HOUSTON, April 26, 2017 /PRNewswire/ -- Service
Corporation International (NYSE: SCI), the largest provider of
deathcare products and services in North
America, reported results for the first quarter of 2017. Our
unaudited consolidated financial statements can be found at the end
of this press release. The table below summarizes our key financial
results:
(In millions,
except for per share amounts)
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
Revenue
|
$
|
777.7
|
|
|
$
|
749.2
|
|
Operating
income
|
$
|
139.6
|
|
|
$
|
123.7
|
|
Net income
attributable to common stockholders
|
$
|
174.7
|
|
|
$
|
47.4
|
|
Diluted earnings per
share
|
$
|
0.91
|
|
|
$
|
0.24
|
|
Earnings from
continuing operations excluding special
items(1)
|
$
|
73.0
|
|
|
$
|
55.3
|
|
Diluted earnings per
share from continuing operations excluding special
items(1)
|
$
|
0.38
|
|
|
$
|
0.28
|
|
Diluted weighted
average shares outstanding
|
192.9
|
|
|
198.0
|
|
Net cash provided by
operating activities
|
$
|
188.4
|
|
|
$
|
184.8
|
|
Net cash provided by
operating activities excluding special
items(1)
|
$
|
188.4
|
|
|
$
|
190.0
|
|
|
|
(1)
|
Earnings from
continuing operations excluding special items, diluted earnings per
share from continuing operations excluding special items, and net
cash provided by operating activities excluding special items are
non-GAAP financial measures. These items are also referred to as
"adjusted earnings per share" and "adjusted operating cash flow". A
reconciliation from net income attributable to common stockholders,
diluted earnings per share, and net cash provided by operating
activities computed in accordance with generally accepted
accounting principles in the United States (GAAP) can be found
later in this press release under the headings "Cash Flow and
Capital Spending" and "Non-GAAP Financial Measures".
|
Quarterly Highlights:
- Diluted earnings per share were $0.91 in the first quarter of 2017 compared to
$0.24 in the first quarter of 2016.
The first quarter of 2017 was positively impacted by the settlement
of IRS tax audits related to tax years 1999 through 2005 and net
gains on business dispositions partially offset by charges related
to certain pension termination settlements. Diluted earnings per
share excluding special items were $0.38 in the first quarter of 2017 compared to
$0.28 in the first quarter of 2016.
The increase in diluted earnings per share excluding special items
was primarily driven by higher operating profits led by a double
digit increase in cemetery sales production and higher funeral
services performed. These results were also bolstered by a lower
tax rate, lower interest expense, and fewer shares outstanding
resulting from our ongoing share repurchase program.
- Net cash provided by operating activities was $188.4 million in the first quarter of 2017
compared to $184.8 million in the
first quarter of 2016. The first quarter of 2016 was impacted by
system transition costs and excess tax benefits from share-based
awards which reduced cash provided by operating activities. Net
cash provided by operating activities excluding special items above
was $188.4 million in the first
quarter of 2017 compared to $190.0
million in the prior year quarter. The cash flow generated
from earnings growth in the first quarter of 2017 was primarily
offset by higher expected cash tax and interest payments.
- During the first quarter, we returned $107.9 million to shareholders through share
repurchases and dividends and deployed $33.2
million of capital to accretive acquisitions.
Tom Ryan, the Company's
Chairman and Chief Executive Officer, commented on the first
quarter of 2017:
"We are extremely proud of the operating performance of our
businesses during the first quarter which delivered an impressive
36% improvement in adjusted earnings per share. Strong preneed
cemetery sales production and an increase in funeral services
performed were the primary factors that drove the earnings
improvement for the quarter. We will focus on maintaining our
current momentum to deliver solid operating results and substantial
cash flows for the remainder of 2017. Based on our impressive first
quarter operational performance and lower tax rate, we now believe
we will achieve adjusted earnings per share growth in the upper end
of our 2017 guidance range of $1.29 to
$1.43 per share. Our results could not have been achieved
without the hard work and dedication of our entire team, and I
thank all 23,000 associates for their efforts and continued focus
on delivering extraordinary service to our client families. We
believe our long-term growth strategy is on track as we continue to
grow revenue, leverage our unparalleled scale, and deploy our
capital wisely to enhance shareholder value."
OUTLOOK FOR 2017
The ranges detailed below are consistent with our previously
reported outlook for 2017 and are in line with our adjusted EPS
long-term growth framework of 8-12% after considering special items
in 2016. We now believe that our performance in 2017 will result in
adjusted EPS at the upper end of this full year 2017
range. Our outlook for adjusted operating cash flow remains
consistent and reflects an anticipated $40 -
$45 million increase in cash taxes, as we expect our cash
tax rate to approximate our effective tax rate adjusted for the IRS
settlement.
