HOUSTON, Oct. 26, 2016 /PRNewswire/ -- Service
Corporation International (NYSE: SCI), the largest provider of
deathcare products and services in North
America, reported results for the third quarter of 2016. 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
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenue
|
$
|
721.5
|
|
|
$
|
714.5
|
|
|
$
|
2,222.1
|
|
|
$
|
2,216.8
|
|
Operating
income
|
$
|
114.4
|
|
|
$
|
124.5
|
|
|
$
|
332.6
|
|
|
$
|
393.2
|
|
Net income
attributable to common stockholders
|
$
|
47.7
|
|
|
$
|
47.4
|
|
|
$
|
110.8
|
|
|
$
|
161.4
|
|
Diluted earnings per
share
|
$
|
0.24
|
|
|
$
|
0.23
|
|
|
$
|
0.56
|
|
|
$
|
0.78
|
|
Earnings from
continuing operations excluding special
items(1)
|
$
|
51.6
|
|
|
$
|
45.9
|
|
|
$
|
162.7
|
|
|
$
|
168.7
|
|
Diluted earnings per
share from continuing operations excluding special
items(1)
|
$
|
0.26
|
|
|
$
|
0.23
|
|
|
$
|
0.83
|
|
|
$
|
0.82
|
|
Diluted weighted
average shares outstanding
|
196.6
|
|
|
203.4
|
|
|
197.2
|
|
|
206.0
|
|
Net cash provided by
operating activities
|
$
|
133.0
|
|
|
$
|
114.1
|
|
|
$
|
358.5
|
|
|
$
|
396.6
|
|
Net cash provided by
operating activities excluding special
items(1)
|
$
|
143.0
|
|
|
$
|
124.9
|
|
|
$
|
401.6
|
|
|
$
|
424.6
|
|
|
|
(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 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 $0.24 in the third quarter of 2016 compared to
$0.23 in the third quarter of 2015.
The third quarter of 2016 included system transition costs and
higher income tax rates related to the divestitures of businesses.
Diluted earnings per share excluding special items were
$0.26 in the third quarter of 2016
compared to $0.23 in the third
quarter of 2015. The increase in diluted earnings per share
excluding special items was driven by solid operating results
bolstered by effective operating expense management, lower interest
expense, and fewer shares outstanding resulting from our ongoing
share repurchase program.
- Net cash provided by operating activities was $133.0 million in the third quarter of 2016
compared to $114.1 million in the
third quarter of 2015. Excess tax benefits from share-based awards
reduced cash provided by operating activities in both periods. The
third quarter of 2015 was also negatively impacted by premiums paid
on early extinguishment of debt. Net cash provided by operating
activities excluding special items was $143.0 million in the third quarter of 2016
compared to $124.9 million in the
prior year quarter. These increases were primarily due to increased
earnings and favorable working capital initiatives.
- During the third quarter, we returned $136.7 million to shareholders through share
repurchases and dividends and deployed $14.3
million of capital to accretive acquisitions.
Tom Ryan, the Company's
Chairman and Chief Executive Officer, commented on the third
quarter of 2016:
"We are pleased to report double-digit percentage growth in both
adjusted earnings per share and adjusted operating cash flow during
the quarter. Growth in cemetery revenue and effectively managing
back office overhead expenses coupled with reduced interest expense
and shares outstanding were the primary drivers of our double-digit
growth in the quarter. While funeral services performed were
sluggish initially against our expectations, they improved in the
back half of the quarter. We expect this momentum to continue in
the fourth quarter of 2016 and we are reiterating our full year
2016 adjusted earnings per share and operating cash flow guidance.
Our results are a testament to the hard work and dedication of our
entire team, and I thank all 24,000 team members for their focus on
delivering extraordinary service to our client families. We believe
our long-term value creation plan is on track as we grow our
revenues by remaining relevant with the consumer, drive future
market share by growing our preneed sales, continue to leverage our
scale, and deploy capital to enhance shareholder value."
REVIEW OF RESULTS
FOR THIRD QUARTER 2016
|
|
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
September 30,
|
|
Nine Months Ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Funeral:
|
|
|
|
|
|
|
|
Atneed
revenue
|
$
|
252.9
|
|
|
$
|
258.1
|
|
|
$
|
800.5
|
|
|
$
|
831.8
|
|
Funeral home matured
preneed revenue
|
127.7
|
|
|
123.8
|
|
|
397.7
|
|
|
403.7
|
|
Core revenue
|
380.6
|
|
|
381.9
|
|
|
1,198.2
|
|
|
1,235.5
|
|
Non-funeral home
matured preneed revenue
|
6.2
|
|
|
5.9
|
|
|
18.7
|
|
|
18.5
|
|
Recognized preneed
revenue
|
27.8
|
|
|
25.7
|
|
|
86.0
|
|
|
74.2
|
|
Other
revenue
|
30.9
|
|
|
35.8
|
|
|
101.7
|
|
|
100.3
|
|
Total
revenue
|
$
|
445.5
|
|
|
$
|
449.3
|
|
|
$
|
1,404.6
|
|
|
$
|
1,428.5
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
$
|
75.6
|
|
|
$
|
77.7
|
|
|
$
|
273.9
|
|
|
$
|
299.8
|
|
Gross margin
percentage
|
17.0
|
%
|
|
17.3
|
%
|
|
19.5
|
%
|
|
21.0
|
%
|
|
|
|
|
|
|
|
|
Funeral services
performed
|
72,680
|
|
|
73,874
|
|
|
230,516
|
|
|
239,153
|
|
Average revenue per
service
|
$
|
5,322
|
|
|
$
|
5,249
|
|
|
$
|
5,279
|
|
|
$
|
5,244
|
|
|
|
|
|
|
|
|
|
Cemetery:
|
|
|
|
|
|
|
|
Atneed
revenue
|
$
|
74.2
|
|
|
$
|
74.4
|
|
|
$
|
231.0
|
|
|
$
|
225.5
|
|
Recognized preneed
revenue
|
171.3
|
|
|
162.5
|
|
|
484.3
|
|
|
461.6
|
|
Core revenue
|
245.5
|
|
|
236.9
|
|
|
715.3
|
|
|
687.1
|
|
Other
revenue
|
30.5
|
|
|
28.3
|
|
|
102.2
|
|
|
101.2
|
|
Total
revenue
|
$
|
276.0
|
|
|
$
|
265.2
|
|
|
$
|
817.5
|
|
|
$
|
788.3
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
$
|
65.2
|
|
|
$
|
63.9
|
|
|
$
|
191.7
|
|
|
$
|
187.0
|
|
Gross margin
percentage
|
23.6
|
%
|
|
24.1
|
%
|
|
23.5
|
%
|
|
23.7
|
%
|
Comparable Funeral Results
The table below details comparable funeral results of operations
("same store") for the three months ended September 30, 2016 and 2015. We consider
comparable operations to be those owned for the entire period
beginning January 1, 2015 and ending September 30,
2016.
(Dollars in
millions, except average revenue per service and average revenue
per contract sold)
|
|
|
|
Three Months Ended
September 30,
|
|
|
2016
|
|
2015
|
|
$
|
|
%
|
Comparable
revenue:
|
|
|
|
|
|
|
|
|
Atneed
revenue(1)
|
|
$
|
248.4
|
|
|
$
|
255.0
|
|
|
$
|
(6.6)
|
|
|
(2.6)
|
%
|
Funeral home matured
preneed revenue(2)
|
|
125.8
|
|
|
122.9
|
|
|
2.9
|
|
|
2.4
|
%
|
Core
revenue(3)
|
|
374.2
|
|
|
377.9
|
|
|
(3.7)
|
|
|
(1.0)
|
%
|
Non-funeral home
matured preneed revenue(4)
|
|
6.1
|
|
|
5.9
|
|
|
0.2
|
|
|
3.4
|
%
|
Recognized preneed
revenue(5)
|
|
27.4
|
|
|
25.5
|
|
|
1.9
|
|
|
7.5
|
%
|
Other
revenue(6)
|
|
30.3
|
|
|
35.6
|
|
|
(5.3)
|
|
|
(14.9)
|
%
|
Total comparable
revenue
|
|
$
|
438.0
|
|
|
$
|
444.9
|
|
|
$
|
(6.9)
|
|
|
(1.6)
|
%
|
|
|
|
|
|
|
|
|
|
Comparable gross
profit
|
|
$
|
75.1
|
|
|
$
|
78.3
|
|
|
$
|
(3.2)
|
|
|
(4.1)
|
%
|
Comparable gross
margin percentage
|
|
17.2
|
%
|
|
17.6
|
%
|
|
(0.4)
|
%
|
|
(2.3)
|
%
|
|
|
|
|
|
|
|
|
|
Comparable funeral
services performed:
|
|
|
|
|
|
|
|
|
Atneed
|
|
43,715
|
|
|
45,325
|
|
|
(1,610)
|
|
|
(3.6)
|
%
|
Funeral home matured
preneed
|
|
21,400
|
|
|
21,351
|
|
|
49
|
|
|
0.2
|
%
|
Total core
|
|
65,115
|
|
|
66,676
|
|
|
(1,561)
|
|
|
(2.3)
|
%
|
Non-funeral home
matured preneed
|
|
