HOUSTON, Feb. 13, 2017 /PRNewswire/ -- Service
Corporation International (NYSE: SCI), the largest provider of
deathcare products and services in North
America, today reported results for the fourth quarter 2016.
Our consolidated financial statements can be found at the end of
this press release. The table below summarizes our key financial
results:
(In millions,
except for per share amounts)
|
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenue
|
|
$
|
809.1
|
|
|
$
|
769.3
|
|
|
$
|
3,031.1
|
|
|
$
|
2,986.0
|
|
Operating
income
|
|
$
|
179.3
|
|
|
$
|
157.1
|
|
|
$
|
511.9
|
|
|
$
|
550.3
|
|
Net income
attributable to common stockholders
|
|
$
|
66.2
|
|
|
$
|
72.4
|
|
|
$
|
177.0
|
|
|
$
|
233.8
|
|
Diluted earnings per
share
|
|
$
|
0.34
|
|
|
$
|
0.36
|
|
|
$
|
0.90
|
|
|
$
|
1.14
|
|
Earnings from
continuing operations excluding special
items(1)
|
|
$
|
90.3
|
|
|
$
|
73.5
|
|
|
$
|
253.1
|
|
|
$
|
242.2
|
|
Diluted earnings per
share from continuing operations excluding special
items(1)
|
|
$
|
0.47
|
|
|
$
|
0.37
|
|
|
$
|
1.29
|
|
|
$
|
1.18
|
|
Diluted weighted
average shares outstanding
|
|
193.0
|
|
|
200.0
|
|
|
196.0
|
|
|
204.5
|
|
Net cash provided by
operating activities
|
|
$
|
105.1
|
|
|
$
|
75.6
|
|
|
$
|
463.6
|
|
|
$
|
472.2
|
|
Net cash provided by
operating activities excluding special
items(1)
|
|
$
|
106.9
|
|
|
$
|
89.3
|
|
|
$
|
508.5
|
|
|
$
|
513.9
|
|
|
|
(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 from net income
attributable to common stockholders, diluted earnings per share,
and net cash provided by operating activities computed in
accordance with generally accepted accounting principles in the
United States (GAAP) can be found later in this press release under
the headings "Cash Flow and Capital Spending" and "Non-GAAP
Financial Measures".
|
Quarterly Highlights:
- Diluted earnings per share were $0.34 in the fourth quarter of 2016 compared to
$0.36 in the fourth quarter of 2015.
The fourth quarter of 2016 was impacted by higher tax rates related
to the divestitures of businesses, a pension termination
settlement, and an adjustment of deferred tax assets related to
properties from the Stewart acquisition in 2013. Diluted earnings
per share excluding special items were $0.47 in the fourth quarter of 2016 compared to
$0.37 in the fourth quarter of 2015.
The increase in diluted earnings per share excluding special items
was driven primarily by increased gross profit from higher cemetery
revenue, bolstered by effective expense management, lower interest
rates, and fewer shares outstanding resulting from our ongoing
share repurchase program.
- Net cash provided by operating activities was $105.1 million in the fourth quarter of 2016
compared to $75.6 million in the
fourth quarter of 2015. The fourth quarter of 2015 was impacted by
payments related to tax structure changes. Net cash provided by
operating activities excluding special items was $106.9 million in the fourth quarter of 2016
compared to $89.3 million in the
prior year quarter. These increases were primarily due to the cash
generated from increased earnings partially offset by higher
working capital uses during the quarter.
- During the fourth quarter, we returned $59.7 million to shareholders through share
repurchases and dividends, and deployed $3.0
million of capital to accretive acquisitions. This brings
our annual capital deployment for 2016 to $326.3 million to shareholders through share
repurchases and dividends, and $72.9
million to accretive acquisitions.
Tom Ryan, the Company's
Chairman and Chief Executive Officer, commented on the fourth
quarter of 2016:
"Our financial results accelerated in the fourth quarter with an
impressive 27.3% improvement in adjusted earnings per share and a
19.7% increase in adjusted operating cash flow. Exceptional growth
in our cemetery businesses coupled with reduced interest expense
and fewer shares outstanding were the primary drivers of our
double-digit growth in the quarter. Looking ahead to 2017, we
believe we are well-positioned to deliver solid results, with
expected adjusted earnings per share growth at the high end of our
long term targeted growth range of 8%-12% after considering special
items in 2016. Our successes could not have been achieved without
the hard work and dedication of our 23,000 associates, and I thank
them for their continued focus on delivering extraordinary service
to our client families. We are confident that our solid operating
platform and healthy financial position will allow us to grow
revenues by remaining relevant with the consumer, drive future
market share by growing preneed sales, continue to leverage our
scale, and deploy capital to enhance shareholder value."
OUTLOOK FOR 2017
Our outlook for diluted earnings per share from continuing
operations excluding special items is expected to be in line with
our expected long-term growth framework of 8%-12% after special
items in 2016. Our outlook for net cash provided by operating
activities excluding special items reflects an anticipated
$40 - $45 million increase in cash
taxes, as we expect our cash tax rate to approximate our effective
tax rate.
(In millions,
except per share amounts)
|
|
2017
Outlook
|
Diluted earnings per
share from continuing operations excluding special
items(1)
|
|
$1.29 to
$1.43
|
Net cash provided by
operating activities excluding special
items(1)
|
|
$465 to
$505
|
Capital improvements
at existing facilities and cemetery development
expenditures
|
|
Approximately
$180
|
|
|
(1)
|
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. 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 2017 excludes the following
because this information is not currently available for 2017: Gains
or losses associated with asset divestitures, gains or losses
associated with the early extinguishment of debt, potential tax
reserve adjustments and IRS settlement payments, acquisition and
integration costs, system implementation and transition costs, and
potential costs associated with settlements of litigation or the
recognition of receivables for insurance recoveries associated with
litigation. The foregoing items, especially gains or losses
associated with asset divestitures and potential tax reserve
adjustments, could materially impact our forward-looking diluted
EPS and/or our net cash provided by operating activities calculated
in accordance with GAAP, consistent with the historical disclosures
found in this press release under the headings "Cash Flow and
Capital Spending" and "Non-GAAP Financial Measures".
|
REVIEW OF FINANCIAL RESULTS FOR THE FOURTH QUARTER OF
2016
Consolidated Segment Results
See definitions of revenue line items in the comparable sections
that follow later in this earnings release.
(In millions,
except funeral services performed and average revenue per
service)
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Funeral
|
|
|
|
|
|
|
|
Atneed
revenue
|
$
|
263.2
|
|
|
$
|
267.6
|
|
|
$
|
1,063.7
|
|
|
$
|
1,099.5
|
|
Funeral home matured
preneed revenue
|
140.0
|
|
|
128.4
|
|
|
537.9
|
|
|
532.4
|
|
Core revenue
|
403.2
|
|
|
396.0
|
|
|
1,601.6
|
|
|
1,631.9
|
|
Non-funeral home
matured preneed revenue
|
6.2
|
|
|
6.0
|
|
|
24.6
|
|
|
24.3
|
|
Recognized preneed
revenue
|
25.6
|
|
|
23.9
|
|
|
111.6
|
|
|
98.1
|
|
Other
revenue
|
29.3
|
|
|
34.5
|
|
|
131.1
|
|
|
134.5
|
|
Total
revenue
|
$
|
464.3
|
|
|
$
|
460.4
|
|
|
$
|
1,868.9
|
|
|
$
|
1,888.8
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
$
|
90.3
|
|
|
$
|
93.4
|
|
|
$
|
364.2
|
|
|
$
|
393.2
|
|
Gross margin
percentage
|
19.4
|
%
|
|
20.3
|
%
|
|
19.5
|
%
|
|
20.8
|
%
|
|
|
|
|
|
|
|
|
Funeral services
performed
|
77,464
|
|
|
77,760
|
|
|
307,980
|
|
|
316,913
|
|
Average revenue per
service
|
$
|
5,285
|
|
|
$
|
5,170
|
|
|
$
|
5,280
|
|
|
$
|
5,226
|
|
|
|
|
|
|
|
|
|
Cemetery
|
|
|
|
|
|
|
|
Atneed
revenue
|
$
|
77.0
|
|
|
$
|
75.2
|
|
|
$
|
308.1
|
|
|
$
|
300.7
|
|
Recognized preneed
revenue
|
227.3
|
|
|
199.4
|
|
|
711.6
|
|
|
660.9
|
|
Core revenue
|
304.3
|
|
|
274.6
|
|
|
1,019.7
|
|
|
961.6
|
|
Other cemetery
revenue
|
40.5
|
|
|
34.4
|
|
|
142.6
|
|
|
135.6
|
|
Total
revenue
|
$
|
344.8
|
|
|
$
|
309.0
|
|
|
$
|
1,162.3
|
|
|
$
|
1,097.2
|
|
|
|
|
|
|
|
|
|
Gross
profit
|
$
|
120.5
|
|
|
$
|
94.4
|
|
|
$
|
312.2
|
|
|
$
|
281.4
|
|
Gross margin
percentage
|
34.9
|
%
|
|
30.6
|
%
|
|
26.9
|
%
|
|
25.6
|
%
|
Comparable Funeral Results
The table below details comparable funeral results of operations
("same store") for the three months ended December 31, 2016
and 2015. We consider comparable operations to be those businesses
owned for the entire period beginning January 1, 2015 and
ending December 31, 2016.
(Dollars in
millions, except average revenue per service and average revenue
per contract sold)
|
|
Three Months Ended
December 31,
|
|
|
2016
|
|
2015
|
|
$
|
|
%
|
Comparable
revenue:
|
|
|
|
|
|
|
|
|
Atneed
revenue(1)
|
|
$
|
255.0
|
|
|
$
|
260.2
|
|
|
$
|
(5.2)
|
|
|
(2.0)%
|
|
Funeral home matured
preneed revenue(2)
|
|
136.9
|
|
|
125.0
|
|
|
11.9
|
|
|
9.5
|
%
|
Core
revenue(3)
|
|
391.9
|
|
|
385.2
|
|
|
6.7
|
|
|
1.7
|
%
|
Non-funeral home
matured preneed revenue(4)
|
|
6.1
|
|
|
6.0
|
|
|
0.1
|
|
|
1.7
|
%
|
Recognized preneed
revenue(5)
|
|
25.2
|
|
|
23.5
|
|
|
1.7
|
|
|
7.2
|
%
|
Other
revenue(6)
|
|
28.8
|
|
|
33.2
|
|
|
(4.4)
|
|
|
(13.3)
|
%
|
Total comparable
funeral revenue
|
|
$
|
452.0
|
|
|
$
|
447.9
|
|
|
$
|
4.1
|
|
|
0.9
|
%
|
|
|
|
|
|
|
|
|
|
Comparable gross
profit
|
|
$
|
88.6
|
|
|
$
|
92.1
|
|
|
$
|
(3.5)
|
|
|
(3.8)
|
%
|
Comparable gross
margin percentage
|
|
19.6
|
%
|
|
20.6
|
%
|
|
(1.0)%
|
|
|
(4.9)
|
%
|
|
|
|
|
|
|
|
|
|
Comparable
services performed:
|
|
|
|
|
|
|
|
|
Atneed
|
|
45,113
|
|
|
46,575
|
|
|
(1,462)
|
|
|
(3.1)
|
%
|
Funeral home matured
preneed
|
|
23,508
|
|
|
22,247
|
|
|
1,261
|
|
|
5.7
|
%
|
Total core
|
|
68,621
|
|
|
68,822
|
|
|
(201)
|
|
|
(0.3)
|
%
|
Non-funeral home
matured preneed
|
|
6,917
|
|
|
6,931
|
|
|
(14)
|
|
|
(0.2)
|
%
|
Total comparable
services performed
|
|
75,538
|
|
|
75,753
|
|
|
(215)
|
|
|
(0.3)
|
%
|
Core cremation
rate
|
|
48.1
|
%
|
|
47.6
|
%
|
|
0.5
|
%
|
|
1.1
|
%
|
Total comparable
cremation rate
|
|
52.8
|
%
|
|
52.3
|
%
|
|
0.5
|
%
|
|
1.0
|
%
|
|
|
|
|
|
|
|
|
|
Comparable sales
average revenue per service:
|
|
|
|
|
|
|
|
|
Atneed
|
|
5,652
|
|
|
5,587
|
|
|
$
|
65
|
|
|
1.2
|
%
|
Funeral home matured
preneed
|
|
5,824
|
|
|
5,619
|
|
|
205
|
|
|
3.6
|
%
|
Total core
|
|
5,711
|
|
|
5,597
|
|
|
114
|
|
|
2.0
|
%
|
Non-funeral home
matured preneed
|
|
882
|
|
|
866
|
|
|
16
|
|
|
1.8
|
%
|
Total comparable
average revenue per service
|
|
$
|
5,269
|
|
|
$
|
5,164
|
|
|
$
|
105
|
|
|
2.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comparable preneed
sales production:
|
|
|
|
|
|
|
|
|
Total preneed
sales
|
|
$
|
193.9
|
|
|
$
|
190.3
|
|
|
$
|
3.6
|
|
|
1.9
|
%
|
Total preneed
contracts sold
|
|
41,363
|
|
|
41,073
|
|
|
290
|
|
|
0.7
|
%
|
Average revenue per
contract sold
|
|
4,688
|
|
|
4,633
|
|
|
$
|
55
|
|
|
1.2
|
%
|
Average revenue per
contract sold, excluding the impact of foreign currency
fluctuations
|
|
$
|
4,803
|
|
|
$
|
4,717
|
|
|
$
|
86
|
|
|
1.8
|
%
|
|
|
(1)
|
Atneed revenue
represents merchandise and services sold and delivered or performed
once death has occurred.
|
(2)
|
Funeral home matured
preneed revenue represents merchandise and services sold on a
preneed contract through one of our funeral homes and delivered or
performed once death has occurred and includes fees charged by our
wholly owned registered investment advisor.
|
(3)
|
Core revenue
represents the sum of merchandise and services sold on an atneed
contract or sold by one of our funeral homes on a preneed contract
and delivered or performed once death has occurred.
|
(4)
|
Non-funeral home
matured preneed revenue represents services sold on a preneed
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 merchandise and travel protection sold on a
preneed contract 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.
|
- Total comparable funeral revenue increased by $4.1 million in the fourth quarter of 2016
compared to the same period of 2015. An increase in core revenue of
$6.7 million and recognized preneed
revenue of $1.7 million was partially
offset by a decrease in general agency revenue of $4.5 million.
- Core average revenue per service increased 2.0% during the
fourth quarter of 2016, while services performed remained flat.
Organic sales average growth of 2.6% was somewhat offset by a 50
basis point increase in core cremation mix to 48.1%.
- Recognized preneed revenue increased $1.7 million, primarily driven by an increase in
the average revenue per contract.
- General agency revenue was down 13.1% compared to the prior
year fourth quarter, primarily from a decline in preneed insurance
sales production as a larger percentage of our production was
funded through our trust product.
- Comparable funeral gross profit decreased $3.5 million to $88.6
million in the current quarter. The impact of growth in
higher margin core revenue was more than offset by the decline in
general agency revenue and inflationary increases in fixed
costs.
- Comparable preneed funeral sales production increased
$3.6 million, or 1.9%, in the fourth
quarter of 2016 compared to 2015, primarily due to a 1.2% increase
in average price per contract sold and a 0.7% increase in the
number of preneed contracts sold. For the year 2016, comparable
preneed funeral sales production increased $31.6 million or 4.0%.
Comparable Cemetery Results
The table below details comparable cemetery results of
operations ("same store") for the three months ended
December 31, 2016 and 2015. We consider comparable operations
to be those businesses owned for the entire period beginning
January 1, 2015 and ending December 31, 2016.
(Dollars in
millions)
|
|
Three Months Ended
December 31,
|
|
|
2016
|
|
2015
|
|
$
|
|
%
|
Comparable
revenue:
|
|
|
|
|
|
|
|
|
Atneed
revenue(1)
|
|
$
|
76.1
|
|
|
$
|
74.2
|
|
|
$
|
1.9
|
|
|
2.6
|
%
|
Recognized preneed
revenue(2)
|
|
225.6
|
|
|
198.1
|
|
|
27.5
|
|
|
13.9
|
%
|
Core
revenue(3)
|
|
301.7
|
|
|
272.3
|
|
|
29.4
|
|
|
10.8
|
%
|
Other
revenue(4)
|
|
40.5
|
|
|
34.0
|
|
|
6.5
|
|
|
19.1
|
%
|
Total comparable
revenue
|
|
$
|
342.2
|
|
|
$
|
306.3
|
|
|
$
|
35.9
|
|
|
11.7
|
%
|
|
|
|
|
|
|
|
|
|
Comparable gross
profit
|
|
$
|
120.1
|
|
|
$
|
93.4
|
|
|
$
|
26.7
|
|
|
28.6
|
%
|
Comparable gross
margin percentage
|
|
35.1
|
%
|
|
30.5
|
%
|
|
4.6
|
%
|
|
15.1
|
%
|
|
|
|
|
|
|
|
|
|
Comparable preneed
and atneed sales production:
|
|
|
|
|
|
|
|
|
Property
|
|
$
|
182.1
|
|
|
$
|
165.4
|
|
|
$
|
16.7
|
|
|
10.1
|
%
|
Merchandise and
services
|
|
133.9
|
|
|
134.2
|
|
|
(0.3)
|
|
|
(0.2)
|
%
|
Discounts
|
|
(38.6)
|
|
|
(35.6)
|
|
|
(3.0)
|
|
|
8.4
|
%
|
Preneed and atneed
sales production
|
|
$
|
277.4
|
|
|
$
|
264.0
|
|
|
$
|
13.4
|
|
|
5.1
|
%
|
Recognition
rate(5)
|
|
108.7
|
%
|
|
103.1
|
%
|
|
|
|
|
|
|
(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 that have been delivered or performed.
|
(3)
|
Core revenue
represents the sum of property, merchandise, and services that have
been delivered or performed.
|
(4)
|
Other revenue is
primarily related to merchandise and service trust fund income,
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 recognition stated as a percentage
of current period sales production.
|
- Comparable cemetery revenue grew $35.9
million, or 11.7% in the fourth quarter of 2016 compared to
2015 led by an increase in recognized preneed revenue of
$27.5 million, or 13.9% and higher
trust fund income.
- Comparable preneed cemetery sales production increased
$11.3 million, or 5.9%, quarter over
quarter. The growth over the prior year quarter is primarily due to
an increase in large sales and an increase in price per contract
sold.
- Comparable cemetery gross profit increased $26.7 million, and the gross margin percentage
grew to 35.1%. The gross profit increase was driven by the increase
in recognized preneed revenue and particularly benefited from an
increase in revenue recognized from completed cemetery construction
projects that carry high margins.
Other Financial Results
- General and administrative expenses increased $1.2 million to $35.1
million in the fourth quarter of 2016. The current quarter
includes $5.6 million due to a
pension termination settlement and $0.8
million in system integration costs related to the 2016
implementation of a new general ledger system. The prior year
quarter includes $2.7 million of
system integration costs. Excluding these costs, general and
administrative expenses decreased $2.5
million compared to the prior year quarter as we incurred
lower legal expenses and effectively managed our back office
overhead expenses.
- Interest expense decreased $2.9
million to $40.1 million in
the fourth quarter of 2016, as we benefited from the debt
refinancings over the past year by obtaining lower interest rates
on our Senior Notes and increasing our proportion of lower variable
rate debt.
- The change in the tax rates is the result of the divestiture of
certain properties and an adjustment of deferred tax assets related
to properties from the Stewart acquisition in 2013.
Cash Flow and Capital Spending
Set forth below is a reconciliation of our reported net cash
provided by operating activities prepared in accordance with GAAP
to net cash provided by operating activities excluding special
items (or sometimes referred to as normalized operating cash flow).
We do not intend for this information to be considered in isolation
or as a substitute for other measures of performance prepared in
accordance with GAAP.
(In
millions)
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net cash provided by
operating activities, as reported
|
$
|
105.1
|
|
|
$
|
75.6
|
|
|
$
|
463.6
|
|
|
$
|
472.2
|
|
Premiums paid on
early extinguishment
|
—
|
|
|
—
|
|
|
20.5
|
|
|
6.5
|
|
Acquisition,
integration, and system transition costs
|
0.6
|
|
|
2.4
|
|
|
11.7
|
|
|
6.6
|
|
Excess tax benefits
from share-based awards
|
1.2
|
|
|
0.8
|
|
|
12.7
|
|
|
18.1
|
|
Payments related to
tax structure changes
|
—
|
|
|
10.5
|
|
|
—
|
|
|
10.5
|
|
Net cash provided by
operating activities excluding special items
|
$
|
106.9
|
|
|
$
|
89.3
|
|
|
$
|
508.5
|
|
|
$
|
513.9
|
|
Net cash provided by operating activities excluding special
items was $106.9 million in the
fourth quarter of 2016 compared to $89.3
million in the prior year quarter. This increase was
primarily due to the cash generated from increased earnings
partially offset by higher uses of working capital during the
quarter. Working capital was negatively affected primarily by
completed cemetery construction projects in which revenue was
recognized but cash payments will be received over installment
periods.
A summary of our capital expenditures is set forth below:
Capital Expenditures
(In millions)
|
Three Months
Ended
December 31,
|
|
Twelve Months
Ended
December 31,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Capital improvements at
existing field locations and corporate
|
$
|
27.9
|
|
|
$
|
20.8
|
|
|
$
|
90.4
|
|
|
$
|
83.4
|
|
Development of cemetery
property
|
29.3
|
|
|
21.9
|
|
|
85.4
|
|
|
58.3
|
|
Subtotal
|
57.2
|
|
|
42.7
|
|
|
175.8
|
|
|
141.7
|
|
Construction of new
funeral home facilities and other
|
5.1
|
|
|
3.5
|
|
|
17.7
|
|
|
9.3
|
|
Total capital
expenditures
|
$
|
62.3
|
|
|
$
|
46.2
|
|
|
$
|
193.5
|
|
|
$
|
151.0
|
|
Total capital expenditures increased in the current quarter by
$16.1 million primarily due to
increases in capital deployed for the development of cemetery
property and improvements at existing locations. Capital
improvements at existing locations grew $7.1
million in the current quarter as we continued to invest in
our locations to provide new and unique celebration of life
experiences. Development of cemetery property increased
$7.4 million related to cemetery
property construction projects completed during the quarter.
TRUST FUND RETURNS
Total trust fund returns include realized and unrealized gains
and losses and dividends. A summary of our consolidated trust fund
returns for the three and twelve months ended December 31, 2016 is set forth below:
|
|
Three
Months
|
|
Twelve
Months
|
Preneed
funeral
|
|
(0.1)%
|
|
7.1%
|
Preneed
cemetery
|
|
—%
|
|
7.2%
|
Cemetery perpetual
care
|
|
0.9%
|
|
9.1%
|
Combined trust
funds
|
|
0.3%
|
|
7.9%
|
NON-GAAP FINANCIAL MEASURES
Earnings from continuing operations excluding special items and
diluted earnings per share from continuing operations excluding
special items (or sometimes referred to as normalized earnings per
share) shown above are non-GAAP financial measures. We believe
these non-GAAP financial measures provide a consistent basis for
comparison between quarters and better reflect the performance of
our core operations, as they are not influenced by certain income
or expense items not affecting continuing 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 from continuing
operations excluding special items and our GAAP diluted earnings
per share to diluted earnings per share from continuing operations
excluding special items. We do not intend for this information to
be considered in isolation or as a substitute for other measures of
performance prepared in accordance with GAAP.
(In millions,
except diluted EPS)
|
Three Months Ended
December 31,
|
|
2016
|
|
2015
|
|
Net Income
|
|
Diluted EPS
|
|
Net Income
|
|
Diluted EPS
|
Net income
attributable to common stockholders, as reported
|
$
|
66.2
|
|
|
$
|
0.34
|
|
|
$
|
72.4
|
|
|
$
|
0.36
|
|
Pre-tax reconciling
items:
|
|
|
|
|
|
|
|
Gain on divestitures
and impairment charges, net
|
(3.6)
|
|
|
(0.01)
|
|
|
(3.1)
|
|
|
(0.01)
|
|
System transition
costs
|
0.8
|
|
|
—
|
|
|
2.7
|
|
|
0.01
|
|
Pension termination
settlement
|
5.6
|
|
|
0.03
|
|
|
—
|
|
|
—
|
|
Tax reconciling
items:
|
|
|
|
|
|
|
|
Tax provision from
special items
|
3.9
|
|
|
0.02
|
|
|
0.3
|
|
|
—
|
|
Change in certain tax
reserves and other
|
17.4
|
|
|
0.09
|
|
|
1.2
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
continuing operations excluding special items and diluted earnings
per share from continuing operations excluding special
items
|
$
|
90.3
|
|
|
$
|
0.47
|
|
|
$
|
73.5
|
|
|
$
|
0.37
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding (in thousands)
|
|
|
192,957
|
|
|
|
|
199,977
|
|
(In millions,
except diluted EPS)
|
Twelve Months
Ended December 31,
|
|
2016
|
|
2015
|
|
Net Income
|
|
Diluted EPS
|
|
Net Income
|
|
Diluted EPS
|
Net income
attributable to common stockholders, as reported
|
$
|
177.0
|
|
|
$
|
0.90
|
|
|
$
|
233.8
|
|
|
$
|
1.14
|
|
Pre-tax reconciling
items:
|
|
|
|
|
|
|
|
Losses (gains) on
divestitures and impairment charges, net
|
26.8
|
|
|
0.14
|
|
|
(6.0)
|
|
|
(0.02)
|
|
Losses on early
extinguishment
|
22.5
|
|
|
0.11
|
|
|
6.9
|
|
|
0.03
|
|
Acquisition and
integration costs
|
5.5
|
|
|
0.03
|
|
|
3.0
|
|
|
0.01
|
|
System transition
costs
|
12.0
|
|
|
0.06
|
|
|
3.8
|
|
|
0.02
|
|
Pension termination
settlement
|
5.6
|
|
|
0.03
|
|
|
—
|
|
|
—
|
|
Tax reconciling
items:
|
|
|
|
|
|
|
|
Tax benefit from
special items
|
(17.2)
|
|
|
(0.09)
|
|
|
(2.3)
|
|
|
(0.01)
|
|
Change in certain tax
reserves and other
|
20.9
|
|
|
0.11
|
|
|
3.0
|
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings from
continuing operations excluding special items and diluted earnings
per share from continuing operations excluding special
items
|
$
|
253.1
|
|
|
$
|
1.29
|
|
|
$
|
242.2
|
|
|
$
|
1.18
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding (in thousands)
|
|
|
196,042
|
|
|
|
|
204,450
|
|
Conference Call and Webcast
We will host a conference call on Tuesday, February 14, 2017, at 8:00 a.m. Central Time. A question and answer
session will follow a brief presentation made by
management. The conference call dial-in number is (847)
413-3238 with the passcode of 44184548. The conference call will
also be broadcast live via the Internet and can be accessed through
our website at www.sci-corp.com. A replay of the conference call
will be available through February 21,
2017 and can be accessed at (630) 652-3042 with the passcode
of 44184548#. Additionally, a replay of the conference call
will be available on our website for approximately two weeks.
Cautionary Statement on Forward-Looking Statements
The statements in this press release that are not historical
facts are forward-looking statements made in reliance on the "safe
harbor" protections provided under the Private Securities
Litigation Reform Act of 1995. These statements may be accompanied
by words such as "believe," "estimate," "project," "expect,"
"anticipate," or "predict," that convey the uncertainty of future
events or outcomes. These statements are based on assumptions that
we believe are reasonable; however, many important factors could
cause our actual results in the future to differ materially from
the forward-looking statements made herein and in any other
documents or oral presentations made by us, or on our behalf.
Important factors, which could cause actual results to differ
materially from those in forward-looking statements include, among
others, the following:
- Our affiliated funeral and cemetery trust funds own investments
in equity securities, fixed income securities, and mutual funds,
which are affected by market conditions that are beyond our
control.
- We may be required to replenish our affiliated funeral and
cemetery trust funds in order 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.
- 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 funeral and preneed cemetery activities, we may be required
to make material cash payments to fund certain trust funds.
- The funeral home and cemetery industry is competitive.
- Increasing death benefits related to preneed contracts funded
through life insurance contracts may not cover future increases in
the cost of providing a price-guaranteed service.
- The financial condition of third-party insurance companies that
fund our preneed funeral contracts may impact our future
revenue.
- Unfavorable results of litigation could have a material adverse
impact on our financial statements.
- Unfavorable publicity could affect our reputation and
business.
- If the number of deaths in our markets declines, our cash flows
and revenue may decrease.
- If we are not able to respond effectively to changing consumer
preferences, our market share, revenue, and profitability could
decrease.
- The continuing upward trend in the number of cremations
performed in North America could
result in lower revenue and gross profit.
- Our funeral home and cemetery businesses are high fixed-cost
businesses.
- Regulation and compliance could have a material adverse impact
on our financial results.
- Cemetery burial practice legal claims could have a material
adverse impact on our financial results.
- We use a combination of insurance, self-insurance and large
deductibles in managing our exposure to certain inherent risks, as
such, we could be exposed to unexpected costs that could negatively
affect our financial performance.
- A number of years may elapse before particular tax matters, for
which we have established accruals, are audited and finally
resolved.
- 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.
- 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.
- Failure to maintain effective internal control over financial
reporting could adversely affect our results of operations,
investor confidence, and our stock price.
For further information on these and other risks and
uncertainties, see our Securities and Exchange Commission filings,
including our 2016 Annual Report on Form 10-K, which will be filed
in the next several days. 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 to publicly update or revise any
forward-looking statements made herein or any other forward-looking
statements made by us, whether as a result of new information,
future events or otherwise.
About Service Corporation International
Service Corporation International (NYSE: SCI), headquartered in
Houston, Texas, is North America's leading provider of deathcare
products and services. At December 31, 2016, we owned and
operated 1,502 funeral homes and 470 cemeteries (of which 281 are
combination locations) in 45 states, eight Canadian provinces, the
District of Columbia, and
Puerto Rico. Through our
businesses, we market the Dignity Memorial® brand which offers
assurance of quality, value, caring service, and exceptional
customer satisfaction. For more information about Service
Corporation International, please visit our website at
www.sci-corp.com. For more information about Dignity Memorial®,
please visit www.dignitymemorial.com.
For additional
information contact:
|
|
|
Investors:
|
|
Debbie Young -
Director / Investor Relations
|
|
(713)
525-9088
|
Media:
|
|
Jay Andrew - Managing
Director / Corporate Communications
|
|
(713)
525-5235
|
SERVICE
CORPORATION INTERNATIONAL
|
CONSOLIDATED
STATEMENT OF OPERATIONS
|
(In thousands,
except per share amounts)
|
|
|
Three Months
Ended December
31,
|
|
Twelve Months
Ended December
31,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenue
|
$
|
809,053
|
|
|
$
|
769,280
|
|
|
$
|
3,031,137
|
|
|
$
|
2,986,041
|
|
Costs and
expenses
|
(598,276)
|
|
|
(581,478)
|
|
|
(2,354,703)
|
|
|
(2,311,452)
|
|
Gross
profit
|
210,777
|
|
|
187,802
|
|
|
676,434
|
|
|
674,589
|
|
General and
administrative expenses
|
(35,061)
|
|
|
(33,866)
|
|
|
(137,730)
|
|
|
(130,813)
|
|
Gains (losses) on
divestitures and impairment charges, net
|
3,613
|
|
|
3,119
|
|
|
(26,819)
|
|
|
6,522
|
|
Operating
income
|
179,329
|
|
|
157,055
|
|
|
511,885
|
|
|
550,298
|
|
Interest
expense
|
(40,105)
|
|
|
(43,054)
|
|
|
(162,093)
|
|
|
(172,897)
|
|
Losses on early
extinguishment of debt, net
|
—
|
|
|
—
|
|
|
(22,503)
|
|
|
(6,918)
|
|
Other income
(expense), net
|
65
|
|
|
(302)
|
|
|
(631)
|
|
|
(132)
|
|
Income from
continuing operations before income taxes
|
139,289
|
|
|
113,699
|
|
|
326,658
|
|
|
370,351
|
|
Provision for income
taxes
|
(72,872)
|
|
|
(41,249)
|
|
|
(149,353)
|
|
|
(135,027)
|
|
Income from continuing
operations
|
66,417
|
|
|
72,450
|
|
|
177,305
|
|
|
235,324
|
|
Net loss from
discontinued operations, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
(390)
|
|
Net income
|
$
|
66,417
|
|
|
$
|
72,450
|
|
|
$
|
177,305
|
|
|
$
|
234,934
|
|
Net income
attributable to noncontrolling interests
|
(171)
|
|
|
(96)
|
|
|
(267)
|
|
|
(1,162)
|
|
Net income
attributable to common stockholders
|
$
|
66,246
|
|
|
$
|
72,354
|
|
|
$
|
177,038
|
|
|
$
|
233,772
|
|
|
|
|
|
|
|
|
|
Basic earnings per
share
|
$
|
0.35
|
|
|
$
|
0.37
|
|
|
$
|
0.92
|
|
|
$
|
1.17
|
|
Diluted earnings per
share
|
$
|
0.34
|
|
|
$
|
0.36
|
|
|
$
|
0.90
|
|
|
$
|
1.14
|
|
|
|
|
|
|
|
|
|
Basic weighted
average number of shares
|
190,367
|
|
|
196,248
|
|
|
193,086
|
|
|
200,356
|
|
Diluted weighted
average number of shares
|
192,957
|
|
|
199,977
|
|
|
196,042
|
|
|
204,450
|
|
SERVICE
CORPORATION INTERNATIONAL
CONSOLIDATED
BALANCE SHEET
|
|
December
31,
|
|
2016
|
|
2015
|
|
(In thousands,
except share amounts)
|
ASSETS
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
194,986
|
|
|
$
|
134,599
|
|
Receivables,
net
|
98,455
|
|
|
90,462
|
|
Inventories
|
26,431
|
|
|
27,835
|
|
Other
|
34,524
|
|
|
47,155
|
|
Total current
assets
|
354,396
|
|
|
300,051
|
|
Preneed funeral
receivables, net and trust investments
|
1,817,445
|
|
|
1,760,297
|
|
Preneed cemetery
receivables, net and trust investments
|
2,487,720
|
|
|
2,318,167
|
|
Cemetery
property
|
1,776,935
|
|
|
1,753,015
|
|
Property and
equipment, net
|
1,827,587
|
|
|
1,846,722
|
|
Goodwill
|
1,799,081
|
|
|
1,796,340
|
|
Deferred charges and
other assets
|
567,520
|
|
|
582,378
|
|
Cemetery perpetual
care trust investments
|
1,407,465
|
|
|
1,319,427
|
|
Total
assets
|
$
|
12,038,149
|
|
|
$
|
11,676,397
|
|
LIABILITIES & EQUITY
|
Current
liabilities:
|
|
|
|
Accounts payable and
accrued liabilities
|
$
|
439,936
|
|
|
$
|
422,816
|
|
Current maturities of
long-term debt
|
89,974
|
|
|
86,823
|
|
Income taxes
payable
|
7,960
|
|
|
1,373
|
|
Total current
liabilities
|
537,870
|
|
|
511,012
|
|
Long-term
debt
|
3,196,616
|
|
|
3,037,605
|
|
Deferred preneed
funeral revenue
|
581,280
|
|
|
557,897
|
|
Deferred preneed
cemetery revenue
|
1,150,137
|
|
|
1,120,001
|
|
Deferred tax
liability
|
454,638
|
|
|
470,584
|
|
Other
liabilities
|
510,322
|
|
|
496,947
|
|
Deferred preneed
receipts held in trust
|
3,103,796
|
|
|
2,973,386
|
|
Care trusts'
corpus
|
1,408,243
|
|
|
1,319,564
|
|
Commitments and
contingencies
|
|
|
|
Equity:
|
|
|
|
Common stock, $1 per
share par value, 500,000,000 shares authorized, 195,403,644 and
200,859,676 shares issued, respectively, and 189,405,244 and
195,772,876 shares outstanding, respectively
|
189,405
|
|
|
195,773
|
|
Capital in excess of
par value
|
990,203
|
|
|
1,092,106
|
|
Accumulated
deficit
|
(103,387)
|
|
|
(109,351)
|
|
Accumulated other
comprehensive income
|
16,492
|
|
|
6,164
|
|
Total common
stockholders' equity
|
1,092,713
|
|
|
1,184,692
|
|
Noncontrolling
interests
|
2,534
|
|
|
4,709
|
|
Total
equity
|
1,095,247
|
|
|
1,189,401
|
|
Total liabilities and
equity
|
$
|
12,038,149
|
|
|
$
|
11,676,397
|
|
SERVICE
CORPORATION INTERNATIONAL
CONSOLIDATED
STATEMENT OF CASH FLOWS
|
|
Years Ended
December 31,
|
|
2016
|
|
2015
|
|
(In
thousands)
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
177,305
|
|
|
$
|
234,934
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Loss from
discontinued operations, net of tax
|
—
|
|
|
390
|
|
Losses on early
extinguishment of debt, net
|
22,503
|
|
|
6,918
|
|
Premiums paid on
early extinguishment of debt
|
(20,524)
|
|
|
(6,549)
|
|
Depreciation and
amortization
|
147,233
|
|
|
141,456
|
|
Amortization of
intangible assets
|
30,956
|
|
|
31,459
|
|
Amortization of
cemetery property
|
66,745
|
|
|
62,407
|
|
Amortization of loan
costs
|
5,826
|
|
|
9,434
|
|
Provision for
doubtful accounts
|
10,776
|
|
|
6,083
|
|
Provision for
deferred income taxes
|
7,490
|
|
|
18,048
|
|
Losses (gains) on
divestitures and impairment charges, net
|
26,819
|
|
|
(6,522)
|
|
Share-based
compensation
|
14,056
|
|
|
13,843
|
|
Excess tax benefits
from share-based awards
|
(12,685)
|
|
|
(18,123)
|
|
Change in assets and
liabilities, net of effects from acquisitions and
dispositions:
|
|
|
|
(Increase) decrease
in receivables
|
(14,198)
|
|
|
464
|
|
Decrease in other
assets
|
17,855
|
|
|
2,457
|
|
Increase in payables
and other liabilities
|
47,888
|
|
|
20,567
|
|
Effect of preneed
funeral production and maturities:
|
|
|
|
Decrease in preneed
funeral receivables, net and trust investments
|
17,506
|
|
|
24,918
|
|
Increase in deferred
preneed funeral revenue
|
9,329
|
|
|
6,199
|
|
Decrease in deferred
preneed receipts held in trust
|
(41,607)
|
|
|
(52,946)
|
|
Effect of preneed
cemetery production and maturities:
|
|
|
|
Increase in preneed
cemetery receivables, net and trust investments
|
(90,900)
|
|
|
(73,038)
|
|
Increase in deferred
preneed cemetery revenue
|
25,446
|
|
|
60,960
|
|
Increase (decrease)
in deferred preneed receipts held in trust
|
15,776
|
|
|
(11,173)
|
|
Net cash provided by
operating activities
|
463,595
|
|
|
472,186
|
|
Cash flows from
investing activities:
|
|
|
|
Capital
expenditures
|
(193,446)
|
|
|
(150,986)
|
|
Acquisitions, net of
cash acquired
|
(69,146)
|
|
|
(41,258)
|
|
Proceeds from
divestitures and sales of property and equipment
|
41,310
|
|
|
16,772
|
|
Net withdrawals of
restricted funds and other
|
5,150
|
|
|
8,066
|
|
Net cash used in
investing activities from continuing operations
|
(216,132)
|
|
|
(167,406)
|
|
Net cash provided by
investing activities from discontinued operations
|
—
|
|
|
987
|
|
Net cash used in
investing activities
|
(216,132)
|
|
|
(166,419)
|
|
Cash flows from
financing activities:
|
|
|
|
Proceeds from
issuance of long-term debt
|
1,060,000
|
|
|
446,250
|
|
Debt issuance
costs
|
(5,232)
|
|
|
(6,025)
|
|
Payments of
debt
|
(36,414)
|
|
|
(160,220)
|
|
Early extinguishment
of debt
|
(875,110)
|
|
|
(197,377)
|
|
Principal payments on
capital leases
|
(33,119)
|
|
|
(28,601)
|
|
Proceeds from
exercise of stock options
|
17,662
|
|
|
31,809
|
|
Excess tax benefits
from share-based awards
|
12,685
|
|
|
18,123
|
|
Purchase of Company
common stock
|
(227,928)
|
|
|
(345,261)
|
|
Payments of
dividends
|
(98,418)
|
|
|
(87,570)
|
|
Purchase of
noncontrolling interest
|
(1,961)
|
|
|
(2,075)
|
|
Bank overdrafts and
other
|
(1,095)
|
|
|
(7,531)
|
|
Net cash used in
financing activities
|
(188,930)
|
|
|
(338,478)
|
|
Effect of foreign
currency
|
1,854
|
|
|
(10,025)
|
|
Net increase
(decrease) in cash and cash equivalents
|
60,387
|
|
|
(42,736)
|
|
Cash and cash
equivalents at beginning of period
|
134,599
|
|
|
177,335
|
|
Cash and cash
equivalents at end of period
|
$
|
194,986
|
|
|
$
|
134,599
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/service-corporation-international-announces-fourth-quarter-2016-financial-results-and-outlook-for-2017-300406424.html
SOURCE Service Corporation International