Welcome to the Q3 2015 Service Corporation International Earnings Conference Call. My name is Ethan and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. Please note that this conference is being recorded. I will now turn the call over to the SCI management team. You may begin.
Good morning. This is Debbie Young from Investor Relations at SCI. Hope everyone is doing well this morning. We have a lot of material to cover today. I'll quickly begin 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 in 8-K that were filed yesterday. Let's now begin with comments from Tom Ryan, SCI's President and Chief Executive Officer.
Thank you, Debbie. Good morning, everyone. Thank you for joining us on the call today. I'm going to begin my comments by giving you the highlights of the quarter, a deeper dive into both funeral and cemetery operations. Finally, I'll give you some color on our updated outlook for the fourth quarter of 2015, as well as our preliminary outlook for 2016. Beginning with an overview of the quarter, we reported Normalized EPS of $0.23, which was consistent with the prior year period and slightly below our internal expectations. Recall that in 2014, we benefited from the Federal Trade Commission-divested businesses that we didn't have in 2015. For the third quarter, this headwind was about $0.01. On a normalized basis, we actually grew earnings per share by $0.01.
Higher Preneed Cemetery Sales production, the impact of our share repurchase program, and a lower tax rate had the anticipated effect of improving our earnings performance. Unfortunately, some things did not go our way. The approximate 17% devaluation of the Canadian dollar versus the U.S. had a $0.01 negative effect on the quarter, impacting both funeral and cemetery margins. Additionally, the 530 basis point negative swing in our trust fund performance during the quarter reduced our earnings per share by another $0.01, impacting both the funeral and cemetery segments. As we had anticipated, our strong first half funeral volume appeared to normalize, and third quarter core volume was 2.2% lower versus 2014, putting pressure on comparable funeral margins.
On the cash flow front, working capital improvements from higher cash receipts tied to our success in Preneed Cemetery Sales production and the timing of a payroll funding more than offset a $25 million increase in normalized cash taxes paid, allowing us to grow our cash flow from operating activities. We continued to deploy capital to enhance shareholder value during the quarter, utilizing just over $153 million for share repurchases, returning $24 million through an increased dividend, investing over $14 million in cemetery inventory, and using over $11 million during the quarter for acquisitions in newly constructed funeral homes. For an overview of funeral operations. When compared to the prior year, our third quarter comparable funeral revenues decreased by $3.6 million.
I apologize in advance for the detail here, in order to better understand what is happening within our funeral segment, you will notice on page three of the earnings release, and please do follow along here if you have it in front of you, that we've broken out non-funeral home matured preneed revenue on its own line item. We combined at-need revenue and funeral home matured preneed revenue, arriving at core revenue. As you will see, core revenue and non-funeral home matured preneed revenues have very different growth trends. The $3.6 million decrease in comparable funeral revenues starts with a $10.4 million decrease in our core revenue. This was offset by a $500,000 or 10% increase in non-funeral home matured preneed revenue, AKA SCI Direct preneed turning at-need.
A $2.9 million or 13% increase in recognized preneed revenue, AKA SCI Direct product sales that get pre-delivered, and a $3.4 million or 10% increase in other revenue, which primarily consists of General Agency commissions earned from preneed insurance sales. The core revenue decline of $10.4 million is a function of a 2.2% decline in volume and a 0.4% decline in the reported average. To understand what is happening with the average, let me restate the revenue decline another way. The decline in the Canadian dollar is responsible for $6 million of the decrease. Trust returns are responsible for another $2 million. This leaves only a $2.4 million decline in core revenues, absent currency and trust earnings. We're achieving inflationary 2% pricing increases, offset by 40 basis points of increased cremation rates.
My takeaway is that currency will fluctuate, trust income will do the same, but over long periods will continue to contribute to growth in the average sale. The real question is, absent the currency and trust noise, how are we doing with the consumer? We're achieving inflationary price increases offset by a 40 basis point cremation mix change, which we anticipated. Look at non-funeral home matured Preneed revenue. The product component of the contract was delivered at the time of sale and reflected as recognized Preneed revenue. The trusted component of the service is being delivered upon death, the revenue recognized, and cash distributed from the trust. You'll notice that we reported a 10% growth in funeral volumes here for the third quarter. This favorable trend began to surface in early 2015, and we believe should continue. Remember, at an average of about $900 per contract.
