XML 22 R10.htm IDEA: XBRL DOCUMENT
v3.8.0.1

Summary of Significant Accounting Policies (Notes) | 3 Months Ended
--- | ---
Mar. 31, 2018
Summary of Significant Accounting Policies [Abstract] |
Significant Accounting Policies | Summary of Significant Accounting Policies Principles of Consolidation and Basis of Presentation Our unaudited condensed consolidated financial statements include the accounts of Service Corporation International (SCI) and all subsidiaries in which we hold a controlling financial interest. Our financial statements also include the accounts of the merchandise and service trusts and cemetery perpetual care trusts in which we have a variable interest and are the primary beneficiary. Our interim condensed consolidated financial statements are unaudited but include all adjustments, consisting of normal recurring accruals and any other adjustments, which management considers necessary for a fair statement of our results for these periods. Our unaudited condensed consolidated financial statements have been prepared in a manner consistent with the accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2017, unless otherwise disclosed herein, and should be read in conjunction therewith. The accompanying year-end Condensed Consolidated Balance Sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year period. Reclassifications to Prior Period Financial Statements and Adjustments Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation with no effect on our previously reported results of operations, consolidated financial position, or cash flows except as described below under "Accounting Standards Adopted in 2018". Use of Estimates in the Preparation of Financial Statements The preparation of the unaudited condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions as described in our Annual Report on Form 10-K for the year ended December 31, 2017. These estimates and assumptions may affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. As a result, actual results could differ from these estimates. Funeral and Cemetery Operations Revenue is recognized when control of the performance obligation is transferred to the customer. Our performance obligations include funeral and cemetery merchandise and services and cemetery property internment rights. Control transfers when merchandise is delivered or services are performed. For cemetery property interment rights, control transfers when construction is complete and the property is available for use by the customer. Once the property is constructed, the customer has obtained substantially all of the remaining benefits of the property. Sales taxes collected are recognized on a net basis in our condensed consolidated financial statements. We sell price-guaranteed preneed contracts through various programs providing for future merchandise and services at prices prevailing when the agreements are signed. Revenue associated with sales of preneed contracts is deferred until merchandise is delivered or the services are performed, generally at the time of need. Travel protection and certain memorialization merchandise sold on a preneed basis are delivered to the customer at the time of sale and are recognized at the time delivery occurs. For personalized marker merchandise, with the customer’s direction generally obtained at the time of sale, we may order, store, and transfer title to the customer. In situations in which we have no further obligation or involvement related to the merchandise, we recognize revenue and record the cost of sales upon the earlier of vendor storage of these items or delivery in our cemetery. There is no general right of return for delivered items. The total consideration received for contracts with customers is allocated to each performance obligation based on relative selling price. Relative selling prices are determined by either the amount we sell the performance obligation for on a stand-alone basis or our best estimate of the amount we would sell it for based on an adjusted market assessment approach that is consistent with our historical pricing practices. Payment on atneed contracts is generally due at the time the merchandise is delivered or the services are performed. For preneed contracts, payment generally occurs prior to our fulfillment of the performance obligations. Our preneed contracts may also have extended payment terms with associated financing charges. Pursuant to state or provincial law, all or a portion of the proceeds from merchandise or services sold on a preneed basis may be required to be deposited into trust funds. When we receive payments from the customer, we deposit the amount required by law into the merchandise and service trusts and reclassify the corresponding amount from Deferred revenue, net into Deferred receipts held in trust. Amounts are withdrawn from the merchandise and service trusts when we fulfill the performance obligations. We defer investment earnings related to these merchandise and service trusts until the associated merchandise is delivered or services are performed. Fees charged by our wholly-owned registered investment advisor are also included in revenue in the period in which they are earned. In addition, we are entitled to retain, in certain jurisdictions, a portion of collected customer payments when a customer cancels a preneed contract; these amounts are also recognized in revenue. A portion of the proceeds from the sale of cemetery property interment rights is required by state or provincial law to be paid into perpetual care trust funds. Investment earnings from these trusts are distributed to us regularly, are recognized in current cemetery revenue, and are intended to defray cemetery maintenance costs, which are expensed as incurred. The principal of such perpetual care trust funds generally cannot be withdrawn. However, some states allow a total return distribution that may contain elements of income, capital appreciation, and principal. Costs related to delivery or performance of merchandise and services are charged to expense when merchandise is delivered or services are performed. Costs related to property interment rights include the property and construction costs specifically identified by each project. Property and construction costs are charged to expense when the revenue is recognized by specific identification in the performance of a contract. Incremental direct selling costs are deferred and recognized when the associated performance obligation is fulfilled based on specific identification in the fulfillment of a contract. All other selling costs are expensed as incurred. As of March 31, 2018, we had $274.7 million in deferred incremental direct selling costs included in Deferred charges and other assets. These deferred costs are classified as long-term on our Condensed Consolidated Balance Sheet because we do not control the timing of the delivery of the merchandise or performance of the services as they are generally provided at the time of need. During the three months ended March 31, 2018, we recognized $7.3 million from deferred incremental direct selling costs. Insurance-funded preneed contracts Not included in our Condensed Consolidated Balance Sheet are insurance-funded preneed contracts that will be funded by life insurance or annuity contracts issued by third party insurers. Where permitted by state or provincial law, we may sell a life insurance or annuity policy from third-party insurance companies, for which we earn a commission as general sales agent for the insurance company. These general agency commissions (GA revenue) are based on a percentage per contract sold and are recognized as funeral revenue when the insurance purchase transaction between the preneed purchaser and third-party insurance provider is completed. All selling costs incurred pursuant to the sale of insurance-funded preneed contracts are expensed as incurred. We do not reflect the unfulfilled insurance-funded preneed contract amounts in our Condensed Consolidated Balance Sheet. The proceeds of the life insurance policies or annuity contracts will be reflected in funeral revenue as we perform these funerals. Cash, Cash Equivalents, and Restricted Cash The components of cash, cash equivalents, and restricted cash at March 31, 2018 and December 31, 2017 are as follows:
| March 31, 2018 |  | December 31, 2017
| (In thousands)
Cash and cash equivalents | $ | 219,507 |  |  | $ | 330,039 |
Restricted cash(1): |  |  |
Included in Other current assets | 5,877 |  |  | 8,625 |
Included in Deferred charges and other assets | 1,936 |  |  | 1,937 |
Total restricted cash | 7,813 |  |  | 10,562 |
Total cash, cash equivalents, and restricted cash | $ | 227,320 |  |  | $ | 340,601 |
(1) | Restricted cash in both periods primarily consists of proceeds from divestitures deposited into escrow accounts under IRS code section 1031 and collateralized obligations under certain insurance policies.
Accounting Standards Adopted in 2018 Revenue Recognition In May 2014, the FASB issued "Revenue from Contracts with Customers", which replaced existing revenue recognition guidance. During 2016, the FASB made several amendments to the new standard that clarified guidance on several matters, including principal vs. agent considerations, identifying performance obligations, sales taxes, and licensing. The new standard, as amended, requires that we recognize revenue in the amount to which we expect to be entitled for delivery of promised goods and services to our customers. The new standard also resulted in enhanced revenue-related disclosures, including any significant judgments and changes in judgments. Additionally, the new standard requires the deferral of incremental direct selling costs to the period in which the related revenue is recognized. We adopted the standard as of January 1, 2018 using the modified retrospective approach applied to all contracts that were not completed at adoption based on the contract terms in existence at adoption. As a result of the adoption, we recorded a $172.2 million increase to Retained earnings, which comprises a $268.0 million increase to Deferred charges and other assets partially offset by a $38.0 million increase to Deferred revenue, net and a $57.8 million increase to Deferred tax liability. Additionally, we reclassified $606.9 million of amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts from Preneed receivables, net and trust investments to Deferred revenue, net. As a result of this reclassification, we eliminated our previous cancellation reserve on these performance obligations. We made the enhanced revenue-related disclosures in Footnotes 2, 3, and 8 of this Form 10-Q. The standard primarily impacts the manner in which we recognize a) certain nonrefundable up-front fees and b) incremental costs to acquire new preneed funeral trust contracts and preneed and atneed cemetery contracts (i.e., selling costs). The nonrefundable fees will be deferred and recognized as revenue when the underlying goods and services are delivered to the customer. The incremental direct selling costs will be deferred and recognized by specific identification to the delivery of the underlying goods and services. Additionally, the amounts due from customers for unfulfilled performance obligations for cancelable preneed contracts are required to be presented with Deferred revenue, net, instead of as Preneed receivables, net and trust investments on our Condensed Consolidated Balance Sheet. We will continue to expense costs to acquire new preneed funeral insurance contracts in the period incurred. The insurance contracts are not, and will not be, reflected in our Condensed Consolidated Balance Sheet because they do not represent assets or liabilities, as we have no claim to the insurance proceeds until the contract is fulfilled and no obligation under the contract until the benefits are assigned to us at the time of need. The impact of adopting the new guidance on our Condensed Consolidated Statement of Operations for the three months ended March 31, 2018 is as follows:
| As Reported |  | Effect of New Guidance |  | Without New Guidance
| (In thousands, except per share amounts)
Revenue | $ | 794,482 |  |  | $ | 557 |  |  | $ | 795,039 |
Costs and expenses | (598,720 | ) |  | (7,267 | ) |  | (605,987 | )
Operating profit (loss) | 195,762 |  |  | (6,710 | ) |  | 189,052 |
General and administrative expenses | (34,784 | ) |  | — |  |  | (34,784 | )
Gain on divestitures and impairment charges, net | 482 |  |  | — |  |  | 482 |
Hurricane recoveries, net | 2,232 |  |  | — |  |  | 2,232 |
Operating income (loss) | 163,692 |  |  | (6,710 | ) |  | 156,982 |
Interest expense | (43,576 | ) |  | — |  |  | (43,576 | )
Loss on early extinguishment of debt, net | (10,131 | ) |  | — |  |  | (10,131 | )
Other income, net | 384 |  |  | — |  |  | 384 |
Income (loss) before income taxes | 110,369 |  |  | (6,710 | ) |  | 103,659 |
(Provision for) benefit from income taxes | (28,321 | ) |  | 1,724 |  |  | (26,597 | )
Net income (loss) | 82,048 |  |  | (4,986 | ) |  | 77,062 |
Net income attributable to noncontrolling interests | (60 | ) |  | — |  |  | (60 | )
Net income (loss) attributable to common stockholders | $ | 81,988 |  |  | $ | (4,986 | ) |  | $ | 77,002 |
Earnings per share (1) |  |  |  |  |
Basic | $ | 0.44 |  |  | $ | (0.03 | ) |  | $ | 0.42 |
Diluted | $ | 0.43 |  |  | $ | (0.03 | ) |  | $ | 0.41 |
(1) | Net income per share is computed independently for each of the columns presented. Therefore, the sum of the first two columns' earnings per share may not equal the Without New Guidance column.
Cash Flow In August and November 2016, the FASB amended "Statement of Cash Flows" to clarify guidance on the classification of certain cash receipts and cash payments. Additionally, the guidance requires that the statement of cash flows reflects changes in restricted cash in addition to cash and cash equivalents. Amended guidance includes clarification on debt prepayment and extinguishment costs, contingent consideration in business combinations, proceeds from insurance claims, and premium payments on Company-owned life insurance. We adopted the new guidance retrospectively on January 1, 2018. As a result, we have recast our Condensed Consolidated Statement of Cash Flows for the three months ended March 31, 2017 as follows:
| As Previously Reported |  | Effect of New Guidance |  | As Recast
| (in thousands)
Net cash provided by operating activities | $ | 188,383 |  |  | $ | (270 | ) |  | $ | 188,113 |
Cash flows from investing activities: |  |  |  |  |
Capital expenditures | (40,150 | ) |  | — |  |  | (40,150 | )
Acquisitions | (19,327 | ) |  | (13,885 | ) |  | (33,212 | )
Proceeds from divestitures and sales of property and equipment | 3,148 |  |  | 17,087 |  |  | 20,235 |
Payments on Company-owned life insurance policies | — |  |  | (2,827 | ) |  | (2,827 | )
Proceeds from Company-owned life insurance policies | — |  |  | 906 |  |  | 906 |
Net cash used in investing activities | (56,329 | ) |  | 1,281 |  |  | (55,048 | )
Net cash used in financing activities | (89,570 | ) |  | — |  |  | (89,570 | )
Effect of foreign currency on cash, cash equivalents, and restricted cash | 784 |  |  | — |  |  | 784 |
Net increase in cash, cash equivalents, and restricted cash | 43,268 |  |  | 1,011 |  |  | 44,279 |
Cash, cash equivalents, and restricted cash at beginning of period | 194,986 |  |  | 16,520 |  |  | 211,506 |
Cash, cash equivalents, and restricted cash at end of period | $ | 238,254 |  |  | $ | 17,531 |  |  | 255,785 |
Retirement Plans In March 2017, the FASB amended "Retirement Plans" to improve the presentation of net periodic pension cost and net periodic postretirement benefit cost by requiring the classification of interest costs and actuarial gains and losses separately from operating income on the Condensed Consolidated Statement of Operations. We adopted the new guidance on January 1, 2018 and applied the practical expedient of reclassifying the amounts disclosed as "total net periodic benefit cost" in Note 11 to our December 31, 2017 Form 10-K from Operating incom e to Other income (expense), net. For the three months ended March 31, 2017 we reclassified $74 thousand and $221 thousand from Costs and expenses and General and administrative expenses, respectively, to Other income (expense), net. Financial Instruments In January 2016 and February 2018, the FASB amended "Financial Instruments" to provide additional guidance on the recognition and measurement of financial assets and liabilities. The amendment requires investments in equity instruments to be measured at fair value with changes in fair value reflected in net income. For us, these changes in fair value will be offset by a corresponding change in the fair value of Deferred receipts held in trust or Care trusts' corpus. The amendment also changes the required disclosures associated with equity instruments as a result of the change in presentation. The new guidance was effective for us on January 1, 2018 and our adoption did not materially impact our consolidated results of operations, consolidated financial position, or cash flows as of and for the three months ended March 31, 2018. We made the appropriate disclosure changes in Footnote 3 of this Form 10-Q. Stock Compensation In May 2017, the FASB amended "Stock Compensation" to clarify which changes in terms and conditions of share-based awards require accounting for as modifications. Under the new guidance, modification accounting is required only if the fair value, vesting conditions, or the classification of the award (as equity or liability) changes as a result of the change in terms or conditions. We adopted the new guidance on January 1, 2018 and adoption did not have an impact on our consolidated results of operations, consolidated financial position, and cash flows. Recently Issued Accounting Standards Financial Instruments In June 2016, the FASB amended "Financial Instruments" to provide financial statement users with more decision-useful information about the expected credit losses on debt instruments and other commitments to extend credit held by a reporting entity at each reporting date. This amendment replaces the incurred loss impairment methodology in the current standard with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to support credit loss estimates. The new guidance is effective for us on January 1, 2020, and we are still evaluating the impact of adoption on our consolidated results of operations, consolidated financial position, and cash flows. Leases In February 2016 and January 2018, the FASB amended "Leases" to increase transparency and comparability among organizations. Under the new standard, an entity will be required to recognize lease assets and liabilities on its balance sheet and disclose key information about leasing arrangements. In addition, the new standard offers specific accounting guidance for a lessee, a lessor, and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. This new standard will be effective for us on January 1, 2019. We are in the process of reviewing our existing leases, have selected a software solution, and are assessing process changes as a result of the new guidance. We are still evaluating the impact of adoption on our consolidated results of operations, consolidated financial position, and cash flows. Goodwill In January 2017, the FASB amended "Goodwill" to simplify the subsequent measurement of goodwill. Amended guidance eliminates Step 2 from the goodwill impairment test. Instead, impairment is defined as the amount by which the carrying value of the reporting unit exceeds its fair value, up to the total amount of goodwill. The new guidance is effective for us on January 1, 2020, and is not expected to have an impact on our consolidated results of operations, consolidated financial position, and cash flows.

X
- Definition Summary of Significant Accounting Policies. + References No definition available. + Details
Name: | sci_SummaryOfSignificantAccountingPoliciesAbstract
Namespace Prefix: | sci_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for all significant accounting policies of the reporting entity. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
Name: | us-gaap_SignificantAccountingPoliciesTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration