Arbor Announces Second Quarter Results

TSX ABO.A and ABO.B

TORONTO, June 7, 2012 /CNW/ - Arbor Memorial Services Inc. announced today its results for the 13 and 26 weeks ended April 29, 2012 and May 1, 2011.

	13 weeks ended		26 weeks ended
(In thousands of dollars)	2012	2011^(1)	2012	2011^(1)
Revenue	70,476	66,218	135,179	129,049
Operating earnings	6,679	7,934	11,749	13,663
Net earnings	5,094	5,652	8,736	9,605
Basic and diluted earnings per share ($)	0.50	0.53	0.86	0.91
^(1) Restated for effects of adoption of International Financial Reporting Standards.

Revenue for the second quarter of 2012 increased by $4.3 million or 6.4% over 2011.  Sales increased by $3.8 million or 6.3% and investment and other income increased by $0.5 million or 7.4%.  Sales in the cemetery division increased by $3.4 million or 12.9% due primarily to higher sales of pre-need interment rights of $3.8 million or 47.0% and an increase in sales of other products and services of $0.5 million or 3.4%, which were partially offset by lower deliveries of pre-need bronze memorials of $0.9 million or 19.9%.  Sales in the funeral division increased by $0.4 million or 1.1% due to higher sales from new operations of $0.5 million and a higher average sale per service for existing operations of 1.8%.  These positive factors were partially offset by a reduction in the number of services at existing operations of 1.5% and lower sales from sold funeral branch operations of $0.2 million.  Existing funeral home sales increased by $0.1 million or 0.3%.  Investment and other income increased by $0.5 million or 7.4% due to higher funeral annuity fee income of $0.6 million or 31.3%.  The higher annuity fee income resulted from an increase in pre-need contracts written under the annuity program of $3.6 million or 35.2%.

Operating earnings decreased by $1.3 million or 15.8% from 2011 to $6.7 million.  The decrease was the result of lower operating earnings before other income (expenses) in the cemetery division of $1.4 million or 41.9% and lower other income (expenses) of $0.4 million or 85.1%, which were partially offset by higher operating earnings before other income (expenses) in the funeral division of $0.1 million or 1.5% and a lower loss before other income (expenses) in the corporate division of $0.4 million or 8.1%.  Cemetery operating earnings were negatively affected by higher obtaining costs and related employee benefits of $1.7 million or 26.5% resulting from higher pre-need contracts written of $8.0 million or 43.2%, a higher cost of sales percentage of 2.7 percentage points that resulted in a negative variance of $0.8 million and an increase in administrative costs of $0.5 million or 30.8%.  The higher cost of sales percentage was mainly due to a higher proportion of pre-need interment right sales.  The increase in cemetery administrative costs was due to an internal restructuring, higher marketing costs for a national promotion and timing of meeting expenses.

Net earnings decreased by $0.6 million or 9.9% from 2011 to $5.1 million.  The reduction in net earnings was the result of a $0.9 million or 11.5% decline in operating earnings before other income (expenses) and lower other income (expenses) of $0.4 million or 85.1%, which were partially offset by the positive impact of lower income taxes of $0.6 million or 33.4% and lower interest expense of $0.1 million or 16.5%.  Excluding other income (expenses), net earnings decreased by $0.2 million or 3.9%.  Other income (expenses) included acquisition transaction costs and gain on disposal of assets.

Revenue for the first 26 weeks of 2012 increased by $6.1 million or 4.8% from 2011.  Sales in the cemetery division increased by $4.0 million or 7.6% due to higher sales of pre-need interment rights of $4.6 million or 28.4%, higher sales of at-need interment rights of $0.4 million or 7.9% and an increase in the sale of other products and services of $0.4 million or 1.6%, which were partially offset by lower sales of pre-need bronze memorials of $1.4 million or 20.8%.  Sales in the funeral division increased by $1.9 million or 2.9% due to a higher average sale per service for existing operations of 2.8% and higher sales from new operations of $1.8 million, which were partially offset by a decrease in the number of services performed by existing operations of 1.9%.  Investment and other income increased by $0.3 million or 2.4% over 2011 due mainly to an increase of $0.6 million or 17.3% in funeral annuity fee income, which was partially offset by declines in other investment and other income categories.  The increase in annuity fee income was related to an improvement in pre-need contracts written under the annuity program of $4.1 million or 22.8%.

Operating earnings decreased by $1.9 million or 14.0% from 2011 to $11.7 million.  The decrease was the result of lower operating earnings before other income (expenses) in the cemetery division of $1.8 million or 38.4%, lower other income (expenses) of $0.3 million or 72.2% and a decline in operating earnings before other income (expenses) in the funeral division of $0.1 million or 0.7%, which were partially offset by the positive impact of a lower loss before other income (expenses) in the corporate division of $0.4 million or 4.0%.  Cemetery operating earnings were negatively affected by higher obtaining costs and related employee benefits of $1.9 million or 15.4% resulting from higher pre-need contracts written of $8.7 million or 24.0%, a higher cost of sales percentage of 1.1 percentage points that resulted in a negative variance of $0.6 million, higher administrative costs of $0.6 million or 21.1% and higher expenses of new reception centres of $0.4 million or 66.6%.  The higher cost of sales percentage was mainly due to a higher proportion of pre-need interment right sales.  The increase in administrative costs was due to an internal restructuring and higher marketing costs for a national promotion.  The lower loss before other income (expenses) in the corporate division was mainly due to lower termination costs and lower incentive compensation.

Net earnings decreased by $0.9 million or 9.0% from 2011 to $8.7 million.  The reduction in net earnings was the result of a $1.6 million or 12.0% decline in operating earnings before other income (expenses) and lower other income (expenses) of $0.3 million or 72.2%, which were partially offset by the positive impact of lower income taxes of $1.0 million or 29.5%.  Excluding other income (expenses), net earnings decreased by $0.5 million or 5.9%.  Other income (expenses) included acquisition transaction costs and gain on disposal of assets.

Arbor Memorial Services Inc. owns 41 cemeteries, 27 crematoria, 8 reception centres located on cemetery premises and 82 funeral homes in eight provinces of Canada.

 

Brian D. Snowdon, President and Chief Executive Officer
Laurel L. Ancheta, Vice-President and Chief Financial Officer
Telephone: [phone]