6,602
|
|
|
6,386
|
|
|
216
|
|
|
3.4
|
%
|
Total comparable
funeral services performed
|
|
71,717
|
|
|
73,062
|
|
|
(1,345)
|
|
|
(1.8)
|
%
|
Core cremation
rate
|
|
47.5
|
%
|
|
46.8
|
%
|
|
0.7
|
%
|
|
1.5
|
%
|
Total comparable
cremation rate
|
|
52.1
|
%
|
|
51.3
|
%
|
|
0.8
|
%
|
|
1.6
|
%
|
|
|
|
|
|
|
|
|
|
Comparable average
revenue per service:
|
|
|
|
|
|
|
|
|
Atneed
|
|
$
|
5,682
|
|
|
$
|
5,626
|
|
|
$
|
56
|
|
|
1.0
|
%
|
Funeral home matured
preneed
|
|
5,879
|
|
|
5,756
|
|
|
123
|
|
|
2.1
|
%
|
Total core
|
|
5,747
|
|
|
5,668
|
|
|
79
|
|
|
1.4
|
%
|
Non-funeral home
matured preneed
|
|
924
|
|
|
924
|
|
|
—
|
|
|
—
|
%
|
Total comparable
average revenue per service
|
|
$
|
5,303
|
|
|
$
|
5,253
|
|
|
$
|
50
|
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable preneed
sales production:
|
|
|
|
|
|
|
|
|
Total preneed
sales
|
|
$
|
203.1
|
|
|
$
|
201.5
|
|
|
$
|
1.6
|
|
|
0.8
|
%
|
Total preneed
contracts sold
|
|
43,667
|
|
|
43,771
|
|
|
(104)
|
|
|
(0.2)
|
%
|
Average revenue per
contract sold
|
|
$
|
4,651
|
|
|
$
|
4,603
|
|
|
$
|
48
|
|
|
1.0
|
%
|
Average revenue per
contract sold, excluding the impact of foreign currency
fluctuations
|
|
$
|
4,744
|
|
|
$
|
4,663
|
|
|
$
|
81
|
|
|
1.7
|
%
|
|
|
(1)
|
Atneed revenue
represents merchandise and services sold and delivered or performed
once death has occurred.
|
|
|
(2)
|
Funeral home 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 sold by one of our funeral homes on a preneed contract
and delivered or performed once death has occurred.
|
|
|
(4)
|
Non-funeral home
matured preneed revenue represents services sold on a preneed
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 decreased by $6.9 million in the third quarter of 2016
compared to the same period of 2015. A decline in core and general
agency revenue was partially offset by growth in recognized preneed
revenue.
- The $3.7 million core revenue
decrease was primarily a result of a 2.3% decline in core funeral
services performed. Core average revenue per service increased 1.4%
during the third quarter of 2016. Organic sales average growth of
2.1% was somewhat offset by a 70 basis point increase in core
cremation mix to 47.5%.
- General agency revenue was down 9.5% compared to the prior year
third quarter, partially from a decline in preneed insurance sales
production due to a temporary mix change between trust and
insurance production as well as the decision to cease production at
the Catholic mortuaries in the Los Angeles Archdiocese.
- Recognized preneed revenue increased $1.9 million, 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 gross profit decreased $3.2 million to $75.1
million in the current quarter. The impact of the decline in
higher margin core revenue due to lower funeral services performed
and a decline in general agency revenue was partially offset by
lower operating expenses and increases in recognized preneed
revenue from our non-funeral home channel.
- Comparable preneed funeral sales production increased
$1.6 million, or 0.8%, in the third
quarter of 2016 compared to 2015, primarily due to a 1.0% increase
in average price per contracts sold. In the first nine months of
2016, preneed funeral sales production grew $29.7 million or 4.9%.
