UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM			10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2023~~March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ____________


Commission File Number:			1-11961

CARRIAGE SERVICES, INC.

(Exact name of registrant as specified in its charter)


Delaware			76-0423828
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

3040 Post Oak Boulevard, Suite 300

Houston, Texas, 77056

(Address of principal executive offices)

(713) 332-8400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, par value $.01 per share	CSV	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s Common Stock, $.01 par value per share, outstanding as of ~~August 1, 2023~~April 26, 2024 was ~~14,965,754.~~15,165,486.

CARRIAGE SERVICES, INC.

INDEX


			Page
PART I – FINANCIAL INFORMATION

Item 1. Financial Statements			3

Unaudited Consolidated Balance Sheet as of December 31, ~~2022~~2023 and ~~June 30, 2023~~March 31, 2024			3

Unaudited Consolidated Statements of Operations for the Three ~~and Six~~ Months ended ~~June 30, 2022~~March 31, 2023 and ~~2023~~2024			4

Unaudited Consolidated Statements of Cash Flows for the ~~Six~~Three Months ended ~~June 30, 2022~~March 31, 2023 and ~~2023~~2024			5

Unaudited Consolidated Statements of Changes in Stockholders' Equity for the Three ~~and Six~~ Months ended ~~June 30, 2022~~March 31, 2023 and ~~2023~~2024			6

Condensed Notes to Consolidated Financial Statements			87

Cautionary Statement on Forward–Looking Statements			3331

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			3533

Item 3. Quantitative and Qualitative Disclosures About Market Risk			4944

Item 4. Controls and Procedures			5045

PART II – OTHER INFORMATION

Item 1. Legal Proceedings			5146

Item 1A. Risk Factors			5146

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			5346

Item 3. Defaults Upon Senior Securities			5346

Item 4. Mine Safety Disclosures			5346

Item 5. Other Information			5346

Item 6. Exhibits			5346

SIGNATURE			5447

INDEX OF EXHIBITS			5548

- 2 -

PART I – FINANCIAL INFORMATION

Item 1.Financial Statements.

CARRIAGE SERVICES, INC.

CONSOLIDATED BALANCE SHEET

(unaudited and in thousands, except share data)


		December 31, 2022		June 30, 2023
	December 31, 2023						December 31, 2023	March 31, 2024
ASSETS	ASSETS
Current assets:	Current assets:
Current assets:
Current assets:
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents	Cash and cash equivalents	$	1,170	$	970
Accounts receivable, net	Accounts receivable, net	24,458		24,639
Inventories	Inventories	7,613		8,448
Prepaid and other current assets	Prepaid and other current assets	4,733		3,610
Total current assets	Total current assets	37,974		37,667
Preneed cemetery trust investments	Preneed cemetery trust investments	95,065		89,874
Preneed funeral trust investments	Preneed funeral trust investments	104,553		103,317
Preneed cemetery receivables, net	Preneed cemetery receivables, net	26,672		33,274
Receivables from preneed funeral trusts, net	Receivables from preneed funeral trusts, net	19,976		21,080
Property, plant and equipment, net	Property, plant and equipment, net	278,106		287,582
Cemetery property, net	Cemetery property, net	104,170		112,830
Goodwill	Goodwill	410,137		423,643
Intangible and other non-current assets, net	Intangible and other non-current assets, net	32,930		37,333
Operating lease right-of-use assets	Operating lease right-of-use assets	17,060		17,123
Cemetery perpetual care trust investments	Cemetery perpetual care trust investments	66,307		78,363
Total assets	Total assets	$	1,192,950	$	1,242,086
LIABILITIES AND STOCKHOLDERS’ EQUITY	LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:	Current liabilities:
Current liabilities:
Current liabilities:
Current portion of debt and lease obligations
Current portion of debt and lease obligations
Current portion of debt and lease obligations	Current portion of debt and lease obligations	$	3,172	$	3,568
Accounts payable	Accounts payable	11,675		9,402
Accrued and other liabilities	Accrued and other liabilities	30,621		29,564

Total current liabilities	Total current liabilities	45,468		42,534
Total current liabilities
Total current liabilities
Acquisition debt, net of current portion	Acquisition debt, net of current portion	3,438		3,370
Credit facility	Credit facility	188,836		202,418

Senior notes
Senior notes
Senior notes	Senior notes	395,243		395,571
Obligations under finance leases, net of current portion	Obligations under finance leases, net of current portion	4,743		4,537
Obligations under operating leases, net of current portion	Obligations under operating leases, net of current portion	17,315		16,860
Deferred preneed cemetery revenue	Deferred preneed cemetery revenue	51,746		59,941
Deferred preneed funeral revenue	Deferred preneed funeral revenue	32,029		39,782
Deferred tax liability	Deferred tax liability	48,820		48,827
Other long-term liabilities	Other long-term liabilities	3,065		1,299
Deferred preneed cemetery receipts held in trust	Deferred preneed cemetery receipts held in trust	95,065		89,874
Deferred preneed funeral receipts held in trust	Deferred preneed funeral receipts held in trust	104,553		103,317
Care trusts’ corpus	Care trusts’ corpus	65,495		77,589
Total liabilities	Total liabilities	1,055,816		1,085,919
Commitments and contingencies:	Commitments and contingencies:					Commitments and contingencies:
Stockholders’ equity:	Stockholders’ equity:
Common stock, $0.01 par value; 80,000,000 shares authorized and 26,359,876 and 26,585,341 shares issued, respectively and 14,732,058 and 14,957,523 shares outstanding, respectively		264		266
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
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
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
Additional paid-in capital	Additional paid-in capital	238,780		240,681
Retained earnings	Retained earnings	176,843		193,973
Treasury stock, at cost; 11,627,818 shares	Treasury stock, at cost; 11,627,818 shares	(278,753)		(278,753)
Total stockholders’ equity	Total stockholders’ equity	137,134		156,167
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	1,192,950	$	1,242,086

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 June 30,				Six months ended June 30,
		2022		2023		2022		2023
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
Revenue:
Revenue:
Revenue:	Revenue:
Service revenue	Service revenue	$	42,550	$	44,522	$	92,287	$	92,729
Service revenue
Service revenue
Property and merchandise revenue
Property and merchandise revenue
Property and merchandise revenue	Property and merchandise revenue	41,276		45,630		82,888		85,641
Other revenue	Other revenue	6,774		7,526		13,586		14,822
		90,600		97,678		188,761		193,192
Other revenue
Other revenue
		95,514
		95,514
		95,514
Field costs and expenses:
Field costs and expenses:
Field costs and expenses:	Field costs and expenses:
Cost of service	Cost of service	21,389		23,075		43,488		46,552
Cost of service
Cost of service
Cost of merchandise
Cost of merchandise
Cost of merchandise	Cost of merchandise	29,306		32,219		58,636		61,953
Cemetery property amortization	Cemetery property amortization	1,704		1,892		3,036		3,093
Cemetery property amortization
Cemetery property amortization
Field depreciation expense
Field depreciation expense
Field depreciation expense	Field depreciation expense	3,253		3,555		6,550		6,912
Regional and unallocated funeral and cemetery costs	Regional and unallocated funeral and cemetery costs	5,966		4,131		12,313		9,568
Regional and unallocated funeral and cemetery costs
Regional and unallocated funeral and cemetery costs
Other expenses	Other expenses	1,270		1,604		2,548		2,857
		62,888		66,476		126,571		130,935
Other expenses
Other expenses
		64,459
		64,459
		64,459
Gross profit
Gross profit
Gross profit	Gross profit	27,712		31,202		62,190		62,257
Corporate costs and expenses:	Corporate costs and expenses:
Corporate costs and expenses:
Corporate costs and expenses:
General, administrative and other
General, administrative and other
General, administrative and other	General, administrative and other	9,180		10,199		17,740		20,379

Net (gain) loss on divestitures, disposals and impairments charges		(1,193)		265		(426)		506
Net loss on divestitures, disposals and impairments charges

Net loss on divestitures, disposals and impairments charges

Net loss on divestitures, disposals and impairments charges
Operating income
Operating income
Operating income	Operating income	19,725		20,738		44,876		41,372

Interest expense	Interest expense	5,988		9,396		11,530		17,935

Interest expense

Net (gain) loss on property damage, net of insurance claims		(1,376)		(235)		(3,275)		36
Interest expense

Loss on property damage, net of insurance claims

Loss on property damage, net of insurance claims

Loss on property damage, net of insurance claims
Other, net
Other, net
Other, net	Other, net	(7)		(125)		17		(647)
Income before income taxes	Income before income taxes	15,120		11,702		36,604		24,048
Income before income taxes
Income before income taxes
Expense for income taxes	Expense for income taxes	4,234		3,273		9,938		6,841
Tax adjustment related to discrete items		(13)		143		(635)		77
Expense for income taxes
Expense for income taxes
(Benefit) expense related to discrete income tax items
(Benefit) expense related to discrete income tax items
(Benefit) expense related to discrete income tax items
Total expense for income taxes	Total expense for income taxes	4,221		3,416		9,303		6,918
Total expense for income taxes
Total expense for income taxes
Net income
Net income
Net income	Net income	$	10,899	$	8,286	$	27,301	$	17,130

Basic earnings per common share:	Basic earnings per common share:	$	0.74	$	0.55	$	1.82	$	1.14

Basic earnings per common share:

Basic earnings per common share:
Diluted earnings per common share:
Diluted earnings per common share:
Diluted earnings per common share:	Diluted earnings per common share:	$	0.69	$	0.53	$	1.70	$	1.10

Dividends declared per common share:	Dividends declared per common share:	$	0.1125	$	0.1125	$	0.2250	$	0.2250

Dividends declared per common share:

Dividends declared per common share:

Weighted average number of common and common equivalent shares outstanding:

Weighted average number of common and common equivalent shares outstanding:

Weighted average number of common and common equivalent shares outstanding:	Weighted average number of common and common equivalent shares outstanding:
Basic	Basic	14,798		14,793		15,020		14,776
Basic
Basic
Diluted	Diluted	15,712		15,454		16,033		15,461
Diluted
Diluted

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)


		Six months ended June 30,				Three months ended March 31,
		2022		2023		2023	2024
Cash flows from operating activities:	Cash flows from operating activities:
Net income	Net income	$	27,301	$	17,130
Net income
Net income
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
Depreciation and amortization
Depreciation and amortization	Depreciation and amortization	9,895		10,437
Provision for credit losses	Provision for credit losses	1,657		1,344
Stock-based compensation expense	Stock-based compensation expense	3,085		4,163
Deferred income tax expense		1,711		7
Deferred income tax benefit
Amortization of intangibles	Amortization of intangibles	634		647
Amortization of debt issuance costs	Amortization of debt issuance costs	253		349
Amortization and accretion of debt	Amortization and accretion of debt	243		255

Net (gain) loss on divestitures, disposals and impairment charges		(426)		506
Net (gain) loss on property damage, net of insurance claims		(3,275)		36
Gain on sale of real property		—		(658)
Other		(6)		—
Net loss on divestitures, disposals and impairment charges

Net loss on divestitures, disposals and impairment charges

Net loss on divestitures, disposals and impairment charges
Loss on property damage, net of insurance claims
Gain on sale of excess land

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

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

Changes in operating assets and liabilities that provided (used) cash:
Accounts and preneed receivables
Accounts and preneed receivables
Accounts and preneed receivables	Accounts and preneed receivables	(3,200)		(1,694)
Inventories, prepaid and other current assets	Inventories, prepaid and other current assets	2,967		1,011
Intangible and other non-current assets	Intangible and other non-current assets	(747)		(1,767)
Preneed funeral and cemetery trust investments	Preneed funeral and cemetery trust investments	(11,100)		5,341
Accounts payable	Accounts payable	(2,712)		(2,272)
Accrued and other liabilities	Accrued and other liabilities	(10,242)		(3,328)
Incentive payment from vendor		—		6,000

Deferred preneed funeral and cemetery revenue
Deferred preneed funeral and cemetery revenue
Deferred preneed funeral and cemetery revenue	Deferred preneed funeral and cemetery revenue	2,633		8,106
Deferred preneed funeral and cemetery receipts held in trust	Deferred preneed funeral and cemetery receipts held in trust	11,506		(6,426)
Net cash provided by operating activities	Net cash provided by operating activities	30,177		39,187

Cash flows from investing activities:	Cash flows from investing activities:
Acquisitions of businesses and real property		(2,601)		(44,000)
Cash flows from investing activities:
Cash flows from investing activities:
Acquisitions of businesses
Acquisitions of businesses
Acquisitions of businesses

Proceeds from divestitures and sale of other assets
Proceeds from divestitures and sale of other assets
Proceeds from divestitures and sale of other assets	Proceeds from divestitures and sale of other assets	3,720		1,973
Proceeds from insurance claims	Proceeds from insurance claims	2,167		1,092
Capital expenditures	Capital expenditures	(13,468)		(8,960)
Net cash used in investing activities		(10,182)		(49,895)
Net cash (used in) provided by investing activities

Cash flows from financing activities:	Cash flows from financing activities:
Cash flows from financing activities:
Cash flows from financing activities:
Borrowings from the credit facility
Borrowings from the credit facility
Borrowings from the credit facility	Borrowings from the credit facility	97,900		64,700
Payments against the credit facility	Payments against the credit facility	(78,100)		(51,400)
Payment of debt issuance costs for the credit facility and senior notes		(339)		—

Payments on acquisition debt and obligations under finance leases

Payments on acquisition debt and obligations under finance leases

Payments on acquisition debt and obligations under finance leases	Payments on acquisition debt and obligations under finance leases	(202)		(256)

Proceeds from the exercise of stock options and employee stock purchase plan contributions	Proceeds from the exercise of stock options and employee stock purchase plan contributions	1,060		923
Proceeds from the exercise of stock options and employee stock purchase plan contributions
Proceeds from the exercise of stock options and employee stock purchase plan contributions
Taxes paid on restricted stock vestings and exercise of stock options	Taxes paid on restricted stock vestings and exercise of stock options	(286)		(119)
Dividends paid on common stock	Dividends paid on common stock	(3,455)		(3,340)
Purchase of treasury stock		(36,663)		—

Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(20,085)		10,508

Net decrease in cash and cash equivalents		(90)		(200)
Net cash provided by (used in) financing activities

Net cash provided by (used in) financing activities

Net increase in cash and cash equivalents
Net increase in cash and cash equivalents
Net increase in cash and cash equivalents
Cash and cash equivalents at beginning of period	Cash and cash equivalents at beginning of period	1,148		1,170
Cash and cash equivalents at end of period	Cash and cash equivalents at end of period	$	1,058	$	970

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 June 30, 2022
Shares
Outstanding Common
Stock Additional
Paid-in
Capital Retained
Earnings Treasury
Stock Total
Balance – March 31, 2022 14,889 $ 263 $ 238,423 $ 151,864 $ (270,529) $ 120,021
Net income — — — 10,899 — 10,899
Issuance of common stock from employee stock purchase plan 12 — 398 — — 398
Issuance of common stock to directors and board advisor 2 — 99 — — 99
Cancellation and surrender of restricted stock — — 2 — — 2
Stock-based compensation expense — — 1,379 — — 1,379
Dividends on common stock — — (1,730) — — (1,730)
Treasury stock acquired (205) — — — (8,224) (8,224)
Balance – June 30, 2022 14,698 $ 263 $ 238,571 $ 162,763 $ (278,753) $ 122,844


	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 June 30, 2023
Shares
Outstanding Common
Stock Additional
Paid-in
Capital Retained
Earnings Treasury
Stock Total
Balance – March 31, 2023 14,935 $ 266 $ 239,962 $ 185,687 $ (278,753) $ 147,162
Net income — — — 8,286 — 8,286
Issuance of common stock from employee stock purchase plan 16 — 397 — — 397
Issuance of common stock to directors and board advisor 2 — 65 — — 65
Exercise of stock options 4 — (20) — — (20)
Cancellation and surrender of common and restricted stock 1 — (1) — — (1)
Stock-based compensation expense — — 1,957 — — 1,957
Dividends on common stock — — (1,679) — — (1,679)
Balance – June 30, 2023 14,958 $ 266 $ 240,681 $ 193,973 $ (278,753) $ 156,167

~~- 6 -~~

Six months ended June 30, 2022
Shares
Outstanding Common
Stock Additional
Paid-in
Capital Retained
Earnings Treasury
Stock Total
Balance – December 31, 2021 15,332 $ 263 $ 236,809 $ 135,462 $ (244,519) $ 128,015
Net income — — — 27,301 — 27,301
Issuance of common stock from employee stock purchase plan 25 — 1,001 — — 1,001
Issuance of common stock to directors and board advisor 5 — 246 — — 246
Exercise of stock options 9 — (22) — — (22)
Cancellation and surrender of restricted stock (5) — (205) — — (205)
Stock-based compensation expense — — 2,839 — — 2,839
Dividends on common stock — — (3,455) — — (3,455)
Treasury stock acquired (695) — — — (34,234) (34,234)
Other 27 — 1,358 — — 1,358
Balance – June 30, 2022 14,698 $ 263 $ 238,571 $ 162,763 $ (278,753) $ 122,844


	Three months ended March 31, 2024															Three months ended March 31, 2024
		Six months ended June 30, 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
		Shares Outstanding
		Shares Outstanding
		Shares Outstanding											Common Stock	Additional Paid-in Capital	Retained Earnings		Treasury Stock	Total
Balance – December 31, 2023
Net income	Net income	—	—		—		17,130		—		17,130
Issuance of common stock from employee stock purchase plan	Issuance of common stock from employee stock purchase plan	38	—		923		—		—		923
Issuance of common stock to directors and board advisor	Issuance of common stock to directors and board advisor	6	—		177		—		—		177
Issuance of common stock to former executive		30	—		826		—		—		826
Issuance of restricted stock		142	2		(2)		—		—		—
Exercise of stock options		5	—		(41)		—		—		(41)
Cancellation and surrender of common and restricted stock		(3)	—		(78)		—		—		(78)

Issuance of restricted common stock
Issuance of restricted common stock
Issuance of restricted common stock

Cancellation and surrender of restricted common stock
Cancellation and surrender of restricted common stock
Cancellation and surrender of restricted common stock
Stock-based compensation expense	Stock-based compensation expense	—	—		3,160		—		—		3,160
Dividends on common stock	Dividends on common stock	—	—		(3,340)		—		—		(3,340)

Other	Other	8	—		276		—		—		276
Balance – June 30, 2023		14,958	$	266	$	240,681	$	193,973	$	(278,753)	$	156,167
Other
Other
Balance – March 31, 2024

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

- 76 -

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,~~Operations, which currently accounts for approximately 70% of our total revenue, and Cemetery ~~operations,~~Operations, which currently accounts for approximately 30% of our total revenue. At ~~June 30, 2023,~~March 31, 2024, we operated ~~172~~165 funeral homes in 26 states and 3231 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~~Consolidated Financial Statements include the Company and its subsidiaries. All intercompany balances and transactions have been eliminated. Our interim ~~consolidated financial statements~~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, ~~2022.~~2023. In addition, our unaudited ~~consolidated financial statements~~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, ~~2022~~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.

