Financial Analysis Of A Company

4209 words - 17 pages

good very goodThe 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 equallyhealthy, strong wings - one ...view middle of the document...

G.I..The Funeral Services IndustryAccording 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 protect the dignity of the deceased as well as his or her estate. These regulations are described in detail in the revenue recognition section.Loewen Group Inc. StrategiesThe Provident America Corporation lawsuit was settled in February, 1995 forUS $19 million. On November 2nd, 1995, a jury in Jackson, Mississippi, awarded US $500 million in Breach-of-contract lawsuit brought by Gulf National. This amount is almost twenty-six times high than what was originally asked for. In order to appeal, Loewen was required to post a US $625 million bond, which was later reduced to US $125 million with the condition that there would be no significant change in assets or increases in dividends without prior notification to the court and the other party. No provision on was made on the financial statement at this point since the result was hard to predict on the appeal. On January 29th, 1996, Loewen settled the lawsuit for US $175 million and recorded US $135 million, present value of $175 million.Loewen decided to settle because of two reasons: the first is that the appeal would have a financial impact on the company's income and the second reason is that prolonging the lawsuits would create uncertainty and speculation amongst the company's shareholders.S.C.I. Take-over AttemptOn September 17, 1996 Service Corporation International (S.C.I.), the largest Funeral Service Company in the world, placed a $ 2.5. billion take-over bid for Loewen Group Inc. The bid's share value is equivalent to US $ 43 each. Houston based S.C.I.'s bid was considered to be fair by many analysts like Todd Richter of Dean Witter Reynolds Inc. (New York) and Ivar Leipens of Moss, Lawson & Co. (Toronto). Another analyst, Dean Martin of TD securities Inc. (Toronto), stated that the bid was too low and that the a bid of US $ 50 would be fair. He noted that Chairman Ray Loewen and his management team retain 20 % (15 % + 5 % respectively) of the company's stock. Canadian institutional holders of the company's stock would be more likely to support the company because they must follow...

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