SERVICE CORP INTERNATIONAL
For the period ended Sep 30, 2024. Filed Oct 31, 2024.
View on SEC.govAbout this filing
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.
Sep 30, 2024 · Filed Oct 31, 2024
SCI$73.74-2.3%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-01.
0000089089-24-000137
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe CompanyFinancial Condition, Liquidity, and Capital ResourcesCash FlowResults of Operations - Three and Six Months EndedCritical Accounting PoliciesCautionary Statement on Forward-Looking StatementsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-31.
0000089089-24-000175
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe CompanyFinancial Condition, Liquidity, and Capital ResourcesCash FlowResults of Operations - Three and Nine Months EndedCritical Accounting PoliciesCautionary Statement on Forward-Looking StatementsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 203 previous paragraphs and 207 current paragraphs.
133 unchanged; 58 reworded; 16 added; 11 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 11 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (16)
Current report
In addition to the above items, operating results are relatively flat over the prior year quarter. Also, higher interest expense and corporate general and administrative expenses were partially offset by a lower tax rate and lower share count.
Current report
36 Service Corporation International
Current report
The core funeral revenue increased by $4.4 million, or 1.0%, primarily due to a favorable 2.1% increase in core average revenue per service. This core average growth was achieved in light of an increase in the core cremation rate of 30 basis points to 56.8%. Non-funeral home preneed sales revenue decreased by $5.5 million, or 17.2%, primarily due to a decline of non-funeral home preneed sales production of $8.1 million, or 10.4%, impacted by our transition from trust to insurance-funded contracts. Core general agency and other revenue grew $7.6 million, primarily due to growth in general agency revenue from higher commission rates, primarily as a result of our new preneed insurance marketing agreement.
Current report
Corporate general and administrative expenses were $43.7 million in the third quarter of 2024 compared to the third quarter of 2023 of $33.2 million. The current year third quarter was pressured by long-term incentive compensation plan expenses that were impacted by the growth in our stock price. Conversely, during the prior year third quarter we saw a decline in our stock price benefiting our long-term incentive compensation plan expenses.
Current report
Interest expense increased $4.3 million to $65.8 million for the third quarter of 2024 primarily due to higher average balances quarter over quarter on our floating rate debt.
Current report
Other income, net increased $2.7 million to $2.8 million for the three months ended September 30, 2024 primarily due to higher investment income from higher investment balances and new investment products compared to the prior year.
Current report
Nine Months Ended September 30, 2024 and 2023
Current report
Non-funeral home preneed sales revenue decreased by $24.8 million primarily due to a decline of non-funeral home preneed sales production of $10.5 million, or 4.5%, impacted by our transition from trust to insurance-funded contracts. Core general agency and other revenue grew $12.6 million, primarily due to growth in general agency revenue from higher commission rates, primarily as a result of our new preneed insurance marketing agreement.
Current report
Corporate general and administrative expenses were $124.1 million for the nine months ended September 30, 2024 compared to $112.3 million for the same period in 2023. The current year and prior year were inversely impacted by long-term incentive compensation plan expenses that are tied to the changes in our stock price.
Current report
Other income, net increased $4.4 million to $7.0 million for the nine months ended September 30, 2024 primarily due to higher investment income from higher investment balances and new investment products compared to the prior year.
Removed paragraphs (11)
Previous report
26 Service Corporation International
Previous report
The core funeral revenue decreased by $6.6 million, or 1.4%, primarily due to a 2.7% decrease in core funeral services performed partially offset by a favorable 1.3% increase in core average revenue. The core cremation rate increased 60 basis points to 56.9%. Non-funeral home preneed sales revenue decreased by $7.0 million, or 19.5%, primarily due to operational changes in certain markets with respect to timing of merchandise deliveries. This decrease is partially offset by an increase in general agency revenue as we continue to shift from trust-funded to insurance-funded contracts. Core general agency and other revenue grew $6.8 million, primarily due to increased core general agency revenue from higher comparable core preneed funeral insurance production.
Previous report
Corporate general and administrative expenses increased $4.1 million to $39.0 million for the second quarter of 2024 compared to the second quarter of 2023 primarily related to the timing of incentive compensation costs versus the prior year quarter.
Previous report
Interest expense increased $4.9 million to $64.4 million for the three months ended June 30, 2024 primarily due to higher balances combined with a slightly higher interest rate on our Bank Credit Facility.
Previous report
Six Months Ended June 30, 2024 and 2023
Previous report
Non-funeral home preneed sales revenue decreased by $19.3 million primarily due to operational changes in certain markets with respect to timing of merchandise deliveries. This decrease is partially offset by an increase in general agency revenue as we continue to shift from trust-funded to insurance-funded contracts. Core general agency and other revenue grew $5.0 million, primarily due to increased core general agency revenue from higher comparable core preneed funeral insurance production.
Previous report
Corporate general and administrative expenses increased $1.2 million to $80.3 million for the six months ended June 30, 2024 primarily due to an increase in salaries and wages, partially offset by a decrease in incentive compensation costs versus the prior year.
Previous report
•Increasing death benefits related to preneed contracts funded through life insurance or annuity contracts may not cover future increases in the cost of providing a price-guaranteed service.
Reworded paragraphs (58)
Previous wording
We are North America’s largest provider of deathcare products and services, with a network of funeral service locations and cemeteries unequaled in geographic scale and reach. At June 30, 2024, we operated 1,490 funeral service locations and 492 cemeteries (including 306 funeral service/cemetery combination locations), which are geographically diversified across 44 states, eight Canadian provinces, the District of Columbia, and Puerto Rico. Our funeral and cemetery operations consist of funeral service locations, cemeteries, funeral service/cemetery combination locations, crematoria, and other related businesses, which enable us to serve a wide array of customer needs. We sell cemetery property and funeral and cemetery merchandise and services at the time of need and on a preneed basis. Our financial position is enhanced by our $15.4 billion backlog of future revenue from both trust and insurance-funded preneed sales at June 30, 2024. Preneed selling provides us with a strategic opportunity to gain future market share. We also believe it adds to the stability and predictability of our revenue and cash flows. While revenue on the majority of preneed merchandise and service sales is deferred until the time of need, sales of preneed cemetery property provide opportunities for full current revenue recognition to the extent that the property is developed and available for use.
Current wording
We are North America’s largest provider of deathcare products and services, with a network of funeral service locations and cemeteries unequaled in geographic scale and reach. At September 30, 2024, we operated 1,495 funeral service locations and 494 cemeteries (including 307 funeral service/cemetery combination locations), which are geographically diversified across 44 states, eight Canadian provinces, the District of Columbia, and Puerto Rico. Our funeral and cemetery operations consist of funeral service locations, cemeteries, funeral service/cemetery combination locations, crematoria, and other related businesses, which enable us to serve a wide array of customer needs. We sell cemetery property and funeral and cemetery merchandise and services at the time of need and on a preneed basis. Our financial position is enhanced by our $16.0 billion backlog of future revenue from both trust and insurance-funded preneed sales at September 30, 2024. Preneed selling provides us with a strategic opportunity to gain future market share. We also believe it adds to the stability and predictability of our revenue and cash flows. While revenue on the majority of preneed merchandise and service sales is deferred until the time of need, sales of preneed cemetery property provide opportunities for full current revenue recognition to the extent that the property is developed and available for use.
Previous wording
We rely on cash flow from operations as a significant source of liquidity. Our cash flow from operating activities provided $417.0 million in the first six months of 2024. As of June 30, 2024, we had $606.0 million in remaining borrowing capacity under our Bank Credit Facility.
Current wording
We rely on cash flow from operations as a significant source of liquidity. Our cash flow from operating activities provided $680.8 million in the first nine months of 2024. As of September 30, 2024, we had $1,351.0 million in remaining borrowing capacity under our Bank Credit Facility.
Previous wording
Net cash provided by operating activities was $417.0 million and $363.6 million for the for the six months ended June 30, 2024 and 2023, respectively.
Current wording
Net cash provided by operating activities was $680.8 million and $591.5 million for the nine months ended September 30, 2024 and 2023, respectively.
Previous wording
The $53.4 million increase in operating cash flows from 2023 comprises:
Current wording
The $89.3 million increase in operating cash flows from 2023 comprises:
Previous wording
•a $12.6 million increase in General Agency (GA) commission and other receipts, and
Current wording
•a $39.6 million increase in General Agency (GA) commission and other receipts, and
Previous wording
•a $1.1 million decrease in employee compensation payments, partially offset by
Current wording
•a $0.1 million decrease in employee compensation payments, partially offset by
Previous wording
•a $16.8 million increase in vendor and other payments, and
Previous wording
•a $9.7 million increase in payments for certain legal matters.
Current wording
•a $14.9 million increase in payments for certain legal matters.
Previous wording
Cash flows from investing activities used $235.8 million and $211.1 million for the six months ended June 30, 2024 and 2023, respectively. The $24.7 million increased outflow in 2024 over 2023 is primarily due to the following:
Current wording
Cash flows from investing activities used $484.6 million and $356.6 million for the nine months ended September 30, 2024 and 2023, respectively. The $128.0 million increased outflow in 2024 over 2023 is primarily due to the following:
Previous wording
•a $0.9 million decrease in cash spent on business acquisitions.
Current wording
•a $89.3 million increase in cash spent on business acquisitions,
Previous wording
•a $9.8 million increase in other investing activities primarily for investments in renewable energy tax credits,
Current wording
•a $13.9 million increase in other investing activities primarily for investments in renewable energy tax credits,
Previous wording
•a $4.7 million increase in cash spent on real estate acquisitions, and
Current wording
•a $12.2 million increase in cash spent on real estate acquisitions,
Previous wording
•a $1.1 million decrease in total capital expenditures which comprises:
Current wording
•a $9.1 million increase in total capital expenditures which comprises:
Previous wording
•a $2.9 million decrease in maintenance capital expenditures:
Current wording
•a $3.7 million net increase in maintenance capital expenditures, which includes:
Previous wording
•a $10.2 million decrease in expenditures for digital investments and corporate,
Current wording
•a $15.5 million decrease in expenditures for digital investments and corporate,
Previous wording
•a $7.6 million increase in expenditures for cemetery property development, and
Current wording
•a $10.6 million increase in expenditures for cemetery property development, and
Previous wording
•a $0.3 million decrease in expenditures for capital improvements at existing field locations.
Current wording
•a $8.6 million increase in expenditures for capital improvements at existing field locations.
Previous wording
•a $1.8 million increase in expenditures for growth capital expenditures/construction of new funeral service locations.
Current wording
•a $5.4 million increase in expenditures for growth capital expenditures/construction of new funeral service locations.
Previous wording
•a $3.0 million decrease in net proceeds for Company-owned life insurance policies, partially offset by
Current wording
•a $2.4 million decrease in net proceeds for Company-owned life insurance policies, and
Previous wording
•a $9.2 million decrease in cash receipts from divestitures and asset sales,
Current wording
•a $1.1 million decrease in cash receipts from divestitures and asset sales.
Previous wording
Financing activities used $215.2 million for the six months ended June 30, 2024 compared to using $181.6 million for the same period in 2023. The $33.6 million increased outflow from 2024 over 2023 is primarily due to the following:
Current wording
Financing activities used $230.8 million for the nine months ended September 30, 2024 compared to using $262.2 million for the same period in 2023. The $31.4 million decreased outflow from 2024 over 2023 is primarily due to the following:
Previous wording
•a $75.7 million decrease in purchase of Company common stock,
Current wording
•a $142.8 million decrease in purchase of Company common stock,
Previous wording
•a $3.3 million increase in proceeds from exercises of stock options.
Current wording
•a $26.8 million increase in proceeds from exercises of stock options, partially offset by
Previous wording
•a $111.0 million increase in debt repayments, net of proceeds, and
Current wording
•a $132.0 million increase in debt repayments, net of proceeds,
Previous wording
•a $5.3 million increase in payments of dividends, partially offset by
Previous wording
Where permitted by state or provincial law, we may sell a life insurance or annuity policy from third-party insurance companies, for which we earn a commission as general sales agent for the insurance company. These general agency revenues are based on a percentage per contract sold and are recognized as funeral revenue when the insurance purchase transaction between the preneed purchaser and third-party insurance provider is complete. All selling costs incurred pursuant to the sale of insurance-funded preneed contracts are expensed as incurred. We do not reflect the unfulfilled insurance-funded preneed contract amounts in our unaudited Condensed Consolidated Balance Sheet. The proceeds of the life insurance policies or annuity contracts will be reflected in funeral revenue as we perform these funerals. Subsequent to June 30, 2024, we finalized our agreement to change our preferred preneed insurance provider in the United States, which will allow us to further utilize our scale and streamline our processes across our network.
Current wording
Where permitted by state or provincial law, we may sell a life insurance or annuity policy from third-party insurance companies for which we earn a commission as general sales agent for the insurance company. These general agency revenues are based on a percentage per contract sold and are recognized as funeral revenue when the insurance purchase transaction between the preneed purchaser and third-party insurance provider is complete. All selling costs incurred pursuant to the sale of insurance-funded preneed contracts are expensed as incurred. We do not reflect the unfulfilled insurance-funded preneed contract amounts in our unaudited Condensed Consolidated Balance Sheet. The proceeds of the life insurance policies or annuity contracts will be reflected in funeral revenue as we perform these funerals. In early July 2024, we finalized our agreement to change our preferred preneed insurance provider in the United States, which will allow us to further utilize our scale and streamline our processes across our network.
Previous wording
The fair value of our trust investments was based on a combination of quoted market prices, observable inputs such as interest rates or yield curves, and appraisals. As of June 30, 2024, the difference between the backlog and asset market amounts represents $0.18 billion related to contracts for which we have posted surety bonds as financial assurance in lieu of trusting, $1.34 billion collected from customers that were not required to be deposited into trusts, and $0.19 billion in allowable cash distributions from trust assets partially offset by $1.53 billion in amounts due on delivered property and merchandise. As of June 30, 2024, the fair value of the total backlog comprised $4.41 billion related to cemetery contracts and $10.99 billion related to funeral contracts. As of June 30, 2024, the fair value of the assets associated with the backlog of trust-funded deferred revenue comprised $4.44 billion related to cemetery contracts and $2.75 billion related to funeral contracts. As of June 30, 2024, the backlog of insurance-funded contracts of $8.03 billion was equal to the proceeds we expect to receive from the associated insurance policies when the corresponding contract is serviced.
Current wording
The fair value of our trust investments was based on a combination of quoted market prices, observable inputs such as interest rates or yield curves, and appraisals. As of September 30, 2024, the difference between the backlog and asset market amounts represents $0.17 billion related to contracts for which we have posted surety bonds as financial assurance in lieu of trusting, $1.39 billion collected from customers that were not required to be deposited into trusts, and $0.19 billion in allowable cash distributions from trust assets partially offset by $1.54 billion in amounts due on delivered property and merchandise. As of September 30, 2024, the fair value of the total backlog comprised $4.58 billion related to cemetery contracts and $11.41 billion related to funeral contracts. As of September 30, 2024, the fair value of the assets associated with the backlog of trust-funded deferred revenue comprised $4.59 billion related to cemetery contracts and $2.90 billion related to funeral contracts. As of September 30, 2024, the backlog of insurance-funded contracts of $8.29 billion was equal to the proceeds we expect to receive from the associated insurance policies when the corresponding contract is serviced.
Previous wording
As of June 30, 2024, approximately 95% of our trusts were under the control and custody of five large financial institutions. The U.S. trustees primarily use four managed limited liability companies (LLCs), one for each merchandise and service trust type and two for the cemetery perpetual care trust type, each with an independent trustee as custodian. Each financial institution acting as trustee manages its allocation of trust assets in accordance with the investment policy through the purchase of the appropriate LLCs' units. For those accounts not eligible for participation in the LLCs or where a particular state's regulations contain other investment restrictions, the trustee utilizes institutional mutual funds that comply with our investment policy or with such state restrictions. The U.S. trusts include a modest allocation to alternative investments. These alternative investments are held in vehicles structured as LLCs and are managed by certain trustees. The trusts that are eligible to allocate a portion of their investments to alternative investments purchase units of the respective alternative investment LLCs.
Current wording
As of September 30, 2024, approximately 98% of our trusts were under the control and custody of four large financial institutions. The U.S. trustees primarily use four managed limited liability companies (LLCs), two for funeral and cemetery merchandise and service trust types and two for the cemetery perpetual care trust types, each with an independent trustee as custodian. Each financial institution acting as trustee, manages its allocation of trust assets in accordance with the investment policy through the purchase of the appropriate LLCs' units. For those accounts not eligible for participation in the LLCs or where a particular state's regulations contain other investment restrictions, the trustee utilizes institutional mutual funds that comply with our investment policy or with such state restrictions. The U.S. trusts include a modest allocation to alternative investments. These alternative investments are held in vehicles structured as LLCs and are managed by certain trustees. The trusts that are eligible to allocate a portion of their investments to alternative investments, purchase units of the respective alternative investment LLCs.
Previous wording
During the six months ended June 30, 2024, the Standard and Poor’s 500 Index increased 15.3% and the Bloomberg’s US Aggregate Bond Index decreased 0.7%. This compares to SCI trusts that increased 6.4% during the same period, which exceeded our internal custom benchmark. The SCI trusts have a diversified allocation of approximately 59% equities, 27% fixed income securities, 10% alternative and other investments with the remaining 4% available in money market funds.
