Table of Contents


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
                      FORM
FORM 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SeptemberJune 30, 20172023
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________  to  
____________        
Commission File Number:1-11961
CARRIAGE SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWAREDelaware76-0423828
(State or other jurisdiction of

incorporation or organization)
(I.R.S. Employer

Identification No.)
3040 Post Oak Boulevard, Suite 300
Houston, Texas, 77056
3040 Post Oak Boulevard, Suite 300
Houston, Texas, 77056
(Address of principal executive offices)
(713) 332-8400
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, par value $.01 per shareCSVNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x☒    No  o☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x☒    No  o☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Securities Exchange Act of 1934.
Large accelerated filer☐Accelerated filer☒
Non-accelerated filer☐Smaller reporting company☐
Large accelerated fileroAccelerated filerx
Non-accelerated filer
o  (Do not check if a smaller reporting company)
Smaller reporting companyo
Emerging growth companyo☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o☐    No  x☒
The number of shares of the registrant’s Common Stock, $.01 par value per share, outstanding as of October 20, 2017August 1, 2023 was 16,085,750.14,965,754.






CARRIAGE SERVICES, INC.
INDEX
 
Page
Page
PART I – FINANCIAL INFORMATION
Item 1. Financial Statements
3
Unaudited Consolidated Balance SheetsSheet as of December 31, 20162022 and SeptemberJune 30, 20172023
3
Unaudited Consolidated Statements of Operations for the Three and NineSix Months ended SeptemberJune 30, 20162022 and 20172023
4
Unaudited Consolidated Statements of Cash Flows for the NineSix Months ended SeptemberJune 30, 20162022 and 20172023
5
Unaudited Consolidated Statements of Changes in Stockholders' Equity for the Three and Six Months ended June 30, 2022 and 2023
6
Condensed Notes to Consolidated Financial Statements
68
Cautionary Statement on Forward–Looking Statements
3033
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
3235
Item 3. Quantitative and Qualitative Disclosures About Market Risk
4549
Item 4. Controls and Procedures
4650
Item 1. Legal Proceedings
4751
Item 1A. Risk Factors
4751
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
4753
Item 3. Defaults Upon Senior Securities
4753
Item 4. Mine Safety Disclosures
4753
Item 5. Other Information
4753
Item 6. Exhibits
4753
4854
4955

- 2 -

PART I – FINANCIAL INFORMATION
Item 1.Financial Statements.
Item 1.Financial Statements.
CARRIAGE SERVICES, INC.
CONSOLIDATED BALANCE SHEETSSHEET
(unaudited and in thousands, except share data)
  (unaudited)
December 31, 2016 September 30, 2017December 31, 2022June 30, 2023
ASSETS   ASSETS
Current assets:   Current assets:
Cash and cash equivalents$3,286
 $759
Cash and cash equivalents$1,170 $970 
Accounts receivable, net of allowance for bad debts of $746 in 2016 and $800 in 201718,860
 18,821
Accounts receivable, netAccounts receivable, net24,458 24,639 
Inventories6,147
 6,346
Inventories7,613 8,448 
Prepaid expenses2,640
 1,355
Other current assets2,034
 764
Prepaid and other current assetsPrepaid and other current assets4,733 3,610 
Total current assets32,967
 28,045
Total current assets37,974 37,667 
Preneed cemetery trust investments69,696
 71,728
Preneed cemetery trust investments95,065 89,874 
Preneed funeral trust investments89,240
 89,444
Preneed funeral trust investments104,553 103,317 
Preneed receivables, net of allowance for bad debts of $2,166 in 2016 and $2,230 in 201730,383
 31,279
Receivables from preneed trusts14,218
 15,306
Property, plant and equipment, net of accumulated depreciation of $110,509 in 2016 and $113,616 in 2017235,113
 235,501
Cemetery property, net of accumulated amortization of $34,194 in 2016 and $36,638 in 201776,119
 76,961
Preneed cemetery receivables, netPreneed cemetery receivables, net26,672 33,274 
Receivables from preneed funeral trusts, netReceivables from preneed funeral trusts, net19,976 21,080 
Property, plant and equipment, netProperty, plant and equipment, net278,106 287,582 
Cemetery property, netCemetery property, net104,170 112,830 
Goodwill275,487
 275,487
Goodwill410,137 423,643 
Intangible and other non-current assets14,957
 14,616
Intangible and other non-current assets, netIntangible and other non-current assets, net32,930 37,333 
Operating lease right-of-use assetsOperating lease right-of-use assets17,060 17,123 
Cemetery perpetual care trust investments46,889
 48,679
Cemetery perpetual care trust investments66,307 78,363 
Total assets$885,069
 $887,046
Total assets$1,192,950 $1,242,086 
LIABILITIES AND STOCKHOLDERS’ EQUITY   LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:   Current liabilities:
Current portion of long-term debt and capital lease obligations$13,267
 $16,323
Current portion of debt and lease obligationsCurrent portion of debt and lease obligations$3,172 $3,568 
Accounts payable10,198
 6,686
Accounts payable11,675 9,402 
Other liabilities717
 1,811
Accrued liabilities20,091
 15,294
Accrued and other liabilitiesAccrued and other liabilities30,621 29,564 
Total current liabilities44,273
 40,114
Total current liabilities45,468 42,534 
Long-term debt, net of current portion137,862
 125,442
Revolving credit facility66,542
 74,550
Convertible subordinated notes due 2021119,596
 123,182
Obligations under capital leases, net of current portion2,630
 2,492
Acquisition debt, net of current portionAcquisition debt, net of current portion3,438 3,370 
Credit facilityCredit facility188,836 202,418 
Senior notesSenior notes395,243 395,571 
Obligations under finance leases, net of current portionObligations under finance leases, net of current portion4,743 4,537 
Obligations under operating leases, net of current portionObligations under operating leases, net of current portion17,315 16,860 
Deferred preneed cemetery revenue54,631
 55,275
Deferred preneed cemetery revenue51,746 59,941 
Deferred preneed funeral revenue33,198
 34,652
Deferred preneed funeral revenue32,029 39,782 
Deferred tax liability42,810
 44,025
Deferred tax liability48,820 48,827 
Other long-term liabilities2,567
 2,723
Other long-term liabilities3,065 1,299 
Deferred preneed cemetery receipts held in trust69,696
 71,728
Deferred preneed cemetery receipts held in trust95,065 89,874 
Deferred preneed funeral receipts held in trust89,240
 89,444
Deferred preneed funeral receipts held in trust104,553 103,317 
Care trusts’ corpus46,290
 48,186
Care trusts’ corpus65,495 77,589 
Total liabilities709,335
 711,813
Total liabilities1,055,816 1,085,919 
Commitments and contingencies:
 
Commitments and contingencies:
Stockholders’ equity:  
Stockholders’ equity:
Common stock, $.01 par value; 80,000,000 shares authorized and 22,490,855 and 22,609,120 shares issued at December 31, 2016 and September 30, 2017, respectively225
 226
Common stock, $0.01 par value; 80,000,000 shares authorized and 26,359,876 and 26,585,341 shares issued, respectively and 14,732,058 and 14,957,523 shares outstanding, respectivelyCommon stock, $0.01 par value; 80,000,000 shares authorized and 26,359,876 and 26,585,341 shares issued, respectively and 14,732,058 and 14,957,523 shares outstanding, respectively264 266 
Additional paid-in capital215,064
 216,396
Additional paid-in capital238,780 240,681 
Retained earnings20,711
 35,243
Retained earnings176,843 193,973 
Treasury stock, at cost; 5,849,316 and 6,523,370 shares at December 31, 2016 and September 30, 2017, respectively(60,266) (76,632)
Treasury stock, at cost; 11,627,818 sharesTreasury stock, at cost; 11,627,818 shares(278,753)(278,753)
Total stockholders’ equity175,734
 175,233
Total stockholders’ equity137,134 156,167 
Total liabilities and stockholders’ equity$885,069
 $887,046
Total liabilities and stockholders’ equity$1,192,950 $1,242,086 
The accompanying condensed notes are an integral part of these Consolidated Financial Statements.

- 3 -

CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share data)
Three months ended June 30,Six months ended June 30,
For the Three Months Ended September 30, For the Nine Months Ended September 30,2022202320222023
2016 2017 2016 2017
Revenues:       
Funeral$45,183
 $47,329
 $140,952
 $150,279
Cemetery14,957
 13,725
 44,384
 42,784
Revenue:Revenue:
Service revenueService revenue$42,550 $44,522 $92,287 $92,729 
Property and merchandise revenueProperty and merchandise revenue41,276 45,630 82,888 85,641 
Other revenueOther revenue6,774 7,526 13,586 14,822 
60,140
 61,054
 185,336
 193,063
90,600 97,678 188,761 193,192 
Field costs and expenses:  
   
Field costs and expenses:
Funeral26,982
 29,267
 82,546
 89,118
Cemetery8,695
 8,769
 25,546
 26,142
Depreciation and amortization3,452
 3,601
 10,359
 10,719
Cost of serviceCost of service21,389 23,075 43,488 46,552 
Cost of merchandiseCost of merchandise29,306 32,219 58,636 61,953 
Cemetery property amortizationCemetery property amortization1,704 1,892 3,036 3,093 
Field depreciation expenseField depreciation expense3,253 3,555 6,550 6,912 
Regional and unallocated funeral and cemetery costs2,783
 3,937
 8,547
 9,845
Regional and unallocated funeral and cemetery costs5,966 4,131 12,313 9,568 
Other expensesOther expenses1,270 1,604 2,548 2,857 
41,912
 45,574
 126,998
 135,824
62,888 66,476 126,571 130,935 
Gross profit18,228
 15,480
 58,338
 57,239
Gross profit27,712 31,202 62,190 62,257 
Corporate costs and expenses:  
   
Corporate costs and expenses:
General, administrative and other6,130
 6,134
 21,208
 19,549
General, administrative and other9,180 10,199 17,740 20,379 
Home office depreciation and amortization355
 401
 1,139
 1,155
6,485
 6,535
 22,347
 20,704
Net (gain) loss on divestitures, disposals and impairments chargesNet (gain) loss on divestitures, disposals and impairments charges(1,193)265 (426)506 
Operating income11,743
 8,945
 35,991
 36,535
Operating income19,725 20,738 44,876 41,372 
Interest expense(2,903) (3,282) (8,722) (9,517)Interest expense5,988 9,396 11,530 17,935 
Accretion of discount on convertible subordinated notes(981) (1,097) (2,862) (3,200)
Loss on early extinguishment of debt—
 —
 (567) —
Net (gain) loss on property damage, net of insurance claimsNet (gain) loss on property damage, net of insurance claims(1,376)(235)(3,275)36 
Other, net(285) (6) 20
 (3)Other, net(7)(125)17 (647)
Income before income taxes7,574
 4,560
 23,860
 23,815
Income before income taxes15,120 11,702 36,604 24,048 
Provision for income taxes(3,030) (1,824) (9,545) (9,526)
Tax adjustment related to certain discrete items1,139
 302
 1,139
 243
Total provision for income taxes$(1,891) $(1,522) $(8,406) $(9,283)
Expense for income taxesExpense for income taxes4,234 3,273 9,938 6,841 
Tax adjustment related to discrete itemsTax adjustment related to discrete items(13)143 (635)77 
Total expense for income taxesTotal expense for income taxes4,221 3,416 9,303 6,918 
Net income$5,683
 $3,038
 $15,454
 $14,532
Net income$10,899 $8,286 $27,301 $17,130 
       
Basic earnings per common share:$0.34
 $0.18
 $0.93
 $0.87
Basic earnings per common share:$0.74 $0.55 $1.82 $1.14 
Diluted earnings per common share:$0.33
 $0.17
 $0.91
 $0.81
Diluted earnings per common share:$0.69 $0.53 $1.70 $1.10 
       
Dividends declared per common share$0.050
 $0.050
 $0.100
 $0.150
Dividends declared per common share:Dividends declared per common share:$0.1125 $0.1125 $0.2250 $0.2250 
       
Weighted average number of common and common equivalent shares outstanding:       Weighted average number of common and common equivalent shares outstanding:
Basic16,529
 16,476
 16,502
 16,575
Basic14,798 14,793 15,020 14,776 
Diluted17,101
 17,598
 16,962
 17,887
Diluted15,712 15,454 16,033 15,461 
The accompanying condensed notes are an integral part of these Consolidated Financial Statements.

- 4 -

CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
For the Nine Months Ended September 30, Six months ended June 30,
2016 2017 20222023
Cash flows from operating activities:   Cash flows from operating activities:
Net income$15,454
 $14,532
Net income$27,301 $17,130 
Adjustments to reconcile net income to net cash provided by operating activities:  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization11,498
 11,874
Depreciation and amortization9,895 10,437 
Provision for losses on accounts receivable1,522
 1,737
Provision for credit lossesProvision for credit losses1,657 1,344 
Stock-based compensation expense2,645
 2,394
Stock-based compensation expense3,085 4,163 
Deferred income tax expense3,618
 1,215
Deferred income tax expense1,711 7 
Amortization of deferred financing costs622
 614
Accretion of discount on convertible subordinated notes2,862
 3,200
Loss on early extinguishment of debt567
 —
Net loss on sale and disposal of other assets186
 341
Impairment of intangible assets145
 —
Amortization of intangiblesAmortization of intangibles634 647 
Amortization of debt issuance costsAmortization of debt issuance costs253 349 
Amortization and accretion of debtAmortization and accretion of debt243 255 
   
Changes in operating assets and liabilities that provided (required) cash:  
Net (gain) loss on divestitures, disposals and impairment chargesNet (gain) loss on divestitures, disposals and impairment charges(426)506 
Net (gain) loss on property damage, net of insurance claimsNet (gain) loss on property damage, net of insurance claims(3,275)36 
Gain on sale of real propertyGain on sale of real property— (658)
OtherOther(6)— 
Changes in operating assets and liabilities that provided (used) cash:Changes in operating assets and liabilities that provided (used) cash:
Accounts and preneed receivables(3,945) (2,594)Accounts and preneed receivables(3,200)(1,694)
Inventories and other current assets682
 2,356
Inventories, prepaid and other current assetsInventories, prepaid and other current assets2,967 1,011 
Intangible and other non-current assets386
 340
Intangible and other non-current assets(747)(1,767)
Preneed funeral and cemetery trust investments(4,828) (5,114)Preneed funeral and cemetery trust investments(11,100)5,341 
Accounts payable(2,149) (3,510)Accounts payable(2,712)(2,272)
Accrued and other liabilities292
 (2,790)Accrued and other liabilities(10,242)(3,328)
Incentive payment from vendorIncentive payment from vendor— 6,000 
Deferred preneed funeral and cemetery revenue742
 2,098
Deferred preneed funeral and cemetery revenue2,633 8,106 
Deferred preneed funeral and cemetery receipts held in trust4,541
 4,132
Deferred preneed funeral and cemetery receipts held in trust11,506 (6,426)
Net cash provided by operating activities34,840
 30,825
Net cash provided by operating activities30,177 39,187 
  
Cash flows from investing activities:  
Cash flows from investing activities:
Acquisitions and land for new construction(15,056) (723)
Purchase of land and buildings previously leased(6,258) —
Net proceeds from the sale of other assets955
 405
Acquisitions of businesses and real propertyAcquisitions of businesses and real property(2,601)(44,000)
Proceeds from divestitures and sale of other assetsProceeds from divestitures and sale of other assets3,720 1,973 
Proceeds from insurance claimsProceeds from insurance claims2,167 1,092 
Capital expenditures(12,039) (13,129)Capital expenditures(13,468)(8,960)
Net cash used in investing activities(32,398) (13,447)Net cash used in investing activities(10,182)(49,895)
  
Cash flows from financing activities:  
Cash flows from financing activities:
Borrowings from the revolving credit facility45,500
 75,100
Payments against the revolving credit facility(74,800) (67,300)
Borrowings from the term loan39,063
 —
Payments against the term loan(8,438) (8,438)
Payments on other long-term debt and obligations under capital leases(987) (1,084)
Payments on contingent consideration recorded at acquisition date—
 (101)
Borrowings from the credit facilityBorrowings from the credit facility97,900 64,700 
Payments against the credit facilityPayments against the credit facility(78,100)(51,400)
Payment of debt issuance costs for the credit facility and senior notesPayment of debt issuance costs for the credit facility and senior notes(339)— 
Payments on acquisition debt and obligations under finance leasesPayments on acquisition debt and obligations under finance leases(202)(256)
Proceeds from the exercise of stock options and employee stock purchase plan contributions686
 1,296
Proceeds from the exercise of stock options and employee stock purchase plan contributions1,060 923 
Taxes paid on restricted stock vestings and exercise of non-qualified options(560) (509)
Taxes paid on restricted stock vestings and exercise of stock optionsTaxes paid on restricted stock vestings and exercise of stock options(286)(119)
Dividends paid on common stock(1,662) (2,503)Dividends paid on common stock(3,455)(3,340)
Purchase of treasury stock—
 (16,366)Purchase of treasury stock(36,663)— 
Payment of loan origination costs related to the credit facility(717) —
Excess tax deficiency of equity compensation(207) —
Net cash used in financing activities(2,122) (19,905)
  

Net increase (decrease) in cash and cash equivalents320
 (2,527)
Net cash provided by (used in) financing activitiesNet cash provided by (used in) financing activities(20,085)10,508 
Net decrease in cash and cash equivalentsNet decrease in cash and cash equivalents(90)(200)
Cash and cash equivalents at beginning of period535
 3,286
Cash and cash equivalents at beginning of period1,148 1,170 
Cash and cash equivalents at end of period$855
 $759
Cash and cash equivalents at end of period$1,058 $970 
   
The accompanying condensed notes are an integral part of these Consolidated Financial Statements.

- 5 -

CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(unaudited and in thousands)
Three months ended June 30, 2022
Shares
Outstanding		Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Treasury
Stock		Total
Balance – March 31, 202214,889 $263 $238,423 $151,864 $(270,529)$120,021 
Net income— — — 10,899 — 10,899 
Issuance of common stock from employee stock purchase plan12 — 398 — — 398 
Issuance of common stock to directors and board advisor2 — 99 — — 99 
Cancellation and surrender of restricted stock— — 2 — — 2 
Stock-based compensation expense— — 1,379 — — 1,379 
Dividends on common stock— — (1,730)— — (1,730)
Treasury stock acquired(205)— — — (8,224)(8,224)
Balance – June 30, 202214,698 $263 $238,571 $162,763 $(278,753)$122,844 

Three months ended June 30, 2023
Shares
Outstanding		Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Treasury
Stock		Total
Balance – March 31, 202314,935 $266 $239,962 $185,687 $(278,753)$147,162 
Net income— — — 8,286 — 8,286 
Issuance of common stock from employee stock purchase plan16 — 397 — — 397 
Issuance of common stock to directors and board advisor2 — 65 — — 65 
Exercise of stock options4 — (20)— — (20)
Cancellation and surrender of common and restricted stock1 — (1)— — (1)
Stock-based compensation expense— — 1,957 — — 1,957 
Dividends on common stock— — (1,679)— — (1,679)
Balance – June 30, 202314,958 $266 $240,681 $193,973 $(278,753)$156,167 


- 6 -

Six months ended June 30, 2022
Shares
Outstanding		Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Treasury
Stock		Total
Balance – December 31, 202115,332 $263 $236,809 $135,462 $(244,519)$128,015 
Net income— — — 27,301 — 27,301 
Issuance of common stock from employee stock purchase plan25 — 1,001 — — 1,001 
Issuance of common stock to directors and board advisor5 — 246 — — 246 
Exercise of stock options9 — (22)— — (22)
Cancellation and surrender of restricted stock(5)— (205)— — (205)
Stock-based compensation expense— — 2,839 — — 2,839 
Dividends on common stock— — (3,455)— — (3,455)
Treasury stock acquired(695)— — — (34,234)(34,234)
Other27 — 1,358 — — 1,358 
Balance – June 30, 202214,698 $263 $238,571 $162,763 $(278,753)$122,844 

Six months ended June 30, 2023
Shares
Outstanding		Common
Stock		Additional
Paid-in
Capital		Retained
Earnings		Treasury
Stock		Total
Balance – December 31, 202214,732 $264 $238,780 $176,843 $(278,753)$137,134 
Net income— — — 17,130 — 17,130 
Issuance of common stock from employee stock purchase plan38 — 923 — — 923 
Issuance of common stock to directors and board advisor6 — 177 — — 177 
Issuance of common stock to former executive30 — 826 — — 826 
Issuance of restricted stock142 2 (2)— — — 
Exercise of stock options5 — (41)— — (41)
Cancellation and surrender of common and restricted stock(3)— (78)— — (78)
Stock-based compensation expense— — 3,160 — — 3,160 
Dividends on common stock— — (3,340)— — (3,340)
Other8 — 276 — — 276 
Balance – June 30, 202314,958 $266 $240,681 $193,973 $(278,753)$156,167 
The accompanying condensed notes are an integral part of these Consolidated Financial Statements.









- 7 -

CARRIAGE SERVICES, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1.BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
Carriage Services, Inc. (“Carriage,” the “Company,” “we,” “us,” or “our”) is a leading provider of deathcarefuneral and cemetery services and merchandise in the United States. As of September 30, 2017, we operated 171 funeral homes in 28 states and 32 cemeteries in 11 states.
Our operations are reported in two business segments: Funeral Home Operationsoperations, which currently accounts for approximately 70% of our total revenue and Cemetery Operations. operations, which currently accounts for approximately 30% of our total revenue. At June 30, 2023, we operated 172 funeral homes in 26 states and 32 cemeteries in 11 states.
Our funeral homes offer a complete rangehome operations are principally service businesses that generate revenue from sales of high value personalburial and cremation services to meet a family’s funeral needs, includingand related merchandise, such as caskets and urns. Funeral services include consultation, the removal and preparation of remains, the sale of caskets and related funeral merchandise, the use of funeral home facilities for visitation and remembrancememorial 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 cemeteries providecemetery operations generate revenue primarily through sales of cemetery interment rights (grave(primarily grave sites, lawn crypts, mausoleum spaces and mausoleum spaces) andniches), related cemetery merchandise such(such as memorial markers, and outer burial containers and monuments) and services (interments, inurnments and installation of cemetery merchandise). We provide cemetery services and products on both on an at-needatneed 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
There have been no material changes in our accounting policies previously disclosed in Part II, Item 8 “Financial Statements and Supplementary Data” in Note 1 in our Annual Report on Form 10-K for the year ended December 31, 2022. In addition, our unaudited consolidated financial statements have been prepared in a manner consistent with the accounting principles described in our Annual Report on Form 10-K for the year ended December 31, 20162022 unless otherwise disclosed herein, and should be read in conjunction therewith.
Reclassifications
Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation with no effect on our previously reported results of operations, consolidated financial position, or cash flows.
Cash and Cash Equivalents
We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
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, revenuesrevenue and expenses. On an ongoing basis, we evaluate our critical estimates and judgments, includingwhich include those related to revenue recognition, realizationthe impairment of accounts receivable, goodwill intangible assets, property and equipment and deferred tax assets and liabilities. We basethe fair value measurements used in business combinations. These policies are considered critical because they may result in fluctuations in our reported results from period to period due to the significant judgments, estimates on historical experience, third-party data and assumptions that we believe to be reasonable underabout complex and inherently uncertain matters and because the circumstances. Theuse of different judgments, assumptions or estimates could have a material impact on our financial condition or results of these considerations form the basis for making judgments about the amount and timing of revenues and expenses, the carrying value of assets and the recorded amounts of liabilities.operations. Actual results may differ from these estimates and such estimates may change if the underlying conditions or assumptions change. Historical performance should not be viewed as indicative of future performance asbecause there can be no assurance that our resultsthe margins, operating income and net earnings, as a percentage of operationsrevenue, will be consistent from yearperiod to year.period.
FuneralCash and Cemetery OperationsCash Equivalents
We recordconsider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Inventory
Inventory consists primarily of caskets, outer burial containers and cemetery monuments and markers and is recorded at the revenuelower of its cost basis or net realizable value. Inventory is relieved using specific identification in fulfillment of performance obligations on our contracts.
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Held for Sale
At June 30, 2023, we had $0.3 million of assets classified as held for sale in Property, plant and equipment, net on our Consolidated Balance Sheet related to one funeral home that we divested on July 12, 2023. The carrying value of these assets held for sale exceeded their fair value and in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”), we recognized an impairment of $0.2 million for assets related to property, plant and equipment, which was recorded in Net (gain) loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.
Deferred Revenue
During the six months ended June 30, 2023, we withdrew $8.6 million of realized capital gains and earnings from sales ofour preneed funeral and cemetery trust investments. In certain states, we are allowed to make these withdrawals prior to the delivery of preneed merchandise and services when the merchandise is delivered or the service is performed. Cemetery interment rightscontracts. The realized capital gains and earnings withdrawn increase our cash flow from operations, but are recordednot recognized as revenue in accordanceour Consolidated Statements of Operations, however, they reduce our Preneed funeral trust investments and Preneed cemetery trust investments and increase our Deferred preneed funeral revenue and Deferred preneed cemetery revenue.
Additionally, during the three and six months ended June 30, 2023, we received a $6.0 million incentive payment from a vendor for entering into a strategic partnership agreement to market and sell prearranged funeral services in the future, which increased our cash flow from operations and Deferred preneed funeral revenue. The incentive payment will be deferred until we complete our implementation of the program and begin selling prearranged funeral services.
Property, Plant and Equipment
Property, plant and equipment is comprised of the following (in thousands):
December 31, 2022June 30, 2023
Land$84,405 $85,717 
Buildings and improvements251,778 261,514 
Furniture, equipment and automobiles70,522 75,025 
Property, plant and equipment, at cost406,705 422,256 
Less: accumulated depreciation(128,599)(134,674)
Property, plant and equipment, net$278,106 $287,582 
During the six months ended June 30, 2023, we acquired $12.8 million of property, plant and equipment related to our 2023 business combination, described in Note 3 to the Consolidated Financial Statements. Additionally, we sold real property for $1.2 million, with a carrying value of $0.6 million, resulting in a gain on the accounting provisionssale of $0.6 million, which was recorded in Net (gain) loss on divestitures, disposals and impairment charges on our Consolidated Statements of Operations.
During the six months ended June 30, 2022, we acquired real property for $2.6 million. Additionally, we sold real estate sales. This method providesproperty for $2.7 million, with a carrying value of $1.4 million, resulting in a gain on the sale of $1.3 million.We also divested two funeral homes that had a carrying value of property, plant and equipment of $0.7 million, which was included in the loss on the sale of divestitures and recorded in Net (gain) loss on divestitures, disposals and impairment charges.
Our growth and maintenance capital expenditures totaled $5.2 million and $2.6 million for the recognitionthree months ended June 30, 2022 and 2023, respectively and $9.8 million and $5.5 million for the six months ended June 30, 2022 and 2023, respectively, for property, plant and equipment. In addition, we recorded depreciation expense of revenue in$3.4 million and $3.7 million for the period in whichthree months ended June 30, 2022 and 2023, respectively and $6.7 million and $7.2 million for the customer’s cumulative payments exceed 10%six months ended June 30, 2022 and 2023, respectively.
Cemetery Property
Cemetery property was $104.2 million and $112.8 million, net of accumulated amortization of $59.0 million and $61.7 million at December 31, 2022 and June 30, 2023, respectively. When cemetery property is sold, the value of the intermentcemetery property (interment right contract price. Interment right costs, which include real property and other costs related to cemetery development, arecosts) 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 expenseOur growth capital expenditures for cemetery property of approximately $0.9development totaled $1.4 million for both the three months ended SeptemberJune 30, 20162022 and 20172023 and $3.1$3.7 million and $2.4$3.5 million for the ninesix months ended SeptemberJune 30, 20162022 and 2017,2023, respectively. Sales taxes collected are recognized on a net basis in our Consolidated Financial Statements.
AllowancesWe recorded amortization expense for bad debts and customer cancellations are provided at the date that the sale is recognized as revenue and are based on our historical experience. We also monitor changes in delinquency rates and provide additional bad debt and cancellation reserves when warranted.

When preneed salescemetery interment rights of funeral services and merchandise are funded through third-party insurance policies, we earn a commission on the sale of the policies. Insurance commissions are recognized as revenues at the point at which the commission is no longer subject to refund, which is typically one year after the policy is issued. Preneed selling costs consist of sales commissions that we pay our sales counselors and other direct related costs of originating preneed sales contracts. These costs are expensed when incurred.
Trust management fees are earned by us for investment management and advisory services that are provided by our wholly-owned registered investment advisor (“CSV RIA”). As of September 30, 2017, CSV RIA provided these services to two institutions, which have custody of 79% 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.
Accounts receivable was comprised of the following at December 31, 2016 and September 30, 2017 (in thousands):
 December 31, 2016 September 30, 2017
Funeral receivables, net of allowance for bad debt of $189 and $197, respectively$8,664
 $7,865
Cemetery receivables, net of allowance for bad debt of $557 and $603, respectively9,862
 10,552
Other receivables334
 404
Accounts receivable, net$18,860
 $18,821
Non-current preneed receivables represent payments expected to be received beyond one year from the balance sheet date. Preneed receivables were comprised of the following at December 31, 2016 and September 30, 2017 (in thousands):
 December 31, 2016 September 30, 2017
Funeral receivables, net of allowance for bad debt of $862 and $883, respectively$7,761
 $7,943
Cemetery receivables, net of allowance for bad debt of $1,304 and $1,347, respectively22,622
 23,336
Preneed receivable, net$30,383
 $31,279
Bad debt expense totaled approximately $0.5$1.7 million and $0.6$1.9 million for the three months ended SeptemberJune 30, 20162022 and 2017,2023, respectively and $1.5 million and $1.7 million for the nine months ended September 30, 2016 and 2017, respectively.
Property, Plant and Equipment
Property, plant and equipment (including equipment under capital 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 capital leases) is computed based on the straight-line method.
Property, plant and equipment was comprised of the following at December 31, 2016 and September 30, 2017 (in thousands):
 December 31, 2016 September 30, 2017
Land$73,744
 $73,503
Buildings and improvements195,214
 201,444
Furniture, equipment and automobiles76,664
 74,170
Property, plant and equipment, at cost345,622
 349,117
Less: accumulated depreciation(110,509) (113,616)
Property, plant and equipment, net$235,113
 $235,501
We recorded depreciation expense of approximately $2.9$3.0 million and $3.1 million for the threesix months ended SeptemberJune 30, 20162022 and 2017, respectively and $8.4 million and $9.4 million for2023, respectively.
During the ninesix months ended SeptemberJune 30, 2016 and 2017, respectively. During the nine months ended September 30, 2017,2023, we acquired real estatecemetery property for $0.7$9.0 million for funeral home parking lot expansion projects. During the nine months ended September 30, 2016, we acquired real estate for $2.7 million for various funeral home expansion projects and we purchased land and buildings at four funeral homes that were previously leased for approximately $6.3 million.
Goodwill
Effective January 1, 2017, we adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”), Intangibles (Topic 350): Goodwill and Other. The guidance simplifies subsequent measurement of goodwill and eliminates Step 2 from the goodwill impairment test, which should reduce the cost and complexity of evaluating goodwill for

impairment. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unitrelated to all of its assets and liabilities as if that reporting unit had been acquiredour 2023 business combination, described in a business combination. Instead, impairment is defined as the amount by which the carrying value of the reporting unit exceeds its fair value, up to the total amount of goodwill.
We performed our 2017 annual impairment test of goodwill using information as of August 31, 2017. 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 2017 annual impairment test, we performed a qualitative assessment and concluded that there was not an impairment to goodwill.
For our 2016 annual impairment test, we performed a quantitative impairment test. Our intent is to perform the quantitative test at least once every three years unless certain indicators or events suggest otherwise. See Part II, Item 7, Overview of Critical Accounting Policies and Estimates and Item 8. Financial Statements and Supplementary Data, Note 1,3 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2016, forStatements. We also divested two cemeteries that had a discussion of the methodology used for the goodwill impairment quantitative test.carrying
In addition to our annual review, we assess the impairment of goodwill whenever events or changes in circumstances indicate that the carrying
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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 adverse changescemetery property of $0.8 million, which was included in the business climate which may be indicated by a decline in our market capitalization or decline in operating results. No such events or changes occurred between our testing date and reporting period to trigger a subsequent impairment review. No impairments were recorded to our goodwill during the nine months ended September 30, 2016 and 2017.
Intangible Assets
Our intangible assets include tradenames resulting from acquisitions and are included in Intangible and other non-current assets on our Consolidated Balance Sheets. Our tradenames are considered to have an indefinite life and are not subject to amortization.
We performed our 2017 annual impairment test of intangible assets using information as of August 31, 2017. Under current guidance, we are permitted to first assess qualitative factors to determine whether it is more-likely-than not that the indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, an entity concludes that it is not more likely than not that the indefinite-lived intangible asset is impaired, then the entity is not required to take further action. However, if an entity concludes otherwise, then it is required to determine the fair value of the indefinite-lived intangible asset and perform the quantitative impairment test by comparing the fair value with the carrying amount in accordance with the guidance. For our 2017 annual impairment test, we performed a qualitative assessment and concluded that there was not an impairment to intangibles assets.
For our 2016 annual impairment test, we performed a quantitative impairment test. Our intent is to perform the quantitative test at least once every three years unless certain indicators or events suggest otherwise. See Part II, Item 7, Overview of Critical Accounting Policies and Estimates and Item 8. Financial Statements and Supplementary Data, Note 1, to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2016, for a discussion of the methodology used for the intangibles impairment quantitative test.
In addition to our annual review, 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. During the third quarter of 2016, we recorded an impairment to tradenames of $145,000 related to a funeral home business held for sale as the carrying value exceeded fair value. No other impairments were recorded to our intangible assets during the nine months ended September 30, 2016 and 2017.
Stock Plans and Stock-Based Compensation
We have stock-based employee and director compensation plans under which we grant restricted stock, stock options and performance awards. We also have an employee stock purchase plan (“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. Fair value is determinedloss on the datesale of the grant.
The fair value of restricted stock is determined using the stock pricedivestitures and recorded in Net (gain) loss on the grant date. The fair value of options or awards containing options is determined using the Black-Scholes valuation model. The fair value of the performance awards related to market performance is determined using a Monte-Carlo simulation pricing model. The fair value of the performance awards related to internal performance metrics is determined using the stock price on the grant date. The fair value of the ESPP is determined

based on the discount element offered to employeesdivestitures, disposals and the embedded option element, which is determined using an option calculation model.
Effective January 1, 2017, we adopted the FASB’s ASU, Compensation: (Topic 718): Stock Compensation. The guidance simplifies several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.
The guidance requires that previously unrecognized excess tax benefits should be recognized on a modified retrospective basis. Entities are required to record a deferred tax asset for previously unrecognized excess tax benefits outstanding as of the beginning of the annual period of adoption, with a cumulative-effect adjustment to retained earnings. At January 1, 2017, we performed an analysis for unrecognized excess tax benefits and deficiencies and determined that there were no adjustments to retained earnings, as there are no unrecognized excess tax benefits.
The guidance also requires that all excess tax benefits and tax deficiencies (including tax benefits of dividends on share-based payment awards) should be recognized as income tax expense or benefit in the income statement on a prospective basis. The tax effects of exercised or vested awards should be treated as discrete items in the reporting period in which they occur. For the three and nine months ended September 30, 2017, the excess tax deficiency related to share-based payments was approximately $70,000, recorded within Tax adjustment related to certain discrete items impairment charges on our Consolidated Statements of Operations. In addition, excess tax benefits or deficiencies related to share-based payments are now included in operating cash flows rather than financing cash flows.
The guidance also allows for a one-time accounting policy election to either account for forfeitures as they occur or continue to estimate forfeitures as required by current guidance. The Company has elected to continue estimating forfeitures under the current guidance.
The guidance also requires that the presentation of employee taxes paid when an employer withholds shares for tax-withholding purposes should be classified as a financing activity on the statement of cash flows and applied retrospectively. This resulted in $0.6 million of employee taxes paid from withheld shares being presented as financing activities on our Consolidated Statement of Cash Flows for both the nine months ended September 30, 2016 and 2017. Prior to January 1, 2017, these amounts were presented as operating activities on our Consolidated Statement of Cash Flows.
We adopted all of the provisions of this amendment in accordance with the transition requirements and it did not have a material effect on our Consolidated Financial Statements.
See Note 11 to the Consolidated Financial Statements included herein for additional information on our stock-based compensation plans.
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 13 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 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 financial statements; provide certain disclosures of uncertain tax matters; and specify how reserves for uncertain tax positions should be classified on our Consolidated Balance Sheets.
On July 18, 2017, we received notification that the Internal Revenue Service (“IRS”) selected our tax years ended December 31, 2013, 2014 and 2015 for examination. The examination of our tax year ended December 31, 2013 had previously been completed during 2016, however, we filed an amendment on June 1, 2017. The examination related to 2013 should be limited in scope to the items revised in the amendment, which include research and development credits, state taxes and preneed cost of sales.
Income tax expense during interim periods is based on our estimated annual effective income 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 the finalization of tax returns, tax audit settlements, and increases or decreases in valuation allowances on deferred tax assets.
Income tax expense was $1.9$4.2 million and $3.4 million for the three months ended SeptemberJune 30, 2016 compared to $1.52022 and 2023, respectively and $9.3 million and $6.9 million for the six months ended June 30, 2022 and 2023, respectively. Our operating tax rate before discrete items was 28.0% for both the three months ended SeptemberJune 30, 2017. We recorded income taxes at2022 and 2023 and 27.2% and 28.5% for the estimated effective rate, before discrete items, of 40.0% for both the three and ninesix months ended SeptemberJune 30, 20162022 and 2017. Income tax expense was $8.4 million for the nine months ended September 30, 2016 compared to $9.3 million for the nine months ended September 30, 2017.

During the third quarter of 2017, we recognized a tax benefit of $0.2 million which reduced our effective tax rate to 39.0% for the nine months ended September 30, 2017. During the third quarter of 2016, we recognized a tax benefit of $1.1 million which reduced our effective tax rate to 35.2% for the nine months ended September 30, 2016.
Correction of Immaterial Error
During the nine months ended September 30, 2017, we corrected an immaterial error related to 2013. The adjustment related to the correction of the deferred tax liability for the difference in book and tax basis of certain assets. The error had the impact of understating the deferred tax liability and overstating net income in 2013. Management evaluated the effect of the adjustment on previously issued interim and annual consolidated financial statements in accordance with the SEC's Staff Accounting Bulletin (“SAB”) No. 99 and SAB 108 and concluded that it was immaterial to the interim and annual periods. As a result, in accordance with SAB No. 108, we corrected our Consolidated Balance Sheets as of January 1, 2015.
The effect of this adjustment on our Consolidated Balance Sheets as of December 31, 2016 is as follows (dollars in thousands):
  % Change
Increase in Deferred tax liability$2,255
5.6%
Increase in Total liabilities$2,255
0.3%
Decrease in Retained earnings$2,255
9.8%
Decrease in Total stockholders' equity$2,255
1.3%
This adjustment had no impact on our Consolidated Statements of Operations or Consolidated Statement of Cash Flows for any periods presented.
Related Party Transactions
Management evaluated reportable events and transactions that occurred between us and related persons during the nine months ended September 30, 2017. See Note 15 to the Consolidated Financial Statements included herein for additional information on our related party transactions.2023, respectively.
Subsequent Events
ManagementWe have evaluated events and transactions during the period subsequent to SeptemberJune 30, 20172023 through the date the financial statements were issued for potential recognition or disclosure in the accompanying financial statements covered by this report.
See Note 16 to the Consolidated Financial Statements included herein for additional information on our subsequent events.
2.RECENTLY ISSUED ACCOUNTING STANDARDS
Stock-Based CompensationCredit Losses - Vintage Disclosures
In May 2017,March 2022, the FASB issued ASU, Compensation: (Topic 718): Stock CompensationFinancial Instruments - ScopeCredit Losses (“Topic 326”) to make the requirement to disclose gross write-offs by class of Modification Accounting.financing receivable and major security type consistent for all public business entities. The amendments provideamendment in this update provides specific guidance about which changes toon the terms and conditionsdisclosure for current period write-offs by year of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity should accountorigination for the effects of a modification unless the fair value, vesting conditions and classification of the modified award are the same as the original award immediately before the award is modified.financing receivables. This ASUamendment is effective for fiscal years beginning after December 15, 2017,2022, and interim periods within those fiscal years, with earlier application permittedtherefore was effective for all entities. The amendments should be applied prospectively to an award modified on or after the adoption date.us beginning January 1, 2023. Our adoption of these amendments had no impact on our consolidated financial statements.
3. BUSINESS COMBINATIONS
Tangible and intangible assets acquired and liabilities assumed are recorded at fair value and goodwill is recognized for any difference between the price of the acquisition and fair value. We recognize the assets acquired, the liabilities assumed and any non-controlling interest in the acquiree at the acquisition date, measured at the fair value as of that date. Acquisition related costs are recognized separately from the acquisition and are expensed as incurred. We customarily estimate related transaction costs known at closing. To the extent that information not available to us at the closing date subsequently becomes available during the measurement period, we may adjust goodwill, intangible assets, assets or liabilities associated with the acquisition.
On March 22, 2023, we acquired a business consisting of three funeral homes, two cemeteries and one cremation focused business in the Bakersfield, California area for $44.0 million in cash. We acquired substantially all of the assets and assumed certain operating liabilities of this ASUbusiness.
The pro forma impact of this acquisition on prior periods is not presented, as the impact is not significant to our reported results. The results of the acquired business are reflected in our Consolidated Statements of Operations from the date of acquisition.
The measurement period to determine the fair values of acquired identifiable assets and assumed liabilities will end at the earlier of 12 months from the date of the acquisition or as soon as we receive the information we are seeking about facts and circumstances that existed as of the acquisition date. Subsequent to our initial purchase price allocation for this acquisition made during the first quarter of 2023, we have adjusted our purchase price allocation based on additional information which became available prior to June 30, 2023. Provisional estimates for cemetery property have been recorded for the acquisition as our valuation has not been finalized at June 30, 2023.
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The following table summarizes the breakdown of the purchase price allocation for our fiscal year beginning January 1, 2018 is2023 acquisition (in thousands):
Initial Purchase Price AllocationAdjustmentsAdjusted Purchase Price Allocation
Current assets$7,087 $131 $7,218 
Preneed trust assets— 11,428 11,428 
Property, plant & equipment12,577 245 12,822 
Cemetery property9,035 — 9,035 
Goodwill13,612 (106)13,506 
Intangible and other non-current assets3,763 — 3,763 
Assumed liabilities(300)(66)(366)
Preneed trust liabilities— (11,428)(11,428)
Deferred revenue(1,774)(204)(1,978)
Purchase price$44,000 $— $44,000 
The current assets relate to accounts receivable and inventory. The intangible and other non-current assets relate to the fair value of tradenames and right-of-use operating lease assets. The assumed liabilities relate to operating lease obligations and commissions payable.
The following table summarizes the fair value of the assets acquired and liabilities assumed for this business (in thousands):
Acquisition DateType of BusinessMarketAssets Acquired (Excluding
Goodwill)		Goodwill
Recorded		Liabilities
and Debt
Assumed
March 22, 2023Three Funeral Homes, Two Cemeteries and One Cremation Focused BusinessBakersfield, CA$44,266 $13,506 $(13,772)
We did not expectedacquire any businesses during the six months ended June 30, 2022.
4.GOODWILL
The following table presents changes in goodwill in the accompanying Consolidated Balance Sheet (in thousands):
December 31, 2022June 30, 2023
Goodwill at the beginning of the period$391,972 $410,137 
Increase in goodwill related to acquisitions19,511 13,506 
Decrease in goodwill related to divestitures(901)— 
Decrease in goodwill related to assets held for sale(445)— 
Goodwill at the end of the period$410,137 $423,643 
During the six months ended June 30, 2023, we recognized $13.5 million in goodwill related to have a material effectour 2023 business combination; $4.5 million was allocated to our cemetery segment and $9.0 million was allocated to our funeral home segment.
5.DIVESTED OPERATIONS
During the three months ended June 30, 2023, we merged one funeral home with another business we own in an existing market. During the six months ended June 30, 2023, we sold one funeral home and two cemeteries for an aggregate of $0.8 million and merged one funeral home with another business we own in an existing market.
During the three months ended June 30, 2022, we merged one funeral home with another business we own in an existing market. During the six months ended June 30, 2022, we sold two funeral homes for an aggregate of $0.9 million and merged one funeral home with another business we own in an existing market.
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The operating results of these divested funeral homes and cemeteries are reflected on our Consolidated Financial Statements.Statements of Operations as shown in the table below (in thousands):
Revenue Recognition
Three months ended June 30,Six months ended June 30,
2022202320222023
Revenue$63 $— $296 $66 
Operating income (loss)(4)(2)25 24 
Loss on divestitures(1)
— — (703)(82)
Income tax benefit1 1 184 17 
Net loss from divested operations, after tax$(3)$(1)$(494)$(41)
In May 2014,
(1)
Loss on divestitures is recorded in Net (gain) loss on divestitures, disposals and impairments charges on our Consolidated Statements of Operations.
6.RECEIVABLES
Accounts Receivable
Our funeral receivables are recorded in Accounts receivable, net and primarily consist of amounts due for funeral services already performed.
Atneed cemetery receivables and preneed cemetery receivables with payments expected to be received within one year from the FASB issued ASU, Revenuebalance sheet date are also recorded in Accounts receivable, net. Preneed cemetery receivables with payments expected to be received beyond one year from Contracts with Customers (Topic 606). FASB Accounting Standards Codification (“ASC”) Topic 606 supersedes the revenue recognition requirements under Topic 605, Revenue Recognition, and most industry-specific guidance throughout the Industry Topicsbalance sheet date are recorded in Preneed cemetery receivables, net.
Accounts receivable is comprised of the ASC. following (in thousands):
June 30, 2023
FuneralCemeteryCorporateTotal
Trade and financed receivables$7,439 $17,504 $— $24,943 
Other receivables616 359 136 1,111 
Allowance for credit losses(284)(1,131)— (1,415)
Accounts receivable, net$7,771 $16,732 $136 $24,639 
December 31, 2022
FuneralCemeteryCorporateTotal
Trade and financed receivables$9,518 $14,429 $— $23,947 
Other receivables643 833 48 1,524 
Allowance for credit losses(311)(702)— (1,013)
Accounts receivable, net$9,850 $14,560 $48 $24,458 
Other receivables include supplier rebates, commissions due from third party insurance companies and perpetual care income receivables. We do not provide an allowance for credit losses for these receivables as we have historically not had any collectability issues nor do we expect any in the foreseeable future.
The core principlefollowing table summarizes the activity in our allowance for credit losses by segment (in thousands):
January 1, 2023Provision for Credit LossesWrite OffsRecoveriesJune 30, 2023
Trade and financed receivables:
Funeral$(311)$(562)$1,183 $(594)$(284)
Cemetery(702)(295)(134)— (1,131)
Total allowance for credit losses on trade and financed receivables$(1,013)$(857)$1,049 $(594)$(1,415)
Balances due on undelivered preneed funeral trust contracts have been reclassified to reduce Deferred preneed funeral revenue on our Consolidated Balance Sheet of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects$8.9 million and $10.3 million at December 31, 2022 and June 30, 2023, respectively. As these performance obligations are to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

The new guidance will significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. Additionally, the guidance requires improved disclosures as to the nature, amount, timing and uncertainty of revenue that is recognized. On July 9, 2015, the FASB deferred the effective date by one year to annual reporting periods beginningcompleted after December 15, 2017, including interim periods within that reporting period. We plan to adopt the provisions of this ASU for our fiscal year beginning January 1, 2018 using the modified retrospective approach, which recognizes the cumulative effect of initially applying the standard as an adjustment to retained earnings at the date of initial application.
Currently, our salesdeath, we cannot quantify the recognition of cemetery interment rights are recorded as revenue in accordancefuture periods. However, we estimate an average maturity period of ten years for preneed funeral contracts.
- 12 -

Preneed Cemetery Receivables
Our preneed cemetery receivables are comprised of the following (in thousands):
December 31, 2022June 30, 2023
Interment rights$45,351 $56,781 
Merchandise and services8,585 10,242 
Unearned finance charges4,894 5,316 
Preneed cemetery receivables$58,830 $72,339 
The components of our preneed cemetery receivables are as follows (in thousands):
December 31, 2022June 30, 2023
Preneed cemetery receivables$58,830 $72,339 
Less: unearned finance charges(4,894)(5,316)
Preneed cemetery receivables, at amortized cost$53,936 $67,023 
Less: allowance for credit losses(1,985)(3,172)
Less: balances due on undelivered cemetery preneed contracts(11,552)(14,204)
Less: amounts in accounts receivable(13,727)(16,373)
Preneed cemetery receivables, net$26,672 $33,274 
The following table summarizes the activity in our allowance for credit losses for Preneed cemetery receivables, net (in thousands):
January 1, 2023Provision for Credit LossesWrite OffsJune 30, 2023
Total allowance for credit losses on Preneed cemetery receivables, net
$(1,283)$(487)$(271)$(2,041)
The amortized cost basis of our preneed cemetery receivables by year of origination at June 30, 2023 is as follows (in thousands):
20232022202120202019PriorTotal
Total preneed cemetery receivables, at amortized cost$20,254 $23,893 $12,418 $6,082 $2,563 $1,813 $67,023 
The aging of past due preneed cemetery receivables at June 30, 2023 is as follows (in thousands):
31-60
Past Due		61-90
Past Due		91-120
Past Due		>120
Past Due		Total Past
Due		CurrentTotal
Recognized revenue$1,376 $700 $273 $3,304 $5,653 $47,166 $52,819 
Deferred revenue361 224 95 1,150 1,830 17,690 19,520 
Total contracts$1,737 $924 $368 $4,454 $7,483 $64,856 $72,339 
Balances due on undelivered preneed cemetery contracts have been reclassified to reduce Deferred preneed cemetery revenue on our Consolidated Balance Sheet. The transaction price allocated to preneed merchandise and service performance obligations that were unfulfilled were $11.6 million and $14.2 million at December 31, 2022 and June 30, 2023, respectively. As these performance obligations are to be completed after the date of death, we cannot quantify the recognition of revenue in future periods. However, we estimate an average maturity period of eight years for preneed cemetery contracts.
7.FAIR VALUE MEASUREMENTS
We evaluated our financial assets and liabilities for those that met the criteria of the disclosure requirements and fair value framework. The carrying values of cash and cash equivalents, accounts receivable and accounts payable approximate the fair values of those instruments due to the short-term nature of the instruments. The fair values of our receivables on preneed cemetery contracts are impracticable to estimate because of the lack of a trading market and the diverse number of individual contracts with varying terms. Our acquisition debt and Credit Facility (as defined in Note 11) and Senior Notes (as defined in Note 12) are classified within Level 2 of the retail land sales provisionsFair Value Measurements hierarchy.
At June 30, 2023, the carrying value and fair value of our Credit Facility was $204.0 million. We believe that our Credit Facility bears interest at a rate that approximates prevailing market rates for accountinginstruments with similar characteristics and therefore, the carrying value of our Credit Facility approximates fair value. We estimate the fair value of our acquisition debt utilizing an income approach, which uses a present value calculation to discount payments based on current market rates as
- 13 -

of the reporting date. At June 30, 2023, the carrying value of our acquisition debt was $3.9 million, which approximated its fair value. The fair value of our Senior Notes was $343.1 million at June 30, 2023 based on the last traded or broker quoted price.
We identified investments in fixed income securities, common stock and mutual funds presented within the preneed and perpetual care trust investments categories on our Consolidated Balance Sheet as having met the criteria for sales of real estate. This method providesfair value measurement. Where quoted prices are available in an active market, investments held by the trusts are classified as Level 1 investments pursuant to the three-level valuation hierarchy. Our Level 1 investments include cash, U.S. treasury debt, common stock and equity mutual funds. Where quoted market prices are not available for the recognitionspecific security, then fair values are estimated by using quoted prices of similar securities in active markets or inputs other than quoted prices that can corroborate observable market data. These investments are fixed income securities, including U.S. agency obligations, foreign debt, corporate debt, preferred stocks, certificates of deposit and fixed income mutual funds and other investments, all of which are classified within Level 2 of the valuation hierarchy.
In addition, we have an investment in a limited partnership fund, whose fair value has been estimated using the net asset value per share practical expedient described in ASC 820-10-35-59, Fair Value Measurement of Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent) and therefore, has not been classified in the fair value hierarchy. The value of the investments in this fund cannot be redeemed because the investments include restrictions that do not allow for redemption within the first 12 months after acquisition. Our unfunded commitment for this investment at June 30, 2023 is $10.0 million.
Our receivables from preneed funeral trusts represent assets in trusts which are controlled and operated by third parties in which we do not have a controlling financial interest (less than 50%) in the trust assets. We account for these investments at cost. See Notes 8 and 9 to our Consolidated Financial Statements for the fair value hierarchy levels of our trust investments.
8.TRUST INVESTMENTS
Preneed trust investments represent trust fund assets that we are generally permitted to withdraw as the services and merchandise are provided to customers. Preneed funeral and cemetery contracts are secured by payments from customers, less amounts not required by law to be deposited into trust. These earnings are recognized in Other revenue on our Consolidated Statements of Operations, when a service is performed or merchandise is delivered. Trust management fees charged by our wholly-owned registered investment advisory firm (“CSV RIA”) are included as revenue in the period in which the customer’s cumulative payments exceed 10% of the contract price relatedthey are earned. Our investments are diversified across multiple industry segments using a balanced allocation strategy to the interment right. We have analyzed the impact on our contract portfolio by reviewing our revenue streams and our current policies and procedures to identify potential differences that would result from applying the requirements of the new standard to our contracts and we do not expect the new accounting standard to significantly impact our current accounting for the cemetery interment rights.minimize long-term risk. We do not expect the adoption of this accounting standardintend to materially affect our accounting for other revenue streams.
We expect the adoption of this new accounting standard to affect our accounting for the selling costs related to preneed cemetery merchandisesell and services and preneed funeral trust contracts. Currently, these costs are charged to operations using the specific identification method in the period incurred. Under the new accounting standard,it is likely that we will capitalize and amortize these costs overnot be required to sell the typical financing term for our preneed cemetery merchandise and services contracts and oversecurities prior to their anticipated recovery.
Cemetery perpetual care trust investments represent a portion of the average preneed maturity period for our preneed funeral trust contracts. Based on our preliminary assessments, we do not expect the change to have a material impact on our Consolidated Financial Statements. The selling costs related to the sales of cemetery interment rights, which include real property and other costs related to cemetery development activities, will continue to be charged to operations using the specific identification method in the period in whichproceeds from the sale of the cemetery property interment rightrights that we are required by various state laws to deposit into perpetual care trust funds. The income earned from these perpetual care trusts offsets maintenance expenses for cemetery property and memorials. This trust fund income is recognized asin Other revenue. The selling costs related to
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 insurance contracts will continueand 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 chargedwithdrawn from the trust in accordance with state regulations and the gain or loss is allocated to operations using the specific identification method in the period incurred.contract.
We are continually evaluatingrely 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 Consolidated Financial Statements and are currently modifying our financial systems to provide accounting under the new guidance.future performance obligations.
Leases
In February 2016, the FASB issued ASU, Leases (Topic 842). This ASU addresses certain aspects of recognition, presentation, and disclosure of leases and applies to all entities that enter into a lease, with some specified scope exemptions. The amendments in this ASU aim to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with earlier application permitted for all entities. Both lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, which recognizes the cumulative effect of initially applying the standard as an adjustment to retained earnings at the date of initial application. We plan to adopt the provisions of this ASU for our fiscal year beginning January 1, 2019 and are currently evaluating the impact the adoption of this new accounting standard will have on our Consolidated Financial Statements.
3.    PRENEED TRUST INVESTMENTS
Preneed Cemetery Trust Investments
The components of Preneed cemetery trust investments represent trust fund assets that we are permitted to withdraw as services and merchandise are provided to customers. Preneed cemetery contracts are secured by payments from customers, less retained amounts not required to be deposited into trust. Preneed cemetery trust investments can be reduced by the trust earnings we have been allowed to withdraw in certain states prior to our performance.
The components of Preneed cemetery trust investments on our Consolidated Balance Sheets at December 31, 2016 and September 30, 2017 wereSheet are as follows (in thousands):
December 31, 2022June 30, 2023
Preneed cemetery trust investments, at market value$98,269 $92,898 
Less: allowance for contract cancellation(3,204)(3,024)
Preneed cemetery trust investments$95,065 $89,874 
- 14 -
 December 31, 2016 September 30, 2017
Preneed cemetery trust investments, at market value$71,834
 $73,889
Less: allowance for contract cancellation(2,138) (2,161)
Preneed cemetery trust investments, net$69,696
 $71,728

Upon cancellation of a preneed cemetery contract, a customer is generally entitled to receive a refund of the corpus, and in some instances, a portion of all of the earnings held in trust. In certain jurisdictions, we may be obligated to fund any shortfall if

the amounts deposited by the customer exceed the funds in trust, including investment income. As a result, when realized or unrealized losses of a trust result in the trust being underfunded, we assess whether we are responsible for replenishing the corpus of the trust, in which case a loss provision is recorded. At September 30, 2017, none of our preneed cemetery trust investments were underfunded.
Earnings from our preneed cemetery trust investments are recognized as revenue when a service is performed or merchandise is delivered. Trust management fees charged by CSV RIA are included in revenue in the period in which they are earned.
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 and common stock. Where quoted market prices are not available for the specific security, fair values are estimated by using quoted prices of similar securities in active markets or other inputs other than quoted prices that can corroborate observable market data. These investments are fixed income securities, including municipal bonds, foreign debt, corporate debt, preferred stocks, mortgage-backed securities and fixed income mutual funds, all of which are classified within Level 2 of the valuation hierarchy. We review and update our fair value hierarchy classifications quarterly. There were no transfers between Levels 1 and 2 in the three and nine months ended September 30, 2017. There are no Level 3 investments in the preneed cemetery trust investment portfolio. See Note 7 to the Consolidated Financial Statements included herein for further information on the fair value measurement and the three-level hierarchy.
The cost and fair market values associated with preneed cemetery trust investments at SeptemberJune 30, 20172023 are detailed below (in thousands):
Fair Value Hierarchy Level Cost 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Fair Value Hierarchy LevelCostUnrealized
Gains		Unrealized
Losses		Fair Market
Value
Cash and money market accounts1 $4,698
 $—
 $—
 $4,698
Cash and money market accounts1$8,330 $— $— $8,330 
Fixed income securities:        Fixed income securities:
U.S. agency obligationsU.S. agency obligations2803 — (65)738 
Foreign debt2 4,834
 275
 (168) 4,941
Foreign debt210,978 1,028 (421)11,585 
Corporate debt2 19,335
 1,145
 (553) 19,927
Corporate debt214,593 180 (4,625)10,148 
Preferred stock2 16,329
 383
 (524) 16,188
Preferred stock211,553 449 (1,521)10,481 
Mortgage-backed securities2 1,089
 240
 (23) 1,306
Certificates of depositCertificates of deposit279 — (9)70 
Common stock1 24,574
 3,376
 (3,119) 24,831
Common stock138,955 6,335 (7,183)38,107 
Limited partnership fundLimited partnership fund3,579 — (1)3,578 
Mutual funds:        Mutual funds:
Fixed Income2 1,200
 81
 —
 1,281
EquityEquity1554 — (52)502 
Fixed incomeFixed income211,379 17 (2,846)8,550 
Trust securities $72,059
 $5,501
 $(4,387) $73,173
Trust securities$100,803 $8,009 $(16,723)$92,089 
Accrued investment income $716
     $716
Accrued investment income$809 $809 
Preneed cemetery trust investments       $73,889
Preneed cemetery trust investments$92,898 
Market value as a percentage of cost       101.5%Market value as a percentage of cost91.4%
The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands):
Due in one year or less$15
Due in one to five years2,718
Due in five to ten years5,751
Thereafter33,879
Total$42,363

Due in one year or less$137 
Due in one to five years9,043 
Due in five to ten years4,782 
Thereafter19,060 
Total fixed income securities$33,022 
The cost and fair market values associated with preneed cemetery trust investments at December 31, 20162022 are detailed below (in thousands):
Fair Value Hierarchy LevelCostUnrealized
Gains		Unrealized
Losses		Fair Market
Value
Cash and money market accounts1$10,434 $— $— $10,434 
Fixed income securities:
U.S. agency obligations2803 — (72)731 
Foreign debt212,241 910 (644)12,507 
Corporate debt215,066 104 (4,139)11,031 
Preferred stock212,560 436 (1,789)11,207 
Certificate of deposit279 — (8)71 
Common stock142,929 5,102 (6,228)41,803 
Mutual funds:
Equity1362 — (33)329 
Fixed income212,324 10 (3,310)9,024 
Trust Securities$106,798 $6,562 $(16,223)$97,137 
Accrued investment income$1,132 $1,132 
Preneed cemetery trust investments$98,269 
Market value as a percentage of cost91.0%
- 15 -

 Fair Value Hierarchy Level Cost 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts1 $10,852
 $—
 $—
 $10,852
Fixed income securities:         
Municipal bonds2 496
 18
 (4) 510
Foreign debt2 7,574
 160
 (656) 7,078
Corporate debt2 20,621
 1,569
 (1,123) 21,067
Preferred stock2 16,287
 8
 (947) 15,348
Mortgage-backed securities2 949
 372
 (4) 1,317
Common stock1 13,250
 2,191
 (1,838) 13,603
Mutual funds:         
Fixed income  1,223
 107
 —
 1,330
Trust securities  $71,252
 $4,425
 $(4,572) $71,105
Accrued investment income  $729
     $729
Preneed cemetery trust investments        $71,834
Market value as a percentage of cost        99.8%
We determine whether or not the assets in the preneed cemetery trust investments have an other-than-temporary impairment on a security-by-security basis. This assessment is made based upon a number of criteria, including the length of time a security has been in a loss position, changes in market conditions and concerns related to the specific issuer. If a loss is considered to be other-than-temporary, the cost basis of the security is adjusted downward to its fair market value. Any reduction in the cost basis of the investment due to an other-than-temporary impairment is likewise recorded as a reduction in Deferred preneed cemetery receipts held in trust onThe following table summarizes our Consolidated Balance Sheets. In the three months ended September 30, 2016, we recorded a $0.1 million impairment for other-than-temporary declines in the fair value related to unrealized losses on certain investments. We did not record any impairments in the three months ended September 30, 2017. In the nine months ended September 30, 2016, we recorded a $0.8 million impairment and no impairments have been recorded in the nine months ended September 30, 2017. There is no impact on earnings until such time that the loss is realized in the trusts, allocated to preneed contracts and the services are performed or the merchandise is delivered, causing the contract to be withdrawn from the trust in accordance with state regulations.
At September 30, 2017, we had certain investmentsfixed income securities (excluding mutual funds) within our preneed cemetery trust investments that had tax lots in an unrealized loss positions for more than one year. Based onposition at June 30, 2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):
June 30, 2023
In Loss Position Less than 12 monthsIn Loss Position Greater than 12 monthsTotal
Fair Market ValueUnrealized LossesFair Market ValueUnrealized LossesFair Market ValueUnrealized Losses
Fixed income securities:
U.S. agency obligations$161 $(25)$577 $(40)$738 $(65)
Foreign debt2,684 (100)1,926 (321)4,610 (421)
Corporate debt4,560 (3,423)2,950 (1,202)7,510 (4,625)
Preferred stock4,118 (825)4,151 (696)8,269 (1,521)
Certificates of deposit— — 70 (9)70 (9)
Total fixed income securities with an unrealized loss$11,523 $(4,373)$9,674 $(2,268)$21,197 $(6,641)
The following table summarizes our analyses of thesefixed income securities the companies’ businesses and current market conditions, we determined that these investment losses were temporary in nature.
Our(excluding mutual funds) within our preneed cemetery trust investmentinvestments in an unrealized losses, their associated fair market values,loss position at December 31, 2022, aggregated by major security type and the durationlength of time in a continuous unrealized losses as of September 30, 2017 are shown in the following tableloss position (in thousands):
December 31, 2022
In Loss Position Less than 12 monthsIn Loss Position Greater than 12 monthsTotal
Fair Market ValueUnrealized LossesFair Market ValueUnrealized LossesFair Market ValueUnrealized Losses
Fixed income securities:
U.S. agency obligations$732 $(72)$— $— $732 $(72)
Foreign debt5,394 (308)744 (336)6,138 (644)
Corporate debt8,037 (3,922)563 (217)8,600 (4,139)
Preferred stock7,146 (1,271)2,517 (518)9,663 (1,789)
Certificates of deposit71 (8)— — 71 (8)
Total fixed income securities with an unrealized loss$21,380 $(5,581)$3,824 $(1,071)$25,204 $(6,652)
 September 30, 2017
 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$153
 $(2) $1,657
 $(166) $1,810
 $(168)
Corporate debt2,158
 (410) 624
 (143) 2,782
 (553)
Preferred stock273
 (2) 8,111
 (522) 8,384
 (524)
Mortgage-backed securities200
 (23) —
 —
 200
 (23)
Common stock8,473
 (2,247) 1,936
 (872) 10,409
 (3,119)
Mutual Funds:           
Fixed Income—
 —
 —
 —
 —
 —
Total temporary impaired securities$11,257
 $(2,684) $12,328
 $(1,703) $23,585
 $(4,387)

Our preneed cemetery trust investment unrealized losses, their associated fair market values, and the duration of unrealized losses as of December 31, 2016 are shown in the following table (in thousands):
 December 31, 2016
 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:           
Municipal bonds$228
 $(4) $—
 $—
 $228
 $(4)
Foreign debt2,523
 (180) 2,868
 (475) 5,391
 (655)
Corporate debt6,939
 (233) 2,168
 (890) 9,107
 (1,123)
Preferred stock3,217
 (121) 11,635
 (826) 14,852
 (947)
Mortgage-backed securities51
 (5) —
 —
 51
 (5)
Common stock2,608
 (202) 3,385
 (1,636) 5,993
 (1,838)
Total temporary impaired securities$15,566
 $(745) $20,056
 $(3,827) $35,622
 $(4,572)
Preneed cemetery trust investment security transactions recorded in Other, net on our Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2017 wereare as follows (in thousands):
For the Three Months Ended September 30, For the Nine Months Ended September 30,Three months ended June 30,Six months ended June 30,
2016 2017 2016 20172022202320222023
Investment income$578
 $474
 $1,546
 $1,755
Investment income$571 $689 $1,062 $1,279 
Realized gains126
 —
 415
 2,215
Realized gains6,870 728 8,893 2,001 
Realized losses(673) —
 (4,081) (1,312)Realized losses(2,320)(269)(2,383)(1,146)
Unrealized gains (losses), netUnrealized gains (losses), net(15,977)3,439 (9,100)(8,714)
Expenses and taxes(139) (336) (832) (1,213)Expenses and taxes(507)(316)(871)(622)
Decrease (increase) in deferred preneed cemetery receipts held in trust108
 (138) 2,952
 (1,445)
Net change in deferred preneed cemetery receipts held in trustNet change in deferred preneed cemetery receipts held in trust11,363 (4,271)2,399 7,202 
$—
 $—
 $—
 $—
$— $— $— $— 
Purchases and sales of investments in the preneed cemetery trusts for the three and nine months ended September 30, 2016 and 2017 wereare as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Purchases$(309)$(2,784)$(1,624)$(9,138)
Sales461 2,817 661 5,862 
- 16 -
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2016 2017 2016 2017
Purchases$(1,434) $(915) $(19,540) $(19,355)
Sales$5,973
 $—
 $18,003
 $13,189

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 are reduced by the trust earnings we have been allowed to withdraw in certain states prior to our performance.
The components of Preneed funeral trust investments on our Consolidated Balance Sheets at December 31, 2016 and September 30, 2017 wereSheet are as follows (in thousands):
December 31, 2022June 30, 2023
Preneed funeral trust investments, at market value$107,995 $106,713 
Less: allowance for contract cancellation(3,442)(3,396)
Preneed funeral trust investments$104,553 $103,317 
 December 31, 2016 September 30, 2017
Preneed funeral trust investments, at market value$91,980
 $92,151
Less: allowance for contract cancellation(2,740) (2,707)
Preneed funeral trust investments, net$89,240
 $89,444
Upon cancellation of a preneed funeral contract, a customer is generally entitled to receive a refund of the corpus and in some instances, a portion of all earnings held in trust. In certain jurisdictions, we may be obligated to fund any shortfall if the amounts deposited by the customer exceed the funds in trust, including investment income. As a result, when realized or unrealized

losses of a trust result in the trust being underfunded, we assess whether we are responsible for replenishing the corpus of the trust, in which case a loss provision is recorded. At September 30, 2017, none of our preneed funeral trust investments were underfunded.
Earnings from our preneed funeral trust investments are recognized as revenue when a service is performed or merchandise is delivered. Trust management fees charged by CSV RIA are included in revenue in the period in which they are earned.
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 and common stock. 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 other inputs other than quoted prices that can corroborate observable market data. These investments are fixed income securities, including municipal bonds, 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. There were no transfers between Levels 1 and 2 for the three and nine months ended September 30, 2017. There are no Level 3 investments in the preneed funeral trust investment portfolio. See Note 7 to the Consolidated Financial Statements included herein for further information on the fair value measurement and the three-level hierarchy.
The cost and fair market values associated with preneed funeral trust investments at SeptemberJune 30, 20172023 are detailed below (in thousands):
Fair Value Hierarchy Level Cost 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Fair Value Hierarchy LevelCostUnrealized
Gains		Unrealized
Losses		Fair Market
Value
Cash and money market accounts1 $15,636
 $—
 $—
 $15,636
Cash and money market accounts1$26,018 $— $— $26,018 
Fixed income securities:        Fixed income securities:
U.S treasury debt1 1,490
 13
 (4) 1,499
U.S treasury debt1485 — (42)443 
Foreign debt2 4,882
 282
 (166) 4,998
Foreign debt210,433 992 (385)11,040 
Corporate debt2 20,244
 1,165
 (571) 20,838
Corporate debt213,219 166 (4,161)9,224 
Preferred stock2 16,837
 457
 (526) 16,768
Preferred stock210,537 428 (1,443)9,522 
Mortgage-backed securities2 1,273
 255
 (25) 1,503
Common stock1 24,488
 3,392
 (3,133) 24,747
Common stock135,390 6,071 (6,319)35,142 
Limited partnership fundLimited partnership fund3,453 — (1)3,452 
Mutual funds:        Mutual funds:
EquityEquity1409— (48)361 
Fixed income2 1,998
 87
 (38) 2,047
Fixed income29,714 16 (2,479)7,251 
Other investments2 3,374
 —
 —
 3,374
Other investments23,521 — — 3,521 
Trust securities $90,222
 $5,651
 $(4,463) $91,410
Trust securities$113,179 $7,673 $(14,878)$105,974 
Accrued investment income $741
     $741
Accrued investment income$739 $739 
Preneed funeral trust investments       $92,151
Preneed funeral trust investments$106,713 
Market value as a percentage of cost       101.3%Market value as a percentage of cost93.6%
The estimated maturities of the fixed income securities (excluding mutual funds) included above are as follows (in thousands):
Due in one year or less$79 
Due in one to five years8,062 
Due in five to ten years4,443 
Thereafter17,645 
Total fixed income securities$30,229 
- 17 -
Due in one year or less$78
Due in one to five years4,320
Due in five to ten years6,208
Thereafter35,000
Total$45,606


The cost and fair market values associated with preneed funeral trust investments at December 31, 20162022 are detailed below (in thousands):

Fair Value Hierarchy LevelCostUnrealized
Gains		Unrealized
Losses		Fair Market
Value
Cash and money market accounts1$29,641 $— $— $29,641 
Fixed income securities:
U.S. treasury debt1484 — (45)439 
Foreign debt210,851 818 (555)11,114 
Corporate debt212,735 89 (3,443)9,381 
Preferred stock210,730 391 (1,564)9,557 
Common stock136,478 4,485 (5,187)35,776 
Mutual funds:
Equity1326 — (30)296 
Fixed income29,907 9 (2,691)7,225 
Other investments23,592 — — 3,592 
Trust securities$114,744 $5,792 $(13,515)$107,021 
Accrued investment income$974 $974 
Preneed funeral trust investments$107,995 
Market value as a percentage of cost93.3%
 Fair Value Hierarchy Level Cost 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts1 $22,787
 $—
 $—
 $22,787
Fixed income securities:         
U.S. treasury debt1 1,491
 21
 (10) 1,502
Municipal bonds2 447
 17
 (4) 460
Foreign debt2 7,692
 170
 (677) 7,185
Corporate debt2 21,454
 1,566
 (1,134) 21,886
Preferred stock2 17,037
 64
 (970) 16,131
Mortgage-backed securities2 1,165
 400
 (5) 1,560
Common stock1 13,675
 2,256
 (1,850) 14,081
Mutual funds:         
Fixed income2 2,124
 115
 (66) 2,173
Other investments2 3,463
 —
 —
 3,463
Trust securities  $91,335
 $4,609
 $(4,716) $91,228
Accrued investment income  $752
     $752
Preneed funeral trust investments        $91,980
Market value as a percentage of cost        99.9%
We determine whether or not the assets in the preneed funeral trust investments have other-than-temporary impairments on a security-by-security basis. This assessment is made based upon a number of criteria including the length of time a security has been in a loss position, changes in market conditions and concerns related to the specific issuer. If a loss is considered to be other-than-temporary, the cost basis of the security is adjusted downward to its fair market value. Any reduction in the cost basis of the investment due to an other-than-temporary impairment is likewise recorded as a reduction to Deferred preneed funeral receipts held in trust onThe following table summarizes our Consolidated Balance Sheets. In the three months ended September 30, 2016, we recorded a $0.1 million impairment for other-than-temporary declines in the fair value related to unrealized losses on certain investments. We did not record any impairments in the three months ended September 30, 2017. In the nine months ended September 30, 2016, we recorded a $0.9 million impairment and no impairments have been recorded in the nine months ended September 30, 2017. There is no impact on earnings until such time that the loss is realized in the trusts, allocated to preneed contracts and the services are performed or the merchandise is delivered, causing the contract to be withdrawn from the trust in accordance with state regulations.
At September 30, 2017, we had certain investmentsfixed income securities (excluding mutual funds) within our preneed funeral trust investments that had tax lotsinvestment in an unrealized loss positions for more than one year. Based onposition at June 30, 2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):
June 30, 2023
In Loss Position Less than 12 monthsIn Loss Position Greater than 12 monthsTotal
Fair Market ValueUnrealized LossesFair Market ValueUnrealized LossesFair Market ValueUnrealized Losses
Fixed income securities:
U.S. treasury debt$— $— $443 $(42)$443 $(42)
Foreign debt2,538 (79)1,774 (306)4,312 (385)
Corporate debt4,090 (3,227)2,648 (934)6,738 (4,161)
Preferred stock4,080 (830)3,523 (613)7,603 (1,443)
Total fixed income securities with an unrealized loss$10,708 $(4,136)$8,388 $(1,895)$19,096 $(6,031)
The following table summarizes our analyses of thesefixed income securities the companies’ businesses and current market conditions, we determined that these investment losses were temporary in nature.
Our(excluding mutual funds) within our preneed funeral trust investment in an unrealized losses, their associated fair market values,loss position at December 31, 2022, aggregated by major security type and the durationlength of time in a continuous unrealized losses as of September 30, 2017 are shown in the following tableloss position (in thousands):

December 31, 2022
In Loss Position Less than 12 monthsIn Loss Position Greater than 12 monthsTotal
Fair Market ValueUnrealized LossesFair Market ValueUnrealized LossesFair Market ValueUnrealized Losses
Fixed income securities:
U.S. treasury debt$439 $(45)$— $— $439 $(45)
Foreign debt4,766 (274)626 (281)5,392 (555)
Corporate debt6,742 (3,248)506 (195)7,248 (3,443)
Preferred stock5,908 (1,099)2,261 (465)8,169 (1,564)
Total fixed income securities with an unrealized loss$17,855 $(4,666)$3,393 $(941)$21,248 $(5,607)
- 18 -

 September 30, 2017
 In Loss Position Less than 12 months In Loss Position Greater than 12 months Total
 Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses
Fixed income securities:           
U.S. treasury debt$837
 $(4) $—
 $—
 $837
 $(4)
Foreign debt170
 (4) 1,628
 (163) 1,798
 (167)
Corporate debt2,273
 (430) 609
 (141) 2,882
 (571)
Preferred stock191
 (6) 8,183
 (520) 8,374
 (526)
Mortgage-backed securities234
 (24) 9
 —
 243
 (24)
Common stock8,497
 (2,241) 1,934
 (892) 10,431
 (3,133)
Mutual Funds:           
Fixed income79
 (1) 608
 (37) 687
 (38)
Total temporary impaired securities$12,281
 $(2,710) $12,971
 $(1,753) $25,252
 $(4,463)
Our preneed funeral trust investment unrealized losses, their associated fair market values, and the duration of unrealized losses as of December 31, 2016 are shown in the following table (in thousands):
 December 31, 2016
 In Loss Position Less than 12 months In Loss Position Greater than 12 months Total
 Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses Fair Market Value Unrealized Losses
Fixed income securities:           
U.S. treasury debt$834
 $(10) $—
 $—
 $834
 $(10)
Municipal bonds244
 (5) —
 —
 244
 (5)
Foreign debt2,654
 (186) 2,905
 (490) 5,559
 (676)
Corporate debt6,977
 (215) 2,234
 (919) 9,211
 (1,134)
Preferred stock3,420
 (128) 11,750
 (842) 15,170
 (970)
Mortgage-backed securities55
 (5) 11
 (1) 66
 (6)
Common stock2,795
 (216) 3,390
 (1,634) 6,185
 (1,850)
Mutual funds:           
Fixed income97
 (7) 644
 (58) 741
 (65)
Total temporary impaired securities$17,076
 $(772) $20,934
 $(3,944) $38,010
 $(4,716)

Preneed funeral trust investment security transactions recorded in Other, net on the Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2017 wereare as follows (in thousands):
For the Three Months Ended September 30, For the Nine Months Ended September 30,Three months ended June 30,Six months ended June 30,
2016 2017 2016 20172022202320222023
Investment income$596
 $524
 $1,639
 $1,801
Investment income$481 $577 $847 $1,063 
Realized gains131
 —
 525
 2,296
Realized gains6,147 703 7,890 1,943 
Realized losses(716) (2) (4,090) (1,314)Realized losses(2,088)(260)(2,146)(1,097)
Unrealized gains (losses), netUnrealized gains (losses), net(13,927)3,380 (7,400)(7,205)
Expenses and taxes(253) (390) (946) (1,106)Expenses and taxes(322)(202)(537)(394)
Decrease (increase) in deferred preneed funeral receipts held in trust242
 (132) 2,872
 (1,677)
Net change in deferred preneed funeral receipts held in trustNet change in deferred preneed funeral receipts held in trust9,709 (4,198)1,346 5,690 
$—
 $—
 $—
 $—
$— $— $— $— 
Purchases and sales of investments in the preneed funeral trusts for the three and nine months ended September 30, 2016 and 2017 wereare as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Purchases$— $(2,687)$(590)$(8,750)
Sales30 2,742 530 5,685 
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2016 2017 2016 2017
Purchases$(1,486) $(966) $(19,917) $(19,548)
Sales$6,336
 $23
 $19,005
 $13,266
Cemetery Perpetual Care Trust Investments
4.    PRENEED CEMETERY RECEIVABLES
Preneed sales of cemetery interment rights and related products and services are usually financed through interest-bearing installment sales contracts, generally with terms of up to five years, with such interest income reflected as Preneed cemetery finance charges. In substantially all cases, we receive an initial down payment at the time the contract is signed. At September 30, 2017, our total financed preneed receivables were $39.9 million, of which $29.3 million and $10.6 million were for cemetery interment rights and for merchandise and services, respectively. These amounts are presentedCare trusts’ corpus on our consolidated balance sheetConsolidated Balance Sheet represents the corpus of those trusts plus undistributed income. The components of Care trusts’ corpus are as $11.7 million within Accounts receivablefollows (in thousands):
December 31, 2022June 30, 2023
Cemetery perpetual care trust investments, at market value$66,307 $78,363 
Obligations due from trust(812)(774)
Care trusts’ corpus$65,495 $77,589 
The following table reflects the cost and $28.2 million within Preneed receivables and exclude unearned finance charges and allowance for contract cancellations. The unearned finance chargesmarket values associated with these receivables were $5.7 millionthe trust investments held in cemetery perpetual care trust funds at both December 31, 2016 and SeptemberJune 30, 2017.2023 (in thousands):
We determine an allowance for customer cancellations and refunds on contracts in which revenue has been recognized on sales of cemetery interment rights. We have a collections policy where past due notifications are sent to the customer beginning at 15 days past due and periodically thereafter until the contract is cancelled or payment is received. We reserve 100%
Fair Value Hierarchy LevelCostUnrealized
Gains		Unrealized
Losses		Fair Market
Value
Cash and money market accounts1$6,001 $— $— $6,001 
Fixed income securities:
Foreign debt29,753 853 (404)10,202 
Corporate debt212,561 208 (4,054)8,715 
Preferred stock210,990 384 (1,359)10,015 
Common stock132,130 5,361 (5,874)31,617 
Limited partnership fund2,969 — (1)2,968 
Mutual funds:
Equity1458 — (45)413 
Fixed income210,119 15 (2,411)7,723 
Trust securities$84,981 $6,821 $(14,148)$77,654 
Accrued investment income$709 $709 
Cemetery perpetual care investments$78,363 
Market value as a percentage of cost91.4%
- 19 -

The estimated maturities of the receivables on contracts in which the revenue has been recognized and paymentsfixed income securities (excluding mutual funds) included above are 90 days past due or more, which was approximately 4.8% of the total receivables on recognized sales at September 30, 2017. An allowance is recorded at the date that the contract is executed and periodically adjusted thereafter based upon actual collection experience at the business level. For the nine months ended September 30, 2017, the change in the allowance for contract cancellations was as follows (in thousands):
Due in one year or less$— 
Due in one to five years6,963 
Due in five to ten years4,183 
Thereafter17,786 
Total fixed income securities$28,932 
The following table reflects the cost and market values associated with the trust investments held in cemetery perpetual care trust funds at December 31, 2022 (in thousands):
Fair Value Hierarchy LevelCostUnrealized
Gains		Unrealized
Losses		Fair Market
Value
Cash and money market accounts1$5,326 $— $— $5,326 
Fixed income securities:
Foreign debt28,746 600 (470)8,876 
Corporate debt210,540 118 (2,961)7,697 
Preferred stock29,831 287 (1,374)8,744 
Common stock128,625 3,443 (4,297)27,771 
Mutual funds:
Equity1345 2 (22)325 
Fixed income29,046 26 (2,310)6,762 
Trust securities$72,459 $4,476 $(11,434)$65,501 
Accrued investment income$806 $806 
Cemetery perpetual care investments$66,307 
Market value as a percentage of cost90.4%
The following table summarizes our fixed income securities (excluding mutual funds) within our cemetery perpetual care trust investment in an unrealized loss position at June 30, 2023, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):
June 30, 2023
In Loss Position Less than 12 monthsIn Loss Position Greater than 12 monthsTotal
Fair Market ValueUnrealized LossesFair Market ValueUnrealized LossesFair Market ValueUnrealized Losses
Fixed income securities:
Foreign debt$2,502 $(84)$1,916 $(320)$4,418 $(404)
Corporate debt3,516 (2,774)2,699 (1,280)6,215 (4,054)
Preferred stock3,369 (681)4,108 (678)7,477 (1,359)
Total fixed income securities with an unrealized loss$9,387 $(3,539)$8,723 $(2,278)$18,110 $(5,817)
- 20 -

 September 30, 2017
Beginning balance$1,861
Write-offs and cancellations(1,004)
Provision1,093
Ending balance$1,950
The following table summarizes our fixed income securities (excluding mutual funds) within our perpetual care trust investment in an unrealized loss position at December 31, 2022, aggregated by major security type and length of time in a continuous unrealized loss position (in thousands):
The aging
December 31, 2022
In Loss Position Less than 12 monthsIn Loss Position Greater than 12 monthsTotal
Fair Market ValueUnrealized LossesFair Market ValueUnrealized LossesFair Market ValueUnrealized Losses
Fixed income securities:
Foreign debt$4,123 $(218)$554 $(252)$4,677 $(470)
Corporate debt5,413 (2,818)371 (143)5,784 (2,961)
Preferred stock6,066 (1,032)1,659 (342)7,725 (1,374)
Total fixed income securities with an unrealized loss$15,602 $(4,068)$2,584 $(737)$18,186 $(4,805)
Cemetery perpetual care trust investment security transactions recorded in Other, net on our Consolidated Statements of past due financing receivables as of September 30, 2017 wasOperations are as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Realized gains$994 $671 $1,244 $831 
Realized losses(281)(293)(289)(470)
Unrealized gains (losses), net(10,844)1,746 (6,116)(7,327)
Net change in care trusts’ corpus10,131 (2,124)5,161 6,966 
Total$— $— $— $— 
Cemetery perpetual care trust investment security transactions recorded in Other revenue are as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Investment income$2,776 $2,881 $5,538 $6,078 
Realized losses, net(258)(18)(604)(474)
Total$2,518 $2,863 $4,934 $5,604 
Purchases and sales of investments in the cemetery perpetual care trusts are as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Purchases$(280)$(2,310)$(411)$(6,711)
Sales441 8,694 441 10,904 
 
31-60
Past Due
 
61-90
Past Due
 
91-120
Past Due
 
>120
Past Due
 
Total Past
Due
 Current 
Total Financing
Receivables
Recognized revenue$866
 $393
 $190
 $1,205
 $2,654
 $26,517
 $29,171
Deferred revenue272
 145
 71
 387
 875
 9,900
 10,775
Total contracts$1,138
 $538
 $261
 $1,592
 $3,529
 $36,417
 $39,946

5.    9.RECEIVABLES FROM PRENEED FUNERAL TRUSTS
TheOur 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. As of December 31, 2016 and September 30, 2017, receivablesReceivables from preneed funeral trusts wereare as follows (in thousands):
 December 31, 2016 September 30, 2017
Preneed trust funds, at cost$14,658
 $15,780
Less: allowance for contract cancellation(440) (474)
Receivables from preneed trusts, net$14,218
 $15,306
December 31, 2022June 30, 2023
Preneed funeral trust funds, at cost$20,594 $21,732 
Less: allowance for contract cancellation(618)(652)
Receivables from preneed funeral trusts, net$19,976 $21,080 
The following summary reflects the composition of the assets held in trust and controlled by third parties to satisfy our future obligations under preneed arrangements related to the precedingunderlying preneed funeral contracts at September 30, 2017 and December 31, 2016.2022 and June 30, 2023. The cost basis includes reinvested interest and dividends that have been earned on the trust assets. Fair value includes the unrealized gains and losses on trust assets.
- 21 -

The composition of the preneed funeral trust funds at SeptemberJune 30, 2017 was2023 is as follows (in thousands):
Historical
Cost Basis		Fair Value
Cash and cash equivalents$6,283 $6,283 
Fixed income investments12,590 12,590 
Mutual funds and common stocks2,855 2,581 
Annuities4 4 
Total$21,732 $21,458 
 
Historical
Cost Basis
 Fair Value
As of September 30, 2017   
Cash and cash equivalents$4,054
 $4,054
Fixed income investments9,218
 9,218
Mutual funds and common stocks2,492
 2,516
Annuities16
 16
Total$15,780
 $15,804
The composition of the preneed funeral trust funds at December 31, 2016 was2022 is as follows (in thousands):
Historical
Cost Basis		Fair Value
Cash and cash equivalents$6,071 $6,071 
Fixed income investments11,795 11,795 
Mutual funds and common stocks2,725 2,440 
Annuities3 3 
Total$20,594 $20,309 
10.INTANGIBLE AND OTHER NON-CURRENT ASSETS
 
Historical
Cost Basis
 Fair Value
As of December 31, 2016   
Cash and cash equivalents$3,378
 $3,378
Fixed income investments8,809
 8,809
Mutual funds and common stocks2,455
 2,463
Annuities16
 16
Total$14,658
 $14,666
6.CEMETERY PERPETUAL CARE TRUST INVESTMENTS
Care trusts’ corpus on our Consolidated Balance Sheets represents the corpus of those trusts plus undistributed income. The components of Care trusts’ corpus as of December 31, 2016Intangible and September 30, 2017 were as follows (in thousands):
 December 31, 2016 September 30, 2017
Trust assets, at market value$46,889
 $48,679
Obligations due from trust(599) (493)
Care trusts’ corpus$46,290
 $48,186
We are required by various state laws to pay a portion of the proceeds from the sale of cemetery property interment rights 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, as earned, in Revenues: Cemetery. Trust management fees charged by CSV RIA are included in revenue in the period in which they are earned. At September 30, 2017, none of our cemetery perpetual care trust investments were underfunded.
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 and common stock. 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 other inputs other than quoted prices that can corroborate observable market data. These investments are fixed income securities, including municipal bonds, foreign debt, corporate debt, preferred stock, mortgage-backed securities and fixed income mutual funds, all of which are classified within Level 2 of the valuation hierarchy. We review and update our fair value hierarchy

classifications quarterly. There were no transfers between Levels 1 and 2 in the three and nine months ended September 30, 2017. There are no Level 3 investments in the cemetery perpetual care trust investment portfolio. See Note 7 to the Consolidated Financial Statements included herein for further information of the fair value measurement and the three-level valuation hierarchy.
The following table reflects the cost and fair market values associated with the trust investments held in perpetual care trust funds at September 30, 2017 (in thousands):
 Fair Value Hierarchy Level Cost 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts1 $2,573
 $—
 $—
 $2,573
Fixed income securities:         
Foreign debt2 3,568
 211
 (117) 3,662
Corporate debt2 13,194
 768
 (368) 13,594
Preferred stock2 11,464
 260
 (368) 11,356
Mortgage-backed securities2 661
 147
 (14) 794
Common stock1 15,263
 1,985
 (2,021) 15,227
Mutual funds:         
Fixed Income2 909
 64
 —
 973
Trust securities  $47,632
 $3,435
 $(2,888) $48,179
Accrued investment income  $500
     $500
Cemetery perpetual care investments        $48,679
Market value as a percentage of cost        101.1%
The estimated maturities of the fixed income securities included abovenon-current assets are as follows (in thousands):
December 31, 2022June 30, 2023
Tradenames$25,610 $29,074 
Capitalized commissions on preneed contracts, net of accumulated amortization of $2,990 and $3,375, respectively4,048 4,350 
Prepaid agreements not-to-compete, net of accumulated amortization of $3,515 and $3,576, respectively1,877 1,592 
Internal-use software, net of accumulated amortization of $200 and $300, respectively1,271 1,935 
Other124 382 
Intangible and other non-current assets, net$32,930 $37,333 
Due in one year or less$9
Due in one to five years1,770
Due in five to ten years4,004
Thereafter23,622
 $29,405
Tradenames
The following table reflectsDuring the costsix months ended June 30, 2023, we increased the value of our tradenames by $3.5 million, with $1.3 million allocated to our funeral home segment and fair market values associated with$2.2 million allocated to our cemetery segment, related to our 2023 business combination, described in Note 3 to the trust investments held in perpetual care trust funds at December 31, 2016 (in thousands):Consolidated Financial Statements.
 Fair Value Hierarchy Level Cost 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts1 $6,522
 $—
 $—
 $6,522
Fixed income securities:         
Municipal bonds2 365
 13
 (3) 375
Foreign debt2 5,100
 99
 (435) 4,764
Corporate debt2 13,715
 966
 (821) 13,860
Preferred stock2 11,323
 5
 (664) 10,664
Mortgage-backed securities2 569
 223
 (3) 789
Common stock1 8,259
 1,382
 (1,146) 8,495
Mutual funds:         
Fixed income2 855
 76
 —
 931
Trust securities  $46,708
 $2,764
 $(3,072) $46,400
Accrued investment income  $489
     $489
Cemetery perpetual care investments        $46,889
Market value as a percentage of cost        99.3%
Capitalized Commissions
We determine whether or not the assets in thecapitalize sales commissions and other direct selling costs related to preneed cemetery perpetual care trusts have an other-than-temporary impairmentmerchandise 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 security-by-security basis. This assessment is made based upon a numberstraight-line basis over the average maturity period of criteria including the length of time a security has been in a loss position, changes in market conditionsten years for our preneed funeral trust contracts and concerns related to the specific issuer. If a loss is considered to be other-eight years for our preneed cemetery merchandise and services contracts.

than-temporary, the cost basis of the security is adjusted downward to its fair market value. Any reduction in the cost basis due to an other-than-temporary impairment is also recorded as a reduction to Care trusts’ corpus. InAmortization expense was $174,000 and $196,000 for the three months ended SeptemberJune 30, 2016, we recorded a $0.1 million impairment2022 and 2023, respectively and $344,000 and $385,000 for other-than-temporary declines in the fair value related to unrealized losses on certain investments. We did not record any impairments in the threesix months ended SeptemberJune 30, 2017. In the nine months ended September 30, 2016, we recorded a $0.5 million impairment2022 and no impairments have been recorded in the nine months ended September 30, 2017. There is no impact on earnings until such time that the loss is realized in the trusts, allocated to preneed contracts and the services are performed or the merchandise is delivered, causing the contract to be withdrawn from the trust in accordance with state regulations.2023, respectively.
At September 30, 2017, we had certain investments within our perpetual care trust investments that had tax lots in loss positions for more than one year. Based on our analyses of these securities, the companies’ businesses and current market conditions, we determined that these investment losses were temporary in nature.Prepaid Agreements
Our perpetual care trust investment unrealized losses, their associated fair market values, and the duration of unrealized losses for the periods ended September 30, 2017 are shown in the following table (in thousands):
 September 30, 2017
 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$93
 $(2) $1,138
 $(115) $1,231
 $(117)
Corporate debt1,435
 (276) 417
 (92) 1,852
 (368)
Preferred stock681
 (4) 5,475
 (364) 6,156
 (368)
Mortgage-backed securities121
 (14) —
 —
 121
 (14)
Common stock5,393
 (1,466) 1,221
 (555) 6,614
 (2,021)
Mutual Funds:           
Fixed Income—
 —
 —
 —
 —
 —
Total temporary impaired securities$7,723
 $(1,762) $8,251
 $(1,126) $15,974
 $(2,888)
Our perpetual care trust investment unrealized losses, their associated fair market values, and the duration of unrealized losses for the periods ended December 31, 2016 are shown in the following table (in thousands):
 December 31, 2016
 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:           
Municipal bonds$137
 $(3) $—
 $—
 $137
 $(3)
Foreign debt1,619
 (120) 1,961
 (315) 3,580
 (435)
Corporate debt4,679
 (152) 1,439
 (669) 6,118
 (821)
Preferred stock2,038
 (77) 8,329
 (587) 10,367
 (664)
Mortgage-backed securities31
 (3) —
 —
 31
 (3)
Common stock1,563
 (121) 2,004
 (1,025) 3,567
 (1,146)
Total temporary impaired securities$10,067
 $(476) $13,733
 $(2,596) $23,800
 $(3,072)

Perpetual care trust investment security transactions recorded in Other, net on our Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2017 were as follows (in thousands):
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2016 2017 2016 2017
Realized gains$44
 $—
 $156
 $925
Realized losses(261) —
 (1,943) (630)
Decrease (increase) in care trusts’ corpus217
 —
 1,787
 (295)
Total$—
 $—
 $—
 $—
Perpetual care trust investment security transactions recorded in Revenues: Cemetery for the three and nine months ended September 30, 2016 and 2017 were as follows (in thousands):
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2016 2017 2016 2017
Investment income$1,523
 $1,539
 $4,503
 $4,831
Realized gain, net14
 (283) (444) (891)
Total$1,537
 $1,256
 $4,059
 $3,940
Purchases and sales of investments in the perpetual care trusts for the three and nine months ended September 30, 2016 and 2017 were as follows (in thousands):
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2016 2017 2016 2017
Purchases$(936) $(556) $(12,888) $(12,430)
Sales$3,832
 $—
 $11,702
 $8,390
7. FAIR VALUE MEASUREMENTS
We evaluate our financial assets and liabilities for those financial assets and liabilities that meet the criteria of the disclosure requirements and fair value framework. The carrying values of cash and cash equivalents, trade receivables and trade payables approximate the fair values of those instruments due to the short-term nature of the instruments. The fair values of receivables on preneed funeral and 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 long-term debt and Credit Facility (as defined in Note 9) are classified within Level 2 of the Fair Value Measurement hierarchy. The fair values of our long-term debt and Credit Facility approximate the carrying values of these instruments based on the index yields of similar securities compared to U.S. Treasury yield curves. The fair value of the convertible subordinated notes due 2021 was approximately $179.9 million at September 30, 2017 based on the last traded or broker quoted price. We identified investments in fixed income securities, common stock and mutual funds presented within the preneed and perpetual care trust investment categories on our Consolidated Balance Sheets as having met the criteria for fair value measurement. As of September 30, 2017, we did not have any assets that had fair values determined by Level 3 inputs and no liabilities measured at fair value.
We account for our investments as available-for-sale and measure them at fair value under the standards of financial accounting and reporting for investments in equity instruments that have readily determinable fair values and for all investments in debt securities. See Notes 3 and 6 to our Consolidated Financial Statements included herein for the fair value hierarchy levels of our trust investments.
8.     INTANGIBLE AND OTHER NON-CURRENT ASSETS
Intangibles and other non-current assets at December 31, 2016 and September 30, 2017 were as follows (in thousands):
 December 31, 2016 September 30, 2017
Prepaid agreements not-to-compete, net of accumulated amortization of $5,501 and $5,908, respectively$3,244
 $2,930
Tradenames11,663
 11,663
Other50
 23
Intangible and other non-current assets$14,957
 $14,616

Prepaid agreements not-to-compete are amortized over the term of the respective agreements, generally ranging generally from one to ten years. Amortization expense was approximately $106,000$142,000 and $135,000$131,000 for the three months ended SeptemberJune 30, 20162022 and 2017,2023, respectively and $308,000$290,000 and $407,000$262,000 for the ninesix months ended SeptemberJune 30, 20162022 and 2017,2023, respectively.
Internal-use Software
Internal-use software is amortized on a straight-line basis typically over three to five years. Amortization expense was $55,000 and $72,000 for the three months ended June 30, 2022 and 2023, respectively and $111,000 and $134,000 for the six months ended June 30, 2022 and 2023, respectively.
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The aggregate amortization expense for our capitalized commissions, prepaid agreements and internal-use software as of June 30, 2023 is as follows (in thousands):
Capitalized CommissionsPrepaid AgreementsInternal-use Software
Years ending December 31,
Remainder of 2023$402 $257 $142 
2024759 424 303 
2025694 377 391 
2026628 262 378 
2027562 142 377 
Thereafter1,305 130 344 
Total amortization expense$4,350 $1,592 $1,935 
11.CREDIT FACILITY AND ACQUISITION DEBT
At June 30, 2023, our senior secured revolving credit facility (the “Credit Facility”) was comprised of: (i) a $250.0 million revolving credit facility, including a $15.0 million subfacility for letters of credit and a $10.0 million swingline, and (ii) an accordion or incremental option allowing for future increases in the facility size by an additional amount of up to $75.0 million in the aggregate in the form of increased revolving commitments or incremental term loans. The final maturity of the Credit Facility will occur on May 13, 2026.
Our tradenames have indefinite livesobligations under the Credit Facility are unconditionally guaranteed on a joint and thereforeseveral basis by the same subsidiaries which guarantee the Senior Notes (as defined in Note 12) and certain of our subsequently acquired or organized domestic subsidiaries (collectively, the “Subsidiary Guarantors”).
The Credit Facility contains customary affirmative covenants, including, but not limited to, covenants with respect to the use of proceeds, payment of taxes and other obligations, continuation of the Company’s business and the maintenance of existing rights and privileges, the maintenance of property and insurance, amongst others.
In addition, the Credit Facility also contains customary negative covenants, including, but not limited to, covenants that restrict (subject to certain exceptions) the ability of the Company and the Subsidiary Guarantors to incur indebtedness, grant liens, make investments, engage in mergers and acquisitions, and pay dividends and other restricted payments, and certain financial maintenance covenants. At June 30, 2023, we were subject to the following financial covenants under our Credit Facility: (A) a Total Leverage Ratio not to exceed 6.00 to 1.00 and (B) a Fixed Charge Coverage Ratio (as defined in the Credit Facility) of not less than 1.20 to 1.00 as of the end of any period of four consecutive fiscal quarters. These financial maintenance covenants are not amortized.calculated for the Company and its subsidiaries on a consolidated basis. We were in compliance with all of the covenants contained in our Credit Facility as of June 30, 2023.
9.LONG-TERM DEBT
Our long-termCredit Facility and acquisition debt consisted of the following at December 31, 2016 and September 30, 2017(in thousands):
December 31, 2022June 30, 2023
Credit Facility$190,700 $204,000 
Debt issuance costs, net of accumulated amortization of $1,926 and $2,202, respectively(1,864)(1,582)
Total Credit Facility$188,836 $202,418 
Acquisition debt$3,993 $3,948 
Less: current portion(555)(578)
Total acquisition debt, net of current portion$3,438 $3,370 
 December 31, 2016 September 30, 2017
Revolving credit facility, secured, floating rate$67,700
 $75,500
Term loan, secured, floating rate138,750
 130,313
Acquisition debt12,245
 11,348
Debt issuance costs, net of accumulated amortization of $4,138 and $4,366, respectively(1,270) (1,043)
Less: current portion(13,021) (16,126)
Total long-term debt$204,404
 $199,992
As of SeptemberAt June 30, 2017, we had a $300 million secured bank credit facility with Bank of America, N.A., as Administrative Agent (the “Credit Agreement”), comprised of a $150 million revolving credit facility and a $150 million term loan (collectively, the “Credit Facility”). The Credit Facility also contains an accordion provision to borrow up to an additional $75 million in revolving loans, subject to certain conditions. The Credit Facility is collateralized by all personal property and funeral home real property in certain states.
As of September 30, 2017,2023, we had outstanding borrowings under the revolving credit facilityCredit Facility of $75.5 million and approximately $130.3 million was outstanding on the term loan.$204.0 million. We havealso had one letter of credit issued on November 30, 2016 and outstandingfor $2.3 million under the Credit Facility for approximately $2.0 million, which bears interest at 2.125% andFacility. The letter of credit will expire on November 27, 2017. The letter of credit2023 and is expected to automatically renewsrenew annually and secures our obligations under our various self-insured policies. At June 30, 2023, we had $43.7 million of availability under the Credit Facility.
Outstanding borrowings under theour Credit Facility bear interest at either a prime rate or a LIBORthe Bloomberg Short-Term Bank Yield Index (“BSBY”) rate, plus an applicable margin based uponon our leverage ratio. As of SeptemberAt June 30, 2017,2023, the prime rate margin was equivalent to 1.125%2.625% and the LIBORBSBY rate margin was 2.125%3.625%. The weighted average interest rate on theour Credit Facility was 2.9% and 8.6% for the three and nine months ended SeptemberJune 30, 2017 was 3.4%2022 and 3.1%,2023, respectively and 2.5% and 8.3% for the six months ended June 30, 2022 and 2023, respectively.
We were in compliance with the covenants contained in the Credit Agreement as of September 30, 2017.
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The Credit Agreement contains key ratios that we must comply with, including a requirement to maintain a leverage ratio of no more than 3.50 to 1.00interest expense and a covenant to maintain a fixed charge coverage ratio of no less than 1.20 to 1.00. As of September 30, 2017, the leverage ratio was 2.99 to 1.00 and the fixed charge coverage ratio was 1.89 to 1.00.
Amortizationamortization of debt issuance costs related to our Credit Facility was approximately $0.1 million for both the three months ended September 30, 2016 and 2017 and $0.3 million and $0.2 million for the nine months ended September 30, 2016 and 2017, respectively. The unamortized debt issuance costs related to the Credit Facility are being amortized over the remaining term of the related debt using the effective interest method for our term loan and the straight line method for our revolving credit facility.as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Credit Facility interest expense$1,314 $4,668 $2,161 $8,479 
Credit Facility amortization of debt issuance costs96 138 184 276 
Acquisition debt consists of deferred purchase price and promissory notes payable to sellers.

10.CONVERTIBLE SUBORDINATED NOTES
On March 19, 2014, we issued $143.75 million aggregate principal amount A majority of 2.75% convertible subordinatedthe deferred purchase price and notes due March 15, 2021 (the “Convertible Notes”)bear no interest and are discounted at imputed interest rates ranging from 7.3% to 10.0%. The Convertible Notes bear interest at 2.75% per year. Interest on the Convertible Notes beganOriginal maturities range from nine to accrue on March 19, 2014 and is payable semi-annually in arrears on March 15 and September 15 of each year.twenty years.
The carrying values of the liability and equity components of the Convertible Notes at December 31, 2016 and September 30, 2017 are reflected inimputed interest expense related to our Consolidated Balance Sheetsacquisition debt is as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Acquisition debt imputed interest expense$79 $71 $159 $142 
 December 31, 2016 September 30, 2017
Long-term liabilities:   
Principal amount$143,750
 $143,750
Unamortized discount of liability component(21,887) (18,687)
Convertible Notes issuance costs, net of accumulated amortization of $1,359 and $1,746, respectively$(2,268) $(1,881)
Carrying value of the liability component$119,596
 $123,182
    
Equity component carrying value$17,973
 $17,973
12. SENIOR NOTES
The carrying value of our 4.25% senior notes due 2029 (the “Senior Notes”) is reflected on our Consolidated Balance Sheet as follows (in thousands):
December 31, 2022June 30, 2023
Long-term liabilities:
Principal amount$400,000 $400,000 
Debt discount, net of accumulated amortization of $794 and $1,049, respectively(3,706)(3,451)
Debt issuance costs, net of accumulated amortization of $226 and $299, respectively(1,051)(978)
Carrying value of the Senior Notes$395,243 $395,571 
At June 30, 2023, the fair value of the ConvertibleSenior Notes, which are Level 2 measurements, was approximately $179.9 million$343.1 million.
The Senior Notes were issued under an indenture, dated as of May 13, 2021 (the “Indenture”), among the Company, the Subsidiary Guarantors and Wilmington Trust, National Association, as trustee. The Senior Notes are unsecured, senior obligations and are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally by each of the Subsidiary Guarantors. The Senior Notes mature on May 15, 2029, unless earlier redeemed or purchased and bear interest at September 30, 2017.4.25% per year, which is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2021.
Interest expenseThe 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 Convertible Notes included contractual couponability of Restricted Subsidiaries to make payments to us, consolidate, merge, sell or otherwise dispose of all or substantially all assets, or engage in transactions with affiliates. The Indenture also contains customary events of default.
The interest expense and amortization of approximately $1.0 million for both the three months ended September 30, 2016debt discount and 2017 and $3.0 million for both the nine months ended September 30, 2016 and 2017. Accretion of the discount on the Convertible Notes was $1.0 million and $1.1 million for the three months ended September 30, 2016 and 2017, respectively, and $2.9 million and $3.2 million for the nine months ended September 30, 2016 and 2017, respectively. Amortization of debt issuance costs related to our ConvertibleSenior Notes was approximately $0.1 million for both the three months ended September 30, 2016 and 2017 and $0.4 million for both the nine months ended September 30, 2016 and 2017.are as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Senior Notes interest expense$4,230 $4,250 $8,480 $8,500 
Senior Notes amortization of debt discount122 128 243 255 
Senior Notes amortization of debt issuance costs35 37 69 73 
The initial conversion rate of the Convertible Notes, as of March 19, 2014, was 44.3169 shares of our common stock per $1,000 principal amount of Convertible Notes, equivalent to an initial conversion price of approximately $22.56 per share of common stock. The adjusted conversion rate of the Convertible Notes, in effect at September 30, 2017, is 44.5392 shares of our common stock per $1,000 principal amount of Convertible Notes, equivalent to an adjusted conversion price of approximately $22.45 per share of common stock.
The unamortizeddebt discount and the unamortized debt issuance costs are being amortized using the effective interest method over the remaining term of approximately 71 months of the ConvertibleSenior Notes. The effective interest rate on the unamortized debt discount and the unamortized debt issuance costs for the Senior Notes for both the three and ninesix months ended SeptemberJune 30, 20162022 and 20172023 was 6.75%4.42% and 2.75%4.30%, respectively.