(In millions,
except per share amounts)
|
|
2017
Outlook
|
Diluted earnings per
share from continuing operations excluding special items (Adjusted
EPS)(1)
|
|
$1.29 to
$1.43
|
Net cash provided by
operating activities excluding special items (Adjusted operating
cash flow)(1)
|
|
$465 to
$505
|
Capital improvements
at existing facilities and cemetery development
expenditures
|
|
Approximately
$180
|
|
|
(1)
|
Diluted earnings per
share from continuing operations excluding special items and Net
cash provided by operating activities excluding special items are
non-GAAP financial measures. We normally reconcile these non-GAAP
financial measures from diluted earnings per share and net cash
provided by operating activities; however, diluted earnings per
share and net cash provided by operating activities calculated in
accordance with GAAP are not currently accessible on a
forward-looking basis. Our outlook for 2017 excludes the following
because this information is not currently available for 2017: Gains
or losses associated with asset divestitures, gains or losses
associated with the early extinguishment of debt, potential tax
reserve adjustments and IRS settlement payments, acquisition and
integration costs, system implementation and transition costs, and
potential costs associated with settlements of litigation or the
recognition of receivables for insurance recoveries associated with
litigation. The foregoing items, especially gains or losses
associated with asset divestitures and potential tax reserve
adjustments, could materially impact our forward-looking diluted
EPS and/or our net cash provided by operating activities calculated
in accordance with GAAP, consistent with the historical disclosures
found in this press release under the headings "Cash Flow and
Capital Spending" and "Non-GAAP Financial Measures".
|
REVIEW OF RESULTS
FOR FIRST QUARTER 2017
|
|
Consolidated
Segment Results
|
(See definitions of
revenue line items later in this earnings release.)
|
|
(In millions,
except funeral services performed and average revenue per
service)
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
Funeral:
|
|
|
|
Atneed
revenue
|
$
|
271.8
|
|
|
$
|
277.6
|
|
Matured preneed
revenue
|
151.8
|
|
|
139.3
|
|
Core revenue
|
423.6
|
|
|
416.9
|
|
Non-funeral home
revenue
|
12.3
|
|
|
11.4
|
|
Recognized preneed
revenue
|
32.1
|
|
|
29.0
|
|
Other
revenue
|
30.8
|
|
|
34.9
|
|
Total
revenue
|
$
|
498.8
|
|
|
$
|
492.2
|
|
|
|
|
|
Operating
profit
|
$
|
112.6
|
|
|
$
|
107.2
|
|
Operating margin
percentage
|
22.6
|
%
|
|
21.8
|
%
|
|
|
|
|
Funeral services
performed
|
82,918
|
|
|
82,198
|
|
Average revenue per
service
|
5,257
|
|
|
$
|
5,211
|
|
|
|
|
|
Cemetery:
|
|
|
|
Atneed
revenue
|
$
|
81.6
|
|
|
$
|
77.6
|
|
Recognized preneed
revenue
|
177.9
|
|
|
153.4
|
|
Core revenue
|
259.5
|
|
|
231.0
|
|
Other
revenue
|
19.4
|
|
|
26.0
|
|
Total
revenue
|
$
|
278.9
|
|
|
$
|
257.0
|
|
|
|
|
|
Operating
profit
|
$
|
64.6
|
|
|
$
|
55.7
|
|
Operating margin
percentage
|
23.2
|
%
|
|
21.7
|
%
|
Comparable Funeral Results
The table below details comparable funeral results of operations
("same store") for the three months ended March 31, 2017 and 2016. We consider comparable
operations to be those owned for the entire period beginning
January 1, 2016 and ending March 31, 2017.
(Dollars in millions, except average revenue per service and
average revenue per contract sold)
|
|
Three Months Ended
March 31,
|
|
|
2017
|
|
2016
|
|
$
|
|
%
|
Comparable
revenue:
|
|
|
|
|
|
|
|
|
Atneed
revenue(1)
|
|
$
|
267.6
|
|
|
$
|
271.8
|
|
|
$
|
(4.2)
|
|
|
(1.5)
|
%
|
Matured preneed
revenue(2)
|
|
150.0
|
|
|
136.3
|
|
|
13.7
|
|
|
10.1
|
%
|
Core
revenue(3)
|
|
417.6
|
|
|
408.1
|
|
|
9.5
|
|
|
2.3
|
%
|
Non-funeral home
revenue(4)
|
|
12.3
|
|
|
11.4
|
|
|
0.9
|
|
|
7.9
|
%
|
Recognized preneed
revenue(5)
|
|
32.1
|
|
|
28.8
|
|
|
3.3
|
|
|
11.5
|
%
|
Other
revenue(6)
|
|
30.0
|
|
|
33.7
|
|
|
(3.7)
|
|
|
(11.0)
|
%
|
Total comparable
revenue
|
|
$
|
492.0
|
|
|
$
|
482.0
|
|
|
$
|
10.0
|
|
|
2.1
|
%
|
|
|
|
|
|
|
|
|
|
Comparable operating
profit
|
|
$
|
111.8
|
|
|
$
|
105.8
|
|
|
$
|
6.0
|
|
|
5.7
|
%
|
Comparable operating
margin percentage
|
|
22.7
|
%
|
|
22.0
|
%
|
|
0.7
|
%
|
|
3.2
|
%
|
|
|
|
|
|
|
|
|
|
Comparable funeral
services performed:
