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Funeral Home Operations, which currently account for approximately 75% of our revenue, and Cemetery Operations, which currently account for approximately 25% of our revenue.
−Removed: At June 30, 2020 , we operated 186 funeral homes in 29 states and 32 cemeteries in 11 states.
+Added: At September 30, 2020, we operated 180 funeral homes in 27 states and 32 cemeteries in 12 states.
We compete with other publicly held and independent operators of funeral and cemetery companies.
4 unchanged sentences
Recent Developments
−Removed: Credit Facility
−Removed: On May 18, 2020, we received a waiver under our Credit Facility for the failure to comply with the Total Leverage Ratio covenant for the fiscal quarter ended March 31, 2020.
−Removed: In connection with the waiver, the Credit Facility was also amended to increase the interest rate margin applicable to borrowings by up to 0.625% at each pricing level based on the Total Leverage Ratio.
−Removed: We are in compliance with the total leverage ratio, fixed charge coverage ratio and senior secured leverage ratio covenants contained in our Credit Facility as of June 30, 2020.
−Removed: Dividend Increase
−Removed: On May 19, 2020, the Board of Directors (the “Board”) approved an increase of $0.05 to our annual dividend beginning with the next dividend declaration in the third quarter.
−Removed: The annual dividend is now $0.35 per share.
−Removed: Performance Awards
−Removed: On May 19, 2020, we cancelled all the Performance Awards previously awarded to all individuals in 2019 and 2020 and the Compensation Committee of the Board approved a new Performance Award Agreement (the “New Agreement”) for certain eligible employees.
−Removed: Pursuant to the New Agreement, the target share awards for each of the eligible employees will vest on December 31, 2024 if the Company’s common stock reaches one of five pre-determined growth targets for a sustained period beginning on the grant date of May 19, 2020 and ending on December 31, 2024.
−Removed: Executive Leadership Changes
−Removed: On June 25, 2020, William W.
−Removed: Goetz resigned as President and Chief Operating Officer effective June 26, 2020.
−Removed: Goetz further agreed to resign from his position as a director on the Board, also effective as of June 26, 2020.
−Removed: The resignation was not the result of any disagreement Mr.
−Removed: Goetz had with the Company on any matter relating to the Company’s operations, policies, and practices.
−Removed: On June 25, 2020, Carlos Quezada joined the Company as Vice President of Cemetery Sales and Marketing.
−Removed: His primary responsibilities include building High Performance sales teams and standardized sales systems across our portfolio of cemetery businesses.
−Removed: Prior to joining Carriage, Mr.
−Removed: Quezada was a Managing Director for another publicly traded deathcare company.
−Removed: He also has held prior leadership roles in sales and operations in the deathcare and hospitality industries.
−Removed: Executive Management reduction in base salaries
−Removed: On April 19, 2020, the Company initiated measures to address potential future challenges from the COVID-19 pandemic.
−Removed: These measures included cost reduction efforts, including, among other things, a temporary reduction in the base salaries for the Company’s executive officers.
−Removed: The Compensation Committee of the Board approved the temporary reductions in compensation.
−Removed: On June 26, 2020, the Compensation Committee of the Board voted to reinstate the 2020 annual base salaries for the executive officers back to 100% due to the Company’s performance.
−Removed: The reinstatement of 2020 annual base salaries is effective as of June 28, 2020.
−Removed: The annual base salary reductions for the Company’s executive officers from April 19, 2020 through June 27, 2020 have been treated as a temporary pay cut, and the lost wages from that time period will not be paid.
−Removed: Board of Directors reduction in retainer fees
−Removed: On April 23, 2020, the Board approved a temporary reduction of the quarterly retainer for our non-employee directors from $35,000 per quarter to $29,750 per quarter (or 15%) effective April 19, 2020.
−Removed: On June 26, 2020, the Board voted to reinstate the compensation fees back to 100%, effective as of June 28, 2020.
+Added: During the three months ended September 30, 2020, we divested six funeral homes for at total of $7.3 million, at a net loss on the sale of $4.9 million.
+Added: Convertible Notes Repurchases
+Added: On September 9, 2020, we repurchased $3.76 million in aggregate principal amount 2.75% convertible subordinated notes due 2021 (“Convertible Notes”) for $4.5 million in cash (plus accrued interest of $0.1 million totaling $4.6 million).
+Added: The privately-negotiated repurchases represented approximately 60% of the aggregate principal amount of Convertible Notes.
+Added: Following the settlement of the repurchases, the aggregate principal amount of the Convertible Notes was reduced to approximately $2.6 million.
+Added: In connection with the repurchases of our Convertible Notes, we obtained a limited consent from the lenders under our $190.0 million senior secured revolving credit facility (“Credit Facility”) on August 7, 2020 to permit the repurchases of the Convertible Notes.
Business Impact under the Macroeconomic Environment of COVID-19
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Our industry’s revenues are impacted by various factors, including the number of funeral services performed, the average price for a service and the mix of traditional burial versus cremation contracts.
−Removed: Changes in the macroeconomic environment as a result of the pandemic may not necessarily impact volume, but could create situations where people choose to spend less on funerals by purchasing less expensive caskets, minimize the scale of services and visitations, or elect not to make a preneed funeral or cemetery arrangement.
+Added: Changes in the macroeconomic environment as a result of the pandemic have, to this point, led to an increase in volume and may create situations where people choose to spend less on funerals by purchasing less expensive caskets, minimize the scale of services and visitations, or elect not to make a preneed funeral or cemetery arrangement.
During this time, our businesses have been focused on being innovative and resourceful, providing some type of immediate service as part of the grieving process.
−Removed: Gathering and travel restrictions across many areas of the country have limited our ability to provide large, in-person memorialization services and we have seen client families elect webcasting and livestreaming services, hold services with smaller attendance or rotating visitors, or in some cases, choose to delay services to a future date.
−Removed: We have also offered various incentives to our customers and sales counselors to continue to foster sales in our cemeteries.
+Added: Gathering and travel restrictions across many areas of the country have limited our ability to provide large, in-person
+Added: memorialization services and we have seen client families elect webcasting and livestreaming services, hold services with smaller attendance or rotating visitors, or in some cases, choose to delay services to a future date.
Within our financial reporting environment, we have considered various areas that could affect the results of our operations, though the scope, severity and duration of these impacts remain uncertain at this time because the COVID-19 pandemic is continually evolving and the ultimate impact of COVID-19 remains uncertain.
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We believe our access to capital, the cost of our capital, or the sources and uses of our cash should be relatively consistent in the near term, but given the unprecedented nature of COVID-19, we also believe, it is prudent for us to take a broad-based approach to ensuring we maintain financial flexibility throughout the expected duration of the pandemic.
−Removed: We have, as part of a larger plan, taken steps to reduce overall expenses throughout the rest of 2020.
+Added: We have, as part of a larger plan, taken steps to reduce overall expenses throughout 2020.
For example, discretionary spending, such as growth capital expenditures (primarily cemetery inventory development) will be tightly managed and minimized during this time.
−Removed: Moreover, our executive officers and non-employee directors voluntarily agreed to temporary reductions in salary compensation from April 19, 2020 through June 28, 2020 (see above herein).
−Removed: While the expected duration of the pandemic is unknown, we have not currently experienced any material impacts to our liquidity position, access to capital, or cash flows as a result of COVID-19.
+Added: Moreover, our executive officers and non-employee directors voluntarily agreed to temporary reductions in salary compensation from April 19, 2020 through June 28, 2020.
+Added: While the expected duration of the pandemic is unknown, we have not currently experienced any material negative impacts to our liquidity position, access to capital, or cash flows as a result of COVID-19.
See Liquidity within Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, for additional information related to our liquidity position.
−Removed: We have also applied certain measures of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted on March 27, 2020, which we anticipate should provide a cash benefit in the form of a tax payment refund, tax credits related to employee retention, cash deferral for the employer portion of the Social Security tax and anticipated minimal cash taxes for 2020.
+Added: We have also applied certain measures of the CARES Act, which was enacted on March 27, 2020, which has provided a cash benefit in the form of tax payment refunds (we received the 2018 tax year refund on August 7, 2020 and anticipate a further refund for tax year 2019), tax credits related to employee retention, cash deferral for the employer portion of the Social Security tax and anticipated minimal cash taxes for 2020.
Although we expect to take advantage of certain tax relief provisions of the CARES Act, we do not believe it will have a significant impact on our short-term or long-term liquidity position.
See Item 1, Financial Statements and Supplementary Data, Note 1 for additional information related to the CARES Act.
−Removed: The COVID-19 pandemic, and related gathering restrictions issued by state and local officials, did impact, while not material, aspects of our financial results in the second quarter and year to date, including revenue, volume, preneed cemetery sales, and average revenue per contract.
+Added: The COVID-19 pandemic, and related gathering restrictions issued by state and local officials, did impact aspects of our financial results in the third quarter and year to date, including revenue, volume, preneed cemetery sales, and average revenue per contract.
We will continue to assess these impacts and implement appropriate procedures, plans, strategy, and issue any disclosures that may be required, as the situation surrounding the pandemic and related gathering restrictions evolves.
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Our belief in our Mission Statement and Guiding Principles that define us and proper execution of the following three models that define our strategy, have given us the competitive advantage in any market in which we compete.
−Removed: We believe that we can execute our three models without proportionate incremental investment in our consolidation platform infrastructure and without additional fixed regional and corporate overhead.
−Removed: This gives us a competitive advantage that is evidenced by the sustained earning power of our portfolio as defined by our EBITDA margin.
+Added: We believe that we can execute our three models without proportionate incremental investment in our consolidation platform infrastructure and fixed regional and corporate overhead.
+Added: This gives us a competitive advantage that is evidenced by the sustained earning power of our portfolio as defined by our earnings before interest, taxes, depreciation and amortization (“EBITDA”) margin (a non-GAAP measure).
Standards Operating Model
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Standards Achievement is the measure by which we judge the success of each business and incentivize our local managers and their teams.
−Removed: Our Standards Operating Model is not designed to produce maximum short-term
−Removed: earnings because we believe such performance is unsustainable and will ultimately stress the business, which very often leads to declining market share, revenue and earnings.
+Added: Our Standards Operating Model is not designed to produce maximum short-term earnings because we believe such performance is unsustainable and will ultimately stress the business, which very often leads to declining market share, revenue and earnings.
4E Leadership Model
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As we execute this strategy over time, we expect to acquire larger, higher margin strategic businesses.
−Removed: We have learned that the long-term growth or decline of a local branded funeral and cemetery business is reflected by several criteria that correlate strongly with five to ten year performance in volumes (market share), revenue and sustainable field-level earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins (a non-GAAP measure).
+Added: We have learned that the long-term growth or decline of a local branded funeral and cemetery business is reflected by several criteria that correlate strongly with five to ten-year performance in volumes (market share), revenue and sustainable field-level EBITDA margins.
We use criteria such as cultural alignment, volume and price trends, size of business, size of market, competitive standing, demographics, strength of brand and barriers to entry to evaluate the strategic position of potential acquisition candidates.
