Service Corporation International · NYSE:SCI
Service Corporation International — Merger or Acquisition (April 2006)
15 slides from Service Corporation International's merger presentation, Apr 3, 2006
Slide 1: Service Corporation International Acquisition of Alderwoods
Service Corporation International Acquisition of Combining the Two Premier Funeral and Cemetery Services Providers in North America April 3, 2006
Slide 2: Agenda
Agenda I.Opening Remarks Tom Ryan President & Chief Executive Officer – SCI Paul Houston President & Chief Executive Officer - Alderwoods II.Transaction Overview Tom Ryan III.Review of Potential Synergies Mike Webb Executive Vice President and Chief Operating Officer – SCI IV.Financial Review Jeff C
Slide 3: Cautionary Statement on Forward-Looking Statements
Cautionary Statement on Forward-Looking Statements Forward-Looking Statements Information set forth in this presentation contains forward-looking statements, which involve a number of risks and uncertainties. Service Corporation International (“SCI”) and Alderwoods Group, Inc. (“Alderwoods”) caution
Slide 4: Compelling Transaction Rationale
Compelling Transaction Rationale Combines the two premier funeral and cemetery services providers in North America 2,332 total locations of which 243 are combination facilities Industry remains fragmented; combined company will have approximately 15% of total estimated industry revenue Timing is rig
Slide 5: Transaction Overview
Transaction Overview $20.00 per share Purchase Price & Equity value: $856 million Consideration Enterprise value: $1,230 million All cash Current cash on hand of $470 million JPMorgan has committed to provide an $850 Sources of Funding million bridge facility Permanent financing may include bank deb
Slide 6: Timing is Right for SCI to Pursue a Strategic Acquisition
Timing is Right for SCI to Pursue a Strategic Acquisition SCI debt has been reduced by $3 billion since 1999 Healthy Balance Sheet Current balance sheet cash of $470 million Net debt-to-total net capital of 32% Moved to single-line management model in Operational Efficiency November 2003 Infrastruct
Slide 7: Alderwoods Represents the Most Complementary Acquisition Opportunity for SCI
Alderwoods Represents the Most Complementary Acquisition Opportunity for SCI Consistently conservative accounting policies Conservatively Managed Disciplined approach to property divestitures and Operations acquisitions Significantly improved processes and systems Strong operating cash flow generati
Slide 8: Combining the Two Premier Funeral and Cemetery Services Providers in North America
Combining the Two Premier Funeral and Cemetery Services Providers in North America (Dollars in millions except per funeral amounts) FYE 2005 SCI AWGI Revenue $1,716 $749 Gross profit $299 $115 Margin 17% 15% Comparable same site: Funeral volume 238,813 113,300 Revenue per funeral $4,410 $4,152 Backl
Slide 9: Significant Synergy Opportunities
Significant Synergy Opportunities We expect to realize approximately $60 - $70 million of annual synergies Duplicate Systems and Infrastructure Full IT systems and infrastructure Duplicate accounting, finance, legal and other systems Management Structure Duplication Overlapping market management Man
Slide 10: Alderwoods Meets SCI's Financial Criteria for Evaluating Acquisitions
Alderwoods Meets SCI’s Financial Criteria for Evaluating Acquisitions Financial objectives SCI/AWGI combination Purchase price discipline IRR estimated to be 250-300 basis points in excess of SCI’s Investment returns in excess of weighted average cost of weighted average cost of capital estimates ca
Slide 11: Estimated Purchase Price Multiples
Estimated Purchase Price Multiples Alderwoods 2005 EBITDA Purchase price ($ millions) ($ millions) $30 Cost of equity $856 Pre-tax income(1) Interest expense 30 Enterprise value $1,230 Depreciation & amortization 45 2005 EBITDA Multiples Alderwoods EBITDA 105 Pre-synergy purchase Estimated run rate
Slide 12: Selected Pro Forma Financial Information
Selected Pro Forma Financial Information The combined company would have revenues of approximately $2.5 billion (based on 2005 financial results) The combined company would have approximately $470 million of EBITDA (based on 2005 financial results), which includes $65 million of pre-tax cost savings
Slide 13: Target Financial Ratios
Target Financial Ratios Target Ratios 2008E Ratio Operating cash flow less certain >1.5x 2.0x capex/Interest Expense Net Debt/Operating cash flow less 5x to 7x 6.2x certain capex Net Debt/Total Net Capital 40% to 45% 45% 13
Slide 14: Transaction Funding
Transaction Funding Current SCI cash balance of approximately $470 million $850 million committed bridge financing from JPMorgan Optimal mix of permanent financing to be evaluated to ensure appropriate liquidity and minimize financing costs On-going dialogue with rating agencies regarding capital st
Slide 15: Transaction Summary
Transaction Summary Compelling strategic fit Scale and scope generating substantial operating synergies and cost savings Accretive to operating cash flow and earnings Customer focus and enhanced service SCI and Alderwoods together = Creating Shareholder Value 15
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