HOUSTON, July 29, 2015 /PRNewswire/ -- Service Corporation
International (NYSE: SCI), the largest provider of deathcare
products and services in North
America, today reported results for the second quarter 2015.
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
June 30,
|
|
Six Months
Ended
June 30,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Revenues
|
|
$
|
754.4
|
|
|
$
|
746.8
|
|
|
$
|
1,502.5
|
|
|
$
|
1,492.3
|
|
Operating
income
|
|
$
|
127.6
|
|
|
$
|
144.7
|
|
|
$
|
268.7
|
|
|
$
|
252.1
|
|
Net income
attributable to common stockholders
|
|
$
|
52.6
|
|
|
$
|
25.9
|
|
|
$
|
114.0
|
|
|
$
|
67.0
|
|
Diluted earnings per
share
|
|
$
|
0.25
|
|
|
$
|
0.12
|
|
|
$
|
0.55
|
|
|
$
|
0.31
|
|
Earnings from
continuing operations excluding special
items(1)
|
|
$
|
57.1
|
|
|
$
|
49.6
|
|
|
$
|
122.8
|
|
|
$
|
110.3
|
|
Diluted earnings per
share from continuing operations excluding special
items(1)
|
|
$
|
0.28
|
|
|
$
|
0.23
|
|
|
$
|
0.59
|
|
|
$
|
0.51
|
|
Diluted weighted
average shares outstanding
|
|
206.7
|
|
|
216.0
|
|
|
207.2
|
|
|
216.6
|
|
Net cash provided by
operating activities
|
|
$
|
93.7
|
|
|
$
|
42.9
|
|
|
$
|
282.5
|
|
|
$
|
170.8
|
|
Net cash provided by
operating activities excluding special
items(1)
|
|
$
|
101.9
|
|
|
$
|
98.4
|
|
|
$
|
299.7
|
|
|
$
|
262.1
|
|
|
|
(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. A reconciliation to net income,
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 from continuing operations excluding
special items grew 21.7% to $0.28 in
the second quarter of 2015 over the same period in 2014 primarily
driven by strong performance from our cemetery segment, which more
than offset the loss of earnings from properties that have been
subsequently divested in connection with the Stewart
acquisition.
- Consolidated funeral gross profit declined $6.1 million in the second quarter of 2015
compared to the second quarter of 2014. However, comparable funeral
gross profits grew $1.6 million which
helped offset the loss of $7.7
million in gross profits contributed in the prior year
quarter by properties that have been subsequently divested.
- Consolidated cemetery gross profit increased $16.8 million in the second quarter of 2015 over
the prior year quarter and the gross margin percentage increased
470 basis points to 26.5%. Higher gross profits driven by a
double-digit percentage increase in preneed cemetery property sales
more than offset the loss of $2.5
million in gross profits contributed in the prior year
quarter by properties that have been subsequently divested.
- Net cash provided by operating activities excluding special
items increased 3.6% to $101.9
million in the second quarter of 2015 compared to
$98.4 million in the prior year
quarter due primarily to higher cash receipts associated with an
increase in cemetery preneed sales production.
- During the second quarter, we returned $98.6 million to our shareholders through a
combination of share repurchases and dividends.
Tom Ryan, the Company's
President and Chief Executive Officer, commented on the second
quarter of 2015:
"We are very proud of the operating
performance during the second quarter, which resulted in a 22%
improvement in normalized earnings per share. This represents our
fifth consecutive quarter of double-digit percentage growth in
normalized earnings per share. Robust preneed cemetery sales
production continues to be the primary factor driving our earnings
ahead of our expectations. Through six months, normalized earnings
per share has increased 16% and adjusted operating cash flows has
also increased 14%. Coming off of this performance, we have revised
upwards the midpoint of our annual earnings and cash flow guidance
and we expect to continue to deploy capital strategically to
increase shareholder value in the back half of 2015."
