What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-08-02 compared with 2022-05-03 · 286 added, 190 removed, 1032 unchanged (32% of the section changed)

3 unchanged sentences

(unaudited and in thousands, except share data)

December 31, 2021 March 31, 2022

December 31, 2021 June 30, 2022

Current assets:

49 unchanged sentences

(unaudited and in thousands, except per share data)

Three months ended March 31,

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

2021 2022 2021 2022

Service revenue $ 40,119 $ 42,550 $ 87,876 $ 92,287

17 unchanged sentences

Accretion of discount on convertible subordinated notes — — ( 20 ) —

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

Gain on insurance reimbursements — 1,376 — 3,275

Other, net 2 7 ( 66 ) ( 17 )

Income before income taxes 18,574 21,484

Expense for income taxes ( 5,758 ) ( 5,704 )

Income (loss) before income taxes ( 10,359 ) 15,120 8,215 36,604

Benefit (expense) for income taxes 3,417 ( 4,234 ) ( 2,341 ) ( 9,938 )

Tax adjustment related to discrete items 775 13 892 635

Total expense for income taxes ( 5,641 ) ( 5,082 )

Net income $ 12,933 $ 16,402

Basic earnings per common share:

Total benefit (expense) for income taxes 4,192 ( 4,221 ) ( 1,449 ) ( 9,303 )

Net income (loss) $ ( 6,167 ) $ 10,899 $ 6,766 $ 27,301

Basic earnings (loss) per common share:

$ ( 0.34 ) $ 0.74 $ 0.38 $ 1.82

Diluted earnings per common share:

Diluted earnings (loss) per common share:

$ ( 0.33 ) $ 0.69 $ 0.37 $ 1.70

8 unchanged sentences

(unaudited and in thousands)

Three months ended March 31,

Six months ended June 30,

Cash flows from operating activities:

4 unchanged sentences

Stock-based compensation expense 2,537 3,085

Deferred income tax expense 1,514 76

Deferred income tax expense (benefit) ( 4,461 ) 1,711

Amortization of intangibles 645 634

1 unchanged sentence

Amortization and accretion of debt 201 243

Net loss on divestitures, disposals and impairment charges 21 767

Loss on extinguishment of debt 23,807 —

Net (gain) loss on divestitures, disposals and impairment charges 519 ( 426 )

Gain on insurance reimbursements — ( 3,275 )

Other 181 ( 6 )

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

17 unchanged sentences

Payments against the credit facility ( 87,568 ) ( 78,100 )

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

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

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

Payment of debt issuance costs for the credit facility and senior notes ( 1,930 ) ( 339 )

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

2 unchanged sentences

Proceeds from the exercise of stock options and employee stock purchase plan contributions 1,495 1,060

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

Taxes paid on restricted stock vestings and exercises of stock options ( 1,323 ) ( 286 )

Dividends paid on common stock ( 3,607 ) ( 3,455 )

Purchase of treasury stock ( 11,559 ) ( 36,663 )

Other financing costs ( 7 ) —

Net cash used in financing activities ( 32,893 ) ( 20,085 )

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

Net increase (decrease) in cash and cash equivalents 604 ( 90 )

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

4 unchanged sentences

(unaudited and in thousands)

Three months ended June 30, 2021

Outstanding Common

2 unchanged sentences

Earnings Treasury

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

Net loss — — — ( 6,167 ) — ( 6,167 )

Issuance of common stock from employee stock purchase plan 14 — 361 — — 361

Issuance of common stock to directors and board advisor 5 — 160 — — 160

Exercise of stock options 85 1 52 — — 53

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

Stock-based compensation expense — — 1,070 — — 1,070

Dividends on common stock — — ( 1,808 ) — — ( 1,808 )

Treasury stock acquired ( 325 ) — — — ( 12,301 ) ( 12,301 )

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

Three months ended June 30, 2022

Outstanding Common

Stock Additional

Capital Retained

Earnings Treasury

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

Net income — — — 10,899 — 10,899

Issuance of common stock from employee stock purchase plan 12 — 398 — — 398

Issuance of common stock to directors and board advisor 2 — 99 — — 99

Cancellation and surrender of restricted common stock — — 2 — — 2

Stock-based compensation expense — — 1,379 — — 1,379

Dividends on common stock — — ( 1,730 ) — — ( 1,730 )

Treasury stock acquired ( 205 ) — — — ( 8,224 ) ( 8,224 )

Balance – June 30, 2022 14,698 $ 263 $ 238,571 $ 162,763 $ ( 278,753 ) $ 122,844

CARRIAGE SERVICES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited and in thousands)

Six months ended June 30, 2021

Outstanding Common

Stock Additional

Capital Retained

Earnings Treasury

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

8 unchanged sentences

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

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

Treasury stock acquired ( 325 ) — — — ( 12,301 ) ( 12,301 )

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

Six months ended June 30, 2022

Outstanding Common

12 unchanged sentences

Other 27 — 1,358 — — 1,358

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

Balance – June 30, 2022 14,698 $ 263 $ 238,571 $ 162,763 $ ( 278,753 ) $ 122,844

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

6 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 March 31, 2022, we operated 168 funeral homes in 26 states and 31 cemeteries in 11 states.

At June 30, 2022, we operated 167 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.

8 unchanged sentences

Our unaudited consolidated financial statements have been prepared in a manner consistent with the accounting principles described in our Annual Report on Form 10-K for the year ended December 31, 2021 unless otherwise disclosed herein, and should be read in conjunction therewith.

Reclassifications

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

9 unchanged sentences

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.

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 .

21 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.

We did not acquire any businesses during the six months ended June 30, 2021 and 2022.

Divested Operations

5 unchanged sentences

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.

5 unchanged sentences

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.

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.

58 unchanged sentences

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

December 31, 2021 March 31, 2022

December 31, 2021 June 30, 2022

Land $ 82,095 $ 82,628

4 unchanged sentences

Property, plant and equipment, net $ 269,367 $ 271,532

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

During the six months ended June 30, 2022, we acquired real property for $ 2.6 million.

Additionally, we sold real property for $ 2.7 million, with a carrying value of $ 1.4 million, resulting in a gain on the sale of $ 1.3 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.

During the six months ended June 30, 2021, we acquired real property for $ 2.9 million.

Additionally, we 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 the sale of divestitures and recorded in Net (gain) loss on divestitures, disposals and impairment charges.

Our growth and maintenance capital expenditures totaled $ 3.2 million and $ 5.2 million for the three months ended June 30, 2021 and 2022, respectively and $ 6.1 million and $ 9.8 million for the six months ended June 30, 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 June 30, 2021 and 2022 and $ 6.8 million and $ 6.7 million, for the six months ended June 30, 2021 and 2022, respectively.

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 $ 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.

Cemetery property was $ 100.7 million and $ 101.3 million, net of accumulated amortization of $ 53.1 million and $ 56.2 million at December 31, 2021 and June 30, 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.

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.

Our growth capital expenditures for cemetery property development totaled $ 1.2 million and $ 1.4 million for the three months ended June 30, 2021 and 2022, respectively and $ 2.7 million and $ 3.7 million, for the six months ended June 30, 2021 and 2022, respectively.

We recorded amortization expense for cemetery interment rights of $ 2.2 million and $ 1.7 million for the three months ended June 30, 2021 and 2022, respectively and $ 3.7 million and $ 3.0 million, for the six months ended June 30, 2021 and 2022, respectively.

We have operating and finance leases.

7 unchanged sentences

ROU assets and lease liabilities are recognized on our Consolidated Balance Sheet at the lease commencement date based on the present value of lease payments over the lease term.

As our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments.

As our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date to determine the present value of lease payments.

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.

1 unchanged sentence

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.

6 unchanged sentences

We also have an employee stock purchase plan (the “ESPP”).

We recognize compensation expense in an amount equal to the fair value of the stock-based awards expected to vest or to be purchased over the requisite service period.

We recognize compensation expense in an amount equal to the fair value of the stock-based awards expected to vest or to be purchased over the requisite

service period.

We recognize the effect of forfeitures in compensation cost when they occur and any previously recognized compensation cost for an award is reversed in the period that the award is forfeited.

24 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 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.

As of June 30, 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 $ 8.0 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 $ 10.4 million and $ 10.8 million at December 31, 2021 and March 31, 2022, respectively.

The transaction price allocated to preneed merchandise and service performance obligations that were unfulfilled were $ 10.4 million and $ 10.1 million at December 31, 2021 and June 30, 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.

12 unchanged sentences

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.

