CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
Carriage Services, Inc. (“Carriage,” the “Company,” “we,” “us,” or “our”) is a leading provider of funeral and cemetery services and merchandise in the United States. Our operations are reported in two business segments: Funeral Home Operations, which currently account for approximately 70% of our revenue and Cemetery Operations, which currently account for approximately 30% of our revenue. At September 30, 2021, we operated 171 funeral homes in 26 states and 32 cemeteries in 12 states.
Our funeral home operations are principally service businesses that generate revenue from sales of burial and cremation services and related merchandise, such as caskets and urns. Funeral services include consultation, the removal and preparation of remains, the use of funeral home facilities for visitation and memorial services and transportation services. We provide funeral services and products on both an “atneed” (time of death) and “preneed” (planned prior to death) basis.
Our cemetery operations generate revenue primarily through sales of cemetery interment rights (primarily grave sites, lawn crypts, mausoleum spaces and niches), related cemetery merchandise (such as memorial markers, outer burial containers and monuments) and services (interments, inurnments and installation of cemetery merchandise). We provide cemetery services and products on both an atneed and preneed basis.
Principles of Consolidation and Interim Condensed Disclosures
Our unaudited consolidated financial statements include the Company and its subsidiaries. All intercompany balances and transactions have been eliminated. Our interim consolidated financial statements are unaudited but include all adjustments, which consist of normal, recurring accruals, that are necessary for a fair presentation of our financial position and results of operations as of and for the interim periods presented. Our unaudited consolidated financial statements have been prepared in a manner consistent with the accounting principles described in our Annual Report on Form 10-K for the year ended December 31, 2020 unless otherwise disclosed herein, and should be read in conjunction therewith.
Reclassifications
Certain reclassifications have been made to prior period amounts on our Consolidated Statements of Cash Flows related to the amortization of our intangible assets, debt and debt issuance costs to conform to the current period financial statement presentation with no effect on our previously reported Consolidated Statements of Operations and Consolidated Balance Sheet.
Use of Estimates
The preparation of our Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. On an ongoing basis, we evaluate our estimates and judgments, which include those related to the realization of our accounts receivable, valuation of goodwill, intangible assets, deferred tax assets and liabilities and depreciation of property and equipment. We base our estimates on historical experience, third-party data and assumptions that we believe to be reasonable under the circumstances. The results of these considerations form the basis for making judgments about the amount and timing of revenue and expenses, the carrying value of assets and the recorded amounts of liabilities. Actual results may differ from these estimates and such estimates may change if the underlying conditions or assumptions change. Historical performance should not be viewed as indicative of future performance, as there can be no assurance that our results of operations will be consistent from year to year.
Cash and Cash Equivalents
We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Funeral and Cemetery Receivables
Our funeral receivables are recorded in Accounts receivable, net and primarily consist of amounts due for funeral services already performed.
Atneed cemetery receivables and preneed cemetery receivables with payments expected to be received within one year from the balance sheet date are recorded in Accounts receivable, net. Preneed cemetery receivables with payments expected to be received beyond one year from the balance sheet date are recorded in Preneed cemetery receivables, net. Our cemetery
receivables generally consist of preneed sales of cemetery interment rights and related products and services, which are typically financed through interest-bearing installment sales contracts, generally with terms of up to five years, with such interest income reflected as Other revenue. In substantially all cases, we receive an initial down payment at the time the contract is signed.
For our funeral and atneed cemetery receivables, we have a collections policy where statements are sent to the customer at 30 days past due. Past due notification letters are sent at 45 days and continue until payment is received or the contract is placed with a third-party collections agency. For our preneed cemetery receivables, we have a collections policy where past due notification letters are sent to the customer beginning at 15 days past due and periodically thereafter until payment is received or the contract is cancelled.
Our allowance for credit losses reflects our best estimate of expected credit losses over the term of both our funeral and cemetery receivables. Our policy is to write off receivables when we have determined they will no longer be collectible. Write-offs are applied as a reduction to the allowance for credit losses and any recoveries of previous write-offs are netted against bad debt expense in the period recovered.
We determine our allowance for credit losses by using a loss-rate methodology, in which we assess our historical write-off of receivables against our total receivables over several years. From this historical loss-rate approach, we also consider the current and forecasted economic conditions expected to be in place over the life of our receivables. These estimates are impacted by a number of factors, including changes in the economy, demographics and competition in our local communities. We monitor our ongoing credit exposure through an active review of our customers’ receivables balance against contract terms and due dates. Our activities include timely performance of our accounts receivable reconciliations, assessment of our aging of receivables, dispute resolution and payment confirmation. We monitor any change in our historical write-off of receivables utilized in our loss-rate methodology and assess forecasted changes in market conditions within our credit reserve.
See Note 5 to the Consolidated Financial Statements herein for additional information related to our funeral and cemetery receivables.
Inventory
Inventory consists primarily of caskets, outer burial containers and cemetery monuments and markers and is recorded at the lower of its cost basis or net realizable value. Inventory is relieved using specific identification in fulfillment of performance obligations on our contracts.
Business Combinations
Tangible and intangible assets acquired and liabilities assumed are recorded at fair value and goodwill is recognized for any difference between the price of the acquisition and fair value. We recognize the assets acquired, the liabilities assumed and any non-controlling interest in the acquiree at the acquisition date, measured at the fair value as of that date. Acquisition related costs are recognized separately from the acquisition and are expensed as incurred. We customarily estimate related transaction costs known at closing. To the extent that information not available to us at the closing date subsequently becomes available during the allocation period, we may adjust goodwill, intangible assets, assets or liabilities associated with the acquisition.
Divested Operations
Prior to divesting a funeral home or cemetery, we first determine whether the sale of the net assets and activities (together referred to as a “set”) qualifies as a business. First, we perform a screen test to determine if the set is not a business. The principle of the screen is that if substantially all of the fair value of the gross assets sold resides in a single asset or group of similar assets, the set is not a business. If the screen is not met, we perform an assessment to determine if the set is a business by evaluating whether the set has both inputs and a substantive process that together significantly contribute to the ability to create outputs. When both inputs and a substantive process are present then the set is determined to be a business and we apply the guidance in Accounting Standards Codification (“ASC”) Topic 350 – Intangibles – Goodwill and Other to determine the accounting treatment of goodwill for that set (see discussion of Goodwill below). Goodwill is only allocated to the sale if the set is considered to be a business.
See Notes 3 and 4 to the Consolidated Financial Statements herein for additional information related to our divestitures.
Goodwill
The excess of the purchase price over the fair value of identifiable net assets of funeral home businesses and cemeteries acquired is recorded as goodwill. Goodwill has an indefinite life and is not subject to amortization. As such, we test goodwill for impairment on an annual basis as of August 31st each year. In addition to our annual test, we assess the impairment of goodwill whenever events or changes in circumstances indicate that the carrying value of a reporting unit may be greater than fair value. Factors that could trigger an interim impairment review include, but are not limited to, significant negative industry
or economic trends and significant adverse changes in the business climate, which may be indicated by a decline in our market capitalization or decline in operating results.
We performed our annual goodwill impairment test as of August 31, 2021. Under current guidance, we are permitted to first assess qualitative factors to determine whether it is more-likely-than not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test. For our 2021 annual goodwill impairment test, we performed a qualitative assessment and determined that there were no factors that would indicate the need to perform an additional quantitative goodwill impairment test. We concluded that it is more-likely-than not that the fair value of our reporting units is greater than their carrying value and thus there was no impairment to goodwill. For our 2020 annual qualitative assessment, there was no impairment to goodwill as the fair value of our reporting units was greater than the carrying value.
When we divest a portion of a reporting unit that constitutes a business in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), we allocate goodwill associated with that business to be included in the gain or loss on divestiture. The goodwill allocated is based on the relative fair value of the business being divested and the portion of the reporting unit that will be retained. Additionally, after each divestiture, we will test the goodwill remaining in the portion of the reporting unit to be retained for impairment using a qualitative assessment unless we deem a quantitative assessment to be appropriate to ensure the fair value of our reporting units is greater than their carrying value.
See Note 3 to the Consolidated Financial Statements included herein for additional information related to our goodwill.
Intangible Assets
Our intangible assets include tradenames resulting from acquisitions and are included in Intangible and other non-current assets, net on our Consolidated Balance Sheet. Our tradenames are considered to have an indefinite life and are not subject to amortization. As such, we test our intangible assets for impairment on an annual basis as of August 31st each year. In addition to our annual test, we assess the impairment of intangible assets whenever certain events or changes in circumstances indicate that the carrying value of the intangible asset may be greater than the fair value. Factors that could trigger an interim impairment review include, but are not limited to, significant under-performance relative to historical or projected future operating results and significant negative industry or economic trends.
We performed our annual intangible assets impairment test as of August 31, 2021. Under current guidance, we are permitted to first assess qualitative factors to determine whether it is more-likely-than not that the fair value of the tradename is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative impairment test. For our 2021 annual intangible assets impairment test, we performed a qualitative assessment and determined that there were no factors that would indicate the need to perform an additional quantitative impairment test. We concluded that it is more-likely-than not that the fair value of our intangible assets is greater than its carrying value and thus there was no impairment to our intangible assets. For our 2020 annual qualitative assessment, there was no impairment to intangible assets as the fair value of our intangible assets was greater than the carrying value.
See Note 9 to the Consolidated Financial Statements included herein for additional information related to our intangible assets.
Preneed and Perpetual Care Trust Funds
Preneed sales generally require deposits to a trust or purchase of a third-party insurance product. We have established a variety of trusts in connection with funeral home and cemetery operations as required under applicable state laws. Such trusts include (i) preneed funeral trusts; (ii) preneed cemetery merchandise and service trusts; and (iii) cemetery perpetual care trusts.
Our preneed and perpetual care trust funds are reported in accordance with the principles of consolidating Variable Interest Entities (“VIEs”). In the case of preneed trusts, the customers are the legal beneficiaries. In the case of perpetual care trusts, we do not have a right to access the corpus in the perpetual care trusts.
Our trust fund assets are reflected in our financial statements as Preneed cemetery trust investments, Preneed funeral trust investments and Cemetery perpetual care trust investments. We have recognized financial interests of third parties in the trust funds in our financial statements as Deferred preneed funeral and cemetery receipts held in trust and Care trusts’ corpus.
The fair value of our trust fund assets are accounted for as Collateralized Financing Entities (“CFEs”) in ASC Topic 810. The accounting guidance for CFEs allows companies to elect to measure both the financial assets and financial liabilities using the more observable of the fair value of the financial assets or fair value of the financial liabilities. Pursuant to this guidance, we have determined the fair value of the financial assets of the trusts are more observable and we first measure those financial assets at fair value. Our fair value of the financial liabilities mirror the fair value of the financial assets, in accordance with the ASC. Any changes in fair value are recognized in earnings.
In accordance with ASC Topic 326, we present our credit losses for fixed income securities as an allowance rather than as a write-down on the fixed income securities we do not intend to sell and it is likely that we will not be required to sell prior to their anticipated recovery.
In accordance with respective state laws, we are required to deposit a specified amount into perpetual and memorial care trust funds for each interment right and certain memorials sold. Income from the trust funds is distributed to us and used to provide for the care and maintenance of the cemeteries and mausoleums. Trust fund income is recognized as revenue when realized by the trust and distributable to us. We are restricted from withdrawing any of the principal balances of these funds.
An enterprise is required to perform an analysis to determine whether the enterprise’s variable interest(s) give it a controlling financial interest in a VIE. This analysis identifies the primary beneficiary of a VIE as the enterprise that has both the power to direct the activities of the VIE that most significantly impact the entity’s economic performance and the obligation to absorb losses of the entity that could potentially be significant to the VIE or the right to receive benefits from the entity that could potentially be significant to the VIE. Our analysis continues to support our position as the primary beneficiary in the majority of our funeral and cemetery trust funds.
See Notes 6 and 7 to the Consolidated Financial Statements herein for additional information related to our preneed and perpetual care trust funds.
Fair Value Measurements
We measure the securities held by our funeral merchandise and service, cemetery merchandise and service, and cemetery perpetual care trusts at fair value on a recurring basis in accordance with ASC Topic 820. This guidance defines fair value as the price that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The guidance establishes a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date.
We disclose the extent to which fair value is used to measure financial assets and liabilities, the inputs utilized in calculating valuation measurements, and the effect of the measurement of significant unobservable inputs on earnings, or changes in net assets, as of the measurement date. We currently do not have any assets that have fair values determined by Level 3 inputs and no liabilities measured at fair value. We have not elected to measure any additional financial instruments and certain other items at fair value that are not currently required to be measured at fair value.
See Notes 6 and 8 to the Consolidated Financial Statements herein for additional required disclosures related to our fair value measurement of our financial assets and liabilities.
Capitalized Commissions on Preneed Contracts
We capitalize sales commissions and other direct selling costs related to preneed cemetery merchandise and services and preneed funeral trust contracts as these costs are incremental and recoverable costs of obtaining a contract with a customer. Our capitalized commissions on preneed contracts are amortized on a straight-line basis over the average maturity period of ten years for our preneed funeral trust contracts and eight years for our preneed cemetery merchandise and services contracts.
The selling costs related to the sales of cemetery interment rights, which include real property and other costs related to cemetery development activities, continue to be expensed using the specific identification method in the period in which the sale of the cemetery interment right is recognized as revenue. The selling costs related to preneed funeral insurance contracts continue to be expensed in the period incurred as these contracts are not included on our Consolidated Balance Sheet.
See Note 9 to the Consolidated Financial Statements herein for additional information related to our capitalized commissions on preneed contracts.
Property, Plant and Equipment
Property, plant and equipment (including equipment under finance leases) are stated at cost. The costs of ordinary maintenance and repairs are charged to operations as incurred, while renewals and major replacements that extend the useful economic life of the asset are capitalized. Depreciation of property, plant and equipment (including equipment under finance leases) is computed based on the straight-line method over the estimated useful lives of the assets.
Long-lived assets, such as property, plant and equipment subject to depreciation and amortization, are reviewed for impairment at least annually or whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable in accordance with ASC Topic 360 – Property, Plant and Equipment.
Property, plant and equipment is comprised of the following (in thousands):
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December 31, 2020
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September 30, 2021
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Land
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$
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82,615
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$
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82,736
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Buildings and improvements
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240,567
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239,190
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Furniture, equipment and automobiles
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91,302
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70,715
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Property, plant and equipment, at cost
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414,484
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392,641
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Less: accumulated depreciation
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(145,433)
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(124,885)
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Property, plant and equipment, net
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$
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269,051
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$
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267,756
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During the nine months ended September 30, 2021, we acquired real property for $3.3 million. We also divested three funeral homes that had a carrying value of property, plant and equipment of $2.4 million, which was included in the Gain (loss) on divestitures and recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations, described in Note 4 to the Consolidated Financial Statements included herein.
Additionally, during the nine months ended September 30, 2021, we sold real property for $0.7 million and recognized a loss on sale of $0.3 million, which was recorded in Net loss on divestitures, disposals and impairment charges. At September 30, 2021, we had $2.3 million carrying value of property, plant and equipment assets held for sale and we recognized a $0.5 million impairment loss related to these assets recorded in Net loss on divestitures, disposals and impairment charges.
Our growth and maintenance capital expenditures totaled $4.2 million and $6.5 million for the three months ended September 30, 2020 and 2021, respectively and $10.0 million and $15.3 million for the nine months ended September 30, 2020 and 2021, respectively, for property, plant, equipment and cemetery development. In addition, we recorded depreciation expense of $3.5 million and $3.4 million for the three months ended September 30, 2020 and 2021, respectively and $10.8 million and $10.2 million for the nine months ended September 30, 2020 and 2021, respectively.
Cemetery Property
When we acquire a cemetery, we utilize an internal and external approach to determine the fair value of the cemetery property. From an external perspective, we obtain an accredited appraisal to provide reasonable assurance for property existence, property availability (unrestricted) for development, property lines, available spaces to sell, identifiable obstacles or easements and general valuation inclusive of known variables in that market. From an internal perspective, we conduct a detailed analysis of the acquired cemetery property using other cemeteries in our portfolio as a benchmark. This provides the added benefit of relevant data that is not available to third party appraisers. Through this thorough internal process, we are able to identify viable costs of property based on historical experience, particular markets and demographics, reasonable margins, practical retail prices and park infrastructure and condition.
Cemetery property was $101.1 million and $100.5 million at December 31, 2020 and September 30, 2021, respectively, net of accumulated amortization of $46.6 million and $51.8 million, respectively. When cemetery property is sold, the value of the cemetery property (interment right costs) is expensed as amortization using the specific identification method in the period in which the sale of the interment right is recognized as revenue. We recorded amortization expense for cemetery interment rights of $1.5 million for both the three months ended September 30, 2020 and 2021 and $3.4 million and $5.2 million for the nine months ended September 30, 2020 and 2021, respectively.
Leases
We have operating and finance leases. We lease certain office facilities, certain funeral homes and equipment under operating leases with original terms ranging from one to nineteen years. Many leases include one or more options to renew, some of which include options to extend the leases for up to 26 years. We lease certain funeral homes under finance leases with original terms ranging from ten to forty years. We do not have lease agreements with residual value guarantees, sale-leaseback terms, material restrictive covenants or related parties. We do not have any material sublease arrangements.
We determine if an arrangement is a lease at inception based on the facts and circumstances of the agreement. A right-of-use (“ROU”) asset represents our right to use the underlying asset for the lease term and the lease liability represents our obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized on our Consolidated Balance Sheet at the lease commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The lease terms used to calculate the ROU asset and related lease liability include options to extend the lease when it is reasonably certain that we will exercise that option. Lease expense for operating leases is recognized on a straight-line basis over the lease term as an operating expense, while the expense for finance leases is recognized as depreciation expense and interest expense using the effective interest method of
recognition. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage, are not included in the ROU assets or liabilities. These are expensed as incurred and recorded as variable lease expense. We have real estate lease agreements which require payments for lease and non-lease components and we account for these as a single lease component. Leases with an initial term of 12 months or less, that do not include an option to renew the underlying asset, are not recorded on our Consolidated Balance Sheet and expense is recognized on a straight-line basis over the lease term.
Operating lease ROU assets are included in Operating lease right-of-use assets and operating lease liabilities are included in Current portion of operating lease obligations and Obligations under operating leases, net of current portion on our Consolidated Balance Sheet. Finance lease ROU assets are included in Property, plant and equipment, net and finance lease liabilities are included in Current portion of finance lease obligations and Obligations under finance leases, net of current portion on our Consolidated Balance Sheet.
See Notes 12 to the Consolidated Financial Statements included herein for additional information related to our leases.
Equity Plans and Stock-Based Compensation
We have equity-based employee and director compensation plans under which we have granted stock awards, stock options and performance awards. We also have an employee stock purchase plan (the “ESPP”). We recognize compensation expense in an amount equal to the fair value of the stock-based awards expected to vest or to be purchased over the requisite service period. We recognize the effect of forfeitures in compensation cost when they occur and any previously recognized compensation cost for an award is reversed in the period that the award is forfeited.
Fair value is determined on the date of the grant. The fair value of restricted stock is determined using the stock price on the grant date. The fair value of options or awards containing options is determined using the Black-Scholes valuation model or the Monte-Carlo simulation pricing model. The fair value of the performance awards related to market performance conditions is determined using the Monte-Carlo simulation pricing model. The fair value of the ESPP is determined based on the discount element offered to employees and the embedded option element, which is determined using an option calculation model.
We recognize all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) as income tax benefit or expense in the income statement. We treat the tax effects of exercised or vested awards as discrete items in the reporting period in which they occur. Excess tax benefits or deficiencies related to share-based payments are included in operating cash flows on the Consolidated Statements of Cash Flows.
See Note 14 to the Consolidated Financial Statements included herein for additional information related to our equity plans and stock-based compensation.
Revenue Recognition
Funeral and Cemetery Operations Revenue is recognized when control of the merchandise or services is transferred to the customer. Our performance obligations include the delivery of funeral and cemetery merchandise and services and cemetery property interment rights. Control transfers when merchandise is delivered or services are performed. For cemetery property interment rights, control transfers to the customer when the property is developed and the interment right has been sold and can no longer be marketed or sold to another customer. On our atneed contracts, we generally deliver the merchandise and perform the services at the time of need.
Memorial services frequently include performance obligations to direct the service, provide facilities and motor vehicles, catering, flowers, and stationary products. All other performance obligations on these contracts, including arrangement, removal, preparation, embalming, cremation, interment, and delivery of urns and caskets and related memorialization merchandise are fulfilled at the time of need. Personalized marker merchandise and marker installation services sold on atneed contracts are recognized when control is transferred to the customer, generally when the marker is delivered and installed in the cemetery.
Some of our contracts with customers include multiple performance obligations. For these contracts, we allocate the transaction price to each performance obligation based on its relative standalone selling price, which is based on prices charged to customers per our general price list. Packages for service and ancillary items are offered to help the customer make decisions during emotional and stressful times. Package discounts are reflected net in Revenue. We recognize revenue when the merchandise is transferred or the service is performed, in satisfaction of the corresponding performance obligation. Sales taxes collected are recognized on a net basis in our Consolidated Financial Statements.
Ancillary funeral service revenue, which is recorded in Other revenue, represents revenue from our flower shop, pet cremation and online cremation businesses.
The earnings from our preneed trust investments, as well as trust management fees charged by our wholly-owned registered investment advisory firm (“CSV RIA”) are recorded in Other revenue. As of September 30, 2021, CSV RIA
provided investment management and advisory services to approximately 80% of our trust assets, for a fee based on the market value of trust assets. Under state trust laws, we are allowed to charge the trust a fee for advising on the investment of the trust assets and these fees are recognized as income in the period in which services are provided.
Balances due on undelivered preneed funeral trust contracts have been reclassified to reduce Deferred preneed funeral revenue on our Consolidated Balance Sheet of $8.2 million at both December 31, 2020 and September 30, 2021. As these performance obligations are to be completed after the date of death, we cannot quantify the recognition of revenue in future periods. However, we estimate an average maturity period of ten years for preneed funeral contracts.
Balances due from customers on delivered preneed cemetery contracts are included in Accounts receivable, net and Preneed cemetery receivables, net on our Consolidated Balance Sheet. Balances due on undelivered preneed cemetery contracts have been reclassified to reduce Deferred preneed cemetery revenue on our Consolidated Balance Sheet. The transaction price allocated to preneed merchandise and service performance obligations that were unfulfilled were $7.9 million and $10.6 million at December 31, 2020 and September 30, 2021, respectively. As these performance obligations are to be completed after the date of death, we cannot quantify the recognition of revenue in future periods. However, we estimate an average maturity period of eight years for preneed cemetery contracts.
See Note 16 to the Consolidated Financial Statements herein for additional information related to revenue.
Income Taxes
We and our subsidiaries file a consolidated U. S. federal income tax return, separate income tax returns in 15 states in which we operate and combined or unitary income tax returns in 14 states in which we operate. We record deferred taxes for temporary differences between the tax basis and financial reporting basis of assets and liabilities. We classify our deferred tax liabilities and assets as non-current on our Consolidated Balance Sheet.
We record a valuation allowance to reflect the estimated amount of deferred tax assets for which realization is uncertain. Management reviews the valuation allowance at the end of each quarter and makes adjustments if it is determined that it is more likely than not that the tax benefits will be realized.
We analyze tax benefits for uncertain tax positions and how they are to be recognized, measured, and derecognized in the financial statements; provide certain disclosures of uncertain tax matters; and specify how reserves for uncertain tax positions should be classified on our Consolidated Balance Sheet.
The Consolidated Appropriations Act was signed into law on December 27, 2020. This Act included several tax provisions directly benefiting individual and corporate taxpayers. The primary benefit in this legislation is a temporary allowance for full deduction for business meals paid or incurred between December 31, 2020 and January 1, 2023.
We filed carryback refund claims for the 2018 and 2019 tax years as allowed by the legislative changes included in the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which was enacted March 27, 2020. As a result of requesting a tax refund in excess of $5 million, we must receive Joint Committee approval and undergo an audit for the tax year ending December 31, 2018. This audit is currently in progress. In 2020, the 2018 tax return was amended to take full advantage of the CARES Act legislative benefits resulting in additional losses that increase the amount of our carryback refund claim. The majority of the net operating losses generated in 2018 are the result of filing non-automatic accounting method changes relating to the recognition of revenue from our cemetery property and merchandise and services sales. As of September 30, 2021, we received an adverse ruling related to the change to our method of recognition of revenue from our constructed cemetery property, however, we are currently in further discussions with the Internal Revenue Service (“IRS”) regarding this ruling. Due to the uncertainty that exists, a reserve has been recorded against the benefit derived from this carrying back that the net operating losses generated. At both December 31, 2020 and September 30, 2021, the reserve for uncertain tax positions was $3.7 million.
Income tax expense during interim periods is based on our forecasted annual effective tax rate plus any discrete items, which are recorded in the period in which they occur. Discrete items include, but are not limited to, such events as changes in estimates due to finalization of income tax returns, tax audit settlements, tax effects of exercised or vested stock-based awards and increases or decreases in valuation allowances on deferred tax assets.
For the three months ended September 30, 2020 and 2021, we had an income tax expense of $2.9 million and $5.1 million, respectively and for the nine months ended September 30, 2020 and 2021, we had an income tax expense of $4.2 million and $6.6 million, respectively. Our operating tax rate before discrete items was 34.0% and 28.2% for the three months ended September 30, 2020 and 2021, respectively and 33.8% and 28.3% for the nine months ended September 30, 2020 and 2021, respectively.
Computation of Earnings Per Common Share
Basic earnings per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Dilutive common equivalent shares consist of stock options.
Share-based awards that contain non-forfeitable rights to dividends or dividend equivalents, whether paid or unpaid, are recognized as participating securities and included in the computation of both basic and diluted earnings per share. Our grants of restricted stock awards to our employees and directors are considered participating securities, and we have prepared our earnings per share calculations attributable to common stockholders to exclude outstanding unvested restricted stock awards, using the two-class method, in both the basic and diluted weighted average shares outstanding calculation.
Our performance awards are considered to be contingently issuable shares because their issuance is contingent upon the satisfaction of certain performance and service conditions. In accordance with ASC 260, we have included in the computation of diluted earnings per share the number of performance awards that would have been issuable as if the end of the reporting period was the end of the contingency period. These shares are considered to be outstanding at the beginning of the reporting period.
See Note 15 to the Consolidated Financial Statements included herein related to the computation of earnings per share.
Subsequent Events
We have evaluated events and transactions during the period subsequent to September 30, 2021 through the date the financial statements were issued for potential recognition or disclosure in the accompanying financial statements covered by this report.
See Note 18 to the Consolidated Financial Statements included herein for additional information related to our subsequent events.
2.RECENTLY ISSUED ACCOUNTING STANDARDS
Accounting Pronouncements Not Yet Adopted
Reference Rate Reform
In March 2020, the FASB issued ASU, Reference Rate Reform (“Topic 848”) to provide optional guidance for a limited time to ease the potential burden in accounting for reference rate reform. The new guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments apply only to contracts and hedging relationships that reference London InterBank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued due to reference rate reform. These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022. The Company did not utilize the optional expedients and exceptions provided by this ASU during the nine months ended September 30, 2021.
3.GOODWILL
The following table presents changes in goodwill in the accompanying Consolidated Balance Sheet (in thousands):
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December 31, 2020
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September 30, 2021
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Goodwill at the beginning of the period
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$
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398,292
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$
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392,978
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Net increase in goodwill related to acquisitions
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14,054
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—
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Decrease in goodwill related to divestitures
|
(5,736)
|
|
|
(1,006)
|
|
|
Decrease in goodwill related to impairments
|
(13,632)
|
|
|
—
|
|
|
Goodwill at the end of the period
|
$
|
392,978
|
|
|
$
|
391,972
|
|
During the nine months ended September 30, 2021, we allocated $1.0 million of goodwill to the sale of one funeral home for a loss recorded in Net loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.
See Note 1 to the Consolidated Financial Statements included herein, for a discussion of the methodology used for our goodwill impairment test.
4.DIVESTED OPERATIONS
During the three months ended September 30, 2021, we did not sell any funeral homes or cemeteries. During the nine months ended September 30, 2021, we sold three funeral homes for $3.5 million. During the three and nine months ended September 30, 2020, we sold six funeral homes for $7.3 million.
The operating results of these divested funeral homes are reflected in our Consolidated Statements of Operations as shown in the table below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
Revenue
|
$
|
144
|
|
|
$
|
(10)
|
|
|
$
|
1,829
|
|
|
$
|
338
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
(112)
|
|
|
(41)
|
|
|
70
|
|
|
(54)
|
|
|
Gain (loss) on divestitures(1)
|
(4,917)
|
|
|
—
|
|
|
(4,917)
|
|
|
103
|
|
|
Income tax benefit (expense)
|
1,710
|
|
|
12
|
|
|
1,638
|
|
|
(14)
|
|
|
Net income (loss) from divested operations, after tax
|
$
|
(3,319)
|
|
|
$
|
(29)
|
|
|
$
|
(3,209)
|
|
|
$
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Gain (loss) on divestitures is recorded in Net loss on divestitures, disposals and impairments charges on our Consolidated Statements of Operations.
|
5.RECEIVABLES
Accounts Receivable
Accounts receivable is comprised of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
|
Funeral
|
|
Cemetery
|
|
Corporate
|
|
Total
|
|
Trade and financed receivables
|
$
|
11,099
|
|
|
$
|
13,289
|
|
|
$
|
—
|
|
|
$
|
24,388
|
|
|
Other receivables
|
461
|
|
|
2,162
|
|
|
260
|
|
|
2,883
|
|
|
Allowance for credit losses
|
(290)
|
|
|
(768)
|
|
|
—
|
|
|
(1,058)
|
|
|
Accounts receivable, net
|
$
|
11,270
|
|
|
$
|
14,683
|
|
|
$
|
260
|
|
|
$
|
26,213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
Funeral
|
|
Cemetery
|
|
Corporate
|
|
Total
|
|
Trade and financed receivables
|
$
|
11,448
|
|
|
$
|
12,230
|
|
|
$
|
—
|
|
|
$
|
23,678
|
|
|
Other receivables
|
367
|
|
|
2,144
|
|
|
201
|
|
|
2,712
|
|
|
Allowance for credit losses
|
(327)
|
|
|
(960)
|
|
|
—
|
|
|
(1,287)
|
|
|
Accounts receivable, net
|
$
|
11,488
|
|
|
$
|
13,414
|
|
|
$
|
201
|
|
|
$
|
25,103
|
|
Other receivables include supplier rebates, commissions due from third party insurance companies and perpetual care income receivables. We do not provide an allowance for credit losses for these receivables as we have historically not had any collectability issues nor do we expect any in the foreseeable future.
The following table summarizes the activity in our allowance for credit losses by portfolio segment (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2021
|
|
Provision for Credit Losses
|
|
|
|
Write Offs
|
|
Recoveries
|
|
September 30, 2021
|
|
Trade and financed receivables:
|
|
|
|
|
|
|
|
|
|
|
|
|
Funeral
|
$
|
(327)
|
|
|
$
|
(637)
|
|
|
|
|
$
|
1,691
|
|
|
$
|
(1,017)
|
|
|
$
|
(290)
|
|
|
Cemetery
|
(960)
|
|
|
(292)
|
|
|
|
|
484
|
|
|
—
|
|
|
(768)
|
|
|
Total allowance for credit losses on Trade and financed receivables
|
$
|
(1,287)
|
|
|
$
|
(929)
|
|
|
|
|
$
|
2,175
|
|
|
$
|
(1,017)
|
|
|
$
|
(1,058)
|
|
Preneed Cemetery Receivables
Our preneed cemetery receivables are comprised of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
September 30, 2021
|
|
Cemetery interment rights
|
$
|
36,696
|
|
|
$
|
41,179
|
|
|
Cemetery merchandise and services
|
10,526
|
|
|
11,661
|
|
|
Cemetery financed receivables
|
$
|
47,222
|
|
|
$
|
52,840
|
|
The components of our preneed cemetery receivables are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
September 30, 2021
|
|
Preneed cemetery receivables
|
$
|
47,222
|
|
|
$
|
52,840
|
|
|
Less: unearned finance charges
|
(4,348)
|
|
|
(4,745)
|
|
|
Preneed cemetery receivables, at amortized cost
|
$
|
42,874
|
|
|
$
|
48,095
|
|
|
Less: allowance for credit losses
|
(2,604)
|
|
|
(2,083)
|
|
|
Less: balances due on undelivered cemetery preneed contracts
|
(7,919)
|
|
|
(10,559)
|
|
|
Less: amounts in accounts receivable
|
(11,270)
|
|
|
(12,521)
|
|
|
Preneed cemetery receivables, net
|
$
|
21,081
|
|
|
$
|
22,932
|
|
The following table summarizes the activity in our allowance for credit losses for Preneed cemetery receivables, net (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January 1, 2021
|
|
Provision for Credit Losses
|
|
Write Offs
|
|
September 30, 2021
|
|
Total allowance for credit losses on Preneed cemetery receivables, net
|
$
|
(1,644)
|
|
|
$
|
(497)
|
|
|
$
|
826
|
|
|
$
|
(1,315)
|
|
The amortized cost basis of our preneed cemetery receivables by year of origination at September 30, 2021 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
2019
|
|
2018
|
|
2017
|
|
Prior
|
|
Total
|
|
Total preneed cemetery receivables, at amortized cost
|
$
|
21,057
|
|
|
$
|
12,168
|
|
|
$
|
7,646
|
|
|
$
|
3,776
|
|
|
$
|
1,699
|
|
|
$
|
1,749
|
|
|
$
|
48,095
|
|
The aging of past due preneed cemetery receivables at September 30, 2021 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
31-60
Past Due
|
|
61-90
Past Due
|
|
91-120
Past Due
|
|
>120
Past Due
|
|
Total Past
Due
|
|
Current
|
|
Total
|
|
Recognized revenue
|
$
|
849
|
|
|
$
|
644
|
|
|
$
|
246
|
|
|
$
|
1,955
|
|
|
$
|
3,694
|
|
|
$
|
34,256
|
|
|
$
|
37,950
|
|
|
Deferred revenue
|
1,436
|
|
|
209
|
|
|
75
|
|
|
511
|
|
|
2,231
|
|
|
12,659
|
|
|
14,890
|
|
|
Total contracts
|
$
|
2,285
|
|
|
$
|
853
|
|
|
$
|
321
|
|
|
$
|
2,466
|
|
|
$
|
5,925
|
|
|
$
|
46,915
|
|
|
$
|
52,840
|
|
6.TRUST INVESTMENTS
Preneed trust investments represent trust fund assets that we are generally permitted to withdraw as the services and merchandise are provided to customers. Preneed funeral and cemetery contracts are secured by payments from customers, less amounts not required by law to be deposited into trust. These earnings are recognized in Other revenue on our Consolidated Statements of Operations, when a service is performed or merchandise is delivered. Trust management fees charged by CSV RIA are included as revenue in the period in which they are earned. Our investments are diversified across multiple industry segments using a balanced allocation strategy to minimize long-term risk. We do not intend to sell and it is likely that we will not be required to sell the securities prior to their anticipated recovery.
Cemetery perpetual care trust investments represent a portion of the proceeds from the sale of cemetery property interment rights which we are required by various state laws to deposit into perpetual care trust funds. The income earned from these perpetual care trusts offsets maintenance expenses for cemetery property and memorials. This trust fund income is recognized in Other revenue.
Where quoted prices are available in an active market, investments held by the trusts are classified as Level 1 investments pursuant to the three-level valuation hierarchy. Our Level 1 investments include cash, U.S. treasury debt, common stock and equity mutual funds. Where quoted market prices are not available for the specific security, then fair values are estimated by using quoted prices of similar securities in active markets or inputs other than quoted prices that can corroborate observable market data. These investments are fixed income securities, including foreign debt, corporate debt, preferred stocks, mortgage-
backed securities and fixed income mutual funds and other investments, all of which are classified within Level 2 of the valuation hierarchy. We review and update our fair value hierarchy classifications quarterly. See Note 8 to the Consolidated Financial Statements included herein for further information of the fair value measurement.
Changes in the fair value of our trust fund assets (Preneed funeral, cemetery and perpetual care trust investments) are offset by changes in the fair value of our trust fund liabilities (Deferred preneed funeral and cemetery receipts held in trust and Care trusts’ corpus) and reflected in Other, net. There is no impact on earnings until such time the services are performed or the merchandise is delivered, causing the contract to be withdrawn from the trust in accordance with state regulations and the gain or loss is allocated to the contract.
For fixed income securities in an unrealized loss position, we first assess whether we intend to sell or it is more likely than not that we will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security's amortized cost basis is written down to fair value through income. For fixed income securities that do not meet the aforementioned criteria, we evaluate whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, we consider the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If our assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis.
We rely on our trust investments to provide funding for the various contractual obligations that arise upon maturity of the underlying preneed contracts. Because of the long-term relationship between the establishment of trust investments and the required performance of the underlying contractual obligations, the impact of current market conditions that may exist at any given time is not necessarily indicative of our ability to generate profit on our future performance obligations.
Preneed Cemetery Trust Investments
The components of Preneed cemetery trust investments on our Consolidated Balance Sheet are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
September 30, 2021
|
|
Preneed cemetery trust investments, at market value
|
$
|
89,081
|
|
|
$
|
100,318
|
|
|
Less: allowance for contract cancellation
|
(2,477)
|
|
|
(2,829)
|
|
|
Preneed cemetery trust investments
|
$
|
86,604
|
|
|
$
|
97,489
|
|
The cost and market values associated with preneed cemetery trust investments at September 30, 2021 are detailed below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Hierarchy Level
|
|
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair Market
Value
|
|
Cash and money market accounts
|
1
|
|
$
|
1,645
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,645
|
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign debt
|
2
|
|
17,434
|
|
|
2,381
|
|
|
(801)
|
|
|
19,014
|
|
|
Corporate debt
|
2
|
|
12,101
|
|
|
1,484
|
|
|
(18)
|
|
|
13,567
|
|
|
Preferred stock
|
2
|
|
12,366
|
|
|
1,241
|
|
|
(422)
|
|
|
13,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
1
|
|
39,372
|
|
|
4,411
|
|
|
(3,750)
|
|
|
40,033
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
Equity
|
1
|
|
28
|
|
|
5
|
|
|
—
|
|
|
33
|
|
|
Fixed Income
|
2
|
|
11,358
|
|
|
706
|
|
|
(344)
|
|
|
11,720
|
|
|
Trust securities
|
|
|
$
|
94,304
|
|
|
$
|
10,228
|
|
|
$
|
(5,335)
|
|
|
$
|
99,197
|
|
|
Accrued investment income
|
|
|
$
|
1,121
|
|
|
|
|
|
|
$
|
1,121
|
|
|
Preneed cemetery trust investments
|
|
|
|
|
|
|
|
|
$
|
100,318
|
|
|
Market value as a percentage of cost
|
|
|
|
|
|
|
|
|
105.2%
|
The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands):
|
|
|
|
|
|
|
|
Due in one year or less
|
$
|
—
|
|
|
Due in one to five years
|
11,492
|
|
|
Due in five to ten years
|
6,868
|
|
|
Thereafter
|
27,406
|
|
|
Total fixed income securities
|
$
|
45,766
|
|
The cost and market values associated with preneed cemetery trust investments at December 31, 2020 are detailed below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Hierarchy Level
|
|
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair Market
Value
|
|
Cash and money market accounts
|
1
|
|
$
|
1,859
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,859
|
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
Foreign debt
|
2
|
|
15,953
|
|
|
2,083
|
|
|
(702)
|
|
|
17,334
|
|
|
Corporate debt
|
2
|
|
14,856
|
|
|
1,820
|
|
|
(358)
|
|
|
16,318
|
|
|
Preferred stock
|
2
|
|
11,886
|
|
|
980
|
|
|
(336)
|
|
|
12,530
|
|
|
Mortgage-backed securities
|
2
|
|
272
|
|
|
—
|
|
|
(159)
|
|
|
113
|
|
|
Common stock
|
1
|
|
30,253
|
|
|
7,642
|
|
|
(6,601)
|
|
|
31,294
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
Fixed income
|
2
|
|
7,494
|
|
|
1,331
|
|
|
(185)
|
|
|
8,640
|
|
|
Trust Securities
|
|
|
$
|
82,573
|
|
|
$
|
13,856
|
|
|
$
|
(8,341)
|
|
|
$
|
88,088
|
|
|
Accrued investment income
|
|
|
$
|
993
|
|
|
|
|
|
|
$
|
993
|
|
|
Preneed cemetery trust investments
|
|
|
|
|
|
|
|
|
$
|
89,081
|
|
|
Market value as a percentage of cost
|
|
|
|
|
|
|
|
|
106.7%
|
The following table summarized our fixed income securities (excluding mutual funds) within our preneed cemetery trust investments in an unrealized loss position at September 30, 2021, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
|
In Loss Position Less than 12 months
|
|
In Loss Position Greater than 12 months
|
|
Total
|
|
|
Fair market value
|
|
Unrealized Losses
|
|
Fair market value
|
|
Unrealized Losses
|
|
Fair market value
|
|
Unrealized Losses
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign debt
|
$
|
4,280
|
|
|
$
|
(427)
|
|
|
$
|
682
|
|
|
$
|
(374)
|
|
|
$
|
4,962
|
|
|
$
|
(801)
|
|
|
Corporate debt
|
746
|
|
|
(18)
|
|
|
—
|
|
|
—
|
|
|
746
|
|
|
(18)
|
|
|
Preferred stock
|
41
|
|
|
(28)
|
|
|
4,059
|
|
|
(394)
|
|
|
4,100
|
|
|
(422)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed income securities with an unrealized loss
|
$
|
5,067
|
|
|
$
|
(473)
|
|
|
$
|
4,741
|
|
|
$
|
(768)
|
|
|
$
|
9,808
|
|
|
$
|
(1,241)
|
|
The following table summarized our fixed income securities (excluding mutual funds) within our preneed cemetery trust investments in an unrealized loss position at December 31, 2020, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
In Loss Position Less than 12 months
|
|
In Loss Position Greater than 12 months
|
|
Total
|
|
|
Fair market value
|
|
Unrealized Losses
|
|
Fair market value
|
|
Unrealized Losses
|
|
Fair market value
|
|
Unrealized Losses
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign debt
|
$
|
2,517
|
|
|
$
|
(57)
|
|
|
$
|
371
|
|
|
$
|
(645)
|
|
|
$
|
2,888
|
|
|
$
|
(702)
|
|
|
Corporate debt
|
784
|
|
|
(99)
|
|
|
542
|
|
|
(259)
|
|
|
1,326
|
|
|
(358)
|
|
|
Preferred stock
|
709
|
|
|
(118)
|
|
|
4,049
|
|
|
(218)
|
|
|
4,758
|
|
|
(336)
|
|
|
Mortgage-backed securities
|
—
|
|
|
—
|
|
|
112
|
|
|
(159)
|
|
|
112
|
|
|
(159)
|
|
|
Total fixed income securities with an unrealized loss
|
$
|
4,010
|
|
|
$
|
(274)
|
|
|
$
|
5,074
|
|
|
$
|
(1,281)
|
|
|
$
|
9,084
|
|
|
$
|
(1,555)
|
|
Preneed cemetery trust investment security transactions recorded in Other, net on our Consolidated Statements of Operations are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
Investment income
|
$
|
449
|
|
|
$
|
441
|
|
|
$
|
1,421
|
|
|
$
|
1,570
|
|
|
Realized gains
|
2,857
|
|
|
2,207
|
|
|
6,392
|
|
|
16,315
|
|
|
Realized losses
|
(918)
|
|
|
(214)
|
|
|
(4,490)
|
|
|
(6,563)
|
|
|
Unrealized gains (losses), net
|
1,235
|
|
|
(3,966)
|
|
|
(2,726)
|
|
|
4,893
|
|
|
Expenses and taxes
|
(357)
|
|
|
(546)
|
|
|
(982)
|
|
|
(1,308)
|
|
|
Net change in deferred preneed cemetery receipts held in trust
|
(3,266)
|
|
|
2,078
|
|
|
385
|
|
|
(14,907)
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Purchases and sales of investments in the preneed cemetery trusts are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
Purchases
|
$
|
(10,297)
|
|
|
$
|
(7,532)
|
|
|
$
|
(42,750)
|
|
|
$
|
(34,740)
|
|
|
Sales
|
9,200
|
|
|
6,446
|
|
|
34,566
|
|
|
33,847
|
|
Preneed Funeral Trust Investments
Preneed funeral trust investments represent trust fund assets that we are permitted to withdraw as services and merchandise are provided to customers. Preneed funeral contracts are secured by payments from customers, less retained amounts not required to be deposited into trust.
The components of Preneed funeral trust investments on our Consolidated Balance Sheet are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
September 30, 2021
|
|
Preneed funeral trust investments, at market value
|
$
|
104,166
|
|
|
$
|
111,587
|
|
|
Less: allowance for contract cancellation
|
(2,931)
|
|
|
(3,183)
|
|
|
Preneed funeral trust investments
|
$
|
101,235
|
|
|
$
|
108,404
|
|
The cost and market values associated with preneed funeral trust investments at September 30, 2021 are detailed below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Hierarchy Level
|
|
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair Market
Value
|
|
Cash and money market accounts
|
1
|
|
$
|
19,132
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19,132
|
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
U.S treasury debt
|
1
|
|
16,554
|
|
|
2,224
|
|
|
(749)
|
|
|
18,029
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign debt
|
2
|
|
10,518
|
|
|
1,325
|
|
|
(17)
|
|
|
11,826
|
|
|
Corporate debt
|
2
|
|
11,011
|
|
|
1,119
|
|
|
(396)
|
|
|
11,734
|
|
|
Preferred stock
|
2
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
1
|
|
35,602
|
|
|
4,055
|
|
|
(3,357)
|
|
|
36,300
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
Equity
|
1
|
|
26
|
|
4
|
|
—
|
|
|
30
|
|
|
Fixed income
|
2
|
|
9,398
|
|
|
539
|
|
|
(269)
|
|
|
9,668
|
|
|
Other investments
|
2
|
|
3,846
|
|
|
—
|
|
|
—
|
|
|
3,846
|
|
|
Trust securities
|
|
|
$
|
106,087
|
|
|
$
|
9,266
|
|
|
$
|
(4,788)
|
|
|
$
|
110,565
|
|
|
Accrued investment income
|
|
|
$
|
1,022
|
|
|
|
|
|
|
$
|
1,022
|
|
|
Preneed funeral trust investments
|
|
|
|
|
|
|
|
|
$
|
111,587
|
|
|
Market value as a percentage of cost
|
|
|
|
|
|
|
|
|
104.2%
|
The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands):
|
|
|
|
|
|
|
|
Due in one year or less
|
$
|
—
|
|
|
Due in one to five years
|
10,164
|
|
|
Due in five to ten years
|
6,184
|
|
|
Thereafter
|
25,241
|
|
|
Total fixed income securities
|
$
|
41,589
|
|
The cost and market values associated with preneed funeral trust investments at December 31, 2020 are detailed below (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Hierarchy Level
|
|
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair Market
Value
|
|
Cash and money market accounts
|
1
|
|
$
|
18,478
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18,478
|
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
U.S. treasury debt
|
1
|
|
819
|
|
|
6
|
|
|
—
|
|
|
825
|
|
|
Foreign debt
|
2
|
|
15,144
|
|
|
2,018
|
|
|
(634)
|
|
|
16,528
|
|
|
Corporate debt
|
2
|
|
13,292
|
|
|
1,638
|
|
|
(310)
|
|
|
14,620
|
|
|
Preferred stock
|
2
|
|
10,944
|
|
|
900
|
|
|
(298)
|
|
|
11,546
|
|
|
Mortgage-backed securities
|
2
|
|
293
|
|
|
1
|
|
|
(155)
|
|
|
139
|
|
|
Common stock
|
1
|
|
28,327
|
|
|
7,364
|
|
|
(6,052)
|
|
|
29,639
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income
|
2
|
|
6,475
|
|
|
1,198
|
|
|
(121)
|
|
|
7,552
|
|
|
Other investments
|
2
|
|
3,928
|
|
|
—
|
|
|
—
|
|
|
3,928
|
|
|
Trust securities
|
|
|
$
|
97,700
|
|
|
$
|
13,125
|
|
|
$
|
(7,570)
|
|
|
$
|
103,255
|
|
|
Accrued investment income
|
|
|
$
|
911
|
|
|
|
|
|
|
$
|
911
|
|
|
Preneed funeral trust investments
|
|
|
|
|
|
|
|
|
$
|
104,166
|
|
|
Market value as a percentage of cost
|
|
|
|
|
|
|
|
|
105.7%
|
The following table summarized our fixed income securities (excluding mutual funds) within our preneed funeral trust investment in an unrealized loss position at September 30, 2021, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
|
In Loss Position Less than 12 months
|
|
In Loss Position Greater than 12 months
|
|
Total
|
|
|
Fair market value
|
|
Unrealized Losses
|
|
Fair market value
|
|
Unrealized Losses
|
|
Fair market value
|
|
Unrealized Losses
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign debt
|
$
|
4,339
|
|
|
$
|
(423)
|
|
|
$
|
599
|
|
|
$
|
(326)
|
|
|
$
|
4,938
|
|
|
$
|
(749)
|
|
|
Corporate debt
|
700
|
|
|
(17)
|
|
|
—
|
|
|
—
|
|
|
700
|
|
|
(17)
|
|
|
Preferred stock
|
39
|
|
|
(26)
|
|
|
3,809
|
|
|
(370)
|
|
|
3,848
|
|
|
(396)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed income securities with an unrealized loss
|
$
|
5,078
|
|
|
$
|
(466)
|
|
|
$
|
4,408
|
|
|
$
|
(696)
|
|
|
$
|
9,486
|
|
|
$
|
(1,162)
|
|
The following table summarized our fixed income securities (excluding mutual funds) within our preneed funeral trust investment in an unrealized loss position at December 31, 2020, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
In Loss Position Less than 12 months
|
|
In Loss Position Greater than 12 months
|
|
Total
|
|
|
Fair market value
|
|
Unrealized Losses
|
|
Fair market value
|
|
Unrealized Losses
|
|
Fair market value
|
|
Unrealized Losses
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign debt
|
$
|
2,225
|
|
|
$
|
(55)
|
|
|
$
|
337
|
|
|
$
|
(579)
|
|
|
$
|
2,562
|
|
|
$
|
(634)
|
|
|
Corporate debt
|
763
|
|
|
(96)
|
|
|
528
|
|
|
(214)
|
|
|
1,291
|
|
|
(310)
|
|
|
Preferred stock
|
506
|
|
|
(87)
|
|
|
3,942
|
|
|
(211)
|
|
|
4,448
|
|
|
(298)
|
|
|
Mortgage-backed securities
|
—
|
|
|
—
|
|
|
111
|
|
|
(155)
|
|
|
111
|
|
|
(155)
|
|
|
Total fixed income securities with an unrealized loss
|
$
|
3,494
|
|
|
$
|
(238)
|
|
|
$
|
4,918
|
|
|
$
|
(1,159)
|
|
|
$
|
8,412
|
|
|
$
|
(1,397)
|
|
Preneed funeral trust investment security transactions recorded in Other, net on the Consolidated Statements of Operations are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
|
|
|
Investment income
|
$
|
373
|
|
|
$
|
357
|
|
|
$
|
1,235
|
|
|
$
|
1,261
|
|
|
|
|
|
|
Realized gains
|
2,821
|
|
|
2,072
|
|
|
6,978
|
|
|
15,331
|
|
|
|
|
|
|
Realized losses
|
(911)
|
|
|
(201)
|
|
|
(4,093)
|
|
|
(6,097)
|
|
|
|
|
|
|
Unrealized gains (losses), net
|
1,197
|
|
|
(3,728)
|
|
|
(2,188)
|
|
|
4,478
|
|
|
|
|
|
|
Expenses and taxes
|
(296)
|
|
|
(409)
|
|
|
(646)
|
|
|
(1,041)
|
|
|
|
|
|
|
Net change in deferred preneed funeral receipts held in trust
|
(3,184)
|
|
|
1,909
|
|
|
(1,286)
|
|
|
(13,932)
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
Purchases and sales of investments in the preneed funeral trusts are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
|
|
|
Purchases
|
$
|
(9,869)
|
|
|
$
|
(6,729)
|
|
|
$
|
(41,560)
|
|
|
$
|
(32,219)
|
|
|
|
|
|
|
Sales
|
8,975
|
|
|
6,864
|
|
|
36,831
|
|
|
32,153
|
|
|
|
|
|
Cemetery Perpetual Care Trust Investments
Care trusts’ corpus on our Consolidated Balance Sheet represent the corpus of those trusts plus undistributed income. The components of Care trusts’ corpus are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
September 30, 2021
|
|
Cemetery perpetual care trust investments, at market value
|
$
|
70,828
|
|
|
$
|
71,640
|
|
|
Obligations due from trust
|
(1,121)
|
|
|
(680)
|
|
|
Care trusts’ corpus
|
$
|
69,707
|
|
|
$
|
70,960
|
|
The following table reflects the cost and fair market values associated with the trust investments held in perpetual care trust funds at September 30, 2021 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Hierarchy Level
|
|
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair Market
Value
|
|
Cash and money market accounts
|
1
|
|
$
|
662
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
662
|
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign debt
|
2
|
|
12,228
|
|
|
1,679
|
|
|
(556)
|
|
|
13,351
|
|
|
Corporate debt
|
2
|
|
8,723
|
|
|
1,167
|
|
|
(12)
|
|
|
9,878
|
|
|
Preferred stock
|
2
|
|
9,841
|
|
|
909
|
|
|
(284)
|
|
|
10,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock
|
1
|
|
27,383
|
|
|
3,383
|
|
|
(2,831)
|
|
|
27,935
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
Equity
|
1
|
|
19
|
|
|
3
|
|
|
—
|
|
|
22
|
|
|
Fixed Income
|
2
|
|
8,223
|
|
|
596
|
|
|
(307)
|
|
|
8,512
|
|
|
Trust securities
|
|
|
$
|
67,079
|
|
|
$
|
7,737
|
|
|
$
|
(3,990)
|
|
|
$
|
70,826
|
|
|
Accrued investment income
|
|
|
$
|
814
|
|
|
|
|
|
|
$
|
814
|
|
|
Cemetery perpetual care investments
|
|
|
|
|
|
|
|
|
$
|
71,640
|
|
|
Market value as a percentage of cost
|
|
|
|
|
|
|
|
|
105.6%
|
The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands):
|
|
|
|
|
|
|
|
Due in one year or less
|
$
|
—
|
|
|
Due in one to five years
|
7,713
|
|
|
Due in five to ten years
|
5,301
|
|
|
Thereafter
|
20,681
|
|
|
Total fixed income securities
|
$
|
33,695
|
|
The following table reflects the cost and fair market values associated with the trust investments held in perpetual care trust funds at December 31, 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Hierarchy Level
|
|
Cost
|
|
Unrealized
Gains
|
|
Unrealized
Losses
|
|
Fair Market
Value
|
|
Cash and money market accounts
|
1
|
|
$
|
686
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
686
|
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
Foreign debt
|
2
|
|
12,539
|
|
|
1,641
|
|
|
(582)
|
|
|
13,598
|
|
|
Corporate debt
|
2
|
|
11,684
|
|
|
1,506
|
|
|
(240)
|
|
|
12,950
|
|
|
Preferred stock
|
2
|
|
10,444
|
|
|
819
|
|
|
(355)
|
|
|
10,908
|
|
|
Mortgage-backed securities
|
2
|
|
206
|
|
|
—
|
|
|
(121)
|
|
|
85
|
|
|
Common stock
|
1
|
|
23,662
|
|
|
6,108
|
|
|
(5,255)
|
|
|
24,515
|
|
|
Mutual funds:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed income
|
2
|
|
6,444
|
|
|
1,054
|
|
|
(220)
|
|
|
7,278
|
|
|
Trust securities
|
|
|
$
|
65,665
|
|
|
$
|
11,128
|
|
|
$
|
(6,773)
|
|
|
$
|
70,020
|
|
|
Accrued investment income
|
|
|
$
|
808
|
|
|
|
|
|
|
$
|
808
|
|
|
Cemetery perpetual care investments
|
|
|
|
|
|
|
|
|
$
|
70,828
|
|
|
Market value as a percentage of cost
|
|
|
|
|
|
|
|
|
106.6%
|
The following table summarized our fixed income securities (excluding mutual funds) within our perpetual care trust investment in an unrealized loss position at September 30, 2021, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2021
|
|
|
In Loss Position Less than 12 months
|
|
In Loss Position Greater than 12 months
|
|
Total
|
|
|
Fair market value
|
|
Unrealized Losses
|
|
Fair market value
|
|
Unrealized Losses
|
|
Fair market value
|
|
Unrealized Losses
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign debt
|
$
|
2,736
|
|
|
$
|
(270)
|
|
|
$
|
517
|
|
|
$
|
(286)
|
|
|
$
|
3,253
|
|
|
$
|
(556)
|
|
|
Corporate debt
|
501
|
|
|
(12)
|
|
|
—
|
|
|
—
|
|
|
501
|
|
|
(12)
|
|
|
Preferred stock
|
28
|
|
|
(19)
|
|
|
2,726
|
|
|
(265)
|
|
|
2,754
|
|
|
(284)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total fixed income securities with an unrealized loss
|
$
|
3,265
|
|
|
$
|
(301)
|
|
|
$
|
3,243
|
|
|
$
|
(551)
|
|
|
$
|
6,508
|
|
|
$
|
(852)
|
|
The following table summarized our fixed income securities (excluding mutual funds) within our perpetual care trust investment in an unrealized loss position at December 31, 2020, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
|
In Loss Position Less than 12 months
|
|
In Loss Position Greater than 12 months
|
|
Total
|
|
|
Fair market value
|
|
Unrealized Losses
|
|
Fair market value
|
|
Unrealized Losses
|
|
Fair market value
|
|
Unrealized Losses
|
|
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign debt
|
$
|
1,728
|
|
|
$
|
(43)
|
|
|
$
|
312
|
|
|
$
|
(539)
|
|
|
$
|
2,040
|
|
|
$
|
(582)
|
|
|
Corporate debt
|
592
|
|
|
(74)
|
|
|
410
|
|
|
(166)
|
|
|
1,002
|
|
|
(240)
|
|
|
Preferred stock
|
1,142
|
|
|
(191)
|
|
|
3,060
|
|
|
(164)
|
|
|
4,202
|
|
|
(355)
|
|
|
Mortgage-backed securities
|
—
|
|
|
—
|
|
|
85
|
|
|
(121)
|
|
|
85
|
|
|
(121)
|
|
|
Total fixed income securities with an unrealized loss
|
$
|
3,462
|
|
|
$
|
(308)
|
|
|
$
|
3,867
|
|
|
$
|
(990)
|
|
|
$
|
7,329
|
|
|
$
|
(1,298)
|
|
Perpetual care trust investment security transactions recorded in Other, net on our Consolidated Statements of Operations are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
Realized gains
|
$
|
773
|
|
|
$
|
275
|
|
|
$
|
1,921
|
|
|
$
|
2,224
|
|
|
Realized losses
|
(249)
|
|
|
(26)
|
|
|
(1,534)
|
|
|
(942)
|
|
|
Unrealized gains (losses), net
|
1,108
|
|
|
(3,070)
|
|
|
(2,349)
|
|
|
3,747
|
|
|
Net change in Care trusts’ corpus
|
(1,632)
|
|
|
2,821
|
|
|
1,962
|
|
|
(5,029)
|
|
|
Total
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Perpetual care trust investment security transactions recorded in Other revenue on our Consolidated Statements of Operations are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
Investment income
|
$
|
2,531
|
|
|
$
|
2,881
|
|
|
$
|
5,879
|
|
|
$
|
8,104
|
|
|
Realized gains (losses), net
|
63
|
|
|
(278)
|
|
|
53
|
|
|
(557)
|
|
|
Total
|
$
|
2,594
|
|
|
$
|
2,603
|
|
|
$
|
5,932
|
|
|
$
|
7,547
|
|
Purchases and sales of investments in the perpetual care trusts are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
Purchases
|
$
|
(7,960)
|
|
|
$
|
(5,049)
|
|
|
$
|
(33,638)
|
|
|
$
|
(24,105)
|
|
|
Sales
|
7,168
|
|
|
4,431
|
|
|
29,319
|
|
|
23,695
|
|
7.RECEIVABLES FROM PRENEED FUNERAL TRUSTS
Our receivables from preneed funeral trusts represent assets in trusts which are controlled and operated by third parties in which we do not have a controlling financial interest (less than 50%) in the trust assets. We account for these investments at cost. Receivables from preneed funeral trusts are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
September 30, 2021
|
|
Preneed trust funeral funds, at cost
|
$
|
17,365
|
|
|
$
|
19,243
|
|
|
Less: allowance for contract cancellation
|
(521)
|
|
|
(578)
|
|
|
Receivables from preneed funeral trusts, net
|
$
|
16,844
|
|
|
$
|
18,665
|
|
The following summary reflects the composition of the assets held in trust and controlled by third parties to satisfy our future obligations under preneed arrangements related to the preceding contracts at December 31, 2020 and September 30, 2021. The cost basis includes reinvested interest and dividends that have been earned on the trust assets. Fair value includes unrealized gains and losses on trust assets.
The composition of the preneed funeral trust funds at September 30, 2021 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
Cost Basis
|
|
Fair Value
|
|
Cash and cash equivalents
|
$
|
5,460
|
|
|
$
|
5,460
|
|
|
Fixed income investments
|
11,279
|
|
|
11,279
|
|
|
Mutual funds and common stocks
|
2,499
|
|
|
2,598
|
|
|
Annuities
|
5
|
|
|
5
|
|
|
Total
|
$
|
19,243
|
|
|
$
|
19,342
|
|
The composition of the preneed funeral trust funds at December 31, 2020 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Historical
Cost Basis
|
|
Fair Value
|
|
Cash and cash equivalents
|
$
|
4,604
|
|
|
$
|
4,604
|
|
|
Fixed income investments
|
10,355
|
|
|
10,355
|
|
|
Mutual funds and common stocks
|
2,402
|
|
|
2,569
|
|
|
Annuities
|
4
|
|
|
4
|
|
|
Total
|
$
|
17,365
|
|
|
$
|
17,532
|
|
8.FAIR VALUE MEASUREMENTS
We evaluated our financial assets and liabilities for those financial assets and liabilities that met the criteria of the disclosure requirements and fair value framework. The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximate the fair values of those instruments due to the short-term nature of the instruments. The fair values of our receivables on preneed cemetery contracts are impracticable to estimate because of the lack of a trading market and the diverse number of individual contracts with varying terms. Our acquisition debt and New Credit Facility (as defined in Note 10) and New Senior Notes (as defined in Note 11) are classified within Level 2 of the Fair Value Measurements hierarchy.
At September 30, 2021, the carrying value and fair value of our New Credit Facility was $86.9 million. We believe that our New Credit Facility bears interest at a rate that approximates prevailing market rates for instruments with similar characteristics and therefore, the carrying value of our New Credit Facility approximates fair value. We estimate the fair value of our acquisition debt utilizing an income approach, which uses a present value calculation to discount payments based on current market rates as of the reporting date. At September 30, 2021, the carrying value of our acquisition debt was $5.1 million, which approximated its fair value. The fair value of our New Senior Notes was approximately $403.2 million at September 30, 2021 based on the last traded or broker quoted price.
At December 31, 2020 and September 30, 2021, we did not have any assets that had fair values determined by Level 3 inputs and no liabilities measured at fair value.
We identified investments in fixed income securities, common stock and mutual funds presented within the preneed and perpetual care trust investments categories on our Consolidated Balance Sheet as having met the criteria for fair value measurement. Our receivables from preneed funeral trusts represent assets in trusts which are controlled and operated by third parties in which we do not have a controlling financial interest (less than 50%) in the trust assets. We account for these investments at cost. See Notes 6 and 7 to our Consolidated Financial Statements herein for the fair value hierarchy levels of our trust investments.
9.INTANGIBLE AND OTHER NON-CURRENT ASSETS
Intangible and other non-current assets are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
September 30, 2021
|
|
Tradenames
|
$
|
23,565
|
|
|
$
|
23,565
|
|
|
Prepaid agreements not-to-compete, net of accumulated amortization of $3,193 and $3,463, respectively
|
2,785
|
|
|
2,364
|
|
|
Capitalized commissions on preneed contracts, net of accumulated amortization of $1,594 and $2,164, respectively
|
3,141
|
|
|
3,505
|
|
|
|
|
|
|
|
Other
|
51
|
|
|
3
|
|
|
Intangible and other non-current assets, net
|
$
|
29,542
|
|
|
$
|
29,437
|
|
Tradenames
Our tradenames have indefinite lives and therefore are not amortized.
See Note 1 to the Consolidated Financial Statements included herein for a discussion of the methodology used for our indefinite-lived intangible asset impairment test.
Prepaid Agreements
Prepaid agreements not-to-compete are amortized over the term of the respective agreements, ranging generally from one to ten years. Amortization expense was $175,000 and $158,000 for the three months ended September 30, 2020 and 2021, respectively and $551,000 and $495,000 for the nine months ended September 30, 2020 and 2021, respectively.
Capitalized Commissions
We capitalize our selling costs related to preneed cemetery merchandise and services and preneed funeral trust contracts. These costs are amortized on a straight-line basis over the average maturity period for our preneed cemetery merchandise and services contracts and preneed funeral trust contracts, of eight and ten years, respectively. Amortization expense was $145,000 and $165,000 for the three months ended September 30, 2020 and 2021, respectively and $430,000 and $473,000 for the nine months ended September 30, 2020 and 2021, respectively.
The aggregate amortization expense for our non-compete agreements and capitalized commissions as of September 30, 2021 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid Agreements
|
|
Capitalized Commissions
|
|
Years ending December 31,
|
|
|
|
|
Remainder of 2021
|
$
|
147
|
|
|
$
|
167
|
|
|
2022
|
519
|
|
|
641
|
|
|
2023
|
446
|
|
|
585
|
|
|
2024
|
380
|
|
|
523
|
|
|
2025
|
373
|
|
|
457
|
|
|
Thereafter
|
499
|
|
|
1,132
|
|
|
Total amortization expense
|
$
|
2,364
|
|
|
$
|
3,505
|
|
10.CREDIT FACILITY AND ACQUISITION DEBT
At December 31, 2020, our senior secured revolving credit facility (the “Former Credit Facility”) was comprised of: (i) a $190.0 million revolving credit facility, including a $15.0 million subfacility for letters of credit and a $10.0 million swingline, and (ii) an accordion or incremental option allowing for future increases in the facility size by an additional amount of up to $75.0 million in the form of increased revolving commitments or incremental term loans. The final maturity of the Former Credit Facility was to occur on May 31, 2023.
On May 13, 2021, in connection with the issuance of the New Senior Notes (defined in Note 11), we entered into an amended and restated $150.0 million senior secured revolving credit facility (the “New Credit Facility”) with the New Credit Facility Subsidiary Guarantors (as defined below), the financial institutions party thereto, as lenders, and Bank of America, N.A., as administrative agent. We incurred $0.8 million in transactions costs related to the New Credit Facility, which were capitalized and will be amortized over the remaining term of the related debt using the straight-line method.
On May 13, 2021, we used approximately $21.4 million of the availability under the New Credit Facility to repay the then outstanding balances under our Former Credit Facility and all commitments thereunder were terminated. In connection with the repayment in full of all amounts due thereunder, the Former Credit Facility was retired and $2.1 million of letters of credit previously issued under the Former Credit Facility were deemed issued under (and remain outstanding under) the New Credit Facility. In connection with the termination of the Former Credit Facility, for the nine months ended September 30, 2021, we recognized a loss on the write-off of $0.1 million in unamortized debt issuance costs, which was recorded in Loss on extinguishment of debt.
Our obligations under the New Credit Facility are unconditionally guaranteed on a joint and several basis by the same subsidiaries which guarantee the New Senior Notes and certain of our subsequently acquired or organized domestic subsidiaries (collectively, the “Subsidiary Guarantors”). The New Credit Facility allows for future increases in the facility size in the form of increased revolving commitments or new incremental term loans by an additional amount of up to $75.0 million in the aggregate. The final maturity of the New Credit Facility will occur on May 13, 2026.
The New Credit Facility is secured by a first-priority perfected security interest in and lien on substantially all of the Company’s personal property assets and those of the Subsidiary Guarantors. In addition, the New Credit Facility includes provisions which require the Company and the Subsidiary Guarantors, upon the occurrence of an event of default or in the event the Company’s actual Total Leverage Ratio is not at least 0.25 less than the required Total Leverage Ratio covenant level under the New Credit Facility, to grant additional liens on real property assets accounting for no less than 50% of the Company’s and the Subsidiary Guarantors’ funeral operations if requested by the administrative agent.
The New Credit Facility contains customary affirmative covenants, including, but not limited to, covenants with respect to the use of proceeds, payment of taxes and other obligations, continuation of the Company’s business and the maintenance of existing rights and privileges, the maintenance of property and insurance, amongst others.
In addition, the New Credit Facility also contains customary negative covenants, including, but not limited to, covenants that restrict (subject to certain exceptions) the ability of the Company and the Subsidiary Guarantors to incur indebtedness, grant liens, make investments, engage in mergers and acquisitions, and pay dividends and other restricted payments, and certain financial maintenance covenants. At September 30, 2021, we were subject to the following financial covenants under our New Credit Facility: (A) a Total Leverage Ratio not to exceed 5.00 to 1.00 and (B) a Fixed Charge Coverage Ratio (as defined in the New Credit Facility) of not less than 1.20 to 1.00 as of the end of any period of four consecutive fiscal quarters. These financial maintenance covenants are calculated for the Company and its subsidiaries on a consolidated basis.
We were in compliance with all of the covenants contained in our New Credit Facility as of September 30, 2021.
Our Credit Facility and Acquisition debt consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
September 30, 2021
|
|
Credit Facility
|
$
|
47,200
|
|
|
$
|
86,900
|
|
|
Debt issuance costs, net of accumulated amortization of $819 and $1,242, respectively
|
(1,136)
|
|
|
(1,482)
|
|
|
Total Credit Facility
|
$
|
46,064
|
|
|
$
|
85,418
|
|
|
|
|
|
|
|
Acquisition debt
|
$
|
5,509
|
|
|
$
|
5,089
|
|
|
Less: current portion
|
(1,027)
|
|
|
(730)
|
|
|
Total acquisition debt, net of current portion
|
$
|
4,482
|
|
|
$
|
4,359
|
|
At September 30, 2021, we had outstanding borrowings under the New Credit Facility of $86.9 million. We also had one letter of credit for $2.1 million under the New Credit Facility, which was increased to $2.3 million on September 1, 2021. The letter of credit will expire on November 26, 2021 and is expected to automatically renew annually and secures our obligations under our various self-insured policies. At September 30, 2021, we had $60.8 million of availability under the New Credit Facility.
Outstanding borrowings under our New Credit Facility bear interest at either a prime rate or a LIBOR rate, plus an applicable margin based upon our leverage ratio. At September 30, 2021, the prime rate margin was equivalent to 0.75% and the LIBOR rate margin was 1.75%. The weighted average interest rate on our New Credit Facility was 2.0% and 2.5% for the three and nine months ended September 30, 2021, respectively. The weighted average interest rate on our Former Credit Facility was 3.9% and 4.0% for the three and nine months ended September 30, 2020, respectively.
The interest expense and amortization of debt issuance costs related to our Credit Facility are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
Credit Facility interest expense
|
$
|
828
|
|
|
$
|
383
|
|
|
$
|
3,164
|
|
|
$
|
1,200
|
|
|
Credit Facility amortization of debt issuance costs
|
118
|
|
|
80
|
|
|
363
|
|
|
297
|
|
Acquisition debt consists of deferred purchase price and promissory notes payable to sellers. A majority of the deferred purchase price and notes bear no interest and are discounted at imputed interest rates ranging from 7.3% to 10.0%. Original maturities range from five to twenty years.
The imputed interest expense related to our acquisition debt is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
Acquisition debt imputed interest expense
|
$
|
122
|
|
|
$
|
90
|
|
|
$
|
373
|
|
|
$
|
280
|
|
|
|
|
|
|
|
|
|
|
11. SENIOR NOTES
On May 13, 2021, we completed the issuance of $400.0 million in aggregate principal amount 4.25% Senior Notes due 2029 (the “New Senior Notes”) and related guarantees by the Subsidiary Guarantors in a private offering under Rule 144A and Regulation S of the Securities Act of 1933, as amended (the “Securities Act”).
We used the proceeds of $395.5 million from the offering of the New Senior Notes, which are net of a 1.125% debt discount of $4.5 million, together with cash on hand and borrowings under the New Credit Facility, to redeem all of our then outstanding $400.0 million in aggregate principal amount 6.625% senior notes due 2026 (the “Original Senior Notes”). We paid a premium of $19.9 million to redeem the Original Senior Notes on June 1, 2021 at a redemption price of 104.97% of the principal amount thereof, plus accrued and unpaid interest of $13.25 million. During the nine months ended September 30, 2021, we incurred $1.3 million in transaction costs related to the New Senior Notes.
For the nine months ended September 30, 2021, we recognized a net loss of $23.7 million related to the redemption of the Original Senior Notes, which was recorded in Loss on extinguishment of debt. The loss is composed of the $19.9 million call premium, the write-off of $3.4 million in unamortized debt discount, the write-off of $1.8 million in unamortized debt issuance costs, offset by the write-off of $1.4 million in unamortized debt premium.
The New Senior Notes were issued under an indenture, dated as of May 13, 2021 (the “Indenture”), among the Company, the Subsidiary Guarantors and Wilmington Trust, National Association, as trustee (“Collateral Trustee”).
The New Senior Notes bear interest at 4.25% per year. Interest on the New Senior Notes is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2021. The New Senior Notes mature on May 15, 2029, unless earlier redeemed or purchased. The New Senior Notes are unsecured, senior obligations and are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally by each of the Subsidiary Guarantors.
We may redeem the New Senior Notes, in whole or in part, at the redemption price of 102.13% on or after May 15, 2024, 101.06% on or after May 15, 2025 and 100% on or after May 15, 2026, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. At any time before May 15, 2024, we may also redeem all or part of the New Senior Notes at the redemption prices described in the Indenture, plus accrued and unpaid interest, if any, to (but excluding) the date of redemption. In addition, before May 15, 2024, we may redeem up to 40% of the aggregate principal amount of the New Senior Notes outstanding using an amount of cash equal to the net proceeds of certain equity offerings, at a price of 104.25% of the principal amount of the New Senior Notes, plus accrued and unpaid interest, if any, to (but excluding) the date of redemption; provided that (1) at least 50% of the aggregate principal amount of the New Senior Notes (including any additional New Senior Notes) outstanding under the Indenture remain outstanding immediately after the occurrence of such redemption (unless all New Senior Notes are redeemed concurrently), and (2) each such redemption must occur within 180 days of the date of the consummation of any such equity offering.
If a “change of control” occurs, holders of the New Senior Notes will have the option to require us to purchase for cash all or a portion of their New Senior Notes at a price equal to 101% of the principal amount of the New Senior Notes, plus accrued and unpaid interest. In addition, if we make certain asset sales and do not reinvest the proceeds thereof or use such proceeds to repay certain debt, we will be required to use the proceeds of such asset sales to make an offer to purchase the New Senior Notes at a price equal to 100% of the principal amount of the New Senior Notes, plus accrued and unpaid interest.
The Indenture contains restrictive covenants limiting our ability and our Restricted Subsidiaries (as defined in the Indenture) to, among other things, incur additional indebtedness or issue certain preferred shares, create liens on certain assets to secure debt, pay dividends or make other equity distributions, purchase or redeem capital stock, make certain investments, sell assets, agree to certain restrictions on the ability of Restricted Subsidiaries to make payments to us, consolidate, merge, sell or otherwise dispose of all or substantially all assets, or engage in transactions with affiliates. The Indenture also contains customary events of default.
The debt discount and the debt issuance costs are being amortized using the effective interest method over the remaining term of approximately 92 months of the New Senior Notes. The effective interest rate on the unamortized debt discount and the unamortized debt issuance costs for the New Senior Notes for both three and nine months ended September 30, 2021 was 4.42% and 4.30%, respectively.
The carrying value of our Senior Notes is reflected on our Consolidated Balance Sheet as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
September 30, 2021
|
|
Long-term liabilities:
|
|
|
|
|
Principal amount
|
$
|
400,000
|
|
|
$
|
400,000
|
|
|
Debt premium, net of accumulated amortization of $221
|
1,467
|
|
|
—
|
|
|
Debt discount, net of accumulated amortization of $1,293 and $181, respectively
|
(3,582)
|
|
|
(4,319)
|
|
|
Debt issuance costs, net of accumulated amortization of $496 and $51, respectively
|
(1,917)
|
|
|
(1,225)
|
|
|
Carrying value of the Senior Notes
|
$
|
395,968
|
|
|
$
|
394,456
|
|
At September 30, 2021, the fair value of the New Senior Notes, which are Level 2 measurements, was $403.2 million.
The interest expense and amortization of debt discount, debt premium and debt issuance costs related to our Senior Notes are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
Senior Notes interest expense
|
$
|
6,625
|
|
|
$
|
4,250
|
|
|
$
|
19,875
|
|
|
$
|
17,517
|
|
|
Senior Notes amortization of debt discount
|
133
|
|
|
118
|
|
|
393
|
|
|
384
|
|
|
Senior Notes amortization of debt premium
|
56
|
|
|
—
|
|
|
165
|
|
|
85
|
|
|
Senior Notes amortization of debt issuance costs
|
72
|
|
|
34
|
|
|
208
|
|
|
161
|
|
The effective interest rate on the unamortized debt discount and unamortized debt issuance costs for the Original Senior Notes, issued in May 2018, for both the three and nine months ended September 30, 2020 was 6.87% and 6.69%, respectively. The effective interest rate on the unamortized debt premium and the unamortized debt issuance costs for the additional Original Senior Notes, issued in December 2019, for both the three and nine months ended September 30, 2020 was 6.20% and 6.90%, respectively.
12.LEASES
Our lease obligations consist of operating and finance leases related to real estate and equipment. The components of lease cost are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
Income Statement Classification
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
Operating lease cost
|
Facilities and grounds expense(1)
|
|
$
|
927
|
|
|
$
|
947
|
|
|
$
|
2,838
|
|
|
$
|
2,871
|
|
|
Short-term lease cost
|
Facilities and grounds expense(1)
|
|
35
|
|
|
39
|
|
|
107
|
|
|
145
|
|
|
Variable lease cost
|
Facilities and grounds expense(1)
|
|
17
|
|
|
43
|
|
|
41
|
|
|
100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance lease cost:
|
|
|
|
|
|
|
|
|
|
|
Depreciation of leased assets
|
Depreciation and amortization(2)
|
|
$
|
111
|
|
|
$
|
111
|
|
|
$
|
329
|
|
|
$
|
328
|
|
|
Interest on lease liabilities
|
Interest expense
|
|
123
|
|
|
117
|
|
|
374
|
|
|
356
|
|
|
Total finance lease cost
|
|
|
234
|
|
|
228
|
|
|
703
|
|
|
684
|
|
|
Total lease cost
|
|
|
$
|
1,213
|
|
|
$
|
1,257
|
|
|
$
|
3,689
|
|
|
$
|
3,800
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Facilities and grounds expense is included within Cost of service and General, administrative and other on our Consolidated Statements of Operations.
|
|
(2)
|
Depreciation and amortization expense is included within Field depreciation and Home office depreciation and amortization on our Consolidated Statements of Operations.
|
Supplemental cash flow information related to our leases is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
|
|
2020
|
|
2021
|
|
Cash paid for operating leases included in operating activities
|
$
|
2,470
|
|
|
$
|
2,891
|
|
|
Cash paid for finance leases included in financing activities
|
621
|
|
|
626
|
|
Right-of-use assets obtained in exchange for new leases is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
|
|
2020
|
|
2021
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities
|
$
|
75
|
|
|
$
|
(1,358)
|
|
|
Right-of-use assets obtained in exchange for new finance lease liabilities
|
—
|
|
|
—
|
|
During the three and nine months ended September 30, 2021, we received a leasehold improvement allowance of $1.4 million for the renovation of our home office space in Houston, Texas from our lessor. We recorded a leasehold improvement asset as property plant and equipment and reduced our right-of-use asset by $1.4 million. The leasehold improvement allowance will be recognized prospectively by ratably reducing the lease expense over the remaining lease term.
Supplemental balance sheet information related to leases is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease Type
|
Balance Sheet Classification
|
December 31, 2020
|
|
September 30, 2021
|
|
Operating lease right-of-use assets
|
Operating lease right-of-use assets
|
$
|
21,201
|
|
|
$
|
18,307
|
|
|
|
|
|
|
|
|
Finance lease right-of-use assets
|
Property, plant and equipment, net
|
$
|
6,770
|
|
|
$
|
6,770
|
|
|
Accumulated depreciation
|
Property, plant and equipment, net
|
(2,005)
|
|
|
(2,333)
|
|
|
Finance lease right-of-use assets, net
|
|
$
|
4,765
|
|
|
$
|
4,437
|
|
|
|
|
|
|
|
|
Operating lease current liabilities
|
Current portion of operating lease obligations
|
$
|
2,082
|
|
|
$
|
1,954
|
|
|
Finance lease current liabilities
|
Current portion of finance lease obligations
|
323
|
|
|
357
|
|
|
Total current lease liabilities
|
|
$
|
2,405
|
|
|
$
|
2,311
|
|
|
|
|
|
|
|
|
Operating lease non-current liabilities
|
Obligations under operating leases, net of current portion
|
$
|
20,302
|
|
|
$
|
18,951
|
|
|
Finance lease non-current liabilities
|
Obligations under finance leases, net of current portion
|
5,531
|
|
|
5,258
|
|
|
Total non-current lease liabilities
|
|
$
|
25,833
|
|
|
$
|
24,209
|
|
|
|
|
|
|
|
|
Total lease liabilities
|
|
$
|
28,238
|
|
|
$
|
26,520
|
|
The average lease terms and discount rates at September 30, 2021 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average remaining lease term (years)
|
|
Weighted-average discount rate
|
|
Operating leases
|
10.1
|
|
8.1
|
%
|
|
Finance leases
|
12.5
|
|
8.2
|
%
|
The aggregate future lease payments for operating and finance leases at September 30, 2021 are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
Finance
|
|
Lease payments due:
|
|
|
|
|
Remainder of 2021
|
$
|
935
|
|
|
$
|
209
|
|
|
2022
|
3,453
|
|
|
860
|
|
|
2023
|
3,326
|
|
|
860
|
|
|
2024
|
3,301
|
|
|
791
|
|
|
2025
|
3,162
|
|
|
736
|
|
|
Thereafter
|
16,187
|
|
|
5,555
|
|
|
Total lease payments
|
30,364
|
|
|
9,011
|
|
|
Less: Interest
|
(9,459)
|
|
|
(3,396)
|
|
|
Present value of lease liabilities
|
$
|
20,905
|
|
|
$
|
5,615
|
|
At September 30, 2021, we had no additional significant operating or finance leases that had not yet commenced.
13.COMMITMENTS AND CONTINGENCIES
Chinchilla v. Carriage Services, Inc., et al., Superior Court of California, San Joaquin County, Case No. STK-CV-UOE-2021-0004661. On May 19, 2021, a putative class action against the Company and several of our subsidiaries was filed. Plaintiff, a former employee, seeks monetary damages on behalf of himself and other similarly situated current and former non-exempt employees in California. Plaintiff claims that the Company failed to, among other things, pay minimum wages, provide meal and rest breaks, pay overtime, provide accurately itemized wage statements, reimburse employees for business expenses, and provide wages when due. At September 30, 2021, we are unable to reasonably estimate the possible loss or ranges of loss, if any.
14.STOCKHOLDERS’ EQUITY
Restricted Stock
Restricted stock activity is as follows (in thousands, except shares):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
Shares
|
Fair Value
|
|
Shares
|
Fair Value
|
|
Shares
|
Fair Value
|
|
Shares
|
Fair Value
|
|
Granted(1)
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
|
10,200
|
|
$
|
255
|
|
|
9,300
|
|
$
|
324
|
|
|
Returned for payroll taxes
|
714
|
|
$
|
16
|
|
|
711
|
|
$
|
28
|
|
|
10,588
|
|
$
|
250
|
|
|
10,399
|
|
$
|
375
|
|
|
Cancelled
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
|
966
|
|
$
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Restricted stock granted during the nine months ended September 30, 2020 and 2021 vest over a three-year period at a weighted average stock price of $25.00 and $34.79, respectively.
|
We recorded stock-based compensation expense, which is included in General, administrative and other expenses, for restricted stock awards of $183,000 and $89,000, for the three months ended September 30, 2020 and 2021, respectively and $551,000 and $308,000, for the nine months ended September 30, 2020 and 2021, respectively.
Stock Options
During the nine months ended September 30, 2021, we granted 150,000 options to a certain key employee at a weighted average price of $34.79. These options will vest when the price of our common stock closes at or above $53.39 (50,000 options) and $77.34 (100,000 options) for three consecutive days within the ten-year term and the employee has remained continuously employed by us through such date. The fair value of these options was $1.7 million. In addition, in accordance with the terms of the separation agreement, we accelerated 12,980 options in connection with the resignation of an employee which resulted in an additional $129,000 of stock-based compensation expense.
Additional stock option activity is as follows (in thousands, except shares):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
Shares
|
Fair Value
|
|
Shares
|
Fair Value
|
|
Shares
|
Fair Value
|
|
Shares
|
Fair Value
|
|
Granted(1)
|
—
|
|
$
|
—
|
|
|
—
|
|
$
|
—
|
|
|
20,000
|
|
$
|
92
|
|
|
701,400
|
|
$
|
7,115
|
|
|
Cancelled
|
8,800
|
|
$
|
52
|
|
|
6,000
|
|
$
|
61
|
|
|
146,034
|
|
$
|
846
|
|
|
19,684
|
|
$
|
181
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Stock options granted during the nine months ended September 30, 2020 and 2021 had a weighted average price of $18.02 and $34.79, respectively. The options granted in 2020 vest over a three-year period and have a ten-year term. The options granted in 2021 vest over a five-year period and have a ten-year term.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
Shares
|
Cash
|
|
Shares
|
Cash
|
|
Shares
|
Cash
|
|
Shares
|
Cash
|
|
Exercised(1)
|
17,913
|
|
N/A
|
|
32,665
|
|
N/A
|
|
17,913
|
|
N/A
|
|
314,294
|
|
N/A
|
|
Returned for option price(2)
|
4,426
|
|
$
|
—
|
|
|
17,790
|
|
$
|
—
|
|
|
4,426
|
|
$
|
—
|
|
|
166,359
|
|
$
|
880
|
|
|
Returned for payroll taxes(3)
|
1,333
|
|
$
|
31
|
|
|
2,192
|
|
$
|
82
|
|
|
1,333
|
|
$
|
31
|
|
|
20,163
|
|
$
|
1,058
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Stock options exercised during the three months ended September 30, 2020 and 2021 had a weighted average exercise price of $5.70 and $21.81, respectively, with an aggregate intrinsic value of $0.3 million and $0.6 million, respectively. Stock options exercised during the nine months ended September 30, 2020 and 2021 had a weighted average exercise price of $5.70 and $21.78 respectively, with an aggregate intrinsic value of $0.3 million and $5.0 million, respectively.
|
|
(2)
|
Represents cash received for the payment of the option price.
|
|
(3)
|
Represents cash withheld for the payment of payroll taxes.
|
We recorded stock-based compensation expense, which is included in General, administrative and other expenses, for stock options, including the accelerated stock options discussed above of $165,000 and $467,000, for the three months ended September 30, 2020 and 2021, respectively and $502,000 and $1,507,000, for the nine months ended September 30, 2020 and 2021, respectively.
Performance Awards
During the nine months ended September 30, 2020, we issued 237,500 performance awards to certain employees, payable in shares, with a fair value of $2.8 million. On May 19, 2020, we cancelled all performance award agreements previously awarded to all individuals during 2019 and the February 19, 2020 award. Concurrently with the cancellation, the Compensation Committee of the Board of Directors (the “Board”) approved 368,921 new performance awards to be issued to certain employees. These new performance awards were treated as a modification of the cancelled awards and resulted in an additional $1.7 million of incremental compensation expense.
On June 1, 2021, we amended the performance award agreements granted on May 19, 2020 for three of our executives. The amendment increased the amount of performance awards payable in shares for the last three predetermined growth targets. These awards will vest (if at all) on December 31, 2024, provided that the Company’s common stock reaches the predetermined growth targets for the sustained period ending on December 31, 2024. The amendment was treated as a modification of the original performance award agreement and resulted in an additional $2.6 million of incremental compensation expense, expected to be recognized over the remaining term of 43 months.
Additional performance award activity is as follows (in thousands, except shares):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
Shares
|
Fair Value
|
|
Shares
|
Fair Value
|
|
Shares
|
Fair Value
|
|
Shares
|
Fair Value
|
|
Granted
|
9,782
|
|
$
|
244
|
|
|
29,548
|
|
$
|
1,062
|
|
|
23,756
|
|
$
|
469
|
|
|
39,802
|
|
$
|
1,464
|
|
|
Cancelled
|
—
|
|
$
|
—
|
|
|
6,987
|
|
$
|
101
|
|
|
33,538
|
|
$
|
631
|
|
|
41,922
|
|
$
|
598
|
|
The fair values of the performance awards granted during the nine months ended September 30, 2021 were determined by using the Monte-Carlo simulation pricing model with the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April 16, 2021
|
|
June 1, 2021
|
|
August 12, 2021
|
|
September 15, 2021
|
|
Performance Period
|
|
April 16, 2021 - December 31, 2024
|
|
June 1, 2021 - December 31, 2024
|
|
August 12, 2021 - December 31, 2024
|
|
September 15, 2021 - December 31, 2024
|
|
Simulation period (years)
|
|
3.71
|
|
3.58
|
|
3.39
|
|
3.29
|
|
Share price at grant date
|
|
$35.83
|
|
$38.78
|
|
$39.48
|
|
$45.27
|
|
Expected volatility
|
|
41.17
|
%
|
|
41.79
|
%
|
|
42.85
|
%
|
|
43.44
|
%
|
|
Risk-free interest rate
|
|
0.52
|
%
|
|
0.46
|
%
|
|
0.53
|
%
|
|
0.49
|
%
|
We recorded stock-based compensation expense, which is included in General, administrative and other expenses, for performance awards of $286,000 and $475,000 for the three months ended September 30, 2020 and 2021, respectively and $589,000 and $1,064,000 for the nine months ended September 30, 2020 and 2021, respectively.
Employee Stock Purchase Plan
ESPP activity is as follows (in thousands, except shares):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
Shares
|
Price
|
|
Shares
|
Price
|
|
Shares
|
Price
|
|
Shares
|
Price
|
|
ESPP
|
15,706
|
|
$
|
18.96
|
|
|
14,734
|
|
$
|
26.32
|
|
|
59,020
|
|
$
|
15.60
|
|
|
46,622
|
|
$
|
26.32
|
|
The fair value of the right (option) to purchase shares under the ESPP is estimated at the date of purchase with the four quarterly purchase dates using the following assumptions:
|
|
|
|
|
|
|
|
|
2021
|
|
Dividend yield
|
0.01%
|
|
Expected volatility
|
48.14%
|
|
Risk-free interest rate
|
0.09%, 0.09%, 0.10%, 0.10%
|
|
Expected life (years)
|
0.25, 0.50, 0.75, 1.00
|
We recorded stock-based compensation expense, which is included in General, administrative and other expenses and Regional and unallocated funeral and cemetery costs, for the ESPP totaling $95,000 and $117,000 for the three months ended September 30, 2020 and 2021, respectively and $339,000 and $458,000 for the nine months ended September 30, 2020 and 2021, respectively.
Non-Employee Director and Board Advisor Compensation
Non-Employee Director and Board Advisor common stock activity is as follows (in thousands, except shares):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
|
Shares
|
Fair Value
|
|
Shares
|
Fair Value
|
|
Shares
|
Fair Value
|
|
Shares
|
Fair Value
|
|
Board of Directors
|
8,540
|
|
$
|
192
|
|
|
3,192
|
|
$
|
142
|
|
|
25,220
|
|
$
|
477
|
|
|
12,565
|
|
$
|
480
|
|
|
Advisor to the Board
|
224
|
|
$
|
6
|
|
|
112
|
|
$
|
5
|
|
|
808
|
|
$
|
15
|
|
|
389
|
|
$
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Common stock granted during the three months ended September 30, 2020 and 2021 had a weighted average price of $26.79 and $44.59, respectively. Common stock granted during the nine months ended September 30, 2020 and 2021 had a weighted average price of $18.91 and $38.20, respectively.
|
We recorded compensation expense, which is included in General, administrative and other expenses, related to annual retainers, including the value of stock granted to non-employee Directors and an advisor to our Board, of $250,000 and $201,000 for the three months ended September 30, 2020 and 2021, respectively and $653,000 and $656,000 for the nine months ended September 30, 2020 and 2021, respectively.
Share Repurchase
On May 18, 2021 and July 26, 2021, our Board authorized increases of up to an additional $25.0 million, respectively, in our share repurchase program to permit us to purchase up to a total of $50.0 million under our share repurchase program, in addition to amounts previously authorized and outstanding, in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Share repurchase activity is as follows (dollar value in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2021
|
|
Nine months ended September 30, 2021
|
|
Number of Shares Repurchased(1)
|
1,203,493
|
|
|
1,528,197
|
|
|
Average Price Paid Per Share
|
$
|
44.24
|
|
|
$
|
42.89
|
|
|
Dollar Value of Shares Repurchased(1)
|
$
|
53,239
|
|
|
$
|
65,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
During the three and nine months ended September 30, 2021, 84,000 shares settled in October 2021, which had a cost of $3.8 million.
|
Our shares were purchased in the open market at times and in amounts as management determined appropriate based on factors such as market conditions, legal requirements and other business considerations. Shares purchased pursuant to the repurchase program are currently held as treasury shares. At September 30, 2021, we had approximately $10.1 million available for repurchase under our share repurchase program.
