SERVICE CORP INTERNATIONAL
For the period ended Mar 31, 2024. Filed May 2, 2024.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed May 2, 2024
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3. Preneed Activities
- Preneed Activities
Preneed Receivables, Net and Trust Investments
The components of Preneed receivables, net and trust investments in our unaudited Condensed Consolidated Balance Sheet were as follows:
| March 31, 2024 | December 31, 2023 | |
|---|---|---|
| (In thousands) | ||
| Preneed receivables, net | $1,513,458 | $1,513,933 |
| Trust investments, at market | 6,719,664 | 6,394,796 |
| Insurance-backed fixed income securities and other | 232,135 | 222,424 |
| Trust investments | 6,951,799 | 6,617,220 |
| Less: Cemetery perpetual care trust investments | (2,034,432) | (1,939,241) |
| Preneed trust investments | 4,917,367 | 4,677,979 |
| Preneed receivables, net and trust investments | $6,430,825 | $6,191,912 |
FORM 10-Q 13
PART I
Preneed receivables, net comprised the following:
| March 31, 2024 | |||
|---|---|---|---|
| Funeral | Cemetery | Total | |
| (In thousands) | |||
| Preneed receivables | $189,783 | $1,374,763 | $1,564,546 |
| Unearned finance charges | (10,239) | (6,455) | (16,694) |
| Preneed receivables, at amortized cost | 179,544 | 1,368,308 | 1,547,852 |
| Reserve for credit losses | (17,852) | (16,542) | (34,394) |
| Preneed receivables, net | $161,692 | $1,351,766 | $1,513,458 |
| December 31, 2023 | |||
| Funeral | Cemetery | Total | |
| (In thousands) | |||
| Preneed receivables | $190,514 | $1,371,804 | $1,562,318 |
| Unearned finance charges | (10,100) | (5,810) | (15,910) |
| Preneed receivables, at amortized cost | 180,414 | 1,365,994 | 1,546,408 |
| Reserve for credit losses | (17,026) | (15,449) | (32,475) |
| Preneed receivables, net | $163,388 | $1,350,545 | $1,513,933 |
At March 31, 2024, the amortized cost basis of our preneed receivables by year of origination was as follows:
| 2024 | 2023 | 2022 | 2021 | 2020 | Prior | Total | |
|---|---|---|---|---|---|---|---|
| (In thousands) | |||||||
| Preneed receivables, at amortized cost: | |||||||
| Funeral | $21,075 | $66,928 | $41,887 | $20,954 | $9,712 | $18,988 | $179,544 |
| Cemetery | 140,995 | 508,951 | 356,583 | 206,946 | 102,217 | 52,616 | 1,368,308 |
| Total preneed receivables, at amortized cost | $162,070 | $575,879 | $398,470 | $227,900 | $111,929 | $71,604 | $1,547,852 |
At March 31, 2024, the payment status of our preneed receivables was as follows:
| Past Due | |||||||
|---|---|---|---|---|---|---|---|
| <30 Days | 30-90 Days | 90-180 Days | >180 Days | Total | Current | Total | |
| (In thousands) | |||||||
| Preneed receivables, at amortized cost: | |||||||
| Funeral | $6,910 | $3,455 | $2,619 | $27,799 | $40,783 | $138,761 | $179,544 |
| Cemetery | 34,438 | 28,523 | 9,147 | 5,360 | 77,468 | 1,290,840 | 1,368,308 |
| Total preneed receivables, at amortized cost | $41,348 | $31,978 | $11,766 | $33,159 | $118,251 | $1,429,601 | $1,547,852 |
14 Service Corporation International
PART I
The following table summarizes the activity for the reserve for credit losses on preneed receivables for the three months ended March 31, 2024:
| December 31, 2023 | Provision for Expected Credit Losses | WriteOffs | Effect of Foreign Currency and Other | March 31, 2024 | |
|---|---|---|---|---|---|
| (In thousands) | |||||
| Funeral | $(17,026) | $(1,622) | $779 | $17 | $(17,852) |
| Cemetery | (15,449) | (1,302) | 201 | 8 | (16,542) |
| Total reserve for credit losses on preneed receivables | $(32,475) | $(2,924) | $980 | $25 | $(34,394) |
The table below sets forth certain investment-related activities associated with our trusts:
| Three months ended March 31, | ||
|---|---|---|
| 2024 | 2023 | |
| (In thousands) | ||
| Deposits | $156,119 | $137,245 |
| Withdrawals | $130,607 | $124,245 |
| Purchases of securities | $341,998 | $607,476 |
| Sales of securities | $334,719 | $630,740 |
| Realized gains from sales of securities(1) | $105,445 | $82,330 |
| Realized losses from sales of securities(1) | $(31,815) | $(49,910) |
(1)All realized gains and losses are recognized in Other income, netfor our trust investments and are offset by a corresponding reclassification in Other income, net to Deferred receipts held in trust and Care trusts’ corpus.
