HOUSTON, July 28, 2021 /PRNewswire/ -- Service
Corporation International (NYSE: SCI), the largest provider of
deathcare products and services in North
America, today reported results for the second quarter of
2021.
Tom Ryan, the Company's
President, Chairman, and Chief Executive Officer, commented on
COVID-19 and second quarter results:
"Today we are pleased to report earnings per share of
$0.92 and net cash provided by
operating activities of $192 million for the quarter. The
$0.33 growth in GAAP earnings per
share in the quarter was primarily driven by continued strength in
comparable preneed cemetery sales production, which grew
$94 million, or 36%, during the quarter, driven by higher
sales velocity, sales averages, and large sales activity.
Additionally, comparable preneed funeral sales production grew
$106 million, or 57%, during the
quarter.
Based on our strong second quarter performance, we are raising
the midpoint of our full year adjusted earnings per share guidance
fifty cents to $3.35 and the midpoint of our adjusted operating
cash flow guidance by $50 million to
$737.5 million. This is the result of
the continued strong performance of preneed cemetery property sales
that we believe will remain strong through the end of 2021 coupled
with strong funeral results driven by growth in the funeral sales
average.
These results are all made possible by our greatest asset, our
24,000 associates. Their health, safety, and well-being remains a
top priority as our dedicated teams continue to provide essential
services for our client families. I would like to thank all of the
SCI family, particularly our frontline associates, 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."
Second Quarter Highlights:
- Revenue grew $168 million over
the prior year quarter to $988
million.
- Gross profit grew almost $50
million over the prior year quarter.
- GAAP earnings per share were $0.92.
- Adjusted earnings per share grew $0.34 over the prior year quarter to $0.92.
- Comparable preneed funeral sales production grew $106 million, or 57%.
- Comparable preneed cemetery sales production grew $94 million, or 36%.
SECOND QUARTER SUMMARY
Details of our second 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
June 30,
|
|
Six months ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Revenue
|
$
|
987.5
|
|
|
$
|
820.0
|
|
|
$
|
2,065.5
|
|
|
$
|
1,623.0
|
|
Operating
income
|
$
|
245.8
|
|
|
$
|
182.3
|
|
|
$
|
587.9
|
|
|
$
|
334.1
|
|
Net income
attributable to common stockholders
|
$
|
157.7
|
|
|
$
|
105.5
|
|
|
$
|
386.6
|
|
|
$
|
187.4
|
|
Diluted earnings per
share
|
$
|
0.92
|
|
|
$
|
0.59
|
|
|
$
|
2.25
|
|
|
$
|
1.03
|
|
Earnings excluding
special items (1)
|
$
|
157.4
|
|
|
$
|
104.9
|
|
|
$
|
385.3
|
|
|
$
|
183.5
|
|
Diluted earnings per
share excluding special items (1)
|
$
|
0.92
|
|
|
$
|
0.58
|
|
|
$
|
2.25
|
|
|
$
|
1.01
|
|
Diluted weighted
average shares outstanding
|
170.9
|
|
|
179.7
|
|
|
171.6
|
|
|
181.6
|
|
Net cash provided by
operating activities
|
$
|
192.2
|
|
|
$
|
184.3
|
|
|
$
|
489.8
|
|
|
$
|
364.3
|
|
(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 $0.92 in the second quarter of 2021 compared to
$0.59 in the second quarter of 2020.
The current year quarter was impacted by a $5.2 million in loss on early extinguishment of
debt, net, which was offset by a $5.5
million increase in net gains on divestitures and impairment
charges. Diluted earnings per share excluding special items was
$0.92 in the second quarter of 2021
compared to $0.58 in the second
quarter of 2020. The growth of $0.34
is due to increased gross profit related to strong growth in
cemetery recognized preneed revenue. Our current period results
also benefited from fewer shares outstanding, lower corporate and
general administrative expenses, lower interest expense, and a
lower adjusted effective tax rate.
- Net cash provided by operating activities increased
$7.9 million to $192.2 million in the second quarter of 2021
compared to $184.3 million in the
second quarter of 2020. Strong growth in gross profit from
increased preneed cemetery sales production, coupled with lower
cash interest payments and favorable working capital, helped to
offset an expected significant increase in cash tax payments
primarily driven by the deferral of federal and state income tax
payments in the prior year as approved by the IRS.
