Exhibit 99.2
Service Corporation International Announces Second Quarter 2004 Results
and New Bank Credit Facility; Confirms Outlook
HOUSTON, Aug. 16 /PRNewswire-FirstCall/ -- Service Corporation
International (SCI) (NYSE: SRV), the world's largest funeral and cemetery
company, today announced results for the second quarter of 2004.
Summary of Results
Three Months Ended Six Months Ended
In millions, except June 30, June 30,
------------------- ----------------------
per share amounts 2004 2003 2004 2003
------ ------ -------- ----------
(Restated) (Restated)
Total Revenues $432.1 $584.1 $1,018.2 $1,162.9
Total Gross Profits $73.4 $94.6 $186.5 $209.6
Net Income $46.4 $15.3 $74.9 $59.4
Diluted Earnings
Per Share (GAAP) $.15 $.05 $.23 $.19
Diluted Earnings
Per Share (Proforma) [a] $.05 $.09 $.19 $.20
Cash Flows from
Operating Activities $44.2 $60.4 $132.8 $243.7
Free Cash Flow [a] $25.4 $45.5 $120.5 $117.2
Cash and Cash
Equivalents [b] $340.9 $239.4
Total Debt [b] $1,297.6 $1,701.9
[a] These are non-GAAP financial measures, as defined by the Securities
and Exchange Commission. Please see reconciliations to GAAP
measures within this press release.
[b] Prior year amounts are as of December 31, 2003
* Included in net income in the second quarter of 2004 was a loss on the
early extinguishment of debt, litigation expenses, foreign currency
transactional losses, gains and impairment losses on dispositions, tax
benefits, and other operating income. Excluding these items, net
income from continuing operations would have been $16.2 million
($.05 per diluted share) in the second quarter of 2004 compared to
$26.4 million ($.09 per diluted share) in the second quarter of 2003.
Diluted earnings per share on a proforma basis in 2004 are based on an
effective tax rate of approximately 34%. A reconciliation of results
excluding these items to GAAP results is included in a separate table
at the end of this press release.
The decrease in net income from continuing operations excluding special
items is primarily associated with the disposition of our funeral operations
in France which was joint ventured on March 11, 2004. While there was no net
income in the second quarter of 2004 attributable to these businesses in
France, net income in the second quarter of 2003 included $7.8 million, or
$.03 per diluted share. Net income in the first six months included $8.1
million or $.02 per diluted share related to our French business compared to
$19.4 million, or $.06 per diluted share in 2003.
* Consolidated revenues and gross profits in the second quarter of 2004
declined $152.0 million and $21.2 million, respectively, primarily
attributable to the disposition of our French funeral operations in
the first quarter of 2004. In the three months ended June 30, 2003,
revenues and gross profits from funeral operations in France were
$140.2 million and $15.8 million, respectively.
* Cash flows from operating activities declined $16.2 million to
$44.2 million in the second quarter of 2004 compared to $60.4 million
in the second quarter of 2003 primarily related to reduced operating
income and higher uses of working capital in North America.
* Free cash flow was $25.4 million in the second quarter of 2004
compared to $45.5 million in the prior period. In the first six
months of 2004, free cash flow increased $3.3 million to
$120.5 million compared to $117.2 million for the first half of 2003.
Year-to-date free cash flow is in line with management's expectations
and on target to meet our free cash flow guidance for the year. See
our definition and calculation of free cash flow included in a
separate section later in this press release.
* Total debt less cash and cash equivalents at June 30, 2004 was
$956.7 million, representing a decrease of $505.8 million or 35% from
December 31, 2003. During the quarter, debt was reduced primarily due
to the redemption in June 2004 of our convertible notes originally due
2008, the repayment of our notes due April 2004, the successful tender
offer in April 2004 of our notes originally due 2005 offset by the
issuance of new notes due 2016. During the quarter we also received
proceeds of $53.8 million from the sale of our equity and debt
holdings in the United Kingdom.
Commenting on the second quarter results and 2004 outlook Robert L.
Waltrip, Chairman and Chief Executive Officer, said:
"Overall, we believe our performance in the first half of 2004 is on pace
to meet our annual forecast. Total debt less cash on hand at the end of the
quarter dropped below $960 million. Free cash flow generated in the first six
months of 2004 exceeded $120 million and is on target to meet our annual
expectations of $200 to $240 million."
Commenting on the comparable North America results Tom Ryan, President and
Chief Operating Officer, added:
"The North America funeral segment performed well during the quarter
despite lower funeral volumes. We achieved a 3.0% improvement in the average
revenue per funeral service which helped to offset a 3.0% decline in funeral
services performed. The average revenue per funeral continues to be
positively impacted by our Dignity Memorial(R) funeral and cremation plans.
We believe the decline in funeral services in the quarter is predominantly due
to declines in the numbers of deaths in our relevant markets. On a year-to-
date basis our funeral volume is slightly ahead of the first six months of
2003 and within our expectations for the year.
"In the cemetery segment, we experienced a decline in earnings from trust
funds which impacted revenue and margin comparisons quarter over quarter. On a
year-to-date basis our cemetery results are in line with expectations for the
year.
"We continue to focus on achieving excellence in all aspects of the
organization to increase our effectiveness, and remain optimistic about the
prospects for SCI in 2004 and beyond. We confirm our original guidance for
2004 given earlier this year of $.42 to $.50 in diluted earnings per share.
As guided in our original expectations, this range excludes special items and
assumes an effective tax rate of 15% to 18% due to non-cash tax benefits
related to the dispositions of our businesses in France and the United
Kingdom."
New Bank Credit Facility
The Company also announced today the execution of a new three-year, $200
million bank credit agreement, including a sub-limit of $175 million for
letters of credit. This new facility replaces a $185 million facility that
was set to expire in July of 2005. The new bank credit facility provides the
Company with greater flexibility in terms of acquisitions, dividends and share
repurchases. The facility is secured by the stock of the Company's domestic
subsidiaries and these subsidiaries have guaranteed the Company's indebtedness
associated with this facility. The new credit agreement will be filed as an
exhibit to our Form 10-Q that will be filed later today.
North America Comparable Operating Results
The following table summarizes the North America comparable operating
results for the second quarters of 2004 and 2003. Comparable North America
operations represented approximately 98% of consolidated revenues and gross
profits during the second quarter of 2004. Comparable financial information
excludes operations that have been divested, acquired or constructed during
the period January 1, 2003 to June 30, 2004, and are meant to be reflective of
"same store" results of operations.
Three Months Ended
June 30,
--------------------- Increase
2004 2003 (Decrease) Percentage
------ ------ --------- ----------
(Restated)
Funeral
-------
Revenues $275.3 $276.5 $(1.2) (0.4)%
Gross Profits $50.3 $52.0 $(1.7) (3.3)%
Gross Margin 18.3% 18.8%
Funeral Services
Performed 61,869 63,789 (1,920) (3.0)%
Average Revenue
Per Funeral Service $4,294 $4,170 $124 3.0%
Cemetery
--------
Revenues $144.3 $150.2 $(5.9) (3.9)%
Gross Profits $21.8 $25.1 $(3.3) (13.1)%
Gross Margin 15.1% 16.7%
In millions, except funeral services performed and average revenue per
funeral service
North America Comparable Funeral
* Funeral revenues declined $1.2 million or 0.4% in the second quarter
of 2004 compared to 2003. Following a 3.5% increase in funeral volume
in the first quarter, the number of funeral services performed in the
second quarter declined 3.0%. On a year-to-date basis, the number of
funeral services performed is slightly ahead of the first six months
of 2003 and within management's expectations for the year. The
decline in funeral volume in the second quarter was partially offset
by an increase in the average revenue per funeral service of 3.0%.
This increase in average revenue continued to be positively affected
by the expanded product and service offerings included in our Dignity
Memorial(R) funeral and cremation plans. During the second quarter of
2004, 17.5% of the total funeral consumers served selected a Dignity
Memorial(R) plan compared to 16.8% in the second quarter of 2003.
* Funeral gross profits decreased by $1.7 million in the second quarter
of 2004 and the gross margin percentage was 18.3% compared to 18.8%.
These results were affected by increases in selling costs and facility
expenses and were partially offset by reductions in overhead costs.
* During the second quarter of 2004, our results were impacted by an
increase in the rate of cremation. Of the total comparable funeral
services performed in the second quarter of 2004, 40.0% were cremation
services versus 39.2% in the same period of 2003. We are the largest
provider of cremation services in North America, serving more than
100,000 cremation consumers per year.
* Preneed funeral sales production was strong during the second quarter
of 2004 with an increase of $11.8 million or 13.6% to $98.5 million
compared to $86.7 million in the second quarter of 2003.
Additionally, we continue to sell a higher percentage of Dignity
Memorial(R) funeral and cremation plans on a preneed basis. During
the second quarter of 2004, approximately 23% of the total preneed
funeral contracts sold were a Dignity Memorial(R) plan compared to
approximately 20% in the second quarter of 2003.
North America Comparable Cemetery
* North America cemetery revenue declined $5.9 million or 3.9% in the
second quarter of 2004 primarily due to a $5.2 million decline in
cemetery trust fund income. Cemetery operating revenues increased
slightly during the period. Increases in atneed revenues helped to
offset declines in recognized preneed revenues primarily associated
with fewer completed cemetery development projects.
* Cemetery gross profits for the quarter declined $3.3 million and the
gross margin percentage was 15.1% compared to 16.7% predominantly due
to lower levels of trust income as mentioned above. The decline in
trust fund income was partially offset by reductions in overhead
costs.
* During the second quarter of 2004, preneed cemetery sales production
at comparable locations decreased $5.6 million or 6.0% to
$87.1 million compared to $92.7 million in the second quarter of 2003.
Cemetery sales production was impacted to some extent in the quarter
as we continued the process of fine-tuning our new compensation
structure for preneed sales counselors that was introduced in early
2004. Year-to-date 2004 preneed cemetery sales production is slightly
ahead of the prior year.
General and Administrative Expenses
* In the second quarter of 2004, general and administrative expenses
declined $12.2 million to $24.0 million predominantly associated with
a decrease in litigation expenses and reduced system amortization
costs. We recognized legal expenses of $15.0 million in the second
quarter of 2003 related to a decision in an arbitration matter. In
the second quarter of 2004, we recognized $5.0 million of expenses for
outstanding litigation matters. Included in the second quarter of
2003 was $4.6 million of accelerated amortization expense that is not
included in 2004. In 2002, we made the decision to implement new
information systems and therefore accelerated the amortization of the
old systems. These accelerated amortization costs ceased in the third
quarter of 2003 when amortization of the new systems commenced. The
declines in litigation expenses and system amortization costs were
partially offset by an increase of $1.4 million in non-cash long-term
incentive compensation expenses primarily related to the appreciation
of the Company's common stock in 2004.
* In addition to general and administrative expenses, there are two
other components of overhead costs that are allocated to funeral and
cemetery operations in North America: home office overhead and field
overhead. These two overhead categories totaled $29.6 million in the
second quarter of 2004 compared to $39.0 million in the same period of
2003 representing a decrease of $9.4 million or 24.1%. This decline
in costs is a direct result of initiatives undertaken in 2003 to
improve the management structure and to reduce our fixed costs.
Other Income and Expenses
* In the second quarter of 2004, we recognized a net pretax gain of
$0.7 million associated with dispositions compared to a net pretax
loss of $2.5 million in 2003. A gain on the sale of our equity and
debt holdings in the United Kingdom was offset by net losses
associated with various dispositions in North America and a purchase
price adjustment related to the joint venture of France.
* Other operating income in the second quarter of 2004 was a net credit
of $6.9 million for various adjustments made related to our trust
assets and preneed backlog. These adjustments had no impact on cash
flow and were a result of reconciling activities undertaken primarily
due to the implementation of the preneed component of our new
information systems and the adoption of FIN 46R.
* Interest expense was $2.8 million lower in the second quarter of 2004
compared to the second quarter of 2003 as we made substantial progress
in reducing outstanding debt.
* Other income declined $2.5 million in the second quarter of 2004
compared to the previous period. This decrease is primarily due to a
$2.8 million foreign currency transactional loss recorded in the
second quarter of 2004 associated with the payment of a contingent
purchase obligation in Chile as further described below as a
subsequent event.
* The consolidated effective tax rate in the second quarter of 2004 was
a benefit of 53.0% which includes non-cash tax benefits recognized
primarily from the sale of our minority interest in the United
Kingdom.
Free Cash Flow
We define free cash flow as cash flows from operating activities (adjusted
for certain unusual items described below) less capital improvements deemed
reasonably necessary to maintain our existing facilities in a condition
consistent with company standards and extend their useful lives. We believe
that free cash flow provides useful information to investors regarding our
financial condition and liquidity as well as our ability to generate cash for
purposes such as reducing debt, expanding through strategic investments and
repurchasing stock or paying dividends. Free cash flow is not reduced by
capital expenditures intended to grow revenues and profits such as the
acquisition of funeral service locations or cemeteries in large or strategic
North America markets, construction of high-end cemetery property inventory or
the construction of funeral home facilities on SCI-owned cemeteries. Growth-
oriented capital spending was $9.0 million in the six months ended June 30,
2004 compared to $11.7 million in the same period of 2003.
While we believe free cash flow, as defined, is helpful in managing our
business and provides useful information to investors, certain events may
arise, financial or otherwise, which could require the use of free cash flow
so that it would not be available for the purposes described above, or as more
fully described in our public filings with the Securities and Exchange
Commission. Furthermore, free cash flow should be reviewed in addition to,
but not as a substitute for, the data provided in our consolidated statement
of cash flows attached to this press release.
The following table provides a reconciliation between cash flows from
operations and free cash flow, as defined.
(In millions) Three Months Ended Six Months Ended
June 30, June 30,
------------------- ------------------
2004 2003 2004 2003
----- ----- ------ ------
Cash Flows from Operations $44.2 $60.4 $132.8 $243.7
Less: Unusual Tax Refund -- -- -- (94.5)
Add: Settlement of
Significant Legal
Matters, Net of
Insurance Recoveries -- 4.0 -- 4.0
Add: Frozen Cash Balance
Pension Plan
Contribution -- -- 20.0 --
----- ----- ------ ------
Adjusted Cash Flows
from Operations $44.2 $64.4 $152.8 $153.2
Less: Capital Improvements
to Maintain Existing
Facilities (18.8) (18.9) (32.3) (36.0)
----- ----- ------ ------
Free Cash Flow $25.4 $45.5 $120.5 $117.2
===== ===== ====== ======
For the second quarter 2004, free cash flow decreased $20.1 million from
the prior year quarter principally attributable to reduced operating income
and higher uses of working capital in North America. The free cash flow
reported in the second quarter of 2004 does not include any amounts from our
businesses in France which was joint ventured in March 2004. In the second
quarter of 2003, free cash flow related to our French operations was a use of
cash of $2.6 million.
Free cash flow in the first six months of 2004 increased $3.3 million to
$120.5 million compared to $117.2 million in the same period of 2003 aided by
declines in capital improvements to maintain existing facilities. A decrease
of $5.5 million in maintenance capital spending in France more than offset a
$1.8 million increase in maintenance capital spending in North America. Free
cash flow related to our French operations was $15.5 million in the first six
months of 2004 compared to $9.9 million in 2003.
Discontinued Operations
During the second quarter of 2004, we began to actively market our
businesses in Argentina and Uruguay for sale. We plan to have no continuing
interest in these operations subsequent to a sale. As a result, these
operations are now being classified as discontinued. In the second quarter of
2004, discontinued operations contributed $34.3 million after tax or $.11 per
diluted share. Included in this amount is a non-cash tax benefit of $49.2
million, which is expected to reduce cash taxes in future years.
Subsequent Event
In connection with the acquisition of our business in Chile, we entered
into a contingent purchase obligation with certain former owners of that
business. According to the agreement, we were required to pay additional
consideration at the option of the former owners between 2003 and 2005, based
on results of operations. In July 2004, we paid $51.8 million to satisfy
these obligations. This payment will not impact earnings in the third quarter
of 2004 as it had been accrued for; however, as a result of this transaction,
we recorded a foreign currency transactional loss of $2.8 million in the
second quarter of 2004.
Non-GAAP Financial Measures
This earnings release includes non-GAAP financial measures, as defined by
the Securities and Exchange Commission. Specifically, net income and diluted
earnings per share excluding the loss on the early extinguishment of debt,
litigation expenses, foreign currency transactional losses, other operating
income, gains and impairment losses on dispositions and tax benefits are non-
GAAP financial measures. The Company has provided these non-GAAP measures
because management believes these measures provide a consistent basis for
comparison between quarters, as they are not influenced by certain non-
recurring expenses and are also useful to investors in helping them understand
the financial condition of the Company by focusing on the performance of its
core operations. These non-GAAP financial measures also facilitate comparisons
to competitors' operating results.
Set forth below is a reconciliation of non-GAAP financial measures to the
most directly comparable GAAP financial measures. The proforma information
may not be comparable to similarly titled measures used by other companies.
Management does not intend for the information to be considered in isolation
or as a substitute for measures of performance prepared in accordance with
GAAP.
Three Months Ended
--------------------------------------------------
June 30, 2004 June 30, 2003 (Restated)
------------------------ ------------------------
Operating Net Diluted Operating Net Diluted
(In Millions) Income Income EPS Income Income EPS
------------------------ ------------------------
As Reported $57.0 $46.4 $.15 $54.2 $15.3 $.05
Settlement of significant
legal matters 5.0 3.1 .01 15.0 9.4 .03
Gains and impairment
losses on dispositions (0.7) (7.1) (.02) 2.5 1.5 .01
Other operating
income/expense (6.9) (4.7) (.02) 1.7 1.1 .00
Loss/gain on early
extinguishment of debt -- 10.5 .03 -- 0.3 .00
Foreign currency
transaction loss -- 2.3 .01 -- -- --
Discontinued operations -- (34.3) (.11) -- (1.2) (.00)
------------------------ ------------------------
Proforma $54.4 $16.2 $.05 $73.4 $26.4 $.09
Diluted weighted
average shares 312,725 299,844
Interest add back -- --
Results for the three month periods ended June 30, 2004 and 2003 were
affected by the following items:
Three Months Ended June 30, 2004
* We recognized expenses of $5.0 million ($3.1 million after tax) or
$.01 per diluted share associated with outstanding litigation matters.
* We recognized a net gain associated with dispositions of $0.7 million
($7.1 million after tax including tax benefits recognized from the
sale of our minority interest in the United Kingdom) or $.02 per
diluted share.
* We recognized other operating income of $6.9 million ($4.7 million
after tax) or $.02 per diluted share as a result of various
reconciling activities regarding our trust accounts and preneed
backlogs.
* We recorded a loss on the early extinguishment of debt of
$10.5 million after tax or $.03 per diluted share primarily related to
the successful tender offer of our notes due 2005 and the redemption
of our convertible notes due 2008.
* We recognized a foreign currency transactional loss of $2.3 million
after tax or $.01 per diluted share associated with the payment of a
contingent purchase obligation in Chile.
* Discontinued operations contributed $34.3 million after tax or $.11
per diluted share. Included in this amount is a non-cash tax benefit
of $49.2 million, which is expected to reduce cash taxes in future
years.
Three Months Ended June 30, 2003:
* We incurred litigation expenses of $15.0 million ($9.4 million after
tax) or $.03 per diluted share related to a decision in an arbitration
matter.
* We recognized a net after tax loss of $1.5 million on dispositions,
other operating expenses of $1.1 million after tax and a loss on the
early extinguishment of debt of $0.3 million after tax. These
combined items reduced net income by $2.9 million or $.01 per diluted
share.
* Discontinued operations contributed $1.2 million after tax or less
than $.01 per diluted share.
Six Months Ended
--------------------------------------------------
June 30, 2004 June 30, 2003 (Restated)
------------------------ ------------------------
June 30, 2004 June 30, 2003 (Restated)
Operating Net Diluted Operating Net Diluted
(In Millions) Income Income EPS Income Income EPS
------------------------ ------------------------
As Reported $154.7 $74.9 $.23 $157.1 $59.4 $.19
Settlement of
significant
legal matters 40.0 25.2 .07 15.0 9.4 .03
Gains and impairment
losses on dispositions (36.3) (58.5) (.17) (6.9) (4.3) (.02)
Other operating
income/expense (6.9) (4.7) (.01) 1.7 1.1 .00
Loss/gain on early
extinguishment of debt -- 10.5 .03 -- (1.2) (.00)
Interest income on
United Kingdom note
receivable -- (2.7) (.01) -- -- --
Foreign currency
transaction loss -- 2.3 .01 -- -- --
Discontinued operations -- (35.1) (.10) -- (1.3) (.00)
Cumulative effect of
accounting changes -- 48.1 .14 -- -- --
------------------------ ------------------------
Proforma $151.5 $60.0 $.19 $166.9 $63.1 $.20
Diluted weighted
average shares 353,438 344,139
Interest add back $6.4 $6.6
Results for the six month periods ended June 30, 2004 and 2003 were
affected by the following items:
Six Months Ended June 30, 2004
* We recognized expenses of $40.0 million ($25.2 million after tax) or
$.07 per diluted share associated with the proposed settlement of our
securities class action lawsuit and other outstanding litigation
matters.
* We recognized a net gain associated with dispositions of $36.3 million
($58.5 million after tax including tax benefits recognized from the
dispositions of our French operations and our minority interest in the
United Kingdom) or $.17 per diluted share.
* We recognized other operating income of $6.9 million ($4.7 million
after tax) or $.01 per diluted share as a result of various
reconciling activities regarding our trust accounts and preneed
backlogs.
* We recorded a loss on the early extinguishment of debt of
$10.5 million after tax or $.03 per diluted share primarily related to
the successful tender offer of our notes due 2005 and the redemption
of our convertible notes due 2008.
* We recognized $2.7 million after tax or $.01 per diluted share of
interest income on a note receivable from our United Kingdom company.
* We recognized a foreign currency transactional loss of $2.3 million
after tax or $.01 per diluted share associated with the payment of a
contingent purchase obligation in Chile.
* Discontinued operations contributed $35.1 million after tax or
$.10 per diluted share. Included in this amount is a non-cash tax
benefit of $49.2 million, which is expected to reduce cash taxes in
future years.
* We incurred a charge of $48.1 million after tax or $.14 per diluted
share for the cumulative effect of accounting changes related to the
implementation of FIN 46R and changes in pension accounting.
Six Months Ended June 30, 2003:
* We incurred litigation expenses of $15.0 million ($9.4 million after
tax) or $.03 per diluted share related to a decision in an arbitration
matter.
* We recognized a net gain associated with dispositions of $6.9 million
($4.3 million after tax) or $.02 per diluted share.
* We recognized other operating expenses of $1.7 million ($1.1 million
after tax) or less than $.01 per diluted share related to the
termination of a lease contract.
* We recognized a gain on the early extinguishment of debt of
$1.2 million after tax or less than $.01 per diluted share.
* Discontinued operations contributed $1.3 million after tax or less
than $.01 per diluted share.
Conference Call and Webcast
We will host a conference call on Monday, August 16, 2004, at 10:00 a.m.
Central time. A question and answer session will follow a brief presentation
made by management. The conference call dial-in number is (719) 457-2679.
The conference call will also be broadcast live via the Internet and can be
accessed through our website at http://www.sci-corp.com. A replay of the
conference call will be available through August 30, 2004 and can be accessed
at (719) 457-0820 with the confirmation code of 317195. Additionally, a
replay of the conference call will be available on our website for
approximately ninety days on the Investors page under the subheading
"Conference Calls" at http://www.sci-corp.com/ConfCalls.html. This earnings
release will also be available on our website on the Home page under the
subheading "In the News" at http://www.sci-corp.com.
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, or on behalf of, us. Important factors, which could cause actual results
to differ materially from those in forward-looking statements include, among
others, the following:
* Changes in general economic conditions, both domestically and
internationally, impacting financial markets (e.g., marketable
security values, as well as currency and interest rate fluctuations)
that could negatively affect us, particularly, but not limited to,
levels of trust fund income, interest expense, pension expense and
negative currency translation effects.
* The outcomes of pending lawsuits and proceedings against us involving
alleged violations of securities laws and the possibility that
insurance coverage is deemed not to apply to these matters or that an
insurance carrier is unable to pay any covered amounts to us.
* Our ability to consummate the previously disclosed proposed settlement
of our Consolidated Lawsuit (as defined within our Form 10-Q)
involving allegations of violations of federal securities laws, which
is subject to court approval following notice to members of the class,
an opportunity for class members to object or opt out, and other
conditions.
* Our ability to consummate the settlement of lawsuits in Florida as
described in the agreement in principle with respect thereto, and the
possibility that insurance coverage is deemed not to apply to these
matters or that an insurance carrier is unable to pay any covered
amounts to us.
* Amounts payable by us with respect to our outstanding legal matters
exceeding reserves established by us.
* Our ability to successfully implement our strategic plan related to
producing operating improvements, strong cash flows and further
deleveraging.
* Our ability to successfully implement our plan to reduce costs and
increase cash flows associated with significant changes being made to
our organization structure, process and quality of our sales efforts.
* Changes to net income as a result of our ongoing reconciliation
processes regarding our trust assets and preneed backlogs.
* Changes in consumer demand and/or pricing for our products and
services due to several factors, such as change in local number of
deaths, cremation rates, competitive pressures and local economic
conditions.
* Changes in domestic and international political and/or regulatory
environments in which we operate, including potential changes in tax,
accounting and trusting policies.
* Changes in credit relationships impacting the availability of credit
and the general availability of credit in the marketplace.
* Our ability to successfully complete our ongoing process improvement
and system implementation projects, including our replacement of our
North America point-of-sale information technology systems.
* Our ability to successfully access surety and insurance markets at a
reasonable cost.
* Our ability to successfully exploit our substantial purchasing power
with certain of our vendors.
* The outcome of a pending Internal Revenue Service audit and future tax
deductions resulting from potential asset sales.
For further information on these and other risks and uncertainties, see
our Securities and Exchange Commission filings, including our 2003 Annual
Report on Form 10-K. Copies of this document as well as other SEC filings can
be obtained from our website at http://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.
Service Corporation International (NYSE: SRV), headquartered in Houston,
Texas, is the leading provider of funeral and cemetery services in the world.
We have an extensive network of businesses including 1,212 funeral service
locations and 402 cemeteries in North America as of June 30, 2004. For more
information about Service Corporation International, please visit our website
at http://www.sci-corp.com.
For additional information contact:
Investors: Debbie Young - Director of Investor Relations (713) 525-9088
Media: Terry Hemeyer - Managing Director /
Corporate Communications (713) 525-5497
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(In thousands, except per share amounts)
Three months ended Six months ended
June 30, June 30,
----------------------- -----------------------
2004 2003 2004 2003
-------- ---------- ---------- ----------
(Restated) (Restated)
Revenues $432,057 $584,050 $1,018,174 $1,162,876
Costs and expenses 358,673 489,418 831,693 953,286
-------- -------- ---------- ----------
Gross profit 73,384 94,632 186,481 209,590
-------- -------- ---------- ----------
General and
administrative expenses (24,028) (36,268) (75,049) (57,679)
Gains and impairment
(losses) on dispositions,
net 696 (2,469) 36,299 6,865
Other operating
income (expense) 6,932 (1,724) 6,932 (1,724)
-------- -------- ---------- ----------
Operating income 56,984 54,171 154,663 157,052
Interest expense (32,982) (35,763) (66,780) (73,133)
(Loss) gain on early
extinguishment of debt (16,770) (419) (16,770) 1,903
Other income, net 625 3,093 8,189 5,372
-------- -------- ---------- ----------
(49,127) (33,089) (75,361) (65,858)
-------- -------- ---------- ----------
Income from continuing
operations before income
taxes and cumulative
effects of accounting
changes 7,857 21,082 79,302 91,194
(Benefit) provision for
income taxes (4,166) 7,008 (8,547) 33,146
-------- -------- ---------- ----------
Income from continuing
operations before
cumulative effects of
accounting changes $12,023 $14,074 $87,849 $58,048
Income from discontinued
operations (net of income
tax (benefit) expense of
($49,096), $386, ($48,956)
and $224, respectively) 34,337 1,234 35,091 1,346
Cumulative effects of
accounting changes
(net of income tax
benefit of $21,274) -- -- (48,061) --
-------- -------- ---------- ----------
Net income $46,360 $15,308 $74,879 $59,394
======== ======== ========== ==========
Basic earnings (loss)
per share:
Income from continuing
operations before
cumulative effects of
accounting changes $.04 $.05 $.29 $.19
Income from discontinued
operations, net of tax .11 -- .12 --
Cumulative effects of
accounting changes, net
of tax -- -- (.16) --
-------- -------- ---------- ----------
Net income $.15 $.05 $.25 $.19
======== ======== ========== ==========
Diluted earnings (loss)
per share:
Income from continuing
operations before
cumulative effects of
accounting changes $.04 $.05 $.27 $.19
Income from discontinued
operations, net of tax .11 -- .10 --
Cumulative effects of
accounting changes,
net of tax -- -- (.14) --
-------- -------- ---------- ----------
Net income $.15 $.05 $.23 $.19
======== ======== ========== ==========
Basic weighted average
number of shares 307,988 299,351 305,290 298,563
======== ======== ========== ==========
Diluted weighted average
number of shares 312,725 299,844 353,438 344,139
======== ======== ========== ==========
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED BALANCE SHEET (UNAUDITED)
(In thousands, except share amounts)
June 30, December 31,
2004 2003
- --------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $340,884 $239,431
Receivables, net 118,535 229,839
Inventories 75,462 136,807
Other 173,981 61,146
---------- ----------
Total current assets 708,862 667,223
---------- ----------
Preneed funeral receivables
and trust investments 1,276,791 1,229,765
Preneed cemetery receivables
and trust investments 1,382,359 1,083,035
Cemetery property, at cost 1,546,662 1,524,847
Property, plant and equipment, at cost, net 962,420 1,277,583
Assets of discontinued operations 8,868 9,318
Deferred charges and other assets 692,865 738,011
Goodwill 1,160,341 1,195,422
Cemetery perpetual care trust investments 699,591 --
---------- ----------
$8,438,759 $7,725,204
========== ==========
Liabilities & Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $410,179 $449,497
Current maturities of long-term debt 58,810 182,682
Income taxes 10,484 29,576
---------- ----------
Total current liabilities 479,473 661,755
---------- ----------
Long-term debt 1,238,792 1,519,189
Deferred preneed funeral revenues 491,628 1,612,347
Deferred preneed cemetery revenues 878,125 1,575,352
Deferred income taxes 306,414 418,375
Liabilities of discontinued operations 76,949 61,530
Other liabilities 365,743 349,698
Non-controlling interest in
funeral and cemetery trusts 2,050,973 --
Non-controlling interest in
perpetual care trusts 674,204 --
Stockholders' equity:
Common stock, $1 per share par value,
500,000,000 shares authorized,
337,368,804 and 302,039,871, issued
and outstanding (net of 2,469,445
treasury shares, at par) 337,369 302,040
Capital in excess of par value 2,476,263 2,274,664
Unearned compensation (2,507) --
Accumulated deficit (863,184) (938,063)
Accumulated other comprehensive loss (71,483) (111,683)
---------- ----------
Total stockholders' equity 1,876,458 1,526,958
---------- ----------
$8,438,759 $7,725,204
========== ==========
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(In thousands)
Six months ended
June 30,
-----------------------
2004 2003
------- ----------
(Restated)
Cash flows from operating activities:
Net income $74,879 $59,394
Adjustments to reconcile net income
to net cash provided by operating activities:
Net income from discontinued operations (35,091) (1,346)
Loss (gains) on early extinguishments of debt 16,770 (1,903)
Cumulative effects of accounting
changes, net of tax 48,061 --
Depreciation and amortization 71,200 80,322
(Benefit) provision for deferred income taxes (9,973) 21,189
(Gains) and impairment losses
on dispositions, net (36,299) (6,865)
Other operating (income) expenses (6,932) 1,724
Change in assets and liabilities,
net of effects from acquisitions and dispositions:
Decrease in receivables 26,362 15,966
Decrease in other assets 7,255 82,943
Decrease in payables and other liabilities (4,244) (7,814)
Net effect of preneed funeral production
and maturities (19,509) (12,240)
Net effect of cemetery production
and deliveries (3,664) 2,544
Other 1,703 10,701
-------- --------
Net cash provided by operating activities
from continuing operations 130,518 244,615
Net cash provided by (used in) operating
activities from discontinued operations 2,278 (965)
-------- --------
Net cash provided by operating activities 132,796 243,650
Cash flows from investing activities:
Capital expenditures (41,289) (47,553)
Proceeds from divestitures and sales
of property and equipment 19,477 34,232
Proceeds and distributions from joint ventures
and equity investments, net of cash retained 337,049 30,802
Net deposits of restricted funds and other (158,632) (37,336)
-------- --------
Net cash provided by (used in) investing
activities from continuing operations 156,605 (19,855)
Net cash used in investing activities
from discontinued operations (117) (125)
-------- --------
Net cash provided by (used in)
investing activities 156,488 (19,980)
Cash flows from financing activities:
Proceeds from long-term debt 242,850 --
Payments of issuance of debt (121,139) (83,469)
Early extinguishments of debt (313,527) (175,515)
Proceeds from exercise of stock options 5,254 --
Bank overdrafts and other -- (11,201)
-------- --------
Net cash used in financing activities (186,562) (270,185)
Effect of foreign currency (1,269) 3,878
-------- --------
Net increase (decrease) in cash
and cash equivalents 101,453 (42,637)
Cash and cash equivalents
at beginning of period 239,431 200,625
-------- --------
Cash and cash equivalents at end of period $340,884 $157,988
======== ========
SOURCE Service Corporation International
-0- 08/16/2004
/CONTACT: Investors, Debbie Young, Director of Investor Relations,
+1-713-525-9088, or Media, Terry Hemeyer, Managing Director and Corporate
Communications, Service Corporation International, +1-713-525-5497/
/Web site: http://www.sci-corp.com
http://www.sci-corp.com/ConfCalls.html /
(SRV)
CO: Service Corporation International
ST: Texas
IN:
SU: ERN CCA