What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-03 compared with 2021-11-03 · 314 added, 419 removed, 908 unchanged (45% of the section changed)

3 unchanged sentences

(unaudited and in thousands, except share data)

December 31, 2020 September 30, 2021

December 31, 2021 March 31, 2022

Current assets:

20 unchanged sentences

Accrued and other liabilities 43,773 31,345

Convertible subordinated notes due 2021 2,538 —

Total current liabilities 60,787 47,813

19 unchanged sentences

Treasury stock, at cost;

8,025,339 and 9,553,536 at December 31, 2020 and September 30, 2021

10,932,322 and 11,422,322 shares, respectively

( 244,519 ) ( 270,529 )

5 unchanged sentences

(unaudited and in thousands, except per share data)

Three months ended September 30, Nine months ended September 30,

2020 2021 2020 2021

Three months ended March 31,

Service revenue $ 47,757 $ 49,737

13 unchanged sentences

General, administrative and other 9,123 8,560

Home office depreciation and amortization 329 275 1,065 841

Net loss on divestitures, disposals and impairments charges 4,917 858 19,610 1,377

Net (gain) loss on divestitures, disposals and impairments charges ( 308 ) 767

Operating income 26,246 25,151

1 unchanged sentence

Accretion of discount on convertible subordinated notes ( 20 ) —

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

Gain on insurance reimbursements — 1,899

Other, net ( 68 ) ( 24 )

17 unchanged sentences

(unaudited and in thousands)

Nine months ended September 30,

Three months ended March 31,

Cash flows from operating activities:

4 unchanged sentences

Stock-based compensation expense 1,307 1,607

Deferred income tax expense (benefit) 4,750 ( 3,433 )

Deferred income tax expense 1,514 76

Amortization of intangibles 320 318

1 unchanged sentence

Amortization and accretion of debt 100 121

Loss on extinguishment of debt 6 23,807

Net loss on divestitures, disposals and impairment charges 21 767

11 unchanged sentences

Cash flows from investing activities:

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

Acquisitions of real estate ( 350 ) ( 2,575 )

Proceeds from divestitures and sale of other assets 2,800 1,026

5 unchanged sentences

Payments against the credit facility ( 34,068 ) ( 51,900 )

Payment of call premium for the redemption of the senior notes due 2026 — ( 19,876 )

Payments of debt issuance and transaction costs ( 78 ) ( 6,554 )

Conversions and maturity of the convertible subordinated notes due 2021 ( 4,563 ) ( 3,980 )

Conversions and maturity of the convertible notes ( 3,980 ) —

Payments on acquisition debt and obligations under finance leases ( 233 ) ( 100 )

Payments on contingent consideration recorded at acquisition date ( 461 ) —

Proceeds from the exercise of stock options and employee stock purchase plan 921 2,107

Proceeds from the exercise of stock options and employee stock purchase plan contributions 625 663

Taxes paid on restricted stock vestings and exercise of stock options ( 642 ) ( 289 )

1 unchanged sentence

Purchase of treasury stock — ( 25,655 )

Other financing costs ( 7 ) —

Net cash used in financing activities ( 25,397 ) ( 8,306 )

Net increase in cash and cash equivalents 9 199

Net decrease in cash and cash equivalents ( 483 ) ( 261 )

Cash and cash equivalents at beginning of period 889 1,148

4 unchanged sentences

(unaudited and in thousands)

Three months ended September 30, 2020

Outstanding Common

2 unchanged sentences

Earnings Treasury

Balance – June 30, 2020 17,934 $ 260 $ 241,868 $ 88,413 $ ( 102,050 ) $ 228,491

Net income — — — 5,525 — 5,525

Issuance of common stock from employee stock purchase plan 16 — 297 — — 297

Issuance of common stock to directors and board advisor 9 — 198 — — 198

Exercise of stock options 12 — ( 31 ) — — ( 31 )

Cancellation and surrender of restricted common stock ( 1 ) — ( 16 ) — — ( 16 )

Stock-based compensation expense — — 729 — — 729

Dividends on common stock — — ( 1,569 ) — — ( 1,569 )

Convertible notes exchange — — ( 828 ) — — ( 828 )

Balance – September 30, 2020 17,970 $ 260 $ 240,648 $ 93,938 $ ( 102,050 ) $ 232,796

Three months ended September 30, 2021

Outstanding Common

Stock Additional

Capital Retained

Earnings Treasury

Balance – June 30, 2021 17,826 $ 262 $ 237,891 $ 109,069 $ ( 114,351 ) $ 232,871

Net income — — — 13,046 — 13,046

Issuance of common stock from employee stock purchase plan 15 — 388 — — 388

Issuance of common stock to directors and board advisor 3 — 147 — — 147

Exercise of stock options 12 — ( 82 ) — — ( 82 )

Cancellation and surrender of restricted common stock ( 1 ) — ( 28 ) — — ( 28 )

Stock-based compensation expense — — 1,148 — — 1,148

Dividends on common stock — — ( 1,783 ) — — ( 1,783 )

Treasury stock acquired ( 1,203 ) — — — ( 53,239 ) ( 53,239 )

Balance – September 30, 2021 16,652 $ 262 $ 237,681 $ 122,115 $ ( 167,590 ) $ 192,468

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

CARRIAGE SERVICES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited and in thousands)

Nine months ended September 30, 2020

Outstanding Common

Stock Additional

Capital Retained

Earnings Treasury

Balance – December 31, 2020 17,995 $ 260 $ 239,989 $ 102,303 $ ( 102,050 ) $ 240,502

7 unchanged sentences

Dividends on common stock — — ( 1,799 ) — — ( 1,799 )

Convertible notes exchange — — ( 828 ) — — ( 828 )

Other 18 — 468 — — 468

Balance – September 30, 2020 17,970 $ 260 $ 240,648 $ 93,938 $ ( 102,050 ) $ 232,796

Nine months ended September 30, 2021

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

Balance – March 31, 2021 18,048 $ 261 $ 238,056 $ 115,236 $ ( 102,050 ) $ 251,503

Outstanding Common

6 unchanged sentences

Issuance of common stock to directors and board advisor 3 — 147 — — 147

Issuance of restricted common stock 9 — — — — —

Exercise of stock options 9 — ( 22 ) — — ( 22 )

2 unchanged sentences

Dividends on common stock — — ( 1,725 ) — — ( 1,725 )

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

Treasury stock acquired ( 490 ) — — — ( 26,010 ) ( 26,010 )

Balance – September 30, 2021 16,652 $ 262 $ 237,681 $ 122,115 $ ( 167,590 ) $ 192,468

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

Other 27 — 1,358 — — 1,358

Balance – March 31, 2022 14,889 $ 263 $ 238,423 $ 151,864 $ ( 270,529 ) $ 120,021

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

CARRIAGE SERVICES, INC.

5 unchanged sentences

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 September 30, 2021, we operated 171 funeral homes in 26 states and 32 cemeteries in 12 states.

At March 31, 2022, we operated 168 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.

9 unchanged sentences

Reclassifications

Certain reclassifications have been made to prior period amounts on our Consolidated Statements of Cash Flows related to the amortization of our intangible assets, 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.

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, liabilities, revenue and expenses.

On an ongoing basis, we evaluate our 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.

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

2 unchanged sentences

Our funeral receivables are recorded in Accounts receivable, net and primarily consist of amounts due for funeral services already performed.

Atneed cemetery receivables and preneed cemetery receivables with payments expected to be received within one year from the balance sheet date are recorded in Accounts receivable, net.

Preneed cemetery receivables with payments expected to be received beyond one year from the balance sheet date are recorded in Preneed cemetery receivables, net.

receivables generally consist of preneed sales of cemetery interment rights and related products and services, which are typically financed through interest-bearing installment sales contracts, generally with terms of up to five years , with such interest income reflected as Other revenue .

Atneed cemetery receivables and preneed cemetery receivables with payments expected to be received within one year from the balance sheet date are also recorded in Accounts receivable, net.

Preneed cemetery receivables with payments

expected to be received beyond one year from the balance sheet date are recorded in Preneed cemetery receivables, net.

Our cemetery receivables generally consist of preneed sales of cemetery interment rights and related products and services, which are typically financed through interest-bearing installment sales contracts, generally with terms of up to five years , with such interest income reflected as Other revenue .

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

20 unchanged sentences

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 the three months ended March 31, 2021 and 2022.

Divested Operations

3 unchanged sentences

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 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).

When both inputs and a substantive process are present then the set is determined to be a business and we consider 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 the three month ended March 31, 2022, we sold two funeral homes for an aggregate of $ 0.9 million.

During the three months ended March 31, 2021, we sold one funeral home for $ 1.5 million and merged 1 funeral home with another business we own in an existing market.

See Notes 3 and 4 to the Consolidated Financial Statements herein for additional information related to our divestitures.

2 unchanged sentences

As such, we test goodwill for impairment on an annual basis as of August 31 st each year.

In addition to our annual test, we assess the impairment of goodwill whenever events or changes in circumstances indicate that the carrying value of a reporting unit may be greater than fair value.

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.

We performed our annual goodwill impairment test as of August 31, 2021.

Under current guidance, we are permitted to first assess qualitative factors to determine whether it is more-likely-than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test.

For our 2021 annual goodwill 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 impairment to goodwill.

For our 2020 annual qualitative assessment, there was no impairment to goodwill as the fair value of our reporting units was greater than the carrying value.

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 goodwill whenever events or changes in circumstances indicate that the carrying value of a reporting unit may be greater than fair value.

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.

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

7 unchanged sentences

As such, we test our intangible assets for impairment on an annual basis as of August 31 st each year.

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.

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.

We performed our annual intangible assets impairment test as of August 31, 2021.

Under current guidance, we are permitted to first assess qualitative factors to determine whether it is more-likely-than not that the fair value of the tradename is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative impairment test.

For our 2021 annual intangible assets impairment test, we performed a qualitative assessment and determined that there were no factors that would indicate the need to perform an additional quantitative impairment test.

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 impairment to our intangible assets.

For our 2020 annual qualitative assessment, there was no impairment to intangible assets as the fair value of our intangible assets was greater than the carrying value.

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 intangible assets 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.

See Note 9 to the Consolidated Financial Statements included herein for additional information related to our intangible assets.

15 unchanged sentences

Any changes in fair value are recognized in earnings.

In accordance with ASC Topic 326, we present our credit losses for fixed income securities as an allowance rather than as a write-down on 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.

2 unchanged sentences

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.

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

See Notes 6 and 7 to the Consolidated Financial Statements herein for additional information related to our preneed and perpetual care 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 6 and 7 to the Consolidated Financial Statements herein for additional information related to preneed and perpetual care trust funds.

Fair Value Measurements

5 unchanged sentences

We currently do not have any assets that have fair values determined by Level 3 inputs and no liabilities measured at fair value.

We have not elected to measure any additional financial instruments and certain other items at fair value that are not currently required to be measured at fair value.

See Notes 6 and 8 to the Consolidated Financial Statements herein for additional required disclosures related to our fair value measurement of our financial assets and liabilities.

9 unchanged sentences

Depreciation of property, plant and equipment (including equipment under finance leases) is computed based on the straight-line method over the estimated useful lives of the assets.

Long-lived assets, such as property, plant and equipment subject to depreciation and amortization, 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 Topic 360 – Property, Plant and Equipment.

Long-lived assets, such as property, plant and equipment and right-of-use assets (see discussion of Leases 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.

Property, plant and equipment is comprised of the following (in thousands):

December 31, 2020 September 30, 2021

December 31, 2021 March 31, 2022

Land $ 82,095 $ 83,282

4 unchanged sentences

Property, plant and equipment, net $ 269,367 $ 271,175

During the nine months ended September 30, 2021, we acquired real property for $ 3.3 million.

We also divested three funeral homes that had a carrying value of property, plant and equipment of $ 2.4 million, which was included in the Gain (loss) on divestitures and recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations, described in Note 4 to the Consolidated Financial Statements included herein.

Additionally, during the nine months ended September 30, 2021, we sold real property for $ 0.7 million and recognized a loss on sale of $ 0.3 million, which was recorded in Net loss on divestitures, disposals and impairment charges.

At September 30, 2021, we had $ 2.3 million carrying value of property, plant and equipment assets held for sale and we recognized a $ 0.5 million impairment loss related to these assets recorded in Net loss on divestitures, disposals and impairment charges.

Our growth and maintenance capital expenditures totaled $ 4.2 million and $ 6.5 million for the three months ended September 30, 2020 and 2021, respectively and $ 10.0 million and $ 15.3 million for the nine months ended September 30, 2020 and 2021, respectively, for property, plant, equipment and cemetery development.

In addition, we recorded depreciation expense of $ 3.5 million and $ 3.4 million for the three months ended September 30, 2020 and 2021, respectively and $ 10.8 million and $ 10.2 million for the nine months ended September 30, 2020 and 2021, respectively.

During the three months ended March 31, 2022, we acquired real property for $ 2.6 million.

We also divested two funeral homes that had a carrying value of property, plant and equipment of $ 0.7 million, which was included in the loss on the sale of divestitures and recorded in Net (gain) loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations, described in Note 4 to the Consolidated Financial Statements included herein.

During the three months ended March 31, 2021, we sold real property for $ 1.3 million, with a carrying value of $ 1.0 million, resulting in a gain on the sale of $ 0.3 million and we divested one funeral home that had a carrying value of property, plant and equipment of $ 0.4 million.

These gains were included in the gain on the sale of divestitures and recorded in Net (gain) loss on divestitures, disposals and impairment charges.

Our growth and maintenance capital expenditures totaled $ 2.9 million and $ 4.6 million for the three months ended March 31, 2021 and 2022, respectively, for property, plant and equipment.

In addition, we recorded depreciation expense of $ 3.4 million for both the three months ended March 31, 2021 and 2022.

Cemetery Property

4 unchanged sentences

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 $ 100.5 million at December 31, 2020 and September 30, 2021, respectively, net of accumulated amortization of $ 46.6 million and $ 51.8 million, respectively.

Cemetery property was $ 100.7 million and $ 101.6 million, net of accumulated amortization of $ 53.1 million and $ 54.4 million at December 31, 2021 and March 31, 2022, 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.

We recorded amortization expense for cemetery interment rights of $ 1.5 million for both the three months ended September 30, 2020 and 2021 and $ 3.4 million and $ 5.2 million for the nine months ended September 30, 2020 and 2021, respectively.

Our growth capital expenditures totaled $ 1.5 million and $ 2.3 million for the three months ended March 31, 2021 and 2022, respectively, for cemetery property development.

We recorded amortization expense for cemetery interment rights of $ 1.5 million and $ 1.3 million for the three months ended March 31, 2021 and 2022, respectively.

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 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 .

6 unchanged sentences

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 effective interest method of

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.

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 we account for these as a single lease component.

15 unchanged sentences

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

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

The excess tax benefit and tax deficiencies are recorded within Tax adjustment related to discrete items on our Consolidated Statements of Operations and the 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 14 to the Consolidated Financial Statements included herein for additional information related to our equity plans and stock-based compensation.

10 unchanged sentences

For these contracts, we allocate the transaction price to each performance obligation based on its relative standalone selling price, which is based on prices charged to customers per our general price list.

Packages for service and ancillary items are offered to help the customer make decisions during emotional and stressful times.

Package discounts are reflected net in Revenue .

3 unchanged sentences

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 September 30, 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.

As of March 31, 2022, 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 $ 8.2 million at both December 31, 2020 and September 30, 2021.

Balances due on undelivered preneed funeral trust contracts have been reclassified to reduce Deferred preneed funeral revenue on our Consolidated Balance Sheet of $ 8.0 million at both December 31, 2021 and March 31, 2022.

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

2 unchanged sentences

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 were $ 7.9 million and $ 10.6 million at December 31, 2020 and September 30, 2021, respectively.

The transaction price allocated to preneed merchandise and service performance obligations that were unfulfilled were $ 10.4 million and $ 10.8 million at December 31, 2021 and March 31, 2022, respectively.

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

10 unchanged sentences

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

The Consolidated Appropriations Act was signed into law on December 27, 2020.

This Act included several tax provisions directly benefiting individual and corporate taxpayers.

The primary benefit in this legislation is a temporary allowance for full deduction for business meals paid or incurred between December 31, 2020 and January 1, 2023.

We filed carryback refund claims for the 2018 and 2019 tax years as allowed by the legislative changes included in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted March 27, 2020.

As a result of requesting a tax refund in excess of $5 million, we must receive Joint Committee approval and undergo an audit for the tax year ending December 31, 2018.

This audit is currently in progress.

In 2020, the 2018 tax return was amended to take full advantage of the CARES Act legislative benefits resulting in additional losses that increase the amount of our carryback refund claim.

On June 30, 2020, we filed carryback refund claims for the 2018 and 2019 tax years.

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

As of September 30, 2021, we received an adverse ruling related to the change to our method of recognition of revenue from our constructed cemetery property, however, we are currently in further discussions with the Internal Revenue Service (“IRS”) regarding this ruling.

Due to the uncertainty that exists, a reserve has been recorded against the benefit derived from this carrying back that the net operating losses generated.

At both December 31, 2020 and September 30, 2021, the reserve for uncertain tax positions was $ 3.7 million.

On October 11, 2021, we received an adverse ruling from the IRS related to our accounting method change for cemetery property revenue recognition filed in 2018 and subsequently filed an automatic accounting method change to adopt the IRS’ preferred method of revenue recognition for cemetery property effective for the year ending December 31, 2021.

