SCI 8-K
Service Corp International (SCI)
8-K
2022-08-02
For: 2022-08-02
View Original
Added on
April 10, 2026
UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 | |||||
Form 8-K
| CURRENT REPORT | ||
| Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 | ||
| Date of Report (Date of earliest event reported) | |||||
| (Exact name of registrant as specified in its charter) | ||
| (State or other jurisdiction of incorporation) | (Commission File Number) | (I.R.S. Employer Identification No.) | ||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
Registrant's telephone number, including area code | ||||||||
| (Former name or former address, if changed since last report.) | ||||||||
| Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: | |||||
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13a-4(c)) | |||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter) . ☐ Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Item 2.02 Results of Operations and Financial Condition
On August 2, 2022 , Service Corporation International issued a press release reporting its financial results for the three and six months ended June 30, 2022. A copy of this press release, dated August 2, 2022 , is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
The information in this Current Report on Form 8-K, including Exhibit 99.1, is furnished and not filed. Accordingly, none of the information will be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, as amended, or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits
(d) The following exhibits are included with this report
| Exhibit No. | Description | |||||||
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) | |||||||
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Service Corporation International | |||||||||||
| By: | /s/ Eric D. Tanzberger | ||||||||||
| Eric D. Tanzberger | |||||||||||
Senior Vice President | |||||||||||
| Chief Financial Officer | |||||||||||
EXHIBIT 99.1
 | SERVICE CORPORATION INTERNATIONAL | ||||
ANNOUNCES SECOND QUARTER 2022 FINANCIAL RESULTS | |||||
AND CONFIRMS 2022 GUIDANCE | |||||
Conference call on Wednesday, August 3, 2022, at 8:00 a.m. Central Time.
HOUSTON, Texas, August 2, 2022 . . . Service Corporation International (NYSE: SCI), the largest provider of deathcare products and services in North America, today reported results for the second quarter of 2022.
Tom Ryan, the Company's Chairman and CEO, commented on second quarter results:
"Today we are very pleased to report solid adjusted earnings per share of $0.84 and net cash provided by operating activities of $141 million for the second quarter of 2022. While our earnings per share is slightly below the prior year quarter that was materially impacted by the effects of COVID-19, we are still performing notably more services, generating significantly more preneed cemetery sales, and delivering a compelling increase in earnings per share as compared to 2020 and pre-pandemic levels.
We are also pleased to confirm our full year 2022 guidance for adjusted earnings guidance and adjusted operating cash flow. 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.
These results would not be possible without the hard work of our 24,000 associates. I would like to thank our entire SCI family for helping our client families gain closure and healing through remembrance and celebration."
Second Quarter Highlights:
–Revenue grew $3 million over the prior year quarter to $991 million.
–GAAP earnings per share were $0.82.
–Adjusted earnings per share were $0.84.
–Comparable average revenue per funeral service grew 1.8%.
–Comparable preneed funeral sales production grew $7 million, or 2.5%.
Details of our second quarter of 2022 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 June 30, | Six months ended June 30, | ||||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||
| Revenue | $ | 990.9 | $ | 987.5 | $ | 2,103.3 | $ | 2,065.5 | ||||||||||||||||||
| Operating income | $ | 221.2 | $ | 245.8 | $ | 556.9 | $ | 587.9 | ||||||||||||||||||
| Net income attributable to common stockholders | $ | 132.7 | $ | 157.7 | $ | 352.2 | $ | 386.6 | ||||||||||||||||||
| Diluted earnings per share | $ | 0.82 | $ | 0.92 | $ | 2.17 | $ | 2.25 | ||||||||||||||||||
Earnings excluding special items (1) | $ | 135.1 | $ | 157.4 | $ | 354.7 | $ | 385.3 | ||||||||||||||||||
Diluted earnings per share excluding special items (1) | $ | 0.84 | $ | 0.92 | $ | 2.18 | $ | 2.25 | ||||||||||||||||||
| Diluted weighted average shares outstanding | 161.3 | 170.9 | 162.6 | 171.6 | ||||||||||||||||||||||
| Net cash provided by operating activities | $ | 140.7 | $ | 192.2 | $ | 472.9 | $ | 489.8 | ||||||||||||||||||
(1) Earnings excluding special items and diluted earnings per share excluding special items are non-GAAP financial measures. These items are also referred to as "adjusted earnings" and "adjusted earnings per share." A reconciliation from net income attributable to common stockholders and diluted earnings per share in accordance with generally accepted accounting principles in the United States (GAAP) can be found later in this press release under the heading “Non-GAAP Financial Measures” in the Appendix at the end of this press release.
•Diluted earnings per share were $0.82 in the second quarter of 2022 compared to $0.92 in the second quarter of 2021. The current year quarter was favorably impacted by $0.3 million of net gains on divestitures and impairment charges and unfavorably impacted by a $1.2 million and a $1.5 million loss related to an early extinguishment of debt and a foreign currency exchange, respectively. The prior year quarter was impacted by a $5.2 million loss on early extinguishment of debt, net, which was offset by a $6.2 million increase in gains on divestitures and impairment charges. Diluted earnings per share excluding special items was $0.84 in the second quarter of 2022 compared to $0.92 in the second quarter of 2021. The decline of $0.08 is primarily due to an expected decline in gross profit related to decreases in COVID-19 related activity and lower trust fund income, increased corporate and general administration expenses, and higher interest and taxes. These results were slightly offset by the benefit of fewer shares outstanding and an increase in contributions from recent acquisitions and new builds of funeral homes and cemeteries.
•Net cash provided by operating activities declined $51.5 million as expected to $140.7 million in the second quarter of 2022 compared to $192.2 million in the second quarter of 2021. The decrease in operating cash flow is primarily due to lower operating income, higher cash interest and tax payments, as well as unfavorable working capital.
1 Service Corporation International
CONFIRMED OUTLOOK FOR 2022
The guidance provided below continues to have a wider range than usual due to the uncertainty around the impact of the COVID-19 pandemic. Our outlook for net cash provided by operating activities excluding special items reflects an estimated $20 million of payroll tax payments in 2022 that were deferred from 2020 as allowed under the CARES Act.
| (Dollars in millions, except per share amounts) | 2022 Outlook | |||||||||||||
Diluted earnings per share excluding special items (1) | $3.30 - $3.70 | |||||||||||||
Net cash provided by operating activities excluding special items and cash taxes (1) | $940 - $980 | |||||||||||||
Cash taxes expected in 2022 | $180 - $190 | |||||||||||||
Net cash provided by operating activities excluding special items (1) | $750 - $800 | |||||||||||||
| Capital improvements at existing locations and cemetery development expenditures | $270 - $290 | |||||||||||||
(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 2022 excludes the following because this information is not currently available for 2022: 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 associated with settlements of litigation 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, consistent with the historical disclosures found in the Appendix at the end of this press release under the headings "Cash Flow and Capital Spending" and “Non-GAAP Financial Measures”.
CONFERENCE CALL AND WEBCAST
We will host a conference call on Wednesday, August 3, 2022, 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 8489167. 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 August 10, 2022 and can be accessed at (877) 344-7529 (US) or (412) 317-0088 (International) with the passcode of 3658741. 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 June 30, 2022, we owned and operated 1,459 funeral service locations and 488 cemeteries (of which 300 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 | ||||||||||||
2 Service Corporation International
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.
•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.
•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 2021 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.
