Carriage Services, Inc. (NYSE:CSV) Q1 2022 Results Conference Call April 28, 2022 11:00 AM ET Company Participants Steve Metzger - Executive Vice President, Chief Administration Officer and General Counsel Mel Payne - Chairman and Chief Executive Officer Carlos Quezada - President and Chief Operating Officer Ben Brink - Executive Vice President and Chief Financial Officer Conference Call Participants Alex Paris - Barrington Research Barry Mendel - Mendel Money Management Operator Good morning, and welcome t ...

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________________________________ FORM10-K ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended, December 31, 2021 or ☐ 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 ________________________________________________ CARRIA ...

Carriage Services Inc. (NYSE:CSV) Q4 2021 Earnings Conference Call February 24, 2022 10:30 AM ET Company Participants Steve Metzger - Executive VP, Secretary, Chief Administrative Officer & General Counsel Mel Payne - Founder, Executive Chairman & CEO Carlos Quezada - Executive VP & COO Ben Brink - CFO, Principal Financial Officer, Executive VP & Treasurer Conference Call Participants Alexander Paris - Barrington Research Liam Burke - B. Riley Securities George Kelly - ROTH Capital Partners Christopher McG ...

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Presents the company's unaudited consolidated financial statements, including balance sheets, operations, and cash flows [Consolidated Balance Sheet](index=3&type=section&id=Consolidated%20Balance%20Sheet) | Metric | December 31, 2020 (in thousands) | September 30, 2021 (in thousands) | | :----- | :------------------------------- | :-------------------------------- | | Total Assets | $1,145,825 | $1,163,975 | | Total Liabilities | $905,323 | $971,507 | | Total Stockholders' Equity | $240,502 | $192,468 | [Consolidated Statements of Operations](index=4&type=section&id=Consolidated%20Statements%20of%20Operations) | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Revenue | $84,393 | $95,041 | $239,360 | $279,955 | | Gross Profit | $27,874 | $33,164 | $76,205 | $97,152 | | Operating Income | $16,494 | $23,265 | $36,910 | $70,435 | | Net Income | $5,525 | $13,046 | $7,725 | $19,812 | | Basic EPS | $0.31 | $0.74 | $0.43 | $1.11 | | Diluted EPS | $0.31 | $0.71 | $0.43 | $1.08 | | Dividends Declared per Common Share | $0.088 | $0.100 | $0.238 | $0.300 | [Consolidated Statements of Cash Flows](index=5&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) | Metric | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | | Net Cash Provided by Operating Activities | $67,822 | $69,699 | | Net Cash Used in Investing Activities | $(30,532) | $(11,216) | | Net Cash Used in Financing Activities | $(37,281) | $(58,284) | | Net Increase in Cash and Cash Equivalents | $9 | $199 | | Cash and Cash Equivalents at End of Period | $725 | $1,088 | [Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) | Metric | Balance – Sep 30, 2020 (in thousands) | Balance – Sep 30, 2021 (in thousands) | | :----- | :------------------------------------ | :------------------------------------ | | Total Stockholders' Equity | $232,796 | $192,468 | | Common Stock | $260 | $262 | | Additional Paid-in Capital | $240,648 | $237,681 | | Retained Earnings | $93,938 | $122,115 | | Treasury Stock | $(102,050) | $(167,590) | [Condensed Notes to Consolidated Financial Statements](index=8&type=section&id=Condensed%20Notes%20to%20Consolidated%20Financial%20Statements) - The notes provide detailed explanations of the company's accounting policies, financial instruments, debt, equity, and segment reporting, crucial for understanding the reported financial figures[28](index=28&type=chunk) [1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=8&type=section&id=1.%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) - Carriage Services, Inc. operates in two segments: **Funeral Home Operations (approximately 70% of revenue)** and **Cemetery Operations (approximately 30% of revenue)**, providing at-need and pre-need services[29](index=29&type=chunk) - The company's unaudited consolidated financial statements include normal, recurring accruals and are prepared consistently with the **2020 Form 10-K**[30](index=30&type=chunk) - Estimates are used in financial reporting for items such as receivables, goodwill, intangible assets, deferred taxes, and property depreciation, with actual results potentially differing from these estimates[32](index=32&type=chunk) [2. RECENTLY ISSUED ACCOUNTING STANDARDS](index=15&type=section&id=2.%20RECENTLY%20ISSUED%20ACCOUNTING%20STANDARDS) - The company did not utilize the optional expedients and exceptions provided by ASU, Reference Rate Reform (Topic 848), during the nine months ended September 30, 2021[63](index=63&type=chunk) [3. GOODWILL](index=15&type=section&id=3.%20GOODWILL) | Metric | December 31, 2020 (in thousands) | September 30, 2021 (in thousands) | | :----- | :------------------------------- | :-------------------------------- | | Goodwill at period end | $392,978 | $391,972 | | Net increase in goodwill related to acquisitions | $14,054 | $0 | | Decrease in goodwill related to divestitures | $(5,736) | $(1,006) | | Decrease in goodwill related to impairments | $(13,632) | $0 | - The company allocated **$1.0 million of goodwill** to the sale of one funeral home during the nine months ended September 30, 2021, resulting in a loss recorded in Net loss on divestitures, disposals and impairment charges[64](index=64&type=chunk) [4. DIVESTED OPERATIONS](index=16&type=section&id=4.%20DIVESTED%20OPERATIONS) - During the nine months ended September 30, 2021, the company sold **three funeral homes for $3.5 million**, compared to six funeral homes for $7.3 million in the same period of 2020[66](index=66&type=chunk) | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Revenue | $144 | $(10) | $1,829 | $338 | | Net income (loss) from divested operations, after tax | $(3,319) | $(29) | $(3,209) | $35 | [5. RECEIVABLES](index=16&type=section&id=5.%20RECEIVABLES) | Metric | December 31, 2020 (in thousands) | September 30, 2021 (in thousands) | | :----- | :------------------------------- | :-------------------------------- | | Accounts receivable, net | $25,103 | $26,213 | | Preneed cemetery receivables, net | $21,081 | $22,932 | - The total allowance for credit losses on trade and financed receivables was **$(1,058) thousand** at September 30, 2021, with a provision for credit losses of **$(929) thousand** for the nine months ended September 30, 2021[67](index=67&type=chunk) [6. TRUST INVESTMENTS](index=17&type=section&id=6.%20TRUST%20INVESTMENTS) - Preneed trust investments are diversified across multiple industry segments using a balanced allocation strategy to minimize long-term risk, with changes in fair value offset by changes in trust fund liabilities[70](index=70&type=chunk)[72](index=72&type=chunk) | Trust Type | December 31, 2020 (in thousands) | September 30, 2021 (in thousands) | | :--------- | :------------------------------- | :-------------------------------- | | Preneed Cemetery Trust Investments | $86,604 | $97,489 | | Preneed Funeral Trust Investments | $101,235 | $108,404 | | Cemetery Perpetual Care Trust Investments | $70,828 | $71,640 | - For the nine months ended September 30, 2021, net realized gains from preneed cemetery trust investments were **$16,315 thousand**, and from preneed funeral trust investments were **$15,331 thousand**[77](index=77&type=chunk)[82](index=82&type=chunk) [7. RECEIVABLES FROM PRENEED FUNERAL TRUSTS](index=25&type=section&id=7.%20RECEIVABLES%20FROM%20PRENEED%20FUNERAL%20TRUSTS) | Metric | December 31, 2020 (in thousands) | September 30, 2021 (in thousands) | | :----- | :------------------------------- | :-------------------------------- | | Preneed trust funeral funds, at cost | $17,365 | $19,243 | | Receivables from preneed funeral trusts, net | $16,844 | $18,665 | - These receivables represent assets in third-party controlled trusts where the company does not have a controlling financial interest, accounted for at cost[90](index=90&type=chunk) [8. FAIR VALUE MEASUREMENTS](index=26&type=section&id=8.%20FAIR%20VALUE%20MEASUREMENTS) - The company's financial assets and liabilities are evaluated for fair value, with cash, accounts receivable, and accounts payable approximating fair value due to their short-term nature[93](index=93&type=chunk) - At September 30, 2021, the fair value of New Senior Notes was approximately **$403.2 million**, and the carrying value of acquisition debt was **$5.1 million**, approximating its fair value[93](index=93&type=chunk) [9. INTANGIBLE AND OTHER NON-CURRENT ASSETS](index=26&type=section&id=9.%20INTANGIBLE%20AND%20OTHER%20NON-CURRENT%20ASSETS) | Metric | December 31, 2020 (in thousands) | September 30, 2021 (in thousands) | | :----- | :------------------------------- | :-------------------------------- | | Intangible and other non-current assets, net | $29,542 | $29,437 | | Tradenames | $23,565 | $23,565 | | Capitalized commissions on preneed contracts, net | $3,141 | $3,505 | - Tradenames have indefinite lives and are not amortized, while prepaid agreements not-to-compete and capitalized commissions on preneed contracts are amortized over their respective terms (1-10 years and 8-10 years)[95](index=95&type=chunk)[96](index=96&type=chunk)[98](index=98&type=chunk) [10. CREDIT FACILITY AND ACQUISITION DEBT](index=27&type=section&id=10.%20CREDIT%20FACILITY%20AND%20ACQUISITION%20DEBT) - On May 13, 2021, the company entered into a new **$150.0 million senior secured revolving credit facility**, maturing on May 13, 2026, replacing the former facility and repaying outstanding balances[99](index=99&type=chunk)[100](index=100&type=chunk) | Metric | December 31, 2020 (in thousands) | September 30, 2021 (in thousands) | | :----- | :------------------------------- | :-------------------------------- | | Total Credit Facility | $46,064 | $85,418 | | Total acquisition debt, net of current portion | $4,482 | $4,359 | - At September 30, 2021, outstanding borrowings under the New Credit Facility were **$86.9 million**, with **$60.8 million of availability**, and the company was in compliance with all covenants[101](index=101&type=chunk)[102](index=102&type=chunk) [11. SENIOR NOTES](index=28&type=section&id=11.%20SENIOR%20NOTES) - On May 13, 2021, the company issued **$400.0 million in 4.25% Senior Notes due 2029**, using proceeds to redeem the outstanding 6.625% senior notes due 2026, incurring a **$23.7 million net loss on extinguishment of debt**[105](index=105&type=chunk)[107](index=107&type=chunk)[180](index=180&type=chunk) | Metric | December 31, 2020 (in thousands) | September 30, 2021 (in thousands) | | :----- | :------------------------------- | :-------------------------------- | | Carrying value of the Senior Notes | $395,968 | $394,456 | - The New Senior Notes are unsecured, senior obligations, fully guaranteed by subsidiary guarantors, and bear interest semi-annually at **4.25% per year**[107](index=107&type=chunk) [12. LEASES](index=30&type=section&id=12.%20LEASES) | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Total lease cost | $1,213 | $1,257 | $3,689 | $3,800 | | Metric | December 31, 2020 (in thousands) | September 30, 2021 (in thousands) | | :----- | :------------------------------- | :-------------------------------- | | Operating lease right-of-use assets | $21,201 | $18,307 | | Finance lease right-of-use assets, net | $4,765 | $4,437 | | Total lease liabilities | $28,238 | $26,520 | - The company leases office facilities, funeral homes, and equipment under operating and finance leases, with weighted-average remaining lease terms of **10.1 years for operating leases** and **12.5 years for finance leases** at September 30, 2021[112](index=112&type=chunk)[113](index=113&type=chunk) [13. COMMITMENTS AND CONTINGENCIES](index=31&type=section&id=13.%20COMMITMENTS%20AND%20CONTINGENCIES) - The company is a party to legal proceedings in the ordinary course of business, including a putative class action lawsuit filed on May 19, 2021, for which the possible loss cannot be reasonably estimated[114](index=114&type=chunk) [14. STOCKHOLDERS' EQUITY](index=32&type=section&id=14.%20STOCKHOLDERS'%20EQUITY) - The company has equity-based compensation plans including restricted stock, stock options, performance awards, and an employee stock purchase plan (ESPP)[116](index=116&type=chunk)[118](index=118&type=chunk)[122](index=122&type=chunk)[123](index=123&type=chunk) | Metric | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | | Stock-based compensation expense (Restricted Stock) | $551 | $308 | | Stock-based compensation expense (Stock Options) | $502 | $1,507 | | Stock-based compensation expense (Performance Awards) | $589 | $1,064 | | Stock-based compensation expense (ESPP) | $339 | $458 | - The Board authorized increases in the share repurchase program, totaling **$50.0 million**, with approximately **$10.1 million remaining available** at September 30, 2021[127](index=127&type=chunk)[128](index=128&type=chunk) | Dividend Date | Per Share (2020) | Dollar Value (2020, in thousands) | Per Share (2021) | Dollar Value (2021, in thousands) | | :------------ | :--------------- | :-------------------------------- | :--------------- | :-------------------------------- | | March 1st | $0.0750 | $1,339 | $0.1000 | $1,799 | | June 1st | $0.0750 | $1,343 | $0.1000 | $1,808 | | September 1st | $0.0875 | $1,569 | $0.1000 | $1,783 | [15. EARNINGS PER SHARE](index=35&type=section&id=15.%20EARNINGS%20PER%20SHARE) | Metric | 3 Months Ended Sep 30, 2020 | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | | :----- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | $0.31 | $0.74 | $0.43 | $1.11 | | Diluted EPS | $0.31 | $0.71 | $0.43 | $1.08 | - Diluted EPS computation includes contingently issuable performance awards for which certain performance criteria were satisfied as of September 30, 2021[131](index=131&type=chunk) [16. SEGMENT REPORTING](index=35&type=section&id=16.%20SEGMENT%20REPORTING) | Segment | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :------ | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Funeral Home Revenue | $61,434 | $68,897 | $182,297 | $200,503 | | Cemetery Revenue | $22,959 | $26,144 | $57,063 | $79,452 | | Total Revenue | $84,393 | $95,041 | $239,360 | $279,955 | | Funeral Home Operating Income | $13,975 | $22,924 | $38,155 | $65,404 | | Cemetery Operating Income | $8,982 | $9,471 | $18,440 | $30,462 | - The company operates in two reportable segments: **Funeral Home Operations** and **Cemetery Operations**, with detailed revenue and operating income breakdowns provided for comparative periods[132](index=132&type=chunk)[135](index=135&type=chunk) [17. SUPPLEMENTARY DATA](index=37&type=section&id=17.%20SUPPLEMENTARY%20DATA) | Metric | December 31, 2020 (in thousands) | September 30, 2021 (in thousands) | | :----- | :------------------------------- | :-------------------------------- | | Total prepaid and other current assets | $2,076 | $2,191 | | Total current portion of debt and lease obligations | $3,432 | $3,041 | | Total accrued and other liabilities | $31,138 | $43,147 | | Total other long-term liabilities | $4,748 | $3,045 | | Metric | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | | Cash paid for interest | $16,960 | $14,800 | | Cash paid (refunded) for taxes | $(6,817) | $9,900 | [18. SUBSEQUENT EVENTS](index=37&type=section&id=18.%20SUBSEQUENT%20EVENTS) - On October 21, 2021, the company sold real property for **$1.4 million**[139](index=139&type=chunk) - On October 27, 2021, the Board authorized an additional **$75 million** for the share repurchase program, increasing total authorization to approximately **$85.1 million**[139](index=139&type=chunk) - On October 27, 2021, the Board approved a **$0.05 per share increase** to its annual cash dividend, declaring a quarterly dividend of **$0.1125 per share** payable on December 1, 2021[139](index=139&type=chunk) [Cautionary Statement on Forward–Looking Statements](index=38&type=section&id=Cautionary%20Statement%20on%20Forward%E2%80%93Looking%20Statements) - The report contains forward-looking statements subject to significant risks and uncertainties, including the ability to retain skilled personnel, effects of compensation plans, competition, changes in death rates, consumer preferences, and investment performance of trust funds[142](index=142&type=chunk) - Investors are cautioned not to place undue reliance on forward-looking statements, and the company undertakes no obligation to publicly update or revise any forward-looking statements after the date they are made[144](index=144&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's analysis of financial condition and results of operations, including key drivers and liquidity [OVERVIEW](index=40&type=section&id=OVERVIEW) - Carriage Services, Inc. is a leading U.S. provider of funeral (approximately 70% revenue) and cemetery (approximately 30% revenue) services, operating **171 funeral homes** and **32 cemeteries** across 26 and 12 states, respectively[146](index=146&type=chunk) - During the nine months ended September 30, 2021, the company sold three funeral homes and real property for a total net loss of **$0.2 million**[147](index=147&type=chunk) - The COVID-19 pandemic led to **increased funeral volumes and services in Q3 2021**, with the company adapting to changing conditions while maintaining liquidity and capital access[148](index=148&type=chunk)[150](index=150&type=chunk) - The company's business strategy is built on strong local leadership, entrepreneurial principles, and three models: **Standards Operating, 4E Leadership, and Strategic Acquisition**, aiming for sustainable long-term growth[153](index=153&type=chunk)[157](index=157&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=43&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) - Primary liquidity sources are internally generated cash flows from operating activities and availability under the New Credit Facility, with no anticipated significant liquidity constraints in the foreseeable future[159](index=159&type=chunk) - The company plans to use cash on hand and borrowings under its New Credit Facility primarily for general corporate purposes, payment of dividends and debt obligations, strategic acquisitions, internal growth capital expenditures, share repurchases, dividend increases, and further debt repayments[159](index=159&type=chunk) | Metric | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | | Net cash provided by operating activities | $67,822 | $69,699 | | Net cash used in investing activities | $(30,532) | $(11,216) | | Net cash used in financing activities | $(37,281) | $(58,284) | | Cash at end of the period | $725 | $1,088 | - Operating cash flow **increased by $1.9 million** for the nine months ended September 30, 2021, primarily due to higher operating income, offset by unfavorable working capital changes in accounts receivable, income tax receivables, and accounts payable[161](index=161&type=chunk)[162](index=162&type=chunk) - Investing activities resulted in a net cash outflow of **$11.2 million** for the nine months ended September 30, 2021, a **$19.3 million decrease in outflow** compared to the prior year, driven by lower acquisition spending and higher insurance reimbursements[163](index=163&type=chunk)[164](index=164&type=chunk) | Capital Expenditure Type | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----------------------- | :--------------------------------------- | :--------------------------------------- | | Total Growth Capital Expenditures | $4,640 | $6,292 | | Total Maintenance Capital Expenditures | $5,394 | $8,960 | | Total Capital Expenditures | $10,034 | $15,252 | - Financing activities resulted in a net cash outflow of **$58.3 million** for the nine months ended September 30, 2021, an **increase of $21.0 million in outflow**, primarily due to treasury stock purchases and debt redemption costs[166](index=166&type=chunk) | Metric | 3 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2021 | | :----- | :-------------------------- | :-------------------------- | | Number of Shares Repurchased | 1,203,493 | 1,528,197 | | Dollar Value of Shares Repurchased | $53,239 | $65,540 | | Debt Type | September 30, 2021 (in thousands) | | :-------- | :-------------------------------- | | Credit Facility | $86,900 | | Finance leases | $5,615 | | Operating leases | $20,905 | | Acquisition debt | $5,089 | | Total | $118,509 | [FINANCIAL HIGHLIGHTS](index=48&type=section&id=FINANCIAL%20HIGHLIGHTS) | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Revenue | $84,393 | $95,041 | $239,360 | $279,955 | | Funeral contracts | 11,512 | 12,566 | 34,742 | 36,704 | | Average revenue per funeral contract | $5,194 | $5,358 | $5,110 | $5,336 | | Preneed interment rights (property) sold | 2,655 | 2,841 | 6,861 | 8,775 | | Average price per preneed interment right sold | $3,662 | $4,763 | $3,805 | $4,635 | | Gross profit | $27,874 | $33,164 | $76,205 | $97,152 | | Net income | $5,525 | $13,046 | $7,725 | $19,812 | - Revenue **increased by $10.6 million (QoQ) and $40.6 million (YoY)** primarily due to increased preneed interment rights sales, higher average prices, and increased funeral contract volumes, partly driven by the Delta COVID-19 variant[183](index=183&type=chunk)[185](index=185&type=chunk) - Net income **increased by $7.5 million (QoQ) and $12.1 million (YoY)**, driven by higher gross profit, decreased interest expense, and reduced net loss on divestitures, partially offset by increased general, administrative, and other expenses and tax expense[185](index=185&type=chunk) [REPORTING AND NON-GAAP FINANCIAL MEASURES](index=49&type=section&id=REPORTING%20AND%20NON-GAAP%20FINANCIAL%20MEASURES) - The company uses an 'Operating and Financial Trend Report' as a supplemental non-GAAP financial statement to monitor performance and compare results, not as a substitute for GAAP[186](index=186&type=chunk) | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Net income | $5,525 | $13,046 | $7,725 | $19,812 | | Sum of special items | $5,374 | $2,804 | $22,780 | $30,476 | | Adjusted net income | $9,144 | $15,112 | $23,262 | $41,669 | | Segment | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :------ | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Funeral Home Operating profit | $25,636 | $31,355 | $75,462 | $88,445 | | Cemetery Operating profit | $11,673 | $13,296 | $25,162 | $42,007 | | Total Operating profit | $37,309 | $44,651 | $100,624 | $130,452 | | Operating profit margin | 44.2% | 47.0% | 42.0% | 46.6% | [RESULTS OF OPERATIONS](index=51&type=section&id=RESULTS%20OF%20OPERATIONS) - The company categorizes operations into 'same store' (acquired prior to January 1, 2017), 'acquired' (purchased after December 31, 2016), 'divested,' and 'planned divested' for performance analysis[193](index=193&type=chunk) [Funeral Home Segment](index=52&type=section&id=Funeral%20Home%20Segment) | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Total Revenue | $61,434 | $68,897 | $182,297 | $200,503 | | Total Operating profit | $25,636 | $31,355 | $75,462 | $88,445 | | Same store contract volume (3 months) | 9,442 | 10,664 | N/A | N/A | | Same store average revenue per contract (3 months, excl. preneed interest) | $5,069 | $5,205 | N/A | N/A | | Acquired contract volume (3 months) | 1,619 | 1,739 | N/A | N/A | | Acquired average revenue per contract (3 months, excl. preneed interest) | $5,068 | $5,379 | N/A | N/A | - Funeral home same store operating revenue **increased by $7.6 million (QoQ) and $20.6 million (YoY)**, driven by a **12.9% (QoQ) and 11.6% (YoY) increase in contract volume** and higher average revenue per contract, partly due to the Delta COVID-19 variant[195](index=195&type=chunk)[197](index=197&type=chunk)[199](index=199&type=chunk) - Funeral home acquired operating revenue **increased by $1.1 million (QoQ) and $1.9 million (YoY)**, primarily due to increased contract volume and higher average revenue per contract, reflecting adaptation to cremation services[197](index=197&type=chunk)[199](index=199&type=chunk) [Cemetery Segment](index=55&type=section&id=Cemetery%20Segment) | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Total Revenue | $22,959 | $26,144 | $57,063 | $79,452 | | Total Operating profit | $11,673 | $13,296 | $25,162 | $42,007 | | Same store preneed revenue (3 months) | $8,771 | $9,909 | N/A | N/A | | Same store number of preneed interment rights sold (3 months) | 1,897 | 2,223 | N/A | N/A | | Acquired preneed revenue (3 months) | $3,642 | $4,195 | N/A | N/A | | Acquired number of preneed interment rights sold (3 months) | 748 | 606 | N/A | N/A | - Cemetery same store preneed revenue **increased by $1.1 million (QoQ) and $6.9 million (YoY)**, driven by a **17.2% (QoQ) and 21.8% (YoY) increase in interment rights sold** and higher average prices, supported by sales strategy execution[201](index=201&type=chunk)[205](index=205&type=chunk) - Cemetery acquired operating profit **increased by $1.2 million (QoQ) and $7.8 million (YoY)**, with operating profit margin increasing by **1,110 basis points (QoQ)** and **1,950 basis points (YoY)**, due to increased revenue and disciplined expense management[203](index=203&type=chunk)[205](index=205&type=chunk) [Cemetery property amortization](index=58&type=section&id=Cemetery%20property%20amortization) - Cemetery property amortization totaled **$1.5 million and $5.2 million** for the three and nine months ended September 30, 2021, respectively, increases of $0.1 million and $1.8 million, respectively, compared to the same periods in prior year primarily due to the increase in property sold across the cemetery portfolio[207](index=207&type=chunk) [Field depreciation](index=58&type=section&id=Field%20depreciation) - Field depreciation expense totaled **$3.2 million and $9.4 million** for the three and nine months ended September 30, 2021, respectively, decreases of $0.1 million and $0.3 million, respectively, compared to the same periods in prior year primarily due to building structures and older vehicles becoming fully depreciated without any newly acquired building structures and vehicles to offset the decreases[207](index=207&type=chunk) [Regional and unallocated funeral and cemetery costs](index=58&type=section&id=Regional%20and%20unallocated%20funeral%20and%20cemetery%20costs) - Regional and unallocated funeral and cemetery costs totaled **$6.8 million** for the three months ended September 30, 2021 (an increase of $2.1 million QoQ) and **$18.7 million** for the nine months ended September 30, 2021 (an increase of $7.5 million YoY), driven by higher cash incentives, equity compensation, general administrative costs, and natural disaster costs[207](index=207&type=chunk) [Other Financial Statement Items](index=58&type=section&id=Other%20Financial%20Statement%20Items) This section details changes in general, administrative, and other expenses, home office depreciation, net loss on divestitures, interest expense, and income taxes[208](index=208&type=chunk) [General, administrative and other](index=58&type=section&id=General%2C%20administrative%20and%20other) - General, administrative, and other expenses totaled **$8.8 million** for the three months ended September 30, 2021 (an increase of $2.6 million QoQ) and **$24.5 million** for the nine months ended September 30, 2021 (an increase of $5.9 million YoY), primarily due to higher insurance claims, incentive compensation, and marketing costs[208](index=208&type=chunk) [Home office depreciation and amortization](index=58&type=section&id=Home%20office%20depreciation%20and%20amortization) - Home office depreciation and amortization expense totaled **$0.3 million and $0.8 million** for the three and nine months ended September 30, 2021, respectively, decreases of $0.1 million and $0.3 million, respectively, compared to the same periods in prior year as equipment and software became fully depreciated[208](index=208&type=chunk) [Net loss on divestitures, disposals and impairment charges](index=59&type=section&id=Net%20loss%20on%20divestitures%2C%20disposals%20and%20impairment%20charges) | Metric | 3 Months Ended Sep 30, 2020 (in thousands) | 3 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | | :----- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Total | $4,917 | $858 | $19,610 | $1,377 | - For the nine months ended September 30, 2021, the company reported a total net loss of **$1.4 million**, including **$0.2 million** from divested funeral homes and real property, **$0.7 million** from fixed asset disposals, and **$0.5 million** impairment loss on assets held for sale[210](index=210&type=chunk) [Interest expense](index=59&type=section&id=Interest%20expense) - Interest expense totaled **$5.1 million and $20.1 million** for the three and nine months ended September 30, 2021, respectively, decreases of $2.9 million and $4.6 million, respectively, compared to the same periods in prior year, primarily due to decreased borrowings and lower interest rates on the Credit Facility and New Senior Notes[210](index=210&type=chunk) [Income taxes](index=59&type=section&id=Income%20taxes) - Income tax expense totaled **$5.1 million and $6.6 million** for the three and nine months ended September 30, 2021, respectively, increases of $2.3 million and $2.4 million, respectively, with operating tax rates of **28.2% (QoQ)** and **28.3% (YoY)** before discrete items[210](index=210&type=chunk) - The company has a **$3.7 million reserve** for uncertain tax positions related to a carryback refund claim under the CARES Act, pending IRS discussions[210](index=210&type=chunk) [OVERVIEW OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=59&type=section&id=OVERVIEW%20OF%20CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) - The preparation of the Consolidated Financial Statements requires the company to make estimates and judgments that affect the amounts reported, with actual results potentially differing from these estimates[211](index=211&type=chunk) [SEASONALITY](index=60&type=section&id=SEASONALITY) - The company's business can be affected by seasonal fluctuations in the death rate, which is generally higher during winter months due to increased incidences of influenza and pneumonia[213](index=213&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=60&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Details the company's exposure to market risks, primarily interest rate risk and changes in trust security values - The company is exposed to interest rate risk and changes in the values of securities associated with preneed and perpetual care trusts, with management actively monitoring and utilizing appropriate risk management techniques[214](index=214&type=chunk) - A **0.25% change in interest rates** causes an approximate **1.26% change in the value of fixed income securities**, and a **100 basis point change** in the New Credit Facility borrowing rate would result in a **$0.9 million change in income before taxes**[214](index=214&type=chunk) - The New Senior Notes bear a fixed annual interest rate of **4.25%**, and increases in market interest rates would not affect the company's interest costs on these notes[214](index=214&type=chunk) [Item 4. Controls and Procedures](index=61&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures with no material changes in internal controls - Management concluded that disclosure controls and procedures were **effective as of September 30, 2021**, ensuring timely and accurate financial reporting[216](index=216&type=chunk) - There were **no material changes** in the company's internal control over financial reporting during the fiscal quarter ended September 30, 2021[217](index=217&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=62&type=section&id=Item%201.%20Legal%20Proceedings) Details legal proceedings from the ordinary course of business, which are not expected to be materially adverse - The company is party to a number of legal proceedings that arise from time to time in the ordinary course of business, but does not expect these matters to have a **material adverse effect** on its financial statements[220](index=220&type=chunk) - The company self-insures against certain risks and carries insurance, believing its reserves and coverage provide reasonable protection for known asserted and unasserted claims[220](index=220&type=chunk) [Item 1A. Risk Factors](index=62&type=section&id=Item%201A.%20Risk%20Factors) Updates risk factors, highlighting potential share dilution from the 'Good To Great II' incentive program - The **'Good To Great II' incentive program**, tied to future company performance and share price targets, could result in **significant dilution to shareholders** if the highest performance tier ($77.34 per share) is achieved, potentially awarding **1,081,287 shares**[221](index=221&type=chunk) - Investors should refer to the complete set of Risk Factors discussed in Part I, Item 1A 'Risk Factors' in the **2020 Form 10-K**, as additional unknown or immaterial risks may also materially adversely affect the business[221](index=221&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=63&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Details common stock repurchase activity during the quarter ended September 30, 2021 | Period | Total Number of Shares (1) Purchased | 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 | | :----- | :----------------------------------- | :--------------------------- | :------------------------------------------------------------------- | :----------------------------------------------------------------- | | July 1, 2021 - July 31, 2021 | — | — | — | $63,300,533 | | August 1, 2021 - August 31, 2021 | 711 | $38.87 | 402,600 | $46,656,948 | | September 1, 2021 - September 30, 2021 | — | — | 800,893 | $10,061,552 | | Total for quarter ended September 30, 2021 | 711 | N/A | 1,203,493 | N/A | - Shares purchased pursuant to the repurchase program were acquired in the open market at times and in amounts as management determined appropriate and are currently held as treasury shares[128](index=128&type=chunk) [Item 3. Defaults Upon Senior Securities](index=63&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is marked as 'Not applicable,' indicating no defaults upon senior securities during the reporting period - This item is not applicable for the reporting period[224](index=224&type=chunk) [Item 4. Mine Safety Disclosures](index=63&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is marked as 'Not applicable,' indicating no mine safety disclosures are required for the reporting period - This item is not applicable for the reporting period[225](index=225&type=chunk) [Item 5. Other Information](index=63&type=section&id=Item%205.%20Other%20Information) This item is marked as 'Not applicable,' indicating no other information requiring disclosure - This item is not applicable for the reporting period[226](index=226&type=chunk) [Item 6. Exhibits](index=63&type=section&id=Item%206.%20Exhibits) States that the required exhibits are set forth in the accompanying Exhibit Index and are incorporated by reference - 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[227](index=227&type=chunk) [SIGNATURE](index=64&type=section&id=SIGNATURE) The report is duly signed by the company's Executive Vice President, Chief Financial Officer, and Treasurer - The report is signed by C. Benjamin Brink, Executive Vice President, Chief Financial Officer and Treasurer, on November 3, 2021[230](index=230&type=chunk) [INDEX OF EXHIBITS](index=65&type=section&id=INDEX%20OF%20EXHIBITS) Lists all exhibits filed with the Quarterly Report on Form 10-Q, including certifications and XBRL documents - The index lists certifications (31.1, 31.2, 32) and XBRL-related documents (101.INS, 101.SCH, 101.CAL, 101.LAB, 101.PRE, 101.DEF, 104) as exhibits[232](index=232&type=chunk)

Financial Data and Key Metrics Changes - Revenue for Q3 2021 increased by 12.6% to $95 million, with year-to-date revenue up 17% to $280 million [33] - Adjusted consolidated EBITDA rose by 17.1% to $32.4 million for Q3, and increased by 26.1% to $95.8 million year-to-date [33] - Adjusted diluted earnings per share increased by 60.8% to $0.82 for Q3, and by 74.6% to $2.27 year-to-date [33] - Total debt to adjusted consolidated EBITDA leverage ratio remained flat at 3.98x [40] Business Line Data and Key Metrics Changes - Funeral segment total operating revenue for Q3 2021 was $64.9 million, an increase of 15.7% [13] - Cemetery segment total operating revenue for Q3 2021 was $22.7 million, an increase of 15.8% [18] - Total funeral field EBITDA for Q3 was $28.9 million, up 26%, with a field EBITDA margin of 44.6% [13] - Total cemetery field EBITDA for Q3 was $10 million, an increase of 17.8%, with a field EBITDA margin of 44.1% [18] Market Data and Key Metrics Changes - The company reported that 60% of funeral volume in Q3 was related to COVID-19 deaths, indicating a significant impact on market dynamics [50] - The company is gaining market share from both independent firms and consolidators, attributed to innovative service offerings [48][49] Company Strategy and Development Direction - The company is focused on organic growth and is actively seeking acquisition partners that meet strategic criteria [21] - The implementation of Microsoft Dynamics 365 CRM, branded as Sales Edge, aims to enhance sales and marketing capabilities [19] - The company plans to continue investing in cemetery product development and high-quality inventory [38][55] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining a higher normalized death rate due to the aging population and the impact of COVID-19 [51] - The company anticipates continued strong performance and is optimistic about growth opportunities in 2022 and beyond [31][42] - Management emphasized the importance of focusing on improving service quality to capture more market share, regardless of death rate fluctuations [51] Other Important Information - The company announced a $0.05 annual increase in its dividend, effective December 1 [38] - Share repurchase activity has been significant, with approximately 1.2 million shares repurchased in Q3 at an average price of $44.24 [35] - The company has a new intrinsic value per share range of $65 to $75, reflecting a 16.7% increase from previous estimates [45] Q&A Session Summary Question: Can you provide examples of new ways you are serving families? - Management highlighted that innovative service offerings have attracted families, leading to market share gains [48][49] Question: What is your expectation for future death rates? - Management expects a higher normalized death rate due to the aging population and the effects of COVID-19 [51] Question: How do you plan to balance share repurchases and M&A? - Management indicated that they can pursue both share repurchases and acquisitions, depending on market conditions and opportunities [52][54] Question: Can you elaborate on the Sales Edge platform? - The Sales Edge platform is a customized CRM system designed to enhance sales processes and improve customer engagement [64]

Honesty | Integrity | Quality in All That We Do Investor Presentation August 2021 Cautionary Statement on Forward Looking Statements and Disclosure of Non-GAAP Performance Measures Certain statements made herein or elsewhere by, or on behalf of, the Company that are not historical facts are intended to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on ass ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Common Stock, par value $.01 per share CSV New York Stock Exchange FORM10-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, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to ____________ | --- | --- | --- | --- | |-------------------------------------- ...

Carriage Services, Inc. (NYSE:CSV) Q2 2021 Results Conference Call July 28, 2021 10:30 AM ET Company Participants Steve Metzger - EVP, CAO and General Counsel Mel Payne - Chairman and CEO Ben Brink - EVP and CFO Carlos Quezada - EVP and COO Conference Call Participants Alex Paris - Barrington Research Liam Burke - B. Riley Chris McGinnis - Sidoti & Company George Kelly - Roth Capital Partners Operator Good day, ladies and gentlemen, and welcome to the Carriage Services Second Quarter 2021 Earnings Results C ...

PART I – FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements of Carriage Services, Inc. for the quarter ended March 31, 2021, including the Balance Sheet, Statements of Operations, Cash Flows, and Changes in Stockholders' Equity, along with detailed condensed notes explaining significant accounting policies, recent accounting standards, and specific financial line items [Consolidated Balance Sheet](index=3&type=section&id=Consolidated%20Balance%20Sheet%20as%20of%20December%2031%2C%202020%20and%20March%2031%2C%202021) This section provides a comparative overview of the company's financial position, detailing assets, liabilities, and stockholders' equity at the end of 2020 and Q1 2021 **Consolidated Balance Sheet (in thousands):** | Metric | Dec 31, 2020 (in thousands) | Mar 31, 2021 (in thousands) | |:---|:---|:---| | Total Assets | $1,145,825 | $1,157,726 | | Total Liabilities | $905,323 | $906,223 | | Total Stockholders' Equity | $240,502 | $251,503 | | Cash and Cash Equivalents | $889 | $406 | - Total assets increased by **$11.9 million**, and total stockholders' equity increased by **$11.0 million** from December 31, 2020, to March 31, 2021, while cash and cash equivalents decreased significantly[12](index=12&type=chunk) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20for%20the%20Three%20Months%20ended%20March%2031%2C%202020%20and%202021) This section presents the company's financial performance for the three months ended March 31, 2020 and 2021, detailing revenue, gross profit, operating income, and net income **Consolidated Statements of Operations (in thousands):** | Metric | Three months ended Mar 31, 2020 (in thousands) | Three months ended Mar 31, 2021 (in thousands) | |:---|:---|:---| | Revenue | $77,490 | $96,637 | | Gross Profit | $23,171 | $35,061 | | Operating Income | $2,150 | $26,246 | | Net Income (Loss) | $(4,197) | $12,933 | | Basic EPS | $(0.23) | $0.72 | | Diluted EPS | $(0.23) | $0.71 | | Dividends Declared per Common Share | $0.075 | $0.1000 | - The company experienced a significant turnaround from a net loss of **$4.2 million** in Q1 2020 to a net income of **$12.9 million** in Q1 2021, driven by substantial revenue and gross profit growth, and a positive shift in operating income[16](index=16&type=chunk) [Consolidated Statements of Cash Flows](index=6&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Three%20Months%20ended%20March%2031%2C%202020%20and%202021) This section details the cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2020 and 2021 **Consolidated Statements of Cash Flows (in thousands):** | Metric | Three months ended Mar 31, 2020 (in thousands) | Three months ended Mar 31, 2021 (in thousands) | |:---|:---|:---| | Net Cash Provided by Operating Activities | $13,546 | $26,811 | | Net Cash Used in Investing Activities | $(30,660) | $(1,897) | | Net Cash Provided by (Used in) Financing Activities | $28,318 | $(25,397) | | Net Increase (Decrease) in Cash | $11,204 | $(483) | | Cash and Cash Equivalents at End of Period | $11,920 | $406 | - Operating cash flow significantly increased by **$13.3 million**, while investing activities shifted from a large outflow due to acquisitions in 2020 to a much smaller outflow in 2021. Financing activities saw a substantial shift from a net inflow to a net outflow, primarily due to net payments on credit facilities and convertible notes[20](index=20&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity%20for%20the%20Three%20Months%20ended%20March%2031%2C%202020%20and%202021) This section outlines the changes in stockholders' equity, including net income, dividends, and stock-based compensation, for the three months ended March 31, 2020 and 2021 **Consolidated Statements of Changes in Stockholders' Equity (in thousands):** | Metric | Balance – Dec 31, 2020 (in thousands) | Balance – Mar 31, 2021 (in thousands) | |:---|:---|:---| | Total Stockholders' Equity | $240,502 | $251,503 | | Net Income - 2021 | — | $12,933 | | Dividends on Common Stock | $(1,339) (2020) | $(1,799) (2021) | | Stock-based Compensation Expense | $689 (2020) | $1,130 (2021) | | Convertible Notes Conversions | — | $(1,424) | - Stockholders' equity increased by **$11.0 million**, primarily driven by net income, partially offset by dividends paid and convertible notes conversions[24](index=24&type=chunk) [Condensed Notes to Consolidated Financial Statements](index=9&type=section&id=Condensed%20Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures for the consolidated financial statements, covering significant accounting policies, recent standards, and specific financial line items [1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=9&type=section&id=1.%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section outlines the company's business, principles of consolidation, use of estimates, and key accounting policies for various financial items including cash, receivables, inventory, business combinations, goodwill, intangible assets, trust funds, fair value measurements, capitalized commissions, property, plant and equipment, cemetery property, leases, equity plans, revenue recognition, and income taxes - Carriage Services, Inc. operates **173 funeral homes** in **26 states** and **32 cemeteries** in **12 states**, with Funeral Home Operations accounting for approximately **75% of revenue** and Cemetery Operations for **25% of revenue**[27](index=27&type=chunk) - The company provides both 'atneed' (time of death) and 'preneed' (planned prior to death) funeral and cemetery services and products[27](index=27&type=chunk) - Goodwill and tradenames are tested for impairment annually as of August 31, with a quantitative test performed at least once every three years and qualitative assessments in the interim[38](index=38&type=chunk)[39](index=39&type=chunk) - Preneed and perpetual care trust funds are reported in accordance with VIE principles, with trust fund assets measured at fair value and corresponding liabilities mirroring these fair values[40](index=40&type=chunk)[42](index=42&type=chunk) - Revenue is recognized when control of merchandise or services is transferred to the customer, with specific policies for atneed, preneed, and ancillary services[53](index=53&type=chunk) **Property, Plant and Equipment, Net (in thousands):** | Category | Dec 31, 2020 | Mar 31, 2021 | |:---|:---|:---| | Land | $82,615 | $81,981 | | Buildings and improvements | $240,567 | $240,988 | | Furniture, equipment and automobiles | $91,302 | $91,481 | | Property, plant and equipment, at cost | $414,484 | $414,450 | | Less: accumulated depreciation | $(145,433) | $(147,395) | | **Property, plant and equipment, net** | **$269,051** | **$267,055** | **Capital Expenditures (in thousands):** | Period | Growth & Maintenance Capital Expenditures | |:---|:---| | Three months ended Mar 31, 2020 | $2,700 | | Three months ended Mar 31, 2021 | $4,300 | [2. RECENTLY ISSUED ACCOUNTING STANDARDS](index=16&type=section&id=2.%20RECENTLY%20ISSUED%20ACCOUNTING%20STANDARDS) The company reviewed the FASB's ASU on Reference Rate Reform (Topic 848) but did not utilize its optional expedients and exceptions during the three months ended March 31, 2021, as it applies to contracts and hedging relationships referencing LIBOR or other discontinued rates - The FASB issued ASU, Reference Rate Reform (Topic 848), in March 2020 to provide optional guidance for accounting for reference rate reform[60](index=60&type=chunk) - The company did not utilize the optional expedients and exceptions provided by this ASU during the three months ended March 31, 2021[60](index=60&type=chunk) [3. GOODWILL](index=16&type=section&id=3.%20GOODWILL) Goodwill decreased by **$1.0 million** during the three months ended March 31, 2021, primarily due to the allocation of goodwill to the sale of one funeral home **Changes in Goodwill (in thousands):** | Metric | Dec 31, 2020 | Mar 31, 2021 | |:---|:---|:---| | Goodwill at beginning of period | $398,292 | $392,978 | | Decrease in goodwill related to divestitures | $(5,736) | $(1,006) | | **Goodwill at the end of the period** | **$392,978** | **$391,972** | - During Q1 2021, **$1.0 million** of goodwill was allocated to the sale of one funeral home, resulting in a loss recorded in Net loss (gain) on divestitures and impairment charges[61](index=61&type=chunk) [4. DIVESTED OPERATIONS](index=16&type=section&id=4.%20DIVESTED%20OPERATIONS) In the first quarter of 2021, the company divested two funeral homes for **$2.8 million**, recognizing a net income of **$0.254 million** from these operations after tax, a significant change from no divestitures in the same period of 2020 - During the three months ended March 31, 2021, the company sold two funeral homes for **$2.8 million**[62](index=62&type=chunk) **Operating Results of Divested Funeral Homes (in thousands):** | Metric | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Revenue | $0 | $282 | | Operating income | $0 | $60 | | Gain on divestitures | $0 | $308 | | Income tax expense | $0 | $(114) | | **Net income from divested operations, after tax** | **$0** | **$254** | [5. RECEIVABLES](index=17&type=section&id=5.%20RECEIVABLES) Accounts receivable, net, increased slightly to **$25.6 million** by March 31, 2021, with a total allowance for credit losses of **$1.283 million**. Preneed cemetery receivables, net, also increased to **$21.5 million**, with a corresponding increase in the allowance for credit losses **Accounts Receivable, Net (in thousands):** | Category | Dec 31, 2020 | Mar 31, 2021 | |:---|:---|:---| | Trade and financed receivables | $23,678 | $22,278 | | Other receivables | $2,712 | $4,590 | | Allowance for credit losses | $(1,287) | $(1,283) | | **Accounts receivable, net** | **$25,103** | **$25,585** | **Preneed Cemetery Receivables, Net (in thousands):** | Category | Dec 31, 2020 | Mar 31, 2021 | |:---|:---|:---| | Preneed cemetery receivables, at amortized cost | $42,874 | $44,389 | | Less: allowance for credit losses | $(2,604) | $(2,864) | | **Preneed cemetery receivables, net** | **$21,081** | **$21,533** | - The total allowance for credit losses on trade and financed receivables remained stable at **$1.283 million**, with provisions for credit losses of **$342 thousand** and write-offs of **$653 thousand** during Q1 2021[65](index=65&type=chunk) [6. TRUST INVESTMENTS](index=18&type=section&id=6.%20TRUST%20INVESTMENTS) The company's preneed and perpetual care trust investments are diversified across various securities, with fair values generally exceeding cost. Both preneed cemetery and funeral trust investments saw increases in market value and realized gains in Q1 2021 compared to Q1 2020, while unrealized gains shifted from significant losses to gains - Preneed trust investments provide funding for contractual obligations and are diversified across multiple industry segments to minimize long-term risk[70](index=70&type=chunk) - Cemetery perpetual care trust investments are required by state laws and their income offsets maintenance expenses for cemetery property[70](index=70&type=chunk) **Preneed Cemetery Trust Investments (in thousands):** | Metric | Dec 31, 2020 | Mar 31, 2021 | |:---|:---|:---| | Preneed cemetery trust investments, at market value | $89,081 | $94,882 | | Less: allowance for contract cancellation | $(2,477) | $(2,519) | | **Preneed cemetery trust investments** | **$86,604** | **$92,363** | **Preneed Funeral Trust Investments (in thousands):** | Metric | Dec 31, 2020 | Mar 31, 2021 | |:---|:---|:---| | Preneed funeral trust investments, at market value | $104,166 | $108,131 | | Less: allowance for contract cancellation | $(2,931) | $(2,930) | | **Preneed funeral trust investments** | **$101,235** | **$105,201** | **Cemetery Perpetual Care Trust Investments (in thousands):** | Metric | Dec 31, 2020 | Mar 31, 2021 | |:---|:---|:---| | Cemetery perpetual care trust investments, at market value | $70,828 | $75,815 | | Obligations due from trust | $(1,121) | $(455) | | **Care trusts' corpus** | **$69,707** | **$75,360** | **Net Change in Deferred Preneed Cemetery Receipts Held in Trust (in thousands):** | Metric | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Investment income | $319 | $467 | | Realized gains | $1,916 | $4,092 | | Realized losses | $(1,372) | $(2,518) | | Unrealized gains (losses), net | $(16,305) | $9,708 | | Expenses and taxes | $(187) | $(327) | | Net change | $15,629 | $(11,422) | **Net Change in Deferred Preneed Funeral Receipts Held in Trust (in thousands):** | Metric | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Investment income | $258 | $369 | | Realized gains | $2,551 | $3,871 | | Realized losses | $(1,129) | $(2,368) | | Unrealized gains (losses), net | $(15,274) | $9,319 | | Expenses and taxes | $(97) | $(196) | | Net change | $13,691 | $(10,995) | **Net Change in Care Trusts' Corpus (in thousands):** | Metric | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Realized gains | $709 | $691 | | Realized losses | $(679) | $(420) | | Unrealized gains (losses), net | $(13,525) | $7,699 | | Net change | $13,495 | $(7,970) | [7. RECEIVABLES FROM PRENEED TRUSTS](index=26&type=section&id=7.%20RECEIVABLES%20FROM%20PRENEED%20TRUSTS) Receivables from preneed trusts, representing assets in third-party controlled trusts, increased slightly to **$17.0 million** at March 31, 2021, with the majority held in fixed income investments **Receivables from Preneed Trusts (in thousands):** | Metric | Dec 31, 2020 | Mar 31, 2021 | |:---|:---|:---| | Preneed trust funds, at cost | $17,365 | $17,502 | | Less: allowance for contract cancellation | $(521) | $(526) | | **Receivables from preneed trusts, net** | **$16,844** | **$16,976** | **Composition of Preneed Trust Funds at March 31, 2021 (in thousands):** | Category | Historical Cost Basis | Fair Value | |:---|:---|:---| | Cash and cash equivalents | $4,697 | $4,697 | | Fixed income investments | $10,473 | $10,473 | | Mutual funds and common stocks | $2,327 | $2,406 | | Annuities | $5 | $5 | | **Total** | **$17,502** | **$17,581** | [8. FAIR VALUE MEASUREMENTS](index=26&type=section&id=8.%20FAIR%20VALUE%20MEASUREMENTS) The company measures securities in its preneed and perpetual care trusts at fair value, primarily classifying them as Level 1 or Level 2. As of March 31, 2021, the fair value of the Credit Facility approximated its carrying value, while Senior Notes had a fair value of **$417.6 million** compared to a carrying value of **$396.1 million** - Fair value measurements for trust investments are categorized into Level 1 (cash, U.S. treasury debt, common stock, equity mutual funds) and Level 2 (fixed income securities, foreign debt, corporate debt, preferred stocks, mortgage-backed securities, fixed income mutual funds, other investments)[70](index=70&type=chunk) - As of March 31, 2021, the Credit Facility's carrying value and fair value were **$28.3 million**, and acquisition debt's carrying value of **$5.4 million** approximated its fair value[93](index=93&type=chunk) - The fair value of Senior Notes was approximately **$417.6 million** at March 31, 2021, based on traded or broker-quoted prices, compared to a carrying value of **$396.1 million**[93](index=93&type=chunk)[105](index=105&type=chunk) [9. INTANGIBLE AND OTHER NON-CURRENT ASSETS](index=27&type=section&id=9.%20INTANGIBLE%20AND%20OTHER%20NON-CURRENT%20ASSETS) Intangible and other non-current assets totaled **$29.5 million** at March 31, 2021, primarily consisting of tradenames, prepaid non-compete agreements, and capitalized commissions on preneed contracts, with amortization expenses recorded for the latter two **Intangible and Other Non-Current Assets (in thousands):** | Category | Dec 31, 2020 | Mar 31, 2021 | |:---|:---|:---| | Tradenames | $23,565 | $23,565 | | Prepaid agreements not-to-compete, net | $2,785 | $2,676 | | Capitalized commissions on preneed contracts, net | $3,141 | $3,240 | | Other | $51 | $21 | | **Intangible and other non-current assets, net** | **$29,542** | **$29,502** | - Amortization expense for prepaid non-compete agreements was **$168 thousand** in Q1 2021 (down from **$187 thousand** in Q1 2020), and for capitalized commissions was **$152 thousand** in Q1 2021 (up from **$141 thousand** in Q1 2020)[97](index=97&type=chunk)[98](index=98&type=chunk) [10. CREDIT FACILITY AND ACQUISITION DEBT](index=27&type=section&id=10.%20CREDIT%20FACILITY%20AND%20ACQUISITION%20DEBT) The company's Credit Facility balance decreased to **$28.3 million** at March 31, 2021, with **$159.6 million** of availability. Acquisition debt remained stable at **$5.4 million**. The company was in compliance with all financial covenants under its Credit Facility **Credit Facility and Acquisition Debt (in thousands):** | Category | Dec 31, 2020 | Mar 31, 2021 | |:---|:---|:---| | Credit Facility | $47,200 | $28,300 | | Debt issuance costs, net | $(1,136) | $(1,018) | | **Total Credit Facility** | **$46,064** | **$27,282** | | Acquisition debt | $5,509 | $5,355 | | Less: current portion | $(1,027) | $(913) | | **Total acquisition debt, net of current portion** | **$4,482** | **$4,442** | - As of March 31, 2021, the company had **$159.6 million** of availability under its **$190.0 million** senior secured revolving credit facility[102](index=102&type=chunk) - The weighted average interest rate on the Credit Facility decreased from **4.3%** in Q1 2020 to **3.3%** in Q1 2021[102](index=102&type=chunk) **Interest Expense (in thousands):** | Category | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Credit Facility interest expense | $1,230 | $445 | | Acquisition debt imputed interest expense | $127 | $97 | [11. CONVERTIBLE SUBORDINATED NOTES](index=29&type=section&id=11.%20CONVERTIBLE%20SUBORDINATED%20NOTES) All Convertible Subordinated Notes due 2021 were fully converted or paid at maturity by March 31, 2021, with approximately **$2.4 million** converted for **$3.8 million** in cash and the remaining **$0.2 million** paid at par - Approximately **$2.4 million** in Convertible Notes were converted for **$3.8 million** in cash during Q1 2021, resulting in a **$1.4 million** reacquisition of the equity component[104](index=104&type=chunk) - The Convertible Notes matured on March 15, 2021, and all remaining outstanding notes (approximately **$0.2 million**) were paid in full, leaving no Convertible Notes outstanding[104](index=104&type=chunk) **Convertible Notes Interest and Accretion (in thousands):** | Metric | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Convertible Notes interest expense | $43 | $18 | | Convertible Notes accretion of debt discount | $65 | $20 | | Convertible Notes amortization of debt issuance costs | $6 | $1 | [12. SENIOR NOTES](index=29&type=section&id=12.%20SENIOR%20NOTES) The company's **$400.0 million** Senior Notes due 2026 bear a fixed interest rate of **6.625%**. Post-quarter, the company issued a conditional redemption notice for these notes, contingent on the issuance of new **4.25%** Senior Notes due 2029 and an amended credit facility **Senior Notes Carrying Value (in thousands):** | Metric | Dec 31, 2020 | Mar 31, 2021 | |:---|:---|:---| | Principal amount | $400,000 | $400,000 | | Debt premium, net | $1,467 | $1,409 | | Debt discount, net | $(3,582) | $(3,444) | | Debt issuance costs, net | $(1,917) | $(1,843) | | **Carrying value of the Senior Notes** | **$395,968** | **$396,122** | - The Senior Notes are unsecured, senior obligations due June 1, 2026, bearing interest at **6.625%** per year[106](index=106&type=chunk) - On April 30, 2021, the company delivered a conditional redemption notice for all outstanding Senior Notes, contingent on the completion of a new offering of **$400 million** in **4.25%** Senior Notes due 2029 and an amended credit facility[108](index=108&type=chunk)[179](index=179&type=chunk) **Senior Notes Interest and Amortization (in thousands):** | Metric | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Senior Notes interest expense | $6,625 | $6,625 | | Senior Notes amortization of debt discount | $129 | $138 | | Senior Notes amortization of debt premium | $54 | $58 | | Senior Notes amortization of debt issuance costs | $67 | $74 | [13. LEASES](index=31&type=section&id=13.%20LEASES) Total lease costs for operating and finance leases increased slightly to **$1.278 million** in Q1 2021. The company maintains both operating and finance lease liabilities on its balance sheet, with weighted-average remaining lease terms of **10.7 years** for operating leases and **5.6 years** for finance leases **Total Lease Cost (in thousands):** | Metric | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Operating lease cost | $957 | $960 | | Short-term lease cost | $32 | $49 | | Variable lease cost | $25 | $41 | | Finance lease cost (Depreciation) | $109 | $108 | | Finance lease cost (Interest) | $126 | $120 | | **Total lease cost** | **$1,249** | **$1,278** | **Lease Liabilities (in thousands):** | Category | Dec 31, 2020 | Mar 31, 2021 | |:---|:---|:---| | Operating lease right-of-use assets | $21,201 | $20,747 | | Finance lease right-of-use assets, net | $4,765 | $4,657 | | Total current lease liabilities | $2,405 | $2,388 | | Total non-current lease liabilities | $25,833 | $25,321 | | **Total lease liabilities** | **$28,238** | **$27,709** | **Weighted-Average Lease Terms and Discount Rates:** | Lease Type | Remaining Lease Term (years) | Discount Rate | |:---|:---|:---| | Operating leases | 10.7 | 8.1% | | Finance leases | 5.6 | 8.2% | [14. STOCKHOLDERS' EQUITY](index=33&type=section&id=14.%20STOCKHOLDERS'%20EQUITY) The company issued restricted stock and significant stock options in Q1 2021, leading to increased stock-based compensation expense. Dividends declared per common share increased to **$0.1000**, while no share repurchases occurred during the quarter - In Q1 2021, the company granted **701,400 stock options** to key employees with a fair value of **$7.1 million** and an additional **150,000 performance-based options** with a fair value of **$1.7 million**[116](index=116&type=chunk)[117](index=117&type=chunk) **Stock-Based Compensation Expense (in thousands):** | Category | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Restricted stock awards | $184 | $121 | | Stock options | $215 | $560 | | Performance awards | $121 | $237 | | Employee Stock Purchase Plan (ESPP) | $163 | $206 | | Non-Employee Director Compensation | $201 | $231 | **Dividends Declared (in thousands, except per share amounts):** | Date | Per Share | Dollar Value | |:---|:---|:---| | Mar 1, 2020 | $0.075 | $1,339 | | Mar 1, 2021 | $0.100 | $1,799 | - No shares of common stock were repurchased during Q1 2021, leaving approximately **$25.6 million** available under the share repurchase program[123](index=123&type=chunk)[166](index=166&type=chunk) [15. EARNINGS PER SHARE](index=35&type=section&id=15.%20EARNINGS%20PER%20SHARE) Basic and diluted earnings per common share significantly improved from a loss in Q1 2020 to positive earnings in Q1 2021, reflecting the company's net income turnaround **Earnings Per Common Share (in thousands, except per share data):** | Metric | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Net income (loss) | $(4,197) | $12,933 | | Income (loss) attributable to common stockholders | $(4,184) | $12,906 | | Basic EPS | $(0.23) | $0.72 | | Diluted EPS | $(0.23) | $0.71 | | Weighted average basic shares outstanding | 17,805 | 17,965 | | Weighted average diluted shares outstanding | 17,805 | 18,199 | - In Q1 2020, **1,034,084 stock options** were excluded from diluted EPS computation due to their antidilutive effect, and **27,085 shares** were excluded because of a net loss. In Q1 2021, no stock options were excluded[125](index=125&type=chunk) [16. SEGMENT REPORTING](index=36&type=section&id=16.%20SEGMENT%20REPORTING) Both Funeral Home and Cemetery segments showed strong revenue and operating income growth in Q1 2021 compared to Q1 2020, with the Funeral Home segment continuing to be the larger contributor **Revenue by Segment (in thousands):** | Segment | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Funeral | $61,742 | $71,774 | | Cemetery | $15,748 | $24,863 | | **Total** | **$77,490** | **$96,637** | **Operating Income (Loss) by Segment (in thousands):** | Segment | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Funeral | $4,311 | $25,876 | | Cemetery | $4,167 | $9,493 | | Corporate | $(6,328) | $(9,123) | | **Consolidated** | **$2,150** | **$26,246** | - Total assets for the Funeral Home segment were **$763.8 million** and for the Cemetery segment were **$378.9 million** as of March 31, 2021[130](index=130&type=chunk) [17. SUPPLEMENTARY DATA](index=37&type=section&id=17.%20SUPPLEMENTARY%20DATA) Supplementary balance sheet data shows changes in current liabilities, including a significant increase in accrued interest and income tax payable, while other long-term liabilities decreased **Accrued and Other Liabilities (in thousands):** | Category | Dec 31, 2020 | Mar 31, 2021 | |:---|:---|:---| | Accrued salaries and wages | $1,392 | $3,307 | | Accrued incentive compensation | $11,139 | $5,964 | | Accrued interest | $2,291 | $8,888 | | Income tax payable | $798 | $4,392 | | **Total accrued and other liabilities** | **$31,138** | **$39,599** | **Other Long-Term Liabilities (in thousands):** | Category | Dec 31, 2020 | Mar 31, 2021 | |:---|:---|:---| | Incentive compensation | $2,975 | $351 | | Employer payroll tax deferral | $1,773 | $1,773 | | Accrued severance | $0 | $553 | | **Total other long-term liabilities** | **$4,748** | **$2,677** | **Cash Paid for Interest and Taxes (in thousands):** | Metric | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Cash paid for interest and financing costs | $1,337 | $1,337 | | Cash paid for taxes | $96 | $96 | [18. SUBSEQUENT EVENTS](index=37&type=section&id=18.%20SUBSEQUENT%20EVENTS) Subsequent to the quarter end, the company entered into an agreement to sell **$400 million** of **4.25%** Senior Notes due 2029, with net proceeds intended to redeem existing Senior Notes and fund an amended credit facility - On April 29, 2021, the company agreed to sell **$400 million** in aggregate principal amount of **4.25%** Senior Notes due 2029 in a private placement[134](index=134&type=chunk) - Net proceeds of approximately **$394 million** from the New Notes sale are intended to redeem all existing Senior Notes and facilitate an amended and restated credit facility[137](index=137&type=chunk) - A conditional redemption notice was delivered on April 30, 2021, for all outstanding Senior Notes, contingent on the completion of the New Notes offering and the new credit facility[138](index=138&type=chunk) [Cautionary Statement on Forward–Looking Statements](index=40&type=section&id=Cautionary%20Statement%20on%20Forward%E2%80%93Looking%20Statements) This section advises that the report contains forward-looking statements subject to various risks and uncertainties, and cautions investors against undue reliance on them - The report contains forward-looking statements regarding future earnings, revenue, cash flow, debt levels, acquisitions, divestitures, financing activities, economic conditions, and operational performance[140](index=140&type=chunk) - These statements are subject to significant risks and uncertainties, including the ability to retain skilled personnel, competition, changes in death rates, consumer preferences, investment performance of trust funds, interest rate fluctuations, and the impact of the COVID-19 pandemic[140](index=140&type=chunk) - Investors are cautioned not to place undue reliance on forward-looking statements, and the company undertakes no obligation to publicly update or revise them[142](index=142&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations for the three months ended March 31, 2021, highlighting significant revenue and profit growth, the impact of COVID-19, and strategic initiatives. It also details liquidity, capital resources, and segment-specific performance [OVERVIEW](index=42&type=section&id=OVERVIEW) This section provides a general overview of Carriage Services, Inc.'s business, recent developments, the impact of COVID-19, and its core business strategy across funeral home and cemetery operations - Carriage Services, Inc. is a leading U.S. provider of funeral and cemetery services, operating **173 funeral homes** and **32 cemeteries**[144](index=144&type=chunk) - The company's business strategy is based on strong local leadership, entrepreneurial principles, and a high-performance culture, executed through its Standards Operating Model, 4E Leadership Model, and Strategic Acquisition Model[152](index=152&type=chunk)[154](index=154&type=chunk) [General](index=42&type=section&id=General) This subsection provides a general description of Carriage Services, Inc.'s business segments and service offerings - Carriage Services, Inc. operates in two segments: Funeral Home Operations (**75% of revenue**) and Cemetery Operations (**25% of revenue**)[144](index=144&type=chunk) - The company provides services and products on both an 'atneed' (time of death) and 'preneed' (planned prior to death) basis[144](index=144&type=chunk) [Recent Developments](index=42&type=section&id=Recent%20Developments) This subsection highlights key corporate actions, including divestitures and the conversion of convertible notes, during the first quarter of 2021 - During Q1 2021, the company divested two funeral homes for **$2.8 million**, realizing a gain of **$0.3 million**[145](index=145&type=chunk) - All **2.75%** convertible subordinated notes due 2021 were converted or paid at maturity by March 31, 2021, with no notes remaining outstanding[146](index=146&type=chunk) [Business Impact under the Macroeconomic Environment of COVID-19](index=42&type=section&id=Business%20Impact%20under%20the%20Macroeconomic%20Environment%20of%20COVID-19) This subsection discusses how the COVID-19 pandemic impacted the company's operations, including increased deathcare volume, shifts in consumer preferences, and the utilization of CARES Act provisions - The company's businesses are designated as essential services and have remained open, adapting operations with updated safety procedures and staffing guidelines[147](index=147&type=chunk) - COVID-19 led to an increase in deathcare volume in Q1 2021, but also shifts in consumer preferences towards less expensive services or delayed memorialization[149](index=149&type=chunk) - The company utilized CARES Act provisions for tax payment refunds and credits, which are not expected to significantly impact short-term or long-term liquidity[149](index=149&type=chunk) [Funeral Home Operations](index=43&type=section&id=Funeral%20Home%20Operations) This subsection identifies the key factors influencing the operating results of the company's funeral home segment - Factors affecting funeral operating results include demographic trends, market share, response to cremation trends, cost control, and pricing leverage[150](index=150&type=chunk) [Cemetery Operations](index=43&type=section&id=Cemetery%20Operations) This subsection outlines the primary factors that impact the operating results of the company's cemetery segment - Cemetery operating results are influenced by sales organization effectiveness, local perceptions, adaptation to economic changes, and capital market fluctuations affecting trust fund earnings[151](index=151&type=chunk) [Business Strategy](index=43&type=section&id=Business%20Strategy) This subsection details the company's strategic framework, emphasizing its decentralized, high-performance culture and acquisition model - The company's strategy is built on a decentralized, high-performance culture, guided by its Standards Operating Model, 4E Leadership Model, and Strategic Acquisition Model[152](index=152&type=chunk)[154](index=154&type=chunk) - The Strategic Acquisition Model focuses on acquiring larger, higher-margin businesses based on criteria like cultural alignment, volume/price trends, market size, and competitive standing[157](index=157&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=45&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the company's ability to generate and manage cash, its capital structure, and its capacity to meet financial obligations and fund strategic initiatives - Primary liquidity sources are internally generated cash flows from operations and availability under the Credit Facility[159](index=159&type=chunk) - The company expects to use cash and Credit Facility borrowings for general corporate purposes, dividends, and debt obligations, with potential for strategic acquisitions, capital expenditures, and share repurchases if Senior Notes are redeemed[159](index=159&type=chunk) - Continued divestiture activity is expected for the next **6-9 months**, potentially yielding **$3-5 million** in cash proceeds[159](index=159&type=chunk) [Overview](index=45&type=section&id=Overview) This subsection provides a general statement on the company's expected cash resources and ability to meet its financial commitments for the upcoming year - The company anticipates sufficient cash resources to meet working capital, capital expenditures, debt payments, and dividends for the next **12 months**[159](index=159&type=chunk) [Cash Flows](index=45&type=section&id=Cash%20Flows) This subsection presents a summary of the company's cash flows from operating, investing, and financing activities for the three months ended March 31, 2020 and 2021 **Cash Flow Summary (in thousands):** | Metric | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Cash at beginning of year | $716 | $889 | | Net cash provided by operating activities | $13,546 | $26,811 | | Net cash used in investing activities | $(30,660) | $(1,897) | | Net cash provided by (used in) financing activities | $28,318 | $(25,397) | | Cash at end of the period | $11,920 | $406 | [Operating Activities](index=46&type=section&id=Operating%20Activities) This subsection details the significant increase in cash generated from the company's core operating activities during Q1 2021 - Cash provided by operating activities increased by **$13.3 million** to **$26.8 million** in Q1 2021, reflecting strong cash generation and favorable working capital changes[162](index=162&type=chunk) [Investing Activities](index=46&type=section&id=Investing%20Activities) This subsection highlights the substantial decrease in net cash outflow from investing activities in Q1 2021, primarily due to reduced acquisition spending - Net cash outflow from investing activities decreased by **$28.8 million** to **$1.9 million** in Q1 2021, primarily due to reduced acquisition spending compared to Q1 2020[163](index=163&type=chunk) [Acquisition and Divestiture Activity](index=46&type=section&id=Acquisition%20and%20Divestiture%20Activity) This subsection summarizes the company's acquisition and divestiture transactions during the first quarters of 2020 and 2021 - In Q1 2021, the company sold two funeral homes for **$2.8 million** and purchased real estate for **$0.4 million**[164](index=164&type=chunk) - In Q1 2020, the company acquired a funeral home and cemetery business for **$33.0 million** in cash[164](index=164&type=chunk) [Capital Expenditures](index=46&type=section&id=Capital%20Expenditures) This subsection details the increase in capital expenditures during Q1 2021, covering both growth and maintenance spending **Capital Expenditures (in thousands):** | Category | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Total Growth | $1,182 | $2,207 | | Total Maintenance | $1,556 | $2,140 | | **Total Capital Expenditures** | **$2,738** | **$4,347** | - Capital expenditures increased by **$1.6 million** to **$4.3 million** in Q1 2021, with increases in both growth and maintenance spending[165](index=165&type=chunk) [Financing Activities](index=46&type=section&id=Financing%20Activities) This subsection describes the significant shift in cash flows from financing activities, moving from a net inflow in Q1 2020 to a net outflow in Q1 2021 - Financing activities shifted from a net cash inflow of **$28.3 million** in Q1 2020 to a net cash outflow of **$25.4 million** in Q1 2021, a **$53.7 million** change[165](index=165&type=chunk) - Key outflows in Q1 2021 included **$19.1 million** in net payments on credit facilities, acquisition debt, and finance leases, **$1.8 million** in dividends, and **$4.0 million** for convertible notes conversions and maturity[165](index=165&type=chunk) [Share Repurchase](index=46&type=section&id=Share%20Repurchase) This subsection reports that no common stock was repurchased in Q1 2021, with a substantial amount remaining available under the repurchase program - No shares of common stock were repurchased during Q1 2021, with approximately **$25.6 million** remaining available under the share repurchase program[166](index=166&type=chunk) [Dividends](index=47&type=section&id=Dividends) This subsection provides a comparative overview of dividends declared per common share and their total dollar value for Q1 2020 and Q1 2021 **Dividends Declared (in thousands, except per share amounts):** | Date | Per Share | Dollar Value | |:---|:---|:---| | Mar 1, 2020 | $0.075 | $1,339 | | Mar 1, 2021 | $0.100 | $1,799 | [Credit Facility, Lease Obligations and Acquisition Debt](index=47&type=section&id=Credit%20Facility%2C%20Lease%20Obligations%20and%20Acquisition%20Debt) This subsection summarizes the company's key debt and lease obligations as of March 31, 2021 **Debt and Lease Obligations (in thousands) at March 31, 2021:** | Category | Amount | |:---|:---| | Credit Facility | $28,300 | | Finance leases | $5,776 | | Operating leases | $21,933 | | Acquisition debt | $5,355 | | **Total** | **$61,364** | [Credit Facility](index=47&type=section&id=Credit%20Facility) This subsection details the company's senior secured revolving credit facility, including its maturity, outstanding balance, availability, and compliance with financial covenants - The **$190.0 million** senior secured revolving credit facility matures on May 31, 2023, with **$28.3 million** outstanding and **$159.6 million** available at March 31, 2021[169](index=169&type=chunk) - The company was in compliance with all financial covenants (Total Leverage Ratio, Senior Secured Leverage Ratio, Fixed Charge Coverage Ratio) as of March 31, 2021[169](index=169&type=chunk) **Credit Facility Interest Expense (in thousands):** | Metric | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Credit Facility interest expense | $1,230 | $445 | | Credit Facility amortization of debt issuance costs | $126 | $118 | [Lease Obligations](index=48&type=section&id=Lease%20Obligations) This subsection provides a breakdown of the company's lease costs for operating and finance leases for the three months ended March 31, 2020 and 2021 **Lease Costs (in thousands):** | Category | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Operating lease cost | $957 | $960 | | Short-term lease cost | $32 | $49 | | Variable lease cost | $25 | $41 | | Finance lease depreciation | $109 | $108 | | Finance lease interest | $126 | $120 | [Acquisition Debt](index=48&type=section&id=Acquisition%20Debt) This subsection describes the nature of the company's acquisition debt, including its composition and imputed interest expense - Acquisition debt consists of deferred purchase price and promissory notes, mostly non-interest bearing and discounted at imputed rates of **7.3% to 10.0%**[173](index=173&type=chunk) **Acquisition Debt Imputed Interest Expense (in thousands):** | Period | Amount | |:---|:---| | Three months ended Mar 31, 2020 | $127 | | Three months ended Mar 31, 2021 | $97 | [Convertible Subordinated Notes due 2021](index=48&type=section&id=Convertible%20Subordinated%20Notes%20due%202021) This subsection confirms the full conversion or payment of all Convertible Subordinated Notes by their maturity date in Q1 2021, resulting in no outstanding balance - All Convertible Notes were either converted for cash or paid at maturity by March 31, 2021, with no outstanding balance remaining[174](index=174&type=chunk) **Convertible Notes Expense (in thousands):** | Metric | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Interest expense | $43 | $18 | | Accretion of debt discount | $65 | $20 | | Amortization of debt issuance costs | $6 | $1 | [Senior Notes due 2026](index=48&type=section&id=Senior%20Notes%20due%202026) This subsection details the company's **$400.0 million** Senior Notes, their fixed interest rate, and the subsequent conditional redemption notice issued post-quarter - The **$400.0 million** Senior Notes bear a fixed interest rate of **6.625%** and are due June 1, 2026[175](index=175&type=chunk)[177](index=177&type=chunk) - The company has the right to redeem the Senior Notes at various prices depending on the redemption date and conditions[178](index=178&type=chunk) **Senior Notes Expense (in thousands):** | Metric | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Interest expense | $6,625 | $6,625 | | Amortization of debt discount | $129 | $138 | | Amortization of debt premium | $54 | $58 | | Amortization of debt issuance costs | $67 | $74 | [FINANCIAL HIGHLIGHTS](index=51&type=section&id=FINANCIAL%20HIGHLIGHTS) This section summarizes key financial performance metrics for Q1 2020 and Q1 2021, including revenue, funeral contracts, interment rights, gross profit, and net income **Financial Highlights (in thousands, except per contract/right data):** | Metric | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Revenue | $77,490 | $96,637 | | Funeral contracts | 11,493 | 13,296 | | Average revenue per funeral contract | $5,233 | $5,276 | | Preneed interment rights (property) sold | 1,868 | 2,658 | | Average price per preneed interment right sold | $3,779 | $4,551 | | Gross profit | $23,171 | $35,061 | | Net income (loss) | $(4,197) | $12,933 | - Revenue increased by **$19.1 million (24.6%)** due to a **15.7%** increase in funeral contracts (driven by COVID-19 related deaths) and a **42.3%** increase in preneed interment rights sold, along with a **20.4%** increase in average price per right[181](index=181&type=chunk) - Net income increased by **$17.1 million**, primarily due to higher gross profit and the absence of a **$14.7 million** impairment charge recorded in Q1 2020, partially offset by increased tax expense[181](index=181&type=chunk) [REPORTING AND NON-GAAP FINANCIAL MEASURES](index=52&type=section&id=REPORTING%20AND%20NON-GAAP%20FINANCIAL%20MEASURES) This section provides reconciliations of GAAP net income and gross profit to adjusted non-GAAP measures, highlighting the impact of special items and segment operating performance **Reconciliation of Net Income (Loss) to Adjusted Net Income (in thousands):** | Metric | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Net income (loss) | $(4,197) | $12,933 | | Special items, net of tax | $10,310 | $1,757 | | **Adjusted net income** | **$6,113** | **$14,690** | **Reconciliation of Gross Profit to Operating Profit (in thousands):** | Metric | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Gross profit | $23,171 | $35,061 | | Cemetery property amortization | $877 | $1,517 | | Field depreciation expense | $3,290 | $3,136 | | Regional and unallocated funeral and cemetery costs | $2,756 | $6,073 | | **Operating profit** | **$30,094** | **$45,787** | **Operating Profit by Segment (in thousands):** | Segment | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Funeral Home | $24,274 | $32,906 | | Cemetery | $5,820 | $12,881 | | **Operating profit** | **$30,094** | **$45,787** | | Operating profit margin | 38.8% | 47.4% | - Adjusted net income increased from **$6.1 million** in Q1 2020 to **$14.7 million** in Q1 2021, primarily due to the absence of significant impairment charges and higher operating performance[183](index=183&type=chunk) [RESULTS OF OPERATIONS](index=53&type=section&id=RESULTS%20OF%20OPERATIONS) This section provides a detailed analysis of the company's financial performance by segment, including revenue and operating profit trends, and discusses key factors influencing these results - The term 'same store' refers to businesses acquired prior to January 1, 2017, and 'acquired' refers to businesses purchased after December 31, 2016, excluding planned divestitures[187](index=187&type=chunk) [Funeral Home Segment](index=54&type=section&id=Funeral%20Home%20Segment) This subsection analyzes the revenue and operating profit performance of the Funeral Home segment, highlighting contributions from same-store, acquired, and divested operations **Funeral Home Segment Revenue (in thousands):** | Category | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Same store operating revenue | $46,696 | $56,683 | | Acquired operating revenue | $8,885 | $10,139 | | Divested/planned divested revenue | $2,757 | $1,217 | | Ancillary revenue | $1,151 | $1,207 | | Preneed funeral insurance commissions | $366 | $330 | | Preneed funeral trust and insurance | $1,887 | $2,198 | | **Total** | **$61,742** | **$71,774** | **Funeral Home Segment Operating Profit (in thousands):** | Category | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Same store operating profit | $18,062 | $25,812 | | Acquired operating profit | $3,247 | $4,467 | | Divested/planned divested operating profit | $673 | $134 | | Ancillary operating profit | $295 | $242 | | Preneed funeral insurance commissions | $156 | $91 | | Preneed funeral trust and insurance | $1,841 | $2,160 | | **Total** | **$24,274** | **$32,906** | - Same store operating revenue increased by **$10.0 million (21.4%)** due to a **21.7%** increase in contract volume, primarily from a peak spike in COVID-19 deaths[190](index=190&type=chunk) - Acquired operating revenue increased by **$1.3 million (14.7%)** due to a **15.5%** increase in acquired contract volume, also influenced by COVID-19[191](index=191&type=chunk) [Cemetery Segment](index=55&type=section&id=Cemetery%20Segment) This subsection analyzes the revenue and operating profit performance of the Cemetery segment, detailing contributions from same-store, acquired, and preneed operations **Cemetery Segment Revenue (in thousands):** | Category | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Same store operating revenue | $10,907 | $14,621 | | Acquired operating revenue | $2,799 | $6,980 | | Divested/planned divested revenue | $58 | $108 | | Preneed cemetery trust revenue | $1,742 | $2,889 | | Preneed cemetery finance charges | $242 | $265 | | **Total** | **$15,748** | **$24,863** | **Cemetery Segment Operating Profit (in thousands):** | Category | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Same store operating profit | $3,167 | $5,711 | | Acquired operating profit | $827 | $4,102 | | Divested/planned divested operating profit | $3 | $38 | | Preneed cemetery trust operating profit | $1,581 | $2,765 | | Preneed cemetery finance charges | $242 | $265 | | **Total** | **$5,820** | **$12,881** | - Same store preneed revenue increased by **$2.2 million (34.9%)** due to a **20.9%** increase in interment rights sold and a **7.3%** increase in average price per right, driven by the cemetery sales strategy[194](index=194&type=chunk) - Acquired cemetery preneed revenue increased by **$2.7 million** and atneed revenue increased by **$1.5 million**, leading to a **$3.3 million** increase in acquired operating profit, with the operating profit margin rising to **58.8%**[194](index=194&type=chunk) [Cemetery property amortization](index=57&type=section&id=Cemetery%20property%20amortization) This subsection reports an increase in cemetery property amortization during Q1 2021, reflecting higher property sales - Cemetery property amortization increased by **$0.6 million** to **$1.5 million** in Q1 2021, reflecting an increase in property sold[196](index=196&type=chunk) [Field depreciation](index=57&type=section&id=Field%20depreciation) This subsection notes a decrease in field depreciation expense in Q1 2021, primarily due to older assets becoming fully depreciated - Field depreciation expense decreased by **$0.2 million** in Q1 2021, primarily due to older assets becoming fully depreciated[196](index=196&type=chunk) [Regional and unallocated funeral and cemetery costs](index=57&type=section&id=Regional%20and%20unallocated%20funeral%20and%20cemetery%20costs) This subsection details the increase in regional and unallocated costs during Q1 2021, driven by higher incentives, equity compensation, and COVID-19 related expenses - Regional and unallocated costs increased by **$3.3 million** to **$6.1 million** in Q1 2021, driven by higher cash incentives, equity compensation, and COVID-19 related health and safety expenses[196](index=196&type=chunk) [Other Financial Statement Items](index=57&type=section&id=Other%20Financial%20Statement%20Items) This section reviews changes in various other financial statement items, including general and administrative expenses, depreciation, divestiture gains/losses, interest expense, and income taxes [General, administrative and other](index=57&type=section&id=General%2C%20administrative%20and%20other) This subsection reports an increase in general, administrative, and other expenses in Q1 2021, mainly due to higher incentives, equity compensation, and leadership separation costs - General, administrative and other expenses increased by **$2.9 million** to **$8.8 million** in Q1 2021, mainly due to increased cash incentives, equity compensation, and separation expenses for senior leadership[197](index=197&type=chunk) [Home office depreciation and amortization](index=57&type=section&id=Home%20of%20ice%20depreciation%20and%20amortization) This subsection notes a decrease in home office depreciation and amortization in Q1 2021 as certain assets became fully depreciated - Home office depreciation and amortization decreased by **$0.1 million** in Q1 2021, as equipment and software became fully depreciated[197](index=197&type=chunk) [Net loss (gain) on divestitures and impairments charges](index=57&type=section&id=Net%20loss%20%28gain%29%20on%20divestitures%20and%20impairments%20charges) This subsection highlights a significant shift from a **$14.7 million** impairment charge in Q1 2020 to a **$0.3 million** gain from divestitures in Q1 2021 **Net Loss (Gain) on Divestitures and Impairment Charges (in thousands):** | Category | Three months ended Mar 31, 2020 | Three months ended Mar 31, 2021 | |:---|:---|:---| | Goodwill impairment | $13,632 | $0 | | Tradename impairment | $1,061 | $0 | | Gain on divestitures | $0 | $(308) | | **Total** | **$14,693** | **$(308)** | - The company recorded a gain of **$0.3 million** from divestitures in Q1 2021, a significant improvement from a **$14.7 million** impairment charge in Q1 2020[197](index=197&type=chunk) [Interest expense](index=57&type=section&id=Interest%20expense) This subsection reports a decrease in interest expense during Q1 2021, primarily attributable to reduced borrowings on the Credit Facility - Interest expense decreased by **$0.8 million** to **$7.6 million** in Q1 2021, primarily due to decreased borrowings on the Credit Facility[198](index=198&type=chunk) [Income taxes](index=57&type=section&id=Income%20taxes) This subsection details the shift from an income tax benefit in Q1 2020 to an expense in Q1 2021, along with changes in the operating tax rate and a reserve for uncertain tax positions - The company shifted from an income tax benefit of **$2.2 million** in Q1 2020 to an expense of **$5.6 million** in Q1 2021[198](index=198&type=chunk) - The operating tax rate before discrete items was **31.0%** in Q1 2021, down from **33.6%** in Q1 2020[198](index=198&type=chunk) - A **$3.7 million** reserve for uncertain tax positions was maintained at March 31, 2021, related to carryback refund claims under the CARES Act[198](index=198&type=chunk) [OVERVIEW OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=58&type=section&id=OVERVIEW%20OF%20CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) This section emphasizes that financial statement preparation involves significant estimates and judgments, which are based on historical data and assumptions, but actual results may vary - The preparation of financial statements requires significant estimates and judgments, including those related to receivables, goodwill, intangible assets, deferred taxes, and property depreciation[200](index=200&type=chunk) - Estimates are based on historical experience, third-party data, and reasonable assumptions, but actual results may differ[200](index=200&type=chunk) [SEASONALITY](index=58&type=section&id=SEASONALITY) This section notes that the company's business can be affected by seasonal fluctuations in the death rate, typically higher during winter months - The business can be affected by seasonal fluctuations in the death rate, which is generally higher during winter months due to increased incidences of influenza and pneumonia[201](index=201&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=58&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to interest rate risk and changes in the value of securities within its preneed and perpetual care trusts. Management actively monitors these risks, but does not use derivative instruments for speculation - The company's primary market risks are related to interest rate fluctuations and changes in the values of securities in preneed and perpetual care trusts[202](index=202&type=chunk) - A **0.25%** change in interest rates causes an approximate **1.38%** change in the value of fixed income securities held in trusts[202](index=202&type=chunk) - A **100 basis point** change in the Credit Facility's borrowing rate would result in a **$0.3 million** change in income before taxes, assuming the outstanding balance remains unchanged[202](index=202&type=chunk) - The Senior Notes bear a fixed interest rate of **6.625%**, so increases in market interest rates would decrease their fair value but not affect the company's interest costs[202](index=202&type=chunk)[204](index=204&type=chunk) [Item 4. Controls and Procedures](index=59&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of March 31, 2021, ensuring accurate and timely financial reporting. No material changes to internal control over financial reporting occurred during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2021, ensuring timely and accurate financial reporting[205](index=205&type=chunk) - No material changes in internal control over financial reporting occurred during the fiscal quarter[206](index=206&type=chunk) PART II – OTHER INFORMATION [Item 1. Legal Proceedings](index=60&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings in the ordinary course of business, but does not expect them to have a material adverse effect on its financial statements. It self-insures against certain risks and maintains insurance coverage - The company is party to legal proceedings arising in the ordinary course of business, but does not expect a material adverse effect on its financial statements[209](index=209&type=chunk) - The company self-insures against certain risks and carries insurance for coverage in excess of self-insurance amounts, believing reserves and insurance provide reasonable coverage[209](index=209&type=chunk) [Item 1A. Risk Factors](index=60&type=section&id=Item%201A.%20Risk%20Factors) This section supplements previously disclosed risk factors, specifically highlighting the potential for significant future payments and share issuances under the company's 'Good To Great' incentive programs, which could lead to less cash availability or shareholder dilution - The 'Good To Great' incentive program rewards Managing Partners for achieving a minimum net revenue compounded annual growth rate over a five-year period, payable in cash and common stock[210](index=210&type=chunk) - The 'Good To Great II' incentive program for non-Managing Partners could result in significant shareholder dilution, with a potential award of **971,820 shares** if the highest performance tier (Common Stock Price Average of **$77.34 per share**) is achieved[210](index=210&type=chunk) - Future bonus payments under these programs are uncertain but could be substantial, potentially reducing cash available for operations[210](index=210&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=61&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2021, the company repurchased **9,688 shares** of common stock, representing shares surrendered by employees for tax withholding upon restricted stock vesting. Approximately **$25.6 million** remained available under the share repurchase program **Common Stock Repurchases (Q1 2021):** | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Dollar Value of Shares That May Yet Be Purchased Under the Program | |:---|:---|:---|:---| | Jan 1 - Jan 31, 2021 | — | — | $25,601,446 | | Feb 1 - Feb 28, 2021 | 9,688 | $35.81 | $25,601,446 | | Mar 1 - Mar 31, 2021 | — | — | $25,601,446 | | **Total for quarter ended Mar 31, 2021** | **9,688** | | | - The repurchased shares represent those surrendered by employees to cover taxes withheld on restricted stock vestings[212](index=212&type=chunk) [Item 3. Defaults Upon Senior Securities](index=61&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company for the reporting period [Item 4. Mine Safety Disclosures](index=61&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company for the reporting period [Item 5. Other Information](index=61&type=section&id=Item%205.%20Other%20Information) No other information is reported under this item [Item 6. Exhibits](index=61&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Quarterly Report on Form 10-Q, which are incorporated by reference - The exhibits required by Item 601 of Regulation S-K are set forth in the Exhibit Index and incorporated by reference[216](index=216&type=chunk) SIGNATURE - The report was signed on May 5, 2021, by C. Benjamin Brink, Senior Vice President, Chief Financial Officer and Treasurer[219](index=219&type=chunk) INDEX OF EXHIBITS - The index provides a list of exhibits filed with the Form 10-Q, including employment agreements, certifications, and XBRL documents[221](index=221&type=chunk)

Carriage Services, Inc. (NYSE:CSV) Q1 2021 Earnings Conference Call April 22, 2021 10:30 AM ET Company Participants Steve Metzger - Senior Vice President and General Counsel Mel Payne - Chairman and Chief Executive Officer Ben Brink - Senior Vice President and Chief Financial Officer Shawn Phillips - Senior Vice President and Regional Partner Peggy Schappaugh - Vice President of Operations and Acquisitions Analysis Paul Elliott - Senior Vice President and Regional Partner Chris Manceaux - Senior Vice Presid ...