What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-05 compared with 2022-11-02 · 279 added, 614 removed, 765 unchanged (54% of the section changed)

3 unchanged sentences

(unaudited and in thousands, except share data)

December 31, 2021 September 30, 2022

December 31, 2022 March 31, 2023

Current assets:

41 unchanged sentences

Treasury stock, at cost;

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

11,627,818 shares

( 278,753 ) ( 278,753 )

5 unchanged sentences

(unaudited and in thousands, except per share data)

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

2021 2022 2021 2022

Three months ended March 31,

Service revenue $ 49,737 $ 48,207

13 unchanged sentences

General, administrative and other 8,560 10,180

Net (gain) loss on divestitures, disposals and impairments charges 858 ( 7 ) 1,377 ( 433 )

Net loss on divestitures, disposals and impairments charges 767 241

Operating income 25,151 20,634

Interest expense 5,542 8,539

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

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

Gain on insurance reimbursements — — — 3,275

(Gain) loss on property damage, net of insurance claims ( 1,899 ) 271

Other, net 24 ( 522 )

17 unchanged sentences

(unaudited and in thousands)

Nine months ended September 30,

Three months ended March 31,

Cash flows from operating activities:

8 unchanged sentences

Amortization and accretion of debt 121 127

Loss on extinguishment of debt 23,807 —

Net (gain) loss on divestitures, disposals and impairment charges 1,558 ( 433 )

Gain on insurance reimbursements — ( 3,275 )

Other — ( 153 )

Net loss on divestitures, disposals and impairment charges 767 241

(Gain) loss on property damage, net of insurance claims ( 1,899 ) 271

Gain on sale of real property — ( 530 )

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

9 unchanged sentences

Cash flows from investing activities:

Acquisitions of businesses and real estate ( 3,285 ) ( 8,876 )

Acquisitions of businesses and real property ( 2,575 ) ( 44,000 )

Proceeds from divestitures and sale of other assets 1,026 1,275

Proceeds from insurance reimbursements 2,946 2,209

Proceeds from insurance claims 676 421

Capital expenditures ( 6,883 ) ( 4,982 )

3 unchanged sentences

Payments against the credit facility ( 51,900 ) ( 28,800 )

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 the 4.25% senior notes due 2029 ( 2,054 ) ( 339 )

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

Payments on acquisition debt and obligations under finance leases ( 100 ) ( 127 )

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

Proceeds from the exercise of stock options and employee stock purchase plan contributions 663 526

Taxes paid on restricted stock vestings and exercises of stock options ( 1,433 ) ( 287 )

Taxes paid on restricted stock vestings and exercise of stock options ( 289 ) ( 98 )

Dividends paid on common stock ( 1,725 ) ( 1,661 )

Purchase of treasury stock ( 25,655 ) —

Net cash used in financing activities ( 58,284 ) ( 27,673 )

Net cash provided by (used in) financing activities ( 8,306 ) 21,540

Net increase (decrease) in cash and cash equivalents ( 261 ) 123

5 unchanged sentences

(unaudited and in thousands)

Three months ended September 30, 2021

Outstanding Common

2 unchanged sentences

Earnings Treasury

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

Net income — — — 13,046 — 13,046

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

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

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

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

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

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

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

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

Three months ended September 30, 2022

Outstanding Common

Stock Additional

Capital Retained

Earnings Treasury

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

Net income — — — 5,860 — 5,860

Issuance of common stock from employee stock purchase plan 14 — 377 — — 377

Issuance of common stock to directors and board advisor 2 — 76 — — 76

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

Stock-based compensation expense — — 1,416 — — 1,416

Dividends on common stock — — ( 1,653 ) — — ( 1,653 )

Balance – September 30, 2022 14,713 $ 263 $ 238,787 $ 168,623 $ ( 278,753 ) $ 128,920

CARRIAGE SERVICES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited and in thousands)

Nine months ended September 30, 2021

Outstanding Common

Stock Additional

Capital Retained

Earnings Treasury

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 3 — 147 — — 147

Issuance of restricted common stock 9 — — — — —

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

2 unchanged sentences

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

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

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

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

Nine months ended September 30, 2022

Other 27 — 1,358 — — 1,358

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

Outstanding Common

6 unchanged sentences

Issuance of common stock to directors and board advisor 4 — 112 — — 112

Issuance of common stock to former executive 30 — 826 — — 826

Issuance of restricted common stock 142 2 ( 2 ) — — —

Exercise of stock options 1 — ( 21 ) — — ( 21 )

Cancellation and surrender of restricted common stock ( 6 ) — ( 205 ) — — ( 205 )

Cancellation and surrender of common and restricted stock ( 4 ) — ( 77 ) — — ( 77 )

Stock-based compensation expense — — 1,203 — — 1,203

Dividends on common stock — — ( 1,661 ) — — ( 1,661 )

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

Other 8 — 276 — — 276

Balance – September 30, 2022 14,713 $ 263 $ 238,787 $ 168,623 $ ( 278,753 ) $ 128,920

Balance – March 31, 2023 14,935 $ 266 $ 239,962 $ 185,687 $ ( 278,753 ) $ 147,162

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

5 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.

At September 30, 2022, we operated 169 funeral homes in 26 states and 31 cemeteries in 11 states.

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

At March 31, 2023, we operated 173 funeral homes in 26 states and 32 cemeteries in 11 states.

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

7 unchanged sentences

Our interim consolidated financial statements are unaudited but include all adjustments, which consist of normal, recurring accruals, that are necessary for a fair presentation of our financial position and results of operations as of and for the interim periods presented.

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

There have been no material changes in our accounting policies previously disclosed in Part II, Item 8 “Financial Statements and Supplementary Data” in Note 1 in our Annual Report on Form 10-K for the year ended December 31, 2022.

In addition, our unaudited consolidated financial statements have been prepared in a manner consistent with the accounting principles described in our Annual Report on Form 10-K for the year ended December 31, 2022 unless otherwise disclosed herein, and should be read in conjunction therewith.

Use of Estimates

6 unchanged sentences

We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Funeral and Cemetery Receivables

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

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

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

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

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

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

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

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

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

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

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

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

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

These estimates are impacted by a number of factors, including changes in the economy, demographics and competition in our local communities.

We monitor our ongoing credit exposure through an active review of our customers’ receivables balance against contract terms and due dates.

Our activities include timely performance of our accounts receivable reconciliations, assessment of our aging of receivables, dispute resolution and payment confirmation.

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

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

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

Inventory is relieved using specific identification in fulfillment of performance obligations on our contracts.

Business Combinations

Tangible and intangible assets acquired and liabilities assumed are recorded at fair value and goodwill is recognized for any difference between the price of the acquisition and fair value.

We recognize the assets acquired, the liabilities assumed and any non-controlling interest in the acquiree at the acquisition date, measured at the fair value as of that date.

Acquisition related costs are recognized separately from the acquisition and are expensed as incurred.

We customarily estimate related transaction costs known at closing.

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

During the three and nine months ended September 30, 2022, we acquired a business consisting of two funeral homes for $ 6.3 million.

We did not acquire any businesses during the three and nine months ended September 30, 2021.

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

Divested Operations

Prior to divesting a funeral home or cemetery, we first determine whether the sale of the net assets and activities (together referred to as a “set”) qualifies as a business.

First, we perform a screen test to determine if the set is not a business.

The principle of the screen is that if substantially all of the fair value of the gross assets sold resides in a single asset or group of similar assets, the set is not a business.

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

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

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

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

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

Goodwill has an indefinite life and is not subject to amortization.

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

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

We performed our annual goodwill impairment test as of August 31, 2022.

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;

however, we 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.

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.

Our quantitative goodwill impairment test involves estimates and management judgment.

In the quantitative analysis, we compare the fair value of each reporting unit to its carrying value, including goodwill.

If the fair value of the reporting unit exceeds its carrying amount, the goodwill of that reporting unit is not considered impaired.

We determine fair value for each reporting unit using both an income approach, weighted 90%, and a market approach, weighted 10%.

Our methodology for determining an income-based fair value is based on discounting projected future cash flows.

The projected future cash flows include assumptions concerning future operating performance and economic conditions that may differ from actual future cash flows discounted at our weighted average cost of capital based on market participant assumptions.

Our methodology for determining a market approach fair value utilizes the guideline public company method, in which we rely on market multiples of comparable companies operating in the same industry as the individual reporting units.

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.

Our 2022 quantitative assessment is not complete at the time of this filing, but we do not expect any impairment to goodwill as a result of our testing.

For our 2020 and 2021 annual qualitative assessments, there was no impairment to goodwill as the fair value of our reporting units was greater than the carrying value.

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

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

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

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

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

Intangible Assets

Our intangible assets include tradenames resulting from acquisitions and are included in Intangible and other non-current assets, net on our Consolidated Balance Sheet.

Our tradenames are considered to have an indefinite life and are not subject to amortization.

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

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

We performed our annual intangible assets impairment test as of August 31, 2022.

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;

however, we performed a quantitative 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.

Our quantitative intangible asset impairment test involves estimates and management judgment.

Our quantitative analysis is performed using the relief from royalty method, which measures the tradenames by determining the value of the royalties that we are relieved from paying due to our ownership of the asset.

We determine the fair value of the asset by discounting the cash flows that represent a savings in lieu of paying a royalty fee for use of the tradename.

The discounted cash flow valuation uses projections of future cash flows and includes assumptions concerning future operating performance and economic conditions that may differ from actual future cash flows and the determination and application of an appropriate royalty rate and discount rate.

To estimate the royalty rates for the individual tradename, we mainly rely on the profit split method, but also consider the comparable third-party license agreements and the return on asset method.

A scorecard is used to assess the relative strength of the individual tradename to further adjust the royalty rates selected under the profit-split method for qualitative factors.

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.

Our 2022 quantitative assessment is not complete at the time of this filing, but we do not expect any impairment to intangible assets as a result of our testing.

For our 2020 and 2021 qualitative assessments, there was no impairment to intangibles assets as the fair value of our intangible assets was greater than the carrying value.

See Note 10 to the Consolidated Financial Statements included herein for additional information related to our intangible assets.

Preneed and Perpetual Care Trust Funds

Preneed sales generally require deposits to a trust or purchase of a third-party insurance product.

We have established a variety of trusts in connection with funeral home and cemetery operations as required under applicable state laws.

Such trusts include (i) preneed funeral trusts;

(ii) preneed cemetery merchandise and service trusts;

and (iii) cemetery perpetual care trusts.

Our preneed and perpetual care trust funds are reported in accordance with the principles of consolidating Variable Interest Entities (“VIEs”).

In the case of preneed trusts, the customers are the legal beneficiaries.

In the case of perpetual care trusts, we do not have a right to access the corpus in the perpetual care trusts.

Our trust fund assets are reflected in our financial statements as Preneed cemetery trust investments, Preneed funeral trust investments and Cemetery perpetual care trust investments.

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

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

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

Pursuant to this guidance, we have determined the fair value of the financial assets of the trusts are more observable and we first measure those financial assets at fair value.

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

Any changes in fair value are recognized in earnings.

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

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

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

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

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

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

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

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

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

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

Fair Value Measurements

We measure the securities held by our funeral merchandise and service, cemetery merchandise and service, and cemetery perpetual care trusts at fair value on a recurring basis in accordance with ASC Topic 820.

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

The guidance establishes a three-level valuation hierarchy for disclosure of fair value measurements.

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

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

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

See Notes 7 and 9 to the Consolidated Financial Statements herein for additional required disclosures related to our fair value measurement of our financial assets and liabilities.

Capitalized Commissions on Preneed Contracts

We capitalize sales commissions and other direct selling costs related to preneed cemetery merchandise and services and preneed funeral trust contracts as these costs are incremental and recoverable costs of obtaining a contract with a customer.

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

The selling costs related to the sales of cemetery interment rights, which include real property and other costs related to cemetery development activities, continue to be expensed using the specific identification method in the period in which the sale of the cemetery interment right is recognized as revenue.

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

See Note 10 to the Consolidated Financial Statements herein for additional information related to our capitalized commissions on preneed contracts.

Deferred Revenue

During the three months ended March 31, 2023, we withdrew $ 7.0 million of realized capital gains and earnings from our preneed cemetery trust investments.

In certain states, we are allowed to make these withdrawals prior to the delivery of preneed merchandise and service contracts.

The realized capital gains and earnings withdrawn increase our cash flow from operations, but are not recognized as revenue in our Consolidated Statements of Operations, however, they reduce our Preneed cemetery trust investment and increase Deferred preneed cemetery revenue.

Property, Plant and Equipment

Property, plant and equipment (including equipment under finance leases) are stated at cost.

The costs of ordinary maintenance and repairs are charged to operations as incurred, while renewals and major replacements that extend the useful economic life of the asset are capitalized.

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

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

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

December 31, 2021 September 30, 2022

December 31, 2022 March 31, 2023

Land $ 84,405 $ 85,845

4 unchanged sentences

Property, plant and equipment, net $ 278,106 $ 289,313

During the nine months ended September 30, 2022, we acquired real property for $ 5.6 million.

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.

We also divested two funeral homes that had a carrying value of property, plant and equipment of $ 0.7 million, which was included in the loss on the sale of divestitures and recorded in Net (gain) loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations, described in Note 5 to the Consolidated Financial Statements included herein.

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

Additionally, we divested three funeral homes that had a carrying value of property, plant and equipment of $ 2.4 million, which was included in the gain/loss on the sale of divestitures and recorded in Net (gain) loss on divestitures, disposals and impairment charges.

Our growth and maintenance capital expenditures totaled $ 5.0 million and $ 5.3 million for the three months ended September 30, 2021 and 2022, respectively, and $ 11.1 million and $ 15.1 million for the nine months ended September 30, 2021 and 2022, respectively, for property, plant and equipment.

In addition, we recorded depreciation expense of $ 3.4 million for both the three months ended September 30, 2021 and 2022 and $ 10.2 million and $ 10.1 million, for the nine months ended September 30, 2021 and 2022, respectively.

During the three months ended March 31, 2023, we acquired $ 12.6 million of property, plant and equipment related to our 2023 business combination, described in Note 3 to the Consolidated Financial Statements.

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

Our growth and maintenance capital expenditures totaled $ 4.6 million and $ 2.9 million for the three months ended March 31, 2022 and 2023, respectively, for property, plant and equipment.

In addition, we recorded depreciation expense of $ 3.4 million and $ 3.5 million for the three months ended March 31, 2022 and 2023, respectively.

Cemetery Property

When we acquire a cemetery, we utilize an internal and external approach to determine the fair value of the cemetery property.

From an external perspective, we obtain an accredited appraisal to provide reasonable assurance for property existence, property availability (unrestricted) for development, property lines, available spaces to sell, identifiable obstacles or easements and general valuation inclusive of known variables in that market.

From an internal perspective, we conduct a detailed analysis of the acquired cemetery property using other cemeteries in our portfolio as a benchmark.

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

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

Cemetery property was $ 100.7 million and $ 101.7 million, net of accumulated amortization of $ 53.1 million and $ 57.4 million at December 31, 2021 and September 30, 2022, respectively.

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

sale of the interment right is recognized as revenue.

Our growth capital expenditures for cemetery property development totaled $ 1.5 million for both the three months ended September 30, 2021 and 2022 and $ 4.1 million and $ 5.2 million, for the nine months ended September 30, 2021 and 2022, respectively.

We recorded amortization expense for cemetery interment rights of $ 1.5 million and $ 1.3 million for the three months ended September 30, 2021 and 2022, respectively, and $ 5.2 million and $ 4.3 million, for the nine months ended September 30, 2021 and 2022, respectively.

We have operating and finance leases.

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

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

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

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

We do not have any material sublease arrangements.

We determine if an arrangement is a lease at inception based on the facts and circumstances of the agreement.

A right-of-use (“ROU”) asset represents our right to use the underlying asset for the lease term and the lease liability represents our obligation to make lease payments arising from the lease.

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

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

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

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

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

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

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

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

Operating lease ROU assets are included in Operating lease right-of-use assets and operating lease liabilities are included in Current portion of operating lease obligation s and Obligations under operating leases, net of current portion on our Consolidated Balance Sheet.

Finance lease ROU assets are included in Property, plant and equipment, net and finance lease liabilities are included in Current portion of finance lease obligations and O bligations under finance leases, net of current portion on our Consolidated Balance Sheet.

See Notes 13 to the Consolidated Financial Statements included herein for additional information related to our leases.

Equity Plans and Stock-Based Compensation

We have equity-based employee and director compensation plans under which we have granted stock awards, stock options and performance awards.

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

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

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

Fair value is determined on the date of the grant.

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

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

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

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

We recognize all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) as income tax benefit or expense in the income statement.

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

The excess tax benefit and tax deficiencies are recorded within Tax adjustment related to discrete items on our Consolidated Statements of Operations and the excess tax benefits or deficiencies related to share-based payments are included in operating cash flows on the Consolidated Statements of Cash Flows.

See Note 15 to the Consolidated Financial Statements included herein for additional information related to our equity plans and stock-based compensation.

Revenue Recognition

Funeral and Cemetery Operations Revenue is recognized when control of the merchandise or services is transferred to the customer.

Our performance obligations include the delivery of funeral and cemetery merchandise and services and cemetery property interment rights.

Control transfers when merchandise is delivered or services are performed.

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

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

Memorial services frequently include performance obligations to direct the service, provide facilities and motor vehicles, catering, flowers, and stationary products.

All other performance obligations on these contracts, including arrangement, removal, preparation, embalming, cremation, interment, and delivery of urns and caskets and related memorialization merchandise are fulfilled at the time of need.

Personalized marker merchandise and marker installation services sold on atneed contracts are recognized when control is transferred to the customer, generally when the marker is delivered and installed in the cemetery.

Some of our contracts with customers include multiple performance obligations.

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

Package discounts are reflected net in Revenue .

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

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

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

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

As of September 30, 2022, CSV RIA provided investment management and advisory services to approximately 80 % of our trust assets, for a fee based on the market value of trust assets.

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

Balances due on undelivered preneed funeral trust contracts have been reclassified to reduce Deferred preneed funeral revenue on our Consolidated Balance Sheet of $ 8.0 million and $ 8.8 million at December 31, 2021 and September 30, 2022, respectively.

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

However, we estimate an average maturity period of ten years for preneed funeral contracts.

Balances due from customers on delivered preneed cemetery contracts are included in Accounts receivable, net and Preneed cemetery receivables, net on our Consolidated Balance Sheet.

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

The transaction price allocated to preneed merchandise and service performance obligations that were unfulfilled were $ 10.4 million and $ 10.5 million at December 31, 2021 and September 30, 2022, respectively.

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

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

See Note 17 to the Consolidated Financial Statements herein for additional information related to revenue.

We and our subsidiaries file a consolidated U.

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

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

We classify our deferred tax liabilities and assets as non-current on our Consolidated Balance Sheet.

We record a valuation allowance to reflect the estimated amount of deferred tax assets for which realization is uncertain.

Management reviews the valuation allowance at the end of each quarter and makes adjustments if it is determined that it is more likely than not that the tax benefits will be realized.

We analyze tax benefits for uncertain tax positions and how they are to be recognized, measured, and derecognized in the financial statements;

provide certain disclosures of uncertain tax matters;

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

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

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

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

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

As a result, we recorded a $ 0.5 million reduction to the reserve for uncertain tax positions, including interest, during the nine months ended September 30, 2022.

At December 31, 2021 and September 30, 2022, the reserve for uncertain tax positions was $ 3.8 million and $ 3.3 million, respectively, related to carrying back the net operating losses generated in the tax year ended December 31, 2018, filed under the CARES Act on June 30, 2020.

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

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

For the three months ended September 30, 2021 and 2022, we had an income tax expense of $ 5.1 million and $ 2.8 million, respectively, and for the nine months ended September 30, 2021 and 2022, we had an income tax expense of $ 6.6 million and $ 12.1 million, respectively.

Our operating tax rate before discrete items was 28.2 % and 30.6 % for the three months ended September 30, 2021 and 2022, respectively, and 28.3 % and 27.8 % for the nine months ended September 30, 2021 and 2022, respectively.

Computation of Earnings Per Common Share

Basic earnings per share is computed using the weighted average number of common shares outstanding during the period.

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

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

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

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

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

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

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

See Note 16 to the Consolidated Financial Statements included herein related to the computation of earnings per share.

Cemetery property was $ 104.2 million and $ 113.3 million, net of accumulated amortization of $ 59.0 million and $ 59.8 million at December 31, 2022 and March 31, 2023, respectively.

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

Our growth capital expenditures for cemetery property development totaled $ 2.3 million and $ 2.1 million for the three months ended March 31, 2022 and 2023, respectively.

We recorded amortization expense for cemetery interment rights of $ 1.3 million and $ 1.2 million for the three months ended March 31, 2022 and 2023, respectively.

During the three months ended March 31, 2023, we acquired cemetery property for $ 9.0 million related to our 2023 business combination, described in Note 3 to the Consolidated Financial Statements.

We also divested two cemeteries that had a carrying value of cemetery property of $ 0.8 million, which was included in the loss on the sale of divestitures and recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

Income tax expense was $ 5.1 million and $ 3.5 million for the three months ended March 31, 2022 and 2023, respectively.

Our operating tax rate before discrete items was 26.5 % and 28.9 % for the three months ended March 31, 2022 and 2023, respectively.

Subsequent Events

We have evaluated events and transactions during the period subsequent to September 30, 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 19 to the Consolidated Financial Statements included herein for additional information related to our subsequent

We have evaluated events and transactions during the period subsequent to March 31, 2023 through the date the financial statements were issued for potential recognition or disclosure in the accompanying financial statements covered by this report.

RECENTLY ISSUED ACCOUNTING STANDARDS

Accounting Pronouncements Not Yet Adopted

Reference Rate Reform

In March 2020, the FASB issued ASU, Reference Rate Reform (“Topic 848”) to provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform.

The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The amendments apply only to contracts and hedging relationships that reference London InterBank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform.

These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered

into or evaluated on or before December 31, 2022.

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

We adopted this amendment in March 2020.

On May 27, 2022, we amended our Credit Facility (defined in Note 11) 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 11 to the Consolidated Financial Statements herein for additional information related to the amended Credit Facility.

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

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

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

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

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

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

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

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

Credit Losses - Vintage Disclosures

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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.

This amendment is effective for fiscal years beginning after December 15, 2022, and therefore was effective for us beginning January 1, 2023.

Our adoption of these amendments had no impact on our consolidated financial statements.

BUSINESS COMBINATIONS

Tangible and intangible assets acquired and liabilities assumed are recorded at fair value and goodwill is recognized for any difference between the price of the acquisition and fair value.

We recognize the assets acquired, the liabilities assumed and any non-controlling interest in the acquiree at the acquisition date, measured at the fair value as of that date.

Acquisition related costs are recognized separately from the acquisition and are expensed as incurred.

We customarily estimate related transaction costs known at closing.

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

On March 22, 2023, we acquired a business consisting of three funeral homes, two cemeteries and one cremation focused business in the Bakersfield, California area for $ 44.0 million in cash.

We acquired substantially all of the assets and assumed certain operating liabilities of this business.

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The measurement period to determine the fair values of acquired identifiable assets and assumed liabilities will end at the earlier of 12 months from the date of the acquisition or as soon as we receive the information we are seeking about facts and circumstances that existed as of the acquisition date.

Provisional estimates for inventory, furniture and equipment and intangible assets have been recorded for the acquisition as independent valuations have not been finalized.

We do not not expect any significant differences from estimated values upon completion of the valuations.

We recorded provisional estimates for the assets and liabilities acquired as our valuations have not been finalized at March 31, 2023.

Estimated fair values of the assets acquired and liabilities assumed in this transaction as of the closing date are as follows (in thousands):

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Property, plant & equipment 12,577

Cemetery property 9,035

Goodwill 13,612

Intangible and other non-current assets 3,763

Assumed liabilities ( 300 )

Deferred revenue ( 1,774 )

Purchase price $ 44,000

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

For the nine months ended September 30, 2021, we did not acquire any businesses.

At September 30, 2022, we did not estimate a fair value for preneed funeral trust assets and liabilities for this acquisition as this information was not yet available.

However, the preneed funeral trust assets and liabilities offset in our Consolidated Balance Sheet.

The intangible and other non-current assets relate to the fair value of tradenames and right-of-use operating lease assets.

The assumed liabilities relate to operating lease obligations.

We did not estimate a fair value for cemetery perpetual care assets and liabilities for this acquisition as this information was not yet available.

However, these trust assets and liabilities offset in our Consolidated Balance Sheet.

The following table summarizes the estimated fair value of the assets acquired and liabilities assumed for this business (in thousands):

Acquisition Date Type of Business Market Assets Acquired (Excluding

Goodwill) Goodwill

Recorded Liabilities

March 22, 2023 Three Funeral Homes, Two Cemeteries and One Cremation Focused Business Bakersfield, CA $ 32,462 $ 13,612 $ ( 2,074 )

We did not acquire any businesses during the three months ended March 31, 2022.

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

December 31, 2021 September 30, 2022

December 31, 2022 March 31, 2023

Goodwill at the beginning of the period $ 391,972 $ 410,137

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Decrease in goodwill related to divestitures ( 901 ) —

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

Goodwill at the end of the period $ 410,137 $ 423,749

During the three and nine months ended September 30, 2022, we recognized $ 2.7 million in goodwill related to our 2022 acquisition described in Note 3 to the Consolidated Financial Statements included herein.

During the nine months ended September 30, 2021 and 2022, we allocated $ 1.0 million and $ 0.9 million of goodwill to the sale of one funeral home and two funeral homes, respectively, for a loss recorded in Net (gain) loss on divestitures, disposals and impairments charges.

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

During the three months ended March 31, 2023, we recognized $ 13.6 million in goodwill related to our 2023 business combination;

$ 5.7 million was allocated to our cemetery segment and $ 7.9 million was allocated to our funeral home segment.

DIVESTED OPERATIONS

During the three months ended September 30, 2021 and 2022, we did not sell any funeral homes or cemeteries.

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

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

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

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

2021 2022 2021 2022

During the three months ended March 31, 2023, we sold one funeral home and two cemeteries for an aggregate of $ 0.8 million.

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

Three months ended March 31,

Revenue $ 137 $ 66

Operating income (loss) ( 41 ) — ( 54 ) 25

Gain (loss) on divestitures (1)

Operating income 2 26

Loss on divestitures (1)

( 703 ) ( 82 )

Income tax benefit (expense) 12 — ( 14 ) 188

Net income (loss) from divested operations, after tax $ ( 29 ) $ — $ 35 $ ( 490 )

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

Income tax benefit 186 16

Net loss from divested operations, after tax $ ( 515 ) $ ( 40 )

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

Accounts Receivable

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

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

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

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

September 30, 2022

March 31, 2023

Funeral Cemetery Corporate Total

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

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

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

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

January 1, 2023 Provision for Credit Losses Write Offs Recoveries March 31, 2023

Trade and financed receivables:

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Total allowance for credit losses on Trade and financed receivables $ ( 1,013 ) $ ( 447 ) $ 700 $ ( 314 ) $ ( 1,074 )

Balances due on undelivered preneed funeral trust contracts have been reclassified to reduce Deferred preneed funeral revenue on our Consolidated Balance Sheet of $ 8.9 million and $ 10.4 million at December 31, 2022 and March 31, 2023, respectively.

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

However, we estimate an average maturity period of ten years for preneed funeral contracts.

Preneed Cemetery Receivables

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

December 31, 2021 September 30, 2022

December 31, 2022 March 31, 2023

Interment rights $ 45,351 $ 45,875

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

December 31, 2021 September 30, 2022

December 31, 2022 March 31, 2023

Preneed cemetery receivables $ 58,830 $ 59,615

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

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

January 1, 2023 Provision for Credit Losses Write Offs March 31, 2023

Total allowance for credit losses on Preneed cemetery receivables, net

$ ( 1,283 ) $ ( 252 ) $ 145 $ ( 1,390 )

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

The amortized cost basis of our preneed cemetery receivables by year of origination at March 31, 2023 is as follows (in thousands):

2023 2022 2021 2020 2019 Prior Total

Total preneed cemetery receivables, at amortized cost $ 7,754 $ 23,937 $ 11,623 $ 6,185 $ 3,092 $ 2,112 $ 54,703

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

The aging of past due preneed cemetery receivables at March 31, 2023 is as follows (in thousands):

Past Due 61-90

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Total contracts $ 1,094 $ 513 $ 333 $ 3,334 $ 5,274 $ 54,341 $ 59,615

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

The transaction price allocated to preneed merchandise and service performance obligations that were unfulfilled were $ 11.6 million and $ 11.9 million at December 31, 2022 and March 31, 2023, respectively.

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

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

FAIR VALUE MEASUREMENTS

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

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

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

Our acquisition debt and Credit Facility (as defined in Note 11) and Senior Notes (as defined in Note 12) are classified within Level 2 of the Fair Value Measurements hierarchy.

At March 31, 2023, the carrying value and fair value of our Credit Facility was $ 213.6 million.

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

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

At March 31, 2023, the carrying value of our acquisition debt was $ 4.0 million, which approximated its fair value.

The fair value of our Senior Notes was $ 328.2 million at March 31, 2023 based on the last traded or broker quoted price.

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

Where quoted prices are available in an active market, investments held by the trusts are classified as Level 1 investments pursuant to the three-level valuation hierarchy.

Our Level 1 investments include cash, U.S.

treasury debt, common stock and equity mutual funds.

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

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

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

In addition, we have an investment in a limited partnership fund, whose fair value has been estimated using the net asset value per share practical expedient described in ASC 820-10-35-59, Fair Value Measurement of Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) and therefore, has not been classified in the fair value hierarchy.

The value of the investments in this fund cannot be redeemed because the investments include restrictions that do not allow for redemption within the first 12 months after acquisition.

Our unfunded commitment for this investment at March 31, 2023 is $ 10.0 million.

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

We account for these investments at cost.

See Notes 8 and 9 to our Consolidated Financial Statements for the fair value hierarchy levels of our trust investments.

TRUST INVESTMENTS

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This trust fund income is recognized in Other revenue.

Where quoted prices are available in an active market, investments held by the trusts are classified as Level 1 investments pursuant to the three-level valuation hierarchy.

Our Level 1 investments include cash, U.S.

treasury debt, common stock and equity mutual funds.

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

We review and update our fair value hierarchy classifications quarterly.

See Note 9 to the Consolidated Financial Statements included herein for further information of the fair value measurement.

Changes in the fair value of our trust fund assets ( Preneed funeral, cemetery and perpetual care trust investments ) are offset by changes in the fair value of our trust fund liabilities ( Deferred preneed funeral and cemetery receipts held in trust and Care trusts’ corpus ) and reflected in Other, net .

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

December 31, 2021 September 30, 2022

December 31, 2022 March 31, 2023

Preneed cemetery trust investments, at market value $ 98,269 $ 89,473

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Preneed cemetery trust investments $ 95,065 $ 86,459

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

The cost and market values associated with preneed cemetery trust investments at March 31, 2023 are detailed below (in thousands):

Fair Value Hierarchy Level Cost Unrealized

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Common stock 1 39,861 4,811 ( 7,491 ) 37,181

Limited partnership fund 3,730 10 — 3,740

Mutual funds:

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Market value as a percentage of cost 87.9 %

The estimated maturities of the fixed income securities (excluding mutual funds) at September 30, 2022 included above are as follows (in thousands):

The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands):

Due in one year or less $ 1,291

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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

Certificate of deposit 2 79 — ( 8 ) 71

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

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Market value as a percentage of cost 91.0 %

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

September 30, 2022

The following table summarizes our fixed income securities (excluding mutual funds) within our preneed cemetery trust investments in an unrealized loss position at March 31, 2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

March 31, 2023

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

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Total fixed income securities with an unrealized loss $ 12,391 $ ( 1,849 ) $ 10,346 $ ( 5,878 ) $ 22,737 $ ( 7,727 )

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 )

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

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

2021 2022 2021 2022

Three months ended March 31,

Investment income $ 491 $ 590

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Net change in deferred preneed cemetery receipts held in trust ( 8,964 ) 11,473

$ — $ — $ — $ —

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

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

2021 2022 2021 2022

Three months ended March 31,

Purchases $ ( 1,315 ) $ ( 6,354 )

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

December 31, 2021 September 30, 2022

December 31, 2022 March 31, 2023

Preneed funeral trust investments, at market value $ 107,995 $ 104,795

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Preneed funeral trust investments $ 104,553 $ 101,366

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

The cost and market values associated with preneed funeral trust investments at March 31, 2023 are detailed below (in thousands):

Fair Value Hierarchy Level Cost Unrealized

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Common stock 1 36,620 4,625 ( 6,688 ) 34,557

Limited partnership fund 3,633 11 — 3,644

Mutual funds:

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Market value as a percentage of cost 90.7 %

The estimated maturities of the fixed income securities (excluding mutual funds) at September 30, 2022 included above are as follows (in thousands):

The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands):

Due in one year or less $ 1,204

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Fixed income securities:

treasury debt 1 484 — ( 45 ) 439

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

10 unchanged sentences

Market value as a percentage of cost 93.3 %

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

September 30, 2022

The following table summarizes our fixed income securities (excluding mutual funds) within our preneed funeral trust investment in an unrealized loss position at March 31, 2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

March 31, 2023

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

6 unchanged sentences

Total fixed income securities with an unrealized loss $ 11,541 $ ( 1,751 ) $ 9,062 $ ( 5,353 ) $ 20,603 $ ( 7,104 )

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

2 unchanged sentences

Fixed income securities:

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

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

3 unchanged sentences

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

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

2021 2022 2021 2022

Three months ended March 31,

Investment income $ 366 $ 486

4 unchanged sentences

Net change in deferred preneed funeral receipts held in trust ( 8,363 ) 9,888

$ — $ — $ — $ —

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

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

2021 2022 2021 2022

Three months ended March 31,

Purchases $ ( 590 ) $ ( 6,063 )

3 unchanged sentences

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

December 31, 2021 September 30, 2022

December 31, 2022 March 31, 2023

Cemetery perpetual care trust investments, at market value $ 66,307 $ 65,322

1 unchanged sentence

Care trusts’ corpus $ 65,495 $ 64,352

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

The following table reflects the cost and market values associated with the trust investments held in cemetery perpetual care trust funds at March 31, 2023 (in thousands):

Fair Value Hierarchy Level Cost Unrealized

7 unchanged sentences

Common stock 1 28,291 3,469 ( 5,319 ) 26,441

Limited partnership fund 2,637 8 — 2,645

Mutual funds:

5 unchanged sentences

Market value as a percentage of cost 87.7 %

The estimated maturities of the fixed income securities (excluding mutual funds) at September 30, 2022 included above are as follows (in thousands):

The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands):

Due in one year or less $ 817

20 unchanged sentences

Market value as a percentage of cost 90.4 %

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

September 30, 2022

The following table summarizes our fixed income securities (excluding mutual funds) within our cemetery perpetual care trust investment in an unrealized loss position at March 31, 2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

March 31, 2023

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

5 unchanged sentences

Total fixed income securities with an unrealized loss $ 9,996 $ ( 1,495 ) $ 7,435 $ ( 4,475 ) $ 17,431 $ ( 5,970 )

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

7 unchanged sentences

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

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

2021 2022 2021 2022

Three months ended March 31,

Realized gains $ 250 $ 160

4 unchanged sentences

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

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

2021 2022 2021 2022

Three months ended March 31,

Investment income $ 2,762 $ 3,197

2 unchanged sentences

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

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

2021 2022 2021 2022

Three months ended March 31,

Purchases $ ( 131 ) $ ( 4,401 )

4 unchanged sentences

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

December 31, 2021 September 30, 2022

December 31, 2022 March 31, 2023

Preneed funeral trust funds, at cost $ 20,594 $ 20,975

1 unchanged sentence

Receivables from preneed funeral trusts, net $ 19,976 $ 20,346

The following summary reflects the composition of the assets held in trust and controlled by third parties to satisfy our future obligations under preneed arrangements related to the preceding contracts at December 31, 2021 and September 30, 2022.

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, 2022 and March 31, 2023.

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

Fair value includes unrealized gains and losses on trust assets.

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

The composition of the preneed funeral trust funds at March 31, 2023 is as follows (in thousands):

Cost Basis Fair Value

11 unchanged sentences

Total $ 20,594 $ 20,309

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

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

Our acquisition debt and Credit Facility (as defined in Note 11) and Senior Notes (as defined in Note 12) are classified within Level 2 of the Fair Value Measurements hierarchy.

At September 30, 2022, the carrying value and fair value of our Credit Facility was $ 169.0 million.

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

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

At September 30, 2022, the fair value of our Senior Notes was $ 317.2 million based on the last traded or broker quoted price.

At December 31, 2021 and September 30, 2022, we did not have any assets that had fair values determined by Level 3 inputs and no liabilities measured at fair value.

We account for these investments at cost.

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

INTANGIBLE AND OTHER NON-CURRENT ASSETS

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

December 31, 2021 September 30, 2022

December 31, 2022 March 31, 2023

Tradenames $ 25,610 $ 29,074

Prepaid agreements not-to-compete, net of accumulated amortization of $ 3,316 and $ 3,373 , respectively

Capitalized commissions on preneed contracts, net of accumulated amortization of $ 2,990 and $ 3,179 , respectively

Prepaid agreements not-to-compete, net of accumulated amortization of $ 3,515 and $ 3,646 , respectively

Internal-use software, net of accumulated amortization of $ 200 and $ 262 , respectively

Other 124 303

Intangible and other non-current assets, net $ 32,930 $ 37,254

Our tradenames have indefinite lives and therefore are not amortized.

During the three and nine months ended September 30, 2022, we increased the value of our tradenames by $ 0.5 million related to our 2022 acquisition described in Note 3 to the Consolidated Financial Statements included herein.

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

Prepaid Agreements

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

Amortization expense was $ 158,000 and $ 142,000 for the three months ended September 30, 2021 and 2022, respectively, and $ 495,000 and $ 432,000 for the nine months ended September 30, 2021 and 2022, respectively.

During the three months ended March 31, 2023, we increased the value of our tradenames by $ 3.6 million related to our 2023 business combination, described in Note 3 to the Consolidated Financial Statements.

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 $ 165,000 and $ 181,000 for the three months ended September 30, 2021 and 2022, respectively, and $ 473,000 and $ 525,000 for the nine months ended September 30, 2021 and 2022, respectively.

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

Prepaid Agreements Capitalized Commissions

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 was $ 170,000 and $ 189,000 for the three months ended March 31, 2022 and 2023, respectively.

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 $ 148,000 and $ 131,000 for the three months ended March 31, 2022 and 2023, respectively.

Internal-use Software

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

Amortization expense was $ 56,000 and $ 62,000 for the three months ended March 31, 2022 and 2023, respectively.

The aggregate amortization expense for our capitalized commissions, prepaid agreements and internal-use software as of March 31, 2023 is as follows (in thousands):

Capitalized Commissions Prepaid Agreements Internal-use Software

Years ending December 31,

Remainder of 2023 $ 729 $ 415 $ 194

2024 715 424 297

2025 650 377 386

2026 584 262 374

2027 518 142 373

Thereafter 965 130 342

1 unchanged sentence

CREDIT FACILITY AND ACQUISITION DEBT

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

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

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

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

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

and (v) modifications to the restricted payments covenant to allow 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 Credit Facility Amendment, which were capitalized and will be amortized over the remaining term of the related debt using the straight-line method.

At September 30, 2022, the Credit Facility was comprised of:

(i) a $ 250.0 million revolving credit facility, including a $ 15.0 million subfacility for letters of credit and a $ 10.0 million swingline, and (ii) an accordion or incremental option allowing for future increases in the facility size by an additional amount of up to $ 75.0 million in the form of increased revolving commitments or incremental term loans.

At March 31, 2023, our senior secured revolving credit facility (the “Credit Facility”) was comprised of:

(i) a $ 250.0 million revolving credit facility, including a $ 15.0 million subfacility for letters of credit and a $ 10.0 million swingline, and (ii) an accordion or incremental option allowing for future increases in the facility size by an additional amount of up to $ 75.0 million in the aggregate in the form of increased revolving commitments or incremental term loans.

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

Our obligations under the Credit Facility are unconditionally guaranteed on a joint and several basis by the same subsidiaries which guarantee the Senior Notes (as defined in Note 12) and certain of our subsequently acquired or organized domestic subsidiaries (collectively, the “Subsidiary Guarantors”).

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

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

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

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

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

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

At March 31, 2023, we were subject to the following financial covenants under our Credit Facility:

(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.

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

We were in compliance with all of the covenants contained in our Credit Facility as of March 31, 2023.

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

December 31, 2021 September 30, 2022

December 31, 2022 March 31, 2023

Credit Facility $ 190,700 $ 213,600

5 unchanged sentences

Total acquisition debt, net of current portion $ 3,438 $ 3,404

At September 30, 2022, we had outstanding borrowings under the Credit Facility of $ 169.0 million.

At March 31, 2023, we had outstanding borrowings under the Credit Facility of $ 213.6 million.

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 September 30, 2022, we had $ 78.7 million of availability under the Credit Facility.

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

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

The weighted average interest rate on our Credit Facility was 2.0 % and 4.3 % for the three months ended September 30, 2021 and 2022, respectively, and 2.5 % and 3.1 % for the nine months ended September 30, 2021 and 2022, respectively.

At March 31, 2023, we had $ 34.1 million of availability under the Credit Facility.

Outstanding borrowings under our Credit Facility bear interest at a prime rate or the Bloomberg Short-Term Bank Yield Index (“BSBY”) rate, plus an applicable margin based on our leverage ratio.

At March 31, 2023, 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 2.1 % and 7.9 % for the three months ended March 31, 2022 and 2023, respectively.

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

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

2021 2022 2021 2022

Three months ended March 31,

Credit Facility interest expense $ 847 $ 3,811

4 unchanged sentences

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

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

2021 2022 2021 2022

Three months ended March 31,

Acquisition debt imputed interest expense $ 80 $ 71

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

December 31, 2021 September 30, 2022

December 31, 2022 March 31, 2023

Long-term liabilities:

5 unchanged sentences

Carrying value of the Senior Notes $ 395,243 $ 395,406

At September 30, 2022, the fair value of the Senior Notes, which are Level 2 measurements, was $ 317.2 million.

At March 31, 2023, the fair value of the Senior Notes, which are Level 2 measurements, was $ 328.2 million.

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

1 unchanged sentence

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

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

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

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

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

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

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

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

or otherwise dispose of all or substantially all assets, or engage in transactions with affiliates.

to secure debt, pay dividends or make other equity distributions, purchase or redeem capital stock, make certain investments, sell assets, agree to certain restrictions on the ability of Restricted Subsidiaries to make payments to us, consolidate, merge, sell or otherwise dispose of all or substantially all assets, or engage in transactions with affiliates.

The Indenture also contains customary events of default.

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

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

2021 2022 2021 2022

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

Three months ended March 31,

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

Senior Notes amortization of debt discount 121 127

Senior Notes amortization of debt premium — — 85 —

Senior Notes amortization of debt issuance costs 34 36

The debt discount and the debt issuance costs are being amortized using the effective interest method over the remaining term of approximately 74 months of the Senior Notes.

For both the three and nine months ended September 30, 2021 and 2022, the effective interest rate on the unamortized debt discount and the unamortized debt issuance costs for the Senior Notes was 4.42 % and 4.30 %, respectively.

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

The effective interest rate on the unamortized debt discount and the unamortized debt issuance costs for the Senior Notes for both the three months ended March 31, 2022 and 2023 was 4.42 % and 4.30 %, respectively.

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

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

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

Three months ended March 31,

Income Statement Classification 2022 2023

Operating lease cost Facilities and grounds expense (1)

$ 947 $ 863 $ 2,871 $ 2,564

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

39 82 145 260

Variable lease cost Facilities and grounds expense (1)

1 unchanged sentence

Depreciation of leased assets Depreciation and amortization (2)

$ 111 $ 111 $ 328 $ 328

Interest on lease liabilities Interest expense 113 105

2 unchanged sentences

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

(2) Depreciation and amortization expense is included within Field depreciation and General, administrative and other 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):

Nine months ended September 30,

Three months ended March 31,

Cash paid for operating leases included in operating activities $ 897 $ 951

1 unchanged sentence

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

Nine months ended September 30,

Three months ended March 31,

Right-of-use assets obtained in exchange for new operating lease liabilities $ 178 $ 908

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

During the three and nine months ended September 30, 2021, we received a leasehold improvement allowance of $ 1.4 million for the renovation of our home office space in Houston, Texas from our lessor.

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

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

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

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

Lease Type Balance Sheet Classification December 31, 2022 March 31, 2023

Operating lease right-of-use assets Operating lease right-of-use assets $ 17,060 $ 17,486

9 unchanged sentences

Total lease liabilities $ 24,675 $ 24,924

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

The average lease terms and discount rates at March 31, 2023 are as follows:

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

1 unchanged sentence

Finance leases 11.3 8.1 %

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

The aggregate future lease payments for non-cancelable operating and finance leases at March 31, 2023 are as follows (in thousands):

Operating Finance

9 unchanged sentences

Present value of lease liabilities $ 19,872 $ 5,052

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

COMMITMENTS AND CONTINGENCIES

Chinchilla v.

Carriage Services, Inc., et al.

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

STK-CV-UOE-2021-0004661.

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

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

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

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

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

The court granted Final Approval on July 26, 2022, and we funded the final settlement in the amount of $ 1.2 million on August 8, 2022.

At March 31, 2023, we had no significant operating or finance leases that had not yet commenced.

STOCKHOLDERS ’ EQUITY

1 unchanged sentence

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

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

2021 2022 2021 2022

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

Three months ended March 31,

Shares Fair Value Shares Fair Value

— $ — 142,020 $ 4,634

1 unchanged sentence

Cancelled 1,000 $ 31 2,400 $ 79

(1) Restricted stock granted during the nine months ended September 30, 2021 vests over a three-year period, if the employee has remained continuously employed by us during the vesting period, at a weighted average stock price of $ 34.79 .

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for restricted stock awards of $ 89,000 and $ 36,000 for the three months ended September 30, 2021 and 2022, respectively, and $ 308,000 and $ 133,000 for the nine months ended September 30, 2021 and 2022, respectively.

(1) Restricted stock granted during the three months ended March 31 2023 vests over a three-year period, if the employee has remained continuously employed by us during the vesting period, at a weighted average stock price of $ 32.63 .

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for restricted stock awards of $ 57,000 and $ 178,000 , for the three months ended March 31, 2022 and 2023, respectively.

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

Three months ended March 31,

Shares Fair Value Shares Fair Value

— $ — 30,000 $ 826

Returned for payroll taxes — $ — 1,001 $ 28

(1) During the three months ended March 31, 2023, we issued 30,000 shares of common stock to C.

Benjamin Brink (former executive) at a stock price of $ 27.54 , in accordance with his Separation and Release agreement pertaining to his resignation from his position as the Company's Executive Vice President, Chief Financial Officer & Treasurer (Principal Financial Officer) effective January 2, 2023.

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for common stock awards of $ 826,000 , for the three months ended March 31, 2023.

Stock Options

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

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

2021 2022 2021 2022

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

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

— $ — — $ — — $ — 310,000 $ 5,388

Three months ended March 31,

Shares Fair Value Shares Fair Value

58,500 $ 959 214,191 $ 2,506

1 unchanged sentence

Cancelled 7,000 $ 71 92,440 $ 1,231

(1) Stock options granted during the nine months ended September 30, 2021 and 2022 had a weighted average price of $ 34.79 and $ 49.48 , respectively.

(1) Stock options granted during the three months ended March 31, 2022 and 2023 had a weighted average price of $ 49.48 and $ 32.69 , respectively.

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

The options granted in 2021 and 2022 vest over a five-year period and have a ten-year term.

The options granted in 2022 vest over a five-year period and have a ten-year term.

The options granted in 2023 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.

(2) Stock options granted during the nine months ended September 30, 2022 had a weighted average price of $ 49.48 .

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

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

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

(3) We granted 150,000 options to a 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.

(4) Stock options granted during the three and nine months ended September 30, 2022 had a weighted average price of $ 31.58 .

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.

The fair value of the options granted during the three months ended March 31, 2023 was estimated using the Black-Scholes option pricing model with the following assumptions:

Grant Date February 22, 2023

Expected holding period (years) 4.00

Awards granted 214,191

Dividend yield 1.38 %

Expected volatility 43.68 %

Risk-free interest rate 4.27 %

Black-Scholes value $ 11.70

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

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

2021 2022 2021 2022

Shares Cash Shares Cash Shares Cash Shares Cash

Three months ended March 31,

Shares Cash Shares Cash

Exercised (1)

— — 314,294 (1)

18,736 N/A 12,000 N/A

Returned for option price (2)

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1,601 $ 82 729 $ 21

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

Stock options exercised during the nine months ended September 30, 2021 and 2022 had a weighted average exercise price of $ 21.78 and $ 25.88 , respectively, with an aggregate intrinsic value of $ 5.0 million and $ 0.5 million, respectively.

(1) Stock options exercised during the three months ended March 31, 2022 and 2023 had a weighted average exercise price of $ 25.88 and $ 25.43 , respectively, with an aggregate intrinsic value of $ 0.5 million and $ 0.1 million, respectively.

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

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

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for stock options of $ 467,000 and $ 559,000 for the three months ended September 30, 2021 and 2022, respectively, and $ 1,507,000 and $ 1,747,000 for the nine months ended September 30, 2021 and 2022, respectively.

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for stock options of $ 638,000 and $ 710,000 , for the three months ended March 31, 2022 and 2023, respectively.

Performance Awards

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

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

2021 2022 2021 2022

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

Three months ended March 31,

Shares Fair Value Shares Fair Value

Granted 3,750 $ 162 — $ —

Cancelled 6,987 $ 67 40,804 $ 1,119

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

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

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

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for performance awards of $ 475,000 and $ 701,000 for the three months ended September 30, 2021 and 2022, respectively, and $ 1,064,000 and $ 1,904,000 for the nine months ended September 30, 2021 and 2022, respectively.

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for performance awards of $ 566,000 and $ 63,000 for the three months ended March 31, 2022 and 2023, respectively.

Employee Stock Purchase Plan

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

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

2021 2022 2021 2022

Shares Price Shares Price Shares Price Shares Price

Three months ended March 31,

Shares Price Shares Price

ESPP 13,293 $ 45.33 21,656 $ 24.28

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

We recorded stock-based compensation expense, which is included in General, administrative and other expenses and Regional and unallocated funeral and cemetery costs , for the ESPP totaling $ 117,000 and $ 120,000 for the three months ended September 30, 2021 and 2022, respectively, and $ 458,000 and $ 471,000 for the nine months ended September 30, 2021 and 2022, respectively.

We recorded stock-based compensation expense, which is included in General, administrative and other expenses and Regional and unallocated funeral and cemetery costs , for the ESPP totaling $ 199,000 and $ 252,000 for the three months ended March 31, 2022 and 2023, respectively.

Good To Great Incentive Program

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

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

2021 2022 2021 2022

Shares Fair Value Shares Fair Value Shares Fair Value Shares Fair Value (1)

— $ — — $ — — $ — 27,448 $ 1,358

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

During the three months ended March 31, 2023, we issued 8,444 shares of our common stock to certain employees, which were valued at $ 0.3 million at a grant date stock price of $ 32.69 .

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

Non-Employee Director and Board Advisor Compensation

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

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

2021 2022 2021 2022

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

Three months ended March 31,

Shares Fair Value Shares Fair Value

Board of Directors 2,669 $ 142 3,518 $ 107

3,192 $ 142 2,214 $ 71 12,565 $ 480 7,255 $ 307

Advisor to the Board 93 $ 5 163 $ 5

112 $ 5 155 $ 5 389 $ 15 374 $ 15

(1) Common stock granted during the three months ended September 30, 2021 and 2022 had a weighted average price of $ 44.59 and $ 32.16 , respectively, and $ 38.20 and $ 42.20 for the nine months ended September 30, 2021 and 2022.

We recorded compensation expense, which is included in General, administrative and other expenses , related to annual retainers, including the value of stock granted to non-employee Directors and an advisor to our Board of Directors (the “Board”), of $ 201,000 and $ 167,000 for the three months ended September 30, 2021 and 2022, respectively, and $ 656,000 and $ 552,000 for the nine months ended September 30, 2021 and 2022, respectively.

(1) Common stock granted during the three months ended March 31, 2022 and 2023 had a weighted average price of $ 53.33 and $ 30.52 , respectively.

We recorded compensation expense, which is included in General, administrative and other expenses , related to annual retainers, including the value of stock granted to non-employee Directors and an advisor to our Board, of $ 201,000 and $ 166,000 for the three months ended March 31, 2022 and 2023, respectively.

Share Repurchase

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

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

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

2021 2022 2021 2022

Three months ended March 31

Number of Shares Repurchased (1)

1,203,493 — 1,528,197 695,496

Average Price Paid Per Share $ 53.08 $ —

Dollar Value of Shares Repurchased (1)

$ 53,239 $ — $ 65,540 $ 34,234

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

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

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

During the three months ended September 30, 2022, we did not repurchase any shares of our common stock pursuant to our share repurchase program.

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

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

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

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

At March 31, 2023, our share repurchase program had $ 48.9 million authorized for repurchases.

Cash Dividend

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$ 0.1125 $ 1,661

$ 0.1125 $ 1,730

September 1 st

$ 0.1125 $ 1,653

2022 Per Share Dollar Value

$ 0.1125 $ 1,725

$ 0.1000 $ 1,808

September 1 st

$ 0.1000 $ 1,783

EARNINGS PER SHARE

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

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

2021 2022 2021 2022

Three months ended March 31,

Numerator for basic and diluted earnings per share:

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$ 1.00 $ 0.57

For the three and nine months ended September 30, 2022, there were 363,073 and 294,310 stock options, respectively, excluded from the computation of diluted earnings per share because the inclusion of such stock option would result in an antidilutive effect.

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

For the three months ended March 31, 2023, 1,129,210 stock options were excluded from the computation of diluted earnings per share because the inclusion of such stock options would result in an antidilutive effect.

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

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

At September 30, 2022, we had satisfied certain performance criteria for the first, second and third predetermined growth targets of our performance awards to be considered outstanding.

At March 31, 2023, we had satisfied certain performance criteria for the first, second and third predetermined growth targets of our performance awards to be considered outstanding.

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

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

Three months ended September 30, 2022

Funeral Cemetery Total

Services $ 38,477 $ 4,515 $ 42,992

Merchandise 20,777 3,651 24,428

Cemetery property — 13,179 13,179

Other revenue 3,526 3,372 6,898

Total $ 62,780 $ 24,717 $ 87,497

Three months ended September 30, 2021

Funeral Cemetery Total

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

Merchandise 23,532 3,305 26,837

Cemetery property — 15,206 15,206

Other revenue 3,378 3,410 6,788

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

Nine months ended September 30, 2022

Three months ended March 31, 2023

Funeral Cemetery Total

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Total $ 70,085 $ 25,429 $ 95,514

Nine months ended September 30, 2021

Three months ended March 31, 2022

Funeral Cemetery Total

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Operating income (loss):

Three months ended September 30, 2022 $ 17,584 $ 8,023 $ ( 10,385 ) $ 15,222

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

Nine months ended September 30, 2022 $ 61,531 $ 26,662 $ ( 28,095 ) $ 60,098

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

Three months ended March 31, 2023 $ 22,192 $ 8,613 $ ( 10,171 ) $ 20,634

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

Income (loss) before income taxes:

Three months ended September 30, 2022 $ 17,605 $ 7,985 $ ( 16,951 ) $ 8,639

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

Nine months ended September 30, 2022 $ 64,577 $ 26,671 $ ( 46,005 ) $ 45,243

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

Three months ended March 31, 2023 $ 22,333 $ 8,672 $ ( 18,659 ) $ 12,346

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

Total assets:

September 30, 2022 $ 759,431 $ 371,441 $ 16,515 $ 1,147,387

March 31, 2023 $ 795,205 $ 412,342 $ 17,437 $ 1,224,984

December 31, 2022 779,500 396,389 17,061 1,192,950

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

December 31, 2021 September 30, 2022

December 31, 2022 March 31, 2023

Prepaid and other current assets:

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Federal income taxes receivable 507 —

State income taxes receivable — 617

Other current assets 149 5,406

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Vacation 3,430 3,538

Natural disaster liability 2,628 43

Interest 2,329 6,713

Salaries and wages 2,263 3,875

Employer payroll tax deferral 1,773 1,773

Employee meetings and award trips 746 798

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

Nine months ended September 30,

Three months ended March 31,

Cash paid for interest $ 927 $ 3,782

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Unsettled share repurchases 2,784 —

Fair value of donated real property 635 —

SUBSEQUENT EVENTS

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

The consideration for this acquisition was funded through a combination of cash on hand and borrowings under our Credit Facility.

On October 25, 2022, in conjunction with our acquisition described above, the Company obtained a limited consent under our Credit Facility from the financial institutions party thereto, as lenders, and Bank of America, N.A., as administrative agent,

to consummate the acquisition notwithstanding the Company exceeding the allowed Total Leverage Ratio under the Credit Facility applicable to permitted acquisitions.

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

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All statements, other than statements of historical information, should be deemed to be forward-looking statements.

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

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

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

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

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

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

Words such as “may”, “will”, “estimate”, “intend”, “believe”, “expect”, “seek”, “project”, “forecast”, “foresee”, “should”, “would”, “could”, “plan”, “anticipate” and other similar words or expressions may be used to identify forward-looking statements;

however, the absence of these words does not mean that the statements are not forward-looking.

These forward-looking statements include, but are not limited to, statements regarding any projections of earnings, revenue, cash flow, investment returns, capital allocation, debt levels, equity performance, death rates, market share growth, overhead, including talent recruitment, field and corporate incentive compensation, or other financial items;

any statements of the plans, strategies and objectives of management for future operations or financing activities, including, but not limited to, capital allocation, the ability to obtain credit or financing, organizational performance, anticipated integration, performance and other benefits of recently completed and anticipated acquisitions, and cost and debt reductions;

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

any statements regarding future economic and market conditions or performance;

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and any statements of assumptions underlying any of the foregoing and are based on our current expectations and beliefs concerning future developments and their potential effect on us.

While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate.

While we believe these assumptions concerning future events are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate.

All comments concerning our expectations for future revenue and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions.

Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections.

Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:

Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to:

• our ability to find and retain skilled personnel;

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• our ability to execute our growth strategy;

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

• our ability to execute and meet the objectives of our High Performance and Credit Profile Restoration Plan, if at all;

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

• the effects of competition;

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• fluctuations in interest rates;

• the effects of inflation to our business and financial condition and performance, including increased overall costs to our goods and services, the impact on customer preferences as a result of changes in discretionary income, and our ability, if at all, to mitigate such effects;

• the effects of inflation on our operational and financial performance, including the increased overall costs for our goods and services, the impact on customer preferences as a result of changes in discretionary income, and our ability, if at all, to mitigate such effects;

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

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

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

• our ability to meet the projected financial and equity performance goals to our updated full year outlook, if at all;

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

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

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

• government, social, business and other actions that have been and will be taken in response to pandemics, including potential responses to new variants of COVID-19, its variants and any sub-variants;

• the potential impact of epidemics and pandemics, such as the COVID-19 coronavirus, including any new or emerging public health threats, on customer preferences and on our business;

• government, social, business and other actions that have been and will be taken in response to pandemics and epidemics, such as the COVID-19 coronavirus, including potential responses to any new or emerging public health threats;

• effects and expense of litigation;

3 unchanged sentences

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

• adverse developments affecting the financial services industry;

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

5 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements