5 unchanged sentences
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 September 30, 2020, we operated 180 funeral homes in 27 states and 32 cemeteries in 12 states.
+Added: At March 31, 2021, we operated 173 funeral homes in 26 states and 32 cemeteries in 12 states.
We compete with other publicly held and independent operators of funeral and cemetery companies.
We believe we are a market leader in most of our markets.
−Removed: Our funeral homes offer a complete range of high value personal services to meet a family’s funeral needs, including consultation, the removal and preparation of remains, the sale of caskets and related funeral merchandise, the use of funeral home facilities for visitation and remembrance services and transportation services.
−Removed: Our cemeteries provide interment rights (grave sites and mausoleum spaces) and related merchandise, such as markers and outer burial containers.
+Added: Funeral home and cemetery businesses provide products and services to families in three principal areas:
+Added: (i) ceremony and tribute, generally in the form of a funeral or memorial service;
+Added: (ii) disposition of remains, either through burial or cremation;
+Added: and (iii) memorialization, generally through monuments, markers or inscriptions.
+Added: Our funeral homes offer a complete range of services to meet a family’s funeral needs, including consultation, the removal and preparation of remains, the sale of caskets and related funeral merchandise, the use of funeral home facilities for visitation and memorial services and transportation services.
+Added: Most of our funeral homes have a non-denominational chapel on the premises, which permits family visitation and services to take place at one location and thereby reduces transportation costs and inconvenience to the family.
+Added: Our cemeteries provide interment rights (primarily grave sites, lawn crypts, mausoleum spaces and niches), related cemetery merchandise (such as outer burial containers, memorial markers and floral placements) and services (interments, inurnments and installation of cemetery merchandise).
We provide funeral and cemetery services and products on both an “atneed” (time of death) and “preneed” (planned prior to death) basis.
Recent Developments
−Removed: 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.
−Removed: Convertible Notes Repurchases
−Removed: 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).
−Removed: The privately-negotiated repurchases represented approximately 60% of the aggregate principal amount of Convertible Notes.
−Removed: Following the settlement of the repurchases, the aggregate principal amount of the Convertible Notes was reduced to approximately $2.6 million.
−Removed: 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.
+Added: During the three months ended March 31, 2021, we divested two funeral homes for a total of $2.8 million, at a gain of $0.3 million.
+Added: Convertible Notes Conversions and Maturity
+Added: During the three months ended March 31, 2021, we converted approximately $2.4 million in aggregate principal amount of our 2.75% convertible subordinated notes due 2021 (the “Convertible Notes”) held by certain holders for approximately $3.8 million in cash.
+Added: The Convertible Notes matured on March 15, 2021, at which time all Convertible Notes outstanding, approximately $0.2 million in aggregate principal amount, were paid in full in cash at par value.
+Added: Therefore, no Convertible Notes remain outstanding at March 31, 2021.
Business Impact under the Macroeconomic Environment of COVID-19
On March 11, 2020, COVID-19 was deemed a global pandemic and since then, the Company has continued to proactively monitor and assess the pandemic’s current and potential impact to the Company’s operations.
−Removed: Since early March, the Company’s senior leadership team has taken certain steps to assist our businesses in appropriately adjusting and adapting to the conditions resulting from the COVID-19 pandemic.
+Added: Beginning in early March 2020, the Company’s senior leadership team took certain steps to assist our businesses in appropriately adjusting and adapting to the conditions resulting from the COVID-19 pandemic.
Our businesses have been designated as essential services and, therefore, each one of the Company’s business locations remains open and ready to provide service to their communities in this time of need.
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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 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.
+Added: 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
−Removed: 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.
+Added: Gathering restrictions across many areas of the country have, in some cases, 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, outdoor services, 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 do not believe we are vulnerable to certain concentrations, whether by geographic area, revenue for specific products or our relationships with our vendors.
−Removed: Our relationships with our vendors and suppliers have remained consistent and we continue to receive utmost service.
−Removed: Remote working arrangements have not adversely affected our ability to maintain and support operations, including financial reporting systems, internal controls over financial reporting, and disclosure controls and procedures.
+Added: Our relationships with our vendors and suppliers have remained consistent and we continue to receive reliable service.
+Added: Remote working arrangements, when utilized, have not materially affected our ability to maintain and support operations, including financial reporting systems, internal controls over financial reporting, and disclosure controls and procedures.
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 2020.
−Removed: 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.
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 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.
+Added: We have also applied certain measures of the CARES Act, which has provided a cash benefit in the form of tax payment refunds, 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 aspects of our financial results in the third 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 first quarter 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 business strategy is based on strong, local leadership with entrepreneurial principles that is focused on sustainable long term market share, revenue, and profitability growth in each local business.
−Removed: We believe Carriage has the most innovative operating model in the funeral and cemetery industry, which we are able to achieve through a decentralized, high-performance culture and operating framework linked with incentive compensation programs that attract top-quality talent to our organization.
+Added: We believe Carriage has the most innovative operating model in the funeral and cemetery industry, which we are able to achieve through a decentralized, high-performance culture operating framework linked with incentive compensation programs that attract top-quality industry talent to our organization.
+Added: We also believe that Carriage provides a unique consolidation and operating framework that offers a highly
+Added: attractive succession planning solution for owners who want their legacy family business to remain operationally prosperous in their local communities.
Our Mission Statement states that “we are committed to being the most professional, ethical and highest quality funeral and cemetery service organization in our industry” and our Guiding Principles state our core values, which are comprised of:
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• Belief in the power of people through individual initiative and teamwork;
−Removed: • Outstanding Service and Profitability Go Hand-in-Hand
+Added: • Outstanding service and profitability to hand-in-hand;
• Growth of the company is driven by decentralization and partnership.
−Removed: Our five Guiding Principles collectively embody our Being The Best high-performance culture, operating framework.
+Added: Our five Guiding Principles collectively embody our Being The Best high-performance culture and operating framework.
Our operations and business strategy are built upon the execution of the following three models:
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• Strategic Acquisition Model.
−Removed: 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 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 earnings before interest, taxes, depreciation and amortization (“EBITDA”) margin (a non-GAAP measure).
Standards Operating Model
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Our 4E Leadership Model requires strong local leadership in each business to grow an entrepreneurial, decentralized, high-value, personal service and sales business at sustainable profit margins.
−Removed: Our 4E Leadership Model is based upon principles established by the late Jack Welch during his tenure at General Electric, and is based upon 4E qualities essential to succeed in a high-performance culture:
+Added: Our 4E Leadership Model is based upon principles established by Jack Welch during his tenure at General Electric, and is based upon 4E qualities essential to succeed in a high performance culture:
Energy to get the job done;
−Removed: the ability to Energize others;
+Added: the ability to Energiz e others;
the Edge necessary to make difficult decisions;
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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 EBITDA margins.
+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 earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins (a non-GAAP measure).
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.
Our financial valuation of the acquisition candidate is then determined through the application of an appropriate after-tax cash return on investment that exceeds our cost of capital.
+Added: Our belief in our Mission Statement and Guiding Principles and proper execution of the three models that define our strategy have given us a competitive advantage in every market where we compete.
+Added: 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.
+Added: This gives us a competitive advantage that is evidenced by the sustained earning power of our portfolio as defined by our EBITDA margin.
LIQUIDITY AND CAPITAL RESOURCES
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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, cost reductions in 2020, and anticipated future cash flows, we do not anticipate any significant liquidity constraints in the foreseeable future.
−Removed: 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.
−Removed: Further, to the extent operating cash flow or access to and cost of financing sources are materially different than expected, future liquidity may be adversely affected.
−Removed: For additional information regarding known material factors that could cause cash flow or access to and cost of finance sources to differ from our expectations, please read (i) Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q and (ii) Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019.
−Removed: Our plan is to remain focused on integrating our newly acquired businesses and to use cash on hand and borrowings under our Credit Facility primarily for general corporate purposes and for payment of dividends and our debt obligations.
−Removed: 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 in the next 12 months, which will yield 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 Convertible Notes in open market or privately negotiated transactions.
+Added: Based on our recent operating results, current cash position and anticipated future cash flows, we do not anticipate any significant liquidity constraints in the foreseeable future.
We have the ability to draw on our Credit Facility, subject to its customary terms and conditions.
−Removed: As of September 30, 2020, we have net unrealized losses of $7.3 million in our trusts.
−Removed: At September 30, 2020, these net unrealized losses represented 3% of our original cost basis of $245.8 million.
−Removed: Our trusts have been and continue to be impacted by current market conditions in the U.S.
−Removed: and global financial markets.
−Removed: The decline in fair value is largely due to changes in interest rates and other market conditions.
−Removed: Our investments are diversified across multiple industry segments using a balanced allocation strategy to minimize long-term risk.
−Removed: 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 trust and Care trusts’ corpus interests in those unrealized gains and/or losses.
−Removed: 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.
−Removed: We rely on our trust investments to provide funding for the various contractual obligations that arise upon maturity of the underlying preneed contracts.
−Removed: Because of the long-term relationship between the establishment of trust investments and the required performance of the underlying contractual obligations, the impact of current market conditions that may exist at any given time is not necessarily indicative of our ability to generate profit on our future performance obligations.
−Removed: 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 third quarter with $0.7 million.
−Removed: 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.
−Removed: During the three months ended September 30, 2020, we reduced the outstanding borrowings on our Credit Facility by $33.7 million.
−Removed: The following table sets forth the elements of cash flow for the nine months ended September 30, 2019 and 2020 (in thousands):
−Removed: Nine months ended September 30,
+Added: However, if our capital expenditures or acquisition plans change, we may need to access the capital markets to obtain additional funding.
+Added: Further, to the extent operating cash flow or access to and cost of financing sources are materially different than expected, future liquidity may be adversely affected.
+Added: For additional information regarding known material factors that could cause cash flow or access to and cost of finance sources to differ from our expectations, please read Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 and Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q.
+Added: Our plan is to remain focused on integrating our newly acquired businesses and to use cash on hand and borrowings under our Credit Facility primarily for general corporate purposes, payment of dividends and debt obligations.
+Added: However, if the conditions set forth in our conditional notice of redemption are satisfied and we are able to redeem our existing Senior Notes on June 1, 2021, then it may provide us the ability, from a capital allocation perspective, to potentially resume strategic acquisitions, internal growth capital expenditures, share repurchases, dividend increases and further debt repayments.
+Added: See Item 1, Financial Statements and Supplementary Data, Note 18 for additional details regarding the notice of conditional redemption for our Senior Notes.
+Added: We also expect continued divestiture activity for the next 6-9 months, which could yield approximately $3-5 million of 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 repurchase shares of our common stock, subject to satisfying certain financial covenants in our Credit Facility.
+Added: 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.
+Added: We began 2021 with $0.9 million in cash and ended the first quarter with $0.4 million in cash.
+Added: At March 31, 2021, we had borrowings of $28.3 million outstanding on our Credit Facility compared to $47.2 million at December 31, 2020.
+Added: The following table sets forth the elements of cash flow (in thousands):
+Added: Three months ended March 31,
Cash at beginning of year $ 716 $ 889
Net cash provided by operating activities 13,546 26,811
−Removed: Acquisitions — (28,011)
−Removed: Proceeds from insurance reimbursements 1,247 97
+Added: Acquisitions of businesses (28,000) —
+Added: Acquisitions of real estate — (350)
Proceeds from divestitures and sale of other assets 78 2,800
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Net borrowings (payments) on our Credit Facility, acquisition debt and finance lease obligations 29,713 (19,133)
−Removed: Payment of debt issuance costs related to long-term debt (113) —
−Removed: Repurchase of the Convertibles Notes (27) (4,563)
−Removed: Payment of transaction costs related to the repurchase of the Convertibles Notes — (12)
−Removed: Payment of debt issuance costs related to the Senior Notes — (66)
−Removed: Net proceeds from employee equity plans 961 640
+Added: Conversions and maturity of the Convertibles Notes — (3,980)
+Added: Payment of debt issuance and transaction costs (14) (7)
+Added: Net proceeds (payments) related to employee equity plans 127 (17)
Dividends paid on common stock (1,339) (1,799)
−Removed: Purchase of treasury stock (7,756) —
Other financing costs (169) (461)
−Removed: Net cash used in financing activities (21,628) (37,281)
+Added: Net cash provided by (used in) financing activities 28,318 (25,397)
Cash at end of the period $ 11,920 $ 406
Operating Activities
−Removed: 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.
+Added: For the three months ended March 31, 2021, cash provided by operating activities was $26.8 million compared to $13.5 million for the three months ended March 31, 2020.
The increase of $13.3 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 $19.6 million net loss on divestitures and impairment charges) increased $15.8 million in addition to other favorable working capital changes.
