Exhibit 99.1
SERVICE CORPORATION INTERNATIONAL REPORTS OPERATING CASH FLOWS AHEAD OF
EXPECTATIONS, A FISCAL YEAR LOSS OF $(.41) PER DILUTED SHARE, AND EARNINGS OF
$.28 PER DILUTED SHARE BEFORE SPECIAL ITEMS
REPORTS NO MATERIAL WEAKNESSES IN INTERNAL CONTROLS FOR 2005
- Conference Call to Be Webcast on Friday, March 3, 2006, at 10:00 a.m.
Central Time
HOUSTON, March 2 /PRNewswire-FirstCall/ -- Service Corporation International
(NYSE: SCI), which owns and operates funeral service locations and cemeteries,
today reported net income for the fourth quarter of 2005 of $24.1 million or
$.08 per diluted share compared to net income of $27.2 million or $.08 per
diluted share in the same period of 2004. For the year ended December 31, 2005,
the Company reported a net loss of $(126.7) million or $(.41) per diluted share
compared to net income of $114.1 million or $.35 per diluted share in the same
period of 2004. The loss reported in 2005 primarily relates to a cumulative
effect of an accounting change of $187.5 million net of tax, attributable to the
Company's change in accounting in 2005 to expense direct preneed selling costs
as they are incurred. The results in both 2005 and 2004 included special items
such as litigation expenses, losses on dispositions, discontinued operations and
cumulative effects of accounting changes.
SCI's fourth quarter diluted earnings from continuing operations excluding
special items were $20.9 million, or $.07 per share compared to earnings from
continuing operations excluding special items of $26.4 million, or $.08 per
diluted share in the fourth quarter of 2004. For the year ended December 31,
2005, SCI's earnings from continuing operations excluding special items were
$86.8 million or $.28 per diluted share ($.30 including income from our
discontinued Chilean operations) compared to $105.0 million or $.32 per diluted
share in the prior period. Earnings from continuing operations excluding special
items for the year ended December 31, 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. Earnings from continuing
operations excluding special items is a non-GAAP financial measure. See a
reconciliation of diluted earnings from continuing operations excluding special
items to GAAP measures included in a separate section later in this press
release.
Free cash flow was $33.3 million for the fourth quarter of 2005 and $227.4
million for the year ended December 31, 2005. Free cash flow for the full year
exceeded prior year results by $21.6 million. Free cash flow is a non- GAAP
financial measure. See our definition and calculation of free cash flow and our
reconciliation to cash flow from operations included in a separate section later
in this press release. At December 31, 2005, total debt was $1.20 billion and
cash on hand was $446.8 million. Total debt less cash and cash equivalents (or
net debt) decreased by $230.2 million (23.5%) during 2005.
Commenting on 2005 operating results, Tom Ryan, President and Chief
Executive Officer said: "2005 was a year of hard work for us and we believe a
significant turning point for SCI. The dedication, commitment, and execution of
the entire organization has helped lead the Company to produce both strong
operating and financial results. Comparable North America funeral revenue
exceeded our expectations for 2005 primarily due to solid increases in volume
and sales average. Our cemetery operating revenues fell within the range of our
annual guidance. Both the funeral and cemetery gross margins finished within our
annual guidance despite increases in energy, health care, and pension costs. The
Company also saw an increase in SOX 404 costs; however, these costs have
contributed to the successful remediation of all material weaknesses previously
reported by the Company."
"Our operating cash flow also finished the year strong and exceeded our
expectations. In 2005 we generated free cash flow that exceeded the high end of
our annual guidance by $7.4 million. Net debt decreased substantially in 2005
and our cash on hand at December 31, 2005 exceeded $445 million. Honoring our
commitment to our shareholders, our strong financial position allowed us to
increase shareholder value in 2005 by the continuation and the expansion of our
share repurchase program and the initiation of quarterly dividends."
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 December 31, 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, the Company 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
$4.7 million of additional direct selling costs in our funeral segment and $9.5
million of additional direct selling costs in our cemetery segment were expensed
during the year ended December 31, 2004.