On March 2, 2022, we received approval from the IRS regarding our method change filed related to the revenue recognition of cemetery merchandise and services sales.

As a result, we recorded a $0.5 million reduction to the reserve for uncertain tax positions during the three months ended March 31, 2022.

At December 31, 2021 and March 31, 2022, the reserve for uncertain tax positions was $ 3.8 million and $ 3.2 million, respectively, related to carrying back the NOLs generated in the tax year ended December 31, 2018, filed under the CARES Act on June 30, 2020.

Income tax expense during interim periods is based on our forecasted annual effective tax rate plus any discrete items, which are recorded in the period in which they occur.

Discrete items include, but are not limited to, such events as changes in estimates due to finalization of income tax returns, tax audit settlements, tax effects of exercised or vested stock-based awards and increases or decreases in valuation allowances on deferred tax assets.

For the three months ended September 30, 2020 and 2021, we had an income tax expense of $ 2.9 million and $ 5.1 million, respectively and for the nine months ended September 30, 2020 and 2021, we had an income tax expense of $ 4.2 million and $ 6.6 million, respectively.

Our operating tax rate before discrete items was 34.0 % and 28.2 % for the three months ended September 30, 2020 and 2021, respectively and 33.8 % and 28.3 % for the nine months ended September 30, 2020 and 2021, respectively.

Income tax expense was $ 5.6 million and $ 5.1 million for the three months ended March 31, 2021 and 2022, respectively.

Our operating tax rate before discrete items was 31.0 % and 26.5 % for the three months ended March 31, 2021 and 2022, respectively.

Computation of Earnings Per Common Share

1 unchanged sentence

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.

Dilutive common equivalent shares consist of stock options and performance awards.

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 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.

of restricted stock awards to our employees 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.

3 unchanged sentences

Subsequent Events

We have evaluated events and transactions during the period subsequent to September 30, 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 18 to the Consolidated Financial Statements included herein for additional information related to our subsequent events.

We have evaluated events and transactions during the period subsequent to March 31, 2022 through the date the financial statements were issued for potential recognition or disclosure in the accompanying financial statements covered by this report.

RECENTLY ISSUED ACCOUNTING STANDARDS

5 unchanged sentences

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 nine months ended September 30, 2021.

We have certain agreements that have LIBOR as a reference rate, which primarily include our Credit Facility (defined in Note 10), which has language for choosing an alternative successor rate if LIBOR reference is no longer considered to be appropriate.

Contract modifications are required to be evaluated in determining whether the modifications result in the establishment of new contracts or the continuation of existing contracts.

We adopted this amendment in March 2020 and plan to apply the amendments in this update to agreements as they are amended to include a new reference rate or when LIBOR reference is no longer used.

We did not utilize the optional expedients and exceptions provided by this ASU during the three months ended March 31, 2022.

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.

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.

Credit Losses - Vintage Disclosures

In March 2022, the FASB issued ASU, Financial Instruments - Credit Losses (“Topic 326”) to make the requirement to disclose gross write-offs by class of financing receivable and major security type consistent for all public business entities.

The amendment in this update provides specific guidance on the disclosure for current period write-offs by year of origination for financing receivables.

This amendment is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and should be applied prospectively to disclosures occurring on or after the effective date of the amendment.

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

We expect the adoption will have no impact on our consolidated financial statements.

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

December 31, 2020 September 30, 2021

December 31, 2021 March 31, 2022

Goodwill at the beginning of the period $ 392,978 $ 391,972

Net increase in goodwill related to acquisitions 14,054 —

Decrease in goodwill related to divestitures ( 1,006 ) ( 901 )

Decrease in goodwill related to impairments ( 13,632 ) —

Goodwill at the end of the period $ 391,972 $ 391,071

During the nine months ended September 30, 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.

See Note 1 to the Consolidated Financial Statements included herein, for a discussion of the methodology used for our goodwill impairment test.

During the three months ended March 31, 2022, we allocated $ 0.9 million of goodwill to the sale of two funeral homes for

a loss recorded in Net (gain) loss on divestitures , disposals and impairments charges.

DIVESTED OPERATIONS

During the three months ended September 30, 2021, we did not sell any funeral homes or cemeteries.

During the nine months ended September 30, 2021, we sold three funeral homes for $ 3.5 million.

During the three and nine months ended September 30, 2020, we sold six funeral homes for $ 7.3 million.

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

Three months ended September 30, Nine months ended September 30,

2020 2021 2020 2021

During the three months ended March 31, 2022, we sold two funeral homes for an aggregate of $ 0.9 million.

During the three months ended March 31, 2021, we sold one funeral home for $ 1.5 million and merged one funeral home with another business we own in an existing market.

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

Three months ended March 31,

Revenue $ 282 $ 137

Operating income (loss) ( 112 ) ( 41 ) 70 ( 54 )

Operating income 60 2

Gain (loss) on divestitures (1)

( 4,917 ) — ( 4,917 ) 103

Income tax benefit (expense) ( 114 ) 186

Net income (loss) from divested operations, after tax $ 254 $ ( 515 )

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

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

Accounts Receivable

Accounts receivable is comprised of the following (in thousands):

September 30, 2021

March 31, 2022

Funeral Cemetery Corporate Total

12 unchanged sentences

The following table summarizes the activity in our allowance for credit losses by portfolio segment (in thousands):

January 1, 2021 Provision for Credit Losses Write Offs Recoveries September 30, 2021

January 1, 2022 Provision for Credit Losses Write Offs Recoveries March 31, 2022

Trade and financed receivables:

4 unchanged sentences

Our preneed cemetery receivables are comprised of the following (in thousands):

December 31, 2020 September 30, 2021

Cemetery interment rights $ 36,696 $ 41,179

Cemetery merchandise and services 10,526 11,661

Cemetery financed receivables $ 47,222 $ 52,840

December 31, 2021 March 31, 2022

Interment rights $ 40,863 $ 40,635

Merchandise and services 7,348 7,518

Unearned finance charges 4,644 4,573

Preneed cemetery receivables $ 52,855 $ 52,726

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

December 31, 2020 September 30, 2021

December 31, 2021 March 31, 2022

Preneed cemetery receivables $ 52,855 $ 52,726

6 unchanged sentences

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

January 1, 2021 Provision for Credit Losses Write Offs September 30, 2021

January 1, 2022 Provision for Credit Losses Write Offs March 31, 2022

Total allowance for credit losses on Preneed cemetery receivables, net

$ ( 1,079 ) $ ( 185 ) $ 221 $ ( 1,043 )

The amortized cost basis of our preneed cemetery receivables by year of origination at September 30, 2021 is as follows (in thousands):

The amortized cost basis of our preneed cemetery receivables by year of origination at March 31, 2022 is as follows (in thousands):

2022 2021 2020 2019 2018 Prior Total

Total preneed cemetery receivables, at amortized cost $ 7,511 $ 20,195 $ 9,856 $ 5,842 $ 2,604 $ 2,145 $ 48,153

The aging of past due preneed cemetery receivables at September 30, 2021 is as follows (in thousands):

The aging of past due preneed cemetery receivables at March 31, 2022 is as follows (in thousands):

Past Due 61-90

13 unchanged sentences

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.

4 unchanged sentences

Where quoted market prices are not available for the specific security, then fair values are estimated by using quoted prices of similar securities in active markets or inputs other than quoted prices that can corroborate observable market data.

These investments are fixed income securities, including foreign debt, corporate debt, preferred stocks, mortgage-

backed securities and fixed income mutual funds and other investments, all of which are classified within Level 2 of the valuation hierarchy.

These investments are fixed income securities, including U.S.

agency obligations, foreign debt, corporate debt, preferred stocks, certificates of deposit and fixed income mutual funds and other investments, all of which are classified within Level 2 of the valuation hierarchy.

We review and update our fair value hierarchy classifications quarterly.

2 unchanged sentences

There is no impact on earnings until such time the services are performed or the merchandise is delivered, causing the contract to be withdrawn from the trust in accordance with state regulations and the gain or loss is allocated to the contract.

For fixed income securities in an unrealized loss position, we first assess whether we intend to sell or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis.

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.

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.

If our assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security.

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.

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

2 unchanged sentences

The components of Preneed cemetery trust investments on our Consolidated Balance Sheet are as follows (in thousands):

December 31, 2020 September 30, 2021

December 31, 2021 March 31, 2022

Preneed cemetery trust investments, at market value $ 103,808 $ 105,459

1 unchanged sentence

Preneed cemetery trust investments $ 100,903 $ 102,533

The cost and market values associated with preneed cemetery trust investments at September 30, 2021 are detailed below (in thousands):

The cost and market values associated with preneed cemetery trust investments at March 31, 2022 are detailed below (in thousands):

Fair Value Hierarchy Level Cost Unrealized

3 unchanged sentences

Fixed income securities:

agency obligations 2 803 — ( 24 ) 779

Foreign debt 2 9,729 1,534 ( 300 ) 10,963

1 unchanged sentence

Preferred stock 2 12,509 604 ( 327 ) 12,786

Certificates of deposit 2 79 — ( 3 ) 76

Common stock 1 49,894 9,592 ( 2,898 ) 56,588

21 unchanged sentences

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

3 unchanged sentences

Market value as a percentage of cost 106.2 %

The following table summarized our fixed income securities (excluding mutual funds) within our preneed cemetery trust investments in an unrealized loss position at September 30, 2021, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

September 30, 2021

The following table summarized our fixed income securities (excluding mutual funds) within our preneed cemetery trust investments in an unrealized loss position at March 31, 2022, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

March 31, 2022

In Loss Position Less than 12 months In Loss Position Greater than 12 months Total

1 unchanged sentence

Fixed income securities:

agency obligations $ 779 $ ( 24 ) $ — $ — $ 779 $ ( 24 )

Foreign debt 1,036 ( 12 ) 783 ( 288 ) 1,819 ( 300 )

1 unchanged sentence

Preferred stock 4,448 ( 113 ) 3,121 ( 214 ) 7,569 ( 327 )

Certificates of deposit 76 ( 3 ) — — 76 ( 3 )

Total fixed income securities with an unrealized loss $ 13,596 $ ( 995 ) $ 3,904 $ ( 502 ) $ 17,500 $ ( 1,497 )

7 unchanged sentences

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 )

Preneed cemetery trust investment security transactions recorded in Other, net on our Consolidated Statements of Operations are as follows (in thousands):

Three months ended September 30, Nine months ended September 30,

2020 2021 2020 2021

Three months ended March 31,

Investment income $ 467 $ 491

1 unchanged sentence

Realized losses ( 2,518 ) ( 63 )

Unrealized gains (losses), net 1,235 ( 3,966 ) ( 2,726 ) 4,893

Unrealized gains, net 9,708 6,877

Expenses and taxes ( 327 ) ( 364 )

Net change in deferred preneed cemetery receipts held in trust ( 11,422 ) ( 8,964 )

$ — $ — $ — $ —

Purchases and sales of investments in the preneed cemetery trusts are as follows (in thousands):

Three months ended September 30, Nine months ended September 30,

2020 2021 2020 2021

Three months ended March 31,

Purchases $ ( 8,411 ) $ ( 1,315 )

4 unchanged sentences

The components of Preneed funeral trust investments on our Consolidated Balance Sheet are as follows (in thousands):

December 31, 2020 September 30, 2021

December 31, 2021 March 31, 2022

Preneed funeral trust investments, at market value $ 116,973 $ 116,605

1 unchanged sentence

Preneed funeral trust investments $ 113,658 $ 113,332

The cost and market values associated with preneed funeral trust investments at September 30, 2021 are detailed below (in thousands):

The cost and market values associated with preneed funeral trust investments at March 31, 2022 are detailed below (in thousands):

Fair Value Hierarchy Level Cost Unrealized

28 unchanged sentences

Fixed income securities:

treasury debt 1 819 6 — 825

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

1 unchanged sentence

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

4 unchanged sentences

Market value as a percentage of cost 105.1 %

The following table summarized our fixed income securities (excluding mutual funds) within our preneed funeral trust investment in an unrealized loss position at September 30, 2021, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

September 30, 2021

The following table summarized our fixed income securities (excluding mutual funds) within our preneed funeral trust investment in an unrealized loss position at March 31, 2022, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

March 31, 2022

In Loss Position Less than 12 months In Loss Position Greater than 12 months Total

1 unchanged sentence

Fixed income securities:

treasury debt $ 534 $ ( 16 ) $ — $ — $ 534 $ ( 16 )

Foreign debt 908 ( 10 ) 668 ( 245 ) 1,576 ( 255 )

10 unchanged sentences

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 )

Preneed funeral trust investment security transactions recorded in Other, net on the Consolidated Statements of Operations are as follows (in thousands):

Three months ended September 30, Nine months ended September 30,

2020 2021 2020 2021

Three months ended March 31,

Investment income $ 369 $ 366

1 unchanged sentence

Realized losses ( 2,368 ) ( 58 )

Unrealized gains (losses), net 1,197 ( 3,728 ) ( 2,188 ) 4,478

Unrealized gains, net 9,319 6,527

Expenses and taxes ( 196 ) ( 215 )

Net change in deferred preneed funeral receipts held in trust ( 10,995 ) ( 8,363 )

$ — $ — $ — $ —

Purchases and sales of investments in the preneed funeral trusts are as follows (in thousands):

Three months ended September 30, Nine months ended September 30,

2020 2021 2020 2021

Three months ended March 31,

Purchases $ ( 7,628 ) $ ( 590 )

3 unchanged sentences

The components of Care trusts’ corpus are as follows (in thousands):

December 31, 2020 September 30, 2021

December 31, 2021 March 31, 2022

Cemetery perpetual care trust investments, at market value $ 72,400 $ 73,525

1 unchanged sentence

Care trusts’ corpus $ 71,156 $ 72,847

The following table reflects the cost and fair market values associated with the trust investments held in perpetual care trust funds at September 30, 2021 (in thousands):

The following table reflects the cost and market values associated with the trust investments held in cemetery perpetual care trust funds at March 31, 2022 (in thousands):

Fair Value Hierarchy Level Cost Unrealized

20 unchanged sentences

Total fixed income securities $ 26,715

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 cemetery perpetual care trust funds at December 31, 2021 (in thousands):

Fair Value Hierarchy Level Cost Unrealized

6 unchanged sentences

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

3 unchanged sentences

Market value as a percentage of cost 106.6 %

The following table summarized our fixed income securities (excluding mutual funds) within our perpetual care trust investment in an unrealized loss position at September 30, 2021, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

September 30, 2021

The following table summarized our fixed income securities (excluding mutual funds) within our cemetery perpetual care trust investment in an unrealized loss position at March 31, 2022, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

March 31, 2022

In Loss Position Less than 12 months In Loss Position Greater than 12 months Total

13 unchanged sentences

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 )

Perpetual care trust investment security transactions recorded in Other, net on our Consolidated Statements of Operations are as follows (in thousands):

Three months ended September 30, Nine months ended September 30,

2020 2021 2020 2021

Cemetery perpetual care trust investment security transactions recorded in Other, net on our Consolidated Statements of Operations are as follows (in thousands):

Three months ended March 31,

Realized gains $ 691 $ 250

Realized losses ( 420 ) ( 8 )

Unrealized gains (losses), net 1,108 ( 3,070 ) ( 2,349 ) 3,747

Unrealized gains, net 7,699 4,728

Net change in Care trusts’ corpus ( 7,970 ) ( 4,970 )

Total $ — $ —

Perpetual care trust investment security transactions recorded in Other revenue on our Consolidated Statements of Operations are as follows (in thousands):

Three months ended September 30, Nine months ended September 30,

2020 2021 2020 2021

Cemetery perpetual care trust investment security transactions recorded in Other revenue are as follows (in thousands):

Three months ended March 31,

Investment income $ 2,513 $ 2,762

Realized gains (losses), net 63 ( 278 ) 53 ( 557 )

Realized losses, net ( 138 ) ( 346 )

Total $ 2,375 $ 2,416

Purchases and sales of investments in the perpetual care trusts are as follows (in thousands):

Three months ended September 30, Nine months ended September 30,

2020 2021 2020 2021

Purchases and sales of investments in the cemetery perpetual care trusts are as follows (in thousands):

Three months ended March 31,

Purchases $ ( 6,137 ) $ ( 131 )

4 unchanged sentences

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

December 31, 2020 September 30, 2021

Preneed trust funeral funds, at cost $ 17,365 $ 19,243

December 31, 2021 March 31, 2022

Preneed funeral trust funds, at cost $ 19,597 $ 19,752

allowance for contract cancellation ( 588 ) ( 592 )

Receivables from preneed funeral trusts, net $ 19,009 $ 19,160

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 September 30, 2021.

The cost basis includes reinvested interest and dividends that have been earned on the trust assets.

Fair value includes unrealized gains and losses on trust assets.

The composition of the preneed funeral trust funds at September 30, 2021 is as follows (in thousands):

The composition of the preneed funeral trust funds at March 31, 2022 is as follows (in thousands):

Cost Basis Fair Value

12 unchanged sentences

FAIR VALUE MEASUREMENTS

We evaluated our financial assets and liabilities for those financial assets and liabilities that met the criteria of the disclosure requirements and fair value framework.

Fair value is defined as the price that would be received from the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date applicable for items that are recognized or disclosed at fair value in the financial statements on a recurring basis.

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.

We evaluated our financial assets and liabilities for those that met the criteria of the disclosure requirements and fair value framework.

The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximate the fair values of those instruments due to the short-term nature of the instruments.

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 New Credit Facility (as defined in Note 10) and New Senior Notes (as defined in Note 11) are classified within Level 2 of the Fair Value Measurements hierarchy.

At September 30, 2021, the carrying value and fair value of our New Credit Facility was $ 86.9 million.

We believe that our New Credit Facility bears interest at a rate that approximates prevailing market rates for instruments with similar characteristics and therefore, the carrying value of our New Credit Facility approximates fair value.

Our acquisition debt and Credit Facility (as defined in Note 10) and Senior Notes (as defined in Note 11) are classified within Level 2 of the Fair Value Measurements hierarchy.

At March 31, 2022, the carrying value and fair value of our Credit Facility was $ 174.2 million.

We believe that our Credit Facility bears interest at a rate that approximates prevailing market rates for instruments with similar characteristics and therefore, the carrying value of our Credit Facility approximates fair value.

We estimate the fair value of our acquisition debt utilizing an income approach, which uses a present value calculation to discount payments based on current market rates as of the reporting date.

At September 30, 2021, the carrying value of our acquisition debt was $ 5.1 million, which approximated its fair value.

The fair value of our New Senior Notes was approximately $ 403.2 million at September 30, 2021 based on the last traded or broker quoted price.

At December 31, 2020 and September 30, 2021, we did not have any assets that had fair values determined by Level 3 inputs and no liabilities measured at fair value.

At March 31, 2022, the carrying value of our acquisition debt was $ 4.5 million, which approximated its fair value.

The fair value of our Senior Notes was $ 373.4 million at March 31, 2022 based on the last traded or broker quoted price.

At December 31, 2021 and March 31, 2022, we did not have any assets that had fair values determined by Level 3 inputs and no liabilities measured at fair value.

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.

4 unchanged sentences

Intangible and other non-current assets are as follows (in thousands):

December 31, 2020 September 30, 2021

December 31, 2021 March 31, 2022

Tradenames $ 23,565 $ 23,565

3 unchanged sentences

Our tradenames have indefinite lives and therefore are not amortized.

See Note 1 to the Consolidated Financial Statements included herein for a discussion of the methodology used for our indefinite-lived intangible asset impairment test.

Prepaid Agreements

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

Amortization expense was $ 175,000 and $ 158,000 for the three months ended September 30, 2020 and 2021, respectively and $ 551,000 and $ 495,000 for the nine months ended September 30, 2020 and 2021, respectively.

Amortization expense was $ 168,000 and $ 148,000 for the three months ended March 31, 2021 and 2022, respectively.

Capitalized Commissions

1 unchanged sentence

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 was $ 145,000 and $ 165,000 for the three months ended September 30, 2020 and 2021, respectively and $ 430,000 and $ 473,000 for the nine months ended September 30, 2020 and 2021, respectively.

The aggregate amortization expense for our non-compete agreements and capitalized commissions as of September 30, 2021 is as follows (in thousands):

Amortization expense was $ 152,000 and $ 170,000 for the three months ended March 31, 2021 and 2022, respectively.

The aggregate amortization expense for our non-compete agreements and capitalized commissions as of March 31, 2022 is as follows (in thousands):

Prepaid Agreements Capitalized Commissions

4 unchanged sentences

CREDIT FACILITY AND ACQUISITION DEBT

At December 31, 2020, our senior secured revolving credit facility (the “Former Credit Facility”) was comprised of:

At March 31, 2022, our senior secured revolving credit facility (the “Credit Facility”) was comprised of:

(i) a $ 200.0 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 Former Credit Facility was to occur on May 31, 2023.

On May 13, 2021, in connection with the issuance of the New Senior Notes (defined in Note 11), we entered into an amended and restated $ 150.0 million senior secured revolving credit facility (the “New Credit Facility”) with the New Credit Facility Subsidiary Guarantors (as defined below), the financial institutions party thereto, as lenders, and Bank of America, N.A., as administrative agent.

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

On May 13, 2021, we used approximately $ 21.4 million of the availability under the New Credit Facility to repay the 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 New Credit Facility.

In connection with the termination of the Former Credit Facility, for the nine months ended September 30, 2021, 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 .

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

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

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

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

In addition, the New Credit Facility includes provisions which require the Company and the Subsidiary Guarantors, upon the occurrence of an event of default or in the event the Company’s actual Total Leverage Ratio is not at least 0.25 less than the required Total Leverage Ratio covenant level under the New Credit Facility, to grant additional liens on real property assets accounting for no less than 50 % of the Company’s and the Subsidiary Guarantors’ funeral operations if requested by the administrative agent.

The New Credit Facility contains customary affirmative covenants, including, but not limited to, covenants with respect to the use of proceeds, payment of taxes and other obligations, continuation of the Company’s business and the maintenance of existing rights and privileges, the maintenance of property and insurance, amongst others.

In addition, the New Credit Facility also contains customary negative covenants, including, but not limited to, covenants that restrict (subject to certain exceptions) the ability of the Company and the Subsidiary Guarantors to incur indebtedness, grant liens, make investments, engage in mergers and acquisitions, and pay dividends and other restricted payments, and certain financial maintenance covenants.

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

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

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

Our 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 11) 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 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 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 March 31, 2022, we were subject to the following financial covenants under our Credit Facility:

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

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

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

We were in compliance with all of the covenants contained in our Credit Facility as of March 31, 2022.

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

December 31, 2020 September 30, 2021

December 31, 2021 March 31, 2022

Credit Facility $ 155,400 $ 174,200

5 unchanged sentences

Total acquisition debt, net of current portion $ 3,979 $ 3,935

At September 30, 2021, we had outstanding borrowings under the New Credit Facility of $ 86.9 million.

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

At March 31, 2022, we had outstanding borrowings under the Credit Facility of $ 174.2 million.

We also had one letter of credit for $ 2.3 million under the Credit Facility.

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 September 30, 2021, we had $ 60.8 million of availability under the New Credit Facility.

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

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

The weighted average interest rate on our New Credit Facility was 2.0 % and 2.5 % for the three and nine months ended September 30, 2021, respectively.

The weighted average interest rate on our Former Credit Facility was 3.9 % and 4.0 % for the three and nine months ended September 30, 2020, respectively.

At March 31, 2022, we had $ 23.5 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 March 31, 2022, the prime rate margin was equivalent to 0.875 % and the LIBOR rate margin was 1.875 %.

The weighted average interest rate on our Credit Facility was 3.3 % and 2.1 % for the three months ended March 31, 2021 and 2022, respectively.

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

Three months ended September 30, Nine months ended September 30,

2020 2021 2020 2021

Three months ended March 31,

Credit Facility interest expense $ 445 $ 847

2 unchanged sentences

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 .

Original maturities range from nine to twenty years .

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

Three months ended September 30, Nine months ended September 30,

2020 2021 2020 2021

Three months ended March 31,

Acquisition debt imputed interest expense $ 97 $ 80

On May 13, 2021, we completed the issuance of $ 400.0 million in aggregate principal amount 4.25 % Senior Notes due 2029 (the “New Senior Notes”) and related guarantees by the Subsidiary Guarantors in a private offering under Rule 144A and Regulation S of the Securities Act of 1933, as amended (the “Securities Act”).

We used the proceeds of $ 395.5 million from the offering of the New Senior Notes, which are net of a 1.125 % debt discount of $ 4.5 million, together with cash on hand and borrowings under the New Credit Facility, to redeem all of our then outstanding $ 400.0 million in aggregate principal amount 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 nine months ended September 30, 2021, we incurred $ 1.3 million in transaction costs related to the New Senior Notes.

For the nine months ended September 30, 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 New Senior Notes were issued under an indenture, dated as of May 13, 2021 (the “Indenture”), among the Company, the Subsidiary Guarantors and Wilmington Trust, National Association, as trustee (“Collateral Trustee”).

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

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

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

The New Senior Notes are unsecured, senior obligations and are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally by each of the Subsidiary Guarantors.

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

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

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

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

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

In addition, if we make certain asset sales and do not reinvest the proceeds thereof or use such proceeds to repay certain debt, we will be required to use the proceeds of such asset sales to make an offer to purchase the New Senior Notes at a price equal to 100 % of the principal amount of the New Senior Notes, plus accrued and unpaid interest.

The Indenture contains restrictive covenants limiting our ability and our Restricted Subsidiaries (as defined in the Indenture) to, among other things, incur additional indebtedness or issue certain preferred shares, create liens on certain assets to secure debt, pay dividends or make other equity distributions, purchase or redeem capital stock, make certain investments, sell assets, agree to certain restrictions on the ability of Restricted Subsidiaries to make payments to us, consolidate, merge, sell or otherwise dispose of all or substantially all assets, or engage in transactions with affiliates.

