Service Corporation International Announces Second Quarter 2016 Financial Results
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