Conference call on Thursday, November
2, 2023, at 8:00 a.m. Central
Time.
HOUSTON, Nov. 1, 2023
/PRNewswire/ -- Service Corporation International (NYSE: SCI), the
largest provider of deathcare products and services in North America, today reported results for the
third quarter of 2023.
Third Quarter Highlights:
- Revenue increased $24.1 million
over the third quarter of 2022 to just over $1.0 billion.
- GAAP earnings per share were $0.80 compared to $0.76 in the third quarter of 2022.
- Adjusted earnings per share grew 15% to $0.78 compared to $0.68 in the third quarter of 2022.
- Net cash provided by operating activities was $227.8 million compared to $182.6 million in the third quarter of 2022.
- Comparable core funeral sales average grew 4.3%.
- Comparable preneed funeral sales production grew $15 million, or 4.9%.
Tom Ryan, the Company's
Chairman and CEO, commented on the third quarter
performance:
"Today we are proud to announce strong results that meaningfully
grew over the prior year despite what continues to be a challenging
consumer and interest rate environment. Adjusted earnings per share
grew 15% over the prior year third quarter to $0.78. Gross profit grew $23 million primarily driven by higher recognized
cemetery preneed revenue. Net cash provided by operating activities
also increased $45 million to
$228 million primarily due to
expected lower cash tax payments offsetting higher cash interest
payments.
I would like to thank our 25,000 associates for their unwavering
commitment in providing excellent service to our client families.
Despite the challenging near term consumer and interest rate
trends, we remain focused on our long-term growth strategy, which
is on track as we continue to grow revenue, leverage our
unparalleled scale, and allocate our capital wisely to enhance
shareholder value."
Details of our third 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
September 30,
|
|
Nine months
ended
September 30,
|
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Revenue
|
|
$ 1,001.9
|
|
$
977.7
|
|
$ 3,044.0
|
|
$ 3,081.0
|
Operating
income
|
|
$
223.0
|
|
$
203.4
|
|
$
702.1
|
|
$
760.4
|
Net income attributable
to common stockholders
|
|
$
122.0
|
|
$
120.9
|
|
$
398.9
|
|
$
473.0
|
Diluted earnings per
share
|
|
$
0.80
|
|
$
0.76
|
|
$
2.60
|
|
$
2.93
|
Earnings excluding
special items (1)
|
|
$
119.1
|
|
$
108.8
|
|
$
390.9
|
|
$
463.6
|
Diluted earnings per
share excluding special items (1)
|
|
$
0.78
|
|
$
0.68
|
|
$
2.55
|
|
$
2.87
|
Diluted weighted
average shares outstanding
|
|
152.3
|
|
159.1
|
|
153.6
|
|
161.4
|
Net cash provided by
operating activities
|
|
$
227.8
|
|
$
182.6
|
|
$
591.5
|
|
$
655.4
|
Net cash provided by
operating activities excluding special items
(1)
|
|
$
227.8
|
|
$
182.6
|
|
$
604.8
|
|
$
655.4
|
(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 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" in the Appendix
at the end of this press release.
|
- Diluted earnings per share was $0.80 in the third quarter of 2023 compared to
$0.76 in the third quarter of 2022.
The current year quarter benefited from $2.5
million of net gains on divestitures while the prior year
quarter was favorably impacted by $14.4
million of net gains on divestitures. Diluted earnings per
share excluding special items was $0.78 in the third quarter of 2023 compared to
$0.68 in the third quarter of 2022.
The growth of ten cents over the
prior year is primarily related to higher cemetery revenue combined
with lower fixed costs resulting in higher gross profit.
Additionally, lower corporate general and administrative expenses
combined with a lower share count offset the impact of higher
interest expense.
- Net cash provided by operating activities grew $45.2 million to $227.8
million in the third quarter of 2023 compared to
$182.6 million in the third quarter
of 2022. The increase in operating cash flow is primarily due to
lower expected cash tax payments and higher operating income, which
more than offset higher cash interest payments.
OUTLOOK FOR 2023
Our annual guidance ranges for 2023 detailed below have not
changed and are consistent with our previously reported outlook for
2023. The forecast for cash taxes includes the impact related to a
change in tax accounting method related to our cemetery segment,
which will defer cash taxes into future years. Our outlook for net
cash provided by operating activities also 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)
|
|
$3.40 -
$3.60
|
|
|
|
|
|
Net cash provided by
operating activities excluding special items and cash taxes
(1)
|
|
$920 - $960
|
Cash taxes expected in
2023 (at the midpoint of Diluted earnings per share
guidance)
|
|
$80 - $90
|
Net cash provided by
operating activities excluding special items
(1)
|
|
$830 - $880
|
|
|
|
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 Thursday, November 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 7598222. The conference call will also be broadcast live via the
Internet and can be accessed through our website at
www.sci-corp.com. A replay of the conference call will be available
through November 9, 2023 and can be
accessed at (877) 344-7529 (US) or (412) 317-0088 (International)
with the passcode of 7499159. 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 September 30, 2023, we owned and operated
1,486 funeral service locations and 489 cemeteries (of which 304
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 THIRD QUARTER OF 2023
Consolidated
Statement of Operations (Unaudited)
|
|
(Dollars in
thousands, except per share amounts)
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
September
30,
|
|
September
30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
|
|
|
|
|
|
|
|
Revenue
|
$ 1,001,859
|
|
$
977,720
|
|
$ 3,043,982
|
|
$ 3,080,978
|
Cost of
revenue
|
(748,176)
|
|
(746,764)
|
|
(2,239,737)
|
|
(2,206,464)
|
Gross profit
|
253,683
|
|
230,956
|
|
804,245
|
|
874,514
|
Corporate general and
administrative expenses
|
(33,213)
|
|
(41,911)
|
|
(112,294)
|
|
(129,336)
|
Gains on divestitures
and impairment charges, net
|
2,542
|
|
14,403
|
|
10,187
|
|
15,186
|
Operating
income
|
223,012
|
|
203,448
|
|
702,138
|
|
760,364
|
Interest
expense
|
(61,512)
|
|
(43,508)
|
|
(174,904)
|
|
(123,107)
|
Losses on early
extinguishment of debt
|
—
|
|
—
|
|
(1,114)
|
|
(1,225)
|
Other income (expense),
net
|
128
|
|
(1,514)
|
|
2,647
|
|
(2,489)
|
Income before income
taxes
|
161,628
|
|
158,426
|
|
528,767
|
|
633,543
|
Provision for income
taxes
|
(39,585)
|
|
(37,521)
|
|
(129,543)
|
|
(159,925)
|
Net income
|
122,043
|
|
120,905
|
|
399,224
|
|
473,618
|
Net income attributable
to noncontrolling interests
|
(72)
|
|
(55)
|
|
(302)
|
|
(585)
|
Net income
attributable to common stockholders
|
$
121,971
|
|
$
120,850
|
|
$
398,922
|
|
$
473,033
|
Basic earnings per
share:
|
|
|
|
|
|
|
|
Net income
attributable to common stockholders
|
$
0.81
|
|
$
0.77
|
|
$
2.63
|
|
$
2.98
|
Basic weighted average
number of shares
|
150,630
|
|
156,781
|
|
151,654
|
|
158,921
|
Diluted earnings per
share:
|
|
|
|
|
|
|
|
Net income
attributable to common stockholders
|
$
0.80
|
|
$
0.76
|
|
$
2.60
|
|
$
2.93
|
Diluted weighted
average number of shares
|
152,289
|
|
159,100
|
|
153,554
|
|
161,398
|
Consolidated Balance
Sheet (Unaudited)
|
|
(Dollars in
thousands, except share amounts)
|
|
|
|
|
September 30,
2023
|
|
December 31,
2022
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
