Service Corporation International (NYSE:SCI) Q1 2020 Earnings Conference Call April 30, 2020 9:00 AM ET
Debbie Young - Director, IR
Thomas Ryan - Chairman, President & CEO
Eric Tanzberger - SVP & CFO
Conference Call Participants
Scott Schneeberger - Oppenheimer
A.J. Rice - Crédit Suisse
John Ransom - Raymond James & Associates
Duncan Brown - Wells Fargo Securities
Good morning, and welcome to the First Quarter 2020 Earnings Conference Call. [Operator Instructions]. Please note, this event is being recorded.
I would now like to turn the conference over to SCI Management. Please go ahead.
Good morning. This is Debbie Young, Director of Investor Relations at SCI. We'd like to thank everyone for joining us today. As usual, I'll quickly go over the safe harbor language, and then we'll begin with prepared remarks from Tom and Eric.
Any comments made by our management team today that state our plans, beliefs, expectations or projections for the future are forward-looking statements that could cause actual results to differ materially from those contemplated in such statements. These risks and uncertainties include, but are not limited to, those factors identified in our earnings release, and in our filings with the SEC that are available on our website.
During this call, we may discuss certain non-GAAP financial measures such as adjusted EPS, adjusted operating cash flow and free cash flow. A reconciliation of these non-GAAP measures to the appropriate GAAP measures is provided on our website under the Investors webcast and Events section and also in our earnings press release that was issued yesterday.
With that, I will now turn the call over to Tom Ryan, SCI's Chairman and CEO.
Thank you, Debbie. Hello, everyone, and thank you for joining us on the call this morning. Obviously, these are unprecedented times, and we're sending our best wishes to you and your families. Our thoughts remain with those affected across the world by this pandemic.
Given the unique circumstances, we have modified the order of our remarks in an effort to anticipate and address topics that are important to you in the most constructive way. I will begin by addressing the strength of our current financial position, followed by a discussion of current business trends, then I will touch upon ways we are continuing to help our families celebrate, heal and find closure in a COVID-19 world. Finally, I will touch upon the business results for the first quarter.
Allocating capital wisely has been central to our company's core strategy for a long time. Key to that strategy, stealing a phrase from Jamie Dimon, is our commitment to maintain a fortress balance sheet. With that, we can and will weather this storm. As of today, we have over $750 million of liquidity, no significant debt maturities until May of 2024 and based on historical experience, the ability to generate significant free cash flow even in an economic downturn. Our fortress balance sheet and strong underlying fundamentals enable us to truly maintain financial flexibility, which is advantageous during a crisis like this. This strength allows us to continue investing in our incredible people and businesses, in technology and other digital strategies, cemetery inventory development and other business development strategies, such as acquisitions and new builds. Additionally, we intend to maintain our current dividend policy, and we'll execute on other opportunities, which capture additional value for our stakeholders.
Next, to my SCI family that I know is listening. I know we are still in the midst of this crisis and it's far from over. But I just want to say how proud I am of the heroic efforts many of you have made to serve our client families during these hectic times and the dedication and perseverance you continue to display. Our teams in hot zones around the country, none more severe than New York and New Jersey, have been extraordinarily busy dealing with an unprecedented number of families that needed our help. Our teams have gone above and beyond. In the New York, New Jersey area over the last 3 weeks, we have brought in over 100 funeral service professionals who volunteered from around the country to assist our local teams in taking care of our families. Additionally, as the cemeteries and crematories have been overwhelmed, we brought in 23 additional refrigeration units, leveraging storage capacity to help relieve an overwhelmed system.
All across our network, our courageous teams have selflessly put the needs of others first, marshaled resources and taken action in the best interest of our community. Thank you for your tremendous efforts and know that our #1 goal of the company is to keep you safe and support you as you care for others.
Now shifting to a discussion of current business trends. The COVID-19 pandemic has had a significant effect on our associates as well as our operations. I will begin the business discussion, sounding like John Ransom telling the story about the hole in one he had while playing by himself. Through February and the first part of March, we had a lot of great momentum in the business. Funeral case volume was up. Average revenue per case was growing by almost 4%, and the cremation mix change was rather muted. Pre-need sales for both funeral and cemetery were both growing impressively. Then we all know it happened, COVID-19 and the ripple effects. There are 2, what we believe to be temporary, negative trends, which are currently having an impact on our earnings. The first is preneed cemetery property sales, and the second is the funeral sales average.
For preneed cemetery sales, one of the most effective lead sources with seminars that occurred predominantly in restaurants. This would lead to an appointment that would occur typically in one's home or touring one of our beautiful parks. Once markets were inundated with shelter in place orders, coupled with the new social distancing norms, our ability to conduct business was impaired. However, our creative sales and marketing teams did not stand still. They found practical ways to overcome social distancing obstacles by leveraging technology, creating an on demand, prerecorded preplanning seminar and pivoting our focus to exponentially grow digital organically.
Pre-COVID, our daily appointments were running about 3,000 a day. They dropped to 1,000 a day early in the crisis. And today, are back up over 2,000 a day and are trending upward. Our sales counselors are now conducting close to 40% of our sales presentations virtually using technology. For the month of April, pre-need cemetery sales are trending down about 35% to 40%. But I have every confidence that as parts of the country begin to reopen as social distancing requirements are relaxed, and as we get more effective at utilizing the technology, we will be back in a big way.
The other temporary negative trend is the funeral sales average. For the month of April, it's down about 11% compared to the prior year. This, too, has been affected by the shelter in place orders around the country that place rigorous restrictions on gathering sizes and in some hotspots required direct burial or cremation. A sizable percentage of our families have been unable to select the use of our facilities for visitations and funerals, certain equipment, and even floral arrangements and catering. While our families have been incredibly understanding, they continue to demonstrate to us their desire for celebration, remembrance and closure. For example, over 1,200 families have booked future memorial services to be conducted at a later day. Until we get back to normal, we have over 1,000 locations offering Facebook Live to allow extended family and friends to participate virtually in the ceremony alongside the immediate family. Again, as parts of the country begin to reopen and social distancing requirements relax, we believe our families will once again return to more robust service offerings, which assists in the grieving, healing and closure process.
Now I'd like to share some examples of creative actions being taken by some of my teammates. For those families who did not defer services until a later date, we're finding creative ways to help them honor their loved one and assisting in the grieving and closure process. We have utilized Facebook Live for virtual participation in services, virtual visitors can leave messages in an online guest book than we attach to balloons or flowers that are present in the room with our family. We have performed drive-through visitations at the funeral location or church so friends and family can participate from their cars, offering condolences at a safe distance. We have organized precessions through neighborhood as friends line the streets, holding up signs of support and remembrance as the precession passes by. Many locations have also extended visitation and service hours to allow family and friends to come in limited groups to pay their respects to the family. After each group departed, our teams will disinfect the public area before allowing the next group of visitors waiting in their cars to enter and participate in the visitation. Even in times as scary as these, our courageous professionals understand the importance of the grieving and healing process and are finding creative ways to facilitate this process in a safe environment.
Now for a brief overview of the first quarter. Diluted earnings per share, excluding special items, declined in the first quarter by $0.04 per share to $0.43, as our powerful momentum through the first 70 or so days of the quarter was abruptly impacted by the ripple effects of the COVID-19 pandemic. Our comparable funeral revenues for the quarter increased by about $8 million. This increase was primarily driven by higher core revenue of $9 million. Our 1.5% increase in core funeral services performed was enhanced by a 1% growth in our organic funeral sales average.
Increased cases from COVID-19 in the latter days of March for the most part, offset the decline in our average revenue per case in the final weeks of the month, as certain customers were limited in accessing our facilities and services due to restrictions in gathering sizes instituted around the U.S. and Canada.
Our cremation mix shift was a modest 30 basis points for the first 2 months and grew to 260 basis points for March, resulting in a 110 basis point shift for the quarter. Comparable funeral gross profit decreased about $3 million to $103 million for the quarter. Comparable cemetery revenues decreased about $7 million for the quarter. The largest decrease came from recognized preneed property revenue decline of almost $13 million. Remember that the end of March is usually when we experienced a surge in preneed sales production related to the celebration of Ching Ming. So our comparable preneed cemetery sales production declined by almost $23 million for the quarter or just over 10%. This had the most dampening effect on our earnings per share for the quarter as cemetery preneed sales production through February was up about 11% and March's production declined by 35%. Therefore, comparable cemetery profits declined by $11 million.
Margins in both segments were impacted by normal inflationary increases in salaries, including higher health insurance premiums, as well as an increase in doubtful account reserves, given the current economic condition.
In closing, I would again like to send my heartfelt appreciation out to our team of heroes. Words cannot describe the feeling of pride I have when I think about what we're doing out there. Every facet of our team is going above and beyond in keeping our teammates, our families and our community safe.
From an operating performance perspective, we have been privileged to serve over 5,400 COVID-19 deceased and their families today. Thankfully, the mortality trend seem to be slow. However, we do believe approximately 20% to 25% of our COVID-19-related cases have come from nursing homes and retirement communities. History tells that some of these cases could be a pull forward of deceased from the back half of the year. While we're experiencing challenging trends in funeral average and preneed cemetery sales, I would expect us to begin to migrate back towards pre-COVID-19 levels in the very near future.
Just know your SCI team will be working hard to protect our most precious asset, our people. We will be working hard to improve financial results and utilizing our fortress balance sheet and liquidity to invest in future value creation opportunities for the benefit of our stakeholders.
Thank you. And now I'll turn the call over to Eric.
Thanks, Tom, and good morning, everybody. First, I want to say that I hope everybody is safe and well during these times that can only be described as what we'd say unprecedented. And similar to Tom, given these unique circumstances, my comments today are going to be a little bit different in terms of their order, and we'll be mostly focused on our current and future financial position and how we will navigate successfully through the impact of this pandemic. I think the most important thing I hope to leave you with today is that our company has a very strong balance sheet, and we are well positioned to weather this storm. In any crisis, I think, adequate liquidity and limited near-term debt maturities are key. And as have you heard us say before, this lesson was evident during the economic downturn in '08 and '09. And since that time, we have deliberately and consistently maintained robust liquidity and managed our debt maturity profile to have limited maturities in the near term. In short, we made significant efforts, which we believe will prepare our company for this storm.
So with that backdrop, let's talk about the current state in more detail and specifically about our current financial position. So as of today, we have liquidity of about $750 million available to us, consists of approximately $175 million of cash on hand, plus $575 million of availability on our long-term bank credit facility. We believe this $750 million is sufficient and well above our projections of liquidity needed in 2020, even in this unique environment. Additionally, other than a small series of notes due in November of next year, we're also very well positioned with a clear middebt maturity schedule having no significant maturities until May of 2024. At March 31, our leverage was 3.88x, slightly higher than the 3.78x where we stood at the end of 2019, but also well within our targeted range of net debt-to-EBITDA of 3.5x to 4x.
So let's shift now forward-looking in terms of our expectations. So currently, our financial performance for 2020 is difficult to predict with a lot of precision. We recognize the temporary impact of COVID-19 and how it will continue to pressure both our funeral and cemetery segments in the near term. We believe that we will also have the ability to temporarily reduce costs and other expenses to alleviate some of this revenue pressure. And as we just mentioned, our resulting earnings and EBITDA will be reduced to some degree from our original 2020 expectations. But from a cash flow perspective, our current expectations are much more optimistic than the expected impact on our EBITDA, especially as it relates to our free cash flow.
Let me give you some color on our assumptions surrounding these cash flows. First, the majority of the revenue headwinds we anticipate in the near-term relates to preneed cemetery property sales. From a cash flow perspective though, as about 70% of these contracts are installment sales paid over a 3 to 5-year term, we expect a significant amount of cash inflows from sales that were recognized as revenue in previous periods. In other words, our working capital will be positively impacted during this period in 2020 as these cash receipts continue to be collected.
Secondly, our expectations for cash taxes will be lower in 2020 than originally anticipated. As provided by the CARES Act, our 2020 cash flow benefit from the deferral of certain payroll taxes to future years. Furthermore, our expectations for federal and state income taxes will also be lower now in 2020. All of these facts, along with the underlying stability of our cash flows in the funeral and cemetery business, give us the confidence and flexibility to be opportunistic in deploying capital for the remainder of the year. We now anticipate spending about $180 million on maintenance and cemetery development CapEx. This includes $75 million on cemetery development projects to ensure there is ample cemetery property inventory for our sales force to continue making preneed cemetery sales. We also expect to spend the remaining $105 million on field maintenance capital expenditures as well as continued investments in technology. These technology investments allow us to continue innovating both our customer and noncustomer-facing support functions to further leverage our scale by improving how we interact with our customers through the use of technology. We recognize that this unprecedented crisis could be adversely impacting many independent owners right now in our industry.