Three Months Ended For the Year Ended
(In millions, except funeral December 31, December 31,
services performed, average revenue ---------------------- ----------------------
per funeral service and gross Pro forma Pro forma
margin percentage) 2005 2004 2005 2004
- ------------------------------------ -------- ---------- -------- ----------
Funeral
Funeral atneed revenue $ 180.6 $ 170.8 $ 709.9 $ 682.1
Funeral recognized preneed revenue 90.2 82.9 343.2 334.3
General agency revenue (A) 6.9 5.5 27.6 27.8
Kenyon revenue (B) 4.8 0.4 23.9 3.4
-------- ---------- -------- ----------
Total funeral revenues $ 282.5 $ 259.6 $1,104.6 $ 1,047.6
Gross profits $ 52.7 $ 42.5 $ 213.3 $ 201.7
Gross margin percentage 18.7% 16.4% 19.3% 19.3%
Total funeral services performed 59,614 58,552 238,813 235,467
Average revenue per funeral
service (C) $ 4,542 $ 4,333 $ 4,410 $ 4,316
Cemetery
Cemetery atneed revenue $ 51.9 $ 42.5 $ 203.4 $ 170.9
Cemetery recognized preneed revenue 71.6 79.6 273.5 301.6
Other revenue (D) 16.4 20.9 71.1 77.8
-------- ---------- -------- ----------
Total cemetery revenues $ 139.9 $ 143.0 $ 548.0 $ 550.3
Gross profits $ 19.9 $ 33.2 $ 83.6 $ 93.5
Gross margin percentage 14.2% 23.2% 15.3% 17.0%
(A) General Agency ("GA") revenue represents 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) GA revenue and Kenyon revenue are excluded from the calculation of average
revenue to avoid distorting our averages of normal funeral services
performed.
(D) Other cemetery revenue is primarily related to merchandise, service, and
endowment care trust fund income and interest and finance charges earned
from customer receivables on preneed installments contracts.
For the Three Months Ended December 31, 2005
* Funeral
-- Funeral revenues grew $22.9 million primarily due to increases in
comparable funeral volume and sales average. Included in the $22.9
million is an increase in Kenyon revenues of $4.4 million over the
prior year quarter due to its involvement in the hurricane disasters
along the gulf coast region.
-- The average revenue per funeral service increased $209 (4.8%) over
the prior year quarter due in part to a price increase consistent
with inflation; favorable results from the Company's initiative to
strategically realign pricing from products to service offerings; and
higher trust fund income.
-- The number of funeral services performed increased 1,062 (1.8%) over
the prior year period.
-- Funeral gross profit increased $10.2 million (24.0%) over the prior
year period. The increase in funeral revenues described above was
partially offset by higher salaries and fringes resulting from
inflationary increases and higher health and pension costs; higher
professional fees associated with Sarbanes- Oxley compliance; and
higher incentive compensation. Kenyon's gross loss increased by $1.0
million in the fourth quarter of 2005 compared to 2004.
-- The cremation rate increased 190 basis points to 40.9% in the fourth
quarter of 2005 compared to 2004. The first, second and third quarter
of 2005 had cremation rate increases of 60, 80, and 140 basis points,
respectively, over prior year periods.
* Cemetery
-- Cemetery revenue decreased $3.1 million from the fourth quarter of
2004 primarily due to a decrease in legacy revenues associated with
constructed cemetery property of $6.7 million. The decrease in legacy
revenues was partially offset by higher atneed revenues coupled with
a favorable sales production shift to developed cemetery property
resulting from our initiative to shorten the time between when the
property is sold and when it is constructed.
-- Cemetery gross profits decreased $13.3 million from the fourth
quarter of 2004. The decrease in revenues described above was coupled
with higher salary and fringe expenses (primarily health and pension
costs); costs related to hurricane damage in the latter part of the
year; and higher professional fees associated with Sarbanes-Oxley
compliance.
Other Consolidated Results
* General and administrative expenses were $22.8 million in the three
months ended December 31, 2005 compared to $30.5 million in the same
period of 2004.
-- In the fourth quarter of 2004, we recognized $12.8 million in legal
expense (net of insurance recoveries) associated with the settlement
of outstanding litigation matters.
-- Excluding the $12.8 million of 2004 litigation expense, general and
administrative expenses were $22.8 million in the fourth quarter of
2005 compared to $17.7 million in the same period of 2004. This
increase is primarily related to higher incentive compensation
(resulting from strong quarterly operating and cash flow results); an
increase in salary and fringes (primarily health and pension costs);
and increased professional fees associated with Sarbanes-Oxley
compliance, external audit fees, and other various professional fees.
During 2005, we incurred significant expenses to improve internal
controls to comply with Section 404 of the Sarbanes-Oxley Act. We
believe that these improvements have measurably increased the
effectiveness of the organization.
* Interest income on notes receivable and commercial paper was $5.5 million
and $3.8 million in the fourth quarter of 2005 and 2004, respectively.
The increase in 2005 was due to an increase in our cash balance and
higher interest rates.
* Other income (expense), net was $2.2 million in the fourth quarter of
2005 compared to $6.1 million in the same period of 2004. The components
of other income for the periods presented were as follows:
-- Cash overrides received from a third party insurance provider related
to the sale of insurance funded preneed funeral contracts were $1.4
million in the fourth quarter of 2005 and 2004.
-- Surety bond premium costs were $0.6 million in the fourth quarter of
2005 and 2004.
-- The remaining income of $1.4 million in the fourth quarter of 2005
and $5.3 million in the fourth quarter of 2004 is primarily related
to net gains from foreign currency transactions.
* The consolidated effective tax rate in the fourth quarter of 2005 was a
provision of 26.5% compared to a benefit of 5.2% in the fourth quarter of
2004. The tax rate in the fourth quarter of 2005 was favorably impacted
by the recognition of state net operating losses partially offset by
higher tax provisions on permanent differences between book and tax bases
of North America asset dispositions. The 2004 tax rate was favorably
impacted by state net operating losses and tax benefits realized from
certain international dispositions.
For the Year Ended December 31, 2005
* Funeral
-- Funeral revenues increased $57.0 million due to stronger funeral
volume and a higher average revenue per funeral service. Included in
the $57.0 million is an increase in Kenyon revenues of $20.5 million
in 2005 compared to 2004 due to its involvement in the hurricane
disasters along the gulf coast region and the tsunami in southeast
Asia.
-- The number of funeral services performed in 2005 increased 3,346
(1.4%) compared to 2004.
-- The average revenue per funeral service in 2005 was up $94 (2.2%)
over the prior year period. Increases resulting from price increases
consistent with inflation and our strategic pricing realignment
initiative in the last half of the year were partially offset by
higher than expected discounts during the first three quarter of
2005.
-- Funeral gross profits increased $11.6 million (5.7%) over the prior
year. The increase in funeral gross profits was a result of increases
in the revenues described above and reductions in overhead expenses.
Kenyon had a lower gross loss during 2005 of $1.6 million. These
increases in funeral gross profits were partially offset by
inflationary increases in merchandise costs; higher salary and fringe
expenses (primarily health care and pension costs); higher incentive
compensation expense; increases related to our trust reconciliation
project; and increased Sarbanes-Oxley expenses.
-- The cremation rate increased 130 basis points to 40.2% in for the
year ended December 31, 2005 compared to the same period of 2004.
* Cemetery
-- Cemetery revenue decreased $2.3 million from 2004 primarily due to a
decrease in legacy revenues associated with constructed cemetery
property; lower interest on trade receivables; partially off set by
an increase in atneed revenues.
-- Cemetery gross profits decreased $9.9 million from the prior year,
partially due to the decrease in revenues described above. Also
decreasing gross margins were higher salary and fringe expenses
(primarily health care and pension costs); increases in vehicle and
utility costs (primarily resulting from higher fuel prices); and
increases in administrative costs resulting from our preneed
verification projects and Sarbanes-Oxley compliance.
Other Consolidated Results
* General and administrative expenses were $84.8 million in the year ended
December 31, 2005 compared to $130.9 million in the same period of 2004.
-- In 2004, we recognized $61.1 million in expense associated with the
settlement of outstanding litigation matters.
-- Excluding the $61.1 million of 2004 litigation expense, general and
administrative expenses were $84.8 million in 2005 compared to $69.8
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; higher incentive compensation
(resulting from strong operating and cash flow results); costs
associated with our funeral and cemetery preneed verification
projects and higher than expected health and pension costs. During
2005, we incurred significant expenses to improve internal controls
to comply with Section 404 of the Sarbanes-Oxley Act. We believe that
these improvements have measurably increased the effectiveness of the
organization.
* Gains and impairment (losses) on dispositions, net was a net loss of
$26.1 million in 2005 compared to a net gain of $25.8 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. Also included in 2005 was a gain of approximately $15.6
million resulting from the release of indemnification liabilities related
to the sales of our former operations in France and the United Kingdom.
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 $15.6 million lower for the year ended December 31,
2005 compared to the same period of 2004 primarily due to the continued
reduction of debt during 2005.
* Interest income increased $3.2 million to $16.7 million in 2005 compared
to 2004 due to increases in our cash balance and higher interest rates
during 2005.
* Other income (expense), net decreased by $6.9 million of income in 2005
compared to the same period of 2004. The components of other income for
the periods presented were as follows:
-- Cash overrides received from a third party insurance provider related
to the sale of insurance funded preneed funeral contracts were $6.0
million in 2005 compared to $6.3 million in 2004.
-- Surety bond premium costs were $3.6 million in 2005 compared to $4.0
million in 2004.
-- The remaining income of $0.4 million in 2005 and income of $7.4
million in 2004 is primarily related to net gains from foreign
currency transactions.
* The consolidated effective tax rate in 2005 was a provision of 37.6%
compared to a benefit of 7.3% in 2004. The tax rate in 2005 was
negatively impacted by permanent differences between book and tax bases
of North America asset dispositions partially offset by the recognition
of state net operating losses. The tax rate in 2004 was favorably
impacted by state net operating losses and non-cash tax benefits realized
from certain international dispositions.
Free Cash Flow
Free cash flow is a non-GAAP financial measure, which we used in 2005 and
2004 to manage our business, including our financial condition and liquidity.
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.
In 2005 and 2004, 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, tax refunds, premiums paid on early
extinguishments of debt, or contributions to our frozen cash balance pension
plan) less capital improvements at our existing facilities. The Company defines
capital improvements at our 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. In 2005 and 2004, the Company defines 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.
The following table provides a reconciliation between cash flows from
operating activities and free cash flow, as defined.
Three Months Ended For the Year Ended
December 31, December 31,
------------------- --------------------
(In millions) 2005 2004 2005 2004
- ------------------------------------ -------- -------- -------- --------
Cash Flows from Operating Activities $ 54.3 $ (75.4) $ 312.7 $ 94.0
Less: Unusual Tax Refund --- --- (29.0) ---
Add: Legal Settlements --- 131.8 --- 131.1
Add: Cash Balance Pension Plan
Contribution --- --- --- 20.0
Add: Premiums Paid on Early
Extinguishment of Debt --- --- 12.2 13.8
Add: Repayment of an Insurance
Policy Loan and Other --- --- --- 11.4
-------- -------- -------- --------
Adjusted Cash Flows from Operating
Activities $ 54.3 $ 56.4 $ 295.9 $ 270.3
Less: Capital Improvements to
Maintain Existing Facilities 21.0 17.4 68.5 64.5
-------- -------- -------- --------
Free Cash Flow $ 33.3 $ 39.0 $ 227.4 $ 205.8
======== ======== ======== ========
As detailed in the table above, adjusted cash flows from operating
activities increased by $25.6 million in 2005 compared to 2004. Adjusted cash
flows from operating activities increased primarily as a result of improvements
in our comparable operating results; one less cash payroll and lower bonus
payments in 2005; an increase in net trust withdrawals; and a decrease in cash
interest paid resulting from reductions in debt. These improvements to cash
flow, which totaled approximately $46.0 million, were partially offset by a
decrease of $18.3 million in 2005 as a result of the sale of our French
operations in March 2004; cash outflows of approximately $16 million associated
with the funding of the Company's 401(k) match with cash (rather than funding
through the use of Company stock in 2004); and increased professional fee
payments.
For the years ended December 31, 2005 and 2004, the Company reported total
capital expenditures of $99.4 million and $95.6 million respectively. Included
in total capital expenditures were capital improvements deemed reasonably
necessary to maintain our existing facilities of $68.5 million and $64.5 million
for 2005 and 2004, respectively. The remaining capital expenditures of $30.9
million in 2005 and $31.1 million in 2004 were related to growth-oriented
capital expenditures. Included in the $30.9 million of growth-oriented capital
expenditures incurred in 2005 was $11.5 million related to new construction of
funeral home facilities, $16.4 million of construction of new high-end cemetery
property, and $3.0 million associated with Dignity Memorial(R) merchandising
displays.
Share Repurchase Program
As of December 31, 2005, the Company had total authorization to repurchase
$400 million of our common stock. As of December 31, 2005, we had repurchased
47.7 million shares at a total cost of $335.4 million under these programs. The
remaining dollar value of shares that may be purchased under our currently
authorized share repurchase programs was $64.6 million at December 31, 2005. Our
total shares outstanding were approximately 294.8 million as of December 31,
2005.
We have made and intend to make share repurchases 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.
Three Months Ended
----------------------------------------------------
December 31, 2005 December 31, 2004
------------------------ ------------------------
Net Diluted Net Diluted
(In millions, except diluted EPS) Income EPS Income EPS
- ------------------------------------ ---------- ---------- ---------- ----------
Net income reported $ 24.1 $ .08 $ 27.2 $ .08
Hurricane insurance deductible
expense 1.5 .01 --- ---
Settlement of significant
legal matters --- --- 7.8 .02
(Gains) and impairment losses
on dispositions, net 7.4 .02 5.9 .02
Income tax benefit from the
recognition of state net
operating losses (11.8) (.04) (7.9) (.02)
Discontinued operations (0.3) --- (6.6) (.02)
---------- ---------- ---------- ----------
Earnings from continuing operations
excluding special items $ 20.9 $ .07 $ 26.4 $ .08
========== ========== ========== ==========
Diluted weighted average shares
outstanding (in thousands) 300,601 332,366
For the Year Ended
----------------------------------------------------
December 31, 2005 December 31, 2004
------------------------ ------------------------
Net (Loss) Diluted Net Diluted
(In millions, except diluted EPS) Income EPS Income EPS
- ------------------------------------ ---------- ---------- ---------- ----------
Net (loss) income reported $ (126.7) $ (.41) $ 114.1 $ .35
Hurricane insurance deductible
expense 1.5 .01 --- ---
Settlement of significant legal
matters --- --- 38.7 .11
(Gains) and impairment losses
on dispositions, net 31.1 .10 (53.7) (.16)
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)
Income tax benefit from the
recognition of state net
operating losses (11.8) (.04) (7.9) (.02)
Discontinued operations (4.1) (.02) (41.6) (.12)
Cumulative effect of
accounting changes 187.5 .61 47.6 .14
---------- ---------- ---------- ----------
Earnings from continuing operations
excluding special items $ 86.8 $ .28 $ 105.0 $ .32
========== ========== ========== ==========
Diluted weighted average shares
outstanding (in thousands) 306,745 344,675
Interest add back $ --- $ 6.4
For the Year Ended
-----------------------
December 31, 2005
-----------------------
Net (Loss) Diluted
(In millions, except diluted EPS) Income EPS
- ---------------------------------------------------- ---------- ----------
Earnings from continuing operations
excluding special items $ 86.8 $ .28
Income from discontinued operations 4.1 .02
---------- ----------
Earnings from continuing operations excluding
special items and income from discontinued options $ 90.9 $ .30
========== ==========
Conference Call and Webcast
We will host a conference call on Friday, March 3, 2006, 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) 457-2641. 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 March 17, 2006 and can be accessed at (719) 457-0820
with the confirmation code of 5641657. 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.
* Maintenance of 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 primarily reversed through the tax provision at the
time of resolution. The resolution of these matters is pending the
outcome of an Internal Revenue Service audit and other various tax
audits.
* Our ability to successfully implement our strategic plan related to
producing operating improvements and strong cash flows.
* 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 access surety and insurance markets at a
reasonable cost.
* Our ability to successfully exploit our substantial purchasing power with
certain of our vendors.
For further information on these and other risks and uncertainties, see our
Securities and Exchange Commission filings, including our 2005 Annual Report on
Form 10-K, which we expect to file in the coming days. 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, headquartered in Houston, Texas, owns and
operates funeral service locations and cemeteries. We have an extensive network
of businesses including 1,058 funeral service locations and 358 cemeteries in
North America as of December 31, 2005. 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 / Investor Relations
(713) 525-9088
Media: Greg Bolton - Director / Corporate Communications
(713) 525-5235
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
Three months ended For the year ended
December 31, December 31,
---------------------------- ----------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Revenues:
Funeral $ 288,652 $ 279,105 $ 1,155,225 $ 1,259,821
Cemetery 141,432 147,523 560,380 571,404
------------ ------------ ------------ ------------
430,084 426,628 1,715,605 1,831,225
Gross profit:
Funeral 51,133 44,823 216,376 226,407
Cemetery 19,849 29,393 82,451 102,122
------------ ------------ ------------ ------------
70,982 74,216 298,827 328,529
General and administrative expenses (22,849) (30,549) (84,812) (130,896)
Gains and impairment (losses) on
dispositions, net 2,566 (7,224) (26,093) 25,797
------------ ------------ ------------ ------------
Operating income 50,699 36,443 187,922 223,430
Interest expense (25,985) (26,800) (102,337) (117,910)
Interest income 5,488 3,835 16,706 13,453
Loss on early extinguishment of debt --- --- (14,258) (16,770)
Other income, net 2,236 6,056 2,774 9,703
------------ ------------ ------------ ------------
(18,261) (16,909) (97,115) (111,524)
------------ ------------ ------------ ------------
Income from continuing operations
before income taxes and cumulative
effects of accounting changes 32,438 19,534 90,807 111,906
Provision (benefit) for income taxes 8,591 (1,017) 34,122 (8,194)
------------ ------------ ------------ ------------
Income from continuing operations
before cumulative effects of
accounting changes 23,847 20,551 56,685 120,100
Income from discontinued operations
(net of income tax provision
(benefit) of $177, $(1,673),
$4,764, and $(49,175),
respectively) 298 6,613 4,123 41,584
Cumulative effects of
accounting changes
(net of income tax benefit
of $117,428 and $20,983,
respectively) --- --- (187,538) (47,556)
------------ ------------ ------------ ------------
Net income (loss) $ 24,145 $ 27,164 $ (126,730) $ 114,128
============ ============ ============ ============
Basic earnings (loss) per share:
Income from continuing operations
before cumulative effects of
accounting changes $ .08 $ .06 $ .19 $ .38
Income from discontinued
operations, net of tax .00 .02 .01 .13
Cumulative effects of accounting
changes, net of tax --- --- (.62) (.15)
------------ ------------ ------------ ------------
Net income (loss) $ .08 $ .08 $ (.42) $ .36
============ ============ ============ ============
Diluted earnings (loss) per share:
Income from continuing
operations before
cumulative effects of
accounting changes $ .08 $ .06 $ .19 $ .37
Income from discontinued
operations, net of tax .00 .02 .01 .12
Cumulative effects of
accounting changes,
net of tax --- --- (.61) (.14)
------------ ------------ ------------ ------------
Net income (loss) $ .08 $ .08 $ (.41) $ .35
============ ============ ============ ============
Basic weighted average
number of shares 295,826 328,342 302,213 318,737
============ ============ ============ ============
Diluted weighted average
number of shares 300,601 332,366 306,745 344,675
============ ============ ============ ============
Dividends declared per share $ .025 --- $ .10 ---
============ ============ ============ ============
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts)
December 31, December 31,
2005 2004
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 446,782 $ 287,785
Receivables, net 97,747 102,622
Inventories 68,327 81,526
Current assets of discontinued operations --- 11,085
Other 37,527 53,820
------------ ------------
Total current assets 650,383 536,838
------------ ------------
Preneed funeral receivables and trust investments 1,226,192 1,267,784
Preneed cemetery receivables and trust investments 1,288,515 1,399,778
Cemetery property, at cost 1,355,654 1,509,599
Property and equipment, at cost, net 942,229 970,547
Non-current assets of discontinued operations --- 4,367
Deferred charges and other assets 249,449 631,839
Goodwill 1,123,888 1,169,040
Cemetery perpetual care trust investments 700,382 729,048
------------ ------------
$ 7,536,692 $ 8,218,840
============ ============
Liabilities & Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 214,679 $ 221,877
Current maturities of long-term debt 20,468 77,950
Current liabilities of discontinued operations --- 7,111
Income taxes 20,359 7,850
------------ ------------
Total current liabilities 255,506 314,788
------------ ------------
Long-term debt 1,175,463 1,189,163
Deferred preneed funeral revenues 535,384 498,571
Deferred preneed cemetery revenues 792,485 803,144
Deferred income taxes 141,676 276,572
Non-current liabilities of discontinued operations --- 58,225
Other liabilities 337,262 431,917
Non-controlling interest in funeral and
cemetery trusts 2,015,811 2,092,881
Non-controlling interest in perpetual care trusts 694,619 704,912
Stockholders' equity:
Common stock, $1 per share par value,
500,000,000 shares authorized, 294,808,872 and
323,225,352, issued and outstanding
(net of 48,962,063 and 18,502,478 treasury
shares, at par) 294,809 323,225
Capital in excess of par value 2,182,745 2,395,057
Unearned compensation (3,593) (2,022)
Accumulated deficit (955,974) (829,244)
Accumulated other comprehensive income (loss) 70,499 (38,349)
------------ ------------
Total stockholders' equity 1,588,486 1,848,667
------------ ------------
$ 7,536,692 $ 8,218,840
============ ============
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
For the year ended
December 31,
----------------------------
2005 2004
------------ ------------
Cash flows from operating activities:
Net (loss) income $ (126,730) $ 114,128
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Income from discontinued operations (4,123) (41,584)
Loss on early extinguishments of debt,
net of tax 14,258 16,770
Premiums paid on early extinguishment of debt (12,186) (13,817)
Cumulative effects of accounting changes,
net of tax 187,538 47,556
Depreciation and amortization 87,449 144,766
Provision for deferred income taxes 26,080 17,739
(Gains) and impairment losses on
dispositions, net 26,093 (25,797)
Payments on restructuring charges (10,723) (14,000)
Litigation payments (3,126) (164,566)
Change in assets and liabilities, net of
effects from acquisitions and dispositions:
Decrease in receivables 18,915 45,983
Decrease in other assets 43,991 5,946
Increase in litigation accrual 370 60,800
(Increase) decrease in payables and
other liabilities 11,953 (53,941)
Net effect of preneed funeral production
and maturities 5,176 (20,989)
Net effect of cemetery production
and deliveries 52,981 (28,691)
Other 86 (1,971)
------------ ------------
Net cash provided by operating activities
from continuing operations 318,002 88,332
Net cash (used in) provided by operating
activities from discontinued operations (5,344) 5,656
------------ ------------
Net cash provided by operating activities 312,658 93,988
Cash flows from investing activities:
Capital expenditures (99,416) (95,619)
Proceeds from divestitures and sales of
property and equipment 111,722 57,749
Proceeds from dispositions of foreign
operations, net of cash retained 151,692 330,829
Payment of contingent obligations to
former owners of acquired businesses --- (48,749)
Indemnity payments related to the sale of
former funeral operations in France (2,105) (2,401)
Net withdrawals of restricted funds and other 9,334 51,378
------------ ------------
Net cash provided by investing activities from
continuing operations 171,227 293,187
Net cash used in investing activities from
discontinued operations (212) (3,663)
------------ ------------
Net cash provided by investing activities 171,015 289,524
Cash flows from financing activities:
Proceeds from issuance of long-term debt 291,503 241,444
Payments of debt (85,618) (177,648)
Early extinguishments of debt (291,277) (299,961)
Proceeds from exercise of stock options 7,834 10,605
Purchase of Company common stock (225,152) (110,258)
Payments of dividends (22,637) ---
Other (844) ---
------------ ------------
Net cash used in financing activities from
continuing operations (326,191) (335,818)
Effect of foreign currency 1,515 660
------------ ------------
Net increase in cash and cash equivalents 158,997 48,354
Cash and cash equivalents at beginning of period 287,785 239,431
------------ ------------
Cash and cash equivalents at end of period $ 446,782 $ 287,785
============ ============
SOURCE Service Corporation International
-0- 03/02/2006
/CONTACT: investors, Debbie Young, Director - Investor Relations,
+1-713-525-9088, or media, Greg Bolton, Director - Corporate Communications,
+1-713-525-5235, 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 /