172,710
|
|
$
191,938
|
Receivables,
net
|
84,118
|
|
96,681
|
Inventories
|
34,190
|
|
31,740
|
Income tax
receivable
|
131,152
|
|
7,021
|
Other
|
31,631
|
|
32,466
|
Total current
assets
|
453,801
|
|
359,846
|
Preneed receivables,
net and trust investments
|
5,827,850
|
|
5,577,499
|
Cemetery
property
|
1,988,636
|
|
1,939,816
|
Property and equipment,
net
|
2,442,085
|
|
2,350,549
|
Goodwill
|
1,964,687
|
|
1,945,588
|
Deferred charges and
other assets, net
|
1,227,196
|
|
1,190,426
|
Cemetery perpetual care
trust investments
|
1,778,882
|
|
1,702,313
|
Total
assets
|
$
15,683,137
|
|
$
15,066,037
|
|
|
|
|
LIABILITIES & EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
641,757
|
|
$
707,488
|
Current maturities of
long-term debt
|
62,646
|
|
90,661
|
Income taxes
payable
|
8,469
|
|
1,131
|
Total current
liabilities
|
712,872
|
|
799,280
|
Long-term
debt
|
4,511,533
|
|
4,251,083
|
Deferred revenue,
net
|
1,651,713
|
|
1,624,028
|
Deferred tax
liability
|
611,676
|
|
445,040
|
Other
liabilities
|
436,491
|
|
411,376
|
Deferred receipts held
in trust
|
4,351,637
|
|
4,163,520
|
Care trusts'
corpus
|
1,776,520
|
|
1,698,287
|
Equity:
|
|
|
|
Common stock, $1 per
share par value, 500,000,000 shares authorized,
156,834,670 and 156,088,438 shares issued, respectively, and
149,555,188 and
153,940,365 shares outstanding, respectively
|
149,555
|
|
153,940
|
Capital in excess of
par value
|
950,739
|
|
958,329
|
Retained
earnings
|
514,811
|
|
544,384
|
Accumulated other
comprehensive income
|
15,326
|
|
16,538
|
Total common
stockholders' equity
|
1,630,431
|
|
1,673,191
|
Noncontrolling
interests
|
264
|
|
232
|
Total
equity
|
1,630,695
|
|
1,673,423
|
Total liabilities and
equity
|
$
15,683,137
|
|
$
15,066,037
|
Consolidated
Statement of Cash Flows (Unaudited)
|
|
(Dollars in
thousands)
|
Nine months ended
September 30,
|
|
2023
|
|
2022
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
399,224
|
|
$
473,618
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Loss on early
extinguishment of debt
|
1,114
|
|
1,225
|
Depreciation and
amortization
|
141,228
|
|
130,451
|
Amortization of
intangibles
|
14,158
|
|
14,059
|
Amortization of
cemetery property
|
71,892
|
|
69,059
|
Amortization of loan
costs
|
5,133
|
|
5,182
|
Provision for expected
credit losses
|
6,997
|
|
11,404
|
Provision for deferred
income taxes
|
166,786
|
|
7,302
|
Gains on divestitures
and impairment charges, net
|
(10,187)
|
|
(15,186)
|
Gain on sale of
investments
|
—
|
|
(1,169)
|
Share-based
compensation
|
11,786
|
|
11,063
|
Change in assets and
liabilities, net of effects from acquisitions and
divestitures:
|
|
|
|
Decrease in
receivables
|
11,781
|
|
15,349
|
(Increase) decrease in
other assets
|
(161,687)
|
|
2,622
|
Decrease in payables
and other liabilities
|
(21,961)
|
|
(17,147)
|
Effect of preneed
sales production and maturities:
|
|
|
|
Increase in preneed
receivables, net and trust investments
|
(162,087)
|
|
(248,289)
|
Increase in deferred
revenue, net
|
105,923
|
|
173,474
|
Increase in deferred
receipts held in trust
|
11,358
|
|
22,426
|
Net cash provided by
operating activities
|
591,458
|
|
655,443
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(267,752)
|
|
(252,763)
|
Business acquisitions,
net of cash acquired
|
(72,535)
|
|
(13,488)
|
Real estate
acquisitions
|
(41,084)
|
|
(8,901)
|
Proceeds from
divestitures and sales of property and equipment
