Exhibit 99.1
ALDERWOODS GROUP REPORTS THIRD QUARTER RESULTS
CINCINNATI, OHIO — November 15, 2006 — Alderwoods Group, Inc. (NASDAQ:AWGI) today announced its third quarter and year-to-date results, representing the 16 weeks and 40 weeks ended October 7, 2006.
For the 16 weeks ended October 7, 2006, the Company reported total net income of $803,000, or $0.02 basic and diluted earnings per share, on revenues of $227.4 million, compared with total net income of $6.9 million, or $0.17 basic and $0.16 diluted earnings per share, on revenues of $214.8 million, for the 16 weeks ended October 8, 2005.
Net income was lower in the 16 weeks ended October 7, 2006, primarily due to expenses related to the proposed merger with Service Corporation International as well as higher litigation costs. Additionally, the Company recorded a favorable non-cash resolution of an outstanding tax liability of $12.6 million in the 16 weeks ended October 8, 2005.
Highlights of the Third Quarter
· Revenue increased 5.9% to $227.4 million
· Number of same site funeral services performed declined 0.3% to 31,788
· Same site average revenue per funeral increased 5.5% to $4,329
· Funeral revenue increased 4.7% to $139.4 million
· Cemetery revenue increased 6.2% to $55.8 million
· Insurance revenue increased 10.9% to $32.3 million
· Net income decreased to $803,000
· Basic and diluted earnings per share decreased to $0.02
· Pre-need funeral contracts written decreased 0.7% to $59.3 million
· Pre-need cemetery contracts written was flat at $28.9 million
· Total debt increased by $6.2 million in the quarter
For the 40 weeks ended October 7, 2006, the Company reported total net income of $5.5 million, or $0.13 basic and diluted earnings per share, on revenues of $581.7 million, compared with total net income of $32.1 million, or $0.79 basic and $0.77 diluted earnings per share, on revenues of $575.4 million, for the 40 weeks ended October 8, 2005.
Highlights of the Year-to-Date Operations
· Revenue increased 1.1% to $581.7 million
· Number of same site funeral services performed declined 2.4% to 84,857
· Same site average revenue per funeral increased 4.4% to $4,306
· Funeral revenue increased 0.1% to $368.0 million
· Cemetery revenue increased 0.3% to $135.1 million
· Insurance revenue increased 7.6% to $78.6 million
· Net income decreased to $5.5 million
· Basic and diluted earnings per share decreased to $0.13
· Pre-need funeral contracts written decreased 3.5% to $144.8 million
· Pre-need cemetery contracts written decreased 0.8% to $74.0 million
· Total debt decreased by $8.9 million in the year-to-date
1
Update on Proposed Transaction with SCI
On April 3, 2006, Service Corporation International (NYSE: SCI) and Alderwoods Group announced that the Boards of Directors of both companies have approved a definitive agreement under which SCI will acquire all of the outstanding shares of Alderwoods for $20.00 per share in cash and assumption of debt. Alderwoods stockholders voted on May 31, 2006 to approve this agreement.
“We look forward to the pending merger of Alderwoods Group and SCI, which will create a large and diversified organization that will offer many benefits to our employees,” said Mr. Paul Houston, President and CEO of Alderwoods Group. “We continue to expect the transaction will close by the end of 2006 and perhaps even as early as the latter half of November.”
Company Overview
Alderwoods is the second largest operator of funeral homes and cemeteries in North America, based upon total revenue and number of locations. As of October 7, 2006, Alderwoods operated 578 funeral homes, 70 cemeteries and 63 combination funeral home and cemetery locations throughout North America. Alderwoods provides funeral and cemetery services and products on both an at-need and pre-need basis. In support of the pre-need business, Alderwoods operates an insurance subsidiary that provides customers with a funding mechanism for the pre-arrangement of funerals. For more information about Alderwoods, please visit our website at http://www.alderwoods.com.
For more information about the Company’s results, readers are directed to the Company’s Form 10-Q for the quarter ended October 7, 2006, which will be filed with the United States Securities and Exchange Commission (SEC) on November 15, 2006, and will be available in PDF format through the Company’s website (www.alderwoods.com).
Basis of Presentation
The Company’s financial results discussed in this media release are presented in U.S. dollars, and all accounting information is presented on the basis of United States generally accepted accounting principles unless otherwise indicated. The Company’s fiscal year ends on the Saturday nearest to the last day of December in each year (whether before or after such date). During 2006, the Company’s first, second and fourth fiscal quarters each consist of 12 weeks and the third fiscal quarter consists of 16 weeks. The third fiscal quarter of 2006 ended on October 7, 2006.
Forward-Looking Statements
Certain statements contained in this press release, including, but not limited to, information regarding the status and progress of the Company’s operating activities, the plans and objectives of the Company’s management, assumptions regarding the Company’s future performance and plans, the expected closing of the transaction with SCI, and any financial guidance provided, as well as certain information in other filings with the SEC and elsewhere are forward-looking statements within the meaning of Section 27A(i) of the Securities Act of 1933 and Section 21E(i) of the Securities Exchange Act of 1934. The words “believe,”
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“may,” “will,” “estimate,” “continues,” “anticipate,” “intend,” “expect” and similar expressions identify these forward-looking statements. These forward-looking statements are made subject to certain risks and uncertainties that could cause actual results to differ materially from those stated, including the following: the ability to obtain regulatory approvals of the transaction with SCI on the proposed terms and schedule; disruption from the SCI transaction making it more difficult to maintain relationships with employees and various other uncertainties associated with the funeral service industry and the Company’s operations in particular, which are referred to in the Company’s periodic reports filed with the SEC, especially under the headings “Forward-Looking Statements” and “Risk Factors”. The Company undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
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Contact: |
| Kenneth A. Sloan |
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| Chaya Cooperberg |
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| Executive Vice President, |
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| Director, Investor Relations |
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| Chief Financial Officer |
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| and Communications |
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| Alderwoods Group, Inc. |
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| Alderwoods Group, Inc. |
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| Tel: 416.498.2455 |
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| Tel: 416.498.2802 |
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| Fax: 416.498.2449 |
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| Fax: 416.498.2449 |
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| Email: ken.sloan@alderwoods.com |
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| chaya.cooperberg@alderwoods.com |
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3
ALDERWOODS GROUP, INC.
Consolidated Statements of Operations (Unaudited)
Expressed in thousands of dollars except per share amounts and number of shares
|
| 16 Weeks Ended |
| 40 Weeks Ended |
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| October 7, |
| October 8, |
| October 7, |
| October 8, |
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| 2006 |
| 2005 |
| 2006 |
| 2005 |
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Revenue |
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Funeral |
| $ | 139,367 |
| $ | 133,158 |
| $ | 368,020 |
| $ | 367,672 |
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Cemetery |
| 55,769 |
| 52,519 |
| 135,105 |
| 134,737 |
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Insurance |
| 32,287 |
| 29,105 |
| 78,559 |
| 73,036 |
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| 227,423 |
| 214,782 |
| 581,684 |
| 575,445 |
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Costs and expenses |
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Funeral |
| 113,854 |
| 116,927 |
| 296,637 |
| 301,457 |
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Cemetery |
| 48,226 |
| 47,202 |
| 116,665 |
| 117,026 |
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Insurance |
| 30,428 |
| 27,752 |
| 74,618 |
| 69,570 |
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| 192,508 |
| 191,881 |
| 487,920 |
| 488,053 |
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|
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| ||||
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| 34,915 |
| 22,901 |
| 93,764 |
| 87,392 |
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General and administrative expenses |
| 24,831 |
| 19,192 |
| 57,388 |
| 31,539 |
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Provision for asset impairment |
| 588 |
| 254 |
| 588 |
| (1,373 | ) | ||||
Income from operations |
| 9,496 |
| 3,455 |
| 35,788 |
| 57,226 |
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Interest on long-term debt |
| 8,554 |
| 8,967 |
| 21,503 |
| 23,495 |
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Other expense (income), net |
| (347 | ) | (68 | ) | (221 | ) | (5,910 | ) | ||||
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Income (loss) before income taxes |
| 1,289 |
| (5,444 | ) | 14,506 |
| 39,641 |
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Income tax expense (recovery) |
| 486 |
| (12,349 | ) | 7,804 |
| 5,844 |
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Income from continuing operations |
| 803 |
| 6,905 |
| 6,702 |
| 33,797 |
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Loss from discontinued operations |
| — |
| — |
| — |
| (1,678 | ) | ||||
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Income before cumulative effect of change in accounting principle |
| 803 |
| 6,905 |
| 6,702 |
| 32,119 |
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Cumulative effect of change in accounting principle |
| — |
| — |
| (1,242 | ) | — |
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Net income |
| $ | 803 |
| $ | 6,905 |
| $ | 5,460 |
| $ | 32,119 |
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Basic earnings per Common share: |
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Income from continuing operations |
| $ | 0.02 |
| $ | 0.17 |
| $ | 0.16 |
| $ | 0.83 |
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Loss from discontinued operations |
| — |
| — |
| — |
| (0.04 | ) | ||||
Cumulative effect of change in accounting principle |
| — |
| — |
| (0.03 | ) | — |
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Net income |
| $ | 0.02 |
| $ | 0.17 |
| $ | 0.13 |
| $ | 0.79 |
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Diluted earnings per Common share: |
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Income from continuing operations |
| $ | 0.02 |
| $ | 0.16 |
| $ | 0.16 |
| $ | 0.81 |
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Loss from discontinued operations |
| — |
| — |
| — |
| (0.04 | ) | ||||
Cumulative effect of change in accounting principle |
| — |
| — |
| (0.03 | ) | — |
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Net income |
| $ | 0.02 |
| $ | 0.16 |
| $ | 0.13 |
| $ | 0.77 |
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Basic weighted average number of shares outstanding (thousands) |
| 40,678 |
| 40,456 |
| 40,606 |
| 40,456 |
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Diluted weighted average number of shares outstanding (thousands) |
| 42,789 |
| 42,051 |
| 42,575 |
| 41,721 |
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4
ALDERWOODS GROUP, INC.
Consolidated Balance Sheets
Expressed in thousands of dollars
|
| October 7, |
| December 31, |
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| 2006 |
| 2005 |
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| (unaudited) |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
| $ | 8,616 |
| $ | 7,455 |
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Receivables, net of allowances |
| 56,796 |
| 52,862 |
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Inventories |
| 14,583 |
| 15,784 |
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Other |
| 7,631 |
| 6,885 |
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| 87,626 |
| 82,986 |
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Pre-need funeral receivables and trust investments |
| 329,462 |
| 334,427 |
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Pre-need cemetery receivables and trust investments |
| 322,200 |
| 307,322 |
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Cemetery property |
| 117,193 |
| 116,467 |
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Property and equipment |
| 544,343 |
| 542,901 |
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Insurance invested assets |
| 322,154 |
| 294,598 |
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Deferred income tax assets |
| 16,563 |
| 13,057 |
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Goodwill |
| 296,211 |
| 295,890 |
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Cemetery perpetual care trust investments |
| 248,919 |
| 243,805 |
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Other assets |
| 42,509 |
| 42,850 |
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| $ | 2,327,180 |
| $ | 2,274,303 |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities |
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Accounts payable and accrued liabilities |
| $ | 118,012 |
| $ | 119,734 |
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Current maturities of long-term debt |
| 2,185 |
| 2,435 |
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| 120,197 |
| 122,169 |
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Long-term debt |
| 362,282 |
| 371,040 |
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Deferred pre-need funeral and cemetery contract revenue |
| 70,730 |
| 91,618 |
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Non-controlling interest in funeral and cemetery trusts |
| 575,634 |
| 548,497 |
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Insurance policy liabilities |
| 302,298 |
| 266,729 |
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Deferred income tax liabilities |
| 12,436 |
| 10,552 |
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Other liabilities |
| 29,232 |
| 21,983 |
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| 1,472,809 |
| 1,432,588 |
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Non-controlling interest in perpetual care trusts |
| 248,980 |
| 243,962 |
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Stockholders’ equity |
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Common stock |
| 407 |
| 405 |
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Capital in excess of par value |
| 746,799 |
| 743,126 |
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Accumulated deficit |
| (166,945 | ) | (172,405 | ) | ||
Accumulated other comprehensive income |
| 25,130 |
| 26,627 |
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|
|
|
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| ||
|
| 605,391 |
| 597,753 |
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| $ | 2,327,180 |
| $ | 2,274,303 |
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5
ALDERWOODS GROUP, INC.
Consolidated Statements of Cash Flows (Unaudited)
Expressed in thousands of dollars
|
| 16 Weeks Ended |
| 40 Weeks Ended |
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|
| October 7, |
| October 8, |
| October 7, |
| October 8, |
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| 2006 |
| 2005 |
| 2006 |
| 2005 |
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CASH PROVIDED BY (APPLIED TO) |
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Operations |
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Net income |
| $ | 803 |
| $ | 6,905 |
| $ | 5,460 |
| $ | 32,119 |
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Loss from discontinued operations, net of tax |
| — |
| — |
| — |
| 1,678 |
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Cumulative effect of change in accounting principle |
| — |
| — |
| 1,242 |
| — |
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Items not affecting cash |
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Depreciation and amortization |
| 13,956 |
| 13,778 |
| 33,221 |
| 34,873 |
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Amortization of debt issue costs |
| 518 |
| 915 |
| 1,426 |
| 2,565 |
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Stock-based compensation |
| 1,068 |
| — |
| 2,664 |
| — |
| ||||
Insurance policy benefit reserves |
| 16,850 |
| 15,957 |
| 36,850 |
| 38,609 |
| ||||
Provision for asset impairment |
| 588 |
| 254 |
| 588 |
| (1,373 | ) | ||||
Gain on disposal of assets |
| (448 | ) | (165 | ) | (1,406 | ) | (6,068 | ) | ||||
Deferred income taxes |
| (511 | ) | (1,699 | ) | (767 | ) | 11,050 |
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Premium on long-term debt repurchase |
| — |
| — |
| — |
| 282 |
| ||||
Other, including net changes in other non-cash balances |
| (10,690 | ) | 9,903 |
| (16,822 | ) | 3,054 |
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Net cash provided by continuing operations |
| 22,134 |
| 45,848 |
| 62,456 |
| 116,789 |
| ||||
Net cash used in discontinued operations |
| — |
| — |
| — |
| (601 | ) | ||||
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| 22,134 |
| 45,848 |
| 62,456 |
| 116,188 |
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Investing |
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| ||||
Proceeds on disposition of business assets |
| 841 |
| 3,759 |
| 3,748 |
| 14,916 |
| ||||
Purchase of property and equipment |
| (14,363 | ) | (15,507 | ) | (23,835 | ) | (31,823 | ) | ||||
Purchase of insurance invested assets |
| (25,059 | ) | (24,794 | ) | (68,694 | ) | (90,025 | ) | ||||
Proceeds on disposition and maturities of insurance invested assets |
| 10,421 |
| 6,702 |
| 35,697 |
| 54,193 |
| ||||
Net cash used in continuing operations |
| (28,160 | ) | (29,842 | ) | (53,084 | ) | (52,739 | ) | ||||
Net cash provided by discontinued operations |
| — |
| — |
| — |
| 7,906 |
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| (28,160 | ) | (29,842 | ) | (53,084 | ) | (44,833 | ) | ||||
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Financing |
|
|
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|
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| ||||
Increase in long-term debt |
| 20,900 |
| 47 |
| 20,900 |
| 5,199 |
| ||||
Repayment of long-term debt |
| (14,662 | ) | (23,111 | ) | (29,909 | ) | (82,320 | ) | ||||
Issuance of Common Stock |
| 4 |
| 1,401 |
| 798 |
| 2,777 |
| ||||
Net cash provided by (used in) continuing operations |
| 6,242 |
| (21,663 | ) | (8,211 | ) | (74,344 | ) | ||||
Net cash used in discontinued operations |
| — |
| — |
| — |
| (57 | ) | ||||
|
| 6,242 |
| (21,663 | ) | (8,211 | ) | (74,401 | ) | ||||
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|
|
|
|
|
|
|
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| ||||
Increase (decrease) in cash and cash equivalents |
| 216 |
| (5,657 | ) | 1,161 |
| (3,046 | ) | ||||
Cash and cash equivalents, beginning of period |
| 8,400 |
| 11,990 |
| 7,455 |
| 9,379 |
| ||||
Cash and cash equivalents, end of period |
| $ | 8,616 |
| $ | 6,333 |
| $ | 8,616 |
| $ | 6,333 |
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