Exhibit 99.1
SERVICE CORPORATION INTERNATIONAL REPORTS THIRD QUARTER 2005 LOSS OF $.03 PER
DILUTED SHARE, EARNINGS OF $.04 PER DILUTED SHARE BEFORE SPECIAL ITEMS AND
CONTINUED STRONG OPERATING CASH FLOWS
- Conference call to be webcast on Tuesday, November 15, 2005,
at 9:00 a.m. central time.
HOUSTON, Nov. 14 /PRNewswire-FirstCall/ -- Service Corporation
International (NYSE: SCI), which owns and operates funeral service locations and
cemeteries, today reported for the third quarter of 2005 a net loss of $9.6
million or a net loss of $.03 per diluted share compared to net income of $13.9
million or $.04 per diluted share in the same period of 2004. The decrease in
2005 primarily relates to a pretax loss on dispositions of property of $27.4
million or $.07 per diluted share. These results in both periods were also
impacted by litigation expenses, other losses on dispositions, and discontinued
operations.
SCI's third quarter earnings from continuing operations excluding special
items were $11.1 million, or $.04 per diluted share. This compares to earnings
of $20.0 million, or $.06 per diluted share in the third quarter of 2004. In the
third quarter of 2005, results were negatively impacted by $.01 per diluted
share due to the Company's 2005 change in accounting to expense direct preneed
selling costs as they are incurred. Earnings from continuing operations
excluding special items is a non-GAAP financial measure. See a reconciliation of
diluted earnings from continuing operations before special items to GAAP
measures included in a separate section later in this press release.
Free cash flow was $47.2 million for the third quarter of 2005 and $46.1
million for the same period of 2004. For the nine months ended September 30,
2005 and 2004, free cash flow was $194.1 million and $166.8 million,
respectively, an increase of $27.3 million. Free cash flow is a non-GAAP
financial measure. See our definition and calculation of free cash flow and
reconciliation to cash flow from operations included in a separate section later
in this press release. At September 30, 2005, total debt was $1.26 billion and
cash on hand was $492.1 million. Total debt less cash and cash equivalents has
decreased by $197.4 million from December 31, 2004. There were no significant
debt repayments during the third quarter of 2005.
For the nine months ended September 30, 2005, the Company reported a net
loss of $150.9 million or $.49 per diluted share related primarily to the
Company's accounting change for expensing direct preneed selling costs in the
period incurred. SCI's earnings from continuing operations excluding special
items were $65.8 million or $.21 per diluted share for the first nine months of
2005 compared to $81.8 million or $.25 per diluted share in the prior period.
Earnings from continuing operations excluding special items in the nine months
ended September 30, 2005 were negatively impacted by $.03 per diluted share as a
result of the Company's 2005 change in accounting to expense direct preneed
selling costs as they are incurred.
"We are pleased with our continuing ability to deliver strong cash flows,"
said Tom Ryan, President and Chief Executive Officer. "Our cash on hand at the
end of the third quarter exceeded $490 million, which included the proceeds from
the sale of our cemetery operations in Chile in September 2005. Operating
margins were below expectations for the quarter as increasing costs associated
with energy, health care, pension and Sarbanes-Oxley more than offset the
positive impact of continued strong funeral case volume and strong cemetery
sales production. I believe the Company is poised to grow from the solid
foundation we have established. We expect to finish the year strong by
delivering a solid operating performance in the last quarter of 2005."
North America Comparable Operating Results
We regard comparable results of operations as analogous to our "same store"
results of operations. For purposes of the following presentation, we consider
comparable operations as operations that were not acquired or constructed after
January 1, 2004 or divested prior to September 30, 2005. Therefore, in the
following presentation, we are providing results of operations for the same
funeral and cemetery locations in each of the periods presented. We believe this
presentation provides greater clarity for comparison purposes of our results of
operations for each of the periods presented.
Effective January 1, 2005, we began expensing direct preneed selling costs
in the period incurred. For a better comparison, comparable results of
operations from 2004 are presented below on a pro forma basis as if $0.9 million
of additional direct selling costs in our funeral segment and $4.1 million of
additional direct selling costs in our cemetery segment were expensed during the
third quarter of 2004, and as if $3.6 million of additional direct selling costs
in our funeral segment and $12.7 million of additional direct selling costs in
our cemetery segment were expensed during the nine month period ended September
30, 2004.
(In millions, except funeral services Three Months Nine Months
performed, average revenue per funeral Ended Ended
service and gross margin percentage) September 30, September 30,
---------------------------- ----------------------------
Pro forma Pro forma
2005 2004 2005 2004
------------ ------------ ------------ ------------
(Restated) (Restated)
Funeral
Funeral atneed revenue $ 165.4 $ 164.8 $ 540.6 $ 523.0
Funeral recognized preneed revenue 79.6 79.9 258.0 256.9
General agency revenue (A) 6.9 7.0 21.0 22.7
Kenyon revenue (B) 5.6 0.5 19.0 3.0
------------ ------------ ------------ ------------
Total funeral revenues $ 257.5 $ 252.2 $ 838.6 $ 805.6
Gross profits $ 36.4 $ 42.8 $ 163.4 $ 162.4
Gross margin percentage 14.1% 17.0% 19.5% 20.2%
Total funeral services performed 56,519 56,494 183,849 182,075
Average revenue per funeral service (C) $ 4,335 $ 4,331 $ 4,344 $ 4,283
Cemetery
Cemetery atneed revenue $ 50.5 $ 41.1 $ 155.2 $ 131.6
Cemetery recognized preneed revenue 71.7 64.2 204.8 225.2
Other revenue (D) 20.7 22.3 55.6 58.0
------------ ------------ ------------ ------------
Total cemetery revenues $ 142.9 $ 127.6 $ 415.6 $ 414.8
Gross profits $ 22.8 $ 19.7 $ 63.4 $ 60.2
Gross margin percentage 16.0% 15.4% 15.3% 14.5%
(A) General Agency ("GA") revenue is commissions we receive from third-
party insurance companies when customers purchase insurance contracts
from such third-party insurance companies to fund funeral services and
merchandise at a future date.
(B) Kenyon International Emergency Services ("Kenyon") is our disaster
response subsidiary that engages in mass fatality and emergency
response services. Revenues and gross profits associated with Kenyon
are subject to significant variation due to the nature of their
operations.
(C) Average revenue per funeral service is calculated as total funeral
revenues (less GA revenue and Kenyon revenue) divided by total funeral
services performed. In the calculation of average revenue per funeral
service, GA revenue and Kenyon revenue are excluded from total funeral
revenues to avoid distorting our averages of normal funeral services
performed.
(D) 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.
For the Three Months Ended September 30, 2005
* North America comparable funeral gross profits decreased $6.4 million
to $36.4 million.
- Funeral revenues were up $5.3 million primarily due to an
increase of $5.1 million in revenues from Kenyon.
- The decrease in funeral gross profit is primarily due to
inflationary increases in the cost of merchandise; an increase in
vehicle and utility costs, which were impacted by rising fuel
prices; and higher salaries and fringes due to inflationary
increases and higher health and pension costs. The decreases in
gross profit were partially offset by an increase in Kenyon gross
profit of $2.9 million in the third quarter of 2005 compared to
2004.
- The average revenue per funeral service and the number of funeral
services performed were flat in the third quarter of 2005
compared to the prior year period. The average revenue per
funeral service fell below expectations during the third quarter
of 2005 as a result of higher than expected discounts to
consumers at the local level and a higher than expected mix of
cremation consumers during the third quarter of 2005.
- The cremation rate increased 140 basis points to 40.9% in the
third quarter of 2005 compared to 2004. The first and second
quarter of 2005 had cremation rate increases of 60 and 80 basis
points, respectively.
* North America comparable cemetery gross profits increased 15.7% to
$22.8 million.
- Cemetery revenue increased $15.3 million from the third quarter
of 2004 primarily due to an increase in preneed and atneed sales
production combined with an increase in legacy revenues
associated with constructed cemetery property.
- Cemetery gross profits increased $3.1 million from the third
quarter of 2004. The increase in revenues described above was
partially offset by inflationary increases in the cost of
merchandise, increases in maintenance expense and higher fringe
expenses, which were primarily health and pension costs.
Other Consolidated Results
* General and administrative expenses were $19.8 million in the three
months ended September 30, 2005 compared to $25.3 million in the same
period of 2004.
- In the third quarter of 2004, we recognized $8.3 million in legal
expense (net of insurance recoveries) associated with the
settlement of outstanding litigation matters.
- Excluding the $8.3 million of 2004 litigation expense, general
and administrative expenses were $19.8 million in 2005 compared
to $17.0 million in the same period of 2004. This increase is
primarily related to increased professional fees associated with
Sarbanes-Oxley compliance and external audit fees. During 2005,
we have spent a significant amount of money to improve internal
controls to comply with Section 404 of the Sarbanes Oxley Act. We
believe that these improvements will continue to increase the
effectiveness of the organization.
* Gains and impairment (losses) on dispositions, net was a net loss of
$27.4 million in the third quarter of 2005 compared to a net loss of
$3.3 million in the same period of 2004. The net losses in the third
quarters of 2005 and 2004 are primarily associated with losses on
dispositions of underperforming funeral homes and cemeteries in North
America. Included in the 2005 net loss was a loss of approximately
$30.0 million related to the disposition of properties to StoneMor LP
in November 2005.
* Interest expense was $0.8 million lower in the third quarter of 2005
compared to the third quarter of 2004 primarily due to the additional
reduction of debt during 2005.
* Other income (expense), net was relatively flat in the third quarter
of 2005 compared to the same period of 2004. The components of other
income for the periods presented were as follows:
- Interest income on notes receivable and commercial paper was $3.3
million and $1.1 million in the third quarter of 2005 and 2004,
respectively.
- Cash overrides received from a third party insurance provider
related to the sale of insurance funded preneed funeral contracts
were $1.5 million in the third quarter of 2005 compared to $1.6
million in the third quarter of 2004.
- Surety bond premium costs were $1.0 million in the third quarter
of 2005 compared to $1.1 million in the third quarter of 2004.
- The remaining income of $0.6 million in the third quarter of 2005
and $2.7 million in the third quarter of 2004 is primarily
related to net gains from foreign currency transactions.
* The consolidated effective tax rate in the third quarter of 2005 was a
benefit of 11.0% compared to a provision of 25.0% in the third quarter
of 2004. The tax benefit in 2005 was negatively impacted by increases
in tax expense resulting from permanent differences between the book
and tax bases of North America asset dispositions.
For the Nine Months Ended September 30, 2005
* North America comparable funeral gross profits increased 0.6% to
$163.4 million.
- Funeral revenues were up $33.0 million (including an increase of
$16.0 million in revenues from Kenyon) due to increases in
funeral volume and average revenue per funeral service partially
offset by a decline in GA revenues.
- The increase in funeral gross profits was a result of increases
in the revenues described above, reductions in overhead expenses,
and an increase in gross profits from Kenyon of $2.6 million,
which were partially offset by inflationary increases in
merchandise costs, higher salary and fringe expenses (primarily
health care and pension costs), and increases related to our
trust reconciliation project and Sarbanes-Oxley compliance.
- The number of funeral services performed increased 1.0% in the
first nine months of 2005.
- Average revenue per funeral service was up 1.4% compared to the
prior year period.
- The cremation rate increased 110 basis points to 40.4% in the
nine months ended September 30, 2005.
* North America comparable cemetery gross profits increased $3.2 million
to $63.4 million.
- Cemetery revenue increased $0.8 million from 2004 primarily due
to an increase in operating atneed revenues and trust fund
income, partially offset by a decline in interest on trade
receivables.
- The increase in cemetery gross profits is primarily due to the
increase in revenues described above and decreases in maintenance
and overhead expenses. These improvements were partially offset
by inflationary increases in the cost of merchandise, higher
salary and fringe expenses (primarily health care and pension
costs), increases in vehicle and utility costs (primarily driven
by higher fuel prices), and increases in auto lease expense
driven by higher variable interest rates.
Other Consolidated Results
* General and administrative expenses were $62.0 million in the nine
months ended September 30, 2005 compared to $100.3 million in the same
period of 2004.
- In the first nine months of 2004, we recognized $48.3 million in
expense associated with the settlement of outstanding litigation
matters including $35.0 million related to a securities class
action lawsuit.
- Excluding the $48.3 million of 2004 litigation expense, general
and administrative expenses were $62.0 million in 2005 compared
to $52.0 million in the same period of 2004. This increase is
primarily related to increased professional fees associated with
Sarbanes-Oxley compliance, external audit fees, and costs
associated with our funeral and cemetery verification projects.
- General and administrative expenses were approximately $3.0
million above our expectations for the first nine months of 2005
primarily related to an increase in professional fees associated
with Sarbanes-Oxley compliance, external audit fees, and costs
associated with our funeral and cemetery trust reconciliation and
verification projects, partially offset by returns on the
Company's cash surrender value of officers' life insurance.
* Gains and impairment (losses) on dispositions, net was a net loss of
$28.7 million in the first nine months of 2005 compared to a net gain
of $33.0 million in the same period of 2004. The net loss in 2005 is
primarily associated with losses on the dispositions of
underperforming funeral and cemetery businesses in North America
partially offset by the resolution of a contingency associated with
the sale of our operations in the United Kingdom. Included in the 2005
net loss amount was a loss of approximately $30.0 million related to
the disposition of properties to StoneMor LP in November 2005. The
2004 net gain includes a gain on the sale of our equity and debt
holdings in the United Kingdom and a gain on the sale of our funeral
operations in France partially offset by net losses associated with
various dispositions in North America.
* Interest expense was $14.8 million lower in the first nine months of
2005 compared to the same period of 2004 primarily due to the
additional reduction of debt during 2005.
* Other income (expense), net decreased by $1.5 million of income in the
first nine months of 2005 compared to the same period of 2004. The
components of other income for the periods presented were as follows:
- Interest income was $11.2 million and $9.6 million in the first
nine months of 2005 and 2004, respectively. Included in 2005 was
$1.9 million of interest income on preferred equity certificates
from our former funeral operations in France. The first half of
2004 included the receipt of $4.5 million of interest income
related to a note receivable collected from our former United
Kingdom company.
- Cash overrides received from a third party insurance provider
related to the sale of insurance funded preneed funeral contracts
were $4.7 million in the first nine months of 2005 compared to
$4.9 million in 2004.
- Surety bond premium costs were $3.0 million in 2005 compared to
$3.4 million in 2004.
- The remaining expense of $1.1 million in 2005 and income of $2.2
million in 2004 are primarily related to net losses and gains
from foreign currency transactions, respectively.
* The consolidated effective tax rate in the first nine months of 2005
was a provision of 43.7% compared to a benefit of 7.8% in the same
period of 2004. The tax rate in the first nine months of 2005 was
negatively impacted by permanent differences between the book and tax
bases of North America asset dispositions. The tax rate in the first
nine months of 2004 was favorably impacted by non-cash tax benefits
realized from the disposition of our funeral operations in France and
the United Kingdom. The tax benefits from dispositions result from
differences between the book and tax bases and the reversal of tax
liabilities that were then recorded as warranty indemnification
liabilities.
Free Cash Flow
Free cash flow is a non-GAAP financial measure. We define free cash flow as
cash flows from operating activities (excluding certain special items such as
payments associated with the settlement of litigation matters, premiums paid on
early extinguishments of debt, tax refunds, or contributions to our frozen cash
balance pension plan) less capital improvements at our existing facilities. We
define capital improvements at existing facilities as capital improvements
deemed reasonably necessary to maintain our existing facilities in a condition
consistent with Company standards and to extend their useful lives. Free cash
flow is not reduced by mandatory debt service requirements or by growth-oriented
capital expenditures. We define growth-oriented capital expenditures as 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 (such as private family
estates) or the construction of funeral home facilities on Company-owned
cemeteries, and the investment in contemporary merchandising displays in our
funeral homes.
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, growing our business through
strategic investments and repurchasing stock or paying dividends. 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
information provided in our consolidated statement of cash flows.
The following table provides a reconciliation between cash flows from
operating activities and free cash flow, as defined.
(In millions) Three Months Nine Months
Ended Ended
September 30, September 30,
------------------- -------------------
2005 2004 2005 2004
-------- -------- -------- --------
Cash Flows from Operating Activities $ 68.0 $ 50.2 $ 258.4 $ 169.4
Less: Unusual Tax Refund -- -- (29.0) --
Add: Premiums paid on early
extinguishments of debt -- -- 12.2 13.8
Cash Balance Pension Plan Contribution -- -- -- 20.0
Repayment of an insurance policy loan
and other -- 10.7 -- 10.7
-------- -------- -------- --------
Adjusted Cash Flows
from Operating Activities $ 68.0 $ 60.9 $ 241.6 $ 213.9
Less: Capital Improvements
to Maintain Existing Facilities 20.8 14.8 47.5 47.1
-------- -------- -------- --------
Free Cash Flow $ 47.2 $ 46.1 $ 194.1 $ 166.8
======== ======== ======== ========
Adjusted cash flows from operating activities increased by $7.1 million in
the third quarter of 2005 compared to the third quarter of 2004. In the third
quarter of 2005, cash flow from operating activities was positively impacted by
increases in net trust fund withdrawals and less cash interest paid.
Improvements in cash flows from operating activities resulting from our working
capital initiatives were offset by cash outflows associated with the Company
funding employee matches to our 401(k) plan using cash in 2005.
For the three months ended September 30, 2005 and 2004, total capital
expenditures were $28.3 million and $26.2 million, respectively. Included in
total capital expenditures were capital improvements deemed reasonably necessary
to maintain our existing facilities of $20.8 million and $14.8 million for the
third quarter of 2005 and 2004, respectively. Growth- oriented capital spending
was $7.5 million in the third quarter of 2005 compared to $11.4 million in the
third quarter of 2004. Included in the $7.5 million of growth-oriented capital
expenditures incurred in the third quarter of 2005 was $5.0 million related to
new construction of funeral home facilities, $1.6 million of construction of new
high-end cemetery property, and $0.9 million associated with Dignity Memorial(R)
merchandising displays.
Share Repurchase Program
As of September 30, 2005, we had total authorization to repurchase $400
million of our common stock. As of today, we have repurchased 45.3 million
shares at a total cost of $314.8 million under these programs. The remaining
dollar value of shares that may be purchased under our currently authorized
share repurchase programs is $85.2 million. Our total shares outstanding were
approximately 296.6 million as of November 8, 2005.
We have made and intend to make purchases from time to time in the open
market or through privately negotiated transactions, subject to acceptable
market conditions and normal trading restrictions. There can be no assurance
that we will buy our common stock under our share repurchase programs.
Important factors that could cause us not to repurchase our shares include,
among others, 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.
NON-GAAP FINANCIAL MEASURES
Earnings from Continuing Operations Excluding Special Items
Earnings from continuing operations excluding special items is a non-GAAP
financial measure. We believe this non-GAAP financial measure provides a
consistent basis for comparison between quarters and better reflects the
performance of our core operations, as it is not influenced by certain income
and expenses not affecting continuing operations. We also believe this measure
helps 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. We do not intend for the
information to be considered in isolation or as a substitute for measures of
performance prepared in accordance with GAAP. See the Company's 2004 Form 10-K,
as amended, for details related to these adjustments.
Results in the three and nine months ended September 30, 2005, were
negatively impacted by $.01 per diluted share and $.03 per diluted share,
respectively, as a result of the Company's change in accounting to expense
direct preneed selling costs as they are incurred.
Three Months Ended
---------------------------------------------------------
(In millions, except diluted EPS) September 30, September 30,
2005 2004
--------------------------- ---------------------------
(As Restated)
Net
(Loss) Diluted Net Diluted
Income EPS Income EPS
------------ ------------ ------------ ------------
Net (loss) income reported $ (9.6) $ (.03) $ 13.9 $ .04
Settlement of significant
legal matters -- -- 5.2 .02
(Gains) and impairment losses
on dispositions, net 20.2 .07 1.8 --
Discontinued operations 0.5 -- (0.9) --
------------ ------------ ------------ ------------
Earnings from continuing
operations excluding
special items $ 11.1 $ .04 $ 20.0 $ .06
============ ============ ============ ============
Diluted weighted average shares
outstanding (in thousands) 297,421 340,215
Interest add back $ -- $ --
Nine Months Ended
---------------------------------------------------------
(In millions, except diluted EPS) September 30, September 30,
2005 2004
--------------------------- ---------------------------
(As Restated)
Net
(Loss) Diluted Net Diluted
Income EPS Income EPS
------------ ------------ ------------ ------------
Net (loss) income reported $ (150.9) $ (.49) $ 87.0 $ .27
Settlement of significant legal matters -- -- 30.6 .09
(Gains) and impairment losses
on dispositions, net 23.7 .07 (58.5) (.17)
Loss on early extinguishment of debt 9.3 .03 10.5 .03
Other income/expense, net Interest
income - United Kingdom note receivable -- -- (2.7) (.01)
Foreign currency transaction loss -- -- 2.3 .01
Discontinued operations (3.8) (.01) (35.0) (.10)
Cumulative effect of accounting changes 187.5 .61 47.6 .13
------------ ------------ ------------ ------------
Earnings from continuing operations
excluding special items $ 65.8 $ .21 $ 81.8 $ .25
============ ============ ============ ============
Diluted weighted average shares
outstanding (in thousands) 308,807 348,894
Interest add back $ -- $ 6.4
Conference Call and Webcast
We will host a conference call on Tuesday, November 15, 2005, at 9:00 a.m.
central time. A question and answer session will follow a brief presentation
made by management. The conference call dial-in number is (785) 832-0326. 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 November 29, 2005 and can be accessed at (719)
457-0820 with the confirmation code of 4218134. 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 Investor Relations page under the subheading
"News" at http://www.sci-corp.com/InvestorsMenu.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, 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 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 our established reserves.
* 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 successfully implement our strategic plan related to
producing operating improvements and strong cash flows.
* 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 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 demographic or
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
projects, particularly related to the implementation of new processes
and internal controls.
* 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.
* The possibility that the Company will identify and report additional
material weaknesses in its internal control over financial reporting.
* The effectiveness of our internal controls over financial reporting,
and our ability to certify the effectiveness of the internal controls
and to obtain a favorable attestation report of our auditors regarding
our assessment of our internal controls.
For further information on these and other risks and uncertainties, see our
Securities and Exchange Commission filings, including our 2004 Annual Report on
Form 10-K/A (Amendment No. 2). 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: SCI), headquartered in Houston,
Texas, owns and operates funeral service locations and cemeteries. We have an
extensive network of businesses including 1,093 funeral service locations and
380 cemeteries in North America as of September 30, 2005. For more information
about Service Corporation International, please visit our website at
http://www.sci-corp.com .
SERVICE CORPORATION INTERNATIONAL
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(In thousands, except per share amounts)
Three months ended Nine months ended
September 30, September 30,
-------------------------- --------------------------
2005 2004 2005 2004
----------- ----------- ----------- -----------
(Restated) (Restated)
Revenues:
Funeral $ 262,665 $ 266,704 $ 866,573 $ 980,716
Cemetery 143,704 130,482 418,948 423,881
----------- ----------- ----------- -----------
406,369 397,186 1,285,521 1,404,597
Gross profit:
Funeral 35,544 44,716 165,243 181,584
Cemetery 22,731 23,579 62,602 72,729
----------- ----------- ----------- -----------
58,275 68,295 227,845 254,313
General and
administrative
expenses (19,753) (25,298) (61,963) (100,347)
Gains and impairment
(losses) on
dispositions, net (27,446) (3,281) (28,659) 33,021
----------- ----------- ----------- -----------
Operating income 11,076 39,716 137,223 186,987
Interest expense (25,821) (26,609) (76,352) (91,110)
Loss on early
extinguishment of debt -- -- (14,258) (16,770)
Other income, net 4,443 4,255 11,756 13,265
----------- ----------- ----------- -----------
(21,378) (22,354) (78,854) (94,615)
----------- ----------- ----------- -----------
(Loss) income from continuing
operations before income taxes
and cumulative effects of accounting
changes (10,302) 17,362 58,369 92,372
(Benefit) provision for income taxes (1,131) 4,336 25,531 (7,177)
----------- ----------- ----------- -----------
(Loss) income from continuing
operations before cumulative effects
of accounting changes (9,171) 13,026 32,838 99,549
(Loss) income from discontinued
operations (net of income tax
provision (benefit) of
$2,606, $623, $4,587, and
$(47,502), respectively) (463) 850 3,825 34,971
Cumulative effects of
accounting changes (net
of income tax benefit of
$117,428 and $20,983,
respectively) -- -- (187,538) (47,556)
----------- ----------- ----------- -----------
Net (loss) income $ (9,634) $ 13,876 $ (150,875) $ 86,964
=========== =========== =========== ===========
Basic (loss) earnings
per share:
(Loss) income from continuing
operations before cumulative
effects of accounting
changes $ (.03) $ .04 $ .11 $ .32
Income from discontinued
operations, net of tax -- -- .01 .11
Cumulative effects of
accounting changes,
net of tax -- -- (.62) (.15)
----------- ----------- ----------- -----------
Net (loss) income $ (.03) $ .04 $ (.50) $ .28
=========== =========== =========== ===========
Diluted (loss) earnings
per share:
(Loss) income from continuing
operations before cumulative
effects of accounting changes $ (.03) $ .04 $ .11 $ .30
Income from discontinued
operations, net of tax -- -- .01 .10
Cumulative effects of
accounting changes,
net of tax -- -- (.61) (.13)
----------- ----------- ----------- -----------
Net (loss) income $ (.03) $ .04 $ (.49) $ .27
=========== =========== =========== ===========
Basic weighted average
number of shares 297,421 336,590 304,366 315,656
=========== =========== =========== ===========
Diluted weighted average
number of shares 297,421 340,215 308,807 348,894
=========== =========== =========== ===========
Dividends declared
per share $ .025 -- $ .075 --
=========== =========== =========== ===========
SERVICE CORPORATION INTERNATIONAL
CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(In thousands, except share amounts)
September 30, December 31,
2005 2004
------------- -------------
(Restated)
Assets
Current assets:
Cash and cash equivalents $ 492,059 $ 287,785
Receivables, net 82,306 102,622
Inventories 66,158 81,526
Current assets held for sale 12,959 --
Current assets of discontinued operations -- 11,085
Other 52,176 50,945
------------- -------------
Total current assets 705,658 533,963
------------- -------------
Preneed funeral receivables
and trust investments 1,238,123 1,267,784
Preneed cemetery receivables
and trust investments 1,295,352 1,399,778
Cemetery property, at cost 1,376,817 1,509,599
Property and equipment, at cost, net 947,024 970,547
Non-current assets held for sale 49,774 --
Non-current assets of discontinued operations -- 4,367
Deferred charges and other assets 247,327 621,561
Goodwill 1,140,509 1,169,040
Cemetery perpetual care trust investments 701,382 729,048
------------- -------------
$ 7,701,966 $ 8,205,687
============= =============
Liabilities & Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 234,281 $ 221,877
Current maturities of long-term debt 88,272 75,075
Current liabilities of discontinued operations -- 7,111
Income taxes 690 7,850
------------- -------------
Total current liabilities 323,243 311,913
------------- -------------
Long-term debt 1,172,513 1,178,885
Deferred preneed funeral revenues 516,158 498,571
Deferred preneed cemetery revenues 789,143 803,144
Deferred income taxes 174,053 276,572
Non-current liabilities held for sale 49,985 --
Non-current liabilities of discontinued operations -- 58,225
Other liabilities 381,346 431,917
Non-controlling interest in funeral
and cemetery trusts 2,015,314 2,092,881
Non-controlling interest
in perpetual care trusts 680,088 704,912
Stockholders' equity:
Common stock, $1 per share par value,
500,000,000 shares authorized,
298,148,297 and 323,225,352, issued
and outstanding (net of 44,917,591
and 18,502,478 treasury shares, at par) 298,148 323,225
Capital in excess of par value 2,216,952 2,395,057
Unearned compensation (4,153) (2,022)
Accumulated deficit (980,119) (829,244)
Accumulated other comprehensive income (loss) 69,295 (38,349)
------------- -------------
Total stockholders' equity 1,600,123 1,848,667
------------- -------------
$ 7,701,966 $ 8,205,687
============= =============
SERVICE CORPORATION INTERNATIONAL
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
(In thousands)
Nine months ended
September 30,
------------------------------
2005 2004
------------- -------------
(Restated)
Cash flows from operating activities:
Net (loss) income $ (150,875) $ 86,964
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Net income from discontinued operations (3,825) (34,971)
Loss on early extinguishments of debt 14,258 16,770
Premiums paid on early extinguishments of debt (12,186) (13,817)
Cumulative effects of accounting changes,
net of tax 187,538 47,556
Depreciation and amortization 64,795 103,882
Provision (benefit) for deferred income taxes 23,871 (9,230)
(Gains) and impairment losses
on dispositions, net 28,659 (33,021)
Other non-cash adjustments -- 667
Change in assets and liabilities, net of effects from
acquisitions and dispositions:
Decrease in receivables 24,912 25,464
Decrease in other assets 33,344 2,106
Increase in payables and other liabilities 9,767 21,049
Net effect of preneed funeral production
and maturities (3,797) (20,838)
Net effect of cemetery production and deliveries 46,932 (18,112)
Other 337 318
------------- -------------
Net cash provided by operating activities
from continuing operations 263,730 174,787
Net cash used in operating activities
from discontinued operations (5,344) (5,378)
------------- -------------
Net cash provided by operating activities 258,386 169,409
Cash flows from investing activities:
Capital expenditures (72,241) (67,495)
Proceeds from divestitures and sales
of property and equipment 58,122 30,326
Proceeds and distributions from dispositions
of businesses, net of cash retained 112,018 330,789
Proceeds from equity investments 39,674 --
Payment of purchase obligation
to former owners of acquired businesses -- (51,749)
Indemnity payments related to the disposition
of former funeral operations (1,834) --
Net withdrawals (deposits) of restricted funds
and other 13,944 (120,903)
------------- -------------
Net cash provided by investing activities
from continuing operations 149,683 120,968
Net cash used in investing activities
from discontinued operations (212) (132)
------------- -------------
Net cash provided by investing activities 149,471 120,836
Cash flows from financing activities:
Proceeds from issuance of long-term debt 291,472 241,237
Payments of debt (8,058) (124,752)
Early extinguishments of debt (286,215) (299,961)
Proceeds from exercise of stock options 5,145 6,040
Purchase of Company common stock (191,221) (34,812)
Payments of dividends (15,184) --
Purchase of subsidiary stock (844) --
------------- -------------
Net cash used in financing activities (204,905) (212,248)
Effect of foreign currency 1,322 617
------------- -------------
Net increase in cash and cash equivalents 204,274 78,614
Cash and cash equivalents at beginning of period 287,785 239,431
------------- -------------
Cash and cash equivalents at end of period $ 492,059 $ 318,045
============= =============
SOURCE Service Corporation International
-0- 11/14/2005
/CONTACT: investors, Debbie Young, Director - Investor Relations,
+1-713-525-9088, or media, Terry Hemeyer, Managing Director - Corporate
Communications, +1-713-525-5497, both of Service Corporation International/
/Web site: http://www.sci-corp.com
http://www.sci-corp.com/ConfCalls.html
http://www.sci-corp.com/InvestorsMenu.html /