The Indenture also contains customary events of default.

The debt discount and the debt issuance costs are being amortized using the effective interest method over the remaining term of approximately 92 months of the New Senior Notes.

The effective interest rate on the unamortized debt discount and the unamortized debt issuance costs for the New Senior Notes for both three and nine months ended September 30, 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):

December 31, 2020 September 30, 2021

The carrying value of our 4.25 % senior notes due 2029 (the “Senior Notes”) is reflected on our Consolidated Balance Sheet as follows (in thousands):

December 31, 2021 March 31, 2022

Long-term liabilities:

Principal amount $ 400,000 $ 400,000

Debt premium, net of accumulated amortization of $ 221

Debt discount, net of accumulated amortization of $ 301 and $ 422 , respectively

3 unchanged sentences

Carrying value of the Senior Notes $ 394,610 $ 394,765

At September 30, 2021, the fair value of the New Senior Notes, which are Level 2 measurements, was $ 403.2 million.

At March 31, 2022, the fair value of the Senior Notes, which are Level 2 measurements, was $ 373.4 million.

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.

The Senior Notes are unsecured, senior obligations and are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally by each of the Subsidiary Guarantors.

The Senior Notes mature on May 15, 2029, unless earlier redeemed or purchased and bear interest at 4.25 % per year, which is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2021.

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 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.

In addition, if we make certain asset sales and do not reinvest the proceeds thereof or use such proceeds to repay certain debt, we will be required to use the proceeds of such asset sales to make an offer to purchase the Senior Notes at a price equal to 100 % of the principal amount of the Senior Notes, plus accrued and unpaid interest.

The Indenture also contains customary events of default.

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

Three months ended September 30, Nine months ended September 30,

2020 2021 2020 2021

Three months ended March 31,

Senior Notes interest expense $ 6,625 $ 4,250

2 unchanged sentences

Senior Notes amortization of debt issuance costs 74 34

The effective interest rate on the unamortized debt discount and unamortized debt issuance costs for the Original Senior Notes, issued in May 2018, for both the three and nine months ended September 30, 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 Original Senior Notes, issued in December 2019, for both the three and nine months ended September 30, 2020 was 6.20 % and 6.90 %, respectively.

The debt discount and the debt issuance costs are being amortized using the effective interest method over the remaining term of approximately 86 months of the Senior Notes.

For the three months ended March 31, 2022, the effective interest rate on the unamortized debt discount and the unamortized debt issuance costs for the Senior Notes was 4.42 % and 4.30 %, respectively.

For the three months ended March 31, 2021, the effective interest rate on the unamortized debt discount and unamortized debt issuance costs for our $400 million in aggregate principal amount of 6.625% senior notes due 2026 (the “Original Senior Notes”) was 6.69 %.

For the three months ended March 31, 2021, 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 was 6.88 %.

All of our Original Senior Notes were redeemed on June 1, 2021.

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

The components of lease cost are as follows (in thousands):

Three months ended September 30, Nine months ended September 30,

Three months ended March 31,

Income Statement Classification 2021 2022

Operating lease cost Facilities and grounds expense (1)

$ 927 $ 947 $ 2,838 $ 2,871

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

35 39 107 145

Variable lease cost Facilities and grounds expense (1)

1 unchanged sentence

Depreciation of leased assets Depreciation and amortization (2)

$ 111 $ 111 $ 329 $ 328

Interest on lease liabilities Interest expense 120 113

2 unchanged sentences

(1) Facilities and grounds expense is included within Cost of service and General, administrative and other on our Consolidated Statements of Operations.

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

(2) Depreciation and amortization expense is included within Field depreciation and General, administrative and other on our Consolidated Statements of Operations.

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

Nine months ended September 30,

Three months ended March 31,

Cash paid for operating leases included in operating activities $ 965 $ 897

1 unchanged sentence

Right-of-use assets obtained in exchange for new leases is as follows (in thousands):

Nine months ended September 30,

Three months ended March 31,

Right-of-use assets obtained in exchange for new operating lease liabilities $ 56 $ 178

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

During the three and nine months ended September 30, 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.

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

Lease Type Balance Sheet Classification December 31, 2020 September 30, 2021

Lease Type Balance Sheet Classification December 31, 2021 March 31, 2022

Operating lease right-of-use assets Operating lease right-of-use assets $ 17,881 $ 17,622

9 unchanged sentences

Total lease liabilities $ 25,965 $ 25,576

The average lease terms and discount rates at September 30, 2021 are as follows:

The average lease terms and discount rates at March 31, 2022 are as follows:

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

1 unchanged sentence

Finance leases 12.1 8.2 %

The aggregate future lease payments for operating and finance leases at September 30, 2021 are as follows (in thousands):

The aggregate future lease payments for operating and finance leases at March 31, 2022 are as follows (in thousands):

Operating Finance

9 unchanged sentences

Present value of lease liabilities $ 20,131 $ 5,445

At September 30, 2021, we had no additional significant operating or finance leases that had not yet commenced.

At March 31, 2022, we had no additional significant operating or finance leases that had not yet commenced.

COMMITMENTS AND CONTINGENCIES

Chinchilla v.

Carriage Services, Inc., et al.

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

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 in California.

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

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

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

The 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.

On January 5, 2022, the parties to the litigation engaged in and executed a Memorandum of Understanding for class settlement in the amount of $ 1.0 million.

The parties subsequently executed a Class Settlement Agreement, and the court granted preliminary approval of the Class Settlement Agreement on March 29, 2022.

The parties are now working with the Claims Administrator.

At March 31, 2022, we accrued $ 1.1 million for the expected settlement amount and associated legal fees.

STOCKHOLDERS ’ EQUITY

1 unchanged sentence

Restricted stock activity is as follows (in thousands, except shares):

Three months ended September 30, Nine months ended September 30,

2020 2021 2020 2021

Shares Fair Value Shares Fair Value Shares Fair Value Shares Fair Value

Three months ended March 31,

Shares Fair Value Shares Fair Value

9,300 $ 324 — $ —

1 unchanged sentence

Cancelled — $ — 1,000 $ 31

(1) Restricted stock granted during the nine months ended September 30, 2020 and 2021 vest over a three-year period at a weighted average stock price of $ 25.00 and $ 34.79 , respectively.

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for restricted stock awards of $ 183,000 and $ 89,000 , for the three months ended September 30, 2020 and 2021, respectively and $ 551,000 and $ 308,000 , for the nine months ended September 30, 2020 and 2021, respectively.

(1) Restricted stock granted during the three months ended March 31 2021 vests 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 $ 34.79 .

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for restricted stock awards of $ 121,000 and $ 57,000 , for the three months ended March 31, 2021 and 2022, respectively.

Stock Options

During the nine months ended September 30, 2021, we granted 150,000 options to a certain key employee at a weighted average price of $ 34.79 .

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.

In addition, in accordance with the terms of the separation agreement, we accelerated 12,980 options in connection with the resignation of an employee which resulted in an additional $ 129,000 of stock-based compensation expense.

Additional stock option activity is as follows (in thousands, except shares):

Three months ended September 30, Nine months ended September 30,

Stock option grants and cancellations are as follows (in thousands, except shares):

Three months ended March 31,

Shares Fair Value Shares Fair Value

701,400 $ 7,115 58,500 $ 959

Shares Fair Value Shares Fair Value Shares Fair Value Shares Fair Value

— $ — 310,000 $ 5,388

Cancelled 3,840 $ 24 7,000 $ 71

(1) Stock options granted during the nine months ended September 30, 2020 and 2021 had a weighted average price of $ 18.02 and $ 34.79 , respectively.

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.

Three months ended September 30, Nine months ended September 30,

2020 2021 2020 2021

Shares Cash Shares Cash Shares Cash Shares Cash

(1) Stock options granted during the three months ended March 31, 2021 and 2022 had a weighted average price of $ 34.79 and $ 49.48 , respectively.

The fair value of these options was calculated using the Black-Scholes option pricing model.

The options granted in 2021 and 2022 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.

(2) Stock options granted during the three months ended March 31, 2022 had a weighted average price of $ 49.48 .

The fair value of these options was calculated using the Black-Scholes option pricing model and vest over a seven-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.

Additionally, during the three months ended March 31, 2021, we granted 150,000 options to a certain key employee at a weighted average price of $ 34.79 .

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.