3 Service Corporation International
| SERVICE CORPORATION INTERNATIONAL | ||||
APPENDIX: RESULTS FOR THE SECOND QUARTER OF 2022 | |||||
Consolidated Statement of Operations (Unaudited)
| (Dollars in thousands, except per share amounts) | Three months ended | Six months ended | |||||||||||||||||||||
| June 30, | June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenue | $ | 990,855 | $ | 987,535 | $ | 2,103,258 | $ | 2,065,516 | |||||||||||||||
| Cost of revenue | (724,210) | (714,211) | (1,459,700) | (1,409,749) | |||||||||||||||||||
| Gross profit | 266,645 | 273,324 | 643,558 | 655,767 | |||||||||||||||||||
| Corporate general and administrative expenses | (45,721) | (33,649) | (87,425) | (75,318) | |||||||||||||||||||
| Gains on divestitures and impairment charges, net | 294 | 6,162 | 783 | 7,428 | |||||||||||||||||||
| Operating income | 221,218 | 245,837 | 556,916 | 587,877 | |||||||||||||||||||
| Interest expense | (40,571) | (37,435) | (79,599) | (73,247) | |||||||||||||||||||
| Losses on early extinguishment of debt, net | (1,225) | (5,226) | (1,225) | (5,226) | |||||||||||||||||||
| Other (expense) income, net | (1,103) | 655 | (975) | 996 | |||||||||||||||||||
| Income before income taxes | 178,319 | 203,831 | 475,117 | 510,400 | |||||||||||||||||||
| Provision for income taxes | (45,173) | (46,042) | (122,404) | (123,656) | |||||||||||||||||||
| Net income | 133,146 | 157,789 | 352,713 | 386,744 | |||||||||||||||||||
| Net income attributable to noncontrolling interests | (476) | (84) | (530) | (160) | |||||||||||||||||||
| Net income attributable to common stockholders | $ | 132,670 | $ | 157,705 | $ | 352,183 | $ | 386,584 | |||||||||||||||
| Basic earnings per share: | |||||||||||||||||||||||
| Net income attributable to common stockholders | $ | 0.84 | $ | 0.94 | $ | 2.20 | $ | 2.29 | |||||||||||||||
| Basic weighted average number of shares | 158,705 | 168,450 | 160,009 | 169,180 | |||||||||||||||||||
| Diluted earnings per share: | |||||||||||||||||||||||
| Net income attributable to common stockholders | $ | 0.82 | $ | 0.92 | $ | 2.17 | $ | 2.25 | |||||||||||||||
| Diluted weighted average number of shares | 161,290 | 170,863 | 162,568 | 171,616 | |||||||||||||||||||
4 Service Corporation International
Consolidated Balance Sheet (Unaudited)
| (Dollars in thousands, except share amounts) | |||||||||||
| June 30, 2022 | December 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 206,242 | $ | 268,626 | |||||||
| Receivables, net | 93,479 | 106,051 | |||||||||
| Inventories | 30,070 | 25,935 | |||||||||
| Other | 31,979 | 40,448 | |||||||||
| Total current assets | 361,770 | 441,060 | |||||||||
| Preneed receivables, net and trust investments | 5,418,621 | 6,015,323 | |||||||||
| Cemetery property | 1,899,554 | 1,900,844 | |||||||||
| Property and equipment, net | 2,268,215 | 2,252,158 | |||||||||
| Goodwill | 1,913,448 | 1,915,082 | |||||||||
| Deferred charges and other assets, net | 1,158,650 | 1,169,813 | |||||||||
| Cemetery perpetual care trust investments | 1,681,703 | 1,996,898 | |||||||||
| Total assets | $ | 14,701,961 | $ | 15,691,178 | |||||||
| LIABILITIES & EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued liabilities | $ | 635,536 | $ | 659,494 | |||||||
| Current maturities of long-term debt | 63,240 | 65,016 | |||||||||
| Income taxes payable | 16,335 | 3,751 | |||||||||
| Total current liabilities | 715,111 | 728,261 | |||||||||
| Long-term debt | 3,954,475 | 3,901,304 | |||||||||
| Deferred revenue, net | 1,583,394 | 1,532,749 | |||||||||
| Deferred tax liability | 437,010 | 437,902 | |||||||||
| Other liabilities | 410,597 | 438,903 | |||||||||
| Deferred receipts held in trust | 4,085,657 | 4,766,492 | |||||||||
| Care trusts’ corpus | 1,676,134 | 1,976,118 | |||||||||
| Equity: | |||||||||||
| Common stock, $1 per share par value, 500,000,000 shares authorized, 167,575,348 and 166,821,502 shares issued, respectively, and 158,219,257 and 163,114,202 shares outstanding, respectively | 158,219 | 163,114 | |||||||||
| Capital in excess of par value | 968,455 | 979,096 | |||||||||
| Retained earnings | 679,052 | 727,021 | |||||||||
| Accumulated other comprehensive income | 33,627 | 40,214 | |||||||||
| Total common stockholders’ equity | 1,839,353 | 1,909,445 | |||||||||
| Noncontrolling interests | 230 | 4 | |||||||||
| Total equity | 1,839,583 | 1,909,449 | |||||||||
| Total liabilities and equity | $ | 14,701,961 | $ | 15,691,178 | |||||||
5 Service Corporation International
Consolidated Statement of Cash Flows (Unaudited)
| (Dollars in thousands) | Six months ended June 30, | ||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 352,713 | $ | 386,744 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Losses on early extinguishment of debt, net | 1,225 | 5,226 | |||||||||
| Depreciation and amortization | 86,234 | 79,552 | |||||||||
| Amortization of intangibles | 9,478 | 10,127 | |||||||||
| Amortization of cemetery property | 47,327 | 52,362 | |||||||||
| Amortization of loan costs | 3,526 | 3,118 | |||||||||
| Provision for expected credit losses | 6,756 | 6,389 | |||||||||
| (Benefit from) provision for deferred income taxes | (3,723) | 1,986 | |||||||||
| Gains on divestitures and impairment charges, net | (783) | (7,428) | |||||||||
| Gain on sale of investments | (1,169) | — | |||||||||
| Share-based compensation | 7,400 | 7,096 | |||||||||
| Change in assets and liabilities, net of effects from acquisitions and divestitures: | |||||||||||
| Decrease (increase) in receivables | 11,878 | (1,002) | |||||||||
| Decrease (increase) in other assets | 1,680 | (31,340) | |||||||||
| (Decrease) increase in payables and other liabilities | (8,582) | 56,891 | |||||||||
| Effect of preneed sales production and maturities: | |||||||||||
| Increase in preneed receivables, net and trust investments | (178,619) | (160,465) | |||||||||
| Increase in deferred revenue, net | 123,450 | 66,107 | |||||||||
| Increase in deferred receipts held in trust | 14,094 | 14,401 | |||||||||
| Net cash provided by operating activities | 472,885 | 489,764 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Capital expenditures | (152,445) | (103,161) | |||||||||
| Business acquisitions, net of cash acquired | (2,000) | (3,591) | |||||||||
| Real estate acquisitions | (3,912) | (10,498) | |||||||||
| Proceeds from divestitures and sales of property and equipment | 6,968 | 12,232 | |||||||||
| Proceeds from sale of investments | 1,169 | — | |||||||||
| Payments for Company-owned life insurance policies | (1,690) | (3,534) | |||||||||
| Net cash used in investing activities | (151,910) | (108,552) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from issuance of long-term debt | 143,000 | 820,000 | |||||||||
| Debt issuance costs | — | (13,618) | |||||||||
| Scheduled payments of debt | (18,142) | (18,070) | |||||||||
| Early payments and extinguishment of debt | (65,591) | (699,837) | |||||||||
| Principal payments on finance leases | (17,920) | (16,091) | |||||||||
| Proceeds from exercise of stock options | 16,197 | 16,254 | |||||||||
| Purchase of Company common stock | (360,114) | (187,183) | |||||||||
| Payments of dividends | (79,627) | (70,920) | |||||||||
| Bank overdrafts and other | (5,759) | (7,030) | |||||||||
| Net cash used in financing activities | (387,956) | (176,495) | |||||||||
| Effect of foreign currency | (1,897) | 3,311 | |||||||||
| Net (decrease) increase in cash, cash equivalents, and restricted cash | (68,878) | 208,028 | |||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | 278,555 | 238,610 | |||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 209,677 | $ | 446,638 | |||||||
6 Service Corporation International
Consolidated Segment Results
(See definitions of revenue line items later in this appendix.)
| (Dollars in millions, except average revenue per service) | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Consolidated funeral: | |||||||||||||||||||||||
| Atneed revenue | $ | 286.0 | $ | 282.3 | $ | 639.4 | $ | 620.4 | |||||||||||||||
| Matured preneed revenue | 165.8 | 159.5 | 360.7 | 349.6 | |||||||||||||||||||
| Core revenue | 451.8 | 441.8 | 1,000.1 | 970.0 | |||||||||||||||||||
| Non-funeral home revenue | 17.7 | 16.9 | 38.5 | 36.6 | |||||||||||||||||||
| Recognized preneed revenue | 42.6 | 33.1 | 85.7 | 74.9 | |||||||||||||||||||
| Other revenue | 36.7 | 39.9 | 73.6 | 69.6 | |||||||||||||||||||
| Total revenue | $ | 548.8 | $ | 531.7 | $ | 1,197.9 | $ | 1,151.1 | |||||||||||||||
| Gross profit | $ | 116.6 | $ | 111.8 | $ | 312.6 | $ | 306.2 | |||||||||||||||
| Gross profit percentage | 21.2 | % | 21.0 | % | 26.1 | % | 26.6 | % | |||||||||||||||
| Funeral services performed | 86,518 | 85,682 | 191,948 | 192,092 | |||||||||||||||||||
| Average revenue per service | $ | 5,427 | $ | 5,354 | $ | 5,411 | $ | 5,240 | |||||||||||||||
| (Dollars in millions) | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Consolidated cemetery: | |||||||||||||||||||||||
| Atneed property revenue | $ | 34.7 | $ | 35.1 | $ | 79.4 | $ | 79.4 | |||||||||||||||
| Atneed merchandise and service revenue | 74.7 | 73.9 | 153.4 | 154.2 | |||||||||||||||||||
| Total atneed revenue | 109.4 | 109.0 | 232.8 | 233.6 | |||||||||||||||||||
| Recognized preneed property revenue | 218.0 | 222.9 | 439.6 | 441.1 | |||||||||||||||||||
| Recognized preneed merchandise and service revenue | 84.8 | 87.7 | 169.8 | 173.5 | |||||||||||||||||||
| Total recognized preneed revenue | 302.8 | 310.6 | 609.4 | 614.6 | |||||||||||||||||||
| Core revenue | 412.2 | 419.6 | 842.2 | 848.2 | |||||||||||||||||||
| Other cemetery revenue | 29.8 | 36.2 | 63.1 | 66.2 | |||||||||||||||||||
| Total revenue | $ | 442.0 | $ | 455.8 | $ | 905.3 | $ | 914.4 | |||||||||||||||
| Gross profit | $ | 150.0 | $ | 161.5 | $ | 330.9 | $ | 349.6 | |||||||||||||||
| Gross profit percentage | 33.9 | % | 35.4 | % | 36.6 | % | 38.2 | % | |||||||||||||||
7 Service Corporation International
Comparable Funeral Results
The table below details comparable funeral results of operations (“same store”) for the three months ended June 30, 2022 and 2021. We consider comparable funeral operations to be those businesses owned for the entire period beginning January 1, 2021 and ending June 30, 2022.
| (Dollars in millions, except average revenue per service and average revenue per contract sold) | Three months ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | Var | % | ||||||||||||||||||||
| Comparable funeral revenue: | |||||||||||||||||||||||
Atneed revenue (1) | $ | 279.6 | $ | 281.3 | $ | (1.7) | (0.6) | % | |||||||||||||||
Matured preneed revenue (2) | 164.0 | 158.9 | 5.1 | 3.2 | % | ||||||||||||||||||
Core revenue (3) | 443.6 | 440.2 | 3.4 | 0.8 | % | ||||||||||||||||||
Non-funeral home revenue (4) | 17.6 | 16.9 | 0.7 | 4.1 | % | ||||||||||||||||||
Recognized preneed revenue (5) | 42.2 | 33.1 | 9.1 | 27.5 | % | ||||||||||||||||||
Other revenue (6) | 36.3 | 39.8 | (3.5) | (8.8) | % | ||||||||||||||||||
| Total comparable revenue | $ | 539.7 | $ | 530.0 | $ | 9.7 | 1.8 | % | |||||||||||||||
| Comparable gross profit | $ | 116.5 | $ | 113.0 | $ | 3.5 | 3.1 | % | |||||||||||||||
| Comparable gross profit percentage | 21.6 | % | 21.3 | % | 0.3 | % | |||||||||||||||||
| Comparable funeral services performed: | |||||||||||||||||||||||
| Atneed | 46,721 | 48,439 | (1,718) | (3.5) | % | ||||||||||||||||||
| Matured preneed | 25,163 | 24,907 | 256 | 1.0 | % | ||||||||||||||||||
| Total core | 71,884 | 73,346 | (1,462) | (2.0) | % | ||||||||||||||||||
| Non-funeral home | 12,637 | 11,950 | 687 | 5.7 | % | ||||||||||||||||||
| Total comparable funeral services performed | 84,521 | 85,296 | (775) | (0.9) | % | ||||||||||||||||||
Comparable core cremation rate | 54.5 | % | 52.8 | % | 1.7 | % | |||||||||||||||||
Total comparable cremation rate (7) | 61.2 | % | 59.2 | % | 2.0 | % | |||||||||||||||||
Comparable funeral average revenue per service: | |||||||||||||||||||||||
| Atneed | $ | 5,984 | $ | 5,807 | $ | 177 | 3.0 | % | |||||||||||||||
| Matured preneed | 6,518 | 6,380 | 138 | 2.2 | % | ||||||||||||||||||
| Total core | 6,171 | 6,002 | 169 | 2.8 | % | ||||||||||||||||||
| Non-funeral home | 1,393 | 1,414 | (21) | (1.5) | % | ||||||||||||||||||
| Total comparable average revenue per service | $ | 5,457 | $ | 5,359 | $ | 98 | 1.8 | % | |||||||||||||||
Comparable funeral preneed sales production: | |||||||||||||||||||||||
| Total preneed sales | $ | 299.9 | $ | 292.6 | $ | 7.3 | 2.5 | % | |||||||||||||||
| Core contracts sold | 36,470 | 38,995 | (2,525) | (6.5) | % | ||||||||||||||||||
| Non-funeral home contracts sold | 23,593 | 20,239 | 3,354 | 16.6 | % | ||||||||||||||||||
| Core average revenue per contract sold | $ | 6,322 | $ | 6,017 | $ | 305 | 5.1 | % | |||||||||||||||
| Non-funeral home average revenue per contract sold | $ | 2,940 | $ | 2,862 | $ | 78 | 2.7 | % | |||||||||||||||
(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.
(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 increased $9.7 million, or 1.8%, in the second quarter of 2022 compared to the same period of 2021, primarily driven by growth in core funeral revenue and recognized preneed revenue which were partially offset by a decline in other revenue.
8 Service Corporation International
•Core funeral revenue grew $3.4 million, or 0.8%, primarily due to a 2.8% increase in core average revenue per service that more than offset the 2.0% decrease in core funeral services performed. The comparable core cremation rate grew by 170 basis points to 54.5%.
•Recognized preneed revenue increased $9.1 million, or 27.5%, primarily driven by a 19.7% increase in non-funeral home preneed sales production.
•Other revenue decreased $3.5 million, or 8.8%, primarily due to lower general agency revenue as a result of a 6.0% decrease in comparable preneed funeral insurance production.
•Comparable funeral gross profit increased $3.5 million to $116.5 million and the gross profit percentage increased 30 basis points to 21.6%, primarily due to the higher revenue mentioned above. Additionally, the prior year quarter had higher fixed expenses associated with the timing of incentive compensation costs and pent up repairs and maintenance costs.
•Comparable preneed funeral sales production grew $7.3 million, or 2.5%, in the second quarter of 2022 compared to 2021. We experienced a 19.7% increase in non-funeral home preneed sales production offset by a 1.7% decline in core preneed sales production as the prior year quarter benefited from strong consumer demand during the COVID-19 pandemic. The large growth in non-funeral home preneed sales production is primarily the result of increased velocity as we experienced better lead technology utilization in our SCI Direct businesses.
Comparable Cemetery Results
The table below details comparable cemetery results of operations (“same store”) for the three months ended June 30, 2022 and 2021. We consider comparable cemetery operations to be those businesses owned for the entire period beginning January 1, 2021 and ending June 30, 2022.
| (Dollars in millions) | Three months ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | Var | % | ||||||||||||||||||||
| Comparable cemetery revenue: | |||||||||||||||||||||||
| Atneed property revenue | $ | 34.8 | $ | 35.1 | $ | (0.3) | (0.9) | % | |||||||||||||||
| Atneed merchandise and service revenue | 74.4 | 73.9 | 0.5 | 0.7 | % | ||||||||||||||||||
Total atneed revenue (1) | 109.2 | 109.0 | 0.2 | 0.2 | % | ||||||||||||||||||
| Recognized preneed property revenue | 213.8 | 222.9 | (9.1) | (4.1) | % | ||||||||||||||||||
| Recognized preneed merchandise and service revenue | 84.8 | 87.6 | (2.8) | (3.2) | % | ||||||||||||||||||
Total recognized preneed revenue (2) | 298.6 | 310.5 | (11.9) | (3.8) | % | ||||||||||||||||||
Core revenue (3) | 407.8 | 419.5 | (11.7) | (2.8) | % | ||||||||||||||||||
Other revenue (4) | 29.7 | 36.2 | (6.5) | (18.0) | % | ||||||||||||||||||
| Total comparable revenue | $ | 437.5 | $ | 455.7 | $ | (18.2) | (4.0) | % | |||||||||||||||
| Comparable gross profit | $ | 147.4 | $ | 161.5 | $ | (14.1) | (8.7) | % | |||||||||||||||
| Comparable gross profit percentage | 33.7 | % | 35.4 | % | (1.7) | % | |||||||||||||||||
Comparable cemetery preneed and atneed sales production: | |||||||||||||||||||||||
| Property | $ | 262.9 | $ | 270.7 | $ | (7.8) | (2.9) | % | |||||||||||||||
| Merchandise and services | 197.0 | 205.1 | (8.1) | (3.9) | % | ||||||||||||||||||
| Discounts and other | (4.8) | (4.0) | (0.8) | (20.0) | % | ||||||||||||||||||
| Preneed and atneed sales production | $ | 455.1 | $ | 471.8 | $ | (16.7) | (3.5) | % | |||||||||||||||
Recognition rate (5) | 89.6 | % | 88.9 | % | |||||||||||||||||||
(1)Atneed revenue represents property, merchandise, and services sold and delivered or performed once death has occurred.
(2)Recognized preneed revenue represents property, merchandise, and services sold on a preneed contract, which were delivered or performed as well as the related merchandise and service trust fund income.
(3)Core revenue represents the sum of property, merchandise, and services that have been delivered or performed as well as the related merchandise and service trust fund income.
(4)Other revenue is primarily related to endowment care trust fund income, royalty income, and interest and finance charges earned from customer receivables on preneed installment contracts.
(5)Represents the ratio of current period core revenue stated as a percentage of current period preneed and atneed sales production.
•Comparable cemetery revenue decreased $18.2 million, or 4.0%, in the second quarter of 2022 compared to the second quarter of 2021. The decline was primarily due to anticipated decreases in core revenue and other revenue.
•Core revenue decreased $11.7 million as a result of an $11.2 million, or 3.1%, decrease in preneed cemetery sales production as the prior year quarter benefited from strong consumer demand for preneed and atneed merchandise and
9 Service Corporation International
services during the COVID-19 pandemic. Also, a portion of the current quarter property sales were deferred and will benefit us in future quarters as the undeveloped property sold is constructed.
•Other revenue was lower by $6.5 million, or 18.0%, compared to the prior year quarter primarily from a decrease in endowment care trust fund income as a result of capital gain distributions in the prior year quarter which did not recur in the current quarter.
•Comparable cemetery gross profit decreased $14.1 million to $147.4 million. The gross profit percentage decreased to 33.7% from 35.4%, primarily due to the decline in revenue mentioned above.
•Comparable preneed cemetery sales production decreased $11.2 million, or 3.1%, against a strong comparable performance in the second quarter of 2021. A decline in velocity of contracts sold was partially offset by better than expected growth in the sales average per contract.
Other Financial Results
•Corporate general and administrative expenses increased $12.1 million to $45.7 million in the second quarter of 2022 compared to the second quarter of 2021. The increase is related to the timing of favorable adjustments to workers compensation, general liability, and incentive compensation costs in the prior year quarter. Additionally, we incurred $3.0 million this quarter of increased expenses related to our long-term incentive compensation plan that is tied to increases in total shareholder return. We expect these elevated expenses to normalize in the back half of the current year.
•Interest expense increased $3.1 million to $40.6 million in the second quarter of 2022 primarily due to our May 2021 refinancing combined with higher interest on our floating rate debt. During the second quarter, our fixed rate debt carried a weighted average interest rate of 4.3%, while our floating rate debt carried a weighted average rate of 2.6%.
•The GAAP effective income tax rate for the second quarter of 2022 was 25.3%, up from 22.6% in the prior year quarter. Our adjusted effective tax rate was 25.0% in the second quarter of 2022 compared to 22.4% in the prior year quarter. The higher tax rate in the current period is primarily due to non-deductible losses on the cash surrender value of certain life insurance policies as a result of negative returns in the financial markets, which increased tax expense for us in the quarter.
Cash Flow and Capital Spending
| (Dollars in millions) | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Net cash provided by operating activities | $ | 140.7 | $ | 192.2 | $ | 472.9 | $ | 489.8 | |||||||||||||||
| Cash taxes included in net cash provided by operating activities | $ | 93.8 | $ | 88.7 | $ | 97.6 | $ | 102.0 | |||||||||||||||
Net cash provided by operating activities declined $51.5 million to $140.7 million in the second quarter of 2022 compared to $192.2 million in the second quarter of 2021. This expected decrease in operating cash flow is primarily due to $18.8 million in lower operating income excluding the impact from divestitures, $14.7 million in higher cash interest and taxes combined with increased working capital uses.
A summary of our capital expenditures is set forth below:
| (Dollars in millions) | Three months ended June 30, | Six months ended June 30, | |||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Capital improvements at existing operating locations | $ | 53.4 | $ | 36.1 | $ | 90.8 | $ | 60.2 | |||||||||||||||
| Development of cemetery property | 30.9 | 15.1 | 41.5 | 24.6 | |||||||||||||||||||
| Capital improvements at existing operating locations and cemetery development expenditures | 84.3 | 51.2 | 132.3 | 84.8 | |||||||||||||||||||
| Growth capital expenditures/construction of new funeral service locations | 11.4 | 9.7 | 20.1 | 18.4 | |||||||||||||||||||
| Total capital expenditures | $ | 95.7 | $ | 60.9 | $ | 152.4 | $ | 103.2 | |||||||||||||||
Total capital expenditures increased in the current quarter by $34.8 million, primarily due to an increase in capital improvements at existing operating locations and the development of cemetery property. The growth in capital spend at existing operation locations is primarily due to increased investments in technology and related infrastructure projects at our funeral and cemetery locations. We also increased spend on cemetery property development as we replenish inventory to meet consumer demand compared to the prior year when construction was impacted by certain weather and COVID-19 related delays.
10 Service Corporation International
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 June 30, 2022 is set forth below:
| Three Months | Six Months | ||||||||||
| Preneed funeral | (11.0)% | (14.8)% | |||||||||
| Preneed cemetery | (11.5)% | (15.1)% | |||||||||
| Cemetery perpetual care | (10.2)% | (13.8)% | |||||||||
| Combined trust funds | (10.9)% | (14.6)% | |||||||||
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 June 30, | ||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Net Income | Diluted EPS | Net Income | Diluted EPS | ||||||||||||||||||||
| Net income attributable to common stockholders, as reported | $ | 132.7 | $ | 0.82 | $ | 157.7 | $ | 0.92 | |||||||||||||||
| Pre-tax reconciling items: | |||||||||||||||||||||||
Gains on divestitures and impairment charges, net | (0.3) | — | (6.2) | (0.04) | |||||||||||||||||||
| Loss on early extinguishment of debt, net | 1.2 | 0.01 | 5.2 | 0.04 | |||||||||||||||||||
Foreign currency exchange loss | 1.5 | 0.01 | — | — | |||||||||||||||||||
| Tax reconciling items: | |||||||||||||||||||||||
Tax effect from special items above | (0.5) | — | 0.6 | — | |||||||||||||||||||
Change in uncertain tax reserves and other | 0.5 | — | 0.1 | — | |||||||||||||||||||
| Earnings excluding special items and diluted earnings per share excluding special items | $ | 135.1 | $ | 0.84 | $ | 157.4 | $ | 0.92 | |||||||||||||||
| Diluted weighted average shares outstanding | 161.3 | 170.9 | |||||||||||||||||||||
| (Dollars in millions, except diluted EPS) | Six months ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | ||||||||||||||||||||||
| Net Income | Diluted EPS | Net Income | Diluted EPS | ||||||||||||||||||||
| Net income attributable to common stockholders, as reported | $ | 352.2 | $ | 2.17 | $ | 386.6 | $ | 2.25 | |||||||||||||||
| Pre-tax reconciling items: | |||||||||||||||||||||||
| Gains on divestitures and impairment charges, net | (0.8) | (0.01) | (7.4) | (0.04) | |||||||||||||||||||
| Losses on early extinguishment of debt, net | 1.2 | 0.01 | 5.2 | 0.04 | |||||||||||||||||||
Foreign currency exchange loss | 1.5 | 0.01 | — | — | |||||||||||||||||||
| Tax reconciling items: | |||||||||||||||||||||||
Tax effect from special items above | (0.3) | — | 0.8 | — | |||||||||||||||||||
Change in uncertain tax reserves and other | 0.9 | — | 0.1 | — | |||||||||||||||||||
| Earnings excluding special items and diluted earnings per share excluding special items | $ | 354.7 | $ | 2.18 | $ | 385.3 | $ | 2.25 | |||||||||||||||
| Diluted weighted average shares outstanding | 162.6 | 171.6 | |||||||||||||||||||||
11 Service Corporation International