Comparable Cemetery Results
The table below details comparable cemetery results of
operations ("same store") for the three months ended September 30, 2016 and 2015. We consider
comparable operations to be those owned for the entire period
beginning January 1, 2015 and ending September 30,
2016.
(Dollars in
millions)
|
|
Three Months Ended
September 30,
|
|
|
2016
|
|
2015
|
|
$
|
|
%
|
Comparable
revenue:
|
|
|
|
|
|
|
|
|
Atneed
revenue(1)
|
|
$
|
73.5
|
|
|
$
|
73.5
|
|
|
$
|
—
|
|
|
—
|
%
|
Recognized preneed
revenue(2)
|
|
170.1
|
|
|
161.6
|
|
|
8.5
|
|
|
5.3
|
%
|
Core
revenue(3)
|
|
243.6
|
|
|
235.1
|
|
|
8.5
|
|
|
3.6
|
%
|
Other
revenue(4)
|
|
30.4
|
|
|
28.0
|
|
|
2.4
|
|
|
8.6
|
%
|
Total comparable
revenue
|
|
$
|
274.0
|
|
|
$
|
263.1
|
|
|
$
|
10.9
|
|
|
4.1
|
%
|
|
|
|
|
|
|
|
|
|
Comparable gross
profit
|
|
$
|
65.0
|
|
|
$
|
63.1
|
|
|
$
|
1.9
|
|
|
3.0
|
%
|
Comparable gross
margin percentage
|
|
23.7
|
%
|
|
24.0
|
%
|
|
(0.3)
|
%
|
|
(1.3)
|
%
|
|
|
|
|
|
|
|
|
|
Comparable preneed
and atneed sales production:
|
|
|
|
|
|
|
|
|
Property
|
|
$
|
157.1
|
|
|
$
|
156.3
|
|
|
$
|
0.8
|
|
|
0.5
|
%
|
Merchandise and
services
|
|
131.6
|
|
|
129.5
|
|
|
2.1
|
|
|
1.6
|
%
|
Discounts
|
|
(28.7)
|
|
|
(34.0)
|
|
|
5.3
|
|
|
15.6
|
%
|
Preneed and atneed
sales production
|
|
$
|
260.0
|
|
|
$
|
251.8
|
|
|
$
|
8.2
|
|
|
3.3
|
%
|
Recognition
rate(5)
|
|
94
|
%
|
|
93
|
%
|
|
|
|
|
|
|
(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.
|
|
|
(3)
|
Core revenue
represents the sum of 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 $10.9
million, or 4.1%, in the third quarter of 2016 compared to
2015, led by an increase in recognized preneed revenue of
$8.5 million, or 5.3%.
- Comparable preneed cemetery sales production increased
$9.1 million, or 5.1%, quarter over
quarter. The growth over the prior year quarter is partially due to
increased large sales activity.
- Comparable cemetery gross profit increased $1.9 million and the gross margin percentage was
23.7%. The gross profit increase was driven primarily by growth in
recognized preneed revenue partially offset by increases in
cemetery administrative and maintenance costs.
Other Financial Results
- General and administrative expenses decreased $1.0 million to $26.9
million in the third quarter of 2016. The current quarter
includes an increase of $2.2 million
in system integration costs related to the 2016 implementation of a
new general ledger system. Excluding this $2.2 million, general and administrative expenses
decreased $3.2 million compared to
prior year quarter as we effectively managed our back office
overhead expenses.
- Interest expense decreased $4.4
million to $39.5 million in
the third quarter of 2016 as we benefited from the debt
refinancings over the past year by obtaining lower interest rates
on our Senior Notes and increasing our proportion of lower variable
rate debt.
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
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net cash provided by
operating activities, as reported
|
$
|
133.0
|
|
|
$
|
114.1
|
|
|
$
|
358.5
|
|
|
$
|
396.6
|
|
Premiums paid on
early extinguishment of debt
|
—
|
|
|
6.5
|
|
|
20.5
|
|
|
6.5
|
|
Excess tax benefits
from share-based awards
|
7.2
|
|
|
4.3
|
|
|
11.5
|
|
|
17.3
|
|
System transition
costs
|
2.8
|
|
|
—
|
|
|
11.1
|
|
|
4.2
|
|
Net cash provided by
operating activities excluding special items
|
$
|
143.0
|
|
|
$
|
124.9
|
|
|
$
|
401.6
|
|
|
$
|
424.6
|
|
Cash taxes included
in net cash provided by operating activities excluding special
items
|
$
|
39.7
|
|
|
$
|
31.9
|
|
|
$
|
100.9
|
|
|
$
|
71.0
|
|
Net cash provided by operating activities excluding special
items was $143.0 million in the third
quarter of 2016 compared to $124.9
million in the prior year quarter, primarily due to the
increase in earnings and favorable working capital initiatives.
Cash flow benefited from a $7.9
million temporary timing difference in payroll funding that
was largely offset by an expected increase in cash taxes in the
third quarter of $7.8 million.
A summary of our capital expenditures is set forth below:
(In
millions)
|
Three Months
Ended
September 30,
|
|
Nine Months
Ended
September 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Capital improvements at
existing locations
|
$
|
21.1
|
|
|
$
|
22.3
|
|
|
$
|
62.5
|
|
|
$
|
62.5
|
|
Development of cemetery
property
|
21.2
|
|
|
14.5
|
|
|
56.1
|
|
|
36.4
|
|
Subtotal
|
42.3
|
|
|
36.8
|
|
|
118.6
|
|
|
98.9
|
|
Construction of new
funeral home facilities
|
5.7
|
|
|
3.2
|
|
|
12.6
|
|
|
5.8
|
|
Total capital
expenditures
|
$
|
48.0
|
|
|
$
|
40.0
|
|
|
$
|
131.2
|
|
|
$
|
104.7
|
|
Total capital expenditures increased in the current quarter by
$8.0 million primarily due to
increases in capital deployed for the development of cemetery
property.
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 nine months ended September 30, 2016 is set forth below:
|
|
Three
Months
|
|
Nine
Months
|
Preneed
funeral
|
|
4.9%
|
|
7.4%
|
Preneed
cemetery
|
|
4.9%
|
|
7.3%
|
Cemetery perpetual
care
|
|
2.5%
|
|
8.1%
|
Combined trust
funds
|
|
4.1%
|
|
7.7%
|
OUTLOOK FOR 2016
Our outlook for potential earnings and operating cash flow for
the full year 2016 remains unchanged and is shown below. Our
outlook for capital improvements at existing facilities and
development of cemetery property has slightly increased from
$150 million to $160 million expected for the full year of
2016.
(In millions
except per share amounts)
|
|
2016 Annual Guidance
|
Diluted earnings per
share from continuing operations excluding special items
(1)
|
|
$1.20 to
$1.30
|
Net cash provided by
operating activities excluding special items
(1)
|
|
$450 to
$500
|
Capital improvements
at existing facilities and development of cemetery
property
|
|
Approx.
$160
|
|
|
(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 2016 excludes the following
because this information is not currently available for 2016: 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".
|
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
September 30,
|
|
2016
|
|
2015
|
|
Net
Income
|
|
Diluted
EPS
|
|
Net
Income
|
|
Diluted
EPS
|
Net income
attributable to common stockholders, as reported
|
$
|
47.7
|
|
|
$
|
0.24
|
|
|
$
|
47.4
|
|
|
$
|
0.23
|
|
Pre-tax reconciling
items:
|
|
|
|
|
|
|
|
Gains on divestitures
and impairment charges, net
|
(0.6)
|
|
|
—
|
|
|
(10.8)
|
|
|
(0.05)
|
|
Losses on early
extinguishment of debt
|
—
|
|
|
—
|
|
|
6.9
|
|
|
0.03
|
|
System transition
costs
|
2.3
|
|
|
0.01
|
|
|
0.1
|
|
|
—
|
|
Tax provision from
special items
|
1.4
|
|
|
0.01
|
|
|
1.3
|
|
|
0.01
|
|
Change in certain tax
reserves and other
|
0.8
|
|
|
—
|
|
|
1.0
|
|
|
0.01
|
|
Earnings from
continuing operations excluding special items and diluted earnings
per share from continuing operations excluding special
items
|
$
|
51.6
|
|
|
$
|
0.26
|
|
|
$
|
45.9
|
|
|
$
|
0.23
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding (in thousands)
|
|
|
196,567
|
|
|
|
|
203,444
|
|
|
|
(In millions,
except diluted EPS)
|
Nine Months Ended
September 30,
|
|
2016
|
|
2015
|
|
Net
Income
|
|
Diluted
EPS
|
|
Net
Income
|
|
Diluted
EPS
|
Net income
attributable to common stockholders, as reported
|
$
|
110.8
|
|
|
$
|
0.56
|
|
|
$
|
161.4
|
|
|
$
|
0.78
|
|
Pre-tax special
items:
|
|
|
|
|
|
|
|
Losses (gains) on
divestitures and impairment charges, net
|
30.4
|
|
|
0.16
|
|
|
(2.9)
|
|
|
(0.01)
|
|
Losses on early
extinguishment of debt
|
22.5
|
|
|
0.11
|
|
|
6.9
|
|
|
0.03
|
|
Acquisition and
integration costs
|
5.5
|
|
|
0.03
|
|
|
3.0
|
|
|
0.01
|
|
System transition
costs
|
11.2
|
|
|
0.06
|
|
|
1.1
|
|
|
0.01
|
|
Tax benefit from
special items
|
(21.1)
|
|
|
(0.11)
|
|
|
(2.6)
|
|
|
(0.01)
|
|
Change in certain tax
reserves and other
|
3.4
|
|
|
0.02
|
|
|
1.8
|
|
|
0.01
|
|
Earnings from
continuing operations excluding special items and diluted earnings
per share from continuing operations excluding special
items
|
$
|
162.7
|
|
|
$
|
0.83
|
|
|
$
|
168.7
|
|
|
$
|
0.82
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding (in thousands)
|
|
|
197,175
|
|
|
|
|
205,950
|
|
Conference Call and Webcast
We will host a conference call on Thursday, October 27, 2016, 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)
619-6397 with the passcode of 43587498. 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 November 10,
2016 and can be accessed at (630) 652-3042 with the passcode
of 43587498#. 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 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 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.
For further information on these and other risks and
uncertainties, see our Securities and Exchange Commission filings,
including our 2015 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 September 30, 2016, we owned and
operated 1,531 funeral homes and 471 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:
|
|
Jay Andrew - Managing
Director / Corporate Communications
|
|
(713)
525-5235
|
SERVICE
CORPORATION INTERNATIONAL
CONSOLIDATED
STATEMENT OF OPERATIONS
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
(In thousands,
except per share amounts)
|
Revenue
|
$
|
721,467
|
|
|
$
|
714,453
|
|
|
$
|
2,222,083
|
|
|
$
|
2,216,761
|
|
Costs and
expenses
|
(580,722)
|
|
|
(572,774)
|
|
|
(1,756,425)
|
|
|
(1,729,974)
|
|
Gross
profit
|
140,745
|
|
|
141,679
|
|
|
465,658
|
|
|
486,787
|
|
General and
administrative expenses
|
(26,916)
|
|
|
(27,895)
|
|
|
(102,668)
|
|
|
(96,947)
|
|
Gains (losses) on
divestitures and impairment charges, net
|
557
|
|
|
10,764
|
|
|
(30,432)
|
|
|
3,403
|
|
Operating
income
|
114,386
|
|
|
124,548
|
|
|
332,558
|
|
|
393,243
|
|
Interest
expense
|
(39,508)
|
|
|
(43,921)
|
|
|
(121,988)
|
|
|
(129,842)
|
|
Loss on early
extinguishment of debt
|
(25)
|
|
|
(6,918)
|
|
|
(22,503)
|
|
|
(6,918)
|
|
Other income
(expense), net
|
110
|
|
|
336
|
|
|
(697)
|
|
|
169
|
|
Income before income
taxes
|
74,963
|
|
|
74,045
|
|
|
187,370
|
|
|
256,652
|
|
Provision for income
taxes
|
(27,422)
|
|
|
(26,118)
|
|
|
(76,482)
|
|
|
(93,778)
|
|
Net income from
continuing operations
|
47,541
|
|
|
47,927
|
|
|
110,888
|
|
|
162,874
|
|
Net loss from
discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(390)
|
|
Net income
|
47,541
|
|
|
47,927
|
|
|
110,888
|
|
|
162,484
|
|
Net loss (income)
attributable to noncontrolling interests
|
186
|
|
|
(479)
|
|
|
(96)
|
|
|
(1,066)
|
|
Net income
attributable to common stockholders
|
$
|
47,727
|
|
|
$
|
47,448
|
|
|
$
|
110,792
|
|
|
$
|
161,418
|
|
Basic earnings per
share:
|
|
|
|
|
|
|
|
Net income
attributable to common stockholders
|
$
|
0.25
|
|
|
$
|
0.24
|
|
|
$
|
0.57
|
|
|
$
|
0.80
|
|
Basic weighted
average number of shares
|
193,274
|
|
|
199,310
|
|
|
193,999
|
|
|
201,729
|
|
Diluted earnings per
share:
|
|
|
|
|
|
|
|
Net income
attributable to common stockholders
|
$
|
0.24
|
|
|
$
|
0.23
|
|
|
$
|
0.56
|
|
|
$
|
0.78
|
|
Diluted weighted
average number of shares
|
196,567
|
|
|
203,444
|
|
|
197,175
|
|
|
205,950
|
|
Dividends declared
per share
|
$
|
0.13
|
|
|
$
|
0.12
|
|
|
$
|
0.38
|
|
|
$
|
0.32
|
|
SERVICE
CORPORATION INTERNATIONAL
CONSOLIDATED
BALANCE SHEET
|
|
|
September 30,
2016
|
|
December 31,
2015
|
|
(In thousands,
except share amounts)
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
177,571
|
|
|
$
|
134,599
|
|
Receivables,
net
|
74,293
|
|
|
90,462
|
|
Inventories
|
28,526
|
|
|
27,835
|
|
Other
|
64,460
|
|
|
47,155
|
|
Total current
assets
|
344,850
|
|
|
300,051
|
|
Preneed funeral
receivables, net and trust investments
|
1,824,772
|
|
|
1,760,297
|
|
Preneed cemetery
receivables, net and trust investments
|
2,466,201
|
|
|
2,318,167
|
|
Cemetery
property
|
1,763,616
|
|
|
1,753,015
|
|
Property and
equipment, net
|
1,834,107
|
|
|
1,846,722
|
|
Non-current assets
held for sale
|
31,946
|
|
|
214
|
|
Goodwill
|
1,801,893
|
|
|
1,796,340
|
|
Deferred charges and
other assets
|
588,688
|
|
|
582,164
|
|
Cemetery perpetual
care trust investments
|
1,395,403
|
|
|
1,319,427
|
|
Total
assets
|
$
|
12,051,476
|
|
|
$
|
11,676,397
|
|
|
|
|
|
LIABILITIES &
EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
447,313
|
|
|
$
|
422,816
|
|
Current maturities of
long-term debt
|
89,531
|
|
|
86,823
|
|
Income taxes
payable
|
997
|
|
|
1,373
|
|
Total current
liabilities
|
537,841
|
|
|
511,012
|
|
Long-term
debt
|
3,181,694
|
|
|
3,037,605
|
|
Deferred preneed
funeral revenue
|
571,885
|
|
|
557,897
|
|
Deferred preneed
cemetery revenue
|
1,182,104
|
|
|
1,120,001
|
|
Deferred tax
liability
|
459,162
|
|
|
470,584
|
|
Other
liabilities
|
507,403
|
|
|
496,947
|
|
Deferred preneed
receipts held in trust
|
3,125,162
|
|
|
2,973,386
|
|
Care trusts'
corpus
|
1,396,527
|
|
|
1,319,564
|
|
|
|
|
|
Equity:
|
|
|
|
Common stock, $1 per
share par value, 500,000,000 shares authorized, 203,119,918 and
200,859,676 shares issued, respectively, and 190,489,048 and
195,772,876 shares outstanding, respectively
|
190,489
|
|
|
195,773
|
|
Capital in excess of
par value
|
1,015,271
|
|
|
1,092,106
|
|
Accumulated
deficit
|
(142,742)
|
|
|
(109,351)
|
|
Accumulated other
comprehensive income
|
24,274
|
|
|
6,164
|
|
Total common
stockholders' equity
|
1,087,292
|
|
|
1,184,692
|
|
Noncontrolling
interests
|
2,406
|
|
|
4,709
|
|
Total
equity
|
1,089,698
|
|
|
1,189,401
|
|
Total liabilities and
equity
|
$
|
12,051,476
|
|
|
$
|
11,676,397
|
|
SERVICE
CORPORATION INTERNATIONAL
CONSOLIDATED
STATEMENT OF CASH FLOWS
(In thousands,
except share amounts)
|
|
|
Nine Months Ended
September 30,
|
|
2016
|
|
2015
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
110,888
|
|
|
$
|
162,484
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Net loss from
discontinued operations, net of tax
|
—
|
|
|
390
|
|
Loss on early
extinguishment of debt
|
22,503
|
|
|
6,918
|
|
Premiums paid on early
extinguishment of debt
|
(20,524)
|
|
|
(6,549)
|
|
Depreciation and
amortization
|
109,531
|
|
|
103,816
|
|
Amortization of
intangible assets
|
22,210
|
|
|
23,536
|
|
Amortization of
cemetery property
|
42,573
|
|
|
40,422
|
|
Amortization of loan
costs
|
4,406
|
|
|
7,221
|
|
Provision for doubtful
accounts
|
4,048
|
|
|
4,663
|
|
(Benefit) provision
for deferred income taxes
|
(11,421)
|
|
|
13,761
|
|
Loss (gain) on
divestitures and impairment charges, net
|
30,432
|
|
|
(3,403)
|
|
Share-based
compensation
|
10,199
|
|
|
10,717
|
|
Excess tax benefits
from share-based awards
|
(11,512)
|
|
|
(17,266)
|
|
Change in assets and
liabilities, net of effects from acquisitions and
divestitures:
|
|
|
|
Decrease in
receivables
|
11,447
|
|
|
11,724
|
|
Increase in other
assets
|
(7,660)
|
|
|
(627)
|
|
Increase in payables
and other liabilities
|
37,565
|
|
|
39,546
|
|
Effect of preneed
funeral production and maturities:
|
|
|
|
Decrease in preneed
funeral receivables, net and trust investments
|
11,167
|
|
|
20,846
|
|
Increase deferred
preneed funeral revenue
|
10,122
|
|
|
9,922
|
|
Decrease in deferred
preneed funeral receipts held in trust
|
(31,790)
|
|
|
(47,365)
|
|
Effect of cemetery
production and deliveries:
|
|
|
|
Increase in preneed
cemetery receivables, net and trust investments
|
(60,004)
|
|
|
(55,777)
|
|
Increase in deferred
preneed cemetery revenue
|
57,855
|
|
|
70,995
|
|
Increase in deferred
preneed cemetery receipts held in trust
|
16,475
|
|
|
644
|
|
Net cash provided by
operating activities
|
358,510
|
|
|
396,618
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(131,195)
|
|
|
(104,732)
|
|
Acquisitions
|
(66,109)
|
|
|
(41,430)
|
|
Proceeds from
divestitures and sales of property and equipment
|
13,044
|
|
|
11,329
|
|
Net withdrawals of
restricted funds
|
5,120
|
|
|
8,066
|
|
Net cash used in
investing activities from continuing operations
|
(179,140)
|
|
|
(126,767)
|
|
Net cash provided by
investing activities from discontinued operations
|
—
|
|
|
987
|
|
Net cash used in
investing activities
|
(179,140)
|
|
|
(125,780)
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from issuance
of long-term debt
|
1,035,000
|
|
|
401,250
|
|
Debt issuance
costs
|
(5,232)
|
|
|
(5,830)
|
|
Payments of
debt
|
(27,632)
|
|
|
(145,171)
|
|
Early extinguishment of
debt
|
(875,110)
|
|
|
(197,377)
|
|
Principal payments on
capital leases
|
(25,220)
|
|
|
(20,421)
|
|
Proceeds from exercise
of stock options
|
16,029
|
|
|
30,491
|
|
Excess tax benefits
from share-based awards
|
11,512
|
|
|
17,266
|
|
Purchase of Company
common stock
|
(192,991)
|
|
|
(305,488)
|
|
Payments of
dividends
|
(73,665)
|
|
|
(64,068)
|
|
Purchase of
noncontrolling interest
|
(1,961)
|
|
|
—
|
|
Bank overdrafts and
other
|
(1,066)
|
|
|
(9,095)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30,
|
|
2016
|
|
2015
|
Net cash used in
financing activities
|
(140,336)
|
|
|
(298,443)
|
|
Effect of foreign
currency on cash and cash equivalents
|
3,938
|
|
|
(7,780)
|
|
Net increase
(decrease) in cash and cash equivalents
|
42,972
|
|
|
(35,385)
|
|
Cash and cash
equivalents at beginning of period
|
134,599
|
|
|
177,335
|
|
Cash and cash
equivalents at end of period
|
$
|
177,571
|
|
|
$
|
141,950
|
|
|
|
|
|
|
|
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/service-corporation-international-announces-third-quarter-2016-financial-results-300351963.html
SOURCE Service Corporation International