What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-11-09 compared with 2023-08-07 · 255 added, 180 removed, 965 unchanged (31% of the section changed)

3 unchanged sentences

(unaudited and in thousands, except share data)

December 31, 2022 June 30, 2023

December 31, 2022 September 30, 2023

Current assets:

49 unchanged sentences

(unaudited and in thousands, except per share data)

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

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

2022 2023 2022 2023

17 unchanged sentences

Interest expense 6,678 9,278 18,208 27,213

Net (gain) loss on property damage, net of insurance claims ( 1,376 ) ( 235 ) ( 3,275 ) 36

Net gain on property damage, net of insurance claims — ( 379 ) ( 3,275 ) ( 343 )

Other, net ( 95 ) 11 ( 78 ) ( 636 )

17 unchanged sentences

(unaudited and in thousands)

Six months ended June 30,

Nine months ended September 30,

Cash flows from operating activities:

9 unchanged sentences

Net (gain) loss on divestitures, disposals and impairment charges ( 433 ) 929

Net (gain) loss on property damage, net of insurance claims ( 3,275 ) 36

Net gain on property damage, net of insurance claims ( 3,275 ) ( 343 )

Gain on sale of real property — ( 658 )

26 unchanged sentences

Purchase of treasury stock ( 36,663 ) —

Net cash provided by (used in) financing activities ( 20,085 ) 10,508

Net decrease in cash and cash equivalents ( 90 ) ( 200 )

Net cash used in financing activities ( 27,673 ) ( 7,959 )

Net increase (decrease) in cash and cash equivalents ( 327 ) 505

Cash and cash equivalents at beginning of period 1,148 1,170

4 unchanged sentences

(unaudited and in thousands)

Three months ended June 30, 2022

Three months ended September 30, 2022

Outstanding Common

2 unchanged sentences

Earnings Treasury

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

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

Net income — — — 5,860 — 5,860

4 unchanged sentences

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

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

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

Three months ended June 30, 2023

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

Three months ended September 30, 2023

Outstanding Common

2 unchanged sentences

Earnings Treasury

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

Balance – June 30, 2023 14,958 $ 266 $ 240,681 $ 193,973 $ ( 278,753 ) $ 156,167

Net income — — — 4,645 — 4,645

2 unchanged sentences

Exercise of stock options 7 — ( 133 ) — — ( 133 )

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

Stock-based compensation expense — — 1,831 — — 1,831

Dividends on common stock — — ( 1,683 ) — — ( 1,683 )

Balance – June 30, 2023 14,958 $ 266 $ 240,681 $ 193,973 $ ( 278,753 ) $ 156,167

Six months ended June 30, 2022

Balance – September 30, 2023 14,982 $ 266 $ 241,141 $ 198,618 $ ( 278,753 ) $ 161,272

CARRIAGE SERVICES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited and in thousands)

Nine months ended September 30, 2022

Outstanding Common

12 unchanged sentences

Other 27 — 1,358 — — 1,358

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

Six months ended June 30, 2023

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

Nine months ended September 30, 2023

Outstanding Common

13 unchanged sentences

Other 8 — 276 — — 276

Balance – June 30, 2023 14,958 $ 266 $ 240,681 $ 193,973 $ ( 278,753 ) $ 156,167

Balance – September 30, 2023 14,982 $ 266 $ 241,141 $ 198,618 $ ( 278,753 ) $ 161,272

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

6 unchanged sentences

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 June 30, 2023, we operated 172 funeral homes in 26 states and 32 cemeteries in 11 states.

At September 30, 2023, we operated 171 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.

19 unchanged sentences

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

Held for Sale

At June 30, 2023, we had $ 0.3 million of assets classified as held for sale in Property, plant and equipment, net on our Consolidated Balance Sheet related to one funeral home that we divested on July 12, 2023.

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

Generally Accepted Accounting Principles (“GAAP”), we recognized an impairment of $ 0.2 million for assets related to property, plant and equipment, which was recorded in Net (gain) loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

Deferred Revenue

During the six months ended June 30, 2023, we withdrew $ 8.6 million of realized capital gains and earnings from our preneed funeral and cemetery trust investments.

During the nine months ended September 30, 2023, we withdrew $ 8.6 million of realized capital gains and earnings from our preneed funeral and 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 funeral trust investments and Preneed cemetery trust investments and increase our Deferred preneed funeral revenue and Deferred preneed cemetery revenue.

Additionally, during the three and six months ended June 30, 2023, we received a $ 6.0 million incentive payment from a vendor for entering into a strategic partnership agreement to market and sell prearranged funeral services in the future, which increased our cash flow from operations and Deferred preneed funeral revenue.

Additionally, during the nine months ended September 30, 2023, we received a $ 6.0 million incentive payment from a vendor for entering into a strategic partnership agreement to market and sell prearranged funeral services in the future, which increased our cash flow from operations and Deferred preneed funeral revenue.

The incentive payment will be deferred until we complete our implementation of the program and begin selling prearranged funeral services.

The excess of the purchase price over the fair value of identifiable net assets of funeral home businesses and cemeteries we acquire 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 most recent annual goodwill impairment test as of August 31, 2023.

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

We conducted a quantitative assessment in 2022 and a qualitative assessment in 2023.

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.

For our 2023 annual qualitative assessment, we determined that there were no factors that would indicate the need to perform an additional quantitative goodwill impairment test.

We concluded that it is more-likely-than-not that the fair value of our reporting units is greater than their carrying value and thus there was no impairment to goodwill.

For our 2022 annual quantitative assessment, 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 most recent annual intangible assets impairment test as of August 31, 2023.

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

We conducted a quantitative assessment in 2022 and a qualitative assessment in 2023.

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.

As a result of our 2023 qualitative assessment, we determined that there were factors that would indicate the need to perform an additional quantitative impairment test for certain funeral home businesses.

As a result of this additional quantitative impairment test, we recorded an impairment to the tradenames for two of our funeral homes of $ 0.2 million, during the three and nine months ended September 30, 2023, as the carrying amount of these tradenames exceeded the fair value.

For our 2022 assessment, there was no impairment to intangibles assets.

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

Property, Plant and Equipment

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

December 31, 2022 June 30, 2023

December 31, 2022 September 30, 2023

Land $ 84,405 $ 85,660

4 unchanged sentences

Property, plant and equipment, net $ 278,106 $ 288,407

During the six months ended June 30, 2023, we acquired $ 12.8 million of property, plant and equipment related to our 2023 business combination, described in Note 3 to the Consolidated Financial Statements.

Additionally, we sold real property for $ 1.2 million, with a carrying value of $ 0.6 million, resulting in a gain on the sale of $ 0.6 million, which was recorded in Net (gain) loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

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

Additionally, we sold real property for $ 2.7 million, with a carrying value of $ 1.4 million, resulting in a gain on the sale of $ 1.3 million.We also divested two funeral homes that had a carrying value of property, plant and equipment of $ 0.7 million, which was included in the loss on the sale of divestitures and recorded in Net (gain) loss on divestitures, disposals and impairment charges.

Our growth and maintenance capital expenditures totaled $ 5.2 million and $ 2.6 million for the three months ended June 30, 2022 and 2023, respectively and $ 9.8 million and $ 5.5 million for the six months ended June 30, 2022 and 2023, respectively, for property, plant and equipment.

In addition, we recorded depreciation expense of $ 3.4 million and $ 3.7 million for the three months ended June 30, 2022 and 2023, respectively and $ 6.7 million and $ 7.2 million for the six months ended June 30, 2022 and 2023, respectively.

During the nine months ended September 30, 2023, we acquired $ 12.8 million of property, plant and equipment related to our acquisition of a business located in Bakersfield, CA, as more fully described in Note 3 to the Consolidated Financial Statements.

Additionally, we sold real property for $ 1.2 million, with a carrying value of $ 0.6 million, resulting in a gain on the sale of $ 0.6 million.

We also divested one funeral home that had a carrying value of property, plant and equipment of $ 0.3 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.

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.

Our growth and maintenance capital expenditures totaled $ 5.3 million and $ 2.4 million for the three months ended September 30, 2022 and 2023, respectively and $ 15.1 million and $ 7.9 million for the nine months ended September 30, 2022 and 2023, respectively, for property, plant and equipment.

In addition, we recorded depreciation expense of $ 3.4 million and $ 3.8 million for the three months ended September 30, 2022 and 2023, respectively and $ 10.1 million and $ 11.0 million for the nine months ended September 30, 2022 and 2023, respectively.

Cemetery Property

Cemetery property was $ 104.2 million and $ 112.8 million, net of accumulated amortization of $ 59.0 million and $ 61.7 million at December 31, 2022 and June 30, 2023, respectively.

Cemetery property was $ 104.2 million and $ 113.2 million, net of accumulated amortization of $ 59.0 million and $ 63.0 million at December 31, 2022 and September 30, 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 $ 1.4 million for both the three months ended June 30, 2022 and 2023 and $ 3.7 million and $ 3.5 million for the six months ended June 30, 2022 and 2023, respectively.

We recorded amortization expense for cemetery interment rights of $ 1.7 million and $ 1.9 million for the three months ended June 30, 2022 and 2023, respectively and $ 3.0 million and $ 3.1 million for the six months ended June 30, 2022 and 2023, respectively.

During the six months ended June 30, 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 (gain) loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

Income tax expense was $ 4.2 million and $ 3.4 million for the three months ended June 30, 2022 and 2023, respectively and $ 9.3 million and $ 6.9 million for the six months ended June 30, 2022 and 2023, respectively.

Our operating tax rate before discrete items was 28.0 % for both the three months ended June 30, 2022 and 2023 and 27.2 % and 28.5 % for the six months ended June 30, 2022 and 2023, respectively.

Our growth capital expenditures for cemetery property development totaled $ 1.5 million and $ 1.6 million for the three months ended September 30, 2022 and 2023 and $ 5.2 million and $ 5.1 million for the nine months ended September 30, 2022 and 2023, respectively.

We recorded amortization expense for cemetery interment rights of $ 1.3 million for both the three months ended September 30, 2022 and 2023 and $ 4.3 million and $ 4.4 million for the nine months ended September 30, 2022 and 2023, respectively.

During the nine months ended September 30, 2023, we acquired cemetery property for $ 9.0 million related to our acquisition of a business located in Bakersfield, CA, as more fully 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 (gain) loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

Income tax expense was $ 2.8 million and $ 2.1 million for the three months ended September 30, 2022 and 2023, respectively and $ 12.1 million and $ 9.0 million for the nine months ended September 30, 2022 and 2023, respectively.

Our operating tax rate before discrete items was 30.6 % and 30.4 % for the three months ended September 30, 2022 and 2023, respectively and 27.8 % and 28.9 % for the nine months ended September 30, 2022 and 2023, respectively.

Subsequent Events

We have evaluated events and transactions during the period subsequent to June 30, 2023 through the date the financial statements were issued for potential recognition or disclosure in the accompanying financial statements covered by this report.

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

14 unchanged sentences

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

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.

Subsequent to our initial purchase price allocation for this acquisition made during the first quarter of 2023, we have adjusted our purchase price allocation based on additional information which became available prior to June 30, 2023.

Provisional estimates for cemetery property have been recorded for the acquisition as our valuation has not been finalized at June 30, 2023.

The following table summarizes the breakdown of the purchase price allocation for our 2023 acquisition (in thousands):

The following table summarizes the breakdown of the purchase price allocation for our Bakersfield, CA business acquisition (in thousands):

Initial Purchase Price Allocation Adjustments Adjusted Purchase Price Allocation

12 unchanged sentences

The assumed liabilities relate to operating lease obligations and commissions payable.

As of September 30, 2023, our accounting for this acquisition is complete.

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

3 unchanged sentences

March 22, 2023 Three Funeral Homes, Two Cemeteries and One Cremation Focused Business Bakersfield, CA $ 44,266 $ 13,506 $ ( 13,772 )

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

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

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

The following table summarizes the breakdown of the purchase price allocation for our Kissimmee, FL business acquisition (in thousands):

Purchase Price Allocation

Current assets $ 28

Preneed trust assets 1,439

Property, plant & equipment 2,986

Goodwill 2,694

Intangible and other non-current assets 542

Preneed trust liabilities ( 1,439 )

Purchase price $ 6,250

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

The following table summarizes the fair value of the assets acquired and liabilities assumed for our Kissimmee, FL business acquisition (in thousands):

Acquisition Date Type of Business Market Assets

Goodwill) Goodwill

Recorded Liabilities

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

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

December 31, 2022 June 30, 2023

December 31, 2022 September 30, 2023

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

3 unchanged sentences

Goodwill at the end of the period $ 410,137 $ 423,643

During the six months ended June 30, 2023, we recognized $ 13.5 million in goodwill related to our 2023 business combination;

$ 4.5 million was allocated to our cemetery segment and $ 9.0 million was allocated to our funeral home segment.

During the nine months ended September 30, 2023, we recognized $ 13.5 million in goodwill related to our acquisition of a business located in Bakersfield, CA, of which $ 4.5 million was allocated to our cemetery segment and $ 9.0 million was allocated to our funeral home segment.

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

goodwill impairment test.

DIVESTED OPERATIONS

During the three months ended June 30, 2023, we merged one funeral home with another business we own in an existing market.

During the six months ended June 30, 2023, we sold one funeral home and two cemeteries for an aggregate of $ 0.8 million and merged one funeral home with another business we own in an existing market.

During the three months ended June 30, 2022, we merged one funeral home with another business we own in an existing market.

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

During the three months ended September 30, 2023, we sold one funeral home for $ 0.3 million.

During the nine months ended September 30, 2023, we sold two funeral homes and two cemeteries for an aggregate of $ 1.1 million and merged one funeral home with another business we own in a nearby market.

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

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

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 June 30, Six months ended June 30,

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

2022 2023 2022 2023

Revenue $ — $ 18 $ 296 $ 242

Operating income (loss) ( 4 ) ( 2 ) 25 24

Operating income — 8 25 3

Loss on divestitures (1)

8 unchanged sentences

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

June 30, 2023

September 30, 2023

Funeral Cemetery Corporate Total

12 unchanged sentences

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 June 30, 2023

January 1, 2023 Provision for Credit Losses Write Offs Recoveries September 30, 2023

Trade and financed receivables:

2 unchanged sentences

Total allowance for credit losses on trade and financed receivables $ ( 1,013 ) $ ( 1,406 ) $ 1,754 $ ( 861 ) $ ( 1,526 )

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 $ 10.3 million at December 31, 2022 and June 30, 2023, respectively.

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 $ 10.7 million at December 31, 2022 and September 30, 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.

2 unchanged sentences

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

December 31, 2022 June 30, 2023

December 31, 2022 September 30, 2023

Interment rights $ 45,351 $ 58,032

3 unchanged sentences

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

December 31, 2022 June 30, 2023

December 31, 2022 September 30, 2023

Preneed cemetery receivables $ 58,830 $ 74,013

6 unchanged sentences

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

January 1, 2023 Provision for Credit Losses Write Offs June 30, 2023

January 1, 2023 Provision for Credit Losses Write Offs September 30, 2023

Total allowance for credit losses on Preneed cemetery receivables, net

$ ( 1,283 ) $ ( 908 ) $ ( 116 ) $ ( 2,307 )

The amortized cost basis of our preneed cemetery receivables by year of origination at June 30, 2023 is as follows (in thousands):

The amortized cost basis of our preneed cemetery receivables by year of origination at September 30, 2023 is as follows (in thousands):

2023 2022 2021 2020 2019 Prior Total

Total preneed cemetery receivables, at amortized cost $ 27,143 $ 21,505 $ 11,134 $ 5,312 $ 1,909 $ 1,603 $ 68,606

The aging of past due preneed cemetery receivables at June 30, 2023 is as follows (in thousands):

The aging of past due preneed cemetery receivables at September 30, 2023 is as follows (in thousands):

Past Due 61-90

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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 $ 14.2 million at December 31, 2022 and June 30, 2023, respectively.

The transaction price allocated to preneed merchandise and service performance obligations that were unfulfilled were $ 11.6 million and $ 13.7 million at December 31, 2022 and September 30, 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.

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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 June 30, 2023, the carrying value and fair value of our Credit Facility was $ 204.0 million.

At September 30, 2023, the carrying value and fair value of our Credit Facility was $ 187.3 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 June 30, 2023, the carrying value of our acquisition debt was $ 3.9 million, which approximated its fair value.

The fair value of our Senior Notes was $ 343.1 million at June 30, 2023 based on the last traded or broker quoted price.

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, 2023, the carrying value of our acquisition debt was $ 3.9 million, which approximated its fair value.

The fair value of our Senior Notes was $ 342.6 million at September 30, 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.

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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 June 30, 2023 is $ 10.0 million.

Our unfunded commitment for this investment at September 30, 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.

17 unchanged sentences

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

December 31, 2022 June 30, 2023

December 31, 2022 September 30, 2023

Preneed cemetery trust investments, at market value $ 98,269 $ 95,632

1 unchanged sentence

Preneed cemetery trust investments $ 95,065 $ 92,583

The cost and market values associated with preneed cemetery trust investments at June 30, 2023 are detailed below (in thousands):

The cost and market values associated with preneed cemetery trust investments at September 30, 2023 are detailed below (in thousands):

Fair Value Hierarchy Level Cost Unrealized

42 unchanged sentences

Market value as a percentage of cost 91.0 %

The following table summarizes our fixed income securities (excluding mutual funds) within our preneed cemetery trust investments in an unrealized loss position at June 30, 2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

June 30, 2023

The following table summarizes our fixed income securities (excluding mutual funds) within our preneed cemetery trust investments in an unrealized loss position at September 30, 2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

September 30, 2023

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

19 unchanged sentences

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

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

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

2022 2023 2022 2023

7 unchanged sentences

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

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

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

2022 2023 2022 2023

5 unchanged sentences

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

December 31, 2022 June 30, 2023

December 31, 2022 September 30, 2023

Preneed funeral trust investments, at market value $ 107,995 $ 109,863

1 unchanged sentence

Preneed funeral trust investments $ 104,553 $ 106,433

The cost and market values associated with preneed funeral trust investments at June 30, 2023 are detailed below (in thousands):

The cost and market values associated with preneed funeral trust investments at September 30, 2023 are detailed below (in thousands):

Fair Value Hierarchy Level Cost Unrealized

42 unchanged sentences

Market value as a percentage of cost 93.3 %

The following table summarizes our fixed income securities (excluding mutual funds) within our preneed funeral trust investment in an unrealized loss position at June 30, 2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

June 30, 2023

The following table summarizes our fixed income securities (excluding mutual funds) within our preneed funeral trust investment in an unrealized loss position at September 30, 2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

September 30, 2023

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

17 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 June 30, Six months ended June 30,

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

2022 2023 2022 2023

7 unchanged sentences

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

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

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

2022 2023 2022 2023

4 unchanged sentences

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

December 31, 2022 June 30, 2023

December 31, 2022 September 30, 2023

Cemetery perpetual care trust investments, at market value $ 66,307 $ 82,042

1 unchanged sentence

Care trusts’ corpus $ 65,495 $ 81,299

The following table reflects the cost and market values associated with the trust investments held in cemetery perpetual care trust funds at June 30, 2023 (in thousands):

The following table reflects the cost and market values associated with the trust investments held in cemetery perpetual care trust funds at September 30, 2023 (in thousands):

Fair Value Hierarchy Level Cost Unrealized

38 unchanged sentences

Market value as a percentage of cost 90.4 %

The following table summarizes our fixed income securities (excluding mutual funds) within our cemetery perpetual care trust investment in an unrealized loss position at June 30, 2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

June 30, 2023

The following table summarizes our fixed income securities (excluding mutual funds) within our cemetery perpetual care trust investment in an unrealized loss position at September 30, 2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

September 30, 2023

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

15 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 June 30, Six months ended June 30,

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

2022 2023 2022 2023

5 unchanged sentences

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

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

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

2022 2023 2022 2023

3 unchanged sentences

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

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

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

2022 2023 2022 2023

5 unchanged sentences

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

December 31, 2022 June 30, 2023

December 31, 2022 September 30, 2023

Preneed funeral trust funds, at cost $ 20,594 $ 21,954

1 unchanged sentence

Receivables from preneed funeral trusts, net $ 19,976 $ 21,295

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 June 30, 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 June 30, 2023 is as follows (in thousands):

The composition of the preneed funeral trust funds at September 30, 2023 is as follows (in thousands):

Cost Basis Fair Value

13 unchanged sentences

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

December 31, 2022 June 30, 2023

December 31, 2022 September 30, 2023

Tradenames $ 25,610 $ 28,863

4 unchanged sentences

Intangible and other non-current assets, net $ 32,930 $ 37,221

During the six months ended June 30, 2023, we increased the value of our tradenames by $ 3.5 million, with $ 1.3 million allocated to our funeral home segment and $ 2.2 million allocated to our cemetery segment, related to our 2023 business combination, described in Note 3 to the Consolidated Financial Statements.

During the nine months ended September 30, 2023, we increased the value of our tradenames by $ 3.5 million, with $ 1.3 million allocated to our funeral home segment and $ 2.2 million allocated to our cemetery segment, related to our acquisition of a business located in Bakersfield, CA, as more fully described in Note 3 to the Consolidated Financial Statements.

assessment, there was no impairment to intangibles assets.

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.

Capitalized Commissions

1 unchanged sentence

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

Amortization expense was $ 174,000 and $ 196,000 for the three months ended June 30, 2022 and 2023, respectively and $ 344,000 and $ 385,000 for the six months ended June 30, 2022 and 2023, respectively.

Amortization expense was $ 181,000 and $ 204,000 for the three months ended September 30, 2022 and 2023, respectively and $ 525,000 and $ 589,000 for the nine months ended September 30, 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 $ 142,000 and $ 131,000 for the three months ended June 30, 2022 and 2023, respectively and $ 290,000 and $ 262,000 for the six months ended June 30, 2022 and 2023, respectively.

Amortization expense was $ 142,000 and $ 131,000 for the three months ended September 30, 2022 and 2023, respectively and $ 432,000 and $ 393,000 for the nine months ended September 30, 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 $ 55,000 and $ 72,000 for the three months ended June 30, 2022 and 2023, respectively and $ 111,000 and $ 134,000 for the six months ended June 30, 2022 and 2023, respectively.

The aggregate amortization expense for our capitalized commissions, prepaid agreements and internal-use software as of June 30, 2023 is as follows (in thousands):

Amortization expense was $ 56,000 and $ 72,000 for the three months ended September 30, 2022 and 2023, respectively and $ 167,000 and $ 206,000 for the nine months ended September 30, 2022 and 2023, respectively.

The aggregate amortization expense for our capitalized commissions, prepaid agreements and internal-use software as of September 30, 2023 is as follows (in thousands):

Capitalized Commissions Prepaid Agreements Internal-use Software

8 unchanged sentences

CREDIT FACILITY AND ACQUISITION DEBT

At June 30, 2023, our senior secured revolving credit facility (the “Credit Facility”) was comprised of:

At September 30, 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.

1 unchanged sentence

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

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

At June 30, 2023, we were subject to the following financial covenants under our Credit Facility:

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, pay dividends and make other restricted payments, and certain financial maintenance covenants.

At September 30, 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 June 30, 2023.

We were in compliance with all of the covenants contained in our Credit Facility as of September 30, 2023.

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

December 31, 2022 June 30, 2023

December 31, 2022 September 30, 2023

Credit Facility $ 190,700 $ 187,300

5 unchanged sentences

Total acquisition debt, net of current portion $ 3,438 $ 3,335

At June 30, 2023, we had outstanding borrowings under the Credit Facility of $ 204.0 million.

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

At September 30, 2023, we had outstanding borrowings under the Credit Facility of $ 187.3 million.

We also had one letter of credit for $ 2.3 million under the Credit Facility, which was increased to $ 2.6 million on July 7, 2023.

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 June 30, 2023, we had $ 43.7 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 June 30, 2023, the prime rate margin was equivalent to 2.625 % and the BSBY rate margin was 3.625 %.

The weighted average interest rate on our Credit Facility was 2.9 % and 8.6 % for the three months ended June 30, 2022 and 2023, respectively and 2.5 % and 8.3 % for the six months ended June 30, 2022 and 2023, respectively.

At September 30, 2023, we had $ 60.1 million of availability under the Credit Facility.

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

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

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

2022 2023 2022 2023

1 unchanged sentence

Credit Facility amortization of debt issuance costs 109 138 293 414

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 September 30, 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 4.3 % and 9.0 % for the three months ended September 30, 2022 and 2023, respectively and 3.1 % and 8.5 % for the nine months ended September 30, 2022 and 2023, respectively.

Acquisition debt consists of deferred purchase price and promissory notes payable to sellers.

2 unchanged sentences

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

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

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

2022 2023 2022 2023

1 unchanged sentence

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, 2022 June 30, 2023

December 31, 2022 September 30, 2023

Long-term liabilities:

5 unchanged sentences

Carrying value of the Senior Notes $ 395,243 $ 395,737

At June 30, 2023, the fair value of the Senior Notes, which are Level 2 measurements, was $ 343.1 million.

At September 30, 2023, the fair value of the Senior Notes, which are Level 2 measurements, was $ 342.6 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.

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

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

The Indenture also contains customary events of default.

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

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

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

2022 2023 2022 2023

3 unchanged sentences

The debt discount and the debt issuance costs are being amortized using the effective interest method over the remaining term of approximately 68 months of the Senior Notes.

The effective interest rate on the unamortized debt discount and the unamortized debt issuance costs for the Senior Notes for both the three and six months ended June 30, 2022 and 2023 was 4.42 % and 4.30 %, respectively.

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

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

Income Statement Classification 2022 2023 2022 2023

13 unchanged sentences

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

Six months ended June 30,

Nine months ended September 30,

Cash paid for operating leases included in operating activities $ 2,698 $ 2,840

1 unchanged sentence

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

Six months ended June 30,

Nine months ended September 30,

Right-of-use assets obtained in exchange for new operating lease liabilities $ 764 $ 412

1 unchanged sentence

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

Lease Type Balance Sheet Classification December 31, 2022 June 30, 2023

Lease Type Balance Sheet Classification December 31, 2022 September 30, 2023

Operating lease right-of-use assets Operating lease right-of-use assets $ 17,060 $ 15,987

9 unchanged sentences

Total lease liabilities $ 24,675 $ 25,682

The average lease terms and discount rates at June 30, 2023 are as follows:

The average lease terms and discount rates at September 30, 2023 are as follows:

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

1 unchanged sentence

Finance leases 9.7 8.3 %

The aggregate future lease payments for non-cancelable operating and finance leases at June 30, 2023 are as follows (in thousands):

The aggregate future lease payments for non-cancelable operating and finance leases at September 30, 2023 are as follows (in thousands):

Operating Finance

9 unchanged sentences

Present value of lease liabilities $ 18,244 $ 7,438

At June 30, 2023, we had no significant operating or finance leases that had not yet commenced.

At September 30, 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 June 30, Six months ended June 30,

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

2022 2023 2022 2023

3 unchanged sentences

Cancelled 500 $ 16 — $ — 1,950 $ 63 1,826 $ 61

(1) Restricted stock granted during the six months ended June 30 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 $ 40,000 and $ 394,000 , for the three months ended June 30, 2022 and 2023, respectively and $ 97,000 and $ 572,000 for the six months ended June 30, 2022 and 2023, respectively.

(1) Restricted stock granted during the nine months ended September 30 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 $ 36,000 and $ 400,000 , for the three months ended September 30, 2022 and 2023, respectively and $ 133,000 and $ 972,000 for the nine months ended September 30, 2022 and 2023, respectively.

Stock Options

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

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

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

2022 2023 2022 2023

2 unchanged sentences

— $ — — $ — 310,000 $ 5,388 — $ —

12,600 $ 143 — $ — 12,600 $ 143 — $ —

Cancelled 3,652 $ 37 1,700 $ 20 28,790 $ 322 103,550 $ 1,354

(1) Stock options granted during the six months ended June 30, 2022 and 2023 had a weighted average price of $ 49.48 and $ 32.69 , respectively.

(1) Stock options granted during the nine months ended September 30, 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.

2 unchanged sentences

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

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

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

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

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

The fair value of the options granted during the six months ended June 30, 2023 was estimated using the Black-Scholes option pricing model with the following assumptions:

(3) 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 nine months ended September 30, 2023 was estimated using the Black-Scholes option pricing model with the following assumptions:

Grant Date February 22, 2023

6 unchanged sentences

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

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

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

2022 2023 2022 2023

6 unchanged sentences

— $ — 4,021 $ 133 1,601 $ 82 5,486 $ 174

(1) Stock options exercised during the three months ended June 30, 2023 had a weighted average exercise price of $ 20.06 with an aggregate intrinsic value of $ 0.2 million.

Stock options exercised during the six months ended June 30, 2022 and 2023 had a weighted average exercise price of $ 25.88 and $ 22.26 , respectively, with an aggregate intrinsic value of $ 0.5 million and $ 0.3 million, respectively.

(1) Stock options exercised during the three months ended September 30, 2023 had a weighted average exercise price of $ 25.1 with an aggregate intrinsic value of $ 0.4 million.

Stock options exercised during the nine months ended September 30, 2022 and 2023 had a weighted average exercise price of $ 25.88 and $ 23.98 , respectively, with an aggregate intrinsic value of $ 0.5 million and $ 0.5 million, respectively.

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

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

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for stock options of $ 550,000 and $ 735,000 , for the three months ended June 30, 2022 and 2023, respectively and $ 1,188,000 and $ 1,445,000 for the six months ended June 30, 2022 and 2023, respectively.

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for stock options of $ 559,000 and $ 735,000 , for the three months ended September 30, 2022 and 2023, respectively and $ 1,747,000 and $ 2,180,000 for the nine months ended September 30, 2022 and 2023, respectively.

Performance Awards

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

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

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

2022 2023 2022 2023

2 unchanged sentences

Cancelled — $ — — $ — 20,961 $ 201 40,181 $ 1,012

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for performance awards of $ 637,000 and $ 665,000 for the three months ended June 30, 2022 and 2023, respectively and $ 1,203,000 and $ 728,000 for the six months ended June 30, 2022 and 2023, respectively.

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for performance awards of $ 701,000 and $ 622,000 for the three months ended September 30, 2022 and 2023, respectively and $ 1,904,000 and $ 1,350,000 for the nine months ended September 30, 2022 and 2023, respectively.

Employee Stock Purchase Plan

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

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

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

2022 2023 2022 2023

6 unchanged sentences

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

We recorded stock-based compensation expense, which is included in General, administrative and other expenses and Regional and unallocated funeral and cemetery costs , for the ESPP totaling $ 152,000 and $ 163,000 for the three months ended June 30, 2022 and 2023, respectively and $ 351,000 and $ 415,000 for the six months ended June 30, 2022 and 2023 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 $ 120,000 and $ 74,000 for the three months ended September 30, 2022 and 2023, respectively and $ 471,000 and $ 489,000 for the nine months ended September 30, 2022 and 2023, respectively.

Former Employee

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

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

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

2022 2023 2022 2023

2 unchanged sentences

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

(1) During the six months ended June 30, 2023, we issued 30,000 shares of common stock to a 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 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 six months ended June 30, 2023.

(1) During the nine months ended September 30, 2023, we issued 30,000 shares of common stock to a 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 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 nine months ended September 30, 2023.

Good To Great Incentive Program

During the six months ended June 30, 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 six months ended June 30, 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 .

During the nine months ended September 30, 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 nine months ended September 30, 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 June 30, Six months ended June 30,

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

2022 2023 2022 2023

4 unchanged sentences

155 $ 5 176 $ 5 374 $ 15 492 $ 15

(1) Common stock granted during the three months ended June 30, 2022 and 2023 had a weighted average price of $ 39.65 and $ 32.47 , respectively and $ 46.83 and $ 31.01 for six months ended June 30, 2022 and 2023, respectively.

On June 21, 2023, the Board elected Chad Fargason to serve as a Class II Director until the 2025 annual meeting of shareholders.

Fargason was appointed to serve as the chairperson of the Corporate Governance Committee and a member of the Audit Committee.

Concurrently with his appointment, the Board granted Mr.

Fargason 910 shares of our common stock under our Director Compensation Policy, which were valued at approximately $ 25,000 based on the closing price on the grant date.

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 $ 184,000 and $ 189,000 for the three months ended June 30, 2022 and 2023, respectively and $ 385,000 and $ 355,000 for the six months ended June 30, 2022 and 2023, respectively.

(1) Common stock granted during the three months ended September 30, 2022 and 2023 had a weighted average price of $ 32.16 and $ 28.25 , respectively and $ 42.20 and $ 29.78 for nine months ended September 30, 2022 and 2023, respectively.

On July 5, 2023, our Board of Directors (the “Board”) elected Somer Webb to serve as a Class I Director until our 2024 annual meeting of shareholders.

Webb was appointed to serve as the Chair of the Compensation Committee and a member of the Audit and Corporate Governance Committees.

Concurrently with her appointment, the Board granted Ms.

Webb 769 shares of our common stock under our Director Compensation Policy, which were valued at approximately $ 25,000 based on the closing price of our common stock on the grant date.

On July 25, 2023, the Board elected Julie Sanders to serve as a Class II Director until our 2025 annual meeting of shareholders.

Sanders was appointed to serve as a member of the Corporate Governance, Audit and Compensation Committees.

Concurrently with her appointment, the Board granted Ms.

Sanders 743 shares of our common stock under our Director Compensation Policy, which were valued at approximately $ 25,000 based on the closing price of our common stock on the grant date.

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 $ 167,000 and $ 250,000 for the three months ended September 30, 2022 and 2023, respectively and $ 552,000 and $ 605,000 for the nine months ended September 30, 2022 and 2023, respectively.

Share Repurchase

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

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

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

2022 2023 2022 2023

4 unchanged sentences

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

At June 30, 2023, our share repurchase program had $ 48.9 million authorized for repurchases.

At September 30, 2023, our share repurchase program had $ 48.9 million authorized for repurchases.

Cash Dividend

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$ 0.1125 $ 1,679

September 1 st

$ 0.1125 $ 1,683

2022 Per Share Dollar Value

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$ 0.1125 $ 1,730

September 1 st

$ 0.1125 $ 1,653

EARNINGS PER SHARE

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

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

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

2022 2023 2022 2023

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Stock options excluded from the computation of diluted earnings per share because the inclusion of such stock options would result in an antidilutive effect are as follows:

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

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

2022 2023 2022 2023

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

At June 30, 2023, we had satisfied certain performance criteria for the first, second and third predetermined growth targets of our performance awards to be considered outstanding.

At September 30, 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 June 30, 2023

Three months ended September 30, 2023

Funeral Cemetery Total

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Total $ 62,626 $ 27,868 $ 90,494

Three months ended June 30, 2022

Three months ended September 30, 2022

Funeral Cemetery Total

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

Six months ended June 30, 2023

Nine months ended September 30, 2023

Funeral Cemetery Total

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Total $ 197,216 $ 86,470 $ 283,686

Six months ended June 30, 2022

Nine months ended September 30, 2022

Funeral Cemetery Total

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Operating income (loss):

Three months ended June 30, 2023 $ 17,898 $ 13,039 $ ( 10,199 ) $ 20,738

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

Six months ended June 30, 2023 $ 40,091 $ 21,651 $ ( 20,370 ) $ 41,372

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

Three months ended September 30, 2023 $ 18,145 $ 8,844 $ ( 11,303 ) $ 15,686

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

Nine months ended September 30, 2023 $ 58,236 $ 30,496 $ ( 31,674 ) $ 57,058

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

Income (loss) before income taxes:

Three months ended June 30, 2023 $ 18,112 $ 13,183 $ ( 19,593 ) $ 11,702

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

Six months ended June 30, 2023 $ 40,446 $ 21,854 $ ( 38,252 ) $ 24,048

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

Three months ended September 30, 2023 $ 18,377 $ 8,902 $ ( 20,503 ) $ 6,776

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

Nine months ended September 30, 2023 $ 58,824 $ 30,757 $ ( 58,757 ) $ 30,824

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

Total assets:

June 30, 2023 $ 796,043 $ 429,272 $ 16,771 $ 1,242,086

September 30, 2023 $ 799,740 $ 439,175 $ 16,544 $ 1,255,459

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, 2022 June 30, 2023

December 31, 2022 September 30, 2023

Prepaid and other current assets:

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

Six months ended June 30,

Nine months ended September 30,

Cash paid for interest $ 12,981 $ 21,754

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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;

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, cost inflation, overhead, including talent recruitment, field and corporate incentive compensation, preneed sales or other financial items;

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

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any statements regarding the timing of the strategic alternatives review;

the outcome of the strategic alternatives review, including whether any transaction occurs, at all;

the outcome of the strategic alternatives review, including whether any transaction occurs, if at all;

any statements of belief;

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• the effects of competition;

• changes in the number of deaths in our markets;

• changes in the number of deaths in our markets, which are not predictable from market to market or over the short term;

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

1 unchanged sentence

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

• fluctuations in interest rates;

• fluctuations in interest rates, including, but not limited to, the effects of increased borrowing costs under our Credit Facility and our ability to minimize such costs, if at all;

• 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;

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• 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;

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

• effects and expense of litigation;

• consolidation of the funeral and cemetery industry;

• consolidation in the funeral and cemetery industry;

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

• potential adverse impacts resulting from our recent announcement regarding our board of directors’ review of potential strategic alternatives for the Company;

• potential adverse impacts resulting from our recent announcement regarding our Board’s review of potential strategic alternatives for the Company;

• economic, financial and stock market fluctuations;

8 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