What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-02 compared with 2021-03-02 · 501 added, 582 removed, 1322 unchanged (45% of the section changed)

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CONSOLIDATED FINANCIAL STATEMENTS:

Reports of Independent Registered Public Accounting Firm

Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 248 )

Consolidated Balance Sheet as of December 31, 2020 and 2021

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Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Carriage Services Inc., a Delaware corporation and subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2020, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”).

We have audited the accompanying consolidated balance sheets of Carriage Services, Inc.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

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We believe that our audits provide a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Goodwill and Tradename quantitative impairment assessment

As described further in Note 1 to the financial statements, the Company is required to evaluate goodwill and intangible assets for impairment annually or whenever events or changes in circumstances indicate that the carrying value of a reporting unit or the intangible asset may be greater than fair value.

The Company first assesses qualitative factors to determine whether it is more-likely-than not that the fair value of a reporting unit or the tradenames is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative impairment test.

The Company determined that as a result of the economic conditions caused by the response to COVID-19, a quantitative impairment assessment was necessary for each of the Company’s reporting units as well as the Company’s tradenames.

As a result of the analysis, the Company determined that the Company’s Eastern Region Reporting Unit exceeded the fair value, as well as certain of the Company’s tradenames were impaired, and an impairment charge was recorded.

We identified the Goodwill and Tradenames quantitative impairment assessment as a critical audit matter.

The principal consideration for our determination that the Goodwill and Tradenames quantitative impairment assessment is a critical audit matter is that the assessment includes a high degree of estimation uncertainty due to significant management judgments in regards to assumptions used within the assessment, including the long-term growth rate, royalty rate, discount rate and forecasted reporting unit cash flow, for which management also utilized an independent valuations specialist (referred to as

“management’s specialists”).

In turn, auditing management’s assumptions involved significant auditor judgment and subjectivity.

Our audit procedures related to the Goodwill and Tradenames quantitative impairment assessment included the following, among others.

• We tested the design and operating effectiveness of controls relating to the Company’s quantitative impairment analysis processes, including controls related to the forecasted reporting unit cash flow and management’s review of the key assumptions which were prepared by managements specialists.

• We evaluated the level of knowledge, skill, and ability of management’s specialists and their relationship to the Company.

• We compared the Company’s reporting unit cash flows used in the forecast model to historical actual results.

• With the assistance of internal valuation specialists, we performed audit procedures over the data, methods and assumptions utilized in performing the quantitative impairment assessment, which included reviewing supporting documents and assessing reasonableness by comparing to historical trends and industry expectations.

Certain key inputs/assumptions tested by us included the following:

◦ Long-term growth rate

◦ Discount rates

◦ Royalty rates

Critical audit matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ GRANT THORNTON LLP

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Preneed cemetery receivables, net 21,081 23,150

Receivables from preneed trusts, net 18,024 16,844

Receivables from preneed funeral trusts, net 16,844 19,009

Property, plant and equipment, net 269,051 269,367

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Accrued and other liabilities 31,138 43,773

Convertible subordinated notes due 2021 — 2,538

Convertible notes 2,538 —

Total current liabilities 48,367 60,787

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Credit facility 46,064 153,857

Convertible subordinated notes due 2021 5,971 —

Senior notes due 2026 395,447 395,968

Senior notes 395,968 394,610

Obligations under finance leases, net of current portion 5,531 5,157

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Treasury stock, at cost;

8,025,339 shares at both December 31, 2019 and 2020

8,025,339 and 10,932,322 shares at December 31, 2020 and 2021, respectively

( 102,050 ) ( 244,519 )

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Total liabilities and stockholders’ equity $ 1,145,825 $ 1,178,631

The accompanying notes are an integral part of these Consolidated Financial Statements.

The accompanying condensed notes are an integral part of these Consolidated Financial Statements.

CARRIAGE SERVICES, INC.

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Home office depreciation and amortization 1,416 1,427 1,241

Net loss on divestitures and impairment charges 1,195 4,846 21,442

Net loss on divestitures, disposals and impairment charges 4,846 21,442 666

Operating income 47,443 57,227 93,660

Interest expense ( 25,522 ) ( 32,515 ) ( 25,445 )

Accretion of discount on convertible subordinated notes ( 2,192 ) ( 241 ) ( 216 )

Net loss on early extinguishment of debt ( 502 ) — ( 6 )

Accretion of discount on convertible notes ( 241 ) ( 216 ) ( 20 )

Loss on extinguishment of debt — ( 6 ) ( 23,807 )

Other, net 736 152 ( 84 )

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Basic earnings per common share:

$ 0.81 $ 0.90 $ 1.90

Diluted earnings per common share:

Dividends declared per share $ 0.3000 $ 0.3000 $ 0.3375

$ 0.80 $ 0.89 $ 1.81

Dividends declared per common share:

$ 0.3000 $ 0.3375 $ 0.4125

Weighted average number of common and common equivalent shares outstanding:

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Diluted 18,005 18,077 18,266

The accompanying notes are an integral part of these Consolidated Financial Statements.

The accompanying condensed notes are an integral part of these Consolidated Financial Statements.

CARRIAGE SERVICES, INC.

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Balance – December 31, 2018 18,078 $ 257 $ 243,849 $ 71,680 $ ( 94,294 ) $ 221,492

Effect of adoption of topic 606 — — — 2,131 — 2,131

Balance – January 1, 2018 16,098 $ 226 $ 216,158 $ 60,035 $ ( 76,632 ) $ 199,787

Net Income – 2019 — — — 14,533 — 14,533

Issuance of common stock 62 1 1,199 — — 1,200

Exercise of stock options 140 1 ( 34 ) — — ( 33 )

Issuance of common stock from employee stock purchase plan 74 1 971 — — 972

Issuance of common stock to directors and board advisor 7 — 155 — — 155

Issuance of restricted common stock 26 — — — — —

Cancellation and surrender of restricted common stock and stock options ( 30 ) — ( 398 ) — — ( 398 )

Exercise of stock options 76 1 471 — — 472

Cancellation and surrender of restricted common stock ( 21 ) — ( 194 ) — — ( 194 )

Stock-based compensation expense — — 1,998 — — 1,998

Dividends on common stock — — ( 5,398 ) — — ( 5,398 )

Convertible notes exchange 2,823 28 25,883 — — 25,911

Treasury stock acquired ( 400 ) — — — ( 7,756 ) ( 7,756 )

Other 15 — 295 — — 295

Balance – December 31, 2019 17,855 $ 259 $ 242,147 $ 86,213 $ ( 102,050 ) $ 226,569

Net Income – 2020 — — — 16,090 — 16,090

Issuance of common stock 81 1 971 — — 972

Issuance of common stock from employee stock purchase plan 72 1 1,201 — — 1,202

Issuance of common stock to directors and board advisor 31 — 653 — — 653

Exercise of stock options 20 — ( 70 ) — — ( 70 )

Issuance of restricted common stock 10 — — — — —

Cancellation and surrender of restricted common stock and stock options ( 21 ) — ( 194 ) — — ( 194 )

Cancellation and surrender of restricted common stock ( 11 ) — ( 250 ) — — ( 250 )

Stock-based compensation expense — — 2,717 — — 2,717

Dividends on common stock — — ( 6,048 ) — — ( 6,048 )

Treasury stock acquired ( 400 ) — — — ( 7,756 ) ( 7,756 )

Convertible notes repurchase — — ( 828 ) — — ( 828 )

Other 18 — 467 — — 467

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Issuance of common stock from employee stock purchase plan 62 1 1,629 — — 1,630

Issuance of common stock to directors 31 — 653 — — 653

Exercise of stock options 20 — ( 70 ) — — ( 70 )

Issuance of common stock to directors and board advisor 15 — 642 — — 642

Issuance of restricted common stock 9 — — — — —

Exercise of stock options 169 2 ( 1,259 ) — — ( 1,257 )

Cancellation and surrender of restricted common stock ( 11 ) — ( 375 ) — — ( 375 )

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Dividends on common stock — — ( 7,264 ) — — ( 7,264 )

Convertible notes repurchase — — ( 828 ) — — ( 828 )

Other 18 — 467 — — 467

Convertible notes conversions — — ( 1,424 ) — — ( 1,424 )

Treasury stock acquired ( 2,907 ) — — — ( 142,469 ) ( 142,469 )

Balance – December 31, 2021 15,332 $ 263 $ 236,809 $ 135,462 $ ( 244,519 ) $ 128,015

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Depreciation and amortization 17,771 19,389 20,520

Provision for bad debt and credit losses 1,841 1,618 2,318

Provision for credit losses 1,618 2,318 1,783

Stock-based compensation expense 2,153 3,370 5,513

Deferred income tax expense 3,823 10,117 4,597

Amortization of deferred financing costs 532 392 782

Amortization of capitalized commissions and non-compete agreements 1,219 1,231 1,299

Accretion of discount on convertible subordinated notes 2,192 241 216

Accretion of debt discount, net of debt premium on senior notes 272 492 307

Net loss on extinguishment of debt 502 — 6

Net loss on divestitures and impairment charges 1,195 4,846 21,442

Net loss on sale of other assets 876 213 251

Deferred income tax expense (benefit) 10,117 4,597 ( 692 )

Amortization of intangibles 1,231 1,299 1,285

Amortization of debt issuance costs 392 782 576

Amortization and accretion of debt discount and premium 733 523 439

Loss on extinguishment of debt — 6 23,807

Net loss on divestitures, disposals and impairment charges 5,059 21,693 847

Gain on insurance reimbursements ( 879 ) ( 97 ) —

Other 121 19 —

Changes in operating assets and liabilities that provided (required) cash:

Changes in operating assets and liabilities that provided (used) cash:

Accounts and preneed receivables ( 5,801 ) ( 4,279 ) ( 4,090 )

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Cash flows from investing activities:

Acquisitions ( 37,970 ) ( 140,907 ) ( 28,011 )

Acquisition of businesses and real estate ( 140,907 ) ( 28,011 ) ( 3,285 )

Deposit on pending acquisition ( 5,000 ) — —

Proceeds from insurance reimbursements — 1,433 248

Proceeds from divestitures and sale of other assets 967 8,541 7,875

Proceeds from insurance reimbursements 1,433 248 7,758

Capital expenditures ( 15,379 ) ( 15,198 ) ( 24,883 )

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Cash flows from financing activities:

Payments against the term loan ( 127,500 ) — —

Borrowings from the credit facility 174,961 109,500 266,168

Payments against the credit facility ( 118,261 ) ( 146,100 ) ( 157,968 )

Payment of debt issuance costs related to the credit facility ( 1,751 ) ( 891 ) —

Repurchase of the convertible subordinated notes due 2021 ( 98,266 ) ( 27 ) ( 4,563 )

Payment of transaction costs related to the repurchase of the convertible subordinated notes due 2021 ( 885 ) — ( 12 )

Proceeds from the issuance of the senior notes due 2026 320,125 76,688 —

Payment of debt issuance costs related to the senior notes due 2026 ( 1,367 ) ( 980 ) ( 66 )

Payment to redeem the original senior notes — — ( 400,000 )

Payment of call premium for the redemption of the original senior notes — — ( 19,876 )

Proceeds from the issuance of the senior notes — — 395,500

Payment of debt issuance costs for the credit facility and senior notes ( 1,871 ) ( 78 ) ( 2,197 )

Conversion and maturity of the convertible notes ( 27 ) ( 4,563 ) ( 3,980 )

Proceeds from the issuance of the original senior notes 76,688 — —

Payments on acquisition debt and obligations under finance leases ( 2,287 ) ( 1,745 ) ( 1,331 )

Payments on contingent consideration recorded at acquisition date ( 162 ) ( 169 ) ( 461 )

Proceeds from the exercise of stock options and employee stock purchase plan contributions 1,246 1,445 1,229

Proceeds from the exercise of stock options and employee stock purchase plan 1,445 1,229 2,644

Taxes paid on restricted stock vestings and exercise of stock options ( 194 ) ( 348 ) ( 2,647 )

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Net cash provided by (used in) financing activities 115,742 ( 48,322 ) ( 71,452 )

Net increase (decrease) in cash and cash equivalents ( 308 ) 72 173

Net increase in cash and cash equivalents 72 173 259

Cash and cash equivalents at beginning of year 644 716 889

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The accompanying notes are an integral part of these Consolidated Financial Statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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(“Carriage,” the “Company,” “we,” “us,” or “our”) is a leading provider of funeral and cemetery services and merchandise in the United States.

At December 31, 2020, we operated 178 funeral homes in 26 states and 32 cemeteries in 12 states.

Our operations are reported in two business segments:

Funeral Home Operations, which currently accounts for approximately 75 % of our revenue and Cemetery Operations, which currently accounts for approximately 25 % of our revenue.

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 December 31, 2021, we operated 170 funeral homes in 26 states and 31 cemeteries in 11 states.

Our funeral home operations are principally service businesses that generate revenue from sales of burial and cremation services and related merchandise, such as caskets and urns.

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Reclassifications

Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation.

Impairments and net loss on divestitures, which were previously reported in Other, net, have been reclassed to Net loss on divestitures and impairment charges within operating income on our Consolidated Statements of Operations with no effect on our previously reported net income, Consolidated Balance Sheet and Consolidated Statements of Cash Flows.

Certain reclassifications have been made to prior period amounts on our Consolidated Statements of Cash Flows related to debt and debt issuance costs to conform to the current period financial statement presentation with no effect on our previously reported Consolidated Statements of Operations and Consolidated Balance Sheet.

Use of Estimates

The preparation of our Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, revenue and expenses.

On an ongoing basis, we evaluate our significant estimates and judgments, which include those related to the realization of our accounts receivable, valuation of goodwill, intangible assets, deferred tax assets and liabilities and depreciation of property and equipment.

We base our estimates on historical experience, third-party data and assumptions that we believe to be reasonable under the circumstances.

The results of these considerations form the basis for making judgments about the amount and timing of revenue and expenses, the carrying value of assets and the recorded amounts of liabilities.

The preparation of our Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses.

On an ongoing basis, we evaluate our critical estimates and judgments, which include those related to the impairment of goodwill and the fair value measurements used in business combinations.

These policies are considered critical because they may result in fluctuations in our reported results from period to period due to the significant judgments, estimates and assumptions about complex and inherently uncertain matters and because the use of different judgments, assumptions or estimates could have a material impact on our financial condition or results of operations.

Actual results may differ from these estimates and such estimates may change if the underlying conditions or assumptions change.

Historical performance should not be viewed as indicative of future performance, as there can be no assurance that our results of operations will be consistent from year to year.

Historical performance should not be viewed as indicative of future performance because there can be no assurance the margins, operating income and net earnings, as a percentage of revenue, will be consistent from period to period.

Cash and Cash Equivalents

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In substantially all cases, we receive an initial down payment at the time the contract is signed.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

For our funeral and atneed cemetery receivables, we have a collections policy where statements are sent to the customer at 30 days past due.

Past due notification letters are sent at 45 days and continue until payment is received or the contract is placed with a third-party collections agency.

Past due notification letters are sent at 45 days and continue until payment is received or the contract is placed

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

with a third-party collections agency.

For our preneed cemetery receivables, we have a collections policy where past due notification letters are sent to the customer beginning at 15 days past due and periodically thereafter until payment is received or the contract is cancelled.

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”), Financial Instruments – Credit Losses:

Measurement of Credit Losses on Financial Instruments and subsequent amendments collectively known as (“Topic 326”).

Topic 326 applies to all entities holding financial assets measured at amortized cost, including loans, trade and financed receivables and other financial instruments.

The guidance introduces a new credit reserving model known as Current Expected Credit Loss (“CECL”), which requires earlier recognition of credit losses, while also providing additional transparency about credit risk.

The CECL model requires all expected credit losses to be measured based on historical experience, current conditions and reasonable and supportable forecasts about collectability.

Prior to adoption of Topic 326, we provided allowances for bad debt and contract cancellations on our receivables based on an analysis of historical trends of collection activity.

For both funeral and cemetery receivables, we determine our allowance for credit losses by using a loss-rate methodology, in which we assess our historical write-off of receivables against our total receivables over several years.

Our allowance for credit losses reflects our best estimate of expected credit losses over the term of both our funeral and cemetery receivables.

Our policy is to write off receivables when we have determined they will no longer be collectible.

Write-offs are applied as a reduction to the allowance for credit losses and any recoveries of previous write-offs are netted against bad debt expense in the period recovered.

We determine our allowance for credit losses by using a loss-rate methodology, in which we assess our historical write-off of receivables against our total receivables over several years.

From this historical loss-rate approach, we also consider the current and forecasted economic conditions expected to be in place over the life of our receivables.

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We monitor any change in our historical write-off of receivables utilized in our loss-rate methodology and assess forecasted changes in market conditions within our credit reserve.

During 2020, we increased our allowance for credit losses on our funeral and cemetery receivables as a result of the economic impact of the COVID-19 pandemic (COVID-19).

See Notes 2 and 6 to the Consolidated Financial Statements herein for additional information related to funeral and cemetery receivables.

See Note 6 to the Consolidated Financial Statements herein for additional information related to our funeral and cemetery receivables.

Inventory consists primarily of caskets, outer burial containers and cemetery monuments and markers and is recorded at the lower of its cost basis or net realizable value.

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To the extent that information not available to us at the closing date subsequently becomes available during the allocation period, we may adjust goodwill, intangible assets, assets or liabilities associated with the acquisition.

We did not acquire any businesses in 2021.

On January 3, 2020, we acquired one funeral home and cemetery combination business in Lafayette, California.

During 2019, we acquired, in three separate transactions, two funeral home and cemetery combination businesses, seven funeral home businesses and three ancillary businesses.

In October 2019, we acquired the following:

(i) four funeral home businesses in Buffalo, New York;

and (ii) one funeral home and cemetery combination business, three funeral home businesses and three ancillary businesses, which consist of a flower shop, a pet cremation business and an online cremation business in the Rockwall, Texas area.

In December 2019, we acquired one funeral home and cemetery combination business in Fairfax, Virginia.

The pro forma impact of the acquisitions on prior periods is not presented as the impact is not material to our reported results.

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See Note 3 to the Consolidated Financial Statements herein for further information related to acquisitions.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Divested Operations

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If the screen is not met, we perform an assessment to determine if the set is a business by evaluating whether the set has both inputs and a substantive process that together significantly contribute to the ability to create outputs.

When both inputs and a substantive process are present then the set is determined to be a business and we apply the guidance in ASC 350 – Intangibles – Goodwill and Other to determine the accounting treatment of goodwill for that set (see discussion of Goodwill below).

When both inputs and a substantive process are present then the set is determined to be a business and we apply the guidance in Accounting Standards Codification (“ASC”) Topic 350 – Intangibles – Goodwill and Other to determine the accounting treatment of goodwill for that set (see discussion of Goodwill below).

Goodwill is only allocated to the sale if the set is considered to be a business.

During 2021, we sold two funeral homes and one cemetery for $ 2.5 million and we merged six funeral homes with other businesses we own in existing markets.

During 2020, we sold eight funeral homes for $ 8.4 million.

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In addition, we merged a funeral home with a business in an existing market.

During 2018, our management agreement with a Florida municipality expired and as a result, we divested three of our cemeteries.

The operating results of these divested funeral homes and cemeteries are reflected on our Consolidated Statements of Operations through the divested date.

We continually review our businesses to optimize the sustainable earning power and return on our invested capital.

See Notes 4 and 5 to the Consolidated Financial Statements herein for additional information related to divestitures.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The excess of the purchase price over the fair value of identifiable net assets of funeral home businesses and cemeteries acquired is recorded as goodwill.

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In accordance with the guidance, if the fair value of the reporting unit is less than its carrying amount an impairment charge is recorded in an amount equal to the difference.

As a result of economic conditions caused by COVID-19, we performed a quantitative assessment of our goodwill at March 31, 2020 and we recorded an impairment to goodwill of $ 13.6 million during the quarter ended March 31, 2020, as the carrying amount of our funeral homes in the Eastern Region Reporting Unit exceeded the fair value.

For our 2020 annual impairment test, we performed a qualitative assessment and determined that there were no factors that would indicate the need to perform an additional quantitative goodwill impairment test.

We concluded that it is more-likely-than not that the fair value of our reporting units is greater than their carrying value and thus there was no additional impairment to goodwill.

For our 2019 quantitative assessment, there was no impairment to goodwill as the fair value of our reporting units was greater than the carrying value, however, we recorded a goodwill impairment of $ 0.7 million during 2019 related to two funeral homes that we divested.

We recorded a goodwill impairment of $ 0.8 million during 2018 related to a funeral home that we divested.

For our 2021 annual impairment test, we performed a qualitative assessment and concluded that there was no impairment to goodwill.

During 2020, as a result of economic conditions caused by COVID-19, we performed a quantitative assessment of our goodwill and we recorded an impairment to goodwill of $ 13.6 million, as the carrying amount of our funeral homes in the Eastern Region Reporting Unit exceeded the fair value.

For our 2019 annual impairment test, we performed a quantitative assessment and concluded there was no impairment to goodwill as the fair value of our reporting units was greater than the carrying value.

However, we recorded a goodwill impairment of $ 0.7 million during the year ended December 31, 2019 related to two funeral homes that we divested.

When we divest a portion of a reporting unit that constitutes a business in accordance with U.S.

Generally Accepted Accounting Principles (“GAAP”), we allocate goodwill associated with that business to be included in the gain or loss on divestiture.

The goodwill allocated is based on the relative fair values of the business being divested and the portion of the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

reporting unit that will be retained.

Additionally, after each divestiture, we test the goodwill remaining in the portion of the reporting unit to be retained for impairment using a qualitative assessment unless we deem a quantitative assessment to be appropriate to ensure the fair value of our reporting units is greater than their carrying value.

For the year ended December 31, 2020, we concluded that it is more-likely-than not that the fair value of our reporting units is greater than their carrying value and thus there was no additional impairment to goodwill.

The goodwill allocated is based on the relative fair value of the business being divested and the portion of the reporting unit that will be retained.

Additionally, after each divestiture, we will test the goodwill remaining in the portion of the reporting unit to be retained for impairment using a qualitative assessment unless we deem a quantitative assessment to be appropriate to ensure the fair value of our reporting units is greater than their carrying value.

For the years ended December 31, 2020 and 2021, after each divestiture, we concluded that it was more-likely-than not that the fair value of our reporting units was greater than their carrying value and thus there was no impairment to goodwill.

See Note 4 to the Consolidated Financial Statements included herein for additional information related to goodwill.

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Our intent is to perform a quantitative impairment test at least once every three years and perform a qualitative assessment during the remaining two years .

In addition to our annual test, we assess the impairment of intangible assets whenever certain events or changes in circumstances indicate that the carrying value of the intangible asset may be greater than the fair value.

In addition to our annual test, we assess the impairment of intangible assets whenever certain

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

events or changes in circumstances indicate that the carrying value of the intangible asset may be greater than the fair value.

Factors that could trigger an interim impairment review include, but are not limited to, significant under-performance relative to historical or projected future operating results and significant negative industry or economic trends.

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In accordance with the guidance, if the fair value of the tradename is less than its carrying amount, then an impairment charge is recorded in an amount equal to the difference.

As a result of economic conditions caused by COVID-19, we performed a quantitative assessment of our tradenames at March 31, 2020 and we recorded an impairment to tradenames for certain of our funeral homes of $ 1.1 million during the quarter ended March 31, 2020 as the carrying amount of these tradenames exceeded the fair value.

We concluded that it is more-likely-than not that the fair value of our intangible assets is greater than its carrying value and thus there was no additional impairment to our intangible assets.

For our 2019 quantitative assessment, we recorded an impairment for tradenames of $ 0.2 million during the year ended December 31, 2019 as the carrying amount of certain tradenames exceeded the fair value.

No impairments were recorded to our intangible assets during the year ended December 31, 2018.

See Note 11 to the Consolidated Financial Statements included herein for additional information related to intangible assets.

For our 2021 annual impairment test, we performed a qualitative assessment and concluded there that was no impairment to our intangible assets.

During 2020, as a result of economic conditions caused by COVID-19, we performed a quantitative assessment of our tradenames and we recorded an impairment to tradenames for certain of our funeral homes of $ 1.1 million, as the carrying amount of these tradenames exceeded the fair value.

For our 2019 annual impairment test, we performed a quantitative assessment and recorded an impairment of $ 0.2 million for tradenames during the year ended December 31, 2019, as the carrying amount of certain tradenames exceeded their fair value.

See Note 11 to the Consolidated Financial Statements included herein for additional information related to our intangible assets.

Preneed and Perpetual Care Trust Funds

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We have recognized financial interests of third parties in the trust funds in our financial statements as Deferred preneed funeral and cemetery receipts held in trust and Care trusts’ corpus .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The fair value of our trust fund assets are accounted for as Collateralized Financing Entities (“CFEs”) in ASC 810.

The fair value of our trust fund assets are accounted for as Collateralized Financing Entities (“CFEs”) in ASC Topic 810.

The accounting guidance for CFEs allows companies to elect to measure both the financial assets and financial liabilities using the more observable of the fair value of the financial assets or fair value of the financial liabilities.

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Any changes in fair value are recognized in earnings.

Topic 326 made changes to the accounting for fixed income securities.

One such change is to require credit losses to be presented as an allowance rather than as a write-down on fixed income securities management does not intend to sell or believes that it is more likely than not will be required to sell.

We present our credit losses for fixed income securities as an allowance for the fixed income securities we do not intend to sell and it is likely that we will not be required to sell prior to their anticipated recovery.

In accordance with respective state laws, we are required to deposit a specified amount into perpetual and memorial care trust funds for each interment right and certain memorials sold.

Income from the trust funds is distributed to us and used to provide for the care and maintenance of the cemeteries and mausoleums.

Such trust fund income is recognized as revenue when realized by the trust and distributable to us.

Trust fund income is recognized as revenue when realized by the trust and distributable to us.

We are restricted from withdrawing any of the principal balances of these funds.

An enterprise is required to perform an analysis to determine whether the enterprise’s variable interest(s) give it a controlling financial interest in a VIE.

This analysis identifies the primary beneficiary of a VIE as the enterprise that has both the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE.

This analysis identifies the primary beneficiary of a VIE as the enterprise that has both

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE.

Our analysis continues to support our position as the primary beneficiary in the majority of our funeral and cemetery trust funds.

We also have preneed funeral trust fund assets in trusts that are controlled and operated by third parties in which we do not have a controlling financial interest (less than 50%) in the trust assets.

We account for these investments at cost, reflected in our financial statements as Receivables from preneed funeral trusts, net.

Our preneed funeral and preneed cemetery merchandise and service trusts are reflected in our financial statements net of an allowance for contract cancellations.

We determine this allowance based on our five-year historical experience of contract cancellations.

On an ongoing basis, we monitor our historical trend and adjust our allowance accordingly.

See Notes 7 and 8 to the Consolidated Financial Statements herein for additional information related to preneed and perpetual care trust funds.

Fair Value Measurements

In August 2018, the FASB amended “Fair Value Measurements” to modify the disclosure requirements related to fair value.

The amendment removes requirements to disclose (1) the amount of and reasons for transfers between Levels 1 and 2 of the fair value hierarchy, (2) our policy related to the timing of transfers between levels, and (3) the valuation processes used in Level 3 measurements.

It clarifies that the narrative disclosure of the effect of changes in Level 3 inputs should be based on changes that could occur at the reporting date.

The amendment adds a requirement to disclose the range and weighted average of the significant unobservable inputs used in Level 3 measurements.

We adopted the new standard as of January 1, 2020 and it had no impact on our consolidated results of operations, consolidated financial position, and cash flows .

We measure the securities held by our funeral merchandise and service, cemetery merchandise and service, and cemetery perpetual care trusts at fair value on a recurring basis in accordance with the Fair Value Measurements Topic of the ASC.

This guidance defines fair value as the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually).

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The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.

The three levels are defined as follows:

• Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets;

• Level 2 — inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument;

• Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement.

We disclose the extent to which fair value is used to measure financial assets and liabilities, the inputs utilized in calculating valuation measurements, and the effect of the measurement of significant unobservable inputs on earnings, or changes in net assets, as of the measurement date.

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Management is actively involved in monitoring exposure to market risk and developing and utilizing risk management techniques when appropriate and when available for a reasonable price.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

See Notes 7 and 10 to the Consolidated Financial Statements herein for additional required disclosures related to fair value measurement of our financial assets and liabilities.

See Notes 7 and 10 to the Consolidated Financial Statements herein for additional required disclosures related to our fair value measurement of our financial assets and liabilities.

Capitalized Commissions on Preneed Contracts

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The selling costs related to preneed funeral insurance contracts continue to be expensed in the period incurred as these contracts are not included on our Consolidated Balance Sheet.

See Note 11 to the Consolidated Financial Statements herein for additional information related to capitalized commissions on preneed contracts.

See Note 11 to the Consolidated Financial Statements herein for additional information related to our capitalized commissions on preneed contracts.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Property, Plant and Equipment

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Property, plant and equipment, net $ 269,051 $ 269,367

During 2020, we acquired $ 1.7 million of property, plant and equipment related to our acquisition that closed on January 3, 2020, described in Note 3 to the Consolidated Financial Statements included herein.

In addition, we divested eight funeral homes that had a carrying value of property, plant and equipment of $ 8.0 million, which was included in the gain or loss on the sale of divestitures and recorded in Net loss on divestitures and impairment charges on our Consolidated Statements of Operations, described in Note 5 to the Consolidated Financial Statements included herein.

During 2019, we acquired $ 21.7 million of property, plant and equipment in connection with the funeral home and cemetery businesses we acquired during 2019.

In addition, we ceased to operate three funeral homes whose building leases expired, sold a funeral home and merged a funeral home in an existing market that had a carrying value of property, plant and equipment of $ 0.6 million .

Our capital expenditures totaled $ 15.4 million and $ 15.2 million for the years ended December 31, 2019 and 2020, for property, plant, equipment and cemetery development.

We recorded depreciation expense of $ 13.8 million, $ 13.8 million and $ 14.4 million for the years ended December 31, 2018, 2019 and 2020, respectively.

Long-lived assets, such as property, plant and equipment and right-of-use assets (see leases discussion below) are reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360 – Property, Plant and Equipment.

This guidance requires that long-lived assets to be held and used are reported at the lower of their carrying amount or fair value.

We evaluate our long-lived assets for impairment when a funeral home or cemetery business has negative earnings before interest, taxes, depreciation and

During the year ended December 31, 2021, we acquired real property for $ 3.3 million and we sold real property for $ 5.2 million, with a carrying value of $ 4.3 million, resulting in a gain on the sale of $ 0.9 million.

We recognized a $ 0.5 million impairment loss related to property, plant and equipment assets held for sale.

The gain on sale and impairment loss were recorded in Net loss on divestitures, disposals and impairment charges.

We also divested two funeral homes and one cemetery that had a carrying value of property, plant and equipment of $ 1.4 million, which was included in the gain or loss on the sale of divestitures and recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations, described in Note 5 to the Consolidated Financial Statements included herein.

Additionally, we disposed of damaged and obsolete property, plant and equipment that had a carrying value of $ 1.0 million, which was recorded in Net loss on divestitures, disposals and impairment charges.

During the year ended December 31, 2020, we acquired $ 1.7 million of property, plant and equipment related to our funeral home and cemetery acquisition, described in Note 3 to the Consolidated Financial Statements included herein.

In addition, we divested eight funeral homes that had a carrying value of property, plant and equipment of $ 8.0 million, which was included in the gain or loss on the sale of divestitures and recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

Our growth and maintenance capital expenditures totaled $ 10.5 million and $ 19.0 million for the years ended December 31, 2020 and 2021, respectively, for property, plant, equipment.

In addition, we recorded depreciation expense of $ 13.8 million, $ 14.4 million and $ 13.8 million for the years ended December 31, 2019, 2020 and 2021, respectively.

Long-lived assets, such as property, plant and equipment and right-of-use assets (see leases discussion below) are reported at the lower of their carrying amount or fair value and are reviewed for impairment whenever events, such as significant negative industry or economic trends or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC 360 – Property, Plant and Equipment.

Factors that could trigger an impairment review include, but are not limited to, significant under-performance relative to historical or projected future operating results.

We evaluate our long-lived assets for impairment when a funeral home or cemetery business has negative earnings before interest, taxes, depreciation and amortization (“EBITDA”) for four consecutive years and if there has been a decline in EBITDA in that same period.

We test the recoverability of our long-lived assets by comparing their carrying value to the sum of the undiscounted cash flows expected to result from the use of the assets over their remaining useful lives.

We recognize an impairment loss if the carrying amount of the long-lived asset is not recoverable and exceeds its fair value.

Additionally, assets to be disposed of and assets not expected to provide any future service potential are recorded at the lower of their carrying amount or fair value less estimated costs to sell.

If we determine that the carrying value is not recoverable from the proceeds of the sale, we record an impairment loss at that time.

For the year ended December 31, 2021, we did not identify any factors or events that would trigger us to perform an impairment test on our long-lived assets and concluded there was no impairment to our long-lived assets.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

amortization (“EBITDA”) for four consecutive years and if there has been a decline in EBITDA in that same period.

Assets to be disposed of and assets not expected to provide any future service potential are recorded at the lower of their carrying amount or fair value less estimated cost to sell.

If we determine that the carrying value is not recoverable from the proceeds of the sale, we record an impairment at that time.

In connection with the goodwill impairment recorded for the Eastern Region Reporting Unit during the quarter ended March 31, 2020 we also evaluated the long-lived assets of our funeral homes in the Eastern Region Reporting Unit and concluded that there was no impairment to our long-lived assets.

In connection with the goodwill impairment recorded for the Eastern Region Reporting Unit during the quarter ended March 31, 2020, we evaluated the long-lived assets of our funeral homes in the Eastern Region Reporting Unit for impairment and concluded that there was no impairment to our long-lived assets.

Subsequent to our impairment tests performed at March 31, 2020, we did not identify any new factors or events that would trigger us to perform an additional assessment of our long-lived assets.

For our 2020 annual impairment test, no impairment was identified on our long-lived assets at December 31, 2020.

For the year ended December 31, 2019, no impairment was identified on our long-lived assets.

For the year ended December 31, 2018, we recorded an impairment of $ 0.2 million related to the real property of a funeral home that we divested, as the carrying value exceeded fair value.

For the year ended December 31, 2019, we did not identify any factors or events that would trigger us to perform an impairment test on our long-lived assets and concluded there was no impairment to our long-lived assets.

Cemetery Property

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This provides the added benefit of relevant data that is not available to third party appraisers.

Through this thorough internal process, the Company is able to identify viable costs of property based on historical experience, particular markets and demographics, reasonable margins, practical retail prices and park infrastructure and condition.

Cemetery property was $ 87.0 million and $ 101.1 million, net of accumulated amortization of $ 41.7 million and $ 46.6 million at December 31, 2019 and December 31, 2020, respectively.

Through this thorough internal process, we are able to identify viable costs of property based on historical experience, particular markets and demographics, reasonable margins, practical retail prices and park infrastructure and condition.

Cemetery property was $ 101.1 million and $ 100.7 million, net of accumulated amortization of $ 46.6 million and $ 53.1 million at December 31, 2020 and 2021, respectively.

When cemetery property is sold, the value of the cemetery property (interment right costs) is expensed as amortization using the specific identification method in the period in which the sale of the interment right is recognized as revenue.

Our growth capital expenditures totaled $ 4.7 million and $ 5.9 million for the years ended December 31, 2020 and 2021, respectively, for cemetery property development.

We recorded amortization expense for cemetery interment rights of $ 4.0 million, $ 5.0 million and $ 6.7 million for the years ended December 31, 2019, 2020 and 2021, respectively.

During the year ended December 31, 2021, we divested one cemetery that had a carrying value of cemetery property of $ 0.1 million, which was included in the gain or loss on the sale of divestitures and recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

We did not divest any cemeteries during the years ended December 31, 2019 and 2020.

We have operating and finance leases.

We lease certain office facilities, certain funeral homes and equipment under operating leases with original terms ranging from one to nineteen years .

Many leases include one or more options to renew, some of which include options to extend the leases for up to 26 years.

We lease certain funeral homes under finance leases with original terms ranging from ten to forty years years.

We lease certain office facilities, certain funeral homes and equipment under operating leases with original terms ranging from one to twenty years .

Many leases include one or more options to renew, some of which include options to extend the leases for up to forty years .

We lease certain funeral homes under finance leases with original terms ranging from ten to forty years .

We do not have lease agreements with residual value guarantees, sale-leaseback terms, material restrictive covenants or related parties.

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The lease terms used to calculate the ROU asset and related lease liability include options to extend the lease when it is reasonably certain that we will exercise that option.

Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense, while the expense for finance leases is recognized as depreciation expense and interest expense using the accelerated interest method of recognition.

Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage, are not included in the ROU assets or liabilities.

These are expensed as incurred and recorded as variable lease expense.

We have real estate lease agreements which require payments for lease and non-lease components and account for these as a single lease component.

We have real estate lease agreements which require payments for lease and non-lease components and we account for these as a single lease component.

Leases with an initial term of 12 months or less, that do not include an option to renew the underlying asset, are not recorded on our Consolidated Balance Sheet and expense is recognized on a straight-line basis over the lease term.

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See discussion of our impairment policy for long-lived assets and right-of-use assets above.

See Note 15 to the Consolidated Financial Statements included herein for additional information related to leases.

See Note 15 to the Consolidated Financial Statements included herein for additional information related to our leases.

Equity Plans and Stock-Based Compensation

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Fair value is determined on the date of the grant.

The fair value of stock awards is determined using the stock price on the grant date.

The fair value of stock options is determined using the Black-Scholes valuation model.

The fair value of the performance awards related to market performance conditions is determined using a Monte-Carlo simulation pricing model.

The fair value of restricted stock is determined using the stock price on the grant date.

The fair value of options or awards containing options is determined using the Black-Scholes valuation model or the Monte Carlo simulation pricing model.

The fair value of the performance awards related to market performance conditions is determined using the Monte-Carlo simulation pricing model.

The fair value of the ESPP is determined based on the discount element offered to employees and the embedded option element, which is determined using an option calculation model.

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We treat the tax effects of exercised or vested awards as discrete items in the reporting period in which they occur.

For the years ended December 31, 2018, 2019 and 2020, the excess tax deficiency related to share-based payments was approximately $ 0.8 million, $ 0.4 million and $ 0.1 million, respectively, recorded within Tax adjustment related to discrete items on our Consolidated Statements of Operations.

Excess tax benefits or deficiencies related to share-based payments are included in operating cash flows on the Consolidated Statements of Cash Flows.

See Note 18 to the Consolidated Financial Statements included herein for additional information related to equity plans and stock-based compensation.

For the years ended December 31, 2019 and 2020 the excess tax deficiency related to share-based payments was $ 0.4 million and $ 0.1 million, respectively.

For the year ended December 31, 2021, the excess tax benefit was $ 1.2 million.

The excess tax benefit and tax deficiencies are recorded within Tax adjustment related to discrete items on our Consolidated Statements of Operations.

Excess tax benefits and deficiencies related to share-based payments are included in operating cash flows on the Consolidated Statements of Cash Flows.

See Note 18 to the Consolidated Financial Statements included herein for additional information related to our equity plans and stock-based compensation.

Revenue Recognition

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For cemetery property interment rights, control transfers to the customer when the property is developed and the interment right has been sold and can no longer be marketed or sold to another customer.

Sales taxes collected are recognized on a net basis on our Consolidated Financial Statements.

On our atneed contracts, we generally deliver the merchandise and perform the services at the time of need.

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We recognize revenue when the merchandise is transferred or the service is performed, in satisfaction of the corresponding performance obligation.

Sales taxes collected are recognized on a net basis on our Consolidated Financial Statements.

Ancillary funeral service revenue, which is recorded in Other revenue, represents revenue from our flower shop, pet cremation and online cremation businesses in Texas .

Sales taxes collected are recognized on a net basis in our Consolidated Financial Statements.

Ancillary funeral service revenue, which is recorded in Other revenue, represents revenue from our flower shop, pet cremation and online cremation businesses .

The earnings from our preneed trust investments, as well as trust management fees charged by our wholly-owned registered investment advisory firm (“CSV RIA”) are recorded in Other revenue .

As of December 31, 2020, CSV RIA provided investment management and advisory services to approximately 80 % of our trust assets, for a fee based on the market value of

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

trust assets.

As of December 31, 2021, CSV RIA provided investment management and advisory services to approximately 80 % of our trust assets, for a fee based on the market value of trust assets.

Under state trust laws, we are allowed to charge the trust a fee for advising on the investment of the trust assets and these fees are recognized as income in the period in which services are provided.

Balances due on undelivered preneed funeral trust contracts have been reclassified to reduce Deferred preneed funeral revenue on our Consolidated Balance Sheet of $ 8.9 million and $ 8.2 million at December 31, 2019 and December 31, 2020, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Balances due on undelivered preneed funeral trust contracts have been reclassified to reduce Deferred preneed funeral revenue on our Consolidated Balance Sheet of $ 8.2 million and $ 8.0 million at December 31, 2020 and 2021, respectively.

As these performance obligations are to be completed after the date of death, we cannot quantify the recognition of revenue in future periods.

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Balances due on undelivered preneed cemetery contracts have been reclassified to reduce Deferred preneed cemetery revenue on our Consolidated Balance Sheet.

The transaction price allocated to preneed merchandise and service performance obligations that were unfulfilled was $ 4.8 million and $ 7.9 million at December 31, 2019 and December 31, 2020, respectively.

The transaction price allocated to preneed merchandise and service performance obligations that were unfulfilled were $ 7.9 million and $ 10.4 million at December 31, 2020 and 2021, respectively.

As these performance obligations are to be completed after the date of death, we cannot quantify the recognition of revenue in future periods.

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We and our subsidiaries file a consolidated U.

federal income tax return, separate income tax returns in 15 states and combined or unitary income tax returns in 14 states.

federal income tax return, separate income tax returns in 15 states in which we operate and combined or unitary income tax returns in 14 states in which we operate.

We record deferred taxes for temporary differences between the tax basis and financial reporting basis of assets and liabilities.

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and specify how reserves for uncertain tax positions should be classified on our Consolidated Balance Sheet.

The recently passed Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) has certain provisions that are applicable to the Company as follows:

(i) allowing net operating losses (“NOLs”) arising in 2018, 2019 and 2020 to be carried back five years;

(ii) increasing the taxable income threshold on the interest deduction from 30% to 50% for tax years beginning in 2019 and 2020;

(iii) suspending payment requirements for the 6.2% employer portion of Social Security taxes from the date of enactment through the end of 2020, with half the balance due by the end of 2021, and the other half due by the end of 2022;

(iv) our ability to receive employee retention credits up to $5,000 for paying wages to employees who are unable to work, while business operations are suspended.

In connection with the CARES Act, we filed a claim for a refund on June 30, 2020, to carryback the NOLs generated in the tax year ended December 31, 2018.

The refund claim from the 2018 tax year was received on August 7, 2020.

An additional carryback claim for a refund was filed on November 3, 2020 for the tax year ended December 31, 2019.

The refund from this filing has not yet been received.

The refund claim for $ 7.0 million from the 2018 tax year was received on August 7, 2020.

As our refund claim filed for tax year 2018 exceeded $5.0 million, our 2018 federal return is under audit by the Internal Revenue Service (“IRS”), as required in order to receive Joint Committee approval.

An additional carryback claim for a refund was filed on November 3, 2020 for the tax year ended December 31, 2019, which has not yet been received.

On December 4, 2020, Carriage filed an amended federal return for the tax year ended December 31, 2018, in order to take full advantage of the CARES Act legislative changes.

The changes reported in the amended return resulted in additional $ 2.3 million of loss.

The changes reported in the amended return resulted in additional $ 2.3 million of losses.

The additional losses generated from the amended filing will be administratively carried back and processed as part of the Joint Committee review of the 2018 carryback claim.

The majority of the NOLs generated in tax years 2018 and 2019 are the result of filing non-automatic accounting method changes relating to the recognition of revenue from our cemetery property and merchandise and services sales.

Due to the uncertainty of the timing of receiving Internal Revenue Service (“IRS”) approval of the method change applications, a reserve has been recorded against the net cash tax benefit derived from carrying back the NOLs generated to tax years in which the enacted federal rate was 35%.

The Company's unrecognized tax benefit reserve for the years ended December 31, 2019 and 2020 was $ 0.7 million and $ 3.7 million, respectively.

There was no reserve recorded at December 31, 2018.

Additional benefits stemming from the CARES Act are the deferral of approximately $ 3.5 million of the 6.2% employer portion of Social Security taxes and approximately $ 0.4 million employer retention credits for qualifying wages paid to employees unable to work due to governmental restrictions.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

These losses were carried back 5 years to tax years in which the enacted federal rate was 35%, under the CARES Act.

On October 11, 2021, we received an adverse ruling from the IRS for the accounting method change filed in 2018 for revenue recognition of cemetery property.

Approval is still pending for the accounting method change filed for revenue recognition of cemetery merchandise and services.

Upon receiving the adverse ruling for cemetery property, we filed an automatic accounting method change on Form 3115, to adopt the IRS’ preferred method of revenue recognition for cemetery property effective for the year ending December 31, 2021, reflected in this filing.

The accounting method change application was submitted under the “three-month window” rule, which would grant audit protection for the cumulative effect of the adverse ruling for revenue recognition of cemetery property, at the discretion of the IRS auditor currently reviewing our 2018 federal return.

Due to the uncertainty of receiving audit protection for the Form 3115 and not yet receiving approval of the cemetery merchandise and services accounting method change filed in 2018, a reserve remains against the net cash tax benefit derived from carrying back the NOLs generated to tax years in which the enacted federal rate was 35%.

Our unrecognized tax benefit reserve for the years ended December 31, 2019, 2020 and 2021 was $ 0.7 million, $ 3.7 million and $ 3.8 million, respectively.

See Note 17 to the Consolidated Financial Statements included herein for additional information related to income taxes.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Computation of Earnings Per Common Share

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Diluted earnings per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period.

Dilutive common equivalent shares consist of stock options and our Convertible Notes (as defined in Note 13).

Dilutive common equivalent shares consist of stock options, performance awards and our Convertible Notes (as defined in Note 13).

Share-based awards that contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are recognized as participating securities and included in the computation of both basic and diluted earnings per share.

Our grants of stock awards to our employees are considered participating securities, and we have prepared our earnings per share calculations attributable to common stockholders to exclude earnings allocated to unvested restricted stock awards, using the two-class method, in both the basic and diluted weighted average shares outstanding calculation.

The fully diluted weighted average shares outstanding for the years ended December 31, 2018, 2019 and 2020, and the corresponding calculation of fully diluted earnings per share, included 337,000 , 10,000 and 9,000 shares that would have been issued upon the conversion of our Convertible Notes as a result of the application of the if-converted method prescribed by the FASB ASC 260.

See Note 20 to the Consolidated Financial Statements included herein related to the computation of per share earnings.

Correction of Immaterial Error

During the fourth quarter of 2020, we corrected an immaterial error related to the net unrealized gains and losses associated with our trust investments.

We previously recognized the net unrealized gains and losses associated with our trust investments in Accumulated other comprehensive income (“OCI”).

In accordance with ASC 810, the fair value of our trust fund assets are accounted for as CFEs.

We have determined the fair value of the financial assets of the trust is more observable and we first measure those financial assets at fair value.

Our fair value of the financial liabilities mirror the fair value of the financial assets, in accordance with the ASC.

Any changes in fair value are recognized in earnings.

As such, we have made the adjustment to reflect changes in unrealized gains and losses related to our trust securities in Other, net on our Consolidated Statements of Operations.

The net unrealized gains and losses in our Preneed cemetery trust investments , Preneed funeral trust investments and Cemetery perpetual care trust investments are equally offset by the net unrealized gains and losses in our Deferred preneed funeral and cemetery receipts held in trust and Care trusts’ corpus , which results in a net impact of zero.

Management evaluated the effect of the adjustment on previously issued interim and annual Consolidated Financial Statements and concluded that it was immaterial to the interim and annual periods.

This adjustment had no impact on our Consolidated Balance Sheet, Consolidated Statements of Operations and Consolidated Statements of Cash Flows for the years ended December 31, 2018 and 2019.

Our grants of restricted stock awards to our employees and directors are considered participating securities, and we have prepared our earnings per share calculations attributable to common stockholders to exclude outstanding unvested restricted stock awards, using the two-class method, in both the basic and diluted weighted average shares outstanding calculation.

Our performance awards are considered to be contingently issuable shares because their issuance is contingent upon the satisfaction of certain performance and service conditions.

In accordance with ASC 260, we have included in the computation of diluted earnings per share the number of performance awards that would have been issuable as if the end of the reporting period was the end of the contingency period.

These shares are considered to be outstanding at the beginning of the reporting period.

See Note 20 to the Consolidated Financial Statements included herein related to the computation of earnings per share.

Subsequent Events

We have evaluated events and transactions during the period subsequent to December 31, 2021 through the date the financial statements were issued for potential recognition or disclosure in the accompanying financial statements covered by this report.

See Note 25 to the Consolidated Financial Statements included herein for additional information related to subsequent events.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

See Note 24 to the Consolidated Financial Statements included herein for additional information related to our subsequent events.

RECENTLY ISSUED ACCOUNTING STANDARDS

Fair Value Measurements

In August 2018, the FASB issued ASU, Fair Value Measurements (“Topic 820”) to modify the disclosure requirements related to fair value.

The amendment removes requirements to disclose (1) the amount of and reasons for transfers between levels 1 and 2 of the fair value hierarchy, (2) our policy related to the timing of transfers between levels, and (3) the valuation processes used in level 3 measurements.

It clarifies that, for investments measured at net asset value, disclosure of liquidation timing is only required if the investee has communicated the timing either to us or publicly.

It also clarifies that the narrative disclosure of the effect of changes in level 3 inputs should be based on changes that could occur at the reporting date.

The amendment adds a requirement to disclose the range and weighted average of the significant unobservable inputs used in level 3 measurements.

On January 1, 2020, we adopted the new standard and the impact was not material our Consolidated Financial Statements.

Financial Instruments - Credit Losses

On January 1, 2020, we adopted Topic 326 using the modified retrospective method and the impact was not material to our Consolidated Financial Statements.

See Notes 6 and 7 to the Consolidated Financial Statements herein for additional disclosures required by Topic 326.

In December 2019, the FASB issued ASU, Income Taxes (“Topic 740”).

The amendments in this ASU simplify the accounting for income taxes by removing certain exceptions such as (1) exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items (for example, discontinued operations or other comprehensive income) and (2) exception to the general methodology for calculating income taxes in an interim period when a year-to-date loss exceeds the anticipated loss for the year.

In addition, the ASU allows for the following (1) requiring that an entity recognize a franchise tax (or similar tax) that is partially based on income as an income-based tax and account for any incremental amount incurred as a non-income-based tax, (2) requiring that an entity evaluate when a step up in the tax basis of goodwill should be considered part of the business combination in which the book goodwill was originally recognized and when it should be considered a separate transaction, (3) requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date and (4) making minor codification improvements for income taxes related to employee stock ownership plans accounted for using the equity method.

On January 1, 2020, we early adopted the provisions of this ASU using the prospective method and the impact was not material to our Consolidated Financial Statements.

Accounting Pronouncements Not Yet Adopted

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These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022.

The Company did not utilize the optional expedients and exceptions provided by this ASU during the year ended December 31, 2020.

We did not utilize the optional expedients and exceptions provided by this ASU during the year ended December 31, 2021.

Business Combinations - Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

In October 2021, the FASB issued ASU, Business Combinations (“Topic 805”) to improve the accounting for acquired revenue contracts with customers in a business combination.

The amendments in this update provide specific guidance on how to recognize and measure acquired contract assets and contract liabilities from revenue contracts in a business combination.

These amendments require that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606 – Revenue from Contracts with Customers (“Topic 606”).

At the acquisition date, an acquirer should account for the related revenue contracts in accordance with Topic 606 as if it had originated the contracts.

These amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and should be applied prospectively to business combinations occurring on or after the effective date of the amendments.

Early adoption of the amendments is permitted.

We plan to adopt the provisions of this ASU for our fiscal year beginning January 1, 2023.

We are still evaluating the impact of adoption on our consolidated financial statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We did not acquire any businesses in 2021.

On January 3, 2020, we acquired one funeral home and cemetery combination business in Lafayette, California for $ 33.0 million in cash, of which $ 5.0 million was deposited in escrow in 2019 and $ 28.0 million was paid at closing in 2020.

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The results of the acquired business are reflected on our Consolidated Statements of Operations from the date of acquisition.

Subsequent to our initial purchase price allocation for this acquisition made during the first quarter of 2020, we have adjusted our purchase price allocation based on additional information which became available prior to December 31, 2020.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Subsequent to our initial purchase price allocation for this acquisition made during the first quarter of 2020, we adjusted and finalized our purchase price allocation based on additional information that became available prior to December 31, 2020.

The following table summarizes the breakdown of the purchase price allocation for our 2020 acquisition (in thousands):

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The goodwill recorded for our 2020 acquisition is expected to be deductible for tax purposes.

As of December 31, 2020, our accounting for our 2020 acquisition is complete.

On October 9, 2019, we acquired four funeral home businesses in Buffalo, New York for $ 15.3 million in cash.

On October 28, 2020, we acquired one funeral home and cemetery combination business, three funeral home businesses and three ancillary service businesses, which consist of a flower shop, a pet cremation business and an online cremation business, in the Rockwall, Texas area for $ 23.6 million in cash.

On December 31, 2019, pursuant to the Transactions Agreement dated November 25, 2019 with Calvary Memorial Park, Inc.

and Fairfax Memorial Funeral Home, LLC, all of the outstanding equity interests of one funeral and cemetery combination business in Fairfax, Virginia were acquired for $ 102.0 million in cash.

The following table summarizes the fair value of the assets acquired for our 2020 acquisition (in thousands):

Acquisition Date Type of Business Market Assets

Goodwill) Goodwill

Recorded Liabilities

January 3, 2020 One Funeral Home and Cemetery Combination Lafayette, CA $ 30,292 $ 13,416 $ ( 10,708 )

We recorded adjustments to the purchase price allocation for our 2019 acquisitions during the year ended December 31, 2020.

The following table summarizes the breakdown of the purchase price allocation for these businesses and the subsequent adjustments made based on additional information which became available subsequent to the acquisitions (in thousands):

Initial Purchase Price Allocation Adjustments Adjusted Purchase Price Allocation

Current assets $ 1,482 $ 204 $ 1,686

Trust investments 15,891 — 15,891

Property, plant & equipment 21,680 — 21,680

Cemetery property 11,994 ( 45 ) 11,949

Goodwill 99,344 638 99,982

Intangible and other non-current assets 8,269 ( 1,480 ) 6,789

Assumed liabilities ( 657 ) ( 145 ) ( 802 )

Trust liabilities ( 15,463 ) — ( 15,463 )

Deferred revenue ( 1,633 ) 992 ( 641 )

Purchase price $ 140,907 $ 164 $ 141,071

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

During the year ended December 31, 2020, we paid an additional $ 164,000 for our acquisition of the cemetery business in Fairfax, Virginia to reimburse the sellers for certain incremental taxes resulting from the 338(h)(10) election under the Internal Revenue Code.

We also received $ 153,000 in cash related to the closing of all operating bank accounts in place prior to the acquisition.

The goodwill recorded for our 2019 acquisitions is expected to be deductible for tax purposes.

As of December 31, 2020, our accounting for our 2019 acquisitions is complete.

The following table summarizes the fair value of the assets acquired for our 2019 acquisitions based on our final purchase price allocation (in thousands):

Acquisition Date Type of Business Market Assets

Goodwill) Goodwill

Recorded Liabilities

October 9, 2019 Four Funeral Homes Buffalo, NY $ 7,942 $ 7,340 $ —

October 28, 2019 One Funeral Home and Cemetery Combination, Three Funeral Homes and Three Ancillary Businesses Rockwall, TX $ 15,878 $ 14,226 $ ( 6,479 )

December 31, 2019 One Funeral Home and Cemetery Combination Fairfax, VA $ 34,175 $ 78,416 $ ( 10,427 )

Many of the former owners and staff of our acquired funeral homes and certain cemeteries have provided high quality service to families for generations, which often represents a substantial portion of the value of a business.

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Factors that could trigger an interim impairment review include, but are not limited to, significant negative industry or economic trends and significant adverse changes in the business climate, which may be indicated by a decline in our market capitalization or decline in operating results.

As a result of economic conditions caused by COVID-19, we performed a quantitative assessment of our goodwill at March 31, 2020 and we recorded an impairment to goodwill of $ 13.6 million during the quarter ended March 31, 2020 recorded in Net loss on divestitures and impairment charges , as the carrying amount of our funeral homes in the Eastern Region Reporting Unit exceeded the fair value.

For our 2020 annual impairment test, we performed a qualitative assessment and determined that there was no additional impairment to goodwill as the fair value of our reporting units was greater than the carrying value.

For our 2021 annual impairment test, we performed a qualitative assessment and determined that there was no impairment to goodwill.

For our 2020 annual impairment test, we performed a qualitative assessment and determined that there was no additional impairment to goodwill.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents changes in goodwill in the accompanying Consolidated Balance Sheet (in thousands):

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Goodwill at the end of the year $ 392,978 $ 391,972

During the year ended December 31, 2020, we recognized $ 14.1 million in goodwill related to our acquisitions;

$ 10.4 million was allocated to our cemetery segment and $ 3.7 million was allocated to our funeral home segment.

In addition, we allocated $ 5.7 million of goodwill to the sale of five funeral homes for a loss recorded in Net loss on divestitures and impairment charges .

During the year ended December 31, 2021, we allocated $ 1.0 million of goodwill to the sale of one funeral home for a loss recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

Goodwill is only allocated to the sale if the set is considered to be a business.

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$ 10.4 million was allocated to our cemetery segment and $ 3.7 million was allocated to our funeral home segment.

In addition, we allocated $ 4.2 million of goodwill to the sale of a funeral home for a loss recorded in Net loss on divestitures and impairment charges.

We also recorded a goodwill impairment of $ 0.7 million during 2019 related to two funeral homes that we divested which was recorded as a loss in Net loss on divestitures and impairment charges .

In addition, we allocated $ 5.7 million of goodwill to the sale of five funeral homes for a loss recorded in Net loss on divestitures, disposals and impairment charges .

See Notes 1, 3 and 5 to the Consolidated Financial Statements included herein, for a discussion of the methodology used for our annual goodwill impairment test and a discussion of our acquisitions and divestitures, respectively.

DIVESTED OPERATIONS

During 2021, we sold two funeral homes and one cemetery for $ 2.5 million and we merged six funeral homes with other businesses we own in existing markets.

During 2020, we sold eight funeral homes for $ 8.4 million.

During 2019, we divested three funeral homes whose building leases expired and sold a funeral home for $ 0.9 million.

In addition, we merged a funeral home with a business in an existing market.

During 2018, our management agreement with a Florida municipality expired and as a result, we divested three of our cemeteries.

In addition, we merged a funeral home with a business we own in an existing market.

The operating results of these divested funeral homes and cemeteries are reflected on our Consolidated Statements of Operations as shown in the table below (in thousands):

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( 3,883 ) ( 6,749 ) ( 62 )

Income tax benefit (expense) ( 246 ) 1,288 2,135

Net income (loss) from divested operations, after tax $ 535 $ ( 3,164 ) $ ( 4,455 )

(1) Net loss on divestitures is recorded in Net loss on divestitures and impairment charges on our Consolidated Statements of Operations.

Income tax benefit 1,288 2,135 16

Net loss from divested operations, after tax $ ( 3,164 ) $ ( 4,455 ) $ ( 40 )

(1) Net loss on divestitures is recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Accounts Receivable

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Other receivables 367 2,144 201 2,712

Allowance for bad debt ( 223 ) ( 626 ) — ( 849 )

Allowance for credit losses ( 327 ) ( 960 ) — ( 1,287 )

Accounts receivable, net $ 11,488 $ 13,414 $ 201 $ 25,103

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We do not provide an allowance for credit losses for these receivables as we have historically not had any collectability issues nor do we expect any in the foreseeable future.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the activity in our allowance for credit losses by portfolio segment for the year ended December 31, 2021 (in thousands):

January 1, 2020 Provision for Credit Losses Allowance Recorded at Acquisition Write Offs Recoveries December 31, 2020

January 1, 2021 Provision for Credit Losses Write Offs Recoveries December 31, 2021

Trade and financed receivables:

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Total allowance for credit losses on Trade and financed receivables $ ( 1,287 ) $ ( 1,240 ) $ 2,853 $ ( 1,316 ) $ ( 990 )

As noted in Note 3, we acquired preneed cemetery receivables in connection with the funeral home and cemetery combination business in Lafayette, California acquired on January 3, 2020.

We recorded an allowance for credit losses of $ 0.4 million on these acquired receivables ($ 0.2 million current portion shown above in Accounts receivable, net and $ 0.2 million non-current portion shown below in Preneed cemetery receivables, net as noted in the respective allowance rollforward tables under Allowance Recorded at Acquisition).

We accounted for the allowance for credit losses on these purchased financed assets using specific identification as these assets have a unique set of risk characteristics.

For these specifically identified receivables, we determined the allowance to be 60 % of the face value.

Bad debt expense for accounts receivable totaled $ 1.1 million for both the years ended December 31, 2018 and 2019.

Preneed Cemetery Receivables

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December 31, 2020 December 31, 2021

Cemetery interment rights $ 31,366 $ 36,696

Cemetery merchandise and services 9,950 10,526

Cemetery financed receivables

$ 41,316 $ 47,222

Interment rights $ 36,425 $ 40,863

Merchandise and services 6,449 7,348

Unearned finance charges 4,348 4,644

Preneed cemetery receivables $ 47,222 $ 52,855

The components of our preneed cemetery receivables are as follows (in thousands):

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Preneed cemetery receivables, at amortized cost $ 42,874 $ 48,211

allowance for bad debt and credit losses ( 1,916 ) ( 2,604 )

allowance for credit losses ( 2,604 ) ( 1,704 )

balances due on undelivered cemetery preneed contracts ( 7,919 ) ( 10,353 )

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Preneed cemetery receivables, net $ 21,081 $ 23,150

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the activity in our allowance for credit losses for Preneed cemetery receivables, net for the year ended December 31, 2021 (in thousands):

January 1, 2020 Provision for Credit Losses Allowance Recorded at Acquisition Write Offs December 31, 2020

January 1, 2021 Provision for Credit Losses Write Offs December 31, 2021

Total allowance for credit losses on Preneed cemetery receivables, net

$ ( 1,644 ) $ ( 543 ) $ 1,108 $ ( 1,079 )

Bad debt expense for our preneed receivables totaled $ 0.7 million and $ 0.5 million for the years ended December 31, 2018 and 2019, respectively.

The amortized cost basis of our preneed cemetery receivables by year of origination as of December 31, 2021 is as follows (in thousands):

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Total preneed cemetery receivables, at amortized cost $ 24,644 $ 10,955 $ 6,723 $ 3,158 $ 1,198 $ 1,533 $ 48,211

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The aging of past due preneed cemetery receivables as of December 31, 2021 is as follows (in thousands):

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Preneed funeral and cemetery contracts are secured by payments from customers, less amounts not required by law to be deposited into trust.

These earnings are recognized in Other revenue on the Consolidated Statements of Operations , when a service is performed or merchandise is delivered.

These earnings are recognized in Other revenue on our Consolidated Statements of Operations, when a service is performed or merchandise is delivered.

Trust management fees charged by CSV RIA are included as revenue in the period in which they are earned.

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We do not intend to sell and it is likely that we will not be required to sell the securities prior to their anticipated recovery.

Cemetery perpetual care trust investments represent a portion of the proceeds from the sale of cemetery property interment rights which we are required by various state laws to deposit into perpetual care trust funds.

Cemetery perpetual care trust investments represent a portion of the proceeds from the sale of cemetery property interment rights that we are required by various state laws to deposit into perpetual care trust funds.

The income earned from these perpetual care trusts offsets maintenance expenses for cemetery property and memorials.

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If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income.

For fixed income securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

income securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors.

In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors.

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If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.

Any unrealized loss that has not been recorded through an allowance for credit losses is recognized in other comprehensive income.

We rely on our trust investments to provide funding for the various contractual obligations that arise upon maturity of the underlying preneed contracts.

Because of the long-term relationship between the establishment of trust investments and the required performance of the underlying contractual obligations, the impact of current market conditions that may exist at any given time is not necessarily indicative of our ability to generate profit on our future performance obligations.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Preneed Cemetery Trust Investments

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Preneed cemetery trust investments $ 86,604 $ 100,903

The cost and fair market values associated with preneed cemetery trust investments at December 31, 2020 are detailed below (in thousands):

The cost and market values associated with preneed cemetery trust investments at December 31, 2021 are detailed below (in thousands):

Fair Value Hierarchy Level Cost Unrealized

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Preferred stock 2 12,455 1,111 ( 344 ) 13,222

Mortgage-backed securities 2 272 — ( 159 ) 113

Common stock 1 40,992 6,906 ( 4,079 ) 43,819

Mutual funds:

Equity 1 28 8 — 36

Fixed income 2 11,443 615 ( 567 ) 11,491

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Preferred stock 1,301 ( 63 ) 2,913 ( 281 ) 4,214 ( 344 )

Mortgage-backed securities — — 112 ( 159 ) 112 ( 159 )

Total fixed income securities with an unrealized loss $ 6,566 $ ( 629 ) $ 3,542 $ ( 717 ) $ 10,108 $ ( 1,346 )

The following table summarized our fixed income securities within our preneed cemetery trust investments in an unrealized loss position at December 31, 2019, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

The following table summarized our fixed income securities (excluding mutual funds) within our preneed cemetery trust investments in an unrealized loss position at December 31, 2020, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

December 31, 2020

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Realized losses ( 4,677 ) ( 5,090 ) ( 6,626 )

Unrealized gains (losses), net ( 6,610 ) 826 5,515

Unrealized gains, net 826 5,515 6,047

Expenses and taxes ( 1,313 ) ( 1,354 ) ( 1,715 )

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Preneed funeral trust investments $ 101,235 $ 113,658

The cost and fair market values associated with preneed funeral trust investments at December 31, 2020 are detailed below (in thousands):

The cost and market values associated with preneed funeral trust investments at December 31, 2021 are detailed below (in thousands):

Fair Value Hierarchy Level Cost Unrealized

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Fixed income securities:

treasury debt 1 819 6 — 825

Foreign debt 2 14,936 1,874 ( 887 ) 15,923

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Preferred stock 2 11,001 986 ( 319 ) 11,668

Mortgage-backed securities 2 293 1 ( 155 ) 139

Common stock 1 36,694 6,417 ( 3,574 ) 39,537

Mutual funds:

Equity 1 26 7 — 33

Fixed income 2 9,396 454 ( 470 ) 9,380

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Mutual funds:

Equity 1 772 617 ( 4 ) 1,385

Fixed income 2 6,475 1,198 ( 121 ) 7,552

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Preferred stock 1,211 ( 58 ) 2,710 ( 261 ) 3,921 ( 319 )

Mortgage-backed securities — — 111 ( 155 ) 111 ( 155 )

Total fixed income securities with an unrealized loss $ 6,427 $ ( 613 ) $ 3,258 $ ( 639 ) $ 9,685 $ ( 1,252 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarized our fixed income securities within our preneed funeral trust investment in an unrealized loss position at December 31, 2019, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

The following table summarized our fixed income securities (excluding mutual funds) within our preneed funeral trust investment in an unrealized loss position at December 31, 2020, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

December 31, 2020

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Realized losses ( 4,612 ) ( 4,677 ) ( 6,155 )

Unrealized gains (losses), net ( 6,727 ) 1,499 5,555

Unrealized gains, net 1,499 5,555 5,665

Expenses and taxes ( 1,129 ) ( 878 ) ( 1,221 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table reflects the cost and fair market values associated with the trust investments held in perpetual care trust funds at December 31, 2020 (in thousands):

The following table reflects the cost and market values associated with the trust investments held in perpetual care trust funds at December 31, 2021 (in thousands):

Fair Value Hierarchy Level Cost Unrealized

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Preferred stock 2 9,742 803 ( 226 ) 10,319

Mortgage-backed securities 2 206 — ( 121 ) 85

Common stock 1 27,853 4,990 ( 3,008 ) 29,835

Mutual funds:

Equity 1 19 5 — 24

Fixed income 2 8,141 530 ( 460 ) 8,211

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Mutual funds:

Equity 1 233 146 ( 1 ) 378

Fixed income 2 6,444 1,054 ( 220 ) 7,278

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Preferred stock 856 ( 41 ) 1,917 ( 185 ) 2,773 ( 226 )

Mortgage-backed securities — — 85 ( 121 ) 85 ( 121 )

Total fixed income securities with an unrealized loss $ 4,351 $ ( 394 ) $ 2,385 $ ( 511 ) $ 6,736 $ ( 905 )

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Realized losses ( 1,258 ) ( 1,695 ) ( 950 )

Unrealized gains (losses), net ( 4,405 ) 2,964 4,355

Unrealized gains, net 2,964 4,355 4,421

Net change in Care trusts’ corpus ( 3,369 ) ( 5,262 ) ( 5,945 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

RECEIVABLES FROM PRENEED TRUSTS

Our receivables from preneed trusts represent assets in trusts which are controlled and operated by third parties in which we do not have a controlling financial interest (less than 50%) in the trust assets.

RECEIVABLES FROM PRENEED FUNERAL TRUSTS

Our receivables from preneed funeral trusts represent assets in trusts which are controlled and operated by third parties in which we do not have a controlling financial interest (less than 50%) in the trust assets.

We account for these investments at cost.

R eceivables from preneed trusts are as follows (in thousands):

Receivables from preneed funeral trusts are as follows (in thousands):

December 31, 2020 December 31, 2021

Preneed trust funds, at cost $ 18,581 $ 17,365

Preneed funeral trust funds, at cost $ 17,365 $ 19,597

allowance for contract cancellation ( 521 ) ( 588 )

Receivables from preneed trusts, net $ 18,024 $ 16,844

Receivables from preneed funeral trusts, net $ 16,844 $ 19,009

The following summary reflects the composition of the assets held in trust and controlled by third parties to satisfy our future obligations under preneed arrangements related to the preceding contracts at December 31, 2020 and 2021.

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Insurance commissions are subject to refund (charge-back) if the preneed policy is cancelled within a year or if there is an imminent death of beneficiary before the first year anniversary of the policy.

We record these insurance commissions as Other revenue , as noted in our table of disaggregated revenue in Note 21 to the Consolidated Financial Statements included herein, when the commission is no longer subject to refund, which is typically one year after the policy is issued.

We record these insurance commissions as Other revenue when the commission is no longer subject to refund, which is typically one year after the policy is issued.

All selling costs incurred pursuant to the sale of the insurance funded preneed contracts are expensed as incurred.

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The fair values of our receivables on preneed cemetery contracts are impracticable to estimate because of the lack of a trading market and the diverse number of individual contracts with varying terms.

Our acquisition debt and Credit Facility (as defined in Note 12), Convertible Notes (as defined in Note 13) and Senior Notes (as defined in Note 14) are classified within Level 2 of the Fair Value Measurements hierarchy.

Our acquisition debt and Credit Facility (as defined in Note 12) and Senior Notes (as defined in Note 14) are classified within Level 2 of the Fair Value Measurements hierarchy.

At December 31, 2021, the carrying value and fair value of our Credit Facility was $ 155.4 million.

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At December 31, 2021, the carrying value of our acquisition debt was $ 4.5 million, which approximated its fair value.

The fair value of our Convertible Notes was approximately $ 3.7 million at December 31, 2020 based on the last traded or broker quoted price.

The fair value of our Senior Notes was approximately $ 427.9 million at December 31, 2020 based on the last traded or broker quoted price.

The fair value of our Senior Notes was $ 401.6 million at December 31, 2021 based on the last traded or broker quoted price.

We identified investments in fixed income securities, common stock and mutual funds presented within the preneed and perpetual care trust investments categories on our Consolidated Balance Sheet as having met the criteria for fair value measurement.

We account for these investments at cost.

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As of December 31, 2020 and 2021, we did not have any assets that had fair values determined by Level 3 inputs and no liabilities measured at fair value.

See Notes 7 and 8 to our Consolidated Financial Statements herein for additional information on the fair value hierarchy levels of our trust investments and receivables from preneed trusts, respectively.

See Notes 7 and 8 to our Consolidated Financial Statements herein for the fair value hierarchy levels of our trust investments.

INTANGIBLE AND OTHER NON-CURRENT ASSETS

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Our tradenames have indefinite lives and therefore are not amortized.

During the years ended December 31, 2019 and 2020, we increased tradenames by $ 7.8 million and $ 0.4 million, respectively, related to our 2019 and 2020 acquisitions described in Note 3 to the Consolidated Financial Statements included herein.

As a result of economic conditions caused by COVID-19, we performed a quantitative assessment of our tradenames at March 31, 2020 and we recorded an impairment to tradenames for certain of our funeral homes of $ 1.1 million during the quarter ended March 31, 2020 recorded in Net loss on divestitures and impairment charges, as the carrying amount of these tradenames exceeded the fair value.

During the year ended December 31, 2020, we divested four funeral homes that had a carrying value of tradenames of $ 1.0 million, which was included in the gain or loss on the sale of divestitures and recorded in Net loss on divestitures and impairment charges on our Consolidated Statements of Operations.

During 2019, we recorded an impairment to tradenames of $ 0.2 million as a result of our 2019 annual impairment test as the carrying amount of certain tradenames exceeded the fair value.

During the year ended December 31, 2020, we increased tradenames by $ 0.4 million related to our 2020 acquisitions described in Note 3 to the Consolidated Financial Statements included herein.

For our 2021 annual impairment test, we performed a qualitative assessment and concluded there that was no impairment to our intangible assets.

See Notes 1, 3 and 5 to the Consolidated Financial Statements included herein, for a discussion of the methodology used for our indefinite lived intangible asset impairment test and discussion of our acquisitions and divestitures, respectively.

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Prepaid agreements not-to-compete are amortized over the term of the respective agreements, ranging generally from one to ten years .

Amortization expense was approximately $ 0.6 million, $ 0.7 million and $ 0.7 million for the years ended December 31, 2018, 2019 and 2020, respectively.

During the year ended December 31, 2020, we divested three funeral homes that had a carrying value of prepaid agreements not-to-compete of $ 0.5 million, which was included in the gain or loss on the sale of divestitures and recorded in Net loss on divestitures and impairment charges on our Consolidated Statements of Operations.

Amortization expense was $ 673,000 , $ 719,000 and $ 645,000 for the years ended December 31, 2019, 2020 and 2021, respectively.

During the year ended December 31, 2020, we divested three funeral homes that had a carrying value of prepaid agreements not-to-compete of $ 537,000 , which was included in the gain or loss on the sale of divestitures and recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

See Note 5 to the Consolidated Financial Statements included herein, for a discussion of our divestitures.

During the year ended December 31, 2019, we increased prepaid agreements not-to-compete by $ 0.4 million related to our 2019 acquisitions described in Note 3 to the Consolidated Financial Statements included herein.

Capitalized Commissions

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These costs are amortized on a straight-line basis over the average maturity period for our preneed cemetery merchandise and services contracts and preneed funeral trust contracts, of eight and ten years , respectively.

Amortization expense totaled $ 0.6 million for both the years ended December 31, 2019 and 2020.

Amortization expense was $ 558,000 , $ 580,000 and $ 640,000 for the years ended December 31, 2019, 2020 and 2021, respectively.

The aggregate amortization expense for our non-compete agreements and capitalized commissions as of December 31, 2021 is as follows (in thousands):

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CREDIT FACILITY AND ACQUISITION DEBT

On December 19, 2019, we entered into a third amendment and commitment increase to our $ 150.0 million senior secured revolving credit facility (“Credit Facility”) with the financial institutions party thereto, as lenders, and Bank of America, N.A., as administrative agent (in such capacity, the “Administrative Agent”) to increase our commitment to $ 190.0 million and incurred $ 0.9 million in transactions costs, which were capitalized and will be amortized over the remaining term of the related debt using the straight-line method.

At December 31, 2020, our Credit Facility was comprised of:

At December 31, 2020, our senior secured revolving credit facility (the "Former 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 final maturity of the Former Credit Facility was to occur on May 31, 2023.

On May 13, 2021, in connection with the issuance of the Senior Notes (defined in Note 14), we entered into an amended and restated $ 150.0 million senior secured revolving credit facility (the “Credit Facility”) with the 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 Credit Facility, which were capitalized and will be amortized over the remaining term of the related debt using the straight-line method.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The Company’s obligations under the Credit Facility are unconditionally guaranteed on a joint and several basis by the same subsidiaries which guarantee the Senior Notes (as defined in Note 14) and certain of the Company’s Credit Facility Guarantors.

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 (as defined below).

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.

On May 13, 2021, we used $ 21.4 million of the availability under the Credit Facility to repay the then outstanding balances under our 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 Credit Facility.

In connection with the termination of the Former Credit Facility, we recognized a loss on the write-off of $ 0.1 million in unamortized debt issuance costs, which was recorded in Loss on extinguishment of debt .

On November 22, 2021, we entered into a first amendment and commitment increase to the Credit Facility with the financial institutions party thereto, as lenders, and Bank of America, N.A., as administrative agent.

Pursuant to this amendment, the revolving credit commitment was increased from $ 150.0 million to $ 200.0 million.

We incurred $ 0.1 million in transactions costs related to this amendment, which were capitalized and will be amortized over the remaining term of the related debt using the straight-line method.

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

The 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 Credit Facility will occur on May 13, 2026.

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 Subsidiary Guarantors.

In addition, the 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 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 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 and 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.

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

(A) a Total Leverage Ratio not to exceed, (i) 5.75 to 1.00 for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020 and (ii) 5.50 to 1.00 for the quarter ended December 31, 2020 and each quarter ended thereafter, (B) a Senior Secured Leverage Ratio (as defined in the Credit Facility) not to exceed 2.00 to 1.00 as of the end of any period of four consecutive fiscal quarters, and (C) a Fixed Charge Coverage Ratio (as defined in the Credit Facility) of not less than 1.20 to 1.00 as of the end of any period of four consecutive fiscal quarters.

(A) a Total Leverage Ratio not to exceed, (i) 5.00 to 1.00 and (B) a Fixed Charge Coverage Ratio (as defined in the Credit Facility) of not less than 1.20 to 1.00 as of the end of any period of four consecutive fiscal quarters.

These financial maintenance covenants are calculated for the Company and its subsidiaries on a consolidated basis.

On May 18, 2020, we received a limited waiver under our Credit Facility for the failure to comply with the Total Leverage Ratio covenant for the fiscal quarter ended March 31, 2020.

In connection with the waiver, we also entered into a fourth amendment to the Credit Facility which increased the interest rate margin applicable to borrowings by up to 0.625% at each pricing level based on the Total Leverage Ratio.

We did not incur any transaction costs related to the limited waiver and fourth amendment to the Credit Facility.

On August 7, 2020, we obtained a limited consent from the lenders under our Credit Facility in connection with our privately-negotiated repurchases of our Convertible Notes (as defined in Note 13).

See Note 13 to the Consolidated Financial Statements included herein, for a discussion of our privately-negotiated repurchases.

We were in compliance with the total leverage ratio, fixed charge coverage ratio and senior secured leverage ratio covenants contained in our Credit Facility at December 31, 2020.

We were in compliance with all of the covenants contained in our Credit Facility at December 31, 2021.

Our Credit Facility and Acquisition debt consisted of the following (in thousands):

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At December 31, 2021, we had outstanding borrowings under the Credit Facility of $ 155.4 million.

We had one letter of credit for $ 2.0 million issued on November 30, 2019 and outstanding under the Credit Facility, which was increased to $ 2.1 million on September 29, 2020.

The letter of credit bears interest at 3.125 % and will expire on November 26, 2021.

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

At December 31, 2020, we had $ 140.7 million of availability under the Credit Facility after giving affect to the $ 2.1 million of the outstanding letter of credit.

We also had one letter of credit for $ 2.1 million under the Credit Facility, which was increased to $ 2.3 million on September 1, 2021.

The letter of credit will expire on November 25, 2022 and is expected to automatically renew annually and secures our obligations under our various self-insured policies.

At December 31, 2021, we had $ 42.3 million of availability under the Credit Facility.

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 December 31, 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 Credit Facility for the years ended December 31, 2019 and 2020 was 2.9 % and 3.8 %, respectively.

The weighted average interest rate on our Credit Facility for the year ended December 31, 2021 was 2.4 %.

The weighted average interest rate on our Former Credit Facility for the year ended December 31, 2020 was 3.8 %.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We have no material assets or operations independent of our subsidiaries.

All assets and operations are held and conducted by subsidiaries, each of which have fully and unconditionally guaranteed our obligations under the Credit Facility.

Additionally, we do not currently have any significant restrictions on our ability to receive dividends or loans from any Credit Facility Guarantors.

We have no material assets or operations independent of Subsidiary Guarantors, as all of our assets and operations are held and conducted by the Subsidiary Guarantors.

Additionally, we do not currently have any significant restrictions on our ability to receive dividends or loans from any Subsidiary Guarantors.

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

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A majority of the deferred purchase price and notes bear no interest and are discounted at imputed interest rates ranging from 7.3 % to 10.0 %.

Original maturities range from five to twenty years.

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

Original maturities typically range from five to twenty years .

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

Years ended December 31,

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On March 19, 2014, we issued $ 143.75 million aggregate principal amount of our 2.75 % convertible subordinated notes due 2021 (the “Convertible Notes”).

The Convertible Notes are due on March 15, 2021 and bear interest at 2.75 % per year, which is payable semi-annually in arrears on March 15 and September 15 of each year.

On May 7, 2018, we completed our exchange of approximately $ 115.0 million in aggregate principal amount of Convertible Notes in a privately-negotiated exchange agreement with a limited number of convertible noteholders.

On December 24, 2018, we completed privately-negotiated repurchases of an additional $ 22.4 million in aggregate principal amount of Convertible Notes.

On April 4, 2019, we completed a privately-negotiated repurchase of $ 25,000 in aggregate principal amount of Convertible Notes then outstanding for $ 27,163 .

On September 9, 2020, we completed privately-negotiated repurchases of $ 3.8 million in aggregate principal amount of our Convertible Notes for $ 4.6 million in cash (including accrued interest of $ 0.1 million) and recorded $ 0.8 million for the reacquisition of the equity component.

The September 2020 repurchases represented approximately 60 % of the aggregate principal amount of Convertible Notes then outstanding.

Following the settlement of the September 2020 repurchases, the aggregate principal amount of the Convertible Notes was reduced to approximately $ 2.6 million.

The Convertible Notes were due on March 15, 2021 and bear interest at 2.75 % per year, which was payable semi-annually in arrears on March 15 and September 15 of each year.

In May 2018, we exchanged $ 115.0 million in aggregate principal amount of Convertible Notes in a privately-negotiated exchange with a limited number of convertible noteholders.

We completed privately-negotiated repurchases of $ 22.4 million, $ 25,000 and $ 3.8 million in aggregate principal amount of our Convertible Notes in December 2018, April 2019 and September 2020, respectively.

During the year ended December 31, 2021, we converted $ 2.4 million in aggregate principal amount of our Convertible Notes held by certain holders for $ 3.8 million in cash and recorded $ 1.4 million for the reacquisition of the equity component.

The Convertible Notes matured on March 15, 2021, at which time all Convertible Notes outstanding, $ 0.2 million in aggregate principal amount, were paid in full in cash at par value.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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Unamortized discount of liability component ( 20 ) —

Convertible Notes issuance costs, net of accumulated amortization of $ 130 and $ 63 , respectively

Convertible Notes issuance costs, net of accumulated amortization of $ 63

Carrying value of the liability component $ 2,538 $ —

Carrying value of the equity component $ 319 $ —

The carrying value of the liability component and the carrying value of the equity component are recorded in Convertible subordinated notes due 2021 and Additional paid-in capital , respectively, on our Consolidated Balance Sheet at December 31, 2019 and 2020.

The fair value of the Convertible Notes, which are Level 2 measurements, was $ 3.7 million at December 31, 2020.

At December 31, 2020, the adjusted conversion rate of the Convertible Notes is 45.9712 shares of our common stock per $1,000 principal amount of Convertible Notes, equivalent to an adjusted conversion price of $ 21.75 per share of common stock.

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

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Convertible Notes amortization of debt issuance costs 24 20 1

The remaining unamortized debt discount and the remaining unamortized debt issuance costs are being amortized using the effective interest method over the remaining term of approximately two months of the Convertible Notes.

The effective interest rate on the unamortized debt discount for both years ended December 31, 2019 and 2020 was 11.4 %.

The effective interest rate on the debt issuance costs for the years ended December 31, 2019 and 2020 was 3.2 % and 3.1 %, respectively.

The aggregate maturities of our Convertible Notes for the next five years subsequent to December 31, 2020 and thereafter are as follows (in thousands):

Principal Maturity Discount Amortization Present

Years ending December 31,

2021 $ 2,559 $ ( 20 ) $ 2,539

Thereafter — — —

Total $ 2,559 $ ( 20 ) $ 2,539

On May 31, 2018, we issued $ 325.0 million in aggregate principal amount of our 6.625 % senior notes due 2026 (the “Initial Senior Notes”) and related guarantees in a private offering under Rule 144A and Regulations S under the Securities Act.

The Initial 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.

On December 19, 2019, we issued an additional $ 75.0 million in aggregate principal amount of our Initial Senior Notes (the “Additional Senior Notes” and, together with the Initial Senior Notes, the “Senior Notes”) and related guarantees by the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Subsidiary Guarantors in a private offering under Rule 144A and Regulation S of the Securities Act.

The Additional Senior Notes were issued as additional securities under the Indenture.

We received proceeds of $ 76.9 million from the issuance of the Additional Senior Notes, net of a debt premium of $ 1.7 million (plus accrued interest of $ 0.2 million).

We incurred $ 1.0 million in debt issuance costs related to the Additional Senior Notes.

The Senior Notes are treated as a single class of securities under the Indenture, and the Additional Senior Notes have identical terms to the Initial Senior Notes, except with respect to the date of issuance, the issue price, the initial interest accrual date and the initial interest payment date.

The effective interest rate on the unamortized debt discount and debt issuance costs for both years ended December 31, 2020 and 2021 was 11.4 % and 3.1 % , respectively.

On May 13, 2021, we issued $ 400.0 million in aggregate principal amount of 4.25 % Senior Notes due 2029 (the “Senior Notes”) and related guarantees by the Subsidiary Guarantors in a private offering under Rule 144A and Regulation S of the Securities Act.

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

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.

During the year ended December 31, 2021, we incurred $ 1.3 million in transaction costs related to the Senior Notes.

For the year ended December 31, 2021, we recognized a net loss of $ 23.7 million related to the redemption of the Original Senior Notes, which was recorded in 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 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 Senior Notes bear interest at 4.25 % per year.

Interest on the Senior Notes began to accrue on May 31, 2018 and is payable semi-annually in arrears on June 1 and December 1 of each year, beginning on December 1, 2018 with respect to the Initial Senior Notes and June 1, 2020 with respect to the Additional Senior Notes to holders of record on each May 15 and November 15 preceding an interest payment date.

The Senior Notes mature on June 1, 2026, unless earlier redeemed or repurchased.

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

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

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.

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.

We may redeem the 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 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 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 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 Senior Notes (including any additional Senior Notes) outstanding under the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Indenture remain outstanding immediately after the occurrence of such redemption (unless all 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 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.

2 unchanged sentences

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 89 months of the Senior Notes.

The effective interest rate on the unamortized debt discount and the unamortized debt issuance costs for the Senior Notes for the year ended December 31, 2021 was 4.42 % and 4.30 %, respectively.

The carrying value of our Senior Notes is reflected on our Consolidated Balance Sheet as follows (in thousands):

2 unchanged sentences

Principal amount $ 400,000 $ 400,000

Debt premium, net of accumulated amortization of $ 0 and $ 221 , respectively

Debt premium, net of accumulated amortization of $ 221

Debt discount, net of accumulated amortization of $ 1,293 and $ 301 , respectively

4 unchanged sentences

The fair value of the Senior Notes, which are Level 2 measurements, was $ 401.6 million at December 31, 2021.

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 65 months of the Senior Notes.

The effective interest rate on the unamortized debt discount and the unamortized debt issuance costs for the Initial Senior Notes, which were issued in May 2018, for the year ended December 31, 2020 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 Senior Notes, which were issued in December 2019, for year ended December 31, 2020 was 6.20 % and 6.90 %, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The effective interest rate on the unamortized debt discount and the unamortized debt issuance costs for the Original Senior Notes, issued in May 2018, for the year ended December 31, 2020 was 6.69 %.

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 year ended December 31, 2020 was 6.90 %.

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

5 unchanged sentences

Senior Notes amortization of debt issuance costs 139 280 195

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The aggregate maturities of our Senior Notes for the next five years subsequent to December 31, 2021 and thereafter are as follows (in thousands):

Principal Maturity Discount Amortization Premium Amortization Present

Principal Maturity Discount Amortization Carrying

Years ending December 31,

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Total $ 400,000 $ ( 4,199 ) $ 395,801

On January 1, 2019, we adopted Topic 842 using the modified retrospective method for all lease arrangements at the beginning of the period of adoption.

Results for reporting periods beginning January 1, 2019 are presented under Topic 842, while prior period amounts have not been adjusted and continue to be reported in accordance with Topic 840.

On January 1, 2019, we recorded operating lease right-of-use assets of $ 16.5 million and operating lease liabilities of $ 17.3 million, related to real estate and equipment leases, based on the present value of the future lease payments on the date of adoption.

Our lease obligations consist of operating and finance leases related to real estate and equipment.

5 unchanged sentences

Short-term lease cost Facilities and grounds expense (1)

Variable lease cost Facilities and grounds expense (1)

Finance lease cost:

Depreciation of leased assets Depreciation and amortization (2)

$ 498 $ 439 $ 438

Interest on lease liabilities Interest expense 520 496 471

3 unchanged sentences

(2) Depreciation and amortization expense is included within Field depreciation expense and Home office depreciation and amortization on our Consolidated Statements of Operations.

Variable lease expense was immaterial for the years ended December 31, 2019 and 2020.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Supplemental cash flow information related to our leases is as follows (in thousands):

Years Ended December 31,

2019 2020 2021

Cash paid for operating leases included in operating activities $ 3,910 $ 3,383 $ 3,822

3 unchanged sentences

Right-of-use assets obtained in exchange for new operating lease liabilities $ 782 $ ( 1,313 )

$ 8,175 $ 782

Right-of-use assets obtained in exchange for new finance lease liabilities — —

(1) During the year ended December 31, 2019, we modified an existing operating lease to extend the term through 2030.

As a result of this modification, we increased our lease liabilities and right-of-use assets by $ 8.2 million.

During the year ended December 31, 2021, we received a leasehold improvement allowance of $ 1.4 million for the renovation of our home office space in Houston, Texas from our lessor.

We recorded a leasehold improvement asset as property,

plant and equipment and reduced our right-of-use asset by $ 1.4 million.

The leasehold improvement allowance will be recognized prospectively by ratably reducing the lease expense over the remaining lease term.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Supplemental balance sheet information related to leases is as follows (in thousands):

11 unchanged sentences

Total lease liabilities $ 28,238 $ 25,965

The average lease terms and discount rates as of December 31, 2020 are as follows:

The average lease terms and discount rates at December 31, 2021 are as follows:

Weighted-average remaining lease term (years) Weighted-average discount rate

1 unchanged sentence

Finance leases 12.1 8.2 %

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The aggregate future lease payments for operating and finance leases as of December 31, 2020 are as follows (in thousands):

The aggregate future lease payments for operating and finance leases at December 31, 2021 are as follows (in thousands):

Operating Finance

9 unchanged sentences

Present value of lease liabilities $ 20,433 $ 5,532

As of December 31, 2020, we had no additional significant operating or finance leases that had not yet commenced .

At December 31, 2021, we had no additional significant operating or finance leases that had not yet commenced .

COMMITMENTS AND CONTINGENCIES

7 unchanged sentences

These agreements are generally for three to five years and provide for participation in various incentive compensation arrangements.

These agreements generally renew automatically on an annual basis after their initial term has expired.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

agreements generally renew automatically on an annual basis after their initial term has expired, with the exception of our Chairman of the Board and Chief Executive Officer, which does not renew after the current term expiring in February 2028.

At December 31, 2021, the maximum estimated future cash commitments under these agreements with remaining commitment terms, and with original terms of more than one year, are as follows (in thousands):

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Payne, our Chairman of the Board and Chief Executive Officer, has an employment agreement that does not renew after the initial term.

See Note 25 to the Consolidated Financial Statements included herein for additional information regarding Mr.

Payne's employment agreement.

Defined Contribution Plan

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For each of our outstanding legal matters, we evaluate the merits of the case, our exposure to the matter, possible legal or settlement strategies, and the likelihood of an unfavorable outcome.

If we determine that an unfavorable outcome is probable and can be reasonably estimated, we establish the necessary

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

If we determine that an unfavorable outcome is probable and can be reasonably estimated, we establish the necessary accruals.

We hold certain insurance policies that may reduce cash outflows with respect to an adverse outcome of certain of these litigation matters.

Faria, et al.

Carriage Funeral Holdings, Inc., Superior Court of California, Contra Costa County, Case No.

On March 26, 2018, six Plaintiffs filed a putative class action against Carriage Funeral Holdings, Inc., our subsidiary, their alleged employer, on behalf of themselves and all similarly situated current and former employees.

Plaintiffs seek monetary damages and claim that Carriage Funeral Holdings, Inc.

failed to pay minimum wages, provide meal and rest breaks, provide accurately itemized wage statements, reimburse employees for required expenses, and provide wages when due.

Plaintiffs also claim that Carriage Funeral Holdings, Inc.

violated California Business and Professions Code §17200 et seq.

On June 5, 2018, Plaintiffs filed a First Amended Complaint to add a claim under the California Private Attorney General Act.

On October 23, 2018, the parties mediated this matter and executed a Memorandum of Understanding for class settlement.

In February 2019, a Class Action Settlement Agreement was fully executed and was approved by the Court in October 2019.

We paid $ 0.7 million under the settlement agreement in November 2019.

This case was formally closed on May 25, 2020.

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.

See Note 24 to the Consolidated Financial Statements included herein for further discussion of the expected final settlement of this matter.

The provision for income taxes consisted of the following (in thousands):

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Total current provision (benefit) $ ( 2,234 ) $ 3,955 $ 11,837

federal provision $ 2,831 $ 8,056 $ 3,994

State provision 992 2,061 603

Total deferred provision $ 3,823 $ 10,117 $ 4,597

federal provision (benefit) $ 8,056 $ 3,994 $ ( 452 )

State provision (benefit) 2,061 603 ( 240 )

Total deferred provision (benefit) $ 10,117 $ 4,597 $ ( 692 )

Total income tax provision $ 7,883 $ 8,552 $ 11,145

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

A reconciliation of income taxes calculated at the U.S.

7 unchanged sentences

Effect of divestitures and impairment of businesses 911 4.10 846 3.40 103 0.2

Change in valuation allowance 26 0.1 ( 34 ) ( 0.2 ) ( 9 ) —

Re-measurement of deferred taxes due to tax reform ( 466 ) ( 2.5 ) — — — —

Change in valuation allowance, net of federal benefit ( 34 ) ( 0.2 ) ( 9 ) — ( 19 ) —

Total $ 7,883 35.1 % $ 8,552 34.7 % $ 11,145 25.1 %

Discrete tax expense for the year ended December 31, 2020 includes $ 0.1 million expense related to stock based compensation and $0.5 million primarily related to return to provision adjustments, state legislative changes and other discrete items.

The discrete tax adjustment for the year ended December 31, 2021 includes a $ 1.2 million excess tax benefit related to share-based payments and other adjustments including return to provision analysis and state legislative changes.

We are subject to taxation in the United States and various states.

As of December 31, 2021, tax years 2013 to 2020 are subject to examination by taxing authorities.

On May 10, 2017, we filed amended federal returns for the tax years ended December 31, 2013, 2014 and 2015, which generated refunds of approximately $ 1.9 million.

On May 10, 2017, we filed amended federal returns for the tax years ended December 31, 2013, 2014 and 2015, which generated refunds of $ 1.9 million.

The amended returns are under audit and as a result, the administrative processing of the carryback claims requires that the statute for tax years 2013 to 2015 remains open.

In connection with the 2019 stock acquisition of Calvary Memorial Park cemetery in Fairfax, Virginia, a 338(h)(10) election was filed April 24, 2020, which allowed the basis in the acquired assets to be stepped up to fair market value.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

On June 30, 2020, Carriage filed a carryback claim for a refund for the tax year ended December 31, 2018, for $ 7.0 million.

On June 30, 2020, we filed a carryback claim for a refund for the tax year ended December 31, 2018 for $ 7.0 million.

The requested refund was received on August 7, 2020.

On November 3, 2020, Carriage filed a carryback claim for refund for the tax year ended December 31, 2019, for $1.2 million.

The requested refund for tax year 2019 has not yet been received.

On December 4, 2020, Carriage filed an amended federal return for the tax year ended December 31, 2018, in order to take full advantage of the CARES Act legislative changes.

As our refund claim filed for the tax year 2018 exceeded $5 million, our 2018 federal return is under IRS under audit as required in order to receive Joint Committee approval for the refund.

On November 3, 2020, we filed a carryback claim for refund for the tax year ended December 31, 2019 for $ 1.2 million, which has not yet been received.

On December 4, 2020, we filed an amended federal return for the tax year ended December 31, 2018, in order to take full advantage of the CARES Act legislative changes.

The changes reported in the amended return resulted in additional $ 2.3 million of loss.

The additional losses generated from the amended filing will be administratively carried back and processed as part of the Joint Committee review of the 2018 carryback claim.

The majority of the NOLs generated in tax years 2018 and 2019 are primarily the result of filing non-automatic accounting method changes relating to cemetery property and merchandise and services deferred revenue.

These losses were carried back 5 years to tax years in which the enacted federal rate was 35%, under the CARES Act.

On October 11, 2021, we received an adverse ruling from the IRS for the accounting method change filed in 2018 for revenue recognition of cemetery property.

Approval is still pending for the accounting method change filed for revenue recognition of cemetery merchandise and services.

Upon receiving the adverse ruling on the revenue recognition of cemetery property accounting method change, we filed an automatic method change on Form 3115, to adopt the IRS’ preferred revenue recognition method for cemetery property.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The tax effects of temporary differences from total operations that give rise to significant deferred tax assets and liabilities are as follows (in thousands):

14 unchanged sentences

Preneed liabilities ( 6,427 ) ( 4,224 )

( 6,446 ) ( 6,427 )

Convertible subordinated notes due 2021 ( 75 ) ( 5 )

Prepaid and other assets ( 289 ) —

Convertible Notes ( 5 ) —

Total deferred income tax liabilities ( 57,378 ) ( 60,254 )

3 unchanged sentences

Management reviews the valuation allowance at the end of each quarter and makes adjustments if it is determined that it is more-likely-than not that the tax benefits will be realized.

We recognized an immaterial net decrease in our valuation allowance during 2020.

We recognized an immaterial net decrease in our valuation allowance during 2020 and 2021.

For state reporting purposes, we have $ 24.4 million of net operating loss carryforwards that will expire between 2022 and 2041, if not utilized.

5 unchanged sentences

The deferred tax assets recognized for those NOLs are presented net of these unrecognized tax benefits.

At December 31, 2020, the Company’s unrecognized tax benefits reserve for uncertain tax positions primarily relates to losses generated from pending accounting method changes filed for the tax year ended December 31, 2018, being carried back 5 years, under the CARES Act.

In 2018, we filed two Form 3115s, Application for Change in Accounting Method, to request consent to change the method of accounting for deferred revenue for our cemetery property and cemetery merchandise and service operations beginning January 1, 2018.

These method changes are still under review.

Therefore, the unrecognized tax benefit reserve for the years ended December 31, 2019 and 2020 was $ 0.7 million and $ 3.7 million, respectively.

There was no reserve recorded at December 31, 2018.

At December 31, 2021, the Company’s unrecognized tax benefits reserve for uncertain tax positions primarily relates to the uncertainty of receiving audit protection for revenue recognition of cemetery property and not yet receiving the IRS approval of the cemetery merchandise and services accounting method change filed in 2018.

Our unrecognized tax benefit reserve for the years ended December 31, 2020 and 2021 was $ 3.7 million and $ 3.8 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

7 unchanged sentences

Unrecognized tax benefit at end of year $ 691 $ 3,656 $ 3,761

Included in balance of unrecognized tax benefit for the years ended December 31, 2019 and 2020 were $ 0.7 million and $ 3.7 million, respectively, of tax benefits that, if recognized, would affect the effective tax rate.

At December 31, 2021, we expect that the $ 3.8 million of unrecognized tax benefit will be recognized in the next twelve months.

We recognize interest accrued related to unrecognized tax benefit as income tax expense.

As of December 31, 2020, we accrued an immaterial amount of interest related to the unrecognized tax benefit.

As of December 31, 2021, we accrued $ 0.1 million of interest related to the unrecognized tax benefit.

STOCKHOLDERS’ EQUITY

1 unchanged sentence

We are authorized to issue 80,000,000 shares of common stock, $ 0.01 per share par value.

We had 25,880,362 and 26,020,494 shares issued and outstanding, net of 8,025,339 shares held in treasury at par, at December 31, 2019 and 2020, respectively.

We had 26,020,494 and 26,264,245 shares issued and 17,995,155 and 15,331,923 shares outstanding, net of 8,025,339 and 10,932,322 shares held in treasury at par, at December 31, 2020 and 2021, respectively.

Stock Based Compensation Plans

During the year ended December 31, 2021, we had two stock benefits plans in effect under which stock, restricted stock, stock options and performance awards have been granted or remain outstanding:

the Second Amended and Restated 2006 Long-Term Incentive Plan (the “Amended and Restated 2006 Plan”) and the 2017 Omnibus Incentive Plan (the “2017 Plan”).

the Second Amended and Restated 2006 Long-Term Incentive Plan (as amended, the “Amended and Restated 2006 Plan”) and the 2017 Omnibus Incentive Plan (as amended, the “2017 Plan”).

The Amended and Restated 2006 Plan was terminated upon the approval of the 2017 Plan at the annual shareholders meeting on May 17, 2017.

The 2017 Plan expires on May 17, 2027.

All stock-based plans are administered by the Compensation Committee appointed by our Board of Directors (the “Board”).

All stock-based plans are administered by the Compensation Committee appointed by our Board of Directors (our “Board”).

At December 31, 2021, we had 2,427,279 shares available to issue under our 2017 Plan.

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Restricted Stock

During the year ended December 31, 2020, we issued restricted stock to certain employees totaling 10,200 shares that vest over a three year period and had an aggregate grant date market value of $ 0.3 million at a weighted average stock price of $25.00.

In 2019, a total of 25,550 shares of restricted stock were awarded with a grant date market value of $ 0.5 million.

In 2018, a total of 86,260 shares of restricted stock were awarded with a grant date market value of $ 2.2 million.

Restricted stock activity is as follows (in thousands, except shares):

Year Ended December 31,

Shares Fair Value Shares Fair Value

10,200 $ 255 9,300 $ 324

Returned for payroll taxes 10,588 $ 250 10,399 $ 375

Cancelled — $ — 966 $ 27

(1) Restricted stock granted during the years ended December 31, 2020 and 2021 will vest over a three-year period, if the employee has remained continuously employed by us during the vesting period, at a weighted average stock price of $ 25.00 and $ 34.79 , respectively.

A summary of the status of unvested restricted stock as of December 31, 2021, and changes during 2021, is presented below:

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Unvested at December 31, 2021 22,643 $ 27.21

We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for restricted stock awards of $ 0.8 million, $ 0.8 million and $ 0.7 million the years ended December 31, 2018, 2019 and 2020, respectively.

At December 31, 2020, we had $ 1.1 million of total unrecognized compensation costs related to unvested restricted stock awards, which are expected to be recognized over a weighted average period of approximately 0.9 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for restricted stock awards of $ 828,000 , $ 735,000 and $ 390,000 for the years ended December 31, 2019, 2020 and 2021, respectively.

At December 31, 2021, we had $ 616,000 of total unrecognized compensation costs related to unvested restricted stock awards, which are expected to be recognized over a weighted average period of 1.2 years.

Stock Options

During the year ended December 31, 2021, we granted 150,000 options to a certain key employee at a weighted average price of $ 34.79 .

These options will vest in one-third increments over a three-year period and have a ten -year term.

The fair value of these options was $ 0.1 million.

On June 26, 2020, we cancelled 100,000 options in connection with the resignation of our President and Chief Operating Officer.

In 2019, a total of 100,000 stock options were awarded, the fair value of which was $ 0.6 million.

In 2018, a total of 212,940 stock options were awarded, the fair value of which was $ 1.4 million.

These options will vest when the price of our common stock closes at or above $ 53.39 ( 50,000 options) and $ 77.34 ( 100,000 options) for three consecutive days within the ten-year term and the employee has remained continuously employed by us through such date.

The fair value of these options was $ 1.7 million and was calculated using the Monte-Carlo simulation pricing model.

During the year ended December 31, 2021, our stock price closed at or above $ 53.39 for three consecutive days, which triggered the vesting of the 50,000 options granted during 2021.

As a result, we accelerated the recognition of the grant date fair value of these options and recognized stock-based compensation expense of $ 511,000 during the year ended December 31, 2021.

Additionally, we recognized an additional $ 129,000 of stock-based compensation expense when we accelerated 12,980 options in connection with the resignation of an employee in accordance with the terms of the separation agreement we entered into in connection with such resignation.

Additional stock option activity is as follows (in thousands, except shares):

Year Ended December 31,

Shares Fair Value Shares Fair Value

20,000 $ 92 701,400 $ 7,115

Cancelled 146,034 $ 846 74,688 $ 722

(1) Stock options granted during the years ended December 31, 2020 and 2021 had a weighted average price of $ 18.02 and $ 34.79 , respectively.

The fair value of these options was calculated using the Black-Scholes option pricing model.

The options granted in 2020 vest over a three-year period and have a ten-year term.

The options granted in 2021 vest over a five-year period and have a ten-year term.

These options will vest if the employee has remained continuously employed by us through the vesting period.

Year Ended December 31,

Shares Cash Shares Cash

Exercised (1)

40,365 N/A 423,294 N/A

Returned for option price (2)

18,640 $ 19 211,088 $ 1,013

Returned for payroll taxes (3)

2,954 $ 89 43,534 $ 2,272

(1) Stock options exercised during the years ended December 31, 2020 and 2021 had a weighted average exercise price of $ 13.72 and $ 21.99 , respectively, with an aggregate intrinsic value of $ 0.5 million and $ 8.2 million, respectively.

(2) Represents cash received for the payment of the option price.

(3) Represents cash withheld for the payment of payroll taxes.

Stock options are granted with an exercise price equal to the closing price of our common stock on the date of grant.

All of the options granted and outstanding under this plan have either a seven or ten-year term.

We utilize the Black-Scholes option valuation model for estimating the fair value of our stock options.

This model allows the use of a range of assumptions related to volatility, risk-free interest rate, expected holding period and dividend yield.

The expected volatility utilized in the valuation model is based on the historical volatility of our stock price.

We utilized the Black-Scholes option pricing model and Monte-Carlo simulation pricing model for estimating the fair value of our stock options.

These models allow for the use of a range of assumptions related to volatility, risk-free interest rate, expected holding period and dividend yield.

The expected volatility utilized in these valuation models is based on the historical volatility of our stock price.

The dividend yield and expected holding period are based on historical experience and management's estimate of future events.

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Treasury yield curve based on the expected life of the option in effect at the time of grant.

The fair values of our stock options were calculated using the following weighted average assumptions, based on the methods described above:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The fair value of the options granted using the Monte-Carlo simulation pricing model was estimated on the date of grant with the following assumptions:

Year ended December 31, 2021

Awards granted 150,000

Dividend yield 1.15 %

Expected volatility 34.08 %

Risk-free interest rate 1.29 %

The fair value of the options granted using the Black-Scholes option pricing model was estimated on the date of grant with the following assumptions:

Years Ended December 31,

2019 2020 2021

Awards granted 100,000 20,000 701,400

Dividend yield 1.23 % 1.67 % 1.15 %

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Black-Scholes value $ 5.70 $ 4.61 $ 10.14

A summary of the stock options at and changes during the three years ended December 31, 2020 is presented in the table and narrative below (shares in thousands):

A summary of the stock options at and changes during the three years ended December 31, 2021 is presented in the table below (shares in thousands):

Years Ended December 31,

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Exercised ( 247 ) $ 17.37 ( 40 ) $ 13.72 ( 423 ) $ 21.99

( 459 ) $ 17.73 ( 247 ) $ 17.37 ( 40 ) $ 13.72

Cancelled or expired ( 298 ) $ 21.96 ( 146 ) $ 23.97 ( 75 ) $ 33.56

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Exercisable at December 31 643 $ 22.02 668 $ 22.90 426 $ 25.71

(1) For the year ended December 31, 2020, 20,000 options were surrendered by employees to pay the option price and taxes related to the option exercises.

The aggregate intrinsic value of the outstanding and exercisable stock options was $ 7.2 million and $ 5.6 million at December 31, 2020.

The total intrinsic value of options exercised during the years ended December 31, 2018, 2019 and 2020 totaled $ 3.9 million, $ 1.2 million and $ 0.5 million, respectively.

The total fair value of stock options vested during 2018, 2019 and 2020 totaled $ 1.5 million, $ 0.9 million and $ 0.7 million, respectively.

We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for stock options of $ 1.0 million, $ 0.7 million and $ 0.7 million for the years ended December 31, 2018, 2019 and 2020, respectively.

At December 31, 2020, there was $ 0.8 million of unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options expected to be recognized over a weighted average period of approximately 1.53 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

A summary of the intrinsic value of stock options exercised and the fair value of stock options vested for the three years ended December 31, 2021 is presented in the table below (in thousands):

Years Ended December 31,

2019 2020 2021

Intrinsic value of options exercised $ 1,197 $ 517 $ 8,229

Fair value of stock options vested

$ 853 $ 735 $ 1,413

The following table further describes our outstanding stock options at December 31, 2021:

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$18.02 - $34.79 1,265,154 7.63 $ 30.94 425,793 5.55 $ 25.71

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The aggregate intrinsic value of the outstanding and exercisable stock options was $ 42.4 million and $ 16.5 million, respectively, at December 31, 2021.

We had $ 6.1 million of unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options expected to be recognized over a weighted average period of approximately 4.79 years at December 31, 2021.

We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for stock options, including the accelerated stock options discussed above of $ 682,000 , $ 669,000 and $ 2,355,000 for the years ended December 31, 2019, 2020 and 2021, respectively.

Performance Awards

On February 19, 2020, we granted 237,500 performance awards to our leadership team and certain key employees, payable in shares.

The fair value of these performance awards was $ 2.8 million and was determined by using the Monte-Carlo simulation pricing model.

On May 19, 2020, we cancelled all performance award agreements previously awarded to all individuals during 2019 and the February 19, 2020 award.

Concurrently with the cancellation, the Compensation Committee of the Board approved a new performance award (“new performance award”) to be issued to certain employees.

These awards will vest (if at all) on December 31, 2024 provided that the Company’s common stock reaches one of five predetermined growth targets for a sustained period beginning on the grant date of May 19, 2020 and ending on December 31, 2024.

The new performance award was treated as a modification of the cancelled awards and resulted in an additional $ 1.7 million of incremental compensation costs.

At December 31, 2020, there was $ 5.0 million of unrecognized compensation cost related to performance awards expected to be recognized over a weighted average period of 4.0 years.

During the year ended December 31, 2020 , we issued 237,500 performance awards to certain employees, payable in shares, with a fair value of $ 2.8 million.

On May 19, 2020, we cancelled all performance award agreements previously awarded to all individuals during 2019, as well as the 237,500 performance awards previously granted in 2020.

Concurrently with the cancellation of those performance awards, the Compensation Committee of the Board approved 368,921 new performance awards to be issued to certain employees.

These new performance awards were treated as a modification of the cancelled awards and resulted in an additional $ 1.7 million of incremental compensation expense.

These awards will vest (if at all) on December 31, 2024, provided that the Company’s common stock reaches the predetermined growth targets for a sustained period beginning on the grant date and ending on December 31, 2024.

On June 1, 2021, we amended the performance award agreements granted on May 19, 2020 for three of our executives.

The amendment increased the amount of performance awards payable in shares for the last three predetermined growth targets.

It was treated as a modification of the original performance award agreement and resulted in an additional $ 2.6 million of incremental compensation expense, expected to be recognized over the remaining term of 36 months.

Additional performance award activity is as follows (in thousands, except shares):

Years Ended December 31,

Shares Fair Value Shares Fair Value

Granted 30,743 $ 733 55,302 $ 2,116

Cancelled 33,538 $ 631 55,896 $ 799

A summary of the new performance award and changes during the year ended December 31, 2021 is presented in the table and below:

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Granted 55,302 38.27

Amended 70,236 36.36

Cancelled ( 55,896 ) 14.29

At December 31, 2021 435,766 $ 21.76

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table reflects the new performance awards granted during the year ended December 31, 2021, their respective fair values and the assumptions utilized in the Monte-Carlo simulation pricing model:

Grant date May 19, 2020 June 25, 2020 July 30, 2020 August 31, 2020 October 30, 2020

Performance period May 19, 2020 - December 31, 2024 June 25, 2020 - December 31, 2024 July 30, 2020 - December 31, 2024 August 31, 2020 - December 31, 2024 October 30, 2020 - December 31, 2024

Awards granted 368,921 13,974 2,795 6,987 6,987

Fair value (in millions) (1)

$ 3.6 $ 0.2 $ 0.1 $ 0.2 $ 0.3

Grant date April 16, 2021 June 1, 2021 August 12, 2021 September 15, 2021 November 29, 2021

Simulation period (years) 3.71 3.58 3.39 3.29 3.09

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Risk-free interest rate 0.52 % 0.46 % 0.53 % 0.49 % 0.85 %

(1) The total fair value of the new performance awards granted is $4.3 million.

During 2019, we granted 306,623 performance awards to our leadership team and certain key employees, payable in shares.

The fair value of these performance awards was $ 1.6 million and was determined by using the Monte-Carlo simulation pricing model.

These performance awards were cancelled on May 19, 2020.

During 2018, we granted 113,320 performance awards to our leadership team and certain key employees, payable in shares.

The fair value of these performance awards was approximately $ 2.9 million and was determined by using the weighted average stock price on the grant date of $ 25.43 .

These performance awards were cancelled on November 29, 2019.

We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for performance awards of $ 4.4 million, $ 0.2 million and $ 0.9 million during the years ended December 31, 2018, 2019 and 2020, respectively.

At December 31, 2021, there was $ 7.2 million of unrecognized compensation cost related to performance awards expected to be recognized over a weighted average period of 36 months.

If all of the predetermined growth targets are met as of December 31, 2024, a total of 1,052,532 shares of common stock would be awarded to participants under this program.

We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for performance awards of $ 196,000 , $ 894,000 and $ 1,573,000 during the years ended December 31, 2019, 2020 and 2021, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Employee Stock Purchase Plan

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the price being 85 % of the lower of the price on the first day of the plan entry date (beginning of the fiscal year) or the actual date of purchase (end of quarter).

In 2020, employees purchased a total of 71,908 shares at a weighted average price of $ 16.71 per share.

In 2019, employees purchased a total of 73,731 shares at a weighted average price of $ 13.18 per share.

In 2018, employees purchased a total of 49,938 shares at a weighted average price of $ 18.56 per share.

We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for our ESPP of approximately $ 0.2 million, $ 0.3 million and $ 0.4 million during the years ended December 31, 2018, 2019 and 2020, respectively.

ESPP activity is as follows (in thousands, except shares):

Years Ended December 31,

2019 2020 2021

Shares Price Shares Price Shares Price

ESPP 73,731 $ 13.18 71,908 $ 16.71 61,904 $ 26.32

We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for our ESPP of $ 292,000 , $ 434,000 and $ 552,000 during the years ended December 31, 2019, 2020 and 2021, respectively.

The fair values of the right to purchase shares under the ESPP are estimated at the date of purchase with the four quarterly purchase dates using the following assumptions:

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Good To Great Incentive Program

On February 19, 2020, we issued 17,991 shares of our common stock to certain employees, which were valued at approximately $ 0.4 million at a grant date stock price of $ 25.00 .

During 2019, we issued 14,844 shares of our common stock to certain employees, which were valued at approximately $ 0.3 million at a grant date stock price of $ 19.92 .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

During 2018, we issued 5,712 shares of our common stock to certain employees, which were valued at approximately $ 0.1 million at a grant date stock price of $ 25.43 .

Director (Non-Employee) Compensation Plans

On February 19, 2020, our Board revised the Director Compensation Policy to provide that each independent director is entitled to a quarterly retainer of $ 35,000 payable in cash and/or unrestricted shares of our common stock at the end of each quarter.

We did not issue any shares of common stock in 2021 related to our Good To Great program.

On February 19, 2020, we issued 17,991 shares of our common stock to certain employees, which were valued at $ 449,000 at a grant date stock price of $ 25.00 .

During 2019, we issued 14,844 shares of our common stock to certain employees, which were valued at $ 294,000 at a grant date stock price of $ 19.92 .

Non-Employee Director and Board Advisor Compensation

Our Director Compensation Policy provides that each independent director is entitled to a quarterly retainer of $ 35,000 payable in cash and/or unrestricted shares of our common stock at the end of each quarter.

The Lead Director and chairman of our Audit Committee are entitled to an additional annual retainer of $ 10,000 , payable in quarterly installments of $ 2,500 each at the end of each quarter, and the chairman of our Corporate Governance and Compensation Committees are entitled to an additional annual retainer of $ 5,000 , payable in quarterly installments of $ 1,250 each at the end of each quarter.

Any new independent director will receive upon admission to the Board a grant of $ 25,000 (in addition to the independent director annual retainer prorated at the time the new director is admitted to the Board) which can be taken in cash or unrestricted shares of our common stock.

The Board Advisor is entitled to a quarterly retainer of $ 18,750 payable in cash and/or unrestricted shares of our common stock at the end of each quarter.

The number of shares of such common stock will be determined by dividing the cash amount by the closing price of our common stock on the date of grant, which will be the date of admission to the Board.

On April 23, 2020, as part of our broad-based effort to respond to COVID-19, the Board approved a temporary reduction of the quarterly retainer for our non-employee directors from $ 35,000 per quarter to $ 29,750 per quarter (or 15 %) effective April 19, 2020.

On June 26, 2020, the Board voted to reinstate the quarterly retainer back to 100 % effective as of June 28, 2020.

On July 30, 2020, the Board elected Dr.

Achille Messac to serve as a Class II Director until the 2022 annual meeting of shareholders.

Messac was appointed to serve on the Audit, Compensation and Corporate Governance Committees.

Pursuant to the revised Director Compensation Policy described above, for the year ended December 31, 2020, we granted 30,883 shares of our common stock to six Directors, which were valued at $ 0.7 million at a weighted average stock price of $ 21.16 .

For the year ended December 31, 2019, we granted 7,458 shares of our common stock to two Directors, which were valued at $ 0.2 million at a weighted average stock price of $ 20.78 .

For the year ended December 31, 2018, we granted 7,403 shares of our common stock to three Directors, which were valued at $ 0.2 million at a weighted average stock price of $ 20.52 .

We recorded compensation expense, which is included in General, administrative and other expenses, related to annual retainers, including the value of stock granted to Directors above, of $ 0.5 million, $ 0.5 million and $ 0.9 million during the years ended December 31, 2018, 2019 and 2020, respectively.

On May 17, 2021, James R.

Schenck provided notice of his resignation from the Board effective on that date.

He served as the chairman of the Corporate Governance Committee and as a member of the Audit Committee and the Compensation Committee.

On June 1, 2021, the Board appointed Dr.

Achille Messac to be the chairman of the Corporate Governance Committee.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Non-Employee Director and Board Advisor common stock activity is as follows (in thousands, except shares):

Years Ended December 31,

2019 2020 2021

Shares Fair Value Shares Fair Value Shares Fair Value

Board of Directors 7,458 $ 155 30,883 $ 654 14,744 $ 622

Advisor to the Board — $ — 967 $ 20 466 $ 20

(1) Common stock granted during the years ended December 31, 2019, 2020 and 2021 had a weighted average price of $ 20.78 , $ 21.16 and $ 42.14 , respectively.

We recorded compensation expense, which is included in General, administrative and other expenses, related to annual retainers, including the value of stock granted to non-employee Directors and an advisor to our Board, of $ 455,000 , $ 889,000 and $ 858,000 during the years ended December 31, 2019, 2020 and 2021, respectively.

Cash Dividends

On May 19, 2020, the Board approved an increase of $ 0.05 per share to our annual dividend beginning with the dividend declaration in the third quarter.

On October 27, 2020, the Board approved an additional increase of $ 0.0125 per share for a total annual dividend of $ 0.40 per share beginning with the dividend declaration in the fourth quarter.

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

On October 27, 2021, our Board approved an annual increase of $ 0.05 per share for a total annual dividend of $ 0.45 per share beginning with the dividend declaration in the fourth quarter.

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

2021 Per Share Dollar Value

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SHARE REPURCHASE PROGRAM

During the year ended December 31, 2018, we repurchased 1,101,969 shares of common stock for a total cost of $ 17.7 million at an average cost of $ 16.03 per share pursuant to our share repurchase program.

On July 31, 2019, our Board approved an additional $ 25.0 million under our share repurchase program in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended.

During the year ended December 31, 2019, we repurchased 400,000 shares of common stock for a total cost of $ 7.8 million at an average cost of $ 19.39 per share pursuant to our share repurchase program.

Subject to market conditions, normal trading restrictions and satisfying certain financial covenants in our Credit Facility, and in the Indenture governing our Senior Notes, we may make purchases in the open market or through privately negotiated transactions under our Board authorized share repurchase program, in accordance with Rule 10b-18 of the Securities Exchange Act.

On May 18, 2021, July 26, 2021 and October 27, 2021, our Board increased our share repurchase authorization by an additional $ 25.0 million, $ 25.0 million and $ 75.0 million, respectively, that including amounts previously authorized and outstanding, totaled up to $ 190.0 million in share repurchase authorizations.

Share repurchase activity is as follows (dollar value in thousands):

Years Ended December 31,

2019 2020 2021

Number of Shares Repurchased (1)

400,000 — 2,906,983

Average Price Paid Per Share $ 19.39 $ — $ 49.01

Dollar Value of Shares Repurchased (1)

$ 7,756 $ — $ 142,469

(1) These amounts may differ from the repurchases of common stock amounts in the consolidated statements of cash flows due to unsettled share repurchases at the end of a period.

In December 2021, we repurchased 37,408 shares for $ 2.4 million, the settlement of which occurred in January 2022.

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.

During the year ended December 31, 2020, we did not repurchase any common shares.

At December 31, 2020, we had approximately $ 25.6 million available for repurchase under our share repurchase program.

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

At December 31, 2021, we had $ 8.1 million remaining available for repurchase under our authorized program.

See Note 24 to the Consolidated Financial Statements included herein for additional information related to our share repurchases.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

EARNINGS PER SHARE

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Convertible Notes 10 9 —

Performance awards — — 382

Denominator for diluted earnings per common share - weighted average shares outstanding 18,005 18,077 18,266

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Diluted earnings per common share $ 0.80 $ 0.89 $ 1.81

The fully diluted weighted average shares outstanding for the years ended December 31, 2018, 2019 and 2020, and the corresponding calculation of fully diluted earnings per share, included approximately 337,000 , 10,000 and 9,000 shares that would have been issued upon the conversion of our convertible subordinated notes as a result of the application of the if-converted method prescribed by the FASB ASC 260.

During the year ended December 31, 2020, no stock options were excluded from the computation of diluted earnings per share.

For the years ended December 31, 2018 and 2019, there were 1,660,919 and 338,440 stock options excluded from the computation of diluted earnings per share because the inclusion of such stock options would result in an antidilutive effect.

The fully diluted weighted average shares outstanding for the years ended December 31, 2019 and 2020, and the corresponding calculation of fully diluted earnings per share, included approximately 10,000 and 9,000 shares that would have been issued upon the conversion of our Convertible Notes as a result of the application of the if-converted method prescribed by the FASB ASC 260.

At December 31, 2021, we had no Convertible Notes outstanding.

For the year ended December 31, 2019, there were 338,440 stock options excluded from the computation of diluted earnings per share because the inclusion of such stock options would result in an antidilutive effect.

For the years ended December 31, 2020 and 2021, no stock options were excluded from the computation of diluted earnings per share.

Our performance awards are considered to be contingently issuable shares because their issuance is contingent upon the satisfaction of certain performance and service conditions.

At December 31, 2021, we had satisfied certain performance criteria for the first, second and third predetermined growth targets of our performance awards to be considered outstanding.

Therefore, we included these awards in the computation of diluted earnings per share as of the beginning of the reporting period.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

SEGMENT REPORTING

We conduct funeral and cemetery operations only in the United States.

Revenue, disaggregated by major source for each of our reportable segments was as follows (in thousands):

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Total $ 216,868 $ 57,239 $ 274,107

The following table presents operating income (loss), income (loss) before income taxes, depreciation and amortization, interest expense, income tax expense (benefit), total assets, long-lived assets, capital expenditures and number of operating locations by segment (in thousands, except number of operating locations):

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents operating income (loss), income (loss) before income taxes, depreciation and amortization, interest expense, income tax expense (benefit), total assets, long-lived assets, goodwill, capital expenditures and number of operating locations by segment (in thousands, except number of operating locations):

Funeral Cemetery Corporate Consolidated

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2019 650,179 145,158 1,303 796,640

2021 $ 344,823 $ 47,149 $ — $ 391,972

2020 345,829 47,149 — 392,978

2019 361,451 36,841 — 398,292

Capital expenditures:

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Prepaid expenses $ 1,919 $ 2,215

Deposit on pending acquisition 5,000 —

Federal income tax receivable — 4,064

State income tax receivable 986 —

Other current assets 157 125

Total other current assets $ 10,667 $ 2,076

Total prepaid and other current assets $ 2,076 $ 6,404

Current portion of debt and lease obligations:

Current portion of acquisition debt $ 1,306 $ 1,027

Current portion of finance lease obligations 290 323

Current portion of operating lease obligations 1,554 2,082

Acquisition debt $ 1,027 $ 521

Finance lease obligations 323 375

Operating lease obligations 2,082 1,913

Total current portion of debt and lease obligations $ 3,432 $ 2,809

Accrued and other liabilities:

Accrued salaries and wages $ 4,323 $ 1,392

Accrued incentive compensation 9,199 11,139

Accrued vacation 2,880 3,271

Accrued insurance 2,329 3,016

Accrued interest 2,299 2,291

Accrued ad valorem and franchise taxes 678 435

Incentive compensation $ 11,139 $ 19,121

Insurance 3,016 4,089

Unrecognized tax benefit 3,656 3,761

Vacation 3,271 3,334

Natural disaster liability — 2,628

Interest 2,291 2,250

Salaries and wages 1,392 2,193

Employer payroll tax deferral 1,773 1,773

Accrued commissions 560 634

Perpetual care trust taxes payable 401 908

Employee meetings and award trips 801 1,462

Income tax payable 798 485

Commissions 634 684

Perpetual care trust payable 908 389

Ad valorem and franchise taxes 435 450

Other accrued liabilities 1,024 1,154

Unrecognized tax benefit — 3,656

Total accrued and other liabilities $ 31,138 $ 43,773

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Incentive compensation $ 2,975 $ 1,291

Contingent consideration 470 —

Employer payroll tax deferral 1,773 —

Severance — 128

Total other long-term liabilities $ 4,748 $ 1,419

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

QUARTERLY FINANCIAL DATA (UNAUDITED)

The tables below set forth consolidated operating results by fiscal quarter (in thousands, except earnings per share):

Quarter Second

Quarter Third

Quarter Fourth

Revenue $ 77,490 $ 77,477 $ 84,393 $ 90,088

Gross profit 23,171 25,160 27,874 29,718

Net income (loss) $ ( 4,197 ) $ 6,397 $ 5,525 $ 8,365

Basic earnings (loss) per common share:

(a) $ ( 0.23 ) $ 0.36 $ 0.31 $ 0.47

Diluted earnings (loss) per common share:

(a) $ ( 0.23 ) $ 0.36 $ 0.31 $ 0.46

Revenue $ 69,081 $ 67,752 $ 66,125 $ 71,149

Gross profit 21,600 19,250 18,056 20,679

Net income $ 6,525 $ 4,862 $ 577 $ 2,569

Basic earnings per common share:

(a) $ 0.36 $ 0.27 $ 0.03 $ 0.14

Diluted earnings per common share:

(a) $ 0.36 $ 0.27 $ 0.03 $ 0.14

(a) Earnings per share are computed independently for each of the quarters presented.

Therefore, the sum of the quarterly per share amounts may not equal the total computed due to rounding.

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

3 unchanged sentences

Cash paid for interest and financing costs $ 23,870 $ 30,935 $ 24,127

Cash paid for taxes $ 3,543 $ 378 $ 2,555

Cash refund received for taxes $ — $ — $ 7,012

Cash paid (refunded) for taxes 378 ( 4,457 ) 16,110

Unsettled share repurchases 1,396 — 2,429

Fair value of donated real property — — 635

SUBSEQUENT EVENTS

On January 25, 2021, the Company detected that its information technology (“IT”) system was affected by a ransomware incident.

Upon learning of the incident, the Company undertook immediate steps to address the incident, including engaging IT security and forensics experts and working diligently with these experts to assess the impact on the Company’s IT systems, implementing additional security measures to help prevent a similar incident in the future, and to restore any of its IT systems that were impacted by the incident.

We have insurance coverage to protect against this type of ransomware attack and therefore the Company expects that recovery of the losses related to the incident is likely after a deductible.

As of February 11, 2021, the restoration of any impacted systems was complete.

While we are taking all appropriate measures to safeguard the integrity of our IT infrastructure, data, and employee, customer and vendor information and prevent such an event from reoccurring, we cannot provide reasonable assurance that similar incidents may occur in the future.

Refer to Part I, Item 1A.

Risk Factors for risks related to our business.

On January 28, 2021, we received a conversion notice from a holder of our Convertible Notes exercising their right to convert.

Following receipt of the conversion notice, in accordance with the terms of the Indenture, we provided notice to settle such conversion in cash, which will settle on the third business day immediately following the applicable 25-day period observation period, as more fully described in the Indenture.

On February 17, 2021, the Company entered into an amendment to the employment agreement of Melvin C.

Payne, the Company’s Chief Executive Officer and Chairman of the Board (the “Amendment”), to extend the term of his employment to February 17, 2028.

The Amendment also increases the minimum amount for Mr.

Payne’s base salary to $900,000 and includes consideration paid by the Company to Mr.

Payne in the form of Company stock options that only vest if the price of the Company's stock reaches predetermined price targets.

On January 5, 2022, the Company and the Plaintiff, a former employee, mediated the Chinchilla v.

Carriage Services, Inc., et al., matter and executed a Memorandum of Understanding for class settlement in the amount of $ 1.0 million.

The parties will seek preliminary approval of the class settlement after executing a long-form class settlement agreement.

At December 31, 2021, we accrued $ 1.1 million for the expected settlement amount and associated legal fees.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

On February 23, 2022, our Board increased our share repurchase program authorization by an additional $ 75 million.

Prior to the Board’s approval of the increase, at December 31, 2021, we had $ 8.1 million remaining available for repurchase under our authorized program.

At February 23, 2022, we had $ 83.1 million of share repurchase authorization remaining under the revised repurchase program.

CARRIAGE SERVICES, INC.

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Allowance for bad debts, current portion $ 769 $ 1,088 $ 1,008 $ 849

Allowance for bad debts of preneed cemetery receivables, non-current portion $ 2,278 $ 730 $ 1,781 $ 1,227

Allowance for bad debts of preneed cemetery receivables,

non-current portion $ 1,227 $ 532 $ 469 $ 1,290

Employee severance accruals $ 1,141 $ 1,265 $ 1,569 $ 837

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Year ended December 31, 2020:

Allowance for bad debts, current portion $ 769 $ 1,088 $ 1,008 $ 849

Allowance for bad debts of preneed cemetery receivables, non-current portion $ 1,227 $ 532 $ 469 $ 1,290

Allowance for credit losses, current portion $ 849 $ 1,617 $ 1,179 $ 1,287

Allowance for credit losses of preneed cemetery receivables, non-current portion $ 1,290 $ 701 $ 347 $ 1,644

Employee severance accruals $ 837 $ 596 $ 1,271 $ 162

7 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-K

Item 8. Financial Statements and Supplementary Data