UPDATED OUTLOOK FOR 2021
The annual guidance provided below has a wider range than usual
at this mid-year period due to the continued uncertainty related to
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
$60 million of additional cash
outflows when compared to 2020.
(Dollars in
millions, except per share amounts)
|
Previous
2021 Outlook
|
Revised 2021
Outlook
|
Diluted earnings per
share excluding special items (1)
|
$2.70 -
$3.00
|
$3.20 -
$3.50
|
Net cash provided by
operating activities excluding special items
(1)
|
$650 -
$725
|
$700 -
$775
|
Cash taxes
included in Net cash provided by operating activities
excluding special items (1)
|
$180
|
$210
|
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 weather events and 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 Thursday, July 29, 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 7309585. 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 5, 2021 and
can be accessed at (877) 344-7529 (US) or (412) 317-0088
(International) with the passcode of 10158218. 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
June 30, 2021, we owned and operated 1,458 funeral service
locations and 485 cemeteries (of which 297 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 SECOND QUARTER OF 2021
Consolidated Statement of Operations
(Unaudited)
|
|
(Dollars in
thousands, except per share amounts)
|
Three months
ended
|
|
Six months
ended
|
|
June
30,
|
|
June
30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
987,535
|
|
|
$
|
820,035
|
|
|
$
|
2,065,516
|
|
|
$
|
1,623,000
|
|
Cost of
revenue
|
(718,822)
|
|
|
(601,268)
|
|
|
(1,419,296)
|
|
|
(1,225,189)
|
|
Gross
profit
|
268,713
|
|
|
218,767
|
|
|
646,220
|
|
|
397,811
|
|
Corporate general and
administrative expenses
|
(29,038)
|
|
|
(37,169)
|
|
|
(65,771)
|
|
|
(68,982)
|
|
Gains on divestitures
and impairment charges, net
|
6,162
|
|
|
737
|
|
|
7,428
|
|
|
5,282
|
|
Operating
income
|
245,837
|
|
|
182,335
|
|
|
587,877
|
|
|
334,111
|
|
Interest
expense
|
(37,435)
|
|
|
(41,767)
|
|
|
(73,247)
|
|
|
(86,118)
|
|
Losses on early
extinguishment of debt, net
|
(5,226)
|
|
|
(11)
|
|
|
(5,226)
|
|
|
(150)
|
|
Other income
(expense), net
|
655
|
|
|
1,166
|
|
|
996
|
|
|
(81)
|
|
Income before income
taxes
|
203,831
|
|
|
141,723
|
|
|
510,400
|
|
|
247,762
|
|
Provision for income
taxes
|
(46,042)
|
|
|
(36,170)
|
|
|
(123,656)
|
|
|
(60,208)
|
|
Net income
|
157,789
|
|
|
105,553
|
|
|
386,744
|
|
|
187,554
|
|
Net income
attributable to noncontrolling interests
|
(84)
|
|
|
(45)
|
|
|
(160)
|
|
|
(105)
|
|
Net income
attributable to common stockholders
|
$
|
157,705
|
|
|
$
|
105,508
|
|
|
$
|
386,584
|
|
|
$
|
187,449
|
|
Basic earnings per
share:
|
|
|
|
|
|
|
|
Net income
attributable to common stockholders
|
$
|
0.94
|
|
|
$
|
0.59
|
|
|
$
|
2.29
|
|
|
$
|
1.04
|
|
Basic weighted average
number of shares
|
168,450
|
|
|
177,902
|
|
|
169,180
|
|
|
179,378
|
|
Diluted earnings per
share:
|
|
|
|
|
|
|
|
Net income
attributable to common stockholders
|
$
|
0.92
|
|
|
$
|
0.59
|
|
|
$
|
2.25
|
|
|
$
|
1.03
|
|
Diluted weighted
average number of shares
|
170,863
|
|
|
179,666
|
|
|
171,616
|
|
|
181,639
|
|
Consolidated
Balance Sheet (Unaudited)
|
|
(Dollars in
thousands, except share amounts)
|
|
|
|
|
June 30,
2021
|
|
December 31,
2020
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
436,796
|
|
|
$
|
230,857
|
|
Receivables,
net
|
89,972
|
|
|
92,939
|
|
Inventories
|
25,036
|
|
|
23,929
|
|
Other
|
34,770
|
|
|
28,427
