# Service Corp International: Form 10-Q for the period ended Sep 30, 2010

- Company: [Service Corp International](/companies/sci.md) (CIK 89089)
- Form: 10-Q
- Filed: 2010-10-28
- Accepted by EDGAR: Oct 28, 2010, 16:16 ET
- Period: 2010-09-30
- Accession: 0000950123-10-097447
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/89089/000095012310097447/h77017e10vq.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/89089/000095012310097447/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2010-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Cost of revenue | 3 months, 2010-07-01 to 2010-09-30 | $430.5m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2010-01-01 to 2010-09-30 | $1.30bn | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2010-07-01 to 2010-09-30 | $102.6m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2010-01-01 to 2010-09-30 | $324.3m | us-gaap:GrossProfit |
| Operating income | 3 months, 2010-07-01 to 2010-09-30 | $68.5m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2010-01-01 to 2010-09-30 | $250.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2010-07-01 to 2010-09-30 | $31.5m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2010-01-01 to 2010-09-30 | $96.3m | us-gaap:InterestExpense |
| Income tax | 3 months, 2010-07-01 to 2010-09-30 | $9.9m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2010-01-01 to 2010-09-30 | $57.3m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2010-07-01 to 2010-09-30 | $18.8m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2010-01-01 to 2010-09-30 | $90.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2010-07-01 to 2010-09-30 | $0.08 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2010-01-01 to 2010-09-30 | $0.36 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2010-07-01 to 2010-09-30 | $0.08 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2010-01-01 to 2010-09-30 | $0.36 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2010-07-01 to 2010-09-30 | 247,523,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2010-01-01 to 2010-09-30 | 252,486,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2010-01-01 to 2010-09-30 | $266.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2010-01-01 to 2010-09-30 | $67.4m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 9 months, 2010-01-01 to 2010-09-30 | $30.2m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months, 2010-01-01 to 2010-09-30 | $86.9m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2010-09-30 | $135.8m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2010-09-30 | $344.5m | us-gaap:AssetsCurrent |
| Total assets | at 2010-09-30 | $8.95bn | us-gaap:Assets |
| Current liabilities | at 2010-09-30 | $343.6m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2010-09-30 | $1.47bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 51,596 characters.

### The Company

We are North America’s largest provider of deathcare products and services, with a network of funeral homes and cemeteries unequalled in geographic scale and reach. At September 30, 2010, we operated 1,405 funeral service locations and 382 cemeteries (including 218 combination locations) in North America, which are geographically diversified across 43 states, eight Canadian provinces, the District of Columbia, and Puerto Rico. Our funeral segment also includes the operations of 12 funeral homes in Germany that we intend to exit when economic values and conditions are conducive to a sale. Our funeral service and cemetery operations consist of funeral service locations, cemeteries, funeral service/cemetery combination locations, crematoria, and related businesses. We sell cemetery property and funeral and cemetery products and services at the time of need and on a preneed basis.

Our financial position is enhanced by our $6.6 billion backlog of future revenues from both trust and insurance-funded sales at September 30, 2010, which is the result of preneed funeral and cemetery sales. We believe we have the financial strength and flexibility to reward shareholders through dividends while maintaining a prudent capital structure and pursuing new opportunities for profitable growth. We currently have approximately $34.9 million authorized to repurchase our common stock.

On March 26, 2010, pursuant to a tender offer, we acquired approximately 91% of the outstanding common stock of Keystone for C$8.07 per share in cash, resulting in a purchase price of $288.9 million, which included the refinancing of $80.7 million of Keystone’s debt and our purchase of the remaining shares of Keystone for $17.5 million, which was completed during the second quarter of 2010 using available cash balance.

### Financial Condition, Liquidity and Capital Resources

### Trust Investments

In addition to selling our products and services to client families at the time of need, we sell price-guaranteed preneed funeral and cemetery contracts, which provide for future funeral or cemetery services and merchandise. Since preneed funeral and cemetery services or merchandise will not be provided until sometime in the future, most states and provinces require that all or a portion of the funds collected from customers on preneed funeral and cemetery contracts be paid into trusts and/or preneed escrow accounts until the merchandise is delivered or the service is performed. Investment earnings associated with the trust investments are expected to mitigate the inflationary costs of providing the preneed funeral and cemetery services and merchandise in the future for the prices that were guaranteed at the time of sale.

Also, we are required by state and provincial law to pay a portion of the proceeds from the sale of cemetery property interment rights into perpetual care trusts. For these investments, the original corpus remains in the trust in perpetuity and the net ordinary earnings are intended to offset the expense to maintain the cemetery property. The majority of states require that net gains or losses are retained and added to the corpus, but certain states allow the net realized gains and losses to be included in the income that is distributed.

Independent trustees manage and invest all of the funds deposited into the funeral and cemetery merchandise and service trusts as well as the cemetery perpetual care trusts. The trustees are selected based on their respective geographic footprint and qualifications per state and provincial regulations. All of the trustees engage the same independent investment advisor. The trustees, with input from the investment advisor, establish an investment policy that serves as an operating document to guide the investment activities of the trusts including asset allocation and manager selection. The investments are also governed by state and provincial guidelines. Asset allocation for the funeral and cemetery merchandise and service trusts is generally based on matching the time period that we expect the funeral or cemetery preneed contract to be outstanding. Since net ordinary earnings are distributed monthly from the cemetery perpetual care trusts to offset cemetery maintenance costs, the cemetery perpetual care trusts contain a higher fixed income allocation than the funeral and cemetery merchandise and service trusts. The investment advisor recommends investment managers to the trustees that are selected on the basis of various criteria set forth in the investment policy. The primary investment objectives for the funeral and cemetery merchandise and service trusts include (1) achieving growth of principal over time sufficient to preserve and increase the purchasing power of the assets, and (2) preserving capital within acceptable levels of volatility. Preneed funeral and cemetery contracts generally take years to mature. Therefore, the funds associated with these contracts are often invested for several market cycles. While cemetery perpetual care trusts share the same investment objectives as listed above, these trusts emphasize providing a steady stream of investment income with some capital appreciation. The trusts seek to control risk and volatility through a combination of asset styles, asset classes, and institutional investment managers.

As of September 30, 2010, approximately 90% of our trusts were under the control and custody of two large financial institutions engaged as preferred trustees. The U.S. trustees primarily use common trust fund structures as the investment vehicle for their trusts. Through the common trust fund structure, each respective trustee manages the allocation of assets through individual managed accounts or institutional mutual funds. In the event a particular state prohibits the use of a common trust fund as a qualified investment, the trustee utilizes institutional mutual funds. The U.S. trusts include a modest allocation to alternative investments, which are comprised primarily of private equity and real estate investments. These investments are structured as limited liability companies (LLCs) and are managed by certain trustees. The trusts that are eligible to allocate a portion of their investments to alternative investments purchase units of the respective LLCs.

#### Fixed Income Securities

Fixed income investments are intended to preserve principal, provide a source of current income, and reduce overall portfolio volatility. The SCI trusts have direct investments primarily in government fixed income securities.

Canadian government fixed income securities are investments in Canadian federal and provincial government instruments. In many cases, regulatory restrictions mandate that the funds from the sales of preneed funeral and cemetery products sold in certain Canadian jurisdictions must be invested in these instruments.

#### Equity Securities

Equity investments have historically provided long-term capital appreciation in excess of inflation. The SCI trusts have direct investments primarily in domestic equity portfolios that include large, mid, and small capitalization companies of different investment objectives (i.e., growth and value). The majority of the equity portfolio is managed by multiple institutional investment managers that specialize in an objective-specific area of expertise. Our equity securities are exposed to market risk; however, these securities are well-diversified. As of September 30, 2010, the largest single equity position represented less than 1% of the total portfolio.

#### Mutual Funds

The SCI trust funds employ institutional mutual funds where operationally or economically efficient. Institutional mutual funds are utilized to invest in various asset classes including US equities, non-US equities, convertible bonds, corporate bonds, government bonds, Treasury inflation protected securities (TIPS), high yield bonds, real estate investment trusts (REITs), and commodities. The mutual funds are governed by guidelines outlined in their individual prospectuses.

#### Private Equity

The objective of these investments is to provide high rates of return with controlled volatility. These investments are typically long-term in duration. These investments are diversified by strategy, sector, manager, and vintage year. Private equity exposure is accessed through LLCs established by certain preferred trustees. These LLCs invest in numerous limited partnerships, including private equity, fund of funds, distressed debt, and mezzanine financing. The trustees that have oversight of their respective LLCs work closely with the investment advisor in making all current investments.

#### Trust Investment Performance

The trust fund income recognized from these investment assets continues to be volatile. During the twelve months ended September 30, 2010, the Standard and Poor’s 500 Index increased approximately 10.2% and the Barclay’s Aggregate Index increased approximately 8.2%, while the combined SCI trusts increased approximately 11.5%.

### Capital Allocation Considerations

We believe that our cash on hand, future operating cash flows, and the available capacity under our credit facility will give us adequate liquidity to meet our short-term needs as well as our long-term financial obligations.

While we have no significant debt maturities until November 2013, we have chosen to make open market debt repurchases when it is opportunistic to do so relative to other capital deployment opportunities. During 2010 and 2009, we bought our debt securities in the open market totaling $111 million and $91 million, respectively.

As a result of the acquisition of Keystone in March 2010, we incurred $150 million of new debt and we also refinanced debt of approximately $81 million, which was settled in cash concurrent with the acquisition closing. We do not believe this additional acquisition-related debt of $150 million added meaningfully to our long term debt obligations as the debt repurchases in 2009 of $91 million were completed partly in anticipation of this new debt.

Our current bank credit facility expires in November 2013, and we believe we will be able to successfully renew the bank credit facility at the appropriate time. Our long term liquidity profile assumes that we will have access to the capital markets to refinance our long term debt if, and when, we choose to do so. We have a relatively consistent annual cash flow stream which is generally resistant to down economic cycles. This cash flow stream is available to substantially reduce our long-term debt maturities should we choose to do so. Furthermore, our capital expenditures are generally discretionary in nature and can be managed based on the availability of operating cash flow.

Our bank credit facility requires us to maintain certain leverage and interest coverage ratios. As of September 30, 2010 we were in compliance with all of our debt covenants. Our financial covenant requirements and actual ratios as of September 30, 2010 are as follows:

|  | Per Credit Agreement | Actual |
| --- | --- | ---: |
| Leverage ratio | 4.00 (Max) | 3.30 |
| Interest coverage ratio | 3.00 (Min) | 4.03 |

From time to time we have business growth initiatives such as Dignity Memorial, Dignity Planning, and DignityMemorial.com. These growth initiatives are generally not capital intensive. As such, we plan to fund these initiatives using our cash flow from operations. Additionally, we do not believe that these aforementioned initiatives materially impact our short term or long term liquidity needs.

### Cash Flow

We believe our ability to generate strong operating cash flow is one of our fundamental financial strengths and provides us with substantial flexibility in meeting operating and investing needs.

*Operating Activities —* Net cash provided by operating activities decreased approximately $39.2 million in the first nine months ended September 30, 2010, compared to the nine months ended September 30, 2009. This decrease primarily resulted from higher payments toward incentive compensation and trade payables made during the current year, and proceeds received in the prior year from liquidating certain life insurance assets, which was partially offset by an increase attributable to higher atneed cash receipts resulting from initiatives that improved collection rates in the current period.

*Investing Activities —* Net cash used in investing activities increased $194.1 million in the first nine months ended September 30, 2010, compared to the first nine months ended September 30, 2009, primarily due to $278.4 million in acquisitions primarily related to the acquisition of Keystone, partially offset by $27.5 million in withdrawals of restricted funds and $61.9 million in proceeds from divestitures.

*Financing Activities —* Net cash used in financing activities decreased by $89.7 million in the first nine months ended September 30, 2010, compared to the first nine months ended September 30, 2009, primarily due to a $238.8 million increase in proceeds from issuance of long-term debt (net of debt issuance costs), which was partially offset by $86.9 million in purchases of company stock, $32.5 million increase in debt payments due to increased purchases of debt in the open market, and $22.0 million increase in capital lease payments primarily associated with the termination of certain transportation leases.

### Financial Assurances

In support of our operations, we have entered into arrangements with certain surety companies whereby such companies agree to issue surety bonds on our behalf as financial assurance and/or as required by existing state and local regulations. The surety bonds are used for various business purposes; however, the majority of the surety bonds issued and outstanding have been used to support our preneed funeral and cemetery sales activities. The obligations underlying these surety bonds are recorded on the unaudited condensed consolidated balance sheet as *Deferred preneed funeral revenues* and *Deferred preneed cemetery revenues.* The breakdown of surety bonds between funeral and cemetery preneed arrangements, as well as surety bonds for other activities, is described below.

*(Dollars in millions)*

|  | September 30, 2010 | December 31, 2009 |
| --- | ---: | ---: |
| Preneed funeral | $121.0 | $126.6 |
| Preneed cemetery: |  |  |
| Merchandise and services | 120.1 | 126.0 |
| Pre-construction | 5.8 | 3.3 |
| Bonds supporting preneed funeral and cemetery obligations | $246.9 | $255.9 |
| Bonds supporting preneed business permits | 5.3 | 4.6 |
| Other bonds | 15.3 | 22.1 |
| Total surety bonds outstanding | $267.5 | $282.6 |

When selling preneed funeral and cemetery contracts, we may post surety bonds where allowed by state law. We post the surety bonds in lieu of trusting a certain amount of funds received from the customer. The amount of the bond posted is generally determined by the total amount of the preneed contract that would otherwise be required to be trusted, in accordance with applicable state law. For the three months ended September 30, 2010 and 2009, we had $4.8 million and $6.0 million, respectively, of cash receipts attributable to bonded sales. For the nine months ended September 30, 2010 and 2009, we had $14.7 million and $18.6 million, respectively, of cash receipts attributable to bonded sales. These amounts do not consider reductions associated with taxes, obtaining costs, or other costs.

Surety bond premiums are paid annually and are automatically renewable until maturity of the underlying preneed contracts, unless we are given prior notice of cancellation. Except for cemetery pre-construction bonds (which are irrevocable), the surety companies generally have the right to cancel the surety bonds at any time with appropriate notice. In the event a surety company would cancel the surety bond, we are required to obtain replacement surety assurance from another surety company or fund a trust for an amount generally less than the posted bond amount. Management does not expect that we will be required to fund material future amounts related to these surety bonds because of lack of surety capacity or surety company non-performance.

### Preneed Funeral and Cemetery Activities and Backlog of Contracts

In addition to selling our products and services to client families at the time of need, we sell price-guaranteed preneed funeral and cemetery contracts, which provide for future funeral or cemetery services and merchandise. Since preneed funeral and cemetery services or merchandise will not be provided until sometime in the future, most states and provinces require that all or a portion of the funds collected from customers on preneed funeral and cemetery contracts be paid into merchandise and service trusts until the merchandise is delivered or the service is performed. These trust funds own investments in equity and debt securities and mutual funds, which are sensitive to current market prices. In certain situations, as described above, where permitted by state or provincial laws, we post a surety bond as financial assurance for a certain amount of the preneed funeral or cemetery contract in lieu of placing funds into trust accounts.

*Trust-Funded Preneed Funeral and Cemetery Contracts:* The funds are deposited into trust and invested by independent trustees in accordance with state and provincial laws. We retain any funds above the amounts required to be deposited into trust accounts and use them for working capital purposes, generally to offset the selling and administrative costs of our preneed programs.

The tables below detail our results of preneed funeral and cemetery production and maturities, excluding insurance contracts, for the three and nine months ended September 30, 2010 and 2009.

*(Dollars in millions)*

*(Dollars in millions)*

| Funeral: Preneed trust-funded (including bonded): | North America Three Months Ended September 30, 2010 | 2009 | Nine Months Ended September 30, 2010 | 2009 |
| --- | ---: | ---: | ---: | ---: |
| Sales production | $30.3 | $33.7 | $93.4 | $109.7 |
| Sales production (number of contracts) | 6,978 | 8,396 | 21,632 | 25,127 |
| Maturities | $42.6 | $41.4 | $135.8 | $130.6 |
| Maturities (number of contracts) | 9,786 | 9,872 | 31,080 | 32,394 |
| **Cemetery:** |  |  |  |  |
| Sales production: |  |  |  |  |
| Preneed | $94.5 | $101.7 | $301.2 | $289.4 |
| Atneed | 56.5 | 58.0 | 181.5 | 179.7 |
| Total sales production | $151.0 | $159.7 | $482.7 | $469.1 |
| Sales production deferred to backlog: |  |  |  |  |
| Preneed | $39.3 | $41.4 | $129.1 | $120.2 |
| Atneed | 43.1 | 43.8 | 136.5 | 137.9 |
| Total sales production deferred to backlog | $82.4 | $85.2 | $265.6 | $258.1 |
| Revenue recognized from backlog: |  |  |  |  |
| Preneed | $41.1 | $30.7 | $109.2 | $98.6 |
| Atneed | 43.5 | 44.8 | 135.5 | 137.0 |
| Total revenue recognized from backlog | $84.6 | $75.5 | $244.7 | $235.6 |

*Insurance-Funded Preneed Funeral Contracts:* Where permitted by state or provincial law, customers may arrange their preneed funeral contract by purchasing a life insurance or annuity policy from third-party insurance companies, for which we earn a commission as general sales agent for the insurance company. The policy amount of the insurance contract between the customer and the third-party insurance company generally equals the amount of the preneed funeral contract. We do not reflect the unfulfilled insurance-funded preneed funeral contract amounts in our unaudited condensed consolidated balance sheet.

