Conference call on Tuesday, February 13, 2024, at
8:00 a.m. Central Time.
HOUSTON, Feb. 12,
2024 /PRNewswire/ -- Service Corporation
International (NYSE: SCI), the largest provider of deathcare
products and services in North
America, today reported results for the fourth quarter of
2023.
Highlights:
- Revenue increased $28 million to
$1.1 billion.
- Comparable preneed cemetery sales production grew 9.4%.
- Comparable preneed funeral sales production grew 4.2%.
- GAAP earnings per share were $0.93 and $3.53,
for the fourth quarter and full year 2023, respectively.
- Adjusted earnings per share were $0.93 and $3.47,
for the fourth quarter and full year 2023, respectively.
- Operating cash flow of $278
million and $869 million, for
the fourth quarter and full year 2023, respectively.
- Adjusted operating cash flow of $882
million for the full year 2023, just above the high end of
our expectations.
- 2024 adjusted earnings per share guidance of $3.50 to $3.80.
Tom Ryan, the Company's
President, Chairman, and Chief Executive Officer, commented on
fourth quarter results:
"We delivered a solid quarter as we closed out 2023 and are
pleased to report growth in revenue and adjusted earnings per
share. The revenue growth is primarily due to a 9% increase in
preneed cemetery sales production, which drove higher gross profit.
Adjusted cash flow for the quarter grew over $100 million from improved operating income
enhanced by expected lower cash taxes and increased sources of
working capital that more than offset higher cash interest
payments.
For the full year of 2023, we reported adjusted earnings per
share of $3.47, which represents a
16% growth on a compounded annual basis since pre-pandemic
2019.
- The number of comparable funeral services performed is 3%
higher than pre-pandemic 2019 levels on a compounded annual growth
basis.
- Comparable cemetery preneed sales production in 2023
experienced a 10% compounded annual growth rate over 2019
levels.
These results are all made possible by our greatest asset, our
25,000 associates. Their hard work, dedication, and focus on our
client families are what makes this company so strong. Looking
forward, we are confident that our solid operating platform and
healthy financial condition will allow us to continue to grow
revenue, leverage our scale, and allocate capital wisely to enhance
shareholder value."
FOURTH QUARTER AND FULL YEAR SUMMARY
Details of our fourth quarter 2023 financial results and the
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
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Revenue
|
$
1,055.8
|
|
$
1,027.7
|
|
$
4,099.8
|
|
$
4,108.7
|
Operating
income
|
$ 242.1
|
|
$ 167.0
|
|
$ 944.3
|
|
$ 927.3
|
Net income attributable
to common stockholders
|
$ 138.4
|
|
$
92.3
|
|
$ 537.3
|
|
$ 565.3
|
Diluted earnings per
share
|
$
0.93
|
|
$
0.59
|
|
$
3.53
|
|
$
3.53
|
Earnings excluding
special items (1)
|
$ 138.4
|
|
$ 144.3
|
|
$ 529.3
|
|
$ 607.9
|
Diluted earnings per
share excluding special items (1)
|
$
0.93
|
|
$
0.92
|
|
$
3.47
|
|
$
3.80
|
Diluted weighted
average shares outstanding
|
148.8
|
|
156.4
|
|
152.4
|
|
160.1
|
Net cash provided by
operating activities
|
$ 277.6
|
|
$ 170.3
|
|
$ 869.0
|
|
$ 825.7
|
Net cash provided by
operating activities excluding special items
(1)
|
$ 277.6
|
|
$ 170.3
|
|
$ 882.3
|
|
$ 825.7
|
|
|
(1)
|
Earnings excluding
special items, diluted earnings per share excluding special items,
and net cash provided by operating activities excluding special
items are non-GAAP financial measures. These items are also
referred to as "adjusted earnings per share" and "adjusted
operating cash flow". A reconciliation from net income attributable
to common stockholders, diluted earnings per share, and net cash
provided by operating activities in accordance with generally
accepted accounting principles in the United States (GAAP) can be
found under the headings "Cash Flow and Capital Spending" and
"Non-GAAP Financial Measures" in the Appendix at the end of this
press release.
|
•
|
Diluted earnings per
share were $0.93 in the fourth quarter of 2023 compared to $0.59 in
the fourth quarter of 2022. The prior year quarter was impacted by
$64.6 million of an estimated charge for certain legal matters
and a $5.2 million pre-tax gain on divestitures. Diluted
earnings per share excluding special items were $0.93 in the fourth
quarter of 2023 compared to $0.92 in the fourth quarter of 2022.
Higher cemetery gross profit and a lower share count helped to
offset the combination of lower funeral gross profit associated
with anticipated decreases in COVID-19 related activity as well as
higher interest expense.
|
•
|
Net cash provided by
operating activities increased $107.3 million to $277.6 million in
the fourth quarter of 2023 compared to $170.3 million in the fourth
quarter of 2022. The increase is due to higher operating income
enhanced by favorable working capital and lower cash tax payments
that more than offset higher cash interest payments.
|
OUTLOOK FOR 2024
Our 2024 outlook for diluted earnings per share from continuing
operations excluding special items is anticipated to be within our
expected long-term growth framework of 8%-12% when excluding an
estimated $20 million impact of the
higher interest rate environment. Our outlook for net cash provided
by operating activities excludes special items relating to the
payments of certain estimated legal charges of $64.6 million recognized in the fourth quarter of
2022. The forecast for cash taxes also includes the impact related
to a change in tax accounting method related to our cemetery
segment, which will defer cash taxes into future years.
(Dollars in
millions, except per share amounts)
|
2024
Outlook
|
Diluted earnings per
share excluding special items (1)
|
$3.50 -
$3.80
|
|
|
|
|
Net cash provided by
operating activities excluding special items and cash taxes
(1)
|
$935 - $985
|
Cash taxes expected in
2024 (at the midpoint of Diluted earnings per share
guidance)
|
$25 - $35
|
Net cash provided by
operating activities excluding special items
(1)
|
$900 - $960
|
|
|
|
|
Capital improvements at
existing field locations
|
$125
|
Development of cemetery
property
|
$165
|
Digital investments and
corporate
|
$35
|
Total maintenance,
cemetery development, and other capital expenditures (Maintenance
capital expenditures)
|
$325
|
|
|
(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 2024 excludes the following because this information is
not currently available for 2024: 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 estimated litigation charges or legal settlements 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
headings "Cash Flow and Capital Spending" and "Non-GAAP Financial
Measures".
|
CONFERENCE CALL AND WEBCAST
We will host a conference call on Tuesday, February 13,
2024, at 8:00 a.m. Central Time. A
question and answer session will follow prepared remarks made by
management. The conference call dial-in numbers are (888)
317-6003 (US) or (412) 317-6061 (International) with the passcode
of 3508658. 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 February 20, 2024 and can be accessed at
(877) 344-7529 (US) or (412) 317-0088 (International) with
the passcode of 5463479. Additionally, a replay of the
conference call will be available on our website for approximately
one year.
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, serving more than 600,000 families each year.
Our diversified portfolio of brands provides families and
individuals a full range of choices to meet their needs, from
simple cremations to full life celebrations and personalized
remembrances. Our Dignity Memorial® brand is the name families turn
to for professionalism, compassion, and attention to detail that is
second to none. At December 31, 2023, we owned and operated
1,483 funeral service locations and 489 cemeteries (of which 305
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 - Assistant
Vice President / 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," "predict," or other similar words that convey the
uncertainty of future events or outcomes. The absence of these
words, however, does not mean that the statements are not
forward-looking. 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 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.
- We may be adversely affected by the effects of inflation.
- Our results may be adversely affected by significant weather
events, natural disasters, catastrophic events or public health
crises.
- 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 life insurance companies
that fund our preneed contracts may impact our future revenue.
- Unfavorable publicity could affect our reputation and
business.
- Our failure to attract and retain qualified sales personnel
could have an adverse effect on our business and financial
condition.
- 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 cash
flows, 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.
- 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 life expectancy and 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.
- Risks associated with our supply chain could materially
adversely affect our financial performance.
- 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, or the interpretation of tax laws or
regulations, 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 2023 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 FOURTH QUARTER OF 2023
Consolidated
Statement of Operations
|
|
(Dollars in
thousands, except per share amounts)
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
Revenue
|
$
1,055,796
|
|
$
1,027,683
|
|
$
4,099,778
|
|
$
4,108,661
|
Cost of
revenue
|
(768,234)
|
|
(747,595)
|
|
(3,007,971)
|
|
(2,954,059)
|
Gross profit
|
287,562
|
|
280,088
|
|
1,091,807
|
|
1,154,602
|
Corporate general and
administrative expenses (1)
|
(45,074)
|
|
(107,912)
|
|
(157,368)
|
|
(237,248)
|
(Losses) gains on
divestitures and impairment charges, net
|
(371)
|
|
(5,224)
|
|
9,816
|
|
9,962
|
Operating
income
|
242,117
|
|
166,952
|
|
944,255
|
|
927,316
|
Interest
expense
|
(64,543)
|
|
(49,002)
|
|
(239,447)
|
|
(172,109)
|
Losses on early
extinguishment of debt, net
|
—
|
|
—
|
|
(1,114)
|
|
(1,225)
|
Other income,
net
|
2,265
|
|
4,135
|
|
4,912
|
|
1,646
|
Income before income
taxes
|
179,839
|
|
122,085
|
|
708,606
|
|
755,628
|
Provision for income
taxes
|
(41,402)
|
|
(29,669)
|
|
(170,945)
|
|
(189,594)
|
Net income
|
138,437
|
|
92,416
|
|
537,661
|
|
566,034
|
Net income attributable
to noncontrolling interests
|
(42)
|
|
(111)
|
|
(344)
|
|
(696)
|
Net income
attributable to common stockholders
|
$ 138,395
|
|
$
92,305
|
|
$ 537,317
|
|
$ 565,338
|
Basic earnings per
share:
|
|
|
|
|
|
|
|
Net income
attributable to common stockholders
|
$
0.94
|
|
$
0.60
|
|
$
3.57
|
|
$
3.58
|
Basic weighted average
number of shares
|
147,334
|
|
154,127
|
|
150,565
|
|
157,713
|
Diluted earnings per
share:
|
|
|
|
|
|
|
|
Net income
attributable to common stockholders
|
$
0.93
|
|
$
0.59
|
|
$
3.53
|
|
$
3.53
|
Diluted weighted
average number of shares
|
148,783
|
|
156,372
|
|
152,351
|
|
160,131
|
|
|
(1)
|
Corporate general
and administrative expenses in the fourth quarter of 2022
included an estimate of $64.6 million related to a private
litigation matter in Florida and settlement discussions with the
California Attorney General. Both matters relate to previously
disclosed litigation.
|
Consolidated Balance
Sheet
|
|
(Dollars in
thousands, except share amounts)
|
|
|
|
|
December
31,
|
|
2023
|
|
2022
|
|
|
|
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
221,557
|
|
$
191,938
|
Receivables,
net
|
97,939
|
|
96,681
|
Inventories
|
33,597
|
|
31,740
|
Income tax
receivable
|
122,183
|
|
7,021
|
Other
|
23,010
|
|
32,466
|
Total current
assets
|
498,286
|
|
359,846
|
Preneed receivables,
net and trust investments
|
6,191,912
|
|
5,577,499
|
Cemetery
property
|
2,020,846
|
|
1,939,816
|
Property and equipment,
net
|
2,480,099
|
|
2,350,549
|
Goodwill
|
1,977,186
|
|
1,945,588
|
Deferred charges and
other assets, net
|
1,247,830
|
|
1,190,426
|
Cemetery perpetual care
trust investments
|
1,939,241
|
|
1,702,313
|
Total
assets
|
$
16,355,400
|
|
$
15,066,037
|
|
|
|
|
LIABILITIES & EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
685,699
|
|
$
707,488
|
Current maturities of
long-term debt
|
63,341
|
|
90,661
|
Income taxes
payable
|
60
|
|
1,131
|
Total current
liabilities
|
749,100
|
|
799,280
|
Long-term
debt
|
4,649,155
|
|
4,251,083
|
Deferred revenue,
net
|
1,703,509
|
|
1,624,028
|
Deferred tax
liability
|
638,106
|
|
445,040
|
Other
liabilities
|
464,935
|
|
411,376
|
Deferred receipts held
in trust
|
4,670,884
|
|
4,163,520
|
Care trusts'
corpus
|
1,938,238
|
|
1,698,287
|
Equity:
|
|
|
|
Common stock,$1 per
share par value,500,000,000 shares authorized, 148,297,042 and
156,088,438 shares issued, respectively, and 146,323,340 and
153,940,365 shares
outstanding, respectively
|
146,323
|
|
153,940
|
Capital in excess of
par value
|
937,596
|
|
958,329
|
Retained
earnings
|
432,454
|
|
544,384
|
Accumulated other
comprehensive income
|
24,891
|
|
16,538
|
Total common
stockholders' equity
|
1,541,264
|
|
1,673,191
|
Noncontrolling
interests
|
209
|
|
232
|
Total
equity
|
1,541,473
|
|
1,673,423
|
Total liabilities and
equity
|
$
16,355,400
|
|
$
15,066,037
|
Consolidated
Statement of Cash Flows
|
|
(Dollars in
thousands)
|
Twelve Months Ended
December 31,
|
|
2023
|
|
2022
|
|
|
|
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
537,661
|
|
$
566,034
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Losses on early
extinguishment of debt, net
|
1,114
|
|
1,225
|
Depreciation and
amortization
|
191,272
|
|
175,330
|
Amortization of
intangibles
|
18,736
|
|
18,355
|
Amortization of
cemetery property
|
101,234
|
|
94,123
|
Amortization of loan
costs
|
6,871
|
|
6,851
|
Provision for expected
credit losses
|
11,245
|
|
16,700
|
Provision for deferred
income taxes
|
191,516
|
|
3,471
|
Gains on divestitures
and impairment charges, net
|
(9,816)
|
|
(9,962)
|
Gain on sale of
investments
|
—
|
|
(1,169)
|
Share-based
compensation
|
15,423
|
|
14,709
|
Change in assets and
liabilities, net of effects from acquisitions and
divestitures:
|
|
|
|
(Increase) decrease in
receivables
|
(3,810)
|
|
4,151
|
Increase in other
assets
|
(131,581)
|
|
(8,206)
|
(Decrease) increase in
payables and other liabilities
|
(9,676)
|
|
37,029
|
Effect of preneed
sales production and maturities:
|
|
|
|
Increase in preneed
receivables, net and trust investments
|
(178,642)
|
|
(309,055)
|
Increase in deferred
revenue, net
|
157,656
|
|
195,358
|
(Decrease) increase in
deferred receipts held in trust
|
(30,160)
|
|
20,781
|
Net cash provided by
operating activities
|
869,043
|
|
825,725
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(361,793)
|
|
(369,709)
|
Business acquisitions,
net of cash acquired
|
(72,535)
|
|
(102,558)
|
Real estate
acquisitions
|
(56,409)
|
|
(17,127)
|
Proceeds from
divestitures and sales of property and equipment
|
25,888
|
|
42,093
|
Payments for
Company-owned life insurance policies
|
(8,058)
|
|
(1,910)
|
Proceeds from
Company-owned life insurance policies and other
|
10,119
|
|
—
|
Other investment
activity
|
(6,598)
|
|
1,330
|
Net cash used in
investing activities
|
(469,386)
|
|
(447,881)
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from issuance
of long-term debt
|
957,433
|
|
484,000
|
Debt issuance
costs
|
(7,471)
|
|
(525)
|
Scheduled payments of
debt
|
(22,230)
|
|
(36,288)
|
Early payments of
debt
|
(580,973)
|
|
(65,591)
|
Principal payments on
finance leases
|
(34,482)
|
|
(35,542)
|
Proceeds from exercise
of stock options
|
24,181
|
|
27,814
|
Purchase of Company
common stock
|
(544,844)
|
|
(660,850)
|
Payments of
dividends
|
(167,983)
|
|
(160,035)
|
Bank overdrafts and
other
|
(4,773)
|
|
(980)
|
Net cash used in
financing activities
|
(381,142)
|
|
(447,997)
|
Effect of foreign
currency
|
1,722
|
|
(3,878)
|
Net increase (decrease)
in cash, cash equivalents, and restricted cash
|
20,237
|
|
(74,031)
|
Cash, cash equivalents,
and restricted cash at beginning of period
|
204,524
|
|
278,555
|
Cash, cash equivalents,
and restricted cash at end of period
|
$
224,761
|
|
$
204,524
|
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
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Consolidated
funeral:
|
|
|
|
|
|
|
|
Atneed
revenue
|
$
300.6
|
|
$
311.3
|
|
$
1,185.4
|
|
$
1,242.3
|
Matured preneed
revenue
|
181.6
|
|
177.2
|
|
715.3
|
|
705.3
|
Core
revenue
|
482.2
|
|
488.5
|
|
1,900.7
|
|
1,947.6
|
Non-funeral home
revenue
|
22.3
|
|
19.6
|
|
85.9
|
|
76.3
|
Non-funeral home
preneed sales revenue
|
25.6
|
|
34.5
|
|
134.8
|
|
146.5
|
Core general agency
and other revenue
|
43.1
|
|
37.6
|
|
181.6
|
|
161.6
|
Total
revenue
|
$
573.2
|
|
$
580.2
|
|
$
2,303.0
|
|
$
2,332.0
|
|
|
|
|
|
|
|
|
Gross profit
|
$
122.4
|
|
$
131.2
|
|
$
497.1
|
|
$
545.7
|
Gross profit
percentage
|
21.4 %
|
|
22.6 %
|
|
21.6 %
|
|
23.4 %
|
|
|
|
|
|
|
|
|
Funeral services
performed
|
90,459
|
|
93,262
|
|
358,873
|
|
373,186
|
Average revenue per
service
|
$
5,577
|
|
$
5,448
|
|
$
5,536
|
|
$
5,423
|
|
(Dollars in
millions)
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Consolidated
cemetery:
|
|
|
|
|
|
|
|
Atneed property
revenue
|
$ 34.2
|
|
$ 34.0
|
|
$
140.1
|
|
$
148.8
|
Atneed merchandise and
service revenue
|
71.3
|
|
72.7
|
|
293.8
|
|
299.3
|
Total atneed
revenue
|
105.5
|
|
106.7
|
|
433.9
|
|
448.1
|
Recognized preneed
property revenue
|
248.7
|
|
228.4
|
|
874.7
|
|
868.7
|
Recognized preneed
merchandise and service revenue
|
95.9
|
|
82.9
|
|
365.0
|
|
338.5
|
Total recognized
preneed revenue
|
344.6
|
|
311.3
|
|
1,239.7
|
|
1,207.2
|
Core
revenue
|
450.1
|
|
418.0
|
|
1,673.6
|
|
1,655.3
|
Other cemetery
revenue
|
32.5
|
|
29.5
|
|
123.1
|
|
121.3
|
Total
revenue
|
$
482.6
|
|
$
447.5
|
|
$
1,796.7
|
|
$
1,776.6
|
|
|
|
|
|
|
|
|
Gross profit
|
$
165.2
|
|
$
148.9
|
|
$
594.7
|
|
$
608.9
|
Gross profit
percentage
|
34.2 %
|
|
33.3 %
|
|
33.1 %
|
|
34.3 %
|
Comparable Funeral Results
The table below details comparable funeral results of operations
("same store") for the three months ended December 31, 2023
and 2022. We consider comparable funeral operations to be those
businesses owned for the entire period beginning January 1,
2022 and ending December 31, 2023.
(Dollars in
millions, except average revenue per service and average
revenue per contract sold)
|
Three Months Ended
December 31,
|
|
2023
|
|
2022
|
|
Var
|
|
%
|
Comparable funeral
revenue:
|
|
|
|
|
|
|
|
Atneed revenue
(1)
|
$
293.9
|
|
$
306.7
|
|
$
(12.8)
|
|
(4.2) %
|
Matured preneed
revenue (2)
|
179.6
|
|
176.8
|
|
2.8
|
|
1.6 %
|
Core revenue
(3)
|
473.5
|
|
483.5
|
|
(10.0)
|
|
(2.1) %
|
Non-funeral home
revenue (4)
|
21.2
|
|
19.5
|
|
1.7
|
|
8.7 %
|
Non-funeral home
preneed sales revenue (5)
|
25.1
|
|
34.4
|
|
(9.3)
|
|
(27.0) %
|
Core general agency
and other revenue (6)
|
42.6
|
|
37.6
|
|
5.0
|
|
13.3 %
|
Total comparable
revenue
|
$
562.4
|
|
$
575.0
|
|
$
(12.6)
|
|
(2.2) %
|
|
|
|
|
|
|
|
|
Comparable gross
profit
|
$
122.3
|
|
$
130.6
|
|
$
(8.3)
|
|
(6.4) %
|
Comparable gross profit
percentage
|
21.7 %
|
|
22.7 %
|
|
(1.0) %
|
|
|
|
|
|
|
|
|
|
|
Comparable funeral
services performed:
|
|
|
|
|
|
|
|
Atneed
|
47,159
|
|
50,923
|
|
(3,764)
|
|
(7.4) %
|
Matured
preneed
|
26,961
|
|
27,611
|
|
(650)
|
|
(2.4) %
|
Total core
|
74,120
|
|
78,534
|
|
(4,414)
|
|
(5.6) %
|
Non-funeral
home
|
13,877
|
|
13,724
|
|
153
|
|
1.1 %
|
Total comparable
funeral services performed
|
87,997
|
|
92,258
|
|
(4,261)
|
|
(4.6) %
|
Core cremation
rate
|
56.3 %
|
|
55.8 %
|
|
0.5 %
|
|
|
Total comparable
cremation rate (7)
|
63.1 %
|
|
62.3 %
|
|
0.8 %
|
|
|
|
|
|
|
|
|
|
|
Comparable funeral
average revenue per service:
|
|
|
|
|
|
|
|
Atneed
|
$
6,232
|
|
$
6,023
|
|
$ 209
|
|
3.5 %
|
Matured
preneed
|
6,661
|
|
6,403
|
|
258
|
|
4.0 %
|
Total core
|
6,388
|
|
6,157
|
|
231
|
|
3.8 %
|
Non-funeral
home
|
1,528
|
|
1,421
|
|
107
|
|
7.5 %
|
Total comparable
average revenue per service
|
$
5,622
|
|
$
5,452
|
|
$ 170
|
|
3.1 %
|
|
|
|
|
|
|
|
|
Comparable funeral
preneed sales production:
|
|
|
|
|
|
|
|
Total preneed
sales
|
$
286.3
|
|
$
274.7
|
|
$
11.6
|
|
4.2 %
|
Core contracts
sold
|
33,601
|
|
33,383
|
|
218
|
|
0.7 %
|
Non-funeral home
contracts sold
|
20,806
|
|
19,988
|
|
818
|
|
4.1 %
|
Core average revenue
per contract sold
|
$
6,618
|
|
$
6,437
|
|
181
|
|
2.8 %
|
Non-funeral home
average revenue per contract sold
|
$
3,072
|
|
$
2,994
|
|
$ 78
|
|
2.6 %
|
|
|
(1)
|
Atneed revenue
represents merchandise and services sold and delivered or performed
once death has occurred.
|
(2)
|
Matured preneed revenue
represents merchandise and services sold on a preneed contract
through 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)
|
Non-funeral home
preneed sales revenue represents travel protection, net and
merchandise sold on a preneed contract that is delivered before
death has occurred and general agency revenue from our non-funeral
home sales channel.
|
(6)
|
Core general agency and
other revenue primarily comprises core 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 and core travel
protection preneed sales, net.
|
(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 decreased by $12.6 million, or 2.2%, primarily driven by a
decline in core funeral revenue of $10.0
million.
- The decrease in core funeral revenue of $10.0 million, or 2.1%, was primarily due to a
5.6% decrease in core funeral services performed (due to lower
COVID-19 related activity) offset by 3.8% growth in the core
average revenue per service. This core average growth was achieved
despite a modest increase of 50 basis points in the core cremation
rate to 56.3%. Core average growth is primarily driven by consumer
preferences for enhanced product and service offerings as well as
an increase in trust fund income.
- Comparable funeral gross profit decreased $8.3 million to $122.3
million and the gross profit percentage decreased to 21.7%
from 22.7%. This decrease is primarily due to the decline in
revenue mentioned above slightly offset by lower fixed costs and
reduced incentive compensation costs this quarter compared with the
prior year.
- Comparable preneed funeral sales production increased
$11.6 million, or 4.2%, in the fourth
quarter of 2023 compared to 2022. We experienced a 6.8% increase in
non-funeral home preneed sales production and a 3.5% increase in
core preneed funeral sales production for the quarter. These
production increases were driven by higher contract velocity as
well as higher sales averages.
Comparable Cemetery Results
The table below details comparable cemetery results of
operations ("same store") for the three months ended
December 31, 2023 and 2022. We consider comparable cemetery
operations to be those businesses owned for the entire period
beginning January 1, 2022 and ending December 31,
2023.
(Dollars in
millions)
|
Three Months Ended
December 31,
|
|
2023
|
|
2022
|
|
Var
|
|
%
|
Comparable cemetery
revenue:
|
|
|
|
|
|
|
|
Atneed property
revenue
|
$
33.8
|
|
$
33.9
|
|
$
(0.1)
|
|
(0.3) %
|
Atneed merchandise and
service revenue
|
70.9
|
|
72.4
|
|
(1.5)
|
|
(2.1) %
|
Total atneed revenue
(1)
|
104.7
|
|
106.3
|
|
(1.6)
|
|
(1.5) %
|
Recognized preneed
property revenue
|
247.8
|
|
227.7
|
|
20.1
|
|
8.8 %
|
Recognized preneed
merchandise and service revenue
|
95.7
|
|
82.7
|
|
13.0
|
|
15.7 %
|
Total recognized
preneed revenue (2)
|
343.5
|
|
310.4
|
|
33.1
|
|
10.7 %
|
Core
revenue (3)
|
448.2
|
|
416.7
|
|
31.5
|
|
7.6 %
|
Other revenue
(4)
|
32.5
|
|
29.5
|
|
3.0
|
|
10.2 %
|
Total comparable
revenue
|
$
480.7
|
|
$
446.2
|
|
$
34.5
|
|
7.7 %
|
|
|
|
|
|
|
|
|
Comparable gross
profit
|
$
165.5
|
|
$
148.5
|
|
$
17.0
|
|
11.4 %
|
Comparable gross profit
percentage
|
34.4 %
|
|
33.3 %
|
|
1.1 %
|
|
|
|
|
|
|
|
|
|
|
Comparable cemetery
preneed and atneed sales production:
|
|
|
|
|
|
|
|
Property
|
$
266.0
|
|
$
246.2
|
|
$
19.8
|
|
8.0 %
|
Merchandise and
services
|
192.4
|
|
183.4
|
|
9.0
|
|
4.9 %
|
Discounts and
other
|
(4.3)
|
|
(3.7)
|
|
(0.6)
|
|
(16.2) %
|
Preneed and atneed
sales production
|
$
454.1
|
|
$
425.9
|
|
$
28.2
|
|
6.6 %
|
|
|
|
|
|
|
|
|
Preneed sales
production
|
$
351.1
|
|
$
321.0
|
|
$
30.1
|
|
9.4 %
|
Recognition rate
(5)
|
98.7 %
|
|
97.8 %
|
|
|
|
|
|
|
(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 by $34.5 million, or 7.7%, primarily due to higher
core revenue of $31.5 million.
- The core revenue increase of $31.5
million was primarily due to a $33.1
million, or 10.7%, increase in total recognized preneed
revenue, which was partially offset by a $1.6 million decrease in atneed revenue. The
$33.1 million in total recognized
preneed revenue growth benefited from growth in comparable preneed
cemetery sales production of $30.1
million, or 9.4%.
- Other revenue was higher by $3.0
million, or 10.2%, primarily from a $2.6 million increase in endowment care trust
fund income due to improved market returns.
- Comparable cemetery gross profit increased $17.0 million to $165.5
million. The gross profit percentage increased to 34.4% from
33.3% primarily due to the growth in core revenue mentioned
above.
- Comparable preneed cemetery sales production increased
$30.1 million, or 9.4%, reflecting
continued strength in large sales activity combined with a healthy
growth in the core production sales average. This growth more than
offset the modest decline in core production contract
velocity.
Other Financial Results
- Corporate general and administrative expenses decreased
$62.8 million to $45.1 million compared to $107.9 million. The decrease included an
estimated charge for certain legal matters of $64.6 million in the prior year. Excluding these
costs, corporate general and administrative expenses increased
$1.8 million primarily related to our
long-term incentive compensation plan that is tied to our relative
shareholder returns.
- Interest expense increased $15.5
million to $64.5 million
primarily due to higher interest on our floating rate debt. During
the fourth quarter, our floating rate debt carried a weighted
average interest rate of 7.55%, which is about 280 basis points
higher than the weighted average rate for our floating rate debt in
the prior year fourth quarter of 4.75%.
- The GAAP effective income tax rate for the fourth quarter of
2023 was 23.0% down from 24.3% in the prior year quarter. Our
adjusted effective income tax rate was 23.2% in the fourth quarter
of 2023 compared to 24.7% in the prior year quarter. The lower tax
rates in the current period were primarily due to non-taxable gains
on the cash surrender value of certain life insurance policies as a
result of better returns in the financial markets.
Cash Flow and
Capital Spending
|
|
(Dollars in
millions)
|
Three Months
Ended
December 31,
|
Twelve Months
Ended
December 31,
|
|
2023
|
|
2022
|
2023
|
|
2022
|
Net cash provided by
operating activities
|
$
277.6
|
|
$
170.3
|
$
869.0
|
|
$
825.7
|
Legal settlement
payments
|
—
|
|
$
—
|
13.3
|
|
$
—
|
Net cash provided by
operating activities excluding special items
|
$
277.6
|
|
$
170.3
|
$
882.3
|
|
$
825.7
|
Cash taxes included in
net cash provided by operating activities excluding special
items
|
$
4.0
|
|
$
37.3
|
$
83.7
|
|
$
179.5
|
The $107.3 million increase
in net cash provided by operating activities is primarily due to
$55.8 million of favorable working
capital associated with stronger cash receipts from prior period
sales as well as the timing of certain payables, $33.3 million of lower cash tax payments,
and a $21.4 million benefit from the
timing of a payroll tax payment in the fourth quarter last year
related to the CARES Act of 2020. These favorable impacts coupled
with higher operating income more than offset a $15.7 million increase in cash interest.
A summary of our capital expenditures is set forth below:
(Dollars in
millions)
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Capital improvements at
existing field locations
|
$
31.4
|
|
$
47.1
|
|
$
114.1
|
|
$
160.2
|
Development of cemetery
property
|
41.3
|
|
48.7
|
|
153.0
|
|
124.6
|
Digital investments and
corporate
|
9.4
|
|
13.1
|
|
57.0
|
|
49.8
|
Total maintenance,
cemetery development, and other capital expenditures (Maintenance
capital expenditures)
|
$
82.1
|
|
$
108.9
|
|
$
324.1
|
|
$
334.6
|
Growth capital
expenditures/construction of new funeral service
locations
|
11.9
|
|
8.0
|
|
37.7
|
|
35.1
|
Total capital
expenditures
|
$
94.0
|
|
$
116.9
|
|
$
361.8
|
|
$
369.7
|
Total capital expenditures decreased in the current quarter by
$22.9 million primarily due to a
decline in capital improvements at existing field locations and the
development of cemetery property both associated with the timing of
certain capital 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 December 31, 2023 is set forth below:
|
Three
Months
|
|
Twelve
Months
|
Preneed
funeral
|
9.2 %
|
|
16.5 %
|
Preneed
cemetery
|
9.6 %
|
|
16.9 %
|
Cemetery perpetual
care
|
9.2 %
|
|
15.3 %
|
Combined trust
funds
|
9.3 %
|
|
16.3 %
|
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
December 31,
|
|
2023
|
|
2022
|
|
Net
Income
|
|
Diluted
EPS
|
|
Net
Income
|
|
Diluted
EPS
|
Net income attributable
to common stockholders
|
$ 138.4
|
|
$ 0.93
|
|
$ 92.3
|
|
$ 0.59
|
Pre-tax reconciling
items:
|
|
|
|
|
|
|
|
Loss on divestitures
and impairment charges, net
|
0.4
|
|
—
|
|
5.2
|
|
0.03
|
Estimate of certain
legal matters (1)
|
—
|
|
—
|
|
64.6
|
|
0.41
|
Tax reconciling
items:
|
|
|
|
|
|
|
|
Tax effect from
special items
|
(0.1)
|
|
—
|
|
(17.1)
|
|
(0.11)
|
Change in uncertain
tax reserves and other
|
(0.3)
|
|
—
|
|
(0.7)
|
|
—
|
Earnings excluding
special items and diluted earnings per share excluding special
items
|
$ 138.4
|
|
$ 0.93
|
|
$ 144.3
|
|
$ 0.92
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
|
|
148.8
|
|
|
|
156.4
|
|
(Dollars in
millions, except diluted EPS)
|
Twelve Months Ended
December 31,
|
|
2023
|
|
2022
|
|
Net
Income
|
|
Diluted
EPS
|
|
Net
Income
|
|
Diluted
EPS
|
Net income attributable
to common stockholders, as reported
|
$ 537.3
|
|
$ 3.53
|
|
$ 565.3
|
|
$ 3.53
|
Pre-tax reconciling
items:
|
|
|
|
|
|
|
|
Gains on divestitures
and impairment charges, net
|
(9.8)
|
|
(0.06)
|
|
(10.0)
|
|
(0.06)
|
Losses on early
extinguishment of debt, net
|
1.1
|
|
—
|
|
1.2
|
|
0.01
|
Foreign currency
exchange loss
|
—
|
|
—
|
|
1.5
|
|
0.01
|
Estimate of certain
legal matters (1)
|
—
|
|
—
|
|
64.6
|
|
0.40
|
Tax reconciling
items:
|
|
|
|
|
|
|
|
Tax effect from
special items
|
2.3
|
|
0.01
|
|
(14.0)
|
|
(0.09)
|
Change in uncertain
tax reserves and other
|
(1.6)
|
|
(0.01)
|
|
(0.7)
|
|
—
|
Earnings excluding
special items and diluted earnings per share excluding special
items
|
$ 529.3
|
|
$ 3.47
|
|
$ 607.9
|
|
$ 3.80
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
|
|
152.4
|
|
|
|
160.1
|
|
|
(1)
|
Estimate of certain
legal matters in the fourth quarter of 2022 include an estimate
of $64.6 million related to a private litigation matter in
Florida and settlement discussions with the California Attorney
General. Both matters relate to previously disclosed
litigation.
|
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content:https://www.prnewswire.com/news-releases/service-corporation-international-announces-fourth-quarter-2023-financial-results-and-provides-2024-guidance-302059930.html
SOURCE Service Corporation International