|
|
Total current
assets
|
586,574
|
|
|
376,152
|
|
Preneed receivables,
net and trust investments
|
5,785,651
|
|
|
5,345,720
|
|
Cemetery
property
|
1,862,309
|
|
|
1,879,340
|
|
Property and
equipment, net
|
2,150,623
|
|
|
2,133,664
|
|
Goodwill
|
1,884,806
|
|
|
1,880,007
|
|
Deferred charges and
other assets, net
|
1,108,207
|
|
|
1,080,053
|
|
Cemetery perpetual
care trust investments
|
1,966,279
|
|
|
1,820,489
|
|
Total
assets
|
$
|
15,344,449
|
|
|
$
|
14,515,425
|
|
|
|
|
|
LIABILITIES & EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
594,778
|
|
|
$
|
575,948
|
|
Current maturities of
long-term debt
|
66,460
|
|
|
228,352
|
|
Income taxes
payable
|
30,254
|
|
|
11,634
|
|
Total current
liabilities
|
691,492
|
|
|
815,934
|
|
Long-term
debt
|
3,772,448
|
|
|
3,514,182
|
|
Deferred revenue,
net
|
1,520,245
|
|
|
1,488,909
|
|
Deferred tax
liability
|
439,844
|
|
|
437,308
|
|
Other
liabilities
|
437,965
|
|
|
420,039
|
|
Deferred receipts
held in trust
|
4,608,554
|
|
|
4,272,382
|
|
Care trusts'
corpus
|
1,955,790
|
|
|
1,814,050
|
|
Equity:
|
|
|
|
Common stock, $1 per
share par value, 500,000,000 shares authorized, 175,724,671 and
174,792,272 shares issued, respectively, and 167,969,163 and
170,717,236 shares outstanding, respectively
|
167,969
|
|
|
170,717
|
|
Capital in excess of
par value
|
984,791
|
|
|
981,934
|
|
Retained
earnings
|
714,073
|
|
|
560,731
|
|
Accumulated other
comprehensive income
|
51,305
|
|
|
39,366
|
|
Total common
stockholders' equity
|
1,918,138
|
|
|
1,752,748
|
|
Noncontrolling
interests
|
(27)
|
|
|
(127)
|
|
Total
equity
|
1,918,111
|
|
|
1,752,621
|
|
Total liabilities and
equity
|
$
|
15,344,449
|
|
|
$
|
14,515,425
|
|
Consolidated
Statement of Cash Flows (Unaudited)
|
|
(Dollars in
thousands)
|
Six months ended
June 30,
|
|
2021
|
|
2020
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
386,744
|
|
|
$
|
187,554
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Losses on early
extinguishment of debt, net
|
5,226
|
|
|
150
|
|
Depreciation and
amortization
|
79,552
|
|
|
75,582
|
|
Amortization of
intangibles
|
10,127
|
|
|
11,304
|
|
Amortization of
cemetery property
|
52,362
|
|
|
33,696
|
|
Amortization of loan
costs
|
3,118
|
|
|
2,571
|
|
Provision for expected
credit losses
|
6,389
|
|
|
9,023
|
|
Provision for deferred
income taxes
|
1,986
|
|
|
5,681
|
|
Gains on divestitures
and impairment charges, net
|
(7,428)
|
|
|
(5,282)
|
|
Share-based
compensation
|
7,096
|
|
|
7,044
|
|
Change in assets and
liabilities, net of effects from acquisitions and
dispositions:
|
|
|
|
(Increase) decrease in
receivables
|
(1,002)
|
|
|
2,781
|
|
Increase in other
assets
|
(31,340)
|
|
|
(18,232)
|
|
Increase in payables
and other liabilities
|
56,891
|
|
|
41,936
|
|
Effect of preneed
sales production and maturities:
|
|
|
|
Increase in preneed
receivables, net and trust investments
|
(160,465)
|
|
|
(16,520)
|
|
Increase in deferred
revenue, net
|
66,107
|
|
|
39,374
|
|
Increase (decrease) in
deferred receipts held in trust
|
14,401
|
|
|
(12,360)
|
|
Net cash provided by
operating activities
|
489,764
|
|
|
364,302
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(103,161)
|
|
|
(104,828)
|
|
Business acquisitions,
net of cash acquired
|
(3,591)
|
|
|
(26,271)
|
|
Real estate
acquisitions
|
(10,498)
|
|
|
(32,766)
|
|
Proceeds from
divestitures and sales of property and equipment
|
12,232
|
|
|
12,136
|
|
Payments for
Company-owned life insurance policies
|
(3,534)
|
|
|
(3,848)
|
|
Proceeds from
Company-owned life insurance policies and other
|
—
|
|
|
3,519
|
|
Net cash used in
investing activities
|
(108,552)
|
|
|
(152,058)
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from issuance
of long-term debt
|
820,000
|
|
|
190,000
|
|
Debt issuance
costs
|
(13,618)
|
|
|
—
|
|
Scheduled payments of
debt
|
(18,070)
|
|
|
(16,455)
|
|
Early payments and
extinguishment of debt
|
(699,837)
|
|
|
(95,897)
|
|
Principal payments on
finance leases
|
(16,091)
|
|
|
(20,453)
|
|
Proceeds from exercise
of stock options
|
16,254
|
|
|
15,126
|
|
Purchase of Company
common stock
|
(187,183)
|
|
|
(210,568)
|
|
Payments of
dividends
|
(70,920)
|
|
|
(68,133)
|
|
Bank overdrafts and
other
|
(7,030)
|
|
|
6,686
|
|
Net cash used in
financing activities
|
(176,495)
|
|
|
(199,694)
|
|
Effect of foreign
currency
|
3,311
|
|
|
(4,575)
|
|
Net increase in cash,
cash equivalents, and restricted cash
|
208,028
|
|
|
7,975
|
|
Cash, cash
equivalents, and restricted cash at beginning of period
|
238,610
|
|
|
242,620
|
|
Cash, cash
equivalents, and restricted cash at end of period
|
$
|
446,638
|
|
|
$
|
250,595
|
|
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
June 30,
|
|
Six months ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Consolidated
funeral:
|
|
|
|
|
|
|
|
Atneed
revenue
|
$
|
282.3
|
|
|
$
|
256.2
|
|
|
$
|
620.4
|
|
|
$
|
521.0
|
|
Matured preneed
revenue
|
159.5
|
|
|
158.4
|
|
|
349.6
|
|
|
321.9
|
|
Core
revenue
|
441.8
|
|
|
414.6
|
|
|
970.0
|
|
|
842.9
|
|
Non-funeral home
revenue
|
16.9
|
|
|
14.1
|
|
|
36.6
|
|
|
28.6
|
|
Recognized preneed
revenue
|
33.1
|
|
|
27.7
|
|
|
74.9
|
|
|
60.5
|
|
Other
revenue
|
39.9
|
|
|
24.5
|
|
|
69.6
|
|
|
53.8
|
|
Total
revenue
|
$
|
531.7
|
|
|
$
|
480.9
|
|
|
$
|
1,151.1
|
|
|
$
|
985.8
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
$
|
108.4
|
|
|
$
|
116.0
|
|
|
$
|
299.2
|
|
|
$
|
219.5
|
|
Gross profit
percentage
|
20.4
|
%
|
|
24.1
|
%
|
|
26.0
|
%
|
|
22.3
|
%
|
|
|
|
|
|
|
|
|
Funeral services
performed
|
85,682
|
|
|
90,579
|
|
|
192,092
|
|
|
177,069
|
|
Average revenue per
service
|
$
|
5,354
|
|
|
$
|
4,733
|
|
|
$
|
5,240
|
|
|
$
|
4,922
|
|
|
|
|
|
(Dollars in
millions)
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
2021
|
|
2020
|
|
2021
|
|
2020
|
Consolidated
cemetery:
|
|
|
|
|
|
|
|
Atneed property
revenue
|
$
|
35.1
|
|
|
$
|
28.7
|
|
|
$
|
79.4
|
|
|
$
|
53.5
|
|
Atneed merchandise and
service revenue
|
73.9
|
|
|
62.4
|
|
|
154.2
|
|
|
122.7
|
|
Total atneed
revenue
|
109.0
|
|
|
91.1
|
|
|
233.6
|
|
|
176.2
|
|
Recognized preneed
property revenue
|
222.9
|
|
|
152.1
|
|
|
441.1
|
|
|
268.2
|
|
Recognized preneed
merchandise and service revenue
|
87.7
|
|
|
69.8
|
|
|
173.5
|
|
|
138.5
|
|
Total recognized
preneed revenue
|
310.6
|
|
|
221.9
|
|
|
614.6
|
|
|
406.7
|
|
Core
revenue
|
419.6
|
|
|
313.0
|
|
|
848.2
|
|
|
582.9
|
|
Other cemetery
revenue
|
36.2
|
|
|
26.1
|
|
|
66.2
|
|
|
54.3
|
|
Total
revenue
|
$
|
455.8
|
|
|
$
|
339.1
|
|
|
$
|
914.4
|
|
|
$
|
637.2
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
$
|
160.3
|
|
|
$
|
102.8
|
|
|
$
|
347.0
|
|
|
$
|
178.3
|
|
Gross profit
percentage
|
35.2
|
%
|
|
30.3
|
%
|
|
37.9
|
%
|
|
28.0
|
%
|
Comparable Funeral Results
The table below details comparable funeral results of operations
("same store") for the three months ended June 30, 2021 and
2020. We consider comparable funeral operations to be those
businesses owned for the entire period beginning January 1,
2020 and ending June 30, 2021.
(Dollars in
millions, except average revenue per service and average
revenue per contract sold)
|
Three months ended
June 30,
|
|
2021
|
|
2020
|
|
Var
|
|
%
|
Comparable funeral
revenue:
|
|
|
|
|
|
|
|
Atneed revenue
(1)
|
$
|
276.9
|
|
|
$
|
252.5
|
|
|
$
|
24.4
|
|
|
9.7
|
%
|
Matured preneed
revenue (2)
|
158.2
|
|
|
157.3
|
|
|
0.9
|
|
|
0.6
|
%
|
Core revenue
(3)
|
435.1
|
|
|
409.8
|
|
|
25.3
|
|
|
6.2
|
%
|
Non-funeral home
revenue (4)
|
16.7
|
|
|
14.1
|
|
|
2.6
|
|
|
18.4
|
%
|
Recognized preneed
revenue (5)
|
32.8
|
|
|
27.7
|
|
|
5.1
|
|
|
18.4
|
%
|
Other revenue
(6)
|
39.8
|
|
|
24.6
|
|
|
15.2
|
|
|
61.8
|
%
|
Total comparable
revenue
|
$
|
524.4
|
|
|
$
|
476.2
|
|
|
$
|
48.2
|
|
|
10.1
|
%
|
|
|
|
|
|
|
|
|
Comparable gross
profit
|
$
|
107.3
|
|
|
$
|
115.0
|
|
|
$
|
(7.7)
|
|
|
(6.7)
|
%
|
Comparable gross
profit percentage
|
20.5
|
%
|
|
24.1
|
%
|
|
(3.6)
|
%
|
|
|
|
|
|
|
|
|
|
|
Comparable funeral
services performed:
|
|
|
|
|
|
|
|
Atneed
|
47,784
|
|
|
50,705
|
|
|
(2,921)
|
|
|
(5.8)
|
%
|
Matured
preneed
|
24,799
|
|
|
27,388
|
|
|
(2,589)
|
|
|
(9.5)
|
%
|
Total core
|
72,583
|
|
|
78,093
|
|
|
(5,510)
|
|
|
(7.1)
|
%
|
Non-funeral
home
|
11,866
|
|
|
11,582
|
|
|
284
|
|
|
2.5
|
%
|
Total comparable
funeral services performed
|
84,449
|
|
|
89,675
|
|
|
(5,226)
|
|
|
(5.8)
|
%
|
Comparable core
cremation rate
|
52.7
|
%
|
|
52.8
|
%
|
|
(0.1)
|
%
|
|
|
Total comparable
cremation rate (7)
|
59.1
|
%
|
|
58.9
|
%
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
Comparable funeral
sales average revenue per service:
|
|
|
|
|
|
|
|
Atneed
|
$
|
5,795
|
|
|
$
|
4,980
|
|
|
$
|
815
|
|
|
16.4
|
%
|
Matured
preneed
|
6,379
|
|
|
5,743
|
|
|
636
|
|
|
11.1
|
%
|
Total core
|
5,995
|
|
|
5,248
|
|
|
747
|
|
|
14.2
|
%
|
Non-funeral
home
|
1,407
|
|
|
1,217
|
|
|
190
|
|
|
15.6
|
%
|
Total comparable
average revenue per service
|
$
|
5,350
|
|
|
$
|
4,727
|
|
|
$
|
623
|
|
|
13.2
|
%
|
|
|
|
|
|
|
|
|
Comparable funeral
preneed sales production:
|
|
|
|
|
|
|
|
Total preneed
sales
|
$
|
290.4
|
|
|
$
|
184.8
|
|
|
$
|
105.6
|
|
|
57.1
|
%
|
Core contracts
sold
|
38,707
|
|
|
26,532
|
|
|
12,175
|
|
|
45.9
|
%
|
Non-funeral home
contracts sold
|
20,032
|
|
|
14,569
|
|
|
5,463
|
|
|
37.5
|
%
|
Core average revenue
per contract sold
|
$
|
6,019
|
|
|
$
|
5,423
|
|
|
$
|
596
|
|
|
11.0
|
%
|
Non-funeral home
average revenue per contract sold
|
$
|
2,865
|
|
|
$
|
2,811
|
|
|
$
|
54
|
|
|
1.9
|
%
|
(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 $48.2 million, or 10.1%, in the second quarter of
2021 compared to the same period of 2020, primarily driven by
significant growth in core funeral revenue of $25.3 million and a $15.2
million increase in other revenue.
