# Service Corp International: Form 10-Q for the period ended Sep 30, 2023

- Company: [Service Corp International](/companies/sci.md) (CIK 89089)
- Form: 10-Q
- Filed: 2023-11-02
- Accepted by EDGAR: Nov 2, 2023, 14:49 ET
- Period: 2023-09-30
- Accession: 0000089089-23-000065
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/89089/000008908923000065/sci-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/89089/000008908923000065/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $1.00bn | us-gaap:Revenues |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $3.04bn | us-gaap:Revenues |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $748.2m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $2.24bn | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2023-07-01 to 2023-09-30 | $253.7m | us-gaap:GrossProfit |
| Gross profit | 9 months, 2023-01-01 to 2023-09-30 | $804.2m | us-gaap:GrossProfit |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | $223.0m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | $702.1m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-07-01 to 2023-09-30 | $61.5m | us-gaap:InterestExpense |
| Interest expense | 9 months, 2023-01-01 to 2023-09-30 | $174.9m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $39.6m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $129.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | $122.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | $398.9m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.80 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | $2.60 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | $0.81 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | $2.63 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 152,289,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 153,554,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $591.5m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $267.8m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 9 months, 2023-01-01 to 2023-09-30 | $125.5m | us-gaap:PaymentsOfDividendsCommonStock |
| Share repurchases | 9 months, 2023-01-01 to 2023-09-30 | $340.3m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-09-30 | $172.7m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $453.8m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $15.68bn | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $712.9m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2023-09-30 | $4.51bn | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-09-30 | $62.6m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2023-09-30 | $1.63bn | us-gaap:StockholdersEquity |
| Shares outstanding | at 2023-09-30 | 149,555,188 shares | dei:EntityCommonStockSharesOutstanding |

## Management's discussion and analysis

As filed, 54,768 characters.

### The Company

We are North America’s largest provider of deathcare products and services, with a network of funeral service locations and cemeteries unequaled in geographic scale and reach. At September 30, 2023, we operated 1,486 funeral service locations and 489 cemeteries (including 304 funeral service/cemetery combination locations), which are geographically diversified across 44 states, eight Canadian provinces, the District of Columbia, and Puerto Rico. Our funeral and cemetery operations consist of funeral service locations, cemeteries, funeral service/cemetery combination locations, crematoria, and other related businesses, which enable us to serve a wide array of customer needs. We sell cemetery property and funeral and cemetery merchandise and services at the time of need and on a preneed basis. We strive to offer families exceptional service in planning life celebrations and personalized remembrances. Our Dignity Memorial® brand serves approximately 600,000 families each year with professionalism, compassion, and attention to detail.

Our financial position is enhanced by our $14.4 billion backlog of future revenue from both trust and insurance-funded preneed sales at September 30, 2023. Preneed selling provides us with a strategic opportunity to gain future market share. We also believe it adds to the stability and predictability of our revenue and cash flows. While revenue on the majority of preneed merchandise and service sales is deferred until the time of need, sales of preneed cemetery property provide opportunities for full current revenue recognition to the extent that the property is developed and available for use.

We have adequate liquidity and a favorable debt maturity profile, which allow us to reinvest and grow our business as well as return capital to shareholders through share repurchases and dividends.

Factors affecting our operating results include: demographic trends in terms of 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 revenue. The average revenue per funeral contract is influenced by the mix of traditional and cremation services because our average revenue for cremations is lower than that for traditional burials. To further enhance revenue opportunities, we continue to focus on our cremation customers' preferences and remaining relevant by developing additional memorialization merchandise and services that specifically appeal to cremation customers. We believe the presentation of these additional merchandise and services through our customer-facing technology improves our customers' experience by reducing administrative burdens and allowing them to visualize the enhanced product and service offerings, which we believe will help drive increases in the average revenue for a cremation in future periods.

For further discussion of our key operating metrics, see our "Cash Flow" and “Results of Operations” sections below.

### Financial Condition, Liquidity, and Capital Resources

Capital Allocation Considerations

We rely on cash flow from operations as a significant source of liquidity. Our cash flow from operating activities provided $591.5 million in the first nine months of 2023. As of September 30, 2023, we had $800.9 million in remaining borrowing capacity under our Bank Credit Facility.

Our Bank Credit Facility requires us to maintain a certain leverage ratio with which we were in compliance at September 30, 2023. We target a leverage ratio of 3.5x to 4.0x.

Our leverage ratio requirement and actual ratio as of September 30, 2023 were as follows:

|  | Per Credit Agreement | Actual |
| --- | --- | ---: |
| Leverage ratio | 5.00 (Max) | 3.54 |

We have the financial strength and flexibility to reward shareholders with dividends while maintaining a prudent capital structure and pursuing new opportunities for profitable growth.

Our unencumbered cash on hand, future operating cash flows, and the available capacity under our Bank Credit Facilities will give us adequate liquidity to meet our short-term needs as well as our long-term financial obligations. A portion of our cash on hand is encumbered primarily due to cash balances residing in Canada and Puerto Rico, as well as minimum captive insurance balance and operating cash requirements.

We consistently evaluate the best uses of our cash flow that will yield the highest value and return on capital. Our capital allocation strategy is prioritized as follows:

*Investing in Acquisitions and Building New Funeral Service and Cemetery Locations.* We manage our footprint by focusing on strategic acquisitions and building new funeral service locations where the expected returns are attractive and exceed our weighted average cost of capital by a meaningful margin. We target businesses with favorable customer dynamics and/or where we can achieve additional economies of scale. We continue to pursue strategic acquisitions and build new funeral service locations in areas that provide us with the potential for scale.

*Managing Debt.* We continue to focus on maintaining optimal levels of liquidity and financial flexibility. We generate a relatively consistent annual cash flow stream that is generally resistant to down economic cycles. This cash flow stream and our significant liquidity allow us to opportunistically manage our debt maturity profile as we maintain a target leverage ratio of 3.5x to 4.0x. Bolstering our flexible capital strategy, in January 2023, we entered into a new bank credit agreement that consists of a $675.0 million term loan due January 2028 and a revolving credit facility due January 2028 providing for borrowings of up to $1.5 billion, an increase of $500.0 million from our previous facility.