The fair value of the options granted during the three months ended March 31, 2022 were estimated using the Black-Scholes option pricing model with the following assumptions:

Grant Date February 23, 2022

Expected holding period (years) 7.00 5.00

Awards granted 310,000 58,500

Dividend yield 0.91 % 0.91 %

Expected volatility 34.35 % 33.18 %

Risk-free interest rate 1.98 % 1.89 %

Black-Scholes value $ 17.38 $ 16.39

Additional stock option activity is as follows (in thousands, except shares):

Three months ended March 31,

Shares Cash Shares Cash

Exercised (1)

17,913 N/A 32,665 N/A 17,913 N/A 314,294 N/A

101,000 N/A 18,736 N/A

Returned for option price (2)

2 unchanged sentences

8,011 $ 295 1,601 $ 82

(1) Stock options exercised during the three months ended September 30, 2020 and 2021 had a weighted average exercise price of $ 5.70 and $ 21.81 , respectively, with an aggregate intrinsic value of $ 0.3 million and $ 0.6 million, respectively.

Stock options exercised during the nine months ended September 30, 2020 and 2021 had a weighted average exercise price of $ 5.70 and $ 21.78 respectively, with an aggregate intrinsic value of $ 0.3 million and $ 5.0 million, respectively.

(2) Represents cash received for the payment of the option price.

(3) Represents cash withheld for the payment of payroll taxes.

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for stock options, including the accelerated stock options discussed above of $ 165,000 and $ 467,000 , for the three months ended September 30, 2020 and 2021, respectively and $ 502,000 and $ 1,507,000 , for the nine months ended September 30, 2020 and 2021, respectively.

(1) Stock options exercised during the three months ended March 31, 2021 and 2022 had a weighted average exercise price of $ 24.18 and $ 25.88 , respectively, with an aggregate intrinsic value of $ 1.3 million and $ 0.5 million, respectively.

(2) Represents shares withheld/cash received for the payment of the option price.

(3) Represents shares withheld/cash paid for the payment of payroll taxes.

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for stock options of $ 560,000 and $ 638,000 , for the three months ended March 31, 2021 and 2022, respectively.

Performance Awards

During the nine months ended September 30, 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 and the February 19, 2020 award.

Concurrently with the cancellation, the Compensation Committee of the Board of Directors (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.

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.

These awards will vest (if at all) on December 31, 2024, provided that the Company’s common stock reaches the predetermined growth targets for the sustained period ending on December 31, 2024.

The amendment 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 43 months.

Additional performance award activity is as follows (in thousands, except shares):

Three months ended September 30, Nine months ended September 30,

2020 2021 2020 2021

Shares Fair Value Shares Fair Value Shares Fair Value Shares Fair Value

Performance award activity is as follows (in thousands, except shares):

Three months ended March 31,

Shares Fair Value Shares Fair Value

Granted — $ — 3,750 $ 162

Cancelled 27,948 $ 268 6,987 $ 67

The fair values of the performance awards granted during the nine months ended September 30, 2021 were determined by using the Monte-Carlo simulation pricing model with the following assumptions:

April 16, 2021 June 1, 2021 August 12, 2021 September 15, 2021

Performance Period April 16, 2021 - December 31, 2024 June 1, 2021 - December 31, 2024 August 12, 2021 - December 31, 2024 September 15, 2021 - December 31, 2024

The fair value of the performance awards granted during the three months ended March 31, 2022 was determined by using the Monte-Carlo simulation pricing model with the following assumptions:

Grant Date February 23, 2022

Performance Period February 23, 2022 - December 31, 2024

Simulation period (years) 2.85

2 unchanged sentences

Risk-free interest rate 1.75 %

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for performance awards of $ 286,000 and $ 475,000 for the three months ended September 30, 2020 and 2021, respectively and $ 589,000 and $ 1,064,000 for the nine months ended September 30, 2020 and 2021, respectively.

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for performance awards of $ 237,000 and $ 566,000 for the three months ended March 31, 2021 and 2022, respectively.

Employee Stock Purchase Plan

ESPP activity is as follows (in thousands, except shares):

Three months ended September 30, Nine months ended September 30,

2020 2021 2020 2021

Shares Price Shares Price Shares Price Shares Price

Three months ended March 31,

Shares Price Shares Price

ESPP 18,182 $ 26.32 13,293 $ 45.33

4 unchanged sentences

Expected life (years) 0.25 , 0.50 , 0.75 , 1.00

We recorded stock-based compensation expense, which is included in General, administrative and other expenses and Regional and unallocated funeral and cemetery costs , for the ESPP totaling $ 95,000 and $ 117,000 for the three months ended September 30, 2020 and 2021, respectively and $ 339,000 and $ 458,000 for the nine months ended September 30, 2020 and 2021, respectively.

We recorded stock-based compensation expense, which is included in General, administrative and other expenses and Regional and unallocated funeral and cemetery costs , for the ESPP totaling $ 206,000 and $ 199,000 for the three months ended March 31, 2021 and 2022, respectively.

Good To Great Incentive Program

During the three months ended March 31, 2022, we issued 27,448 shares of our common stock to certain employees, which were valued at approximately $ 1.4 million at a grant date stock price of $ 49.48 .

During the three months ended March 31, 2021, we did not issue any shares of common stock related to this incentive program.

Non-Employee Director and Board Advisor Compensation

Non-Employee Director and Board Advisor common stock activity is as follows (in thousands, except shares):

Three months ended September 30, Nine months ended September 30,

2020 2021 2020 2021

Shares Fair Value Shares Fair Value Shares Fair Value Shares Fair Value

Three months ended March 31,

Shares Fair Value Shares Fair Value

Board of Directors 5,040 $ 177 2,669 $ 142

Advisor to the Board 142 $ 5 93 $ 5

(1) Common stock granted during the three months ended September 30, 2020 and 2021 had a weighted average price of $ 26.79 and $ 44.59 , respectively.

Common stock granted during the nine months ended September 30, 2020 and 2021 had a weighted average price of $ 18.91 and $ 38.20 , 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 $ 250,000 and $ 201,000 for the three months ended September 30, 2020 and 2021, respectively and $ 653,000 and $ 656,000 for the nine months ended September 30, 2020 and 2021, respectively.

(1) Common stock granted during the three months ended March 31, 2021 and 2022 had a weighted average price of $ 35.19 and $ 53.33 , 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 $ 236,000 and $ 201,000 for the three months ended March 31, 2021 and 2022, respectively.

Share Repurchase

On May 18, 2021 and July 26, 2021, our Board authorized increases of up to an additional $ 25.0 million, respectively, in our share repurchase program to permit us to purchase up to a total of $ 50.0 million under our share repurchase program, in addition to amounts previously authorized and outstanding, in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

On February 23, 2022, our Board authorized an increase in our share repurchase program to permit us to purchase up to an additional $ 75.0 million under our share repurchase program, in addition to amounts previously authorized and outstanding in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended (“the Exchange Act”).

Prior to the Board's approval of the increase, we had $8.1 million remaining available for repurchase under our authorized program.

Share repurchase activity is as follows (dollar value in thousands):

Three months ended September 30, 2021 Nine months ended September 30, 2021

Three months ended March 31

Number of Shares Repurchased (1)

1,203,493 1,528,197

Average Price Paid Per Share $ — $ 53.08

Dollar Value of Shares Repurchased (1)

$ 53,239 $ 65,540

(1) During the three and nine months ended September 30, 2021, 84,000 shares settled in October 2021, which had a cost of $ 3.8 million.

(1) During the three months ended March 31, 2022, 52,242 shares settled in April 2022, which had a cost of $ 2.8 million.

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

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

At September 30, 2021, we had approximately $ 10.1 million available for repurchase under our share repurchase program.

Cash Dividends

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

At March 31, 2022, our share repurchase program had $57.1 million authorized for repurchases.

Cash Dividend

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

2022 Per Share Dollar Value

$ 0.1125 $ 1,725

$ 0.1000 $ 1,808

September 1 st

$ 0.1000 $ 1,783

2021 Per Share Dollar Value

$ 0.1000 $ 1,799

$ 0.0750 $ 1,343

September 1 st

$ 0.0875 $ 1,569

EARNINGS PER SHARE

The following table sets forth the computation of the basic and diluted earnings per share (in thousands, except per share data):

Three months ended September 30, Nine months ended September 30,

2020 2021 2020 2021

Three months ended March 31,

Numerator for basic and diluted earnings per share:

5 unchanged sentences

Stock options 234 409

Convertible Notes 3 — 1 —

Performance awards — 716

4 unchanged sentences

$ 0.71 $ 1.00

For the three and nine months ended September 30, 2021, no stock options were excluded from the computation of diluted earnings per share.

For the three and nine months ended September 30, 2020 there were 765,722 and 848,513 stock options, respectively, excluded from the computation of diluted earnings per share because the inclusion of such stock options would result in an antidilutive effect.

For the three months ended March 31, 2021 and 2022, 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 September 30, 2021, we had satisfied certain performance criteria for the first and second predetermined growth targets of our performance awards to be considered outstanding.

At March 31, 2022, 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.

