Service Corporation International (SCI) 2015 Q1 法說會逐字稿

Welcome to the Q1 2015 Service Corporation International earnings conference call. My name is Elsa and I'll be your operator for today's call. At this time all participants are a in a listen-only mode. Later we will conduct a Q&A session. Please note this conference is being recorded. I will now turn the call over to SCI management.

Hi, and good morning. This is Debbie Young, Director of Investor Regulations at SCI. We appreciate you taking the time this morning to join us as we discuss our results for the first quarter.

As usual I'll begin with our customary Safe Harbor language. The comments made by our management team 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 website.

In today's comments we may also refer to certain non-GAAP measurements such as normalized EPS, adjusted operating cash flow, and free cash flow. Reconciliation of these measurements to the appropriate measures calculated in accordance with GAAP is provided on our website and in our press release and 8-K that were filed yesterday. With that behind us let's begin with comments from Tom Ryan, SCI's President and CEO.

Thank you, Debbie, and good morning everyone. Thanks for joining us on the call today. As you saw in our press release yesterday we're off to a great start in 2015 with an outstanding performance in the first quarter. Normalized earnings per share grew an impressive 14.3% to $0.32 per share. We're proud to report that this is the fourth consecutive quarter of double digit earnings per share growth. This growth is even more impressive when you consider the $0.03 per share headwind we overcame from losing the contribution of the divested properties from the Stewart combination. Excluding the impact of these divestitures, our growth would have been 28%.

Overall, we had a very strong performances in both funeral and cemetery segments. Additionally, lower interest expense and lower share count helped to offset increased overhead expenses as we expanded our support capacity to match the larger portfolio of businesses created from the Stewart transaction.

Let me mention a few other highlights of the quarter. Our adjusted cash flow from operations grew an impressive $34 million or 21% over the prior year. Also during the quarter we acquired various properties which we expect will add approximately $13 million in annual revenue. Accordingly, I would like to welcome the employees of these prestigious businesses to the SCI and Dignity family. Finally and perhaps most importantly to you, we continue to deliver on our commitment to return capital to our shareholders with share repurchases and dividends totaling nearly $94 million during the first quarter of 2015.

Now for a deeper dive into funeral operations for the quarter. The results of our comparable funeral segment which now includes the Stewart operations came in slightly higher than our expectations for the quarter due higher than anticipated funeral volume. We were well-positioned to respond to the high demand created by the strong flu season that continued from December into the first quarter of 2015. When compared to the prior year our first quarter funeral revenues increased by $21 million or 4.4%. The bulk of this revenue growth came from a 4.1% increase in funeral volume, which exceeded our expectations. We believe this increase was primarily driven by the impact of a tough flu season which had a differential effect on the elderly population.

The obvious question you want to ask is, Tom, is this the impact of demographics or maybe the first signs of market share gains from our recent success in pre-need sales? As many of you know, as an industry we lack any real-time reliable death rate or market share data. While we could be experiencing a slight impact it's important to remember this -- back in 2013, first quarter volumes up 4.3% but we ended the entire year 2013 down 0.8%. Now let's look back at 2014. The first quarter volume was down 7.2% but we finished the year 2014 only down 1.8%. So in our recent experience, many of these flu-related deaths are an acceleration that would have likely occurred later in the year. So while this higher volume had a significant impact on the quarter, for now we're still modeling volume for the year to be down in the low single digit percentage range.

Now the funeral sales average. They grew 0.2% which fell slightly short of our expectations. Isolating the anticipated negative currency impacts from a weaker Canadian dollar, the average grew 1.1% on a constant currency basis. The remaining funeral revenue growth of $2.5 million was related to an increase in recognized preneed revenue and higher general agency revenue from preneed insurance contracts sold.

So nice revenue growth but what do we put on the bottom line? Comparable funeral gross profits grew $14 million or almost 13%. And the gross margin percentage improved almost 25% or just under 200 basis points. We managed our costs well and we were able to generate 66% incremental margins on the revenue growth we produced which is in line with our expectations in the range of what we've been communicating to you. As it relates to preneed, comparable preneed funeral sales production excluding terminally imminent situations in both periods grew 4.4% which is in line with our expectations of mid-single-digit growth year over year. So overall, great job for the funeral segment.

Now let's talk about cemetery operations. Overall, comparable cemetery results which, again, now includes the Stewart businesses performed extremely well and ahead of our expectations. Comparable cemetery revenue grew $17.6 million or almost 8% quarter over quarter. Of the $17.6 million increase in cemetery revenue, $11.8 million of it was from recognized preneed revenue. While this 10% increase was impressive, our actual preneed sales production grew $25.2 million or 17.5%. This was beyond our expectations and a real testament to the talents and efforts of our sales organization. It also means that future quarters will benefit from this additional sales production when the revenue recognition requirement is met -- either 10% down payment collected or the completion of construction.

We believe the preneed sales production increase can be attributed to three primary factors. First last year was a tough first quarter in that we were neck deep into the integration of Stewart and our focus was on managing that change. Second, it took longer to finalize our cemetery construction planning last year because of the integration. This year with planned projects and their associated timing clear, we are selling into those projects faster. These two factors should have a waning year over year effect as 2015 progresses.

However, the third and final factor should accelerate. It is our new customer relationship management platform that allows us to manage the light sales behaviors with end results and improved outcomes and more predictable results. Our implementation of Salesforce has allowed our sales leadership to identify gaps in the selling process and more effectively direct our training resources to close those gaps, leading to improved appointment and closing rates.

In addition to increased preneed cemetery revenues, at-need cemetery revenue grew some $4.9 million, or 7%, as increased activity similar to the funeral business drove increases in at-need property, merchandise, and service revenues. The preneed and at-need cemetery revenue growth drove cemetery profits higher by $8.7 million and the margins increased 210 basis points to 22.3%. So this $17.6 million revenue increase produced $8.7 million in incremental cemetery profits, or 49% incremental margin. Keep in mind when we generate sales production we will incur and recognize a selling cost, even if that production revenue is deferred in the current period. For the first quarter we net deferred $40.2 million of sales production versus $26.8 million in the prior year quarter. This $13.4 million increase in deferred production revenues, assuming a 20% sales cost, produces $2.7 million in selling costs associated with that incremental deferred production. If you were to remove that selling cost from first quarter earnings the incremental margin for the quarter would have been 65% which would then be in line with our range of expectation.

So to wrap it up, we have a lot of positive momentum for the first quarter that we believe will serve us well as we continue throughout the remainder of the year. We remain very confident in our earnings per share and cash flow targets for the year and while we're feeling very enthusiastic about the first quarter, we will revisit our guidance with you after the second quarter when we have six months under our belt. Overall, we remain optimistic about our ability to continue to deliver strong results which will allow us to actively pursue growth strategies which continue to focus on increasing shareholder value.

With that, I'll turn the call over to Eric.

Good morning, everybody. As usual, this morning I will walk you through the details of the first quarter cash flow performance as well as our 2015 outlook, and then I would like to highlight some of the capital deployment that we did for the quarter. So let's start with our cash flow performance.

As everybody has probably seen by now in yesterday's press release, our adjusted operating cash flow in the quarter was very strong going $34 million, or 21%, over the prior year to a total amount of $198 million. This exceeded our expectations. This was accomplished despite contributions from FTC-divested properties in 2014 that did not benefit us in the first quarter of 2015, and we estimate that cash flow impact to be about $10 million to $12 million difference quarter over quarter. Cash flow growth during the quarter was predominantly different by higher cash receipts from improved operating performance, lower cash taxes and interest, and improved preneed funeral and cemetery collections.

Let me give you a little bit more color on that. First our cash receipts during the quarter were higher due to cash collections increasing from the strong funeral case volume activity that we've experienced starting back in December of 2014 through this quarter. Our cash interest payments also declined by about $3 million. This was in line with our expectations as we continue to pay the required amortization of our term loan from the Stewart transaction. Next our cash tax payments during the quarter also dropped by almost $11 million over the prior year quarter and came in lower than we expected. That being said, we still anticipate our full-year cash tax payments we previously communicated to remain unchanged, and I'm going to give you a little bit more color to that in just a moment.

Our cemetery preneed sales production levels were up from last year as Tom mentioned and we also experienced an improvement in preneed cash collections, driven by customer payments on the installment plans received during this quarter. Finally, cash flow also benefited this quarter from lower payroll disbursements as we partially funded a January 2015 payroll in December of 2014. This is a temporary effect, obviously, then, and it had an effect of about $11 million for this quarter's cash flow.

Our maintenance capex and cemetery development capex and, again, these are the two components that we consider our recurrent capex -- these for the quarter came in at $26.6 million, which was about $4.5 million higher than prior year but in line with what we expected. Deducting these recurring capital expending items from our adjusted around flow from ops, we calculate our free cash flow for the first quarter to be about $171 million. This reflects an impressive $30 million increase over the prior year quarter, which, again, was higher than our expectations for the reasons I just mentioned.

So let's look forward now in terms of cash flow outlook for the remainder of 2015. As Tom mentioned, we would like to reaffirm our outlook for the full year of 2015 it relates to cash flow from operations excluding special items of a range of $450 million to $500 million as our confidence many this range has been bolstered by our strong first quarter operating results.

Let me give you a few comments on our assumptions for this outlook. First we believe our strong funeral case volume experienced in the first quarter will return to more normalized levels in the second through fourth quarters of of 2015. So for the full year of 2015 we are still modeling funeral case volume to be flat to slightly down in the low single digit percentage range. Also, remember that our first quarter cash flow is seasonally high due to cash interest payments that primarily occur for us in the second and fourth quarters during a year. During this quarter, we paid only $17 million in cash interest. We expect to pay about $65 million in cash interest in the second quarter and about $81 million thereafter in 2015. Finally, our cash tax estimate for 2015 which, again, is based on the midpoints of our models, remains unchanged at $125 million for the full year. While cash tax payment during the quarter came in lower than we expected, as I mentioned before, we expect these cash tax payments to increase over the remainder of 2015. As our track record has shown, we are always continuing to work on implementing tax-planning opportunities to help mitigate cash taxes going forward.

Our guidance for capital spending in 2015 for maintenance and cemetery development remains unchanged at $130 million to $140 million. Deducting these recurring capex items from our 2015 cash flow from operation expectations will result in free cash flow in 2015 continuing to range from $310 million to $370 million. This equates to about $1.65 per share, free cash flow per share at the midpoint of this range.

So I'd like to shift to cash deployment during the quarter. To begin with, we finished the quarter with healthy liquidity of approximately $435 million, which consisted of about $217 million of cash on hand and just about the same amount of availability on our credit facility. This liquidity positions us well to strategically execute our capital deployment plans. So during the quarter, we first acquired several locations for a total investment of just over $45 million. These were funded with $30 million of cash and around $15 million of funds from like-kind exchange accounts that were set up in conjunction with the 24 -- 2014 FTC asset divestitures.

And as Tom mentioned in his remarks, returning capital to our shareholders remains the priority for us. We paid a $0.10 dividend in the quarter funded just over $20 million in dividend payments. This reflects the third dividend increase in the past 15 months and ewatts to a 1.4% dividend yield. In the quarter we also repurchased just over 3 million shares for a total investment of $73 million. But subsequent to the end of the quarter, we've also repurchased about almost 1 million additional shares for a total investment of about $23 million. Therefore, when you look at what we have done in total in 2015 through today, we've repurchased about 4 million shares for a total investment of nearly $100 million. Since completing the Stewart acquisition in December of 2013, we have repurchased over 15 million shares for a total investment of $335 million. And currently we have about 202 million shares outstanding and about $145 million of remaining share repurchase authorization.

Our leverage, which is calculated as net debt to EBITDA in accordance with our correctly facility was 3.6 times at the end of the first quarter. This sets us firmly within our current targeted leverage range of 3.5 to 3.7 which we intend to maintain going forward and positions us well as we move forward in 2015.

So in conclusion to echo what Tom has already said, we're off to a great start in 2015. Our robust cash flow coupled with the strength of our balance sheet and our liquidity continues to provide us with a tremendous amount of financial flexibility to continue to deploy our capital to increase shareholder value. We'll continue to deploy this capital to achieve the highest total shareholder return while maintaining our leverage targets as follows -- acquisitions and funeral location new builds, dividends, share repurchases, and occasionally near term debt maturity management as may be needed from time to time.

So we appreciate you joining us this morning, and, operator, that concludes our comments. And now we'll open it up for questions.

(Operator Instructions). Okay, and we have our first question from Chris Rigg from Susquehanna. Chris your line is now open.

Hi. Good morning, guys. Just wanted to ask about M&A. Should we be thinking about the M&A in the first quarter at about $46 million, not the $30ish million that's in the cash flow statement? And then with that, that's basically the low end of your target range for the year. So how do you feel about transactions over the balance of 2015? Thanks.

Yes, first, Chris, to answer your question, that's the right way to think about it, about $46 million, and it would tell me that I'd be looking for the higher end of our range as to what will close because clearly we've got triages in the pipeline, and so we feel really good about the opportunities that are in front of us in 2015, both from an acquisition perspective as well as looking at some new build opportunities, and continuing to invest in cemetery inventory that these types of returns, as good as they are, even outshine share repurchases. So as soon as we can -- as much of that as we can get, we'll do.

Okay. And then on -- with regard to the Stewart synergies, are you sort of run rating the full amount at this point? Is there still some more costs to come out of the deal?

There's very -- there's still some costs to go. I mean, when you think of the hundred million we shifted and announced last quarter that more came in in 2014 than what we expected. So we expected about -- we're -- the run rate was about $55 million coming in, about $35 million will come in in 2015, and about $10 million in 2016. So you're really not at the full run rate. You will be at the full run rate in 2015, but it's going to be later in the year, and some of that, a very small amount, will lop over into 2016 in terms of actually hitting the income statement.

Great. Thanks a lot.

Thank you. Our next question comes from Robert Willoughby from Bank of America, Merrill Lynch. Robert, you may go ahead.

Tom and Eric, can you speak to -- and Eric you touched on possible refis here, I guess. You do have a substantial amount of debt coming due over the years and it looks like higher coupon stuff. How are you thinking about refinancing maybe all of it at some point? What kind of rate arbitrage would you anticipate from that kind of activity?

Without quoting anybody that we've worked with, because you have to be careful doing that, obviously, publicly, but if you just take where we're trading today and look at where we could refinance, it's probably similar to the past transaction last year, where you could probably do something in the high fours or low fives. Now in terms of specifically talking with financial partners in terms of entering the market, we continue to look at that. We have no plans right now to announce, obviously. But in terms of looking at more of a big-bang refinancing, what I'd point out to you, Robert, is that a lot of the near-term stuff still has [make-hold] payments associated with it.

Okay.

So we're kind of looking at it from an NPV perspective in terms of if interest rates continue to stay at these levels, then every day that goes by that you're not refinancing yet you're going to have a lower make-hold payment ultimately when you do refinance. And you balance that with our liquidity and our desire to clean -- have a good, clean track record, looking forward for 12 months or so of near term debt maturity profiles to give us the flexibility to have the deployment plans such as dividends and share repurchases and acquisitions that we've described to you. Ultimately, as you get through those make-hold payments, you get to some maturities that don't have those, that have call provisions, and that would lead you to be at that time maybe something a little bit bigger. But as of right now that's how we're balancing it, balancing the make hold provisions of it with an opinion of when do we think interest rates should move? In that case you've probably got to go sooner rather than later.

Okay, okay. And then on the acquisition side, some of the tax benefits I think you've seen. I know my wife routinely sells my house and gets rid of all my possessions regularly but she rolls it forward into something bigger. With the divestitures you've done, you've got the benefit in what you pay for the deals this past quarter, does that -- is that a continuing benefit there? Have you redeployed all that benefit as yet or how -- how big is what's left?

Not as big. I mean, when we did strategically is -- you have a period of time where you can do what you're describing, which is a like-kind exchange and keep the money into some type of escrow account.

Yes.

But at some point it expires over a certain number of months. And so we were able to utilize that in foreseeing this particular transaction. It was very successful for us. But there's not a lot left to do probably in that perspective.

Okay. And, Tom, any color? Can you tell us what you did acquire, funeral homes versus cemeteries, locations?

Yes, I think we've got -- that are reported in this quarter I believe it's three funeral homes and one cemetery is correct, and that's on the West Coast.

Okay. Perfect. Thank you.

Thank you.

Thank you. Our next questions come from AJ Rice from UBS. AJ, you may go ahead.

Thanks. Hello everybody. Just a couple questions if I could. First of all maybe to follow up on some of the related questions. I guess I could see why you guys Stewart deal step back from the mom and pop type acquisition a little bit and now you're back in full bore and that may be what's going on but I also wondered are you also seeing a uptick in available properties, sort of what's happening in terms of from the seller's side out there?

Sure, AJ. I think we are seeing like you said before, part of it can be timing. When you took Stewart out as a buyer and waited during that FTC waiting period you took us out as a buyer, you have a lot of the potential buyers that were getting their balance sheets and financing ready to buy our divestitures. There was truly a lull in activity for over a year's period. And so I think part of this is that pent up natural transactional flow.

Another thing that -- I just think it's getting to a time when you think about these businesses and the generations they've been in hands. We clearly are seeing less and less generational handover I think as time goes on so I think a lot of these businesses are just -- it's the right time for these people to look at diversification and selling the businesses. So we have seen a pickup in activity. I can't tell you how long that's going to last but I'd tell you that we're pretty busy right now and the pipeline looks busy through 2015. I hope that continues because we're excited about those opportunities.

The other thing I'd just point out is we continue to look at opportunities to develop cemetery inventory and diversify our product offerings for consumers. And particularly with the bringing on the Stewart businesses, there's ample opportunity to do that and those generate high internal rates of return. We're also looking pretty hard at new builds versus acquisitions and you'll probably see a little more activity on that front, combo facilities that we're building as well as some standalone opportunities.

So we see ample opportunity to deploy our cash. We continue to have a great problem, which is generating a lot of cash and deploying it, but I view that as a real opportunity and really from a deploying it for growth, which is our first opportunity, we still are excited about the share price and it's still a good opportunity for us to buy in those shares. And I think Bob even mentioned we're thinking about the dividends and growing that over time because, again, with the growth rate of the company, we can foresee an opportunity to continue to grow that dividend over the next few years.

Okay. And on the -- one other question on the potential acquisitions. Are you seeing pricing be relatively constant or valuations relatively constant versus what you've been seeing?

Yes, I don't think we've seen any dramatic change. I think there's always that bid-ask difference that you've got to talk through and understand. And from our perspective, we really look at it from our ability to make a difference, and I think we've mentioned this before. The two real strategic opportunities for us are who are the customers and what value do they bring? And then what's the scale opportunity for us? And as those things go up, it affords us the ability to pay a little bit more.

Right.

So we see a variety of pricing depending on which market it is because, again, we like being in a lot of different markets, but it's going to change by geography and demographic mix and the like. So, yes, I think we're in the same general ballpark of where we've been, and that's a very comfortable place for us.

Okay. Maybe if I can just ask you on the corridor, I guess the 4%-plus volume increase, I understand the comments about the flu, but I think it's your third straight quarter now of positive volumes. If you drilled down in the quarter, I know a lot of flu was early in the quarter, late in last quarter, did you see consistency in your cases -- case growth year to year across the quarter? I don't know if there's any early read in your second quarter yet, what you're seeing so far.

Yes, AJ. I think, again, for us, I just don't want to ever get into predicting business. It's too hard to tell with a lack of good data. But to answer your question, it was fairly consistent throughout all three months. I think March was a little bit less than January and February, but they were all solid improvements both December, January, and February being in the, call it the 4% to 5% range and March dropping off slightly. What we're early seeing in April is not that strong, as I reported in the first quarter, but still on a relative basis a really solid performance.

So it's really hard to understand. Can some of that be market share? Can some of that be preneed? Surely it could. And the only reason we caution everyone is if history tells us something, that if you go back to 2013, we started off about the same way, and we ended up slightly down for the year. So we gave it back in the back half of the year. So we're just modeling that way. I hope I'm wrong.

Right.

But at this point in time we'd rather have a little more data to support that thesis and that's why we're keeping the models where we are.

Yes.

You know, I tried to move them up but Tranzberger wouldn't let me.

There you go.

So we are where we are.

One last -- one last question on it. On the pricing side you were up 1.1% but I think you also make the comment that cremation was sort of flattish. I guess if you don't have that headwind from the cremation in the quarter, I would have thought like your pricing might have been a little stronger. Have you drilled down at all to look at that? Any commentary on that.

Yes, I mean, we did drill down. I don't think it's something that we see as a long-term trend. It is short of our expectation, as I think I mentioned in our comments. We would expect it to be a little more. Having said that, I will he tell you when we -- for whatever reason, when we see kind of a surge in volume, this tends to be the case. And what we've historically seen is that's generally bounced back when you saw volume lighten up that the average tends to get a little better. We don't have any -- we don't see something that greatly concerns us. Obviously anything concerns us if we're going to work at it, but I feel pretty good about the rest of the year, absent that Canadian currency situation, that, again, we forecasted but I think as the year goes on, particularly next quarter you'll continue to see that kind of currency headwind. But I feel pretty good about where we are. I was kind of surprised by a flat cremation rate quite honestly but again that could change quarter to quarter as well.

Okay, all right, great. Things thanks a lot.

Thank you.

Thank you. Our next question comes from John Ransom from Raymond James.

Hi. Just a picayune question, what was the share count at the end of the quarter? I know you did a fair amount of buy back, but how did that play out toward the end of the quarter share count?