*Return Excess Cash to Shareholders.* Absent strategic acquisition or other higher return opportunities, we intend to return excess cash to shareholders. Our quarterly dividend rate has steadily grown from $0.025 per common share in 2005 to $0.29 per common share in 2023. We target a payout ratio of 30% to 40% of after tax earnings excluding special items and intend to grow our cash dividend commensurate with the growth in our business. While we intend to pay regular quarterly cash dividends for the foreseeable future, all future dividends are subject to limitations in our debt covenant and final determination by our Board of Directors each quarter upon review of our financial performance.

Cash Flow

Our ability to generate strong operating cash flow is one of our fundamental financial strengths and provides us with substantial flexibility in meeting operating and investing needs.

### Operating Activities

Net cash provided by operating activities was $591.5 million and $655.4 million for the for the nine months ended September 30, 2023 and 2022, respectively. This expected decrease in operating cash flow is primarily due to $53.2 million in lower operating income (excluding the impact from *Gains on divestitures and impairment charges, net*) as the first nine months 2022 was impacted significantly by the continued effects of the COVID-19 pandemic.

The $63.9 million decrease in operating cash flows from 2022 comprises:

- a $63.0 million decrease in cash receipts from customers,
- a $50.6 million increase in cash interest payments,
- a $29.0 million increase in employee compensation payments, and
- a $13.3 million increase in payments for certain legal matters that were expensed in the prior year, partially offset by
- a $62.5 million decrease in cash tax payments which is primarily related to a change in tax accounting method for our cemetery segment and will defer cash taxes into future years,
- a $12.4 million increase in General Agency (GA) commission and other receipts,
- a $9.4 million decrease in vendor and other payments, and
- a $7.7 million increase in net trust withdrawals.

### Investing Activities

Cash flows from investing activities used $356.6 million and $244.2 million for the nine months ended September 30, 2023 and 2022, respectively. The $112.4 million increased outflow in 2023 over 2022 is primarily due to the following:

- a $59.0 million increase in cash spent on business acquisitions,
- a $32.2 million increase in cash spent on real estate acquisitions,
- a $15.0 million increase in total capital expenditures which comprises:
- $16.4 million increase in maintenance capital expenditures:
- a $35.9 million increase in expenditures for cemetery property development,
- a $30.2 million decrease in expenditures for capital improvements at existing field locations,
- a $10.7 million increase in expenditures for digital investments and corporate, partially offset by
- a $1.4 million decrease in expenditures for growth capital expenditures/construction of new funeral service locations
- a $8.7 million decrease in cash receipts from divestitures and asset sales, and
- a $1.3 million decrease in proceeds from sale of investments, partially offset by
- a $3.8 million increase in proceeds for Company-owned life insurance policies, net of repayments.

### Financing Activities

Financing activities used $262.2 million for the nine months ended September 30, 2023 compared to using $496.6 million for the same period in 2022. The $234.4 million decreased outflow from 2023 over 2022 is primarily due to the following:

- a $246.3 million decrease in purchase of Company common stock, and
- a $4.4 million change in bank overdrafts and other, partially offset by
- a $8.5 million increase in debt repayments, net of proceeds,
- a $7.1 million increase in payments of dividends, and
- a $0.7 million decrease in proceeds from exercises of stock options.

Financial Assurances

In support of our operations, we have entered into arrangements with certain surety companies whereby such companies agree to issue surety bonds on our behalf as financial assurance and/or as required by existing state and local regulations. The surety bonds are used for various business purposes; however, the majority of the surety bonds issued and outstanding have been used to support our preneed sales activities. The obligations underlying these surety bonds are recorded on our unaudited Condensed Consolidated Balance Sheet as *Deferred revenue, net.* The breakdown of surety bonds between funeral and cemetery preneed arrangements, as well as surety bonds for other activities, is described below.

*(In millions)*

|  | September 30, 2023 | December 31, 2022 |
| --- | ---: | ---: |
| Preneed funeral | $67.8 | $68.4 |
| Preneed cemetery: |  |  |
| Merchandise and services | 141.3 | 141.5 |
| Pre-construction | 52.4 | 42.5 |
| Bonds supporting preneed funeral and cemetery obligations | 261.5 | 252.4 |
| Bonds supporting preneed business permits | 7.6 | 7.1 |
| Other bonds | 25.0 | 23.9 |
| Total surety bonds outstanding | $294.1 | $283.4 |

When selling preneed contracts, we may post surety bonds where allowed by state law. We post the surety bonds in lieu of trusting a certain amount of funds received from the customer. The amount of the bond posted is generally determined by the total amount of the preneed contract that would otherwise be required to be trusted, in accordance with applicable state law.

Surety bond premiums are paid annually and the bonds are automatically renewable until maturity of the underlying preneed contracts, unless we are given prior notice of cancellation.

Except for cemetery pre-construction bonds (which are irrevocable), the surety companies generally have the right to cancel the surety bonds at any time with appropriate notice. In the event a surety company were to cancel the surety bond, we are required to obtain replacement surety assurance from another surety company or fund a trust for an amount generally less than the posted bond amount. Management does not expect that we will be required to fund material future amounts related to these surety bonds due to a lack of surety capacity or surety company non-performance.

Preneed Activities and Backlog of Contracts

In addition to selling our products and services to client families at the time of need, we enter into price-guaranteed preneed contracts, which provide for future funeral or cemetery merchandise and services. Because preneed funeral and cemetery merchandise and services will generally not be provided until sometime in the future, most states and provinces require that all or a portion of the funds collected from customers on preneed contracts be deposited into merchandise and service trusts until the merchandise is delivered or the service is performed. In certain situations, as described above, where permitted by state or provincial laws, we may post a surety bond as financial assurance for a certain amount of the preneed contract in lieu of placing funds into trust accounts. Alternatively, we may sell a life insurance or annuity policy from third-party insurance companies.

### Insurance-Funded Preneed Contracts

Where permitted by state or provincial law, we may sell a life insurance or annuity policy from third-party insurance companies, for which we earn a commission as general sales agent for the insurance company. These general agency revenues are based on a percentage per contract sold and are recognized as funeral revenue when the insurance purchase transaction between the preneed purchaser and third-party insurance provider is complete. All selling costs incurred pursuant to the sale of insurance-funded preneed contracts are expensed as incurred. We do not reflect the unfulfilled insurance-funded preneed contract amounts in our unaudited Condensed Consolidated Balance Sheet. The proceeds of the life insurance policies or annuity contracts will be reflected in funeral revenue as we perform these funerals.

The table below details our results of insurance-funded preneed production and maturities.

*(Dollars in millions)*

| Preneed insurance-funded: | Three months ended September 30, 2023 | 2022 | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Sales production(1) | $176.1 | $170.0 | $537.4 | $508.3 |
| Sales production (number of contracts) (1) | 28,284 | 27,864 | 87,128 | 82,710 |
| General agency revenue | $49.0 | $41.6 | $139.8 | $126.4 |
| Maturities | $93.0 | $93.8 | $291.5 | $296.8 |
| Maturities (number of contracts) | 15,005 | 15,459 | 47,202 | 48,737 |

(1) Amounts are not included in our unaudited Condensed Consolidated Balance Sheet.

### Trust-Funded Preneed Contracts

The funds collected from customers and required by state or provincial law are deposited into trusts. We retain any funds above the amounts required to be deposited into trust accounts and use them for working capital purposes, generally to offset the selling and administrative costs of our preneed programs. Although this represents cash flow to us, the associated revenues are deferred until the merchandise is delivered or services are performed (typically at maturity). The funds in trust are then invested by professional money managers with oversight by independent trustees in accordance with state and provincial laws.

The tables below detail our results of preneed production and maturities, excluding insurance contracts:

*(Dollars in millions)*

| Funeral: Preneed trust-funded (including bonded): | Three months ended September 30, 2023 | 2022 | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: | ---: | ---: |
| Sales production | $138.4 | $125.9 | $418.2 | $387.5 |
| Sales production (number of contracts) | 33,782 | 30,505 | 102,881 | 96,922 |
| Maturities | $93.0 | $84.5 | $280.6 | $265.4 |
| Maturities (number of contracts) | 20,072 | 20,185 | 63,230 | 62,904 |
| **Cemetery:** |  |  |  |  |
| Sales production: |  |  |  |  |
| Preneed | $322.2 | $341.5 | $981.5 | $1,055.1 |
| Atneed | 103.1 | 106.1 | 317.9 | 346.4 |
| Total sales production | $425.3 | $447.6 | $1,299.4 | $1,401.5 |
| Sales production deferred to backlog: |  |  |  |  |
| Preneed | $162.0 | $161.6 | $486.8 | $511.1 |
| Atneed | 72.1 | 74.4 | 224.6 | 241.6 |
| Total sales production deferred to backlog | $234.1 | $236.0 | $711.4 | $752.7 |
| Revenue recognized from backlog: |  |  |  |  |
| Preneed | $132.3 | $101.8 | $356.5 | $310.3 |
| Atneed | 78.2 | 76.3 | 233.2 | 234.6 |
| Total revenue recognized from backlog | $210.5 | $178.1 | $589.7 | $544.9 |

### Backlog of Preneed Contracts

The following table reflects our backlog of trust-funded deferred preneed contract revenue, including amounts related to deferred receipts held in trust at September 30, 2023 and December 31, 2022. Additionally, the table reflects our backlog of unfulfilled insurance-funded contracts (which are not included in our unaudited Condensed Consolidated Balance Sheet) at September 30, 2023 and December 31, 2022. The backlog amounts presented include amounts due from customers for undelivered performance obligations on cancelable preneed contracts to arrive at our total backlog of deferred revenue. The table does not include the backlog associated with businesses that are held for sale.

The table also reflects our preneed receivables and trust investments associated with the backlog of deferred preneed contract revenue, including the amounts due from customers for undelivered performance obligations on cancelable preneed contracts. We believe that the table below is meaningful because it sets forth the aggregate amount of future revenue we expect to recognize as a result of preneed sales, as well as the amount of funds associated with this revenue. Because the future revenue exceeds the assets, future revenue will exceed the cash distributions actually received from the associated trusts and future collections from the customer.

PART I

*(In billions)*

|  | September 30, 2023 Fair Value | Cost | December 31, 2022 Fair Value | Cost |
| --- | ---: | ---: | ---: | ---: |
| Deferred revenue, net | $1.65 | $1.65 | $1.62 | $1.62 |
| Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts | 0.93 | 0.93 | 0.85 | 0.85 |
| Deferred receipts held in trust | 4.35 | 4.20 | 4.16 | 4.12 |
| Allowance for cancellation on trust investments | (0.25) | (0.24) | (0.24) | (0.23) |
| Backlog of trust-funded deferred revenue, net of estimated allowance for cancellation | 6.68 | 6.54 | 6.39 | 6.36 |
| Backlog of insurance-funded revenue (1) | 7.70 | 7.70 | 7.35 | 7.35 |
| Total backlog of deferred revenue | $14.38 | $14.24 | $13.74 | $13.71 |
| Preneed receivables, net and trust investments | $5.83 | $5.68 | $5.58 | $5.54 |
| Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts | 0.93 | 0.93 | 0.85 | 0.85 |
| Allowance for cancellation on trust investments | (0.25) | (0.24) | (0.24) | (0.23) |
| Assets associated with backlog of trust-funded deferred revenue, net of estimated allowance for cancellation | 6.51 | 6.37 | 6.19 | 6.16 |
| Insurance policies associated with insurance-funded deferred revenue (1) | 7.70 | 7.70 | 7.35 | 7.35 |
| Total assets associated with backlog of preneed revenue | $14.21 | $14.07 | $13.54 | $13.51 |

(1) Amounts are not included in our unaudited Condensed Consolidated Balance Sheet.

The fair value of our trust investments was based on a combination of quoted market prices, observable inputs such as interest rates or yield curves, and appraisals. As of September 30, 2023, the difference between the backlog and asset market amounts represents $0.19 billion related to contracts for which we have posted surety bonds as financial assurance in lieu of trusting, $1.29 billion collected from customers that were not required to be deposited into trusts, and $0.16 billion in allowable cash distributions from trust assets partially offset by $1.47 billion in amounts due on delivered property and merchandise. As of September 30, 2023, the fair value of the total backlog comprised $4.00 billion related to cemetery contracts and $10.38 billion related to funeral contracts. As of September 30, 2023, the fair value of the assets associated with the backlog of trust-funded deferred revenue comprised $4.02 billion related to cemetery contracts and $2.49 billion related to funeral contracts. As of September 30, 2023, the backlog of insurance-funded contracts of $7.70 billion was equal to the proceeds we expect to receive from the associated insurance policies when the corresponding contract is serviced.

Trust Investments

In addition to selling our products and services to client families at the time of need, we enter into price-guaranteed preneed funeral and cemetery contracts, which provide for future funeral or cemetery merchandise and services. Since preneed funeral and cemetery merchandise or services will generally not be provided until sometime in the future, most states and provinces require that all or a portion of the funds collected from customers on preneed funeral and cemetery contracts be paid into trusts and/or escrow accounts until the merchandise is delivered or the service is performed. Investment earnings associated with the trust investments are expected to mitigate the inflationary costs of providing the preneed funeral and cemetery merchandise and services in the future at the prices that were guaranteed at the time of sale. Also, we are required by state and provincial law to pay a portion of the proceeds from the preneed or atneed sale of cemetery property interment rights into perpetual care trusts. For these investments, the original corpus generally remains in the trust in perpetuity and the earnings or elected distributions are withdrawn as allowed to defray the expenses to maintain the cemetery property. While many states require that net capital gains or losses be retained and added to the corpus, certain states allow the net realized capital gains and losses to be included in the earnings that are distributed. Additionally, some states allow a total return distribution that may contain elements of income, capital appreciation, and principal.

Independent trustees manage and invest the majority of the funds deposited into the funeral and cemetery merchandise and service trusts as well as the cemetery perpetual care trusts. The majority of the trustees are selected based on their respective geographic footprint and qualifications per state and provincial regulations. Most of the trustees engage the same independent investment managers. These trustees, with input from SCI's wholly-owned registered investment advisor, establish an investment policy that serves as an operating document to guide the investment activities of the trusts including asset allocation and manager selection. The investments are also governed by state and provincial guidelines. All of the trusts seek to control risk and volatility through a combination of asset classes, investment styles, and a diverse mix of investment managers.

Asset allocation is based on the liability structure of each funeral, cemetery, and perpetual care trust. Based on the various criteria set forth in the investment policy, the investment advisor recommends investment managers to the trustees. The primary investment objectives for the funeral and cemetery merchandise and service trusts include 1) preserving capital within acceptable levels of volatility and risk and 2) achieving growth of principal over time sufficient to preserve and increase the purchasing power of the assets. Preneed funeral and cemetery contracts generally take several years to mature; therefore, the funds associated with these contracts are often invested through several market cycles.

Where allowed by state and provincial regulations, the cemetery perpetual care trusts’ primary investment objectives are growth-oriented to provide for a fixed distribution rate from the trusts’ assets. Where such distributions are limited to ordinary income, the cemetery perpetual care trusts’ investment objectives emphasize providing a steady stream of current investment income with some capital appreciation. Both types of distributions are used to provide for the current and future maintenance and beautification of the cemetery properties.

As of September 30, 2023, approximately 95% of our trusts were under the control and custody of five large financial institutions. The U.S. trustees primarily use four managed limited liability companies (LLCs), one for each merchandise and service trust type and two for the cemetery perpetual care trust type, each with an independent trustee as custodian. Each financial institution acting as trustee manages its allocation of trust assets in accordance with the investment policy through the purchase of the appropriate LLCs' units. For those accounts not eligible for participation in the LLCs or where a particular state's regulations contain other investment restrictions, the trustee utilizes institutional mutual funds that comply with our investment policy or with such state restrictions. The U.S. trusts include a modest allocation to alternative investments. These alternative investments are held in vehicles structured as LLCs and are managed by certain trustees. The trusts that are eligible to allocate a portion of their investments to alternative investments purchase units of the respective alternative investment LLCs.

### Investment Structures

The managed LLCs use the following structures for investments:

*Commingled funds* allow the trusts to access, at a reduced cost, some of the same investment managers and strategies used elsewhere in the portfolios.

*Mutual funds* employ institutional share class mutual funds where operationally or economically efficient. These mutual funds are utilized to invest in various asset classes including U.S. equities, non-U.S. equities, corporate bonds, government bonds, high yield bonds, and commodities, all of which are governed by guidelines outlined in their individual prospectuses.

*Separately managed accounts* are trusts that utilize separately managed accounts, where appropriate, to reduce the costs to the investment portfolios.

### Asset Classes

*Equity investments* have historically provided long-term capital appreciation in excess of inflation. The trusts have direct investments in individual equity securities primarily in domestic equity portfolios that include large, mid, and small capitalization companies of different investment styles (i.e., growth and value). The majority of the equity allocation is managed by institutional investment managers that specialize in an objective-specific area of expertise. Our equity securities are exposed to market risk; however, we believe these securities are well-diversified. As of September 30, 2023, the largest single equity position represented 1% of the total securities portfolio.

*Fixed income investments* are intended to preserve principal, provide a source of current income, and reduce overall portfolio volatility. The majority of the fixed income allocation for the trusts is invested in institutional share class mutual funds. Where the trusts have direct investments in individual fixed income securities, these are primarily in government and corporate instruments.

Canadian government fixed income securities are investments in Canadian federal and provincial government instruments. In many cases, regulatory restrictions mandate that the funds from the sales of preneed funeral and cemetery contracts sold in certain Canadian jurisdictions must be invested in these instruments.

*Alternative investments* serve to provide high rates of return with reduced volatility and lower correlation to publicly-traded securities. These investments are typically longer term in duration and are diversified by strategy, sector, manager, geography, and vintage year. The investments consist of numerous limited partnerships invested in private equity, private market real estate, energy and natural resources, infrastructure, transportation, and private debt including both distressed debt and mezzanine financing. The trustees that have oversight of their respective alternative LLCs work closely with the investment advisor in making all investment decisions.

### Trust Performance

During the nine months ended September 30, 2023, the Standard and Poor’s 500 Index increased 13.1% and the Bloomberg’s US Aggregate Bond Index decreased 1.2%. This compares to SCI trusts that increased 6.4% during the same period, which exceeded our internal custom benchmark. The SCI trusts have a diversified allocation of approximately 57% equities, 28% fixed income securities, 10% alternative and other investments with the remaining 5% available in money market funds.

Recognized trust fund income (realized and unrealized) related to our preneed trust investments was $121.3 million and $113.1 million for the nine months ended September 30, 2023 and 2022, respectively. Recognized trust fund income (realized and unrealized) related to our cemetery perpetual care trust investments was $63.5 million and $64.6 million for the nine months ended September 30, 2023 and 2022, respectively. The increase in recognized trust fund income is due in part to earnings retained related to the unclaimed property audit. Information regarding the unclaimed property audit is set forth in Part I, Item 1. Financial Statements, Note 9 of this Form 10-Q.

SCI, the trustees, and the investment advisor monitor the capital markets and the trusts on an on-going basis. The trustees, with input from the investment advisor, take prudent action as needed to achieve the investment goals and objectives of the trusts.

### Results of Operations — Three and Nine Months Ended September 30, 2023 and 2022

Three Months Ended September 30, 2023 and 2022

Management Summary

In the third quarter of 2023, we reported consolidated net income attributable to common stockholders of $122.0 million ($0.80 per diluted share) compared to net income attributable to common stockholders in the third quarter of 2022 of $120.9 million ($0.76 per diluted share). These results were impacted by certain items including:

*(In millions)*

|  | Three months ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Pre-tax gains on divestitures and impairment charges, net | $2.5 | $14.4 |
| Tax effect from above item | $(0.5) | $(3.4) |
| Change in uncertain tax reserves and other | $0.9 | $1.1 |

In addition to the above items, the increase from the prior year is primarily related to higher cemetery revenue combined with lower fixed costs resulting in higher gross profit. Additionally, lower corporate general and administrative expenses combined with a lower share count offset the impact of higher interest expense.

Funeral Results

*(Dollars in millions, except average revenue per service)*

|  | Three months ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Consolidated funeral revenue | $554.8 | $554.0 |
| Less: revenue associated with acquisitions/new construction | 9.3 | 1.8 |
| Less: revenue associated with divestitures | 1.2 | 0.5 |
| Comparable(1) funeral revenue | 544.3 | 551.7 |
| Less: comparable recognized preneed revenue | 32.3 | 40.1 |
| Less: comparable general agency and other revenue | 44.0 | 36.6 |
| Adjusted comparable funeral revenue | $468.0 | $475.0 |
| Comparable services performed | 83,004 | 87,569 |
| Comparable average revenue per service(2) | $5,638 | $5,424 |
| Consolidated funeral gross profit | $109.7 | $101.8 |
| Less: gross profit associated with acquisitions/new construction | 0.3 | 0.4 |
| Less: gross losses associated with divestitures | 0.9 | (1.3) |
| Comparable(1) funeral gross profit | $108.5 | $102.7 |

(1) We define comparable (or same store) operations as those funeral locations owned by us for the entire period beginning January 1, 2022 and ending September 30, 2023.

(2) We calculate comparable average revenue per service by dividing comparable funeral revenue, excluding general agency revenue, recognized preneed revenue, and other revenue to avoid distorting our average of normal funeral services revenue, by the comparable number of funeral services performed during the period. Recognized preneed revenue is excluded from our calculation of comparable average revenue per service because the associated service has not yet been performed.

### Funeral Revenue

Consolidated revenue from funeral operations was $554.8 million for the three months ended September 30, 2023 compared to $554.0 million for the same period in 2022. This $0.8 million increase is primarily attributable to the $7.5 million increase in revenue from acquired and newly constructed properties, partially offset by the $7.4 million decrease in comparable revenue.

Comparable revenue from funeral operations was $544.3 million for the three months ended September 30, 2023 compared to $551.7 million for the same period in 2022. This $7.4 million, or 1.3%, decrease was primarily driven by a $10.2 million, or 2.2%, decrease in core funeral revenue combined with a $7.8 million decrease in recognized preneed revenue. These decreases were partially offset by a $7.4 million increase in other revenue. Other revenue increased due to higher general agency revenue primarily as a result of 4.9% growth in preneed sales production.

The core funeral revenue decrease of $10.2 million is primarily due to a decline in core funeral services performed of 6.2% partially offset by growth in the core average revenue per service of 4.3%. This core average growth was achieved despite a 120 basis point increase in the core cremation rate. The core average growth is primarily driven by consumer preferences for enhanced product and service offerings as well as an increase in trust fund income.

### Funeral Gross Profit

Consolidated funeral gross profit increased $7.9 million, or 7.8%, for the three months ended September 30, 2023 compared to 2022. This increase is primarily attributable to the increase in comparable funeral gross profit of $5.8 million, or 5.6%. Comparable funeral gross profit increased $5.8 million to $108.5 million and the comparable gross profit percentage increased from 18.6% to 19.9%. This increase is primarily due to lower fixed costs and reduced incentive compensation costs this quarter compared with the prior year quarter.

