service corp international presentation at bofa's lev fin conference 2012

7/27/2019 Service Corp International Presentation at BofA's Lev Fin Conference 2012

1/19

NYSE: SCI North Americas largest provider of funeral, cemetery & cremation services

ServiceCorporation

International

Bank of America Merrill Lynch2012 Leveraged Finance Conference

Tom Ryan President & CEO


2/19

SCI at a glance

Founded in 1962 & headquartered in Houston, TX

Largest company in North America funeral & cemeteryindustry with 1,800 locations

NYSE: SCI with a market cap of ~$3.0 billion

LTM September 2012 Revenues of ~$2.4 billion or ~14% share of industryrevenues

Backlog of future revenues of $7 billion or 3x annual revenues

Primarily supported by cash in state-regulated trust funds or third party life insurancepolicies

Robust and consistent free cash flow

Free cash flow per share has grown at a CAGR of 10% since 2004

Free cash flow used to enhance shareholder value through strategic acquisitions,share repurchases and dividends, while also managing debt maturity profile

Poised to benefit from aging of America

2Free cash flow is a non-GAAP financial term. Please see appendix at the end of this presentation for a reconciliation to theappropriate GAAP term and for other disclosures.
http://www.svccorp.com/InsideSCI/SCI-Logos/SCI_k.jpg


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Our competitive strengths

Unparalleled network

1,429 funeral homes and 374 cemeteries (57% combos*)

43 states and 8 Canadian provinces

Multi-brand portfolio: key brand called Dignity Memorial

Ability to leverage scale

Sharing of personnel, vehicles & other resources

Centralized or outsourced operating & accounting functions

Purchasing power

Preneed sales opportunity

Premier education platform for our ~21,000 employees

3*SCI has 215 combos which means 57% of our cemeteries have a funeral home located on the cemetery grounds creating, synergiesand added convenience for customers.


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Broad geographic footprint

4

Our expansive network of properties sets us apart in this industry


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Favorable demographics trends

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

1990 2000 2010E 2020E 2030E

11.3%10.9% 11.2%

14.3%

17.3%

1.2% 1.5%1.9% 2.0%

2.4%

0%

4%

8%

12%

16%

20%

1990 2000 2010E 2020E 2030E

Population in Thousands% of total population

In 2010, the 65+ population was 13% and is projected to grow to nearly 20% by 2030

Age 65-84

Age 85+

First Baby Boomers

reached age 65 in 2011

85 years & over

Age 65-84

Source: U.S. Census Bureau http://www.census.gov/population/www/projections/2009cnmsSumTabs.html

5
http://www.census.gov/population/www/projections/2009cnmsSumTabs.htmlhttp://www.census.gov/population/www/projections/2009cnmsSumTabs.htmlhttp://www.svccorp.com/InsideSCI/SCI-Logos/SCI_k.jpg


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$276.8

$57.7

$21.8 $9.7 $10.3

Deathcare Industry landscape

SCI $2,368

Stewart$516 Arbor

$270StoneMor

$239Carriage

$193

Revenues

Free Cash Flow

SCI$6,920

Stewart$1,615 Arbor

$927StoneMor

$381Carriage

$466

2011 Preneed Backlog

Cemeteries

Funeral homes

Properties

SCI1,803

Stewart359 Arbor

123

StoneMor340 Carriage

194

6

(In millions)

Estimated Market Shareshown as %

(In millions)Free Cash Flow/Revs shown as % (In millions)

12%

11%5%8%

14%

3%2% 1% 1%

Public Consolidators = 21%

Independent = 79%

SCI$2,368

SCI

4%

StewartCarriageStoneMorArbor

Data based on trailing twelve month of companys most recent public financial reports . Preneed backlog are based on 2011. Arbordollar amounts are reflected in Canadian dollars. Free Cash Flow is a non-GAAP financial measure. We use Free Cash Flow as a

measure of performance as it reflects the amount of cash a company can generate after spending the necessary amount of capital tomaintain its asset base. Please see appendix for a reconciliation to the appropriate GAAP term and for other disclosures for SCI.


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Robust & consistent Free cash flow is our strength

$0.23

$0.60

$0.71 $0.73

$0.60

$0.69

$0.84$0.93

$0.85

$1.20

$1.04

$1.19

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Free Cash Flow Per Share

Free cash flow per share is equal to cash flow from operations adjusted for unusual items less recurring capital expenditures divided by fully

diluted weighted average shares outstanding. Free cash flow is a Non-GAAP financial measure. Please see appendix slides for areconciliation to the appropriate GAAP measure and for other disclosures.

7

7

Number of properties

Free Cash Flow

Per Share

Number of

Properties


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Sept YTD 2012 Free cash flow & deployment

Free Cash FlowIn Millions

8

DEPLOYM

ENT

Share Repurchases $144.6

Acquisitions /

Growth Capex

$24.8

Dividends $34.8

Debt Repurchases -------

Build in Cash $8.7

Free cash flow was mainly directed towards sharerepurchases in the first nine months of 2012

Free cash flow is a Non-GAAP financial measure. Please see appendix slides for a reconciliation to the appropriate GAAPmeasure and for other disclosures.

$215.1 $212.9

September YTD 2011 September YTD 2012


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Free cash flow outlook

9

Free Cash Flow

In Millions

($280 - $300) ($260 - $320)

Operating cash flow is expected to grow in 2013, but will be offset by anticipatedhigher cash tax payments of $18 to $28 million as NOLs become fully utilized.

Free cash flow is a non-GAAP financial terms. Please see appendix slides for a reconciliation to the appropriate GAAP measures and for otherdisclosures.

$279.0 $290.0 $290.0

Fiscal 2011 2012 UpdatedGuidance

2013 Guidance


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Free cash flow deployment principles

Acquisitions

We expect an acquisition investment to earn an after-tax cash return that is inexcess of our WACC with room for execution risk

We target businesses with favorable consumer segments and/or where canachieve additional economies of scale

Debt Repurchases We actively manage near-term liquidity profile and will be opportunistic to

repurchase when market values are attractive to us

Share Repurchases

Absent a strategic acquisition opportunity, we believe share repurchases are

attractive with free cash flow yield in the low teens

Dividends

We target a payout ratio of approximately 30% of recurring net income (currentlywe are at 29%). Our yield is just under 2%

10


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$5 $136

$284 $295$250 $250

$200$150

$200

$0

$100

$200

$300

$400

$500

$600

$700

$800

2013 2014 2015 2016 2017 2018 2019 2020 2021 2027

Favorable debt maturity profile

11

$381M UnusedCredit Facility

$32M Credit FacilityLetters of Credit

(inmillions)

7.500%

SeniorNotes

4.5% New

SeniorNotes

8.000%SeniorNotes

7.000%SeniorNotes

Debt maturities at 9/30/12 and Pro Forma for recent bond offering

7.625%

SeniorNotes

7.000%Senior

Notes

7.875%Debenture

6.750%

SeniorNotes

$87M CreditFacilityBorrowings

$197

Debt maturity schedule excludes capital lease obligations, mortgage notes and other debt with maturities through2047 of approx $173M at 9/30/12.


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4.2

3.53.5 3.5

3.33.1 3.1

$-

$100

$200

$300

$400

$500

$600

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2006 2007 2008 2009 2010 2011 ProformaSept. 30, 2012

Consistent leverage metrics

We believe the appropriate leverage (Net Debt/EBITDA) for our company isbetween 3.0x and 3.5x; we are currently at the low end of our target range.

Liquidity is defined as total cash on hand plus credit facility availability. Net Debt and EBITDA are Non-GAAP financial terms. Pleasesee appendix slides for a reconciliation to the appropriate GAAP terms and for other disclosures. 12

LiquidityIn Millions

Leverage(Net Debt/EBITDA)

Liquidity

Alderwood Acquisitionin Nov 2006


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SCI: A solid long-term investment

Predominant player in stable funeral & cemetery industry

Unparalleled network and scale

Significant and consistent cash flows

Disciplined and focused capital allocation strategy

Differential growth strategies that are not capital intensive

Attractive demographic trends

Strong liquidity, financial flexibility, favorable debt maturityprofile

13


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Appendix

15 Forward-Looking Statements

16 Free cash flow YTD Sept 2012 vs 2011

17 Free cash flow 2004-2011; 2012-2013 Guidance

18 Peer Company Free Cash Flow

19 Leverage Metrics Support

14

14


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Forward-Looking Statements

The statements in this presentation that are not historical facts are forward-lookingstatements made in reference on the safe harbor protections provided under the

Private Securities Litigation Reform Act of 1995. These statements are based onassumptions that the Company believes are reasonable; however, many importantfactors could cause the Companys 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, or on behalf of, the Company.

For further information on these and other risks and uncertainties, see our Securitiesand Exchange Commission filings, including our 2011 Annual Report on Form 10-Kand our September 30, 2012 quarterly report on Form 10-Q. Copies of thisdocument 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-lookingstatements made herein or any other forward-looking statements made by us,whether as a result of new information, future events, or otherwise.

15

15
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Free cash flow is a non-GAAP financial measure. It is not a measure of performance or liquidity under GAAP and should not beused in isolation or as a substitute for cash f lows from operating activities or other income or cash flow statement data prepared inaccordance with GAAP or as a measure of profitability or liquidity.

Certain capital expenditures are expenditures for capital improvements at existing locations and for the development of cemeteryproperty. The company deems these expenditures to be of a recurring nature.

Nine Months

YTD 2012 YTD 2011

Cash flow from ops, as reported $ 280.3 $ 291.3

IRS Audit Payment 6.6 ____

System and Process Transition Costs 1.3 ____

Acquisition and Transition Costs 0.2 2.1

Adjusted cash flow from ops $ 288.4 $ 293.4

Certain capital expenditures (75.5) (78.3)

Free cash flow $ 212.9 $ 215.1

Net cash used in investing activities $ (95.1) $ (167.2)

Net cash used in financing activities $ (163.6) $ (166.2)

16

16

In millions

Free cash flow Sept YTD 2012 vs 2011


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Free cash flow per share

* SCI's FCF in 2007 excludes $26M from Mayflower (discontinued) & Katrina insurance proceeds.

Certain capex = maintenance expenditures in years 2002-2004 and maintenance & cemetery development expenditures in 2005 forward

Diluted shares in 2012 and 2013 are estimated

(A) Cash flow from operations calculated in accordance with GAAP is not currently accessible on a forward-looking basis. Our outlook for fiscal 2012 &

2013 excludes the following because this information is not currently available: Potential tax adjustments to reserves, payments, credits or refunds;Potential costs associated with settlements of litigation or the recognition of receivables for insurance recoveries associated with litigation.

17

(in millions)

17

2004 2005 2006 2007 * 2008 2009 2010 2011 Midpoint Low High Midpoint Low High

Cash flow from ops, as reported 94.0 312.7 324.2 330.3 350.3 372.1 354.4 388.1 (A) (A) (A) (A) (A) (A)

Special trust receipts - - - - - - - -

Termination of pension

plans/Other 31.4 - - 23.9 3.0 - - -

Settlement of litigation, net 131.1 - - - - - - -

Premiums paid on

extinguishment of debt 13.8 12.2 15.7 11.7 - - - -

Net tax refund/payment - (29.0) - - (1.2) - - -

Acquisition, System & process

transition costs - - 3.2 38.6 3.3 - - 2.6Adj. Cash flow from ops 270.3 295.9 343.1 404.5 355.4 372.1 354.4 390.7 390.0 400.0 410.0 375.0 400.0 425.0

Certain capital expenditures (64.5) (84.9) (92.7) (134.7) (133.7) (67.9) (94.1) (109.1) (110.0) (110.0) (110.0) (115.0) (110.0) (105.0)

Free cash flow 205.8 211.0 250.4 269.8 221.7 304.2 260.3 281.6 280.0 290.0 300.0 260.0 290.0 320.0

Diluted Weighted Avg Shares 344.7 306.7 297.4 290.9 261.0 252.5 250.6 236.7 220.0 220.0 220.0 218.0 218.0 218.0

FCF per share (Diluted Weighted AvgShares) 0.60$ 0.69$ 0.84$ 0.93$ 0.85$ 1.20$ 1.04$ 1.19$ 1.27$ 1.32$ 1.36$ 1.19$ 1.33$ 1.47$

Net cash (used in) from

investing activi ties 289.5 171.0 (1,297.0) 378.1 (151.3) ( 152.5) (279.7) (190.3) N/A N/A N/A N/A N/A N/ANet cash (use d in) from

financing activities (349.6) (326.4) 565.2 (607.5) (230.5) (178.4) ( 88.2) (238.7) N/A N/A N/A N/A N/A N/A

2012 Guidance 2013 Guidance
http://www.svccorp.com/InsideSCI/SCI-Logos/SCI_k.jpghttp://www.svccorp.com/InsideSCI/SCI-Logos/SCI_k.jpg


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Peer Company Free Cash Flow

Our peer companies may not use the measure entitled Free Cash Flow, or if they do, they may not calculate it in the

same way that we do. The numbers above are based on public disclosures of our peer companies and are calculated, to

the extent we can determine, in the same manner that we calculate Free Cash Flow.

Stewart: 2011 YTD 2011 YTD 2012 TTMOperating CF $ 86,830 $ 60,467 $ 58,739 $ 85,102

Non-Recurring (11,300) - - (11,300)CapEx (17,600) (12,900) (11,400) (16,100)

FCF $ 57,930 $ 47,567 $ 47,339 $ 57,702

Arbor: 2011 YTD 2011 YTD 2012 TTM

Operating CF $ 32,450 $ 34,305 $ 34,950 $ 33,095Non-Recurring - - - -

CapEx (12,500) (7,857) (6,672) (11,315)FCF $ 19,950 $ 26,448 $ 28,278 $ 21,780

Stonemor: 2011 YTD 2011 YTD 2012 TTM

Operating CF $ 5,466 $ (3,126) $ 14,195 $ 22,787

Non-Recurring - - - -CapEx (13,166) (5,474) (5,435) (13,127)

FCF $ (7,700) $ (8,600) $ 8,760 $ 9,660

Carriage: 2011 YTD 2011 YTD 2012 TTMOperating CF $ 31,155 $ 15,761 $ 13,374 $ 28,768

Non-Recurring (10,100) - - (10,100)CapEx (9,000) (4,400) (3,800) (8,400)

FCF $ 12,055 $ 11,361 $ 9,574 $ 10,268


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Leverage metrics support

19

2006 2007 2008 2009 2010 2011 Sept. 2012 TTM

Leverage Ratio

Reported Debt 1,958,872 1,856,700 1,848,508 1,890,489 1,854,882 1,884,670 1,914,122

Cash and Cash Equivalents (39,880) (168,594) (128,397) (179,745) (170,846) (128,569) (151,547)

$25M Floor 25,000 25,000 25,000 25,000 25,000 25,000 25,000

Letters of Credit 61,100 54,319 52,655 47,380 42,090 32,704 32,379

Compliance Net Debt 2,005,092 1,767,425 1,797,766 1,783,124 1,751,126 1,813,805 1,819,954

Gross profit, as reported 344.7 466.8 418.7 421.4 449.2 478.5 507.0

General & administrative expense (94.9) (135.8) (87.4) (102.5) (103.7) (103.9) (108.4)

Depreciation and amortization 96.7 137.8 137.8 132.8 141.6 143.6 143.1

Cemetery property amortization 28.3 32.7 32.7 30.7 32.4 40.0 43.7

Non-cash Stock compensation 7.0 8.8 10.0 9.7 8.9 9.1 10.5Alderwoods 82.4 - - - - - -

Other 16.6 2.4 (3.2) 12.7 10.8 14.5 4.5

Compliance adjusted EBITDA 480.8 512.7 508.6 504.8 539.2 581.8 600.4

Leverage ratio 4.17 3.45 3.53 3.53 3.25 3.12 3.03

Liquidity

Cash and Cash Equivalents 39,880$ 168,594$ 128,397$ 179,745$ 170,846$ 128,569$ 151,547$

Plus: Revolver Availability 388,400 395,700 397,300 203,000 357,900 402,296 390,600

Liquidity 428,280$ 564,294$ 525,697$ 382,745$ 528,746$ 530,865$ 542,147$

service corp international presentation at bofa's lev fin conference 2012

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