Service Corporation International (SCI) 2011 Q1 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the first-quarter 2011 Service Corporation International earnings conference call. My name is Regina and I will be your operator today. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session. (Operator Instructions). Today's event is being recorded for replay purposes. I would now like to turn the conference over to SCI management.

Good morning. This is Debbie Young, Director of Investor Relations at SCI. Thanks for joining us this morning as we talk about our first-quarter results.

Let me just briefly read our Safe Harbor language. In our comments today, we will make statements that are not historical facts and are forward-looking. These statements are based on assumptions that we believe are reasonable, however, there are many important factors that could cause our actual results in the future to differ materially from these forward-looking statements. For more information related to these statements and other risk factors, please review our periodic filings with the SEC that are available on our website.

Also on the call today, we may use terms such as normalized EPS or normalized for adjusted cash flow. These are, of course, non-GAAP financial terms. Please see our press release and 8-K that were issued yesterday where we have provided the detailed reconciliation for these measures to the appropriate GAAP term. And with that, we will begin with our President and CEO, Tom Ryan.

Thank you, Debbie, and thanks, everybody, for joining us on the call today. I'm excited to report that we started off the year strong results that exceeded both external expectations, as well as our internal expectations for earnings per share and for cash flows. We reported a normalized earnings per share of $0.17 versus $0.13 in the prior-year quarter. This is a growth of $0.04 per share or some 31%.

This quarter-over-quarter improvement was primarily driven by four things. First, the acquisition contribution from our Keystone businesses. Remember, we close Keystone on March 26 of last year, so it really wasn't in our results until the second quarter of 2010.

Secondly, positive comparable funeral volumes. Positive comparable funeral volumes. I never thought I would say that, but I am and I'm very proud to say it. That had a very positive impact on the quarter.

The third item was higher cemetery preneed sales production, which again, we've seen some trends of that in the past quarters that have continued in the first quarter of this year.

And lastly, we had higher trust fund income.

Now I'm going to shift to talk in a little more detail about the funeral operations. In the first quarter, our comparable funeral revenues we reported were $379 million, which is a growth rate of 4.3% or some $15.6 million. This was driven by the same-store volume which was up 1% for the quarter, and this was a trend which began in the last two months of 2010 and continued really through February of this year. March was a bit softer, and we have to believe that this was generally caused by the severe weather we have experienced in the winter and actually are experiencing right now unfortunately, and that this has had an impact on the volumes associated with the stronger flu season.

In Q1, our funeral average grew 1.9%, which takes into account higher trust fund income and a positive Canadian currency effect. Excluding these favorable impacts, we experienced a growth of 0.9% quarter over quarter, which was in line with our expectations. This growth in overall average occurred despite a 230 basis point increase in cremation (technical difficulty). This increase is larger than which

at we typically have seen in any given period, but remember it's only three months. I don't think this is something to overreact to. Keep in mind that last year, the cremation rate only grew at 70 basis points. So, this can be volatile and again we will continue to monitor, but it did have an impact on this quarter. Because while we saw a healthy increase in the burial average this quarter, it was offset as all of the increase in the cremation mix during the quarter really fell to the direct cremation category for us. That put pressure on the overall average.

Also aiding the increase in funeral revenue was higher G&A revenue of $5.4 million on increased production, as well as a continuing shift to an insurance-funded product.

From a profitability standpoint, comparable funeral profits increased $9 million, and the margins grew 140 basis points. This is what you would expect on a revenue increase of $15.6 million where about 60% drops to the bottom line.

We manage our costs well and the revenue increases are reflected in the margins which were slightly offset by increased selling costs of $4.2 million from higher preneed production in the current quarter. Remember that the costs get recognized immediately in the period incurred while the revenue is deferred until delivery.

Our reported preneed funeral sales declined 1.2% or roughly $1.5 million for the quarter. Included in these results is a one-time adjustment of $7.3 million to reflect insurance cancellations that occurred in November and December of last year that did not get recorded as we transitioned to new systems.

As this adjustment does not have a GAAP impact -- remember insurance-funded contracts aren't even on our balance sheet -- we chose to run it through the first-quarter period for reporting purposes. If you exclude the out-of-period cancellation adjustment, we actually grew preneed funeral sales by 4.8% or $5.8 million.

So to be fair then, when you look back at 2010, we had originally reported a 10% increase, which after incorporating this adjustment, we still grew preneed funeral sales last year some 8.4%. And we continue to demonstrate that we can grow preneed funeral sales in the low to mid-single-digit range. In 2009, we had a 3.2% growth; 2010, 8.4%; and again in the first quarter, growth of about 5%. And we expect this trend to continue.

As far as the rest of the year goes, when you think about the rest of the quarters, remember that Q2 last year had the benefit of tax changes in Canada which generated a lot of sales. So it's going to be a difficult comp for us I think in the second quarter. Having said that, remember sales fell off in Q3, so we would expect to get a lot of that back as we get into the back half of the year and the softness that we experienced in the Canadian operations associated with preneed sales.

Now I'm going to shift to cemetery operations. Our comparable cemetery revenue increased $10 million or 6.2% quarter over quarter. This was mainly attributable to increased cemetery sales production and higher trust fund income. Our comparable preneed sales production in cemetery grew $15.1 million in the quarter, or some 16.1%.

Recognition rates were down some 10%. So we have the impact of some of the revenue that's going to come into future periods while we bore all the selling costs in the current period. This growth, as you can expect 16% growth, and again, a lot less down payments of 10%, is really happening as we radiate outside of our cemeteries.

As we grow cemetery sales, we are moving farther and farther away from the property, and this growth tends to have lower down payments and it's beginning to work. So I view this as a very, very positive trend. And as we collect those dollars in future periods, those revenues will flow through our profit statement and have no selling costs associated with them the way that our GAAP accounting works.

Another exciting part of cemetery, trust fund net income increased $2.4 million quarter over quarter and came in a little ahead of our expectations. Despite the increases in revenues, cemetery profits declined $1 million for the quarter; margins dropped 160 basis points.

Let me just address the key factors here because we had a number of unusual items that impacted our results, and when isolated, show that the cemetery segment margins are actually pretty good.

Within our margins this time, we had $1.2 million of higher selling compensation on unrecognized revenues. So the point I made before, we sold some things into the backlog, recognized the selling costs and don't have the revenues yet. That's about $1.2 million in our profit stream.

We had an additional item that relates to property. We had two very large sales that occurred in previous periods. I think one was in 2007 and one was in 2009. We recognized some extraordinary profits on these in California in those periods related to the land sale. Now we have to turn around and build the mausoleum. And as we bid this project (technical difficulty) competitively, there's not a lot of profit in the completion of that mausoleum. We had about $2.2 million of revenue, and $2.2 million of costs associated with completing those mausoleums. Again, this is an unusual item to occur, so that, too, negated some of the profitability in the quarter.

And lastly, just had some adjustments as it relates to our inventories. And again, installing the new system and putting in new costs, we had about $1 million that impacted that as well.

So excluding these unusual items, and there's a couple more, cemetery profits were really -- would be about what we would expect on these incremental revenues if you change [them], probably 18%, 19%.

These items are expected to be non-recurring. And therefore, we anticipate that our cemetery cost structure would return to our more normalized levels when you think about how we roll out the rest of 2011.

So in conclusion, we are very pleased with our performance for the quarter. As we look ahead, we are very optimistic about the remainder of 2011. Again, cemetery should benefit as we collect on the less than 10% down sales paid during the first quarter and when we return to a more normalized cost structure which we would expect to happen beginning next quarter.

We continue to have great cash flow and liquidity. Our preneed sales efforts continue to be very successful, and remember these are not capital-intensive initiatives. We will deploy our cash to capitalize on value-enhancing opportunities for you, first and foremost, through strategic acquisitions at the appropriate returns. The M&A environment has been steadily improving and we are well positioned to take advantage of that.

In the first quarter, we purchased two funeral homes, which combined have annual revenues of approximately $6 million. And our pipeline is very busy.

Secondly, we will return cash to shareholders through share repurchases and dividends. At our current share price, we have a free cash flow yield of some 10%, 11%, which we believe repurchasing our shares continues to be a prudent use of our capital.

Eric will talk about our investments and share repurchases that we made in the first quarter in just a moment.

And lastly, we will reduce liquidity risk and manage our debt maturity profile as we see fit.

Finally, just remember the baby boomer impact is coming. Baby boomers turn 65 this year and every day, 10,000 Americans celebrate their 65th birthday. We believe this will have a very positive effect on our preneed programs in the near term. And towards the latter half of the decade, we will begin to see some impact on the at-need results. We believe we are very well positioned to capture differential growth associated with these trends.

This concludes my prepared remarks. Now I'm going to turn it over to Eric.

Good morning. As Tom just said, I'm going to talk about our cash flow and our trust fund performance for the quarter. Then I'm going to briefly discuss our current financial position and liquidity and then I will end with some comments about our capital deployment during the quarter. So let's start with cash flow.

As you saw in the press release, our cash flow from operations for the quarter was about $108 million. And this is basically flat to last year. But it's higher than our internal expectations, primarily because of the better than anticipated earnings that Tom just walked you through. Included in this cash flow number for the quarter was about where tax refunds of about $8 million. And this is primarily related to the tax accounting method changes that I previously described and talked to you about on our February conference call.

Excluding these tax refunds, the cash flow then declined by approximately $9 million quarter over quarter. And although we had higher EBITDA, as we described and slightly lower cash interest and cash tax payments, these cash flow benefits were offset by working capital timing differences, which by the way, that we anticipated in our internal expectations.

But most importantly overall, our cash flow from operations for the quarter came in slightly better than what we anticipated.

Total CapEx for the quarter as you saw in the release was $25 million, but the recurring maintenance and cemetery development CapEx was about $23 million of this amount. This is generally in line with our expectations, and again, recall, as we discussed in February, we would anticipate recurring CapEx to range about $85 million to $95 million for the full year of 2011.

When we deduct the recurring CapEx that I just mentioned, we calculate our free cash flow for the first quarter to be about $85 million. This is slightly above our expectation. even if you exclude the tax refund, about $8 million that we received, which is included in that $85 million.

Now I really want to note something important here again about our free cash flow in the first quarter. The free cash flow is impacted by the timing of cash interest payments as we know, and to remind you, that are primarily concentrated for SCI in April and in October. So we want to caution you about using our first-quarter free cash flow and annualizing it to a full-year amount.

Just speaking of the full year, we still believe our guidance of $235 million to $295 million of free cash flow for full year 2011 is achievable. And as we've said on many occasions, at a share price in the mid-$11 range, this represents a very attractive free cash flow yield in the 10% to 11% range.

A couple of quick income statement items -- our normalized effective tax rate for the quarter was about 36.4% compared to 36.0% last year. This is lower than our guidance for the full year of 37% to 38% due to certain discrete items or one-time items positively affected our effective tax rate in the quarter. And these primarily related to changes in state income tax laws that had lowered slightly our state tax rate. We would still though anticipate the full-year guidance being about 37% to 38% for a normalized effective tax rate.

Our general and administrative expenses for the quarter as you saw were about $28 million. These were slightly higher than our original expectations. Since we talked about this in our February call, our stock price has increased about 30%. And this affects our long-term incentive plan which is tied to total shareholder return, and caused us to accrue about $3.5 million in the first quarter above our original expectations.

And again, while we can't predict the total shareholder return for the rest of 2011, at these current share return levels, we would possibly accrue only another $3 million in total over the rest of 2011.

Let's then talk about our trust funds. Our combined trust fund assets increased by about 3.8% in the first quarter. This compares to the S&P, up about $5.9 million and the Barclays aggregate index up about 0.4% in the quarter. So this performance was slightly ahead of our expectations.

The total trust fund income recognized in our income statement for the quarter was $24.4 million, which is $3.2 million more than the first quarter of 2010. This is a little ahead of our expectations on better than anticipated trust fund performance that I just mentioned to you.

At this point, our assumptions for the trust fund returns in 2011 remain unchanged. Recall that we are assuming that our consolidated trust fund assets will realize an annual positive return in the low single digit percentage range. And again, this measure correlates to the percentage we provide in our press release every quarter and is consistent with the first-quarter performance.

Let's talk about our financial position and our liquidity as well. Our cash balance at the end of the quarter as you saw was about $210 million. Today, we have about $175 million of cash on hand and generally the difference in our cash balance was due to about $36 million in cash interest payments that we had in April.

In terms of our credit capacity, in March, you may have seen that we completed an amended bank credit facility. This new facility was filed on 8-K in late March and is substantially similar to our previous facility, but some of the changes are the size was expanding the facility from $400 million to $500 million. The maturity was extended from November 2013 to March of 2016. And we had slightly better interest rates as well.

We have no borrowings on the $500 million facility, but we do use it to support just over $40 million of letters of credit.

At the end of the quarter, our total debt was about $1.85 billion. Our debt maturity profile again positions us well to explore value enhancing opportunities, as again, we have no meaningful debt maturities until October 2014, and that amount is right around $180 million.

And really when you look at our near-term maturities through 2016, we believe they are manageable within the levels of normalized free cash flow that we have consistently generated.

Our current leverage continues to be favorable and at the low end of our target range that we have discussed on a net debt basis of 3 to 3.5 times. At the end of the quarter, we had approximately 3.1 times.

Let's talk about our capital deployment in the first quarter. Tom mentioned this, that we closed two acquisitions during the quarter for a total spend of about $10.5 million that you saw reported on the cash flow statement and investing activities.

During the first quarter, we also continued our share repurchase program and repurchased just over 3 million shares for a total investment of just under $29 million. Subsequent to the end of the quarter, we continued and bought about 60,000 shares for about $600,000.

As of today, we currently have about $150 million remaining on our existing share repurchase authorization from our Board of Directors.

Our current shares outstanding are now down to about $238 million. And really looking back at this, our share count peaked in mid-2004 at a little bit more than $337 million. So our current share count today represents a 30% reduction since that time.

We didn't have any meaningful debt repurchases during the quarter, and we repurchased about $5 million in the open market, so we will continue to repurchase debt in the open market when we believe that the values indicate it's a prudent use of our capital, and as Tom mentioned, as we continue to manage our near-term debt maturity profile.

So in conclusion, we are very excited about 2011 and we like where we stand financially. We have a strong balance sheet as I mentioned with $175 million of cash, which is a great liquidity; very favorable debt maturity profile and attractive free cash flow. We will continue and intend to use our capital wisely to take advantage of opportunities that ultimately will increase shareholder value.

So with that, Regina, I'm going to turn the call back over to you and open it up to questions, please.

(Operator Instructions). John Ransom, Raymond James.

Good morning. Do you all think the death rate in the first quarter was a little bit of a blip? Do you expect we will return to kind of the down 1 to 2 market that we have seen over the past several years?

John, I wish I could predict that, but the truth of the matter is we don't know. I think it's our belief that --

You guys spent $1 million on some fancy study. You're supposed to know this kind of stuff.

We did.

Out of Harvard, right? Doesn't (multiple speakers) out of Harvard give you all the answers?

Yes, we have opinions about trends and going forward, John.

Yes.

It's very, very difficult in a given year to predict. I think what we believe is that the trends should begin to start pointing in a better direction for us. But quarter to quarter and year to year, it's very, very difficult to predict. And so I think we view the first quarter as we're doing a good job and maybe some of the demographics are starting to slightly shift the other way, so a lot of that can be driven, as you know, by severe weather and flu, and so we are pleased with where it is.

We have positioned the businesses to be able to handle increases in volume and decreases in volume, so we're prepared to deal with whatever comes our way.

And what are you doing now in terms of if you looked at just your standalone, your cremation business, how much is your revenue per call up from maybe a couple of years ago? And if you do everything you want to do, what could that number look like in two or three years?

Well, I think if you look at cremation and we kind of view it in two different buckets internally to talk to your issue. One is direct cremation and then we call it cremation with service. But if you look at pricing in both of those over the last five years, the compounded growth rates have exceeded the industry and have exceeded the burial growth rate. We're probably looking at, in cremation, at 6% and 7% kind of compounded over the last five years, versus, let's say a burial growth rate that's closer to 3%. And then you are dealing with the mix change.

So we are seeing cremation go up. Some of that is within our network, we've raised prices on direct cremation. And probably the bigger piece of it is we are selling more products and services to cremation (technical difficulty) that want those, and we're doing that a lot through the packaging, and we are seeing some success. So I think our belief is, as it relates to that consumer that wants service and wants merchandising, we can grow it differentially from a percentage perspective relative to the burial consumer.

Now there's a direct cremation consumer that is driven more by price that I think we will handle in a different way, but there's a way to profit from both of those streams if you do it right.

Okay. And, certainly you have a lot more competitors for acquisitions, both financial sponsors. A couple other companies have repaired their balance sheets. Have prices kind of passed the point where they are all that attractive? Are you still seeing sizable deals that have attractive multiples?

We're still seeing deals that we like at attractive multiples. The pipeline looks good. We haven't seen an impact from those things. Again, you're always looking for that to begin to kick in because the industry has seen it before. But I would say today, the deals we are seeing we like, and they are at reasonable prices.

Okay. Thank you.

(Operator Instructions). Clint Fendley, Davenport.

Thanks. Good morning, guys. First question on the cremation. Obviously, it's a volatile metric here, but I'm wondering if you saw the uptick consistently throughout the US.

I think we see it in different regions. I don't think it is across the board US. It's different rates in different places, so, but again, not isolated in any one, but it's not a national trend either.

And I know historically you've dropped some of your alliances with the direct cremation groups and all. I mean, why do you think we are seeing it move up so much here in this quarter?

You know, it's very, very difficult to explain, and again, quarter to quarter you got to view this as a an anomaly. Like we said, there was a time -- well last year, as an example, it grew 70 basis points and someone could have said is it slowing down? And I think their answer was no. It's just these trends tend to occur over long periods of time and are very, very predictable in any one year, and particularly any one quarter, you can't overreact to.

So I think we look at the 230 basis points as an anomaly. And again, if we are wrong and there's a trend, that's something you later react to. But I don't think, Clint, that this means necessarily anything.

I know we're not -- we do pay attention to things that are out there, and so we do get concerned that a lot of folks that are elderly have fixed incomes that are -- very low interest rate environment. We've got gasoline prices coming up. So you've got to believe on the fringe, some of those things are going to impact us, but we don't see this as a continuing trend or a consumer choice that would grow at this rate.

Okay. And then on the cemetery side, I guess just fundamentally, why do you think we are seeing fewer down payments of 10%? Is it just again the strain on the consumer? Or have you offered any different packages or anything that would maybe explain the reason here?

I think it's two things. I think there probably is an element of the consumer being strained, and therefore needing a little more financing. But actually we believe there's another thing that's beginning to happen.

As our sales force continues to improve and grow, you've got sales that radiate within a certain distance of your cemetery. And a lot of that gets sold -- what we call our family service counselors. so they are walking through our cemetery doing tours.

As our sales force matures and grows, we are expanding outside of that cemetery and beginning to grow through what we call community service. So these are folks that are out there meeting with people in their home, maybe further away from the cemetery, and so we are converting sales that maybe in prior periods we wouldn't have converted. And that consumer is not paying at a down payment that you would see in I would say our more core traditional sale.

So as you begin to do that, which is an element of success, you are seeing less people with the down payment. And the key now is collect those and make those sales real. And we think that's what should occur in the coming quarters. So, there's surely an element of that that we're seeing higher penetration rates as it relates to numbers of people buying cemetery property.

And that was my next question then. I mean you think it will be a couple of quarters before you can collect that 10% and recognize some of the revenue here then?

Yes, I think again, it depends on how long we are financing it over and what their down payment is. But if you use a simple metric like 5% down, if it's a three-year pay, it ought to convert next quarter. It's a five-year pay, you may take two quarters. But generally it's going to be there.

And the other thing that makes us feel good is we are very focused on collection. We have injected a lot of discipline as it relates to the collection process, both on the at-front piece and on the come behind piece. We are getting bank drafts as a way to set these up in the first place. And I think that makes it a lot easier than relying upon trying to collect that first payment about making a call or sending out a note. So we feel pretty good about the collectibility of this stream, again, assuming there's not a big economic crisis where people pull away from this type of sale.

So, we view the growth is good. We're not concerned about the down payment less than 10% because we view it as a way that we are growing cemetery sales now and potentially follow-up sales. Because again, remember the adjacency associated with cemetery. If you sell Tom, hopefully you are going to sell his wife and my brother. I take that back. My brother would not want to be buried next to me, but --

Got it. Thanks, guys.

Robert Willoughby, Bank of America Merrill Lynch.

Folks, I jumped on late, so if you've answered these, I will just circle back with you. But what -- have you expressed any comments on the death rate in the current quarter? Have the stronger trends continued or have they tapered off seasonally as you might expect?

And then secondarily, the step-up in CapEx year over year, can you remind us any particular projects underway here? Or is this just spending now that times are a little bit easier, frees up the wallet a bit?

Bob, it's Tom, and to answer your question as it relates to volumes first, we experienced -- the trend really began for us that we saw in November continued through February. March softened up a bit. And we attribute a lot of this to probably the severe weather patterns that we've experienced throughout the country.

Having said that, we got a question about we've been doing a study about trends in deaths. And again, our conclusion from that study is that we believe that the death -- numbers of deaths should begin to stabilize and potentially begin to grow.

Now a lot of this study can't predict what's going to happen in 2011 specifically, but more about what's going to happen in '11 through 2020 and what trends should be there. And we feel pretty good about that. So having said that, that's the background with which we try to look at our crystal ball. But we don't know what's going to happen.

I will tell you, we haven't closed April yet, but April looks pretty good. It doesn't look like a bad month by any stretch of the imagination. So again, very, very hard to predict. Our businesses, we can manage up volume without any big investment, and we can manage down if we have to. We've injected a lot of variable cost mentality into our business, so we will do the best we can.

As it relates to CapEx, really what's happening, we don't expect CapEx to go any higher than what we gave guidance on. The reason why quarter over quarter I think it looked the way it is, remember this is cash spend, so a lot of projects were finished, particularly in the major markets in the first quarter of this year. And if you think back to last year's first quarter in 2010, you're coming out of kind of a scary 2009. So I think a lot of the cash got extended later in the year. So year over year, we feel pretty good that we're going to fall within the boundaries that we gave you and it's not really any different than what we spent in 2010.

That's great. Thank you.

A.J. Rice, Susquehanna.

Thanks. Hello, everybody. Maybe just -- you sort of talked around it a little bit, but just the update on the priorities for the use of cash flow. I know you got your debt down to a level where I don't think that's necessarily a high priority unless there's an unusual shakeout in the market, but can you just comment on debt versus share -- debt repayment versus share repurchase versus development and acquisition? Sort of how do you think about those these days?

Sure, A.J. I think the first priority as we sit today when you look at where the share price is, where debt levels are, where interest rates are, and in the pipeline, it's pretty easy to conclude that acquisitions are the highest and best use, because the returns we are seeing on those are at levels that we believe outperform buying back our own stock.

And so as that continues to be the case, and again, the pipeline is pretty full, we would expect that to be the place we're going to place our cash first.

Having said that, I think we generate sums that are significant enough where you're not going to make that -- you're not going to spend all of it on acquisition.

And as you look at the next step, the next best use in this environment for us is to return it to you guys. And you can return it through share repurchase. You can return it through dividend.

We feel pretty strongly as a company and as a board that we need to have a decent dividend yield, and we will continue to work to try to grow that dividend over periods of time.

However, at these rates, buying back our shares, if you think of the cash returns today, it's yielding north of 10% -- we will buy back our shares. And that makes a lot of sense for us to do.

The last use of our cash we would ever do, and Eric touched upon this -- our credit facility -- I'm sorry, our liquidity and our balance sheet are in very great shape from a leverage perspective. So there's really no need and it's not a great return for us to be buying in our debt.

The reason we would ever buy in our debts in this type of environment is really, like Eric said, to manage the liquidity profile. And so, from time to time, you might see us do that, but we would not do it for strategic purposes at this point in time.

Okay. You talked around a couple times also the fact that the pipeline looks good and there is -- it's building and may be better than it has been over the last few years. Is there -- can you just give us some flavor for what is driving that and sort of the nature of the discussions? Is it a succession issue? Is it fallout from the weak economy and the market debacle of two years ago? Or is it the fact that Palm sold out lead others to think about it? Maybe give us a little more flavor for what's driving an improved pipeline.

It would always be our gut feel. There's no empirical evidence, but I think a lot of things have to do with it. There was a rush, if you will, I think created by the uncertainty around taxes, specifically related to capital gains, regulatory concerns. These things always tend to create a buzz about it, but I think, AJ, what it really is and Steve Mack put it so appropriately. When you go back to the '90s, we were -- we and many others were out-stirring people and trying to convince them to sell their businesses maybe when they weren't even ready and take that owner that was in his late 50's, still had a lot of energy and wanted to do it, but and had a price in mind.

And then when you go 10 years and it may take that long for somebody to go, that price that somebody showed me in '97, not going to get it. I finally give up, and now I am 68, I'm 70 years old. I don't have children that are interested in the business. I'm much more likely -- a transaction is much more likely to occur.

I'm generalizing, but I think that's part of it, is just the industry, from an ownership perspective, is 10 to 12 years older. There's been a lot of time past from when prices were significantly higher. And so, I think that realization set in.

And -- but you know again, I think the perfect thing to say is about this industry, you never really buy them cheap. You buy them fair. And therefore, our approach is really about selectivity. We want to go after the ones that are there. The pricing isn't going to dramatically change because these are consistent, good business to be in, and we like the ones we're buying. We're doing it on purpose.

Okay. Maybe one last thing. When you look at your book of business, obviously, the cremation rates continues to move up there. If you look at the year-to-year price changes, I guess there's been some discussion by at least one of the other players that there might be an opportunity just to realize better rates on the cremation by selling obviously -- and I know you guys have talked about this, the fuller mix of services.

If you look at the year-to-year change in your average cremation rate of price, for service on the cremation side versus the traditional funeral side, are they growing about the same? Or is the cremation side seeing a higher realization on price? I don't know if you guys have talked about that or not.

Yes, if you look over the last five years, we just did this study. And, we looked at what was happening in 2005, what was happening in 2010. We looked at our business, and then we did a survey of businesses across the country. And again, we did it regionally, and so I could give you a bunch of different answers but I won't. But the general conclusion is that from 2005 to 2010, the funeral, the burial consumer grew at about 3% and the cremation consumer grew at about 3% compounded. And I'm rounding, so forgive me.

When you look at SCI's business, our burial consumer probably grew at about 3.5%, and our cremation consumer grew at about 7% compounded. So I think -- that tells me two things. We are probably being a little braver about our cremation service charges, which again, may have an impact of losing some volume too. But at the same time, I think we've done a good job of packaging and gearing our packages and presentations, therefore, towards the cremation consumer.

Now it's geared towards the cremation consumer that wants services and products. And therefore I think that's where we're seeing the highest level of success.

I think what some competitors are talking about are how do you get that person into the cemetery? I think that's been a challenge for the industry all along; and the success rate of pulling that person in the cemetery is pretty low, probably in the 10% to 15% range. And that's a trick that we all could do a better job of, but it's a real challenge organizationally to get the funeral customer to go visit the cemetery that isn't in their backyard.

And so we will continue to just try things, and I think there's ample opportunity to continue that growth as we get better at putting relevant products and services that they are willing to buy. This all gets back to what's the consumer willing to pay for? And nobody has completely cracked that code yet, and we will continue to try.

Okay, that's great. Thanks a lot.

Ladies and gentlemen, this concludes the question-and-answer portion of today's call. I would like to turn the call back over to management for closing remarks.

We want to thank everybody for being on the call with us today. We look forward to talking to you again and we will -- which will probably be late July. So thanks again for your participation and see you then.

Ladies and gentlemen, this concludes the presentation and you may now disconnect. Have a wonderful day.