Conference call on Wednesday, November 2, 2022, at 8:00 a.m. Central Time.
HOUSTON, Nov. 1, 2022 /PRNewswire/ -- Service Corporation International (NYSE: SCI), the largest provider of deathcare products and services in North America, today reported results for the third quarter of 2022.
Tom Ryan, the Company's Chairman and CEO, commented on the third quarter performance:
"We are proud to report GAAP earnings per share of $0.76 and adjusted earnings per share of $0.68 and net cash provided by operating activities of $183 million for the third quarter of 2022. These results significantly exceeded our expectations; however, they are below the prior year quarter that was materially impacted by the effects of COVID-19. Comparing back to the pre-pandemic third quarter of 2019, we have greatly exceeded our expected growth.
We are raising the midpoint of our full year 2022 adjusted earnings guidance by 20 cents to $3.70 and the midpoint of our adjusted operating cash flow guidance by $40 million to $815 million. These increases are driven by the strong earnings performance in the first nine months, particularly around higher than anticipated funeral services performed.
I would like to thank our 24,000 associates for their unwavering commitment in providing excellent service to our client families. We believe our long-term growth strategy is on track as we continue to grow revenue, leverage our unparalleled scale, and deploy our capital wisely to enhance shareholder value."
Third Quarter Highlights:
Details of our third quarter 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 | Nine months ended | ||||||
2022 | 2021 | 2022 | 2021 | |||||
Revenue | $ 977.7 | $ 1,034.4 | $ 3,081.0 | $ 3,099.9 | ||||
Operating income | $ 203.4 | $ 304.3 | $ 760.4 | $ 892.2 | ||||
Net income attributable to common stockholders | $ 120.9 | $ 209.9 | $ 473.0 | $ 596.4 | ||||
Diluted earnings per share | $ 0.76 | $ 1.23 | $ 2.93 | $ 3.49 | ||||
Earnings excluding special items (1) | $ 108.8 | $ 197.7 | $ 463.6 | $ 583.0 | ||||
Diluted earnings per share excluding special items (1) | $ 0.68 | $ 1.16 | $ 2.87 | $ 3.41 | ||||
Diluted weighted average shares outstanding | 159.1 | 170.0 | 161.4 | 171.1 | ||||
Net cash provided by operating activities | $ 182.6 | $ 240.6 | $ 655.4 | $ 730.4 | ||||
Net cash provided by operating activities excluding special items (1) | $ 182.6 | $ 232.3 | $ 655.4 | $ 722.1 |
(1) | Earnings excluding special items, diluted earnings per share excluding special items, and net cash provided by operating activities excluding special items are non-GAAP financial measures. These items are also referred to as "adjusted earnings per share" and "adjusted operating cash flow". A reconciliation from net income attributable to common stockholders, diluted earnings per share, and net cash provided by operating activities in accordance with generally accepted accounting principles in the United States (GAAP) can be found later in this press release under the headings "Cash Flow and Capital Spending" and "Non-GAAP Financial Measures" in the Appendix at the end of this press release. |
UPDATED 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 and the impact of recent economic uncertainty. Our outlook for net cash provided by operating activities excluding special items reflects an estimated $21 million of payroll tax payments in the fourth quarter of 2022 that were deferred from 2020 as allowed under the CARES Act. The outlook for capital improvements at existing field locations, corporate systems development, and cemetery development expenditures was increased due to elevated spend on cemetery property development as we replenish inventory to meet consumer demand after the COVID-19 pandemic. We also are continuing to invest in field technology and related infrastructure projects to support future customer facing and non-customer facing technology improvements.
(Dollars in millions, except per share amounts) | Previous 2022 Outlook | Revised 2022 Outlook | |||||
Diluted earnings per share excluding special items (1) | $3.30 - $3.70 | $3.60 - $3.80 | |||||
Net cash provided by operating activities excluding special items and cash taxes (1) | $940 - $980 | $985 - $1,015 | |||||
Cash taxes expected in 2022 | $180 - $190 | $180 - $190 | |||||
Net cash provided by operating activities excluding special items (1) | $750 - $800 | $795 - $835 | |||||
Capital improvements at existing field locations, corporate systems development, | $270 - $290 | $280 - $300 | |||||
(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, November 2, 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 0676297. 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 November 9, 2022 and can be accessed at (877) 344-7529 (US) or (412) 317-0088 (International) with the passcode of 6922087. 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 September 30, 2022, we owned and operated 1,463 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 |
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:
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.