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 October 11, 2021, we received an adverse ruling from the Internal Revenue Service (“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.

As a result, we recorded a $ 0.6 million reduction to the reserve for uncertain tax positions, including interest, during the six months ended June 30, 2022.

At December 31, 2021 and June 30, 2022, the reserve for uncertain tax positions was $ 3.8 million and $ 3.2 million, respectively, related to carrying back the net operating losses 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.

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.

For the three months ended June 30, 2021 and 2022, we had an income tax benefit of $ 4.2 million and an income tax expense of $ 4.2 million, respectively and for the six months ended June 30, 2021 and 2022, we had an income tax expense of $ 1.4 million and $ 9.3 million, respectively.

Our operating tax rate before discrete items was 33.0 % and 28.0 % for the three months ended June 30, 2021 and 2022, respectively and 28.5 % and 27.2 % for the six months ended June 30, 2021 and 2022, respectively.

Computation of Earnings Per Common Share

3 unchanged sentences

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.

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 grants 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 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.

We have evaluated events and transactions during the period subsequent to June 30, 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.

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.

We adopted this amendment in March 2020.

On May 27 2022, we amended our Credit Facility (defined in Note 10) to establish the Bloomberg Short-Term Bank Yield Index Rate (“BSBY”) as a benchmark rate and removed LIBOR from our Credit Facility, among other things.

We did not apply the optional expedients provided by the guidance in this ASU.

See Note 10 to the Consolidated Financial Statements herein for additional information related to the amended Credit Facility.

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

13 unchanged sentences

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

December 31, 2021 March 31, 2022

December 31, 2021 June 30, 2022

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

1 unchanged sentence

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

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

During the six months ended June 30, 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 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.

During the three and six months ended June 30, 2022, we merged one funeral home with another business we own in an existing market and sold two funeral homes for an aggregate of $ 0.9 million, respectively.

During the three and six months ended June 30, 2021, we sold one funeral home for $ 0.7 million and three funeral homes for $ 3.5 million, respectively.

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,

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

2021 2022 2021 2022

Revenue $ 29 $ 63 $ 349 $ 296

Operating income 60 2

Operating income (loss) ( 37 ) ( 4 ) ( 12 ) 25

Gain (loss) on divestitures (1)

( 205 ) — 103 ( 703 )

Income tax benefit (expense) 80 1 ( 26 ) 184

3 unchanged sentences

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

March 31, 2022

June 30, 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, 2022 Provision for Credit Losses Write Offs Recoveries March 31, 2022

January 1, 2022 Provision for Credit Losses Write Offs Recoveries June 30, 2022

Trade and financed receivables:

4 unchanged sentences

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

December 31, 2021 March 31, 2022

December 31, 2021 June 30, 2022

Interment rights $ 40,863 $ 43,387

3 unchanged sentences

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

December 31, 2021 March 31, 2022

December 31, 2021 June 30, 2022

Preneed cemetery receivables $ 52,855 $ 56,287

6 unchanged sentences

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

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

January 1, 2022 Provision for Credit Losses Write Offs June 30, 2022

Total allowance for credit losses on Preneed cemetery receivables, net

$ ( 1,079 ) $ ( 488 ) $ 461 $ ( 1,106 )

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

The amortized cost basis of our preneed cemetery receivables by year of origination at June 30, 2022 is as follows (in thousands):

2022 2021 2020 2019 2018 Prior Total

Total preneed cemetery receivables, at amortized cost $ 16,696 $ 17,141 $ 8,749 $ 5,053 $ 2,117 $ 1,762 $ 51,518

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

The aging of past due preneed cemetery receivables at June 30, 2022 is as follows (in thousands):

Past Due 61-90

19 unchanged sentences

treasury debt, common stock and equity mutual funds.

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 U.S.

8 unchanged sentences

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

December 31, 2021 March 31, 2022

December 31, 2021 June 30, 2022

Preneed cemetery trust investments, at market value $ 103,808 $ 94,435

1 unchanged sentence

Preneed cemetery trust investments $ 100,903 $ 91,352

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

The cost and market values associated with preneed cemetery trust investments at June 30, 2022 are detailed below (in thousands):

Fair Value Hierarchy Level Cost Unrealized

39 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 March 31, 2022, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

March 31, 2022

The following table summarized our fixed income securities (excluding mutual funds) within our preneed cemetery trust investments in an unrealized loss position at June 30, 2022, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

June 30, 2022

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

17 unchanged sentences

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

Three months ended March 31,

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

2021 2022 2021 2022

Investment income $ 662 $ 571 $ 1,129 $ 1,062

1 unchanged sentence

Realized losses ( 3,831 ) ( 2,320 ) ( 6,349 ) ( 2,383 )

Unrealized gains, net 9,708 6,877

Unrealized gains (losses), net ( 849 ) ( 15,977 ) 8,859 ( 9,100 )

Expenses and taxes ( 435 ) ( 507 ) ( 762 ) ( 871 )

Net change in deferred preneed cemetery receipts held in trust ( 5,563 ) 11,363 ( 16,985 ) 2,399

$ — $ — $ — $ —

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

Three months ended March 31,

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

2021 2022 2021 2022

Purchases $ ( 18,797 ) $ ( 309 ) $ ( 27,208 ) $ ( 1,624 )

4 unchanged sentences

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

December 31, 2021 March 31, 2022

December 31, 2021 June 30, 2022

Preneed funeral trust investments, at market value $ 116,973 $ 106,232

1 unchanged sentence

Preneed funeral trust investments $ 113,658 $ 102,843

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

The cost and market values associated with preneed funeral trust investments at June 30, 2022 are detailed below (in thousands):

Fair Value Hierarchy Level Cost Unrealized

40 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 March 31, 2022, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

March 31, 2022

The following table summarized our fixed income securities (excluding mutual funds) within our preneed funeral trust investment in an unrealized loss position at June 30, 2022, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

June 30, 2022

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

16 unchanged sentences

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

Three months ended March 31,

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

2021 2022 2021 2022

Investment income $ 535 $ 481 $ 904 $ 847

1 unchanged sentence

Realized losses ( 3,528 ) ( 2,088 ) ( 5,896 ) ( 2,146 )

Unrealized gains, net 9,319 6,527

Unrealized gains (losses), net ( 1,113 ) ( 13,927 ) 8,206 ( 7,400 )

Expenses and taxes ( 436 ) ( 322 ) ( 632 ) ( 537 )

Net change in deferred preneed funeral receipts held in trust ( 4,846 ) 9,709 ( 15,841 ) 1,346

$ — $ — $ — $ —

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

Three months ended March 31,

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

2021 2022 2021 2022

Purchases $ ( 17,863 ) $ — $ ( 25,491 ) $ ( 590 )

3 unchanged sentences

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

December 31, 2021 March 31, 2022

December 31, 2021 June 30, 2022

Cemetery perpetual care trust investments, at market value $ 72,400 $ 63,703

1 unchanged sentence

Care trusts’ corpus $ 71,156 $ 63,004

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):

The following table reflects the cost and market values associated with the trust investments held in cemetery perpetual care trust funds at June 30, 2022 (in thousands):

Fair Value Hierarchy Level Cost Unrealized

37 unchanged sentences

Market value as a percentage of cost 106.6 %

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

The following table summarized our fixed income securities (excluding mutual funds) within our cemetery perpetual care trust investment in an unrealized loss position at June 30, 2022, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

June 30, 2022

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

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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,

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

2021 2022 2021 2022

Realized gains $ 1,258 $ 994 $ 1,949 $ 1,244

Realized losses ( 496 ) ( 281 ) ( 916 ) ( 289 )

Unrealized gains, net 7,699 4,728

Unrealized gains (losses), net ( 882 ) ( 10,844 ) 6,817 ( 6,116 )

Net change in Care trusts’ corpus 120 10,131 ( 7,850 ) 5,161

1 unchanged sentence

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

Three months ended March 31,

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

2021 2022 2021 2022

Investment income $ 2,710 $ 2,776 $ 5,223 $ 5,538

2 unchanged sentences

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

Three months ended March 31,

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

2021 2022 2021 2022

Purchases $ ( 12,919 ) $ ( 280 ) $ ( 19,056 ) $ ( 411 )

4 unchanged sentences

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

December 31, 2021 March 31, 2022

December 31, 2021 June 30, 2022

Preneed funeral trust funds, at cost $ 19,597 $ 20,298

1 unchanged sentence

Receivables from preneed funeral trusts, net $ 19,009 $ 19,689

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, 2021 and March 31, 2022.

