TO BUSINESS EDITOR:
Service Corporation International Announces
First Quarter 2008 Financial Results
- - Conference call on Thursday, May 8, 2008, at 9:00 a.m. Central Daylight Time.
HOUSTON, May 7 /PRNewswire-FirstCall/ -- Service Corporation International
(NYSE: SCI), a provider of deathcare products and services, today reported
results for the first quarter 2008. Our unaudited consolidated financial
statements can be found at the end of this press release. The table below
summarizes our key financial results:
Three Months Ended
(In millions, except for per share amounts) March 31,
----------------------
2008 2007
--------- ---------
Revenues $573.5 $607.6
Operating income $99.4 $98.1
Net income $41.5 $37.6
Diluted earnings per share $.16 $.13
Earnings from continuing operations excluding
special items(1) $51.8 $51.7
Diluted earnings per share from continuing
operations excluding special items(1) $.20 $.17
Diluted weighted average shares outstanding 264.8 298.6
Net cash provided by operating activities $46.3 $127.9
Net cash provided by operating activities
excluding special items(1) $136.3 $127.9
(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 to net income,
diluted earnings per share, and net cash provided by operating
activities computed in accordance with GAAP can be found later in this
press release under the heading "Non-GAAP Financial Measures".
Highlights:
* Diluted earnings per share from continuing operations excluding special
items increased 18% to $0.20 compared to $0.17.
* Revenues decreased $34.1 million, or 5.6%, primarily due to significant
divestiture activity throughout 2007 which included 55 FTC-mandated
properties and 349 non-strategic locations. These divestitures produced
total proceeds of over $400 million.
* Comparable average revenue per funeral service increased 5.3%.
Comparable funeral services performed were 0.9% below prior year levels.
* Comparable cemetery property sales production increased 7% compared to
prior year levels.
* Comparable cemetery property revenue decreased $7.2 million due to
previously disclosed one-time construction revenues of $10.8 million
primarily at our Rose Hills cemetery in the first quarter of 2007 that
were not repeated in 2008.
* Excluding a $90 million U.S. federal tax payment in the first quarter of
2008 related to certain divestitures, cash flow from operating
activities increased $8.4 million compared to the prior year.
* SCI returned more than $47 million in capital to shareholders in the
first quarter of 2008 through a combination of dividends and share
repurchases.
Tom Ryan, the Company's President and Chief Executive Officer, commented
on the first quarter of 2008:
"We are encouraged by our strong operating performance in the first
quarter of 2008, particularly in the funeral segment of our business. Comparable
funeral revenues grew by 5% as we continue to see the benefits from the
implementation of strategic pricing initiatives at the former Alderwoods
locations. The enhanced revenues generated substantial margin improvement
against a leaner infrastructure created by the synergies from the Alderwoods
transaction. Cemetery margins decreased from the prior year as certain
high-margin construction projects completed in 2007 were not repeated in 2008.
However, we are pleased with the momentum in cemetery sales production,
especially in these challenging economic times for consumers."
REVIEW OF FIRST QUARTER 2008 RESULTS
The following table represents consolidated results of operations. These
results are impacted by significant divestiture activity in 2007, including 55
FTC-mandated properties and 349 non-strategic locations. These divestitures
produced total proceeds of over $400 million.
(In millions)
Three Months Ended
March 31,
------------------------
2008 2007
---------- ----------
Funeral
Funeral revenues $405.6 $422.9
Gross profit $108.5 $102.3
Gross margin percentage 26.8% 24.2%
Cemetery
Cemetery revenues $167.9 $184.7
Gross profit $29.1 $38.7
Gross margin percentage 17.3% 21.0%
Comparable Funeral Results for the First Quarter 2008
The table below details comparable funeral results of operations ("same
store") for the three months ended March 31, 2008 and 2007, including the
properties that we acquired in the Alderwoods transaction. We consider
comparable operations as those owned for the entire period beginning January 1,
2007 and ending March 31, 2008.
(In millions, except funeral services performed,
total preneed funeral contracts, and average
revenue per funeral service or per contract sold)
Three Months Ended
March 31,
2008 2007
---------- ----------
Comparable funeral revenue:
Atneed revenue $266.6 $261.0
Recognized preneed revenue 123.6 113.0
General agency revenues(1) 11.6 8.9
Other revenue 2.3 2.1
---------- ----------
Total comparable funeral revenues $404.1 $385.0
Comparable funeral gross profit $108.8 $94.0
Comparable funeral gross margin percentage 26.9% 24.4%
Comparable funeral services performed:
Preneed 25,791 25,266
Atneed 51,305 52,536
---------- ----------
Total 77,096 77,802
Comparable average revenue per funeral
service $5,061 $4,807
Comparable preneed funeral sales production:
Sales $107.2 $110.4
Total preneed funeral contracts sold 19,068 20,741
Average revenue per contract sold $5,622 $5,323
(1) General Agency (GA) revenues are commissions we receive from
third-party insurance companies for life insurance policies or
annuities sold to preneed customers for the purpose of funding preneed
funeral arrangements.
Comparable funeral revenue increased 5.0% primarily due to increased
average revenue per funeral service. Comparable gross profit and gross margins
increased as a result of the increase in revenue as well as decreased costs
resulting from the elimination of duplicative processes and other synergies
achieved during the Alderwoods integration as well as other cost initiatives.
Comparable Cemetery Results for the First Quarter 2008
The table below details comparable cemetery results of operations ("same
store") for the three months ended March 31, 2008 and 2007, including the
properties that we acquired in the Alderwoods transaction. We consider
comparable operations as those owned for the entire period beginning January 1,
2007 and ending March 31, 2008.
(In millions) Three Months Ended
March 31,
-------------------------
2008 2007
---------- ----------
Comparable cemetery revenue:
Atneed revenue $65.5 $67.9
Recognized preneed revenue 79.6 79.6
Other revenue (1) 22.3 24.3
---------- ----------
Total comparable cemetery revenues $167.4 $171.8
Comparable cemetery gross profit $29.2 $38.3
Comparable cemetery gross margin percentage 17.4% 22.3%
Comparable preneed and atneed cemetery sales production:
Preneed and atneed sales $158.4 $154.3
Recognition rate (2) 91.6% 95.6%
(1) Other cemetery revenue is primarily related to endowment care trust
fund income and interest and finance charges earned from customer
receivables on preneed installments contracts.
(2) Represents the ratio of current period revenue recognition stated as a
percentage of current period sales production.
* Comparable cemetery revenues decreased $4.4 million, or 2.6%. This was
driven by $10.8 million recognized in the first quarter of 2007 from
one-time construction projects primarily at our Rose Hills cemetery. As
anticipated, no major construction projects were completed in the first
quarter of 2008 and we remain confident in our forecasted construction
revenue for the remainder of 2008. Increases in both comparable
merchandise and services revenue partially offset this decline.
* Comparable cemetery gross profit decreased $9.1 million, and the
comparable gross margin percentage was 17.4% compared to 22.3% in the
prior year. The lower margin percentage is driven by the $10.8 million
decreased cemetery property construction revenue described above, which
typically generates comparatively higher margins. After adjusting out
this and all other year-over-year variances in cemetery property
construction revenues and associated costs from both our 2008 and 2007
gross margins, the 2008 margin percentage would be 17.4% compared to
17.7% in the prior year.
* Comparable cemetery preneed and atneed property sales production
increased 7% compared to prior year levels.
Other First Quarter 2008 Financial Results
* General and administrative expenses decreased $10.2 million primarily
due to a decrease of $10.1 million in transition costs related to the
acquisition of Alderwoods. In the first quarter of 2008, general and
administrative expenses included $1.2 million on a pretax basis relative
to the Alderwoods transition costs.
* Pretax losses on divestitures and impairment charges were $12.0 million
compared to $7.7 million.
* Interest expense decreased $3.5 million due to the repayment of debt in
2007.
Cash Flow and Capital Spending
Net cash provided by operating activities was $46.3 million in the first
quarter of 2008 compared to $127.9 million in the first quarter of 2007. As
discussed when providing our outlook for 2008, we made a $90 million federal tax
payment in March 2008 related to gains on the sale of our equity investment in
French operations and other major divestitures. Adjusting for this tax payment,
cash flows from operating activities generated $136 million versus $128 million,
or an $8.4 million increase compared to the prior year. This increase is due to
a decrease in cash interest payments and lower costs from the elimination of
duplicative processes and other synergies achieved during the Alderwoods
integration. These improvements were partially offset by cash flows from
divested businesses and the receipt of $7.6 million of insurance proceeds
related to Hurricane Katrina in 2007 that did not recur in 2008 and decreases in
cash flow from operations that were divested in 2007.
A summary of our capital expenditures is set forth below:
(In millions) Capital Expenditures
----------------------------
Three Months Ended March 31,
----------------------------
2008 2007
------------ ------------
Capital improvements at existing locations 14.2 15.1
Development of cemetery property 10.6 10.0
Construction of new funeral home facilities
and other growth capital 4.4 1.1
------------ ------------
Total capital expenditures $29.2 $26.2
============ ============
NON-GAAP FINANCIAL MEASURES
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 all 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, expense, and cash items not affecting continuing operations. We also
believe this measure helps facilitate comparisons to our competitors' operating
results. Set forth below is a reconciliation of earnings from continuing
operations excluding special items to our reported net income and diluted
earnings per share from continuing operations excluding special items to our
reported diluted EPS. 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 March 31,
--------------------------------------------
2008 2007
------------------- ---------------------
Net Diluted Net Diluted
Income EPS Income EPS
-------- -------- -------- --------
Net income as reported $41.5 $.16 $37.6 $.13
After-tax reconciling items:
Losses on divestitures
and impairment charges, net 9.6 .04 8.6 .03
Loss on early extinguishment
of debt - - 1.4 -
Alderwoods transition
and other costs 0.7 - 7.0 .02
Discontinued operations - - (2.9) (.01)
-------- -------- -------- --------
Earnings from continuing
operations excluding special
items $51.8 $.20 $51.7 $.17
======== ======== ======== ========
Set forth below is a reconciliation of net cash provided by operating
activities excluding special items to our reported net cash provided by
operating activities prepared in accordance with GAAP. 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.
Three Months Ended
(In millions) March 31,
---------------------
2008 2007
--------- ---------
Net cash provided by operating activities, as
reported $46.3 $127.9
United States federal transaction-related tax
payment 90.0 -
--------- ---------
Net cash provided by operating activities
excluding special items $136.3 $127.9
========= =========
Conference Call and Webcast
We will host a conference call on Thursday, May 8, 2008, at 9:00 a.m.
Central Daylight Time. A question and answer session will follow a brief
presentation made by management. The conference call dial-in number is (617)
597-5324 with the passcode of 83373396. 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 May 15, 2008 and can be accessed at (617) 801-6888 with the passcode of
66060160. 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.
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:
* Changes in general economic conditions, both domestically and
internationally, impacting financial markets (e.g., marketable security
values, access to capital markets, 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, and negative
currency translation effects.
* The outcomes of pending lawsuits, proceedings, and claims against us 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.
* Allegations regarding compliance with laws, regulations, industry
standards, and customs regarding burial procedures and practices.
* The amounts payable by us with respect to our outstanding legal matters
exceed our established reserves.
* The outcome of pending Internal Revenue Service audits. We maintain
accruals for tax liabilities which relate to uncertain tax matters. If
these tax matters are unfavorably resolved, we will make any required
payments to tax authorities. If these tax matters are favorably
resolved, the accruals maintained by us will no longer be required, and
these amounts will be reversed through the tax provision at the time of
resolution.
* Our ability to manage changes in consumer demand and/or pricing for our
products and services due to several factors, such as changes in numbers
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 access surety and insurance markets at a
reasonable cost.
* Our ability to successfully leverage our substantial purchasing power
with certain of our vendors.
* The effectiveness of our internal control over financial reporting, and
our ability to certify the effectiveness of the internal controls and to
obtain an unqualified attestation report of our auditors regarding the
effectiveness of our internal control over financial reporting.
* The possibility that our credit agreement and privately placed debt
securities may prevent us from engaging in certain transactions.
* Our ability to buy our common stock under our share repurchase programs
which could be impacted by, among others, restrictive covenants in our
bank agreements, unfavorable market conditions, the market price of our
common stock, the nature of other investment opportunities presented to
us from time to time, and the availability of funds necessary to
continue purchasing common stock.
For further information on these and other risks and uncertainties, see our
Securities and Exchange Commission filings, including our 2007 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.
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 March 31, 2008, we owned and operated more than 1,300 funeral homes and 350
cemeteries (of which over 200 are combination locations) in 43 states, eight
Canadian provinces, the District of Columbia and Puerto Rico. Through our
businesses, we market the Dignity Memorial(R) 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
http://www.sci-corp.com. For more information about Dignity Memorial(R), please
visit http://www.dignitymemorial.com.
For additional information contact:
Investors: Debbie Young - Director / Investor Relations (713) 525-9088
Media: Lisa Marshall - Managing Director /
Corporate Communications (713) 525-3066
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED) (In
thousands, except per share amounts)
Three Months Ended
March 31,
------------------------------
2008 2007
------------ ------------
Revenues $573,451 $607,555
Costs and expenses (435,854) (466,572)
------------ ------------
Gross profit 137,597 140,983
------------ ------------
General and administrative expenses (25,075) (35,228)
Loss on divestitures and impairment
charges, net (12,046) (7,680)
Other operating expense (1,106) -
------------ ------------
Operating income 99,370 98,075
Interest expense (34,069) (37,597)
Loss on early extinguishment of debt - (2,358)
Equity in earnings of unconsolidated
subsidiaries - 711
Other income (expense), net 1,172 (617)
------------ ------------
(32,897) (39,861)
------------ ------------
Income from continuing operations
before income taxes 66,473 58,214
Provision for income taxes (24,969) (23,497)
------------ ------------
Income from continuing operations 41,504 34,717
Income from discontinued operations
(net of income tax provision of $0 and
$737, respectively) 15 2,925
------------ ------------
Net income $41,519 $37,642
============ ============
Basic earnings per share:
Income from continuing operations $.16 $.12
Income from discontinued operations,
net of tax - .01
------------ ------------
Net income $.16 $.13
============ ============
Diluted earnings per share:
Income from continuing operations $.16 $.12
Income from discontinued operations,
net of tax - .01
------------ ------------
Net income $.16 $.13
============ ============
Basic weighted average number of shares 260,805 293,096
============ ============
Diluted weighted average number of shares 264,830 298,621
============ ============
Dividends declared per share $.04 $.03
============ ============
SERVICE CORPORATION INTERNATIONAL
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED) (In
thousands, except share amounts)
March 31, December 31,
2008 2007
------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents $132,475 $168,594
Receivables, net 104,434 113,793
Inventories 33,747 36,203
Deferred tax asset 73,182 73,182
Current assets held for sale 2,560 2,294
Other 31,881 27,261
----------- -----------
Total current assets 378,279 421,327
----------- -----------
Preneed funeral receivables and trust
investments 1,355,025 1,434,403
Preneed cemetery receivables and trust
investments 1,345,062 1,428,057
Cemetery property, at cost 1,452,443 1,451,666
Property and equipment, at cost, net 1,556,251 1,569,534
Non-current assets held for sale 123,318 122,626
Goodwill 1,226,524 1,198,153
Deferred charges and other assets 436,490 400,734
Cemetery perpetual care trust investments 874,688 905,744
----------- -----------
$8,748,080 $8,932,244
=========== ===========
Liabilities & Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $347,795 $343,392
Current maturities of long-term debt 38,558 36,594
Current liabilities held for sale 237 149
Income taxes 23 46,305
----------- -----------
Total current liabilities 386,613 426,440
----------- -----------
Long-term debt 1,840,398 1,820,106
Deferred preneed funeral revenues 571,805 526,668
Deferred preneed cemetery revenues 760,511 753,876
Deferred income taxes 139,024 140,623
Non-current liabilities held for sale 91,313 91,928
Other liabilities 381,324 383,642
Non-controlling interest in funeral and
cemetery trusts 2,230,721 2,390,288
Non-controlling interest in cemetery perpetual
care trusts 880,056 906,590
Stockholders' equity:
Common stock, $1 per share par value,
500,000,000 shares authorized, 260,548,606
and 262,858,169, issued and outstanding
(net of 4,971,900 and 1,961,300 treasury
shares, at par, respectively) 260,549 262,858
Capital in excess of par value 1,847,057 1,874,600
Accumulated deficit (771,775) (797,965)
Accumulated other comprehensive income 130,484 152,590
----------- -----------
Total stockholders' equity 1,466,315 1,492,083
----------- -----------
$8,748,080 $8,932,244
=========== ===========
SERVICE CORPORATION INTERNATIONAL
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED) (In
thousands)
Three Months Ended March 31,
-----------------------------
2008 2007
------------- -------------
Cash flows from operating activities:
Net income $41,519 $37,642
Adjustments to reconcile net income to net
cash provided by operating activities:
Income from discontinued operations,
net of tax (15) (2,925)
Equity in earnings of unconsolidated
subsidiaries - (711)
Loss on early extinguishment of debt - 2,358
Premiums paid on early extinguishment of debt - (650)
Depreciation and amortization 33,201 37,468
Amortization of cemetery property 7,385 8,213
Amortization of loan costs 995 2,114
Provision for doubtful accounts 1,948 3,562
Provision for deferred income taxes 19,231 13,728
Loss on divestitures and impairment
charges, net 12,046 7,680
Share-based compensation 2,197 3,809
Excess tax benefits from share based
awards (1,324) (3,865)
Change in assets and liabilities, net of
effects from acquisitions and divestitures:
Decrease (increase) in receivables 581 (506)
(Increase) decrease in other assets (7,719) 4,452
Decrease in payables and other
liabilities (80,877) (11,489)
Net effect of preneed funeral production
and maturities 4,443 1,771
Net effect of cemetery production and
deliveries 12,721 13,061
Other 12 173
------------- -------------
Net cash provided by operating
activities from continuing operations 46,344 115,885
Net cash provided by operating activities
from discontinued operations - 12,004
------------- -------------
Net cash provided by operating activities 46,344 127,889
Cash flows from investing activities:
Capital expenditures (29,240) (26,238)
Acquisitions, net of cash acquired (3,882) (212)
Proceeds from divestitures and sales of
property and equipment 7,987 43,709
Net deposits of restricted funds and other (21,483) (222)
------------- -------------
Net cash (used in) provided by investing
activities from continuing operations (46,618) 17,037
Net cash provided by (used in) investing
activities from discontinued operations 858 (6,582)
------------- -------------
Net cash (used in) provided by investing
activities (45,760) 10,455
Cash flows from financing activities:
Proceeds from issuance of long-term debt and
capital leases 69,000 -
Payments of debt (46,179) (516)
Principal payments on capital leases (5,888) (6,795)
Early extinguishment of debt - (100,000)
Proceeds from exercise of stock options 1,335 5,889
Excess tax benefits from share-based awards 1,324 3,865
Purchase of Company common stock (36,606) -
Payments of dividends (10,585) (8,801)
Bank overdrafts and other (7,829) 6,764
------------- -------------
Net cash used in financing activities
from continuing operations (35,428) (99,594)
Net cash used in financing activities
from discontinued operations - (706)
------------- -------------
Net cash used in financing activities (35,428) (100,300)
Effect of foreign currency (1,275) 169
------------- -------------
Net (decrease) increase in cash and
cash equivalents (36,119) 38,213
Cash and cash equivalents at beginning
of period 168,594 39,880
------------- -------------
Cash and cash equivalents at end of period $132,475 $78,093
============= =============
SOURCE Service Corporation International