This is the result of the success we have had in growing Preneed sales in SCI Direct, whose contracts are averaging a shorter five to six-year life that are now maturing, and yes, we believe is taking share from our at-need focused direct cremation competitors. Let's talk about funeral profits. With a $3.6 million decrease in funeral revenues, funeral profits declined nearly $11.5 million. What happened? Remember, the core revenue declined $10.4 million. Of that, $6 million was currency, which also impacts the Canadian cost structure. As our Canadian funeral margins are about 15% in the third quarter, we lost $900,000 of profit to currency. Trust revenues declined $2 million and our 100% margin. Our true core operational decline of $2.4 million has a 60% incremental margin, as it is driven by volume.
All in, our $10.4 million core revenue decline negatively impacted our profits by $4.3 million. Next, our fixed costs in our funeral segment run about $300 million a quarter. With a 2% inflation assumption, this would have a $6 million negative effect on funeral profits. Finally, we experienced over $6 million of revenue growth from General Agency commissions, SCI Direct product sales, and services associated with our SCI Direct Preneed contracts that are maturing. We are very proud of the trends in these businesses, and we believe they will continue to grow differentially from the core business. The margins here run about 20%, they contributed an additional $1.2 million in profit for the quarter. These profits were largely offset by the timing of costs associated with our lead management and marketing programs.
To summarize, we lost $6 million of profit through inflationary fixed costs, an additional $4.3 million from core revenue declines, including currency, trust income, and case volume. This explains $10.3 million of the profit decrease. Lower margin revenue gains from SCI Direct and General Agency commissions were essentially offset by increased costs from Preneed Funeral Sales, lead management, and marketing costs. Speaking of Preneed production, one of our core strategies for growing future market share, our comparable funeral sales production grew more than $10 million, or 5.4%. This is consistent with our annual guidance of low- to mid-single-digit growth. Let's turn to cemetery operations.
Comparable cemetery revenue increased $9.5 million, or 3.8%, over the prior year quarter, primarily due to higher recognized preneed revenue offset by the unfavorable effect of the Canadian dollar, as well as lower trust fund income caused by a negative 530 basis point move in our trust fund performance. Excluding the $3 million currency decline and the $1.4 million decline in trust earnings, comparable cemetery revenues grew by $13.9 million or 5.5%. The primary reason for increased cemetery revenues was preneed sales production growth of $15 million or 9.2%. Continued success in growing both the sales velocity and the average spend per contract was partially offset by the negative Canadian currency impact. Through the first nine months of the year, total cemetery preneed production was up 14.5%, and this will be the fourth year in the last five that we've been able to achieve double-digit percentage growth.
Comparable cemetery profits increased $6.1 million in the quarter, and the margin percentage grew 150 basis points to 24.4%. Let's look at the components of cemetery profits. Revenue from core operations, which are at need and preneed recognized cemetery production, grew nearly $13 million. On this growth, we should have seen a 65% margin or an $8.5 million increase in our profit. Second, the $1.4 million decrease in trust income has a 100% margin. Finally, we backlogged roughly $4 million of cemetery sales, for which we recognized and incurred a 20% selling cost, which negatively impacted profits by about $800,000. We expect these sales to convert to revenue over the next few quarters. The net effect of these three items resulted in a $6.3 million projected increase in cemetery profits, which approximates a reported increase of $6.1 million. Regarding our fourth quarter 2015 outlook.
We have had a great year thus far in 2015. Cash flow is outpacing our forecast. Normalized earnings per share has grown $0.08 or 11%, which was accomplished despite losing the $0.08 contribution from the Federal Trade Commission-ordered Stewart divestitures. Taking the impact of these divestitures out of the 2014 base, normalized earnings per share grew $0.16 or 24% year-to-date as Stewart synergies, strong pre-need cemetery sales, and a shrinking equity base had their anticipated effects. As we think about the remaining three months of 2015, there are a couple of areas that we want to highlight. First, we would expect to see funeral volumes decline versus 2014, as last year we began to see the effect of a strong flu season. Volume was up 1.8% in the fourth quarter of last year.
In the fourth quarter this year, core volume could be down in the low to mid-single digits. We believe somewhat offset by low single-digit average growth in revenue per case, absent currency and mix, and further helped by growth in SCI Direct, but at a lower average spend and gross profit. We would expect a continued negative impact from currency, as last year the Canadian dollar was in the high 80s, and today it sits around 76. In our cemetery segment, while we're comparing to a very tough comparable number, we still expect to grow pre-need sales in the high single-digit percentage range. We also will record a large amount of revenue from construction in the fourth quarter, as it is the seasonal nature of the business. However, not quite as much as we did in the prior year quarter.
Finally, do recall that during the fourth quarter last year, we had approximately $15 million of trust income related to accelerated capital gains that we noted would not repeat. We currently believe our fourth quarter normalized earnings per share will range between $0.36 and $0.39. Excluding the $15 million of accelerated trust income in the prior year, we would have reported $0.33 per share last year. Guidance is a 9%-18% growth over that base. Looking ahead to 2016, I am very optimistic and believe we are well positioned to deliver solid results. Our preliminary earnings per share guidance range is $1.24-$1.36. At the midpoint, we fall within the 8%-12% range of growth we spoke to in our Investor Day presentation last February.
Eric will cover cash flow guidance, which remains very robust and allows us to continue to grow the company, enhance the value of your shares. Just to give a little more color on the broad assumptions regarding the 2016 outlook, we believe total funeral revenues should grow in the 2%-3% range, absent currency fluctuation. Comparable core revenues should grow in the half to 1% range, as inflationary pricing with a slight headwind from mix should result in a low single-digit average growth. We expect this to be slightly offset by a 1%-2% reduction in case volume. I would expect the tough volume comparisons to be in the first and second quarters. Non-comparable revenue from 2015 acquisitions should add an additional 80-100 basis points of revenue growth in 2016.
Non-funeral home matured pre-need revenue, recognized pre-need revenue, and General Agency revenue should all grow in the mid to high single-digit range. This should enhance funeral revenue growth by 50-80 basis points. As we've discussed before, funeral gross margin percentages should be relatively stable. Revenue increases should generate additional margin dollars and cash flow. We believe Preneed Funeral Sales should continue to grow in the mid-single digits. As it relates to cemetery, we anticipate that reported revenues will continue to increase in the mid-single-digit percentage range, led by Preneed sales production growth in the mid to high single-digit percentage range, modest growth in at-need cemetery revenues, and slightly decreasing trust income as we recorded and withdrew approximately $10 million of one-time capital gains in 2015 that do not anticipate to recur.
Our segment margin percentages, which normally grow in the 50-100 basis point range with this kind of revenue growth, should actually be just slightly higher as the missing trust income carries 100% margins. Still, we expect healthy increases in cash dollar margins for 2016. Finally, expect corporate G&A to be relatively flat for the year in the lower $30 million range on a quarterly basis. To wrap it up, I just want to say thank you to our entire team for their hard work in helping to produce great results thus far, and we look forward to a strong finish in the fourth quarter of 2015. With that, I'll turn the call over to Eric.
Good morning, everybody. I'd like to start this morning by summarizing some key financial points that I think are important for everybody to understand before I get too much into the details of the quarter. Cash flow continues to be very strong, with the third quarter well ahead of our expectations and slightly higher than prior year. Cash flow was primarily bolstered by favorable trends and preneed cemetery working capital that I'll touch upon in a few minutes when I get into the details. We also have a new expectation of lower normalized cash tax payments for the full year of 2015. As a result of this, coupled with the strong preneed cemetery working capital that I just mentioned, we are once again raising our full year 2015 guidance for Adjusted Operating Cash Flow to a range of $500 million-$525 million.
This cash flow strength, coupled with our favorable liquidity profile, has enabled us to execute a robust capital deployment program during the quarter, which included returning an impressive $177 million to our shareholders through both dividends and share repurchases. Finally, our outlook for 2016 cash flow is in the range of $475 million-$525 million, which continues to demonstrate the consistency and predictability of our cash flow stream at SCI. With that, let's begin with the third quarter in terms of cash flow. As you saw in our press releases, the Adjusted Operating Cash Flow grew $1.7 million in the third quarter to $125 million as lower payroll funding and better working capital basically offset the expected increase we had in normalized cash taxes. A little bit more color on this cash flow in the third quarter.
Similar to what we disclosed last quarter, cash flow from operations increased despite contributions from FTC-mandated Stewart divested properties in 2014 that we did not benefit from in 2015. This estimated impact in the quarter was $3 million-$4 million. As we also highlighted for you last quarter, due to the way the July 4th holiday fell this year, we benefited from lower payroll funding in this third quarter by about $19 million. Also, on a positive note, we have been seeing an upward trend in recent quarters of increasing cash receipts from preneed cemetery installment collections as a result of preneed cemetery sales production growing in the high single to low double-digit percentage range, as you've seen over the past several quarters. While revenue recognition primarily occurred at the time of sale, many of these cemetery property sales are paid on installments over a five-year period.
In line with our expectations, normalized cash taxes during the third quarter increased $25 million over the prior year, and maintenance and cemetery development CapEx for the quarter came in at approximately $37 million. Our calculation of Free Cash Flow for the third quarter, therefore, is $88 million. This is flat to the prior year, but again, well above our internal expectations as the greater benefit in working capital offset the increase in normalized cash taxes. Overall, a solid quarter for us in terms of our cash flow from our point of view. Now, shifting to look forward into the fourth quarter of 2015 as well as the full year of 2015. First, in the first nine months of the year, adjusted cash flow from operation has increased $39 million or 10% to $425 million.
Based on these strong year-to-date results so far, better working capital than previously expected related to preneed cemetery installment cash receipts and a revised lower estimate for normalized cash taxes, we are raising our guidance range for 2015 annual adjusted cash flow by $25 million, which equates to a new range of $500 million-$525 million for the full year of 2015. This new guidance for the full year implies a cash flow range in the fourth quarter of $75 million-$100 million, compared to the prior year amount of $123 million. Keep in mind that we have two significant headwinds in the fourth quarter. First, remember that last year we benefited from $15 million of trust fund distributions when we received one-time capital gains distributions from integrating Stewart's trust funds.
Second, we'll also have a higher normalized cash tax payment with an expected $30 million in the fourth quarter of this year versus no normalized cash tax payment in the fourth quarter of last year. Despite this fourth quarter increase in normalized cash taxes over the prior year, we now believe that we'll end 2015 with about $100 million in total normalized cash taxes versus our previous expectation of $125 million. Our recurring CapEx guidance expectation for the full year of 2015 is approximately $140 million, which is at the high end of the range that we previously provided. This results in a higher expected range of Free Cash Flow of $360 million-$385 million for the full year of 2015. Now let's shift to the third quarter going back, and let's talk about our Free Cash Flow deployment.
To begin with, we finished the quarter with healthy liquidity of a little less than $385 million, consisting of $142 million of cash on hand and $242 million of availability on our long-term credit facility. This liquidity positions us well to strategically execute our capital deployment plans. During the quarter, we spent approximately $8 million on two new acquisitions after including almost $4 million of 1031 exchange funds, which are not reflected in our statement of cash flows. Both transactions have projected after-tax IRRs in the mid to high teen percentages. Now for what we gave back to our shareholders. We returned an impressive $177 million of value to our shareholders during the quarter, which by the way, represents the most we have returned in a single quarter since 2007.
In addition to $24 million in dividend payments, we also repurchased about $153 million or 5.1 million shares during the quarter. Subsequent to the end of the quarter, we have repurchased just over 620,000 additional shares for a total investment of approximately $17.5 million. Therefore, when you look at what we have done so far in 2015 through today, we have repurchased about 11.6 million shares for a total investment of over $321 million. These repurchases are more than double what we said could be possible at the beginning of the year, and we are pleased that we have been able to be opportunistic at these share price levels. Currently, we have just over 196 million shares outstanding and about $300 million of remaining share repurchase authorization. Now let's shift to our outlook for 2016.
In 2016, we expect our adjusted operating cash flow to be in the range of $475 million-$525 million. Higher cash flow growth from our underlying funeral and cemetery operations will be more than offset by higher anticipated normalized cash tax payments. As we transition to become a full cash taxpayer in 2016, our preliminary estimate for normalized cash taxes in 2016 is approximately $160 million, or a $60 million increase compared to 2015 normalized cash tax payments of approximately $100 million that I just mentioned. Absent this growth, though, in normalized cash taxes, our adjusting operating cash flows are expected to grow a healthy 9% in 2016 when utilizing the midpoint of our current guidance range.
Lastly, capital spending in 2016 for maintenance and cemetery development CapEx is expected to range from $140 million-$150 million, slightly higher than our expected spend in 2015 as we continue to reinvest in our core businesses. In conclusion, we continue to have a healthy balance sheet and capital structure and of course, tremendous liquidity. All of which adds to our flexibility to pursue opportunities that will drive value for our shareholders and our company. We are expecting continued strong cash flow in the remainder of this year and into 2016. We, both as shareholders and as management, consider this Free Cash Flow stream to be both steady and predictable. I'm not sure there are any two better attributes a company can have when describing its cash flow strength. We will deploy this cash flow to continue to deliver significant value for our shareholders in 2016.
Operator, that concludes our prepared remarks, and now I'd like to shift it back to you for questions.
Thank you. We will now begin the question and answer session. If you have a question, please press star then one on your touchtone phone. If you wish to be removed from the queue, please press the pound sign or the hash key. If you are using a speakerphone, you may need to pick up the handset first before pressing the numbers. Once again, if you have a question, please press star then one on your touchtone phone. Our first question comes from Chris Rigg from Susquehanna Financial Group. Chris, please go ahead.
Hi, this is Frank Lee on for Chris. Thanks for taking my question. Share repurchases are well above the target for the year, and acquisitions seem to be in line. Could you provide some more color on how we should think about capital deployment in the fourth quarter and in 2016, specifically the mix of repurchases and acquisitions?
Frank, this is Tom. Thank you for the question. I think specifically as it relates to 2014, I know that we have a transaction that we believe will close in the fourth quarter. I also think we're going to have a healthy amount of money that we're going to deploy towards share repurchase. Think of the acquisition spend being in the middle, I guess, kind of high single-digit million dollars and then spending money on share purchases otherwise. As you think about 2016, my thoughts are. Again, this changes from time to time. I'd say the pipeline's not as robust as it once was. As I think about the mix at this point in time, 2016 may be a little heavier on the share purchases versus opportunities to deploy cash for acquisitions.
Having said that, I think we're building more funeral homes that are, again, on the plan for 2016. We'll continue to grow future revenues through growing the businesses that we operate.
Okay, thanks. If I can, I'm not sure if I missed this, but had you quantified what you were expecting as far as trust fund and currency impact in the fourth quarter and then in 2016 EPS guidance?
I think when you think about the fourth quarter, because we lost close to $0.01 of currency in the fourth quarter, if you assume the Canadian rate stayed the same, it began to slightly dip in the fourth quarter last year. It probably won't be quite $0.01, but it'll be somewhere between $0.005 and $0.01. We're really forecasting the Canadian currency for next year to stay where it is, if you will. Again, that can change up and down. From a trust income perspective, clearly, we've reset the bar in the third quarter by having a bad third quarter, the market's up 9% in October, we got a little bit back and your guess is as good as mine on what's going to happen in 2016.
We generally project for returns in the year to be kind of in the low- to mid-single digits as far as market returns, those get adjusted based upon the realities of what the fluctuations in the market do. That's the way we think about it, and that's the way we modeled it when you think about 2016.
Okay, that's helpful. Thanks a lot.
Okay.
Our next question comes from A.J. Rice from UBS. A.J., please go ahead.
Thanks. Hi, everybody. Just maybe to follow up on a couple of those earlier points. On the buybacks for 2016, I'm assuming you've factored in or in the EPS guidance for 2016, I'm assuming you've factored in the buybacks from 2015. Have you assumed any level of buyback in your guidance for next year?
Yeah, A.J., I think, again, we've got a range, so we've got kind of a low and a high thought on what's going to happen on buybacks. I think the way to think about it is we have some buyback activity in there, but I would say not a historical trend that you've seen us do. I do think there's some upside potential if and when we execute the buyback strategy. Again, remember, it'll have a half year's effect, if you will, on 2016, and probably really plant the seed for more earnings per share and cash flow per share growth in 2017. Not a lot in there, but some.
Okay. Just on the working capital benefit you're seeing from the better payouts of the installment sales on the cemetery side, is that sort of the result of an initiative? Is that the result of different consumer behavior? Have you realized the full benefit of that? Is where you're at now sustainable? Is there potential for more room? Give us a little more flavor on that.
A.J., this is Eric. What you've seen, as I try to describe in my notes, is a really good, healthy increase in our cemetery sales production, especially what we call heritage or cemetery property. As you know, where the accounting is, we're recognizing that revenue, but a lot of that was done at the time under installment contracts. What you're really seeing is an increase of cash flows coming from those installment contracts, which are higher because of that sales production. It's really a function of what do we think are the levels of sales production that will dictate the installment contracts and the cash receipts coming in later. You've seen some really healthy increases in cemetery sales production in the first half of the year. They were up mid-double digit kind of teen percentages. In no way are we projecting that type of increase to continue.
I think it will kind of moderate, but it was very nice in terms of a tailwind for us for cash flow for this quarter and probably into the fourth quarter as well.
A.J., this is Tom. I'd just add to piggyback on what Eric's saying. When you think about this sales production growth, we get some of it, for lack of a better way of saying it to the external world, from internal sales. You think about an internal sale, that customer that used to come in the cemetery, they generally paid more upfront cash. They generally weren't extending as much payment terms. As we've been able to grow our cemetery through the outside sales force, that outside sales force is bringing a customer that may or may not have come in before, and they tend to finance over periods of time. I think the mix of people that are utilizing that financing tool continue to increase.
To Eric's point, I think those receivables are out there, and we'll continue to grow that aspect of our business.
Okay, maybe last, I know it said in the prepared remarks, and you mentioned on that first question, the de novo activity maybe is on a little bit of an upswing as well as, it's been a long time since I think I've heard you say you're buying cemetery land. Could you just give us some flavor for, is that a one-off or is that something that we're likely to see more of?
Well, I think on the cemetery, it's generally a one-off because we just don't have a lot of those situations. I think what you will see going forward and the things that are in the pipeline is we've got approvals to build funeral homes, sometimes on combination facilities and cemeteries, sometimes on parcels of real estate that we believe demographically are the right place to be. We've got quite a few of those on the drawing board and in plans, and probably to the tune of nine or 10 that I'm aware of, that again, increased activity relative to the past. I think you're going to see more of that, but more related to the funeral side of the business versus the cemetery.
Okay. All right.
Thanks, A.J.
Our next question comes from John Ransom from Raymond James. John, please go ahead.
Hi, good morning. I'm sorry, I was pinging back and forth on a couple of calls, so I apologize if I missed this. Did you say last year was obviously a big flu season? If flu is a more normal season this year, do you have just a ballpark estimate of what that might do to your at-need funeral volumes?
Hey, John. This is Tom.
Good morning.
I think, again, it's hard, John, to project that. I would just tell you this, that in my mind, if you model 1%-2% down for the year.
the way I would expect it to roll in is that you could see a, call it a 3% or 4% decline in the first quarter, maybe even in the first half of the year, which again, you'd make back a lot of that with flat to slightly up in the back half is, again, I think if history tells us that's probably a trend line, the truth is we don't know.
Right.
I think the way we're looking at it is you could have a pretty tough comp, particularly in the first quarter, less so in the second, obviously the third quarter we'd expect to be a little more favorable comp based upon what we saw here.
Okay, great. Do you think we've gotten to a new plateau with respect to your Preneed business and the lack of cash burn that we saw so far? Is that the new normal?
No, I think, again, I think we've really seen some good traction on some of the stuff we've done in the Preneed world in terms of good production, getting down payments, and then seeing the tailwind that will last, as I said, three to five years for that. I think it was a little bit more than what we expected, John, is what I said.
Right. Yep.
I'm going to wait a quarter or so to fully opine if this is the new normal, but my gut is we're starting to see some traction, but probably not as good as we saw this quarter.
Is your mix of trust versus third-party insurance still kind of consistent with what it has been?
Yes.
Okay. Thanks a lot. That's all I had.
Thanks.
Once again, if you have a question, please press star then one on your touch tone phone. Our next question comes from Duncan Brown from Wells Fargo. Duncan, please go ahead.
Hey, good morning. When you think about 2016 guidance, are there any additional maybe Stewart opportunities, or has most of that or all of that been realized?
Yeah, Duncan, this is Tom. I think what we've got in place. Again, we're always trying to find new ways that don't just apply to Stewart to enhance our cost structure and our efficiencies. I'd say from a Stewart synergy perspective, they're all in place, and there should not be a real incremental piece in 2016. Having said that, on the revenue side, as you think about cemetery development, we're constantly looking at cemetery plans and developing new levels of inventory, new tiers of inventory. We have not got around to every Stewart cemetery and developed the right levels of inventory, the right tiers of inventory. I think we believe there's opportunity to create value and create synergies for the Stewart cemeteries. It probably gets into 2016 and even into 2017.
Again, these numbers are probably in the low single-digit million-dollar opportunities as the years go on. We're excited. There's much more to do, and we're constantly looking at ways to enhance value for our consumers and drive profitability for our shareholders.
Okay, that's fair. I appreciate that color. Also on the 2016 guidance, would love to get any thoughts that you have on wage inflation pressure that you're seeing on that, and just you seeing any changes on that front or expect anything?
Nothing outside the normal. I think, again, we're a people-oriented business, it's important for our employees to be engaged in what they're doing and doing the right thing. I'd say we're not seeing anything that trend-wise that we hadn't seen in the last two or three years.
Okay, great. Thank you.
Thanks, Duncan.
We have no further questions at this time. I would like to turn the call back over to the SCI management team.
We want to thank everybody for being on the call today, and we look forward to reporting back to you guys in February, our fourth quarter and final 2015 numbers. Thanks again for being on the call.
Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.