SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.
FORM 11-K
(X) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 30, 2002
or
( ) TRANSITION REPORT PURUSANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ______________ TO ___________________
COMMISSION FILE NUMBER 1-6402-1
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THE SCI 401(k) RETIREMENT SAVINGS PLAN
(Full title of the plan)
SERVICE CORPORATION INTERNATIONAL
(Name of issuer of the securities held pursuant to the plan)
1929 ALLEN PARKWAY
HOUSTON, TEXAS 77019
(Address of the plan and address of issuer's principal executive offices)
THE SCI 401(k) RETIREMENT SAVINGS PLAN
INDEX
Financial Statements
Independent Auditor's Report...................................................................... 3
Statements of Net Assets Available for Benefits as of
December 30, 2002 and 2001...................................................................... 4
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 30, 2002............................................................ 5
Notes to Financial Statements..................................................................... 6-8
Supplemental Schedules
Schedule of Assets (Held at End of Year).......................................................... 9
Schedule of Reportable Transactions............................................................... 10
Other Information
Signature.......................................................................................... 11
Independent Auditor's Consent......................................................................... 12
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002............................... 13
2
INDEPENDENT AUDITOR'S REPORT
To the Administrative Committee
The SCI 401(k) Retirement Savings Plan
Houston, Texas
We have audited the accompanying Statements of Net Assets Available for Benefits
of The SCI 401(k) Retirement Savings Plan as of December 30, 2002 and 2001 and
the related Statement of Changes in Net Assets Available for Benefits for the
year ended December 30, 2002. These financial statements are the responsibility
of the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of The SCI 401(k)
Retirement Savings Plan as of December 30, 2002 and 2001 and the changes in net
assets available for benefits for the year ended December 30, 2002 in conformity
with generally accepted accounting principles in the United States of America.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The Supplemental Schedules of Assets
(Held at End of Year) and Reportable Transactions are presented for purposes of
complying with the Department of Labor's Rules and Regulations for Reporting and
Disclosure under the Employee Retirement Income Security Act of 1974 and are not
a required part of the basic financial statements. The supplemental schedules
have been subjected to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, are fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
HARPER & PEARSON COMPANY
Houston, Texas
June 5, 2003
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THE SCI 401(k) RETIREMENT SAVINGS PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 30,
-------------------------------------
2002 2001
---------------- ----------------
Investments:
Pooled separate accounts.......................................... $42,697,838 $22,346,589
SCI common stock.................................................. 19,281,105 14,054,306
Interest bearing cash............................................. 1,001,437 336,808
Participant loans................................................. 2,065,014 827,027
---------------- ----------------
Total assets.......................................................... 65,045,394 37,564,730
---------------- ----------------
Net assets available for benefits..................................... $65,045,394 $37,564,730
================ ================
See notes to financial statements.
4
THE SCI 401(k) RETIREMENT SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year ended
December 30, 2002
---------------------------
Additions to net assets attributed to:
Contributions:
Employer - SCI Common Stock............................................ $18,150,101
Participants........................................................... 24,811,931
Rollovers from other qualified plans................................... 1,187,937
---------------------------
Total contributions................................................. 44,149,969
---------------------------
Investment income:
Interest income........................................................ 75,697
Net depreciation in the fair value of pooled separate
accounts............................................................. (3,029,788)
Net depreciation in the fair value of Company stock.................... (4,648,050)
Realized loss on sale of Company stock................................. (1,086,608)
---------------------------
Total investment loss.................................................. (8,688,749)
---------------------------
Total additions..................................................... 35,461,220
---------------------------
Deductions from net assets attributed to:
Distributions to participants............................................. 7,632,246
Administrative expenses................................................... 348,310
---------------------------
Total deductions...................................................... 7,980,556
---------------------------
Net increase.................................................................. 27,480,664
Net assets available for benefits:
Beginning of period....................................................... 37,564,730
---------------------------
End of period............................................................. $65,045,394
===========================
See notes to financial statements.
5
THE SCI 401(k) RETIREMENT SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
1. PLAN DESCRIPTION
GENERAL
The following description of The SCI 401(k) Retirement Savings Plan (the Plan)
is provided for general information purposes only. Participants should refer to
the Summary Plan Description or the Plan Document for a more complete
description of the Plan's provisions.
