Welcome to the 4th Quarter 2015 Service Corporation International Earnings Conference Call. My name is Hilda, and I will be your operator for today. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session. Please note that this conference is being recorded.
I will now turn the call over to the SCI management team.
Good morning. This is Debbie Young from Investor Relations at SEI. Thanks for joining us today. As customary, let me begin our call with the Safe Harbor statement. 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 normalized EPS, adjusted operating cash flow and free cash flow. 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 So now let's begin with comments from SCI's Chairman and CEO, Tom Ryan.
Thank you, Debbie, and good morning, everyone, and thank you for joining us on the call today. I'd like to start this earnings call by reflecting on some of our major accomplishments in 2015. Then I'll get into the details of the quarter and then with some color on our outlook for the year 2016. So first, some observations on 15. 1st and foremost, I am most proud of what we do for our client families each and every day, providing peace of mind and making their worst day just a little bit better.
There are also milestones as a public company that we should be proud of, and these are a few I would like to highlight. 1st, while maintaining our position as the largest by far in our with 16% market share and $3,000,000,000 in revenues. We were able to grow earnings per share again in 2015 to 1 $0.18 per share, which translates to an impressive 16% annualized rate since 2011. We also reported record adjusted operating cash flow of approximately $514,000,000 for the year and deployed $433,000,000 to return to our shareholders through share buybacks and an increasing dividend. We continued our momentum in preneed cemetery sales by growing them over 12% for the year and at a compounded double digit rate over the last 5 years.
We also received the prestigious J. D. Power President's Award in recognition of our high quality service to our customers, one of only 12 recipients in J. D. Power's 47 year history, touring with the likes of Ritz Carlton and customer satisfaction and loyalty.
And finally, for our shareholders, we delivered a 17% total shareholder return versus a flat S and P the 2015 and now delivered a significant premium to the S and P return for the 1, 3, 5 10 year periods ending in 2015. So I would like to say thank you to my 24,000 team that we're able that we're able to accomplish what we have. Now let's shift to an overview of the Q4. We reported normalized earnings per share of $0.37 which was consistent with the prior year period and within the guidance range provided to you back in October of $0.36 to 0.39 dollars Adjusting for the $0.04 prior year perpetual care benefit, earnings per share grew approximately 12% despite headwinds of lower funeral volume impacted by a mild comparative flu season, the negative impact of Canadian currency and lower trust fund income due to the volatility in the financial markets. These headwinds were more than overcome by strong preneed cemetery sales production, the impact of our share repurchase program and a lower tax rate.
On the cash flow front, we generated $89,000,000 in adjusted operating cash flows, which again was well within our guidance range, despite expected higher cash tax payments of $22,000,000 year over year. Now for an overview of funeral operations in the quarter. When compared to the prior year, our 4th quarter comparable funeral revenues decreased by $11,100,000 or 2.4%. This is below our expectations as lower funeral volumes, negative currency trends and lower trust fund income put pressure on our funeral revenues. As noted in the press release, core revenues declined $1,000,000 or 4.7 percent.
A comparable funeral volume decline of 4.2% was the primary reason. As far as core funeral average goes, we experienced a 1.2% growth at the customer level. However, revenues in average were negatively affected by $5,300,000 as a result of the Canadian dollar trading at 0.75 dollars versus the prior year at $0.88 as well as a $2,600,000 negative impact from lower trust fund income and an 80 basis point increase in the cremation mix. Outside of core revenues, we saw increases from SCI Direct of approximately $3,400,000 or 13.1 percent as non funeral home matured preneed volume or performance of funeral services increased over 7% and recognized preneed sales of earns and travel protection increased $3,200,000 or almost 16%. Other revenue grew $4,500,000 or 13.2%, which primarily consists of general agency commissions earned from preneed insurance sales production.
Funeral profit, therefore, decreased $8,800,000 from the prior year quarter and margins were 20% compared to 21.4% in the Q4 of 2014. Core profit declines were partially offset by increased profits from SEI Direct and general agency commissions. Comparable preneedfuneral sales production, excluding terminally imminent transactions in both periods, was essentially flat or down about $1,000,000 Keep in mind, we were facing a very difficult comparison as the prior year quarter growth rate was nearly 12%. For the full year, preneed funeral sales production increased $24,000,000 or 3.4%. This is consistent with our annual guidance of low to mid single digit growth.
Now let's turn to cemetery operations. Overall, comparable cemetery results was the highlight of the quarter as operating performance was ahead of our expectations. Comparable core cemetery revenue grew $15,200,000 or 5.9% in the 4th quarter due to higher recognized preneed revenue, which was reduced by lower currency. Preneed sales production was the primary driver as it grew by $12,100,000 or 6.8% through increases in both average customer spend as well as increased sales contract velocity. Additionally, revenue associated with the completion of construction projects, which from a seasonal perspective tends to be more pronounced in the 4th quarter, contributed to the balance of the core revenue increase.
Other revenue declined $17,200,000 primarily a result of the $15,000,000 perpetual care trust fund income benefit reported in the prior year. Additionally, our normal trust fund income declined $2,200,000 due to unfavorable market returns. Therefore, comparable cemetery decreased $8,600,000 as the $15,000,000 perpetual care trust income benefit reported in the prior year was 100% profit. Excluding that unique item, cemetery gross profit grew $6,400,000 and margins increased 70 basis points to 31.5%. This growth resulted from the $15,200,000 core revenue increase, which should produce 60% incremental margins or approximately $9,000,000 This increase was partially reduced by a $2,200,000 decline in normalized trust fund income.
Now shifting to our 2016 outlook. As we disclosed in our press release, we're providing 2016 earnings per share guidance in the range of $1.20 to 1 $0.36 Since we provided preliminary guidance to you back in October, we've continued to see negative financial market returns as well as a weaker Canadian dollar. As we're not in the business of predicting the future for the stock market or currency movements for that matter, rather than moving the entire range down from our previous guidance, we lowered the bottom of the range by $0.04 At the midpoint of our range, expectations for growth in 2016 still falls within the 8% to 12% range, even after considering these headwinds and a slightly higher tax rate. While we do not provide quarterly guidance, from a timing perspective, please keep in mind that we had a very strong flu season in the first quarter last year, up almost 5% in funeral volume and had a 17% growth in preneed cemetery sales production. So it was going to be a very tough comparison this year under any scenario.
This January, we saw a decline in funeral volume of over 12%, which was consistent with what we saw in our market share checks and in conversations with other industry participants. Therefore, the Q1 should be a challenging comparison. After that, we would expect to get back to with a slight growth in core funeral average, excluding currency, mix and trust income. We expect SCI Direct to grow high single digits and general entity commissions to grow in the mid single digits, and we will manage our costs aggressively. We also expect to grow preneed funeral sales in the low to mid single digit percentage range.
On the cemetery side of things, we anticipate revenues will continue to increase, led by preneed sales production growth in the mid- to high single digit percentage range. So in conclusion, we expect continued growth of
the business around
the assumption that demographics are moving towards us. We will continue our strategy of growing revenues by remaining relevant and driving preneed sales now and into the future. We will continue to leverage scale differentially through our sales organization, through supply chain and technology and through our preneed trust and insurance backlog. Finally, we will continue to deploy capital towards its highest and best use by growing through acquisition and new builds, increasing our dividend and shrinking the equity base in anticipation of the demographic impact coming. All the while, we will protect this great company by maintaining a fortress balance sheet, carefully managing both our liquidity and debt maturity profile.
This concludes my prepared comments, and I'll now turn the call over to Eric.
Thank you, Tom, and thank you, everybody, for joining us this morning. And before I dive too deep into the details, I want to stay back up at 2015 full year versus 2014 and just really reiterate how proud we are of our financial results for the full year of 2015. And of course, I'd like to thank our nearly 24,000 both dedicated and talented associates that really drove this outstanding performance throughout 2015. So this morning, I'm going to be addressing our annual cash flow results as well as the capital deployment that we did in 2015. I also want to talk about our cash flow in the quarter and then I also want to give you some more color and some comments related to cash flow for our outlook for 2016.
So first though, let me start by taking an opportunity to again step back and reiterate our capital deployment philosophy. We've been executing this for the past several years. So to begin, our consistent and predictable cash flows form all of the basis of our overall strategy to drive increased value for our shareholders. Looking at 2015, we generated $514,000,000 in adjusting operating cash flow, which by the way is the highest we have achieved in many, many years. Complementing the strong operating cash flow base, we maintain robust liquidity and we manage our near term debt maturities.
So with those facts as the backdrop, we then deploy capital to achieve the highest relative total shareholder return through our choices of acquisitions, growth CapEx, dividends and share repurchases, and the results have been impressive. For the 5 years ended December 31, 2015, we have achieved about a 2.45 percent total shareholder return when you compare it to the S and P 500 of about 80%. And you can be assured that we intend to keep our focus on growing the value of your investment in SCI over time. So with that backdrop, let me give you an overview of our cash flows for the full year of 2015 and then dive into the capital deployment that I just said. So as I just mentioned, in 2015, we generated $514,000,000 in adjusting operating cash flows compared to $509,000,000 in 2014.
But to really give you a more accurate picture of these 2015 cash flows, I really need to highlight a couple of items when you compare to 2014. First, we paid $51,000,000 more of recurring cash taxes during 2015 compared to 2014, as again we moved closer to becoming a full cash taxpayer. Secondly, we benefited from approximately $27,000,000 of operating cash flows in 2014 that were associated with the FTC divestitures that we have previously mentioned. So when you really normalize those two items, I think of adjusting operating cash flow in 2014 of being about $431,000,000 versus the $514,000,000 in 2015, which by the way is a growth of over 19%. And the drivers of the cash flow growth are predominantly the higher earnings that Tom just described and higher cash receipts, primarily associated with strong preneed cemetery sales.
So we also finished 2015 with healthy liquidity of $335,000,000 which consisted of 135,000,000 dollars of cash on hand that you've seen on our balance sheet and about $200,000,000 of availability on our longer term credit facility. This strong liquidity through 2015 positioned us well to deploy a healthy amount of capital towards what I've already mentioned, acquisitions, dividends and share repurchases. And in fact, when you include some 1031 exchange funds, we deployed $69,000,000 in acquisitions in 2015, which reflects 176 percent increase over the $25,000,000 that we invested in acquisitions in the prior year. Dividend payments in 2015 totaled about $88,000,000 again, an increase of over 22% compared to 2014 payments of just over $70,000,000 We also returned $345,000,000 of capital to investors in 2015 in the form of share repurchases, which is the largest annual amount we have repurchased since 2,007. So in total, $433,000,000 in capital was returned in 2015 to our shareholders through these combined share repurchases and dividends, which by the way is 37% or $118,000,000 more than 2014 levels.
So now let's shift gears and talk a little bit about cash flow during the quarter. We generated $89,000,000 of adjusted operating cash flow in the 4th quarter, which was well within our guidance range communicated to you in October, which was $75,000,000 to $100,000,000 Similar to the full year though, let me provide a bit more color on these cash flows for the Q4. First, our recurring cash tax payments were $22,000,000 higher in the 4th quarter of 2015 versus the Q4 of 2014. And in addition to this $22,000,000 as a side note, we also paid about $10,000,000 in non recurring cash taxes, which was associated with the restructuring of some of our legal entities. Secondly, during the quarter though, we also funded about $12,000,000 more in payroll quarter over quarter, which is really just a timing difference due to the timing of the New Year's holiday this year versus last year.
Lastly, when you think of the quarters, also want to address 2 cash flow items that are similar amounts that really occurred in both quarters. If you remember in the Q4 of 2014, we received $15,000,000 of perpetual care trust capital gains that did have a correspondent earnings impact that Tom just mentioned earlier. In the Q4 of 2015 though, we also received a similar amount. It was $15,000,000 but it was from our Cemetery Merchandise and Service Trust capital gains and those will not have an earnings impact until at the time we deliver or perform that underlying merchandise and services on those preneed contracts. So now let's shift and talk about 2016.