FORM 10-Q 15
PART I
The cost and market values associated with trust investments recorded at market value are detailed below. Cost reflects the investment (net of redemptions) of control holders in the trusts. Fair value represents the value of the underlying securities held by the trusts.
| Fair Value Hierarchy Level | Cost | UnrealizedGains | UnrealizedLosses | Value | |
|---|---|---|---|---|---|
| (In thousands) | |||||
| Fixed income securities: | |||||
| U.S. Treasury | 2 | $42,605 | $90 | $(1,285) | $41,410 |
| Canadian government | 2 | 31,337 | — | — | 31,337 |
| Corporate | 2 | 10,808 | 105 | (16) | 10,897 |
| Residential mortgage-backed | 2 | 5,269 | 23 | (95) | 5,197 |
| Asset-backed | 2 | 286 | — | (47) | 239 |
| Equity securities: | |||||
| Preferred stock | 2 | 420 | — | (72) | 348 |
| Common stock: | |||||
| United States | 1 | 1,725,582 | 646,399 | (57,808) | 2,314,173 |
| Canada | 1 | 41,553 | 20,424 | (866) | 61,111 |
| Other international | 1 | 122,152 | 35,834 | (10,413) | 147,573 |
| Mutual funds: | |||||
| Equity | 1 | 892,823 | 149,405 | (5,188) | 1,037,040 |
| Fixed income | 1 | 1,043,839 | 4,753 | (114,631) | 933,961 |
| Trust investments, at fair value | 3,916,674 | 857,033 | (190,421) | 4,583,286 | |
| Commingled funds | |||||
| Fixed income | 823,946 | 1,692 | (66,005) | 759,633 | |
| Equity | 336,779 | 90,667 | (208) | 427,238 | |
| Money market funds | 369,276 | — | — | 369,276 | |
| Alternative investments | 429,754 | 159,323 | (8,846) | 580,231 | |
| Trust investments, at net asset value | 1,959,755 | 251,682 | (75,059) | 2,136,378 | |
| Trust investments, at market | $5,876,429 | $1,108,715 | $(265,480) | $6,719,664 | |
16 Service Corporation International
PART I
| Fair Value Hierarchy Level | Cost | UnrealizedGains | UnrealizedLosses | Value | |
|---|---|---|---|---|---|
| (In thousands) | |||||
| Fixed income securities: | |||||
| U.S. Treasury | 2 | $45,645 | $145 | $(1,376) | $44,414 |
| Canadian government | 2 | 31,896 | — | — | 31,896 |
| Corporate | 2 | 10,642 | 138 | (17) | 10,763 |
| Residential mortgage-backed | 2 | 5,452 | 29 | (104) | 5,377 |
| Asset-backed | 2 | 291 | — | (51) | 240 |
| Equity securities: | |||||
| Preferred stock | 2 | 417 | — | (97) | 320 |
| Common stock: | |||||
| United States | 1 | 1,744,919 | 478,226 | (78,630) | 2,144,515 |
| Canada | 1 | 42,721 | 20,251 | (676) | 62,296 |
| Other international | 1 | 108,106 | 19,580 | (11,088) | 116,598 |
| Mutual funds: | |||||
| Equity | 1 | 876,620 | 118,476 | (9,540) | 985,556 |
| Fixed income | 1 | 998,767 | 5,727 | (109,231) | 895,263 |
| Trust investments, at fair value | 3,865,476 | 642,572 | (210,810) | 4,297,238 | |
| Commingled funds | |||||
| Fixed income | 827,600 | 2,432 | (63,021) | 767,011 | |
| Equity | 337,500 | 71,819 | (642) | 408,677 | |
| Money market funds | 346,672 | — | — | 346,672 | |
| Alternative investments | 412,482 | 169,825 | (7,109) | 575,198 | |
| Trust investments, at net asset value | 1,924,254 | 244,076 | (70,772) | 2,097,558 | |
| Trust investments, at market | $5,789,730 | $886,648 | $(281,582) | $6,394,796 | |
Our alternative investments include funds invested in limited partnerships with interests in private equity, private market real estate, energy and natural resources, infrastructure, transportation, and private debt including both distressed debt and mezzanine financing. These investments can never be redeemed by the funds. Instead, due to the nature of the investments in this category, distributions are received through the liquidation of the underlying assets of the funds. The funds' managers have not communicated the timing of any liquidations.
Maturity dates of our fixed income securities range from 2024 to 2040. Maturities of fixed income securities (excluding mutual and commingled funds) at March 31, 2024 are estimated as follows:
| Fair Value | |
|---|---|
| (In thousands) | |
| Due in one year or less | $53,339 |
| Due in one to five years | 29,654 |
| Due in five to ten years | 6,003 |
| Thereafter | 84 |
| Total estimated maturities of fixed income securities | $89,080 |
Recognized trust fund income (realized and unrealized) related to our preneed trust investments was $42.7 million and $36.0 million for the three months ended March 31, 2024 and 2023, respectively. Recognized trust fund income (realized and unrealized) related to our cemetery perpetual care trust investments was $23.3 million and $22.0 million for the three months ended March 31, 2024 and 2023, respectively.
FORM 10-Q 17
PART I
Deferred Revenue, Net
Deferred revenue, net represents future revenue, including distributed trust investment earnings associated with unperformed trust-funded preneed contracts that are not held in trust accounts. Future revenue and net trust investment earnings that are held in trust accounts are included in Deferred receipts held in trust.
The components of Deferred revenue, net in our unaudited Condensed Consolidated Balance Sheet were as follows:
| March 31, 2024 | December 31, 2023 | |
|---|---|---|
| (In thousands) | ||
| Deferred revenue | $2,690,118 | $2,649,397 |
| Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts | (976,468) | (945,888) |
| Deferred revenue, net | $1,713,650 | $1,703,509 |
The following table summarizes the activity for our contract liabilities, which are reflected in Deferred revenue, net and Deferred receipts held in trust:
| Three months ended March 31, | ||
|---|---|---|
| 2024 | 2023 | |
| (In thousands) | ||
| Beginning balance — Deferred revenue, net and Deferred receipts held in trust | $6,374,393 | $5,787,548 |
| Net preneed contract sales | 367,166 | 364,463 |
| Acquisitions (dispositions) of businesses, net | 7,678 | 2,904 |
| Net investment gains (losses)(1) | 208,719 | 178,220 |
| Recognized revenue from backlog(2) | (172,580) | (180,172) |
| Recognized revenue from current period sales | (130,146) | (137,324) |
| Change in amounts due on unfulfilled performance obligations | (27,954) | (22,519) |
| Change in cancellation reserve | (83) | 26 |
| Effect of foreign currency and other | (4,363) | (832) |
| Ending balance — Deferred revenue, net and Deferred receipts held in trust | $6,622,830 | $5,992,314 |
(1)Includes both realized and unrealized investment gains (losses)
(2)Includes current year trust fund income through the date of performance.
18 Service Corporation International
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.