The Plan, established July 1, 2000, is a defined contribution plan for the
exclusive benefit of Service Corporation International's (SCI or the Company)
United States non-union employees. The Plan is subject to the provisions of the
Employee Retirement Income Security Act of 1974 (ERISA). The Plan's assets are
held by Massachusetts Mutual Life Insurance Company and participant accounts are
maintained by MassMutual Retirement Services. Investors Bank & Trust Company
serves as the trustee for the SCI Common Stock Fund.
CONTRIBUTIONS
Eligible employees can participate in the Plan after completing three months of
service and attaining age 21. Employees covered by a collective bargaining
agreement in which retirement benefits are provided are not eligible under the
Plan. The election to contribute to the Plan is voluntary. Employees are
initially enrolled in the Plan, after meeting eligibility requirements, to
contribute 3% of pretax annual compensation, unless participation is
specifically rejected by such employees. Participants may contribute up to a
maximum of 50% of pretax annual compensation. Each individual's participant
contributions were limited to $11,000 in 2002.
The Company contributes a matching amount up to 6% of the participant's pretax
annual compensation, generally in Company common stock. The percentage of the
match is based on years of service with the Company and ranges from 75% to 135%
of the employee's eligible contribution. Additional amounts may be contributed
at the Company's discretion. Company contributions were made in Company stock
during the year ended December 30, 2002. There were no discretionary Company
contributions in 2002.
PARTICIPANT ACCOUNTS
Participant account balances are valued based upon the number of units of each
investment fund owned by the participants. Each participant's account is
credited with the participant's contribution and allocations of the Company's
contributions and plan earnings or losses. Forfeited balances of terminated
participants' non-vested accounts are used to reduce administrative expenses and
future Company contributions. Forfeited balances were $471,980 during the year
ended December 30, 2002.
6
VESTING
Participants are fully vested in their deferred salary and rollover
contributions. Participants are not vested in Company contributions until they
complete three years of vesting service with the Company thus becoming 100%
vested.
PARTICIPANT LOANS
Participants may borrow from their accounts up to one half of their vested
account balance to a maximum of $50,000. The minimum amount that may be borrowed
is $1,000. Loans are to be repaid within five years, unless the loan is used to
purchase a primary residence. The loans are secured by the balance in the
participant's account and bear interest at 1% above the prime rate. A
participant may have no more than two loans outstanding at any one time.
PARTICIPANT DISTRIBUTIONS
The Plan provides for several different types of participant withdrawals.
Participants who have reached age 59 1/2 may make in-service withdrawals.
Participants may make withdrawals before age 59 1/2 if they qualify for certain
hardship withdrawals. Upon termination of service with the Company or death, the
participant or beneficiary may receive a lump-sum amount equal to the vested
amount in the participant's account. A participant whose account balance exceeds
$5,000 may elect a deferred distribution up until age 70 1/2. As of December 30,
2002, total deferred vested benefits related to terminated employees were
$1,438,579.
PLAN TERMINATION
The Company expects the Plan to continue indefinitely, however, it reserves the
right to terminate or amend the Plan to eliminate future benefits. If the Plan
is terminated, participants will become 100% vested and account balances will be
distributed by a lump-sum payment.
2. SUMMARY OF ACCOUNTING POLICIES
PRINCIPLES OF REPORTING
The financial statements and schedules have been prepared in accordance with
accounting principles generally accepted in the United States and the financial
reporting requirements of ERISA and are maintained on an accrual basis except
for participant distributions, which are reported when paid.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires Plan management to make
estimates and assumptions that may affect the amounts reported in the financial
statements. As a result, actual results could differ from those estimates.
INVESTMENTS
Investments are stated at fair value, which is determined by quoted market
prices. Participant loans are valued at their outstanding balances, which
approximates fair value.
Net appreciation (depreciation) in the fair value of the pooled separate
accounts consists of net realized and unrealized appreciation
7
(depreciation). Each investment fund's appreciation (depreciation) is allocated
to participants based upon their proportionate share of assets in each
investment fund.
RISKS AND UNCERTAINTIES
The Plan provides for several investment options, which are exposed to various
risks, such as interest rate risk, market risk and credit risk. Due to the level
of risk associated with certain investment securities and the level of
uncertainty related to changes in the value of investment securities, it is at
least reasonably possible that changes in risks in the near term could
materially affect participants' account balances and the amounts reported in the
Statement of Net Assets Available for Benefits and the Statement of Changes in
Net Assets Available for Benefits.
ADMINISTRATIVE EXPENSE
Administrative expenses represent record keeping fees paid to MassMutual. Legal
and audit fees are paid by SCI.
3. INVESTMENTS
Investments that comprised 5% or more of the Plan's net assets available for
benefits are as follows:
December 30,
-------------------------------------
2002 2001
---------------- ----------------
JCC Balanced Fund (Janus)........................................... $4,744,197 $2,999,414
MassMutual Small Cap Growth Fund.................................... 3,632,799 3,126,159
MassMutual International Equity Fund................................ - 1,995,676
MassMutual Core Bond Fund........................................... 11,115,339 3,025,163
MassMutual Government Money Market.................................. 12,435,685 4,871,479
MassMutual Ultra Fund (American Century)............................ - 3,326,862
MassMutual Large Cap Value Fund..................................... 4,206,217 3,001,836
MassMutual Large Cap Growth Fund.................................... 3,623,044 -
SCI Common Stock(1)................................................. 19,281,105 14,054,306
(1) Includes both participant and non-participant directed common stock.
4. INCOME TAXES
A determination letter has been requested from the Internal Revenue Service
which the Plan administrator expects will declare that the Plan qualifies under
Section 401(a) of the Internal Revenue Code as exempt from income taxes. The
Plan administrator believes the Plan is designed and being operating in
compliance with the requirements of Section 401(a) of the Internal Revenue Code.
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THE SCI 401(k) RETIREMENT SAVINGS PLAN
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 30, 2002
EIN: 74-1488375 PIN: 002
Identity of issue, borrower, lessor or
similar party Description of investment Current value
----------------------------------------------- ---------------------------------------------- -----------------
*Massachusetts Mutual Life
Insurance Co.............................. JCC Balanced Fund (Janus) $ 4,744,197
*Massachusetts Mutual Life
Insurance Co.............................. MassMutual Small Cap Growth Fund 3,632,799
*Massachusetts Mutual Life
Insurance Co.............................. MassMutual Core Bond Fund 11,115,339
*Massachusetts Mutual Life MassMutual
Insurance Co.............................. Government Money Market 12,435,685
*Massachusetts Mutual Life
Insurance Co.............................. MassMutual Large Cap Value Fund 4,206,217
*Massachusetts Mutual Life
Insurance Co.............................. MassMutual Large Cap Growth Fund 3,623,044
*Massachusetts Mutual Life
Insurance Co.............................. MassMutual Small Company Value Fund 590,942
*Massachusetts Mutual Life
Insurance Co.............................. MassMutual Overseas Fund 2,349,615
*Service Corporation
International............................. SCI Common Stock 19,281,105
*Investors Bank & Trust
Company................................... Interest Bearing Cash 1,001,437
Loans with interest
*Participant Loans............................ rates of 5.25% to 10.5% 2,065,014
-----------------
$65,045,394
=================
Cost value of SCI Common Stock and Interest Bearing Cash was $23,929,155 and
$1,001,437, respectively, at December 30, 2002.
*Denotes a party-in-interest as defined by ERISA.
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THE SCI 401(k) RETIREMENT SAVINGS PLAN
SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 30, 2002
EIN: 74-1488375 PIN: 002
(b)
Description of Assets
(a) (Include Interest Rate and (i)
Identity of Party Maturity in Case (c) (d) (g) Net Gain or
Involved of a Loan) Purchase Price Selling Price Cost of Asset (Loss)
------------------- ------------------------------- ----------------- -------------- --------------- --------------
Series Transactions
-------------------
(A) SCI Common Stock* $18,150,101 $ - $18,150,101 $ -
A reportable transaction is any purchase or sale (or series of purchases or
sales) of an investment security that exceeds 5% of net assets available for
plan assets at the beginning of the plan year, excluding participant directed
activity.
*Identified party in interest transactions.
(A) All transactions were with Investors Bank & Trust Company.
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SIGNATURE
The Plan pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer the employee benefit plan) have
duly caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized.
The SCI 401(k) Retirement Savings Plan
Date: June 30, 2003 By: SCI Management L.P., a Delaware limited
partnership (and administrator of the Plan)
By: SCI Administrative Services, LLC, a
Delaware limited liability company,
General Partner to SCI Management L.P.
By: /s/ Helen Dugand
---------------------------------------------
Helen Dugand
President of SCI Administrative Services, LLC
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Exhibit Index
Ex-23.1 Independent Auditor's Consent
Ex-99.1 906 Certification