And as you saw yesterday in our press release, we finalized our guidance for 2016 to generate a solid $450,000,000 to $500,000,000 of adjusted operating cash flows. Now our range has slightly decreased due to the acceleration of the $15,000,000 of cemetery MST capital gains that was received in the Q4 of 2015 that I just mentioned. And just so you know, our models previously reflected that receipt of those funds in the Q1 of 2016. We also took, when you think of our guidance, a more measured approach to our expectations for normal trust related capital gain distributions due to recent market conditions. While we expect to pay more in cash taxes in 2016 over 2015, The good news is that our expectations for these cash tax payments in 2016 have now been lowered to approximately $140,000,000 which compares to $160,000,000 from our previous guidance that we disclosed to you last quarter, and that's primarily driven by further tax plan.
Our expectations for maintenance and cemetery development capital spending in 2016 are approximately $150,000,000 This is slightly higher than 2015 levels as we continue to improve the aesthetics of our funeral businesses and most importantly reinvest in our cemetery businesses by constructing relevant and contemporary cemetery property inventory. So when you deduct that CapEx from the operating cash flow, our guidance for normalized free cash flow in 2016 is a range of $300,000,000 to 3 $50,000,000 Now this does compare to free cash flow of $372,000,000 in 2015. So the primary cause for the year over year variance is associated with the increase in cash tax payments in 2016 versus 2015, which is an increase of about $47,000,000 Additionally, we are expecting a greater use of preneed working capital as our cemetery preneed property installment sales continue to experience robust growth. So in conclusion, 2015 was a great year for us as we had generated very robust free cash flow. And when I look forward to 2016, we expect to repeat the consistent capital deployment philosophy, which we executed in both 2014 and 2015.
We, of course, will continue to maintain adequate liquidity, a beneficial near term debt maturity profile and think of our leverage range of about 3.5 times to just below 4 times. So we will continue then to deploy that free cash flow towards acquisitions, dividends and share repurchases. And in fact, since closing on the Steward acquisition in December 2013, we have repurchased almost 25,000,000 shares for a total investment of just over $600,000,000 which includes, by the way, 1,000,000 shares we have repurchased subsequent to the end of 2015 for just under $25,000,000 Currently, today, we have just under 195,000,000 shares outstanding and about 255,000,000 dollars of remaining share repurchase authorization, which again gives us substantial amount of capital deployment flexibility as we move forward in 2016. Ultimately though, we will continue our balanced approach to driving shareholder value by focusing on deploying that capital to the highest relative value opportunities. And again, this has been our track record and you can expect
us remarks
and
We will now begin the question and answer session. We have a question from Scott Schneeberger from Oppenheimer. Please go ahead.
Thanks. Good morning, everybody. I guess, first question I'd like to start off with would be the trust funds. Have you had conversations with the investment managers about how they are positioning given volatility in the equity markets year to date? And then just some thoughts about how that may be impact obviously, you've adjusted guidance at the low end a little bit for 2016.
How you're thinking about the cadence of impact of the equity markets as you move through the year? What's implied in guidance? Is it as far as what your prior expectation was till now? Thanks.
Okay. Well, Scott, the way we're set up is we interact daily with our registered investment advisor. We do talk to our trustees and periodically we do have meetings. We probably have 25 ish professional institutional money managers. And we do have several conversations during the quarter just to further our understanding, but in no way are we influenced in that.
I mean, we believe in our asset return of about just over 3%, I would call it over the last trailing 10 years. And that's additional earnings and cash flow to us in the future. And we're going to maintain that discipline. Now talking about the guidance in terms of what you're referring to, yes, we did bring down the low end of our guidance as it relates to some of the performance that we saw subsequent to the last time we talked to you in October. So when we talked in October, the trust funds were up about 1% year to date.
They ended the year down 1%. So we had that swing primarily in the month of December. Since then in January, our trust funds are about down 3%. And ultimately, to recall the metric that we try to give, for every 1% or so that our trust funds drop on an annualized basis. And again, as a very general statement, it can equate to about $1,500,000 of EBITDA.
So but we don't want to get into this game of trying to predict of what we think the markets are going to do. So generally, yes, we've taken down the low end of the guidance, but we didn't want to infer that we wouldn't come back during the year either and that's why we maintained that high end of the guidance. But ultimately, we have this plugged in where we do think that our standard way of modeling, which is the markets will generally be flat to slightly up is what's built in to the midpoint of our models in our guidance.
Great. Thanks. That's helpful. As a follow-up, I'd like to ask, obviously, you have some nice momentum in preneed sales in cemetery. I'm curious how you think about that as well as funeral in an economy that might be uncertain where consumer confidence might be uncertain.
It is after all discretionary spend, but maybe some anecdotal history as to your confidence on why that would hang in this environment, what you've seen in the past and what will lead you to such conclusions? Thanks.
Sure, Scott. This is Tom. I think based upon historical observation, when you go back to 2,008, 2,009, when the world looked like it was going to end and the markets were down 30% 40%, we did see a temporary pause in prearrangement. And it probably lasted 3 or 4 months and it really lasted through March of 2,009. And I must admit, surprisingly to me, it bounced back pretty dramatically beginning in April.
And so I think the conclusion we've had is that this is probably the least volatile discretionary purchase you can have in the sense that it's a planning item that people want to resolve. So even in bad times, I think people try to find a way to deal with this. So there is an added pressure on their survivors. So, I think generally, you're going to find people staying pretty attentive from a contract flow perspective. What I will say when there's financial uncertainty or down markets is you do tend to see the high end drive a bit.
So as an example, we even saw some in the 4th quarter. We did not see the same robust level of what I'd call high value sales on the cemetery side that we did in the Q4 of last year. So I do think it's more sensitive at the high end as far as what people are willing to spend. But relative to other discretionary businesses, I like our odds.
Thanks. If I could sneak one more in and then I'll turn it over. Could you speak to the M and A environment right now? You gave some color on the call about 2015 versus 2014. What are the thoughts as we enter 2016?
And what are you seeing out there with regard to the targets, susceptibility to or openness to talk? Thanks.
Yes. I think we're seeing a healthy level of openness to talk. We've got a few under letter of intent as we speak today. We've got a couple others in negotiating stage. So I'd say that we feel really good about the activity levels.
The way that we try to do it is to maintain relationships with businesses that we're attracted to. That's predominantly what we're doing. And these are going to turn when it's time for them. And so generally, there's a transition from an owner to the children or something like that, where that isn't what's going to work for that family. And we want to be in position to understand the opportunity FCI presents their employees, them themselves and staying involved.
So most of the time, that's what it is. We do see a few broker deals as well, but we feel really good about what we're seeing and therefore pretty comfortable with the guidance that we put out there as to what we think we'll be able to accomplish this year.
Great. Thanks.
The next question comes from Chris Rigg from Susquehanna. Please go ahead.
Good morning. Just wanted to follow-up on the operating cash flow guidance change. Obviously, you had the pull forward of some of the trust income into the Q4. That seems like it was substantially, if not entirely offset by lower cash taxes. So when we think about what's causing the $25,000,000 delta, I know you laid out a bunch of items.
Can you help us quantify or at least sort of force rank what's causing the biggest impact versus the least impact? Thanks.
I think generally, Chris, we expect to continue to have robust preneed cemetery property sales. And for the most part, those will be sold on an installment basis. And as we grow, I think that creates as you recognize that revenue under our accounting, as you know, after 10% down and it's constructed, Now that creates a use of cash because you're recognizing revenue today and installment sales going to come in over the next 3 to 5 years is the way I would describe it. I'd also talk about that there is some normalized level under each state is complex and each state is different under these trust and laws. But as a general statement, there is a normal amount of, let's call it $10,000,000 to $20,000,000 of capital gain distributions that we get from these trustees based on the performance of the trust fund.
And I think we also obviously is what I was trying to say is we've taken those down as well. We've also continued to drive some sources in working capital related to day sales outstanding. And after you start squeezing it down, there's only so much you could do as well. And so those all those factors, Chris, were kind of taken into account, as well as the $15,000,000 that was pulled forward in the Q4 of 2015 when we talked about the general guidance of $450,000,000 to $500,000,000
Okay. And then just on the volume outlook, I think unless I missed it, you just said low single digits, which I think is I think you were down 1% to 2% in the guidance from last fall. Has there been any change to that outlook today?
Yes, Chris, this is Tom. So we saw, as you heard in my comments, January was not a pretty volume month, down some We still feel comfortable about the low single digit guidance for the year. Let me explain a couple of reasons why. Number 1, just to give you more color on January. We have a new market share tracking capability in certain markets.
So we're looking at that and we're again seeing market share trends the same. Our volume in FCI Direct was down 10%. This is a business that tends to grow. So again, we know debts are off. We talk to suppliers and so we feel very comfortable that this is a market phenomenon that occurred in January.
So to give you a little history, in 2014, volume was down 11% for SCI. We finished the year down 2%. Go back to 2012, volume was down some 4.5%. We finished the year flat. So I think what we see and I can go further back in history as we look at these things, we tend to gain back some of that loss throughout the year, typically in the back half of the year as you begin to enter the next comparison.
So we feel pretty good and are still modeling, like you said, a little deterioration in the annual, but not a lot because we think most of it comes back as the year progresses.
Okay, great. Thanks a lot.
We have a question from A. Dave Rice from UBS. Please go ahead.
Hi, everybody. I know usually your biggest swing factor in your EPS range would be I think I would say the uncertainty around what the add deep volumes are going to be. And I guess today you're introducing as well given the volatility of the market, the trust funds. Are there any other big items that swing you around in your range? Or are those really the 2 drivers that will determine whether you get to the higher end or the lower end of the range?
Well, I think from a revenue perspective, you see FX having an impact, A. J, but as you know, as you drop it down to the bottom, it's probably as impactful or less impactful than the trust fund side. So really the other big number for us, in my opinion, is screening cemetery sales. So if that were for whatever reason not to grow or flat or go backwards, that's going to have a pretty big impact on our numbers. So we still feel good about that number.
But I think the biggest one other than that you hit upon is going to be funeral volume. The other 2 are impactful, but I'd say less impactful as you think about the volatility quarter to quarter.
And just to come back on the preneed cemetery side, in light of the volatility in the market, little uncertainty on the economy, clearly not what we saw in 2,008, 2,009. Are you guys making any changes or adjustments to your compensation programs for your salespeople to try to either maintain the strong results you've seen or even potentially pick it up in light of some soft volumes on the funeral side? Is there anything you can do there?
I think not so much. We always tweak from time to time. But again, I don't think January sales were as bad as they could have been expected to be. And we really kind of maintain a posture with the sales force to really look at the long term of this thing. So we're not going to be reactive.
We feel good about our compensation programs. We feel good about the opportunities that are out there, A. J. So no, I wouldn't say we're doing any kind of reactionary things. We're going to achieve our numbers.
We feel good about that. And so the short answer is no.
Right. Okay. And then final question on the thinking about the share repurchase. I know 18, 24 months ago, there was discussion about recap and other things you could do. And I think the company went through the process and said, look, we'll stick with our knitting and buyback with the free cash flow, but we're not going to at that point lever the balance sheet up.
And I understand the comments today about when to maintain a fortress like balance sheet, but it does with the market pullback, it sounds like you're sort of going back to the sort of couple of 100,000,000 buyback mode absent some bigger deal coming down the pike. Is that the right way to think about it? Or is there anything because of the pullback in the shares that you perceive that you're being presented with an unusual opportunity and you might actually take on a little leverage to accelerate the buyback?
Well, I think we will be like the guidance says, we want to maintain the fortress balance sheet. We want to make sure we survive if things got really bad economically, again, outside the controls of SCI. So we'll be aggressive within that realm. I don't foresee us at this point in time changing our strategy as it relates to leverage on the company in any super aggressive way. Now having said that, you never say never, But in today's environment, I think we'll be aggressive within the realm of maintaining that fortress balance sheet.
Okay. All
right. Thanks
a lot. We have a question from Duncan Brown from Wells Fargo.
Hey, good morning. Maybe going back to the outlook for preneed cemetery sales, I think Tommy said bad years historically, some of the high end of that business has been hit and maybe at risk. Can you help us think about or quantify what percentage of preneed cemetery
of contract, if I remember this right, and Steve, help me if I'm wrong. Yes, printing cemetery. 130. 130 is about the high end, and that's over what type of sales period? 130,000,000?
130,000 contracts. 130,000 contracts, okay. So I think at the high end, the way to think about it is we'll do, look, for instance, last year's Q4, I think, Jerry, we did 300 and
something high end sales as we defined, is that right?
And this year, we did 250. So the fall off is, call it 20% and the number of contracts above is $20,000 Up $40,000 40. So contracts above $40,000 quantify that as somewhere between $250,300 is thinking about those. And so what you'll tend to see is in these types of uncertainties, you might see that drop off some 20%, 25%. You can quantify that number times the $40,000 So it isn't by any stretch, I don't want to alarm you, it just challenges your ability to grow year over year, I think is the way to model it.
So what we believe we'll continue to grow contract count because I go back to the fact that in uncertain times, people tend to plan. And the real issue gets around, can you get those over $40,000 or in some cases, dollars 1,000,000 sales that just don't happen when the stock markets go down 20% because people are waiting to see a bottom. But generally, those are people that defer and make that purchase when things get better. So we'll manage through it.
Okay. That's helpful. And I appreciate the granularity. And also appreciate the color on January volumes in the historical context. Can you I mean, since you called it out, can you tell us what January 2015 volumes were?
Were they up on outsized amount relative to Q1 2015, so they're particularly difficult comp?
Yes. January last year was up over 5%. 5.1% is my recollection of that. So therefore, as you would expect, that was going to be a tough comp no matter what happened this year. And so that's why I tried to even though we don't give quarterly guidance, Q1 is going to be tough on a comparable basis.
But we feel really positive about the quarters afterwards that we can regain that momentum of growing earnings per share like you guys expect. But I do think we got to get our helmet on. Q1 is not going to be a pretty comp, just won't be.
But the year
is going to be
fine. Thanks.
And last one for me. I think historically, you've talked about a 3.5 to 3.7 leverage target. It sounds like maybe you're I don't want to put words in Eric's mouth, maybe it sounds like just below 4 times. Is there sort of an official change in the leverage target? What should we leverage range?
Or how should we think about that?
I think it's just what we've evolved and said it's going to be around 3.75 as well. And I was just trying to give color and make sure people understand our thought, which is we really believe in this environment coupled liquidity and near term debt I think some percent. I think some of the volume that we talked about in the back half of the quarter fell off towards December, some of the financial markets again and trust fund income fell off in December. So it probably bumped a little bit higher, but no philosophical change, Duncan. I wouldn't think of it that way.
I just think when you start having 0.2 of a range, it's a little bit tougher and it's implying a sense of accuracy that's probably not always there because we're such long term thinkers in terms of guidance and such. That's all I was trying to say.
Got it. Thank you.
Yes.
We have a follow-up question from Chris Rigg from Susquehanna.
Thanks for taking me again here. Just a follow-up on an earlier question with regard to capital deployment broadly. The stock is down about 33% from its summer highs. Does that change the way you guys think about buybacks versus M and A, just given the magnitude of the sell off doesn't seem to reflect the underlying performance of the business? Thanks.
Definitely on a relative basis, Chris, it's a good question. The stock becomes much more attractive. But I think the good news is we like to say about acquisitions from a long term perspective. When you think about our strategy of growing revenues through preneed, about leveraging the scale of the business and then generating more cash to redeploy, acquisitions always have a near and dear part of our equation. And also when you think about the internal rates of return, they tend to get, I'd say most of our acquisitions are in the 14% to 15% type of IRR return.
And the stock, even at these levels, is a great return, but it's probably not that level of return. So the acquisition is still probably pop up number 1. But boy, from a timing perspective, if we can get low 20s, we're going to that's an opportunity for us.
Okay. Thanks again.
Thank you. And at this time, I would like to turn the call back over to the SCI management.
Okay. We want to thank everybody for being on the call today. We appreciate your participation, and we look forward to speaking to you again on our Q1 results in April. Thanks so much.
Thank you. Ladies and gentlemen, this concludes today's conference. We thank you for your participation. You may now disconnect.