Financial Report of Loewen Group Inc.
The Loewen Group Inc. was founded in 1969. The company has two major
headquarters in North America, one in Burnaby, British Colombia and a second in
Cincinnati, Ohio. Loewen Group Inc. (L.G.I.) is the largest funeral services
enterprise in Canada and is the second largest company in the North American
Funeral Services Industry. L.G.I. owns 918 funeral homes and 269 cemeteries and
also engages in the pre-need selling of funeral services including cemetery and
cremation services. The company strives on respecting its Eagle Principle,
which is displayed on the first page of its 1995 Annual Report:
"To soar to heights of possibilities one needs two equally
healthy, strong wings - one being that of people or service concerns, the other
that of responsible planning and fiscal management. It is the balance of these
wings that enables the eagle to soar beyond all heights"1
In 1995, the company defended itself against two major lawsuits, as well
as continued to negotiate acquisition agreements. The Loewen Group Inc.
stresses that once an acquisition has been completed, local management is
encouraged to remain and offers long term contracts to its key employees, rarely
dismissing the other employees. L.G.I. provides many services to its acquired
companies including offering training to new employees on its management
information systems and covering costs for any renovations which are needed on
the acquired locations. Each funeral home and cemetery is operated as a
distinct profit centre, with monthly and annual financial performance monitored
by regional and corporate management in accordance with budgeted projections.
This report includes a study of The Canadian Funeral Services Industry
practices, a review of the take-over attempt by Service Corporation
International, an analysis of the Loewen Group Inc. 1995 Annual Report for the
period ending December 31, 1995, and examination of the revenue recognition
practices used by L.G.I..
The Funeral Services Industry
According to a paper issued in August 1995, by Statistics Canada's Services,
Science and technology Division Final Purchase, Growing Demand: The Canadian
Funeral Services Industry, the funeral services industry, in comparison to other
industries, has historically been considered a low risk industry. The Funeral
service industry is not significantly affected by economic cycles. The
stability of the industry is increased by future demographic trends.
Individuals from the "baby boomer" generation are now entering their fifties and
the death rate is growing slowly at 1.5% per year, compounded, as demonstrated
in Appendix A: Deaths, Actual and Projected. The industry is characterised by
above-average profitability and revenue growth.
Public Health issues and consumer protection issues are primarily regulated at
the provincial level of government. These regulations are implemented to