It's about $202 million at the end of the quarter, John, and it's 202 million shares, excuse me, at the end of the quarter, and we started the year just under 205 million shares.

That's basic. What about dilute diluted?

Diluted was two -- yes, 207 million, and I don't remember what it started at. It started at like 212 million.

The 207 million that was your share count during the quarter so you're saying the ending share counter wasn't much different from the average share count for the quarter?

Yes what I'm saying is from shares outstanding it was about 202 million at the end of the quarter, from a diluted perspective, add about 5 million to that and let's call it about 207 million.

Okay. Is that a good number is? What do you think a good share count number is for the second quarter? Kind of a net range? Or do you think it will be --

Well, I think as I said before, subsequent to the quarter, we've already started repurchasing shares, about a million -- million shares are already repurchased. I would hope that would continue.

Okay.

Now, the other issue is, is that we're starting to get a good amount of option exercises from the overhang as well that's been occurred being at stock price that we are, and that I can't predict. But ultimately we hope to continue, John, as we've shown our track record, to continue to whittle it down just like you saw in this quarter from a net basis.

Right.

It whittled down from 204 million to 202 million.

Okay. And where do you think -- have valuations, now that you're back in the mom and pop world, are valuations better or worse than you thought or about the same?

I'd say about the same, John. Again, I think people are -- there's been enough transactions that have occurred since the downturn that it's kind of leveled off to an area where people understand. Cemetery business can be slightly different than the funeral business. Geographies can be different based on demographics.

Right.

It's falling within an acceptable range.

How many people are competing with you on funeral homes? I know you've got your friends in Houston but do you see anybody else showing up that you're competing against that wasn't there a couple years ago?

No. I'd say generally it's the same group of people and depending on geography it could be a local type buyer. But we still continue to see -- our goal is to develop relationships with the businesses that -- so when they come up for sale they aren't people we don't know.

Okay.

And so we continue to see opportunities where people approach us and we may or may not compete on a transaction with someone else, but from time to time we do. I'd say it's generally the same people. There's a few that got created out of this -- the merger between SCI and Stewart, the divestiture process created some new consolidators but, again, not significant amounts of money and so they're going to -- they're going to look at opportunities that present themselves in markets that are conducive for them.

Okay. And do you feel as badly about Bob's wife as I do? I wanted to ask your opinion about that. [Laughter]

Yes, I do. I just hope next time she sells everything that she calls me first. [Laughter]

All right. Thank you.

Okay.

Thank you. Our next question comes from Duncan Brown from Wells Fargo.

On determining imminent contract front, how should we think about that going forward? Will that number eventually be zero?

I think the answer is it will never be absolutely zero. It's kind of a tricky situation because, again, we want to take care of the families as best we can. And so in most places I think we've got a pretty good process to hand off that imminent situation to an at-need arranger that can, again, handle that contract. But sometimes we don't have that luxury or that option or it just doesn't fit the situation. So we're having to continue to write it. So I think what you'll see is a diminishing amount of those contracts being imminent and those are going to be written on trust contracts.

That's right.

So we'll continue to identify those for you. You should see them trend down but, again, it's really a customer-facing issue and then for us a staffing issue as to how we handle that. At the end of the day what's most important is taking care of that family first and foremost and we think this process is the best way to do it, assuming that's what's right for the family and we have the capability internally to deal with that.

I mean, it's helpful. I appreciate the disclosure in the press release regarding how much gross profit was loose -- lost due to divestitures. I wonder if you can give us that number for Q2, just given I assume it would be a lower number we saw in Q1 as divestitures ramped last year.

Debbie is looking it up but I think it's around $6 million, is that right?

In total it would be 6 million. $3 million, $3.5 this quarter, would be about the same --

No, you're wrong. Seven -- it's $9.7 million total between cemetery and funeral was the profit so it's going to drop call it $10 million to about $9 million in the second quarter. Eric's talking about per share.

I was talking about EPS.

So your second quarter is still pretty big because some of the bigger divestitures didn't concur until late in the second quarter or early third quarter. After the second quarter it drops off significantly, I think it's down to like $1 million when you get to the third quarter.

Right.

So another quarter of little bit of a head wind like Eric said, equal it three pennies rounded off.

Okay. That's great. Thank you.

Okay.

Thank you. We have no further questions at this time. I'll now turn the call over to SCI management.

Thank you so much for being on the call with us. We look forward to talking to you again in late July with our second quarter earnings call. Have a great week.

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