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11.STOCKHOLDERS’ EQUITY

Stock-Based Compensation Plans13.LEASES
During the nine months ended September 30, 2017, we had two stock benefits plans in effect under which restricted stock, stock optionsOur lease obligations consist of operating and performance awards have been granted or remain outstanding: the Second Amendedfinance leases related to real estate, equipment and Restated 2006 Long-Term Incentive Plan (the “Amended and Restated 2006 Plan”) and the 2017 Omnibus Incentive Plan (the “2017 Plan”).vehicles. The Amended and Restated 2006 Plan was terminated upon the approvalcomponents of the 2017 Plan at the annual shareholders meeting on May 17, 2017. The termination of the Amended and Restated 2006 Plan does not affect the awards previously issued and outstanding.
All stock-based planslease cost are administered by the Compensation Committee appointed by our Board of Directors (the “Board”). The 2017 Plan provides for grants of options as non-qualified options or incentive stock options, restricted stock and performance awards. The 2017 Plan expires on May 17, 2027.
The status of each of the plans at September 30, 2017 is as follows (shares in(in thousands):
 Shares
Reserved		 Shares
Available to
Issue		 Options
Outstanding		 
Performance Awards Outstanding (2)
Amended and Restated 2006 Plan—
 —
 1,929
 319
2017 Plan1,571
(1) 
1,541
 16
 9
      Total1,571
 1,541
 1,945
 328
Three months ended June 30,Six months ended June 30,
Income Statement Classification2022202320222023
Operating lease cost
Facilities and grounds expense(1)
$853 $917 $1,701 $1,792 
Short-term lease cost
Facilities and grounds expense(1)
76 92 178 186 
Variable lease cost
Facilities and grounds expense(1)
16 56 23 114 
Finance lease cost:
Depreciation of leased assets
Depreciation and amortization(2)
$109 $109 $217 $217 
Interest on lease liabilitiesInterest expense112 103 225 208 
Total finance lease cost221 212 442 425 
Total lease cost$1,166 $1,277 $2,344 $2,517 
(1)
Facilities and grounds expense is included within Cost of service and General, administrative and other on our Consolidated Statements of Operations.
(1)(2)Amount includes approximately 17,500 shares granted from the Amended
Depreciation and Restated 2006 Plan that were returned to the Company due to cancellations.
(2)Performance Awards are reserved at 200%amortization expense is included within Field depreciation expense and General, administrative and other on our Consolidated Statements of shares granted which is equal to the maximum payout in shares.Operations.
Supplemental cash flow information related to our leases is as follows (in thousands):
Six months ended June 30,
20222023
Cash paid for operating leases included in operating activities$1,795 $1,934 
Cash paid for finance leases included in financing activities426 447 
Right-of-use assets obtained in exchange for new leases is as follows (in thousands):
Six months ended June 30,
20222023
Right-of-use assets obtained in exchange for new operating lease liabilities$576 $1,067 
Right-of-use assets obtained in exchange for new finance lease liabilities— — 
Supplemental balance sheet information related to leases is as follows (in thousands):
Lease TypeBalance Sheet ClassificationDecember 31, 2022June 30, 2023
Operating lease right-of-use assetsOperating lease right-of-use assets$17,060 $17,123 
Finance lease right-of-use assetsProperty, plant and equipment, net$6,770 $6,770 
Accumulated depreciationProperty, plant and equipment, net(2,881)(3,098)
Finance lease right-of-use assets, net$3,889 $3,672 
Operating lease current liabilitiesCurrent portion of operating lease obligations$2,203 $2,581 
Finance lease current liabilitiesCurrent portion of finance lease obligations414 409 
Total current lease liabilities$2,617 $2,990 
Operating lease non-current liabilitiesObligations under operating leases, net of current portion$17,315 $16,860 
Finance lease non-current liabilitiesObligations under finance leases, net of current portion4,743 4,537 
Total non-current lease liabilities$22,058 $21,397 
Total lease liabilities$24,675 $24,387 
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The average lease terms and discount rates at June 30, 2023 are as follows:
Weighted-average remaining lease term (years)Weighted-average discount rate
Operating leases8.38.1 %
Finance leases11.18.1 %
The aggregate future lease payments for non-cancelable operating and finance leases at June 30, 2023 are as follows (in thousands):
OperatingFinance
Lease payments due:
Remainder of 2023$1,973 $423 
20243,942 791 
20253,651 736 
20263,528 746 
20273,375 746 
Thereafter10,011 4,064 
Total lease payments26,480 7,506 
Less: Interest(7,039)(2,560)
Present value of lease liabilities$19,441 $4,946 
At June 30, 2023, we had no significant operating or finance leases that had not yet commenced.
14.STOCKHOLDERS’ EQUITY
Restricted Stock
Restricted stock activity is as follows (in thousands, except shares):
Three months ended June 30,Six months ended June 30,
2022202320222023
SharesFair ValueSharesFair ValueSharesFair ValueSharesFair Value
Granted(1)
— $— — $— — $— 142,020 $4,634 
Returned for payroll taxes(49)$(2)39 $1 4,136 $205 1,473 $50 
Cancelled450 $16 776 $27 1,450 $47 1,826 $61 
(1)Restricted stock granted during the six months ended June 30 2023 vests over a three-year period, if the employee has remained continuously employed by us during the vesting period, at a weighted average stock price of $32.63.
We did not issue anyrecorded stock-based compensation expense, which is included in General, administrative and other expenses, for restricted stock duringawards of $40,000 and $394,000, for the three months ended SeptemberJune 30, 2017. During2022 and 2023, respectively and $97,000 and $572,000 for the second quarter of 2017, we issued 5,000 restricted stock grants to a new employee of the leadership team that vest over a five-year period with an aggregate grant date market value of approximately $0.1 million. During the first quarter of 2017, we issued a total of 22,250 restricted stock grants that vest over a three-year period with an aggregate grant date market value of approximately $0.6 million.
During the threesix months ended SeptemberJune 30, 20162022 and 2017, we recorded a benefit of $21,000 and $174,000 of pre-tax compensation expense, respectively, related to the vesting of restricted stock awards, which is included in general, administrative and other expenses. The benefit was primarily related to the cancellation of 50,000 unvested restricted stock for a former executive. During the nine months ended September 30, 2016 and 2017, we recorded pre-tax compensation expense of approximately $0.5 million for both periods.2023, respectively.
As of September 30, 2017, we had approximately $1.3 million of total unrecognized compensation costs related to unvested restricted stock awards, which are expected to be recognized over a weighted average period of approximately 1.7 years.
Stock Options
As of September 30, 2017, there were 1,945,656 stock options outstandingStock option grants and 708,379 stock options which remain unvested. We did not grant any options during the three months ended September 30, 2017. During the second quarter of 2017, we granted 16,250 options to a new employee of the leadership team at an exercise price of $26.89. These options willcancellations are as follows (in thousands, except shares):
Three months ended June 30,Six months ended June 30,
2022202320222023
SharesFair ValueSharesFair ValueSharesFair ValueSharesFair Value
Granted(1)
— $— — $— 58,500 $959 214,191 $2,506 
Granted(2)
— $— — $— 310,000 $5,388 — $— 
Cancelled18,138 $214 13,810 $152 25,138 $285 101,850 $1,334 
(1)Stock options granted during the six months ended June 30, 2022 and 2023 had a weighted average price of $49.48 and $32.69, respectively. The fair value of these options was calculated using the Black-Scholes option pricing model. The options granted in 2022 vest in one-fifth increments over a five-year period and have a ten-year term. The options granted in 2023 vest over a three-year period and have a ten-year term. These options will vest if the employee has remained continuously employed by us through the vesting period.
(2)Stock options granted during the six months ended June 30, 2022 had a weighted average price of $49.48. The fair value of these options was calculated using the Black-Scholes option pricing model and vest over a seven-year period and have a ten-year term. These options will vest if the employee has remained continuously employed by us through the vesting period.
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The fair value of the options granted during the second quarter of 2017 was approximately $0.1 million. During the first quarter of 2017, we granted 445,450 options to our leadership team and certain key employees at a weighted average exercise price of $26.54. These options will vest in one-fifth increments over a five-year period and have a ten-year term. The fair value of the total options granted during the first quarter of 2017 was approximately $3.2 million.
During the threesix months ended SeptemberJune 30, 2016 and 2017, we2023 was estimated using the Black-Scholes option pricing model with the following assumptions:
Grant DateFebruary 22, 2023
Expected holding period (years)4.00
Awards granted214,191
Dividend yield1.38%
Expected volatility43.68%
Risk-free interest rate4.27%
Black-Scholes value$11.70
Additional stock option activity is as follows (in thousands, except shares):
Three months ended June 30,Six months ended June 30,
2022202320222023
SharesCashSharesCashSharesCashSharesCash
Exercised(1)
— N/A17,300 N/A18,736 N/A29,300 N/A
Returned for option price(2)
— $— 12,652 $— 8,125 $60 22,797 $— 
Returned for payroll taxes(3)
— $— 736 $20 1,601 $82 1,465 $41 
(1)Stock options exercised during the three months ended June 30, 2023 had a weighted average exercise price of $20.06 with an aggregate intrinsic value of $0.2 million. Stock options exercised during the six months ended June 30, 2022 and 2023 had a weighted average exercise price of $25.88 and $22.26, respectively, with an aggregate intrinsic value of $0.5 million and $0.3 million, respectively.
(2)Represents shares withheld/cash received for the payment of the option price.
(3)Represents shares withheld/cash paid for the payment of payroll taxes.
We recorded approximately $0.2 million and $0.3 million, respectively, of pre-tax stock-based compensation expense, which is included in General, administrative and other expenses, for stock options. During the nine months ended September 30, 2016options of $550,000 and 2017, we recorded approximately $1.4 million and $1.2 million, respectively, of pre-tax compensation expense for stock options.

Performance Awards
We did not grant any performance awards during the three months ended September 30, 2017. During the second quarter of 2017, we granted 4,500 performance awards to a new employee of the leadership team, payable in shares. The fair value of these performance awards granted during the second quarter of 2017 was approximately $0.1 million. These awards will vest (if at all) on June 30, 2022, provided that certain criteria surrounding Adjusted Consolidated EBITDA (Adjusted Earnings Before Interest Tax Depreciation and Amortization) and Adjusted Consolidated EBITDA Margin performance is achieved and the individual has remained continuously employed by Carriage through such date. The Adjusted Consolidated EBITDA performance represents 50% of the award and the Adjusted Consolidated EBITDA Margin performance represents 50% of the award. During the first quarter of 2017, we granted 101,040 performance awards to our leadership team and certain key employees, payable in shares. The fair value of these performance awards granted during the first quarter of 2017 was approximately $2.7 million. We recorded pre-tax compensation expense for performance awards totaling $46,000 and $208,000$735,000, for the three months ended SeptemberJune 30, 20162022 and 2017,2023, respectively and $154,000$1,188,000 and $465,000$1,445,000 for the ninesix months ended SeptemberJune 30, 20162022 and 2017,2023, respectively.
Performance Awards
Performance award activity is as follows (in thousands, except shares):
Three months ended June 30,Six months ended June 30,
2022202320222023
SharesFair ValueSharesFair ValueSharesFair ValueSharesFair Value
Granted23,263 $1,100 — $— 27,013 $1,262 — $— 
Cancelled13,974 $134 2,795 $27 20,961 $201 40,181 $1,012 
We recorded stock-based compensation expense, which is included in General, administrative and other expenses, for performance awards of $637,000 and $665,000 for the three months ended June 30, 2022 and 2023, respectively and $1,203,000 and $728,000 for the six months ended June 30, 2022 and 2023, respectively.
Employee Stock Purchase Plan
During the third quarter of 2017, employees purchased a total of 11,525 shares of common stock through our employee stock purchase plan (“ESPP”) at a weighted average price of $21.76 per share. We recorded pre-tax stock-based compensation expense for the ESPP totaling approximately $53,000 and $60,000 for the three months ended September 30, 2016 and 2017, respectively, and $197,000 and $204,000 for both the nine months ended September 30, 2016 and 2017.activity is as follows (in thousands, except shares):
Three months ended June 30,Six months ended June 30,
2022202320222023
SharesPriceSharesPriceSharesPriceSharesPrice
ESPP11,796 $33.70 16,386 $24.28 25,089 $39.86 38,042 $24.28 
The fair value of the optionright (option) to purchase shares under the ESPP is estimated onat the date of grant (January 1 of each year) associatedpurchase with the four quarterly purchase dates using the following assumptions:
2023
Dividend yield1.30%
Expected volatility53.51%
Risk-free interest rate4.53%, 4.77%, 4.75%, 4.72%
Expected life (years)0.25, 0.50, 0.75, 1.00
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We recorded stock-based compensation expense, which is included in General, administrative and other expenses and Regional and unallocated funeral and cemetery costs, for the ESPP totaling $152,000 and $163,000 for the three months ended June 30, 2022 and 2023, respectively and $351,000 and $415,000 for the six months ended June 30, 2022 and 2023 respectively.
Common Stock
Former Employee
Common stock activity is as follows (in thousands, except shares):
Three months ended June 30,Six months ended June 30,
2022202320222023
SharesFair ValueSharesFair ValueSharesFair ValueSharesFair Value
Granted(1)
— $— — $— — $— 30,000 $826 
Returned for payroll taxes— $— — $— — $— 1,001 $28 
2017
Dividend yield(1)0.82%
Expected volatility18.82%
Risk-free interest rate0.53%, 0.65%, 0.77%, 0.89%
Expected life (years)0.25, 0.50, 0.75, 1.00
During the six months ended June 30, 2023, we issued 30,000 shares of common stock to a former executive at a stock price of $27.54, in accordance with his Separation and Release agreement pertaining to his resignation from his position as the Company's Executive Vice President, Chief Financial Officer & Treasurer effective January 2, 2023.
Expected volatilities are based on the historical volatility during the previous twelve months of the underlying common stock. The risk-free rate for the quarterly purchase periods is based on the U.S. Treasury yields in effect at the time of the purchase. The expected life of the ESPP grants represents the calendar quarters from the beginning of the year to the purchase date (end of each quarter).
Director Compensation
We recorded pre-taxstock-based compensation expense, related to director compensation, which is included in general,General, administrative and other expenses totaling $90,000, for bothcommon stock awards of $826,000, for the six months ended June 30, 2023.
Good To Great Incentive Program
During the six months ended June 30, 2023, we issued 8,444 shares of our common stock to certain employees, which were valued at $0.3 million at a grant date stock price of $32.69. During the six months ended June 30, 2022, we issued 27,448 shares of our common stock to certain employees, which were valued at $1.4 million at a grant date stock price of $49.48.
Non-Employee Director and Board Advisor Compensation
Non-Employee Director and Board Advisor common stock activity is as follows (in thousands, except shares):
Three months ended June 30,Six months ended June 30,
2022202320222023
SharesFair ValueSharesFair ValueSharesFair ValueSharesFair Value
Board of Directors(1)
2,372 $94 1,077 $35 5,041 $236 4,595 $142 
Advisor to the Board(1)
126 $5 153 $5 219 $10 316 $10 
(1)Common stock granted during the three months ended June 30, 2022 and 2023 had a weighted average price of $39.65 and $32.47, respectively and $46.83 and $31.01 for six months ended June 30, 2022 and 2023, respectively.
On June 21, 2023, the Board elected Chad Fargason to serve as a Class II Director until the 2025 annual meeting of shareholders. Mr. Fargason was appointed to serve as the chairperson of the Corporate Governance Committee and a member of the Audit Committee. Concurrently with his appointment, the Board granted Mr. Fargason 910 shares of our common stock under our Director Compensation Policy, which were valued at approximately $25,000 based on the closing price on the grant date.
We recorded compensation expense, which is included in General, administrative and other expenses, related to annual retainers, including the value of stock granted to non-employee Directors and an advisor to our Board, of $184,000 and $189,000 for the three months ended SeptemberJune 30, 20162022 and 2017,2023, respectively and $302,000$385,000 and $271,000$355,000 for the ninesix months ended SeptemberJune 30, 20162022 and 2017,2023, respectively.
Share Repurchase
On February 25, 2016, our Board approved a shareShare repurchase program authorizing us to purchase up to an aggregate of $25.0 million of our common stockactivity is as follows (dollar value in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). During the three months ended September 30, 2017, we repurchased 574,054 shares of common stock for a total cost of $14.0 million at an average cost of $24.35 per share pursuant to this share repurchase program. We did not repurchase any shares of common stock in the first or second quarter of 2017. thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Number of Shares Repurchased205,496 — 695,496 — 
Average Price Paid Per Share$40.02 $— $49.22 $— 
Dollar Value of Shares Repurchased$8,224 $— $34,234 $— 
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Our shares were purchased in the open market. Purchases weremarket 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.
On August 18, 2017, we purchased 100,000 shares ofstock. At June 30, 2023, our common stock from Melvin C. Payne, our Chairman of the Board and Chief Executive Officer. The purchase of these shares was made pursuant to a privately negotiated transaction at a price of $23.85 per share for a total purchase price of $2.4 million. The purchase price was the stock's trading price at the time of the transaction. This purchase was not a part of the share repurchase program approved by the Board on February 25, 2016. The repurchase of the shares held by Mr. Payne was approved in advance by our Board, with Mr. Payne abstaining. See Note 15 to our Consolidated Financial Statements included hereinhad $48.9 million authorized for additional information on our related party transactions.

repurchases.
Cash DividendsDividend
On July 26, 2017, ourOur Board declared a dividend of $0.05the following dividends payable on the dates below (in thousands, except per share totaling approximately $0.8 million, which was paid on September 1, 2017 to record holders of our common stock as of August 14, 2017. For the three months ended September 30, 2016, we paid a quarterly dividend of $0.050 per share, totaling approximately $0.8 million. For the nine months ended September 30, 2016 and 2017, we paid total dividends of approximately $1.7 million and $2.5 million, respectively.amounts):
Accumulated other comprehensive income
2023Per ShareDollar Value
March 1st
$0.1125 $1,661 
June 1st
$0.1125 $1,679 
2022Per ShareDollar Value
March 1st
$0.1125 $1,725 
June 1st
$0.1125 $1,730 
Our components of accumulated other comprehensive income are as follows (in thousands):
Accumulated Other Comprehensive Income
Balance at December 31, 2016$—
Increase in net unrealized gains associated with available-for-sale securities of the trusts2,849
Reclassification of net unrealized gain activity attributable to the Deferred preneed funeral and cemetery receipts held in trust and Care trusts’ corpus
(2,849)
Balance at September 30, 2017$—
12.15.EARNINGS PER SHARE
The following table sets forth the computation of the basic and diluted earnings per share for the three and nine months ended September 30, 2016 and 2017 (in thousands, except per share data):
Three months ended June 30,Six months ended June 30,
2022202320222023
Numerator for basic and diluted earnings per share:
Net income$10,899 $8,286 $27,301 $17,130 
Less: Earnings allocated to unvested restricted stock(6)(79)(20)(150)
Income attributable to common stockholders$10,893 $8,207 27,281 16,980 
Denominator:
Denominator for basic earnings per common share - weighted average shares outstanding14,798 14,793 15,020 14,776 
Effect of dilutive securities:
Stock options226 50 325 74 
Performance awards688 611 688 611 
Denominator for diluted earnings per common share - weighted average shares outstanding15,712 15,454 16,033 15,461 
Basic earnings per common share:$0.74 $0.55 $1.82 $1.14 
Diluted earnings per common share:$0.69 $0.53 $1.70 $1.10 
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2016 2017 2016 2017
Numerator for basic and diluted earnings per share:       
Net income$5,683
 $3,038
 $15,454
 $14,532
Less: Earnings allocated to unvested restricted stock(25) (10) (76) (52)
Income attributable to common stockholders$5,658
 $3,028
 $15,378
 $14,480
        
Denominator:       
Denominator for basic earnings per common share - weighted average shares outstanding16,529
 16,476
 16,502
 16,575
Effect of dilutive securities:       
Stock options273
 335
 260
 332
Convertible subordinated notes299
 787
 200
 980
Denominator for diluted earnings per common share - weighted average shares outstanding17,101
 17,598
 16,962
 17,887
        
Basic earnings per common share:$0.34
 $0.18
 $0.93
 $0.87
Diluted earnings per common share:$0.33
 $0.17
 $0.91
 $0.81
The fully diluted weighted average shares outstanding for the three and nine months ended September 30, 2017 and the corresponding calculation of fully diluted earnings per share, include approximately 787,000 and 980,000 shares that would have been issued upon the conversion of our convertible subordinated notes as a result of the application of the if-converted method prescribed by the FASB ASC 260, Earnings Per Share. There were 299,000 and 200,000 shares for the three and nine months ended September 30, 2016 that would have been issued upon conversion under the if-converted method.
For the both the three and nine months ended September 30, 2017 approximately 455,000 and 320,000 stockStock options were excluded from the computation of diluted earnings per share because the inclusion of such stock options would result in an antidilutive effect. Foreffect are as follows:
Three months ended June 30,Six months ended June 30,
2022202320202023
Antidilutive stock options366,038 1,236,490 259,359 1,183,146 
Our performance awards are considered to be contingently issuable shares because their issuance is contingent upon the bothsatisfaction of certain performance and service conditions. At June 30, 2023, we had satisfied certain performance criteria for the threefirst, second and nine months ended September 30, 2016, no stock options were excluded fromthird predetermined growth targets of our performance awards to be considered outstanding. Therefore, we included these awards in the computation of diluted earnings per share.share as of the beginning of the reporting period.

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13.MAJOR SEGMENTS OF BUSINESS

We conduct funeral and cemetery operations only in the United States. 16.SEGMENT REPORTING
Revenue, disaggregated by major source for each of our reportable segments was as follows (in thousands):
Three months ended June 30, 2023
FuneralCemeteryTotal
Services$39,799 $4,723 $44,522 
Merchandise21,211 4,244 25,455 
Cemetery property— 20,175 20,175 
Other revenue3,495 4,031 7,526 
Total$64,505 $33,173 $97,678 

Three months ended June 30, 2022
FuneralCemeteryTotal
Services$38,140 $4,410 $42,550 
Merchandise20,525 3,777 24,302 
Cemetery property— 16,974 16,974 
Other revenue3,273 3,501 6,774 
Total$61,938 $28,662 $90,600 
Six months ended June 30, 2023
FuneralCemeteryTotal
Services$83,401 $9,328 $92,729 
Merchandise44,180 8,178 52,358 
Cemetery property— 33,283 33,283 
Other revenue7,009 7,813 14,822 
Total$134,590 $58,602 $193,192 

Six months ended June 30, 2022
FuneralCemeteryTotal
Services$83,656 $8,631 $92,287 
Merchandise45,810 6,878 52,688 
Cemetery property— 30,200 30,200 
Other revenue6,827 6,759 13,586 
Total$136,293 $52,468 $188,761 
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The following table presents revenues from operations,operating income (loss) from operations, income (loss) before income taxes and total assets by segment (in thousands):
FuneralCemeteryCorporateConsolidated
Operating income (loss):
Three months ended June 30, 2023$17,898 $13,039 $(10,199)$20,738 
Three months ended June 30, 202218,485 10,421 (9,181)19,725 
Six months ended June 30, 2023$40,091 $21,651 $(20,370)$41,372 
Six months ended June 30, 202243,947 18,639 (17,710)44,876 
Income (loss) before income taxes:
Three months ended June 30, 2023$18,112 $13,183 $(19,593)$11,702 
Three months ended June 30, 202219,765 10,427 (15,072)15,120 
Six months ended June 30, 2023$40,446 $21,854 $(38,252)$24,048 
Six months ended June 30, 202246,973 18,686 (29,055)36,604 
Total assets:
June 30, 2023$796,043 $429,272 $16,771 $1,242,086 
December 31, 2022779,500 396,389 17,061 1,192,950 
 Funeral Cemetery Corporate Consolidated
Revenues from operations:       
Three months ended September 30, 2017$47,329
 $13,725
 $—
 $61,054
Three months ended September 30, 2016$45,183
 $14,957
 $—
 $60,140
        
Nine months ended September 30, 2017$150,279
 $42,784
 $—
 $193,063
Nine months ended September 30, 2016$140,952
 $44,384
 $—
 $185,336
        
Income (loss) from operations before income taxes:       
Three months ended September 30, 2017$12,394
 $3,002
 $(10,836) $4,560
Three months ended September 30, 2016$13,478
 $4,327
 $(10,231) $7,574
        
Nine months ended September 30, 2017$45,414
 $11,609
 $(33,208) $23,815
Nine months ended September 30, 2016$44,322
 $12,875
 $(33,337) $23,860
        
Total assets:       
September 30, 2017$637,075
 $245,674
 $4,297
 $887,046
December 31, 2016$634,145
 $241,621
 $9,303
 $885,069

14.17.SUPPLEMENTARY DATA

Balance Sheet

The following table presents the detail of certain balance sheet accounts as of December 31, 2016 and September 30, 2017 (in thousands):
December 31, 2022June 30, 2023
Prepaid and other current assets:
Prepaid expenses$4,077 $2,803 
Federal income taxes receivable507 678 
Other current assets149 129 
Total prepaid and other current assets$4,733 $3,610 
Current portion of debt and lease obligations:
Acquisition debt$555 $578 
Finance lease obligations414 409 
Operating lease obligations2,203 2,581 
Total current portion of debt and lease obligations$3,172 $3,568 
Accrued and other liabilities:
Incentive compensation$12,140 $8,337 
Insurance3,051 4,134 
Unrecognized tax benefit3,294 3,338 
Vacation3,430 3,714 
Interest2,329 2,462 
Salaries and wages2,263 2,310 
Employee meetings and award trips746 552 
Commissions743 974 
Income tax payable459 168 
Ad valorem and franchise taxes455 1,634 
Perpetual care trust payable222 400 
Other accrued liabilities1,489 1,541 
Total accrued and other liabilities$30,621 $29,564 
Other long-term liabilities:
Incentive compensation$2,541 $1,042 
Other long-term liabilities524 257 
Total other long-term liabilities$3,065 $1,299 
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 December 31, 2016 September 30, 2017
Other current assets:   
Income taxes receivable$1,932
 $671
Other current assets102
 93
Total other current assets$2,034
 $764
    
Current portion of long-term debt and capital lease obligations:   
Term note$11,250
 $14,063
Acquisition debt1,771
 2,063
Capital leases246
 197
Total current portion of long-term debt and capital lease obligations$13,267
 $16,323
    
Other current liabilities:   
Income taxes payable$509
 $1,579
Deferred rent208
 232
Total other current liabilities$717
 $1,811
    
Accrued liabilities:   
Accrued salaries and wages$4,005
 $1,365
Accrued incentive compensation8,237
 4,864
Accrued vacation2,305
 2,614
Accrued insurance1,726
 2,053
Accrued interest1,235
 257
Accrued ad valorem and franchise taxes981
 2,314
Accrued commissions543
 410
Other accrued liabilities1,059
 1,417
Total accrued liabilities$20,091
 $15,294
    
Other long-term liabilities:   
Deferred rent$1,207
 $1,029
Incentive compensation575
 924
Contingent consideration785
 770
Total other long-term liabilities$2,567
 $2,723
Cash Flow

The following information is supplemental disclosure for the Consolidated Statements of Cash Flows (in thousands):

Six months ended June 30,
20222023
Cash paid for interest$10,901 $17,056 
Cash paid for taxes4,495 7,329 
15.RELATED PARTY TRANSACTIONS
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On August 18, 2017, we purchased 100,000 shares of our common stock from Melvin C. Payne, our Chairman of the Board and Chief Executive Officer. These shares had been held by Mr. Payne prior to such repurchase for over one year. The purchase of these shares was made pursuant to a privately negotiated transaction at a price of $23.85 per share for a total purchase price of $2.4 million. The purchase price was the stock's trading price at the time of the transaction. These shares are currently held as treasury shares. This purchase was not a part of the share repurchase program approved by the Board on February 25, 2016. The repurchase of the shares held by Mr. Payne was approved in advance by our Board, with Mr. Payne abstaining.

16.SUBSEQUENT EVENTS
On October 14, 2017, we completed construction of and began operating a new funeral home in Pennsylvania.
On October 25, 2017, our Board approved an increase in our quarterly dividend on our common stock from $0.050 to $0.075 per share, effective with respect to dividends payable on December 1, 2017 and later.
On October 25, 2017, our Board approved a $15.0 million increase in its authorization for repurchases of ourcommon stock in addition to the $25.0 million approved on February 25, 2016, bringing the total authorized repurchase amount to $40.0 million, in accordance with the Exchange Act.
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 safe harbor provisionsmeaning of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical information, should be deemed to be forward-looking statements. Words such as “may”, “will”, “estimate”, “intend”, “believe”, “expect”, “seek”, “project”, “forecast”, “foresee”, “should”, “would”, “could”, “plan”, “anticipate” and other similar words or expressions may be used to identify forward-looking statements; however, the absence of these words does not mean that the statements are not forward-looking. These forward-looking statements include, but are not limited to, statements regarding any projections of earnings, revenues, asset sales,revenue, cash flow, investment returns, capital allocation, debt levels, equity performance, death rates, market share growth, overhead, including talent recruitment, field and corporate incentive compensation, or other financial items; any statements of the plans, strategies and objectives of management for future operations;operations or financing activities, including, but not limited to, capital allocation, the ability to obtain credit or financing, organizational performance, anticipated integration, performance and other benefits of recently completed and anticipated acquisitions, and cost and debt reductions; any statements of the plans, timing and objectives of management for acquisition and divestiture activities; any statements regarding future economic and market conditions or performance; any statements regarding the timing of the strategic alternatives review; the outcome of the strategic alternatives review, including whether any transaction occurs, at all; any statements of belief; and any statements of assumptions underlying any of the foregoing and are based on our current expectations and beliefs concerning future developments and their potential effect on us. 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. While management believes thatwe believe these forward-looking statementsassumptions concerning future events are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenuesrevenue 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:to:
•our ability to find and retain skilled personnel;
•the effects of our talent recruitment efforts, incentive and compensation plans and programs, including such effects on our Standards Operating Model and the Company’s operational and financial performance;
•our ability to execute our growth strategy;strategy, if at all;
•our ability to execute and meet the effectsobjectives of competition;our High Performance and Credit Profile Restoration Plan, if at all;
•the execution of our Standards Operating, 4E Leadership and Strategic Acquisition Models;
•the effects of competition;
•changes in the number of deaths in our markets;
•changes in consumer preferences;preferences and our ability to adapt to or meet those changes;
•our ability to generate preneed sales;sales, including implementing our cemetery portfolio sales strategy, product development and optimization plans;
•the investment performance of our funeral and cemetery trust funds;
•fluctuations in interest rates;
•the effects of inflation on our operational and financial performance, including the increased overall costs for our goods and services, the impact on customer preferences as a result of changes in discretionary income, and our ability, if at all, to mitigate such effects;
•our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;
•our ability to meet the timing, objectives and expectations related to our capital allocation framework, including our forecasted rates of return, planned uses of free cash flow and future capital allocation, including share repurchases, potential strategic acquisitions, internal growth projects, dividend increases, or debt repayment plans;
•our ability to meet the projected financial and equity performance goals to our updated full year outlook, if at all;
•the timely and full payment of death benefits related to preneed funeral contracts funded through life insurance contracts;
•the financial condition of third-party insurance companies that fund our preneed funeral contracts;
•increased or unanticipated costs, such as merchandise, goods, insurance or taxes;taxes, and our ability to mitigate or minimize such costs, if at all;
•our level of indebtedness and the cash required to service our indebtedness;
•changes in federal income tax laws and regulations and the implementation and interpretation of these laws and regulations by the Internal Revenue Service;
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•effects of the application of other applicable laws and regulations, including changes in such regulations or the interpretation thereof;
•the potential impact of epidemics and pandemics, such as the COVID-19 coronavirus, including any new or emerging public health threats, on customer preferences and on our business;
•government, social, business and other actions that have been and will be taken in response to pandemics and epidemics, such as the COVID-19 coronavirus, including potential responses to any new or emerging public health threats;
•effects and expense of litigation;
•consolidation of the deathcarefuneral and cemetery industry;
•our ability to identify and consummate strategic acquisitions, if at all, and successfully integrate acquired businesses with our existing businesses, including expected performance and financial improvements related thereto;
•potential adverse impacts resulting from our recent announcement regarding our board of directors’ review of potential strategic alternatives for the Company;
•economic, financial and stock market fluctuations;
•interruptions or security lapses of our information technology, including any cybersecurity or ransomware incidents,
•adverse developments affecting the financial services industry;
•acts of war or terrorists acts and the governmental or military response to such acts;
•our failure to maintain effective control over financial reporting; and
•other factors and uncertainties inherent in the deathcarefuneral 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, 2016.2022.
ReadersInvestors 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.

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

Item 2.Management’s Discussion and Analysis of Financial Condition and Results of Operations.
OVERVIEW
General
Carriage Services, Inc. (“Carriage,” the “Company,” “we,” “us,” or “our”) was incorporated in the State of Delaware in December 1993 and is a leading provider of funeral and cemetery services and merchandise in the United States. We operate in two business segments: funeral homeFuneral Home operations, which currently accountaccounts for approximately 78%70% of our revenues,total revenue, and cemeteryCemetery operations, which accountcurrently accounts for approximately 22%30% of our revenues.total revenue.
At SeptemberJune 30, 2017,2023, we operated 171172 funeral homes in 2826 states and 32 cemeteries in 11 states. We compete with other publicpublicly held, privately held and independent operators of funeral and cemetery companiescompanies.
Funeral home and smaller, independent operators. We believe we arecemetery businesses provide products and services to families in three principal areas: (i) ceremony and tribute, generally in the form of a market leader in mostfuneral or memorial service; (ii) disposition of remains, either through burial or cremation; and (iii) memorialization, generally through monuments, markers or inscriptions. Our funeral homes offer a complete range of high value personal services to meet a family’s funeral needs, including consultation, the removal and preparation of remains, the sale of caskets and related funeral merchandise, the use of funeral home facilities for visitation and memorial services and transportation services. Most of our markets. funeral homes have a non-denominational chapel on the premises, which permits family visitation and services to take place at one location and thereby reduces transportation costs and inconvenience to the family.
Our cemeteries provide interment rights (primarily grave sites, lawn crypts, mausoleum spaces and niches), related cemetery merchandise (such as memorial markers, outer burial containers and monuments) and services (interments, inurnments and installation of cemetery merchandise).
We provide funeral and cemetery services and products on both an “at-need”“atneed” (time of death) and “preneed” (planned prior to death) basis.
Recent Developments
Board of Directors - Resignation; Election; and Review of Potential Strategic Alternatives
On June 15, 2023, Dr. Achille Messac, a member of our Board of Directors (the “Board”), provided notice of his resignation from the Board, effective on that date. Dr. Messac’s resignation was not a result of any disagreement with the Company on any matter related to its operations, policies or practices.
On June 21, 2023, the Board elected Chad Fargason to serve as a Class II Director until the Company’s 2025 annual meeting of shareholders. Mr. Fargason was appointed to serve on the Audit Committee, along with being appointed Chairman of the Corporate Governance Committee.
On June 29, 2023, the Board announced it had initiated a process to explore potential strategic alternatives, possibly including a sale, merger or other potential strategic or financial transaction, to maximize shareholder value.
Leadership Changes
On June 21, 2023, the Board appointed Carlos R. Quezada, to serve as Chief Executive Officer (“CEO”), effective on that date, as part of a planned succession of Melvin C. Payne, founder and former CEO. Concurrently with the appointment of Mr. Quezada as CEO, Mr. Payne stepped down as CEO and the Board approved his appointment as Executive Chairman of the Board, effective on that date.
On June 21, 2023, the Board appointed Steven D. Metzger, to serve as President, along with remaining in his role as Secretary, effective on that date.
Strategic Partnership Agreement
On May 16, 2023, we received a $6.0 million incentive payment from a vendor for entering into a strategic partnership agreement to market and sell prearranged funeral services in the future.
Inflationary and Macroeconomic Trends
During the second quarter of 2023, we continued to experience modest cost increases and surcharges from our vendors and suppliers on merchandise and goods due to increases in the cost of raw materials, as well as broader inflationary, and global supply chain impacts, along with rising interest rates. For example, we experienced higher costs related to full-time hourly base rates, utilities, funeral supplies, merchandise costs, insurance, and increased borrowing costs under our Credit Facility.
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Although we have taken steps to mitigate these cost increases and we expect these impacts to continue throughout the current year, the ultimate scope and duration of these impacts are unknown at this time. More broadly, the U.S. economy continues to experience higher rates of inflation, which has impacted a wide variety of industries and sectors, with consumers facing rising prices. Such inflation may negatively impact consumers or discretionary spending, including the amount that consumers are able to spend on our services, although we have not experienced such impacts to date and our industry has been largely resilient to similar adverse economic and market environments in the past. Although we expect these trends to continue throughout the current year, we will continue to assess these impacts and take the appropriate steps, if necessary, to mitigate these cost increases, if possible.
Funeral Home Operations
Our funeral homes offer a complete range of high value personal services to meet a family’s funeral needs, including consultation, the removal and preparation of remains, the sale of caskets and related funeral merchandise, the use of funeral home facilities for visitation and remembrancememorial services and transportation services. Factors affecting our funeral operating results include, but are not limited to: demographic trends relating to population growth and average age, which impact death rates and number of deaths; establishing and maintaining leading market share positions supported by strong local heritage and relationships; effectively responding to increasing cremation trends by selling complementary services and merchandise; controlling salary and merchandise costs; and exercising pricing leverage to increase average revenue per contract.
Cemetery Operations
Our cemeteries provide interment rights (grave(primarily grave sites, lawn crypts, mausoleum spaces and mausoleum spaces)niches) and related cemetery merchandise such(such as memorial markers, and outer burial containers and monuments) and services (interments, inurnments and installation of cemetery merchandise) both on an at-needatneed and preneed basis. Factors affecting our cemetery operating results include, but are not limited to: the size and success of our sales organization; local perceptions and heritage of our cemeteries; our ability to adapt to changes in the economy and consumer confidence; and our response to fluctuations in capital markets and interest rates, which affect investment earnings on trust funds, finance charges on installment contracts and our securities portfolio within the trust funds.
Business Strategy
Our business strategy is based on having strong, local leadership with entrepreneurial principles that is focused on sustainable long term market share, revenue and profitability growth in each local business. We believe Carriage has the most innovative operating model in the funeral and cemetery industry, which we are able to achieve through a decentralized, high performancehigh-performance culture and operating framework linked with incentive compensation programs that attract top-qualitytop quality industry talent to our organizationorganization. We also believe that Carriage provides a unique consolidation and operating framework that offers a highly attractive succession planning solution for independent funeral home owners who want their legacy family business to remain operationally prosperous in their local communities.
Our Mission Statement states that “we are committed to being the most professional, ethical and highest quality funeral and cemetery service organization in our industry” and our Guiding Principles state our core values, which are comprised of:
honesty,•Honesty, integrity and quality in all that we do;
hard•Hard work, pride of accomplishment, and shared success through employee ownership;
belief•Belief in the power of people through individual initiative and teamwork;
outstanding•Outstanding service and profitability go hand-in-hand; and
growth•Growth of the Company is driven by decentralization and partnership.
Our five Guiding Principles collectively embody our Being The Best high-performance culture and operating framework. Our operations and business strategy are built upon the execution of the following three models:
•Standards Operating Model;
•4E Leadership Model; and
•Strategic Acquisition Model.

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Standards Operating Model
Our Standards Operating Model is focused on growing local market share, people development,providing personalized high-value services to our client families and the keyguests, and operating and financial metrics that drive long-term, sustainable revenue growth and improved earning power of our portfolio of businesses by employing leadership and entrepreneurial principles that fit the nature of our high-value personal service business. Standards Achievement is the measure by which we judge the success of each business and incentivize our local managers and their teams. Our Standards Operating Model is not designed to produce maximum short-term earnings because we believe such performance is unsustainable and will ultimately stress the business, which very often leads to declining market share, revenuesrevenue and earnings.
4E Leadership Model
Our 4E Leadership Model requires strong local leadership in each business to grow an entrepreneurial, decentralized, high-value, personal service and sales business at sustainable profit margins. Our 4E Leadership Model is based upon principles established by Jack Welch during his tenure at General Electric, and is based upon 4E Leadership qualities essential to succeed in a high-performancehigh performance culture: Energy to get the job done; the ability to EnergizeEnergize others; the Edge necessary to make difficult decisions; and the ability to Execute and produce results. To achieve a high level within our Standards in a business year after year, we require our local Managing Partners that have the 4E Leadership skills to entrepreneurially grow the business by hiring, training and developing highly motivated and productive local teams.

Strategic Acquisition Model
Our Standards Operating Model led to the development of our Strategic Acquisition Model, which guides our acquisition strategy. BothWe believe that both models, when executed effectively, will drive long-term, sustainable increases in market share, revenue, earnings and cash flow. We believe a primary driver of higher revenue and profits in the future will be the execution of our Strategic Acquisition Model using strategic ranking criteria to assess acquisition candidates. As we execute this strategy over time, we willexpect to acquire larger, higher margin strategic businesses.businesses in growing markets.
We have learned that the long-term growth or decline of a local branded funeral and cemetery business is reflected by several criteria that correlate strongly with five-to-ten-year performance in volumes (market share), revenue and sustainable field-level earnings before interest, taxes, depreciation and amortization (“EBITDA”) margins (a non-GAAP measure). We use criteria such as cultural alignment, volume and price trends, size of business, size of market, competitive standing, demographics, strength of brand and barriers to entry to evaluate the strategic position of potential acquisition candidates. Our financial valuation of the acquisition candidate is then determined through the application of an appropriate after-tax cash return on investment that exceeds our cost of capital.
Our belief in our Mission Statement and Guiding Principles that define us and proper execution of the three models that define our strategy have given us thea competitive advantage in anyevery market in whichwhere we compete. We believe that we can execute our three models without proportionate incremental investment in our consolidation platform infrastructure and without additional fixed regional and corporate overhead. This gives us a competitive advantage that is evidenced by the sustained earning power of our portfolio as defined by our EBITDA margin.
LIQUIDITY AND CAPITAL RESOURCES
Overview
Our primary sources of liquidity and capital resources are internally generated cash flows from operating activities and availability under our Credit Facility (defined below).
We generate cash in our operations primarily from atneed sales and delivery of preneed sales. We also generate cash from earnings on our cemetery perpetual care trusts. Based on our recent operating results, current cash position and anticipated future cash flows, we do not anticipate any significant liquidity constraints in the foreseeable future. We have the ability to draw on our Credit Facility, subject to its customary terms and conditions. However, if our capital expenditures or acquisition plans change, we may need to access the capital markets or seek further borrowing capacity from our lenders to obtain additional funding and we may not be able to obtain such funding on terms and conditions that are acceptable to us. Further, to the extent operating cash flow or access to and cost of financing sources are materially different than expected, future liquidity may be adversely affected. For additional information regarding known material factors that could cause cash flow or access to and cost of finance sources to differ from our expectations, please read Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.
Our plan is to remain focused on integrating our recently acquired businesses and prioritizing our capital allocation for debt repayments, the payment of dividends and debt obligations and internal growth capital expenditures, which we expect to fund using cash on hand and borrowings under our Credit Facility, along with general corporate purposes, as allowed under our
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Credit Facility. We believe that our existing and anticipated cash resources, including, as needed, additional borrowings or other financings that we may be able to obtain, will be sufficient to meet our anticipated working capital requirements, capital expenditures, scheduled debt payments, commitments and dividends for the next 12 months, as well as our long-term financial obligations.
Cash Flows
We began 2023 with $1.2 million in cash and ended the second quarter with $1.0 million in cash. At June 30, 2023, we had borrowings of $204.0 million outstanding on our Credit Facility compared to $190.7 million at December 31, 2022.
The following table sets forth the elements of cash flow (in thousands):
Six months ended June 30,
20222023
Cash at beginning of the year$1,148 $1,170 
Net cash provided by operating activities30,177 39,187 
Acquisitions of businesses and real property(2,601)(44,000)
Proceeds from divestitures and sale of other assets3,720 1,973 
Proceeds from insurance claims2,167 1,092 
Capital expenditures(13,468)(8,960)
Net cash used in investing activities(10,182)(49,895)
Net borrowings on our Credit Facility, acquisition debt and finance lease obligations19,598 13,044 
Payment of debt issuance for the Credit Facility and Senior Notes(339)— 
Net proceeds from employee equity plans774 804 
Dividends paid on common stock(3,455)(3,340)
Purchase of treasury stock(36,663)— 
Net cash provided by (used in) financing activities(20,085)10,508 
Cash at end of the period$1,058 $970 
Operating Activities
For the six months ended June 30, 2023, cash provided by operating activities was $39.2 million compared to $30.2 million for the six months ended June 30, 2022. The increase of $9.0 million is primarily due to an $8.6 million withdrawal of realized capital gains and earnings from our preneed funeral and cemetery trust investments and receiving a $6.0 million incentive payment from a vendor for entering into a strategic partnership agreement to market and sell prearranged funeral services in the future, offset by unfavorable working capital changes in accrued liabilities and accounts payable.
Investing Activities
Our investing activities, resulted in a net cash outflow of $49.9 million for the six months ended June 30, 2023 compared to $10.2 million for the six months ended June 30, 2022, an increase of $39.7 million.
Acquisition and Divestiture Activity
During the six months ended June 30, 2023, we acquired a business consisting of three funeral homes, two cemeteries and one cremation focused business for $44.0 million. In addition, we sold one funeral home and two cemeteries for $0.8 million and real property for $1.2 million.
We also received proceeds of $1.1 million from our property insurance policy for the reimbursement of renovation costs for certain of our funeral businesses damaged by Hurricane Ian that occurred during the third quarter of 2022 and a fire that occurred during the first quarter of 2023.
During the six months ended June 30, 2022, we sold real property for $2.9 million and we sold two funeral homes for an aggregate of $0.9 million and purchased real property for $2.6 million.
Capital Expenditures
For the six months ended June 30, 2023, capital expenditures (comprised of growth and maintenance spend) totaled $9.0 million compared to $13.5 million for the six months ended June 30, 2022, a decrease of $4.5 million.
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The following tables present our growth and maintenance capital expenditures (in thousands):
Six months ended June 30,
20222023
Growth
Cemetery development$3,673 $3,505 
Renovations at certain businesses(1)
3,620 1,623 
Other193 109 
Total Growth$7,486 $5,237 
(1)During the six months ended June 30, 2023, we spent $0.5 million for renovations on two businesses that were affected by Hurricane Ian, which occurred during the third quarter of 2022 and $0.3 million for renovations on one business that was damaged by a fire, which occurred during the first quarter of 2023, all of which was reimbursed by our property insurance. During the six months ended June 30, 2022, we spent $2.1 million for renovations on two businesses that were affected by Hurricane Ida, which occurred during the third quarter of 2021, all of which was reimbursed by our property insurance.
Six months ended June 30,
20222023
Maintenance
General equipment and furniture$2,347 $2,260 
Facility repairs and improvements1,599 249 
Vehicles1,129 443 
Paving roads and parking lots485 330 
Other422 441 
Total Maintenance$5,982 $3,723 
Financing Activities
Our financing activities resulted in a net cash inflow of $10.5 million for the six months ended June 30, 2023 compared to a net cash outflow of $20.1 million for the six months ended June 30, 2022, an increase of $30.6 million. 
During the six months ended June 30, 2023, we had net borrowings on our Credit Facility, acquisition debt and finance leases of $13.0 million, offset by $3.3 million in dividends.
During the six months ended June 30, 2022, we had net borrowings on our Credit Facility, acquisition debt and finance leases of $19.6 million, offset by $36.7 million for the purchase of treasury stock and $3.5 million in dividends.
Share Repurchase
Share repurchase activity is as follows (dollar value in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Number of Shares Repurchased205,496 — 695,496 — 
Average Price Paid Per Share$40.02 $— $49.22 $— 
Dollar Value of Shares Repurchased$8,224 $— $34,234 $— 
Our shares were purchased in the open market at times and in amounts as management determined appropriate based on factors such as market conditions, legal requirements and other business considerations. Shares purchased pursuant to the repurchase program are currently held as treasury stock. At June 30, 2023, our share repurchase program had $48.9 million authorized for repurchases.
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Cash Dividend
Our Board declared the following dividends payable on the dates below (in thousands, except per share amounts):
2023Per ShareDollar Value
March 1st
$0.1125 $1,661 
June 1st
$0.1125 $1,679 
2022Per ShareDollar Value
March 1st
$0.1125 $1,725 
June 1st
$0.1125 $1,730 
Credit Facility, Lease Obligations and Acquisition Debt
The outstanding principal of our Credit Facility, lease obligations and acquisition debt at June 30, 2023 is as follows (in thousands):
June 30, 2023
Credit Facility$204,000 
Finance leases4,946 
Operating leases19,441 
Acquisition debt3,948 
Total$232,335 
Credit Facility
At June 30, 2023, our senior secured revolving credit facility (the “Credit Facility”) was comprised of: (i) a $250.0 million revolving credit facility, including a $15.0 million subfacility for letters of credit and a $10.0 million swingline, and (ii) an accordion or incremental option allowing for future increases in the facility size by an additional amount of up to $75.0 million in the aggregate in the form of increased revolving commitments or incremental term loans. The final maturity of the Credit Facility will occur on May 13, 2026.
Our obligations under the Credit Facility are unconditionally guaranteed on a joint and several basis by the same subsidiaries which guarantee the Senior Notes (as defined in Note 12) and certain of our subsequently acquired or organized domestic subsidiaries (collectively, the “Subsidiary Guarantors”).
The Credit Facility contains customary affirmative covenants, including, but not limited to, covenants with respect to the use of proceeds, payment of taxes and other obligations, continuation of the Company’s business and the maintenance of existing rights and privileges, the maintenance of property and insurance, amongst others.
In addition, the Credit Facility also contains customary negative covenants, including, but not limited to, covenants that restrict (subject to certain exceptions) the ability of the Company and the Subsidiary Guarantors to incur indebtedness, grant liens, make investments, engage in mergers and acquisitions, and pay dividends and other restricted payments, and certain financial maintenance covenants. At June 30, 2023, we were subject to the following financial covenants under our Credit Facility: (A) a Total Leverage Ratio not to exceed 6.00 to 1.00 and (B) a Fixed Charge Coverage Ratio (as defined in the Credit Facility) of not less than 1.20 to 1.00 as of the end of any period of four consecutive fiscal quarters. These financial maintenance covenants are calculated for the Company and its subsidiaries on a consolidated basis. We were in compliance with all of the covenants contained in our Credit Facility as of June 30, 2023.
At June 30, 2023, we had outstanding borrowings under the Credit Facility of $204.0 million. We also had one letter of credit for $2.3 million under the Credit Facility. The letter of credit will expire on November 27, 2023 and is expected to automatically renew annually and secures our obligations under our various self-insured policies. At June 30, 2023, we had $43.7 million of availability under the Credit Facility.
Outstanding borrowings under our Credit Facility bear interest at a prime rate or the Bloomberg Short-Term Bank Yield Index (“BSBY”) rate, plus an applicable margin based on our leverage ratio. At June 30, 2023, the prime rate margin was equivalent to 2.625% and the BSBY rate margin was 3.625%. The weighted average interest rate on our Credit Facility was 2.9% and 8.6% for the three months ended June 30, 2022 and 2023, respectively and 2.5% and 8.3% for the six months ended June 30, 2022 and 2023, respectively.
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The interest expense and amortization of debt issuance costs related to our Credit Facility are as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Credit Facility interest expense$1,314 $4,668 $2,161 $8,479 
Credit Facility amortization of debt issuance costs96 138 184 276 
The interest payments on our remaining borrowings under the Credit Facility will be determined based on the average outstanding balance of our borrowings and the prevailing interest rate during that time.
Lease Obligations
Our lease obligations consist of operating and finance leases. We lease certain office facilities, certain funeral homes, equipment and vehicles under operating leases with original terms ranging from one to twenty years. Many leases include one or more options to renew, some of which include options to extend the leases for up to forty years. We lease certain funeral homes under finance leases with original terms ranging from ten to forty years. At June 30, 2023, operating and finance lease obligations were $35.3 million, with $5.0 million payable within 12 months.
The components of lease cost are as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Operating lease cost$853 $917 $1,701 $1,792 
Short-term lease cost76 92 178 186 
Variable lease cost16 56 23 114 
Finance lease cost:
Depreciation of leased assets$109 $109 $217 $217 
Interest on lease liabilities112 103 225 208 
Total finance lease cost221 212 442 425 
Total lease cost$1,166 $1,277 $2,344 $2,517 
Acquisition Debt
Acquisition debt consists of deferred purchase price and promissory notes payable to sellers. A majority of the deferred purchase price and notes bear no interest and are discounted at imputed interest rates ranging from 7.3% to 10.0%. Original maturities range from nine to twenty years. At June 30, 2023, acquisition debt obligations were $5.5 million, with $0.8 million payable within 12 months. Original maturities range from nine to twenty years.
The imputed interest expense related to our acquisition debt is as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Acquisition debt imputed interest expense$79 $71 $159 $142 
Senior Notes
At June 30, 2023, the principal amount of our 4.25% senior notes due in May 2029 (the “Senior Notes”) was $400.0 million. The Senior Notes were issued under an indenture, dated as of May 13, 2021 (the “Indenture”), among the Company, the Subsidiary Guarantors and Wilmington Trust, National Association, as trustee. The Senior Notes are unsecured, senior obligations and are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally by each of the Subsidiary Guarantors. The Senior Notes mature on May 15, 2029, unless earlier redeemed or purchased and bear interest at 4.25% per year, which is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2021.
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 71 months of the Senior Notes. The effective interest rate on the unamortized debt discount and the
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unamortized debt issuance costs for the Senior Notes for both the three and six months ended June 30, 2022 and 2023 was 4.42% and 4.30%, respectively.
At June 30, 2023, the fair value of the Senior Notes, which are Level 2 measurements, was $343.1 million.
The interest expense and amortization of debt discount and debt issuance costs related to our Senior Notes are as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Senior Notes interest expense$4,230 $4,250 $8,480 $8,500 
Senior Notes amortization of debt discount122 128 243 255 
Senior Notes amortization of debt issuance costs35 37 69 73 
At June 30, 2023, our future interest payments on our outstanding balance were $99.9 million, with $17.0 million payable within 12 months.
FINANCIAL HIGHLIGHTS
Below are our financial highlights (in thousands except for volumes and averages):
Three months ended June 30,Six months ended June 30,
2022202320222023
Revenue$90,600 $97,678 $188,761 $193,192 
Funeral contracts11,006 11,431 24,521 23,846 
Average revenue per funeral contract$5,493 $5,492 $5,439 $5,510 
Preneed interment rights (property) sold3,5113,3915,8895,895
Average price per preneed interment right sold$4,337 $5,237 $4,398 $4,922 
Gross profit$27,712 $31,202 $62,190 $62,257 
Net income$10,899 $8,286 $27,301 $17,130 
Revenue for the three months ended June 30, 2023 increased $7.1 million compared to the three months ended June 30, 2022, as we experienced a 3.9% increase in funeral contract volume, while the average revenue per funeral contract remained flat, and a 20.8% increase in the average price per interment right sold, slightly offset by a 3.4% decrease in the number of preneed interment rights (property) sold.
Gross profit for the three months ended June 30, 2023 increased $3.5 million compared to the three months ended June 30, 2022, primarily due to the increase in revenue from both our funeral home and cemetery segments.
Net income for the three months ended June 30, 2023 decreased $2.6 million compared to the three months ended June 30, 2022, primarily due to the following: (1) a $3.4 million increase in interest expense; (2) a $2.6 million impact from divestitures, disposals and insurance reimbursements; (3) a $1.0 million increase in general and administrative expenses, offset by (4) the $3.5 million increase in gross profit and (5) an $0.8 million decrease in income tax expense.
Revenue for the six months ended June 30, 2023 increased $4.4 million compared to the six months ended June 30, 2022, as we experienced a 1.3% increase in the average revenue per funeral contract, while funeral contract volume decreased 2.8%, and an 11.9% increase in the average price per interment right sold, while the number of preneed interment rights (property) sold remained flat. The contract volume decrease is primarily a result of the significant decline in COVID-19 related deaths in the first quarter of 2023 as compared to the same period in 2022, as these deaths now have a minimal impact on the overall death rate.
Gross profit for the six months ended June 30, 2023 increased $0.1 million compared to the six months ended June 30, 2022, due to the increase in revenue from our cemetery segment, offset by increases in operating expenses in both our funeral home and cemetery segments.
Net income for the six months ended June 30, 2023 decreased $10.2 million compared to the six months ended June 30, 2022, primarily due to the following: (1) a $6.4 million increase in interest expense; (2) a $3.5 million impact from divestitures, disposals and insurance reimbursements; (3) a $2.6 million increase in general and administrative expenses, offset by (4) a $2.4 million decrease in income tax expense.
Further discussion of revenue and the components of gross profit for our Funeral Home and Cemetery segments is presented under “– Results of Operations.”
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Further discussion of general, administrative and other expenses, interest expense, income taxes and other components of income and expenses are presented under “– Other Financial Statement Items.”
REPORTING AND NON-GAAP FINANCIAL MEASURES
We also present our financial performance in our “Operating“Condensed Operating and Financial Trend Report” (“Trend Report”) as reported in our earnings release for the quarter ending Septemberthree months ended June 30, 2017 dated October 25, 20172023 issued on August 2, 2023, and discussed in the corresponding earnings conference call. ThisThe Trend Report is used as a supplemental financial measurement statement by management and investors to compare our current financial performance with our previous results and with the performance of other companies. We do not intend for this information to be considered in isolation or as a substitute for other measures of performance prepared in accordance with United States generally accepted accounting principles (“GAAP”). The Trend Report is a non-GAAP statement that also provides insight into underlying trends in our business.
Historically, the dynamic nature of the evolutionary process of building our culture, especially since launching the Good To Great Journey in the beginning of 2012, has led to a large number of charges such as severance and retirement, consulting and other activities, which are not core to our operations and as such, have been added back to GAAP earnings as “Special Items”. The Special Items are important to add back because of the transformational nature of major changes over the last several years within our Operations and Strategic Growth Leadership Team.
Accordingly, these non-GAAP Special Items will be comprised of only those charges materially outside the normal course of business. The number of these Special Items were minimal in 2016 and should continue to be minimal thereafter, which should result in major shrinkage of “the gap” between our GAAP and non-GAAP reported performance.
The non-GAAP financial measures in the Trend Report include such measures as “Special Items,” “Adjusted Net Income,” “Consolidated EBITDA,” “Adjusted Consolidated EBITDA,” “Adjusted Consolidated EBITDA Margin,” “Adjusted Free Cash Flow,” “Funeral Field EBITDA,” “Cemetery Field EBITDA,” “Funeral Financial EBITDA,” “Cemetery Financial EBITDA,” “Total Field EBITDA,” “Total Field EBITDA Margin,” “Operating Profit,” “Operating Profit Margin,” “Adjusted Basic Earnings Per Share” and “Adjusted Diluted Earnings Per Share.” These financial measurements are defined as GAAP items adjusted for Special Items and are reconciled to GAAP in our earnings release and on the Trend Reports posted on our website (www.carriageservices.com). Our presentation of these measures may not be comparable to similarly titled measures in other companies’ reports.
The non-GAAP definitions we use are as follows:
Special Items are defined as charges or credits included in our GAAP financial statements that can vary from period to period and are not reflective of costs incurred in the ordinary course of our operations. Special Items are taxed at the federal statutory rate of 35% for both the three and nine months ended September 30, 2016 and 2017, except for the accretion of the discount on the Convertible Notes as thisBelow is a non-tax deductible item.
Adjusted Net Income is defined as net income plus adjustments for Special Items.
Consolidated EBITDA is defined as net income before income taxes, interest expenses, non-cash stock compensation, depreciation and amortization, and interest income and other, net.
Adjusted Consolidated EBITDA is defined as Consolidated EBITDA plus adjustments for Special Items.
Adjusted Consolidated EBITDA Margin is defined as Adjusted Consolidated EBITDA as a percentage of revenue.
Adjusted Free Cash Flow is defined as net cash provided by operations, adjusted by Special Items as deemed necessary, less cash for maintenance capital expenditures.
Funeral Field EBITDA is defined as Funeral Gross Profit, which is funeral revenue minus funeral field costs and expenses, less depreciation and amortization, regional and unallocated funeral costs and Funeral Financial EBITDA.

Cemetery Field EBITDA is defined as Cemetery Gross Profit, which is cemetery revenue minus cemetery field costs and expenses, less depreciation and amortization, regional and unallocated cemetery costs and Cemetery Financial EBITDA.
Funeral Financial EBITDA is defined as Funeral Financial Revenue less Funeral Financial Expenses.
Cemetery Financial EBITDA is defined as Cemetery Financial Revenue less Cemetery Financial Expenses.
Total Field EBITDA is defined as Gross Profit less depreciation and amortization, regional and unallocated costs.
Total Field EBITDA Margin is defined as Total Field EBITDA as a percentage of revenue.
Operating Profit is defined as Gross Profit, which is funeral and cemetery revenue minus funeral and cemetery field costs and expenses, less field depreciation and amortization and regional and unallocated funeral and cemetery costs.
Operating Profit Margin is defined as Operating Profit as a percentage of revenue.
Adjusted Basic Earnings Per Share is defined as GAAP Basic Earnings Per Share, adjusted for Special Items.
Adjusted Diluted Earnings Per Share is defined as GAAP Diluted Earnings Per Share, adjusted for Special Items.
We are providing below a reconciliation of Grossgross profit (a GAAP financial measure) to Operatingoperating profit (a non-GAAP financial measure) for the three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016 (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Gross profit$27,712 $31,202 $62,190 $62,257 
Cemetery property amortization1,704 1,892 3,036 3,093 
Field depreciation expense3,253 3,555 6,550 6,912 
Regional and unallocated funeral and cemetery costs5,966 4,131 12,313 9,568 
Operating profit(1)
$38,635 $40,780 $84,089 $81,830 
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2016 2017 2016 2017
Gross profit$18,228
 $15,480
 $58,338
 $57,239
        
Field depreciation and amortization3,452
 3,601
 10,359
 10,719
Regional and unallocated funeral and cemetery costs2,783
 3,937
 8,547
 9,845
Operating profit$24,463
 $23,018
 $77,244
 $77,803
(1)Operating profit is defined as gross profit plus cemetery property amortization, field depreciation expense and regional and unallocated funeral and cemetery costs.
WeOur operations are providing belowreported in two business segments: Funeral Home and Cemetery. Below is a breakdown of Operatingoperating profit (a non-GAAPnon-financial GAAP measure) by Segment for the three and nine months ended September 30, 2017 compared to the three and nine months ended September 30, 2016segment (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Funeral Home$24,152 $23,947 $57,887$52,913
Cemetery14,483 16,833 26,20228,917
Operating profit$38,635 $40,780 $84,089$81,830
Operating profit margin(1)
42.6%41.7%44.5%42.4%
 For the Three Months Ended September 30, For the Nine Months Ended September 30,
 2016 2017 2016 2017
Funeral Home Segment$18,201
 $18,062
 $58,406
 $61,161
Cemetery Segment6,262
 4,956
 18,838
 16,642
Operating profit$24,463
 $23,018
 $77,244
 $77,803
(1)Operating profit margin is defined as operating profit as a percentage of revenue.
Further discussion of Operatingoperating profit for our Funeral Home and Cemetery Segmentssegments is presented herein under “Results“– Results of Operations.”

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Financial HighlightsRESULTS OF OPERATIONS
Three months ended September 30, 2017 compared to three months ended September 30, 2016
Total revenueThe following is a discussion of our results of operations for the three and six months ended SeptemberJune 30, 20172023 and 2016 was $61.1 million2022.
We previously classified our funeral homes and $60.1 million, respectively,cemeteries as “same store” or “acquired” in our results of operations discussion in our quarterly and annual filings prior to December 31, 2022. Same store generally referred to funeral homes and cemeteries acquired at least five years before the reporting period being presented, while acquired generally referred to funeral homes and cemeteries acquired within the preceding five years of the reporting period being presented, both of which representsexcluded certain funeral homes and cemeteries that we intended to divest.
In an increaseeffort to simplify the discussion of approximately $0.9 million, or 1.5%our results of operations, provide meaningful metrics to investors to compare our results to previous periods and provide more insight into the underlying long-term performance trends in our business, we have combined both the same store and acquired categories and now refer to this combination as “operating”. Funeral revenue increased $2.1 million to $47.3 million, while cemetery revenue decreased $1.2 million to $13.7 millionThe term “operating” in the three months ended September 30, 2017 comparedFuneral Home and Cemetery segment simply refers to the same period in 2016. For the quarter comparatives, we experienced a 3.3% increase in totalall our funeral contractshomes and an increasecemeteries owned and operated in the average revenue per funeral contract of 1.8%. In addition, while we experienced a decrease of 6.3% in the number of preneed interment rights (property) sold, the average price per interment right sold increased 1.2%. Further discussion of revenue for ourcurrent reporting period, excluding certain funeral home and cemetery segments on a same store and acquired basis is presented herein under “Results of Operations.”businesses that we have divested or intend to divest in the near future.
Gross profit forThe term “divested” when discussed in the three months ended September 30, 2017 decreased $2.7 million, or 15.1%,Funeral Home segment, refers to $15.5 million, from $18.2 million for the three months ended September 30, 2016 primarily due to a decline in preneed cemetery revenue and higher costs as a percentage of revenueone funeral home we sold in the six businessesmonths ended June 30, 2023 and two funeral homes we acquiredsold in 2016. As these acquired businesses transition into our Standards Operating Model,the six months ended June 30, 2022. The term “divested” when discussed in the Cemetery segment, refers to two cemeteries we expectsold during the six months ended June 30, 2023.
“Planned divested” refers to see their gross profit margins rise towards those on a same store basis.
Further discussion of the components of Gross profit, excluding field depreciation and amortization and regional and unallocated funeral and cemetery costs is presented herein under “Results of Operations” within our funeral home and cemetery segments. Further discussion ofbusinesses that we intend to divest.
“Ancillary” in the Funeral Home segment represents our flower shop, our monument company, our pet cremation business and our online cremation businesses.
Cemetery property amortization, field depreciation and amortizationexpense and regional and unallocated funeral and cemetery costs, are presented herein under “Other Financial Statement Items.”not included in operating profit, a non-GAAP financial measure. Adding back these items will result in gross profit, a GAAP financial measure.
Net incomeFuneral Home Segment
The following table sets forth certain information regarding our revenue and operating profit for our funeral home operations (in thousands):
Three months ended June 30,
20222023
Revenue:
Operating$58,108 $60,800 
Divested/planned divested557 210 
Ancillary980 1,232 
Other2,293 2,263 
Total$61,938 $64,505 
Operating profit:
Operating$21,999 $21,891 
Divested/planned divested14 29 
Ancillary151 73 
Other1,988 1,954 
Total$24,152 $23,947 
The following operating measures reflect the significant metrics over this comparative period:
Contract volume10,912 11,398 
Average revenue per contract, excluding preneed funeral trust earnings$5,325 $5,334 
Average revenue per contract, including preneed funeral trust earnings$5,488 $5,489 
Cremation rate57.4%58.4%
Funeral home operating revenue increased $2.7 million for the three months ended SeptemberJune 30, 2017 decreased $2.6 million to $3.0 million, equal to $0.17 per diluted share,2023 compared to net incomethe three months ended June 30, 2022. The increase in operating revenue is primarily driven by a 4.5% increase in contract volume,
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while the average revenue per contract excluding preneed interest remained flat. The contract volume increase is primarily due to our newly acquired funeral home businesses, which were not present in the comparative quarter of $5.7 million, equal to $0.33 per diluted share,2022.

Funeral home operating profit for the three months ended SeptemberJune 30, 2016. Further discussion of general, administrative and other expenses, home office depreciation and amortization expense, interest expense, income taxes and other components of income and expenses are presented herein under “Other Financial Statement Items.”
Nine months ended September 30, 2017 compared to Nine months ended September 30, 2016
Total revenue for the nine months ended September 30, 2017 and 2016 was $193.12023 decreased $0.1 million and $185.3 million, respectively, which represents an increase of approximately $7.7 million, or 4.2%. Funeral revenue increased $9.3 million to $150.3 million, while cemetery revenue decreased $1.6 million to $42.8 million in the nine months ended September 30, 2017when compared to the same period in 2016. For the period comparatives, we experienced a 5.2%2022, primarily due to an increase in totaloperating expenses as a percentage of revenue. The comparable operating profit margin decreased 190 basis points to 36.0%. Operating expenses as a percentage of revenue increased 1.9% with the largest increases in salary and benefits expenses of 1.4% and general and administrative expenses of 0.5%. The increase in operating expenses is partially due to higher costs from inflationary impacts concentrated in our full-time hourly base rates, utilities and funeral contractssupplies.
Ancillary revenue, which represents revenue from our flower shop, pet cremation and anonline cremation businesses increased $0.3 million and Ancillary operating profit decreased $0.1 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022.
Other revenue and other operating profit, which consists of preneed funeral insurance commissions and preneed funeral trust and insurance remained flat for the three months ended June 30, 2023, compared to the three months ended June 30, 2022.
The following table sets forth certain information regarding our revenue and operating profit for our funeral home operations (in thousands):
Six months ended June 30,
20222023
Revenue:
Operating$128,127 $127,044 
Divested/planned divested1,339 537 
Ancillary2,050 2,289 
Other4,777 4,720 
Total$136,293 $134,590 
Operating profit:
Operating$53,183 $48,416 
Divested/planned divested151 106 
Ancillary372 219 
Other4,181 4,172 
Total$57,887 $52,913 
The following operating measures reflect the significant metrics over this comparative period:
Contract volume24,271 23,746 
Average revenue per contract, excluding preneed funeral trust earnings$5,279 $5,350 
Average revenue per contract, including preneed funeral trust earnings$5,438 $5,510 
Cremation rate57.2%58.7%
Funeral home operating revenue decreased $1.1 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The decrease in operating revenue is primarily driven by a 2.2% decrease in contract volume, which was partially offset by a 1.3% increase in the average revenue per contract excluding preneed interest. The contract volume decrease is primarily a result of the significant decline in COVID-19 related deaths in the first quarter of 2023 as compared to the same period in 2022, as these deaths now have a minimal impact on the overall death rate. The increase in average revenue per contract is primarily due to a combination of price increases and our continued focus on educating families on the many products and service options that are available with burials and cremations.
Funeral home operating profit for the six months ended June 30, 2023 decreased $4.8 million when compared to the same period in 2022, primarily due to an increase in operating expenses as a percentage of revenue. The comparable operating profit margin decreased 340 basis points to 38.1%. Operating expenses as a percentage of revenue increased 3.4% with the largest increases in salary and benefits expenses of 1.9%, facilities and grounds expenses of 0.7%, general and administrative expenses of 0.5% and other funeral contractcosts of 1.7%0.3%. In addition, whileThe increase in operating expenses is partially due to higher costs from inflationary impacts concentrated in our full-time hourly base rates, utilities and funeral supplies.
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Ancillary revenue, which represents revenue from our flower shop, pet cremation and online cremation businesses increased $0.2 million and Ancillary operating profit decreased $0.2 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.
Other revenue and other operating profit, which consists of preneed funeral insurance commissions and preneed funeral trust and insurance, remained flat for the six months ended June 30, 2023, compared to the six months ended June 30, 2022.
Cemetery Segment
The following table sets forth certain information regarding our revenue and operating profit for our cemetery operations (in thousands):
Three months ended June 30,
20222023
Revenue:
Operating$25,104 $29,142 
Divested/planned divested57 — 
Other3,501 4,031 
Total$28,662 $33,173 
Operating profit (loss):
Operating$11,136 $12,940 
Divested/planned divested(18)(2)
Other3,365 3,895 
Total$14,483 $16,833 
The following operating measures reflect the significant metrics over this comparative period:
Preneed revenue as a percentage of operating revenue66.0%67.0%
Preneed revenue (in thousands)$16,476 $19,385 
Atneed revenue (in thousands)$8,628 $9,757 
Number of preneed interment rights sold3,5063,391
Average price per interment right sold$4,341 $5,237 
Cemetery operating revenue increased $4.0 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, as we experienced a 20.6% increase in the average price per preneed interment right sold, slightly offset by a 3.3% decrease in preneed interment rights sold. Cemetery atneed revenue, which represents 33.0% of 10.4%our total operating revenue, increased $1.1 million for the three months ended June 30, 2023, compared to the same period of the prior year, primarily due to an increase in sales of merchandise and services from our newly acquired cemetery businesses, not present in the comparative quarter of 2022.
Cemetery operating profit increased $1.8 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, due to the increase in revenue. The comparable operating profit margin remained flat at 44.4%. Operating expenses as a percent of operating revenue also remained flat.
Other revenue, which consists of preneed cemetery trust revenue and preneed cemetery finance charges, increased $0.5 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022. The increase is primarily due to realized capital gains in the current year compared to the prior year and an increase in income in our perpetual care trust fund. Other operating profit increased $0.5 million for the same comparative period, primarily due to the increase in revenue.






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The following table sets forth certain information regarding our revenue and operating profit for our cemetery operations (in thousands):
Six months ended June 30,
20222023
Revenue:
Operating$45,579 $50,747 
Divested/planned divested130 42 
Other6,759 7,813 
Total$52,468 $58,602 
Operating profit (loss):
Operating$19,731 $21,333 
Divested/planned divested(14)10 
Other6,485 7,574 
Total$26,202 $28,917 
The following operating measures reflect the significant metrics over this comparative period:
Preneed revenue as a percentage of operating revenue63.0%63.0%
Preneed revenue (in thousands)$28,555 $31,833 
Atneed revenue (in thousands)$17,024 $18,914 
Number of preneed interment rights sold5,8715,890
Average price per interment right sold$4,409 $4,924 
Cemetery operating revenue increased $5.2 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, as we experienced an 11.7% increase in the average price per preneed interment right sold, while the number of preneed interment rights (property) sold the average price per interment right soldremained flat. Cemetery atneed revenue, which represents 37.0% of our total operating revenue increased 4.6%. Further discussion of revenue for our funeral home and cemetery segments on a same store and acquired basis is presented herein under “Results of Operations.”
Gross profit for the nine months ended September 30, 2017 decreased $1.1 million, or 1.9%, to $57.2 million, from $58.3$1.9 million for the ninesix months ended SeptemberJune 30, 20162023, compared to the same period of the prior year, primarily due to an increase in sales of merchandise and services from our newly acquired cemetery businesses, which were not present in the comparative period of 2022.
Cemetery operating profit increased $1.6 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The comparable operating profit margin decreased 130 basis point to 42.0%. Operating expenses as a declinepercent of operating revenue increased 1.2% primarily due to an increase in salary and benefits expenses.
Other revenue, which consists of preneed cemetery trust revenue and higher costs as a percentage of revenue inpreneed cemetery finance charges, increased $1.1 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. The increase is primarily due to an increase in income in our perpetual care trust fund and an increase in finance charges on preneed sales. Other operating profit increased $1.1 million for the same comparative period, primarily due to the increase in revenue.
Cemetery property amortization. Cemetery property amortization totaled $1.9 million and $3.1 million for the three and six months ended June 30, 2023, respectively, an increase of $0.2 million and $0.1 million, respectively, compared to the same period in 2022, primarily due to the increase in property sold across our cemetery portfolio.
Field depreciation. Depreciation expense for our field businesses we acquiredtotaled $3.6 million and $6.9 million for the three and six months ended June 30, 2023, respectively, an increase of $0.3 million and $0.4 million, respectively, compared to the same period in 2016. As these acquired businesses transition into2022, primarily due to acquisitions made in latter half of 2022 and our Standards Operating Model, we expect to see their gross profit margins rise towards those on a same store basis.March 2023 acquisition.
Further discussion of the components of Gross profit, excluding field depreciationRegional and amortizationunallocated funeral and regionalcemetery costs. Regional and unallocated funeral and cemetery costs is presented herein under “Resultsconsist of Operations” within our funeral homesalaries and cemetery segments. Further discussion ofbenefits for regional management, field depreciationincentive compensation and amortization and regionalother related costs for field infrastructure. Regional and unallocated funeral and cemetery costs are presented herein under “Othertotaled $4.1 million for the three months ended June 30, 2023, a decrease of $1.8 million compared to the same period in 2022, primarily due to the following: (1) a $0.7 million decrease in cash incentives and equity compensation; (2) a $0.7 million decrease in incentive award trips and annual managing partner meetings and (3) a $0.4 million decrease in other expenses.
Regional and unallocated funeral and cemetery costs totaled $9.6 million for the six months ended June 30, 2023, a decrease of $2.7 million compared to the same period in 2022, primarily due to the following: (1) a $1.3 million decrease in cash incentives and equity compensation; (2) a $1.1 million decrease in incentive award trips and annual managing partner meetings and (3) a $0.3 million decrease in other expenses.
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Other Financial Statement Items.”Items
Net income for the nine months ended September 30, 2017 decreased $0.9 million to $14.5 million, equal to $0.81 per diluted share, compared to net income of $15.4 million, equal to $0.91 per diluted share, for the nine months ended September 30, 2016. Further discussion of general,General, administrative and other. General, administrative and other expenses, homewhich includes salaries and benefits, cash and equity incentive compensation for the Houston support office depreciationtotaled $10.2 million for the three months ended June 30, 2023, an increase of $1.0 million compared to the same period in 2022, primarily due to the following: (1) $1.4 million increase in salary and amortizationbenefits expense interest expense, income taxesand cash and equity incentive compensation, as a result of having a complete senior leadership team, including current year executive promotions, offset by (2) a $0.4 million decrease in other expenses, including lower online marketing costs and travel costs.
General, administrative and other expenses totaled $20.4 million for the six months ended June 30, 2023, an increase of $2.6 million compared to the same period in 2022, primarily due to the following: (1) a $3.2 million increase in salary and benefits expense and cash and equity incentive compensation, as a result of having a complete senior leadership team, including current year executive promotions, offset by (2) a $0.6 million decrease in other expenses, including lower online marketing costs and travel costs.
Net (gain) loss on divestitures, disposals and impairments charges. The components of Net (gain) loss on divestitures, disposals and impairment charges are as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Net (gain) loss on divestitures$(1,278)$— $(575)$82 
Impairments related to assets held for sale— 243 — 243 
Net loss on disposals of fixed assets85 22 149 181 
Total$(1,193)$265 $(426)$506 
During the six months ended June 30, 2023, we sold one funeral home and two cemeteries for a loss of $0.1 million. We also recognized an impairment of $0.2 million related to property, plant and equipment for assets held for sale.
During the six months ended June 30, 2022, we sold real property and two funeral homes for a net gain of $0.6 million.
Interest expense. Interest expense related to its respective debt arrangement is as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Senior Notes$4,387 $4,414 $8,793 $8,827 
Credit Facility1,409 4,806 2,344 8,755 
Finance leases112 103 225 209 
Acquisition debt79 71 159 142 
Other1 2 9 2 
Total$5,988 $9,396 $11,530 $17,935 
Net (gain) loss on property damage, net of insurance claims. During the three and six months ended June 30, 2023, we recorded a $0.2 million gain and $36,000 loss, respectively, net of insurance proceeds, primarily for property damaged by a fire that occurred during first quarter of 2023.
During the three and six months ended June 30, 2022, we recorded a $1.4 million gain and $3.3 million gain, net of insurance proceeds, for property damaged by Hurricane Ida that occurred during the third quarter of 2021.
Other, net. During the three and six months ended June 30, 2023, we recorded a $0.1 million gain and $0.6 million gain, respectively, on the sale of other real property not used in business operations.
Income taxes. Income tax expense totaled $3.4 million for the three months ended June 30, 2023, a decrease of $0.8 million compared to the same period in 2022, primarily due to lower pre-tax income in the current period. Our operating tax rate before discrete items was 28.0% for both the three months ended June 30, 2023 and expenses are presented herein under “Other Financial Statement Items.”2022.
Income tax expense totaled $6.9 million for the six months ended June 30, 2023, a decrease of $2.4 million compared to the same period in 2022, primarily due to lower pre-tax income in the current period. Our operating tax rate before discrete items was 28.5% and 27.2% for six months ended June 30, 2023 and 2022, respectively.
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OVERVIEW OF CRITICAL ACCOUNTING POLICIES AND ESTIMATESOther Financial Statement Items
The preparation of the Consolidated Financial Statements requires us to make estimatesGeneral, administrative and judgments that affect the amounts reported in the unaudited consolidated financial statementsother. General, administrative and accompanying notes. We base our estimates on historical experience, third-party dataother expenses, which includes salaries and assumptions that we believe to be reasonable under the circumstances. The results of these considerations form the basis for making judgments about the amountbenefits, cash and timing of revenues 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 because there

can be no assurance the margins, operating income and net earnings, as a percentage of revenues, will be consistent from year to year.
Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is based upon our Consolidated Financial Statements presented herewith, which have been prepared in accordance with GAAP. Our critical accounting policies are discussed in MD&A in our Annual Report on Form 10-Kequity incentive compensation for the year ended December 31, 2016.
RESULTS OF OPERATIONS
The following is a discussion of our results of operations for the three and nine months ended September 30, 2017 compared to the same periods of 2016. The term “same store” refers to funeral homes and cemeteries acquired prior to January 1, 2013 and operated for the entirety of each period being presented. Funeral homes and cemeteries purchased after December 31, 2012 are referred to as “acquired.” This classification of acquisitions has been important to management and investors in monitoring the results of these businesses and to gauge the leveraging performance contribution that a selective acquisition program can have on total company performance. Depreciation and amortization, within our field costs and expenses and regional and unallocated funeral and cemetery costs, are not included in operating profit, a non-GAAP financial measure. Adding back these items will result in Gross Profit, a GAAP financial measure.
Funeral Home Segment. The following tables set forth certain information regarding the revenues and operating profit from our funeral home operationsHouston support office totaled $10.2 million for the three months ended SeptemberJune 30, 2017 compared to three months ended September 30, 2016 (dollars in thousands):
 For the Three Months Ended September 30, Change
 2016 2017 Amount %
Revenues:       
Same store operating revenue$37,094
 $38,032
 $938
 2.5 %
Acquired operating revenue5,996
 7,363
 1,367
 22.8 %
Preneed funeral insurance commissions361
 315
 (46) (12.7)%
Preneed funeral trust earnings1,732
 1,618
 (114) (6.6)%
Total$45,183
 $47,328
 $2,145
 4.7 %
        
Operating profit:
 
    
Same store operating profit$13,894
 $13,938
 $44
 0.3 %
Acquired operating profit2,431
 2,419
 (12) (0.5)%
Preneed funeral insurance commissions166
 120
 (46) (27.7)%
Preneed funeral trust earnings1,710
 1,585
 (125) (7.3)%
Total$18,201
 $18,062
 $(139) (0.8)%
Funeral home same store operating revenues for the three months ended September 30, 2017 increased $0.92023, an increase of $1.0 million or 2.5%, when compared to the three months ended September 30, 2016. This was due primarily to a 0.7% increase in same store contract volumes to 7,093 and a 1.8% increase in the average revenue per contract to $5,362. The average revenue per contract excludes the impact of the preneed funeral trust earnings (separately reflected in Revenues above) recognized at the time that we provide the services pursuant to the preneed contract. Including preneed funeral trust earnings, the average revenue per contract increased 1.6% to $5,543 in the three months ended September 30, 2017. The average revenue per burial contract increased 0.2% to $8,832 and the number of burial contracts increased 1.9% to 2,898. The average revenue per cremation contract increased 1.1% to $3,352 and the number of cremation contracts increased 1.7% to 3,702.
The burial rate for our same store businesses increased 50 basis points to 40.9% and the cremation rate also increased 50 basis points to 52.2% for the three months ended September 30, 2017 when compared to the three months ended September 30, 2016. The average revenue for “other” contracts, which are charges for merchandise or services for which we do not perform a funeral service and which made up approximately 6.9% of the total number of contracts in the three months ended September 30, 2017, increased 16.6% to $2,669.
Same store operating profit for the three months ended September 30, 2017 remained flat, when compared to the three months ended September 30, 2016. Although revenue increased, operating profit margin decreased by 90 basis points to 36.6% for the three months ended September 30, 2017 compared to the same period in 2016. The decline2022, primarily due to the following: (1) $1.4 million increase in operating profit margin largely relates to significant increasessalary and benefits expense and cash and equity incentive compensation, as a result of having a complete senior leadership team, including current year executive promotions, offset by (2) a $0.4 million decrease in certainother expenses, including $0.4 million of general liabilitylower online marketing costs and travel costs.
General, administrative and other insurance related expenses $0.2totaled $20.4 million of salaries and benefits and $0.1 million of bad debt expense.

Funeral home acquired operating revenues for the threesix months ended SeptemberJune 30, 2017 increased $1.42023, an increase of $2.6 million or 22.8%, when compared to the three months ended September 30, 2016. The funeral home acquired portfolio for the three months ended September 30, 2017 includes four businesses acquired in the latter half of 2016, not fully present in the three months ended September 30, 2016 results. We experienced a slight increase in the average revenue per contract of 0.2% to $6,370 and a 22.6% increase in the total number of contracts to 1,156. The average revenue per contract excludes the impact of the preneed funeral trust earnings (reflected separately in Revenues above) recognized at the time that we provide the services pursuant to the preneed contract. Including funeral trust earnings, the average revenue per contract slightly decreased 0.4% to $6,538 in the three months ended September 30, 2017. The average revenue per burial contract decreased 1.7% to $9,458, while the number of burial contracts increased 22.4% to 525. The average revenue per cremation contract increased 6.1% to $4,421 and the number of cremation contracts increased 18.3% to 531.
The burial rate for our acquired businesses slightly decreased 10 basis points to 45.4% and the cremation rate also decreased 170 basis points to 45.9% for the three months ended September 30, 2017 when compared to the three months ended September 30, 2016. The average revenue for “other” contracts, which are charges for merchandise or services for which we do not perform a funeral service and which made up approximately 8.7% of the total number of contracts in the three months ended September 30, 2017, decreased 17.6% to $2,446.
Acquired operating profit for the three months ended September 30, 2017 remained flat when compared to the three months ended September 30, 2016. Although revenue increased, operating profit margin decreased 760 basis points to 32.9% for the three months ended September 30, 2017 compared to the same period in 2016. The decrease is2022, primarily due to the businesses we acquiredfollowing: (1) a $3.2 million increase in 2016, as salariessalary and benefits for newly acquired businesses are generally higherexpense and cash and equity incentive compensation, as a percentageresult of revenue than same store businesses. As these acquired businesses transition into our Standards Operating Model,having a complete senior leadership team, including current year executive promotions, offset by (2) a $0.6 million decrease in other expenses, including lower online marketing costs and travel costs.
Net (gain) loss on divestitures, disposals and impairments charges. The components of Net (gain) loss on divestitures, disposals and impairment charges are as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Net (gain) loss on divestitures$(1,278)$— $(575)$82 
Impairments related to assets held for sale— 243 — 243 
Net loss on disposals of fixed assets85 22 149 181 
Total$(1,193)$265 $(426)$506 
During the six months ended June 30, 2023, we expectsold one funeral home and two cemeteries for a loss of $0.1 million. We also recognized an impairment of $0.2 million related to see their operating profit margins rise towards thoseproperty, plant and equipment for assets held for sale.
During the six months ended June 30, 2022, we sold real property and two funeral homes for a net gain of $0.6 million.
Interest expense. Interest expense related to its respective debt arrangement is as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Senior Notes$4,387 $4,414 $8,793 $8,827 
Credit Facility1,409 4,806 2,344 8,755 
Finance leases112 103 225 209 
Acquisition debt79 71 159 142 
Other1 2 9 2 
Total$5,988 $9,396 $11,530 $17,935 
Net (gain) loss on property damage, net of insurance claims. During the three and six months ended June 30, 2023, we recorded a same store basis.$0.2 million gain and $36,000 loss, respectively, net of insurance proceeds, primarily for property damaged by a fire that occurred during first quarter of 2023.
The two categoriesDuring the three and six months ended June 30, 2022, we recorded a $1.4 million gain and $3.3 million gain, net of financial revenue consistinsurance proceeds, for property damaged by Hurricane Ida that occurred during the third quarter of preneed funeral insurance commission revenue2021.
Other, net. During the three and preneed funeral trust earnings. Preneed funeral insurance commission revenue decreased by 12.7%six months ended June 30, 2023, we recorded a $0.1 million gain and $0.6 million gain, respectively, on the sale of other real property not used in business operations.
Income taxes. Income tax expense totaled $3.4 million for the three months ended SeptemberJune 30, 20172023, a decrease of $0.8 million compared to the same period in 2016. Preneed funeral insurance commission revenue is deferred2022, primarily due to lower pre-tax income in the current period. Our operating tax rate before discrete items was 28.0% for one year after the preneed funeral contracts are sold. The Preneed commission revenue recognized forboth the three months ended SeptemberJune 30, 2017 is from2023 and 2022.
Income tax expense totaled $6.9 million for the preneed funeral insurance contracts sold in the threesix months ended SeptemberJune 30, 2016. The number2023, a decrease of preneed insurance contracts sold in the three months ended September 30, 2016 decreased 4.9% and the face value of the insurance products that earned commissions decreased 2.3% compared to the contracts sold during the same period of the prior year. Preneed funeral trust earnings include trust management fees charged by our wholly-owned registered investment advisor based on the fair market value of the trust assets and earnings from the maturity of preneed funeral contracts. Trust earnings decreased $0.1$2.4 million or 6.6% for the three months ended September 30, 2017, which is comprised of a 7.8% decrease in earnings from the maturity of preneed contracts, offset by an 8.9% increase in earnings from trust management fees.
Operating profit for our two categories of financial revenue, on a combined basis, decreased 9.1% in the three months ended September 30, 2017 due to the decrease in preneed funeral trust earnings and preneed funeral insurance commission revenue, along with an increase in commission and preneed selling expenses.

The following tables set forth certain information regarding the revenues and operating profit from our funeral home operations for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016 (dollars in thousands):
 For the Nine Months Ended September 30, Change
 2016 2017 Amount %
Revenues:       
Same store operating revenue$117,029
 $119,310
 $2,281
 1.9 %
Acquired operating revenue17,303
 24,727
 7,424
 42.9 %
Preneed funeral insurance commissions1,138
 951
 (187) (16.4)%
Preneed funeral trust earnings5,482
 5,290
 (192) (3.5)%
Total$140,952
 $150,278
 $9,326
 6.6 %
        
Operating profit:       
Same store operating profit$45,119
 $46,111
 $992
 2.2 %
Acquired operating profit7,293
 9,515
 2,222
 30.5 %
Preneed funeral insurance commissions577
 329
 (248) (43.0)%
Preneed funeral trust earnings5,417
 5,206
 (211) (3.9)%
Total$58,406
 $61,161
 $2,755
 4.7 %
Funeral home same store operating revenues for the nine months ended September 30, 2017 increased $2.3 million, or 1.9%, when compared to the nine months ended September 30, 2016. The increase was due primarily to a 0.9% increase in same store contract volumes to 22,296 and a 1.0% increase in the average revenue per contract to $5,351. The average revenue per contract excludes the impact of the preneed funeral trust earnings (separately reflected in Revenues above) recognized at the time that we provide the services pursuant to the preneed contract. Including preneed funeral trust earnings, the average revenue per contract increased 0.9% to $5,540 in the nine months ended September 30, 2017. The average revenue per burial contract increased 1.1% to $8,877, while the number of burial contracts decreased 0.6% to 9,037. The average revenue per cremation contract increased 1.3% to $3,363 and the number of cremation contracts increased 3.0% to 11,664.
The burial rate for our same store businesses decreased 70 basis points to 40.5%, while the cremation rate increased 100 basis points to 52.3% for the nine months ended September 30, 2017 when compared to the nine months ended September 30, 2016. The average revenue for “other” contracts, which are charges for merchandise or services for which we do not perform a funeral service and which made up approximately 7.2% of the total number of contracts in the nine months ended September 30, 2017, increased 10.8% to $2,561.
Same store operating profit for the nine months ended September 30, 2017 increased $1.0 million, or 2.2%, when compared to the nine months ended September 30, 2016. This increase is a result of increased revenue and better management of expenses as operating profit margin remained stable at 38.6% for the nine months ended September 30, 2017 compared to the same period in 2016.
Funeral home acquired operating revenues for the nine months ended September 30, 2017 increased $7.4 million, or 42.9%, when compared to the nine months ended September 30, 2016. The funeral home acquired portfolio for the nine months ended September 30, 2017 includes six businesses acquired during 2016, not fully present in the nine months ended September 30, 2016 results. We experienced an increase in the average revenue per contract of 1.7% to $6,524 and a 40.5% increase in the total number of contracts to 3,790. The average revenue per contract excludes the impact of the preneed funeral trust earnings (reflected separately in Revenues above) recognized at the time that we provide the services pursuant to the preneed contract. Including funeral trust earnings, the average revenue per contract increased 1.2% to $6,699 in the nine months ended September 30, 2017. The average revenue per burial contract decreased 1.3% to $9,505, while the number of burial contracts increased 43.4% to 1,817. The average revenue per cremation contract increased 5.9% to $4,396 and the number of cremation contracts increased 35.8% to 1,661.
The burial rate for our acquired businesses increased 90 basis points to 47.9%, while the cremation rate decreased 150 basis points to 43.8%. This is the result of an increase in the number of burial versus cremation contract sales at the businesses that were acquired the latter half of 2016. The average revenue for “other” contracts, which are charges for merchandise or services for which we do not perform a funeral service and which made up approximately 8.3% of the total number of contracts in the nine months ended September 30, 2017, decreased 5.1% to $2,625.
Acquired operating profit for the nine months ended September 30, 2017 increased $2.2 million, or 30.5%, from the nine months ended September 30, 2016,2022, primarily due to the six businesses acquired during 2016 and not fully presentlower pre-tax income in the ninecurrent period. Our operating tax rate before discrete items was 28.5% and 27.2% for six months ended SeptemberJune 30, 2016 results. Although revenues increased, operating profit margin decreased 360 basis points to 38.5% for the nine months ended September 30, 2017 compared to the same period in 2016. The decrease is primarily due to the

businesses we acquired in 2016, as salaries2023 and benefits for newly acquired businesses are generally higher as a percentage of revenue than same store businesses. As these acquired businesses transition into our Standards Operating Model, we expect to see their operating profit margins rise towards those on a same store basis.
The two categories of financial revenue consist of preneed funeral insurance commission revenue and preneed funeral trust earnings. Preneed funeral insurance commission revenue decreased $0.2 million or 16.4% for the nine months ended September 30, 2017 compared to the same period in 2016. Preneed funeral insurance commission revenue is deferred for one year after the preneed funeral contracts are sold. The Preneed commission revenue recognized for the nine months ended September 30, 2017 is from the preneed funeral insurance contracts sold in the nine months ended September 30, 2016. The number of preneed insurance contracts sold in the nine months ended September 30, 2016 decreased 1.1% and the face value of the insurance products that earned commissions decreased 7.1% over the same period of the prior year. Preneed funeral trust earnings include trust management fees charged by our wholly-owned registered investment advisor based on the fair market value of the trust assets and earnings from the maturity of preneed funeral contracts. Trust earnings decreased $0.2 million or 3.5% for the nine months ended September 30, 2017, which is comprised of a 4.6% decrease in earnings from the maturity of preneed contracts, offset by a 12.3% increase in earnings from trust management fees.
Operating profit for our two categories of financial revenue, on a combined basis, decreased 7.7% in the nine months ended September 30, 2017 due to the decrease in preneed funeral trust earnings and preneed funeral insurance commission revenue, along with an increase in commission and preneed selling expenses.
Cemetery Segment. The following tables set forth certain information regarding the revenues and operating profit from the cemetery operations for the three months ended September 30, 2017 compared to three months ended September 30, 2016 (dollars in thousands):2022, respectively.
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 For the Three Months Ended September 30, Change
 2016 2017 Amount %
Revenues:       
Same store operating revenue$11,467
 $10,748
 $(719) (6.3)%
Acquired operating revenue978
 761
 (217) (22.2)%
Cemetery trust earnings2,025
 1,768
 (257) (12.7)%
Preneed cemetery finance charges487
 449
 (38) (7.8)%
Total$14,957
 $13,726
 $(1,231) (8.2)%
        
Operating profit:       
Same store operating profit$3,342
 $2,649
 $(693) (20.7)%
Acquired operating profit479
 200
 (279) (58.2)%
Cemetery trust earnings1,954
 1,658
 (296) (15.1)%
Preneed cemetery finance charges487
 449
 (38) (7.8)%
Total$6,262
 $4,956
 $(1,306) (20.9)%
Cemetery same store operating revenues for the three months ended September 30, 2017 decreased $0.7 million, or 6.3%, when compared to the three months ended September 30, 2016. Approximately 55.0% of our same store operating revenues were related to preneed sales of interment rights and related merchandise and services for the three months ended September 30, 2017. Preneed revenue decreased $0.9 million, or 13.6%, as we experienced a 5.7% decrease in the number of preneed interment rights sold to 1,542 and a 5.9% decrease in average price per interment to $3,278 for the three months ended September 30, 2017 compared to the same period in 2016. The decrease in preneed revenue was due to the attrition of key sales personnel at certain businesses, the absence of approximately $0.4 million of large private estate sales we had in the third quarter of last year, as well as the impact of the Texas and Florida hurricanes which caused business closures and displaced workers in these States during the period. Same store at-need revenue, which represents approximately 45.0% of our same store operating revenues, increased $0.2 million, or 4.4%, due primarily to a 7.9% increase in the average sale per contract to $1,562.
Cemetery same store operating profit for the three months ended September 30, 2017 decreased $0.7 million, or 20.7% from the same period in 2016. As a percentage of revenue, cemetery operating profit decreased to 24.6% in the three months ended September 30, 2017 compared to 29.1% in the same period in 2016. The decline in operating profit margin largely relates to significant increases in certain expenses including $0.2 million of general liability and other insurance related expenses, $0.1 million of salaries and benefits and $0.1 million of facilities and grounds expenses, offset by a $0.4 million decrease in promotional expenses.

Cemetery acquired operating revenue and acquired operating profit decreased for the three months ended September 30, 2017 primarily due to a $0.2 million decrease in preneed revenue. The decrease in preneed revenue was primarily due to the absence of approximately $0.2 million of large private estate sales we had in the third quarter of last year. In addition, we experienced a 14% decrease in the number of preneed interment rights sold compared with the same period in 2016 and increases in facilities and grounds expenses and bad debt expense for the three months ended September 30, 2017 compared to the same period in 2016.
The two categories of financial revenue consist of trust earnings and finance charges on preneed receivables. Trust earnings also include trust management fees charged by our wholly-owned registered investment advisor based on the fair market value of the trust assets. Total trust earnings decreased $0.3 million or 12.7%, primarily due to a $0.3 million decrease in capital gains from our perpetual care trust in the three months ended September 30, 2017 compared to the same period in 2016. Financial revenue earned from finance charges on the preneed contracts remained flat in the three months ended September 30, 2017 compared to the same period in 2016.
Cemetery Segment. The following tables set forth certain information regarding the revenues and operating profit from the cemetery operations for the nine months ended September 30, 2017 compared to nine months ended September 30, 2016 (dollars in thousands):

 For the Nine Months Ended September 30, Change
 2016 2017 Amount %
Revenues:       
Same store operating revenue$35,093
 $33,522
 $(1,571) (4.5)%
Acquired operating revenue2,312
 2,370
 58
 2.5 %
Cemetery trust earnings5,622
 5,512
 (110) (2.0)%
Preneed cemetery finance charges1,357
 1,381
 24
 1.8 %
Total$44,384
 $42,785
 $(1,599) (3.6)%
        
Operating profit:       
Same store operating profit$11,283
 $9,287
 $(1,996) (17.7)%
Acquired operating profit791
 743
 (48) (6.1)%
Cemetery trust earnings5,407
 5,231
 (176) (3.3)%
Preneed cemetery finance charges1,357
 1,381
 24
 1.8 %
Total$18,838
 $16,642
 $(2,196) (11.7)%
Cemetery same store operating revenues for the nine months ended September 30, 2017 decreased $1.6 million, or 4.5%, when compared to the nine months ended September 30, 2016. Approximately 56.0% of our same store operating revenues were related to preneed sales of interment rights and related merchandise and services for the nine months ended September 30, 2017. Preneed revenue decreased $2.4 million, or 11.2%, as we experienced a 11.4% decrease in the number of preneed interment rights sold to 4,942 in the nine months ended September 30, 2017 compared to the same period in 2016. The decrease was primarily a result of attrition of key sales personnel at certain businesses during the period. In addition, preneed sales were negatively impacted in our Texas and Florida businesses due to the hurricanes affecting those areas in the third quarter of 2017, as well as the absence of approximately $0.4 million of large private estate sales we had in the third quarter of last year. The decrease was slightly offset by a 4.0% increase in the average price per interment to $3,256. Same store at-need revenue, which represents approximately 44.0% of our same store operating revenues, increased $0.8 million, or 5.7%, due primarily to a 9.0% increase in the average sale per contract to $1,459.
Cemetery same store operating profit for the nine months ended September 30, 2017 decreased $2.0 million, or 17.7% from the same period in 2016. As a percentage of revenue, cemetery operating profit decreased to 27.7% in the nine months ended September 30, 2017 compared to 32.2% in the same period in 2016. The decrease in operating profit was primarily a result of the decrease in revenue, combined with a $0.4 million, or 1.8%, increase in operating costs for the nine months ended September 30, 2017 compared with the same period in 2016. Those expenses with significant increases include $0.2 million of salaries and benefits and $0.2 million of facilities and grounds expenses.
Cemetery acquired operating revenue and acquired operating profit remained flat for the nine months ended September 30, 2017. Cemetery acquired operating profit margin decreased from 34.2% to 31.4% for the nine months ended September 30, 2017 compared to the same period in 2016 as we experienced increases in salaries and benefits and bad debt expense.
The two categories of financial revenue consist of trust earnings and finance charges on preneed receivables. Trust earnings also include trust management fees charged by our wholly-owned registered investment advisor based on the fair market value of

the trust assets. Total trust earnings decreased $0.1 million or 2.0%, primarily due to decreased capital gains from our perpetual care trust in the nine months ended September 30, 2017 compared to the same period in 2016. Financial revenue earned from finance charges on the preneed contracts remained flat at $1.4 million in the nine months ended September 30, 2017 compared to the same period in 2016.
Investing Activities
Our investing activities, resulted in a net cash outflow of $49.9 million for the six months ended June 30, 2023 compared to $10.2 million for the six months ended June 30, 2022, an increase of $39.7 million.
Acquisition and Divestiture Activity
During the six months ended June 30, 2023, we acquired a business consisting of three funeral homes, two cemeteries and one cremation focused business for $44.0 million. In addition, we sold one funeral home and two cemeteries for $0.8 million and real property for $1.2 million.
We also received proceeds of $1.1 million from our property insurance policy for the reimbursement of renovation costs for certain of our funeral businesses damaged by Hurricane Ian that occurred during the third quarter of 2022 and a fire that occurred during the first quarter of 2023.
During the six months ended June 30, 2022, we sold real property for $2.9 million and we sold two funeral homes for an aggregate of $0.9 million and purchased real property for $2.6 million.
Capital Expenditures
For the six months ended June 30, 2023, capital expenditures (comprised of growth and maintenance spend) totaled $9.0 million compared to $13.5 million for the six months ended June 30, 2022, a decrease of $4.5 million.
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The following tables present our growth and maintenance capital expenditures (in thousands):
Six months ended June 30,
20222023
Growth
Cemetery development$3,673 $3,505 
Renovations at certain businesses(1)
3,620 1,623 
Other193 109 
Total Growth$7,486 $5,237 
(1)During the six months ended June 30, 2023, we spent $0.5 million for renovations on two businesses that were affected by Hurricane Ian, which occurred during the third quarter of 2022 and $0.3 million for renovations on one business that was damaged by a fire, which occurred during the first quarter of 2023, all of which was reimbursed by our property insurance. During the six months ended June 30, 2022, we spent $2.1 million for renovations on two businesses that were affected by Hurricane Ida, which occurred during the third quarter of 2021, all of which was reimbursed by our property insurance.
Six months ended June 30,
20222023
Maintenance
General equipment and furniture$2,347 $2,260 
Facility repairs and improvements1,599 249 
Vehicles1,129 443 
Paving roads and parking lots485 330 
Other422 441 
Total Maintenance$5,982 $3,723 
Financing Activities
Our financing activities resulted in a net cash inflow of $10.5 million for the six months ended June 30, 2023 compared to a net cash outflow of $20.1 million for the six months ended June 30, 2022, an increase of $30.6 million. 
During the six months ended June 30, 2023, we had net borrowings on our Credit Facility, acquisition debt and finance leases of $13.0 million, offset by $3.3 million in dividends.
During the six months ended June 30, 2022, we had net borrowings on our Credit Facility, acquisition debt and finance leases of $19.6 million, offset by $36.7 million for the purchase of treasury stock and $3.5 million in dividends.
Share Repurchase
Share repurchase activity is as follows (dollar value in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Number of Shares Repurchased205,496 — 695,496 — 
Average Price Paid Per Share$40.02 $— $49.22 $— 
Dollar Value of Shares Repurchased$8,224 $— $34,234 $— 
Our shares were purchased in the open market at times and in amounts as management determined appropriate based on factors such as market conditions, legal requirements and other business considerations. Shares purchased pursuant to the repurchase program are currently held as treasury stock. At June 30, 2023, our share repurchase program had $48.9 million authorized for repurchases.
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Cash Dividend
Our Board declared the following dividends payable on the dates below (in thousands, except per share amounts):
2023Per ShareDollar Value
March 1st
$0.1125 $1,661 
June 1st
$0.1125 $1,679 
2022Per ShareDollar Value
March 1st
$0.1125 $1,725 
June 1st
$0.1125 $1,730 
Credit Facility, Lease Obligations and Acquisition Debt
The outstanding principal of our Credit Facility, lease obligations and acquisition debt at June 30, 2023 is as follows (in thousands):
June 30, 2023
Credit Facility$204,000 
Finance leases4,946 
Operating leases19,441 
Acquisition debt3,948 
Total$232,335 
Credit Facility
At June 30, 2023, our senior secured revolving credit facility (the “Credit Facility”) was comprised of: (i) a $250.0 million revolving credit facility, including a $15.0 million subfacility for letters of credit and a $10.0 million swingline, and (ii) an accordion or incremental option allowing for future increases in the facility size by an additional amount of up to $75.0 million in the aggregate in the form of increased revolving commitments or incremental term loans. The final maturity of the Credit Facility will occur on May 13, 2026.
Our obligations under the Credit Facility are unconditionally guaranteed on a joint and several basis by the same subsidiaries which guarantee the Senior Notes (as defined in Note 12) and certain of our subsequently acquired or organized domestic subsidiaries (collectively, the “Subsidiary Guarantors”).
The Credit Facility contains customary affirmative covenants, including, but not limited to, covenants with respect to the use of proceeds, payment of taxes and other obligations, continuation of the Company’s business and the maintenance of existing rights and privileges, the maintenance of property and insurance, amongst others.
In addition, the Credit Facility also contains customary negative covenants, including, but not limited to, covenants that restrict (subject to certain exceptions) the ability of the Company and the Subsidiary Guarantors to incur indebtedness, grant liens, make investments, engage in mergers and acquisitions, and pay dividends and other restricted payments, and certain financial maintenance covenants. At June 30, 2023, we were subject to the following financial covenants under our Credit Facility: (A) a Total Leverage Ratio not to exceed 6.00 to 1.00 and (B) a Fixed Charge Coverage Ratio (as defined in the Credit Facility) of not less than 1.20 to 1.00 as of the end of any period of four consecutive fiscal quarters. These financial maintenance covenants are calculated for the Company and its subsidiaries on a consolidated basis. We were in compliance with all of the covenants contained in our Credit Facility as of June 30, 2023.
At June 30, 2023, we had outstanding borrowings under the Credit Facility of $204.0 million. We also had one letter of credit for $2.3 million under the Credit Facility. The letter of credit will expire on November 27, 2023 and is expected to automatically renew annually and secures our obligations under our various self-insured policies. At June 30, 2023, we had $43.7 million of availability under the Credit Facility.
Outstanding borrowings under our Credit Facility bear interest at a prime rate or the Bloomberg Short-Term Bank Yield Index (“BSBY”) rate, plus an applicable margin based on our leverage ratio. At June 30, 2023, the prime rate margin was equivalent to 2.625% and the BSBY rate margin was 3.625%. The weighted average interest rate on our Credit Facility was 2.9% and 8.6% for the three months ended June 30, 2022 and 2023, respectively and 2.5% and 8.3% for the six months ended June 30, 2022 and 2023, respectively.
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The interest expense and amortization of debt issuance costs related to our Credit Facility are as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Credit Facility interest expense$1,314 $4,668 $2,161 $8,479 
Credit Facility amortization of debt issuance costs96 138 184 276 
The interest payments on our remaining borrowings under the Credit Facility will be determined based on the average outstanding balance of our borrowings and the prevailing interest rate during that time.
Lease Obligations
Our lease obligations consist of operating and finance leases. We lease certain office facilities, certain funeral homes, equipment and vehicles under operating leases with original terms ranging from one to twenty years. Many leases include one or more options to renew, some of which include options to extend the leases for up to forty years. We lease certain funeral homes under finance leases with original terms ranging from ten to forty years. At June 30, 2023, operating and finance lease obligations were $35.3 million, with $5.0 million payable within 12 months.
The components of lease cost are as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Operating lease cost$853 $917 $1,701 $1,792 
Short-term lease cost76 92 178 186 
Variable lease cost16 56 23 114 
Finance lease cost:
Depreciation of leased assets$109 $109 $217 $217 
Interest on lease liabilities112 103 225 208 
Total finance lease cost221 212 442 425 
Total lease cost$1,166 $1,277 $2,344 $2,517 
Acquisition Debt
Acquisition debt consists of deferred purchase price and promissory notes payable to sellers. A majority of the deferred purchase price and notes bear no interest and are discounted at imputed interest rates ranging from 7.3% to 10.0%. Original maturities range from nine to twenty years. At June 30, 2023, acquisition debt obligations were $5.5 million, with $0.8 million payable within 12 months. Original maturities range from nine to twenty years.
The imputed interest expense related to our acquisition debt is as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Acquisition debt imputed interest expense$79 $71 $159 $142 
Senior Notes
At June 30, 2023, the principal amount of our 4.25% senior notes due in May 2029 (the “Senior Notes”) was $400.0 million. The Senior Notes were issued under an indenture, dated as of May 13, 2021 (the “Indenture”), among the Company, the Subsidiary Guarantors and Wilmington Trust, National Association, as trustee. The Senior Notes are unsecured, senior obligations and are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally by each of the Subsidiary Guarantors. The Senior Notes mature on May 15, 2029, unless earlier redeemed or purchased and bear interest at 4.25% per year, which is payable semi-annually in arrears on May 15 and November 15 of each year, beginning on November 15, 2021.
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 71 months of the Senior Notes. The effective interest rate on the unamortized debt discount and the
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unamortized debt issuance costs for the Senior Notes for both the three and six months ended June 30, 2022 and 2023 was 4.42% and 4.30%, respectively.
At June 30, 2023, the fair value of the Senior Notes, which are Level 2 measurements, was $343.1 million.
The interest expense and amortization of debt discount and debt issuance costs related to our Senior Notes are as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Senior Notes interest expense$4,230 $4,250 $8,480 $8,500 
Senior Notes amortization of debt discount122 128 243 255 
Senior Notes amortization of debt issuance costs35 37 69 73 
At June 30, 2023, our future interest payments on our outstanding balance were $99.9 million, with $17.0 million payable within 12 months.
FINANCIAL HIGHLIGHTS
Below are our financial highlights (in thousands except for volumes and averages):
Three months ended June 30,Six months ended June 30,
2022202320222023
Revenue$90,600 $97,678 $188,761 $193,192 
Funeral contracts11,006 11,431 24,521 23,846 
Average revenue per funeral contract$5,493 $5,492 $5,439 $5,510 
Preneed interment rights (property) sold3,5113,3915,8895,895
Average price per preneed interment right sold$4,337 $5,237 $4,398 $4,922 
Gross profit$27,712 $31,202 $62,190 $62,257 
Net income$10,899 $8,286 $27,301 $17,130 
Revenue for the three months ended June 30, 2023 increased $7.1 million compared to the three months ended June 30, 2022, as we experienced a 3.9% increase in funeral contract volume, while the average revenue per funeral contract remained flat, and a 20.8% increase in the average price per interment right sold, slightly offset by a 3.4% decrease in the number of preneed interment rights (property) sold.
Gross profit for the three months ended June 30, 2023 increased $3.5 million compared to the three months ended June 30, 2022, primarily due to the increase in revenue from both our funeral home and cemetery segments.
Net income for the three months ended June 30, 2023 decreased $2.6 million compared to the three months ended June 30, 2022, primarily due to the following: (1) a $3.4 million increase in interest expense; (2) a $2.6 million impact from divestitures, disposals and insurance reimbursements; (3) a $1.0 million increase in general and administrative expenses, offset by (4) the $3.5 million increase in gross profit and (5) an $0.8 million decrease in income tax expense.
Revenue for the six months ended June 30, 2023 increased $4.4 million compared to the six months ended June 30, 2022, as we experienced a 1.3% increase in the average revenue per funeral contract, while funeral contract volume decreased 2.8%, and an 11.9% increase in the average price per interment right sold, while the number of preneed interment rights (property) sold remained flat. The contract volume decrease is primarily a result of the significant decline in COVID-19 related deaths in the first quarter of 2023 as compared to the same period in 2022, as these deaths now have a minimal impact on the overall death rate.
Gross profit for the six months ended June 30, 2023 increased $0.1 million compared to the six months ended June 30, 2022, due to the increase in revenue from our cemetery segment, offset by increases in operating expenses in both our funeral home and cemetery segments.
Net income for the six months ended June 30, 2023 decreased $10.2 million compared to the six months ended June 30, 2022, primarily due to the following: (1) a $6.4 million increase in interest expense; (2) a $3.5 million impact from divestitures, disposals and insurance reimbursements; (3) a $2.6 million increase in general and administrative expenses, offset by (4) a $2.4 million decrease in income tax expense.
Further discussion of revenue and the components of gross profit for our Funeral Home and Cemetery segments is presented under “– Results of Operations.”
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Further discussion of general, administrative and other expenses, interest expense, income taxes and other components of income and expenses are presented under “– Other Financial Statement ItemsItems.”
Depreciation
REPORTING AND NON-GAAP FINANCIAL MEASURES
We also present our financial performance in our “Condensed Operating and Amortization. Depreciation and amortization costsFinancial Trend Report” (“Trend Report”) as reported in our earnings release for the three months ended June 30, 2023 issued on August 2, 2023, and discussed in the corresponding earnings conference call. The Trend Report is used as a supplemental financial statement by management and investors to compare our current financial performance with our previous results and with the performance of other companies. We do not intend for this information to be considered in isolation or as a substitute for other measures of performance prepared in accordance with United States generally accepted accounting principles (“GAAP”). The Trend Report is a non-GAAP statement that also provides insight into underlying trends in our business.
Below is a reconciliation of gross profit (a GAAP financial measure) to operating profit (a non-GAAP financial measure) (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Gross profit$27,712 $31,202 $62,190 $62,257 
Cemetery property amortization1,704 1,892 3,036 3,093 
Field depreciation expense3,253 3,555 6,550 6,912 
Regional and unallocated funeral and cemetery costs5,966 4,131 12,313 9,568 
Operating profit(1)
$38,635 $40,780 $84,089 $81,830 
(1)Operating profit is defined as gross profit plus cemetery property amortization, field depreciation expense and regional and unallocated funeral and cemetery costs.
Our operations are reported in two business segments: Funeral Home and Cemetery. Below is a breakdown of operating profit (a non-financial GAAP measure) by segment (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Funeral Home$24,152 $23,947 $57,887$52,913
Cemetery14,483 16,833 26,20228,917
Operating profit$38,635 $40,780 $84,089$81,830
Operating profit margin(1)
42.6%41.7%44.5%42.4%
(1)Operating profit margin is defined as operating profit as a percentage of revenue.
Further discussion of operating profit for our Funeral Home and Cemetery segments is presented under “– Results of Operations.”
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RESULTS OF OPERATIONS
The following is a discussion of our results of operations for the three and six months ended June 30, 2023 and 2022.
We previously classified our funeral homes and cemeteries as “same store” or “acquired” in our results of operations discussion in our quarterly and annual filings prior to December 31, 2022. Same store generally referred to funeral homes and cemeteries acquired at least five years before the reporting period being presented, while acquired generally referred to funeral homes and cemeteries acquired within the preceding five years of the reporting period being presented, both of which excluded certain funeral homes and cemeteries that we intended to divest.
In an effort to simplify the discussion of our results of operations, provide meaningful metrics to investors to compare our results to previous periods and provide more insight into the underlying long-term performance trends in our business, we have combined both the same store and acquired categories and now refer to this combination as “operating”. The term “operating” in the Funeral Home and Cemetery segment simply refers to all our funeral homes and cemeteries owned and operated in the current reporting period, excluding certain funeral home and cemetery businesses that we have divested or intend to divest in the near future.
The term “divested” when discussed in the Funeral Home segment, refers to one funeral home we sold in the six months ended June 30, 2023 and two funeral homes we sold in the six months ended June 30, 2022. The term “divested” when discussed in the Cemetery segment, refers to two cemeteries we sold during the six months ended June 30, 2023.
“Planned divested” refers to the funeral home and cemetery businesses that we intend to divest.
“Ancillary” in the Funeral Home segment represents our flower shop, our monument company, our pet cremation business and our online cremation businesses.
Cemetery property amortization, field depreciation expense and regional and unallocated funeral and cemetery costs, are not included in operating profit, a non-GAAP financial measure. Adding back these items will result in gross profit, a GAAP financial measure.
Funeral Home Segment
The following table sets forth certain information regarding our revenue and operating profit for our funeral home office totaledoperations (in thousands):
Three months ended June 30,
20222023
Revenue:
Operating$58,108 $60,800 
Divested/planned divested557 210 
Ancillary980 1,232 
Other2,293 2,263 
Total$61,938 $64,505 
Operating profit:
Operating$21,999 $21,891 
Divested/planned divested14 29 
Ancillary151 73 
Other1,988 1,954 
Total$24,152 $23,947 
The following operating measures reflect the significant metrics over this comparative period:
Contract volume10,912 11,398 
Average revenue per contract, excluding preneed funeral trust earnings$5,325 $5,334 
Average revenue per contract, including preneed funeral trust earnings$5,488 $5,489 
Cremation rate57.4%58.4%
Funeral home operating revenue increased $2.7 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022. The increase in operating revenue is primarily driven by a 4.5% increase in contract volume,
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while the average revenue per contract excluding preneed interest remained flat. The contract volume increase is primarily due to our newly acquired funeral home businesses, which were not present in the comparative quarter of 2022.

Funeral home operating profit for the three months ended June 30, 2023 decreased $0.1 million when compared to the same period in 2022, primarily due to an increase in operating expenses as a percentage of revenue. The comparable operating profit margin decreased 190 basis points to 36.0%. Operating expenses as a percentage of revenue increased 1.9% with the largest increases in salary and benefits expenses of 1.4% and general and administrative expenses of 0.5%. The increase in operating expenses is partially due to higher costs from inflationary impacts concentrated in our full-time hourly base rates, utilities and funeral supplies.
Ancillary revenue, which represents revenue from our flower shop, pet cremation and online cremation businesses increased $0.3 million and Ancillary operating profit decreased $0.1 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022.
Other revenue and other operating profit, which consists of preneed funeral insurance commissions and preneed funeral trust and insurance remained flat for the three months ended June 30, 2023, compared to the three months ended June 30, 2022.
The following table sets forth certain information regarding our revenue and operating profit for our funeral home operations (in thousands):
Six months ended June 30,
20222023
Revenue:
Operating$128,127 $127,044 
Divested/planned divested1,339 537 
Ancillary2,050 2,289 
Other4,777 4,720 
Total$136,293 $134,590 
Operating profit:
Operating$53,183 $48,416 
Divested/planned divested151 106 
Ancillary372 219 
Other4,181 4,172 
Total$57,887 $52,913 
The following operating measures reflect the significant metrics over this comparative period:
Contract volume24,271 23,746 
Average revenue per contract, excluding preneed funeral trust earnings$5,279 $5,350 
Average revenue per contract, including preneed funeral trust earnings$5,438 $5,510 
Cremation rate57.2%58.7%
Funeral home operating revenue decreased $1.1 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The decrease in operating revenue is primarily driven by a 2.2% decrease in contract volume, which was partially offset by a 1.3% increase in the average revenue per contract excluding preneed interest. The contract volume decrease is primarily a result of the significant decline in COVID-19 related deaths in the first quarter of 2023 as compared to the same period in 2022, as these deaths now have a minimal impact on the overall death rate. The increase in average revenue per contract is primarily due to a combination of price increases and our continued focus on educating families on the many products and service options that are available with burials and cremations.
Funeral home operating profit for the six months ended June 30, 2023 decreased $4.8 million when compared to the same period in 2022, primarily due to an increase in operating expenses as a percentage of revenue. The comparable operating profit margin decreased 340 basis points to 38.1%. Operating expenses as a percentage of revenue increased 3.4% with the largest increases in salary and benefits expenses of 1.9%, facilities and grounds expenses of 0.7%, general and administrative expenses of 0.5% and other funeral costs of 0.3%. The increase in operating expenses is partially due to higher costs from inflationary impacts concentrated in our full-time hourly base rates, utilities and funeral supplies.
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Ancillary revenue, which represents revenue from our flower shop, pet cremation and online cremation businesses increased $0.2 million and Ancillary operating profit decreased $0.2 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.
Other revenue and other operating profit, which consists of preneed funeral insurance commissions and preneed funeral trust and insurance, remained flat for the six months ended June 30, 2023, compared to the six months ended June 30, 2022.
Cemetery Segment
The following table sets forth certain information regarding our revenue and operating profit for our cemetery operations (in thousands):
Three months ended June 30,
20222023
Revenue:
Operating$25,104 $29,142 
Divested/planned divested57 — 
Other3,501 4,031 
Total$28,662 $33,173 
Operating profit (loss):
Operating$11,136 $12,940 
Divested/planned divested(18)(2)
Other3,365 3,895 
Total$14,483 $16,833 
The following operating measures reflect the significant metrics over this comparative period:
Preneed revenue as a percentage of operating revenue66.0%67.0%
Preneed revenue (in thousands)$16,476 $19,385 
Atneed revenue (in thousands)$8,628 $9,757 
Number of preneed interment rights sold3,5063,391
Average price per interment right sold$4,341 $5,237 
Cemetery operating revenue increased $4.0 million for the three months ended SeptemberJune 30, 2017,2023 compared to the three months ended June 30, 2022, as we experienced a 20.6% increase in the average price per preneed interment right sold, slightly offset by a 3.3% decrease in preneed interment rights sold. Cemetery atneed revenue, which represents 33.0% of our total operating revenue, increased $1.1 million for the three months ended June 30, 2023, compared to the same period of the prior year, primarily due to an increase in sales of merchandise and services from our newly acquired cemetery businesses, not present in the comparative quarter of 2022.
Cemetery operating profit increased $1.8 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, due to the increase in revenue. The comparable operating profit margin remained flat at 44.4%. Operating expenses as a percent of operating revenue also remained flat.
Other revenue, which consists of preneed cemetery trust revenue and preneed cemetery finance charges, increased $0.5 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022. The increase is primarily due to realized capital gains in the current year compared to the prior year and an increase in income in our perpetual care trust fund. Other operating profit increased $0.5 million for the same comparative period, primarily due to the increase in revenue.






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The following table sets forth certain information regarding our revenue and operating profit for our cemetery operations (in thousands):
Six months ended June 30,
20222023
Revenue:
Operating$45,579 $50,747 
Divested/planned divested130 42 
Other6,759 7,813 
Total$52,468 $58,602 
Operating profit (loss):
Operating$19,731 $21,333 
Divested/planned divested(14)10 
Other6,485 7,574 
Total$26,202 $28,917 
The following operating measures reflect the significant metrics over this comparative period:
Preneed revenue as a percentage of operating revenue63.0%63.0%
Preneed revenue (in thousands)$28,555 $31,833 
Atneed revenue (in thousands)$17,024 $18,914 
Number of preneed interment rights sold5,8715,890
Average price per interment right sold$4,409 $4,924 
Cemetery operating revenue increased $5.2 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, as we experienced an 11.7% increase in the average price per preneed interment right sold, while the number of preneed interment rights sold remained flat. Cemetery atneed revenue, which represents 37.0% of our total operating revenue increased $1.9 million for the six months ended June 30, 2023, compared to the same period of the prior year, primarily due to an increase in sales of merchandise and services from our newly acquired cemetery businesses, which were not present in the comparative period of 2022.
Cemetery operating profit increased $1.6 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The comparable operating profit margin decreased 130 basis point to 42.0%. Operating expenses as a percent of operating revenue increased 1.2% primarily due to an increase in salary and benefits expenses.
Other revenue, which consists of preneed cemetery trust revenue and preneed cemetery finance charges, increased $1.1 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. The increase is primarily due to an increase in income in our perpetual care trust fund and an increase in finance charges on preneed sales. Other operating profit increased $1.1 million for the same comparative period, primarily due to the increase in revenue.
Cemetery property amortization. Cemetery property amortization totaled $1.9 million and $3.1 million for the three and six months ended June 30, 2023, respectively, an increase of $0.2 million or 5.1%, fromand $0.1 million, respectively, compared to the three months ended September 30, 2016same period in 2022, primarily due to the increase in property sold across our cemetery portfolio.
Field depreciation. Depreciation expense for our field businesses totaled $3.6 million and $11.9$6.9 million for the ninethree and six months ended SeptemberJune 30, 2017,2023, respectively, an increase of $0.3 million and $0.4 million, or 3.3%, fromrespectively, compared to the nine months ended September 30, 2016. These increases weresame period in 2022, primarily attributabledue to additional depreciation expense from assets acquiredacquisitions made in latter half of 2022 and our 2016 acquisitions.March 2023 acquisition.
Regional and Unallocated Funeralunallocated funeral and Cemetery Costs.cemetery costs. Regional and unallocated funeral and cemetery costs consist of salaries and benefits for regional management, field incentive compensation and other related costs for field infrastructure. Regional and unallocated funeral and cemetery costs totaled $3.9$4.1 million for the three months ended SeptemberJune 30, 2017, an increase2023, a decrease of $1.2$1.8 million or 41.5%, compared to the same period in 2016,2022, primarily due to the following: (1) a $0.5$0.7 million increasedecrease in fieldcash incentives and equity compensation; (2) a $0.7 million decrease in incentive compensation,award trips and annual managing partner meetings and (3) a $0.4 million increase in natural disaster related costs and a $0.3 million increasedecrease in other general administrative costs.expenses.
Regional and unallocated funeral and cemetery costs totaled $9.8$9.6 million for the ninesix months ended SeptemberJune 30, 2017, an increase2023, a decrease of $1.3$2.7 million or 15.2%, compared to the same period in 2016,2022, primarily due to the following: (1) a $0.4 million increase in field incentive compensation, a $0.4 million increase in natural disaster related costs, a $0.4 million increase in other general administrative costs and $0.1 million increase in salaries and benefits.
On Friday, August 25, 2017 and Sunday, September 10, 2017, hurricanes Harvey and Irma struck Texas and Florida, respectively. Thirteen of our funeral homes and six of our cemeteries were impacted by either or both property damage and business interruption. Based on our preliminary review of our property, flood and business interruption insurance policies, we believe that much of the loss we have experienced will be covered by insurance. As of September 30, 2017, we have spent approximately $0.5 million for employee assistance and property repair costs. We have recognized approximately $0.4 million in expenses and recorded a receivable for insurance reimbursement of approximately $0.1 million.
General, Administrative and Other. General, administrative and other expenses remained flat at $6.1 million for both the three months ended September 30, 2016 and 2017. Those expenses with significant increases include $0.4 million of equity compensation, $0.2 million of salaries and benefits for leadership investments in our Houston support office, $0.2 million of other general administrative costs, $0.2 million of incentive compensation and $0.2 million of public company and regulatory costs related to tax planning, offset by a $1.2$1.3 million decrease in severancecash incentives and retirement expenses primarily related to the retirement ofequity compensation; (2) a former executive.
General, administrative and other expenses totaled $19.5 million for the nine months ended September 30, 2017, a decrease of $1.7 million, or 7.8%, from the nine months ended September 30, 2016. The decrease was attributable to a $3.5$1.1 million decrease in retirement expenses primarily related to the retirement of two former executives during 2016,incentive award trips and annual managing partner meetings and (3) a $0.7$0.3 million decrease in acquisition costs, offset by a $0.9 million increase in salaries and benefits for leadership investments in our Houston support office, a $0.7 million increase in public company, regulatory and legal costs related to tax planning, filing our current shelf registration statement and adopting a new long-term incentive plan, a $0.6 million increase in other general administrative costs and a $0.3 million increase in incentive and equity compensation.
Interest Expense. Interest expense was $3.3 million for the three months ended September 30, 2017 compared to $2.9 million for the three months ended September 30, 2016, an increase of approximately $0.4 million. During the three months ended September 30, 2017, interest expense increased by approximately $0.3 million related to our term note and revolving credit facility and by approximately $0.1 million related to our deferred purchase obligations for our 2016 acquisitions. During the three months ended September 30, 2017, the weighted average interest rate increased 0.6% compared to the same period in 2016.
Interest expense was $9.5 million for the nine months ended September 30, 2017 compared to $8.7 million for the nine months ended September 30, 2016, an increase of approximately $0.8 million. During the nine months ended September 30, 2017, interest expense increased by approximately $0.4 million related to our term note and revolving credit facility and by approximately $0.4 million related to our deferred purchase obligations for our 2016 acquisitions. During the nine months ended September 30, 2017, the weighted average interest rate increased 0.3% compared to the same period in 2016.
Accretion of Discount on Convertible Subordinated Notes. For the three and nine months ended September 30, 2017, we recognized accretion of the discount on our convertible subordinated notes issued in March 2014 of $1.1 million and $3.2 million respectively,

compared to $1.0 million and $2.9 million for the three and nine months ended September 30, 2016, respectively. Accretion is calculated using the effective interest method based on a stated interest rate of 6.75%.
Income Taxes. Income tax expense was $1.5 million for the three months ended September 30, 2017 compared to $1.9 million for the three months ended September 30, 2016. We recorded income taxes at the estimated effective rate, before discrete items, of 40.0% for both the three and nine months ended September 30, 2017 and 2016. Income tax expense was $9.3 million for the nine months ended September 30, 2017 compared to $8.4 million for the nine months ended September 30, 2016.
During the third quarter of 2017, we recognized a tax benefit of $0.2 million which reduced our effective tax rate to 39% for the nine months ended September 30, 2017. During the third quarter of 2016, we recognized a tax benefit of $1.1 million which reduced our effective tax rate to 35.2% for the nine months ended September 30, 2016.
We have approximately $36.8 million of state net operating loss carry forwards that will expire between 2018 and 2038, if not utilized. Based on management’s assessment of the various state net operating losses, it has been determined that it is more likely than not that we will not be able to realize the tax benefits of certain portions of the state losses. Accordingly, a valuation allowance has been established and the deferred tax asset for the state operating losses is reviewed every quarter. At September 30, 2017, the valuation allowance totaled $0.2 million.
LIQUIDITY AND CAPITAL RESOURCES
Our primary sources of liquidity and capital resources are internally generated cash flows from operating activities and availability under our Credit Facility.
We generate cash in our operations primarily from at-need sales and delivery of preneed sales. We also generate cash from earnings on our cemetery perpetual care trusts. Based on our recent operating results, current cash position and anticipated future cash flows, we do not anticipate any significant liquidity constraints in the foreseeable future. However, if our capital expenditures or acquisition plans change, we may need to access the capital markets to obtain additional funding. Further, to the extent operating cash flow or access to and costs of financing sources are materially different than expected, future liquidity may be adversely affected. Please read Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016.
We intend to use cash on hand and borrowings under our Credit Facility primarily to acquire funeral home and cemetery businesses and for internal growth projects, such as cemetery inventory development and funeral home expansion projects, and for payment of dividends. From time to time we may also use available cash to repurchase shares of our common stock in open market or privately negotiated transactions. We have the ability to draw on our revolving credit facility, subject to customary terms and conditions of the Credit Agreement. We believe that our existing cash balance, future cash flows from operations and borrowings under our Credit Facility described below will be sufficient to meet our anticipated working capital requirements, capital expenditures, scheduled debt payments, commitments, dividends and acquisitions for the foreseeable future.

Cash Flows
We began 2017 with $3.3 million in cash and other liquid investments and ended the third quarter with $0.8 million in cash. As of September 30, 2017, we had borrowings of $75.5 million outstanding on our revolving credit facility compared to $67.7 million outstanding as of December 31, 2016.
The following table sets forth the elements of cash flow for the nine months ended September 30, 2016 and 2017 (in millions):expenses.
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 For the Nine Months Ended September 30,
 2016 2017
Cash at January 1st
$0.5
 $3.3
Cash flow from operating activities34.8
 30.8
Acquisitions and land for new construction(15.1) (0.7)
Purchase of land and buildings previously leased(6.3) —
Net proceeds from the sale of other assets1.0
 0.4
Growth capital expenditures(6.8) (6.8)
Maintenance capital expenditures(5.2) (6.3)
Net (payments) borrowings on our revolving credit facility, term loan and long-term debt obligations0.3
 (1.7)
Taxes paid on restricted stock vestings and exercise of non-qualified options(0.6) (0.5)
Dividends paid on common stock(1.7) (2.5)
Proceeds from the exercise of stock options and employee stock purchase plan contributions0.7
 1.2
Purchase of treasury stock—
 (16.4)
Payment of loan origination costs related to the credit facility(0.7) —
Other financing costs(0.1) —
Cash at September 30th$0.8
 $0.8

Operating Activities
For the nine months ended September 30, 2017, cash provided by operating activities was $30.8 million compared to cash provided by operating activities of $34.8 million for the nine months ended September 30, 2016, a decrease of $4.0 million, due primarily to the decline in preneed cemetery revenue and acquired funeral home operating profit margin in the second and third quarters of 2017 and unfavorable working capital changes, which include, the timing of payments for income taxes, payments for accrued severance for the retirement of a former executive and our Good To Great incentive compensation plan during the first quarter of 2017.
Investing Activities
Our investing activities, resulted in a net cash outflow of $13.4$49.9 million for the ninesix months ended SeptemberJune 30, 20172023 compared to $32.4$10.2 million for the ninesix months ended SeptemberJune 30, 2016,2022, an increase of $39.7 million.
Acquisition and Divestiture Activity
During the six months ended June 30, 2023, we acquired a business consisting of three funeral homes, two cemeteries and one cremation focused business for $44.0 million. In addition, we sold one funeral home and two cemeteries for $0.8 million and real property for $1.2 million.
We also received proceeds of $1.1 million from our property insurance policy for the reimbursement of renovation costs for certain of our funeral businesses damaged by Hurricane Ian that occurred during the third quarter of 2022 and a fire that occurred during the first quarter of 2023.
During the six months ended June 30, 2022, we sold real property for $2.9 million and we sold two funeral homes for an aggregate of $0.9 million and purchased real property for $2.6 million.
Capital Expenditures
For the six months ended June 30, 2023, capital expenditures (comprised of growth and maintenance spend) totaled $9.0 million compared to $13.5 million for the six months ended June 30, 2022, a decrease of $19.0$4.5 million. During the nine months ended September 30, 2017, we purchased real estate for funeral home parking lot expansion projects for approximately $0.7 million. Capital expenditures totaled $13.1 million, of which $6.8 million and $6.3 million were
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The following tables present our growth and maintenance capital expenditures respectively. Our growth capital expenditures were primarily related to cemetery development costs of $3.0 million, construction costs related to two new funeral home facilities of approximately $2.5 million and renovations at certain businesses of $1.3 million. Maintenance capital expenditures in the nine months ended September 30, 2017 were primarily related to maintenance projects for facility repairs and improvements of $1.8 million, vehicle purchases of $1.7 million, IT infrastructure improvements, general equipment, and furniture purchases of $1.8 million, and paving roads, parking lots and landscaping projects of $1.0 million.(in thousands):
During the nine months ended September 30, 2016, we acquired three funeral home businesses for approximately $15.8 million. We purchased land for funeral home expansion projects for approximately $2.7 million. Additionally, we purchased land and buildings at four funeral home locations that were previously leased for approximately $6.3 million. Capital expenditures totaled $12.0 million, of which $6.8 million and $5.2 million were growth and maintenance capital expenditures, respectively. Our growth capital expenditures were primarily construction costs related to funeral home facilities of approximately $2.3 million, renovations at certain business locations of $1.3 million and cemetery development costs of $3.2 million. Maintenance capital expenditures in the nine months ended September 30, 2016 were primarily related to vehicle purchases of $1.2 million, general
Six months ended June 30,
20222023
Growth
Cemetery development$3,673 $3,505 
Renovations at certain businesses(1)
3,620 1,623 
Other193 109 
Total Growth$7,486 $5,237 

equipment and furniture purchases of $1.6 million and maintenance projects such as paving roads, parking lots, facility repairs and general improvements of $2.4 million.
(1)During the six months ended June 30, 2023, we spent $0.5 million for renovations on two businesses that were affected by Hurricane Ian, which occurred during the third quarter of 2022 and $0.3 million for renovations on one business that was damaged by a fire, which occurred during the first quarter of 2023, all of which was reimbursed by our property insurance. During the six months ended June 30, 2022, we spent $2.1 million for renovations on two businesses that were affected by Hurricane Ida, which occurred during the third quarter of 2021, all of which was reimbursed by our property insurance.
Six months ended June 30,
20222023
Maintenance
General equipment and furniture$2,347 $2,260 
Facility repairs and improvements1,599 249 
Vehicles1,129 443 
Paving roads and parking lots485 330 
Other422 441 
Total Maintenance$5,982 $3,723 
Financing Activities
Our financing activities resulted in a net cash outflowinflow of $19.9$10.5 million for the ninesix months ended SeptemberJune 30, 20172023 compared to $2.1a net cash outflow of $20.1 million for the ninesix months ended SeptemberJune 30, 2016,2022, an increase of $17.8$30.6 million. 
During the ninesix months ended SeptemberJune 30, 2017,2023, we had net paymentsborrowings on our revolving credit facilityCredit Facility, acquisition debt and term loanfinance leases of $0.6 million. We also purchased treasury stock for $16.4$13.0 million, and paid $2.5offset by $3.3 million in dividends.
During the ninesix months ended SeptemberJune 30, 2016,2022, we had net borrowings on our revolving credit facility and term loan of $1.3 million. We also paid transaction costs of approximately $0.7 million related to the Seventh Amendment of our Credit Facility, acquisition debt and paid $1.7finance leases of $19.6 million, offset by $36.7 million for the purchase of treasury stock and $3.5 million in dividends.
Dividends
On July 26, 2017 our Board declared a dividend of $0.05 per share, totaling approximately $0.8 million, which was paid on September 1, 2017 to record holders of our common stock as of August 14, 2017. For the three months ended September 30, 2016, we paid a quarterly dividend of $0.050 per share, totaling approximately $0.8 million. For the nine months ended September 30, 2016 and 2017, we paid total dividends of approximately $1.7 million and $2.5 million, respectively.
Share Repurchase
On February 25, 2016, our Board approved a shareShare repurchase program authorizing us to purchase up to an aggregate of $25.0 million of our common stockactivity is as follows (dollar value in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). During the three months ended September 30, 2017, we repurchased 574,054 shares of common stock for a total cost of $14.0 million at an average cost of $24.35 per share pursuant to this share repurchase program. We did not purchase any shares of common stock in the first or second quarter of 2017. thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Number of Shares Repurchased205,496 — 695,496 — 
Average Price Paid Per Share$40.02 $— $49.22 $— 
Dollar Value of Shares Repurchased$8,224 $— $34,234 $— 
Our shares were purchased in the open market. Purchases weremarket 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.
On August 18, 2017, we purchased 100,000 shares ofstock. At June 30, 2023, our common stock from Melvin C. Payne, our Chairman of the Board and Chief Executive Officer. The purchase of these shares was made pursuant to a privately negotiated transaction at a price of $23.85 per share for a total purchase price of $2.4 million. The purchase price was the stock's trading price at the time of the transaction. This purchase was not a part of the share repurchase program approved byhad $48.9 million authorized for repurchases.
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Cash Dividend
Our Board declared the Boardfollowing dividends payable on February 25, 2016. The repurchase of the shares held by Mr. Payne was approved in advance by our Board, with Mr. Payne abstaining.dates below (in thousands, except per share amounts):
2023Per ShareDollar Value
March 1st
$0.1125 $1,661 
June 1st
$0.1125 $1,679 
2022Per ShareDollar Value
March 1st
$0.1125 $1,725 
June 1st
$0.1125 $1,730 
Credit Facility, Lease Obligations and Acquisition Debt Obligations
The outstanding principal of our total long-term debt and capitalCredit Facility, lease obligations and acquisition debt at SeptemberJune 30, 2017 totaled $218.8 million and consisted of $130.3 million under2023 is as follows (in thousands):
June 30, 2023
Credit Facility$204,000 
Finance leases4,946 
Operating leases19,441 
Acquisition debt3,948 
Total$232,335 
Credit Facility
At June 30, 2023, our term loan, $75.5 million outstanding under oursenior secured revolving credit facility and $14.0 million in acquisition indebtedness and capital lease obligations.
As of September 30, 2017, we had a $300 million secured bank credit facility with Bank of America, N.A., as Administrative Agent (the “Credit Agreement”Facility”), was comprised ofof: (i) a $150$250.0 million revolving credit facility, including a $15.0 million subfacility for letters of credit and a $150$10.0 million swingline, and (ii) an accordion or incremental option allowing for future increases in the facility size by an additional amount of up to $75.0 million in the aggregate in the form of increased revolving commitments or incremental term loanloans. The final maturity of the Credit Facility will occur on May 13, 2026.
Our obligations under the Credit Facility are unconditionally guaranteed on a joint and several basis by the same subsidiaries which guarantee the Senior Notes (as defined in Note 12) and certain of our subsequently acquired or organized domestic subsidiaries (collectively, the “Credit Facility”“Subsidiary Guarantors”).
The Credit Facility contains customary affirmative covenants, including, but not limited to, covenants with respect to the use of proceeds, payment of taxes and other obligations, continuation of the Company’s business and the maintenance of existing rights and privileges, the maintenance of property and insurance, amongst others.
In addition, the Credit Facility also contains an accordion provisioncustomary negative covenants, including, but not limited to, borrow upcovenants that restrict (subject to an additional $75 millioncertain exceptions) the ability of the Company and the Subsidiary Guarantors to incur indebtedness, grant liens, make investments, engage in revolving loans,mergers and acquisitions, and pay dividends and other restricted payments, and certain financial maintenance covenants. At June 30, 2023, we were subject to certain conditions. Thethe following financial covenants under our Credit Facility: (A) a Total Leverage Ratio not to exceed 6.00 to 1.00 and (B) a Fixed Charge Coverage Ratio (as defined in the Credit Facility) of not less than 1.20 to 1.00 as of the end of any period of four consecutive fiscal quarters. These financial maintenance covenants are calculated for the Company and its subsidiaries on a consolidated basis. We were in compliance with all of the covenants contained in our Credit Facility is collateralized by all personal property and funeral home real property in certain states.as of June 30, 2023.
At June 30, 2023, we had outstanding borrowings under the Credit Facility of $204.0 million. We havealso had one letter of credit issued on November 30, 2016 and outstandingfor $2.3 million under the Credit Facility for approximately $2.0 million, which bears interest at 2.125% andFacility. The letter of credit will expire on November 27, 2017. The letter of credit2023 and is expected to automatically renewsrenew annually and secures our obligations under our various self-insured policies. UnderAt June 30, 2023, we had $43.7 million of availability under the Credit Facility.
Outstanding borrowings under our Credit Facility outstanding borrowings bear interest at either a prime rate or a LIBORthe Bloomberg Short-Term Bank Yield Index (“BSBY”) rate, plus an applicable margin based uponon our leverage ratio. At SeptemberJune 30, 2017,2023, the prime rate margin was equivalent to 1.125%2.625% and the LIBORBSBY rate margin was 2.125%3.625%. The weighted average interest rate on theour Credit Facility was 2.9% and 8.6% for the three and nine months ended SeptemberJune 30, 2017 was 3.4%2022 and 3.1%,2023, respectively and 2.5% and 8.3% for the six months ended June 30, 2022 and 2023, respectively.
We have no material assets or operations independent of our subsidiaries. All assets
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The interest expense and operations are held and conducted by our subsidiaries, each of which have fully and unconditionally guaranteed our obligations under the Credit Facility. Additionally, we do not currently have any significant restrictions on our ability to receive dividends or loans from any subsidiary guarantor under the Credit Facility.
We were in compliance with the covenants contained in the Credit Agreement as of September 30, 2017. The Credit Agreement contains key ratios with which we must comply, including a requirement to maintain a leverage ratio of no more than 3.5 to 1.00 and a covenant to maintain a fixed charge coverage ratio of no less than 1.20 to 1.00. As of September 30, 2017, the leverage ratio was 2.99 to 1.00 and the fixed charge coverage ratio was 1.89 to 1.00.

Amortizationamortization of debt issuance costs related to our Credit Facility was approximately $0.1 million for both the three months ended September 30, 2016 and 2017 and $0.3 million and $0.2 million for the nine months ended September 30, 2016 and 2017, respectively. are as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Credit Facility interest expense$1,314 $4,668 $2,161 $8,479 
Credit Facility amortization of debt issuance costs96 138 184 276 
The unamortized debt issuance costs related tointerest payments on our remaining borrowings under the Credit Facility will be determined based on the average outstanding balance of our borrowings and the prevailing interest rate during that time.
Lease Obligations
Our lease obligations consist of operating and finance leases. We lease certain office facilities, certain funeral homes, equipment and vehicles under operating leases with original terms ranging from one to twenty years. Many leases include one or more options to renew, some of which include options to extend the leases for up to forty years. We lease certain funeral homes under finance leases with original terms ranging from ten to forty years. At June 30, 2023, operating and finance lease obligations were $35.3 million, with $5.0 million payable within 12 months.
The components of lease cost are being amortized over the remaining termas follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Operating lease cost$853 $917 $1,701 $1,792 
Short-term lease cost76 92 178 186 
Variable lease cost16 56 23 114 
Finance lease cost:
Depreciation of leased assets$109 $109 $217 $217 
Interest on lease liabilities112 103 225 208 
Total finance lease cost221 212 442 425 
Total lease cost$1,166 $1,277 $2,344 $2,517 
Acquisition Debt
Acquisition debt consists of deferred purchase price and promissory notes payable to sellers. A majority of the deferred purchase price and notes bear no interest and are discounted at imputed interest rates ranging from 7.3% to 10.0%. Original maturities range from nine to twenty years. At June 30, 2023, acquisition debt obligations were $5.5 million, with $0.8 million payable within 12 months. Original maturities range from nine to twenty years.
The imputed interest expense related to our acquisition debt usingis as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Acquisition debt imputed interest expense$79 $71 $159 $142 
Senior Notes
At June 30, 2023, the effective interest method for our term loan and the straight line method for our revolving credit facility.
Convertible Subordinated Notes due 2021
On March 19, 2014, we issued $143.75 million aggregate principal amount of 2.75% convertible subordinatedour 4.25% senior notes due March 15,in May 2029 (the “Senior Notes”) was $400.0 million. The Senior Notes were issued under an indenture, dated as of May 13, 2021 (the “Convertible Notes”“Indenture”)., among the Company, the Subsidiary Guarantors and Wilmington Trust, National Association, as trustee. The ConvertibleSenior Notes are unsecured, senior obligations and are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally by each of the Subsidiary Guarantors. The Senior Notes mature on May 15, 2029, unless earlier redeemed or purchased and bear interest at 2.75%4.25% per year. Interest on the Convertible Notes began to accrue on March 19, 2014 andyear, which is payable semi-annually in arrears on MarchMay 15 and SeptemberNovember 15 of each year.year, beginning on November 15, 2021.
At September 30, 2017,The Indenture contains restrictive covenants limiting our ability and our Restricted Subsidiaries (as defined in the carrying amountIndenture) 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 the equity component was approximately $18.0 million. At September 30, 2017, the principal amountRestricted Subsidiaries to make payments to us, consolidate, merge, sell or otherwise dispose of the liability component was $143.75 millionall or substantially all assets, or engage in transactions with affiliates. The Indenture also contains customary events of default.
The debt discount and the net carrying amount was $123.2 million. The unamortized discount of $18.7 million and the unamortized debt issuance costs of $1.9 million as of September 30, 2017 are being amortized using the effective interest method over the remaining term of approximately 71 months of the ConvertibleSenior Notes. The effective interest rate on the unamortized debt discount and the
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unamortized debt issuance costs for the three and nine months ended September 30, 2016 and 2017 was 6.75% and 2.75%, respectively.
Interest expense on the ConvertibleSenior Notes included contractual coupon interest expense of approximately $1.0 million for both the three and six months ended SeptemberJune 30, 20162022 and 20172023 was 4.42% and $3.04.30%, respectively.
At June 30, 2023, the fair value of the Senior Notes, which are Level 2 measurements, was $343.1 million.
The interest expense and amortization of debt discount and debt issuance costs related to our Senior Notes are as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Senior Notes interest expense$4,230 $4,250 $8,480 $8,500 
Senior Notes amortization of debt discount122 128 243 255 
Senior Notes amortization of debt issuance costs35 37 69 73 
At June 30, 2023, our future interest payments on our outstanding balance were $99.9 million, with $17.0 million payable within 12 months.
FINANCIAL HIGHLIGHTS
Below are our financial highlights (in thousands except for volumes and averages):
Three months ended June 30,Six months ended June 30,
2022202320222023
Revenue$90,600 $97,678 $188,761 $193,192 
Funeral contracts11,006 11,431 24,521 23,846 
Average revenue per funeral contract$5,493 $5,492 $5,439 $5,510 
Preneed interment rights (property) sold3,5113,3915,8895,895
Average price per preneed interment right sold$4,337 $5,237 $4,398 $4,922 
Gross profit$27,712 $31,202 $62,190 $62,257 
Net income$10,899 $8,286 $27,301 $17,130 
Revenue for the three months ended June 30, 2023 increased $7.1 million compared to the three months ended June 30, 2022, as we experienced a 3.9% increase in funeral contract volume, while the average revenue per funeral contract remained flat, and a 20.8% increase in the average price per interment right sold, slightly offset by a 3.4% decrease in the number of preneed interment rights (property) sold.
Gross profit for the three months ended June 30, 2023 increased $3.5 million compared to the three months ended June 30, 2022, primarily due to the increase in revenue from both our funeral home and cemetery segments.
Net income for the three months ended June 30, 2023 decreased $2.6 million compared to the three months ended June 30, 2022, primarily due to the following: (1) a $3.4 million increase in interest expense; (2) a $2.6 million impact from divestitures, disposals and insurance reimbursements; (3) a $1.0 million increase in general and administrative expenses, offset by (4) the $3.5 million increase in gross profit and (5) an $0.8 million decrease in income tax expense.
Revenue for the six months ended June 30, 2023 increased $4.4 million compared to the six months ended June 30, 2022, as we experienced a 1.3% increase in the average revenue per funeral contract, while funeral contract volume decreased 2.8%, and an 11.9% increase in the average price per interment right sold, while the number of preneed interment rights (property) sold remained flat. The contract volume decrease is primarily a result of the significant decline in COVID-19 related deaths in the first quarter of 2023 as compared to the same period in 2022, as these deaths now have a minimal impact on the overall death rate.
Gross profit for the six months ended June 30, 2023 increased $0.1 million compared to the six months ended June 30, 2022, due to the increase in revenue from our cemetery segment, offset by increases in operating expenses in both our funeral home and cemetery segments.
Net income for the six months ended June 30, 2023 decreased $10.2 million compared to the six months ended June 30, 2022, primarily due to the following: (1) a $6.4 million increase in interest expense; (2) a $3.5 million impact from divestitures, disposals and insurance reimbursements; (3) a $2.6 million increase in general and administrative expenses, offset by (4) a $2.4 million decrease in income tax expense.
Further discussion of revenue and the components of gross profit for our Funeral Home and Cemetery segments is presented under “– Results of Operations.”
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Further discussion of general, administrative and other expenses, interest expense, income taxes and other components of income and expenses are presented under “– Other Financial Statement Items.”
REPORTING AND NON-GAAP FINANCIAL MEASURES
We also present our financial performance in our “Condensed Operating and Financial Trend Report” (“Trend Report”) as reported in our earnings release for the three months ended June 30, 2023 issued on August 2, 2023, and discussed in the corresponding earnings conference call. The Trend Report is used as a supplemental financial statement by management and investors to compare our current financial performance with our previous results and with the performance of other companies. We do not intend for this information to be considered in isolation or as a substitute for other measures of performance prepared in accordance with United States generally accepted accounting principles (“GAAP”). The Trend Report is a non-GAAP statement that also provides insight into underlying trends in our business.
Below is a reconciliation of gross profit (a GAAP financial measure) to operating profit (a non-GAAP financial measure) (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Gross profit$27,712 $31,202 $62,190 $62,257 
Cemetery property amortization1,704 1,892 3,036 3,093 
Field depreciation expense3,253 3,555 6,550 6,912 
Regional and unallocated funeral and cemetery costs5,966 4,131 12,313 9,568 
Operating profit(1)
$38,635 $40,780 $84,089 $81,830 
(1)Operating profit is defined as gross profit plus cemetery property amortization, field depreciation expense and regional and unallocated funeral and cemetery costs.
Our operations are reported in two business segments: Funeral Home and Cemetery. Below is a breakdown of operating profit (a non-financial GAAP measure) by segment (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Funeral Home$24,152 $23,947 $57,887$52,913
Cemetery14,483 16,833 26,20228,917
Operating profit$38,635 $40,780 $84,089$81,830
Operating profit margin(1)
42.6%41.7%44.5%42.4%
(1)Operating profit margin is defined as operating profit as a percentage of revenue.
Further discussion of operating profit for our Funeral Home and Cemetery segments is presented under “– Results of Operations.”
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RESULTS OF OPERATIONS
The following is a discussion of our results of operations for the three and six months ended June 30, 2023 and 2022.
We previously classified our funeral homes and cemeteries as “same store” or “acquired” in our results of operations discussion in our quarterly and annual filings prior to December 31, 2022. Same store generally referred to funeral homes and cemeteries acquired at least five years before the reporting period being presented, while acquired generally referred to funeral homes and cemeteries acquired within the preceding five years of the reporting period being presented, both of which excluded certain funeral homes and cemeteries that we intended to divest.
In an effort to simplify the discussion of our results of operations, provide meaningful metrics to investors to compare our results to previous periods and provide more insight into the underlying long-term performance trends in our business, we have combined both the same store and acquired categories and now refer to this combination as “operating”. The term “operating” in the Funeral Home and Cemetery segment simply refers to all our funeral homes and cemeteries owned and operated in the current reporting period, excluding certain funeral home and cemetery businesses that we have divested or intend to divest in the near future.
The term “divested” when discussed in the Funeral Home segment, refers to one funeral home we sold in the six months ended June 30, 2023 and two funeral homes we sold in the six months ended June 30, 2022. The term “divested” when discussed in the Cemetery segment, refers to two cemeteries we sold during the six months ended June 30, 2023.
“Planned divested” refers to the funeral home and cemetery businesses that we intend to divest.
“Ancillary” in the Funeral Home segment represents our flower shop, our monument company, our pet cremation business and our online cremation businesses.
Cemetery property amortization, field depreciation expense and regional and unallocated funeral and cemetery costs, are not included in operating profit, a non-GAAP financial measure. Adding back these items will result in gross profit, a GAAP financial measure.
Funeral Home Segment
The following table sets forth certain information regarding our revenue and operating profit for our funeral home operations (in thousands):
Three months ended June 30,
20222023
Revenue:
Operating$58,108 $60,800 
Divested/planned divested557 210 
Ancillary980 1,232 
Other2,293 2,263 
Total$61,938 $64,505 
Operating profit:
Operating$21,999 $21,891 
Divested/planned divested14 29 
Ancillary151 73 
Other1,988 1,954 
Total$24,152 $23,947 
The following operating measures reflect the significant metrics over this comparative period:
Contract volume10,912 11,398 
Average revenue per contract, excluding preneed funeral trust earnings$5,325 $5,334 
Average revenue per contract, including preneed funeral trust earnings$5,488 $5,489 
Cremation rate57.4%58.4%
Funeral home operating revenue increased $2.7 million for both the ninethree months ended SeptemberJune 30, 20162023 compared to the three months ended June 30, 2022. The increase in operating revenue is primarily driven by a 4.5% increase in contract volume,
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while the average revenue per contract excluding preneed interest remained flat. The contract volume increase is primarily due to our newly acquired funeral home businesses, which were not present in the comparative quarter of 2022.

Funeral home operating profit for the three months ended June 30, 2023 decreased $0.1 million when compared to the same period in 2022, primarily due to an increase in operating expenses as a percentage of revenue. The comparable operating profit margin decreased 190 basis points to 36.0%. Operating expenses as a percentage of revenue increased 1.9% with the largest increases in salary and 2017. Accretionbenefits expenses of 1.4% and general and administrative expenses of 0.5%. The increase in operating expenses is partially due to higher costs from inflationary impacts concentrated in our full-time hourly base rates, utilities and funeral supplies.
Ancillary revenue, which represents revenue from our flower shop, pet cremation and online cremation businesses increased $0.3 million and Ancillary operating profit decreased $0.1 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022.
Other revenue and other operating profit, which consists of preneed funeral insurance commissions and preneed funeral trust and insurance remained flat for the three months ended June 30, 2023, compared to the three months ended June 30, 2022.
The following table sets forth certain information regarding our revenue and operating profit for our funeral home operations (in thousands):
Six months ended June 30,
20222023
Revenue:
Operating$128,127 $127,044 
Divested/planned divested1,339 537 
Ancillary2,050 2,289 
Other4,777 4,720 
Total$136,293 $134,590 
Operating profit:
Operating$53,183 $48,416 
Divested/planned divested151 106 
Ancillary372 219 
Other4,181 4,172 
Total$57,887 $52,913 
The following operating measures reflect the significant metrics over this comparative period:
Contract volume24,271 23,746 
Average revenue per contract, excluding preneed funeral trust earnings$5,279 $5,350 
Average revenue per contract, including preneed funeral trust earnings$5,438 $5,510 
Cremation rate57.2%58.7%
Funeral home operating revenue decreased $1.1 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The decrease in operating revenue is primarily driven by a 2.2% decrease in contract volume, which was partially offset by a 1.3% increase in the average revenue per contract excluding preneed interest. The contract volume decrease is primarily a result of the discountsignificant decline in COVID-19 related deaths in the first quarter of 2023 as compared to the same period in 2022, as these deaths now have a minimal impact on the Convertible Notes was $1.0overall death rate. The increase in average revenue per contract is primarily due to a combination of price increases and our continued focus on educating families on the many products and service options that are available with burials and cremations.
Funeral home operating profit for the six months ended June 30, 2023 decreased $4.8 million when compared to the same period in 2022, primarily due to an increase in operating expenses as a percentage of revenue. The comparable operating profit margin decreased 340 basis points to 38.1%. Operating expenses as a percentage of revenue increased 3.4% with the largest increases in salary and benefits expenses of 1.9%, facilities and grounds expenses of 0.7%, general and administrative expenses of 0.5% and other funeral costs of 0.3%. The increase in operating expenses is partially due to higher costs from inflationary impacts concentrated in our full-time hourly base rates, utilities and funeral supplies.
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Ancillary revenue, which represents revenue from our flower shop, pet cremation and online cremation businesses increased $0.2 million and Ancillary operating profit decreased $0.2 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022.
Other revenue and other operating profit, which consists of preneed funeral insurance commissions and preneed funeral trust and insurance, remained flat for the six months ended June 30, 2023, compared to the six months ended June 30, 2022.
Cemetery Segment
The following table sets forth certain information regarding our revenue and operating profit for our cemetery operations (in thousands):
Three months ended June 30,
20222023
Revenue:
Operating$25,104 $29,142 
Divested/planned divested57 — 
Other3,501 4,031 
Total$28,662 $33,173 
Operating profit (loss):
Operating$11,136 $12,940 
Divested/planned divested(18)(2)
Other3,365 3,895 
Total$14,483 $16,833 
The following operating measures reflect the significant metrics over this comparative period:
Preneed revenue as a percentage of operating revenue66.0%67.0%
Preneed revenue (in thousands)$16,476 $19,385 
Atneed revenue (in thousands)$8,628 $9,757 
Number of preneed interment rights sold3,5063,391
Average price per interment right sold$4,341 $5,237 
Cemetery operating revenue increased $4.0 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, as we experienced a 20.6% increase in the average price per preneed interment right sold, slightly offset by a 3.3% decrease in preneed interment rights sold. Cemetery atneed revenue, which represents 33.0% of our total operating revenue, increased $1.1 million for the three months ended SeptemberJune 30, 20162023, compared to the same period of the prior year, primarily due to an increase in sales of merchandise and 2017, respectively, and $2.9 million and $3.2services from our newly acquired cemetery businesses, not present in the comparative quarter of 2022.
Cemetery operating profit increased $1.8 million for the ninethree months ended SeptemberJune 30, 20162023 compared to the three months ended June 30, 2022, due to the increase in revenue. The comparable operating profit margin remained flat at 44.4%. Operating expenses as a percent of operating revenue also remained flat.
Other revenue, which consists of preneed cemetery trust revenue and 2017, respectively. Amortizationpreneed cemetery finance charges, increased $0.5 million for the three months ended June 30, 2023, compared to the three months ended June 30, 2022. The increase is primarily due to realized capital gains in the current year compared to the prior year and an increase in income in our perpetual care trust fund. Other operating profit increased $0.5 million for the same comparative period, primarily due to the increase in revenue.






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The following table sets forth certain information regarding our revenue and operating profit for our cemetery operations (in thousands):
Six months ended June 30,
20222023
Revenue:
Operating$45,579 $50,747 
Divested/planned divested130 42 
Other6,759 7,813 
Total$52,468 $58,602 
Operating profit (loss):
Operating$19,731 $21,333 
Divested/planned divested(14)10 
Other6,485 7,574 
Total$26,202 $28,917 
The following operating measures reflect the significant metrics over this comparative period:
Preneed revenue as a percentage of operating revenue63.0%63.0%
Preneed revenue (in thousands)$28,555 $31,833 
Atneed revenue (in thousands)$17,024 $18,914 
Number of preneed interment rights sold5,8715,890
Average price per interment right sold$4,409 $4,924 
Cemetery operating revenue increased $5.2 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, as we experienced an 11.7% increase in the average price per preneed interment right sold, while the number of debt issuancepreneed interment rights sold remained flat. Cemetery atneed revenue, which represents 37.0% of our total operating revenue increased $1.9 million for the six months ended June 30, 2023, compared to the same period of the prior year, primarily due to an increase in sales of merchandise and services from our newly acquired cemetery businesses, which were not present in the comparative period of 2022.
Cemetery operating profit increased $1.6 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022. The comparable operating profit margin decreased 130 basis point to 42.0%. Operating expenses as a percent of operating revenue increased 1.2% primarily due to an increase in salary and benefits expenses.
Other revenue, which consists of preneed cemetery trust revenue and preneed cemetery finance charges, increased $1.1 million for the six months ended June 30, 2023, compared to the six months ended June 30, 2022. The increase is primarily due to an increase in income in our perpetual care trust fund and an increase in finance charges on preneed sales. Other operating profit increased $1.1 million for the same comparative period, primarily due to the increase in revenue.
Cemetery property amortization. Cemetery property amortization totaled $1.9 million and $3.1 million for the three and six months ended June 30, 2023, respectively, an increase of $0.2 million and $0.1 million, respectively, compared to the same period in 2022, primarily due to the increase in property sold across our cemetery portfolio.
Field depreciation. Depreciation expense for our field businesses totaled $3.6 million and $6.9 million for the three and six months ended June 30, 2023, respectively, an increase of $0.3 million and $0.4 million, respectively, compared to the same period in 2022, primarily due to acquisitions made in latter half of 2022 and our March 2023 acquisition.
Regional and unallocated funeral and cemetery costs. Regional and unallocated funeral and cemetery costs consist of salaries and benefits for regional management, field incentive compensation and other related costs for field infrastructure. Regional and unallocated funeral and cemetery costs totaled $4.1 million for the three months ended June 30, 2023, a decrease of $1.8 million compared to the same period in 2022, primarily due to the following: (1) a $0.7 million decrease in cash incentives and equity compensation; (2) a $0.7 million decrease in incentive award trips and annual managing partner meetings and (3) a $0.4 million decrease in other expenses.
Regional and unallocated funeral and cemetery costs totaled $9.6 million for the six months ended June 30, 2023, a decrease of $2.7 million compared to the same period in 2022, primarily due to the following: (1) a $1.3 million decrease in cash incentives and equity compensation; (2) a $1.1 million decrease in incentive award trips and annual managing partner meetings and (3) a $0.3 million decrease in other expenses.
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Other Financial Statement Items
General, administrative and other. General, administrative and other expenses, which includes salaries and benefits, cash and equity incentive compensation for the Houston support office totaled $10.2 million for the three months ended June 30, 2023, an increase of $1.0 million compared to the same period in 2022, primarily due to the following: (1) $1.4 million increase in salary and benefits expense and cash and equity incentive compensation, as a result of having a complete senior leadership team, including current year executive promotions, offset by (2) a $0.4 million decrease in other expenses, including lower online marketing costs and travel costs.
General, administrative and other expenses totaled $20.4 million for the six months ended June 30, 2023, an increase of $2.6 million compared to the same period in 2022, primarily due to the following: (1) a $3.2 million increase in salary and benefits expense and cash and equity incentive compensation, as a result of having a complete senior leadership team, including current year executive promotions, offset by (2) a $0.6 million decrease in other expenses, including lower online marketing costs and travel costs.
Net (gain) loss on divestitures, disposals and impairments charges. The components of Net (gain) loss on divestitures, disposals and impairment charges are as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Net (gain) loss on divestitures$(1,278)$— $(575)$82 
Impairments related to assets held for sale— 243 — 243 
Net loss on disposals of fixed assets85 22 149 181 
Total$(1,193)$265 $(426)$506 
During the six months ended June 30, 2023, we sold one funeral home and two cemeteries for a loss of $0.1 million. We also recognized an impairment of $0.2 million related to our Convertible Notesproperty, plant and equipment for assets held for sale.
During the six months ended June 30, 2022, we sold real property and two funeral homes for a net gain of $0.6 million.
Interest expense. Interest expense related to its respective debt arrangement is as follows (in thousands):
Three months ended June 30,Six months ended June 30,
2022202320222023
Senior Notes$4,387 $4,414 $8,793 $8,827 
Credit Facility1,409 4,806 2,344 8,755 
Finance leases112 103 225 209 
Acquisition debt79 71 159 142 
Other1 2 9 2 
Total$5,988 $9,396 $11,530 $17,935 
Net (gain) loss on property damage, net of insurance claims. During the three and six months ended June 30, 2023, we recorded a $0.2 million gain and $36,000 loss, respectively, net of insurance proceeds, primarily for property damaged by a fire that occurred during first quarter of 2023.
During the three and six months ended June 30, 2022, we recorded a $1.4 million gain and $3.3 million gain, net of insurance proceeds, for property damaged by Hurricane Ida that occurred during the third quarter of 2021.
Other, net. During the three and six months ended June 30, 2023, we recorded a $0.1 million gain and $0.6 million gain, respectively, on the sale of other real property not used in business operations.
Income taxes. Income tax expense totaled $3.4 million for the three months ended June 30, 2023, a decrease of $0.8 million compared to the same period in 2022, primarily due to lower pre-tax income in the current period. Our operating tax rate before discrete items was approximately $0.1 million28.0% for both the three months ended SeptemberJune 30, 20162023 and 2017 and $0.42022.
Income tax expense totaled $6.9 million for both the ninesix months ended SeptemberJune 30, 20162023, a decrease of $2.4 million compared to the same period in 2022, primarily due to lower pre-tax income in the current period. Our operating tax rate before discrete items was 28.5% and 2017.27.2% for six months ended June 30, 2023 and 2022, respectively.
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OVERVIEW OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The initial conversion rate of the Convertible Notes, as of March 19, 2014, was 44.3169 sharespreparation of our common stock per $1,000 principal amountConsolidated Financial Statements requires us to make estimates and assumptions that affect the reported amounts of Convertible Notes, equivalentassets, liabilities, revenue and expenses. Understanding our accounting policies and the extent to which our management uses judgment, assumptions and estimates in applying these policies is integral to understanding our Consolidated Financial Statements. Our critical accounting policies are more fully described in Part II, Item 8 “Financial Statements and Supplementary Data” in Note 1 in our Annual Report on Form 10-K for the year ended December 31, 2022.
We have identified Business Combinations and Goodwill as those accounting policies that require significant judgments, assumptions and estimates and that have a significant impact on our financial condition and results of operations. These policies are considered critical because they may result in fluctuations in our reported results from period to period due to the significant judgments, estimates and assumptions about complex and inherently uncertain matters and because the use of different judgments, assumptions or estimates could have a material impact on our financial condition or results of operations. Actual results may differ from these estimates and such estimates may change if the underlying conditions or assumptions change. Historical performance should not be viewed as indicative of future performance because there can be no assurance the margins, operating income and net earnings, as a percentage of revenue, will be consistent from period to period. We evaluate our critical accounting estimates and judgments required by our policies on an initial conversion price of approximately $22.56 per share of common stock. The adjusted conversion rate of the Convertible Notes, in effect at September 30, 2017, is 44.5392 shares of our common stock per $1,000 principal amount of Convertible Notes, equivalent to an adjusted conversion price of approximately $22.45 per share of common stock.ongoing basis and update them as appropriate based on changing conditions.
SEASONALITY
Our business can be affected by seasonal fluctuations in the death rate.rate and may be further affected by epidemics and pandemics, like COVID-19, including any new or emerging public health threats. Generally, the death ratenumber of deaths is higher during the winter months because the incidences of death from influenza and pneumonia are higher during this period than other periods of the year. For example, we experienced fluctuations in the death rate due to COVID-19, with a result of increased deaths during the duration of the pandemic. Although deaths directly attributable from COVID-19 now have minimal direct impact on the overall death rate, the overall death rate remains higher than the pre-COVID-19 pandemic period. As a result, we are unable to predict or forecast the duration or variation of this increased death rate with any certainty.
Item 3.Quantitative and Qualitative Disclosures About Market Risk.
Item 3.Quantitative and Qualitative Disclosures About Market Risk.
In the ordinary course of business, we are typically exposed to a variety of market risks. Currently, these are primarily related to interest rate risk and changes in the values of securities associated with the preneed and perpetual care trusts. Management is actively involved in monitoring exposure to market risk and developing and utilizing appropriate risk management techniques when appropriate and when available for a reasonable price. We are not exposed to any other significant market risks.risks other than those related to the impact of health and safety concerns from epidemics and pandemics and and inflation, which are described in more detail in Part 1, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022.
The following quantitative and qualitative information is provided about financial instruments to which we are a party at SeptemberJune 30, 20172023 and from which we may incur future gains or losses from changes in market conditions. We do not enter into derivative or other financial instruments for speculative or trading purposes.
Hypothetical changes in interest rates and the values of securities associated with the preneed and perpetual care trusts chosen for the following estimated sensitivity analysis are considered to be reasonable near-term changes generally based on consideration of past fluctuations for each risk category. However, since it is not possible to accurately predict future changes in interest rates, these hypothetical changes may not necessarily be an indicator of probable future fluctuations.
The following information about our market-sensitive financial instruments constitutes a “forward-looking statement.”
In connection with our preneed funeral operations and preneed cemetery merchandise and service sales, the related funeral and cemetery trust funds own investments in equity and debt securities and mutual funds, which are sensitive to current market prices. Cost and market values of such investments as of Septemberat June 30, 20172023 are presented in Part 1, Item 1, “Condensed Notes to Consolidated Financial Statements,” Notes 3 and 6 Note 8 to our Consolidated Financial Statements in this Quarterly Report on Form 10-Q. The sensitivity of the fixed income securities is such that a 0.25% change in interest rates causes an approximate 1.51%1.19% change in the value of the fixed income securities.
We monitor current and forecasted interest rate risk in the ordinary course of business and seek to maintain optimal financial flexibility, quality and solvency. As of SeptemberAt June 30, 2017,2023, we had outstanding borrowings under the Credit Facility of $75.5 million under our $150.0

million revolving credit facility and approximately $130.3 million outstanding on our term loan.$204.0 million. Any further borrowings or voluntary prepayments against the revolving credit facilityCredit Facility or any change in the floating rate would cause a change in interest expense. We have the option to pay interest under the Credit Facility at either prime rate or LIBORthe BSBY rate plus a margin. At SeptemberJune 30, 2017,2023, the prime rate margin was equivalent to 1.125%2.625% and the LIBORBSBY rate margin was 2.125%3.625%. Assuming the outstanding balance remains unchanged, a change of 100 basis points in our borrowing rate would result in a
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change in income before taxes of $2.1$2.0 million. We have not entered into interest rate hedging arrangements in the past. Management continually evaluates the cost and potential benefits of interest rate hedging arrangements.
Our ConvertibleSenior Notes bear interest at athe fixed annual rate of 2.75% per year. The Convertible4.25%. We may redeem the Senior Notes, do not contain a call feature.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 Septemberany time before May 15, 2024, we may also redeem all or part of the Senior Notes at the redemption prices described in the Indenture, plus accrued and unpaid interest, if any, to (but excluding) the date of redemption. At June 30, 2017,2023, the carrying value of the Senior Notes on our Consolidated Balance Sheet was $395.6 million and the fair value of these notesthe Senior Notes was approximately $179.9$343.1 million based on the last traded or broker quoted price.price, reported by the Financial Industry Regulatory Authority, Inc. Increases in market interest rates may cause the value of the ConvertibleSenior Notes to decrease, but such changes will not affect our interest costs. 
The remainder of our long-term debt and leases consistsconsist of non-interest bearing notes and fixed rate instruments that do not trade in a market and do not have a quoted market value. Any increase in market interest rates could causecauses the fair value of those liabilities to decrease, but such changes will not affect our interest costs.
Item 4.Controls and Procedures.
Item 4.Controls and Procedures.
Management’s Evaluation of Disclosure Controls and Procedures
Our management, including our principal executive and principal financial officer, hasofficers, have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to ensure that the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange CommissionSEC rules and forms, and to ensure that such information is accumulated and communicated to management, including our principal executive and principal financial officer,officers, as appropriate, to allow timely decisions regarding required disclosure. Based on such evaluation, our principal executive and principal financial officerofficers concluded that our disclosure controls and procedures are effective as of Septemberat June 30, 20172023 and that the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our financial condition, results of operations, and cash flows for the periods presented in conformity with US GAAP.
Changes in Internal Control over Financial Reporting
There was no change in our system of internal control over financial reporting (defined in Rules 13a-15(f) or 15d-15(f) under the Exchange Act) during the fiscal quarter covered by this quarterly reportQuarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION
Item 1.Legal Proceedings.
Item 1.Legal Proceedings.
We and our subsidiaries are parties to a number of legal proceedings that arise from time to time in the ordinary course of our business. While the outcome of these proceedings cannot be predicted with certainty, we do not expect these matters to have a material adverse effect on our financial statements.
We self-insure against certain risks and carry insurance with coverage and coverage limits for risk in excess of the coverage amounts consistent with our assessment of risks in our business and of an acceptable level of financial exposure. Although there can be no assurance that self-insurance reserves and insurance will be sufficient to mitigate all damages, claims, or contingencies, we believe that the reserves and our insurance provides reasonable coverage for known asserted and unasserted claims. In the event we sustain a loss from a claim and the insurance carrier disputes coverage or coverage limits, we may record a charge in a different period than the recovery, if any, from the insurance carrier.
Item 1A.Risk Factors.
There have been no material changes inItem 1A.Risk Factors.
Risk Factor Update
In light of our recent announcement regarding the Board’s review of potential strategic alternatives for the Company and recent developments affecting the financial services industry, we are also supplementing the risk factors as previously disclosed in Part I, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2016. Readers should carefully consider the factors discussed inset out under Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016,2022 with the new risk factors set out below. The risk factors below should be carefully read in conjunction with the risk factors set out in our Annual Report on Form 10-K for the year ended December 31, 2022, which could materially affect our business, financial condition or future results. The risks described in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the year ended December 31, 20162022, and our Quarterly Report on Form 10-Q for the quarter ending March 31, 2023 are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.
RISKS RELATED TO OUR BUSINESS
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds.
Risks Related to Review of Strategic Alternatives Process and a Potential Strategic Transaction
We are reviewing strategic alternatives and there can be no assurance that we will be successful in identifying or completing any strategic transaction, that any such strategic transaction will result in additional value for our stockholders or that the process will not have an adverse impact on our business.
On June 29, 2023, we announced our Board had initiated a process to explore potential strategic alternatives, possibly including, but not limited to, a sale, merger or other potential strategic or financial transaction, aimed at increasing stockholder value. There can be no assurance that the review of strategic alternatives will result in the identification or consummation of any transaction. Our Board may also determine that our most effective strategy is to continue to execute on our current strategy.
The process of reviewing strategic alternatives may be costly, time consuming and disruptive to our business operations and, if we are unable to effectively manage the process, our business, financial condition and results of operations could be adversely affected. We have incurred, and may in the future incur, significant costs associated with identifying, evaluating and negotiating potential strategic alternatives, such as legal, financial advisor and accounting fees and expenses and other related charges. We may also incur additional unanticipated expenses in connection with this process. A considerable portion of these costs will be incurred regardless of whether any such course of action is implemented or transaction is completed, decreasing cash available for use in our business.
There can be no assurance that any potential transaction, or series of transactions, or other strategic alternative, if consummated, will provide greater value to our stockholders than that reflected in the current price of our common stock. Until the review process is concluded, perceived uncertainties related to our future may impact our business performance and volatility in the market price of our common stock and may make it more difficult for us to attract and retain qualified personnel and key employees. Our Board has not set a timetable for the conclusion of this review, nor has it made any definitive decisions related to taking any further actions or potential strategic options at this time or at all.
Even if we are successful in completing a strategic alternative, we may be exposed to other operational and financial risks.
Although there can be no assurance that a strategic alternative will result from the process we have undertaken to explore potential strategic alternatives, the negotiation and consummation of any such transaction, if completed, will require significant time on the part of our management, which could result in disruption to our business.
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The negotiation and consummation of any such transaction may also require more time or greater cash resources than we anticipate and expose us to other operational and financial risks, including, but not limited to:
•increased near-term and long-term expenditures;
•exposure to unknown liabilities;
•higher than expected acquisition or integration costs;
•incurrence of substantial debt or dilutive issuances of equity securities to fund future operations;
•write-downs of assets or goodwill or incurrence of non-recurring, impairment or other charges;
•increased amortization expenses;
•difficulty and cost in combining the operations and personnel of any acquiring or acquired business with our operations and personnel;
•impairment of relationships with key suppliers or customers of any acquired business due to changes in management and ownership;
•inability to retain key employees of our Company or any acquired or merged business; and
•possibility of future litigation.
Any of the foregoing risks could have a material adverse effect on our business, financial condition and prospects.
GENERAL RISKS
Economic Conditions and Natural Disasters
Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults, or non-performance by financial institutions, could adversely affect our business, financial condition, or results of operations.
We currently maintain cash balances in accounts at U.S. financial institutions that we believe are high quality. These accounts, held by us and our affiliated companies, are in non-interest-bearing and interest-bearing operating accounts and may, from time to time, exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. If such banking institutions were to fail, we could lose all or a portion of those amounts held in excess of such insurance limitations. In addition, actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, our third-party vendors and counterparties or other companies in the financial services industry or the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems, which could adversely affect our business, financial condition, results of operations and liquidity.
Although we assess our banking relationships as we believe necessary or appropriate, our access to funding sources and other credit arrangements in amounts adequate to finance or capitalize our respective current and projected future business operations could be significantly impaired by factors that affect us, the financial institutions with which we have arrangements directly, or the financial services industry or economy in general. These factors could include, among others, events such as liquidity constraints or failures, the ability to perform obligations under various types of financial, credit or liquidity agreements or arrangements, disruptions or instability in the financial services industry or financial markets, or concerns or negative expectations about the prospects for companies in the financial services industry. These factors could involve financial institutions or financial services industry companies with which we, have financial or business relationships, but could also include factors involving financial markets or the financial services industry generally.
In addition, investor concerns regarding the U.S. or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire future financing or access to capital on acceptable terms or at all. As availability under our Credit Facility and/or the ability to access capital has historically been, and is expected to continue to be, one of our primary sources of liquidity, any adverse impacts on our ability to access such credit and liquidity sources as a result of adverse developments affecting the financial services industry could adversely affect our business, financial condition, results of operations.


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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
The following table sets forth certain information with respect to repurchases of our common stock during the quarter ended SeptemberJune 30, 2017:2023:
Period 
Total Number of Shares Purchased (1)
 Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program Dollar Value of Shares That May Yet Be Purchased Under the Program
         
July 1, 2017 - July 31, 2017 —
 $—
 —
 $—
August 1, 2017 - August 31, 2017 285,353
 $24.30
 185,353
 $20,450,852
September 1, 2017 - September 30, 2017 388,701
 $24.26
 388,701
 $11,019,052
Total for quarter ended September 30, 2017 674,054
   574,054
  
Period
Total Number of Shares Purchased(1)
Average Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced Program
Dollar Value of Shares That May Yet Be Purchased Under the Program(2)
April 1, 2023 - April 30, 202339 $28.18 — $48,898,769 
May 1, 2023 - May 31, 2023— $— — $48,898,769 
June 1, 2023 - June 30, 2023— $— — $48,898,769 
Total for quarter ended June 30, 202339 — 
(1(1))Represents shares surrendered by employees to pay taxes withheld upon the vesting of restricted stock awards.
(2)
On August 18, 2017, we purchased 100,000 shares ofSee Part I, Item 1, Financial Statements, Note 14 for additional information on our common stock from Melvin C. Payne, our Chairman of the Board and Chief Executive Officer. The purchase of these shares was made pursuant to a privately negotiated transaction at a price of $23.85 per share for a total purchase price of $2.4 million.The purchase price was the stock's trading price at the time of the transaction. This purchase was not a part of thepublicly announced share repurchase program approved by the Board on February 25, 2016. The repurchase of the shares held by Mr. Payne was approved in advance by our Board, with Mr. Payne abstaining.
program.
Item 3.
Defaults Upon Senior Securities.
Item 3.Defaults Upon Senior Securities.
Not applicable.
Item 4.Mine Safety Disclosures.
Item 4.Mine Safety Disclosures.
Not applicable.
Item 5.Other Information.
None.
Item 5.Other Information.
Item 6.Exhibits.
Rule 10b5-1 Stock Selling Plan
On March 13, 2023, Melvin C. Payne, Executive Chairman of the Board of Directors of the Company entered into a stock trading plan designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the “Plan”). Rule 10b5-1 permits officers and directors of public companies, who routinely become aware of material nonpublic information and therefore are unable to sell company securities until the information has been made public, to plan in advance for their liquidity or other needs by adopting, at a time when they are not in possession of material non-public information, a written plan providing for securities transactions to occur over specified future periods of time under specified conditions. Once an individual has entered into a Rule 10b5-1 trading plan, the individual has no discretion or control over whether or when transactions in Company securities will occur pursuant to the Plan.
Mr. Payne’s Plan provides for sales of Company securities as part of his long-term asset diversification, tax, estate and financial planning strategy, and is in accordance with the Company’s Insider Trading & Anti-Hedging Policy. Under the terms of the Plan, Mr. Payne will sell 50,000 shares of the Company’s common stock on a specified date every three months beginning on June 13, 2023 and continuing through December 31, 2024. Accordingly, the maximum number of shares to be sold under the Plan is 350,000.
Any transactions under the Plan will be disclosed publicly through Form 144 and Form 4 filings with the SEC to the extent required by applicable law.
Item 6.Exhibits.
The exhibits required to be filed pursuant to the requirements of Item 601 of Regulation S-K are set forth in the Exhibit Index accompanying this Quarterly Report on Form 10-Q and are incorporated herein by reference.

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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
CARRIAGE SERVICES, INC.
Date:October 25, 2017August 7, 2023/s/ Viki K. BlindermanL. Kian Granmayeh
Viki K. BlindermanL. Kian Granmayeh
SeniorExecutive Vice President, PrincipalChief Financial Officer and SecretaryTreasurer
(Principal Financial Officer)

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CARRIAGE SERVICES, INC.
INDEX OF EXHIBITS
Exhibit No.Description
3.1
Amended and Restated Certificate of Incorporation, as amended, of the Company. Incorporated by reference to Exhibit 3.1 to the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 1996, filed on March 20, 1997.
3.2
Certificate of Amendment dated May 7, 1997. Incorporated by reference to Exhibit No.
Description10.2 to the Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended September 30, 1997, filed on November 14, 1997.
*31.13.3
Certificate of Amendment dated May 7, 2002. Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended June 30, 2002, filed on August 13, 2002.
3.4
Amended and Restated By-Laws of Carriage Services, Inc. dated June 21, 2023. Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on June 22, 2023.
*10.1
Second Amendment to Employment Agreement dated June 21, 2023, by and between the Company and Melvin C. Payne.†
*10.2
Third Amendment to Employment Agreement dated June 21, 2023, by and between the Company and Carlos R. Quezada.†
*10.3
Third Amendment to Employment Agreement dated June 21, 2023, by and between the Company and Steven D. Metzger.†
*31.1
Certification of Periodic Financial Reports by Melvin C. PayneCarlos R. Quezada in satisfaction of Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2
Certification of Periodic Financial Reports by Viki K. BlindermanL. Kian Granmayeh in satisfaction of Section 302 of the Sarbanes-Oxley Act of 2002.
**32
Certification of Periodic Financial Reports by Melvin C. PayneCarlos R. Quezada and Viki K. BlindermanL. Kian Granmayeh in satisfaction of Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. Section 1350.
*101Interactive Data Files.

 __________________
(*)*101.INSFiled herewith.
XBRL Instance Document - the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document.
(**)101.SCHFurnished herewith.
Inline XBRL Taxonomy Extension Schema Documents.
*101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document.
*101.LABInline XBRL Taxonomy Extension Label Linkbase Document.
*101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document.
*101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document.
*104Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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



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