Current wording
During the nine months ended September 30, 2024, the Standard and Poor’s 500 Index increased 22.1% and the Bloomberg’s US Aggregate Bond Index decreased 4.5%. This compares to SCI trusts that returned 12.8% during the same period, which exceeded our internal custom benchmark. The SCI trusts have a diversified allocation of approximately 60% equities, 27% fixed income securities, 9% alternative and other investments with the remaining 5% available in money market funds.
Previous wording
Recognized trust fund income (realized and unrealized) related to our preneed trust investments was $88.6 million and $77.3 million for the six months ended June 30, 2024 and 2023, respectively. Recognized trust fund income (realized and unrealized) related to our cemetery perpetual care trust investments was $48.8 million and $43.4 million for the six months ended June 30, 2024 and 2023, respectively. The increase in recognized trust fund income is primarily due to the market returns experienced over the trailing twelve month period.
Current wording
Recognized trust fund income (realized and unrealized) related to our preneed trust investments was $134.3 million and $121.3 million for the nine months ended September 30, 2024 and 2023, respectively. Recognized trust fund income (realized and unrealized) related to our cemetery perpetual care trust investments was $73.5 million and $63.5 million for the nine months ended September 30, 2024 and 2023, respectively. The increase in recognized trust fund income is primarily due to the market returns experienced over the trailing twelve month period.
Previous wording
Results of Operations — Three and Six months ended June 30, 2024 and 2023
Current wording
Results of Operations — Three and Nine months ended September 30, 2024 and 2023
Previous wording
In the second quarter of 2024, we reported consolidated net income attributable to common stockholders of $118.2 million ($0.81 per diluted share) compared to net income attributable to common stockholders in the second quarter of 2023 of $132.2 million ($0.86 per diluted share). These results were impacted by certain items including:
Current wording
In the third quarter of 2024, we reported consolidated net income attributable to common stockholders of $117.8 million ($0.81 per diluted share) compared to net income attributable to common stockholders in the third quarter of 2023 of $122.0 million ($0.80 per diluted share). These results were impacted by certain items including:
Previous wording
Consolidated revenue from funeral operations was $565.8 million for the three months ended June 30, 2024 compared to $565.4 million for the same period in 2023. This $0.4 million increase is primarily attributable to the $5.6 million increase in revenue from acquired and newly constructed properties, partially offset by the $5.1 million decrease in comparable revenue.
Current wording
Consolidated revenue from funeral operations was $566.0 million for the three months ended September 30, 2024 compared to $554.8 million for the same period in 2023. This $11.2 million increase is primarily attributable to the $5.9 million increase in revenue from acquired and newly constructed properties and the $7.0 million increase in comparable revenue.
Previous wording
Comparable revenue from funeral operations was $558.1 million for the three months ended June 30, 2024 compared to $563.2 million for the same period in 2023. This $5.1 million, or 0.9%, decrease is primarily due to a $6.6 million decrease in core funeral revenue and $7.0 million decrease in non-funeral home preneed sales revenue, partially offset by a $6.8 million increase in core general agency revenue and other revenue.
Current wording
Comparable revenue from funeral operations was $556.9 million for the three months ended September 30, 2024 compared to $549.9 million for the same period in 2023. This $7.0 million, or 1.3%, increase is primarily due to a $4.4 million increase in core funeral revenue and a $7.6 million increase in core general agency revenue and other revenue offset by a $5.5 million decrease in non-funeral home preneed sales revenue.
Previous wording
Consolidated funeral gross profit decreased $15.1 million, or 13.1%, for the three months ended June 30, 2024 compared to the same period in 2023. This decrease is primarily attributable to the decrease in comparable funeral gross profit of $16.4 million, or 14.2%. Comparable funeral gross profit decreased $16.4 million to $99.4 million and the comparable gross profit percentage decreased from 20.6% to 17.8%. This decrease is primarily due to the decline in revenue described above and the timing of incentive compensation costs compared to the prior year quarter.
Current wording
Consolidated funeral gross profit decreased $1.8 million, or 1.6%, for the three months ended September 30, 2024 compared to the same period in 2023. This decrease is primarily attributable to the decrease in comparable funeral gross profit of $1.5 million, or 1.4%. Comparable funeral gross profit decreased $1.5 million to $107.4 million and the comparable gross profit percentage decreased from 19.8% to 19.3%. The stability in gross profit, in light of modest revenue growth, reflects our continued focus on managing our fixed cost structure.
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Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
In addition to the above items, the decrease from the prior year is primarily due to lower funeral gross profit on lower services performed which was offset by a slightly higher cemetery gross profit. Also, fewer shares outstanding and a lower tax rate helped to partially offset the impact of higher interest expense.