What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-03 compared with 2023-11-09 · 157 added, 228 removed, 194 unchanged (66% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Carriage Services, Inc.

(“Carriage,” the “Company,” “we,” “us,” or “our”) was incorporated in the State of Delaware in December 1993 and is a leading provider of funeral and cemetery services and merchandise in the United States.

We operate 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 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.

We compete with other publicly held, privately held and independent operators of funeral and cemetery companies.

Funeral Home and Cemetery Operations

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.

3 unchanged sentences

We provide cemetery services and products on both an atneed and preneed basis.

Recent Developments

Board of Directors - Resignation and Election

On July 5, 2023, the Board of Directors (the “Board”) elected Somer Webb to serve as a Class I Director until the Company’s 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.

On July 24, 2023, Barry Fingerhut, a member of the Board, provided notice of his resignation from the Board, effective on that date.

Fingerhut’s resignation was not a result of any disagreement with the Company on any matter related to its operations, policies or practices.

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

Sanders was appointed to serve on each of the Audit, Compensation and Corporate Governance Committees.

COMPANY DEVELOPMENTS

Board of Directors and Leadership Changes

On February 22, 2024, the Board of Directors (the “Board”) of the Company 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.

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

Payne, the Company’s founder and former Chief Executive Officer, would cease to serve as Executive Chairman of the Board, but 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 began serving as a special advisor to the Board and senior management in a consulting role.

In connection with Mr.

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

On February 21, 2024, the Company and Mr.

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

Under the Transition Agreement, Mr.

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

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

These payments and benefits include the following:

• Salary continuation for 24 months of $2.0 million;

• 2023 annual bonus of $1.25 million;

• Prorated 2024 bonus of $181,500;

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

• Consulting payments of $1.0 million;

• Payments for maintaining health benefits for Mr.

Payne and his spouse for up to 36 months;

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

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

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

Payne and his spouse with their respective Releases.

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

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

On March 7, 2024, upon the recommendation of the Corporate Governance Committee of the Company, the Board realigned the Company’s classes of directors to provide for equal apportionment among the three classes as a result of the previous announcement of Mr.

Payne, a current Class I director, remaining on the Board until the Company’s 2024 annual meeting of stockholders, at which time his term will expire.

To facilitate the class realignment, on March 7, 2024, Julie Sanders resigned from the Board as a Class II director (term expiring in 2025), and, effective as of March 7, 2024, was re-elected by the Board to serve as a Class I director until the Company’s 2024 annual meeting of shareholders.

Sanders will continue to serve on the Audit, Compensation and Corporate Governance Committees of the Board.

On March 7, 2024, upon the recommendation of the Corporate Governance Committee of the Company, the Board elected Chad Fargason to serve as the Company’s first Non-Executive Chairman of the Board, effective on that date.

The election of Mr.

Fargason as the Board’s Non-Executive Chairman was as a result of the previous announcement of Mr.

Payne ceasing to serve as Executive Chairman of the Board of the Company, effective February 22, 2024.

Effective March 25, 2024, Kathryn Shanley was appointed to serve as the Company’s Chief Accounting Officer (Principal Accounting Officer).

In connection with the appointment of Ms.

Shanley as the Company’s Chief Accounting Officer (Principal Accounting Officer), effective March 25, 2024, L.

Kian Granmayeh ceased serving as the Company’s Principal Accounting Officer.

Granmayeh continues to serve as the Company’s Executive Vice President, Chief Financial Officer, and Treasurer (Principal Financial Officer).

During the three months ended March 31, 2024, we sold six funeral homes and one cemetery for an aggregate of $10.9 million for a net loss of $1.5 million.

Inflationary and Macroeconomic Trends

During the third quarter of 2023, we continued to experience cost increases and surcharges from our vendors and suppliers on merchandise and goods due to increases in the cost of raw materials, as well as inflationary impacts and rising interest rates.

For example, we experienced higher costs related to full-time hourly base rates, utilities, funeral supplies, merchandise costs, insurance, and increased borrowing costs due to higher variable interest rates under our Credit Facility.

Although we have taken steps to mitigate these cost increases and we expect these impacts to continue throughout the current year, the ultimate scope and duration of these impacts are unknown at this time.

During the first quarter of 2024, we experienced a stabilization of inflationary costs from our vendors and suppliers for merchandise and goods, particularly as it relates to utilities, funeral supplies and merchandise costs, with costs remaining flat when compared to the same period during 2023.

Although we continue to experience higher variable interest rates under our Credit Facility, we anticipate lower borrowing costs as we continue prioritizing paying down our outstanding debt throughout the year.

While we are encouraged by the stabilization of inflationary costs that we have experienced thus far in 2024, we are unable to forecast with any certainty whether inflationary costs will continue to moderate in future periods, as the ultimate scope and duration of these impacts remain unknown at this time.

More broadly, the U.S.

economy continues to experience higher rates of inflation, which has impacted a wide variety of industries and sectors, with consumers facing rising prices.

economy continues to experience the impact of several years of higher rates of inflation, which has impacted a wide variety of industries and sectors, with consumers facing rising prices.

Such inflation may negatively impact consumer discretionary spending, including the amount that consumers are able to spend on our services, although we have not experienced any material impacts to date and our industry has been largely resilient to similar adverse economic and market environments in the past.

Although we expect these trends to continue throughout the current year, we will continue to assess these impacts and take the appropriate steps, if necessary, to mitigate these cost increases, if possible.

During the third quarter of 2023, we experienced lower volumes as compared to prior quarters due to fluctuations in the death rate, although overall financial performance remains at or above prior reporting periods.

Although we expect these trends to continue throughout the year, we will assess these impacts and take the appropriate steps, if necessary, to mitigate any changes in consumer preferences or additional cost increases, if possible.

During the first quarter of 2024, we experienced lower volumes as compared to prior years due to fluctuations in the death rate, although overall financial performance remains at or above prior reporting periods.

Although we expect fluctuations in the death rate to continue, we are unable to predict or forecast the duration or variation of the death rate with any certainty.

6 unchanged sentences

We have the ability to draw on our Credit Facility, subject to its customary terms and conditions.

However, if our capital expenditures or acquisition plans change, we may need to access the capital markets or seek further borrowing capacity from our lenders to obtain additional funding and we may not be able to obtain such funding on terms and conditions that are acceptable to us.

However, if our capital allocations and expenditures or acquisition plans change, we may need to access the capital markets or seek further borrowing capacity from our lenders to obtain additional funding and we may not be able to obtain such funding on terms and conditions that are acceptable to us.

Further, to the extent operating cash flow or access to and cost of financing sources are materially different than expected, future liquidity may be adversely affected.

For additional information regarding known material factors that could cause cash flow or access to and cost of finance sources to differ from our expectations, please read Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023.

Our plan remains focused on integrating our recently acquired businesses and prioritizing our capital allocation for debt repayments, the payment of dividends and debt obligations and internal growth capital expenditures, which we expect to fund using cash on hand and borrowings under our Credit Facility, along with general corporate purposes, as allowed under our Credit Facility.

Our plan is to remain focused on integrating our recently acquired business and prioritizing our capital allocation for debt repayments, the payment of dividends and debt obligations and internal growth capital expenditures, which we expect to fund using cash on hand and borrowings under our Credit Facility, along with general corporate purposes, as allowed under our Credit Facility.

We believe that our existing and anticipated cash resources, including, as needed, additional borrowings or other financings that we may be able to obtain, will be sufficient to meet our anticipated working capital requirements, capital expenditures, scheduled debt payments, commitments and dividends for the next 12 months, as well as our long-term financial obligations.

We began 2023 with $1.2 million in cash and ended the third quarter with $1.7 million in cash.

At September 30, 2023, we had borrowings of $187.3 million outstanding on our Credit Facility compared to $190.7 million at December 31, 2022.

We began 2024 with $1.5 million in cash and ended the first quarter with $1.7 million in cash.

At March 31, 2024, we had borrowings of $154.1 million outstanding on our Credit Facility compared to $179.1 million at December 31, 2023.

The following table sets forth the elements of cash flow (in thousands):

Nine months ended September 30,

Three months ended March 31,

Cash at beginning of the year $ 1,170 $ 1,523

Net cash provided by operating activities 25,869 19,703

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) provided by investing activities (47,286) 7,372

Net borrowings (payments) on our Credit Facility, acquisition debt and finance lease obligations 22,773 (25,152)

Payment of debt issuance costs for the Credit Facility and Senior Notes (339) —

Net proceeds from employee equity plans 1,151 955

Net proceeds from (payments for) employee equity plans 428 (71)

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

Cash at end of the period $ 1,293 $ 1,689

Operating Activities

For the nine months ended September 30, 2023, cash provided by operating activities was $61.8 million compared to $50.0 million for the nine months ended September 30, 2022.

The increase of $11.8 million is primarily due to an $8.6 million withdrawal of realized capital gains and earnings from our preneed funeral and cemetery trust investments and receiving a $6.0 million incentive payment from a vendor related to a strategic partnership agreement to market and sell prearranged funeral services, partially offset by unfavorable working capital changes in income tax receivables.

For the three months ended March 31, 2024, cash provided by operating activities was $19.7 million compared to $25.9 million for the three months ended March 31, 2023, a decrease of $6.2 million primarily due to a $7.0 million withdrawal of realized capital gains and earnings from our preneed funeral and cemetery trust investments received in the first quarter of 2023.

Investing Activities

Our investing activities, resulted in a net cash outflow of $53.4 million for the nine months ended September 30, 2023 compared to $22.7 million for the nine months ended September 30, 2022, an increase of $30.7 million.

Our investing activities, resulted in a net cash inflow of $7.4 million for the three months ended March 31, 2024 compared to a net cash outflow of $47.3 million for the three months ended March 31, 2023, an increase of $54.7 million.

Acquisition and Divestiture Activity

During the nine months ended September 30, 2023, we acquired a business consisting of three funeral homes, two cemeteries and one cremation focused business for $44.0 million.

In addition, we sold two funeral homes and two cemeteries for an aggregate of $1.1 million and real property for $1.2 million.

We also received proceeds of $1.4 million from our property insurance policy for the reimbursement of renovation costs for certain of our funeral businesses damaged by Hurricane Ian that occurred during the third quarter of 2022 and a fire that occurred during the first quarter of 2023.

During the nine months ended September 30, 2022, we acquired a business consisting of two funeral homes for $6.3 million in cash and we purchased real property for $2.6 million.

In addition, we sold two funeral homes for an aggregate of $0.9 million and real property for $3.3 million.

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 acquired a business consisting of three funeral homes, two cemeteries and one cremation focused business for $44.0 million.

In addition, we sold one funeral home and two cemeteries for $0.8 million.

Capital Expenditures

For the nine months ended September 30, 2023, capital expenditures (comprised of growth and maintenance spend) totaled $13.1 million compared to $20.3 million for the nine months ended September 30, 2022, a decrease of $7.2 million.

For the three months ended March 31, 2024, our capital expenditures (comprised of growth and maintenance spend) totaled $3.6 million compared to $5.0 million for the three months ended March 31, 2023, a decrease of $1.4 million.

The following tables present our growth and maintenance capital expenditures (in thousands):

Nine months ended September 30,

Three months ended March 31,

Cemetery development $ 2,118 $ 2,000

Renovations at certain businesses 906 362

Other 447 110

Total Growth $ 3,140 $ 2,389

(1) During the nine months ended September 30, 2023, we spent $0.8 million for renovations to two businesses that were affected by Hurricane Ian, which occurred during the third quarter of 2022 and $0.4 million for renovations to one business that was damaged by a fire, which occurred during the first quarter of 2023, all of which was reimbursed by our property insurance.

During the nine months ended September 30, 2022, we spent $2.4 million for renovations to two businesses that were affected by Hurricane Ida, which occurred during the third quarter of 2021, all of which was reimbursed by our property insurance.

Nine months ended September 30,

Three months ended March 31,

General equipment and furniture $ 1,218 $ 623

2 unchanged sentences

Paving roads and parking lots 156 60

Other 146 163

Total Maintenance $ 1,842 $ 1,162

Financing Activities

Our financing activities resulted in a net cash outflow of $8.0 million for the nine months ended September 30, 2023 compared to a net cash outflow of $27.7 million for the nine months ended September 30, 2022, a decrease of $19.7 million.

During the nine months ended September 30, 2023, we had net payments on our Credit Facility, acquisition debt and finance leases of $3.9 million and we paid $5.0 million in dividends.

During the nine months ended September 30, 2022, we had net borrowings on our Credit Facility, acquisition debt and finance leases of $13.3 million, offset by $36.7 million for the purchase of treasury stock and $5.1 million in dividends.

Our financing activities resulted in a net cash outflow of $26.9 million for the three months ended March 31, 2024 compared to a net cash inflow of $21.5 million for the three months ended March 31, 2023, a decrease of $48.4 million.

During the three months ended March 31, 2024, we had net payments on our Credit Facility, acquisition debt and finance leases of $25.2 million and paid dividends of $1.7 million.

During the three months ended March 31, 2023, we had net borrowings on our Credit Facility, acquisition debt and finance leases of $22.8 million, offset by $1.7 million of dividends paid.

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):

1 unchanged sentence

$ 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

Credit Facility, Lease Obligations and Acquisition Debt

The outstanding principal of our Credit Facility, lease obligations and acquisition debt at September 30, 2023 is as follows (in thousands):

September 30, 2023

The outstanding principal of our Credit Facility, lease obligations and acquisition debt at March 31, 2024 is as follows (in thousands):

March 31, 2024

Credit Facility $ 154,100

4 unchanged sentences

Credit Facility

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.

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:

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 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.

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.

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

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.

The interest payments on our remaining borrowings under the Credit Facility will be determined based on the average outstanding balance of our borrowings and the prevailing interest rate during that time.

1 unchanged sentence

Our lease obligations consist of operating and finance leases.

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

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

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

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

At September 30, 2023, operating and finance lease obligations were $37.0 million, with $5.4 million payable within 12 months.

In addition, we lease certain other funeral homes, vehicles and equipment under finance leases with original terms ranging from three and a half to forty years.

At March 31, 2024, operating and finance lease obligations were $35.5 million, with $5.5 million payable within 12 months.

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

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

2022 2023 2022 2023

Three months ended March 31,

Operating lease cost $ 875 $ 978

9 unchanged sentences

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.

At September 30, 2023, acquisition debt obligations were $5.4 million, with $0.8 million payable within 12 months.

Original maturities typically range from five to twenty years.

