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Service Corporation International Message Board

  • Just give me the facts! I've heard all the shorts
    opinions, the Chapter 11 and Mr. Gann but no one has
    challenged this post(#5100).
    With all due respect I
    would love to hear what you think Mr. Gann regarding
    this post. I can believe in further devaluation to
    $3-4 because of all the talk and sometimes rumors do
    move the market but ... I also strongly believe it
    will comeback just as fast as it declined. Good post
    mgoodson2.

    POST #5100
    If the notes for $150MM constitute the
    significant principal paydown due in 2000, then this stock is
    sorely depressed and undervalued. Based on the
    statements for the period ending 09/30/99, the company had
    already made enough money to cover the $150MM and service
    all its debt without even considering the money that
    would have been available had the company not paid any
    dividends during the year. In fact, it leaves about $93MM
    available to absorb the higher interest expense that the
    company incurs due to debt downgrades. Again, this
    analysis does not even consider the dividend cash
    flow.

    One could reasonably argue that it makes more sense
    to buy the debt about right now than it does to buy
    the stock.

    At this point, I can't figure much
    risk of bankruptcy.

    I'm probably wasting my
    time explaining because those who are capable of
    understanding this stuff have undoubtedly already figured this
    out for themselves. If by chance, however, someone
    with a great deal of money happens past this post then
    I suppose (s)he might appreciate something
    meaningful and worth consideration. Heck, when you're down
    50% as I am, you start marketing the stock
    yourself.

    As of 09/3099, EBIT was $418,402M while depreciation
    and amortization was $185,092M. Add the two and you
    have $593,504M available cash with which to pay down
    debt. According to the 09/30/99 10Q, current maturities
    of principal was $88,718M. Add the $150MM notes to
    that and you end up with about $239MM in principal
    pmts for 2000. My projected interest expense for the
    full year of 1999 was $231,484M. If you add the $30MM
    marginal increase in interest expense (per 11/23/99 press
    release) to $231.5M, you end up projecting interest
    expense of $261.5.

    $593.5MM minus $239MM minus
    $261.5MM still leaves $93MM for additional debt payments
    or heck, at this price, banks permitting, stock
    repurchases. And again, this does not consider the $90MM+ that
    would have been allocated to dividends.

    Another
    important point- of the entire $312MM restructuring and
    non-recurring charge only $22.83MM will be paid out in cash per
    year over the next six years (per 1/12/99 press
    release). It's for the reasons expressed that I think the
    present market value and debt ratings are absurd and
    saliently reflect just how poor the stock and bond analysts
    of today's markets are.



    --------------------------------------------------------------------------------

    Posted as a reply to: Msg 1 by YahooFinance

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    • As noted in post 5108, there was an error in post
      5100. 09/30/99 EBIT was $408,402M, not $418,402.


      To recap, depreciation and amortization was
      $185,092M. EBITDA totaled $593,504M; this is available cash
      with which to pay down debt.

      The conclusion of
      post 5100 was that there was more than enough cash
      flow from operations available to pay down debt. What
      struck me as particularly cogent was that the available
      cash flow was based on 09/30/99 results.

      This
      is where my argument gets a bit scary, so scary in
      fact that I'm beginning to doubt myself. You see,
      SCI's cash flow from operations has grown from 12/31/95
      to 12/31/98 at a compounded annual growth rate of
      24.34%. And guess what? It's still growing. The total
      cash flow from operations for the year ended 12/31/98
      was $329.6MM. For the period ended 09/30/99, it had
      already reached ~$327MM, a 28% increase over 09/30/98
      results of $256MM.

      So how much do you figure will
      be added during the final quarter? Another $50MM? Or
      maybe $75MM? Well, the point is that there will be even
      more cash to increase EBITDA and pay down
      debt.

      So what scares me?

      The Moody's
      downgrade.

      According to the article dated 1/24/00, Moody's made the
      cuts "based on the weakness of (SCI's) cash flow
      generation relative to the company's high level of debt, as
      well as significant upcoming debt repayment
      obligations that the company must meet over the medium term."
      Pretty scary, huh?

      First, the company's cash flow
      generation is weak relative to the company's high level of
      debt. I suppose one would reasonably inquire as to what
      amount would make the company's cash flow generation
      strong relative to its high level of debt? Second, on
      what basis did you choose this amount since it's
      clearly not based on the company's ability to service the
      outstanding debt? Third, what constitutes significant debt
      repayment obligations? And finally, what's the medium
      term?

      Seems to me, Moody's analysts should have access to
      plenty more information than I do, yet there's this
      downgrade. On the other hand, S&P chose not to follow suit.
      I'd like to think that S&P has the better analysts,
      at least I hope it does.

    • Isn't that part of the SCI Air Force...I guess Delta and American don't fly into Houston

    • The G-5 is one of SRV's many airplanes, except this one cost a bunch...around $30-40 million, I think...maybe low but the G stands for Gulfstream

    • I know this sounds stupid, but want the hell is a G-5?

    • Gann is a winner, don't confuse him with facts.
      Chapter 11 will be unable to go beyond the first
      paragraph.

      Their minds are made up and no
      information to the contrary will changed them.

      I too
      found 5100 interesting. May he be proven right.

    • Am in the process of trying to analyze this
      issue. I have considerable holdings but my choices of
      late leave a lot to be desired, at least at this time.
      Probably an unfair question, but wondering if a lot of the
      positive posters are extremely long. I totally understand
      this, if it is the case, as I am in that posture on
      several other stocks. My main concern is the Chapter 11
      issue. I know people have used this vehicle for
      possitive gains but for me personally it is the kiss of
      death. Sorry for being so wordy but I would truly like
      your opinion as to the future of SRV. Thanks.

      • 2 Replies to ronhhumpy
      • I purchased a very small position of 500 shares @
        $18 thinking I was at a double bottom. I had a chance
        to move out at $21 and though tempted, decided to
        hold on. I've been watching from a distance for the
        last few months waiting for and opportunity to buy
        some more. I must say my tech stocks have received the
        bulk of my attention in recent months.
        I
        personally don't think we are in danger of Chapter 11 but I
        do think that there is a chance of further erosion
        to $4. I think I'll wait until they report before I
        buy again, even if I have to pay a premium.
        I
        also have to tell you that instead of buying more SRV
        I'm thinking of buying CSV instead. I think they were
        pulled down by LWN and SRV and unfairly so. I think
        their debt and fundamentals are sound and as a result
        they will probably turn around quicker. Then I'll jump
        from them and go back to SRV. In any case poster #5100
        made some good points and it would be great if someone
        challenged his numbers.
        The more opinions the better.
        Then I'll decide from what I hear and what I see
        what's best for me.

      • I can tell you all you want to know about the
        debt. I have done the homework- and I have the facts.
        Ask a ? Get an answer. NO BS...just the facts. No
        liquidity problem, just a bunch of rumors. What do you want
        to know? THE BLIND TIGER HAS SPOKEN!

 
SCI
21.65-0.46(-2.08%)4:03 PMEST