Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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 December 31, 2025, we operated 1,485 funeral service locations and 500 cemeteries (including 312 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 700,000 families each year with professionalism, compassion, and attention to detail.
Our financial position is enhanced by our $17.0 billion backlog of future revenue from both trust and insurance-funded preneed sales at December 31, 2025. 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 as 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. While economic conditions, inflation, and consumer confidence may affect the timing or mix of customer purchases, demand is generally deferred rather than . Accordingly, demand for these products and services has historically been less sensitive to economic cycles than other discretionary consumer purchases.
For further discussion of our key operating metrics, see our " Cash Flow " and “ Results of Operations ” sections below. For a discussion of our results of operations and liquidity and capital resources for the fiscal year ended December 31, 2024, see
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Management’s Discussion and Analysis of Financial Condition, Liquidity and Capital Resources and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year December 31, 2024, filed with the Securities and Exchange Commission on February 13, 2025.
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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 $942.8 million in 2025. In addition, as of December 31, 2025, we have $1,448.0 million in borrowing capacity under our revolving credit facility. As of December 31, 2025, we had $56.8 million in current maturities of long-term debt, which primarily consist of the current amounts due on our term loan, mortgage notes and other debt, and finance leases.
Our Bank Credit Facility requires us to maintain a certain leverage ratio with which we were in compliance at December 31, 2025. We target a leverage ratio of 3.5x to 4.0x.
Our financial covenant requirements and actual ratio as of December 31, 2025 are as follows:
Per Credit Agreement
Actual
Leverage ratio
5.00 (Max)
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 gives us adequate liquidity to meet our short-term needs as well as our long-term financial obligations. Due to cash balances residing in Canada and minimum operating cash requirements, a portion of our cash on hand is encumbered.
We consistently evaluate the best uses of our cash flow that will yield the highest value and return on capital. Our capital investment 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. We target businesses with favorable customer dynamics and/or where we can achieve the benefits of economies of scale. We continue to pursue strategic acquisitions and build new funeral service locations in areas that provide us with the potential for additional scale. In 2025, we invested $101.3 million in acquiring 22 funeral service locations and 2 cemeteries, which included 2 combination locations.
Return Excess Cash to Shareholders. In addition to any strategic acquisitions or new build opportunities, we continue to return cash to shareholders through dividends and our share repurchase program. Our quarterly dividend rate has steadily grown from $0.025 per common share in 2005 to $0.34 per common share at the end of 2025. We target a dividend 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 covenants and final determination by our Board of Directors each quarter upon review of our financial performance. We also expect to continue to repurchase shares of our common stock in the open market or through privately negotiated transactions, subject to market conditions, debt covenants, and normal trading restrictions. There can be no assurance that we will buy our common stock under our repurchase program in the future. In 2025, we repurchased 5,864,563 shares of our common stock at an aggregate cost of $464.2 million, which is an average cost per share of $79.15. In 2024, we repurchased 3,439,551 shares of our common stock at an aggregate cost of $249.8 million, which is an average cost per share of $72.63. Subsequent to December 31, 2025, we repurchased 552,313 shares for $44.4 million at an average cost per share of $80.48.
Managing Debt. We continue to focus on maintaining optimal levels of liquidity and financial flexibility. Our recent $325.0 million increase in availability under our bank credit facility bolsters our flexible capital strategy and allows us to further manage our debt maturity profile by making open market debt repurchases when it is opportunistic to do so. 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 substantially reduce our long-term debt maturities should we choose to do so. In November 2025, we entered into a new bank credit agreement due November 2030 consisting of a $750.0 million term loan, which is funded debt, and a revolving credit facility providing for borrowings of up to $1.75 billion. Proceeds from this new bank credit agreement were used to settle our existing Term Loan and Bank Credit Facility, which were both due January 2028. In addition to more favorable pricing, the new bank credit agreement provides us flexibility with incremental liquidity for capital investment, working capital, and other general corporate purposes.
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 $942.8 million and $944.9 million for the years ended December 31, 2025, and 2024, respectively.
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The $2.1 million decrease in operating cash flow during 2025 comprises:
• a $119.2 million increase in cash tax payments,
• a $20.2 million increase in employee compensation payments,
• a $19.3 million increase in restructuring payments,
• a $12.2 million increase in net trust deposits,
• a $11.2 million increase in cash interest payments, and
• a $3.9 million increase in vendor and other payments, partially offset by
• a $116.9 million increase in cash receipts from customers,
• a $38.6 million increase in General Agency (GA) commission and other receipts, and
• a $28.4 million decrease in payments for certain legal matters.
Investing Activities
Cash flows from investing activities used $548.3 million and $620.9 million, in 2025, and 2024, respectively. The $72.6 million decreased outflow from 2025 over 2024 is primarily due to the following:
• a $79.9 million decrease in cash spent on business acquisitions,
• a $43.6 million decrease in cash spent on real estate acquisitions,
• a $10.3 million increase in net proceeds for Company-owned life insurance policies,
• a $6.0 million increase in cash receipts from divestitures and asset sales, and
• a $2.2 million decrease in other investing activities primarily for investments in renewable energy tax credits, partially offset by
• a $54.5 million increase in capital expenditures related to construction of our new corporate headquarters which is financed through a separate construction loan facility,
• a $14.9 million increase in total capital expenditures, which includes:
• an $18.8 million increase for growth capital expenditures/construction of new funeral service locations, partially offset by
• a $3.9 million decrease in maintenance capital expenditures, consisting of:
• an $8.6 million decrease in expenditures for digital investments and corporate, partially offset by
• a $3.1 million increase in expenditures for cemetery property development, and
• a $1.6 million increase in expenditures for capital improvements at existing field locations.
Financing Activities
Financing activities used $374.7 million in 2025 compared to $319.6 million in 2024. The $55.1 million increased outflow from 2025 over 2024 is primarily due to the following:
• a $207.3 million increase in purchase of Company common stock,
• a $27.3 million decrease in proceeds from exercises of stock options, and
• a $9.3 million increase in payments of dividends, partially offset by
• a $132.4 million increase in debt proceeds, net of repayments,
• a $54.8 million increase in borrowings from our corporate headquarters debt facility, and
• a $1.6 million decrease in bank overdrafts and other.
Material Cash Requirements
Our material cash requirements include the following contractual and other obligations.
Debt & Finance Leases
As of December 31, 2025, we had $5.1 billion in aggregate principal outstanding on our notes, term loan, revolving credit facility, finance leases, mortgage notes, and other debt (collectively "debt and finance leases"), of which $56.8 million is payable in the next twelve months. The aggregate principal excludes $38.1 million in unamortized non-cash debt issuance costs and original issuance discounts and premiums. Future interest payments associated with the debt and finance leases
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total $1.2 billion, of which $249.1 million is payable in the next twelve months. For further information on our debt and finance leases see Note 6 and Note 8 of Part II, Item 8. Financial Statements and Supplementary Data.
Operating Leases
We have operating lease agreements for funeral service real estate and office equipment for funeral service locations, cemetery locations, and administrative offices. As of December 31, 2025, we had fixed lease payment obligations of $65.6 million, of which $10.4 million is due in the next twelve months. See Note 8 in Part II, Item 8. Financial Statements and Supplementary Data for additional details related to our leases.
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 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.
Years Ended December 31,
(In millions)
Preneed funeral
Preneed cemetery:
Merchandise and services
Pre-construction
Bonds supporting preneed funeral and cemetery obligations
Bonds supporting preneed business permits
Other bonds
Total surety bonds outstanding
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.
During the second quarter of 2025, we replaced our then-existing letters of credit under the Bank Credit Facility with a $46.0 million surety bond and a related indemnity obligation with a large insurance company, which is included in Other bonds in the table above.
