CARRIAGE SERVICES INC 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. CARRIAGE SERVICES, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page CONSOLIDATED FINANCIAL STATEMENTS: Reports of Independent Registered Public Accounting Firm (PCAOB ID Number 248 ) 41 Consolidated Balance Sheet as of December 31, 202 2 and 202 3 43 Consolidated Statements of Operations for the Years Ended December 31, 202 1 , 202 2 and 202 3 44 Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 202 1 , 202 2 and 202 3 45 Consolidated Statements of Cash Flows for the Years Ended December 31, 202 1 , 202 2 and 202 3 46 Notes to Consolidated Financial Statements 47 40 Report of Independent Registered Public Accounting Firm Board of Directors and Stockholders Carriage Services, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of Carriage Services, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023 and 2022, the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes and financial statement schedule included under Item 15(a) (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 1, 2024 expressed an unqualified opinion. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ GRANT THORNTON LLP We have served as the Company's auditor since 2014. Dallas, Texas March 1, 2024 41 Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders Carriage Services, Inc. Opinion on internal control over financial reporting We have audited the internal control over financial reporting of Carriage Services, Inc., (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2023, and our report dated March 1, 2024 expressed an unqualified opinion on those financial statements. Basis for opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Dallas, Texas March 1, 2024 42 CARRIAGE SERVICES, INC. CONSOLIDATED BALANCE SHEET (in thousands, except share data) December 31, 2022 2023 ASSETS Current assets: Cash and cash equivalents $ 1,170 $ 1,523 Accounts receivable, net 24,458 27,060 Inventories 7,613 8,347 Prepaid and other current assets 4,733 4,791 Total current assets 37,974 41,721 Preneed cemetery trust investments 95,065 96,374 Preneed funeral trust investments 104,553 107,842 Preneed cemetery receivables, net 26,672 35,575 Receivables from preneed funeral trusts, net 19,976 21,530 Property, plant and equipment, net 278,106 287,484 Cemetery property, net 104,170 114,580 Goodwill 410,137 423,643 Intangible and other non-current assets, net 32,930 37,677 Operating lease right-of-use assets 17,060 16,295 Cemetery perpetual care trust investments 66,307 85,331 Total assets $ 1,192,950 $ 1,268,052 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current portion of debt and lease obligations $ 3,172 $ 3,842 Accounts payable 11,675 11,866 Accrued and other liabilities 30,621 35,362 Total current liabilities 45,468 51,070 Acquisition debt, net of current portion 3,438 5,461 Credit facility 188,836 177,794 Senior notes 395,243 395,905 Obligations under finance leases, net of current portion 4,743 5,831 Obligations under operating leases, net of current portion 17,315 15,797 Deferred preneed cemetery revenue 51,746 61,048 Deferred preneed funeral revenue 32,029 39,537 Deferred tax liability 48,820 52,127 Other long-term liabilities 3,065 1,855 Deferred preneed cemetery receipts held in trust 95,065 96,374 Deferred preneed funeral receipts held in trust 104,553 107,842 Care trusts’ corpus 65,495 84,351 Total liabilities 1,055,816 1,094,992 Commitments and contingencies: Stockholders’ equity: Common stock, $ 0.01 par value; 80,000,000 shares authorized and 26,359,876 and 26,627,319 shares issued, respectively and 14,732,058 and 14,999,501 shares outstanding, respectively 264 266 Additional paid-in capital 238,780 241,291 Retained earnings 176,843 210,256 Treasury stock, at cost; 11,627,818 shares ( 278,753 ) ( 278,753 ) Total stockholders’ equity 137,134 173,060 Total liabilities and stockholders’ equity $ 1,192,950 $ 1,268,052 The accompanying condensed notes are an integral part of these Consolidated Financial Statements. 43 CARRIAGE SERVICES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) Years Ended December 31, 2021 2022 2023 Revenue: Service revenue $ 180,572 $ 181,271 $ 182,166 Property and merchandise revenue 167,721 161,970 169,490 Other revenue 27,593 26,933 30,864 375,886 370,174 382,520 Field costs and expenses: Cost of service 82,395 87,322 91,799 Cost of merchandise 113,871 116,453 123,817 Cemetery property amortization 6,670 5,859 6,039 Field depreciation expense 12,609 13,316 14,166 Regional and unallocated funeral and cemetery costs 25,846 22,960 16,576 Other expenses 4,979 5,038 5,828 246,370 250,948 258,225 Gross profit 129,516 119,226 124,295 Corporate costs and expenses: General, administrative and other 35,190 37,471 42,125 Net loss on divestitures, disposals and impairment charges 666 2,029 1,191 Operating income 93,660 79,726 80,979 Interest expense 25,445 25,895 36,266 Accretion of discount on convertible notes 20 — — Loss on extinguishment of debt 23,807 190 — Net gain on property damage, net of insurance claims — ( 3,471 ) ( 343 ) Other, net 84 ( 82 ) ( 1,373 ) Income before income taxes 44,304 57,194 46,429 Expense for income taxes 12,316 16,243 13,186 Tax benefit related to discrete items ( 1,171 ) ( 430 ) ( 170 ) Total expense for income taxes 11,145 15,813 13,016 Net income $ 33,159 $ 41,381 $ 33,413 Basic earnings per common share: $ 1.90 $ 2.78 $ 2.24 Diluted earnings per common share: $ 1.81 $ 2.63 $ 2.14 Dividends declared per common share: $ 0.4125 $ 0.4500 $ 0.4500 Weighted average number of common and common equivalent shares outstanding: Basic 17,409 14,857 14,803 Diluted 18,266 15,710 15,455 The accompanying condensed notes are an integral part of these Consolidated Financial Statements. 44 CARRIAGE SERVICES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in thousands) Shares Outstanding Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Total Balance – December 31, 2020 17,995 $ 260 $ 239,989 $ 102,303 $ ( 102,050 ) $ 240,502 Net Income – 2021 — — — 33,159 — 33,159 Issuance of common stock from employee stock purchase plan 62 1 1,629 — — 1,630 Issuance of common stock to directors and board advisor 15 — 642 — — 642 Issuance of restricted common stock 9 — — — — — Exercise of stock options 169 2 ( 1,259 ) — — ( 1,257 ) Cancellation and surrender of restricted common stock ( 11 ) — ( 375 ) — — ( 375 ) Stock-based compensation expense — — 4,871 — — 4,871 Dividends on common stock — — ( 7,264 ) — — ( 7,264 ) 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 Net Income – 2022 — — — 41,381 — 41,381 Issuance of common stock from employee stock purchase plan 52 1 1,685 — — 1,686 Issuance of common stock to directors and board advisor 12 — 435 — — 435 Exercise of stock options 10 — ( 63 ) — — ( 63 ) Cancellation and surrender of restricted common stock ( 6 ) — ( 205 ) — — ( 205 ) Stock-based compensation expense — — 5,524 — — 5,524 Dividends on common stock — — ( 6,763 ) — — ( 6,763 ) 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 Net Income – 2023 — — — 33,413 — 33,413 Issuance of common stock from employee stock purchase plan 63 — 1,494 — — 1,494 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 ) Cancellation and surrender of restricted common stock ( 3 ) — ( 78 ) — — ( 78 ) Stock-based compensation expense — — 6,426 — — 6,426 Dividends on common stock — — ( 6,708 ) — — ( 6,708 ) Other 8 — 276 — — 276 Balance – December 31, 2023 15,000 $ 266 $ 241,291 $ 210,256 $ ( 278,753 ) $ 173,060 The accompanying notes are an integral part of these Consolidated Financial Statements. 45 CARRIAGE SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Years Ended December 31, 2021 2022 2023 Cash flows from operating activities: Net income $ 33,159 $ 41,381 $ 33,413 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 20,520 19,799 21,117 Provision for credit losses 1,783 2,818 3,050 Stock-based compensation expense 5,513 5,959 7,703 Deferred income tax expense (benefit) ( 692 ) 3,036 3,307 Amortization of intangibles 1,285 1,286 1,401 Amortization of debt issuance costs 576 552 699 Amortization and accretion of debt 439 493 515 Loss on extinguishment of debt 23,807 190 — Net loss on divestitures, disposals and impairment charges 847 2,029 1,191 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: Accounts and preneed receivables ( 4,090 ) ( 5,358 ) ( 8,122 ) Inventories, prepaid and other current assets ( 4,449 ) 2,295 ( 72 ) Intangible and other non-current assets ( 1,181 ) ( 1,917 ) ( 3,246 ) Preneed funeral and cemetery trust investments ( 31,349 ) ( 17,679 ) ( 775 ) Accounts payable 522 ( 101 ) 169 Accrued and other liabilities 3,485 ( 9,120 ) 2,988 Deferred preneed funeral and cemetery revenue 5,010 1,302 14,968 Deferred preneed funeral and cemetery receipts held in trust 29,061 17,685 ( 966 ) Net cash provided by operating activities 84,246 61,024 75,590 Cash flows from investing activities: Acquisitions of businesses and real estate ( 3,285 ) ( 33,876 ) ( 44,500 ) Proceeds from divestitures and sale of other assets 7,875 5,027 4,132 Proceeds from insurance claims 7,758 2,440 1,403 Capital expenditures ( 24,883 ) ( 26,081 ) ( 18,039 ) Net cash used in investing activities ( 12,535 ) ( 52,490 ) ( 57,004 ) Cash flows from financing activities: Borrowings from the credit facility 266,168 155,400 86,100 Payments against the credit facility ( 157,968 ) ( 120,100 ) ( 97,700 ) Payment to redeem the 6.625% senior notes due 2026 ( 400,000 ) — — Payment of call premium for the redemption of the 6.625% senior notes due 2026 ( 19,876 ) — — Proceeds from the issuance of the 4.25% senior notes due 2029 395,500 — — Payment of debt issuance costs for the credit facility and 4.25% senior notes due 2029 ( 2,197 ) ( 922 ) — Conversions and maturity of the convertible notes ( 3,980 ) — — Payments on acquisition debt and obligations under finance leases ( 1,331 ) ( 882 ) ( 1,167 ) Payments on contingent consideration recorded at acquisition date ( 461 ) — — Proceeds from the exercise of stock options and employee stock purchase plan contributions 2,644 1,745 1,494 Taxes paid on restricted stock vestings and exercise of stock options ( 2,647 ) ( 327 ) ( 252 ) Dividends paid on common stock ( 7,264 ) ( 6,763 ) ( 6,708 ) Purchase of treasury stock ( 140,040 ) ( 36,663 ) — Net cash used in financing activities ( 71,452 ) ( 8,512 ) ( 18,233 ) Net increase in cash and cash equivalents 259 22 353 Cash and cash equivalents at beginning of year 889 1,148 1,170 Cash and cash equivalents at end of year $ 1,148 $ 1,170 $ 1,523 The accompanying notes are an integral part of these Consolidated Financial Statements. 46 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company Carriage Services, Inc. (“Carriage,” the “Company,” “we,” “us,” or “our”) is a leading provider of funeral and cemetery services and merchandise in the United States. Our operations are reported in two business segments: Funeral Home Operations, which currently 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 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. Our cemetery operations generate revenue primarily through sales of cemetery interment rights (primarily grave sites, lawn crypts, mausoleum spaces and niches), related cemetery merchandise (such as memorial markers, outer burial containers and monuments) and services (interments, inurnments and installation of cemetery merchandise). We provide cemetery services and products on both an atneed and preneed basis. Principles of Consolidation The accompanying Consolidated Financial Statements include the Company and its subsidiaries. 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 The preparation of our Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. On an ongoing basis, we evaluate our critical estimates and judgments, which include those related to the impairment of goodwill and the fair value measurements used in business combinations. These policies are considered critical because they may result in fluctuations in our reported results from period to period due to the significant judgments, estimates and assumptions about complex and inherently uncertain matters and because the use of different judgments, assumptions or estimates could have a material impact on our financial condition or results of operations. Actual results may differ from these estimates and such estimates may change if the underlying conditions or assumptions change. Historical performance should not be viewed as indicative of future performance because there can be no assurance the margins, operating income and net earnings, as a percentage of revenue, will be consistent from period to period. Cash and Cash Equivalents We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. 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 Our funeral receivables are recorded in Accounts receivable, net and primarily consist of amounts due for funeral services already performed. Atneed cemetery receivables and preneed cemetery receivables with payments expected to be received within one year from the balance sheet date are also recorded in Accounts receivable, net. Preneed cemetery receivables with payments expected to be received beyond one year from the balance sheet date are recorded in Preneed cemetery receivables, net. Our 47 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. For our funeral and atneed cemetery receivables, we have a collections policy where statements are sent to the customer at 30 days past due. Past due notification letters are sent at 45 days and continue until payment is received or the contract is placed with a third-party collections agency. For our preneed cemetery receivables, we have a collections policy where past due notification letters are sent to the customer beginning at 15 days past due and periodically thereafter until payment is received or the contract is cancelled. Our allowance for credit losses reflects our best estimate of expected credit losses over the term of both our funeral and cemetery receivables. Our policy is to write off receivables when we have determined they will no longer be collectible. Write-offs are applied as a reduction to the allowance for credit losses and any recoveries of previous write-offs are netted against bad debt expense in the period recovered. We determine our allowance for credit losses by using a loss-rate methodology, in which we assess our historical write-off of receivables against our total receivables over several years. From this historical loss-rate approach, we also consider the current and forecasted economic conditions expected to be in place over the life of our receivables. These estimates are impacted by a number of factors, including changes in the economy, demographics and competition in our local communities. We monitor our ongoing credit exposure through an active review of our customers’ receivables balance against contract terms and due dates. Our activities include timely performance of our accounts receivable reconciliations, assessment of our aging of receivables, dispute resolution and payment confirmation. We monitor any change in our historical write-off of receivables utilized in our loss-rate methodology and assess forecasted changes in market conditions within our credit reserve. See Note 6 to the Consolidated Financial Statements for additional information related to our funeral and cemetery receivables. Inventory Inventory consists primarily of caskets, outer burial containers and cemetery monuments and markers and is recorded at the lower of its cost basis or net realizable value. Inventory is relieved using specific identification in fulfillment of performance obligations on our contracts. Business Combinations Tangible and intangible assets acquired and liabilities assumed are recorded at fair value and goodwill is recognized for any difference between the price of the acquisition and fair value. We recognize the assets acquired, the liabilities assumed and any non-controlling interest in the acquiree at the acquisition date, measured at the fair value as of that date. Acquisition related costs are recognized separately from the acquisition and are expensed as incurred. We customarily estimate related transaction costs known at closing. To the extent that information not available to us at the closing date subsequently becomes available during the allocation period, we may adjust goodwill, intangible assets, assets or liabilities associated with the acquisition. 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. The pro forma impact of the acquisitions on prior periods is not presented as the impact is not material to our reported results. The results of the acquired businesses are included in our results of operations from the date of acquisition. See Note 3 to the Consolidated Financial Statements for additional information related to acquisitions. Divested Operations Prior to divesting a funeral home or cemetery, we first determine whether the sale of the net assets and activities (together referred to as a “set”) qualifies as a business. First, we perform a screen test to determine if the set is not a business. The principle of the screen is that if substantially all of the fair value of the gross assets sold resides in a single asset or group of similar assets, the set is not a business. If the screen is not met, we perform an assessment to determine if the set is a business by evaluating whether the set has both inputs and a substantive process that together significantly contribute to the ability to create outputs. When both inputs and a substantive process are present then the set is determined to be a business and we consider the accounting treatment of goodwill for that set (see discussion of Goodwill below). Goodwill is only allocated to the sale if the set is considered to be a business. 48 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 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. Goodwill The excess of the purchase price over the fair value of identifiable net assets of funeral home businesses and cemeteries acquired is recorded as goodwill. Goodwill has an indefinite life and is not subject to amortization. As such, we test goodwill for impairment on an annual basis as of August 31 st each year. Under current guidance, we are permitted to first assess qualitative factors to determine whether it is more-likely-than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test. We performed our most recent annual goodwill impairment test as of August 31, 2023. We intend to perform a quantitative impairment test at least once every three years and perform a qualitative assessment during the remaining two years. We conducted a quantitative assessment in 2022 and a qualitative assessment in 2023. In addition to our annual test, we assess the impairment of goodwill whenever events or changes in circumstances indicate that the carrying value of a reporting unit may be greater than fair value. Factors that could trigger an interim impairment review include, but are not limited to, significant negative industry or economic trends and significant adverse changes in the business climate, which may be indicated by a decline in our market capitalization or decline in operating results. Our quantitative goodwill impairment test involves estimates and management judgment. In the quantitative analysis, we compare the fair value of each reporting unit to its carrying value, including goodwill. If the fair value of the reporting unit exceeds its carrying amount, the goodwill of that reporting unit is not considered impaired. We determine fair value for each reporting unit using both an income approach, weighted 90%, and a market approach, weighted 10%. Our methodology for determining an income-based fair value is based on discounting projected future cash flows. The projected future cash flows include assumptions concerning future operating performance and economic conditions that may differ from actual future cash flows discounted at our weighted average cost of capital based on market participant assumptions. Our methodology for determining a market approach fair value utilizes the guideline public company method, in which we rely on market multiples of comparable companies operating in the same industry as the individual reporting units. In accordance with the guidance, if the fair value of the reporting unit is less than its carrying amount an impairment charge is recorded in an amount equal to the difference. For our 2023 annual qualitative assessment, we determined that there were no factors that would indicate the need to perform an additional quantitative goodwill impairment test. We concluded that it is more-likely-than-not that the fair value of our reporting units is greater than their carrying value and thus there was no impairment to goodwill. For our 2022 annual 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. When we divest a portion of a reporting unit that constitutes a business in accordance with GAAP, we allocate goodwill associated with that business to be included in the gain or loss on divestiture. The goodwill allocated is based on the relative fair value of the business being divested and the portion of the reporting unit that will be retained. Additionally, after each divestiture, we will test the goodwill remaining in the portion of the reporting unit to be retained for impairment using a qualitative assessment unless we deem a quantitative assessment to be appropriate to ensure the fair value of our reporting units is greater than their carrying value. 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. 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. See Note 4 to the Consolidated Financial Statements for additional information related to goodwill. Intangible Assets Our intangible assets include tradenames resulting from acquisitions and are included in Intangible and other non-current assets, net on our Consolidated Balance Sheet. Our tradenames are considered to have an indefinite life and are not subject to amortization. As such, we test our intangible assets for impairment on an annual basis as of August 31 st each year. Under current guidance, we are permitted to first assess qualitative factors to determine whether it is more-likely-than not that the fair 49 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) value of the tradename is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative impairment test. We performed our most recent annual intangible assets impairment test as of August 31, 2023. We intend to perform a quantitative impairment test at least once every three years and perform a qualitative assessment during the remaining two years. We conducted a quantitative assessment in 2022 and a qualitative assessment in 2023. In addition to our intangible assets annual test, we assess the impairment of intangible assets whenever certain events or changes in circumstances indicate that the carrying value of the intangible asset may be greater than the fair value. Factors that could trigger an interim impairment review include, but are not limited to, significant under-performance relative to historical or projected future operating results and significant negative industry or economic trends. Our quantitative intangible asset impairment test involves estimates and management judgment. Our quantitative analysis is performed using the relief from royalty method, which measures the tradenames by determining the value of the royalties that we are relieved from paying due to our ownership of the asset. We determine the fair value of the asset by discounting the cash flows that represent a savings in lieu of paying a royalty fee for use of the tradename. The discounted cash flow valuation uses projections of future cash flows and includes assumptions concerning future operating performance and economic conditions that may differ from actual future cash flows and the determination and application of an appropriate royalty rate and discount rate. To estimate the royalty rates for the individual tradename, we mainly rely on the profit split method, but also consider the comparable third-party license agreements and the return on asset method. A scorecard is used to assess the relative strength of the individual tradename to further adjust the royalty rates selected under the profit-split method for qualitative factors. In accordance with the guidance, if the fair value of the tradename is less than its carrying amount, then an impairment charge is recorded in an amount equal to the difference. As a result of our 2023 qualitative assessment, we determined that there were factors that would indicate the need to perform an additional quantitative impairment test for certain funeral home businesses. As a result of this additional quantitative impairment test, we recorded an impairment to the tradenames for two of our funeral homes of $ 0.2 million, during the 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. Preneed and Perpetual Care Trust Funds Preneed sales generally require deposits to a trust or purchase of a third-party insurance product. We have established a variety of trusts in connection with funeral home and cemetery operations as required under applicable state laws. Such trusts include (i) preneed funeral trusts; (ii) preneed cemetery merchandise and service trusts; and (iii) cemetery perpetual care trusts. Our preneed and perpetual care trust funds are reported in accordance with the principles of consolidating Variable Interest Entities (“VIEs”). In the case of preneed trusts, the customers are the legal beneficiaries. In the case of perpetual care trusts, we do not have a right to access the corpus in the perpetual care trusts. Our trust fund assets are reflected in our financial statements as Preneed cemetery trust investments, Preneed funeral trust investments and Cemetery perpetual care trust investments. We have recognized financial interests of third parties in the trust funds in our financial statements as Deferred preneed funeral and cemetery receipts held in trust and Care trusts’ corpus . The fair value of our trust fund assets are accounted for as Collateralized Financing Entities (“CFEs”) in ASC Topic 810. The accounting guidance for CFEs allows companies to elect to measure both the financial assets and financial liabilities using the more observable of the fair value of the financial assets or fair value of the financial liabilities. Pursuant to this guidance, we have determined the fair value of the financial assets of the trusts are more observable and we first measure those financial assets at fair value. Our fair value of the financial liabilities mirror the fair value of the financial assets, in accordance with the ASC. Any changes in fair value are recognized in earnings. In accordance with respective state laws, we are required to deposit a specified amount into perpetual and memorial care trust funds for each interment right and certain memorials sold. Income from the trust funds is distributed to us and used to provide for the care and maintenance of the cemeteries and mausoleums. Trust fund income is recognized as revenue when realized by the trust and distributable to us. We are restricted from withdrawing any of the principal balances of these funds. 50 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. This analysis identifies the primary beneficiary of a VIE as the enterprise that has both the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. Our analysis continues to support our position as the primary beneficiary in the majority of our funeral and cemetery trust funds. 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. On an ongoing basis, we monitor our historical trend and adjust our allowance accordingly. See Notes 8 and 9 to the Consolidated Financial Statements for additional information related to preneed and perpetual care trust funds. Deferred Revenue We have preneed funeral trust fund assets in trusts that are controlled and operated by third parties in which we do not have a controlling financial interest (less than 50%) in the trust assets. We account for these investments at cost, reflected in our financial statements as Receivables from preneed funeral trusts, net, with a corresponding amount recognized as Deferred preneed funeral revenue . Under certain state regulations, we are allowed to retain certain amounts not required to be deposited to a trust or used to purchase a third-party insurance policy. These amounts we retain represent future revenue that are not held in trust accounts and are recorded in Deferred preneed funeral and cemetery revenue. Future revenue that are held in trust accounts are included in Deferred preneed funeral and cemetery receipts held in trust discussed above. 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 We measure the securities held by our funeral merchandise and service, cemetery merchandise and service, and cemetery perpetual care trusts at fair value on a recurring basis in accordance with ASC Topic 820. This guidance defines fair value as the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The guidance establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. We disclose the extent to which fair value is used to measure financial assets and liabilities, the inputs utilized in calculating valuation measurements, and the effect of the measurement of significant unobservable inputs on earnings, or changes in net assets, as of the measurement date. We currently do not have any assets that have fair values determined by Level 3 inputs and no liabilities measured at fair value. In the ordinary course of business, we are typically exposed to a variety of market risks. Currently, these are primarily related to changes in fair market values related to outstanding debts and changes in the values of securities associated with the preneed and perpetual care trusts. Management is actively involved in monitoring exposure to market risk and developing and utilizing risk management techniques when appropriate and when available for a reasonable price. See Notes 7 and 8 to the Consolidated Financial Statements for additional required disclosures related to the fair value measurement of our financial assets and liabilities. Capitalized Commissions on Preneed Contracts We capitalize sales commissions and other direct selling costs related to preneed cemetery merchandise and services and preneed funeral trust contracts as these costs are incremental and recoverable costs of obtaining a contract with a customer. Our capitalized commissions on preneed contracts are amortized on a straight-line basis over the average maturity period of ten years for our preneed funeral trust contracts and eight years for our preneed cemetery merchandise and services contracts. 51 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. The selling costs related to preneed funeral insurance contracts continue to be expensed in the period incurred as these contracts are not included on our Consolidated Balance Sheet. See Note 11 to the Consolidated Financial Statements for additional information related to capitalized commissions on preneed contracts. Property, Plant and Equipment 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 is computed based on the straight-line method over the following estimated useful lives of the assets: Years Buildings and improvements 15 to 40 Furniture and fixtures 5 to 10 Machinery and equipment 3 to 15 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. Factors that could trigger an impairment review include, but are not limited to, significant under-performance relative to historical or projected future operating results. We evaluate our long-lived assets for impairment when a funeral home or cemetery business has negative earnings before interest, taxes, depreciation and amortization (“EBITDA”) for four consecutive years and if there has been a decline in EBITDA in that same period. We test the recoverability of our long-lived assets by comparing their carrying value to the sum of the undiscounted cash flows expected to result from the use of the assets over their remaining useful lives. We recognize an impairment loss if the carrying amount of the long-lived asset is not recoverable and exceeds its fair value. Additionally, assets to be disposed of and assets not expected to provide any future service potential are recorded at the lower of their carrying amount or fair value less estimated costs to sell. If we determine that the carrying value is not recoverable from the proceeds of the sale, we record an impairment loss at that time. Property, plant and equipment is comprised of the following (in thousands): December 31, 2022 December 31, 2023 Land $ 84,405 $ 87,635 Buildings and improvements 251,778 263,522 Furniture, equipment and vehicles 70,522 74,372 Property, plant and equipment, at cost 406,705 425,529 Less: accumulated depreciation ( 128,599 ) ( 138,045 ) Property, plant and equipment, net $ 278,106 $ 287,484 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. 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 estate acquisitions. 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. 52 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. In addition, we recorded depreciation expense of $ 13.8 million, $ 13.7 million and $ 14.7 million for the years ended December 31, 2021, 2022 and 2023, respectively. Cemetery Property When we acquire a cemetery, we utilize an internal and external approach to determine the fair value of the cemetery property. From an external perspective, we obtain an accredited appraisal to provide reasonable assurance for property existence, property availability (unrestricted) for development, property lines, available spaces to sell, identifiable obstacles or easements and general valuation inclusive of known variables in that market. From an internal perspective, we conduct a detailed analysis of the acquired cemetery property using other cemeteries in our portfolio as a benchmark. This provides the added benefit of relevant data that is not available to third party appraisers. Through this thorough internal process, we are able to identify viable costs of property based on historical experience, particular markets and demographics, reasonable margins, practical retail prices and park infrastructure and condition. Cemetery property was $ 104.2 million and $ 114.6 million, net of accumulated amortization of $ 59.0 million and $ 64.6 million at December 31, 2022 and 2023, respectively. When cemetery property is sold, the value of the cemetery property (interment right costs) is expensed as amortization using the specific identification method in the period in which the sale of the interment right is recognized as revenue. Our growth capital expenditures 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 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. Leases We have operating and finance leases. 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, 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. A right-of-use (“ROU”) asset represents our right to use the underlying asset for the lease term and the lease liability represents our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized on our Consolidated Balance Sheet at the lease commencement date based on the present value of lease payments over the lease term. 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. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage, are not included in the ROU assets or liabilities. These are expensed as incurred and recorded as variable lease expense. We have real estate lease agreements which require payments for lease and non-lease components and we account for these as a single lease component. Leases with an initial term of 12 months or less, that do not include an option to renew the underlying asset, are not recorded on our Consolidated Balance Sheet and expense is recognized on a straight-line basis over the lease term. Operating lease ROU assets are included in Operating lease right-of-use assets and operating lease liabilities are included in Current portion of operating lease obligation s and Obligations under operating leases, net of current portion on our Consolidated Balance Sheet. Finance lease ROU assets are included in Property, plant and equipment, net and finance lease 53 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. Equity Plans and Stock-Based Compensation We have equity-based employee and director compensation plans under which we have granted stock awards, stock options and performance awards. We also have an employee stock purchase plan (the “ESPP”). We recognize compensation expense in an amount equal to the fair value of the stock-based awards expected to vest or to be purchased over the requisite service period. We recognize the effect of forfeitures in compensation cost when they occur and any previously recognized compensation cost for an award is reversed in the period that the award is forfeited. Fair value is determined on the date of the grant. The fair value of restricted stock is determined using the stock price on the grant date. The fair value of options or awards containing options is determined using the Black-Scholes valuation model or the Monte-Carlo simulation pricing model. The fair value of the performance awards related to market performance conditions is determined using the Monte-Carlo simulation pricing model. The fair value of the ESPP is determined based on the discount element offered to employees and the embedded option element, which is determined using an option calculation model. We recognize all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) as income tax benefit or expense in the income statement. We treat the tax effects of exercised or vested awards as discrete items in the reporting period in which they occur. 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. See Note 18 to the Consolidated Financial Statements for additional information related to equity plans and stock-based compensation. Revenue Recognition Funeral and Cemetery Operations Revenue is recognized when control of the merchandise or services is transferred to the customer. Our performance obligations include the delivery of funeral and cemetery merchandise and services and cemetery property interment rights. Control transfers when merchandise is delivered or services are performed. For cemetery property interment rights, control transfers to the customer when the property is developed and the interment right has been sold and can no longer be marketed or sold to another customer. On our atneed contracts, we generally deliver the merchandise and perform the services at the time of need. Memorial services frequently include performance obligations to direct the service, provide facilities and motor vehicles, catering, flowers, and stationary products. All other performance obligations on these contracts, including arrangement, removal, preparation, embalming, cremation, interment, and delivery of urns and caskets and related memorialization merchandise are fulfilled at the time of need. Personalized marker merchandise and marker installation services sold on atneed contracts are recognized when control is transferred to the customer, generally when the marker is delivered and installed in the cemetery. Some of our contracts with customers include multiple performance obligations. For these contracts, we allocate the transaction price to each performance obligation based on its relative standalone selling price, which is based on prices charged to customers per our general price list. Package discounts are reflected net in Revenue . We recognize revenue when the merchandise is transferred or the service is performed, in satisfaction of the corresponding performance obligation. Sales taxes collected are recognized on a net basis in our Consolidated Financial Statements. Ancillary funeral service revenue, which is recorded in Other revenue, represents revenue from our flower shop, 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 . At December 31, 2023, CSV RIA provided investment management and advisory services to approximately 80 % of our trust assets, for a fee based on the market value of trust assets. Under state trust laws, we are allowed to charge the trust a fee for advising on the investment of the trust assets and these fees are recognized as income in the period in which services are provided. Balances due on undelivered preneed funeral trust contracts have been reclassified to reduce Deferred preneed funeral revenue on our Consolidated Balance Sheet of $ 8.9 million and $ 10.7 million at December 31, 2022 and 2023, respectively. As 54 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. Balances due from customers on delivered preneed cemetery contracts are included in Accounts receivable, net and Preneed cemetery receivables, net on our Consolidated Balance Sheet. Balances due on undelivered preneed cemetery contracts have been reclassified to reduce Deferred preneed cemetery revenue on our Consolidated Balance Sheet. The transaction price allocated to preneed merchandise and service performance obligations that were unfulfilled were $ 11.6 million and $ 15.8 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. However, we estimate an average maturity period of eight years for preneed cemetery contracts. See Note 21 to the Consolidated Financial Statements for additional information related to revenue. Income Taxes We and our subsidiaries file a consolidated U. S. federal income tax return, separate income tax returns in 15 states in which we operate and combined or unitary income tax returns in 14 states in which we operate. We record deferred taxes for temporary differences between the tax basis and financial reporting basis of assets and liabilities. We classify our deferred tax liabilities and assets as non-current on our Consolidated Balance Sheet. We record a valuation allowance to reflect the estimated amount of deferred tax assets for which realization is uncertain. Management reviews the valuation allowance at the end of each quarter and makes adjustments if it is determined that it is more-likely-than not that the tax benefits will be realized. We analyze tax benefits for uncertain tax positions and how they are to be recognized, measured, and derecognized in the financial statements; provide certain disclosures of uncertain tax matters; and specify how reserves for uncertain tax positions should be classified on our Consolidated Balance Sheet. See Note 17 to the Consolidated Financial Statements for additional information related to income taxes. Computation of Earnings Per Common Share Basic earnings per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Dilutive common equivalent shares consist of stock options and performance awards. Share-based awards that contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are recognized as participating securities and included in the computation of both basic and diluted earnings per share. Our grants of restricted stock awards to our employees and directors are considered participating securities, and we have prepared our earnings per share calculations attributable to common stockholders to exclude outstanding unvested restricted stock awards, using the two-class method, in both the basic and diluted weighted average shares outstanding calculation. Our performance awards are considered to be contingently issuable shares because their issuance is contingent upon the satisfaction of certain performance and service conditions. In accordance with ASC 260, we have included in the computation of diluted earnings per share the number of performance awards that would have been issuable as if the end of the reporting period was the end of the contingency period. These shares are considered to be outstanding at the beginning of the reporting period. See Note 20 to the Consolidated Financial Statements for additional information related to the computation of earnings per share. Subsequent Events We have evaluated events and transactions during the period subsequent to December 31, 2023 through the date the financial statements were issued for potential recognition or disclosure in the accompanying financial statements covered by this report. See Note 24 to the Consolidated Financial Statements for additional information related to subsequent events. 2. RECENTLY ISSUED ACCOUNTING STANDARDS 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 55 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. Income Taxes 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. 3. 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 in our Consolidated Statements of Operations from the date of acquisition. 56 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 Acquired (Excluding Goodwill) Goodwill Recorded Liabilities and Debt Assumed 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 Preneed trust assets 4,146 Property, plant & equipment 8,146 Cemetery property 2,375 Goodwill 19,511 Intangible and other non-current assets 2,145 Preneed trust liabilities ( 4,146 ) Deferred revenue ( 1,146 ) Purchase price $ 31,250 The intangible and other non-current assets relate to the fair value of tradenames and non-compete agreements. 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. 57 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 Acquired (Excluding Goodwill) Goodwill Recorded Liabilities and Debt Assumed August 8, 2022 Two Funeral Homes Kissimmee FL $ 4,995 $ 2,694 $ ( 1,439 ) October 25, 2022 Three Funeral Homes, One Cemetery and One Cremation Focused Business Charlotte, NC $ 12,036 $ 16,817 $ ( 3,853 ) 4. GOODWILL Many of the former owners and staff of our acquired funeral homes and certain cemeteries have provided high quality service to families for generations, which often represents a substantial portion of the value of a business. The excess of the purchase price over the fair value of identifiable net assets of funeral home businesses and cemeteries acquired is recorded as goodwill. The following table presents changes in goodwill in the accompanying Consolidated Balance Sheet (in thousands): December 31, 2022 December 31, 2023 Goodwill at the beginning of year $ 391,972 $ 410,137 Increase in goodwill related to acquisitions 19,511 13,506 Decrease in goodwill related to divestitures ( 901 ) — Decrease in goodwill related to assets held for sale ( 445 ) — Goodwill at the end of the year $ 410,137 $ 423,643 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. 58 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 5. DIVESTED 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 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): Years Ended December 31, 2021 2022 2023 Revenue $ 1,070 $ 656 $ 242 Operating income 6 54 6 Net loss on divestitures (1) ( 62 ) ( 736 ) ( 106 ) Income tax benefit 16 193 28 Net loss from divested operations, after tax $ ( 40 ) $ ( 488 ) $ ( 72 ) (1) Net loss on divestitures is recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations. 6. RECEIVABLES Accounts Receivable Accounts receivable is comprised of the following (in thousands): December 31, 2023 Funeral Cemetery Corporate Total Trade and financed receivables $ 8,822 $ 18,459 $ — $ 27,281 Other receivables 404 595 286 1,285 Allowance for credit losses ( 266 ) ( 1,240 ) — ( 1,506 ) Accounts receivable, net $ 8,960 $ 17,814 $ 286 $ 27,060 December 31, 2022 Funeral Cemetery Corporate Total Trade and financed receivables $ 9,518 $ 14,429 $ — $ 23,947 Other receivables 643 833 48 1,524 Allowance for credit losses ( 311 ) ( 702 ) — ( 1,013 ) Accounts receivable, net $ 9,850 $ 14,560 $ 48 $ 24,458 Other receivables include supplier rebates, commissions due from third party insurance companies and perpetual care income receivables. We do not provide an allowance for credit losses for these receivables as we have historically not had any collectability issues nor do we expect any in the foreseeable future. 59 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): January 1, 2023 Provision for Credit Losses Write Offs Recoveries December 31, 2023 Trade and financed receivables: Funeral $ ( 311 ) $ ( 1,088 ) $ 2,229 $ ( 1,096 ) $ ( 266 ) Cemetery ( 702 ) ( 739 ) 201 — ( 1,240 ) Total allowance for credit losses on Trade and financed receivables $ ( 1,013 ) $ ( 1,827 ) $ 2,430 $ ( 1,096 ) $ ( 1,506 ) Cemetery Receivables Our cemetery receivables are comprised of the following (in thousands): December 31, 2022 December 31, 2023 Interment rights $ 45,351 $ 60,863 Merchandise and services 8,585 11,223 Unearned finance charges 4,894 5,669 Cemetery receivables $ 58,830 $ 77,755 The components of our cemetery receivables are as follows (in thousands): December 31, 2022 December 31, 2022 Cemetery receivables $ 58,830 $ 77,755 Less: unearned finance charges ( 4,894 ) ( 5,669 ) Cemetery receivables, at amortized cost $ 53,936 $ 72,086 Less: allowance for credit losses ( 1,985 ) ( 3,495 ) Less: balances due on undelivered cemetery preneed contracts ( 11,552 ) ( 15,797 ) Less: amounts in accounts receivable ( 13,727 ) ( 17,219 ) Preneed cemetery receivables, net $ 26,672 $ 35,575 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): January 1, 2023 Provision for Credit Losses Write Offs December 31, 2023 Total allowance for credit losses on Preneed cemetery receivables, net $ ( 1,283 ) $ ( 1,223 ) $ 251 $ ( 2,255 ) 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 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): 31-60 Past Due 61-90 Past Due 91-120 Past Due >120 Past Due Total Past Due Current Total Recognized revenue $ 1,877 $ 715 $ 353 $ 3,790 $ 6,735 $ 49,554 $ 56,289 Deferred revenue 466 139 90 1,388 2,083 19,383 21,466 Total contracts $ 2,343 $ 854 $ 443 $ 5,178 $ 8,818 $ 68,937 $ 77,755 The aging of past due preneed cemetery receivables as of December 31, 2022 is as follows (in thousands): 31-60 Past Due 61-90 Past Due 91-120 Past Due >120 Past Due Total Past Due Current Total Recognized revenue $ 864 $ 555 $ 180 $ 2,146 $ 3,745 $ 38,639 $ 42,384 Deferred revenue 285 184 74 1,009 1,552 14,894 16,446 Total contracts $ 1,149 $ 739 $ 254 $ 3,155 $ 5,297 $ 53,533 $ 58,830 60 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 7. 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. 8. TRUST INVESTMENTS Preneed trust investments represent trust fund assets that we are generally permitted to withdraw as the services and merchandise are provided to customers. Preneed funeral and cemetery contracts are secured by payments from customers, less amounts not required by law to be deposited into trust. These earnings are recognized in Other revenue on our Consolidated Statements of Operations, when a service is performed or merchandise is delivered. Trust management fees charged by CSV RIA are included as revenue in the period in which they are earned. Our investments are diversified across multiple industry segments using a balanced allocation strategy to minimize long-term risk. We do not intend to sell and it is likely that we will not be required to sell the securities prior to their anticipated recovery. Cemetery perpetual care trust investments represent a portion of the proceeds from the sale of cemetery property interment rights that we are required by various state laws to deposit into perpetual care trust funds. The income earned from 61 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. Changes in the fair value of our trust fund assets ( Preneed funeral, cemetery and perpetual care trust investments ) are offset by changes in the fair value of our trust fund liabilities ( Deferred preneed funeral and cemetery receipts held in trust and Care trusts’ corpus ) and reflected in Other, net . There is no impact on earnings until such time the services are performed or the merchandise is delivered, causing the contract to be withdrawn from the trust in accordance with state regulations and the gain or loss is allocated to the contract. We rely on our trust investments to provide funding for the various contractual obligations that arise upon maturity of the underlying preneed contracts. Because of the long-term relationship between the establishment of trust investments and the required performance of the underlying contractual obligations, the impact of current market conditions that may exist at any given time is not necessarily indicative of our ability to generate profit on our future performance obligations. Preneed Cemetery Trust Investments The components of Preneed cemetery trust investments on our Consolidated Balance Sheet are as follows (in thousands): December 31, 2022 December 31, 2023 Preneed cemetery trust investments, at market value $ 98,269 $ 99,461 Less: allowance for contract cancellation ( 3,204 ) ( 3,087 ) Preneed cemetery trust investments $ 95,065 $ 96,374 The cost and market values associated with preneed cemetery trust investments at December 31, 2023 are detailed below (in thousands): Fair Value Hierarchy Level Cost Unrealized Gains Unrealized Losses Fair Market Value Cash and money market accounts 1 $ 9,643 $ — $ — $ 9,643 Fixed income securities: U.S. agency obligations 2 803 1 ( 51 ) 753 Foreign debt 2 7,764 1,371 ( 17 ) 9,118 Corporate debt 2 15,071 342 ( 3,657 ) 11,756 Preferred stock 2 10,965 473 ( 1,572 ) 9,866 Certificates of deposit 2 79 — ( 7 ) 72 Common stock 1 43,057 9,466 ( 7,935 ) 44,588 Limited partnership fund 3,575 — ( 3 ) 3,572 Mutual funds: Equity 1 553 10 ( 30 ) 533 Fixed income 2 11,369 16 ( 2,759 ) 8,626 Trust securities $ 102,879 $ 11,679 $ ( 16,031 ) $ 98,527 Accrued investment income $ 934 $ 934 Preneed cemetery trust investments $ 99,461 Market value as a percentage of cost 95.8 % The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands): Due in one year or less $ 140 Due in one to five years 9,177 Due in five to ten years 5,657 Thereafter 16,591 Total fixed income securities $ 31,565 62 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The cost and market values associated with preneed cemetery trust investments at December 31, 2022 are detailed below (in thousands): Fair Value Hierarchy Level Cost Unrealized Gains Unrealized Losses Fair Market Value Cash and money market accounts 1 $ 10,434 $ — $ — $ 10,434 Fixed income securities: U.S. agency obligations 2 803 — (72) 731 Foreign debt 2 12,241 910 ( 644 ) 12,507 Corporate debt 2 15,066 104 ( 4,139 ) 11,031 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 Mutual funds: Equity 1 362 — ( 33 ) 329 Fixed Income 2 12,324 10 ( 3,310 ) 9,024 Trust Securities $ 106,798 $ 6,562 $ ( 16,223 ) $ 97,137 Accrued investment income $ 1,132 $ 1,132 Preneed cemetery trust investments $ 98,269 Market value as a percentage of cost 91.0 % The following table summarizes our fixed income securities (excluding mutual funds) within our preneed cemetery trust investments in an unrealized loss position at December 31, 2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands): December 31, 2023 In Loss Position Less than 12 months In Loss Position Greater than 12 months Total Fair market value Unrealized Losses Fair market value Unrealized Losses Fair market value Unrealized Losses Fixed income securities: U.S. agency obligations $ — $ — $ 613 $ ( 51 ) $ 613 $ ( 51 ) Foreign debt 284 ( 5 ) 209 ( 12 ) 493 ( 17 ) Corporate debt 666 ( 62 ) 4,239 ( 3,595 ) 4,905 ( 3,657 ) Preferred stock 45 — 7,821 ( 1,572 ) 7,866 ( 1,572 ) Certificates of deposit — — 72 ( 7 ) 72 ( 7 ) Total fixed income securities with an unrealized loss $ 995 $ ( 67 ) $ 12,954 $ ( 5,237 ) $ 13,949 $ ( 5,304 ) 63 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): December 31, 2022 In Loss Position Less than 12 months In Loss Position Greater than 12 months Total Fair market value Unrealized Losses Fair market value Unrealized Losses Fair market value Unrealized Losses Fixed income securities: U.S. agency obligations $ 732 $ ( 72 ) $ — $ — $ 732 $ ( 72 ) Foreign debt 5,394 ( 308 ) 744 ( 336 ) 6,138 ( 644 ) Corporate debt 8,037 ( 3,922 ) 563 ( 217 ) 8,600 ( 4,139 ) Preferred stock 7,146 ( 1,271 ) 2,517 ( 518 ) 9,663 ( 1,789 ) Certificates of deposit 71 ( 8 ) — — 71 ( 8 ) Total fixed income securities with an unrealized loss $ 21,380 $ ( 5,581 ) $ 3,824 $ ( 1,071 ) $ 25,204 $ ( 6,652 ) Preneed cemetery trust investment security transactions recorded in Other, net on our Consolidated Statements of Operations are as follows (in thousands): Years ended December 31, 2021 2022 2023 Investment income $ 2,147 $ 2,219 $ 2,479 Realized gains 18,321 10,619 3,492 Realized losses ( 6,626 ) ( 2,548 ) ( 2,507 ) Unrealized gains (losses), net 6,047 ( 9,661 ) ( 4,352 ) Expenses and taxes ( 1,715 ) ( 1,748 ) ( 1,653 ) Net change in deferred preneed cemetery receipts held in trust ( 18,174 ) 1,119 2,541 $ — $ — $ — Purchases and sales of investments in the preneed cemetery trusts are as follows (in thousands): Years ended December 31, 2021 2022 2023 Purchases $ ( 41,414 ) $ ( 8,336 ) $ ( 22,478 ) Sales 43,265 8,248 18,378 Preneed Funeral Trust Investments Preneed funeral trust investments represent trust fund assets that we are permitted to withdraw as services and merchandise are provided to customers. Preneed funeral contracts are secured by payments from customers, less retained amounts not required to be deposited into trust. The components of Preneed funeral trust investments on our Consolidated Balance Sheet are as follows (in thousands): December 31, 2022 December 31, 2023 Preneed funeral trust investments, at market value $ 107,995 $ 111,247 Less: allowance for contract cancellation ( 3,442 ) ( 3,405 ) Preneed funeral trust investments $ 104,553 $ 107,842 64 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): Fair Value Hierarchy Level Cost Unrealized Gains Unrealized Losses Fair Market Value Cash and money market accounts 1 $ 26,707 $ — $ — $ 26,707 Fixed income securities: U. S. treasury debt 1 451 — ( 34 ) 417 Foreign debt 2 7,300 1,297 ( 16 ) 8,581 Corporate debt 2 13,848 323 ( 3,255 ) 10,916 Preferred stock 2 9,786 442 ( 1,468 ) 8,760 Common stock 1 38,600 8,858 ( 6,855 ) 40,603 Limited partnership fund 3,383 — ( 2 ) 3,381 Mutual funds: Equity 1 401 3 ( 29 ) 375 Fixed income 2 9,513 15 ( 2,383 ) 7,145 Other investments 2 3,510 — — 3,510 Trust securities $ 113,499 $ 10,938 $ ( 14,042 ) $ 110,395 Accrued investment income $ 852 $ 852 Preneed funeral trust investments $ 111,247 Market value as a percentage of cost 97.3 % The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands): Due in one year or less $ 46 Due in one to five years 8,317 Due in five to ten years 5,193 Thereafter 15,118 Total fixed income securities $ 28,674 The cost and market values associated with preneed funeral trust investments at December 31, 2022 are detailed below (in thousands): Fair Value Hierarchy Level Cost Unrealized Gains Unrealized Losses Fair Market Value Cash and money market accounts 1 $ 29,641 $ — $ — $ 29,641 Fixed income securities: U.S. treasury debt 1 484 — ( 45 ) 439 Foreign debt 2 10,851 818 ( 555 ) 11,114 Corporate debt 2 12,735 89 ( 3,443 ) 9,381 Preferred stock 2 10,730 391 ( 1,564 ) 9,557 Common stock 1 36,478 4,485 ( 5,187 ) 35,776 Mutual funds: Equity 1 326 — ( 30 ) 296 Fixed income 2 9,907 9 ( 2,691 ) 7,225 Other investments 2 3,592 — — 3,592 Trust securities $ 114,744 $ 5,792 $ ( 13,515 ) $ 107,021 Accrued investment income $ 974 $ 974 Preneed funeral trust investments $ 107,995 Market value as a percentage of cost 93.3 % 65 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): December 31, 2023 In Loss Position Less than 12 months In Loss Position Greater than 12 months Total Fair market value Unrealized Losses Fair market value Unrealized Losses Fair market value Unrealized Losses Fixed income securities: U.S. treasury debt $ — $ — $ 371 $ ( 34 ) $ 371 $ ( 34 ) Foreign debt 269 ( 5 ) 198 ( 11 ) 467 ( 16 ) Corporate debt 630 ( 59 ) 3,802 ( 3,196 ) 4,432 ( 3,255 ) Preferred stock — — 7,078 ( 1,468 ) 7,078 ( 1,468 ) Total fixed income securities with an unrealized loss $ 899 $ ( 64 ) $ 11,449 $ ( 4,709 ) $ 12,348 $ ( 4,773 ) The following table summarizes our fixed income securities (excluding mutual funds) within our preneed funeral trust investment in an unrealized loss position at December 31, 2022, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands): December 31, 2022 In Loss Position Less than 12 months In Loss Position Greater than 12 months Total Fair market value Unrealized Losses Fair market value Unrealized Losses Fair market value Unrealized Losses Fixed income securities: U.S. treasury debt $ 439 $ ( 45 ) $ — $ — $ 439 $ ( 45 ) Foreign debt 4,766 ( 274 ) 626 ( 281 ) 5,392 ( 555 ) Corporate debt 6,742 ( 3,248 ) 506 ( 195 ) 7,248 ( 3,443 ) Preferred stock 5,908 ( 1,099 ) 2,261 ( 465 ) 8,169 ( 1,564 ) Total fixed income securities with an unrealized loss $ 17,855 $ ( 4,666 ) $ 3,393 $ ( 941 ) $ 21,248 $ ( 5,607 ) Preneed funeral trust investment security transactions recorded in Other, net on our Consolidated Statements of Operations are as follows (in thousands): Years ended December 31, 2021 2022 2023 Investment income $ 1,747 $ 1,700 $ 2,004 Realized gains 17,091 9,446 3,354 Realized losses ( 6,155 ) ( 2,301 ) ( 2,170 ) Unrealized gains (losses), net 5,665 ( 7,723 ) ( 3,104 ) Expenses and taxes ( 1,221 ) 958 ( 848 ) Net change in deferred preneed funeral receipts held in trust ( 17,127 ) ( 2,080 ) 764 $ — $ — $ — Purchases and sales of investments in the preneed funeral trusts are as follows (in thousands): Years ended December 31, 2021 2022 2023 Purchases $ ( 38,175 ) $ ( 6,239 ) $ ( 21,425 ) Sales 40,658 7,419 17,300 66 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Cemetery Perpetual Care Trust Investments Care trusts’ corpus on our Consolidated Balance Sheet represent the corpus of those trusts plus undistributed income. The components of Care trusts’ corpus are as follows (in thousands): December 31, 2022 December 31, 2023 Cemetery perpetual care trust investments, at market value $ 66,307 $ 85,331 Obligations due from trust ( 812 ) ( 980 ) Care trusts’ corpus $ 65,495 $ 84,351 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): Fair Value Hierarchy Level Cost Unrealized Gains Unrealized Losses Fair Market Value Cash and money market accounts 1 $ 6,688 $ — $ — $ 6,688 Fixed income securities: Foreign debt 2 7,101 1,177 ( 18 ) 8,260 Corporate debt 2 13,491 334 ( 3,367 ) 10,458 Preferred stock 2 10,723 415 ( 1,435 ) 9,703 Common stock 1 36,413 8,098 ( 6,580 ) 37,931 Limited partnership fund 3,042 — ( 2 ) 3,040 Mutual funds: Equity 1 467 5 ( 26 ) 446 Fixed income 2 10,326 14 ( 2,382 ) 7,958 Trust securities $ 88,251 $ 10,043 $ ( 13,810 ) $ 84,484 Accrued investment income $ 847 $ 847 Cemetery perpetual care investments $ 85,331 Market value as a percentage of cost 95.7 % The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands): Due in one year or less $ — Due in one to five years 7,563 Due in five to ten years 5,005 Thereafter 15,853 Total fixed income securities $ 28,421 67 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): Fair Value Hierarchy Level Cost Unrealized Gains Unrealized Losses Fair Market Value Cash and money market accounts 1 $ 5,326 $ — $ — $ 5,326 Fixed income securities: Foreign debt 2 8,746 600 ( 470 ) 8,876 Corporate debt 2 10,540 118 ( 2,961 ) 7,697 Preferred stock 2 9,831 287 ( 1,374 ) 8,744 Common stock 1 28,625 3,443 ( 4,297 ) 27,771 Mutual funds: Equity 1 345 2 ( 22 ) 325 Fixed income 2 9,046 26 ( 2,310 ) 6,762 Trust securities $ 72,459 $ 4,476 $ ( 11,434 ) $ 65,501 Accrued investment income $ 806 $ 806 Cemetery perpetual care investments $ 66,307 Market value as a percentage of cost 90.4 % 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): December 31, 2023 In Loss Position Less than 12 months In Loss Position Greater than 12 months Total Fair market value Unrealized Losses Fair market value Unrealized Losses Fair market value Unrealized Losses Fixed income securities: Foreign debt $ 440 $ ( 8 ) $ 178 $ ( 10 ) $ 618 $ ( 18 ) Corporate debt 567 ( 53 ) 3,879 ( 3,314 ) 4,446 ( 3,367 ) Preferred stock — — 7,301 ( 1,435 ) 7,301 ( 1,435 ) Total fixed income securities with an unrealized loss $ 1,007 $ ( 61 ) $ 11,358 $ ( 4,759 ) $ 12,365 $ ( 4,820 ) The following table summarizes our fixed income securities within our perpetual care trust investment in an unrealized loss position at December 31, 2022, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands): December 31, 2022 In Loss Position Less than 12 months In Loss Position Greater than 12 months Total Fair market value Unrealized Losses Fair market value Unrealized Losses Fair market value Unrealized Losses Fixed income securities: Foreign debt $ 4,123 $ ( 218 ) $ 554 $ ( 252 ) $ 4,677 $ ( 470 ) Corporate debt 5,413 ( 2,818 ) 371 ( 143 ) 5,784 ( 2,961 ) Preferred stock 6,066 ( 1,032 ) 1,659 ( 342 ) 7,725 ( 1,374 ) Total fixed income securities with an unrealized loss $ 15,602 $ ( 4,068 ) $ 2,584 $ ( 737 ) $ 18,186 $ ( 4,805 ) 68 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): Years ended December 31, 2021 2022 2023 Realized gains $ 2,474 $ 1,454 $ 1,025 Realized losses ( 950 ) ( 309 ) ( 639 ) Unrealized gains (losses), net 4,421 ( 6,958 ) ( 3,767 ) Net change in care trusts’ corpus ( 5,945 ) 5,813 3,381 Total $ — $ — $ — Perpetual care trust investment security transactions recorded in Other revenue are as follows (in thousands): Years ended December 31, 2021 2022 2023 Investment income $ 10,443 $ 11,425 $ 12,824 Realized losses ( 118 ) ( 2,427 ) ( 1,583 ) Total $ 10,325 $ 8,998 $ 11,241 Purchases and sales of investments in the perpetual care trusts are as follows (in thousands): Years ended December 31, 2021 2022 2023 Purchases $ ( 28,317 ) $ ( 4,872 ) $ ( 18,024 ) Sales 29,829 5,444 21,613 9. RECEIVABLES FROM PRENEED FUNERAL TRUSTS Our receivables from preneed funeral trusts represent assets in trusts which are controlled and operated by third parties in which we do not have a controlling financial interest (less than 50%) in the trust assets. We account for these investments at cost. Receivables from preneed funeral trusts are as follows (in thousands): December 31, 2022 December 31, 2023 Preneed funeral trust funds, at cost $ 20,594 $ 22,196 Less: allowance for contract cancellation ( 618 ) ( 666 ) Receivables from preneed funeral trusts, net $ 19,976 $ 21,530 The following summary reflects the composition of the assets held in trust and controlled by third parties to satisfy our future obligations related to the underlying preneed funeral contracts at December 31, 2022 and 2023. The cost basis includes reinvested interest and dividends that have been earned on the trust assets. Fair value includes unrealized gains and losses on trust assets. The composition of the preneed trust funds at December 31, 2023 is as follows (in thousands): Historical Cost Basis Fair Value Cash and cash equivalents $ 6,547 $ 6,547 Fixed income investments 12,732 12,732 Mutual funds and common stocks 2,913 2,695 Annuities 4 4 Total $ 22,196 $ 21,978 69 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The composition of the preneed trust funds at December 31, 2022 is as follows (in thousands): Historical Cost Basis Fair Value Cash and cash equivalents $ 6,071 $ 6,071 Fixed income investments 11,795 11,795 Mutual funds and common stocks 2,725 2,440 Annuities 3 3 Total $ 20,594 $ 20,309 10. 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, 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. However, this commitment is generally revocable and the proceeds from the policy are portable, so the customer can choose to use an alternative provider at the time of need. 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. 11. INTANGIBLE AND OTHER NON-CURRENT ASSETS Intangible and other non-current assets are as follows (in thousands): December 31, 2022 December 31, 2023 Tradenames $ 25,610 $ 28,862 Capitalized commissions on preneed contracts, net of accumulated amortization of $ 2,990 and $ 3,788 , respectively 4,048 4,678 Prepaid agreements not-to-compete, net of accumulated amortization of $ 3,515 and $ 3,158 , respectively 1,877 1,335 Internal-use software, net of accumulated amortization of $ 200 and $ 444 , respectively 1,271 2,422 Other 124 380 Intangible and other non-current assets, net $ 32,930 $ 37,677 Tradenames 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. 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 70 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 $ 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 $ 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 $ 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): Capitalized Commissions Prepaid Agreements Internal-use Software Years ending December 31, 2024 $ 843 $ 424 $ 337 2025 778 377 510 2026 711 262 501 2027 646 142 495 2028 562 78 354 Thereafter 1,138 52 225 Total amortization expense $ 4,678 $ 1,335 $ 2,422 12. CREDIT FACILITY AND ACQUISITION DEBT 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. 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, among others. In addition, the Credit Facility also contains customary negative covenants, including, but not limited to, covenants that restrict (subject to certain exceptions) the ability of the Company and the Subsidiary Guarantors to incur indebtedness, grant liens, make investments, engage in mergers and acquisitions, and pay dividends and other restricted payments, and certain financial maintenance covenants. At December 31, 2023, we were subject to the following financial covenants under our Credit Facility: (A) a Total Leverage Ratio not to exceed 5.75 to 1.00 and (B) a Fixed Charge Coverage Ratio (as defined in the Credit Facility) of not less than 1.20 to 1.00 as of the end of any period of four consecutive fiscal quarters. These financial maintenance covenants are calculated for the Company and its subsidiaries on a consolidated basis. We were in compliance with all of the covenants contained in our Credit Facility at December 31, 2023. 71 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Our Credit Facility and acquisition debt consisted of the following (in thousands): December 31, 2022 December 31, 2023 Credit Facility $ 190,700 $ 179,100 Debt issuance costs, net of accumulated amortization of $ 1,926 and $ 2,478 , respectively ( 1,864 ) ( 1,306 ) Total Credit Facility $ 188,836 $ 177,794 Acquisition debt $ 3,993 $ 5,998 Less: current portion ( 555 ) ( 537 ) Total acquisition debt, net of current portion $ 3,438 $ 5,461 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, 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. At December 31, 2023, we had $ 68.3 million of availability under the Credit Facility. Outstanding borrowings under our Credit Facility bear interest at a prime rate or a BSBY rate, plus an applicable margin based on our leverage ratio. At December 31, 2023, the prime rate margin was equivalent to 2.375 % and the BSBY rate margin was 3.375 %. The weighted average interest rate on our Credit Facility was 4.0 % and 8.6 % for the years ended December 31, 2022 and 2023, respectively. We have no material assets or operations independent of the Subsidiary Guarantors, as all of our assets and operations are held and conducted by the Subsidiary Guarantors. Additionally, we do not currently have any significant restrictions on our ability to receive dividends or loans from any Subsidiary Guarantors. The interest expense and amortization of debt issuance costs related to our Credit Facility are as follows (in thousands): Years ended December 31, 2021 2022 2023 Credit Facility interest expense $ 1,820 $ 7,105 $ 17,251 Credit Facility amortization of debt issuance costs 380 412 552 Acquisition debt consists of deferred purchase price and promissory notes payable to sellers. A majority of the deferred purchase price and notes bear no interest and are discounted at imputed interest rates ranging from 6.5 % to 7.3 %. Original maturities typically range from five to twenty years . The imputed interest expense related to our acquisition debt is as follows (in thousands): Years ended December 31, 2021 2022 2023 Acquisition debt imputed interest expense $ 364 $ 311 $ 291 The aggregate maturities of our Credit Facility and acquisition debt for the next five years subsequent to December 31, 2023 and thereafter, excluding debt issuance costs, are as follows (in thousands): Credit Facility Acquisition Debt Years ending December 31, 2024 $ — $ 938 2025 — 938 2026 179,100 491 2027 — 491 2028 — 491 Thereafter — 5,928 Total Credit Facility and acquisition debt $ 179,100 $ 9,277 Less: Interest — ( 3,279 ) Present value of Credit Facility and acquisition debt $ 179,100 $ 5,998 72 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 13. CONVERTIBLE SUBORDINATED NOTES During the year ended December 31, 2021, we converted $ 2.4 million in aggregate principal amount of our 2.75 % convertible subordinated notes due 2021 (the “Convertible Notes”) held by certain holders for $ 3.8 million in cash and recorded $ 1.4 million for the reacquisition of the equity component. The Convertible Notes matured on March 15, 2021, at which time all Convertible Notes outstanding, $ 0.2 million in aggregate principal amount, were paid in full in cash at par value. Therefore, no Convertible Notes remain outstanding at December 31, 2022 and 2023. The interest expense and accretion of debt discount and debt issuance costs related to our Convertible Notes are as follows (in thousands): Years ended December 31, 2021 2022 2023 Convertible Notes interest expense $ 18 $ — $ — Convertible Notes accretion of debt discount 20 — — Convertible Notes amortization of debt issuance costs 1 — — The effective interest rate on the unamortized debt discount and debt issuance costs for the year ended December 31, 2021 was 3.1 % . 14. SENIOR NOTES At December 31, 2023, we had $ 400.0 million in aggregate principal amount of 4.25 % Senior Notes due 2029 (the “Senior Notes”) and related guarantees by the Subsidiary Guarantors, which were issued in a private offering under Rule 144A and Regulation S of the Securities Act. The Senior Notes were issued under an indenture, dated as of May 13, 2021 (the “Indenture”), among the Company, the Subsidiary Guarantors and Wilmington Trust, National Association, as trustee (“Collateral Trustee”). The Senior Notes are unsecured, senior obligations and are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally by each of the Subsidiary Guarantors. The Senior Notes mature on May 15, 2029, unless earlier redeemed or purchased and bear interest at 4.25 % per year, which is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2021. We may redeem the Senior Notes, in whole or in part, at the redemption price of 102.13 % on or after May 15, 2024, 101.06 % on or after May 15, 2025 and 100 % on or after May 15, 2026, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. At any time before May 15, 2024, we may also redeem all or part of the Senior Notes at the redemption prices described in the Indenture, plus accrued and unpaid interest, if any, to (but excluding) the date of redemption. In addition, before May 15, 2024, we may redeem up to 40 % of the aggregate principal amount of the Senior Notes outstanding using an amount of cash equal to the net proceeds of certain equity offerings, at a price of 104.25 % of the principal amount of the Senior Notes, plus accrued and unpaid interest, if any, to (but excluding) the date of redemption; provided that (1) at least 50 % of the aggregate principal amount of the Senior Notes (including any additional Senior Notes) outstanding under the Indenture remain outstanding immediately after the occurrence of such redemption (unless all Senior Notes are redeemed concurrently), and (2) each such redemption must occur within 180 days of the date of the consummation of any such equity offering. If a “change of control” occurs, holders of the Senior Notes will have the option to require us to purchase for cash all or a portion of their Senior Notes at a price equal to 101 % of the principal amount of the Senior Notes, plus accrued and unpaid interest. In addition, if we make certain asset sales and do not reinvest the proceeds thereof or use such proceeds to repay certain debt, we will be required to use the proceeds of such asset sales to make an offer to purchase the Senior Notes at a price equal to 100 % of the principal amount of the Senior Notes, plus accrued and unpaid interest. The Indenture contains restrictive covenants limiting our ability and our Restricted Subsidiaries (as defined in the Indenture) to, among other things, incur additional indebtedness or issue certain preferred shares, create liens on certain assets to secure debt, pay dividends or make other equity distributions, purchase or redeem capital stock, make certain investments, sell assets, agree to certain restrictions on the ability of Restricted Subsidiaries to make payments to us, consolidate, merge, sell or otherwise dispose of all or substantially all assets, or engage in transactions with affiliates. The Indenture also contains customary events of default. The debt discount and the debt issuance costs are being amortized using the effective interest method over the remaining term of 65 months of the Senior Notes. The effective interest rate on the unamortized debt discount and the unamortized debt issuance costs for the Senior Notes for both the years ended December 31, 2022 and 2023 was 4.42 % and 4.30 %, respectively. 73 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) The carrying value of our Senior Notes is reflected on our Consolidated Balance Sheet as follows (in thousands): December 31, 2022 December 31, 2023 Long-term liabilities: Principal amount $ 400,000 $ 400,000 Debt discount, net of accumulated amortization of $ 794 and $ 1,309 , respectively ( 3,706 ) ( 3,191 ) Debt issuance costs, net of accumulated amortization of $ 226 and $ 373 , respectively ( 1,051 ) ( 904 ) Carrying value of the Senior Notes $ 395,243 $ 395,905 The fair value of the Senior Notes, which are Level 2 measurements, was $ 355.4 million at December 31, 2023. The interest expense and amortization of debt discount, debt premium and debt issuance costs related to our Senior Notes are as follows (in thousands): Years ended December 31, 2021 2022 2023 Senior Notes interest expense $ 21,767 $ 16,980 $ 17,000 Senior Notes amortization of debt discount 504 493 515 Senior Notes amortization of debt premium 85 — — Senior Notes amortization of debt issuance costs 195 140 147 The aggregate maturities of our Senior Notes for the next five years subsequent to December 31, 2023 and thereafter are as follows (in thousands): Principal Maturity Discount Amortization Carrying Value Years ending December 31, 2024 $ — $ ( 539 ) $ ( 539 ) 2025 — ( 563 ) ( 563 ) 2026 — ( 588 ) ( 588 ) 2027 — ( 615 ) ( 615 ) 2028 — ( 642 ) ( 642 ) Thereafter 400,000 ( 244 ) 399,756 Total $ 400,000 $ ( 3,191 ) $ 396,809 15. LEASES 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): Years Ended December 31, Income Statement Classification 2021 2022 2023 Operating lease cost Facilities and grounds expense (1) $ 3,762 $ 3,375 $ 3,526 Short-term lease cost Facilities and grounds expense (1) 193 329 372 Variable lease cost Facilities and grounds expense (1) 160 324 234 Finance lease cost: Depreciation of leased assets Depreciation and amortization (2) $ 438 $ 438 $ 541 Interest on lease liabilities Interest expense 471 442 500 Total finance lease cost 909 880 1,041 Total lease cost $ 5,024 $ 4,908 $ 5,173 (1) Facilities and grounds expense is included within Cost of service and General, administrative and other on our Consolidated Statements of Operations. (2) Depreciation and amortization expense is included within Field depreciation expense and General, administrative and other on our Consolidated Statements of Operations. 74 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Supplemental cash flow information related to our leases is as follows (in thousands): Years Ended December 31, 2021 2022 2023 Cash paid for operating leases included in operating activities $ 3,822 $ 3,671 $ 3,779 Cash paid for finance leases included in financing activities 835 868 1,153 Right-of-use assets obtained in exchange for new leases are as follows (in thousands): Years Ended December 31, 2022 2023 Right-of-use assets obtained in exchange for new operating lease liabilities $ 674 $ 1,243 Right-of-use assets obtained in exchange for new finance lease liabilities — 1,896 Supplemental balance sheet information related to leases is as follows (in thousands): Lease Type Balance Sheet Classification December 31, 2022 December 31, 2023 Operating lease right-of-use assets Operating lease right-of-use assets $ 17,060 $ 16,295 Finance lease right-of-use assets Property, plant and equipment, net 6,770 8,249 Accumulated depreciation Property, plant and equipment, net ( 2,881 ) ( 3,059 ) Finance lease right-of-use assets, net $ 3,889 $ 5,190 Operating lease current liabilities Current portion of operating lease obligations $ 2,203 $ 2,713 Finance lease current liabilities Current portion of finance lease obligations 414 592 Total current lease liabilities $ 2,617 $ 3,305 Operating lease non-current liabilities Obligations under operating leases, net of current portion $ 17,315 $ 15,797 Finance lease non-current liabilities Obligations under finance leases, net of current portion 4,743 5,831 Total non-current lease liabilities $ 22,058 $ 21,628 Total lease liabilities $ 24,675 $ 24,933 The average lease terms and discount rates at December 31, 2023 are as follows: Weighted-average remaining lease term (years) Weighted-average discount rate Operating leases 7.9 8.1 % Finance leases 10.2 8.3 % The aggregate future lease payments for non-cancelable operating and finance leases at December 31, 2023 are as follows (in thousands): Operating Finance Lease payments due: 2024 $ 4,004 $ 1,152 2025 3,712 1,066 2026 3,606 1,093 2027 3,441 1,016 2028 3,232 772 Thereafter 6,853 4,512 Total lease payments $ 24,848 $ 9,611 Less: Interest ( 6,338 ) ( 3,188 ) Present value of lease liabilities $ 18,510 $ 6,423 At December 31, 2023, we had no significant operating or finance leases that had not yet commenced . 75 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 16. COMMITMENTS AND CONTINGENCIES Non-Compete, Consulting and Employment Agreements We have various non-compete agreements with former owners and employees. These agreements are generally for one to ten years and provide for periodic future payments over the term of the agreements. We have various consulting agreements with former owners of businesses we have acquired. Payments for such agreements are generally not made in advance. These agreements are generally for one to five years and provide for bi-weekly or monthly payments. We have employment agreements with our executive officers. These agreements are generally for three to five years and provide for participation in various incentive compensation arrangements. 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 (1) Employment (1) Total Years ending December 31, 2024 $ 2,347 $ 884 $ 5,470 $ 8,701 2025 1,956 508 4,181 6,645 2026 1,393 392 2,504 4,289 2027 897 225 1,000 2,122 2028 379 128 125 632 Thereafter 757 75 — 832 Total $ 7,729 $ 2,212 $ 13,280 $ 23,221 (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 $ 2.5 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. Litigation We are a party to various litigation matters and proceedings. For each of our outstanding legal matters, we evaluate the merits of the case, our exposure to the matter, possible legal or settlement strategies, and the likelihood of an unfavorable outcome. If we determine that an unfavorable outcome is probable and can be reasonably estimated, we establish the necessary accruals. We hold certain insurance policies that may reduce cash outflows with respect to an adverse outcome of certain of these litigation matters. 76 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 17. INCOME TAXES We are subject to taxation in the United States and various states. The provision for income taxes consisted of the following (in thousands): Years Ended December 31, 2021 2022 2023 Current: U. S. federal provision $ 8,848 $ 9,490 $ 7,862 State provision 2,989 3,287 1,847 Total current provision $ 11,837 $ 12,777 $ 9,709 Deferred: U. S. federal provision (benefit) $ ( 452 ) $ 1,723 $ 2,117 State provision (benefit) ( 240 ) 1,313 1,190 Total deferred provision (benefit) $ ( 692 ) $ 3,036 $ 3,307 Total income tax provision $ 11,145 $ 15,813 $ 13,016 A reconciliation of income taxes calculated at the U.S. federal statutory rate to those reflected in the Consolidated Statements of Operations is as follows (dollars in thousands): Years Ended December 31, 2021 2022 2023 Amount Percent Amount Percent Amount Percent Federal statutory rate $ 9,304 21.0 % $ 12,000 21.0 % $ 9,750 21.0 % Effect of state income taxes, net of federal benefit 2,180 4.9 3,630 6.3 2,421 5.2 Effect of non-deductible expenses and other, net ( 423 ) ( 1.0 ) 59 0.1 864 1.8 Effect of divestitures and impairment of businesses 103 0.2 138 0.2 — — Change in valuation allowance, net of federal benefit ( 19 ) — ( 14 ) — ( 19 ) — Total $ 11,145 25.1 % $ 15,813 27.6 % $ 13,016 28.0 % The tax effects of temporary differences from total operations that give rise to significant deferred tax assets and liabilities are as follows (in thousands): Years Ended December 31, 2022 2023 Deferred income tax assets: Net operating loss carryforwards $ 839 $ 694 Interest expense limitation 3,506 6,981 Tax credit carryforwards 75 63 State depreciation 1,297 1,310 Accrued and other liabilities 8,606 6,707 Amortization of non-compete agreements 1,213 855 Right-of-use assets 4,819 4,347 Total deferred income tax assets 20,355 20,957 Less valuation allowance ( 181 ) ( 156 ) Total deferred income tax assets $ 20,174 $ 20,801 Deferred income tax liabilities: Depreciation and amortization $ ( 61,432 ) $ ( 66,863 ) Preneed liabilities ( 2,582 ) ( 1,070 ) Lease liabilities ( 4,212 ) ( 3,806 ) Prepaid assets and other ( 768 ) ( 1,189 ) Total deferred income tax liabilities ( 68,994 ) ( 72,928 ) Total net deferred tax liabilities $ ( 48,820 ) $ ( 52,127 ) 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 77 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. For state reporting purposes, we have $ 14.8 million of net operating loss carryforwards that will expire between 2024 and 2042, if not utilized. Based on management’s assessment of the various state net operating losses, it was determined that it is more-likely-than not that we will be able to realize tax benefits on some portion of the amount of the state losses. The valuation allowance at December 31, 2023 was attributable to the deferred tax asset related to a portion of the state operating losses. We analyze tax benefits for uncertain tax positions and how they are to be recognized, measured, and derecognized in financial statements; provide certain disclosures of uncertain tax matters; and specify how reserves for uncertain tax positions should be classified on our Consolidated Balance Sheet. The deferred tax assets recognized for those NOLs are presented net of these unrecognized tax benefits. 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): Years Ended December 31, 2021 2022 2023 Unrecognized tax benefit at beginning of year $ 3,656 $ 3,761 $ 3,294 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 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. 18. STOCKHOLDERS’ EQUITY Share Authorization We are authorized to issue 80,000,000 shares of common stock, $ 0.01 per share par value. 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 During the year ended December 31, 2023, we had two stock benefits plans in effect under which stock, restricted stock, stock options and performance awards have been granted or remain outstanding: 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 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. 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. 78 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Restricted Stock Restricted 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 Granted (1) 9,300 $ 324 — $ — 142,020 $ 4,634 Returned for payroll taxes 10,399 $ 375 4,136 $ 205 1,473 $ 50 Cancelled 966 $ 27 1,950 $ 63 1,826 $ 61 (1) Restricted stock granted during the year ended December 31, 2021 and 2023 will vest over a three-year period, if the employee has remained continuously employed by us during the vesting period, at a weighted average stock price of $ 34.79 and $ 32.63 , respectively. A summary of the number of unvested restricted stock awards and their weighted average grant date fair values during the year ended December 31, 2023 is presented in the table below (shares in thousands): Restricted stock awards Shares Weighted Average Grant Date Fair Value Unvested at January 1 7,848 $ 31.05 Granted 142,020 $ 32.63 Vested ( 4,874 ) $ 29.40 Cancelled ( 1,826 ) $ 33.48 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 $ 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 Stock option grants and cancellations are as follows (in thousands, except shares): Years Ended December 31, 2021 2022 2023 Shares Fair Value Shares Fair Value Shares Fair Value Granted (1) 701,400 $ 7,115 58,500 $ 959 214,191 $ 2,506 Granted (2) — $ — 310,000 $ 5,388 — $ — Granted (3) 150,000 $ 1,684 — $ — — $ — Granted (4) — $ — 12,600 $ 143 — $ — Cancelled 74,688 $ 722 45,590 $ 512 105,150 $ 1,380 (1) Stock options granted during the year ended December 31, 2021, 2022 and 2023 had a weighted average price of $ 34.79 , $ 49.48 and $ 32.69 , respectively. The fair value of these options was calculated using the Black-Scholes option pricing model. The options granted in 2021 and 2022 vest over a five-year period and have a ten-year term. The options granted in 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 . The fair value of these options was calculated using the Black-Scholes option pricing model and vest over a seven-year period and have a ten-year term. These options will vest if the employee has remained continuously employed by us through the vesting period. (3) We granted 150,000 options to a key employee at a weighted average price of $ 34.79 . These options will vest when the price of our common stock closes at or above $ 53.39 ( 50,000 options) and $ 77.34 ( 100,000 options) for three consecutive days within the ten-year term and the employee has remained continuously employed by us through such date. The fair value of these options was $ 1.7 million. (4) Stock options granted during the 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. 79 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Additional stock option activity is as follows (in thousands, except shares): Years Ended December 31, 2021 2022 2023 Shares Cash Shares Cash Shares Cash Exercised (1) 423,294 N/A 32,196 N/A 74,200 N/A Returned for option price (2) 211,088 $ 1,013 18,797 $ 60 56,957 $ — Returned for payroll taxes (3) 43,534 $ 2,272 2,895 $ 123 5,486 $ 174 (1) Stock options exercised during the years ended December 31, 2021, 2022 and 2023 had a weighted average exercise price of $ 21.99 , $ 25.49 and $ 23.98 , respectively. (2) Represents shares withheld/cash received for the payment of the option price. (3) Represents shares withheld/cash paid for the payment of payroll taxes. Stock options are granted with an exercise price equal to the closing price of our common stock on the date of grant. All of the options granted and outstanding under this plan have either a seven or ten-year term. We utilized the Black-Scholes option pricing model and Monte-Carlo simulation pricing model for estimating the fair value of our stock options. These models allow for the use of a range of assumptions related to volatility, risk-free interest rate, expected holding period and dividend yield. The expected volatility utilized in these valuation models is based on the historical volatility of our stock price. The dividend yield and expected holding period are based on historical experience and management's estimate of future events. The risk-free interest rate is derived from the U.S. Treasury yield curve based on the expected life of the option in effect at the time of grant. 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: Years Ended December 31, 2021 2022 2022 2022 2023 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 Awards granted 701,400 310,000 58,500 12,600 214,191 Dividend yield 1.15 % 0.91 % 0.91 % 1.43 % 1.38 % Expected volatility 36.72 % 34.35 % 33.18 % 43.68 % 43.68 % Risk-free interest rate 0.57 % 1.98 % 1.89 % 4.29 % 4.27 % Black-Scholes value $ 10.14 $ 17.38 $ 16.39 $ 11.35 $ 11.70 The fair value of the options granted using the Monte-Carlo simulation pricing model was estimated on the date of grant with the following assumptions: Year ended December 31, 2022 Awards granted 150,000 Dividend yield 1.15 % Expected volatility 34.08 % Risk-free interest rate 1.29 % A summary of the number of stock options and their weighted average exercise prices during the year ended December 31, 2023 is presented in the table below (shares in thousands): Shares Wtd. Avg. Ex. Price Outstanding at January 1 1,568 $ 35.23 Granted 214 $ 32.69 Exercised ( 74 ) $ 23.98 Forfeited or expired ( 105 ) $ 40.89 Outstanding at December 31 1,603 $ 35.04 Exercisable at December 31 688 $ 30.38 80 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): Shares Wtd. Avg. Fair Value Non-vested at January 1 976 $ 12.83 Granted 214 $ 11.70 Vested or exercised ( 185 ) $ 11.46 Forfeited ( 90 ) $ 13.59 Non-vested at December 31 915 $ 12.77 A summary of the intrinsic value of stock options exercised and the fair value of stock options vested for the three years ended December 31, 2023 is presented in the table below (in thousands): Years Ended December 31, 2021 2022 2023 Intrinsic value of options exercised $ 8,229 $ 580 $ 538 Fair value of stock options vested 1,413 1,784 6,003 The following table further describes our outstanding stock options at December 31, 2023: Options Outstanding Options Exercisable Actual Ranges of Exercise Prices Number Outstanding at 12/31/23 Weighted-Average Remaining Contractual Life Weighted-Average Exercise Price Number Exercisable at 12/31/23 Weighted-Average Remaining Contractual Life Weighted-Average Exercise Price $18.02 - $18.02 13,333 6.48 $ 18.02 13,333 6.48 $ 18.02 $20.06 - $26.54 358,335 3.23 $ 25.02 358,335 3.23 $ 25.02 $31.58 - $31.58 12,600 8.74 $ 31.58 4,200 8.74 $ 31.58 $32.69 - $49.48 1,219,041 7.74 $ 38.20 312,380 7.28 $ 37.08 $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 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 Performance award activity is as follows (in thousands, except shares): Years Ended December 31, 2021 2022 2023 Shares Fair Value Shares Fair Value Shares Fair Value Granted 55,302 $ 2,116 27,013 $ 1,262 — $ — Cancelled 55,896 $ 799 30,743 $ 295 54,229 $ 1,565 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): Performance Awards Shares Weighted Average Grant Date Fair Value At January 1 432,036 $ 20.95 Cancelled ( 54,229 ) $ 28.85 At December 31 377,807 $ 19.81 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. 81 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 We provide all employees the opportunity to purchase common stock through payroll deductions in our ESPP. Purchases are made quarterly; the price being 85 % of the lower of the price on the first day of the plan entry date (beginning of the fiscal year) or the actual date of purchase (end of quarter). ESPP activity is as follows (in thousands, except shares): Years Ended December 31, 2021 2022 2023 Shares Price Shares Price Shares Price 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 $ 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: Years Ended December 31, 2021 2022 2023 Dividend yield 0.01 % 0.01 % 1.30 % Expected volatility 48.1 % 30.2 % 53.5 % Risk-free interest rate 0.09 %, 0.09 %, 0.10 %, 0.10 % 0.08 %, 0.22 %, 0.31 %, 0.40 % 4.53 %, 4.77 %, 4.75 %, 4.72 % Expected life (years) 0.25 , 0.50 , 0.75 , 1.00 0.25 , 0.50 , 0.75 , 1.00 0.25 , 0.50 , 0.75 , 1.00 Expected volatilities are based on the historical volatility during the previous twelve months of the underlying common stock. The risk-free rate for the quarterly purchase periods is based on the U.S. Treasury yields in effect at the time of purchase. 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). Common Stock 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 Granted (1) — $ — — $ — 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. 82 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Good To Great Incentive Program Common stock issued to certain employees under this incentive program is as follows (in thousands, except shares): Years Ended December 31, 2021 2022 2023 Shares Fair Value Shares Fair Value Shares Fair Value — $ — 27,448 $ 1,358 8,444 $ 276 (1) Common stock granted during the year ended December 31, 2022 and 2023 had a grant date stock price of $ 49.48 and $32.69, respectively. Non-Employee Director and Board Advisor Compensation Our Director Compensation Policy provides that each independent director is entitled to a quarterly retainer of $ 35,000 payable in cash and/or unrestricted shares of our common stock at the end of each quarter. The lead director and chairman of our Audit Committee are entitled to an additional annual retainer of $ 10,000 , payable in quarterly installments of $ 2,500 each at the end of each quarter, and the chairman of our Corporate Governance and Compensation Committees are entitled to an additional annual retainer of $ 5,000 , payable in quarterly installments of $ 1,250 each at the end of each quarter. Any new independent director will receive upon admission to the Board a grant of $ 25,000 (in addition to the independent director annual retainer prorated at the time the new director is admitted to the Board) which can be taken in cash or unrestricted shares of our common stock. The board advisor is entitled to a quarterly retainer of $ 18,750 payable in cash and/or unrestricted shares of our common stock at the end of each quarter. 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. Non-employee director and board advisor 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 Board of Directors (1) 14,744 $ 622 11,155 $ 415 15,059 $ 431 Advisor to the Board (1) 466 $ 20 555 $ 20 691 $ 20 (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 $ 0.9 million, $ 0.7 million and $ 0.8 million during the years ended December 31, 2021, 2022 and 2023, respectively. Cash Dividends Our Board declared the following dividends payable on the dates below (in thousands, except per share amounts): 2023 Per Share Dollar Value March 1st $ 0.1125 $ 1,661 June 1st $ 0.1125 $ 1,679 September 1st $ 0.1125 $ 1,683 December 1st $ 0.1125 $ 1,685 2022 Per Share Dollar Value March 1st $ 0.1125 $ 1,725 June 1st $ 0.1125 $ 1,730 September 1st $ 0.1125 $ 1,653 December 1st $ 0.1125 $ 1,655 19. SHARE REPURCHASE PROGRAM Subject to market conditions, normal trading restrictions and satisfying certain financial covenants in our Credit Facility, and in the Indenture governing our Senior Notes, we may make purchases in the open market or through privately negotiated transactions under our Board authorized share repurchase program, in accordance with Rule 10b-18 of the Securities Exchange Act, as amended (the “Exchange Act”). 83 Table of Contents On February 23, 2022, our Board authorized an increase in our share repurchase program to permit us to purchase up to an additional $ 75.0 million under our share repurchase program, in addition to amounts previously authorized and outstanding in accordance with Rule 10b-18 of the Exchange Act, which totaled up to $ 265.0 million in share repurchase authorizations. Share repurchase activity is as follows (dollar value in thousands): Years Ended December 31, 2021 2022 2023 Number of Shares Repurchased (1) 2,906,983 695,496 — Average Price Paid Per Share $ 49.01 $ 49.22 $ — Dollar Value of Shares Repurchased (1) $ 142,469 $ 34,234 $ — (1) These amounts may differ from the repurchases of common stock amounts in the consolidated statements of cash flows due to unsettled share repurchases at the end of a period. In December 2021, we repurchased 37,408 shares for $ 2.4 million, the settlement of which occurred in January 2022. Our shares were purchased in the open market at times and in amounts as management determined appropriate based on factors such as market conditions, legal requirements and other business considerations. Shares purchased pursuant to the repurchase program are currently held as treasury stock. At December 31, 2023, our share repurchase program had $ 48.9 million authorized for repurchases. 20. EARNINGS PER SHARE Share-based awards that contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are participating securities and included in the computation of both basic and diluted earnings per share. Our grants of stock awards to our employees are considered participating securities and we have prepared our earnings per share calculations to exclude earnings allocated to unvested restricted stock awards, using the two-class method, in the basic and diluted weighted average shares outstanding calculation. The following table sets forth the computation of the basic and diluted earnings per share (in thousands, except per share data): Years Ended December 31, 2021 2022 2023 Numerator for basic and diluted earnings per share: Net income $ 33,159 $ 41,381 $ 33,413 Less: Earnings allocated to unvested restricted stock ( 53 ) ( 26 ) ( 306 ) Income attributable to common stockholders $ 33,106 $ 41,355 $ 33,107 Denominator: Denominator for basic earnings per common share - weighted average shares outstanding 17,409 14,857 14,803 Effect of dilutive securities: Stock options 475 183 55 Performance awards 382 670 597 Denominator for diluted earnings per common share - weighted average shares outstanding 18,266 15,710 15,455 Basic earnings per common share $ 1.90 $ 2.78 $ 2.24 Diluted earnings per common share $ 1.81 $ 2.63 $ 2.14 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 84 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) Our performance awards are considered to be contingently issuable shares because their issuance is contingent upon the satisfaction of certain performance and service conditions. At December 31, 2023, we had satisfied certain performance criteria for the first, second and third predetermined growth targets of our performance awards to be considered outstanding. Therefore, we included these awards in the computation of diluted earnings per share as of the beginning of the reporting period. 21. SEGMENT REPORTING Revenue, disaggregated by major source for each of our reportable segments was as follows (in thousands): Year Ended, December 31, 2023 Funeral Cemetery Total Services $ 163,600 $ 18,566 $ 182,166 Merchandise 85,795 16,385 102,180 Cemetery property — 67,310 67,310 Other revenue 15,381 15,483 30,864 Total $ 264,776 $ 117,744 $ 382,520 Year Ended, December 31, 2022 Funeral Cemetery Total Services $ 163,904 $ 17,367 $ 181,271 Merchandise 89,052 14,307 103,359 Cemetery property — 58,611 58,611 Other revenue 13,947 12,986 26,933 Total $ 266,903 $ 103,271 $ 370,174 Year Ended, December 31, 2021 Funeral Cemetery Total Services $ 164,082 $ 16,490 $ 180,572 Merchandise 92,023 13,741 105,764 Cemetery property — 61,957 61,957 Other revenue 13,982 13,611 27,593 Total $ 270,087 $ 105,799 $ 375,886 85 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 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 Gross profit 2023 $ 81,912 $ 42,383 $ — $ 124,295 2022 83,067 36,159 — 119,226 2021 89,027 40,489 — 129,516 Operating income (loss): 2023 $ 81,306 $ 41,923 $ ( 42,250 ) $ 80,979 2022 82,080 35,095 ( 37,449 ) 79,726 2021 88,591 40,353 ( 35,284 ) 93,660 Income (loss) before income taxes: 2023 $ 82,453 $ 42,208 $ ( 78,232 ) $ 46,429 2022 85,196 35,126 ( 63,128 ) 57,194 2021 88,015 40,473 ( 84,184 ) 44,304 Depreciation and amortization: 2023 $ 12,197 $ 8,008 $ 912 $ 21,117 2022 11,591 7,584 624 19,799 2021 11,062 8,217 1,241 20,520 Interest expense: 2023 $ 783 $ 8 $ 35,475 $ 36,266 2022 753 — 25,142 25,895 2021 835 — 24,610 25,445 Income tax expense (benefit): 2023 $ 23,115 $ 11,833 $ ( 21,932 ) $ 13,016 2022 23,555 9,712 ( 17,454 ) 15,813 2021 22,141 10,181 ( 21,177 ) 11,145 Total assets: 2023 $ 802,368 $ 448,018 $ 17,666 $ 1,268,052 2022 779,500 396,389 17,061 1,192,950 2021 769,539 390,344 18,748 1,178,631 Long-lived assets: 2023 $ 648,253 $ 209,401 $ 5,732 $ 863,386 2022 630,599 190,226 4,518 825,343 2021 611,181 176,398 3,839 791,418 Goodwill: 2023 $ 364,639 $ 59,004 $ — $ 423,643 2022 355,654 54,483 — 410,137 2021 344,823 47,149 — 391,972 Capital expenditures: 2023 $ 7,483 $ 10,061 $ 495 $ 18,039 2022 14,917 10,566 598 26,081 2021 11,511 9,704 3,668 24,883 Number of operating locations at year end: 2023 171 32 — 203 2022 171 32 — 203 2021 170 31 — 201 86 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 22. SUPPLEMENTARY DATA Balance Sheet The following table presents the detail of certain balance sheet accounts (in thousands): December 31, 2022 2023 Prepaids and other current assets: Prepaid expenses $ 4,077 $ 3,779 Federal income tax receivable 507 454 State income tax receivable — 421 Other current assets 149 137 Total prepaid and other current assets $ 4,733 $ 4,791 Current portion of debt and lease obligations: Acquisition debt $ 555 $ 537 Finance lease obligations 414 592 Operating lease obligations 2,203 2,713 Total current portion of debt and lease obligations $ 3,172 $ 3,842 Accrued and other liabilities: Incentive compensation $ 12,140 $ 13,156 Insurance 3,051 3,017 Unrecognized tax benefit 3,294 3,382 Vacation 3,430 3,647 Interest 2,329 2,409 Salaries and wages 2,263 2,285 Employee meetings and award trips 746 1,185 Income tax payable 459 — Commissions 743 1,144 Perpetual care trust payable 222 1,358 Ad valorem and franchise taxes 455 2,395 Other accrued liabilities 1,489 1,384 Total accrued and other liabilities $ 30,621 $ 35,362 Other long-term liabilities: Incentive compensation $ 2,541 $ 1,855 Other long-term liabilities 524 — Total other long-term liabilities $ 3,065 $ 1,855 23. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION The following information is supplemental disclosure for the Consolidated Statements of Cash Flows (in thousands): Years Ended December 31, 2021 2022 2023 Cash paid for interest and financing costs $ 24,127 $ 24,456 $ 34,682 Cash paid for taxes 16,110 9,713 10,448 Land purchased in exchange for debt — — 2,550 Unsettled share repurchases 2,429 — — Fair value of donated real property 635 — — 24. SUBSEQUENT EVENTS 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. 87 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; and • 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. Upon Mr. Payne’s death, any consulting fee payments would be paid to his estate. 88 CARRIAGE SERVICES, INC. SCHEDULE II — VALUATION AND QUALIFYING ACCOUNTS (in thousands) Description Balance at beginning of year Charged to costs and expenses Deduction Balance at end of year Year ended December 31, 2021: Allowance for credit losses, current portion $ 1,287 $ 1,240 $ 1,537 $ 990 Allowance for credit losses of preneed cemetery receivables, non-current portion 1,644 543 1,108 1,079 Employee severance accruals 162 1,431 952 641 Valuation allowance of the deferred tax asset 222 — 24 198 Year ended December 31, 2022: Allowance for credit losses, current portion $ 990 $ 1,821 $ 1,798 $ 1,013 Allowance for credit losses of preneed cemetery receivables, non-current portion 1,079 997 793 1,283 Employee severance accruals 641 1,880 1,361 1,160 Valuation allowance of the deferred tax asset 198 — 17 181 Year ended December 31, 2023: Allowance for credit losses, current portion $ 1,013 $ 1,827 $ 1,334 $ 1,506 Allowance for credit losses of preneed cemetery receivables, non-current portion 1,283 1,223 251 2,255 Employee severance accruals 1,160 186 799 547 Valuation allowance of the deferred tax asset 181 — 25 156 89 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None.