|
|
|
|
|
|
|
|
|
Atneed
|
|
45,832
|
|
|
46,699
|
|
|
(867)
|
|
|
(1.9)
|
%
|
Matured
preneed
|
|
25,632
|
|
|
23,979
|
|
|
1,653
|
|
|
6.9
|
%
|
Total core
|
|
71,464
|
|
|
70,678
|
|
|
786
|
|
|
1.1
|
%
|
Non-funeral
home
|
|
10,653
|
|
|
10,086
|
|
|
567
|
|
|
5.6
|
%
|
Total comparable
funeral services performed
|
|
82,117
|
|
|
80,764
|
|
|
1,353
|
|
|
1.7
|
%
|
Core cremation
rate
|
|
46.6
|
%
|
|
45.5
|
%
|
|
1.1
|
%
|
|
2.4
|
%
|
Total comparable
cremation rate
|
|
53.4
|
%
|
|
52.2
|
%
|
|
1.2
|
%
|
|
2.3
|
%
|
|
|
|
|
|
|
|
|
|
Comparable average
revenue per service:
|
|
|
|
|
|
|
|
|
Atneed
|
|
$
|
5,839
|
|
|
$
|
5,820
|
|
|
$
|
19
|
|
|
0.3
|
%
|
Matured
preneed
|
|
5,852
|
|
|
5,684
|
|
|
168
|
|
|
3.0
|
%
|
Total core
|
|
5,844
|
|
|
5,774
|
|
|
70
|
|
|
1.2
|
%
|
Non-funeral
home
|
|
1,155
|
|
|
1,130
|
|
|
25
|
|
|
2.2
|
%
|
Total comparable
average revenue per service
|
|
$
|
5,235
|
|
|
$
|
5,194
|
|
|
$
|
41
|
|
|
0.8
|
%
|
|
|
|
|
|
|
|
|
|
Comparable preneed
sales production:
|
|
|
|
|
|
|
|
|
Total preneed
sales
|
|
$
|
210.3
|
|
|
$
|
206.5
|
|
|
$
|
3.8
|
|
|
1.8
|
%
|
Core contracts
sold
|
|
27,073
|
|
|
27,840
|
|
|
(767)
|
|
|
(2.8)
|
%
|
Non-funeral home
contracts sold
|
|
19,530
|
|
|
18,008
|
|
|
1,522
|
|
|
8.5
|
%
|
Core revenue per
contract sold
|
|
$
|
6,088
|
|
|
$
|
6,004
|
|
|
$
|
84
|
|
|
1.4
|
%
|
Non-funeral home
revenue per contract sold
|
|
$
|
2,331
|
|
|
$
|
2,186
|
|
|
$
|
145
|
|
|
6.6
|
%
|
|
|
(1)
|
Atneed revenue
represents merchandise and services sold and delivered or performed
once death has occurred.
|
(2)
|
Matured preneed
revenue represents merchandise and services sold on a preneed
contract through one of our funeral homes and delivered or
performed once death has occurred.
|
(3)
|
Core revenue
represents the sum of merchandise and services sold on an atneed
contract or preneed contract and delivered or performed once death
has occurred through one of our funeral homes.
|
(4)
|
Non-funeral home
revenue represents services sold on a preneed or atneed contract
through one of our non-funeral home sales channels (e.g. SCI
Direct) and performed once death has occurred.
|
(5)
|
Recognized preneed
revenue represents merchandise and travel protection sold on a
preneed contract and delivered before death has
occurred.
|
(6)
|
Other revenue
primarily comprises general agency revenue, which is commissions we
receive from third-party insurance companies for life insurance
policies sold to preneed customers for the purpose of funding
preneed arrangements.
|
- Total comparable funeral revenue increased by $10.0 million, or 2.1%, in the first quarter of
2017 compared to the same period of 2016. An increase in core
revenue and recognized preneed revenue was partially offset by a
decline in general agency revenue due to lower preneed funeral
insurance production.
- The $9.5 million core revenue
increase was primarily the result of a 1.1% increase in core
funeral services performed. Core average revenue per service
increased 1.2% during the first quarter of 2017. Organic sales
average growth of 1.9% was somewhat offset by a 110 basis point
increase in the core cremation mix to 46.6%.
- Recognized preneed revenue increased $3.3 million, or 11.5%, primarily driven by an
increase in both the number of contracts sold through our
non-funeral home sales channel and the average price per
contract.
- Comparable funeral operating profit increased $6.0 million to $111.8
million and the operating margin percentage increased 70
basis points to 22.7%. The $6.0
million increase in comparable funeral operating profit was
generally in line with our expectations based on the $10.0 million increase in comparable funeral
revenue when taking into account our fixed cost structure in our
comparable funeral operations.
- Comparable preneed funeral sales production increased
$3.8 million, or 1.8%, in the first
quarter of 2017 compared to 2016, primarily due to continued growth
from our non-funeral home sales channel.
Comparable Cemetery Results
The table below details comparable cemetery results of
operations ("same store") for the three months ended March 31, 2017 and 2016. We consider comparable
operations to be those owned for the entire period beginning
January 1, 2016 and ending March 31, 2017.