|
22,713
|
|
31,394
|
Proceeds from sale of
investments and other
|
—
|
|
1,330
|
Payments for
Company-owned life insurance policies
|
(8,050)
|
|
(1,788)
|
Proceeds from
Company-owned life insurance policies and other
|
10,119
|
|
—
|
Net cash used in
investing activities
|
(356,589)
|
|
(244,216)
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from issuance
of long-term debt
|
737,433
|
|
325,000
|
Debt issuance
costs
|
(7,471)
|
|
—
|
Scheduled payments of
debt
|
(16,402)
|
|
(27,212)
|
Early payments and
extinguishment of debt
|
(490,973)
|
|
(65,591)
|
Principal payments on
finance leases
|
(25,678)
|
|
(26,779)
|
Proceeds from exercise
of stock options
|
16,106
|
|
16,840
|
Purchase of Company
common stock
|
(340,279)
|
|
(586,562)
|
Payments of
dividends
|
(125,543)
|
|
(118,435)
|
Bank overdrafts and
other
|
(9,362)
|
|
(13,854)
|
Net cash used in
financing activities
|
(262,169)
|
|
(496,593)
|
Effect of foreign
currency
|
(298)
|
|
(4,744)
|
Net decrease in cash,
cash equivalents, and restricted cash
|
(27,598)
|
|
(90,110)
|
Cash, cash equivalents,
and restricted cash at beginning of period
|
204,524
|
|
278,555
|
Cash, cash equivalents,
and restricted cash at end of period
|
$
176,926
|
|
$
188,445
|
Consolidated Segment
Results
|
|
(See definitions of
revenue line items later in this appendix.)
|
|
(Dollars in
millions, except average revenue per service)
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Consolidated
funeral:
|
|
|
|
|
|
|
|
Atneed
revenue
|
$ 283.0
|
|
$ 291.6
|
|
$ 884.8
|
|
$ 931.0
|
Matured preneed
revenue
|
172.3
|
|
167.4
|
|
533.7
|
|
528.1
|
Core
revenue
|
455.3
|
|
459.0
|
|
1,418.5
|
|
1,459.1
|
Non-funeral home
revenue
|
21.9
|
|
18.2
|
|
63.7
|
|
56.7
|
Recognized preneed
revenue
|
33.0
|
|
40.1
|
|
119.9
|
|
125.8
|
Other
revenue
|
44.6
|
|
36.7
|
|
127.8
|
|
110.3
|
Total
revenue
|
$ 554.8
|
|
$ 554.0
|
|
$
1,729.9
|
|
$
1,751.9
|
|
|
|
|
|
|
|
|
Gross profit
|
$ 109.7
|
|
$ 101.8
|
|
$ 374.8
|
|
$ 414.5
|
Gross profit
percentage
|
19.8 %
|
|
18.4 %
|
|
21.7 %
|
|
23.7 %
|
|
|
|
|
|
|
|
|
Funeral services
performed
|
85,139
|
|
87,976
|
|
268,414
|
|
279,924
|
Average revenue per
service
|
$ 5,605
|
|
$ 5,424
|
|
$ 5,522
|
|
$ 5,415
|
|
(Dollars in
millions)
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Consolidated
cemetery:
|
|
|
|
|
|
|
|
Atneed property
revenue
|
$ 35.5
|
|
$ 35.4
|
|
$ 105.9
|
|
$ 114.8
|
Atneed merchandise and
service revenue
|
74.7
|
|
73.2
|
|
222.5
|
|
226.6
|
Total atneed
revenue
|
110.2
|
|
108.6
|
|
328.4
|
|
341.4
|
Recognized preneed
property revenue
|
214.6
|
|
200.8
|
|
626.0
|
|
640.4
|
Recognized preneed
merchandise and service revenue
|
93.1
|
|
85.7
|
|
269.1
|
|
255.5
|
Total recognized
preneed revenue
|
307.7
|
|
286.5
|
|
895.1
|
|
895.9
|
Core
revenue
|
417.9
|
|
395.1
|
|
1,223.5
|
|
1,237.3
|
Other cemetery
revenue
|
29.2
|
|
28.7
|
|
90.6
|
|
91.8
|
Total
revenue
|
$ 447.1
|
|
$ 423.8
|
|
$
1,314.1
|
|
$
1,329.1
|
|
|
|
|
|
|
|
|
Gross profit
|
$ 143.9
|
|
$ 129.1
|
|
$ 429.5
|
|
$ 460.1
|
Gross profit
percentage
|
32.2 %
|
|
30.5 %
|
|
32.7 %
|
|
34.6 %
|
Comparable Funeral Results
The table below details comparable funeral results of operations
("same store") for the three months ended September 30, 2023
and 2022. We consider comparable funeral operations to be those
businesses owned for the entire period beginning January 1,
2022 and ending September 30, 2023.
(Dollars in
millions, except average revenue per service and average revenue
per contract sold)
|
Three months ended
September 30,
|
|
2023
|
|
2022
|
|
Var
|
|
%
|
Comparable funeral
revenue:
|
|
|
|
|
|
|
|
Atneed revenue
(1)
|
$
276.6
|
|
$
289.7
|
|
$
(13.1)
|
|
(4.5) %
|
Matured preneed
revenue (2)
|
170.1
|
|
167.2
|
|
2.9
|
|
1.7 %
|
Core revenue
(3)
|
446.7
|
|
456.9
|
|
(10.2)
|
|
(2.2) %
|
Non-funeral home
revenue (4)
|
21.3
|
|
18.1
|
|
3.2
|
|
17.7 %
|
Recognized preneed
revenue (5)
|
32.3
|
|
40.1
|
|
(7.8)
|
|
(19.5) %
|
Other revenue
(6)
|
44.0
|
|
36.6
|
|
7.4
|
|
20.2 %
|
Total comparable
revenue
|
$
544.3
|
|
$
551.7
|
|
$
(7.4)
|
|
(1.3) %
|
|
|
|
|
|
|
|
|
Comparable gross
profit
|
$
108.5
|
|
$
102.7
|
|
$ 5.8
|
|
5.6 %
|
Comparable gross profit
percentage
|
19.9 %
|
|
18.6 %
|
|
1.3 %
|
|
|
|
|
|
|
|
|
|
|
Comparable funeral
services performed:
|
|
|
|
|
|
|
|
Atneed
|
44,865
|
|
48,427
|
|
(3,562)
|
|
(7.4) %
|
Matured
preneed
|
25,010
|
|
26,097
|
|
(1,087)
|
|
(4.2) %
|
Total core
|
69,875
|
|
74,524
|
|
(4,649)
|
|
(6.2) %
|
Non-funeral
home
|
13,129
|
|
13,045
|
|
84
|
|
0.6 %
|
Total comparable
funeral services performed
|
83,004
|
|
87,569
|
|
(4,565)
|
|
(5.2) %
|
Comparable core
cremation rate
|
56.3 %
|
|
55.1 %
|
|
1.2 %
|
|
|
Total comparable
cremation rate (7)
|
63.0 %
|
|
61.7 %
|
|
1.3 %
|
|
|
|
|
|
|
|
|
|
|
Comparable funeral
average revenue per service:
|
|
|
|
|
|
|
|
Atneed
|
$
6,165
|
|
$
5,982
|
|
$ 183
|
|
3.1 %
|
Matured
preneed
|
6,801
|
|
6,407
|
|
394
|
|
6.1 %
|
Total core
|
6,393
|
|
6,131
|
|
262
|
|
4.3 %
|
Non-funeral
home
|
1,622
|
|
1,388
|
|
234
|
|
16.9 %
|
Total comparable
average revenue per service
|
$
5,638
|
|
$
5,424
|
|
$ 214
|
|
3.9 %
|
|
|
|
|
|
|
|
|
Comparable funeral
preneed sales production:
|
|
|
|
|
|
|
|
Total preneed
sales
|
$
310.7
|
|
$
296.2
|
|
$
14.5
|
|
4.9 %
|
Core contracts
sold
|
36,395
|
|
36,969
|
|
(574)
|
|
(1.6) %
|
Non-funeral home
contracts sold
|
24,772
|
|
21,690
|
|
3,082
|
|
14.2 %
|
Core average revenue
per contract sold
|
$
6,439
|
|
$
6,263
|
|
$ 176
|
|
2.8 %
|
Non-funeral home
average revenue per contract sold
|
$
3,083
|
|
$
2,983
|
|
$ 100
|
|
3.4 %
|
(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 by $7.4 million, or 1.3%, primarily driven by a
$10.2 million, or 2.2%, decrease in
core funeral revenue.
- Core funeral revenue decreased $10.2
million, or 2.2%, primarily due to a decline in core funeral
services performed of 6.2% offset by growth in the core average
revenue per service of 4.3%. This core average growth was achieved
despite a 120 basis point increase in the core cremation rate. The
core average growth is primarily driven by consumer preferences for
enhanced product and service offerings as well as an increase in
trust fund income.
- Comparable funeral gross profit grew by $5.8 million to $108.5
million despite the revenue decline. This increase in gross
profit margin of 130 basis points to 19.9% is primarily due to
lower fixed costs and reduced incentive compensation costs this
quarter compared with the prior year.
- Comparable preneed funeral sales production grew $14.5 million, or 4.9%, in the third quarter of
2023 compared to 2022. Core preneed sales production grew
$2.8 million, or 1.2%, from higher
sales averages and non-funeral home preneed sales production grew
$11.7 million, or 18.0%, both from
higher sales averages and increased velocity.
Comparable Cemetery Results
The table below details comparable cemetery results of
operations ("same store") for the three months ended
September 30, 2023 and 2022. We consider comparable cemetery
operations to be those businesses owned for the entire period
beginning January 1, 2022 and ending September 30,
2023.
(Dollars in
millions)
|
Three months ended
September 30,
|
|
2023
|
|
2022
|
|
Var
|
|
%
|
Comparable cemetery
revenue:
|
|
|
|
|
|
|
|
Atneed property
revenue
|
$
35.2
|
|
$
35.4
|
|
$
(0.2)
|
|
(0.6) %
|
Atneed merchandise and
service revenue
|
73.9
|
|
73.2
|
|
0.7
|
|
1.0 %
|
Total atneed revenue
(1)
|
109.1
|
|
108.6
|
|
0.5
|
|
0.5 %
|
Recognized preneed
property revenue
|
214.4
|
|
200.8
|
|
13.6
|
|
6.8 %
|
Recognized preneed
merchandise and service revenue
|
93.0
|
|
85.7
|
|
7.3
|
|
8.5 %
|
Total recognized
preneed revenue (2)
|
307.4
|
|
286.5
|
|
20.9
|
|
7.3 %
|
Core
revenue (3)
|
416.5
|
|
395.1
|
|
21.4
|
|
5.4 %
|
Other revenue
(4)
|
29.1
|
|
28.6
|
|
0.5
|
|
1.7 %
|
Total comparable
revenue
|
$
445.6
|
|
$
423.7
|
|
$
21.9
|
|
5.2 %
|
|
|
|
|
|
|
|
|
Comparable gross
profit
|
$
144.3
|
|
$
129.3
|
|
$
15.0
|
|
11.6 %
|
Comparable gross profit
percentage
|
32.4 %
|
|
30.5 %
|
|
1.9 %
|
|
|
|
|
|
|
|
|
|
|
Comparable cemetery
preneed and atneed sales production:
|
|
|
|
|
|
|
|
Property
|
$
244.1
|
|
$
257.4
|
|
$
(13.3)
|
|
(5.2) %
|
Merchandise and
services
|
184.9
|
|
194.2
|
|
(9.3)
|
|
(4.8) %
|
Discounts and
other
|
(4.7)
|
|
(4.0)
|
|
(0.7)
|
|
(17.5) %
|
Preneed and atneed
sales production
|
$
424.3
|
|
$
447.6
|
|
$
(23.3)
|
|
(5.2) %
|
|
|
|
|
|
|
|
|
Preneed sales
production
|
$
321.4
|
|
$
341.5
|
|
$
(20.1)
|
|
(5.9) %
|
Recognition rate
(5)
|
98.2 %
|
|
88.3 %
|
|
|
|
|
(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.
|
- Comparable cemetery revenue increased $21.9 million, or 5.2%, in the third quarter of
2023 compared to the third quarter of 2022. The increase was
primarily due to higher core revenue of $21.4 million.
- Core revenue was higher by $21.4
million primarily as a result of a $20.9 million increase in total recognized
preneed revenue. This growth is primarily due to revenue
recognition from an expected increase in completed construction
projects in the third quarter coupled with higher trust fund
income.
- Comparable cemetery gross profit increased $15.0 million to $144.3
million. The growth of 190 basis points to 32.4% is
primarily due to the growth in revenue mentioned above coupled with
reduced incentive compensation costs this quarter compared with the
prior year.
- Comparable preneed cemetery sales production decreased
$20.1 million, or 5.9%. While we saw
increased large sales production during the quarter, core
production declined over the prior year as we experienced continued
moderation in consumer discretionary spending as compared to the
prior year quarter.
Other Financial Results
- Corporate general and administrative expenses decreased
by $8.7 million to $33.2 million in the third quarter of 2023
compared to the third quarter of 2022. The decrease was primarily
related to lower incentive compensation costs versus the prior year
quarter.
- Interest expense increased $18.0
million to $61.5 million in
the third quarter of 2023 primarily due to higher interest on our
floating rate debt. During the third quarter, our floating rate
debt carried a weighted average rate of 7.5%, which is over 400
basis points higher than the weighted average rate for our floating
rate debt in the third quarter of 2022.
- The GAAP effective income tax rate for the third quarter of
2023 was 24.5%, up from 23.7% in the prior year quarter. Our
adjusted effective tax rate was 25.1% in the third quarter of 2023
compared to 24.4% in the prior year quarter. The higher tax rate in
the current period is primarily due to a change in estimate in the
finalization of the 2021 tax return in the prior year.
Cash Flow and
Capital Spending
|
|
(Dollars in
millions)
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net cash provided by
operating activities
|
$
227.8
|
|
$
182.6
|
|
$
591.5
|
|
$
655.4
|
Payments for certain
legal matters
|
—
|
|
—
|
|
13.3
|
|
—
|
Net cash provided by
operating activities excluding special items
|
$
227.8
|
|
$
182.6
|
|
$
604.8
|
|
$
655.4
|
Cash taxes included in
net cash provided by operating activities
|
$ 3.8
|
|
$ 44.6
|
|
$ 79.7
|
|
$
142.2
|
Net cash provided by operating activities increased $45.2 million to $227.8 million in the third quarter of 2023
compared to $182.6 million in the
third quarter of 2022. This increase in operating cash flow is
primarily due to lower cash tax payments of $40.8 million and higher operating income. The
decrease in cash taxes is related to a change in tax accounting
method related to our cemetery segment, which will defer cash taxes
into future years. Additionally, we experienced $18.3 million of higher cash interest payments
and an increased use of preneed working capital compared to the
prior year.
A summary of our capital expenditures is set forth below:
(Dollars in
millions)
|
Three months
ended
September 30,
|
|
Nine months
ended
September 30,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Capital improvements at
existing field locations
|
$ 28.1
|
|
$ 45.2
|
|
$ 82.7
|
|
$
112.9
|
Development of cemetery
property
|
40.8
|
|
34.4
|
|
111.8
|
|
75.9
|
Digital investments and
corporate
|
12.9
|
|
13.7
|
|
47.5
|
|
36.8
|
Total maintenance,
cemetery development, and other capital expenditures (Maintenance
capital expenditures)
|
$ 81.8
|
|
$ 93.3
|
|
$
242.0
|
|
$
225.6
|
Growth capital
expenditures/construction of new funeral service
locations
|
8.9
|
|
7.0
|
|
25.8
|
|
27.2
|
Total capital
expenditures
|
$ 90.7
|
|
$
100.3
|
|
$
267.8
|
|
$
252.8
|
Total capital expenditures decreased in the current quarter by
$9.6 million, primarily due to lower
spend for capital improvements at existing locations as the prior
year was impacted by certain technology infrastructure projects
that did not recur in the current year. This decline was partially
offset by increased outlays for the development of cemetery
property to create inventory that we expect to generate future
sales growth.
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 September 30, 2023 is set forth below:
|
Three
Months
|
|
Nine
Months
|
Preneed
funeral
|
(2.8) %
|
|
6.7 %
|
Preneed
cemetery
|
(3.1) %
|
|
6.7 %
|
Cemetery perpetual
care
|
(2.8) %
|
|
5.6 %
|
Combined trust
funds
|
(2.9) %
|
|
6.4 %
|
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 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
September 30,
|
|
2023
|
|
2022
|
|
Net
Income
|
|
Diluted
EPS
|
|
Net
Income
|
|
Diluted
EPS
|
Net income attributable
to common stockholders, as reported
|
$ 122.0
|
|
$ 0.80
|
|
$ 120.9
|
|
$ 0.76
|
Pre-tax reconciling
items:
|
|
|
|
|
|
|
|
Gains on divestitures
and impairment charges, net
|
(2.5)
|
|
(0.02)
|
|
(14.4)
|
|
(0.09)
|
Tax effect from
special items above
|
0.5
|
|
0.01
|
|
3.4
|
|
0.02
|
Change in uncertain
tax reserves and other
|
(0.9)
|
|
(0.01)
|
|
(1.1)
|
|
(0.01)
|
Earnings excluding
special items and diluted earnings per share excluding special
items
|
$ 119.1
|
|
$ 0.78
|
|
$ 108.8
|
|
$ 0.68
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
|
|
152.3
|
|
|
|
159.1
|
|
|
(Dollars in
millions, except diluted EPS)
|
Nine months ended
September 30,
|
|
2023
|
|
2022
|
|
Net
Income
|
|
Diluted
EPS
|
|
Net
Income
|
|
Diluted
EPS
|
Net income attributable
to common stockholders, as reported
|
$ 398.9
|
|
$ 2.60
|
|
$ 473.0
|
|
$ 2.93
|
Pre-tax reconciling
items:
|
|
|
|
|
|
|
|
Gains on divestitures
and impairment charges, net
|
(10.2)
|
|
(0.07)
|
|
(15.2)
|
|
(0.10)
|
Losses on early
extinguishment of debt
|
1.1
|
|
0.01
|
|
1.2
|
|
0.01
|
Foreign currency
exchange loss
|
—
|
|
—
|
|
1.5
|
|
0.01
|
Tax effect from
special items above
|
2.5
|
|
0.02
|
|
3.3
|
|
0.02
|
Change in uncertain
tax reserves and other
|
(1.4)
|
|
(0.01)
|
|
(0.2)
|
|
—
|
Earnings excluding
special items and diluted earnings per share excluding special
items
|
$ 390.9
|
|
$ 2.55
|
|
$ 463.6
|
|
$ 2.87
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding
|
|
|
153.6
|
|
|
|
161.4
|
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content:https://www.prnewswire.com/news-releases/service-corporation-international-announces-third-quarter-2023-financial-results-301974838.html
SOURCE Service Corporation International