The table below details the results of insurance-funded preneed funeral production and maturities for the three and nine months ended September 30, 2010 and 2009, and the number of contracts associated with those transactions.

*(Dollars in millions)*

*(Dollars in millions)*

| Preneed funeral insurance-funded: | North America Three Months Ended September 30, 2010 | 2009 | Nine Months Ended September 30, 2010 | 2009 |
| --- | ---: | ---: | ---: | ---: |
| Sales production (1) | $102.0 | $88.4 | $313.8 | $240.0 |
| Sales production (number of contracts) (1) | 17,664 | 15,364 | 54,375 | 41,378 |
| General agency revenue | $19.7 | $15.8 | $51.0 | $42.4 |
| Maturities | $68.3 | $58.2 | $209.9 | $182.5 |
| Maturities (number of contracts) | 12,676 | 10,998 | 39,094 | 34,173 |

(1) Amounts are not included in our unaudited condensed consolidated balance sheet.

*North America Backlog of Preneed Funeral and Cemetery Contracts:* The following table reflects our North America backlog of trust-funded deferred preneed funeral and cemetery contract revenues, including amounts related to *Deferred preneed funeral and cemetery receipts held in trust* at September 30, 2010 and December 31, 2009. Additionally, the table reflects our backlog of unfulfilled insurance-funded contracts (which are not included in our unaudited condensed consolidated balance sheet) at September 30, 2010 and December 31, 2009. The backlog amounts presented are reduced by an amount that we believe will cancel before maturity based on historical experience.

The table also reflects our preneed funeral and cemetery receivables and trust investments (market and cost bases) associated with the backlog of deferred preneed funeral and cemetery contract revenues, net of the estimated cancellation allowance. We believe that the table below is meaningful because it sets forth the aggregate amount of future revenues we expect to recognize as a result of preneed sales, as well as the amount of assets associated with those revenues. Because the future revenues exceed the asset amounts, future revenues will exceed the cash distributions actually received from the associated trusts.

*(Dollars in billions)*

|  | September 30, 2010 Market | Cost | December 31, 2009 Market | Cost |
| --- | ---: | ---: | ---: | ---: |
| Deferred preneed funeral revenues | $0.59 | $0.59 | $0.59 | $0.59 |
| Deferred preneed funeral receipts held in trust | 1.16 | 1.17 | 1.14 | 1.17 |
|  | $1.75 | $1.76 | $1.73 | $1.76 |
| Allowance for cancellation on trust investments | (0.13) | (0.13) | (0.12) | (0.12) |
| Backlog of trust-funded preneed funeral revenues | $1.62 | $1.63 | $1.61 | $1.64 |
| Backlog of insurance-funded preneed funeral revenues | 3.23 | 3.23 | 3.03 | 3.03 |
| Total backlog of preneed funeral revenues | $4.85 | $4.86 | $4.64 | $4.67 |
| Preneed funeral receivables and trust investments | $1.37 | $1.38 | $1.35 | $1.39 |
| Allowance for cancellation on trust investments | (0.11) | (0.11) | (0.11) | (0.11) |
| Assets associated with backlog of trust-funded deferred preneed funeral revenues, net of estimated allowance for cancellation | $1.26 | $1.27 | $1.24 | $1.28 |
| Insurance policies associated with insurance-funded deferred preneed funeral revenues, net of estimated allowance for cancellation | 3.23 | 3.23 | 3.03 | 3.03 |
| Total assets associated with backlog of preneed funeral revenues, net of estimated allowance for cancellation | $4.49 | $4.50 | $4.27 | $4.31 |
| Deferred preneed cemetery revenues | $0.82 | $0.82 | $0.82 | $0.82 |
| Deferred preneed cemetery receipts held in trust | 1.11 | 1.12 | 1.06 | 1.11 |
|  | $1.93 | $1.94 | $1.88 | $1.93 |
| Allowance for cancellation on trust investments | (0.16) | (0.16) | (0.16) | (0.16) |
| Total backlog of deferred cemetery revenues | $1.77 | $1.78 | $1.72 | $1.77 |
| Preneed cemetery receivables and trust investments | $1.46 | $1.46 | $1.38 | $1.43 |
| Allowance for cancellation on trust investments | (0.15) | (0.15) | (0.14) | (0.14) |
| Total assets associated with backlog of deferred cemetery revenues, net of estimated allowance for cancellation | $1.31 | $1.31 | $1.24 | $1.29 |

40

The market value of our funeral and cemetery trust investments was based on a combination of quoted market prices, observable inputs such as interest rates or yield curves, and appraisals. For more information on how market values are estimated, see Critical Accounting Policies below. The difference between the backlog and asset amounts represents the contracts for which we have posted surety bonds as financial assurance in lieu of trusting, the amounts collected from customers that were not required to be deposited into trust, and allowable cash distributions from trust assets. The table also reflects the amounts expected to be received from insurance companies through the assignment of policy proceeds related to insurance-funded funeral contracts.

**Results of Operations — Three Months Ended September 30, 2010 and 2009**

### Management Summary

Key highlights in the third quarter of 2010 were as follows:

- Funeral gross profit increased $0.3 million, or 0.4%, due to an increase in funeral case volume and profits from the Keystone and Palm Mortuaries acquisitions partially offset by higher selling costs; and,
- Cemetery gross profit increased $1.1 million due to an increase in preneed cemetery property sales and preneed merchandise sales offset by higher selling costs.

### Results of Operations

In the third quarter of 2010, we reported net income attributable to common stockholders of $18.8 million ($.08 per diluted share) compared to net income attributable to common stockholders in the third quarter of 2009 of $31.2 million ($.12 per diluted share). These results were impacted by the following items:

- a net after-tax loss on asset sales of $8.5 million in the third quarter of 2010 and an after-tax loss of $2.3 million in the third quarter of 2009;
- a decrease in certain tax reserves of $2.5 million in the third quarter of 2010 as compared to a decrease of $0.8 million in the third quarter of 2009;
- an after-tax loss from the early extinguishment of debt of $5.3 million in the third quarter of 2010 and an after-tax gain of $0.3 million in the third quarter of 2009; and,
- after-tax expenses related to our acquisition and integration of Keystone of $1.8 million in the third quarter of 2010.

### Consolidated Versus Comparable Results

The table below reconciles our consolidated GAAP results to our comparable, or “same store,” results for the three months ended September 30, 2010 and 2009. We define comparable operations (or same store operations) as those funeral and cemetery locations that were owned for the entire period beginning January 1, 2009 and ending September 30, 2010. The following tables present operating results for funeral and cemetery locations that were owned by us during this period.

*(Dollars in millions)*

| Three Months Ended September 30, 2010 North America Revenue | Consolidated | Less: Results Associated with Acquisition/ New Construction | Less: Results Associated with Divestitures | Comparable |
| --- | ---: | ---: | ---: | ---: |
| Funeral revenue | $357.4 | $29.9 | $0.3 | $327.2 |
| Cemetery revenue | 174.2 | 3.0 | 0.1 | 171.1 |
|  | 531.6 | 32.9 | 0.4 | 498.3 |
| Germany revenue | 1.6 | — | — | 1.6 |
| Total revenue | $533.2 | $32.9 | $0.4 | $499.9 |
| North America Gross Profits |  |  |  |  |
| Funeral gross profits | $68.8 | $6.1 | $(0.1) | $62.8 |
| Cemetery gross profits | 33.6 | 0.3 | (0.1) | 33.4 |
|  | 102.4 | 6.4 | (0.2) | 96.2 |
| Germany gross profits | 0.2 | — | — | 0.2 |
| Total gross profits | $102.6 | $6.4 | $(0.2) | $96.4 |

41

*(Dollars in millions)*

| Three Months Ended September 30, 2009 North America Revenue | Consolidated | Less: Results Associated with Acquisition/ New Construction | Less: Results Associated with Divestitures | Comparable |
| --- | ---: | ---: | ---: | ---: |
| Funeral revenue | $327.4 | $0.1 | $4.0 | $323.3 |
| Cemetery revenue | 168.3 | — | 3.1 | 165.2 |
|  | 495.7 | 0.1 | 7.1 | 488.5 |
| Germany revenue | 1.5 | — | — | 1.5 |
| Total revenue | $497.2 | $0.1 | $7.1 | $490.0 |
| North America Gross Profits |  |  |  |  |
| Funeral gross profits | $68.7 | $(0.2) | $0.1 | $68.8 |
| Cemetery gross profits | 32.5 | (0.2) | 0.5 | 32.2 |
|  | 101.2 | (0.4) | 0.6 | 101.0 |
| Germany gross profits | — | — | — | — |
| Total gross profits | $101.2 | $(0.4) | $0.6 | $101.0 |

The following table provides the data necessary to calculate our consolidated average revenue per funeral service for the three months ended September 30, 2010 and 2009. We calculate average revenue per funeral service by dividing consolidated funeral revenue, excluding General Agency (GA) revenues and certain other revenues to avoid distorting our averages of normal funeral services revenue, by the number of consolidated funeral services performed during the period.

*(Dollars in millions,*

|  | Three Months Ended September 30, 2010 except average revenue per funeral service) | 2009 |
| --- | ---: | ---: |
| Consolidated funeral revenue | $359.0 | $328.9 |
| Less: Consolidated GA revenue | 19.7 | 15.8 |
| Less: Other revenue | 2.3 | 1.8 |
| Adjusted consolidated funeral revenue | $337.0 | $311.3 |
| Consolidated funeral services performed | 64,680 | 60,494 |
| Consolidated average revenue per funeral service | $5,210 | $5,146 |

The following table provides the data necessary to calculate our comparable average revenue per funeral service for the three months ended September 30, 2010 and 2009. We calculate average revenue per funeral service by dividing comparable funeral revenue, excluding comparable GA revenues and certain other revenues to avoid distorting our averages of normal funeral services revenue, by the number of comparable funeral services performed during the period.

*(Dollars in millions,*

|  | Three Months Ended September 30, 2010 except average revenue per funeral service) | 2009 |
| --- | ---: | ---: |
| Comparable funeral revenue | $328.8 | $324.8 |
| Less: Comparable GA revenue | 18.8 | 15.7 |
| Less: Other revenue | 2.3 | 1.8 |
| Adjusted comparable funeral revenue | $307.7 | $307.3 |
| Comparable funeral services performed | 58,676 | 59,632 |
| Comparable average revenue per funeral service | $5,244 | $5,153 |

42

### Funeral Results

#### Funeral Revenue

Our consolidated revenues from funeral operations were $359.0 million in the third quarter of 2010 compared to $328.9 million in the same period of 2009. This increase is primarily due to a 6.9% increase in funeral services performed combined with an increase of 1.2% in the average revenue per funeral. Our comparable funeral revenues increased by $4.0 million, as higher General Agency revenues and higher average revenues per funeral service more than offset a decline in funeral services performed.

#### Funeral Services Performed

Our consolidated funeral services performed increased 6.9% during the third quarter of 2010 compared to the same period in 2009. Our comparable funeral services performed decreased 1.6% during the third quarter of 2010 compared to the same period in 2009, which we believe is consistent with trends experienced by other funeral service providers and industry vendors. Our comparable cremation rate of 41.6% in the third quarter of 2010 increased from 41.0% in the same period of 2009. We continue to expand our cremation memorialization products and services, which have resulted in higher average sales for cremation services.

#### Average Revenue Per Funeral

Our consolidated average revenue per funeral service increased $64, or 1.2%, in the third quarter of 2010 over the same period of 2009. Our comparable average revenue per funeral service increased $91, or 1.8%, per funeral service. Higher average revenue per funeral service and higher general agency revenues more than offset a decline in funeral services performed. Excluding a favorable Canadian currency impact and higher funeral trust fund income, the comparable average revenue per funeral service grew approximately 0.9%.

#### Funeral Gross Profit

Consolidated funeral gross profits increased $0.3 million and the funeral gross margin percentage decreased by 1.7% in the third quarter of 2010 compared to the third quarter of 2009. Comparable funeral gross profits decreased $5.8 million in comparison to the prior year quarter and the gross margin decreased from 21.2% to 19.2%, primarily attributable to lower costs in the prior year that resulted from a $4.5 million reduction in insurance reserves. The remaining decrease in profits is due to higher preneed selling costs and higher field overhead costs associated with our new operating structure in the current period.

### Cemetery Results

#### Cemetery Revenue

Consolidated revenues from our cemetery operations increased $5.9 million, or 3.5%, in the third quarter of 2010 compared to the third quarter of 2009. This increase was primarily a result of increased new construction property and higher merchandise deliveries in the current period, offset by lower than expected sales of developed property.

#### Cemetery Gross Profits

Consolidated cemetery gross profit increased $1.1 million, or 3.4%, and cemetery gross margin percentage remained flat at 19.3% compared to the prior year quarter. This increase was due to higher comparable cemetery revenues being offset by higher expenses in the current quarter compared to the prior year quarter, which included the benefit from a $2.7 million reduction in insurance reserves.

### Other Financial Statement Items

#### General and Administrative Expenses

*General and administrative expenses* were $26.9 million in the third quarter of 2010 compared to $21.0 million in the third quarter of 2009. This $5.9 increase was primarily due to current quarter acquisition and transition expenses of $2.2 million, and an increase in legal costs and employee benefit expenses.

#### (Losses) Gains on Divestitures and Impairment Charges, net

We recognized a $7.3 million net pre-tax loss on divestitures and impairment charges in the third quarter of 2010. This loss is due to the impairment of certain assets and other losses on the dispositions of various businesses in North America. In the third quarter of 2009, we recognized a $2.2 million net pre-tax loss on divestitures and impairment charges. This loss was due primarily to impairment charges on various locations in North America.

#### Weighted Average Shares

The diluted weighted average number of shares outstanding was 247.5 million in the third quarter of 2010, compared to 253.0 million in the third quarter of 2009.

### Results of Operations — Nine Months Ended September 30, 2010 and 2009

### Management Summary

Key highlights in the first nine months of 2010 were as follows:

- Funeral gross profit increased $7.3 million, or 3.3%, due to an increase in funeral case volume and profits from the Keystone and Palm Mortuaries acquisitions partially offset by higher selling costs; and,
- Cemetery gross profit increased $13.9 million, or 17.6%, due to an increase in preneed cemetery property sales and preneed merchandise sales, partially offset by higher selling costs.

### Results of Operations

In the first nine months of 2010, we reported net income attributable to common stockholders of $90.0 million ($.36 per diluted share) compared to net income attributable to common stockholders in the first nine months of 2009 of $88.8 million ($.35 per diluted share). These results were impacted by the following items:

- a net after-tax loss on asset sales of $3.2 million in the first nine months of 2010 and an after-tax loss of $5.3 million in the first nine months of 2009;
- decrease in certain tax reserves of $1.1 million in the first nine months of 2010 as compared to an increase of $1.6 million in the first nine months of 2009;
- an after-tax loss from the early extinguishment of debt of $5.5 million in the first nine months of 2010 and an after-tax gain of $2.4 million in the first nine months of 2009; and,
- after-tax expenses related to our acquisition and integration of Keystone of $6.4 million in the first nine months of 2010.

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### Consolidated Versus Comparable Results

The table below reconciles our consolidated GAAP results to our comparable, or “same store,” results for the nine months ended September 30, 2010 and 2009. We define comparable operations (or same store operations) as those funeral and cemetery locations that were owned for the entire period beginning January 1, 2009 and ending September 30, 2010. The following tables present operating results for funeral and cemetery locations that were owned by us during this period.

*(Dollars in millions)*

| Nine Months Ended September 30, 2010 North America Revenue | Consolidated | Less: Results Associated with Acquisition/ New Construction | Less: Results Associated with Divestitures | Comparable |
| --- | ---: | ---: | ---: | ---: |
| Funeral revenue | $1,100.8 | $67.0 | $8.0 | $1,025.8 |
| Cemetery revenue | 513.6 | 9.1 | 3.0 | 501.5 |
|  | 1,614.4 | 76.1 | 11.0 | 1,527.3 |
| Germany revenue | 4.9 | — | — | 4.9 |
| Total revenue | $1,619.3 | $76.1 | $11.0 | $1,532.2 |
| North America Gross Profits |  |  |  |  |
| Funeral gross profits | $230.8 | $15.8 | $1.0 | $214.0 |
| Cemetery gross profits | 93.1 | 2.0 | (0.2) | 91.3 |
|  | 323.9 | 17.8 | 0.8 | 305.3 |
| Germany gross profits | 0.4 | — | — | 0.4 |
| Total gross profits | $324.3 | $17.8 | $0.8 | $305.7 |

*(Dollars in millions)*

| Nine Months Ended September 30, 2009 North America Revenue | Consolidated | Less: Results Associated with Acquisition/ New Construction | Less: Results Associated with Divestitures | Comparable |
| --- | ---: | ---: | ---: | ---: |
| Funeral revenue | $1,031.8 | $0.4 | $16.0 | $1,015.4 |
| Cemetery revenue | 485.2 | — | 8.7 | 476.5 |
|  | 1,517.0 | 0.4 | 24.7 | 1,491.9 |
| Germany revenue | 4.8 | — | — | 4.8 |
| Total revenue | $1,521.8 | $0.4 | $24.7 | $1,496.7 |
| North America Gross Profits |  |  |  |  |
| Funeral gross profits | $223.7 | $(0.6) | $1.1 | $223.2 |
| Cemetery gross profits | 79.2 | (0.3) | 0.6 | 78.9 |
|  | 302.9 | (0.9) | 1.7 | 302.1 |
| Germany gross profits | 0.2 | — | — | 0.2 |
| Total gross profits | $303.1 | $(0.9) | $1.7 | $302.3 |

The following table provides the data necessary to calculate our consolidated average revenue per funeral service for the nine months ended September 30, 2010 and 2009. We calculate average revenue per funeral service by dividing consolidated funeral revenue, excluding General Agency (GA) revenues and certain other revenues to avoid distorting our averages of normal funeral services revenue, by the number of consolidated funeral services performed during the period.

*(Dollars in millions,*

|  | Nine Months Ended September 30, 2010 except average revenue per funeral service) | 2009 |
| --- | ---: | ---: |
| Consolidated funeral revenue | $1,105.7 | $1,036.6 |
| Less: Consolidated GA revenue | 51.0 | 42.4 |
| Less: Other revenue | 8.6 | 6.0 |
| Adjusted consolidated funeral revenue | $1,046.1 | $988.2 |
| Consolidated funeral services performed | 200,672 | 193,572 |
| Consolidated average revenue per funeral service | $5,213 | $5,105 |

45

The following table provides the data necessary to calculate our comparable average revenue per funeral service for the nine months ended September 30, 2010 and 2009. We calculate average revenue per funeral service by dividing comparable funeral revenue, excluding comparable GA revenues and certain other revenues to avoid distorting our averages of normal funeral services revenue, by the number of comparable funeral services performed during the period.

*(Dollars in millions,*

|  | Nine Months Ended September 30, 2010 except average revenue per funeral service) | 2009 |
| --- | ---: | ---: |
| Comparable funeral revenue | $1,030.7 | $1,020.2 |
| Less: Comparable GA revenue | 49.0 | 42.0 |
| Less: Other revenue | 6.7 | 6.0 |
| Adjusted comparable funeral revenue | $975.0 | $972.2 |
| Comparable funeral services performed | 185,476 | 190,067 |
| Comparable average revenue per funeral service | $5,257 | $5,115 |

### Funeral Results

#### Funeral Revenue

Our consolidated revenues from funeral operations were $1,105.7 million in the first nine months of 2010 compared to $1,036.6 million in the same period of 2009. This increase is primarily due to a $53.9 million increase resulting from the acquisition of Keystone, a $8.7 million increase in GA revenue, and a 3.7% increase in funeral services performed combined with an increase of 2.1% in the average revenue per funeral.

#### Funeral Services Performed

Our consolidated funeral services performed increased 3.7% during the first nine months of 2010 compared to the same period in 2009 due to acquisitions. Our comparable funeral services performed decreased 2.4% during the first nine months of 2010 compared to the same period in 2009, primarily related to soft demand in our relevant markets. We believe the decline in deaths in our comparable markets is consistent with trends experienced by other funeral service providers and industry vendors compared to the third quarter of 2009. Our comparable cremation rate of 41.5% in the first nine months of 2010 increased from 40.8% in the same period of 2009. We continue to expand our cremation memorialization products and services, which have resulted in higher average sales for cremation services.

#### Average Revenue Per Funeral

Our consolidated average revenue per funeral service increased $108, or 2.1%, in the first nine months of 2010 over the same period of 2009. Higher average revenue per funeral service and higher general agency revenues more than offset a decline in funeral services performed. Our comparable average revenue per funeral service increased $142, or 2.8%, per funeral service. Excluding a favorable Canadian currency impact and higher funeral trust fund income, the average comparable revenue per funeral service grew approximately 0.9%.

#### Funeral Gross Profit

Consolidated funeral gross profits increased $7.3 million, or 3.3%, and the funeral gross margin percentage was relatively flat at approximately 21% in the first nine months of 2010 compared to the first nine months of 2009. Comparable funeral gross profits decreased $9.0 million, or 4.0%, primarily reflecting the impact of higher selling compensation from increased preneed funeral sales production.

### Cemetery Results

#### Cemetery Revenue

Consolidated revenues from our cemetery operations increased $28.4 million, or 5.9%, in the first nine months of 2010 compared to the first nine months of 2009. Comparable cemetery revenues increased $25.0 million, or 5.2%, when compared with the same period in 2009. This comparable increase was primarily due to a $19.9 million increase in preneed property sales and merchandise deliveries and a $6.8 million increase in cemetery trust fund income.

#### Cemetery Gross Profits

Consolidated cemetery gross profit increased $13.9 million, or 17.6%, and cemetery gross margin percentage improved to approximately 18.1% from 16.3% due to a significant increase in cemetery property sales and increases in cemetery trust fund income compared to prior year levels. We are also beginning to see some benefit from initiatives to reduce maintenance expenses implemented last year, which helped to offset increased selling costs as a result of higher sales production.

### Other Financial Statement Items

#### General and Administrative Expenses

*General and administrative expenses* were $80.0 million in the first nine months of 2010 compared to $69.2 million in the first nine months of 2009. This $10.8 million increase was primarily due to $8.3 million increase in acquisition and transition expenses and $6.6 million increase in employee related compensation plans expenses and insurance-related expenses, partially offset by a $6.7 million decrease in legal costs and employee benefit expenses.

#### (Losses) Gains on Divestitures and Impairment Charges, net

We recognized a $5.8 million net pre-tax gain on divestitures and impairment charges in the first nine months of 2010. This gain was due to gains incurred on various divestitures, primarily the sale of former SCI properties included in the 22 funeral homes and five cemeteries divested as a result of our agreement with the Federal Trade Commission in conjunction with our recent Keystone acquisition. In the first nine months of 2009, we recognized a $1.3 million net pre-tax loss composed of divestitures and impairment charges of $19.0 million, offset by a $17.7 million release of VAT, social security, and litigation indemnifications related to our former French operations.

#### Other income, net

*Other income, net* increased $1.7 million to $3.1 million in the first nine months of 2010 compared to $1.4 million in the first nine months of 2009. This increase is primarily due to a favorable foreign currency exchange impact from liability settlements between U.S. and Canadian subsidiaries.

#### Weighted Average Shares

The diluted weighted average number of shares outstanding was 252.5 million in the first nine months of 2010, compared to 251.3 million in the first nine months of 2009.

### Critical Accounting Policies

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Our critical accounting policies are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2009.

No other significant changes to our accounting policies have occurred subsequent to December 31, 2009, except as described below within *Recent Accounting Pronouncements and Accounting Changes.*

### Recent Accounting Pronouncements and Accounting Changes

For discussion of recent accounting pronouncements and accounting changes, see Part I, Item 1. Financial Statements, Note 3.

### Cautionary Statement on Forward-Looking Statements

The statements in this Form 10-Q that are not historical facts are forward-looking statements made in reliance on the “safe harbor” protections provided under the Private Securities Litigation Reform Act of 1995. These statements may be accompanied by words such as “believe,” “estimate,” “project,” “expect,” “anticipate,” or “predict,” that convey the uncertainty of future events or outcomes. These statements are based on assumptions that we believe are reasonable; however, many important factors could cause our actual results in the future to differ materially from the forward-looking statements made herein and in any other documents or oral presentations made by us, or on our behalf. Important factors, which could cause actual results to differ materially from those in forward-looking statements include, among others, the following:

- Changes in general economic conditions, both domestically and internationally, impacting financial markets (e.g., marketable security values, access to capital markets, as well as currency and interest rate fluctuations) that could negatively affect us, particularly, but not limited to, levels of trust fund income, interest expense, and negative currency translation effects.
- Changes in operating conditions such as supply disruptions and labor disputes.
- Our inability to achieve the level of cost savings, productivity improvements or earnings growth anticipated by management, whether due to significant increases in energy costs (e.g., electricity, natural gas and fuel oil), costs of other materials, employee-related costs or other factors.
- Our inability to complete acquisitions, divestitures or strategic alliances as planned or to realize expected synergies and strategic benefits.
- The outcomes of pending lawsuits, proceedings, and claims against us and the possibility that insurance coverage is deemed not to apply to these matters or that an insurance carrier is unable to pay any covered amounts to us.
- Allegations regarding compliance with laws, regulations, industry standards, and customs regarding burial procedures and practices.
- The amounts payable by us with respect to our outstanding legal matters exceed our established reserves.
- Amounts that we may be required to replenish into our affiliated funeral and cemetery trust funds in order to meet minimum funding requirements.
- The outcome of pending Internal Revenue Service audits. We maintain accruals for tax liabilities that relate to uncertain tax matters. If these tax matters are unfavorably resolved, we will make any required payments to tax authorities. While such payments would affect our cash flow, we do not believe it would impair our ability to service debt or our overall liquidity. If these tax matters are favorably resolved, the accruals maintained by us will no longer be required, and these amounts will be reversed through the tax provision at the time of resolution.
- Our ability to manage changes in consumer demand and/or pricing for our products and services due to several factors, such as changes in numbers of deaths, cremation rates, competitive pressures, and local economic conditions.
- Changes in domestic and international political and/or regulatory environments in which we operate, including potential changes in tax, accounting, and trusting policies.
- Changes in credit relationships impacting the availability of credit and the general availability of credit in the marketplace.
- Our ability to successfully access surety and insurance markets at a reasonable cost.
- Our ability to successfully leverage our substantial purchasing power with certain of our vendors.
- The effectiveness of our internal control over financial reporting, and our ability to certify the effectiveness of the internal controls and to obtain an unqualified attestation report of our auditors regarding the effectiveness of our internal control over financial reporting.

48

|  |  |
| --- | --- |
| **•** | The possibility that restrictive covenants in our credit agreement and debt securities may prevent us from engaging in certain transactions. |
| **•** | Our ability to buy our common stock under our share repurchase programs, which could be impacted by, among others, restrictive covenants in our bank agreements, unfavorable market conditions, the market price of our common stock, the nature of other investment opportunities presented to us from time to time, and the availability of funds necessary to continue purchasing common stock. |
| **•** | The financial condition of third-party insurance companies that fund our preneed funeral contracts may impact our future revenues. |
| **•** | Declines in overall economic conditions beyond our control could reduce future potential earnings and cash flows and could result in future goodwill impairments. |
| **•** | Our funeral and cemetery trust funds’ investments in equity securities, fixed income securities, and mutual funds may be impacted by market conditions that are beyond our control. |
| **•** | Failure to realize the anticipated benefits and/or successful implementation of the acquisition of Keystone, which could prove to be disruptive and could result in the combined business failing to meet our expectations. |
|  | For further information on these and other risks and uncertainties, see our Securities and Exchange Commission filings, including our 2009 Annual Report on Form 10-K. Copies of this document as well as other SEC filings can be obtained from our website at www.sci-corp.com. We assume no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by us, whether as a result of new information, future events or otherwise. |

## Market risk

As filed, 667 characters.

### Marketable Equity and Debt Securities — Price Risk

In connection with our preneed funeral operations and preneed cemetery merchandise and service sales, the related funeral and cemetery trust funds own investments in equity and debt securities and mutual funds, which are sensitive to current market prices.

Cost and market values as of September 30, 2010 are presented in Part I, Item 1. Financial Statements and Notes 4, 5, and 6 of this Form 10-Q. Also, see Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, *Financial Conditions, Liquidity and Capital Resources*, for discussion of volatility in financial markets.

## Controls and procedures

As filed, 1,581 characters.

### Disclosure Controls and Procedures

As of September 30, 2010, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the Securities and Exchange Commission (“SEC”) reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time period specified by the SEC’s rules and forms and that such information is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. The officers have concluded that our disclosure controls and procedures were effective as of September 30, 2010 and that the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with US GAAP.

### Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 290 characters.

There have been no material changes in our Risk Factors as set forth in Item 1A of our Form 10-K for the fiscal year ended December 31, 2009, except that the Risk Factor relating to failure to consummate the acquisition of Keystone is no longer applicable because we have acquired Keystone.

Filed Oct 28, 2010.
Source: SEC EDGAR, the filing index for accession 0000950123-10-097447. Last ingested by Listed: Nov 6, 2026, 13:24 ET. No prices; not investment advice.