UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
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FORM 8-K
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CURRENT REPORT | |||||
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported) | February 18, 2019 (February 18, 2019) | ||||
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 | |||||
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(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:
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¨ | 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).
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Emerging growth company ¨
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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 February 18, Service Corporation International issued a press release reporting its financial results for the fourth 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 February 18, 2019 reporting fourth 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.
February 18, 2019 | Service Corporation International | |
By: | /s/ Eric D. Tanzberger | |
|
Eric D. Tanzberger | |
Senior Vice President | ||
Chief Financial Officer |
Service Corporation International Announces Fourth Quarter 2018 Financial Results And Outlook For 2019
HOUSTON, Feb. 18, 2019 /PRNewswire/ -- Service Corporation International (NYSE: SCI), the largest provider of deathcare products and services in North America, today reported results for the fourth quarter 2018. Our 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
|
| Twelve Months Ended
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| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||
Revenue | $ | 820.8 |
|
| $ | 812.7 |
|
| $ | 3,190.2 |
|
| $ | 3,095.0 |
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Operating income | $ | 172.7 |
|
| $ | 178.0 |
|
| $ | 630.7 |
|
| $ | 571.1 |
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Net income attributable to common stockholders | $ | 193.0 |
|
| $ | 247.3 |
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| $ | 447.2 |
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| $ | 546.7 |
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Diluted earnings per share | $ | 1.04 |
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| $ | 1.29 |
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| $ | 2.39 |
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| $ | 2.84 |
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Earnings excluding special items(1) | $ | 99.6 |
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| $ | 95.0 |
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| $ | 335.2 |
|
| $ | 298.5 |
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Diluted earnings per share excluding special items(1) | $ | 0.54 |
|
| $ | 0.50 |
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| $ | 1.79 |
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| $ | 1.55 |
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Diluted weighted average shares outstanding | 185.7 |
|
| 191.7 |
|
| 187.0 |
|
| 192.2 |
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Net cash provided by operating activities | $ | 163.5 |
|
| $ | 113.9 |
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| $ | 615.8 |
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| $ | 503.4 |
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Net cash provided by operating activities excluding special items(1) | $ | 163.5 |
|
| $ | 125.4 |
|
| $ | 610.2 |
|
| $ | 555.4 |
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(1) | Earnings excluding special items, diluted earnings per share 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 fourth quarter of 2018:
"We delivered a solid quarter as we closed out 2018 and are pleased to report an 8% increase in adjusted earnings per share. Double-digit growth in our preneed cemetery sales production drove cemetery profit higher. This along with increased profit from newly acquired businesses were somewhat offset by lower funeral segment profit. Tax planning and tax reform also had a favorable impact for the quarter.
For the full year of 2018, we reported a 15% increase in adjusted earnings per share. We expanded comparable cemetery segment profit margin by 170 basis points while comparable funeral segment profit margin contracted by 50 basis points. Higher cash flows allowed us to invest over $226 million towards growth and return more than $400 million to our shareholders through dividends and our share repurchase program.
Looking ahead to 2019, we believe we are well positioned to deliver solid results, with expected adjusted earnings per share growth within our long-term targeted growth range of 8% to 12%. We anticipate operating growth to be at the upper end of the range but will be somewhat offset by a higher effective tax rate in 2019. These results are all made possible by our greatest asset, our 24,000 associates. Their hard work, dedication, and focus on our client families are what makes this company so strong. Looking forward, we are confident that our solid operating platform and healthy financial condition will allow us to continue to grow revenue, leverage our scale, and deploy capital wisely to enhance shareholder value."
OUTLOOK FOR 2019
Our outlook for diluted earnings per share from continuing operations excluding special items is anticipated to be in line with our expected long-term growth framework of 8%-12%. Our outlook for net cash provided by operating activities excluding special items reflects an anticipated $40 million net increase in cash taxes compared to 2018.