1 unchanged sentence

Revenue, disaggregated by major source for each of our reportable segments was as follows (in thousands):

Three months ended September 30, 2021

Funeral Cemetery Total

Services $ 41,987 $ 4,223 $ 46,210

Merchandise 23,532 3,305 26,837

Cemetery property — 15,206 15,206

Other revenue 3,378 3,410 6,788

Total $ 68,897 $ 26,144 $ 95,041

Three months ended September 30, 2020

Funeral Cemetery Total

Services $ 36,987 $ 4,231 $ 41,218

Merchandise 20,846 3,019 23,865

Cemetery property — 12,433 12,433

Other revenue 3,601 3,276 6,877

Total $ 61,434 $ 22,959 $ 84,393

Nine months ended September 30, 2021

Three months ended March 31, 2022

Funeral Cemetery Total

4 unchanged sentences

Total $ 74,355 $ 23,806 $ 98,161

Nine months ended September 30, 2020

Three months ended March 31, 2021

Funeral Cemetery Total

7 unchanged sentences

Operating income (loss):

Three months ended September 30, 2021 $ 22,924 $ 9,471 $ ( 9,130 ) $ 23,265

Three months ended September 30, 2020 13,975 8,982 ( 6,463 ) 16,494

Nine months ended September 30, 2021 $ 65,404 $ 30,462 $ ( 25,431 ) $ 70,435

Nine months ended September 30, 2020 38,155 18,440 ( 19,685 ) 36,910

Three months ended March 31, 2022 $ 25,463 $ 8,218 $ ( 8,530 ) $ 25,151

Three months ended March 31, 2021 25,876 9,493 ( 9,123 ) 26,246

Income (loss) before income taxes:

Three months ended September 30, 2021 $ 22,777 $ 9,508 $ ( 14,117 ) $ 18,168

Three months ended September 30, 2020 13,753 9,024 ( 14,393 ) 8,384

Nine months ended September 30, 2021 $ 64,951 $ 30,537 $ ( 69,105 ) $ 26,383

Nine months ended September 30, 2020 37,481 18,538 ( 44,136 ) 11,883

Three months ended March 31, 2022 $ 27,209 $ 8,259 $ ( 13,984 ) $ 21,484

Three months ended March 31, 2021 25,718 9,476 ( 16,620 ) 18,574

Total assets:

September 30, 2021 $ 764,569 $ 385,573 $ 13,833 $ 1,163,975

March 31, 2022 $ 769,717 $ 394,627 $ 16,005 $ 1,180,349

December 31, 2021 769,539 390,344 18,748 1,178,631

1 unchanged sentence

Balance Sheet

The following table presents t he detail of certain balance sheet accounts (in thousands):

December 31, 2020 September 30, 2021

The following table presents the detail of certain balance sheet accounts (in thousands):

December 31, 2021 March 31, 2022

Prepaid and other current assets:

Prepaid expenses $ 2,215 $ 3,829

State income taxes receivable — 49

Federal income taxes receivable 4,064 50

Other current assets 125 126

7 unchanged sentences

Incentive compensation $ 19,121 $ 3,690

Interest 2,291 6,572

Insurance 4,089 4,443

Unrecognized tax benefit 3,761 3,228

Salaries and wages 1,392 3,533

Vacation 3,334 3,389

Income tax payable 798 799

Ad valorem and franchise taxes 435 2,115

Natural disaster liability 2,628 269

Interest 2,250 6,542

Salaries and wages 2,193 3,517

Employer payroll tax deferral 1,773 1,773

1 unchanged sentence

Commissions 684 787

Income tax payable 485 469

Ad valorem and franchise taxes 450 1,045

Perpetual care trust payable 389 463

3 unchanged sentences

Incentive compensation $ 1,291 $ 1,309

Employer payroll tax deferral 1,773 1,773

Severance — 277

Other long-term liabilities 128 —

Total other long-term liabilities $ 1,419 $ 1,309

The following information is supplemental disclosure for the Consolidated Statements of Cash Flows (in thousands):

Nine months ended September 30,

Three months ended March 31,

Cash paid for interest $ 616 $ 927

Cash paid (refunded) for taxes ( 6,817 ) 9,974

Cash paid for taxes 532 1,540

Unsettled share repurchases — 2,784

Fair value of donated real property 635 —

SUBSEQUENT EVENTS

On October 21, 2021, we sold real property for $ 1.4 million.

On October 27, 2021, the Board authorized an increase in our share repurchase program to permit us to purchase up to an additional $ 75 million of our outstanding common shares.

Prior to the Board’s approval of the increase, at September 30, 2021, we had approximately $ 10.1 million authorization remaining under the original repurchase program.

At October 27, 2021, we had approximately $ 85.1 million of share repurchase authorization remaining under the revised repurchase program.

On October 27, 2021, the Board also approved a $ 0.05 per share increase to its annual cash dividend and subsequently declared a quarterly dividend of $ 0.1125 per share payable on December 1, 2021 to common share record holders as of November 9, 2021.

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

2 unchanged sentences

The words “may”, “will”, “estimate”, “intend”, “believe”, “expect”, “seek”, “project”, “forecast”, “foresee”, “should”, “would”, “could”, “plan”, “anticipate” and other similar words or expressions are intended to identify forward-looking statements, which are generally not historical in nature.

These forward-looking statements include, but are not limited to, statements regarding any projections of earnings, revenue, asset sales, cash flow, debt levels or other financial items;

any statements of the plans, strategies and objectives of management for future operations or future acquisitions;

any statements of the plans, timing and objectives of management for acquisition and divestiture activities;

These forward-looking statements include, but are not limited to, statements regarding any projections of earnings, revenue, cash flow, debt levels or other financial items;

any statements of the plans, strategies and objectives of management for future operations;

including, but not limited to, technology innovations;

any statements of the plans, timing and objectives of management for acquisition activities;

any statements of the plans, timing, expectations and objectives of management for future financing activities;

7 unchanged sentences

• our ability to find and retain skilled personnel;

• the effects of our incentive and compensation plans and programs, including such effects on our Standards Operating Model and our operational and financial performance;

• the effects of our incentive and compensation plans and programs, including such effects on our Standards Operating Model and the Company’s operational and financial performance;

• our ability to execute our growth strategy;

• the execution of our Standards Operating, 4E Leadership and Strategic Acquisition Models;

• the execution of our Standards Operating, 4E Leadership and Standard Acquisition Models;

• the effects of competition;

1 unchanged sentence

• changes in consumer preferences and our ability to adapt to or meet those changes;

• our ability to generate preneed sales, including implementing our cemetery portfolio sales strategy;

• our ability to generate preneed sales, including implementing our cemetery portfolio sales strategy and optimization plan;

• the investment performance of our funeral and cemetery trust funds;

1 unchanged sentence

• our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;

• our ability to meet the timing, objectives and expectations related to our capital allocation framework, including our forecasted rates of return, planned uses of free cash flow and future capital allocation, including share repurchases, internal growth projects, potential strategic acquisitions, dividend increases, or debt repayment plans;

• our ability to meet the timing, objectives and expectations related to our capital allocation framework, including our forecasted rates of return, planned uses of free cash flow and future capital allocation, including share repurchases, potential strategic acquisitions, internal growth projects, dividend increases, or debt repayment plans;

• our ability to meet the projected financial and equity performance metrics to our updated three-year roughly right range and performance scenario, our rolling four quarter outlook, and intrinsic value per share range, if at all;

• the timely and full payment of death benefits related to preneed funeral contracts funded through life insurance contracts;

4 unchanged sentences

• effects of the application of other applicable laws and regulations, including changes in such regulations or the interpretation thereof;

• the potential impact of epidemics and pandemics, including the COVID-19 coronavirus, including new variants of COVID-19, such as the Delta variant, on customer preferences and on our business;

• government, social, business and other actions that have been and will be taken in response to pandemics, including potential responses to new variants of COVID-19, such as the Delta variant;

• effects of litigation;

• the potential impact of epidemics and pandemics, including the COVID-19 coronavirus, including new variants of COVID-19, such as the Delta and Omicron variants, on customer preferences and on our business;

• government, social, business and other actions that have been and will be taken in response to pandemics, including potential responses to new variants of COVID-19, such as the Delta and Omicron variants;

• effects and expense of litigation;

• consolidation of the funeral and cemetery industry;

• our ability to consummate the divestiture of low performing businesses as currently expected, if at all, including expected use of proceeds related thereto;

• our ability to identify and consummate strategic acquisitions, if at all, and successfully integrate acquired businesses with our existing businesses, including expected performance and financial improvements related thereto;

1 unchanged sentence

• interruptions or security lapses of our information technology, including any cybersecurity or ransomware incidents,

• acts of war or terrorists acts and the governmental or military response to such acts;

• our failure to maintain effective control over financial reporting;

4 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements