Service Corporation International (SCI) Q3 2012 Earnings Report, Transcript and Summary

Welcome to the Q3 2012 Service Corporation International Earnings Conference Call. My name is Cristine, 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. Please note, that this conference is being recorded. I will now turn the call over to SCI management. You may begin.

Hi. Good morning. This is Debbie Young, Director of Investor Relations for SCI. We welcome you today to our call as we discuss our third quarter results and our outlook for next year. And our comments today will make statements that are not historical facts and are forward-looking. These statements are based on assumptions that we believe are reasonable. However, there are many important factors that could cause our actual results in the future to differ materially from these forward-looking statements. For more information related to these statements and other risk factors, please see our filings with the SEC that are available on our website. Also, today on the call, we will use the terms normalized EPS, adjusted operating cash flow and free cash flow, all of which are non-GAAP financial terms. For reconciliation of these terms to the appropriate measures calculated in accordance with GAAP, please see our press release and 8-K that was filed yesterday. We have also posted a presentation on our website containing each of these reconciliations that you can find under the subheading, Website and Presentation. With that, we’ll now begin with comments from Tom Ryan, SCI’s President and CEO.

Thanks, Debbie, and thanks everybody for being on the call today. We are going to or I’m going to start with an overview of key items from the quarter, then move to the more detail review of both funeral and cemetery operations, and finally, add some additional color on our outlook for 2013. So to begin an overview of the quarter. We had an outstanding quarter, with significantly increases in both funeral and cemetery profits, in an impressive 36% growth in normalized earnings per share, that exceeded not only external expectations but our own internal expectations. I want to thank our hardworking team over 20,000 professionals who make these results possible, while continuing to provide everyday extraordinary service to our client families. These results highlight the leverage we have in our business, where modest revenue growth can translate into substantial earnings per share growth. Our normalized earnings per share increased $0.05 to 19% versus $0.14 in the prior year quarter. Most of this increase came from operating earnings growth. Growth in cemetery gross profit contributed approximately $0.02 of the total $0.05, as revenues recognized from the completion of new cemetery property construction project generated comparatively higher margins approaching some 80%, because the associated selling costs were recognized in prior periods when the sale occurred. Comparable funeral profit growth contributed another penny, as lower merchandize expense, selling and advertising costs, and favorable staffing efficiency more than overcame a slight revenue decline. Non-comparable funeral operations delivered another penny as incremental performance from recent acquisitions began to take hold. Finally, an additional penny improvement came from the favorable impact from share repurchases and foreign currency impact from liability settlement somewhat offset by increases in general and administrative expense, predominantly incentive-related and a slightly higher tax rate. Free cash flow produced during the quarter…

Thanks, Tom. I’m going to continue our comments today. With our prepared remarks, I’m going to give you our thoughts about our cash flow results and free cash flow deployment in the third quarter. Then, I’ll have some comments about our cash flow outlook for the remainder of 2012 and I’ll also discussed 2013 as well. Let’s start with cash flow during the third quarter. The result in the quarter grew about $7 million, or 6% on an adjusted basis over the prior year quarter and this was in line with our expectations. You can see the reconciliation in our press release and our website that Debbie mentioned, but this excludes some modest amounts related to system and process transition costs. The increase in adjusted operating cash flow was due to higher EBITDA of about $12 million that was partially offset by timing differences in working capital. These differences primarily relate to our increase in pre-need cemetery property sales that were sold on an installment basis as Tom just discussed in his remarks as well. Maintenance CapEx and cemetery development CapEx and again, these are the two components that we consider our recurring CapEx. In the quarter, these amounts were flat at about $26 million, and this again was in line with our expectations. Deducting this recurring capital spending items from adjusted cash flow from ops, we calculate our free cash flow for the third quarter to be about $97 million and this grew roughly 8% over the prior year quarter. On a free cash flow per share basis, this represents $0.44 of free cash flow per share, representing impressive growth of 16% over the prior year quarter on a per-share basis. So, I’m going to talk about how we deploy that free cash flow during the quarter. As Tom…

Thank you. (Operator Instructions) And our first question comes from A.J. Rice of UBS. Please go ahead.

Thanks. Hello, everybody. A couple of quick questions if I could ask. On the acquisitions in the quarter and then the comment about -- related to the fourth quarter, on the cash flow statement as you spend $9 million for acquisition-related activities, is that all of the North Carolina property or was there anything else in there?

I think there was some other things that were also in there, A.J. in that I mean all of the number.

Okay. All right.

With regards to the fourth quarter, we are pretty excited about it. There is a lot of activity. John Faulk is sitting here with me and his team is working very hard, has been on the road quite a bit and there is a number of deals. I mean, I could count them all on one hand, about probably two, give an idea…

Do you think that’s driven by people who wanted to do tax planning ahead of whatever comes next year gets the reduction or talks, or do you think you are just seeing a natural pickup in the underlying tone of the market?

I think more of the former. There is a lot of people that are being driven by fear as to what is to come with regards to taxes. But again, that is probably what pushes them more to the hump, only getting by just selling just for that reason. You get to a point where it makes sense, but we definitely are seeing, I’d say some acceleration of that behavior.

Okay. And then maybe just one other area. Clearly in the quarter, there was some discussion about all of things that were happening in the REIT world and non-traditional companies are looking at taking on REIT structures and so forth, and for whatever reason your name is serviced on that. Can you give us any, maybe a little discussion about what you're thinking along those lines will be and the opportunity and the challenges to considering something like that might be?

Hey, David. This is Eric. As you know and you’ve seen our track record, we are always looking at different projects and different ways to enhance shareholder value. A REIT structure that came up recently, mostly because of the non-traditional REITs out there, is just one piece of an equation. They were always looking at ways to increase our shareholder value. The update is that structurally, there's some complexity for a company to get into that in a non-traditional REIT area and we are currently forming our opinion at that. But I would tell you that it’s going to take a while for us to complete that analysis.

And again, A.J., the full benefit of a REIT would be when you are a full taxpayer and as Eric pointed out, we are still not, but always worthy of aspiration for the benefit of shareholder value. So if we just get to a point where we got under this offer, we’ll surely let you guys now.

All right. And then maybe just, final thing here. In your guidance for next year, you didn’t mentioned buyback or acquisitions. I'm assuming there is no further buyback baked in there. It sounds like you’ve probably pursued, but you just didn’t baked in there and is that true for acquisitions as well?

Yeah. I think, what we’ve done in there is minimal amounts of both, because again, we don’t know which way we are going to drive it and what’s going to happen, and that’s being consistent with whatever we’ve done over the last few years, predominantly. So, yeah, there is some upside to capital deployment in 2013.

Okay. All right. Thanks a lot.

Thank you. Our next question is from Chris Rigg of Susquehanna. Please go ahead.

Good morning. Thanks for taking my question. I just wanted to and maybe I missed it and if I did I apologize. But did you guys give directionally, what do you think operating income next year is going to be up or down relative to 2012?

Yeah. The operating income is going to be, Chris, for sure and again, not looking at our sheet, but my memory, operating income should be -- I don’t have in front of me because I don’t know. I think on a pre-tax basis, it’s surely somewhere in the $8 million to $15 million range like that.

Okay. And then the tax rate for the guidance next year is what percent?

It would be north around where it is right now, which is 37% to 38% absent any type of discrete items that’s up that obviously they are not forecasted.

Okay. And then on the cemetery develop and project completion for next year. Is that going to be comparable to this year or up or down or any color there would be helpful?

I think generally it’s going to be about the same, Chris, the way to think about it, because our philosophy on cemetery sales, which shifted back in the mid-2000, it’s been pretty consistent year-over-year and we are building fantastic cemetery inventory for people to see and to buy and that’s really been the strategy that we’ve deployed, which is a little heavy on capital in the front but really generates sales in the back. So we are going to continue that program in 2013 and beyond.

Okay. And then just qualitatively on the refresh dignity and you guys said you’re going to -- given what you saw in the quarter, going to go back out to the field and do some retraining. Can you give us a sense for what you guys are seeing that you don’t like with regard to the refreshment of the product?

It is so much that we don’t like. I think what we find Chris, we want to get this out there. People are anxious for it to get into markets. And when you think about going into funeral home side, almost 1500 locations. It is the chore and we only have so many resources to train and so we want to get it up and running. And so what I would say is we got to be up and running in every place we possibly can., And what we find is in one market, it’s very successful because it was trained well, received well and we’re seeing an traction and their market next door maybe a total different reaction for a variety of reasons that may be that we didn’t stay long enough due to training. So what we find is when we roll these things out sometimes it doesn’t track the first half. So we’ll be doing the rest of this year and early part of next year. We’re going back to the market and saying why hasn’t this worked because the concept of this refresh was enhanced flexibility. One of the pushbacks we had for forward, it was flexible enough too rigid of a program. So we think what people really understand the benefits of the flexibility and understand the substitution capabilities with regards to product that once that really registers, it’s going to take hold of all these markets. So that’s our mission 2013 and I feel pretty good about it. I’m just -- pointing out that we have ruled it out now to everybody. It’s improvement from here.

Okay. Thanks a lot.

Thank you. Our next question is from Clint Fendley of Davenport. Please go ahead.

Thank you. Good morning guys. Nice quarter and nice outlook here. First question on the cemetery side, I guess, and if I understood you correctly, it sounds like obviously benefit flow through in the quarter about $5.1 million due to the cemetery construction. I wondered how much we would expect to potentially hit then in the fourth quarter and if you could find that against what I believe you characterize this sort of a tougher quarter that’s coming up for this cemetery segment.

Yeah. Let me speak to the 5.1. It’s a little confusing, Clint. I’ll try to clarify for you. What we call construction revenues is once this is completely constructed, whatever has been sold in that backlog gets triggered. Little bit of a deceiving number. The number for the quarter was probably more like $7.5 million of more constructed revenue. Let me explain what constructed revenue really is these days. If you think about our project that’s been built, we’re selling it aggressively in the first part of the year and particularly in this quarter. Just think about this quarter beginning in first day of July, we’re sort of heck out of a project, that’s going to be completed at the end. Lot of the sales occurred during the third quarter. It just so happens is that it has deferred into a bucket until that final world has put in and now that’s considered constructive. So I think the better way to think about it is to look at the production that’s occurring over periods of time and again we are up 9% on a premium basis year-to-date. So when you think about the fourth quarter, we have lot of that constructed activity occur in the prior year. We won’t have as much “constructed inventory” whereas I do believe though is we’re going to sell more and be able to recognize more because that constructive inventory already exists. So rather than confusing with when things get called construction and not, I would point you towards, we feel comfortable that from a production basis in what we’re able to recognize, we’re going to have a solid fourth quarter. Just know that the accounting treatment of last year’s quarter gave it a heavier dose of profit. Again, not something we can overcome, just relative information for you.

Okay. So we still expect this as strong quarter but probably just not quite as good as the 22.5% margin that we saw a year ago. Is that the right word?

Probably so. I mean, I’m saying it can’t do it but again I think that was helped by the fact that you recognized their revenue in the selling costs went there. You already took it in prior quarters in 2011. So agreed with your statement but again we feel if you look at the guidance 18% to 21% for the fourth quarter, that shows you that hey, we’re in the ballpark of last year, may be beaten it. The things that are going to really help us to have a reduced share count and we’ve done a good job of managing our expenses throughout the year. So we believe that’s going to overcome any differential in the cemetery business if there is one.

Okay. Fair enough. And did you guys notice any -- just change in the selling environment for the pre-need during the quarter and any changes on the part of the consumer?

Not anything to speak of but again I think the two things to decline. I mean year-to-date 9.1% and we’re comparing against the third quarter of last year that grew 23%. So over the loss of 4% and that we really trying to overcome. So I don’t see anything. I mean, the clearly the consumer is a bit distractive by things that are happening out there and we’re seeing that consistently over the last few years. And again review of what we sell as -- while it is discretionary, it’s probably one of the least discretionary when you characterize those items because it’s a planning event. It’s taking care of something. It’s getting people peace of mind. So even in difficult times, people are coming back and wanting to take care of something like this. So nothing noticeable to point out for you at this point.

Okay. A couple of questions quickly here on the guidance. I wondered what share count was implicit within the fourth quarter guidance. Are we expecting maybe slightly north of the, I believe, $212 million that you referenced in the commentary?

From a weighted average perspective, it will be slightly higher than that. I think for the whole year, the weighted average comes down to just under $220 million for the whole year.

Okay. And I wondered what volume expectation was baked into the 2013 guidance. We’re still sort of thinking flat to slightly down.

Yeah. I think our midpoint of our guidance is slightly down similar to the trends we experienced in the last two years.

Okay. And then final question I mean, just any idea when you might be able to complete the lead analysis that you’re doing. And I wondered if you’ve had any discussions with IRS on the potential conversion yet?

We’ve not done any discussions with the IRS client on a potential convergent. If we go down this research path that we’re doing forming an opinion and it continues to look like something that will give us tax efficiency, we’ll continue to go as far as we can to form the full opinion as where I describe it. If you do involve the IRS, it’s not going to be timely. My guess would be maybe 6 to 12 months we could have that opinion formed one way or the other.

Okay. Excellent. Thank you guys and again nice quarter.

Thanks, Clint.

Thank you. Our next question comes from Robert Willoughby of Bank of America.

Yeah. Tom and Eric, can you speak to just sort of the revenue trends surprising trends you’re seeing under base cremations and then kind of some representation of what you’re seeing under the memorialization-type event, cremation event that you have? How was the number of those growing and how surprising comparing?

I think on the cremation side, Bob, I don’t have anything right in front of me but looking at some of the churns, cremation growth is actually better than the burial growth from a percentage perspective. So we’re seeing some traction in people again probably in our enhanced presentation materials, in our ability to deliver products associated with more relevant to cremation consumers. So the churns on cremation pricing actually is little better than historical memorial. And again speaking over quite a longer period of time and not so much to the quarter but even in a quarter, I’m looking at something now that is up. I think some 3% on a year-to-date basis for cremation and on the burial side, closer to 2, 2.5. So trends are good there. Again, I don’t think the tough part someone referenced before, it’s still a tough economy out there and I don’t think you have highly confident consumer particularly our targeted audience with interest rates as well as they are, that being in a very consumable spend to where again, very cognizant of that fact in trying to find ways to make these things affordable through payment terms upon pre-need basis. But we’ve been able to continue to enhance the pricing mainly through increased mix, getting people to buy additional product and services that are relevant. So we feel pretty good relative to other retailers realizes it’s a challenge.

And just to be clear dormant, there is a base cremation which should be kind of at the lowest end business you see and do but you -- I guess, you’re seeing -- you do see a little bit of a price pump there and then we kind of percentage of cremations that are answering, taking more and more, two or months one or more -- two or more of the things that you offer, some type of memorialization issue. What representation of that is, is that the total cremation procedures? Is that a fair question?

Yeah. It is and I think on both accounts, we’re seeing increases obviously on -- increases on direct cremation, that’s a direction function of our pricing. And again we view direct cremation as something we want to participate in but again we’ve got to have a price that allows us to make some money in this business. And so with inflationary cost of that one, I think it’s up some 2% or so year-over-year. And so the reason we get to the 3, 3.5 for the year is that cremation was services doing even better. Because again back of that expanded take up rate and getting each packages more. So we feel good about both trends. I’d say the direct cremation trend is going to correlate well with base inflation and the other one that has ability for upside with regard to products and services.

And just to go with healthcare, the guidance for next year. I’m not pushing the volume. I’m not really kind of pushing any type of trust for return assumption. So there is a lot of things happening on the margin. Can you possibly give us the buckets in terms of what the bigger drivers, what the smaller drivers and things like the newer services like events planning in each laurel. What are those adding year-over-year in terms of your guidance increase?

Okay. I think the way to think about it, Bob, is this. On a funeral side, we launched a lot of new things in 2012, which had an impact. First, take any packages, as you mentioned e-commerce floral sales, additionally the catering in events packages all those things are in the 2012 number because I think about 2013, we should see some bounce but probably harder to overcome because you’re comparing back again those initiatives. So the funeral side of business, so we’re sharing something exciting to tell you. I think our expectation that we could maintain margins, we will have slight revenue increase which eke out slight increases in cash flow. And the real -- left side 2013 like we’ve said over the last few years, our ability to grow cemetery profit. And that’s predominantly going to be a function of our ability to maintain sales minimal on a pre-need basis. So open that cemetery inventory, training and getting good leads and utilizing those leads effectively leading into the system. So I think it’s really going to hinge upon how successful are we on selling pre-mature. We also know that we’ve got initiatives launched that are going to say this to money. I referenced them a little bit, spend smart which is a new system that is going to allow us to have information to manage our supply chain much more effectively. So it’s a fantastic system that we think is going to allow us to leverage some of our sizing units. And secondarily, Eric mentioned earlier we’ve got to financing accounting business process improvement where we lose some off shoring capabilities that with one vendor to another is going to allow us to really transform the way we do the financing and accounting function and save us a lot of money in the mean time. It’s a long-term project and it pays down over five years but these are two things in particular that you’re going to leverage again our size and be able to reduce some of our costs. So look further for that and look for the cemetery and that’s going to tell the sales how good 2013 is. We’re going to lend some good acquisitions. We got some good ones that we’ve had so far this year, mostly close to more in the fourth quarter and those will be impactful but again not a lot more. That tends another one. They have enough tunnel, continue to improve. We’re very pleased with the progress. Great management team there in driving performance. So all these little things that I’d say pretty cemetery that’s going to row the boat.

So that is the one door you’re making a bet on the economy as well I guess, would you characterize the such goal for that pre-need cemetery businesses and be the stretch or is it really going to be more confident?

I feel very confident. I mean we saw what happened in 2008, I am not going print to you. You had another 2008, 2009 event. We saw health insurance sales freeze up. And the good news is they came back out of the shelves they come up later. That something that we can’t control, but we think about our model, Bob and you understand as good as anybody. On the funeral side, we recognized revenue when we have a volume event and when we collect the price. There is not a lot you can do move a gap profit. On the cemetery, we have ability to that cemetery sale to leverage both cash flow and earnings per share. So unfortunately, because of accounting that’s the thing and it is more economically sensitive than the former. So, you are right. It is a little more economically sensitive. Currently, the last cycle is it will come back after a terrible event. I don’t expect that I think its different circumstance. I am confident that 2013 is going to -- our politicians work this hour, right, we’ll get there.

Politicians. Okay. That’s great. Thank you.

Okay.

Thank you. Our next question is from Duncan Brown from Wells Fargo. Please go ahead.

Hey, good morning. You referenced the implementation of the new purchase order system plus some changes I believe in outsourcing providers and if I read the press release is right, there was a roughly a $2.5 million hit to G&A because of that, is that one-time in nature or how should we think about that?

Well, it’s one-time during 2012 and we should have those systems and process transformation cost behind us for the most part. Well, yes, those specific cost that you referring to relate to those two projects and we are finishing those projects. But obviously, there is always tweaking on the back-end. So, maybe some of that weak into the -- through the first quarter of next year, but generally that’s correct, Duncan.

So another roughly 2.5 for Q4 as well, is that fair?

Yeah.

Got you. Thank you. And then maybe going to the reception and events front, I mean it sounds like that’s flight line a little bit at least sequentially. Tom, I think last quarter you gave some stats about certain locations having even the cadence available everywhere, but certain locations have even sold one. I want to if you could update us on that and then the progress that how you drive that further?

Sure. I think I will tell you that the update isn’t dramatically different. We moved it slightly. We still probably have some 40% of our location that have either sold one or none. Now, we give you hope right, because that is discount flat line. When you think about how we trained all this, there is actually one team that has implemented the daily packages and pricing. Those are same people that are doing they are helping the rollout the events in catering. And so what happened is, we have been initiating with rollout as you can imagine. We’ve now completed that. So, think of this team we really, really good team by the way. They are now going to be able to right to approach and go back into fixed places that have been implemented to our expectations at this point. And so instead of having to run through market and do the initial rollout, they are going to go focus on for in this area or catering in this area or DVD package uptake in this area. So, I knew this is our -- we’ve been shoot the shotgun last season, in this season its using arrival and going in and fixed anything. So, I think we are going to have traction in both catering as well as we take a break in markets that really need the assistance in the training. So that’s the upside to this.

Thanks. And then just one numbers question, how much is that on the revolver currently please?

About $77 million on a revolver, Duncan.

Great. Thanks a lot.

Thank you. Our last question is from John Ransom of Raymond James. Please go ahead.

Just been under the wire. A couple of things, your acquisition of Neptune, what have you learned on the cemetery business, I am sorry the cremation business and what have you been able to do if anything that cross pollinate your cremation efforts across your mainstream franchise?

Well, I think at this point, we’ve leaned from Neptune is that in this five crunches cremation consumer, getting in front of them ahead of time is a tremendous benefit. Because these consumers typically probably lack information in order to make the decision. And so when it’s made on hourly basis, there is not enough time or thought to goes into it. We are finding that their approach to getting in front of these folks and explaining the options to them in terms of take a $600 and $700 spend in their mine to somewhere closed to $1800. And that is probably the real life switch for us as it relates to dealing with this cost conscious direct cremation consumer. As far as cross colonization, there is plans in place to begin to do a lot more of that. So we can begin to think about some other things, one similar for us is leveraging scale, they sell lot of earnings, we buy our earns, we buy more than they did, we can leverage our cost benefit in to their model. We are learning things about how they do direct mail and dealing with cremation consumers and being able to transfer some of that. And actually put some of that management under them as well. We had an NCS brand that did try to do similar things although under different model. And as you think about the cemetery, we’ve got cremation gardens and parks of the country and again our unique opportunities for this consumer to consider. And whether that’s its going to work or not work in different locations, again we get back to how we train it, and how we present it to the consumer. So, all that’s kind of a work in progress, right now, John we are focused on with Neptune in particularly is growing the model. We’ve actually open new offices this year alone in Chicago, Detroit, Minneapolis, Milwaukee, Indianapolis, New Orleans, Nashville, Atlanta, Albuquerque, this is the real opportunity is the put this model in front of the consumers, if we want going to see, because our approach was it going to attack the cost conscious direct payment. So, that’s probably we were focused on more versus cross organization at this point. Having said, its on a radar screen and we will continue working.

Hey, nice. Just a couple other ones. What was the contribution approximately to EBITDA this year from the good returns you have got another year trust fund?

Well, in total the trust fund income is model to be about $95 million to $100 million for the full year. Now, there is a lot of cost associated with that as well, but that’s pretty much talking online, depending on how you want to think about it was really doing, is offsetting inflation for us. But generally, when you think of EBITDA and you do the math on the guidance, it’s close to $600 million EBITDA company.

Right. But I am saying when you gave your guidance, you want assuming these levels of returns. I mean is there upside, is there some upside in -- you have been once you get return you got.

Right. I think you asked about the quarter. But if you move into to 2013, no, we assume learn single-digit…

I am sorry. Yeah. I am sorry. I am not very, very clear, on that the year-to-date numbers the good numbers out of your trust how they -- how much does they help you year-to-date number relative to what you are modeling initially?

It’s without $75 million year-to-date, as I expected and I would say last year somewhere between $70 million and $75 million. So its not very material. I mean as you know, the first quarter it was good. The second quarter was good. And then it’s comeback in the first quarter. So, it’s not really moving the needle too much. John.

Generally reason for that is…

Okay.

This is a confusing topic. Because some of those who don’t know, what we do. Take a $1 billion trust portfolio, 100 banks this morning is 10 million bucks in the year, that’s sound great even 100 basis point is 10 million. Guess what $9 million of that $10 million gets deferred into the backlog. The reason with the robust returns in the market this year think of it this way, we get about 10% of the benefit of what’s happening within that trust fund because all type of the event of death and we will rollover some 10% of our backlog each year. So that’s why I think in highly accretive markets is not nearly beneficial as people would expect and Mike, we learn in 2008, 2009 when the markets trader -- it doesn’t reflect through our income statement as quickly. So great question and it’s not a big number as Eric pointed out because again at the deferral speculating some backlog.

Yeah. I think a number Eric you used to give us like everyone 1% was a $1.5 million of EBITDA, I don’t know if that number still hold but that’s the number from kind of the areas…

Yeah. It’s pretty close John. Its about a 1% is probably more closer to million than $10.5 million generally that’s true and its all because of their 10 year contracts, 10 year assets lives…

Right. Okay. And then lastly just I was looking at your longer terms model the other day and clearly there has been structural improvement in the cemetery of about 400 basis point could you just take a step back and look at and that business used to be very -- the margin used to be incredibly volatile and it looks now the cemetery margins are both higher and little lot -- lot less volatile than used to be. Is that structural, is that something that you can help us to understand that a little better?

Sure. I really think its two things and they can’t go hand in hand. One is we have a very definitive strategy as it relates to cemetery property that we embarked upon -- some call it seven years ago and that was build and they will come number. Remember Kevin, Faster maybe…

We are building…

Fantastic inventory that we believe we can sell and people look money we will buy as they can see it. So a lot of our strategy was putting fantastic things out there and then being able to sell it. Than you. It’s a robust portfolio to go out and sell any point in time. We have had the stability to visit. Certainly, we did because we really invested in our sales force and our sales management in leads and lead management systems and putting the way of effort behind that we’ve seen total for any cemetery production growth. This is on a comparable base, 7% in 2009, 6% in 2010 over 12% in 2011, 9% in 2012 that John that consistency as it’ relates to many cemetery growth (inaudible) inventory and putting the impetus on training has allowed us to really growth the profitability of that segment.

Okay. Perfect. Thanks.

Thank you. We have no further questions. I will now turn the call back over to SCI Management.

Thank you very much on the call today. I will look forward to seeing you for year end call sometimes in February. Thanks very much.