares
reported in the table as beneficially owned by Windsor, for whom
BHMS is an investment manager. |
The table below sets forth, as of March 22, 2005, the
amount of the Companys Common Stock beneficially owned by
each Named Executive Officer (except for Mr. B. D. Hunter
who resigned February 9, 2005), each director and nominee
for director, and all directors and executive officers as a
group, based upon information
27
obtained from such persons. Securities reported as beneficially
owned include those for which the persons listed have sole
voting and investment power, unless otherwise noted.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Right to Acquire Ownership | |
|
|
|
|
Shares | |
|
Under Options Exercisable | |
|
Percent | |
Name of Individual or Group |
|
Owned(1) | |
|
Within 60 Days | |
|
of Class | |
|
|
| |
|
| |
|
| |
R. L. Waltrip
|
|
|
1,651,681 |
(1) |
|
|
8,487,003 |
|
|
|
3.1 |
% |
Thomas L. Ryan
|
|
|
199,765 |
|
|
|
543,332 |
|
|
|
* |
|
Michael R. Webb
|
|
|
184,685 |
|
|
|
589,499 |
|
|
|
* |
|
Jeffrey E. Curtiss
|
|
|
167,446 |
(2) |
|
|
958,500 |
(2) |
|
|
* |
|
Alan R. Buckwalter
|
|
|
35,743 |
(3) |
|
|
|
|
|
|
* |
|
Anthony L. Coelho
|
|
|
82,797 |
|
|
|
|
|
|
|
* |
|
Jack Finkelstein
|
|
|
258,974 |
(4) |
|
|
|
|
|
|
* |
|
A. J. Foyt, Jr.
|
|
|
119,684 |
(5) |
|
|
|
|
|
|
* |
|
S. Malcolm Gillis
|
|
|
9,798 |
|
|
|
|
|
|
|
* |
|
James H. Greer
|
|
|
113,070 |
|
|
|
|
|
|
|
* |
|
Victor L. Lund
|
|
|
60,599 |
|
|
|
|
|
|
|
* |
|
John W. Mecom, Jr.
|
|
|
50,255 |
|
|
|
|
|
|
|
* |
|
Clifton H. Morris, Jr.
|
|
|
94,283 |
(6) |
|
|
|
|
|
|
* |
|
W. Blair Waltrip
|
|
|
2,116,258 |
(7) |
|
|
410,000 |
|
|
|
* |
|
Edward E. Williams
|
|
|
220,415 |
|
|
|
|
|
|
|
* |
|
Executive Officers and Directors as a Group (23 persons)
|
|
|
5,676,230 |
|
|
|
15,321,867 |
|
|
|
6.5 |
% |
|
|
(1) |
Includes 468,384 shares held in trusts under which
Mr. R. L. Waltrips three children, as trustees, share
voting and investment powers; Mr. R.L. Waltrip disclaims
beneficial ownership of such shares. These shares are also
included in the shares owned by Mr. W. Blair Waltrip. See
Footnote (6). Also includes 530,133 shares held by trusts
of which Mr. R. L. Waltrip is the trustee having sole
voting and investment powers. |
|
(2) |
Shares Owned include 10,000 shares held in a
revocable trust of which Mr. Curtiss is trustee and
94,312 shares held by a family limited partnership. Options
include exercisable options for 100,000 shares held in
trust for the benefit of certain family members.
Mr. Curtiss disclaims beneficial ownership of the shares
and options held in trust. |
|
(3) |
Includes 1,500 shares held by Mr. Buckwalter as
custodian for family members. Mr. Buckwalter has sole
voting and investment power for such shares and disclaims
beneficial ownership of such shares. |
|
(4) |
Includes 244,105 shares held in trusts for the benefit of
other family members and/or himself. As trustee,
Mr. Finkelstein has sole voting and investment power with
respect to 153,571 shares and shared voting and investment
power with respect to 90,534 shares. Mr. Finkelstein
disclaims beneficial ownership as to 90,534 shares held in
such trusts. |
|
(5) |
Includes 17,885 shares held by Mr. Foyt as custodian
for family members. Mr. Foyt has sole voting and investment
power for such shares and disclaims beneficial ownership of such
shares. Also includes 200 shares owned by
Mr. Foyts wife. |
|
(6) |
Includes 4,034 shares owned by Mr. Morris wife.
Mr. Morris disclaims beneficial ownership of such shares. |
|
(7) |
Includes 152,204 shares held in a trust for the benefit of
Mr. W. Blair Waltrip, 1,072,224 shares held in trusts
under which Mr. W. Blair Waltrip, his brother and his
sister are trustees and have shared voting and investment power
and for which Mr. W. Blair Waltrip disclaims 2/3 beneficial
ownership. Also includes 105,357 shares held by other
family members or trusts, of which shares Mr. W. Blair
Waltrip disclaims beneficial ownership. Of the shares
attributable to the trusts, 468,384 shares are also
included in the shares owned by Mr. R. L. Waltrip. See
Footnote (1). Also includes 90,000 shares held by a
charitable foundation of which Mr. Waltrip is President. |
28
REPORT OF THE AUDIT COMMITTEE
The primary purpose of the Audit Committee is to assist the
Board of Directors in fulfilling its oversight responsibilities
to ensure the integrity of the Companys financial
statements, the Companys compliance with legal and
regulatory requirements, the independent accountants
qualifications, independence and performance and the performance
of the Companys internal audit functions. The Audit
Committees functions are detailed in the section entitled
Board of Directors Board
Committees Audit Committee above. The Audit
Committee Charter is available for viewing on the SCIs
home page, www.sci-corp.com, and is also available in print to
any shareholder who requests it.
Each member of the Audit Committee is independent and
financially literate, as defined by the New York Stock Exchange
rules, and is limited to serving on no more than three audit
committees. The Board of Directors has appointed, and the Audit
Committee has acknowledged, Mr. Victor L. Lund, Chairman of
the Audit Committee, as the Audit Committee Financial Expert as
defined by the rules of the Securities and Exchange Commission.
The Audit Committee has reviewed and discussed the audited
financial statements with management of the Company and with the
independent accountants. Specifically, the Committee has
discussed with the independent accountants the matters required
to be discussed by SAS 61 (Codification of Statements on
Auditing Standards), as modified or supplemented. The Committee
received a written disclosure letter from the Companys
independent accountants as required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit
Committees), as modified and supplemented. The Committee has
also reviewed the independence of the independent accountants
considering the compatibility of non-audit services with
maintaining their independence from the Company. Based on the
preceding review and discussions contained in this paragraph,
the Committee recommended to the Board of Directors that the
audited financial statements be included in the Companys
Annual Report on Form 10-K for the 2004 fiscal year
for filing with the Securities and Exchange Commission.
AUDIT COMMITTEE:
Victor L. Lund, Chair
Alan R. Buckwalter, III
Jack Finkelstein
S. Malcolm Gillis
Edward E. Williams
PROPOSAL TO APPROVE THE SELECTION OF INDEPENDENT
ACCOUNTANTS
The Audit Committee of the Board of Directors of the Company has
recommended PricewaterhouseCoopers LLP
(PricewaterhouseCoopers) to serve as the independent
accountants for the Company for the fiscal year ending
December 31, 2005. PricewaterhouseCoopers and its
predecessors have audited the Companys accounts since
1993. A representative of PricewaterhouseCoopers is expected to
be present at the Annual Meeting of Shareholders, will have the
opportunity to make a statement if he or she desires to do so
and will be available to respond to appropriate questions at
such meeting. The Audit Committee wishes to submit the selection
of PricewaterhouseCoopers for shareholders approval at the
Annual Meeting. If the shareholders do not give approval, the
Audit Committee will reconsider its selection.
Audit Fees and All Other Fees
The Audit Committee has adopted a policy that requires advance
approval of all audit, audit-related, tax services, and other
services performed by the independent auditor. The policy
permits the Audit Committee to grant pre-approval for
specifically defined audit and non-audit services.
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Fees for audit services totaled $6,651,942 in 2004 and
$2,663,622 in 2003, including fees associated with the annual
audit and for compliance with Section 404 of the
Sarbanes-Oxley Act, the reviews of the Companys quarterly
reports on Form 10-Q, and statutory audits required
internationally.
Fees for audit related services totaled $-0- in 2004 and
$2,264,160 in 2003. Audit related services in 2003 were related
to due diligence performed in connection with the disposition of
international operations.
Fees for tax services, including tax compliance, tax advice and
tax planning, totaled $207,450 in 2004 and $197,133 in 2003.
Fees for tax services in both years were primarily related to
compliance work in the Companys international operations.
Fees for all other services not described above totaled
approximately $2,800 in 2004 and $806,577 in 2003. The 2004
amount was a licensing fee for a research data base, and the
fees paid in 2003 were related to restructuring advice for the
Companys international operations.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE
FOR APPROVAL OF THE SELECTION OF
PRICEWATERHOUSECOOPERS LLP AS THE INDEPENDENT ACCOUNTANTS OF THE
COMPANY.
OTHER MATTERS
Section 16(a) Beneficial Ownership Reporting
Compliance
Based solely upon a review of Forms 3 and 4 and amendments
thereto furnished to the Company during its most recent fiscal
year and Forms 5 and amendments thereto furnished to the
Company with respect to its most recent fiscal year, and written
representations from reporting persons that no Form 5 was
required, the Company believes that all required Form 3, 4
and 5 reports for transactions occurring in 2004 were timely
filed, except that Mr. James M. Shelger, Senior Vice
President General Counsel, filed late one Form 4 in 2004
reporting one transaction in 2004.
Proxy Solicitation
In addition to solicitation by mail, further solicitation of
proxies may be made by mail, facsimile, telephone, telegraph or
oral communication following the original solicitation by
directors, officers and regular employees of the Company who
will not be additionally compensated therefor, or by its
transfer agent. The expense of such solicitation will be borne
by the Company and will include reimbursement paid to brokerage
firms and other custodians, nominees and fiduciaries for their
expenses in forwarding solicitation material regarding the
Annual Meeting to beneficial owners. In addition, the Company
has retained Georgeson Shareholder Communications Inc. to aid in
the solicitation of proxies from shareholders generally in
connection with the Annual Meeting of Shareholders. Such
solicitations may be by mail, facsimile, telephone, telegraph or
personal interview. The fee of such firm is not expected to
exceed $12,000 plus reimbursement for reasonable expenses.
Other Business
The Board of Directors of the Company is not aware of other
matters to be presented for action at the Annual Meeting of
Shareholders; however, if any such matters are properly
presented for action, it is the intention of the persons named
in the enclosed form of proxy to vote in accordance with their
judgment.
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Submission of Shareholder Proposals
Any proposal to be presented by a shareholder at the
Companys 2006 Annual Meeting of Shareholders scheduled to
be held on May 11, 2006 must be received by the Company by
December 19, 2005, so that it may be considered by the
Company for inclusion in its proxy statement relating to that
meeting.
Pursuant to the Companys Bylaws, any holder of Common
Stock of the Company desiring to bring business before the
Companys 2006 Annual Meeting of Shareholders scheduled to
be held on May 11, 2006 in a form other than a shareholder
proposal in accordance with the preceding paragraph must give
advance written notice in accordance with the Bylaws that is
received by the Company, addressed to the Secretary, no earlier
than January 11, 2006 and no later than January 31,
2006. Any notice pursuant to this or the preceding paragraph
should be addressed to the Secretary of the Company, 1929 Allen
Parkway, P.O. Box 130548, Houston, Texas 77219-0548.
To avoid unnecessary expense, please return your proxy
regardless of the number of shares that you own. Simply date,
sign and return the enclosed proxy in the enclosed business
reply envelope. Thank you.
Service Corporation International
1929 Allen Parkway
P.O. Box 130548
Houston, Texas 77219-0548
April 18, 2005
31
Service Corporation International
1929 Allen Parkway
P.O. Box 130548
Houston, Texas 77219-0548
ò DETACH PROXY CARD HERE ò
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Please mark, sign, date and |
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return this proxy promptly
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x |
using the enclosed envelope.
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Votes MUST be indicated |
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(x) in Black or Blue ink. |
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1.
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ELECTION OF DIRECTORS. (The Board recommends a vote FOR all of the nominees).
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FOR
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AGAINST
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ABSTAIN |
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FOR
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WITHHOLD FOR ALL |
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*EXCEPTIONS
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Approval of the selection of
PricewaterhouseCoopers LLP as the
Companys independent accountants |
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for fiscal 2005. (The Board
recommends |
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Nominees:
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Thomas L. Ryan, S. Malcolm Gillis, |
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vote FOR this proposal). |
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Clifton H. Morris, Jr. and W. Blair Waltrip. |
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(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the
Exceptions box and write that nominees name in the space provided below.)
*Exceptions:
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To change your address, please mark
this box. |
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The undersigned acknowledges receipt of the Notice of Annual Meeting of Shareholders and of the
Proxy Statement
Please sign exactly as the name appears hereon. Joint
owners should each sign personally. Where applicable,
indicate your official position or representation
capacity. |
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Date
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Share Owner sign here
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Co-Owner sign here |
SERVICE CORPORATION INTERNATIONAL
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
For The Annual Meeting
of Stockholders May 12, 2005
The undersigned hereby
appoints Robert L. Waltrip, Jeffrey E. Curtiss and James M. Shelger, and
each or any of them as attorneys, agents and proxies of the undersigned with full power of
substitution, for and in the name, place and stead of the undersigned, to attend the annual meeting
of shareholders of Service Corporation International (the Company) to be held in the Newmark
Group Auditorium, American Funeral Service Training Center, 415 Barren Springs Drive, Houston,
Texas 77090 on Thursday, May 12, 2005, at 10:00 a.m., Houston time, and any adjournment(s) thereof,
and to vote thereat the number of shares of Common Stock of the Company which the undersigned would
be entitled to vote if personally present as indicated below and on the reverse side hereof and, in
their discretion, upon any other business which may properly come before said meeting. This Proxy
when properly executed will be voted in accordance with your indicated directions. If no direction
is made, this proxy will be voted FOR the election of directors and FOR approval of the selection
of PricewaterhouseCoopers LLP as the Companys independent accountants.
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PLEASE VOTE, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. |
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SERVICE CORPORATION INTERNATIONAL
P.O. BOX 11270
NEW YORK, N.Y. 10203-0270 |
(Continued and to be dated and signed on the reverse side.)