News Releases

HOUSTON, April 29, 2020 /PRNewswire/ -- Service Corporation International (NYSE: SCI), the largest provider of deathcare products and services in North America, today reported results for the first quarter of 2020 and provided updates related to the effect of the COVID-19 pandemic.

Tom Ryan, the Company's President, Chairman, and Chief Executive Officer, had the following opening remarks:
"Currently, the impact of COVID-19 is having a devastating effect on our global health and economies. During this unprecedented time, we remain deeply committed to the health and well-being of our client families, employees, and communities. Through it all, our team of almost 25,000 associates are selflessly putting the needs of others before their own by serving client families during their greatest time of need. I want to thank our associates for rising to the occasion and stepping up to serve with creativity, compassion, and courage. Our associates are truly heroes."

FIRST QUARTER SUMMARY

Details of our first quarter 2020 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.

 

• Diluted earnings per share were $0.45 in the first quarter of 2020 compared to $0.43 in the first quarter of 2019. The current period was impacted by a $4.5 million pre-tax gain on divestitures and the prior year quarter was impacted by a pre-tax amount of $8.0 million in unusual legal expenses. Diluted earnings per share excluding special items was $0.43 in the first quarter of 2020 compared to $0.47 in the first quarter of 2019. The decline of $0.04, or 8.5%, is due to lower gross profit primarily related to less preneed cemetery property sales due to the effects of the COVID-19 pandemic, which was partially offset by reductions in corporate general and administrative expenses and lower interest expense.
• Net cash provided by operating activities declined $4.9 million to $180.0 million in the first quarter of 2020 compared to $184.9 million in the first quarter of 2019. Strong atneed and preneed cash receipts along with a reduction in cash interest payments helped to offset lower cash earnings during the quarter.

Tom Ryan, the Company's President, Chairman, and Chief Executive Officer, commented on the state of the Company:
"Given the unique circumstances that have been created by the COVID-19 pandemic, we believe it is critical to emphasize both the strength of our team as well as the sound financial position of our Company. Our immediate response to this crisis has been centered around the safety and security of our largest and most significant asset - our associates. We have provided an abundant amount of safety and protective equipment to our associates so that they may be able to safely serve our client families during their greatest time of need. Additionally, I am extremely proud that we came into this crisis in a very strong financial position. We have a strong balance sheet, tremendous liquidity, and a favorable debt maturity profile. This foundation will allow us to weather this storm. While we are currently navigating these turbulent waters, these two great assets - our people and our financial position - will allow us to eventually reach smoother waters and emerge as an even stronger company."

COVID-19 PANDEMIC RESPONSE

Associates

Jay Waring, the Company's Chief Operating Officer, commented:
"During this time, our dedicated team of associates on the front lines are acting as first responders and providing essential services for the well-being of our client families and communities. They are providing care and support in a world of heightened anxiety, and I am grateful and humbled by their enormous courage and resolve. We will continue to take every measure possible to ensure their well-being so they may continue fulfilling their vital role in our communities. Our entire SCI family is rising to the occasion and working around the clock to lend a hand in heavily impacted areas, especially New York, New Jersey, Detroit, Seattle, New Orleans, and Quebec. We are proud of their dedication and resolve, and thank them for continuing to serve client families and communities with the utmost care and compassion."

Customers

The rigorous restrictions placed on gatherings and mandated by state, provincial, and local governments has posed a unique challenge for our funeral homes and cemeteries. In mid-March, we quickly developed a technology solution by leveraging Facebook Live, which allows extended family and friends to virtually participate in the ceremony alongside the immediate family. We now have over 1,000 locations offering this service and we have trained approximately 1,000 associates in less than a month. In addition, guests are given the opportunity to leave condolences on balloons that are tied to chapel chairs so families can feel connected to those unable to attend in person and carefully designed outdoor venues are also allowing guests to be present, yet remain at a safe distance. Also, several locations now offer customers the ability to broadcast cemetery services through radio transmitters. As we have continued to ramp up and train more locations on streaming services through Dignity Memorial® Facebook pages, we are beginning to see an increase in the number of families choosing this option resulting in tens of thousands of views. Atneed funeral directors are also using virtual meeting platforms to discuss and plan service details with client families. Although they may be unable to meet face-to-face, our funeral directors continue to listen, understand, suggest, and plan important details for honoring a loved one's life.

Preneed Sales

Our preneed sales teams are beginning to overcome social distancing obstacles by further leveraging technology and arranging virtual sales presentations with customers who currently prefer to participate from their home. Our preneed sales teams are also utilizing various other tools and techniques such as virtual on-demand preneed sales seminars and setting up informational pop-up tents to discuss pre-planning from a safe distance. Once this crisis is over, we believe we can capitalize on many of the technological solutions that are helping us manage through these unprecedented times.

Outlook for the Remainder of 2020

Eric Tanzberger, the Company's Chief Financial Officer, commented further on the strength of the Company's financial position:
"I think it is important to reiterate that we are well-positioned financially to weather this storm. Our financial position is strong with very robust liquidity. We continue to expect a significant amount of positive operating cash flow during 2020. Additionally, we have no meaningful debt maturities until May 2024. Out of an abundance of caution, we have implemented appropriate financial measures, which should allow us to safe-guard the employment of our associates. In order to fund these employment safe-guards, we have deferred certain cash expenditures for corporate and field maintenance, cemetery development, and growth capital expenditures, and we believe we have the flexibility to adjust further. We are proud that we have had no lay-offs or mandatory furloughs so far as a result of this pandemic. Lastly, we have taken measures to reduce expenses in certain areas of our business and believe there is room for further reduction, if needed. Looking ahead we are confident in the strength of our liquidity and cash flow position that will allow us to return to growth quickly after this crisis passes."

Due to the uncertainty of current economic conditions, in early April, we withdrew our full year 2020 guidance. We will continue to closely assess this situation, and will provide further updates when the effects of the pandemic are more predictable. As we look forward in 2020, we anticipate the impact of COVID-19 pandemic on both our funeral and cemetery segments will result in a decline of our adjusted earnings per share, which we hope to minimize as we continue to be vigilant with our costs and expenses. We believe that adjusted operating cash flow will be less impacted than adjusted earnings per share as we expect to continue to collect cash from preneed installment sales, defer taxes as allowed by federal and state laws, and temporarily reduce expenses and capital expenditures.

CONFERENCE CALL AND WEBCAST

We will host a conference call on Thursday, April 30, 2020, 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 2624254. The conference call will also be broadcast live via the Internet and can be accessed through our website at www.sci-corp.com. A replay of the conference call will be available through May 7, 2020 and can be accessed at (877) 344-7529 (US), (412) 317-0088 (International), or (855)-669-9658 (Canada) with the passcode of 10141950. Additionally, a replay of the conference call will be available on our website for approximately one week.

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 March 31, 2020, we owned and operated 1,475 funeral homes and 483 cemeteries (of which 296 are combination locations) in 44 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.

 

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 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.
• 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 insurance companies that fund our preneed 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.
• 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.
• 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.
• 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 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.
• 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, operating results, financial condition, or cash flow 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.
• Regulation and compliance could have a material adverse impact on our financial results.
• Cemetery burial practice claims could have a material adverse impact on our financial results.
• The COVID-19 pandemic has had an adverse effect on our business and results of operations and future public health threats could have additional material adverse consequences for our business and results of operations.

For further information on these and other risks and uncertainties, see our Securities and Exchange Commission filings, including our 2019 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.

APPENDIX: RESULTS FOR THE FIRST QUARTER OF 2020

 

 

 

Comparable Funeral Results

The table below details comparable funeral results of operations ("same store") for the three months ended March 31, 2020 and 2019. We consider comparable funeral operations to be those businesses owned for the entire period beginning January 1, 2019 and ending March 31, 2020.

 

Comparable Cemetery Results

 

The table below details comparable cemetery results of operations ("same store") for the three months ended March 31, 2020 and 2019. We consider comparable cemetery operations to be those businesses owned for the entire period beginning January 1, 2019 and ending March 31, 2020. 

 

 

 

Net cash provided by operating activities declined $4.9 million to $180.0 million in the first quarter of 2020 compared to $184.9 million in the first quarter of 2019. A $14.8 million reduction in cash interest payments along with a $6.8 million growth in atneed and preneed cash receipts was substantially offset by a $12.8 million decline in gross profit and increases in incentive compensation and other payments.

A summary of our capital expenditures is set forth below:

 

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 for the period ended March 31, 2020 is set forth below:

 

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.

 

 

 

SOURCE Service Corporation International