(In millions, except per share amounts) |
| 2019 Outlook | ||
Diluted earnings per share excluding special items(1) |
| $1.84 to $2.02 | ||
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Net cash provided by operating activities excluding special items and cash taxes(1) |
| $650 |
| $710 |
Cash taxes expected in 2019(2) |
| (100) |
| (100) |
Net cash provided by operating activities excluding special items(1) |
| $550 |
| $610 |
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Capital improvements at existing locations and cemetery development expenditures |
| Approximately $195 |
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(1) | Diluted earnings per share excluding special items, net cash provided by operating activities excluding special items and, net cash provided by operating activities excluding special items and taxes, 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 2019 excludes the following because this information is not currently available for 2019: 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 earnings per share 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". |
(2) | Cash taxes in 2018 were $60 million, or approximately $40 million lower than expected cash taxes in 2019. |
REVIEW OF FINANCIAL RESULTS FOR THE FOURTH QUARTER OF 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
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| Twelve Months Ended
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| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||
Funeral |
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Atneed revenue | $ | 245.1 |
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| $ | 254.1 |
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| $ | 998.5 |
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| $ | 1,011.2 |
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Matured preneed revenue | 150.9 |
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| 149.0 |
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| 600.9 |
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| 574.2 |
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Core revenue | 396.0 |
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| 403.1 |
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| 1,599.4 |
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| 1,585.4 |
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Non-funeral home revenue | 12.4 |
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| 11.7 |
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| 49.7 |
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| 46.5 |
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Recognized preneed revenue | 26.6 |
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| 28.5 |
|
| 125.1 |
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| 117.4 |
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Other revenue | 29.0 |
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| 29.7 |
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| 123.8 |
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| 118.8 |
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Total revenue | $ | 464.0 |
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| $ | 473.0 |
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| $ | 1,898.0 |
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| $ | 1,868.1 |
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Operating profit | $ | 90.6 |
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| $ | 97.0 |
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| $ | 369.6 |
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| $ | 371.9 |
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Operating margin percentage | 19.5 | % |
| 20.5 | % |
| 19.5 | % |
| 19.9 | % | ||||
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Funeral services performed | 79,309 |
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| 78,253 |
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| 315,700 |
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| 308,786 |
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Average revenue per service | $ | 5,149 |
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| $ | 5,301 |
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| $ | 5,224 |
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| $ | 5,285 |
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Cemetery |
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Atneed property revenue | $ | 23.6 |
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| $ | 22.5 |
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| $ | 90.4 |
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| $ | 90.4 |
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Atneed merchandise and service revenue | 58.6 |
|
| 59.2 |
|
| 232.7 |
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| 229.5 |
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Total atneed revenue | 82.2 |
|
| 81.7 |
|
| 323.1 |
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| 319.9 |
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Recognized preneed property revenue | 169.6 |
|
| 159.8 |
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| 573.0 |
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| 538.3 |
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Recognized preneed merchandise and service revenue | 77.8 |
|
| 68.5 |
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| 288.3 |
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| 274.9 |
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Total recognized preneed revenue | 247.4 |
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| 228.3 |
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| 861.3 |
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| 813.2 |
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Core revenue | 329.6 |
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| 310.0 |
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| 1,184.4 |
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| 1,133.1 |
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Other cemetery revenue | 27.2 |
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| 29.7 |
|
| 107.8 |
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| 93.8 |
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Total revenue | $ | 356.8 |
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| $ | 339.7 |
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| $ | 1,292.2 |
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| $ | 1,226.9 |
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Operating profit | $ | 119.7 |
|
| $ | 115.2 |
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| $ | 390.7 |
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| $ | 350.9 |
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Operating margin percentage | 33.5 | % |
| 33.9 | % |
| 30.2 | % |
| 28.6 | % |
Comparable Funeral Results
The table below details comparable funeral results of operations ("same store") for the three months ended December 31, 2018 and 2017. We consider comparable operations to be those businesses owned for the entire period beginning January 1, 2017 and ending December 31, 2018.
(Dollars in millions, except average revenue per service and average revenue per contract sold) | Three Months Ended December 31, | |||||||||||||
| 2018 |
| 2017 |
| Var |
| % | |||||||
Comparable revenue: |
|
|
|
|
|
|
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Atneed revenue(1) | $ | 236.7 |
|
| $ | 248.0 |
|
| $ | (11.3) |
|
| (4.6) | % |
Matured preneed revenue(2) | 147.4 |
|
| 147.3 |
|
| 0.1 |
|
| 0.1 | % | |||
Core revenue(3) | 384.1 |
|
| 395.3 |
|
| (11.2) |
|
| (2.8) | % | |||
Non-funeral home revenue(4) | 12.1 |
|
| 11.7 |
|
| 0.4 |
|
| 3.4 | % | |||
Recognized preneed revenue(5) | 26.1 |
|
| 28.4 |
|
| (2.3) |
|
| (8.1) | % | |||
Other revenue(6) | 29.4 |
|
| 29.5 |
|
| (0.1) |
|
| (0.3) | % | |||
Total comparable revenue | $ | 451.7 |
|
| $ | 464.9 |
|
| $ | (13.2) |
|
| (2.8) | % |
|
|
|
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|
|
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Comparable operating profit | $ | 90.6 |
|
| $ | 98.3 |
|
| $ | (7.7) |
|
| (7.8) | % |
Comparable operating margin percentage | 20.1 | % |
| 21.1 | % |
| (1.1) | % |
|
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Comparable services performed: |
|
|
|
|
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Atneed | 41,710 |
|
| 42,611 |
|
| (901) |
|
| (2.1) | % | |||
Matured preneed | 24,253 |
|
| 24,341 |
|
| (88) |
|
| (0.4) | % | |||
Total core | 65,963 |
|
| 66,952 |
|
| (989) |
|
| (1.5) | % | |||
Non-funeral home | 9,928 |
|
| 9,869 |
|
| 59 |
|
| 0.6 | % | |||
Total comparable funeral services performed | 75,891 |
|
| 76,821 |
|
| (930) |
|
| (1.2) | % | |||
Core cremation rate | 49.2 | % |
| 47.4 | % |
| 1.8 | % |
|
| ||||
Total comparable cremation rate | 55.7 | % |
| 54.0 | % |
| 1.7 | % |
|
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Comparable sales average revenue per service: |
|
|
|
|
|
|
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Atneed | $ | 5,675 |
|
| $ | 5,820 |
|
| $ | (145) |
|
| (2.5) | % |
Matured preneed | 6,078 |
|
| 6,052 |
|
| 26 |
|
| 0.4 | % | |||
Total core | 5,823 |
|
| 5,904 |
|
| (81) |
|
| (1.4) | % | |||
Non-funeral home | 1,219 |
|
| 1,186 |
|
| 33 |
|
| 2.8 | % | |||
Total comparable average revenue per service | $ | 5,221 |
|
| $ | 5,298 |
|
| $ | (77) |
|
| (1.5) | % |
|
|
|
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|
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Comparable preneed sales production: |
|
|
|
|
|
|
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Total preneed sales | $ | 196.0 |
|
| $ | 200.2 |
|
| $ | (4.2) |
|
| (2.1) | % |
Core contracts sold | 27,004 |
|
| 26,714 |
|
| 290 |
|
| 1.1 | % | |||
Non-funeral home contracts sold | 13,896 |
|
| 16,043 |
|
| (2,147) |
|
| (13.4) | % | |||
Core average revenue per contract sold | $ | 5,905 |
|
| $ | 6,069 |
|
| $ | (164) |
|
| (2.7) | % |
Non-funeral home average revenue per contract sold | $ | 2,631 |
|
| $ | 2,369 |
|
| $ | 262 |
|
| 11.1 | % |
|
|
(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. |
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(5) | Recognized preneed revenue represents travel protection, net and merchandise sold on a preneed contract and delivered before death has occurred. |
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(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 December 31, 2018 and 2017. We consider comparable operations to be those businesses owned for the entire period beginning January 1, 2017 and ending December 31, 2018.
(Dollars in millions) | Three Months Ended December 31, | |||||||||||||
| 2018 |
| 2017 |
| Var |
| % | |||||||
Comparable revenue: |
|
|
|
|
|
|
| |||||||
Atneed property revenue | $ | 23.2 |
|
| $ | 22.4 |
|
| $ | 0.8 |
|
| 3.6 | % |
Atneed merchandise and service revenue | 57.1 |
|
| 58.7 |
|
| (1.6) |
|
| (2.7) | % | |||
Total atneed revenue(1) | 80.3 |
|
| 81.1 |
|
| (0.8) |
|
| (1.0) | % | |||
Recognized preneed property revenue | 167.9 |
|
| 159.4 |
|
| 8.5 |
|
| 5.3 | % | |||
Recognized preneed merchandise and service revenue | 76.5 |
|
| 68.0 |
|
| 8.5 |
|
| 12.5 | % | |||
Total recognized preneed revenue(2) | 244.4 |
|
| 227.4 |
|
| 17.0 |
|
| 7.5 | % | |||
Core revenue(3) | 324.7 |
|
| 308.6 |
|
| 16.1 |
|
| 5.2 | % | |||
Other revenue(4) | 25.4 |
|
| 29.3 |
|
| (3.9) |
|
| (13.3) | % | |||
Total comparable revenue | $ | 350.1 |
|
| $ | 337.9 |
|
| $ | 12.2 |
|
| 3.6 | % |
|
|
|
|
|
|
|
| |||||||
Comparable operating profit | $ | 118.4 |
|
| $ | 115.2 |
|
| $ | 3.2 |
|
| 2.8 | % |
Comparable operating margin percentage | 33.8 | % |
| 34.1 | % |
| (0.3) | % |
|
| ||||
|
|
|
|
|
|
|
| |||||||
Comparable preneed and atneed sales production: |
|
|
|
|
|
|
| |||||||
Property | $ | 177.6 |
|
| $ | 155.7 |
|
| $ | 21.9 |
|
| 14.1 | % |
Merchandise and services | 134.2 |
|
| 132.9 |
|
| 1.3 |
|
| 1.0 | % | |||
Discounts and other | (2.1) |
|
| (1.1) |
|
| (1.0) |
|
| 90.9 | % | |||
Preneed and atneed sales production | $ | 309.7 |
|
| $ | 287.5 |
|
| $ | 22.2 |
|
| 7.7 | % |
|
|
|
|
|
|
|
| |||||||
Recognition rate(5) | 104.8 | % |
| 107.3 | % |
|
|
|
|
|
|
(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
Set forth below is a reconciliation of our reported net cash provided by operating activities prepared in accordance with GAAP to net cash provided by operating activities excluding special items (or sometimes referred to as adjusted operating cash flow). 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) | Three Months Ended
|
| Twelve Months
| ||||||||||||
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||
Net cash provided by operating activities | $ | 163.5 |
|
| $ | 113.9 |
|
| $ | 615.8 |
|
| $ | 503.4 |
|
Legal settlement, net of insurance recoveries | — |
|
| 11.5 |
|
| — |
|
| 11.5 |
| ||||
IRS tax settlement | — |
|
| — |
|
| (5.6) |
|
| 34.2 |
| ||||
Pension termination settlement payment | — |
|
| — |
|
| — |
|
| 6.3 |
| ||||
Net cash provided by operating activities excluding special items | $ | 163.5 |
|
| $ | 125.4 |
|
| $ | 610.2 |
|
| $ | 555.4 |
|
Cash taxes included in net cash provided by operating activities excluding special items | $ | 3.8 |
|
| $ | 45.3 |
|
| $ | 59.8 |
|
| $ | 132.7 |
|
Net cash provided by operating activities was $163.5 million compared to $113.9 million in the prior year quarter. Excluding the legal settlement of $11.5 million in the prior year, net cash provided by operating activities excluding special items was $163.5 million in the fourth quarter of 2018 compared to $125.4 million in the prior year quarter. The increase was primarily due to lower cash taxes of approximately $41 million. Similar to last year, we were able to identify approximately $20 million of non-earnings related working capital initiatives, resulting in cash received from our trust funds, that we do not expect to recur in 2019.
A summary of our capital expenditures is set forth below:
(In millions) | Three Months Ended
|
| Twelve Months
| ||||||||||||
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||
Capital improvements at existing operating locations and corporate office | $ | 37.0 |
|
| $ | 44.4 |
|
| $ | 124.8 |
|
| $ | 117.6 |
|
Development of cemetery property | 21.9 |
|
| 24.4 |
|
| 78.7 |
|
| 79.1 |
| ||||
Capital improvements at existing operating locations and cemetery development expenditures | 58.9 |
|
| 68.8 |
|
| 203.5 |
|
| 196.7 |
| ||||
Growth capital expenditures/construction of new funeral home locations | 10.7 |
|
| 4.0 |
|
| 32.0 |
|
| 17.8 |
| ||||
Total capital expenditures | $ | 69.6 |
|
| $ | 72.8 |
|
| $ | 235.5 |
|
| $ | 214.5 |
|
Total capital expenditures decreased in the current quarter by $3.2 million, primarily due to $6.0 million of additional spend on locations affected by the hurricanes in the prior year.
TRUST FUND RETURNS
Total trust fund returns include realized and unrealized gains and losses and dividends and are shown gross without netting of certain fees. A summary of our consolidated trust fund returns for the three and twelve months ended December 31, 2018 is set forth below:
|
| Three Months |
| Twelve Months |
Preneed funeral |
| (9.1)% |
| (4.9)% |
Preneed cemetery |
| (9.5)% |
| (5.2)% |
Cemetery perpetual care |
| (6.4)% |
| (3.0)% |
Combined trust funds |
| (8.3)% |
| (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 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 December 31, | ||||||||||||||
| 2018 |
| 2017 | ||||||||||||
| Net Income |
| Diluted EPS |
| Net Income |
| Diluted EPS | ||||||||
Net income attributable to common stockholders, as reported | $ | 193.0 |
|
| $ | 1.04 |
|
| $ | 247.3 |
|
| $ | 1.29 |
|
Pre-tax reconciling items: |
|
|
|
|
|
|
| ||||||||
Gains on divestitures and impairment charges, net | (0.6) |
|
| — |
|
| (1.5) |
|
| (0.01) |
| ||||
Loss on early extinguishment of debt, net | — |
|
| — |
|
| 0.3 |
|
| — |
| ||||
Tax reconciling items: |
|
|
|
|
|
|
| ||||||||
Tax effect from special items | 0.2 |
|
| — |
|
| 1.0 |
|
| 0.01 |
| ||||
Change in uncertain tax reserves and other (1) | (93.0) |
|
| (0.50) |
|
| (152.1) |
|
| (0.79) |
| ||||
Earnings excluding special items and diluted earnings per share excluding special items | $ | 99.6 |
|
| $ | 0.54 |
|
| $ | 95.0 |
|
| $ | 0.50 |
|
|
|
|
|
|
|
|
| ||||||||
Diluted weighted average shares outstanding (in thousands) |
|
| 185,676 |
|
|
|
| 191,729 |
| ||||||
| |||||||||||||||
| |||||||||||||||
(In millions, except diluted EPS) | Twelve Months Ended December 31, | ||||||||||||||
| 2018 |
| 2017 | ||||||||||||
| Net Income |
| Diluted EPS |
| Net Income |
| Diluted EPS | ||||||||
Net income attributable to common stockholders, as reported | $ | 447.2 |
|
| $ | 2.39 |
|
| $ | 546.7 |
|
| $ | 2.84 |
|
Pre-tax reconciling items: |
|
|
|
|
|
|
| ||||||||
Gains on divestitures and impairment charges, net | (15.9) |
|
| (0.09) |
|
| (7.0) |
|
| (0.04) |
| ||||
Losses on early extinguishment of debt, net | 10.1 |
|
| 0.05 |
|
| 0.3 |
|
| — |
| ||||
Pension termination settlements | — |
|
| — |
|
| 12.8 |
|
| 0.07 |
| ||||
Legal settlements, net of insurance recoveries | — |
|
| — |
|
| 11.5 |
|
| 0.06 |
| ||||
Tax reconciling items: |
|
|
|
|
|
|
| ||||||||
Tax effect from special items | 1.6 |
|
| 0.01 |
|
| (5.7) |
|
| (0.03) |
| ||||
Change in uncertain tax reserves and other (1) | (107.8) |
|
| (0.57) |
|
| (260.1) |
|
| (1.35) |
| ||||
Earnings excluding special items and diluted earnings per share excluding special items | $ | 335.2 |
|
| $ | 1.79 |
|
| $ | 298.5 |
|
| $ | 1.55 |
|
|
|
|
|
|
|
|
| ||||||||
Diluted weighted average shares outstanding (in thousands) |
|
| 186,972 |
|
|
|
| 192,246 |
|
|
(1) 2018 is primarily impacted by the reduction in uncertain tax reserves due to the expiration of statutes of limitations for the Internal Revenue Service to assess tax on tax years prior to 2015. On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the "Tax Act". As a result of the Tax Act, we realized in 2017 a net tax benefit for the remeasurement of deferred tax assets and liabilities, partially offset by a transition tax on certain unrepatriated earnings of our foreign subsidiaries. 2017 is also impacted by the settlement of IRS tax audits related to tax years 1999-2005. Please see our 2018 Form 10-K filing for further details, which will be filed later this week. |
Conference Call and Webcast
We will host a conference call on Tuesday, February 19, 2019, 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 48142408. 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 February 26, 2019 and can be accessed at (888) 843-7419 or (630) 652-3042 with the passcode of 48142408#. 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 2018 Annual Report on Form 10-K. 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 and make no undertaking 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 December 31, 2018, we owned and operated 1,481 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 December 31, |
| Twelve Months Ended December 31, | ||||||||||||
| 2018 |
| 2017 |
| 2018 |
| 2017 | ||||||||
| (In thousands, except per share amounts) | ||||||||||||||
Revenue: |
|
|
|
|
|
|
| ||||||||
Property and merchandise revenue | $ | 426,018 |
|
| $ | 409,196 |
|
| $ | 1,584,242 |
|
| $ | 1,525,747 |
|
Service revenue | 338,586 |
|
| 344,034 |
|
| 1,374,380 |
|
| 1,356,665 |
| ||||
Other revenue | 56,210 |
|
| 59,503 |
|
| 231,552 |
|
| 212,619 |
| ||||
Total revenue | 820,814 |
|
| 812,733 |
|
| 3,190,174 |
|
| 3,095,031 |
| ||||
Costs and expenses: |
|
|
|
|
|
|
| ||||||||
Cost of property and merchandise | (210,577) |
|
| (206,355) |
|
| (811,574) |
|
| (794,725) |
| ||||
Cost of service | (184,454) |
|
| (182,226) |
|
| (752,488) |
|
| (729,204) |
| ||||
Overhead and other expenses | (215,520) |
|
| (211,906) |
|
| (865,790) |
|
| (848,323) |
| ||||
Total costs and expenses | (610,551) |
|
| (600,487) |
|
| (2,429,852) |
|
| (2,372,252) |
| ||||
Operating profit | 210,263 |
|
| 212,246 |
|
| 760,322 |
|
| 722,779 |
| ||||
General and administrative expenses | (38,509) |
|
| (31,423) |
|
| (145,499) |
|
| (153,067) |
| ||||
Gains on divestitures and impairment charges, net | 616 |
|
| 1,470 |
|
| 15,933 |
|
| 7,015 |
| ||||
Hurricane recoveries (expenses), net | 340 |
|
| (4,294) |
|
| (97) |
|
| (5,584) |
| ||||
Operating income | 172,710 |
|
| 177,999 |
|
| 630,659 |
|
| 571,143 |
| ||||
Interest expense | (47,042) |
|
| (43,652) |
|
| (181,556) |
|
| (169,125) |
| ||||
Losses on early extinguishment of debt, net | — |
|
| (274) |
|
| (10,131) |
|
| (274) |
| ||||
Other income (expense), net | 344 |
|
| (437) |
|
| 2,760 |
|
| (1,486) |
| ||||
Income before income taxes | 126,012 |
|
| 133,636 |
|
| 441,732 |
|
| 400,258 |
| ||||
Benefit from income taxes | 67,224 |
|
| 113,759 |
|
| 5,826 |
|
| 146,589 |
| ||||
Net income | 193,236 |
|
| 247,395 |
|
| 447,558 |
|
| 546,847 |
| ||||
Net income attributable to noncontrolling interests | (190) |
|
| (79) |
|
| (350) |
|
| (184) |
| ||||
Net income attributable to common stockholders | $ | 193,046 |
|
| $ | 247,316 |
|
| $ | 447,208 |
|
| $ | 546,663 |
|
Basic earnings per share: |
|
|
|
|
|
|
| ||||||||
Net income attributable to common stockholders | $ | 1.07 |
|
| $ | 1.32 |
|
| $ | 2.45 |
|
| $ | 2.91 |
|
Basic weighted average number of shares | 181,233 |
|
| 187,241 |
|
| 182,447 |
|
| 187,630 |
| ||||
Diluted earnings per share |
|
|
|
|
|
|
| ||||||||
Net income attributable to common stockholders | $ | 1.04 |
|
| $ | 1.29 |
|
| $ | 2.39 |
|
| $ | 2.84 |
|
Diluted weighted average number of shares | 185,676 |
|
| 191,729 |
|
| 186,972 |
|
| 192,246 |
|
SERVICE CORPORATION INTERNATIONAL | |||||||
CONSOLIDATED BALANCE SHEET | |||||||
| |||||||
| December 31, | ||||||
| 2018 |
| 2017 | ||||
| (In thousands, except share amounts) | ||||||
ASSETS | |||||||
Current assets: |
|
|
| ||||
Cash and cash equivalents | $ | 198,850 |
|
| $ | 330,039 |
|
Receivables, net | 73,825 |
|
| 90,304 |
| ||
Inventories | 24,950 |
|
| 25,378 |
| ||
Other | 33,607 |
|
| 35,575 |
| ||
Total current assets | 331,232 |
|
| 481,296 |
| ||
|
|
|
| ||||
Preneed receivables, net and trust investments | 4,271,392 |
|
| 4,778,842 |
| ||
Cemetery property | 1,837,464 |
|
| 1,791,989 |
| ||
Property and equipment, net | 1,977,364 |
|
| 1,873,044 |
| ||
Goodwill | 1,863,842 |
|
| 1,805,981 |
| ||
Deferred charges and other assets | 934,151 |
|
| 601,184 |
| ||
Cemetery perpetual care trust investments | 1,477,798 |
|
| 1,532,167 |
| ||
Total assets | $ | 12,693,243 |
|
| $ | 12,864,503 |
|
|
|
|
| ||||
LIABILITIES & EQUITY | |||||||
Current liabilities: |
|
|
| ||||
Accounts payable and accrued liabilities | $ | 479,768 |
|
| $ | 489,172 |
|
Current maturities of long-term debt | 69,896 |
|
| 337,337 |
| ||
Income taxes payable | 5,936 |
|
| 2,470 |
| ||
Total current liabilities | 555,600 |
|
| 828,979 |
| ||
Long-term debt | 3,532,182 |
|
| 3,135,316 |
| ||
Deferred revenue, net | 1,418,814 |
|
| 1,789,776 |
| ||
Deferred tax liability | 404,627 |
|
| 283,765 |
| ||
Other liabilities | 297,302 |
|
| 410,982 |
| ||
Deferred receipts held in trust | 3,371,738 |
|
| 3,475,430 |
| ||
Care trusts' corpus | 1,471,165 |
|
| 1,530,818 |
| ||
Commitments and contingencies |
|
|
| ||||
Equity: |
|
|
| ||||
Common stock, $1 per share par value, 500,000,000 shares authorized, 184,720,582 and 191,935,647 shares issued, respectively, and 181,470,582 and 186,614,747 shares outstanding, respectively | 181,471 |
|
| 186,615 |
| ||
Capital in excess of par value | 972,710 |
|
| 970,468 |
| ||
Retained earnings | 474,327 |
|
| 210,364 |
| ||
Accumulated other comprehensive income | 13,395 |
|
| 41,943 |
| ||
Total common stockholders' equity | 1,641,903 |
|
| 1,409,390 |
| ||
Noncontrolling interests | (88) |
|
| 47 |
| ||
Total equity | 1,641,815 |
|
| 1,409,437 |
| ||
Total liabilities and equity | $ | 12,693,243 |
|
| $ | 12,864,503 |
|
SERVICE CORPORATION INTERNATIONAL | |||||||
CONSOLIDATED STATEMENT OF CASH FLOWS | |||||||
| |||||||
| Years Ended December 31, | ||||||
| 2018 |
| 2017 | ||||
| (In thousands) | ||||||
Cash flows from operating activities: |
|
|
| ||||
Net income | $ | 447,558 |
|
| $ | 546,847 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
| ||||
Losses on early extinguishment of debt, net | 10,131 |
|
| 274 |
| ||
Depreciation and amortization | 153,650 |
|
| 153,141 |
| ||
Amortization of intangibles | 26,195 |
|
| 27,650 |
| ||
Amortization of cemetery property | 68,640 |
|
| 68,102 |
| ||
Amortization of loan costs | 6,059 |
|
| 5,859 |
| ||
Provision for doubtful accounts | 8,372 |
|
| 9,980 |
| ||
Benefit for deferred income taxes | (41,479) |
|
| (317,838) |
| ||
Gains on divestitures and impairment charges, net | (15,933) |
|
| (7,015) |
| ||
Gain on sale of investments | (2,636) |
|
| — |
| ||
Share-based compensation | 15,626 |
|
| 14,788 |
| ||
Change in assets and liabilities, net of effects from acquisitions and dispositions: |
|
|
| ||||
Decrease (increase) in receivables | 8,052 |
|
| (9,740) |
| ||
Increase in other assets | (4,814) |
|
| (14,353) |
| ||
(Decrease) increase in payables and other liabilities | (16,699) |
|
| 81,763 |
| ||
Effect of preneed sales production and maturities: |
|
|
| ||||
Increase in preneed receivables, net and trust investments | (55,607) |
|
| (63,994) |
| ||
Increase in deferred revenue | 28,005 |
|
| 31,182 |
| ||
Decrease in deferred receipts held in trust | (19,290) |
|
| (23,274) |
| ||
Net cash provided by operating activities | 615,830 |
|
| 503,372 |
| ||
Cash flows from investing activities: |
|
|
| ||||
Capital expenditures | (235,545) |
|
| (214,501) |
| ||
Acquisitions, net of cash acquired | (194,824) |
|
| (76,171) |
| ||
Proceeds from divestitures and sales of property and equipment | 37,309 |
|
| 52,381 |
| ||
Proceeds from sale of investments | 2,900 |
|
| — |
| ||
Payments for Company-owned life insurance policies | (14,760) |
|
| (7,360) |
| ||
Proceeds from Company-owned life insurance policies | 4,824 |
|
| 2,592 |
| ||
Purchase of land and other | (14,525) |
|
| 175 |
| ||
Net cash used in investing activities | (414,621) |
|
| (242,884) |
| ||
Cash flows from financing activities: |
|
|
| ||||
Proceeds from issuance of long-term debt | 396,349 |
|
| 1,787,500 |
| ||
Debt issuance costs | — |
|
| (12,939) |
| ||
Scheduled payments of debt | (34,134) |
|
| (468,973) |
| ||
Early payments of debt | (259,590) |
|
| (1,117,512) |
| ||
Principal payments on capital leases | (39,686) |
|
| (51,106) |
| ||
Proceeds from exercise of stock options | 24,517 |
|
| 33,611 |
| ||
Purchase of Company common stock | (277,611) |
|
| (199,637) |
| ||
Payments of dividends | (123,849) |
|
| (108,750) |
| ||
Purchase of noncontrolling interest | — |
|
| (4,580) |
| ||
Bank overdrafts and other | (15,177) |
|
| 5,959 |
| ||
Net cash used in financing activities | (329,181) |
|
| (136,427) |
| ||
Effect of foreign currency | (5,045) |
|
| 5,034 |
| ||
Net (decrease) increase in cash, cash equivalents, and restricted cash | (133,017) |
|
| 129,095 |
| ||
Cash, cash equivalents, and restricted cash at beginning of period | 340,601 |
|
| 211,506 |
| ||
Cash, cash equivalents, and restricted cash at end of period | $ | 207,584 |
|
| $ | 340,601 |
|