OMB APPROVAL | ||||
OMB Number: | 3235-0059 | |||
Expires: | January 31, 2008 | |||
Estimated average burden hours per response | 14.75 |
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. )
Filed by the Registrant þ | |
Filed by a Party other than the Registrant o | |
Check the appropriate box: |
o Preliminary Proxy Statement | |
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) | |
þ Definitive Proxy Statement | |
o Definitive Additional Materials | |
o Soliciting Material Pursuant to §240.14a-12 |
Payment of Filing Fee (Check the appropriate box):
þ No fee required. | |
o Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. |
1) Title of each class of securities to which transaction applies: |
2) Aggregate number of securities to which transaction applies: |
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): |
4) Proposed maximum aggregate value of transaction: |
5) Total fee paid: |
o Fee paid previously with preliminary materials. |
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. |
1) Amount Previously Paid: |
2) Form, Schedule or Registration Statement No.: |
3) Filing Party: |
4) Date Filed: |
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. |
Houston, Texas 77219-0548 | April 17, 2006 |
1. | To elect four nominees to the Board of Directors (the “Board”). | |
2. | To approve the appointment of PricewaterhouseCoopers LLP as SCI’s independent registered public accounting firm for the 2006 fiscal year. | |
3. | To consider and act on a proposal to approve the Amended and Restated Director Fee Plan. | |
4. | To transact such other business that may properly come before the meeting. |
• | Election of four nominees to the Board of Directors. | |
• | Approval of PricewaterhouseCoopers LLP as SCI’s independent registered public accounting firm for the 2006 fiscal year. | |
• | Approval of the Amended and Restated Director Fee Plan. |
• | 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”. | |
• | FOR approval of PricewaterhouseCoopers LLP as SCI’s independent registered public accounting firm (the “independent accountants”) for the 2006 fiscal year. | |
• | FOR approval of the Amended and Restated Director Fee Plan. |
1
• | Bylaws of SCI | |
• | Charters of the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee |
2
• | Corporate Governance Guidelines | |
• | Principles of Conduct and Ethics for the Board of Directors | |
• | Code of Conduct and Ethics for Officers and Employees |
3
R. L. Waltrip Age: 75 Director Since: 1962 Term Expires: 2009 Mr. Waltrip is the founder and Chairman of the Board of SCI. He has provided invaluable leadership to the Company for over 40 years. A licensed funeral director, Mr. Waltrip grew up in his family’s funeral business and assumed management of the firm in the 1950s. He began buying additional funeral homes in the 1960s and achieved significant cost efficiencies through the “cluster” strategy of sharing pooled resources among numerous locations. At the end of 2005, the network he began had grown to include more than 1,400 funeral service locations and cemeteries. Mr. Waltrip took SCI public in 1969. Mr. Waltrip holds a bachelor’s degree in business administration from the University of Houston. SCI Common Shares Beneficially Owned(1): 8,655,315(2) Other Directorships Currently Held: None |
Anthony L. Coelho Age: 63 Director Since: 1991 Term Expires: 2009 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 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 President’s Committee on Employment of People with Disabilities from 1994 to 2001. He is currently serving as Chairman of the Board of the Epilepsy Foundation. SCI Common Shares Beneficially Owned(1): 91,617 Other Directorships Currently Held: Cyberonics, Inc. and Warren Resources, Inc. | ||
4
A.J. Foyt, Jr. Age: 71 Director Since: 1974 Term Expires: 2009 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): 129,628 Other Directorships Currently Held: None |
Edward E. Williams Age: 60 Director Since: 1991 Term Expires: 2009 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. 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): 229,222 Other Directorships Currently Held: None | ||
5
Thomas L. Ryan Age: 40 Director Since: 2004 Term Expires: 2008 Mr. Ryan was elected Chief Executive Officer of Service Corporation International in February 2005 and has served as President of SCI since July 2002. Mr. Ryan joined the Company in 1996 and served in a variety of financial management roles until November 2000, when he was asked to serve as Chief Executive Officer of European Operations. In July 2002, Mr. Ryan was appointed Chief Operating Officer of SCI, a position he held until February 2005. Before joining SCI, Mr. Ryan was a certified public accountant with Coopers & Lybrand LLP for eight years. He holds a bachelor’s degree in business administration from the University of Texas at Austin. Mr. Ryan is a member of the Young Presidents’ Organization and serves on the Board of Trustees of the Texas Gulf Coast United Way. SCI Common Shares Beneficially Owned(1): 936,521(2) Other Directorships Currently Held: None |
Alan R. Buckwalter, III Age: 59 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. Luke’s Episcopal Health System and Baylor College of Medicine. SCI Common Shares Beneficially Owned(1): 46,987 Other Directorships Currently Held: Plains Exploration and Production Company | ||
6
Malcolm Gillis Age: 65 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 taught at Harvard and Duke Universities and has held named professorships at Duke and Rice Universities. He 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 Bachelor’s and Master’s degrees from the University of Florida and a Doctorate from the University of Illinois. SCI Common Shares Beneficially Owned(1): 19,958 Other Directorships Currently Held: Electronic Data Systems Corp., Halliburton Co. and Introgen Therapeutics, Inc. |
Victor L. Lund Age: 58 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): 71,111 Other Directorships Currently Held: Borders Group Inc., Del Monte Foods Company and NCR Corporation |
John W. Mecom, Jr. Age: 66 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 Gardiner’s 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): 60,199 Other Directorships Currently Held: None | ||
7
Clifton H. Morris, Jr. Age: 70 Director Since: 1990 Term Expires: 2008 Mr. Morris has been Chairman of AmeriCredit Corp. (financing of automotive vehicles) since May 1988, 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 43 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 Company’s 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): 104,227 Other Directorships Currently Held: AmeriCredit Corp. |
W. Blair Waltrip Age: 51 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 SCI’s 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. Waltrip’s 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 SCI’s founder, R. L. Waltrip. SCI Common Shares Beneficially Owned(1): 2,536,202(2) Other Directorships Currently Held: Sanders Morris Harris Group Inc. | ||
8
Consideration of Director Nominees |
• | the prospective nominee’s integrity, character and accountability; | |
• | the prospective nominee’s ability to provide wise and thoughtful counsel on a broad range of issues; | |
• | the prospective nominee’s financial literacy and ability to read and understand financial statements and other indices of financial performance; | |
• | the prospective nominee’s ability to work effectively as part of a team with mature confidence; | |
• | the prospective nominee’s ability to provide counsel to management in developing creative solutions and in identifying innovative opportunities; and | |
• | the commitment of the prospective nominee to prepare for and attend meetings and to be accessible to management and other directors. |
9
Director Independence |
“3.1 Board Independence | |
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. |
The Nominating and Corporate Governance Committee of SCI will review the independence of SCI’s 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.” |
Name of Committee | ||
and Members | Functions of the Committee | |
Audit Committee Victor L. Lund (Chair) Alan R. Buckwalter, III Malcolm Gillis Edward E. Williams Meetings In 2005 Sixteen | • Assists the Board of Directors in fulfilling its oversight responsibilities to ensure the integrity of the Company’s financial statements, the Company’s compliance with legal and regulatory requirements, the independent accountant’s qualifications, independence and performance and the performance of the Company’s internal audit function. • Reviews the annual audited financial statements with SCI management and the independent accountants, including items noted under “Management’s 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. | |
• Reviews SCI’s 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. |
10
Name of Committee | ||
and Members | Functions of the Committee | |
Audit Committee (Cont’d) | • Reviews with management and the independent accountants the effect of any major changes to SCI’s accounting principles and practices, as well as the impact of any regulatory and accounting initiatives on SCI’s financial statements. | |
• Oversees and reviews the performance and effectiveness of SCI’s internal audit function. | ||
• 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. | ||
• Meets regularly with the independent accountants without SCI management present. Reviews with the independent accountants any audit problems or difficulties and management’s responses to address these issues. | ||
• Meets with SCI management at least quarterly to review any matters the Audit Committee believes should be discussed. | ||
• Meets with SCI management and the independent accountants to review SCI’s significant financial risks and steps management has taken to monitor and control such exposures. | ||
• Reviews with the Company’s legal counsel any legal matters that could have a significant impact on the Company’s financial statements. | ||
• Reviews and discusses summary reports from SCI’s 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. | ||
• In accordance with Section 404 of the Sarbanes-Oxley Act of 2002, the Audit Committee also reviews reports relative to the effectiveness of SCI’s internal control over financial reporting, including obtaining and reviewing a report by the independent accountants regarding management’s assertions on the effectiveness of SCI’s internal control over financial reporting. The Audit Committee reviews any material issues raised by the most recent assessment of the effectiveness of SCI’s 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. | ||
11
Name of Committee | ||
and Members | Functions of the Committee | |
Nominating and Corporate Governance Committee Clifton H. Morris, Jr. (Chair) Alan R. Buckwalter, III Victor L. Lund John W. Mecom, Jr. Edward E. Williams | • 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 Company’s bylaws. • Makes recommendations to the Board with respect to the nomination of candidates for Board membership and committee assignments for Board members, including the chairmanships of the Board committees. | |
Meetings In 2005 | ||
Four | • 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. | |
• 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. | ||
• 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. | ||
• With outside assistance, when needed, makes recommendations to the full Board with respect to compensation for Board members. | ||
• Oversees the development of orientation programs for new Board members in conjunction with SCI’s Chairman. | ||
• 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. | ||
• Oversees and implements the annual process for assessment of the performance of SCI’s 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. | ||
• Oversees and implements the individual peer review process for assessment of the performance of individual members of the Board. | ||
• The Committee Chair presides at executive sessions of non-management directors held during every SCI Board meeting. | ||
12
Name of Committee | ||
and Members | Functions of the Committee | |
Investment Committee Edward E. Williams (Chair) Anthony L. Coelho S. Malcolm Gillis John W. Mecom, Jr. W. Blair Waltrip Meetings In 2005 Four | • Assists the Board of Directors in fulfilling its responsibility to oversee the management of the Company’s investment in securities and alternative investments. These include investments for the Company’s own account as well as 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 state’s jurisdiction. • Establishes guidelines and policies for the management of investments. | |
• 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. | ||
• 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 investments. The Investment Committee’s policies are implemented through the Investment Operating Committee of SCI. | ||
• 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 investment managers; and makes recommendations to the Investment Operating Committee and Trustees relative to the engagement of 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. | ||
• 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. | ||
• Oversees all of the Company’s outstanding preneed funeral insurance, including the review of insurance companies underwriting preneed insurance plans offered by the Company. | ||
13
Name of Committee | ||
and Members | Functions of the Committee | |
Compensation Committee Alan R. Buckwalter, III (Chair) Anthony L. Coelho Malcolm Gillis John W. Mecom, Jr. Meetings In 2005 Four | • Oversees the compensation program for SCI’s 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. | |
• 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. | ||
• Presents recommendations to the Board with respect to any executive employment contracts for SCI’s officers, including the Chairman and the CEO. | ||
• 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. | ||
• Determines and adjusts SCI stock ownership guidelines for officers, including the review at least annually of officer compliance with such guidelines. | ||
Executive Committee Robert L. Waltrip (Chair) Alan R. Buckwalter, III Victor L. Lund Clifton H. Morris, Jr. Thomas L. Ryan | • 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. | |
Meetings In 2005 None | ||
14
Annual Retainer |
Meeting Fees |
Directors’ Retirement Plan |
Use of Company Aircraft |
15
12/31 | 12/31 | 12/31 | 12/31 | 12/31 | 12/31 | |||||||||||||||||||
2000 | 2001 | 2002 | 2003 | 2004 | 2005 | |||||||||||||||||||
SCI | 100.00 | 285.14 | 189.71 | 308.00 | 425.71 | 471.85 | ||||||||||||||||||
S&P 500 Index | 100.00 | 88.11 | 68.64 | 88.33 | 97.94 | 102.75 | ||||||||||||||||||
Peer Group Index | 100.00 | 125.90 | 105.44 | 136.66 | 140.00 | 132.73 |
16
• | align pay with performance; and | |
• | attract, motivate, reward and retain the broad-based management talent required to achieve corporate objectives. |
Comparison Group |
Findings |
Other Factors in Determining Salary Adjustments for Named Executive Officers |
17
Philosophy |
Targets |
Performance Measures |
Awards |
18
2006 Grants for 2005 Performance | ||||||||||||
Stock Options | Restricted Stock | Performance Units | ||||||||||
Name | Grant (Shares) | Grant (Shares) | Grant (Units) | |||||||||
R. L. Waltrip | 189,400 | 70,200 | 665,800 | |||||||||
Thomas L. Ryan | 260,400 | 96,500 | 915,500 | |||||||||
Michael R. Webb | 118,400 | 43,900 | 416,200 | |||||||||
Sumner J. Waring, III | 53,200 | 19,700 | 187,300 | |||||||||
Stephen M. Mack | 53,200 | 19,700 | 187,300 |
Base Salary |
Annual Performance-Based Incentive Compensation |
19
Long-Term Incentive Compensation |
20
Long-Term Compensation | ||||||||||||||||||||||||||||||||||
Annual Compensation | Awards | Payouts | ||||||||||||||||||||||||||||||||
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(4) | Compensation(5) | ||||||||||||||||||||||||||
R. L. Waltrip | 2005 | $ | 950,000 | $ | 979,498 | $ | 420,963 | $ | 578,488 | 189,400 | $ | 3,000,000 | $ | 223,564 | ||||||||||||||||||||
Chairman of the Board | 2004 | 986,538 | 492,860 | 345,628 | 498,960 | 150,200 | 0 | 428,759 | ||||||||||||||||||||||||||
2003 | 980,269 | 1,581,750 | 535,806 | 597,520 | 102,000 | 0 | 43,779 | |||||||||||||||||||||||||||
Thomas L. Ryan | 2005 | 800,000 | 824,840 | 85,974 | 795,160 | 260,400 | 2,200,000 | 341,971 | ||||||||||||||||||||||||||
President and Chief | 2004 | 541,440 | 272,370 | 135,359 | 587,664 | 177,000 | 0 | 14,058 | ||||||||||||||||||||||||||
Executive Officer | 2003 | 440,673 | 599,400 | 78,024 | 336,105 | 57,500 | 0 | 14,058 | ||||||||||||||||||||||||||
Michael R. Webb | 2005 | 575,000 | 592,854 | 24,141 | 361,736 | 118,400 | 1,800,000 | 265,016 | ||||||||||||||||||||||||||
Executive Vice President | 2004 | 466,058 | 233,460 | 27,371 | 338,184 | 101,900 | 0 | 18,000 | ||||||||||||||||||||||||||
and Chief Operating Officer | 2003 | 416,153 | 566,100 | 23,496 | 271,600 | 46,000 | 0 | 17,957 | ||||||||||||||||||||||||||
Sumner J. Waring, III | 2005 | 350,000 | 348,226 | 30,093 | 162,328 | 53,200 | 1,000,000 | 166,471 | ||||||||||||||||||||||||||
Senior Vice President, | 2004 | 320,422 | 150,000 | 5,819 | 319,470 | 0 | 0 | 13,568 | ||||||||||||||||||||||||||
Major Market Operations | 2003 | 273,808 | 241,080 | 6,626 | 149,710 | 25,500 | 0 | 13,346 | ||||||||||||||||||||||||||
Stephen M. Mack | 2005 | 350,000 | 316,579 | 15,780 | 162,328 | 53,200 | 1,000,000 | 185,977 | ||||||||||||||||||||||||||
Senior Vice President, | 2004 | 363,462 | 90,000 | 7,259 | 283,590 | 0 | 0 | 54,851 | ||||||||||||||||||||||||||
Middle Market Operations | 2003 | 356,731 | 153,300 | 6,857 | 139,503 | 24,000 | 0 | 17,404 | ||||||||||||||||||||||||||
(1) | Includes the incremental cost of personal use of Company aircraft to the extent not reimbursed to the Company: Mr. R. L. Waltrip, $205,617 in 2005, $146,706 in 2004 and $180,950 in 2003; Mr. Ryan, $13,491 in 2005 and $15,074 in 2004; Mr. Webb, $17,841 in 2005, $20,592 in 2004 and $13,265 in 2003; Mr. Waring, $22,758 in 2005; Mr. Mack, $4,692 in 2005. Also includes $142,460 in 2005, $144,835 in 2004 and $130,413 in 2003 for security and transportation services provided for Mr. R. L. Waltrip. For 2005, the amounts also include $43,881 for foreign tax reimbursement and preparation and $25,168 for related gross up for Mr. Ryan. For each of Messrs. Webb, Waring and Mack, the aggregate of the executive’s perquisites and benefits in 2005 did not exceed the lesser of $50,000 or 10 percent of the total of the executive’s annual salary and bonus. In prior years, certain of the figures reported were calculated using a different cost method and differ from those reported here. |
(2) | Awards of restricted stock and stock options set forth in the table for 2005, 2004 and 2003 reflect awards granted, respectively, in February 2006, February 2005 and February 2004. |
(3) | At December 31, 2005, the number and value of unvested restricted stock holdings (including restricted stock awards made in February 2006) of the listed executives were as follows: Mr. R. L. Waltrip: 200,867 shares ($1,643,092); Mr. Ryan: 214,300 shares ($1,752,974); Mr. Webb: 119,367 shares ($976,422); Mr. Waring: 80,667 shares ($659,856) and Mr. Mack: 74,467 shares ($609,140). 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). |
(4) | Consists of the payout in February 2006 of cash performance units previously awarded in February 2003 regarding the three year performance period ended December 31, 2005. For information concerning cash performance units awarded in February 2006, see the caption “Long-Term Incentive Plan: Performance Units” herein below. |
21
(5) | Consists of the following for 2005: $204,115 for reimbursement of life insurance premium and related taxes (as described in “Other Compensation” below), $2,439 for term life insurance and $17,010 for Company contributions to the Company’s 401(k) plan for Mr. R. L. Waltrip; $858 for term life insurance, $13,860 for Company contributions to the Company’s 401(k) plan and $327,253 for Company contributions to the Executive Deferred Compensation Plan for Mr. Ryan; $1,757 for term life insurance, $17,010 for Company contributions to the Company’s 401(k) plan, and $246,248 for Company contributions to the Executive Deferred Compensation Plan for Mr. Webb; $248 for term life insurance, $13,860 for Company contributions to the Company’s 401(k) plan and $152,363 for Company contributions to the Executive Deferred Compensation Plan for Mr. Waring; $23,109 for reimbursement of life insurance premium and related taxes, $316 for term life insurance, $17,010 for Company contributions to the Company’s 401(k) plan and $145,542 for Company contributions to the Executive Deferred Compensation Plan for Mr. Mack. |
% 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 | 02/07/06 | 189,400 | 11.82 | % | $ | 8.240 | 02/07/14 | $ | 598,031 | |||||||||||||||
Thomas L. Ryan | 02/07/06 | 260,400 | 16.25 | % | $ | 8.240 | 02/07/14 | 822,213 | ||||||||||||||||
Michael R. Webb | 02/07/06 | 118,400 | 7.39 | % | $ | 8.240 | 02/07/14 | 373,848 | ||||||||||||||||
Sumner J. Waring, III | 02/07/06 | 53,200 | 3.32 | % | $ | 8.240 | 02/07/14 | 167,979 | ||||||||||||||||
Stephen M. Mack | 02/07/06 | 53,200 | 3.32 | % | $ | 8.240 | 02/07/14 | 167,979 |
(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 2006 grants are: volatility rate of 38.80%; annual dividend yield of 1.5%; turnover rate of 3%; and risk free interest rate of 4.30%. |
Number of Shares | ||||||||||||||||||||||||
Underlying Unexercised | Value of Unexercised | |||||||||||||||||||||||
Shares | Options at | In-The-Money Options at | ||||||||||||||||||||||
Acquired | December 31, 2005 | December 31, 2005 | ||||||||||||||||||||||
on | Value | |||||||||||||||||||||||
Name | Exercise | Realized | Exercisable | Unexercisable(1) | Exercisable | Unexercisable(1) | ||||||||||||||||||
R. L. Waltrip | 0 | NA | 7,287,003 | 407,600 | $ | 12,802,690 | $ | 279,210 | ||||||||||||||||
Thomas L. Ryan | 0 | NA | 561,666 | 475,734 | 2,066,369 | 272,809 | ||||||||||||||||||
Michael R. Webb | 0 | NA | 587,833 | 250,967 | 2,061,214 | 168,622 | ||||||||||||||||||
Sumner J. Waring, III | 33,000 | $ | 111,393 | 78,500 | 70,200 | 384,883 | 22,865 | |||||||||||||||||
Stephen M. Mack | 50,000 | $ | 295,830 | 712,680 | 69,200 | 1,658,130 | 21,520 |
(1) | Includes stock options granted in February 2006. |
22
Estimated Future Payouts | ||||||||||||||||||||
Under Non-Stock Price Based Plan(2) | ||||||||||||||||||||
Number of | Threshold | Target | Maximum | |||||||||||||||||
Name | Units(1) | Performance Period | ($) | ($) | ($) | |||||||||||||||
R. L. Waltrip | 665,800 | 1/1/06-12/31/08 | $ | 166,450 | $ | 665,800 | $ | 1,331,600 | ||||||||||||
Thomas L. Ryan | 915,500 | 1/1/06-12/31/08 | 228,875 | 915,500 | 1,831,000 | |||||||||||||||
Michael R. Webb | 416,200 | 1/1/06-12/31/08 | 104,050 | 416,200 | 832,400 | |||||||||||||||
Sumner J. Waring, II | 187,300 | 1/1/06-12/31/08 | 46,825 | 187,300 | 374,600 | |||||||||||||||
Stephen M. Mack | 187,300 | 1/1/06-12/31/08 | 46,825 | 187,300 | 374,600 |
(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 and at or above the threshold target to trigger a payout. In 2006, the plan was simplified to pay out at threshold for achievement of minimum established targets, at target for expected level of performance and a maximum award of 200% for achieving 75th percentile or better performance, provided that no individual payout may exceed $3 million. |
SCI Cash Balance Plan |
Estimated Annual Benefits Payable at Age 65 |
Name | Annual Benefit | |||
R. L. Waltrip | $ | 118,852 | (1) | |
Thomas L. Ryan | 13,866 | (2) | ||
Michael R. Webb | 28,712 | (2) | ||
Sumner J. Waring, III | 11,739 | (2) | ||
Stephen M. Mack | 47,323 | (2) |
(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. |
23
Supplemental Executive Retirement Plan for Senior Officers |
Estimated | ||||
Annual Benefit | ||||
at Age 60 | ||||
R. L. Waltrip | $ | 1,110,773 | (1) | |
Thomas L. Ryan | 18,968 | |||
Michael R. Webb | 42,725 | |||
Sumner J. Waring III | — 0 — | |||
Stephen M. Mack | 72,583 |
(1) | This is Mr. R. L. Waltrip’s 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. |
Executive Deferred Compensation Plan |
24
Employment Agreement with the Chairman of the Board |
Other Named Executive Officers |
25
26
27
Amount | |||||||||
Name and Address | Beneficially | Percent | |||||||
of Beneficial Owner | Owned | of Class | |||||||
Barrow, Hanley, Mewhinney & Strauss, Inc. | 31,473,480 | (1) | 10.6 | % | |||||
2200 Ross Avenue, 31st Floor | |||||||||
Dallas, Texas 75201-2761 | |||||||||
FMR Corp., Fidelity Management & Research Company, Fidelity Leveraged Co. Stock Fund and | |||||||||
Edward C. Johnson, 3d | 46,305,925 | (2) | 15.6 | % | |||||
82 Devonshire Street | |||||||||
Boston, Massachusetts 02109 | |||||||||
Southeastern Asset Management, Inc., Longleaf Partners Small-Cap Fund and O. Mason Hawkins | 15,543,300 | (3) | 5.2 | % | |||||
6410 Poplar Ave., Suite 900 | |||||||||
Memphis, TN 38119 | |||||||||
Vanguard Windsor Funds — Vanguard Windsor II Fund 23-2439135 | 26,080,100 | (4) | 8.8 | % | |||||
(“Windsor II”) | |||||||||
100 Vanguard Blvd | |||||||||
Malvern, Pennsylvania 19355 |
(1) | Based on a filing made by Barrow, Hanley, Mewhinney & Strauss, Inc. on February 7, 2006, which reported sole voting power for 806,080 shares, shared voting power for 30,667,400 shares, sole investment power for 31,473,480 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 II, for whom BHMS is an investment manager. |
(2) | Based on a filing made by the named companies and person on February 14, 2006, which reported sole voting power for 3,253,425 shares, shared voting power for no shares, sole investment power for 46,305,925 shares and shared investment power for no shares. |
(3) | Based on a filing made by the named companies and person on February 10, 2006, which reported sole voting power for no shares, shared voting power for 15,286,300 shares, sole investment power for 257,000 shares and shared investment power for 15,286,300 shares. |
(4) | Based on a filing made by the named fund on February 13, 2006, 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 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 II, for whom BHMS is an investment manager. |
28
Right to Acquire Ownership | ||||||||||||
Shares | Under Options Exercisable | Percent | ||||||||||
Name of Individual or Group | Owned | Within 60 Days | of Class | |||||||||
R. L. Waltrip | 1,724,246 | (1) | 6,931,069 | 2.9 | % | |||||||
Thomas L. Ryan | 296,688 | 639,833 | * | |||||||||
Michael R. Webb | 227,056 | 637,132 | * | |||||||||
Sumner J. Waring, III | 201,716 | 87,000 | * | |||||||||
Stephen M. Mack | 109,751 | 720,680 | * | |||||||||
Alan R. Buckwalter | 46,987 | (2) | — | * | ||||||||
Anthony L. Coelho | 91,617 | — | * | |||||||||
A. J. Foyt, Jr. | 129,628 | (3) | — | * | ||||||||
Malcolm Gillis | 19,958 | — | * | |||||||||
Victor L. Lund | 71,111 | — | * | |||||||||
John W. Mecom, Jr. | 60,199 | — | * | |||||||||
Clifton H. Morris, Jr. | 104,227 | (4) | — | * | ||||||||
W. Blair Waltrip | 2,126,202 | (5) | 410,000 | * | ||||||||
Edward E. Williams | 229,222 | — | * | |||||||||
Executive Officers and Directors as a Group (25 persons) | 5,785,415 | 13,737,765 | 6.3 | % |
* | Less than one percent |
(1) | Includes 468,384 shares held in trusts under which Mr. R. L. Waltrip’s 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 (5). Also includes 530,133 shares held by trusts of which Mr. R. L. Waltrip is the trustee having sole voting and investment powers. |
(2) | Includes 2,800 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. |
(3) | 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. Foyt’s wife. |
(4) | Includes 4,034 shares owned by Mr. Morris’ wife. Mr. Morris disclaims beneficial ownership of such shares. |
(5) | 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. W. Blair Waltrip is President. |
29
30
Audit Fees |
Audit Related Fees |
Tax |
All Other Fees |
31
32
33
34
1. | PURPOSE |
2. | ELIGIBILITY |
3. | ADMINISTRATION |
4. | DIRECTOR FEE PAYMENTS |
A-1
5. | DISTRIBUTION |
(i) such election may not take effect until at least twelve (12) months after the date on which this election is made; | |
(ii) the distribution must be deferred for at least five (5) years from the date the distribution otherwise would have been paid; and | |
(iii) such election may not be made less than twelve (12) months before the date the distribution is otherwise scheduled to be paid. |
6. | RIGHTS AS A STOCKHOLDER |
7. | CONTINUATION OF DIRECTORS IN SAME STATUS |
8. | SHARES SUBJECT TO THE PLAN |
A-2
9. | TERMINATION AND AMENDMENTS |
10. | COMPLIANCE WITH APPLICABLE LEGAL REQUIREMENTS |
11. | TERM OF THE PLAN |
12. | RULE 16B-3 COMPLIANCE |
A-3
òDETACH PROXY CARD HEREò
Please mark, sign, date and | ||
return this proxy promptly | x | |
using the enclosed envelope. | Votes MUST be indicated | |
(x) in Black or Blue ink. |
1. | ELECTION OF DIRECTORS.(The Board recommends a vote FOR all of the nominees). | FOR | AGAINST | ABSTAIN |
FOR ALL | o | WITHHOLD FOR ALL | o | *EXCEPTIONS | o | 2. | Approval of the selection of PricewaterhouseCoopers LLP as the Company’s independent accountants | o | o | o | ||||||||||||
for fiscal 2006.(The Board recommends a | ||||||||||||||||||||||
Nominees: | R.L. Waltrip, Anthony L. Coelho, | vote FOR this proposal). | ||||||||||||||||||||
A.J. Foyt, Jr. and Edward E. Williams | ||||||||||||||||||||||
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, mark the “Exceptions” box and write that nominee’s name in the space provided below.) *Exceptions: | 3. | Approval of a proposal to approve the Amended and Restated Director Fee Plan. (The Board recommends a vote FOR this proposal). | o | o | o | |||||||||||||||||
To change your address, please mark this box. | o | |||||||||||||||||||||
Indicate change on the reverse side. | o |
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. |
Date | Share Owner sign here | Co-Owner sign here |
SERVICE CORPORATION INTERNATIONAL
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
For The Annual Meeting of Stockholders May 11, 2006
The undersigned hereby appoints Thomas L. Ryan, 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 11, 2006, 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, FOR approval of the selection of PricewaterhouseCoopers LLP as the Company’s independent accountants and FOR a proposal to approve the Amended and Restated Director Fee Plan.
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE. | ||
Change of Address | ||
________________________ | ||
________________________ | SERVICE CORPORATION INTERNATIONAL | |
________________________ | P.O. BOX 11270 NEW YORK, N.Y. 10203-0270 |
(Continued and to be dated and signed on the reverse side.)