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Also on the call today, we will use the terms normalized EPS and free cash flow. Both of these are non-GAAP financial terms. For reconciliation of normalized EPS to EPS calculated in accordance with GAAP, please see our press release and 8-K that were issued yesterday. For calculations of free cash flow and free cash flow per share, we would refer you to a presentation that is posted on our website under Webcasts & Presentations that will give you the supporting calculations and reconciliations to GAAP cash flow.With that, we’ll start with comments from Tom Ryan, SCI’s President and CEO. Thomas Ryan Thank you, Debbie, and welcome everyone to the call today. What I’m going to do is start off with an overview of the quarter, and then kind of dive down into funeral operations and cemetery operations, and then hand it over to Eric. To start off, I’m very excited to report to you that earnings per share and cash flow performance had exceeded our own internal expectation. This was accomplished despite a very challenging comparable funeral volume environment, and I would like to thank all of my fellow associates for their outstanding effort and performance. Normalized earnings per share increased $0.03 to $0.20 versus $0.17 in the prior year quarter. While operating improvements generated about a $0.01 worth of growth, the impact of fewer shares outstanding, and the foreign currency gain offset by a higher tax rate contributed on a net basis the remaining $0.02 of improvement, resulting overall in the $0.03, or an impressive 17.6% improvement in earnings per share. This all despite a 4.6% reduction in comparable funeral volume. Free cash flow produced during the quarter was $74 million. This was down from the prior year by some $11 million, as it was impacted by higher cash tax payments and higher annual incentive payments, and long-term incentive compensation payments, which were tied to total shareholder returns.
If you exclude these $17 million of payment we had accounted for in our forecasting, we grew operating cash flow some $6 million, which was better than we had anticipated in our own forecast. With our free cash flow on hand we continue to be active with our share purchase program during the first quarter, buying back approximately 6.8 million shares for $75 million.Consolidated funeral revenues grew 3.9%, which can predominantly be attributable to the contribution from [inaudible], but SCI comparable revenues were down slightly. Still we were able to grow funeral profit almost $1 billion, even with the challenging volume environment and increased compensation selling expense associated with our growing preneed funeral production. Our funeral gross margin percentage declined slightly as high margin comparable revenues replaced by lower margin Neptune and G&A revenue. Consolidated cemetery revenue grew 4% over the prior year quarter. This growth was driven primarily through strong comparable preneed cemetery sales growth of 14.1% over the prior year quarter, while atneed revenues were slightly lower by some 1% quarter-over-quarter. Our preneed sales production growth was substantially muted and converted to GAAP revenues by two items. First by an $8.5 million increase in property sales that were undeveloped as compared to the prior year, and therefore deferred into our backlog. Second, a $1.5 million deferral of cemetery merchandise sale that were unable to be installed due to certain vendor deliveries. By the way the issue is being fixed as we speak. The good news is that these revenues are simply deferred, and predominantly a benefit for the last three quarters of 2012. The 4% revenue growth was substantially offset by unusual increases in selling compensation and maintenance cost in our cemetery segment. We believe that these cost trends should normalize in the coming quarters, resulting in higher gross margin percentages.
Now shifting to an overview of the comparable funeral operations, and keeping in mind that this now includes the Keystone property. For the quarter, comparable funeral revenues declined $2 million or 0.5%, or was better than we had expected mainly due to higher G&A revenues on the backs of better than anticipated funeral preneed production. Funeral volumes continue to be solid down 4.6%, similar to the levels we saw in the fourth quarter of last year. This was for the most part anticipated in our forecast.Read the rest of this transcript for free on seekingalpha.com