What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-04 compared with 2021-05-05 · 376 added, 162 removed, 315 unchanged (63% of the section changed)

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Funeral Home Operations, which currently account for approximately 70% of our revenue, and Cemetery Operations, which currently account for approximately 30% of our revenue.

At March 31, 2021, we operated 173 funeral homes in 26 states and 32 cemeteries in 12 states.

At June 30, 2021, we operated 171 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.

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Recent Developments

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.

Convertible Notes Conversions and Maturity

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.

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.

Therefore, no Convertible Notes remain outstanding at March 31, 2021.

Executive Team Appointment and Promotions

On June 1, 2021, C.

Benjamin Brink, Steven D.

Metzger and Carlos R.

Quezada were each promoted to Executive Vice President.

The Board also appointed Carlos R.

Quezada to serve as the Company’s Chief Operating Officer and Steven D.

Metzger to serve as the Company's Chief Administrative Officer.

Senior Notes and Credit Facility

On May 13, 2021, we completed the issuance of $400.0 million in aggregate principal amount 4.25% Senior Notes due 2029 (the “New Senior Notes”).

In connection with the issuance of the New Senior Notes, we entered into an amended and restated $150.0 million senior secured revolving credit facility (the “New Credit Facility”).

We used the proceeds of $395.5 million from the offering of the New Senior Notes, which are net of a 1.125% debt discount of $4.5 million, together with cash on hand and borrowings under the New Credit Facility, to redeem all of our existing $400.0 million in aggregate principal amount 6.625% senior notes due 2026 (the “Original Senior Notes”).

During the six months ended June 30, 2021, we divested three funeral homes for a total of $3.5 million, at a gain of $0.1 million.

Chinchilla v.

Carriage Services, Inc., et al.

, Superior Court of California, San Joaquin County, Case No.

STK-CV-UOE-2021-0004661.

On May 19, 2021, a putative class action against the Company and several of our subsidiaries was filed.

Plaintiff, a former employee, seeks monetary damages on behalf of himself and other similarly situated current and former non-exempt employees.

Plaintiff claims that the Company failed to, among other things, pay minimum wages, provide meal and rest breaks, pay overtime, provide accurately itemized wage statements, reimburse employees for business expenses, and provide wages when due.

At June 30, 2021, we are unable to reasonably estimate the possible loss or ranges of loss, if any.

Business Impact under the Macroeconomic Environment of COVID-19

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The Company has taken additional steps during this time to continually review and update our processes and procedures to comply with all regulatory mandates and procure additional supplies to ensure that each of our businesses have appropriate personal protective equipment to provide these essential services.

Additionally, in many of our business locations, we have also updated staffing and service guidelines, such as reducing the number of team members present for a service, restricting the size and number of attendees and adjusting other operating procedures.

The Company has also implemented additional safety and precautionary measures as it concerns our businesses’ day-to-day interaction with the families and communities they serve.

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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.

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.

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.

Certain estimates inherently involve assumptions about future events and annual results, making reliable estimates for those matters challenging in periods of economic instability.

Changes in the macroeconomic environment as a result of the pandemic have, to this point, begun to normalize consistent with pre-COVID-19 levels as it relates to volumes and the services we provide.

Our businesses have remained focused on being innovative and resourceful, providing families immediate service as part of the grieving process.

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 ultimate impact of COVID-19 remains uncertain, including the potential impacts of new variants of COVID-19, such as the delta variant, and any resulting government responses to such variants.

We do not believe we are vulnerable to certain concentrations, whether by geographic area, revenue for specific products or our relationships with our vendors.

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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.

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.

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.

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.

We have also applied certain measures of the CARES Act, which have 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.

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.

During the second quarter of 2021, as gathering restrictions were lifted by state and local officials, we saw a normalization of funeral volumes at broadly higher funeral contract revenue averages, with geographical funeral revenue and margin difference related to the COVID-19 pandemic death rates decreasing.

Although we expect these trends to continue, we will continue to assess these impacts, including the potential impacts of new variants of COVID-19, such as the delta variant, and implement appropriate procedures, plans, strategy, and issue any disclosures that may be required, as the situation surrounding the pandemic and related gathering restrictions, if any, evolves.

Funeral Home Operations

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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.

We also believe that Carriage provides a unique consolidation and operating framework that offers a highly

attractive succession planning solution for owners who want their legacy family business to remain operationally prosperous in their local communities.

We also believe that Carriage provides a unique consolidation and operating framework that offers a highly attractive succession planning solution for independent 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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LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity and capital resources are internally generated cash flows from operating activities and availability under our Credit Facility.

Our primary sources of liquidity and capital resources are internally generated cash flows from operating activities and availability under our New Credit Facility.

We generate cash in our operations primarily from atneed sales and delivery of preneed sales.

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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.

We have the ability to draw on our New Credit Facility, subject to its customary terms and conditions.

However, if our capital expenditures or acquisition plans change, we may need to access the capital markets to obtain additional funding.

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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.

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.

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.

See Item 1, Financial Statements and Supplementary Data, Note 18 for additional details regarding the notice of conditional redemption for our Senior Notes.

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.

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.

Our plan is to remain focused on integrating our newly acquired businesses and to use cash on hand and borrowings under our New Credit Facility primarily for general corporate purposes, payment of dividends and debt obligations, strategic acquisitions, internal growth capital expenditures, share repurchases, dividend increases and further debt repayments.

We also expect continued divestiture activity for the next six months, which could yield approximately $3-5 million of cash from the proceeds of the sale.

From time to time we may also use available cash resources (including borrowings under our New Credit Facility) to repurchase shares of our common stock, subject to satisfying certain financial covenants in our New Credit Facility and in the Indenture governing our New Senior Notes.

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.

We began 2021 with $0.9 million in cash and ended the first quarter with $0.4 million in cash.

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.

We began 2021 with $0.9 million in cash and ended the second quarter with $1.5 million in cash.

At June 30, 2021, we had borrowings of $60.5 million outstanding on our Credit Facility compared to $47.2 million at December 31, 2020.

The following table sets forth the elements of cash flow (in thousands):

Three months ended March 31,

Six months ended June 30,

Cash at beginning of year $ 716 $ 889

Net cash provided by operating activities 31,001 41,441

Acquisitions of businesses (28,000) —

Acquisitions of real estate — (350)

Acquisitions of businesses and real estate (28,011) (2,935)

Proceeds from divestitures and sale of other assets 78 3,622

Proceeds from insurance reimbursements — 120

Capital expenditures (5,786) (8,751)

Net cash used in investing activities (33,719) (7,944)

Net borrowings (payments) on our Credit Facility, acquisition debt and finance lease obligations 29,713 (19,133)

Conversions and maturity of the Convertibles Notes — (3,980)

Net borrowings on our Credit Facility, acquisition debt and finance lease obligations 5,221 12,848

Payment of call premium related to the Original Senior Notes — (19,876)

Payment of debt issuance and transaction costs (66) (6,430)

Net proceeds (payments) related to employee equity plans 127 (17)

Conversions and maturity of the Convertibles Notes — (3,980)

Net proceeds related to employee equity plans 390 172

Dividends paid on common stock (2,682) (3,607)

Purchase of treasury stock — (11,559)

Other financing costs (169) (461)

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Operating Activities

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.

For the six months ended June 30, 2021, cash provided by operating activities was $41.4 million compared to $31.0 million for the six months ended June 30, 2020.

The increase of $10.4 million is a reflection of the resilient cash generating ability of our portfolio of high-quality funeral home and cemetery operations.

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.

Our operating income (excluding the non-cash impact of the divestitures, disposals and impairment charges) increased $12.6 million, which was slightly offset by other unfavorable working capital changes.

Investing Activities

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.

Our investing activities, resulted in a net cash outflow of $7.9 million for the six months ended June 30, 2021 compared to $33.7 million for the six months ended June 30, 2020, a decrease of $25.8 million.

Acquisition and Divestiture Activity

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.

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.

During the six months ended June 30, 2021, we sold three funeral homes for $3.5 million and purchased real estate for $2.9 million.

During the six months ended June 30, 2020, we acquired a funeral home and cemetery combination business in Lafayette, California for $33.0 million in cash, of which $5.0 million was deposited in escrow in 2019 and $28.0 million was paid in 2020.

Capital Expenditures

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.

For the six months ended June 30, 2021, capital expenditures (comprising of growth and maintenance spend) totaled $8.8 million compared to $5.8 million for the six months ended June 30, 2020, an increase of $3.0 million.

The following tables present our growth and maintenance capital expenditures (in thousands):

Three months ended March 31,

Six months ended June 30,

Cemetery development $ 2,127 $ 2,665

Renovations at certain businesses 319 1,397

Live streaming equipment 388 87

Total Growth $ 2,888 $ 4,149

Three months ended March 31,

Six months ended June 30,

Facility repairs and improvements $ 694 $ 870

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Paving roads and parking lots 181 265

Other 213 376

Total Maintenance $ 2,898 $ 4,602

Financing Activities

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.

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.

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.

Our financing activities resulted in a net cash outflow of $32.9 million for the six months ended June 30, 2021 compared to a net cash inflow of $2.7 million for the six months ended June 30, 2020, an increase of $35.6 million.

During the six months ended June 30, 2021, we had net borrowings on our Credit Facility, acquisition debt and finance leases of $12.8 million, offset by the following payments:

i) $19.9 million for the call premium to redeem our Original Senior Notes;

ii) $11.6 million for the purchase of treasury stock;

iii) $6.4 million for debt issuance and transactions costs related to our New Senior Notes and New Credit Facility;

iv) $4.0 million for the conversions and maturity of our Convertible Notes;

and v) $3.6 million in dividends.

During the six months ended June 30, 2020, we had net borrowings on our Credit Facility, acquisition debt and finance leases of $5.2 million and paid $2.7 million in dividends.

Share Repurchase

During the three months ended March 31, 2021, we did not repurchase any shares of our common stock.

At March 31, 2021, we had approximately $25.6 million available for repurchases under our share repurchase program.

On May 18, 2021, our Board approved an additional $25.0 million under our share repurchase program in accordance with Rule 10b-18 of the Exchange Act.

During the three and six months ended June 30, 2021, we repurchased 324,700 shares of common stock (of which 24,700 settled in July 2021) for a total cost of $12.3 million (of which $742,000 settled in July 2021) at an average cost of $37.88 per share pursuant to our share repurchase program.

Our shares were purchased in the open market at times and in amounts as management determined appropriate based on factors such as market conditions, legal requirements and other business considerations.

Shares purchased pursuant to the repurchase program are currently held as treasury shares.

At June 30, 2021, we had approximately $38.3 million available for repurchase under our share repurchase program.

Our Board declared the following dividends payable on the dates below (in thousands, except per share amounts):

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Credit Facility, Lease Obligations and Acquisition Debt

The outstanding principal of our Credit Facility, lease obligations and acquisition debt at March 31, 2021 is as follows (in thousands):

March 31, 2021

The outstanding principal of our Credit Facility, lease obligations and acquisition debt at June 30, 2021 is as follows (in thousands):

June 30, 2021

Credit Facility $ 60,500

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Credit Facility

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.

The final maturity of the Credit Facility will occur on May 31, 2023.

The Credit Facility is secured by a first-priority perfected security interest in and lien on substantially all of the Company’s personal property assets and those of the Credit Facility Guarantors.

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.

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.

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.

As of March 31, 2021, we were subject to the following financial covenants under our Credit Facility:

(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.

On May 13, 2021, in connection with the issuance of the New Senior Notes, we entered into the New Credit Facility with the New Credit Facility Subsidiary Guarantors (as defined below), the financial institutions party thereto, as lenders, and Bank of America, N.A., as administrative agent.

We incurred $0.8 million in transactions costs related to the New Credit Facility, which were capitalized and will be amortized over the remaining term of the related debt using the straight-line method.

On May 13, 2021, we used approximately $21.4 million of the availability under the New Credit Facility to repay the outstanding balances under our prior $190.0 million senior secured revolving credit facility (the “Former Credit Facility”) and all commitments thereunder were terminated.

In connection with the repayment in full of all amounts due thereunder, the Former Credit Facility was retired and $2.1 million of letters of credit previously issued under the Former Credit Facility were deemed issued under (and remain outstanding under) the New Credit Facility.

In connection with the termination of the Former Credit Facility, for the three and six months ended June 30, 2021, we recognized a loss on the write-off of $0.1 million in unamortized debt issuance costs, which was recorded in Net loss on extinguishment of debt .

Immediately following the issuance of the New Senior Notes, we had outstanding borrowings under the New Credit Facility of $58.8 million and $89.1 million available for additional borrowings after giving effect to the $2.1 million of outstanding letters of credit.

Our obligations under the New Credit Facility are unconditionally guaranteed on a joint and several basis by the same subsidiaries which guarantee the New Senior Notes and certain of our subsequently acquired or organized domestic subsidiaries (collectively, the “Subsidiary Guarantors”).

The New Credit Facility allows for future increases in the facility size in the form of increased revolving commitments or new incremental term loans by an additional amount of up to $75.0 million in the aggregate.

The final maturity of the New Credit Facility will occur on May 13, 2026.

The New Credit Facility is secured by a first-priority perfected security interest in and lien on substantially all of the Company’s personal property assets and those of the Subsidiary Guarantors.

In addition, the New Credit Facility includes provisions which require the Company and the Subsidiary Guarantors, upon the occurrence of an event of default or 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 under the New Credit Facility, to grant additional liens on real property assets accounting for no less than 50% of the Company’s and the Subsidiary Guarantors’ funeral operations if requested by the administrative agent.

The New 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.

In addition, the New 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 the Subsidiary Guarantors to incur indebtedness, grant liens, make investments, engage in mergers and acquisitions, and pay dividends and other restricted payments, and certain

financial maintenance covenants.

At June 30, 2021, we were subject to the following financial covenants under our New Credit Facility:

(A) a Total Leverage Ratio not to exceed 5.00 to 1.00 and (B) a Fixed Charge Coverage Ratio (as defined in the New 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.

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.

At March 31, 2021, we had outstanding borrowings under our Credit Facility of $28.3 million.

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.

The letter of credit will automatically renew annually and secures our obligations under our various self-insured policies.

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.

At March 31, 2021, the prime rate margin was equivalent to 1.5% and the LIBOR rate margin was 2.5%.

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.

We were in compliance with all of the covenants contained in our New Credit Facility as of June 30, 2021.

At June 30, 2021, we had outstanding borrowings under the New Credit Facility of $60.5 million.

We also had one letter of credit for $2.1 million outstanding under the New Credit Facility, which will expire on November 25, 2021.

This letter of credit is expected to automatically renew annually and secures our obligations under our various self-insured policies.

At June 30, 2021, we had $87.4 million of availability under the New Credit Facility.

Outstanding borrowings under our New Credit Facility bear interest at either a prime rate or a LIBOR rate, plus an applicable margin based upon our leverage ratio.

At June 30, 2021, the prime rate margin was equivalent to 0.75% and the LIBOR rate margin was 1.75%.

The weighted average interest rate on our New Credit Facility was 2.5% and 2.8% and for the three and six months ended June 30, 2021, respectively.

The weighted average interest rate on our Former Credit Facility was 3.6% and 3.9% for the three and six months ended June 30, 2020, respectively.

The interest expense and amortization of debt issuance costs related to our Credit Facility are as follows (in thousands):

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2020 2021 2020 2021

Credit Facility interest expense $ 1,106 $ 372 $ 2,336 $ 817

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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):

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2020 2021 2020 2021

Operating lease cost $ 954 $ 964 $ 1,911 $ 1,924

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The imputed interest expense related to our acquisition debt is as follows (in thousands):

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2020 2021 2020 2021

Acquisition debt imputed interest expense $ 124 $ 93 $ 251 $ 190

Convertible Subordinated Notes due 2021

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.

During the six months ended June 30, 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.

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.

Therefore, no Convertible Notes remain outstanding at March 31, 2021.

Therefore, no Convertible Notes remain outstanding at June 30, 2021.

The interest expense and accretion of debt discount and debt issuance costs related to our Convertible Notes are as follows (in thousands):

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2020 2021 2020 2021

Convertible Notes interest expense $ 43 $ 18 $ 87 $ 18

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Convertible Notes amortization of debt issuance costs 6 1 12 1

The effective interest rate on the unamortized debt discount for both the three months ended March 31, 2020 and 2021 was 11.4%.

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

At March 31, 2021, the principal amount of our 6.625% senior notes due 2026 (the “Senior Notes”) was $400.0 million.

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.

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.

The Senior Notes are due on June 1, 2026 unless earlier redeemed

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.

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.

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.

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;

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);

and (2) each such redemption must occur within 180 days of the date of the closing of each such equity offering.

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.

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.

The effective interest rate on the unamortized debt discount for both the three months ended June 30, 2020 and 2021 was 11.4%.

The effective interest rate on the debt issuance costs for the three months ended June 30, 2020 and 2021 was 3.2% and 3.1%, respectively.

On May 13, 2021, we completed the issuance of the New Senior Notes and related guarantees by the Subsidiary Guarantors in a private offering under Rule 144A and Regulation S of the Securities Act of 1933, as amended (the “Securities Act”).

We paid a premium of $19.9 million to redeem the Original Senior Notes on June 1, 2021 at a redemption price of 104.97% of the principal amount thereof, plus accrued and unpaid interest of $13.25 million.

We incurred $1.3 million in transaction costs related to the New Senior Notes.

For the three and six months ended June 30, 2021, we recognized a net loss of $23.7 million related to the redemption of the Original Senior Notes, which was recorded in Net loss on extinguishment of debt .

The loss is composed of the $19.9 million call premium, the write-off of $3.4 million in unamortized debt discount, the write-off of $1.8 million in unamortized debt issuance costs, offset by the write-off of $1.4 million in unamortized debt premium.

The New Senior Notes were issued under an indenture, dated as of May 13, 2021 (the “Indenture”), among the Company, the Subsidiary Guarantors and Wilmington Trust, National Association, as trustee (“Collateral Trustee”).

The New Senior Notes bear interest at 4.25% per year.

Interest on the New Senior Notes is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2021.

The New Senior Notes mature on May 15, 2029, unless earlier redeemed or purchased.

The New 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.

We may redeem the New Senior Notes, in whole or in part, at the redemption price of 102.13% on or after May 15, 2024, 101.06% on or after May 15, 2025 and 100% on or after May 15, 2026, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

At any time before May 15, 2024, we may also redeem all or part of the New Senior Notes at the redemption prices described in the Indenture, plus accrued and unpaid interest, if any, to (but excluding) the date of redemption.

In addition, before May 15, 2024, we may redeem up to 40% of the aggregate principal amount of the New Senior Notes outstanding using an amount of cash equal to the net proceeds of certain equity offerings, at a price of 104.25% of the principal amount of the New Senior Notes, plus accrued and unpaid interest, if any, to (but excluding) the date of redemption;

provided that (1) at least 50% of the aggregate principal amount of the New Senior Notes (including any additional New Senior Notes) outstanding under the Indenture remain outstanding immediately after the occurrence of such redemption (unless all New Senior Notes are redeemed concurrently), and (2) each such redemption must occur within 180 days of the date of the consummation of any such equity offering.

If a “change of control” occurs, holders of the New Senior Notes will have the option to require us to purchase for cash all or a portion of their New Senior Notes at a price equal to 101% of the principal amount of the New Senior Notes, plus accrued and unpaid interest.

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 New Senior Notes at a price equal to 100% of the principal amount of the New Senior Notes, plus accrued and unpaid interest.

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.

The Indenture also contains customary events of default.

The debt discount and the debt issuance costs are being amortized using the effective interest method over the remaining term of approximately 95 months of the New Senior Notes.

The effective interest rate on the unamortized debt discount and the unamortized debt issuance costs for the New Senior Notes for both three and six months ended June 30, 2021 was 4.42% and 4.30%, respectively.

The interest expense and amortization of debt discount, debt premium and debt issuance costs related to our Senior Notes are as follows (in thousands):

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2020 2021 2020 2021

Senior Notes interest expense $ 6,625 $ 6,642 $ 13,250 $ 13,267

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Senior Notes amortization of debt issuance costs 69 53 136 127

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.

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.

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.

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.

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.

At June 30, 2021, the fair value of the New Senior Notes, which are Level 2 measurements, was $399.5 million.

The effective interest rate on the unamortized debt issuance costs for the Original Senior Notes, issued in May 2018, for both three and six months ended June 30, 2021 was 6.87% and 6.69%, respectively.

The effective interest rate on the unamortized debt premium and the unamortized debt issuance costs for the additional Original Senior Notes, issued in December 2019, for both three and six months ended June 30, 2021 was 6.20% and 6.88%, respectively.

FINANCIAL HIGHLIGHTS

Below are our financial highlights (in thousands except for volumes and averages):

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2020 2021 2020 2021

Revenue $ 77,477 $ 88,277 $ 154,967 $ 184,914

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Net income (loss) $ 6,397 $ (6,167) $ 2,200 $ 6,766

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.

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.

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.

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.

Revenue for the three months ended June 30, 2021 increased $10.8 million compared to the three months ended June 30, 2020, as we experienced a 40.1% increase in the number of preneed interment rights (property) sold, as well as a 15.1% increase in the average price per interment right sold, primarily due to (1) our sales personnel being less impacted by social distancing restrictions that were in place in the second quarter of 2020 due to COVID-19;

(2) the full integration of the cemetery acquisitions made in the fourth quarter of 2019 and first quarter of 2020;

and (3) 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.

We also experienced a 9.7% increase in the average revenue per funeral contract for the three months ended June 30, 2021 compared to the same period in 2020, which reflects a normalization of contracts under which we provide memorial services returning to pre-COVID-19 levels.

Total funeral contracts decreased 7.6% for the same comparable period as the volume lift related to the COVID-19 death rate we experienced in the second quarter of 2020 tapered off.

Gross profit for the three months ended June 30, 2021 increased $3.8 million compared to the three months ended June 30, 2020, primarily due to the increase in revenue from our cemetery segment, as well as decreases in cemetery operating expenses as a percent of operating revenue primarily in salaries and benefits expense as we increased revenue without adding extra personnel.

These decreases were partially offset by increases in salaries and benefits expense in our funeral segment as a percent of operating revenue, which reflects the normalization of funeral personnel hours returning to pre-COVID-19 levels from being reduced during the second quarter of 2020 due to COVID-19.

Net income for the three months ended June 30, 2021 decreased $12.6 million compared to the three months ended June 30, 2020, primarily due to the $23.8 million loss on extinguishment of debt, offset by the $7.6 million decrease in tax expense and $3.8 million increase in gross profit.

Revenue for the six months ended June 30, 2021 increased $29.9 million compared to the six months ended June 30, 2020, as we experienced a 41.1% increase in the number of preneed interment rights (property) sold, as well as a 17.4% increase in the average price per interment right sold, primarily due to (1) our sales personnel being less impacted by social distancing restrictions that were in place in 2020 due to COVID-19;

(2) the full integration of the cemetery acquisitions made in

the fourth quarter of 2019 and first quarter of 2020;

and (3) 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.

We also experienced a 3.9% increase in total funeral contracts for the six months ended June 30, 2021 compared to the same period in 2020, primarily due to a peak spike in COVID-19 deaths during the first quarter of 2021, offset by volume decreases in the second quarter as death rates began to normalize to pre-COVID-19 levels.

Additionally, the average revenue per funeral contract increased 5.1% for the same comparable period in 2020 as contracts under which we provide memorial services began to normalize to pre-COVID-19 levels during the second quarter of 2021.

Gross profit for the six months ended June 30, 2021 increased $15.7 million compared to the six months ended June 30, 2020, primarily due to the increase in revenue from both our funeral home and cemetery segments, as well as decreases in funeral home and cemetery operating expenses as a percent of operating revenue primarily in salaries and benefits expense as we increased revenue without adding extra personnel primarily during the first quarter of 2021.

Net income for the six months ended June 30, 2021 increased $4.6 million compared to the six months ended June 30, 2020, primarily due to the increase in gross profit and the $14.7 million impairment charge we recorded in the first six months of 2020 that did not occur in first six months of 2021, offset by the $23.8 million loss on extinguishment of debt in the second quarter of 2021.

Further discussion of Revenue and the components of Gross profit for our funeral home and cemetery segments is presented herein under “– Results of Operations.”

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REPORTING AND NON-GAAP FINANCIAL MEASURES

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.

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 June 30, 2021 issued on July 27, 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.

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Below is a reconciliation of Net income (loss), a GAAP measure, to Adjusted net income, a non-GAAP measure, (in thousands):

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2020 2021 2020 2021

Net income (loss) $ 6,397 $ (6,167) $ 2,200 $ 6,766

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Severance and separation costs (2)

217 (118) 445 1,126

Performance awards cancellation and exchange 56 — 56 —

Accretion of discount on Convertible Notes (1)

Gain on divestitures (3)

Net loss on extinguishment of debt (3)

— 17,022 — 17,022

Net (gain) loss on divestitures and other costs — 139 — (74)

Net impact of impairment of goodwill and other intangibles 51 — 9,808 —

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Natural disaster and pandemic costs 657 37 768 743

Other special items (5)

371 954 371 954

Adjusted net income (6)

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(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.

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.

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).

(2) The increase is due to separation costs related to the resignation of two members of senior leadership in the first quarter of 2021.

(3) Net of the operating tax rate of 33.6% in 2020 and 31.0% in 2021.

(4) The increase is primarily due to health and safety expenses, including personal protective equipment (“PPE”).

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.

In 2020, Special items are taxed at the federal statutory rate of 21.0%, except the Net (gain) loss on divestitures and other costs and the Net impact of impairment of goodwill and other intangibles, which are taxed at the operating tax rate of 33.3%.

In 2021, Special items are taxed at the operating tax rate of 28.5%.

The Accretion of discount on Convertible Notes is not tax effected.

(2) The increase during the six months ended June 30, 2021 is due to separation costs related to the resignation of two members of senior leadership in the first quarter of 2021.

(3) Loss on the redemption of our Original Senior Notes during the second quarter of 2021.

(4) Relates to legal costs associated with a former corporate employee lawsuit.

(5) In 2020, the Special item relates to the costs associated with a state audit assessment.

In 2021, the Special item relates to the write-off of certain fixed assets and interest paid on our Original Senior Notes for the two-week period during which our New Senior Notes were issued prior to the redemption of our Original Senior Notes.

(6) Adjusted net income is defined as Net income (loss) 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.

Below is a reconciliation of Gross profit (a GAAP measure) to Operating profit (a non-GAAP measure) (in thousands):

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2020 2021 2020 2021

Gross profit $ 25,160 $ 28,927 $ 48,331 $ 63,988

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Below is a breakdown of Operating profit (a non-GAAP measure) by Segment (in thousands):

Three months ended March 31,

Three months ended June 30, Six months ended June 30,

2020 2021 2020 2021

Funeral Home $ 25,552 $ 24,184 $ 49,826 $ 57,090

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Operating profit margin (1)

42.9% 45.3% 40.9% 46.4%

(1) Operating profit margin is defined as Operating profit as a percentage of Revenue.

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RESULTS OF OPERATIONS

The following is a discussion of our results of operations for the three months ended March 31, 2021 and 2020.

The following is a discussion of our results of operations for the three months ended June 30, 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.

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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.

The term “divested” when discussed in the Funeral Home Segment, refers to the two funeral homes we sold in first quarter of 2021.

The term “divested” when discussed in the Funeral Home Segment, refers to the three funeral homes we sold in the first six months of 2021.

“Planned divested” refers to the funeral home and cemetery businesses that we intend to divest.

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The following table sets forth certain information regarding our Revenue and Operating profit from our funeral home operations (in thousands):

Three months ended March 31,

Three months ended June 30,

Same store operating revenue $ 44,296 $ 47,284

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The following measures reflect the significant metrics over this comparative period:

Three months ended March 31,

Three months ended June 30,

Contract volume 9,056 9,061

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Cremation rate 55.0% 54.9%

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.

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.

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.

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.

Funeral home same store operating revenue for the three months ended June 30, 2021 increased $3.0 million compared to the same period in 2020.

The increase in operating revenue is primarily driven by a 6.7% increase in the average revenue per contract excluding preneed interest, while same store contract volume remained flat.

The average revenue per contract in the second quarter of 2021 reflects a normalization of contracts under which we provide memorial services returning to pre-COVID-19 levels.

Funeral home same store operating profit for the three months ended June 30, 2021 decreased $0.1 million when compared to the same period in 2020.

The comparable operating profit margin decreased 280 basis points to 39.5%.

Operating expenses as a percent of operating revenue increased 2.8% for the three months ended June 30, 2021 compared to the same period in 2020.

The largest increase was in salaries and benefits expenses, which increased 1.3% as a percent of operating revenue, when funeral personnel hours were reduced during the second quarter of 2020 due to COVID-19.

This increase reflects normalization of salaries and benefits expenses returning to pre-COVID-19 levels.

We also experienced increases as a

percentage of revenue in the following areas:

(1) general liability insurance costs increased 0.5%;

(2) general and administrative expenses increased 0.3%;

and (3) merchandise costs increased 0.2%.

Funeral home acquired operating revenue for the three months ended June 30, 2021 decreased $0.5 million compared to the same period in 2020.

The decrease in operating revenue is primarily due to a 16.3% decrease in acquired contract volume, which was partially offset by a 13.3% increase in the average revenue per contract.

The average revenue per contract in the second quarter of 2021 reflects a normalization of contracts under which we provide memorial services returning to pre-COVID-19 levels and the volume lift related to the COVID-19 death rate we experienced in the second quarter of 2020 tapering off.

Acquired operating profit for the three months ended June 30, 2021 decreased by $0.5 million when compared to the same period in 2020.

The comparable operating profit margin decreased 350 basis points to 38.1%.

The decrease in operating profit is primarily due to the decrease in acquired operating revenue.

Operating expenses as a percent of operating revenue increased 3.5% for the three months ended June 30, 2021 compared to the same period in 2020, as we experienced increases as a percentage of revenue in the following areas:

(1) other funeral costs increased 1.5%;

(2) general liability insurance costs increased 0.6%;

and (3) salaries and benefits expenses increased 0.2%.

Ancillary revenue, which is recorded in Other revenue , represents revenue from our flower shop, pet cremation and online cremation businesses, remained flat, while Ancillary operating profit decreased 14.6% for three months ended June 30, 2021 compared to the same period in 2020.

Operating expenses as a percent of operating revenue increased 1.8% for the same comparative period, as we experienced slight increases in rent expense and other funeral costs, slightly offset by a decrease in salaries and benefits expenses.

Preneed funeral insurance commissions and preneed funeral trust and insurance revenue (recorded in Other revenue) and the respective operating profit, on a combined basis, remained flat for the three months ended June 30, 2021 compared to the same period in 2020.

The following table sets forth certain information regarding our Revenue and Operating profit from our funeral home operations (in thousands):

Six months ended June 30,

Same store operating revenue $ 90,992 $ 103,967

Acquired operating revenue 17,908 18,696

Divested/planned divested revenue 5,341 2,026

Ancillary revenue 2,268 2,295

Preneed funeral insurance commissions 692 593

Preneed funeral trust and insurance 3,662 4,029

Total $ 120,863 $ 131,606

Operating profit:

Same store operating profit $ 36,787 $ 44,471

Acquired operating profit 7,002 7,728

Divested/planned divested operating profit 1,503 253

Ancillary operating profit 616 516

Preneed funeral insurance commissions 318 167

Preneed funeral trust and insurance 3,600 3,955

Total $ 49,826 $ 57,090

The following measures reflect the significant metrics over this comparative period:

Six months ended June 30,

Contract volume 18,114 20,089

Average revenue per contract, excluding preneed funeral trust earnings $ 5,023 $ 5,175

Average revenue per contract, including preneed funeral trust earnings $ 5,205 $ 5,354

Burial rate 36.5% 36.0%

Cremation rate 56.2% 57.0%

Contract volume 3,674 3,627

Average revenue per contract, excluding preneed funeral trust earnings $ 4,874 $ 5,155

Average revenue per contract, including preneed funeral trust earnings $ 4,933 $ 5,220

Burial rate 41.6% 40.7%

Cremation rate 54.8% 54.5%

Funeral home same store operating revenue for the six months ended June 30, 2021 increased $13.0 million compared to the same period in 2020.

The increase in operating revenue is primarily driven by a 10.9% increase in same store contract volume, as well as a 3.0% increase in the average revenue per contract excluding preneed interest.

The increase in volume is primarily due to a peak spike in COVID-19 deaths during the first quarter of 2021, offset by volume decreases in the second quarter as death rates began to normalize to pre-COVID-19 levels.

Additionally, the average revenue per contract increased as contracts under which we provide memorial services began to normalize to pre-COVID-19 levels in the second quarter of 2021.

Funeral home same store operating profit for the six months ended June 30, 2021 increased $7.7 million when compared to the same period in 2020.

The comparable operating profit margin increased 240 basis points to 42.8%.

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.

Operating expenses as a percent of operating revenue decreased 6.9% for the three months ending 2021 compared to the same period in 2020.

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.

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.

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.

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.

Operating expenses as a percent of operating revenue decreased 2.3% for the six months ended June 30, 2021 compared to the same period in 2020.

The largest decrease was in salaries and benefits expense, which decreased 1.4% as a percent of operating revenue as we increased revenue during the first quarter of 2021 without adding extra personnel.

We also experienced decreases as a percentage of revenue in the following areas:

(1) allowance for credit losses decreased 0.3%;

(2) promotional expenses decreased 0.3%;

and (3) general and administrative expenses decreased 0.2%;

offset slightly by a 0.2% increase in general liability insurance costs.

Funeral home acquired operating revenue for the six months ended June 30, 2021 increased $0.8 million compared to the same period in 2020.

The increase in operating revenue is primarily driven by a 5.8% increase in the average revenue per contract excluding preneed interest, while acquired contract volume decreased by 1.3%.

The increase in the average revenue per contract reflects a normalization of contracts under which we provide memorial services returning to pre-COVID-19 levels in the second quarter of 2021, as the volume lift related to the COVID-19 death rate we experienced in the first quarter of 2021 tapered off.

Acquired operating profit for the six months ended June 30, 2021 increased $0.7 million when compared to the same period in 2020.

The comparable operating profit margin increased 220 basis points to 41.3%.

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.

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.

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.

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.

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.

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.

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.

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.

Operating expenses as a percent of operating revenue decreased 2.2% for the six months ended June 30, 2021 compared to the same period in 2020.

The largest decrease was in salaries and benefits expense, which decreased 3.0% as a percent of operating revenue as we increased revenue without adding extra personnel during the first quarter of 2021.

We also experienced decreases as a percentage of revenue in the following areas:

(1) allowance for credit losses decreased 0.4%;

and (2) promotional expenses decreased 0.3%;

offset slightly by a 0.8% increase in other funeral costs.

Ancillary revenue, which is recorded in Other revenue , represents revenue from our flower shop, pet cremation and online cremation businesses, remained flat, while Ancillary operating profit decreased 16.2% for the six months ended June 30, 2021 compared to the same period in 2020.

Operating expenses as a percent of operating revenue increased 3.4% for the same comparative period, as we experienced increases in the following areas:

(1) other funeral costs increased 3.1%;

(2) rent expense increased 1.7%;

and (3) general and administrative expenses increased 1.6%.

Preneed funeral insurance commissions and preneed funeral trust and insurance (recorded in Other revenue) on a combined basis, increased $0.3 million or 6.2% for the six months ended June 30, 2021 compared to the same period in 2020.

The increase is primarily related to a 1.0% increase in preneed contracts maturing to atneed which triggers the recognition of

trust earnings on matured contracts.

Operating profit for preneed funeral insurance commissions and preneed trust and insurance, on a combined basis, increased $0.2 million or 5.2% for the same comparative period, primarily due to the increase in preneed funeral trust and insurance revenue.

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The following table sets forth certain information regarding our Revenue and Operating profit from our cemetery operations (in thousands):

Three months ended March 31,

Three months ended June 30,

Same store operating revenue $ 11,565 $ 16,516

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The following measures reflect the significant metrics over this comparative period:

Three months ended March 31,

Three months ended June 30,

Preneed revenue as a percentage of operating revenue 61% 63%

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Average price per interment right sold $ 4,273 $ 5,704

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.

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.

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.

Cemetery same store operating profit for the three months ended March 31, 2021 increased $2.5 million from the same period in 2020.

Cemetery same store preneed revenue increased $3.3 million for the three months ended June 30, 2021 compared to the same period in 2020, as we experienced a 28.7% increase in the number of interments rights sold, as well as a 3.7% increase in the average price per interment right sold.

The increase is primarily due to (1) our sales personnel being less impacted by social distancing restrictions that were in place in the second quarter of 2020 due to COVID-19;

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.

Cemetery same store atneed revenue, which represents 37% of our same store operating revenue, increased $1.7 million as we experienced a 17.2% increase in same store atneed contracts and a 16.5% increase in the average sale per contract for the three months ended June 30, 2021 compared to the same period in 2020.

This increase is primarily due to the increased number of deaths in 2021 related to COVID-19.

Cemetery same store operating profit for the three months ended June 30, 2021 increased $3.9 million from the same period in 2020.

The comparable operating profit margin increased 1,420 basis points to 45.9% primarily as a result of the increase in operating revenue, along with disciplined expense and cost management by leaders at each business.

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.

Operating expenses as a percent of operating revenue decreased 14.2% in the three months ended June 30, 2021 compared to the same period in 2020.

The largest decrease was in salaries and benefits expense, which decreased 3.4% as a percent of operating revenue as we increased revenue without adding extra personnel.

We also experienced decreases as a percentage of revenue in the following areas:

(1) allowance for credit losses decreased 3.1%;

(2) general liability insurance costs decreased 1.4%;

and (3) promotional expenses decreased 1.3%.

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.

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.

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.

Cemetery acquired operating profit increased $3.3 million for three months ended March 31, 2021.

In the first quarter of 2020, we hired new sales leadership at two of the newly acquired cemeteries and continue to build their respective sales teams as we execute 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.

As a result, our acquired cemetery portfolio experienced a $3.5 million increase in preneed revenue and a $0.6 million increase in atneed revenue for the three months ended June 30, 2021 compared to the same period in 2020.

Cemetery acquired operating profit increased $3.3 million for three months ended June 30, 2021 from the same period in 2020.

The comparable operating profit margin increased 2,250 basis points to 57.9% primarily as a result of the increase in operating revenue, along with disciplined expense and cost management by leaders at each business.

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.

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.

Operating expenses as a percent of operating revenue decreased 22.6% in the three months ended June 30, 2021 compared to the same period in 2020.

The largest decrease was in salaries and benefits expense, which decreased 10.7% as a percent of operating revenue as we increased revenue without adding extra personnel.

We also experienced decreases as a percentage of revenue in the following areas:

(1) promotional expenses decreased 5.6%;

(2) merchandise and services costs decreased 3.1%;

and (3) general liability insurance costs decreased 1.2%.

Preneed cemetery trust revenue and preneed cemetery finance charges (recorded in Other revenue) on a combined basis increased $0.7 million for the three months ended June 30, 2021 compared to the same period in 2020.

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.

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.

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.

We experienced a $0.6 million increase in income and a $0.1 million increase in realized capital gains primarily within our perpetual care trusts in the three months ended June 30, 2021 compared to the same period of 2020.

Operating profit for the two categories of Other revenue , on a combined basis, increased $0.6 million for three months ended June 30, 2021 compared to the same period in 2020 primarily due to the increase in our perpetual care trust revenue.

The following table sets forth certain information regarding our Revenue and Operating profit from our cemetery operations (in thousands):

Six months ended June 30,

Same store operating revenue $ 22,439 $ 31,083

Acquired operating revenue 6,855 15,155

Divested/planned divested revenue 261 696

Preneed cemetery trust revenue 4,067 5,856

Preneed cemetery finance charges 482 518

Total $ 34,104 $ 53,308

Operating profit:

Same store operating profit $ 6,838 $ 13,284

Acquired operating profit 2,262 8,839

Divested/planned divested operating profit 47 462

Preneed cemetery trust operating profit 3,860 5,608

Preneed cemetery finance charges 482 518

Total $ 13,489 $ 28,711

The following measures reflect the significant metrics over this comparative period:

Six months ended June 30,

Preneed revenue as a percentage of operating revenue 59% 60%

Preneed revenue (in thousands) $ 13,335 $ 18,778

Atneed revenue (in thousands) $ 9,104 $ 12,305

Number of preneed interment rights sold 3,306 4,129

Average price per interment right sold $ 3,803 $ 4,012

Preneed revenue as a percentage of operating revenue 62% 69%

Preneed revenue (in thousands) $ 4,258 $ 10,498

Atneed revenue (in thousands) $ 2,597 $ 4,657

Number of preneed interment rights sold 852 1,763

Average price per interment right sold $ 4,422 $ 5,745

Cemetery same store preneed revenue increased $5.4 million for the six months ended June 30, 2021 compared to the same period in 2020, as we experienced a 24.9% increase in the number of interments rights sold, as well as a 5.5% increase in the average price per interment right sold.

The increase is primarily due to (1) our sales personnel being less impacted by social distancing restrictions that were in place in 2020 due to COVID-19;

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.

Cemetery same store atneed revenue, which represents 40% of our same store operating revenue, increased $3.2 million for the six months ended June 30, 2021 compared to the same period in 2020.

The increase was a result of a 20.4% increase in same store atneed contracts and a 12.2% increase in the average sale per contract, primarily due to the increased deaths in 2021 related to COVID-19.

Cemetery same store operating profit increased $6.4 million for the six months ended June 30, 2021 compared to the same period in 2020.

The comparable operating profit margin increased 1,220 basis points to 42.7% primarily as a result of the increase in operating revenue, along with disciplined expense and cost management by leaders at each business.

Operating expenses as a percent of operating revenue decreased 12.2% in the six months ended June 30, 2021 compared to the same period in 2020.

The largest decrease was in salaries and benefits expense, which decreased 4.0% as a percent of operating revenue as we increased revenue without adding extra personnel.

We also experienced decreases as a percentage of revenue in the following areas:

(1) allowance for credit losses decreased 1.7%;

(2) promotional expenses decreased 1.5%;

and (3) general liability insurance costs decreased 1.4%.

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.

As a result, our acquired cemetery portfolio experienced a $6.2 million increase in preneed revenue and a $2.1 million increase in atneed revenue for the six months ended June 30, 2021 compared to the same period in 2020.

Cemetery acquired operating profit increased $6.6 million for six months ended June 30, 2021 compared to the same period in 2020.

The comparable operating profit margin increased 2,530 basis points to 58.3% primarily as a result of the increase in operating revenue, along with disciplined expense and cost management by leaders at each business.

Operating expenses as a percent of operating revenue decreased 25.3% in the six months ended June 30, 2021 compared to the same period in 2020.

The largest decrease was in salaries and benefits expense, which decreased 13.1% as a percent of operating revenue as we increased revenue without adding extra personnel.

We also experienced decreases as a percentage of revenue in the following areas:

(1) promotional expenses decreased 4.8%;

(2) merchandise and services costs decreased 2.2%;

and (3) general liability insurance costs decreased 2.1%.

Preneed cemetery trust revenue and preneed cemetery finance charges (recorded in Other revenue) on a combined basis increased $1.8 million for the six months ended June 30, 2021 compared to the same period in 2020.

We experienced a $1.3 million increase in income and a $0.5 million increase in realized capital gains primarily within our perpetual care trusts

for the six months ended June 30, 2021 compared to the same period of 2020.

Operating profit for the two categories of Other revenue , on a combined basis, increased $1.8 million for six months ended June 30, 2021 compared to the same period in 2020 primarily due to the increase in preneed cemetery trust revenue.

Cemetery property amortization .

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.

Cemetery property amortization totaled $2.2 million and $3.7 million for the three and six months ended June 30, 2021, respectively, increases of $1.1 million and $1.7 million, respectively, compared to the same periods in prior year primarily due to the increase in property sold across our cemetery portfolio.

Field depreciation.

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.

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.

Depreciation expense for our field businesses totaled $3.1 million and $6.3 million for the three and six months ended June 30, 2021, respectively, decreases of $0.1 million and $0.3 million, respectively, compared to the same periods in prior year 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.

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:

Regional and unallocated funeral and cemetery costs totaled $5.8 million for the three months ended June 30, 2021, an increase of $2.1 million primarily due to the following:

(1) a $1.7 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;

(2) a $0.5 million increase in salary and benefits expenses, which includes our Chief Operating Officer hired in June 2020 and three cemetery directors of sales support hired in the second half of 2020;

(3) a $0.3 million increase in other general administrative costs, which includes higher travel and advertising costs;

and (4) a $0.1 million increase in separation expenses;

offset by (5) a $0.4 million decrease in state audit assessments and (6) a $0.1 million decrease in health and safety expenses related to the COVID-19 pandemic.

Regional and unallocated funeral and cemetery costs totaled $11.8 million for the six months ended June 30, 2021, an increase of $5.4 million primarily due to the following:

(1) a $4.2 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;

(2) $0.7 million increase in salary and benefits expenses, which includes our Chief Operating Officer hired in June 2020 and three cemetery directors of sales support hired in the second half of 2020;

(3) a $0.6 million increase in health and safety expenses related to the COVID-19 pandemic;

and (3) a $0.4 million increase in other general administrative costs.

and (4) a $0.3 million increase in other general administrative costs, which includes higher travel and advertising costs;

offset by (5) a $0.4 million decrease in state audit assessments.

Other Financial Statement Items

General, administrative and other.

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.

General, administrative and other expenses totaled $6.9 million for the three months ended June 30, 2021, an increase of $0.4 million compared to the three months ended June 30, 2020.

The increase was primarily attributable to the following:

(1) a $0.4 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;

and (2) a $0.2 million increase in other general administrative costs, which includes higher online marketing and advertising costs and software license fees for new technology;

offset by (3) a $0.2 million decrease in litigation reserve.

General, administrative and other expenses totaled $15.7 million for the six months ended June 30, 2021, an increase of $3.2 million compared to the six months ended June 30, 2020.

The increase was primarily attributable to the following:

(1) a $1.8 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;

(2) a $1.2 million increase in separation expenses related to the resignation of two members of senior leadership;

and (3) a $0.2 million increase in other general administrative costs.

and (3) a $0.5 million increase in other general administrative costs, which includes higher online marketing and advertising costs and software license fees for new technology, offset by (4) a $0.3 million decrease in litigation reserve.

Home office depreciation and amortization.

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.

Net loss (gain) on divestitures and impairments charges.

The components of Net loss (gain) on divestitures and impairment charges are as follows (in thousands):

Three months ended March 31,

Home office depreciation and amortization expense totaled $0.3 million and $0.6 million for the three and six months ended June 30, 2021, respectively, decreases of $0.1 million and $0.2 million, respectively, compared to the same periods in prior year 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.

Net loss on divestitures, disposals and impairments charges.

The components of Net loss on divestitures, disposals and impairment charges are as follows (in thousands):

Three months ended June 30, Six months ended June 30,

2020 2021 2020 2021

Goodwill impairment $ — $ — $ 13,632 $ —

Tradename impairment — — 1,061 —

Gain on divestitures — (308)

Net (gain) loss on divestitures — 205 — (103)

Net loss on disposals of fixed assets — 622 — 622

Total $ — $ 827 $ 14,693 $ 519

During the three months ended March 31, 2021, we divested two funeral homes for a gain of $0.3 million.

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.

During the six months ended June 30, 2021, we divested three funeral homes for a net gain of $0.1 million and disposed of fixed assets for a net loss of $0.6 million.

During the six months ended June 30, 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 .

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.

Interest expense totaled $7.5 million and $15.1 million for the three and six months ended June 30, 2021, respectively, decreases of $0.9 million and $1.7 million, respectively, compared to the same periods in prior year, primarily due to decreased borrowings and lower interest rates on our Credit Facility, as well as lower interest on our New Senior Notes.

Income taxes.

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.

Our operating tax rate before discrete items was 31.0% and 33.6% for the three months ended March 31, 2021 and 2020.

We had an income tax benefit of $4.2 million and an income tax expense of $3.4 million for the three months ended June 30, 2021 and 2020, respectively and an income tax expense of $1.4 million and $1.3 million for the six months ended June 30, 2021 and 2020, respectively.

Our operating tax rate before discrete items was 33.0% and 33.5% for the three months ended June 30, 2021 and 2020, respectively and 28.5% and 33.3% for the six months ended June 30, 2021 and 2020, respectively.

We filed carryback refund claims for the 2018 and 2019 tax years as allowed by the legislative changes included in the CARES Act.

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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.

At March 31, 2021, the reserve for uncertain tax positions was $3.7 million.

At June 30, 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.

What changed 10-Q

Item 2. Management’s Discussion and Analysis