Debbie Young - Director, IR
Tom Ryan - President and CEO
Eric Tanzberger - CFO, SVP and Treasurer
A.J. Rice - UBS
Clint Fendley - Davenport
Bob Willoughby - Bank of America
Duncan Brown - Wells Fargo
Service Corporation International (SCI) Q4 2012 Earnings Call February 13, 2013 10:00 AM ET
Welcome to the Q4 2012 Service Corporation International Earnings Conference Call. My name is Loren, 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 SCI management. Please go ahead.
This is Debbie Young, Director of Investor Relations for SCI. On behalf of the company I want to welcome you to our call today as we discuss our fourth quarter results and also talk a little bit about our outlook for 2013.
Before I turn the call over to Tom, let me remind you that the comments made by our management 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 of the SEC that are available on our website.
Today's comment may also include certain non-GAAP measurements such as normalized EPS, adjusted operating cash flow, free cash flow and free cash flow per share. Reconciliations of these measurements to be appropriate measures calculated in accordance with GAAP is provided on our website, and in our press release and 8-K that was filed yesterday.
Now let me turn the call over to Tom Ryan, SCI’s President and CEO.
Thanks Debbie and thanks everybody for being on the call today. Let me begin my comments by giving some overall perspective on 2012 before getting into details of the quarter in our 2013 outlook. We finished the year on very solid footing and overall I am very proud of what our teams accomplished in 2012. Normalized earnings per share grew an impressive 23% to $0.80 from the $0.65 that we've posted in the prior year and exceeded the high end of our guidance. As we anticipated, our comparable Funeral segment for the year was challenging the growth with continued sale volumes in the first three quarters in 2012, that we were pleased to be able to increase gross profits by more than 4% with an 80 basis point improvement in margin. Throughout the year, our operating teams have done an extraordinary job of improving efficiency and managing costs. And most importantly, our Funeral segment continued to generate significant cash flows.
On the symmetry side, we once again hitted out the ball hard and demonstrated that we are very effective in our pre needs sales efforts. Our comparable symmetry revenues were up more than 6% for the year and gross profits were up an impressive 19% including the 240 basis point improvement in margin.
And finally, we generated $272 million of free cash flow. We returned close to 250 million to our shareholders through a combination of share repurchases and dividend additionally we directed more than $70 million to strategic acquisitions in growth projects during the year.
As we indicated to you on our last call, the fourth quarter was very active for us in the acquisition arena. We closed on four deals adding 11 funeral homes to our net worth. These businesses have combined revenues of approximately $20 million and we welcome them to our SCI family.
These successes we achieved in 2012 could not have been possible without each and every one of our 21,000 associates. To them, I want to say that I am grateful for your dedication and commitment and I sincerely appreciate all that you do to make us a better company and to deliver service excellence to our client families every day.
Now shifting to an overview of the quarter, we posted outstanding results in the fourth quarter with earnings exceeding the high-end of our guidance ranges discussed in October. Normalized earnings per share increased $0.03 or nearly 16% to $0.22 versus $0.19 in the prior year quarter. This was accomplished by generating strong preneed cemetery sales performance and increased funeral revenues on higher volume and average.
Now for an overview of funeral operations for the quarter, comparable funeral revenues increased nearly $18 million or 4.8% and was ahead of our expectations. Let’s talk a little bit about the key drivers. We were very pleased to see a 1.5% increase in same store funeral volumes during the quarter.
Keep in mind, we had an easy comparable as the fourth quarter 2011 was down over 5%. This quarter was for the most part just to return to a more normalize level. For the full year 2012, same store volumes were down 2% which was in line with our expectation.
Complementing the volume growth, we also saw an increase in the average sale with 2.3% isolating the currency and trust fund impacts, the average grew at 1.3%. This was accomplished despite 50 basis point increase in the mix of cremation.
For the full year, our average was up 2.2% in line with what we’ve modeled. This was accomplished by contributions from our new reception and event offerings Refresh Dignity Packages as well as price modifications which offset a 60 basis point increase in the cremation mix for the year.
Lastly in the quarter, general latency revenue increased $1.7 million on a 2% growth in preneed funeral sales production. From a profit perspective, comparable funeral profits increased 6% and the margin grew 30 basis points during the quarter. The strong revenue increase was partially offset by higher incentive based compensation payments, higher healthcare costs and higher selling expenses related to preneed funeral sales production.
Now for an overview of cemetery operation. Comparable cemetery revenue increased $21.6 million or 11.3% quarter over quarter and also exceeded our expectations. I must tell you, I'm running out of adjectives to describe the success we've had. Our sales team continues to amaze. Comparable preneed sales production grew a strong 14% in the quarter and greatly exceeded our expectations.
For the full year, preneed cemetery sales production grew a little over 10%. This is just great execution, a big thank you to our sales team and sales leadership for continuing to deliver exceptional results.
Cemetery trust fund income also increased $6 million during the quarter due to the positive impact from the financial markets an increased trust fund balances. The cemetery revenue growth generated profits growth of $13.7 million or 31.5% for the quarter and margins increased 410 basis points, 26.8%, which is what you'd expect on an incremental revenue increase we generated. So we are very pleased with our cemetery results.
Now shifting to our outlook for 2013. We're in full swing for what we anticipate to be another strong year in 2013. As indicated in our press release, we're increasing our guidance for normalized earnings per share that we provided to you last quarter of $0.79 to $0.87 per share to a new range of $0.80 to $0.90 per share. At the midpoint our 2013 earnings per share guidance represents about a 6% growth from 2012. However, if you remove the foreign currency benefits from intercompany notes of a penny that we generated in 2012, the normalized growth will be closer to 8% at the midpoint.
Just to reiterate our broad assumptions included in our 2013 outlook, we expect growth in funeral revenues will continue to be a challenge, we're continuing to model funeral volumes down in the low single digit percentage range even though January was very busy with the impact of the flu season. We would anticipate the tapering off of activity as the year progresses. We'll continue our strategy to focus on growing our preneed backlog and we expect preneed funeral sales to grow in the low mid-single digit range.
We expect the funeral average to continue to grow in the low single digit range as well absent currency and trust fund impact. Speaking to average, for presentation purposes starting in the first quarter of 2013, Neptune will be included in both the 2012 and 2013 comparable amounts.
For the year-over-year change we’ll not be materially different than what you're used to seeing, it will only impact the absolute sales average dollars to gross margin percentage in cremation rate. If you need any help on that obviously, you can get in touch with Debbie and she will talk you through it.
On the cemetery side, revenues will continue to grow lead by strong preneed sales production, the double digit growth we’ve achieved in the last two years have been outstanding. We think this will be hard to replicate going forward. Our models for 2013 suggest growth in the mid high single percentage range versus the 10% and 12% increases we've experienced in 2011 and again in 2012.
From a margin perspective, we'll continue to be diligent in managing costs but we’ll face some headwinds from an anticipated increase in personnel cost specifically related the higher healthcare, insurance expenses, and salaries as well as increase in preneed selling costs on anticipated higher preneed sales.
In conclusion, we could not be more pleased with the trajectory of the results we continue to deliver and we look forward to successful 2013.
As a reminder, our strategy remains the same. Demographics dictate that our industry will experience a natural growth trajectory over the coming years. We will capture more than our share as we expand our network through acquisitions and continue to grow our preneed backlog. Meanwhile we’ll generate substantial cash flow that we intend to use to capitalize on value enhancing opportunities which include returning capital to you through measured share repurchases and a growing dividend.
This concludes my prepared comments and I’ll now turn the call over to Eric.
Good morning everybody, I’m going to start this morning, I’m going to walk you through the details of our cash flow for the quarter and the year and how we deployed that free cash flow to grow the company and also to enhance shareholder value. And now I’m going to finish with a few comments about our cash flow outlook as we shift forth towards 2013.
So as Tom mentioned, we are very proud of the way we finished 2012 on a really high note delivering strong earnings which exceeded our expectations. We also generated more than $270 million of free cash flow in 2012.
We deploy this cash throughout the year in a disciplined manner primarily between accretive acquisitions and also returning cash value to our shareholders. The free cash flow generated in 2012 represents a $1.24 of free cash flow per diluted share and its growth of 4.2% over 2011's free cash flow per share which was a $1.19. And just to remind you, this is despite slightly higher cash taxes paid in 2012 versus 2011.
We are anticipating cash flow to grow in 2013 and again this is despite a further increase and expected cash tax payments that I'll address in a moment. We have a long history of strong free cash flow despite a variety of economic and other challenges in the current years. But over the last eight years, our free cash flow per diluted share has grown at a compounded annual growth rate of about 9.5%. We strongly believe this is attractive from an investment standpoint and again especially in today's tough economic environment.
Now, let's shift to the results of the fourth quarter and start with operating cash flow which in the quarter was $92 million compared to $97 million in the prior year quarter. So, slightly below the prior year and slightly below our internal expectations. There are really two items that affected our cash flow that were different than our internal quarter to date expectations. First, preneed cemetery sales were up a strong 14% in the quarter which is well ahead of our expectations. And again, we were extremely pleased to see this high quality performance from our sales force.
As I have been describing though for the past couple of quarters, most of our growth in our preneed cemetery sales are increasingly made on an installment basis with average payment terms of around five years. So while we continue to see an increase in cemetery revenues, the associated cash will be received in future periods resulting in a use of working capital during the quarter of 2012.
Also, described in previous calls at the end of the third quarter, we rolled out a new purchase order and accounts payable system. While we said before, we are very excited about this new and improved system and expect it to generate significant synergies as we gain greater visibility into company expenditures. But we did experience more cash outflows during the fourth quarter as we caught up from the initial implementation of this system from the third quarter of 2012. Now other components of cash flow, let's start with maintenance CapEx and cemetery development CapEx, which again are the two components that we consider our recurring CapEx, and this for the quarter came in at about $33.5 million. When you deduct these recurring capital spending items, from our cash flow from operations, we calculate our free cash flow of the fourth quarter to be $58.5 million.
For the full year 2012 cash flow from operations was just over $380 million, and when you deduct the recurring CapEx of a $109 million for the full year, that results in a free cash flow for 2012, of just over $271 million and as I mentioned before, this represents a $1.24 per diluted share or a growth of 4% year over year.
So let's talk about how we deploy this free cash flow. During the quarter we continue to deliver on our commitment to return excess cash to shareholders and we're actually very active in the acquisition market. So first in the fourth quarter, we repurchased 3.1 million shares for a total investment of just over $42 million. For the full year of 2012, we bought back 15.3 million shares for a total investment of about $185 million. This represents a reduction of about 7% of the shares that were outstanding at the beginning of the year. And as of today we currently have approximately $190 million of repurchased authorization remaining and our current shares outstanding have been reduced now to just over $211 million shares outstanding.
As Tom mentioned earlier today, we also had a very busy acquisition quarter, closing on four acquisitions for a total investment of about $46 million. We funded the acquisition from our cash balances in December. This brings our total acquisition investment for the full year to more than 65 million in 2012. We are very excited about these new additions and their anticipated positive and accretive contribution to both earnings and cash flow as we look forward in 2013. Lastly, I wanted to mention that during the quarter we did refinance our 2014 notes effectively extended this maturity to 2020 and opportunistically replacing seven and [7.38%] debt with 4.5% debt.
So now let’s look forward to 2013. In 2013 we expect to continue to generate attractive operating cash flow and we remain comfortable with the guidance we provided in October which was 375 million to 425 million of operating cash flow.
At the midpoint, this implies growth over 2012 of nearly $20 million and that $20 million growth is accomplished again despite the headwind of an expected increase in cash taxes and again we expect our current cash taxes in 2013 to be in a range of $35 million to $45 million which was up from just under 17 million of current cash taxes paid during 2012.
Our recurring CapEx guidance remains unchanged as well at 105 million to 115 million which results in anticipated free cash flow for the full year 2013 to range from $260 million to $320 million.
On a per share basis, this equates to $1.20 to $1.48 range for 2013 and that’s used in a fully deluded weighted average share count of 216 million shares which is what we’re currently modeling for 2013.
At the midpoint of this range, it represents a growth of more than 8% over our 2012 free cash flow per share but if you normalized the cash tax increase that I just described to you, it's actually more like a 17% growth and free cash flow per share.
So, we enter 2013 both financially strong with a solid balance sheet and great liquidity. With our recent refinancing we continue to have a debt maturity profile with no meaningful debt maturities until April 2015.
This profile and favorable leverage metrics position us well to continue to explore value enhancing opportunities for our shareholders in 2013, so our first priority is to continue to invest in opportunities to grow the company for the future. You can expect this in 2013 that we’ll target acquisitions again at the appropriate returns. We have a healthier pipeline of profitable growth opportunities now, than what we've seen in a long time. We will also continue to invest in preneed initiatives which is not a very capital intensive initiative as we described in the past. Our backlog of preneed revenues which will be recognized sometime in the future is now $7.4 billion which adds to the stability and predictability of both our earnings and our cash flow streams. And of course consistent with our track record, to the extent we have excess cash remaining and conditions are favorable. We will continue to invest and share repurchases.
So, In conclusion we look forward to another successful year in 2013, with anticipated growth of approximately 8% and both normalized free cash flow and normalized earnings per diluted share at the midpoints of our 2013 guidance.
So, with that operator that includes mine and Tom's remarks, we now like to turn the call open for questions please.
(Operator Instructions) And our first question comes from A.J. Rice from UBS
A.J. Rice - UBS
A couple questions if I could ask. On the flurry of deals at the end of the quarter there, can you give us a little more flavor? Maybe you mentioned it, Eric, and I missed it, but what was the revenues added from those deals in aggregate if you have that, and also are these traditional mom and pop type facilities? Can you give us any flavor for what the businesses look like?
Sure A.J. this is Tom and as Eric mentioned there's really forward deals that closes all great businesses. At the eleven Funeral homes and they generated on a performer basis probably just over $20 million. And there are family on businesses there in one of them Virginia, there's others that are in Texas and the other's on the East coast in Kentucky in New York so we're very-very pleased with again the management teams of the businesses that we acquired and we really look forward to been able to partner with him and generate great returns on these businesses so very excited to get them all in a demographic places where we want to be.
A.J. Rice - UBS
My sense of it in chatting in the fourth quarter with you guys was that there was sort of a push among some of these to get done by year-end, but in hearing your comments today, it sounds like the pipeline, even though the whole capital gain year-end stuff is done, there is still a pretty good backlog going into the new year as well?
Really appears to be (inaudible), I think it's a different level, anybody that was going to get it done and the next six to nine months probably hurry to get it done by the end of the year. But the pipelines robust, there's probably not a lot of activity that's going to close in the first quarter, but we're very active in getting out and talking with people and reviewing financial statements of, yes we see a robust pipeline as we look forward into 2013 and even into '14.
A.J. Rice - UBS
Again, I was trying to write fast. If I missed something you said on this legal defense number of $6.6 million, forgive me. Can you give us a little more background on that? Is this a new level or was there a run rate of this that you've been incurring that you just haven't been breaking out and now you are breaking it out? Just a little more background on what's going on with that.
Well, it's, we incurred it in the quarter and it's primarily related to disputed legal defense costs and also some minor legal settlements they're all bundled together. We have ongoing legal fees and settlements AJ as you know and in particular instance, we're dealing with our insurance providers for recovery of legal fees paid, we tend to have a deductible and generally once you reach a deductible insurance companies provide coverage for those fees, and this is a case where that's not occurring. I'm hesitant because lawyers are dealing with this and I really don't want to get into the specifics of any case or settlement because again the settlements are confidential to protect the parties and legal counsel's advised us not to disclose specific legal fees incurred on matters so I want to leave it at general, I tell you that it's a accumulative number of a number of cases somewhat, some are related but no all one case.
But AJ just to add to that, what really differentiated this is the fact their dispute, we believe they're insurable cost and they're being disputed, so we broke it out in what we hope to see in G&A, and what we hope to see is a credit come through when we receive payment as we work through this with insurance companies.
A.J. Rice - UBS
So the dispute is not with the lawyers over the amount but the dispute is with the insurance companies as to whether --
Want to make it clear (inaudible) that this would separate this as a dispute with our insurance companies is what we meant to say that we hope will be reimbursed.
A.J. Rice - UBS
Okay. And then maybe a last one for now. You made a comment that the flow didn't really -- I think you said didn't really impact too much in the fourth quarter but has had some impact in the first quarter. I know in previous times where we've had a really robust flu season that there is actually tended to be a little bit of a ripple effect that goes on for a few quarters. It doesn't sound you're, in terms of -- I don't know whether it affects the immune systems of elderly people or what it does, but it seems like last time we had a big flu season there was -- it carried over for a couple quarters. You are not baking anything like that into your guidance, doesn't sound like. Any comment about previous experiences?
Yes (inaudible) first of all I’ll defer to you the expert on flu so I would ask you the question but I’ll tell you we did see solid results in the fourth quarter on a comfortable growth basis. We don’t believe there is much of an impact of flu at all we definitely are seeing a flu impact in January results and you’re right I think again there has been different trends of history (inaudible) and all worse thing is from our modeling perspective we’re not going to get out of ahead of ourselves we’re going to maintain what we thought and again there could be some (inaudible) of course but we do think that while you may see a robust first quarter you could begin to see that taking case volume at a Q2 and Q3 and Q4, so that’s the way we’re looking at now but we’re not in the predication business or so.
Thank you and our next question comes from Clint Fendley from Davenport. Please go ahead.
Clint Fendley - Davenport
First question on the preneed cemetery, another quarter here of very impressive result and I’m just wondering how much of this reflects the possibly a change in your sales efforts versus just very possibly strong demographic trends that you’ll be getting to sell into and like to maybe a just get a better understanding of how sustainable these results might be over a longer period of time.
What you’ve seen in the last few years again in 2011 we grew preneed cemetery about 10%, 12 in 2012, we’re modeling you guys to high single digits because again as the base gets bigger, it just gets harder and harder but I will tell you this I do believe that the demographic impact is having an influence. As we’ve mentioned before I believe the average preneed cemetery sales customer is 62 to 63 years old. We know there's more and more of those folks every day because the baby boomers now is at the top of the range is going to be 67 this year. So, larger pool of people to sell to, it's clearly having an impact. I also would have to say and give credit to our sales and operations leadership and what they've been able to accomplish in developing sales managers and developing sales folks and generating leads.
But lastly also I think which you saw the push in the fourth quarter and I think there is a little more impetus here. And that is, if you remember in the third quarter we finished a lot of big projects. Remember the call we recognize in revenue related to projects that have been constructive. It’s my opinion that when you've got constructed inventory that people can see, they're more excited about it, you're getting more people out there to see the property itself. And so a lot of time when you see these kind of surge in construction, you'll get a little bit of wind at your back as it relates to generating sales growth. So it's hard to bifurcate how much is what, but say all three of those things are factored in the why it's growing and it's our belief that we can continue to grow it for all those reasons. It's just gets harder because as the amount gets bigger, it's harder to move it.
Clint Fendley - Davenport
I wonder also just switching over to Neptune. I wander if you had possibly a general update there. How you're feeling about that business as we look forward to the coming year?
Yes, as I mentioned before when we first partnered with Neptune, prior little bit of growing pains coming out of the gate. So I'll tell you over the last few quarters, we've been very excited with the performance and one of the things that I think was difficult out of the gate is we're growing faster than we thought. We're opening new offices and when you open new offices, there is going to be challenges in transition and opening up and getting effectiveness on the ground. We’re seeing that effectiveness in the new offices and we're ahead of pro forma as it relates to getting out there. And I am also pleased because of the way that we've been able to continue to grow it. We anticipate in 2013 that we'll probably open another additional eight offices in new cities and so the momentum is solid and exciting as we think about Neptune.
Clint Fendley - Davenport
Last question here, I understand your comments earlier on, just the volumes and not wanting to get ahead of yourselves. Just wondered if you had an expectation of the strong volumes that you've seen in January would likely carry over to February, in to February or do you think all we've really seen is maybe just an earlier than usual flu season here.
Well I think it's more severe, no doubt about it, but I do think we saw, if you track the flu index, it's beginning to trickle back down as you get into early February, but I think it's too early to tell. So it's still probably having an impact but surely not the impact we saw in January. It was about as big an impact as I've ever seen in my business career.
And our next question comes from Bob Willoughby from Bank of America, please go ahead.
Bob Willoughby - Bank of America
Hey, Tom or Eric, you've touched on a lot of the positives on the fourth quarter, a lot of trends that went your way, I guess the guidance boost, a couple of pennies on the high end of the range, the driver there, it's not the debt rate it doesn't seem like you have much in share repurchases in the numbers, is it simply just an administrative expense line item, or the debt refinance (inaudible) that's getting us to that higher range, have you assumed any more aggressive assumption elsewhere?
No, I think the big driver is cemetery production, at the end of the day Bob, we had such a good fourth quarter and so now you go back and say can we grow at the same percentage rate as we thought we were before and we're saying yes, and now you're growing off that bigger base and that's really what's the trajectory that's taken the number up. Other than that I think everything's pretty much what we thought it was. Eric would you.
I would agree, I mean you're basically taking the $0.02 that we exceeded our internal expectations during the quarter and pushing it through into the guidance, as Tom's been saying you can grow off of that then, and then holding the cash flow neutral with the guidance we gave because of the working capital movement towards installment sales that we’ve been talking about. So same relationship really as we talked to you about in October, Bob.
Bob Willoughby - Bank of America
And you said that in 216 million shares outstanding this year that reflects really no activity from the fourth quarter close, is that, right?
211 million shares outstanding Bob, 216 is the diluted number that we were modeling with and answer to your question is yes, because what I said in the remarks was that we used our cash balance to go ahead and do the acquisitions during the month of December, and so we're in January, we've been building that cash balance back up is the way I would say it. But once we get up there, then it would be the standard strategy that described the four what you'd say acquisitions to grow the company at the appropriate returns and share repurchases will be in that mix consistent with our track record.
Bob Willoughby - Bank of America
Okay and you referenced to $65 million deal spend, the flurry of activity in fourth quarter. Is that a reasonable expectation for the year another 65 million or would it be somewhat down from that based on the higher fourth quarter.
I’d say it’s reasonable but I mean it’s really just depend it’s hard to predict when they come in the size of what comes but I’d say that’s within the realm our expectation.
(Operator Instructions). And our next question comes from Duncan Brown from Wells Fargo. Please go ahead.
Duncan Brown - Wells Fargo
I guess you’re talking about more preneed cemetery being done on installment basis; I guess some of the cash is still to come. How do you all think about the risk of customers not paying future installments? Is there any sort of metric that you can provide what percentages don’t pay the full amount after you’re already signed the contract?
We look at the cancelation reserve and that’s a great point Duncan, because I want to make the point very clear that we look at the quality of the sales when you see a mix shift towards installment and we’re very clearly continuing to see good quality sales and what you ultimately look for is a cancellation rate or a change in your cancellation rate and we’ve looked at that during 2012 as we’ve seen this shift and we have not seen a deterioration in that cancellation rate which is greatness and that’s why again we continue to drive community service sales the way we’re doing profitable as they are.
And Duncan just I think with that the part of your question, we’ve seen you know paid in full type contract go and I’m estimating here but let’s say 40% of our contracts a few year ago were paid all upfront, now that’s shifting down into 30s and may high 20s, so more people financing over longer term, we’re seeing people shift from three and four paper into fiver paper and a lot of that’s a function of the consumer. As we’re growing think about the cemetery in the radius around it you're beginning to sell the people that are further and further away and Eric referred to community service think about that as outside sales versus inside sales. So as you're getting to people that, what we are really thinking about cemetery property but now I think it’s a good idea to more likely to finance. And Eric is right we’re looking at this. We’re very cognizant of collectability but compared to other industries think about it, if you don’t pay the cemetery property, it's not too hard to repossess, we're sitting right there. It's not a car we got to send somebody to get. So, I think from a risk perspective, we feel very comfortable about where we're ahead, what we're doing and the cash will follow.
Duncan Brown - Wells Fargo
So, for that that you do cancel, let`s say they cancel your three, are there any back payments that you would owe them from your one and two or is it just a straight cancellation?
In the property area that we're describing it will be a straight cancellation. When you get into merchandize and service now you're getting Duncan into trusting roles and its by state and such so get a little bit more complex but the answer to what we've been talking about was preneed cemetery property, so the answer is, it would just be a straight cancellation.
Duncan Brown - Wells Fargo
Highlighted to sort of onetime items, the 4 million and the 6.6 related to legal cost and I know you can't talk in too much detail on the legal front, but I guess how should we think about those items in 2013, I mean are those unique to Q4. I know you had a little bit on the outsource provider and accounting in Q3. Is that primarily behind us or what should we think about those one times?
The vision cost related to the movement of the accounting providers as well as the payable and purchase order system are for the most part vastly behind us. In terms of legal fees, we'll always be the size of our company have legal fees going forward. This again was a little bit unusual In terms of the way we're disputing it with related to insurance companies.
And I think the way to think about the legal fees like Eric said, there is some possibility we're going to get reimbursed fees. And the other way to think about as we think about little cost to defend some of these cases that are bring segregated out. I think the trend would say, it's not going to be as much as you saw this year.
Duncan Brown - Wells Fargo
Last quarter I think you had asked about the possibilities of looking at it on a nontraditional reed, like you said, you were forming your opinion and obviously looking for anything for shareholder value. Can you provide any update on that front for us?
What we concluded is we would have to spilt the company in two companies. We'll have to do a property company and an operating company. It would be a complex transaction potentially taxable, potentially not taxable, just depends on how you could pull it off. But ultimately, we think the value is there today with the company that we have specifically the interactions on our combination facilities, which is 57% of our cemeteries or that like have a funeral home on top of it and they're tremendous synergies for us and tremendous one stop shopping synergies that the customer has as well and we also have as all know an organic play coming down the road whether that's five years, ten years or whatever you think it is in terms of growth from the baby boomer generation effecting this industry and of course you have further consolidation in this industry as we've proven to you in the fourth quarter and we'll continue through acquisitions. So just lot of things that are going our way right now, which in our opinion outweigh the fact that we believe and our advisors believe, our experts believe that we'd have to split the company in two to transition over to the restructure. Not saying never but not in the near future is the way I describe it.
I will now turn the call back to SCI management for closing remarks.
Thank you again everyone for being on the call today, we look forward to talking to you in April with our first quarter results, have great day.
And thank you ladies and gentlemen, this concludes today's conference, thank you for participating, you may now disconnect.
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