Service Corporation International (NYSE:SCI) Q4 2018 Earnings Conference Call Transcript
Feb 19, 2019 • 09:00 am ET
Welcome to the Fourth Quarter 2018 Service Corporation International Earnings Conference Call. My name is Sophia and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. (Operator Instructions)
Please note that this conference is being recorded. I will now turn the call over to SCI management. You may now begin.
Good morning to the SCI call. Thanks for joining us as we discuss our fourth quarter and our year-end results. As usual, I'm going to go through the customary Safe Harbor language, before we begin with prepared remarks from the quarter from Tom and Eric. 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 website. In today's comments, we may also refer to certain non-GAAP measurements, such as adjusted EPS, adjusted operating cash flow and free cash flow. A 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 or earlier this morning actually.
All right. With that over with, I will now turn the call over to Tom Ryan, SCI's Chairman and CEO.
Thomas L. Ryan
Thanks, Debbie. Hello, everyone, and thank you for joining us on the call this morning. Today I'd like to start by reflecting on the full year of 2018, then I'll get into the analysis of the fourth quarter, and end with some color on our outlook for 2019. So first, some observations looking back at the year, 2018. For the full year, we were proud to report double-digit percentage growth in adjusted earnings per share and adjusted operating cash flow. The $1.79 we reported in adjusted earnings per share was a $0.24 or more than 15% improvement over 2017. Solid revenue increases, particularly in the cemetery segment were somewhat offset operationally by higher salaries and wages from intentional adjustments made in the beginning of the year as well as from higher self-insured health and general liability costs that were not anticipated. These increased costs impacted both business segments as well as general and administrative expense.
In total, operations including the overhead burden contributed $0.11 to the $0.24 earnings per share improvement. Increased debt levels from acquisition funding and higher average variable rates tied to LIBOR led to higher interest expense for the year that effectively offset the favorable impact from lower average share count. So the remaining $0.13 in earnings per share improvement for the year was from a favorable tax rate, which was primarily due to the lower federal rate from the 2017 Tax Act as well as favorable state tax result.