UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) | October 29, 2018 (October 29, 2018) |
Service Corporation International
(Exact name of registrant as specified in its charter)
Texas | 1-6402-1 | 74-1488375 |
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
1929 Allen Parkway Houston, Texas | 77019 |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (713) 522-5141
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13a-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Item 2.02 | Results of Operations and Financial Condition |
On October 29, Service Corporation International issued a press release reporting its financial results for the third quarter of 2018. A copy of this press release is attached as Exhibit 99.1 to this report and is incorporated herein by reference.
The attached Exhibit 99.1 is not filed, but is furnished to comply with Regulation FD. The information in this Current Report on Form 8-K, including the exhibit, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 | Financial Statements and Exhibits |
(d) | The following exhibits are included with this report |
Exhibit No. | Description | |
99.1 | Press Release, dated October 29, 2018 reporting third quarter 2018 financial results |
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
October 29, 2018 | Service Corporation International | ||
By: | /s/ Eric D. Tanzberger | ||
|
Eric D. Tanzberger | ||
Senior Vice President | |||
Chief Financial Officer |
Service Corporation International Announces Third Quarter 2018 Financial Results And Confirms Guidance For 2018
HOUSTON, Oct. 29, 2018 /PRNewswire/ -- Service Corporation International (NYSE: SCI), the largest provider of deathcare products and services in North America, today announced results for the third quarter of 2018. Our unaudited consolidated financial statements can be found at the end of this press release. The table below summarizes our key financial results:
(In millions, except for per share amounts) | Three Months Ended
|
| Nine Months Ended
| ||||||||||||
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||
Revenue | $ | 778.8 |
|
| $ | 731.3 |
|
| $ | 2,369.4 |
|
| $ | 2,282.3 |
|
Operating income | $ | 132.3 |
|
| $ | 109.4 |
|
| $ | 457.9 |
|
| $ | 393.1 |
|
Net income attributable to common stockholders | $ | 68.9 |
|
| $ | 56.2 |
|
| $ | 254.2 |
|
| $ | 299.3 |
|
Diluted earnings per share | $ | 0.37 |
|
| $ | 0.29 |
|
| $ | 1.36 |
|
| $ | 1.56 |
|
Earnings excluding special items(1) | $ | 64.3 |
|
| $ | 63.0 |
|
| $ | 235.6 |
|
| $ | 203.5 |
|
Diluted earnings per share excluding special items(1) | $ | 0.35 |
|
| $ | 0.33 |
|
| $ | 1.26 |
|
| $ | 1.06 |
|
Diluted weighted average shares outstanding | 185.5 |
|
| 192.2 |
|
| 187.5 |
|
| 192.4 |
| ||||
Net cash provided by operating activities | $ | 136.9 |
|
| $ | 167.0 |
|
| $ | 452.3 |
|
| $ | 389.5 |
|
Net cash provided by operating activities excluding special items(1) | $ | 136.9 |
|
| $ | 167.0 |
|
| $ | 446.7 |
|
| $ | 430.0 |
|
|
|
(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. These items are also referred to as "adjusted earnings per share" and "adjusted operating cash flow". A reconciliation from net income attributable to common stockholders, diluted earnings per share, and net cash provided by operating activities computed in accordance with generally accepted accounting principles in the United States (GAAP) can be found later in this press release under the headings "Cash Flow and Capital Spending" and "Non-GAAP Financial Measures". |
Quarterly Highlights:
Tom Ryan, the Company's Chairman and Chief Executive Officer, commented on the third quarter of 2018:
"We are pleased to report strong operating performance in the third quarter highlighted by producing mid-single digit percentage growth in revenue and double-digit percentage growth in operating profit. Revenue grew $47.5 million, or 6.5%, and operating profit grew $16.4 million, or 11%, quarter over quarter. This strong operating performance was partially offset by increases in adjusted general and administrative expenses for our long-term incentive compensation plan that is tied to increases in total shareholder return as we experienced a significant increase in our share price during the quarter compared to market indices.
We look forward to carrying our operating performance momentum into the fourth quarter and finishing the year strong. We are narrowing the range of our full year guidance for adjusted earnings per share to $1.77 to $1.85 per share and are confirming the midpoint of $595 million of our existing adjusted operating cash flow range. Our results could not have been achieved without the hard work and dedication of our entire team, and I thank all 23,000 associates for their efforts and continued focus on delivering extraordinary service to our client families. We believe our long-term growth strategy is on track as we continue to grow revenue, leverage our unparalleled scale, and deploy our capital wisely to enhance shareholder value."