At March 31, 2024, acquisition debt obligations were $9.2 million, with $0.9 million payable within 12 months.

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

At September 30, 2023, the principal amount of our 4.25% senior notes due in May 2029 (the “Senior Notes”) was $400.0 million.

At March 31, 2024, the principal amount of our 4.25% senior notes due in May 2029 (the “Senior Notes”) was $400.0 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 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.

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

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.

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

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

1 unchanged sentence

Senior Notes amortization of debt issuance costs 36 38

At September 30, 2023, our future interest payments on our outstanding balance were $102.0 million, with $17.0 million payable within 12 months.

At March 31, 2024, our future interest payments on our outstanding balance were $93.5 million, with $17.0 million payable within 12 months.

FINANCIAL HIGHLIGHTS

Below are our financial highlights (in thousands except for volumes and averages):

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

2022 2023 2022 2023

Three months ended March 31,

Revenue $ 95,514 $ 103,493

5 unchanged sentences

Net income $ 8,844 $ 6,973

Revenue for the three months ended September 30, 2023 increased $3.0 million compared to the three months ended September 30, 2022, as we experienced a 13.4% increase in the number of preneed interment rights (property) sold and a 12.4% increase in the average price per interment right sold, while the funeral contract volume and the average revenue per funeral contract remained flat.

Gross profit for the three months ended September 30, 2023 increased $1.8 million compared to the three months ended September 30, 2022, primarily due to the increase in revenue from our cemetery segment, as well as improved cost management within our funeral segment.

Net income for the three months ended September 30, 2023 decreased $1.2 million compared to the three months ended September 30, 2022, primarily due to a $2.6 million increase in interest expense and a $0.9 million increase in general and administrative expenses, offset by the $1.8 million increase in gross profit.

Revenue for the nine months ended September 30, 2023 increased $7.4 million compared to the nine months ended September 30, 2022, as we experienced a 12.2% increase in the average price per preneed interment right sold, a 4.0% increase in the number of preneed interment rights (property) sold and a 0.9% increase in the average revenue per funeral contract, offset by a 2.0% decrease in the funeral contract volume.

The funeral contract volume decrease is primarily a result of the lower impact of COVID-19 related deaths in the first quarter of 2023 as compared to the same period in 2022.

Gross profit for the nine months ended September 30, 2023 increased $1.9 million compared to the nine months ended September 30, 2022, due to the increase in revenue from our cemetery segment, offset by increases in operating expenses in both our funeral home and cemetery segments.

Net income for the nine months ended September 30, 2023 decreased $11.4 million compared to the nine months ended September 30, 2022, primarily due to a $9.0 million increase in interest expense and a $3.7 million impact from divestitures, disposals and insurance reimbursements.

Revenue for the three months ended March 31, 2024 increased $8.0 million compared to the three months ended March 31, 2023, as we experienced a 37.3% increase in the number of preneed interment rights (property) sold, a 7.9% increase in the average price per interment right sold and a 4.1% increase in the average revenue per funeral contract, offset by a 2.6% decrease in funeral contract volume.

The increase in cemetery revenue highlights the effectiveness of our preneed cemetery sales growth plan, as we continue to focus on executing our strategic goals.

Additionally, despite the funeral contract volume decline due to the COVID-19 related pull forward effect, we increased our average revenue per funeral contract through the successful execution of our enhanced pricing strategy, which was the primary driver in funeral revenue growth this quarter.

Gross profit for the three months ended March 31, 2024 increased $6.2 million compared to the three months ended March 31, 2023, primarily due to the increase in revenue from both our funeral and cemetery segments, as well as the continued progress we have made successfully executing on our cost management initiatives this quarter.

Net income for the three months ended March 31, 2024 decreased $1.9 million compared to the three months ended March 31, 2023, as the $6.2 million increase in profit contribution from our businesses was offset by a $6.1 million increase in general, administrative and other expenses and a $1.3 million increase in loss on divestitures.

Further discussion of revenue and the components of gross profit for our funeral home and cemetery segments is presented under “– Results of Operations.”

1 unchanged sentence

REPORTING AND NON-GAAP FINANCIAL MEASURES

We also present our financial performance in our “Condensed Operating and Financial Trend Report” (“Trend Report”) as reported in our earnings release for the three months ended September 30, 2023 issued on November 8, 2023, and discussed in the corresponding earnings conference call.

We also present our financial performance in our “Condensed Operating and Financial Trend Report” (“Trend Report”) as reported in our earnings release for the three months ended March 31, 2024 issued on May 1, 2024, and discussed in the corresponding earnings conference call.

The Trend Report is used as a supplemental financial statement by management and investors to compare our current financial performance with our previous results and with the performance of other companies.

2 unchanged sentences

Below is a reconciliation of gross profit (a GAAP financial measure) to operating profit (a non-GAAP financial measure) (in thousands):

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

2022 2023 2022 2023

Three months ended March 31,

Gross profit $ 31,055 $ 37,262

7 unchanged sentences

Funeral Home and Cemetery.

Below is a breakdown of operating profit (a non-financial GAAP measure) by segment (in thousands):

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

2022 2023 2022 2023

Below is a breakdown of operating profit (a non-GAAP financial measure) by segment (in thousands):

Three months ended March 31,

Funeral Home $ 28,966 $ 30,602

2 unchanged sentences

Operating profit margin (1)

40.3% 39.9% 43.2% 41.6%

(1) Operating profit margin is defined as operating profit as a percentage of revenue.

1 unchanged sentence

RESULTS OF OPERATIONS

The following is a discussion of our results of operations for the three and nine months ended September 30, 2023 and 2022.

The following is a discussion of our results of operations for the three months ended March 31, 2024 and 2023.

The term “operating” in the funeral home and cemetery segments refers to all funeral homes and cemeteries that we owned and operated in the current reporting period, excluding certain funeral home and cemetery businesses that we have divested in such period.

The term “divested” when discussed in the Funeral Home segment, refers to two funeral home we sold in the nine months ended September 30, 2023 and two funeral homes we sold in the nine months ended September 30, 2022.

The term “divested” when discussed in the Cemetery segment, refers to two cemeteries we sold during the nine months ended September 30, 2023.

The term “ancillary” in the Funeral Home segment represents our flower shop, monument company, pet cremation business and online cremation businesses.

The term “divested” when discussed in the funeral home segment, refers to six funeral homes we sold in the three months ended March 31, 2024 and one funeral home we sold in the three months ended March 31, 2023.

The term “divested” when discussed in the cemetery segment, refers to the sale of one cemetery in each of the three months ended March 31, 2024 and 2023.

The term “ancillary” in the funeral home segment represents our flower shop, monument business, pet cremation business and online cremation businesses.

Cemetery property amortization, field depreciation expense and regional and unallocated funeral and cemetery costs, are not included in operating profit, a non-GAAP financial measure.

2 unchanged sentences

The following table sets forth certain information regarding our revenue and operating profit for our funeral home operations (in thousands):

Three months ended September 30,

Three months ended March 31,

Operating $ 65,407 $ 66,578

14 unchanged sentences

Cremation rate 59.1% 59.0%

Funeral home operating revenue increased $0.5 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

The increase in operating revenue is primarily driven by our newly acquired funeral home businesses, which were not present in the comparative quarter of 2022, as the funeral contract volume and the average revenue per contract excluding preneed interest remained flat.

Funeral home operating profit for the three months ended September 30, 2023 increased $0.3 million when compared to the same period in 2022.

Funeral home operating revenue increased $1.2 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

The increase in operating revenue is primarily driven by a 4.1% increase in the average revenue per contract excluding preneed interest, which was partially offset by a 2.6% decrease in contract volume.

Despite the funeral contract volume decline due to the COVID-19 related pull forward effect, we increased our average revenue per funeral contract through the successful execution of our enhanced pricing strategy, which was the primary driver in funeral revenue growth this quarter.

Funeral home operating profit for the three months ended March 31, 2024 increased $1.2 million when compared to the same period in 2023, primarily due to the increase in operating revenue, as well as a decrease in operating expenses as a percentage of revenue.

The comparable operating profit margin increased 100 basis points to 41.3%.

The increase in operating profit is primarily due to the increase in operating revenue, as well as improved cost management across our businesses.

Operating expenses as a percentage of revenue remained flat for the comparable period.

Ancillary revenue, which represents revenue from our flower shop, monument company, pet cremation business and online cremation businesses, increased $0.1 million, while ancillary operating profit remained flat for the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

Other revenue and other operating profit, which consists of preneed funeral insurance commissions and preneed funeral trust and insurance, both decreased $0.4 million, for the three months ended September 30, 2023, compared to the same period in 2022.

The decreases are primarily due to a decline in realized earnings on preneed funeral trust and insurance contracts that matured to atneed during the period.

The following table sets forth certain information regarding our revenue and operating profit for our funeral home operations (in thousands):

Nine months ended September 30,

Operating $ 187,433 $ 186,779

Divested 1,287 217

Ancillary 3,099 3,445

Other 7,254 6,775

Total $ 199,073 $ 197,216

Operating profit:

Operating $ 75,078 $ 70,578

Divested 22 (20)

Ancillary 560 366

Other 6,400 5,951

Total $ 82,060 $ 76,875

The following operating measures reflect the significant metrics over this comparative period:

Contract volume 35,373 34,852

Average revenue per contract, excluding preneed funeral trust earnings $ 5,299 $ 5,359

Average revenue per contract, including preneed funeral trust earnings $ 5,464 $ 5,516

Cremation rate 57.6% 59.0%

Funeral home operating revenue decreased $0.7 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

The decrease in operating revenue is primarily driven by a 1.5% decrease in contract volume, which was not fully offset by a 1.1% increase in the average revenue per contract excluding preneed interest.

The contract volume decrease is primarily a result of the significant decline in COVID-19 related deaths in the first quarter of 2023 as compared to the same period in 2022, as these deaths now have a minimal impact on the overall death rate.

The increase in average revenue per contract is primarily due to a combination of price increases and our continued focus on educating families on the many products and service options that are available with burials and cremations.

Funeral home operating profit for the nine months ended September 30, 2023 decreased $4.5 million when compared to the same period in 2022, primarily due to an increase in operating expenses as a percentage of revenue.

The comparable operating profit margin decreased 230 basis points to 37.8%.

Operating expenses as a percentage of revenue increased 2.3%, with the largest increases in salary and benefits expenses of 1.3%, general and administrative expenses of 0.4%, other funeral costs of 0.3%, and facilities and grounds expenses of 0.2%.

The increase in operating expenses is partially due to higher costs from inflationary impacts concentrated in our full-time hourly base rates, utilities and funeral supplies.

Ancillary revenue, which represents revenue from our flower shop, monument company, pet cremation business and online cremation businesses, increased $0.3 million, while ancillary operating profit decreased $0.2 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

The increase in revenue is primarily due to our Bakersfield, CA business acquired during the first quarter of 2023, as it was not present in the comparative period of 2022.

Similarly, the decrease in operating profit is primarily due to this same business, as its operating profit margins were lower compared to our other ancillary businesses, particularly with regard to higher salaries and benefits expenses.

Other revenue, which consists of preneed funeral insurance commissions and preneed funeral trust decreased $0.5 million and other operating profit decreased $0.4 million, for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022.

The decreases are primarily due to a decline in realized earnings on preneed funeral trust and insurance contracts that matured to atneed during the period.

Operating expenses as a percentage of revenue decreased 1.1%, with the largest decreases in salaries and benefits expenses of 0.6% and promotional expenses of 0.2%, which reflects the continued progress we have made successfully executing on our cost management initiatives this quarter.

Ancillary revenue, which represents revenue from our flower shop, monument business, pet cremation business and online cremation businesses, increased $0.2 million, while ancillary operating profit remained flat for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

The increase in ancillary revenue is primarily due to our Bakersfield, CA business, which was acquired during the last week of March 2023 and therefore was not fully present in the comparative period.

Other revenue and other operating profit, which consists of preneed funeral insurance commissions and earnings from delivered preneed funeral trust and insurance contracts, increased $0.7 million and $0.6 million, respectively, for the three months ended March 31, 2024, compared to the same period in 2023.

These increases are primarily due to our continued focus on growth of our preneed funeral sales through our strategic partnership with a national insurance provider that began during the second quarter of 2023.

As a result, we have experienced a 25.7% increase in preneed insurance contracts sold during the first quarter of 2024, compared to the same period in 2023.

Cemetery Segment

The following table sets forth certain information regarding our revenue and operating profit for our cemetery operations (in thousands):

Three months ended September 30,

Operating $ 21,285 $ 24,577

Divested 60 3

Other 3,372 3,288

Total $ 24,717 $ 27,868

Operating profit (loss):

Operating $ 7,869 $ 9,005

Divested (21) 2

Other 3,232 3,166

Total $ 11,080 $ 12,173

The following operating measures reflect the significant metrics over this comparative period:

Preneed revenue as a percentage of operating revenue 61.0% 62.0%

Preneed revenue (in thousands) $ 12,905 $ 15,166

Atneed revenue (in thousands) $ 8,380 $ 9,411

Number of preneed interment rights sold 2,444 2,785

Average price per interment right sold $ 4,585 $ 5,134

Cemetery operating revenue increased $3.3 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022, as we experienced a 12.0% increase in the average price per preneed interment right sold, and a 14.0% increase in preneed interment rights sold.

Cemetery atneed revenue, which represents 38.0% of our total operating revenue, increased $1.0 million for the three months ended September 30, 2023, compared to the same period of the prior year, primarily due to an increase in sales of merchandise and services from our newly acquired cemetery businesses, not present in the comparative quarter of 2022.

Cemetery operating profit increased $1.1 million for the three months ended September 30, 2023 compared to the three months ended September 30, 2022.

The comparable operating profit margin decreased 40 basis points to 36.6%.

The increase in operating profit is primarily due to the increase in operating revenue, as well as improved cost management across our businesses.

Operating expenses as a percentage of revenue remained flat for the comparable period.

Other revenue and other operating profit, which consist of preneed cemetery trust revenue and preneed cemetery finance charges, both decreased $0.1 million for the three months ended September 30, 2023, compared to the three months ended September 30, 2022.

The decreases are primarily due to realized capital gains in the current year compared to the prior year in our merchandise and service fund.

The following table sets forth certain information regarding our revenue and operating profit for our cemetery operations (in thousands):

Nine months ended September 30,

Three months ended March 31,

Operating $ 21,317 $ 27,581

13 unchanged sentences

Average price per interment right sold $ 4,496 $ 4,849

Cemetery operating revenue increased $8.5 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022, as we experienced an 11.9% increase in the average price per preneed interment right sold, as well as a 4.3% increase in the number of preneed interment rights sold.

Cemetery atneed revenue, which represents 38.0% of our total operating revenue, increased $2.9 million for the nine months ended September 30, 2023, compared to the same period of the prior year, primarily due to an increase in sales of merchandise and services from our newly acquired cemetery businesses, which were not present in the comparative period of 2022.

Cemetery operating profit increased $2.7 million for the nine months ended September 30, 2023 compared to the nine months ended September 30, 2022.

The increase in operating profit is primarily due to the increase in operating revenue, offset by an increase in operating expenses as a percentage of revenue.

The comparable operating profit margin decreased 100 basis point to 40.3%.

Operating expenses as a percent of operating revenue increased 1.0% primarily due to an increase in salary and benefits expenses.

Other revenue and other operating profit, which consist of preneed cemetery trust revenue and preneed cemetery finance charges, both increased $1.0 million for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022.

The increases are primarily due to an increase in income in our perpetual care trust fund and an increase in finance charges on preneed sales.

Cemetery operating revenue increased $6.3 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, as we experienced a 37.3% increase in the number of preneed interment rights (property) sold and a 7.9% increase in the average price per interment right sold.

Cemetery atneed revenue, which represents 35.0% of our total operating revenue, increased $0.6 million for the three months ended March 31, 2024, compared to the same period in 2023, primarily due to an increase in delivered merchandise and services across our cemetery portfolio.

The increase in cemetery revenue highlights the effectiveness of our preneed cemetery sales growth plan, as we continue to focus on executing our strategic goals.

Cemetery operating profit increased $3.6 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, primarily due to the increase in operating revenue, as well as a decrease in operating expenses as a percentage of revenue.

The comparable operating profit margin increased 430 basis points to 43.3%.

Operating expenses as a percentage of revenue decreased 4.3%, with the largest decreases in salaries and benefits expenses of 2.9%, merchandise costs of 1.2%, and facilities and grounds expenses of 0.6%, which reflects the continued progress we have made successfully executing on our cost management initiatives this quarter.

Other revenue and other operating profit, which consist of preneed cemetery trust revenue and preneed cemetery finance charges, both increased $0.1 million for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, primarily due to an increase in finance charge revenue related to the increase in cemetery sales during the first quarter of 2024, compared to the same period in 2023.

Cemetery property amortization .

Cemetery property amortization totaled $1.3 million for both the three months ended September 30, 2023 and 2022.

Cemetery property amortization totaled $4.4 million for the nine months ended September 30, 2023, an increase of $0.1 million, compared to the same period in 2022, primarily due to the increase in property sold across our cemetery portfolio.

Cemetery property amortization totaled $1.8 million for the three months ended March 31, 2024, an increase of $0.6 million compared to the same period in 2023, primarily due to the increase in property sold across our cemetery portfolio.

Field depreciation.

Depreciation expense for our field businesses totaled $3.6 million and $10.5 million for the three and nine months ended September 30, 2023, respectively, an increase of $0.4 million and $0.7 million, respectively, compared to the same period in 2022, primarily due to the business acquisitions made in the latter half of 2022 and the first quarter of 2023.

Depreciation expense for our field businesses totaled $3.5 million for the three months ended March 31, 2024, an increase of $0.1 million compared to the same period in 2023.

Regional and unallocated funeral and cemetery costs.

Regional and unallocated funeral and cemetery costs consist of salaries and benefits for regional management, field incentive compensation and other related costs for field infrastructure.

Regional and unallocated funeral and cemetery costs totaled $3.8 million for the three months ended September 30, 2023, a decrease of $1.3 million compared to the same period in 2022, primarily due to the following:

(1) a $1.0 million decrease in cash incentives and equity compensation;

(2) a $0.2 million decrease in incentive award trips and annual managing partner meetings and (3) a $0.1 million decrease in other expenses.

Regional and unallocated funeral and cemetery costs totaled $13.3 million for the nine months ended September 30, 2023, a decrease of $4.1 million compared to the same period in 2022, primarily due to the following:

(1) a $2.2 million decrease in cash incentives and equity compensation;

(2) a $1.2 million decrease in incentive award trips and annual managing partner meetings;

(3) $0.4 million decrease in travel expense and (3) a $0.3 million decrease in other expenses.

Regional and unallocated funeral and cemetery costs totaled $3.8 million for the three months ended March 31, 2024, a decrease of $1.6 million compared to the same period in 2023, primarily due to an $0.8 million decrease in cash incentives and equity compensation costs and an $0.8 million decrease in incentive award trip costs.

Other Financial Statement Items

General, administrative and other.

General, administrative and other expenses, which includes salaries and benefits, cash and equity incentive compensation for the Houston support office totaled $11.3 million for the three months ended September 30, 2023, an increase of $0.9 million compared to the same period in 2022, which is primarily due to a $0.9 million increase in consulting fees related to our review of strategic alternatives.

General, administrative and other expenses totaled $31.7 million for the nine months ended September 30, 2023, an increase of $3.6 million compared to the same period in 2022, primarily due to the following:

(1) a $3.1 million increase in salary and benefits expense and cash and equity incentive compensation, as a result of changes to our senior leadership team, including current year executive promotions and (2) a $1.0 million increase in consulting fees related to our review of strategic alternatives, offset by (3) a $0.5 million decrease in other expenses, including lower online marketing costs and travel costs.

Net (gain) loss on divestitures, disposals and impairments charges.

The components of Net (gain) loss on divestitures, disposals and impairment charges are as follows (in thousands):

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

2022 2023 2022 2023

Impairment of goodwill, intangibles and PPE $ — $ 211 $ — $ 454

Net (gain) loss on divestitures — 24 (575) 106

Net (gain) loss on disposals of fixed assets (7) 188 142 369

General, administrative and other expenses, which includes salaries and benefits and cash and equity incentive compensation for the Houston support office, totaled $16.2 million for the three months ended March 31, 2024, an increase of $6.1 million compared to the same period in 2023, which is primarily due to the following:

(1) a $4.2 million increase in salary and benefits expenses and cash and equity incentive compensation costs, primarily driven by the termination expense recorded during the first quarter of 2024 for our former Executive Chairman of the Board pursuant to his Transition Agreement effective February 22, 2024;

(2) a $1.5 million increase in professional fees related to the Board’s review of strategic alternatives;

and (3) a $0.4 million increase in all other expenses.

Net loss on divestitures, disposals and impairments charges.

The components of Net loss on divestitures, disposals and impairment charges are as follows (in thousands):

Three months ended March 31,

Net loss on divestitures $ 82 $ 1,501

Net loss on disposals of fixed assets 159 44

Total $ 241 $ 1,545

During the nine months ended September 30, 2023, we sold two funeral homes and two cemeteries for a loss of $0.1 million.

We also recognized an impairment of $0.2 million as a result of our 2023 qualitative assessment of tradenames and an impairment of $0.2 million related to property, plant and equipment for assets held for sale.

During the nine months ended September 30, 2022, we sold real property and two funeral homes for a net gain of $0.7 million, of which $0.1 million was recorded in Other, net related to the sale of assets not used in operating activities.

During the three months ended March 31, 2024, we sold six funeral homes and one cemetery for an aggregate loss of $1.5 million.

During the three months ended March 31, 2023, we sold one funeral home and two cemeteries for an aggregate loss of $0.1 million.

Interest expense .

Interest expense related to its respective debt arrangement is 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 $ 4,413 $ 4,420

2 unchanged sentences

Acquisition debt 71 104

Other (1) 8 8 10

Total $ 8,539 $ 8,712

Net gain on property damage, net of insurance claims.

The components of Net gain on property damage, net of insurance claims are as follows (in thousands):

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

2022 2023 2022 2023

(Gain) on property damaged by Hurricane Ida $ — $ — $ (3,275) $ (28)

(Gain) on property damaged by Hurricane Ian — (379) — (379)

Loss on property damaged by a fire in Q1 2023 — — — 64

Total $ — $ (379) $ (3,275) $ (343)

During the nine months ended September 30, 2023, we recorded a $0.6 million gain on the sale of other real property not used in business operations.

We did not record any gain or loss activity during the three months ended September 30, 2023.

Net loss on property damage, net of insurance claims.

During the three months ended March 31, 2023, we recorded a $0.3 million loss, net of insurance proceeds, for property damaged by a fire that occurred during first quarter of 2023.

We did not record any gain or loss activity during the three months ended March 31, 2024.

During the three months ended March 31, 2023, we recorded a $0.5 million gain on the sale of other real estate not used in business operations.

We did not record any gain or loss activity during the three months ended March 31, 2024.

Income taxes.

Income tax expense totaled $2.1 million for the three months ended September 30, 2023, a decrease of $0.6 million compared to the same period in 2022, primarily due to lower pre-tax income in the current period.

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

Income tax expense totaled $9.0 million for the nine months ended September 30, 2023, a decrease of $3.0 million compared to the same period in 2022, primarily due to lower pre-tax income in the current period.

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

OVERVIEW OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Income tax expense totaled $3.7 million for the three months ended March 31, 2024, an increase of $0.2 million compared to the same period in 2023, primarily due to an increase in tax expense on discrete items.

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

CRITICAL ACCOUNTING ESTIMATES

The preparation of our Consolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses.

8 unchanged sentences

Seasonal fluctuations in the death rate may be further affected by epidemics and pandemics, like COVID-19, including any new or emerging public health threats.

These unexpected fluctuations may not only increase death rates during the affected period, but also may subsequently decrease death rates following the affected period as a result of an acceleration of death rates.

As a result, we are unable to predict or forecast the duration or variation of the current death rate with any certainty.

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 2. Management’s Discussion and Analysis