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We also generate cash from earnings on our cemetery perpetual care trusts.
−Removed: Based on our recent operating results, current cash position, steps taken to reduce overall expenses throughout the rest of 2020, and anticipated future cash flows, we do not anticipate any significant liquidity constraints in the foreseeable future.
+Added: Based on our recent operating results, current cash position, cost reductions in 2020, and anticipated future cash flows, we do not anticipate any significant liquidity constraints in the foreseeable future.
However, if our capital expenditures, acquisition or divestiture plans, or business impacts from the pandemic change, we may need to access the capital markets to obtain additional funding.
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Discretionary spending, such as internal growth projects and expenditures (primarily cemetery inventory development, along with funeral home expansion projects) will be tightly managed and minimized during the remainder of 2020.
−Removed: We also expect increased divestiture activity for the next 12-18 months which we anticipate will yield approximately $15 million of additional cash from the proceeds of the sale.
−Removed: From time to time we may also use available cash resources (including borrowings under our Credit Facility) to, subject to satisfying certain financial covenants in our Credit Facility, repurchase shares of our common stock and our remaining 2.75% convertible subordinated notes due 2021 (“Convertible Notes”) in open market or privately negotiated transactions.
+Added: We also expect increased divestiture activity in the next 12 months, which will yield additional cash from the proceeds of the sale.
+Added: From time to time we may also use available cash resources (including borrowings under our Credit Facility) to, subject to satisfying certain financial covenants in our Credit Facility, repurchase shares of our common stock and our remaining Convertible Notes in open market or privately negotiated transactions.
We have the ability to draw on our Credit Facility, subject to its customary terms and conditions.
−Removed: As of June 30, 2020 , we have net unrealized losses of $10.8 million in our trusts.
−Removed: At June 30, 2020 , these net unrealized losses represented 4% of our original cost basis of $242.1 million .
−Removed: The decline in fair value is largely due to changes in interest rates and other market conditions as a result of COVID-19.
+Added: As of September 30, 2020, we have net unrealized losses of $7.3 million in our trusts.
+Added: At September 30, 2020, these net unrealized losses represented 3% of our original cost basis of $245.8 million.
+Added: Our trusts have been and continue to be impacted by current market conditions in the U.S.
+Added: and global financial markets.
+Added: The decline in fair value is largely due to changes in interest rates and other market conditions.
Our investments are diversified across multiple industry segments using a balanced allocation strategy to minimize long-term risk.
In addition, we do not intend to sell and it is likely that we will not be required to sell the securities prior to their anticipated recovery.
−Removed: Changes in unrealized gains and/or losses related to these securities are reflected in Other comprehensive income and offset by the Deferred preneed funeral and cemetery receipts held in
−Removed: trust and Care trusts’ corpus interests in those unrealized gains and/or losses.
+Added: Changes in unrealized gains and/or losses related to these securities are reflected in Other comprehensive income and offset by the Deferred preneed funeral and cemetery receipts held in trust and Care trusts’ corpus interests in those unrealized gains and/or losses.
There is no impact on earnings until such time that the loss is realized in the trusts, allocated to the preneed contracts and the services are performed or the merchandise is delivered, causing the contract to be withdrawn from the trust in accordance with state regulations.
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In light of recent developments relating to COVID-19, we believe that our existing and anticipated cash resources will be sufficient to meet our anticipated working capital requirements, capital expenditures, scheduled debt payments, commitments and dividends for the next 12 months.
−Removed: We began 2020 with $0.7 million in cash and other liquid investments and ended the second quarter with $0.7 million .
−Removed: As of June 30, 2020 , we had borrowings of $89.7 million outstanding on our Credit Facility compared to $83.8 million as of December 31, 2019 .
−Removed: The following table sets forth the elements of cash flow for the six months ended June 30, 2019 and 2020 (in thousands):
−Removed: Six months ended June 30,
+Added: We began 2020 with $0.7 million in cash and other liquid investments and ended the third quarter with $0.7 million.
+Added: As of September 30, 2020, we had borrowings of $56.0 million outstanding on our Credit Facility compared to $83.8 million as of December 31, 2019.
+Added: During the three months ended September 30, 2020, we reduced the outstanding borrowings on our Credit Facility by $33.7 million.
+Added: The following table sets forth the elements of cash flow for the nine months ended September 30, 2019 and 2020 (in thousands):
+Added: Nine months ended September 30,
Cash at beginning of year $ 644 $ 716
Net cash provided by operating activities 36,061 67,822
−Removed: Net proceeds from the sale of other assets
+Added: Acquisitions — (28,011)
+Added: Proceeds from insurance reimbursements 1,247 97
+Added: Proceeds from divestitures and sale of other assets 967 7,416
Capital expenditures (11,479) (10,034)
1 unchanged sentence
Net borrowings (payments) on our Credit Facility, acquisition debt and finance lease obligations (10,470) (28,860)
−Removed: Redemption of the Convertibles Notes
+Added: Payment of debt issuance costs related to long-term debt (113) —
+Added: Repurchase of the Convertibles Notes (27) (4,563)
+Added: Payment of transaction costs related to the repurchase of the Convertibles Notes — (12)
Payment of debt issuance costs related to the Senior Notes — (66)
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Other financing costs (162) (169)
−Removed: Net cash provided by (used in) financing activities
+Added: Net cash used in financing activities (21,628) (37,281)
Cash at end of the period $ 5,812 $ 725
Operating Activities
−Removed: For the six months ended June 30, 2020 , cash provided by operating activities was $31.0 million compared to $21.9 million for the six months ended June 30, 2019 .
+Added: For the nine months ended September 30, 2020, cash provided by operating activities was $67.8 million compared to $36.1 million for the nine months ended September 30, 2019.
The increase of $31.7 million is a reflection of the resilient cash generating ability of our portfolio of high-quality funeral home and cemetery operations.
−Removed: Our operating income (excluding the non-cash $14.7 million impairment charge of goodwill and tradenames recorded in the first quarter) increased $6.3 million in addition to other favorable working capital changes.
+Added: Our operating income (excluding the non-cash $19.6 million net loss on divestitures and impairment charges) increased $15.8 million in addition to other favorable working capital changes.
Investing Activities
−Removed: Our investing activities, resulted in a net cash outflow of $33.7 million for the six months ended June 30, 2020 compared to $8.6 million for the six months ended June 30, 2019 , an increase of $25.1 million .
−Removed: During the six months ended June 30, 2020 , we acquired a funeral home and cemetery combination business in Lafayette, California for $33.0 million in cash, of which $5.0 million was deposited in escrow in 2019 and $28.0 million was paid at closing in 2020.
+Added: Our investing activities, resulted in a net cash outflow of $30.5 million for the nine months ended September 30, 2020 compared to $9.3 million for the nine months ended September 30, 2019, an increase of $21.2 million.
+Added: During the nine months ended September 30, 2020, we acquired a funeral home and cemetery combination business in Lafayette, California for $33.0 million in cash, of which $5.0 million was deposited in escrow in 2019 and $28.0 million was paid at closing in 2020.
We also paid an additional $0.2 million for our acquisition of the cemetery business in Fairfax, Virginia to reimburse the sellers for certain incremental taxes resulting from the 338(h)(10) election under the Internal Revenue Code, which was offset by the receipt of $0.2 million in cash related to the sellers closing all operating bank accounts in place prior to the acquisition.
−Removed: For the six months ended June 30, 2020 , capital expenditures totaled $5.8 million compared to $8.7 million for the six months ended June 30, 2019 , a decrease of $2.9 million .
+Added: During the nine months ended September 30, 2020, we sold six funeral homes for $7.3 million and we sold real property for $0.1 million.
+Added: During the nine months ended September 30, 2020, we received proceeds of $0.1 million from our property insurance policy for the reimbursement of renovation costs for our cemetery businesses that were damaged by Hurricane Michael.
+Added: For the nine months ended September 30, 2020, capital expenditures totaled $10.0 million compared to $11.5 million for the nine months ended September 30, 2019, a decrease of $1.5 million.
The following tables present our growth and maintenance capital expenditures (in thousands):
−Removed: Six months ended June 30,
+Added: Nine months ended September 30,
Cemetery development $ 3,109 $ 3,321
3 unchanged sentences
Facility repairs and improvements $ 1,565 $ 1,610
+Added: Vehicles 1,641 1,201
General equipment and furniture 2,245 1,957
3 unchanged sentences
Financing Activities
−Removed: Our financing activities resulted in a net cash inflow of $2.7 million for the six months ended June 30, 2020 compared to a net cash outflow of $13.3 million for the six months ended June 30, 2019 , an increase of $16.0 million .
−Removed: During the six months ended June 30, 2020 , we had net borrowings on our Credit Facility of $5.9 million and payments on our acquisition debt and finance leases of $0.7 million and paid $2.7 million in dividends.
−Removed: During the six months ended June 30, 2019 , we had net payments on our Credit Facility of $2.5 million , payments on our acquisition debt and finance leases of $0.9 million , we paid $2.7 million in dividends and repurchased treasury stock for $7.8 million .
−Removed: During the six months ended June 30, 2019 and 2020 , our Board declared the following dividends payable on the dates below (in thousands, except per share amounts):
−Removed: On May 19, 2020, the Board approved an increase of $0.05 to our annual dividend beginning with the next dividend declaration in the third quarter.
+Added: Our financing activities resulted in a net cash inflow of $37.3 million for the nine months ended September 30, 2020 compared to a net cash outflow of $21.6 million for the nine months ended September 30, 2019, an increase of $15.7 million.
+Added: During the nine months ended September 30, 2020, we had net payments on our Credit Facility, acquisition debt and finance leases of $28.9 million, paid $4.3 million in dividends and paid $4.6 million for the repurchases of our Convertible Notes.
+Added: During the nine months ended September 30, 2019, we had net payments on our Credit Facility, acquisition debt and finance leases of $10.5 million, paid $4.1 million in dividends and repurchased treasury stock for $7.8 million.
+Added: During the nine months ended September 30, 2019 and 2020, our Board declared the following dividends payable on the dates below (in thousands, except per share amounts):
+Added: 2019 Per Share Dollar Value
+Added: $ 0.0750 $ 1,360
+Added: $ 0.0750 $ 1,365
+Added: September 1 st
+Added: $ 0.0750 $ 1,336
+Added: 2020 Per Share Dollar Value
+Added: $ 0.0750 $ 1,339
+Added: $ 0.0750 $ 1,343
+Added: September 1 st
+Added: $ 0.0875 $ 1,569
Share Repurchases
−Removed: During the six months ended June 30, 2020 , we did not repurchase any shares of common stock pursuant to our share repurchase program.
−Removed: At June 30, 2020 , we had approximately $25.6 million available for repurchases under our share repurchase program.
+Added: During the nine months ended September 30, 2020, we did not repurchase any shares of common stock pursuant to our share repurchase program.
+Added: At September 30, 2020, we had approximately $25.6 million available for repurchases under our share repurchase program.
Credit Facility, Lease Obligations and Acquisition Debt
−Removed: The outstanding principal of our Credit Facility, lease obligations and acquisition debt at June 30, 2020 is as follows (in thousands):
−Removed: June 30, 2020
+Added: The outstanding principal of our Credit Facility, lease obligations and acquisition debt at September 30, 2020 is as follows (in thousands):
+Added: September 30, 2020
Credit Facility $ 56,000
2 unchanged sentences
Acquisition debt 6,119
+Added: Total $ 90,064
Credit Facility
−Removed: At June 30, 2020 , our Credit Facility was comprised of:
+Added: At September 30, 2020, our Credit Facility was comprised of:
(i) a $190.0 million revolving credit facility, including a $15.0 million subfacility for letters of credit and a $10.0 million swingline, and (ii) an accordion or incremental option allowing for future increases in the facility size by an additional amount of up to $75.0 million in the form of increased revolving commitments or incremental term loans.
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In the event the Company’s actual Total Leverage Ratio is not at least 0.25 less than the required Total Leverage Ratio covenant level, at the discretion of the Administrative Agent, the Administrative Agent may unilaterally compel the Company and the Credit Facility Guarantors to grant and perfect first-priority mortgage liens on fee-owned real property assets which account for no less than 50% of funeral operations EBITDA.
−Removed: As of June 30, 2020 , we were subject to the following financial covenants under our Credit Facility:
+Added: As of September 30, 2020, we were subject to the following financial covenants under our Credit Facility:
(A) a Total Leverage Ratio not to exceed, (i) 5.75 to 1.00 for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020 and (ii) 5.50 to 1.00 for the quarter ended December 31, 2020 and each quarter ended thereafter, (B) a Senior Secured Leverage Ratio (as defined in the Credit Facility) not to exceed 2.00 to 1.00 as of the end of any period of four consecutive fiscal quarters, and (C) a Fixed Charge Coverage Ratio (as defined in the Credit Facility) of not less than 1.20 to 1.00 as of the end of any period of four consecutive fiscal quarters.
These financial maintenance covenants are calculated for the Company and its subsidiaries on a consolidated basis.
−Removed: On May 18, 2020, we received a waiver under our Credit Facility for the failure to comply with the Total Leverage Ratio covenant for the fiscal quarter ended March 31, 2020.
−Removed: In connection with the waiver, the Credit Facility was also amended to increase the interest rate margin applicable to borrowings by up to 0.625% at each pricing level based on the Total Leverage Ratio.
−Removed: We were in compliance with the total leverage ratio, fixed charge coverage ratio and senior secured leverage ratio covenants contained in our Credit Facility as of June 30, 2020 .
−Removed: We have one letter of credit outstanding under the Credit Facility issued on November 30, 2019 for approximately $2.0 million , which bears interest at 2.125% and will expire on November 25, 2020 .
+Added: On August 7, 2020, we obtained a limited consent from the lenders under our Credit Facility in connection with our privately-negotiated repurchases of our Convertible Notes.
+Added: We were in compliance with the total leverage ratio, fixed charge coverage ratio and senior secured leverage ratio covenants contained in our Credit Facility as of September 30, 2020.
+Added: We have one letter of credit outstanding under the Credit Facility issued on November 30, 2019 for approximately $2.0 million, which was increased to $2.1 million on September 29, 2020.
+Added: The letter of credit bears interest at 3.125% and will expire on November 25, 2020.
The letter of credit automatically renews annually and secures our obligations under our various self-insured policies.
Outstanding borrowings under our Credit Facility bear interest at either a prime rate or a LIBOR rate, plus an applicable margin based upon our leverage ratio.
−Removed: As of June 30, 2020 , the prime rate margin was equivalent to 2.00% and the LIBOR rate margin was 3.00% .
−Removed: The weighted average interest rate on our Credit Facility was 3.6% and 3.9% for the three and six months ended June 30, 2020 , respectively.
−Removed: The weighted average interest rate on our Credit Facility was 3.9% and 4.0% for the three and six months ended June 30, 2019 , respectively.
−Removed: The interest expense and amortization of debt issuance costs related to our Credit Facility during the three and six months ended June 30, 2019 and 2020 is as follows (in thousands):
−Removed: Three months ended June 30,
−Removed: Six months ended June 30,
+Added: As of September 30, 2020, the prime rate margin was equivalent to 2.00% and the LIBOR rate margin was 3.00%.
+Added: The weighted average interest rate on our Credit Facility was 3.9% for both the three months ended September 30, 2019 and 2020 and 3.9% and 4.0% for the nine months ended September 30, 2019 and 2020, respectively.
+Added: The interest expense and amortization of debt issuance costs related to our Credit Facility during the three and nine months ended September 30, 2019 and 2020 is as follows (in thousands):
+Added: Three months ended September 30, Nine months ended September 30,
+Added: 2019 2020 2019 2020
Credit Facility interest expense $ 350 $ 828 $ 1,090 $ 3,164
5 unchanged sentences
We lease certain funeral homes under finance leases with original terms ranging from ten to forty years.
−Removed: The lease cost related to our operating leases and short-term leases and depreciation expense and interest expense related to our finance leases during the three and six months ended June 30, 2019 and 2020 are as follows (in thousands):
−Removed: Three months ended June 30,
−Removed: Six months ended June 30,
+Added: The lease cost related to our operating leases and short-term leases and depreciation expense and interest expense related to our finance leases during the three and nine months ended September 30, 2019 and 2020 are as follows (in thousands):
+Added: Three months ended September 30, Nine months ended September 30,
+Added: 2019 2020 2019 2020
Operating lease cost $ 899 $ 927 $ 2,762 $ 2,838
7 unchanged sentences
Original maturities range from five to twenty years.
−Removed: The imputed interest expense related to our acquisition debt during the three and six months ended June 30, 2019 and 2020 is as follows (in thousands):
−Removed: Three months ended June 30,
−Removed: Six months ended June 30,
+Added: The imputed interest expense related to our acquisition debt during the three and nine months ended September 30, 2019 and 2020 is as follows (in thousands):
+Added: Three months ended September 30, Nine months ended September 30,
+Added: 2019 2020 2019 2020
Acquisition debt imputed interest expense $ 152 $ 122 $ 481 $ 373
Convertible Subordinated Notes due 2021
−Removed: At June 30, 2020 , the principal amount of the liability component of our Convertible Notes was $6.3 million , the net carrying amount was $6.1 million and the carrying amount of the equity component was $0.8 million .
−Removed: The fair value of the Convertible Notes, which are Level 2 measurements, was $6.4 million at June 30, 2020 .
+Added: On September 9, 2020, we completed privately-negotiated repurchases (the “Repurchases”) of $3.8 million in aggregate principal amount of Convertible Notes for $4.5 million in cash (plus accrued interest of $0.1 million totaling $4.6 million) and recorded $0.8 million for the reacquisition of the equity component.
+Added: The Repurchases represented approximately 60% of the aggregate principal amount of Convertible Notes then outstanding.
+Added: Following the settlement of the Repurchases, the aggregate principal amount of the Convertible Notes was reduced to approximately $2.6 million.
+Added: At September 30, 2020, the principal amount of the liability component of our Convertible Notes was $2.6 million, the net carrying amount was $2.5 million and the carrying amount of the equity component was $0.3 million.
+Added: The fair value of the Convertible Notes, which are Level 2 measurements, was $2.9 million at September 30, 2020.
The Convertible Notes are due in March 2021 and bear interest at 2.75% per year, which is payable semi-annually in arrears on March 15 and September 15 of each year.
−Removed: The interest expense and accretion of debt discount and debt issuance costs related to our Convertible Notes during the three and six months ended June 30, 2019 and 2020 is as follows (in thousands):
−Removed: Three months ended June 30,
−Removed: Six months ended June 30,
+Added: The interest expense and accretion of debt discount and debt issuance costs related to our Convertible Notes during the three and nine months ended September 30, 2019 and 2020 is as follows (in thousands):
+Added: Three months ended September 30, Nine months ended September 30,
+Added: 2019 2020 2019 2020
Convertible Notes interest expense $ 43 $ 43 $ 131 $ 130
1 unchanged sentence
Convertible Notes amortization of debt issuance costs 6 9 19 21
−Removed: The remaining unamortized debt discount and the remaining unamortized debt issuance costs are being amortized using the effective interest method over the remaining term of approximately eight months of the Convertible Notes.
−Removed: The effective interest rate on the unamortized debt discount for both the three and six months ended June 30, 2019 and 2020 was 11.4% .
−Removed: The effective interest rate on the debt issuance costs for both three and six months ended June 30, 2019 and 2020 was 3.2% .
+Added: The remaining unamortized debt discount and the remaining unamortized debt issuance costs are being amortized using the effective interest method over the remaining term of approximately five months of the Convertible Notes.
+Added: The effective interest rate on the unamortized debt discount for both the three and nine months ended September 30, 2019 and 2020 was 11.4%.
+Added: The effective interest rate on the debt issuance costs for both the three months ended September 30, 2019 and 2020 was 3.2% and for the nine months ended September 30, 2019 and 2020 was 3.2% and 3.1%, respectively.
Senior Notes due 2026
−Removed: At June 30, 2020 , the principal amount of our Senior Notes was $400.0 million .
−Removed: The fair value of the Senior Notes, which are Level 2 measurements, was $419.9 million at June 30, 2020 .
+Added: At September 30, 2020, the principal amount of our Senior Notes was $400.0 million.
+Added: The fair value of the Senior Notes, which are Level 2 measurements, was $422.3 million at September 30, 2020.
The Senior Notes are due on June 1, 2026 and bear interest at 6.625% per year, which is payable semi-annually in arrears on June 1 and December 1 of each year.
−Removed: The interest expense and amortization of debt discount, debt premium and debt issuance costs related to our Senior Notes during the three and six months ended June 30, 2019 and 2020 is as follows (in thousands):
−Removed: Three months ended June 30,
−Removed: Six months ended June 30,
+Added: The interest expense and amortization of debt discount, debt premium and debt issuance costs related to our Senior Notes during the three and nine months ended September 30, 2019 and 2020 is as follows (in thousands):
+Added: Three months ended September 30, Nine months ended September 30,
+Added: 2019 2020 2019 2020
Senior Notes interest expense $ 5,383 $ 6,625 $ 16,148 $ 19,875
3 unchanged sentences
The debt discount, the debt premium and the debt issuance costs are being amortized using the effective interest method over the remaining term of approximately 68 months of the Senior Notes.
−Removed: The effective interest rate on the unamortized debt discount and the unamortized debt issuance costs for the initial Senior Notes, which were issued in May 2018, for both the three and six months ended June 30, 2020 was 6.87% and 6.69% , respectively.
−Removed: The effective interest rate on the unamortized debt premium and the unamortized debt issuance costs for the additional Senior Notes, which were issued in December 2019, for both the three and six months ended June 30, 2020 was 6.20% and 6.90% , respectively.
+Added: The effective interest rate on the unamortized debt discount and the unamortized debt issuance costs for the initial Senior Notes, which were issued in May 2018, for both the three and nine months ended September 30, 2020 was 6.87% and 6.69%, respectively.
+Added: The effective interest rate on the unamortized debt premium and the unamortized debt issuance costs for the additional Senior Notes, which were issued in December 2019, for both the three and nine months ended September 30, 2020 was 6.20% and 6.90%, respectively.
FINANCIAL HIGHLIGHTS
−Removed: Below are our financial highlights for the three months ended June 30, 2019 and 2020 (in thousands except for volumes and averages):
−Removed: Three months ended June 30,
+Added: Below are our financial highlights for the three months ended September 30, 2019 and 2020 (in thousands except for volumes and averages):
+Added: Three months ended September 30,
+Added: Revenue $ 66,125 $ 84,393
Funeral contracts 9,238 11,512
2 unchanged sentences
Average price per preneed interment right sold $ 3,622 $ 3,662
−Removed: Revenue for the three months ended June 30, 2020 increased $9.7 million compared to the three months ended June 30, 2019 , as we experienced a 25.3% increase in total funeral contracts primarily due to the funeral home acquisitions made in the fourth quarter of 2019 and first quarter of 2020, offset by a decrease in the average revenue per funeral contract of 11.7% .
+Added: Gross profit $ 18,056 $ 27,874
+Added: Net income $ 577 $ 5,525
+Added: Revenue for the three months ended September 30, 2020 increased $18.3 million compared to the three months ended September 30, 2019, as we experienced a 24.6% increase in total funeral contracts primarily due to the funeral home acquisitions made in the fourth quarter of 2019 and first quarter of 2020, as well as increases from broad market share gains and death rate growth related to the COVID-19 pandemic.
+Added: Volume growth was offset by a decrease in the average revenue per funeral contract of 5.8%.
In addition, we experienced an increase of 39.7% in the number of preneed interment rights (property) sold primarily due to the cemetery acquisitions made in the fourth quarter of 2019 and first quarter of 2020, as well as an increase in the average price per interment right sold of 1.1%.
−Removed: Gross profit for the three months ended June 30, 2020 increased $5.9 million compared to the three months ended June 30, 2019 , primarily due to the increase in revenue from both our funeral home and cemetery segments due to the acquisitions made in the fourth quarter of 2019 and first quarter of 2020, as well as measures the Company has taken to control costs during the COVID-19 pandemic.
−Removed: Net income for the three months ended June 30, 2020 increased $1.5 million compared to the three months ended June 30, 2019 , primarily due to the increase in gross profit, offset by the increase in interest expense related to our Senior Notes and Credit Facility.
−Removed: Below are our financial highlights for the six months ended June 30, 2019 and 2020 (in thousands except for volumes and averages):
−Removed: Six months ended June 30,
+Added: Gross profit for the three months ended September 30, 2020 increased $9.8 million compared to the three months ended September 30, 2019, primarily due to the increase in revenue from both our funeral home and cemetery segments due to the acquisitions made in the fourth quarter of 2019 and first quarter of 2020, as well as cost reduction measures implemented prior to and during the COVID-19 pandemic.
+Added: Net income for the three months ended September 30, 2020 increased $4.9 million compared to the three months ended September 30, 2019, primarily due to the increase in gross profit, offset by the increase in interest expense related to our Senior Notes and Credit Facility.
+Added: Below are our financial highlights for the nine months ended September 30, 2019 and 2020 (in thousands except for volumes and averages):
+Added: Nine months ended September 30,
+Added: Revenue $ 202,958 $ 239,360
Funeral contracts 28,485 34,742
2 unchanged sentences
Average price per preneed interment right sold $ 3,687 $ 3,805
−Removed: Revenue for the six months ended June 30, 2020 increased $18.1 million compared to the six months ended June 30, 2019 , as we experienced a 20.7% increase in total funeral contracts primarily due to the funeral home acquisitions made in the fourth quarter of 2019 and first quarter of 2020, offset by a decrease in the average revenue per funeral contract of 9.4% .
+Added: Gross profit $ 58,907 $ 76,205
+Added: Net income $ 11,964 $ 7,725
+Added: Revenue for the nine months ended September 30, 2020 increased $36.4 million compared to the nine months ended September 30, 2019, as we experienced a 22.0% increase in total funeral contracts primarily due to the funeral home acquisitions made in the fourth quarter of 2019 and first quarter of 2020, as well as increases from broad market share gains and death rate growth related to the COVID-19 pandemic.
+Added: Volume growth was offset by a decrease in the average revenue per funeral contract of 8.3%.
In addition, we experienced an increase of 26.6% in the number of preneed interment rights (property) sold primarily due to the cemetery acquisitions made in the fourth quarter of 2019 and first quarter of 2020, as well as an increase of 3.2% in the average price per interment right sold.
−Removed: Gross profit for the six months ended June 30, 2020 increased $7.5 million compared to the six months ended June 30, 2019 , primarily due to the increase in revenue from both our funeral home and cemetery segments due to the acquisitions made in the fourth quarter of 2019 and first quarter of 2020, as well as measures the Company has taken to control costs during the COVID-19 pandemic.
−Removed: Net income for the six months ended June 30, 2020 decreased $9.2 million compared to the six months ended June 30, 2019 , primarily due to the $14.7 million impairment of goodwill and tradenames recorded in the first quarter and $4.2 million increase in interest expense related to our Senior Notes and Credit facility, offset by the $7.5 million increase in gross profit.
+Added: Gross profit for the nine months ended September 30, 2020 increased $17.3 million compared to the nine months ended September 30, 2019, primarily due to the increase in revenue from both our funeral home and cemetery segments due to the acquisitions made in the fourth quarter of 2019 and first quarter of 2020, as well as cost reduction measures implemented prior to and during the COVID-19 pandemic.
+Added: Net income for the nine months ended September 30, 2020 decreased $4.2 million compared to the nine months ended September 30, 2019, primarily due to the $19.6 million net loss on divestitures and impairment charges and $5.9 million increase in interest expense related to our Senior Notes and Credit facility, offset by the increase in gross profit.
Further discussion of Revenue and the components of Gross profit for our funeral home and cemetery segments is presented herein under “– Results of Operations.”
1 unchanged sentence
REPORTING AND NON-GAAP FINANCIAL MEASURES
−Removed: We also present our financial performance in our “Operating and Financial Trend Report” (“Trend Report”) as reported in our earnings release for the three and six months ended June 30, 2020 dated July 28, 2020 and discussed in the corresponding earnings conference call.
−Removed: This Trend Report is used as a supplemental financial statement by management and investors to compare our current financial performance with our previous results and with the performance of other companies.
+Added: We also present our financial performance in our “Operating and Financial Trend Report” (“Trend Report”) as reported in our earnings release for the three and nine months ended September 30, 2020 dated October 27, 2020 and discussed in the corresponding earnings conference call.
+Added: The Trend Report is used as a supplemental financial statement by management and investors to compare our current financial performance with our previous results and with the performance of other companies.
We do not intend for this information to be considered in isolation or as a substitute for other measures of performance prepared in accordance with United States generally accepted accounting principles (“GAAP”).
The Trend Report is a non-GAAP statement that also provides insight into underlying trends in our business.
−Removed: Below is a reconciliation of Net income (a GAAP measure) to Adjusted net income (a non-GAAP measure) for the three and six months ended June 30, 2019 and 2020 (in thousands):
−Removed: Three months ended June 30,
−Removed: Six months ended June 30,
+Added: Below is a reconciliation of Net income (a GAAP measure) to Adjusted net income (a non-GAAP measure) for the three and nine months ended September 30, 2019 and 2020 (in thousands):
+Added: Three months ended September 30, Nine months ended September 30,
+Added: 2019 2020 2019 2020
+Added: Net income $ 577 $ 5,525 $ 11,964 $ 7,725
Special items, net of tax (1)
3 unchanged sentences
Accretion of discount on Convertible Notes (1)
+Added: 61 69 178 200
+Added: Net loss on divestitures and other costs (2)
+Added: 3,143 3,245 3,143 3,245
Net impact of impairment of goodwill and other intangibles (2)
+Added: 577 — 577 9,808
Litigation reserve 74 — 454 213
Natural disaster and pandemic costs — 268 — 1,036
+Added: Tax expense related to divested business (1)
+Added: Gain on insurance reimbursements (504) — (504) —
Other special items — (47) — 324
Adjusted net income (3)
+Added: $ 5,023 $ 9,144 $ 17,561 $ 23,262
(1) Special items are defined as charges or credits included in our GAAP financial statements that can vary from period to period and are not reflective of costs incurred in the ordinary course of our operations.
−Removed: Special Items are taxed at the federal statutory rate of 21% for the three and six months ended June 30, 2019 and 2020, except for the Accretion of the discount on the Convertible Notes, as this is a non-tax deductible item and the Net impact of impairment of goodwill and other intangibles (described below).
−Removed: The Net impact of impairment of goodwill and other intangibles special item is net of the operating tax rate of 33.3%.
+Added: Special Items are taxed at the federal statutory rate of 21.0% for the three and nine months ended September 30, 2019 and 2020, except for the Accretion of the discount on Convertible Notes, as this is a non-tax deductible item and Tax expense related to divested business, the Net impact of impairment of goodwill and other intangibles and the Net loss on divestitures and other costs (described below).
+Added: (2) The Net loss on divestitures and other costs and The Net impact of impairment of goodwill and other intangibles special items are net of the federal statutory rate of 21.0% in 2019 and are net of the operating tax rate of approximately 34.0% in 2020.
(3) Adjusted net income is defined as Net income plus adjustments for Special items and other expenses or gains that we believe do not directly reflect our core operations and may not be indicative of our normal business operations.
−Removed: Below is a reconciliation of Gross profit (a GAAP measure) to Operating profit (a non-GAAP measure) for the three and six months ended June 30, 2019 and 2020 (in thousands):
−Removed: Three months ended June 30,
−Removed: Six months ended June 30,
+Added: Below is a reconciliation of Gross profit (a GAAP measure) to Operating profit (a non-GAAP measure) for the three and nine months ended September 30, 2019 and 2020 (in thousands):
+Added: Three months ended September 30, Nine months ended September 30,
+Added: 2019 2020 2019 2020
+Added: Gross profit $ 18,056 $ 27,874 $ 58,907 $ 76,205
Cemetery property amortization 972 1,471 2,990 3,445
2 unchanged sentences
Operating profit (1)
+Added: $ 25,731 $ 37,309 $ 81,155 $ 100,624
(1) Operating profit is defined as Gross profit less Cemetery property amortization, Field depreciation expense and Regional and unallocated funeral and cemetery costs.
1 unchanged sentence
Funeral Home and Cemetery.
−Removed: Below is a breakdown of Operating profit (a non-GAAP measure) by Segment for the three and six months ended June 30, 2019 and 2020 (in thousands):
−Removed: Three months ended June 30,
−Removed: Six months ended June 30,
+Added: Below is a breakdown of Operating profit (a non-GAAP measure) by Segment for the three and nine months ended September 30, 2019 and 2020 (in thousands):
+Added: Three months ended September 30, Nine months ended September 30,
+Added: 2019 2020 2019 2020
+Added: Funeral Home $ 19,647 $ 25,636 $ 63,234 $ 75,462
+Added: Cemetery 6,084 11,673 17,921 25,162
Operating profit $ 25,731 $ 37,309 $ 81,155 $ 100,624
Operating profit margin (1)
+Added: 38.9% 44.2% 40.0% 42.0%
(1) Operating profit margin is defined as Operating profit as a percentage of Revenue.
1 unchanged sentence
RESULTS OF OPERATIONS
−Removed: The following is a discussion of our results of operations for the three and six months ended June 30, 2020 and 2019 .
−Removed: The term “same store” refers to funeral homes and cemeteries acquired prior to January 1, 2016 and owned and operated for the entirety of each period being presented, excluding certain funeral home businesses that we intend to divest in the near future.
−Removed: The term “acquired” refers to funeral homes and cemeteries purchased after December 31, 2015, excluding any funeral home businesses that we intend to divest in the near future.
+Added: The following is a discussion of our results of operations for the three and nine months ended September 30, 2020 and 2019.
+Added: The term “same store” refers to funeral homes and cemeteries acquired prior to January 1, 2016 and owned and operated for the entirety of each period being presented, excluding certain funeral home and cemetery businesses that we intend to divest in the near future.
+Added: The term “acquired” refers to funeral homes and cemeteries purchased after December 31, 2015, excluding any funeral home and cemetery businesses that we intend to divest in the near future.
This classification of acquisitions has been important to management and investors in monitoring the results of these businesses and to gauge the leveraging performance contribution that a selective acquisition program can have on total company performance.
−Removed: The term “divested” when discussed in the Funeral Home Segment, refers to the three funeral home businesses whose building leases expired, one funeral home business we sold and a funeral home business we merged with a business in an existing market in 2019 .
−Removed: “Planned divested” in the Funeral Home Segment refers to the funeral home businesses that we intend to divest in the near future.
−Removed: “Ancillary” in the Funeral Home Segment represents our flower shop, pet cremation business and online cremation business in Texas.
+Added: The term “divested” when discussed in the Funeral Home Segment, refers to the six funeral homes we sold in 2020 and three funeral homes whose building leases expired, one funeral home we sold and a funeral home we merged with a funeral home in an existing market in 2019.
+Added: “Planned divested” refers to the funeral home and cemetery businesses that we intend to divest in the near future.
+Added: “Ancillary funeral services” in the Funeral Home Segment represents our flower shop, pet cremation business and online cremation business in Texas.
Cemetery property amortization, Field depreciation expense and Regional and unallocated funeral and cemetery costs, are not included in Operating profit, a non-GAAP financial measure.
1 unchanged sentence
Funeral Home Segment
−Removed: The following table sets forth certain information regarding our Revenue and Operating profit from our funeral home operations for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 (in thousands):
−Removed: Three months ended June 30,
+Added: The following table sets forth certain information regarding our Revenue and Operating profit from our funeral home operations for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 (in thousands):
+Added: Three months ended September 30,
Same store operating revenue $ 40,824 $ 44,444
4 unchanged sentences
Preneed funeral trust and insurance 1,657 1,992
+Added: Total $ 51,517 $ 61,434
Operating profit:
5 unchanged sentences
Preneed funeral trust and insurance 1,615 1,960
+Added: Total $ 19,647 $ 25,636
The following measures reflect the significant metrics over this comparative period:
−Removed: Three months ended June 30,
+Added: Three months ended September 30,
Contract volume 7,725 8,923
1 unchanged sentence
Average revenue per contract, including preneed funeral trust earnings $ 5,472 $ 5,175
+Added: Burial rate 37.4 % 35.3 %
Cremation rate 54.9 % 57.6 %
2 unchanged sentences
Average revenue per contract, including preneed funeral trust earnings $ 6,706 $ 5,489
+Added: Burial rate 48.5 % 40.5 %
Cremation rate 44.4 % 54.0 %
−Removed: Funeral home same store operating revenue for the three months ended June 30, 2020 increased $1.0 million compared to the three months ended June 30, 2019 .
−Removed: The increase in operating revenue is primarily due to a 12.0% same store contract volume increase in the three months ended June 30, 2020 compared to the same period in 2019.
−Removed: The increase was offset by a decrease in contract averages excluding preneed interest of 8.6% .
−Removed: The decrease in funeral contract averages for the three months ended June 30, 2020 compared to the same period in 2019 is primarily due to a 230 basis point decrease in the burial rate.
−Removed: In addition, in the three months ended June 30, 2020 , we experienced a decrease in services performed due to the restrictions placed on gatherings mandated by state and local governments due to COVID-19.
−Removed: For both burial and cremation contracts for which memorial services were performed, we experienced a 940 and 1240 basis point decrease in the number of these contracts, respectively, in the three months ended June 30, 2020 .
−Removed: Funeral same store operating profit for the three months ended June 30, 2020 increased $2.5 million when compared to the three months ended June 30, 2019 , and the comparable operating profit margin increased 500 basis points to 42.3% .
−Removed: The increase in operating margin is primarily due to the increase in same store operating revenue and a 5.0% decrease in operating costs.
−Removed: store salaries and benefits for the three months ended June 30, 2020 had the largest decrease of $0.4 million or 1.6% compared to the three months ended June 30, 2019 .
−Removed: The decrease in salaries and benefits was primarily due to the decrease in part-time funeral staff needed to assist with memorial services, offset by an increase in the demand for pickup and embalming services due to increased contracts.
−Removed: The decrease in other operating costs was a result of disciplined expense and cost management by local leaders at each business during the COVID-19 pandemic.
−Removed: Funeral home acquired operating revenue for the three months ended June 30, 2020 increased $5.0 million , as our funeral home acquired portfolio for the three months ended June 30, 2020 included nine funeral home businesses added through four acquisitions in the fourth quarter of 2019 and one business acquired in the first quarter of 2020 not present in the three months ended June 30, 2019 .
−Removed: Acquired operating profit for the three months ended June 30, 2020 increased $2.2 million when compared to the three months ended June 30, 2019 .
−Removed: Operating profit margin increased 240 basis points to 41.2% for the three months ended June 30, 2020 compared to the same period in 2019.
−Removed: The increase is primarily due to certain measures taken to control costs during the COVID-19 pandemic, slightly offset by lower margins for our most recent acquisition compared to our other acquired businesses, particularly with regard to higher salaries and benefits expenses.
−Removed: We expect the operating margins for our recently acquired business to improve as we focus on integrating this business into our high performance framework of the Standards Operating Model.
−Removed: Ancillary funeral services revenue, which is recorded in Other revenue , represents revenue from our flower shop, pet cremation business and online cremation business in Texas, which were acquired in the fourth quarter of 2019.
−Removed: Operating profit from our ancillary funeral service businesses was $0.3 million for the three months ended June 30, 2020 , with an operating profit margin of 28.7% .
−Removed: Preneed funeral insurance commissions and preneed funeral trust and insurance, also recorded in Other revenue , on a combined basis, remained flat for the three months ended June 30, 2020 compared to the same period in 2019.
−Removed: Operating profit for preneed funeral insurance commissions and preneed trust and insurance, on a combined basis, increased $0.1 million or 4.3% for the same comparative period in 2019 primarily due to a reduction in preneed trust and insurance expenses.
−Removed: The following table sets forth certain information regarding our Revenue and Operating profit from our funeral home operations for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 (in thousands):
−Removed: Six months ended June 30,
+Added: Funeral home same store operating revenue for the three months ended September 30, 2020 increased $3.6 million compared to the three months ended September 30, 2019.
+Added: The increase in operating revenue is primarily due to a 15.5% same store contract volume increase in the three months ended September 30, 2020 compared to the same period in 2019.
+Added: The increase in contract volume is due to market share gains in a majority of our markets, in addition to the increased deaths related to COVID-19.
+Added: This increase was offset by a 5.8% decrease in the average revenue per contract, excluding preneed interest, for the same period, primarily due to a 210 basis point decrease in the burial rate.
+Added: In addition, in the three months ended September 30, 2020 compared to the same period in 2019, we experienced a decrease in services performed due to the restrictions placed on gatherings mandated by state and local governments due to COVID-19.
+Added: Funeral home same store operating profit for the three months ended September 30, 2020 increased $3.1 million when compared to the three months ended September 30, 2019, and the comparable operating profit margin increased 400 basis points to 41.0%.
+Added: The increase in operating margin is primarily due to the increase in same store operating revenue and
+Added: disciplined expense and cost management by local leaders at each business.
+Added: Same store salaries and benefits increased $0.5 million due to an increase of $0.5 million in group health care costs related to higher claims and an increase of $0.3 million in the demand for pickup and embalming services due to increased contracts, offset by a decrease of $0.2 million in part-time funeral staff needed to assist with memorial services and a decrease of $0.1 million in full time salaries.
+Added: While salaries and benefits increased, we experienced decreases in the majority of our other operating costs for the three months ended September 30, 2020 compared to the same period in 2019.
+Added: Funeral home acquired operating revenue for the three months ended September 30, 2020 increased $5.6 million, as our funeral home acquired portfolio for the three months ended September 30, 2020 included nine funeral home businesses added through three acquisitions in the fourth quarter of 2019 and one business acquired in the first quarter of 2020 not present in the three months ended September 30, 2019.
+Added: Acquired operating profit for the three months ended September 30, 2020 increased $2.4 million when compared to the three months ended September 30, 2019, and the comparable operating profit margin increased 250 basis points to 40.2%.
+Added: The increase is primarily due to disciplined expense and cost management by local leaders at each business.
+Added: The increase is slightly offset by lower margins for our businesses acquired in the fourth quarter of 2019 compared to our other acquired businesses, particularly with regard to higher salaries and benefits expenses.
+Added: We expect the operating margins for these businesses to improve as we focus on integrating them into our high performance framework of the Standards Operating Model.
+Added: Ancillary funeral services revenue, which is recorded in Other revenue , represents revenue from our flower shop, pet cremation and online cremation businesses in Texas, which were acquired in the fourth quarter of 2019.
+Added: Operating profit from our ancillary funeral service businesses was $0.3 million for the three months ended September 30, 2020, with an operating profit margin of 24.4%.
+Added: Preneed funeral insurance commissions and preneed funeral trust and insurance, also recorded in Other revenu e, on a combined basis, increased $0.3 million or 12.8% for the three months ended September 30, 2020 compared to the same period in 2019.
+Added: The increase is primarily related to a 20.2% increase in preneed contracts maturing to at-need during the three months ended September 30, 2020 compared to the same period in 2019, which triggers the recognition of trust earnings on the matured contracts.
+Added: Operating profit for preneed funeral insurance commissions and preneed trust and insurance, on a combined basis, increased $0.3 million or 15.9% for the same comparative period, primarily due to the increase in funeral trust and insurance revenue.
+Added: The following table sets forth certain information regarding our Revenue and Operating profit from our funeral home operations for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 (in thousands):
+Added: Nine months ended September 30,
Same store operating revenue $ 126,549 $ 130,755
4 unchanged sentences
Preneed funeral trust and insurance 5,226 5,676
+Added: Total $ 160,187 $ 182,298
Operating profit:
5 unchanged sentences
Preneed funeral trust and insurance 5,100 5,580
+Added: Total $ 63,234 $ 75,462
The following measures reflect the significant metrics over this comparative period:
−Removed: Six months ended June 30,
+Added: Nine months ended September 30,
Contract volume 23,690 26,263
1 unchanged sentence
Average revenue per contract, including preneed funeral trust earnings $ 5,532 $ 5,167
+Added: Burial rate 38.3 % 36.0 %
Cremation rate 53.9 % 56.8 %
2 unchanged sentences
Average revenue per contract, including preneed funeral trust earnings $ 6,741 $ 5,247
+Added: Burial rate 48.5 % 40.9 %
Cremation rate 44.5 % 54.2 %
−Removed: Funeral home same store operating revenue for the six months ended June 30, 2020 increased $0.7 million compared to the six months ended June 30, 2019 .
−Removed: The increase in operating revenue is due to an 8.7% same store contract volume increase in the six months ended June 30, 2020 compared to the same period in 2019.
−Removed: The increase was offset by a decrease in contract averages excluding preneed interest of 7.2% .
−Removed: The decrease in funeral contract averages for the six months ended June 30, 2020 compared to the same period in 2019 is primarily due to a 250 basis point decrease in the burial rate.
+Added: Funeral home same store operating revenue for the nine months ended September 30, 2020 increased $4.2 million compared to the nine months ended September 30, 2019.
+Added: The increase in operating revenue is due to a 10.9% same store contract volume increase which is due to market share gains in a majority of our markets, in addition to the increased deaths related to COVID-19.
+Added: This increase was offset by a 6.8% decrease in average revenue per contract, excluding preneed interest, primarily due to a 230 basis point decrease in the burial rate.
Beginning in the latter half of March 2020, we saw a decrease in services performed due to the restrictions placed on gatherings mandated by state and local governments as the COVID-19 pandemic became more prominent and individuals began to practice social distancing to comply with applicable shelter in place and related orders.
−Removed: For both burial and cremation contracts for which memorial services were performed, we experienced a 580 and 820 basis point decrease in the number of these contracts, respectively, in the six months ended June 30, 2020 .
−Removed: Funeral same store operating profit for the six months ended June 30, 2020 increased $1.6 million when compared to the six months ended June 30, 2019 , and the comparable operating profit margin increased 150 basis points to 40.3% .
−Removed: The increase in operating margin is due to the increase in same store operating revenue and a 1.5% decrease in operating costs.
−Removed: Same store promotional costs for the six months ended June 30, 2020 had the largest decrease of $0.4 million or 0.5% compared to the six months ended June 30, 2019.
−Removed: The decrease in promotional costs and other operating costs resulted from cost control measures undertaken during the COVID-19 pandemic.
−Removed: Funeral home acquired operating revenue for the six months ended June 30, 2020 increased $9.8 million , as our funeral home acquired portfolio for the six months ended June 30, 2020 included nine funeral home businesses added through four acquisitions in the fourth quarter of 2019 and one business acquired in the first quarter of 2020 not present in the six months ended June 30, 2019 .
−Removed: Acquired operating profit for the six months ended June 30, 2020 increased $3.7 million when compared to the six months ended June 30, 2019.
−Removed: Operating profit margin decreased 70 basis points to 38.9% for the six months ended June 30, 2020 compared to the same period in 2019.
−Removed: The decrease is primarily due to the recently acquired businesses (discussed above), as operating profit margins for these businesses were lower compared to our other acquired businesses, particularly with regard to higher salaries and benefits expenses.
−Removed: However, the operating margins for our 2019 acquired businesses have increased 440 basis points in the second quarter of 2020 compared to the first quarter of 2020 and we expect continuous improvement as we focus on integrating all of our newly acquired businesses into our high performance framework of the Standards Operating Model.
−Removed: Ancillary funeral services revenue, which is recorded in Other revenue , represents revenue from our flower shop, pet cremation business and online cremation business in Texas, which were acquired in the fourth quarter of 2019.
−Removed: Operating profit from our ancillary funeral service businesses was $0.6 million for the six months ended June 30, 2020 , with an operating profit margin of 27.2% .
−Removed: Preneed funeral insurance commissions and preneed funeral trust and insurance, also recorded in Other revenue , on a combined basis, increased $0.1 million or 3.1% for the six months ended June 30, 2020 compared to the same period in 2019.
−Removed: The increase is due to the increase in preneed trust and insurance.
+Added: During the third quarter of 2020, we experienced an increase in memorial services compared to the second quarter of 2020, as social distancing restrictions were eased in certain jurisdictions.
+Added: In addition, our Managing Partners continued to show innovation by creating high value, uniquely customized personal services and sales in challenging local environments.
+Added: Funeral home same store operating profit for the nine months ended September 30, 2020 increased $4.7 million when compared to the nine months ended September 30, 2019, and the comparable operating profit margin increased 230 basis points to 40.7%.
+Added: The increase in operating margin is primarily due to the increase in same store operating revenue and a $0.5 million or 0.6% decrease in operating costs of which the largest decreases were in part-time funeral staff needed to assist with memorial services, promotional costs, facilities and ground expenses and transportation costs.
+Added: These decreases were as a result of disciplined expense and cost management by local leaders at each business.
+Added: The decreases were partially offset by an increase in the demand for pickup and embalming services due to increased contracts and an increase in group health care costs related to higher claims in the nine months ended September 30, 2020.
+Added: Funeral home acquired operating revenue for the nine months ended September 30, 2020 increased $15.4 million, as our funeral home acquired portfolio for the nine months ended September 30, 2020 included nine funeral home businesses added through three acquisitions in the fourth quarter of 2019 and one business acquired in the first quarter of 2020 not present in the nine months ended September 30, 2019.
+Added: Acquired operating profit for the nine months ended September 30, 2020 increased $6.1 million when compared to the nine months ended September 30, 2019.
+Added: Operating profit margin increased slightly by 30 basis points to 39.3%.
+Added: We experienced an increase in margin despite the lower operating profit margins of the recently acquired businesses (discussed above), as operating profit margin for these businesses were lower compared to our other acquired businesses, particularly with regard to higher salaries and benefits.
+Added: We expect the operating margins for our recently acquired businesses to increase as we focus on integrating them into our high performance framework of the Standards Operating model.
+Added: Ancillary funeral services revenue, which is recorded in Other revenue , represents revenue from our flower shop, pet cremation and online cremation businesses in Texas, which were acquired in the fourth quarter of 2019.
+Added: Operating profit from our ancillary funeral service businesses was $0.9 million for the nine months ended September 30, 2020, with an operating profit margin of 26.2%.
+Added: Preneed funeral insurance commissions and preneed funeral trust and insurance, also recorded in Other revenue , on a combined basis, increased $0.4 million or 6.1% for the nine months ended September 30, 2020 compared to the same period in 2019.
+Added: The increase is due to a 10.1% increase in preneed contracts maturing to at-need during the nine months ended September 30, 2020 compared to the same period in 2019, which triggers the recognition of trust earnings on the matured contracts.
Operating profit for preneed funeral insurance commissions and preneed trust and insurance, on a combined basis, increased $0.5 million or 8.6% for the same comparative period in 2019, primarily due to the increase in revenue and reduction of preneed trust and insurance expenses.
Cemetery Segment
−Removed: The following table sets forth certain information regarding our Revenue and Operating profit from our cemetery operations for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 (in thousands):
−Removed: Three months ended June 30,
+Added: The following table sets forth certain information regarding our Revenue and Operating profit from our cemetery operations for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 (in thousands):
+Added: Three months ended September 30,
Same store operating revenue $ 12,768 $ 14,393
Acquired operating revenue — 5,220
+Added: Divested/planned divested revenue 65 116
Preneed cemetery trust and insurance 1,430 3,016
Preneed cemetery finance charges 345 214
+Added: Total $ 14,608 $ 22,959
Operating profit:
1 unchanged sentence
Acquired operating profit — 2,335
+Added: Divested/planned divested operating profit (9) 40
Preneed cemetery trust and insurance 1,284 2,909
Preneed cemetery finance charges 345 214
+Added: Total $ 6,084 $ 11,673
The following measures reflect the significant metrics over this comparative period:
−Removed: Three months ended June 30,
−Removed: Preneed revenue as a percentage of operating revenue
−Removed: Preneed revenue (in thousands)
−Removed: Atneed revenue (in thousands)
−Removed: Number of preneed interment rights sold
−Removed: Average price per interment right sold
+Added: Three months ended September 30,
Preneed revenue as a percentage of operating revenue 62 % 61 %
3 unchanged sentences
Average price per interment right sold $ 3,622 $ 3,529
−Removed: Cemetery same store preneed revenue for the three months ended June 30, 2020 decreased $1.4 million due to the decrease in cemetery property revenue as we experienced a 13.1% decrease in the number of preneed interment rights sold, offset by a 6.6% increase in the average price per interment right sold.
−Removed: The decrease in the number of preneed interment rights sold is primarily due to the COVID-19 pandemic as individuals began practicing social distancing to comply with applicable shelter in place and related orders, which resulted in our preneed sales personnel being unable to meet with families at our businesses, in certain areas of the country, during this time.
−Removed: In addition, these restrictions impacted our ability to host annual events at certain cemeteries notably the Ching Ming festival during April and Memorial Day festivities during May.
−Removed: Cemetery same store atneed revenue, which represents 39.0% of our same store operating revenue decreased $0.2 million , as we experienced a 3.1% decrease in the average sale per contract, while the number of atneed contracts sold remained flat.
−Removed: Cemetery same store operating profit for the three months ended June 30, 2020 decreased $1.1 million from the same period in 2019.
−Removed: The comparable operating profit margin decreased 490 basis points to 31.4% for the three months ended June 30, 2020 from 36.3% in the same period in 2019 .
−Removed: The decrease in operating profit margin is the result of an 11.6% decrease in operating revenue, offset by a 4.8% decrease in operating costs.
−Removed: Operating expense as a percent of operating revenue increased in two categories for the three months ended June 30, 2020 compared to the same period in 2019 .
−Removed: Most notably, salaries and benefits increased 1.2% as a percentage of revenue and the allowance for credit losses expense increased 2.4% as a percentage of revenue.
−Removed: The increase in salaries and benefits is due to additional support staff hired in the latter half of 2019.
−Removed: The increase in the allowance for credit losses is due to slower payments on financed receivables particularly in the states most affected by COVID-19.
+Added: Preneed revenue as a percentage of operating revenue n/a 70 %
+Added: Preneed revenue (in thousands) n/a $ 3,642
+Added: Atneed revenue (in thousands) n/a $ 1,578
+Added: Number of preneed interment rights sold n/a 748
+Added: Average price per interment right sold n/a $ 4,051
+Added: Cemetery same store preneed revenue for the three months ended September 30, 2020 increased $0.9 million compared to the same period in 2019.
+Added: Although the number of preneed interments sold remained flat and we experienced a 2.6% decrease in the average sale per preneed contract, preneed property revenue increased $0.4 million or 6.6% primarily due to additional revenue recognized from several memorial gardens under construction that progressed towards completion during the three months ended September 30, 2020.
+Added: Preneed merchandise and service revenue increased $0.5 million as we experienced a 45.6% increase in the deliveries of merchandise and service contracts during the three months ended September 30, 2020.
+Added: Cemetery same store atneed revenue, which represents 39.0% of our same store operating revenue increased $0.7 million, as we experienced 21.2% increase in the number of contracts, offset by a 4.9% decrease in the average sale per contract.
+Added: Cemetery same store operating profit for the three months ended September 30, 2020 increased $1.7 million from the same period in 2019.
+Added: The comparable operating profit margin increased 790 basis points to 42.9% primarily as a result of the increase in operating revenue and a 1% decrease in operating expenses with the most significant decrease of $0.2 million in the allowance for credit losses, as we received an increase in payments on financed receivables in the third quarter of 2020.
Our acquired cemetery portfolio includes two businesses acquired during the fourth quarter of 2019 and one business acquired during the first quarter of 2020.
−Removed: These three businesses contributed $4.1 million in operating revenue and $1.4 million in operating profit for the three months ended June 30, 2020 .
−Removed: Preneed cemetery trust and insurance and preneed cemetery finance charges, which are recorded in Other revenue , on a combined basis increased $0.6 million for the three months ended June 30, 2020 compared to the same period in 2019 .
−Removed: Earnings in our perpetual care trust fund increased $0.6 million due to our acquisitions.
−Removed: Operating profit for the two categories of Other revenue , on a combined basis, increased $0.7 million for the three months ended June 30, 2020 compared to the same period in 2019 , primarily due to the increase in perpetual care trust fund revenue.
−Removed: The increase in our trust fund income is primarily due to our major capital deployment during and after the COVID-19 market crash in March 2020, which we expect will produce sustainable increases in both revenue and operating profit throughout the year.
−Removed: The following table sets forth certain information regarding our Revenue and Operating profit from our cemetery operations for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 (in thousands):
−Removed: Six months ended June 30,
+Added: These three businesses contributed $5.2 million in operating revenue and $2.3 million in operating profit for the three months ended September 30, 2020.
+Added: Preneed cemetery trust and preneed cemetery finance charges, which are recorded in Other revenue , on a combined basis increased $1.5 million for the three months ended September 30, 2020 compared to the same period in 2019.
+Added: The increase is primarily due to a $0.7 million increase in perpetual care trust income from our acquired cemetery businesses and a $0.3 million increase in realized capital gains during the quarter.
+Added: Operating profit for the two categories of Other revenue , on a combined basis, increased $1.5 million for the three months ended September 30, 2020 compared to the same period in 2019, primarily due to the increase in perpetual care trust fund revenue.
+Added: The increase in our trust fund income is primarily due to our execution of a major repositioning strategy during and after the COVID-19 market crash in March 2020, substantially increasing our preneed cemetery trust revenue and operating profit.
+Added: The following table sets forth certain information regarding our Revenue and Operating profit from our cemetery operations for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019 (in thousands):
+Added: Nine months ended September 30,
Same store operating revenue $ 37,157 $ 36,910
Acquired operating revenue — 12,074
+Added: Divested/planned divested revenue 230 283
Preneed cemetery trust and insurance 4,266 7,099
Preneed cemetery finance charges 1,118 696
+Added: Total $ 42,771 $ 57,062
Operating profit:
1 unchanged sentence
Acquired operating profit — 4,596
+Added: Divested/planned divested operating profit 2 87
Preneed cemetery trust and insurance 3,840 6,785
Preneed cemetery finance charges 1,118 696
+Added: Total $ 17,921 $ 25,162
The following measures reflect the significant metrics over this comparative period:
−Removed: Six months ended June 30,
−Removed: Preneed revenue as a percentage of operating revenue
−Removed: Preneed revenue (in thousands)
−Removed: Atneed revenue (in thousands)
−Removed: Number of preneed interment rights sold
−Removed: Average price per interment right sold
+Added: Nine months ended September 30,
Preneed revenue as a percentage of operating revenue 62 % 60 %
3 unchanged sentences
Average price per interment right sold $ 3,690 $ 3,693
−Removed: Cemetery same store preneed revenue for the six months ended June 30, 2020 decreased $1.7 million due to the decrease in cemetery property revenue as we experienced a 4.7% decrease in the number of preneed interments sold compared to the same period in 2019 , offset slightly by a 1.1% increase in the average price per interment right sold.
−Removed: The decrease in the number of preneed interment rights sold is primarily due to the COVID-19 pandemic as individuals began practicing social distancing to comply with applicable shelter in place and related orders, which resulted in our preneed sales personnel being unable to meet with families at our businesses, in certain areas of the country, during this time.
−Removed: Cemetery same store atneed revenue, which represents 41% of our same store operating revenue, decreased $0.2 million as we experienced a 1.3% decrease in the average sale per contract, while the number of atneed contracts sold remained flat.
−Removed: Cemetery same store operating profit for the six months ended June 30, 2020 decreased $1.6 million from the same period in 2019 .
−Removed: The comparable operating profit margin decreased 440 basis points to 30.1% for the six months ended June 30, 2020 from 34.5% in the same period in 2019 .
−Removed: The decrease in operating profit margin is a result of a 7.7% decrease in operating revenue and a 1.5% decrease in operating costs.
−Removed: Operating expense as a percent of operating revenue increased in three categories in the six months ended June 30, 2020 compared to the same period in 2019 .
−Removed: Our allowance for credit losses expense increased 1.7%, promotional expense increased 1.2% and salaries and wages increased 1.0% as a percentage of revenue.
−Removed: The increase in the allowance for credit losses is due to slower payments on financed receivables particularly in the states most affected by COVID-19.
−Removed: The increase in promotional expenses is due to the addition of marketing personnel and increased counselor bonuses at certain cemeteries.
−Removed: Salaries and benefits related to the beautification and maintenance of our cemetery grounds were fairly flat but increased as a percentage of revenue.
−Removed: Our acquired cemetery portfolio includes two businesses acquired during the fourth quarter of 2019 and one business acquired during the first quarter of 2020.
−Removed: These three businesses contributed $6.9 million in operating revenue and $2.3 million in operating profit for the six months ended June 30, 2020 .
−Removed: Preneed cemetery trust and insurance and preneed cemetery finance charges, which are recorded in Other revenue , on a combined basis increased $1.0 million for the six months ended June 30, 2020 compared to the same period in 2019 .
−Removed: Earnings in our perpetual care trust fund increased $1.4 million primarily from acquisitions and an increase in realized gains and was partially offset by $0.3 million decrease in finance charge revenue.
−Removed: The decrease in finance charge revenue is due to our enhanced preneed cemetery property sales strategy of reducing interest rates on preneed contracts.
−Removed: Operating profit for the two categories of Other revenue , on a combined basis, also increased $1.0 million for the six months ended June 30, 2020 compared to the same period in 2019 due to the increase in revenue.
−Removed: The increase in our trust fund income is primarily due to our major capital deployment during and after the COVID-19 market crash in March 2020, which we expect will produce sustainable increases in both revenue and operating profit throughout the year.
+Added: Preneed revenue as a percentage of operating revenue n/a 65 %
+Added: Preneed revenue (in thousands) n/a $ 7,899
+Added: Atneed revenue (in thousands) n/a $ 4,175
+Added: Number of preneed interment rights sold n/a 1,600
+Added: Average price per interment right sold n/a $ 4,248
+Added: Cemetery same store preneed revenue decreased $0.8 million for the nine months ended September 30, 2020 compared to the same period in 2019.
+Added: We experienced a $1.2 million or 6.2% decrease in preneed property revenue due to a 3.6% decrease in the number of preneed interments rights sold, while the average price per interment right sold remained flat.
+Added: The decrease in the number of preneed interment rights sold is primarily due to the COVID-19 pandemic as individuals practiced social distancing to comply with applicable shelter in place and related orders, which resulted in our preneed sales personnel being unable to meet with families at our businesses, in certain areas of the country.
+Added: This was most evident in the second quarter of 2020 as these restrictions affected our ability to host certain annual events such as the Ching Ming festival during April and Memorial Day festivities during May.
+Added: The decrease in preneed property revenue was partially offset by a $0.4 million increase in preneed merchandise and service revenue as we experienced a 16.7% increase in the deliveries of merchandise and service contracts during the nine months ended September 30, 2020.
+Added: Cemetery same store atneed revenue, which represents 40% of our same store operating revenue, increased $0.6 million as we experienced a 6.5% increase in the number of atneed contracts, while the average sales per contract decreased 2.1%.
+Added: Cemetery same store operating profit for the nine months ended September 30, 2020 remained flat compared to the same period in 2019.
+Added: The comparable operating profit margin increased 30 basis points to 35.2% as a result of better management of operating expenses throughout the year.
+Added: Operating expense as a percent of operating revenue increased in two categories in the nine months ended September 30, 2020 compared to the same period in 2019.
+Added: Our allowance for credit losses expense and salaries and wages both increased 0.4% as a percentage of revenue.
+Added: The increase in the allowance for credit losses is due to slower payments on financed receivables mostly in the second quarter of 2020, particularly in the states most affected by COVID-19.
+Added: Salaries and benefits increased due to the addition of field personnel in the fourth quarter of 2019.
+Added: Our acquired cemetery portfolio includes two businesses that were acquired during the fourth quarter of 2019 and one business that was acquired during the first quarter of 2020.
+Added: These three businesses contributed $12.1 million in operating revenue and $4.6 million in operating profit for the nine months ended September 30, 2020.
+Added: Preneed cemetery trust and preneed cemetery finance charges, which are recorded in Other revenue , on a combined basis increased $2.4 million for the nine months ended September 30, 2020 compared to the same period in 2019.
+Added: The increase was primarily due to a $3.0 million increase in perpetual care trust fund earnings of which $1.7 million was from acquisitions and a $0.4 million increase in realized gains.
+Added: These increases were partially offset by a $0.4 million decrease in finance charge revenue.
+Added: The decrease in finance charge revenue is primarily due to our enhanced preneed cemetery property sales strategy of reducing interest rates on preneed contracts.
+Added: Operating profit for the two categories of Other revenue , on a combined basis, increased $2.5 million for the nine months ended September 30, 2020 compared to the same period in 2019 due to the increase in revenue.
+Added: The increase in our trust fund income is primarily due to our execution of a major repositioning strategy during and after the COVID-19 market crash in March 2020, substantially increasing our preneed cemetery trust revenue and operating profit.
Cemetery property amortization .
−Removed: Cemetery property amortization totaled $1.1 million for the three months ended June 30, 2020 , a decrease of $0.1 million compared to the three months ended June 30, 2019 .
−Removed: Cemetery property amortization remained flat at $2.0 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 .
+Added: Cemetery property amortization totaled $1.5 million for the three months ended September 30, 2020, an increase of $0.5 million compared to the three months ended September 30, 2019.
+Added: The increase in amortization in the third quarter of 2020 is primarily due to the increase in property sales at the newly acquired cemetery businesses.
+Added: Cemetery property amortization totaled $3.4 million for the nine months ended September 30, 2020, an increase of $0.5 million compared to the nine months ended September 30, 2019.
+Added: The increase in property sold at our acquired cemeteries resulted in a $0.7 million increase in amortization expense for the nine months ended September 30, 2020, while the amortization expense for our same store businesses decreased $0.2 million due to a decrease in property sales in the period.
Field depreciation.
−Removed: Depreciation expense for our field businesses increased $0.2 million for the three months ended June 30, 2020 compared to the three months ended June 30, 2019 .
−Removed: Depreciation expense for our field businesses increased $0.4 million for the six months ended June 30, 2020 compared to the six months ended June 30, 2019 .
−Removed: The increase was primarily attributable to additional depreciation expense from the assets acquired through our 2019 and first quarter 2020 acquisitions.
+Added: Depreciation expense for our field businesses increased $0.1 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019.
+Added: Depreciation expense for our field businesses increased $0.5 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019.
+Added: The increase was primarily due to additional depreciation expense from assets added as a result of our acquisitions during the fourth quarter of 2019 and first quarter of 2020.
Regional and unallocated funeral and cemetery costs.
Regional and unallocated funeral and cemetery costs consist of salaries and benefits for regional management, field incentive compensation and other related costs for field infrastructure.
−Removed: Regional and unallocated funeral and cemetery costs totaled $3.7 million for the three months ended June 30, 2020 , an increase of $0.1 million primarily due to a $0.4 million increase related to a state audit assessment, a $0.3 million increase in expenses related to the COVID-19 pandemic and a $0.1 million increase in other general and administrative costs, offset by a $0.7 million decrease in severance expense.
−Removed: Regional and unallocated funeral and cemetery costs totaled $6.5 million for the six months ended June 30, 2020 , an increase of $0.1 million primarily due to a $0.4 million increase related to a state audit assessment, a $0.4 million increase in expenses due to the COVID-19 pandemic, offset by a $0.6 million decrease in severance expense and a $0.1 million decrease in other general administrative costs.
+Added: Regional and unallocated funeral and cemetery costs totaled $4.7 million for the three months ended September 30, 2020, an increase of $1.1 million primarily due to a $1.2 million increase in incentive and equity compensation, a $0.3 million increase in health and safety expenses related to the COVID-19 pandemic and a $0.3 million increase in salaries and benefits, offset by a $0.5 million decrease in severance expense and a $0.2 million decrease in other general administrative costs.
+Added: Regional and unallocated funeral and cemetery costs totaled $11.2 million for the nine months ended September 30, 2020, an increase of $1.2 million primarily due to a $1.0 million increase in incentive and equity compensation, a $0.9 million increase in health and safety expenses due to the COVID-19 pandemic, a $0.6 million increase in salaries and benefits and a $0.3 million increase related to a state audit assessment, offset by a $1.1 million decrease in severance expense, a $0.3 million decrease in other general administrative costs and a $0.2 million employee retention credit in connection with the CARES Act.
Other Financial Statement Items
General, administrative and other.
−Removed: General, administrative and other expenses totaled $6.5 million for the three months ended June 30, 2020 , an increase of $0.8 million compared to the three months ended June 30, 2019 .
−Removed: The increase was primarily attributable to a $0.6 million increase in incentive compensation, a $0.3 million increase in public company costs, a $0.2 million increase in litigation reserve, offset by a $0.2 million decrease in other general administrative costs and a $0.1 million decrease in acquisition expenses.
−Removed: General, administrative and other expenses totaled $12.5 million for the six months ended June 30, 2020 , an increase of $1.2 million compared to the six months ended June 30, 2019 .
−Removed: The increase was primarily attributable to a $0.5 million increase in salaries, benefits and severance costs, a $0.4 million increase in incentive and equity compensation, a $0.3 million increase in public company costs, a $0.3 million increase in litigation reserve and a $0.1 million increase in acquisition expenses, offset by a $0.4 million decrease in other general administrative costs.
+Added: General, administrative and other expenses totaled $6.1 million for the three months ended September 30, 2020, an increase of $0.4 million compared to the three months ended September 30, 2019.
+Added: The increase was primarily attributable to an $0.8 million increase in incentive and equity compensation, offset by a $0.4 million decrease in other general administrative costs.
+Added: General, administrative and other expenses totaled $18.6 million for the nine months ended September 30, 2020, an increase of $1.6 million compared to the nine months ended September 30, 2019.
+Added: The increase was primarily attributable to a $1.2 million increase in incentive and equity compensation, a $0.5 million increase in salaries, benefits and severance costs, a $0.4 million increase in public company and acquisition costs and a $0.2 million increase in litigation reserve, offset by a $0.7 million decrease in other general administrative costs.
Home office depreciation and amortization.
−Removed: Home office depreciation and amortization expense remained flat at $0.4 million and $0.7 million for the three and six months ended June 30, 2020 , compared to the three and six months ended June 30, 2019 primarily due to machinery and equipment at the home office becoming fully depreciated in 2019, offset by additional software assets purchased in the latter half of 2019.
−Removed: Impairment of goodwill and other intangibles .
−Removed: As a result of the economic conditions caused by the response to COVID-19, we performed a quantitative assessment of our goodwill and indefinite-lived intangible assets at March 31, 2020.
−Removed: We recorded a goodwill impairment of $13.6 million related to our funeral homes in the Eastern Reporting Unit as the carrying value of goodwill exceeded the fair value at March 31, 2020.
−Removed: We also recorded a $1.1 million impairment charge to certain of our tradenames as the carrying amount of these tradenames exceeded the fair value.
+Added: Home office depreciation and amortization expense remained flat at $0.3 million and $1.1 million for the three and nine months ended September 30, 2020, compared to the three and nine months ended September 30, 2019 primarily due to machinery and equipment at the home office becoming fully depreciated in the latter half of 2019, offset by additional software assets purchased during the fourth quarter of 2019.
+Added: Net loss on divestitures and impairments charges.
+Added: The components of Net loss on divestitures and impairment charges for the three and nine months ended September 30, 2020 and 2019 are as follows (in thousands):
+Added: Three months ended September 30, Nine months ended September 30,
+Added: 2019 2020 2019 2020
+Added: Goodwill impairment $ (509) $ — $ (509) (13,632)
+Added: Tradename impairment (221) — (221) (1,061)
+Added: Net loss on divestitures (3,863) (4,917) (3,874) (4,917)
+Added: Total $ (4,593) $ (4,917) $ (4,604) $ (19,610)
Interest expense .
−Removed: Interest expense totaled $8.4 million for the three months ended June 30, 2020 , an increase of $2.1 million compared to the three months ended June 30, 2019 .
−Removed: Interest expense totaled $16.8 million for the six months ended June 30, 2020 , an increase of $4.2 million compared to the six months ended June 30, 2019 .
+Added: Interest expense totaled $8.0 million for the three months ended September 30, 2020, an increase of $1.7 million compared to the three months ended September 30, 2019.
+Added: Interest expense totaled $24.8 million for the nine months ended September 30, 2020, an increase of $5.9 million compared to the nine months ended September 30, 2019.
The increase was primarily due to increased borrowings on our Credit Facility and the $75.0 million of additional Senior Notes we issued on December 19, 2019.
Accretion of discount on convertible subordinated notes .
−Removed: We recognized accretion of the discount on our Convertible Notes of $0.1 million for both the three months ended June 30, 2020 and 2019 and $0.1 million for both the six months ended June 30, 2020 and 2019 .
+Added: We recognized accretion of the discount on our Convertible Notes of $0.1 million for both the three months ended September 30, 2020 and 2019 and $0.2 million for both the nine months ended September 30, 2020 and 2019.
+Added: The components of Other, net for the three and nine months ended September 30, 2020 and 2019 are as follows (in thousands):
+Added: Three months ended September 30, Nine months ended September 30,
+Added: 2019 2020 2019 2020
+Added: Gain on insurance reimbursements related to Hurricane Michael $ 638 $ — $ 638 $ 55
+Added: Other income (expense) (121) (1) 52 (63)
+Added: Other gain (loss) — (27) — (26)
+Added: Total $ 517 $ (28) $ 690 $ (34)
Income taxes.
−Removed: We calculate our quarterly income tax expense using a forecasted annual effective tax rate and we adjust for any discrete items arising during the quarter.
−Removed: Our income tax expense was $3.4 million and $2.1 million for the three months ended June 30, 2020 and 2019 , respectively and $1.3 million and $4.8 million for the six months ended June 30, 2020 and 2019 , respectively.
−Removed: Our operating tax rate before discrete items was 33.5% and 29.2% for the three months ended June 30, 2020 and 2019 , and 33.3% and 28.5% for the six months ended June 30, 2020 and 2019 , respectively.
−Removed: The increase in our overall effective tax rate is due to the unfavorable tax impact of impairment of goodwill and other intangibles recorded in the first quarter of 2020 for businesses that were previously acquired through stock acquisitions.
−Removed: In connection with the CARES Act, we expect to file a claim for a refund during 2020 to carryback the net operating losses generated in the tax years ending December 31, 2018 and 2019 and have included the anticipated impact in our current provision.
+Added: Our income tax expense was $2.9 million and $0.9 million for the three months ended September 30, 2020 and 2019, respectively and $4.2 million and $5.8 million for the nine months ended September 30, 2020 and 2019, respectively.
+Added: Our operating tax rate before discrete items was 34.0% and 61.0% for the three months ended September 30, 2020 and 2019, respectively and 33.8% and 31.3% for the nine months ended September 30, 2020 and 2019, respectively.
+Added: The increase in our overall effective tax rate for the nine months ended September 30, 2019 is due to the unfavorable tax impact of impairment of goodwill and other intangibles recorded in the first quarter of 2020 for businesses that were previously acquired through stock acquisitions.
+Added: In connection with the CARES Act, we filed a claim for a refund on June 30, 2020, to carryback the net operating losses generated in the tax year ending December 31, 2018.
+Added: The refund claim from the 2018 tax year was received on August 7, 2020, and we have included the impact in our current provision.
In an effort to maximize the expected benefits afforded by the CARES Act, we plan to amend our 2018 tax return to include the additional first year depreciation deduction for qualified improvement property.
The majority of the net operating losses generated in 2018 are the result of filing non-automatic accounting method changes relating to the recognition of revenue from our cemetery property and merchandise and services sales.
−Removed: Due to the uncertainty of the timing of receiving Internal Revenue Service approval for non-automatic accounting method changes, a reserve has been recorded against the benefit derived from this carrying back that the net operating losses generated.
+Added: Due to the uncertainty of the timing of receiving IRS approval for non-automatic accounting method changes, a reserve has been recorded against the benefit derived from this carrying back that the net operating losses generated;
+Added: therefore, for the nine months ended September 30, 2020, the reserve for uncertain tax positions was $2.9 million.
+Added: Additionally, we plan to file a claim for a refund for the net operating losses generated in the tax year ending December 31, 2019, in the fourth quarter of 2020.
+Added: Although we expect to take advantage of certain tax relief provisions of the CARES Act, we do not believe it will have a significant impact on our short-term or long-term liquidity position.
OVERVIEW OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
9 unchanged sentences
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.