Welcome to the Q3 2017 Service Corporation International Earnings Conference Call. My name is John, and I'll be your operator for today's call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer Please note the conference is being recorded. And now I'll turn the call over to SCI Management.
Thank you. Hi, everyone. This is Debbie Young, Director of Investor Relations at SCI. Before we start today with our prepared remarks, let me quickly go over the customary Safe Harbor language. The comments made by our management team today will include statements that are not historical and are forward looking.
These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, those factors identified in our press release and in our filings with the SEC that are available on our website. In today's comments, we may also refer to certain non GAAP measurements such as adjusted EPS, adjusted operating cash flow and free cash flow. A reconciliation of these measurements to the appropriate measures calculated in accordance with GAAP is provided on our website and in our press release and 8 ks that were filed yesterday. So with that behind us, I'll now turn the call over to Tom Ryan, SEI's Chairman and CEO.
Thank you, Debbie, and hello, everyone, and thank you for joining us on the call today. I'm going to begin my remarks this morning with some comments regarding the recent disasters that have impacted members of our SCI team and their communities. Next, I'll provide an overview of the quarter. I will then get into a more detailed analysis of our funeral and cemetery operations. And finally, I'll comment on our outlook for the Q4 and for the full year 2017.
Over the past 9 weeks, many people throughout our company and the communities in which they live were severely impacted by 3 major hurricanes: Harvey, Irma and then Maria. We also endured the tragedy suffered in Las Vegas and the wildfires in Northern California. While hundreds of employees have experienced personal loss of homes, cars and personal effects, we never lost our focus on serving our client families. I have heard countless stories of personal sacrifice that will bring a tear to your eye. Our hearts and prayers go out to all the people affected by these tragedies and know that we stand beside you as you deal with the challenge of your personal recovery.
Throughout each of these tragedies, our employees have been nothing short of amazing. The examples of teamwork, sacrifice hard work have been incredible. Vendors, members of our board and employees all across Canada and the United States have shown unwavering support through monetary donations as well as personal items to help our SCI family members who are impacted get back on their feet. With a company match, we've raised nearly $900,000 for our SCI disaster relief fund, which is going directly to the 100 employees who've experienced a loss. In addition, we've donated over $300,000 to local United Way chapters in the markets impacted.
And last but not least, our employees have spent countless hours of their own personal time working side by side with their fellow teammates as they cleaned up home, delivered and sorted personal supplies and drove thousands of miles to help each other out. I just want to take a moment to thank the entire SEI team and tell you that I couldn't be more proud to work with such a compassionate and caring group of people. On the operational front, we sustained damages to approximately 100 of our locations, predominantly in Texas, Florida and Puerto Rico as well as our corporate campus. We estimate the impact on earnings for the 3rd quarter approximated $0.02 per share. This estimated loss included a $5,800,000 expense associated with repairs to locations offset by a $4,500,000 in insurance proceeds making the net profit and loss impact from the damages to be about 0.5 $0.01 Additionally, we estimate that we lost another $0.015 from reduced revenue in the impacted markets when comparing year over year, which we view as temporary and should rebound in the near future.
Keep in mind, we are continuing to repair our locations in our home office, so you should probably expect another $0.01 to $0.02 of negative earnings per share impact in the 4th quarter. Now for an overview of the quarter. We reported adjusted earnings per share of $0.33 for the 3rd quarter, which is a $0.07 or 27% increase over the prior year quarter. In light of the challenges, we were very pleased with our $0.07 increase in adjusted earnings. There were several moving parts.
So I'll try to walk you through this as simply as I can by doing a roll forward from $0.26 of adjusted earnings per share posted in the prior year quarter to $0.33 in the current year. First, we generated $0.05 of operating growth before the impacts of the hurricanes from our comparable businesses. This growth was achieved with higher property sales production and recognition rates as well as higher recognized merchandise and service deliveries in our cemetery business. This strong performance in cemetery was tempered slightly by softer results, funeral results, primarily due to lower revenues and ordinary fixed cost growth. Adding the $0.05 of operating growth to the prior year earnings per share of $0.26 gets you to the $0.31 Moving on, I just mentioned that our estimated loss from the storms was approximately $0.02 across the affected operating locations.
So now we're at $0.29 Next, there was an additional $0.04 in the quarter related to the non cash benefit in our tax provision from the new accounting standard for share based compensation, which we discussed the past 2 quarters and another $0.01 of benefit resulting from tax planning. So now we're at adjusted earnings per share of $0.34 Lastly, there was about a $0.02 increase in anticipated corporate, general and administrative expenses and interest expense during the quarter that was partially offset by a $0.01 of benefit from fewer shares outstanding, which then reconciles back to the $0.33 in the quarter. Now shifting to some more detail around the funeral operating performance during the quarter. Comparable funeral revenue decreased by less than 1% compared to the same period last year. Comparable core funeral services performed were essentially flat quarter over quarter.
Organic sales average at the customer level was flat. The other components of the average also were essentially flat as an increase in core cremation mix of 80 basis points was offset by a favorable Canadian currency impact and increased trust fund income. Total non funeral home revenue continued to increase by 4.8% impacted by growth in volume and average revenue per service. Typically, we've seen a steady growth in recognized pre need revenues. However, during the Q3, we saw a decline of $1,100,000 or 4% due to a decrease in the number of contracts sold in hurricane impacted locations, primarily Florida, where a significant amount of this particular revenue stream is generated.
Recall, these are the products sold in conjunction with the preneed contract that are delivered at the time of sale, primarily representing cremation related merchandise and travel protection membership plans sold by our non funeral home network. Other funeral revenue, the proponents of which is general agency revenue, was down $1,200,000 compared to the prior year quarter on lower insurance funded preneed sales production. Comparable preneed funeral sales production decreased $3,600,000 or 1.8 percent in the Q3 of 2017 compared to 2016. This decline was primarily related to a 2.4% drop in production through the core funeral home channel that was slightly offset by a 0.8% increase in production through our non funeral home sales channel. We estimate that the impact of the reduced funeral preneed sales production at affected locations by approximately $5,000,000 in total.
When taking into account the estimated production that we lost, we believe that preneed funeral sales production would have been slightly higher than the prior year. Finally, comparable funeral operating profit decreased $3,200,000 and operating margins dropped 60 basis points. This decrease is primarily driven by decreases in revenue and ordinary fixed cost growth. However, the reduced profit was somewhat mitigated by enhanced selling cost efficiencies during the quarter. Now moving on to cemetery operations.
Our cemetery segment continued to deliver outstanding results, posting top line comparable cemetery revenue growth of $16,200,000 or 5.9 percent, which included a $15,500,000 or 8.5% increase in recognized pre need revenue. Included in this $15,500,000 increase is higher preneed property revenue as well as higher merchandise and service deliveries, which includes higher merchandise and service trust fund income. Preneed sales production or sales activity grew by $4,000,000 or 2%. Again, not to sound like a broken record, but this would have certainly been higher barring the sales disruption caused by the hurricanes. We estimate that the impact of the hurricane reduced cemetery sales production at affected locations by approximately $8,000,000 in total, which would have led to an estimated 6.3% increase over the prior year, which is in line with our expectations.
Finally, cemetery operating profits grew nearly $13,000,000 or just under 20% and operating margins expanded 300 basis points to just over 27%. Typically, we have said that we expect to receive an estimated 65% incremental margin. However, the margin was closer to 85% for the quarter. In this year's Q3, our preneed sales recognition exceeded preneed sales production by $5,700,000 whereas last year's quarter, the inverse occurred. Preneed sales production exceeded preneed sales recognition by $5,300,000 As selling costs are recognized at the time of sale, not recognition, this creates a savings of selling costs for recognition purposes on $11,000,000 of revenue quarter over quarter or about $2,200,000 in reduced selling costs.
Remember, the consistent investment in developing cemetery inventory over the past 3 or 4 years has enabled us now to recognize more preneed cemetery sales in conjunction with the actual selling activity. This has had the effect of allowing us on a year over year basis to recognize more of what we sell in the 1st 3 quarters of the year. While we should see continued growth in preneed sales in the Q4, the recognition rate should be lower year over year as less of what we sold throughout the year is in the backlog. The higher recognition rate also has a negative effect on working capital as we are recognizing all of the revenues for items that are generally sold on an installment basis. The good news is, is that the cash is on its way.
Now as we step back and think about our overall business for the remaining 3 months of 20 17, we believe the 4th quarter will be another solid earnings quarter. However, we are facing a very tough comparison, especially as it relates to the completion of those large cemetery development projects in Vancouver last year, which contributed approximately $0.03 per share. This coupled with the fact that we will continue repairs on our impacted locations that will probably reduce adjusted earnings per share in the 4th quarter by another $0.01 to $0.02 In light of the success that we've had in the 1st 3 quarters, we are raising our full year 2017 adjusted earnings per share guidance to $1.48 to 1 $0.54 versus our previous expectation of $1.42 to $1.52 Included in this new midpoint of 1.51 dollars is $0.09 of non cash excess tax benefit resulting from the new share based accounting guidance. We are expecting a nominal amount of these types of tax benefits in the 4th quarter. Even when backing out the $0.09 of excess tax benefit, the $1.42 then represents an expected 15% increase over our 20 8% to 12% growth expectations.
Further remember, the 15% growth absorbs an estimated $0.04 in 2017 for the negative impact of the hurricanes, dollars 0.02 in the 3rd quarter and an additional $0.02 in the 4th. So to wrap it up, we were able to deliver another impressive quarter despite the challenges we faced with the rash of natural disasters. Once again, I could not be more proud of our team and how they reacted to adversity. Thank you, team, We look forward to a strong Q4 finish, kind of like the Astros and Extra Innings. With that, I'll turn the call over to Eric.
Thanks, Tom. Good morning, everybody. In my remarks for you today, very similar to other quarters, I'm going to address some details of our cash flow performance and our capital deployment specifically for the Q3. And now I'm going to touch on our outlook and our financial position for the remainder of 2017. So let's start with our cash flow performance for the Q3.
So during this quarter, we reported $165,000,000 of adjusted operating cash flow. That was an increase of about $22,000,000 or 15% versus the prior year quarter adjusted amount of $143,000,000 However, most of this increase is timing due to the deferral of cash tax payments. So let's talk about that. During the quarter, the IRS granted the deferral of paying federal cash taxes for the remainder of the year for businesses affected by Hurricane Harvey. As a result, we have deferred about $25,000,000 of cash tax payments that would have been paid during the Q3 and we deferred it into the Q4 of 2017.
Additionally, we also benefited by around $10,000,000 from reduced cash tax reduced cash taxes, primarily as a result of the hard work of our tax team on ongoing tax planning initiatives as well as a favorable true up of cash taxes paid associated with the finalization of our 2016 federal tax return. Neutralizing for this total of $35,000,000 reduction in total cash tax payments that I just described, our businesses produced $130,000,000 of cash flow for the quarter. This is about $13,000,000 reduction from the $143,000,000 in the prior year that I'd now like to walk you through that math. Our operating profits contributed $0.05 of earnings growth, as Tom just mentioned, which we equate to about $15,000,000 of positive cash flow growth during the quarter. This growth is partially offset by 3 cash flow items summing to $7,000,000 during the quarter.
1, we had about $3,000,000 of higher field compensation payments from higher mid year field bonus payments and this was due to our strong first half field operating results. Additionally, cash interest was up about $3,000,000 as we increased borrowings on our revolving credit facility to maintain our target leverage ratio and of course we deployed that capital to its best and highest return to continue to drive shareholder returns. Finally, net of insurance payments received, we had about $1,000,000 of cash expenses associated with the hurricanes. The remaining $8,000,000 of operating cash flow was more than offset by 2 working capital items summoned to $21,000,000 that's important to note we believe are temporary in nature. First, we had a use of $9,000,000 due to lower cash receipts, primarily attributable to the impacts of the hurricanes late in Q3.
We expect these cash receipts to rebound in the 4th quarter. We also had a use of working capital of around $10,000,000 due to the timing of payables during the quarter as compared to prior year. So now after discussing these cash flow results for the quarter, it's probably good, let's step back and cover where we stand on cash flow for the year so far. Year to date, we have generated $430,000,000 of adjusted operating cash flow, which is an increase of about $29,000,000 versus 2016. When we neutralize the net decrease of 14 taxes in 2017 versus 2016, our operating cash flow has increased by about $15,000,000 over prior year, which is right in line with where we expected to be year to date when taking into account the acceleration of our recognition of the Prinead Cemetery revenues compared to the underlying cash receipts and the temporary 3rd quarter working capital uses I just described to you.
So maintenance CapEx and cemetery development CapEx, which are the 2 components that we define as CapEx in our free cash flow calculation came in at about $53,000,000 for the quarter. This is about $10,000,000 higher than the prior year quarter. While our CapEx was slightly down to the prior year in the first half of twenty seventeen, remember, we expected about a $10,000,000 increase in CapEx for the full year, which primarily occurred in the Q3. We continue to believe this $10,000,000 more in CapEx is a prudent use of our cash flow as we continue to invest more to update our facilities and to remain relevant with our customer through being able to offer catering and other celebration of life type service offerings. Deducting this capital spending items from our adjusted cash flow from ops, we calculate our free cash flow for the Q3 to be about $112,000,000 which is $11,000,000 higher than the $101,000,000 generated in the prior year.
And again, adjusting for the deferral of the Q3 cash taxes of $25,000,000 our free cash flow would have declined by about $14,000,000 The primary driver for this reduction in free cash flow during the quarter is due to the increased uses of working capital, which again, we believe are temporary and the increase in maintenance CapEx that I just noted. So moving on to free cash flow deployment in the quarter, our capital deployed to acquisitions, new location builds and to shareholders was significant during the quarter, totaling roughly $90,000,000 We are pleased to note that we invested over $29,000,000 for the acquisition of several funeral homes in the Midwest. Remember, as we've said in the past, accretive acquisitions remain our highest priority for capital deployment due to the significant after tax cash returns we generate on these investments. Year to date, we have invested an impressive $80,000,000 against our goal of $50,000,000 to $100,000,000 including 1031 exchange funds and we continue to remain optimistic about the pipeline of acquisition opportunities available to us in future quarters. We've also invested almost $4,000,000 on the construction or expansion of several funeral homes during the quarter.
This brings our year to date spend to $14,000,000 on these construction and expansion investments that will yield positive returns to us. Shifting to capital return to shareholders during the quarter, we paid just over 20 $8,000,000 in dividend payments. Looking year to date, we paid an impressive $81,000,000 in dividends to our shareholders. And last, but certainly not least, we invested about $29,000,000 on the repurchase of shares at an average price of 34 $0.89 per share. Since the beginning of 2017, we have repurchased 4,800,000 shares for a total investment of nearly $150,000,000 at an average price just over $31 per share.
We currently have about 188,000,000 shares outstanding and just over 206,000,000 of remaining share repurchase authorization. Subsequent to quarter end, we continued to buy back shares investing about $14,000,000 to repurchase just under 500,000 shares. So now let's shift to the cash flow outlook for the rest of the year. And when we do look forward, as Tom noted, while we're expecting a strong Q4, we expect earnings to be flat to slightly down to the prior year due to the tough comparables as a result of the completion of the large cemetery projects in Vancouver in the Q4 of last year. Additionally, we expect to have more hurricane related expenses, which we believe could have an additional impact in the Q4.
As I mentioned previously, with the IRS tax payment relief due to Hurricane Harvey, we deferred $25,000,000 of 3rd quarter taxes that will be that will now be paid in the 4th quarter. So this is just timing in the year. I'm happy to note that the $10,000,000 of other tax planning initiatives we benefited from during the Q3 has reduced our cash tax payment expectations for the year to be approximately $130,000,000 to $135,000,000 or about $10,000,000 less than the previously guided $142,000,000 at the midpoint of the previous guidance. When you think about our original guidance for adjusted operating cash flow at the beginning of the year, we are projecting 4.80 $5,000,000 at the midpoint. In my remarks to you last quarter, we increased our guidance range by about $15,000,000 to $500,000,000 primarily on our strong first half results.
Our revised 2017 adjusted cash flow guidance range remains unchanged at this midpoint of $500,000,000 but we have tightened the endpoints to $485,000,000 to $515,000,000 Our guidance for capital expended in 2017 for maintenance and cemetery development also remains unchanged at the $180,000,000 for the full year. And when you deduct these recurring CapEx items from our 20 17 adjusted cash flow from operations expectations, you will calculate free cash flow in 2017 ranging from 305 dollars to $335,000,000 with a midpoint of $320,000,000 So lastly, before we close, let me provide a high level view of our financial position as we close out the quarter. We finished with $268,000,000 of cash on hand and $197,000,000 of availability on our long term revolver. Taking into account the fact that some of our cash is encumbered due to being in Canada and our minimum operating cash flow threshold, we believe our unencumbered liquidity to be about approximately $390,000,000 at the end of the quarter, which we view favorably and is well in excess of our internal goals. Our leverage, which is calculated as net debt to EBITDA in accordance with our updated credit facility, was approximately 3.62 times at September 30, which is well in line with our target leverage range of 3.5 times to 4 times.
So lastly, we're very proud of our performance thus far in the year and we expect to finish the year strongly. As our track record is shown, we are constantly looking for ways to maximize value for our shareholders and we plan to execute accordingly for the remainder of this year. So with that operator, that concludes the prepared remarks from Tom and I. And we'll go ahead and turn the call over to you to generate questions for the remainder of the call.
Thank you. And we'll now begin the question and answer And our first question is from Chris Rigg from Deutsche Bank.
Hey, how are you doing? This is Adam Chaim stepping in for Chris Rigg. Thanks for taking my question. Regarding the same store funeral results, can you provide some color on the drivers of the divergence in atneed and matured preneed revenue and volume growth in the quarter?
Sure. So atneed and maturedpreneed you said as far as volume goes? Yes. So the drivers The
volume revenue, right?
Yes. So the drivers of those, one of the things, remember that we focused on terminally imminent contracts, approaching that in a different way as it relates to interacting with our sales force. So what we're seeing right now is the potential for year over year, you're seeing more volume through that category that has to do with terminally imminent. The other thing that I would say is over time because we've grown preneed over the years that we're forcing, we would expect that over time those matured preneed will become a larger and larger portion of the contracts that we're going to service. So atneed is getting impacted, if you will, temporarily by the process through which we're handling term of the imminent and longer term again because we're we believe we're locking up more people every year as we write preneed contracts that that number as a percentage of the people we serve is going to continue to go up.
As you think about the year and step back, our volumes up this year overall below 1%, but it is comparably up and we're very pleased with that. I think our field leadership has really taken a focus this year on trying to capture more market share in the markets that which we operate. And I think they've done a great job. With that, I think we've seen from a pricing perspective, at least in certain markets, we're being a little more competitive as it relates to pricing where that is a primary issue with the consumer. That is probably that's clearly less than most of the business that we interact.
But on the margin of that business, we're competing more effectively.
Our next question is from Joanna Gajuk from Bank of America.
Good morning. Thank you. So just on the first on the guidance, which you raised at the midpoint by $0.04 right? So there's $0.02 in there from the higher expectation for the from the benefits from the accounting change for stock compensation rate. So call it $0.02 but then what you're saying is that does include about $0.04 headwind from the hurricanes, right?
So when you think about it, excluding the taxes and storm impacts, that essentially means that you're raising your core guidance by more like, plus 0.0 $0.05 to 0 point 0 $6 right? So can you confirm that the way I think about it is whether it's correct? And then if it is, then what's driving that core business kind of outlook improving?
Yes. Generally, your math is right, Joanna. And I would say that what is happening in the core business is really the preneed cemetery growth that we expect during the year during the Q4, I should say. And we also expect some momentum in the Q4 related to our prayer range funeral sales that will generate general agency revenue, which will be both cash and earnings. And then lastly, in the Neptune part of our business, which was interrupted as we've described to you earlier related to the hurricane, we also think those sales are temporary in nature in terms of the pause that they had.
And so I think the benefit is we expect some momentum in the Q4 from the sales organization, which will generate preneed cemetery revenues, general agency revenues and recognized preneed funeral revenues from SCI Direct.
Great. So you're saying that you're seeing already the rebounding in those sales in some of these markets that were impacted?
Yes, we are seeing it. I think let's put Puerto Rico to side. I think that was devastated and we're not seeing that rebound yet. But yes, I think it's safe to say in October, we feel good about our momentum going into going in for the 1st month. The 1st month doesn't make the quarter.
But yes, we feel good about our momentum in those areas.
And just talking about the Q4, what are your expectation for flu activity, I guess, this year? Because it seems like in Australia, the flu was quite strong actually resulted in a lot of deaths related to influenza in that hemisphere. And some people believe that what happens in Australia implies what's going to happen in the Northern Hemisphere during the flu season. So how do you think about that and what are your expectation? What do you assume in your guidance there for flu and related, I guess, business activities for you there?
We've seen that correlation work in the past and we've seen that correlation not work in the past. So to answer your question, we've not built anything in the Q4 in our funeral segment for an incremental influenza outbreak that would increase the number of services that we are performing. I think it's possible, but we don't try to guess at that correlation with the crystal ball. So we don't have that built in. Our funeral volumes are similar to what you've seen the rest of the year in terms of our outlook.
Okay.
And then if I may on the Cemetery segment, right, the margins continue to be very impressive because of this dynamic that you explained around looking the revenues of the property that you sold. So how should we think about these margins going forward? Because I guess at some point, I guess you're going to anniversary sort of the recognition or rather you're going to as you say in Q4, it's going to reverse where you have the recognition rate versus the production rate might reverse. But I guess you still keep on investing in developing new cemetery properties. So how should we think about it in kind of next year in terms of the margins for cementary business?
Yes, Joanna. So I think the way to think about it is if you look year to date, we have upside surprise as it relates to the 1st 9 months in the sense that our long term guidance would say we could grow cemetery margins in the, in call it 80 basis points to 120 basis points a year. I think that's still very achievable than what we expect. We've outperformed that year to date pretty significantly. And the reason for that is what I was touching on before, selling activity.
Think about the 1st 3 quarters of the year, we'd sell more than we'd recognize for 3 quarters and then you get to the 4th quarter and get all the construction and now the big reversal happens and you have a huge influx of recognition that's going to well exceed the production. What's happened this year because we've spent money in developing a particularly a lot of high end product, we're now selling stuff and recognizing it quicker relative to the prior year. So what you've seen is an acceleration of margins that again we're going to have great margins in the Q4. But I think compared to last year's Q4, you should see a diminishment of the margins that then will get you back to a more normalized year over year growth for when you think of the entire year. So as I think of 2018 and again, we haven't perfected this yet, but I think my belief would be that we'll continue to see kind of that early recognition in the 1st 9 months of the year that will be pretty comparable to what you've seen in 2017 and then the same thing happens in the Q4 of 'eighteen that we've got a new dynamic where there's more inventory readily available for sale and therefore we'll accelerate our ability to recognize those revenues.
Great. Thank you. I'll go back to the queue. Thanks so much.
Thanks, Joanna.
And our next question is from Scott Fendberger from Oppenheimer.
Good morning. This is Daniel stepping in for Scott. Let's start with Funeral. Can you discuss the selling cost efficiencies you know there and how we should think about the margin outlook for funeral?
I think, again, our long term guidance as it relates to funeral margins is that we believe until there's a demographic impact on the funeral business that they're generally going to be constant year over year. You may have slight dip in 1 year, a slight acceleration. What we've seen this year so far is in the Q3, we're talking about a slight diminishment of the margin. But if you step back and look at the 9 months, they're actually up a little bit. And again, we believe that is driven by better volume performance than we anticipated, coupled with, again, I think very good expense management as it relates to the operations of the business.
When you think about the selling changes, this the selling changes really gets back to what we're incenting people to sell and what we're willing to pay for it. So as an example, we're paying people to sell terminally imminent contracts on the funeral side at a certain commission gate. We're paying a little bit more, if you will, I think on the cemetery side and again raising the targets of the sales force in accordance with that. And a lot of this has to do with the technology we've invested. We've got salesforce.com.
We've got where we're going to be where we're going to be able to interface with consumers and utilize contemporary technology for our presentations that also will generate a contract and allow us to initiate collection procedures right there in the family's home. So a lot of what we're doing is with this new technology place. And so we're seeing those efficiencies today in the way that we do it. The other thing that has been interesting is we're generating a lot more leads through the Internet. And so that form of lead procurement is a lot cheaper than some of the historical methodologies that we've utilized in selling costs.
So we expect to continue to be able to generate leads more effectively and efficiently, particularly as it relates to our website project that's going to roll out in 2018. So we're continuing to find ways to be more efficient on the selling front and we're beginning to see that show up in our margins in 2017.
Got it. I appreciate the color. There's been discussions with respect to the FTC funeral roll and the potential for an increase to online pricing transparency for the industry, how do you think about the probability of that happening? And if it went to an effect, what do you think about the impact for the industry?
I think right now, it's our belief that these changes are not likely to occur. It would be really long and expensive process to make a significant rule change because again hearings have to be held in a variety of markets across the U. S. We just don't believe that that's a priority of the administration at this time. Having said that, faced with that, we deal with it and we're not afraid of it.
I think the complicating factor about online is just the uniqueness of what we do. Prices can vary greatly depending on cremation or burial, the quality of the facilities, additional benefits that can be provided like catering or personalized services or tribute videos. So we're selling a unique experience that can be altered dramatically. And I think it's really hard to convey that with Internet pricing. It's easy to price caskets against each other.
It's terribly hard to compare as an example, Ritz Carlton and a Holiday Inn, right? They're going to have 2 different pricing mechanisms. And so you're in a Holiday Inn and are shouting you've got a lower price, well, of course, you do. But there's still people that want to stay at the Ritz Carlton. So that's the way we think about it.
It's complicated. If that were required, we surely would be compliant and I think we'd be really good at it.
Got it. Appreciate the color there. Final one from me. How should we think about the outlook for general agency revenue and preneed insurance production?
I think we think as we roll into 2018, we feel very good about it. As it relates to our ability to grow that and particularly on the insurance product side. So yes, I think we've worked through some challenges in 2017 and we've got a stable year over year selling compensation plan. And so I think with those two things in place, we would expect more of a normalized growth pattern as it relates to 2018 versus 2017, which we typically guide to lowtomidsingledigit kind of growth.
Got it. Thank you and congratulations on a good quarter.
Thank you very much. Appreciate it, Daniel.
And we have our next question is from Duncan Brown from Wells
Fargo. Hey, good morning. Thanks for taking the question. I've been thinking about you guys obviously with all the disasters, but Harvey in particular. I wonder if you could give us an update on the home office or in headquarters or is it up and running fully or where does that stand?
We're getting really close, Duncan. It's getting really close. We have 2 buildings of the corporate headquarters. 1 is going to come, the larger building is going to come first. We think that's early November that we'll start moving back in there.
And the second one will probably be towards the end of November. A lot of it has to do is just finishing the construction, getting the electrical grid that was flooded back up and running, which were primarily there. And then the rest of it is just a little bit of infrastructure of the building itself with connectivity. But thanks for asking. We've been displaced, but the truth to it is we've been able to rent space and we've been operating just like a normal company, has been despite that.
I think what we're most concerned in reality is not the corporate office, but the people that were really impacted out of the funeral homes and their families and their personal effects as well. We had a little bit of that with corporate employees, but a lot of that was out in the field that we're facing the customer. And that's who we've been really truly trying to support to get them back to work in front of the customer as soon as we possibly could.
Okay. Thanks for that. And then the I guess you got $4,500,000 or so of insurance dollars in the quarter. Should we expect some more in Q4?
Yes, I would hope so. The deductible is complex, but ultimately, we've had a payment in the quarter as we said it was a net number that $1,300,000 of hurricane expenses that are in there. It was about $5,800,000 of expenses offset by about $4,500,000 insurance proceeds. We could end up spending somewhere in the $15,000,000 $20,000,000 range in total related to everything that includes all the field operations. And it's a range right now because of the Puerto Rican situation that we're still grasping, getting our hands around.
But ultimately, we believe insurance will cover the vast majority of that. And I think ultimately what you're going to see is that hurricane expense that's not covered by insurance, growing from about $1,300,000 to maybe $4,000,000 to 6 ish million and that's what we're referring to when we say maybe 1 or 2 more pennies of headwind in the Q4 will affect us. But again, the good news is the vast majority of this stuff is going to be covered by insurance.
Great. And you mentioned Puerto Rico. Can you disclose or would you disclose some metrics for us to help size it like maybe percentage of revenue for the company or total revenue in Puerto Rico?
It's not very significant in the big picture of things.
That's fair. And then just last one, Tom, you mentioned I think new website project rolling out in 2018 and I wonder if you could give some more color on that.
Yes. So the color is really our websites were designed originally and it's a problem a lot of companies have. We're designed with a desktop in mind. So as you about the way people were searching for us and our ability to compete in a search world, we weren't geared to deal with mobile the right way. So I'd say in a nutshell, there's a lot of changes that I think are going to be very dynamic.
But in a nutshell, we had to get to a mobile solution that allows us to compete more effectively as it relates to search. And so that's what this is designed to do is to upgrade the websites, have more customer interactivity, again, be in a position to compete more effectively as it relates to the search world. Great. Thank you.
And at this time, we have no further questions. I'll turn the call back over to SCI Management.
We want to thank everybody again for being on the call. Thank you for a lot of you for your support through this challenging time of our employees. We look forward to get back in our building. And so our next call, we will be back in the home office and we'll talk to you again in February. Thanks so much.
Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating.