What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-01 compared with 2022-03-02 · 336 added, 382 removed, 1441 unchanged (33% of the section changed)

87 unchanged sentences

Accrued and other liabilities 43,773 30,621

Convertible notes 2,538 —

Total current liabilities 60,787 45,468

19 unchanged sentences

Treasury stock, at cost;

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

10,932,322 and 11,627,818 shares, respectively

( 244,519 ) ( 278,753 )

22 unchanged sentences

General, administrative and other 27,254 35,190 37,471

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

Net loss on divestitures, disposals and impairment charges 21,442 666 2,029

3 unchanged sentences

Loss on extinguishment of debt ( 6 ) ( 23,807 ) ( 190 )

Gain on insurance reimbursements — — 3,471

Other, net 152 ( 84 ) 82

30 unchanged sentences

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

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

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

Other 18 — 467 — — 467

8 unchanged sentences

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

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

Other 18 — 467 — — 467

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

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

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

2 unchanged sentences

Issuance of common stock to directors and board advisor 12 — 435 — — 435

Issuance of restricted common stock 9 — — — — —

Exercise of stock options 10 — ( 63 ) — — ( 63 )

2 unchanged sentences

Dividends on common stock — — ( 6,763 ) — — ( 6,763 )

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

Treasury stock acquired ( 695 ) — — — ( 34,234 ) ( 34,234 )

Other 27 — 1,358 — — 1,358

Balance – December 31, 2022 14,732 $ 264 $ 238,780 $ 176,843 $ ( 278,753 ) $ 137,134

14 unchanged sentences

Amortization of debt issuance costs 782 576 552

Amortization and accretion of debt discount and premium 733 523 439

Amortization and accretion of debt 523 439 493

Loss on extinguishment of debt 6 23,807 190

13 unchanged sentences

Cash flows from investing activities:

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

Deposit on pending acquisition ( 5,000 ) — —

Acquisitions of businesses and real estate ( 28,011 ) ( 3,285 ) ( 33,876 )

Proceeds from divestitures and sale of other assets 8,541 7,875 5,027

5 unchanged sentences

Payments against the credit facility ( 146,100 ) ( 157,968 ) ( 120,100 )

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 ( 1,871 ) ( 78 ) ( 2,197 )

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

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

Payment to redeem the 6.625% senior notes due 2026 — ( 400,000 ) —

Payment of call premium for the redemption of the 6.625% senior notes due 2026 — ( 19,876 ) —

Proceeds from the issuance of the 4.25% senior notes due 2029 — 395,500 —

Payment of debt issuance costs for the credit facility and 4.25% senior notes due 2029 ( 78 ) ( 2,197 ) ( 922 )

Conversions and maturity of the convertible notes ( 4,563 ) ( 3,980 ) —

Payments on acquisition debt and obligations under finance leases ( 1,745 ) ( 1,331 ) ( 882 )

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

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

Proceeds from the exercise of stock options and employee stock purchase plan contributions 1,229 2,644 1,745

Taxes paid on restricted stock vestings and exercise of stock options ( 348 ) ( 2,647 ) ( 327 )

1 unchanged sentence

Purchase of treasury stock — ( 140,040 ) ( 36,663 )

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

Net cash used in financing activities ( 48,322 ) ( 71,452 ) ( 8,512 )

Net increase in cash and cash equivalents 173 259 22

2 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2 unchanged sentences

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.

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

At December 31, 2022, we operated 171 funeral homes in 26 states and 32 cemeteries in 11 states.

7 unchanged sentences

All significant intercompany balances and transactions have been eliminated.

Reclassifications

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

Use of Estimates

8 unchanged sentences

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

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

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.

2 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

with a third-party collections agency.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

7 unchanged sentences

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

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

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

6 unchanged sentences

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

During the year ended December 31, 2022, we acquired a business in Kissimmee, Florida consisting of two funeral homes for $ 6.3 million and a business in the Charlotte, North Carolina area consisting of three funeral homes, one cemetery and one cremation focused business for $ 25.0 million.

We did not acquire any businesses in 2021.

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

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

The results of the acquired businesses are included in our results of operations from the date of acquisition.

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

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

Divested Operations

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

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

When both inputs and a substantive process are present then the set is determined to be a business and we consider the accounting treatment of goodwill for that set (see discussion of Goodwill below).

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

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

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

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

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

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

During the year ended December 31, 2022, we sold four funeral homes for $ 1.5 million and merged one funeral home with another business we own in an existing market.

During the year ended December 31, 2021, we sold two funeral homes and one cemetery for $ 2.5 million and we merged six funeral homes with other businesses we own in existing markets.

During the year ended December 31, 2020, we sold eight funeral homes for $ 8.4 million.

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

Held for Sale

At December 31, 2022, we had $ 0.8 million of assets classified as held for sale on our Consolidated Balance Sheet related to one funeral home and two cemeteries that we divested on January 31, 2023, described in Note 24 to the Consolidated Financial Statements.

The carrying value of these assets held for sale exceeded the fair value and in accordance with U.S.

Generally Accepted Accounting Principles (“GAAP”), we recognized impairments of $ 1.0 million related to property, plant and

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

equipment, $ 0.9 million related to cemetery property and $ 0.4 million related to goodwill, which were recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

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.

3 unchanged sentences

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 .

We conducted qualitative assessments in 2020 and 2021 and performed a quantitative assessment in 2022.

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.

8 unchanged sentences

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

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

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

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

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

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

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

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

For our 2022, 2021 and 2020 annual impairment tests performed as of August 31 each year, we concluded that there was no impairment to goodwill as the fair value of our reporting units was greater than the carrying value.

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

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

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

During the year ended December 31, 2022, we allocated $ 0.9 million of goodwill related to the sale of two funeral homes for a loss recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

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

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

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

Intangible Assets

4 unchanged sentences

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

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

We conducted qualitative assessments in 2020 and 2021 and performed a quantitative

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

assessment in 2022.

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.

6 unchanged sentences

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

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

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

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

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

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

For our 2022, 2021 and 2020 annual impairment tests performed as of August 31 each year, we concluded there that was no impairment to our intangible assets as the fair value of our intangible assets was greater than the carrying value.

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

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

Preneed and Perpetual Care Trust Funds

14 unchanged sentences

Any changes in fair value are recognized in earnings.

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

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

3 unchanged sentences

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

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

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.

1 unchanged sentence

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Deferred Revenue

We 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, with a corresponding amount recognized as Deferred preneed funeral revenue .

Under certain state regulations, we are allowed to retain certain amounts not required to be deposited to a trust or used to purchase a third-party insurance policy.

These amounts we retain represent future revenue that are not held in trust accounts and are recorded in Deferred preneed funeral and cemetery revenue.

Future revenue that are held in trust accounts are included in Deferred preneed funeral and cemetery receipts held in trust discussed above.

Fair Value Measurements

5 unchanged sentences

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

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

In the ordinary course of business, we are typically exposed to a variety of market risks.

1 unchanged sentence

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

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

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

Capitalized Commissions on Preneed Contracts

1 unchanged sentence

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.

Amortization expense totaled $ 0.6 million for each of the years ended December 31, 2019, 2020 and 2021.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Property, Plant and Equipment

6 unchanged sentences

Automobiles 5 to 7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

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

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

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

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

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

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

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

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Property, plant and equipment, net $ 269,367 $ 278,106

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

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

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

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

During the year ended December 31, 2022, we acquired $ 8.1 million of property, plant and equipment related to our business combinations, described in Note 3 to the Consolidated Financial Statements and $ 2.6 million related to real property acquisitions.

Additionally, we sold real property for $ 3.3 million, with a carrying value of $ 1.8 million, resulting in a gain on the sale of $ 1.4 million, which was recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

We also divested four funeral homes that had a carrying value of property, plant and equipment of $ 1.3 million, described in Note 5 to the Consolidated Financial Statements.

During the year ended December 31, 2021, we acquired real property for $ 3.3 million.

Additionally, we sold real property for $ 5.2 million, with a carrying value of $ 4.3 million, resulting in a gain on the sale of $ 0.9 million.

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

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

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

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

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

Our growth and maintenance capital expenditures totaled $ 19.0 million and $ 18.4 million for the years ended December 31, 2021 and 2022, respectively, for property, plant, equipment.

In addition, we recorded depreciation expense of $ 14.4 million, $ 13.8 million and $ 13.7 million for the years ended December 31, 2020, 2021 and 2022, respectively.

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

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

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

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

Cemetery Property

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Our growth capital expenditures totaled $ 5.9 million and $ 7.7 million for the years ended December 31, 2021 and 2022, respectively, for cemetery property development.

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

We recorded amortization expense for

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

cemetery interment rights of $ 5.0 million, $ 6.7 million and $ 6.1 million for the years ended December 31, 2020, 2021 and 2022, respectively.

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

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

We have operating and finance leases.

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

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

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

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

6 unchanged sentences

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

In connection with the goodwill and intangible impairment tests performed at March 31, 2020, we also evaluated the operating and finance leases of our funeral homes in the Eastern Reporting Unit and concluded that there was no impairment to our operating and finance lease assets.

Subsequent to our impairment tests performed at March 31, 2020, we did not identify any new factors or events that would trigger us to perform an additional assessment of our operating and finance leases.

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

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

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

Equity Plans and Stock-Based Compensation

10 unchanged sentences

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

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

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

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

For the year ended December 31, 2020, the excess tax deficiency related to share-based payments was $ 0.1 million and the excess tax benefit for the year ended December 31, 2021 was $ 1.2 million.

We did not have an excess tax benefit or deficiency for the year ended December 31, 2022.

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Revenue Recognition

9 unchanged sentences

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

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

Package discounts are reflected net in Revenue .

3 unchanged sentences

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

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

At December 31, 2022, CSV RIA provided investment management and advisory services to approximately 80 % of our trust assets, for a fee based on the market value of trust assets.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Balances due on undelivered preneed funeral trust contracts have been reclassified to reduce Deferred preneed funeral revenue on our Consolidated Balance Sheet of $ 8.0 million and $ 8.9 million at December 31, 2021 and 2022, respectively.

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However, we estimate an average maturity period of eight years for preneed cemetery contracts.

See Notes 21 to the Consolidated Financial Statements herein for additional information related to revenue.

See Note 21 to the Consolidated Financial Statements for additional information related to revenue.

We and our subsidiaries file a consolidated U.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

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.

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

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

See Note 20 to the Consolidated Financial Statements for additional information related to the computation of earnings per share.

Subsequent Events

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

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

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

RECENTLY ISSUED ACCOUNTING STANDARDS

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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.

Topic 848 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.

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

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 the provisions of Topic 848 in March 2020.

On May 27, 2022, we amended our Credit Facility (defined in Note 12) 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 Topic 848.

See Note 12 to the Consolidated Financial Statements for additional information related to the amended Credit Facility.

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

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

Early adoption of the amendments is permitted.

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

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

We plan to adopt the provisions of Topic 805 for our fiscal year beginning January 1, 2023.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We did not acquire any businesses in 2021.

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

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 Topic 326 for our fiscal year beginning January 1, 2023.

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

On August 8, 2022, we acquired a business consisting of two funeral homes in Kissimmee, Florida for $ 6.3 million in cash.

On October 25, 2022, we acquired a business consisting of three funeral homes, one cemetery and one cremation focused business in the Charlotte, North Carolina area for $ 25.0 million in cash.

We acquired substantially all of the assets and assumed certain operating liabilities of these businesses.

The pro forma impact of this acquisition on prior periods is not presented, as the impact is not significant to our reported results.

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

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

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

Initial Purchase Price Allocation Adjustments Adjusted Purchase Price Allocation

We did not acquire any businesses in 2021.

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

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

The following table summarizes the breakdown of the purchase price allocation for the businesses described above (in thousands):

Purchase Price Allocation

Current assets $ 219

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Intangible and other non-current assets 2,145

Assumed liabilities ( 489 ) $ — $ ( 489 )

Deferred tax liability ( 527 ) ( 5 ) ( 532 )

Trust liabilities ( 4,146 )

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Purchase price $ 31,250

The current assets primarily relate to preneed cemetery receivables.

The intangible and other non-current assets primarily relate to the fair value of tradenames.

The assumed liabilities primarily relate to the obligations associated with delivered preneed merchandise that were not paid for prior to acquisition.

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

The intangible and other non-current assets relate to the fair value of tradenames and non-compete agreements.

The goodwill recorded for our 2022 acquisitions is expected to be deductible for tax purposes.

As of December 31, 2022, our accounting for our 2022 acquisitions is complete.

The following table summarizes the fair value of the assets acquired for these businesses (in thousands):

Acquisition Date Type of Business Market Assets

Goodwill) Goodwill

Recorded Liabilities

August 8, 2022 Two Funeral Homes Kissimmee, FL $ 4,995 $ 2,694 $ ( 1,439 )

October 25, 2022 Three Funeral Homes, One Cemetery and One Cremation Focused Business Charlotte, NC $ 12,036 $ 16,817 $ ( 3,853 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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.

Our 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 31st each year.

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

Net increase in goodwill related to acquisitions 14,054 —

Increase in goodwill related to acquisitions — 19,511

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

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

Decrease in goodwill related to assets held for sale — ( 445 )

Goodwill at the end of the year $ 391,972 $ 410,137

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

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

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

GAAP, we allocate goodwill associated with that business to be included in the gain or loss on divestiture.

When divesting a business, goodwill is allocated based on the relative fair values of the business being divested and the portion of the reporting unit that will be retained.

During the year ended December 31, 2022, we recognized $ 19.5 million in goodwill related to our 2022 acquisitions;

$ 7.4 million was allocated to our cemetery segment and $ 12.1 million was allocated to our funeral home segment.

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

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

During the year ended December 31, 2022, we allocated $ 0.9 million of goodwill to the sale of two funeral homes for a loss recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

In addition, we recorded a $ 0.4 million goodwill impairment related to one funeral home and two cemeteries that were classified as held for sale at the balance sheet date, which was recorded in Net loss on divestitures, disposals and impairment charges in our Consolidated Statements of Operations.

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

DIVESTED OPERATIONS

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

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

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

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

During 2022, we sold four funeral homes for an aggregate of $ 1.5 million and merged one funeral home with another business we own in an existing market.

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

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

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

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Revenue $ 2,643 $ 1,070 $ 656

Operating income (loss) ( 569 ) 159 6

Operating income 159 6 54

Net loss on divestitures (1)

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Past Due Total Past

Due Current Total Financing

Due Current Total

Recognized revenue $ 864 $ 555 $ 180 $ 2,146 $ 3,745 $ 38,639 $ 42,384

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Past Due Total Past

Due Current Total Financing

Due Current Total

Recognized revenue $ 777 $ 738 $ 210 $ 1,919 $ 3,644 $ 34,214 $ 37,858

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

These investments are fixed income securities, including foreign debt, corporate debt, preferred stocks, mortgage-backed securities and fixed income mutual funds and other investments, all of which are classified within Level 2 of the valuation hierarchy.

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

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

We review and update our fair value hierarchy classifications quarterly.

See Note 10 to the Consolidated Financial Statements included herein for further information of the fair value measurement.

See Note 10 to the Consolidated Financial Statements for additional information related to our 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.

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

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

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

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

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.

Because of the long-term relationship between the establishment of trust investments and the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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Fixed income securities:

agency obligations 2 803 — ( 72 ) 731

Foreign debt 2 12,241 910 ( 644 ) 12,507

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Preferred stock 2 12,560 436 ( 1,789 ) 11,207

Certificates of deposit 2 79 — ( 8 ) 71

Common stock 1 42,929 5,102 ( 6,228 ) 41,803

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

Mortgage-backed securities 2 272 — ( 159 ) 113

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

Mutual funds:

Equity 1 28 8 — 36

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

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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 December 31, 2021, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

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

December 31, 2022

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Fixed income securities:

agency obligations $ 732 $ ( 72 ) $ — $ — $ 732 $ ( 72 )

Foreign debt 5,394 ( 308 ) 744 ( 336 ) 6,138 ( 644 )

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Preferred stock 7,146 ( 1,271 ) 2,517 ( 518 ) 9,663 ( 1,789 )

Certificates of deposit 71 ( 8 ) — — 71 ( 8 )

Total fixed income securities with an unrealized loss $ 21,380 $ ( 5,581 ) $ 3,824 $ ( 1,071 ) $ 25,204 $ ( 6,652 )

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

The following table summarizes 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

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

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

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

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Realized losses ( 5,090 ) ( 6,626 ) ( 2,548 )

Unrealized gains, net 826 5,515 6,047

Unrealized gains (losses), net 5,515 6,047 ( 9,661 )

Expenses and taxes ( 1,354 ) ( 1,715 ) ( 1,748 )

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Fixed income securities:

treasury debt 1 484 — ( 45 ) 439

Foreign debt 2 10,851 818 ( 555 ) 11,114

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Fixed income securities:

treasury debt 1 819 6 — 825

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

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

Mortgage-backed securities 2 293 1 ( 155 ) 139

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

Mutual funds:

Equity 1 26 7 — 33

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

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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 December 31, 2021, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

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

December 31, 2022

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Fixed income securities:

treasury debt $ 439 $ ( 45 ) $ — $ — $ 439 $ ( 45 )

Foreign debt 4,766 ( 274 ) 626 ( 281 ) 5,392 ( 555 )

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

The following table summarizes 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

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

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

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

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Realized losses ( 4,677 ) ( 6,155 ) ( 2,301 )

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

Unrealized gains (losses), net 5,555 5,665 ( 7,723 )

Expenses and taxes ( 878 ) ( 1,221 ) 958

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

Mortgage-backed securities 2 206 — ( 121 ) 85

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

Mutual funds:

Equity 1 19 5 — 24

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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):

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

December 31, 2022

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Total fixed income securities with an unrealized loss $ 15,602 $ ( 4,068 ) $ 2,584 $ ( 737 ) $ 18,186 $ ( 4,805 )

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

The following table summarizes our fixed income securities 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

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

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

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

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Realized losses ( 1,695 ) ( 950 ) ( 309 )

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

Unrealized gains (losses), net 4,355 4,421 ( 6,958 )

Net change in care trusts’ corpus ( 5,262 ) ( 5,945 ) 5,813

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Receivables from preneed funeral trusts, net $ 19,009 $ 19,976

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

The following summary reflects the composition of the assets held in trust and controlled by third parties to satisfy our future obligations related to the underlying preneed funeral contracts at December 31, 2021 and 2022.

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

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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.

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These inputs include interest rates, yield curves, credit risk, prepayment speeds, rating and tax-exempt status.

Our investments classified as Level 2 securities include foreign debt, corporate debt, preferred stocks, mortgage-backed securities and fixed income mutual funds and other investments.

Our investments classified as Level 2 securities include U.S.

agency obligations, foreign debt, corporate debt, preferred stocks, certificates of deposit and fixed income mutual funds and other investments.

• Level 3—Unobservable inputs based upon the reporting entity’s internally developed assumptions, which market participants would use in pricing the asset or liability.

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

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

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

INTANGIBLE AND OTHER NON-CURRENT ASSETS

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Tradenames $ 23,565 $ 25,610

Prepaid agreements not-to-compete, net of accumulated amortization of $ 3,193 and $ 3,316 , respectively

Capitalized commissions on preneed contracts, net of accumulated amortization

of $ 2,278 and $ 2,990 , respectively

Prepaid agreements not-to-compete, net of accumulated amortization of $ 3,316 and $ 3,515 , respectively

Internal-use software, net of accumulated amortization of $ 200

Intangible and other non-current assets, net $ 29,378 $ 32,930

During the year ended December 31, 2022, we increased the value of our tradenames by $ 2.0 million related to our 2022 acquisitions described in Note 3 to the Consolidated Financial Statements.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Our tradenames have indefinite lives and therefore are not amortized.

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

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

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

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

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

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

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

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 $ 580,000 , $ 640,000 and $ 712,000 for the years ended December 31, 2020, 2021 and 2022, respectively.

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

Non-Compete Agreements Capitalized Commissions

Prepaid Agreements

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

Amortization expense was $ 719,000 , $ 645,000 and $ 574,000 for the years ended December 31, 2020, 2021 and 2022, respectively.

Internal-use Software

Internal-use software is typically amortized on a straight-line basis over five years .

Amortization expense was $ 200,000 for the year ended December 31, 2022.

The aggregate amortization expense for our capitalized commissions, prepaid agreements and internal-use software as of December 31, 2022 is as follows (in thousands):

Capitalized Commissions Prepaid Agreements Internal-use Software

Years ending December 31,

2023 $ 742 $ 536 $ 314

2024 681 391 283

2025 616 382 226

2026 549 267 221

2027 484 147 220

Thereafter 976 154 7

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CREDIT FACILITY AND ACQUISITION DEBT

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

(i) a $ 190.0 million revolving credit facility, including a $ 15.0 million subfacility for letters of credit and a $ 10.0 million swingline, and (ii) an accordion or incremental option allowing for future increases in the facility size by an additional amount of up to $ 75.0 million in the form of increased revolving commitments or incremental term loans.

The final maturity of the Former Credit Facility was to occur on May 31, 2023.

On May 13, 2021, in connection with the issuance of the Senior Notes (defined in Note 14), we entered into an amended and restated $ 150.0 million senior secured revolving credit facility (the “Credit Facility”) with the Credit Facility Subsidiary Guarantors (as defined below), the financial institutions party thereto, as lenders, and Bank of America, N.A., as administrative agent.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

On May 13, 2021, we used $ 21.4 million of the availability under the Credit Facility to repay the then outstanding balances under our Former Credit Facility and all commitments thereunder were terminated.

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

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

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

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

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

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

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

At December 31, 2022, our senior secured revolving credit facility (as previously amended, including the Second Credit Facility Amendment and Third Credit Facility Amendment, the “Credit Facility”) was comprised of:

(i) a $ 250.0 million senior secured 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 aggregate in the form of increased revolving commitments or incremental term loans.

On May 27, 2022, we entered into a second amendment and commitment increase (the “Second Credit Facility Amendment”) to our Credit Facility with the financial institutions party thereto, as lenders, and Bank of America, N.A., as administrative agent.

The Second Credit Facility Amendment provided, among other things, for (i) an increase to the Revolving Credit Commitments (as defined in 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;

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

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

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

On December 9, 2022, we entered into a third amendment (the “Third Credit Facility Amendment”), to our Credit Facility with the financial institutions party thereto, as lenders, and Bank of America, N.A., as administrative agent.

The Third Credit Facility Amendment provides, among other things, for (i) 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;

(ii) an increase in the maximum Total Leverage Ratio (as defined in the Credit Facility) covenant as follows:

a Total Leverage Ratio not to exceed (a) 6.00 to 1.00 from the effective date of the Third Credit Facility Amendment through the quarter ended June 30, 2023, (b) 5.75 to 1.00 for the quarters ended September 30, 2023, and December 31, 2023, (c) 5.50 to 1.00 for the quarters ended March 31, 2024 and June 30, 2024, (d) 5.25 to 1.00 for the quarter ended September 30, 2024, and (e) 5.00 and 1.00 for the quarter ended December 31, 2024 and each quarter ended thereafter;

(iii) modifications to the permitted investments covenant, relating to the Company’s ability to make certain acquisitions, subject to the satisfaction of certain conditions therein;

(iv) modifications to the restricted payments covenant related to the Company’s ability to make stock repurchases, subject to the satisfaction of certain conditions therein;

and (v) a modification to the Total Leverage Ratio level which constitutes a Real Property Collateral Trigger Event (as defined in the Credit Facility).

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Prior to the execution of the Third Credit Facility Amendment, we recognized a loss on the write-off of $ 0.2 million in unamortized debt issuance costs, which was recorded in Loss on extinguishment of debt .

We also incurred $ 0.6 million in transactions costs related to the execution of the Third Credit Facility Amendment, which were capitalized and will be amortized over the remaining term of the related debt using the straight-line method.

Our obligations under the Credit Facility are unconditionally guaranteed on a joint and several basis by the same subsidiaries which guarantee the Senior Notes (as defined in Note 14) and certain of our subsequently acquired or organized domestic subsidiaries (collectively, the “Subsidiary Guarantors”).

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.

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At December 31, 2022, we were subject to the following financial covenants under our Credit Facility:

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

(A) a Total Leverage Ratio not to exceed 6.00 to 1.00 and (B) a Fixed Charge Coverage Ratio (as defined in the Credit Facility) of not less than 1.20 to 1.00 as of the end of any period of four consecutive fiscal quarters.

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

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At December 31, 2022, we had outstanding borrowings under the Credit Facility of $ 190.7 million.

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

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

The letter of credit will expire on November 27, 2023 and is expected to automatically renew annually and secures our obligations under our various self-insured policies.

At December 31, 2022, we had $ 57.0 million of availability under the Credit Facility.

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

At December 31, 2021, the prime rate margin was equivalent to 0.75 % and the LIBOR rate margin was 1.75 %.

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Outstanding borrowings under our Credit Facility bear interest at a prime rate or a BSBY rate, plus an applicable margin based on our leverage ratio.

At December 31, 2022, the prime rate margin was equivalent to 2.375 % and the BSBY rate margin was 3.375 %.

The weighted average interest rate on our Credit Facility was 3.8 % and 4.0 % for the years ended December 31, 2021 and 2022, respectively.

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

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

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Original maturities typically range from five to twenty years .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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CONVERTIBLE SUBORDINATED NOTES

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

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

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

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

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

During the year ended December 31, 2021, we converted $ 2.4 million in aggregate principal amount of our 2.75 % convertible subordinated notes due 2021 (the “Convertible Notes”) held by certain holders for $ 3.8 million in cash and recorded $ 1.4 million for the reacquisition of the equity component.

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The carrying values of the liability and equity components of the Convertible Notes are reflected on our Consolidated Balance Sheet as follows (in thousands):

December 31, 2020 December 31, 2021

Long-term liabilities:

Principal amount $ 2,559 $ —

Unamortized discount of liability component ( 20 ) —

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

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

Carrying value of the equity component $ 319 $ —

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

Therefore, no Convertible Notes remain outstanding at December 31, 2021 and 2022.

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

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Convertible Notes amortization of debt issuance costs 20 1 —

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

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

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

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

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

For the year ended December 31, 2021, we recognized a net loss of $ 23.7 million related to the redemption of the Original Senior Notes, which was recorded in Loss on extinguishment of debt .

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

The effective interest rate on the unamortized debt discount and debt issuance costs for the year ended December 31, 2021 was 3.1 % .

At December 31, 2022, we had $ 400.0 million in aggregate principal amount of 4.25 % Senior Notes due 2029 (the “Senior Notes”) and related guarantees by the Subsidiary Guarantors, which were issued in a private offering under Rule 144A and Regulation S of the Securities Act.

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

The Senior Notes bear interest at 4.25 % per year.

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Indenture remain outstanding immediately after the occurrence of such redemption (unless all Senior Notes are redeemed concurrently), and (2) each such redemption must occur within 180 days of the date of the consummation of any such equity offering.

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.

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The debt discount and the debt issuance costs are being amortized using the effective interest method over the remaining term of 77 months of the Senior Notes.

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

The effective interest rate on the unamortized debt discount and the unamortized debt issuance costs for the Senior Notes for both the years ended December 31, 2021 and 2022 was 4.42 % and 4.30 %, respectively.

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

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Principal amount $ 400,000 $ 400,000

Debt premium, net of accumulated amortization of $ 221

Debt discount, net of accumulated amortization of $ 301 and $ 794 , respectively

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The fair value of the Senior Notes, which are Level 2 measurements, was $ 322.3 million at December 31, 2022.

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

The effective interest rate on the unamortized debt premium and the unamortized debt issuance costs for the additional Original Senior Notes, issued in December 2019, for year ended December 31, 2020 was 6.90 %.

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

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Senior Notes amortization of debt issuance costs 280 195 140

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The aggregate maturities of our Senior Notes for the next five years subsequent to December 31, 2022 and thereafter are as follows (in thousands):

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Total $ 400,000 $ ( 3,706 ) $ 396,294

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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(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 expense and Home office depreciation and amortization on our Consolidated Statements of Operations.

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

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

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

We recorded a leasehold improvement asset as property,

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

We recorded a leasehold improvement asset as property, plant and equipment and reduced our right-of-use asset by $ 1.4 million.

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

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Finance leases 11.4 8.2 %

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

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

Operating Finance

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Present value of lease liabilities $ 19,518 $ 5,157

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

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

COMMITMENTS AND CONTINGENCIES

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These agreements are generally for one to five years and provide for bi-weekly or monthly payments.

We have employment agreements with our executive officers and certain of our senior leadership.

We have employment agreements with our executive officers.

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

These agreements generally renew automatically on

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

At December 31, 2022, the maximum estimated future cash commitments under these agreements with remaining commitment terms, and with original terms of more than one year, are as follows (in thousands):

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

Chinchilla v.

Carriage Services, Inc., et al., Superior Court of California, San Joaquin County, Case No.

STK-CV-UOE-2021-0004661.

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

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

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

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

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

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2020 2021 2022

federal provision (benefit) $ ( 2,039 ) $ 1,778 $ 8,848

State provision (benefit) ( 195 ) 2,177 2,989

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

federal provision $ 1,778 $ 8,848 $ 9,490

State provision 2,177 2,989 3,287

Total current provision $ 3,955 $ 11,837 $ 12,777

federal provision (benefit) $ 3,994 $ ( 452 ) $ 1,723

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Total $ 8,552 34.7 % $ 11,145 25.1 % $ 15,813 27.6 %

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

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

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

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

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

The requested refund was received on August 7, 2020.

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

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

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

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

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

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

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

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

In connection with the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) enacted on March 27, 2020 in response to the COVID-19 pandemic, we filed a claim for a refund on June 30, 2020, to carryback the net operating losses (“NOLs”) generated in the tax year ended December 31, 2018.

The CARES Act, among other things, permits NOLs incurred in taxable years beginning after December 31, 2017 and before January 1, 2021, to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes in which the enacted federal rate was 35%.

The refund claim for $ 7.0 million from the 2018 tax year was received on August 7, 2021.

An additional carryback claim for a refund was filed on November 3, 2020 for the tax year ended December 31, 2019, for $ 1.2 million not yet received.

On December 4, 2020, we filed an amended federal return for the tax year ended December 31, 2018, in order to take full advantage of the CARES Act legislative changes, which resulted in an additional carryback refund claim of $ 0.8 million not yet received, which will be processed as part of the Joint Committee review of the 2018 carryback claim.

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

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

Upon receiving the adverse ruling on the revenue recognition of cemetery property accounting method change, we filed an automatic method change on Form 3115, to adopt the IRS’ preferred revenue recognition method for cemetery property.

As uncertainty exists involving audit protection of the net operating loss carrybacks under IRS audit, a reserve for the unrecognized tax benefit was recorded for the benefit derived from carrying back losses to tax years with a higher effective tax rates than the current 21% rate.

On March 2, 2022, the IRS indicated the non-automatic method change filed for deferred revenue recognition for cemetery merchandise and services met the requirements to be filed as an automatic method change.

As such, on March 31, 2022, we submitted Form 3115 to request the automatic method change and recorded a $ 0.5 million reduction to the reserve for uncertain tax positions.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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Amortization of non-compete agreements 1,172 1,213

Prepaid and other assets 741 616

Prepaid assets 616 —

Total deferred income tax assets 14,668 15,536

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Preneed liabilities ( 4,224 ) ( 2,582 )

Convertible Notes ( 5 ) —

Prepaid assets — ( 161 )

Total deferred income tax liabilities ( 60,254 ) ( 64,175 )

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The deferred tax assets recognized for those NOLs are presented net of these unrecognized tax benefits.

At December 31, 2021, the Company’s unrecognized tax benefits reserve for uncertain tax positions primarily relates to the uncertainty of receiving audit protection for revenue recognition of cemetery property and not yet receiving the IRS approval of the cemetery merchandise and services accounting method change filed in 2018.

At December 31, 2022, the Company’s unrecognized tax benefit reserve for uncertain tax positions primarily relates to the uncertainty of receiving audit protection for revenue recognition of cemetery property for the benefit derived from carrying back losses to tax years with a higher effective tax rate than the current 21.0% rate.

Our unrecognized tax benefit reserve for the years ended December 31, 2021 and 2022 was $ 3.8 million and $ 3.3 million, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

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Unrecognized tax benefit at beginning of year $ 691 $ 3,656 $ 3,761

Gross increases - tax positions in prior period 691 — —

Gross decreases - tax positions in prior period ( 691 ) — ( 533 )

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Unrecognized tax benefit at end of year $ 3,656 $ 3,761 $ 3,294

At December 31, 2021, we expect that the $ 3.8 million of unrecognized tax benefit will be recognized in the next twelve months.

We recognize interest accrued related to unrecognized tax benefit as income tax expense.

As of December 31, 2021, we accrued $ 0.1 million of interest related to the unrecognized tax benefit.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

At December 31, 2022, we expect that the $ 3.3 million of unrecognized tax benefit (“UTB”) will be recognized in the next twelve months.

We accrued interest of $ 0.1 million during 2022 and in total, as of December 31, 2022, recognized a liability related to the UTB's noted above for interest of $ 0.2 million.

During 2021, we accrued interest of $ 0.1 million and in total, as of December 31, 2021, recognized a liability for interest of $ 0.1 million.

STOCKHOLDERS’ EQUITY

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

Year Ended December 31,

Shares Fair Value Shares Fair Value

Years Ended December 31,

2020 2021 2022

Shares Fair Value Shares Fair Value Shares Fair Value

10,200 $ 255 9,300 $ 324 — $ —

Returned for payroll taxes 10,588 $ 250 10,399 $ 375 4,136 $ 205

Cancelled — $ — 966 $ 27 1,950 $ 63

(1) Restricted stock granted during the years ended December 31, 2020 and 2021 will vest over a three-year period, if the employee has remained continuously employed by us during the vesting period, at a weighted average stock price of $ 25.00 and $ 34.79 , respectively.

A summary of the status of unvested restricted stock as of December 31, 2021, and changes during 2021, is presented below:

(1) Restricted stock granted during the year ended December 31, 2020 and 2021 will vest over a three-year period, if the employee has remained continuously employed by us during the vesting period, at a weighted average stock price of $ 25.00 and $ 34.79 , respectively.

A summary of the number of unvested restricted stock awards and their weighted average grant date fair values during the year ended December 31, 2022 is presented in the table below (shares in thousands):

Restricted stock awards Shares Weighted Average

Unvested at January 1 22,643 $ 27.21

Granted 9,300 34.79

Vested ( 13,111 ) $ 24.23

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Unvested at December 31 7,582 $ 31.05

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for restricted stock awards of $ 735,000 , $ 390,000 and $ 171,000 for the years ended December 31, 2020, 2021 and 2022, respectively.

At December 31, 2022, we had $ 235,000 of total unrecognized compensation costs related to unvested restricted stock awards, which are expected to be recognized over a weighted average period of 0.8 years.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Stock Options

During the year ended December 31, 2021, we granted 150,000 options to a certain key employee at a weighted average price of $ 34.79 .

These options will vest when the price of our common stock closes at or above $ 53.39 ( 50,000 options) and $ 77.34 ( 100,000 options) for three consecutive days within the ten-year term and the employee has remained continuously employed by us through such date.

The fair value of these options was $ 1.7 million and was calculated using the Monte-Carlo simulation pricing model.

During the year ended December 31, 2021, our stock price closed at or above $ 53.39 for three consecutive days, which triggered the vesting of the 50,000 options granted during 2021.

As a result, we accelerated the recognition of the grant date fair value of these options and recognized stock-based compensation expense of $ 511,000 during the year ended December 31, 2021.

Additionally, we recognized an additional $ 129,000 of stock-based compensation expense when we accelerated 12,980 options in connection with the resignation of an employee in accordance with the terms of the separation agreement we entered into in connection with such resignation.

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

Year Ended December 31,

Shares Fair Value Shares Fair Value

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

Years Ended December 31,

2020 2021 2022

Shares Fair Value Shares Fair Value Shares Fair Value

— $ — 701,400 $ 7,115 58,500 $ 959

— $ — — $ — 310,000 $ 5,388

— $ — 150,000 $ 1,684 — $ —

20,000 $ 92 — $ — 12,600 $ 143

Cancelled 146,034 $ 846 74,688 $ 722 45,590 $ 512

(1) Stock options granted during the years ended December 31, 2020 and 2021 had a weighted average price of $ 18.02 and $ 34.79 , respectively.

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

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

The options granted in 2020 vest over a three-year period and have a ten-year term.

The options granted in 2021 vest over a five-year period and have a ten-year term.

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.

Year Ended December 31,

Shares Cash Shares Cash

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

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

These options will vest if the employee has remained continuously employed by us through the vesting period.

(3) We granted 150,000 options to a key employee at a weighted average price of $ 34.79 .

The fair value of these options was $ 1.7 million.

(4) Stock options granted during the year ended December 31, 2020 and 2022 had a weighted average price of $ 18.02 and $ 31.58 , respectively.

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

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

Years Ended December 31,

2020 2021 2022

Shares Cash Shares Cash Shares Cash

Exercised (1)

40,365 N/A 423,294 N/A

40,365 (1) 423,294 (1) 32,196 (1)

Returned for option price (2)

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2,954 $ 89 43,534 $ 2,272 2,895 $ 123

(1) Stock options exercised during the years ended December 31, 2020 and 2021 had a weighted average exercise price of $ 13.72 and $ 21.99 , respectively, with an aggregate intrinsic value of $ 0.5 million and $ 8.2 million, respectively.

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

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

(1) Stock options exercised during the years ended December 31, 2020, 2021 and 2022 had a weighted average exercise price of $ 13.72 , $ 21.99 and $ 25.49 , 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.

Stock options are granted with an exercise price equal to the closing price of our common stock on the date of grant.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The fair value of the options granted using the Monte-Carlo simulation pricing model was estimated on the date of grant with the following assumptions:

Year ended December 31, 2021

Awards granted 150,000

Dividend yield 1.15 %

Expected volatility 34.08 %

Risk-free interest rate 1.29 %

The fair value of the options granted using the Black-Scholes option pricing model was estimated on the date of grant with the following assumptions:

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2020 2021 2022 2022 2022

Grant date June 25 February 17 February 23 February 23 September 27

Expected holding period (years) 3.7 5.0 7.0 5.0 4.1

Awards granted 20,000 701,400 310,000 58,500 12,600

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Risk-free interest rate 0.25 % 0.57 % 1.98 % 1.89 % 4.29 %

Expected holding period (years) 5.0 3.7 5.0

Black-Scholes value $ 4.61 $ 10.14 $ 17.38 $ 16.39 $ 11.35

A summary of the stock options at and changes during the three years ended December 31, 2021 is presented in the table below (shares in thousands):

Years Ended December 31,

2019 2020 2021

Price Shares Wtd.

The fair value of the options granted using the Monte-Carlo simulation pricing model was estimated on the date of grant with the following assumptions:

Year ended December 31, 2022

Awards granted 150,000

Dividend yield 1.15 %

Expected volatility 34.08 %

Risk-free interest rate 1.29 %

A summary of the number of stock options and their weighted average exercise prices during the year ended December 31, 2022 is presented in the table below (shares in thousands):

Outstanding at January 1 1,265 $ 30.94

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Exercised ( 32 ) $ 25.49

Cancelled or expired ( 298 ) $ 21.96 ( 146 ) $ 23.97 ( 75 ) $ 33.56

Forfeited or expired ( 46 ) $ 37.34

Outstanding at December 31 1,568 $ 35.23

Exercisable at December 31 592 $ 27.60

A summary of the number of stock options and their weighted average grant date fair values during the year ended December 31, 2022 is presented in the table below (shares in thousands):

Non-vested at January 1 839 $ 9.90

Granted 381 $ 17.03

Vested or exercised ( 201 ) $ 8.86

Forfeited ( 43 ) $ 11.43

Non-vested at December 31 976 $ 12.83

A summary of the intrinsic value of stock options exercised and the fair value of stock options vested for the three years ended December 31, 2022 is presented in the table below (in thousands):

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$ 735 $ 1,413 $ 1,784

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table further describes our outstanding stock options at December 31, 2022:

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$34.79 - $49.88 1,107,000 8.47 $ 39.56 169,980 8.14 $ 34.79

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

$18.02 - $49.48 1,568,468 7.24 $ 35.23 592,216 5.27 $ 27.60

The aggregate intrinsic value of the outstanding and exercisable stock options was $ 1.3 million and $ 1.2 million, respectively, at December 31, 2022.

We had $ 6.1 million of unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options expected to be recognized over a weighted average period of approximately 4.79 years at December 31, 2021.

We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for stock options, including the accelerated stock options discussed above of $ 682,000 , $ 669,000 and $ 2,355,000 for the years ended December 31, 2019, 2020 and 2021, respectively.

We had $ 9.5 million of unrecognized compensation cost, net of estimated forfeitures, related to unvested stock options expected to be recognized over a weighted average period of 5.0 years at December 31, 2022.

We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for stock options of $ 669,000 , $ 2,355,000 and $ 2,284,000 for the years ended December 31, 2020, 2021 and 2022, respectively.

Performance Awards

During the year ended December 31, 2020 , we issued 237,500 performance awards to certain employees, payable in shares, with a fair value of $ 2.8 million.

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

Years Ended December 31,

2020 2021 2022

Shares Fair Value Shares Fair Value Shares Fair Value

Granted 30,743 $ 733 55,302 $ 2,116 27,013 $ 1,262

Cancelled 33,538 $ 631 55,896 $ 799 30,743 $ 295

In addition to the activity described in the table above, we issued 237,500 performance awards to certain employees, during the year ended December 31, 2020, payable in shares, with a fair value of $ 2.8 million.

On May 19, 2020, we cancelled all performance award agreements previously awarded to all individuals during 2019, as well as the 237,500 performance awards previously granted in 2020.

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

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

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

Years Ended December 31,

Shares Fair Value Shares Fair Value

Granted 30,743 $ 733 55,302 $ 2,116

Cancelled 33,538 $ 631 55,896 $ 799

A summary of the new performance award and changes during the year ended December 31, 2021 is presented in the table and below:

It was treated as a modification of the original performance award agreement and resulted in $ 2.6 million of incremental compensation expense, expected to be recognized over the remaining term of 24 months.

A summary of the number of performance awards and their weighted average grant date fair values during the year ended December 31, 2022 is presented in the table below (shares in thousands):

Performance Awards Shares Weighted Average

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Granted 27,013 $ 46.71

Amended 70,236 36.36

Cancelled ( 30,743 ) $ 9.59

At December 31 432,036 $ 20.95

The following table reflects the new performance awards granted during the year ended December 31, 2021, their respective fair values and the assumptions utilized in the Monte-Carlo simulation pricing model:

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The fair value of the performance awards granted during the year ended December 31, 2022 was calculated on the date of grant using the Monte-Carlo simulation pricing model with the following assumptions:

Grant date February 23, 2022 April 1, 2022

Simulation period (years) 2.85 2.75

Share price at grant date $ 49.48 $ 52.49

Expected volatility 43.99 % 44.44 %

Risk-free interest rate 1.75 % 2.55 %

The fair value of the performance awards granted during the year ended December 31, 2021 was calculated on the date of grant using the Monte-Carlo simulation pricing model with the following assumptions:

Grant date April 16, 2021 June 1, 2021 August 12, 2021 September 15, 2021 November 29, 2021

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We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for performance awards of $ 894,000 , $ 1,573,000 and $ 2,524,000 during the years ended December 31, 2020, 2021 and 2022, respectively.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Employee Stock Purchase Plan

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The expected life of the ESPP grants represents the calendar quarters from the beginning of the year to the purchase date (end of each quarter).

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Good To Great Incentive Program

We did not issue any shares of common stock in 2021 related to our Good To Great program.

On February 19, 2020, we issued 17,991 shares of our common stock to certain employees, which were valued at $ 449,000 at a grant date stock price of $ 25.00 .

During 2019, we issued 14,844 shares of our common stock to certain employees, which were valued at $ 294,000 at a grant date stock price of $ 19.92 .

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

Years Ended December 31,

2020 2021 2022

Shares Fair Value Shares Fair Value Shares Fair Value

17,991 $ 449 — $ — 27,448 $ 1,358

(1) Common stock granted during the year ended December 31, 2020 and 2022 had a grant date stock price of $ 25.00 and $ 49.48 , respectively.

Non-Employee Director and Board Advisor Compensation

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The number of shares of such common stock will be determined by dividing the cash amount by the closing price of our common stock on the date of grant, which will be the date of admission to the Board.

On May 17, 2021, James R.

Schenck provided notice of his resignation from the Board effective on that date.

He served as the chairman of the Corporate Governance Committee and as a member of the Audit Committee and the Compensation Committee.

On June 1, 2021, the Board appointed Dr.

Achille Messac to be the chairman of the Corporate Governance Committee.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

On May 17, 2022, Bryan D.

Leibman resigned from the Board effective on that date.

He served as the Company's Lead Independent Director.

Effective with Mr.

Leibman’s resignation, the Board appointed Donald D.

Patteson, Jr.

as Lead Independent Director.

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

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Board of Directors (1)

30,883 $ 654 14,744 $ 622 11,155 $ 415

Advisor to the Board (1)

967 $ 20 466 $ 20 555 $ 20

(1) Common stock granted during the years ended December 31, 2020, 2021 and 2022 had a weighted average price of $ 21.16 , $ 42.14 and $ 37.14 , respectively.

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Cash Dividends

On October 27, 2021, our Board approved an annual increase of $ 0.05 per share for a total annual dividend of $ 0.45 per share beginning with the dividend declaration in the fourth quarter.

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

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SHARE REPURCHASE PROGRAM

Subject to market conditions, normal trading restrictions and satisfying certain financial covenants in our Credit Facility, and in the Indenture governing our Senior Notes, we may make purchases in the open market or through privately negotiated transactions under our Board authorized share repurchase program, in accordance with Rule 10b-18 of the Securities Exchange Act.

On May 18, 2021, July 26, 2021 and October 27, 2021, our Board increased our share repurchase authorization by an additional $ 25.0 million, $ 25.0 million and $ 75.0 million, respectively, that including amounts previously authorized and outstanding, totaled up to $ 190.0 million in share repurchase authorizations.

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 Exchange Act, which totaled up to $ 265.0 million in share repurchase authorizations.

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

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

At December 31, 2021, we had $ 8.1 million remaining available for repurchase under our authorized program.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

At December 31, 2022, our share repurchase program had $ 48.9 million authorized for additional repurchases.

EARNINGS PER SHARE

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Diluted earnings per common share $ 0.89 $ 1.81 $ 2.63

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

At December 31, 2021, we had no Convertible Notes outstanding.

For the year ended December 31, 2022, there were 311,143 stock options excluded from the computation of diluted earnings per share because the inclusion of such stock options would result in an antidilutive effect.

For the years ended December 31, 2020 and 2021, no stock options were excluded from the computation of diluted earnings per share.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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Therefore, we included these awards in the computation of diluted earnings per share as of the beginning of the reporting period.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

At December 31, 2021 and 2022, we had no Convertible Notes outstanding.

SEGMENT REPORTING

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Balance Sheet

The detail of certain balance sheet accounts is as follows (in thousands):

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

Prepaids and other current assets:

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Incentive compensation $ 1,291 $ 2,541

Employer payroll tax deferral 1,773 —

Severance — 128

Other long-term liabilities 128 524

Total other long-term liabilities $ 1,419 $ 3,065

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SUBSEQUENT EVENTS

On January 5, 2022, the Company and the Plaintiff, a former employee, mediated the Chinchilla v.

Carriage Services, Inc., et al., matter and executed a Memorandum of Understanding for class settlement in the amount of $ 1.0 million.

The parties will seek preliminary approval of the class settlement after executing a long-form class settlement agreement.

At December 31, 2021, we accrued $ 1.1 million for the expected settlement amount and associated legal fees.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

On February 23, 2022, our Board increased our share repurchase program authorization by an additional $ 75 million.

Prior to the Board’s approval of the increase, at December 31, 2021, we had $ 8.1 million remaining available for repurchase under our authorized program.

At February 23, 2022, we had $ 83.1 million of share repurchase authorization remaining under the revised repurchase program.

On January 31, 2023, we sold one funeral home and two cemeteries in Marshall, Texas for $ 0.8 million.

CARRIAGE SERVICES, INC.

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Year ended December 31, 2020:

Allowance for bad debts, current portion $ 769 $ 1,088 $ 1,008 $ 849

Allowance for bad debts of preneed cemetery receivables,

Allowance for credit losses, current portion $ 849 $ 1,617 $ 1,179 $ 1,287

Allowance for credit losses of preneed cemetery receivables,

non-current portion 1,290 701 347 1,644

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data