REVIEW OF RESULTS
FOR SECOND QUARTER AND FIRST HALF OF 2015
|
|
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
June 30,
|
|
Six Months Ended
June 30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Funeral:
|
|
|
|
|
|
|
|
Atneed
revenue
|
$
|
269.8
|
|
|
$
|
273.6
|
|
|
$
|
566.0
|
|
|
$
|
565.9
|
|
Matured preneed
revenue
|
136.6
|
|
|
151.4
|
|
|
291.9
|
|
|
313.8
|
|
Core revenue
|
406.4
|
|
|
425.0
|
|
|
857.9
|
|
|
879.7
|
|
Recognized preneed
revenue
|
25.4
|
|
|
20.8
|
|
|
48.5
|
|
|
42.5
|
|
Other
revenue
|
39.7
|
|
|
33.7
|
|
|
72.8
|
|
|
66.4
|
|
Total
revenue
|
$
|
471.5
|
|
|
$
|
479.5
|
|
|
$
|
979.2
|
|
|
$
|
988.6
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
$
|
91.7
|
|
|
$
|
97.8
|
|
|
$
|
216.4
|
|
|
$
|
217.0
|
|
Gross margin
percentage
|
19.4
|
%
|
|
20.4
|
%
|
|
22.1
|
%
|
|
22.0
|
%
|
|
|
|
|
|
|
|
|
Funeral services
performed
|
77,969
|
|
|
80,846
|
|
|
165,279
|
|
|
168,910
|
|
Average revenue per
service
|
$
|
5,212
|
|
|
$
|
5,257
|
|
|
$
|
5,191
|
|
|
$
|
5,208
|
|
|
|
|
|
|
|
|
|
Cemetery:
|
|
|
|
|
|
|
|
Atneed
revenue
|
$
|
75.7
|
|
|
$
|
77.6
|
|
|
$
|
151.2
|
|
|
$
|
154.0
|
|
Recognized preneed
revenue
|
167.2
|
|
|
153.6
|
|
|
299.1
|
|
|
280.0
|
|
Core revenue
|
242.9
|
|
|
231.2
|
|
|
450.3
|
|
|
434.0
|
|
Other
revenue
|
40.0
|
|
|
36.0
|
|
|
73.0
|
|
|
69.7
|
|
Total
revenue
|
$
|
282.9
|
|
|
$
|
267.2
|
|
|
$
|
523.3
|
|
|
$
|
503.7
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
$
|
75.0
|
|
|
$
|
58.2
|
|
|
$
|
128.3
|
|
|
$
|
105.1
|
|
Gross margin
percentage
|
26.5
|
%
|
|
21.8
|
%
|
|
24.5
|
%
|
|
20.9
|
%
|
Comparable Funeral Results
The table below details comparable funeral results of operations
("same store") for the three months ended June 30, 2015 and 2014. We consider comparable
operations to be those owned for the entire period beginning
January 1, 2014 and ending June 30,
2015.
(Dollars in
millions, except average revenue per service and average revenue
per contract sold)
|
|
Three Months Ended
June 30,
|
|
|
2015
|
|
2014
|
Comparable
revenue:
|
|
|
|
|
Atneed
revenue(1)
|
|
$
|
267.5
|
|
|
$
|
262.0
|
|
Matured preneed
revenue(2)
|
|
136.3
|
|
|
143.0
|
|
Core
revenue(3)
|
|
403.8
|
|
|
405.0
|
|
Recognized preneed
revenue(4)
|
|
24.9
|
|
|
20.7
|
|
Other
revenue(5)
|
|
39.7
|
|
|
32.8
|
|
Total comparable
revenue
|
|
$
|
468.4
|
|
|
$
|
458.5
|
|
|
|
|
|
|
Comparable gross
profit
|
|
$
|
92.7
|
|
|
$
|
91.1
|
|
Comparable gross
margin percentage
|
|
19.8
|
%
|
|
19.9
|
%
|
|
|
|
|
|
Comparable funeral
services performed
|
|
77,172
|
|
|
77,198
|
|
Comparable average
revenue per service
|
|
$
|
5,233
|
|
|
$
|
5,246
|
|
Comparable average
revenue per service, excluding the impact of foreign currency
fluctuations
|
|
$
|
5,330
|
|
|
$
|
5,289
|
|
|
|
|
|
|
Comparable preneed
sales production:
|
|
|
|
|
Sales excluding
terminally imminent contracts
|
|
$
|
193.3
|
|
|
$
|
186.9
|
|
Sales of terminally
imminent contracts
|
|
16.9
|
|
|
24.0
|
|
Total preneed
sales
|
|
$
|
210.2
|
|
|
$
|
210.9
|
|
|
|
|
|
|
Total preneed contracts
sold
|
|
44,894
|
|
|
44,590
|
|
Average revenue per
contract sold
|
|
$
|
4,682
|
|
|
$
|
4,731
|
|
Average revenue per
contract sold, excluding the impact of foreign currency
fluctuations
|
|
$
|
4,757
|
|
|
$
|
4,766
|
|
|
|
(1)
|
Atneed revenue
represents merchandise and services sold once death has
occurred.