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 March 31, 2022 is as follows (in thousands):

The composition of the preneed funeral trust funds at June 30, 2022 is as follows (in thousands):

Cost Basis Fair Value

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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.

At June 30, 2022, the carrying value and fair value of our Credit Facility was $ 175.2 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.

At June 30, 2022, the carrying value of our acquisition debt was $ 4.5 million, which approximated its 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 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.

At June 30, 2022, the fair value of our Senior Notes was $ 327.7 million based on the last traded or broker quoted price.

At December 31, 2021 and June 30, 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, 2021 March 31, 2022

December 31, 2021 June 30, 2022

Tradenames $ 23,565 $ 23,565

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

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

Amortization expense was $ 169,000 and $ 142,000 for the three months ended June 30, 2021 and 2022, respectively and $ 337,000 and $ 290,000 for the six months ended June 30, 2021 and 2022, respectively.

Capitalized Commissions

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

Amortization expense 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):

Amortization expense was $ 156,000 and $ 174,000 for the three months ended June 30, 2021 and 2022, respectively and $ 308,000 and $ 344,000 for the six months ended June 30, 2021 and 2022, respectively.

The aggregate amortization expense for our non-compete agreements and capitalized commissions as of June 30, 2022 is as follows (in thousands):

Prepaid Agreements Capitalized Commissions

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CREDIT FACILITY AND ACQUISITION DEBT

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

On May 27 2022, we entered into a second amendment and commitment increase (the “Credit Facility Amendment”) to the first amended and restated credit agreement dated May 13, 2021 (as amended, the “Credit Facility”) with the financial institutions party thereto, as lenders, and Bank of America, N.A., as administrative agent.

The Credit Facility Amendment provided, among other things, for (i) an increase to the Revolving Credit Commitments (as defined in the Credit Facility) under the Credit Facility from $ 200.0 million to $ 250.0 million in the aggregate;

(ii) modifications to the definitions of “Applicable Rate” and “Applicable Fee Rate” to change the applicable rates and pricing levels set forth in each pricing grid;

(iii) the establishment of the BSBY as a benchmark rate and the removal of LIBOR from the Credit Facility;

(iv) an increase in the

maximum Total Leverage Ratio (as defined in the Credit Facility) to 5.25 to 1.00;

and (v) modifications to the restricted payments covenant to allow the Company to make additional stock repurchases, subject to the satisfaction of certain conditions therein.

We incurred $ 0.3 million in transactions costs related to this amendment, which were capitalized and will be amortized over the remaining term of the related debt using the straight-line method.

At June 30, 2022, our senior secured revolving Credit Facility was comprised of:

(i) a $ 250.0 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.

6 unchanged sentences

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:

At June 30, 2022, we were subject to the following financial covenants under our Credit Facility:

(A) a Total Leverage Ratio not to exceed 5.25 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 Credit Facility as of March 31, 2022.

We were in compliance with all of the covenants contained in our Credit Facility as of June 30, 2022.

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

December 31, 2021 March 31, 2022

December 31, 2021 June 30, 2022

Credit Facility $ 155,400 $ 175,200

5 unchanged sentences

Total acquisition debt, net of current portion $ 3,979 $ 3,891

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

At June 30, 2022, we had outstanding borrowings under the Credit Facility of $ 175.2 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 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.

At June 30, 2022, we had $ 72.5 million of availability under the Credit Facility.

As of the effective date of the Credit Facility Amendment, outstanding borrowings under our Credit Facility bear interest at a prime rate or a BSBY rate, plus an applicable margin based our leverage ratio.

At June 30, 2022, the prime rate margin was equivalent to 1.125 % and the BSBY rate margin was 2.125 %.

The weighted average interest rate on our Credit Facility was 2.5 % and 2.9 % for the three months ended June 30, 2021 and 2022, respectively and 2.8 % and 2.5 % for the six months ended June 30, 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 March 31,

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

2021 2022 2021 2022

Credit Facility interest expense $ 372 $ 1,314 $ 817 $ 2,161

4 unchanged sentences

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

Three months ended March 31,

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

2021 2022 2021 2022

Acquisition debt imputed interest expense $ 93 $ 79 $ 190 $ 159

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

December 31, 2021 June 30, 2022

Long-term liabilities:

5 unchanged sentences

Carrying value of the Senior Notes $ 394,610 $ 394,923

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

At June 30, 2022, the fair value of the Senior Notes, which are Level 2 measurements, was $ 327.7 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.

