News Release

SCI Corporate Communications
Phone: 1-844-220-4408
Email: Press.Room@sci-us.com
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/FIRST ADD -- DATU027 -- SERVICE CORPORATION INTERNATIONAL/

Funeral

Funeral segment revenues for the second quarter of 2000 were $461.3 million compared to $483.2 million for the second quarter of 1999. Funeral segment gross profits were $57.9 million for the three months ended June 30, 2000 compared to $82.8 million for the same period of 1999. The funeral service gross margin percentage was 12.6% for the second quarter of 2000 compared to 17.1% for the same period of 1999.

The primary reasons for the decrease in funeral segment revenues, gross profits and gross margin percentage in the second quarter of 2000 were the effect of negative currency translations and weak volume of funeral services performed compared to the same period of 1999. Due to the high fixed cost structure inherent in the funeral industry, the number of funeral services performed can create significant swings in the results of operations during a reporting period. In North America funeral service locations, approximately 72,100 funeral services were performed during the second quarter of 2000, a decrease of 1.6% compared to the second quarter of 1999. The Company believes its market share in its North America funeral markets slightly increased during the second quarter of 2000. In the Company's European funeral service locations, approximately 60,850 funeral services were performed in the three months ended June 30, 2000, a decrease of 6.5% compared to the same period of 1999. The Company believes its market share in its European funeral markets slightly decreased during the second quarter of 2000. In April 2000, the weakest month of the second quarter in terms of funeral volumes, the Company performed approximately 9% and 22% fewer funeral services in its North America and European funeral service locations, respectively, compared to April 1999 funeral volumes.

Funeral segment revenues continue to be adversely affected by negative currency translations, primarily related to the Euro. During the three months ended June 30, 2000, funeral segment revenues contained an approximate $26 million negative currency translation effect and funeral segment gross profits contained an approximate $1.5 million negative currency translation effect, both calculated compared to currency rates in effect during the second quarter of 1999.

The average revenue per funeral service for all funeral services performed in North America during the second quarter of 2000 was $3,871, an increase of 1.3% over the first quarter of 2000 and flat compared to the second quarter of 1999. For the three months ended June 30, 2000, 27.8% of funeral services performed in North America were previously prearranged funeral contracts compared to 27.1% in the second quarter of 1999. The average revenue per funeral service in North America from prearranged funeral contracts becoming atneed was $3,652 in the second quarter of 2000, a 2.5% increase compared to the same period of 1999. Of the total mix of funeral services performed in North America, 36.8% were cremation cases in the second quarter of 2000 compared to 33.5% for the same period of 1999. Of the total cremation cases in the second quarter of 2000, approximately 63% were cremations with memorialization services versus immediate cremation cases, while approximately 52% of the total cremation cases in the second quarter of 1999 were cremations with memorialization services. Cremation with memorialization services have a higher average revenue per case compared to immediate cremations. In the Company's European funeral service locations, the average revenue per funeral service increased 2.2% in the second quarter of 2000 compared to the second quarter of 1999, excluding the negative effect of currency translation.

Cemetery

Cemetery segment revenues for the second quarter of 2000 were $236.5 million compared to $257.2 million for the second quarter of 1999. Cemetery segment gross profits were $67.4 million for the three months ended June 30, 2000 compared to $84.0 million for the same period of 1999. The cemetery gross margin percentage was 28.5% for the second quarter of 2000 compared to 32.7% for the second quarter of 1999.

The decrease in cemetery revenues in the second quarter of 2000 compared to the same period of 1999 was primarily attributable to a decrease in realized investment earnings and capital gains from the Company's cemetery trust funds and sales of excess undeveloped cemetery property. Realized investment earnings and capital gains for the three months ended June 30, 2000 were $15.5 million compared to $20.6 million for the same period of 1999. Sales of excess undeveloped cemetery property were approximately $10 million less in the second quarter of 2000 compared to the second quarter of 1999. Revenues from North America cemeteries, excluding realized investment earnings and capital gains and sales of excess undeveloped cemetery property decreased 3.4% to $180.2 million in the second quarter of 2000 compared to the same period of 1999. The decrease in the core North America cemetery revenue was due to a $6.0 million decrease, quarter over quarter, in atneed cemetery sales primarily as a result of fewer number of deaths in these markets during the second quarter of 2000.

The cemetery gross margin percentage decrease in the second quarter of 2000 compared to the same period of 1999 was primarily attributable to the decrease in realized investment earnings and capital gains and sales of excess undeveloped cemetery property, quarter over quarter, which usually carry a much higher margin than core cemetery sales. Excluding the effects of realized investment earnings and capital gains and the sales of excess undeveloped cemetery property, the gross profit margin for North America cemeteries for the second quarter of 2000 was 20.0% compared to 21.3% in the same quarter of 1999. The decrease is attributable to a higher mix of heritage sales in 2000, which carry a lower gross profit margin offset by a reduction in operating costs of $2.4 million due to cost rationalization programs.

Discontinued Operations

Revenues from discontinued operations were $99.9 million in the second quarter of 2000 compared to $84.4 million in the second quarter of 1999. Gross profits from discontinued operations for the three months ended June 30, 2000 were $9.5 million compared to $10.2 million for the same period of 1999.

The results from discontinued operations were in line with the Company's expectations for the second quarter of 2000. Whenever possible, the Company is funding prearranged funeral contracts using AMLIC in North America. While having the effect of increasing revenues, this initiative initially increases actuarially determined benefits and expenses more than revenues, having the effect of reducing the gross margin percentage. The Company will continue the sale of prearranged funeral contracts using funding from AMLIC and Auxia after the closing of the sale transactions under multi-year marketing agreements with the purchasers of the insurance operations.

Extraordinary Gains And Non-Recurring Charges

During the second quarter of 2000, the Company reported extraordinary gains on early extinguishments of debt of $15.4 million, net of taxes of $8.8 million. The extraordinary gains were a result of the Company repurchasing certain bonds in the open market with an aggregate face value of $134.3 million during the second quarter of 2000.

The Company reported restructuring and non-recurring charges of $13.3 million during the second quarter of 2000. These charges were related to changes in estimates of certain items included in the Company's fourth quarter 1999 restructuring charge of $272.6 million. The primary changes in estimates relate to the Company's asset impairment charges associated with loans made by the Company's lending subsidiary and other funeral services and cemetery properties held for sale, which were written down to their estimated fair value in the fourth quarter 1999 restructuring charge. The Company reported an additional $22.2 million impairment charge during the second quarter of 2000 as a change in estimate related to the above loans held for sale, which was offset by a reduction of previous impairment charges of $11.3 million during the second quarter of 2000 associated with certain funeral and cemetery properties in North America that are no longer being held for sale by the Company.

Revised Outlook for 2000

Operating Free Cash Flow

The Company had reported expectations of operating free cash flow for full-year 2000 in the range of $100 million to $200 million as defined previously in the Company's press releases and Form 10-Q for the first quarter of 2000. For the six months ended June 30, 2000, the Company reported operating free cash flow of $131.4 million, already within the expected year- end 2000 range. As anticipated, the primary reason for the Company accomplishing these levels of cash flows relates to increased efforts to expedite the receipt of funds due to the Company from certain funeral and cemetery trusts. Through the six months ended June 30, 2000, the Company has received $81.5 million of non-recurring funds from certain funeral and cemetery trusts included in operating free cash flow. Based upon these funds already received by the Company, additional funds expected during 2000 from certain funeral and cemetery trusts, efforts associated with the bonding of certain funeral and cemetery trusts in various states and normal recurring cash flow from operating businesses, the Company now expects operating free cash flow to be in the range of $100 million to $250 million by the end of 2000.

Debt Balance

The Company had reported expectations of total debt at the end of 2000 in the range of $3.6 billion to $3.8 billion. As of June 30, 2000, the Company's total debt was $3.76 billion and already within the year-end 2000 total debt targeted range.

The $3.76 billion debt balance at June 30, 2000 is expected to be further reduced by approximately $230 million of expected after tax proceeds from the closing of the Auxia and AMLIC transactions in 2000. The Company also anticipates additional after tax proceeds from the sales of certain loans of its lending subsidiary and other non-core assets during 2000. Due to the increased expectations in 2000 associated with the Company's operating free cash flow and anticipated after tax proceeds from non-core asset sales, the Company now expects total debt to be in the range of $3.3 billion to $3.6 billion at the end of 2000.

Earnings Per Share and EBITDA

The Company had reported expectations of earnings per share for full-year 2000 in the range of $.65 to $.75 per diluted share and EBITDA of approximately $800 million, both before non-recurring items defined as extraordinary gains on early extinguishments of debt and restructuring and non-recurring charges. Through the six months ended June 30, 2000, the Company has reported diluted earnings per share of $.37 and EBITDA of $428 million, both before non-recurring items.

The most important factor in the determination of the Company's earnings is the number of deaths during a certain period in the Company's North America, European and other international funeral markets. Due to the high fixed cost structure inherent in the funeral industry, the number of funeral services performed can create large swings in the revenues, gross margin percentages and gross profits of the Company's funeral segment. Since the suspension of the Company's acquisition program in 1999, the Company's funeral segment revenues are almost entirely comprised of comparable funeral service locations, resulting in funeral segment gross profits affected primarily by market share and number of deaths in their respective markets. Primarily beginning in the third quarter of 1999, the Company has experienced the trend of fewer number of deaths in its worldwide funeral operating markets. Through June 2000, the Company believes the number of deaths in 2000 has decreased approximately 1.6% in North America and over 3.0% in Europe compared to the same period of 1999, respectively. The Company does not believe it will achieve its previously disclosed earnings guidance and with limited future visibility and insight into accurately predicting the number of deaths for the remainder of 2000, the Company is not comfortable disclosing revised earnings per share and EBITDA guidance for the full-year 2000 at this time. The Company believes if this negative trend in the number of deaths continues, the Company's underlying fixed cost structure and personnel needs would have to be adjusted accordingly.

Commenting on the revised outlook for 2000, SCI Senior Vice President and Chief Financial Officer, Jeffrey E. Curtiss, said:

"We are pleased to announce today our positive revisions to our operating free cash flow and debt targets for 2000, which show execution by our management team of our initiatives to significantly increase cash flow and pay down our debt. Due to the weakness in the number of deaths experienced in our worldwide funeral markets, we are reluctant to revise EPS and EBITDA expectations for the remainder of 2000. We are in compliance at June 30, 2000 with our financial covenants associated with our revolving credit facilities. We have calculated several EPS and EBITDA scenarios based on different levels of the number of deaths for the remainder of 2000, and based on this analysis, we believe the Company will not breach any of our covenants associated with our revolving credit facilities. The covenant calculations are defined in our credit facilities filed with the SEC as exhibits to our 1999 Form 10-K."

Cautionary Statement on Forward-Looking Statements

The statements contained in this press release that are not historical facts are forward-looking statements within the meaning of 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 the Company believes are reasonable; however, many important factors could cause the Company's 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, or on behalf of, the Company. Important factors which could cause actual results of the Company to differ materially from those in forward-looking statements include, among others, the following:

    1)  Changes in general economic conditions, both domestically and
        internationally, impacting financial markets (e.g. marketable security
        values, as well as currency and interest rate fluctuations) that could
        negatively affect the Company, particularly but not limited to, levels
        of interest expense and negative currency translation effects.
    2)  Changes in credit relationships impacting the availability of credit.
    3)  The Company's ability to successfully implement and complete all three
        phases of its strategic plan as defined in this press release,
        including the interest of third parties to enter into and consummate
        alliances and joint ventures with the Company, and the successful
        implementation of its Internet initiatives.
    4)  Changes in consumer demand and/or pricing for the Company's products
        and services caused by several factors, such as changes in local death
        rates, cremation rates, competitive pressures and local economic
        conditions.
    5)  The Company's ability to sell preneed heritage cemetery property which
        is usually associated with new customers of the Company's cemeteries.
    6)  The Company's ability to successfully implement ongoing cost reduction
        initiatives, as well as changes in domestic and international
        economic, political and/or regulatory environments, which could
        negatively effect the implementation of the Company's cost reduction
        initiatives.
    7)  The Company's ability to successfully realize the estimated savings
        associated with the Company's cost reduction initiatives announced in
        1999.
    8)  The Company's ability to successfully implement certain strategic
        revenue and marketing initiatives resulting in increased volume
        through its existing facilities.
    9)  The Company's ability to successfully implement certain strategic cash
        flow initiatives, including but not limited to the sale of non-core
        assets and the previously announced funeral and cemetery consumer
        financing program, which could improve or generate cash flow for the

Company and enhance the Company's ability to reduce debt. 10) Changes in domestic and international political and/or regulatory

environments in which the Company operates, including tax and

accounting policies. 11) The Company's ability to successfully exploit its substantial

purchasing power with certain of the Company's vendors.

The Company assumes no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by the Company.

As of June 30, 2000, SCI affiliates operated 3,809 funeral service locations, 581 cemeteries and 201 crematoria. SCI provides funeral and cemetery services in 20 countries on five continents.

Other Service Corporation International and press releases are available through Company News On-Call by fax, (800) 758-5804, extension 104532, or at http://www.prnewswire.com or SCI's homepage: http://www.sci-corp.com.
SOURCE Service Corporation International