Service Corporation International (SCI) 2013 Q3 法說會逐字稿

Welcome to the Q3 2013 Service Corporation International earnings conference call. My name is Rada, and I will be your Operator for today's call. (Operator Instructions).

I will now turn the call over to SCI management. You may begin.

Good morning. This is Debbie Young, Director of IR at SCI. Thank you for joining us today as we talk about our third quarter results, and our preliminary outlook for 2014. Before I turn the call over to Tom, let me do the usual Safe Harbor statement. The comments made by our management team today will include statements that are not historical, and are forward-looking. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.

These risks and uncertainties include, but are not limited to, those factors identified in our press release and in our filings with the SEC that are available on our web site. These comments may also include certain non-GAAP measurements such as normalized (inaudible), adjusted operating cash flow, and free cash flow. Reconciliation of these measurements to the appropriate measures (inaudible) in accordance with GAAP is provided on our web site, and in our press release and 8K that were filed yesterday.

With that out of the way, I'd like to now turn the call over to Tom Ryan, SCI's President and CEO.

Thank you, Debbie, and thanks every body for being on the call with us today. As usual, we're going to have an overview of the quarter, and the year to date results. Then I'd like to share some thoughts about the remainder of 2013 and what we see. Then finally, I'll add some additional color to our preliminary outlook for 2014.

For the quarter, normalized earnings per share was 18%, which was $.01 lower than prior year, and slightly below our internal expectations. That lost penny, as compared to the prior year, was from non-operating items such as low-reform currency impact, and higher tax rate that was slightly offset by a reduced share count.

Then, operationally, we were slightly down, or essentially flat to prior year, on earnings. As our cemetery results were very strong, primarily driven by an impressive increase in cemetery sales production.

This was offset by weaker funeral results from lower (inaudible) volume, costs associated with investments and sales infrastructure, and other inflationary funeral costs.

I must admit, when I first saw our quarterly profit numbers, I was a little disappointed. As I dove into the numbers, though, I realized the shortfall is mainly funeral volume driven, which we had anticipated as the strong flu season accelerated activity that would have occurred in the third quarter, in the first half of the year.

Let's step back a moment, and view the nine month, year to date numbers.

Earnings per share grew at 12% and free cash flow grew at 23%. All of this was accomplished while we accumulated cash for Stewart and were not deploying it in more strategic ways to share repurchases or smaller accretive deals.

Then I think, what were the two most important strategic focus areas for 2013? They were first, invest in our preneed sales platform, to create differential growth. We've invested in recruiters, trainers, and resources to sell through a new, or expanded channel.

From this, we have grown our counselor count by over 7% year-to-date. We grew preneed funeral sales by over 14% in the quarter and we grew preneed cemetery sales over 16%. I'm really proud of our team for their efforts here.

The second strategic focus for the year was to successfully close, integrate and divest assets under the FTC order for Stewart. We believe we are on track to close Stewart by the end of this year. We have seen a tremendous amount of interest in the required divestitures and we are on track to deliver the $60 million in synergies that we had identified.

And finally, we believe there is a real opportunity to drive sales differentially within the Stewart cemetery portfolio. All in all I'm really enthusiastic about where we are and where we are going.

Now, for an overview of funeral in the quarter. On the surface, comparable funeral revenues grew by $3.9 million. However, $3.4 million was other funeral revenues primarily General Agency revenues which is completely offset by incremental selling compensation and has no immediate impact on profit margins.

Secondly, recognized preneed revenue primarily Neptune grew $2.8 million during quarter. This revenue generates profit growth that has a lower gross margin than core SCI business. Therefore, core SCI comparable revenues were down some $2.3 million as comparable funeral volumes declined by 2.9%, and this could not be completely offset by our 2.3% increase in average revenue per case.

Year-to-date our volume is up 0.4% and supports what we have previously. That because of the strong flu season in the first quarter, a portion of our volume that would have otherwise occurred throughout the year was accelerated in the first quarter. Now, from a margin perspective. With the $3.8 millionincrease in revenues we would expect a 60% margin, or a gross profit increase of $2.3 million. Unfortunately, we had a $9.8 million decline in gross profit. I want to give some clarity on the $12.1 million gross profit difference.

There are four items I want to touch upon. First, the real culprit to the margin decline. Realize that non-selling funeral segment expenses are some $280 million on a quarterly basis. So, at 2.5% inflation rate we start the quarter down $7 million before considering revenues.

Now, the second item. Our core revenues, which enjoy a 60% incremental margin, are down $2.4 million. At a 60% margin we lost another $1.4 million of margin. Added up, that total decline that I have described at $8.4 million down because of the volumes and because of inflationary costs.

Now, for some positive news but not achieving the anticipated 60% margins. This is item number three. Neptune revenues up $2.8 million. Over the 15% margin we get $400,000, not the 1.7 one would expect from core revenue growth.

And finally, General Agency revenue growth was $3.4 million and has no profit margin as it is entirely offset by increased selling compensation.

So again, if this were core revenue you would expect to add $2 million to profit. I hope that is helpful in analyzing what is going on within funeral.

As we tried to make clear in previous guidance discussions funeral profits are very difficult to grow until we see movement in comparable funeral volume as revenue recognition is so dependent on the event of death. Until then, we should continue to see steady, predictable cash flows, and flat to slightly increasing profits.

So far in the nine months of 2013 we have seen our funeral gross profits grow from $258 million to $263 million, or some $5 million. While we are growing our network rapidly in our preneed backlog to further leverage the inevitable demographic impact on future profits and cash flows.

Speaking of growing backlog, in the quarter, I could not be more proud of the preneed sales efforts. We grew total preneed funeral sales production by $23 million or 14.2%, again exceeding our expectations.

We are very pleased with the momentum that our preneed sales program has right now and we currently expect to finish 2013 with a year-over-year increase in the high single digit percentage range.

Now, for an overview of cemetery operations. Comparable cemetery revenue increased $17.6 million or 9% for the quarter, which is in line with our internal expectations.

As you'll recall, in the second quarter we talked about how we had a large amount of cemetery property production that was deferredand we told you that these revenues would get recognized primarily in the third quarter as we either constructed the cemetery property, or collected more than 10% of the sales price from the customer. This is exactly what we saw.

Secondly, our preneed cemetery sales production grew 16.3% in the quarter which we view as outstanding against a high hurdle rate set in the prior year quarter which is up some 14%.

Through the first nine months of the year total cemetery preneed production was up 9.1%. We are anticipating continued strong results in the fourth quarter leading to an increase in the high single digit percentage range for the entire year.

From a profit perspective, cemetery gross profits grew $4 million or 9% in the quarter. Higher revenues somewhat offset by higher healthcare costs and increase in selling costs associated with unrecognized revenue with the sales force infrastructure investment we are making for the future.

Similar to my comments about funeral, we are very pleased with the operating performance of cemetary in the first nine months of the year with revenues up $39 million, or 7%. Profits are up $15 million, or 13% and the margin has expanded some 110 basis points.

Now, I would like to turn to our 2013 outlook. As you saw from our press release, our expectations for the full year 2013 normalized earnings per share are now in a range of $0.87 to $0.91 which is within our previous range but again takes into account our lower volume expectations for the fourth quarter.

Last year, in the fourth quarter, we reported volume up 1.5% which benefited from the front end of a strong flu season. We are modeling volumes to be down in the mid single digit range this year in the fourth quarter. This will result in our volume expectations for the full year to be down in the 1% range as we guided you in the previous quarter's guidance.

Our expectations for the full year 2013 of $0.87 to $0.91 compares favorably to prior year 2012 earnings per share of $0.80 and represents a range of 9% to 14% growth over the 2012 year. And remember, this is true operating growth as we have not had the ability to deploy capital and grow earnings per share through share repurchases or meaningful acquisitions as we are focusing on the regulatory approval of the Stewart transaction. So all in all, a very impressive year.

Now, I would turn to our 2014 outlook. So, in addition to SCI's core business growth we are enthusiastic about the growth that the Stewart acquisition gives us in 2014. Our preliminary earnings per share guidance of $1.00 to $1.10 at the mid point represents a little more than a 19% increase from the mid point of our expected 2013 earnings per share.

Then, in 2015, we will realize an additional $30 million in identified synergies. We will have reduced interest expense by de-leveraging business allowing us to deploy capital more aggressively and I also believe that we can identify further natural synergies in our field operations like we did in (inaudible), and grow Stewart cemetery sales production at a more rapid pace than has historically been the case.

Now, turning back to our broad assumptions of 2014. You saw a few of our assumptions regarding the Stewart acquisition in our press release. Perhaps one of the most important assumptions is quantifying the divestiture impact and estimating the timing. We are still in discussions with the federal trade commission and don't know exactly where we are going to land. We wanted to be helpful, though, in giving you some kind of road map for 2014.

So for purposes of modeling only, our forecast assumes a range of $35 million to $45 million of EBITDA as divested and we have assumed the timing of the sale and the related proceeds to occur during the first half of 2014.

This $35 million to $45 million of EBITDA equates to approximately $30 million to $40 million of EBITDA the way you are used to seeing it that Stewart reports it. Keep in mind that we add back cemetery amortization under our definition. Again, this is just a range we have used for modeling purposes.

Ultimately the divestiture amount should not make a material difference to our internal rates of return as long as we are able to get more than eight times in proceeds, and based upon the level of interest we believe we can do that.

Now, as it relates to our base business,let me give you a bit of additional color. Comparable funeral volumes will still be challenging but we believe we can offset the effect with continued increases in the sales average. Also, we would expect higher recognized preneed revenues as Neptune continues to growth.

We will continue to focus on preneed which we feel is our best avenue to expand market share over the long-term and we think we can continue to share success here in the mid single digit range growth. On the cemetery side revenues will continue to increase led by preneed sales production growth in the mid to high single digit range.

Preneed sales growth will be driven by continued sales force expansion primarily in the family service team, or inside sales for those of you not in the industry, while we enhance the productivity of our expanded community service team throughout the year.

Second, margins will be impacted by the traditional inflationary costs in our business but we have a track record of minimizing that impact through our focus on standardized metrics and a continuous improvement culture. And finally, corporate General and Administrative expenses should trend similar to 2013 levels of about $26 million to $27 million per quarter excluding one-time costs.

In closing, I just want to say thank you to the entire team of 21,000 people for their hard work in helping to produce great results thus far in 2013. 2014 will be an exciting year as we welcome the Stewart businesses and their talented people into our organization. As you can see from our preliminary outlook, this transaction is accretive to earnings in 2014 and even more pronounced as we enter 2015. This concludes my prepared comments and now I will turn it over to Eric.

Thank you, and good morning, everybody. I will continue our comments today by walking you through the details of our cash flow and I will do this for both the quarter and our full year 2013 cash expectations. Then I plan to provide you some color on our cash flow outlook for 2014 which includes the Stewart acquisition.

As we disclosed in the press release, our adjusted operating cash flow in the third quarter was just over $100 million which was slightly ahead of our expectations. Compared to the prior year quarter, we are $21 million lighter in adjusted operating cash flows. This variance was expected. It is predominantly associated with the timing of vendor payments last year in the third quarter. And recall as we discussed before, last year during the third quarter we rolled out our new purchase order and accounts payable system.

Because of the complexities involved in this implementation, which was during the third quarter last year, many of our normal third quarter 2012 vendor payments shifted into the following two quarters. This quarters cash flow was also positively affected by strong preneed cash receipts in the current quarter due in part to the outstanding sales production that Tom just mentioned.

Maintenance CapEx and cemetery development CapEx, and remember these are the two components that we consider our recurring CapEx, these two components for the quarter came in at approximately $27 million which was slightly lower than our expectations but consistent with the prior year.

When you deduct these recurring capital spending items from our adjusted cash flow from ops we calculate our free cash flow for the third quarter to be about $76 million. Our cash flow deployment during the third quarter continues to be somewhat limited.

We did pay off the balance on our existing bank credit facility of roughly $87 million in July. This is part of our process of finalizing the expected Stewart acquisition financing. And from an acquisition standpoint we did make a funeral cemetery combination acquisition in Texas during the quarter which was a total investment of about $5 million.

Looking forward, we will continue to build our cash balance in anticipation of the Stewart acquisition. As you can see from the press release, we did tighten the range of our adjusted cash flow from ops for the full year 2013 to $415 million to $430 million. Which is well within our previous guidance range.

Our guidance for maintenance and cemetery development CapEx remains unchanged and that is approximately $110 million. Our free cash flow, which deducts our current CapEx from the adjusted operating cash flow, is therefore anticipated to be in a range of $305 million to $320 million for the full year of 2013. This compares to about $272 million of free cash flow in 2012 which is a 12% to 18% increase over 2012 free cash flow levels.

We are extremely pleased with these 2013 free cash flow results. And remember, this growth has been achieved despite about a $15 million increase in cash taxes in 2013 versus 2012. So as we continue to look ahead to 2014, I just want to emphasize that the preliminary outlook that we have given in our press release today is subject to more uncertainties than usual.

Mostly related to the timing of the closing in the Stewart acquisition, the amount and timing of the divestitures that will be required, the timing of the expected synergies, and variability in cash taxes which I will discuss in a moment.

When we speak to you again in February to report our fourth quarter earnings, we will try to update you with better estimates for any items for which we expect to have more clarity.

So looking at cash flow for 2014, we expect our adjusted cash flow from operations to range between $430 million to $480 million. This represents an 8% increase from the 2013 mid points of cash flow from operations.

In addition to benefiting from the addition of Stewart's cash flows, our funeral and cemetery operating cash flows are expected to grow next year. However, our cash tax payments are increasing with the anticipated expiration of SCI's net operating losses which will occur during the early part of 2014. We still have a lot of work to do in refining our cash tax estimates primarily as it relates to incorporating the Stewart acquisition.

However, our preliminary estimate as of today is that cash taxes will grow to approximately $70 million in 2014. Assuming a Stewart transaction occurs in late 2013 or early 2014.

This compares to about $30 million of cash taxes expected in 2013 so this leads to the increase of $40 million in cash taxes. When you neutralize the impact of this increase in cash tax payments, our expecting operating cash flow is grown approximately 15% as opposed to the 8% that I mentioned before that includes the increase in cash taxes.

So we will keep you posted as we refine our cash tax estimates as we work through the integration of Stewart which will include refining our assumptions around their net operating losses, their deferred tax assets, et cetera.

Finally, capital spending in 2014 for maintenance and cemetery development due to the inclusion of Stewart will grow approximately $30 million which now leads us to a range of $135 million to $145 million expected in 2014.

So one last note about the 2014 outlook as it relates to interest. While the annualized interest expense related to the incremental Stewart acquisition debt of roughly $1.4 billion is estimated to be around $56 million, our anticipated debt reductions expected during 2014 will reduce our interest amount resulting in interest expense for full year 2014 to an expected range of $175 million to $185 million. Our cash interest payments are expected to be about $5 million less than this interest expense range.

In conclusion the Company continues to be financially strong and we are very excited about our growth prospects in 2014. As we have previously stated, it is our attention to quickly delever the company following the close of the Stewart acquisition by using both our free cash flow and our anticipated divestiture proceeds.

Our proven track record of quick deleveraging post large acquisitions will continue to allow us to transition our focus to additional future investments and capital deployment that will enhance shareholder value in the future. So we appreciate you joining us this morning. And Operator, we will now open up the call to questions.

Thank you. We will now begin the question and answer session. (Operator Instructions). Your first question comes from A.J. Rice from UBS. A.J., you may begin.

Thanks. Hi, everybody. Maybe a couple of things related to the deal. The government shutdown, did that have any impact as far as you can tell on the timing on the processing of your submittals and all?

A.J., this is Tom. The government shutdown, which I believe was 18 days, the team that we were working with was required to stop. One of the things we tried to do was on our side continue to work diligently to not lose any time in that process. I think we were very successful in attempting to do that. We still feel comfortable about the December time frame that we outlined for you. Having said that, we do know we lost a little bit of time but I think we've made that up.

Okay. You referenced on the divestitures, $35 million to $45 million of EBITDA you are thinking as a preliminary swipe at it. And eight times would be the targeted sale at a minimum. So that would be about $320 million of gross proceeds at the mid point. Is there likely to be a tax hit on that as well or is that gross proceeds which you will actually probably get?

You know, right now it is hard to tell because you have to know specifically A.J.

Right.

Exactly which assets we are selling and what the tax basis is for that. Right now we have not taken into account additional cash taxes related to the divestitures. So the $70 million that I assumed of that puts aside capital losses or capital gains associated with that. We'll have to wait until we get further and identify the specific properties and their tax basis balance sheet so we can comment on that.

Okay. And then just thinking about the assumptions you are using in the 2014 guidance around volume and pricing. Assuming that whatever volume and pricing assumptions you are using are they pretty much the same for the Stewart portfolio and the SCI portfolio? Is there any reason to assume that Stewart to be able to be materially different in either direction? And then any comment about next year volume assumptions?

This is Tom. I think we would say that right now in our guidance we made similar assumptions around volume and pricing. They are not dramatically different than what we experienced over the last three or four years and we always model slightly down volume and a little bit of growth in average to get it back. I think we have an additional tool now on the funeral side with Neptune that gives us a little bit more growth in that category of recognized preneed revenues. As far as Stewart goes, and you know this well for a long time, we are very hesitant to give guidance where we don't have a specific plan. My gut tells me there is opportunity that we will have on the funeral side with regards to packages and success that we can do there in expanding the products and services services that we sell. And on the cemetery side, again, Stewart has been through a lot of change in their sales organization over the last couple of years and I would expect that we could do some things differentially there but we are not going to bake that into guidance until we have specific plans to do so.

Okay. And then maybe just to follow-up on the last point you were making. So it sounds like you guys think you accelerate the preneed business at Stewart a little bit, certainly they have been going through an integration that slowed them down. Is that on both the funeral and the cemetery side? And is there working capital assumptions you made in your cash flow guidance about that, that is worth highlighting?

Great question, A.J. The answer is our gut tells us we can. And we have factored that into our guidance. We believe we are going to go preneed on both sides and there will be a slight working capital use which is included in our guidance. And again, that is a gut feeling based upon what they have been able to do over the last three or four years and growth that we have been able to see in some of the things that we try. Combine that with the fact that they have made some difficult changes, I think good ones, with regard to compensation. But I think it has hurt them as it relates to their ability to grow. We are hoping that once we get this integrated we can start experiencing growth rates similar to what we have seen the last three or four years which is essentially high single digit growth rate ranges.

Okay. Thanks a lot.

Thanks, A.J.

(Operator Instructions). Our next question comes comes from Chris Rig, from Susquehanna International Group. Chris, you may begin.

Just a clarifying question on the divestitures. The guidance, the EPS, cash flow, et cetera, does that assume the $35 million to $45 million of EBITDA is gone on January 1?

It actually assumes that we divest of it over the first half of the year so maybe your best way to think about that is to use the mid point March 31 in your model. But again, Chris, I would caution you, we just don't know. Depends on the time that we close the deal. We have done this before so I do feel that we have a process that is such that we will get this accomplished in a pretty rapid way. And the level of interest again I would just tell you has been pretty tremendous. A lot of phone calls and a lot of people that are very interested in parts of the assets, all of the assets. I think that process will work well.

Okay. And then on your leverage comments about trying to aggressively delever once the deal closes. How should we think about that? Is that on a leverage multiple bases of the EBITDA or are you actually targeting an absolute level of debt over the 12 to 24 months post transaction?

Chris, it is really more from a leverage ratio perspective. As we told you prior to the Stewart announcement, we were running the company on a net debt to EBITDA basis 3 to 3.5. We kind of like the mid point of that maybe to the higher end of that. Upon close we will be in the low fours, call it 4.25,and we will work down as quickly as we can in that area. That doesn't mean, though, that we are not going deploy capital along the way. There are certain limitations such as the first $200 million of proceeds needs to go to reducing the term loan. But after that I would anticipate a balanced approach in terms of enhancing shareholder value as we delever.

Okay. And then last question. Could you just help us, or remind us rather, on the Alderwood synergies where you started initially what the initial target was and then where you ultimately ended up over time?

Alderwood, this is a different transaction but you would expect some similarity. We initially identified about $60 million in synergies and most of that related to purchasing and back office synergies that were identifiable and quantifiable at the time. We also knew that once we got into the operations we would begin to find synergies as it relates to the footprints of these markets. So think about management structure, think about numbers of facilities, think about utilization of staff and vehicles. And all those things will come one day. But that happens to occur once you know which businesses you are keeping and you develop a local plan for realizing some of those synergies. But those are some things that we later found. We also found some opportunities as it relates to packages and our success in expanding the products and services that we offer client families. And again finally here which I think is a little bit different, Alderwood didn't have a lot of cemeteries. They had one tremendous cemetery in Rose Hills and we saw a lot of opportunities that existed there. But here, Stewart has some of the most premier cemeteries in the country. We have seen some success in managing our cemeteries particularly in major markets and I would anticipate that is an opportunity as well. Alderwood's went from 60 to 90 and the 90 was really field synergies, packages and the like. Hopefully that answers your questions, Chris.

It did. Thanks a lot.

And our next question comes from Nicholas Jansen, with Raymond James. Please begin.

Hi, guys. Maybe just a thought on kind of the cadence of earnings for 2014? Obviously you have a very tough comp in the first quarter. Certainly the synergies will probably build over time. How should we think about the cadence of kind of earnings and cash flow as we construct our pro forma numbers for next year?

Nick, I think you are right. We don't provide quarterly guidance as you know. I think the way I would think about it is this. You got really tough comparable funeral volumes in the first quarter that hopefully get easier by the back end of the year. Your synergy observation is true as well. Again, most of that would move towards the mid and the back of the year. And then finally what I like to believe which are the improvements to the Stewart businesses that we find are more likely to occur towards the back half of year. So as I think about the cadence first half is getting all of the details right so we can be rewarded with the fruits of our labor in the back half of the year. That is at 30,000 feet, but hopefully that is helpful to you.

That is. And thinking about preneed,multiple quarters in a row where you had robust performance there. I know you added some kind of sales force to help drive that. What are you seeing on preneed side, how sustainable is the double digit growth, and given that Stewart has had some challenges growing preneed over the last couple of years, where do you think you offer the most level of opportunity as you deploy your strategies on preneed to their book of business?

Sitting across from two of the geniuses that are going to do it but I will go ahead and try to explain it on their behalf. We really believe what we are doing most recently if you go back, Nick, over the last four to five years, all of our success has been on productivity. We've done a tremendous amount of growth but the number of people in our organization really hasn't changed. It has ebbed and flowed slightly, but it all goes back to retention. We have a hard time getting people onboarded and successful so therefore you end up seeing the same people, they are more efficient. They have better leads, better technology, and better training. So what we said here is we said, how do we grow the number of people? You'll notice in my comments, the headcount is up 7%. We have never done that in last four or five years. We did that on purpose. The way we did it on purpose is we added some infrastructure. We have more sales management in place. We've got recruiters. We have more trainers than we had before. All with the idea of making these new people more successful and therefore more productive and having them stay. I would tell you that we feel pretty good about where that is. Like everything, it is a big monster to move and it is moving slowly but we are getting the job done. So we are excited about where we are. As we think about bringing Stewart onboard, we see Stewart doing a lot of the same things we were doing. They are probably a few years behind some of the changes that we made to our sales organization. We are learning some things from their side. So we feel pretty confident that with their good ideas and our experience at having gone through this that we can get them onboard with us and very quickly begin to see some of the results that we have seen. And we are excited about onboarding them particularly around the cemetery's. Our real success has been in major metropolitan areas where we have large internment cemeteries. Stewart has a lot of those. We are excited about onboarding those businesses and getting started with some of the enhancements that we can provide with ideas both from Stewart and from our success that we have seen over last three or four years.

Okay. Maybe just lastly thinking about Neptune,and just the cremation customer as a whole. Is there anything that you are doing that Stewart is not doing, or anything that they are doing on let's say cremation guards and things along those lines that you are not doing that you can see perhaps incremental synergies develop on the top line over time as you guys deploy different cremation strategies?

I would say what they are doing a good job of and we are still analyzing is they have seen some success with cremation garden strategies. And again we have got some of those, too. But they have seen probably some differential success in how they are doing it. We believe we can take some of those thoughts and ideas and apply them to our business which should create some synergies. On the Neptune style front, which again is more of a funeral side model, what I would say is very different that we see about our Neptune and anybody else in the industry and not just Stewart, we were no different than Stewart is that this is a much more aggressive preneed model. Whereas, our old direct cremation model, and Stewart's current, and really anybody else for that matter, is really centered more around the at need customer and we weren't aggressive around selling preneed. We believe the Neptune model is best and I think there will be opportunities within their direct cremation population to apply some of thosestrategies that Neptune deployed in a successful manner. Like you mentioned, at the same time, there are some great ideas that they've generated that we will take to our network and hopefully win/win on both sides.

Thanks for the call, guys.

Thanks, Nick.

And I will now turn the call back over to SCI management for closing remarks.

We want to thank everybody for participating in the call. The next time we talk to you I believe will be when we report the full year and the fourth quarter which will be in February. Until then, everybody take care and thanks again for being on the call with us today.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.