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Service Corporation International (SCI)

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Vincent Ng, [email protected]

Analyst:Vincent Ng Direct: 1.647.403.3358Email: [email protected] or [email protected]

Disclosure: The Analyst owns a position in Service Corporation International (NYSE: SCI).

Service Corporation International is North America’s leader in the highly fragmented deathcare products and services with 16% revenue market share in Canada and the United States. The Company operates 1,535 funeral locations and 469 cemeteries across 8 Canadian provinces and 45 States. Some of the best known brands the Company controls are Dignity Memorial, Dignity Planning, National Cremation Society, Advantage Funeral and Cremation Services, and Funeraria del Angel.

Investment Drivers (1) Pivotal Locations for the Aging Baby BoomersBased on the latest U.S. Census Bureau there are over 46MM Americans aged 65 or over as of the summer of 2014. The Bureau projects that this number will rise to over 61MM by 2029, which is when the youngest baby bombers will be 65 years old. SCI has strategically placed 40% of their funeral properties in the States that represent the oldest population. These five states represent a total of 16.3MM Americans aged 65 and over, as of the summer of 2014. This means they will be well positioned to take advantage of both atneed and preneed services from customers. (2) Obesity Does Not Discriminate Against AgeObesity is directly associated with 3 of the top leading causes of deaths in America, heart disease, stroke and type 2 diabetes. In fact, obesity has a lower survival rate than smoking. Over 91M Americans, both adults (78.6M) and children (12.7M), are considered obese in the United States. One CDC report revealed that heart disease, stroke, and cancer were among the leading causes to death and is a growing part of the population.(3) Leveraging Their SizeRepresenting 16% of the 21% that the five largest competitors make up, SCI has the ability to leverage its buying power through its network to more efficiently control costs. For example, signing multiple year contracts with national vendors.

Investment Risks (1) Baby Boomers are Living Longer Baby bombers are getting older but the improvements in medicine and technology have also help drive a longer life expectancy. The average life expectancy in Canada is 82 years old and in the United States is 80 years old. (2) Balancing Debt and Interest PaymentsThe Company has about $3.2Bn of debt on the balance sheet. One portion of the debt was raised to fund its 2013 acquisition of Stewart Enterprises for $1.5Bn. The consolidated debt has a weighted average interest rate of 5.2% and 76% of the total debt has a fixed interest rate.

Valuation in Thousands of USDDiscount Rate 8.5X 9.5X 10.5X

5.0% $2,566,557 $2,566,557 $2,566,557 PV of UFCF$5,502,560 $6,149,920 $6,797,280 PV of Terminal Value$8,069,117 $8,716,477 $9,363,837 Enterprise Value$3,032,320 $3,032,320 $3,032,320 Net Debt$5,036,797 $5,684,157 $6,331,517 Equity Value

189,871 189,871 189,871 Shares Outstanding$26.53 $29.94 $33.35 Implied Share Price

Terminal EBITDA Multiples

Recommendation: “Buy” Rating“In this world nothing can be said to be certain, except death and taxes.” - Benjamin Franklin

Price at March 31, 2016Close: $24.6852 Week Range: $20.21 - $32.02

12-Month Price Target: $29.94Upside Potential: 21%

Shares Outstanding: 194.9MMarket Capitalization: $4.7Bn

Estimated Annual Dividend: $0.51Fiscal Year End: December 31

Exchange/Ticker: NYSE (SCI)Bloomberg: SCI USSector: ServicesIndustry: Personal Services

Service Corporation International (NYSE: SCI)Service Corporation International (NYSE: SCI)

May 8, 2023


Valuation (continued)

Target Price $29.94Share Price, March 31, 2016 $24.68Potential 21%Recommendation BUY

Football Field Analysis

$17.37 $18.78 $20.21$17.36

$39.06 $40.85

$32.02$28.14

$24.68

$29.94

$0.00$5.00

$10.00$15.00$20.00$25.00$30.00$35.00$40.00$45.00$50.00

EV/ EBITDA 7.5X to 11.5X, SCI

EV/ EBITDA 8.0X to 12.0X, Peers

52 Week Range, March 31, 2016

P/S, 1.1X to 1.8X

Current Stock Price Target Price

*SCI peers are Carriage Services Inc., Matthews Intl., and StoneMor Partners LP.**EV/EBITDA Multiples used in peer group are forward looking. ***P/S is 5 year historical range for SCI.

Investment Drivers(1) Pivotal Locations for the Aging Baby BoomersSCI dominates the North American deathcare industry with a strong footprint across every major market; see Figure 1 – North American Footprint. The properties are strategically placed in five States, i.e. Texas, California, Florida, New York, and North Carolina, because they represent the highest demographic of 65 years and over. Currently, these five States have over 35% (16.3M out of 46.2M), see Table 1- Five Key States, of the 65 years and over demographic which make them pivotal States for current and future success of SCI. With the expected rise in U.S. deaths, see Figure 2 – U.S. Deaths, over the next decade this shows potential growth that SCI has in the market.

of 15Vincent Ng, [email protected]

Service Corporation International (SCI)Figure 1 – North American Footprint

(2) Obesity Does Not Discriminate Against AgeIn the report, “An Aging Nation: The Older Population in the United States”, obesity was documented as a large problem for the continued enhancement of the average life expectancy in the United States. They state that, “The incidence of obesity increased dramatically between 1980 and 2008, doubling for adults and tripling for children…Obesity increases the risk of a number of health conditions including hypertension, adverse lipid concentrations, and type 2 diabetes.” This suggests that even if baby boomers are living longer, other factors such as obesity, which does not discriminate against age, can negate the impact from the advancements in medicine on the mortality rate in the United States. The number of obese United States citizens is alarming since over 91M Americans fall into this category – 78.6M adults and 12.7M children (aged 2-19 years old). According to a February 2014 article written in the Journal of the American Medical Association (JAMA) the research concluded that, “…the prevalence of obesity in the United States is high, with one-third of adults and 17% of children obese…” - article is titled “Prevalence of Childhood and Adult Obesity in the United States, 2011-2012”. In a study published in 2012 by the Centers for Disease Control and Prevention (CDC) one of the key findings by Dr. Donna Hoyert was that, “Heart disease, cancer, and stroke were among the five leading causes every year between 1935 and 2010.” In summary, obesity has and appears will continue to play a leading role in the mortality rates within the United States.

(3) Leveraging the SystemSome of the deal making that SCI have completed, e.g. Alderwoods ($1.2Bn), Keystone ($265MM), and Stewart ($1.5Bn), over the past ten years have given them cumulative bargaining power when negotiating with suppliers. They have been able to realize immediate success through these acquisitions mainly due to the synergies created with leveraging technology and economies of scale. For example, in order to streamline and simplify the supply chain SCI has a centralized purchasing team. In the past SCI used 187 different suppliers for funeral caskets which created unnecessary drag on the network. It now only handles with 9 funeral casket suppliers. The same aggressive approach has been applied to the cemetery granite suppliers segment. Before there were 200 cemetery granite suppliers used and now only 8 are actively doing business with SCI. It is not only in the supply chain that SCI has found synergies to exploit but the use of functional technology to drive front and back office performance. SCI has been able to improve their processes through the use of salesforce to manage new sales leads and contacts, workday to control human capital and payroll, and carepoint to track and schedule personal care centers. Other areas that SCI has leveraged is the cemetery land care (over $3M saved) and accounting and IT services – Infosys, Tata Consultancy Services, and West (over $8M saved).



Investment Risks(1) Baby Boomers are Living Longer The improvements in medicine and technology have helped not only save countless number of lives but also prolong the lives of many more. In 1960 the average life expectancy in Canada was 71 years old and in the United States was 70 years old. Forward to the modern age and we have escalated the average life expectancy for both countries, i.e. Canada is 82 years old and the United States is 80 years old. Another strong contributing factor to the added life expectancy is mainly due to the drop in smoking. In a report called “An Aging Nation: The Older Population in the United States” the results show that one of the leading causes for mortality is directly related to smoking, “In 1970, 45 percent of the population aged 25 to 44 smoked (this is the population aged 67 to 86 in 2012). In 2011, only 22.1 percent of those aged 25 to 44 smoked (this will be the population aged 64 to 83 in 2050)... Reduction in smoking at younger ages is expected to improve survivorship for these cohorts when they reach the older ages.”

(2) Balancing Debt and Interest PaymentsThe significant portion of the debt on the Company’s balance sheet is related to deals that closed in the past decade, e.g. Alderwoods ($1.2Bn) in 2006, Keystone ($265MM) in 2009, and Stewart ($1.5Bn) in 2013. The coverage ratios such as EBITDA/ Interest Expense at 4.6X and EBIT/ Interest Expense at 3.1X show that SCI is capable to service the debt. When compared against its peer group, Carriage Services Inc., StoneMor Partners LP, and Matthews International, in Net Debt/ EBITDA and Total Debt/ EBITDA SCI has the lowest ratio at 3.8X and 4X. This means that based on EBITDA cash flows SCI is most proficient to pay off the existing debt on the balance sheet.

Ticker Name Net Debt/EBITDA Total Debt/EBITDACSV CARRIAGE SERVICES INC 5.0X 5.0XSTON STONEMOR PARTNERS LP 15.9X 16.7XMATW MATTHEWS INTL CORP-CLASS A 4.1X 4.5XSCI SERVICE CORP INTERNATIONAL 3.8X 4.0X

SCI has a credit rating of BB+ and a one year default probably of 0.0977% according to Bloomberg; see Graph 1 – Bloomberg 1-Year Default Probability. This is backed by about $3.2Bn of debt on the balance sheet with a weighted average interest rate of 5.2% and 76% of the debt issued at a fixed rate. The fixed interest rate gives SCI an opportunity to strategize its interest and principal payments without the volatility of the markets. Also, the majority of the debt 53% or $1.66Bn is backend loaded, debt maturity due 2021 or later, which gives them time to maneuver its cash flows to meet the maturity of the debt; see Table 2 – Debt Maturity. Graph 1 – Bloomberg 1-Year Default Probability

Table 2 – Debt Maturity

Year Amount %2016 95,181 3%2017 437,575 14%2018 727,315 23%2019 16,695 1%2020 225,364 7%

2021 and thereafter 1,664,789 53%Total 3,166,919 100%

*in Thousands of USD

Debt Maturity



Key FactsIndustry OverviewThe deathcare industry is highly fragmented with several independent operators across North America (Canada and the US). The top 5 operators, SCI being the leader at 16% market share, control approximately 21% of the market. The other notable competitors in the industry are Arbor (private company), Carriage, Northstar (private company), and Stonemor. The industry has traditionally and continues to be dominated by independently owned and operated local entrepreneurs. In North America the deathecare industry is estimated to be $19Bn with 22,000 funeral homes and 4,000 cemeteries. The funeral segment is estimated at $15Bn and is motivated by a caregiver attitude. This means catering to specific ethnic and religious cultures with appropriate arrangements. There are also relatively low barriers to entry, except in the high-end market. The cemetery segment is estimated at $4Bn and is mainly driven by a sales mindset. In the cemetery segment there are high barriers to entry due to government zoning restrictions and capital investments. According to the National Funeral Directors Association (NFDA) in the United States there were 19,391 funeral homes in 2015, which is down from 21,528 funeral homes in 2004. The median cost of a funeral with burial has gone up from $6,580 in 2004 to $8,508 in 2014, representing a 29.3% increase.

RevenuesThe growth of preneed backlog has grown to $9.5Bn, which are contracts that customers have signed but revenue cannot be fully recognized until service and/ or merchandise have been provided. The cumulative preneed backlog is divided between funeral services of $7Bn over 2.8MM contracts, and cemetery services of $2.5Bn over 1.7MM contracts. The average total annual preneed sales from funeral services represent $800MM (~174k customers) and cemetery services represent $765MM (~135k customers). Therefore, the average funeral service is ~$4,600 and cemetery service is ~$5,700. The preneed sales provides several positive attributes for SCI; first, it helps create a brand awareness within the community; second, it helps drive future market share; third, it provides a competitive advantage when negotiating contracts with suppliers.

Eric Tanzberger, SVP, CFO, and Treasurer, mentioned in a recent Raymond James Institutional Investor Conference that, “…, we think about one out of every four contracts…of pre-arranged funeral sales, is actually going to our branded home...” If this is indeed correct than SCI is capturing market share in the highly fragmented deathcare space. This will most likely continue as Steve Tidwell, SVP of Sales & Merchandising, leads the largest sales team, i.e. ~5,000 sales counselors, in the deathcare market. The penetration of 1,800 Pre-Planning Advisors and 2,300 Family Service Counselors to reach local communities is unparallel to its closest competitor StoneMor Partners, which has ~800 total sales counselors. The recent introduction of saleforce’s CRM platform will only contribute to a stronger and more effective sales team.

The bulk of total revenues are driven by the funeral segment, representing 63% or $1.9Bn of Sales, and the remaining portion is directed by the cemetery segment, representing 37% or $1.1Bn of Sales; see Graph 2 – 2015 Revenue Distribution. The Canadian operations delivered $181MM, or 6% of total sales, to the Company’s top line in 2015. Over the past ten years, revenues in Canada have stayed relatively stable representing 8% of total sales.

In order to attractive a greater and more diverse market SCI has used a tiered product and pricing offering to accommodate the local communities that have ethnic traditions and customs; see Graph 3 – Ethnic and Religious Needs. This has been and will continue to be part of the growth strategy in the cemetery segment.

Fifty six percent of the cemeteries (262 out of 469) are considered “combination locations” which means that the funeral service is connected to the cemetery. The combination locations are a win-win for the customers and SCI because it creates cost efficiencies and synergies between the funeral service and the cemetery, leading to higher margins, and allows the customer, both atneed and preneed, added comfort and value as a one stop shop.

In the future, revenues should continue to be strong and stable with the support of the $9.5Bn preneed backlog. The sales team will continue to contribute to increasing sales with the efforts of its new salesforce CRM platform, tiered product and pricing schedule, and robust combination locations; see Graph 4 – Tiered Product & Pricing.


Service Corporation International (SCI)Graph 2 – 2015 Revenue Distribution

*in Thousands of USD

$1,888,812 63%

$1,097,568 37% Funeral

Cemetery

Dividend & Share Repurchases Since 2011 over $1.2Bn of value has been returned to shareholders through dividends and share repurchases. Based on the capital deployment strategy it is expected that additional value will continue to be returned to shareholders in the future. This message is further echoed by the increased dividend payout ratio, which was previously 25%-35% but has since been increased to 30%-40% of recurring net income.

Based on the recent historical patterns of dividend payments it is forecast that an annual distribution of $0.51/ per share is expected. Since the reinstatement of the dividend in 2005 it has steadily climbed to an annual $0.44/ per share in 2015. Typically the dividend increase is not reflected until Q2 or Q3.

Graph 5 – Historical and Estimated Quarterly Dividend

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$0.02

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$0.12

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$0.16

2011 2012 2013 2014 2015 2016

in U

SD $0.51 estimated 2016 dividend

The share repurchase program has decreased shares from 222M in 2011 to 195M in 2015, representing a 12% or 27M share drop. It is expected that SCI will utilize the available $278.8M in the share repurchase program to extend the share repurchase. It is anticipated that shares will stabilize around 190M shares in 2016, thus illustrating a 14% or 32M share downtick from 2011. The acquisition of Stewart Enterprises for $1.5Bn in 2013 was the only year, since 2011, that did not see a contraction in the share count.


Service Corporation International (SCI)Graph 6 – Historical and Estimated Annual Share Count

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Estimated

Acquisition of Stewart Enterprises for $1.5Bn

Share PerformanceSince 2011 the S&P 500 has seen a rise of 61% compared to SCI which has advanced 185%. When compared to its peer group, SCI is ranked second only behind Carriage Services Inc. (CSV) as the top performer.

Graph 7 – Five Year Stock Performance of SCI vs. S&P 500 vs. Peers

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SCI vs. S&P 500 vs. Peers5 Year Performance

SPY SCI CSV MATW STON

CSV, $4,429 or +325%

SCI, $2,975 or +185%

STO N, $802 or -21%MATW, $1,480 or +47%

SPY, $1,633 or +61%

Leadership TeamChairman/CEO – Thomas L. RyanMr. Ryan was most recently elected Chairman of the Board of SCI effective January 2016 and has been CEO since early 2005. He initially joined the Company in 1996 and has served in a number of diverse financial leadership roles. Prior to joining SCI, Mr. Ryan was a CPA for Coopers & Lybrand LLP. He attended the University of Texas at Austin.

Senior VP/CFO/Treasurer – Eric D. Tanzberger Mr. Tanzberger was appointed Senior VP and CFO in the summer of 2006 and later in the following summer was named Treasurer. He initially joined the Company in August of 1996 and retained several management roles prior to his promotion in August of 2002 to Corporate Controller. Prior to joining SCI, Mr. Tanzberger was


Service Corporation International (SCI)the Assistant Corporate Controller at Kirby Marine Transportation Corp., an inland waterway barge and tanker company. He graduated from the University of Notre Dame with a bachelor’s in business administration. Senior VP of Sales & Merchandising – Steven A. TidwellMr. Tidwell was appointed to Senior VP of Sales and Merchandising in 2012. He originally joined the Company as a VP early in 2010. Mr. Tidwell was a co-founder of Keystone North America, where he served as President and CEO from May 2007 until it was acquired by SCI. At the start of Mr. Tidwell’s career he was a licensed Funeral Director and Embalmer in Nashville, Tennessee. He graduated from John A. Gupton College with an AA degree and has since completed Executive Management and Leadership programs at Harvard Business School.

Table 3 – Executive Officers of the Company

Officer Name Position Year First Became Officer AgeThomas L. Ryan Chairman of the Board and CEO 1999 50Michael R. Webb President and COO 1998 57Eric D. Tanzberger Senior VP, CFO and Treasurer 2000 47Gregory T. Sangalis Senior VP, General Counsel and Secretary 2007 60Sumner J. Waring, III Senior VP, Operations 2002 47Steven A. Tidwell Senior VP, Sales and Merchandising 2010 54Tammy R. Moore VP and Corporate Controller 2010 48R. L. Waltrip Founder and Chairman Emeritus 1962 85

RatiosRatio Analysis 2013 2014 2015 2016 2017 2018 2019 2020

SolvencyDebt Ratio 88.5% 88.4% 89.9% 90.1% 89.9% 89.3% 88.6% 87.8%Net Debt/ EBITDA 5.2X 3.9X 3.8X 4.0X 3.8X 3.5X 3.2X 2.9XTotal Debt/ EBITDA 5.5X 4.1X 4.0X 4.3X 4.1X 3.9X 3.7X 3.5X

Profitability - %OROA 3.1% 4.1% 4.6% 4.3% 4.4% 4.5% 4.6% 4.7%ROC 1.1% 1.4% 2.0% 1.7% 1.8% 1.9% 2.0% 2.1%ROE 10.0% 12.6% 19.7% 17.1% 17.7% 17.5% 17.7% 17.2%ROA 1.1% 1.4% 2.0% 1.7% 1.8% 1.9% 2.0% 2.1%NPM 5.8% 5.8% 7.8% 6.4% 6.6% 6.7% 7.1% 7.2%GPM 27.2% 28.5% 28.3% 27.2% 27.2% 27.2% 27.2% 27.2%ROIC w/ Goodwill 2% 3% 3% 3% 3% 3% 3% 4%ROIC w/o Goodwill 3% 3% 4% 3% 4% 4% 4% 4%

CoverageEBITDA/ Interest Expense 4.2X 4.1X 4.6X 4.0X 4.1X 4.3X 4.8X 4.9XEBIT/ Interest Expense 2.8X 2.8X 3.1X 2.6X 2.7X 2.9X 3.2X 3.2X

MultiplesEnd of Year Price $18.12 $22.76 $25.62 $25.62 $25.62 $25.62 $25.62 $25.62BV per share, Basic $6.94 $6.49 $5.91 $6.05 $6.25 $6.70 $7.22 $7.75Basic EPS $0.70 $0.82 $1.17 $1.04 $1.11 $1.17 $1.28 $1.33Sales per Share $12.04 $14.21 $14.91 $16.12 $16.82 $17.40 $17.99 $18.61EBITDA per Share $2.84 $3.50 $3.94 $3.94 $4.11 $4.25 $4.40 $4.55EBIT per Share $1.86 $2.33 $2.71 $2.62 $2.73 $2.83 $2.93 $3.03Enterprise Value $7,008,489 $7,682,507 $8,170,150 $7,877,811 $7,669,077 $7,459,729 $7,247,926 $7,041,068Enterprise Value per Share $33.09 $36.45 $40.78 $41.49 $41.11 $40.35 $39.57 $38.79

Historical Estimated



AppendixTable 1 – Five Key States

State Funeral Cemeteries 65 Years and OverTexas 164 64 3,100,050 California 172 37 5,005,523 Florida 131 60 3,799,620 New York 82 0 2,902,695 North Carolina 60 17 1,461,763 Total 609 178 16,269,650 35%USA 46,234,273

Figure 2 – U.S. Deaths



Graph 3 – Ethnic and Religious Needs

Graph 4 – Tiered Product & Pricing



Key Variables

Risk Free Rate 1.90% Debt $3,166,919 Debt (%) 40%Market Risk Premium 4.62% Stock Price $24.68 Equity (%) 60%Beta 0.94 Shares Outstanding 189,614 Total 100%Cost of Equity 6.24% Equity Value $4,679,671Cost of Debt 5.38% # of Periods 5WACC 5.10% Long Term Growth Rate 2.5%Tax 36% EV/ EBITDA Multiple, Current 9.8XCash and cash equivalents $134,599

Key Variables to DCF Analysis

Data Table Analysis Scenario Comparison

$0.00 7.5X 8.5X 9.5X 10.5X 11.5X $0.00 7.5X 8.5X 9.5X 10.5X 11.5X $0.00 7.5X 8.5X 9.5X 10.5X 11.5X4.0% $17.69 $20.59 $23.49 $26.39 $29.29 4.0% $24.76 $28.33 $31.91 $35.49 $39.06 4.0% $33.57 $38.04 $42.52 $47.00 $51.475.0% $16.34 $19.10 $21.87 $24.63 $27.40 5.0% $23.12 $26.53 $29.94 $33.35 $36.76 5.0% $31.55 $35.82 $40.08 $44.35 $48.626.0% $15.06 $17.70 $20.33 $22.97 $25.61 6.0% $21.56 $24.82 $28.07 $31.32 $34.57 6.0% $29.64 $33.71 $37.78 $41.85 $45.927.0% $13.85 $16.36 $18.88 $21.39 $23.91 7.0% $20.09 $23.19 $26.30 $29.40 $32.50 7.0% $27.83 $31.71 $35.59 $39.48 $43.368.0% $12.69 $15.10 $17.50 $19.90 $22.30 8.0% $18.69 $21.66 $24.62 $27.58 $30.54 8.0% $26.11 $29.82 $33.52 $37.23 $40.949.0% $11.60 $13.90 $16.19 $18.48 $20.78 9.0% $17.37 $20.20 $23.02 $25.85 $28.68 9.0% $24.48 $28.02 $31.56 $35.10 $38.64

Terminal EBITDA MultiplesTerminal EBITDA Multiples Terminal EBITDA MultiplesCase A - Worst Performance Case B - Base Performance Case C - Best Performance

Free Cash Flow



ScenarioCase B - Base Performance

Service Corporation International (NYSE:SCI)Fiscal Year Ended December 31

Consolidated Statement of Operationsin Thousands of USD 2013 2014 2015 2016 2017 2018 2019 2020Net Sales 2,550,466 2,994,011 2,986,380 3,061,040 3,137,565 3,216,005 3,296,405 3,378,815

% Growth 17% 0% 2.5% 2.5% 2.5% 2.5% 2.5%EBITDA 602,300 736,842 788,513 748,509 767,221 786,402 806,062 826,214

% Margin 24% 25% 26% 24% 24% 24% 24% 24%(-) Depreciation and Amortization 208,381 245,906 244,756 250,794 257,064 263,491 270,078 276,830EBIT 393,919 490,936 543,757 497,715 510,157 522,911 535,984 549,384

% Margin 15% 16% 18% 16% 16% 16% 16% 16%(-) Taxes 93,024 225,980 135,027 112,611 118,112 123,904 133,763 138,474Marginal Tax Rate 24% 46% 25% 23% 23% 24% 25% 25%Unlevered Net Income 300,895 264,956 408,730 385,104 392,046 399,007 402,222 410,910Plus: Depreciation and Amortization 208,381 245,906 244,756 250,794 257,064 263,491 270,078 276,830Plus: Other Amortizations 86,146 105,904 103,300 105,850 108,496 111,208 113,988 116,838Plus: Provision for doubtful accounts 7,874 7,376 6,083 7,742 7,936 8,134 8,337 8,546Plus: Provision for deferred income taxes 71,708 129,671 18,048 (1,938) (3,159) (16,462) (28,025) (38,210)Plus: Changes in Working Capital (73,997) (111,855) (21,592) (59,140) (15,699) (16,091) (16,494) (16,906)Less: Capital Expenditures (99,720) 279,884 (134,214) (137,569) (141,009) (144,534) (148,147) (151,851)Unlevered Free Cash Flow 501,287 921,842 625,111 550,842 605,674 604,754 601,960 606,156





in Thousands of USDDiscount Rate 8.5X 9.5X 10.5X










Income Statement


x Consolidated Statement of OperationsUSD ($) shares in Thousands 2013 2014 2015 2016 2017 2018 2019 2020

