Service Corporation International Announces Third Quarter 2013 Financial Results, Reaffirms 2013 Outlook, And Provides Initial

   Service Corporation International Announces Third Quarter 2013 Financial
    Results, Reaffirms 2013 Outlook, And Provides Initial Outlook For 2014

- Conference call on Thursday, October 24, 2013, at 9:00 a.m. Central Time.

PR Newswire

HOUSTON, Oct. 23, 2013

HOUSTON, Oct. 23, 2013 /PRNewswire/ -- Service Corporation International
(NYSE: SCI), the largest provider of deathcare products and services in North
America, today reported results for the third quarter 2013. Our unaudited
condensed consolidated financial statements can be found at the end of this
press release. The table below summarizes our key financial results:

(In millions,        Three Months Ended September  Nine Months Ended September
except for per       30,                           30,
share amounts)
                     2013             2012         2013            2012
Revenues             $   610.0        $  581.2     $  1,887.8      $  1,781.1
Operating income     $   83.3         $  95.2      $  300.2        $  296.0
Net income
attributable to      $   26.8         $  41.1      $  118.0        $  126.2
common stockholders
Diluted earnings     $   0.12         $  0.19      $  0.55         $  0.57
per share
Earnings from
continuing
operations           $   38.5         $  42.2      $  140.0        $  127.2
excluding special
items^(1)
Diluted earnings
per share from
continuing           $   0.18         $  0.19      $  0.65         $  0.58
operations
excluding special
items^(1)
Diluted weighted
average shares       216.4            218.5        215.9           220.3
outstanding
Net cash provided
by operating         $   99.5         $  121.9     $  326.4        $  280.3
activities
Net cash provided
by operating
activities           $   102.2        $  123.0     $  334.4        $  288.4
excluding special
items^(1)

 

    Earnings from continuing operations excluding special items, diluted
    earnings per share from continuing operations excluding special items, and
    net cash provided by operating activities excluding special items are
(1) non-GAAP financial measures. A reconciliation to net income, diluted
    earnings per share, and net cash provided by operating activities computed
    in accordance with GAAP can be found later in this press release under the
    headings "Cash Flow and Capital Spending" and "Non-GAAP Financial
    Measures".



Quarterly Highlights:

  oDiluted earnings per share from continuing operations excluding special
    items was $0.18 in the third quarter 2013 compared to $0.19 in the same
    period of the prior year.
  oFuneral gross profit decreased by $8.9 million, or 11.7%, primarily due to
    inflationary increases in fixed costs and lower funeral services
    performed.
  oCemetery gross profit increased $3.7 million, or 8.2%, due primarily to an
    increase in cemetery recognized preneed revenues led by a strong growth in
    preneed sales production.
  oNet cash provided by operating activities excluding special items
    decreased to $102.2 million compared to $123.0 million in 2012. This was
    in line with expectations due to lower cash outflows in the prior year
    primarily associated with the timing of vendor payments, partially offset
    by higher preneed cash receipts.

Tom Ryan, the Company's President and Chief Executive Officer, commented on
the third quarter of 2013:
"We delivered a solid quarter with preneed funeral and cemetery sales
percentage growth in the mid-teens. Coming off a strong first half of 2013, we
knew the quarter over quarter earnings comparisons would be challenging in the
last half of the year. However, year-to-date we continue to trend very
favorably to last year with a 12% growth in normalized earnings per share and
a 16% increase in normalized operating cash flow. This gives us great momentum
as we enter 2014. As you can see from our initial outlook provided for next
year, the Stewart acquisition is expected to accelerate our growth and deliver
significant value to our shareholders in year one. I am excited about the
opportunities that lie ahead as we capitalize on our resources and financial
strength to continue delivering solid results."

OUTLOOK FOR REMAINDER OF 2013 AND PRELIMINARY OUTLOOK FOR 2014

Our outlook for potential earnings and cash flow for the full year of 2013 as
well as our initial outlook for 2014 is detailed below.

(In millions, except per share amounts)         2013          2014 Preliminary
                                                Outlook      Outlook
Diluted earnings per share from continuing      $.87 to $.91  $1.00 to $1.10
operations excluding special items^(1)
Net cash provided by operating activities       $415 to $430  $430 to $480
excluding special items^(1)
Capital improvements at existing facilities     Approx. $110  $135 to $145
and cemetery development expenditures



    Diluted earnings per share from continuing operations 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 to 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 2013 and 2014 excludes the following because this information is not
    currently available for the remainder of 2013 and for 2014: Gains or
(1) losses associated with asset divestitures, gains or losses associated with
    the early extinguishment of debt, potential tax reserve adjustments and
    IRS settlement payments, acquisition and transition costs, and potential
    costs associated with settlements of litigation or the recognition of
    receivables for insurance recoveries associated with litigation. The
    foregoing items, especially gains or losses associated with asset
    divestitures and tax adjustments, could materially impact our
    forward-looking diluted EPS and/or our net cash provided by operating
    activities calculated in accordance with GAAP, consistent with the
    historical disclosures found in this press release under the headings
    "Cash Flow and Capital Spending" and "Non-GAAP Financial Measures".



Key Assumptions for 2014 Preliminary Outlook:

  oOur outlook for 2014 includes expected earnings and cash flow for a full
    twelve months from our pending acquisition of Stewart Enterprises.
  oOur outlook assumes that we will achieve half of our targeted synergies
    related to the Stewart acquisition, or $30 million, in 2014. Our outlook
    specifically excludes one-time cash costs incurred to achieve these
    synergies.
  oInterest expense is expected to grow to a range of $175 to $185 million on
    the incremental acquisition debt, net of expected debt reductions during
    the year. Cash interest payments are expected to range from $170 to $180
    million.
  oCorporate general and administrative expenses are expected to be
    approximately $26 to $27 million per quarter excluding Stewart acquisition
    and transition costs, system and process transition costs, and other
    one-time costs.
  oCash tax payments in 2014 are expected to increase to approximately $70
    million, compared to approximately $30 million in 2013. The effective tax
    rate is expected to be approximately 38%.

This outlook reflects management's current views and estimates regarding
future economic and financial market conditions, company performance and
financial results, business prospects, the competitive environment and other
events. This outlook also reflects management's current views and estimates on
the timing of closing of the Stewart acquisition, the amount of divestitures
that will be required, the timing of the divestitures and estimated proceeds,
the timing of synergies, the future performance of Stewart's businesses
acquired, and cash taxes of the combined entity. These views and estimates
that support the outlook provided are subject to a number of risks and
uncertainties, many of which are beyond the control of SCI, that could cause
actual results to differ materially from the potential results highlighted
above. A further list and description of these risks and uncertainties and
other matters can be found later in this press release under "Cautionary
Statement on Forward-Looking Statements".

REVIEW OF RESULTS FOR THIRD QUARTER AND FIRST NINE MONTHS OF 2013

Consolidated Segment Results
(See definitions of revenue line items later in this earnings release.)

(In millions,
except funeral
services         Three Months Ended September
performed and    30,                           Nine Months Ended September 30,
average revenue
per funeral
service)
                 2013            2012          2013             2012
Funeral
Funeral atneed   $   224.4       $  227.3      $  728.0         $  714.5
revenue
Funeral matured  124.2           119.2         400.9            371.1
preneed revenue
 Core        348.6           346.5         1,128.9          1,085.6
funeral revenues
Funeral
recognized       19.6            14.4          56.5             42.2
preneed revenue
Other funeral    31.4            27.5          92.0             81.3
revenue
 Total funeral $   399.6       $  388.4      $  1,277.4       $  1,209.1
revenues
Gross profit     $   67.1        $  76.0       $  267.5         $  257.7
Gross margin     16.8       %    19.6      %   20.9        %    21.3        %
percentage
Funeral services 66,603          67,455        216,434          211,012
performed
Average revenue
per funeral      $   5,234       $  5,137      $  5,216         $  5,145
service
Cemetery
Cemetery atneed  $   58.7        $  58.6       $  181.2         $  175.9
revenue
Cemetery
recognized       126.3           110.9         350.5            325.6
preneed revenue
Other cemetery   25.4            23.3          78.7             70.5
revenue
 Total
cemetery         $   210.4       $  192.8      $  610.4         $  572.0
revenues
Gross profit     $   49.0        $  45.3       $  134.0         $  119.3
Gross margin     23.3       %    23.5      %   22.0        %    20.9        %
percentage



Comparable Funeral Results

The table below details comparable funeral results of operations ("same
store") for the three months ended September 30, 2013 and 2012, including the
results of the Neptune Society for both periods. We consider comparable
operations to be those owned for the entire period beginning January1, 2012
and ending September 30, 2013.

(Dollars in millions, except average revenue
per funeral service and average revenue per   Three Months Ended September 30,
contract sold)
                                              2013              2012
Comparable funeral revenue:
Atneed revenue^(1)                            $   218.7      $   225.1
Matured preneed revenue^(2)                   122.8             118.7
 Core funeral revenues^(3)                341.5             343.8
Recognized preneed revenue^(4)                16.7              13.9
Other funeral revenue^(5)                     30.9              27.5
Total comparable funeral revenues             $     389.1       $    385.2
Comparable gross profit                       $     66.4        $    76.2
Comparable gross margin percentage            17.1           %  19.8         %
Comparable funeral services performed         64,641            66,576
Comparable average revenue per funeral        $     5,283       $    5,164
service
Comparable preneed funeral sales production:
Sales                                         $     186.6       $    163.4
Preneed funeral contracts sold - SCI          27,918            25,053
(excluding Neptune Society)
Preneed funeral contracts sold - Neptune      11,484            10,953
Society
Average revenue per contract sold - SCI       $     5,893       $    5,734
(excluding Neptune Society)
Average revenue per contract sold - Neptune   $     1,921       $    1,802
Society



(1) Funeral atneed revenue represents merchandise and funeral services sold
    after a death has occurred.
    Funeral matured preneed revenue represents merchandise and services
(2) primarily sold on a preneed contract but delivered and/or performed after
    a death has occurred.
(3) Core funeral revenue represents merchandise and funeral services
    recognized after a death has occurred.
    Funeral recognized preneed revenue represents merchandise and products
(4) sold on a preneed contract and delivered before a death has occurred,
    including funeral merchandise and travel protection insurance, which
    primarily represent sales by the Neptune Society.
    Other funeral revenue consists primarily of General Agency revenues, which
(5) 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.



  oComparable funeral revenues increased by $3.9 million. Higher recognized
    preneed revenue and other revenue growth were partially offset by lower
    core funeral revenues.
  oThe comparable average revenue per funeral service included within our
    core funeral revenues grew 2.3% over the prior year quarter which helped
    to offset a 2.9% decline in funeral services performed. Excluding an
    unfavorable Canadian currency impact and a benefit from higher trust fund
    income, the average revenue per funeral service grew approximately 1.8%.
    This was achieved despite a 160 basis point increase in the cremation rate
    to 50.2% in the third quarter of 2013.
  oComparable funeral gross profit decreased $9.8 million, or 12.9%, compared
    to the prior year quarter, and the gross margin percentage decreased 270
    basis points to 17.1%. Core funeral revenues declined by $2.3 million on
    lower funeral volumes, while we experienced inflationary increases in our
    fixed costs (including higher healthcare costs) which negatively impacted
    profits and margins. An increase in recognized preneed revenue (primarily
    from Neptune) generated profit growth which partially offset the decline.
  oComparable preneed funeral sales production increased $23.2 million, or
    14.2%, compared to the prior year. Preneed funeral sales are deferred and
    recognized as revenues in future periods when the funeral service is
    performed, unless the corresponding merchandise or product is delivered
    before death has occurred.

Comparable Cemetery Results

The table below details comparable cemetery results of operations ("same
store") for the three months ended September 30, 2013 and 2012. We consider
comparable operations to be those owned for the entire period beginning
January1, 2012 and ending September 30, 2013.

(Dollars in millions)                         Three Months Ended September 30,
                                              2013               2012
Comparable cemetery revenue:
Atneed revenue^(1)                            $   58.7           $   58.6
Recognized preneed revenue^(2)                126.3              110.9
Other cemetery revenue^(3)                    25.4               23.3
Total comparable cemetery revenues            $   210.4          $   192.8
Comparable gross profit                       $   49.3           $   45.3
Comparable gross margin percentage            23.4        %      23.5       %
Comparable preneed and atneed cemetery sales
production:
Property                                      $   116.6          $   101.6
Merchandise and services                      98.2               91.5
Discounts                                     (24.5)             (20.6)
Preneed and atneed cemetery sales production  $   190.3          $   172.5
Recognition rate ^(4)                       97          %      98         %



(1) Cemetery atneed revenue represents property, merchandise and services sold
    after a death has occurred.
    Cemetery recognized preneed revenue represents property sold on a preneed
(2) contract and merchandise and services sold on a preneed contract that have
    been delivered or performed.
    Other cemetery revenue is primarily related to cemetery merchandise and
(3) service trust fund income, endowment care trust fund income, royalty
    income, and interest and finance charges earned from customer receivables
    on preneed installment contracts.
(4) Represents the ratio of current period revenue recognition stated as a
    percentage of current period sales production.



  oComparable cemetery revenues increased $17.6 million, or 9.1%, generally
    as a result of higher recognized preneed revenues. This was led by strong
    preneed sales production during the quarter and an increase in new
    construction revenue.
  oComparable cemetery gross profit increased $4.0 million and the gross
    margin percentage was relatively flat. Higher revenues more than offset
    higher selling-related expenses and higher healthcare costs.
  oIncluded in the preneed and atneed cemetery sales production above is an
    increase of $18.7 million, or 16.3%, in preneed cemetery sales production
    for the current quarter.

Other Financial Results

  oGeneral and administrative expenses increased $7.4 million to $33.8
    million. The current quarter included $6.9 million of costs related to the
    pending acquisition of Stewart Enterprises and $2.3 million of other
    system integration costs. The prior year included, $2.3 million of costs
    related to the implementation of a new purchase order system and the
    transition to new outsource providers for certain accounting and
    administrative functions.
  oInterest expense increased to $38.1 million compared to $33.6 million in
    the prior period. The current period included $5.7 million of interest
    expense associated with the incremental debt raised in anticipation of the
    Stewart acquisition.
  oOther income declined $1.6 million in the third quarter primarily
    reflecting a lower foreign currency impact from liability settlements
    between the U.S. and Canadian subsidiaries.

Cash Flow and Capital Spending

Set forth below is a reconciliation of our reported net cash provided by
operating activities prepared in accordance with GAAP to net cash provided by
operating activities excluding special items (or sometimes referred to as
normalized operating cash flow). 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.

                                                  Nine Months Ended September
                 Three Months Ended September 30,  30,
(In millions)
                 2013              2012            2013            2012
Net cash
provided by
operating        $   99.5          $   121.9       $   326.4       $  280.3
activities, as
reported
System and
process          0.6               0.9             2.2             1.3
transition costs
Stewart
acquisition and  2.1               0.2             3.6             0.2
transition costs
Legal defense
fees and other   —                 —               2.2             —
matters
IRS audit        $   —             —               $   —           6.6
payment
Net cash
provided by
operating        $   102.2         $   123.0       $   334.4       $  288.4
activities
excluding
special items



  oNet cash provided by operating activities excluding special items
    decreased $20.8 million to $102.2 million compared to $123.0 million in
    2012. This was in line with our expectations due to lower cash outflows in
    the prior year primarily associated with the timing of vendor payments,
    partially offset by higher preneed cash receipts.
  oA summary of our capital expenditures is set forth below:


                               Three Months Ended September  Nine Months Ended
Capital Expenditures (In      30,                           September 30,
millions)
                               2013             2012         2013      2012
Capital improvements at        $   14.8         $   13.8     $  47.2   $ 45.6
existing locations
Development of cemetery        11.7             12.3         25.8      29.9
property
Construction of new funeral    2.3              2.9          6.6       5.5
home facilities
Total capital expenditures     $   28.8         $   29.0     $  79.6   $ 81.0



TRUST FUND RETURNS

Total trust fund returns include realized and unrealized gains and losses and
dividends. A summary of our consolidated trust fund returns for the three and
nine months ended September 30, 2013 is set forth below:

                         Three Months  Nine Months
Preneed funeral          5.7%          11.5%
Preneed cemetery         6.3%          13.2%
Cemetery perpetual care  1.9%          4.7%
Combined trust funds     4.7%          9.9%



NON-GAAP FINANCIAL MEASURES

Earnings from continuing operations excluding special items and diluted
earnings per share from continuing operations excluding special items (or
sometimes referred to as normalized earnings per share) shown above are
non-GAAP financial measures. We believe these non-GAAP financial measures
provide a consistent basis for comparison between quarters and better reflect
the performance of our core operations, as they are not influenced by certain
income or expense items not affecting continuing 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 from continuing operations excluding special
items and our GAAP diluted earnings per share to diluted earnings per share
from continuing operations 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.

(In millions, except diluted EPS)         Three Months Ended September 30,
                                          2013               2012
                                          Net      Diluted   Net      Diluted

                                          Income   EPS       Income   EPS
Net income attributable to common         $ 26.8   $  0.12   $ 41.1   $  0.19
stockholders, as reported
After-tax reconciling items:
Impact of divestitures and impairment     (0.4)    —         (0.4)    (0.01)
charges, net
System and process transition costs       2.0      0.01      1.5      0.01
Stewart acquisition and transition costs  8.7      0.04      —        —
Legal defense fees and other matters      0.6      —         —        —
Change in certain tax reserves            0.8      0.01      —        —
Earnings from continuing operations and
diluted earnings per share excluding      $ 38.5   $  0.18   $ 42.2   $  0.19
special items
Diluted weighted average shares                    216,370            218,460
outstanding (in thousands)



(In millions, except diluted EPS)       Nine Months Ended September 30,
                                        2013                2012
                                        Net       Diluted   Net       Diluted

                                        Income    EPS       Income    EPS
Net income attributable to common       $ 118.0   $  0.55   $ 126.2   $  0.57
stockholders, as reported
After-tax reconciling items:
Impact of divestitures and impairment   3.5       0.02      —         —
charges, net
System and process transition costs     3.8       0.02      2.9       0.02
Stewart acquisition and transition      11.2      0.05      —         —
costs
Gain on early extinguishment of debt,   (0.3)     —         —         —
net
Legal defense fees and other matters    2.0       —         —         —
Change in certain tax reserves          1.8       0.01      (1.9)     (0.01)
Earnings from continuing operations and
diluted earnings per share excluding    $ 140.0   $  0.65   $ 127.2   $  0.58
special items
Diluted weighted average shares                   215,877             220,306
outstanding (in thousands)



Conference Call and Webcast

We will host a conference call on Thursday, October 24, 2013, at 9:00 a.m.
Central Time. A question and answer session will follow a brief presentation
made by management.The conference call dial-in number is (847) 619-6548 with
the passcode of 35883594. 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 November23, 2013 and
can be accessed at (630) 652-3042 with the passcode of
35883594#.Additionally, a replay of the conference call will be available on
our website for approximately ninety days.

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" 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:

  oOur affiliated funeral and cemetery trust funds own investments in equity
    securities, fixed income securities, and mutual funds, which are affected
    by market conditions that are beyond our control.
  oWe may be required to replenish our affiliated funeral and cemetery trust
    funds in order to meet minimum funding requirements, which would have a
    negative effect on our earnings and cash flow.
  oOur ability to execute our strategic plan depends on many factors, some of
    which are beyond our control.
  oOur credit agreements contain covenants that may prevent us from engaging
    in certain transactions.
  oIf we lost the ability to use surety bonding to support our preneed
    funeral and preneed cemetery activities, we may be required to make
    material cash payments to fund certain trust fund.
  oThe funeral home and cemetery industry continues to be increasingly
    competitive.
  oIncreasing death benefits related to preneed funeral contracts funded
    through life insurance or annuity contracts may not cover future increases
    in the cost of providing a price-guaranteed funeral service.
  oThe financial condition of third-party insurance companies that fund our
    preneed funeral contracts may impact our future revenues.
  oUnfavorable results of litigation, including currently pending class
    action cases concerning cemetery or burial practices, could have a
    material adverse impact on our financial statements.
  oUnfavorable publicity could affect our reputation and business.
  oIf the number of deaths in our markets declines, our cash flows and
    revenues may decrease.
  oIf we are not able to respond effectively to changing consumer
    preferences, our market share, revenues and profitability could decrease.
  oThe continuing upward trend in the number of cremations performed in North
    America could result in lower revenues and gross profit.
  oOur funeral home and cemetery businesses are high fixed-cost businesses.
  oRegulation and compliance could have a material adverse impact on our
    financial results.
  oIncreased costs, including potential increased health care costs, may have
    a negative impact on earnings and cash flows.
  oCemetery burial practice claims could have a material adverse impact on
    our financial results.
  oA number of years may elapse before particular tax matters, for which we
    have established accruals, are audited and finally resolved.
  oDeclines in overall economic conditions beyond our control could reduce
    future potential earnings and cash flows and could result in future
    goodwill impairments and/or other intangible assets.
  oAny failure to maintain the security of the information relating to our
    customers, their loved ones, our associates, and our vendors could damage
    our reputation, could cause us to incur substantial additional costs and
    to become subject to litigation, and could adversely affect our operating
    results.
  oThe acquisition of Stewart Enterprises, Inc. is subject to certain closing
    conditions that, if not satisfied or waived, will result in the
    acquisition not being completed, which may cause the market price of SCI
    common stock to decline.
  oWe may fail to realize the anticipated benefits of the acquisition of
    Stewart Enterprises.
  oThe acquisition of Stewart Enterprises may result in unexpected
    consequences to our business and results of operations.
  oOur level of indebtedness following the completion of the acquisition of
    Stewart Enterprises could adversely affect our ability to raise additional
    capital to fund our operations, limit our ability to react to changes in
    the economy or our industry and prevent us from fulfilling our obligations
    under our indebtedness.

For further information on these and other risks and uncertainties, see our
Securities and Exchange Commission filings included in our 2012 Annual Report
on Form 10-K, which was filed February 13, 2013. 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 September 30, 2013, we owned and operated 1,431 funeral homes
and 374 cemeteries (of which 214 are combination locations) in 43 states,
eight Canadian provinces and the District of Columbia. Through our
businesses, we market the Dignity Memorial® 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®,
please visit www.dignitymemorial.com.

For additional information contact:
Investors:  Debbie Young - Director / Investor Relations        (713) 525-9088
Media:      Lisa Marshall - Managing Director / Corporate       (713) 525-3066
            Communications





SERVICE CORPORATION INTERNATIONAL

CONSOLIDATED STATEMENT OF OPERATIONS

(In thousands, except per share amounts)
                            Three Months Ended      Nine Months Ended

                            September 30,          September 30,
                            2013        2012        2013          2012
Revenues                    $ 609,951   $ 581,182   $ 1,887,808   $ 1,781,060
Costs and expenses          (493,872)   (459,911)   (1,486,308)   (1,404,033)
Gross profit                116,079     121,271     401,500       377,027
General and administrative  (33,764)    (26,410)    (95,792)      (81,927)
expenses
Gains(losses) on
divestitures and impairment 981         315         (5,533)       883
charges, net
Operating income            83,296      95,176      300,175       295,983
Interest expense            (38,080)    (33,568)    (103,589)     (101,050)
Gains on early              —           —           468           —
extinguishment of debt, net
Other income (expense), net 666         2,317       (1,017)       4,001
Income from continuing
operations before income    45,882      63,925      196,037       198,934
taxes
Provision for income taxes  (18,488)    (22,128)    (75,485)      (71,183)
Net income                  27,394      41,797      120,552       127,751
Net income attributable to  (615)       (735)       (2,537)       (1,588)
noncontrolling interests
Net income attributable to  $ 26,779    $ 41,062    $ 118,015     $ 126,163
common stockholders
Basic earnings per share    $ 0.13      $ 0.19      $ 0.56        $ 0.58
Diluted earnings per share  $ 0.12      $ 0.19      $ 0.55        $ 0.57
Basic weighted average      211,954     214,914     211,721       216,974
number of shares
Diluted weighted average    216,370     218,460     215,877       220,306
number of shares



SERVICE CORPORATION INTERNATIONAL

CONSOLIDATED BALANCE SHEET

(In thousands, except share amounts)
                                         September 30, 2013  December 31, 2012
ASSETS
Current assets:
Cash and cash equivalents                $   182,592         $   92,708
Receivables, net                         78,990              101,817
Deferred tax asset                       42,813              42,864
Inventories, net                         24,612              24,560
Other                                    28,963              20,546
Total current assets                     357,970             282,495
Preneed funeral receivables, net and     1,577,398           1,535,932
trust investments
Preneed cemetery receivables, net and    2,003,478           1,826,835
trust investments
Cemetery property, at cost               1,486,095           1,489,948
Property and equipment, net              1,623,187           1,641,101
Goodwill                                 1,377,946           1,382,410
Restricted cash                          419,548             4,457
Deferred charges and other assets        423,014             420,810
Cemetery perpetual care trust            1,120,726           1,099,580
investments
                                         $   10,389,362      $   9,683,568
LIABILITIES & EQUITY
Current liabilities:
Accounts payable and accrued liabilities $   392,011         $   373,783
Current maturities of long-term debt     36,647              31,429
Income taxes                             3,103               6,892
Total current liabilities                431,761             412,104
Long-term debt                           2,257,103           1,916,621
Deferred preneed funeral revenues        523,091             536,647
Deferred preneed cemetery revenues       895,893             861,148
Deferred tax liability                   530,670             471,198
Other liabilities                        397,113             399,950
Deferred preneed funeral and cemetery    2,793,456           2,624,321
receipts held in trust
Care trusts' corpus                      1,119,501           1,098,752
Stockholders' Equity:
Common stock, $1 per share par value,
500,000,000 shares authorized,
212,082,348 and 211,056,501 shares       211,960             211,047
issued, respectively, and 211,960,401
and 211,046,501 shares outstanding,
respectively
Capital in excess of par value           1,282,667           1,307,058
Accumulated deficit                      (169,797)           (286,795)
Accumulated other comprehensive income   101,949             111,717
Total common stockholders' equity        1,426,779           1,343,027
Noncontrolling interests                 13,995              19,800
Total Equity                             1,440,774           1,362,827
                                         $   10,389,362      $   9,683,568



SERVICE CORPORATION INTERNATIONAL

CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)
                                                        Nine Months Ended

                                                        September 30,
                                                        2013        2012
Cash flows from operating activities:
Net income                                              $ 120,552   $ 127,751
Adjustments to reconcile net income to net cash
provided by operating activities:
Gains on early extinguishment of debt, net              (468)       —
Depreciation and amortization                           91,945      89,349
Amortization of intangible assets                       16,619      17,950
Amortization of cemetery property                       32,036      31,528
Amortization of loan costs                              3,997       3,635
Provision for doubtful accounts                         5,238       6,801
Provision for deferred income taxes                     55,784      57,428
Losses (gains) on divestitures and impairment charges,  5,533       (883)
net
Share-based compensation                                8,887       8,217
Excess tax benefits from share-based awards             (6,083)     —
Change in assets and liabilities, net of effects from
acquisitions and divestitures:
Decrease in receivables                                 14,487      1,066
Increase in other assets                                (14,636)    (6,331)
Increase in payables and other liabilities              24,767      6,623
Effect of preneed funeral production and maturities:
Decrease in preneed funeral receivables, net and trust  33,066      34,134
investments
Decrease in deferred preneed funeral revenue            (10,202)    (30,325)
Decrease in deferred preneed funeral receipts held in   (34,026)    (18,185)
trust
Effect of preneed cemetery production and deliveries:
Increase in preneed cemetery receivables, net and trust (49,500)    (72,012)
investments
Increase in deferred preneed cemetery revenue           36,183      27,502
Decrease in deferred preneed cemetery receipts held in  (8,051)     (480)
trust
Other                                                   306)        (3,481)
Net cash provided by operating activities               326,434     280,287
Cash flows from investing activities:
Capital expenditures                                    (79,586)    (80,973)
Acquisitions                                            (8,543)     (19,281)
Proceeds from divestitures and sales of property and    10,013      8,933
equipment, net
Net withdrawals (deposits) of restricted funds          341         (3,816)
Net cash used in investing activities                   (77,775)    (95,137)
Cash flows from financing activities:
Proceeds from the issuance of long-term debt            —           17,907
Payments of debt                                        (91,794)    (988)
Principal payments on capital leases                    (19,585)    (19,303)
Proceeds from exercise of stock options                 4,954       17,347
Excess tax benefit from share-based awards              6,083       —
Purchase of Company common stock                        (1,708)     (144,607)
Payments of dividends                                   (42,371)    (34,844)
Purchase of non-controlling interest                    (8,333)     —
Bank overdrafts and other                               (5,479)     868
Net cash used in by financing activities                (158,233)   (163,620)
Effect of foreign currency                              (542)       1,448
Net increase in cash and cash equivalents               89,884      22,978
Cash and cash equivalents at beginning of period        92,708      128,569
Cash and cash equivalents at end of period              $ 182,592   $ 151,547

SOURCE Service Corporation International

Website: http://www.sci-corp.com