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Feb 18, 2020 1:55 AM ET

Service Corporation International Announces Fourth Quarter 2019 Financial Results And Outlook For 2020


iCrowd Newswire - Feb 18, 2020

HOUSTON,- Service Corporation International (NYSE: SCI), the largest provider of deathcare products and services in North America, today reported results for the fourth quarter 2019. 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,

 

2019

 

2018

 

2019

 

2018

Revenue

$

850.8

   

$

820.8

   

$

3,230.8

   

$

3,190.2

 

Operating income

$

240.9

   

$

172.7

   

$

666.6

   

$

630.7

 

Net income attributable to common stockholders

$

147.2

   

$

193.0

   

$

369.6

   

$

447.2

 

Diluted earnings per share

$

0.79

   

$

1.04

   

$

1.99

   

$

2.39

 

Earnings excluding special items (1)

$

111.3

   

$

99.6

   

$

352.9

   

$

335.2

 

Diluted earnings per share excluding special items (1)

$

0.60

   

$

0.54

   

$

1.90

   

$

1.79

 

Diluted weighted average shares outstanding

185.2

   

185.7

   

185.5

   

187.0

 

Net cash provided by operating activities

$

156.6

   

$

163.5

   

$

628.8

   

$

615.8

 

Net cash provided by operating activities excluding special items (1)

$

156.6

   

$

163.5

   

$

635.2

   

$

610.2

 
   

(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 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 Summary

Tom Ryan, the Company’s President, Chairman, and Chief Executive Officer, commented on the fourth quarter of 2019:

“We ended the year with a strong operating performance from our funeral businesses for the fourth quarter, which contributed to an impressive 11% growth in adjusted earnings per share. Revenue and profit growth in our funeral segment was somewhat offset by the timing of revenue recognition from cemetery sales production for the fourth quarter. Comparable funeral and cemetery preneed sales production increased by over 8% on a combined basis compared to the prior year quarter. These results are all made possible by our greatest asset, our 25,000 associates. Their hard work, dedication, and focus on our client families are what makes this company so strong.

Looking ahead to 2020, we believe we are well positioned to deliver solid results, with expected adjusted earnings per share growth in our long-term targeted growth range of 8% to 12%, despite pressure from a higher effective tax rate in 2020. Looking forward, we believe that our operating platform and healthy financial condition will allow us to continue to grow revenue, leverage our scale, and deploy capital wisely to enhance shareholder value.”

OUTLOOK FOR 2020

Our outlook for diluted earnings per share from continuing operations excluding special items is anticipated to be in line with our expected long-term growth framework of 8%-12%. Included in our outlook for diluted earnings per share excluding special items below, is an expected increase in our adjusted effective tax rate from 22.3% in 2019 to approximately 24.0% in 2020. This expected increase in our adjusted effective tax rate equates to a negative impact of approximately five cents per share year over year. Additionally, our outlook for net cash provided by operating activities excluding special items reflects an anticipated $55 million net increase in cash taxes paid compared to 2019.

(In millions, except per share amounts)

 

2020 Outlook

Diluted earnings per share excluding special items (1)

 

$1.96 – $2.16

         

Net cash provided by operating activities excluding special items and cash taxes (1)

 

$710

 

$760

Cash taxes expected in 2020

 

$(120)

 

$(120)

Net cash provided by operating activities excluding special items (1)

 

$590

$640

Capital improvements at existing locations and cemetery development expenditures

 

Approximately $230

   

(1)

Diluted earnings per share excluding special items, net cash provided by operating activities excluding special items and, net cash provided by operating activities excluding special items and taxes, 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 2020 excludes the following because this information is not currently available for 2020: Expenses net of insurance recoveries related to 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 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, could materially impact our forward-looking diluted earnings per share 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 2019

Consolidated Segment Results

 

(See definitions of revenue line items 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,

 

2019

 

2018

 

2019

 

2018

Funeral:

             

Atneed revenue

$

256.3

   

$

245.1

   

$

996.6

   

$

998.5

 

Matured preneed revenue

155.8

   

150.9

   

605.2

   

600.9

 

Core revenue

412.1

   

396.0

   

1,601.8

   

1,599.4

 

Non-funeral home revenue

13.5

   

12.4

   

52.2

   

49.7

 

Recognized preneed revenue

34.9

   

26.6

   

139.5

   

125.1

 

Other revenue

31.5

   

29.0

   

130.4

   

123.8

 

Total revenue

$

492.0

   

$

464.0

   

$

1,923.9

   

$

1,898.0

 
               

Gross profit

$

102.3

   

$

90.6

   

$

372.6

   

$

369.6

 

Gross profit percentage

20.8

%

 

19.5

%

 

19.4

%

 

19.5

%

               

Funeral services performed

81,294

   

79,309

   

319,616

   

315,700

 

Average revenue per service

$

5,235

   

$

5,149

   

$

5,175

   

$

5,224

 
 
 

(In millions)

Three Months Ended December
31,

 

Twelve Months Ended December
31,

 

2019

 

2018

 

2019

 

2018

Cemetery:

             

Atneed property revenue

$

23.5

   

$

23.6

   

$

93.9

   

$

90.4

 

Atneed merchandise and service revenue

59.1

   

58.6

   

232.4

   

232.7

 

Total atneed revenue

82.6

   

82.2

   

326.3

   

323.1

 

Recognized preneed property revenue

171.9

   

169.6

   

581.7

   

573.0

 