(Dollars in
millions)
|
|
Three Months Ended
March 31,
|
|
|
2017
|
|
2016
|
|
$
|
|
%
|
Comparable
revenue:
|
|
|
|
|
|
|
|
|
Atneed
revenue(1)
|
|
$
|
81.2
|
|
|
$
|
77.6
|
|
|
$
|
3.6
|
|
|
4.6
|
%
|
Recognized preneed
revenue(2)
|
|
177.5
|
|
|
153.2
|
|
|
24.3
|
|
|
15.9
|
%
|
Core
revenue(3)
|
|
258.7
|
|
|
230.8
|
|
|
27.9
|
|
|
12.1
|
%
|
Other
revenue(4)
|
|
19.2
|
|
|
26.0
|
|
|
(6.8)
|
|
|
(26.2)
|
%
|
Total comparable
revenue
|
|
$
|
277.9
|
|
|
$
|
256.8
|
|
|
$
|
21.1
|
|
|
8.2
|
%
|
|
|
|
|
|
|
|
|
|
Comparable operating
profit
|
|
$
|
64.3
|
|
|
$
|
55.6
|
|
|
$
|
8.7
|
|
|
15.6
|
%
|
Comparable operating
margin percentage
|
|
23.1
|
%
|
|
21.7
|
%
|
|
1.4
|
%
|
|
6.5
|
%
|
|
|
|
|
|
|
|
|
|
Comparable preneed
and atneed sales production:
|
|
|
|
|
|
|
|
|
Property
|
|
$
|
157.0
|
|
|
$
|
136.9
|
|
|
$
|
20.1
|
|
|
14.7
|
%
|
Merchandise and
services
|
|
134.9
|
|
|
127.5
|
|
|
7.4
|
|
|
5.8
|
%
|
Other
|
|
(1.7)
|
|
|
(2.2)
|
|
|
0.5
|
|
|
22.7
|
%
|
Preneed and atneed
sales production
|
|
$
|
290.2
|
|
|
$
|
262.2
|
|
|
$
|
28.0
|
|
|
10.7
|
%
|
Preneed property
production
|
|
$
|
132.0
|
|
|
$
|
115.7
|
|
|
$
|
16.3
|
|
|
14.1
|
%
|
|
|
|
|
|
|
|
|
|
Recognition
rate(5)
|
|
89.1
|
%
|
|
88.0
|
%
|
|
|
|
|
|
|
(1)
|
Atneed revenue
represents property, merchandise, and services sold and delivered
or performed once death has occurred.
|
(2)
|
Recognized preneed
revenue represents property, merchandise, and services sold on a
preneed contract that have been delivered or performed as well as
the related merchandise and service trust fund income.
|
(3)
|
Core revenue
represents the sum of property, merchandise, and services that have
been delivered or performed as well as the related merchandise and
service trust fund income.
|
(4)
|
Other revenue is
primarily related to endowment care trust fund income, royalty
income, and interest and finance charges earned from customer
receivables on preneed installment contracts.
|
(5)
|
Represents the ratio
of current period core revenue recognition stated as a percentage
of current period preneed and atneed sales production.
|
- Comparable cemetery revenue grew $21.1
million, or 8.2%, in the first quarter of 2017 compared to
2016, led by an increase in recognized preneed revenue of
$24.3 million, or 15.9%.
- Comparable preneed cemetery sales production increased
$23.8 million, or 13.0%, quarter over
quarter. The growth over the prior year quarter is due primarily to
the continued momentum of our sales team selling into developed
inventory projects completed at the end of 2016.
- Comparable other cemetery revenue declined $6.8 million reflecting the $7.2 million of perpetual care trust capital gain
distributions received in the prior year quarter that did not
reoccur in the current quarter.
- Comparable cemetery operating profit increased $8.7 million to $64.3
million and the operating margin percentage increased 140
basis points to 23.1%. The $8.7
million increase in comparable cemetery operating profit was
the result of high margin core revenue growth of $27.9 million when taking into account our fixed
cost structure offset by the decline in the other cemetery
revenue.
Other Financial Results
- General and administrative expenses increased $3.6 million to $42.5
million in the first quarter of 2017. The current quarter
includes an increase of $11.6 million
due to certain pension termination settlements. The prior year
quarter included $4.1 million of
system transition costs primarily related to our 2016
implementation of a new general ledger system and $5.5 million related to the write off of debt
costs associated with previous acquisitions. Excluding these costs
in both periods, general and administrative expenses increased
$1.6 million compared to prior year
quarter due to increased costs primarily related to the company's
long-term incentive compensation program tied to improvements in
total shareholder return.
- Interest expense decreased $2.4
million to $40.6 million in
the first quarter of 2017 as we benefited from the debt
refinancings over the past year which increased our proportion of
lower variable rate debt.
- The effective income tax rate for the first quarter of 2017 was
a benefit of 77.4%, down from the full year rate of 40.5% for 2016,
primarily due to our recent IRS tax settlement(A). Our
adjusted effective income tax rate was 30.6% in the first quarter
of 2017 compared to 38.7% in the prior year quarter. The reduction
in our adjusted effective income tax rate was a result of tax
benefits recognized during the quarter on the settlement of
employee share-based awards in accordance with a revised accounting
standard for share-based compensation (B).
Footnotes
|
(A)
|
We reached an
agreement in principle with the Internal Revenue Service to resolve
the issues under audit with respect to tax years 1999 through 2005.
On March 2, 2017, we received from the IRS Office of Appeals the
fully executed Form 870-AD, which, subject to finalization of
computations, effectively settles the issues under audit for those
years. As a result of this resolution, we recognized a
reduction in our uncertain tax reserves of $143.0 million of which
$102.5 million was recognized as an income tax benefit during the
quarter for the matters that were effectively settled with an
increase in our taxes payable of $40.5 million.
|
(B)
|
In the first quarter
of 2017, as required, the Company adopted ASU No. 2016-09,
"Compensation - Stock Compensation (Topic 718) - Improvements to
Employee Share-Based Payment Accounting," which recognizes the tax
effect related to the settlement of share-based awards in income
tax benefit or expense in the statements of earnings rather than in
additional paid-in-capital. This ASU guidance also eliminates the
requirement to reclassify excess tax benefits from operating
activities to financing activities within the statement of cash
flows. The impact of the restricted stock deliveries and option
exercises in the first quarter of 2017 was a reduction to our
adjusted provision for income taxes of $6.4 million, which had the
effect of increasing our diluted earnings per share from continuing
operations excluding special items by $0.03 per share.
|
Cash Flow and Capital Spending
Set forth below is a reconciliation of our reported net cash
provided by operating activities prepared in accordance with GAAP
to net cash provided by operating activities excluding special
items (or sometimes referred to as adjusted operating cash flow).
We do not intend for this information to be considered in isolation
or as a substitute for other measures of performance prepared in
accordance with GAAP.
(In
millions)
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
Net cash provided by
operating activities, as reported
|
$
|
188.4
|
|
|
$
|
184.8
|
|
Excess tax benefits
from share-based awards
|
—
|
|
|
2.3
|
|
System transition
costs
|
—
|
|
|
2.9
|
|
Net cash provided by
operating activities excluding special items
|
$
|
188.4
|
|
|
$
|
190.0
|
|
Cash taxes included
in net cash provided by operating activities excluding special
items
|
$
|
19.0
|
|
|
$
|
7.1
|
|
Net cash provided by operating activities excluding special
items was $188.4 million in the first
quarter of 2017 compared to $190.0
million in the prior year quarter. The cash flow generated
from increased earnings growth in the quarter was primarily offset
by expected increases in cash taxes of $11.9
million and cash interest of $4.0
million.
A summary of our capital expenditures is set forth below:
(In
millions)
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
Capital improvements at
existing locations
|
$
|
17.5
|
|
|
$
|
19.0
|
|
Development of cemetery
property
|
17.1
|
|
|
19.7
|
|
Subtotal
|
34.6
|
|
|
38.7
|
|
Construction of new
funeral home facilities
|
5.6
|
|
|
3.0
|
|
Total capital
expenditures
|
$
|
40.2
|
|
|
$
|
41.7
|
|
Total capital expenditures decreased slightly in the current
quarter by $1.5 million as a result
of the timing of capital deployed throughout the year.
TRUST FUND RETURNS
Total trust fund returns include realized and unrealized gains
and losses, interest, and dividends. A summary of our consolidated
trust fund returns for the three months ended March 31, 2017 is set forth below:
|
|
Three
Months
|
Preneed
funeral
|
|
4.4%
|
Preneed
cemetery
|
|
4.8%
|
Cemetery perpetual
care
|
|
2.5%
|
Combined trust
funds
|
|
3.9%
|
NON-GAAP FINANCIAL MEASURES
Earnings from continuing operations excluding special items and
diluted earnings per share from continuing operations excluding
special items shown above are non-GAAP financial measures. We
believe these non-GAAP financial measures provide a consistent
basis for comparison between quarters and better reflect the
performance of our core operations, as they are not influenced by
certain income or expense items not affecting continuing
operations. We also believe these measures help facilitate
comparisons to our competitors' operating results.
Set forth below is a reconciliation of our reported net income
attributable to common stockholders to earnings from continuing
operations excluding special items and our GAAP diluted earnings
per share to diluted earnings per share from continuing operations
excluding special items. We do not intend for this information to
be considered in isolation or as a substitute for other measures of
performance prepared in accordance with GAAP.
(In millions,
except diluted EPS)
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
|
Net
Income
|
|
Diluted
EPS
|
|
Net
Income
|
|
Diluted
EPS
|
Net income
attributable to common stockholders, as reported
|
$
|
174.7
|
|
|
$
|
0.91
|
|
|
$
|
47.4
|
|
|
$
|
0.24
|
|
Pre-tax reconciling
items:
|
|
|
|
|
|
|
|
(Gains) losses on
divestitures and impairment charges, net
|
(4.9)
|
|
|
(0.03)
|
|
|
0.3
|
|
|
—
|
|
Losses on early
extinguishment of debt
|
—
|
|
|
—
|
|
|
0.6
|
|
|
—
|
|
Acquisition and
integration costs
|
—
|
|
|
—
|
|
|
5.5
|
|
|
0.03
|
|
System transition
costs
|
—
|
|
|
—
|
|
|
4.1
|
|
|
0.02
|
|
Pension termination
settlements
|
11.6
|
|
|
0.06
|
|
|
—
|
|
|
—
|
|
Tax reconciling
items:
|
|
|
|
|
|
|
|
Tax benefit from
special items noted above
|
(2.4)
|
|
|
(0.01)
|
|
|
(3.7)
|
|
|
(0.02)
|
|
Change in certain tax
reserves and other (1)
|
(106.0)
|
|
|
(0.55)
|
|
|
1.1
|
|
|
0.01
|
|
Earnings from
continuing operations excluding special items and diluted earnings
per share from continuing operations excluding special
items
|
$
|
73.0
|
|
|
$
|
0.38
|
|
|
$
|
55.3
|
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding (in thousands)
|
|
|
192,867
|
|
|
|
|
198,030
|
|
|
|
(1)
|
2017 is primarily
impacted by the settlement of IRS tax audits related to tax years
1999-2005. Please see our Form 8-K filed on March 6, 2017 for more
information.
|
Conference Call and Webcast
We will host a conference call on Thursday, April 27, 2017, at 8:00 a.m. Central Time. A question and answer
session will follow a brief presentation made by
management. The conference call dial-in number is (847)
619-6396 with the passcode of 44757174. The conference call will
also be broadcast live via the Internet and can be accessed through
our website at www.sci-corp.com. A replay of the conference
call will be available through May 4,
2017 and can be accessed at (630) 652-3042 with the passcode
of 44757174#. Additionally, a replay of the conference call
will be available on our website for approximately two weeks.
Cautionary Statement on Forward-Looking Statements
The statements in this press release that are not historical
facts are forward-looking statements made in reliance on the "safe
harbor" protections provided under the Private Securities
Litigation Reform Act of 1995. These statements may be accompanied
by words such as "believe," "estimate," "project," "expect,"
"anticipate," or "predict," that convey the uncertainty of future
events or outcomes. These statements are based on assumptions that
we believe are reasonable; however, many important factors could
cause our actual results in the future to differ materially from
the forward-looking statements made herein and in any other
documents or oral presentations made by us, or on our behalf.
Important factors, which could cause actual results to differ
materially from those in forward-looking statements include, among
others, the following:
- Our affiliated funeral and cemetery trust funds own investments
in equity securities, fixed income securities, and mutual funds,
which are affected by market conditions that are beyond our
control.
- We may be required to replenish our affiliated funeral and
cemetery trust funds in order to meet minimum funding requirements,
which would have a negative effect on our earnings and cash
flow.
- Our ability to execute our strategic plan depends on many
factors, some of which are beyond our control.
- Our credit agreements contain covenants that may prevent us
from engaging in certain transactions.
- If we lost the ability to use surety bonding to support our
preneed funeral and preneed cemetery activities, we may be required
to make material cash payments to fund certain trust funds.
- The funeral and cemetery industry is competitive.
- Increasing death benefits related to preneed contracts funded
through life insurance contracts may not cover future increases in
the cost of providing a price-guaranteed service.
- The financial condition of third-party insurance companies that
fund our preneed funeral contracts may impact our future
revenue.
- Unfavorable results of litigation could have a material adverse
impact on our financial statements.
- Unfavorable publicity could affect our reputation and
business.
- If the number of deaths in our markets declines, our cash flows
and revenue may decrease.
- If we are not able to respond effectively to changing consumer
preferences, our market share, revenue, and profitability could
decrease.
- The continuing upward trend in the number of cremations
performed in North America could
result in lower revenue, gross profit and cash flows.
- Our funeral home and cemetery businesses are high fixed-cost
businesses.
- Regulation and compliance could have a material adverse impact
on our financial results.
- Cemetery burial practice legal claims could have a material
adverse impact on our financial results.
- We use a combination of insurance, self-insurance and large
deductibles in managing our exposure to certain inherent risks, as
such, we could be exposed to unexpected costs that could negatively
affect our financial performance.
- A number of years elapse before particular tax matters, for
which we have established accruals, are audited and finally
resolved.
- Declines in overall economic conditions beyond our control
could reduce future potential earnings and cash flows and could
result in future impairments to goodwill and/or other intangible
assets.
- Any failure to maintain the security of the information
relating to our customers, their loved ones, our associates, and
our vendors could damage our reputation, could cause us to incur
substantial additional costs and to become subject to litigation,
and could adversely affect our operating results.
- Our Canadian business exposes us to operational, economic, and
currency risks.
- Our level of indebtedness could adversely affect our ability to
raise additional capital to fund our operations, limit our ability
to react to changes in the economy or our industry, and may prevent
us from fulfilling our obligations under our indebtedness.
- Failure to maintain effective internal control over financial
reporting could adversely affect our results of operations,
investor confidence, and our stock price.
- The application of unclaimed property laws by certain states to
our preneed funeral and cemetery backlog could have a material
adverse impact on our liquidity, cash flows, and our financial
results.
For further information on these and other risks and
uncertainties, see our Securities and Exchange Commission filings,
including our 2016 Annual Report on Form 10-K/A and as updated in
our Form 10-Q filings. Copies of this document as well as other SEC
filings can be obtained from our website at www.sci-corp.com. We
assume no obligation to publicly update or revise any
forward-looking statements made herein or any other forward-looking
statements made by us, whether as a result of new information,
future events or otherwise.
About Service Corporation International
Service Corporation International (NYSE: SCI), headquartered in
Houston, Texas, is North America's leading provider of deathcare
products and services. At March 31, 2017, we owned and
operated 1,500 funeral homes and 475 cemeteries (of which 283 are
combination locations) in 45 states, eight Canadian provinces, the
District of Columbia, and
Puerto Rico. Through our
businesses, we market the Dignity Memorial® brand which offers
assurance of quality, value, caring service, and exceptional
customer satisfaction. For more information about Service
Corporation International, please visit our website at
www.sci-corp.com. For more information about Dignity Memorial®,
please visit www.dignitymemorial.com.
For additional
information contact:
|
|
|
Investors:
|
|
Debbie Young -
Director / Investor Relations
|
|
(713)
525-9088
|
Media:
|
|
Jay Andrew - Managing
Director / Corporate Communications
|
|
(713)
525-5235
|
SERVICE
CORPORATION INTERNATIONAL
|
CONSOLIDATED
STATEMENT OF OPERATIONS
|
|
|
Three Months
Ended
|
|
March
31,
|
|
2017
|
|
2016
|
|
(In thousands,
except per share amounts)
|
Revenue
|
$
|
777,710
|
|
|
$
|
749,219
|
|
Costs and
expenses
|
(600,545)
|
|
|
(586,296)
|
|
Operating
profit
|
177,165
|
|
|
162,923
|
|
General and
administrative expenses
|
(42,504)
|
|
|
(38,904)
|
|
Gains (losses) on
divestitures and impairment charges, net
|
4,935
|
|
|
(347)
|
|
Operating
income
|
139,596
|
|
|
123,672
|
|
Interest
expense
|
(40,636)
|
|
|
(43,082)
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
(581)
|
|
Other expense,
net
|
(434)
|
|
|
(242)
|
|
Income before income
taxes
|
98,526
|
|
|
79,767
|
|
Benefit from
(provision for) income taxes
|
76,223
|
|
|
(32,313)
|
|
Net income
|
174,749
|
|
|
47,454
|
|
Net income
attributable to noncontrolling interests
|
(47)
|
|
|
(9)
|
|
Net income
attributable to common stockholders
|
$
|
174,702
|
|
|
$
|
47,445
|
|
Basic earnings per
share:
|
|
|
|
Net income
attributable to common stockholders
|
$
|
0.93
|
|
|
$
|
0.24
|
|
Basic weighted
average number of shares
|
188,260
|
|
|
194,924
|
|
Diluted earnings per
share:
|
|
|
|
Net income
attributable to common stockholders
|
$
|
0.91
|
|
|
$
|
0.24
|
|
Diluted weighted
average number of shares
|
192,867
|
|
|
198,030
|
|
Dividends declared
per share
|
$
|
0.13
|
|
|
$
|
0.12
|
|
SERVICE
CORPORATION INTERNATIONAL
|
CONSOLIDATED
BALANCE SHEET
|
|
|
March 31,
2017
|
|
December 31,
2016
|
|
(In thousands,
except share amounts)
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
238,254
|
|
|
$
|
194,986
|
|
Receivables,
net
|
86,946
|
|
|
98,455
|
|
Inventories
|
27,375
|
|
|
26,431
|
|
Other
|
38,182
|
|
|
34,524
|
|
Total current
assets
|
390,757
|
|
|
354,396
|
|
Preneed funeral
receivables, net and trust investments
|
1,862,655
|
|
|
1,817,445
|
|
Preneed cemetery
receivables, net and trust investments
|
2,581,745
|
|
|
2,487,720
|
|
Cemetery
property
|
1,782,731
|
|
|
1,776,935
|
|
Property and
equipment, net
|
1,810,347
|
|
|
1,827,587
|
|
Goodwill
|
1,805,590
|
|
|
1,799,081
|
|
Deferred charges and
other assets
|
584,406
|
|
|
567,520
|
|
Cemetery perpetual
care trust investments
|
1,440,935
|
|
|
1,407,465
|
|
Total
assets
|
$
|
12,259,166
|
|
|
$
|
12,038,149
|
|
|
|
|
|
LIABILITIES &
EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
477,002
|
|
|
$
|
439,936
|
|
Current maturities of
long-term debt
|
63,606
|
|
|
89,974
|
|
Income taxes
payable
|
72,382
|
|
|
7,960
|
|
Total current
liabilities
|
612,990
|
|
|
537,870
|
|
Long-term
debt
|
3,224,653
|
|
|
3,196,616
|
|
Deferred preneed
funeral revenue
|
580,676
|
|
|
581,280
|
|
Deferred preneed
cemetery revenue
|
1,180,388
|
|
|
1,150,137
|
|
Deferred tax
liability
|
446,086
|
|
|
454,638
|
|
Other
liabilities
|
362,338
|
|
|
510,322
|
|
Deferred preneed
receipts held in trust
|
3,226,020
|
|
|
3,103,796
|
|
Care trusts'
corpus
|
1,442,265
|
|
|
1,408,243
|
|
Commitments and
contingencies (Note 12)
|
|
|
|
Equity:
|
|
|
|
Common stock, $1 per
share par value, 500,000,000 shares authorized, 196,761,485 and
195,403,644 shares issued, respectively, and 187,949,951 and
189,405,244 shares outstanding, respectively
|
187,950
|
|
|
189,405
|
|
Capital in excess of
par value
|
968,194
|
|
|
990,203
|
|
Retained earnings
(accumulated deficit)
|
5,369
|
|
|
(103,387)
|
|
Accumulated other
comprehensive income
|
19,656
|
|
|
16,492
|
|
Total common
stockholders' equity
|
1,181,169
|
|
|
1,092,713
|
|
Noncontrolling
interests
|
2,581
|
|
|
2,534
|
|
Total
equity
|
1,183,750
|
|
|
1,095,247
|
|
Total liabilities and
equity
|
$
|
12,259,166
|
|
|
$
|
12,038,149
|
|
SERVICE
CORPORATION INTERNATIONAL
|
CONSOLIDATED
STATEMENT OF CASH FLOWS
|
(In thousands,
except share amounts)
|
|
|
Three Months Ended
March 31,
|
|
2017
|
|
2016
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
174,749
|
|
|
$
|
47,454
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
581
|
|
Depreciation and
amortization
|
38,043
|
|
|
35,834
|
|
Amortization of
intangible assets
|
6,844
|
|
|
7,667
|
|
Amortization of
cemetery property
|
13,881
|
|
|
13,599
|
|
Amortization of loan
costs
|
1,433
|
|
|
1,615
|
|
Provision for doubtful
accounts
|
2,484
|
|
|
538
|
|
Benefit from deferred
income taxes
|
(149,585)
|
|
|
(1,291)
|
|
(Gain) loss on
divestitures and impairment charges, net
|
(4,935)
|
|
|
347
|
|
Share-based
compensation
|
3,633
|
|
|
3,067
|
|
Excess tax benefits
from share-based awards
|
—
|
|
|
(2,258)
|
|
Change in assets and
liabilities, net of effects from acquisitions and
divestitures:
|
|
|
|
Decrease in
receivables
|
10,959
|
|
|
9,340
|
|
(Increase) decrease in
other assets
|
(4,858)
|
|
|
1,598
|
|
Increase in payables
and other liabilities
|
86,596
|
|
|
56,062
|
|
Effect of preneed
funeral production and maturities:
|
|
|
|
(Increase) decrease in
preneed funeral receivables, net and trust investments
|
(790)
|
|
|
3,146
|
|
Decrease in deferred
preneed funeral revenue
|
(3,198)
|
|
|
(599)
|
|
Decrease in deferred
preneed funeral receipts held in trust
|
(5,263)
|
|
|
(10,273)
|
|
Effect of cemetery
production and deliveries:
|
|
|
|
Increase in preneed
cemetery receivables, net and trust investments
|
(9,453)
|
|
|
(7,869)
|
|
Increase in deferred
preneed cemetery revenue
|
26,599
|
|
|
22,286
|
|
Increase in deferred
preneed cemetery receipts held in trust
|
1,244
|
|
|
3,918
|
|
Net cash provided by
operating activities
|
188,383
|
|
|
184,762
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(40,150)
|
|
|
(41,708)
|
|
Acquisitions
|
(19,327)
|
|
|
(56)
|
|
Proceeds from
divestitures and sales of property and equipment
|
3,148
|
|
|
10,164
|
|
Net withdrawals of
restricted funds
|
—
|
|
|
5,120
|
|
Net cash used in
investing activities
|
(56,329)
|
|
|
(26,480)
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from issuance
of long-term debt
|
35,000
|
|
|
590,000
|
|
Debt issuance
costs
|
—
|
|
|
(5,035)
|
|
Payments of
debt
|
(8,787)
|
|
|
(10,054)
|
|
Early extinguishment of
debt
|
—
|
|
|
(580,483)
|
|
Principal payments on
capital leases
|
(21,055)
|
|
|
(8,156)
|
|
Proceeds from exercise
of stock options
|
15,261
|
|
|
3,133
|
|
Excess tax benefits
from share-based awards
|
—
|
|
|
2,258
|
|
Purchase of Company
common stock
|
(83,460)
|
|
|
(54,632)
|
|
Payments of
dividends
|
(24,433)
|
|
|
(23,324)
|
|
Bank overdrafts and
other
|
(2,096)
|
|
|
1,369
|
|
Net cash used in
financing activities
|
(89,570)
|
|
|
(84,924)
|
|
Effect of foreign
currency on cash and cash equivalents
|
784
|
|
|
5,548
|
|
Net increase in cash
and cash equivalents
|
43,268
|
|
|
78,906
|
|
Cash and cash
equivalents at beginning of period
|
194,986
|
|
|
134,599
|
|
Cash and cash
equivalents at end of period
|
$
|
238,254
|
|
|
$
|
213,505
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/service-corporation-international-announces-first-quarter-2017-financial-results-and-comments-on-outlook-for-2017-300446581.html
SOURCE Service Corporation International