- Conference call on Wednesday August 8, 2007, at 9:00 a.m. Central Standard Time.HOUSTON, Aug 07, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Service Corporation
International (NYSE: SCI), which owns and operates funeral service locations
and cemeteries, today reported results for the second quarter 2007. Our
consolidated financial statements can be found at the end of this press
release. The table below summarizes our key GAAP financial results:
Three Months Ended Six Months Ended
(In millions, except for per share June 30, June 30,
amounts) 2007 2006 2007 2006
Revenues $565.5 $431.4 $1,173.0 $873.4
Operating income 82.8 60.4 180.9 122.6
Net income 15.1 25.5 52.8 52.4
Diluted earnings per share .05 .09 .18 .18
Net cash provided by operating
activities 63.7 71.4 191.6 151.6
2007 Highlights
* In the second quarter of 2007, earnings from continuing operations
excluding special items were $32.4 million, or $.11 per diluted share
compared to $28.4 million, or $0.10 per diluted share in the second
quarter of 2006. In the first six months of 2007, earnings from
continuing operations excluding special items were $84.1 million, or
$.28 per diluted share compared to $58.9 million, or $0.20 per
diluted share in the first six months of 2006. Both periods of 2006
include the receipt and recognition of $7.9 million of cemetery
endowment care trust fund income as a result of the resolution of
disputes over ownership rights to the funds. Earnings from continuing
operations excluding special items is a non-GAAP financial measure
because this calculation excludes certain non-recurring items. A
reconciliation of this non-GAAP financial measure to net income
computed in accordance with GAAP is set forth below under the heading
"Non-GAAP Financial Measures".
* Alderwoods operations are accretive to earnings and cash flow and
improvement synergies are being realized as expected.
* Consolidated revenues increased 34.3% to approximately $1.2 billion
in the first six months of 2007 compared to 2006.
* Although impacted by divestitures and the $7.9 million of previously
disputed endowment care income recognized in 2006, consolidated gross
profit margins for the first six months of 2007 grew to 20.8%
compared to 19.8% in 2006.
* In the first six months of 2007, consolidated North America average
revenue per funeral service increased 2.8% to $4,793 compared to
$4,661 in the same period of 2006.
* Cash flow from operating activities increased $40.0 million in the
first six months of 2007 to $191.6 million compared to $151.6 million
in the first six months of 2006.
Tom Ryan, the Company's President and Chief Executive Officer, commented
on the second quarter of 2007:
"We delivered another good quarter, with earnings and cash flow on target
despite facing difficult volume comparisons and the negative impact from
divestitures," said Tom Ryan, President and Chief Executive Officer.
"Our performance is a credit to the commitment and execution of our entire
organization. We continue to make great strides in our key focus areas of
integrating Alderwoods, realigning our pricing, and implementing standardized
operating metrics. I am confident that we will continue to produce solid
results as we move forward through 2007."
Consolidated Results of Operations - North America
The following table represents consolidated results from our operations in
North America, including the properties acquired in the Alderwoods
transaction.
(In millions, except funeral
services performed, average
revenue per funeral service or
per contract sold and total Three Months Ended Six Months Ended
preneed funeral contracts) June 30, June 30,
2007 2006 2007 2006
Funeral
Funeral atneed revenue $251.0 $180.8 $536.9 $375.2
Funeral recognized preneed revenue 109.2 86.5 233.3 182.9
General agency revenue (1) 12.4 10.2 22.6 19.7
Kenyon revenue (2) 1.6 0.6 2.8 1.9
Total funeral revenues $374.2 $278.1 $795.6 $579.7
Gross profit $70.7 $53.3 $172.9 $119.6
Gross margin percentage 18.9% 19.2% 21.7% 20.6%
Funeral services performed:
Preneed 23,510 19,167 50,987 40,483
Atneed 51,075 37,312 109,685 79,257
Total 74,585 56,479 160,672 119,740
Average revenue per funeral
service:
Preneed $4,647 $4,512 $4,574 $4,517
Atneed $4,914 $4,846 $4,895 $4,735
Total $4,830 $4,733 $4,793 $4,661
Preneed funeral production:
Sales $106.1 $79.4 $224.3 $160.7
Total preneed funeral contracts
sold 19,785 16,433 42,489 33,970
Average revenue per contract $5,362 4,832 $5,279 $4,731
Cemetery
Cemetery atneed revenue $72.5 $53.9 $146.6 $109.5
Cemetery recognized preneed revenue 91.0 71.4 176.1 134.8
Other cemetery revenue (3) 26.2 26.4 51.6 46.2
Total cemetery revenues $189.7 $151.7 $374.3 $290.5
Gross profit $32.8 $30.7 $71.6 $52.9
Gross margin percentage 17.3% 20.2% 19.1% 18.2%
Preneed and atneed cemetery
production:
Preneed and atneed sales $181.1 $138.5 $348.1 $271.9
Recognition rate (4) 90.3% 90.5% 92.7% 89.8%
(1) General Agency (GA) revenues are commissions we receive from
third-party insurance companies for life insurance policies or
annuities sold to preneed customers for the purpose of funding
preneed funeral arrangements.
(2) Kenyon International Emergency Services (Kenyon) is our disaster
response subsidiary that engages in mass fatality and emergency
response services.
(3) Other cemetery revenue is primarily related to endowment care trust
fund income and interest and finance charges earned from customer
receivables on preneed installments contracts.
(4) Represents the ratio of current period revenue recognition stated
as a percentage of current period sales production.
For the Three Months Ended June 30, 2007
Funeral Results
Consolidated North America funeral revenue increased $96.1 million, or
34.6%, in the second quarter of 2007 compared to the second quarter of 2006.
This increase is primarily a result of the addition of Alderwoods operations
which contributed $101.6 million in funeral revenues in the second quarter of
2007. Alderwoods average revenue per funeral service was consistent with our
expectations and Alderwoods funeral case volume was approximately 3% below our
expectations. In addition, we divested of locations which contributed an
incremental $8.2 million of revenue in the second quarter of 2006. Our
comparable North America funeral revenues which represent locations that were
owned in both periods were up $2.7 million, or 1.0%, compared to the second
quarter of 2006 as detailed in the table below.
Consolidated North America funeral gross profit increased $17.3 million in
the second quarter of 2007 versus the same period of 2006 primarily due to
gross profit contributed from Alderwoods operations. The consolidated gross
margin percentage decreased to 18.8% from 19.1% due primarily to Alderwoods
operations which historically have had lower gross profit margins, partially
offset by synergies achieved in the Alderwoods transaction and cost
improvements in our infrastructure. In addition, we divested locations which
contributed an incremental $4.8 million of gross profit in the second quarter
of 2006 compared to the second quarter of 2007. Gross profit from our
comparable North America funeral locations increased $2.1 million, or 4.1% as
detailed in the table below primarily due to our strategic pricing initiative
and more centralization and standardization in our organization. Comparable
North America funeral gross margin percentage increased to 20.2% in the second
quarter of 2007 compared to 19.6% in the same period of 2006.
Other key items impacting funeral results include:
* The consolidated average revenue per funeral service increased 2.0%,
or $97 per service to $4,830. The average revenue at comparable
locations increased $228 or 4.8% (as detailed in the table below).
These increases reflect the continued benefits of our strategic
pricing initiative, which places less emphasis on traditional funeral
merchandise and more focus on service offerings.
* The number of consolidated funeral services performed increased
18,106, or 32.1%, in the second quarter of 2007 compared to the second
quarter of 2006. This increase includes 23,065 services performed by
locations acquired in the Alderwoods transaction. The increase was
partially offset by a decrease from divested locations of 2,828
funeral services. Additionally, SCI comparable funeral services
decreased 2,131, or 4.0%, which we attribute to certain local business
decisions to exit unprofitable business relationships, primarily
related to low-priced direct cremation activities, and a decrease in
the number of deaths in the markets in which we operate in the second
quarter of 2007. The local business decisions mentioned above were
made based on our customer segmentation strategy, which focuses on
more profitable opportunities with certain customer segments.
The table below details comparable funeral results of operations for the
three months ended June 30, 2007 and 2006. We regard comparable results of
operations as analogous to our "same store" results of operations. For
purposes of the following presentation, we consider comparable operations to
be those owned for the entire period beginning January 1, 2006 and ending June
30, 2007. Therefore, in the following presentation, we are providing results
of operations for the same funeral and cemetery locations in each of the
periods presented, which means that our Alderwoods operations are excluded.
We believe this presentation provides greater clarity for comparison purposes
of our results of operations for each of the periods presented.
(In millions, except funeral
services performed, average Three months ended
revenue per funeral service) June 30,
2007 2006 Change Change %
Comparable revenue $265.9 $263.2 $2.7 1.0%
Comparable gross profit 53.8 51.7 2.1 4.1%
Comparable gross margin percentage 20.2% 19.6%
Comparable funeral services
performed:
Preneed 17,402 18,105 (703) (3.9%)
Atneed 33,451 34,879 (1,428) (4.1%)
Total 50,853 52,984 (2,131) (4.0%)
Comparable average revenue per
funeral service $4,997 $4,769 $228 4.8%
Our comparable operations gross profit and gross margin percentage in 2007
above also include new planned field and home office overhead that is needed
as a result of the addition of over 600 funeral homes and 100 cemeteries
acquired in the Alderwoods transaction.
Cemetery Results
Consolidated cemetery revenues increased $38.0 million, or 25.0%, in the
second quarter of 2007 compared to the same period of 2006 reflecting a $41.0
million revenue contribution from operations acquired from Alderwoods. This
increase was partially offset by a $3.9 million decline in revenue from
divested locations. Our comparable cemetery revenues increased $0.9 million
in the second quarter of 2007 compared to the same period of 2006 as increased
preneed production in the second quarter of 2007 was partially offset by the
receipt and recognition of $7.9 million of endowment care income in the second
quarter of 2006 as a result of the resolution of disputes over ownership
rights to the funds.
Consolidated cemetery gross profit increased $2.1 million in the second
quarter of 2007 compared to the second quarter of 2006 reflecting the addition
of gross profit from Alderwoods operations of $4.5 million. We also divested
locations with negative gross profits of $(0.5) million in 2006. Our
comparable cemetery gross margins decreased $1.9 million in the second quarter
of 2007 compared to the second quarter of 2006 and our comparable cemetery
gross margin percentage decreased to 19.6% compared to 21.1% in the same
period of 2006. This was due to the revenue growth in 2007 being offset by the
receipt and recognition of $7.9 million of endowment care income described
above in the second quarter of 2006. We estimate that this income positively
impacted our comparable cemetery gross margin percentage for the second
quarter of 2006 by approximately 450 basis points.
Other Results
* General and administrative expenses were $30.3 million in the second
quarter of 2007 compared to $20.9 million in the second quarter of
2006. General and administrative costs increased $9.4 million
primarily due to $5.6 million of one-time transition and other expenses
related to our acquisition of Alderwoods. Additionally, salary expense
increased $1.9 million compared to prior year as a result of Alderwoods
corporate expenses that are expected to wind down throughout 2007.
* Interest expense increased to $36.2 million in the second quarter of
2007 compared to $26.6 million in the second quarter of 2006. The
increase of $9.6 million resulted from increased borrowings to finance
the Alderwoods acquisition in the fourth quarter of 2006.
* Interest income decreased $4.3 million in the second quarter of 2007 to
$2.5 million as expected due to decreases in our average cash balances.
* Other income, net for the second quarter of 2007 includes income of
$5.6 million from our equity investment in operations in France for
which no comparable amounts were received in 2006.
For the Six Months Ended June 30, 2007
Funeral Results
Consolidated North America funeral revenue increased $215.9 million, or
37.2%, in the first six months of 2007 compared to the first six months of
2006. This increase is primarily a result of the addition of Alderwoods
operations which contributed $217.1 million in funeral revenues in the first
six months of 2007. Alderwoods average revenue per funeral service was
consistent with our expectations and Alderwoods funeral case volume was
approximately 3% below our expectations, which we believe is generally
consistent with death trends in North America in the first half of 2007. In
addition, we divested locations which contributed $5.1 million of incremental
revenue in the first half of 2006. Our comparable North America funeral
revenues were up $3.9 million, or 0.7%, compared to the first half of 2006 as
detailed in the table below.
Consolidated North America funeral gross profit increased $53.3 million in
the first half of 2007 versus the same period of 2006 primarily due to gross
profit contributed from Alderwoods operations of $50.6 million. The
consolidated gross margin percentage increased to 21.7% from 20.6% due
primarily to synergies achieved in the Alderwoods transaction and cost
improvements in our infrastructure, partially offset by a decrease in funeral
gross profit contributed from locations that were divested in the second
quarter of 2007. We divested locations which contributed an incremental $2.5
million of gross profit in the first half of 2006 compared to the first half
of 2007. Gross profit from our comparable North America funeral locations
increased $5.3 million or 4.6% as detailed in the table below primarily due to
more centralization and standardization in our organization. Comparable North
America funeral gross margin percentage increased to 21.9% in the first half
of 2007 compared to 21.1% in the same period of 2006.
Other key items impacting funeral results include:
* The consolidated average revenue per funeral service increased 2.8%, or
$132 per service to $4,793. The average revenue at comparable
locations increased $252 or 5.4% (as detailed in the table below).
These increases reflect the continued benefits of our strategic pricing
initiative, which places less emphasis on traditional funeral
merchandise and more focus on service offerings.
* The number of consolidated funeral services performed increased 40,932,
or 34.2%, in the first half of 2007 compared to the same period of
2006. This increase includes 51,659 services performed by locations
acquired in the Alderwoods transaction. The increase was partially
offset by a decrease from divested locations of 5,430 funeral services.
Additionally, SCI comparable funeral services performed decreased
5,297, or 4.7%, which we attribute to certain local business decisions
to exit unprofitable business relationships, primarily related to
low-priced direct cremation activities, and a decrease in the number of
deaths in our markets in the first half of 2007. The local business
decisions mentioned above were made based on our customer segmentation
strategy, which focuses on more profitable opportunities with certain
customer segments.
The table below details comparable funeral results of operations for the
six months ended June 30, 2007 and 2006.
(In millions, except funeral
services performed, average Six months ended
revenue per funeral service) June 30,
2007 2006 Change Change %
Comparable revenue $552.0 $548.1 $3.9 0.7%
Comparable gross profit 121.0 115.7 5.3 4.6%
Comparable gross margin percentage 21.9% 21.1%
Comparable funeral services
performed:
Preneed 36,803 38,209 (1,406) (3.7%)
Atneed 70,128 74,019 (3,891) (5.3%)
Total 106,931 112,228 (5,297) (4.7%)
Comparable average revenue per
funeral service $4,951 $4,699 $252 5.4%
Our comparable operations gross profit and gross margin percentage in 2007
above also include new planned field and home office overhead that is needed
as a result of the addition of over 600 funeral homes and 100 cemeteries
acquired in the Alderwoods transaction.
Cemetery Results
Consolidated cemetery revenues increased $83.8 million, or 28.8%, in the
first half of 2007 compared to the same period of 2006 reflecting a $90.5
million increase from operations acquired from Alderwoods. This increase was
offset by a $5.2 million decline in revenue from divested locations. Our
comparable cemetery revenues decreased $1.5 million in the first half of 2007
compared to the same period of 2006 as increased preneed production was more
than offset by the receipt and recognition of $7.9 million of previously
disputed endowment care income in the second quarter of 2006 described
earlier.
Consolidated cemetery gross profit increased $18.7 million in the first
half of 2007 compared to the first half of 2006 reflecting the addition of
gross profit from Alderwoods operations of $18.8 million. Consolidated
cemetery gross margin percentage was 19.1% in the first half of 2007 compared
to 18.2% in the same period of 2006. We also divested locations with
incremental gross profits in 2007 compared to 2006 of $0.6 million. Our
comparable cemetery gross margins decreased $0.7 million in the first half of
2007 compared to the first half of 2006 as increased revenue was offset by the
receipt and recognition of $7.9 million of previously disputed endowment care
income in the second quarter of 2006. We estimate that this income positively
impacted our comparable cemetery gross margin percentage for the first half of
2006 by approximately 240 basis points. Comparable North America cemetery
margin percentage was 19.3% in the first half of 2007 compared to 19.5% in the
first half of 2006.
Other Results
* General and administrative expenses were $65.7 million in the first
half of 2007 compared to $42.9 million in the first half of 2006.
General and administrative costs increased $22.8 million primarily due
to $16.9 million of one-time transition and other expenses related to
our acquisition of Alderwoods. Additionally, salary expense increased
$4.8 million compared to prior year as a result of Alderwoods corporate
expenses that are expected to wind down throughout 2007.
* Interest expense increased to $73.8 million in the first half of 2007
compared to $53.3 million in the first half of 2006. The increase of
$20.5 million resulted from increased borrowings to finance the
Alderwoods acquisition in the fourth quarter of 2006.
* Interest income decreased $8.7 million in the first half of 2007 to
$4.1 million as expected due to decreases in our average cash balances.
* Other income net for the first half of 2007 includes income of
$6.3 million from our equity investment in operations in France for
which no comparable amounts were received in 2006..
Cash Flow & Capital Expenditures
Cash flows from operating activities in the first six months of 2007 were
$191.6 million compared to $151.6 million in the first six months of 2006.
Included in the first six months of 2007 are one-time transition costs related
to the Alderwoods acquisition and integration of $19.5 million and $11.4
million of premiums paid on the early extinguishment of debt. Excluding the
above items, cash flow from operations increased approximately $70.9 million.
The receipt of $20.6 million in trust proceeds arising from our recent
reconciliations of the preneed funeral and cemetery trust fund backlog of
Alderwoods, and $14 million from our internal working capital improvement
initiatives were essentially offset by other operating and working capital
declines. These declines included $21.0 million in additional interest
payments resulting from increased borrowings to finance the Alderwoods
acquisition, $12 million in additional cash tax payments, and $7.9 million of
previously disputed endowment care funds received in the first half of 2006
for which no comparable amounts were received in 2007. After taking into
account the above items, the remaining increase in cash flows from operations
in the first half of 2007 was primarily driven by operating cash flows
generated as a result of adding the Alderwoods locations to our company.
A summary of our capital expenditures is set forth below:
(In millions) Capital Expenditures
Six Months Ended
June 30, June 30,
2007 2006
Capital improvements at existing locations 41.6 23.8
Development of cemetery property 22.4 14.7
Construction of new funeral home facilities and
other growth capital 1.4 2.0
Total capital expenditures $65.4 $40.5
NON-GAAP FINANCIAL MEASURES
Earnings from Continuing Operations Excluding Special Items
Earnings from continuing operations excluding special items is a non-GAAP
financial measure. We believe this non-GAAP financial measure provides a
consistent basis for comparison between quarters and enhances the
understanding of the performance of our core operations, as it is not
influenced by certain income and expense items not affecting continuing
operations. We also believe this measure helps facilitate comparisons to our
competitors' operating results.
Set forth below is a reconciliation of Earnings from continuing operations
excluding special items to our reported net income. 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.
Three Months Ended Six Months Ended
(In millions, except June 30, June 30, June 30, June 30,
diluted EPS) 2007 2006 2007 2006
Net Diluted Net Diluted Net Diluted Net Diluted
Income EPS Income EPS Income EPS Income EPS
Net income
reported $15.1 $.05 $25.5 $.09 $52.8 $.18 $52.4 $.18
After-tax
reconciling
items:
(Gains) losses
on dispositions
and impairment
charges, net 9.7 .03 3.0 .01 18.3 .06 6.7 .02
Loss on early
extinguishment
of debt 7.0 .03 -- -- 8.4 .03 -- --
Alderwoods
transition
costs 2.8 .01 -- -- 9.7 .03 -- --
Discontinued
operations (2.2) (.01) (0.1) -- (5.1) (.02) (0.2) --
Earnings from
continuing
operations
excluding special
items $32.4 $.11 $28.4 $.10 $84.1 $.28 $58.9 $.20
Diluted weighted
average shares
outstanding (in
thousands) 296,124 297,501 297,480 297,784
Conference Call and Webcast
We will host a conference call on Wednesday, August 8, 2007, at 9:00 a.m.
Central Standard Time. A question and answer session will follow a brief
presentation made by management. The conference call dial-in number is (617)
614-3453 with the passcode of 11878005. The conference call will also be
broadcast live via the Internet and can be accessed through our website at
www.sci-corp.com and can be accessed by clicking on "Webcasts and
Presentations" in the Investors section of the website. A replay of the
conference call will be available through August 22, 2007 and can be accessed
at (617) 801-6888 with the confirmation code of 18151155. Additionally, a
replay of the conference call will be available on our website for at least
ninety days and can be accessed by clicking on "Webcasts and Presentations" in
the Investors section of the website.
Cautionary Statement on Forward-Looking Statements
The statements in this Form 10-Q 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:
* 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 us, particularly, but not limited to,
levels of trust fund income, interest expense, pension expense, and
negative currency translation effects.
* Our ability to successfully integrate Alderwoods or to fully realize
the anticipated benefits of the acquisition.
* The outcomes of pending lawsuits, proceedings, and claims against us
and the possibility that insurance coverage is deemed not to apply to
these matters or that an insurance carrier is unable to pay any
covered amounts to us.
* Allegations regarding compliance with laws, regulations, industry
standards, and customs regarding burial procedures and practices.
* The amounts payable by us with respect to our outstanding legal
matters exceed our established reserves.
* The outcome of a pending Internal Revenue Service audit. We maintain
accruals for tax liabilities that relate to uncertain tax matters. If
these tax matters are unfavorably resolved, we will make any required
payments to tax authorities. If these tax matters are favorably
resolved, the accruals maintained by us will no longer be required,
and these amounts will be reversed through the tax provision at the
time of resolution.
* Our ability to manage changes in consumer demand and/or pricing for
our products and services due to several factors, such as changes in
numbers of deaths, cremation rates, competitive pressures, and local
economic conditions.
* Changes in domestic and international political and/or regulatory
environments in which we operate, including potential changes in tax,
accounting, and trusting policies.
* Changes in credit relationships impacting the availability of credit
and the general availability of credit in the marketplace.
* Our ability to successfully access surety and insurance markets at a
reasonable cost.
* Our ability to successfully leverage our substantial purchasing power
with certain of our vendors.
* The effectiveness of our internal control over financial reporting,
and our ability to certify the effectiveness of the internal controls
and to obtain an unqualified attestation report of our auditors
regarding the effectiveness of our internal control over financial
reporting.
* Our credit agreement and privately placed debt securities that may
prevent us from engaging in certain transactions.
* Our ability to buy our common stock under our share repurchase
programs which could be impacted by, among others, restrictive
covenants in our bank agreements, unfavorable market conditions, the
market price of our common stock, the nature of other investment
opportunities presented to us from time to time, and the availability
of funds necessary to continue purchasing common stock.
For further information on these and other risks and uncertainties, see
our Securities and Exchange Commission filings, including our 2006 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 to
publicly update or revise any forward-looking statements made herein or any
other forward-looking statements made by us, whether as a result of new
information, future events or otherwise.
About Service Corporation International
Service Corporation International (NYSE: SCI), headquartered in Houston,
Texas, is North America's leading provider of deathcare products and services.
At June 30, 2007, we owned and operated more than 1,500 funeral homes and 400
cemeteries (of which over 230 are combination locations) in 45 states, eight
Canadian provinces, the District of Columbia and Puerto Rico. Through our
businesses, we market the Dignity Memorial(R) 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(R),
please visit www.dignitymemorial.com.
For additional information contact:
Investors: Debbie Young - Director / Investor Relations (713) 525-9088
Media: Robyn Sadowsky - Director / Corporate Communications (713) 525-7795
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands, except per share amounts)
Three months ended Six months ended
June 30, June 30,
2007 2006 2007 2006
Revenues $565,492 $431,400 $1,173,047 $873,401
Costs and expenses (462,131) (347,212) (928,532) (700,519)
Gross profit 103,361 84,188 244,515 172,882
General and administrative
expenses (30,281) (20,922) (65,680) (42,929)
Gains (losses) on
dispositions and
impairment charges, net 9,743 (2,881) 2,063 (7,391)
Operating income 82,823 60,385 180,898 122,562
Interest expense (36,165) (26,609) (73,762) (53,337)
Loss on early
extinguishment of debt (12,122) -- (14,480) --
Interest income 2,478 6,782 4,070 12,763
Other income, net 4,836 203 3,338 1,195
Income from continuing
operations before
income taxes 41,850 40,761 100,064 83,183
Provision for income
taxes (28,941) (15,404) (52,438) (31,049)
Income from continuing
operations 12,909 25,357 47,626 52,134
Income from discontinued
operations (net of income
tax provision (benefit)
of $1,223, ($13), $1,960
and $83, respectively) 2,209 93 5,134 242
Net income $15,118 $25,450 $52,760 $52,376
Basic earnings per share:
Income from continuing
operations $.04 $.09 $.16 $.18
Income from discontinued
operations, net of tax .01 -- .02 --
Net income $.05 $.09 $.18 $.18
Diluted earnings per share:
Income from continuing
operations $.04 $.09 $.16 $.18
Income from discontinued
operations, net of tax .01 -- .02 --
Net income $.05 $.09 $.18 $.18
Basic weighted average
number of shares 290,577 293,409 291,941 293,580
Diluted weighted average
number of shares 296,124 297,501 297,480 297,784
Dividends declared per share $.030 $.025 $0.60 $.050
SERVICE CORPORATION INTERNATIONAL
CONSOLIDATED BALANCE SHEET
(In thousands, except share amounts)
June 30, December 31,
2007 2006
Assets
Current assets:
Cash and cash equivalents $222,785 $39,880
Receivables, net 102,107 107,194
Inventories 39,017 39,535
Current assets of discontinued operations 2,480 2,236
Current assets held for sale 3,033 6,330
Other 37,363 43,162
Total current assets 406,785 238,337
Preneed funeral receivables and trust
investments 1,546,224 1,516,676
Preneed cemetery receivables and trust
investments 1,550,552 1,522,584
Cemetery property, at cost 1,465,152 1,495,248
Property and equipment, net 1,605,899 1,641,353
Goodwill 1,260,587 1,264,272
Non-current assets of discontinued operations 380,579 371,132
Non-current assets held for sale 169,407 349,311
Deferred charges and other assets 396,861 436,545
Cemetery perpetual care trust investments 958,947 893,931
$9,740,993 $9,729,389
Liabilities & Stockholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $305,374 $341,173
Current maturities of long-term debt 103,837 46,176
Current liabilities of discontinued operations 3,071 2,351
Current liabilities held for sale 157 419
Income taxes 22,498 17,828
Total current liabilities 434,937 407,947
Long-term debt 1,837,318 1,912,696
Deferred preneed funeral revenues 541,472 537,792
Deferred preneed cemetery revenues 735,098 754,193
Deferred income taxes 99,866 177,341
Non-current liabilities of discontinued
operations 324,383 311,498
Non-current liabilities held for sale 116,161 239,800
Other liabilities 479,506 357,418
Non-controlling interest in funeral and
cemetery trusts 2,609,718 2,548,743
Non-controlling interest in cemetery
perpetual care trusts 955,358 887,186
Stockholders' equity:
Common stock, $1 per share par value,
500,000,000 shares authorized,
288,103,566 and 293,222,114, issued and
outstanding (net of 7,975,808 and
10,000 treasury shares, at par,
respectively) 288,104 293,222
Capital in excess of par value 2,046,825 2,135,649
Accumulated deficit (841,647) (906,394)
Accumulated other comprehensive income 113,894 72,298
Total stockholders' equity 1,607,176 1,594,775
$9,740,993 $9,729,389
SERVICE CORPORATION INTERNATIONAL
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Six months ended
June 30,
2007 2006
Cash flows from operating activities:
Net income $52,760 $52,376
Adjustments to reconcile net income to net
cash provided by operating activities:
Net income from discontinued operations,
net of tax (5,134) (242)
Loss on early extinguishment of debt 14,480 --
Premiums paid on early extinguishment
of debt (11,368) --
Depreciation and amortization 66,876 45,670
Amortization of cemetery property 17,800 12,743
Amortization of loan cost 3,617 5,070
Provision for doubtful accounts 6,688 4,718
Provision for deferred income taxes 38,024 24,966
(Gains) losses on dispositions and
impairment charges, net (2,063) 7,391
Share-based compensation 5,980 3,856
Excess tax benefits from share based awards (4,123) --
Equity in earnings of unconsolidated
subsidiaries (6,270) (137)
Change in assets and liabilities, net of
effects from acquisitions and dispositions:
(Increase) decrease in receivables (5,222) 18,001
Increase in other assets (10,112) (16,431)
Decrease in payables and other liabilities (40,626) (39,150)
Net effect of preneed funeral production
and maturities 14,651 4,421
Net effect of cemetery production and
deliveries 38,647 27,866
Other (329) (264)
Net cash provided by operating activities
from continuing operations 174,276 150,854
Net cash provided by operating activities
from discontinued operations 17,279 749
Net cash provided by operating activities 191,555 151,603
Cash flows from investing activities:
Capital expenditures (65,392) (40,533)
Proceeds from divestitures and sales of
property and equipment 214,494 26,744
Acquisitions (212) (14,677)
Net (deposits) withdrawals of restricted
funds and other (238) 10,613
Net cash provided by (used in) investing
activities from continuing operations 148,652 (17,853)
Net cash (used in) provided by investing
activities from discontinued operations (8,546) 11,155
Net cash provided by (used in) investing
activities 140,106 (6,698)
Cash flows from financing activities:
Proceeds from long-term debt issued 398,996 --
Debt issuance costs (6,443) --
Payments of debt (2,152) (13,713)
Principal payments on capital leases (13,807) (10,701)
Early extinguishment of debt (422,641) --
Proceeds from exercise of stock options 13,189 2,402
Purchase of Company common stock (103,598) (27,870)
Excess tax benefits from share based awards 4,123 --
Payments of dividends (17,645) (14,719)
Bank overdrafts and other 2,211 --
Net cash used in financing activities from
continuing operations (147,767) (64,601)
Net cash used in financing activities from
discontinued operations (2,113) --
Net cash used in financing activities (149,880) (64,601)
Effect of foreign currency 1,124 2,085
Net increase in cash and cash equivalents 182,905 82,389
Cash and cash equivalents at beginning
of period 39,880 446,782
Cash and cash equivalents at end of period $222,785 $529,171
SOURCE Service Corporation International
Investors, Debbie Young, Director, Investor Relations, +1-713- 525-9088, or Media,
Robyn Sadowsky, Director, Corporate Communications, +1- 713-525-7795, both of Service
Corporation International
http://www.sci-corp.com/
