CARRIAGE SERVICES INC 10-Q

Item 1. Financial Statements. CARRIAGE SERVICES, INC. CONSOLIDATED BALANCE SHEET (unaudited and in thousands, except share data) December 31, 2021 June 30, 2022 ASSETS Current assets: Cash and cash equivalents $ 1,148 $ 1,058 Accounts receivable, net 25,314 24,308 Inventories 7,346 7,645 Prepaid and other current assets 6,404 3,951 Total current assets 40,212 36,962 Preneed cemetery trust investments 100,903 91,352 Preneed funeral trust investments 113,658 102,843 Preneed cemetery receivables, net 23,150 25,699 Receivables from preneed funeral trusts, net 19,009 19,689 Property, plant and equipment, net 269,367 271,532 Cemetery property, net 100,701 101,348 Goodwill 391,972 391,071 Intangible and other non-current assets, net 29,378 29,653 Operating lease right-of-use assets 17,881 17,571 Cemetery perpetual care trust investments 72,400 63,703 Total assets $ 1,178,631 $ 1,151,423 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current portion of debt and lease obligations $ 2,809 $ 3,023 Accounts payable 14,205 9,064 Accrued and other liabilities 43,773 30,744 Total current liabilities 60,787 42,831 Acquisition debt, net of current portion 3,979 3,891 Credit facility 153,857 173,501 Senior notes 394,610 394,923 Obligations under finance leases, net of current portion 5,157 4,945 Obligations under operating leases, net of current portion 18,520 18,005 Deferred preneed cemetery revenue 50,202 52,494 Deferred preneed funeral revenue 30,584 31,466 Deferred tax liability 45,784 47,495 Other long-term liabilities 1,419 1,829 Deferred preneed cemetery receipts held in trust 100,903 91,352 Deferred preneed funeral receipts held in trust 113,658 102,843 Care trusts’ corpus 71,156 63,004 Total liabilities 1,050,616 1,028,579 Commitments and contingencies: Stockholders’ equity: Common stock, $ 0.01 par value; 80,000,000 shares authorized and 26,264,245 and 26,325,468 shares issued, respectively and 15,331,923 and 14,697,650 shares outstanding, respectively 263 263 Additional paid-in capital 236,809 238,571 Retained earnings 135,462 162,763 Treasury stock, at cost; 10,932,322 and 11,627,818 shares, respectively ( 244,519 ) ( 278,753 ) Total stockholders’ equity 128,015 122,844 Total liabilities and stockholders’ equity $ 1,178,631 $ 1,151,423 The accompanying condensed notes are an integral part of these Consolidated Financial Statements. - 3 - CARRIAGE SERVICES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited and in thousands, except per share data) Three months ended June 30, Six months ended June 30, 2021 2022 2021 2022 Revenue: Service revenue $ 40,119 $ 42,550 $ 87,876 $ 92,287 Property and merchandise revenue 41,606 41,276 83,502 82,888 Other revenue 6,552 6,774 13,536 13,586 88,277 90,600 184,914 188,761 Field costs and expenses: Cost of service 19,583 21,389 40,550 43,488 Cost of merchandise 27,520 29,306 56,040 58,636 Cemetery property amortization 2,175 1,704 3,692 3,036 Field depreciation expense 3,142 3,253 6,278 6,550 Regional and unallocated funeral and cemetery costs 5,770 5,966 11,843 12,313 Other expenses 1,160 1,270 2,523 2,548 59,350 62,888 120,926 126,571 Gross profit 28,927 27,712 63,988 62,190 Corporate costs and expenses: General, administrative and other 7,176 9,180 16,299 17,740 Net (gain) loss on divestitures, disposals and impairments charges 827 ( 1,193 ) 519 ( 426 ) Operating income 20,924 19,725 47,170 44,876 Interest expense ( 7,478 ) ( 5,988 ) ( 15,062 ) ( 11,530 ) 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 (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 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 (loss) per common share: $ ( 0.33 ) $ 0.69 $ 0.37 $ 1.70 Dividends declared per common share: $ 0.100 $ 0.1125 $ 0.200 $ 0.225 Weighted average number of common and common equivalent shares outstanding: Basic 17,967 14,798 17,966 15,020 Diluted 18,511 15,712 18,364 16,033 The accompanying condensed notes are an integral part of these Consolidated Financial Statements. - 4 - CARRIAGE SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited and in thousands) Six months ended June 30, 2021 2022 Cash flows from operating activities: Net income $ 6,766 $ 27,301 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 10,536 9,895 Provision for credit losses 849 1,657 Stock-based compensation expense 2,537 3,085 Deferred income tax expense (benefit) ( 4,461 ) 1,711 Amortization of intangibles 645 634 Amortization of debt issuance costs 345 253 Amortization and accretion of debt 201 243 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: Accounts and preneed receivables ( 702 ) ( 3,200 ) Inventories, prepaid and other current assets ( 894 ) 2,967 Intangible and other non-current assets ( 592 ) ( 747 ) Preneed funeral and cemetery trust investments ( 18,473 ) ( 11,100 ) Accounts payable ( 471 ) ( 2,712 ) Accrued and other liabilities 1,382 ( 10,242 ) Deferred preneed funeral and cemetery revenue 1,977 2,633 Deferred preneed funeral and cemetery receipts held in trust 17,289 11,506 Net cash provided by operating activities 41,441 30,177 Cash flows from investing activities: Acquisitions of real estate ( 2,935 ) ( 2,601 ) Proceeds from divestitures and sale of other assets 3,622 3,720 Proceeds from insurance reimbursements 120 2,167 Capital expenditures ( 8,751 ) ( 13,468 ) Net cash used in investing activities ( 7,944 ) ( 10,182 ) Cash flows from financing activities: Borrowings from the credit facility 100,868 97,900 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 ) — Payments on acquisition debt and obligations under finance leases ( 452 ) ( 202 ) Payments on contingent consideration recorded at acquisition date ( 461 ) — Proceeds from the exercise of stock options and employee stock purchase plan contributions 1,495 1,060 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 ) Net cash used in financing activities ( 32,893 ) ( 20,085 ) Net increase (decrease) in cash and cash equivalents 604 ( 90 ) Cash and cash equivalents at beginning of period 889 1,148 Cash and cash equivalents at end of period $ 1,493 $ 1,058 The accompanying condensed notes are an integral part of these Consolidated Financial Statements. - 5 - CARRIAGE SERVICES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited and in thousands) Three months ended June 30, 2021 Shares Outstanding Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Total 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 Shares Outstanding Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Total 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 - 6 - CARRIAGE SERVICES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited and in thousands) Six months ended June 30, 2021 Shares Outstanding Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Total Balance – December 31, 2020 17,995 $ 260 $ 239,989 $ 102,303 $ ( 102,050 ) $ 240,502 Net income — — — 6,766 — 6,766 Issuance of common stock from employee stock purchase plan 32 1 839 — — 840 Issuance of common stock to directors and board advisor 10 — 337 — — 337 Issuance of restricted common stock 9 — — — — — Exercise of stock options 115 1 ( 96 ) — — ( 95 ) Cancellation and surrender of restricted common stock ( 10 ) — ( 347 ) — — ( 347 ) Stock-based compensation expense — — 2,200 — — 2,200 Dividends on common stock — — ( 3,607 ) — — ( 3,607 ) Convertible notes conversions — — ( 1,424 ) — — ( 1,424 ) 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 Shares Outstanding Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Total Balance – December 31, 2021 15,332 $ 263 $ 236,809 $ 135,462 $ ( 244,519 ) $ 128,015 Net income — — — 27,301 — 27,301 Issuance of common stock from employee stock purchase plan 25 — 1,001 — — 1,001 Issuance of common stock to directors and board advisor 5 — 246 — — 246 Exercise of stock options 9 — ( 22 ) — — ( 22 ) Cancellation and surrender of restricted common stock ( 5 ) — ( 205 ) — — ( 205 ) Stock-based compensation expense — — 2,839 — — 2,839 Dividends on common stock — — ( 3,455 ) — — ( 3,455 ) Treasury stock acquired ( 695 ) — — — ( 34,234 ) ( 34,234 ) Other 27 — 1,358 — — 1,358 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. - 7 - CARRIAGE SERVICES, INC. CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company Carriage Services, Inc. (“Carriage,” the “Company,” “we,” “us,” or “our”) is a leading provider of funeral and cemetery services and merchandise in the United States. Our operations are reported in two business segments: 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 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. Funeral services include consultation, the removal and preparation of remains, the use of funeral home facilities for visitation and memorial services and transportation services. We provide funeral services and products on both an “atneed” (time of death) and “preneed” (planned prior to death) basis. Our cemetery operations generate revenue primarily through sales of cemetery interment rights (primarily grave sites, lawn crypts, mausoleum spaces and niches), related cemetery merchandise (such as memorial markers, outer burial containers and monuments) and services (interments, inurnments and installation of cemetery merchandise). We provide cemetery services and products on both an atneed and preneed basis. Principles of Consolidation and Interim Condensed Disclosures Our unaudited consolidated financial statements include the Company and its subsidiaries. All intercompany balances and transactions have been eliminated. Our interim consolidated financial statements are unaudited but include all adjustments, which consist of normal, recurring accruals, that are necessary for a fair presentation of our financial position and results of operations as of and for the interim periods presented. 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. 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 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 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 We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Funeral and Cemetery Receivables 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 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. - 8 - For our funeral and atneed cemetery receivables, we have a collections policy where statements are sent to the customer at 30 days past due. Past due notification letters are sent at 45 days and continue until payment is received or the contract is placed with a third-party collections agency. For our preneed cemetery receivables, we have a collections policy where past due notification letters are sent to the customer beginning at 15 days past due and periodically thereafter until payment is received or the contract is cancelled. Our allowance for credit losses reflects our best estimate of expected credit losses over the term of both our funeral and cemetery receivables. Our policy is to write off receivables when we have determined they will no longer be collectible. Write-offs are applied as a reduction to the allowance for credit losses and any recoveries of previous write-offs are netted against bad debt expense in the period recovered. We determine our allowance for credit losses by using a loss-rate methodology, in which we assess our historical write-off of receivables against our total receivables over several years. From this historical loss-rate approach, we also consider the current and forecasted economic conditions expected to be in place over the life of our receivables. These estimates are impacted by a number of factors, including changes in the economy, demographics and competition in our local communities. We monitor our ongoing credit exposure through an active review of our customers’ receivables balance against contract terms and due dates. Our activities include timely performance of our accounts receivable reconciliations, assessment of our aging of receivables, dispute resolution and payment confirmation. We monitor any change in our historical write-off of receivables utilized in our loss-rate methodology and assess forecasted changes in market conditions within our credit reserve. See Note 5 to the Consolidated Financial Statements herein for additional information related to our funeral and cemetery receivables. Inventory Inventory consists primarily of caskets, outer burial containers and cemetery monuments and markers and is recorded at the lower of its cost basis or net realizable value. Inventory is relieved using specific identification in fulfillment of performance obligations on our contracts. Business Combinations Tangible and intangible assets acquired and liabilities assumed are recorded at fair value and goodwill is recognized for any difference between the price of the acquisition and fair value. We recognize the assets acquired, the liabilities assumed and any non-controlling interest in the acquiree at the acquisition date, measured at the fair value as of that date. Acquisition related costs are recognized separately from the acquisition and are expensed as incurred. We customarily estimate related transaction costs known at closing. 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 during the six months ended June 30, 2021 and 2022. Divested Operations Prior to divesting a funeral home or cemetery, we first determine whether the sale of the net assets and activities (together referred to as a “set”) qualifies as a business. First, we perform a screen test to determine if the set is not a business. The principle of the screen is that if substantially all of the fair value of the gross assets sold resides in a single asset or group of similar assets, the set is not a business. 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 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. See Notes 3 and 4 to the Consolidated Financial Statements herein for additional information related to our divestitures. Goodwill The excess of the purchase price over the fair value of identifiable net assets of funeral home businesses and cemeteries acquired is recorded as goodwill. Goodwill has an indefinite life and is not subject to amortization. As such, we test goodwill for impairment on an annual basis as of August 31 st each year. 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. 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 - 9 - 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. Generally Accepted Accounting Principles (“GAAP”), we allocate goodwill associated with that business to be included in the gain or loss on divestiture. The goodwill allocated is based on the relative fair value of the business being divested and the portion of the reporting unit that will be retained. Additionally, after each divestiture, we will test the goodwill remaining in the portion of the reporting unit to be retained for impairment using a qualitative assessment unless we deem a quantitative assessment to be appropriate to ensure the fair value of our reporting units is greater than their carrying value. See Note 3 to the Consolidated Financial Statements included herein for additional information related to our goodwill. Intangible Assets Our intangible assets include tradenames resulting from acquisitions and are included in Intangible and other non-current assets, net on our Consolidated Balance Sheet. Our tradenames are considered to have an indefinite life and are not subject to amortization. As such, we test our intangible assets for impairment on an annual basis as of August 31 st each year. 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. 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. 