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What changed in CARRIAGE SERVICES INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CARRIAGE SERVICES INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+263 added−310 removedSource: 10-K (2024-03-01) vs 10-K (2023-03-01)

Top changes in CARRIAGE SERVICES INC's 2023 10-K

263 paragraphs added · 310 removed · 203 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

43 edited+23 added−61 removed38 unchanged
Biggest changeAll of our funeral directors and embalmers possess licenses required by applicable regulatory agencies. None of our employees are represented by unions. AVAILABLE INFORMATION We file annual, quarterly and other reports, and any amendments to those reports, and information with the United States Securities and Exchange Commission (“SEC”).
Biggest changeAs of December 31, 2023, we and our subsidiaries employed 2,602 employees, of whom 1,249 were full-time and 1,353 were part-time. All of our funeral directors and embalmers possess licenses required by applicable regulatory agencies. None of our employees are represented by unions.
Code of Business Conduct and Ethics Amendments On February 22, 2023, our Board, on the recommendation of the Board’s Audit Committee, approved various amendments to the Company’s Code of Business Conduct and Ethics (the “Code”), which applies to all directors, officers and employees of the Company and its subsidiaries.
Code of Business Conduct and Ethics On February 22, 2023, our Board, on the recommendation of the Board’s Audit Committee, approved various amendments to the Company’s Code of Business Conduct and Ethics (the “Code”), which applies to all directors, officers and employees of the Company and its subsidiaries.
Available on our website under “Investors – SEC Filings,” free of charge, are Carriage’s annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements, current reports on Form 8-K, insider reports on Forms 3, 4 and 5 filed on behalf of directors and officers and amendments to those reports as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC.
Available on our website under “Investors – SEC Filings,” free of charge, are Carriage’s annual reports on Form 10-K, quarterly reports on Form 10-Q, proxy statements, current reports on Form 8-K, insider reports on Forms 3, 4 and 5 filed on behalf of directors and officers and amendments to those reports, each as soon as reasonably practicable after such materials are electronically filed with or furnished to the SEC.
Copies of the Code of Business Conduct and Ethics and the Corporate Governance Guidelines are also posted on our website under “Investors – Corporate Governance.” Within the time period required by the SEC and the New York Stock Exchange, we will post on our website any modifications to the charters and any waivers applicable to senior officers as defined in the applicable charters, as required by the Sarbanes-Oxley Act of 2002.
Copies of the Code of Business Conduct and Ethics and the Corporate Governance Guidelines are also posted on our website under “Investors - Corporate Governance – Governance Documents.” Within the time period required by the SEC and the New York Stock Exchange, we will post on our website any modifications to the charters and any waivers applicable to senior officers as defined in the applicable charters, as required by the Sarbanes-Oxley Act of 2002.
In most states, we are not permitted to withdraw principal or investment income from such trusts until the service is performed. Additionally, in most states, regulations require a portion (generally 10%) of the sale amount of cemetery property and memorials to be placed in a 7 perpetual care trust.
In most states, we are not permitted to withdraw principal or investment income from such trusts until the service is performed. Additionally, in most states, regulations require a portion (generally 10%) of the sale amount of cemetery property and memorials to be placed in a perpetual care trust.
Moreover, accidental releases or spills may occur in the course of our operations, and we cannot assure that we will not incur 10 significant costs and liabilities as a result of such releases or spills, including any third party claims for damages to property, natural resources or persons.
Moreover, accidental releases or spills may occur in the course of our operations, and we cannot assure that we will not incur significant costs and liabilities as a result of such releases or spills, including any third party claims for damages to property, natural resources or persons.
In addition to making certain technical and administrative updates, the amendments to the Code include, among other things, summarizing and clarifying the Company’s existing compliance 3 requirements and also identifies and expands upon certain policies, including those related to bribery and kickbacks, antitrust, political activity and improper influence on auditors.
In addition to making certain technical and administrative updates, the amendments to the Code include, among other things, summarizing and clarifying the Company’s existing compliance requirements and also identifies and expands upon certain policies, including those related to bribery and kickbacks, antitrust, political activity and improper influence on auditors.
Funeral home and cemetery businesses provide products and services to families in three principal areas: (i) ceremony and tribute, generally in the form of a funeral or memorial service; (ii) disposition of remains, either through burial or cremation; and (iii) memorialization, generally through monuments, markers or inscriptions.
Funeral Home and Cemetery Operations Funeral home and cemetery businesses provide products and services to families in three principal areas: (i) ceremony and tribute, generally in the form of a funeral or memorial service; (ii) disposition of remains, either through burial or cremation; and (iii) memorialization, generally through monuments, markers or inscriptions.
Legislative bodies and regulatory agencies frequently propose new laws and regulations, some of which could have a material impact on our business. We cannot predict the impact of any future laws and regulations or changes to existing laws and regulations. Federal Trade Commission.
Legislative bodies and regulatory agencies frequently propose new laws and regulations, some of which could have a material impact on our business. We cannot predict the impact of any future laws and regulations or changes to existing laws and regulations. 7 Federal Trade Commission.
While we believe we are in compliance with existing environmental laws and regulations, we cannot assure that we will not incur substantial costs in the future. Worker Health and Safety .
While we believe we are in compliance with existing environmental laws and regulations, we cannot assure that we will not incur substantial costs in the future. 8 Worker Health and Safety .
Each Managing Partner participates in a variable bonus plan whereby he or she earns a percentage of his or her respective business’ earnings based upon the actual standards achieved as long as the performance exceeds our minimum standards. • The Right Local Leadership – Successful execution of our operating model is highly dependent on strong local leadership as defined by our 4E Leadership Model, intelligent risk taking and entrepreneurial empowerment.
Each Managing Partner participates in a variable bonus plan whereby he or she earns a percentage of his or her respective business’ earnings based upon the actual standards achieved as long as the performance exceeds our minimum standards. • The Right Local Leadership – Successful execution of our operating model is highly dependent on strong local leadership, intelligent risk taking and entrepreneurial empowerment.
We operate in two business segments: Funeral Home Operations, which currently accounts for approximately 70% of our total revenue, and Cemetery Operations, which currently accounts for approximately 30% of our total revenue. At December 31, 2022, we operated 171 funeral homes in 26 states and 32 cemeteries in 11 states.
We operate in two business segments: Funeral Home Operations, which currently accounts for approximately 70% of our total revenue, and Cemetery Operations, which currently accounts for approximately 30% of our total revenue. At December 31, 2023, we operated 171 funeral homes in 26 states and 32 cemeteries in 11 states.
COMPETITION The operating environment in the funeral and cemetery industry has been highly competitive. The largest publicly held operators, in terms of revenue, of both funeral homes and cemeteries with operations in the United States are Service Corporation International (“SCI”), Park Lawn Corporation (“Park Lawn”) and Carriage.
COMPETITION The funeral and cemetery industry has been, and remains, highly competitive. The largest publicly held operators, in terms of revenue, of both funeral homes and cemeteries with operations in the United States are Service Corporation International (“SCI”), Park Lawn Corporation (“Park Lawn”) and Carriage.
The income from these perpetual care trusts provides funds necessary to maintain cemetery property and memorials in perpetuity. For additional information with respect to our trusts, see Part II, Item 8, Financial Statements and Supplementary Data, Note 7.
The income from these perpetual care trusts provides funds necessary to maintain cemetery property and memorials in perpetuity. For additional information with respect to our trusts, see Part II, Item 8, Financial Statements and Supplementary Data, Notes 8 and 9.
Important elements of our Standards Operating Model include: • Balanced Operating Model – We believe a decentralized structure works best in the funeral and cemetery industry.
Important elements of our Standards Operating Model include: • Balanced Operating Model – We believe a partially decentralized structure works best in the funeral and cemetery industry and for our Company.
As a result, we are unable to predict or forecast the duration or variation of this increased death rate with any certainty. REGULATION General.
As a result, we are unable to predict or forecast the duration or variation of the current death rate with any certainty. REGULATION General.
Trust Funds and Insurance Contracts We have established a variety of trusts in connection with funeral home and cemetery operations as required under applicable state laws. Such trusts include (i) preneed funeral trusts; (ii) preneed cemetery merchandise and service trusts; and (iii) cemetery perpetual care trusts. These trusts are typically administered by independent financial institutions that we select.
We have established a variety of trusts in connection with funeral home and cemetery operations as required under applicable state laws. Such trusts include (i) preneed funeral trusts; (ii) preneed cemetery merchandise and service trusts; and (iii) cemetery perpetual care trusts. These trusts are typically administered by independent financial institutions which we select.
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.
We believe that we can execute on our models and strategies without proportionate incremental investment in our consolidation platform infrastructure and without additional fixed regional and corporate overhead, which should give us a competitive advantage that is evidenced by the sustained earning power of our portfolio as defined by our EBITDA margin.
Information contained on our website is not part of this Form 10-K. 11
Information contained on our website is not part of this Annual Report on Form 10-K.
Our preneed cemetery strategy is to build family heritage in our cemeteries by selling property and interment rights prior to death through full time, highly motivated and entrepreneurial local sales teams.
Approximately 49% of our cemetery operating revenue is derived from preneed property sales. Our preneed cemetery strategy is to build family heritage in our cemeteries by selling property and interment rights prior to death through full time, highly motivated and entrepreneurial local sales teams.
Strategic Acquisition Model Our Standards Operating Model led to the development of our Strategic Acquisition Model, which guides our acquisition strategy. We believe that both models, when executed effectively, will drive long-term, sustainable increases in market share, revenue, earnings and cash flow.
A Managing Partner’s performance is judged according to achievement of the standards for that business. 6 Strategic Acquisition Model Our Standards Operating Model led to the development of our Strategic Acquisition Model, which guides our acquisition strategy. We believe that both models, when executed effectively, will drive long-term, sustainable increases in market share, revenue, earnings and cash flow.
Pre-planned funeral arrangements permit a family to avoid the burden of making deathcare plans at the time of need and enable a funeral home to establish relationships with a client that may eventually lead to an atneed sale. Approximately 50% of our cemetery operating revenue is derived from preneed property sales.
Pre-planned funeral arrangements permit a family to avoid the burden of making deathcare plans at the time of need and enable a funeral home to establish relationships with a client that may eventually lead to an atneed sale.
We believe these three companies collectively represent approximately 20% of funeral and cemetery revenue in the United States. Independent businesses, along with a few privately-owned consolidators, represent the remaining amount of industry revenue, accounting for an estimated 80% share of revenue. Our funeral home and cemetery operations face competition in the markets that they serve.
We believe these three companies collectively represent approximately 20% of funeral and cemetery revenue in the United States. Independent businesses, along with other privately-owned consolidators, represent the remaining 80% of industry revenue. Our funeral home and cemetery operations face competition in the markets that they serve. Our primary competition in most of our markets is from local independent operators.
We also face competition from companies that market products and related merchandise over the internet and non-traditional casket stores in certain markets. These competitors have been successful in capturing a portion of the low-end market and product sales.
There has been increasing competition from providers specializing in specific services, such as cremations, who offer minimal service and low-end pricing. We also face competition from companies that market products and related merchandise over the internet and non-traditional casket stores in certain markets. These competitors have been successful in capturing a portion of the low-end market and product sales.
The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. Our website address is www.carriageservices.com .
AVAILABLE INFORMATION We file annual, quarterly and other reports, and any amendments to those reports, and information with the United States Securities and Exchange Commission (“SEC”). The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including us. Our website address is www.carriageservices.com .
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 “atneed” (time of death) and “preneed” (planned prior to death) basis.
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). 4 Preneed Programs Funeral and cemetery arrangements sold prior to death occurring are referred to as preneed contracts.
SEASONALITY Our business can be affected by seasonal fluctuations in the death rate and may be further affected by epidemics and pandemics, like COVID-19. Generally, the number 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.
SEASONALITY Our business can be affected by seasonal fluctuations in the death rate, with number of deaths generally higher during the winter months due to the higher incidences of death from influenza and pneumonia as compared to other periods of the year.
We compete with other publicly held and independent operators of funeral and cemetery companies. We believe we are a market leader in most of our markets.
We compete with other publicly held and independent operators of funeral and cemetery companies. We believe we are a market leader in most of our markets. We provide funeral and cemetery services and products on both an “atneed” (time of death) and “preneed” (planned prior to death) basis.
We operate under a decentralized preneed sales strategy whereby each business location customizes its preneed program to its local needs. Preneed funeral or cemetery contracts enable families to establish, in advance, the type of service to be performed, the products to be used and the cost of such products and services.
We market funeral and cemetery services and products on a preneed basis at the local level. Preneed funeral or cemetery contracts enable families to establish, in advance, the type of service to be performed, the products to be used and the cost of such products and services.
Such trusts include (i) preneed funeral trusts; (ii) preneed cemetery merchandise and service trusts; and (iii) cemetery perpetual care trusts. These trusts are typically administered by independent financial institutions which we select.
Such trusts include (i) preneed funeral trusts; (ii) preneed cemetery merchandise and service trusts; and (iii) cemetery perpetual care trusts. These trusts are typically administered by independent financial institutions that we select. Investment management and advisory services are provided either by our wholly-owned registered investment advisory firm (“CSV RIA”) or by independent financial advisors.
The performance of these preneed cemetery contracts is secured by placing the funds collected in trust for the benefit of the customer, the proceeds of which will pay for such services at the time of need. General consumer confidence and discretionary income may have a significant impact on our preneed sales success rate.
Cemetery merchandise and services are often purchased in addition to cemetery property at the time of sale. The performance of these preneed cemetery contracts is secured by placing the funds collected in trust for the benefit of the customer, the proceeds of which will pay for such services at the time of need.
Investment management and advisory services are provided either by our wholly-owned registered investment advisory firm (“CSV RIA”) or by independent financial advisors. As of December 31, 2022, CSV RIA provided these services to approximately 80% of our trust assets, for a fee based on the market value of trust assets.
As of December 31, 2023, CSV RIA provided these services to approximately 80% of our trust assets, for a fee based on the market value of trust assets.
Market share for funeral homes and cemeteries is largely a function of reputation and heritage, although competitive pricing, professional service and attractive, well-maintained and conveniently located facilities are also important. Because of the importance of reputation and heritage, market share increases are usually gained over a long period of time.
We have observed new start-up competition in certain areas of the country, which may impact our profitability in certain markets. Market share for funeral homes and cemeteries is largely a function of reputation and heritage, although competitive pricing, professional service and attractive, well-maintained and conveniently located facilities are also important.
Olaniyan will serve as both the Company’s Principal Financial Officer and Principal Accounting Officer. Board of Director Changes On February 22, 2023, our Board elected Carlos R. Quezada, President and Chief Operating Officer of the Company, to serve as a Class II director, effective February 22, 2023, until the Company’s 2025 annual meeting of stockholders. The Board also appointed Mr.
Quezada, who was then the Company's President and Chief Operating Officer, to serve as a Class II director, effective that same date, until the Company’s 2025 annual meeting of stockholders. The Board also appointed Mr. Quezada to serve as Vice Chairman of the Board. Mr.
Our financial valuation of the acquisition candidate is then determined through the application of an appropriate after-tax cash return on investment that exceeds our cost of capital. Our belief in our Mission Statement and Guiding Principles and proper execution of the three models that define our strategy have given us a competitive advantage in every market where we compete.
Our financial valuation of an acquisition candidate is then determined through the application of an appropriate after-tax cash return on investment that exceeds our cost of capital.
We sold 9,563 and 9,111 preneed funeral contracts, net of cancellations, during the years ended December 31, 2021 and 2022, respectively. At December 31, 2022, we had a backlog of 100,861 preneed funeral contracts to be delivered in the future.
At December 31, 2023, we had a backlog of 104,834 preneed funeral contracts to be delivered in the future.
On January 2, 2023, following the resignation of Carl Benjamin Brink, Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer) from the Company, our Board of Directors (our “Board”) appointed Adeola Olaniyan, the Company’s Corporate Controller and Principal Accounting Office, as the Company’s interim Principal Financial Officer until a permanent replacement is identified. In this interim role, Ms.
COMPANY DEVELOPMENTS Executive Leadership Changes On January 2, 2023, the Company’s Board of Directors (the “Board”) appointed Adeola Olaniyan, the Company’s Corporate Controller (Principal Accounting Officer), as the Company’s interim Principal Financial Officer, effective on that date, to serve until a permanent replacement was identified. On March 13, 2023, the Board appointed L.
The cash flow and earnings from insurance contracts are more stable, but are generally lower than traditional trust fund investments. In markets that depend on preneed sales for market share, we supplement the arrangements written by our local funeral directors with sales sourced by our own sales counselors and by third party sellers.
In markets that depend on preneed sales for market share, we supplement the arrangements written by our local funeral directors with sales sourced by our own sales counselors and by third party sellers. We sold 9,111 and 10,511 preneed funeral contracts, net of cancellations, during the years ended December 31, 2022 and 2023, respectively.
Additionally, we utilize short-term and long-term incentive performance programs to attract and retain talent in critical positions, ranging from sales counselors and sales managers to Houston support center leaders and employees. As of December 31, 2022, we and our subsidiaries employed 2,553 employees, of whom 1,174 were full-time and 1,379 were part-time.
Standards Achievement is the measure by which we judge the Managing Partner's performance and how we incentivize our Managing Partners and their teams. Additionally, we utilize short-term and long-term incentive performance programs to attract and retain talent in critical positions, ranging from sales counselors and sales managers to Houston support center leaders and employees.
We cannot predict what changes, if any, may be made to the Funeral Rule or the impact of any such changes on our business. State Trust Laws. We have established a variety of trusts in connection with funeral home and cemetery operations as required under applicable state laws.
At December 31, 2023, we had a backlog of 69,930 preneed cemetery contracts to be delivered in the future. 5 Trust Funds and Insurance Contracts We have established a variety of trusts in connection with funeral home and cemetery operations as required under applicable state laws.
The sale of preneed funeral services and cemetery property has increasingly been used by many companies as a marketing tool to build market share. There has been increasing competition from providers specializing in specific services, such as cremations, who offer minimal service and low-end pricing.
Because of the importance of reputation and heritage, market share increases are usually gained over a long period of time. The sale of preneed funeral services and cemetery property has increasingly been used by many companies as a marketing tool to build market share.
Insurance-funded contracts allow us to earn commission income to improve our near-term cash flow and offset a significant amount of the up-front costs associated with preneed sales. Trust funded contracts typically provide cash that is invested in various securities with the expectation that returns will exceed the growth factor in the insurance contracts.
Insurance-funded contracts allow us to earn commission income to improve our near-term cash flow and offset a significant amount of the up-front costs associated with preneed sales. In 2023, we entered into an exclusive partnership agreement with a national insurance provider to market and sell prearranged funeral services, for which we received a $6.0 million incentive payment.
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.
BUSINESS STRATEGY Our operations and business strategy are founded on the shared values of our Guiding Principles and built upon the execution of our Standards Operating and Strategic Acquisition Models, aligned with our purpose of creating a premier experience through innovation, empowered partnership, and elevated service.
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CURRENT YEAR DEVELOPMENTS Executive Leadership Changes On April 1, 2022, Rob Franch joined our executive leadership team as Chief Information Officer. On September 26, 2022, Robbie Pape joined our executive leadership team as Senior Vice President and Regional Partner. On September 27, 2022, C.
Added
Kian Granmayeh to serve as the Company’s Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer), effective on that date. 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.
Removed
Benjamin Brink informed the Company of his plans to resign from his position as Executive Vice President, Chief Financial Officer and Treasurer effective January 2, 2023. Mr. Brink remained in his role through January 2, 2023 and will serve as a consultant for the Company through June 30, 2023. The planned resignation was not the result of any disagreement Mr.
Added
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 February 24, 2024, Mr.
Removed
Brink had with the Company on any matter related to the Company's operations, policies, and practices, including any matters concerning the Company's controls or any financial or accounting-related matters or disclosures.
Added
Payne ceased serving as Executive Chairman of the Board and began serving as a special advisor to the Board and senior management of the Company in a consulting role. For more information on his transition, see Part II, Item 8, Financial Statements and Supplementary Data, Note 24 (Subsequent Events). On June 21, 2023, the Board appointed Steven D.
Removed
Quezada to serve as Vice Chairman of the Board. Mr. Quezada will serve as a non-independent member of the Board, and the Board does not expect to appoint Mr. Quezada to any of its standing committees. Following the appointment of Mr. Quezada, the Board is now comprised of six directors, including four independent directors.
Added
Metzger, to serve as President, along with remaining in his role as Secretary, effective on that date. Board of Directors - Resignation; Election; and Review of Potential Strategic Alternatives On February 22, 2023, the Board elected Mr.
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The approval of the amendments to the Code did not relate to or result in any waiver, whether explicit or implicit, of any provision of the prior version of the Code. Acquisitions On August 8, 2022, we acquired a business consisting of two funeral homes in Kissimmee, Florida for $6.3 million in cash.
Added
Quezada serves as a non-independent member of the Board, but was not appointed to any of its standing committees. On June 15, 2023, Dr. Achille Messac, a member of our Board, provided notice of his resignation from the Board, effective on that date. Dr.
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On October 25, 2022, we acquired a business consisting of three funeral homes, one cemetery and one cremation focused business in the Charlotte, North Carolina area for $25.0 million in cash. Divestitures During the year ended December 31, 2022, we sold real property for $3.3 million and four funeral homes for $1.5 million for a net gain of $0.7 million.
Added
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, concurrently with Mr. Payne stepping down as CEO, the Board approved his appointment as Executive Chairman of the Board, effective on that date. On February 24, 2024, Mr.
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On January 31, 2023, we sold one funeral home and two cemeteries in Marshall, Texas for $0.8 million. Credit Facility On May 27 2022, we entered into a second amendment and commitment increase to the Credit Facility with the financial institutions party thereto, as lenders, and Bank of America, N.A., as administrative agent.
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Payne ceased serving as Executive Chairman of the Board and began serving as a special advisor to the Board and senior management of the Company in a consulting role. For more information on this transition, see Part II, Item 8, Financial Statements and Supplementary Data, Note 24 (Subsequent Events).
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Pursuant to the amendment, the revolving credit commitment was increased from $200.0 million to $250.0 million. On December 9, 2022, we entered into a third amendment to the Credit Facility with the financial institutions party thereto, as lenders, and Bank of America, N.A., as administrative agent.
Added
On June 21, 2023, the Board elected Chad Fargason to serve as a Class II Director until the Company’s 2025 annual meeting of stockholders. Mr. Fargason was appointed to serve on the Audit Committee, along with being appointed Chairman of the Corporate Governance Committee.
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The amendment provided, among other things, for an increase in the maximum Total Leverage Ratio and modifications to the permitted investments covenant, relating to the Company’s ability to make certain acquisitions. For additional discussion about our Credit Facility, see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Liquidity and Capital Resources.
Added
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 stockholder value. On February 21, 2024, the Board voted to bring the review of potential strategic alternatives to a close.
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Share Repurchase Program On February 23, 2022, our Board authorized an increase in our share repurchase program to permit us to purchase up to an additional $75.0 million under our share repurchase program, in addition to amounts previously authorized. During the three months ended December 31, 2022, we did not repurchase any common shares.
Added
For more information on this process and its conclusion, see Part II, Item 8, Financial Statements and Supplementary Data, Note 24 (Subsequent Events). 3 On July 5, 2023, the Board elected Somer Webb to serve as a Class I Director until the Company’s 2024 annual meeting of stockholders. Ms.
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At December 31, 2022, our share repurchase program had $48.9 million authorized for repurchases. Business Impacts of COVID-19 On March 11, 2020, COVID-19 was deemed a global pandemic and since then, the Company has continued to proactively monitor and assess the pandemic’s current and potential impact to the Company’s operations.
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Webb was appointed to serve as the Chair of the Compensation Committee and a member of the Audit and Corporate Governance Committees. On July 24, 2023, Barry Fingerhut, a member of the Board, provided notice of his resignation from the Board, effective on that date. Mr.
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Since that time, the Company’s senior leadership team has taken steps to assist our businesses throughout each phase of the COVID-19 pandemic, including updating our processes and procedures to comply with all regulatory mandates, along with keeping the health and safety of our employees and the families we serve our top priority.
Added
Fingerhut’s resignation was not a result of any disagreement with the Company on any matter related to its operations, policies or practices. On July 25, 2023, the Board elected Julie Sanders to serve as a Class II Director until the Company’s 2025 annual meeting of stockholders. Ms.
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While we believe the country has begun to transition to a post-pandemic phase, we continue to monitor the situation and may make appropriate adjustments to our operations as necessary. The overall macroeconomic impact from the pandemic to the deathcare industry may provide varying results as compared to other industries.
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Sanders was appointed to serve on each of the Audit, Compensation and Corporate Governance Committees. On November 1, 2023, the Board appointed Mr. Fargason, an existing Class II Director, to serve on the Compensation Committee.
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Our industry’s revenues are impacted by various factors, including for example, fluctuations in the death rate, the number of funeral services performed, the average price for a service and the mix of traditional burial versus cremation contracts.
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Strategic Partnership Agreement On May 16, 2023, we received a $6.0 million incentive payment from a national insurance provider for entering into a strategic partnership agreement to market and sell prearranged funeral services in the future, which is subject to partial claw-back if we do not meet certain preneed funeral sales volumes.
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During the year ended December 31, 2022, we continued to see the death rate normalize to pre-COVID-19 levels, which accelerated during the latter part of the year. Although deaths directly attributable from COVID-19 have now largely decreased to have minimal direct impact on the overall death rate, the overall death rate remains slightly higher than the pre-COVID-19 pandemic period.
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A copy of the Code, as amended, is posted on our website under “Investors - Corporate Governance – Governance Documents.” Acquisitions On March 22, 2023, we acquired three funeral homes, two cemeteries and a cremation focused business in the Bakersfield, CA area for $44.0 million.
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Regardless of these recent trends, our businesses have remained focused on being innovative and resourceful, providing families immediate service as part of the grieving process. Within our financial reporting environment, we have considered the impact of COVID-19 on the assumptions and estimates used in preparing our consolidated financial statements.
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Divestitures During the year ended December 31, 2023, we sold two funeral homes and two cemeteries for an aggregate of $1.1 million and merged one funeral home with another business we own in a nearby market. OUR OPERATIONS See Part II, Item 8, Financial Statements and Supplementary Data, Note 21 for segment data related to our operations.
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In the opinion of management, all material adjustments necessary for a fair presentation of the Company’s financial results for the year have been made, but are complicated by the continued uncertainty surrounding the normalization of the death rate and the scope, severity and duration of the COVID-19 pandemic and its ultimate impact.
Added
The incentive payment is subject to partial claw-back if certain preneed funeral sales volumes are not met within the ten-year term of the agreement. As such, we will recognize the incentive payment in proportion to our achieved preneed funeral sales volume per the agreement at each reporting period.
Removed
This includes the potential impacts of new variants of COVID-19, its sub-variants and any other new variants, and any resulting impacts from such variants. We do not believe we are particularly vulnerable to concentrations, with respect to geographic area, revenue for specific products or our relationships with our vendors.
Added
Trust funded contracts typically provide cash that is invested in various securities with the expectation that returns will exceed the growth factor in the insurance contracts. The cash flow and earnings from insurance contracts are more stable, but are generally lower than traditional trust fund investments.
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To date, we have not experienced any material supply chain impacts or disruptions from our vendors attributable to COVID-19 and we continue to receive reliable service. 4 We believe our access to capital, the cost of our capital, and the sources and uses of our cash should be relatively consistent in the near term.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeMoreover, changes in environmental laws, regulations and enforcement policies occur frequently, and any changes that result in more stringent or costly emissions control or waste handling, storage, transport, disposal or cleanup requirements could require us to make significant expenditures to attain and maintain compliance and may otherwise have a material adverse effect on our results of operations, competitive position or financial condition. 17 RISKS RELATED TO OUR CREDIT FACILITY AND FINANCIAL ACTIVITIES Credit Facility and Debt Obligations Covenant restrictions in our debt instruments may limit our flexibility to operate and grow our business, and if we are not able to comply with such covenants, our lenders could accelerate our indebtedness, proceed against certain collateral or exercise other remedies, which could have a material adverse effect on us.
Biggest changeMoreover, changes in environmental laws, regulations and enforcement policies occur frequently, and any changes that result in more stringent or costly emissions control or waste handling, storage, transport, disposal or cleanup requirements could require us to make significant expenditures to attain and maintain compliance and may otherwise have a material adverse effect on our results of operations, competitive position or financial condition.
Our and our subsidiaries’ level of indebtedness could have important consequences to us, including: • continuing to require us and certain of our subsidiaries to dedicate a substantial portion of our cash flow from operations to the payment of our indebtedness, thereby reducing the funds available for operations and any future business opportunities; • limiting flexibility in planning for, or reacting to, changes in our business or the industry in which we operate; • placing us at a competitive disadvantage compared to our competitors that have less indebtedness; • increasing our vulnerability to adverse general economic or industry conditions; 18 • making us and our subsidiaries more vulnerable to increases in interest rates, as borrowings under our Credit Facility are at variable rates; and • limiting our ability to obtain additional financing to fund working capital, capital expenditures, acquisitions or other general corporate requirements and increasing our cost of borrowing.
Our and our subsidiaries’ level of indebtedness could have important consequences to us, including: • continuing to require us and certain of our subsidiaries to dedicate a substantial portion of our cash flow from operations to the payment of our indebtedness, thereby reducing the funds available for operations and any future business opportunities; • limiting flexibility in planning for, or reacting to, changes in our business or the industry in which we operate; • placing us at a competitive disadvantage compared to our competitors that have less indebtedness; • increasing our vulnerability to adverse general economic or industry conditions; • making us and our subsidiaries more vulnerable to increases in interest rates, as borrowings under our Credit Facility are at variable rates; and • limiting our ability to obtain additional financing to fund working capital, capital expenditures, acquisitions or other general corporate requirements and increasing our cost of borrowing.
The covenants in our Credit Facility and the Indenture governing our Senior Notes contain a number of provisions that impose operating and financial restrictions which, subject to certain exceptions, limit our ability and the ability of our subsidiaries to, among other things: incur additional indebtedness (including guarantees); pay dividends or make distributions or redeem or repurchase our common stock; make investments; grant liens on assets; make capital expenditures; enter into transactions with affiliates; enter into sale-leaseback transactions; sell or dispose assets; and acquire the assets of, or merge or consolidate with, other companies.
The covenants in our Credit Facility and the Indenture governing our Senior Notes contain a number of provisions that impose operating and financial restrictions which, subject to certain exceptions, limit our ability and the ability of our subsidiaries to, among other things: incur additional indebtedness (including guarantees); pay dividends or make distributions or redeem or repurchase our common stock; make investments; grant liens on assets; make capital expenditures; enter into 15 transactions with affiliates; enter into sale-leaseback transactions; sell or dispose assets; and acquire the assets of, or merge or consolidate with, other companies.
We may be required to cover any such shortfall with cash flows from operations or other sources of cash, which could have a material adverse effect on our financial condition, results of operations or cash flows. For more information related to our trust investments, see Part II, Item 8, Financial Statements and Supplementary Data, Note 7.
We may be required to cover any such shortfall with cash flows from operations or other sources of cash, which could have a material adverse effect on our financial condition, results of operations or cash flows. For more information related to our trust investments, see Part II, Item 8, Financial Statements and Supplementary Data, Note 8.
Various state governments, notably California, New York, Nevada and Virginia, have enacted or enhanced data privacy regulations, and other state governments are considering establishing similar or stronger protections. These regulations impose certain 20 obligations for securing, and potentially removing, specified personal information in our systems, and for apprising individuals of the information we have collected about them.
Various state governments, notably California, New York, Nevada and Virginia, have enacted or enhanced data privacy regulations, and other state governments are considering establishing similar or stronger protections. These regulations impose certain obligations for securing, and potentially removing, specified personal information in our systems, and for apprising individuals of the information we have collected about them.
In the event of realized losses or market declines, we may be required to deposit portions or all of these amounts into the respective trusts in some future period. Increasing death benefits related to preneed funeral contracts funded through life insurance contracts may not cover future increases in the cost of providing a price-guaranteed funeral service.
In the event of realized losses or market declines, we may be required to deposit portions or all of these amounts into the respective trusts in some future period. 12 Increasing death benefits related to preneed funeral contracts funded through life insurance contracts may not cover future increases in the cost of providing a price-guaranteed funeral service.
Because we cannot decrease these costs significantly or rapidly when we experience declines in sales, those declines can cause margins, profits and cash flow to decrease at a greater rate than the decline in revenue. Regulatory Changes Changes or increases in, or failure to comply with, regulations applicable to our business could increase costs or decrease cash flows.
Because we cannot decrease these costs significantly or rapidly when we experience declines in sales, those declines can cause margins, profits and cash flow to decrease at a greater rate than the decline in revenue. 14 Regulatory Changes Changes or increases in, or failure to comply with, regulations applicable to our business could increase costs or decrease cash flows.
Due in part to the presence of competitors who have been in certain markets longer than we have, such acquisitions or investments may be more difficult or expensive than we anticipate. Divestitures could negatively impact our business and retained liabilities from businesses that we sell could adversely affect our financial results.
Due in part to the presence of competitors who have been in certain markets longer than we have, such acquisitions or investments may be more difficult or expensive than we anticipate. 10 Divestitures could negatively impact our business and retained liabilities from businesses that we sell could adversely affect our financial results.
A weak or declining economy could also strain our supply partners. Additionally, our business relies heavily on our employees, including key employees due to the localized and personal 19 nature of our business, and adverse events such as health-related concerns, the inability to travel and other matters affecting the general work environment could harm our business.
A weak or declining economy could also strain our supply partners. Additionally, our business relies heavily on our employees, including key employees due to the localized and personal nature of our business, and adverse events such as health-related concerns, the inability to travel and other matters affecting the general work environment could harm our business.
Failure to successfully implement our Standards Operating Model in our funeral and cemetery operations could have a material adverse effect on our financial condition, results of operations and cash flows. 12 Our ability to execute our growth strategy is highly dependent upon our ability to successfully identify suitable acquisition candidates and negotiate transactions on favorable terms.
Failure to successfully implement our Standards Operating Model in our funeral and cemetery operations could have a material adverse effect on our financial condition, results of operations and cash flows. Our ability to execute our growth strategy is highly dependent upon our ability to successfully identify suitable acquisition candidates and negotiate transactions on favorable terms.
In addition, economic conditions at the local or national level could cause declines in preneed sales either as a result of less discretionary income or lower consumer confidence. Declines in preneed cemetery property sales reduces current revenue, and declines in other preneed sales would reduce our backlog and future revenue and could reduce future market share.
In addition, economic conditions at the local or national level could cause declines in preneed sales either as a result of less discretionary income or lower consumer confidence. 11 Declines in preneed cemetery property sales reduces current revenue, and declines in other preneed sales would reduce our backlog and future revenue and could reduce future market share.
Increased price competition in the future could further reduce revenue, profits and our preneed backlog. 13 Change in Preneed Sales Our ability to generate preneed sales depends on a number of factors, including sales incentives and local and general economic conditions. Significant declines in preneed sales would reduce our backlog and future revenue and could reduce our future market share.
Increased price competition in the future could further reduce revenue, profits and our preneed backlog. Change in Preneed Sales Our ability to generate preneed sales depends on a number of factors, including sales incentives and local and general economic conditions. Significant declines in preneed sales would reduce our backlog and future revenue and could reduce our future market share.
For additional information, see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Estimates. 14 Earnings from and principal of trust funds could be reduced by changes in financial markets and the mix of securities owned.
For additional information, see Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, Critical Accounting Estimates. Earnings from and principal of trust funds could be reduced by changes in financial markets and the mix of securities owned.
As a result of inflation, we have already experienced modest cost increases and surcharges from our vendors and suppliers on merchandise and goods and may continue to experience additional cost increases in the future, which could be of greater magnitude than those experienced to date.
As a result of inflation, we have already experienced cost increases and surcharges from our vendors and suppliers on merchandise and goods and may continue to experience additional cost increases in the future, which could be of greater magnitude than those experienced to date.
However, we may not correctly anticipate or identify trends in consumer 16 preferences, or we may identify them later than our competitors. In addition, any strategies we may implement to address these trends may prove incorrect or ineffective.
However, we may not correctly anticipate or identify trends in consumer preferences, or we may identify them later than our competitors. In addition, any strategies we may implement to address these trends may prove incorrect or ineffective.
We may not generate sufficient funds to service our debt and meet our business needs, such as funding working capital or the expansion of our operations.
We may not generate sufficient funds to 16 service our debt and meet our business needs, such as funding working capital or the expansion of our operations.
While the program aligns our incentives with long-term value creation, there is a potential risk of dilution to our shareholders if we achieve the highest performance tier under the Good To Great II incentive program, which equals a Common Stock Price Average (as defined by the program) of $77.34 per share.
While the program aligns our incentives with long-term value creation, there is a potential risk of dilution to our stockholders if we achieve the highest performance tier under the Good To Great II incentive program, which equals a Common Stock Price Average (as defined by the program) of $77.34 per share.
The impact of these provisions will become effective for our Company beginning on January 1, 2023. We have reviewed and assessed the provisions of the IRA, and we do not currently believe that the IRA will have a material impact on our business, operating results, and financial condition.
The impact of these provisions became effective for our Company beginning on January 1, 2023. We have reviewed and assessed the provisions of the IRA, and we do not currently believe that the IRA will have a material impact on our business, operating results, and financial condition.
At December 31, 2022, under such a scenario, a total of 995,873 shares of common stock would be awarded to participants under the program. We believe this incentive program will result in improved overall financial performance. Strategic Business Execution and Performance Improved performance in our funeral and cemetery segments is dependent upon successful execution of our Standards Operating Model.
At December 31, 2023, under such a scenario, a total of 892,045 shares of common stock would be awarded to participants under the program. We believe this incentive program will result in improved overall financial performance. Strategic Business Execution and Performance Improved performance in our funeral and cemetery segments is dependent upon successful execution of our Standards Operating Model.
The following table summarizes our investment returns (realized and unrealized), excluding certain fees, on our trust funds for the years ended December 31, 2020, 2021 and 2022: 2020 2021 2022 Preneed funeral trust funds 13.5 % 16.0 % 1.0 % Preneed cemetery trust funds 15.5 % 19.3 % 0.7 % Perpetual care trust funds 16.8 % 19.1 % (0.2) % Generally, earnings or gains and losses on our preneed funeral and cemetery trust investments are recognized, and we withdraw cash, when the underlying service is performed, merchandise is delivered, or upon contract cancellation.
The following table summarizes our investment returns (realized and unrealized), excluding certain fees, on our trust funds for the years ended December 31, 2021, 2022 and 2023: 2021 2022 2023 Preneed funeral trust funds 16.0 % 1.0 % 17.3 % Preneed cemetery trust funds 19.3 % 0.7 % 19.1 % Perpetual care trust funds 19.1 % (0.2) % 20.2 % Generally, earnings or gains and losses on our preneed funeral and cemetery trust investments are recognized, and we withdraw cash, when the underlying service is performed, merchandise is delivered, or upon contract cancellation.
A severe or prolonged economic downturn from a pandemic or epidemic, like the COVID-19 pandemic and the related adverse economic and health consequences, could result in a variety of risks to our business, financial condition or results from operations, including weakened demand from our client families, decreased preneed sales, increased preneed installment contract defaults, increased cremation rates, reduced access to capital and credit markets or delays in obtaining client family payments.
A severe or prolonged economic downturn from a pandemic or epidemic, including any new or emerging public health threats and the related adverse economic and health consequences, could result in a variety of risks to our business, financial condition or results from operations, including weakened demand from our client families, decreased preneed sales, increased preneed installment contract defaults, increased cremation rates, reduced access to capital and credit markets or delays in obtaining client family payments.
If we are not able to repay or refinance our debt as it becomes due, we may be forced to take certain actions, including reducing spending on day-to-day operations, reducing future financing for working capital, capital expenditures and general corporate purposes, selling assets or dedicating an unsustainable level of our cash flow from operations to the payment of principal and interest on our indebtedness.
If we are not able to repay or refinance our debt as it becomes due, we may be forced to take certain actions, including reducing spending on day-to-day operations, reducing future financing for working capital, capital expenditures and general corporate purposes, selling assets, dedicating an unsustainable level of our cash flow from operations to the payment of principal and interest on our indebtedness or issuing equity, each of which may lead to negative impacts on our business, results of operations, financial condition and for our stockholders.
We will continue to evaluate the impact of the IRA, along with any other new or revised tax laws or regulations, as such information becomes available. Litigation and Claims Unfavorable results of litigation could have a material adverse impact on our financial statements. We are subject to a variety of claims and lawsuits in the ordinary course of our business.
We will continue to evaluate the impact of the IRA, along with any other new or revised tax laws or regulations, as such information becomes available. 13 Litigation and Claims Unfavorable results of litigation could have a material adverse impact on our financial statements.
In the event of a major disruption caused by the outbreak of pandemic diseases, such as COVID-19 or any new variants, we may lose the services of a number of our key employees or experience system interruptions, which could lead to impacts to our regular business operations, inefficiencies and reputational harm.
In the event of a major disruption caused by the outbreak of pandemic diseases, or any new or emerging public health threats, we may lose the services of a number of our key employees or experience system interruptions, which could lead to impacts to our regular business operations, inefficiencies and reputational harm.
Due to the uncertainty around the ultimate impacts of any epidemic or pandemic, including COVID-19, to our business and operations, any related impact on our business and operational results cannot be reasonably estimated at this time.
Due to the uncertainty around the ultimate impacts of any epidemic or pandemic, including any new or emerging public health threats, to our business and operations, any related impact on our business and operational results cannot be reasonably estimated at this time.
It may be difficult for us to find an alternative lending source under these circumstances. Without access to borrowings under the Credit Facility, our liquidity would be adversely affected and we would lack sufficient working capital to operate our business as presently conducted. Any disruption in access to credit could force us to take measures to conserve cash.
It may be difficult for us to find an alternative lending source under these circumstances. Without access to borrowings under the Credit Facility, our liquidity would be adversely affected and we would lack sufficient working capital to operate our business as presently conducted.
Our business and operational results could be adversely affected by general conditions in the U.S. economy, including conditions that are outside of our control, such as the impact of health and safety concerns from epidemics and pandemics.
Unfavorable economic conditions, including those resulting from health and safety concerns, could adversely affect our business, financial condition or results of operations. Our business and operational results could be adversely affected by general conditions in the U.S. economy, including conditions that are outside of our control, such as the impact of health and safety concerns from epidemics and pandemics.
As of December 31, 2022, we had $594.7 million of total debt (excluding debt issuance costs, debt discounts and lease obligations), consisting of $4.0 million of acquisition debt (consisting of deferred purchase price and promissory notes payable to sellers of businesses we purchased), $400.0 million of our Senior Notes and $190.7 million of outstanding borrowings under our Credit Facility, with $57.0 million of availability under our Credit Facility after giving effect to $2.3 million of outstanding letters of credit.
As of December 31, 2023, we had $585.1 million of total debt (excluding debt issuance costs, debt discounts and lease obligations), consisting of $6.0 million of acquisition debt (consisting of deferred purchase price and promissory notes payable to sellers of businesses and real estate we purchased), $400.0 million of our Senior Notes and $179.1 million of outstanding borrowings under our Credit Facility, with $68.3 million of availability under our Credit Facility after giving effect to $2.6 million of outstanding letters of credit.
As a result, we are unable to predict or forecast the duration or variation of this increased death rate with any certainty, including the potential impact of epidemics and pandemics on the death rate, including COVID-19 and any new variant or sub-variant.
As a result, we are unable to predict or forecast the duration or variation of the current death rate with any certainty , including the potential impact of epidemics and pandemics on the death rate, including any new or emerging public health threats .
Significant weather events, natural disasters or catastrophic events in these states or other key areas where our operations are concentrated could disrupt our business through injury to our employees or client families, physical damage, closure or destruction of one or more of our locations, data centers or office facilities, or disrupt the delivery of goods or services by one or more of our vendors, any or all of which could adversely impact our operations or increase our costs, which would adversely affect our financial results.
Significant weather events, natural disasters or catastrophic events in these states or other key areas where our operations are concentrated could disrupt our business through injury to our employees or client families, physical damage, closure or destruction of one or more of our locations, data centers or office facilities, or disrupt the delivery of goods or services by one or more of our vendors, any or all of which could adversely impact our operations or increase our costs, which would adversely affect our financial results. 18 Information Technology and Internal Controls We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cybersecurity incidents could harm our ability to operate our business effectively.
Any of the foregoing could harm our business and we cannot anticipate all the ways in which future epidemics and pandemics, including the most recent COVID-19 pandemic and any future variants, would affect financial market conditions that could adversely impact our business.
Any of the foregoing could harm our business and we cannot anticipate all the ways in which future epidemics and pandemics, including any new or emerging public health threats, would affect financial market conditions that could adversely impact our business.
Changes in federal, state, or local tax laws, adverse tax audit results, or adverse tax rulings on positions taken could have a material adverse effect on the results of our operations, financial condition, or cash flows. 15 New or revised tax laws or regulations could have a material effect on our financial statements New tax laws or regulations could be enacted at any time, and existing tax laws or regulations could be interpreted, amended, or applied in a manner that has a material effect on us, which could materially impact our business and financial condition.
New or revised tax laws or regulations could have a material effect on our financial statements New tax laws or regulations could be enacted at any time, and existing tax laws or regulations could be interpreted, amended, or applied in a manner that has a material effect on us, which could materially impact our business and financial condition.
Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost of inflation is incurred. Unfavorable economic conditions, including those resulting from health and safety concerns, could adversely affect our business, financial condition or results of operations.
Even if such measures are effective, there could be a difference between the timing of when these beneficial actions impact our results of operations and when the cost of inflation is incurred.
Adverse outcomes in potential litigation related to our business may result in significant monetary damages or injunctive relief against us, as litigation and other claims are subject to inherent uncertainties. Any such adverse outcomes that may arise in the future, could have a material adverse impact on our financial position, results of operations, and cash flows.
We are subject to a variety of claims and lawsuits in the ordinary course of our business. Adverse outcomes in potential litigation related to our business may result in significant monetary damages or injunctive relief against us, as litigation and other claims are subject to inherent uncertainties.
Declines in the number of deaths could cause atneed sales of funeral and cemetery services, property and merchandise to decline, which could decrease revenue. Although the United States Bureau of the Census estimates that the number of deaths in the United States will increase in the future, longer life spans could reduce the rate of deaths.
Although the United States Bureau of the Census estimates that the number of deaths in the United States will increase in the future, longer life spans could reduce the rate of deaths.
RISKS RELATED TO THE FUNERAL AND CEMETERY INDUSTRY Changes in Death Rates and Consumer Preferences Declines in the number of deaths in our markets can cause a decrease in revenue. Changes in the number of deaths are not predictable from market to market or over the short term.
Changes in the number of deaths are not predictable from market to market or over the short term. Declines in the number of deaths could cause atneed sales of funeral and cemetery services, property and merchandise to decline, which could decrease revenue.
Based on the results of our annual goodwill and intangible assets impairment test we performed as of August 31, 2022 and our annual review of long-lived assets and leases at December 31, 2022, we concluded that there were no impairments of our goodwill, intangible assets or other long-lived assets and leases.
Based on the results of our annual goodwill and intangible assets impairment test we performed as of August 31, 2023 and our annual review of long-lived assets and leases at December 31, 2023, we determined that there were factors that would indicate the need to perform an additional quantitative impairment test for tradenames for certain funeral home businesses.
Our level of indebtedness could adversely affect our financial condition and prevent us from fulfilling our debt obligations. Our indebtedness requires significant interest and principal payments.
For example, if we raised additional funds through issuing additional equity securities, our stockholders may experience significant dilution and the price of our common stock may decline. Our level of indebtedness could adversely affect our financial condition and prevent us from fulfilling our debt obligations. Our indebtedness requires significant interest and principal payments.
ITEM 1A. RISK FACTORS RISKS RELATED TO OUR BUSINESS Key Employees and Compensation The success of our businesses is typically dependent upon one or a few key employees for success because of the localized and personal nature of our business.
In addition, our stock price may experience periods of increased volatility as a result of such perceptions and speculation about the future of our business and operations. 9 Key Employees and Compensation The success of our businesses is typically dependent upon one or a few key employees for success because of the localized and personal nature of our business.
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For example, we have seen the recent COVID-19 pandemic affect the death rate, with a result of increased deaths during the duration of the pandemic. Although deaths directly attributable from COVID-19 have now largely decreased to have minimal impact on the overall death rate, the overall death rate remains higher than the pre-COVID-19 pandemic period.
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ITEM 1A. RISK FACTORS RISKS RELATED TO OUR BUSINESS Risks Related to Review of Strategic Alternatives Process and a Potential Strategic Transaction We recently announced the conclusion of our review of strategic alternatives and there can be no assurance that the announcement of the conclusion of that process will not have an adverse impact on our business.
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Information Technology and Internal Controls We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cybersecurity incidents could harm our ability to operate our business effectively.
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On June 29, 2023, following an unsolicited bid, 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.
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After engaging in discussions with a number of potential counter parties as part of the process, on February 21, 2024 the Board voted to bring its review of strategic alternatives to a close and determined that continuing to execute on our strategic plan as an independent public company was in the best interest of our Company and our stockholders at this time.
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Our announcement on February 21, 2024 may result in a perception that there is uncertainty about the future of our business and operations, regardless of the actual circumstances. Such perceptions may negatively affect our business, disrupt our operations and divert the attention of our Board, management, and employees, all of which could materially and adversely affect our business and operations.
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Changes in federal, state, or local tax laws, adverse tax audit results, or adverse tax rulings on positions taken could have a material adverse effect on the results of our operations, financial condition, or cash flows.
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Any such adverse outcomes that may arise in the future, could have a material adverse impact on our financial position, results of operations, and cash flows. RISKS RELATED TO THE FUNERAL AND CEMETERY INDUSTRY Changes in Death Rates and Consumer Preferences Declines in the number of deaths in our markets can cause a decrease in revenue.
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For example, our business can be affected by seasonal fluctuations in the death rate, with number of deaths generally higher during the winter months due to the higher incidences of death from influenza and pneumonia as compared to other periods of the year.
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Seasonal fluctuations in the death rate may be further affected by epidemics and pandemics, like COVID-19, including any new or emerging public health threats.
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These unexpected fluctuations may not only increase death rates during the affected period, like we saw with the recent COVID-19 pandemic, but also may subsequently decrease death rates following the affected period as a result of an acceleration of death rates.
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RISKS RELATED TO OUR CREDIT FACILITY AND FINANCIAL ACTIVITIES Credit Facility and Debt Obligations Covenant restrictions in our debt instruments may limit our flexibility to operate and grow our business, and if we are not able to comply with such covenants, our lenders could accelerate our indebtedness, proceed against certain collateral or exercise other remedies, which could have a material adverse effect on us.
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Any disruption in access to credit could force us to take measures to conserve cash and take steps to raise additional funds, which could have negative impacts on our business, results of operations, financial condition and for our stockholders.
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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.
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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.
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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.
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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.
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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.
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These factors could involve financial 17 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.
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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.
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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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As a result of this additional quantitative impairment test, we recorded an impairment to the tradenames for two of our funeral homes of $0.2 million, as the carrying amount of these tradenames exceeded the fair value. We concluded that there were no impairments of our goodwill or other long-lived assets and leases.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe anticipate having a sufficient inventory of lots to maintain our property sales for the foreseeable future. 21 The following table sets forth certain information as of December 31, 2022, regarding our properties used by the funeral home segment and by the cemetery segment identified by state: Number of Funeral Homes Number of Cemeteries State Owned Leased (1) Owned Managed California 21 5 5 — Connecticut 7 2 — — Florida 11 5 5 — Georgia 3 — — — Idaho 4 1 3 — Illinois 2 — 1 — Kansas 2 — — — Kentucky 7 1 — — Louisiana 3 1 1 — Massachusetts 7 — — — Michigan 2 — — — Montana 2 1 1 — Nevada 2 — 2 1 New Jersey 1 1 — — New Mexico 1 — — — New York 10 1 — — North Carolina 11 1 2 — Ohio 5 — — — Oklahoma 5 — 2 — Pennsylvania 2 — — — Rhode Island 4 — — — Tennessee 4 — — — Texas 23 1 8 — Virginia 8 1 1 — Washington 2 — — — Wisconsin 1 — — — Total 150 21 31 1 (1) The leases, with respect to these funeral homes, generally have remaining terms ranging from one to twenty years, and generally, we have the right to renew past the initial terms and have a right of first refusal on any proposed sale of the property where these funeral homes are located.
Biggest changeThe following table sets forth certain information as of December 31, 2023, regarding our properties used by the funeral home segment and by the cemetery segment identified by state: Number of Funeral Homes Number of Cemeteries State Owned Leased (1) Owned Managed California 23 5 7 — Connecticut 7 2 — — Florida 11 5 5 — Georgia 3 — — — Idaho 4 1 3 — Illinois 2 — 1 — Kansas 2 — — — Kentucky 6 1 — — Louisiana 3 1 1 — Massachusetts 7 — — — Michigan 2 — — — Montana 2 1 1 — Nevada 2 — 2 1 New Jersey 1 1 — — New Mexico 1 — — — New York 10 1 — — North Carolina 11 1 2 — Ohio 5 — — — Oklahoma 5 — 2 — Pennsylvania 2 — — — Rhode Island 4 — — — Tennessee 4 — — — Texas 22 1 6 — Virginia 8 1 1 — Washington 2 — — — Wisconsin 1 — — — Total 150 21 31 1 (1) The leases, with respect to these funeral homes, generally have remaining terms ranging from one to twenty years, and generally, we have the right to renew past the initial terms and have a right of first refusal on any proposed sale of the property where these funeral homes are located. 21 The following table sets forth the number of funeral homes and cemeteries owned and operated by us for the periods presented: Years Ended December 31, 2021 2022 2023 Funeral homes at beginning of period 178 170 171 Acquisitions — 6 3 Divestitures (2) (4) (2) Mergers of funeral homes (6) (1) (1) Funeral homes at end of period 170 171 171 Cemeteries at beginning of period 32 31 32 Acquisitions — 1 2 Divestitures (1) — (2) Cemeteries at end of period 31 32 32 ITEM 3.
ITEM 2. PROPERTIES. At December 31, 2022, we operated 171 funeral homes in 26 states and 32 cemeteries in 11 states. We own the real estate and buildings for 150 of our funeral homes and lease 21 facilities.
ITEM 2. PROPERTIES. At December 31, 2023, we operated 171 funeral homes in 26 states and 32 cemeteries in 11 states. We own the real estate and buildings for 150 of our funeral homes and lease 21 facilities.
We own 31 cemeteries and operate one cemetery under a long-term contract with a municipality, which we refer to as a managed property. We operate 19 funeral homes in combination with cemeteries as these locations are physically located on the same property or in very close proximity and are under the same leadership.
We own 31 cemeteries and operate one cemetery under a long-term contract with a municipality, which we refer to as a managed property.
The 32 cemeteries that we operate have developed cemetery property of approximately 147,000 and 143,000 units available-for-sale at December 31, 2021 and 2022, respectively. In addition, we own approximately 500 acres that are available for future development or sale.
We operate 20 funeral homes in combination with cemeteries as these locations are physically located on the same property or in very close proximity and are under the same leadership. 20 The 32 cemeteries that we operate have developed cemetery property of approximately 143,000 and 162,000 units available-for-sale at December 31, 2022 and 2023, respectively.
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Our support center occupies approximately 48,000 square feet of leased office space in Houston, Texas. At December 31, 2022, we owned and operated 791 vehicles.
Added
In addition, we own approximately 500 acres that are available for future development or sale. We anticipate having a sufficient inventory of lots to maintain our property sales for the foreseeable future. Our support center is located in Houston, Texas, where we lease approximately 48,000 square feet of office space.
Removed
The following table sets forth the number of funeral homes and cemeteries owned and operated by us for the periods presented: Years Ended December 31, 2020 2021 2022 Funeral homes at beginning of period 186 178 170 Acquisitions 1 — 6 Divestitures (8) (2) (4) Mergers of funeral homes (1) (6) (1) Funeral homes at end of period 178 170 171 Cemeteries at beginning of period 31 32 31 Acquisitions 1 — 1 Divestitures — (1) — Cemeteries at end of period 32 31 32 22 ITEM 3.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table sets forth certain information with respect to repurchases of our common stock during the quarter ended December 31, 2022: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program Dollar Value of Shares That May Yet Be Purchased Under the Program (1) October 1, 2022 - October 31, 2022 — $ — — $ 48,898,769 November 1, 2022 - November 30, 2022 — $ — — $ 48,898,769 December 1, 2022 - December 31, 2022 — $ — — $ 48,898,769 Total for quarter ended December 31, 2022 — — (1) See the first paragraph under the caption “ Purchases of Equity Securities by the Issuer ” for more information on our publicly announced share repurchase program. 24 STOCKHOLDER RETURN PERFORMANCE GRAPH The following line graph below compares the yearly change in cumulative total shareholder return over a 5-year period on our common stock relative to the cumulative total returns of the Russell 3000 Index (the “Russell 3000”), the Peer Group shown in our Annual Report on Form 10-K for the year ended December 31, 2021, which consisted of SCI and StoneMor (the “2021 Peer Group”), and our new peer group consisting of SCI, Matthews International Corp.
Biggest changeThe following table sets forth certain information with respect to repurchases of our common stock during the quarter ended December 31, 2023: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program Dollar Value of Shares That May Yet Be Purchased Under the Program (1) October 1, 2023 - October 31, 2023 — $ — — $ 48,898,769 November 1, 2023 - November 30, 2023 — $ — — $ 48,898,769 December 1, 2023 - December 31, 2023 — $ — — $ 48,898,769 Total for quarter ended December 31, 2023 — — (1) See the first paragraph under the caption “ Purchases of Equity Securities by the Issuer ” for more information on our publicly announced share repurchase program. 23 STOCKHOLDER RETURN PERFORMANCE GRAPH The following line graph below compares the yearly change in cumulative total stockholder return over a 5-year period on our common stock relative to the cumulative total returns of the Russell 3000 Index (the “Russell 3000”), a peer group selected by the Company comprising SCI, Matthews International Corp.
In December 2021, we repurchased 37,408 shares for $2.4 million, the settlement of which occurred in January 2022. 23 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.
In December 2021, we repurchased 37,408 shares for $2.4 million, the settlement of which occurred in January 2022. 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.
Share repurchase activity is as follows (dollar value of shares repurchased in thousands): Years Ended December 31, 2020 2021 2022 Number of Shares Repurchased (1) — 2,906,983 695,496 Average Price Paid Per Share $ — $ 49.01 $ 49.22 Dollar Value of Shares Repurchased (1) $ — $ 142,469 $ 34,234 (1) These amounts may differ from the repurchases of common stock amounts in the consolidated statements of cash flows due to unsettled share repurchases at the end of a period.
Share repurchase activity is as follows (dollar value of shares repurchased in thousands): Years Ended December 31, 2021 2022 2023 Number of Shares Repurchased (1) 2,906,983 695,496 — Average Price Paid Per Share $ 49.01 $ 49.22 $ — Dollar Value of Shares Repurchased (1) $ 142,469 $ 34,234 $ — (1) These amounts may differ from the repurchases of common stock amounts in the consolidated statements of cash flows due to unsettled share repurchases at the end of a period.
RECENT SALES OF UNREGISTERED SECURITIES During the year ended December 31, 2022, we did not have any sales of securities in transactions that were not registered under the Securities Act of 1933 (as amended, the “Securities Act”) that have not been reported in a Form 8-K or Form 10-Q.
RECENT SALES OF UNREGISTERED SECURITIES During the year ended December 31, 2023, we did not have any sales of securities in transactions that were not registered under the Securities Act of 1933 (as amended, the “Securities Act”) that have not been reported in a Form 8-K or Form 10-Q.
(“Matthews”) and Park Lawn (the “2022 Peer Group”). We use a peer group index, as we believe there is no relevant published industry or line-of-business index that reflects the companies against which we compete in our industry.
(“Matthews”) and Park Lawn (the “Peer Group”). We use a peer group index, as we believe there is no relevant published industry or line-of-business index that reflects the companies against which we compete in our industry.
Performance data for Carriage, the Russell 3000 Index, the 2021 Peer Group and the 2022 Peer Group is provided as of the last trading day of each of our last five fiscal years.
Performance data for Carriage, the Russell 3000 Index and the Peer Group is provided as of the last trading day of each of our last five fiscal years.
On February 23, 2022, our Board authorized an increase in our share repurchase program to permit us to purchase up to an additional $75.0 million under our share repurchase program, in addition to amounts previously authorized and outstanding in accordance with Rule 10b-18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which totaled up to $265.0 million in share repurchase authorizations.
On February 23, 2022, our Board authorized an increase in our share repurchase program to permit us to purchase up to an additional $75.0 million under our share repurchase program, in addition to amounts previously authorized and outstanding in accordance with Rule 10b-18 of the Securities Exchange Act, which totaled up to $265.0 million in share repurchase authorizations.
Shares purchased pursuant to the repurchase program are currently held as treasury stock. At December 31, 2022, our share repurchase program had $48.9 million authorized for additional repurchases.
Shares purchased pursuant to the repurchase program are currently held as treasury stock. At December 31, 2023, our share repurchase program had $48.9 million authorized for repurchases.
The stock price performance included in this graph is not necessarily indicative of future stock price performance. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among Carriage, the Russell 3000 Index, the 2021 Peer Group and the 2022 Peer Group ITEM 6. [RESERVED] 25
The stock price performance included in this graph is not necessarily indicative of future stock price performance. COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN Among Carriage, the Russell 3000 Index and the Peer Group ITEM 6. [RESERVED] 24
The graph assumes that the value of the investment in our common stock, the Russell 3000 Index, the 2021 Peer Group and the 2022 Peer Group was $100 on the last trading day of December 2017, and that all dividends were reinvested.
The graph assumes that the value of the investment in our common stock, the Russell 3000 Index and the Peer Group was $100 on the last trading day of December 2018, and that all dividends were reinvested.
The returns of each member of the 2021 Peer Group and 2022 Peer Group are weighted according to their respective stock market capitalization as of the beginning of each period measured.
The returns of each member of the Peer Group are weighted according to their respective stock market capitalization as of the beginning of each period measured.
Each share is entitled to one vote on matters requiring the vote of stockholders. We believe there are approximately 5,200 beneficial owners of our common stock.
Each share is entitled to one vote on matters requiring the vote of stockholders. We believe there are approximately 8,100 beneficial owners of our common stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. MARKET INFORMATION Our common stock is traded on the New York Stock Exchange under the symbol “CSV.” At February 24, 2023, there were 14,890,623 shares of our common stock outstanding. The shares of common stock outstanding are held by approximately 330 stockholders of record.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. MARKET INFORMATION Our common stock is traded on the New York Stock Exchange under the symbol “CSV.” At February 23, 2024, there were 15,141,435 shares of our common stock outstanding. The shares of common stock outstanding are held by approximately 300 stockholders of record.
PURCHASES OF EQUITY SECURITIES BY THE ISSUER Subject to market conditions, normal trading restrictions and satisfying certain financial covenants in our Credit Facility, and in the Indenture governing our Senior Notes, we may make purchases in the open market or through privately negotiated transactions under our Board authorized share repurchase program, in accordance with Rule 10b-18 of the Securities Exchange Act.
EQUITY PLANS For information regarding securities authorized for issuance under our equity compensation plans, see Part III, Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. 22 PURCHASES OF EQUITY SECURITIES BY THE ISSUER Subject to market conditions, normal trading restrictions and satisfying certain financial covenants in our Credit Facility, and in the Indenture governing our Senior Notes, we may make purchases in the open market or through privately negotiated transactions under our Board authorized share repurchase program, in accordance with Rule 10b-18 of the Securities Exchange Act, as amended (the “Exchange Act”).
Removed
EQUITY PLANS For information regarding securities authorized for issuance under our equity compensation plans, see Part III, Item 12, Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Removed
We removed Stonemor from our 2022 Peer Group and selected Matthews and Park Lawn to be added to our 2022 Peer Group as a result of StoneMor being delisted from the NYSE as of November 30, 2022.
Removed
For the 2021 Peer Group, as a result of StoneMor’s delisting on November 30, 2022, the stock performance data as of December 31, 2022 reflects SCI’s total cumulative return only.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCemetery Segment The following table sets forth certain information regarding our Revenue and Operating profit for our cemetery operations (in thousands): Years Ended December 31, 2021 2022 Revenue: Operating $ 91,330 $ 90,033 Divested/planned divested 858 252 Other 13,611 12,986 Total $ 105,799 $ 103,271 Operating Profit: Operating $ 42,158 $ 37,509 Divested/planned divested 365 (47) Other 13,111 12,428 Total $ 55,634 $ 49,890 The following measures reflect the significant metrics over this comparative period: Preneed revenue as a percentage of operating revenue 63% 62% Preneed revenue (in thousands) $ 57,886 $ 56,099 Atneed revenue (in thousands) $ 34,302 $ 34,186 Number of preneed interment rights sold 11,408 10,878 Average price per interment right sold $ 4,718 $ 4,576 Cemetery operating revenue decreased $1.3 million for the year ended December 31, 2022 compared to the year ended December 31, 2021, as we experienced a 4.6% decline in the number of preneed interment rights sold, as well as a 3.0% decline in the average price per preneed interment right sold.
Biggest changeOther revenue and other operating profit, which consist of preneed funeral insurance commissions and preneed funeral trust earnings, both increased $1.0 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to the recognition of additional general agency commission revenue in 2023 as we entered into an exclusive partnership agreement with a national insurance provider to market and sell prearranged funeral services in the future. 35 Cemetery Segment The following table sets forth certain information regarding our revenue and operating profit for our cemetery operations (in thousands): Years Ended December 31, 2022 2023 Revenue: Operating $ 90,033 $ 102,216 Divested 252 45 Other 12,986 15,483 Total $ 103,271 $ 117,744 Operating profit (loss): Operating $ 37,509 $ 41,096 Divested (47) 12 Other 12,428 14,971 Total $ 49,890 $ 56,079 The following measures reflect the significant metrics over this comparative period: Preneed revenue as a percentage of operating revenue 67% 78% Preneed revenue (in thousands) $ 68,884 $ 79,954 Atneed revenue (in thousands) $ 34,186 $ 37,763 Number of preneed interment rights sold 10,878 11,813 Average price per interment right sold $ 4,576 $ 5,007 Cemetery operating revenue increased $12.2 million for the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily as a result of a 9.4% increase in the average price per preneed interment right sold, as well as an 8.6% increase in preneed interment rights sold.
See Part II, Item 8, Financial Statements and Supplementary Data, Note 12 to our Consolidated Financial Statements for further detail of our debt and interest payments. Lease Obligations Our lease obligations consist of operating and finance leases. We lease certain office facilities, certain funeral homes and equipment under operating leases with original terms ranging from one to twenty years.
See Part II, Item 8, Financial Statements and Supplementary Data, Note 12 to our Consolidated Financial Statements for further detail of our debt and interest payments. Lease Obligations Our lease obligations consist of operating and finance leases. We lease certain office facilities, certain funeral homes, vehicles and equipment under operating leases with original terms ranging from one to twenty years.
In addition, we sold four funeral homes for $1.5 million, sold real property for $3.3 million and purchased real property for $2.6 million. We also received proceeds of $2.4 million from our property insurance policy for the reimbursement of renovation costs for our funeral and cemetery businesses that were damaged by Hurricane Ida.
In addition, we sold four funeral homes for $1.5 million, sold real estate for $3.3 million and purchased real estate for $2.6 million. We also received proceeds of $2.4 million from our property insurance policy for the reimbursement of renovation costs for our funeral and cemetery businesses that were damaged by Hurricane Ida.
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.
However, if our capital allocations and expenditures or acquisition plans change, we may need to access the capital markets or seek further borrowing capacity from our lenders to obtain additional funding and we may not be able to obtain such funding on terms and conditions that are acceptable to us.
We also received proceeds of $7.8 million from our 28 property insurance policy for the reimbursement of renovation costs for our funeral and cemetery businesses that were damaged by Hurricane Ida.
We also received proceeds of $7.8 million from our property insurance policy for the reimbursement of renovation costs for our funeral and cemetery businesses that were damaged by Hurricane Ida.
See Part II, Item 8, Financial Statements and Supplementary Data, Note 14 to our Consolidated Financial Statements for further detail of our debt and interest payments. Off-Balance Sheet Arrangements At December 31, 2022, our off-balance sheet arrangements were as follows: Non-compete agreements - We have various non-compete agreements with former owners and employees of businesses we have acquired.
See Part II, Item 8, Financial Statements and Supplementary Data, Note 14 to our Consolidated Financial Statements for further detail of our debt and interest payments. Off-Balance Sheet Arrangements At December 31, 2023, our off-balance sheet arrangements were as follows: Non-compete agreements - We have various non-compete agreements with former owners and employees of businesses we have acquired.
Senior Notes At December 31, 2022, we had $400.0 million in aggregate principal amount of 4.25% Senior Notes due 2029 (the “Senior Notes”) and related guarantees by the Subsidiary Guarantors, which were issued in a private offering under Rule 144A and Regulation S of the Securities Act.
Senior Notes At December 31, 2023, we had $400.0 million in aggregate principal amount of 4.25% Senior Notes due 2029 (the “Senior Notes”) and related guarantees by the Subsidiary Guarantors, which were issued in a private offering under Rule 144A and Regulation S of the Securities Act.
In addition, we divested four funeral homes and sold real property for a net gain of $0.7 million, of which $0.2 million was recorded in Other, net . We also disposed of damaged and obsolete property, plant and equipment that had a carrying value of $0.2 million.
In addition, we divested four funeral homes and sold real property for a net gain of $0.7 million, of which $0.2 million was recorded in Other, net . We also disposed of damaged and obsolete property, plant and equipment that had a carrying value of $0.2 million. Interest expense .
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.
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, among others.
Further discussion of Operating profit for our funeral home and cemetery segments is presented under “Results of Operations.” YEAR ENDED DECEMBER 31, 2022 COMPARED TO YEAR ENDED DECEMBER 31, 2021 Results of Operations The following is a discussion of our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Further discussion of operating profit for our funeral home and cemetery segments is presented under “Results of Operations.” YEAR ENDED DECEMBER 31, 2023 COMPARED TO YEAR ENDED DECEMBER 31, 2022 Results of Operations The following is a discussion of our results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
See Part II, Item 8, Financial Statements and Supplementary Data, Note 3 for additional information related to business combinations. 41 RECENT ACCOUNTING PRONOUNCEMENTS, ACCOUNTING CHANGES AND OTHER REGULATIONS For discussion of recent accounting pronouncements and accounting changes, see Part II, Item 8, Financial Statements and Supplementary Data, Note 2.
See Part II, Item 8, Financial Statements and Supplementary Data, Note 3 for additional information related to business combinations. 38 RECENT ACCOUNTING PRONOUNCEMENTS, ACCOUNTING CHANGES AND OTHER REGULATIONS For discussion of recent accounting pronouncements and accounting changes, see Part II, Item 8, Financial Statements and Supplementary Data, Note 2.
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.
Although we have taken steps to mitigate these cost increases and we expect these impacts to continue throughout the next year, the ultimate scope and duration of these impacts are unknown at this time.
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 77 months of the Senior Notes.
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 65 months of the Senior Notes.
The effective interest rate on the unamortized debt discount and the unamortized debt issuance costs for the Senior Notes for both the years ended December 31, 2021 and 2022 was 4.42% and 4.30%, respectively.
The effective interest rate on the unamortized debt discount and the unamortized debt issuance costs for the Senior Notes for both the years ended December 31, 2022 and 2023 was 4.42% and 4.30%, respectively.
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.
Although we expect these trends to continue throughout the next year, we will continue to assess these impacts and take the appropriate steps, if necessary, to mitigate these cost increases, if possible.
Our unrecognized tax benefit reserve for the years ended December 31, 2022 and 2021 was $3.3 million and $3.8 million, respectively. See Part II, Item 8, Financial Statements and Supplementary Data, Notes 1 and 17 for additional information regarding income taxes.
Our unrecognized tax benefit reserve for the years ended December 31, 2023 and 2022 was $3.4 million and $3.3 million, respectively. See Part II, Item 8, Financial Statements and Supplementary Data, Notes 1 and 17 for additional information regarding income taxes.
During the year ended December 31, 2021, we sold two funeral homes and one cemetery for $2.5 million, sold real property for $5.2 million and purchased real property for $3.3 million.
During the year ended December 31, 2021, we sold two funeral homes and one cemetery for $2.5 million, sold real estate for $5.2 million and purchased real estate for $3.3 million.
Further discussion of General, administrative and other expenses, Net loss on divestitures, disposals and impairment charges, Interest expense, Income taxes and other components of income and expenses are presented under “Other Financial Statement Items.” 35 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 year ending December 31, 2022, dated February 23, 2022, and discussed in the corresponding earnings conference call.
Further discussion of general, administrative and other expenses, net loss on divestitures, disposals and impairment charges, 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 year ending December 31, 2023, dated February 21, 2024, and discussed in the corresponding earnings conference call.
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.
Such inflation may negatively impact consumer discretionary spending, including the amount that consumers are able to spend on our services, although we have not experienced any material impacts to date and our industry has been largely resilient to similar adverse economic and market environments in the past.
The decrease in funeral contract volume and the number of interment rights sold correspond to the decline in COVID-19 related cases in 2022 compared to 2021, as deaths directly attributable from COVID-19 have now largely decreased to have minimal impact on the overall death rate.
The decrease in funeral contract volume and the number of interment rights sold correspond to the decline in COVID-19 related cases in 2022 compared to 2021, as deaths directly attributable from COVID-19 largely decreased during that period to have minimal impact on the overall death rate.
At December 31, 2022, 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.
At December 31, 2023, we were subject to the following financial covenants under our Credit Facility: (A) a Total Leverage Ratio not to exceed 5.75 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.
Shares purchased pursuant to the repurchase program are currently held as treasury stock. At December 31, 2022, our share repurchase program had $48.9 million authorized for additional repurchases.
Shares purchased pursuant to the repurchase program are currently held as treasury stock. At December 31, 2023, our share repurchase program had $48.9 million authorized for repurchases.
The weighted average interest rate on our Credit Facility was 3.8% and 4.0% for the years ended December 31, 2021 and 2022, respectively. We have no material assets or operations independent of the Subsidiary Guarantors, as all of our assets and operations are held and conducted by the Subsidiary Guarantors.
The weighted average interest rate on our Credit Facility was 4.0% and 8.6% for the years ended December 31, 2022 and 2023, respectively. 29 We have no material assets or operations independent of the Subsidiary Guarantors, as all of our assets and operations are held and conducted by the Subsidiary Guarantors.
These agreements are generally for one to ten years and provide for periodic payments over the term of the agreements. We have future payments on our non-compete agreements of $8.0 million, with $2.5 million payable within 12 months. Consulting agreements - We have various consulting agreements with former owners of businesses we have acquired.
These agreements are generally for one to ten years and provide for periodic payments over the term of the agreements. We have future payments on our non-compete agreements of $7.7 million, with $2.3 million payable within 12 months. Consulting agreements - We have various consulting agreements with former owners of businesses we have acquired.
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 typically range from five to twenty years.
A majority of the deferred purchase price and notes bear no interest and are discounted at imputed interest rates ranging from 6.5% to 7.3%. Original maturities typically range from five to twenty years.
Therefore, no Convertible Notes remain outstanding at December 31, 2021 and 2022. 32 The interest expense and accretion of debt discount and debt issuance costs related to our Convertible Notes are as follows (in thousands): Years ended December 31, 2020 2021 2022 Convertible Notes interest expense $ 149 $ 18 $ — Convertible Notes accretion of debt discount 216 20 — Convertible Notes amortization of debt issuance costs 20 1 — The effective interest rate on the unamortized debt discount and debt issuance costs for the year ended December 31, 2021 was 3.1%.
Therefore, no Convertible Notes remain outstanding at December 31, 2022 and 2023. 30 The interest expense and accretion of debt discount and debt issuance costs related to our Convertible Notes are as follows (in thousands): Years ended December 31, 2021 2022 2023 Convertible Notes interest expense $ 18 $ — $ — Convertible Notes accretion of debt discount 20 — — Convertible Notes amortization of debt issuance costs 1 — — The effective interest rate on the unamortized debt discount and debt issuance costs for the year ended December 31, 2021 was 3.1%.
Our effective tax rate was 27.6% and 25.2% for years ended December 31, 2022 and 2021, respectively. 40 At December 31, 2022, our unrecognized tax benefit reserve for uncertain tax positions primarily relates to the uncertainty of receiving audit protection for revenue recognition of cemetery property for the benefit derived from carrying back losses to tax years with a higher effective tax rate than the current 21.0% rate.
Our effective tax rate was 28.0% and 27.6% for years ended December 31, 2023 and 2022, respectively. 37 At December 31, 2023, our unrecognized tax benefit reserve for uncertain tax positions primarily relates to the uncertainty of receiving audit protection for revenue recognition of cemetery property for the benefit derived from carrying back losses to tax years with a higher effective tax rate than the current 21.0% rate.
The interest expense and amortization of debt issuance costs related to our Credit Facility are as follows (in thousands): Years Ended December 31, 2020 2021 2022 Credit Facility interest expense $ 3,738 $ 1,820 $ 7,105 Credit Facility amortization of debt issuance costs 482 380 412 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.
The interest expense and amortization of debt issuance costs related to our Credit Facility are as follows (in thousands): Years Ended December 31, 2021 2022 2023 Credit Facility interest expense $ 1,820 $ 7,105 $ 17,251 Credit Facility amortization of debt issuance costs 380 412 552 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.
The decrease in operating revenue is primarily driven by a 3.6% decrease in contract volume, which was partially offset by a 2.4% increase in the average revenue per contract excluding preneed interest.
The decrease in operating revenue is primarily driven by a 2.4% decrease in contract volume, which was partially offset by a 1.0% increase in the average revenue per contract excluding preneed interest.
In simple terms, volume and price are the two variables that affect funeral revenue. The average revenue per contract is influenced by the mix of traditional and cremation services because our average cremation service revenue is approximately one-third of the average revenue earned from a traditional burial service.
In simple terms, volume and price are the two variables that affect funeral revenue. The average revenue per contract is influenced by the mix of traditional and cremation services because our average cremation service revenue is approximately one-third of the average revenue earned from a traditional burial service. Funeral homes have a relatively fixed cost structure.
These financial maintenance covenants are calculated for the Company and its subsidiaries on a consolidated basis. We were in compliance with all of the covenants contained in our Credit Facility at December 31, 2022. At December 31, 2022, we had outstanding borrowings under the Credit Facility of $190.7 million.
These financial maintenance covenants are calculated for the Company and its subsidiaries on a consolidated basis. We were in compliance with all of the covenants contained in our Credit Facility at December 31, 2023. At December 31, 2023, we had outstanding borrowings under the Credit Facility of $179.1 million.
Funeral homes have a relatively fixed cost structure. 26 Cemetery Operations Factors affecting our cemetery operating results include: 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.
Cemetery Operations Factors affecting our cemetery operating results include: 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.
Investing Activities Our investing activities resulted in a net cash outflow of $52.5 million f or the year ended December 31, 2022 compared to $12.5 million for the year ended December 31, 2021 and $34.4 million for the year ended December 31, 2020.
Investing Activities Our investing activities resulted in a net cash outflow of $57.0 million f or the year ended December 31, 2023 compared to $52.5 million for the year ended December 31, 2022 and $12.5 million for the year ended December 31, 2021.
For 2023, our plan is to remain focused on integrating our recently acquired businesses, along with closing and integrating one pending acquisition, 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 and strategic acquisitions, as allowed under our Credit Facility.
For 2024, our plan is to remain focused on integrating our recently acquired business and prioritizing our capital allocation for debt repayments, the payment of dividends and debt obligations and internal growth capital expenditures, which we expect to fund using cash on hand and borrowings under our Credit Facility, along with general corporate purposes, as allowed under our Credit Facility.
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.
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, vehicles and equipment under finance leases with original terms ranging from three and a half to forty years.
Acquisition and Divestiture Activity During the year ended December 31, 2022, we acquired a business consisting of two funeral homes in Kissimmee, Florida for $6.3 million in cash and a business consisting of three funeral homes, one cemetery and one cremation focused business in the Charlotte, North Carolina area for $25.0 million in cash.
During the year ended December 31, 2022, we acquired a business consisting of two funeral homes in Kissimmee, FL for $6.3 million in cash and a business consisting of three funeral homes, one cemetery and one cremation focused business in the Charlotte, NC area for $25.0 million in cash.
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. 27 Cash Flows We began 2022 with $1.1 million in cash and ended the year with $1.2 million in cash.
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.
Outstanding borrowings under our Credit Facility bear interest at a prime rate or a BSBY rate, plus an applicable margin based on our leverage ratio. At December 31, 2022, the prime rate margin was equivalent to 2.375% and the BSBY rate margin 31 was 3.375%.
At December 31, 2023, we had $68.3 million of availability under the Credit Facility. Outstanding borrowings under our Credit Facility bear interest at a prime rate or a BSBY rate, plus an applicable margin based on our leverage ratio. At December 31, 2023, the prime rate margin was equivalent to 2.375% and the BSBY rate margin was 3.375%.
Below is a breakdown of Operating profit (a non-GAAP financial measure) by Segment (in thousands): Years Ended December 31, 2020 2021 2022 Funeral Home $ 104,998 $ 119,007 $ 111,471 Cemetery 36,944 55,634 49,890 Operating profit $ 141,942 $ 174,641 $ 161,361 Operating profit margin (1) 43.1% 46.5% 43.6% (1) Operating profit margin is defined as Operating profit as a percentage of Revenue.
Below is a breakdown of operating profit (a non-GAAP financial measure) by Segment (in thousands): Years Ended December 31, 2021 2022 2023 Funeral Home $ 119,007 $ 111,471 $ 104,997 Cemetery 55,634 49,890 56,079 Operating profit $ 174,641 $ 161,361 $ 161,076 Operating profit margin (1) 46.5% 43.6% 42.1% (1) Operating profit margin is defined as operating profit as a percentage of revenue.
Net income in 2021 increased $17.1 million compared to 2020, primarily due to the following: (1) the increase in gross profit of $23.6 million; (2) a $20.8 million decrease in net loss on divestitures, disposals and impairments charges, and (3) a $7.1 million decrease in interest expense; offset by (4) a $23.8 million loss on extinguishment of debt; (5) an $8.1 million increase in general and administrative expenses, and (6) a $2.6 million increase in tax expense.
Net income in 2022 increased $8.2 million compared to 2021, primarily due to the following: (1) a $23.6 million loss on extinguishment of debt in 2021; (2) a $3.5 million gain on insurance reimbursements in 2022, offset by (3) the decrease in gross profit of $10.3 million; (4) a $4.7 million increase in tax expense; (5) a $2.3 million increase in general, administrative and other expenses; and (6) a $1.4 million decrease in net loss on divestitures, disposals and impairments charges.
We recorded a net discrete tax benefit of $0.4 million and $1.2 million for the years ended December 31, 2022 and 2021, respectively. The net discrete tax benefit for the year ended December 31, 2022, includes benefit related to equity compensation and other adjustments including return to provision analysis and state legislative changes.
We recorded a net discrete tax benefit of $0.2 million for the year ended December 31, 2023, a decrease of $0.3 million compared to the year ended December 31, 2022. The net discrete tax benefit for the year ended December 31, 2023, includes benefit related to equity compensation and other adjustments including return to provision analysis and state legislative changes.
The imputed interest expense related to our acquisition debt is as follows (in thousands): Years Ended December 31, 2020 2021 2022 Acquisition debt imputed interest expense $ 489 $ 364 $ 311 At December 31, 2022, acquisition debt obligations were $5.7 million, with $0.8 million payable within 12 months.
The imputed interest expense related to our acquisition debt is as follows (in thousands): Years Ended December 31, 2021 2022 2023 Acquisition debt imputed interest expense $ 364 $ 311 $ 291 At December 31, 2023, acquisition debt obligations were $9.3 million, with $0.9 million payable within 12 months.
Funeral home operating profit for the year ended December 31, 2022 decreased $7.3 million when compared to the same period in 2021, primarily due to an increase in operating expenses as a percentage of revenue. The comparable operating profit margin decreased 260 basis points to 40.6%.
Funeral home operating profit for the year ended December 31, 2023 decreased $7.0 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 250 basis points to 38.1%.
During the year ended December 31, 2021, we spent $1.6 million for renovations on four businesses that were affected by Hurricane Ida, all of which was reimbursed by our property insurance.
During the year ended December 31, 2022, we spent $2.4 million for renovations on two businesses that were affected by Hurricane Ida, all of which was reimbursed by our property insurance.
In addition, we paid $6.0 million in dividends and $4.6 million for the repurchase of a portion of our 2.75% convertible subordinated notes. 29 Dividends Our Board declared the following dividends payable on the dates below (in thousands, except per share amounts): 2022 Per Share Dollar Value March 1st $ 0.1125 $ 1,725 June 1st $ 0.1125 $ 1,730 September 1st $ 0.1125 $ 1,653 December 1st $ 0.1125 $ 1,655 2021 Per Share Dollar Value March 1st $ 0.1000 $ 1,799 June 1st $ 0.1000 $ 1,808 September 1st $ 0.1000 $ 1,783 December 1st $ 0.1125 $ 1,873 2020 Per Share Dollar Value March 1st $ 0.0750 $ 1,339 June 1st $ 0.0750 $ 1,343 September 1st $ 0.0875 $ 1,569 December 1st $ 0.1000 $ 1,797 Share Repurchases Subject to market conditions, normal trading restrictions and satisfying certain financial covenants in our Credit Facility, and in the Indenture governing our Senior Notes, we may make purchases in the open market or through privately negotiated transactions under our Board authorized share repurchase program, in accordance with Rule 10b-18 of the Securities Exchange Act, as amended (the “Exchange Act”).
Dividends Our Board declared the following dividends payable on the dates below (in thousands, except per share amounts): 2023 Per Share Dollar Value March 1st $ 0.1125 $ 1,661 June 1st $ 0.1125 $ 1,679 September 1st $ 0.1125 $ 1,683 December 1st $ 0.1125 $ 1,685 2022 Per Share Dollar Value March 1st $ 0.1125 $ 1,725 June 1st $ 0.1125 $ 1,730 September 1st $ 0.1125 $ 1,653 December 1st $ 0.1125 $ 1,655 2021 Per Share Dollar Value March 1st $ 0.1000 $ 1,799 June 1st $ 0.1000 $ 1,808 September 1st $ 0.1000 $ 1,783 December 1st $ 0.1125 $ 1,873 Share Repurchases Subject to market conditions, normal trading restrictions and satisfying certain financial covenants in our Credit Facility, and in the Indenture governing our Senior Notes, we may make purchases in the open market or through privately negotiated transactions under our Board authorized share repurchase program, in accordance with Rule 10b-18 of the Securities Exchange Act, as amended (the “Exchange Act”).
The following table sets forth the elements of cash flow (in thousands): Years Ended December 31, 2020 2021 2022 Cash at beginning of year $ 716 $ 889 $ 1,148 Net cash provided by operating activities 82,915 84,246 61,024 Acquisition of businesses and real estate (28,011) (3,285) (33,876) Proceeds from divestiture and sale of other assets 8,541 7,875 5,027 Proceeds from insurance reimbursements 248 7,758 2,440 Capital expenditures (15,198) (24,883) (26,081) Net cash used in investing activities (34,420) (12,535) (52,490) Net borrowings (payments) on our Credit Facility, acquisition debt and finance lease obligations (38,345) 106,869 34,418 Payment to redeem the 6.625% senior notes due 2026 — (400,000) — Payment of call premium related to the 6.625% senior notes due 2026 — (19,876) — Proceeds from the issuance of the 4.25% senior notes due 2029 — 395,500 — Payment of debt issuance costs for the Credit Facility and 4.25% senior notes due 2029 (78) (2,197) (922) Conversions and maturity of the Convertible Notes (4,563) (3,980) — Net proceeds from employee equity plans 881 (3) 1,418 Dividends paid on common stock (6,048) (7,264) (6,763) Purchase of treasury stock — (140,040) (36,663) Other financing costs (169) (461) — Net cash used in financing activities (48,322) (71,452) (8,512) Cash at end of year $ 889 $ 1,148 $ 1,170 Operating Activities For the year ended December 31, 2022, cash provided by operating activities was $61.0 million compared to $84.2 million for the year ended December 31, 2021 and $82.9 million for the year ended December 31, 2020.
The following table sets forth the elements of cash flow (in thousands): Years Ended December 31, 2021 2022 2023 Cash at beginning of year $ 889 $ 1,148 $ 1,170 Net cash provided by operating activities 84,246 61,024 75,590 Acquisitions of businesses and real estate (3,285) (33,876) (44,500) Proceeds from divestitures and sale of other assets 7,875 5,027 4,132 Proceeds from insurance claims 7,758 2,440 1,403 Capital expenditures (24,883) (26,081) (18,039) Net cash used in investing activities (12,535) (52,490) (57,004) Net borrowings (payments) on our Credit Facility, acquisition debt and finance lease obligations 106,869 34,418 (12,767) Payment to redeem the 6.625% senior notes due 2026 (400,000) — — Payment of call premium related to the 6.625% senior notes due 2026 (19,876) — — Proceeds from the issuance of the 4.25% senior notes due 2029 395,500 — — Payment of debt issuance costs for the Credit Facility and 4.25% senior notes due 2029 (2,197) (922) — Conversions and maturity of the Convertible Notes (3,980) — — Net proceeds from employee equity plans (3) 1,418 1,242 Dividends paid on common stock (7,264) (6,763) (6,708) Purchase of treasury stock (140,040) (36,663) — Other financing costs (461) — — Net cash used in financing activities (71,452) (8,512) (18,233) Cash at end of year $ 1,148 $ 1,170 $ 1,523 26 Operating Activities For the year ended December 31, 2023, cash provided by operating activities was $75.6 million compared to $61.0 million for the year ended December 31, 2022 and $84.2 million for the year ended December 31, 2021.
Further discussion of the components of Gross profit for our funeral home and cemetery segments, is presented under “Results of Operations.” Net income in 2022 increased $8.2 million compared to 2021, primarily due to the following: (1) a $23.6 million loss on extinguishment of debt in 2021; (2) a $3.5 million gain on insurance reimbursements in 2022; offset by (3) the decrease in gross profit of $10.3 million; (4) a $4.7 million increase in tax expense; (5) a $2.3 million increase in general and administrative expenses; and (6) a $1.4 million decrease in net loss on divestitures, disposals and impairments charges.
Further discussion of the components of gross profit for our funeral home and cemetery segments, is presented under “Results of Operations.” Net income in 2023 decreased $8.0 million compared to 2022, primarily due to the following: (1) a $10.4 million increase in interest expense; (2) a $4.7 million increase in general, administrative and other expenses; and (3) a $1.0 million increase in divestitures, disposals, impairment charges and insurance reimbursements, offset by (4) the increase in gross profit of $5.1 million; and (5) a $2.8 million decrease in tax expense.
The fair value of the Senior Notes, which are Level 2 measurements, was $322.3 million at December 31, 2022. 33 The interest expense and amortization of debt discount, debt premium and debt issuance costs related to our Senior Notes are as follows (in thousands): Years Ended December 31, 2020 2021 2022 Senior Notes interest expense $ 26,500 $ 21,767 $ 16,980 Senior Notes amortization of debt discount 528 504 493 Senior Notes amortization of debt premium 221 85 — Senior Notes amortization of debt issuance costs 280 195 140 We have future interest payments on our outstanding balance of $108.3 million, with $17.0 million payable within 12 months.
The fair value of the Senior Notes, which are Level 2 measurements, was $355.4 million at December 31, 2023. 31 The interest expense and amortization of debt discount, debt premium and debt issuance costs related to our Senior Notes are as follows (in thousands): Years Ended December 31, 2021 2022 2023 Senior Notes interest expense $ 21,767 $ 16,980 $ 17,000 Senior Notes amortization of debt discount 504 493 515 Senior Notes amortization of debt premium 85 — — Senior Notes amortization of debt issuance costs 195 140 147 We have future interest payments on our outstanding balance of $93.5 million, with $17.0 million payable within 12 months.
The increase in average revenue per contract for 2022 reflects increases of 2.0% and 0.8% in cremations and burials with services, respectively. These increases are 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.
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.
“Ancillary” in the Funeral Home Segment represents our flower shop, pet cremation business and online cremation business. 37 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.
The term “ancillary” in the Funeral Home segment represents our flower shop, monument business, pet cremation business and 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.
Ancillary revenue, which represents revenue from our flower shop, pet cremation and online cremation businesses and Ancillary operating profit both decreased $0.2 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Ancillary revenue, which represents revenue from our flower shop, monument business, pet cremation business and online cremation businesses increased $0.4 million, while ancillary operating profit decreased $0.4 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
See Part II, Item 8, Financial Statements and Supplementary Data, Notes 12 and 16 to our Consolidated Financial Statements for further detail of our letter of credit and off-balance sheet agreements, respectively. 34 FINANCIAL HIGHLIGHTS Below are our financial highlights (in thousands except for volumes and averages): Years Ended December 31, 2020 2021 2022 Revenue $ 329,448 $ 375,886 $ 370,174 Funeral contracts 47,190 49,249 47,498 Average revenue per funeral contract $ 5,145 $ 5,360 $ 5,493 Preneed interment rights (property) sold 9,503 11,408 10,878 Average price per interment right sold $ 4,033 $ 4,718 $ 4,576 Gross profit $ 105,923 $ 129,516 $ 119,226 Net income $ 16,090 $ 33,159 $ 41,381 Revenue in 2022 decreased $5.7 million compared to 2021, as we experienced a 3.6% decrease in funeral contract volume, a 4.6% decrease in the number of preneed interment rights (property) sold and a 3.0% decrease in the average price per interment right sold, which were slightly offset by a 2.5% increase in average revenue per funeral contract.
See Part II, Item 8, Financial Statements and Supplementary Data, Notes 12 and 16 to our Consolidated Financial Statements for further detail of our letter of credit and off-balance sheet agreements, respectively. 32 FINANCIAL HIGHLIGHTS Below are our financial highlights (in thousands except for volumes and averages): Years Ended December 31, 2021 2022 2023 Revenue $ 375,886 $ 370,174 $ 382,520 Funeral contracts 49,249 47,498 46,355 Average revenue per funeral contract $ 5,360 $ 5,493 $ 5,543 Preneed interment rights (property) sold 11,408 10,878 11,813 Average price per preneed interment right sold $ 4,718 $ 4,576 $ 5,007 Gross profit $ 129,516 $ 119,226 $ 124,295 Net income $ 33,159 $ 41,381 $ 33,413 Revenue in 2023 increased $12.3 million compared to 2022, primarily as a result of a 9.4% increase in the average price per preneed interment right sold, an 8.6% increase in the number of preneed interment rights (property) sold and a 0.9% increase in the average revenue per funeral contract, offset by a 2.4% decrease in the funeral contract volume.
Credit Facility, Lease Obligations and Acquisition Debt The outstanding principal of our long-term debt and lease obligations is as follows (in thousands): December 31, 2021 December 31, 2022 Credit Facility $ 155,400 $ 190,700 Finance leases 5,532 5,157 Operating leases 20,433 19,518 Acquisition debt 4,500 3,993 Total $ 185,865 $ 219,368 30 Credit Facility At December 31, 2022, our senior secured revolving credit facility (as previously amended, including the Second Credit Facility Amendment and Third Credit Facility Amendment, the “Credit Facility”) was comprised of: (i) a $250.0 million senior secured 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.
Credit Facility, Lease Obligations and Acquisition Debt The outstanding principal of our Credit Facility, lease obligations and acquisition debt at December 31, 2023 is as follows (in thousands): December 31, 2022 December 31, 2023 Credit Facility $ 190,700 $ 179,100 Operating leases 19,518 18,510 Finance leases 5,157 6,423 Acquisition debt 3,993 5,998 Total $ 219,368 $ 210,031 Credit Facility At December 31, 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.
Funeral Home Operations Factors affecting our funeral operating results include: 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 related to our atneed business to increase average revenue per contract.
Funeral Home Operations Factors affecting our funeral operating results include: 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, merchandise and other controllable costs; exercising pricing leverage related to our atneed business to increase average revenue per contract; and our response to fluctuations in capital markets and interest rates, which affect investment earnings on trust funds, which would offset lower pricing power as preneed contracts mature.
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 “operating” in the Funeral Home and Cemetery segments refers to all funeral homes and cemeteries that we owned and operated in the current reporting period, excluding certain funeral home and cemetery businesses that we have divested in such period.
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 below) and certain of our subsequently acquired or organized domestic subsidiaries (collectively, the “Subsidiary Guarantors”).
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 14 to our Consolidated Financial Statements in Part II, Item 8, Financial Statements and Supplementary Data) and certain of our subsequently acquired or organized domestic subsidiaries (collectively, the “Subsidiary Guarantors”).
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 December 31, 2022, we had $57.0 million of availability under the Credit Facility.
We also had one letter of credit for $2.3 million under the Credit Facility, which was increased to $2.6 million on July 7, 2023. The letter of credit will expire on November 27, 2024 and is expected to automatically renew annually and secures our obligations under our various self-insured policies.
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. Please read Part I, Item 1A, Risk Factors.
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.
Cemetery property amortization totaled $5.9 million for the year ended December 31, 2022, a decrease of $0.8 million compared to the year ended December 31, 2021, primarily due to the decrease in property sold across our cemetery portfolio. Field depreciation.
Cemetery property amortization. Cemetery property amortization totaled $6.0 million for the year ended December 31, 2023, an increase of $0.2 million compared to the year ended December 31, 2022, primarily due to the increase in property sold across our cemetery portfolio. Field depreciation.
Regional and unallocated funeral and cemetery costs totaled $23.0 million for the year ended December 31, 2022, a decrease of $2.9 million compared to the year ended December 31, 2021, primarily due to the following: (1) a $3.1 million decrease in cash incentives and equity compensation; (2) a $1.4 million decrease in health and safety expenses related to COVID-19; (3) a $0.2 million decrease in salary and benefits expenses; offset by (4) a $1.1 million increase in incentive award trips and annual managing partner meetings, which were postponed in the prior year due to COVID-19; and (5) a $0.8 million increase in other general administrative costs.
Regional and unallocated funeral and cemetery costs totaled $16.6 million for the year ended December 31, 2023, a decrease of $6.4 million compared to the year ended December 31, 2022, primarily due to the following: (1) a $4.6 million decrease in cash incentives and equity compensation; (2) a $1.2 million decrease in incentive award trips and annual managing partner meetings; 36 (3) a $0.4 million decrease in health and safety expenses related to COVID-19; and (4) a $0.2 million decrease in all other expenses.
The obligations related to our off-balance sheet arrangements are significant to our future liquidity; however, although we can provide no assurances, we anticipate that these obligations will be funded from cash provided from our operating activities.
The letter of credit will expire on November 27, 2024 and is expected to automatically renew annually. The obligations related to our off-balance sheet arrangements are significant to our future liquidity; however, although we can provide no assurances, we anticipate that these obligations will be funded from cash provided from our operating activities.
General We operate in two business segments: Funeral Home Operations, which currently accounts for approximately 70% of our revenue, and Cemetery Operations, which currently accounts for approximately 30% of our revenue.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW General We operate in two business segments: Funeral Home Operations, which currently accounts for approximately 70% of our total revenue and Cemetery Operations, which currently accounts for approximately 30% of our total revenue.
The contract volume decrease is primarily a result of the significant decline in COVID-19 related cases in 2022 as compared to 2021, as deaths directly attributable from COVID-19 have now largely decreased to have minimal impact on the overall death rate.
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 lease cost related to our operating leases and short-term leases and depreciation expense and interest expense related to our finance leases are as follows (in thousands): Years Ended December 31, 2020 2021 2022 Operating lease cost $ 3,795 $ 3,762 $ 3,375 Short-term lease cost 185 193 329 Variable lease cost 39 160 324 Finance lease cost: Depreciation of leased assets $ 439 $ 438 $ 438 Interest on lease liabilities 496 471 442 At December 31, 2022, non-cancelable operating and finance lease obligations were $36.4 million, with $4.7 million payable within 12 months.
The components of lease cost are as follows (in thousands): Years Ended December 31, 2021 2022 2023 Operating lease cost $ 3,762 $ 3,375 $ 3,526 Short-term lease cost 193 329 372 Variable lease cost 160 324 234 Finance lease cost: Depreciation of leased assets $ 438 $ 438 $ 541 Interest on lease liabilities 471 442 500 At December 31, 2023, non-cancelable operating and finance lease obligations were $35.9 million with $5.4 million payable within 12 months.
The following tables present our growth and maintenance capital expenditures (in thousands): Years Ended December 31, 2020 2021 2022 Growth Cemetery development $ 4,705 $ 5,845 $ 7,679 Renovations at certain businesses (1) 953 4,541 5,048 Crematory projects 46 495 788 Other 732 687 782 Total Growth $ 6,436 $ 11,568 $ 14,297 (1) During the year ended December 31, 2022, we spent $2.4 million for renovations on two businesses that were affected by Hurricane Ida, all of which was reimbursed by our property insurance.
The following tables present our growth and maintenance capital expenditures (in thousands): Years Ended December 31, 2021 2022 2023 Growth Cemetery development $ 5,845 $ 7,679 $ 7,143 Renovations at certain businesses (1) 4,541 5,048 1,504 Crematory projects 495 788 1,206 Other 687 782 110 Total Growth $ 11,568 $ 14,297 $ 9,963 (1) During the year ended December 31, 2023, we spent $0.8 million for renovations to two businesses that were affected by Hurricane Ian, which occurred during the third quarter of 2022 and $0.4 million for renovations to 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.
For the year ended December 31, 2020, we had net payments on our Credit Facility, acquisition debt and finance leases of $38.3 million.
For the year ended December 31, 2023, we had net payments on our Credit Facility, acquisition debt and finance leases of $12.8 million and paid dividends of $6.7 million.
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.
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”).
Cemetery operating profit decreased $4.6 million for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to an increase in operating expenses as a percentage of revenue. The comparable operating profit margin decreased 450 basis points to 41.7%.
Cemetery operating profit increased $3.6 million for the year ended December 31, 2023, compared to the year ended December 31, 2022. The increase in operating profit is primarily due to the increase in operating revenue, offset by an increase in operating expenses as a percentage of revenue. The comparable operating profit margin decreased 150 basis point to 40.2%.
Interest expense related to its respective debt arrangement is as follows (in thousands): Years Ended December 31, 2021 2022 Senior Notes $ 22,381 $ 17,614 Credit Facility 2,200 7,517 Finance leases 471 442 Acquisition debt 364 311 Convertible Notes 19 — Other 10 11 Total $ 25,445 $ 25,895 Gain on insurance reimbursements.
Interest expense related to its respective debt arrangement is as follows (in thousands): Years Ended December 31, 2022 2023 Senior Notes $ 17,614 $ 17,662 Credit Facility 7,517 17,803 Finance leases 442 500 Acquisition debt 311 291 Other 11 10 Total $ 25,895 $ 36,266 Net gain on property damage, net of insurance claims.
At December 31, 2022, we had borrowings of $190.7 million outstanding on our Credit Facility compared to $155.4 million as of December 31, 2021 and $47.2 million as of December 31, 2020.
Cash Flows We began 2023 with $1.2 million in cash and ended the year with $1.5 million in cash. At December 31, 2023, we had borrowings of $179.1 million outstanding on our Credit Facility compared to $190.7 million as of December 31, 2022 and $155.4 million as of December 31, 2021.
Years Ended December 31, 2020 2021 2022 Maintenance General equipment and furniture $ 3,536 $ 7,027 $ 4,834 Facility repairs and improvements 2,053 2,543 3,207 Vehicles 1,493 2,329 2,062 Paving roads and parking lots 731 1,186 1,157 Information technology infrastructure improvements 949 230 524 Total Maintenance $ 8,762 $ 13,315 $ 11,784 Financing Activities Our financing activities resulted in a net cash outflow of $8.5 million for the year ended December 31, 2022 compared to a net cash outflow of $71.5 million for the year ended December 31, 2021 and a net cash outflow of $48.3 million for the year ended December 31, 2020.
During the year ended December 31, 2021, we spent $1.6 million for renovations on four businesses that were affected by Hurricane Ida, all of which was reimbursed by our property insurance. 27 Years Ended December 31, 2021 2022 2023 Maintenance General equipment and furniture $ 7,027 $ 4,834 $ 5,993 Facility repairs and improvements 2,543 3,207 1,041 Vehicles 2,329 2,062 618 Paving roads and parking lots 1,186 1,157 424 Information technology infrastructure improvements 230 524 — Total Maintenance $ 13,315 $ 11,784 $ 8,076 Financing Activities Our financing activities resulted in a net cash outflow of $18.2 million for the year ended December 31, 2023 compared to a net cash outflow of $8.5 million for the year ended December 31, 2022 and a net cash outflow of $71.5 million for the year ended December 31, 2021.
Share repurchase activity is as follows (dollar value of shares repurchased in thousands): Years Ended December 31, 2020 2021 2022 Number of Shares Repurchased (1) — 2,906,983 695,496 Average Price Paid Per Share $ — $ 49.01 $ 49.22 Dollar Value of Shares Repurchased (1) $ — $ 142,469 $ 34,234 (1) These amounts may differ from the repurchases of common stock amounts in the consolidated statements of cash flows due to unsettled share repurchases at the end of a period.
On February 23, 2022, our Board authorized an increase in our share repurchase program to permit us to purchase up to an additional $75.0 million under our share repurchase program, in addition to amounts previously authorized and outstanding in accordance with Rule 10b-18 of the Exchange Act, which totaled up to $265.0 million in share repurchase authorizations. 28 Share repurchase activity is as follows (dollar value of shares repurchased in thousands): Years Ended December 31, 2021 2022 2023 Number of Shares Repurchased (1) 2,906,983 695,496 — Average Price Paid Per Share $ 49.01 $ 49.22 $ — Dollar Value of Shares Repurchased (1) $ 142,469 $ 34,234 $ — (1) These amounts may differ from the repurchases of common stock amounts in the consolidated statements of cash flows due to unsettled share repurchases at the end of a period.
The term “divested” when discussed in the Cemetery Segment, refers to one cemetery we sold during the year ended December 31, 2021. “Planned divested” refers to the funeral home and cemetery businesses that we intend to divest.
The term “divested” when discussed in the Funeral Home segment, refers to two funeral home we sold during the year ended December 31, 2023 and two funeral homes we sold during the year ended December 31, 2022. The term “divested” when discussed in the Cemetery segment, refers to two cemeteries we sold during the year ended December 31, 2023.
Funeral Home Segment The following table sets forth certain information regarding our Revenue and Operating profit for our funeral home operations (in thousands): Years Ended December 31, 2021 2022 Revenue: Operating $ 252,926 $ 251,396 Divested/planned divested 3,179 1,560 Ancillary 4,437 4,193 Other 9,545 9,754 Total $ 270,087 $ 266,903 Operating Profit: Operating $ 109,204 $ 101,951 Divested/planned divested 300 53 Ancillary 1,006 841 Other 8,497 8,626 Total $ 119,007 $ 111,471 The following measures reflect the significant metrics over this comparative period: Contract volume 49,249 47,498 Average revenue per contract, excluding preneed funeral trust earnings $ 5,200 $ 5,326 Average revenue per contract, including preneed funeral trust earnings $ 5,360 $ 5,493 Cremation rate 56.7% 57.7% Funeral home operating revenue decreased $1.5 million for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Adding back these items will result in gross profit, a GAAP financial measure. 34 Funeral Home Segment The following table sets forth certain information regarding our revenue and operating profit for our funeral home operations (in thousands): Years Ended December 31, 2022 2023 Revenue: Operating $ 251,396 $ 249,180 Divested 1,560 215 Ancillary 4,193 4,588 Other 9,754 10,793 Total $ 266,903 $ 264,776 Operating profit: Operating $ 101,951 $ 94,949 Divested 53 (17) Ancillary 841 455 Other 8,626 9,610 Total $ 111,471 $ 104,997 The following measures reflect the significant metrics over this comparative period: Contract volume 47,498 46,355 Average revenue per contract, excluding preneed funeral trust earnings $ 5,326 $ 5,380 Average revenue per contract, including preneed funeral trust earnings $ 5,493 $ 5,543 Cremation rate 57.7% 59.0% Funeral home operating revenue decreased $2.2 million for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Further discussion of Revenue for our funeral home and cemetery segments is presented under “Results of Operations.” Gross profit in 2022 decreased $10.3 million compared to 2021, due to the decrease in revenue, as well as increases in operating expenses, in both our funeral and cemetery segments.
Further discussion of revenue for our funeral home and cemetery segments is presented under “Results of Operations.” Gross profit in 2023 increased $5.1 million compared to 2022, primarily due to the increase in revenue from our cemetery segment, offset by an increase in operating expenses in our cemetery segment.
In addition, we sold eight funeral homes for $8.4 million and we sold real property for $0.1 million. Capital Expenditures For the year ended December 31, 2022, our capital expenditures (comprising of growth and maintenance spend) totaled $26.1 million compared to $24.9 million for the year ended December 31, 2021, and $15.2 million for the year ended December 31, 2020.
Capital Expenditures For the year ended December 31, 2023, our capital expenditures (comprised of growth and maintenance spend) totaled $18.0 million compared to $26.1 million for the year ended December 31, 2022, and $24.9 million for the year ended December 31, 2021.
These increases are partially due to higher costs from inflationary impacts concentrated in our full-time hourly base rates, utilities, funeral supplies, and merchandise costs.
Gross profit in 2022 decreased $10.3 million compared to 2021, due to the decrease in revenue, as well as increases in operating expenses, in both our funeral and cemetery segments. These increases are partially due to higher costs from inflationary impacts concentrated in our full-time hourly base rates, utilities, funeral supplies, and merchandise costs.
The components of Net loss on divestitures, disposals and impairment charges are as follows (in thousands): Years Ended December 31, 2021 2022 Impairments related to assets held for sale $ 500 $ 2,358 Net gain on divestitures and real property (856) (543) Net loss on disposals of fixed assets 1,022 214 Total $ 666 $ 2,029 During the year ended December 31, 2022, we recognized impairments of $1.0 million related to property, plant and equipment, $0.9 million related to cemetery property and $0.4 million related to goodwill for assets held for sale .
The components of Net loss on divestitures, disposals and impairment charges are as follows (in thousands): Years Ended December 31, 2022 2023 Impairment of goodwill, intangibles and PPE $ 2,358 $ 454 Net (gain) loss on divestitures (543) 106 Net loss on disposals of fixed assets 214 631 Total $ 2,029 $ 1,191 During the year ended December 31, 2023, we sold two funeral homes and two cemeteries for a loss of $0.1 million.
During the year ended December 31, 2021, we recognized an impairment of $0.5 million related to property, plant and equipment assets held for sale . In addition, we sold two funeral homes and one cemetery and sold real property for a net gain of $0.9 million.
During the year ended December 31, 2022, we recognized impairments of $1.0 million related to property, plant and equipment, $0.9 million related to cemetery property and $0.4 million related to goodwill for assets held for sale .
These agreements are generally for three to six years and provide for participation in various incentive compensation arrangements. These agreements generally renew automatically on an annual basis after their initial term has expired, with the exception of our Chairman of the Board and Chief Executive Officer, which does not renew after the current term expiring in February 2028.
These agreements are generally for three to six years and provide for participation in various incentive compensation arrangements. These agreements generally renew automatically on an annual basis after their initial term has expired. We have future payments on our employment agreements of $13.3 million, with $5.5 million payable within 12 months. In connection with Mr.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe are not exposed to any other significant market risks other than those related to COVID-19 and inflation which are described in more detail in Part 1, Item 1A, Risk Factors in this Form 10-K for the year ended December 31, 2022.
Biggest changeWe are not exposed to any other significant market risks other than those related to the impact of health and safety concerns from epidemics and pandemics and inflation which are described in more detail in Part 1, Item 1A, Risk Factors in this Form 10-K for the year ended December 31, 2023.
The following quantitative and qualitative information is provided about financial instruments to which we are a party at December 31, 2022 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.
The following quantitative and qualitative information is provided about financial instruments to which we are a party at December 31, 2023 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.
Any increase in market interest rates causes the fair value of those liabilities to decrease, but such changes will not affect our interest costs. 42
Any increase in market interest rates causes the fair value of those liabilities to decrease, but such changes will not affect our interest costs. 39
At December 31, 2022, the prime rate margin was equivalent to 2.375% and the BSBY rate margin was 3.375%. Assuming the outstanding balance remains unchanged, a change of 100 basis points in our borrowing rate would result in a change in income before taxes of $1.9 million. We have not entered into interest rate hedging arrangements in the past.
At December 31, 2023, the prime rate margin was equivalent to 2.375% and the BSBY rate margin was 3.375%. Assuming the outstanding balance remains unchanged, a change of 100 basis points in our borrowing rate would result in a change in income before taxes of $1.8 million. We have not entered into interest rate hedging arrangements in the past.
Cost and market values of such investments at December 31, 2022 are presented in Part II, Item 8, Financial Statements and Supplementary Data, Note 7. The sensitivity of the fixed income securities is such that a 0.25% change in interest rates causes an approximate 1.11% change in the value of the fixed income securities.
Cost and market values of such investments at December 31, 2023 are presented in Part II, Item 8, Financial Statements and Supplementary Data, Note 8. The sensitivity of the fixed income securities is such that a 0.25% change in interest rates causes an approximate 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 December 31, 2022, we had outstanding borrowings under the Credit Facility of $190.7 million.
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 December 31, 2023, we had outstanding borrowings under the Credit Facility of $179.1 million.
At December 31, 2022, the carrying value of the Senior Notes on our Consolidated Balance Sheet was $395.2 million and the fair value of the Senior Notes was $322.3 million based on the last traded or broker quoted price as reported by FINRA.
At December 31, 2023, the carrying value of the Senior Notes on our Consolidated Balance Sheet was $395.9 million and the fair value of the Senior Notes was $355.4 million based on the last traded or broker quoted price as reported by Financial Industry Regulatory Authority.

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