Revenue 2,550,466 2,994,011 2,986,380 3,061,040 3,137,565 3,216,005 3,296,405 3,378,815YoY Growth % 17% 0% 2.5% 2.5% 2.5% 2.5% 2.5% Drivers

Costs and Expenses 1,857,325 2,141,684 2,141,520 2,229,140 2,284,868 2,341,990 2,400,540 2,460,553Gross profit 693,141 852,327 844,860 831,900 852,697 874,015 895,865 918,262

% of Sales 27% 28% 28% 27.2% 27.2% 27.2% 27.2% 27.2% DriversOperating ExpensesGeneral and administrative expenses 90,841 115,485 56,347 83,391 85,476 87,613 89,803 92,048

% of Sales 3.6% 3.9% 1.9% 2.7% 2.7% 2.7% 2.7% 2.7% DriversEBITDA 602,300 736,842 788,513 748,509 767,221 786,402 806,062 826,214

EBITDA Margin % 24% 25% 26% 24% 24% 24% 24% 24%YoY Growth % 22% 7% -5% 3% 2% 3% 2%

Depreciation and amortization 122,235 140,002 141,456 144,945 148,568 152,282 156,089 159,992Amortization of intangible assets 21,859 36,640 31,459 31,980 32,780 33,599 34,439 35,300Amortization of cemetery property 48,344 60,439 62,407 61,260 62,792 64,362 65,971 67,620Amortization of loan costs 15,943 8,825 9,434 12,609 12,924 13,247 13,579 13,918Total D&A 208,381 245,906 244,756 250,794 257,064 263,491 270,078 276,830

% of Sales 8% 8% 8% 8% 8% 8% 8% 8%EBIT 393,919 490,936 543,757 497,715 510,157 522,911 535,984 549,384

EBIT Margin % 15% 16% 18% 16% 16% 16% 16% 16%YoY Growth % 25% 11% -8% 3% 2% 3% 3%

Interest expense 142,360 177,571 172,897 188,422 185,756 182,601 168,597 169,056EBT 251,559 313,365 370,860 309,293 324,401 340,310 367,387 380,327

EBT Margin % 10% 10% 12% 10% 10% 11% 11% 11%Tax 93,024 225,980 135,027 112,611 118,112 123,904 133,763 138,474

Tax Rate 37% 72% 36% 36% 36% 36% 36% 36% DriversNet Income (Adjusted) 158,535 87,385 235,833 196,682 206,289 216,406 233,625 241,853

Net Income % 6% 3% 8% 6% 7% 7% 7% 7%




Income Statement Continued


x Consolidated Statement of OperationsUSD ($) shares in Thousands 2013 2014 2015 2016 2017 2018 2019 2020

Net Income (Adjusted) 158,535 87,385 235,833 196,682 206,289 216,406 233,625 241,853Net Income % 6% 3% 8% 6% 7% 7% 7% 7%

Non-Recurring EventsGains (losses) on divestitures and impairment charges, net -6,263 116,613 6,522 - - - - - (Losses) gains on early extinguishment of debt, net 468 -29,158 -6,918 - - - - - Net (loss) income from discontinued operations, net of tax 406 2,186 -390 - - - - - Other (expense) income, net -558 1,780 -113 - - - - - Total Non-Recurring Events -5,947 91,421 -899 0 0 0 0 0Net Income (Reported) 152,588 178,806 234,934 196,682 206,289 216,406 233,625 241,853Net income attributable to noncontrolling interests -5,256 -6,337 -1,162Net income attributable to common stockholders 147,332 172,469 233,772 196,682 206,289 216,406 233,625 241,853

147,332 172,469 233,772Basic earnings per share:Net income attributable to common stockholders, basic $0.70 $0.82 $1.17 $1.04 $1.11 $1.17 $1.28 $1.33Basic weighted average number of shares 211,811 210,741 200,356 189,871 186,531 184,860 183,190 181,520Diluted earnings per share:Net income attributable to common stockholders, diluted $0.68 $0.81 $1.14 $0.99 $1.04 $1.09 $1.17 $1.22Diluted weighted average number of shares 216,014 214,200 204,450 198,839 198,839 198,839 198,839 198,839Dividends declared per share 0.27 0.34 0.44 $0.51 $0.55 $0.59 $0.63 $0.67



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