+Added: Our operating income (excluding the non-cash impact of the divestitures and impairment charges) increased $9.1 million in addition to other favorable working capital changes.
Investing Activities
−Removed: 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.
−Removed: 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.
−Removed: 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: 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.
−Removed: 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.
−Removed: 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.
+Added: Our investing activities, resulted in a net cash outflow of $1.9 million for the three months ended March 31, 2021 compared to $30.7 million for the three months ended March 31, 2020, a decrease of $28.8 million.
+Added: Acquisition and Divestiture Activity
+Added: During the three months ended March 31, 2021, we sold two funeral homes for $2.8 million and purchased real estate for $0.4 million.
+Added: During the three months ended March 31, 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 in 2020.
+Added: Capital Expenditures
+Added: For the three months ended March 31, 2021, capital expenditures (comprising of growth and maintenance spend) totaled $4.3 million compared to $2.7 million for the three months ended March 31, 2020, an increase of $1.6 million.
The following tables present our growth and maintenance capital expenditures (in thousands):
−Removed: Nine months ended September 30,
+Added: Three months ended March 31,
Cemetery development $ 954 $ 1,486
Renovations at certain businesses 141 710
−Removed: Live streaming equipment 42 560
−Removed: Total growth expenditures $ 5,298 $ 4,640
+Added: Total Growth $ 1,182 $ 2,207
+Added: Three months ended March 31,
Facility repairs and improvements $ 246 $ 253
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Paving roads and parking lots 132 182
−Removed: Total maintenance expenditures $ 6,181 $ 5,394
−Removed: Total capital expenditures $ 11,479 $ 10,034
+Added: Total Maintenance $ 1,556 $ 2,140
Financing Activities
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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: Our financing activities resulted in a net cash outflow of $25.4 million for the three months ended March 31, 2021 compared to a net cash inflow of $28.3 million for the three months ended March 31, 2020, an increase of $53.7 million.
+Added: During the three months ended March 31, 2021, we had net payments on our Credit Facility, acquisition debt and finance leases of $19.1 million, we paid $1.8 million in dividends and $4.0 million for the conversions and maturity of our Convertible Notes.
+Added: During the three months ended March 31, 2020, we had net borrowings on our Credit Facility, acquisition debt and finance leases of $29.7 million and paid $1.3 million in dividends.
+Added: Share Repurchase
+Added: During the three months ended March 31, 2021, we did not repurchase any shares of our common stock.
+Added: At March 31, 2021, we had approximately $25.6 million available for repurchases under our share repurchase program.
+Added: Our Board declared the following dividends payable on the dates below (in thousands, except per share amounts):
2020 Per Share Dollar Value
$ 0.075 $ 1,339
−Removed: $ 0.0750 $ 1,365
−Removed: September 1 st
−Removed: $ 0.0750 $ 1,336
2021 Per Share Dollar Value
$ 0.100 $ 1,799
−Removed: $ 0.0750 $ 1,343
−Removed: September 1 st
−Removed: $ 0.0875 $ 1,569
−Removed: Share Repurchases
−Removed: During the nine months ended September 30, 2020, we did not repurchase any shares of common stock pursuant to our share repurchase program.
−Removed: 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 September 30, 2020 is as follows (in thousands):
−Removed: September 30, 2020
+Added: The outstanding principal of our Credit Facility, lease obligations and acquisition debt at March 31, 2021 is as follows (in thousands):
+Added: March 31, 2021
Credit Facility $ 28,300
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Credit Facility
−Removed: At September 30, 2020, our Credit Facility was comprised of:
+Added: At March 31, 2021, our $190.0 million senior secured revolving credit facility (the “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 September 30, 2020, we were subject to the following financial covenants under our Credit Facility:
−Removed: (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.
+Added: The Credit Facility contains customary affirmative covenants, including, but not limited to, covenants with respect to the use of proceeds, payment of taxes and other obligations, continuation of the Company’s business and the maintenance of existing rights and privileges, the maintenance of property and insurance, amongst others.
+Added: In addition, the Credit Facility also contains customary negative covenants, including, but not limited to, covenants that restrict (subject to certain exceptions) the ability of the Company and its subsidiaries party thereto as guarantors (the “Credit Facility Guarantors”) to incur additional indebtedness, grant liens on assets, make investments, engage in mergers and acquisitions, and pay dividends and other restricted payments, and certain financial covenants.
+Added: As of March 31, 2021, we were subject to the following financial covenants under our Credit Facility:
+Added: (A) a Total Leverage Ratio not to exceed 5.50 to 1.00, (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 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.
−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 September 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 was increased to $2.1 million on September 29, 2020.
−Removed: The letter of credit bears interest at 3.125% and will expire on November 25, 2020.
−Removed: The letter of credit automatically renews annually and secures our obligations under our various self-insured policies.
+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 March 31, 2021.
+Added: At March 31, 2021, we had outstanding borrowings under our Credit Facility of $28.3 million.
+Added: We also had one letter of credit for $2.1 million outstanding under the Credit Facility, which bears interest at 3.125% and will expire on November 25, 2021.
+Added: The letter of credit will automatically renew annually and secures our obligations under our various self-insured policies.
+Added: At March 31, 2021, we had $159.6 million of availability under the Credit Facility after giving effect to the $2.1 million of the outstanding letter of credit.
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 September 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 3.9% 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.
−Removed: 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):
−Removed: Three months ended September 30, Nine months ended September 30,
−Removed: 2019 2020 2019 2020
+Added: At March 31, 2021, the prime rate margin was equivalent to 1.5% and the LIBOR rate margin was 2.5%.
+Added: The weighted average interest rate on our Credit Facility was 4.3% and 3.3% for the three months ended March 31, 2020 and 2021, respectively.
+Added: The interest expense and amortization of debt issuance costs related to our Credit Facility are as follows (in thousands):
+Added: Three months ended March 31,
Credit Facility interest expense $ 1,230 $ 445
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 nine months ended September 30, 2019 and 2020 are as follows (in thousands):
−Removed: Three months ended September 30, Nine months ended September 30,
−Removed: 2019 2020 2019 2020
+Added: The lease cost related to our operating leases and short-term leases and depreciation expense and interest expense related to our finance leases are as follows (in thousands):
+Added: Three months ended March 31,
Operating lease cost $ 957 $ 960
Short-term lease cost 32 49
+Added: Variable lease cost 25 41
Finance lease cost:
5 unchanged sentences
Original maturities range from five to twenty years.
−Removed: 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):
−Removed: Three months ended September 30, Nine months ended September 30,
−Removed: 2019 2020 2019 2020
+Added: The imputed interest expense related to our acquisition debt is as follows (in thousands):
+Added: Three months ended March 31,
Acquisition debt imputed interest expense $ 127 $ 97
Convertible Subordinated Notes due 2021
−Removed: 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.
−Removed: The Repurchases represented approximately 60% of the aggregate principal amount of Convertible Notes then outstanding.
−Removed: Following the settlement of the Repurchases, the aggregate principal amount of the Convertible Notes was reduced to approximately $2.6 million.
−Removed: 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.
−Removed: The fair value of the Convertible Notes, which are Level 2 measurements, was $2.9 million at September 30, 2020.
−Removed: 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 nine months ended September 30, 2019 and 2020 is as follows (in thousands):
−Removed: Three months ended September 30, Nine months ended September 30,
−Removed: 2019 2020 2019 2020
+Added: During the three months ended March 31, 2021, we converted approximately $2.4 million in aggregate principal amount of our Convertible Notes held by certain holders for approximately $3.8 million in cash.
+Added: The Convertible Notes matured on March 15, 2021, at which time all Convertible Notes outstanding, approximately $0.2 million in aggregate principal amount, were paid in full in cash at par value.
+Added: Therefore, no Convertible Notes remain outstanding at March 31, 2021.
+Added: The interest expense and accretion of debt discount and debt issuance costs related to our Convertible Notes are as follows (in thousands):
+Added: Three months ended March 31,
Convertible Notes interest expense $ 43 $ 18
1 unchanged sentence
Convertible Notes amortization of debt issuance costs 6 1
−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 five months of the Convertible Notes.
−Removed: 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%.
−Removed: 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.
+Added: The effective interest rate on the unamortized debt discount for both the three months ended March 31, 2020 and 2021 was 11.4%.
+Added: The effective interest rate on the debt issuance costs for the three months ended March 31, 2020 and 2021 was 3.2% and 3.1%, respectively.
Senior Notes due 2026
−Removed: At September 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 $422.3 million at September 30, 2020.
−Removed: 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 nine months ended September 30, 2019 and 2020 is as follows (in thousands):
−Removed: Three months ended September 30, Nine months ended September 30,
−Removed: 2019 2020 2019 2020
+Added: At March 31, 2021, the principal amount of our 6.625% senior notes due 2026 (the “Senior Notes”) was $400.0 million.
+Added: The Senior Notes were issued under an indenture, dated as of May 31, 2018 (the “Indenture”), among us, certain of our existing subsidiaries (collectively, the “Subsidiary Guarantors”), as guarantors, and Wilmington Trust, National Association., as trustee.
+Added: The Senior Notes are unsecured, senior obligations and are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally, by each of the Subsidiary Guarantors.
+Added: The Senior Notes are due on June 1, 2026 unless earlier redeemed
+Added: or repurchased and bear interest at 6.625% per year, which is payable semi-annually in arrears on June 1 and December 1 of each year.
+Added: We may redeem all or part of the Senior Notes at any time prior to June 1, 2021 at a redemption price equal to 100% of the principal amount of Senior Notes redeemed, plus a “make whole” premium, and accrued and unpaid interest, if any, to the date of redemption.
+Added: We have the right to redeem the Senior Notes at any time on or after June 1, 2021 at the redemption prices described in the Indenture, plus accrued and unpaid interest, if any, to the date of redemption.
+Added: Additionally, at any time before June 1, 2021, we may redeem up to 40% of the aggregate principal amount of the Senior Notes issued with an amount equal to the net proceeds of certain equity offerings, at a price equal to 106.625% of the principal amount of the Senior Notes, plus accrued and unpaid interest, if any, to the date of redemption;
+Added: provided that (1) at least 60% of the aggregate principal amount of the Senior Notes (including any additional Senior Notes) originally issued under the Indenture remain outstanding immediately after the occurrence of such redemption (excluding Senior Notes held by us);
+Added: and (2) each such redemption must occur within 180 days of the date of the closing of each such equity offering.
+Added: If a “change of control” occurs, holders of the Senior Notes will have the option to require us to purchase for cash all or a portion of their Senior Notes at a price equal to 101% of the principal amount of the Senior Notes, plus accrued and unpaid interest.
+Added: In addition, if we make certain asset sales and do not reinvest the proceeds thereof or use such proceeds to repay certain debt, we will be required to use the proceeds of such asset sales to make an offer to purchase the Senior Notes at a price equal to 100% of the principal amount of the Senior Notes, plus accrued and unpaid interest.
+Added: The Indenture contains restrictive covenants limiting our ability and our Restricted Subsidiaries (as defined in the Indenture) to, among other things, incur additional indebtedness or issue certain preferred shares, create liens on certain assets to secure debt, pay dividends or make other equity distributions, purchase or redeem capital stock, make certain investments, sell assets, agree to certain restrictions on the ability of Restricted Subsidiaries to make payments to us, consolidate, merge, sell or otherwise dispose of all or substantially all assets, or engage in transactions with affiliates.
+Added: The Indenture also contains customary events of default.
+Added: The interest expense and amortization of debt discount, debt premium and debt issuance costs related to our Senior Notes are as follows (in thousands):
+Added: Three months ended March 31,
Senior Notes interest expense $ 6,625 $ 6,625
2 unchanged sentences
Senior Notes amortization of debt issuance costs 67 74
+Added: At March 31, 2021, the fair value of the Senior Notes, which are Level 2 measurements, was $417.6 million.
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 62 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 nine months ended September 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 nine months ended September 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 Senior Notes, issued in May 2018, for both three months ended March 31, 2020 and 2021 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 Senior Notes, issued in December 2019, for both three months ended March 31, 2020 and 2021 was 6.20% and 6.88%, respectively.
+Added: On April 30, 2021, we delivered a notice of conditional redemption to the trustee for the Senior Notes to call for redemption on June 1, 2021, all of the outstanding aggregate principal amount of the Senior Notes at a redemption price of 104.969% of the principal amount thereof, plus accrued and unpaid interest up to, but excluding, the scheduled redemption date.
+Added: Our redemption obligation is conditioned on and subject to the completion of the offering of $400 million in aggregate principal amount of 4.25% Senior Notes due 2029 and the entry into an amended and restated credit facility in connection with the closing of the offering.
FINANCIAL HIGHLIGHTS
−Removed: Below are our financial highlights for the three months ended September 30, 2019 and 2020 (in thousands except for volumes and averages):
−Removed: Three months ended September 30,
−Removed: Revenue $ 66,125 $ 84,393
−Removed: Funeral contracts 9,238 11,512
−Removed: Average revenue per funeral contract $ 5,516 $ 5,194
−Removed: Preneed interment rights (property) sold 1,901 2,655
−Removed: Average price per preneed interment right sold $ 3,622 $ 3,662
−Removed: Gross profit $ 18,056 $ 27,874
−Removed: Net income $ 577 $ 5,525
−Removed: 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.
−Removed: Volume growth was offset by a decrease in the average revenue per funeral contract of 5.8%.
−Removed: 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 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.
−Removed: 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.
−Removed: Below are our financial highlights for the nine months ended September 30, 2019 and 2020 (in thousands except for volumes and averages):
−Removed: Nine months ended September 30,
+Added: Below are our financial highlights (in thousands except for volumes and averages):
+Added: Three months ended March 31,
Revenue $ 77,490 $ 96,637
4 unchanged sentences
Gross profit $ 23,171 $ 35,061
−Removed: Net income $ 11,964 $ 7,725
−Removed: 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.
−Removed: Volume growth was offset by a decrease in the average revenue per funeral contract of 8.3%.
−Removed: 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 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.
−Removed: 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.
+Added: Net income (loss) $ (4,197) $ 12,933
+Added: Revenue for the three months ended March 31, 2021 increased $19.1 million compared to the three months ended March 31, 2020, as we experienced a 15.7% increase in total funeral contracts primarily due to a peak spike in Covid deaths in the first quarter of 2021 when compared to the first quarter of 2020, which resulted in market share gains for the majority of our businesses, while the average revenue per funeral contract remained flat.
+Added: In addition, we experienced a 42.3% increase in the number of preneed interment rights (property) sold, as well as a 20.4% increase in the average price per interment right sold of 20.4%, primarily due to 1) the full integration of the cemetery acquisitions made in the fourth quarter of 2019 and first quarter of 2020, and 2) the execution of the initial stages of our two year cemetery sales strategy of building high performance sales teams and standardized sales systems across our portfolio of cemeteries.
+Added: Gross profit for the three months ended March 31, 2021 increased $11.9 million compared to the three months ended March 31, 2020, primarily due to the increase in revenue from both our funeral home and cemetery segments, as well as disciplined expense and cost management by leaders at each business.
+Added: Net income for the three months ended March 31, 2021 increased $17.1 million compared to the three months ended March 31, 2020, primarily due to the increase in gross profit and the $14.7 million impairment charge we recorded in the first quarter of 2020 that did not occur in first quarter of 2021, offset by the $7.8 million increase in tax expense in the first quarter of 2021 as we experienced a net loss in the first quarter of 2020.
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 nine months ended September 30, 2020 dated October 27, 2020 and discussed in the corresponding earnings conference call.
+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 months ended March 31, 2021 issued on April 21, 2021 and discussed in the corresponding earnings conference call.
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.
1 unchanged sentence
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 nine months ended September 30, 2019 and 2020 (in thousands):
−Removed: Three months ended September 30, Nine months ended September 30,
−Removed: 2019 2020 2019 2020
−Removed: Net income $ 577 $ 5,525 $ 11,964 $ 7,725
+Added: Below is a reconciliation of Net income (loss), a GAAP measure, to Adjusted net income, a non-GAAP measure, (in thousands):
+Added: Three months ended March 31,
+Added: Net income (loss) $ (4,197) $ 12,933
Special items, net of tax (1)
−Removed: Acquisition and divestiture expenses — — — 126
+Added: Acquisition expenses 90 —
Severance and separation costs (2)
−Removed: Performance awards cancellation and exchange — 84 — 140
Accretion of discount on Convertible Notes (1)
−Removed: 61 69 178 200
−Removed: Net loss on divestitures and other costs (2)
−Removed: 3,143 3,245 3,143 3,245
+Added: Gain on divestitures (3)
Net impact of impairment of goodwill and other intangibles (3)
−Removed: 577 — 577 9,808
Litigation reserve 59 —
Natural disaster and pandemic costs (4)
−Removed: Tax expense related to divested business (1)
−Removed: Gain on insurance reimbursements (504) — (504) —
−Removed: Other special items — (47) — 324
Adjusted net income (5)
1 unchanged sentence
(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 21.0% 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).
−Removed: (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.
+Added: Special items are taxed at the federal statutory rate of 21.0%, except for the Accretion of the discount on Convertible Notes, as this is a non-tax deductible item.
+Added: The Gain on divestitures and the Net impact of impairment of goodwill and other intangibles taxed at the operating tax rate during the respective period (described below).
+Added: (2) The increase is due to separation costs related to the resignation of two members of senior leadership in the first quarter of 2021.
+Added: (3) Net of the operating tax rate of 33.6% in 2020 and 31.0% in 2021.
+Added: (4) The increase is primarily due to health and safety expenses, including personal protective equipment (“PPE”).
+Added: In the first quarter of 2020, we purchased PPE during the last few weeks of March 2020 when the Pandemic began compared to three months in the first quarter of 2021.
(5) 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 nine months ended September 30, 2019 and 2020 (in thousands):
−Removed: Three months ended September 30, Nine months ended September 30,
−Removed: 2019 2020 2019 2020
+Added: Below is a reconciliation of Gross profit (a GAAP measure) to Operating profit (a non-GAAP measure) (in thousands):
+Added: Three months ended March 31,
Gross profit $ 23,171 $ 35,061
7 unchanged sentences
Funeral Home and Cemetery.
−Removed: 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):
−Removed: Three months ended September 30, Nine months ended September 30,
−Removed: 2019 2020 2019 2020
+Added: Below is a breakdown of Operating profit (a non-GAAP measure) by Segment (in thousands):
+Added: Three months ended March 31,
Funeral Home $ 24,274 $ 32,906
2 unchanged sentences
Operating profit margin (1)
−Removed: 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 nine months ended September 30, 2020 and 2019.
+Added: The following is a discussion of our results of operations for the three months ended March 31, 2021 and 2020.
The term “same store” refers to funeral homes and cemeteries acquired prior to January 1, 2017 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.
1 unchanged sentence
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 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.
−Removed: “Planned divested” refers to the funeral home and cemetery businesses that we intend to divest in the near future.
−Removed: “Ancillary funeral services” 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 two funeral homes we sold in first quarter of 2021.
+Added: “Planned divested” refers to the funeral home and cemetery businesses that we intend to divest.
+Added: “Ancillary” in the Funeral Home Segment represents our flower shop, pet cremation business and online cremation business.
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 September 30, 2020 compared to the three months ended September 30, 2019 (in thousands):
−Removed: Three months ended September 30,
−Removed: Same store operating revenue $ 40,824 $ 44,444
−Removed: Acquired operating revenue 6,100 11,702
−Removed: Divested/planned divested revenue 2,500 1,731
−Removed: Ancillary funeral services revenue — 1,196
−Removed: Preneed funeral insurance commissions 436 369
−Removed: Preneed funeral trust and insurance 1,657 1,992
−Removed: Total $ 51,517 $ 61,434
−Removed: Operating profit:
−Removed: Same store operating profit $ 15,124 $ 18,236
−Removed: Acquired operating profit 2,297 4,699
−Removed: Divested/planned divested operating profit 398 290
−Removed: Ancillary funeral services operating profit — 292
−Removed: Preneed funeral insurance commissions 213 159
−Removed: Preneed funeral trust and insurance 1,615 1,960
−Removed: Total $ 19,647 $ 25,636
−Removed: The following measures reflect the significant metrics over this comparative period:
−Removed: Three months ended September 30,
−Removed: Contract volume 7,725 8,923
−Removed: Average revenue per contract, excluding preneed funeral trust earnings $ 5,285 $ 4,981
−Removed: Average revenue per contract, including preneed funeral trust earnings $ 5,472 $ 5,175
−Removed: Burial rate 37.4 % 35.3 %
−Removed: Cremation rate 54.9 % 57.6 %
−Removed: Contract volume 922 2,165
−Removed: Average revenue per contract, excluding preneed funeral trust earnings $ 6,616 $ 5,405
−Removed: Average revenue per contract, including preneed funeral trust earnings $ 6,706 $ 5,489
−Removed: Burial rate 48.5 % 40.5 %
−Removed: Cremation rate 44.4 % 54.0 %
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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%.
−Removed: The increase in operating margin is primarily due to the increase in same store operating revenue and
−Removed: disciplined expense and cost management by local leaders at each business.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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%.
−Removed: The increase is primarily due to disciplined expense and cost management by local leaders at each business.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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%.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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):
−Removed: Nine months ended September 30,
+Added: The following table sets forth certain information regarding our Revenue and Operating profit from our funeral home operations (in thousands):
+Added: Three months ended March 31,
Same store operating revenue $ 46,696 $ 56,683
1 unchanged sentence
Divested/planned divested revenue 2,757 1,217
−Removed: Ancillary funeral services revenue — 3,464
+Added: Ancillary revenue 1,151 1,207
Preneed funeral insurance commissions 366 330
5 unchanged sentences
Divested/planned divested operating profit 673 134
−Removed: Ancillary funeral services operating profit — 908
+Added: Ancillary operating profit 295 242
Preneed funeral insurance commissions 156 91
2 unchanged sentences
The following measures reflect the significant metrics over this comparative period:
−Removed: Nine months ended September 30,
+Added: Three months ended March 31,
Contract volume 9,058 11,028
8 unchanged sentences
Cremation rate 54.6% 54.1%
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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: 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.
−Removed: In addition, our Managing Partners continued to show innovation by creating high value, uniquely customized personal services and sales in challenging local environments.
−Removed: 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%.
−Removed: 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.
−Removed: These decreases were as a result of disciplined expense and cost management by local leaders at each business.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Operating profit margin increased slightly by 30 basis points to 39.3%.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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%.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: Funeral home same store operating revenue for the three months ended March 31, 2021 increased $10.0 million compared to the three months ended March 31, 2020.
+Added: The increase in operating revenue is primarily due to a 21.7% same store contract volume increase, while the average revenue per contract excluding preneed interest, remained flat in the three months ended March 31, 2021 compared to the same period in 2020.
+Added: The increase in volume is primarily due to a peak spike in Covid deaths in the first quarter of 2021, which resulted in market share gains for the majority of our businesses.
+Added: Funeral home same store operating profit for the three months ended March 31, 2021 increased $7.8 million when compared to the three months ended March 31, 2020.
+Added: The comparable operating profit margin increased 680 basis points to 45.5%.
+Added: The increase in operating profit is primarily due to the increase in same store operating revenue along with disciplined expense and cost management by leaders at each business.
+Added: Operating expenses as a percent of operating revenue decreased 6.9% for the three months ending 2021 compared to the same period in 2020.
+Added: The largest decrease was in salaries and benefits, which decreased 3.7% as a percent of operating revenue as we increased revenue without adding extra personnel.
+Added: Funeral home acquired operating revenue for the three months ended March 31, 2021 increased $1.3 million compared to the three months ended March 31, 2020.
+Added: The increase in operating revenue is primarily due to a 15.5% increase in acquired contract volume primarily due to the increased deaths related to the COVID-19 pandemic and broad market share gains, which was partially offset by a 1.2% decrease in the average revenue per contract, excluding preneed interest, due to a 90 basis point decrease in the burial rate, along with a 5.4% decrease of cremation contracts with services.
+Added: Acquired operating profit for the three months ended March 31, 2021 increased $1.2 million when compared to the three months ended March 31, 2020.
+Added: The comparable operating profit margin increased 760 basis points to 44.1%.
+Added: The increase in operating profit is primarily due to the increase in acquired operating revenue along with disciplined expense and cost management by leaders at each business.
+Added: The operating margin of the nine businesses acquired in the fourth quarter of 2019 increased 310 basis points and the operating margin of the business acquired in the first quarter of 2020 increased 520 basis points during the three months ended March 31, 2021 compared to the same period in 2020.
+Added: Overall acquired operating expenses as a percent of operating revenue decreased 7.5%, with the largest decrease in salaries and benefits of 5.9% as we increased revenue without adding extra personnel.
+Added: Ancillary revenue, which is recorded in Other revenue , represents revenue from our flower shop, pet cremation and online cremation businesses acquired in the fourth quarter of 2019.
+Added: Ancillary revenue increased 4.9% for the three months ending March 31, 2021 compared to the three months ending March 31, 2020 primarily due to an increase in our online cremation business.
+Added: Ancillary operating profit decreased 18.0% for the three months ended March 31, 2021 compared to the same period in 2020, primarily due to an increase in operating expenses with the largest increase in third party pick up and embalming and general and administrative expenses at our online cremation business.
+Added: Preneed funeral insurance commissions and preneed funeral trust and insurance, also recorded in Other revenue , on a combined basis, increased $0.3 million or 12.2% for the three months ended March 31, 2021 compared to the same period in 2020.
+Added: The increase is primarily related to a 13.9% increase in preneed contracts maturing to atneed which triggers the recognition of trust earnings on matured contracts.
+Added: Operating profit for preneed funeral insurance commissions and preneed trust and insurance, on a combined basis, increased $0.3 million or 12.7% for the same comparative period, primarily due to the increase in preneed funeral trust and insurance revenue.
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 September 30, 2020 compared to the three months ended September 30, 2019 (in thousands):
−Removed: Three months ended September 30,
+Added: The following table sets forth certain information regarding our Revenue and Operating profit from our cemetery operations (in thousands):
+Added: Three months ended March 31,
Same store operating revenue $ 10,907 $ 14,621
1 unchanged sentence
Divested/planned divested revenue 58 108
−Removed: Preneed cemetery trust and insurance 1,430 3,016
+Added: Preneed cemetery trust revenue 1,742 2,889
Preneed cemetery finance charges 242 265
4 unchanged sentences
Divested/planned divested operating profit 3 38
−Removed: Preneed cemetery trust and insurance 1,284 2,909
+Added: Preneed cemetery trust operating profit 1,581 2,765
Preneed cemetery finance charges 242 265
1 unchanged sentence
The following measures reflect the significant metrics over this comparative period:
−Removed: Three months ended September 30,
+Added: Three months ended March 31,
Preneed revenue as a percentage of operating revenue 58% 58%
3 unchanged sentences
Average price per interment right sold $ 3,615 $ 3,879
−Removed: Preneed revenue as a percentage of operating revenue n/a 70 %
−Removed: Preneed revenue (in thousands) n/a $ 3,642
−Removed: Atneed revenue (in thousands) n/a $ 1,578
−Removed: Number of preneed interment rights sold n/a 748
−Removed: Average price per interment right sold n/a $ 4,051
−Removed: Cemetery same store preneed revenue for the three months ended September 30, 2020 increased $0.9 million compared to the same period in 2019.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Cemetery same store operating profit for the three months ended September 30, 2020 increased $1.7 million from the same period in 2019.
−Removed: 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.
−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 $5.2 million in operating revenue and $2.3 million in operating profit for the three months ended September 30, 2020.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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):
−Removed: Nine months ended September 30,
−Removed: Same store operating revenue $ 37,157 $ 36,910
−Removed: Acquired operating revenue — 12,074
−Removed: Divested/planned divested revenue 230 283
−Removed: Preneed cemetery trust and insurance 4,266 7,099
−Removed: Preneed cemetery finance charges 1,118 696
−Removed: Total $ 42,771 $ 57,062
−Removed: Operating profit:
−Removed: Same store operating profit $ 12,961 $ 12,998
−Removed: Acquired operating profit — 4,596
−Removed: Divested/planned divested operating profit 2 87
−Removed: Preneed cemetery trust and insurance 3,840 6,785
−Removed: Preneed cemetery finance charges 1,118 696
−Removed: Total $ 17,921 $ 25,162
−Removed: The following measures reflect the significant metrics over this comparative period:
−Removed: Nine months ended September 30,
Preneed revenue as a percentage of operating revenue 62% 64%
3 unchanged sentences
Average price per interment right sold $ 4,696 $ 5,800
−Removed: Preneed revenue as a percentage of operating revenue n/a 65 %
−Removed: Preneed revenue (in thousands) n/a $ 7,899
−Removed: Atneed revenue (in thousands) n/a $ 4,175
−Removed: Number of preneed interment rights sold n/a 1,600
−Removed: Average price per interment right sold n/a $ 4,248
−Removed: Cemetery same store preneed revenue decreased $0.8 million for the nine months ended September 30, 2020 compared to the same period in 2019.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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%.
−Removed: Cemetery same store operating profit for the nine months ended September 30, 2020 remained flat compared to the same period in 2019.
−Removed: The comparable operating profit margin increased 30 basis points to 35.2% as a result of better management of operating expenses throughout the year.
−Removed: 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.
−Removed: Our allowance for credit losses expense and salaries and wages both increased 0.4% as a percentage of revenue.
−Removed: 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.
−Removed: Salaries and benefits increased due to the addition of field personnel in the fourth quarter of 2019.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: These increases were partially offset by a $0.4 million decrease in finance charge revenue.
−Removed: The decrease in finance charge revenue is primarily 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, 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.
−Removed: 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: Cemetery same store preneed revenue increased $2.2 million for the three months ended March 31, 2021 compared to the same period in 2020, as we experienced a 20.9% increase in the number of interments rights sold, as well as a 7.3% increase in the average price per interment right sold.
+Added: The increase is primarily due to the execution of the initial stages of our two year cemetery sales strategy of building high performance sales teams and standardized sales systems across our portfolio of cemeteries.
+Added: Cemetery same store atneed revenue, which represents 42% of our same store operating revenue, increased $1.6 million as we experienced a 23.7% increase in same store atneed contracts and an 8.3% increase in the average sale per contract for the three months ended March 31, 2021 compared to the same period in 2020, primarily due to the increased deaths related to the COVID-19 pandemic.
+Added: Cemetery same store operating profit for the three months ended March 31, 2021 increased $2.5 million from the same period in 2020.
+Added: The comparable operating profit margin increased 1,010 basis points to 39.1% primarily as a result of the increase in operating revenue, along with disciplined expense and cost management by leaders at each business.
+Added: Operating expenses as a percent of operating revenue decreased 10.0% in the first quarter of 2021 compared to the same period in 2020, most notably in salaries and wages, which decreased 4.5% as a percent of operating revenue, followed by promotional expenses and facilities and grounds costs which decreased 1.8% and 1.3% respectively, as a percent of operating revenue.
+Added: There are three businesses in our acquired cemetery portfolio, two of which were acquired in the fourth quarter of 2019 and one acquired in the first quarter of 2020.
+Added: In the first quarter of 2020, we hired new sales leadership at two of the newly acquired cemeteries and continued to build their respective sales team throughout the year.
+Added: As a result, our acquired cemetery portfolio experienced a $2.7 million increase in preneed revenue and a $1.5 million increase in atneed revenue for the period ended March 31, 2021 compared to the same period in 2020.
+Added: Cemetery acquired operating profit increased $3.3 million for three months ended March 31, 2021.
+Added: The comparable operating profit margin increased 2,930 basis points to 58.8% primarily as a result of the increase in operating revenue, along with disciplined expense and cost management by leaders at each business.
+Added: Operating expenses as a percent of operating revenue decreased 29% in the first quarter of 2021 compared to the same period in 2020, as we experienced decreases in the majority of our operating costs, most notably in salaries and wages, which decreased 17% as a percent of operating revenue, as we increased revenue without adding extra personnel.
+Added: Preneed cemetery trust revenue and preneed cemetery finance charges, which are recorded in Other revenue , on a combined basis increased $1.2 million for the three months ended March 31, 2021 compared to the same period in 2020.
+Added: The increase in our trust fund income is primarily due to our execution of a major repositioning strategy beginning at the height of the COVID-19 market crisis in March 2020, substantially increasing our preneed cemetery trust revenue and operating profit.
+Added: We experienced a $0.9 million increase in income and a $0.2 million increase in realized capital gains within our trusts in the first quarter of 2021 compared to the same period of 2020.
+Added: Operating profit for the two categories of Other revenue , on a combined basis, increased $1.2 million for three months ended March 31, 2021 compared to the same period in 2020 primarily due to the increase in preneed cemetery trust revenue.
Cemetery property amortization .
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: Cemetery property amortization totaled $1.5 million for the three months ended March 31, 2021, an increase of $0.6 million compared to the three months ended March 31, 2020, due to the increase in property sold across our cemetery portfolio.
Field depreciation.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: Depreciation expense for our field businesses decreased $0.2 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020.
+Added: The decrease was primarily due to building structures and older vehicles becoming fully depreciated without any newly acquired building structures and vehicles to offset the decrease.
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 $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.
−Removed: 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.
+Added: Regional and unallocated funeral and cemetery costs totaled $6.1 million for the three months ended March 31, 2021, an increase of $3.3 million primarily due to the following:
+Added: (1) a $2.2 million increase in cash incentives and equity compensation, as a result of our improved performance, which reinforces our strategy of aligning incentives with long-term value creation;
+Added: (2) a $0.7 million increase in health and safety expenses related to the COVID-19 pandemic;
+Added: and (3) a $0.4 million increase in other general administrative costs.
Other Financial Statement Items
General, administrative and other.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: General, administrative and other expenses totaled $8.8 million for the three months ended March 31, 2021, an increase of $2.9 million compared to the three months ended March 31, 2020.
+Added: The increase was primarily attributable to the following:
+Added: (1) a $1.4 million increase in cash incentives and equity compensation, as a result of our improved performance, which reinforces our strategy of aligning incentives with long-term value creation;
+Added: (2) a $1.3 million increase in separation expenses related to the resignation of two members of senior leadership;
+Added: and (3) a $0.2 million increase in other general administrative costs.
Home office depreciation and amortization.
−Removed: 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.
−Removed: Net loss on divestitures and impairments charges.
−Removed: 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):
−Removed: Three months ended September 30, Nine months ended September 30,
−Removed: 2019 2020 2019 2020
+Added: Home office depreciation and amortization expense totaled $0.3 million for the three months ended March 31, 2021, a decrease of $0.1 million compared to the three months ended March 31, 2020 primarily due to equipment and software at the home office becoming fully depreciated in the latter half of 2020 without any newly acquired assets to offset the decrease.
+Added: Net loss (gain) on divestitures and impairments charges.
+Added: The components of Net loss (gain) on divestitures and impairment charges are as follows (in thousands):
+Added: Three months ended March 31,
Goodwill impairment $ 13,632 $ —
Tradename impairment 1,061 —
−Removed: Net loss on divestitures (3,863) (4,917) (3,874) (4,917)
+Added: Gain on divestitures — (308)
Total $ 14,693 $ (308)
+Added: During the three months ended March 31, 2021, we divested two funeral homes for a gain of $0.3 million.
+Added: During the three months ended March 31, 2020, we recorded an impairment for goodwill of $13.6 million as the carrying amount of our funeral homes in the Eastern Region Reporting Unit exceeded the fair value and we recorded an impairment for certain of our tradenames of $1.1 million as the carrying amount of these tradenames exceeded the fair value.
Interest expense .
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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 September 30, 2020 and 2019 and $0.2 million for both the nine months ended September 30, 2020 and 2019.
−Removed: The components of Other, net for the three and nine months ended September 30, 2020 and 2019 are as follows (in thousands):
−Removed: Three months ended September 30, Nine months ended September 30,
−Removed: 2019 2020 2019 2020
−Removed: Gain on insurance reimbursements related to Hurricane Michael $ 638 $ — $ 638 $ 55
−Removed: Other income (expense) (121) (1) 52 (63)
−Removed: Other gain (loss) — (27) — (26)
−Removed: Total $ 517 $ (28) $ 690 $ (34)
+Added: Interest expense totaled $7.6 million for the three months ended March 31, 2021, a decrease of $0.8 million compared to the three months ended March 31, 2020, primarily due to decreased borrowings on our Credit Facility.
Income taxes.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The refund claim from the 2018 tax year was received on August 7, 2020, and we have included the impact in our current provision.
−Removed: 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.
+Added: Our income tax expense was $5.6 million for the three months ended March 31, 2021 compared to an income tax benefit of $2.2 million for the three months ended March 31, 2020.
+Added: Our operating tax rate before discrete items was 31.0% and 33.6% for the three months ended March 31, 2021 and 2020.
+Added: We filed carryback refund claims for the 2018 and 2019 tax years as allowed by the legislative changes included in the CARES Act.
+Added: As a result of requesting a tax refund in excess of $5 million, we must receive Joint Committee approval and undergo an audit for the tax year ending December 31, 2018.
+Added: This audit is currently in progress.
+Added: In 2020, the 2018 tax return was amended to take full advantage of the CARES Act legislative benefits resulting in additional losses that increase the amount of our carryback refund claim.
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 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;
−Removed: therefore, for the nine months ended September 30, 2020, the reserve for uncertain tax positions was $2.9 million.
−Removed: 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.
−Removed: 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.
+Added: Due to the uncertainty of receiving Internal Revenue Service approval regarding our 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: At March 31, 2021, the reserve for uncertain tax positions was $3.7 million.
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.