Conference call on Tuesday, May 2, 2023, at 8:00 a.m. Central Time.
HOUSTON, May 1, 2023
/PRNewswire/ --Service Corporation International (NYSE: SCI), the
largest provider of deathcare products and services in North America, today reported results for the
first quarter of 2023.
Tom Ryan, the Company's
Chairman and CEO, commented on the first quarter
performance:
"We are excited to start the year with GAAP earnings per share
of $0.93 and net cash provided by
operating activities of $220 million for the first quarter of
2023. We continue to exceed our long-term growth expectations when
comparing against a pre-pandemic first quarter of 2019.
- Adjusted earnings per share has grown an impressive 19% on a
compounded annual basis compared to the first quarter of 2019
(compared to an expectation of 8%-12%).
- The number of funeral services performed is trending higher
than we anticipated and is approximately 4% higher than the first
quarter of 2019 levels on a compounded annual growth basis.
- Both cemetery and funeral preneed sales production have
increased at a 9% compounded annual growth basis over first quarter
2019 levels.
We believe our long-term growth strategy is on track as we
continue to grow revenue, leverage our unparalleled scale, and
allocate our capital wisely to enhance shareholder value. I would
like to thank our 25,000 associates for their dedicated service to
our client families that has made these results possible."
First Quarter Highlights:
– GAAP earnings per share were $0.93.
– Net cash provided by operating activities were $220 million.
– Comparable funeral sales average grew 2.4%.
– Comparable preneed funeral sales production grew
$24 million, or 8.1%.
Details of our first quarter 2023 financial results and the
unaudited consolidated financial statements can be found in the
Appendix at the end of this press release. The table below
summarizes our key financial results.
(Dollars in
millions, except for per share amounts)
|
|
Three months ended
March 31,
|
|
|
2023
|
|
2022
|
Revenue
|
|
$ 1,028.7
|
|
$ 1,112.4
|
Operating
income
|
|
$
245.6
|
|
$
335.7
|
Net income attributable
to common stockholders
|
|
$
144.8
|
|
$
219.5
|
Diluted earnings per
share
|
|
$
0.93
|
|
$
1.34
|
Earnings excluding
special items (1)
|
|
$
144.9
|
|
$
219.6
|
Diluted earnings per
share excluding special items (1)
|
|
$
0.93
|
|
$
1.34
|
Diluted weighted
average shares outstanding
|
|
155.3
|
|
163.8
|
Net cash provided by
operating activities
|
|
$
219.6
|
|
$
332.2
|
|
|
(1)
|
Earnings excluding
special items, and diluted earnings per share excluding special
items, are non- GAAP financial measures. These items are also
referred to as "adjusted earnings per share". A reconciliation from
net income attributable to common stockholders and diluted earnings
per share, in accordance with generally accepted accounting
principles in the United States (GAAP), can be found later in this
press release under the heading "Non-GAAP Financial Measures" in
the Appendix at the end of this press release.
|
|
|
- Diluted earnings per share was $0.93 in the first quarter of 2023 compared to
$1.34 in the first quarter of 2022.
The decline of $0.41 is primarily due
to an expected decline in gross profit related to decreases in
COVID-19 related activity compared to the prior year. Additionally,
fewer shares outstanding and a lower tax rate helped to offset the
impact of higher interest expense primarily due to rising interest
rates.
- Net cash provided by operating activities declined $112.6 million to $219.6
million in the first quarter of 2023 compared to
$332.2 million in the first quarter
of 2022. The decrease in operating cash flow is primarily due to
lower operating income resulting from a decrease in
COVID-19-related activity, higher cash interest, and a slight net
working capital use.
OUTLOOK FOR 2023
Our guidance ranges for 2023 detailed below have not changed and
are consistent with our previously reported outlook for 2023. Our
2023 outlook for diluted earnings per share from continuing
operations excluding special items is anticipated to be at the
upper end of our expected long-term growth framework of 8%-12% when
excluding the impact of COVID-19 activity in 2022 and before
absorbing an expected 25 cent
increase in interest expense. Our outlook for net cash provided by
operating activities excludes special items relating to the
payments of certain estimated legal charges of $64.6 million recognized in the fourth
quarter of 2022.
(Dollars in
millions, except per share amounts)
|
|
2023
Outlook
|
Diluted earnings per
share excluding special items (1)
|
|
$3.45 -
$3.75
|
|
|
|
|
|
Net cash provided by
operating activities excluding special items and cash taxes
(1)
|
|
$910 - $960
|
Cash taxes expected in
2023 (at the midpoint of Diluted earnings per share
guidance)
|
|
$160 - $170
|
Net cash provided by
operating activities excluding special items
(1)
|
|
$740 - $800
|
|
|
|
Capital improvements at
existing field locations
|
|
$115 - $125
|
Development of cemetery
property
|
|
$125 - $135
|
Digital investments and
corporate
|
|
$50
|
Total maintenance,
cemetery development, and other capital expenditures (Maintenance
capital
expenditures)
|
|
$290 - $310
|
|
|
(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 2023 excludes the following because this information is
not currently available for 2023: Expenses net of insurance
recoveries related to weather events and 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 or cash outflows associated with estimated
litigation charges or legal settlements or the recognition of
receivables for insurance recoveries associated with litigation, or
deferred tax payments. The foregoing items could materially impact
our forward-looking diluted earnings per share and/or our net cash
provided by operating activities calculated in accordance with
GAAP.
|
|
|
CONFERENCE CALL AND WEBCAST
We will host a conference call on Tuesday, May 2, 2023, 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 numbers are (888)
317-6003 (US) or (412) 317-6061 (International) with the passcode
of 7616153. 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 May 9, 2023 and can
be accessed at (877) 344-7529 (US) or (412) 317-0088
(International) with the passcode of 1573671. Additionally, a
replay of the conference call will be available on our website for
approximately three months.
ABOUT SERVICE CORPORATION INTERNATIONAL
Service Corporation International (NYSE: SCI), headquartered in
Houston, Texas, is North America's leading provider of funeral,
cemetery and cremation services, as well as final-arrangement
planning in advance, serving more than 600,000 families each year.
Our diversified portfolio of brands provides families and
individuals a full range of choices to meet their needs, from
simple cremations to full life celebrations and personalized
remembrances. Our Dignity Memorial® brand is the name families turn
to for professionalism, compassion, and attention to detail that is
second to none. At March 31, 2023, we owned and operated 1,480
funeral service locations and 490 cemeteries (of which 303 are
combination locations) in 44 states, eight Canadian provinces, the
District of Columbia, and
Puerto Rico. 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 - Assistant
Vice President / Corporate Communications
|
|
(713)
525-3468
|
|
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," "predict," or other similar words that convey the
uncertainty of future events or outcomes. The absence of these
words, however, does not mean that the statements are not
forward-looking. 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:
- Our affiliated trust funds own investments in securities, which
are affected by market conditions that are beyond our control.
- We may be required to replenish our affiliated funeral and
cemetery trust funds to meet minimum funding requirements, which
would have a negative effect on our earnings and cash flow.
- Our ability to execute our strategic plan depends on many
factors, some of which are beyond our control.
- We may be adversely affected by the effects of inflation.
- Our results may be adversely affected by significant weather
events, natural disasters, catastrophic events or public health
crises.
- Our credit agreements contain covenants that may prevent us
from engaging in certain transactions.
- If we lost the ability to use surety bonding to support our
preneed activities, we may be required to make material cash
payments to fund certain trust funds.
- Increasing death benefits related to preneed contracts funded
through life insurance or annuity contracts may not cover future
increases in the cost of providing a price-guaranteed service.
- The financial condition of third-party life insurance companies
that fund our preneed contracts may impact our future revenue.
- Unfavorable publicity could affect our reputation and
business.
- Our failure to attract and retain qualified sales personnel
could have an adverse effect on our business and financial
condition.
- We use a combination of insurance, self-insurance, and large
deductibles in managing our exposure to certain inherent risks;
therefore, we could be exposed to unexpected costs that could
negatively affect our financial performance.
- Declines in overall economic conditions beyond our control
could reduce future potential earnings and cash flows and could
result in future impairments to goodwill and/or other intangible
assets.
- Any failure to maintain the security of the information
relating to our customers, their loved ones, our associates, and
our vendors could damage our reputation, could cause us to incur
substantial additional costs and to become subject to litigation,
and could adversely affect our operating results, financial
condition, or cash flow.