Cash Dividends
Our Board declared the following dividends payable on the dates below (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
Per Share
|
|
Dollar Value
|
|
March 1st
|
$
|
0.1000
|
|
|
$
|
1,799
|
|
|
June 1st
|
$
|
0.1000
|
|
|
$
|
1,808
|
|
|
September 1st
|
$
|
0.1000
|
|
|
$
|
1,783
|
|
|
|
|
|
|
|
2020
|
Per Share
|
|
Dollar Value
|
|
March 1st
|
$
|
0.0750
|
|
|
$
|
1,339
|
|
|
June 1st
|
$
|
0.0750
|
|
|
$
|
1,343
|
|
|
September 1st
|
$
|
0.0875
|
|
|
$
|
1,569
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15.EARNINGS PER SHARE
The following table sets forth the computation of the basic and diluted earnings per share (in thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30,
|
|
Nine months ended September 30,
|
|
|
2020
|
|
2021
|
|
2020
|
|
2021
|
|
Numerator for basic and diluted earnings per share:
|
|
|
|
|
|
|
|
|
Net income
|
$
|
5,525
|
|
|
$
|
13,046
|
|
|
$
|
7,725
|
|
|
$
|
19,812
|
|
|
Less: Earnings allocated to unvested restricted stock
|
(14)
|
|
|
(18)
|
|
|
(23)
|
|
|
(33)
|
|
|
Income attributable to common stockholders
|
$
|
5,511
|
|
|
$
|
13,028
|
|
|
$
|
7,702
|
|
|
$
|
19,779
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Denominator for basic earnings per common share - weighted average shares outstanding
|
17,895
|
|
|
17,499
|
|
|
17,853
|
|
|
17,809
|
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
Stock options
|
34
|
|
|
235
|
|
|
39
|
|
|
277
|
|
|
Convertible Notes
|
3
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
Performance awards
|
—
|
|
|
512
|
|
|
—
|
|
|
279
|
|
|
Denominator for diluted earnings per common share - weighted average shares outstanding
|
17,932
|
|
|
18,246
|
|
|
17,893
|
|
|
18,365
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common share:
|
$
|
0.31
|
|
|
$
|
0.74
|
|
|
$
|
0.43
|
|
|
$
|
1.11
|
|
|
Diluted earnings per common share:
|
$
|
0.31
|
|
|
$
|
0.71
|
|
|
$
|
0.43
|
|
|
$
|
1.08
|
|
For the three and nine months ended September 30, 2021, no stock options were excluded from the computation of diluted earnings per share. For the three and nine months ended September 30, 2020 there were 765,722 and 848,513 stock options, respectively, excluded from the computation of diluted earnings per share because the inclusion of such stock options would result in an antidilutive effect.
Our performance awards are considered to be contingently issuable shares because their issuance is contingent upon the satisfaction of certain performance and service conditions. At September 30, 2021, we had satisfied certain performance criteria for the first and second predetermined growth targets of our performance awards to be considered outstanding. Therefore, we included these awards in the computation of diluted earnings per share as of the beginning of the reporting period.
16.SEGMENT REPORTING
Revenue, disaggregated by major source for each of our reportable segments was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2021
|
|
|
|
|
|
|
|
|
|
Funeral
|
|
Cemetery
|
|
Total
|
|
Services
|
|
$
|
41,987
|
|
|
$
|
4,223
|
|
|
$
|
46,210
|
|
|
Merchandise
|
|
23,532
|
|
|
3,305
|
|
|
26,837
|
|
|
Cemetery property
|
|
—
|
|
|
15,206
|
|
|
15,206
|
|
|
Other revenue
|
|
3,378
|
|
|
3,410
|
|
|
6,788
|
|
|
Total
|
|
$
|
68,897
|
|
|
$
|
26,144
|
|
|
$
|
95,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
Funeral
|
|
Cemetery
|
|
Total
|
|
Services
|
|
$
|
36,987
|
|
|
$
|
4,231
|
|
|
$
|
41,218
|
|
|
Merchandise
|
|
20,846
|
|
|
3,019
|
|
|
23,865
|
|
|
Cemetery property
|
|
—
|
|
|
12,433
|
|
|
12,433
|
|
|
Other revenue
|
|
3,601
|
|
|
3,276
|
|
|
6,877
|
|
|
Total
|
|
$
|
61,434
|
|
|
$
|
22,959
|
|
|
$
|
84,393
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2021
|
|
|
|
|
|
|
|
|
|
Funeral
|
|
Cemetery
|
|
Total
|
|
Services
|
|
$
|
121,734
|
|
|
$
|
12,352
|
|
|
$
|
134,086
|
|
|
Merchandise
|
|
68,363
|
|
|
10,387
|
|
|
78,750
|
|
|
Cemetery property
|
|
—
|
|
|
46,795
|
|
|
46,795
|
|
|
Other revenue
|
|
10,406
|
|
|
9,918
|
|
|
20,324
|
|
|
Total
|
|
$
|
200,503
|
|
|
$
|
79,452
|
|
|
$
|
279,955
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2020
|
|
|
|
|
|
|
|
|
|
Funeral
|
|
Cemetery
|
|
Total
|
|
Services
|
|
$
|
110,199
|
|
|
$
|
10,631
|
|
|
$
|
120,830
|
|
|
Merchandise
|
|
61,667
|
|
|
7,817
|
|
|
69,484
|
|
|
Cemetery property
|
|
—
|
|
|
30,727
|
|
|
30,727
|
|
|
Other revenue
|
|
10,431
|
|
|
7,888
|
|
|
18,319
|
|
|
Total
|
|
$
|
182,297
|
|
|
$
|
57,063
|
|
|
$
|
239,360
|
|
The following table presents operating income (loss), income (loss) before income taxes and total assets (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funeral
|
|
Cemetery
|
|
Corporate
|
|
Consolidated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2021
|
$
|
22,924
|
|
|
$
|
9,471
|
|
|
$
|
(9,130)
|
|
|
$
|
23,265
|
|
|
Three months ended September 30, 2020
|
13,975
|
|
|
8,982
|
|
|
(6,463)
|
|
|
16,494
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2021
|
$
|
65,404
|
|
|
$
|
30,462
|
|
|
$
|
(25,431)
|
|
|
$
|
70,435
|
|
|
Nine months ended September 30, 2020
|
38,155
|
|
|
18,440
|
|
|
(19,685)
|
|
|
36,910
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes:
|
|
|
|
|
|
|
|
|
Three months ended September 30, 2021
|
$
|
22,777
|
|
|
$
|
9,508
|
|
|
$
|
(14,117)
|
|
|
$
|
18,168
|
|
|
Three months ended September 30, 2020
|
13,753
|
|
|
9,024
|
|
|
(14,393)
|
|
|
8,384
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30, 2021
|
$
|
64,951
|
|
|
$
|
30,537
|
|
|
$
|
(69,105)
|
|
|
$
|
26,383
|
|
|
Nine months ended September 30, 2020
|
37,481
|
|
|
18,538
|
|
|
(44,136)
|
|
|
11,883
|
|
|
|
|
|
|
|
|
|
|
|
Total assets:
|
|
|
|
|
|
|
|
|
September 30, 2021
|
$
|
764,569
|
|
|
$
|
385,573
|
|
|
$
|
13,833
|
|
|
$
|
1,163,975
|
|
|
December 31, 2020
|
764,535
|
|
|
366,964
|
|
|
14,326
|
|
|
1,145,825
|
|
17.SUPPLEMENTARY DATA
Balance Sheet
The following table presents the detail of certain balance sheet accounts (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2020
|
|
September 30, 2021
|
|
Prepaid and other current assets:
|
|
|
|
|
Prepaid expenses
|
$
|
1,919
|
|
|
$
|
2,018
|
|
|
|
|
|
|
|
|
|
|
|
|
State income taxes receivable
|
—
|
|
|
49
|
|
|
Other current assets
|
157
|
|
|
124
|
|
|
Total prepaid and other current assets
|
$
|
2,076
|
|
|
$
|
2,191
|
|
|
|
|
|
|
|
Current portion of debt and lease obligations:
|
|
|
|
|
Acquisition debt
|
$
|
1,027
|
|
|
$
|
730
|
|
|
Finance lease obligations
|
323
|
|
|
357
|
|
|
Operating lease obligations
|
2,082
|
|
|
1,954
|
|
|
Total current portion of debt and lease obligations
|
$
|
3,432
|
|
|
$
|
3,041
|
|
|
|
|
|
|
|
Accrued and other liabilities:
|
|
|
|
|
Incentive compensation
|
$
|
11,139
|
|
|
$
|
13,472
|
|
|
Interest
|
2,291
|
|
|
6,572
|
|
|
Insurance
|
3,016
|
|
|
3,995
|
|
|
Unrecognized tax benefit
|
3,656
|
|
|
3,735
|
|
|
Salaries and wages
|
1,392
|
|
|
3,533
|
|
|
Vacation
|
3,271
|
|
|
3,222
|
|
|
Income tax payable
|
798
|
|
|
799
|
|
|
Ad valorem and franchise taxes
|
435
|
|
|
2,115
|
|
|
Employer payroll tax deferral
|
1,773
|
|
|
1,773
|
|
|
Employee meetings and award trips
|
801
|
|
|
1,110
|
|
|
Commissions
|
634
|
|
|
861
|
|
|
Perpetual care trust payable
|
908
|
|
|
500
|
|
|
Other accrued liabilities
|
1,024
|
|
|
1,460
|
|
|
Total accrued and other liabilities
|
$
|
31,138
|
|
|
$
|
43,147
|
|
|
|
|
|
|
|
Other long-term liabilities:
|
|
|
|
|
Incentive compensation
|
$
|
2,975
|
|
|
$
|
995
|
|
|
Employer payroll tax deferral
|
1,773
|
|
|
1,773
|
|
|
Severance
|
—
|
|
|
277
|
|
|
Total other long-term liabilities
|
$
|
4,748
|
|
|
$
|
3,045
|
|
Cash Flow
The following information is supplemental disclosure for the Consolidated Statements of Cash Flows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine months ended September 30,
|
|
|
2020
|
|
2021
|
|
Cash paid for interest
|
$
|
16,960
|
|
|
$
|
14,817
|
|
|
Cash paid (refunded) for taxes
|
(6,817)
|
|
|
9,974
|
|
|
Fair value of donated real property
|
—
|
|
|
635
|
|
18.SUBSEQUENT EVENTS
On October 21, 2021, we sold real property for $1.4 million.
On October 27, 2021, the Board authorized an increase in our share repurchase program to permit us to purchase up to an additional $75 million of our outstanding common shares. Prior to the Board’s approval of the increase, at September 30, 2021, we had approximately $10.1 million authorization remaining under the original repurchase program. At October 27, 2021, we had approximately $85.1 million of share repurchase authorization remaining under the revised repurchase program.
On October 27, 2021, the Board also approved a $0.05 per share increase to its annual cash dividend and subsequently declared a quarterly dividend of $0.1125 per share payable on December 1, 2021 to common share record holders as of November 9, 2021.
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
In addition to historical information, this Quarterly Report on Form 10-Q contains certain statements and information that may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical information, should be deemed to be forward-looking statements. The words “may”, “will”, “estimate”, “intend”, “believe”, “expect”, “seek”, “project”, “forecast”, “foresee”, “should”, “would”, “could”, “plan”, “anticipate” and other similar words or expressions are intended to identify forward-looking statements, which are generally not historical in nature. These forward-looking statements include, but are not limited to, statements regarding any projections of earnings, revenue, asset sales, cash flow, debt levels or other financial items; any statements of the plans, strategies and objectives of management for future operations or future acquisitions; any statements of the plans, timing and objectives of management for acquisition and divestiture activities; any statements of the plans, timing, expectations and objectives of management for future financing activities; any statements regarding future economic and market conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing and are based on our current expectations and beliefs concerning future developments and their potential effect on us. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenue and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:
•our ability to find and retain skilled personnel;
•the effects of our incentive and compensation plans and programs, including such effects on our Standards Operating Model and our operational and financial performance;
•our ability to execute our growth strategy;
•the execution of our Standards Operating, 4E Leadership and Strategic Acquisition Models;
•the effects of competition;
•changes in the number of deaths in our markets;
•changes in consumer preferences and our ability to adapt to or meet those changes;
•our ability to generate preneed sales, including implementing our cemetery portfolio sales strategy;
•the investment performance of our funeral and cemetery trust funds;
•fluctuations in interest rates;
•our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;
•our ability to meet the timing, objectives and expectations related to our capital allocation framework, including our forecasted rates of return, planned uses of free cash flow and future capital allocation, including share repurchases, internal growth projects, potential strategic acquisitions, dividend increases, or debt repayment plans;
•the timely and full payment of death benefits related to preneed funeral contracts funded through life insurance contracts;
•the financial condition of third-party insurance companies that fund our preneed funeral contracts;
•increased or unanticipated costs, such as insurance or taxes;
•our level of indebtedness and the cash required to service our indebtedness;
•changes in federal income tax laws and regulations and the implementation and interpretation of these laws and regulations by the Internal Revenue Service;
•effects of the application of other applicable laws and regulations, including changes in such regulations or the interpretation thereof;
•the potential impact of epidemics and pandemics, including the COVID-19 coronavirus, including new variants of COVID-19, such as the Delta variant, on customer preferences and on our business;
•government, social, business and other actions that have been and will be taken in response to pandemics, including potential responses to new variants of COVID-19, such as the Delta variant;
•effects of litigation;
•consolidation of the funeral and cemetery industry;
•our ability to consummate the divestiture of low performing businesses as currently expected, if at all, including expected use of proceeds related thereto;
•our ability to identify and consummate strategic acquisitions, if at all, and successfully integrate acquired businesses with our existing businesses, including expected performance and financial improvements related thereto;
•economic, financial and stock market fluctuations;
•interruptions or security lapses of our information technology, including any cybersecurity or ransomware incidents;
•our failure to maintain effective control over financial reporting; and
•other factors and uncertainties inherent in the funeral and cemetery industry.
For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see (i) Part II, Item 1A “Risk Factors” in this Quarterly Report on Form 10-Q and (ii) Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020.
Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise.