What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-01 compared with 2023-03-01 · 319 added, 299 removed, 1478 unchanged (29% of the section changed)

108 unchanged sentences

Treasury stock, at cost;

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

11,627,818 shares

( 278,753 ) ( 278,753 )

27 unchanged sentences

Loss on extinguishment of debt 23,807 190 —

Gain on insurance reimbursements — — 3,471

Net gain on property damage, net of insurance claims — ( 3,471 ) ( 343 )

Other, net 84 ( 82 ) ( 1,373 )

1 unchanged sentence

Expense for income taxes 12,316 16,243 13,186

Tax adjustment related to discrete items ( 567 ) 1,171 430

Tax benefit related to discrete items ( 1,171 ) ( 430 ) ( 170 )

Total expense for income taxes 11,145 15,813 13,016

26 unchanged sentences

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

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

Other 18 — 467 — — 467

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

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

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

3 unchanged sentences

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

Issuance of restricted common stock 9 — — — — —

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

1 unchanged sentence

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

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

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

Other 27 — 1,358 — — 1,358

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

2 unchanged sentences

Issuance of common stock to directors and board advisor 16 — 451 — — 451

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

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

Exercise of stock options 12 — ( 174 ) — — ( 174 )

2 unchanged sentences

Dividends on common stock — — ( 6,708 ) — — ( 6,708 )

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

Other 8 — 276 — — 276

18 unchanged sentences

Net loss on divestitures, disposals and impairment charges 847 2,029 1,191

Gain on insurance reimbursements ( 97 ) — ( 3,471 )

Other 19 — ( 155 )

Net gain on property damage, net of insurance claims — ( 3,471 ) ( 343 )

Gain on sale of excess land — ( 155 ) ( 1,407 )

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

11 unchanged sentences

Proceeds from divestitures and sale of other assets 7,875 5,027 4,132

Proceeds from insurance reimbursements 248 7,758 2,440

Proceeds from insurance claims 7,758 2,440 1,403

Capital expenditures ( 24,883 ) ( 26,081 ) ( 18,039 )

24 unchanged sentences

Our operations are reported in two business segments:

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

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 December 31, 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.

Funeral services include consultation, the removal and preparation of remains, the use of funeral home facilities for visitation and memorial services and transportation services.

Funeral services include consultation, the removal and preparation of remains, the sale of caskets and related funeral merchandise, the use of funeral home facilities for visitation and memorial services and transportation services.

We provide funeral services and products on both an “atneed” (time of death) and “preneed” (planned prior to death) basis.

4 unchanged sentences

All significant intercompany balances and transactions have been eliminated.

Reclassifications

Certain reclassifications have been made to prior period amounts in our income tax footnote related to the presentation of deferred right-of-use assets and deferred lease liabilities to conform to the current period presentation with no effect on our previously reported Consolidated Balance Sheet, Consolidated Statements of Operations and Consolidated Statements of Cash Flows.

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.

We maintain cash and cash equivalents at United States financial institutions for which the combined account balances in individual institutions may exceed Federal Deposit Insurance Corporation (“FDIC”) insurance coverage and, as a result, there is a concentration of credit risk related to amounts on deposit in excess of FDIC insurance coverage.

As of December 31, 2023, approximately $ 1.4 million of our deposits were not covered by FDIC insurance.

We have not experienced any losses and believe we are not exposed to any significant risk with such accounts.

Funeral and Cemetery Receivables

2 unchanged sentences

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 .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

2 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

16 unchanged sentences

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

During the year ended December 31, 2023, we acquired a business in the Bakersfield, California area consisting of three funeral homes, two cemeteries and one cremation focused business for $ 44.0 million in cash.

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

We did not acquire any businesses in 2021.

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

8 unchanged sentences

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

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

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

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

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

Held for Sale

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

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

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

2 unchanged sentences

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

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

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

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.

8 unchanged sentences

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

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

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

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 impairment test, we concluded that there was no impairment to goodwill as the fair value of our reporting units was greater than the carrying value.

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

2 unchanged sentences

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

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

For the years ended December 31, 2023 and 2022, after each divestiture, we concluded that it was more-likely-than not that the fair value of our reporting units was greater than their carrying value and thus there was no impairment to goodwill.

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

3 unchanged sentences

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

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

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

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

Under current guidance, we are permitted to first assess qualitative factors to determine whether it is more-likely-than not that the fair

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

assessment in 2022.

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.

7 unchanged sentences

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

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

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

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 year ended December 31, 2023, as the carrying amount of these tradenames exceeded the fair value.

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

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

19 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

1 unchanged sentence

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

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

Our preneed funeral and preneed cemetery merchandise and service trusts, as well as the corresponding trust liabilities, 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.

1 unchanged sentence

See Notes 8 and 9 to the Consolidated Financial Statements for additional information related to preneed and perpetual care trust funds.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Deferred Revenue

4 unchanged sentences

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

During the year ended December 31, 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.

Fair Value Measurements

12 unchanged sentences

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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

2 unchanged sentences

Property, Plant and Equipment

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

Property, plant and equipment 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 following estimated useful lives of the assets:

Depreciation of property, plant and equipment is computed based on the straight-line method over the following estimated useful lives of the assets:

Buildings and improvements 15 to 40

1 unchanged sentence

Machinery and equipment 3 to 15

Automobiles 5 to 7

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Vehicles 5 to 7

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.

9 unchanged sentences

Buildings and improvements 251,778 263,522

Furniture, equipment and automobiles 73,377 70,522

Furniture, equipment and vehicles 70,522 74,372

Property, plant and equipment, at cost 406,705 425,529

1 unchanged sentence

Property, plant and equipment, net $ 278,106 $ 287,484

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

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

During the year ended December 31, 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 and $ 3.1 million related to the acquisition of real estate.

Additionally, we sold real estate for $ 3.1 million, with a carrying value of $ 1.7 million, resulting in a gain on the sale of $ 1.4 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 loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

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

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

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

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

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Our growth and maintenance capital expenditures totaled $ 18.4 million and $ 10.9 million for the years ended December 31, 2022 and 2023, respectively, for property, plant, equipment.

9 unchanged sentences

Our growth capital expenditures totaled $ 7.7 million and $ 7.1 million for the years ended December 31, 2022 and 2023, respectively, for cemetery property development.

We recorded amortization expense for

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

We recorded amortization expense for cemetery interment rights of $ 6.7 million, $ 6.1 million and $ 6.0 million for the years ended December 31, 2021, 2022 and 2023, respectively.

During the year ended December 31, 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 loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

During the year ended December 31, 2022, we divested one cemetery that had a carrying value of cemetery property of $ 0.1 million, which was included in the gain or loss on the sale of divestitures and recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

We 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 .

We lease certain office facilities, certain funeral homes, vehicles 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 lease certain funeral homes, vehicles and equipment under finance leases with original terms ranging from three and a half to forty years .

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

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

1 unchanged sentence

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.

For our leases that do not provide an implicit interest rate in the agreement, 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.

4 unchanged sentences

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.

Finance lease ROU assets are included in Property, plant and equipment, net and finance lease

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

11 unchanged sentences

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

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

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

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

We did not have an excess tax benefit or deficiency related to share-based payments for the years ended December 31, 2023 and 2022.

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

13 unchanged sentences

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 .

Ancillary funeral service revenue, which is recorded in Other revenue, represents revenue from our flower shop, monument company, pet cremation business 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 .

2 unchanged sentences

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 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

15 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Computation of Earnings Per Common Share

12 unchanged sentences

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.

Topic 848 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

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

These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022.

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

We adopted the provisions of Topic 848 in March 2020.

On May 27, 2022, we amended our Credit Facility (defined in Note 12) to establish the Bloomberg Short-Term Bank Yield Index Rate (“BSBY”) as a benchmark rate and removed LIBOR from our Credit Facility, among other things.

We did not apply the optional expedients provided by the guidance in Topic 848.

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Credit Losses - Vintage Disclosures

In March 2022, the FASB issued ASU, Financial Instruments - Credit Losses (“Topic 326”) to make the requirement to disclose gross write-offs by class of financing receivable and major security type consistent for all public business entities.

The amendment in this update provides specific guidance on the disclosure for current period write-offs by year of origination for financing receivables.

This amendment is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years and should be applied prospectively to disclosures occurring on or after the effective date of the amendment.

We plan to adopt the provisions of Topic 326 for our fiscal year beginning January 1, 2023.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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, and therefore was effective for us beginning January 1, 2023.

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

Accounting Pronouncements Not Yet Adopted

Segment Reporting

In November 2023, the FASB issued ASU, Segment Reporting - Improvements to Reportable Segment Disclosures (“Topic 280”) to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The amendments in this update require that a public entity disclose, on an annual and interim basis (1) significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss;

and (2) an amount for other segment items, as described in the amendments, by reportable segment and a description of its composition.

Additionally, the amendments require that a public entity disclose the title and position of the CODM and an explanation of how the CODM uses the reported measure(s) of segment profit or loss in assessing segment performance and deciding how to allocate resources.

The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

We plan to adopt the amendments of Topic 280 for our fiscal year beginning January 1, 2024 and interim periods within our fiscal year beginning January 1, 2025.

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

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

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

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

We did not acquire any businesses in 2021.

In December 2023, the FASB issued ASU, Income Taxes - Improvements to Income Tax Disclosures (“Topic 740”) to enhance the transparency about income tax information through improvements to income tax disclosures primarily related to rate reconciliation and income taxes paid information.

The amendments in this update require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation;

and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than five percent of the amount computed by multiplying pretax income (loss) by the applicable statutory income tax rate).

The amendments in this update also require that all entities disclose on an annual basis (1) the amount of net income taxes paid disaggregated by federal and state taxes;

and (2) the amount of net income taxes paid disaggregated by individual jurisdictions in which net income taxes paid is equal to or greater than five percent of total net income taxes paid.

The amendments are effective for annual periods beginning after December 15, 2024.

Early adoption is permitted.

We plan to adopt the amendments of Topic 740 for our fiscal year beginning January 1, 2025.

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

BUSINESS COMBINATIONS

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

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

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Current assets $ 7,087 $ 131 $ 7,218

Preneed trust assets — 11,428 11,428

Property, plant & equipment 12,577 245 12,822

Cemetery property 9,035 — 9,035

Goodwill 13,612 ( 106 ) 13,506

Intangible and other non-current assets 3,763 — 3,763

Assumed liabilities ( 300 ) ( 66 ) ( 366 )

Preneed trust liabilities — ( 11,428 ) ( 11,428 )

Deferred revenue ( 1,774 ) ( 204 ) ( 1,978 )

Purchase price $ 44,000 $ — $ 44,000

The current assets relate to accounts receivable and inventory.

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 and commissions payable.

As of December 31, 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):

Acquisition Date Type of Business Market Assets

Goodwill) Goodwill

Recorded Liabilities

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

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

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

The following table summarizes the breakdown of the purchase price allocation for our 2022 business acquisitions (in thousands):

Purchase Price Allocation

Current assets $ 219

Trust investments 4,146

Preneed trust assets 4,146

Property, plant & equipment 8,146

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Intangible and other non-current assets 2,145

Trust liabilities ( 4,146 )

Preneed trust liabilities ( 4,146 )

Deferred revenue ( 1,146 )

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

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

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Acquisition Date Type of Business Market Assets

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

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

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

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

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

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

During the year ended December 31, 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.

During the year ended December 31, 2022, we recognized $ 19.5 million in goodwill related to our 2022 business acquisitions, of which $ 7.4 million was allocated to our cemetery segment and $ 12.1 million was allocated to our funeral home segment.

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

DIVESTED OPERATIONS

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

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

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

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Accounts Receivable

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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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the activity in our allowance for credit losses by portfolio segment for the year ended December 31, 2023 (in thousands):

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Total allowance for credit losses on Trade and financed receivables $ ( 1,013 ) $ ( 1,827 ) $ 2,430 $ ( 1,096 ) $ ( 1,506 )

Preneed Cemetery Receivables

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

Cemetery Receivables

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

December 31, 2022 December 31, 2023

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Unearned finance charges 4,894 5,669

Preneed cemetery receivables $ 52,855 $ 58,830

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

Cemetery receivables $ 58,830 $ 77,755

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

December 31, 2022 December 31, 2022

Preneed cemetery receivables $ 52,855 $ 58,830

Cemetery receivables $ 58,830 $ 77,755

unearned finance charges ( 4,894 ) ( 5,669 )

Preneed cemetery receivables, at amortized cost $ 48,211 $ 53,936

Cemetery receivables, at amortized cost $ 53,936 $ 72,086

allowance for credit losses ( 1,985 ) ( 3,495 )

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Preneed cemetery receivables, net $ 26,672 $ 35,575

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table summarizes the activity in our allowance for credit losses for Preneed cemetery receivables, net for the year ended December 31, 2023 (in thousands):

2 unchanged sentences

$ ( 1,283 ) $ ( 1,223 ) $ 251 $ ( 2,255 )

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

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

2023 2022 2021 2020 2019 Prior Total

Total preneed cemetery receivables, at amortized cost $ 27,597 $ 13,005 $ 7,028 $ 3,736 $ 1,237 $ 1,333 $ 53,936

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

Total cemetery receivables, at amortized cost $ 35,122 $ 19,478 $ 10,020 $ 4,584 $ 1,432 $ 1,450 $ 72,086

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

Past Due 61-90

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Total contracts $ 1,149 $ 739 $ 254 $ 3,155 $ 5,297 $ 53,533 $ 58,830

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 12) and Senior Notes (as defined in Note 14) are classified within Level 2 of the Fair Value Measurements hierarchy.

At December 31, 2023, the carrying value and fair value of our Credit Facility was $ 179.1 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 December 31, 2023, the carrying value of our acquisition debt was $ 6.0 million, which approximated its fair value.

The fair value of our Senior Notes was $ 355.4 million at December 31, 2023 based on the last traded or broker quoted price.

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 investment strategy of this fund is to generate attractive risk-adjusted returns over a multi-year performance period through the construction of a concentrated portfolio of investments possessing certain distinct business attributes that suggest the potential for long-term value creation.

The value of the investments in this fund cannot be redeemed at December 31, 2023 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 December 31, 2023 is $ 10.0 million.

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

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

We account for these investments at cost.

The following three-level valuation hierarchy based upon the transparency of inputs is utilized in the measurement and valuation of financial assets or liabilities as of the measurement date:

• Level 1—Fair value of securities based on unadjusted quoted prices for identical assets or liabilities in active markets.

Our investments classified as Level 1 securities include cash, U.S.

treasury debt, common stock and equity mutual funds;

• Level 2—Fair value of securities estimated based on quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted market prices that are observable or that can be corroborated by observable market data by correlation.

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

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

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

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

As of December 31, 2022 and 2023, we did not have any assets that had fair values determined by Level 3 inputs and no liabilities measured at fair value.

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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Cemetery perpetual care trust investments represent a portion of the proceeds from the sale of cemetery property interment rights that we are required by various state laws to deposit into perpetual care trust funds.

The income earned from these perpetual care trusts offsets maintenance expenses for cemetery property and memorials.

The income earned from

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

these perpetual care trusts offsets maintenance expenses for cemetery property and memorials.

This trust fund income is recognized in Other revenue.

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

Our Level 1 investments include cash, U.S.

treasury debt, common stock and equity mutual funds.

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

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

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

We review and update our fair value hierarchy classifications quarterly.

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

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

1 unchanged sentence

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

required performance of the underlying contractual obligations, the impact of current market conditions that may exist at any given time is not necessarily indicative of our ability to generate profit on our future performance obligations.

Because of the long-term relationship between the establishment of trust investments and the required performance of the underlying contractual obligations, the impact of current market conditions that may exist at any given time is not necessarily indicative of our ability to generate profit on our future performance obligations.

Preneed Cemetery Trust Investments

16 unchanged sentences

Common stock 1 43,057 9,466 ( 7,935 ) 44,588

Limited partnership fund 3,575 — ( 3 ) 3,572

Mutual funds:

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Fixed income securities:

agency obligations 2 803 — (72) 731

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

1 unchanged sentence

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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Total fixed income securities with an unrealized loss $ 995 $ ( 67 ) $ 12,954 $ ( 5,237 ) $ 13,949 $ ( 5,304 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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):

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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 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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Preneed funeral trust investments $ 104,553 $ 107,842

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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Common stock 1 38,600 8,858 ( 6,855 ) 40,603

Limited partnership fund 3,383 — ( 2 ) 3,381

Mutual funds:

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Market value as a percentage of cost 97.3 %

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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Fixed income securities:

treasury debt 1 484 — ( 45 ) 439

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

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Market value as a percentage of cost 93.3 %

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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, 2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

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Total fixed income securities with an unrealized loss $ 899 $ ( 64 ) $ 11,449 $ ( 4,709 ) $ 12,348 $ ( 4,773 )

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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):

3 unchanged sentences

Fixed income securities:

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

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

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Sales 40,658 7,419 17,300

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Cemetery Perpetual Care Trust Investments

5 unchanged sentences

Care trusts’ corpus $ 65,495 $ 84,351

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

8 unchanged sentences

Common stock 1 36,413 8,098 ( 6,580 ) 37,931

Limited partnership fund 3,042 — ( 2 ) 3,040

Mutual funds:

11 unchanged sentences

Total fixed income securities $ 28,421

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table reflects the cost and market values associated with the trust investments held in perpetual care trust funds at December 31, 2022 (in thousands):

15 unchanged sentences

Market value as a percentage of cost 90.4 %

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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, 2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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Sales 29,829 5,444 21,613

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

RECEIVABLES FROM PRENEED FUNERAL TRUSTS

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Cost Basis Fair Value

As of December 31, 2022

Cash and cash equivalents $ 6,547 $ 6,547

3 unchanged sentences

Total $ 22,196 $ 21,978

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The composition of the preneed trust funds at December 31, 2022 is as follows (in thousands):

Cost Basis Fair Value

As of December 31, 2021

Cash and cash equivalents $ 6,071 $ 6,071

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CONTRACTS FUNDED BY INSURANCE

When preneed funeral contracts are funded through third-party insurance policies, we earn a commission on the sale of the policies.

Insurance commissions are subject to refund (charge-back) if the preneed policy is cancelled within a year or if there is an imminent death of beneficiary before the first year anniversary of the policy.

We record these insurance commissions as Other revenue when the commission is no longer subject to refund, which is typically one year after the policy is issued.

When preneed funeral contracts are funded through third-party insurance policies, we earn a commission on the sale of the policies, which are recorded in Other revenue .

These insurance commissions are subject to refund (charge-back) if the preneed policy is cancelled within a year or if there is an imminent death of beneficiary before the first year anniversary of the policy.

Approximately 12%-15% of our preneed funeral contracts are cancelled before the first year anniversary of the policy.

As such, we recognize 80% of our commissions revenue at the time that it is earned and we defer 20% of the commissions revenue earned for twelve months until the commission is no longer subject to refund.

All selling costs incurred pursuant to the sale of the insurance funded preneed contracts are expensed as incurred.

Additionally, during the year ended December 31, 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 is subject to partial claw-back if certain preneed funeral sales volumes are not met within the ten-year term of the agreement.

As such, we will recognize the incentive payment in proportion to our achieved preneed funeral sales volume per the agreement at each reporting period.

During the year ended December 31, 2023, we recognized $ 0.2 million of the incentive payment as Other revenue.

Generally, at the time of the sale of either the preneed insurance or preneed trust contract, the intent is that the beneficiary has made a commitment to assign the proceeds to us for the fulfillment of the service and merchandise obligations on the preneed contract at the time of need.

1 unchanged sentence

Preneed funeral contracts to be funded at maturity by third-party insurance policies totaled $ 419.5 million and $ 434.9 million at December 31, 2022 and 2023, respectively, and are not recorded as assets or liabilities on our Consolidated Balance Sheet.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

Our acquisition debt and Credit Facility (as defined in Note 12) and Senior Notes (as defined in Note 14) are classified within Level 2 of the Fair Value Measurements hierarchy.

At December 31, 2022, the carrying value and fair value of our Credit Facility was $ 190.7 million.

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 December 31, 2022, the carrying value of our acquisition debt was $ 4.0 million, which approximated its fair value.

The fair value of our Senior Notes was $ 322.3 million at December 31, 2022 based on the last traded or broker quoted price.

We account for these investments at cost.

The following three-level valuation hierarchy based upon the transparency of inputs is utilized in the measurement and valuation of financial assets or liabilities as of the measurement date:

• Level 1—Fair value of securities based on unadjusted quoted prices for identical assets or liabilities in active markets.

Our investments classified as Level 1 securities include cash, U.S.

treasury debt, common stock and equity mutual funds;

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

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

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

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

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

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

INTANGIBLE AND OTHER NON-CURRENT ASSETS

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Prepaid agreements not-to-compete, net of accumulated amortization of $ 3,515 and $ 3,158 , respectively

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

Internal-use software, net of accumulated amortization of $ 200 and $ 444 , respectively

Other 124 380

Intangible and other non-current assets, net $ 32,930 $ 37,677

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

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

During the year ended December 31, 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.

For our 2022 annual

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

Amortization expense was $ 0.6 million, $ 0.7 million and $ 0.8 million for the years ended December 31, 2021, 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 $ 719,000 , $ 645,000 and $ 574,000 for the years ended December 31, 2020, 2021 and 2022, respectively.

Amortization expense was $ 0.6 million for each of the years ended December 31, 2021, 2022 and 2023.

Internal-use Software

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

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

Amortization expense was $ 0.2 million and $ 0.3 million for the years ended December 31, 2022 and 2023, respectively.

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

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CREDIT FACILITY AND ACQUISITION DEBT

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

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

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

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

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

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

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

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

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

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

The Third Credit Facility Amendment provides, among other things, for (i) modifications to the definitions of “Applicable Rate” and “Applicable Fee Rate” to change the applicable rates and pricing levels set forth in each pricing grid;

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

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

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

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

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

At December 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

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

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

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.

3 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

8 unchanged sentences

At December 31, 2023, we had outstanding borrowings under the Credit Facility of $ 179.1 million.

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

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, 2024 and is expected to automatically renew annually and secures our obligations under our various self-insured policies.

13 unchanged sentences

Original maturities typically range from five to twenty years .

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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Present value of Credit Facility and acquisition debt $ 179,100 $ 5,998

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

CONVERTIBLE SUBORDINATED NOTES

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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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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.

5 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

25 unchanged sentences

Total $ 400,000 $ ( 3,191 ) $ 396,809

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

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

13 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

7 unchanged sentences

Right-of-use assets obtained in exchange for new finance lease liabilities — 1,896

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

COMMITMENTS AND CONTINGENCIES

7 unchanged sentences

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

These agreements generally renew automatically on

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

These agreements generally renew automatically on an annual basis after their initial term has expired.

At December 31, 2023, the maximum estimated future cash commitments under these agreements with remaining commitment terms, and with original terms of more than one year, are as follows (in thousands):

Non-Compete Consulting Employment (a)

Non-Compete Consulting (1)

Employment (1)

Years ending December 31,

6 unchanged sentences

Total $ 7,729 $ 2,212 $ 13,280 $ 23,221

(a) Melvin C.

Payne, our Chairman of the Board and Chief Executive Officer, has an employment agreement that does not renew after the initial term.

(1) In connection with Mr.

Payne’s transition from Executive Chairman of the Board to serving as a special advisor to the Board, his employment agreement with the Company was terminated and he entered into a transition agreement, effective February 22, 2024.

For more information on this transition see Note 24 to the Consolidated Financial Statements.

Defined Contribution Plan

We sponsor a defined contribution plan, a 401K plan, for the benefit of our employees.

Matching contributions and plan administrative expenses totaled $ 2.3 million, $ 2.5 million and $ 2.8 million during the years ended December 31, 2020, 2021 and 2022, respectively.

Matching contributions and plan administrative expenses totaled $ 2.5 million during the year ended December 31, 2021 and $ 2.8 million during the years ended December 31, 2022 and 2023.

We do not offer any post-retirement or post-employment benefits.

3 unchanged sentences

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

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

8 unchanged sentences

Total income tax provision $ 11,145 $ 15,813 $ 13,016

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

A reconciliation of income taxes calculated at the U.S.

9 unchanged sentences

Total $ 11,145 25.1 % $ 15,813 27.6 % $ 13,016 28.0 %

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

As of December 31, 2022, tax years 2013 to 2020 are subject to examination by taxing authorities.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The tax effects of temporary differences from total operations that give rise to significant deferred tax assets and liabilities are as follows (in thousands):

7 unchanged sentences

Amortization of non-compete agreements 1,213 855

Prepaid assets 616 —

Right-of-use assets 4,819 4,347

Total deferred income tax assets 20,355 20,957

4 unchanged sentences

Preneed liabilities ( 2,582 ) ( 1,070 )

Prepaid assets — ( 161 )

Lease liabilities ( 4,212 ) ( 3,806 )

Prepaid assets and other ( 768 ) ( 1,189 )

Total deferred income tax liabilities ( 68,994 ) ( 72,928 )

1 unchanged sentence

Our deferred tax assets and liabilities, along with related valuation allowances, are classified as non-current on our Consolidated Balance Sheet at December 31, 2022 and 2023.

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

We record a valuation allowance to reflect the estimated amount

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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 recognized an immaterial net decrease in our valuation allowance during 2021 and 2022.

For state reporting purposes, we have $ 14.8 million of net operating loss carryforwards that will expire between 2024 and 2042, if not utilized.

5 unchanged sentences

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

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

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

At December 31, 2023, the Company’s unrecognized tax benefit (“UTB”) reserve for uncertain tax positions primarily relates to the uncertainty of receiving audit protection for revenue recognition of cemetery property for the benefit derived from carrying back losses generated in 2018 to tax years with a higher effective tax rate than the current 21.0% rate.

Our UTB reserve for the years ended December 31, 2022 and 2023 was $ 3.3 million and $ 3.4 million, respectively.

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

3 unchanged sentences

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

Gross increases - tax positions in prior period 105 66 —

Gross increases - tax positions in current period — — 88

Unrecognized tax benefit at end of year $ 3,761 $ 3,294 $ 3,382

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

At December 31, 2023, we expect that the $ 3.4 million of UTB will be recognized in the next twelve months.

We accrued interest of $ 0.1 million during 2023 and in total, as of December 31, 2023, recognized a liability related to the UTB's noted above for interest of $ 0.3 million.

During 2022, we accrued interest of $ 0.1 million and in total, as of December 31, 2022, recognized a liability for interest of $ 0.2 million.

As of December 31, 2023, we expect to receive approximately $ 1.9 million as a result of amended federal returns filed in 2017 for the tax years ended December 31, 2013, 2014 and 2015 in connection with various legislative changes.

In addition, we expect to receive approximately $ 2.0 million of carryback claims filed in 2020 for the tax years ended December 31, 2018 and 2019 related to the Coronavirus Aid, Relief, and Economic Security Act enacted on March 27, 2020 in response to the COVID-19 pandemic.

As of December 31, 2023, tax years 2013 to 2022 remain subject to examination by taxing authorities.

STOCKHOLDERS’ EQUITY

1 unchanged sentence

We are authorized to issue 80,000,000 shares of common stock, $ 0.01 per share par value.

We had 26,264,245 and 26,359,876 shares issued and 15,331,923 and 14,732,058 shares outstanding, net of 10,932,322 and 11,627,818 shares held in treasury at par, at December 31, 2021 and 2022, respectively.

We had 26,359,876 and 26,627,319 shares issued and 14,732,058 and 14,999,501 shares outstanding, net of 11,627,818 shares held in treasury at par, at December 31, 2022 and 2023, respectively.

Stock Based Compensation Plans

1 unchanged sentence

the Second Amended and Restated 2006 Long-Term Incentive Plan (as amended, the “Amended and Restated 2006 Plan”) and the 2017 Omnibus Incentive Plan (as amended, the “2017 Plan”).

The Amended and Restated 2006 Plan was terminated upon the approval of the 2017 Plan at the annual shareholders meeting on May 17, 2017.

The Amended and Restated 2006 Plan was terminated upon the approval of the 2017 Plan at the annual stockholders meeting on May 17, 2017.

The 2017 Plan expires on May 17, 2027.

All stock-based plans are administered by the Compensation Committee appointed by our Board of Directors (our “Board”).

All stock-based plans are administered by the Compensation Committee appointed by our Board.

At December 31, 2023, we had 2,001,964 shares available to issue under our 2017 Plan.

The termination of the Amended and Restated 2006 Plan does not affect the awards previously issued and outstanding.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Restricted Stock

10 unchanged sentences

Unvested at January 1 7,848 $ 31.05

Granted 142,020 $ 32.63

Vested ( 4,874 ) $ 29.40

1 unchanged sentence

Unvested at December 31 143,168 $ 32.65

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

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for restricted stock awards of $ 0.4 million, $ 0.2 million and $ 1.4 million for the years ended December 31, 2021, 2022 and 2023, respectively.

At December 31, 2023, we had $ 4.7 million of total unrecognized compensation costs related to unvested restricted stock awards, which are expected to be recognized over a weighted average period of 2.2 years.

Stock Options

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

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

Years Ended December 31,

9 unchanged sentences

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

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

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 year ended December 31, 2022 had a weighted average price of $ 49.48 .

4 unchanged sentences

The fair value of these options was $ 1.7 million.

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

(4) Stock options granted during the year ended December 31, 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.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

3 unchanged sentences

Exercised (1)

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

423,294 N/A 32,196 N/A 74,200 N/A

Returned for option price (2)

13 unchanged sentences

Treasury yield curve based on the expected life of the option in effect at the time of grant.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

1 unchanged sentence

2021 2022 2022 2022 2023

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

Grant date February 17 February 23 February 23 September 27 February 22

Expected holding period (years) 5.0 7.0 5.0 4.1 4.0

17 unchanged sentences

Exercisable at December 31 688 $ 30.38

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

A summary of the number of stock options and their weighted average grant date fair values during the year ended December 31, 2023 is presented in the table below (shares in thousands):

10 unchanged sentences

1,413 1,784 6,003

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table further describes our outstanding stock options at December 31, 2023:

10 unchanged sentences

$18.02 - $49.48 1,603,309 6.73 $ 35.04 688,248 5.16 $ 30.38

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

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

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

The aggregate intrinsic value of the outstanding and exercisable stock options were both $ 0.4 million at December 31, 2023.

We had $ 9.0 million of unrecognized compensation cost related to unvested stock options expected to be recognized over a weighted average period of 3.8 years at December 31, 2023.

We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for stock options of $ 2.4 million, $ 2.3 million and $ 2.9 million for the years ended December 31, 2021, 2022 and 2023, respectively.

Performance Awards

5 unchanged sentences

Cancelled 55,896 $ 799 30,743 $ 295 54,229 $ 1,565

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

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

Concurrently with the cancellation of those performance awards, the Compensation Committee of the Board approved 368,921 new performance awards to be issued to certain employees.

These new performance awards were treated as a modification of the cancelled awards and resulted in an additional $ 1.7 million of incremental compensation expense.

These awards will vest (if at all) on December 31, 2024, provided that the Company’s common stock reaches the predetermined growth targets for a sustained period beginning on the grant date and ending on December 31, 2024.

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

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

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

A summary of the number of performance awards and their weighted average grant date fair values during the year ended December 31, 2023 is presented in the table below (shares in thousands):

1 unchanged sentence

At January 1 432,036 $ 20.95

Granted 27,013 $ 46.71

Cancelled ( 54,229 ) $ 28.85

At December 31 377,807 $ 19.81

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

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

Grant date February 23, 2022 April 1, 2022

Simulation period (years) 2.85 2.75

Share price at grant date $ 49.48 $ 52.49

Expected volatility 43.99 % 44.44 %

Risk-free interest rate 1.75 % 2.55 %

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

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

Simulation period (years) 3.71 3.58 3.39 3.29 3.09

Share price at grant date $ 35.83 $ 38.78 $ 39.48 $ 45.27 $ 51.15

Expected volatility 41.17 % 41.79 % 42.85 % 43.44 % 45.50 %

Risk-free interest rate 0.52 % 0.46 % 0.53 % 0.49 % 0.85 %

At December 31, 2023, there was $ 2.3 million of unrecognized compensation cost related to performance awards expected to be recognized over a weighted average period of 12 months.

If all of the predetermined growth targets are met as of December 31, 2024, a total of 892,045 shares of common stock would be awarded to participants under this program.

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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for performance awards of $ 1.6 million, $ 2.5 million and $ 1.6 million during the years ended December 31, 2021, 2022 and 2023, respectively.

Employee Stock Purchase Plan

7 unchanged sentences

ESPP 61,904 $ 26.32 52,053 $ 32.38 63,372 $ 23.58

We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for our ESPP of $ 434,000 , $ 552,000 and $ 545,000 during the years ended December 31, 2020, 2021 and 2022, respectively.

We recorded stock-based compensation expense, which is included in Regional and unallocated funeral and cemetery costs and General, administrative and other expenses, for our ESPP of $ 0.6 million, $ 0.5 million and $ 0.6 million during the years ended December 31, 2021, 2022 and 2023, respectively.

The fair values of the right to purchase shares under the ESPP are estimated at the date of purchase with the four quarterly purchase dates using the following assumptions:

13 unchanged sentences

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

Former Employee

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

Years Ended December 31,

2021 2022 2023

Shares Fair Value Shares Fair Value Shares Fair Value

— $ — — $ — 30,000 $ 826

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

(1) During the year ended December 31, 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 $ 0.8 million, for the year ended December 31, 2023.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

12 unchanged sentences

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

On May 17, 2022, Bryan D.

Leibman resigned from the Board effective on that date.

He served as the Company's Lead Independent Director.

Effective with Mr.

Leibman’s resignation, the Board appointed Donald D.

Patteson, Jr.

as Lead Independent Director.

Non-employee director and board advisor common stock activity is as follows (in thousands, except shares):

7 unchanged sentences

(1) Common stock granted during the years ended December 31, 2021, 2022 and 2023 had a weighted average price of $ 42.14 , $ 37.14 and $ 28.60 , 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 $ 889,000 , $ 858,000 and $ 718,000 during the years ended December 31, 2020, 2021 and 2022, 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 $ 0.9 million, $ 0.7 million and $ 0.8 million during the years ended December 31, 2021, 2022 and 2023, respectively.

Cash Dividends

25 unchanged sentences

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

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

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

EARNINGS PER SHARE

11 unchanged sentences

Stock options 475 183 55

Convertible Notes 9 — —

Performance awards 382 670 597

2 unchanged sentences

Diluted earnings per common share $ 1.81 $ 2.63 $ 2.14

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

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

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:

Years Ended December 31,

2021 2022 2023

Antidilutive stock options — 311,143 1,208,396

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

2 unchanged sentences

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

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

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

SEGMENT REPORTING

22 unchanged sentences

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

The following table presents operating income (loss), income (loss) before income taxes, depreciation and amortization, interest expense, income tax expense (benefit), total assets, long-lived assets, goodwill, capital expenditures and number of operating locations by segment (in thousands, except number of operating locations):

The following table presents gross profit, operating income (loss), income (loss) before income taxes, depreciation and amortization, interest expense, income tax expense (benefit), total assets, long-lived assets, goodwill, capital expenditures and number of operating locations by segment (in thousands, except number of operating locations):

Funeral Cemetery Corporate Consolidated

2023 $ 81,912 $ 42,383 $ — $ 124,295

2022 83,067 36,159 — 119,226

2021 89,027 40,489 — 129,516

Operating income (loss):

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Federal income tax receivable 507 454

State income tax receivable — 421

Other current assets 149 137

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Vacation 3,430 3,647

Natural disaster liability 2,628 —

Interest 2,329 2,409

Salaries and wages 2,263 2,285

Employer payroll tax deferral 1,773 —

Employee meetings and award trips 746 1,185

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Cash paid for interest and financing costs $ 24,127 $ 24,456 $ 34,682

Cash paid (refunded) for taxes ( 4,457 ) 16,110 9,713

Cash paid for taxes 16,110 9,713 10,448

Land purchased in exchange for debt — — 2,550

Unsettled share repurchases 2,429 — —

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SUBSEQUENT EVENTS

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

On February 22, 2024, the Board announced the conclusion of the Company’s review of strategic alternatives, first announced on June 29, 2023, which was overseen by the Board with assistance from experienced financial advisors and legal counsel.

On February 21, 2024, the Board voted to bring the strategic review process to a close.

The Board unanimously determined that continuing to execute on the Company’s strategic plan as an independent, public company is in the best interests of the Company and its stockholders at this time.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

On February 22, 2024 (the “Transition Date”), the Company announced that Mr.

Payne, the Company’s founder and former Chief Executive Officer, will cease to serve as Executive Chairman of the Board, but he will remain on the Board until the Company’s 2024 annual meeting of stockholders, when the term for Class I directors is scheduled to expire.

Beginning on the Transition Date, Mr.

Payne will begin serving as a special advisor to the Board and senior management in a consulting role.

In connection with Mr.

Payne’s termination of employment, the employment-related provisions of his Employment Agreement, dated as of November 5, 2019, with the Company (as amended prior to the Transition Date, the “ Employment Agreement ”) terminated on the Transition Date.

On February 21, 2024, the Company and Mr.

Payne entered into a Transition Agreement (the “ Transition Agreement ”), setting forth the terms of his severance benefits and his consulting arrangement.

Under the Transition Agreement, Mr.

Payne is entitled to receive certain benefits, subject to the timely execution and non-revocation by Mr.

Payne and his spouse of waiver and release agreements in connection with the Transition Date and the end of the 12-month consulting term set forth in the Transition Agreement (the “ Releases ”) .

These payments and benefits include the following:

• Salary continuation for 24 months of $ 2.0 million ;

• 2023 annual bonus of $ 1.25 million ;

• Prorated 2024 bonus of $ 181,500 ;

• Prorated settlement of performance awards of $ 3.0 million payable in cash;

• Consulting payments of $ 1.0 million ;

• Payments for maintaining health benefits for Mr.

Payne and his spouse for up to 36 months;

• Reimbursement of legal expenses up to $ 35,000 .

All of the payments and benefits provided under the Transition Agreement are subject to Mr.

Payne’s continued compliance with certain confidentiality, non-competition, non-solicitation and non-disparagement provisions of the Employment Agreement, as well as to compliance by Mr.

Payne and his spouse with their respective Releases.

The Transition Agreement may be terminated by the Company upon the material breach of the Transition Agreement, the Employment Agreement or either of the Releases.

Payne’s death, any consulting fee payments would be paid to his estate.

CARRIAGE SERVICES, INC.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data