10 unchanged sentences

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

Three months ended March 31,

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

2021 2022 2021 2022

Senior Notes interest expense $ 6,642 $ 4,230 $ 13,267 $ 8,480

3 unchanged sentences

The debt discount and the debt issuance costs are being amortized using the effective interest method over the remaining term of approximately 83 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 %.

For both the three and six months ended June 30, 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 and six months ended June 30, 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 6.87 % and 6.69 %, respectively.

For the three and six months ended June 30, 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 6.20 % and 6.88 %, respectively.

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

1 unchanged sentence

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

Three months ended March 31,

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

Income Statement Classification 2021 2022 2021 2022

Operating lease cost Facilities and grounds expense (1)

$ 964 $ 853 $ 1,924 $ 1,701

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

57 76 106 178

Variable lease cost Facilities and grounds expense (1)

1 unchanged sentence

Depreciation of leased assets Depreciation and amortization (2)

$ 109 $ 109 $ 217 $ 217

Interest on lease liabilities Interest expense 119 112 239 225

4 unchanged sentences

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

Three months ended March 31,

Six months ended June 30,

Cash paid for operating leases included in operating activities $ 1,930 $ 1,795

1 unchanged sentence

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

Three months ended March 31,

Six months ended June 30,

Right-of-use assets obtained in exchange for new operating lease liabilities $ 75 $ 576

1 unchanged sentence

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

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

Lease Type Balance Sheet Classification December 31, 2021 June 30, 2022

Operating lease right-of-use assets Operating lease right-of-use assets $ 17,881 $ 17,571

9 unchanged sentences

Total lease liabilities $ 25,965 $ 25,390

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

The average lease terms and discount rates at June 30, 2022 are as follows:

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

1 unchanged sentence

Finance leases 12.0 8.2 %

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

The aggregate future lease payments for operating and finance leases at June 30, 2022 are as follows (in thousands):

Operating Finance

9 unchanged sentences

Present value of lease liabilities $ 20,034 $ 5,356

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

At June 30, 2022, we had no additional significant operating or finance leases that had not yet commenced.

COMMITMENTS AND CONTINGENCIES

7 unchanged sentences

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.

The court granted Final Approval on July 26, 2022, and we will fund the final settlement in the amount of $ 1.2 million within 15 days of the court’s order.

At June 30, 2022, we accrued $ 1.3 million for the final settlement amount and associated legal fees.

STOCKHOLDERS ’ EQUITY

1 unchanged sentence

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

Three months ended March 31,

Shares Fair Value Shares Fair Value

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

2021 2022 2021 2022

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

— $ — — $ — 9,300 $ 324 — $ —

Returned for payroll taxes — $ — ( 49 ) $ ( 2 ) 9,688 $ 347 4,136 $ 205

Cancelled 966 $ 27 450 $ 16 966 $ 27 1,450 $ 47

(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.

(1) Restricted stock granted during the six months ended June 30, 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 $ 98,000 and $ 40,000 for the three months ended June 30, 2021 and 2022, respectively and $ 219,000 and $ 97,000 for the six months ended June 30, 2021 and 2022, respectively.

Stock Options

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

Three months ended March 31,

Shares Fair Value Shares Fair Value

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

2021 2022 2021 2022

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

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

— $ — — $ — — $ — 310,000 $ 5,388

— — — — 150,000 $ 1,684 — —

Cancelled — $ — 18,138 $ 214 3,840 $ 24 25,138 $ 285

(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.

(1) Stock options granted during the six months ended June 30, 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.

1 unchanged sentence

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 .

(2) Stock options granted during the six months ended June 30, 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 .

(3) 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

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

2021 2022 2021 2022

Shares Cash Shares Cash Shares Cash Shares Cash

Exercised (1)

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

— — 281,629 (1)

Returned for option price (2)

2 unchanged sentences

17,971 $ 681 — $ — 25,982 $ 976 1,601 $ 82

(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.

(1) Stock options exercised during the three months ended June 30, 2021 had a weighted average exercise price of $ 20.44 , with an aggregate intrinsic value of $ 3.1 million.

Stock options exercised during the six months ended June 30, 2021 and 2022 had a weighted average exercise price of $ 21.78 and $ 25.88 , respectively, with an aggregate intrinsic value of $ 4.4 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.