With that backdrop, we will continue to seek acquisition opportunities during 2020, which have traditionally been the highest and best use of our capital. We also expect to continue deploying capital towards new funeral homes and expansion opportunities to increase our footprint into desirable markets. And lastly, and perhaps most importantly, to some of our shareholders, the confidence we have described here today in our cash flow stream confirms our expectation that we will maintain our current dividend policy for the foreseeable future.
So I'd also want to shift to impacts of some of the trust funds, which has been a lot of the questions we've been receiving. So financial market volatility will undoubtedly put pressure on the market value of our approximately $4.5 billion of trust funds that support our future revenues. Ultimately, as the underlying contracts mature, the market value of the trust funds will negatively affect our funeral sales average and our cemetery merchandise and service revenues. Both of these effects can put pressure on future cash flows and revenue growth rates, which we experienced in the last economic downturn again in '08, '09. However, it is important to reiterate that this financial market impact does not have a significant effect on our EBITDA or cash flows in the near term.
So let me explain this muted impact to our cash flows. Given the 10- to 12-year average life of the customer contracts, only about 8% of the contracts in the trust backlog mature in any given year. So because of this, the impact on the reduction in market value, which is allocated to each individual contract is reflected in our cash flows over a 12-year period or about 8% per year.
Now I'd also like to shift and talk about the first quarter. So for the quarter, we reported operating cash flow of $180 million, which was a $5 million decline from the prior year and below our expectations. Our cash flows trended similar to our operating performance with strong cash flows in the first 2 months of the quarter that ultimately softened in March. Positives for the quarter were a reduction of $15 million in cash interest payments due to the timing of strategic financing transactions we did last year. And the stability and growth in our atneed and preneed cash receipts. Both of these helped to offset the declines in cash earnings that occurred in the month of March, increases in incentive compensation that were paid quarter-over-quarter and other working capital uses.
Maintenance and cemetery development CapEx totaled $44 million for the quarter, which is generally in line with the prior year, but a little lower than our original expectations. All of this above resulted in free cash flow for the quarter of about $135 million, which compares to $146 million in the first quarter of last year.
So then finally, I'd like to conclude my remarks by reiterating that we take very seriously the responsibilities that we have as management to all of our stakeholders. I believe we are taking the appropriate and necessary actions to sustain our financial health in this ever-changing environment. Because of the foundation that we have built, strong balance sheet, adequate liquidity, a favorable debt maturity schedule, we will weather this storm, and we will be okay. We'll continue to be prudent with our capital deployment. We will continue to invest so that we are not just open for business now, but we'll invest with the future in mind, so that we may emerge from this crisis stronger and ready to grow again. Lastly, and again, certainly not least, I want to say how very proud I am of the extraordinary efforts underway across our company to serve our client families and the way our teams have supported each other. I especially want to convey a very special thank you to our frontline associates for their countless hours, and dedication who are sacrificing so much to help families during this extremely difficult time. You are truly heroes to us and to the communities that you serve.
So with that -- operator that concludes our prepared remarks. And we now like to go ahead and turn the call back over to you for questions.
[Operator Instructions]. Our first question comes from Scott Schneeberger of Oppenheimer.
Can you hear me?
Now we can, Scott.
Sorry, it's the mute button. The -- I guess I wanted to start off on -- the start to the quarter was very strong. Now just back in '19, there had been issues with preselling. So could you address perhaps some of the West Coast markets? And I assume those improved and what you were seeing? And then more importantly, kind of fast-forwarding, once we can come out of this current environment, can you get back to the strength you were seeing in January and February with preneed sales and harder sales?
Scott, this is Tom. Thanks for the question. I think as you talk about the West Coast, if you look at the performance through the first 2 months, we were extremely proud of the turnaround there and saw really fabulous results in those markets. We were excited about Ching Ming. And what really happened, and again, you can give California some credit for this. Is they were one of the first states to shut down. And so as you got to March, we saw a real decline, as you would anticipate, in the ability to sell and particularly around Ching Ming, it became very challenging. Kind of the same thing in Vancouver. So I would tell you that the pre-COVID trends were very good. We felt like we were really excited about Ching Ming, and we had a lot of great momentum. So I truly believe that we will get back to that level.
I think the thing we just have to keep in mind is we are currently impacted by this, let's call it, social distancing to wrap everything into it. And as economies begin to open back up, we've got Texas opening up tomorrow. You've got Georgia already opened, South Carolina. I think that is going to be a real impetus to begin to see our sales jump back up towards those normalized levels. I think there -- so then when we get to that point, you right now have a recession. And again, we've lived through recessions. We know how it works. And based on our experience, people tend to still spend on funerals. They don't really lie down. It's an emotional spend. They tend to not shop on price. People tend to get back to buying preneed property. And the harder sales are kind of the high-end sales. If you got a bad economy or the market is not good, people aren't as confident to buy at the high end. So I think those are the things that we'll watch and monitor. But we'll get back because social distancing will begin to relax. And also, again, I mentioned this in my prepared remarks, I'm excited about this virtual interaction. We're up to 40% of the sales force today, and we just get better every day at it. I mean, think about it, we had to stand that up, train people, the consumers are more educated. I mean how I'm a Zoom, WebEx expert now, give me a burger, I mean you'd be impressed.
I'm sure I would be. The -- would do one soon talent show, sure. The -- I guess if we could pivot over, it's kind of a similar question, but cremation, I think you said 30 basis point average in January and February. That's very low versus the trend we saw in 2019. And then, of course, I think you had said that, that spiked 260 basis points in March to average 110 for the quarter. Just curious what we should expect going forward. I imagine a pretty elevated level based on the current dynamic for the second quarter. But how would you envision that progressing? And just kind of speak also to that low January and February number text?
Sure. If you recall last year, we talked about the fact that we had accelerated, for lack of a better way of saying it, the cremation percentage in our business. And that really has a lot to do with some pricing changes that we had made, and we're going to have -- be anniversaried out as we came into this period. So we expected kind of at the end of last year and the beginning of this year that we would see more normalized favorable year-over-year comparisons because we feel like we captured more cremation share based upon some of those price changes. Remember, they were kind of entry point pricing on the cremation customer specifically. So we had told you guys look for normalization and normalization probably looks somewhere in the 120 to 150 basis points. So 30 basis points was surprising to me, I will say, 260 in March is not surprising. Some of that, quite honestly, is just being forced upon the consumer, I would -- is the way to put it. Because of some of these emergency situations, because of concerns around the spread of COVID-19, I think you've seen a temporary spike. We saw a spike kind of continue into April at essentially the same type of rate. My expectation is as social distancing norms change back, as people go back to an ability to have celebrations, to have ability to have gathering that, that rate should normalize back into what we believe is a normalized rate of 120 to 150 basis points.
Great. And just one more quickie to wrap up from me, and I'll pass it along. Could you just give an update on the funeral rule and your perspective of where that process is at?
Scott, it's Eric. So not much has happened related to the funeral rule other than the fact that because of this crisis, the FCC has extended the comment period. And so it was originally mid-April, where you had to respond related to your comments. Now it's going to be mid-June. I assume that enough is going on where we're coming out of this pandemic a little bit to some degree, that I don't really anticipate it going beyond June 15 in terms of our response. Our response will again be consistent with what I have described before. And that relates to really laying the facts on the table in terms of the high, high levels of customer satisfaction that exists in the industry.
We think the funeral rule is a good thing. But in terms of expansion more, it's hard to see the linear connected dots to that. Obviously, what people are asking us about is the online presence. And as we've described to you before, that's part of our strategy to continue to move online. You've seen some of our locations with these starting at prices. We're now into the several hundreds of those locations that have that. It's interesting because as you tier the market based on our funeral homes being tiered, our client families have different priorities and different things. And so having to strategize and figure that out tactically as one of the processes that we're going through in terms of being methodical and trying to understand but that's a place that we will go to and we'll continue to go to. But we think we need to do it aligned with how the customer wants to receive that information. And all of those comments, again, will be put out there in writing for the public to see because these comments will be public for everybody, not just us, but in terms of when we submit ours, probably sometime in June.
Our next question comes from A.J. Rice of Credit Suisse.
Glad to hear everyone's staying safe. Just real quick on that cremation spike first at the end of the quarter. Could we attribute some of that maybe to the fact that the pickup in deaths has been in the Northeast and on the West Coast, where you already have pretty high cremation rate naturally? Is there any chance that, that's accounting for some of that?
I think it definitely could be a portion, A.J. Some of the New York markets where we are actually its pretty high burial rates, you'd be correct in California and other places. But I think the bigger issue is, like I said before, like even in markets where you don't have a big COVID outbreak, it's the social distancing rule. It's the application of 10 people, I can't have a service and I think that is having an impact on the rate as well. But we have every -- again, we get feedback from people all the time and consumers and I got to tell you, customers have been incredibly kind and polite. But there's a lot of people that are frustrated that they can't have that closure. And again, it's -- we've got 1,200 people that have booked memorial services just over the last 4 weeks or so to be done at a future day. So it says a lot about, I think, where the family's minds are.
I mean one of the things in the latter part of the quarter are -- for the quarter that was somewhat surprising was the negative leverage, decremental margin, I guess, if I look at cemeteries, revenues are down $7 million year-to-year, but your gross profit was down $11 million. Is that just because you couldn't do any mitigating cost offset in that short period of time? I know you referenced fixed cost growth and higher bad debt reserves. But as we think about second quarter where you potentially have a full impact of this, how do we think about what the decremental margin should be? I know some degree of that also in the funeral side as well?
Yes, A.J., I think the way -- you're thinking about it right. There really was -- it's hard -- it would be hard to see in the numbers and the actions that we took on the cost side in March. You definitely would see some of those actions showing up in the April results. There was also just some really kind of quarter-over-quarter weird stuff like, I think Eric mentioned, we had some incentive comp accruals that were a little bit higher than last year's first quarter. The year may be very similar, it's just kind of timing of accruals. So nothing to be concerned within the cost structure and no real impact you can see yet, probably seeing a little bit of cost creep from our ability to procure things to protect our people. We spent a lot of time and effort and money in obtaining N95 mask and obtaining body pouches and gloves and obtaining refrigeration units to ship over. So you got a little bit of that probably showing up in March and in April. But for the most part, the cost savings initiatives should begin to show up in the second quarter.
Okay. Is there any way to quantify those cost savings initiatives? What you think you might be able to take out of the cost structure?
I mean, all of these are really kind of -- the way to think about it, we are not -- we have not, to date, had any layoffs or anything of the sorts. We've done some things around hiring freezes, salaries. We've obviously stopped traveling and entertaining during this period. So it's stuff like that and just being smart about the way we think about our cemeteries and maybe some things we can do to manage the maintenance a little more effectively during these lower traffic times. So it's more on the edge, A.J., I wouldn't think of it as a big cut in the cost structure because we really want to have -- come out of the gates with this thing in a powerful way. So we're postured to do so.
Okay. On the preneed cemetery sale drop, I understand why it's happening, and we obviously had the precedent of 2008, 2009, where you had a couple of quarters where it was depressed and then rebound. And back then, it rebounded very quickly. Really sort of made it up in a couple of quarters of excess sales. It sounds like this time, I don't know if it's -- I'm wondering because of the lingering effects of the social distancing it sounds like you expect it to come back, but maybe at a more gradual pace. Just give some thoughts about how to think about the rebound in those preneed sales. As we come out the other end, I guess, there's also the economic outlook could be a question a bit, although less sensitive population that's buying that, its retirement population. But anyway, any thoughts on how you may come out of that and the pacing of it versus something we saw in 2008, 2009?
Yes. I think you're hitting on the right factors, A.J. The first one, social distancing is hard to define the time line on. I think we're seeing, again, the economy is beginning to rev back up. You're seeing some of the rules being relaxed and I think it's our belief that over the coming months, that's going to begin to normalize with a lot better kind of social hygiene practices in place. But that people will want and desire to gather again, people will want to interact and transact. So we feel pretty good. I think it will take a little bit of time for people to get more comfortable, but we should be back in place. And as I think about the economic, and again, I know the cost. But if you think about '08 and '09, there were such a lingering effect because it was the financial system itself that it just -- it went on for quite some period of time. I'm a little more hopeful on this one that while the unemployment is unprecedented, that we're about to reemploy a significant portion of those people over the coming months. And I realize everybody is doing a little bit of a pause, but my hope is that maybe people come out of it a little quicker if we're reemployed. We didn't see reemployment happen that quickly in '08 and '09. So again, just my opinion, but I'm a little more hopeful on that front.
Okay. Maybe just one last question. When you think about 2021, coming out of this, obviously, depressed first half this year, maybe a little bit elevated, hopefully, return in the back half of the year. Do you think -- how should we think about 2021 relative to this year? Do we have a new base that we grow the 8% to 12% off of? Do you think there's an ability -- I mean, certainly, the first half, I think you probably have to normalize that somehow. But any way to think about how quickly we get back to normal growth rate or a normal baseline?
I think, first of all, it's obviously impacted by what happens with COVID, right? I mean, I can't predict that. But I think if you told me COVID becomes less of a factor later in the year, my personal opinion is, we should rebound pretty strongly. I mean, I don't see any reason other than the lingering effects of the economics that you would trend back towards to where you were. That the funeral average that people are going to start doing services again, and it gets back to a normal place. So the only two negative things I can think of when I try to apply my pre-COVID screen to this is, clearly, we may have accelerated some depth in 2020 that may not show up in 2021.
So I could definitely paint a picture that volumes in 2021 aren't -- is quite as strong, but you're not talking about a significant amount. And then I think the question is preneed cemetery sales and probably more acutely, high-end preneed cemetery sales. Is that customer coming back in a robust way? And again, I think that's more a function of, quite honestly, the stock market and things like that because those consumers, as long as they're feeling good, they're going to step up and pay. And if they're not feeling good, they won't. So I am very optimistic about 2021 and believe that we are not growing off a normalized growth rate off 2020. We should bounce back substantially. I don't know, as you get back to levels of '19 right away, but getting up there anyway.
Our next question comes from John Ransom of Raymond James.
So for the record, I've never had a hole in one. It's the final goal.
I get some bad information now.
So it's kind of disappointing that I haven't, but that's all right. It's a goal to live for. So my question is, there's stories in other industries where this perverse incentive not to work is having an effect on labor supply. Are you seeing any of that?
Really not, John. It's surprising, but I guess not surprising in the sense of, it's such a calling for people that are in this business that I think our folks when they feel like they're needed most, they really step up. So has there been a little fear? Absolutely. That has happened, and that's normal. But I think as we talk through it and we're identified as essential employees, and have heard us refer to as first responders, I've heard us referred to as last responders, but we couldn't be more proud. So really not, have not seen anything like that.
And are you -- I know there's some strains in New York with the industry. Are you seeing anything to call out in New York from just kind of the capacity buckling or just not being able to handle what's being thrown at you there?
Well, John, it's been really nice about our team. And again, this has been coordinated, obviously, by our Chief Operating Officer, Jay and his team and Bill O'Brien in New York. We've been in constant communications. And so our teams there have gone above and beyond, but there were points where we were really starting to stretch. And the good news is we had a team headed up by Jay that kind of anticipated the potential impact. And so we've had refrigeration units available there to ensure that our families are taken care of as the system is kind of backed up. We've had over 100 people brought in from across the country from, I think, 25 states that have volunteered to help out our teams in New York and New Jersey that have been there. So we have actually been able to handle the capacity as a company. I will say what we've seen, and again, it's just another sign of the advantage of scale. We've had some competitors, which we've tried to help with, they're at capacity and they couldn't take calls anymore, and we were there to help them out and help those families out. We've had stories of people, I think we got a call from somebody that's 2.5 hours away from one of our locations and said, "Can you please help me? I can't get anybody to help my mom." And we took care of them. So incredible stories. Couldn't be more proud of our team. And I think this is an example of where scale is a true advantage and our teams in New York and New Jersey have just been incredible.
Well, congrats on getting on wartime footing so expeditiously. It's not easy to move all that mass. So congrats on that. And then just the last one for me, and this is really an impossible question I realize, but if you had to put your swag on it, the cremation mix. How much of that is just out of necessity or either a lockdown order or I just can't pull this together? It's New York and I can't pull -- I can't even think about playing them together. And how much of this you think will linger in terms of just consumer elasticity in a weak economy?
I don't think very much, John. I think, again, to think about a rate that's, call it, 150 basis points. And if we're running 260 during this crisis, I really think 80 to 100 basis points is this. And I don't know that it's going to have that much of a lingering effect. I almost think it goes the other way, and I hear this from our sales team and from our locations. This gets people to kind of ponder what's important in life. It's -- I think this is maybe a positive impact where people say, somebody told me I couldn't mourn or gather, if I am, I'm going to mourn and gather. And so I just don't think that's going to have a big lingering effect. Obviously, it will impact the second quarter because we're pretty busy in April and May. But I think as we get to the back half of the year, I wouldn't anticipate much of that. John, try not to work so hard and get out there and maybe you can get a hole in on one, one day.
And our last question comes from Duncan Brown of Wells Fargo.
Going back to funeral ASP. Sounds -- I think you said it was down 11% in April. Is that inclusive of cremation mix changes? Or is that just sort of an apples-to-apples comparison?
Yes, that would be inclusive of cremation mix change.
Okay, great. And then on the 1,200 services that are going be done at a future date, I guess I was curious, are those at ASP levels that would have been sort of pre-COVID at ASP levels? Or do they have any impacts on the pricing side?
Yes. They would be free and they're not recognized yet, obviously, because we can't record those until the services are performed.
I guess what I'm trying to get is the go-forward pricing, you're still seeing, the ability to drive pricing in the -- for the contracts that are coming down the pipe. Is that the right way to think about it?
That's correct. Yes. So people are -- we've not altered our pricing. And so they're paying what they're paying pre-COVID.
Great. I should probably be able to do the math on this, but are you willing to give a trust fund dollar impact in the quarter?
I think the way that works is it's a 30-day deferral because it gets allocated the month before. So there really isn't much of an impact from the month of March. We anticipate an impact in April. Eric, do you have a speculation on how that would...
Well, what I'd say is, first of all, some good news. In the press release, the trust funds were disclosed at the end of the quarter to be down about 16%. They're now down about 10% to 11% as we close the month at April. So that's significantly different. Now we started the year in the MST funds, Duncan, at about a $300 million unrealized gain. And that 10% type decrease would give us somewhere in the ballpark, and again, I'll use round, round numbers of about $150 million loss. So about a $450 million swing. So do the math, what I put in my conference call remarks, multiply that by 8%, you're somewhere in the 30s in terms of -- and part of that $30 million, $35 million, part of that would be funeral, in effect the 22%, 20% of the contracts that are mature trust contracts that affect that ASP and the other part of it will affect merchandise and services on the cemetery side as well.
But again, that's kind of -- that kind of assumes no recovery, right? That $30 million, $35 million number would have been a bigger number at March 31. And as we get through this pandemic and the markets rebound further, again, I'm going to point you to '08, '09 to see this effect. We don't anticipate that type of revenue headwind over the course of the year. Everything I just described to you, by the way, would be an annual number as well. But it should be much better than that. And think of that absent any recovery, all else being equal, would be kind of the worst-case scenario, which with '08, '09 being a proxy for that, that's not going to happen. It will be better than that, Duncan.
Perfect. I appreciate that. And then last question for me. So if you think about a preneed contract that gets realized, and let's say that, that contract required a large funeral procession, I don't know, 200 people in the funeral room, et cetera, and that can't be done now. How is that being realized? Are you able to still collect all the money that was in backlog there? Or do you have to have a payback for that since not the full amount of services we're able to provide -- to be able to be provided?
I think all those are kind of managed on a local basis because when you're signing up for a funeral service, a lot of times, it isn't necessarily the capacity of how many people is for funeral service. So if we're able to perform a more limited service, I'd say most of the time that's going to meet the expectations of the consumer. We also have some things that we call graveside services. So that would be a transition. So if you had a full-service and we want to transition to, let's say, a graveside service with family only that would be a lower price point that we would work with the customer, again, to refund monies if that's appropriate or if we couldn't provide a service, then obviously, we would refund those monies. And so we're seeing some of that. But again, I think it's really kind of worked out at the local level for the expectations with the family.
This concludes our question-and-answer session. I would now like to turn the conference back over to SCI management for any closing remarks.
We want to thank everybody for being on the call today. Thank you, everybody. From SCI, we appreciate you all that you're doing, and we'll speak to everybody again in July. Take care.
The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.