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What changed in SERVICE CORP INTERNATIONAL's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of SERVICE CORP INTERNATIONAL's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+229 added−248 removedSource: 10-K (2024-02-13) vs 10-K (2023-02-15)

Top changes in SERVICE CORP INTERNATIONAL's 2023 10-K

229 paragraphs added · 248 removed · 208 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

69 edited+9 added−17 removed39 unchanged
Biggest changeThe following table at December 31, 2022 provides the number of our funeral service locations and cemeteries by country, and by state, territory, or province: Country, State/Territory/Province Number of Funeral Service Locations Number of Cemeteries Total United States Alabama 35 13 48 Arizona 31 11 42 Arkansas 12 3 15 California 170 42 212 Colorado 29 11 40 Connecticut 22 — 22 Delaware — 1 1 District of Columbia 1 — 1 Florida 132 61 193 Georgia 32 18 50 Hawaii 8 3 11 Idaho 1 — 1 Illinois 37 26 63 Indiana 51 14 65 Iowa 6 2 8 Kansas 8 5 13 Kentucky 11 5 16 Louisiana 29 11 40 Maine 10 — 10 Maryland 16 13 29 Massachusetts 27 — 27 Michigan 40 — 40 Minnesota 8 2 10 Mississippi 12 3 15 Missouri 25 10 35 Nebraska 8 2 10 Nevada 15 6 21 FORM 10-K 7 PART I Country, State/Territory/Province Number of Funeral Service Locations Number of Cemeteries Total New Hampshire 6 — 6 New Jersey 22 — 22 New Mexico 1 — 1 New York 52 — 52 North Carolina 46 17 63 Ohio 48 14 62 Oklahoma 13 7 20 Oregon 15 4 19 Pennsylvania 25 16 41 Puerto Rico 6 9 15 Rhode Island 6 — 6 South Carolina 12 9 21 Tennessee 41 18 59 Texas 162 65 227 Utah 4 3 7 Virginia 36 24 60 Washington 34 15 49 West Virginia 6 8 14 Wisconsin — 7 7 Canada Alberta 9 — 9 British Columbia 36 9 45 Manitoba 4 3 7 New Brunswick 5 — 5 Nova Scotia 12 — 12 Ontario 43 — 43 Quebec 40 — 40 Saskatchewan 14 — 14 Total funeral service locations and cemeteries 1,474 490 1,964 We believe we have satisfactory title to the properties owned and used in our business, subject to various liens, encumbrances, and easements that are incidental to ownership rights and uses and do not materially detract from the value of the property.
Biggest changeThe following table at December 31, 2023 provides the number of our funeral service locations and cemeteries by country, and by state, territory, or province: Country, State/Territory/Province Number of Funeral Service Locations Number of Cemeteries Total United States Alabama 34 13 47 Arizona 31 11 42 Arkansas 12 3 15 California 172 42 214 Colorado 29 11 40 Connecticut 21 — 21 Delaware — 1 1 District of Columbia 1 — 1 Florida 135 62 197 Georgia 31 18 49 Hawaii 8 3 11 Idaho 1 — 1 Illinois 41 27 68 Indiana 50 14 64 Iowa 6 2 8 Kansas 8 5 13 Kentucky 11 4 15 Louisiana 33 11 44 Maine 10 — 10 Maryland 15 13 28 Massachusetts 27 — 27 Michigan 40 — 40 Minnesota 8 2 10 Mississippi 12 3 15 Missouri 25 10 35 Nebraska 8 2 10 Nevada 15 6 21 New Hampshire 5 — 5 New Jersey 21 — 21 New Mexico 1 — 1 New York 52 — 52 North Carolina 47 17 64 Ohio 48 14 62 FORM 10-K 7 PART I Country, State/Territory/Province Number of Funeral Service Locations Number of Cemeteries Total Oklahoma 13 7 20 Oregon 15 4 19 Pennsylvania 25 16 41 Puerto Rico 6 9 15 Rhode Island 6 — 6 South Carolina 12 9 21 Tennessee 43 18 61 Texas 162 65 227 Utah 4 3 7 Virginia 37 24 61 Washington 35 15 50 West Virginia 6 6 12 Wisconsin — 7 7 Canada Alberta 9 — 9 British Columbia 36 9 45 Manitoba 4 3 7 New Brunswick 5 — 5 Nova Scotia 12 — 12 Ontario 42 — 42 Quebec 40 — 40 Saskatchewan 13 — 13 Total funeral service locations and cemeteries 1,483 489 1,972 We believe we have satisfactory title to the properties owned and used in our business, subject to various liens, encumbrances, and easements that are incidental to ownership rights and uses and do not materially detract from the value of the property.
We target a payout ratio of 30% to 40% of after-tax earnings excluding special items and intend to grow our cash dividend commensurate with the growth in our business.
We target a dividend payout ratio of 30% to 40% of after-tax earnings excluding special items and intend to grow our cash dividend commensurate with the growth in our business.
We have established a social media presence for a number of our funeral and cemetery businesses, including the ability to livestream services at many of our locations. These digital efforts resulted in favorable customer satisfaction ratings and increased digital sales leads over the last several years.
We have established a social media presence for many of our funeral and cemetery businesses, including the ability to livestream services at many of our locations. These digital efforts have resulted in favorable customer satisfaction ratings and increased digital sales leads over the last several years.
Proceeds from this new bank credit agreement were used to settle our existing Term Loan and Bank Credit Facility due May 2024. The new bank credit agreement provides us with flexibility for incremental liquidity, capital investment, working capital, and other general corporate purposes.
Proceeds from this new bank credit agreement were used to settle our existing Term Loan and Bank Credit Facility due May 2024. Our new bank credit agreement provides us with flexibility for incremental liquidity, capital investment, working capital, and other general corporate purposes.
Growing Our Preneed Backlog Our preneed backlog, which includes both insurance and trust-funded merchandise and service products, allows us the opportunity to grow future revenue in a more stable and efficient manner than selling at the time of need.
Growing Our Preneed Backlog Our preneed backlog, which includes both insurance and trust-funded merchandise and service products, allows us to grow future revenue in a more stable and efficient manner than selling at the time of need.
He is also a current member of the Executive Committee and the Audit Committee Chair of the United Way of Greater Houston. Mr. Tanzberger is a former member of the Board of Trustees of Junior Achievement of Southeast Texas and the National Funeral Directors Association Funeral Service Foundation. Mr.
He is also a current member of the Executive Committee and the Audit Committee Chair of the United Way of Greater Houston. Mr. Tanzberger is a former member of the Board of Trustees of Junior Achievement of Southeast Texas and the National Funeral Directors Association Funeral Service Foundation. Ms.
Although labor disputes occur from time to time, relations with associates are generally considered favorable. We reach out to our associates for feedback throughout their employment at SCI using a variety o f voluntary surveys ensuring we are meeting the needs and expectations of our large and diverse workforce.
Although labor disputes occur from time to time, relations with associates are generally considered favorable. We reach out to our associates for feedback throughout their employment at SCI using a variety o f voluntary surveys ensuring we are meeting the needs and expectations of our workforce.
We will post on our internet website all waivers to, or amendments of, our Code of Conduct for Officers and Employees, which are required to be disclosed by applicable law and rules of the New York Stock Exchange listing standards. Information contained on our website is not part of this report.
We will post on our internet website all waivers to, or amendments of, our Code of Conduct for Officers and Employees, which are required to be disclosed by applicable law and New York Stock Exchange listing standards. Information contained on our website is not part of this report.
We have an unparalleled network of funeral service locations and cemeteries that offers high quality products and services at prices that are competitive with local competing funeral service locations, cemeteries, and retail locations. Within this network, the funeral service locations and cemeteries operate under various names as most operations were acquired as existing businesses.
We have an unparalleled network of funeral service locations and cemeteries that offers high quality products and services at prices that are competitive with local competing funeral service locations, cemeteries, and retail locations. Within this network, our funeral service locations and cemeteries operate under various names as most operations were acquired as existing businesses.
The ARCs allow colleagues with similar backgrounds or interests to connect for networking, provide opportunities for growth, and support the communities and customers we serve. Our leadership team is committed to advancing inclusion and diversity within the workplace.
The ARCs allow colleagues with similar backgrounds or interests to connect for networking, provide opportunities for mentorship, and support the communities and customers we serve. Our leadership team is committed to advancing inclusion and diversity within the workplace.
We target businesses with favorable customer dynamics and locations where we can achieve additional economies of scale. Over the last several years, we have increased our growth capital spend on new funeral service locations, enlarging our footprint into new communities as well as expanding existing locations to remain relevant to our customers.
We target businesses with favorable customer dynamics and locations where we can achieve additional economies of scale. Over the last several years, we have deployed significant growth capital spend on new funeral service locations, enlarging our footprint into new communities as well as expanding existing locations to remain relevant to our customers.
We have reduced the time it takes to receive customer feedback through digital J.D. Power surveys. Online reviews provide visibility of customer engagement down to the location level and shorten our response time in addressing any customer concerns.
We have reduced the time it takes to receive customer feedback through digital surveys. Online reviews provide visibility of customer engagement down to the location level and shorten our response time in addressing any customer concerns.
The SEC website address is http://www.sec.gov . 12 Service Corporation International PART I Executive Officers of the Company The following table sets forth, as of February 15, 2023, the name and age of each executive officer of the Company, the office held, and the year first elected an officer. Officer Name Age Position Year First Became Officer Thomas L.
The SEC website address is http://www.sec.gov . 12 Service Corporation International PART I Executive Officers of the Company The following table sets forth, as of February 13, 2024, the name and age of each executive officer of the Company, the office held, and the year first elected an officer. Officer Name Age Position Year First Became Officer Thomas L.
Moore joined the Company in August 2002 as Manager of Financial Reporting. She was promoted to Director of Financial Reporting in 2004 and Managing Director and Assistant Controller in June 2006. In February 2010, she was promoted to Vice President and Corporate Controller and oversees trust accounting and compliance, general accounting, internal and external reporting and customer service.
Moore was named Vice President and Corporate Controller in 2010 and oversees general accounting, trust and technical accounting, internal and external reporting, and customer service. She joined the Company in August 2002 as Manager of Financial Reporting and was promoted to Director of Financial Reporting in 2004 and Managing Director and Assistant Controller in June 2006.
Funeral merchandise, including burial caskets and related accessories, urns and other cremation receptacles, outer burial containers, flowers, online and video tributes, stationery products, casket and cremation memorialization products, and other ancillary merchandise, is sold at funeral service locations. Our cemeteries provide cemetery property interment rights, including developed lots, lawn crypts, mausoleum spaces, niches, and other cremation memorialization and interment options.
Funeral merchandise, including burial caskets and related accessories, urns and other cremation receptacles, outer burial containers, flowers, online and video tributes, stationery products, casket and cremation memorialization products, and other ancillary merchandise, is sold at funeral service locations. 6 Service Corporation International PART I Our cemeteries provide cemetery property interment rights, including developed lots, lawn crypts, mausoleum spaces, niches, and other cremation memorialization and interment options.
The scale of our multi-billion dollar trust portfolios allows us to leverage access to preeminent money managers with favorable fee structures generating above average returns.
The scale of our multi-billion dollar trust portfolios allows us to leverage access to preeminent money managers with favorable fee structures generating above average returns to help offset inflation.
Our original business plan was based on efficiencies of scale, specifically reducing overhead costs by sharing resources such as preparation services, back office administration support, transportation, and personnel among funeral service locations in a business “cluster.” After proving the plan’s effectiveness in Houston in the early 1960s, we set out to apply this operating strategy through the acquisition of deathcare businesses in other markets over the next three decades.
Our original business plan was based on efficiencies of scale, specifically reducing overhead costs by sharing resources such as preparation services, back office administration support, transportation, and personnel among funeral service locations in a business “cluster.” We set out to apply this operating strategy through the acquisition of deathcare businesses in other markets over the next three decades.
Strategies for Growth We are the largest consolidated deathcare company in North America and are well positioned for long-term profitable growth. Like most businesses world-wide, COVID-19 has impacted various aspects of our business operations, however, our fundamental strategy has not changed.
Strategies for Growth We are the largest consolidated deathcare company in North America and are well positioned for long-term profitable growth. Like most businesses world-wide, the outbreak of a novel strain of coronavirus (COVID-19) impacted various aspects of our business operations. However, our fundamental strategy has not changed.
At December 31, 2022 and 2021, there were 9,478 and 9,685 associates, respectively, who had elected to participate in our group health insurance plans. Eligible associates in the United States are covered by retirement plans of SCI or various subsidiaries, while international associates are covered by other SCI (or SCI subsidiary) defined contribution or government-mandated benefit plans.
At December 31, 2023 and 2022, there were 9,779 and 9,478 associates, respectively, who had elected to participate in our group health insurance plans. Eligible associates in the United States are covered by retirement plans of SCI or various subsidiaries, while Canadian associates are covered by other SCI (or SCI subsidiary) defined contribution or government-mandated benefit plans.
At December 31, 2022, we owned approximately 90% of the real estate and buildings used at our facilities, and the remainder of the facilities were leased under both finance and operating leases. At December 31, 2022, our 490 cemeteries contained a total of approximately 35,500 acres, of which approximately 66% was developed.
At December 31, 2023, we owned approximately 90% of the real estate and buildings used at our facilities, and the remainder of the facilities were leased under both financing and operating leases. At December 31, 2023, our 489 cemeteries contained a total of approximately 35,500 acres, of which approximately 66% was developed.
At December 31, 2022, we operated 1,474 funeral service locations and 490 cemeteries (including 303 funeral service/cemetery combination locations), which are geographically diversified across 44 states, eight Canadian provinces, the District of Columbia, and Puerto Rico. We are well known for our Dignity Memorial ® brand, North America's first transcontinental brand of deathcare products and services.
At December 31, 2023, we operated 1,483 funeral service locations and 489 cemeteries (including 305 funeral service/cemetery combination locations), which are geographically diversified across 44 states, eight Canadian provinces, the District of Columbia, and Puerto Rico. We are well known for our Dignity Memorial ® brand, North America's first transcontinental brand of deathcare products and services.
As a result of such preneed sales, our preneed backlog of unfulfilled funeral and cemetery contracts was $13.7 billion at December 31, 2022 and 2021.
As a result of such preneed sales, our preneed backlog of unfulfilled funeral and cemetery contracts was $14.8 billion and $13.7 billion at December 31, 2023 and 2022.
As a co-founder of Keystone North America, Inc., Mr. Tidwell served as its President and Chief Executive Officer from May 2007 until it was acquired by SCI in March 2010. In his role, Mr. Tidwell worked closely with Keystone's Senior Leadership Team to develop and implement organic growth strategies as well as external growth and acquisition strategies.
Tidwell served as its President and Chief Executive Officer from May 2007 until it was acquired by SCI in March 2010. In his role, Mr. Tidwell worked closely with Keystone's Senior Leadership Team to develop and implement organic growth strategies as well as external growth and acquisition strategies.
Inclusion and Diversity We believe in the power of inclusion and respecting our fellow associates’ work, ideas, beliefs, and lifestyles. Our Inclusion and Diversity (I&D) Committee, which is a cross-functional team of associates, has been key to the development of programs such as our Women’s Leadership Conference and Associate Resource Communities (ARCs).
Diversity, Equity, and Inclusion We believe in the power of inclusion and respecting our fellow associates’ work, ideas, beliefs, and lifestyles. Our Diversity, Equity, and Inclusion (DEI) Committee, which is a cross-functional team of associates, has been key to the development of programs such as our inclusive leadership training and Associate Resource Communities (ARCs).
Faulk 47 Senior Vice President, Revenue and Business Development 2010 Steven A. Tidwell 61 Senior Vice President, Sales and Marketing 2010 Tammy R. Moore 55 Vice President and Corporate Controller 2010 Mr. Ryan was elected Chairman of the Board of SCI effective in January 2016, appointed Chief Executive Officer in February 2005, and President in 2019.
Faulk 48 Senior Vice President, Revenue and Business Development 2010 Steven A. Tidwell 62 Senior Vice President, Sales and Marketing 2010 Tammy R. Moore 56 Vice President and Corporate Controller 2010 Mr. Ryan was elected Chairman of the Board of SCI effective in January 2016, appointed Chief Executive Officer in February 2005, and President in 2002.
Gupton College and has attended Executive Management and Leadership programs at the Harvard Business School, Vanderbilt University Owen Graduate School of Management, and the Center for Creative Leadership. Mr. Tidwell has served for over three years as the Chairman of the Board of Regents of Commonwealth Institute of Funeral Service. Mrs.
Gupton College and has attended Executive Management and Leadership programs at the Harvard Business School, Vanderbilt University Owen Graduate School of Management, and the Center for Creative Leadership. Since 2019, Mr. Tidwell has served on the Board of Regents of Commonwealth Institute of Funeral Service. Mrs.
Return Excess Cash to Shareholders Absent any strategic acquisition or new build opportunities, we intend to return excess cash to shareholders. Our quarterly dividend rate has steadily grown from $0.025 per common share in 2005 to $0.27 per common share at the end of 2022.
Return Excess Cash to Shareholders Absent any strategic acquisition or new build opportunities, we intend to return excess cash to shareholders through dividends and our share repurchase program. Our quarterly dividend rate has steadily grown from $0.025 per common share in 2005 to $0.29 per common share at the end of 2023.
By embracing the many backgrounds and perspectives that make each of us unique, we are able to remain relevant to the diverse families we serve. We have created an I&D senior management position to support the Company's belief that diversity of talent and people is a key driver of better business outcomes.
Embracing the many backgrounds and perspectives that make each of us unique allows us to remain relevant to the diverse families we serve. We maintain a DEI senior management position to support the Company's belief that diversity of talent and people is a key driver of better business outcomes.
Although the last several years were difficult in many unexpected ways through the COVID-19 pandemic, we learned valuable lessons around our ability to quickly deploy customer-facing technology. Our associates and client families embraced an increasingly digital world and we utilized various online tools to complete sales and meet families.
Through the COVID-19 pandemic, we learned valuable lessons around our ability to quickly deploy customer-facing technology. Our associates and client families embraced an increasingly digital world, as we utilized various online tools to complete sales and meet families.
Whether choosing burial or cremation, the Baby Boomers are redefining the traditional funeral by transitioning away from solemnly mourning a death to a personalized celebration of life ceremony. In certain markets, we are responding to this trend by spending capital to repurpose traditional casket selection rooms to event rooms that can accommodate a celebration.
Whether choosing burial or cremation, the Baby Boomers are redefining the traditional funeral by transitioning away from solemnly mourning a death to a personalized celebration of life ceremony. We responded to this trend by spending capital to repurpose traditional casket selection rooms to event rooms that can accommodate a celebration, while also updating existing locations to more contemporary, uplifting spaces.
Beginning in 1993, we expanded beyond North America, acquiring major deathcare companies in Australia, the United Kingdom, and France, plus smaller holdings in other European countries, Asia, and South America. During the mid to late 1990s, acquisitions of deathcare facilities became extremely competitive, resulting in increased prices for acquisitions and substantially reduced returns on invested capital.
Beginning in 1993, we expanded beyond North America, acquiring major deathcare companies internationally. During the mid to late 1990s, acquisitions of deathcare facilities became extremely competitive, resulting in increased prices for acquisitions and substantially reduced returns on invested capital.
We are offering a customer friendly digital presentation of options that allow the customer to choose merchandise and services including unique celebration, catering, and celebrant services. In our funeral business, we focus on memorialization merchandise and services that are meaningful to both our burial and cremation customers. The growing trend of cremation requires more flexibility in providing products and services.
We are offering a customer-friendly digital presentation of options that allows the customer to choose merchandise and services including unique celebration, catering, and celebrant services. In our funeral segment, we focus on merchandise and services that are meaningful to both our burial and cremation customers.
Remaining Relevant to the Customer Remaining relevant to our customer is key to generating revenue growth in a changing customer environment. We are constantly evolving to meet the varying preferences and needs of our customers.
We also expect that continued growth in our preneed sales will drive future revenue expansion. Remaining Relevant to the Customer Remaining relevant to our customer is key to generating revenue growth in a changing customer environment. We are constantly evolving to meet the varying preferences and needs of our customers.
Human Capital Management At December 31, 2022, we employed 17,589 full-time individuals and 7,550 part-time individuals. Of the full-time associates, 15,028 were employed in the funeral and cemetery operations and 2,561 were employed in corporate or other overhead areas of our business. Approximately 2.1% of our associates are represented by unions.
Human Capital Management At December 31, 2023, we employed 17,612 full-time individuals and 7,310 part-time individuals. Of the full-time associates, 14,840 were employed in the funeral and cemetery operations and 2,772 were employed in corporate or other overhead areas of our business. Approximately 2.5% of our associates are represented by unions.
This investment in our future will allow us to continue creating cemetery offerings that appeal to varying preferences in those markets for many years to come. We invested $102.6 million in acquiring 18 funeral service locations and 3 cemeteries, which included 3 combination locations, in 2022.
This investment in our future will allow us to continue creating cemetery offerings that appeal to varying preferences in those markets for many years to come. We invested $72.5 million in acquiring 17 funeral service locations and 2 cemeteries in 2023.
Ryan 57 Chairman of the Board, Chief Executive Officer, and President 1999 Sumner J. Waring, III 54 Senior Vice President, Chief Operating Officer 2002 Eric D. Tanzberger 54 Senior Vice President, Chief Financial Officer 2000 Gregory T. Sangalis 67 Senior Vice President, General Counsel and Secretary 2007 Elisabeth G. Nash 61 Senior Vice President, Operations Services 2004 John H.
Ryan 58 Chairman of the Board, Chief Executive Officer, and President 1999 Sumner J. Waring, III 55 Senior Vice President, Chief Operating Officer 2002 Eric D. Tanzberger 55 Senior Vice President, Chief Financial Officer 2000 Lori Spilde 53 Senior Vice President, General Counsel and Secretary 2019 Elisabeth G. Nash 62 Senior Vice President, Operations Services 2004 John H.
In addition to the contemporary and sophisticated design, client families enjoy innovative features such as an interactive obituary experience, social media sharing capabilities, the ability to create and share personalized content in memory of their loved one, and the ability to see venue and catering options for locations.
In addition to the contemporary and sophisticated design, client families enjoy innovative features such as an interactive obituary experience, the ability to create and share personalized content in memory of their loved one, the ability to see venues, catering options, online pricing, and new self-service options like scheduling an appointment online.
We divested our international businesses and many North American funeral service locations and cemeteries that were either underperforming or did not fit within our long-term strategy. At the same time, we began to capitalize on the strength of our network by introducing to North America the first transcontinental brand of deathcare services and products — Dignity Memorial ® (see www.dignitymemorial.com).
In 1999, we significantly reduced our level of acquisition activity and divested certain of our international businesses and many North American funeral service locations and cemeteries. At the same time, we began to capitalize on the strength of our network by introducing to North America the first transcontinental brand of deathcare services and products — Dignity Memorial ® (see www.dignitymemorial.com).
See Note 13 in Part II, Item 8. Financial Statements and Supplementary Data, for financial information about our business segments and geographic areas. We have the largest number of combination locations in North America. Funeral service/cemetery combination locations are businesses in which a funeral service location is physically located within or adjoining a cemetery that we own.
Funeral and Cemetery Operations Our funeral service and cemetery operations consist of funeral service locations, cemeteries, funeral service/cemetery combination locations, crematoria, and other related businesses. See Note 13 in Part II, Item 8. Financial Statements and Supplementary Data, for financial information about our business segments and geographic areas. We have the largest number of combination locations in North America.
This cash flow stream and our significant liquidity allow us to substantially reduce our long-term debt maturities should we choose to do so.
We generate a relatively consistent annual cash flow stream that is generally resistant to down economic cycles. This cash flow stream and our significant liquidity allow us to substantially reduce our long-term debt maturities should we choose to do so.
FORM 10-K 11 PART I Invest Capital We maximize capital deployment opportunities in a disciplined and balanced manner to the highest relative return. Our strong liquidity, favorable debt maturity profile, and robust cash flow generation enables us to continue our long-standing commitment to use capital deployment to opportunistically grow our business and enhance shareholder value.
FORM 10-K 11 PART I Capital Allocation We consistently evaluate the best uses of our cash flow that will yield the highest value and return on capital. Our strong liquidity, favorable debt maturity profile, and robust cash flow generation enables us to continue our long-standing commitment to allocate capital to opportunistically grow our business and enhance shareholder value.
Combination locations also create synergies between funeral and cemetery sales personnel and give families added convenience to purchase both funeral and cemetery merchandise and services at a single location.
Combination facilities typically are more cost competitive and have a higher gross margin than funeral and cemetery operations that are operated separately. Combination locations also create synergies between funeral and cemetery sales personnel and give families added convenience to purchase both funeral and cemetery merchandise and services at a single location.
We have remained flexible to meet the varying needs of customers, demonstrating our resolve to remain relevant to changing customer preferences. 10 Service Corporation International PART I Growing Preneed Sales Our preneed sales program drives current and future revenue growth.
We have remained flexible to meet the varying needs of customers, demonstrating our resolve to remain relevant to changing customer preferences. Growing Preneed Sales Our preneed sales program drives current and future revenue growth. Baby Boomers have been influencing our cemetery preneed sales for several years and are beginning to positively affect the growth of our preneed funeral sales programs.
Over the next several years, our industry will be largely shaped by the aging of the Baby Boomer generation in the deathcare space and we are poised to benefit from the aging of the North American population.
Over the next several years, our industry will be largely shaped by the aging of the Baby Boomer generation in the deathcare space which we are poised to benefit from. In each stage of life, Baby Boomers have set new trends, transformed society, and redefined norms, and we are already seeing the impact on our industry.
The following strategies remain the core of our foundation: 1) grow revenue, 2) leverage our unparalleled scale, and 3) invest capital. While these strategies remain unchanged, a shift to increased utilization of technology during the COVID-19 pandemic has influenced how we serve our customers and how we invest our capital.
While these strategies remain unchanged, a shift to increased utilization of technology during the COVID-19 pandemic has influenced how we serve our customers and how we invest our capital. Grow Revenue We plan to remain relevant to our customers as their preferences evolve through a combination of price, product, and service differentiation strategies to facilitate revenue growth.
Our atneed point of sale system, HMIS+, uses a digital platform enabled with high resolution video and photographs to create a seamless presentation of our products and service offerings. Our mobile preneed sales system, Beacon, provides customers with a full digital presentation experience in their home or other place of their choosing.
Our advancements in technology are changing the way we present our product and service offerings to customers. Our atneed point of sale system, HMIS+, uses a digital platform enabled with high resolution video and photographs to create a seamless presentation of our products and service offerings.
Our Dignity Memorial® location websites feature a modern and user-friendly design. Our location-specific websites are designed for mobile use and optimized for better search engine ranking.
Our mobile preneed sales system, Beacon, provides customers with a full digital presentation experience in their home or other place of their choosing. Our Dignity Memorial® location websites feature a modern and user-friendly design. Our location-specific websites are designed for mobile use and optimized for better search engine ranking.
Optimizing Our Network and Deploying Customer-Facing Technology We continue driving operating discipline and leveraging our scale through standardizing processes and capitalizing on new technologies to improve the customer experience. Our advancements in technology are changing the way we present our product and service offerings to customers.
Our scale allows us to operate and expand our sales organization in a manner that would be difficult for our competitors to replicate. Optimizing Our Network and Deploying Customer-Facing Technology We continue driving operating discipline and leveraging our scale through standardizing processes and capitalizing on new technologies to improve the customer experience.
Leverage Our Unparalleled Scale As the largest deathcare company in North America, we leverage our scale by developing our sales organization and optimizing the use of our network using technology, which benefits our preneed backlog. Our scale enables cost efficiencies through purchasing power and utilizing economies of scale through our supply chain channel.
In addition, our increased digital presence has provided significant growth in our digital lead channels over the last several years. Leverage Our Unparalleled Scale As the largest deathcare company in North America, we leverage our scale by developing our sales organization and optimizing the use of our network using technology, which benefits our preneed backlog.
These investments include a customer relationship management system, which drives improvements in productivity and sales production by leveraging data analytics, rigorous lead tracking, and effective follow up campaigns. We continue to diversify our sales force to understand and cater to the religious, ethnic, and cultural traditions important to our customers.
Developing Our Sales Organization Over the last several years, we have continued to invest significantly in the development of our sales organization with best in class tools and technologies. These investments include a customer relationship management system, which drives improvements in productivity and sales production by leveraging data analytics, rigorous lead tracking, and effective follow-up campaigns.
FORM 10-K 9 PART I Competition Although there are several public companies that own funeral service locations and cemeteries, the majority of deathcare businesses in North America are locally-owned, independent operations. We estimate that our funeral and cemetery market share in North America is approximately 15%-16% based on estimated total industry revenue.
We own a building in Jefferson, Louisiana with approximately 96,200 square feet of office space that we use, in part, for corporate activities. 8 Service Corporation International PART I A map of our locations in North America is presented below: FORM 10-K 9 PART I Competition Although there are several public companies that own funeral service locations and cemeteries, the majority of deathcare businesses in North America are locally-owned, independent operations.
Managing Debt We continue to focus on maintaining optimal levels of liquidity and financial flexibility. Our flexible capital strategy allows us to manage our debt maturity profile by making open market debt repurchases when it is opportunistic to do so. We generate a relatively consistent annual cash flow stream that is generally resistant to down economic cycles.
Subsequent to December 31, 2023, we repurchased 310,581 shares for $20.93 million at an average cost per share of $67.39. Managing Debt We continue to focus on maintaining optimal levels of liquidity and financial flexibility. Our flexible capital strategy allows us to manage our debt maturity profile by making open market debt repurchases when it is opportunistic to do so.
Nash was named Senior Vice President of Operations Services in 2010 and is currently responsible for a variety of support functions, including human resources, supply chain, and program management. Prior to that she was Vice President of Process Improvement and Technology, where she led the redefinition of our field and home office processes and systems. Before joining SCI, Ms.
She also earned Juris Doctor, Master of Arts, and bachelor's degrees from the University of South Dakota. Ms. Nash was named Senior Vice President of Operations Services in 2010 and is currently responsible for a variety of support functions, including human resources, supply chain, centralized operations and program management.
Our preneed program provides us with an opportunity to develop greater brand awareness, gives consumers peace of mind about their end of life arrangements, and secures future market share. In addition, our increased digital presence has provided significant growth in our digital lead channels over the last several years.
We have a unique competitive advantage to continue growing preneed sales benefiting from our size and scale. Our preneed program provides us with an opportunity to develop greater brand awareness, gives consumers peace of mind about their end of life arrangements, and secures future market share.
Baby Boomers have been influencing our cemetery preneed sales for several years and are beginning to positively affect the growth of our preneed funeral sales programs. Our highly trained sales force of approximately 3,750 counselors provide customers with informed guidance about various service and merchandise options tailored for today’s consumers.
Our highly trained sales force of approximately 3,800 counselors provide customers with informed guidance about various service and merchandise options tailored for today’s consumers. Utilizing our scale, our counselors are reaching out to consumers through multiple lead channels, driving future revenue growth.
Nash served in various senior management accounting and financial positions with Pennzoil Corp. She holds a bachelor's degree in business administration in accounting from Texas A&M University. Ms. Nash serves as Chair of the Board of Directors of Genesys Works Houston. Mr. Faulk was named Senior Vice President of Revenue and Business Development in 2018.
Prior to that she was Vice President of Process Improvement and Technology, where she led the redefinition of our field and home office processes and systems. Before joining SCI, Ms. Nash served in various senior management accounting and financial positions with Pennzoil Corp. She holds a bachelor's degree in business administration in accounting from Texas A&M University. Ms.
He joined SCI in March 2010 as Vice President, Business Development, to oversee the Company's strategic growth, including mergers and acquisitions, real estate, and construction. His promotion in 2018 expanded his role to include setting direction for the company’s pricing and cemetery development functions. Prior to joining the Company, Mr.
Nash serves as Chair of the Board of Directors of Genesys Works Houston. Mr. Faulk was named Senior Vice President of Revenue and Business Development in 2018. He joined SCI in March 2010 as Vice President, Business Development, to oversee the Company's strategic growth, including mergers and acquisitions, real estate, and construction.
Faulk worked for Bain & Company, Inc. where he helped FORM 10-K 13 PART I Fortune 500 Companies and specialty retailers identify profit growth opportunities and achieve strong operating results.
His promotion in 2018 expanded his role to include setting direction for the company’s pricing and cemetery development functions. Prior to joining the Company, Mr. Faulk worked for Bain & Company, Inc. where he helped Fortune 500 Companies and specialty retailers identify profit growth opportunities and achieve strong operating results.
He holds a master's degree in business administration from the Darden Graduate School of Business at the University of Virginia and a bachelor's degree in electrical engineering from the University of Virginia. Mr. Tidwell joined SCI as Vice President, Main Street Market Operations, in March 2010 and was promoted to Senior Vice President of Sales and Merchandising in 2012.
He FORM 10-K 13 PART I holds a master's degree in business administration from the Darden Graduate School of Business at the University of Virginia and a bachelor's degree in electrical engineering from the University of Virginia. Mr.
We expect to see a similar impact on our preneed funeral results and ultimately our atneed results as these preneed contracts mature. In every aspect of our business, we are listening and responding to our customer’s changing needs and leveraging our scale to deliver unparalleled experiences - both digitally and in person - to meet those changing needs.
In every aspect of our business, we are listening and responding to our customer’s changing needs and leveraging our scale to deliver unparalleled experiences - both digitally and in person - to meet those changing needs. The following strategies remain the core of our foundation: 1) grow revenue, 2) leverage our unparalleled scale, and 3) invest capital.
Over the past several years, we have substantially increased our property options to offer many unique choices. From high-end family estates, which capture incredible views, to nicely landscaped hedge estates, we continue to develop property selections that resonate with our customers.
From high-end family estates, which capture incredible views, to nicely landscaped hedge estates, we continue to develop property selections that resonate with our customers. For cemetery merchandise and services, we have developed innovative products such as recurring floral placements, customized cemetery property offerings, and specialized graveside service options.
We have developed cremation service packages, which may or may not include a celebratory memorialization, depending on the consumers preference. In our cemetery business, we continue to grow revenue by responding to the customer’s desire for personalized and unique options by expanding our tiered product and cemetery property options.
In our cemetery segment, we continue to grow revenue by responding to the customer’s desire for personalized and unique options by expanding our tiered product and cemetery property options. Over the past several years, we have substantially increased our property options to offer many unique choices.
As we evolve to meet ever-changing customer preferences, we will continue catering to the religious, ethnic, and cultural traditions important to many of our customers.
We continue to embrace cremation opportunities for customers in our cemetery segment by offering an increased variety of cremation property options, including glass-front niches and scattering gardens. 10 Service Corporation International PART I As we evolve to meet ever-changing customer preferences, we will continue catering to the numerous religious, ethnic, and cultural traditions important to many of our customers.
We have adopted a more sophisticated and targeted direct mail approach, and we continue increasing our digital presence through search engine optimization and other marketing channels. We have a unique competitive advantage to continue growing preneed sales benefiting from our size and scale.
We sponsor community events and seminars to educate and provide guidance around preplanning both funeral and cemetery services and merchandise. We have adopted a more sophisticated and targeted marketing approach, and we continue increasing our digital presence through search engine optimization and other marketing channels.
During the COVID-19 pandemic, we were able to continue to operate without any major disruptions to our business, which highlights the strength of our scale. Developing Our Sales Organization Over the last several years, we have continued to invest significantly in the development of our sales organization with best in class tools and technologies.
Our scale enables cost efficiencies through purchasing power and utilizing economies of scale through our supply chain channel. During the COVID-19 pandemic, we were able to continue to operate without any major disruptions to our business, which highlights the strength of our scale.
The preventive measures require a funeral provider to give consumers accurate, itemized price information and various other disclosures about funeral merchandise and services and prohibit a funeral provider from: 1) misrepresenting legal, crematory, and cemetery requirements; 2) embalming for a fee without permission; 3) requiring the purchase of a casket for direct cremation; and 4) requiring consumers to buy certain funeral merchandise or services as a condition for furnishing other funeral merchandise or services.
The preventive measures require a funeral provider to give consumers accurate, itemized price information as well as various other disclosures about funeral merchandise and services and prohibit a funeral provider from making misrepresentations and engaging in deceptive or unfair practices.
Combination locations allow certain facility, personnel, and equipment costs to be shared between the funeral service location and a cemetery location. Combination facilities typically are more cost competitive and have a higher gross margin than funeral and 6 Service Corporation International PART I cemetery operations that are operated separately.
Funeral service/cemetery combination locations are businesses in which a funeral service location is physically located within or adjoining a cemetery that we own. Combination locations allow certain facility, personnel, and equipment costs to be shared between the funeral service location and a cemetery location.
Information contained on our website is not part of this report. In late 2006, having arrived at a position of financial stability and improved operating efficiency, we acquired the then second largest company in the North American deathcare industry, Alderwoods Group. In early 2010, we acquired the then fifth largest company in the North American deathcare industry, Keystone North America.
Information contained on our website is not part of this report. In late 2006, we began a series of strategic acquisitions through 2013 by acquiring Alderwoods Group, Keystone North America, The Neptune Society, Inc. (Neptune), also now known as SCI Direct, and Stewart Enterprises, Inc. (Stewart).
Our premier combination locations and other large and recognizable cemeteries and funeral homes attract high-quality sales talent. Our scale allows us to operate and expand our sales organization in a manner that would be difficult for our competitors to replicate.
We continue to diversify our sales force to understand and cater to the numerous religious, ethnic, and cultural traditions important to our customers. Our premier combination locations and other large and recognizable cemeteries and funeral homes attract high-quality sales talent.
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In 1999, we significantly reduced our level of acquisition activity and over the next several years implemented various initiatives to pay down debt, increase cash flow, reduce overhead costs, increase efficiency, and leverage our scale.
Added
We continue to pursue strategic acquisitions and complete divestitures of non-strategic funeral homes and cemeteries. See Strategies for Growth within Part I, Item 1. Business for more information on how we invest capital to grow our business.
Removed
In June 2011, we acquired 70% of the outstanding shares of The Neptune Society, Inc. (Neptune), which is the nation's largest direct cremation organization, now known as SCI Direct. Subsequently, in 2013 and 2014, we acquired the remaining 30% of the outstanding shares of Neptune. In December 2013, we purchased Stewart Enterprises, Inc.
Added
We estimate that our funeral and cemetery market share in North America is approximately 16% based on estimated total industry revenue. Our funeral business has low to moderate barriers to entry, whereas the cemetery business barriers to entry are high due to the requirement of land and permitting along with the requirement of sufficient capital to develop cemetery property.
Removed
(Stewart), the then second largest operator of funeral service locations and cemeteries in North America. We continue to pursue strategic acquisitions and complete divestitures of non-strategic funeral homes and cemeteries. Funeral and Cemetery Operations Our funeral service and cemetery operations consist of funeral service locations, cemeteries, funeral service/cemetery combination locations, crematoria, and other related businesses.
Added
Over the last five years, we have seen the impact of the Baby Boomers through the growth in both our preneed cemetery sales production and our preneed funeral production. We expect to see a similar impact on our atneed results as these preneed contracts mature.
Removed
We own a building in Jefferson, Louisiana with approximately 96,200 square feet of office space that we use, in part, for corporate activities. 8 Service Corporation International PART I A map of our locations in North America is presented below: COVID-19 Impact Since the World Health Organization declared the worldwide outbreak of a novel strain of coronavirus (COVID-19) a global pandemic in March 2020, we have worked continuously to meet the challenges it presented.
Added
The growing trend of cremation has resulted in new product and service offerings, including cremation-specific service packages, which may or may not include memorialization. In addition, we have focused on making the entire cremation experience more meaningful for families, from the first point of contact to the delivery of a loved one’s ashes to the family.
Removed
Like many businesses worldwide, COVID-19 is still directly and indirectly impacting various aspects of our business operations. We continue to maintain a high priority focus on the health, safety, and mental well-being of our associates. We provide an employee assistance program that offers free and confidential counseling by masters level counselors for our associates' overall mental health.
Added
We also expect to continue to repurchase shares of our common stock in the open market or through privately negotiated transactions, subject to market conditions, debt covenants, and normal trading restrictions. There can be no assurance that we will buy our common stock under our repurchase program in the future.
Removed
We have avoided layoffs, mandatory furloughs, and any widespread reductions in pay as a result of the impact of COVID-19. Over the last several years, we have awarded discretionary bonuses to associates in recognition of their courageous efforts and dedication to serving families throughout the pandemic.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeVariations in the death rate and seasonality of deaths throughout each year may also cause revenue to fluctuate between quarters or years. If we are not able to respond effectively to changing consumer preferences, our market share, revenue, and/or profitability could decrease.
Biggest changeChanges in the number of deaths may vary from quarter to quarter and across local markets, and those variations are not predictable. Variations in the death rate and seasonality of deaths throughout each year may also cause revenue to fluctuate between quarters or years.
The covenants limit, among other things, our and our subsidiaries’ ability to: • Incur additional indebtedness (including guarantee obligations); • Create liens on assets; • Engage in certain transactions with affiliates; • Enter into sale-leaseback transactions; FORM 10-K 15 PART I • Engage in mergers, liquidations, and dissolutions; • Sell assets; • Pay dividends, distributions, and other payments in respect of our capital stock; • Purchase our capital stock in the open market; • Make investments, loans, or advances; • Repay indebtedness or amend the agreements relating thereto; • Create restrictions on our ability to receive distributions from subsidiaries; and • Change our lines of business.
The covenants limit, among other things, our and our subsidiaries’ ability to: • Incur additional indebtedness (including guarantee obligations); • Create liens on assets; • Engage in certain transactions with affiliates; • Enter into sale-leaseback transactions; • Engage in mergers, liquidations, and dissolutions; FORM 10-K 15 PART I • Sell assets; • Pay dividends, distributions, and other payments in respect of our capital stock; • Purchase our capital stock in the open market; • Make investments, loans, or advances; • Repay indebtedness or amend the agreements relating thereto; • Create restrictions on our ability to receive distributions from subsidiaries; and • Change our lines of business.
In the ordinary course of our business, we and our vendors receive and retain certain personal information, in both physical and electronic formats, about our customers, their loved ones, our associates, and our vendors, and there is an expectation that we will adequately protect that information.
In the ordinary course of our business, we and our vendors receive and retain certain personal information, in both physical and electronic formats, about our customers, their loved ones, our associates, and our vendors. There is an expectation that we will adequately protect that information.
In addition, our online operations at our websites depend upon the secure transmission of confidential information over public networks, including information permitting electronic payments. The U.S. regulatory environment surrounding information security and privacy is increasingly demanding.
In addition, our online operations at our websites depend upon the secure transmission of confidential information over public networks, including information permitting electronic payments. The U.S. regulatory environment surrounding information security and privacy is dynamic and increasingly demanding.
Our inability to leverage scale to drive cost savings, productivity improvements, preneed production, or earnings growth anticipated by management could affect our financial performance. Our inability to identify acquisition candidates and to complete acquisitions, divestitures, or strategic alliances as planned or to successfully integrate acquired businesses and realize expected synergies and strategic benefits could impact our financial performance.
Our inability to leverage scale to drive cost savings, productivity improvements, preneed production, or earnings growth anticipated by management could affect our financial performance. Our inability to identify acquisition targets and to complete acquisitions, divestitures, or strategic alliances as planned or to successfully integrate acquired businesses and realize expected synergies and strategic benefits could impact our financial performance.
As of December 31, 2022, no such charge was required in any reported period. We may be required to replenish our affiliated funeral and cemetery trust funds to meet minimum funding requirements, which would have a negative effect on our earnings and cash flow.
As of December 31, 2023, no such charge was required in any reported period. We may be required to replenish our affiliated funeral and cemetery trust funds to meet minimum funding requirements, which would have a negative effect on our earnings and cash flow.
Our inability to deploy capital to maximize shareholder value could impact our financial performance. We cannot give assurance that we will be able to execute any or all of our strategic plan. Failure to execute any or all of our strategic plan could have a material adverse effect on our financial condition, results of operations, and cash flows.
Our inability to allocate capital to maximize shareholder value could impact our financial performance. We cannot give assurance that we will be able to execute any or all of our strategic plan. Failure to execute any or all of our strategic plan could have a material adverse effect on our financial condition, results of operations, and cash flows.
If the investments in our trust funds experience significant declines in 2023 or subsequent years or in a high inflation environment, there could be insufficient funds in the trusts to cover the costs of delivering merchandise and services or maintaining our cemeteries in the future.
If the investments in our trust funds experience significant declines in 2024 or subsequent years or in a high inflation environment, there could be insufficient funds in the trusts to cover the costs of delivering merchandise and services or maintaining our cemeteries in the future.
A significant theft, loss, or fraudulent use of the personally identifiable information we maintain or failure of our vendors to use or maintain such data in accordance with contractual provisions could result in significant costs, fines, and litigation.
A significant theft, loss, or fraudulent use of the personally identifiable information we maintain or failure of our vendors to use or maintain such data in accordance with contractual provisions could result in significant costs, fines, litigation, and reputational damage.
The following table summarizes our investment returns (realized and unrealized), excluding certain fees, on our trust funds: Years Ended December 31, 2022 2021 2020 Preneed funeral merchandise and service trust funds (11.5) % 14.2 % 16.5 % Preneed cemetery merchandise and service trust funds (11.8) % 15.3 % 16.7 % Cemetery perpetual care trust funds (11.0) % 13.7 % 13.4 % Combined trust funds (11.5) % 14.4 % 15.6 % Generally, earnings or gains and losses on our trust investments are recognized and we withdraw cash when the underlying merchandise is delivered, service is performed, or upon contract cancellation.
The following table summarizes our investment returns (realized and unrealized), excluding certain fees, on our trust funds: Years Ended December 31, 2023 2022 2021 Preneed funeral merchandise and service trust funds 16.5 % (11.5) % 14.2 % Preneed cemetery merchandise and service trust funds 16.9 % (11.8) % 15.3 % Cemetery perpetual care trust funds 15.3 % (11.0) % 13.7 % Combined trust funds 16.3 % (11.5) % 14.4 % Generally, earnings or gains and losses on our trust investments are recognized and we withdraw cash when the underlying merchandise is delivered, service is performed, or upon contract cancellation.
Our level of indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, and may prevent us from fulfilling our obligations under our indebtedness.
Our level of indebtedness could adversely affect our cash flows, our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, and may prevent us from fulfilling our obligations under our indebtedness.
Significant weather events in these states or other key areas where our operations are concentrated, natural or other disasters, and unforeseen public health crises, such as pandemics and epidemics (including the ongoing COVID-19 pandemic), could disrupt our business through injury or illness to our associates or client families, physical damage, closure or destruction of one or more of our locations, data centers or office facilities, or disrupt the delivery of goods or services by one or more of our vendors, any or all of which could adversely impact our operations or increase our costs, which would adversely affect our financial results.
Significant weather events in these states or other key areas where our operations are concentrated, natural or other disasters, and unforeseen public health crises, such as pandemics and epidemics (including the COVID-19 pandemic), could disrupt our business through injury or illness to our associates or client families, physical damage, closure or destruction of one or more of our locations, data centers or office facilities, disrupt access to scarce resources such as water supply or disrupt the delivery of goods or services by one or more of our vendors, any or all of which could adversely impact our operations or increase our costs, which would adversely affect our financial results.
Changes in taxation as well as the inherent difficulty in quantifying potential tax effects of business decisions could have a material adverse effect on the results of our operations, financial condition, or cash flows.
Changes in taxation, or the interpretation of tax laws or regulations, as well as the inherent difficulty in quantifying potential tax effects of business decisions could have a material adverse effect on the results of our operations, financial condition, or cash flows.
FORM 10-K 17 PART I Our Canadian business exposes us to operational, economic, and currency risks. Our Canadian operations represent a significant portion of our revenue. Our ability to successfully conduct operations in Canada is affected by many of the same risks we face in our U.S. operations, as well as unique costs and difficulties of managing Canadian operations.
FORM 10-K 17 PART I Our Canadian business exposes us to operational, economic, and currency risks. Our Canadian operations represent approximately 5% of our revenue. Our ability to successfully conduct operations in Canada is affected by many of the same risks we face in our U.S. operations, as well as unique costs and difficulties of managing Canadian operations.
Our cemetery segment, which has a goodwill balance of $342.0 million as of December 31, 2022, is more sensitive to market conditions and goodwill impairments because it is more reliant on preneed sales, which are impacted by customer discretionary spending. For additional information, see Critical Accounting Policies, Recent Accounting Pronouncements, and Accounting Changes in Part II, Item 7.
Our cemetery segment, which has a goodwill balance of $358.8 million as of December 31, 2023, is more sensitive to market conditions and goodwill impairments because it is more reliant on preneed sales, which are impacted by customer discretionary spending. For additional information, see Critical Accounting Policies, Recent Accounting Pronouncements, and Accounting Changes in Part II, Item 7.
In the event of market declines that result in a severe decrease in trust fund value, we may be required to replenish amounts in the respective trusts in some future period. As of December 31, 2022, we had unrealized losses of $4.1 million in the various trusts within these states; but no such replenishment is currently necessary.
In the event of market declines that result in a severe decrease in trust fund value, we may be required to replenish amounts in the respective trusts in some future period. As of December 31, 2023, we had unrealized losses of $2.6 million in the various trusts within these states, but no such replenishment is currently necessary.
The majority of our operations are managed in groups we call “markets”. Markets are geographical groups of funeral service locations and cemeteries that share common resources such as operating personnel, preparation services, clerical staff, motor vehicles, and preneed sales personnel.
Our funeral and cemetery businesses are high fixed-cost businesses. The majority of our operations are managed in groups we call “markets”. Markets are geographical groups of funeral service locations and cemeteries that share common resources such as operating personnel, preparation services, clerical staff, motor vehicles, and preneed sales personnel.
In the event all of the surety companies canceled or did not renew our surety bonds, which generally have twelve-month renewal periods, we would be required to either obtain replacement coverage or fund approximately $128.8 million into state-mandated trust accounts as of December 31, 2022.
In the event all of the surety companies canceled or did not renew our surety bonds, which generally have twelve-month renewal periods, we would be required to either obtain replacement coverage or fund approximately $121.9 million into state-mandated trust accounts as of December 31, 2023.
New laws and regulations governing data privacy, security, cybersecurity, and the unauthorized disclosure of confidential information, including recent legislation in California, other states, and Canadian provinces, pose increasingly complex compliance challenges and potentially elevate our costs.
New laws and regulations governing data privacy, security, cybersecurity, and the unauthorized disclosure of confidential information, including recent legislation in several U.S. states and Canadian provinces, pose increasingly complex compliance challenges and potentially elevate our costs.
We may be required to cover any such shortfall with cash flows from operations, 14 Service Corporation International PART I which could have a material adverse effect on our financial condition, results of operations, and cash flows. For more information related to our trust investments, see Note 3 in Part II, Item 8. Financial Statements and Supplementary Data.
We may be required to cover any such shortfall with cash flows from operations, which could have a material adverse effect on our financial condition, results of operations, and cash flows. For more information related to our trust investments, see Note 3 in Part II, Item 8.
As a result, we or our service providers could experience errors, interruptions, delays, or cessations of service in key portions of our information technology infrastructure, which could significantly disrupt our operations and be costly, time consuming, and resource-intensive to remedy.
As a result, we or our service providers could experience errors, interruptions, delays, or cessations of service in key portions of our information technology infrastructure, which could significantly disrupt our operations and be costly, time consuming, and resource-intensive to remedy. Risks Related to Our Industry The funeral and cemetery industry is competitive.
If the fair value of these trusts, plus any other amount due to us upon delivery of the associated contracts, were to decline below the estimated costs to deliver the underlying products and services, we would record a charge to earnings to record a liability for the expected losses on the delivery of the associated contracts.
Financial Statements and Supplementary Data. 14 Service Corporation International PART I If the fair value of these trusts, plus any other amount due to us upon delivery of the associated contracts, were to decline below the estimated costs to deliver the underlying products and services, we would record a charge to earnings to record a liability for the expected losses on the delivery of the associated contracts.
Violations of applicable laws could result in fines or sanctions against us. FORM 10-K 19 PART I In addition, from time to time, governments and agencies propose to amend or add regulations or reinterpret existing regulations, which could increase costs and decrease cash flows.
Our pay practices, including wage and hour overtime pay, are subject to federal and state regulations. Violations of applicable laws could result in fines or sanctions against us. FORM 10-K 19 PART I In addition, from time to time, governments and agencies propose to amend or add regulations or reinterpret existing regulations, which could increase costs and decrease cash flows.
If the number of deaths in our markets declines, the number of funeral services and interments performed by us could decrease and our financial condition, results of operations, and cash flows could be materially adversely affected. Changes in the number of deaths may vary from quarter to quarter and across local markets, and those variations are not predictable.
Changes in the number of deaths are not predictable from market to market or over the short term. If the number of deaths in our markets declines, the number of funeral services and interments performed by us could decrease and our financial condition, results of operations, and cash flows could be materially adversely affected.
Changes in federal, state, or local tax laws, adverse tax audit results, or adverse tax rulings on positions taken could have a material adverse effect on the results of our operations, financial condition, or cash flows. Item 1B. Unresolved Staff Comments None. Item 2. Properties Information regarding properties is set forth in Part I, Item 1. Business. Item 3.
Changes in federal, state, or local tax laws, adverse tax audit results, or adverse tax rulings on positions taken could have a material adverse effect on the results of our operations, financial condition, or cash flows. Item 1B. Unresolved Staff Comments None.
Our facilities are also subject to stringent health, safety, and environmental regulations. In particular, cremation and embalming facilities are subject to stringent health and environmental regulations and there are associated risks of investigations from regulatory authorities or incidental non-compliance with such regulations. Our pay practices, including wage and hour overtime pay, are subject to federal and state regulations.
Accordingly, we are subject to financial and compliance audits of preneed sales practices and state trust funds. Our facilities are also subject to stringent health, safety, and environmental regulations. In particular, cremation and embalming facilities are subject to stringent health and environmental regulations and there are associated risks of investigations from regulatory authorities or incidental non-compliance with such regulations.
If we are unable to continue to expand our cremation memorialization products and services, and cremations remain or increase as a significant percentage of our services, our financial condition, results of operations, and cash flows could be materially adversely affected. Our funeral and cemetery businesses are high fixed-cost businesses.
Our average revenue for cremations is lower than that for traditional burials. If we are unable to continue to expand our cremation memorialization products and services, and cremations remain or increase as a significant percentage of our services, our financial condition, results of operations, and cash flows could be materially adversely affected.
Future market share, revenue, and profit will depend in part on our ability to anticipate, identify, and respond to changing consumer preferences. We may not correctly anticipate or identify trends in consumer preferences, or we may identify them later than our competitors do. In addition, any strategies we may implement to address these trends may prove incorrect or ineffective.
We may not correctly anticipate or identify trends in consumer preferences, or we may identify them later than our competitors do. In addition, any strategies we may implement to address these trends may prove incorrect or ineffective.
If we are unable to successfully compete, our financial condition, results of operations, and cash flows could be materially adversely affected. If the number of deaths in our markets declines, our cash flows and revenue may decrease. Changes in the number of deaths are not predictable from market to market or over the short term.
If we are unable to successfully compete, our financial condition, results of operations, and cash flows could be materially adversely affected. 18 Service Corporation International PART I If the number of deaths in our markets declines, our cash flows and revenue may decrease.
We make judgments regarding the utilization of existing income tax credits and the potential tax effects of various financial transactions and results of operations to estimate our obligations to taxing authorities. Tax obligations include income, franchise, real estate, sales and use, and employment-related taxes. These judgments include reserves for potential adverse outcomes regarding tax positions that have been taken.
Our tax obligations include income, franchise, real estate, sales and use, and employment-related taxes and the judgments we make include reserves for potential adverse outcomes regarding tax positions that have been taken.
In certain states and provinces, we have withdrawn allowable distributable earnings, including unrealized gains, prior to the maturity or cancellation of the related contract. Additionally, some states have laws that either require replenishment of investment losses under certain circumstances or impose various restrictions on withdrawals of future earnings when trust fund values drop below certain prescribed amounts.
Additionally, some states have laws that either require replenishment of investment losses under certain circumstances or impose various restrictions on withdrawals of future earnings when trust fund values drop below certain prescribed amounts.
For example, the funeral industry is regulated at the federal level by the FTC, which requires funeral service locations to take actions designed to protect consumers. State law regulates preneed sales and imposes licensing requirements. Accordingly, we are subject to financial and compliance audits of preneed sales practices and state trust funds.
For example, the funeral industry is regulated at the federal level by the FTC, which requires funeral service locations to take actions designed to protect consumers. Although the FTC is considering updates to the Funeral Rule, the rulemaking process is ongoing. State law regulates preneed sales and imposes licensing requirements.
In our operations during 2022, 61.1% of the comparable services we performed were cremation cases compared to 59.2% and 58.6% performed in 2021 and 2020, respectively. Our average revenue for cremations is lower than that for traditional burials.
Additionally, there is a continuing upward trend in the number of cremations performed in North America as an alternative to traditional funeral service dispositions. In our operations during 2023, 62.9% of the comparable services we performed were cremation cases compared to 61.3% and 59.2% performed in 2022 and 2021, respectively.
The continuing upward trend in the number of cremations performed in North America could result in lower revenue, operating profit, and cash flows. There is a continuing upward trend in the number of cremations performed in North America as an alternative to traditional funeral service dispositions.
The continuing upward trend in life expectancy and the number of cremations performed in North America could result in lower revenue, operating profit, and cash flows. Generally, life expectancy in North America has increased steadily and is expected to continue to do so in the future, absent events related to pandemics or similar outbreaks.
Removed
Failure to maintain effective internal control over financial reporting could adversely affect our results of operations, investor confidence, and our stock price. The accuracy of our financial reporting depends on the effectiveness of our internal control over financial reporting.
Added
In certain states and provinces, we have withdrawn allowable distributable earnings, including unrealized gains, from our trust funds prior to the maturity or cancellation of the related contract.
Removed
Internal control over financial reporting can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements and may not prevent or detect misstatements because of its inherent limitations.
Added
If we are not able to respond effectively to changing consumer preferences, our market share, revenue, and/or profitability could decrease. Future market share, revenue, and profit will depend in part on our ability to anticipate, identify, and respond to changing consumer preferences.
Removed
If we do not maintain effective internal control over financial reporting or implement controls sufficient to provide reasonable assurance with respect to the preparation and fair presentation of our financial statements, we could be unable to file accurate financial reports on a timely basis, and our results of operations, investor confidence, and stock price could be materially adversely affected. 18 Service Corporation International PART I Risks Related to Our Industry The funeral and cemetery industry is competitive.
Added
We make judgments regarding the utilization of existing income tax credits and the potential tax effects of various financial transactions and results of operations to estimate our obligations to taxing authorities. We are also subject to regular reviews, examinations, and audits by taxing authorities with respect to our taxes.
Removed
Legal Proceedings Information regarding legal proceedings is set forth in Note 9 of Part II, Item 8. Financial Statements and Supplementary Data. Item 4. Mine Safety Disclosures Not applicable. 20 Service Corporation International

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeFORM 10-K 21 PART II The following table summarizes our share repurchases during the three months ended December 31, 2022: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs (2) Approximate Dollar Value of Shares That May Yet be Purchased Under the Program (2) October 1, 2022 — October 31, 2022 858,375 $ 60.09 858,375 $ 256,321,857 November 1, 2022 — November 30, 2022 121,933 $ 61.51 121,933 599,250,036 December 1, 2022 — December 31, 2022 (1) 223,791 $ 69.19 216,932 584,239,887 1,204,099 1,197,240 (1) Includes 6,859 shares purchased in December 2022 in connection with the surrender of shares by associates to satisfy certain tax withholding obligations under compensation plans.
Biggest changeFORM 10-K 23 PART II The following table summarizes our share repurchases during the three months ended December 31, 2023: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Programs (2) Approximate Dollar Value of Shares That May Yet be Purchased Under the Program (2) October 1, 2023 — October 31, 2023 (1) 1,818,681 $ 54.96 1,800,992 $ 148,384,812 November 1, 2023 — November 30, 2023 (2) 1,395,540 $ 58.65 1,395,540 547,671,399 December 1, 2023 — December 31, 2023 354,267 $ 64.10 354,267 524,963,678 3,568,488 3,550,799 (1) Includes 17,689 shares purchased in October 2023 in connection with the surrender of shares by associates to satisfy certain tax withholding obligations under compensation plans.
The following graph assumes the total return on $100 invested on December 31, 2017, in SCI Common Stock, the S&P 500 Index, the S&P MidCap 400 Index, and a peer group selected by the Company (the “Peer Group”). The Peer Group comprises Carriage Services, Inc., Hillenbrand Inc., Matthews International Corp., and Park Lawn Corporation.
The following graph assumes the total return on $100 invested on December 31, 2018, in SCI Common Stock, the S&P 500 Index, the S&P MidCap 400 Index, and a peer group selected by the Company (the “Peer Group”). The Peer Group comprises Carriage Services, Inc., Hillenbrand Inc., Matthews International Corp., and Park Lawn Corporation.
These repurchases were not part of our publicly announced program and do not affect our share repurchase program. (2) On November 2, 2022 we announced that our Board of Directors increased our share repurchase authorization to $600.0 million. Item 6. [Reserved]
These repurchases were not part of our publicly announced program and do not affect our share repurchase program. (2) On November 8, 2023 we announced that our Board of Directors increased our share repurchase authorization to $600.0 million. Item 6. [Reserved]
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Our common stock has been traded on the New York Stock Exchange since May 14, 1974. On December 31, 2022, there were 3,214 holders of record of our common stock.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Our common stock has been traded on the New York Stock Exchange since May 14, 1974. On December 31, 2023, there were 3,088 holders of record of our common stock.
Total return data assumes reinvestment of dividends. Total Stockholder Return Indexed Returns For equity compensation plan information, see Part III of this Form 10-K.
Total return data assumes reinvestment of dividends. For equity compensation plan information, see Part III of this Form 10-K.
In calculating the number of stockholders, we consider clearing agencies and security position listings as one stockholder for each agency or listing. At December 31, 2022, we had 153,940,365 shares outstanding, net of 2,148,073 treasury shares. Our common stock is traded on the New York Stock Exchange under the symbol SCI.
In calculating the number of stockholders, we consider clearing agencies and security position listings as one stockholder for each agency or listing. At December 31, 2023, we had 146,323,340 shares outstanding, net of 1,973,702 treasury shares. Our common stock is traded on the New York Stock Exchange under the symbol SCI.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

90 edited+9 added−19 removed74 unchanged
Biggest changeThe $33.0 million increased outflow from 2022 over 2021 is primarily due to the following: • a $66.0 million increase in capital expenditures: • a $26.2 million increase in expenditures for capital improvements at existing field locations, • a $29.2 million increase in expenditures for cemetery property development, • a $19.0 million increase in expenditures for digital investments and corporate, • a $8.4 million decrease in expenditures for growth capital expenditures/construction of new funeral service locations; partially offset by • a $18.8 million decrease in cash spent on business acquisitions, • a $9.5 million decrease in cash spent on real estate acquisitions, • a $2.0 million decrease in payments for Company-owned life insurance policies, net of proceeds, • a $1.4 million increase in cash receipts from divestitures and asset sales, and • a $1.3 million increase in proceeds from sale of investments and other.
Biggest changeThe $21.5 million increased outflow from 2023 over 2022 is primarily due to the following: • a $39.3 million increase in cash spent on real estate acquisitions, • a $16.2 million decrease in cash receipts from divestitures and asset sales, • a $7.9 million increase in other investing activities, partially offset by • a $30.0 million decrease in cash spent on business acquisitions, • a $7.9 million decrease in total capital expenditures, which comprises: • $10.5 million decrease in maintenance capital expenditures: • a $46.1 million decrease in expenditures for capital improvements at existing field locations, • a $28.4 million increase in expenditures for cemetery property development, • a $7.2 million increase in expenditures for digital investments and corporate, • a $2.6 million increase in expenditures for growth capital expenditures/construction of new funeral service locations, and • a $4.0 million increase in proceeds for Company-owned life insurance policies, net of repayments.
We target a payout ratio of 30% to 40% of after tax earnings excluding special items and intend to grow our cash dividend commensurate with the growth in our business.
We target a dividend payout ratio of 30% to 40% of after tax earnings excluding special items and intend to grow our cash dividend commensurate with the growth in our business.
We do not reflect the unfulfilled insurance-funded preneed contract amounts in our Consolidated Balance Sheet. The proceeds of the life insurance policies or annuity contracts will be reflected in funeral revenue as we perform these funerals. FORM 10-K 25 PART II The table below details our results of insurance-funded preneed production and maturities.
We do not reflect the unfulfilled insurance-funded preneed contract amounts in our Consolidated Balance Sheet. The proceeds of the life insurance policies or annuity contracts will be reflected in funeral revenue as we perform these funerals. FORM 10-K 27 PART II The table below details our results of insurance-funded preneed production and maturities.
These trustees, with input from SCI's wholly-owned registered investment advisor, FORM 10-K 27 PART II establish an investment policy that serves as an operating document to guide the investment activities of the trusts including asset allocation and manager selection. The investments are also governed by state and provincial guidelines.
These trustees, with input from SCI's wholly-owned registered investment advisor, FORM 10-K 29 PART II establish an investment policy that serves as an operating document to guide the investment activities of the trusts including asset allocation and manager selection. The investments are also governed by state and provincial guidelines.
The majority of the equity allocation is managed by institutional investment managers that specialize in an objective-specific area of expertise. Our equity securities are exposed to market risk; however, we believe these securities are well-diversified. As of December 31, 2022, the largest single equity position represented less than 1% of the total securities portfolio.
The majority of the equity allocation is managed by institutional investment managers that specialize in an objective-specific area of expertise. Our equity securities are exposed to market risk; however, we believe these securities are well-diversified. As of December 31, 2023, the largest single equity position represented less than 1% of the total securities portfolio.
Additionally, the table reflects our backlog of unfulfilled insurance-funded contracts (which are not included in our Consolidated Balance Sheet) at December 31, 2022 and 2021. The backlog amounts presented include amounts due from customers for undelivered performance obligations on cancelable preneed contracts to arrive at our total backlog of deferred revenue.
Additionally, the table reflects our backlog of unfulfilled insurance-funded contracts (which are not included in our Consolidated Balance Sheet) at December 31, 2023 and 2022. The backlog amounts presented include amounts due from customers for undelivered performance obligations on cancelable preneed contracts to arrive at our total backlog of deferred revenue.
The table does not include the backlog associated with businesses that are held for sale. 26 Service Corporation International PART II The table also reflects our preneed receivables and trust investments associated with the backlog of deferred preneed contract revenue including the amounts due from customers for undelivered performance obligations on cancelable preneed contracts.
The table does not include the backlog associated with businesses that are held for sale. 28 Service Corporation International PART II The table also reflects our preneed receivables and trust investments associated with the backlog of deferred preneed contract revenue including the amounts due from customers for undelivered performance obligations on cancelable preneed contracts.
The average revenue per funeral contract is influenced by the mix of traditional and cremation services because our average revenue for cremations is lower than that for traditional burials. To further enhance revenue opportunities, we continue to focus on our cremation customer’s preferences and remaining relevant by developing additional memorialization merchandise and services that specifically appeal to cremation customers.
The average revenue per funeral contract is influenced by the mix of traditional and cremation services because our average revenue for cremations is lower than that for traditional burials. To further enhance revenue opportunities, we continue to focus on our cremation customers' preferences and remaining relevant by developing additional memorialization merchandise and services that specifically appeal to cremation customers.
The federal statutes of limitation have expired for all tax years prior to 2019, and we are not currently under audit by the IRS. However, pursuant to the 2017 Tax Cuts and Jobs Act, the statute of limitations on the transition tax for the 2017 tax year does not expire until 2024.
The federal statutes of limitation have expired for all tax years prior to 2020, and we are not currently under audit by the IRS. However, pursuant to the 2017 Tax Cuts and Jobs Act, the statute of limitations on the transition tax for the 2017 tax year does not expire until 2024.
All of the trusts seek to control risk and volatility through a combination of asset classes, investment styles, and a diverse mix of investment managers. Asset allocation is based on the liability structure of each funeral, cemetery, and perpetual care trust.
All of the trusts are intended to control risk and volatility through a combination of asset classes, investment styles, and a diverse mix of investment managers. Asset allocation is based on the liability structure of each funeral, cemetery, and perpetual care trust.
This portion of the proceeds is not recognized as revenue. Investment earnings from these trusts are distributed to us regularly and recognized in current cemetery revenue. 32 Service Corporation International PART II For more information related to revenue, see Notes 2 , 3 , and 13 in Part II, Item 8. Financial Statements and Supplementary Data.
This portion of the proceeds is not recognized as revenue. Investment earnings from these trusts are distributed to us regularly and recognized in current cemetery revenue. For more information related to revenue, see Notes 2 , 3 , and 13 in Part II, Item 8. Financial Statements and Supplementary Data.
The tables below detail our results of preneed production and maturities, excluding insurance contracts, for the years ended December 31, 2022 and 2021.
The tables below detail our results of preneed production and maturities, excluding insurance contracts, for the years ended December 31, 2023 and 2022.
Debt & Finance Leases As of December 31, 2022, we had $4.3 billion in aggregate principal outstanding on our notes, term loan, revolving credit facility, finance leases, mortgages, and other debt (collectively "debt and finance leases"), of which $90.7 million is payable in the next twelve months.
Debt & Finance Leases As of December 31, 2023, we had $4.7 billion in aggregate principal outstanding on our notes, term loan, revolving credit facility, finance leases, mortgages, and other debt (collectively "debt and finance leases"), of which $63.3 million is payable in the next twelve months.
As of December 31, 2022, approximately 94% of our trusts were under the control and custody of four large financial institutions. The U.S. trustees primarily use four managed limited liability companies (LLCs), one for each merchandise and service trust type and two for the cemetery perpetual care trust type, each with an independent trustee as custodian.
As of December 31, 2023, approximately 95% of our trusts were under the control and custody of five large financial institutions. The U.S. trustees primarily use four managed limited liability companies (LLCs), one for each merchandise and service trust type and two for the cemetery perpetual care trust type, each with an independent trustee as custodian.
An increase in the valuation allowance would result in additional income tax expense in such period. As of December 31, 2022, foreign withholding taxes have not been provided on the estimated $212.6 million of undistributed earnings and profits ("E&P") of our foreign subsidiaries as we intend to permanently reinvest these foreign E&P in those businesses outside the United States.
An increase in the valuation allowance would result in additional income tax expense in such period. As of December 31, 2023, foreign withholding taxes have not been provided on the estimated $247.6 million of undistributed earnings and profits ("E&P") of our foreign subsidiaries as we intend to permanently reinvest these foreign E&P in the respective businesses outside the United States.
(2) We calculate comparable average revenue per service by dividing comparable funeral revenue, excluding general agency revenue, recognized preneed revenue, and other revenue to avoid distorting our average of normal funeral services revenue, by the comparable number of funeral services performed during the period.
(2) We calculate comparable average revenue per service by dividing comparable funeral revenue, excluding general agency revenue, non-funeral home preneed sales revenue, and other revenue to avoid distorting our average of normal funeral services revenue, by the comparable number of funeral services performed during the period.
Various state jurisdictions are auditing years 2013 through 2020. There are currently no federal or provincial audits in Canada; however, years subsequent to 2016 remain open and could be subject to examination.
Various state jurisdictions are auditing years 2013 through 2021. There are currently no federal or provincial audits in Canada; however, years subsequent to 2017 remain open and could be subject to examination.
Gains on Divestitures and Impairment Charges, Net We recognized a $10.0 million and a $25.2 million net pre-tax gain on asset divestitures and impairments in 2022 and 2021, respectively, primarily as the result of asset divestitures associated with non-strategic funeral and cemetery locations in the United States and Canada partially offset by impairment losses.
Gains on Divestitures and Impairment Charges, Net We recognized a $9.8 million and a $10.0 million net pre-tax gain on asset divestitures and impairments in 2023 and 2022, respectively, primarily as the result of asset divestitures associated with non-strategic funeral and cemetery locations in the United States and Canada partially offset by impairment losses.
We believe the presentation of these additional merchandise and services through our customer-facing technology enhances our customer’s experience by reducing administrative burdens and allowing them to visualize the product offerings and services, which will help drive increases in the average revenue for a cremation in future periods.
We believe the presentation of these additional merchandise and services through our customer-facing technology improves our customers' experience by reducing administrative burdens and allowing them to visualize the enhanced product and service offerings, which we believe will help drive increases in the average revenue for a cremation in future periods.
As of December 31, 2022, the backlog of insurance-funded contracts of $7.35 billion was equal to the proceeds we expect to receive from the associated insurance policies when the corresponding contract is serviced.
As of December 31, 2023, the backlog of insurance-funded contracts of $7.78 billion was equal to the proceeds we expect to receive from the associated insurance policies when the corresponding contract is serviced.
Additionally, if we were to repatriate E&P in excess of our previously taxed income under the Tax Cuts and Jobs Act of 2017, such excess repatriation may cause us to incur an additional U.S. federal income tax of approximately $7.7 million related to the Company’s hybrid debt accounting between Canada and the United States.
Additionally, if we were to repatriate E&P in excess of our previously taxed income under the Tax Cuts and Jobs Act of 2017, such excess repatriation may cause us to incur an additional U.S. federal income tax of approximately $7.7 million related to our hybrid debt structure between Canada and the United States that was eliminated in 2022.
Critical estimates used by management include: FORM 10-K 33 PART II Reserves and Allowances We provide reserves for credit losses on our receivables. These reserves are based on an analysis of historical trends of collection activity adjusted for current conditions and forecasts.
Critical estimates used by management include: Reserves and Allowances We provide reserves for credit losses on our receivables. These reserves are based on an analysis of historical trends of collection activity adjusted for current conditions and forecasts.
These alternative investments are held in vehicles structured as LLCs and are managed by certain trustees. The trusts that are eligible to allocate a portion of their investments to alternative investments purchase units of the respective alternative investment LLCs. Investment Structures The managed LLCs use the following structures for investments: Commingled Funds.
These alternative investments are held in vehicles structured as LLCs and are managed by certain trustees. The trusts that are eligible to allocate a portion of their investments to alternative investments purchase units of the respective alternative investment LLCs.
As of December 31, 2022, the difference between the backlog and asset market amounts represents $0.19 billion related to contracts for which we have posted surety bonds as financial assurance in lieu of trusting, $1.27 billion collected from customers that were not required to be deposited into trusts, and $0.14 billion in allowable cash distributions from trust assets partially offset by $1.40 billion in amounts due on delivered property and merchandise.
As of December 31, 2023, the difference between the backlog and total assets at fair value represents $0.19 billion related to contracts for which we have posted surety bonds as financial assurance in lieu of trusting, $1.31 billion collected from customers that were not required to be deposited into trusts, and $0.19 billion in allowable cash distributions from trust assets partially offset by $1.51 billion in amounts due on delivered property and merchandise.
However, if we were to repatriate such foreign E&P, the foreign withholding tax liability is estimated to be $11.0 million.
However, if we were to repatriate such foreign E&P, the foreign withholding tax liability is estimated to be $12.8 million.
This compares to the SCI trusts that decreased 11.5% during the same year-end period, which exceeded our internal custom benchmarks. The SCI trusts have a diversified allocation of approximately 57% equities, 28% fixed income securities, 10% alternative and other investments with the remaining 5% in money market funds.
This compares to the SCI trusts that increased 16.3% during the same year-end period, which exceeded our internal custom benchmarks. The SCI trusts have a diversified allocation of approximately 58% equities, 28% fixed income securities, 10% alternative and other investments with the remaining 4% in money market funds.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The Company We are North America’s largest provider of deathcare products and services, with a network of funeral service locations and cemeteries unequaled in geographic scale and reach, serving more than 600,000 families each year.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations The Company We are North America’s largest provider of deathcare products and services, with a network of funeral service locations and cemeteries unequaled in geographic scale and reach.
Results of Operations — Years Ended December 31, 2022 and 2021 Management Summary In 2022, we reported consolidated net income attributable to common stockholders of $565.3 million ($3.53 per diluted share) compared to net income attributable to common stockholders in 2021 of $802.9 million ($4.72 per diluted share).
Results of Operations — Years Ended December 31, 2023 and 2022 Management Summary In 2023, we reported consolidated net income attributable to common stockholders of $537.3 million ($3.53 per diluted share) compared to net income attributable to common stockholders in 2022 of $565.3 million ($3.53 per diluted share).
For trademark and tradenames, our test uses the relief from royalty method whereby we determine the fair value of the assets by discounting the cash flows that represent a savings over having to pay a royalty fee for use of the trademark and tradenames.
Our intangible asset impairment tests involve estimates and management judgment. For trademark and tradenames, our test uses the relief from royalty method whereby we determine the fair value of the assets by discounting the cash flows that represent a savings over having to pay a royalty fee for use of the trademark and tradenames.
As of December 31, 2022, we had fixed lease payment obligations of $68.8 million, of which $9.0 million is payable in the next twelve months. See Note 8 in Part II, Item 8. Financial Statements and Supplementary Data for additional details related to our leases.
As of December 31, 2023, we had fixed lease payment obligations of $70.3 million, of which $10.0 million is due in the next twelve months. See Note 8 in Part II, Item 8. Financial Statements and Supplementary Data for additional details related to our leases.
At December 31, 2022, we operated 1,474 funeral service locations and 490 cemeteries (including 303 funeral service/cemetery combination locations), which are geographically diversified across 44 states, eight Canadian provinces, the District of Columbia, and Puerto Rico.
At December 31, 2023, we operated 1,483 funeral service locations and 489 cemeteries (including 305 funeral service/cemetery combination locations), which are geographically diversified across 44 states, eight Canadian provinces, the District of Columbia, and Puerto Rico.
As of December 31, 2022, insurance loss reserves were $99.3 million. Recent Accounting Pronouncements and Accounting Changes For discussion of recent accounting pronouncements and accounting changes, see Note 2 in Part II, Item 8. Financial Statements and Supplementary Data. 34 Service Corporation International PART II
As of December 31, 2023, insurance loss reserves were $103.3 million. Recent Accounting Pronouncements and Accounting Changes For discussion of recent accounting pronouncements and accounting changes, see Note 2 in Part II, Item 8. Financial Statements and Supplementary Data.
The aggregate principal excludes $39.9 million in unamortized non-cash debt issuance costs and 24 Service Corporation International PART II original issuance discounts and premiums. Future interest payments associated with the debt and finance leases total $1,011.6 million, of which $202.9 million is payable in the next twelve months.
The aggregate principal excludes $35.8 million in unamortized non-cash debt issuance costs and original issuance discounts and premiums. Future interest payments associated with the debt and finance leases total $1.2 26 Service Corporation International PART II billion, of which $250.9 million is payable in the next twelve months.
FORM 10-K 23 PART II Cash Flow Our ability to generate strong operating cash flow is one of our fundamental financial strengths and provides us with substantial flexibility in meeting operating and investing needs. Operating Activities Net cash provided by operating activities was $825.7 million and $920.6 million for the years ended December 31, 2022, and 2021, respectively.
Cash Flow Our ability to generate strong operating cash flow is one of our fundamental financial strengths and provides us with substantial flexibility in meeting operating and investing needs. Operating Activities Net cash provided by operating activities was $869.0 million and $825.7 million for the years ended December 31, 2023, and 2022, respectively.
December 31, 2022 December 31, 2021 Fair Value Cost Fair Value Cost (In billions) Deferred revenue, net $ 1.62 $ 1.62 $ 1.53 $ 1.53 Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts 0.85 0.85 0.72 0.72 Deferred receipts held in trust 4.16 4.12 4.77 3.93 Allowance for cancellation on trust investments (0.24) (0.23) (0.33) (0.27) Backlog of trust-funded deferred revenue, net of estimated allowance for cancellation 6.39 6.36 6.69 5.91 Backlog of insurance-funded revenue (1) 7.35 7.35 6.97 6.97 Total backlog of deferred revenue $ 13.74 $ 13.71 $ 13.66 $ 12.88 Preneed receivables, net and trust investments $ 5.58 $ 5.54 $ 6.02 $ 5.18 Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts 0.85 0.85 0.71 0.71 Allowance for cancellation on trust investments (0.24) (0.23) (0.33) (0.27) Assets associated with backlog of trust-funded deferred revenue, net of estimated allowance for cancellation 6.19 6.16 6.40 5.62 Insurance policies associated with insurance-funded deferred revenue (1) 7.35 7.35 6.97 6.97 Total assets associated with backlog of preneed revenue $ 13.54 $ 13.51 $ 13.37 $ 12.59 (1) Amounts are not included in our Consolidated Balance Sheet.
December 31, 2023 December 31, 2022 Fair Value Cost Fair Value Cost (In billions) Deferred revenue, net $ 1.70 $ 1.70 $ 1.62 $ 1.62 Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts 0.95 0.95 0.85 0.85 Deferred receipts held in trust 4.67 4.18 4.16 4.12 Allowance for cancellation on trust investments (0.26) (0.24) (0.24) (0.23) Backlog of trust-funded deferred revenue, net of estimated allowance for cancellation 7.06 6.59 6.39 6.36 Backlog of insurance-funded revenue (1) 7.78 7.78 7.35 7.35 Total backlog of deferred revenue $ 14.84 $ 14.37 $ 13.74 $ 13.71 Preneed receivables, net and trust investments $ 6.19 $ 5.70 $ 5.58 $ 5.54 Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts 0.95 0.95 0.85 0.85 Allowance for cancellation on trust investments (0.26) (0.24) (0.24) (0.23) Assets associated with backlog of trust-funded deferred revenue, net of estimated allowance for cancellation 6.88 6.41 6.19 6.16 Insurance policies associated with insurance-funded deferred revenue (1) 7.78 7.78 7.35 7.35 Total assets associated with backlog of preneed revenue $ 14.66 $ 14.19 $ 13.54 $ 13.51 (1) Amounts are not included in our Consolidated Balance Sheet.
In January 2023, we entered into a new bank credit agreement that consists of a $675.0 million term loan due January 2028 and a revolving credit facility due January 2028 providing for borrowings of up to $1.5 billion.
Bolstering our flexible capital strategy, we entered into a new bank credit agreement in January 2023 that consists of a $675.0 million term loan due January 2028 and a revolving credit facility due January 2028 providing for borrowings of up to $1.5 billion, an increase of $500.0 million from our previous facility.
We also believe it adds to the stability and predictability of our revenue and cash flows. While revenue on the majority of preneed merchandise and service sales is deferred until the time of need, sales of preneed cemetery property provide opportunities for full current revenue recognition to the extent that the property is developed and available for use.
While revenue on the majority of preneed merchandise and service sales is deferred until the time of need, sales of preneed cemetery property provide opportunities for full current revenue recognition to the extent that the property is developed and available for use.
The decrease in funeral services performed was comprised of a 5.6% decrease in funeral services performed by our funeral service locations offset by a 1.8% increase in cremations performed by our non-funeral home channel.
Our comparable funeral services performed decreased 5.6% which comprised of a 6.9% decrease in funeral services performed by our funeral service locations offset by a 1.9% increase in cremations performed by our non-funeral home channel.
Our floating rate debt carried a weighted average interest rate of 2.95% for the full year 2022, which is 166 basis points higher than the weighted average rate for our floating rate debt for the full year 2021 of 1.29%.
Our floating rate debt carried a weighted average interest rate of 7.11% for the full year 2023, which is 416 basis points higher than the weighted average rate for our floating rate debt for the full year 2022 of 2.95%.
Absent strategic acquisition or new opportunities, we intend to return excess cash to shareholders. Our quarterly dividend rate has steadily grown from $0.025 per common share in 2005 to $0.27 per common share at the end of 2022.
Absent strategic acquisitions or new opportunities, we intend to return excess cash to shareholders through dividends and our share repurchase program. Our quarterly dividend rate has steadily grown from $0.025 per common share in 2005 to $0.29 per common share at the end of 2023.
Years Ended December 31, 2022 2021 (In millions) Preneed funeral $ 68.4 $ 89.2 Preneed cemetery: Merchandise and services 141.5 147.0 Pre-construction 42.5 24.8 Bonds supporting preneed funeral and cemetery obligations 252.4 261.0 Bonds supporting preneed business permits 7.1 7.0 Other bonds 23.9 20.4 Total surety bonds outstanding $ 283.4 $ 288.4 When selling preneed contracts, we may post surety bonds where allowed by state law.
Years Ended December 31, 2023 2022 (In millions) Preneed funeral $ 67.8 $ 68.4 Preneed cemetery: Merchandise and services 141.3 141.5 Pre-construction 54.6 42.5 Bonds supporting preneed funeral and cemetery obligations 263.7 252.4 Bonds supporting preneed business permits 7.6 7.1 Other bonds 25.4 23.9 Total surety bonds outstanding $ 296.7 $ 283.4 When selling preneed contracts, we may post surety bonds where allowed by state law.
For a discussion of our results of operations and liquidity and capital resources for the fiscal year ended December 31, 2020, see Management’s Discussion and Analysis of Financial Condition, Liquidity and Capital Resources and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year December 31, 2021, filed with the Securities and Exchange Commission on February 15, 2022.
For a discussion of our results of operations and liquidity and capital resources for the fiscal year ended December 31, 2021, see Management’s Discussion and Analysis of Financial Condition, Liquidity and Capital Resources and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year December 31, 2022, filed with the Securities and Exchange Commission on February 15, 2023. 24 Service Corporation International PART II Financial Condition, Liquidity, and Capital Resources Capital Allocation Considerations We rely on cash flow from operations as a significant source of liquidity.
Investing Activities Cash flows from investing activities used $447.9 million, and $414.9 million, in 2022, and 2021, respectively.
Investing Activities Cash flows from investing activities used $469.4 million and $447.9 million, in 2023, and 2022, respectively.
Recognized trust fund income (realized and unrealized) related to our cemetery perpetual care trust investments was $85.1 million, $96.1 million, and $77.8 million for the years ended December 31, 2022, 2021, and 2020, respectively.
Recognized trust fund income (realized and unrealized) related to our preneed trust investments was $158.2 million and $143.8 million for the years ended December 31, 2023 and 2022, respectively. Recognized trust fund income (realized and unrealized) related to our cemetery perpetual care trust investments was $86.6 million and $85.1 million for the years ended December 31, 2023 and 2022, respectively.
The trustees, with input from the investment advisor, take prudent action as needed to achieve the investment goals and objectives of the trusts.
SCI, the trustees, and the investment advisor monitor the capital markets and the trusts on an on-going basis. The trustees, with input from the investment advisor, take prudent action as needed to achieve the investment goals and objectives of the trusts.
In addition to the above items, the decrease over the prior year is due to an expected decline in gross profit primarily due to decreases in COVID-19 related activity combined with higher inflationary costs and lower trust fund income. Additionally, fewer shares outstanding more than offset the impact of higher interest expense.
In addition to the above items, the decrease over the prior year is due to an expected decline in gross profit primarily due to decreases in COVID-19 related activity. Additionally, fewer shares outstanding and a lower tax rate helped to offset the impact of higher interest expense primarily due to rising interest rates.
If the aggregate fair value is less than the related carrying amount for a reporting unit, we compare the implied fair value of goodwill to the carrying amount of goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.
We do not record an impairment of goodwill in instances where the fair value of a reporting unit exceeds its carrying amount. If the aggregate fair value is less than the related carrying amount for a reporting unit, we compare the implied fair value of goodwill to the carrying amount of goodwill.
This decrease in gross profit is due to the expected decline in revenue mentioned above combined with higher energy and employee-related inflationary costs. 30 Service Corporation International PART II Cemetery Results Years Ended December 31, 2022 2021 (In millions) Consolidated cemetery revenue $ 1,776.6 $ 1,800.0 Less: revenue associated with acquisitions/new construction 16.0 0.1 Less: revenue associated with divestitures 0.1 0.3 Comparable (1) cemetery revenue $ 1,760.5 $ 1,799.6 Consolidated cemetery gross profit $ 608.9 $ 683.3 Less: gross (loss) profit associated with acquisitions/new construction 8.6 (0.4) Less: gross profit associated with divestitures — 0.2 Comparable (1) cemetery gross profit $ 600.3 $ 683.5 (1) We define comparable (or same store) operations as those cemetery locations owned by us for the entire period beginning January 1, 2021 and ending December 31, 2022.
This decrease in gross profit is due to the expected decline in revenue mentioned above combined with higher selling costs on higher preneed insurance sales production during the current year. 32 Service Corporation International PART II Cemetery Results Years Ended December 31, 2023 2022 (In millions) Consolidated cemetery revenue $ 1,796.7 $ 1,776.6 Less: revenue associated with acquisitions/new construction 4.8 1.1 Less: revenue associated with divestitures 0.8 1.1 Comparable (1) cemetery revenue $ 1,791.1 $ 1,774.4 Consolidated cemetery gross profit $ 594.7 $ 608.9 Less: gross (loss) profit associated with acquisitions/new construction (1.5) (0.1) Comparable (1) cemetery gross profit $ 596.2 $ 609.0 (1) We define comparable (or same store) operations as those cemetery locations owned by us for the entire period beginning January 1, 2022 and ending December 31, 2023.
See Note 2 in Part II, Item 8. Financial Statements and Supplementary Data, for more information. Estimates and assumptions affect the carrying values of assets and liabilities and disclosures of contingent assets and liabilities at the balance sheet date. Actual results could differ from such estimates due to uncertainties associated with the methods and assumptions underlying our critical accounting measurements.
Estimates and assumptions affect the carrying values of assets and liabilities and disclosures of contingent assets and liabilities at the balance sheet date. Actual results could differ from such estimates due to uncertainties associated with the methods and assumptions underlying our critical accounting measurements.
The trustees that have oversight of their respective alternative LLCs work closely with the investment advisor in making all investment decisions. 28 Service Corporation International PART II Trust Performance During the year ended December 31, 2022, the Standard and Poor’s 500 Index decreased 18.1% and the Barclay’s Aggregate Index decreased 13.0%.
The trustees that have oversight of their respective alternative LLCs work closely with the investment advisor in making all investment decisions. 30 Service Corporation International PART II Trust Performance During the year ended December 31, 2023, the Standard and Poor’s 500 Index increased 26.3% and the Bloomberg’s US Aggregate Bond Index increased 5.5%.
Years Ended December 31, 2022 2021 (Dollars in millions) Preneed insurance-funded: Sales production (1) $ 664.6 $ 636.9 Sales production (number of contracts) (1) 107,553 107,191 General agency revenue $ 164.3 $ 157.4 Maturities $ 397.8 $ 392.9 Maturities (number of contracts) 64,962 65,812 (1) Amounts are not included in our Consolidated Balance Sheet.
Years Ended December 31, 2023 2022 (Dollars in millions) Preneed insurance-funded: Sales production (1) $ 704.8 $ 664.6 Sales production (number of contracts) (1) 113,095 107,553 General agency revenue $ 185.6 $ 164.3 Maturities $ 394.5 $ 397.8 Maturities (number of contracts) 63,839 64,962 (1) Amounts are not included in our Consolidated Balance Sheet.
The $17.6 million decreased outflow from 2022 over 2021 is primarily due to: • a $155.3 million decrease in debt payments, net of proceeds, partially offset by • a $106.5 million increase in the purchase of Company common stock, • a $13.1 million increase in payments of dividends, • a $11.5 million decrease in proceeds from exercises of stock options, and • a $6.6 million change in bank overdrafts and other.
The $66.9 million decreased outflow from 2023 over 2022 is primarily due to the following: • a $116.0 million decrease in the purchase of Company common stock, partially offset by • a $33.8 million increase in debt repayments, net of proceeds, • a $7.9 million increase in payments of dividends, • a $3.8 million change in bank overdrafts and other, and • a $3.6 million decrease in proceeds from exercises of stock options.
Years Ended December 31, 2022 2021 (Dollars in millions) Funeral: Preneed trust-funded (including bonded): Sales production $ 506.2 $ 451.0 Sales production (number of contracts) 125,457 116,654 Maturities $ 353.1 $ 352.4 Maturities (number of contracts) 84,392 83,846 Cemetery: Sales production: Preneed $ 1,376.7 $ 1,337.2 Atneed 451.1 494.0 Total sales production $ 1,827.8 $ 1,831.2 Sales production deferred to backlog: Preneed $ 669.0 $ 575.8 Atneed 315.6 338.3 Total sales production deferred to backlog $ 984.6 $ 914.1 Revenue recognized from backlog: Preneed $ 444.1 $ 348.2 Atneed 309.8 317.7 Total revenue recognized from backlog $ 753.9 $ 665.9 Backlog of Preneed Contracts The following table reflects our backlog of trust-funded deferred preneed contract revenue, including amounts related to Deferred receipts held in trust at December 31, 2022 and 2021.
Years Ended December 31, 2023 2022 (Dollars in millions) Funeral: Preneed trust-funded (including bonded): Sales production $ 541.5 $ 506.2 Sales production (number of contracts) 132,268 125,457 Maturities $ 372.7 $ 353.1 Maturities (number of contracts) 84,572 84,392 Cemetery: Sales production: Preneed $ 1,333.9 $ 1,376.7 Atneed 421.9 451.1 Total sales production $ 1,755.8 $ 1,827.8 Sales production deferred to backlog: Preneed $ 651.6 $ 669.0 Atneed 297.2 315.6 Total sales production deferred to backlog $ 948.8 $ 984.6 Revenue recognized from backlog: Preneed $ 503.0 $ 444.1 Atneed 307.3 309.8 Total revenue recognized from backlog $ 810.3 $ 753.9 Backlog of Preneed Contracts The following table reflects our backlog of trust-funded deferred preneed contract revenue, including amounts related to Deferred receipts held in trust at December 31, 2023 and 2022.
These results were impacted by certain significant items including: Years Ended December 31, 2022 2021 (In millions) Pre-tax gains on divestitures and impairment charges, net $ 10.0 $ 25.2 Pre-tax losses on early extinguishment of debt, net $ (1.2) $ (5.2) Pre-tax foreign currency exchange loss $ (1.5) $ — Pre-tax income from vendor waiver and release agreement cash receipts $ — $ 8.3 Pre-tax estimate of certain legal matters (1) $ (64.6) $ — Tax effect from significant items $ 14.0 $ (7.3) Change in uncertain tax reserves and other (2) $ 0.7 $ 4.0 (1) Estimate of certain legal matters relates to an estimate charge of $64.6 million for certain legal matters.
These results were impacted by certain significant items including: Years Ended December 31, 2023 2022 (In millions) Pre-tax gains on divestitures and impairment charges, net $ 9.8 $ 10.0 Pre-tax losses on early extinguishment of debt, net $ (1.1) $ (1.2) Pre-tax foreign currency exchange loss $ — $ (1.5) Pre-tax estimate of certain legal matters (1) $ — $ (64.6) Tax effect from significant items $ (2.3) $ 14.0 Change in uncertain tax reserves and other (2) $ 1.6 $ 0.7 (1) Estimate of certain legal matters in the fourth quarter of 2022 included an estimate of $64.6 million related to a private litigation matter in Florida and settlement discussions with the California Attorney General.
These mutual funds are utilized to invest in various asset classes including U.S. equities, non-U.S. equities, corporate bonds, government bonds, high yield bonds, and commodities, all of which are governed by guidelines outlined in their individual prospectuses. Separately Managed Accounts. To reduce the costs to the investment portfolios, the trusts utilize separately managed accounts where appropriate.
Mutual funds employ institutional share class mutual funds where operationally or economically efficient. These mutual funds are utilized to invest in various asset classes including U.S. equities, non-U.S. equities, corporate bonds, government bonds, high yield bonds, and commodities, all of which are governed by guidelines outlined in their individual prospectuses.
As of December 31, 2022, the fair value of the total backlog comprised $3.83 billion related to cemetery contracts and $9.91 billion related to funeral contracts. As of December 31, 2022, the fair value of the assets associated with the backlog of trust-funded deferred revenue comprised $3.82 billion related to cemetery contracts and $2.37 billion related to funeral contracts.
As of December 31, 2023, the fair value of the total backlog comprised $4.23 billion related to cemetery contracts and $10.61 billion related to funeral contracts. As of December 31, 2023, the fair value of the assets associated with the backlog of trust-funded deferred revenue comprised $4.26 billion related to cemetery contracts and $2.62 billion related to funeral contracts.
Comparable cemetery gross profit decreased $83.2 million to $600.3 million, and the gross profit percentage decreased 390 basis points to 34.1%. The decrease in gross profit is due to the decline in comparable cemetery atneed revenue and merchandise and service trust fund income mentioned above combined with higher inflationary employee-related and maintenance costs.
Comparable cemetery gross profit decreased $12.8 million to $596.2 million, and the gross profit percentage decreased 100 basis points to 33.3%. The decrease in gross profit is due to the decline in cemetery atneed revenue mentioned above combined with higher selling, maintenance and employee-related costs.
We have adequate liquidity and a favorable debt maturity profile, which allow us to return capital to shareholders.
We have adequate liquidity and a favorable debt maturity profile, which allow us to reinvest and grow our business as well as return capital to shareholders through share repurchases and dividends.
Interest Expense Interest expense increased $21.5 million to $172.1 million in 2022 primarily due to higher interest on our floating rate debt as well as higher balances.
Interest Expense Interest expense increased $67.3 million to $239.4 million in 2023 primarily due to higher interest on our floating rate debt as well as higher balances.
Cemetery Revenue Consolidated revenue from our cemetery operations decreased $23.4 million, or 1.3%, in 2022 compared to 2021 primarily due to a $39.1 million, or 2.2%, decrease in comparable cemetery revenue, partially offset by a $15.9 million increase in revenue contributed by newly constructed and acquired properties.
Cemetery Revenue Consolidated revenue from our cemetery operations increased $20.1 million, or 1.1%, in 2023 compared to 2022 primarily due to a $16.7 million, or 0.9%, increase in comparable cemetery revenue and a $3.7 million increase in revenue contributed by newly constructed and acquired properties.
Cemetery Gross Profit Consolidated cemetery gross profit decreased $74.4 million, or 10.9%, in 2022 compared to 2021, which is primarily attributable to the decrease in comparable cemetery gross profit of $83.2 million, or 12.2%, partially offset by a $9.0 million increase in gross profit contributed from newly constructed and acquired properties.
Cemetery Gross Profit Consolidated cemetery gross profit decreased $14.2 million, or 2.3%, in 2023 compared to 2022 and is primarily attributable to the decrease in comparable cemetery gross profit of $12.8 million, or 2.1%, and a $1.4 million decrease in gross profit due to an increase in gross losses contributed by newly constructed and acquired properties.
Certain of our trademark and tradenames and other intangible assets are considered to have an indefinite life and are not subject to amortization. We test for impairment of intangible assets annually during the fourth quarter. Our intangible asset impairment tests involve estimates and management judgment.
Valuation of Intangible Assets Our intangible assets include covenants-not-to-compete, customer relationships, trademarks and tradenames, and other intangible assets primarily resulting from acquisitions. Certain of our trademark and tradenames and other intangible assets are considered to have an indefinite life and are not subject to amortization. We test for impairment of intangible assets annually during the fourth quarter.
Additionally, we experienced a $1.6 million increase in comparable general agency and other revenue and a $3.7 million increase in comparable recognized preneed revenue, as a result of higher comparable preneed funeral sales production. Average revenue per funeral service increased 2.0% for the year ended December 31, 2022 compared to the same period in 2021.
This decrease was partially offset by a $18.2 million increase in comparable core general agency and other revenue as a result of higher comparable preneed insurance sales production. Average revenue per funeral service increased 2.8% for the year ended December 31, 2023 compared to the same period in 2022.
FORM 10-K 29 PART II Funeral Results Years Ended December 31, 2022 2021 (Dollars in millions, except average revenue per service) Consolidated funeral revenue $ 2,332.0 $ 2,343.2 Less: revenue associated with acquisitions/new construction 48.0 4.5 Less: revenue associated with divestitures 1.6 6.6 Comparable (1) funeral revenue 2,282.4 2,332.1 Less: comparable recognized preneed revenue 163.0 159.3 Less: comparable general agency and other revenue 142.0 140.4 Adjusted comparable funeral revenue $ 1,977.4 $ 2,032.4 Comparable services performed 362,565 380,089 Comparable average revenue per service (2) $ 5,454 $ 5,347 Consolidated funeral gross profit 545.7 639.8 Less: gross profit associated with acquisitions/new construction 6.0 0.2 Less: gross losses associated with divestitures (2.2) (3.5) Comparable (1) funeral gross profit $ 541.9 $ 643.1 (1) We define comparable (or same store) operations as those funeral locations owned by us for the entire period beginning January 1, 2021 and ending December 31, 2022.
FORM 10-K 31 PART II Funeral Results Years Ended December 31, 2023 2022 (Dollars in millions, except average revenue per service) Consolidated funeral revenue $ 2,303.0 $ 2,332.0 Less: revenue associated with acquisitions/new construction 33.8 7.2 Less: revenue associated with divestitures 2.5 3.2 Comparable (1) funeral revenue 2,266.7 2,321.6 Less: non-funeral home preneed sales revenue 133.1 146.4 Less: core general agency and other revenue 179.6 161.4 Adjusted comparable funeral revenue $ 1,954.0 $ 2,013.8 Comparable services performed 350,610 371,319 Comparable average revenue per service (2) $ 5,573 $ 5,423 Consolidated funeral gross profit 497.1 545.7 Less: gross profit associated with acquisitions/new construction 2.5 2.0 Less: gross losses associated with divestitures — (3.1) Comparable (1) funeral gross profit $ 494.6 $ 546.8 (1) We define comparable (or same store) operations as those funeral locations owned by us for the entire period beginning January 1, 2022 and ending December 31, 2023.
Comparable revenue from funeral operations was $2,282.4 million for the year ended December 31, 2022 compared to $2,332.1 million for the same period in 2021. This $49.7 million decrease was primarily attributable to a 4.6% decrease in our comparable funeral services performed as the prior year was impacted by the COVID-19 pandemic.
Comparable revenue from funeral operations was $2,266.7 million for the year ended December 31, 2023 compared to $2,321.6 million in 2022. This $54.9 million decrease was primarily driven by the decrease in core revenue of $67.1 million as the prior year was impacted by the COVID-19 pandemic.
Financing Activities Financing activities used $448.0 million in 2022 compared to using $465.6 million in 2021.
Financing Activities Financing activities used $381.1 million in 2023 compared to $448.0 million in 2022.
This expected decrease in operating cash flow is primarily due to $183.6 million in lower operating income (excluding the impact certain significant items) as the prior year was positively impacted by the more pronounced effects of the COVID-19 pandemic.
This $43.3 million increase in operating cash flow is primarily driven by a $95.8 million decrease in cash tax payments partially offset by $66.3 million increase in cash interest payments and lower operating income of $47.5 million (excluding the impact of certain significant items) as the prior year was positively impacted by the pronounced effects of the COVID-19 pandemic.
Certain of these transactions resulted in the recognition of pre-tax losses of $1.2 million and $5.2 million in 2022 and 2021, respectively, recorded in Losses on early extinguishment of debt, net in our Consolidated Statement of Operations.
Certain of these transactions resulted in the recognition of pre-tax losses of $1.1 million and $1.2 million in 2023 and 2022, respectively, recorded in Losses on early extinguishment of debt, net in our Consolidated Statement of Operations. FORM 10-K 33 PART II Provision for Income Taxes The 2023 consolidated effective tax rate was 24.1%, compared to 25.1% in 2022.
The decrease in comparable cemetery revenue was primarily attributable to a $28.6 million decrease in comparable cemetery core revenue, which was driven by a $32.1 million decline in comparable cemetery atneed revenue, and a $20.5 million decline in merchandise and service trust fund income, partially offset by $24.0 million increase in recognized preneed revenue.
The increase in comparable cemetery revenue was primarily attributable to a $15.0 million increase in comparable cemetery core revenue, which was driven by a $31.2 million increase in recognized preneed revenue, partially offset by a $16.2 million decline in atneed revenue.
The remainder of the charge includes anticipated reimbursement of California governmental investigative costs and other legal expenses. (2) See Note 5 in Part II, Item 8. Financial Statements and Supplementary Data, for additional information related to change in uncertain tax reserves and other.
Both matters relate to previously disclosed litigation. (2) See Note 5 in Part II, Item 8. Financial Statements and Supplementary Data, for additional information related to change in uncertain tax reserves and other.
We continue to pursue strategic acquisitions and build new funeral service locations in areas that provide us with the potential for scale. We invested $102.6 million acquiring 18 funeral service locations and 3 cemeteries, which included 3 combination locations, during 2022. Managing Debt.
We continue to pursue strategic acquisitions and build new funeral service locations in areas that provide us with the potential for additional scale. We invested $72.5 million in acquiring 17 funeral service locations and 2 cemeteries in 2023. Return Excess Cash to Shareholders.
The income approach, which is a discounted cash flow method, uses projections of future cash flows and includes assumptions concerning future operating performance and economic conditions that may differ from actual future cash flows. We do not record an impairment of goodwill in instances where the fair value of a reporting unit exceeds its carrying amount.
The income approach, which is a discounted cash flow method, uses 34 Service Corporation International PART II projections of future cash flows and includes assumptions concerning future operating performance and economic conditions that may differ from actual future cash flows.
Funeral Gross Profit Consolidated funeral gross profit decreased $94.1 million, or 14.7%, in 2022 compared to 2021 as the prior year was positively impacted by COVID-19.
Funeral Gross Profit Consolidated funeral gross profit decreased $48.6 million, or 8.9%, in 2023 compared to 2022 as the prior year was positively impacted by COVID-19. This decrease is primarily attributable to the decrease in comparable funeral gross profit of $52.2 million, or 9.5%.
This $11.2 million, or 0.5%, decrease in revenue is primarily attributable to a $49.7 million decrease in comparable funeral revenue, partially offset by a $43.5 million increase in revenue contributed from newly constructed and acquired properties.
Funeral Revenue Consolidated revenue from funeral operations was $2,303.0 million for the year ended December 31, 2023, compared to $2,332.0 million in 2022. This $29.0 million, or 1.2%, decrease in revenue is primarily attributable to a $54.9 million decrease in comparable funeral revenue, partially offset by a $26.6 million increase in revenue contributed from newly constructed and acquired properties.
Excluding an estimated charge for certain legal matters of $64.6 million in 2022, corporate general and administrative expenses increased $15.0 million primarily related to workers compensation and general liability insurance claims as well as expenses related to the timing of incentive compensation.
Other Financial Statement Items Corporate General and Administrative Expenses Corporate general and administrative expenses were $157.4 million in 2023 compared to $237.2 million in 2022. Excluding an estimated charge for certain legal matters of $64.6 million in the prior year, corporate general and administrative expenses decreased $15.2 million, primarily related to our incentive compensation plan.
Financial Statements and Supplementary Data, our legal exposures and the ultimate outcome of these legal proceedings could be material to operating results or cash flows in any given quarter or year. Income Taxes We compute income taxes using the liability method. Our ability to realize the benefit of our deferred tax assets requires us to achieve certain future earnings levels.
Income Taxes We compute income taxes using the liability method. Our ability to realize the benefit of our deferred tax assets requires us to achieve certain future earnings levels.
The valuation of certain investments requires significant management judgment due to the absence of quoted market prices, inherent lack of liquidity, and the long-term nature of such assets. Legal Liability Reserves Contingent liabilities, principally for legal matters, are recorded when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
The valuation of certain investments requires significant management judgment due to the absence of quoted market prices, inherent lack of liquidity, and the long-term nature of such assets.
FORM 10-K 31 PART II Losses on Early Extinguishment of Debt, Net During 2022, we made aggregate debt payments of $101.9 million for scheduled and early extinguishment payments. During 2021, we made aggregate debt payments of $736.0 million for scheduled and early extinguishment payments.
Losses on Early Extinguishment of Debt, Net During 2023, we made aggregate debt payments of $603.2 million for scheduled and early extinguishment payments primarily associated with our new bank credit agreement. During 2022, we made aggregate debt payments of $101.9 million for scheduled and early extinguishment payments.
Our Dignity Memorial® brand is the name families turn to for professionalism, compassion, and attention to detail that is second to none. Our financial position is enhanced by our $13.7 billion backlog of future revenue from both trust and insurance-funded preneed sales at December 31, 2022. Preneed selling provides us with a strategic opportunity to gain future market share.
We strive to offer families exceptional service in planning life celebrations and personalized remembrances. Our Dignity Memorial® brand serves approximately 600,000 families each year with professionalism, compassion, and attention to detail. Our financial position is enhanced by our $14.8 billion backlog of future revenue from both trust and insurance-funded preneed sales at December 31, 2023.
The decline in comparable cemetery atneed revenue was due to an expected decrease in contract velocity compared to the same period in 2021 that was heavily impacted by the COVID-19 pandemic. Additionally, comparable other revenue declined $10.5 million, or 8.0%, primarily from lower endowment care trust fund income due to the impact of the financial markets.
The recognized preneed revenue growth benefited from increases in property, merchandise, and service revenue, as well as higher trust fund income. The decline in comparable cemetery atneed revenue was due to an expected decrease in contract velocity compared to 2022 that was heavily impacted by the COVID-19 pandemic.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeMarketable Equity and Debt Securities — Price Risk In connection with our preneed funeral operations and preneed cemetery merchandise and service sales, the related funeral and cemetery trust funds own investments in equity and debt securities and mutual funds, which are sensitive to current market prices.
Biggest changeActual fair value movements related to changes in equity markets, interest rates, and currencies, along with the timing of such movements, may differ from those estimated. 36 Service Corporation International PART II Marketable Equity and Debt Securities — Price Risk In connection with our preneed funeral operations and preneed cemetery merchandise and service sales, the related funeral and cemetery trust funds own investments in equity and debt securities and mutual funds, which are sensitive to current market prices.
Cost and market values as of December 31, 2022 are presented in Note 3 in Part II, Item 8, Financial Statements and Supplementary Data. Also see " Trust Investments " in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Financial Conditions, Liquidity, and Capital Resources, for discussion of trust investments.
Cost and market values as of December 31, 2023 are presented in Note 3 in Part II, Item 8, Financial Statements and Supplementary Data. Also see " Trust Investments " in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Financial Conditions, Liquidity, and Capital Resources, for discussion of trust investments.
A hypothetical 10% adverse change in the strength of the U.S. dollar relative to our foreign currency instruments would have negatively affected our net income on an annual basis by $5.8 million and $5.7 million for the years ended December 31, 2022 and 2021, respectively.
A hypothetical 10% adverse change in the strength of the U.S. dollar relative to our foreign currency instruments would have negatively affected our net income on an annual basis by $4.7 million and $5.8 million for the years ended December 31, 2023 and 2022, respectively.
Market-Rate Sensitive Instruments — Currency Risk At December 31, 2022 and 2021, our foreign currency exposure was primarily associated with the Canadian dollar.
Market-Rate Sensitive Instruments — Currency Risk At December 31, 2023 and 2022, our foreign currency exposure was primarily associated with the Canadian dollar.
At December 31, 2022, approximately 6% of our stockholders’ equity and debt and 8% of our operating income was denominated in the Canadian dollar. Approximately 6% of our stockholders’ equity and debt and 6% of our operating income was denominated in the Canadian dollar at December 31, 2021.
At December 31, 2023, approximately 6% of our stockholders’ equity and debt and 6% of our operating income was denominated in the Canadian dollar. Approximately 6% of our stockholders’ equity and debt and 8% of our operating income was denominated in the Canadian dollar at December 31, 2022.
We do not have an investment in foreign operations considered to be in highly inflationary economies. FORM 10-K 35 PART II
We do not have an investment in foreign operations considered to be in highly inflationary economies. FORM 10-K 37 PART II
A hypothetical increase in interest rates by 10% of the rates associated with our floating rate debt would increase our interest expense by $2.9 million. See Notes 6 and 7 in Part II, Item 8. Financial Statements and Supplementary Data, for additional information.
A hypothetical increase in interest rates by 10% of the rates associated with our floating rate debt would increase our interest expense by $11.0 million. See Notes 6 and 7 in Part II, Item 8. Financial Statements and Supplementary Data, for additional information.
Market-Rate Sensitive Instruments — Interest Rate Risk At December 31, 2022 and 2021, approximately 72% and 79%, respectively, of our total debt consisted of fixed rate debt at a weighted average rate of 4.32% and 4.33%, respectively.
Market-Rate Sensitive Instruments — Interest Rate Risk At December 31, 2023 and 2022, approximately 69% and 72%, respectively, of our total debt consisted of fixed rate debt at a weighted average rate of 4.35% and 4.32%, respectively.
Our views on market risk are not necessarily indicative of actual results that may occur, and they do not represent the maximum possible gains or losses that may occur. Actual fair value movements related to changes in equity markets, interest rates, and currencies, along with the timing of such movements, may differ from those estimated.
Our views on market risk are not necessarily indicative of actual results that may occur, and they do not represent the maximum possible gains or losses that may occur.

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