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for stock options of $ 480,000 and $ 550,000 for the three months ended June 30, 2021 and 2022, respectively and $ 1,040,000 and $ 1,188,000 for the six months ended June 30, 2021 and 2022, respectively.

Performance Awards

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

Three months ended March 31,

Shares Fair Value Shares Fair Value

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

2021 2022 2021 2022

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

Granted — $ — 23,263 $ 1,100 10,254 $ 402 27,013 $ 1,262

Cancelled 6,987 $ 67 13,974 $ 134 34,935 $ 335 20,961 $ 201

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

On June 1, 2021, we amended the performance award agreements granted on May 19, 2020 for three of our executives.

The amendment increased the amount of performance awards payable in shares for the last three predetermined growth targets.

It was treated as a modification of the original performance award agreement and resulted in an additional $ 2.6 million of incremental compensation expense, expected to be recognized over the remaining term of 36 months.

The fair value of the performance awards granted during the three months ended June 30, 2022 was determined by using the Monte-Carlo simulation pricing model with the following assumptions:

Grant date April 1, 2022

Performance Period April 1, 2022 - December 31, 2024

Simulation period (years) 2.75

2 unchanged sentences

Risk-free interest rate 2.55 %

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.

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for performance awards of $ 352,000 and $ 637,000 for the three months ended June 30, 2021 and 2022, respectively and $ 589,000 and $ 1,203,000 for the six months ended June 30, 2021 and 2022, respectively.

Employee Stock Purchase Plan

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

Three months ended March 31,

Shares Price Shares Price

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

2021 2022 2021 2022

Shares Price Shares Price Shares Price Shares Price

ESPP 13,706 $ 26.32 11,796 $ 33.70 31,888 $ 26.32 25,089 $ 39.86

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 $ 206,000 and $ 199,000 for the three months ended March 31, 2021 and 2022, 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 $ 135,000 and $ 152,000 for the three months ended June 30, 2021 and 2022, respectively and $ 341,000 and $ 351,000 for the six months ended June 30, 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.

Common stock issued to certain employees under this incentive program is as follows (in millions, except shares):

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

2021 2022 2021 2022

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

— $ — — $ — — $ — 27,448 $ 1.4

(1) Common stock granted during the six months ended June 30, 2022 had a grant date stock price of $ 49.48 .

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 March 31,

Shares Fair Value Shares Fair Value

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

2021 2022 2021 2022

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

Board of Directors 4,333 $ 160 2,372 $ 94 9,373 $ 338 5,041 $ 236

Advisor to the Board 135 $ 5 126 $ 5 277 $ 10 219 $ 10

(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.

(1) Common stock granted during the three months ended June 30, 2021 and 2022 had a weighted average price of $ 36.97 and $ 39.65 , respectively and $ 36.01 and $ 46.83 for the six months ended June 30, 2021 and 2022.

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 $ 219,000 and $ 184,000 for the three months ended June 30, 2021 and 2022, respectively and $ 455,000 and $ 385,000 for the six months ended June 30, 2021 and 2022, respectively.

Share Repurchase

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 March 31

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

2021 2022 2021 2022

Number of Shares Repurchased (1)

324,700 205,496 324,700 695,496

Average Price Paid Per Share $ 37.88 $ 40.02 $ 37.88 $ 49.22

Dollar Value of Shares Repurchased (1)

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

$ 12,301 $ 8,224 $ 12,301 $ 34,234

(1) During the six months ended June 30, 2021, 24,700 shares settled in July 2021, which had a cost of $ 0.7 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 March 31, 2022, our share repurchase program had $57.1 million authorized for repurchases.

At June 30, 2022, our share repurchase program had $ 48.9 million authorized for repurchases.

Cash Dividend

2 unchanged sentences

$ 0.1125 $ 1,725

$ 0.1125 $ 1,730

2021 Per Share Dollar Value

$ 0.1000 $ 1,799

$ 0.1000 $ 1,808

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 March 31,

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

2021 2022 2021 2022

Numerator for basic and diluted earnings per share:

Net income $ 12,933 $ 16,402

Earnings allocated to unvested restricted stock ( 27 ) ( 15 )

Income attributable to common stockholders $ 12,906 $ 16,387

Net income (loss) $ ( 6,167 ) $ 10,899 $ 6,766 $ 27,301

Loss (earnings) allocated to unvested restricted stock 8 ( 6 ) ( 13 ) ( 20 )

Income (loss) attributable to common stockholders $ ( 6,159 ) $ 10,893 $ 6,753 $ 27,281

Denominator for basic earnings per common share - weighted average shares outstanding 17,967 14,798 17,966 15,020

3 unchanged sentences

Denominator for diluted earnings per common share - weighted average shares outstanding 18,511 15,712 18,364 16,033

Basic earnings per common share:

Basic earnings (loss) per common share:

$ ( 0.34 ) $ 0.74 $ 0.38 $ 1.82

Diluted earnings per common share:

Diluted earnings (loss) per common share:

$ ( 0.33 ) $ 0.69 $ 0.37 $ 1.70

For the three months ended March 31, 2021 and 2022, no stock options were excluded from the computation of diluted earnings per share.

For the three and six months ended June 30, 2022 there were 366,038 and 259,359 stock options, respectively, excluded from the computation of diluted earnings per share because the inclusion of such stock option would result in an antidilutive effect.

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

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

At 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.

At June 30, 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.

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

Three months ended March 31, 2022

Three months ended June 30, 2022

Funeral Cemetery Total

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Total $ 61,938 $ 28,662 $ 90,600

Three months ended March 31, 2021

Three months ended June 30, 2021

Funeral Cemetery Total

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Total $ 59,832 $ 28,445 $ 88,277

Six months ended June 30, 2022

Funeral Cemetery Total

Services $ 83,656 $ 8,631 $ 92,287

Merchandise 45,810 6,878 52,688

Cemetery property — 30,200 30,200

Other revenue 6,827 6,759 13,586

Total $ 136,293 $ 52,468 $ 188,761

Six months ended June 30, 2021

Funeral Cemetery Total

Services $ 79,747 $ 8,129 $ 87,876

Merchandise 44,831 7,082 51,913

Cemetery property — 31,589 31,589

Other revenue 7,028 6,508 13,536

Total $ 131,606 $ 53,308 $ 184,914

The following table presents operating income (loss), income (loss) before income taxes and total assets (in thousands):

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Operating income (loss):

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

Three months ended June 30, 2022 $ 18,485 $ 10,421 $ ( 9,181 ) $ 19,725

Three months ended June 30, 2021 16,604 11,498 ( 7,178 ) 20,924

Six months ended June 30, 2022 $ 43,947 $ 18,639 $ ( 17,710 ) $ 44,876

Six months ended June 30, 2021 42,480 20,991 ( 16,301 ) 47,170

Income (loss) before income taxes:

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

Three months ended June 30, 2022 $ 19,765 $ 10,427 $ ( 15,072 ) $ 15,120

Three months ended June 30, 2021 16,462 11,552 ( 38,373 ) ( 10,359 )

Six months ended June 30, 2022 $ 46,973 $ 18,686 $ ( 29,055 ) $ 36,604

Six months ended June 30, 2021 42,174 21,028 ( 54,987 ) 8,215

Total assets:

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

June 30, 2022 $ 757,341 $ 377,702 $ 16,380 $ 1,151,423

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

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

December 31, 2021 March 31, 2022

December 31, 2021 June 30, 2022

Prepaid and other current assets:

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Federal income taxes receivable 4,064 —

State income taxes receivable — 361

Other current assets 125 124

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

Three months ended March 31,

Six months ended June 30,

Cash paid for interest $ 14,329 $ 10,901

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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, cash flow, debt levels or other financial items;

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

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

including, but not limited to, technology innovations;

including, but not limited to, technology innovations and product development;

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;

any statements of the plans, timing, expectations and objectives of management for future financing activities, including, but not limited to, capital allocation;

any statements regarding future economic and market conditions or performance;

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• 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 the Company’s operational and financial performance;

• the effects of our talent recruitment efforts, 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;

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• 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 and optimization plan;

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

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

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• 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;

• our ability to meet the projected financial and equity performance metrics to our rolling four quarter outlook, if at all;

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

• the financial condition of third-party insurance companies that fund our preneed funeral contracts;

• increased or unanticipated costs, such as insurance or taxes;

• increased or unanticipated costs, such as merchandise, goods, insurance or taxes, and our ability to mitigate or minimize such costs, if at all;

• our level of indebtedness and the cash required to service our indebtedness;

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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