Aug 7, 2009
Operator
Good day ladies and gentlemen and welcome to the Quarter Two, 2009 Service Corporation International Earnings Conference Call. My name is Denise and I will be your coordinator for today.
At this time, all participants are in listen-only mode. We will be conducting a question-and-answer session towards the end of this conference.
(Operator Instructions). I will now like to turn the presentation over to your host SCI Management.
Please proceed.
Debbie Young
Good morning and welcome. This is Debbie Young, Director of Investor Relations for SCI.
As usual before we begin I get the pleasure of taking you through the Safe Harbor language. In our comments today, we will make statements that are not historical facts and are forward-looking.
These statements are based on assumptions that we believe are reasonable. However, there are many important factors that could cause our actual results in the future to differ materially from these forward-looking statements.
For more information related to these statements and other important risk factors, please review our periodic filings with the SEC that are available on our website, at sci-corp.com. In addition, during the call today, Tom and Eric may use the terms normalized or adjusted EPS, or adjusted operating cash flows.
These are non-GAAP financial terms. Please see our press release and 8-K that were issued yesterday where we have provided detailed reconciliation for each of these measures to the appropriate GAAP term.
And now, I'll turn the call over to President and CEO Tom Ryan.
Thomas L. Ryan
Thank you Debbie and thanks everybody for being on the call today. I am going do my normal thing and give an overview of the business and give a little bit into the segment both funeral and cemetery and add concluding remarks before I turn it over to Eric.
As many first you know in the written press release, we reported normalized earnings per share in the second quarter of 2009 of $0.12, this compares to $0.14 in the 2008 second quarter. While it's slightly down from the prior year quarter, as many of you know, a lot has happened between now and then, and therefore the $0.12 that we were able to print definitely surpassed our expectations based upon the difficult business environment that we've been operating in.
And I'd like to thank my 20,000 teammates here at SCI for executing and performing at levels that were well beyond my expectations. The primary drivers of our performing beyond expectations we're really three.
The first one was outstanding execution on cost reduction. One piece I would define as strategic initiatives.
We talked about these many times that are kind of metric driven. We've been able to reduce costs through our, what we call our FTE our Full Time Equivalent metrics that allow us to optimize staffing particularly on the funeral side of the business.
Secondarily, we've launched a cemetery administration initiative that's allowing us to utilize the technology and again be more efficient in the back office performance of the cemeteries. And lastly, the cemetery maintenance initiative which is focusing on again taking best practice and disseminating into all of our cemeteries again across our entire business profile.
And so, those things have begun to take effect. I would define them as very much in the middle of the game if you will.
And so, there's much more to come. It just takes time to have these initiatives take hold because it's a lot of planning, it's a lot of use of metrics and the like.
The second way that we're able to reduce costs, it's really driven at the field and home office levels. And these had a more median impact.
I would say, these were driven by great execution in the field, of people just taken hold and understanding what a difficult environment we're operating in. We're making those tough decisions not to spend the money.
I would say the bunch of this is well within some of incentive comp changes that we put in place for our field management. We actually shorten the bonus period from 12 months to six months.
We also kind of lower the gate if you will as to when you can begin to earn a bonus. I think both of these things kept people ahead in the game as we were operating in the first six months of all the uncertainty around it.
So, all that together allowed us in my opinion to reduce cost pretty dramatically. That's when we saw very favorable trust performances particularly here in the second quarter.
We are at 11.9% versus an expectation that we're really at low single-digits as it relates to trust performance. And remember as we said that back in February when the market was nearest loss.
Most of these gets deferred, but the income statement impact in the second quarter alone which probably about 3 to $3.5 million beyond our expectation. So again, better than we could have anticipated.
Last future performance that drove beyond our expectations is having to do premium cemetery sales reductions. We're beginning to see large sales come back, not to the levels that we saw in 2006 and 07.
But we really saw some shutdown for about eight months and we're seeing it back in April, May and June. Production for the quarter was down approximately 5% versus an original expectation for this quarter that was probably around the mid teens being down.
So again, lot better than we expected, still not back to the levels we were enjoying in 2007 or early 2008. Other favorable items to note that I'll just briefly mentioned.
We had very favorable working capital management that produced solid cash flow reduction, I'll get into that little bit later. We continue to see our average funeral revenue growth performance again pretty much in lined with expectations.
We thought we could hold the line here we have. We've also seen solid preneed funeral sales reduction.
Again this only impacts the back log predominantly but we're able to maintain essentially at the levels we saw in 2008. And lastly we have very favorable tax rate versus our expectations.
The primary challenge we continue to face is that we're seeing lower number of comparable cases within our funeral business and the markets. While we saw improved comparable performance compared to the Q1, we still saw funeral cases up just over 7%, which is difficult to find anyway from normal and that's we expect to continue.
Now I will take that moments to shift us into funeral operations. Within our funeral segment, we saw our comparable revenues for the quarter down almost $22 million or about 6%.
Our comparable funeral volumes as I mentioned before were down 7.1% or about 4,700. As I've said many times there is no perfect market data for us, it just isn't available.
So we look at a lot of things. We look at cemetery interments if you begin I think the cemetery business is less competitive relative to the funeral side.
If we look at preneed to at need conversions of people that have bought those contracts years ago, they're not going to switch. So again that trends out hold to what's happening in markets.
Lastly we also look at competitors and vendors and we look at the CBC 122 sitting again not completely accurate data but directionally correct. If you bore all that down you tell me that within our markets I believe that this should have been down somewhere in the 4, 5, 6, 7% range.
So again that's somewhere in the outer end of that range could be losing a little market share certain market of course. I don't think its something that's dramatic I think all these numbers should begin to shift back when normalize comparisons as the year goes on.
Also I want to talk briefly about what we're seeing reflected adjustment in the marketplace. The first quarter we were down with 11% and April and May we saw comparable numbers down about 9% and in June and continuing into July, we're looking at comparable funeral cases at around down 4%.
So still not sense into right home about but the trend it is little healthier than we started off in year-end. On the good note, our comparable revenue per funeral service was up about 1 percentage reported to prior year.
And that's a little bit exceeding because there is two things putting downward pressure on that. First is the trust income comparison, as we all know our trust income is down year-over-year that was about 120 basis points downward impact on our average.
In addition, the Canadian currency changes year-over-year impacted the average by about 170 basis points. And keep in mind even though it impacts revenues, the same impacts are recurring down in cost.
So, when you pull all way down with bottom-line the Canadian currency does not have a material impact on us. If you take those two trends away and say, what's happening to the SCI business, consumers want to manage year-over-year ex-currency, ex-trust, we're up about 3.6%.
So again, this is inline or slightly ahead of what I would say we expected and I would say surprising compared to other industries that are seeing down and pressure on pricing. It also encompasses the fact that we have slight growth in our cremation rate which grew by about 20 basis points.
What I would attribute this 3.6% achievement to is few things; one is our continued focus on strategic pricing that we're doing all the time moving market-to-market. We're also managing discounts better and particularly we're seeing an increase in the Dignity package pick rates.
And we rolled out this new Dignity rooms and our Dignity package pick up rates are up 250 basis points this quarter over the last quarter. And so those things are really driving the average as we expected and we're pretty excited about it.
When you take all of that revenue, talk about that just the funeral profits decreased only about $2.6 million year-over-year. Remember that's in the phase of this 7% lower volume, and this resulted in actually, a 50 basis point improvement in our comparable gross margin percentage which is now 20.9%.
We were not happy about making $2.6 million less, I think our costs savings initiatives were dramatically impacting in negating the negative impact of volumes. I am very proud of our team handling those variable personnel cost, this negated the majority of the revenue change.
The Preneed funeral which again is, a backlog issue but very, very important to us, in the face of very difficult retail environment, we are please that our preneed funeral sales were about $120 million for the quarter and while this was 3 million below the prior year, it was pretty much in line with our expectations. So we're seeing improvements there and again you've got a much more apprehensive consumer.
But I think we're doing things to negate some of that impact. The other important thing about preneed that I point out is the average contract written continues to grow.
If you look, the average contract we're writing, and remember, this is 52% cremation business, its $5,700. When you compare that to what's running through our P&L today, the average funeral we're performing is $5,100.
So as you think about that 5,700 and having growth on that in the future, it's going to bode for revenues and for enhanced margins. The down operation and remember this was the naturally more volatile due to the discretionary consumer and because of the higher trust on exposure to relative to the size business.
Our comparable cemetery revenues decreased about $16 million or 8.6% and that was due primarily to a couple of things; number one comfortable Atneed cemetery revenues decline $5.9 million or about 9%. We believe that this was primarily approach of the decline of debts in the market no different that will be seeing on the field.
Our comparable preneed sales production, remember projection is what we are selling in and not necessary what we are recognizing, was only slightly down or about $6 million of this quarter compared to last quarter that's about 5% reduction compared to last quarter. I should say second quarter 2008.
Now to recognize preneed revenues declined some $7.2 million so the incremental decline from projection really relates to our ability to recognize what we sell and why wouldn't we recognize something we sell? You see the property we haven't got 10% add-on or property does not constructed it -- quite possibly it could be merchandize like a marker than we have to set here.
So, even though was somebody bottom marker we have to go through this down as a cemetery. Now there is a reason why actually it's a different between projection and what we recognize and so there was a slight projection from this quarter to the second quarter of 2008.
I think the thing to focus on here is our cemetery preneed sales projection was much stronger than we anticipated, down 5% versus the expectation that we set in February to be in down mid teen so we are very pleased with the direction of sales. Last thing, we impacted cemetery revenues is the category you'll see in other cemetery revenue down about $2.8 million.
And this is primarily reduced trust fund income particularly on our merchandise service trust. Still improved beyond our expectations as the market rebounded from the March 2009 low.
Our cemetery profit that we're talking about all those revenues, the easy way to think about is they're down about $5.4 million year-over-year which reduced the gross margin percentage to 17.4%. While this is slightly down from the prior year on a sequential basis this is up from a 10.7% margin we reported in first quarter.
Simple way to think about what's happening in the cemetery is that I apply a 65% margin to the reduction in sales, but if you look at the recognized revenues on Preneed and Atneed, they are down about $13 million and if you buy at 65% margin you would expect our gross profit to be down 8.5 million bucks. The other cemetery revenues really pure profit.
So that's $2.8 million drops straight to the bottom line. So you would expect our cemetery profits to be down somewhere around do the math quick, 11.3 million bucks.
But they're only down 5.4. The reason for that is again that our team delivers incremental cost savings of roughly $6 million and this is primarily related to lower merchandise cost and lower personnel cost in leveraging our scale in use of metrics again.
So in the conclusion the economy in the markets are still very uncertain. We're not here to tell you that the economy is out of the woods and the financial market will continue to march North, we surely don't anticipate that.
So we believe in improved cost structure, enhanced trust returns and a more productive cemetery sales force will result in higher earnings per share for 2009, the rest of 2009. Therefore, as you saw in the press release, we moved our guidance from 26 to $0.36 to 36 to $0.42 earnings projection for 2009.
While liquidity in leverage are still our rate -- we're focusing on those everyday. I think most companies will produce to come.
We're cautiously seeking value added opportunities for our shareholders. We're generating lots of cash.
Its time to put that cash towards the best price we possibly can. This concludes my prepared comments.
And I would like to turn the call over to Eric Tanzberger, our Chief Financial Officer.
Eric Tanzberger
Good morning, everybody. Thanks again for joining the call as Tom said.
I may really address three issues, really talking more detailed about cash flows, about our trust fund performance and returns for the quarter and about our liquidity and financial position. And throughout those three topics, I'll make some comments and give you some color on our '09 updated guidance that we released yesterday during the press release.
So starting with cash flows, as you saw our cash flow from operations is very healthy to 70 million for the second quarter. And this is relatively flat to last year from cash flow from ops.
Through a strong compared to our internal expectations and that primarily relates to good cost containment initiatives, higher than anticipated trust fund income as Tom hit on that a couple of times, strong working capital management and lower cash access. And all this positive events helped to offset a soft volume that we saw in a number of funeral services perform versus our expectations.
So we're very pleased with our working capital initiatives especially mostly in the areas of managing our customer receivables, preneed trust deposits and withdrawals and of course our payables as well. And additionally, these working capital initiatives in the quarter included the liquidation of some cash surrender value, a certain team life insurance policy.
And this contributed about $15 million of positive cash flows to working capital in the quarter and it's safe to say that that's something that probably will not occur next year as we look forward. Unlike the first quarter though which had relatively minimal cash interest payments, the cash flow this quarter included about $57 million of cash interest payments.
The cash flows in this quarter also included about $4 million that we paid in cash taxes which amounts to about 14 million of total cash access that we've paid in the first half of '09. And while it's operating free cash flow that I'm referring to is flat quarter-over-quarter, our free cash flow grew substantially, as we continue to manage the capital dollars very effectively.
The total CapEx for the quarter is about 19 million and about 15 of that was related to maintenance and sanitary developing CapEx, which is somewhat consistent sequentially with the first quarter spend in those areas. When you deduct the recurring capital spending items of 15 million from the cash flow from ops.
We calculate our free cash flow for the quarter to be around $55 million, which is about $20 million more than the $35 million generated in free cash flow in the prior year quarter. The shipment from a year-to-date cash flow from our was about 211 million which is consistent with the 210 million in the first half of last year.
For the full year of 2009, the original expectations that we've had compared was in the range of 220 to 300 million. We now expect the cash flow from operations for the second half of this year to be about 110 million to $160 million.
This revise is our full year 2009 cash flow from OpEx guidance for a range of 320 to 370 million as you saw on the press release yesterday. We also expect that to continue to manage our capital spending very effectively for the remainder this year.
So we think our maintenance in cemetery development CapEx will end '09 in the range of about 17 to $18 million. This compares to give you a reference point about $33 million of maintenance in cemetery development CapEx that we spend in the first half of this year.
So the revised guidance I just gave you with the cash flow from operations and the CapEx will result in revised free cash flow guidance of about 240 to $300 million. That's for the full year of 2009.
This range compares to just under a 180 million of free cash-flow that we have for the first half of this year. Expectation for free cash flow represents the free cash flow yield kind in the mid teens rather 14 to 18% yield on an annual basis which is based on yesterdays closing price of the stock.
So hope you agreed that this kind of free cash flow performance especially in an environment where we had some significant challenges demonstrates the strength and durability of our business model and our company. Within this free cash flow guidance there to give you a little more color.
One item there I'd like to point out to you is that cash tax payments are also dependent lower than what we originally anticipating communicated to year in here. The revised cash-flow outlook includes about 20 to 30 million anticipated cash tax payments that are expected in the entire year of 2009 and for reference point in the first half of 2009, we paid about 14 million in these cash taxes.
Speaking about taxes the shift in through the income statement our effective tax rate related to our earnings from continuing ops was about 34% for the full year as what our original expectations are and we continue to have those expectations. However, what I want to mentioned is that in the first half the effective tax rate was about 32% so we do expect the second half to have a higher effective tax rate which will primarily be in the range of $0.36 to $0.38.
The second item we're pointed now is despite the increase that we saw in corporate G&A expenses that we incurred in the second quarter, the remaining two quarters of 2009 should transact in more normal levels. So, I referred to those about 20 to $23 million per quarter for corporate G&A and as we mentioned the second quarter of '09 included about $5 million related to our prior period adjustment related employee benefits and $2 million in litigation and investigation fees as well.
So, to summarize all this cash flow comments, the increase as we expect in 2009 are really a result or derivative anticipated performance as it relates to cost reductions credit cemetery sales, trust fund income and prudent working capital management. Now looking ahead into 2010, we would very preliminarily anticipate higher cash taxes in '09 levels as well as a return to more normal working capital levels as well.
Now let’s shift to trust funds performance we had for the quarter. Certainly as you saw in the press release, our trust funds have benefited from the rebound in the financial market.
The trust fund experience significant performance improvement sequentially in the second quarter relative to what we experience and disclosed to you both last quarter and in the fourth quarter of 2008. The investment returns of our combined trust fund assets increased by just under 12% in the second quarter of '09.
That translated into our income statement for trust fund income recognize was about $17.6 million for the quarter. And while this is below about $25 million that we recognized in trust fund income in the prior year quarter, as Tom mentioned it was higher that we originally anticipated by about 3 to $4 million.
Now from a year-to-date perspective the trust fund income that we recognize in the first half was about $30 million. This was also ahead of our original expectations.
So looking forward from here, due to this improvement that we were mentioning in the financial market, we have updated our expectations for trust fund income for the remainder of the year and now anticipate the second half of the year that trust fund income of about 30 to $35 million. And as a measurement that's roughly equivalent to how much we recognize in the second half of '08 and it also revises our full year 2009 guidance of trust fund income to be in the range of 60 to $65 million.
Lastly, let's talk about our liquidity in financial position. We continued and enjoy very stronger liquidity in good financial position that SCI.
Our cash balance at the end of the quarter as you saw was $117 million which is just over $40 million from the year-end of 2008. Today as we speak, we have just under $200 million in cash on hand and we also have about $250 million of available capacity on our credit facility.
Our total debt is about 1.75 billion at June 30, which represents a reduction of just about a $100 million since year-end 2008. We've been very successful in de-leveraging in the first half I mentioned this.
When we did it by repurchasing our debt in the open market at a discount for values as well as retiring schedule maturities with cash from the second quarter. So, we had about $74 million of repurchases in the open market in the first half of 2009.
And this was in addition to the $29 million of schedule maturities that we paid off in cash in April of this year. Now, we do not have any significant debt maturities for over two years until November 2011 and even with that, that maturity is about a $150 million.
With saying that in our opinion, our current cash position, attractive cash flow and lack of substantial near term maturities really bodes well for the future financial position of our company. And then in conclusion in the near term, we'll continue to focus on cost control initiatives, and prudently managing our capital expenditures.
And again as we look again to the opportunistic, we've got capital and seeking investments that will increase shareholder value as we go forward. So that's my prepared remarks.
So as a means at this time, I think we'll turn it back over to you and will take questions from the investors group.
Operator
(Operator Instructions). Your first question comes from the line of A.J.
Rice from Soleil Securities. Please proceed.
A.J. Rice
Hi.
Eric Tanzberger
AJ, ---.
Operator
We actually have to remove his line. And your next question comes from the line of Robert Willoughby from Banc of America.
Please proceed.
Robert Willoughby
Yeah. I don't think I am going to sound as cool as that.
But... Did you, Eric, did you mentioned on the receivables that's been trending down for several quarters now, I mean what's specifically are you up to on that line item and it sounds like, I guess, moving into next year, you're expecting it to bounce back a bit?
Eric Tanzberger
Well, we have to say our manage our receivables as well, and our day sales outstanding is now probably when you -- markets are raise up to the high teens to low 20 days. I think it will go ahead all that, Robert, in terms of working capital management.
We also move in more room at payables as well thinking a whole, but again, I mentioned that we had some receipts this quarter from cash to valuable stuff about $15 million. That's the type of thing that I just want to highlight won't occur next year, bring it down to more normal working capital levels.
But again, we'll continue to prudently manage working capital well into 2010 as well.
Robert Willoughby
Are you guys charging anymore for outstanding balances or is that part of the program or...
Thomas Ryan
Robert, this is Tom. I think couple of things, I think on the funeral asset to address before that those, there aren't any charges rapped they collected pretty quickly.
When you talk about the cemetery Preneed side which is something that I think everybody has little more concerned with we've done somethings to try to enhance our flexibility. Giving example in certain markets we've actually lower the finance charges in offerings as long as long as people would sign us for bank draft to become a bank draft customer.
So that's more really assured us that is collectable. So, we're seeing today continue to be on cemetery side single pay customers are above 50% and we're seeing people that are financing 60% or up to 60% now they are financing on a bank draft.
So, we're trying to do something they just make collectability a little more assured as it relates to interacting with our consumers.
Robert Willoughby
Got you. and I very difficult to call I guess but are you making any assumptions for flu season that's coming up everything or seem so just may be a bit more severe, I mean do you guys are making any protections, are any of the guidance boost here on dependent on seeing an uptick in the death rate?
Thomas Ryan
We're definitely not putting in our guidance above, but I have heard of same thing you heard in the feed back I've got from people a lots more demand on this topic is that you definitely are seeing that was Swine Flu has traveled around the world and I think its run a little more rapidly than people anticipated. But it has not mutated into a very dangerous form yet now but people really believe it will.
The bad news is I think it attacks younger people and so it's probably less of -- its going to be a bad flu season but probably isn't one that's going to impact our businesses dramatically. I'm more concerned about our employees and them getting sick and not being able to come into work during peak periods.
So, those are the types of things that we're just trying to prepare for better. I'm with you.
The first quarter of last of this year is so bad on a comparable volumes basis that it's hard to be not to believe that from a comparable perspective 2010 is going to look pretty good.
Robert Willoughby
That's great. Thank you.
Operator
And your next question comes from the line of AJ Rice from Soleil Securities.
Operator
Your next question comes from the line of John Ransom from Raymond James.
John Ransom
Yeah, I never liked AJ, so that's good.
Philip Jacobs
Do you remember that Black Steps, Iron Maiden?
John Ransom
All right. You're showing your age.
Eric, here just a quick numerical question, because of free cash flow, the cash flow from ops to CapEx and I guess 250 to 290, what is the difference in your GAAP taxes and your cash taxes that actually part of your calculation, I want to double check what that number would be when we got it?
Eric Tanzberger
It is pretty big amount difference, because obviously you're currently net about 34% from year-to-date basis as I've said. The original guidance channel we talked about really kind of worked out about 40 to 70 million.
And now, we're having really seeing today, its going to be about less than that it will probably be in the 20 to 30 million and probably more towards the lower end of that range. So, from a mid-point perspective, it's about $30 million lower from the original guidance.
John Ransom
The 20 to 30 in cash, so what's your in your guidance, what's your GAAP tax equivalent number?
Eric Tanzberger
Its 34%, you get to the pre-tax amount of the 36 to $0.42 and that will generally be your number.
John Ransom
Okay. So that's and you think that, what's driving the lower rate this year?
Eric Tanzberger
What's driving, what John?
John Ransom
What is driving the rate to be so much lower this year than what you expected?
Eric Tanzberger
We had really two things we, statutory rate is probably about 3 to 400 basis points higher than that when United States and all of that, we have some really good tax plan and we have been starting to initiate and we have a structure at the hybrid energy structure, not to get technical between, cemetery loans between the U.S. business and the preneed business which helps us as well.
Those two things pretty much dry have been driving us down to more the 34% areas close to 38% areas.
John Ransom
Okay. My third question is just kind a sitting back for a minute and looking at your strategy, you are clearly trying to drive more of the premium end of the market, are you just given that structure of selling higher cost in the backlog and you had a pretty aggressive pricing strategy a couple of years ago, are you just resigned yourself to probably being 2 to 300 points out of the market going forward, strictly at the lower end it's going to be more distressed and they'll be more toward lower inclinations.
Eric Tanzberger
No general, I wouldn't define is that, I think if you look at our preneed consumers one of the things I think, if I going to keep in mind, for any consumer and you walk in and you want to spend $6,000, you got to write a cheque for $6,000, you got to put it on your credit card. And one of the beauties of Preneed is that it makes it much more affordable for a larger array of consumer and so that's what we like the best about preneed, its allowing us finances these over 3, 4, 5 years term make a much more affordable for somebody than just coming up with $6000 because my uncle had a heart attack I wasn't expecting in - I didn't know is going to happened that's very difficult to come out of pocket versus the planning mechanism that allows us to think about what we want allows us to pay for it over time maybe if it was an insurance product it allows me again to under write that product is something does happen.
So, I think that's really the strategy is focusing preneed allowing people to make as affordable as we possibly can give them great funeral service great immortalization products because that's we believe the consumer want.
John Ransom
Another question Eric what has the trust fund performance been since quarter end?
Eric Tanzberger
We are just planning get in John and I don't have a really good consolidated number for U.S and Canada. I would tell you just based on the preliminary feed back we're getting collecting it from the trustees it probably looks like its going to be some more in the mid single digits probably 8% for the month of July.
That's probably what our guess at this point we have then couple of days.
John Ransom
Okay and just speaking of your CapEx for a minute was that include share repurchase or you looking more optimistic acquisitions and the another question I had Eric was just could you with your new guidance where you be on your debt to EBITDA covenant, what's kind subs down I think in March of '10?.
Eric Tanzberger
The leverage ratio coming through current to we're probably about 3.6% right now as of June 30. that got us down but I think it's comfortable -- I think I'm comfortable with the rationing down when it does in 2010 and 2011 as well.
Right now the limits for in quarter and counts to 3.5, but probably we leave you impression on comfortable that John.
John Ransom
Okay.
Eric Tanzberger
Okay?
John Ransom
How much so how much flexibility does that really gives you to spend money on things outside of your cemetery?
Eric Tanzberger
Well, I think it all affirms to you're right we're paying close attention to that John. And the way I characterize this obviously buying back this kind of debt is the most beneficial step ratio.
The second most beneficial leverage ratio could be an acquisition that carries with it a trailing EBITDA, because again if you play at price, you don't harm that ratio very much and at least beneficial to the ratio would be share repurchase because you'd under the calculation you're getting the credit. What I would tell you is, we got to manage the ratio.
All three of those options are on the table for us. And we're going to look at all three.
We do have to be careful on share purchase again. We want to maintain about its raising a good point.
The ratio is 3.75 for the covenant. But we want to manage the company is about 3.5.
And so again as a result to get better or we have enhanced cash flow. We look for share repurchase to be a possibility.
But they're probably more likely are going to be a little more de-leveraging possibly. And also I think again these are times to begin to look at opportunities as it relates to growth as long as they're within the parameters of value that we'd be proud of us more.
John Ransom
Well, I hear, you guys saying almost I said. And that's an expectation are about, I think I said.
And there is one of thing I was going to ask, but I forgot. I'll get back in queue.
Thanks.
Operator
And your next question comes from the line of Clint Fendley from Davenport.
Clint Fendley
Good morning Tom and Eric.
Eric Tanzberger
Good morning Clint.
Clint Fendley
You mentioned the improvement in the consumer sentiment later in the quarter; I wondered if you have the data by month for the preneed cemetery production?
Eric Tanzberger
We've got it Clint, but I don't have it in my fingertips. But, we'll be glad to share with you, the one thing I would just caution you, it's hard to look at sequential, let me tell you why.
May is always a huge month for a lot of reasons. Mother's Day primarily a lot of other I think, again religious type of holidays that drive bigger Memorial Day obviously is another one that drives these types of sales.
So you can't look at May and look at June that June will follow off in May every year. So the best way to look at it is because of the seasonal nature, its a look April-to-April, May-to-May, June-to-June, and what I will tell you is that May was a really, really good month.
June was a really, really good month. I think we definitely saw it get better as the quarter went on as it relates to seeing those sales pick up.
And I'd tell you the same trend held as it relates to high end cemetery inventory and what we define that as let's say a sale over $100,000. I am not sure we had one from October to March, and we definitely began to see that pick up and really in different pockets of the country.
It wasn't isolated to any one area. We're beginning to see that consumer come back and again if they're finding value in those products, they're beginning to take performance.
And that's a good sign for us.
Clint Fendley
And have those same trends held through them into the month of July?
Eric Tanzberger
You know, July we're just closing the books on sale, I would say if preliminarily I think we're doing fine on sales. I haven't seen any particular large sale that come to my attention but again I don't expect those to go away anytime soon.
Most of the people that are minors have the money and I think and they didn't loose all their money the question is how comfortable are you that things are going to get a lot worse and until you see something like that I'd expect the high end to continue to trek along. I don't think we're going to see 2007 levels may be ever again at least not the next four or five years but I think again these are quality products that people find value and we're going to present them to families and hopefully they'll buy.
Clint Fendley
Okay and final question I mean with some of the changes in your sales force, have you moved towards a more commission base structure or have you left your basic approach there intact?
Eric Tanzberger
There is really two types sales that I would point you towards. We have what we call family service counselors.
Family service counselors are I would say driven much more towards salary and a bonus type of structure. We're beginning in some of our growth market and again we're isolating this at first I think still now to 20 market that they could get.
With this strategy what we're trying to do is establish a over colony community service sales force and we've had this in pockets in the past. I think we've got a different approach to try to generate the needs utilize technology to manage those leads the best we can and in doing so you're looking at a more commissions style type of employee as we drive in those types.
So kind of a mixed bag but again I'd say the proponents of our sales around the family service model which is started.
Clint Fendley
Great thanks guys, nice quarter.
Eric Tanzberger
Thanks.
Operator
And your next question comes from the line of Jazz Jerich (ph) from Wisco Research (ph). Please proceed.
Unidentified Analyst
Hi guys. Good morning.
Eric Tanzberger
Hi Jazz.
Unidentified Analyst
Couple of questions we have for you today, as far as your number of shares, it seems like the reduction year-over-year would be a bit more and then just kind of dilutive effect with that and if you gone through the repurchase, I apologize for asking you that again. And then something else you could add a little color to for us with really employee reductions, there just -- is this permanent reduction, is this something just oriented to the economy or do you feel that you're at a good level their now?
Eric Tanzberger
I'll take the first one I think and Tom take the second one, Jazz. So, when we haven't done any share repurchases in 2009.
The last one we did was very late in 2008 which is about 17 million shares. So, when you figure that out with weighted averages.
That's really gained about 250 to 251 million shares. And I will tell you there were restricted shares and stock option issues as we normally do in our board cycle in the month of February.
So, that also had an a factor as well. But, I don't know if that that's the really only movement in the weighted average shares.
And now Tom will talk to that.
Thomas Ryan
Yeah. I think on the personnel levels, while we think that again some selective type of headcount reduction is been nothing massive whatsoever.
I say that in certain markets, we may have a little more as we grow up some of these few metrics and few ways of doing things. So, I don't want to belittle the impact of the market.
I think when you look globally at our headcount, it's not dramatically reduced. A lot of these factor normalizing the job and then utilizing the staffing better.
So, you can imagine a lot of the functions that we performed are very volatile in nature in the sense that as you think about a funeral home, you made three funerals in a day and then go four days without a funeral. So there are ways to utilize metrics to share staffing with the market, its don't necessary relate to headcount reductions which is more efficient use of staffing in the market.
Clint Fendley
Okay. Thank a lot guys.
Eric Tanzberger
Okay.
Operator
And from Barclays Capital, your next question comes from the line of Emily Shank. Please proceed.
Unidentified Analyst
Hi good morning this is Jason for -- in for Emily. Just one follow-up question on the debt pay down for the first half of the year, for the 74 million of market repurchases, can you guys walk us through which bonds you bought back and how much each of those?
Thomas Ryan
The amount that we first called in, they are schedule maturities its just under 30 million. The amount that was repurchased in market was about 74 million and again I think as we talked about before, we look for it's really to short of maturities and then obviously from the best bank you bought to get some yield.
The best to highest yield as well and in based discounts that's PAR but primarily that 74 million was concentrated in two areas, it was the 2013 so we were able to get a very near term maturity and I think reduced about 56 to 32 million. And then, we were able to purchase a good size block in the 2050s (ph) which went down from 200 million into the 160.
We've not been able to do anything with the 2014 at this time but that should give a feel for where we were doing it. This as Eric said that, we're very comfortable with our debt level where it is, so we are really only looking for opportunistic usage of our capital at this point and we will look at opportunities as it relates that if they present themselves as a corporate yield.
Unidentified Analyst
Great, that's a very helpful guys. Good job on the quarter.
Thanks.
Operator
And from Riviera Capital (ph) your next question comes from the line of Ben Macback (ph) Please proceed.
Unidentified Analyst
Hey guys thank you for taking my call and very nice quarter. Looking at the trust fund performance was very nice in Q2 but that type performance cuts both way so is there any thought to de-risking of the portfolios using this rally in the market?
Eric Tanzberger
Well a couple of things I mentioned here. We believe very strongly in a diversified approach.
We've disclosed kind of what our equity and debt mix is for the most part, the funeral trust around 45% equity and the rest debt such just to give you an example of that. So, we look at it very firmly but the real truth to driving it is that these are very long term investments.
And the fact that there are pretty funeral contracts in that example to stick with funeral. That has somewhere the long life, its over a couple of market cycles.
So I called it some where around 10 years may be 12 years and so we really look to match the underlying investment profile and the structure of those assets with the life of liability itself. So we look at it, we look for trends like other than its something getting shorter in its life or longer than its life and see if we have to adjust accordingly but from the state that we're able to not just to governments securities and take a prudent personal approach, I think we are pretty comfortable with the diversification and asset allocation that we had at this point based on the life of those underlying liabilities past.
Thomas Ryan
I'd just add to that, first of all so you know great kind Eric kind of primary ever seeing the trust investment through March 9 of this year (inaudible). So any way I'll stop kidding.
Understand that these are trustees and it's pretty tough to move money quickly anyway one way or the other not compare to when I think we want to. What we do look that the primarily we've got strategy we're going to stick to it.
On the French, we do hold the pains about what we think is going to happen. As an example, I think as a committee, we believe inflation will rear its head some time in the next year, two years, three years and a dozen of things is on our mind.
So we may slightly position ourselves to better live through that type of scenario. But it won't be dramatic movements in how we invest, what we think have taken positions and better allow us to live through, lets say higher inflationary environment.
Unidentified Analyst
Okay, again great quarter. Thanks guys.
Operator
And you have a follow-up question from the line of John Ransom from Raymond James.
John Ransom
I knew, I want to ask, is there any...
Robert Waltrip
Hey, you may say John.
John Ransom
Can you hear me?
Robert Waltrip
Yes.
John Ransom
Yeah. Is there any opportunity to for any more asset sales particularly on the cemetery side?
Robert Waltrip
You mean selling businesses?
John Ransom
No. Are there any more asset sales opportunity particularly on the cemetery side as you've done in the past?
Robert Waltrip
Yeah, I think there is a little bit of that. But I wouldn't define in the lot.
We've pretty much proven the portfolio, but from time-to-time things changes, John three way gets bill. And therefore, the value of that underlying demand changes.
So I think that's going to happen from time-to-time when you own almost 400 cemetery, but it isn't a big number that we can honor or think its going to dramatically impact what we do.
John Ransom
Okay. Thank you.
Robert Waltrip
Alright.
Operator
At this time, we have exhausted the time allotted for question. I'll now turn the call back over to SCI Management for closing remarks.
Thomas Ryan
We want to thank everybody for being on the call today and we look forward to talking to you again in early November. Thank you.
Operator
Thank you of our participation in today's conference. This concludes the presentation.
You may now disconnect. Have a great day.