HOUSTON, July 27, 2016 /PRNewswire/ -- Service
Corporation International (NYSE: SCI), the largest provider of
deathcare products and services in North
America, reported results for the second quarter of 2016.
Our unaudited consolidated financial statements can be found at the
end of this press release. The table below summarizes our key
financial results:
(In millions,
except for per share amounts)
|
Three Months
Ended June
30,
|
|
Six Months
Ended June
30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenue
|
$
|
751.7
|
|
|
$
|
754.4
|
|
|
$
|
1,501.0
|
|
|
$
|
1,502.5
|
|
Operating
income
|
$
|
94.5
|
|
|
$
|
127.6
|
|
|
$
|
218.1
|
|
|
$
|
268.7
|
|
Net income
attributable to common stockholders
|
$
|
15.6
|
|
|
$
|
52.6
|
|
|
$
|
63.1
|
|
|
$
|
114.0
|
|
Diluted earnings per
share
|
$
|
0.08
|
|
|
$
|
0.25
|
|
|
$
|
0.32
|
|
|
$
|
0.55
|
|
Earnings from
continuing operations excluding special
items(1)
|
$
|
55.8
|
|
|
$
|
57.1
|
|
|
$
|
111.1
|
|
|
$
|
122.8
|
|
Diluted earnings per
share from continuing operations excluding special
items(1)
|
$
|
0.28
|
|
|
$
|
0.28
|
|
|
$
|
0.56
|
|
|
$
|
0.59
|
|
Diluted weighted
average shares outstanding
|
196.7
|
|
|
206.7
|
|
|
197.5
|
|
|
207.2
|
|
Net cash provided by
operating activities
|
$
|
40.8
|
|
|
$
|
93.7
|
|
|
$
|
225.5
|
|
|
$
|
282.5
|
|
Net cash provided by
operating activities excluding special
items(1)
|
$
|
68.7
|
|
|
$
|
101.9
|
|
|
$
|
258.6
|
|
|
$
|
299.7
|
|
|
|
(1)
|
Earnings from
continuing operations excluding special items, diluted earnings per
share from continuing operations excluding special items, and net
cash provided by operating activities excluding special items are
non-GAAP financial measures. A reconciliation from net income
attributable to common stockholders, diluted earnings per share,
and net cash provided by operating activities computed in
accordance with generally accepted accounting principles in the
United States (GAAP) can be found later in this press release under
the headings "Cash Flow and Capital Spending" and "Non-GAAP
Financial Measures".
|
Quarterly Highlights:
- Diluted earnings per share was $0.08 in the second quarter of 2016 compared to
$0.25 in the second quarter of 2015.
The primary differences are a $24.5
million increase in pretax losses on divestitures and
impairment charges and a $21.9
million pretax loss on early extinguishment of debt. Diluted
earnings per share from continuing operations excluding special
items was $0.28 in both the second
quarter of 2016 and 2015. Growth in cemetery revenue, higher
recognized preneed funeral revenue and effective cost management
were offset by lower funeral services performed as the strong flu
season in the first half of 2015 continued to impact period over
period comparisons.
- Net cash provided by operating activities was $40.8 million in the second quarter of 2016
compared to $93.7 million in the
second quarter of 2015. The second quarter of 2016 includes a
$20.5 million premium paid on early
extinguishment of debt. Net cash provided by operating activities
excluding special items was $68.7
million in the second quarter of 2016 compared to
$101.9 million in the second quarter
of 2015 driven by expected higher cash tax payments and timing
differences in working capital.
- During the second quarter, we deployed $52.8 million of capital to accretive
acquisitions and returned $52.0
million to shareholders through share repurchases and
dividends.
Tom Ryan, the Company's
Chairman and Chief Executive Officer, commented on the second
quarter of 2016:
Today we reported adjusted earnings per share on par with the
prior year quarter in the face of challenging year over year
funeral and cemetery comparisons. Considering both the expected
funeral volume decline due to the strong 2015 flu season and tough
cemetery sales production comparison, we were pleased to report a
solid quarter as we successfully were able to manage our expenses
in this challenging low volume environment. Also during the
quarter, we completed two acquisitions and at mid-year, we are
already within our full year acquisition spend target range. Our
results could not have been achieved without the hard work and
dedication of our entire team, and I thank all 24,000 for their
efforts and continued focus on delivering extraordinary service to
our client families. In the second half of the year, we will
continue to focus on growing our revenues by remaining relevant
with the consumer, driving future market share by growing our
preneed sales, continuing to leverage our increasing scale and
deploying capital to enhance shareholder value.
OUTLOOK FOR 2016
Below is our updated guidance for potential earnings and cash
flow based on the results of the first six months of 2016.
(In millions
except per share amounts)
|
|
Previous
2016 Annual
Guidance
|
|
Updated 2016
Annual Guidance
|
Diluted earnings per
share from continuing operations excluding special items
(1)
|
|
$1.20 to
$1.36
|
|
$1.20 to
$1.30
|
Net cash provided by
operating activities excluding special items
(1)
|
|
$450 to
$500
|
|
$450 to
$500
|
Capital improvements
at existing facilities and development of cemetery
property
|
|
Approx.
$150
|
|
Approx.
$150
|
|
|
(1)
|
Diluted earnings per
share from continuing operations excluding special items and Net
cash provided by operating activities excluding special items are
non-GAAP financial measures. We normally reconcile these non-GAAP
financial measures from diluted earnings per share and net cash
provided by operating activities; however, diluted earnings per
share and net cash provided by operating activities calculated in
accordance with GAAP are not currently accessible on a
forward-looking basis. Our outlook for 2016 excludes the following
because this information is not currently available for 2016: Gains
or losses associated with asset divestitures, gains or losses
associated with the early extinguishment of debt, potential tax
reserve adjustments and IRS settlement payments, acquisition and
integration costs, system implementation and transition costs, and
potential costs associated with settlements of litigation or the
recognition of receivables for insurance recoveries associated with
litigation. The foregoing items, especially gains or losses
associated with asset divestitures and potential tax reserve
adjustments, could materially impact our forward-looking diluted
EPS and/or our net cash provided by operating activities calculated
in accordance with GAAP, consistent with the historical disclosures
found in this press release under the headings "Cash Flow and
Capital Spending" and "Non-GAAP Financial Measures".
|
REVIEW OF RESULTS
FOR SECOND QUARTER 2016
|
|
Consolidated
Segment Results
|
(See
definitions of revenue line items later in this earnings
release.)
|
|
(In millions,
except funeral services performed and average revenue per
service)
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Funeral:
|
|
|
|
|
|
|
|
Atneed
revenue
|
$
|
265.0
|
|
|
$
|
273.7
|
|
|
$
|
547.6
|
|
|
$
|
573.8
|
|
Funeral home matured
preneed revenue
|
131.0
|
|
|
130.8
|
|
|
270.4
|
|
|
280.3
|
|
Core revenue
|
396.0
|
|
|
404.5
|
|
|
818.0
|
|
|
854.1
|
|
Non-funeral home
matured preneed revenue
|
6.0
|
|
|
5.9
|
|
|
12.1
|
|
|
12.3
|
|
Recognized preneed
revenue
|
29.3
|
|
|
25.4
|
|
|
58.3
|
|
|
48.5
|
|
Other
revenue
|
35.8
|
|
|
35.7
|
|
|
70.8
|
|
|
64.3
|
|
Total
revenue
|
$
|
467.1
|
|
|
$
|
471.5
|
|
|
$
|
959.2
|
|
|
$
|
979.2
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
$
|
88.0
|
|
|
$
|
94.3
|
|
|
$
|
195.0
|
|
|
$
|
221.2
|
|
Gross margin
percentage
|
18.8
|
%
|
|
20.0
|
%
|
|
20.3
|
%
|
|
22.6
|
%
|
|
|
|
|
|
|
|
|
Funeral services
performed
|
75,638
|
|
|
77,969
|
|
|
157,836
|
|
|
165,279
|
|
Average revenue per
service
|
$
|
5,315
|
|
|
$
|
5,264
|
|
|
$
|
5,259
|
|
|
$
|
5,241
|
|
|
|
|
|
|
|
|
|
Cemetery:
|
|
|
|
|
|
|
|
Atneed
revenue
|
$
|
79.2
|
|
|
$
|
75.7
|
|
|
$
|
156.8
|
|
|
$
|
151.2
|
|
Recognized preneed
revenue
|
169.2
|
|
|
167.2
|
|
|
312.9
|
|
|
299.0
|
|
Core revenue
|
248.4
|
|
|
242.9
|
|
|
469.7
|
|
|
450.2
|
|
Other
revenue
|
36.2
|
|
|
39.9
|
|
|
72.1
|
|
|
73.1
|
|
Total
revenue
|
$
|
284.6
|
|
|
$
|
282.8
|
|
|
$
|
541.8
|
|
|
$
|
523.3
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
$
|
73.4
|
|
|
$
|
72.0
|
|
|
$
|
127.9
|
|
|
$
|
122.5
|
|
Gross margin
percentage
|
25.8
|
%
|
|
25.5
|
%
|
|
23.6
|
%
|
|
23.4
|
%
|
Comparable Funeral Results
The table below details comparable funeral results of operations
("same store") for the three months ended June 30, 2016 and 2015. We consider comparable
operations to be those owned for the entire period beginning
January 1, 2015 and ending June 30, 2016.
(Dollars in
millions, except average revenue per service and average revenue
per contract sold)
|
|
|
|
Three Months Ended
June 30,
|
|
|
2016
|
|
2015
|
|
$
|
|
%
|
Comparable
revenue:
|
|
|
|
|
|
|
|
|
Atneed
revenue(1)
|
|
$
|
262.4
|
|
|
$
|
270.8
|
|
|
$
|
(8.4)
|
|
|
(3.1)
|
%
|
Funeral home matured
preneed revenue(2)
|
|
130.3
|
|
|
130.2
|
|
|
0.1
|
|
|
0.1
|
%
|
Core
revenue(3)
|
|
392.7
|
|
|
401.0
|
|
|
(8.3)
|
|
|
(2.1)
|
%
|
Non-funeral home
matured preneed revenue(4)
|
|
6.0
|
|
|
5.9
|
|
|
0.1
|
|
|
1.7
|
%
|
Recognized preneed
revenue(5)
|
|
28.9
|
|
|
25.3
|
|
|
3.6
|
|
|
14.2
|
%
|
Other
revenue(6)
|
|
35.8
|
|
|
35.9
|
|
|
(0.1)
|
|
|
(0.3)
|
%
|
Total comparable
revenue
|
|
$
|
463.4
|
|
|
$
|
468.1
|
|
|
$
|
(4.7)
|
|
|
(1.0)
|
%
|
|
|
|
|
|
|
|
|
|
Comparable gross
profit
|
|
$
|
88.7
|
|
|
$
|
95.9
|
|
|
$
|
(7.2)
|
|
|
(7.5)
|
%
|
Comparable gross
margin percentage
|
|
19.1
|
%
|
|
20.5
|
%
|
|
(1.4)
|
%
|
|
(6.8)
|
%
|
|
|
|
|
|
|
|
|
|
Comparable funeral
services performed:
|
|
|
|
|
|
|
|
|
Atneed
|
|
45,907
|
|
|
48,014
|
|
|
(2,107)
|
|
|
(4.4)
|
%
|
Funeral home matured
preneed
|
|
22,308
|
|
|
22,570
|
|
|
(262)
|
|
|
(1.2)
|
%
|
Total core
|
|
68,215
|
|
|
70,584
|
|
|
(2,369)
|
|
|
(3.4)
|
%
|
Non-funeral home
matured preneed
|
|
6,776
|
|
|
6,527
|
|
|
249
|
|
|
3.8
|
%
|
Total comparable
funeral services performed
|
|
74,991
|
|
|
77,111
|
|
|
(2,120)
|
|
|
(2.7)
|
%
|
Core cremation
rate
|
|
47.7
|
%
|
|
47.0
|
%
|
|
0.7
|
%
|
|
1.5
|
%
|
Total comparable
cremation rate
|
|
52.4
|
%
|
|
51.4
|
%
|
|
1.0
|
%
|
|
1.9
|
%
|
|
|
|
|
|
|
|
|
|
Comparable average
revenue per service:
|
|
|
|
|
|
|
|
|
Atneed
|
|
$
|
5,716
|
|
|
$
|
5,640
|
|
|
$
|
76
|
|
|
1.3
|
%
|
Funeral home matured
preneed
|
|
5,841
|
|
|
5,769
|
|
|
72
|
|
|
1.2
|
%
|
Total core
|
|
5,757
|
|
|
5,681
|
|
|
76
|
|
|
1.3
|
%
|
Non-funeral home
matured preneed
|
|
885
|
|
|
904
|
|
|
(19)
|
|
|
(2.1)
|
%
|
Total comparable
average revenue per service
|
|
$
|
5,317
|
|
|
$
|
5,277
|
|
|
$
|
40
|
|
|
0.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable preneed
sales production:
|
|
|
|
|
|
|
|
|
Total preneed
sales
|
|
$
|
222.3
|
|
|
$
|
211.2
|
|
|
$
|
11.1
|
|
|
5.3
|
%
|
Total preneed
contracts sold
|
|
47,093
|
|
|
45,272
|
|
|
1,821
|
|
|
4.0
|
%
|
Average revenue per
contract sold
|
|
$
|
4,720
|
|
|
$
|
4,665
|
|
|
$
|
55
|
|
|
1.2
|
%
|
Average revenue per
contract sold, excluding the impact of foreign currency
fluctuations
|
|
$
|
4,813
|
|
|
$
|
4,739
|
|
|
$
|
74
|
|
|
1.6
|
%
|
|
|
(1)
|
Atneed revenue
represents merchandise and services sold and delivered or performed
once death has occurred.
|
(2)
|
Funeral home matured
preneed revenue represents merchandise and services sold on a
preneed contract through one of our funeral homes and delivered or
performed once death has occurred.
|
(3)
|
Core revenue
represents the sum of merchandise and services sold on an atneed
contract or sold by one of our funeral homes on a preneed contract
and delivered or performed once death has occurred.
|
(4)
|
Non-funeral home
matured preneed revenue represents services sold on a preneed
contract through one of our non-funeral home sales channels and
performed once death has occurred.
|
(5)
|
Recognized preneed
revenue represents merchandise and travel protection sold on a
preneed contract and delivered before death has
occurred.
|
(6)
|
Other revenue
primarily comprises General Agency revenue, which is commissions we
receive from third-party insurance companies for life insurance
policies sold to preneed customers for the purpose of funding
preneed arrangements.
|
- Total comparable funeral revenue decreased by $4.7 million in the second quarter of 2016
compared to the same period of 2015. A decline in core revenue of
$8.3 million was partially offset by
growth in recognized preneed revenue.
- The core revenue decrease was primarily a result of a 3.4%
decline in core funeral services performed due to a strong 2015 flu
season that positively impacted the prior year quarter.
- Core average revenue per service increased 1.3% during the
second quarter of 2016. Organic sales average growth of 3.0% was
somewhat offset by a 70 basis point increase in core cremation mix
to 47.7%, lower trust fund income, and an unfavorable Canadian
currency impact.
- Recognized preneed revenue increased $3.6 million, primarily driven by an increase in
production through our non-funeral home sales channel.
- Comparable funeral gross profit decreased $7.2 million to $88.7
million in the second quarter of 2016. The decline in higher
margin core revenue was partially offset by increased gross profit
from recognized preneed revenue. As a result of strong funeral
sales production, selling costs increased proportionately by
approximately $3.0 million but were
partially offset by effectively managing our employee related fixed
costs.
- Comparable preneed funeral sales production increased
$11.1 million, or 5.3%, in the second
quarter of 2016 compared to 2015, primarily due to a 4.0% increase
in the number of preneed contracts sold.
Comparable Cemetery Results
The table below details comparable cemetery results of
operations ("same store") for the three months ended June 30, 2016 and 2015. We consider comparable
operations to be those owned for the entire period beginning
January 1, 2015 and ending June 30, 2016.
(Dollars in
millions)
|
|
Three Months Ended
June 30,
|
|
|
2016
|
|
2015
|
|
$
|
|
%
|
Comparable
revenue:
|
|
|
|
|
|
|
|
|
Atneed
revenue(1)
|
|
$
|
78.3
|
|
|
$
|
75.0
|
|
|
$
|
3.3
|
|
|
4.4
|
%
|
Recognized preneed
revenue(2)
|
|
168.0
|
|
|
166.4
|
|
|
1.6
|
|
|
1.0
|
%
|
Core
revenue(3)
|
|
246.3
|
|
|
241.4
|
|
|
4.9
|
|
|
2.0
|
%
|
Other
revenue(4)
|
|
35.8
|
|
|
39.7
|
|
|
(3.9)
|
|
|
(9.8)
|
%
|
Total comparable
revenue
|
|
$
|
282.1
|
|
|
$
|
281.1
|
|
|
$
|
1.0
|
|
|
0.4
|
%
|
|
|
|
|
|
|
|
|
|
Comparable gross
profit
|
|
$
|
72.5
|
|
|
$
|
71.6
|
|
|
$
|
0.9
|
|
|
1.3
|
%
|
Comparable gross
margin percentage
|
|
25.7
|
%
|
|
25.5
|
%
|
|
0.2
|
%
|
|
0.8
|
%
|
|
|
|
|
|
|
|
|
|
Comparable preneed
and atneed sales production:
|
|
|
|
|
|
|
|
|
Property
|
|
$
|
192.0
|
|
|
$
|
190.6
|
|
|
$
|
1.4
|
|
|
0.7
|
%
|
Merchandise and
services
|
|
146.1
|
|
|
140.9
|
|
|
5.2
|
|
|
3.7
|
%
|
Discounts
|
|
(39.6)
|
|
|
(37.7)
|
|
|
(1.9)
|
|
|
(5.0)
|
%
|
Preneed and atneed
sales production
|
|
$
|
298.5
|
|
|
$
|
293.8
|
|
|
$
|
4.7
|
|
|
1.6
|
%
|
Recognition
rate(5)
|
|
83
|
%
|
|
82
|
%
|
|
|
|
|
|
|
(1)
|
Atneed revenue
represents property, merchandise, and services sold and delivered
or performed once death has occurred.
|
(2)
|
Recognized preneed
revenue represents property, merchandise, and services sold on a
preneed contract that have been delivered or performed.
|
(3)
|
Core revenue
represents the sum of property, merchandise, and services that have
been delivered or performed.
|
(4)
|
Other revenue is
primarily related to merchandise and service trust fund income,
endowment care trust fund income, royalty income, and interest and
finance charges earned from customer receivables on preneed
installment contracts.
|
(5)
|
Represents the ratio
of current period core revenue recognition stated as a percentage
of current period sales production.
|
- Comparable cemetery revenue grew $1.0
million, or 0.4%, in the second quarter of 2016 compared to
2015. Recognized preneed and atneed revenue grew $4.9 million quarter over quarter and was
partially offset by lower other revenue.
- The decrease in other revenue of $3.9
million was primarily related to a decrease in cash
distributions of capital gains received from perpetual care trusts
in the current year quarter.
- Comparable preneed cemetery sales production increased
$2.2 million, or 1.0%, quarter over
quarter. This increase is the result of growth in the number of
contracts sold partially offset by a decline in large sales
activity. Comparable preneed cemetery sales production increased
$15.2 million, or 3.9%, in the first
half of 2016 compared to the same period in 2015, which had an
increase of 17.2%.
- Comparable cemetery gross profit increased $0.9 million and the gross margin percentage
increased 20 basis points to 25.7%. The gross profit increase was
driven by growth in recognized preneed and atneed revenue along
with effectively managing our employee related fixed costs, which
were partially offset by a decline in cemetery trust fund
income.
Other Financial Results
- General and administrative expenses increased $3.2 million to $36.3
million in the second quarter of 2016. The current quarter
includes an increase of $4.7 million
in system transition costs primarily related to the 2016
implementation of a new general ledger system. Excluding this
$4.7 million, general and
administrative expenses decreased $1.5
million compared to prior year primarily due to lower legal
costs.
- We incurred a $21.9 million loss
on early extinguishment of debt in the current quarter to manage
our near-term debt maturity profile and lower our effective
interest rate by refinancing our 2017 notes. We expect this
transaction to result in cash interest savings of approximately
$9 million in 2016.
- We incurred a $31.2 million
impairment charge related to the planned divestiture of certain
funeral homes in Los Angeles,
California.
Cash Flow and Capital Spending
Set forth below is a reconciliation of our reported net cash
provided by operating activities prepared in accordance with GAAP
to net cash provided by operating activities excluding special
items (or sometimes referred to as adjusted operating cash flow).
We do not intend for this information to be considered in isolation
or as a substitute for other measures of performance prepared in
accordance with GAAP.
(In
millions)
|
Three Months
Ended
June 30,
|
|
Six Months
Ended
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net cash provided by
operating activities, as reported
|
$
|
40.8
|
|
|
$
|
93.7
|
|
|
$
|
225.5
|
|
|
$
|
282.5
|
|
Premiums paid on
early extinguishment
|
20.5
|
|
|
—
|
|
|
20.5
|
|
|
—
|
|
Excess tax benefits
from share-based awards
|
2.0
|
|
|
7.5
|
|
|
4.3
|
|
|
13.0
|
|
System transition
costs
|
5.4
|
|
|
0.7
|
|
|
8.3
|
|
|
4.2
|
|
Net cash provided by
operating activities excluding special items
|
$
|
68.7
|
|
|
$
|
101.9
|
|
|
$
|
258.6
|
|
|
$
|
299.7
|
|
Net cash provided by operating activities excluding special
items was $68.7 million in the second
quarter of 2016 compared to $101.9
million in the prior year quarter. The difference compared
to the second quarter of 2015 was primarily due to expected higher
cash tax payments of $17.9 million,
an $8.3 million temporary timing
difference in payroll funding, and lower funeral cash receipts.
A summary of our capital expenditures is set forth below:
(In
millions)
|
Three Months
Ended June
30,
|
|
Six Months
Ended
June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Capital improvements at
existing locations
|
$
|
22.3
|
|
|
$
|
23.1
|
|
|
$
|
41.4
|
|
|
$
|
40.3
|
|
Development of cemetery
property
|
15.3
|
|
|
12.5
|
|
|
34.9
|
|
|
21.9
|
|
Subtotal
|
37.6
|
|
|
35.6
|
|
|
76.3
|
|
|
62.2
|
|
Growth capital
expenditures related to the construction of new funeral home
facilities
|
3.9
|
|
|
0.8
|
|
|
6.9
|
|
|
2.5
|
|
Total capital
expenditures
|
$
|
41.5
|
|
|
$
|
36.4
|
|
|
$
|
83.2
|
|
|
$
|
64.7
|
|
Total capital expenditures increased in the current quarter by
$5.1 million primarily due to
increases in capital deployed for the development of cemetery
property and to construct new funeral homes. The $14.1 million year-to-date increase in capital
deployed for capital improvements at existing locations and
development of cemetery property does not alter our outlook of
$150 million in 2016.
TRUST FUND RETURNS
Total trust fund returns include realized and unrealized gains
and losses and dividends. A summary of our consolidated trust fund
returns for the three and six months ended June 30, 2016 is set forth below:
|
|
Three
Months
|
|
Six
Months
|
Preneed
funeral
|
|
1.9%
|
|
2.5%
|
Preneed
cemetery
|
|
1.9%
|
|
2.3%
|
Cemetery perpetual
care
|
|
3.1%
|
|
5.4%
|
Combined trust
funds
|
|
2.3%
|
|
3.4%
|
NON-GAAP FINANCIAL MEASURES
Earnings from continuing operations excluding special items and
diluted earnings per share from continuing operations excluding
special items shown above are non-GAAP financial measures. We
believe these non-GAAP financial measures provide a consistent
basis for comparison between quarters and better reflect the
performance of our core operations, as they are not influenced by
certain income or expense items not affecting continuing
operations. We also believe these measures help facilitate
comparisons to our competitors' operating results.
Set forth below is a reconciliation of our reported net income
attributable to common stockholders to earnings from continuing
operations excluding special items and our GAAP diluted earnings
per share to diluted earnings per share from continuing operations
excluding special items. We do not intend for this information to
be considered in isolation or as a substitute for other measures of
performance prepared in accordance with GAAP.
(In millions,
except diluted EPS)
|
Three Months Ended
June 30,
|
|
2016
|
|
2015
|
|
Net
Income
|
|
Diluted
EPS
|
|
Net
Income
|
|
Diluted
EPS
|
Net income
attributable to common stockholders, as reported
|
$
|
15.6
|
|
|
$
|
0.08
|
|
|
$
|
52.6
|
|
|
$
|
0.25
|
|
Pre-tax reconciling
items:
|
|
|
|
|
|
|
|
Losses on divestitures
and impairment charges, net
|
30.6
|
|
|
0.16
|
|
|
6.1
|
|
|
0.04
|
|
Losses on early
extinguishment
|
21.9
|
|
|
0.11
|
|
|
—
|
|
|
—
|
|
System transition
costs
|
4.9
|
|
|
0.02
|
|
|
0.2
|
|
|
—
|
|
Tax benefit from
special items
|
(18.7)
|
|
|
(0.10)
|
|
|
(1.6)
|
|
|
(0.01)
|
|
Change in certain tax
reserves and other
|
1.5
|
|
|
0.01
|
|
|
(0.2)
|
|
|
—
|
|
Earnings from
continuing operations excluding special items and diluted earnings
per share from continuing operations excluding special
items
|
$
|
55.8
|
|
|
$
|
0.28
|
|
|
$
|
57.1
|
|
|
$
|
0.28
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding (in thousands)
|
|
|
196,718
|
|
|
|
|
206,746
|
|
(In millions,
except diluted EPS)
|
Six Months Ended
June 30,
|
|
2016
|
|
2015
|
|
Net
Income
|
|
Diluted
EPS
|
|
Net
Income
|
|
Diluted
EPS
|
Net income
attributable to common stockholders, as reported
|
$
|
63.1
|
|
|
$
|
0.32
|
|
|
$
|
114.0
|
|
|
$
|
0.55
|
|
Pre-tax special
items:
|
|
|
|
|
|
|
|
Losses on divestitures
and impairment charges, net
|
31.0
|
|
|
0.16
|
|
|
7.8
|
|
|
0.04
|
|
Losses on early
extinguishment
|
22.5
|
|
|
0.11
|
|
|
—
|
|
|
—
|
|
Acquisition and
integration costs
|
5.5
|
|
|
0.03
|
|
|
3.0
|
|
|
0.02
|
|
System transition
costs
|
9.0
|
|
|
0.05
|
|
|
1.0
|
|
|
—
|
|
Tax benefit from
special items
|
(22.7)
|
|
|
(0.12)
|
|
|
(3.7)
|
|
|
(0.02)
|
|
Change in certain tax
reserves and other
|
2.7
|
|
|
0.01
|
|
|
0.7
|
|
|
—
|
|
Earnings from
continuing operations excluding special items and diluted earnings
per share from continuing operations excluding special
items
|
$
|
111.1
|
|
|
$
|
0.56
|
|
|
$
|
122.8
|
|
|
$
|
0.59
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding (in thousands)
|
|
|
197,463
|
|
|
|
|
207,221
|
|
Conference Call and Webcast
We will host a conference call on Thursday, July 28, 2016, at 8:00 a.m. Central Time. A question and answer
session will follow a brief presentation made by
management. The conference call dial-in number is (847)
619-6396 with the passcode of 43011264. 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 11,
2016 and can be accessed at (630) 652-3042 with the passcode
of 43011264#. Additionally, a replay of the conference call
will be available on our website for approximately two weeks.
Cautionary Statement on Forward-Looking Statements
The statements in this press release that are not historical
facts are forward-looking statements made in reliance on the "safe
harbor" protections provided under the Private Securities
Litigation Reform Act of 1995. These statements may be accompanied
by words such as "believe," "estimate," "project," "expect,"
"anticipate," or "predict," that convey the uncertainty of future
events or outcomes. These statements are based on assumptions that
we believe are reasonable; however, many important factors could
cause our actual results in the future to differ materially from
the forward-looking statements made herein and in any other
documents or oral presentations made by us, or on our behalf.
Important factors, which could cause actual results to differ
materially from those in forward-looking statements include, among
others, the following:
- Our affiliated funeral and cemetery trust funds own investments
in equity securities, fixed income securities, and mutual funds,
which are affected by market conditions that are beyond our
control.
- We may be required to replenish our affiliated funeral and
cemetery trust funds in order to meet minimum funding requirements,
which would have a negative effect on our earnings and cash
flow.
- Our ability to execute our strategic plan depends on many
factors, some of which are beyond our control.
- Our credit agreements contain covenants that may prevent us
from engaging in certain transactions.
- If we lost the ability to use surety bonding to support our
preneed funeral and preneed cemetery activities, we may be required
to make material cash payments to fund certain trust funds.
- The funeral and cemetery industry is competitive.
- Increasing death benefits related to preneed contracts funded
through life insurance contracts may not cover future increases in
the cost of providing a price-guaranteed service.
- The financial condition of third-party insurance companies that
fund our preneed funeral contracts may impact our future
revenue.
- Unfavorable results of litigation could have a material adverse
impact on our financial statements.
- Unfavorable publicity could affect our reputation and
business.
- If the number of deaths in our markets declines, our cash flows
and revenue may decrease.
- If we are not able to respond effectively to changing consumer
preferences, our market share, revenue, and profitability could
decrease.
- The continuing upward trend in the number of cremations
performed in North America could
result in lower revenue and gross profit.
- Our funeral home and cemetery businesses are high fixed-cost
businesses.
- Regulation and compliance could have a material adverse impact
on our financial results.
- Cemetery burial practice legal claims could have a material
adverse impact on our financial results.
- We use a combination of insurance, self-insurance and large
deductibles in managing our exposure to certain inherent risks, as
such, we could be exposed to unexpected costs that could negatively
affect our financial performance.
- A number of years elapse before particular tax matters, for
which we have established accruals, are audited and finally
resolved.
- Declines in overall economic conditions beyond our control
could reduce future potential earnings and cash flows and could
result in future impairments to goodwill and/or other intangible
assets.
- Any failure to maintain the security of the information
relating to our customers, their loved ones, our associates, and
our vendors could damage our reputation, could cause us to incur
substantial additional costs and to become subject to litigation,
and could adversely affect our operating results.
- Our Canadian business exposes us to operational, economic, and
currency risks.
- Our level of indebtedness could adversely affect our ability to
raise additional capital to fund our operations, limit our ability
to react to changes in the economy or our industry, and may prevent
us from fulfilling our obligations under our indebtedness.
- Failure to maintain effective internal control over financial
reporting could adversely affect our results of operations,
investor confidence, and our stock price.
For further information on these and other risks and
uncertainties, see our Securities and Exchange Commission filings,
including our 2015 Annual Report on Form 10-K. Copies of this
document as well as other SEC filings can be obtained from our
website at www.sci-corp.com. We assume no obligation to publicly
update or revise any forward-looking statements made herein or any
other forward-looking statements made by us, whether as a result of
new information, future events or otherwise.
About Service Corporation International
Service Corporation International (NYSE: SCI), headquartered in
Houston, Texas, is North America's leading provider of deathcare
products and services. At June 30, 2016, we owned and operated
1,525 funeral homes and 469 cemeteries (of which 262 are
combination locations) in 45 states, eight Canadian provinces, the
District of Columbia, and
Puerto Rico. Through our
businesses, we market the Dignity Memorial® brand which offers
assurance of quality, value, caring service, and exceptional
customer satisfaction. For more information about Service
Corporation International, please visit our website at
www.sci-corp.com. For more information about Dignity Memorial®,
please visit www.dignitymemorial.com.
For additional
information contact:
|
|
|
Investors:
|
|
Debbie Young -
Director / Investor Relations
|
|
(713)
525-9088
|
Media:
|
|
Jay Andrew - Managing
Director / Corporate Communications
|
|
(713)
525-5235
|
SERVICE
CORPORATION INTERNATIONAL
|
CONSOLIDATED
STATEMENT OF OPERATIONS
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
June
30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
(In thousands,
except per share amounts)
|
Revenue
|
$
|
751,710
|
|
|
$
|
754,354
|
|
|
$
|
1,500,981
|
|
|
$
|
1,502,471
|
|
Costs and
expenses
|
(590,339)
|
|
|
(588,097)
|
|
|
(1,178,114)
|
|
|
(1,158,770)
|
|
Gross
profit
|
161,371
|
|
|
166,257
|
|
|
322,867
|
|
|
343,701
|
|
General and
administrative expenses
|
(36,260)
|
|
|
(33,095)
|
|
|
(73,768)
|
|
|
(67,645)
|
|
Losses on
divestitures and impairment charges, net
|
(30,641)
|
|
|
(5,582)
|
|
|
(30,988)
|
|
|
(7,361)
|
|
Operating
income
|
94,470
|
|
|
127,580
|
|
|
218,111
|
|
|
268,695
|
|
Interest
expense
|
(39,398)
|
|
|
(42,982)
|
|
|
(82,480)
|
|
|
(85,921)
|
|
Loss on early
extinguishment of debt
|
(21,898)
|
|
|
—
|
|
|
(22,479)
|
|
|
—
|
|
Other expense,
net
|
(535)
|
|
|
(109)
|
|
|
(746)
|
|
|
(167)
|
|
Income before income
taxes
|
32,639
|
|
|
84,489
|
|
|
112,406
|
|
|
182,607
|
|
Provision for income
taxes
|
(16,746)
|
|
|
(31,007)
|
|
|
(49,059)
|
|
|
(67,660)
|
|
Net income from continuing operations
|
15,893
|
|
|
53,482
|
|
|
63,347
|
|
|
114,947
|
|
Net loss from
discontinued operations, net of tax
|
—
|
|
|
(390)
|
|
|
—
|
|
|
(390)
|
|
Net income
|
15,893
|
|
|
53,092
|
|
|
63,347
|
|
|
114,557
|
|
Net income
attributable to noncontrolling interests
|
(273)
|
|
|
(497)
|
|
|
(282)
|
|
|
(587)
|
|
Net income
attributable to common stockholders
|
$
|
15,620
|
|
|
$
|
52,595
|
|
|
$
|
63,065
|
|
|
$
|
113,970
|
|
Basic earnings per
share:
|
|
|
|
|
|
|
|
Net income
attributable to common stockholders
|
$
|
0.08
|
|
|
$
|
0.26
|
|
|
$
|
0.32
|
|
|
$
|
0.56
|
|
Basic weighted
average number of shares
|
193,806
|
|
|
202,466
|
|
|
194,366
|
|
|
202,966
|
|
Diluted earnings per
share:
|
|
|
|
|
|
|
|
Net income
attributable to common stockholders
|
$
|
0.08
|
|
|
$
|
0.25
|
|
|
$
|
0.32
|
|
|
$
|
0.55
|
|
Diluted weighted
average number of shares
|
196,718
|
|
|
206,746
|
|
|
197,463
|
|
|
207,221
|
|
Dividends declared
per share
|
$
|
0.13
|
|
|
$
|
0.10
|
|
|
$
|
0.25
|
|
|
$
|
0.20
|
|
SERVICE
CORPORATION INTERNATIONAL
|
CONSOLIDATED
BALANCE SHEET
|
|
|
June 30,
2016
|
|
December 31,
2015
|
|
(In thousands,
except share amounts)
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
171,788
|
|
|
$
|
134,599
|
|
Receivables,
net
|
78,791
|
|
|
90,462
|
|
Inventories
|
28,568
|
|
|
27,835
|
|
Other
|
53,455
|
|
|
47,155
|
|
Total current
assets
|
332,602
|
|
|
300,051
|
|
Preneed funeral
receivables, net and trust investments
|
1,788,065
|
|
|
1,760,297
|
|
Preneed cemetery
receivables, net and trust investments
|
2,385,539
|
|
|
2,318,167
|
|
Cemetery
property
|
1,757,740
|
|
|
1,753,015
|
|
Property and
equipment, net
|
1,831,102
|
|
|
1,846,722
|
|
Non-current assets
held for sale
|
30,191
|
|
|
214
|
|
Goodwill
|
1,801,645
|
|
|
1,796,340
|
|
Deferred charges and
other assets
|
585,180
|
|
|
582,164
|
|
Cemetery perpetual
care trust investments
|
1,363,428
|
|
|
1,319,427
|
|
Total
assets
|
$
|
11,875,492
|
|
|
$
|
11,676,397
|
|
|
|
|
|
LIABILITIES &
EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
410,141
|
|
|
$
|
422,842
|
|
Current maturities of
long-term debt
|
90,104
|
|
|
86,823
|
|
Income taxes
payable
|
1,465
|
|
|
1,373
|
|
Total current
liabilities
|
501,710
|
|
|
511,038
|
|
Long-term
debt
|
3,113,179
|
|
|
3,037,605
|
|
Deferred preneed
funeral revenue
|
562,889
|
|
|
557,897
|
|
Deferred preneed
cemetery revenue
|
1,174,164
|
|
|
1,120,001
|
|
Deferred tax
liability
|
467,364
|
|
|
470,584
|
|
Other
liabilities
|
503,915
|
|
|
496,921
|
|
Deferred preneed
receipts held in trust
|
3,020,407
|
|
|
2,973,386
|
|
Care trusts'
corpus
|
1,364,044
|
|
|
1,319,564
|
|
|
|
|
|
Equity:
|
|
|
|
Common stock, $1 per
share par value, 500,000,000 shares authorized, 202,067,016 and
200,859,676 shares issued, respectively, and 193,669,014 and
195,772,876 shares outstanding, respectively
|
193,669
|
|
|
195,773
|
|
Capital in excess of
par value
|
1,046,061
|
|
|
1,092,106
|
|
Accumulated
deficit
|
(106,119)
|
|
|
(109,351)
|
|
Accumulated other
comprehensive income
|
29,289
|
|
|
6,164
|
|
Total common
stockholders' equity
|
1,162,900
|
|
|
1,184,692
|
|
Noncontrolling
interests
|
4,920
|
|
|
4,709
|
|
Total
equity
|
1,167,820
|
|
|
1,189,401
|
|
Total liabilities and
equity
|
$
|
11,875,492
|
|
|
$
|
11,676,397
|
|
SERVICE
CORPORATION INTERNATIONAL
|
CONSOLIDATED
STATEMENT OF CASH FLOWS
|
(In thousands,
except share amounts)
|
|
|
Six Months Ended
June 30,
|
|
2016
|
|
2015
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
63,347
|
|
|
$
|
114,557
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Loss from discontinued
operations, net of tax
|
—
|
|
|
390
|
|
Loss on early
extinguishment of debt
|
22,479
|
|
|
—
|
|
Premiums paid on early
extinguishment of debt
|
(20,500)
|
|
|
—
|
|
Depreciation and
amortization
|
72,522
|
|
|
68,899
|
|
Amortization of
intangible assets
|
15,392
|
|
|
15,983
|
|
Amortization of
cemetery property
|
27,837
|
|
|
26,027
|
|
Amortization of loan
costs
|
3,004
|
|
|
4,865
|
|
Provision for doubtful
accounts
|
1,854
|
|
|
3,431
|
|
Benefit for deferred
income taxes
|
(2,856)
|
|
|
(8,466)
|
|
Losses on divestitures
and impairment charges, net
|
30,988
|
|
|
7,361
|
|
Share-based
compensation
|
6,574
|
|
|
7,284
|
|
Excess tax benefits
from share-based awards
|
(4,269)
|
|
|
(13,003)
|
|
Change in assets and
liabilities, net of effects from acquisitions and
divestitures:
|
|
|
|
Decrease in
receivables
|
10,201
|
|
|
2,276
|
|
Increase in other
assets
|
(1,572)
|
|
|
(761)
|
|
(Decrease) increase in
payables and other liabilities
|
(1,169)
|
|
|
33,932
|
|
Effect of preneed
funeral production and maturities:
|
|
|
|
Decrease in preneed
funeral receivables, net and trust investments
|
2,756
|
|
|
16,144
|
|
(Decrease) increase
deferred preneed funeral revenue
|
(747)
|
|
|
14,247
|
|
Decrease in deferred
preneed funeral receipts held in trust
|
(16,244)
|
|
|
(37,366)
|
|
Effect of cemetery
production and deliveries:
|
|
|
|
Increase in preneed
cemetery receivables, net and trust investments
|
(48,267)
|
|
|
(28,272)
|
|
Increase in deferred
preneed cemetery revenue
|
51,663
|
|
|
62,482
|
|
Increase (decrease) in
deferred preneed cemetery receipts held in trust
|
12,535
|
|
|
(7,506)
|
|
Other
|
—
|
|
|
3
|
|
Net cash provided by
operating activities
|
225,528
|
|
|
282,507
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(83,189)
|
|
|
(64,724)
|
|
Acquisitions
|
(52,844)
|
|
|
(36,726)
|
|
Proceeds from
divestitures and sales of property and equipment
|
11,422
|
|
|
8,268
|
|
Net withdrawals of
restricted funds
|
5,120
|
|
|
8,066
|
|
Net cash used in
investing activities from continuing operations
|
(119,491)
|
|
|
(85,116)
|
|
Net cash provided by
investing activities from discontinued operations
|
—
|
|
|
987
|
|
Net cash used in
investing activities
|
(119,491)
|
|
|
(84,129)
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from issuance
of long-term debt
|
960,000
|
|
|
30,000
|
|
Debt issuance
costs
|
(5,232)
|
|
|
—
|
|
Payments of
debt
|
(18,835)
|
|
|
(30,121)
|
|
Early extinguishment of
debt
|
(875,001)
|
|
|
—
|
|
Principal payments on
capital leases
|
(16,907)
|
|
|
(15,257)
|
|
Proceeds from exercise
of stock options
|
8,872
|
|
|
26,799
|
|
Excess tax benefits
from share-based awards
|
4,269
|
|
|
13,003
|
|
|
|
|
Six Months Ended
June 30,
|
|
2016
|
|
2015
|
Purchase of Company
common stock
|
(81,477)
|
|
|
(151,795)
|
|
Payments of
dividends
|
(48,506)
|
|
|
(40,398)
|
|
Purchase of
noncontrolling interest
|
(42)
|
|
|
—
|
|
Bank overdrafts and
other
|
(1,424)
|
|
|
(7,533)
|
|
Net cash used in
financing activities
|
(74,283)
|
|
|
(175,302)
|
|
Effect of foreign
currency on cash and cash equivalents
|
5,435
|
|
|
(1,315)
|
|
Net increase in cash
and cash equivalents
|
37,189
|
|
|
21,761
|
|
Cash and cash
equivalents at beginning of period
|
134,599
|
|
|
177,335
|
|
Cash and cash
equivalents at end of period
|
$
|
171,788
|
|
|
$
|
199,096
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/service-corporation-international-announces-second-quarter-2016-financial-results-300305113.html
SOURCE Service Corporation International