What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-05-03 compared with 2023-11-09 · 215 added, 377 removed, 843 unchanged (41% of the section changed)

3 unchanged sentences

(unaudited and in thousands, except share data)

December 31, 2022 September 30, 2023

December 31, 2023 March 31, 2024

Current assets:

49 unchanged sentences

(unaudited and in thousands, except per share data)

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

2022 2023 2022 2023

Three months ended March 31,

Service revenue $ 48,207 $ 49,699

13 unchanged sentences

General, administrative and other 10,180 16,240

Net (gain) loss on divestitures, disposals and impairments charges ( 7 ) 423 ( 433 ) 929

Net loss on divestitures, disposals and impairments charges 241 1,545

Operating income 20,634 19,477

Interest expense 8,539 8,712

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

Loss on property damage, net of insurance claims 271 —

Other, net ( 522 ) 43

1 unchanged sentence

Expense for income taxes 3,568 3,519

Tax adjustment related to discrete items 139 73 ( 496 ) 150

(Benefit) expense related to discrete income tax items ( 66 ) 230

Total expense for income taxes 3,502 3,749

13 unchanged sentences

(unaudited and in thousands)

Nine months ended September 30,

Three months ended March 31,

Cash flows from operating activities:

4 unchanged sentences

Stock-based compensation expense 2,141 489

Deferred income tax expense 1,699 87

Deferred income tax benefit ( 178 ) ( 2,342 )

Amortization of intangibles 321 332

1 unchanged sentence

Amortization and accretion of debt 127 132

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

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

Gain on sale of real property — ( 658 )

Other ( 153 ) —

Net loss on divestitures, disposals and impairment charges 241 1,545

Loss on property damage, net of insurance claims 271 —

Gain on sale of excess land ( 530 ) —

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

5 unchanged sentences

Accrued and other liabilities 1,924 4,831

Incentive payment from vendor — 6,000

Deferred preneed funeral and cemetery revenue 8,132 2,267

2 unchanged sentences

Cash flows from investing activities:

Acquisitions of businesses and real property ( 8,876 ) ( 44,000 )

Acquisitions of businesses ( 44,000 ) —

Proceeds from divestitures and sale of other assets 1,275 10,877

1 unchanged sentence

Capital expenditures ( 4,982 ) ( 3,551 )

Net cash used in investing activities ( 22,700 ) ( 53,385 )

Net cash (used in) provided by investing activities ( 47,286 ) 7,372

Cash flows from financing activities:

1 unchanged sentence

Payments against the credit facility ( 28,800 ) ( 38,600 )

Payment of debt issuance costs for the credit facility and senior notes ( 339 ) —

Payments on acquisition debt and obligations under finance leases ( 127 ) ( 152 )

2 unchanged sentences

Dividends paid on common stock ( 1,661 ) ( 1,686 )

Purchase of treasury stock ( 36,663 ) —

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

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

Net cash provided by (used in) financing activities 21,540 ( 26,909 )

Net increase in cash and cash equivalents 123 166

Cash and cash equivalents at beginning of period 1,170 1,523

4 unchanged sentences

(unaudited and in thousands)

Three months ended September 30, 2022

Outstanding Common

Stock Additional

Capital Retained

Earnings Treasury

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

Net income — — — 5,860 — 5,860

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

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

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

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

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

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

Three months ended September 30, 2023

Outstanding Common

Stock Additional

Capital Retained

Earnings Treasury

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

Net income — — — 4,645 — 4,645

Issuance of common stock from employee stock purchase plan 12 — 284 — — 284

Issuance of common stock to directors and board advisor 5 — 161 — — 161

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

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

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

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

CARRIAGE SERVICES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(unaudited and in thousands)

Nine months ended September 30, 2022

Three months ended March 31, 2023

Outstanding Common

6 unchanged sentences

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

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

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

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

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

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

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

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

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

Other 8 — 276 — — 276

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

Nine months ended September 30, 2023

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

Three months ended March 31, 2024

Outstanding Common

6 unchanged sentences

Issuance of common stock to directors and board advisor 4 — 113 — — 113

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

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

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

Cancellation and surrender of common and restricted stock ( 3 ) — ( 78 ) — — ( 78 )

Issuance of restricted common stock 157 2 ( 2 ) — — —

Cancellation and surrender of restricted common stock ( 43 ) — ( 418 ) — — ( 418 )

Stock-based compensation expense — — 376 — — 376

1 unchanged sentence

Other 31 — 790 — — 790

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

Balance – March 31, 2024 15,165 $ 268 $ 240,811 $ 217,229 $ ( 278,753 ) $ 179,555

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

6 unchanged sentences

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

At September 30, 2023, we operated 171 funeral homes in 26 states and 32 cemeteries in 11 states.

At March 31, 2024, we operated 165 funeral homes in 26 states and 31 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.

20 unchanged sentences

Deferred Revenue

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

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

We did not withdraw any realized capital gains and earnings from our preneed trust investments during the three months ended March 31, 2024.

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

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

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

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

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

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

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

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

We performed our most recent annual goodwill impairment test as of August 31, 2023.

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

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

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

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

Our quantitative goodwill impairment test involves estimates and management judgment.

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

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

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

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

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

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

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

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

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

For our 2022 annual quantitative assessment, there was no impairment to goodwill as the fair value of our reporting units was greater than the carrying value.

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

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

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

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

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

Intangible Assets

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

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

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

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

value of the tradename is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative impairment test.

We performed our most recent annual intangible assets impairment test as of August 31, 2023.

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

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

In addition to our intangible assets annual test, we assess the impairment of intangible assets whenever certain events or changes in circumstances indicate that the carrying value of the intangible asset may be greater than the fair value.

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

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

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

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

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

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

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

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

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

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

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

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

Property, Plant and Equipment

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

December 31, 2022 September 30, 2023

December 31, 2023 March 31, 2024

Land $ 87,635 $ 86,888

Buildings and improvements 263,522 260,864

Furniture, equipment and automobiles 70,522 76,653

Furniture, equipment and vehicles 74,372 72,880

Property, plant and equipment, at cost 425,529 420,632

1 unchanged sentence

Property, plant and equipment, net $ 287,484 $ 281,965

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

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

We also divested one funeral home that had a carrying value of property, plant and equipment of $ 0.3 million, which was included in the loss on the sale of divestitures and recorded in Net (gain) loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

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

Additionally, we sold real property for $ 3.3 million, with a carrying value of $ 1.8 million, resulting in a gain on the sale of $ 1.4 million.

We also divested two funeral homes that had a carrying value of property, plant and equipment of $ 0.7 million, which was included in the loss on the sale of divestitures and recorded in Net (gain) loss on divestitures, disposals and impairment charges.

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

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

During the three months ended March 31, 2024, we sold six funeral homes and one cemetery that had a carrying value of property, plant and equipment of $ 3.1 million, which was included in the loss on sale and recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

During the three months ended March 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.

Our growth and maintenance capital expenditures totaled $ 2.9 million and $ 1.6 million for the three months ended March 31, 2023 and 2024, respectively.

In addition, we recorded depreciation expense of $ 3.5 million and $ 3.6 million for the three months ended March 31, 2023 and 2024, respectively.

Cemetery Property

Cemetery property was $ 104.2 million and $ 113.2 million, net of accumulated amortization of $ 59.0 million and $ 63.0 million at December 31, 2022 and September 30, 2023, respectively.

Cemetery property was $ 114.6 million and $ 114.0 million, net of accumulated amortization of $ 64.6 million and $ 66.2 million at December 31, 2023 and March 31, 2024, respectively.

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

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

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

During the nine months ended September 30, 2023, we acquired cemetery property for $ 9.0 million related to our acquisition of a business located in Bakersfield, CA, as more fully described in Note 3 to the Consolidated Financial Statements.

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

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

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

Our growth capital expenditures for cemetery property development totaled $ 2.1 million and $ 2.0 million for the three months ended March 31, 2023 and 2024, respectively.

We recorded amortization expense for cemetery interment rights of $ 1.2 million and $ 1.8 million for the three months ended March 31, 2023 and 2024, respectively.

During the three months ended March 31, 2024, we sold one cemetery that had a carrying value of cemetery property of $ 0.8 million, which was included in the loss on sale and recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

During the three months ended March 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 sold two cemeteries that had a carrying value of cemetery property of $ 0.8 million, which was included in the loss on sale and recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

Income tax expense was $ 3.5 million and $ 3.7 million for the three months ended March 31, 2023 and 2024, respectively.

Our operating tax rate before discrete items was 28.9 % and 32.8 % for the three months ended March 31, 2023 and 2024, respectively.

Subsequent Events

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

We have evaluated events and transactions during the period subsequent to March 31, 2024 through the date the financial statements were issued for potential recognition or disclosure in the accompanying financial statements covered by this report.

RECENTLY ISSUED ACCOUNTING STANDARDS

Credit Losses - Vintage Disclosures

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

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

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

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

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, and therefore were effective for us for our fiscal year beginning January 1, 2024 and for interim periods within our fiscal year beginning January 1, 2025.

We expect the adoption will have no impact on our Consolidated Financial Statements.

Accounting Pronouncements Not Yet Adopted

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

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

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

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

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

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

Early adoption is permitted.

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

We expect the adoption will have no impact on our Consolidated Financial Statements.

BUSINESS COMBINATIONS

4 unchanged sentences

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

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

We did not acquire any businesses during the three months ended March 31, 2024.

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.

16 unchanged sentences

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

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

As of December 31, 2023, our accounting for this acquisition was complete.

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

3 unchanged sentences

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

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

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

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

Purchase Price Allocation

Current assets $ 28

Preneed trust assets 1,439

Property, plant & equipment 2,986

Goodwill 2,694

Intangible and other non-current assets 542

Preneed trust liabilities ( 1,439 )

Purchase price $ 6,250

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

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

Acquisition Date Type of Business Market Assets

Goodwill) Goodwill

Recorded Liabilities

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

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

December 31, 2022 September 30, 2023

December 31, 2023 March 31, 2024

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

1 unchanged sentence

Decrease in goodwill related to divestitures — ( 8,748 )

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

Goodwill at the end of the period $ 423,643 $ 414,895

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

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

goodwill impairment test.

During the three months ended March 31, 2024, we allocated $ 8.7 million of goodwill to the sale of six funeral homes and one cemetery for a loss recorded in Net loss on divestitures, disposals and impairments charges, of which $ 7.8 million was allocated to our funeral homes segment and $ 1.0 million was allocated to our cemetery segment.

During the three months ended March 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.

DIVESTED OPERATIONS

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

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

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

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

During the three months ended March 31, 2024, we sold six funeral homes and one cemetery for an aggregate of $ 10.9 million.

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

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

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

2022 2023 2022 2023

Three months ended March 31,

Revenue $ 66 $ 1,151

4 unchanged sentences

Net loss from divested operations, after tax $ ( 40 ) $ ( 927 )

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

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

Accounts Receivable

3 unchanged sentences

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

September 30, 2023

March 31, 2024

Funeral Cemetery Corporate Total

12 unchanged sentences

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

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

January 1, 2024 Provision for Credit Losses Write Offs Recoveries March 31, 2024

Trade and financed receivables:

2 unchanged sentences

Total allowance for credit losses on trade and financed receivables $ ( 1,506 ) $ ( 446 ) $ 604 $ ( 257 ) $ ( 1,605 )

Balances due on undelivered preneed funeral trust contracts have been reclassified to reduce Deferred preneed funeral revenue on our Consolidated Balance Sheet of $ 8.9 million and $ 10.7 million at December 31, 2022 and September 30, 2023, respectively.

Balances due on undelivered preneed funeral trust contracts have been reclassified to reduce Deferred preneed funeral revenue on our Consolidated Balance Sheet of $ 10.7 million at both December 31, 2023 and March 31, 2024.

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

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

Preneed Cemetery Receivables

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

December 31, 2022 September 30, 2023

Cemetery Receivables

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

December 31, 2023 March 31, 2024

Interment rights $ 60,863 $ 63,328

1 unchanged sentence

Unearned finance charges 5,669 5,884

Preneed cemetery receivables $ 58,830 $ 74,013

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

December 31, 2022 September 30, 2023

Preneed cemetery receivables $ 58,830 $ 74,013

Cemetery receivables $ 77,755 $ 80,526

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

December 31, 2023 March 31, 2024

Cemetery receivables $ 77,755 $ 80,526

unearned finance charges ( 5,669 ) ( 5,884 )

Preneed cemetery receivables, at amortized cost $ 53,936 $ 68,606

Cemetery receivables, at amortized cost $ 72,086 $ 74,642

allowance for credit losses ( 3,495 ) ( 3,602 )

3 unchanged sentences

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

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

January 1, 2024 Provision for Credit Losses Write Offs March 31, 2024

Total allowance for credit losses on Preneed cemetery receivables, net

$ ( 2,255 ) $ ( 336 ) $ 292 $ ( 2,299 )

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

The amortized cost basis of our cemetery receivables by year of origination at March 31, 2024 is as follows (in thousands):

2024 2023 2022 2021 2020 Prior Total

Total preneed cemetery receivables, at amortized cost $ 12,395 $ 29,871 $ 17,435 $ 8,853 $ 3,818 $ 2,270 $ 74,642

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

The aging of past due cemetery receivables at March 31, 2024 is as follows (in thousands):

Past Due 61-90

7 unchanged sentences

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 $ 13.7 million at December 31, 2022 and September 30, 2023, respectively.

The transaction price allocated to preneed merchandise and service performance obligations that were unfulfilled were $ 15.8 million and $ 16.5 million at December 31, 2023 and March 31, 2024, respectively.

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

5 unchanged sentences

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

At September 30, 2023, the carrying value and fair value of our Credit Facility was $ 187.3 million.

At March 31, 2024, the carrying value and fair value of our Credit Facility was $ 154.1 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 September 30, 2023, the carrying value of our acquisition debt was $ 3.9 million, which approximated its fair value.

The fair value of our Senior Notes was $ 342.6 million at September 30, 2023 based on the last traded or broker quoted price.

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

of the reporting date.

At March 31, 2024, the carrying value of our acquisition debt was $ 6.0 million, which approximated its fair value.

The fair value of our Senior Notes was $ 355.2 million at March 31, 2024 based on the last traded or broker quoted price.

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

6 unchanged sentences

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

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

Our unfunded commitment for this investment at September 30, 2023 is $ 10.0 million.

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.

Beginning March 31, 2024, the agreement permits us to withdraw a percentage of the value of the investments in this fund through quarterly withdrawal dates with the intention to permit withdrawal of the entire investment over twelve successive withdrawal dates.

Our unfunded commitment for this investment at March 31, 2024 was $ 10.0 million.

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

5 unchanged sentences

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 our wholly-owned registered investment advisory firm (“CSV RIA”) are included as revenue in the period in which they are earned.

Trust management fees charged by our wholly-owned registered investment advisory firm 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.

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

December 31, 2022 September 30, 2023

December 31, 2023 March 31, 2024

Preneed cemetery trust investments, at market value $ 99,461 $ 101,990

1 unchanged sentence

Preneed cemetery trust investments $ 96,374 $ 98,757

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

The cost and market values associated with preneed cemetery trust investments at March 31, 2024 are detailed below (in thousands):

Fair Value Hierarchy Level Cost Unrealized

35 unchanged sentences

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

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

Mutual funds:

5 unchanged sentences

Market value as a percentage of cost 95.8 %

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

September 30, 2023

The following table summarizes our fixed income securities (excluding mutual funds) within our preneed cemetery trust investments in an unrealized loss position at March 31, 2024, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

March 31, 2024

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

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

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

2022 2023 2022 2023

Three months ended March 31,

Investment income $ 590 $ 539

1 unchanged sentence

Realized losses ( 877 ) ( 3,764 )

Unrealized gains (losses), net ( 5,037 ) 1,818 ( 14,137 ) ( 6,896 )

Unrealized losses, net ( 12,153 ) ( 6,959 )

Expenses and taxes ( 306 ) ( 634 )

Net change in deferred preneed cemetery receipts held in trust 11,473 242

$ — $ — $ — $ —

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

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

2022 2023 2022 2023

Three months ended March 31,

Purchases $ ( 6,354 ) $ ( 4,326 )

4 unchanged sentences

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

December 31, 2022 September 30, 2023

December 31, 2023 March 31, 2024

Preneed funeral trust investments, at market value $ 111,247 $ 113,377

1 unchanged sentence

Preneed funeral trust investments $ 107,842 $ 109,833

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

The cost and market values associated with preneed funeral trust investments at March 31, 2024 are detailed below (in thousands):

Fair Value Hierarchy Level Cost Unrealized

34 unchanged sentences

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

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

Mutual funds:

6 unchanged sentences

Market value as a percentage of cost 97.3 %

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

September 30, 2023

The following table summarizes our fixed income securities (excluding mutual funds) within our preneed funeral trust investment in an unrealized loss position at March 31, 2024, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

March 31, 2024

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

17 unchanged sentences

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

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

2022 2023 2022 2023

Three months ended March 31,

Investment income $ 486 $ 436

1 unchanged sentence

Realized losses ( 837 ) ( 3,209 )

Unrealized gains (losses), net ( 4,394 ) 1,911 ( 11,794 ) ( 5,294 )

Unrealized losses, net ( 10,585 ) ( 5,848 )

Expenses and taxes ( 192 ) ( 371 )

Net change in deferred preneed funeral receipts held in trust 9,888 ( 788 )

$ — $ — $ — $ —

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

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

2022 2023 2022 2023

Three months ended March 31,

Purchases $ ( 6,063 ) $ ( 4,003 )

3 unchanged sentences

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

December 31, 2022 September 30, 2023

December 31, 2023 March 31, 2024

Cemetery perpetual care trust investments, at market value $ 85,331 $ 87,802

Obligations due from trust ( 812 ) ( 743 )

Obligations (due from) due to trust ( 980 ) 198

Care trusts’ corpus $ 84,351 $ 88,000

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

The following table reflects the cost and market values associated with the trust investments held in cemetery perpetual care trust funds at March 31, 2024 (in thousands):

Fair Value Hierarchy Level Cost Unrealized

31 unchanged sentences

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

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

Mutual funds:

5 unchanged sentences

Market value as a percentage of cost 95.7 %

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

September 30, 2023

The following table summarizes our fixed income securities (excluding mutual funds) within our cemetery perpetual care trust investment in an unrealized loss position at March 31, 2024, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):

March 31, 2024

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

15 unchanged sentences

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

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

2022 2023 2022 2023

Three months ended March 31,

Realized gains $ 160 $ 1,306

Realized losses ( 177 ) ( 426 )

Unrealized gains (losses), net ( 3,730 ) 1,444 ( 9,846 ) ( 5,883 )

Unrealized losses, net ( 9,073 ) ( 6,069 )

Net change in care trusts’ corpus 9,090 5,189

1 unchanged sentence

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

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

2022 2023 2022 2023

Three months ended March 31,

Investment income $ 3,197 $ 3,129

2 unchanged sentences

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

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

2022 2023 2022 2023

Three months ended March 31,

Purchases $ ( 4,401 ) $ ( 3,649 )

4 unchanged sentences

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

December 31, 2022 September 30, 2023

December 31, 2023 March 31, 2024

Preneed funeral trust funds, at cost $ 22,196 $ 22,301

1 unchanged sentence

Receivables from preneed funeral trusts, net $ 21,530 $ 21,632

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 September 30, 2023.

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

Fair value includes unrealized gains and losses on trust assets.

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

The composition of the preneed funeral trust funds at March 31, 2024 is as follows (in thousands):

Cost Basis Fair Value

13 unchanged sentences

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

December 31, 2022 September 30, 2023

December 31, 2023 March 31, 2024

Tradenames $ 28,862 $ 28,713

4 unchanged sentences

Intangible and other non-current assets, net $ 37,677 $ 37,872

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

assessment, there was no impairment to intangibles assets.

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

Our tradenames have indefinite lives and therefore are not amortized.

During the three months ended March 31, 2024, two of the funeral homes that we sold had a carrying value of tradenames of $ 0.2 million, which was included in the loss on sale and recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

Capitalized Commissions

1 unchanged sentence

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

Amortization expense was $ 181,000 and $ 204,000 for the three months ended September 30, 2022 and 2023, respectively and $ 525,000 and $ 589,000 for the nine months ended September 30, 2022 and 2023, respectively.

Amortization expense was $ 0.2 million for both the three months ended March 31, 2023 and 2024.

Prepaid Agreements

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

Amortization expense was $ 142,000 and $ 131,000 for the three months ended September 30, 2022 and 2023, respectively and $ 432,000 and $ 393,000 for the nine months ended September 30, 2022 and 2023, respectively.

Amortization expense was $ 0.1 million for both the three months ended March 31, 2023 and 2024.

Internal-use Software

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

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

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

Amortization expense was $ 0.1 million for both the three months ended March 31, 2023 and 2024.

The aggregate amortization expense for our capitalized commissions, prepaid agreements and internal-use software as of March 31, 2024 is as follows (in thousands):

Capitalized Commissions Prepaid Agreements Internal-use Software

8 unchanged sentences

CREDIT FACILITY AND ACQUISITION DEBT

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

At March 31, 2024, our senior secured revolving credit facility (the “Credit Facility”) was comprised of:

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

1 unchanged sentence

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

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

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

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

At March 31, 2024, we were subject to the following financial covenants under our Credit Facility:

(A) a Total Leverage Ratio not to exceed 5.50 to 1.00 and (B) a Fixed Charge Coverage Ratio (as defined in the Credit Facility) of not less than 1.20 to 1.00 as of the end of any period of four consecutive fiscal quarters.

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

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

We were in compliance with all of the covenants contained in our Credit Facility at March 31, 2024.

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

December 31, 2022 September 30, 2023

December 31, 2023 March 31, 2024

Credit Facility $ 179,100 $ 154,100

5 unchanged sentences

Total acquisition debt, net of current portion $ 5,461 $ 5,380

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

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

At March 31, 2024, we had outstanding borrowings under the Credit Facility of $ 154.1 million.

We also had one letter of credit for $ 2.6 million under the Credit Facility.

The letter of credit will expire on November 25, 2024 and is expected to automatically renew annually and secures our obligations under our various self-insured policies.

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

At March 31, 2024, we had $ 93.3 million of availability under the Credit Facility.

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

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

2022 2023 2022 2023

Three months ended March 31,

Credit Facility interest expense $ 3,811 $ 3,916

1 unchanged sentence

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

At September 30, 2023, the prime rate margin was equivalent to 2.375 % and the BSBY rate margin was 3.375 %.

The weighted average interest rate on our Credit Facility was 4.3 % and 9.0 % for the three months ended September 30, 2022 and 2023, respectively and 3.1 % and 8.5 % for the nine months ended September 30, 2022 and 2023, respectively.

At March 31, 2024, 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 7.9 % and 8.9 % for the three months ended March 31, 2023 and 2024, respectively.

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 range from nine to twenty years .

Original maturities typically range from five to twenty years .

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

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

2022 2023 2022 2023

Three months ended March 31,

Acquisition debt imputed interest expense $ 71 $ 104

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

December 31, 2022 September 30, 2023

December 31, 2023 March 31, 2024

Long-term liabilities:

5 unchanged sentences

Carrying value of the Senior Notes $ 395,905 $ 396,075

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

At March 31, 2024, the fair value of the Senior Notes, which are Level 2 measurements, was $ 355.2 million.

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

4 unchanged sentences

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

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

2022 2023 2022 2023

Three months ended March 31,

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

2 unchanged sentences

The debt discount and the debt issuance costs are being amortized using the effective interest method over the remaining term of approximately 62 months of the Senior Notes.

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

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

The effective interest rate on the unamortized debt discount and the

unamortized debt issuance costs for the Senior Notes for both the three months ended March 31, 2023 and 2024 was 4.42 % and 4.30 %, respectively.

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):

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

Three months ended March 31,

Income Statement Classification 2023 2024

Operating lease cost Facilities and grounds expense (1)

$ 863 $ 887 $ 2,564 $ 2,638

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

82 75 260 261

Variable lease cost Facilities and grounds expense (1)

1 unchanged sentence

Depreciation of leased assets Depreciation and amortization (2)

$ 111 $ 190 $ 328 $ 407

Interest on lease liabilities Interest expense 105 125

4 unchanged sentences

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

Nine months ended September 30,

Three months ended March 31,

Cash paid for operating leases included in operating activities $ 951 $ 1,071

1 unchanged sentence

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

Nine months ended September 30,

Three months ended March 31,

Right-of-use assets obtained in exchange for new operating lease liabilities $ 908 $ 852

1 unchanged sentence

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

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

Lease Type Balance Sheet Classification December 31, 2023 March 31, 2024

Operating lease right-of-use assets Operating lease right-of-use assets $ 16,295 $ 16,512

9 unchanged sentences

Total lease liabilities $ 24,933 $ 24,590

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

The average lease terms and discount rates at March 31, 2024 are as follows:

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

1 unchanged sentence

Finance leases 10.4 8.3 %

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

The aggregate future lease payments for non-cancelable operating and finance leases at March 31, 2024 are as follows (in thousands):

Operating Finance

9 unchanged sentences

Present value of lease liabilities $ 18,642 $ 5,948

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

At March 31, 2024, we had no significant operating or finance leases that had not yet commenced.

STOCKHOLDERS ’ EQUITY

1 unchanged sentence

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

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

2022 2023 2022 2023

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

Three months ended March 31,

Shares Fair Value Shares Fair Value

142,020 $ 4,634 156,630 $ 3,834

1 unchanged sentence

Cancelled 2,400 $ 79 26,240 $ 841

(1) Restricted stock granted during the nine months ended September 30 2023 vests over a three-year period, if the employee has remained continuously employed by us during the vesting period, at a weighted average stock price of $ 32.63 .

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for restricted stock awards of $ 36,000 and $ 400,000 , for the three months ended September 30, 2022 and 2023, respectively and $ 133,000 and $ 972,000 for the nine months ended September 30, 2022 and 2023, respectively.

(1) Restricted stock granted during the three months ended March 31 2023 and 2024 vests over a three-year period, if the employee has remained continuously employed by us during the vesting period, at a weighted average stock price of $ 32.63 and $ 24.48 , respectively.

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for restricted stock awards of $ 0.2 million and $ 0.5 million, for the three months ended March 31, 2023 and 2024, respectively.

Stock Options

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

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

2022 2023 2022 2023

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

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

— $ — — $ — 310,000 $ 5,388 — $ —

Three months ended March 31,

Shares Fair Value Shares Fair Value

214,191 $ 2,506 370,590 $ 3,830

Cancelled 92,440 $ 1,231 294,728 $ 3,757

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

(1) Stock options granted during the three months ended March 31, 2023 and 2024 had a weighted average price of $ 32.69 and $ 24.48 , respectively.

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

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

The options granted in 2023 vest over a three-year period and have a ten-year term.

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

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

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

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

The options granted in 2023 and 2024 vest over a three-year period and have a ten-year term.

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

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

The fair value of the options granted during the three months ended March 31, 2024 was estimated using the Black-Scholes option pricing model with the following assumptions:

Grant Date February 21, 2024

6 unchanged sentences

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

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

2022 2023 2022 2023

Shares Cash Shares Cash Shares Cash Shares Cash

Three months ended March 31,

Shares Cash Shares Cash

Exercised (1)

— N/A 44,900 N/A 18,736 N/A 74,200 N/A

12,000 N/A — N/A

Returned for option price (2)

2 unchanged sentences

729 $ 21 — $ —

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

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

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

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

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

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

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for stock options of $ 0.7 million and $ 0.2 million, for the three months ended March 31, 2023 and 2024, respectively.

Performance Awards

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

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

2022 2023 2022 2023

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

Granted — $ — — $ — 27,013 $ 1,262 — $ —

Three months ended March 31,

Shares Fair Value Shares Fair Value

Cancelled 40,804 $ 1,119 80,276 $ 871

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

For the three months ended March 31, 2023 and 2024, we recorded stock-based compensation expense of $ 0.1 million and stock-based compensation benefit of $ 0.4 million, respectively, for performance awards, which is included in General, administrative and other expenses.

Employee Stock Purchase Plan

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

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

2022 2023 2022 2023

Shares Price Shares Price Shares Price Shares Price

Three months ended March 31,

Shares Price Shares Price

ESPP 21,656 $ 24.28 16,296 $ 21.26

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

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

We recorded stock-based compensation expense, which is included in General, administrative and other expenses and Regional and unallocated funeral and cemetery costs , for the ESPP totaling $ 0.3 million and $ 0.2 million for the three months ended March 31, 2023 and 2024, respectively.

Former Employee

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

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

2022 2023 2022 2023

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

Three months ended March 31,

Shares Fair Value Shares Fair Value

30,000 $ 826 — $ —

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

(1) During the nine months ended September 30, 2023, we issued 30,000 shares of common stock to a former executive at a stock price of $ 27.54 , in accordance with his Separation and Release agreement pertaining to his resignation from his position as the Company’s Executive Vice President, Chief Financial Officer & Treasurer effective January 2, 2023.

We recorded stock-based compensation expense, which is included in General, administrative and other expenses , for common stock awards of $ 826,000 , for the nine months ended September 30, 2023.

(1) During the three months ended March 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 three months ended March 31, 2023.

Good To Great Incentive Program

During the nine months ended September 30, 2023, we issued 8,444 shares of our common stock to certain employees, which were valued at $ 0.3 million at a grant date stock price of $ 32.69 .

During the nine months ended September 30, 2022, we issued 27,448 shares of our common stock to certain employees, which were valued at $ 1.4 million at a grant date stock price of $ 49.48 .

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

Three months ended March 31,

Shares Fair Value Shares Fair Value

8,444 $ 276 31,470 $ 790

(1) Common stock granted during the three months ended March 31, 2023 and 2024 had a grant date stock price of $ 32.69 and $ 25.08 , respectively.

Non-Employee Director and Board Advisor Compensation

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

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

2022 2023 2022 2023

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

Three months ended March 31,

Shares Fair Value Shares Fair Value

Board of Directors (1)

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163 $ 5 184 $ 5

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

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

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

Concurrently with her appointment, the Board granted Ms.

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

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

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

Concurrently with her appointment, the Board granted Ms.

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

We recorded compensation expense, which is included in General, administrative and other expenses , related to annual retainers, including the value of stock granted to non-employee Directors and an advisor to our Board, of $ 167,000 and $ 250,000 for the three months ended September 30, 2022 and 2023, respectively and $ 552,000 and $ 605,000 for the nine months ended September 30, 2022 and 2023, respectively.

(1) Common stock granted during the three months ended March 31, 2023 and 2024 had a weighted average price of $ 30.52 and $ 27.04 , 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 $ 0.2 million and $ 0.5 million for the three months ended March 31, 2023 and 2024, respectively.

Share Repurchase

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

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

2022 2023 2022 2023

Number of Shares Repurchased — — 695,496 —

Average Price Paid Per Share $ — $ — $ 49.22 $ —

Dollar Value of Shares Repurchased $ — $ — $ 34,234 $ —

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

Cash Dividend

We did not repurchase any shares during the three months ended March 31, 2023 and 2024.

At March 31, 2024, our share repurchase program had $ 48.9 million authorized for repurchases.

Cash Dividends

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

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$ 0.1125 $ 1,686

$ 0.1125 $ 1,679

September 1 st

$ 0.1125 $ 1,683

2023 Per Share Dollar Value

$ 0.1125 $ 1,661

$ 0.1125 $ 1,730

September 1 st

$ 0.1125 $ 1,653

EARNINGS PER SHARE

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

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

2022 2023 2022 2023

Three months ended March 31,

Numerator for basic and diluted earnings per share:

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

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

2022 2023 2022 2023

Three months ended March 31,

Antidilutive stock options 1,129,210 1,564,656

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

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

At March 31, 2024, we had satisfied certain performance criteria for the first, second and third predetermined growth targets of our performance awards to be considered outstanding.

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

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

Three months ended September 30, 2023

Funeral Cemetery Total

Services $ 39,090 $ 4,618 $ 43,708

Merchandise 20,325 4,067 24,392

Cemetery property — 15,895 15,895

Other revenue 3,211 3,288 6,499

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

Three months ended September 30, 2022

Funeral Cemetery Total

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

Merchandise 20,777 3,651 24,428

Cemetery property — 13,179 13,179

Other revenue 3,526 3,372 6,898

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

Nine months ended September 30, 2023

Three months ended March 31, 2024

Funeral Cemetery Total

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Total $ 71,831 $ 31,662 $ 103,493

Nine months ended September 30, 2022

Three months ended March 31, 2023

Funeral Cemetery Total

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Operating income (loss):

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

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

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

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

Three months ended March 31, 2024 $ 23,074 $ 12,642 $ ( 16,239 ) $ 19,477

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

Income (loss) before income taxes:

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

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

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

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

Three months ended March 31, 2024 $ 22,869 $ 12,709 $ ( 24,856 ) $ 10,722

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

Total assets:

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

March 31, 2024 $ 790,358 $ 452,517 $ 17,644 $ 1,260,519

December 31, 2023 802,368 448,018 17,666 1,268,052

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

December 31, 2022 September 30, 2023

December 31, 2023 March 31, 2024

Prepaid and other current assets:

Prepaid expenses $ 3,779 $ 3,767

Federal income taxes receivable 507 540

Federal income tax receivable 454 —

State income tax receivable 421 —

Other current assets 137 138

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Incentive compensation $ 13,156 $ 4,548

Insurance 3,051 3,685

Unrecognized tax benefit 3,294 3,360

Vacation 3,647 3,758

Unrecognized tax benefit 3,382 3,405

Insurance 3,017 3,278

Interest 2,409 6,626

Ad valorem and franchise taxes 2,395 1,493

Salaries and wages 2,285 7,061

Perpetual care trust payable 1,358 1,529

Employee meetings and award trips 1,185 601

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Income tax payable — 4,732

Ad valorem and franchise taxes 455 2,188

Perpetual care trust payable 222 493

Other accrued liabilities 1,384 1,091

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

Nine months ended September 30,

Three months ended March 31,

Cash paid for interest $ 3,782 $ 4,083

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

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

any statements of the plans, strategies, objectives and timing of management for future operations or financing activities, including, but not limited to, technology improvements, product development, capital allocation, organizational performance, execution of our strategic objectives and growth plan, planned divestitures, the ability to obtain credit or financing, anticipated integration, performance and other benefits of recently completed and anticipated acquisitions, and cost management and debt reductions;

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

any statements regarding future economic and market conditions or performance;

any statements regarding the timing of the strategic alternatives review;

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

any projections or expectations related to the conclusion of the Board's strategic review;

any statements of belief;

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• the effects of our talent recruitment efforts, incentive and compensation plans and programs, including such effects on our Standards Operating Model and the Company’s operational and financial performance;

• our ability to execute our growth strategy, if at all;

• our ability to execute our strategic objectives and growth strategy, if at all;

• the potential adverse effects on the Company's business, financial and equity performance if management fails to meet the expectations of its strategic objectives and growth plan;

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

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

• the execution of our Standards Operating and Strategic Acquisition Models;

• the effects of competition;

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

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

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

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

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

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

• potential adverse impacts resulting from shareholder or market perceptions of our recent announcement regarding the conclusion of our Board’s review of potential strategic alternatives;

• economic, financial and stock market fluctuations;

8 unchanged sentences

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

What changed 10-Q

Item 1. Financial Statements