HOUSTON, May 3, 2021 /PRNewswire/ -- Service
Corporation International (NYSE: SCI), the largest provider of
deathcare products and services in North
America, today reported results for the first quarter of
2021.
Tom Ryan, the Company's
President, Chairman, and Chief Executive Officer, commented on
COVID-19 and first quarter results:
"Today we are reporting earnings per share of $1.33 and net
cash provided by operating activities of $298 million for the quarter. The $0.88 growth in earnings per share in the quarter
was primarily driven by increased comparable preneed cemetery sales
production and continued elevated COVID-19 mortality, which
resulted in an increase in both funeral services performed and
burials in our cemeteries. Comparable preneed cemetery sales
production grew $130 million, or 67%, during the quarter
driven by an increase in sales velocity, sales averages, and large
sales activity. Net cash provided by operating activities grew
approximately $118 million over
the prior year quarter, primarily due to increased operating
profit.
Based on our first quarter results, we are raising the midpoint
of our full year adjusted earnings per share guidance fifteen cents to $2.85 and the midpoint of our adjusted operating
cash flow guidance to $687.5 million.
Our long-term earnings growth framework remains in place, we will
maintain focus on our core strategies of growing revenue by
remaining relevant to our client families, leveraging our scale,
and maximizing our capital deployment opportunities in a
disciplined and balanced manner.
The health, safety and well-being of our SCI family remains a
top priority as our dedicated teams continue to provide essential
services for our client families. I would like to thank our entire
SCI family, particularly our frontline associates, for your
continued courage and resolve, but also for focusing on what we do
best, which is helping our client families gain closure and healing
through the process of grieving, remembrance, and celebration."
First Quarter Highlights:
- Revenue grew $275 million over
the prior year quarter to $1.1
billion.
- GAAP earnings per share were $1.33.
- Adjusted earnings per share grew $0.89 over the prior year quarter to $1.32.
- Funeral preneed sales grew $35
million, or 16%.
- Cemetery preneed sales grew $130
million, or 67%.
- Comparable funeral gross profit grew 82% and margin expanded
1,030 basis points to 31.0%.
- Comparable cemetery gross profit grew 147% and margin expanded
1,540 basis points to 40.7%.
FIRST QUARTER SUMMARY
Details of our first quarter of 2021 financial results and the
unaudited consolidated financial statements can be found in the
Appendix at the end of this press release. The table below
summarizes our key financial results.
(Dollars in
millions, except for per share amounts)
|
Three months ended
March 31,
|
|
2021
|
|
2020
|
Revenue
|
$
|
1,078.0
|
|
|
$
|
803.0
|
|
Operating
income
|
$
|
342.0
|
|
|
$
|
151.8
|
|
Net income
attributable to common stockholders
|
$
|
228.9
|
|
|
$
|
81.9
|
|
Diluted earnings per
share
|
$
|
1.33
|
|
|
$
|
0.45
|
|
Earnings excluding
special items (1)
|
$
|
227.9
|
|
|
$
|
78.5
|
|
Diluted earnings per
share excluding special items (1)
|
$
|
1.32
|
|
|
$
|
0.43
|
|
Diluted weighted
average shares outstanding
|
172.4
|
|
|
183.6
|
|
Net cash provided by
operating activities
|
$
|
297.6
|
|
|
$
|
180.0
|
|
|
|
(1)
|
Earnings excluding
special items and diluted earnings per share excluding special
items are non-GAAP financial measures. These items are also
referred to as "adjusted earnings per share". A reconciliation from
net income attributable to common stockholders and diluted earnings
per share in accordance with generally accepted accounting
principles in the United States (GAAP) can be found later in this
press release under the heading "Non-GAAP Financial Measures" in
the Appendix at the end of this press release.
|
- Diluted earnings per share were $1.33 in the first quarter of 2021 compared to
$0.45 in the first quarter of 2020.
The current year quarter was impacted by a $3.2 million unfavorable reduction in net gains
on divestitures and impairment charges. Diluted earnings per share
excluding special items were $1.32 in
the first quarter of 2021 compared to $0.43 in the first quarter of 2020. The growth of
$0.89 is due to higher gross profit
related to strong growth in cemetery recognized preneed revenue
primarily driven by a more productive and efficient sales force as
well as increased funeral services and burials performed due to the
ongoing COVID-19 pandemic. Our current period results also
benefited from fewer shares outstanding and lower interest expense
partially offset by an increase in our adjusted effective tax
rate.
- Net cash provided by operating activities increased
$117.6 million to $297.6 million in the first quarter of 2021
compared to $180.0 million in the
first quarter of 2020. Our strong growth in gross profit primarily
from strong preneed cemetery sales production was somewhat offset
by unfavorable working capital changes including the timing of our
payroll funding versus the prior year quarter.
UPDATED OUTLOOK FOR 2021
The guidance provided below has a wider range than usual for the
twelve month period due to the continued uncertainty around the
impact of the COVID-19 pandemic. Our outlook for net cash provided
by operating activities excluding special items reflects an
estimated $20 million of payroll tax
payments in 2021 that were deferred from 2020 as allowed under the
CARES Act. We will also incur normal payroll taxes in 2021 of
approximately $40 million (which we
were able to defer in 2020). These combined items represent a
$60 million of additional cash
outflows when compared to 2020.
(Dollars in
millions, except per share amounts)
|
Original 2021
Outlook
|
Revised 2021
Outlook
|
Diluted earnings per
share excluding special items (1)
|
$2.50 -
$2.90
|
$2.70 -
$3.00
|
Net cash provided by
operating activities excluding special items
(1)
|
$600 -
$700
|
$650 -
$725
|
Cash taxes
included in Net cash provided by operating activities
excluding special items (1)
|
$160
|
$180
|
Capital improvements
at existing locations and cemetery development
expenditures
|
$235 -
$255
|
$235 -
$255
|
|
|
(1)
|
Diluted earnings per
share 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 2021 excludes the following because this information is
not currently available for 2021: Expenses net of insurance
recoveries related to hurricanes, gains or losses associated with
asset divestitures, gains or losses associated with the early
extinguishment of debt, potential tax reserve adjustments and IRS
payments and/or refunds, 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, or deferred
tax payments. The foregoing items could materially impact our
forward-looking diluted earnings per share and/or our net cash
provided by operating activities calculated in accordance with
GAAP, consistent with the historical disclosures found in the
Appendix at the end of this press release under the heading
"Non-GAAP Financial Measures".
|
CONFERENCE CALL AND WEBCAST
We will host a conference call on Tuesday, May 4, 2021, 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 numbers are (888)
317-6003 (US) or (412) 317-6061 (International) with the passcode
of 2982081. 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 11, 2021 and
can be accessed at (877) 344-7529 (US) or (412) 317-0088
(International) with the passcode of 10153986. Additionally, a
replay of the conference call will be available on our website for
approximately three months.
ABOUT SERVICE CORPORATION INTERNATIONAL
Service Corporation International (NYSE: SCI), headquartered in
Houston, Texas, is North America's leading provider of funeral,
cemetery and cremation services, as well as final-arrangement
planning in advance. We offer families exceptional service in
planning life celebrations and personalized remembrances. Our
Dignity Memorial® brand serves approximately 500,000 families each
year with professionalism, compassion, and attention to detail. At
March 31, 2021, we owned and operated 1,461 funeral service
locations and 484 cemeteries (of which 296 are combination
locations) in 44 states, eight Canadian provinces, the District of Columbia, and Puerto Rico. 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 - Director
/ Corporate Communications
|
|
(713)
525-3468
|
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:
- Continued effects from the COVID-19 pandemic could have
material adverse consequences for our business and results of
operations.
- Our affiliated trust funds own investments in securities, which
are affected by market conditions that are beyond our control.
- We may be required to replenish our affiliated funeral and
cemetery trust funds 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 activities, we may be required to make material cash
payments to fund certain trust funds.
- Increasing death benefits related to preneed contracts funded
through life insurance or annuity 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 contracts may impact our future revenue.
- Unfavorable publicity could affect our reputation and
business.
- We use a combination of insurance, self-insurance, and large
deductibles in managing our exposure to certain inherent risks;
therefore, we could be exposed to unexpected costs that could
negatively affect our financial performance.
- 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, financial
condition, or cash flow.
- 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.
- A failure of a key information technology system or process
could disrupt and adversely affect our business.
- Failure to maintain effective internal control over financial
reporting could adversely affect our results of operations,
investor confidence, and our stock price.
- The funeral and cemetery industry is competitive.
- If the number of deaths in our markets declines, our cash flows
and revenue may decrease. Changes in the number of deaths are not
predictable from market to market or over the short term.
- If we are not able to respond effectively to changing consumer
preferences, our market share, revenue, and/or profitability could
decrease.
