- Conference call on Thursday, November 5, 2009, at 8:00 a.m. Central Standard Time.
Nov. 4, 2009 (PR Newswire) -- HOUSTON, Nov. 4 /PRNewswire-FirstCall/ -- Service Corporation International (NYSE: SCI), the largest provider of deathcare products and services in North America, today reported results for the third 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 Nine Months Ended
(In millions, except for September 30, September 30,
per share amounts)
------------------ -----------------
2009 2008 2009 2008
---- ---- ---- ----
Revenues $497.2 $516.4 $1,521.8 $1,638.7
Operating income $78.0 $49.0 $232.6 $231.7
Net income attributable to
common stockholders $31.2 $14.6 $88.8 $87.6
Diluted earnings per share $.12 $.06 $.35 $.33
Earnings from
continuing operations
excluding special items(1) $32.4 $23.9 $93.3 $112.1
Diluted earnings per
share from continuing
operations excluding
special items(1) $.13 $.09 $.37 $.43
Diluted weighted average
shares outstanding 253.0 260.4 251.3 263.0
Net cash provided by
operating activities $94.2 $116.9 $305.3 $233.4
Net cash provided by
operating activities
excluding special items(1) $94.2 $116.9 $305.3 $326.7
(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 headings "Non-GAAP Financial Measures" and "Cash Flow and Capital Spending."
Quarter Highlights:
-- Diluted earnings per share from continuing operations excluding special
items was $0.13 in the third quarter 2009 compared to $0.09 in the prior
year third 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 funeral services performed in the quarter.
-- Funeral gross profit increased $9.5 million, or 16.0%, and funeral gross
margin percentage improved to 20.9% from 16.9% as significant
efficiencies obtained from cost control initiatives more than offset
declines in funeral services performed.
-- Cemetery gross profit increased $9.4 million, or 40.7%, and cemetery
gross margin percentage improved to 19.3% from 13.9% due to an increase
in preneed cemetery property sales, higher cemetery trust fund income
and reductions in costs compared to prior year levels, which were
partially offset by lower atneed revenues in the third quarter.
-- Net cash provided by operating activities excluding special items for
the quarter was $94.2 million, a decrease of $22.7 million compared to
the prior year, reflecting the impact of partially funding an October
payroll in the current quarter, disbursements for mid-year incentive
compensation and lower receipts on preneed receivables, which were
partially offset by higher earnings.
Tom Ryan, the Company's President and Chief Executive Officer, commented on the third quarter of 2009:
"Our financial performance for the quarter was very encouraging, and continued the trend of strong financial results for the year, and I want to thank all of our associates for their efforts and hard work in achieving these results. We believe our proactive response to the challenging economic climate, which included realigning our cost structure to promote sustainable operating efficiency and investing in our sales production channel, has been validated by the results achieved, as operating income surpassed prior year results for the quarter. Moreover, our fundamentally sound business model and efficient cost structure will provide the basis for high margin growth as we expand the organization both organically and through acquisition."
"We recently announced the acquisition of Keystone North America Inc., the fifth largest provider of deathcare products and services in North America. The transaction is anticipated to close in the first quarter of 2010 and is expected to be immediately accretive to earnings and cash flow. Looking forward, we intend to continue to capitalize on our leading market position, utilizing our strength as the industry leader to make our business stronger and to enhance shareholder value."
REVIEW OF RESULTS FOR THIRD QUARTER 2009
Consolidated Segment Results
(In millions, except funeral services performed
and average revenue per funeral service) Three Months Ended
September 30,
-------------
2009 2008
---- ----
Funeral
-------
Funeral atneed revenue $211.7 $229.6
Funeral recognized preneed revenue 99.6 103.7
Other funeral revenue(1) 17.6 17.1
---- ----
Total funeral revenues $328.9 $350.4
Gross profit $68.7 $59.2
Gross margin percentage 20.9% 16.9%
Funeral services performed 60,494 65,177
Average revenue per funeral service $5,146 $5,114
Cemetery
--------
Cemetery atneed revenue $59.2 $65.1
Cemetery recognized preneed revenue 89.1 79.5
Other cemetery revenue (2) 20.0 21.4
---- ----
Total cemetery revenues $168.3 $166.0
Gross profit $32.5 $23.1
Gross margin percentage 19.3% 13.9%
(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 September 30, 2009 and 2008. We consider comparable operations to be those owned for the entire period beginning January 1, 2008 and ending September 30, 2009.
(Dollars in millions, except average
revenue per funeral service and average
revenue per contract sold) Three Months Ended
September 30,
-------------
2009 2008 Change
---- ---- ------
Comparable funeral revenue:
Atneed revenue $207.8 $218.7 $(10.9)
Recognized preneed revenue 98.5 102.0 (3.5)
Other funeral revenue(1) 17.7 17.0 0.7
---- ---- ---
Total comparable funeral revenues $324.0 $337.7 $(13.7)
Comparable gross profit $69.9 $59.9 $10.0
Comparable gross margin percentage 21.6% 17.7%
Comparable funeral services performed:
Preneed 20,723 20,946 (223)
Atneed 38,543 41,172 (2,629)
------ ------ -------
Total 59,266 62,118 (2,852)
Comparable average revenue per funeral
service $5,168 $5,163 $5
Comparable preneed funeral production:
Sales $122.7 $126.5 $(3.8)
Total preneed funeral contracts sold 21,572 22,125 (553)
Average revenue per contract sold $5,688 $5,718 $(30)
(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 4.6%, primarily related
to soft demand experienced in our markets. We believe this decline is
consistent with trends experienced by other funeral service providers
and industry vendors.
-- The comparable average revenue per funeral service grew 0.1% 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 1.9%.
-- The cremation rate increased 50 basis points to 42.8% in the third
quarter of 2009 compared to 42.3% for the same period of 2008.
-- Comparable funeral gross profit increased $10.0 million, or 16.7%, and
gross margin percentage increased to 21.6% compared to 17.7% in 2008 due
to lower variable merchandise costs, a decline in personnel costs
related to work force initiatives and a reduction in our self-insurance
reserves, which were partially offset by the impact of lower funeral
services performed.
-- Preneed funeral sales production decreased $3.8 million, or 3.0%. Total
funeral contracts sold decreased 2.5% while the average revenue per
contract sold decreased 0.5%. 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 September 30, 2009 and 2008. We consider comparable operations to be those owned for the entire period beginning January 1, 2008 and ending September 30, 2009.
Three Months Ended
(Dollars in millions) September 30,
-------------
2009 2008 Change
---- ---- ------
Comparable cemetery revenue:
Atneed revenue $58.1 $61.6 $(3.5)
Recognized preneed revenue 88.6 79.3 9.3
Other cemetery revenue(1) 19.7 21.0 (1.3)
---- ---- ----
Total comparable cemetery revenues $166.4 $161.9 $4.5
Comparable gross profit $32.2 $22.4 $9.8
Comparable gross margin percentage 19.4% 13.8%
Comparable preneed and atneed cemetery
sales production:
Property $87.3 $75.3 $12.0
Merchandise and services 87.2 83.9 3.3
Discounts (16.8) (13.9) (2.9)
------ ------ -----
Preneed and atneed cemetery sales
production $157.7 $145.3 $12.4
Recognition rate (2) 93% 97%
(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 $3.5 million, or 5.7%,
which we believe was primarily driven by a decline in deaths in our
markets.
-- Comparable recognized preneed cemetery revenues increased $9.3 million,
primarily as a result of strong cemetery property sales production in
the current period.
-- Cemetery gross profit increased $9.8 million, and gross margin
percentage increased to 19.4% compared to 13.8% in 2008 due to the
higher preneed revenues described above, a decline in personnel costs
related to work force initiatives, and a reduction in our self-insurance
reserves, partially offset by lower atneed revenues.
-- Preneed and atneed cemetery sales production increased $12.4 million, or
8.5%, primarily due to higher property sales resulting from new company
sales initiatives coinciding with an overall improvement in the general
economic climate.
Other Financial Results
-- General and administrative expenses of $21.0 million in the third
quarter of 2009 increased $4.9 million compared to the third quarter of
2008 primarily because the prior year quarter reflected a $4.0 million
reduction in corporate bonuses and long-term incentive plans.
-- We recognized a $2.2 million net pretax loss on divestitures and
impairment charges in the third quarter of 2009 compared to $12.8
million in 2008. These losses were due primarily to impairment charges
on various locations in North America.
-- Prior year results included Hurricane expenses of $4.3 million
reflecting estimated property damages incurred at various locations
caused by Hurricane Ike in September 2008, net of estimated insurance
recoveries.
-- Interest expense decreased to $29.4 million in the third quarter of
2009, compared to $33.2 million in the third quarter of 2008. The
decrease was primarily due to lower average levels of debt.
-- During the third quarter of 2009, we purchased $17.2 million of our
senior notes and debentures on the open market.