REVISED OUTLOOK FOR 2018
Our revised outlook for potential earnings and cash flow in 2018 is as follows:
(In millions, except per share amounts) | Previous 2018
|
| Revised 2018
|
Diluted earnings per share excluding special items(1) | $1.72 to $1.90 |
| $1.77 to $1.85 |
Net cash provided by operating activities excluding special items(1) | $575 to $615 |
| $575 to $615 |
Capital improvements at existing facilities and cemetery development expenditures | Approximately
|
| Approximately
|
|
|
(1) | Diluted earnings per share excluding special items and Net cash provided by operating activities excluding special items are non-GAAP financial measures. We normally reconcile these non-GAAP financial measures from diluted earnings per share and net cash provided by operating activities; however, diluted earnings per share and net cash provided by operating activities calculated in accordance with GAAP are not currently accessible on a forward-looking basis. Our outlook for 2018 excludes the following because this information is not currently available for 2018: Expenses net of insurance recoveries related to hurricanes, gains or losses associated with asset divestitures, gains or losses associated with the early extinguishment of debt, potential tax reserve adjustments and IRS payments and/or refunds, acquisition and integration costs, system implementation and transition costs, and potential costs associated with settlements of litigation or the recognition of receivables for insurance recoveries associated with litigation. The foregoing items, especially gains or losses associated with asset divestitures, could materially impact our forward-looking diluted EPS and/or our net cash provided by operating activities calculated in accordance with GAAP, consistent with the historical disclosures found in this press release under the headings "Cash Flow and Capital Spending" and "Non-GAAP Financial Measures". |
REVIEW OF RESULTS FOR THIRD QUARTER 2018
Consolidated Segment Results
(See definitions of revenue line items later in this earnings release.)
(In millions, except funeral services performed and average revenue per service) | Three Months Ended
|
| Nine Months Ended
| ||||||||||||
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||
Funeral: |
|
|
|
|
|
|
| ||||||||
Atneed revenue | $ | 236.0 |
|
| $ | 236.2 |
|
| $ | 753.4 |
|
| $ | 757.1 |
|
Matured preneed revenue | 138.8 |
|
| 135.2 |
|
| 450.1 |
|
| 425.3 |
| ||||
Core revenue | 374.8 |
|
| 371.4 |
|
| 1,203.5 |
|
| 1,182.4 |
| ||||
Non-funeral home revenue | 11.5 |
|
| 10.8 |
|
| 37.2 |
|
| 34.8 |
| ||||
Recognized preneed revenue | 32.1 |
|
| 26.6 |
|
| 98.5 |
|
| 88.9 |
| ||||
Other revenue | 32.6 |
|
| 28.7 |
|
| 94.8 |
|
| 89.1 |
| ||||
Total revenue | $ | 451.0 |
|
| $ | 437.5 |
|
| $ | 1,434.0 |
|
| $ | 1,395.2 |
|
|
|
|
|
|
|
|
| ||||||||
Operating profit | $ | 68.1 |
|
| $ | 70.1 |
|
| $ | 279.0 |
|
| $ | 274.8 |
|
Operating margin percentage | 15.1 | % |
| 16.0 | % |
| 19.5 | % |
| 19.7 | % | ||||
|
|
|
|
|
|
|
| ||||||||
Funeral services performed | 73,896 |
|
| 72,049 |
|
| 236,391 |
|
| 230,533 |
| ||||
Average revenue per service | $ | 5,228 |
|
| $ | 5,305 |
|
| $ | 5,249 |
|
| $ | 5,280 |
|
| |||||||||||||||
Cemetery: |
|
|
|
|
|
|
| ||||||||
Atneed property revenue | $ | 21.6 |
|
| $ | 20.5 |
|
| $ | 66.9 |
|
| $ | 67.9 |
|
Atneed merchandise and service revenue | 55.4 |
|
| 55.6 |
|
| 174.1 |
|
| 170.3 |
| ||||
Total atneed revenue | 77.0 |
|
| 76.1 |
|
| 241.0 |
|
| 238.2 |
| ||||
Recognized preneed property revenue | 151.3 |
|
| 129.7 |
|
| 403.4 |
|
| 378.5 |
| ||||
Recognized preneed merchandise and service revenue | 69.0 |
|
| 69.2 |
|
| 210.5 |
|
| 206.4 |
| ||||
Total recognized preneed revenue | 220.3 |
|
| 198.9 |
|
| 613.9 |
|
| 584.9 |
| ||||
Core revenue | 297.3 |
|
| 275.0 |
|
| 854.9 |
|
| 823.1 |
| ||||
Other cemetery revenue | 30.5 |
|
| 18.8 |
|
| 80.5 |
|
| 64.0 |
| ||||
Total revenue | $ | 327.8 |
|
| $ | 293.8 |
|
| $ | 935.4 |
|
| $ | 887.1 |
|
|
|
|
|
|
|
|
| ||||||||
Operating profit | $ | 98.0 |
|
| $ | 79.7 |
|
| $ | 271.0 |
|
| $ | 235.7 |
|
Operating margin percentage | 29.9 | % |
| 27.1 | % |
| 29.0 | % |
| 26.6 | % |
Comparable Funeral Results
The table below details comparable funeral results of operations ("same store") for the three months ended September 30, 2018 and 2017. We consider comparable operations to be those owned for the entire period beginning January 1, 2017 and ending September 30, 2018.
(Dollars in millions, except average revenue per service and average revenue per contract sold)
| Three Months Ended September 30, | |||||||||||||
| 2018 |
| 2017 |
| Var |
| % | |||||||
Comparable revenue: |
|
|
|
|
|
|
| |||||||
Atneed revenue(1) | $ | 227.0 |
|
| $ | 230.6 |
|
| $ | (3.6) |
|
| (1.6) | % |
Matured preneed revenue(2) | 136.3 |
|
| 133.4 |
|
| 2.9 |
|
| 2.2 | % | |||
Core revenue(3) | 363.3 |
|
| 364.0 |
|
| (0.7) |
|
| (0.2) | % | |||
Non-funeral home revenue(4) | 11.5 |
|
| 11.0 |
|
| 0.5 |
|
| 4.5 | % | |||
Recognized preneed revenue(5) | 31.5 |
|
| 26.6 |
|
| 4.9 |
|
| 18.4 | % | |||
Other revenue(6) | 32.1 |
|
| 28.6 |
|
| 3.5 |
|
| 12.2 | % | |||
Total comparable revenue | $ | 438.4 |
|
| $ | 430.2 |
|
| $ | 8.2 |
|
| 1.9 | % |
|
|
|
|
|
|
|
| |||||||
Comparable operating profit | $ | 67.5 |
|
| $ | 70.6 |
|
| $ | (3.1) |
|
| (4.4) | % |
Comparable operating margin percentage | 15.4 | % |
| 16.4 | % |
| (1.0) | % |
|
|
| |||
|
|
|
|
|
|
|
| |||||||
Comparable services performed: |
|
|
|
|
|
|
| |||||||
Atneed | 39,079 |
|
| 39,578 |
|
| (499) |
|
| (1.3) | % | |||
Matured preneed | 22,147 |
|
| 22,090 |
|
| 57 |
|
| 0.3 | % | |||
Total core | 61,226 |
|
| 61,668 |
|
| (442) |
|
| (0.7) | % | |||
Non-funeral home | 9,234 |
|
| 9,137 |
|
| 97 |
|
| 1.1 | % | |||
Total comparable funeral services performed | 70,460 |
|
| 70,805 |
|
| (345) |
|
| (0.5) | % | |||
Core cremation rate | 48.3 | % |
| 46.6 | % |
| 1.7 | % |
|
| ||||
Total comparable cremation rate | 55.0 | % |
| 53.4 | % |
| 1.6 | % |
|
| ||||
|
|
|
|
|
|
|
| |||||||
Comparable sales average revenue per service: |
|
|
|
|
|
|
| |||||||
Atneed | $ | 5,809 |
|
| $ | 5,826 |
|
| $ | (17) |
|
| (0.3) | % |
Matured preneed | 6,154 |
|
| 6,039 |
|
| 115 |
|
| 1.9 | % | |||
Total core | 5,934 |
|
| 5,903 |
|
| 31 |
|
| 0.5 | % | |||
Non-funeral home | 1,245 |
|
| 1,204 |
|
| 41 |
|
| 3.4 | % | |||
Total comparable average revenue per service | $ | 5,319 |
|
| $ | 5,296 |
|
| $ | 23 |
|
| 0.4 | % |
|
|
|
|
|
|
|
| |||||||
Comparable preneed sales production: |
|
|
|
|
|
|
| |||||||
Total preneed sales | $ | 227.5 |
|
| $ | 200.2 |
|
| $ | 27.3 |
|
| 13.6 | % |
Core contracts sold | 30,507 |
|
| 27,208 |
|
| 3,299 |
|
| 12.1 | % | |||
Non-funeral home contracts sold | 17,204 |
|
| 16,292 |
|
| 912 |
|
| 5.6 | % | |||
Core average revenue per contract sold | $ | 5,964 |
|
| $ | 5,929 |
|
| $ | 35 |
|
| 0.6 | % |
Non-funeral home average revenue per contract sold | $ | 2,651 |
|
| $ | 2,385 |
|
| $ | 266 |
|
| 11.2 | % |
|
|
(1) | Atneed revenue represents merchandise and services sold and delivered or performed once death has occurred. |
|
|
(2) | Matured preneed revenue represents merchandise and services sold on a preneed contract through our core funeral homes which have been delivered or performed as well as the related merchandise and service trust fund income. |
|
|
(3) | Core revenue represents the sum of merchandise and services sold on an atneed contract or preneed contract, which were delivered or performed once death has occurred through our core funeral homes. |
|
|
(4) | Non-funeral home revenue represents services sold on a preneed or atneed contract through one of our non-funeral home sales channels (e.g. SCI Direct) and performed once death has occurred. |
|
|
(5) | Recognized preneed revenue represents travel protection, net and merchandise sold on a preneed contract and delivered before death has occurred. |
|
|
(6) | Other revenue primarily comprises general agency revenue, which is commissions we receive from third-party insurance companies for life insurance policies sold to preneed customers for the purpose of funding preneed arrangements. |
Comparable Cemetery Results
The table below details comparable cemetery results of operations ("same store") for the three months ended September 30, 2018 and 2017. We consider comparable operations to be those owned for the entire period beginning January 1, 2017 and ending September 30, 2018.
(Dollars in millions) | Three Months Ended September 30, | |||||||||||||
| 2018 |
| 2017 |
| Var |
| % | |||||||
Comparable revenue: |
|
|
|
|
|
|
| |||||||
Atneed property revenue | $ | 21.3 |
|
| $ | 20.3 |
|
| $ | 1.0 |
|
| 4.9 | % |
Atneed merchandise and service revenue | 54.7 |
|
| 55.1 |
|
| (0.4) |
|
| (0.7) | % | |||
Total atneed revenue (1) | 76.0 |
|
| 75.4 |
|
| 0.6 |
|
| 0.8 | % | |||
Recognized preneed property revenue | 149.1 |
|
| 129.3 |
|
| 19.8 |
|
| 15.3 | % | |||
Recognized preneed merchandise and service revenue | 66.4 |
|
| 68.7 |
|
| (2.3) |
|
| (3.3) | % | |||
Total recognized preneed revenue (2) | 215.5 |
|
| 198.0 |
|
| 17.5 |
|
| 8.8 | % | |||
Core revenue(3) | 291.5 |
|
| 273.4 |
|
| 18.1 |
|
| 6.6 | % | |||
Other revenue(4) | 29.6 |
|
| 18.7 |
|
| 10.9 |
|
| 58.3 | % | |||
Total comparable revenue | $ | 321.1 |
|
| $ | 292.1 |
|
| $ | 29.0 |
|
| 9.9 | % |
|
|
|
|
|
|
|
| |||||||
Comparable operating profit | $ | 96.1 |
|
| $ | 79.3 |
|
| $ | 16.8 |
|
| 21.2 | % |
Comparable operating margin percentage | 29.9 | % |
| 27.1 | % |
| 2.8 | % |
|
| ||||
|
|
|
|
|
|
|
| |||||||
Comparable preneed and atneed sales production: |
|
|
|
|
|
|
| |||||||
Property | $ | 149.0 |
|
| $ | 143.9 |
|
| $ | 5.1 |
|
| 3.5 | % |
Merchandise and services | 131.3 |
|
| 124.4 |
|
| 6.9 |
|
| 5.5 | % | |||
Discounts and other | (1.0) |
|
| (0.4) |
|
| (0.6) |
|
| (150.0) | % | |||
Preneed and atneed sales production | $ | 279.3 |
|
| $ | 267.9 |
|
| $ | 11.4 |
|
| 4.3 | % |
|
|
|
|
|
|
|
| |||||||
Recognition rate(5) | 104.4 | % |
| 102.1 | % |
|
|
|
|
|
|
(1) | Atneed revenue represents property, merchandise, and services sold and delivered or performed once death has occurred. |
|
|
(2) | Recognized preneed revenue represents property, merchandise, and services sold on a preneed contract, which were delivered or performed as well as the related merchandise and service trust fund income. |
|
|
(3) | Core revenue represents the sum of property, merchandise, and services that have been delivered or performed as well as the related merchandise and service trust fund income. |
|
|
(4) | Other revenue is primarily related to endowment care trust fund income, royalty income, and interest and finance charges earned from customer receivables on preneed installment contracts. |
|
|
(5) | Represents the ratio of current period core revenue stated as a percentage of current period preneed and atneed sales production. |
Other Financial Results
Cash Flow and Capital Spending
(In millions) | Three Months Ended
|
| Nine Months Ended
| ||||||||||||
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||
Net cash provided by operating activities | $ | 136.9 |
|
| $ | 167.0 |
|
| $ | 452.3 |
|
| $ | 389.5 |
|
Pension settlement payment | — |
|
| — |
|
| — |
|
| 6.3 |
| ||||
IRS tax settlement | — |
|
| — |
|
| (5.6) |
|
| 34.2 |
| ||||
Net cash provided by operating activities excluding special items | $ | 136.9 |
|
| $ | 167.0 |
|
| $ | 446.7 |
|
| $ | 430.0 |
|
Cash taxes included in net cash provided by operating activities excluding special items | $ | 25.1 |
|
| $ | 4.0 |
|
| $ | 56.0 |
|
| $ | 87.3 |
|
Net cash provided by operating activities excluding special items decreased $30.1 million to $136.9 million in the third quarter of 2018 from $167.0 million in the prior year quarter. The decrease is primarily driven by $21.1 million higher cash taxes paid. Additionally, higher earnings in the quarter were more than offset by decreases in preneed working capital.
A summary of our capital expenditures is set forth below:
(In millions) | Three Months Ended
|
| Nine Months Ended
| ||||||||||||
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||
Capital improvements at existing field locations and corporate | $ | 31.3 |
|
| $ | 30.8 |
|
| $ | 87.9 |
|
| $ | 73.2 |
|
Development of cemetery property | 21.9 |
|
| 21.7 |
|
| 56.7 |
|
| 54.6 |
| ||||
Capital improvements at existing facilities and cemetery development expenditures | 53.2 |
|
| 52.5 |
|
| 144.6 |
|
| 127.8 |
| ||||
Growth capital expenditures/construction of new funeral home facilities | 9.9 |
|
| 3.8 |
|
| 21.3 |
|
| 13.8 |
| ||||
Total capital expenditures | $ | 63.1 |
|
| $ | 56.3 |
|
| $ | 165.9 |
|
| $ | 141.6 |
|
Total capital expenditures increased in the current quarter by $6.8 million primarily due to expected increases in growth capital for the construction of new funeral home facilities, along with slight increases in capital improvements at existing facilities and new cemetery property development.
TRUST FUND RETURNS
Total trust fund returns include realized and unrealized gains and losses and dividends and are shown without netting of certain fees. A summary of our consolidated trust fund returns for the three and nine months ended September 30, 2018 is set forth below:
|
| Three Months |
| Nine Months |
Preneed funeral |
| 3.2% |
| 4.7% |
Preneed cemetery |
| 3.3% |
| 4.8% |
Cemetery perpetual care |
| 2.7% |
| 3.6% |
Combined trust funds |
| 3.1% |
| 4.4% |
NON-GAAP FINANCIAL MEASURES
Earnings excluding special items and diluted earnings per share excluding special items shown above are non-GAAP financial measures. We believe these non-GAAP financial measures provide a consistent basis for comparison between quarters and better reflect the performance of our core operations, as they are not influenced by certain income or expense items not affecting continuing operations. We also believe these measures help facilitate comparisons to our competitors' operating results.
Set forth below is a reconciliation of our reported net income attributable to common stockholders to earnings excluding special items and our GAAP diluted earnings per share to diluted earnings per share excluding special items. We do not intend for this information to be considered in isolation or as a substitute for other measures of performance prepared in accordance with GAAP.
(In millions, except diluted EPS) | Three Months Ended September 30, | ||||||||||||||
| 2018 |
| 2017 | ||||||||||||
| Net
|
| Diluted
|
| Net
|
| Diluted
| ||||||||
Net income attributable to common stockholders, as reported | $ | 68.9 |
|
| $ | 0.37 |
|
| $ | 56.2 |
|
| $ | 0.29 |
|
Pre-tax reconciling items: |
|
|
|
|
|
|
| ||||||||
(Gains) losses on divestitures and impairment charges, net | (8.0) |
|
| (0.04) |
|
| 0.1 |
|
| — |
| ||||
Legal settlements | — |
|
| — |
|
| 11.5 |
|
| 0.06 |
| ||||
Tax reconciling items: |
|
|
|
|
|
|
| ||||||||
Tax effect from special items | 0.8 |
|
| — |
|
| (4.0) |
|
| (0.02) |
| ||||
Change in certain tax reserves and other (1) | 2.6 |
|
| 0.02 |
|
| (0.8) |
|
| — |
| ||||
Earnings excluding special items and diluted earnings per share excluding special items | $ | 64.3 |
|
| $ | 0.35 |
|
| $ | 63.0 |
|
| $ | 0.33 |
|
|
|
|
|
|
|
|
| ||||||||
Diluted weighted average shares outstanding (in thousands) |
|
| 185,460 |
|
|
|
| 192,243 |
| ||||||
| |||||||||||||||
(In millions, except diluted EPS) | Nine Months Ended September 30, | ||||||||||||||
| 2018 |
| 2017 | ||||||||||||
| Net
|
| Diluted
|
| Net
|
| Diluted
| ||||||||
Net income attributable to common stockholders, as reported | $ | 254.2 |
|
| $ | 1.36 |
|
| $ | 299.3 |
|
| $ | 1.56 |
|
Pre-tax reconciling items: |
|
|
|
|
|
|
| ||||||||
Gains on divestitures and impairment charges, net | (15.3) |
|
| (0.08) |
|
| (5.5) |
|
| (0.03) |
| ||||
Losses on early extinguishment of debt | 10.1 |
|
| 0.05 |
|
| — |
|
| — |
| ||||
Pension termination settlements | — |
|
| — |
|
| 12.8 |
|
| 0.07 |
| ||||
Legal settlements | — |
|
| — |
|
| 11.5 |
|
| 0.06 |
| ||||
Tax reconciling items: |
|
|
|
|
|
|
| ||||||||
Tax effect from special items | 1.4 |
|
| 0.01 |
|
| (6.6) |
|
| (0.03) |
| ||||
Change in certain tax reserves and other (1) | (14.8) |
|
| (0.08) |
|
| (108.0) |
|
| (0.57) |
| ||||
Earnings excluding special items and diluted earnings per share excluding special items | $ | 235.6 |
|
| $ | 1.26 |
|
| $ | 203.5 |
|
| $ | 1.06 |
|
|
|
|
|
|
|
|
| ||||||||
Diluted weighted average shares outstanding (in thousands) |
|
| 187,517 |
|
|
|
| 192,417 |
|
|
|
(1) | 2018 is impacted by the remeasurement of deferred taxes resulting from a change in estimate related to the finalization of the 2017 tax return. 2017 is impacted by the settlement of IRS tax audits related to tax years 1999-2005. Please see our third quarter 2018 Form 10-Q filing for further details, which will be filed later. |
Conference Call and Webcast
We will host a conference call on Tuesday, October 30, 2018, at 8:00 a.m. Central Time. A question and answer session will follow a brief presentation made by management. The conference call dial-in number is (888) 771-4371 or (847) 585-4405 with the passcode of 47683779. The conference call will also be broadcast live via the Internet and can be accessed through our website at www.sci-corp.com. A replay of the conference call will be available through November 6, 2018 and can be accessed at (888) 843-7419 or (630) 652-3042 with the passcode of 47683779#. Additionally, a replay of the conference call will be available on our website for approximately one week.
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:
For further information on these and other risks and uncertainties, see our Securities and Exchange Commission filings, including our 2017 Annual Report on Form 10-K and as updated in our Form 10-Q filings. Copies of this document as well as other SEC filings can be obtained from our website at www.sci-corp.com. We assume no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by us, whether as a result of new information, future events or otherwise.
About Service Corporation International
Service Corporation International (NYSE: SCI), headquartered in Houston, Texas, is North America's leading provider of deathcare products and services. At September 30, 2018, we owned and operated 1,478 funeral homes and 481 cemeteries (of which 286 are combination locations) in 44 states, eight Canadian provinces, the District of Columbia, and Puerto Rico. Through our businesses, we market the Dignity Memorial® brand, which offers assurance of quality, value, caring service, and exceptional customer satisfaction. For more information about Service Corporation International, please visit our website at www.sci-corp.com. For more information about Dignity Memorial®, please visit www.dignitymemorial.com.
For additional information contact: |
|
| ||
Investors: |
| Debbie Young - Director / Investor Relations |
| (713) 525-9088 |
Media: |
| Jay Andrew - Director / Corporate Communications |
| (713) 525-5235 |
SERVICE CORPORATION INTERNATIONAL | |||||||||||||||
CONSOLIDATED STATEMENT OF OPERATIONS | |||||||||||||||
| |||||||||||||||
| Three Months Ended |
| Nine Months Ended | ||||||||||||
| September 30, |
| September 30, | ||||||||||||
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||
| (In thousands, except per share amounts) | ||||||||||||||
Revenue: |
|
|
|
|
|
|
| ||||||||
Property and merchandise revenue | $ | 392,410 |
|
| $ | 363,934 |
|
| $ | 1,158,224 |
|
| $ | 1,116,551 |
|
Service revenue | 323,246 |
|
| 319,810 |
|
| 1,035,794 |
|
| 1,012,631 |
| ||||
Other revenue | 63,130 |
|
| 47,602 |
|
| 175,342 |
|
| 153,116 |
| ||||
Total revenue | 778,786 |
|
| 731,346 |
|
| 2,369,360 |
|
| 2,282,298 |
| ||||
Costs and expenses: |
|
|
|
|
|
|
| ||||||||
Cost of property and merchandise | (203,349) |
|
| (189,818) |
|
| (600,997) |
|
| (588,370) |
| ||||
Cost of service | (188,893) |
|
| (179,924) |
|
| (568,034) |
|
| (546,978) |
| ||||
Overhead and other expenses | (220,374) |
|
| (211,828) |
|
| (650,270) |
|
| (636,417) |
| ||||
Total costs and expenses | (612,616) |
|
| (581,570) |
|
| (1,819,301) |
|
| (1,771,765) |
| ||||
Operating profit | 166,170 |
|
| 149,776 |
|
| 550,059 |
|
| 510,533 |
| ||||
General and administrative expenses | (41,070) |
|
| (38,992) |
|
| (106,990) |
|
| (121,644) |
| ||||
Gains (losses) on divestitures and impairment charges, net | 7,970 |
|
| (143) |
|
| 15,317 |
|
| 5,545 |
| ||||
Hurricane expenses, net | (767) |
|
| (1,290) |
|
| (437) |
|
| (1,290) |
| ||||
Operating income | 132,303 |
|
| 109,351 |
|
| 457,949 |
|
| 393,144 |
| ||||
Interest expense | (46,419) |
|
| (42,754) |
|
| (134,514) |
|
| (125,473) |
| ||||
Loss on early extinguishment of debt, net | — |
|
| — |
|
| (10,131) |
|
| — |
| ||||
Other income (expense), net | 152 |
|
| (19) |
|
| 2,416 |
|
| (1,049) |
| ||||
Income before income taxes | 86,036 |
|
| 66,578 |
|
| 315,720 |
|
| 266,622 |
| ||||
(Provision for) benefit from income taxes | (17,043) |
|
| (10,437) |
|
| (61,398) |
|
| 32,830 |
| ||||
Net income | 68,993 |
|
| 56,141 |
|
| 254,322 |
|
| 299,452 |
| ||||
Net (income) loss attributable to noncontrolling interests | (58) |
|
| 23 |
|
| (160) |
|
| (105) |
| ||||
Net income attributable to common stockholders | $ | 68,935 |
|
| $ | 56,164 |
|
| $ | 254,162 |
|
| $ | 299,347 |
|
Basic earnings per share: |
|
|
|
|
|
|
| ||||||||
Net income attributable to common stockholders | $ | 0.38 |
|
| $ | 0.30 |
|
| $ | 1.39 |
|
| $ | 1.59 |
|
Basic weighted average number of shares | 180,858 |
|
| 187,435 |
|
| 182,859 |
|
| 187,761 |
| ||||
Diluted earnings per share: |
|
|
|
|
|
|
| ||||||||
Net income attributable to common stockholders | $ | 0.37 |
|
| $ | 0.29 |
|
| $ | 1.36 |
|
| $ | 1.56 |
|
Diluted weighted average number of shares | 185,460 |
|
| 192,243 |
|
| 187,517 |
|
| 192,417 |
| ||||
Dividends declared per share | $ | 0.17 |
|
| $ | 0.15 |
|
| $ | 0.51 |
|
| $ | 0.43 |
|
SERVICE CORPORATION INTERNATIONAL | |||||||
CONSOLIDATED BALANCE SHEET | |||||||
| |||||||
| September 30, 2018 |
| December 31, 2017 | ||||
| (In thousands, except share amounts) | ||||||
ASSETS |
|
|
| ||||
Current assets: |
|
|
| ||||
Cash and cash equivalents | $ | 158,301 |
|
| $ | 330,039 |
|
Receivables, net | 84,018 |
|
| 90,304 |
| ||
Inventories | 26,061 |
|
| 25,378 |
| ||
Other | 32,107 |
|
| 35,575 |
| ||
Total current assets | 300,487 |
|
| 481,296 |
| ||
Preneed receivables, net and trust investments | 4,568,470 |
|
| 4,778,842 |
| ||
Cemetery property | 1,835,761 |
|
| 1,791,989 |
| ||
Property and equipment, net | 1,960,329 |
|
| 1,873,044 |
| ||
Goodwill | 1,854,167 |
|
| 1,805,981 |
| ||
Deferred charges and other assets | 954,478 |
|
| 601,184 |
| ||
Cemetery perpetual care trust investments | 1,596,542 |
|
| 1,532,167 |
| ||
Total assets | $ | 13,070,234 |
|
| $ | 12,864,503 |
|
|
|
|
| ||||
LIABILITIES & EQUITY |
|
|
| ||||
Current liabilities: |
|
|
| ||||
Accounts payable and accrued liabilities | $ | 482,357 |
|
| $ | 489,172 |
|
Current maturities of long-term debt | 68,806 |
|
| 337,337 |
| ||
Income taxes payable | 3,726 |
|
| 2,470 |
| ||
Total current liabilities | 554,889 |
|
| 828,979 |
| ||
Long-term debt | 3,542,314 |
|
| 3,135,316 |
| ||
Deferred revenue, net | 1,431,181 |
|
| 1,789,776 |
| ||
Deferred tax liability | 372,929 |
|
| 283,765 |
| ||
Other liabilities | 402,593 |
|
| 410,982 |
| ||
Deferred receipts held in trust | 3,687,394 |
|
| 3,475,430 |
| ||
Care trusts' corpus | 1,589,948 |
|
| 1,530,818 |
| ||
Commitments and contingencies |
|
|
| ||||
Equity: |
|
|
| ||||
Common stock, $1 per share par value, 500,000,000 shares authorized, 193,556,602 and 191,935,647 shares issued, respectively, and 180,933,966 and 186,614,747 shares outstanding, respectively | 180,934 |
|
| 186,615 |
| ||
Capital in excess of par value | 962,041 |
|
| 970,468 |
| ||
Retained earnings | 313,720 |
|
| 210,364 |
| ||
Accumulated other comprehensive income | 32,167 |
|
| 41,943 |
| ||
Total common stockholders' equity | 1,488,862 |
|
| 1,409,390 |
| ||
Noncontrolling interests | 124 |
|
| 47 |
| ||
Total equity | 1,488,986 |
|
| 1,409,437 |
| ||
Total liabilities and equity | $ | 13,070,234 |
|
| $ | 12,864,503 |
|
SERVICE CORPORATION INTERNATIONAL | |||||||
CONSOLIDATED STATEMENT OF CASH FLOWS | |||||||
(In thousands, except share amounts) | |||||||
| |||||||
| Nine Months Ended September 30, | ||||||
| 2018 |
| 2017 | ||||
Cash flows from operating activities: |
|
|
| ||||
Net income | $ | 254,322 |
|
| $ | 299,452 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
| ||||
Loss on early extinguishment of debt | 10,131 |
|
| — |
| ||
Depreciation and amortization | 117,496 |
|
| 113,641 |
| ||
Amortization of intangibles | 20,170 |
|
| 20,923 |
| ||
Amortization of cemetery property | 47,509 |
|
| 46,533 |
| ||
Amortization of loan costs | 4,531 |
|
| 4,344 |
| ||
Provision for doubtful accounts | 6,522 |
|
| 6,846 |
| ||
Provision for (benefit from) deferred income taxes | 25,491 |
|
| (148,465) |
| ||
Gains on divestitures and impairment charges, net | (15,317) |
|
| (5,545) |
| ||
Gain on sale of investments | (2,636) |
|
| — |
| ||
Share-based compensation | 11,740 |
|
| 10,719 |
| ||
Change in assets and liabilities, net of effects from acquisitions and divestitures: |
|
|
| ||||
(Increase) decrease in receivables | (964) |
|
| 12,568 |
| ||
Increase in other assets | (19,251) |
|
| (15,814) |
| ||
(Decrease) increase in payables and other liabilities | (2,879) |
|
| 66,455 |
| ||
Effect of preneed sales production and maturities: |
|
|
| ||||
Increase in preneed receivables, net and trust investments | (37,387) |
|
| (58,631) |
| ||
Increase in deferred revenue, net | 43,329 |
|
| 37,438 |
| ||
Decrease in deferred receipts held in trust | (10,541) |
|
| (981) |
| ||
Net cash provided by operating activities | 452,266 |
|
| 389,483 |
| ||
Cash flows from investing activities: |
|
|
| ||||
Capital expenditures | (165,943) |
|
| (141,652) |
| ||
Acquisitions, net of cash acquired | (187,616) |
|
| (75,818) |
| ||
Proceeds from divestitures and sales of property and equipment | 29,890 |
|
| 32,588 |
| ||
Proceeds from sale of investments | 2,900 |
|
| — |
| ||
Payments for Company-owned life insurance policies | (14,283) |
|
| (6,189) |
| ||
Proceeds from Company-owned life insurance policies | 2,810 |
|
| 2,591 |
| ||
Purchase of land and other | (14,525) |
|
| 175 |
| ||
Net cash used in investing activities | (346,767) |
|
| (188,305) |
| ||
Cash flows from financing activities: |
|
|
| ||||
Proceeds from issuance of long-term debt | 395,000 |
|
| 120,000 |
| ||
Scheduled payments of debt | (25,601) |
|
| (26,376) |
| ||
Early payments of debt | (259,590) |
|
| — |
| ||
Principal payments on capital leases | (29,771) |
|
| (40,509) |
| ||
Proceeds from exercise of stock options | 18,481 |
|
| 30,672 |
| ||
Purchase of Company common stock | (275,726) |
|
| (148,818) |
| ||
Payments of dividends | (93,002) |
|
| (80,711) |
| ||
Purchase of noncontrolling interest | — |
|
| (4,580) |
| ||
Bank overdrafts and other | (8,842) |
|
| 2,790 |
| ||
Net cash used in financing activities | (279,051) |
|
| (147,532) |
| ||
Effect of foreign currency on cash, cash equivalents, and restricted cash | (1,111) |
|
| 9,463 |
| ||
Net (decrease) increase in cash, cash equivalents, and restricted cash | (174,663) |
|
| 63,109 |
| ||
Cash, cash equivalents, and restricted cash at beginning of period | 340,601 |
|
| 211,506 |
| ||
Cash, cash equivalents, and restricted cash at end of period | $ | 165,938 |
|
| $ | 274,615 |
|