CARRIAGE SERVICES INC 10-Q

Item 1. Financial Statements. CARRIAGE SERVICES, INC. CONSOLIDATED BALANCE SHEET (unaudited and in thousands, except share data) December 31, 2023 March 31, 2024 ASSETS Current assets: Cash and cash equivalents $ 1,523 $ 1,689 Accounts receivable, net 27,060 26,549 Inventories 8,347 8,252 Prepaid and other current assets 4,791 3,905 Total current assets 41,721 40,395 Preneed cemetery trust investments 96,374 98,757 Preneed funeral trust investments 107,842 109,833 Preneed cemetery receivables, net 35,575 36,854 Receivables from preneed funeral trusts, net 21,530 21,632 Property, plant and equipment, net 287,484 281,965 Cemetery property, net 114,580 114,002 Goodwill 423,643 414,895 Intangible and other non-current assets, net 37,677 37,872 Operating lease right-of-use assets 16,295 16,512 Cemetery perpetual care trust investments 85,331 87,802 Total assets $ 1,268,052 $ 1,260,519 LIABILITIES AND STOCKHOLDERS’ EQUITY Current liabilities: Current portion of debt and lease obligations $ 3,842 $ 3,953 Accounts payable 11,866 12,727 Accrued and other liabilities 35,362 39,380 Total current liabilities 51,070 56,060 Acquisition debt, net of current portion 5,461 5,380 Credit facility 177,794 152,932 Senior notes 395,905 396,075 Obligations under finance leases, net of current portion 5,831 5,434 Obligations under operating leases, net of current portion 15,797 15,802 Deferred preneed cemetery revenue 61,048 61,219 Deferred preneed funeral revenue 39,537 39,745 Deferred tax liability 52,127 49,785 Other long-term liabilities 1,855 1,942 Deferred preneed cemetery receipts held in trust 96,374 98,757 Deferred preneed funeral receipts held in trust 107,842 109,833 Care trusts’ corpus 84,351 88,000 Total liabilities 1,094,992 1,080,964 Commitments and contingencies: Stockholders’ equity: Common stock, $ 0.01 par value; 80,000,000 shares authorized and 26,627,319 and 26,793,343 shares issued, respectively and 14,999,501 and 15,165,525 shares outstanding, respectively 266 268 Additional paid-in capital 241,291 240,811 Retained earnings 210,256 217,229 Treasury stock, at cost; 11,627,818 shares ( 278,753 ) ( 278,753 ) Total stockholders’ equity 173,060 179,555 Total liabilities and stockholders’ equity $ 1,268,052 $ 1,260,519 The accompanying condensed notes are an integral part of these Consolidated Financial Statements. - 3 - CARRIAGE SERVICES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited and in thousands, except per share data) Three months ended March 31, 2023 2024 Revenue: Service revenue $ 48,207 $ 49,699 Property and merchandise revenue 40,011 45,502 Other revenue 7,296 8,292 95,514 103,493 Field costs and expenses: Cost of service 23,477 23,708 Cost of merchandise 29,734 31,950 Cemetery property amortization 1,201 1,756 Field depreciation expense 3,357 3,467 Regional and unallocated funeral and cemetery costs 5,437 3,842 Other expenses 1,253 1,508 64,459 66,231 Gross profit 31,055 37,262 Corporate costs and expenses: General, administrative and other 10,180 16,240 Net loss on divestitures, disposals and impairments charges 241 1,545 Operating income 20,634 19,477 Interest expense 8,539 8,712 Loss on property damage, net of insurance claims 271 — Other, net ( 522 ) 43 Income before income taxes 12,346 10,722 Expense for income taxes 3,568 3,519 (Benefit) expense related to discrete income tax items ( 66 ) 230 Total expense for income taxes 3,502 3,749 Net income $ 8,844 $ 6,973 Basic earnings per common share: $ 0.59 $ 0.46 Diluted earnings per common share: $ 0.57 $ 0.45 Dividends declared per common share: $ 0.1125 $ 0.1125 Weighted average number of common and common equivalent shares outstanding: Basic 14,758 14,876 Diluted 15,468 15,309 The accompanying condensed notes are an integral part of these Consolidated Financial Statements. - 4 - CARRIAGE SERVICES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited and in thousands) Three months ended March 31, 2023 2024 Cash flows from operating activities: Net income $ 8,844 $ 6,973 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,769 5,460 Provision for credit losses 699 782 Stock-based compensation expense 2,141 489 Deferred income tax benefit ( 178 ) ( 2,342 ) Amortization of intangibles 321 332 Amortization of debt issuance costs 174 176 Amortization and accretion of debt 127 132 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: Accounts and preneed receivables 120 ( 1,800 ) Inventories, prepaid and other current assets 884 814 Intangible and other non-current assets ( 1,277 ) ( 834 ) Preneed funeral and cemetery trust investments 5,356 ( 15,255 ) Accounts payable ( 246 ) 862 Accrued and other liabilities 1,924 4,831 Deferred preneed funeral and cemetery revenue 8,132 2,267 Deferred preneed funeral and cemetery receipts held in trust ( 5,903 ) 15,271 Net cash provided by operating activities 25,869 19,703 Cash flows from investing activities: Acquisitions of businesses ( 44,000 ) — Proceeds from divestitures and sale of other assets 1,275 10,877 Proceeds from insurance claims 421 46 Capital expenditures ( 4,982 ) ( 3,551 ) Net cash (used in) provided by investing activities ( 47,286 ) 7,372 Cash flows from financing activities: Borrowings from the credit facility 51,700 13,600 Payments against the credit facility ( 28,800 ) ( 38,600 ) Payments on acquisition debt and obligations under finance leases ( 127 ) ( 152 ) Proceeds from the exercise of stock options and employee stock purchase plan contributions 526 347 Taxes paid on restricted stock vestings and exercise of stock options ( 98 ) ( 418 ) Dividends paid on common stock ( 1,661 ) ( 1,686 ) 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 Cash and cash equivalents at end of period $ 1,293 $ 1,689 The accompanying condensed notes are an integral part of these Consolidated Financial Statements. - 5 - CARRIAGE SERVICES, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited and in thousands) Three months ended March 31, 2023 Shares Outstanding Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Total Balance – December 31, 2022 14,732 $ 264 $ 238,780 $ 176,843 $ ( 278,753 ) $ 137,134 Net income — — — 8,844 — 8,844 Issuance of common stock from employee stock purchase plan 22 — 526 — — 526 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 common stock ( 4 ) — ( 77 ) — — ( 77 ) Stock-based compensation expense — — 1,203 — — 1,203 Dividends on common stock — — ( 1,661 ) — — ( 1,661 ) Other 8 — 276 — — 276 Balance – March 31, 2023 14,935 $ 266 $ 239,962 $ 185,687 $ ( 278,753 ) $ 147,162 Three months ended March 31, 2024 Shares Outstanding Common Stock Additional Paid-in Capital Retained Earnings Treasury Stock Total Balance – December 31, 2023 15,000 $ 266 $ 241,291 $ 210,256 $ ( 278,753 ) $ 173,060 Net income — — — 6,973 — 6,973 Issuance of common stock from employee stock purchase plan 16 — 347 — — 347 Issuance of common stock to directors and board advisor 4 — 113 — — 113 Issuance of restricted common stock 157 2 ( 2 ) — — — Cancellation and surrender of restricted common stock ( 43 ) — ( 418 ) — — ( 418 ) Stock-based compensation expense — — 376 — — 376 Dividends on common stock — — ( 1,686 ) — — ( 1,686 ) Other 31 — 790 — — 790 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 - CARRIAGE SERVICES, INC. CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Company Carriage Services, Inc. (“Carriage,” the “Company,” “we,” “us,” or “our”) is a leading provider of funeral and cemetery services and merchandise in the United States. Our operations are reported in two business segments: Funeral Home Operations, which currently accounts for approximately 70 % of our total revenue, and Cemetery Operations, which currently accounts for approximately 30 % of our total revenue. At 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. Funeral services include consultation, the removal and preparation of remains, the sale of caskets and related funeral merchandise, the use of funeral home facilities for visitation and memorial services and transportation services. We provide funeral services and products on both an “atneed” (time of death) and “preneed” (planned prior to death) basis. Our cemetery operations generate revenue primarily through sales of cemetery interment rights (primarily grave sites, lawn crypts, mausoleum spaces and niches), related cemetery merchandise (such as memorial markers, outer burial containers and monuments) and services (interments, inurnments and installation of cemetery merchandise). We provide cemetery services and products on both an atneed and preneed basis. Principles of Consolidation and Interim Condensed Disclosures Our unaudited Consolidated Financial Statements include the Company and its subsidiaries. All intercompany balances and transactions have been eliminated. Our interim Consolidated Financial Statements are unaudited, but include all adjustments, which consist of normal, recurring accruals, that are necessary for a fair presentation of our financial position and results of operations as of and for the interim periods presented. There have been no material changes in our accounting policies previously disclosed in Part II, Item 8 “Financial Statements and Supplementary Data” in Note 1 in our Annual Report on Form 10-K for the year ended December 31, 2023. In addition, our unaudited Consolidated Financial Statements have been prepared in a manner consistent with the accounting principles described in our Annual Report on Form 10-K for the year ended December 31, 2023 unless otherwise disclosed herein, and should be read in conjunction therewith. Use of Estimates The preparation of our Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. On an ongoing basis, we evaluate our critical estimates and judgments, which include those related to the impairment of goodwill and the fair value measurements used in business combinations. These policies are considered critical because they may result in fluctuations in our reported results from period to period due to the significant judgments, estimates and assumptions about complex and inherently uncertain matters and because the use of different judgments, assumptions or estimates could have a material impact on our financial condition or results of operations. Actual results may differ from these estimates and such estimates may change if the underlying conditions or assumptions change. Historical performance should not be viewed as indicative of future performance because there can be no assurance the margins, operating income and net earnings, as a percentage of revenue, will be consistent from period to period. Cash and Cash Equivalents We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Inventory Inventory consists primarily of caskets, outer burial containers and cemetery monuments and markers and is recorded at the lower of its cost basis or net realizable value. Inventory is relieved using specific identification in fulfillment of performance obligations on our contracts. - 7 - Deferred Revenue 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. Property, Plant and Equipment Property, plant and equipment is comprised of the following (in thousands): December 31, 2023 March 31, 2024 Land $ 87,635 $ 86,888 Buildings and improvements 263,522 260,864 Furniture, equipment and vehicles 74,372 72,880 Property, plant and equipment, at cost 425,529 420,632 Less: accumulated depreciation ( 138,045 ) ( 138,667 ) Property, plant and equipment, net $ 287,484 $ 281,965 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 $ 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 $ 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 Taxes 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 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. - 8 - 2. RECENTLY ISSUED ACCOUNTING STANDARDS 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 Income Taxes In December 2023, the FASB issued ASU, Income Taxes - Improvements to Income Tax Disclosures (“Topic 740”) to enhance the transparency about income tax information through improvements to income tax disclosures primarily related to rate reconciliation and income taxes paid information. The amendments in this update require that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation; and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than five percent of the amount computed by multiplying pretax income (loss) by the applicable statutory income tax rate). The amendments in this update also require that all entities disclose on an annual basis (1) the amount of net income taxes paid disaggregated by federal and state taxes; and (2) the amount of net income taxes paid disaggregated by individual jurisdictions in which net income taxes paid is equal to or greater than five percent of total net income taxes paid. The amendments are effective for annual periods beginning after December 15, 2024. Early adoption is permitted. We plan to adopt the amendments of Topic 740 for our fiscal year beginning January 1, 2025. We expect the adoption will have no impact on our Consolidated Financial Statements. 3. BUSINESS COMBINATIONS Tangible and intangible assets acquired and liabilities assumed are recorded at fair value and goodwill is recognized for any difference between the price of the acquisition and fair value. We recognize the assets acquired, the liabilities assumed and any non-controlling interest in the acquiree at the acquisition date, measured at the fair value as of that date. Acquisition related costs are recognized separately from the acquisition and are expensed as incurred. We customarily estimate related transaction costs known at closing. To the extent that information not available to us at the closing date subsequently becomes available during the measurement period, we may adjust goodwill, intangible assets, assets or liabilities associated with the acquisition. 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. The pro forma impact of this acquisition on prior periods is not presented, as the impact is not significant to our reported results. The results of the acquired business are reflected in our Consolidated Statements of Operations from the date of acquisition. - 9 - The following table summarizes the breakdown of the purchase price allocation for our Bakersfield, CA business acquisition (in thousands): Initial Purchase Price Allocation Adjustments Adjusted Purchase Price Allocation Current assets $ 7,087 $ 131 $ 7,218 Preneed trust assets — 11,428 11,428 Property, plant & equipment 12,577 245 12,822 Cemetery property 9,035 — 9,035 Goodwill 13,612 ( 106 ) 13,506 Intangible and other non-current assets 3,763 — 3,763 Assumed liabilities ( 300 ) ( 66 ) ( 366 ) Preneed trust liabilities — ( 11,428 ) ( 11,428 ) Deferred revenue ( 1,774 ) ( 204 ) ( 1,978 ) Purchase price $ 44,000 $ — $ 44,000 The current assets relate to accounts receivable and inventory. The intangible and other non-current assets relate to the fair value of tradenames and right-of-use operating lease assets. The assumed liabilities relate to operating lease obligations and commissions payable. As of December 31, 2023, our accounting for this acquisition was complete. The following table summarizes the fair value of the assets acquired and liabilities assumed for this business (in thousands): Acquisition Date Type of Business Market Assets Acquired (Excluding Goodwill) Goodwill Recorded Liabilities and Debt Assumed March 22, 2023 Three Funeral Homes, Two Cemeteries and One Cremation Focused Business Bakersfield, CA $ 44,266 $ 13,506 $ ( 13,772 ) 4. GOODWILL The following table presents changes in goodwill in the accompanying Consolidated Balance Sheet (in thousands): December 31, 2023 March 31, 2024 Goodwill at the beginning of the period $ 410,137 $ 423,643 Increase in goodwill related to acquisitions 13,506 — Decrease in goodwill related to divestitures — ( 8,748 ) Goodwill at the end of the period $ 423,643 $ 414,895 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. 5. DIVESTED OPERATIONS 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. - 10 - 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 March 31, 2023 2024 Revenue $ 66 $ 1,151 Operating income 26 122 Loss on divestitures (1) ( 82 ) ( 1,501 ) Income tax benefit 16 452 Net loss from divested operations, after tax $ ( 40 ) $ ( 927 ) (1) Loss on divestitures is recorded in Net loss on divestitures, disposals and impairments charges on our Consolidated Statements of Operations. 6. RECEIVABLES Accounts Receivable Our funeral receivables are recorded in Accounts receivable, net and primarily consist of amounts due for funeral services already performed. Atneed cemetery receivables and preneed cemetery receivables with payments expected to be received within one year from the balance sheet date are also recorded in Accounts receivable, net . Preneed cemetery receivables with payments expected to be received beyond one year from the balance sheet date are recorded in Preneed cemetery receivables, net . Accounts receivable is comprised of the following (in thousands): March 31, 2024 Funeral Cemetery Corporate Total Trade and financed receivables $ 8,412 $ 19,023 $ — $ 27,435 Other receivables 388 219 112 719 Allowance for credit losses ( 302 ) ( 1,303 ) — ( 1,605 ) Accounts receivable, net $ 8,498 $ 17,939 $ 112 $ 26,549 December 31, 2023 Funeral Cemetery Corporate Total Trade and financed receivables $ 8,822 $ 18,459 $ — $ 27,281 Other receivables 404 595 286 1,285 Allowance for credit losses ( 266 ) ( 1,240 ) — ( 1,506 ) Accounts receivable, net $ 8,960 $ 17,814 $ 286 $ 27,060 Other receivables include supplier rebates, commissions due from third party insurance companies and perpetual care income receivables. We do not provide an allowance for credit losses for these receivables as we have historically not had any collectability issues nor do we expect any in the foreseeable future. The following table summarizes the activity in our allowance for credit losses by segment (in thousands): January 1, 2024 Provision for Credit Losses Write Offs Recoveries March 31, 2024 Trade and financed receivables: Funeral $ ( 266 ) $ ( 238 ) $ 459 $ ( 257 ) $ ( 302 ) Cemetery ( 1,240 ) ( 208 ) 145 — ( 1,303 ) 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 $ 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. - 11 - Cemetery Receivables Our cemetery receivables are comprised of the following (in thousands): December 31, 2023 March 31, 2024 Interment rights $ 60,863 $ 63,328 Merchandise and services 11,223 11,314 Unearned finance charges 5,669 5,884 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 Less: unearned finance charges ( 5,669 ) ( 5,884 ) Cemetery receivables, at amortized cost $ 72,086 $ 74,642 Less: allowance for credit losses ( 3,495 ) ( 3,602 ) Less: balances due on undelivered cemetery preneed contracts ( 15,797 ) ( 16,466 ) Less: amounts in accounts receivable ( 17,219 ) ( 17,720 ) Preneed cemetery receivables, net $ 35,575 $ 36,854 The following table summarizes the activity in our allowance for credit losses for Preneed cemetery receivables, net (in thousands): 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 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 cemetery receivables at March 31, 2024 is as follows (in thousands): 31-60 Past Due 61-90 Past Due 91-120 Past Due >120 Past Due Total Past Due Current Total Recognized revenue $ 2,418 $ 512 $ 333 $ 3,635 $ 6,898 $ 51,278 $ 58,176 Deferred revenue 444 128 141 1,234 1,947 20,403 22,350 Total contracts $ 2,862 $ 640 $ 474 $ 4,869 $ 8,845 $ 71,681 $ 80,526 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 $ 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. However, we estimate an average maturity period of eight years for preneed cemetery contracts. 7. FAIR VALUE MEASUREMENTS We evaluated our financial assets and liabilities for those that met the criteria of the disclosure requirements and fair value framework. The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximate the fair values of those instruments due to the short-term nature of the instruments. The fair values of our receivables on preneed cemetery contracts are impracticable to estimate because of the lack of a trading market and the diverse number of individual contracts with varying terms. Our acquisition debt and Credit Facility (as defined in Note 11) and Senior Notes (as defined in Note 12) are classified within Level 2 of the Fair Value Measurements hierarchy. 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 - 12 - 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. Where quoted prices are available in an active market, investments held by the trusts are classified as Level 1 investments pursuant to the three-level valuation hierarchy. Our Level 1 investments include cash, U.S. treasury debt, common stock and equity mutual funds. Where quoted market prices are not available for the specific security, then fair values are estimated by using quoted prices of similar securities in active markets or inputs other than quoted prices that can corroborate observable market data. These investments are fixed income securities, including U.S. agency obligations, foreign debt, corporate debt, preferred stocks, certificates of deposit and fixed income mutual funds and other investments, all of which are classified within Level 2 of the valuation hierarchy. In addition, we have an investment in a limited partnership fund, whose fair value has been estimated using the net asset value per share practical expedient described in ASC 820-10-35-59, Fair Value Measurement of Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) and therefore, has not been classified in the fair value hierarchy. The investment strategy of this fund is to generate attractive, risk-adjusted returns over a multi-year performance period through the construction of a concentrated portfolio of investments possessing certain distinct business attributes that suggest the potential for long-term value creation. 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. We account for these investments at cost. See Notes 8 and 9 to our Consolidated Financial Statements for the fair value hierarchy levels of our trust investments. 8. TRUST INVESTMENTS Preneed trust investments represent trust fund assets that we are generally permitted to withdraw as the services and merchandise are provided to customers. Preneed funeral and cemetery contracts are secured by payments from customers, less amounts not required by law to be deposited into trust. These earnings are recognized in Other revenue on our Consolidated Statements of Operations, when a service is performed or merchandise is delivered. Trust management fees charged by 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. We do not intend to sell and it is likely that we will not be required to sell the securities prior to their anticipated recovery. Cemetery perpetual care trust investments represent a portion of the proceeds from the sale of cemetery property interment rights that we are required by various state laws to deposit into perpetual care trust funds. The income earned from these perpetual care trusts offsets maintenance expenses for cemetery property and memorials. This trust fund income is recognized in Other revenue. Changes in the fair value of our trust fund assets ( Preneed funeral, cemetery and perpetual care trust investments ) are offset by changes in the fair value of our trust fund liabilities ( Deferred preneed funeral and cemetery receipts held in trust and Care trusts’ corpus ) and reflected in Other, net . There is no impact on earnings until such time the services are performed or the merchandise is delivered, causing the contract to be withdrawn from the trust in accordance with state regulations and the gain or loss is allocated to the contract. We rely on our trust investments to provide funding for the various contractual obligations that arise upon maturity of the underlying preneed contracts. Because of the long-term relationship between the establishment of trust investments and the required performance of the underlying contractual obligations, the impact of current market conditions that may exist at any given time is not necessarily indicative of our ability to generate profit on our future performance obligations. Preneed Cemetery Trust Investments The components of Preneed cemetery trust investments on our Consolidated Balance Sheet are as follows (in thousands): December 31, 2023 March 31, 2024 Preneed cemetery trust investments, at market value $ 99,461 $ 101,990 Less: allowance for contract cancellation ( 3,087 ) ( 3,233 ) Preneed cemetery trust investments $ 96,374 $ 98,757 - 13 - 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 Gains Unrealized Losses Fair Market Value Cash and money market accounts 1 $ 21,052 $ — $ — $ 21,052 Fixed income securities: U.S. agency obligations 2 664 — ( 56 ) 608 Foreign debt 2 7,849 1,454 ( 14 ) 9,289 Corporate debt 2 15,489 257 ( 2,508 ) 13,238 Preferred stock 2 11,296 492 ( 1,790 ) 9,998 Certificates of deposit 2 79 — ( 7 ) 72 Common stock 1 34,679 2,459 ( 5,314 ) 31,824 Limited partnership fund 3,611 301 — 3,912 Mutual funds: Equity 1 546 33 ( 21 ) 558 Fixed income 2 12,490 34 ( 2,279 ) 10,245 Trust securities $ 107,755 $ 5,030 $ ( 11,989 ) $ 100,796 Accrued investment income $ 1,194 $ 1,194 Preneed cemetery trust investments $ 101,990 Market value as a percentage of cost 93.5 % The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands): Due in one year or less $ 136 Due in one to five years 12,662 Due in five to ten years 3,303 Thereafter 17,104 Total fixed income securities $ 33,205 The cost and market values associated with preneed cemetery trust investments at December 31, 2023 are detailed below (in thousands): Fair Value Hierarchy Level Cost Unrealized Gains Unrealized Losses Fair Market Value Cash and money market accounts 1 $ 9,643 $ — $ — $ 9,643 Fixed income securities: U.S. agency obligations 2 803 1 ( 51 ) 753 Foreign debt 2 7,764 1,371 ( 17 ) 9,118 Corporate debt 2 15,071 342 ( 3,657 ) 11,756 Preferred stock 2 10,965 473 ( 1,572 ) 9,866 Certificate of deposit 2 79 — ( 7 ) 72 Common stock 1 43,057 9,466 ( 7,935 ) 44,588 Limited partnership fund 3,575 — ( 3 ) 3,572 Mutual funds: Equity 1 553 10 ( 30 ) 533 Fixed income 2 11,369 16 ( 2,759 ) 8,626 Trust Securities $ 102,879 $ 11,679 $ ( 16,031 ) $ 98,527 Accrued investment income $ 934 $ 934 Preneed cemetery trust investments $ 99,461 Market value as a percentage of cost 95.8 % - 14 - 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 Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fixed income securities: U.S. agency obligations $ — $ — $ 608 $ ( 56 ) $ 608 $ ( 56 ) Foreign debt — — 501 ( 14 ) 501 ( 14 ) Corporate debt 685 ( 16 ) 5,046 ( 2,492 ) 5,731 ( 2,508 ) Preferred stock 941 ( 4 ) 7,708 ( 1,786 ) 8,649 ( 1,790 ) Certificates of deposit — — 73 ( 7 ) 73 ( 7 ) Total fixed income securities with an unrealized loss $ 1,626 $ ( 20 ) $ 13,936 $ ( 4,355 ) $ 15,562 $ ( 4,375 ) The following table summarizes our fixed income securities (excluding mutual funds) within our preneed cemetery trust investments in an unrealized loss position at December 31, 2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands): December 31, 2023 In Loss Position Less than 12 months In Loss Position Greater than 12 months Total Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fixed income securities: U.S. agency obligations $ — $ — $ 613 $ ( 51 ) $ 613 $ ( 51 ) Foreign debt 284 ( 5 ) 209 ( 12 ) 493 ( 17 ) Corporate debt 666 ( 62 ) 4,239 ( 3,595 ) 4,905 ( 3,657 ) Preferred stock 45 — 7,821 ( 1,572 ) 7,866 ( 1,572 ) Certificates of deposit — — 72 ( 7 ) 72 ( 7 ) Total fixed income securities with an unrealized loss $ 995 $ ( 67 ) $ 12,954 $ ( 5,237 ) $ 13,949 $ ( 5,304 ) Preneed cemetery trust investment security transactions recorded in Other, net on our Consolidated Statements of Operations are as follows (in thousands): Three months ended March 31, 2023 2024 Investment income $ 590 $ 539 Realized gains 1,273 10,576 Realized losses ( 877 ) ( 3,764 ) 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 March 31, 2023 2024 Purchases $ ( 6,354 ) $ ( 4,326 ) Sales 3,045 16,560 - 15 - Preneed Funeral Trust Investments Preneed funeral trust investments represent trust fund assets that we are permitted to withdraw as services and merchandise are provided to customers. Preneed funeral contracts are secured by payments from customers, less retained amounts not required to be deposited into trust. The components of Preneed funeral trust investments on our Consolidated Balance Sheet are as follows (in thousands): December 31, 2023 March 31, 2024 Preneed funeral trust investments, at market value $ 111,247 $ 113,377 Less: allowance for contract cancellation ( 3,405 ) ( 3,544 ) Preneed funeral trust investments $ 107,842 $ 109,833 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 Gains Unrealized Losses Fair Market Value Cash and money market accounts 1 $ 39,108 $ — $ — $ 39,108 Fixed income securities: U.S treasury debt 1 405 — ( 37 ) 368 Foreign debt 2 7,217 1,346 ( 13 ) 8,550 Corporate debt 2 13,931 237 ( 2,162 ) 12,006 Preferred stock 2 10,084 455 ( 1,645 ) 8,894 Common stock 1 30,277 2,170 ( 4,557 ) 27,890 Limited partnership fund 3,342 278 — 3,620 Mutual funds: Equity 1 397 8 ( 19 ) 386 Fixed income 2 10,353 27 ( 1,936 ) 8,444 Other investments 2 3,046 — — 3,046 Trust securities $ 118,160 $ 4,521 $ ( 10,369 ) $ 112,312 Accrued investment income $ 1,065 $ 1,065 Preneed funeral trust investments $ 113,377 Market value as a percentage of cost 95.1 % The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands): Due in one year or less $ 80 Due in one to five years 11,310 Due in five to ten years 2,962 Thereafter 15,466 Total fixed income securities $ 29,818 - 16 - The cost and market values associated with preneed funeral trust investments at December 31, 2023 are detailed below (in thousands): Fair Value Hierarchy Level Cost Unrealized Gains Unrealized Losses Fair Market Value Cash and money market accounts 1 $ 26,707 $ — $ — $ 26,707 Fixed income securities: U.S. treasury debt 1 451 — ( 34 ) 417 Foreign debt 2 7,300 1,297 ( 16 ) 8,581 Corporate debt 2 13,848 323 ( 3,255 ) 10,916 Preferred stock 2 9,786 442 ( 1,468 ) 8,760 Common stock 1 38,600 8,858 ( 6,855 ) 40,603 Limited partnership fund 3,383 — ( 2 ) 3,381 Mutual funds: Equity 1 401 3 ( 29 ) 375 Fixed income 2 9,513 15 ( 2,383 ) 7,145 Other investments 2 3,510 — — 3,510 Trust securities $ 113,499 $ 10,938 $ ( 14,042 ) $ 110,395 Accrued investment income $ 852 $ 852 Preneed funeral trust investments $ 111,247 Market value as a percentage of cost 97.3 % The 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 Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fixed income securities: U.S. treasury debt $ — $ — $ 368 $ ( 37 ) $ 368 $ ( 37 ) Foreign debt — — 464 ( 13 ) 464 ( 13 ) Corporate debt 635 ( 14 ) 4,423 ( 2,148 ) 5,058 ( 2,162 ) Preferred stock 830 ( 4 ) 6,817 ( 1,641 ) 7,647 ( 1,645 ) Total fixed income securities with an unrealized loss $ 1,465 $ ( 18 ) $ 12,072 $ ( 3,839 ) $ 13,537 $ ( 3,857 ) The following table summarizes our fixed income securities (excluding mutual funds) within our preneed funeral trust investment in an unrealized loss position at December 31, 2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands): December 31, 2023 In Loss Position Less than 12 months In Loss Position Greater than 12 months Total Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fixed income securities: U.S. treasury debt $ — $ — $ 371 $ ( 34 ) $ 371 $ ( 34 ) Foreign debt 269 ( 5 ) 198 ( 11 ) 467 ( 16 ) Corporate debt 630 ( 59 ) 3,802 ( 3,196 ) 4,432 ( 3,255 ) Preferred stock — — 7,078 ( 1,468 ) 7,078 ( 1,468 ) Total fixed income securities with an unrealized loss $ 899 $ ( 64 ) $ 11,449 $ ( 4,709 ) $ 12,348 $ ( 4,773 ) - 17 - Preneed funeral trust investment security transactions recorded in Other, net on the Consolidated Statements of Operations are as follows (in thousands): Three months ended March 31, 2023 2024 Investment income $ 486 $ 436 Realized gains 1,240 9,780 Realized losses ( 837 ) ( 3,209 ) 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 March 31, 2023 2024 Purchases $ ( 6,063 ) $ ( 4,003 ) Sales 2,943 15,118 Cemetery Perpetual Care Trust Investments Care trusts’ corpus on our Consolidated Balance Sheet represents the corpus of those trusts plus undistributed income. The components of Care trusts’ corpus are as follows (in thousands): December 31, 2023 March 31, 2024 Cemetery perpetual care trust investments, at market value $ 85,331 $ 87,802 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 March 31, 2024 (in thousands): Fair Value Hierarchy Level Cost Unrealized Gains Unrealized Losses Fair Market Value Cash and money market accounts 1 $ 17,744 $ — $ — $ 17,744 Fixed income securities: Foreign debt 2 7,116 1,239 ( 15 ) 8,340 Corporate debt 2 13,736 258 ( 2,315 ) 11,679 Preferred stock 2 10,239 415 ( 1,609 ) 9,045 Common stock 1 29,301 2,135 ( 4,563 ) 26,873 Limited partnership fund 3,047 254 — 3,301 Mutual funds: Equity 1 458 24 ( 18 ) 464 Fixed income 2 11,167 78 ( 1,952 ) 9,293 Trust securities $ 92,808 $ 4,403 $ ( 10,472 ) $ 86,739 Accrued investment income $ 1,063 $ 1,063 Cemetery perpetual care investments $ 87,802 Market value as a percentage of cost 93.5 % - 18 - The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands): Due in one year or less $ — Due in one to five years 10,687 Due in five to ten years 2,905 Thereafter 15,472 Total fixed income securities $ 29,064 The following table reflects the cost and market values associated with the trust investments held in cemetery perpetual care trust funds at December 31, 2023 (in thousands): Fair Value Hierarchy Level Cost Unrealized Gains Unrealized Losses Fair Market Value Cash and money market accounts 1 $ 6,688 $ — $ — $ 6,688 Fixed income securities: Foreign debt 2 7,101 1,177 ( 18 ) 8,260 Corporate debt 2 13,491 334 ( 3,367 ) 10,458 Preferred stock 2 10,723 415 ( 1,435 ) 9,703 Common stock 1 36,413 8,098 ( 6,580 ) 37,931 Limited partnership fund 3,042 — ( 2 ) 3,040 Mutual funds: Equity 1 467 5 ( 26 ) 446 Fixed income 2 10,326 14 ( 2,382 ) 7,958 Trust securities $ 88,251 $ 10,043 $ ( 13,810 ) $ 84,484 Accrued investment income $ 847 $ 847 Cemetery perpetual care investments $ 85,331 Market value as a percentage of cost 95.7 % The 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 Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fixed income securities: Foreign debt $ — $ — $ 622 $ ( 15 ) $ 622 $ ( 15 ) Corporate debt 578 ( 13 ) 4,588 ( 2,302 ) 5,166 ( 2,315 ) Preferred stock 757 ( 4 ) 7,151 ( 1,605 ) 7,908 ( 1,609 ) Total fixed income securities with an unrealized loss $ 1,335 $ ( 17 ) $ 12,361 $ ( 3,922 ) $ 13,696 $ ( 3,939 ) - 19 - The following table summarizes our fixed income securities (excluding mutual funds) within our perpetual care trust investment in an unrealized loss position at December 31, 2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands): December 31, 2023 In Loss Position Less than 12 months In Loss Position Greater than 12 months Total Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fixed income securities: Foreign debt $ 440 $ ( 8 ) $ 178 $ ( 10 ) $ 618 $ ( 18 ) Corporate debt 567 ( 53 ) 3,879 ( 3,314 ) 4,446 ( 3,367 ) Preferred stock — — 7,301 ( 1,435 ) 7,301 ( 1,435 ) Total fixed income securities with an unrealized loss $ 1,007 $ ( 61 ) $ 11,358 $ ( 4,759 ) $ 12,365 $ ( 4,820 ) 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 March 31, 2023 2024 Realized gains $ 160 $ 1,306 Realized losses ( 177 ) ( 426 ) Unrealized losses, net ( 9,073 ) ( 6,069 ) Net change in care trusts’ corpus 9,090 5,189 Total $ — $ — Cemetery perpetual care trust investment security transactions recorded in Other revenue are as follows (in thousands): Three months ended March 31, 2023 2024 Investment income $ 3,197 $ 3,129 Realized losses, net ( 456 ) ( 374 ) Total $ 2,741 $ 2,755 Purchases and sales of investments in the cemetery perpetual care trusts are as follows (in thousands): Three months ended March 31, 2023 2024 Purchases $ ( 4,401 ) $ ( 3,649 ) Sales 2,210 14,661 9. RECEIVABLES FROM PRENEED FUNERAL TRUSTS Our receivables from preneed funeral trusts represent assets in trusts which are controlled and operated by third parties in which we do not have a controlling financial interest (less than 50%) in the trust assets. We account for these investments at cost. Receivables from preneed funeral trusts are as follows (in thousands): December 31, 2023 March 31, 2024 Preneed funeral trust funds, at cost $ 22,196 $ 22,301 Less: allowance for contract cancellation ( 666 ) ( 669 ) 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, 2023 and March 31, 2024. 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. - 20 - The composition of the preneed funeral trust funds at March 31, 2024 is as follows (in thousands): Historical Cost Basis Fair Value Cash and cash equivalents $ 6,568 $ 6,568 Fixed income investments 12,665 12,665 Mutual funds and common stocks 3,064 2,815 Annuities 4 4 Total $ 22,301 $ 22,052 The composition of the preneed funeral trust funds at December 31, 2023 is as follows (in thousands): Historical Cost Basis Fair Value Cash and cash equivalents $ 6,547 $ 6,547 Fixed income investments 12,732 12,732 Mutual funds and common stocks 2,913 2,695 Annuities 4 4 Total $ 22,196 $ 21,978 10. INTANGIBLE AND OTHER NON-CURRENT ASSETS Intangible and other non-current assets are as follows (in thousands): December 31, 2023 March 31, 2024 Tradenames $ 28,862 $ 28,713 Capitalized commissions on preneed contracts, net of accumulated amortization of $ 3,788 and $ 3,980 , respectively 4,678 4,715 Prepaid agreements not-to-compete, net of accumulated amortization of $ 3,158 and $ 3,276 , respectively 1,335 1,269 Internal-use software, net of accumulated amortization of $ 444 and $ 528 , respectively 2,422 2,835 Other 380 340 Intangible and other non-current assets, net $ 37,677 $ 37,872 Tradenames 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 We capitalize sales commissions and other direct selling costs related to preneed cemetery merchandise and services and preneed funeral trust contracts as these costs are incremental and recoverable costs of obtaining a contract with a customer. Our capitalized commissions on preneed contracts are amortized on a straight-line basis over the average maturity period of ten years for our preneed funeral trust contracts and eight years for our preneed cemetery merchandise and services contracts. 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 $ 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 $ 0.1 million for both the three months ended March 31, 2023 and 2024. - 21 - 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 Years ending December 31, Remainder of 2024 $ 645 $ 345 $ 297 2025 803 390 606 2026 737 262 597 2027 653 142 591 2028 582 78 450 Thereafter 1,295 52 294 Total amortization expense $ 4,715 $ 1,269 $ 2,835 11. CREDIT FACILITY AND ACQUISITION DEBT 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. The final maturity of the Credit Facility will occur on May 13, 2026. Our obligations under the Credit Facility are unconditionally guaranteed on a joint and several basis by the same subsidiaries which guarantee the Senior Notes (as defined in Note 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, 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 at March 31, 2024. Our Credit Facility and acquisition debt consisted of the following (in thousands): December 31, 2023 March 31, 2024 Credit Facility $ 179,100 $ 154,100 Debt issuance costs, net of accumulated amortization of $ 2,478 and $ 2,616 , respectively ( 1,306 ) ( 1,168 ) Total Credit Facility $ 177,794 $ 152,932 Acquisition debt $ 5,998 $ 5,979 Less: current portion ( 537 ) ( 599 ) Total acquisition debt, net of current portion $ 5,461 $ 5,380 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 March 31, 2024, we had $ 93.3 million of availability under the Credit Facility. - 22 - The interest expense and amortization of debt issuance costs related to our Credit Facility are as follows (in thousands): Three months ended March 31, 2023 2024 Credit Facility interest expense $ 3,811 $ 3,916 Credit Facility amortization of debt issuance costs 138 138 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 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 typically range from five to twenty years . The imputed interest expense related to our acquisition debt is as follows (in thousands): Three months ended March 31, 2023 2024 Acquisition debt imputed interest expense $ 71 $ 104 12. SENIOR NOTES 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, 2023 March 31, 2024 Long-term liabilities: Principal amount $ 400,000 $ 400,000 Debt discount, net of accumulated amortization of $ 1,309 and $ 1,441 , respectively ( 3,191 ) ( 3,059 ) Debt issuance costs, net of accumulated amortization of $ 373 and $ 411 , respectively ( 904 ) ( 866 ) Carrying value of the Senior Notes $ 395,905 $ 396,075 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. The Senior Notes are unsecured, senior obligations and are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally by each of the Subsidiary Guarantors. The Senior Notes mature on May 15, 2029, unless earlier redeemed or purchased and bear interest at 4.25 % per year, which is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2021. The Indenture contains restrictive covenants limiting our ability and the ability of our Restricted Subsidiaries (as defined in the Indenture) to, among other things, incur additional indebtedness or issue certain preferred shares, create liens on certain assets to secure debt, pay dividends or make other equity distributions, purchase or redeem capital stock, make certain investments, sell assets, agree to certain restrictions on the ability of Restricted Subsidiaries to make payments to us, consolidate, merge, sell or otherwise dispose of all or substantially all assets, or engage in transactions with affiliates. The Indenture also contains customary events of default. The interest expense and amortization of debt discount and debt issuance costs related to our Senior Notes are as follows (in thousands): Three months ended March 31, 2023 2024 Senior Notes interest expense $ 4,250 $ 4,250 Senior Notes amortization of debt discount 127 132 Senior Notes amortization of debt issuance costs 36 38 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 - 23 - 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. 13. LEASES Our lease obligations consist of operating and finance leases related to real estate, vehicles and equipment. The components of lease cost are as follows (in thousands): Three months ended March 31, Income Statement Classification 2023 2024 Operating lease cost Facilities and grounds expense (1) $ 875 $ 978 Short-term lease cost Facilities and grounds expense (1) 94 18 Variable lease cost Facilities and grounds expense (1) 58 104 Finance lease cost: Depreciation of leased assets Depreciation and amortization (2) $ 108 $ 126 Interest on lease liabilities Interest expense 105 125 Total finance lease cost 213 251 Total lease cost $ 1,240 $ 1,351 (1) Facilities and grounds expense is included within Cost of service and General, administrative and other on our Consolidated Statements of Operations. (2) Depreciation and amortization expense is included within Field depreciation expense and General, administrative and other on our Consolidated Statements of Operations. Supplemental cash flow information related to our leases is as follows (in thousands): Three months ended March 31, 2023 2024 Cash paid for operating leases included in operating activities $ 951 $ 1,071 Cash paid for finance leases included in financing activities 223 277 Right-of-use assets obtained in exchange for new leases is as follows (in thousands): Three months ended March 31, 2023 2024 Right-of-use assets obtained in exchange for new operating lease liabilities $ 908 $ 852 Right-of-use assets obtained in exchange for new finance lease liabilities — — Supplemental balance sheet information related to leases is as follows (in thousands): 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 Finance lease right-of-use assets Property, plant and equipment, net $ 8,249 $ 7,870 Accumulated depreciation Property, plant and equipment, net ( 3,059 ) ( 3,162 ) Finance lease right-of-use assets, net $ 5,190 $ 4,708 Operating lease current liabilities Current portion of operating lease obligations $ 2,713 $ 2,840 Finance lease current liabilities Current portion of finance lease obligations 592 514 Total current lease liabilities $ 3,305 $ 3,354 Operating lease non-current liabilities Obligations under operating leases, net of current portion $ 15,797 $ 15,802 Finance lease non-current liabilities Obligations under finance leases, net of current portion 5,831 5,434 Total non-current lease liabilities $ 21,628 $ 21,236 Total lease liabilities $ 24,933 $ 24,590 - 24 - The average lease terms and discount rates at March 31, 2024 are as follows: Weighted-average remaining lease term (years) Weighted-average discount rate Operating leases 7.6 8.1 % Finance leases 10.4 8.3 % The aggregate future lease payments for non-cancelable operating and finance leases at March 31, 2024 are as follows (in thousands): Operating Finance Lease payments due: Remainder of 2024 $ 3,210 $ 774 2025 3,960 964 2026 3,824 974 2027 3,583 974 2028 3,314 723 Thereafter 6,854 4,512 Total lease payments 24,745 8,921 Less: Interest ( 6,103 ) ( 2,973 ) Present value of lease liabilities $ 18,642 $ 5,948 At March 31, 2024, we had no significant operating or finance leases that had not yet commenced. 14. STOCKHOLDERS ’ EQUITY Restricted Stock Restricted stock activity is as follows (in thousands, except shares): Three months ended March 31, 2023 2024 Shares Fair Value Shares Fair Value Granted (1) 142,020 $ 4,634 156,630 $ 3,834 Returned for payroll taxes 1,434 $ 49 16,315 $ 418 Cancelled 2,400 $ 79 26,240 $ 841 (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 March 31, 2023 2024 Shares Fair Value Shares Fair Value Granted (1) 214,191 $ 2,506 370,590 $ 3,830 Cancelled 92,440 $ 1,231 294,728 $ 3,757 (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 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. - 25 - 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 Expected holding period (years) 6.00 Awards granted 370,590 Dividend yield 1.79 % Expected volatility 43.59 % Risk-free interest rate 4.31 % Black-Scholes value $ 10.34 Additional stock option activity is as follows (in thousands, except shares): Three months ended March 31, 2023 2024 Shares Cash Shares Cash Exercised (1) 12,000 N/A — N/A Returned for option price (2) 10,145 $ — — $ — Returned for payroll taxes (3) 729 $ 21 — $ — (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 $ 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 March 31, 2023 2024 Shares Fair Value Shares Fair Value Cancelled 40,804 $ 1,119 80,276 $ 871 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 March 31, 2023 2024 Shares Price Shares Price ESPP 21,656 $ 24.28 16,296 $ 21.26 The fair value of the right (option) to purchase shares under the ESPP is estimated at the date of purchase with the four quarterly purchase dates using the following assumptions: 2024 Dividend yield 1.84 % Expected volatility 41.15 % Risk-free interest rate 5.46 %, 5.24 %, 5.02 %, 4.80 % 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 $ 0.3 million and $ 0.2 million for the three months ended March 31, 2023 and 2024, respectively. - 26 - Common Stock Former Employee Common stock activity is as follows (in thousands, except shares): Three months ended March 31, 2023 2024 Shares Fair Value Shares Fair Value Granted (1) 30,000 $ 826 — $ — Returned for payroll taxes 1,001 $ 28 — $ — (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 Common stock issued to certain employees under this incentive program is as follows (in thousands, except shares): Three months ended March 31, 2023 2024 Shares Fair Value Shares Fair Value Granted (1) 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 March 31, 2023 2024 Shares Fair Value Shares Fair Value Board of Directors (1) 3,518 $ 107 3,999 $ 108 Advisor to the Board (1) 163 $ 5 184 $ 5 (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 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): 2024 Per Share Dollar Value March 1 st $ 0.1125 $ 1,686 2023 Per Share Dollar Value March 1 st $ 0.1125 $ 1,661 - 27 - 15. 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 March 31, 2023 2024 Numerator for basic and diluted earnings per share: Net income $ 8,844 $ 6,973 Less: Earnings allocated to unvested restricted stock ( 71 ) ( 101 ) Income attributable to common stockholders $ 8,773 $ 6,872 Denominator: Denominator for basic earnings per common share – weighted average shares outstanding 14,758 14,876 Effect of dilutive securities: Stock options 99 17 Performance awards 611 416 Denominator for diluted earnings per common share – weighted average shares outstanding 15,468 15,309 Basic earnings per common share: $ 0.59 $ 0.46 Diluted earnings per common share: $ 0.57 $ 0.45 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 March 31, 2023 2024 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 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. 16. SEGMENT REPORTING Revenue, disaggregated by major source for each of our reportable segments was as follows (in thousands): Three months ended March 31, 2024 Funeral Cemetery Total Services $ 44,807 $ 4,892 $ 49,699 Merchandise 22,659 4,140 26,799 Cemetery property — 18,703 18,703 Other revenue 4,365 3,927 8,292 Total $ 71,831 $ 31,662 $ 103,493 Three months ended March 31, 2023 Funeral Cemetery Total Services $ 43,602 $ 4,605 $ 48,207 Merchandise 22,969 3,934 26,903 Cemetery property — 13,108 13,108 Other revenue 3,514 3,782 7,296 Total $ 70,085 $ 25,429 $ 95,514 - 28 - The following table presents operating income (loss), income (loss) before income taxes and total assets (in thousands): Funeral Cemetery Corporate Consolidated Operating income (loss): 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 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: March 31, 2024 $ 790,358 $ 452,517 $ 17,644 $ 1,260,519 December 31, 2023 802,368 448,018 17,666 1,268,052 - 29 - 17. SUPPLEMENTARY DATA Balance Sheet The following table presents the detail of certain balance sheet accounts (in thousands): December 31, 2023 March 31, 2024 Prepaid and other current assets: Prepaid expenses $ 3,779 $ 3,767 Federal income tax receivable 454 — State income tax receivable 421 — Other current assets 137 138 Total prepaid and other current assets $ 4,791 $ 3,905 Current portion of debt and lease obligations: Acquisition debt $ 537 $ 599 Finance lease obligations 592 514 Operating lease obligations 2,713 2,840 Total current portion of debt and lease obligations $ 3,842 $ 3,953 Accrued and other liabilities: Incentive compensation $ 13,156 $ 4,548 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 Commissions 1,144 1,258 Income tax payable — 4,732 Other accrued liabilities 1,384 1,091 Total accrued and other liabilities $ 35,362 $ 39,380 Other long-term liabilities: Incentive compensation $ 1,855 $ 917 Other long-term liabilities — 1,025 Total other long-term liabilities $ 1,855 $ 1,942 Cash Flow The following information is supplemental disclosure for the Consolidated Statements of Cash Flows (in thousands): Three months ended March 31, 2023 2024 Cash paid for interest $ 3,782 $ 4,083 Cash paid for taxes 230 461 - 30 - CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS In addition to historical information, this Quarterly Report on Form 10-Q contains certain statements and information that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical information, should be deemed to be forward-looking statements. Words such as “may”, “will”, “estimate”, “intend”, “believe”, “expect”, “seek”, “project”, “forecast”, “foresee”, “should”, “would”, “could”, “plan”, “anticipate” and other similar words or expressions may be used to identify forward-looking statements; however, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements include, but are not limited to, statements regarding any projections of earnings, revenue, cash flow, investment returns, capital allocation, debt levels, equity performance, death rates, market share growth, cost inflation, overhead, including talent recruitment, field and corporate incentive compensation, preneed sales or other financial items; 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 projections or expectations related to the conclusion of the Board's strategic review; any statements of belief; and any statements of assumptions underlying any of the foregoing and are based on our current expectations and beliefs concerning future developments and their potential effect on us. While we believe these assumptions concerning future events are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenue and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: • our ability to find and retain skilled personnel; • 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 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 and Strategic Acquisition Models; • the effects of competition; • changes in the number of deaths in our markets, which are not predictable from market to market or over the short term; • changes in consumer preferences and our ability to adapt to or meet those changes; • our ability to generate preneed sales, including implementing our cemetery portfolio sales strategy, product development and optimization plans; • the investment performance of our funeral and cemetery trust funds; • fluctuations in interest rates, including, but not limited to, the effects of increased borrowing costs under our Credit Facility and our ability to minimize such costs, if at all; • the effects of inflation on our operational and financial performance, including the increased overall costs for our goods and services, the impact on customer preferences as a result of changes in discretionary income, and our ability, if at all, to mitigate such effects; • our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness; • 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 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; • the financial condition of third-party insurance companies that fund our preneed funeral contracts; - 31 - • increased or unanticipated costs, such as merchandise, goods, insurance or taxes, and our ability to mitigate or minimize such costs, if at all; • our level of indebtedness and the cash required to service our indebtedness; • changes in federal income tax laws and regulations and the implementation and interpretation of these laws and regulations by the Internal Revenue Service; • effects of the application of other applicable laws and regulations, including changes in such regulations or the interpretation thereof; • the potential impact of epidemics and pandemics, such as the COVID-19 coronavirus, including any new or emerging public health threats, on customer preferences and on our business; • government, social, business and other actions that have been and will be taken in response to pandemics and epidemics, such as those that were taken with the COVID-19 coronavirus, including potential responses to any new or emerging public health threats; • effects and expense of litigation; • consolidation in the funeral and cemetery industry; • our ability to identify and consummate strategic acquisitions, if at all, and successfully integrate acquired businesses with our existing businesses, including expected performance and financial improvements related thereto; • potential adverse impacts resulting from 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; • interruptions or security lapses of our information technology, including any cybersecurity or ransomware incidents; • adverse developments affecting the financial services industry; • acts of war or terrorists acts and the governmental or military response to such acts; • our failure to maintain effective control over financial reporting; and • other factors and uncertainties inherent in the funeral and cemetery industry. For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see (i) Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q and (ii) Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023. Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise. - 32 -