- The continuing upward trend in the number of cremations
performed in North America could
result in lower revenue, operating profit, and cash flows.
- Our funeral and cemetery businesses are high fixed-cost
businesses.
- Regulation and compliance could have a material adverse impact
on our financial results.
- Unfavorable results of litigation could have a material adverse
impact on our financial statements.
- Cemetery burial practice claims could have a material adverse
impact on our financial results.
- 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 financial
results.
- Changes in taxation as well as the inherent difficulty in
quantifying potential tax effects of business decisions could have
a material adverse effect on the results of our operations,
financial condition, or cash flows.
For further information on these and other risks and
uncertainties, see our Securities and Exchange Commission filings,
including our 2020 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 and make no
undertaking 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.
SERVICE CORPORATION INTERNATIONAL
APPENDIX: RESULTS FOR THE FIRST QUARTER OF 2021
Consolidated
Statement of Operations (Unaudited)
|
|
(Dollars in
thousands, except per share amounts)
|
Three months
ended
|
|
March
31,
|
|
2021
|
|
2020
|
|
|
|
|
Revenue
|
$
|
1,077,981
|
|
|
$
|
802,965
|
|
Cost of
revenue
|
(700,474)
|
|
|
(623,921)
|
|
Gross
profit
|
377,507
|
|
|
179,044
|
|
Corporate general and
administrative expenses
|
(36,733)
|
|
|
(31,813)
|
|
Gains on divestitures
and impairment charges, net
|
1,266
|
|
|
4,545
|
|
Operating
income
|
342,040
|
|
|
151,776
|
|
Interest
expense
|
(35,812)
|
|
|
(44,351)
|
|
Losses on early
extinguishment of debt, net
|
—
|
|
|
(139)
|
|
Other income
(expense), net
|
341
|
|
|
(1,247)
|
|
Income before income
taxes
|
306,569
|
|
|
106,039
|
|
Provision for income
taxes
|
(77,614)
|
|
|
(24,038)
|
|
Net income
|
228,955
|
|
|
82,001
|
|
Net income
attributable to noncontrolling interests
|
(76)
|
|
|
(60)
|
|
Net income
attributable to common stockholders
|
$
|
228,879
|
|
|
$
|
81,941
|
|
Basic earnings per
share:
|
|
|
|
Net income
attributable to common stockholders
|
$
|
1.35
|
|
|
$
|
0.45
|
|
Basic weighted average
number of shares
|
169,918
|
|
|
180,854
|
|
Diluted earnings per
share:
|
|
|
|
Net income
attributable to common stockholders
|
$
|
1.33
|
|
|
$
|
0.45
|
|
Diluted weighted
average number of shares
|
172,367
|
|
|
183,585
|
|
Consolidated
Balance Sheet (Unaudited)
|
|
(Dollars in
thousands, except share amounts)
|
|
|
|
|
March 31,
2021
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
243,726
|
|
|
$
|
230,857
|
|
Receivables,
net
|
89,590
|
|
|
92,939
|
|
Inventories
|
25,945
|
|
|
23,929
|
|
Other
|
28,224
|
|
|
28,427
|
|
Total current
assets
|
387,485
|
|
|
376,152
|
|
Preneed receivables,
net and trust investments
|
5,549,121
|
|
|
5,345,720
|
|
Cemetery
property
|
1,865,261
|
|
|
1,879,340
|
|
Property and
equipment, net
|
2,136,826
|
|
|
2,133,664
|
|
Goodwill
|
1,882,513
|
|
|
1,880,007
|
|
Deferred charges and
other assets, net
|
1,085,326
|
|
|
1,080,053
|
|
Cemetery perpetual
care trust investments
|
1,881,728
|
|
|
1,820,489
|
|
Total
assets
|
$
|
14,788,260
|
|
|
$
|
14,515,425
|
|
|
|
|
|
LIABILITIES & EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
550,072
|
|
|
$
|
575,948
|
|
Current maturities of
long-term debt
|
217,062
|
|
|
228,352
|
|
Income taxes
payable
|
74,648
|
|
|
11,634
|
|
Total current
liabilities
|
841,782
|
|
|
815,934
|
|
Long-term
debt
|
3,439,102
|
|
|
3,514,182
|
|
Deferred revenue,
net
|
1,501,574
|
|
|
1,488,909
|
|
Deferred tax
liability
|
438,263
|
|
|
437,308
|
|
Other
liabilities
|
423,065
