Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C.Washington, D.C. 20549

FORMForm 10-Q
þ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJUNE 30, 2017
or
2022
OR
o☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from          __________to          __________
Commission file number 1-6402-1
sci-20220630_g1.jpg
SERVICE CORPORATION INTERNATIONAL
(Exact name of registrant as specified in its charter)
TexasTexas74-1488375
(State or other jurisdiction of incorporation or organization)(I. R. S.I.R.S. employer identification number)no.)
1929 Allen Parkway Houston, Texas77019
Houston
Texas77019
(Address of principal executive offices)(Zip code)
713-522-5141
(Registrant’s telephone number, including area code)
None
(Former name, former address, or former fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports requiredRegistrant’s telephone number, including area code: (713)522-5141
Securities registered pursuant to be filed by Section 13 or 15(d)12(b) of the Act:
Title of Each ClassTrading Symbol (s)Name of Each Exchange on Which Registered
Common Stock ($1 par value)SCINew York Stock Exchange
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and postedregistered pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). YES þ NO o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2Section 12(g) of the Exchange Act. (Check one):
Act: None
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.YesþNo¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).YesþNo¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filerþ
þ
Accelerated filero
¨
Non-accelerated filero
¨
Smaller reporting companyo
☐
Emerging growth companyo
(Do not check if smaller reporting company)


☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). YES o NO þ
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨
Indicate by check mark whether the registrant is a shell company (as defined in 12b-2 of the act).Yes☐Noþ
The number of shares outstanding of the registrant’s common stock as of October 25, 2017August 3, 2022 was 187,470,180157,674,951 (net of treasury shares).



SERVICE CORPORATION INTERNATIONAL
INDEX
SERVICE CORPORATION INTERNATIONAL
INDEX
Page
Glossary
��
3
5
Item 1.
5
5
6
7
8
9
Notes to Consolidated Financial Statements
11
1. Nature of Operations
11
2. Summary of Significant Accounting Policies
11
3. Preneed Activities
14
4. Income Taxes
20
5. Debt
20
6. Credit Risk and Fair Value of Financial Instruments
21
7. Equity
22
8. Segment Reporting
23
9. Commitments and Contingencies
24
10. Earnings Per Share
25
11. Acquisitions and Divestiture-Related Activities
25
Notes to Unaudited Condensed Consolidated Financial StatementsItem 2.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
2527
2527
2527
3134
3640
3640
Item 3.
3741
Item 4.
3841
3843
Item 1.
3843
Item 1A.
3843
Item 2.
3843
Item 3.
3843
Item 4.
3843
Item 5.
3843
Item 6. Exhibits
44
3945

2 Service Corporation International
GLOSSARY

Glossary
The following terms are common to the deathcare industry, are used throughout this report, and have the following meanings:
Atneed — Funeral, including cremation, and cemetery arrangements sold once death has occurred.
Burial VaultAverage Revenue per Service — A reinforced container intended to inhibitAverage revenue per funeral service performed, excluding the subsidenceimpact of the earthfuneral recognized preneed revenue, GA revenue, and house the casket after it is placed in the ground, also known as outer burial containers.certain other revenue.
Cancellation — Termination of a preneed contract, which relieves us of the obligation to provide the goods and services included in the contract. Cancellations may be requested by the customer or be initiated by us for failure to comply with the contractual terms of payment. State or provincial laws govern the amount of refund, if any, owed to the customer.
Care TrustTrusts' Corpus — The deposits and net realized capital gains and losses included in athe perpetual care trusttrusts that cannot be withdrawn. In certain states, some or all of the net realized capital gains can be distributed, so they are not included in the corpus.
Cemetery Merchandise and Services — Stone and bronze memorials, markers, outer burial containers, floral placement, graveside services, merchandise installations, urns, and interments.
Cemetery Perpetual Care Trust or Endowment Care Fund (ECF) — A trust fund established for the purpose of maintaining cemetery grounds and property into perpetuity, also referred to as a cemetery perpetual care trust.perpetuity. For these trusts, the corpus remains in the trust in perpetuity and the net ordinary investment earnings or elected distributions are distributed to uswithdrawn regularly and are intended to defray our expenses incurred to maintain the cemetery. In certain states, some or all of the net realized capital gains can also be distributed. Additionally, some states allow a total return distribution that may contain elements of income, capital appreciation, and principal.
Cemetery Property — Developed lots, lawn crypts, mausoleum spaces, niches, and cremation memorialization property items (constructed and ready to accept interments) and undeveloped land we intend to develop for the sale of interment rights. Includes the construction-in-progress balance during the pre-construction and construction phases of projects creating new developed property items.
Cemetery Property Amortization or Amortization of Cemetery Property — The non-cash recognized expenses of cemetery property interment rights, which are recorded by specific identification with the cemetery property revenue for each contract.
Cemetery Property Interment Rights — The exclusive right to determine the human remains that will be interred in a specific cemetery property space. See also Cemetery Property Revenue below.
Cemetery Property Revenue — Recognized sales of interment rights in cemetery property when a minimum of 10% of the sales price has been collectedreceivable is deemed collectible and the property has beenis fully constructed and is available for interment.
Cemetery Merchandise and ServicesCombination Location (Combos) — Stone and bronze memorials, markers, burial vaults, floral placement, graveside services, merchandise installations, urns, outer burial containers, and burial interments.Locations where a funeral service location is physically located within or adjoining an SCI-owned cemetery location.
Cremation — The reduction of human remains to bone fragments by intense heat.
Cremation Memorialization — Products specifically designed to commemorate and honor the life of an individual that has been cremated. These products include cemetery property inventory typesitems that provide for the disposition of cremated remains within our cemeteries such as benches, boulders, statues, glass front niches, etc. They also include memorial walls and books where the name of the individual is inscribed but the remains have been scattered or kept by the family.
Funeral Merchandise and Services — Merchandise such as burial caskets and related accessories, outer burial vaults,containers, urns and other cremation receptacles, casket and cremation memorialization products, and flowers, and professional services relating to funerals including arranging and directing services, use of funeral facilities and motor vehicles, removal, preparation, embalming, cremations, memorialization, visitations, travel protection, and catering.
Funeral Recognized Preneed Revenue — Funeral merchandise and travel protection, net, sold on a preneed contract and delivered before a death has occurred.
Funeral Services Performed — The number of funeral services, including cremations, provided after the date of death, sometimes referred to as funeral volume.
General Agency (GA) Revenue — Commissions we receive from third-party life insurance companies for life insurance policies sold to preneed customers for the purpose of funding preneed funeral arrangements. The commission rate paid is determined based on the product type sold, the length of payment terms, and the health and age of the insured/annuitant.
Interment — The burial or final placement of human remains in the ground (interment), in mausoleums (entombment), in niches (inurnment), or in cremation memorialization property.property (inurnment).
Lawn Crypt — AnCemetery property in which an underground outer burial receptacle constructed of concrete and reinforced steel which is usuallyhas been pre-installed in predetermined designated areas.
FORM 10-Q 3

Marker — A method of identifying a deceased person in a particular burial space, crypt, niche, or cremation memorialization property. Permanent burial and cremation memorialization markers are usually made of bronze or stone.
Maturity — When the underlying contracted merchandise is delivered or service is performed, typically at death. This is the point at which preneed funeral contracts are converted to atneed contracts (note — delivery of certain merchandise and services can occur prior to death).

Mausoleum — An above ground structure that is designed to house caskets andand/or cremation urns.
Merchandise and Service Trust — A trust account established in accordance with state or provincial law into which we deposit the required percentage of customers’ payments for preneed funeral, cremation, or cemetery merchandise and services to be delivered or performed by us in the future. The amounts deposited can be withdrawn only after we have completed our obligations under the preneed contract or upon the cancellation of the contract. Also referred to as Preneed Trust.a preneed trust.
Outer Burial Container — A reinforced container intended to inhibit the subsidence of the earth and house the casket after it is placed in the ground, also known as a burial vault.
Preneed — Purchase of cemetery property interment rights or any merchandise and services prior to death occurring.
Preneed Backlog or Backlog of Preneed Revenue — Future revenue from unfulfilled preneed funeral, cremation, and cemetery contractual arrangements.
Preneed Cemetery Sales Production — Sales of preneed or atneed cemetery contracts. These sales are recorded in Deferred preneed cemetery revenue, net until the merchandise is delivered, the service is performed, or when a minimum of 10% of the sales price has been collected and the property has been constructed and is available for interment.
Preneed Funeral Sales Production — Sales of preneed funeral trust-funded and insurance-funded contracts. Preneed funeral trust-funded contracts are recorded in Deferred preneed funeral revenue, net until the merchandise is delivered or the service is performed. We do not reflect the unfulfilled insurance-funded preneed funeral contract amounts in our unaudited Condensed Consolidated Balance Sheet. The proceeds of the life insurance policies will be reflected in revenue as these funerals are performed by us in the future.
Sales AveragePreneed Receivables, Net — Average revenue per funeralAmounts due from customers when we have delivered the merchandise, performed the service, performed, excludingor transferred control of the impact of funeral recognizedcemetery property interment rights prior to a death occurring and amounts due from customers on irrevocable preneed revenue, GA revenue, and certain other revenue.contracts.
Travel Protection — A product that provides shipment of remains to the servicing funeral home or cemetery of choice if the purchaser passes away outside of a certain radius of their residence, without any additional expense to the family.
Trust Fund Income — Recognized investment earnings from our merchandise and service and perpetual care trust investments.
As used herein, “SCI”, “Company”, “we”, “our”,“SCI,” “Company,” “we,” “our,” and “us” refer to Service Corporation International and companies owned directly or indirectly by Service Corporation International, unless the context requires otherwise. Management has published a white paper on the corporate website for further understanding of accounting for preneed sales. You can view the white paper at http://investors.sci-corp.com under Featured Documents. Documents and information on our website are not incorporated by reference herein.
As used herein, each reference to the SCI Annual Report on Form 10-K for the year ended December 31, 2016 shall mean such Form 10-K as amended by the SCI Annual Report on Form 10-K/A for the year ended December 31, 2016.


4 Service Corporation International
PART I. FINANCIAL INFORMATION


PART I. FINANCIAL INFORMATION
Item 1. Financial Statements

Service Corporation International
SERVICE CORPORATION INTERNATIONALCondensed Consolidated Statement of Operations (Unaudited)         
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)

Three Months Ended Nine Months Ended
September 30, September 30,Three months ended June 30,Six months ended June 30,
2017 2016 2017 20162022202120222021
(In thousands, except per share amounts)(In thousands, except per share amounts)
Revenue$731,346

$721,467

$2,282,298

$2,222,083
Revenue
Costs and expenses(581,644)
(580,722)
(1,771,986)
(1,756,425)
Operating profit149,702

140,745
 510,312
 465,658
General and administrative expenses(39,213)
(26,916)
(122,307)
(102,668)
(Losses) gains on divestitures and impairment charges, net(143)
557

5,545

(30,432)
Hurricane expenses, net of insurance proceeds(1,290) —
 (1,290) —
Property and merchandise revenueProperty and merchandise revenue$529,816 $519,777 $1,091,363 $1,074,368 
Service revenueService revenue394,507 391,617 875,116 855,476 
Other revenueOther revenue66,532 76,141 136,779 135,672 
Total revenueTotal revenue990,855 987,535 2,103,258 2,065,516 
Costs of revenueCosts of revenue
Cost of property and merchandiseCost of property and merchandise(262,479)(248,067)(522,530)(499,759)
Cost of serviceCost of service(217,804)(202,378)(437,342)(405,356)
Overhead and other expensesOverhead and other expenses(243,927)(263,766)(499,828)(504,634)
Costs of revenueCosts of revenue(724,210)(714,211)(1,459,700)(1,409,749)
Gross profitGross profit266,645 273,324 643,558 655,767 
Corporate general and administrative expensesCorporate general and administrative expenses(45,721)(33,649)(87,425)(75,318)
Gains on divestitures and impairment charges, netGains on divestitures and impairment charges, net294 6,162 783 7,428 
Operating income109,056

114,386
 392,260
 332,558
Operating income221,218 245,837 556,916 587,877 
Interest expense(42,754)
(39,508)
(125,473)
(121,988)Interest expense(40,571)(37,435)(79,599)(73,247)
Loss on early extinguishment of debt—

(25)
—

(22,503)
Other income (expense), net276

110

(165)
(697)
Losses on early extinguishment of debt, netLosses on early extinguishment of debt, net(1,225)(5,226)(1,225)(5,226)
Other (expense) income, netOther (expense) income, net(1,103)655 (975)996 
Income before income taxes66,578

74,963
 266,622
 187,370
Income before income taxes178,319 203,831 475,117 510,400 
(Provision for) benefit from income taxes(10,437)
(27,422)
32,830

(76,482)
Provision for income taxesProvision for income taxes(45,173)(46,042)(122,404)(123,656)
Net income56,141

47,541
 299,452
 110,888
Net income133,146 157,789 352,713 386,744 
Net income (loss) attributable to noncontrolling interests23

186

(105)
(96)
Net income attributable to noncontrolling interestsNet income attributable to noncontrolling interests(476)(84)(530)(160)
Net income attributable to common stockholders$56,164

$47,727
 $299,347

$110,792
Net income attributable to common stockholders$132,670 $157,705 $352,183 $386,584 
Basic earnings per share:    
 
Basic earnings per share: 
Net income attributable to common stockholders$0.30

$0.25

$1.59

$0.57
Net income attributable to common stockholders$0.84 $0.94 $2.20 $2.29 
Basic weighted average number of shares187,435

193,274

187,761

193,999
Basic weighted average number of shares158,705 168,450 160,009 169,180 
Diluted earnings per share:

 




Diluted earnings per share:
Net income attributable to common stockholders$0.29

$0.24

$1.56

$0.56
Net income attributable to common stockholders$0.82 $0.92 $2.17 $2.25 
Diluted weighted average number of shares192,243

196,567

192,417

197,175
Diluted weighted average number of shares161,290 170,863 162,568 171,616 
Dividends declared per share$0.15

$0.13

$0.43

$0.38
(See notes to unaudited condensed consolidated financial statements)

SERVICE CORPORATION INTERNATIONAL
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)

FORM 10-Q 5
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
 (In thousands)
Net income$56,141
 $47,541
 $299,452
 $110,888
Other comprehensive income:       
Foreign currency translation adjustments16,580
 (5,018) 30,185
 18,116
Total comprehensive income72,721
 42,523
 329,637
 129,004
Total comprehensive income (loss) attributable to noncontrolling interests14
 189
 (121) (102)
Total comprehensive income attributable to common stockholders$72,735
 $42,712
 $329,516
 $128,902



PART I
Service Corporation International
Condensed Consolidated Statement of Comprehensive Income (Unaudited)
Three months ended June 30,Six months ended June 30,
2022202120222021
(In thousands)
Net income$133,146 $157,789 $352,713 $386,744 
Other comprehensive income:
Foreign currency translation adjustments(13,867)6,934 (6,588)11,939 
Total comprehensive income119,279 164,723 346,125 398,683 
Total comprehensive income attributable to noncontrolling interests(475)(84)(529)(160)
Total comprehensive income attributable to common stockholders$118,804 $164,639 $345,596 $398,523 
(See notes to unaudited condensed consolidated financial statements)



SERVICE CORPORATION INTERNATIONAL
CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
 September 30, 2017 December 31, 2016
 (In thousands, except share amounts)
ASSETS   
Current assets:   
Cash and cash equivalents$267,956
 $194,986
Receivables, net77,426
 98,455
Inventories27,161
 26,431
Other32,340
 34,524
Total current assets404,883
 354,396
Preneed receivables, net and trust investments4,677,585
 4,305,165
Cemetery property1,792,843
 1,776,935
Property and equipment, net1,859,408
 1,827,587
Goodwill1,807,816
 1,799,081
Deferred charges and other assets592,462
 567,520
Cemetery perpetual care trust investments1,490,201
 1,407,465
Total assets$12,625,198
 $12,038,149
    
LIABILITIES & EQUITY   
Current liabilities:   
Accounts payable and accrued liabilities$494,020

$439,936
Current maturities of long-term debt76,314

89,974
Income taxes payable9,395

7,960
Total current liabilities579,729

537,870
Long-term debt3,292,816

3,196,616
Deferred revenue1,796,756

1,731,417
Deferred tax liability451,273

454,638
Other liabilities375,504

510,322
Deferred receipts held in trust3,399,644

3,103,796
Care trusts’ corpus1,490,525

1,408,243
Commitments and contingencies (Note 9)




Equity: 
 
Common stock, $1 per share par value, 500,000,000 shares authorized, 198,538,478 and 195,403,644 shares issued, respectively, and 187,746,443 and 189,405,244 shares outstanding, respectively187,746

189,405
Capital in excess of par value971,131

990,203
Retained earnings (accumulated deficit)33,140

(103,387)
Accumulated other comprehensive income46,661

16,492
Total common stockholders’ equity1,238,678

1,092,713
Noncontrolling interests273

2,534
Total equity1,238,951

1,095,247
Total liabilities and equity$12,625,198

$12,038,149
(See notes to unaudited condensed consolidated financial statements)

SERVICE CORPORATION INTERNATIONAL
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)

6 Service Corporation International
 Nine Months Ended
 September 30,
 2017 2016
 (In thousands)
Cash flows from operating activities: 
 
Net income$299,452

$110,888
Adjustments to reconcile net income to net cash provided by operating activities:


Loss on early extinguishment of debt—

22,503
Premiums paid on early extinguishment of debt—

(20,524)
Depreciation and amortization113,641

109,531
Amortization of intangibles20,923

22,210
Amortization of cemetery property46,533

42,573
Amortization of loan costs4,344

4,406
Provision for doubtful accounts6,846

4,048
Benefit from deferred income taxes(148,465)
(11,421)
(Gains) losses on divestitures and impairment charges, net(5,545)
30,432
Share-based compensation10,719

10,199
Excess tax benefits from share-based awards—

(11,512)
Change in assets and liabilities, net of effects from acquisitions and divestitures:


Decrease in receivables12,568

11,447
Increase in other assets(15,683)
(7,660)
Increase in payables and other liabilities66,455

37,565
Effect of preneed sales production and maturities:


Increase in preneed receivables, net and trust investments(58,631)
(48,837)
Increase in deferred revenue37,438

67,977
Decrease in deferred receipts held in trust(981)
(15,315)
Net cash provided by operating activities389,614

358,510
Cash flows from investing activities:


Capital expenditures(141,652)
(131,195)
Acquisitions(49,635)
(66,109)
Proceeds from divestitures and sales of property and equipment12,547

13,044
Net withdrawals of restricted funds and other175

5,120
Net cash used in investing activities(178,565)
(179,140)
Cash flows from financing activities:


Proceeds from issuance of long-term debt120,000

1,035,000
Debt issuance costs—

(5,232)
Payments of debt(26,376)
(27,632)
Early extinguishment of debt—

(875,110)
Principal payments on capital leases(40,509)
(25,220)
Proceeds from exercise of stock options30,672

16,029
Excess tax benefits from share-based awards—

11,512
Purchase of Company common stock(148,818)
(192,991)
Payments of dividends(80,711)
(73,665)
Purchase of noncontrolling interest(4,580)
(1,961)
Bank overdrafts and other2,790

(1,066)
Net cash used in financing activities(147,532)
(140,336)
Effect of foreign currency on cash and cash equivalents9,453

3,938
Net increase in cash and cash equivalents72,970

42,972
Cash and cash equivalents at beginning of period194,986

134,599
Cash and cash equivalents at end of period$267,956

$177,571


PART I
Service Corporation International
Condensed Consolidated Balance Sheet (Unaudited)
 June 30, 2022December 31, 2021
 (In thousands, except share amounts)
ASSETS
Current assets:  
Cash and cash equivalents$206,242 $268,626 
Receivables, net of reserves of $5,686 and $6,338, respectively93,479 106,051 
Inventories30,070 25,935 
Other31,979 40,448 
Total current assets361,770 441,060 
Preneed receivables, net of reserves of $23,566 and $20,727, respectively, and trust investments5,418,621 6,015,323 
Cemetery property1,899,554 1,900,844 
Property and equipment, net2,268,215 2,252,158 
Goodwill1,913,448 1,915,082 
Deferred charges and other assets, net of reserves of $3,771 and $4,577, respectively1,158,650 1,169,813 
Cemetery perpetual care trust investments1,681,703 1,996,898 
Total assets$14,701,961 $15,691,178 
LIABILITIES & EQUITY
Current liabilities:  
Accounts payable and accrued liabilities$635,536 $659,494 
Current maturities of long-term debt63,240 65,016 
Income taxes payable16,335 3,751 
Total current liabilities715,111 728,261 
Long-term debt3,954,475 3,901,304 
Deferred revenue, net1,583,394 1,532,749 
Deferred tax liability437,010 437,902 
Other liabilities410,597 438,903 
Deferred receipts held in trust4,085,657 4,766,492 
Care trusts’ corpus1,676,134 1,976,118 
Commitments and contingencies (Note 9)00
Equity:
Common stock, $1 per share par value, 500,000,000 shares authorized, 167,575,348 and 166,821,502 shares issued, respectively, and 158,219,257 and 163,114,202 shares outstanding, respectively158,219 163,114 
Capital in excess of par value968,455 979,096 
Retained earnings679,052 727,021 
Accumulated other comprehensive income33,627 40,214 
Total common stockholders’ equity1,839,353 1,909,445 
Noncontrolling interests230 4 
Total equity1,839,583 1,909,449 
Total liabilities and equity$14,701,961 $15,691,178 
(See notes to unaudited condensed consolidated financial statements)

SERVICE CORPORATION INTERNATIONAL
CONDENSED CONSOLIDATED STATEMENT OF EQUITY
(UNAUDITED)
(In thousands)
FORM 10-Q 7
 
Common
Stock
 Treasury Stock 
Capital in
Excess of
Par Value
 
Retained Earnings (Accumulated
Deficit)
 
Accumulated
Other
Comprehensive
Income
 
Noncontrolling
Interests
 Total
Balance at December 31, 2016
$195,403
 $(5,998) $990,203
 $(103,387) $16,492
 $2,534
 $1,095,247
Comprehensive income—
 —
 —
 299,347
 30,169
 121
 329,637
Dividends declared on common stock ($0.43 per share)—
 —
 (37,011) (43,700) —
 —
 (80,711)
Employee share-based compensation earned—
 —
 10,719
 —
 —
 —
 10,719
Stock option exercises2,476
 —
 28,196
 —
 —
 —
 30,672
Restricted stock awards, net of forfeitures207
 —
 (207) —
 —
 —
 —
Purchase of Company common stock—
 (4,794) (24,904) (119,120) —
 —
 (148,818)
Noncontrolling interest payments—
 —
 —
 —
 —
 (60) (60)
Noncontrolling interest purchases—
 —
 (2,258) —
 —
 (2,322) (4,580)
Other452
 —
 6,393
 —
 —
 —
 6,845
Balance at September 30, 2017$198,538
 $(10,792) $971,131
 $33,140
 $46,661
 $273
 $1,238,951



PART I
Service Corporation International
Condensed Consolidated Statement of Cash Flows (Unaudited)
 Six months ended June 30,
 20222021
(In thousands)
Cash flows from operating activities:  
Net income$352,713 $386,744 
Adjustments to reconcile net income to net cash provided by operating activities:
Losses on early extinguishment of debt, net1,225 5,226 
Depreciation and amortization86,234 79,552 
Amortization of intangibles9,478 10,127 
Amortization of cemetery property47,327 52,362 
Amortization of loan costs3,526 3,118 
Provision for expected credit losses6,756 6,389 
(Benefit from) provision for deferred income taxes(3,723)1,986 
Gains on divestitures and impairment charges, net(783)(7,428)
Gain on sale of investments(1,169)— 
Share-based compensation7,400 7,096 
Change in assets and liabilities, net of effects from acquisitions and divestitures:
Decrease (increase) in receivables11,878 (1,002)
Decrease (increase) in other assets1,680 (31,340)
(Decrease) increase in payables and other liabilities(8,582)56,891 
Effect of preneed sales production and maturities:
Increase in preneed receivables, net and trust investments(178,619)(160,465)
Increase in deferred revenue, net123,450 66,107 
Increase in deferred receipts held in trust14,094 14,401 
Net cash provided by operating activities472,885 489,764 
Cash flows from investing activities:
Capital expenditures(152,445)(103,161)
Business acquisitions, net of cash acquired(2,000)(3,591)
Real estate acquisitions(3,912)(10,498)
Proceeds from divestitures and sales of property and equipment6,968 12,232 
Proceeds from sale of investments1,169 — 
Payments for Company-owned life insurance policies
(1,690)(3,534)
Net cash used in investing activities(151,910)(108,552)
Cash flows from financing activities:
Proceeds from issuance of long-term debt143,000 820,000 
Debt issuance costs— (13,618)
Scheduled payments of debt(18,142)(18,070)
Early payments and extinguishment of debt(65,591)(699,837)
Principal payments on finance leases(17,920)(16,091)
Proceeds from exercise of stock options16,197 16,254 
Purchase of Company common stock(360,114)(187,183)
Payments of dividends(79,627)(70,920)
Bank overdrafts and other(5,759)(7,030)
Net cash used in financing activities(387,956)(176,495)
Effect of foreign currency(1,897)3,311 
Net (decrease) increase in cash, cash equivalents, and restricted cash(68,878)208,028 
Cash, cash equivalents, and restricted cash at beginning of period278,555 238,610 
Cash, cash equivalents, and restricted cash at end of period$209,677 $446,638 
(See notes to unaudited condensed consolidated financial statements)

8 Service Corporation International


SERVICE CORPORATION INTERNATIONAL
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTSPART I
Service Corporation International
Condensed Consolidated Statement of Equity (Unaudited)
Common
Stock		Treasury
Stock,
Par Value		Capital in
Excess of
Par Value
Retained
Earnings		Accumulated Other
Comprehensive
Income		Noncontrolling
Interest		Total
 (In thousands, except per share amounts)
Balance at December 31, 2020$174,792 $(4,075)$981,934 $560,731 $39,366 $(127)$1,752,621 
Comprehensive income— — — 228,879 5,005 76 233,960 
Dividends declared on common stock ($0.21 per share)— — — (35,568)— — (35,568)
Employee share-based compensation earned— — 3,500 — — — 3,500 
Stock option exercises99 — 2,265 — — — 2,364 
Restricted stock awards, net of forfeitures163 — (163)— — — — 
Purchase of Company common stock— (2,142)(12,304)(91,771)— — (106,217)
Retirement of treasury shares(3)3 — — — — — 
Balance at March 31, 2021$175,051 $(6,214)$975,232 $662,271 $44,371 $(51)$1,850,660 
Comprehensive income— — — 157,705 6,934 84 164,723 
Dividends declared on common stock ($0.21 per share)— — — (35,352)— — (35,352)
Employee share-based compensation earned— — 3,596 — — — 3,596 
Stock option exercises644 — 13,328 — — — 13,972 
Restricted stock awards, net of forfeitures(3)— 3 — — — — 
Purchase of Company common stock— (1,542)(8,955)(70,551)— — (81,048)
Noncontrolling interest payments— — — — — (60)(60)
Other33 — 1,587 — — — 1,620 
Balance at June 30, 2021$175,725 $(7,756)$984,791 $714,073 $51,305 $(27)$1,918,111 















FORM 10-Q 9


PART I
Service Corporation International
Condensed Consolidated Statement of Equity (Unaudited)
Common
Stock		Treasury
Stock,
Par Value		Capital in
Excess of
Par Value		 
Retained
Earnings		Accumulated Other
Comprehensive
Income		Noncontrolling
Interest		Total
 (In thousands, except per share amounts)
Balance at December 31, 2021$166,822 $(3,708)$979,096 $727,021 $40,214 $4 $1,909,449 
Comprehensive income— — — 219,513 7,279 54 226,846 
Dividends declared on common stock ($0.25 per share)— — — (39,964)— — (39,964)
Employee share-based compensation earned— — 3,687 — — — 3,687 
Stock option exercises7 — 265 — — — 272 
Restricted stock awards and units, net of forfeitures147 — (147)— — — — 
Purchase of Company common stock— (4,104)(24,613)(227,638)— — (256,355)
Noncontrolling interest payments— — — — — (162)(162)
Other— — (1,127)— — — (1,127)
Balance at March 31, 2022$166,976 $(7,812)$957,161 $678,932 $47,493 $(104)$1,842,646 
Comprehensive income— — — 132,670 (13,866)475 119,279 
Dividends declared on common stock ($0.25 per share)— — — (39,663)— — (39,663)
Employee share-based compensation earned— — 3,713 — — — 3,713 
Stock option exercises574 — 15,351 — — — 15,925 
Restricted stock awards and units, net of forfeitures2 — (2)— — — — 
Purchase of Company common stock— (1,545)(9,327)(92,887)— — (103,759)
Noncontrolling interest payments— — — — — (141)(141)
Other24 — 1,559 — — — 1,583 
Balance at June 30, 2022$167,576 $(9,357)$968,455 $679,052 $33,627 $230 $1,839,583 
(Dollars in thousands, except per share amounts)See notes to unaudited condensed consolidated financial statements)
10 Service Corporation International


PART I
Service Corporation International
Notes to Unaudited Condensed Consolidated Financial Statements
1. Nature of Operations
Service Corporation International (SCI) is a holding company and all operations are conducted by its subsidiaries. We are North America’s largest provider of deathcare products and services, with a network of funeral service locations and cemeteries operating in the United States and Canada. Our funeral service and cemetery operations consist of funeral service locations, cemeteries, funeral service/cemetery combination locations, crematoria, and other related businesses, which enable us to serve a wide array of customer needs. We sell cemetery property and funeral and cemetery merchandise and services at the time of need and on a preneed basis. We strive to offer families exceptional service in planning life celebrations and personalized remembrances.
Funeral service locations provide all professional services relating to funerals and cremations, including the use of funeral facilities and motor vehicles, arranging and directing services, removal, preparation, embalming, cremations, memorialization, travel protection, and catering. Funeral merchandise, including burial caskets and related accessories, urns and other cremation receptacles, outer burial containers, flowers, online and video tributes, stationery products, casket and cremation memorialization products, and other ancillary merchandise, is sold at funeral service locations.
Our cemeteries provide cemetery property interment rights, including developed lots, lawn crypts, mausoleum spaces, niches, and other cremation memorialization and interment options. Cemetery merchandise and services, including memorial markers and bases, outer burial containers, flowers and floral placement, other ancillary merchandise, graveside memorial services, merchandise installation, and burial openings and closings,interments, are sold at our cemeteries.
2. 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. Intercompany balances and transactions have been eliminated in consolidation.
Our unaudited condensed consolidated 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. We have retained the specialized industry accounting principles when consolidating the trusts. Although we consolidate the trusts, it does not change the legal relationships among the trusts, us, or our customers. The customers are the legal beneficiaries of these trusts; therefore, their interests in these trusts represent a liability to us.
Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation with no effect on our consolidated net income or cash flows.
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, 2016,2021, unless otherwise disclosed herein, and should be read in conjunction therewith. The accompanying year-end condensedCondensed 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. The Company has two reportable segments: Funeral and Cemetery. See Note 8 for further detail on the Company's segments.
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.
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, 2016. These estimates and assumptionsthat may affect the reported amounts of assets and liabilities and disclosuresdisclosure 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.period. As a result, actual results could differ from these estimates.
Accounting Standards Adopted in 2017Cash, Cash Equivalents, and Restricted Cash
Stock Compensation
In March 2016, the FASB amended "Stock Compensation", modifying certain aspectsWe consider all highly liquid investments with an original maturity of the accounting for share-based payment transactions, which requires the tax effects related to share-based paymentsthree months or less to be recorded throughcash equivalents. The carrying amounts of our cash and cash equivalents approximate fair value due to the income statement, simplifies the accounting requirements for forfeitures and employers' tax withholding requirements, and modifies the presentationshort-term nature of certain items on the statementthese instruments.
FORM 10-Q 11


PART I
The components of cash, flows. cash equivalents, and restricted cash were as follows:
June 30, 2022December 31, 2021
 (In thousands)
Cash and cash equivalents$206,242 $268,626 
Restricted cash (1)
Included in Other current assets
1,192 7,847 
Included in Deferred charges and other assets, net
2,243 2,082 
Total restricted cash3,435 9,929 
Total cash, cash equivalents, and restricted cash$209,677 $278,555 
(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.
Receivables, net
The guidance requires the tax effect related to the settlementcomponents of share-based awards beReceivables, net in our unaudited Condensed Consolidated Balance Sheetwere as follows:
June 30, 2022
Atneed FuneralAtneed CemeteryMiscellaneousCurrent Portion of NotesTotal
 (In thousands)
Receivables$34,755 $28,674 $35,475 $261 $99,165 
Reserve for credit losses(3,260)(1,929)(348)(149)(5,686)
Receivables, net$31,495 $26,745 $35,127 $112 $93,479 
December 31, 2021
Atneed FuneralAtneed CemeteryMiscellaneousCurrent Portion of NotesTotal
 (In thousands)
Receivables$49,011 $27,461 $35,650 $267 $112,389 
Reserve for credit losses(3,597)(2,231)(344)(166)(6,338)
Receivables, net$45,414 $25,230 $35,306 $101 $106,051 

Additionally, included in income tax benefit or expenseDeferred charges and other assets, net were long-term miscellaneous receivables, net and notes receivable, net as follows:
June 30, 2022December 31, 2021
 (In thousands)
Notes receivable$8,372 $8,684 
Reserve for credit losses(2,709)(3,424)
Notes receivable, net$5,663 $5,260 
Long-term miscellaneous receivables$8,038 $8,146 
Reserve for credit losses(1,062)(1,153)
Long-term miscellaneous receivables, net$6,976 $6,993 

12 Service Corporation International


PART I
The following table summarizes the activity in our reserve for credit losses by portfolio segment, excluding preneed receivables which are presented in Note 3, for the statement of operations rather than in additional paid-in-capital. This guidance also eliminates the requirement to reclassify excess tax benefits from operating activities to financing activities within the statement of cash flows. We adopted the new guidance in the first quarter of 2017, as required, and the impact of the restricted stock deliveries and option exercises in the three and ninesix months ended SeptemberJune 30, 20172022:
December 31, 2021(Provision) benefit for Expected Credit LossesAcquisitions
(Divestitures), net		Write OffsRecoveriesEffect of Foreign Currency and OtherJune 30, 2022
 (In thousands)
Trade receivables:
Funeral$(3,597)$(2,913)$(39)$4,343 $(1,098)$44 $(3,260)
Cemetery(2,231)(137)(32)601 (130)— (1,929)
Total reserve for credit losses on trade receivables$(5,828)$(3,050)$(71)$4,944 $(1,228)$44 $(5,189)
Miscellaneous receivables:
Current$(344)$(3)$— $— $— $(1)$(348)
Long-term(1,153)91 — — — — (1,062)
Total reserve for credit losses on miscellaneous receivables$(1,497)$88 $— $— $— $(1)$(1,410)
Notes receivable$(3,590)$17 $— $715 $— $— $(2,858)

At June 30, 2022, the amortized cost basis of our miscellaneous and notes receivables by year of origination was a reduction toas follows:
20222021202020192018PriorRevolving Line of CreditTotal
 (In thousands)
Miscellaneous receivables:
Current$33,532 $931 $463 $403 $141 $5 $— $35,475 
Long-term1,061 3,294 1,534 1,728 398 23 — 8,038 
Total miscellaneous receivables$34,593 $4,225 $1,997 $2,131 $539 $28 $— $43,513 
Notes receivable$— $— $— $71 $— $4,896 $3,666 $8,633 
At June 30, 2022, the payment status of our provision for income taxes of $7.6 millionmiscellaneous and $16.9 million, respectively. Prior periods have not been retrospectively adjusted for adoption of this guidance. The remaining amendments to this standard,notes receivables was as noted above, are eitherfollows:

Past Due
<30 Days30-90 Days90-180 Days>180 DaysTotalCurrentTotal
 (In thousands)
Miscellaneous receivables:
Current$— $— $34 $213 $247 $35,228 $35,475 
Long-term— — — — — 8,038 8,038 
Total miscellaneous receivables$— $— $34 $213 $247 $43,266 $43,513 
Notes receivable$1 $4 $4 $1,124 $1,133 $7,500 $8,633 
not applicable or do not change our current accounting practices and thus do not impact our consolidated financial statements, including our consolidated statement of cash flows.
Inventory
FORM 10-Q 13

In July 2015, the FASB amended "Inventory" to state that an entity using an inventory method other than last-in, first out ("LIFO") or the retail inventory method should measure inventory at the lower of cost or net realizable value. The new guidance clarifies that net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The new guidance was effective for us on January 1, 2017 and our adoption did not materially impact our consolidated results of operations, consolidated financial position, or cash flows.
PART I
Recently Issued Accounting Standards
Revenue RecognitionBusiness Combinations
In May 2014,October 2021, the FASB issued "Revenue from ContractsFinancial Accounting Standards Board ("FASB") amended guidance to require that an acquirer recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Customers", which replaces existing revenue recognition guidance. During 2016,Topic 606. Generally, this new guidance will result in the FASB made several amendments toCompany recognizing contract assets and contract liabilities consistent with those reported by the acquiree immediately before the acquisition date. We have adopted 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 revenuewill apply it to customer contracts acquired in the amount to which we expect to be entitled for delivery of promised goods and services to our customers. The new standard will also result in enhanced revenue-related disclosures, includingbusiness combinations, if any, significant judgments and changes in judgments. Additionally, the new standard requires the deferral of incremental selling costs to the period in which the related revenue is recognized. The new standard will be effective for us beginningafter January 1, 2018. We intend to implement the standard with the modified retrospective approach, which recognizes the cumulative effect of2022. The adoption recognized on that date.
We established a cross-functional team and analyzed thehad no impact on our contract portfolio by reviewing our revenue streams and our current policies and procedures to identify potential differences that would result from applying the requirements of the new standard to our contracts. The implementation team reports findings and progress of the project to management on a frequent basis. Through this process, we have identified appropriate changes to our processes, systems, and controls to support recognition and disclosure under the new standard.
In the first nine months of 2017, we made significant progress towards completing our evaluation of the potential changes from adopting the new standard on our future reporting and disclosures. We also made progress on our contract reviews and policy amendments, including developing a process for the systemic application of the standard to existing undelivered performance obligations at adoption. Additionally, we began making programming changes to our point of sale system to accommodate recognition and disclosure under the new standard. During the third quarter, we began testing these changes to ensure the updated system functions as intended. Finally, we have identified and begun designing additional controls around new processes that will be implemented upon adoption of the new standard.
We cannot determine the cumulative effect prior to adoption as the delivery of the performance obligations is not under our control. We do not know which services will be performed or merchandise will be delivered on existing contracts during the fourth quarter of 2017. We have not fully determined the ongoing financial impact of the new standard to our consolidated results of operations, consolidated financial position, and cash flows. However, we have concluded that the standard will impact 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 related goods and services are delivered to the customer. The incremental selling costs will be deferred and recognized by specific identification based on the delivery of the respective goods and services. Additionally, we believe the amounts due from customers for undelivered performance obligations on cancelable preneed contracts represent contract assets, which are required to be netted with deferred revenue, instead of preneed receivables on our 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 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.
Financial Instruments
In January 2016, 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. We will continue to defer the recognition of this income until we provide the related service or deliver the related merchandise. The new guidance is effective for us on January 1, 2018, and we do not expect a material impact of adoption on our consolidated results of operations, consolidated financial position, and cash flows.
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.
LeasesFinancial Instruments
In February 2016,March 2022, the FASB amended "Leases" guidance 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 requiredrequire public companies to disclose qualitative and quantitative information about leasing arrangements to enable a userthe vintage year of receivable write-offs during the financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.reporting period. This new standard will be effectivedisclosure is required for us on January 1, 2019. Webeginning with our Form 10-Q for the three months ended March 31, 2023 and we will add the additional disclosures if write-offs during the period 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.
Cash Flow
In August and November 2016, the FASBmaterial. The 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. The guidance requires these presentation changes to be made retrospectively to all consolidated statements of cash flows presented after the new guidance is effective for us on January 1, 2018. We are still evaluating the impact of adoption on our consolidated statement of 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 anhas no impact on our consolidated results of operations, consolidated financial position, and cash flows.
Retirement PlansFair Value Measurements
In March 2017,June 2022, 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 consolidated statement of operations. The guidance requires these presentation changes to be made retrospectively to all consolidated statements of operations presented after the new guidance is effective for us on January 1, 2018. We intend to apply the practical expedient of reclassifying the amounts previously disclosed as "total net periodic benefit cost" in Note 14 of our 2016 Form 10-K from operating income to other income. Adoption is not expected to have an impact on our results of operations, consolidated financial position, and cash flows.
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 ifthat the fair value vesting conditions, or the classification of the award (asinvestments in equity or liability) changesinstruments with contractual sale restrictions should not be discounted as a result of the changecontractual restrictions. Additionally, the new guidance mandated disclosure of the fair value of any such securities, a description of the nature and duration of the restrictions, and circumstances that could cause a lapse in terms or conditions.the restrictions. The new guidance is effective for us onbeginning with valuations that occur after January 1, 20182024 and is not expected to have anany impact on our consolidated results of operations, consolidated financial position, and cash flows.
3. Preneed Activities
Preneed receivables, netReceivables, Net and trust investmentsTrust Investments
The components of Preneed receivables, net and trust investments in our unaudited condensedCondensed Consolidated Balance Sheet at Septemberwere as follows:
June 30, 2022December 31, 2021
 (In thousands)
Preneed receivables, net$1,326,506 $1,243,781 
Trust investments, at market5,547,990 6,536,851 
Insurance-backed fixed income securities and other225,828 231,589 
Trust investments5,773,818 6,768,440 
Less: Cemetery perpetual care trust investments(1,681,703)(1,996,898)
Preneed trust investments4,092,115 4,771,542 
Preneed receivables, net and trust investments$5,418,621 $6,015,323 

14 Service Corporation International


PART I
Preneed receivables, net comprised the following:
June 30, 2022
FuneralCemeteryTotal
 (In thousands)
Preneed receivables$174,770 $1,195,158 $1,369,928 
Unearned finance charges(11,429)(8,427)(19,856)
Preneed receivables, at amortized cost163,341 1,186,731 1,350,072 
Reserve for credit losses(14,034)(9,532)(23,566)
Preneed receivables, net$149,307 $1,177,199 $1,326,506 
December 31, 2021
FuneralCemeteryTotal
 (In thousands)
Preneed receivables$162,183 $1,125,539 $1,287,722 
Unearned finance charges(12,038)(11,176)(23,214)
Preneed receivables, at amortized cost150,145 1,114,363 1,264,508 
Reserve for credit losses(12,722)(8,005)(20,727)
Preneed receivables, net$137,423 $1,106,358 $1,243,781 
At June 30, 2017 and December 31, 2016 are2022, the amortized cost basis of our preneed receivables by year of origination was as follows:

20222021202020192018PriorTotal
 (In thousands)
Preneed receivables, at amortized cost:
Funeral$45,242 $54,855 $28,813 $15,829 $5,417 $13,185 $163,341 
Cemetery279,990 438,945 252,283 116,143 60,011 39,359 1,186,731 
Total preneed receivables, at amortized cost$325,232 $493,800 $281,096 $131,972 $65,428 $52,544 $1,350,072 

At June 30, 2022, the payment status of our preneed receivables was as follows:
Past Due
<30 Days30-90 Days90-180 Days>180 DaysTotalCurrentTotal
 (In thousands)
Preneed receivables, at amortized cost:
Funeral$3,241 $2,743 $1,662 $19,934 $27,580 $135,761 $163,341 
Cemetery33,783 24,728 5,538 4,535 68,584 1,118,147 1,186,731 
Total preneed receivables, at amortized cost$37,024 $27,471 $7,200 $24,469 $96,164 $1,253,908 $1,350,072 
FORM 10-Q 15


PART I
 September 30, 2017 December 31, 2016
 (In thousands)
Preneed funeral receivables$331,917
 $312,556
Preneed cemetery receivables1,099,795
 1,038,592
Preneed receivables from customers1,431,712
 1,351,148
Unearned finance charge(45,751) (45,989)
Allowance for cancellation(108,635) (104,740)
Preneed receivables, net$1,277,326
 $1,200,419
    
Trust investments, at market$4,343,081
 $3,936,908
Cash held in trust

282,594
 304,055
Assets associated with businesses held for sale(2,680) —
Insurance-backed fixed income securities and other267,465
 271,248
Trust investments4,890,460
 4,512,211
Less: Cemetery perpetual care trust investments(1,490,201) (1,407,465)
Preneed trust investments$3,400,259
 $3,104,746
    
Preneed receivables, net and trust investments$4,677,585
 $4,305,165
The following table summarizes the activity for the reserve for credit losses on preneed receivables for the six months ended June 30, 2022:

December 31, 2021Provision for Expected Credit LossesWrite OffsEffect of Foreign CurrencyJune 30, 2022
 (In thousands)
Funeral$(12,722)$(2,950)$1,636 $2 $(14,034)
Cemetery(8,005)(1,861)333 1 (9,532)
Total reserve for credit losses on preneed receivables$(20,727)$(4,811)$1,969 $3 $(23,566)


The table below sets forth certain investment-related activities associated with our trusts:

Three months ended June 30,Six months ended June 30,
2022202120222021
 (In thousands)
Deposits$140,450 $133,819 $268,422 $254,102 
Withdrawals$123,787 $117,578 $246,151 $230,158 
Purchases of securities$434,659 $379,836 $903,956 $812,567 
Sales of securities$429,281 $399,076 $823,683 $831,075 
Realized gains from sales of securities(1)
$117,684 $174,732 $221,239 $304,919 
Realized losses from sales of securities(1)
$(52,711)$(17,644)$(80,643)$(33,812)
(1)All realized gains and losses are recognized in Other (expense) income, net for our trust investments and are offset by a corresponding reclassification in Other (expense) income, net to Deferred receipts held in trust and Care trusts’ corpus.

16 Service Corporation International
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
 (In thousands) (In thousands)
Deposits$86,028
 $82,286
 $277,286
 $243,957
Withdrawals$99,872
 $90,156
 $297,595
 $260,199
Purchases of available-for-sale securities$886,732
 $500,577
 $1,792,190
 $1,142,873
Sales of available-for-sale securities$509,675
 $490,945
 $1,742,860
 $1,092,912




PART I
The costscost and market values associated with trust investments recorded at fairmarket value at September 30, 2017 and December 31, 2016 are detailed below. Cost reflects the investment (net of redemptions) of control holders in the trusts. Fair value represents the value of the underlying securities held by the trusts.
 June 30, 2022
Fair Value Hierarchy LevelCostUnrealized
Gains		Unrealized
Losses		Value
  (In thousands) 
Fixed income securities:    
U.S. Treasury2$49,838 $159 $(1,480)$48,517 
Canadian government232,889 17 — 32,906 
Corporate21,362 1 (99)1,264 
Residential mortgage-backed21,428 1 (61)1,368 
Asset-backed2300 1 (44)257 
Equity securities: 
Preferred stock24,341 — (1,492)2,849 
Common stock: 
United States11,723,029 236,461 (254,580)1,704,910 
Canada148,097 11,750 (14,763)45,084 
Other international1149,430 8,764 (27,600)130,594 
Mutual funds: 
Equity1908,801 55,050 (130,621)833,230 
Fixed income11,109,802 9,875 (140,217)979,460 
Other3187 1 — 188 
Trust investments, at fair value4,029,504 322,080 (570,957)3,780,627 
Commingled funds
Fixed income677,724 78,464 (73,699)682,489 
Equity234,318 65,230 (6,194)293,354 
Money market funds319,375 — — 319,375 
Alternative investments309,352 163,765 (972)472,145 
Trust investments, at net asset value1,540,769 307,459 (80,865)1,767,363 
Trust investments, at market$5,570,273 $629,539 $(651,822)$5,547,990 
FORM 10-Q 17


PART I
September 30, 2017 December 31, 2021
Value Hierarchy Level Cost 
Unrealized
Gains
 
Unrealized
Losses
 ValueFair Value Hierarchy LevelCostUnrealized
Gains		Unrealized
Losses		Value
   (In thousands)    (In thousands) 
Fixed income securities:        Fixed income securities:    
U.S. Treasury2 $24,704
 $25
 $(12) $24,717
U.S. Treasury2$51,002 $795 $(283)$51,514 
Canadian government2 84,387
 182
 (904) 83,665
Canadian government229,881 28 — 29,909 
Corporate2 16,720
 374
 (139) 16,955
Corporate2170 6 (2)174 
Residential mortgage-backed2 427
 16
 (1) 442
Residential mortgage-backed21,407 58 (15)1,450 
Asset-backed2 317
 18
 (7) 328
Asset-backed2274 2 (10)266 
Equity securities:        Equity securities: 
Preferred stock2 8,127
 166
 (159) 8,134
Preferred stock24,843 4 (1,024)3,823 
Common stock:        Common stock: 
United States1 1,184,510
 213,024
 (22,703) 1,374,831
United States11,648,785 624,349 (56,092)2,217,042 
Canada1 33,167
 11,612
 (942) 43,837
Canada134,787 19,617 (898)53,506 
Other international1 57,114
 13,546
 (1,137) 69,523
Other international1129,486 42,171 (9,819)161,838 
Mutual funds:        Mutual funds: 
Equity1 607,088
 56,277
 (6,304) 657,061
Equity1875,828 140,893 (10,116)1,006,605 
Fixed income1 1,218,188
 17,273
 (23,794) 1,211,667
Fixed income11,025,327 12,560 (18,675)1,019,212 
Other3 6,369
 2,513
 (47) 8,835
Other3187 1 — 188 
Trust investments, at fair value 3,241,118
 315,026
 (56,149) 3,499,995
Trust investments, at fair value3,801,977 840,484 (96,934)4,545,527 
Fixed income commingled funds 653,105
 1,103
 (6,095) 648,113
Private equity 191,815
 16,009
 (12,851) 194,973
Commingled fundsCommingled funds
Fixed incomeFixed income662,125 115,939 (3,171)774,893 
EquityEquity230,926 161,125 (114)391,937 
Money market fundsMoney market funds408,762 — — 408,762 
Alternative investmentsAlternative investments292,888 128,197 (5,353)415,732 
Trust investments, at net asset value 844,920
 17,112
 (18,946) 843,086
Trust investments, at net asset value1,594,701 405,261 (8,638)1,991,324 
Trust investments, at market $4,086,038
 $332,138
 $(75,095) $4,343,081
Trust investments, at market$5,396,678 $1,245,745 $(105,572)$6,536,851 

 December 31, 2016
 Value Hierarchy Level Cost 
Unrealized
Gains
 
Unrealized
Losses
 Value
     (In thousands)  
Fixed income securities:         
U.S. Treasury2 $145,315
 $884
 $(838) $145,361
Canadian government2 79,141
 409
 (222) 79,328
Corporate2 18,934
 295
 (227) 19,002
Residential mortgage-backed2 333
 1
 (1) 333
Asset-backed2 448
 16
 (31) 433
Equity securities:         
Preferred stock2 2,907
 83
 (156) 2,834
Common stock:         
United States1 1,107,942
 151,146
 (35,542) 1,223,546
Canada1 25,708
 10,030
 (455) 35,283
Other international1 83,238
 4,995
 (10,632) 77,601
Mutual funds:         
Equity1 688,120
 19,962
 (56,857) 651,225
Fixed income1 875,615
 6,203
 (46,219) 835,599
Other3 4,712
 2,468
 (17) 7,163
Trust investments, at fair value  3,032,413
 196,492
 (151,197) 3,077,708
Fixed income commingled funds  692,434
 8,524
 (12,234) 688,724
Private equity  175,881
 9,812
 (15,217) 170,476
Trust investments, at net asset value  868,315
 18,336
 (27,451) 859,200
Trust investments, at market  $3,900,728
 $214,828
 $(178,648) $3,936,908
As of September 30, 2017, our unfunded commitment for ourOur alternative investments include funds invested in limited partnerships with interests in private equity, private market real estate, energy and othernatural resources, infrastructure, transportation, and private debt including both distressed debt and mezzanine financing. These investments was $153.3 million which, if called, wouldcan never be fundedredeemed by the funds. Instead, due to the nature of the investments in this category, distributions are received through the liquidation of the underlying assets of the trusts.

funds. The funds' managers have not communicated the timing of any liquidations.
The change in our market-based trust investments with significant unobservable inputs (Level 3) is as follows:

Three months ended June 30,Six months ended June 30,
2022202120222021
(In thousands)
Fair value, beginning balance$188 $190 $188 $190 
Net realized and unrealized (losses) included in Other income, net(1)
— (1)— (1)
Fair value, ending balance$188 $189 $188 $189 
(1)All net realized and unrealized (losses) recognized in Other (expense) income, net for our trust investments are offset by a corresponding reclassification in Other (expense) income, net to Deferred receipts held in trust and Care trusts' corpus.
18 Service Corporation International
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
 (In thousands) (In thousands)
Fair value, beginning balance$7,924
 $8,553
 $7,163
 $8,177
Net unrealized (loss) gain included in Accumulated other comprehensive income(1)
(116) 117
 694
 486
Purchases1,881
 36
 1,909
 61
Sales(854) (1,309) (931) (1,327)
Fair value, ending balance$8,835
 $7,397
 $8,835
 $7,397



(1)
All net unrealized (losses) gains recognized in Accumulated other comprehensive income for our trust investments are offset by a corresponding reclassification in Accumulated other comprehensive income to Deferred receipts held in trust and Care trusts' corpus.
PART I

Maturity dates of our fixed income securities range from 20172022 to 2040. Maturities of fixed income securities (excluding mutual funds) at SeptemberJune 30, 20172022 are estimated as follows:
 Fair Value
 (In thousands)
Due in one year or less$73,050
Due in one to five years50,496
Due in five to ten years2,175
Thereafter386
 $126,107

Fair Value
(In thousands)
Due in one year or less$53,260 
Due in one to five years25,888 
Due in five to ten years4,963 
Thereafter201 
Total estimated maturities of fixed income securities$84,312 
Recognized trust fund income (realized and unrealized) related to theseour preneed trust investments was $39.1$35.7 million and $35.7$43.8 million, for the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. Recognized trust fund income (realized and unrealized) related to theseour cemetery perpetual care trust investments was $122.6$20.8 million and $116.2$27.0 million for the ninethree months ended SeptemberJune 30, 20172022 and 2016,2021, respectively.
We have determinedRecognized trust fund income (realized and unrealized) related to our preneed trust investments was $81.5 million and $88.8 million, for the six months ended June 30, 2022 and 2021, respectively. Recognized trust fund income (realized and unrealized) related to our cemetery perpetual care trust investments was $45.3 million and $47.8 million for the six months ended June 30, 2022 and 2021, respectively.
Deferred Revenue, Net
Deferred revenue, net represents future revenue, including distributed trust investment earnings associated with unperformed trust-funded preneed contracts that the unrealized lossesare not held in trust accounts. Future revenue and net trust investment earnings that are held in trust accounts are included in Deferred receipts held in trust.
The components of Deferred revenue, net in our unaudited Condensed Consolidated Balance Sheet were as follows:
June 30, 2022December 31, 2021
 (In thousands)
Deferred revenue$2,386,552 $2,259,364 
Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts(803,158)(726,615)
Deferred revenue, net$1,583,394 $1,532,749 
The following table summarizes the activity for our contract liabilities, which are reflected in Deferred revenue, net and Deferred receipts held in trust:
Six months ended June 30,
20222021
 (In thousands)
Beginning balance — Deferred revenue, net and Deferred receipts held in trust
$6,299,241 $5,761,291 
Net preneed contract sales753,691 644,559 
Acquisitions (dispositions) of businesses, net889 (604)
Net investment (losses) gains(1)
(692,181)312,837 
Recognized revenue from backlog(2)
(301,448)(270,817)
Recognized revenue from current period sales(312,274)(285,596)
Change in amounts due on unfulfilled performance obligations(76,884)(40,933)
Change in cancellation reserve(331)(108)
Effect of foreign currency and other(1,652)8,170 
Ending balance — Deferred revenue, net and Deferred receipts held in trust
$5,669,051 $6,128,799 
(1)Includes both realized and unrealized investment (losses) gains.
(2)Includes current year trust investments are considered temporary in nature, asfund income through the unrealized losses were due to temporary fluctuations in interest rates and equity prices. The investments are diversified across multiple industry segments using a balanced allocation strategy to minimize long-term risk. We believe that nonedate of the securities are other-than-temporarily impaired based on our analysis of the investments. Our analysis included a review of the portfolio holdings and discussions with the individual money managers as to the sector exposures, credit ratings, and the severity and duration of the unrealized losses. Our trust investment unrealized losses, their associated values, and the duration of unrealized losses as of September 30, 2017 and December 31, 2016, respectively, are shown in the following tables:performance.
FORM 10-Q 19
 September 30, 2017
 
In Loss Position
Less Than 12 Months
 
In Loss Position
Greater Than 12 Months
 Total
 Value 
Unrealized
Losses
 Value 
Unrealized
Losses
 Value 
Unrealized
Losses
     (In thousands)    
Fixed income securities:           
U.S. Treasury$5,372
 $(12) $—
 $—
 $5,372
 $(12)
Canadian government24,819
 (596) 3,536
 (308) 28,355
 (904)
Corporate3,695
 (49) 3,676
 (90) 7,371
 (139)
Residential mortgage-backed202

(1)
—

—

202

(1)
 Asset-backed—
 —
 23
 (7) 23
 (7)
Equity securities:           
Preferred stock2,936
 (123) 259
 (36) 3,195
 (159)
Common stock:           
United States232,604
 (22,023) 23,507
 (680) 256,111
 (22,703)
Canada4,345
 (510) 3,022
 (432) 7,367
 (942)
Other international7,911
 (494) 5,700
 (643) 13,611
 (1,137)
Mutual funds:           
Equity25,057
 (2,402) 17,439
 (3,902) 42,496
 (6,304)
Fixed income79,805
 (827) 292,789
 (22,967) 372,594
 (23,794)
Other190
 (2) 1,279
 (45) 1,469
 (47)
Trust investments, at fair value386,936
 (27,039) 351,230
 (29,110) 738,166
 (56,149)
Fixed income commingled funds347,260
 (1,496) 176,493
 (4,599) 523,753
 (6,095)
Private equity4,067
 (599) 71,881
 (12,252) 75,948
 (12,851)
Trust investments, at net asset value351,327
 (2,095) 248,374
 (16,851) 599,701
 (18,946)
Total temporarily impaired securities$738,263
 $(29,134) $599,604
 $(45,961) $1,337,867
 $(75,095)



PART II
 December 31, 2016
 
In Loss Position
Less Than 12 Months
 
In Loss Position
Greater Than 12 Months
 Total
 Value 
Unrealized
Losses
 Value 
Unrealized
Losses
 Value 
Unrealized
Losses
     (In thousands)    
Fixed income securities:           
U.S. Treasury$41,409
 $(838) $—
 $—
 $41,409
 $(838)
Canadian government2,913
 (31) 3,344
 (191) 6,257
 (222)
Corporate2,107
 (22) 6,162
 (205) 8,269
 (227)
Residential mortgage-backed303
 (1) —
 —
 303
 (1)
 Asset-backed28
 (22) 156
 (9) 184
 (31)
Equity securities:           
Preferred stock971
 (53) 515
 (103) 1,486
 (156)
Common stock:           
United States271,433
 (23,168) 50,923
 (12,374) 322,356
 (35,542)
Canada3,318
 (383) 1,078
 (72) 4,396
 (455)
Other international19,274
 (4,139) 24,525
 (6,493) 43,799
 (10,632)
Mutual funds:           
Equity234,714
 (9,825) 276,504
 (47,032) 511,218
 (56,857)
Fixed income323,917
 (5,941) 425,614
 (40,278) 749,531
 (46,219)
Other26
 (2) 1,160
 (15) 1,186
 (17)
Trust investments, at fair value900,413
 (44,425) 789,981
 (106,772) 1,690,394
 (151,197)
Fixed income commingled funds473,550
 (11,714) 20,587
 (520) 494,137
 (12,234)
Private equity22,677
 (750) 73,100
 (14,467) 95,777
 (15,217)
Trust investments, at net asset value496,227
 (12,464) 93,687
 (14,987) 589,914
 (27,451)
Total temporarily impaired securities$1,396,640
 $(56,889) $883,668
 $(121,759) $2,280,308
 $(178,648)


4. Income Taxes
Income tax expense during interim periods is based on our estimated annual effective income tax rate plus any discrete items, which are recorded in the period in which they occur. Discrete items include, among others, events such events as changes in estimates due to the finalization of tax returns, tax audit settlements, expiration of statutes of limitation, and increases or decreases in valuation allowances on deferred tax assets. Our effective tax rate was 15.7%25.3% and 36.6%22.6% for the three months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. Our effective tax rate was a benefit of 12.3%25.8% and expense of 40.8%24.2% for the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. The higher effective tax rate for the three and ninesix months ended SeptemberJune 30, 2017 is lower2022 was primarily due to non-deductible losses in the cash surrender value of certain life insurance policies due to negative returns in the financial markets, which increased tax expense for us in the quarter. The effective tax rate for the six months ended June 30, 2022 was higher than the federal statutory tax rate of 35%21% primarily due to the recent IRSstate and foreign tax settlement discussed below and a result of tax benefits recognized on the settlement of employee share-based awards. The higher effective tax rate for the quarter ended September 30, 2016 as the result of non-deductible goodwill related to funeral home divestitures.expenses.
Unrecognized Tax Benefits
As of SeptemberJune 30, 2017,2022, the total amount of our unrecognized tax benefits was $79.5$1.3 million and the total amount of our accrued interest was $8.5$0.8 million.
In March 2017, we received from the IRS OfficeThe federal statutes of Appeals the fully executed Form 870-ADlimitation have expired for theall tax years 1999-2005, which effectively settles the issues under audit for those years. As a result of this resolution, we recognized a reduction in our unrecognized tax benefits of $143.0 million, of which $102.5 million was recognized as an income tax benefit for the matters that were effectively settled with an increase in our taxes payable of $40.5 million. In June 2017, we made $34.2 million in settlement paymentsprior to 2018, and associated interest to the IRS.
We remain under audit for years 2006 and 2007 as a result of carryback claims. In addition, we are not currently under audit by variousthe IRS. However, pursuant to the 2017 Tax Cuts and Jobs Act, the statute of limitations on the transition tax for the 2017 tax year does not expire until 2024. Various state jurisdictions forare auditing years 20002013 through 2015.2020. There are currently no federal or provincial audits in Canada. ItCanada; however, years subsequent to 2016 remain open and could be subject to examination. We believe that it is reasonably possible that the recorded amount of gross unrecognized tax benefits could significantlymay decrease over the next 12 months. However, due to the uncertainty regarding the timing of completion and possible outcomes on the outstanding audits, a current estimate of the range of decrease that may occurby $1.3 million within the next 12twelve months cannot be made.as a result of concluding various state tax matters.
5. Debt
The components of Debt as of September 30, 2017 and December 31, 2016 was as follows:are:
 September 30, 2017 December 31, 2016
 (In thousands)
7.625% Senior Notes due October 2018$250,000
 $250,000
4.5% Senior Notes due November 2020200,000
 200,000
8.0% Senior Notes due November 2021150,000
 150,000
5.375% Senior Notes due January 2022425,000
 425,000
5.375% Senior Notes due May 2024850,000
 850,000
7.5% Senior Notes due April 2027200,000
 200,000
Term Loan due March 2021647,500
 673,750
Bank Credit Facility due March 2021470,000
 350,000
Obligations under capital leases191,627
 208,758
Mortgage notes and other debt, maturities through 20506,134
 3,753
Unamortized premiums, net7,673
 8,313
Unamortized debt issuance costs(28,804) (32,984)
Total debt3,369,130
 3,286,590
Less: Current maturities of long-term debt(76,314) (89,974)
Total long-term debt$3,292,816
 $3,196,616
June 30, 2022December 31, 2021
 (In thousands)
7.5% Senior Notes due April 2027$138,274 $152,710 
4.625% Senior Notes due December 2027550,000 550,000 
5.125% Senior Notes due June 2029750,000 750,000 
3.375% Senior Notes due August 2030850,000 850,000 
4.0% Senior Notes due May 2031800,000 800,000 
Term Loan due May 2024552,500 568,750 
Bank Credit Facility due May 2024240,000 155,000 
Obligations under finance leases124,824 136,847 
Mortgage notes and other debt, maturities through 205054,201 48,113 
Unamortized debt issuance costs(42,084)(45,100)
Total debt4,017,715 3,966,320 
Less: Current maturities of long-term debt(63,240)(65,016)
Total long-term debt$3,954,475 $3,901,304 
Current maturities of debt at SeptemberJune 30, 20172022 include amounts due under our Term Loan,term loan, mortgage notes and other debt, and capital leasesfinance lease payments due within the next year.year as well as the portion of unamortized debt issuance costs expected to be recognized in the next twelve months.
Our consolidated debt had a weighted average interest rate of 4.80%3.94% and 4.68%3.70% at SeptemberJune 30, 20172022 and December 31, 2016,2021, respectively. Approximately, 62%78% and 63%79% of our total debt had a fixed interest rate at SeptemberJune 30, 20172022 and December 31, 2016,2021, respectively.
During the ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, we paid $101.7$76.2 million and $98.8$69.0 million in cash interest, respectively.
Bank Credit AgreementFacility
As of September 30, 2017, we have $470.0 million of outstanding borrowings under ourThe Bank Credit Facility due March 2021; $647.5 million of outstanding borrowings under our Term Loan due March 2021; and issued $33.4 million of letters of

credit. The bank credit agreement provides us with flexibility for working capital, if needed, and is guaranteed by a majority of our domestic subsidiaries. The subsidiary guaranty is a guaranty of payment of the outstanding amount of the total lending commitment, including letters of credit. The bank credit agreementBank Credit Facility contains certain financial covenants, including a minimum
20 Service Corporation International


PART I
interest coverage ratio, a maximum leverage ratio, and certain dividend and share repurchase restrictions. As of SeptemberJune 30, 2017,2022, we were in compliance with all of our debt covenants. We issued $33.7 million of letters of credit and pay a quarterly fee on the unused commitment, which was 0.30%0.10% at SeptemberJune 30, 2017.2022. As of SeptemberJune 30, 2017,2022, we have $196.6had $726.3 million in borrowing capacity under the Bank Credit Facility. The Bank Credit Facility had an interest rate of 2.67% and 1.11% at June 30, 2022 and December 31, 2021, respectively.
Debt Issuances and Additions
ForDuring the ninesix months ended SeptemberJune 30, 2017,2022, we drew $120.0$135.0 million on our Bank Credit Facility to make required paymentsand issued $8.0 million in other debt primarily for general corporate purposes, respectively.
During the six months ended June 30, 2021, we issued or added $820.0 million of debt including:
•$800.0 million unsecured 4.0% Senior Notes due May 2031; and
•$20.0 million on our term loan,Bank Credit Facility due May 2024.
Net proceeds from newly issued debt during the six months ended June 30, 2021 were used to fundpay down our IRS settlement payments,Bank Credit Facility due May 2024, to redeem our 8.0% Senior Notes due November 2021, and for general corporate purposes. These transactions resulted in additional debt issuance costs of $13.6 million.
Debt Extinguishments and Reductions
During the ninesix months ended SeptemberJune 30, 2017,2022, we made aggregate principal debt payments of $26.4 million, including $26.3$83.7 million for scheduled and early debt extinguishment payments towardsincluding:
•$50.0 million in aggregate principal of our Bank Credit Facility due May 2024;
•$16.3 million in aggregate principal of our Term Loan.Loan due May 2024;
•$14.4 million in aggregate principal of 7.5% Senior Notes due April 2027 repurchased on the open market;
•$1.1 million of premiums paid on early extinguishment of debt; and
•$1.9 million in other debt.
Certain of the above transactions resulted in the recognition of a loss of $1.2 million recorded in Losses on early extinguishment of debt, net in our Consolidated Statement of Operations for the six months ended June 30, 2022.
During the six months ended June 30, 2021, we made aggregate debt payments of $717.9 million for scheduled and early debt extinguishment payments including:
•$545.0 million in aggregate principal of our Bank Credit Facility due May 2024;
•$16.3 million in aggregate principal of our Term Loan due May 2024;
•$150.0 million in aggregate principal of 8.0% Senior Notes due November 2021;
•$4.8 million of premiums paid on early extinguishment of debt; and
•$1.8 million in other debt.
Certain of the above transactions resulted in the recognition of a loss of $5.2 million recorded inLosses on early extinguishment of debt, net in our Consolidated Statement of Operations for the six months ended June 30, 2021.
6. Credit Risk and Fair Value of Financial Instruments
Fair Value Estimates
The fair value estimates of the following financial instruments have been determined using available market information and appropriate valuation methodologies. The carrying values of cash and cash equivalents, trade receivables, and trade payables approximate the fair values of those instruments due to the short-term nature of the instruments. The fair valuecarrying values of receivables on preneed funeral and cemetery contracts approximate fair value as the terms and conditions of these contracts are impracticablecomparable to estimate because of the lack of a trading market and the diverse number of individual contracts with varying terms.our current contract offerings.
FORM 10-Q 21


PART I
The fair value of our debt instruments at SeptemberJune 30, 20172022 and December 31, 20162021 was as follows:
 September 30, 2017 December 31, 2016
 (In thousands)
7.625% Senior Notes due October 2018$264,375
 $272,353
4.5% Senior Notes due November 2020202,750
 205,000
8.0% Senior Notes due November 2021177,563
 175,500
5.375% Senior Notes due January 2022436,726
 444,614
5.375% Senior Notes due May 2024907,205
 884,000
7.5% Senior Notes due April 2027240,200
 231,590
Term Loan due March 2021647,500
 673,750
Bank Credit Facility due March 2021470,000
 350,000
Mortgage notes and other debt, maturities through 20506,134
 3,753
Total fair value of debt instruments$3,352,453
 $3,240,560
June 30, 2022December 31, 2021
 (In thousands)
7.5% Senior Notes due April 2027$146,882 $181,511 
4.625% Senior Notes due December 2027520,030 575,443 
5.125% Senior Notes due June 2029708,750 809,737 
3.375% Senior Notes due August 2030696,728 836,825 
4.0% Senior Notes due May 2031683,000 813,552 
Term Loan due May 2024552,500 568,750 
Bank Credit Facility due May 2024240,000 155,000 
Mortgage notes and other debt, maturities through 205051,386 46,878 
Total fair value of debt instruments$3,599,276 $3,987,696 
The fair valuevalues of our long-term, fixed-ratefixed rate loans were estimated using market prices for those loans, and therefore they are classified within Level 2 of the fair value measurements hierarchy. The Term Loan, Bank Credit Facility, agreement, and the mortgage and other debt are classified within Level 3 of the fair value measurements hierarchy. The fair valuevalues of these instruments hashave been estimated using a discounted cash flow analysis based on our incremental borrowing rate for similar borrowing arrangements. An increase (decrease) in the inputs results in a directionally opposite change in the fair value of the instruments.

7. Equity
(All shares reported in whole numbers)
Our components of Accumulated other comprehensive income are as follows:Share Repurchase Program
 
Foreign
Currency
Translation
Adjustment
 
Unrealized
Gains and
Losses
 
Accumulated
Other
Comprehensive
Income
   (In thousands)  
Balance at December 31, 2016
$16,492
 $—
 $16,492
Activity in 201730,169
 —
 30,169
Net unrealized gains associated with available-for-sale securities of the trusts, net of taxes—
 142,958
 142,958
Reclassification of net unrealized gain activity attributable to the Deferred receipts held in trust and Care trusts’ corpus, net of taxes
—
 (142,958) (142,958)
Balance at September 30, 2017$46,661
 $—
 $46,661
The assets and liabilities of foreign operations are translated into U.S. dollars using the current exchange rate. The U.S. dollar amount that arises from such translation, as well as exchange gains and losses on intercompany balances of a long-term investment nature, are included in the foreign currency translation adjustment in Accumulated other comprehensive income.
Share Repurchases
Subject to market conditions, normal trading restrictions, and limitations in our debt covenants, we may make purchases in the open market or through privately negotiated transactions under our stockshare repurchase program. During the ninesix months ended SeptemberJune 30, 2017,2022, we repurchased 4,793,6355,648,791 shares of common stock at an aggregate cost of $148.8$360.1 million, which is an average cost per share of $31.04.$63.75. During May 2022, our Board of Directors increased our share repurchase authorization to $600.0 million. After these repurchases and the increase in our share repurchase authorization, the remaining dollar value of shares authorized to be purchased under the share repurchase program was $534.1 million at June 30, 2022.
Subsequent to June 30, 2022, we repurchased 544,382 shares for $38.2 million at an average cost per share of $70.17. After these repurchases, the remaining dollar value of shares authorized to be purchased under ourthe share repurchase program was approximately $219.4 million at September 30, 2017.
Subsequent to September 30, 2017, we repurchased 390,063 shares of common stock at an aggregate cost of $13.4 million, which is an average cost per share of $34.39. After these subsequent repurchases, the remaining dollar value of shares authorized to be repurchased under our repurchase program is $206.0$495.9 million.
Noncontrolling Interest
22 Service Corporation International
In May 2017, we purchased the remaining 11% of the common stock of our consolidated subsidiary, Wilson Financial Group, Inc. for $4.6 million.


PART I
8. Segment Reporting
Our operations are both product-based and geographically-based, and the reportable operating segments presented below include our funeral and cemetery operations. Our geographic areas include the United States and Canada, where we conduct both funeral and cemetery operations.

Our reportable segment information, isincluding disaggregated revenue, was as follows:
 Funeral Cemetery 
Reportable
Segments
 (In thousands)
Three months ended September 30,     
Revenue from external customers:     
2017$437,529
 $293,817
 $731,346
2016$445,501
 $275,966
 $721,467
Operating profit:     
2017$70,118
 $79,584
 $149,702
2016$74,543
 $66,202
 $140,745
Nine Months Ended September 30,     
Revenue from external customers:     
2017$1,395,167
 $887,131
 $2,282,298
2016$1,404,794
 $817,289
 $2,222,083
Operating profit:     
2017$274,802
 $235,510
 $510,312
2016$271,186
 $194,472
 $465,658
The following table reconciles operatingfollows and includes a reconciliation of gross profit from reportable segments to our consolidated income before income taxes:
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
  
Operating profit from reportable segments$149,702
 $140,745
 $510,312
 $465,658
General and administrative expenses(39,213) (26,916) (122,307) (102,668)
(Losses) gains on divestitures and impairment charges, net(143) 557
 5,545
 (30,432)
Hurricane expense, net(1,290) —
 (1,290) —
Operating income109,056
 114,386
 392,260
 332,558
Interest expense(42,754) (39,508) (125,473) (121,988)
Loss on early extinguishment of debt—
 (25) —
 (22,503)
Other expense, net276
 110
 (165) (697)
Income before income taxes$66,578
 $74,963
 $266,622
 $187,370
taxes.
Three months ended June 30,Six months ended June 30,
2022202120222021
(In thousands)
Revenue from customers:
Funeral revenue:
Atneed revenue$285,991 $282,333 $639,360 $620,403 
Matured preneed revenue165,768 159,452 360,695 349,641 
Core funeral revenue451,759 441,785 1,000,055 970,044 
Non-funeral home revenue17,734 16,882 38,544 36,611 
Recognized preneed revenue42,570 33,113 85,692 74,862 
Other revenue36,749 39,923 73,618 69,624 
Total funeral revenue548,812 531,703 1,197,909 1,151,141 
Cemetery revenue:
Atneed revenue109,404 109,030 232,793 233,651 
Recognized preneed property revenue218,028 222,866 439,567 441,140 
Recognized preneed merchandise and services revenue84,828 87,718 169,828 173,536 
Core cemetery revenue412,260 419,614 842,188 848,327 
Other revenue29,783 36,218 63,161 66,048 
Total cemetery revenue442,043 455,832 905,349 914,375 
Total revenue from customers$990,855 $987,535 $2,103,258 $2,065,516 
Gross profit:
Funeral gross profit$116,629 $111,813 $312,612 $306,199 
Cemetery gross profit150,016 161,511 330,946 349,568 
Gross profit from reportable segments266,645 273,324 643,558 655,767 
Corporate general and administrative expenses(45,721)(33,649)(87,425)(75,318)
Gains on divestitures and impairment charges, net294 6,162 783 7,428 
Operating income221,218 245,837 556,916 587,877 
Interest expense(40,571)(37,435)(79,599)(73,247)
Losses on early extinguishment of debt, net(1,225)(5,226)(1,225)(5,226)
Other (expense) income, net(1,103)655 (975)996 
Income before income taxes$178,319 $203,831 $475,117 $510,400 
Our geographic area information iswas as follows:
United StatesCanadaTotal
 (In thousands)
Three months ended June 30,
Revenue from external customers:
2022$931,617 $59,238 $990,855 
2021$933,644 $53,891 $987,535 
Six months ended June 30,   
Revenue from external customers:
2022$1,982,237 $121,021 $2,103,258 
2021$1,953,614 $111,902 $2,065,516 
FORM 10-Q 23
 United States Canada Total
   (In thousands)  
Three months ended September 30,     
Revenue from external customers:     
2017$685,186
 $46,160
 $731,346
2016$681,769
 $39,698
 $721,467
Nine Months Ended September 30,     
Revenue from external customers:     
2017$2,140,796
 $141,502
 $2,282,298
2016$2,098,091
 $123,992
 $2,222,083


PART I
9. Commitments and Contingencies
Insurance Loss Reserves
We purchase comprehensive general liability, morticians’morticians and cemetery professional liability, automobile liability, and workers’ compensation insurance coverage all of which are structured with high deductibles. The high-deductible insurance

program means we are primarily self-insured for claims and associated costs and losses covered by these policies. As of SeptemberJune 30, 20172022 and December 31, 2016,2021, we havehad self-insurance reserves of $84.7$94.1 million and $78.0$94.3 million, respectively.
Litigation and Regulatory Matters
We are a party to various litigation and regulatory matters, investigations, and proceedings. Some of the more frequent routine litigations incidental to our business are based on burial practices claims and employment-related matters, including discrimination, harassment, and wage and hour laws and regulations. For each of our outstanding legal matters, we evaluate the merits of the case, our exposure to the matter, possible legal or settlement strategies, and the likelihood of an unfavorable outcome. We intend to vigorously defend ourselves in the matters described herein; however, if we determine that an unfavorable outcome is probable and can be reasonably estimated, or if we determine an amount for which we would be willing to settle the matter to avoid further costs and risk, we establish the necessary accruals. We hold certain insurance policies that may reduce cash outflows with respect to an adverse outcome of certain of these matters. We accrue such insurance recoveries when they become probable of being paid and can be reasonably estimated.
Wage and Hour Claims. We are named as a defendant in various lawsuits alleging violations of federal and state laws regulating wage and hour pay, including but not limited to the Samborsky, Vasquez, Romano, and Horton lawsuitsFredeen lawsuit described below.
Charles Samborsky, et al, individuallyLisa Fredeen, an aggrieved employee and on behalf of those persons similarly situated, v. SCI California Funeral Services, Inc., et al ; Case No. BC544180; in the Superior Court of the State of California for the County of Los Angeles, Central District-Central Civil West Courthouse. This lawsuit was filed in April 2014 against an SCI subsidiary and purports to have been brought on behalf ofother aggrieved employees who worked as family service counselors in California since April 2010. The plaintiffs allege causes of action for various violations of state laws regulating wage and hour pay. The plaintiffs seek unpaid wages, compensatory and punitive damages, attorneys’ fees and costs, interest, and injunctive relief. The claims have been sent to arbitration. In July 2017, the arbitrator entered an award rejecting the plantiffs' claims, ruling that they did not sue the correct party. We cannot quantify our ultimate liability, if any, in this lawsuit.
Adrian Mercedes Vasquez, an individual and on behalf of others similarly situated, v. California Cemetery and Funeral Services, LLC, et al; Case No. BC58837;BC706930; in the Superior Court of the State of California for the County of Los Angeles. This lawsuit was filed in July 2015 against SCI subsidiaries on May 18, 2018 and purports to be brought on behalf of the defendants' current and former non-exempt California employees of defendants during the four years preceding the filing of the complaint. The plaintiff allegesThis lawsuit asserts numerous causes of actionclaims for alleged wage and hour pay violations.violations under the California Labor Code and the California Private Attorneys General Act. The plaintiff seeks unpaid wages, compensatory and punitive damages, civil penalties, attorneys’ fees and costs, interest, and injunctive relief. The claims have been ordered to arbitration, withinterest. Given the arbitrator to determine whether the claims will proceed as a class or individual claims. In addition, the plaintiff filed an unfair labor practice charge against defendants with the National Labor Relations Board alleging that by enforcing a mandatory arbitration provision, defendants allegedly violated the National Labor Relations Act. We cannot quantify our ultimate liability, if any, in this lawsuit.
Nicole Romano, individually and on behalfnature of all others similarly situated v. SCI Direct, Inc., et al; Case No. BC656654; in the Superior Court of California for the County of Los Angeles. This lawsuit was filed in April 2017 against an SCI subsidiary and purports to have been brought on behalf of persons who worked as independent sales representatives in the U.S. during the four years preceding the filing of the complaint. The plaintiff alleges numerous causes of action for alleged wage and hour pay violations, including misclassifying the independent sales representatives as independent contractors instead of employees. The plaintiff seeks unpaid wages, compulsory and punitive damages, attorneys’ fees and costs, interest, and injunctive relief. We cannot quantify our ultimate liability, if any, in the lawsuit.
Felicia Horton, an individual and on behalf of other aggrieved employees v. SCI Direct, Inc., et al; Case No. 37-2016-00039356-CU-OE-CTL; in the Superior Court of California for the County of San Diego. This lawsuit was filed in November 2016 on behalf of the plaintiff who worked as an independent sales representative of our subsidiary in California. In addition, this lawsuit, asserts claims under California Private Attorney General Act (“PAGA”) provisions on behalfwe are unable to reasonably estimate the possible loss or ranges of other similarly situated California persons. The lawsuit alleges causes of action and seeks damages and relief similar to those in the Romano case described above. The attorneys in the Horton case have also filed additional lawsuits alleging individual and PAGA claims similar to those alleged in the Horton case. The additional lawsuits are styled Jandy Quismundo v. SCI Direct, Inc., et al; Case No. 37-2017-00031825-CU-OE-CTL; in the Superior Court of California for the County of San Diego, and Jaime Kallweit v. SCI Direct, Inc., et al; Case No. 37-2017-00037186-CU-OE-CTL; The Superior Court for the State of California for the County of San Diego. We cannot quantify our ultimate liability,loss, if any, in the lawsuits.any.
Claims Regarding Acquisition of Stewart Enterprises. We are involved in the following lawsuit.
Karen Moulton, Individually and on behalf of all others similarly situated v. Stewart Enterprises, Inc., Service Corporation International and others ; Case No. 2013-5636; in the Civil District Court Parish of New Orleans. This case was filed as a class action in June 2013 against SCI and our subsidiary in connection with SCI's acquisition of Stewart Enterprises, Inc. The plaintiffs allege that SCI aided and abetted breaches of fiduciary duties by Stewart Enterprises and its board of directors in negotiating the combination of Stewart Enterprises with a subsidiary of SCI. The plaintiffs seek damages concerning the

combination. We filed exceptions to the plaintiffs’ complaint that were granted in June 2014. Thus, subject to appeals, SCI will no longer be party to the suit. The case has continued against our subsidiary Stewart Enterprises and its former individual directors. However, in October 2016, the court entered a judgment dismissing all of plaintiffs’ claims. Plaintiffs have appealed the dismissal. We cannot quantify our ultimate liability, if any, for the payment of damages.
Operational Claims. Claims.We are named a defendant in various lawsuits alleging operational claims, including but not limited to the AllardState of California and Taylor lawsuits described below.
The People of the State of California v. Service Corporation International, a Texas corporation, SCI Direct, Inc. a Florida Corporation, S.E. Acquisition of California, Inc., a California corporation dba Neptune Society of Northern California, Neptune Management Corp., a California corporation, Trident Society, Inc. a California corporation, and Does 1 through 100, inclusive, Case No. RG 19045103; in the Superior Court of the State of California in and for the County of Alameda. In July 2019, we received a letter from the Attorney General, State of California, Department of Justice (“CAAG") alleging that the allocation of prices among certain of our cremation service contracts and cremation merchandise contracts, and the related preneed trust funding, violates section 7735 of the California Business and Professions Code and that provisions of these same contracts constitute false advertising and deceptive sales practices in violation of California consumer protection laws. On November 21, 2019, we filed a complaint, S.E. Combined Services of California, Inc., a California Corporation dba Neptune Society of Northern California, Neptune Management Corp. a California Corporation, and Trident Society, Inc. v. Xavier Becerra, Attorney General of the State of California, and Does 1-50, Case No. 34-2019-00269617; in the Sacramento County Superior Court seeking declaratory relief holding, in general, that our practices, methods, and documentation utilized in the sale of preneed funeral goods and services are in all respects compliant with California law. On December 2, 2019, the CAAG filed the complaint, referenced above, seeking permanent injunction from making false statements and engaging in unfair competition, a placement of funds into preneed trusts, civil penalties, customer refunds, attorneys’ fees, and costs. We believe our contracts comply with applicable laws. Given the nature of this lawsuit, described below.    we are unable to estimate a reasonably possible loss or range of loss, if any.
Linda Allard,Nancy Taylor, on behalf of herself and all others similarly situated v. SCI Direct, Inc.,Service Corporation International and others, Case No 16-1033;No. 20-cv-60709; in the United States District Court MiddleSouthern District of Tennessee.Florida Fort Lauderdale Division. This case was filed in June 2016April 2020 as a Florida class action underalleging that the Telephone Consumer Protectionallocation of prices among certain of our cremation service contracts and cremation merchandise contracts, and the related preneed trust funding, and the failure to disclose commissions paid and sales practices associated with the sale of third-party travel protection plans, violate the Florida Deceptive and Unfair Trade Practices Act (the Act). Plaintiff alleges she received telemarketing telephone calls that were made with a prerecorded voice or made by an automatic telephone dialing system in violation of the Act.and constitute unjust enrichment. Plaintiff seeks refunds, general, actual, compensatory and statutoryexemplary damages, as well as attorney’s feescivil penalties, interest, and costs.attorney fees. The parties have reached a tentative settlement of the lawsuit as reported in our Form 8-K filed on August 30, 2017.that would include an immaterial payment of attorney fees and provide consumers enhanced cancellation rights under certain circumstances. The settlement agreement is subject to court approval and notice to the class. The financial terms of the settlement call for SCI Direct to pay $15.0 million, of which $3.5 million will be paid by its insurer.

24 Service Corporation International


PART I
Unclaimed Property Audit. We are involved in the following matter.Audit
We received notices from a third party auditorauditors representing the unclaimed property departments of 36thirty-nine states regarding certain preneed funeral and cemetery contractscontracts. The states claim that were not funded by the purchase and assignment of the proceeds of insurance policies. The auditor claims that wesuch contracts are subject to the states’ unclaimed property or escheatment laws of those states concerning escheatment of unclaimed funds. The auditor seeks escheatment of funds from theand generally assert that all or a portion of such contracts for which it claims that we will probably not be required to providethe trusted preneed funds are escheatable if the beneficiary and/or purchaser is deceased or presumed deceased and no services or merchandise have been provided. We received notice that no additional property is due to be reported for the states of Alabama, Kentucky, Nebraska, New Mexico, Oklahoma, Oregon, South Carolina, South Dakota, Texas, and West Virginia. We consider the unclaimed property audits resolved in those ten states. We have reserved all of our rights, claims, and defenses. Given the future. No actual audits have commenced atnature of this time. We cannot quantify our ultimate liability,matter, we are unable to reasonably estimate the possible loss or ranges of loss, if any, in this matter.any.
The ultimate outcome of the matters described above cannot be determined at this time. We intend to vigorously defend all of the above matters; however, an adverse decision in one or more of such matters could have a material effect on us, our financial condition, results of operations, and cash flows.
10. Earnings Per Share
Basic earnings per common share (EPS) excludes dilution and is computed by dividing Net income attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted EPSearnings per share reflects the potential dilution that could occur if securities or other obligations to issue common stock were exercised or converted into common stock or resulted in the issuance of common sharesstock that then shared in our earnings.
A reconciliation of the numerators and denominators of the basic and diluted EPS computations is presented below:

 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
 (In thousands, except per share amounts)
Amounts attributable to common stockholders:       
Net income:       
Net income — basic$56,164
 $47,727
 $299,347
 $110,792
After tax interest on convertible debt13
 13
 38
 35
Net income — diluted$56,177
 $47,740
 $299,385
 $110,827
Weighted average shares (denominator):       
Weighted average shares — basic187,435
 193,274
 187,761
 193,999
Stock options4,575
 3,154
 4,448
 3,049
Restricted stock units112
 18
 87
 6
Convertible debt121
 121
 121
 121
Weighted average shares — diluted192,243
 196,567
 192,417
 197,175
Net income per share:       
Basic$0.30
 $0.25
 $1.59
 $0.57
Diluted$0.29
 $0.24
 $1.56
 $0.56
Three months ended June 30,Six months ended June 30,
2022202120222021
 (In thousands, except per share amounts)
Amounts attributable to common stockholders:
Net income — basic and diluted$132,670 $157,705 $352,183 $386,584 
Weighted average shares:
Weighted average shares — basic158,705 168,450 160,009 169,180 
Stock options2,521 2,363 2,486 2,382 
Restricted share units64 50 73 54 
Weighted average shares — diluted161,290170,863162,568171,616
Amounts attributable to common stockholders:
Earnings per share:
Basic$0.84 $0.94 $2.20 $2.29 
Diluted$0.82 $0.92 $2.17 $2.25 

The computation of diluted EPS excludes outstanding stock options and restricted stockshare units in certain periods in which the inclusion of such options or restricted stock unitsequity awards would be anti-dilutive inantidilutive to the periods presented. Total antidilutive options and

restricted stock units not currently included in the computation of dilutive EPSdiluted earnings per share are as follows (in shares):
Three months ended June 30,Six months ended June 30,
 2022202120222021
(In thousands)
Antidilutive options561 1,612 419 1,445 

FORM 10-Q 25


PART II
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
 (In thousands)
Antidilutive options—
 551
 878
 936
Antidilutive restricted stock units—
 —
 —
 2
Total common stock equivalents excluded from computation—
 551
 878
 938
11. Acquisitions and Divestiture-Related Activities
Acquisitions
We spent $2.0 million and $3.6 million, net of cash acquired, for several business acquisitions during the six months ended June 30, 2022 and 2021, respectively, and $3.9 million and $10.5 million, net of cash acquired, for several real estate acquisitions during the six months ended June 30, 2022 and 2021, respectively.
Divestiture-Related Activities
As divestitures occur in the normal course of business, gains or losses on the sale of such assetslocations are recognized in the income statementunaudited Condensed Consolidated Statement of Operations line item (Losses) gainsGains on divestitures and impairment charges, net, which consist ofcomprised the following:
Three months ended June 30,Six months ended June 30,
2022202120222021
 (In thousands)
Gains on divestitures, net$388 $6,267 $1,089 $7,593 
Impairment losses(94)(105)(306)(165)
Gains on divestitures and impairment charges, net$294 $6,162 $783 $7,428 

26 Service Corporation International
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
 (In thousands)
(Losses) gains on divestitures, net$(62) $864
 $22,611
 $2,974
Impairment losses(81) (307) (17,066) (33,406)
(Losses) gains on divestitures and impairment charges, net$(143) $557
 $5,545
 $(30,432)




PART I

Item 2. Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations
The Company
We are North America’s largest provider of deathcare products and services, with a network of funeral service locations and cemeteries unequaled in geographic scale and reach. At SeptemberJune 30, 2017,2022, we operated 1,5091,459 funeral service locations and 476488 cemeteries (including 287300 funeral service/cemetery combination locations), which are geographically diversified across 4544 states, eight Canadian provinces, the District of Columbia, and Puerto Rico.
We are well known for our Dignity Memorial® brand, North America's first transcontinental brand of deathcare products and services. Our other brands are Dignity Planning™, National Cremation Society®, Advantage® Funeral and Cremation Services, Funeraria del Angel™, Making Everlasting Memories®, Neptune Society™, and Trident Society™. Our funeral and cemetery operations consist of funeral service locations, cemeteries, funeral service/cemetery combination locations, crematoria, and other related businesses, which enablesenable us to serve a wide array of customer needs. We sell cemetery property and funeral and cemetery merchandise and services at the time of need and on a preneed basis. We strive to offer families exceptional service in planning life celebrations and personalized remembrances. Our Dignity Memorial® brand serves approximately 600,000 families each year with professionalism, compassion, and attention to detail.
Our financial position is enhanced by our approximately $10.5$13.3 billion backlog of future revenue from both trust and insurance-funded preneed sales at SeptemberJune 30, 2017, which is the result of preneed sales.2022. Preneed selling provides us with a currentstrategic opportunity to lock-ingain future market share while deterring the customer from going to a competitor in the future.share. We also believe it adds to the stability and predictability of our revenue and cash flows. While revenue on the majority of preneed merchandise and service sales is deferred until the time of need, sales of preneed cemetery property provide opportunities for full current revenue recognition (toto the extent we collect 10% from the customer andthat the property is developed).developed and available for use.
We believe we have the financial strengthadequate liquidity and flexibilitya favorable debt maturity profile, which allow us to rewardreinvest and grow our business as well as return capital to shareholders through dividends and share repurchases while maintaining a prudent capital structure and pursuing new opportunities for profitable growth.dividends.
Factors affecting our operating results include: demographic trends in terms of population growth and average age, which impact death rates and number of deaths; establishing and maintaining leading market share positions supported by strong local heritage and relationships; effectively responding to increasing cremation trends by selling complementary services and merchandise; controlling salary and merchandise costs; and exercising pricing leverage related to our at-needatneed revenue. The average revenue per funeral contract is influenced by the mix of traditional and cremation services because our average cremation service revenue for cremations is approximately half of the average revenue earned from alower than that for traditional burial service.burials. To further enhance revenue opportunities, we have developedcontinue to focus on our cremation customers' preferences and remaining relevant by developing additional memorialization merchandise and services that specifically appeal to cremation customers. We believe thatthe presentation of these additional merchandise and services through our customer-facing technology improves our customers' experience by reducing administrative burdens and allowing them to visualize the enhanced product and service offerings, which we believe will help drive increases in the average revenue for a cremation in future periods.
Recent Trends
Like most businesses world-wide, COVID-19 and recent inflationary and economic pressures are impacting various aspects of our business operations; however, we cannot, with certainty, predict the scope, severity, or duration with which COVID-19 and these pressures will continue to impact our business, financial condition, results of operations, and cash flows. As these trends continue, we are actively monitoring the potential impact on our business operations from both a revenue and cost perspective.
In 2022, the families we serve are generally selecting to have funerals and celebrations of life either with the same service and merchandise levels we experienced before the COVID-19 pandemic or are choosing to celebrate with even more robust services. The increase we have seen in the number of families who desire more comprehensive memorial services has driven growth in our preneed sales as well as positively affected our average revenue per funeral service. We view this as evidence that our customers continue to value what our team does best, which is helping our client families gain closure and healing through the process of grieving, remembrance, and celebration.
For further discussion of our key operating metrics, see our "Cash Flow" and “Results of Operations and Cash Flow” sections below.
Financial Condition, Liquidity, and Capital Resources
Capital Allocation Considerations
We rely on cash flow from operations as a significant source of liquidity. Our cash flow from operating activities provided $389.6$472.9 million in the first ninesix months of 2017. We have $196.62022. As of June 30, 2022, we had $726.3 million in remaining borrowing capacity under our bank credit agreement.Bank Credit Facility.
Our bank credit agreementBank Credit Facility requires us to maintain certain leverage and interest coverage ratios. As of SeptemberJune 30, 2017,2022, we were in compliance with all of our debt covenants. Our leverage ratio has recently benefited from the strong earnings associated with
FORM 10-Q 27


PART I
the increase in funeral services performed throughout the COVID-19 pandemic; however, as these impacts subside in future years, we expect leverage to return to our 3.5 to 4.0x target leverage range.

Our financial covenant requirements and actual ratios as of SeptemberJune 30, 2017 are2022 were as follows:
Per Credit AgreementActual
Leverage ratio4.25 4.75 (Max)3.622.69 
Interest coverage ratio3.00 (Min)5.399.54 
We believe we have the financial strength and flexibility to reward shareholders through share repurchases and dividends while maintaining a prudent capital structure and pursuing new opportunities for profitable growth.
We believe that our unencumbered cash on hand, future operating cash flows, and the available capacity under our bank credit agreementBank Credit Facility will give us adequate liquidity to meet our short-term needs as well as our long-term financial obligations. Due to cash balances residing in Canada and expected minimum operating cash in transit,requirements, a portion of our cash on hand is encumbered.
We intend toconsistently evaluate the best uses of our cash flow that will yield the highest value and return on capital. Our capital deploymentallocation strategy is prioritized as follows:
InvestInvesting in Acquisitions and Building New Funeral Service and Cemetery Locations. We manage our footprint by focusing on strategic acquisitions and building new builds. We intend to make acquisitions of funeral service locations where the expected returns are attractive and cemeteries when pricing and terms are favorable. We expect an acquisition investment to earn an after-tax cash return in excess ofexceed our weighted average cost of capital with room for execution risk. We will also invest in the construction of funeral service locations.by a meaningful margin. We target businesses with favorable customer segmentsdynamics and/or where we can achieve additional economies of scale. We continue to pursue strategic acquisitions and build new funeral service locations in areas that provide us with the potential for scale.
PayManaging Debt. We may seek to make open market debt repurchases when it is opportunistic to do so relative to other capital allocation opportunities and to manage our near-term debt maturity profile. We have a dividend. relatively consistent annual cash flow stream that is generally resistant to down economic cycles. This cash flow stream and our significant liquidity are available to substantially reduce our long-term debt maturities should we choose to do so.
Return Excess Cash to Shareholders. Absent strategic acquisition or new opportunities, we intend to return excess cash to shareholders. Our quarterly dividend rate has steadily grown from $0.025 per common share in 2005 to $0.15$0.25 per common share in 2017.2022. We target a payout ratio of 35%30% to 45%40% of after tax earnings excluding special items and intend to grow our cash dividend commensurate with the

growth in our business. While we intend to pay regular quarterly cash dividends for the foreseeable future, all future dividends are subject to limitations in our debt covenants and final determination by our Board of Directors each quarter upon review of our financial performance.
Repurchase shares. Absent a strategic acquisition opportunity, we believe share repurchases are attractive at the appropriate price. During the nine months ended September 30, 2017, we repurchased 4,793,635 shares of common stock at an aggregate cost of $148.8 million, which is an average cost per share of $31.04. After these repurchases, the remaining dollar value of shares authorized to be purchased under our share repurchase program was approximately $219.4 million at September 30, 2017. We intend to make purchases from time to time in the open market or through privately negotiated transactions, subject to market conditions, debt covenants, and normal trading restrictions. Our bank credit agreement contains covenants that limit our ability to repurchase our common stock. There can be no assurance that we will buy our common stock under our share repurchase program in the future.
Subsequent to September 30, 2017, we repurchased 390,063 shares of common stock at an aggregate cost of $13.4 million, which is an average cost per share of $34.39. After these subsequent repurchases, the remaining dollar value of shares authorized to be repurchased under our repurchase program is $206.0 million.
Repurchase debt. We seek open market debt repurchases when it is opportunistic to do so relative to other capital development opportunities to manage our near-term debt maturity profile. We have a relatively consistent annual cash flow stream that is generally resistant to down economic cycles. This cash flow stream and our significant liquidity is available to substantially reduce our long-term debt maturities should we choose to do so. Furthermore, our capital expenditures are generally discretionary in nature and can be managed based on the availability of operating cash flow.
Cash Flow
We believe our ability to generate strong operating cash flow is one of our fundamental financial strengths and provides us with substantial flexibility in meeting our operating and investing needs.
Operating Activities
Net cash provided by operating activities increased $31.1was $472.9 million to $389.6and $489.8 million for the six months ended June 30, 2022 and 2021, respectively. Cash flow from operations decreased $16.9 million for the six months ended June 30, 2022 versus the same period in the first nine months of 2017, compared to $358.52021. The 2022 decrease over 2021 comprises:
•a $59.0 million increase in the first nine months of 2016. Includedvendor and other payments,
•a $57.0 million increase in 2017 are employee compensation payments, and
•a decrease of $20.5$7.2 million increase in premiums paid on early extinguishment of debt, an $11.1 million decrease in system and process transition costs, and an $11.5 million decrease in excess tax benefits from share-based awardscash interest payments partially offset by an increase of $34.2 million in cash taxes paid related to the March 2017 IRS tax settlement and
•a $6.3 million increase in pension settlement payments. See discussion regarding the change in accounting treatment for excess tax benefits from share-based awards and IRS tax settlements in Part I, Item 1. Financial Statements, Notes 2 and 4.
Excluding the above items, cash flow from operations increased $28.5 million as a result of the following:
a $43.4$90.2 million increase in cash receipts from customers;customers,
•a $4.5$10.2 million increase in insurance proceeds;General Agency (GA) commission and other receipts,
•a $13.6$4.4 million decrease in cash tax payments, due to the deferral of IRS permitted payments (excluding the March 2017 IRS tax settlement noted above), partially offset byand
•a $12.5 million increase in employee compensation;
a $12.3 million increase in vendor and other payments;
a $2.9 million increase in cash interest paid;
a $0.4$1.5 million increase in net trust deposits; and
a $4.9 million decrease in General Agency (GA) and other receipts.

withdrawals.
Investing Activities
Cash flows from investing activities used $178.6$151.9 million and $108.6 million for the six months ended June 30, 2022 and 2021, respectively. The $43.3 million increased outflow from 2022 over 2021 is primarily due to the following:
•a $49.2 million increase in the first nine months of 2017 compared to using $179.1 million in the same period of 2016. This was primarily attributable to capital expenditures and
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PART I
•a decrease of $16.5 million in cash spent on acquisitions, a $0.5$5.3 million decrease in cash receipts from divestitures and asset sales, partially offset by
•a $4.9$6.6 million decrease in cash spent on real estate acquisitions,
•a $1.8 million decrease in payments for Company-owned life insurance policies, net withdrawals of restricted funds,proceeds,
•a $1.6 million decrease in cash spent on business acquisitions, and
•a $10.5$1.2 million increase in capital expenditures.proceeds from sale of investments.
Financing Activities
Financing activities used $147.5$388.0 million infor the first ninesix months of 2017ended June 30, 2022 compared to using $140.3$176.5 million infor the same period in 2021. The $211.5 million increased outflow from 2022 over 2021 is primarily due to the following:
•a $172.9 million increase in purchase of 2016. This increase was primarily driven byCompany common stock,
• a $31.0 million decrease in net debt issuance proceeds, net of payments of $48.7 million, repayments, and
•a decrease of $11.5 million in excess tax benefits from share-based awards, a $7.0$8.7 million increase in payments of dividends, a $2.6 million increase in purchases of noncontrolling interests to acquire the remaining 11% of the common stock of our consolidated subsidiary, Wilson Financial Group, Inc., partially offset by decrease in purchases of Company common stock of $44.2 million and increased proceeds from exercises of stock options of $14.6 million.dividends.

We repurchased 4.8 million shares in the first nine months of 2017 for $148.8 million and 7.5 million shares in the same period of 2016 for $193.0 million. We paid cash dividends of $80.7 million in the first nine months of 2017 and $73.7 million in the same period of 2016.
Financial Assurances
In support of our operations, we have entered into arrangements with certain surety companies whereby such companies agree to issue surety bonds on our behalf as financial assurance and/or as required by existing state and local regulations. The surety bonds are used for various business purposes; however, the majority of the surety bonds issued and outstanding have been used to support our preneed funeral and cemetery sales activities. The obligations underlying these surety bonds are recorded on the unaudited condensedCondensed Consolidated Balance Sheet as Deferred revenue.revenue, net. The breakdown of surety bonds between funeral and cemetery preneed arrangements, as well as surety bonds for other activities, is described below.
September 30, 2017 December 31, 2016June 30, 2022December 31, 2021
(In millions) (In millions)
Preneed funeral$112.7
 $118.6
Preneed funeral$68.6 $89.2 
Preneed cemetery:
 
Preneed cemetery:  
Merchandise and services135.3
 141.6
Merchandise and services135.9 147.0 
Pre-construction11.9
 7.8
Pre-construction26.7 24.8 
Bonds supporting preneed obligations259.9
 268.0
Bonds supporting preneed funeral and cemetery obligationsBonds supporting preneed funeral and cemetery obligations231.2 261.0 
Bonds supporting preneed business permits4.6
 4.5
Bonds supporting preneed business permits8.4 7.0 
Other bonds18.0
 18.4
Other bonds21.1 20.4 
Total surety bonds outstanding$282.5
 $290.9
Total surety bonds outstanding$260.7 $288.4 
When selling preneed contracts, we may post surety bonds where allowed by state law. We post the surety bonds in lieu of trusting a certain amount of funds received from the customer. The amount of the bond posted is generally determined by the total amount of the preneed contract that would otherwise be required to be trusted, in accordance with applicable state law.  For the nine months ended September 30, 2017 and 2016, we had $17.6 million and $16.1 million, respectively, of cash receipts attributable to bonded sales. These amounts do not consider reductions associated with taxes, obtaining costs, or other costs.
Surety bond premiums are paid annually and the bonds are automatically renewable until maturity of the underlying preneed contracts, unless we are given prior notice of cancellation. We discontinued using surety bonds in lieu of trusting for new sales of preneed funeral and cemetery merchandise and services in 2020. As a result, we expect to see continued decreases in the outstanding surety bond amounts for these items. We continue to use surety bonds for pre-construction sales of cemetery property where permitted.
Except for cemetery pre-construction bonds (which are irrevocable), the surety companies generally have the right to cancel the surety bonds at any time with appropriate notice. In the event a surety company were to cancel the surety bond, we are required to obtain replacement surety assurance from another surety company or fund a trust for an amount generally less than the posted bond amount. Management does not expect that we will be required to fund material future amounts related to these surety bonds because ofdue to a lack of surety capacity or surety company non-performance.

FORM 10-Q 29


PART I
Preneed Funeral and Cemetery Activities and Backlog of Contracts
In addition to selling our products and services to client families at the time of need, we enter into price-guaranteed preneed contracts, which provide for future funeral or cemetery merchandise and services. SinceBecause preneed funeral and cemetery merchandise or services will generally not be provided until sometime in the future, most states and provinces require that all or a portion of the funds collected from customers on preneed contracts be paiddeposited into merchandise and service trusts and/or escrow accounts until the merchandise is delivered or the service is performed. These trust funds own investments in equity and debt securities and mutual funds, which are sensitive to current market prices. In certain situations, as described above, where permitted by state or provincial laws, we may post a surety bond as financial assurance for a certain amount of the preneed contract in lieu of placing funds into trust accounts. Alternatively, we may sell a life insurance or annuity policy from third-party insurance companies.
Insurance-Funded Preneed Contracts
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 revenues 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 complete. 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 unaudited 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.
The table below details our results of insurance-funded preneed production and maturities.
Three months ended June 30,Six months ended June 30,
2022202120222021
(Dollars in millions)
Preneed insurance-funded:
Sales production(1)
$173.6 $180.3 $338.3 $313.6 
Sales production (number of contracts) (1)
27,942 30,436 54,846 54,225 
General agency revenue$41.8 $43.1 $84.8 $77.2 
Maturities$92.6 $87.5 $203.0 $198.8 
Maturities (number of contracts)15,126 14,608 33,278 33,604 
(1)    Amounts are not included in our unaudited Condensed Consolidated Balance Sheet.
Trust-Funded Preneed Contracts:Contracts
The funds collected from customers and required by state or provincial law are deposited into trust and invested by independent trustees in accordance with state and provincial laws.trusts. We retain any funds above the amounts required to be deposited into trust accounts and use them for working capital purposes, generally to offset the selling and administrative costs of our preneed programs. Although this represents cash flow to us, the associated revenues are deferred until the merchandise is delivered or services are performed (typically at maturity). The funds in trust are then invested by professional money managers with oversight by independent trustees in accordance with state and provincial laws.

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The tables below detail our results of preneed production and maturities, excluding insurance contracts, for the three and nine months ended September 30, 2017 and 2016.contracts:
Three months ended June 30,Six months ended June 30,
 2022202120222021
 (Dollars in millions)
Funeral:  
Preneed trust-funded (including bonded):  
Sales production$130.6 $112.2 $261.6 $229.3 
Sales production (number of contracts)32,630 28,740 66,237 60,469 
Maturities$84.0 $82.3 $180.9 $172.9 
Maturities (number of contracts)19,879 19,265 42,719 42,159 
Cemetery:
Sales production:
Preneed$351.4 $359.7 $713.6 $683.9 
Atneed107.3 112.2 240.3 242.3 
Total sales production$458.7 $471.9 $953.9 $926.2 
Sales production deferred to backlog:
Preneed$166.8 $150.5 $349.5 $275.4 
Atneed75.4 79.9 167.2 169.1 
Total sales production deferred to backlog$242.2 $230.4 $516.7 $444.5 
Revenue recognized from backlog:
Preneed$105.1 $85.3 $208.5 $170.4 
Atneed77.3 75.7 158.3 157.9 
Total revenue recognized from backlog$182.4 $161.0 $366.8 $328.3 
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
 (In millions) (In millions)
Funeral:       
Preneed trust-funded (including bonded):       
Sales production$76.6
 $72.5
 $241.1
 $216.4
Sales production (number of contracts)22,451
 22,549
 72,112
 68,562
Maturities$64.0
 $58.1
 $195.7
 $177.2
Maturities (number of contracts)16,065
 15,295
 50,897
 48,417
Cemetery:       
Sales production:       
Preneed$194.8
 $189.8
 $638.3
 $595.6
Atneed74.6
 72.6
 237.8
 230.1
Total sales production$269.4
 $262.4
 $876.1
 $825.7
Sales production deferred to backlog:       
Preneed$91.5
 $93.9
 $292.2
 $283.8
Atneed55.2
 55.6
 173.9
 172.4
Total sales production deferred to backlog$146.7
 $149.5
 $466.1
 $456.2
Revenue recognized from backlog:       
Preneed$79.9
 $73.4
 $210.6
 $187.1
Atneed55.8
 56.5
 171.4
 171.3
Total revenue recognized from backlog$135.7
 $129.9
 $382.0
 $358.4
Insurance-Funded Preneed Contracts: Where permitted by state or provincial law, customers may arrange their preneed contract by purchasing a life insurance policy from third-party insurance companies, for which we earn a commission as a general sales agent for the insurance company. The policy amount of the insurance contract between the customer and the third-party insurance company generally equals the amount of the preneed contract. As the insurance contract is between the insurance company and the customer, we do not reflect the unfulfilled insurance-funded preneed contract amounts in our unaudited condensed Consolidated Balance Sheet.
The table below details the results of insurance-funded preneed production and maturities for the three and nine months ended September 30, 2017 and 2016, and the number of contracts associated with those transactions.
 Three Months Ended Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
 (In millions) (In millions)
Preneed insurance-funded:       
Sales production (1)
$124.9
 $131.9
 $386.2
 $422.4
Sales production (number of contracts) (1)
21,297
 21,434
 64,305
 69,156
General agency revenue$29.1
 $32.1
 $90.9
 $105.4
Maturities$77.4
 $76.0
 $249.5
 $239.4
Maturities (number of contracts)13,061
 12,943
 42,144
 40,778
(1)Amounts are not included in our unaudited condensed Consolidated Balance Sheet.
Backlog of Preneed Contracts:Contracts
The following table reflects our backlog of trust-funded deferred preneed contract revenue, including amounts related to Deferred receipts held in trust at SeptemberJune 30, 20172022 and December 31, 2016.2021. Additionally, the table reflects our backlog of unfulfilled insurance-funded contracts (which are not included in our unaudited condensedCondensed Consolidated Balance Sheet) at SeptemberJune 30, 20172022 and December 31, 2016.2021. The backlog amounts presented are reduced by an amount that we believe will cancel before maturity basedinclude amounts due from customers for undelivered performance obligations on historical experience.cancelable preneed contracts to arrive at our total backlog of deferred revenue. The table does not include the backlog associated with businesses that are held for sale.

The table also reflects our preneed receivables and trust investments (fair value and cost bases) associated with the backlog of deferred preneed contract revenue, net ofincluding the estimated cancellation allowance.amounts due from customers for undelivered performance obligations on cancelable preneed contracts. We believe that the table below is meaningful because it sets forth the aggregate amount of future revenue we expect to recognize as a result of preneed sales, as well as the amount of assetsfunds associated with this revenue. Because the future revenue exceeds the asset amounts,assets, future revenue will exceed the cash distributions actually received from the associated trusts.trusts and future collections from the customer.
FORM 10-Q 31


PART I
June 30, 2022December 31, 2021
September 30, 2017 December 31, 2016 Fair ValueCostFair ValueCost
Fair Value Cost Fair Value Cost (In billions)
Deferred revenue, netDeferred revenue, net$1.58 $1.58 $1.53 $1.53 
Amounts due from customers for unfulfilled performance obligations on cancelable preneed contractsAmounts due from customers for unfulfilled performance obligations on cancelable preneed contracts0.80 0.80 0.72 0.72 
Deferred receipts held in trustDeferred receipts held in trust4.09 4.09 4.77 3.93 
Allowance for cancellation on trust investmentsAllowance for cancellation on trust investments(0.28)(0.28)(0.33)(0.27)
Backlog of trust-funded deferred revenue, net of estimated allowance for cancellationBacklog of trust-funded deferred revenue, net of estimated allowance for cancellation6.19 6.19 6.69 5.91 
Backlog of insurance-funded revenue (1)
Backlog of insurance-funded revenue (1)
7.15 7.15 6.97 6.97 
Total backlog of deferred revenueTotal backlog of deferred revenue$13.34 $13.34 $13.66 $12.88 
  (In billions)  
Deferred revenue$1.80
 $1.80
 $1.73
 $1.73
Deferred receipts held in trust3.40
 3.18
 3.10
 3.05
$5.20
 $4.98
 $4.83
 $4.78
Allowance for cancellation on trust investments(0.26) (0.25) (0.25) (0.25)
Backlog of trust-funded deferred revenue$4.94
 $4.73
 $4.58
 $4.53
Backlog of insurance-funded deferred revenue(1)
5.60
 5.60
 5.37
 5.37
Total backlog of deferred revenue$10.54
 $10.33
 $9.95
 $9.90
Preneed receivables, net and trust investments$4.68
 $4.46
 $4.31
 $4.26
Preneed receivables, net and trust investments$5.42 $5.42 $6.02 $5.18 
Amounts due from customers for unfulfilled performance obligations on cancelable preneed contractsAmounts due from customers for unfulfilled performance obligations on cancelable preneed contracts0.80 0.80 0.71 0.71 
Allowance for cancellation on trust investments(0.26) (0.25) (0.25) (0.25)Allowance for cancellation on trust investments(0.28)(0.28)(0.33)(0.27)
Assets associated with backlog of trust-funded deferred revenue, net of estimated allowance for cancellation$4.42
 $4.21
 $4.06
 $4.01
Assets associated with backlog of trust-funded deferred revenue, net of estimated allowance for cancellation5.94 5.94 6.40 5.62 
Insurance policies associated with insurance-funded deferred revenue, net of estimated allowance for cancellation(1)
5.60
 5.60
 5.37
 5.37
Total assets associated with backlog of preneed deferred revenue, net of estimated allowance for cancellation$10.02
 $9.81
 $9.43
 $9.38
Insurance policies associated with insurance-funded deferred revenue (1)
Insurance policies associated with insurance-funded deferred revenue (1)
7.15 7.15 6.97 6.97 
Total assets associated with backlog of preneed revenueTotal assets associated with backlog of preneed revenue$13.09 $13.09 $13.37 $12.59 
(1)Amounts are not included in our unaudited condensed Consolidated Balance Sheet.
(1)    Amounts are not included in our unaudited Condensed Consolidated Balance Sheet.
The fair value of our trust investments was based on a combination of quoted market prices, observable inputs such as interest rates or yield curves, and appraisals. As of SeptemberJune 30, 2017,2022, the difference between the backlog and asset fair valuemarket amounts represents $0.26$0.19 billion related to contracts for which we have posted surety bonds as financial assurance in lieu of trusting, $0.05$1.23 billion collected from customers that were not required to be deposited into trust,trusts, and $0.21$0.16 billion in allowable cash distributions from trust assets.assets partially offset by $1.33 billion in amounts due on delivered property and merchandise. As of SeptemberJune 30, 2017,2022, the fair value of the total backlog comprised $2.78$3.69 billion related to cemetery contracts and $7.76$9.65 billion related to funeral contracts. As of SeptemberJune 30, 2017,2022, the fair value of the assets associated with the backlog of trust-funded deferred revenue comprised $2.55$3.63 billion related to cemetery contracts and $1.87$2.31 billion related to funeral contracts.
The table also reflects As of June 30, 2022, the amounts expected to be received from insurance companies through the assignmentbacklog of policy proceeds related to insurance-funded contracts. We do not reflect the unfulfilled insurance-funded preneed amounts in our unaudited condensed Consolidated Balance Sheet because they are not assets or liabilities as defined in Statementcontracts of Accounting Concepts No. 6 as we have no claim$7.15 billion was equal to the proceeds we expect to receive from the associated insurance proceeds untilpolicies when the corresponding contract is fulfilled and no obligation under the contract until the benefits are assigned to us upon or after the time of need.serviced.
Trust Investments
In addition to selling our products and services to client families at the time of need, we enter into price-guaranteed preneed funeral and cemetery contracts, which provide for future funeral or cemetery merchandise and services. Since preneed funeral and cemetery merchandise or services will generally not be provided until sometime in the future, most states and provinces require that all or a portion of the funds collected from customers on preneed funeral and cemetery contracts be paid into trusts and/or escrow accounts until the merchandise is delivered or the service is performed. Investment earnings associated with the trust investments are expected to mitigate the inflationary costs of providing the preneed funeral and cemetery merchandise and services in the future at the prices that were guaranteed at the time of sale.
Also, we are required by state and provincial law to pay a portion of the proceeds from the preneed or atneed sale of cemetery property interment rights into perpetual care trusts. For these investments, the original corpus generally remains in the trust in perpetuity and the net ordinary earnings or elected distributions are withdrawn with the intention of offsettingas allowed to defray the expense to maintain the cemetery property. While many states require that net capital gains or losses be retained and added to the corpus, certain states allow the net realized capital gains and losses to be included in the net ordinary earnings that are distributed. Additionally, some states allow a total return distribution that may contain elements of income, capital appreciation, and principal.
Independent trustees manage and invest the majority of the funds deposited into the funeral and cemetery merchandise and servicesservice trusts as well as the cemetery perpetual care trusts. The majority of the trustees are selected based on their respective geographic footprint and qualifications per state and provincial regulations. Most of the trustees engage the same independent investment managers. These trustees, with input from SCI's wholly-owned registered investment advisor, establish an

investment policy that serves as an operating document to guide the investment activities of the trusts including asset allocation and manager selection. The investments are also governed by state and provincial guidelines. All of the trusts
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seek to control risk and volatility through a combination of asset classes, investment styles, and a diverse mix of investment managers.
Asset allocation is based on the liability structure of each funeral, cemetery, and perpetual care trust. TheBased on the various criteria set forth in the investment policy, the investment advisor recommends investment managers to the trustees, which are selected on the basis of various criteria set forth in the investment policy.trustees. The primary investment objectives for the funeral and cemetery merchandise and service trusts include 1) preserving capital within acceptable levels of volatility and risk and 2) achieving growth of principal over time sufficient to preserve and increase the purchasing power of the assets. Preneed funeral and cemetery contracts generally take several years to mature; therefore, the funds associated with these contracts are often invested through several market cycles. Historically,
Where allowed by state and provincial regulations, the cemetery perpetual care trusts'trusts’ primary investment objectives are growth-oriented to provide for a fixed distribution rate from the trusts’ assets. Where such distributions are limited to ordinary income, the cemetery perpetual care trusts’ investment objectives emphasize providing a steady stream of current investment income with some capital appreciation. During 2016, SCI worked with several state legislaturesBoth types of distributions are used to adjust laws to allowprovide for a set distribution rate from cemetery perpetual care trusts' assets regardless of income similar to a university endowment. As a result, beginning in 2017, a portion of cemetery perpetual care trust assets were liquidatedthe current and reinvested with investment objectives similar to the funeralfuture maintenance and cemetery merchandise and service trusts to drive asset growth and provide further protection to our customers. Allbeautification of the trusts seek to control risk and volatility through a combination of asset classes, investment styles, and a diverse mix of investment managers.cemetery properties.
As of SeptemberJune 30, 2017,2022, approximately 86%94% of our trusts were under the control and custody of threefour large financial institutions. The U.S. trustees primarily use four managed limited liability companies (LLCs), one for each merchandise and service trust type and two for the cemetery perpetual care trust type, and each with an independent trustee as custodian. Each financial institution acting as trustee manages its allocation of trust assets in accordance with the investment policy through the purchase of the appropriate LLCs' units. For those accounts not eligible for participation in the LLCs or in the eventwhere a particular state's regulations contain other investment restrictions, the trustee utilizes institutional mutual funds that comply with our investment policy or with such state restrictions. The U.S. trusts include a modest allocation to alternative investments, which comprise primarily private equity investments. These alternative investments are held in vehicles structured as LLCs and are managed by certain trustees. The trusts that are eligible to allocate a portion of their investments to alternative investments purchase units of the respective alternative investment LLCs.
Investment Structures
Each financial institution, acting as trustee, manages its allocation of trust assets in compliance with the investment policy primarily through the purchase of threeone of four managed LLCs, one for eachmatched to their trust type and each with a different, independent trustee acting as custodian. The managed LLCs use the following structures for investments:
Commingled funds.Funds. These funds allow the trusts to access, at a reduced cost, some of the same investment managers and strategies used elsewhere in the portfolios.
Mutual funds.Funds.The trust funds employ institutional share class mutual funds where operationally or economically efficient. These mutual funds are utilized to invest in various asset classes including U.S. equities, non-U.S. equities, corporate bonds, government bonds, Treasury inflation protected securities (TIPS), high yield bonds, and commodities, all of which are governed by guidelines outlined in their individual prospectuses.
Separately managed accounts.Managed Accounts.To reduce the costs to the investment portfolios, the trusts utilize separately managed accounts where appropriate.
For those accounts not eligible for participation in the managed LLCs, the trustee utilizes institutional share class mutual funds that comply with our investment policy statement or with applicable state or provincial regulations. The U.S. trusts also include a modest allocation to alternative investments, which comprise primarily private equity investments. These investments are also held in LLCs and are managed by certain trustees.
Asset Classes
Fixed income investments are intended to preserve principal, provide a source of current income, and reduce overall portfolio volatility. The majority of the fixed income allocation for the trusts is invested in institutional share class mutual funds. Where the trusts have direct investments in individual fixed income securities, these are primarily in government and corporate instruments.
Canadian government fixed income securities are investments in Canadian federal and provincial government instruments. In many cases, regulatory restrictions mandate that the funds from the sales of preneed funeral and cemetery productscontracts sold in certain Canadian jurisdictions must be invested in these instruments.
Equity investments have historically provided long-term capital appreciation in excess of inflation. The trusts have direct investments in individual equity securities primarily in domestic equity portfolios that include large, mid, and small capitalization companies of different investment styles (i.e., growth and value). The majority of the equity allocation is managed by institutional investment managers that specialize in an objective-specific area of expertise. Our equity securities are exposed to market risk; however, we believe these securities are well-diversified. As of SeptemberJune 30, 2017,2022, the largest single equity position represented less than 1% of the total securities portfolio.
The objective of private equityAlternative investments isserve to provide high rates of return with reduced volatility.volatility and lower correlation to publicly-traded securities. These investments are typically longlonger term in duration. These investmentsduration and are diversified by strategy, sector, manager, geography and vintage year. The investments consist of numerous limited partnerships, includinginvested in private equity, private market real estate, fund of funds,energy and natural resources, infrastructure, transportation, and private debt including both distressed debt and

mezzanine financing. The trustees that have oversight of their respective alternative LLCs work closely with the investment advisor in making all investment decisions.
FORM 10-Q 33


PART I
Trust Performance
During the ninesix months ended SeptemberJune 30, 2017,2022, the Standard and Poor’s 500 Index increased 14.2%decreased 20.0% and the Barclay’s Aggregate Index increased 3.1%, while the combineddecreased 10.4%. This compares to SCI trusts increased 10.8%.that decreased 14.6% during the same period. SCI trusts have a diversified allocation of approximately 55% equities, 29% fixed income securities, 11% alternative and other investments with the remaining 5% available in cash.
Recognized trust fund income (realized and unrealized) related to our preneed trust investments was $81.5 million and $88.8 million for the six months ended June 30, 2022 and 2021, respectively. Recognized trust fund income (realized and unrealized) related to our cemetery perpetual care trust investments was $45.3 million and $47.8 million for the six months ended June 30, 2022 and 2021, respectively. The decline in recognized trust fund income is primarily due to negative market returns experienced during the first half of 2022 as well as the timing of capital gains and other distributions.
SCI, the trustees, and the investment advisor monitor the capital markets and the trusts on an on-going basis. The trustees, with input from the investment advisor, take prudent action as needed to achieve the investment goals and objectives of the trusts.
Results of Operations — Three and Six Months Ended SeptemberJune 30, 20172022 and 20162021
Three Months Ended June 30, 2022 and 2021
Management Summary
In the three months ended September 30, 2017,second quarter of 2022, we reported consolidated net income attributable to common stockholders of $56.2$132.7 million ($0.290.82 per diluted share) compared to net income attributable to common stockholders in the second quarter of 2021 of $157.7 million ($0.92 per diluted share). These results were impacted by certain items including:
Three months ended June 30,
20222021
 (In millions)
Pre-tax gains on divestitures and impairment charges, net$0.3 $6.2 
Pre-tax losses on early extinguishment of debt, net$(1.2)$(5.2)
Pre-tax foreign currency exchange loss$(1.5)$— 
Tax effect from above items$0.5 $(0.6)
Change in uncertain tax reserves and other$(0.5)$(0.1)
In addition to the above items, the decrease over the prior year is primarily due to an expected decline in gross profit related to decreases in COVID-19 related activity and lower trust fund income, increased corporate and general administration expenses, and higher interest and taxes. These results were slightly offset by the benefit of fewer shares outstanding and an increase in contributions from recent acquisitions and new builds of funeral homes and cemeteries.
34 Service Corporation International


PART I
Funeral Results
Three months ended June 30,
20222021
 (Dollars in millions, except average revenue per service)
Consolidated funeral revenue$548.8 $531.7 
Less: revenue associated with acquisitions/new construction8.9 0.2 
Less: revenue associated with divestitures0.2 1.5 
Comparable(1) funeral revenue
539.7 530.0 
Less: comparable recognized preneed revenue42.2 33.1 
Less: comparable general agency and other revenue36.3 39.8 
Adjusted comparable funeral revenue$461.2 $457.1 
Comparable services performed84,521 85,296 
Comparable average revenue per service(2)
$5,457 $5,359 
Consolidated funeral gross profit$116.6 $111.8 
Less: gross profit (loss) associated with acquisitions/new construction0.7 (0.2)
Less: gross losses associated with divestitures(0.6)(1.0)
Comparable(1) funeral gross profit
$116.5 $113.0 
(1)    We define comparable (or same store) operations as those funeral locations owned by us for the entire period beginning January 1, 2021 and ending June 30, 2022.
(2)    We calculate comparable average revenue per service by dividing comparable funeral revenue, excluding general agency revenue, recognized preneed revenue, and other revenue to avoid distorting our average of normal funeral services revenue, by the comparable number of funeral services performed during the period. Recognized preneed revenue is preneed sales of merchandise that are delivered at the time of sale, including memorial merchandise and travel protection, net, and excluded from our calculation of comparable average revenue per service because the associated service has not yet been performed.
Funeral Revenue
Consolidated revenue from funeral operations was $548.8 million for the three months ended June 30, 2022 compared to $531.7 million for the same period in 2021. This $17.1 million increase is primarily attributable to the $8.7 million revenue growth contributed by acquired and newly constructed properties and a $9.7 million increase in comparable revenue as described below partially offset by the loss of $1.3 million in revenue contributed by properties that have been subsequently divested.
Comparable revenue from funeral operations was $539.7 million for the three months ended June 30, 2022 compared to $530.0 million for the same period in 2021. This $9.7 million, or 1.8%, increase was primarily driven by growth in core funeral revenue and recognized preneed revenue of $3.4 million and $9.1 million, respectively.
Comparable average revenue per funeral service grew 1.8%, for the three months ended June 30, 2022, compared to the same period in 2021, that more than offset the 2.0% decrease in core funeral services performed over the same period. Our total comparable cremation rate increased 200 basis points to 61.2% for the three months ended June 30, 2022.
Funeral Gross Profit
Consolidated funeral gross profit increased $4.8 million, or 4.3%, for the three months ended June 30, 2022 compared to 2021. This increase is primarily attributable to the growth in comparable funeral gross profit of $3.5 million, or 3.1%, as well as a $0.9 million higher gross profit from acquired and newly constructed properties. Comparable funeral gross profit grew $3.5 million to $116.5 million and the comparable gross profit percentage grew 30 basis points to 21.6%, primarily due to the higher revenue mentioned above. Additionally, the prior year quarter had higher fixed expenses associated with the timing of incentive compensation costs and pent up repairs and maintenance costs.
FORM 10-Q 35


PART I
Cemetery Results
Three months ended June 30,
20222021
 (In millions)
Consolidated cemetery revenue$442.0 $455.8 
Less: revenue associated with acquisitions/new construction4.5 — 
Less: revenue associated with divestitures— 0.1 
Comparable(1) cemetery revenue
$437.5 $455.7 
Consolidated cemetery gross profit$150.0 $161.5 
Less: gross profit (loss) associated with acquisitions/new construction2.6 (0.1)
Less: gross profit associated with divestitures— 0.1 
Comparable(1) cemetery gross profit
$147.4 $161.5 
(1)    We define comparable (or same store) operations as those cemetery locations owned by us for the entire period beginning January 1, 2021 and ending June 30, 2022.
Cemetery Revenue
Consolidated revenue from our cemetery operations decreased $13.8 million, or 3.0%, for the three months ended June 30, 2022 compared to the same period in 2021 primarily due to a $18.2 million decrease in comparable cemetery revenue partially offset by $4.5 million in revenue growth contributed by acquired and newly constructed properties. The $18.2 million, or 4.0% decrease in comparable cemetery revenue was primarily attributable to a $11.7 million decrease in comparable cemetery core revenue. This comparable cemetery core revenue decline was primarily driven by a $11.2 million, or 3.1%, decrease in comparable preneed cemetery sales production as the prior year quarter benefited from strong growth during a heightened period of awareness from the COVID-19 pandemic. Also, a portion of the current quarter property sales were deferred and will benefit us in future quarters as the undeveloped property sold is constructed. Comparable cemetery other revenue also decreased $6.5 million, or 18.0%, primarily from a decrease in endowment care trust fund income as a result of capital gain distributions in the prior year quarter which did not recur in the current quarter.
Cemetery Gross Profit
Consolidated cemetery gross profit decreased $11.5 million, or 7.1%, in the three months ended June 30, 2022 compared to the same period in 2021, which is primarily attributable to the decrease in comparable cemetery gross profit of $14.1 million, or 8.7%, partially offset by a $2.7 million increase in gross profit from acquired and newly constructed properties. Comparable cemetery gross profit decreased $14.1 million to $147.4 million, and the gross profit percentage decreased 170 basis points to 33.7%, primarily due to the decline in revenue mentioned.
Other Financial Statement Items
Corporate General and Administrative Expenses
Corporate general and administrative expenses increased $12.1 million to $45.7 million for the second quarter of 2022 compared to the second quarter of 2021. The increase is related to the timing of favorable adjustments to workers compensation and general liability and incentive compensation costs in the prior year quarter. Additionally, we incurred $3.0 million of increased expenses related to our long-term incentive compensation plan that is tied to increases in total shareholder return during the current quarter.
Gains on Divestitures and Impairment Charges, Net
We recognized a $0.3 million net pre-tax gain on asset divestitures and impairments in the second quarter of 2022 compared to a $6.2 million net pre-tax gain in the second quarter of 2021 on asset divestitures associated with non-strategic funeral and cemetery locations in the United States and Canada.
Interest Expense
Interest expense increased $3.1 million to $40.6 million for the three months ended June 30, 2022 primarily due to our May 2021 refinancing combined with higher interest on our floating rate debt.
FORM 10-Q 36


PART I
Provision for Income Taxes
Our effective tax rate was 25.3% and 22.6% for the three months ended June 30, 2022 and 2021, respectively. The higher effective tax rate for the three months ended June 30, 2022 was primarily due to non-deductible losses in the cash surrender value of certain life insurance policies due to negative returns in the financial markets, which increased tax expense for us in the quarter.
Weighted Average Shares
The diluted weighted average number of shares outstanding was 161.3 million for the three months ended June 30, 2022 compared to 170.9 million for the same period in 2021. The decrease primarily reflects the impact of shares repurchased under our share repurchase program.
Six Months Ended June 30, 2022 and 2021
Management Summary
In the first six months of 2022, we reported consolidated net income attributable to common stockholders of $352.2 million ($2.17 per diluted share) compared to net income attributable to common stockholders for the same period in 20162021 of $47.7$386.6 million ($0.242.25 per diluted share). These results were affectedimpacted by the following items:certain items including:
 Three Months Ended September 30,
 2017 2016
 (In millions)
Pre-tax (losses) gains from divestitures and impairment, net$(0.1) $0.6
Pre-tax legal settlement$(11.5) $—
Pre-tax expenses related to system transition costs$—
 $(2.3)
Tax benefit from above items$4.0
 $(1.4)
Change in certain tax reserves$0.8
 $(0.8)
Six months ended June 30,
20222021
 (In millions)
Pre-tax gains on divestitures and impairment charges, net$0.8 $7.4 
Pre-tax losses on early extinguishment of debt, net$(1.2)$(5.2)
Pre-tax foreign currency exchange loss$(1.5)$— 
Tax effect from significant items$0.3 $(0.8)
Change in uncertain tax reserves and other$(0.9)$(0.1)
In addition to the above items, the increasedecrease over the prior year is primarily due to a decline in diluted earningsgross profit, increased corporate and general administration expenses, and higher interest and taxes, which was slightly offset by the benefit of fewer shares outstanding and non-organic contributions from recent acquisitions and new builds of funeral homes and cemeteries.
FORM 10-Q 37


PART I
Funeral Results
Six months ended June 30,
20222021
 (Dollars in millions, except average revenue per service)
Consolidated funeral revenue$1,197.9 $1,151.1 
Less: revenue associated with acquisitions/new construction21.9 0.2 
Less: revenue associated with divestitures0.7 3.4 
Comparable(1) funeral revenue
1,175.3 1,147.5 
Less: comparable recognized preneed revenue85.1 74.8 
Less: comparable general agency and other revenue72.7 69.5 
Adjusted comparable funeral revenue$1,017.5 $1,003.2 
Comparable services performed187,025 191,277 
Comparable average revenue per service(2)
$5,440 $5,245 
Consolidated funeral gross profit$312.6 $306.2 
Less: gross profit (losses) associated with acquisitions/new construction3.4 (0.3)
Less: gross losses associated with divestitures(0.7)(1.9)
Comparable(1) funeral gross profit
$309.9 $308.4 
(1)    We define comparable (or same store) operations as those funeral locations owned by us for the entire period beginning January 1, 2021 and ending June 30, 2022.
(2)    We calculate comparable average revenue per share was primarily drivenservice by strong cemetery resultsdividing comparable funeral revenue, excluding general agency revenue, recognized preneed revenue, and a lower effective tax rate. We also encountered temporary business interruptions in certainother revenue to avoid distorting our average of our businesses in Texas, Florida and Puerto Rico related tonormal funeral services revenue, by the three hurricanescomparable number of funeral services performed during the quarter.
Funeral Results
 Three Months Ended September 30,
 2017 2016
 (Dollars in millions, except average revenue per service)
Consolidated funeral revenue$437.5
 $445.5
Less: Revenue associated with acquisitions/new construction8.2
 4.3
Less: Revenue associated with divestitures0.2
 9.4
Comparable1 funeral revenue
429.1
 431.8
Less: Comparable recognized preneed revenue26.6
 27.7
Less: Comparable general agency and other revenue28.4
 29.6
Adjusted comparable funeral revenue$374.1
 $374.5
Comparable services performed70,974
 70,929
Comparable average revenue per service2
$5,271
 $5,280
    
Consolidated funeral operating profit$70.1
 $74.5
Less: Operating profit associated with acquisitions/new construction1.1
 0.8
Less: Operating (loss) profit associated with divestitures(0.8) 0.7
Comparable funeral operating profit
$69.8
 $73.0
(1)We define comparable (or same store) operations as those funeral locations owned by us for the entire period beginning January 1, 2016 and ending September 30, 2017.
(2)We calculate comparable average revenue per service by dividing comparable funeral revenue, excluding recognized preneed revenue, general agency revenue, and other revenue to avoid distorting our average of normal funeral services revenue, by the comparable number of services performed during the period. Recognized preneed revenue is preneed sales of merchandise that are delivered at the time of sale, including memorial merchandise and travel protection, and is excluded from our calculation of comparable average revenue per service because the associated service has not yet been performed.

period. Recognized preneed revenue is preneed sales of merchandise that are delivered at the time of sale, including memorial merchandise and travel protection, net, and excluded from our calculation of comparable average revenue per service because the associated service has not yet been performed.
Funeral Revenue
Consolidated revenue from funeral operations was $437.5$1,197.9 million for the threesix months ended SeptemberJune 30, 20172022, compared to $445.5$1,151.1 million for the same period in 2016.2021. This decrease$46.8 million increase is primarily attributable to the $21.7 million growth in revenue contributed by acquired and newly constructed properties and a $27.8 million increase in comparable revenue as described below partially offset by the loss of $9.2$2.7 million in revenue contributed by properties that have been subsequently divested and a $2.7 million decrease in comparable revenue as described below. These decreases were partially offset by $3.9 million in revenue contributed by acquired properties.divested.
Comparable revenue from funeral operations was $429.1$1,175.3 million for the threesix months ended SeptemberJune 30, 20172022 compared to $431.8$1,147.5 million for the same period in 2016.2021. This $2.7$27.8 million, decrease is dueor 2.4%, increase was primarily attributable to an increase in our comparable average revenue per service. Additionally, we experienced a 0.2% decrease$3.2 million increase in comparable general agency and other revenue and a $10.3 million increase in comparable recognized preneed revenue as the growth from both resulted from higher comparable preneed funeral sales production. Comparable services performed declined 2.2% during the six months ended June 30, 2022 compared to the same period in 2021, which was heavily impacted by COVID-19 mortality.
Comparable average revenue per funeral service grew 3.7% for the six months ended June 30, 2022 compared to the same period in 2021. This average revenue growth was primarily attributable to our customers desire for more comprehensive services including items such catering and a decrease in general agency revenue as preneed sales suffered a temporary interruption at the hurricane impacted locations, partially offset by 0.1% higher comparable services performed.
Organic sales average, excluding impacts from foreign currency and cremation rate was essentially flat.flowers. Our total comparable cremation rate increased 170 basis points to 53.5% in60.5% for the threesix months ended SeptemberJune 30, 2017 from 52.7% in 2016 as a result of an increase in both direct cremations and cremations with service.2022.
Funeral OperatingGross Profit
Consolidated funeral operatinggross profit decreased $4.4increased $6.4 million, or 5.9%2.1%, in the threefirst six months ended September 30, 2017of 2022 compared to the same period in 2016.2021. This decreasegrowth is primarily attributable to a decrease$3.7 million increase in comparable funeral operatinggross profit of $3.2 million, or 4.4%.contributed by acquired and newly constructed properties. Comparable funeral operatinggross profit decreased $3.2increased $1.5 million to $69.8$309.9 million andwhile the operating margincomparable gross profit percentage decreased 6050 basis points to 16.3%, which is primarily due26.4%. Funeral margins were impacted by the increase in revenue described above along with higher cost in the current year relative to the decrease in revenue mentioned aboveprior year as staffing and normal fixed cost growth partially offsetservice levels normalized driven by selling cost efficiencies.more comprehensive services compared to the prior year.
FORM 10-Q 38


PART I
Cemetery Results
Six months ended June 30,
20222021
 (In millions)
Consolidated cemetery revenue$905.3 $914.4 
Less: revenue associated with acquisitions/new construction8.4 — 
Less: revenue associated with divestitures— 0.2 
Comparable(1) cemetery revenue
$896.9 $914.2 
Consolidated cemetery gross profit$330.9 $349.6 
Less: gross profit (losses) associated with acquisitions/new construction5.0 (0.1)
Less: gross profit associated with divestitures— 0.1 
Comparable(1) cemetery gross profit
$325.9 $349.6 
 Three Months Ended September 30,
 2017 2016
 (In millions)
Consolidated cemetery revenue$293.8
 $276.0
Less: Revenue associated with acquisitions/new construction1.6
 —
Comparable1 cemetery revenue
$292.2
 $276.0
    
Consolidated cemetery operating profit$79.6
 $66.2
Less: Operating profit associated with acquisitions/new construction0.4
 (0.1)
Less: Operating profit associated with divestitures(0.1) (0.2)
Comparable cemetery operating profit$79.3
 $66.5
(1)    We define comparable (or same store) operations as those cemetery locations owned by us for the entire period beginning January 1, 2021 and ending June 30, 2022.
(1)We define comparable (or same store) operations as those cemetery locations owned by us for the entire period beginning January 1, 2016 and ending September 30, 2017.
Cemetery Revenue
Consolidated revenue from our cemetery operations increased $17.8decreased $9.1 million, or 6.4%1.0%, infor the third quarter of 2017six months ended June 30, 2022 compared to the same period in 20162021 primarily due to a $16.2$17.3 million, increaseor 1.9%, decrease in comparable cemetery revenue and $1.6partially offset by a $8.4 million increase in revenue contributed by newly constructed and acquired properties. The growth over$17.3 million decrease in comparable cemetery revenue is primarily driven by $12.7 million, or 2.1%, decline in comparable cemetery recognized preneed revenue as well as a $3.0 million, or 4.5%, decrease in comparable cemetery other revenue as a result of capital gain distributions in the prior year quarter is primarily due to both the sales and recognition of cemetery property, as well as increaseswhich did not recur in cemetery merchandise delivered during the quarter.2022.
Cemetery OperatingGross Profit
Consolidated cemetery operatinggross profit increased $13.4decreased $18.7 million or 20.2%, in the third quarter of 2017six months ended June 30, 2022 compared to the same period in 2016.2021, which is primarily attributable to the decrease in comparable cemetery gross profit of $23.7 million partially offset by a $5.1 million increase in revenue contributed by newly constructed and acquired properties. Comparable cemetery operatinggross profit increased $12.8decreased $23.7 million to $79.3$325.9 million, and the operating margingross profit percentage increased 300decreased 190 basis points to 27.1%. The $12.8 million increase36.3%, primarily due to the decline in comparable cemetery operating profit was primarilyrevenue mentioned above and a decline in incentive compensation costs during the result of high margin core revenue growth when taking into account our fixed cost structure.current year.
Other Financial Statement Items
Corporate General and Administrative Expenses
General and administrative expenses increased $12.3 million to $39.2 million in the three months ended September 30, 2017 compared to $26.9 million in the same period of 2016. We finalized a legal settlement for $11.5 million of which approximately $10 million was recognized during the quarter. The prior year period includes $2.3 million in system transition costs primarily related to our 2016 implementation of a new general ledger system. Excluding these costs in both periods,Corporate general and administrative expenses increased $3.0$12.1 million primarilyto $87.4 million for the six months ended June 30, 2022. The increase is related to long-term incentive compensation programsplan that is tied to increases in total shareholder return as well as increased workers compensation and general liability insurance claims.
Gains on Divestitures and Impairment Charges, Net
We recognized a $0.8 million net pre-tax gain on asset divestitures and impairments in the six months ended June 30, 2022 compared to the prior year quarter.

Hurricane Expenses, Net
On August 26, Hurricane Harvey made landfall in Texas causing significant damage across coastal Texas. In addition to damage caused directly by the storm itself, the region suffered massive damage from flooding as rainfall nearly exceeded the annual average. The main corporate headquarters sustained significant flood damage as did many of our Texas operations. On September 10, Irma made landfall in western Florida causing wind and flood damage to large parts of that state and the southeastern United States.  On September 20, Maria made landfall in Puerto Rico causing significant wind and flood damage. During the third quarter of 2017, we began cleanup, repair and restoration of much of the damage in Texas and in Florida related to Hurricanes Harvey and Irma. During the quarter, we incurred $5.8a $7.4 million in repair and cleanup costs and received $4.5 million of insurance proceeds related to these claims for a net impact of $1.3 millionpre-tax gain on our income statement. We believe we could incur another estimated $5.0 million in repair and clean upasset divestitures in the fourth quarter of 2017 and expect to receive additional insurance proceeds that would partially offset those costs. In addition, we expect to incur total capital costs of approximately $10.0 million to replace damaged assets. We are still assessing the impact from Hurricane Maria as communicationsix months ended June 30, 2021 associated with the island has been difficult, but based on our footprint ondisposition of non-strategic funeral and cemetery locations in the island, we do not expect the overall impact to be material.United States and Canada.
Interest Expense
Interest expense increased $3.2$6.4 million to $42.8$79.6 million in the threefor six months ended SeptemberJune 30, 2017 as we were impacted by increased rates2022 primarily due to our May 2021 refinancing combined with higher interest on our floating rate debt as well as higher Bank Credit Facility balances as we continued to maintain our leverage ratio.debt.
Provision for Income Taxes
Income tax expense during interim periods is based on our estimated annual effective income tax rate plus any discrete items, which are recorded in the period in which they occur. Discrete items include, among others, such events as changes in estimates due to the finalization of tax returns, tax audit settlements, expiration of statutes of limitation, and increases or decreases in valuation allowances on deferred tax assets. Our effective tax rate was 15.7%25.8% and 36.6%24.2% for the threesix months ended SeptemberJune 30, 20172022 and 2016,2021, respectively. The higher effective tax rate for the six months ended June 30, 2022 was primarily due to non-deductible losses in the cash surrender value of certain life insurance policies due to negative returns in the financial markets, which increased tax expense for us in the quarter. The effective tax rate for the threesix months ended SeptemberJune 30, 2017 is lower2022 was higher than the federal statutory tax rate of 35%21% primarily due to state and foreign tax benefits recognized on the settlement of employee share-based awards. The higher effective tax rate for the prior year quarter was the result of non-deductible goodwill related to funeral home divestitures.expenses.
FORM 10-Q 39


PART I
Weighted Average Shares
The diluted weighted average number of shares outstanding was 192.2162.6 million infor the threesix months ended SeptemberJune 30, 2017,2022 compared to 196.6171.6 million infor the same period in 2016.2021. The decrease in the number of sharesprimarily reflects the impact of shares repurchased under our share repurchase program.
Results of Operations — Nine Months Ended September 30, 2017 and 2016
Management Summary
In the nine months ended September 30, 2017, we reported net income attributable to common stockholders of $299.3 million ($1.56 per diluted share) compared to net income attributable to common stockholders for the same period in 2016 of $110.8 million ($0.56 per diluted share). These results were affected by the following items:
 Nine Months Ended September 30,
 2017 2016
 (In millions)
Pre-tax gains (losses) from divestitures and impairment, net$5.5
 $(30.4)
Pre-tax losses from the early extinguishment of debt$—
 $(22.5)
Pre-tax legal settlement$(11.5) $—
Pre-tax acquisition and integration costs$—
 $(5.5)
Pre-tax expenses related to system transition costs$—
 $(11.2)
Pre-tax pension termination settlement$(12.8) $—
Tax benefit from above items$6.6
 $21.1
Change in certain tax reserves and other$108.0
 $(3.4)
In addition to the above items, the increase in diluted earnings per share was primarily driven by higher operating profits led by an increase in cemetery sales production. These results were also bolstered by effective cost management, a lower tax rate, and fewer shares outstanding resulting from our ongoing share repurchase program.

Funeral Results
 Nine Months Ended September 30,
 2017 2016
 (Dollars in millions, except average revenue per service)
Consolidated funeral revenue$1,395.2
 $1,404.8
Less: Revenue associated with acquisitions/new construction21.9
 5.3
Less: Revenue associated with divestitures2.5
 31.0
Comparable1 funeral revenue
1,370.8
 1,368.5
Less: Comparable recognized preneed revenue88.8
 85.6
Less: Comparable general agency and other revenue87.8
 97.6
Adjusted comparable funeral revenue$1,194.2
 $1,185.3
Comparable services performed227,196
 225,550
Comparable average revenue per service2
$5,256
 $5,255
    
Consolidated funeral operating profit$274.8
 $271.2
Less: Operating profit associated with acquisitions/new construction4.5
 1.1
Less: Operating loss associated with divestitures(3.0) 2.7
Comparable funeral operating profit
$273.3
 $267.4
(1)We define comparable (or same store) operations as those funeral locations owned by us for the entire period beginning January 1, 2016 and ending September 30, 2017.
(2)We calculate comparable average revenue per service by dividing comparable funeral revenue, excluding recognized preneed revenue, general agency revenue, and other revenue to avoid distorting our average of normal funeral services revenue, by the comparable number of services performed during the period. Recognized preneed revenue are preneed sales of merchandise that are delivered at the time of sale, including memorial merchandise and travel protection, and are excluded from our calculation of comparable average revenue per service because the associated service has not yet been performed.
Funeral Revenue
Consolidated revenue from funeral operations was $1,395.2 million for the nine months ended September 30, 2017 compared to $1,404.8 million for the same period in 2016. This decrease is primarily attributable to the loss of $28.5 million in revenue contributed by properties that have been subsequently divested, partially offset by $16.6 million in revenue contributed by acquired properties and a $2.3 million increase in comparable revenue as described below.
Comparable revenue from funeral operations was $1,370.8 million for the nine months ended September 30, 2017 compared to $1,368.5 million for the same period in 2016. The $2.3 million increase was primarily due to a 0.7% increase in comparable services performed. The increase in services performed comprises a 0.4% increase in services performed by our funeral homes and a 3.2% increase in cremation services performed by our non-funeral home channel.
Organic growth at the customer level of 0.8% was largely offset by the increase in our cremation mix. Our total comparable cremation rate increased to 53.4% in the first nine months of 2017 from 52.4% in 2016 as a result of an increase in both direct cremations and cremations with service.
Funeral Operating Profit
Consolidated funeral operating profit increased $3.6 million, or 1.3%, in the first nine months of 2017 compared to the same period in 2016. This increase is primarily attributable to an increase in comparable funeral operating profit of $5.9 million, or 2.2%. Comparable funeral operating profit increased $5.9 million to $273.3 million and the operating margin percentage increased 40 basis points to 19.9%, which is primarily the result of increased comparable revenue described above, lower selling costs from lower sales production, and effective cost management.

Cemetery Results
 Nine Months Ended September 30,
 2017 2016
 (In millions)
Consolidated cemetery revenue$887.1
 $817.3
Less: Revenue associated with acquisitions/new construction4.0
 —
Less: Revenue associated with divestitures—
 0.2
Comparable1 cemetery revenue
$883.1
 $817.1
    
Consolidated cemetery operating profit$235.5
 $194.5
Less: Operating profit associated with acquisitions/new construction0.5
 (0.1)
Less: Operating loss associated with divestitures(0.1) (0.3)
Comparable cemetery operating profit$235.1
 $194.9
(1)We define comparable (or same store) operations as those cemetery locations owned by us for the entire period beginning January 1, 2016 and ending September 30, 2017.
Cemetery Revenue
Consolidated revenue from our cemetery operations increased $69.8 million, or 8.5%, in the nine months ended September 30, 2017 compared to the same period in 2016, primarily attributable to the $66.0 million increase in comparable revenue and $4.0 million in revenue contributed by acquired properties. This increase primarily resulted from higher recognized preneed revenue from higher preneed sales production and higher merchandise deliveries.
Cemetery Operating Profit
Consolidated cemetery operating profit increased $41.0 million, or 21.1%, in the nine months ended September 30, 2017 compared to the same period in 2016. This increase is primarily the result of a $40.2 million increase in comparable operating profit. The operating profit increase was driven by growth in recognized preneed revenue as described above, partially offset by increased selling commissions from higher sales production.
Other Financial Statement Items
General and Administrative Expenses
General and administrative expenses increased $19.6 million to $122.3 million in the nine months ended September 30, 2017 compared to $102.7 million in the same period of 2016. The current period includes $12.8 million related to a pension termination settlement and $11.5 million related to a legal settlement. The prior year period includes $5.5 million in acquisition costs and $11.2 million in system transition costs primarily related to our 2016 implementation of a new general ledger system. Excluding these costs, general and administrative expenses increased $12.1 million in the nine months ended September 30, 2017 compared to the same period in 2016 due to higher insurance claims and increased costs related to the company's long-term incentive compensation.
(Losses) Gains on Divestitures and Impairment Charges, Net
(Losses) gains on divestitures and impairment charges, net, improved $36.0 million in the nine months ended September 30, 2017 compared to the same period of 2016, which included the divestiture of certain funeral homes in Los Angeles, California.
Hurricane Expenses, Net
On August 26, Hurricane Harvey made landfall in Texas causing significant damage across coastal Texas. In addition to damage caused directly by the storm itself, the region suffered massive damage from flooding as rainfall nearly exceeded the annual average. The main corporate headquarters sustained significant flood damage as did many of our Texas operations. On September 10, Irma made landfall in western Florida causing wind and flood damage to large parts of that state and the southeastern United States. On September 20, Maria made landfall in Puerto Rico causing significant wind and flood damage. During the third quarter of 2017, we began cleanup, repair and restoration of much of the damage in Texas and in Florida related to Hurricanes Harvey and Irma. During the quarter, we incurred $5.8 million in repair and cleanup costs and received $4.5 million of insurance proceeds related to these claims for a net impact of $1.3 million on our income statement. We believe we could incur another estimated $5.0 million in repair and clean up in the fourth quarter of 2017 and expect to receive additional insurance proceeds that would partially offset those costs. In addition, we expect to incur total capital costs of approximately $10.0 million to replace damaged assets. We are still assessing the impact from Hurricane Maria as communication with the island has been difficult, but based on our footprint on the island, we do not expect the overall impact to be material.

Loss on Early Extinguishment of Debt
We incurred a $22.5 million loss on early extinguishment of debt in the first nine months of 2016 to manage our near-term debt maturity profile and lower our effective interest rate by refinancing our 2017 notes.
Interest Expense
Interest expense increased $3.5 million to $125.5 million in the nine months ended September 30, 2017 as we were impacted by increased rates on our floating rate debt as well as higher Bank Credit Facility balances as we continued to maintain our leverage ratio.
Provision for Income Taxes
Income tax expense during interim periods is based on our estimated annual effective income tax rate plus any discrete items, which are recorded in the period in which they occur. Discrete items include, among others, such events as changes in estimates due to the finalization of tax returns, tax audit settlements, expiration of statute of limitations, and increases or decreases in valuation allowances on deferred tax assets. Our effective tax rate was a benefit of 12.3% and expense of 40.8% for the nine months ended September 30, 2017 and 2016, respectively. The effective tax rate for the nine months ended September 30, 2017 is lower than the federal statutory tax rate of 35% primarily due to the recent IRS tax settlement and result of tax benefits recognized on the settlement of employee share-based awards. The higher effective tax rate for the prior year quarter was the result of non-deductible goodwill related to funeral home divestitures.
Weighted Average Shares
The diluted weighted average number of shares outstanding was 192.4 million in the nine months ended September 30, 2017, compared to 197.2 million in the same period in 2016. The decrease in the number of shares reflects the impact of shares repurchased under our share repurchase program.
Critical Accounting Policies, Recent Accounting Pronouncements, and Accounting Changes
The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Although we base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, actual results may differ from the estimates on which our financial statements are prepared at any given point of time. Changes in these estimates could materially affect our consolidated financial position, consolidated results of operations, or cash flows. Significant items that are subject to such estimates and assumptions include revenue and expense accruals, fair value of merchandise and perpetual care trust assets, and the allocation of purchase price to the fair value of assets acquired. Our critical accounting policies have not significantly changed since December 31, 2021 and are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016.
There were no significant changes to our accounting policies that have occurred subsequent to December 31, 2016, except as described below within Recent Accounting Pronouncements and Accounting Changes.2021.
Recent Accounting Pronouncements and Accounting Changes
For discussion of recent accounting pronouncements and accounting changes, see Part I, Item 1. Financial Statements, Note 2.2 of this Form 10-Q.
Cautionary Statement on Forward-Looking Statements
The statements in this Form 10-Q that may be deemedare not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, are made in reliance on the “safe harbor”safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. These statements may be accompanied by words such as “believe,” “estimate,” “project,” “expect,” “anticipate,” “predict,” or “predict”other similar words that convey the uncertainty of future events or outcomes. The absence of these words, however, does not mean that the statements are not forward-looking. These statements are based on assumptions that we believe are reasonable; however, many important factors could cause our actual consolidated results in the future to differ materially from the forward-looking statements made herein and in any other documents or oral presentations made by, us, or on our behalf. Importantbehalf of, the Company. These factors which could cause actual resultsare discussed below. We assume no obligation and make no undertaking to differ materially from those inpublicly update or revise any forward-looking statements include, among others,made herein or any other forward-looking statements made by the following:Company, whether as a result of new information, future events, or otherwise.
•Our affiliated funeral and cemetery trust funds own investments in equity securities, fixed income securities, and mutual funds, which are affected by market conditions that are beyond our control.
•We may be required to replenish our affiliated funeral and cemetery trust funds to meet minimum funding requirements, which would have a negative effect on our earnings and cash flow.
•Our ability to execute our strategic plan depends on many factors, some of which are beyond our control.
•Our results may be adversely affected by significant weather events, natural disasters, catastrophic events, or public health crises.
•Our credit agreements contain covenants that may prevent us from engaging in certain transactions.
•If we lost the ability to use surety bonding to support our preneed funeral and preneed cemetery activities, we may be required to make material cash payments to fund certain trust funds.

The funeral and cemetery industry is competitive.
•Increasing death benefits related to preneed contracts funded through life insurance or annuity contracts may not cover future increases in the cost of providing a price-guaranteed service.
•The financial condition of third-party life insurance companies that fund our preneed funeral contracts may impact our future revenue.
Unfavorable results of litigation could have a material adverse impact on our financial statements.
•Unfavorable publicity could affect our reputation and business.
If the number of deaths in our markets declines, our cash flows and revenue may decrease.
If we are not able to respond effectively to changing consumer preferences, our market share, revenue, and profitability could decrease.
The continuing upward trend in the number of cremations performed in North America could result in lower revenue, gross profit, and cash flows.
Our funeral home and cemetery businesses are high fixed-cost businesses.
Regulation and compliance could have a material adverse impact on our financial results.
Cemetery burial practice legal claims could have a material adverse impact on our financial results.
•We use a combination of insurance, self-insurance, and large deductibles in managing our exposure to certain inherent risks; as such,therefore, we could be exposed to unexpected costs that could negatively affect our financial performance.
A number of years elapse before particular tax matters, for which we have established accruals, are audited and finally resolved.
•Declines in overall economic conditions beyond our control could reduce future potential earnings and cash flows and could result in future impairments to goodwill and/or other intangible assets.
FORM 10-Q 40


PART I
•Any failure to maintain the security of the information relating to our customers, their loved ones, our associates, and our vendors could damage our reputation, could cause us to incur substantial additional costs and to become subject to litigation, and could adversely affect our operating results.results, financial condition, or cash flow.
•Our Canadian business exposes us to operational, economic, and currency risks.
•Our level of indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, and may prevent us from fulfilling our obligations under our indebtedness.
•A failure of a key information technology system or process could disrupt and adversely affect our business.
•Failure to maintain effective internal control over financial reporting could adversely affect our results of operations, investor confidence, and our stock price.
•The funeral and cemetery industry is competitive.
•If the number of deaths in our markets declines, our cash flows and revenue may decrease. Changes in the number of deaths are not predictable from market to market or over the short term.
•If we are not able to respond effectively to changing consumer preferences, our market share, revenue, and/or profitability could decrease.
•The continuing upward trend in the number of cremations performed in North America could result in lower revenue, operating profit, and cash flows.
•Our funeral and cemetery businesses are high fixed-cost businesses.
•Risks associated with our supply chain could materially adversely affect our financial performance.
•Regulation and compliance could have a material adverse impact on our financial results.
•Unfavorable results of litigation could have a material adverse impact on our financial statements.
•Cemetery burial practice claims could have a material adverse impact on our financial results.
•The application of unclaimed property laws by certain states to our preneed funeral and cemetery backlog could have a material adverse impact on our liquidity, cash flows, and our financial results.
•Changes in taxation as well as the inherent difficulty in quantifying potential tax effects of business decisions could have a material adverse effect on the results of our operations, financial condition, or cash flows.
For further information on these and other risks and uncertainties, see our Securities and Exchange Commission filings, including our 20162021 Annual Report on Form 10-K. Copies of this document as well as other SEC filings can be obtained from our website at www.sci-corp.com. We assume no obligation and make no undertaking to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by us whether as a result of new information, future events, or otherwise.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. The term “market” risk refers to the risk of gains or losses arising from changes in interest rates and prices of marketable securities. The disclosures are not meant to be precise indicators of expected future gains or losses, but rather indicators of reasonably possible gains or losses. This forward-looking information provides indicators of how we view and manage our ongoing market risk exposures. All of our market risk-sensitive instruments were entered into for purposes other than trading.
Marketable Equity and Debt Securities — Price Risk
In connection with our preneed operations and sales, the related trust funds own investments in equity and debt securities and mutual funds, which are sensitive to current market prices. Cost and market values as of SeptemberJune 30, 20172022 are presented

in Part I, Item 1. Financial Statements, and Note 3 of this Form 10-Q. Also, see Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations Financial Conditions,"Financial Condition, Liquidity and Capital Resources,Resources" section for discussion of trust investments.



FORM 10-Q 41


PART II
Item 4. Controls and Procedures
Disclosure Controls and Procedures
As of SeptemberJune 30, 2017,2022, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)). Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the Securities and Exchange Commission (SEC) reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time period specified by the SEC’s rules and forms and that such information is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Based on our evaluation, our CEO and CFO have concluded that our disclosure controls and procedures are effective as of SeptemberJune 30, 20172022 and that the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our consolidated financial condition, consolidated results of operations, and cash flows for the periods presented in conformity with US GAAP.
Changes in Internal Control Over Financial Reporting
NoThere were no changes in our internal control over financial reporting occurred during the quarter ended SeptemberJune 30, 20172022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
42 Service Corporation International
PART II. OTHER INFORMATION

PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Information regarding legal proceedings is set forth in Part I, Item 1. Financial Statements, Note 9 in Item 1 of Part I of this Form 10-Q, which information is hereby incorporated by reference herein.
Item 1A. Risk Factors
There have been no material changes in our Risk Factors as set forth in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2016, except as set forth below.2021.
A failure of a key information technology system or process could disrupt and adversely affect our business.
We rely extensively on information technology systems, some of which are managed or provided by third-party service providers, to analyze, process, store, manage, and protect transactions and data. In managing our business, we also rely heavily on the integrity of, security of and consistent access to this data for information such as sales, merchandise ordering, inventory replenishment and order fulfillment. For these information technology systems and processes to operate effectively, we or our service providers must periodically maintain and update them. Our systems and the third-party systems on which we rely are subject to damage or interruption from a number of causes, including power outages; computer and telecommunications failures; computer viruses; security breaches; cyber-attacks, including the use of ransomware; catastrophic events such as fires, floods, earthquakes, tornadoes, or hurricanes; acts of war or terrorism; and design or usage errors by our associates, contractors, or third-party service providers. Although we and our third-party service providers seek to maintain our respective systems effectively and to successfully address the risk of compromise of the integrity, security, and consistent operations of these systems, such efforts may not be successful. As a result, we or our service providers could experience errors, interruptions, delays, or cessations of service in key portions of our information technology infrastructure, which could significantly disrupt our operations and be costly, time consuming, and resource-intensive to remedy.
The application of unclaimed property laws by certain states to our preneed funeral and cemetery backlog could have a material adverse impact on our liquidity, cash flows, and our financial results.
In the ordinary course, our businesses have sold preneed funeral and cemetery contracts for decades. To the extent these contracts will not be funded with the assignment of the proceeds of life insurance policies, depending on applicable state laws, we could be responsible for escheatment of the portion of the funds paid that relate to contracts which we are unlikely to fulfill. For additional information, see Unclaimed Property Audit in Note 9 in Item 1 of Part 1 of this Form 10-Q. The aforesaid application of unclaimed property laws could have a material adverse effect on our liquidity, cash flows, and financial results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The following table summarizes our share repurchases during the three months ended SeptemberJune 30, 2017:2022:

PeriodTotal Number of
Shares Purchased		Average Price
Paid per Share		Total Number
of Shares
Purchased as
Part of Publicly
Announced Programs		Approximate Dollar Value of
Shares That
May Yet be
Purchased Under the Program
April 1, 2022 — April 30, 2022 (1)
396,223 $67.68 395,208 $213,560,808 
May 1, 2022 — May 31, 2022 (2)
547,484 $67.03 547,253 $574,317,013 
June 1, 2022 — June  30, 2022600,850 $66.97 600,850 $534,080,967 
1,544,557 1,543,311 
(1) 1,015 shares were purchased in April 2022 in connection with the surrender of shares by associates to satisfy certain tax withholding obligations under compensation plans. These repurchases were not part of our publicly announced program and do not affect our share repurchase program.
(2) 231 shares were purchased in May 2022 in connection with the surrender of shares by associates to satisfy certain tax withholding obligations under compensation plans. These repurchases were not part of our publicly announced program and do not affect our share repurchase program.
Period Total number of shares purchased Average price paid per share Total number of shares purchased as part of publicly announced programs Dollar value of shares that may yet be purchased under the program
July 1, 2017 - July 31, 2017 118,299
 $33.51
 118,299
 $244,188,178
August 1, 2017 - August 31, 2017 258,300
 $35.33
 258,300
 $235,062,389
September 1, 2017 - September 30, 2017 447,492
 $35.00
 447,492
 $219,398,818
  824,091
   824,091
  
Item 3. Defaults Upon Senior Securities.

Securities
None.

Item 4. Mine Safety Disclosures.

Disclosures
Not applicable.

Item 5. Other Information.Information

No other information.
None.
FORM 10-Q 43



PART II
Item 6. Exhibits
12.1Exhibit Number
—Description

—
—
31.1
—
—
—
—
—
—
Certification of Thomas L. Ryan as Principal Executive Officer in satisfaction of Section 302 of the Sarbanes-Oxley Act of 2002.

—
Certification of Eric D. Tanzberger as Principal Financial Officer in satisfaction of Section 302 of the Sarbanes-Oxley Act of 2002.

—
Certification of Periodic Financial Reports by Thomas L. Ryan as Principal Executive Officer in satisfaction of Section 906 of the Sarbanes- Oxley Act of 2002.

—
Certification of Periodic Financial Reports by Eric D. Tanzberger as Principal Financial Officer in satisfaction of Section 906 of the Sarbanes-Oxley Act of 2002.
101
——
Interactive data file.file formatted Inline XBRL.
104—Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).



44 Service Corporation International
SIGNATURE

Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
October 26, 2017August 3, 2022SERVICE CORPORATION INTERNATIONAL
By:/s/ Tammy MooreTAMMY MOORE
Tammy Moore
Vice President and Corporate Controller
(Principal Accounting Officer)


39FORM 10-Q 45