SERVICE CORPORATION INTERNATIONAL
APPENDIX: RESULTS FOR THE THIRD QUARTER OF 2022
Consolidated Statement of Operations (Unaudited) | |||||||
(Dollars in thousands, except per share amounts) | Three months ended | Nine months ended | |||||
September 30, | September 30, | ||||||
2022 | 2021 | 2022 | 2021 | ||||
Revenue | $ 977,720 | $ 1,034,372 | $ 3,080,978 | $ 3,099,888 | |||
Cost of revenue | (746,764) | (696,369) | (2,206,464) | (2,106,118) | |||
Gross profit | 230,956 | 338,003 | 874,514 | 993,770 | |||
Corporate general and administrative expenses | (41,911) | (41,461) | (129,336) | (116,779) | |||
Gains on divestitures and impairment charges, net | 14,403 | 7,804 | 15,186 | 15,232 | |||
Operating income | 203,448 | 304,346 | 760,364 | 892,223 | |||
Interest expense | (43,508) | (38,618) | (123,107) | (111,865) | |||
Losses on early extinguishment of debt, net | — | — | (1,225) | (5,226) | |||
Other (expense) income, net | (1,514) | 8,218 | (2,489) | 9,214 | |||
Income before income taxes | 158,426 | 273,946 | 633,543 | 784,346 | |||
Provision for income taxes | (37,521) | (64,003) | (159,925) | (187,659) | |||
Net income | 120,905 | 209,943 | 473,618 | 596,687 | |||
Net income attributable to noncontrolling interests | (55) | (88) | (585) | (248) | |||
Net income attributable to common stockholders | $ 120,850 | $ 209,855 | $ 473,033 | $ 596,439 | |||
Basic earnings per share: | |||||||
Net income attributable to common stockholders | $ 0.77 | $ 1.25 | $ 2.98 | $ 3.54 | |||
Basic weighted average number of shares | 156,781 | 167,417 | 158,921 | 168,586 | |||
Diluted earnings per share: | |||||||
Net income attributable to common stockholders | $ 0.76 | $ 1.23 | $ 2.93 | $ 3.49 | |||
Diluted weighted average number of shares | 159,100 | 170,005 | 161,398 | 171,057 |
Consolidated Balance Sheet (Unaudited) | |||
(Dollars in thousands, except share amounts) | |||
September 30, 2022 | December 31, 2021 | ||
ASSETS | |||
Current assets: | |||
Cash and cash equivalents | $ 167,965 | $ 268,626 | |
Receivables, net | 86,471 | 106,051 | |
Inventories | 31,595 | 25,935 | |
Other | 52,315 | 40,448 | |
Total current assets | 338,346 | 441,060 | |
Preneed receivables, net and trust investments | 5,278,066 | 6,015,323 | |
Cemetery property | 1,912,232 | 1,900,844 | |
Property and equipment, net | 2,297,950 | 2,252,158 | |
Goodwill | 1,907,169 | 1,915,082 | |
Deferred charges and other assets, net | 1,150,264 | 1,169,813 | |
Cemetery perpetual care trust investments | 1,607,502 | 1,996,898 | |
Total assets | $ 14,491,529 | $ 15,691,178 | |
LIABILITIES & EQUITY | |||
Current liabilities: | |||
Accounts payable and accrued liabilities | $ 641,400 | $ 659,494 | |
Current maturities of long-term debt | 63,510 | 65,016 | |
Income taxes payable | 1,678 | 3,751 | |
Total current liabilities | 706,588 | 728,261 | |
Long-term debt | 4,127,411 | 3,901,304 | |
Deferred revenue, net | 1,600,338 | 1,532,749 | |
Deferred tax liability | 447,433 | 437,902 | |
Other liabilities | 407,269 | 438,903 | |
Deferred receipts held in trust | 3,921,886 | 4,766,492 | |
Care trusts' corpus | 1,603,182 | 1,976,118 | |
Equity: | |||
Common stock, $1 per share par value, 500,000,000 shares authorized, | 154,738 | 163,114 | |
Capital in excess of par value | 951,247 | 979,096 | |
Retained earnings | 559,631 | 727,021 | |
Accumulated other comprehensive income | 11,586 | 40,214 | |
Total common stockholders' equity | 1,677,202 | 1,909,445 | |
Noncontrolling interests | 220 | 4 | |
Total equity | 1,677,422 | 1,909,449 | |
Total liabilities and equity | $ 14,491,529 | $ 15,691,178 |
Consolidated Statement of Cash Flows (Unaudited) | |||
(Dollars in thousands) | Nine months ended September 30, | ||
2022 | 2021 | ||
Cash flows from operating activities: | |||
Net income | $ 473,618 | $ 596,687 | |
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 | 130,451 | 119,200 | |
Amortization of intangibles | 14,059 | 15,095 | |
Amortization of cemetery property | 69,059 | 75,394 | |
Amortization of loan costs | 5,182 | 4,736 | |
Provision for expected credit losses | 11,404 | 8,545 | |
Provision for (benefit from) deferred income taxes | 7,302 | (8,125) | |
Gains on divestitures and impairment charges, net | (15,186) | (15,232) | |
Gain on sale of investments | (1,169) | — | |
Share-based compensation | 11,063 | 10,630 | |
Change in assets and liabilities, net of effects from acquisitions and divestitures: | |||
Decrease (increase) in receivables | 15,349 | (9,921) | |
Decrease (increase) in other assets | 2,622 | (39,681) | |
(Decrease) increase in payables and other liabilities | (17,147) | 84,404 | |
Effect of preneed sales production and maturities: | |||
Increase in preneed receivables, net and trust investments | (248,289) | (246,867) | |
Increase in deferred revenue, net | 173,474 | 92,991 | |
Increase in deferred receipts held in trust | 22,426 | 37,280 | |
Net cash provided by operating activities | 655,443 | 730,362 | |
Cash flows from investing activities: | |||
Capital expenditures | (252,763) | (177,767) | |
Business acquisitions, net of cash acquired | (13,488) | (9,221) | |
Real estate acquisitions | (8,901) | (15,642) | |
Proceeds from divestitures and sales of property and equipment | 31,394 | 25,602 | |
Proceeds from sale of investments and other | 1,330 | — | |
Payments for Company-owned life insurance policies | (1,788) | (3,666) | |
Net cash used in investing activities | (244,216) | (180,694) | |
Cash flows from financing activities: | |||
Proceeds from issuance of long-term debt | 325,000 | 820,000 | |
Debt issuance costs | — | (13,640) | |
Scheduled payments of debt | (27,212) | (27,110) | |
Early payments and extinguishment of debt | (65,591) | (699,837) | |
Principal payments on finance leases | (26,779) | (25,421) | |
Proceeds from exercise of stock options | 16,840 | 34,521 | |
Purchase of Company common stock | (586,562) | (344,373) | |
Payments of dividends | (118,435) | (109,285) | |
Bank overdrafts and other | (13,854) | (3,497) | |
Net cash used in financing activities | (496,593) | (368,642) | |
Effect of foreign currency | (4,744) | (197) | |
Net (decrease) increase in cash, cash equivalents, and restricted cash | (90,110) | 180,829 | |
Cash, cash equivalents, and restricted cash at beginning of period | 278,555 | 238,610 | |
Cash, cash equivalents, and restricted cash at end of period | $ 188,445 | $ 419,439 |
Consolidated Segment Results | |||||||
(See definitions of revenue line items later in this appendix.) | |||||||
(Dollars in millions, except average revenue per service) | Three months ended | Nine months ended | |||||
2022 | 2021 | 2022 | 2021 | ||||
Consolidated funeral: | |||||||
Atneed revenue | $ 291.6 | $ 318.4 | $ 931.0 | $ 938.8 | |||
Matured preneed revenue | 167.4 | 172.4 | 528.1 | 522.1 | |||
Core revenue | 459.0 | 490.8 | 1,459.1 | 1,460.9 | |||
Non-funeral home revenue | 18.2 | 18.5 | 56.7 | 55.1 | |||
Recognized preneed revenue | 40.1 | 45.6 | 125.8 | 120.4 | |||
Other revenue | 36.7 | 37.4 | 110.3 | 107.0 | |||
Total revenue | $ 554.0 | $ 592.3 | $ 1,751.9 | $ 1,743.4 | |||
Gross profit | $ 101.8 | $ 168.5 | $ 414.5 | $ 474.7 | |||
Gross profit percentage | 18.4 % | 28.4 % | 23.7 % | 27.2 % | |||
Funeral services performed | 87,976 | 94,239 | 279,924 | 286,331 | |||
Average revenue per service | $ 5,424 | $ 5,404 | $ 5,415 | $ 5,295 |
(Dollars in millions) | Three months ended | Nine months ended | |||||
2022 | 2021 | 2022 | 2021 | ||||
Consolidated cemetery: | |||||||
Atneed property revenue | $ 35.4 | $ 46.0 | $ 114.8 | $ 125.4 | |||
Atneed merchandise and service revenue | 73.2 | 77.5 | 226.6 | 231.7 | |||
Total atneed revenue | 108.6 | 123.5 | 341.4 | 357.1 | |||
Recognized preneed property revenue | 200.8 | 201.9 | 640.4 | 643.0 | |||
Recognized preneed merchandise and service revenue | 85.7 | 85.0 | 255.5 | 258.5 | |||
Total recognized preneed revenue | 286.5 | 286.9 | 895.9 | 901.5 | |||
Core revenue | 395.1 | 410.4 | 1,237.3 | 1,258.6 | |||
Other cemetery revenue | 28.7 | 31.7 | 91.8 | 97.9 | |||
Total revenue | $ 423.8 | $ 442.1 | $ 1,329.1 | $ 1,356.5 | |||
Gross profit | $ 129.1 | $ 169.6 | $ 460.1 | $ 519.1 | |||
Gross profit percentage | 30.5 % | 38.4 % | 34.6 % | 38.3 % |
Comparable Funeral Results
The table below details comparable funeral results of operations ("same store") for the three months ended September 30, 2022 and 2021. We consider comparable funeral operations to be those businesses owned for the entire period beginning January 1, 2021 and ending September 30, 2022.
(Dollars in millions, except average revenue per service and average | Three months ended September 30, | ||||||
2022 | 2021 | Var | % | ||||
Comparable funeral revenue: | |||||||
Atneed revenue (1) | $ 282.9 | $ 316.9 | $ (34.0) | (10.7) % | |||
Matured preneed revenue (2) | 165.3 | 172.0 | (6.7) | (3.9) % | |||
Core revenue (3) | 448.2 | 488.9 | (40.7) | (8.3) % | |||
Non-funeral home revenue (4) | 18.0 | 18.4 | (0.4) | (2.2) % | |||
Recognized preneed revenue (5) | 39.8 | 45.5 | (5.7) | (12.5) % | |||
Other revenue (6) | 36.1 | 37.2 | (1.1) | (3.0) % | |||
Total comparable revenue | $ 542.1 | $ 590.0 | $ (47.9) | (8.1) % | |||
Comparable gross profit | $ 102.1 | $ 169.5 | $ (67.4) | (39.8) % | |||
Comparable gross profit percentage | 18.8 % | 28.7 % | (9.9) % | ||||
Comparable funeral services performed: | |||||||
Atneed | 46,965 | 53,868 | (6,903) | (12.8) % | |||
Matured preneed | 25,658 | 26,794 | (1,136) | (4.2) % | |||
Total core | 72,623 | 80,662 | (8,039) | (10.0) % | |||
Non-funeral home | 12,932 | 12,955 | (23) | (0.2) % | |||
Total comparable funeral services performed | 85,555 | 93,617 | (8,062) | (8.6) % | |||
Comparable core cremation rate | 54.7 % | 52.8 % | 1.9 % | ||||
Total comparable cremation rate (7) | 61.4 % | 59.2 % | 2.2 % | ||||
Comparable funeral average revenue per service: | |||||||
Atneed | $ 6,024 | $ 5,883 | $ 141 | 2.4 % | |||
Matured preneed | 6,442 | 6,419 | 23 | 0.4 % | |||
Total core | 6,172 | 6,061 | 111 | 1.8 % | |||
Non-funeral home | 1,392 | 1,420 | (28) | (2.0) % | |||
Total comparable average revenue per service | $ 5,449 | $ 5,419 | $ 30 | 0.6 % | |||
Comparable funeral preneed sales production: | |||||||
Total preneed sales | $ 292.9 | $ 286.6 | $ 6.3 | 2.2 % | |||
Core contracts sold | 36,507 | 37,502 | (995) | (2.7) % | |||
Non-funeral home contracts sold | 21,482 | 20,432 | 1,050 | 5.1 % | |||
Core average revenue per contract sold | $ 6,268 | $ 6,084 | $ 184 | 3.0 % | |||
Non-funeral home average revenue per contract sold | $ 2,982 | $ 2,861 | $ 121 | 4.2 % |
(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 to a preneed customer 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). |
Comparable Cemetery Results
The table below details comparable cemetery results of operations ("same store") for the three months ended September 30, 2022 and 2021. We consider comparable cemetery operations to be those businesses owned for the entire period beginning January 1, 2021 and ending September 30, 2022.
(Dollars in millions) | Three months ended September 30, | ||||||
2022 | 2021 | Var | % | ||||
Comparable cemetery revenue: | |||||||
Atneed property revenue | $ 35.2 | $ 46.0 | $ (10.8) | (23.5) % | |||
Atneed merchandise and service revenue | 73.0 | 77.5 | (4.5) | (5.8) % | |||
Total atneed revenue (1) | 108.2 | 123.5 | (15.3) | (12.4) % | |||
Recognized preneed property revenue | 198.9 | 201.9 | (3.0) | (1.5) % | |||
Recognized preneed merchandise and service revenue | 85.7 | 84.9 | 0.8 | 0.9 % | |||
Total recognized preneed revenue (2) | 284.6 | 286.8 | (2.2) | (0.8) % | |||
Core revenue (3) | 392.8 | 410.3 | (17.5) | (4.3) % | |||
Other revenue (4) | 28.5 | 31.7 | (3.2) | (10.1) % | |||
Total comparable revenue | $ 421.3 | $ 442.0 | $ (20.7) | (4.7) % | |||
Comparable gross profit | $ 128.3 | $ 169.6 | $ (41.3) | (24.4) % | |||
Comparable gross profit percentage | 30.5 % | 38.4 % | (7.9) % | ||||
Comparable cemetery preneed and atneed sales production: | |||||||
Property | $ 255.5 | $ 255.7 | $ (0.2) | (0.1) % | |||
Merchandise and services | 193.3 | 201.8 | (8.5) | (4.2) % | |||
Discounts and other | (3.9) | (4.1) | 0.2 | 4.9 % | |||
Preneed and atneed sales production | $ 444.9 | $ 453.4 | $ (8.5) | (1.9) % | |||
Recognition rate (5) | 88.3 % | 90.5 % |
(1) | Atneed revenue represents property, merchandise, and services sold and delivered or performed once death has occurred. |
(2) | Recognized preneed revenue represents property, merchandise, and services sold on a preneed contract, which were delivered or performed as well as the related merchandise and service trust fund income. |
(3) | Core revenue represents the sum of property, merchandise, and services that have been delivered or performed as well as the related merchandise and service trust fund income. |
(4) | Other revenue is primarily related to endowment care trust fund income, royalty income, and interest and finance charges earned from customer receivables on preneed installment contracts. |
(5) | Represents the ratio of current period core revenue stated as a percentage of current period preneed and atneed sales production. |
Other Financial Results
Cash Flow and Capital Spending | |||||||
(Dollars in millions) | Three months ended | Nine months ended | |||||
2022 | 2021 | 2022 | 2021 | ||||
Net cash provided by operating activities | $ 182.6 | $ 240.6 | $ 655.4 | $ 730.4 | |||
Cash received from a vendor waiver and release agreement payment | — | (8.3) | — | (8.3) | |||
Net cash provided by operating activities excluding special items | $ 182.6 | $ 232.3 | $ 655.4 | $ 722.1 | |||
Cash taxes included in net cash provided by operating activities | $ 44.6 | $ 66.8 | $ 142.2 | $ 168.8 |
Net cash provided by operating activities declined $58.0 million to $182.6 million in the third quarter of 2022 compared to $240.6 million in the third quarter of 2021. The prior year quarter benefited from a cash receipt of $8.3 million from a vendor waiver and release agreement. Net cash provided by operating activities excluding special items was $182.6 million in the third quarter of 2022 compared to $232.3 million in the third quarter of 2021. This expected decrease in operating cash flow is primarily due to $107.5 million in lower operating income (excluding the impact from divestitures) as the prior year was positively impacted by the effects of the COVID-19 pandemic and $5.0 million of higher cash interest payments. Offsetting the decline in operating income was the impact from lower cash tax payments of $22.2 million and favorable working capital primarily due to the timing of a payroll tax payment of $21 million related to the CARES Act in 2020 in the third quarter last year.
A summary of our capital expenditures is set forth below:
(Dollars in millions) | Three months ended | Nine months ended | |||||
2022 | 2021 | 2022 | 2021 | ||||
Capital improvements at existing field locations and corporate | $ 58.9 | $ 39.9 | $ 149.7 | $ 100.1 | |||
Development of cemetery property | 34.4 | 25.4 | 75.9 | 50.0 | |||
Capital improvements at existing field locations, corporate | 93.3 | 65.3 | 225.6 | 150.1 | |||
Growth capital expenditures/construction of new funeral service locations | 7.0 | 9.3 | 27.2 | 27.7 | |||
Total capital expenditures | $ 100.3 | $ 74.6 | $ 252.8 | $ 177.8 |
Total capital expenditures increased in the current quarter by $25.7 million, primarily due to increases in capital improvements at existing field locations, corporate systems development, and cemetery development expenditures. The growth in capital spend at existing field locations and corporate systems development is primarily due to increased investments in field technology and related infrastructure projects to support future customer facing and non-customer facing technology improvements. We also increased spend on cemetery property development as we replenish inventory to meet consumer demand after the impact of the COVID-19 pandemic. We expect this spend to normalize in 2023.
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 September 30, 2022 is set forth below:
Three Months | Nine Months | ||
Preneed funeral | (3.2) % | (17.5) % | |
Preneed cemetery | (3.5) % | (18.1) % | |
Cemetery perpetual care | (3.4) % | (16.8) % | |
Combined trust funds | (3.4) % | (17.5) % |
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 September 30, | ||||||
2022 | 2021 | ||||||
Net Income | Diluted EPS | Net Income | Diluted EPS | ||||
Net income attributable to common stockholders, as reported | $ 120.9 | $ 0.76 | $ 209.9 | $ 1.23 | |||
Pre-tax reconciling items: | |||||||
Gains on divestitures and impairment charges, net | (14.4) | (0.09) | (7.8) | (0.05) | |||
Vendor waiver and release agreement cash receipts | — | — | (8.3) | (0.05) | |||
Tax reconciling items: | |||||||
Tax effect from special items above
| 3.4 | 0.02 | 4.0 | 0.03 | |||
Change in uncertain tax reserves and other | (1.1) | (0.01) | (0.1) | — | |||
Earnings excluding special items and diluted earnings per share
| $ 108.8 | $ 0.68 | $ 197.7 | $ 1.16 | |||
Diluted weighted average shares outstanding | 159.1 | 170.0 |
(Dollars in millions, except diluted EPS) | Nine months ended September 30, | ||||||
2022 | 2021 | ||||||
Net Income | Diluted EPS | Net Income | Diluted EPS | ||||
Net income attributable to common stockholders, as reported | $ 473.0 | $ 2.93 | $ 596.4 | $ 3.49 | |||
Pre-tax reconciling items: | |||||||
Gains on divestitures and impairment charges, net | (15.2) | (0.10) | (15.2) | (0.09) | |||
Losses on early extinguishment of debt, net | 1.2 | 0.01 | 5.2 | 0.03 | |||
Vendor waiver and release agreement cash receipts
| — | — | (8.3) | (0.05) | |||
Foreign currency exchange loss | 1.5 | 0.01 | — | — | |||
Tax reconciling items: | |||||||
Tax effect from special items above | 3.3 | 0.02 | 4.9 | 0.03 | |||
Change in uncertain tax reserves and other | (0.2) | — | — | — | |||
Earnings excluding special items and diluted earnings | $ 463.6 | $ 2.87 | $ 583.0 | $ 3.41 | |||
Diluted weighted average shares outstanding | 161.4 | 171.1 |
SOURCE Service Corporation International
https://investors.sci-corp.com/2022-11-01-SERVICE-CORPORATION-INTERNATIONAL-ANNOUNCES-THIRD-QUARTER-2022-FINANCIAL-RESULTS-AND-RAISES-2022-GUIDANCE