|
|
|
420,039
|
|
Deferred receipts
held in trust
|
4,422,331
|
|
|
4,272,382
|
|
Care trusts'
corpus
|
1,871,483
|
|
|
1,814,050
|
|
Equity:
|
|
|
|
Common stock, $1 per
share par value, 500,000,000 shares authorized, 175,051,063 and
174,792,272 shares issued, respectively, and 168,837,094 and
170,717,236 shares outstanding, respectively
|
168,837
|
|
|
170,717
|
|
Capital in excess of
par value
|
975,232
|
|
|
981,934
|
|
Retained
earnings
|
662,271
|
|
|
560,731
|
|
Accumulated other
comprehensive income
|
44,371
|
|
|
39,366
|
|
Total common
stockholders' equity
|
1,850,711
|
|
|
1,752,748
|
|
Noncontrolling
interests
|
(51)
|
|
|
(127)
|
|
Total
equity
|
1,850,660
|
|
|
1,752,621
|
|
Total liabilities and
equity
|
$
|
14,788,260
|
|
|
$
|
14,515,425
|
|
Consolidated
Statement of Cash Flows (Unaudited)
|
|
(Dollars in
thousands)
|
Three months ended
March 31,
|
|
2021
|
|
2020
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
228,955
|
|
|
$
|
82,001
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Losses on early
extinguishment of debt, net
|
—
|
|
|
139
|
|
Depreciation and
amortization
|
39,558
|
|
|
37,912
|
|
Amortization of
intangibles
|
5,335
|
|
|
5,257
|
|
Amortization of
cemetery property
|
28,929
|
|
|
13,924
|
|
Amortization of loan
costs
|
1,526
|
|
|
1,276
|
|
Provision for expected
credit losses
|
3,824
|
|
|
3,197
|
|
Provision for deferred
income taxes
|
553
|
|
|
4,233
|
|
Gains on divestitures
and impairment charges, net
|
(1,266)
|
|
|
(4,545)
|
|
Share-based
compensation
|
3,500
|
|
|
3,406
|
|
Change in assets and
liabilities, net of effects from acquisitions and
dispositions:
|
|
|
|
Decrease in
receivables
|
2,525
|
|
|
2,460
|
|
(Increase) decrease in
other assets
|
(12,204)
|
|
|
10,549
|
|
Increase (decrease) in
payables and other liabilities
|
43,046
|
|
|
(4,832)
|
|
Effect of preneed
sales production and maturities:
|
|
|
|
(Increase) decrease in
preneed receivables, net and trust investments
|
(66,194)
|
|
|
19,134
|
|
Increase in deferred
revenue, net
|
19,660
|
|
|
12,908
|
|
Decrease in deferred
receipts held in trust
|
(141)
|
|
|
(7,027)
|
|
Net cash provided by
operating activities
|
297,606
|
|
|
179,992
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(42,274)
|
|
|
(52,275)
|
|
Business acquisitions,
net of cash acquired
|
(1,160)
|
|
|
(26,349)
|
|
Real estate
acquisitions
|
(5,608)
|
|
|
(2,114)
|
|
Proceeds from
divestitures and sales of property and equipment
|
4,045
|
|
|
11,324
|
|
Payments for
Company-owned life insurance policies
|
(18)
|
|
|
(3,770)
|
|
Proceeds from
Company-owned life insurance policies and other
|
—
|
|
|
3,519
|
|
Net cash used in
investing activities
|
(45,015)
|
|
|
(69,665)
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from issuance
of long-term debt
|
20,000
|
|
|
75,000
|
|
Scheduled payments of
debt
|
(9,023)
|
|
|
(8,222)
|
|
Early payments of
debt
|
(100,000)
|
|
|
(25,792)
|
|
Principal payments on
finance leases
|
(6,652)
|
|
|
(10,254)
|
|
Proceeds from exercise
of stock options
|
2,282
|
|
|
15,126
|
|
Purchase of Company
common stock
|
(106,135)
|
|
|
(123,102)
|
|
Payments of
dividends
|
(35,568)
|
|
|
(34,414)
|
|
Bank overdrafts and
other
|
(7,932)
|
|
|
1,575
|
|
Net cash used in
financing activities
|
(243,028)
|
|
|
(110,083)
|
|
Effect of foreign
currency
|
1,412
|
|
|
(8,249)
|
|
Net increase
(decrease) in cash, cash equivalents, and restricted
cash
|
10,975
|
|
|
(8,005)
|
|
Cash, cash
equivalents, and restricted cash at beginning of period
|
238,610
|
|
|
242,620
|
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
|
249,585
|
|
|
$
|
234,615
|
|
Consolidated
Segment Results
|
|
(See definitions of
revenue line items later in this appendix.)
|
|
(Dollars in
millions, except funeral services performed and average revenue per
service)
|
Three months ended
March 31,
|
|
2021
|
|
2020
|
Consolidated
funeral:
|
|
|
|
Atneed
revenue
|
$
|
338.1
|
|
|
$
|
264.8
|
|
Matured preneed
revenue
|
190.2
|
|
|
163.6
|
|
Core
revenue
|
528.3
|
|
|
428.4
|
|
Non-funeral home
revenue
|
19.7
|
|
|
14.5
|
|
Recognized preneed
revenue
|
41.7
|
|
|
32.8
|
|
Other
revenue
|
29.7
|
|
|
29.2
|
|
Total
revenue
|
$
|
619.4
|
|
|
$
|
504.9
|
|
|
|
|
|
Gross
profit
|
$
|
190.7
|
|
|
$
|
103.6
|
|
Gross profit
percentage
|
30.8
|
%
|
|
20.5
|
%
|
|
|
|
|
Funeral services
performed
|
106,410
|
|
|
86,490
|
|
Average revenue per
service
|
$
|
5,150
|
|
|
$
|
5,121
|
|
|
|
(Dollars in
millions)
|
Three months ended
March 31,
|
|
2021
|
|
2020
|
Consolidated
cemetery:
|
|
|
|
Atneed property
revenue
|
$
|
44.3
|
|
|
$
|
24.8
|
|
Atneed merchandise and
service revenue
|
80.3
|
|
|
60.3
|
|
Total atneed
revenue
|
124.6
|
|
|
85.1
|
|
Recognized preneed
property revenue
|
218.3
|
|
|
116.1
|
|
Recognized preneed
merchandise and service revenue
|
85.8
|
|
|
68.7
|
|
Total recognized
preneed revenue
|
304.1
|
|
|
184.8
|
|
Core
revenue
|
428.7
|
|
|
269.9
|
|
Other cemetery
revenue
|
29.8
|
|
|
28.2
|
|
Total
revenue
|
$
|
458.5
|
|
|
$
|
298.1
|
|
|
|
|
|
Gross
profit
|
$
|
186.8
|
|
|
$
|
75.5
|
|
Gross profit
percentage
|
40.7
|
%
|
|
25.3
|
%
|
Comparable Funeral Results
The table below details comparable funeral results of operations
("same store") for the three months ended March 31, 2021 and 2020. We consider comparable
funeral operations to be those businesses owned for the entire
period beginning January 1, 2020 and ending March 31,
2021.
(Dollars in
millions, except average revenue per service and average
revenue per contract sold)
|
Three months ended
March 31,
|
|
2021
|
|
2020
|
|
Var
|
|
%
|
Comparable funeral
revenue:
|
|
|
|
|
|
|
|
Atneed revenue
(1)
|
$
|
332.2
|
|
|
$
|
263.2
|
|
|
$
|
69.0
|
|
|
26.2
|
%
|
Matured preneed
revenue (2)
|
189.0
|
|
|
163.1
|
|
|
25.9
|
|
|
15.9
|
%
|
Core revenue
(3)
|
521.2
|
|
|
426.3
|
|
|
94.9
|
|
|
22.3
|
%
|
Non-funeral home
revenue (4)
|
19.6
|
|
|
14.4
|
|
|
5.2
|
|
|
36.1
|
%
|
Recognized preneed
revenue (5)
|
41.4
|
|
|
32.8
|
|
|
8.6
|
|
|
26.2
|
%
|
Other revenue
(6)
|
29.6
|
|
|
29.3
|
|
|
0.3
|
|
|
1.0
|
%
|
Total comparable
revenue
|
$
|
611.8
|
|
|
$
|
502.8
|
|
|
$
|
109.0
|
|
|
21.7
|
%
|
|
|
|
|
|
|
|
|
Comparable gross
profit
|
$
|
189.5
|
|
|
$
|
104.3
|
|
|
$
|
85.2
|
|
|
81.7
|
%
|
Comparable gross
profit percentage
|
31.0
|
%
|
|
20.7
|
%
|
|
10.3
|
%
|
|
|
|
|
|
|
|
|
|
|
Comparable funeral
services performed:
|
|
|
|
|
|
|
|
Atneed
|
59,439
|
|
|
47,680
|
|
|
11,759
|
|
|
24.7
|
%
|
Matured
preneed
|
31,298
|
|
|
26,894
|
|
|
4,404
|
|
|
16.4
|
%
|
Total core
|
90,737
|
|
|
74,574
|
|
|
16,163
|
|
|
21.7
|
%
|
Non-funeral
home
|
14,444
|
|
|
11,489
|
|
|
2,955
|
|
|
25.7
|
%
|
Total comparable
funeral services performed
|
105,181
|
|
|
86,063
|
|
|
19,118
|
|
|
22.2
|
%
|
Core cremation
rate
|
52.0
|
%
|
|
51.8
|
%
|
|
0.2
|
%
|
|
|
Total comparable
cremation rate (7)
|
58.5
|
%
|
|
58.2
|
%
|
|
0.3
|
%
|
|
|
|
|
|
|
|
|
|
|
Comparable funeral
sales average revenue per service:
|
|
|
|
|
|
|
|
Atneed
|
$
|
5,589
|
|
|
$
|
5,520
|
|
|
$
|
69
|
|
|
1.3
|
%
|
Matured
preneed
|
6,039
|
|
|
6,065
|
|
|
(26)
|
|
|
(0.4)
|
%
|
Total core
|
5,744
|
|
|
5,716
|
|
|
28
|
|
|
0.5
|
%
|
Non-funeral
home
|
1,357
|
|
|
1,253
|
|
|
104
|
|
|
8.3
|
%
|
Total comparable
average revenue per service
|
$
|
5,142
|
|
|
$
|
5,121
|
|
|
$
|
21
|
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
Comparable funeral
preneed sales production:
|
|
|
|
|
|
|
|
Total preneed
sales
|
$
|
250.0
|
|
|
$
|
214.7
|
|
|
$
|
35.3
|
|
|
16.4
|
%
|
Core contracts
sold
|
32,275
|
|
|
29,122
|
|
|
3,153
|
|
|
10.8
|
%
|
Non-funeral home
contracts sold
|
23,015
|
|
|
16,295
|
|
|
6,720
|
|
|
41.2
|
%
|
Core average revenue
per contract sold
|
$
|
5,719
|
|
|
$
|
5,807
|
|
|
$
|
(88)
|
|
|
(1.5)
|
%
|
Non-funeral home
average revenue per contract sold
|
$
|
2,844
|
|
|
$
|
2,801
|
|
|
$
|
43
|
|
|
1.5
|
%
|
|
|
(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 our core funeral homes, which have been delivered
or performed as well as the related merchandise and service trust
fund income.
|
(3)
|
Core revenue
represents the sum of merchandise and services sold on an atneed
contract or preneed contract, which were delivered or performed
once death has occurred through our core 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 travel protection, net and merchandise 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.
|
(7)
|
Total comparable
cremation rate includes the impact of cremation services through
our non-funeral sales channel (e.g. SCI Direct).
|
- Total comparable funeral revenue increased by $109.0 million, or 21.7%, in the first quarter of
2021 compared to the same period of 2020, primarily driven by
significant growth in core funeral revenue of $94.9 million.
- The increase in core funeral revenue of $94.9 million, or 22.3%, was primarily the result
of a 21.7% increase in core funeral services performed and a 0.5%
increase in core average revenue per service. The core cremation
rate increased by only 20 basis points to 52.0%.
- Non-funeral home revenue increased $5.2
million, or 36.1%, as a result of a 25.7% increase in
services performed and an 8.3% increase in the average revenue per
service.
- Recognized preneed revenue increased $8.6 million, or 26.2%, primarily driven by a
43.4% increase in preneed funeral sales production through our
non-funeral home channel as described below.
- Comparable funeral gross profit increased $85.2 million to $189.5
million and the gross profit percentage increased to 31.0%.
Funeral margins continued to be positively impacted by growth in
higher margin core business activities and a more efficient cost
structure.
- Comparable preneed funeral sales production increased
$35.3 million, or 16.4%, in the first
quarter of 2021 compared to 2020. We experienced a 9.2% increase at
our core funeral locations and a 43.4% increase in preneed
production through our non-funeral home channel. The increase in
comparable preneed funeral sales production was primarily driven by
the significant growth in digital and direct mail leads, an
increase in location traffic due to higher services performed, and
the gradual return of in-person seminars.
Comparable Cemetery Results
The table below details comparable cemetery results of
operations ("same store") for the three months ended March 31,
2021 and 2020. We consider comparable cemetery operations to be
those businesses owned for the entire period beginning
January 1, 2020 and ending March 31, 2021.
(Dollars in
millions)
|
Three months ended
March 31,
|
|
2021
|
|
2020
|
|
Var
|
|
%
|
Comparable
cemetery revenue:
|
|
|
|
|
|
|
|
Atneed property
revenue
|
$
|
44.3
|
|
|
$
|
24.8
|
|
|
$
|
19.5
|
|
|
78.6
|
%
|
Atneed merchandise and
service revenue
|
80.3
|
|
|
60.3
|
|
|
20.0
|
|
|
33.2
|
%
|
Total atneed revenue
(1)
|
124.6
|
|
|
85.1
|
|
|
39.5
|
|
|
46.4
|
%
|
Recognized preneed
property revenue
|
218.3
|
|
|
116.1
|
|
|
102.2
|
|
|
88.0
|
%
|
Recognized preneed
merchandise and service revenue
|
85.8
|
|
|
68.6
|
|
|
17.2
|
|
|
25.1
|
%
|
Total recognized
preneed revenue (2)
|
304.1
|
|
|
184.7
|
|
|
119.4
|
|
|
64.6
|
%
|
Core
revenue (3)
|
428.7
|
|
|
269.8
|
|
|
158.9
|
|
|
58.9
|
%
|
Other revenue
(4)
|
29.8
|
|
|
28.2
|
|
|
1.6
|
|
|
5.7
|
%
|
Total comparable
revenue
|
$
|
458.5
|
|
|
$
|
298.0
|
|
|
$
|
160.5
|
|
|
53.9
|
%
|
|
|
|
|
|
|
|
|
Comparable gross
profit
|
$
|
186.7
|
|
|
$
|
75.5
|
|
|
$
|
111.2
|
|
|
147.3
|
%
|
Comparable gross
profit percentage
|
40.7
|
%
|
|
25.3
|
%
|
|
15.4
|
%
|
|
|
|
|
|
|
|
|
|
|
Comparable
cemetery preneed and atneed sales production:
|
|
|
|
|
|
|
|
Property
|
$
|
261.6
|
|
|
$
|
145.0
|
|
|
$
|
116.6
|
|
|
80.4
|
%
|
Merchandise and
services
|
196.0
|
|
|
135.2
|
|
|
60.8
|
|
|
45.0
|
%
|
Discounts and
other
|
(3.3)
|
|
|
(1.5)
|
|
|
(1.8)
|
|
|
(120.0)
|
%
|
Preneed and atneed
sales production
|
$
|
454.3
|
|
|
$
|
278.7
|
|
|
$
|
175.6
|
|
|
63.0
|
%
|
|
|
|
|
|
|
|
|
Recognition
rate (5)
|
94.4
|
%
|
|
96.8
|
%
|
|
|
|
|
|
|
(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, which were 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 stated as a percentage of current
period preneed and atneed sales production.
|
- Comparable cemetery revenue increased $160.5 million, or 53.9%, in the first quarter of
2021 compared to the first quarter of 2020. The increase was
primarily due to a $158.9 million, or
58.9%, increase in core revenue.
- The core revenue growth of $158.9
million was a result of a $119.4
million, or 64.6%, increase in recognized preneed revenue
driven by strong comparable preneed cemetery property sales
production for the period as described below and a $39.5 million, or 46.4%, increase in atneed
revenue that was driven by an increase in burials performed.
- Comparable cemetery gross profit increased $111.2 million to $186.7
million. The gross profit percentage increased to 40.7%,
resulting from the cemetery revenue increases described above
coupled with a more efficient cost structure.
- Comparable preneed cemetery sales production increased
$130.1 million, or 67.1%, driven by
significant increases in sales velocity, sales averages, and large
sales. Comparable preneed cemetery sales production continues to
benefit from a more productive and efficient sales force, with
better utilization of our customer relationship management system,
and improved conversion rates from our direct mail and digital lead
campaigns. We continued to experience higher conversion and close
rates due to the consumer's increased awareness related to the
possible impact of COVID-19, coupled with an increase in location
traffic due to higher funeral services and burials performed.
Other Financial Results
- Corporate general and administrative expenses increased
$4.9 million to $36.7 million in the first quarter of 2021. This
was primarily related to increased incentive compensation
expenses.
- Interest expense decreased $8.5
million to $35.8 million in
the first quarter of 2021 primarily due to lower interest rates on
our floating rate debt and other debt refinancing activities over
the last twelve months.
- The GAAP effective income tax rate for the first quarter of
2021 was 25.3% up from 22.7% in the prior year quarter. The current
year effective tax rates are higher compared to the prior year
quarter primarily due to lower excess tax benefits on fewer
exercises of stock options during the current year.
Cash Flow and
Capital Spending
|
|
(Dollars in
millions)
|
Three months ended
March 31,
|
|
2021
|
|
2020
|
Net cash provided by
operating activities
|
$
|
297.6
|
|
|
$
|
180.0
|
|
Cash taxes included
in net cash provided by operating activities
|
$
|
13.3
|
|
|
$
|
1.6
|
|
Net cash provided by operating activities increased $117.6 million to $297.6
million in the first quarter of 2021 compared to
$180.0 million in the first quarter
of 2020. Higher gross profit of $198.5
million drove the strong cash flow, which was partially
offset by the timing of funding of one additional payroll for
$35.7 million in the first quarter of
2021 and unfavorable working capital changes from the substantial
growth of cemetery preneed sales production. Recall that cash
receipts related to preneed property sales are generally received
on an installment basis over a three to five year period.
A summary of our capital expenditures is set forth below:
(Dollars in
millions)
|
Three months ended
March 31,
|
|
2021
|
|
2020
|
Capital improvements at
existing operating locations
|
$
|
24.1
|
|
|
$
|
20.3
|
|
Development of cemetery
property
|
9.5
|
|
|
24.1
|
|
Capital improvements
at existing operating locations and cemetery development
expenditures
|
33.6
|
|
|
44.4
|
|
Growth capital
expenditures/construction of new funeral service
locations
|
8.7
|
|
|
7.9
|
|
Total capital
expenditures
|
$
|
42.3
|
|
|
$
|
52.3
|
|
Total capital expenditures decreased in the current quarter by
$10.0 million, primarily due to a
decrease in spend for the development of cemetery property. The
capital expenditures for the development of cemetery property were
lower than expected due to certain weather and property
construction delays. We expect to return to more normalized levels
of capital spending later in the year as we catch up on these
projects.
Trust Fund Returns
Total trust fund returns include realized and unrealized gains
and losses and dividends and are shown gross without netting of
certain fees. A summary of our consolidated trust fund returns as
of March 31, 2021 is set forth below:
|
Three
Months
|
Preneed
funeral
|
4.8%
|
Preneed
cemetery
|
5.2%
|
Cemetery perpetual
care
|
4.2%
|
Combined trust
funds
|
4.8%
|
Non-GAAP Financial Measures
Earnings excluding special items and diluted earnings per share
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 years, and
better reflect the performance of our core operations, as they are
not influenced by certain income or expense items not affecting
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 excluding special
items and our GAAP diluted earnings per share to diluted earnings
per share 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.
(Dollars in
millions, except diluted EPS)
|
Three months ended
March 31,
|
|
2021
|
|
2020
|
|
Net
Income
|
|
Diluted
EPS
|
|
Net
Income
|
|
Diluted
EPS
|
Net income attributable
to common stockholders, as reported
|
$
|
228.9
|
|
|
$
|
1.33
|
|
|
$
|
81.9
|
|
|
$
|
0.45
|
|
Pre-tax reconciling
items:
|
|
|
|
|
|
|
|
Gains on divestitures
and impairment charges, net
|
(1.3)
|
|
|
(0.01)
|
|
|
(4.5)
|
|
|
(0.03)
|
|
Losses on early
extinguishment of debt, net
|
—
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
Tax reconciling
items:
|
|
|
|
|
|
|
|
Tax effect from
special items
|
0.3
|
|
|
—
|
|
|
1.2
|
|
|
0.01
|
|
Change in uncertain
tax reserves and other
|
—
|
|
|
—
|
|
|
(0.2)
|
|
|
—
|
|
Earnings excluding
special items and diluted earnings per share
excluding special items
|
$
|
227.9
|
|
|
$
|
1.32
|
|
|
$
|
78.5
|
|
|
$
|
0.43
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
|
|
172.4
|
|
|
|
|
183.6
|
|
View original
content:http://www.prnewswire.com/news-releases/service-corporation-international-announces-first-quarter-2021-financial-results-and-increases-2021-guidance-301282454.html
SOURCE Service Corporation International