- The increase in core funeral revenue of $25.3 million, or 6.2%, was primarily the result
of a 14.2% increase in core average revenue per service partially
offset by a 7.1% decrease in core funeral services performed. The
comparable core cremation rate declined by a modest 10 basis points
to 52.7%.
- Non-funeral home revenue increased $2.6
million, or 18.4%, as a result of a 2.5% increase in
services performed and a 15.6% increase in the average revenue per
service.
- Recognized preneed revenue increased $5.1 million, or 18.4%, primarily driven by a
40.1% increase in preneed funeral sales production through our
non-funeral home channel as described below.
- Other revenue increased $15.2
million, or 61.8%, as a result of an increase in general
agency revenue from a 70.2% increase in comparable preneed funeral
insurance production during the quarter.
- Comparable funeral gross profit decreased $7.7 million to $107.3
million and the gross profit percentage decreased to 20.5%.
Funeral gross profit was reduced as staffing and service levels
normalized compared to the prior year quarter, driven by our
customers desire for more robust remembrances and celebrations.
Fixed costs increased due to higher incentive compensation expense
and pent up repairs and maintenance expenses. Significant growth in
our comparable preneed funeral sales production generated general
agency revenue that is effectively offset by selling costs, putting
downward pressure on the gross profit percentage.
- Comparable preneed funeral sales production increased
$105.6 million, or 57.1%, in the
second quarter of 2021 compared to 2020. We experienced a 61.9%
increase at our core funeral locations and a 40.1% increase in
preneed production through our non-funeral home channel. The
increase in comparable preneed funeral sales production was aided
by a significant growth in digital and direct mail leads, as well
as the gradual return of local marketing events and in-person
seminars.
Comparable Cemetery Results
The table below details comparable cemetery results of
operations ("same store") for the three months ended June 30,
2021 and 2020. We consider comparable cemetery operations to be
those businesses owned for the entire period beginning
January 1, 2020 and ending June 30, 2021.
(Dollars in
millions)
|
Three months ended
June 30,
|
|
2021
|
|
2020
|
|
Var
|
|
%
|
Comparable
cemetery revenue:
|
|
|
|
|
|
|
|
Atneed property
revenue
|
$
|
35.1
|
|
|
$
|
28.7
|
|
|
$
|
6.4
|
|
|
22.3
|
%
|
Atneed merchandise and
service revenue
|
73.8
|
|
|
62.4
|
|
|
11.4
|
|
|
18.3
|
%
|
Total atneed revenue
(1)
|
108.9
|
|
|
91.1
|
|
|
17.8
|
|
|
19.5
|
%
|
Recognized preneed
property revenue
|
222.8
|
|
|
152.1
|
|
|
70.7
|
|
|
46.5
|
%
|
Recognized preneed
merchandise and service revenue
|
87.6
|
|
|
69.8
|
|
|
17.8
|
|
|
25.5
|
%
|
Total recognized
preneed revenue (2)
|
310.4
|
|
|
221.9
|
|
|
88.5
|
|
|
39.9
|
%
|
Core
revenue (3)
|
419.3
|
|
|
313.0
|
|
|
106.3
|
|
|
34.0
|
%
|
Other revenue
(4)
|
36.3
|
|
|
26.0
|
|
|
10.3
|
|
|
39.6
|
%
|
Total comparable
revenue
|
$
|
455.6
|
|
|
$
|
339.0
|
|
|
$
|
116.6
|
|
|
34.4
|
%
|
|
|
|
|
|
|
|
|
Comparable gross
profit
|
$
|
160.2
|
|
|
$
|
102.8
|
|
|
$
|
57.4
|
|
|
55.8
|
%
|
Comparable gross
profit percentage
|
35.2
|
%
|
|
30.3
|
%
|
|
4.9
|
%
|
|
|
|
|
|
|
|
|
|
|
Comparable
cemetery preneed and atneed sales production:
|
|
|
|
|
|
|
|
Property
|
$
|
270.7
|
|
|
$
|
201.3
|
|
|
$
|
69.4
|
|
|
34.5
|
%
|
Merchandise and
services
|
205.0
|
|
|
159.6
|
|
|
45.4
|
|
|
28.4
|
%
|
Discounts and
other
|
(4.0)
|
|
|
(1.9)
|
|
|
(2.1)
|
|
|
(110.5)
|
%
|
Preneed and atneed
sales production
|
$
|
471.7
|
|
|
$
|
359.0
|
|
|
$
|
112.7
|
|
|
31.4
|
%
|
|
|
|
|
|
|
|
|
Recognition
rate (5)
|
88.9
|
%
|
|
87.2
|
%
|
|
|
|
|
(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 $116.6 million, or 34.4%, in the second quarter
of 2021 compared to the second quarter of 2020. The increase was
primarily due to a $106.3 million, or
34.0%, increase in core revenue.
- The core revenue growth of $106.3
million was a result of a $88.5
million, or 39.9%, increase in recognized preneed revenue
driven by strong comparable preneed cemetery sales production for
the period as described below and a $17.8
million, or 19.5%, increase in atneed revenue that was
driven by an increase in burials performed.
- Other revenue increased $10.3
million, or 39.6%, primarily from higher endowment care
trust fund income due to higher capital gains and other
distributions.
- Comparable cemetery gross profit increased $57.4 million to $160.2
million. The gross profit percentage increased to 35.2% from
30.3%, primarily resulting from the revenue increases described
above. The incremental margin on the revenue increases more than
offset higher fixed costs in the current quarter relative to the
prior year as staffing and service levels normalized driven by
customer interaction and we recorded elevated levels of incentive
compensation expense compared to the prior year second
quarter.
- Comparable preneed cemetery sales production increased
$94.3 million, or 35.6%, driven by
significant increases in sales velocity, sales averages, and large
sales activity. 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.
Other Financial Results
- Corporate general and administrative expenses decreased
$8.1 million to $29.0 million in the second quarter of 2021. This
was primarily related to fewer workers compensation, general
liability and auto liability insurance claims in the current year
and higher charitable contributions in the prior year.
- Interest expense decreased $4.3
million to $37.4 million in
the second quarter of 2021 primarily due to lower interest rates on
our floating rate debt and debt refinancing activities over the
last twelve months.
- The GAAP effective income tax rate for the second quarter of
2021 was 22.6%, down from 25.5% in the prior year quarter. The
current year effective tax rates are lower compared to the prior
year quarter primarily due to higher excess tax benefits on the
exercise of stock options during the second quarter.
Cash Flow and
Capital Spending
|
|
(Dollars in
millions)
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|
2021
|
|
2020
|
2021
|
|
2020
|
Net cash provided by
operating activities
|
$
|
192.2
|
|
|
$
|
184.3
|
|
$
|
489.8
|
|
|
$
|
364.3
|
|
Cash taxes included
in net cash provided by operating
activities
|
$
|
88.7
|
|
|
$
|
0.1
|
|
$
|
102.0
|
|
|
$
|
1.7
|
|
Net cash provided by operating activities increased $7.9 million to $192.2
million in the second quarter of 2021 compared to
$184.3 million in the second quarter
of 2020. Strong growth in gross profit of approximately
$49.9 million, primarily from
strong preneed cemetery sales production, lower cash interest
payments of $25.0 million and
some favorable working capital variances, were offset by an
increase in cash tax payments of $88.6 million primarily driven by the
deferral of federal and state income tax payments in the prior year
as approved by the IRS. The favorable working capital was primarily
driven by the timing of funding one less payroll quarter over
quarter partially offset by the impact of funding regular payroll
taxes during the quarter that were deferred in 2020 as allowed
under the CARES Act.
A summary of our capital expenditures is set forth below:
(Dollars in
millions)
|
Three months ended
June 30,
|
Six months ended
June 30,
|
|
2021
|
|
2020
|
2021
|
|
2020
|
Capital improvements at
existing operating locations
|
$
|
36.1
|
|
|
$
|
23.0
|
|
$
|
60.2
|
|
|
$
|
43.2
|
|
Development of cemetery
property
|
15.1
|
|
|
21.2
|
|
24.6
|
|
|
45.3
|
|
Capital improvements
at existing operating locations and
cemetery development expenditures
|
51.2
|
|
|
44.2
|
|
84.8
|
|
|
88.5
|
|
Growth capital
expenditures/construction of new funeral service
locations
|
9.7
|
|
|
8.4
|
|
18.4
|
|
|
16.3
|
|
Total capital
expenditures
|
$
|
60.9
|
|
|
$
|
52.6
|
|
$
|
103.2
|
|
|
$
|
104.8
|
|
Total capital expenditures increased in the current quarter by
$8.3 million, primarily due to an
increase in capital improvements at existing operating locations
offset by lower spend on cemetery property development. 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 June 30, 2021 is set forth below:
|
Three
Months
|
|
Six
Months
|
Preneed
funeral
|
5.5%
|
|
10.5%
|
Preneed
cemetery
|
5.7%
|
|
11.2%
|
Cemetery perpetual
care
|
5.1%
|
|
9.6%
|
Combined trust
funds
|
5.4%
|
|
10.5%
|
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
June 30,
|
|
2021
|
|
2020
|
|
Net
Income
|
|
Diluted
EPS
|
|
Net
Income
|
|
Diluted
EPS
|
Net income
attributable to common stockholders, as reported
|
$
|
157.7
|
|
|
$
|
0.92
|
|
|
$
|
105.5
|
|
|
$
|
0.59
|
|
Pre-tax reconciling
items:
|
|
|
|
|
|
|
|
Gains on divestitures
and impairment charges, net
|
(6.2)
|
|
|
(0.04)
|
|
|
(0.7)
|
|
|
(0.01)
|
|
Losses on early
extinguishment of debt, net
|
5.2
|
|
|
0.04
|
|
|
—
|
|
|
—
|
|
Tax reconciling
items:
|
|
|
|
|
|
|
|
Tax effect from
special items
|
0.7
|
|
|
—
|
|
|
0.1
|
|
|
—
|
|
Earnings excluding
special items and diluted earnings per share
excluding special items
|
$
|
157.4
|
|
|
$
|
0.92
|
|
|
$
|
104.9
|
|
|
$
|
0.58
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
|
|
170.9
|
|
|
|
|
179.7
|
|
(Dollars in
millions, except diluted EPS)
|
Six months ended
June 30,
|
|
2021
|
|
2020
|
|
Net
Income
|
|
Diluted
EPS
|
|
Net
Income
|
|
Diluted
EPS
|
Net income attributable
to common stockholders, as reported
|
$
|
386.6
|
|
|
$
|
2.25
|
|
|
$
|
187.4
|
|
|
$
|
1.03
|
|
Pre-tax reconciling
items:
|
|
|
|
|
|
|
|
Gains on divestitures
and impairment charges, net
|
(7.4)
|
|
|
(0.04)
|
|
|
(5.3)
|
|
|
(0.03)
|
|
Losses on early
extinguishment of debt, net
|
5.2
|
|
|
0.04
|
|
|
0.2
|
|
|
—
|
|
Tax reconciling
items:
|
|
|
|
|
|
|
|
Tax effect from
special items
|
0.9
|
|
|
—
|
|
|
1.2
|
|
|
0.01
|
|
Earnings excluding
special items and diluted earnings per share
excluding special items
|
$
|
385.3
|
|
|
$
|
2.25
|
|
|
$
|
183.5
|
|
|
$
|
1.01
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
|
|
171.6
|
|
|
|
|
181.6
|
|
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SOURCE Service Corporation International