- Our Canadian business exposes us to operational, economic, and
currency risks.
- Our level of indebtedness could adversely affect our ability to
raise additional capital to fund our operations, limit our ability
to react to changes in the economy or our industry, and may prevent
us from fulfilling our obligations under our indebtedness.
- A failure of a key information technology system or process
could disrupt and adversely affect our business.
- Failure to maintain effective internal control over financial
reporting could adversely affect our results of operations,
investor confidence, and our stock price.
- The funeral and cemetery industry is competitive.
- If the number of deaths in our markets declines, our cash flows
and revenue may decrease. Changes in the number of deaths are not
predictable from market to market or over the short term.
- If we are not able to respond effectively to changing consumer
preferences, our market share, revenue, and/or profitability could
decrease.
- The continuing upward trend in the number of cremations
performed in North America could
result in lower revenue, operating profit, and cash flows.
- Our funeral and cemetery businesses are high fixed-cost
businesses.
- Risks associated with our supply chain could materially
adversely affect our financial performance.
- Regulation and compliance could have a material adverse impact
on our financial results.
- Unfavorable results of litigation could have a material adverse
impact on our financial statements.
- Cemetery burial practice claims could have a material adverse
impact on our financial results.
- The application of unclaimed property laws by certain states to
our preneed funeral and cemetery backlog could have a material
adverse impact on our liquidity, cash flows, and financial
results.
- Changes in taxation as well as the inherent difficulty in
quantifying potential tax effects of business decisions could have
a material adverse effect on the results of our operations,
financial condition, or cash flows.
For further information on these and other risks and
uncertainties, see our Securities and Exchange Commission filings,
including our 2022 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.
SERVICE CORPORATION
INTERNATIONAL
|
|
APPENDIX: RESULTS
FOR THE FIRST QUARTER OF 2023
|
|
Consolidated
Statement of Operations (Unaudited)
|
|
(Dollars in
thousands, except per share amounts)
|
Three months
ended
|
|
March
31,
|
|
2023
|
|
2022
|
|
|
|
|
Revenue
|
$ 1,028,709
|
|
$ 1,112,403
|
Cost of
revenue
|
(739,615)
|
|
(735,490)
|
Gross profit
|
289,094
|
|
376,913
|
Corporate general and
administrative expenses
|
(44,160)
|
|
(41,704)
|
Gains on divestitures
and impairment charges, net
|
691
|
|
489
|
Operating
income
|
245,625
|
|
335,698
|
Interest
expense
|
(53,916)
|
|
(39,028)
|
Losses on early
extinguishment of debt
|
(1,060)
|
|
—
|
Other income,
net
|
1,209
|
|
128
|
Income before income
taxes
|
191,858
|
|
296,798
|
Provision for income
taxes
|
(47,029)
|
|
(77,231)
|
Net income
|
144,829
|
|
219,567
|
Net income attributable
to noncontrolling interests
|
(66)
|
|
(54)
|
Net income
attributable to common stockholders
|
$
144,763
|
|
$
219,513
|
Basic earnings per
share:
|
|
|
|
Net income
attributable to common stockholders
|
$
0.95
|
|
$
1.36
|
Basic weighted average
number of shares
|
153,125
|
|
161,328
|
Diluted earnings per
share:
|
|
|
|
Net income
attributable to common stockholders
|
$
0.93
|
|
$
1.34
|
Diluted weighted
average number of shares
|
155,300
|
|
163,807
|
Consolidated Balance
Sheet (Unaudited)
|
|
(Dollars in
thousands, except share amounts)
|
|
|
|
|
March 31,
2023
|
|
December 31,
2022
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
157,831
|
|
$
191,938
|
Receivables,
net
|
100,864
|
|
96,681
|
Inventories
|
35,200
|
|
31,740
|
Other
|
32,219
|
|
39,487
|
Total current
assets
|
326,114
|
|
359,846
|
Preneed receivables,
net and trust investments
|
5,777,597
|
|
5,577,499
|
Cemetery
property
|
1,948,809
|
|
1,939,816
|
Property and equipment,
net
|
2,372,563
|
|
2,350,549
|
Goodwill
|
1,948,014
|
|
1,945,588
|
Deferred charges and
other assets, net
|
1,196,326
|
|
1,190,426
|
Cemetery perpetual care
trust investments
|
1,774,489
|
|
1,702,313
|
Total
assets
|
$
15,343,912
|
|
$
15,066,037
|
|
|
|
|
LIABILITIES & EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
659,112
|
|
$
707,488
|
Current maturities of
long-term debt
|
71,358
|
|
90,661
|
Income taxes
payable
|
36,929
|
|
1,131
|
Total current
liabilities
|
767,399
|
|
799,280
|
Long-term
debt
|
4,327,787
|
|
4,251,083
|
Deferred revenue,
net
|
1,644,714
|
|
1,624,028
|
Deferred tax
liability
|
444,484
|
|
445,040
|
Other
liabilities
|
420,685
|
|
411,376
|
Deferred receipts held
in trust
|
4,347,600
|
|
4,163,520
|
Care trusts'
corpus
|
1,769,342
|
|
1,698,287
|
Equity:
|
|
|
|
Common stock, $1 per
share par value, 500,000,000 shares authorized,
156,518,824 and 156,088,438 shares issued, respectively, and
151,939,138 and
153,940,365 shares outstanding, respectively
|
151,939
|
|
153,940
|
Capital in excess of
par value
|
953,368
|
|
958,329
|
Retained
earnings
|
499,567
|
|
544,384
|
Accumulated other
comprehensive income
|
16,837
|
|
16,538
|
Total common
stockholders' equity
|
1,621,711
|
|
1,673,191
|
Noncontrolling
interests
|
190
|
|
232
|
Total
equity
|
1,621,901
|
|
1,673,423
|
Total liabilities and
equity
|
$
15,343,912
|
|
$
15,066,037
|
Consolidated
Statement of Cash Flows (Unaudited)
|
|
(Dollars in
thousands)
|
Three months ended
March 31,
|
|
2023
|
|
2022
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
144,829
|
|
$
219,567
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Loss on early
extinguishment of debt, net
|
1,060
|
|
—
|
Depreciation and
amortization
|
46,114
|
|
42,436
|
Amortization of
intangibles
|
4,731
|
|
5,074
|
Amortization of
cemetery property
|
20,338
|
|
24,849
|
Amortization of loan
costs
|
1,697
|
|
1,644
|
Provision for expected
credit losses
|
1,906
|
|
3,078
|
Benefit from deferred
income taxes
|
(492)
|
|
(4,580)
|
Gains on divestitures
and impairment charges, net
|
(691)
|
|
(489)
|
Share-based
compensation
|
4,478
|
|
3,687
|
Change in assets and
liabilities, net of effects from acquisitions and
divestitures:
|
|
|
|
Decrease in
receivables
|
8,329
|
|
5,435
|
Increase in other
assets
|
(17,421)
|
|
(2,714)
|
Increase in payables
and other liabilities
|
1,977
|
|
52,003
|
Effect of preneed
sales production and maturities:
|
|
|
|
Increase in preneed
receivables, net and trust investments
|
(39,923)
|
|
(91,641)
|
Increase in deferred
revenue, net
|
41,030
|
|
67,625
|
Increase in deferred
receipts held in trust
|
1,610
|
|
6,199
|
Net cash provided by
operating activities
|
219,572
|
|
332,173
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(77,903)
|
|
(56,748)
|
Business acquisitions,
net of cash acquired
|
(8,700)
|
|
—
|
Real estate
acquisitions
|
(16,666)
|
|
(226)
|
Proceeds from
divestitures and sales of property and equipment
|
9,741
|
|
2,986
|
Payments for
Company-owned life insurance policies
|
(1,366)
|
|
(1,666)
|
Net cash used in
investing activities
|
(94,894)
|
|
(55,654)
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from issuance
of long-term debt
|
408,383
|
|
75,000
|
Debt issuance
costs
|
(7,471)
|
|
—
|
Scheduled payments of
debt
|
(5,287)
|
|
(9,075)
|
Early payments and
extinguishment of debt
|
(345,073)
|
|
—
|
Principal payments on
finance leases
|
(8,537)
|
|
(9,059)
|
Proceeds from exercise
of stock options
|
8,763
|
|
272
|
Purchase of Company
common stock
|
(165,950)
|
|
(256,355)
|
Payments of
dividends
|
(41,207)
|
|
(39,964)
|
Bank overdrafts and
other
|
(6,729)
|
|
(12,517)
|
Net cash used in
financing activities
|
(163,108)
|
|
(251,698)
|
Effect of foreign
currency
|
20
|
|
2,556
|
Net (decrease) increase
in cash, cash equivalents, and restricted cash
|
(38,410)
|
|
27,377
|
Cash, cash equivalents,
and restricted cash at beginning of period
|
204,524
|
|
278,555
|
Cash, cash equivalents,
and restricted cash at end of period
|
$
166,114
|
|
$
305,932
|
Consolidated Segment
Results
|
(See definitions of
revenue line items later in this appendix.)
|
|
(Dollars in
millions, except average revenue per service)
|
Three months ended
March 31,
|
|
2023
|
|
2022
|
Consolidated
funeral:
|
|
|
|
Atneed
revenue
|
$
313.2
|
|
$
353.4
|
Matured preneed
revenue
|
185.7
|
|
194.9
|
Core
revenue
|
498.9
|
|
548.3
|
Non-funeral home
revenue
|
21.2
|
|
20.8
|
Recognized preneed
revenue
|
46.4
|
|
43.1
|
Other
revenue
|
43.2
|
|
36.9
|
Total
revenue
|
$
609.7
|
|
$
649.1
|
|
|
|
|
Gross profit
|
$
149.5
|
|
$
196.0
|
Gross profit
percentage
|
24.5 %
|
|
30.2 %
|
|
|
|
|
Funeral services
performed
|
96,205
|
|
105,430
|
Average revenue per
service
|
$
5,406
|
|
$
5,398
|
(Dollars in
millions)
|
Three months ended
March 31,
|
|
2023
|
|
2022
|
Consolidated
cemetery:
|
|
|
|
Atneed property
revenue
|
$
36.8
|
|
$
44.7
|
Atneed merchandise and
service revenue
|
73.5
|
|
78.7
|
Total atneed
revenue
|
110.3
|
|
123.4
|
Recognized preneed
property revenue
|
191.7
|
|
221.5
|
Recognized preneed
merchandise and service revenue
|
86.2
|
|
85.0
|
Total recognized
preneed revenue
|
277.9
|
|
306.5
|
Core
revenue
|
388.2
|
|
429.9
|
Other cemetery
revenue
|
30.8
|
|
33.4
|
Total
revenue
|
$
419.0
|
|
$
463.3
|
|
|
|
|
Gross profit
|
$
139.6
|
|
$
180.9
|
Gross profit
percentage
|
33.3 %
|
|
39.0 %
|
Comparable Funeral
Results
|
The table below details
comparable funeral results of operations ("same store") for the
three months ended March 31, 2023
and 2022. We consider comparable funeral operations to be those
businesses owned for the entire period beginning
January 1,
2022 and ending March 31, 2023.
|
|
(Dollars in
millions, except average revenue per service and average
revenue per contract sold)
|
Three months ended
March 31,
|
|
2023
|
|
2022
|
|
Var
|
|
%
|
Comparable funeral
revenue:
|
|
|
|
|
|
|
|
Atneed revenue
(1)
|
$
307.9
|
|
$
352.8
|
|
$
(44.9)
|
|
(12.7) %
|
Matured preneed
revenue (2)
|
184.7
|
|
194.5
|
|
(9.8)
|
|
(5.0) %
|
Core revenue
(3)
|
492.6
|
|
547.3
|
|
(54.7)
|
|
(10.0) %
|
Non-funeral home
revenue (4)
|
20.8
|
|
20.8
|
|
—
|
|
— %
|
Recognized preneed
revenue (5)
|
46.2
|
|
43.1
|
|
3.1
|
|
7.2 %
|
Other revenue
(6)
|
42.7
|
|
36.8
|
|
5.9
|
|
16.0 %
|
Total comparable
revenue
|
$
602.3
|
|
$
648.0
|
|
$
(45.7)
|
|
(7.1) %
|
|
|
|
|
|
|
|
|
Comparable gross
profit
|
$
148.4
|
|
$
196.4
|
|
$
(48.0)
|
|
(24.4) %
|
Comparable gross profit
percentage
|
24.6 %
|
|
30.3 %
|
|
(5.7) %
|
|
|
|
|
|
|
|
|
|
|
Comparable funeral
services performed:
|
|
|
|
|
|
|
|
Atneed
|
51,111
|
|
60,267
|
|
(9,156)
|
|
(15.2) %
|
Matured
preneed
|
28,439
|
|
30,248
|
|
(1,809)
|
|
(6.0) %
|
Total core
|
79,550
|
|
90,515
|
|
(10,965)
|
|
(12.1) %
|
Non-funeral
home
|
14,667
|
|
14,761
|
|
(94)
|
|
(0.6) %
|
Total comparable
funeral services performed
|
94,217
|
|
105,276
|
|
(11,059)
|
|
(10.5) %
|
Comparable core
cremation rate
|
55.7 %
|
|
53.7 %
|
|
2.0 %
|
|
|
Total comparable
cremation rate (7)
|
62.5 %
|
|
60.1 %
|
|
2.4 %
|
|
|
|
|
|
|
|
|
|
|
Comparable funeral
average revenue per service:
|
|
|
|
|
|
|
|
Atneed
|
$
6,024
|
|
$
5,854
|
|
$ 170
|
|
2.9 %
|
Matured
preneed
|
6,495
|
|
6,430
|
|
65
|
|
1.0 %
|
Total core
|
6,192
|
|
6,047
|
|
145
|
|
2.4 %
|
Non-funeral
home
|
1,418
|
|
1,409
|
|
9
|
|
0.6 %
|
Total comparable
average revenue per service
|
$
5,449
|
|
$
5,396
|
|
$ 53
|
|
1.0 %
|
|
|
|
|
|
|
|
|
Comparable funeral
preneed sales production:
|
|
|
|
|
|
|
|
Total preneed
sales
|
$
320.7
|
|
$
296.7
|
|
$
24.0
|
|
8.1 %
|
Core contracts
sold
|
38,389
|
|
36,281
|
|
2,108
|
|
5.8 %
|
Non-funeral home
contracts sold
|
25,884
|
|
24,511
|
|
1,373
|
|
5.6 %
|
Core average revenue
per contract sold
|
$
6,324
|
|
$
6,228
|
|
$ 96
|
|
1.5 %
|
Non-funeral home
average revenue per contract sold
|
$
3,009
|
|
$
2,885
|
|
$ 124
|
|
4.3 %
|
|
|
(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 to a
preneed customer 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.
|
(7)
|
Total comparable
cremation rate includes the impact of cremation services through
our non-funeral sales channel (e.g. SCI Direct).
|
|
|
- Total comparable funeral revenue decreased $45.7 million, or 7.1%, primarily driven by a
decrease in core funeral revenue slightly offset by an increase in
recognized preneed revenue and other revenue.
- Core funeral revenue decreased $54.7
million, or 10.0%, primarily due to a 12.1% expected
decrease in core funeral services performed as the prior year was
impacted by the COVID-19 pandemic. This decrease was slightly
offset by a 2.4% increase in the core average revenue per service,
which absorbed the comparable core cremation rate increase of 200
basis points.
- Recognized preneed revenue increased $3.1 million, or 7.2%, primarily driven by the
$7.2 million, or 10.1%, increase in
non-funeral home sales production.
- Other revenue increased $5.9
million, or 16.0%, primarily due to increased general agency
revenue as a result of 7.8% growth in preneed insurance sales
production.
- Comparable funeral gross profit decreased $48.0 million to $148.4
million and the gross profit percentage decreased from 30.3%
to 24.6%. This decrease is due to the decline in revenue mentioned
above combined with higher selling costs on higher preneed
insurance sales production.
- Comparable preneed funeral sales production grew $24.0 million, or 8.1%, in the first quarter of
2023 compared to 2022. The growth was primarily due to a
$16.8 million, or 7.5%, increase in
core preneed sales production coupled with a $7.2 million, or 10.1%, increase in non-funeral
preneed sales production both driven by increased velocity and
sales averages.
Comparable Cemetery
Results
|
The table below details
comparable cemetery results of operations ("same store") for the
three months ended March 31, 2023
and 2022. We consider comparable cemetery operations to be those
businesses owned for the entire period beginning
January 1,
2022 and ending March 31, 2023.
|
|
(Dollars in
millions)
|
Three months ended
March 31,
|
|
2023
|
|
2022
|
|
Var
|
|
%
|
Comparable cemetery
revenue:
|
|
|
|
|
|
|
|
Atneed property
revenue
|
$
36.3
|
|
$
44.7
|
|
$
(8.4)
|
|
(18.8) %
|
Atneed merchandise and
service revenue
|
73.7
|
|
78.7
|
|
(5.0)
|
|
(6.4) %
|
Total atneed revenue
(1)
|
110.0
|
|
123.4
|
|
(13.4)
|
|
(10.9) %
|
Recognized preneed
property revenue
|
191.6
|
|
221.5
|
|
(29.9)
|
|
(13.5) %
|
Recognized preneed
merchandise and service revenue
|
86.1
|
|
85.0
|
|
1.1
|
|
1.3 %
|
Total recognized
preneed revenue (2)
|
277.7
|
|
306.5
|
|
(28.8)
|
|
(9.4) %
|
Core
revenue (3)
|
387.7
|
|
429.9
|
|
(42.2)
|
|
(9.8) %
|
Other revenue
(4)
|
30.8
|
|
33.4
|
|
(2.6)
|
|
(7.8) %
|
Total comparable
revenue
|
$
418.5
|
|
$
463.3
|
|
$
(44.8)
|
|
(9.7) %
|
|
|
|
|
|
|
|
|
Comparable gross
profit
|
$
140.3
|
|
$
181.0
|
|
$
(40.7)
|
|
(22.5) %
|
Comparable gross profit
percentage
|
33.5 %
|
|
39.1 %
|
|
(5.6) %
|
|
|
|
|
|
|
|
|
|
|
Comparable cemetery
preneed and atneed sales production:
|
|
|
|
|
|
|
|
Property
|
$
229.4
|
|
$
291.2
|
|
$
(61.8)
|
|
(21.2) %
|
Merchandise and
services
|
189.0
|
|
207.5
|
|
(18.5)
|
|
(8.9) %
|
Discounts and
other
|
(3.5)
|
|
(3.5)
|
|
—
|
|
— %
|
Preneed and atneed
sales production
|
$
414.9
|
|
$
495.2
|
|
$
(80.3)
|
|
(16.2) %
|
|
|
|
|
|
|
|
|
Preneed sales
production
|
$
305.1
|
|
$
362.2
|
|
$
(57.1)
|
|
(15.8) %
|
Recognition rate
(5)
|
93.4 %
|
|
86.8 %
|
|
|
|
|
|
|
(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.
|
|
|
- Comparable cemetery revenue decreased $44.8 million, or 9.7%, in the first quarter of
2023 compared to the first quarter of 2022. The decline was
primarily due to decreases in core revenue of $42.2 million and other revenue of $2.6 million.
- Core revenue decreased $42.2
million primarily as a result of a $28.8 million decrease in total recognized
preneed revenue and a $13.4 million
decrease in atneed revenue as the prior year was more heavily
impacted by the COVID-19 pandemic.
- Other revenue was lower by $2.6
million, or 7.8%, compared to the prior year quarter
primarily from a decrease in endowment care trust fund income due
to the timing of capital gains.
- Comparable cemetery gross profit decreased $40.7 million to $140.3
million. The gross profit percentage decreased to 33.5% from
39.1% due to the decline in revenue mentioned above combined with
higher maintenance costs during the quarter.
- Comparable preneed cemetery sales production decreased
$57.1 million, or 15.8%, driven
primarily by a $50.3 million decrease
in preneed cemetery property sales production. While we anticipated
a decrease compared to the prior year quarter, which was heavily
impacted by the COVID-19 pandemic, additional declines were
experienced in our large cemeteries on the West Coast resulting
from unusual weather patterns throughout the quarter.
Other Financial Results
- Corporate general and administrative expenses increased
by $2.5 million to $44.2 million in the first quarter of 2023
compared to the first quarter of 2022. The increase was primarily
related to our long-term incentive compensation plan that is tied
to growth in total shareholder return and accelerated compensation
expenses related to the retirement of certain executives.
- Interest expense increased $14.9
million to $53.9 million in
the first quarter of 2023 primarily due to higher interest on our
floating rate debt. During the first quarter, our floating rate
debt carried a weighted average rate of 6.0%, which is over 400
basis points higher than the weighted average rate for our floating
rate debt in the prior year first quarter.
- The GAAP effective income tax rate for the first quarter of
2023 was 24.5%, down from 26.0% in the prior year quarter. Our
adjusted effective tax rate was 24.6% in the first quarter of 2023
compared to 25.9% in the prior year quarter. The lower tax rate in
the current period is primarily due to greater excess tax benefits
recognized on the settlement of employee share-based awards.
Cash Flow and
Capital Spending
|
|
(Dollars in
millions)
|
Three months ended
March 31,
|
|
2023
|
|
2022
|
Net cash provided by
operating activities
|
$
219.6
|
|
$
332.2
|
Cash taxes included in
net cash provided by operating activities
|
$
5.5
|
|
$
3.8
|
|
Net cash provided by operating activities declined $112.6 million to $219.6
million in the first quarter of 2023 compared to
$332.2 million in the first quarter
of 2022. This expected decrease in operating cash flow is primarily
due to $90.3 million in lower
operating income (excluding the impact from divestitures) as the
prior year was positively impacted by the effects of the COVID-19
pandemic. Operating cash flow was also impacted by $11.9 million of higher cash interest
payments and a slight increase in the uses of working capital
primarily related to incentive compensation payments.
A summary of our capital expenditures is set forth
below:
(Dollars in
millions)
|
Three months ended
March 31,
|
|
2023
|
|
2022
|
Capital improvements at
existing field locations
|
$
22.8
|
|
$
30.8
|
Development of cemetery
property
|
33.0
|
|
10.6
|
Digital investments and
corporate
|
14.2
|
|
6.6
|
Total maintenance,
cemetery development, and other capital expenditures (Maintenance
capital expenditures)
|
$
70.0
|
|
$
48.0
|
Growth capital
expenditures/construction of new funeral service
locations
|
7.9
|
|
8.7
|
Total capital
expenditures
|
$
77.9
|
|
$
56.7
|
|
Total capital expenditures increased in the current quarter by
$21.2 million, primarily due to
increases in cemetery development expenditures and digital
investments and corporate expenditures. The increased spend on
cemetery property development is primarily due to timing and we
expect it to normalize throughout the year. We also had expected
increases in spend on digital investments. These digital
investments are primarily for the development of technology,
including enhancements to Beacon and our location websites, further
supporting preneed sales growth and optimizing for an enhanced
customer experience.
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 as
of March 31, 2023 is set forth below:
|
|
|
Three
Months
|
Preneed
funeral
|
5.3 %
|
Preneed
cemetery
|
5.4 %
|
Cemetery perpetual
care
|
4.8 %
|
Combined trust
funds
|
5.2 %
|
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
years, 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.
|
|
(Dollars in
millions, except diluted EPS)
|
Three months ended
March 31,
|
|
2023
|
|
2022
|
|
Net
Income
|
|
Diluted
EPS
|
|
Net
Income
|
|
Diluted
EPS
|
Net income attributable
to common stockholders, as reported
|
$ 144.8
|
|
$ 0.93
|
|
$ 219.5
|
|
$ 1.34
|
Pre-tax reconciling
items:
|
|
|
|
|
|
|
|
Gains on divestitures
and impairment charges, net
|
(0.7)
|
|
(0.01)
|
|
(0.5)
|
|
—
|
Losses on early
extinguishment of debt
|
1.1
|
|
0.01
|
|
—
|
|
—
|
Tax reconciling
items:
|
|
|
|
|
|
|
|
Tax effect from
special items above
|
(0.1)
|
|
—
|
|
0.6
|
|
|
Change in uncertain
tax reserves and other
|
(0.2)
|
|
—
|
|
—
|
|
—
|
Earnings excluding
special items and diluted earnings per share excluding special
items
|
$ 144.9
|
|
$ 0.93
|
|
$ 219.6
|
|
$ 1.34
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
|
|
155.3
|
|
|
|
163.8
|
View original
content:https://www.prnewswire.com/news-releases/service-corporation-international-announces-first-quarter-2023-financial-results-and-confirms-2023-guidance-301812304.html
SOURCE Service Corporation International