Service Corp. International, the world’s largest operator of cemeteries and funeral homes, announced that it will probably restate its results for each year going back to 2000 and for the first quarter of this year. For the second time this month, SCI also sought more time to file its quarterly results.
The Houston-based company added that the adjustments are of a non-cash nature, but expects them “to be material” to the second quarter of 2005.
SCI’s trust and cemetery deferred-revenue verification project, which suggested that a restatement would likely be needed, included two primary components. One includes the reconciliation of assets and deferred revenue related to pre-need cemetery merchandise and service trusts, pre-need funeral merchandise and service trusts, and cemetery perpetual-care trusts. The other component involves verifying about 430,000 pre-need funeral contracts to determine if they were accurately included in the company’s new point-of-sale system, and determining whether each individual item on every cemetery contract was recognized at the time of delivery or service.
The company stated that it has determined that certain of the reconciling items were reflected improperly in its initial reconciliation process last December, which resulted in the errors in its previously issued financial statements.
SCI added that it has identified other adjustments, one of which related to a point-of-sale system error which caused pre-need funeral trust income to be understated in the fourth quarter of 2004 and the first quarter of 2005. Another adjustment related to the recognition of a loss on a property sale which should have been recognized in the first quarter of 2005.
The adjustments are expected to result in a cumulative $7.5 million non-cash charge; other adjustments are possible, the company added.
SCI has implemented several accounting changes during the past year, according to Reuters, and has disclosed material weaknesses in its internal controls.