Recognized preneed merchandise and service revenue

74.8

   

77.8

   

287.6

   

288.3

 

Total recognized preneed revenue

246.7

   

247.4

   

869.3

   

861.3

 

Core revenue

329.3

   

329.6

   

1,195.6

   

1,184.4

 

Other cemetery revenue

29.5

   

27.2

   

111.3

   

107.8

 

Total revenue

$

358.8

   

$

356.8

   

$

1,306.9

   

$

1,292.2

 
               

Gross profit

$

115.6

   

$

119.7

   

$

387.9

   

$

390.7

 

Gross profit percentage

32.2

%

 

33.5

%

 

29.7

%

 

30.2

%

Comparable Funeral Results

The table below details comparable funeral results of operations (“same store”) for the three months ended December 31, 2019 and 2018. We consider comparable operations to be those businesses owned for the entire period beginning January 1, 2018 and ending December 31, 2019.

(Dollars in millions, except average revenue per service and average revenue per contract sold)

Three Months Ended December 31,

 

2019

 

2018

 

Var

 

%

Comparable revenue:

             

Atneed revenue(1)

$

248.0

   

$

239.2

   

$

8.8

   

3.7

%

Matured preneed revenue(2)

152.1

   

148.1

   

4.0

   

2.7

%

Core revenue(3)

400.1

   

387.3

   

12.8

   

3.3

%

Non-funeral home revenue(4)

13.2

   

12.2

   

1.0

   

8.2

%

Recognized preneed revenue(5)

34.1

   

26.3

   

7.8

   

29.7

%

Other revenue(6)

30.9

   

29.2

   

1.7

   

5.8

%

Total comparable revenue

$

478.3

   

$

455.0

   

$

23.3

   

5.1

%

               

Comparable gross profit

$

100.8

   

$

91.6

   

$

9.2

   

10.0

%

Comparable gross profit percentage

21.1

%

 

20.1

%

 

1.0

%

   
               

Comparable services performed:

             

Atneed

42,831

   

42,261

   

570

   

1.3

%

Matured preneed

24,704

   

24,409

   

295

   

1.2

%

Total core

67,535

   

66,670

   

865

   

1.3

%

Non-funeral home

10,619

   

9,982

   

637

   

6.4

%

Total comparable funeral services performed

78,154

   

76,652

   

1,502

   

2.0

%

Core cremation rate

50.7

%

 

49.4

%

 

1.3

%

   

Total comparable cremation rate

57.3

%

 

55.9

%

 

1.4

%

   
               

Comparable sales average revenue per service:

             

Atneed

$

5,790

   

$

5,660

   

$

130

   

2.3

%

Matured preneed

6,157

   

6,067

   

90

   

1.5

%

Total core

5,924

   

5,809

   

115

   

2.0

%

Non-funeral home

1,243

   

1,222

   

21

   

1.7

%

Total comparable average revenue per service

$

5,288

   

$

5,212

   

$

76

   

1.5

%

               

Comparable preneed sales production:

             

Total preneed sales

$

222.0

   

$

198.0

   

$

24.0

   

12.1

%

Core contracts sold

30,054

   

27,350

   

2,704

   

9.9

%

Non-funeral home contracts sold

15,879

   

14,004

   

1,875

   

13.4

%

Core average revenue per contract sold

$

5,919

   

$

5,896

   

$

23

   

0.4

%

Non-funeral home average revenue per contract sold

$

2,777

   

$

2,627

   

$

150

   

5.7

%

   

(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 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.

Comparable Cemetery Results

The table below details comparable cemetery results of operations (“same store”) for the three months ended December 31, 2019 and 2018. We consider comparable operations to be those businesses owned for the entire period beginning January 1, 2018 and ending December 31, 2019.

(Dollars in millions)

Three Months Ended December 31,

 

2019

 

2018

 

Var

 

%

Comparable revenue:

             

Atneed property revenue

$

23.2

   

$

23.2

   

$

   

%

Atneed merchandise and service revenue

57.7

   

57.4

   

0.3

   

0.5

%

Total atneed revenue(1)

80.9

   

80.6

   

0.3

   

0.4

%

Recognized preneed property revenue

170.6

   

168.4

   

2.2

   

1.3

%

   Recognized preneed merchandise and service revenue

73.4

   

76.2

   

(2.8)

   

(3.7)

%

  Total recognized preneed revenue(2)

244.0

   

244.6

   

(0.6)

   

(0.2)

%

   Core revenue(3)

324.9

   

325.2

   

(0.3)

   

(0.1)

%

Other revenue(4)

27.8

   

25.6

   

2.2

   

8.6

%

Total comparable revenue

$

352.7

   

$

350.8

   

$

1.9

   

0.5

%

               

Comparable gross profit

$

114.6

   

$

118.1

   

$

(3.5)

   

(3.0)

%

Comparable gross profit percentage

32.5

%

 

33.7

%

 

(1.2)

%

   
               

Comparable preneed and atneed sales production:

             

Property

$

187.4

   

$

178.3

   

$

9.1

   

5.1

%

Merchandise and services

138.7

   

135.0

   

3.7

   

2.7

%

Discounts and other

(1.4)

   

(2.0)

   

0.6

   

30.0

%

Preneed and atneed sales production

$

324.7

   

$

311.3

   

$

13.4

   

4.3

%

               

 Recognition rate(5)

100.1

%

 

104.5

%

       
   

(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.

Other Financial Results

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 adjusted 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.

Contact Information:

Service Corporation International








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