Cemetery Results

*(In millions)*

|  | Three months ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Consolidated cemetery revenue | $447.1 | $423.8 |
| Less: revenue associated with acquisitions/new construction | 1.5 | 0.1 |
| Comparable(1) cemetery revenue | $445.6 | $423.7 |
| Consolidated cemetery gross profit | $143.9 | $129.1 |
| Less: gross (loss) associated with acquisitions/new construction | (0.4) | (0.2) |
| Comparable(1) cemetery gross profit | $144.3 | $129.3 |

(1) We define comparable (or same store) operations as those cemetery locations owned by us for the entire period beginning January 1, 2022 and ending September 30, 2023.

### Cemetery Revenue

Consolidated revenue from our cemetery operations increased $23.3 million, or 5.5%, for the three months ended September 30, 2023 compared to the same period in 2022 primarily due to a $21.9 million increase in comparable cemetery revenue.

The $21.9 million, or 5.2%, increase in comparable cemetery revenue was primarily as a result of a $20.9 million increase in total recognized preneed revenue. This increase was primarily due to revenue recognition from an expected increase in completed construction projects in the third quarter coupled with higher trust fund income.

### Cemetery Gross Profit

Consolidated cemetery gross profit increased $14.8 million, or 11.5%, in the three months ended September 30, 2023 compared to the same period in 2022, which is primarily attributable to the increase in comparable cemetery gross profit of $15.0 million, or 11.6%. Comparable cemetery gross profit increased $15.0 million to $144.3 million, and the gross profit percentage increased to 32.4% from 30.5% primarily due to the growth in revenue mentioned above coupled with lower incentive compensation costs this quarter compared with the prior year.

Other Financial Statement Items

### Corporate General and Administrative Expenses

*Corporate general and administrative expenses* decreased $8.7 million to $33.2 million for the third quarter of 2023 compared to the third quarter of 2022 related to a lower incentive compensation costs versus the prior year quarter.

### Gains on Divestitures and Impairment Charges, Net

We recognized a $2.5 million net pre-tax gain on asset divestitures and impairments in the third quarter of 2023 compared to a $14.4 million net pre-tax gain in the third quarter of 2022 on asset divestitures associated with non-strategic funeral and cemetery locations in the United States and Canada.

### Interest Expense

*Interest expense* increased $18.0 million to $61.5 million for the three months ended September 30, 2023 due to higher interest on our floating rate debt. During the third quarter of 2023, our floating rate debt carried a weighted average rate of 7.5%, which is over 400 basis points higher than the weighted average rate for our floating rate debt in the third quarter of 2022.

### Provision for Income Taxes

Our effective tax rate was 24.5% and 23.7% for the three months ended September 30, 2023 and 2022, respectively. The lower effective tax rate for the three months ended September 30, 2022 was primarily due to a change in estimate in the finalization of the 2021 tax return. The effective tax rate for the three months ended September 30, 2023 was higher than the federal statutory tax rate of 21.0% primarily due to state tax expense.

### Weighted Average Shares

The diluted weighted average number of shares outstanding was 152.3 million for the three months ended September 30, 2023 compared to 159.1 million for the same period in 2022. The decrease primarily reflects the impact of shares repurchased under our share repurchase program.

Nine Months Ended September 30, 2023 and 2022

Management Summary

In the first nine months of 2023, we reported consolidated net income attributable to common stockholders of $398.9 million ($2.60 per diluted share) compared to net income attributable to common stockholders for the same period in 2022 of $473.0 million ($2.93 per diluted share). These results were impacted by certain items including:

*(In millions)*

|  | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Pre-tax gains on divestitures and impairment charges, net | $10.2 | $15.2 |
| Pre-tax loss on early extinguishment of debt | $(1.1) | $(1.2) |
| Pre-tax foreign currency exchange loss | $— | $(1.5) |
| Tax effect from above items | $(2.5) | $(3.3) |
| Change in uncertain tax reserves and other | $1.4 | $0.2 |

In addition to the above items, the decrease from the prior year is primarily due to an expected decline in gross profit related to decreases in COVID-19 related activity. Additionally, fewer shares outstanding and a lower tax rate helped to offset the impact of higher interest expense primarily due to rising interest rates.

Funeral Results

*(Dollars in millions, except average revenue per service)*

|  | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Consolidated funeral revenue | $1,729.9 | $1,751.9 |
| Less: revenue associated with acquisitions/new construction | 23.1 | 2.5 |
| Less: revenue associated with divestitures | 2.2 | 2.4 |
| Comparable(1) funeral revenue | 1,704.6 | 1,747.0 |
| Less: comparable recognized preneed revenue | 118.7 | 125.8 |
| Less: comparable general agency and other revenue | 126.3 | 110.0 |
| Adjusted comparable funeral revenue | $1,459.6 | $1,511.2 |
| Comparable services performed | 262,641 | 279,130 |
| Comparable average revenue per service(2) | $5,557 | $5,414 |
| Consolidated funeral gross profit | $374.8 | $414.5 |
| Less: gross profit associated with acquisitions/new construction | 2.1 | 0.8 |
| Less: gross losses associated with divestitures | 0.3 | (2.5) |
| Comparable(1) funeral gross profit | $372.4 | $416.2 |

(1) We define comparable (or same store) operations as those funeral locations owned by us for the entire period beginning January 1, 2022 and ending September 30, 2023.

(2) We calculate comparable average revenue per service by dividing comparable funeral revenue, excluding general agency revenue, recognized preneed revenue, and other revenue to avoid distorting our average of normal funeral services revenue, by the comparable number of funeral services performed during the period. Recognized preneed revenue is preneed sales of merchandise that are delivered at the time of sale, including memorial merchandise and travel protection, net, and excluded from our calculation of comparable average revenue per service because the associated service has not yet been performed.

### Funeral Revenue

Consolidated revenue from funeral operations was $1,729.9 million for the nine months ended September 30, 2023, compared to $1,751.9 million for the same period in 2022. This $22.0 million decrease is primarily attributable to a $42.4 million decrease in comparable revenue as described below and offset by $20.6 million of growth in revenue contributed by acquired and newly constructed properties.

Comparable revenue from funeral operations was $1,704.6 million for the nine months ended September 30, 2023 compared to $1,747.0 million for the same period in 2022. This $42.4 million, or 2.4%, decrease was primarily driven by the decrease in core funeral revenue of $57.2 million as the prior year was impacted by the COVID-19 pandemic combined with lower recognized preneed revenue. This decrease was partially offset by a $16.3 million increase in comparable general agency and other revenue. The growth in general agency revenue is primarily the result of a 5.6% increase in our comparable preneed funeral sales production.

The core revenue decrease of $57.2 million, or 3.9%, is due to the decline in core funeral services performed of 7.3%, offset by the growth in the core average revenue per service of 3.6%. This core average growth was achieved despite a 150 basis point increase in the core cremation rate and is primarily driven by consumer preferences for enhanced product and service offerings as well as an increase in trust fund income.

### Funeral Gross Profit

Consolidated funeral gross profit decreased $39.7 million, or 9.6%, in the first nine months of 2023 compared to 2022. This decrease is primarily attributable to the $43.8 million, or 10.5%, decrease in comparable funeral gross profit. Comparable funeral gross profit decreased $43.8 million to $372.4 million and the comparable gross profit percentage decreased from 23.8% to 21.8%. This decrease in gross profit is due to the expected decline in revenue mentioned above combined with higher selling costs on higher preneed insurance sales production during the current year.

Cemetery Results

*(In millions)*

|  | Nine months ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Consolidated cemetery revenue | $1,314.1 | $1,329.1 |
| Less: revenue associated with acquisitions/new construction | 2.8 | — |
| Comparable(1) cemetery revenue | $1,311.3 | $1,329.1 |
| Consolidated cemetery gross profit | $429.5 | $460.1 |
| Less: gross losses associated with acquisitions/new construction | (1.3) | (0.5) |
| Comparable(1) cemetery gross profit | $430.8 | $460.6 |

(1) We define comparable (or same store) operations as those cemetery locations owned by us for the entire period beginning January 1, 2022 and ending September 30, 2023.

### Cemetery Revenue

Consolidated revenue from our cemetery operations decreased $15.0 million, or 1.1%, for the nine months ended September 30, 2023 compared to the same period in 2022 primarily due to a $17.8 million, or 1.3%, decrease in comparable cemetery revenue partially offset by a $2.8 million increase in revenue contributed by newly constructed and acquired properties.

The $17.8 million, or 1.3%, decrease in comparable cemetery revenue was primarily attributable to a $16.4 million decrease in comparable cemetery core revenue. This decline was primarily a result of a $14.6 million decrease in atneed revenue as the prior year was more heavily impacted by the COVID-19 pandemic. Recognized preneed revenue decreased $1.8 million as a result of an 8.5% decline in preneed property production, offset by revenue recognition from an expected increase in completed construction projects and merchandise deliveries. Comparable other revenue also decreased $1.4 million, or 1.5%, compared to the prior year quarter primarily from a decrease in endowment care trust fund income due to the timing of capital gains.

### Cemetery Gross Profit

Consolidated cemetery gross profit decreased $30.6 million for the nine months ended September 30, 2023 compared to the same period in 2022, which is primarily attributable to the decrease in comparable cemetery gross profit of $29.8 million. Comparable cemetery gross profit decreased $29.8 million to $430.8 million, and the gross profit percentage decreased from 34.7% to 32.9%. The decrease in gross profit is due to the decline in revenue mentioned above combined with higher selling costs and higher property and merchandise costs as the mix of sales recognized incurred higher costs compared to prior year.

Other Financial Statement Items

### Corporate General and Administrative Expenses

*Corporate general and administrative expenses* decreased $17.0 million to $112.3 million for the nine months ended September 30, 2023 primarily due to lower incentive compensation costs versus prior year.

### Gains on Divestitures and Impairment Charges, Net

We recognized a $10.2 million net pre-tax gain on asset divestitures and impairments in the nine months ended September 30, 2023 compared to a $15.2 million pre-tax gain on asset divestitures in the nine months ended September 30, 2022 associated with the disposition of non-strategic funeral and cemetery locations in the United States and Canada.

### Interest Expense

*Interest expense* increased $51.8 million to $174.9 million for the nine months ended September 30, 2023 primarily due to higher interest on our floating rate debt. During the nine months ended September 30, 2023, our floating rate debt carried a weighted average rate of 6.9%, which is over 450 basis points higher than the weighted average rate for our floating rate debt in the first nine months of 2022.

### Provision for Income Taxes

Our effective tax rate was 24.5% and 25.2% for the nine months ended September 30, 2023 and 2022, respectively. The lower effective tax rate for the nine months ended September 30, 2023 was primarily due to non-taxable gains on the cash surrender value of certain life insurance policies. The effective tax rate for the nine months ended September 30, 2023 was higher than the federal statutory tax rate of 21.0% primarily due to state tax expense.

### Weighted Average Shares

The diluted weighted average number of shares outstanding was 153.6 million for the nine months ended September 30, 2023 compared to 161.4 million for the same period in 2022. The decrease primarily reflects the impact of shares repurchased under our share repurchase program.

### Critical Accounting Policies, Recent Accounting Pronouncements, and Accounting Changes

The preparation of financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Although we base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances, actual results may differ from the estimates on which our financial statements are prepared at any given point of time. Changes in these estimates could materially affect our consolidated financial position, consolidated results of operations, or cash flows. Significant items that are subject to such estimates and assumptions include revenue and expense accruals, fair value of merchandise and perpetual care trust assets, and the allocation of purchase price to the fair value of assets acquired. Our critical accounting policies have not significantly changed since December 31, 2022 and are disclosed in our Annual Report on Form 10-K for the year ended December 31, 2022.

Recent Accounting Pronouncements and Accounting Changes

For discussion of recent accounting pronouncements and accounting changes, see Part I, Item 1. Financial Statements, Note 2 of this Form 10-Q.

### Cautionary Statement on Forward-Looking Statements

The statements in this Form 10-Q that are not historical facts are forward-looking statements made in reliance on the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995. These statements may be accompanied by words such as “believe”, “estimate”, “project”, “expect”, “anticipate”, “predict” that convey the uncertainty of future events or outcomes. These statements are based on assumptions that we believe are reasonable; however, many important factors could cause our actual consolidated results in the future to differ materially from the forward-looking statements made herein and in any other documents or oral presentations made by, or on behalf of, the Company. These factors are discussed below. We assume no obligation and make no undertaking to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by the Company, whether as a result of new information, future events, or otherwise.

- Our affiliated trust funds own investments in securities, which are affected by market conditions that are beyond our control.
- We may be required to replenish our affiliated funeral and cemetery trust funds to meet minimum funding requirements, which would have a negative effect on our earnings and cash flow.
- Our ability to execute our strategic plan depends on many factors, some of which are beyond our control.
- We may be adversely affected by the effects of inflation.
- Our results may be adversely affected by significant weather events, natural disasters, catastrophic events or public health crises.
- Our credit agreements contain covenants that may prevent us from engaging in certain transactions.
- If we lost the ability to use surety bonding to support our preneed activities, we may be required to make material cash payments to fund certain trust funds.
- Increasing death benefits related to preneed contracts funded through life insurance or annuity contracts may not cover future increases in the cost of providing a price-guaranteed service.
- The financial condition of third-party life insurance companies that fund our preneed contracts may impact our future revenue.
- Unfavorable publicity could affect our reputation and business.
- Our failure to attract and retain qualified sales personnel could have an adverse effect on our business and financial condition.
- We use a combination of insurance, self-insurance, and large deductibles in managing our exposure to certain inherent risks; therefore, we could be exposed to unexpected costs that could negatively affect our financial performance.
- Declines in overall economic conditions beyond our control could reduce future potential earnings and cash flows and could result in future impairments to goodwill and/or other intangible assets.
- Any failure to maintain the security of the information relating to our customers, their loved ones, our associates, and our vendors could damage our reputation, could cause us to incur substantial additional costs and to become subject to litigation, and could adversely affect our operating results, financial condition, or cash flow.
- Our Canadian business exposes us to operational, economic, and currency risks.
- Our level of indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, and may prevent us from fulfilling our obligations under our indebtedness.
- A failure of a key information technology system or process could disrupt and adversely affect our business.
- Failure to maintain effective internal control over financial reporting could adversely affect our results of operations, investor confidence, and our stock price.
- The funeral and cemetery industry is competitive.
- If the number of deaths in our markets declines, our cash flows and revenue may decrease. Changes in the number of deaths are not predictable from market to market or over the short term.
- If we are not able to respond effectively to changing consumer preferences, our market share, revenue, and/or profitability could decrease.
- The continuing upward trend in the number of cremations performed in North America could result in lower revenue, operating profit, and cash flows.
- Our funeral and cemetery businesses are high fixed-cost businesses.
- Risks associated with our supply chain could materially adversely affect our financial performance.
- Regulation and compliance could have a material adverse impact on our financial results.
- Unfavorable results of litigation could have a material adverse impact on our financial statements.
- Cemetery burial practice claims could have a material adverse impact on our financial results.
- The application of unclaimed property laws by certain states to our preneed funeral and cemetery backlog could have a material adverse impact on our liquidity, cash flows, and financial results.
- Changes in taxation as well as the inherent difficulty in quantifying potential tax effects of business decisions could have a material adverse effect on the results of our operations, financial condition, or cash flows.

For further information on these and other risks and uncertainties, see our Securities and Exchange Commission filings, including our 2022 Annual Report on Form 10-K. Copies of this document as well as other SEC filings can be obtained from our website at www.sci-corp.com. We assume no obligation and make no undertaking to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by us whether as a result of new information, future events, or otherwise.

## Market risk

As filed, 1,242 characters.

The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. The term “market” risk refers to the risk of gains or losses arising from changes in interest rates and prices of marketable securities. The disclosures are not meant to be precise indicators of expected future gains or losses, but rather indicators of reasonably possible gains or losses. This forward-looking information provides indicators of how we view and manage our ongoing market risk exposures. All of our market risk-sensitive instruments were entered into for purposes other than trading.

### Marketable Equity and Debt Securities — Price Risk

In connection with our preneed operations and sales, the related trust funds own investments in equity and debt securities and mutual funds, which are sensitive to current market prices. Cost and market values as of September 30, 2023 are presented in Part I, Item 1. Financial Statements, Note 3 of this Form 10-Q. Also, see Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations "Financial Condition, Liquidity and Capital Resources" section for discussion of trust investments.

## Controls and procedures

As filed, 1,617 characters.

### Disclosure Controls and Procedures

As of September 30, 2023, we carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act)). Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the Securities and Exchange Commission (SEC) reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time period specified by the SEC’s rules and forms and that such information is accumulated and communicated to management, including our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure. Based on our evaluation, our CEO and CFO have concluded that our disclosure controls and procedures are effective as of September 30, 2023 and that the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q fairly present, in all material respects, our consolidated financial condition, consolidated results of operations, and cash flows for the periods presented in conformity with US GAAP.

### Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 158 characters.

There have been no material changes in our Risk Factors as set forth in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022.

Filed Nov 2, 2023.
Source: SEC EDGAR, the filing index for accession 0000089089-23-000065. Last ingested by Listed: Nov 6, 2026, 13:24 ET. No prices; not investment advice.