|
(2)
|
Matured preneed
revenue represents merchandise and services primarily sold on a
preneed contract but delivered and/or performed once death has
occurred.
|
(3)
|
Core revenue
represents merchandise and services recognized once death has
occurred.
|
(4)
|
Recognized preneed
revenue represents merchandise and travel protection sold on a
preneed contract and delivered before death has occurred
|
(5)
|
Other revenue
consists primarily of General Agency revenue, which are commissions
we receive from third-party insurance companies for life insurance
policies sold to preneed customers for the purpose of funding
preneed arrangements.
|
- Comparable funeral revenue increased by $9.9 million in the second quarter of 2015
compared to 2014 mainly driven by an increase in recognized preneed
revenue and higher General Agency revenue.
- Comparable average revenue per service decreased by 0.2%.
Excluding an unfavorable Canadian currency impact, the average
revenue per service grew 0.8%. Our comparable cremation rate
increased to 51.3% in the second quarter of 2015 compared to 50.7%
in the second quarter of 2014.
- Comparable gross profit increased $1.6
million, or 1.8%, compared to the prior year quarter while
the gross margin percentage remained relatively flat compared to
the prior year quarter. The improvement was led by the revenue
increases described above.
- Preneed funeral sales production, excluding terminally imminent
contracts in both periods, increased $6.4
million for the quarter or 3.4%. A terminally imminent
contract is used when a family chooses to make arrangements several
weeks or a few months in advance of need. In mid-2014, we began to
record more of these sales directly into atneed sales instead of
recording them as preneed sales that quickly convert into atneed
business.
Comparable Cemetery Results
The table below details comparable cemetery results of
operations ("same store") for the three months ended June 30, 2015 and 2014. We consider comparable
operations to be those owned for the entire period beginning
January 1, 2014 and ending June 30,
2015.
(Dollars in
millions)
|
|
Three Months Ended
June 30,
|
|
|
2015
|
|
2014
|
Comparable
revenue:
|
|
|
|
|
Atneed
revenue(1)
|
|
$
|
74.7
|
|
|
$
|
72.3
|
|
Recognized preneed
revenue(2)
|
|
166.3
|
|
|
147.6
|
|
Core
revenue(3)
|
|
241.0
|
|
|
219.9
|
|
Other
revenue(4)
|
|
39.7
|
|
|
34.5
|
|
Total comparable
revenue
|
|
$
|
280.7
|
|
|
$
|
254.4
|
|
|
|
|
|
|
Comparable gross
profit
|
|
$
|
74.6
|
|
|
$
|
56.2
|
|
Comparable gross
margin percentage
|
|
26.6
|
%
|
|
22.1
|
%
|
|
|
|
|
|
Comparable preneed and
atneed sales production:
|
|
|
|
|
Property
|
|
$
|
190.6
|
|
|
$
|
167.8
|
|
Merchandise and
services
|
|
140.7
|
|
|
127.9
|
|
Discounts
|
|
(37.7)
|
|
|
(34.2)
|
|
Preneed and atneed
sales production
|
|
$
|
293.6
|
|
|
$
|
261.5
|
|
Recognition
rate(5)
|
|
82
|
%
|
|
84
|
%
|
|
|
(1)
|
Atneed revenue
represents property, merchandise, and services sold once death has
occurred.
|
(2)
|
Recognized preneed
revenue represents property sold on a preneed contract and
merchandise and services sold on a preneed contract that have been
delivered or performed.
|
(3)
|
Core revenue
represents property, merchandise, and services that have been
delivered or performed.
|
(4)
|
Other revenue is
primarily related to merchandise and service trust fund income,
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 sales production.
|
- Comparable cemetery revenue grew $26.3
million, or 10.3%, in the second quarter of 2015 compared to
2014 primarily from an increase in preneed cemetery property sales
production and higher trust fund income.