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. See Note 9 to the Consolidated Financial Statements included herein for additional information related to our intangible assets. Preneed and Perpetual Care Trust Funds Preneed sales generally require deposits to a trust or purchase of a third-party insurance product. We have established a variety of trusts in connection with funeral home and cemetery operations as required under applicable state laws. Such trusts include (i) preneed funeral trusts; (ii) preneed cemetery merchandise and service trusts; and (iii) cemetery perpetual care trusts. Our preneed and perpetual care trust funds are reported in accordance with the principles of consolidating Variable Interest Entities (“VIEs”). In the case of preneed trusts, the customers are the legal beneficiaries. In the case of perpetual care trusts, we do not have a right to access the corpus in the perpetual care trusts. Our trust fund assets are reflected in our financial statements as Preneed cemetery trust investments, Preneed funeral trust investments and Cemetery perpetual care trust investments. We have recognized financial interests of third parties in the trust funds in our financial statements as Deferred preneed funeral and cemetery receipts held in trust and Care trusts’ corpus . The fair value of our trust fund assets are accounted for as Collateralized Financing Entities (“CFEs”) in ASC Topic 810. The accounting guidance for CFEs allows companies to elect to measure both the financial assets and financial liabilities using the more observable of the fair value of the financial assets or fair value of the financial liabilities. Pursuant to this guidance, we have determined the fair value of the financial assets of the trusts are more observable and we first measure those financial assets at fair value. Our fair value of the financial liabilities mirror the fair value of the financial assets, in accordance with the ASC. Any changes in fair value are recognized in earnings. In accordance with respective state laws, we are required to deposit a specified amount into perpetual and memorial care trust funds for each interment right and certain memorials sold. Income from the trust funds is distributed to us and used to provide for the care and maintenance of the cemeteries and mausoleums. Trust fund income is recognized as revenue when realized by the trust and distributable to us. We are restricted from withdrawing any of the principal balances of these funds. 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. - 10 - Fair Value Measurements We measure the securities held by our funeral merchandise and service, cemetery merchandise and service, and cemetery perpetual care trusts at fair value on a recurring basis in accordance with ASC Topic 820. This guidance defines fair value as the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The guidance establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. 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 currently do not have any assets that have fair values determined by Level 3 inputs and no liabilities 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. Capitalized Commissions on Preneed Contracts We capitalize sales commissions and other direct selling costs related to preneed cemetery merchandise and services and preneed funeral trust contracts as these costs are incremental and recoverable costs of obtaining a contract with a customer. Our capitalized commissions on preneed contracts are amortized on a straight-line basis over the average maturity period of ten years for our preneed funeral trust contracts and eight years for our preneed cemetery merchandise and services contracts. The selling costs related to the sales of cemetery interment rights, which include real property and other costs related to cemetery development activities, continue to be expensed using the specific identification method in the period in which the sale of the cemetery interment right is recognized as revenue. The selling costs related to preneed funeral insurance contracts continue to be expensed in the period incurred as these contracts are not included on our Consolidated Balance Sheet. See Note 9 to the Consolidated Financial Statements herein for additional information related to our capitalized commissions on preneed contracts. Property, Plant and Equipment Property, plant and equipment (including equipment under finance leases) are stated at cost. The costs of ordinary maintenance and repairs are charged to operations as incurred, while renewals and major replacements that extend the useful economic life of the asset are capitalized. 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 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, 2021 June 30, 2022 Land $ 82,095 $ 82,628 Buildings and improvements 240,387 244,793 Furniture, equipment and automobiles 73,377 68,406 Property, plant and equipment, at cost 395,859 395,827 Less: accumulated depreciation ( 126,492 ) ( 124,295 ) Property, plant and equipment, net $ 269,367 $ 271,532 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 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. - 11 - 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 When we acquire a cemetery, we utilize an internal and external approach to determine the fair value of the cemetery property. From an external perspective, we obtain an accredited appraisal to provide reasonable assurance for property existence, property availability (unrestricted) for development, property lines, available spaces to sell, identifiable obstacles or easements and general valuation inclusive of known variables in that market. From an internal perspective, we conduct a detailed analysis of the acquired cemetery property using other cemeteries in our portfolio as a benchmark. This provides the added benefit of relevant data that is not available to third party appraisers. 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 $ 101.3 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 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. Leases 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 twenty years . Many leases include one or more options to renew, some of which include options to extend the leases for up to forty years . We lease certain funeral homes under finance leases with original terms ranging from ten to forty years . We do not have lease agreements with residual value guarantees, sale-leaseback terms, material restrictive covenants or related parties. We do not have any material sublease arrangements. We determine if an arrangement is a lease at inception based on the facts and circumstances of the agreement. A right-of-use (“ROU”) asset represents our right to use the underlying asset for the lease term and the lease liability represents our obligation to make lease payments arising from the lease. 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 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. 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 recognition. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage, are not included in the ROU assets or liabilities. These are expensed as incurred and recorded as variable lease expense. We have real estate lease agreements which require payments for lease and non-lease components and we account for these as a single lease component. Leases with an initial term of 12 months or less, that do not include an option to renew the underlying asset, are not recorded on our Consolidated Balance Sheet and expense is recognized on a straight-line basis over the lease term. Operating lease ROU assets are included in Operating lease right-of-use assets and operating lease liabilities are included in Current portion of operating lease obligation s and Obligations under operating leases, net of current portion on our Consolidated Balance Sheet. Finance lease ROU assets are included in Property, plant and equipment, net and finance lease liabilities are included in Current portion of finance lease obligations and O bligations under finance leases, net of current portion on our Consolidated Balance Sheet. See Notes 12 to the Consolidated Financial Statements included herein for additional information related to our leases. Equity Plans and Stock-Based Compensation We have equity-based employee and director compensation plans under which we have granted stock awards, stock options and performance awards. 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 - 12 - 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. Fair value is determined on the date of the grant. The fair value of restricted stock is determined using the stock price on the grant date. The fair value of options or awards containing options is determined using the Black-Scholes valuation model or the Monte-Carlo simulation pricing model. The fair value of the performance awards related to market performance conditions is determined using the Monte-Carlo simulation pricing model. The fair value of the ESPP is determined based on the discount element offered to employees and the embedded option element, which is determined using an option calculation model. We recognize all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) as income tax benefit or expense in the income statement. We treat the tax effects of exercised or vested awards as discrete items in the reporting period in which they occur. 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. Revenue Recognition Funeral and Cemetery Operations Revenue is recognized when control of the merchandise or services is transferred to the customer. Our performance obligations include the delivery of funeral and cemetery merchandise and services and cemetery property interment rights. Control transfers when merchandise is delivered or services are performed. For cemetery property interment rights, control transfers to the customer when the property is developed and the interment right has been sold and can no longer be marketed or sold to another customer. On our atneed contracts, we generally deliver the merchandise and perform the services at the time of need. Memorial services frequently include performance obligations to direct the service, provide facilities and motor vehicles, catering, flowers, and stationary products. All other performance obligations on these contracts, including arrangement, removal, preparation, embalming, cremation, interment, and delivery of urns and caskets and related memorialization merchandise are fulfilled at the time of need. Personalized marker merchandise and marker installation services sold on atneed contracts are recognized when control is transferred to the customer, generally when the marker is delivered and installed in the cemetery. Some of our contracts with customers include multiple performance obligations. 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. Package discounts are reflected net in Revenue . We recognize revenue when the merchandise is transferred or the service is performed, in satisfaction of the corresponding performance obligation. Sales taxes collected are recognized on a net basis in our Consolidated Financial Statements. Ancillary funeral service revenue, which is recorded in Other revenue, represents revenue from our flower shop, pet cremation and online cremation businesses . The earnings from our preneed trust investments, as well as trust management fees charged by our wholly-owned registered investment advisory firm (“CSV RIA”) are recorded in Other revenue . As of 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 and $ 8.2 million and 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. However, we estimate an average maturity period of ten years for preneed funeral contracts. Balances due from customers on delivered preneed cemetery contracts are included in Accounts receivable, net and Preneed cemetery receivables, net on our Consolidated Balance Sheet. 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 $ 10.1 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. However, we estimate an average maturity period of eight years for preneed cemetery contracts. See Note 16 to the Consolidated Financial Statements herein for additional information related to revenue. - 13 - Income Taxes We and our subsidiaries file a consolidated U. S. federal income tax return, separate income tax returns in 15 states in which we operate and combined or unitary income tax returns in 14 states in which we operate. We record deferred taxes for temporary differences between the tax basis and financial reporting basis of assets and liabilities. We classify our deferred tax liabilities and assets as non-current on our Consolidated Balance Sheet. We record a valuation allowance to reflect the estimated amount of deferred tax assets for which realization is uncertain. Management reviews the valuation allowance at the end of each quarter and makes adjustments if it is determined that it is more likely than not that the tax benefits will be realized. We analyze tax benefits for uncertain tax positions and how they are to be recognized, measured, and derecognized in the financial statements; provide certain disclosures of uncertain tax matters; and specify how reserves for uncertain tax positions should be classified on our Consolidated Balance Sheet. 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. 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 $ 0.6 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. 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 Basic earnings per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Dilutive common equivalent shares consist of stock options and 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 are considered participating securities, and we have prepared our earnings per share calculations attributable to common stockholders to exclude outstanding unvested restricted stock awards, using the two-class method, in both the basic and diluted weighted average shares outstanding calculation. Our performance awards are considered to be contingently issuable shares because their issuance is contingent upon the satisfaction of certain performance and service conditions. In accordance with ASC 260, we have included in the computation of diluted earnings per share the number of performance awards that would have been issuable as if the end of the reporting period was the end of the contingency period. These shares are considered to be outstanding at the beginning of the reporting period. See Note 15 to the Consolidated Financial Statements included herein related to the computation of earnings per share. - 14 - Subsequent Events 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. 2. RECENTLY ISSUED ACCOUNTING STANDARDS Accounting Pronouncements Not Yet Adopted Reference Rate Reform In March 2020, the FASB issued ASU, Reference Rate Reform (“Topic 848”) to provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference London InterBank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. 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. 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. 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 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. 3. GOODWILL The following table presents changes in goodwill in the accompanying Consolidated Balance Sheet (in thousands): December 31, 2021 June 30, 2022 Goodwill at the beginning of the period $ 392,978 $ 391,972 Decrease in goodwill related to divestitures ( 1,006 ) ( 901 ) Goodwill at the end of the period $ 391,972 $ 391,071 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. - 15 - 4. DIVESTED OPERATIONS 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 June 30, Six months ended June 30, 2021 2022 2021 2022 Revenue $ 29 $ 63 $ 349 $ 296 Operating income (loss) ( 37 ) ( 4 ) ( 12 ) 25 Gain (loss) on divestitures (1) ( 205 ) — 103 ( 703 ) Income tax benefit (expense) 80 1 ( 26 ) 184 Net income (loss) from divested operations, after tax $ ( 162 ) $ ( 3 ) $ 65 $ ( 494 ) (1) Gain (loss) on divestitures is recorded in Net (gain) loss on divestitures, disposals and impairments charges on our Consolidated Statements of Operations. 5. RECEIVABLES Accounts Receivable Accounts receivable is comprised of the following (in thousands): June 30, 2022 Funeral Cemetery Corporate Total Trade and financed receivables $ 8,719 $ 14,650 $ — $ 23,369 Other receivables 402 1,160 331 1,893 Allowance for credit losses ( 328 ) ( 626 ) — ( 954 ) Accounts receivable, net $ 8,793 $ 15,184 $ 331 $ 24,308 December 31, 2021 Funeral Cemetery Corporate Total Trade and financed receivables $ 10,728 $ 13,629 $ — $ 24,357 Other receivables 329 1,433 185 1,947 Allowance for credit losses ( 365 ) ( 625 ) — ( 990 ) Accounts receivable, net $ 10,692 $ 14,437 $ 185 $ 25,314 Other receivables include supplier rebates, commissions due from third party insurance companies and perpetual care income receivables. We do not provide an allowance for credit losses for these receivables as we have historically not had any collectability issues nor do we expect any in the foreseeable future. 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 June 30, 2022 Trade and financed receivables: Funeral $ ( 365 ) $ ( 869 ) $ 1,518 $ ( 612 ) $ ( 328 ) Cemetery ( 625 ) ( 300 ) 299 — ( 626 ) Total allowance for credit losses on Trade and financed receivables $ ( 990 ) $ ( 1,169 ) $ 1,817 $ ( 612 ) $ ( 954 ) - 16 - Preneed Cemetery Receivables Our preneed cemetery receivables are comprised of the following (in thousands): December 31, 2021 June 30, 2022 Interment rights $ 40,863 $ 43,387 Merchandise and services 7,348 8,131 Unearned finance charges 4,644 4,769 Preneed cemetery receivables $ 52,855 $ 56,287 The components of our preneed cemetery receivables are as follows (in thousands): December 31, 2021 June 30, 2022 Preneed cemetery receivables $ 52,855 $ 56,287 Less: unearned finance charges ( 4,644 ) ( 4,769 ) Preneed cemetery receivables, at amortized cost $ 48,211 $ 51,518 Less: allowance for credit losses ( 1,704 ) ( 1,732 ) Less: balances due on undelivered cemetery preneed contracts ( 10,353 ) ( 10,063 ) Less: amounts in accounts receivable ( 13,004 ) ( 14,024 ) Preneed cemetery receivables, net $ 23,150 $ 25,699 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 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 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 June 30, 2022 is as follows (in thousands): 31-60 Past Due 61-90 Past Due 91-120 Past Due >120 Past Due Total Past Due Current Total Recognized revenue $ 608 $ 393 $ 201 $ 1,901 $ 3,103 $ 38,352 $ 41,455 Deferred revenue 191 144 60 469 864 13,968 14,832 Total contracts $ 799 $ 537 $ 261 $ 2,370 $ 3,967 $ 52,320 $ 56,287 6. TRUST INVESTMENTS Preneed trust investments represent trust fund assets that we are generally permitted to withdraw as the services and merchandise are provided to customers. Preneed funeral and cemetery contracts are secured by payments from customers, less amounts not required by law to be deposited into trust. These earnings are recognized in Other revenue on our Consolidated Statements of Operations, when a service is performed or merchandise is delivered. Trust management fees charged by CSV RIA are included as revenue in the period in which they are earned. Our investments are diversified across multiple industry segments using a balanced allocation strategy to minimize long-term risk. 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 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. This trust fund income is recognized in Other revenue. Where quoted prices are available in an active market, investments held by the trusts are classified as Level 1 investments pursuant to the three-level valuation hierarchy. Our Level 1 investments include cash, U.S. 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 - 17 - market data. 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. See Note 8 to the Consolidated Financial Statements included herein for further information of the fair value measurement. Changes in the fair value of our trust fund assets ( Preneed funeral, cemetery and perpetual care trust investments ) are offset by changes in the fair value of our trust fund liabilities ( Deferred preneed funeral and cemetery receipts held in trust and Care trusts’ corpus ) and reflected in Other, net . 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. We rely on our trust investments to provide funding for the various contractual obligations that arise upon maturity of the underlying preneed contracts. Because of the long-term relationship between the establishment of trust investments and the required performance of the underlying contractual obligations, the impact of current market conditions that may exist at any given time is not necessarily indicative of our ability to generate profit on our future performance obligations. Preneed Cemetery Trust Investments The components of Preneed cemetery trust investments on our Consolidated Balance Sheet are as follows (in thousands): December 31, 2021 June 30, 2022 Preneed cemetery trust investments, at market value $ 103,808 $ 94,435 Less: allowance for contract cancellation ( 2,905 ) ( 3,083 ) Preneed cemetery trust investments $ 100,903 $ 91,352 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 Gains Unrealized Losses Fair Market Value Cash and money market accounts 1 $ 11,852 $ — $ — $ 11,852 Fixed income securities: U.S. agency obligations 2 803 — ( 46 ) 757 Foreign debt 2 10,914 752 ( 791 ) 10,875 Corporate debt 2 13,837 214 ( 2,869 ) 11,182 Preferred stock 2 12,647 224 ( 1,324 ) 11,547 Certificates of deposit 2 79 — ( 5 ) 74 Common stock 1 40,998 3,160 ( 5,560 ) 38,598 Mutual funds: Equity 1 29 — ( 3 ) 26 Fixed income 2 11,612 23 ( 2,875 ) 8,760 Trust securities $ 102,771 $ 4,373 $ ( 13,473 ) $ 93,671 Accrued investment income $ 764 $ 764 Preneed cemetery trust investments $ 94,435 Market value as a percentage of cost 91.1 % The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands): Due in one year or less $ 1,372 Due in one to five years 7,092 Due in five to ten years 6,137 Thereafter 19,834 Total fixed income securities $ 34,435 - 18 - The cost and market values associated with preneed cemetery trust investments at December 31, 2021 are detailed below (in thousands): Fair Value Hierarchy Level Cost Unrealized Gains Unrealized Losses Fair Market Value Cash and money market accounts 1 $ 3,088 $ — $ — $ 3,088 Fixed income securities: Foreign debt 2 15,846 2,025 ( 953 ) 16,918 Corporate debt 2 12,965 1,374 ( 49 ) 14,290 Preferred stock 2 12,455 1,111 ( 344 ) 13,222 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 Trust Securities $ 96,817 $ 12,039 $ ( 5,992 ) $ 102,864 Accrued investment income $ 944 $ 944 Preneed cemetery trust investments $ 103,808 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 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 Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fixed income securities: U.S. agency obligations $ 757 $ ( 46 ) $ — $ — $ 757 $ ( 46 ) Foreign debt 6,018 ( 323 ) 616 ( 468 ) 6,634 ( 791 ) Corporate debt 8,298 ( 2,869 ) — — 8,298 ( 2,869 ) Preferred stock 6,574 ( 868 ) 3,430 ( 456 ) 10,004 ( 1,324 ) Certificates of deposit 74 ( 5 ) — — 74 ( 5 ) Total fixed income securities with an unrealized loss $ 21,721 $ ( 4,111 ) $ 4,046 $ ( 924 ) $ 25,767 $ ( 5,035 ) The following table summarized our fixed income securities (excluding mutual funds) within our preneed cemetery trust investments in an unrealized loss position at December 31, 2021, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands): December 31, 2021 In Loss Position Less than 12 months In Loss Position Greater than 12 months Total Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fixed income securities: Foreign debt $ 4,228 $ ( 517 ) $ 629 $ ( 436 ) $ 4,857 $ ( 953 ) Corporate debt 1,037 ( 49 ) — — 1,037 ( 49 ) Preferred stock 1,301 ( 63 ) 2,913 ( 281 ) 4,214 ( 344 ) Total fixed income securities with an unrealized loss $ 6,566 $ ( 629 ) $ 3,542 $ ( 717 ) $ 10,108 $ ( 1,346 ) - 19 - Preneed cemetery trust investment security transactions recorded in Other, net on our Consolidated Statements of Operations are as follows (in thousands): Three months ended June 30, Six months ended June 30, 2021 2022 2021 2022 Investment income $ 662 $ 571 $ 1,129 $ 1,062 Realized gains 10,016 6,870 14,108 8,893 Realized losses ( 3,831 ) ( 2,320 ) ( 6,349 ) ( 2,383 ) 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 June 30, Six months ended June 30, 2021 2022 2021 2022 Purchases $ ( 18,797 ) $ ( 309 ) $ ( 27,208 ) $ ( 1,624 ) Sales 19,352 461 27,401 661 Preneed Funeral Trust Investments Preneed funeral trust investments represent trust fund assets that we are permitted to withdraw as services and merchandise are provided to customers. Preneed funeral contracts are secured by payments from customers, less retained amounts not required to be deposited into trust. The components of Preneed funeral trust investments on our Consolidated Balance Sheet are as follows (in thousands): December 31, 2021 June 30, 2022 Preneed funeral trust investments, at market value $ 116,973 $ 106,232 Less: allowance for contract cancellation ( 3,315 ) ( 3,389 ) Preneed funeral trust investments $ 113,658 $ 102,843 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 Gains Unrealized Losses Fair Market Value Cash and money market accounts 1 $ 31,673 $ — $ — $ 31,673 Fixed income securities: U.S treasury debt 1 551 — ( 31 ) 520 Foreign debt 2 9,728 681 ( 684 ) 9,725 Corporate debt 2 11,713 185 ( 2,394 ) 9,504 Preferred stock 2 10,881 203 ( 1,181 ) 9,903 Common stock 1 35,408 2,851 ( 4,665 ) 33,594 Mutual funds: Equity 1 26 0 ( 2 ) 24 Fixed income 2 9,312 20 ( 2,383 ) 6,949 Other investments 2 3,677 — — 3,677 Trust securities $ 112,969 $ 3,940 $ ( 11,340 ) $ 105,569 Accrued investment income $ 663 $ 663 Preneed funeral trust investments $ 106,232 Market value as a percentage of cost 93.4 % - 20 - The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands): Due in one year or less $ 1,241 Due in one to five years 5,844 Due in five to ten years 5,297 Thereafter 17,270 Total fixed income securities $ 29,652 The cost and market values associated with preneed funeral trust investments at December 31, 2021 are detailed below (in thousands): Fair Value Hierarchy Level Cost Unrealized Gains Unrealized Losses Fair Market Value Cash and money market accounts 1 $ 23,438 $ — $ — $ 23,438 Fixed income securities: Foreign debt 2 14,936 1,874 ( 887 ) 15,923 Corporate debt 2 11,231 1,223 ( 46 ) 12,408 Preferred stock 2 11,001 986 ( 319 ) 11,668 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 Other investments 2 3,754 — — 3,754 Trust securities $ 110,476 $ 10,961 $ ( 5,296 ) $ 116,141 Accrued investment income $ 832 $ 832 Preneed funeral trust investments $ 116,973 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 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 Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fixed income securities: U.S. treasury debt $ 520 $ ( 31 ) $ — $ — $ 520 $ ( 31 ) Foreign debt 5,365 ( 289 ) 522 ( 395 ) 5,887 ( 684 ) Corporate debt 6,951 ( 2,394 ) — — 6,951 ( 2,394 ) Preferred stock 5,683 ( 762 ) 3,009 ( 419 ) 8,692 ( 1,181 ) Total fixed income securities with an unrealized loss $ 18,519 $ ( 3,476 ) $ 3,531 $ ( 814 ) $ 22,050 $ ( 4,290 ) - 21 - The following table summarized our fixed income securities (excluding mutual funds) within our preneed funeral trust investment in an unrealized loss position at December 31, 2021, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands): December 31, 2021 In Loss Position Less than 12 months In Loss Position Greater than 12 months Total Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fixed income securities: Foreign debt $ 4,251 $ ( 509 ) $ 548 $ ( 378 ) $ 4,799 $ ( 887 ) Corporate debt 965 ( 46 ) — — 965 ( 46 ) Preferred stock 1,211 ( 58 ) 2,710 ( 261 ) 3,921 ( 319 ) 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 June 30, Six months ended June 30, 2021 2022 2021 2022 Investment income $ 535 $ 481 $ 904 $ 847 Realized gains 9,388 6,147 13,259 7,890 Realized losses ( 3,528 ) ( 2,088 ) ( 5,896 ) ( 2,146 ) 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 June 30, Six months ended June 30, 2021 2022 2021 2022 Purchases $ ( 17,863 ) $ — $ ( 25,491 ) $ ( 590 ) Sales 17,765 30 25,289 530 Cemetery Perpetual Care Trust Investments Care trusts’ corpus on our Consolidated Balance Sheet represent the corpus of those trusts plus undistributed income. The components of Care trusts’ corpus are as follows (in thousands): December 31, 2021 June 30, 2022 Cemetery perpetual care trust investments, at market value $ 72,400 $ 63,703 Obligations due from trust ( 1,244 ) ( 699 ) Care trusts’ corpus $ 71,156 $ 63,004 - 22 - 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 Gains Unrealized Losses Fair Market Value Cash and money market accounts 1 $ 7,600 $ — $ — $ 7,600 Fixed income securities: Foreign debt 2 7,637 480 ( 566 ) 7,551 Corporate debt 2 9,449 209 ( 1,974 ) 7,684 Preferred stock 2 9,630 143 ( 951 ) 8,822 Common stock 1 26,615 2,210 ( 3,771 ) 25,054 Mutual funds: Equity 1 18 — ( 2 ) 16 Fixed Income 2 8,312 28 ( 1,922 ) 6,418 Trust securities $ 69,261 $ 3,070 $ ( 9,186 ) $ 63,145 Accrued investment income $ 558 $ 558 Cemetery perpetual care investments $ 63,703 Market value as a percentage of cost 91.2 % The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands): Due in one year or less $ 875 Due in one to five years 4,217 Due in five to ten years 4,177 Thereafter 14,788 Total fixed income securities $ 24,057 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 Gains Unrealized Losses Fair Market Value Cash and money market accounts 1 $ 1,447 $ — $ — $ 1,447 Fixed income securities: Foreign debt 2 10,949 1,401 ( 647 ) 11,703 Corporate debt 2 9,139 1,065 ( 32 ) 10,172 Preferred stock 2 9,742 803 ( 226 ) 10,319 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 Trust securities $ 67,290 $ 8,794 $ ( 4,373 ) $ 71,711 Accrued investment income $ 689 $ 689 Cemetery perpetual care investments $ 72,400 Market value as a percentage of cost 106.6 % - 23 - 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 Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fixed income securities: Foreign debt $ 4,401 $ ( 225 ) $ 446 $ ( 341 ) $ 4,847 $ ( 566 ) Corporate debt 5,511 ( 1,974 ) — — 5,511 ( 1,974 ) Preferred stock 5,137 ( 634 ) 2,831 ( 317 ) 7,968 ( 951 ) Total fixed income securities with an unrealized loss $ 15,049 $ ( 2,833 ) $ 3,277 $ ( 658 ) $ 18,326 $ ( 3,491 ) The following table summarized our fixed income securities (excluding mutual funds) within our perpetual care trust investment in an unrealized loss position at December 31, 2021, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands): December 31, 2021 In Loss Position Less than 12 months In Loss Position Greater than 12 months Total Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fixed income securities: Foreign debt $ 2,649 $ ( 321 ) $ 468 $ ( 326 ) $ 3,117 $ ( 647 ) Corporate debt 846 ( 32 ) — — 846 ( 32 ) Preferred stock 856 ( 41 ) 1,917 ( 185 ) 2,773 ( 226 ) Total fixed income securities with an unrealized loss $ 4,351 $ ( 394 ) $ 2,385 $ ( 511 ) $ 6,736 $ ( 905 ) 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 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 (losses), net ( 882 ) ( 10,844 ) 6,817 ( 6,116 ) Net change in Care trusts’ corpus 120 10,131 ( 7,850 ) 5,161 Total $ — $ — $ — $ — Cemetery perpetual care trust investment security transactions recorded in Other revenue are as follows (in thousands): Three months ended June 30, Six months ended June 30, 2021 2022 2021 2022 Investment income $ 2,710 $ 2,776 $ 5,223 $ 5,538 Realized losses, net ( 141 ) ( 258 ) ( 279 ) ( 604 ) Total $ 2,569 $ 2,518 $ 4,944 $ 4,934 Purchases and sales of investments in the cemetery perpetual care trusts are as follows (in thousands): Three months ended June 30, Six months ended June 30, 2021 2022 2021 2022 Purchases $ ( 12,919 ) $ ( 280 ) $ ( 19,056 ) $ ( 411 ) Sales 13,307 441 19,263 441 - 24 - 7. RECEIVABLES FROM PRENEED FUNERAL TRUSTS Our receivables from preneed funeral trusts represent assets in trusts which are controlled and operated by third parties in which we do not have a controlling financial interest (less than 50%) in the trust assets. We account for these investments at cost. Receivables from preneed funeral trusts are as follows (in thousands): December 31, 2021 June 30, 2022 Preneed funeral trust funds, at cost $ 19,597 $ 20,298 Less: allowance for contract cancellation ( 588 ) ( 609 ) 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 June 30, 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 June 30, 2022 is as follows (in thousands): Historical Cost Basis Fair Value Cash and cash equivalents $ 5,927 $ 5,927 Fixed income investments 11,706 11,706 Mutual funds and common stocks 2,661 2,436 Annuities 4 4 Total $ 20,298 $ 20,073 The composition of the preneed funeral trust funds at December 31, 2021 is as follows (in thousands): Historical Cost Basis Fair Value Cash and cash equivalents $ 5,595 $ 5,595 Fixed income investments 11,386 11,386 Mutual funds and common stocks 2,611 2,682 Annuities 5 5 Total $ 19,597 $ 19,668 8. FAIR VALUE MEASUREMENTS 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 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 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 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. - 26 - 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. Our receivables from preneed funeral trusts represent assets in trusts which are controlled and operated by third parties in which we do not have a controlling financial interest (less than 50%) in the trust assets. We account for these investments at cost. See Notes 6 and 7 to our Consolidated Financial Statements herein for the fair value hierarchy levels of our trust investments. 9. INTANGIBLE AND OTHER NON-CURRENT ASSETS Intangible and other non-current assets are as follows (in thousands): December 31, 2021 June 30, 2022 Tradenames $ 23,565 $ 23,565 Prepaid agreements not-to-compete, net of accumulated amortization of $ 3,316 and $ 3,232 , respectively 2,247 2,019 Capitalized commissions on preneed contracts, net of accumulated amortization of $ 2,278 and $ 2,622 , respectively 3,560 3,809 Other 6 260 Intangible and other non-current assets, net $ 29,378 $ 29,653 Tradenames Our tradenames have indefinite lives and therefore are not amortized. 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 $ 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 We capitalize our selling costs related to preneed cemetery merchandise and services and preneed funeral trust contracts. 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 $ 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 Years ending December 31, Remainder of 2022 $ 270 $ 644 2023 496 673 2024 381 612 2025 372 547 2026 257 481 Thereafter 243 852 Total amortization expense $ 2,019 $ 3,809 10. CREDIT FACILITY AND ACQUISITION DEBT 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 - 27 - 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. 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 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 June 30, 2022. Our Credit Facility and Acquisition debt consisted of the following (in thousands): December 31, 2021 June 30, 2022 Credit Facility $ 155,400 $ 175,200 Debt issuance costs, net of accumulated amortization of $ 1,324 and $ 1,508 , respectively ( 1,543 ) ( 1,699 ) Total Credit Facility $ 153,857 $ 173,501 Acquisition debt $ 4,500 $ 4,474 Less: current portion ( 521 ) ( 583 ) Total acquisition debt, net of current portion $ 3,979 $ 3,891 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 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. - 28 - T he interest expense and amortization of debt issuance costs related to our Credit Facility are as follows (in thousands): Three months ended June 30, Six months ended June 30, 2021 2022 2021 2022 Credit Facility interest expense $ 372 $ 1,314 $ 817 $ 2,161 Credit Facility amortization of debt issuance costs 99 96 217 184 Acquisition debt consists of deferred purchase price and promissory notes payable to sellers. 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 nine to twenty years . The imputed interest expense related to our acquisition debt is as follows (in thousands): Three months ended June 30, Six months ended June 30, 2021 2022 2021 2022 Acquisition debt imputed interest expense $ 93 $ 79 $ 190 $ 159 11. SENIOR NOTES 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 June 30, 2022 Long-term liabilities: Principal amount $ 400,000 $ 400,000 Debt discount, net of accumulated amortization of $ 301 and $ 544 , respectively ( 4,199 ) ( 3,955 ) Debt issuance costs, net of accumulated amortization of $ 86 and $ 155 , respectively ( 1,191 ) ( 1,122 ) Carrying value of the Senior Notes $ 394,610 $ 394,923 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. 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 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. - 29 - 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 June 30, Six months ended June 30, 2021 2022 2021 2022 Senior Notes interest expense $ 6,642 $ 4,230 $ 13,267 $ 8,480 Senior Notes amortization of debt discount 128 122 266 243 Senior Notes amortization of debt premium 27 — 85 — Senior Notes amortization of debt issuance costs 53 35 127 69 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 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. 12. LEASES 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 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) 16 16 57 23 Finance lease cost: Depreciation of leased assets Depreciation and amortization (2) $ 109 $ 109 $ 217 $ 217 Interest on lease liabilities Interest expense 119 112 239 225 Total finance lease cost 228 221 456 442 Total lease cost $ 1,265 $ 1,166 $ 2,543 $ 2,344 (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 General, administrative and other on our Consolidated Statements of Operations. Supplemental cash flow information related to our leases is as follows (in thousands): Six months ended June 30, 2021 2022 Cash paid for operating leases included in operating activities $ 1,930 $ 1,795 Cash paid for finance leases included in financing activities 417 426 Right-of-use assets obtained in exchange for new leases is as follows (in thousands): Six months ended June 30, 2021 2022 Right-of-use assets obtained in exchange for new operating lease liabilities $ 75 $ 576 Right-of-use assets obtained in exchange for new finance lease liabilities — — - 30 - Supplemental balance sheet information related to leases is as follows (in thousands): 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 Finance lease right-of-use assets Property, plant and equipment, net $ 6,770 $ 6,770 Accumulated depreciation Property, plant and equipment, net ( 2,443 ) ( 2,660 ) Finance lease right-of-use assets, net $ 4,327 $ 4,110 Operating lease current liabilities Current portion of operating lease obligations $ 1,913 $ 2,029 Finance lease current liabilities Current portion of finance lease obligations 375 411 Total current lease liabilities $ 2,288 $ 2,440 Operating lease non-current liabilities Obligations under operating leases, net of current portion $ 18,520 $ 18,005 Finance lease non-current liabilities Obligations under finance leases, net of current portion 5,157 4,945 Total non-current lease liabilities $ 23,677 $ 22,950 Total lease liabilities $ 25,965 $ 25,390 The average lease terms and discount rates at June 30, 2022 are as follows: Weighted-average remaining lease term (years) Weighted-average discount rate Operating leases 9.3 8.1 % Finance leases 12.0 8.2 % The aggregate future lease payments for operating and finance leases at June 30, 2022 are as follows (in thousands): Operating Finance Lease payments due: Remainder of 2022 $ 1,791 $ 442 2023 3,509 860 2024 3,485 791 2025 3,256 736 2026 3,201 745 Thereafter 13,101 4,810 Total lease payments 28,343 8,384 Less: Interest ( 8,309 ) ( 3,028 ) Present value of lease liabilities $ 20,034 $ 5,356 At June 30, 2022, we had no additional significant operating or finance leases that had not yet commenced. 13. COMMITMENTS AND CONTINGENCIES Chinchilla v. Carriage Services, Inc., et al., Superior Court of California, San Joaquin County, Case No. STK-CV-UOE-2021-0004661. On May 19, 2021, a putative class action against the Company and several of our subsidiaries was filed. 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 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. - 31 - 14. STOCKHOLDERS ’ EQUITY Restricted Stock Restricted stock activity is as follows (in thousands, 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 Granted (1) — $ — — $ — 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 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 June 30, Six months ended June 30, 2021 2022 2021 2022 Shares Fair Value Shares Fair Value Shares Fair Value Shares Fair Value Granted (1) — $ — — $ — 701,400 $ 7,115 58,500 $ 959 Granted (2) — $ — — $ — — $ — 310,000 $ 5,388 Granted (3) — — — — 150,000 $ 1,684 — — Cancelled — $ — 18,138 $ 214 3,840 $ 24 25,138 $ 285 (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. 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 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. (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. Additional stock option activity is as follows (in thousands, except shares): Three months ended June 30, Six months ended June 30, 2021 2022 2021 2022 Shares Cash Shares Cash Shares Cash Shares Cash Exercised (1) 180,629 (1) — — 281,629 (1) 18,736 (1) Returned for option price (2) 77,792 $ 733 — $ — 142,524 $ 879 8,125 $ 60 Returned for payroll taxes (3) 17,971 $ 681 — $ — 25,982 $ 976 1,601 $ 82 (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 $ 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. - 32 - Performance Awards Performance award activity is as follows (in thousands, 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 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 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 Share price at grant date $ 52.49 Expected volatility 44.44 % 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 $ 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 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 The fair value of the right (option) to purchase shares under the ESPP is estimated at the date of purchase with the four quarterly purchase dates using the following assumptions: 2022 Dividend yield 0.01 % Expected volatility 30.24 % Risk-free interest rate 0.08 %, 0.22 %, 0.31 %, 0.40 % 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 $ 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. - 33 - Good To Great 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 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 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”). Share repurchase activity is as follows (dollar value in thousands): 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) $ 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 June 30, 2022, our share repurchase program had $ 48.9 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 March 1 st $ 0.1125 $ 1,725 June 1 st $ 0.1125 $ 1,730 2021 Per Share Dollar Value March 1 st $ 0.1000 $ 1,799 June 1 st $ 0.1000 $ 1,808 - 34 - 15. 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 June 30, Six months ended June 30, 2021 2022 2021 2022 Numerator for basic and diluted earnings per share: Net income (loss) $ ( 6,167 ) $ 10,899 $ 6,766 $ 27,301 Less: 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: Denominator for basic earnings per common share - weighted average shares outstanding 17,967 14,798 17,966 15,020 Effect of dilutive securities: Stock options 213 226 232 325 Performance awards 331 688 166 688 Denominator for diluted earnings per common share - weighted average shares outstanding 18,511 15,712 18,364 16,033 Basic earnings (loss) per common share: $ ( 0.34 ) $ 0.74 $ 0.38 $ 1.82 Diluted earnings (loss) per common share: $ ( 0.33 ) $ 0.69 $ 0.37 $ 1.70 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 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. 16. SEGMENT REPORTING Revenue, disaggregated by major source for each of our reportable segments was as follows (in thousands): Three months ended June 30, 2022 Funeral Cemetery Total Services $ 38,140 $ 4,410 $ 42,550 Merchandise 20,525 3,777 24,302 Cemetery property — 16,974 16,974 Other revenue 3,273 3,501 6,774 Total $ 61,938 $ 28,662 $ 90,600 - 35 - Three months ended June 30, 2021 Funeral Cemetery Total Services $ 36,225 $ 3,894 $ 40,119 Merchandise 20,370 3,658 24,028 Cemetery property — 17,578 17,578 Other revenue 3,237 3,315 6,552 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): Funeral Cemetery Corporate Consolidated Operating income (loss): 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 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: June 30, 2022 $ 757,341 $ 377,702 $ 16,380 $ 1,151,423 December 31, 2021 769,539 390,344 18,748 1,178,631 - 36 - 17. SUPPLEMENTARY DATA Balance Sheet The following table presents the detail of certain balance sheet accounts (in thousands): December 31, 2021 June 30, 2022 Prepaid and other current assets: Prepaid expenses $ 2,215 $ 3,466 Federal income taxes receivable 4,064 — State income taxes receivable — 361 Other current assets 125 124 Total prepaid and other current assets $ 6,404 $ 3,951 Current portion of debt and lease obligations: Acquisition debt $ 521 $ 583 Finance lease obligations 375 411 Operating lease obligations 1,913 2,029 Total current portion of debt and lease obligations $ 2,809 $ 3,023 Accrued and other liabilities: Incentive compensation $ 19,121 $ 6,069 Insurance 4,089 4,547 Unrecognized tax benefit 3,761 3,250 Vacation 3,334 3,425 Natural disaster liability 2,628 — Interest 2,250 2,221 Salaries and wages 2,193 5,131 Employer payroll tax deferral 1,773 1,773 Employee meetings and award trips 1,462 234 Commissions 684 1,077 Income tax payable 485 387 Ad valorem and franchise taxes 450 1,653 Perpetual care trust payable 389 65 Other accrued liabilities 1,154 912 Total accrued and other liabilities $ 43,773 $ 30,744 Other long-term liabilities: Incentive compensation $ 1,291 $ 1,829 Other long-term liabilities 128 — Total other long-term liabilities $ 1,419 $ 1,829 Cash Flow The following information is supplemental disclosure for the Consolidated Statements of Cash Flows (in thousands): Six months ended June 30, 2021 2022 Cash paid for interest $ 14,329 $ 10,901 Cash paid for taxes 7,663 4,495 Unsettled share repurchases 742 — Fair value of donated real property 635 — - 37 - CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS In addition to historical information, this Quarterly Report on Form 10-Q contains certain statements and information that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical information, should be deemed to be forward-looking statements. 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, 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 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, including, but not limited to, capital allocation; any statements regarding future economic and market conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing and are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenue and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below: • our ability to find and retain skilled personnel; • 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; • the execution of our Standards Operating, 4E Leadership and Standard Acquisition Models; • the effects of competition; • changes in the number of deaths in our markets; • 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, product development and optimization plans; • the investment performance of our funeral and cemetery trust funds; • fluctuations in interest rates; • 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, 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 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 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; • changes in federal income tax laws and regulations and the implementation and interpretation of these laws and regulations by the Internal Revenue Service; • 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 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 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; • economic, financial and stock market fluctuations, - 38 - • 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; and • other factors and uncertainties inherent in the funeral and cemetery industry. For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see (i) Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q and (ii) Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise. - 39 -