- Conference call on Thursday, August 6, 2009, at 9:00 a.m. Central Daylight Standard Time.
HOUSTON, Aug. 5 /PRNewswire-FirstCall/ -- Service Corporation International (NYSE: SCI), a leading provider of deathcare products and services, today reported results for the second quarter 2009. Our unaudited condensed consolidated financial statements can be found at the end of this press release. The table below summarizes our key financial results:
Three Months Ended Six Months Ended
(In millions, except for June 30, June 30,
per share amounts) ------------------- -------------------
2009 2008 2009 2008
------ ------ ------ ------
Revenues $513.9 $548.8 $1,024.5 $1,122.2
Operating income $69.1 $83.3 $154.6 $182.7
Net income attributable to
common stockholders $23.1 $31.4 $57.6 $72.9
Diluted earnings per share $.09 $.12 $.23 $.28
Earnings from continuing
operations excluding special
items(1) $30.0 $36.4 $60.9 $88.2
Diluted earnings per share
from continuing operations
excluding special items(1) $.12 $.14 $.24 $.33
Diluted weighted average
shares outstanding 251.1 263.1 250.7 264.2
Net cash provided by
operating activities $69.7 $70.2 $211.1 $116.5
Net cash provided by
operating activities
excluding special items(1) $69.7 $70.2 $211.1 $209.8
(1) Earnings from continuing operations excluding special items, diluted
earnings per share from continuing operations excluding special
items, and net cash provided by operating activities excluding
special items are non-GAAP financial measures. A reconciliation to
net income, diluted earnings per share, and net cash provided by
operating activities computed in accordance with GAAP can be found
later in this press release under the heading "Non-GAAP Financial
Measures" or "Cash Flow and Capital Spending".
Highlights:
- Diluted earnings per share (EPS) from continuing operations excluding special items was $0.12 in the second quarter 2009 compared to $0.14 in the prior year second quarter. These results exceeded our internal expectations as cost reduction initiatives, better than expected trust fund performance, and better than expected preneed cemetery production more than offset lower than expected funeral services performed.
- While funeral gross profit decreased slightly, funeral gross profit margins improved to 20.7% from 19.9% as declines in funeral services performed were more than offset by cost control initiatives.
- Cemetery gross profit decreased $4.2 million due to a decline in cemetery property sales and lower cemetery trust fund income compared to prior year levels, which were partially offset by lower variable costs. Cemetery gross profit exceeded our expectations as cost control initiatives helped to offset expected cemetery revenue declines.
- Despite the decline in earnings, net cash provided by operating activities excluding special items for the quarter was flat to the prior year at approximately $70 million due primarily to favorable working capital initiatives and the cost control initiatives mentioned above.
Tom Ryan, the Company's President and Chief Executive Officer, commented on the second quarter of 2009:
"We are very pleased with our solid operational results this quarter, which were better than expected and reflect the actions we've taken to mitigate the economic and near-term pressures on our business. We also benefited from positive developments in the external environment, including a rebound in the financial markets and an improvement in consumer confidence. Cash flow performance continues to be strong and we have been actively deleveraging our capital structure, retiring more than $100 million of debt in the first half of 2009. Our solid financial position and healthy cash flow outlook provide us the flexibility to pursue opportunities to invest in the long-term growth of our business and to return value to our shareholders."
REVIEW OF RESULTS FOR SECOND QUARTER 2009
Consolidated Segment Results
(In millions, except funeral services performed Three Months Ended
and average revenue per funeral service) June 30,
--------
2009 2008
---- ----
Funeral
-------
Funeral atneed revenue $222.9 $235.4
Funeral recognized preneed revenue 102.6 110.6
Other funeral revenue(1) 17.2 17.3
----- -----
Total funeral revenues $342.7 $363.3
Gross profit $71.1 $72.3
Gross margin percentage 20.7% 19.9%
Funeral services performed 63,749 67,919
Average revenue per funeral service $5,106 $5,094
Cemetery
--------
Cemetery atneed revenue $61.0 $65.8
Cemetery recognized preneed revenue 89.5 96.1
Other cemetery revenue (2) 20.7 23.6
----- -----
Total cemetery revenues $171.2 $185.5
Gross profit $30.7 $34.9
Gross margin percentage 17.9% 18.8%
(1) Other funeral revenue consists primarily of General Agency (GA)
revenues, which are commissions we receive from third-party insurance
companies for life insurance policies or annuities sold to preneed
customers for the purpose of funding preneed funeral arrangements.
(2) Other cemetery revenue is primarily related to cemetery merchandise
and service trust fund income, endowment care trust fund income, and
interest and finance charges earned from customer receivables on
preneed installment contracts.
Comparable Funeral Results
The table below details comparable funeral results of operations ("same store") for the three months ended June 30, 2009 and 2008. We consider comparable operations to be those owned for the entire period beginning January 1, 2008 and ending June 30, 2009.
(Dollars in millions, except average Three Months Ended
revenue per funeral service and June 30,
average revenue per contract sold) --------------
2009 2008 Change
---- ---- ------
Comparable funeral revenue:
Atneed revenue $218.1 $232.3 $(14.2)
Recognized preneed revenue 101.5 109.1 (7.6)
Other funeral revenue(1) 17.1 17.2 (0.1)
------ ------ ------
Total comparable funeral revenues $336.7 $358.6 $(21.9)
Comparable gross profit $70.4 $73.0 $(2.6)
Comparable gross margin percentage 20.9% 20.4%
Comparable funeral services performed:
Preneed 21,879 22,809 (930)
Atneed 40,554 44,360 (3,806)
------ ------ ------
Total 62,433 67,169 (4,736)
Comparable average revenue per funeral
service $5,119 $5,083 $36
Comparable preneed funeral production:
Sales $119.9 $122.9 $(3.0)
Total preneed funeral contracts sold 20,868 22,275 (1,407)
Average revenue per contract sold $5,746 $5,517 $229
(1) Other funeral revenue consists primarily of General Agency (GA)
revenues, which are commissions we receive from third-party
insurance companies for life insurance policies or annuities sold
to preneed customers for the purpose of funding preneed funeral
arrangements.
- Comparable funeral services performed decreased 7.1%, primarily related to soft demand experienced at the beginning of the quarter. We believe the decline in deaths in our markets is consistent with trends experienced by other funeral service providers and industry vendors.
- The comparable average revenue per funeral service grew 0.7% over the prior year quarter. Excluding an unfavorable Canadian currency impact and lower funeral trust fund income, the average revenue per funeral service grew approximately 3.5%.
- The cremation rate increased 20 basis points to 42.9% in the second quarter of 2009 compared to 42.7% for the same period of 2008.
- Comparable funeral gross profit decreased $2.6 million, or 3.6%, due to the impact of lower funeral services performed and a decrease in funeral trust fund income, which were partially offset by lower variable merchandise costs and a decline in personnel costs related to work force initiatives. The gross margin percentage increased to 20.9% compared to 20.4% in 2008.
- Preneed funeral sales production decreased $3.0 million, or 2.4%. Total funeral contracts sold decreased 6.3% while the average revenue per contract sold increased 4.2%. Preneed funeral sales are deferred and recognized as revenues in the future when the funeral service is performed.
Comparable Cemetery Results
The table below details comparable cemetery results of operations ("same store") for the three months ended June 30, 2009 and 2008. We consider comparable operations to be those owned for the entire period beginning January 1, 2008 and ending June 30, 2009.
Three Months Ended
(Dollars in millions) June 30,
--------------
2009 2008 Change
---- ---- ------
Comparable cemetery revenue:
Atneed revenue $59.7 $65.6 $(5.9)
Recognized preneed revenue 88.8 96.0 (7.2)
Other cemetery revenue(1) 20.5 23.3 (2.8)
---- ---- -----
Total comparable cemetery revenues $169.0 $184.9 $(15.9)
Comparable gross profit $29.4 $34.8 $(5.4)
Comparable gross margin percentage 17.4% 18.8%
Comparable preneed and atneed cemetery
sales production:
Property $86.3 $94.9 $(8.6)
Merchandise and services 93.7 95.0 (1.3)
Discounts (16.5) (16.8) 0.3
----- ----- -----
Preneed and atneed cemetery sales
production $163.5 $173.1 $(9.6)
Recognition rate (2) 91% 93%
(1) Other cemetery revenue is primarily related to cemetery merchandise
and service trust fund income, endowment care trust fund income and
interest and finance charges earned from customer receivables on
preneed installment contracts.
(2) Represents the ratio of current period revenue recognition stated as a
percentage of current period sales production.
- Comparable atneed cemetery revenues declined $5.9 million, or 9.0%, which we believe was primarily driven by a decline in deaths in our markets.
- Comparable recognized preneed cemetery revenues declined $7.2 million, of which approximately $5 million related to a decline in preneed sales production. However, this preneed sales production was better than we expected as we began to see improvements in consumer sentiment late in the quarter.
- Other cemetery revenue decreased by $2.8 million, or 12.0%, as cemetery trust fund income recognized from our preneed merchandise and service and cemetery perpetual care trusts declined $2.4 million due to negative market returns experienced in late 2008 and early 2009.
- Cemetery gross profit decreased $5.4 million, due to the revenue declines described above, which were largely offset by lower variable selling compensation and merchandise expenses and a decline in personnel costs related to work force initiatives.
Cash Flow and Capital Spending
Set forth below is a reconciliation of net cash provided by operating activities excluding special items to our reported net cash provided by operating activities prepared in accordance with GAAP. We do not intend for this information to be considered in isolation or as a substitute for other measures of performance prepared in accordance with GAAP.
Three Months Six Months Ended
Ended
(In millions) June 30, June 30,
---------------- ----------------
2009 2008 2009 2008
----- ----- ----- -----
Net cash provided by operating
activities, as reported $69.7 $70.2 $211.1 $116.5
Federal tax payment - - - 90.0
One-time Alderwoods transition
and other costs - - - 3.3
----- ----- ----- -----
Net cash provided by operating
activities, excluding special
items $69.7 $70.2 $211.1 $209.8
===== ===== ====== ======
Net cash provided by operating activities, excluding special items, was $69.7 million for the second quarter of 2009, down slightly from $70.2 million in the prior year quarter.