- Preneed cemetery sales production increased $31.6 million, or 16.9%, in the current quarter
compared to same period last year. This increase was driven by
strong growth in the number of preneed property contracts sold as
well as a healthy increase in the average sale, which was partially
offset by an unfavorable Canadian currency impact.
- Comparable cemetery gross profit increased $18.4 million and the adjusted gross margin
percentage increased 450 basis points to 26.6% in the current
quarter. The gross profit improvement was driven by the increases
in cemetery property sales stated above as well as a $5.0 million increase in trust fund income. This
increase was partially offset by higher selling costs associated
with the higher preneed sales production.
Other Financial Results
- General and administrative expenses decreased $12.7 million to $33.6
million. The prior year included $14.1 million of costs related to the integration
of Stewart and $3.9 million of system
integration and other costs. Excluding these one-time costs,
general and administrative expenses increased $5.3 million over the prior year, which is
primarily due to the permanent costs associated with the increased
scale of the combined SCI and Stewart entity.
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
June 30,
|
|
Six Months
Ended
June 30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Net cash provided by
operating activities, as reported
|
$
|
93.7
|
|
|
$
|
42.9
|
|
|
$
|
282.5
|
|
|
$
|
170.8
|
|
Premiums paid on
early extinguishment
|
—
|
|
|
24.8
|
|
|
—
|
|
|
24.8
|
|
Stewart acquisition
and transition costs
|
—
|
|
|
18.4
|
|
|
—
|
|
|
47.0
|
|
Legal defense fees
and other matters
|
—
|
|
|
10.0
|
|
|
—
|
|
|
10.3
|
|
Excess tax benefits
from share-based awards
|
7.5
|
|
|
5.8
|
|
|
13.0
|
|
|
12.5
|
|
Other
|
0.7
|
|
|
(3.5)
|
|
|
4.2
|
|
|
(3.3)
|
|
Net cash provided by
operating activities excluding special items
|
$
|
101.9
|
|
|
$
|
98.4
|
|
|
$
|
299.7
|
|
|
$
|
262.1
|
|
- Net cash provided by operating activities excluding special
items increased $3.5 million to
$101.9 million for the second quarter
compared to $98.4 million in the
prior year quarter due primarily to higher cash receipts associated
with the increase in cemetery comparable preneed sales production,
an increase in net trust fund withdrawals, and a $9.1 million decrease in cash interest paid.
These increases were partially offset by an increase in payroll
funding as a result of the timing of the Independence Day holiday and anticipated higher
cash tax payments.
- A summary of our capital expenditures is set forth below:
(In millions)
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Capital improvements at
existing locations
|
$
|
23.1
|
|
|
$
|
17.5
|
|
|
$
|
40.3
|
|
|
$
|
29.3
|
|
Development of cemetery
property
|
12.5
|
|
|
10.4
|
|
|
21.9
|
|
|
20.7
|
|
Construction of new
funeral home facilities
|
0.8
|
|
|
4.6
|
|
|
2.5
|
|
|
7.4
|
|
Total capital
expenditures
|
$
|
36.4
|
|
|
$
|
32.5
|
|
|
$
|
64.7
|
|
|
$
|
57.4
|
|
TRUST FUND RETURNS
Total trust fund returns include
realized and unrealized gains and losses and dividends. A summary
of our consolidated trust fund returns for the three and six months
ended June 30, 2015 is set forth
below:
|
|
Three
Months
|
|
Six
Months
|
Preneed
funeral
|
|
0.3%
|
|
2.5%
|
Preneed
cemetery
|
|
0.3%
|
|
2.8%
|
Cemetery perpetual
care
|
|
(0.2)%
|
|
1.6%
|
Combined trust
funds
|
|
0.1%
|
|
2.3%
|
OUTLOOK FOR 2015
Our updated outlook for potential earnings and cash flow in 2015
is as follows:
(In millions
except per share amounts)
|
|
Previous 2015
Outlook
|
|
Updated
2015
Annual Guidance
|
Diluted earnings per
share from continuing operations excluding special items
(1)
|
|
$1.16 to
$1.28
|
|
$1.22 to
$1.28
|
Net cash provided by
operating activities excluding special items
(1)
|
|
$450 to
$500
|
|
$475 to
$500
|
Capital improvements
at existing facilities and cemetery development
expenditures
|
|
$130 to
$140
|
|
$130 to
$140
|
|
|
(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 historically reconcile these
non-GAAP financial measures to 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 guidance for 2015 excludes the following
because this information is not currently available for 2015: Gains
or losses associated with asset divestitures, gains or losses
associated with the early extinguishment of debt, potential tax
reserve adjustments, acquisition 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 could materially impact our
forward-looking diluted EPS and 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".
|
This outlook reflects management's current views and estimates
regarding future economic and financial market conditions, company
performance and financial results, business prospects, the
competitive environment, and other events. This outlook is subject
to a number of risks and uncertainties, many of which are beyond
the control of SCI, that could cause actual results to differ
materially from the potential results highlighted above. A further
list and description of these risks and uncertainties and other
matters can be found later in this press release under "Cautionary
Statement on Forward-Looking Statements".
NON-GAAP FINANCIAL MEASURES
Earnings from continuing
operations excluding special items and diluted earnings per share
from continuing operations excluding special items (or sometimes
referred to as normalized earnings per share) 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
June 30,
|
|
2015
|
|
2014
|
|
Net
Income
|
|
Diluted
EPS
|
|
Net
Income
|
|
Diluted
EPS
|
Net income
attributable to common stockholders, as reported
|
$
|
52.6
|
|
|
$
|
0.25
|
|
|
$
|
25.9
|
|
|
$
|
0.12
|
|
After-tax reconciling
items:
|
|
|
|
|
|
|
|
Losses (gains) on
divestitures and impairment charges, net
|
4.6
|
|
|
0.03
|
|
|
(7.0)
|
|
|
(0.05)
|
|
Acquisition and
transition costs
|
—
|
|
|
—
|
|
|
9.1
|
|
|
0.05
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
—
|
|
|
18.4
|
|
|
0.09
|
|
Other
|
(0.1)
|
|
|
—
|
|
|
3.2
|
|
|
0.02
|
|
Earnings from
continuing operations and diluted earnings per share excluding
special items
|
$
|
57.1
|
|
|
$
|
0.28
|
|
|
$
|
49.6
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding (in thousands)
|
|
|
206,746
|
|
|
|
|
215,989
|
|
|
|
(In millions,
except diluted EPS)
|
Six Months Ended
June 30,
|
|
2015
|
|
2014
|
|
Net
Income
|
|
Diluted
EPS
|
|
Net
Income
|
|
Diluted
EPS
|
Net income
attributable to common stockholders, as reported
|
$
|
114.0
|
|
|
$
|
0.55
|
|
|
$
|
67.0
|
|
|
$
|
0.31
|
|
After-tax reconciling
items:
|
|
|
|
|
|
|
|
Losses (gains) on
divestitures and impairment charges, net
|
5.7
|
|
|
0.03
|
|
|
(5.8)
|
|
|
(0.03)
|
|
Acquisition and
transition costs
|
1.8
|
|
|
0.01
|
|
|
19.2
|
|
|
0.09
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
—
|
|
|
18.4
|
|
|
0.08
|
|
Legal defense fees and
other matters
|
—
|
|
|
—
|
|
|
7.7
|
|
|
0.04
|
|
Other
|
1.3
|
|
|
—
|
|
|
3.8
|
|
|
0.02
|
|
Earnings from
continuing operations and diluted earnings per share excluding
special items
|
$
|
122.8
|
|
|
$
|
0.59
|
|
|
$
|
110.3
|
|
|
$
|
0.51
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding (in thousands)
|
|
|
207,221
|
|
|
|
|
216,593
|
|
Conference Call and Webcast
We will host a conference call on Thursday, July 30, 2015, at 9:00 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)
619-6441 with the passcode of 40238041. 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 August 13,
2015 and can be accessed at (630) 652-3042 with the passcode
of 40238041#. Additionally, a replay of the conference call
will be available on our website for approximately ninety days.
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 home and cemetery industry is competitive.
- Increasing death benefits related to preneed funeral contracts
funded through life insurance or annuity contracts may not cover
future increases in the cost of providing a price-guaranteed
funeral service.
- The financial condition of third-party insurance companies that
fund our preneed funeral contracts may impact our future
revenues.
- 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 revenues may decrease.
- If we are not able to respond effectively to changing consumer
preferences, our market share, revenues, and profitability could
decrease.
- The continuing upward trend in the number of cremations
performed in North America could
result in lower revenues and gross profit.
- 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 claims could have a material adverse
impact on our financial results.
- A number of years may 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 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.
For further information on these and other risks and
uncertainties, see our Securities and Exchange Commission filings,
including our 2014 Annual Report on Form 10-K. 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 June 30,
2015, we owned and operated 1,550 funeral homes and 467
cemeteries (of which 262 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:
|
|
Marianne Gooch-
Managing Director/ Corporate Communications
|
|
(713)
525-9167
|
SERVICE
CORPORATION INTERNATIONAL
|
CONSOLIDATED
STATEMENT OF OPERATIONS
|
|
(In thousands,
except per share amounts)
|
|
|
Three Months
Ended
June
30,
|
|
Six Months
Ended
June
30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Revenues
|
$
|
754,354
|
|
|
$
|
746,760
|
|
|
$
|
1,502,471
|
|
|
$
|
1,492,255
|
|
Costs and
expenses
|
(587,624)
|
|
|
(590,716)
|
|
|
(1,157,792)
|
|
|
(1,170,151)
|
|
Gross
profit
|
166,730
|
|
|
156,044
|
|
|
344,679
|
|
|
322,104
|
|
General and
administrative expenses
|
(33,568)
|
|
|
(46,307)
|
|
|
(68,623)
|
|
|
(102,137)
|
|
(Losses) gains on
divestitures and impairment charges, net
|
(5,582)
|
|
|
34,994
|
|
|
(7,361)
|
|
|
32,182
|
|
Operating
income
|
127,580
|
|
|
144,731
|
|
|
268,695
|
|
|
252,149
|
|
Interest
expense
|
(42,982)
|
|
|
(46,307)
|
|
|
(85,921)
|
|
|
(91,303)
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
(29,158)
|
|
|
—
|
|
|
(29,158)
|
|
Other (expense)
income, net
|
(109)
|
|
|
50
|
|
|
(167)
|
|
|
1,586
|
|
Income from
continuing operations before income taxes
|
84,489
|
|
|
69,316
|
|
|
182,607
|
|
|
133,274
|
|
Provision for income
taxes
|
(31,007)
|
|
|
(37,357)
|
|
|
(67,660)
|
|
|
(60,064)
|
|
Net income from
continuing operations
|
53,482
|
|
|
31,959
|
|
|
114,947
|
|
|
73,210
|
|
Net losses from
discontinued operations, net of tax
|
(390)
|
|
|
(178)
|
|
|
(390)
|
|
|
(38)
|
|
Net income
|
53,092
|
|
|
31,781
|
|
|
114,557
|
|
|
73,172
|
|
Net income
attributable to noncontrolling interests
|
(497)
|
|
|
(5,859)
|
|
|
(587)
|
|
|
(6,148)
|
|
Net income
attributable to common stockholders
|
$
|
52,595
|
|
|
$
|
25,922
|
|
|
$
|
113,970
|
|
|
$
|
67,024
|
|
Basic earnings per
share:
|
|
|
|
|
|
|
|
Net income
attributable to common stockholders
|
$
|
0.26
|
|
|
$
|
0.12
|
|
|
$
|
0.56
|
|
|
$
|
0.32
|
|
Basic weighted
average number of shares
|
202,466
|
|
|
212,390
|
|
|
202,966
|
|
|
212,613
|
|
Diluted earnings per
share:
|
|
|
|
|
|
|
|
Net income
attributable to common stockholders
|
$
|
0.25
|
|
|
$
|
0.12
|
|
|
$
|
0.55
|
|
|
$
|
0.31
|
|
Diluted weighted
average number of shares
|
206,746
|
|
|
215,989
|
|
|
207,221
|
|
|
216,593
|
|
Dividends declared
per share
|
$
|
0.10
|
|
|
$
|
0.08
|
|
|
$
|
0.20
|
|
|
$
|
0.16
|
|
SERVICE
CORPORATION INTERNATIONAL
|
CONSOLIDATED
BALANCE SHEET
|
|
(In thousands,
except share amounts)
|
|
|
June 30,
2015
|
|
December 31,
2014
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
199,096
|
|
|
$
|
177,335
|
|
Receivables,
net
|
92,192
|
|
|
109,050
|
|
Inventories
|
29,846
|
|
|
29,697
|
|
Other
|
40,036
|
|
|
80,774
|
|
Total current
assets
|
361,170
|
|
|
396,856
|
|
Preneed funeral
receivables, net and trust investments
|
1,829,071
|
|
|
1,843,023
|
|
Preneed cemetery
receivables, net and trust investments
|
2,355,034
|
|
|
2,306,669
|
|
Cemetery
property
|
1,743,950
|
|
|
1,739,216
|
|
Property and
equipment, net
|
1,846,579
|
|
|
1,861,403
|
|
Goodwill
|
1,811,842
|
|
|
1,810,853
|
|
Deferred charges and
other assets
|
629,436
|
|
|
624,248
|
|
Cemetery perpetual
care trust investments
|
1,347,753
|
|
|
1,341,376
|
|
|
$
|
11,924,835
|
|
|
$
|
11,923,644
|
|
LIABILITIES &
EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
420,926
|
|
|
$
|
453,042
|
|
Current maturities of
long-term debt
|
290,016
|
|
|
90,931
|
|
Income
taxes
|
14,323
|
|
|
8,035
|
|
Total current
liabilities
|
725,265
|
|
|
552,008
|
|
Long-term
debt
|
2,769,861
|
|
|
2,963,794
|
|
Deferred preneed
funeral revenues
|
550,663
|
|
|
540,164
|
|
Deferred preneed
cemetery revenues
|
1,123,686
|
|
|
1,062,381
|
|
Deferred tax
liability
|
436,602
|
|
|
448,824
|
|
Other
liabilities
|
502,130
|
|
|
502,553
|
|
Deferred preneed
receipts held in trust
|
3,137,017
|
|
|
3,148,884
|
|
Care trusts'
corpus
|
1,345,876
|
|
|
1,327,658
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
Common stock, $1 per
share par value, 500,000,000 shares authorized, 208,205,991 and
205,458,331 shares issued, respectively, and 201,751,035 and
204,866,770 shares outstanding, respectively
|
201,751
|
|
|
204,867
|
|
Capital in excess of
par value
|
1,158,121
|
|
|
1,186,304
|
|
Accumulated
deficit
|
(79,971)
|
|
|
(81,859)
|
|
Accumulated other
comprehensive income
|
44,668
|
|
|
59,414
|
|
Total common
stockholders' equity
|
1,324,569
|
|
|
1,368,726
|
|
Noncontrolling
interests
|
9,166
|
|
|
8,652
|
|
Total
Equity
|
1,333,735
|
|
|
1,377,378
|
|
|
$
|
11,924,835
|
|
|
$
|
11,923,644
|
|
SERVICE
CORPORATION INTERNATIONAL
|
CONSOLIDATED
STATEMENT OF CASH FLOWS
|
|
(In
thousands)
|
|
|
Six Months
Ended
December
31,
|
|
2015
|
|
2014
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
114,557
|
|
|
$
|
73,172
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Loss from discontinued
operations, net of tax
|
390
|
|
|
38
|
|
Losses on early
extinguishment of debt
|
—
|
|
|
29,158
|
|
Premiums paid on early
extinguishment of debt
|
—
|
|
|
(24,804)
|
|
Depreciation and
amortization
|
68,899
|
|
|
70,595
|
|
Amortization of
intangible assets
|
15,983
|
|
|
19,346
|
|
Amortization of
cemetery property
|
26,027
|
|
|
25,790
|
|
Amortization of loan
costs
|
4,865
|
|
|
4,048
|
|
Provision for doubtful
accounts
|
3,431
|
|
|
4,541
|
|
(Benefit) provision
for deferred income taxes
|
(8,466)
|
|
|
26,484
|
|
Losses (gains) on
divestitures and impairment charges, net
|
7,361
|
|
|
(32,182)
|
|
Share-based
compensation
|
7,284
|
|
|
6,423
|
|
Excess tax benefits
from share-based awards
|
(13,003)
|
|
|
(12,521)
|
|
Change in assets and
liabilities, net of effects from acquisitions and
divestitures:
|
|
|
|
Decrease (increase) in
receivables
|
2,276
|
|
|
(7,241)
|
|
Increase in other
assets
|
(761)
|
|
|
(22,351)
|
|
Increase in payables
and other liabilities
|
33,932
|
|
|
9,437
|
|
Effect of preneed
funeral production and maturities:
|
|
|
|
Decrease in preneed
funeral receivables, net and trust investments
|
16,144
|
|
|
23,963
|
|
Increase (decrease) in
deferred preneed funeral revenue
|
14,247
|
|
|
(11,965)
|
|
Decrease in deferred
preneed funeral receipts held in trust
|
(37,366)
|
|
|
(22,550)
|
|
Effect of cemetery
production and deliveries:
|
|
|
|
Increase in preneed
cemetery receivables, net and trust investments
|
(28,272)
|
|
|
(31,736)
|
|
Increase in deferred
preneed cemetery revenue
|
62,482
|
|
|
43,478
|
|
Decrease in deferred
preneed cemetery receipts held in trust
|
(7,506)
|
|
|
(1,323)
|
|
Other
|
3
|
|
|
2,017
|
|
Net cash provided by
operating activities from continuing operations
|
282,507
|
|
|
171,817
|
|
Net cash used in
operating activities from discontinued operations
|
—
|
|
|
(1,000)
|
|
Net cash provided by
operating activities
|
282,507
|
|
|
170,817
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(64,724)
|
|
|
(57,379)
|
|
Acquisitions
|
(36,726)
|
|
|
(7,575)
|
|
Proceeds from
divestitures and sales of property and equipment, net
|
8,268
|
|
|
154,893
|
|
Net withdrawals
(deposits) of restricted funds and other
|
8,066
|
|
|
(12,225)
|
|
Net cash (used in) by
provided investing activities from continuing operations
|
(85,116)
|
|
|
77,714
|
|
Net cash provided by
(used in) investing activities from discontinued
operations
|
987
|
|
|
(361)
|
|
Net cash (used in)
provided by investing activities
|
(84,129)
|
|
|
77,353
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from the
issuance of long-term debt
|
30,000
|
|
|
755,000
|
|
Debt issuance
costs
|
—
|
|
|
(10,500)
|
|
Payments of
debt
|
(30,121)
|
|
|
(135,371)
|
|
Early extinguishment of
debt
|
—
|
|
|
(762,782)
|
|
Principal payments on
capital leases
|
(15,257)
|
|
|
(14,491)
|
|
Proceeds from exercise
of stock options
|
26,799
|
|
|
14,791
|
|
Excess tax benefit from
share-based awards
|
13,003
|
|
|
12,521
|
|
Purchase of Company
common stock
|
(151,795)
|
|
|
(60,425)
|
|
Payments of
dividends
|
(40,398)
|
|
|
(34,024)
|
|
Purchase of
noncontrolling interest
|
—
|
|
|
(15,000)
|
|
Bank overdrafts and
other
|
(7,533)
|
|
|
115
|
|
Net cash used in
financing activities
|
(175,302)
|
|
|
(250,166)
|
|
Net change in cash of
discontinued operations
|
—
|
|
|
1,323
|
|
Effect of foreign
currency on cash and cash equivalents
|
(1,315)
|
|
|
(392)
|
|
Net increase
(decrease) in cash and cash equivalents
|
21,761
|
|
|
(1,065)
|
|
Cash and cash
equivalents at beginning of period
|
177,335
|
|
|
141,580
|
|
Cash and cash
equivalents at end of period
|
$
|
199,096
|
|
|
$
|
140,515
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/service-corporation-international-announces-second-quarter-2015-financial-results-and-updates-2015-financial-guidance-300120766.html
SOURCE Service Corporation International