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~~Held for Sale~~

~~At June 30, 2023, we had $0.3 million of assets classified as held for sale in~~ ~~Property, plant and equipment, net~~ on our Consolidated Balance Sheet related to one funeral home that we divested on July 12, 2023. The carrying value of these assets held for sale exceeded their fair value and in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), we recognized an impairment of $0.2 million for assets related to property, plant and equipment, which was recorded in ~~Net (gain) loss on divestitures, disposals and impairment charges~~ ~~on our Consolidated Statements of Operations.~~

Deferred Revenue

During the ~~six~~three months ended ~~June 30,~~March 31, 2023, we withdrew ~~$8.6~~$7.0 million of realized capital gains and earnings from our preneed funeral and cemetery trust investments. We did not withdraw any realized capital gains and earnings from our preneed trust investments during the three months ended March 31, 2024. In certain states, we are allowed to make these withdrawals prior to the delivery of preneed merchandise and service contracts. The realized capital gains and earnings withdrawn increase our cash flow from operations, but are not recognized as revenue in our Consolidated Statements of Operations, however, they reduce our Preneed funeral trust investments and Preneed cemetery trust investments and increase our Deferred preneed funeral revenue and Deferred preneed cemetery revenue.

Additionally, during the three and six months ended June 30, 2023, we received a $6.0 million incentive payment from a vendor for entering into a strategic partnership agreement to market and sell prearranged funeral services in the future, which increased our cash flow from operations and ~~Deferred preneed funeral revenue.~~ ~~The incentive payment will be deferred until we complete our implementation of the program and begin selling prearranged funeral services.~~

Property, Plant and Equipment

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


		December 31, 2022		June 30, 2023
	December 31, 2023					December 31, 2023	March 31, 2024
Land	Land	$	84,405	$	85,717
Buildings and improvements	Buildings and improvements	251,778		261,514
Furniture, equipment and automobiles		70,522		75,025
Furniture, equipment and vehicles
Property, plant and equipment, at cost	Property, plant and equipment, at cost	406,705		422,256
Less: accumulated depreciation	Less: accumulated depreciation	(128,599)		(134,674)
Property, plant and equipment, net	Property, plant and equipment, net	$	278,106	$	287,582

During the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, we ~~acquired $12.8 million~~sold six funeral homes and one cemetery that had a carrying value of property, plant and equipment ~~related to our 2023 business combination, described in Note 3 to the Consolidated Financial Statements. Additionally, we sold real property for $1.2 million, with a carrying value~~ of ~~$0.6 million, resulting in a gain on the sale of $0.6~~$3.1 million, which was included in the loss on sale and recorded in Net ~~(gain)~~ loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

During the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, we acquired ~~real property for $2.6 million. Additionally, we sold real property for $2.7~~$12.8 million ~~with a carrying value of $1.4 million, resulting in a gain on the sale of $1.3 million.We also divested two funeral homes that had a carrying value~~ of property, plant and equipment related to our acquisition of ~~$0.7 million, which was included~~a business located in Bakersfield, CA, as more fully described in Note 3 to the ~~loss on the sale of divestitures and recorded in~~Consolidated Financial Statements. ~~Net (gain) loss on divestitures, disposals and impairment charges.~~

Our growth and maintenance capital expenditures totaled ~~$5.2~~$2.9 million and ~~$2.6~~$1.6 million for the three months ended ~~June 30, 2022~~March 31, 2023 and ~~2023, respectively and $9.8 million and $5.5 million for the six months ended June 30, 2022 and 2023, respectively, for property, plant and equipment.~~2024, respectively. In addition, we recorded depreciation expense of ~~$3.4~~$3.5 million and ~~$3.7~~$3.6 million for the three months ended ~~June 30, 2022~~March 31, 2023 and ~~2023, respectively and $6.7 million and $7.2 million for the six months ended June 30, 2022 and 2023,~~2024, respectively.

Cemetery Property

Cemetery property was ~~$104.2~~$114.6 million and ~~$112.8~~$114.0 million, net of accumulated amortization of ~~$59.0~~$64.6 million and ~~$61.7~~$66.2 million at December 31, ~~2022~~2023 and ~~June 30, 2023,~~March 31, 2024, respectively. When cemetery property is sold, the value of the cemetery property (interment right costs) is expensed as amortization using the specific identification method in the period in which the sale of the interment right is recognized as revenue. Our growth capital expenditures for cemetery property development totaled ~~$1.4~~$2.1 million and $2.0 million for ~~both~~ the three months ended ~~June 30, 2022 and~~March 31, 2023 and ~~$3.7 million and $3.5 million for the six months ended June 30, 2022 and 2023,~~2024, respectively. We recorded amortization expense for cemetery interment rights of ~~$1.7~~$1.2 million and ~~$1.9~~$1.8 million for the three months ended ~~June 30, 2022~~March 31, 2023 and ~~2023, respectively and $3.0 million and $3.1 million for~~2024, respectively.

During the ~~six~~three months ended ~~June 30, 2022 and 2023, respectively.~~

~~During the six months ended June 30, 2023,~~March 31, 2024, we ~~acquired~~sold one cemetery ~~property for $9.0 million related to our 2023 business combination, described in Note 3 to the Consolidated Financial Statements. We also divested two cemeteries~~ that had a carrying

~~- 9 -~~

value of cemetery property of $0.8 million, which was included in the loss on ~~the~~ sale ~~of divestitures~~ and recorded in Net ~~(gain)~~loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.

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 ~~$4.2~~$3.5 million and ~~$3.4~~$3.7 million for the three months ended ~~June 30, 2022~~March 31, 2023 and ~~2023, respectively and $9.3 million and $6.9 million for the six months ended June 30, 2022 and 2023,~~2024, respectively. Our operating tax rate before discrete items was ~~28.0%~~28.9% and 32.8% for ~~both~~ the three months ended ~~June 30, 2022 and~~March 31, 2023 and ~~27.2% and 28.5% for the six months ended June 30, 2022 and 2023,~~2024, respectively.

Subsequent Events

We have evaluated events and transactions during the period subsequent to ~~June 30, 2023~~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.

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2.RECENTLY ISSUED ACCOUNTING STANDARDS

~~Credit Losses - Vintage Disclosures~~Segment Reporting

In ~~March 2022,~~November 2023, the FASB issued ASU, ~~Financial Instruments~~Segment Reporting - ~~Credit Losses~~Improvements to Reportable Segment Disclosures (“Topic ~~326”~~280”) to ~~make the requirement to disclose gross write-offs by class of financing receivable and major security type consistent for all public business entities.~~improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The ~~amendment~~amendments in this update ~~provides specific guidance~~require that a public entity disclose, on an annual and interim basis (1) significant segment expenses that are regularly provided to the ~~disclosure~~chief operating decision maker (“CODM”) and included within each reported measure of segment profit or loss; and (2) an amount for ~~current period write-offs~~other segment items, as described in the amendments, by ~~year~~reportable segment and a description of ~~origination for financing receivables. This amendment is~~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, ~~2022,~~2023, and interim periods within fiscal years beginning after December 15, 2024, and therefore ~~was~~were effective for us for our fiscal year beginning January 1, ~~2023. Our~~2024 and for interim periods within our fiscal year beginning January 1, 2025. We expect the adoption ~~of these amendments had~~will have no impact on our ~~consolidated financial statements.~~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, ~~California~~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.

The measurement period to determine the fair values of acquired identifiable assets and assumed liabilities will end at the earlier of 12 months from the date of the acquisition or as soon as we receive the information we are seeking about facts and circumstances that existed as of the acquisition date. Subsequent to our initial purchase price allocation for this acquisition made during the first quarter of 2023, we have adjusted our purchase price allocation based on additional information which became available prior to June 30, 2023. Provisional estimates for cemetery property have been recorded for the acquisition as our valuation has not been finalized at June 30, 2023.

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The following table summarizes the breakdown of the purchase price allocation for our ~~2023~~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)

~~We did not acquire any businesses during the six months ended June 30, 2022.~~

4.GOODWILL

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


		December 31, 2022		June 30, 2023
	December 31, 2023					December 31, 2023	March 31, 2024
Goodwill at the beginning of the period	Goodwill at the beginning of the period	$	391,972	$	410,137
Increase in goodwill related to acquisitions	Increase in goodwill related to acquisitions	19,511		13,506
Decrease in goodwill related to divestitures	Decrease in goodwill related to divestitures	(901)		—
Decrease in goodwill related to assets held for sale		(445)		—

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

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 ~~six~~three months ended ~~June 30,~~March 31, 2023, we recognized $13.5 million in goodwill related to our ~~2023~~acquisition of a business ~~combination;~~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 ~~June 30, 2023,~~March 31, 2024, we ~~merged~~sold six funeral homes and one ~~funeral home with another business we own in~~cemetery for an ~~existing market.~~aggregate of $10.9 million. During the ~~six~~three months ended ~~June 30,~~March 31, 2023, we sold one funeral home and two cemeteries for an aggregate of $0.8 ~~million and merged one funeral home with another business we own in an existing market.~~

During the three months ended June 30, 2022, we merged one funeral home with another business we own in an existing market. During the six months ended June 30, 2022, we sold two funeral homes for an aggregate of $0.9 million and merged one funeral home with another business we own in an existing market.million.

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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 June 30,				Six months ended June 30,
		2022		2023		2022		2023
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
Revenue
Revenue
Revenue	Revenue	$	63	$	—	$	296	$	66

Operating income (loss)		(4)		(2)		25		24
Operating income

Operating income

Operating income
Loss on divestitures(1)
Loss on divestitures(1)
Loss on divestitures(1)	Loss on divestitures(1)	—		—		(703)		(82)
Income tax benefit	Income tax benefit	1		1		184		17
Income tax benefit
Income tax benefit
Net loss from divested operations, after tax	Net loss from divested operations, after tax	$	(3)	$	(1)	$	(494)	$	(41)
Net loss from divested operations, after tax
Net loss from divested operations, after tax

(1)

Loss on divestitures is recorded in Net ~~(gain)~~ 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.~~ 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.~~net.

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


		June 30, 2023
		Funeral		Cemetery		Corporate		Total
	March 31, 2024											March 31, 2024
	Funeral									Funeral	Cemetery	Corporate	Total
Trade and financed receivables	Trade and financed receivables	$	7,439	$	17,504	$	—	$	24,943
Other receivables	Other receivables	616		359		136		1,111
Allowance for credit losses	Allowance for credit losses	(284)		(1,131)		—		(1,415)
Accounts receivable, net	Accounts receivable, net	$	7,771	$	16,732	$	136	$	24,639


		December 31, 2022
		Funeral		Cemetery		Corporate		Total
	December 31, 2023											December 31, 2023
	Funeral									Funeral	Cemetery	Corporate	Total
Trade and financed receivables	Trade and financed receivables	$	9,518	$	14,429	$	—	$	23,947
Other receivables	Other receivables	643		833		48		1,524
Allowance for credit losses	Allowance for credit losses	(311)		(702)		—		(1,013)
Accounts receivable, net	Accounts receivable, net	$	9,850	$	14,560	$	48	$	24,458

Other receivables include supplier rebates, commissions due from third party insurance companies and perpetual care income receivables. We do not provide an allowance for credit losses for these receivables as we have historically not had any collectability issues nor do we expect any in the foreseeable future.

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


		January 1, 2023		Provision for Credit Losses		Write Offs		Recoveries		June 30, 2023
		January 1, 2024
		January 1, 2024
		January 1, 2024										Provision for Credit Losses	Write Offs	Recoveries	March 31, 2024
Trade and financed receivables:	Trade and financed receivables:
Funeral
Funeral
Funeral	Funeral	$	(311)	$	(562)	$	1,183	$	(594)	$	(284)
Cemetery	Cemetery	(702)		(295)		(134)		—		(1,131)
Total allowance for credit losses on trade and financed receivables	Total allowance for credit losses on trade and financed receivables	$	(1,013)	$	(857)	$	1,049	$	(594)	$	(1,415)

Balances due on undelivered preneed funeral trust contracts have been reclassified to reduce Deferred preneed funeral revenue on our Consolidated Balance Sheet of ~~$8.9 million and $10.3~~$10.7 million at both December 31, ~~2022~~2023 and ~~June 30, 2023, respectively.~~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.

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~~Preneed~~ Cemetery Receivables

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


		December 31, 2022		June 30, 2023
	December 31, 2023					December 31, 2023	March 31, 2024
Interment rights	Interment rights	$	45,351	$	56,781
Merchandise and services	Merchandise and services	8,585		10,242
Unearned finance charges	Unearned finance charges	4,894		5,316
Preneed cemetery receivables		$	58,830	$	72,339
Cemetery receivables

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


		December 31, 2022		June 30, 2023
Preneed cemetery receivables		$	58,830	$	72,339
	December 31, 2023					December 31, 2023	March 31, 2024
Cemetery receivables
Less: unearned finance charges	Less: unearned finance charges	(4,894)		(5,316)
Preneed cemetery receivables, at amortized cost		$	53,936	$	67,023
Cemetery receivables, at amortized cost
Less: allowance for credit losses	Less: allowance for credit losses	(1,985)		(3,172)
Less: balances due on undelivered cemetery preneed contracts	Less: balances due on undelivered cemetery preneed contracts	(11,552)		(14,204)
Less: amounts in accounts receivable	Less: amounts in accounts receivable	(13,727)		(16,373)
Preneed cemetery receivables, net	Preneed cemetery receivables, net	$	26,672	$	33,274

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

January 1, 2023 Provision for Credit Losses Write Offs June 30, 2023
Total allowance for credit losses on Preneed cemetery receivables, net
$ (1,283) $ (487) $ (271) $ (2,041)


	January 1, 2024		Provision for Credit Losses		Write Offs		March 31, 2024
Total allowance for credit losses on Preneed cemetery receivables, net	$	(2,255)	$	(336)	$	292	$	(2,299)

The amortized cost basis of our ~~preneed~~ cemetery receivables by year of origination at ~~June 30, 2023~~March 31, 2024 is as follows (in thousands):

2023 2022 2021 2020 2019 Prior Total
Total preneed cemetery receivables, at amortized cost $ 20,254 $ 23,893 $ 12,418 $ 6,082 $ 2,563 $ 1,813 $ 67,023


	2024		2023		2022		2021		2020		Prior		Total
Total preneed cemetery receivables, at amortized cost	$	12,395	$	29,871	$	17,435	$	8,853	$	3,818	$	2,270	$	74,642

The aging of past due ~~preneed~~ cemetery receivables at ~~June 30, 2023~~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
	31-60 Past Due															31-60 Past Due	61-90 Past Due	91-120 Past Due	>120 Past Due	Total Past Due	Current	Total
Recognized revenue	Recognized revenue	$	1,376	$	700	$	273	$	3,304	$	5,653	$	47,166	$	52,819
Deferred revenue	Deferred revenue	361		224		95		1,150		1,830		17,690		19,520
Total contracts	Total contracts	$	1,737	$	924	$	368	$	4,454	$	7,483	$	64,856	$	72,339

Balances due on undelivered preneed cemetery contracts have been reclassified to reduce Deferred preneed cemetery revenue on our Consolidated Balance Sheet. The transaction price allocated to preneed merchandise and service performance obligations that were unfulfilled were ~~$11.6~~$15.8 million and ~~$14.2~~$16.5 million at December 31, ~~2022~~2023 and ~~June 30, 2023,~~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 ~~June 30, 2023,~~March 31, 2024, the carrying value and fair value of our Credit Facility was ~~$204.0~~$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

- 1312 -

of the reporting date. At ~~June 30, 2023,~~March 31, 2024, the carrying value of our acquisition debt was ~~$3.9~~$6.0 million, which approximated its fair value. The fair value of our Senior Notes was ~~$343.1~~$355.2 million at ~~June 30, 2023~~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 ~~cannot be redeemed because~~through quarterly withdrawal dates with the ~~investments include restrictions that do not allow for redemption within~~intention to permit withdrawal of the ~~first 12 months after acquisition.~~entire investment over twelve successive withdrawal dates. Our unfunded commitment for this investment at ~~June 30, 2023 is~~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 ourConsolidated Statements of Operations, when a service is performed or merchandise is delivered. Trust management fees charged by our wholly-owned registered investment advisory firm ~~(“CSV RIA”)~~ are included as revenue in the period in which they are earned. 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, 2022		June 30, 2023
	December 31, 2023					December 31, 2023	March 31, 2024
Preneed cemetery trust investments, at market value	Preneed cemetery trust investments, at market value	$	98,269	$	92,898
Less: allowance for contract cancellation	Less: allowance for contract cancellation	(3,204)		(3,024)
Preneed cemetery trust investments	Preneed cemetery trust investments	$	95,065	$	89,874

- 1413 -

The cost and market values associated with preneed cemetery trust investments at ~~June 30, 2023~~March 31, 2024 are detailed below (in thousands):


		Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Fair Market Value
	Fair Value Hierarchy Level											Fair Value Hierarchy Level	Cost	Unrealized Gains	Unrealized Losses	Fair Market Value
Cash and money market accounts	Cash and money market accounts	1	$	8,330	$	—	$	—	$	8,330
Fixed income securities:	Fixed income securities:

U.S. agency obligations

U.S. agency obligations

U.S. agency obligations	U.S. agency obligations	2	803		—		(65)		738
Foreign debt	Foreign debt	2	10,978		1,028		(421)		11,585
Corporate debt	Corporate debt	2	14,593		180		(4,625)		10,148
Preferred stock	Preferred stock	2	11,553		449		(1,521)		10,481
Certificates of deposit	Certificates of deposit	2	79		—		(9)		70
Common stock	Common stock	1	38,955		6,335		(7,183)		38,107
Limited partnership fund	Limited partnership fund		3,579		—		(1)		3,578
Mutual funds:	Mutual funds:
Equity	Equity	1	554		—		(52)		502
Equity
Equity
Fixed income	Fixed income	2	11,379		17		(2,846)		8,550
Trust securities	Trust securities		$	100,803	$	8,009	$	(16,723)	$	92,089
Accrued investment income	Accrued investment income		$	809					$	809
Preneed cemetery trust investments	Preneed cemetery trust investments								$	92,898
Market value as a percentage of cost	Market value as a percentage of cost								91.4%		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	$	~~137~~136
Due in one to five years	~~9,043~~12,662
Due in five to ten years	~~4,782~~3,303
Thereafter	~~19,060~~17,104
Total fixed income securities	$	~~33,022~~33,205

The cost and market values associated with preneed cemetery trust investments at December 31, ~~2022~~2023 are detailed below (in thousands):


		Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Fair Market Value
	Fair Value Hierarchy Level											Fair Value Hierarchy Level	Cost	Unrealized Gains	Unrealized Losses	Fair Market Value
Cash and money market accounts	Cash and money market accounts	1	$	10,434	$	—	$	—	$	10,434
Fixed income securities:	Fixed income securities:
U.S. agency obligations
U.S. agency obligations
U.S. agency obligations	U.S. agency obligations	2	803		—		(72)		731
Foreign debt	Foreign debt	2	12,241		910		(644)		12,507
Corporate debt	Corporate debt	2	15,066		104		(4,139)		11,031
Preferred stock	Preferred stock	2	12,560		436		(1,789)		11,207
Certificate of deposit	Certificate of deposit	2	79		—		(8)		71

Common stock	Common stock	1	42,929		5,102		(6,228)		41,803
Common stock
Common stock
Limited partnership fund
Mutual funds:	Mutual funds:
Equity
Equity
Equity	Equity	1	362		—		(33)		329
Fixed income	Fixed income	2	12,324		10		(3,310)		9,024
Trust Securities	Trust Securities		$	106,798	$	6,562	$	(16,223)	$	97,137
Accrued investment income	Accrued investment income		$	1,132					$	1,132
Preneed cemetery trust investments	Preneed cemetery trust investments								$	98,269
Market value as a percentage of cost	Market value as a percentage of cost								91.0%		Market value as a percentage of cost						95.8%

- 1514 -

The following table summarizes our fixed income securities (excluding mutual funds) within our preneed cemetery trust investments in an unrealized loss position at ~~June 30, 2023,~~March 31, 2024, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):


		June 30, 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
	March 31, 2024																			March 31, 2024
	In Loss Position Less than 12 months														In Loss Position Less than 12 months			In Loss Position Greater than 12 months			Total
	Fair Market Value													Fair Market Value		Unrealized Losses	Fair Market Value		Unrealized Losses		Fair Market Value	Unrealized Losses
Fixed income securities:	Fixed income securities:
U.S. agency obligations
U.S. agency obligations
U.S. agency obligations	U.S. agency obligations	$	161	$	(25)	$	577	$	(40)	$	738	$	(65)
Foreign debt	Foreign debt	2,684		(100)		1,926		(321)		4,610		(421)
Corporate debt	Corporate debt	4,560		(3,423)		2,950		(1,202)		7,510		(4,625)
Preferred stock	Preferred stock	4,118		(825)		4,151		(696)		8,269		(1,521)
Certificates of deposit	Certificates of deposit	—		—		70		(9)		70		(9)
Total fixed income securities with an unrealized loss	Total fixed income securities with an unrealized loss	$	11,523	$	(4,373)	$	9,674	$	(2,268)	$	21,197	$	(6,641)

The following table summarizes our fixed income securities (excluding mutual funds) within our preneed cemetery trust investments in an unrealized loss position at December 31, ~~2022,~~2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):


		December 31, 2022
		In Loss Position Less than 12 months				In Loss Position Greater than 12 months				Total
		Fair Market Value		Unrealized Losses		Fair Market Value		Unrealized Losses		Fair Market Value		Unrealized Losses
	December 31, 2023																			December 31, 2023
	In Loss Position Less than 12 months														In Loss Position Less than 12 months			In Loss Position Greater than 12 months			Total
	Fair Market Value													Fair Market Value		Unrealized Losses	Fair Market Value		Unrealized Losses		Fair Market Value	Unrealized Losses
Fixed income securities:	Fixed income securities:
U.S. agency obligations
U.S. agency obligations
U.S. agency obligations	U.S. agency obligations	$	732	$	(72)	$	—	$	—	$	732	$	(72)
Foreign debt	Foreign debt	5,394		(308)		744		(336)		6,138		(644)
Corporate debt	Corporate debt	8,037		(3,922)		563		(217)		8,600		(4,139)
Preferred stock	Preferred stock	7,146		(1,271)		2,517		(518)		9,663		(1,789)
Certificates of deposit	Certificates of deposit	71		(8)		—		—		71		(8)
Total fixed income securities with an unrealized loss	Total fixed income securities with an unrealized loss	$	21,380	$	(5,581)	$	3,824	$	(1,071)	$	25,204	$	(6,652)

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


		Three months ended June 30,				Six months ended June 30,
		2022		2023		2022		2023
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
Investment income
Investment income
Investment income	Investment income	$	571	$	689	$	1,062	$	1,279
Realized gains	Realized gains	6,870		728		8,893		2,001
Realized gains
Realized gains
Realized losses	Realized losses	(2,320)		(269)		(2,383)		(1,146)
Unrealized gains (losses), net		(15,977)		3,439		(9,100)		(8,714)
Realized losses
Realized losses
Unrealized losses, net
Unrealized losses, net
Unrealized losses, net
Expenses and taxes
Expenses and taxes
Expenses and taxes	Expenses and taxes	(507)		(316)		(871)		(622)
Net change in deferred preneed cemetery receipts held in trust	Net change in deferred preneed cemetery receipts held in trust	11,363		(4,271)		2,399		7,202
		$	—	$	—	$	—	$	—
Net change in deferred preneed cemetery receipts held in trust
Net change in deferred preneed cemetery receipts held in trust
		$
		$
		$

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


		Three months ended June 30,				Six months ended June 30,
		2022		2023		2022		2023
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
Purchases
Purchases
Purchases	Purchases	$	(309)	$	(2,784)	$	(1,624)	$	(9,138)
Sales	Sales	461		2,817		661		5,862
Sales
Sales

- 1615 -

Preneed Funeral Trust Investments

Preneed funeral trust investments represent trust fund assets that we are permitted to withdraw as services and merchandise are provided to customers. Preneed funeral contracts are secured by payments from customers, less retained amounts not required to be deposited into trust.

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


		December 31, 2022		June 30, 2023
	December 31, 2023					December 31, 2023	March 31, 2024
Preneed funeral trust investments, at market value	Preneed funeral trust investments, at market value	$	107,995	$	106,713
Less: allowance for contract cancellation	Less: allowance for contract cancellation	(3,442)		(3,396)
Preneed funeral trust investments	Preneed funeral trust investments	$	104,553	$	103,317

The cost and market values associated with preneed funeral trust investments at ~~June 30, 2023~~March 31, 2024 are detailed below (in thousands):


		Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Fair Market Value
	Fair Value Hierarchy Level											Fair Value Hierarchy Level	Cost	Unrealized Gains	Unrealized Losses	Fair Market Value
Cash and money market accounts	Cash and money market accounts	1	$	26,018	$	—	$	—	$	26,018
Fixed income securities:	Fixed income securities:
U.S treasury debt	U.S treasury debt	1	485		—		(42)		443
U.S treasury debt
U.S treasury debt

Foreign debt
Foreign debt
Foreign debt	Foreign debt	2	10,433		992		(385)		11,040
Corporate debt	Corporate debt	2	13,219		166		(4,161)		9,224
Preferred stock	Preferred stock	2	10,537		428		(1,443)		9,522

Common stock	Common stock	1	35,390		6,071		(6,319)		35,142
Common stock
Common stock
Limited partnership fund	Limited partnership fund		3,453		—		(1)		3,452
Mutual funds:	Mutual funds:
Equity
Equity
Equity	Equity	1	409		—		(48)		361
Fixed income	Fixed income	2	9,714		16		(2,479)		7,251
Other investments	Other investments	2	3,521		—		—		3,521
Trust securities	Trust securities		$	113,179	$	7,673	$	(14,878)	$	105,974
Accrued investment income	Accrued investment income		$	739					$	739
Preneed funeral trust investments	Preneed funeral trust investments								$	106,713
Market value as a percentage of cost	Market value as a percentage of cost								93.6%		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	$	7980
Due in one to five years	~~8,062~~11,310
Due in five to ten years	~~4,443~~2,962
Thereafter	~~17,645~~15,466
Total fixed income securities	$	~~30,229~~29,818

- 1716 -

The cost and market values associated with preneed funeral trust investments at December 31, ~~2022~~2023 are detailed below (in thousands):


		Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Fair Market Value
	Fair Value Hierarchy Level											Fair Value Hierarchy Level	Cost	Unrealized Gains	Unrealized Losses	Fair Market Value
Cash and money market accounts	Cash and money market accounts	1	$	29,641	$	—	$	—	$	29,641
Fixed income securities:	Fixed income securities:
U.S. treasury debt
U.S. treasury debt
U.S. treasury debt	U.S. treasury debt	1	484		—		(45)		439
Foreign debt	Foreign debt	2	10,851		818		(555)		11,114
Corporate debt	Corporate debt	2	12,735		89		(3,443)		9,381
Preferred stock	Preferred stock	2	10,730		391		(1,564)		9,557

Common stock	Common stock	1	36,478		4,485		(5,187)		35,776
Common stock
Common stock
Limited partnership fund
Mutual funds:	Mutual funds:
Equity
Equity
Equity	Equity	1	326		—		(30)		296
Fixed income	Fixed income	2	9,907		9		(2,691)		7,225
Other investments	Other investments	2	3,592		—		—		3,592
Trust securities	Trust securities		$	114,744	$	5,792	$	(13,515)	$	107,021
Accrued investment income	Accrued investment income		$	974					$	974
Preneed funeral trust investments	Preneed funeral trust investments								$	107,995
Market value as a percentage of cost	Market value as a percentage of cost								93.3%		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 ~~June 30, 2023,~~March 31, 2024, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):


		June 30, 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
	March 31, 2024																			March 31, 2024
	In Loss Position Less than 12 months														In Loss Position Less than 12 months			In Loss Position Greater than 12 months			Total
	Fair Market Value													Fair Market Value		Unrealized Losses	Fair Market Value		Unrealized Losses		Fair Market Value	Unrealized Losses
Fixed income securities:	Fixed income securities:
U.S. treasury debt
U.S. treasury debt
U.S. treasury debt	U.S. treasury debt	$	—	$	—	$	443	$	(42)	$	443	$	(42)
Foreign debt	Foreign debt	2,538		(79)		1,774		(306)		4,312		(385)
Corporate debt	Corporate debt	4,090		(3,227)		2,648		(934)		6,738		(4,161)
Preferred stock	Preferred stock	4,080		(830)		3,523		(613)		7,603		(1,443)

Total fixed income securities with an unrealized loss	Total fixed income securities with an unrealized loss	$	10,708	$	(4,136)	$	8,388	$	(1,895)	$	19,096	$	(6,031)
Total fixed income securities with an unrealized loss
Total fixed income securities with an unrealized loss

The following table summarizes our fixed income securities (excluding mutual funds) within our preneed funeral trust investment in an unrealized loss position at December 31, ~~2022,~~2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):


		December 31, 2022
		In Loss Position Less than 12 months				In Loss Position Greater than 12 months				Total
		Fair Market Value		Unrealized Losses		Fair Market Value		Unrealized Losses		Fair Market Value		Unrealized Losses
	December 31, 2023																			December 31, 2023
	In Loss Position Less than 12 months														In Loss Position Less than 12 months			In Loss Position Greater than 12 months			Total
	Fair Market Value													Fair Market Value		Unrealized Losses	Fair Market Value		Unrealized Losses		Fair Market Value	Unrealized Losses
Fixed income securities:	Fixed income securities:
U.S. treasury debt
U.S. treasury debt
U.S. treasury debt	U.S. treasury debt	$	439	$	(45)	$	—	$	—	$	439	$	(45)
Foreign debt	Foreign debt	4,766		(274)		626		(281)		5,392		(555)
Corporate debt	Corporate debt	6,742		(3,248)		506		(195)		7,248		(3,443)
Preferred stock	Preferred stock	5,908		(1,099)		2,261		(465)		8,169		(1,564)

Total fixed income securities with an unrealized loss	Total fixed income securities with an unrealized loss	$	17,855	$	(4,666)	$	3,393	$	(941)	$	21,248	$	(5,607)
Total fixed income securities with an unrealized loss
Total fixed income securities with an unrealized loss

- 1817 -

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


		Three months ended June 30,				Six months ended June 30,
		2022		2023		2022		2023
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
Investment income
Investment income
Investment income	Investment income	$	481	$	577	$	847	$	1,063
Realized gains	Realized gains	6,147		703		7,890		1,943
Realized gains
Realized gains
Realized losses	Realized losses	(2,088)		(260)		(2,146)		(1,097)
Unrealized gains (losses), net		(13,927)		3,380		(7,400)		(7,205)
Realized losses
Realized losses
Unrealized losses, net
Unrealized losses, net
Unrealized losses, net
Expenses and taxes
Expenses and taxes
Expenses and taxes	Expenses and taxes	(322)		(202)		(537)		(394)
Net change in deferred preneed funeral receipts held in trust	Net change in deferred preneed funeral receipts held in trust	9,709		(4,198)		1,346		5,690
		$	—	$	—	$	—	$	—
Net change in deferred preneed funeral receipts held in trust
Net change in deferred preneed funeral receipts held in trust
		$
		$
		$

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


		Three months ended June 30,				Six months ended June 30,
		2022		2023		2022		2023
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
Purchases
Purchases
Purchases	Purchases	$	—	$	(2,687)	$	(590)	$	(8,750)
Sales	Sales	30		2,742		530		5,685
Sales
Sales

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, 2022		June 30, 2023
	December 31, 2023					December 31, 2023	March 31, 2024
Cemetery perpetual care trust investments, at market value	Cemetery perpetual care trust investments, at market value	$	66,307	$	78,363
Obligations due from trust		(812)		(774)
Obligations (due from) due to trust
Care trusts’ corpus	Care trusts’ corpus	$	65,495	$	77,589

The following table reflects the cost and market values associated with the trust investments held in cemetery perpetual care trust funds at ~~June 30, 2023~~March 31, 2024 (in thousands):


		Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Fair Market Value
	Fair Value Hierarchy Level											Fair Value Hierarchy Level	Cost	Unrealized Gains	Unrealized Losses	Fair Market Value
Cash and money market accounts	Cash and money market accounts	1	$	6,001	$	—	$	—	$	6,001
Fixed income securities:	Fixed income securities:

Foreign debt

Foreign debt

Foreign debt	Foreign debt	2	9,753		853		(404)		10,202
Corporate debt	Corporate debt	2	12,561		208		(4,054)		8,715
Preferred stock	Preferred stock	2	10,990		384		(1,359)		10,015

Common stock	Common stock	1	32,130		5,361		(5,874)		31,617
Common stock
Common stock
Limited partnership fund	Limited partnership fund		2,969		—		(1)		2,968
Mutual funds:	Mutual funds:
Equity	Equity	1	458		—		(45)		413
Equity
Equity
Fixed income	Fixed income	2	10,119		15		(2,411)		7,723

Trust securities
Trust securities
Trust securities	Trust securities		$	84,981	$	6,821	$	(14,148)	$	77,654
Accrued investment income	Accrued investment income		$	709					$	709
Cemetery perpetual care investments	Cemetery perpetual care investments								$	78,363
Market value as a percentage of cost	Market value as a percentage of cost								91.4%		Market value as a percentage of cost						93.5%

- 1918 -

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	~~6,963~~10,687
Due in five to ten years	~~4,183~~2,905
Thereafter	~~17,786~~15,472
Total fixed income securities	$	~~28,932~~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, ~~2022~~2023 (in thousands):


		Fair Value Hierarchy Level	Cost		Unrealized Gains		Unrealized Losses		Fair Market Value
	Fair Value Hierarchy Level											Fair Value Hierarchy Level	Cost	Unrealized Gains	Unrealized Losses	Fair Market Value
Cash and money market accounts	Cash and money market accounts	1	$	5,326	$	—	$	—	$	5,326
Fixed income securities:	Fixed income securities:
Foreign debt
Foreign debt
Foreign debt	Foreign debt	2	8,746		600		(470)		8,876
Corporate debt	Corporate debt	2	10,540		118		(2,961)		7,697
Preferred stock	Preferred stock	2	9,831		287		(1,374)		8,744

Common stock	Common stock	1	28,625		3,443		(4,297)		27,771
Common stock
Common stock
Limited partnership fund
Mutual funds:	Mutual funds:
Equity
Equity
Equity	Equity	1	345		2		(22)		325
Fixed income	Fixed income	2	9,046		26		(2,310)		6,762
Trust securities	Trust securities		$	72,459	$	4,476	$	(11,434)	$	65,501
Accrued investment income	Accrued investment income		$	806					$	806
Cemetery perpetual care investments	Cemetery perpetual care investments								$	66,307
Market value as a percentage of cost	Market value as a percentage of cost								90.4%		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 ~~June 30, 2023,~~March 31, 2024, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):


		June 30, 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
	March 31, 2024																			March 31, 2024
	In Loss Position Less than 12 months														In Loss Position Less than 12 months			In Loss Position Greater than 12 months			Total
	Fair Market Value													Fair Market Value		Unrealized Losses	Fair Market Value		Unrealized Losses		Fair Market Value	Unrealized Losses
Fixed income securities:	Fixed income securities:
Foreign debt
Foreign debt
Foreign debt	Foreign debt	$	2,502	$	(84)	$	1,916	$	(320)	$	4,418	$	(404)
Corporate debt	Corporate debt	3,516		(2,774)		2,699		(1,280)		6,215		(4,054)
Preferred stock	Preferred stock	3,369		(681)		4,108		(678)		7,477		(1,359)

Total fixed income securities with an unrealized loss	Total fixed income securities with an unrealized loss	$	9,387	$	(3,539)	$	8,723	$	(2,278)	$	18,110	$	(5,817)
Total fixed income securities with an unrealized loss
Total fixed income securities with an unrealized loss

- 2019 -

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, ~~2022,~~2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):


		December 31, 2022
		In Loss Position Less than 12 months				In Loss Position Greater than 12 months				Total
		Fair Market Value		Unrealized Losses		Fair Market Value		Unrealized Losses		Fair Market Value		Unrealized Losses
	December 31, 2023																			December 31, 2023
	In Loss Position Less than 12 months														In Loss Position Less than 12 months			In Loss Position Greater than 12 months			Total
	Fair Market Value													Fair Market Value		Unrealized Losses	Fair Market Value		Unrealized Losses		Fair Market Value	Unrealized Losses
Fixed income securities:	Fixed income securities:
Foreign debt
Foreign debt
Foreign debt	Foreign debt	$	4,123	$	(218)	$	554	$	(252)	$	4,677	$	(470)
Corporate debt	Corporate debt	5,413		(2,818)		371		(143)		5,784		(2,961)
Preferred stock	Preferred stock	6,066		(1,032)		1,659		(342)		7,725		(1,374)

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

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 June 30,				Six months ended June 30,
		2022		2023		2022		2023
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
Realized gains
Realized gains
Realized gains	Realized gains	$	994	$	671	$	1,244	$	831
Realized losses	Realized losses	(281)		(293)		(289)		(470)
Unrealized gains (losses), net		(10,844)		1,746		(6,116)		(7,327)
Realized losses
Realized losses
Unrealized losses, net
Unrealized losses, net
Unrealized losses, net
Net change in care trusts’ corpus
Net change in care trusts’ corpus
Net change in care trusts’ corpus	Net change in care trusts’ corpus	10,131		(2,124)		5,161		6,966
Total	Total	$	—	$	—	$	—	$	—
Total
Total

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


		Three months ended June 30,				Six months ended June 30,
		2022		2023		2022		2023
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
Investment income
Investment income
Investment income	Investment income	$	2,776	$	2,881	$	5,538	$	6,078
Realized losses, net	Realized losses, net	(258)		(18)		(604)		(474)
Realized losses, net
Realized losses, net
Total	Total	$	2,518	$	2,863	$	4,934	$	5,604
Total
Total

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


		Three months ended June 30,				Six months ended June 30,
		2022		2023		2022		2023
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
Purchases
Purchases
Purchases	Purchases	$	(280)	$	(2,310)	$	(411)	$	(6,711)
Sales	Sales	441		8,694		441		10,904
Sales
Sales

9.RECEIVABLES FROM PRENEED FUNERAL TRUSTS

Our receivables from preneed funeral trusts represent assets in trusts which are controlled and operated by third parties in which we do not have a controlling financial interest (less than 50%) in the trust assets. We account for these investments at cost. Receivables from preneed funeral trusts are as follows (in thousands):


		December 31, 2022		June 30, 2023
	December 31, 2023					December 31, 2023	March 31, 2024
Preneed funeral trust funds, at cost	Preneed funeral trust funds, at cost	$	20,594	$	21,732
Less: allowance for contract cancellation	Less: allowance for contract cancellation	(618)		(652)
Receivables from preneed funeral trusts, net	Receivables from preneed funeral trusts, net	$	19,976	$	21,080

The following summary reflects the composition of the assets held in trust and controlled by third parties to satisfy our future obligations related to the underlying preneed funeral contracts at December 31, ~~2022~~2023 and ~~June 30, 2023.~~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.

- 2120 -

The composition of the preneed funeral trust funds at ~~June 30, 2023~~March 31, 2024 is as follows (in thousands):


		Historical Cost Basis		Fair Value
	Historical Cost Basis					Historical Cost Basis	Fair Value
Cash and cash equivalents	Cash and cash equivalents	$	6,283	$	6,283
Fixed income investments	Fixed income investments	12,590		12,590
Mutual funds and common stocks	Mutual funds and common stocks	2,855		2,581
Annuities	Annuities	4		4
Total	Total	$	21,732	$	21,458

The composition of the preneed funeral trust funds at December 31, ~~2022~~2023 is as follows (in thousands):


		Historical Cost Basis		Fair Value
	Historical Cost Basis					Historical Cost Basis	Fair Value
Cash and cash equivalents	Cash and cash equivalents	$	6,071	$	6,071
Fixed income investments	Fixed income investments	11,795		11,795
Mutual funds and common stocks	Mutual funds and common stocks	2,725		2,440
Annuities	Annuities	3		3
Total	Total	$	20,594	$	20,309

10.INTANGIBLE AND OTHER NON-CURRENT ASSETS

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


		December 31, 2022		June 30, 2023
	December 31, 2023					December 31, 2023	March 31, 2024
Tradenames	Tradenames	$	25,610	$	29,074
Capitalized commissions on preneed contracts, net of accumulated amortization of $2,990 and $3,375, respectively		4,048		4,350
Prepaid agreements not-to-compete, net of accumulated amortization of $3,515 and $3,576, respectively		1,877		1,592
Internal-use software, net of accumulated amortization of $200 and $300, respectively		1,271		1,935
Capitalized commissions on preneed contracts, net of accumulated amortization of $3,788 and $3,980, respectively
Prepaid agreements not-to-compete, net of accumulated amortization of $3,158 and $3,276, respectively
Internal-use software, net of accumulated amortization of $444 and $528, respectively
Other	Other	124		382
Intangible and other non-current assets, net	Intangible and other non-current assets, net	$	32,930	$	37,333

Tradenames

Our tradenames have indefinite lives and therefore are not amortized.

During the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, two of the funeral homes that we ~~increased the~~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 tradenames by $3.5 million, with $1.3 million allocated to our funeral home segment and $2.2 million allocated to our cemetery segment, related to our 2023 business combination, described in Note 3 to the Consolidated ~~Financial Statements.~~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 ~~$174,000 and $196,000~~$0.2 million for both the three months ended ~~June 30, 2022~~March 31, 2023 and ~~2023, respectively and $344,000 and $385,000 for the six months ended June 30, 2022 and 2023, respectively.~~2024.

Prepaid Agreements

Prepaid agreements not-to-compete are amortized over the term of the respective agreements, generally ranging from one to ten years. Amortization expense was ~~$142,000 and $131,000~~$0.1 million for both the three months ended ~~June 30, 2022~~March 31, 2023 and ~~2023, respectively and $290,000 and $262,000 for the six months ended June 30, 2022 and 2023, respectively.~~2024.

Internal-use Software

Internal-use software is amortized on a straight-line basis typically over three to five years. Amortization expense was ~~$55,000 and $72,000~~$0.1 million for both the three months ended ~~June 30, 2022~~March 31, 2023 and ~~2023, respectively and $111,000 and $134,000 for the six months ended June 30, 2022 and 2023, respectively.~~2024.

- 2221 -

The aggregate amortization expense for our capitalized commissions, prepaid agreements and internal-use software as of ~~June 30, 2023~~March 31, 2024 is as follows (in thousands):


		Capitalized Commissions		Prepaid Agreements		Internal-use Software
	Capitalized Commissions							Capitalized Commissions	Prepaid Agreements	Internal-use Software
Years ending December 31,	Years ending December 31,
Remainder of 2023		$	402	$	257	$	142
2024		759		424		303
Remainder of 2024
Remainder of 2024
Remainder of 2024
2025	2025	694		377		391
2026	2026	628		262		378
2027	2027	562		142		377
2028
Thereafter	Thereafter	1,305		130		344
Total amortization expense	Total amortization expense	$	4,350	$	1,592	$	1,935

11.CREDIT FACILITY AND ACQUISITION DEBT

At ~~June 30, 2023,~~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, ~~amongst~~among others.

In addition, the Credit Facility also contains customary negative covenants, including, but not limited to, covenants that restrict (subject to certain exceptions) the ability of the Company and the Subsidiary Guarantors to incur indebtedness, grant liens, make investments, engage in mergers and acquisitions, ~~and~~ pay dividends and make other restricted payments, and certain financial maintenance covenants. At ~~June 30, 2023,~~March 31, 2024, we were subject to the following financial covenants under our Credit Facility: (A) a Total Leverage Ratio not to exceed ~~6.00~~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 June 30, 2023.~~at March 31, 2024.

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


		December 31, 2022		June 30, 2023
	December 31, 2023					December 31, 2023	March 31, 2024
Credit Facility	Credit Facility	$	190,700	$	204,000
Debt issuance costs, net of accumulated amortization of $1,926 and $2,202, respectively		(1,864)		(1,582)
Debt issuance costs, net of accumulated amortization of $2,478 and $2,616, respectively
Total Credit Facility	Total Credit Facility	$	188,836	$	202,418

Acquisition debt	Acquisition debt	$	3,993	$	3,948
Acquisition debt
Acquisition debt
Less: current portion	Less: current portion	(555)		(578)
Total acquisition debt, net of current portion	Total acquisition debt, net of current portion	$	3,438	$	3,370

At ~~June 30, 2023,~~March 31, 2024, we had outstanding borrowings under the Credit Facility of ~~$204.0~~$154.1 million. We also had one letter of credit for ~~$2.3~~$2.6 million under the Credit Facility. The letter of credit will expire on November ~~27, 2023~~25, 2024 and is expected to automatically renew annually and secures our obligations under our various self-insured policies. At ~~June 30, 2023,~~March 31, 2024, we had ~~$43.7~~$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 ~~June 30, 2023,~~March 31, 2024, the prime rate margin was equivalent to ~~2.625%~~2.375% and the BSBY rate margin was ~~3.625%~~3.375%. The weighted average interest rate on our Credit Facility was ~~2.9%~~7.9% and ~~8.6%~~8.9% for the three months ended ~~June 30, 2022~~March 31, 2023 and ~~2023, respectively and 2.5% and 8.3% for the six months ended June 30, 2022 and 2023,~~2024, respectively.

~~- 23 -~~

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

Three months ended June 30, Six months ended June 30,
2022 2023 2022 2023
Credit Facility interest expense $ 1,314 $ 4,668 $ 2,161 $ 8,479
Credit Facility amortization of debt issuance costs 96 138 184 276

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

Three months ended June 30, Six months ended June 30,
2022 2023 2022 2023
Acquisition debt imputed interest expense $ 79 $ 71 $ 159 $ 142


	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, 2022

June 30, 2023

December 31, 2023

March 31, 2024

Long-term liabilities:

Principal amount

400,000

Principal amount

Debt discount, net of accumulated amortization of $794 and $1,049, respectively

(3,706)

(3,451)

Debt issuance costs, net of accumulated amortization of $226 and $299, respectively

(1,051)

(978)

Debt discount, net of accumulated amortization of $1,309 and $1,441, respectively

Debt issuance costs, net of accumulated amortization of $373 and $411, respectively

Carrying value of the Senior Notes

395,243

395,571

At ~~June 30, 2023,~~March 31, 2024, the fair value of the Senior Notes, which are Level 2 measurements, was ~~$343.1~~$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 June 30,				Six months ended June 30,
		2022		2023		2022		2023
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
Senior Notes interest expense	Senior Notes interest expense	$	4,230	$	4,250	$	8,480	$	8,500
Senior Notes interest expense
Senior Notes interest expense
Senior Notes amortization of debt discount
Senior Notes amortization of debt discount
Senior Notes amortization of debt discount	Senior Notes amortization of debt discount	122		128		243		255

Senior Notes amortization of debt issuance costs	Senior Notes amortization of debt issuance costs	35		37		69		73

Senior Notes amortization of debt issuance costs

Senior Notes amortization of debt issuance costs

The debt discount and the debt issuance costs are being amortized using the effective interest method over the remaining term of approximately 7162 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 ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2023~~2024 was 4.42% and 4.30%, respectively.

~~- 24 -~~

13.LEASES

Our lease obligations consist of operating and finance leases related to real estate, ~~equipment~~vehicles and ~~vehicles.~~equipment. The components of lease cost are as follows (in thousands):


			Three months ended June 30,				Six months ended June 30,
		Income Statement Classification	2022		2023		2022		2023
			Three months ended March 31,
			Three months ended March 31,
			Three months ended March 31,
		Income Statement Classification
		Income Statement Classification
		Income Statement Classification
Operating lease cost
Operating lease cost
Operating lease cost	Operating lease cost	Facilities and grounds expense(1)	$	853	$	917	$	1,701	$	1,792
Short-term lease cost	Short-term lease cost	Facilities and grounds expense(1)	76		92		178		186
Short-term lease cost
Short-term lease cost
Variable lease cost
Variable lease cost
Variable lease cost	Variable lease cost	Facilities and grounds expense(1)	16		56		23		114

Finance lease cost:	Finance lease cost:

Finance lease cost:

Finance lease cost:
Depreciation of leased assets
Depreciation of leased assets
Depreciation of leased assets	Depreciation of leased assets	Depreciation and amortization(2)	$	109	$	109	$	217	$	217
Interest on lease liabilities	Interest on lease liabilities	Interest expense	112		103		225		208
Interest on lease liabilities
Interest on lease liabilities
Total finance lease cost
Total finance lease cost
Total finance lease cost	Total finance lease cost		221		212		442		425
Total lease cost	Total lease cost		$	1,166	$	1,277	$	2,344	$	2,517
Total lease cost
Total lease cost



(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):


		Six months ended June 30,
		2022		2023
	Three months ended March 31,						Three months ended March 31,
	2023					2023		2024
Cash paid for operating leases included in operating activities	Cash paid for operating leases included in operating activities	$	1,795	$	1,934
Cash paid for finance leases included in financing activities	Cash paid for finance leases included in financing activities	426		447

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


		Six months ended June 30,
		2022		2023
	Three months ended March 31,						Three months ended March 31,
	2023					2023		2024
Right-of-use assets obtained in exchange for new operating lease liabilities	Right-of-use assets obtained in exchange for new operating lease liabilities	$	576	$	1,067
Right-of-use assets obtained in exchange for new finance lease liabilities	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	Lease Type	Balance Sheet Classification	December 31, 2022		June 30, 2023		Lease Type	Balance Sheet Classification	December 31, 2023	March 31, 2024
Operating lease right-of-use assets	Operating lease right-of-use assets	Operating lease right-of-use assets	$	17,060	$	17,123

Finance lease right-of-use assets	Finance lease right-of-use assets	Property, plant and equipment, net	$	6,770	$	6,770
Finance lease right-of-use assets
Finance lease right-of-use assets
Accumulated depreciation	Accumulated depreciation	Property, plant and equipment, net	(2,881)		(3,098)
Finance lease right-of-use assets, net	Finance lease right-of-use assets, net		$	3,889	$	3,672

Operating lease current liabilities
Operating lease current liabilities
Operating lease current liabilities	Operating lease current liabilities	Current portion of operating lease obligations	$	2,203	$	2,581
Finance lease current liabilities	Finance lease current liabilities	Current portion of finance lease obligations	414		409
Total current lease liabilities	Total current lease liabilities		$	2,617	$	2,990

Operating lease non-current liabilities	Operating lease non-current liabilities	Obligations under operating leases, net of current portion	$	17,315	$	16,860
Operating lease non-current liabilities
Operating lease non-current liabilities
Finance lease non-current liabilities	Finance lease non-current liabilities	Obligations under finance leases, net of current portion	4,743		4,537
Total non-current lease liabilities	Total non-current lease liabilities		$	22,058	$	21,397

Total lease liabilities	Total lease liabilities		$	24,675	$	24,387
Total lease liabilities
Total lease liabilities

- 2524 -

The average lease terms and discount rates at ~~June 30, 2023~~March 31, 2024 are as follows:


		Weighted-average remaining lease term (years)	Weighted-average discount rate
	Weighted-average remaining lease term (years)						Weighted-average remaining lease term (years)			Weighted-average discount rate
Operating leases	Operating leases	8.3	8.1	%	Operating leases	7.6		8.1	%
Finance leases	Finance leases	11.1	8.1	%	Finance leases	10.4		8.3	%

The aggregate future lease payments for non-cancelable operating and finance leases at ~~June 30, 2023~~March 31, 2024 are as follows (in thousands):


		Operating		Finance
	Operating					Operating	Finance
Lease payments due:	Lease payments due:
Remainder of 2023		$	1,973	$	423
2024		3,942		791
Remainder of 2024
Remainder of 2024
Remainder of 2024
2025	2025	3,651		736
2026	2026	3,528		746
2027	2027	3,375		746
2028
Thereafter	Thereafter	10,011		4,064
Total lease payments	Total lease payments	26,480		7,506
Less: Interest	Less: Interest	(7,039)		(2,560)
Present value of lease liabilities	Present value of lease liabilities	$	19,441	$	4,946

At ~~June 30, 2023,~~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 June 30,						Six months ended June 30,
		2022			2023			2022			2023
		Shares	Fair Value		Shares	Fair Value		Shares	Fair Value		Shares	Fair Value
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
		Shares
		Shares
		Shares
Granted(1)
Granted(1)
Granted(1)	Granted(1)	—	$	—	—	$	—	—	$	—	142,020	$	4,634
Returned for payroll taxes	Returned for payroll taxes	(49)	$	(2)	39	$	1	4,136	$	205	1,473	$	50
Returned for payroll taxes
Returned for payroll taxes
Cancelled
Cancelled
Cancelled	Cancelled	450	$	16	776	$	27	1,450	$	47	1,826	$	61

(1)

Restricted stock granted during the ~~six~~three months ended ~~June 30~~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.~~$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 ~~$40,000~~$0.2 million and ~~$394,000,~~$0.5 million, for the three months ended ~~June 30, 2022~~March 31, 2023 and ~~2023, respectively and $97,000 and $572,000 for the six months ended June 30, 2022 and 2023,~~2024, respectively.

Stock Options

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


		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
		Shares
		Shares
		Shares
Granted(1)
Granted(1)
Granted(1)

		Three months ended June 30,						Six months ended June 30,
Cancelled
		2022			2023			2022			2023
		Shares	Fair Value		Shares	Fair Value		Shares	Fair Value		Shares	Fair Value
Granted(1)		—	$	—	—	$	—	58,500	$	959	214,191	$	2,506
Granted(2)		—	$	—	—	$	—	310,000	$	5,388	—	$	—
Cancelled	Cancelled	18,138	$	214	13,810	$	152	25,138	$	285	101,850	$	1,334

Cancelled

(1)

Stock options granted during the ~~six~~three months ended ~~June 30, 2022~~March 31, 2023 and ~~2023~~2024 had a weighted average price of ~~$49.48~~$32.69 and ~~$32.69,~~$24.48, respectively. The fair value of these options was calculated using the Black-Scholes option pricing model. The options granted in ~~2022 vest over a five-year period~~2023 and ~~have a ten-year term. The options granted in 2023~~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.

~~(2)~~

Stock options granted during the six months ended June 30, 2022 had a weighted average price of $49.48. The fair value of these options was calculated using the Black-Scholes option pricing model and vest over a seven-year period and have a ten-year term. These options will vest if the employee has remained continuously employed by us through the vesting period.

- 2625 -

The fair value of the options granted during the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 was estimated using the Black-Scholes option pricing model with the following assumptions:

Grant Date

February ~~22, 2023~~21, 2024

Expected holding period (years)

~~4.00~~6.00

Awards granted

~~214,191~~370,590

Dividend yield

~~1.38%~~1.79%

Expected volatility

~~43.68%~~43.59%

Risk-free interest rate

~~4.27%~~4.31%

Black-Scholes value

$~~11.70~~10.34

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


		Three months ended June 30,						Six months ended June 30,
		2022			2023			2022			2023
		Shares	Cash		Shares	Cash		Shares	Cash		Shares	Cash
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
		Shares
		Shares
		Shares
Exercised(1)
Exercised(1)
Exercised(1)	Exercised(1)	—	N/A		17,300	N/A		18,736	N/A		29,300	N/A
Returned for option price(2)	Returned for option price(2)	—	$	—	12,652	$	—	8,125	$	60	22,797	$	—
Returned for option price(2)
Returned for option price(2)
Returned for payroll taxes(3)	Returned for payroll taxes(3)	—	$	—	736	$	20	1,601	$	82	1,465	$	41
Returned for payroll taxes(3)
Returned for payroll taxes(3)



(1)			Stock options exercised during the three months ended ~~June 30,~~March 31, 2023 had a weighted average exercise price of ~~$20.06~~$25.43 with an aggregate intrinsic value of ~~$0.2~~$0.1 million. Stock options exercised during the six months ended June 30, 2022 and 2023 had a weighted average exercise price of $25.88 and $22.26, respectively, with an aggregate intrinsic value of $0.5 million and $0.3 million, respectively.
(2)			Represents shares withheld/cash received for the payment of the option price.
(3)			Represents shares withheld/cash paid for the payment of payroll taxes.

We recorded stock-based compensation expense, which is included in General, administrative and other expenses, for stock options of ~~$550,000~~$0.7 million and ~~$735,000,~~$0.2 million, for the three months ended ~~June 30, 2022~~March 31, 2023 and ~~2023, respectively and $1,188,000 and $1,445,000 for the six months ended June 30, 2022 and 2023,~~2024, respectively.

Performance Awards

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


		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
		Shares
		Shares
		Shares
		Three months ended June 30,						Six months ended June 30,
Cancelled
		2022			2023			2022			2023
Cancelled
		Shares	Fair Value		Shares	Fair Value		Shares	Fair Value		Shares	Fair Value
Granted		23,263	$	1,100	—	$	—	27,013	$	1,262	—	$	—
Cancelled	Cancelled	13,974	$	134	2,795	$	27	20,961	$	201	40,181	$	1,012

WeFor 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~~, for performance awards of $637,000 and $665,000 for the three months ended June 30, 2022 and 2023, respectively and $1,203,000 and $728,000 for the six months ended June 30, 2022 and 2023, respectively.expenses.

Employee Stock Purchase Plan

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

Three months ended June 30, Six months ended June 30,
2022 2023 2022 2023
Shares Price Shares Price Shares Price Shares Price
ESPP 11,796 $ 33.70 16,386 $ 24.28 25,089 $ 39.86 38,042 $ 24.28


	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:


			~~2023~~2024
Dividend yield			~~1.30%~~1.84%
Expected volatility			~~53.51%~~41.15%
Risk-free interest rate			~~4.53%~~5.46%, ~~4.77%~~5.24%, ~~4.75%~~5.02%, ~~4.72%~~4.80%
Expected life (years)			0.25, 0.50, 0.75, 1.00

~~- 27 -~~

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 ~~$152,000~~$0.3 million and ~~$163,000~~$0.2 million for the three months ended ~~June 30, 2022~~March 31, 2023 and ~~2023, respectively and $351,000 and $415,000 for the six months ended June 30, 2022 and 2023~~2024, respectively.

- 26 -

Common Stock

Former Employee

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


		Three months ended June 30,						Six months ended June 30,
		2022			2023			2022			2023
		Shares	Fair Value		Shares	Fair Value		Shares	Fair Value		Shares	Fair Value
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
		Shares
		Shares
		Shares
Granted(1)
Granted(1)
Granted(1)	Granted(1)	—	$	—	—	$	—	—	$	—	30,000	$	826
Returned for payroll taxes	Returned for payroll taxes	—	$	—	—	$	—	—	$	—	1,001	$	28
Returned for payroll taxes
Returned for payroll taxes

(1)

During the ~~six~~three months ended ~~June 30,~~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~~Company’s Executive Vice President, Chief Financial Officer & Treasurer effective January 2, 2023.

We recorded stock-based compensation expense, which is included in General, administrative and other expenses, for common stock awards of ~~$826,000,~~$0.8 million, for the ~~six~~three months ended ~~June 30,~~March 31, 2023.

Good To Great Incentive Program

~~During the six months ended June 30, 2023, we~~Common stock issued ~~8,444 shares of our common stock~~ to certain employees which were valued at $0.3 million at a grant date stock price of $32.69. During the six months ended June 30, 2022, we issued 27,448 shares of our common stock to certain employees, which were valued at $1.4 million at a grant date stock price of $49.48.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 June 30,						Six months ended June 30,
		2022			2023			2022			2023
		Shares	Fair Value		Shares	Fair Value		Shares	Fair Value		Shares	Fair Value
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
		Shares
		Shares
		Shares
Board of Directors(1)
Board of Directors(1)
Board of Directors(1)	Board of Directors(1)	2,372	$	94	1,077	$	35	5,041	$	236	4,595	$	142
Advisor to the Board(1)	Advisor to the Board(1)	126	$	5	153	$	5	219	$	10	316	$	10
Advisor to the Board(1)
Advisor to the Board(1)

(1)

Common stock granted during the three months ended ~~June 30, 2022~~March 31, 2023 and ~~2023~~2024 had a weighted average price of ~~$39.65~~$30.52 and ~~$32.47, respectively and $46.83 and $31.01 for six months ended June 30, 2022 and 2023,~~$27.04, respectively.

On June 21, 2023, the Board elected Chad Fargason to serve as a Class II Director until the 2025 annual meeting of shareholders. Mr. Fargason was appointed to serve as the chairperson of the Corporate Governance Committee and a member of the Audit Committee. Concurrently with his appointment, the Board granted Mr. Fargason 910 shares of our common stock under our Director Compensation Policy, which were valued at approximately $25,000 based on the closing price on the grant date.

We recorded compensation expense, which is included in General, administrative and other expenses, related to annual retainers, including the value of stock granted to non-employee Directors and an advisor to our Board, of ~~$184,000~~$0.2 million and ~~$189,000~~$0.5 million for the three months ended ~~June 30, 2022~~March 31, 2023 and ~~2023, respectively and $385,000 and $355,000 for the six months ended June 30, 2022 and 2023,~~2024, respectively.

Share Repurchase

~~Share~~We did not repurchase ~~activity is as follows (dollar value in thousands):~~

Three months ended June 30, Six months ended June 30,
2022 2023 2022 2023
Number of Shares Repurchased 205,496 — 695,496 —
Average Price Paid Per Share $ 40.02 $ — $ 49.22 $ —
Dollar Value of Shares Repurchased $ 8,224 $ — $ 34,234 $ —

~~- 28 -~~

~~Our~~any shares ~~were purchased in~~during the ~~open market at times~~three months ended March 31, 2023 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.2024. At ~~June 30, 2023,~~March 31, 2024, our share repurchase program had $48.9 million authorized for repurchases.

Cash ~~Dividend~~Dividends

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


2024						2024	Per Share		Dollar Value
March 1st

2023

2023

2023	2023	Per Share		Dollar Value		Per Share		Dollar Value
March 1st	March 1st	$	0.1125	$	1,661
June 1st		$	0.1125	$	1,679

2022		Per Share		Dollar Value
March 1st		$	0.1125	$	1,725
June 1st		$	0.1125	$	1,730

- 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 June 30,				Six months ended June 30,
		2022		2023		2022		2023
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
Numerator for basic and diluted earnings per share:
Numerator for basic and diluted earnings per share:
Numerator for basic and diluted earnings per share:	Numerator for basic and diluted earnings per share:
Net income	Net income	$	10,899	$	8,286	$	27,301	$	17,130
Net income
Net income
Less: Earnings allocated to unvested restricted stock	Less: Earnings allocated to unvested restricted stock	(6)		(79)		(20)		(150)
Less: Earnings allocated to unvested restricted stock
Less: Earnings allocated to unvested restricted stock
Income attributable to common stockholders
Income attributable to common stockholders
Income attributable to common stockholders	Income attributable to common stockholders	$	10,893	$	8,207	27,281		16,980

Denominator:	Denominator:
Denominator for basic earnings per common share - weighted average shares outstanding		14,798		14,793		15,020		14,776

Denominator:

Denominator:
Denominator for basic earnings per common share – weighted average shares outstanding
Denominator for basic earnings per common share – weighted average shares outstanding
Denominator for basic earnings per common share – weighted average shares outstanding
Effect of dilutive securities:	Effect of dilutive securities:
Effect of dilutive securities:
Effect of dilutive securities:
Stock options
Stock options
Stock options	Stock options	226		50		325		74

Performance awards	Performance awards	688		611		688		611
Denominator for diluted earnings per common share - weighted average shares outstanding		15,712		15,454		16,033		15,461

Performance awards

Performance awards
Denominator for diluted earnings per common share – weighted average shares outstanding
Denominator for diluted earnings per common share – weighted average shares outstanding
Denominator for diluted earnings per common share – weighted average shares outstanding

Basic earnings per common share:

Basic earnings per common share:

Basic earnings per common share:	Basic earnings per common share:	$	0.74	$	0.55	$	1.82	$	1.14
Diluted earnings per common share:	Diluted earnings per common share:	$	0.69	$	0.53	$	1.70	$	1.10
Diluted earnings per common share:
Diluted earnings per common share:

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

Three months ended June 30, Six months ended June 30,
2022 2023 2020 2023
Antidilutive stock options 366,038 1,236,490 259,359 1,183,146


	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 ~~June 30, 2023,~~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.

~~- 29 -~~

16.SEGMENT REPORTING

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


Three months ended June 30, 2023
		Funeral		Cemetery		Total
Three months ended March 31, 2024
		Funeral
		Funeral
		Funeral						Cemetery	Total
Services	Services	$	39,799	$	4,723	$	44,522
Merchandise	Merchandise	21,211		4,244		25,455
Cemetery property	Cemetery property	—		20,175		20,175
Other revenue	Other revenue	3,495		4,031		7,526
Total	Total	$	64,505	$	33,173	$	97,678

Three months ended June 30, 2022
Funeral Cemetery Total
Services $ 38,140 $ 4,410 $ 42,550
Merchandise 20,525 3,777 24,302
Cemetery property — 16,974 16,974
Other revenue 3,273 3,501 6,774
Total $ 61,938 $ 28,662 $ 90,600


Six months ended June 30, 2023
		Funeral		Cemetery		Total
Three months ended March 31, 2023
		Funeral
		Funeral
		Funeral						Cemetery	Total
Services	Services	$	83,401	$	9,328	$	92,729
Merchandise	Merchandise	44,180		8,178		52,358
Cemetery property	Cemetery property	—		33,283		33,283
Other revenue	Other revenue	7,009		7,813		14,822
Total	Total	$	134,590	$	58,602	$	193,192

Six months ended June 30, 2022
Funeral Cemetery Total
Services $ 83,656 $ 8,631 $ 92,287
Merchandise 45,810 6,878 52,688
Cemetery property — 30,200 30,200
Other revenue 6,827 6,759 13,586
Total $ 136,293 $ 52,468 $ 188,761

- 3028 -

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 June 30, 2023 $ 17,898 $ 13,039 $ (10,199) $ 20,738
Three months ended June 30, 2022 18,485 10,421 (9,181) 19,725
Six months ended June 30, 2023 $ 40,091 $ 21,651 $ (20,370) $ 41,372
Six months ended June 30, 2022 43,947 18,639 (17,710) 44,876
Income (loss) before income taxes:
Three months ended June 30, 2023 $ 18,112 $ 13,183 $ (19,593) $ 11,702
Three months ended June 30, 2022 19,765 10,427 (15,072) 15,120
Six months ended June 30, 2023 $ 40,446 $ 21,854 $ (38,252) $ 24,048
Six months ended June 30, 2022 46,973 18,686 (29,055) 36,604
Total assets:
June 30, 2023 $ 796,043 $ 429,272 $ 16,771 $ 1,242,086
December 31, 2022 779,500 396,389 17,061 1,192,950


	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, 2022 June 30, 2023
Prepaid and other current assets:
Prepaid expenses $ 4,077 $ 2,803
Federal income taxes receivable 507 678
Other current assets 149 129
Total prepaid and other current assets $ 4,733 $ 3,610
Current portion of debt and lease obligations:
Acquisition debt $ 555 $ 578
Finance lease obligations 414 409
Operating lease obligations 2,203 2,581
Total current portion of debt and lease obligations $ 3,172 $ 3,568
Accrued and other liabilities:
Incentive compensation $ 12,140 $ 8,337
Insurance 3,051 4,134
Unrecognized tax benefit 3,294 3,338
Vacation 3,430 3,714
Interest 2,329 2,462
Salaries and wages 2,263 2,310
Employee meetings and award trips 746 552
Commissions 743 974
Income tax payable 459 168
Ad valorem and franchise taxes 455 1,634
Perpetual care trust payable 222 400
Other accrued liabilities 1,489 1,541
Total accrued and other liabilities $ 30,621 $ 29,564
Other long-term liabilities:
Incentive compensation $ 2,541 $ 1,042
Other long-term liabilities 524 257
Total other long-term liabilities $ 3,065 $ 1,299

~~- 31 -~~


	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):


		Six months ended June 30,
		2022		2023
	Three months ended March 31,						Three months ended March 31,
	2023					2023		2024
Cash paid for interest	Cash paid for interest	$	10,901	$	17,056
Cash paid for taxes	Cash paid for taxes	4,495		7,329

- 3230 -

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 ~~objectives~~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, ~~organizational performance,~~ anticipated integration, performance and other benefits of recently completed and anticipated acquisitions, and cost management and debt reductions; any statements of the plans, timing and objectives of management for acquisition and divestiture activities; any statements regarding future economic and market conditions or performance; any ~~statements regarding~~projections or expectations related to the ~~timing~~conclusion of the Board's strategic ~~alternatives~~ review; ~~the outcome of the strategic alternatives review, including whether any transaction occurs, at all;~~ 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 ~~4E Leadership~~ and Strategic Acquisition Models;

•the effects of competition;

•changes in the number of deaths in our ~~markets;~~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;~~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 toof our ~~updated~~ 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;

~~- 33 -~~

•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 ofin 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 of directors’~~Board’s review of potential strategic ~~alternatives for the Company;~~alternatives;

•economic, financial and stock market fluctuations;

•interruptions or security lapses of our information technology, including any cybersecurity or ransomware ~~incidents,~~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, ~~2022.~~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.

- 3432 -

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

OVERVIEW

General

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 ~~June 30, 2023,~~March 31, 2024, we operated ~~172~~165 funeral homes in 26 states and 3231 cemeteries in 11 states. We compete with other publicly held, privately held and independent operators of funeral and cemetery companies.

Funeral home and cemetery businesses provide products and services to families in three principal areas: (i) ceremony and tribute, generally in the form of a funeral or memorial service; (ii) disposition of remains, either through burial or cremation; and (iii) memorialization, generally through monuments, markers or inscriptions. Our funeral ~~homes offer a complete range~~home operations are principally service businesses that generate revenue from sales of ~~high value personal~~burial and cremation services ~~to meet a family’s funeral needs, including~~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. ~~Most~~We provide funeral services and products on both an “atneed” (time of ~~our funeral homes have a non-denominational chapel on the premises, which permits family visitation~~death) and ~~services~~“preneed” (planned prior to ~~take place at one location and thereby reduces transportation costs and inconvenience to the family.~~death) basis.

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

~~Recent Developments~~COMPANY DEVELOPMENTS

Board of Directors ~~- Resignation; Election;~~ and ~~Review of Potential Strategic Alternatives~~Leadership Changes

On ~~June 15, 2023, Dr. Achille Messac, a member of our~~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”), ~~provided notice~~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 ~~resignation~~Employment Agreement, dated as of November 5, 2019, with the Company (as amended prior to the Transition Date, the “Employment Agreement”) terminated on the Transition Date.

On February 21, 2024, the Company and Mr. Payne entered into a Transition Agreement (the “Transition Agreement”), setting forth the terms of his severance benefits and his consulting arrangement. Under the Transition Agreement, Mr. Payne is entitled to receive certain benefits, subject to the timely execution and non-revocation by Mr. Payne and his spouse of waiver and release agreements in connection with the Transition Date and the end of the 12-month consulting term set forth in the Transition Agreement (the “Releases”).

These payments and benefits include the following:

• Salary continuation for 24 months of $2.0 million;

• 2023 annual bonus of $1.25 million;

• Prorated 2024 bonus of $181,500;

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

• Consulting payments of $1.0 million;

• Payments for maintaining health benefits for Mr. Payne and his spouse for up to 36 months; and

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

All of the payments and benefits provided under the Transition Agreement are subject to Mr. Payne’s continued compliance with certain confidentiality, non-competition, non-solicitation and non-disparagement provisions of the Employment Agreement, as well as compliance by Mr. Payne and his spouse with their respective Releases. The Transition Agreement may be terminated by the Company upon the material breach of the Transition Agreement, the Employment Agreement or either of the Releases. Upon Mr. Payne’s death, any consulting fee payments would be paid to his estate.

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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. Ms. Sanders will continue to serve on ~~that date. Dr. Messac’s resignation was not a result~~the Audit, Compensation and Corporate Governance Committees of ~~any disagreement with~~the Board.

On March 7, 2024, upon the recommendation of the Corporate Governance Committee of the Company, ~~on any matter related to its operations, policies or practices.~~

~~On June 21, 2023,~~ the Board elected Chad Fargason to serve as ~~a Class II Director until~~ the Company’s ~~2025 annual meeting of shareholders. Mr. Fargason was appointed to serve on the Audit Committee, along with being appointed Chairman of the Corporate Governance Committee.~~

On June 29, 2023, the Board announced it had initiated a process to explore potential strategic alternatives, possibly including a sale, merger or other potential strategic or financial transaction, to maximize shareholder value.

~~Leadership Changes~~

On June 21, 2023, the Board appointed Carlos R. Quezada, to serve as Chief Executive Officer (“CEO”), effective on that date, as part of a planned succession of Melvin C. Payne, founder and former CEO. Concurrently with the appointment of Mr. Quezada as CEO, Mr. Payne stepped down as CEO and the Board approved his appointment as Executivefirst Non-Executive Chairman of the Board, effective on that date.

~~On June 21, 2023,~~ The election of Mr. Fargason as the ~~Board appointed Steven D. Metzger,~~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. Mr. Granmayeh continues to serve as the Company’s Executive Vice President, ~~along with remaining in his role as Secretary, effective on that date.~~Chief Financial Officer, and Treasurer (Principal Financial Officer).

~~Strategic Partnership Agreement~~Divestitures

~~On May 16, 2023,~~During the three months ended March 31, 2024, we ~~received~~sold six funeral homes and one cemetery for an aggregate of $10.9 million for a ~~$6.0 million incentive payment from a vendor for entering into a strategic partnership agreement to market and sell prearranged funeral services in the future.~~net loss of $1.5 million.

Inflationary and Macroeconomic Trends

During the ~~second~~first quarter of ~~2023,~~2024, we ~~continued to experience modest cost increases and surcharges~~experienced a stabilization of inflationary costs from our vendors and suppliers onfor merchandise and goods, ~~due~~particularly as it relates to increases in the cost of raw materials, as well as broader inflationary, and global supply chain impacts, along with rising interest rates. For example, we experienced higher costs related to full-time hourly base rates, utilities, funeral supplies and merchandise costs, ~~insurance, and increased borrowing~~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.~~

~~- 35 -~~

~~Although~~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 ~~taken steps~~experienced thus far in 2024, we are unable to ~~mitigate these cost increases and we expect these impacts~~forecast with any certainty whether inflationary costs will continue to ~~continue throughout the current year,~~moderate in future periods, as the ultimate scope and duration of these impacts ~~are~~remain unknown at this time. More broadly, the U.S. 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 ~~consumers or~~consumer discretionary spending, including the amount that consumers are able to spend on our services, although we have not experienced ~~such~~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~~any changes in consumer preferences or additional cost increases, if possible.

~~Funeral Home Operations~~

~~Our funeral homes offer a complete range~~During the first quarter of ~~high value personal services~~2024, we experienced lower volumes as compared to meet a family’s funeral needs, including 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. Factors affecting our funeral operating results include, but are not limited to: demographic trends relating to population growth and average age, which impact death rates and number of deaths; establishing and maintaining leading market share positions supported by strong local heritage and relationships; effectively responding to increasing cremation trends by selling complementary services and merchandise; controlling salary and merchandise costs; and exercising pricing leverage to increase average revenue per contract.

~~Cemetery Operations~~

Our cemeteries provide interment rights (primarily grave sites, lawn crypts, mausoleum spaces and niches) and related cemetery merchandise (such as memorial markers, outer burial containers and monuments) and services (interments, inurnments and installation of cemetery merchandise) both on an atneed and preneed basis. Factors affecting our cemetery operating results include, but are not limited to: the size and success of our sales organization; local perceptions and heritage of our cemeteries; our ability to adapt to changes in the economy and consumer confidence; and our responseprior years due to fluctuations in ~~capital markets and interest rates, which affect investment earnings~~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. Regardless of these fluctuations in the death rate, we continue to focus on ~~trust funds, finance charges on installment contracts and our securities portfolio within the trust funds.~~

~~Business Strategy~~

~~Our business strategy is based on strong, local leadership with entrepreneurial principles that is focused on sustainable long term~~expanding market share, ~~revenue~~cost management and profitability growth in each local business. We believe Carriage has the most innovative operating model in the funeral and cemetery industry, which we are able to achieve through a decentralized, high-performance culture and operating framework linked with incentive compensation programs that attract top quality industry talent toexecuting on our organization. We also believe that Carriage provides a unique consolidation and operating framework that offers a highly attractive succession planning solution for independent funeral home owners who want their legacy family business to remain operationally prosperous in their local communities.

~~Our~~ ~~Mission Statement~~ ~~states that “we are committed to being the most professional, ethical and highest quality funeral and cemetery service organization in our industry” and our~~ ~~Guiding Principles~~ ~~state our core values, which are comprised of:~~

•~~Honesty, integrity and quality in all that we do;~~

•~~Hard work, pride of accomplishment, and shared success through employee ownership;~~

•~~Belief in the power of people through individual initiative and teamwork;~~

•~~Outstanding service and profitability go hand-in-hand; and~~

•~~Growth of the Company is driven by decentralization and partnership.~~

~~Our five~~ ~~Guiding Principles~~ ~~collectively embody our~~ ~~Being The Best~~ ~~high-performance culture and operating framework. Our operations and business strategy are built upon the execution of the following three models:~~

•~~Standards Operating Model;~~

•~~4E Leadership Model; and~~

•~~Strategic Acquisition Model.~~

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~~Standards Operating Model~~

Our Standards Operating Model is focused on growing local market share, providing personalized high-value services to our client families and guests, and operating financial metrics that drive long-term, sustainable revenue growth and improved earning power of our portfolio of businesses by employing leadership and entrepreneurial principles that fit the nature of our high-value personal service business. Standards Achievement is the measure by which we judge the success of each business and incentivize our local managers and their teams. Our Standards Operating Model is not designed to produce maximum short-term earnings because we believe such performance is unsustainable and will ultimately stress the business, which very often leads to declining market share, revenue and earnings.

~~4E Leadership Model~~

Our 4E Leadership Model requires strong local leadership in each business to grow an entrepreneurial, decentralized, high-value, personal service and sales business at sustainable profit margins. Our 4E Leadership Model is based upon principles established by Jack Welch during his tenure at General Electric, and is based upon 4E Leadership qualities essential to succeed in a high performance culture: ~~Energy~~ ~~to get the job done; the ability to~~ ~~Energize others; the~~ ~~Edge~~ ~~necessary to make difficult decisions; and the ability to~~ ~~Execute~~ and produce results. To achieve a high level within our Standards in a business year after year, we require our local Managing Partners that have the 4E Leadership skills to entrepreneurially grow the business by hiring, training and developing highly motivated and productive local teams.

~~Strategic Acquisition Model~~

Our Standards Operating Model led to the development of our Strategic Acquisition Model, which guides our acquisition strategy. We believe that both models, when executed effectively, will drive long-term, sustainable increases in market share, revenue, earnings and cash flow. We believe a primary driver of higher revenue and profits in the future will be the execution of our Strategic Acquisition Model using strategic ~~ranking criteria to assess acquisition candidates. As we execute this strategy over time, we expect to acquire larger, higher margin strategic businesses in growing markets.~~

We have learned that the long-term growth or decline of a local branded funeral and cemetery business is reflected by several criteria that correlate strongly with five-to-ten-year performance in volumes (market share), revenue and sustainable field-level earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins (a non-GAAP measure). We use criteria such as cultural alignment, volume and price trends, size of business, size of market, competitive standing, demographics, strength of brand and barriers to entry to evaluate the strategic position of potential acquisition candidates. Our financial valuation of the acquisition candidate is then determined through the application of an appropriate after-tax cash return on investment that exceeds our cost of capital.

~~Our belief in our~~ ~~Mission Statement~~ ~~and~~ ~~Guiding Principles~~ and proper execution of the three models that define our strategy have given us a competitive advantage in every market where we compete. We believe that we can execute our three models without proportionate incremental investment in our consolidation platform infrastructure and without additional fixed regional and corporate overhead. This gives us a competitive advantage that is evidenced by the sustained earning power of our portfolio as defined by our EBITDA margin.operational plans.

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our primary sources of liquidity and capital resources are internally generated cash flows from operating activities and availability under our Credit Facility (defined below).

We generate cash in our operations primarily from atneed sales and delivery of preneed sales. We also generate cash from earnings on our cemetery perpetual care trusts. Based on our recent operating results, current cash position and anticipated future cash flows, we do not anticipate any significant liquidity constraints in the foreseeable future. We have the ability to draw on our Credit Facility, subject to its customary terms and conditions. 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, ~~2022.~~2023.

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Our plan is to remain focused on integrating our recently acquired ~~businesses~~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

~~- 37 -~~

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.

Cash Flows

We began ~~2023~~2024 with ~~$1.2~~$1.5 million in cash and ended the ~~second~~first quarter with ~~$1.0~~$1.7 million in cash. At ~~June 30, 2023,~~March 31, 2024, we had borrowings of ~~$204.0~~$154.1 million outstanding on our Credit Facility compared to ~~$190.7~~$179.1 million at December 31, ~~2022.~~2023.

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


	Three months ended March 31,						Three months ended March 31,
	2023					2023		2024
Cash at beginning of the year

Net cash provided by operating activities
Net cash provided by operating activities
Net cash provided by operating activities

Acquisitions of businesses
Acquisitions of businesses
Acquisitions of businesses

Proceeds from divestitures and sale of other assets
Proceeds from divestitures and sale of other assets
Proceeds from divestitures and sale of other assets
Proceeds from insurance claims
Capital expenditures
Net (cash used) provided by investing activities

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

		Six months ended June 30,
		2022		2023
Cash at beginning of the year		$	1,148	$	1,170

Net cash provided by operating activities		30,177		39,187

Acquisitions of businesses and real property		(2,601)		(44,000)

Proceeds from divestitures and sale of other assets		3,720		1,973
Proceeds from insurance claims		2,167		1,092
Capital expenditures		(13,468)		(8,960)
Net cash used in investing activities		(10,182)		(49,895)

Net borrowings on our Credit Facility, acquisition debt and finance lease obligations		19,598		13,044

Payment of debt issuance for the Credit Facility and Senior Notes		(339)		—
Net proceeds from (payments for) employee equity plans

Net proceeds from employee equity plans		774		804

Net proceeds from (payments for) employee equity plans

Net proceeds from (payments for) employee equity plans
Dividends paid on common stock	Dividends paid on common stock	(3,455)		(3,340)
Purchase of treasury stock		(36,663)		—

Net cash provided by (used in) financing activities

Net cash provided by (used in) financing activities

Net cash provided by (used in) financing activities	Net cash provided by (used in) financing activities	(20,085)		10,508

Cash at end of the period	Cash at end of the period	$	1,058	$	970
Cash at end of the period
Cash at end of the period

Operating Activities

For the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, cash provided by operating activities was ~~$39.2~~$19.7 million compared to ~~$30.2~~$25.9 million for the ~~six~~three months ended ~~June 30, 2022. The increase~~March 31, 2023, a decrease of ~~$9.0~~$6.2 million is primarily due to ~~an $8.6~~a $7.0 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 for entering into a strategic partnership agreement to market and sell prearranged funeral services~~received in the ~~future, offset by unfavorable working capital changes in accrued liabilities and accounts payable.~~first quarter of 2023.

Investing Activities

Our investing activities, resulted in a net cash ~~outflow~~inflow of ~~$49.9~~$7.4 million for the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 compared to ~~$10.2~~a net cash outflow of $47.3 million for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, an increase of ~~$39.7~~$54.7 million.

Acquisition and Divestiture Activity

During the ~~six~~three months ended ~~June 30,~~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 and real property for $1.2 million.~~

We also received proceeds of $1.1 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 six months ended June 30, 2022, we sold real property for $2.9 million and we sold two funeral homes for an aggregate of $0.9 million and purchased real property for $2.6~~ million.

Capital Expenditures

For the ~~six~~three months ended ~~June 30, 2023,~~March 31, 2024, our capital expenditures (comprised of growth and maintenance spend) totaled ~~$9.0~~$3.6 million compared to ~~$13.5~~$5.0 million for the ~~six~~three months ended ~~June 30, 2022,~~March 31, 2023, a decrease of ~~$4.5~~$1.4 million.

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


		Six months ended June 30,
		2022		2023
	Three months ended March 31,						Three months ended March 31,
	2023					2023		2024
Growth	Growth
Cemetery development	Cemetery development	$	3,673	$	3,505
Cemetery development
Cemetery development

Renovations at certain businesses(1)		3,620		1,623
Renovations at certain businesses
Renovations at certain businesses
Renovations at certain businesses

Other	Other	193		109
Other
Other
Total Growth	Total Growth	$	7,486	$	5,237

~~(1)~~

During the six months ended June 30, 2023, we spent $0.5 million for renovations on two businesses that were affected by Hurricane Ian, which occurred during the third quarter of 2022 and $0.3 million for renovations on 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 six months ended June 30, 2022, we spent $2.1 million for renovations on 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.

Six months ended June 30,
2022 2023
Maintenance
General equipment and furniture $ 2,347 $ 2,260
Facility repairs and improvements 1,599 249
Vehicles 1,129 443
Paving roads and parking lots 485 330
Other 422 441
Total Maintenance $ 5,982 $ 3,723


	Three months ended March 31,
	2023		2024
Maintenance
General equipment and furniture	$	1,218	$	623
Facility repairs and improvements	89		302
Vehicles	233		14
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 ~~inflow~~outflow of ~~$10.5~~$26.9 million for the ~~six~~three months ended ~~June 30, 2023~~March 31, 2024 compared to a net cash ~~outflow~~inflow of ~~$20.1~~$21.5 million for the ~~six~~three months ended ~~June 30, 2022, an increase~~March 31, 2023, a decrease of ~~$30.6~~$48.4 million.

During the ~~six~~three months ended ~~June 30,~~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 ~~$13.0~~$22.8 million, offset by ~~$3.3~~$1.7 million ~~in dividends.~~

~~During the six months ended June 30, 2022, we had net borrowings on our Credit Facility, acquisition debt and finance leases~~ of ~~$19.6 million, offset by $36.7 million for the purchase of treasury stock and $3.5 million in dividends.~~dividends paid.

Share Repurchase

~~Share~~We did not repurchase ~~activity is as follows (dollar value in thousands):~~

~~- 39 -~~

Cash ~~Dividend~~Dividends

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


2024						2024	Per Share		Dollar Value
March 1st

2023

2023

2023	2023	Per Share		Dollar Value		Per Share		Dollar Value
March 1st	March 1st	$	0.1125	$	1,661
June 1st		$	0.1125	$	1,679

2022		Per Share		Dollar Value
March 1st		$	0.1125	$	1,725
June 1st		$	0.1125	$	1,730

Credit Facility, Lease Obligations and Acquisition Debt

The outstanding principal of our Credit Facility, lease obligations and acquisition debt at ~~June 30, 2023~~March 31, 2024 is as follows (in thousands):


	~~June 30, 2023~~March 31, 2024
Credit Facility	$	~~204,000~~154,100
Operating leases	18,642
Finance leases	~~4,946~~5,948
~~Operating leases~~	~~19,441~~
Acquisition debt	~~3,948~~5,979
Total	$	~~232,335~~184,669

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Credit Facility

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 June 30, 2023, the prime rate margin was equivalent to 2.625% and the BSBY rate margin was 3.625%. The weighted average interest rate on our Credit Facility was 2.9% and 8.6% for the three months ended June 30, 2022 and 2023, respectively and 2.5% and 8.3% for the six months ended June 30, 2022 and 2023, respectively.

~~- 40 -~~

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


		Three months ended June 30,				Six months ended June 30,
		2022		2023		2022		2023
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
Credit Facility interest expense
Credit Facility interest expense
Credit Facility interest expense	Credit Facility interest expense	$	1,314	$	4,668	$	2,161	$	8,479
Credit Facility amortization of debt issuance costs	Credit Facility amortization of debt issuance costs	96		138		184		276
Credit Facility amortization of debt issuance costs
Credit Facility amortization of debt issuance costs

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.

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.

Lease Obligations

Our lease obligations consist of operating and finance leases. We lease certain office facilities, certain funeral homes, ~~equipment~~vehicles and ~~vehicles~~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. WeIn addition, we lease certain other funeral homes, vehicles and equipment under finance leases with original terms ranging from ~~ten~~three and a half to forty years. At ~~June 30, 2023,~~March 31, 2024, operating and finance lease obligations were ~~$35.3~~$35.5 million, with ~~$5.0~~$5.5 million payable within 12 months.

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


		Three months ended June 30,				Six months ended June 30,
		2022		2023		2022		2023
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
Operating lease cost
Operating lease cost
Operating lease cost	Operating lease cost	$	853	$	917	$	1,701	$	1,792
Short-term lease cost	Short-term lease cost	76		92		178		186
Short-term lease cost
Short-term lease cost
Variable lease cost
Variable lease cost
Variable lease cost	Variable lease cost	16		56		23		114

Finance lease cost:	Finance lease cost:

Finance lease cost:

Finance lease cost:
Depreciation of leased assets
Depreciation of leased assets
Depreciation of leased assets	Depreciation of leased assets	$	109	$	109	$	217	$	217
Interest on lease liabilities	Interest on lease liabilities	112		103		225		208
Interest on lease liabilities
Interest on lease liabilities
Total finance lease cost
Total finance lease cost
Total finance lease cost	Total finance lease cost	221		212		442		425
Total lease cost	Total lease cost	$	1,166	$	1,277	$	2,344	$	2,517
Total lease cost
Total lease cost

Acquisition Debt

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 ~~7.3%~~6.5% to ~~10.0%~~7.3%. Original maturities typically range from ~~nine~~five to twenty years. At ~~June 30, 2023,~~March 31, 2024, acquisition debt obligations were ~~$5.5~~$9.2 million, with ~~$0.8~~$0.9 million payable within 12 months. ~~Original maturities range from nine to twenty years.~~

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

Three months ended June 30, Six months ended June 30,
2022 2023 2022 2023
Acquisition debt imputed interest expense $ 79 $ 71 $ 159 $ 142


	Three months ended March 31,
	2023		2024
Acquisition debt imputed interest expense	$	71	$	104

Senior Notes

At ~~June 30, 2023,~~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. 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.

~~- 41 -~~

unamortized debt issuance costs for the Senior Notes for both the three ~~and six~~ months ended ~~June 30, 2022~~March 31, 2023 and ~~2023~~2024 was 4.42% and 4.30%, respectively.

At ~~June 30, 2023,~~March 31, 2024, the fair value of the Senior Notes, which are Level 2 measurements, was ~~$343.1~~$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 June 30,				Six months ended June 30,
		2022		2023		2022		2023
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
Senior Notes interest expense
Senior Notes interest expense
Senior Notes interest expense	Senior Notes interest expense	$	4,230	$	4,250	$	8,480	$	8,500
Senior Notes amortization of debt discount	Senior Notes amortization of debt discount	122		128		243		255
Senior Notes amortization of debt discount
Senior Notes amortization of debt discount

Senior Notes amortization of debt issuance costs	Senior Notes amortization of debt issuance costs	35		37		69		73

Senior Notes amortization of debt issuance costs

Senior Notes amortization of debt issuance costs

At ~~June 30, 2023,~~March 31, 2024, our future interest payments on our outstanding balance were ~~$99.9~~$93.5 million, with $17.0 million payable within 12 months.

- 38 -

FINANCIAL HIGHLIGHTS

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


		Three months ended June 30,				Six months ended June 30,
		2022		2023		2022		2023
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
Revenue
Revenue
Revenue	Revenue	$	90,600	$	97,678	$	188,761	$	193,192
Funeral contracts	Funeral contracts	11,006		11,431		24,521		23,846
Funeral contracts
Funeral contracts
Average revenue per funeral contract
Average revenue per funeral contract
Average revenue per funeral contract	Average revenue per funeral contract	$	5,493	$	5,492	$	5,439	$	5,510
Preneed interment rights (property) sold	Preneed interment rights (property) sold	3,511		3,391		5,889		5,895
Preneed interment rights (property) sold
Preneed interment rights (property) sold
Average price per preneed interment right sold
Average price per preneed interment right sold
Average price per preneed interment right sold	Average price per preneed interment right sold	$	4,337	$	5,237	$	4,398	$	4,922
Gross profit	Gross profit	$	27,712	$	31,202	$	62,190	$	62,257
Gross profit
Gross profit
Net income	Net income	$	10,899	$	8,286	$	27,301	$	17,130
Net income
Net income

Revenue for the three months ended ~~June 30, 2023~~March 31, 2024 increased ~~$7.1~~$8.0 million compared to the three months ended ~~June 30, 2022,~~March 31, 2023, as we experienced a ~~3.9%~~37.3% increase in ~~funeral contract volume, while~~ the ~~average revenue per funeral contract remained flat, and~~number of preneed interment rights (property) sold, a ~~20.8%~~7.9% increase in the average price per interment right sold ~~slightly~~and a 4.1% increase in the average revenue per funeral contract, offset by a ~~3.4%~~2.6% decrease in funeral contract volume. The increase in cemetery revenue highlights the ~~number~~effectiveness of our preneed ~~interment rights (property) sold.~~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 ~~June 30, 2023~~March 31, 2024 increased ~~$3.5~~$6.2 million compared to the three months ended ~~June 30, 2022,~~March 31, 2023, primarily due to the increase in revenue from both our funeral ~~home~~ and cemetery ~~segments.~~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 ~~June 30, 2023~~March 31, 2024 decreased ~~$2.6~~$1.9 million compared to the three months ended ~~June 30, 2022, primarily due to~~March 31, 2023, as the ~~following: (1) a $3.4~~$6.2 million increase in ~~interest expense; (2)~~profit contribution from our businesses was offset by a ~~$2.6 million impact from divestitures, disposals and insurance reimbursements; (3) a $1.0~~$6.1 million increase in general, administrative and ~~administrative~~other expenses ~~offset by (4) the $3.5~~and a $1.3 million increase in ~~gross profit and (5) an $0.8 million decrease in income tax expense.~~

Revenue for the six months ended June 30, 2023 increased $4.4 million compared to the six months ended June 30, 2022, as we experienced a 1.3% increase in the average revenue per funeral contract, while funeral contract volume decreased 2.8%, and an 11.9% increase in the average price per interment right sold, while the number of preneed interment rights (property) sold remained flat. 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 impactloss on ~~the overall death rate.~~

Gross profit for the six months ended June 30, 2023 increased $0.1 million compared to the six months ended June 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 six months ended June 30, 2023 decreased $10.2 million compared to the six months ended June 30, 2022, primarily due to the following: (1) a $6.4 million increase in interest expense; (2) a $3.5 million impact from divestitures, disposals and insurance reimbursements; (3) a $2.6 million increase in general and administrative expenses, offset by (4) a $2.4 million decrease in income tax expense.divestitures.

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

~~- 42 -~~

Further discussion of general, administrative and other expenses, interest expense, income taxes and other components of income and expenses are presented under “– Other Financial Statement Items.”

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 ~~June 30, 2023~~March 31, 2024 issued on ~~August 2, 2023,~~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. We do not intend for this information to be considered in isolation or as a substitute for other measures of performance prepared in accordance with United States generally accepted accounting principles (“GAAP”). The Trend Report is a non-GAAP statement that also provides insight into underlying trends in our business.

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


		Three months ended June 30,				Six months ended June 30,
		2022		2023		2022		2023
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
Gross profit
Gross profit
Gross profit	Gross profit	$	27,712	$	31,202	$	62,190	$	62,257

Cemetery property amortization	Cemetery property amortization	1,704		1,892		3,036		3,093

Cemetery property amortization

Cemetery property amortization
Field depreciation expense
Field depreciation expense
Field depreciation expense	Field depreciation expense	3,253		3,555		6,550		6,912
Regional and unallocated funeral and cemetery costs	Regional and unallocated funeral and cemetery costs	5,966		4,131		12,313		9,568
Regional and unallocated funeral and cemetery costs
Regional and unallocated funeral and cemetery costs
Operating profit(1)	Operating profit(1)	$	38,635	$	40,780	$	84,089	$	81,830
Operating profit(1)
Operating profit(1)

(1)

Operating profit is defined as gross profit plus cemetery property amortization, field depreciation expense and regional and unallocated funeral and cemetery costs.

- 39 -

Our operations are reported in two business segments: Funeral Home and Cemetery. Below is a breakdown of operating profit (a ~~non-financial GAAP~~non-GAAP financial measure) by segment (in thousands):


		Three months ended June 30,				Six months ended June 30,
		2022		2023		2022		2023
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
Funeral Home
Funeral Home
Funeral Home	Funeral Home	$	24,152	$	23,947	$	57,887	$	52,913
Cemetery	Cemetery	14,483		16,833		26,202		28,917
Cemetery
Cemetery
Operating profit
Operating profit
Operating profit	Operating profit	$	38,635	$	40,780	$	84,089	$	81,830

Operating profit margin(1)	Operating profit margin(1)	42.6%		41.7%		44.5%		42.4%

Operating profit margin(1)

Operating profit margin(1)

(1)

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

Further discussion of operating profit for our ~~Funeral Home~~funeral home and ~~Cemetery~~cemetery segments is presented under “– Results of Operations.”

~~- 43 -~~

RESULTS OF OPERATIONS

The following is a discussion of our results of operations for the three ~~and six~~ months ended ~~June 30, 2023~~March 31, 2024 and ~~2022.~~2023.

~~We previously classified our~~The term “operating” in the funeral ~~homes~~home and ~~cemeteries as “same store” or “acquired” in our results of operations discussion in our quarterly and annual filings prior~~cemetery segments refers to December 31, 2022. Same store generally referred to funeral homes and cemeteries acquired at least five years before the reporting period being presented, while acquired generally referred to funeral homes and cemeteries acquired within the preceding five years of the reporting period being presented, both of which excluded certainall funeral homes and cemeteries that we ~~intended to divest.~~

In an effort to simplify the discussion of our results of operations, provide meaningful metrics to investors to compare our results to previous periods and provide more insight into the underlying long-term performance trends in our business, we have combined both the same store and acquired categories and now refer to this combination as “operating”. The term “operating” in the Funeral Home and Cemetery segment simply refers to all our funeral homes and cemeteries owned and operated in the current reporting period, excluding certain funeral home and cemetery businesses that we have divested ~~or intend to divest~~ in ~~the near future.~~such period.

The term “divested” when discussed in the ~~Funeral Home~~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 ~~six~~three months ended ~~June 30, 2023 and two funeral homes we sold in the six months ended June 30, 2022.~~March 31, 2023. The term “divested” when discussed in the ~~Cemetery~~cemetery segment, refers to ~~two cemeteries we sold during~~ the ~~six~~sale of one cemetery in each of the three months ended ~~June 30,~~March 31, 2024 and 2023.

~~“Planned divested” refers to~~The term “ancillary” in the funeral home ~~and cemetery businesses that we intend to divest.~~

~~“Ancillary” in the Funeral Home~~ segment represents our flower shop, ~~our~~ monument ~~company, our~~business, pet cremation business and ~~our~~ 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. Adding back these items will result in gross profit, a GAAP financial measure.

- 40 -

Funeral Home Segment

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


		Three months ended June 30,
		2022		2023
	Three months ended March 31,									Three months ended March 31,
	2023							2023			2024
Revenue:	Revenue:
Operating	Operating	$	58,108	$	60,800
Divested/planned divested		557		210
Operating
Operating
Divested
Ancillary	Ancillary	980		1,232
Other	Other	2,293		2,263
Total	Total	$	61,938	$	64,505

Operating profit:	Operating profit:
Operating profit:
Operating profit:
Operating	Operating	$	21,999	$	21,891
Divested/planned divested		14		29
Operating
Operating
Divested
Ancillary	Ancillary	151		73
Other	Other	1,988		1,954
Total	Total	$	24,152	$	23,947

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

Contract volume

Contract volume

Contract volume	Contract volume	10,912		11,398
Average revenue per contract, excluding preneed funeral trust earnings	Average revenue per contract, excluding preneed funeral trust earnings	$	5,325	$	5,334
Average revenue per contract, including preneed funeral trust earnings	Average revenue per contract, including preneed funeral trust earnings	$	5,488	$	5,489
Cremation rate	Cremation rate	57.4%		58.4%		Cremation rate	59.1%		59.0%

Funeral home operating revenue increased ~~$2.7~~$1.2 million for the three months ended ~~June 30, 2023~~March 31, 2024, compared to the three months ended ~~June 30, 2022.~~March 31, 2023. The increase in operating revenue is primarily driven by a ~~4.5%~~4.1% increase in ~~contract volume,~~

~~- 44 -~~

~~while~~ the average revenue per contract excluding preneed interest, ~~remained flat. The~~which was partially offset by a 2.6% decrease in contract volume. Despite the funeral contract volume ~~increase is primarily~~decline due to the COVID-19 related pull forward effect, we increased our ~~newly acquired~~average revenue per funeral ~~home businesses,~~contract through the successful execution of our enhanced pricing strategy, which ~~were not present~~was the primary driver in ~~the comparative quarter of 2022.~~

funeral revenue growth this quarter.

Funeral home operating profit for the three months ended ~~June 30, 2023 decreased $0.1~~March 31, 2024 increased $1.2 million when compared to the same period in ~~2022,~~2023, primarily due to anthe increase in operating revenue, as well as a decrease in operating expenses as a percentage of revenue. The comparable operating profit margin ~~decreased 190~~increased 100 basis points to ~~36.0%~~41.3%. Operating expenses as a percentage of revenue ~~increased 1.9%~~decreased 1.1%, with the largest ~~increases~~decreases in ~~salary~~salaries and benefits expenses of ~~1.4%~~0.6% and ~~general and administrative~~promotional expenses of ~~0.5%. The increase in operating expenses is partially due to higher costs from inflationary impacts concentrated in~~0.2%, which reflects the continued progress we have made successfully executing on our ~~full-time hourly base rates, utilities and funeral supplies.~~cost management initiatives this quarter.

Ancillary revenue, which represents revenue from our flower shop, monument business, pet cremation business and online cremation businesses, increased ~~$0.3~~$0.2 million, ~~and Ancillary~~while ancillary operating profit ~~decreased $0.1 million~~remained flat for the three months ended ~~June 30, 2023~~March 31, 2024, compared to the three months ended ~~June 30, 2022.~~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 ~~remained flat~~contracts, increased $0.7 million and $0.6 million, respectively, for the three months ended ~~June 30, 2023, compared to the three months ended June 30, 2022.~~

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

Six months ended June 30,
2022 2023
Revenue:
Operating $ 128,127 $ 127,044
Divested/planned divested 1,339 537
Ancillary 2,050 2,289
Other 4,777 4,720
Total $ 136,293 $ 134,590
Operating profit:
Operating $ 53,183 $ 48,416
Divested/planned divested 151 106
Ancillary 372 219
Other 4,181 4,172
Total $ 57,887 $ 52,913
The following operating measures reflect the significant metrics over this comparative period:
Contract volume 24,271 23,746
Average revenue per contract, excluding preneed funeral trust earnings $ 5,279 $ 5,350
Average revenue per contract, including preneed funeral trust earnings $ 5,438 $ 5,510
Cremation rate 57.2% 58.7%

Funeral home operating revenue decreased $1.1 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The decrease in operating revenue is primarily driven by a 2.2% decrease in contract volume, which was partially offset by a 1.3% 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 asMarch 31, 2024, 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~~2023. These increases are primarily due to ~~a combination of price increases and~~ our continued focus on ~~educating families on~~growth of our preneed funeral sales through our strategic partnership with a national insurance provider that began during the ~~many products and service options that are available with burials and cremations.~~

~~Funeral home operating profit for~~second quarter of 2023. As a result, we have experienced a 25.7% increase in preneed insurance contracts sold during the ~~six months ended June 30, 2023 decreased $4.8 million when~~first quarter of 2024, 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 340 basis points to 38.1%. Operating expenses as a percentage of revenue increased 3.4% with the largest increases in salary and benefits expenses of 1.9%, facilities and grounds expenses of 0.7%, general and administrative expenses of 0.5% and other funeral costs of 0.3%. 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.2023.

- 4541 -

Ancillary revenue, which represents revenue from our flower shop, pet cremation and online cremation businesses increased $0.2 million and Ancillary operating profit decreased $0.2 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.

Other revenue and other operating profit, which consists of preneed funeral insurance commissions and preneed funeral trust and insurance, remained flat for the six months ended June 30, 2023, compared to the six months ended June 30, 2022.

Cemetery Segment

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


		Three months ended June 30,
		2022		2023
	Three months ended March 31,								Three months ended March 31,
	2023						2023			2024
Revenue:	Revenue:
Operating	Operating	$	25,104	$	29,142
Divested/planned divested		57		—
Operating
Operating
Divested
Other	Other	3,501		4,031
Total	Total	$	28,662	$	33,173

Operating profit (loss):	Operating profit (loss):
Operating profit (loss):
Operating profit (loss):
Operating	Operating	$	11,136	$	12,940
Divested/planned divested		(18)		(2)
Operating
Operating
Divested
Other	Other	3,365		3,895
Total	Total	$	14,483	$	16,833

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

Preneed revenue as a percentage of operating revenue

Preneed revenue as a percentage of operating revenue

Preneed revenue as a percentage of operating revenue	Preneed revenue as a percentage of operating revenue	66.0%		67.0%		58.0%		65.0%
Preneed revenue (in thousands)	Preneed revenue (in thousands)	$	16,476	$	19,385
Atneed revenue (in thousands)	Atneed revenue (in thousands)	$	8,628	$	9,757
Number of preneed interment rights sold	Number of preneed interment rights sold	3,506		3,391
Average price per interment right sold	Average price per interment right sold	$	4,341	$	5,237

Cemetery operating revenue increased ~~$4.0~~$6.3 million for the three months ended ~~June 30, 2023~~March 31, 2024, compared to the three months ended ~~June 30, 2022,~~March 31, 2023, as we experienced a ~~20.6%~~37.3% increase in the number of preneed interment rights (property) sold and a 7.9% increase in the average price per ~~preneed~~ interment right ~~sold, slightly offset by a 3.3% decrease in preneed interment rights~~ sold. Cemetery atneed revenue, which represents ~~33.0%~~35.0% of our total operating revenue, increased ~~$1.1~~$0.6 million for the three months ended ~~June 30, 2023,~~March 31, 2024, compared to the same period ~~of the prior year,~~in 2023, primarily due to an increase in ~~sales of~~delivered merchandise and services ~~from~~across our ~~newly acquired~~ cemetery ~~businesses, not present~~portfolio. The increase in cemetery revenue highlights the ~~comparative quarter~~effectiveness of ~~2022.~~our preneed cemetery sales growth plan, as we continue to focus on executing our strategic goals.

Cemetery operating profit increased ~~$1.8~~$3.6 million for the three months ended ~~June 30, 2023~~March 31, 2024, compared to the three months ended ~~June 30, 2022,~~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 ~~remained flat at 44.4%~~increased 430 basis points to 43.3%. Operating expenses as a ~~percent~~percentage of ~~operating~~ revenue ~~also remained flat.~~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 ~~consists~~consist of preneed cemetery trust revenue and preneed cemetery finance charges, both increased ~~$0.5~~$0.1 million for the three months ended ~~June 30, 2023,~~March 31, 2024, compared to the three months ended June 30, 2022. The increase is primarily due to realized capital gains in the current year compared to the prior year and an increase in income in our perpetual care trust fund. Other operating profit increased $0.5 million for the same comparative period, primarily due to the increase in revenue.

~~- 46 -~~

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

Six months ended June 30,
2022 2023
Revenue:
Operating $ 45,579 $ 50,747
Divested/planned divested 130 42
Other 6,759 7,813
Total $ 52,468 $ 58,602
Operating profit (loss):
Operating $ 19,731 $ 21,333
Divested/planned divested (14) 10
Other 6,485 7,574
Total $ 26,202 $ 28,917
The following operating measures reflect the significant metrics over this comparative period:
Preneed revenue as a percentage of operating revenue 63.0% 63.0%
Preneed revenue (in thousands) $ 28,555 $ 31,833
Atneed revenue (in thousands) $ 17,024 $ 18,914
Number of preneed interment rights sold 5,871 5,890
Average price per interment right sold $ 4,409 $ 4,924

~~Cemetery operating revenue increased $5.2 million for the six months ended June 30,~~March 31, 2023, compared to the six months ended June 30, 2022, as we experienced an 11.7% increase in the average price per preneed interment right sold, while the number of preneed interment rights sold remained flat. Cemetery atneed revenue, which represents 37.0% of our total operating revenue increased $1.9 million for the six months ended June 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 $1.6 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The comparable operating profit margin decreased 130 basis point to 42.0%. Operating expenses as a percent of operatingfinance charge revenue ~~increased 1.2% primarily due to an increase in salary and benefits expenses.~~

Other revenue, which consists of preneed cemetery trust revenue and preneed cemetery finance charges, increased $1.1 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. The increase is primarily due to an increase in income in our perpetual care trust fund and an increase in finance charges on preneed sales. Other operating profit increased $1.1 million for the same comparative period, primarily duerelated to the increase in ~~revenue.~~

~~Cemetery property amortization.~~ ~~Cemetery property amortization totaled $1.9 million and $3.1 million for~~cemetery sales during the ~~three and six months ended June 30, 2023, respectively, an increase~~first quarter of ~~$0.2 million and $0.1 million, respectively,~~2024, compared to the same period in ~~2022,~~2023.

Cemetery property amortization. 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 $6.9~~$3.5 million for the three ~~and six~~ months ended ~~June 30, 2023, respectively,~~March 31, 2024, an increase of ~~$0.3~~$0.1 million ~~and $0.4 million, respectively,~~ compared to the same period in ~~2022, primarily due to acquisitions made in latter half of 2022 and our March 2023 acquisition.~~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 ~~$4.1~~$3.8 million for the three months ended ~~June 30, 2023,~~March 31, 2024, a decrease of ~~$1.8~~$1.6 million compared to the same period in ~~2022,~~2023, primarily due to ~~the following: (1) a $0.7~~an $0.8 million decrease in cash incentives and equity ~~compensation; (2) a $0.7~~compensation costs and an $0.8 million decrease in incentive award ~~trips and annual managing partner meetings and (3) a $0.4 million decrease in other expenses.~~trip costs.

Regional and unallocated funeral and cemetery costs totaled $9.6 million for the six months ended June 30, 2023, a decrease of $2.7 million compared to the same period in 2022, primarily due to the following: (1) a $1.3 million decrease in cash incentives and equity compensation; (2) a $1.1 million decrease in incentive award trips and annual managing partner meetings and (3) a $0.3 million decrease in other expenses.

- 4742 -

Other Financial Statement Items

General, administrative and other. General, administrative and other expenses, which includes salaries and benefits and cash and equity incentive compensation for the Houston support office, totaled ~~$10.2~~$16.2 million for the three months ended ~~June 30, 2023,~~March 31, 2024, an increase of ~~$1.0~~$6.1 million compared to the same period in 2022, primarily due to the following: (1) $1.4 million increase in salary and benefits expense and cash and equity incentive compensation, as a result of having a complete senior leadership team, including current year executive promotions, offset by (2) a $0.4 million decrease in other expenses, including lower online marketing costs and travel costs.

~~General, administrative and other expenses totaled $20.4 million for the six months ended June 30,~~ 2023, ~~an increase of $2.6 million compared to the same period in 2022,~~which is primarily due to the following: (1) a ~~$3.2~~$4.2 million increase in salary and benefits ~~expense~~expenses and cash and equity incentive compensation ~~as a result~~costs, primarily driven by the termination expense recorded during the first quarter of ~~having a complete senior leadership team, including current year executive promotions, offset by~~2024 for our former Executive Chairman of the Board pursuant to his Transition Agreement effective February 22, 2024; (2) a ~~$0.6~~$1.5 million ~~decrease~~increase in professional fees related to the Board’s review of strategic alternatives; and (3) a $0.4 million increase in all other ~~expenses, including lower online marketing costs and travel costs.~~expenses.

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 June 30,				Six months ended June 30,
		2022		2023		2022		2023
Net (gain) loss on divestitures		$	(1,278)	$	—	$	(575)	$	82
Impairments related to assets held for sale		—��		243		—		243
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
Net loss on divestitures
Net loss on divestitures
Net loss on divestitures
Net loss on disposals of fixed assets
Net loss on disposals of fixed assets
Net loss on disposals of fixed assets	Net loss on disposals of fixed assets	85		22		149		181
Total	Total	$	(1,193)	$	265	$	(426)	$	506
Total
Total

During the ~~six~~three months ended ~~June 30,~~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 aan aggregate loss of $0.1 ~~million. We also recognized an impairment of $0.2 million related to property, plant and equipment for assets held for sale.~~

~~During the six months ended June 30, 2022, we sold real property and two funeral homes for a net gain of $0.6~~ million.

Interest expense. Interest expense related to its respective debt arrangement is as follows (in thousands):


		Three months ended June 30,				Six months ended June 30,
		2022		2023		2022		2023
		Three months ended March 31,
		Three months ended March 31,
		Three months ended March 31,
		2023
		2023
		2023
Senior Notes
Senior Notes
Senior Notes	Senior Notes	$	4,387	$	4,414	$	8,793	$	8,827
Credit Facility	Credit Facility	1,409		4,806		2,344		8,755
Credit Facility
Credit Facility
Finance leases
Finance leases
Finance leases	Finance leases	112		103		225		209
Acquisition debt	Acquisition debt	79		71		159		142
Acquisition debt
Acquisition debt
Other
Other
Other	Other	1		2		9		2
Total	Total	$	5,988	$	9,396	$	11,530	$	17,935
Total
Total

Net ~~(gain)~~ loss on property damage, net of insurance claims. During the three ~~and six~~ months ended ~~June 30,~~March 31, 2023, we recorded a ~~$0.2~~$0.3 million ~~gain and $36,000~~ loss, ~~respectively,~~ net of insurance proceeds, ~~primarily~~ for property damaged by a fire that occurred during first quarter of 2023.

~~During~~ We did not record any gain or loss activity during the three ~~and six~~ months ended ~~June 30, 2022, we recorded a $1.4 million gain and $3.3 million gain, net of insurance proceeds, for property damaged by Hurricane Ida that occurred during the third quarter of 2021.~~March 31, 2024.

Other, net. During the three ~~and six~~ months ended ~~June 30,~~March 31, 2023, we recorded a ~~$0.1~~$0.5 million gain ~~and $0.6 million gain, respectively,~~ on the sale of other real ~~property~~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 ~~$3.4~~$3.7 million for the three months ended ~~June 30, 2023, a decrease~~March 31, 2024, an increase of ~~$0.8~~$0.2 million compared to the same period in ~~2022,~~2023, primarily due to ~~lower pre-tax income~~an increase in ~~the current period.~~tax expense on discrete items. Our operating tax rate before discrete items was ~~28.0%~~32.8% and 28.9% for ~~both~~ the three months ended ~~June 30,~~March 31, 2024 and 2023, ~~and 2022.~~respectively.

Income tax expense totaled $6.9 million for the six months ended June 30, 2023, a decrease of $2.4 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 28.5% and 27.2% for six months ended June 30, 2023 and 2022, respectively.

- 4843 -

~~OVERVIEW OF~~ CRITICAL ACCOUNTING ~~POLICIES AND~~ 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. Understanding our accounting policies and the extent to which our management uses judgment, assumptions and estimates in applying these policies is integral to understanding our Consolidated Financial Statements. Our critical accounting policies are more fully described 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, ~~2022.~~2023.

We have identified Business Combinations and Goodwill as those accounting policies that require significant judgments, assumptions and estimates and that have a significant impact on our financial condition and results of operations. 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. We evaluate our critical accounting estimates and judgments required by our policies on an ongoing basis and update them as appropriate based on changing conditions.

SEASONALITY

Our business can be affected by seasonal fluctuations in the death rate, with number of deaths generally higher during the winter months due to the higher incidences of death from influenza and pneumonia as compared to other periods of the year. 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. ~~Generally, the number of deaths is higher~~These unexpected fluctuations may not only increase death rates during the ~~winter months because~~affected period, but also may subsequently decrease death rates following the ~~incidences of death from influenza and pneumonia are higher during this~~affected period ~~than other periods of the year. For example, we experienced fluctuations in the death rate due to COVID-19, with~~as a result of ~~increased deaths during the duration~~an acceleration of ~~the pandemic. Although deaths directly attributable from COVID-19 now have minimal direct impact on the overall~~ death ~~rate, the overall death rate remains higher than the pre-COVID-19 pandemic period.~~rates (also referred to as a “pull forward effect”). As a result, we are unable to predict or forecast the duration or variation of ~~this increased~~the current death rate with any certainty.

Item 3.Quantitative and Qualitative Disclosures About Market Risk.

In the ordinary course of business, we are typically exposed to a variety of market risks. Currently, these are primarily related to interest rate risk and changes in the values of securities associated with the preneed and perpetual care trusts. Management is actively involved in monitoring exposure to market risk and developing and utilizing appropriate risk management techniques when appropriate and when available for a reasonable price. We are not exposed to any other significant market risks other than those related to the impact of health and safety concerns from epidemics and pandemics and ~~and~~ inflation, which are described in more detail in Part 1, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2022.~~2023.

The following quantitative and qualitative information is provided about financial instruments to which we are a party at ~~June 30, 2023~~March 31, 2024 and from which we may incur future gains or losses from changes in market conditions. We do not enter into derivative or other financial instruments for speculative or trading purposes.

Hypothetical changes in interest rates and the values of securities associated with the preneed and perpetual care trusts chosen for the following estimated sensitivity analysis are considered to be reasonable near-term changes generally based on consideration of past fluctuations for each risk category. However, since it is not possible to accurately predict future changes in interest rates, these hypothetical changes may not necessarily be an indicator of probable future fluctuations.

The following information about our market-sensitive financial instruments constitutes a “forward-looking statement.”

In connection with our preneed funeral operations and preneed cemetery merchandise and service sales, the related funeral and cemetery trust funds own investments in equity and debt securities and mutual funds, which are sensitive to current market prices. Cost and market values of such investments at ~~June 30, 2023~~March 31, 2024 are presented in Part 1, Item 1, Financial Statements, Note 8 to our Consolidated Financial Statements in this Quarterly Report on Form 10-Q. The sensitivity of the fixed income securities is such that a 0.25% change in interest rates causes an approximate ~~1.19%~~0.87% change in the value of the fixed income securities.

We monitor current and forecasted interest rate risk in the ordinary course of business and seek to maintain optimal financial flexibility, quality and solvency. At ~~June 30, 2023,~~March 31, 2024, we had outstanding borrowings under the Credit Facility of ~~$204.0~~$154.1 million. Any further borrowings or voluntary prepayments against the Credit Facility or any change in the floating rate would cause a change in interest expense. We have the option to pay interest under the Credit Facility at either prime rate or the BSBY rate plus ~~a margin.~~an applicable margin based on our leverage ratio. At ~~June 30, 2023,~~March 31, 2024, the prime rate margin was equivalent to ~~2.625%~~2.375% and the BSBY rate margin was ~~3.625%~~3.375%. Assuming the outstanding balance remains unchanged, a change of 100 basis

- 44 -

points in our borrowing rate would result in a

~~- 49 -~~

change in income before taxes of ~~$2.0~~$1.5 million. We have not entered into interest rate hedging arrangements in the past. Management continually evaluates the cost and potential benefits of interest rate hedging arrangements.

Our Senior Notes bear interest at the fixed annual rate of 4.25%. We may redeem the Senior Notes, in whole or in part, at the redemption price of 102.13% on or after May 15, 2024, 101.06% on or after May 15, 2025 and 100% on or after May 15, 2026, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. At any time before May 15, 2024, we may also redeem all or part of the Senior Notes at the redemption prices described in the Indenture, plus accrued and unpaid interest, if any, to (but excluding) the date of redemption. At ~~June 30, 2023,~~March 31, 2024, the carrying value of the Senior Notes on our Consolidated Balance Sheet was ~~$395.6~~$396.1 million and the fair value of the Senior Notes was ~~$343.1~~$355.2 million based on the last traded or broker quoted price, reported by ~~the~~ Financial Industry Regulatory ~~Authority, Inc.~~Authority. Increases in market interest rates may cause the value of the Senior Notes to decrease, but such changes will not affect our interest costs.

The remainder of our long-term debt and leases consist of non-interest bearing notes and fixed rate instruments that do not trade in a market and do not have a quoted market value. Any increase in market interest rates causes the fair value of those liabilities to decrease, but such changes will not affect our interest costs.

Item 4.Controls and Procedures.

Management’s Evaluation of Disclosure Controls and Procedures

Our management, including our principal executive and principal financial officers, ~~have~~has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange ~~Act~~Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to ensure that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the ~~SEC~~SEC's rules and forms, and to ensure that such information is accumulated and communicated to management, including our principal executive and principal financial officers, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and principal financial officers have concluded that our disclosure controls and procedures are effective at ~~June 30, 2023~~March 31, 2024 and that the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations, and cash flows for the periods presented in conformity with US GAAP.

Changes in Internal Control over Financial Reporting

There was no change in our system of internal control over financial reporting (defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the fiscal quarter covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

- 5045 -

PART II – OTHER INFORMATION

Item 1.Legal Proceedings.

We and our subsidiaries are parties to a number of legal proceedings that arise from time to time in the ordinary course of our business. While the outcome of these proceedings cannot be predicted with certainty, we do not expect these matters to have a material adverse effect on our financial statements.

We self-insure against certain risks and carry insurance with coverage and coverage limits for risk in excess of the coverage amounts consistent with our assessment of risks in our business and of an acceptable level of financial exposure. Although there can be no assurance that self-insurance reserves and insurance will be sufficient to mitigate all damages, claims, or contingencies, we believe that the reserves and our insurance provides reasonable coverage for known asserted and unasserted claims. In the event we sustain a loss from a claim and the insurance carrier disputes coverage or coverage limits, we may record a charge in a different period than the recovery, if any, from the insurance carrier.

Item 1A.Risk Factors.

~~Risk Factor Update~~

~~In light of~~There have been no material changes in our ~~recent announcement regarding the Board’s review of potential strategic alternatives for the Company and recent developments affecting the financial services industry, we are also supplementing the~~ risk factors ~~set out under~~as previously disclosed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2022 with~~2023. Readers should carefully consider the ~~new risk~~ factors ~~set out below. The risk factors below should be carefully read~~discussed in ~~conjunction with the risk factors set out~~Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, ~~2022,~~2023, which could materially affect our business, financial condition or future results. The risks described in ~~this Quarterly Report on Form 10-Q,~~ our Annual Report on Form 10-K for the year ended December ~~31, 2022, and our Quarterly Report on Form 10-Q for the quarter ending March~~ 31, 2023 are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

~~RISKS RELATED TO OUR BUSINESS~~

~~Risks Related to Review of Strategic Alternatives Process and a Potential Strategic Transaction~~

We are reviewing strategic alternatives and there can be no assurance that we will be successful in identifying or completing any strategic transaction, that any such strategic transaction will result in additional value for our stockholders or that the process will not have an adverse impact on our business.

On June 29, 2023, we announced our Board had initiated a process to explore potential strategic alternatives, possibly including, but not limited to, a sale, merger or other potential strategic or financial transaction, aimed at increasing stockholder value. There can be no assurance that the review of strategic alternatives will result in the identification or consummation of any transaction. Our Board may also determine that our most effective strategy is to continue to execute on our current strategy.

The process of reviewing strategic alternatives may be costly, time consuming and disruptive to our business operations and, if we are unable to effectively manage the process, our business, financial condition and results of operations could be adversely affected. We have incurred, and may in the future incur, significant costs associated with identifying, evaluating and negotiating potential strategic alternatives, such as legal, financial advisor and accounting fees and expenses and other related charges. We may also incur additional unanticipated expenses in connection with this process. A considerable portion of these costs will be incurred regardless of whether any such course of action is implemented or transaction is completed, decreasing cash available for use in our business.

There can be no assurance that any potential transaction, or series of transactions, or other strategic alternative, if consummated, will provide greater value to our stockholders than that reflected in the current price of our common stock. Until the review process is concluded, perceived uncertainties related to our future may impact our business performance and volatility in the market price of our common stock and may make it more difficult for us to attract and retain qualified personnel and key employees. Our Board has not set a timetable for the conclusion of this review, nor has it made any definitive decisions related to taking any further actions or potential strategic options at this time or at all.

~~Even if we are successful in completing a strategic alternative, we may be exposed to other operational and financial risks.~~

Although there can be no assurance that a strategic alternative will result from the process we have undertaken to explore potential strategic alternatives, the negotiation and consummation of any such transaction, if completed, will require significant time on the part of our management, which could result in disruption to our business.

~~- 51 -~~

The negotiation and consummation of any such transaction may also require more time or greater cash resources than we anticipate and expose us to other operational and financial risks, including, but not limited to:

•~~increased near-term and long-term expenditures;~~

•~~exposure to unknown liabilities;~~

•~~higher than expected acquisition or integration costs;~~

•~~incurrence of substantial debt or dilutive issuances of equity securities to fund future operations;~~

•~~write-downs of assets or goodwill or incurrence of non-recurring, impairment or other charges;~~

•~~increased amortization expenses;~~

•~~difficulty and cost in combining the operations and personnel of any acquiring or acquired business with our operations and personnel;~~

•~~impairment of relationships with key suppliers or customers of any acquired business due to changes in management and ownership;~~

•~~inability to retain key employees of our Company or any acquired or merged business; and~~

•~~possibility of future litigation.~~

~~Any of the foregoing risks could have a material adverse effect on our business, financial condition and prospects.~~

~~GENERAL RISKS~~

~~Economic Conditions and Natural Disasters~~

Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults, or non-performance by financial institutions, could adversely affect our business, financial condition, or results of operations.

We currently maintain cash balances in accounts at U.S. financial institutions that we believe are high quality. These accounts, held by us and our affiliated companies, are in non-interest-bearing and interest-bearing operating accounts and may, from time to time, exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. If such banking institutions were to fail, we could lose all or a portion of those amounts held in excess of such insurance limitations. In addition, actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, our third-party vendors and counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems, which could adversely affect our business, financial condition, results of operations and liquidity.

Although we assess our banking relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our respective current and projected future business operations could be significantly impaired by factors that affect us, the financial institutions with which we have arrangements directly, or the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could involve financial institutions or financial services industry companies with which we, have financial or business relationships, but could also include factors involving financial markets or the financial services industry generally.

In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire future financing or access to capital on acceptable terms or at all. As availability under our Credit Facility and/or the ability to access capital has historically been, and is expected to continue to be, one of our primary sources of liquidity, any adverse impacts on our ability to access such credit and liquidity sources as a result of adverse developments affecting the financial services industry could adversely affect our business, financial condition, results of operations.

~~- 52 -~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

The following table sets forth certain information with respect to repurchases of our common stock during the quarter ended ~~June 30, 2023:~~March 31, 2024:

Period
Total Number of Shares Purchased(1)
Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program
Dollar Value of Shares That May Yet Be Purchased Under the Program(2)
April 1, 2023 - April 30, 2023 39 $ 28.18 — $ 48,898,769
May 1, 2023 - May 31, 2023 — $ — — $ 48,898,769
June 1, 2023 - June 30, 2023 — $ — — $ 48,898,769
Total for quarter ended June 30, 2023 39 —


Period	Total Number of Shares Purchased(1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Dollar Value of Shares That May Yet Be Purchased Under the Program(2)

January 1, 2024 - January 31, 2024	—	$	—	—	$	48,898,769
February 1, 2024 - February 29, 2024	14,597	$	25.58	—	$	48,898,769
March 1, 2024 - March 31, 2024	1,718	$	26.14	—	$	48,898,769
Total for quarter ended March 31, 2024	16,315			—



(1)			Represents shares surrendered by employees to pay taxes withheld upon the vesting of restricted stock awards.
(2)			See Part I, Item 1, Financial Statements, Note 14 for additional information on our publicly announced share repurchase program.

Item 3.Defaults Upon Senior Securities.

Not applicable.

Item 4.Mine Safety Disclosures.

Not applicable.

Item 5.Other Information.

~~Rule 10b5-1 Stock Selling Plan~~

On March 13, 2023, Melvin C. Payne, Executive Chairman of the Board of Directors of the Company entered into a stock trading plan designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Plan”). Rule 10b5-1 permits officers and directors of public companies, who routinely become aware of material nonpublic information and therefore are unable to sell company securities until the information has been made public, to plan in advance for their liquidity or other needs by adopting, at a time when they are not in possession of material non-public information, a written plan providing for securities transactions to occur over specified future periods of time under specified conditions. Once an individual has entered into a Rule 10b5-1 trading plan, the individual has no discretion or control over whether or when transactions in Company securities will occur pursuant to the Plan.

Mr. Payne’s Plan provides for sales of Company securities as part of his long-term asset diversification, tax, estate and financial planning strategy, and is in accordance with the Company’s Insider Trading & Anti-Hedging Policy. Under the terms of the Plan, Mr. Payne will sell 50,000 shares of the Company’s common stock on a specified date every three months beginning on June 13, 2023 and continuing through December 31, 2024. Accordingly, the maximum number of shares to be sold under the Plan is 350,000.

~~Any transactions under the Plan will be disclosed publicly through Form 144 and Form 4 filings with the SEC to the extent required by applicable law.~~Not applicable.

Item 6.Exhibits.

The exhibits required to be filed pursuant to the requirements of Item 601 of Regulation S-K are set forth in the Exhibit Index accompanying this Quarterly Report on Form 10-Q and are incorporated herein by reference.

- 5346 -

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		CARRIAGE SERVICES, INC.
Date:	~~August 7, 2023~~May 3, 2024	/s/ L. Kian Granmayeh
		L. Kian Granmayeh
		Executive Vice President, Chief Financial Officer and Treasurer
		(Principal Financial Officer)

- 5447 -

CARRIAGE SERVICES, INC.

INDEX OF EXHIBITS


Exhibit No.						Description
3.1						Amended and Restated Certificate of Incorporation, as amended, of the Company. Incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 1996, filed on March 20, 1997.

3.2						Certificate of Amendment dated May 7, 1997. Incorporated by reference to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended September 30, 1997, filed on November 14, 1997.

3.3						Certificate of Amendment dated May 7, 2002. Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended June 30, 2002, filed on August 13, 2002.

3.4						Amended and Restated By-Laws of Carriage Services, Inc. dated June 21, 2023. Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 22, 2023.

*10.1						~~Second Amendment to~~ Employment Agreement dated ~~June 21, 2023,~~March 25, 2024, by and between the Company and ~~Melvin C. Payne.~~Kathryn Shanley. Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on March 25, 2024.†

10.2						Employment Agreement dated November 5, 2019, by and between the Company and Paul D. Elliott. Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed on November 8, 2019. †

*~~10.2~~10.3						~~Third~~First Amendment to Employment Agreement dated ~~June~~September 30, 2022, by and between the Company and Paul D. Elliott. †

*10.4						Fourth Amendment to Employment Agreement dated February 21, ~~2023,~~2024, by and between the Company and Carlos R. Quezada.†

*~~10.3~~10.5						~~Third~~Fourth Amendment to Employment Agreement dated ~~June~~February 21, ~~2023,~~2024, by and between the Company and Steven D. Metzger.†

*10.6						First Amendment to Employment Agreement dated February 21, 2024, by and between the Company and L. Kian Granmayeh. †

*10.7						Second Amendment to Employment Agreement dated February 21, 2024, by and between the Company and Shawn R. Phillips. †

10.8						Transition Agreement, dated February 21, 2024, by and between the Company and Melvin C. Payne. Incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K filed on February 22, 2024. †

*31.1						Certification of Periodic Financial Reports by Carlos R. Quezada in satisfaction of Section 302 of the Sarbanes-Oxley Act of 2002.

*31.2						Certification of Periodic Financial Reports by L. Kian Granmayeh in satisfaction of Section 302 of the Sarbanes-Oxley Act of 2002.

**32						Certification of Periodic Financial Reports by Carlos R. Quezada and L. Kian Granmayeh in satisfaction of Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. Section 1350.

*101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.

*101.SCH						Inline XBRL Taxonomy Extension Schema Documents.

*101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document.

*101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document.

*101.PRE						Inline XBRL Taxonomy Extension Presentation Linkbase Document.

*101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document.

*104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

~~__________________~~



(*)			Filed herewith.
(**)			Furnished herewith.
(†)			Management contract or compensatory plan or arrangement.

- 5548 -


	Three months ended June 30, 2022

	Shares Outstanding	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Total













Balance – March 31, 2022	14,889	$	263	$	238,423	$	151,864	$	(270,529)	$	120,021
Net income	—	—		—		10,899		—		10,899
Issuance of common stock from employee stock purchase plan	12	—		398		—		—		398
Issuance of common stock to directors and board advisor	2	—		99		—		—		99


Cancellation and surrender of restricted stock	—	—		2		—		—		2
Stock-based compensation expense	—	—		1,379		—		—		1,379
Dividends on common stock	—	—		(1,730)		—		—		(1,730)
Treasury stock acquired	(205)	—		—		—		(8,224)		(8,224)

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


	Six months ended June 30, 2022

	Shares Outstanding	Common Stock		Additional Paid-in Capital		Retained Earnings		Treasury Stock		Total













Balance – December 31, 2021	15,332	$	263	$	236,809	$	135,462	$	(244,519)	$	128,015
Net income	—	—		—		27,301		—		27,301
Issuance of common stock from employee stock purchase plan	25	—		1,001		—		—		1,001
Issuance of common stock to directors and board advisor	5	—		246		—		—		246

Exercise of stock options	9	—		(22)		—		—		(22)
Cancellation and surrender of restricted stock	(5)	—		(205)		—		—		(205)
Stock-based compensation expense	—	—		2,839		—		—		2,839
Dividends on common stock	—	—		(3,455)		—		—		(3,455)

Treasury stock acquired	(695)	—		—		—		(34,234)		(34,234)
Other	27	—		1,358		—		—		1,358
Balance – June 30, 2022	14,698	$	263	$	238,571	$	162,763	$	(278,753)	$	122,844