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 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 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 or use other non-insurance funded third-party providers.
Insurance- and Other 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 a general sales agent for the insurance company. These general agency commissions (GA revenue) 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 completed. All selling costs incurred pursuant to the sale of insurance-funded preneed contracts are expensed as incurred. We do not reflect the
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unfulfilled insurance- and other funded preneed contract amounts in our Consolidated Balance Sheet. The proceeds of the life insurance policies or annuity contracts will be reflected in funeral revenue as we perform these funerals. In early July 2024, we finalized our agreement to change our preferred preneed insurance provider in the United States, which has allowed us to further utilize our scale and streamline our processes across our network. In addition, we have shifted our non-funeral home preneed sales production from trust to insurance-funded contracts.
The table below details our results of insurance-funded and other non-insurance funded third-party preneed production and maturities.
Years Ended December 31,
(Dollars in millions)
Preneed insurance-funded:
Sales production (1)
Sales production (number of contracts) (1)
General agency revenue
Maturities
Maturities (number of contracts)
Other non-insurance funded third-party:
Sales production (1)
Sales production (number of contracts) (1)
Maturities
Maturities (number of contracts)
(1) Amounts are not included in our Consolidated Balance Sheet.
Trust-Funded Preneed Contracts
The funds collected from customers are deposited into trusts as required by state or provincial law. 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. As discussed above in Insurance- and Other Funded Preneed Contracts, we have shifted our non-funeral home preneed sales production from trust to insurance-funded contracts.
The tables below detail our results of preneed production and maturities, excluding insurance contracts, for the years ended December 31, 2025 and 2024.
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Years Ended December 31,
(Dollars in millions)
Funeral:
Preneed trust-funded (including bonded):
Sales production
Sales production (number of contracts)
Maturities
Maturities (number of contracts)
Cemetery:
Sales production:
Preneed
Atneed
Total sales production
Sales production deferred to backlog:
Preneed
Atneed
Total sales production deferred to backlog
Revenue recognized from backlog:
Preneed
Atneed
Total revenue recognized from backlog
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 December 31, 2025 and 2024. Additionally, the table reflects our backlog of unfulfilled insurance-funded contracts and other non-insurance funded third-party contracts (which are not included in our Consolidated Balance Sheet) at December 31, 2025 and 2024. 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.
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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. 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.
December 31, 2025
December 31, 2024
Fair Value
Cost
Fair Value
Cost
(In billions)
Deferred revenue, net
Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts
Deferred receipts held in trust
Allowance for cancellation on trust investments
Backlog of trust-funded deferred revenue, net of estimated allowance for cancellation
Backlog of insurance- and other funded deferred revenue (1)
Total backlog of deferred revenue
Preneed receivables, net and trust investments
Amounts due from customers for unfulfilled performance obligations on cancelable preneed contracts
Allowance for cancellation on trust investments
Assets associated with backlog of trust-funded deferred revenue, net of estimated allowance for cancellation
Policies associated with insurance- and other funded deferred revenue (1)
Total assets associated with backlog of preneed revenue
(1) Amounts are not included in our 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 December 31, 2025, the difference between the backlog and total assets at fair value represents $0.17 billion related to contracts for which we have posted surety bonds as financial assurance in lieu of trusting, $1.39 billion collected from customers that were not required to be deposited into trusts, and $0.20 billion in allowable cash distributions from trust assets partially offset by $1.56 billion in amounts due on delivered property and merchandise. As of December 31, 2025, the fair value of the total backlog comprised $5.04 billion related to cemetery contracts and $11.97 billion related to funeral contracts. As of December 31, 2025, the fair value of the assets associated with the backlog of trust-funded deferred revenue comprised $5.10 billion related to cemetery contracts and $2.98 billion related to funeral contracts. As of December 31, 2025, the backlog of insurance-funded contracts of $8.73 billion was equal to the proceeds we expect to receive from the associated insurance policies when the corresponding contract is serviced by one of our operating locations.
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. These trustees, with input from SCI's
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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 are intended 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 December 31, 2025, 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.
Separately managed accounts are trusts that utilize separately managed accounts, where appropriate, to reduce the costs to the investment 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.
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 December 31, 2025, the largest single equity position represented approximately 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.
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Trust Performance
During the year ended December 31, 2025, the Standard and Poor’s 500 Index increased 17.9% and the Bloomberg’s US Aggregate Bond Index increased 7.3%. This compares to the SCI trusts that increased 15.1% during the same year-end period, which exceeded our internal custom benchmarks. The SCI trusts have a diversified allocation of approximately 60% equities, 26% fixed income securities, 10% alternative and other investments with the remaining 4% in money market funds.
Recognized trust fund income (realized and unrealized) related to our preneed trust investments was $202.2 million and $185.7 million for the years ended December 31, 2025 and 2024, respectively. Recognized trust fund income (realized and unrealized) related to our cemetery perpetual care trust investments was $111.1 million and $96.4 million for the years ended December 31, 2025 and 2024, respectively.
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 — Years Ended December 31, 2025 and 2024
Management Summary
In 2025, we reported consolidated net income attributable to common stockholders of $542.6 million ($3.80 per diluted share) compared to net income attributable to common stockholders in 2024 of $518.6 million ($3.53 per diluted share). These results were impacted by certain significant items including:
Years Ended December 31,
(In millions)
Pre-tax gain (loss) on divestitures and impairment charges, net
Pre-tax loss on early extinguishment of debt, net
Pre-tax estimate of (growth) reduction in legal reserve (1)
Pre-tax estimate of restructuring charge
Tax effect from significant items
Change in uncertain tax reserves and other (2)
(1) Corporate general and administrative expenses in the fourth quarter of 2024, includes a reduction of our California legal reserve of $20.3 million as the primary claims period expired
(2) See Note 5 in Part II, Item 8. Financial Statements and Supplementary Data, for additional information related to change in uncertain tax reserves and other.
In addition to the above items, the increase over the prior year is due to higher funeral gross profit driven by an increase in funeral average revenue per service and higher cemetery gross profit. Additionally, the higher tax rate was partially offset by lower interest expense and a lower share count.
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Funeral Results
Years Ended December 31,
(Dollars in millions, except average revenue per service)
Consolidated funeral revenue
Less: revenue associated with acquisitions/new construction
Less: revenue associated with divestitures
Comparable (1) funeral revenue
Less: non-funeral home preneed sales revenue
Less: core general agency and other revenue
Adjusted comparable funeral revenue
Comparable services performed
Comparable average revenue per service (2)
Consolidated funeral gross profit
Less: gross profit associated with acquisitions/new construction
Less: gross loss associated with divestitures
Comparable (1) funeral gross profit
(1) We define comparable (or same store) operations as those funeral locations owned by us for the entire period beginning January 1, 2024 and ending December 31, 2025.
(2) We calculate comparable average revenue per service by dividing comparable funeral revenue, excluding general agency revenue, non-funeral home preneed sales 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.
Funeral Revenue
Consolidated revenue from funeral operations was $2,405.5 million for the year ended December 31, 2025, compared to $2,324.2 million in 2024. This $81.3 million, or 3.5%, increase in revenue is primarily attributable to a $45.4 million increase in revenue contributed by newly constructed and acquired properties, and a $40.2 million increase in comparable funeral revenue.
Comparable revenue from funeral operations was $2,340.0 million for the year ended December 31, 2025 compared to $2,299.8 million in 2024. The $40.2 million, or 1.7%, increase was due to a $40.7 million increase in adjusted comparable funeral revenue and a $11.1 million increase in core general agency and other revenue, partially offset by a $11.6 million decrease in non-funeral home preneed sales revenue.
Adjusted comparable funeral revenue increased $40.7 million, or 2.1%, primarily due to a 2.9% growth in total average revenue per service, partially offset by a 0.8% decrease in total services performed. Our total comparable cremation rate increased 50 basis points over prior year to 64.4%.
Core general agency and other revenue increased $11.1 million, primarily due to growth in general agency revenue from higher commission rates as a result of the change in our preferred preneed insurance provider in mid-2024.
Non-funeral home preneed sales revenue decreased $11.6 million primarily due to an operational shift to defer the delivery of urns on preneed contracts to the time of need. This decrease is partially offset by an increase in general agency revenue as we shifted more production from trust to insurance-funded contracts.
Funeral Gross Profit
Consolidated funeral gross profit increased $30.5 million, or 6.6%, in 2025 compared to 2024. This increase is primarily attributable to a $22.6 million, or 4.8%, increase in comparable funeral gross profit and a $7.6 million increase in gross profit contributed by acquired and newly constructed properties. Comparable funeral gross profit increased $22.6 million to $488.8 million and the comparable gross profit percentage increased 60 basis points from 20.3% to 20.9%. This increase in gross profit is due to the higher revenue mentioned above and effectively managing fixed costs, partially offset by a $13.0 million increase in selling compensation costs. Higher selling compensation costs resulted primarily from a $121.2 million increase in funeral preneed insurance sales production coupled with an operational shift from variable to fixed compensation for core preneed funeral sales counselors. Fixed selling compensation is expensed as incurred.
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Cemetery Results
Years Ended December 31,
(In millions)
Consolidated cemetery revenue
Less: revenue associated with acquisitions/new construction
Less: revenue associated with divestitures
Comparable (1) cemetery revenue
Consolidated cemetery gross profit
Less: gross profit (loss) associated with acquisitions/new construction
Less: gross (loss) profit associated with divestitures
Comparable (1) cemetery gross profit
(1) We define comparable (or same store) operations as those cemetery locations owned by us for the entire period beginning January 1, 2024 and ending December 31, 2025.
Cemetery Revenue
Consolidated revenue from our cemetery operations increased $41.5 million, or 2.2%, in 2025 compared to 2024 primarily due to a $29.7 million, or 1.6%, increase in comparable cemetery revenue and a $11.6 million increase in revenue contributed by acquired and newly constructed properties.
The $29.7 million increase in comparable cemetery revenue was primarily attributable to a $14.6 million increase in comparable cemetery core revenue. This increase was primarily a result of a $12.7 million increase in recognized preneed revenue, which benefited from growth in comparable preneed sales production and higher trust fund income. Additionally, comparable other revenue increased $15.0 million, primarily from higher endowment care trust fund income.
Cemetery Gross Profit
Consolidated cemetery gross profit increased $18.9 million, or 3.0%, in 2025 compared to 2024. This increase is primarily attributable to a $13.1 million increase in comparable cemetery gross profit and a $5.5 million increase in gross profit contributed by acquired and newly constructed properties. Comparable cemetery gross profit increased $13.1 million to $638.1 million, and the gross profit percentage increased 20 basis points from 33.6% to 33.8% primarily due to the higher revenue mentioned above coupled with effective cost management, partially offset by higher selling compensation on higher sales production.
Other Financial Statement Items
Corporate General and Administrative Expenses
Corporate general and administrative expenses were $166.2 million in 2025 compared to $139.0 million in 2024. In the prior year, we recognized a $20.3 million reduction in our California legal reserve. Additionally, we recognized a $6.4 million settlement of certain legal matters in the current year. Adjusting for the $26.7 million in legal matters, corporate general and administrative expenses increased $0.5 million.
Gain and Loss on Divestitures and Impairment Charges, Net
We recognized a $6.2 million net pre-tax gain and a $12.5 million net pre-tax loss on asset divestitures and impairments in 2025 and 2024, respectively, which includes the net impact from the sale of non-essential real estate and businesses as well as impairment of long-lived assets and intangibles.
Interest Expense
Interest expense decreased $2.4 million to $255.4 million in 2025 primarily due to lower interest rates on our floating rate debt partially offset by higher average debt balances outstanding.
Provision for Income Taxes
The 2025 consolidated effective tax rate was 25.6% , compared to 23.2% in 2024. The increase in the effective tax rate in 2025 was primarily due to a de crease in excess tax benefits recognized on the settlement of employee share-based awards . The effective tax rate for the year ended December 31, 2025 was higher than the federal statutory tax rate of 21% primarily due to state and foreign income taxes.
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Critical Accounting Policies, Recent Accounting Pronouncements, and Accounting Changes
Our consolidated financial statements are impacted by the accounting policies used and the estimates and assumptions made by management during their preparation. See Note 2 in Part II, Item 8. Financial Statements and Supplementary Data, for more information. Estimates and assumptions affect the carrying values of assets and liabilities and disclosures of contingent assets and liabilities at the balance sheet date. Actual results could differ from such estimates due to uncertainties associated with the methods and assumptions underlying our critical accounting measurements. The following is a discussion of our critical accounting policies pertaining to revenue recognition, valuation of goodwill, valuation of intangible assets, fair value measurements, and the use of estimates.
Revenue Recognition
Revenue is recognized when control of the merchandise or services is transferred to the customer. Our performance obligations include the delivery of funeral and cemetery merchandise and services and cemetery property interment rights. Control transfers when merchandise is delivered or services are performed. For cemetery property interment rights, control transfers to the customer when the property is developed and the interment right has been sold and can no longer be marketed or sold to another customer.
On our atneed contracts, we generally deliver the merchandise and perform the services at the time of need. Personalized marker merchandise and marker installation services sold on atneed contracts are recognized when control is transferred to the customer, generally when the marker is delivered and installed in the cemetery.
We also sell price-guaranteed preneed contracts through various programs providing for future merchandise and services at prices prevailing when the agreements are signed. Revenue associated with sales of preneed contracts is deferred until control of the merchandise or the services is transferred to the customer, which is upon delivery of the merchandise or as services are performed, generally at the time of need. On certain preneed contracts, we historically sold memorialization merchandise, which consists of urns and urn-related products, that we delivered to the customer at the time of sale. In 2024, we began a transition and operational shift to defer the delivery of urns on preneed contracts to the time of need. Revenue is recognized at the time of delivery as control of the memorialization merchandise is transferred to the customer.
For personalized marker merchandise sold on a preneed contract, we will:
• purchase the merchandise from vendors,
• personalize such merchandise in accordance with the customer's specific written instructions,
• either store the merchandise at a third-party bonded storage facility or install the merchandise, based on the customer's instructions, and
• transfer title to the customer.
We recognize revenue and record the cost of sales when control of the merchandise is transferred, which occurs upon delivery to the third-party storage facility or installation of the merchandise at the cemetery.
Pursuant to state or provincial law, all or a portion of the proceeds from funeral and cemetery merchandise or services sold on a preneed basis may be required to be paid into trust funds. We defer investment earnings related to these merchandise and service trusts until the associated merchandise is delivered or services are performed. Fees charged by our wholly-owned registered investment advisor are also included in revenue in the period in which they are earned.
A portion of the proceeds from the sale of cemetery property interment rights is required by state or provincial law to be paid by us into perpetual care trust funds to maintain the cemetery. This portion of the proceeds is not recognized as revenue. Investment earnings from these trusts are distributed to us regularly and recognized in current cemetery revenue.
For more information related to revenue, see Notes 2 , 3 , and 13 in Part II, Item 8. Financial Statements and Supplementary Data.
Valuation of Goodwill
We record the excess of purchase price over the fair value of identifiable net assets acquired in business combinations as goodwill. Goodwill is tested annually during the fourth quarter for impairment by assessing the fair value of each of our reporting units.
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Our goodwill impairment test involves estimates and management judgment. In order to perform our goodwill impairment test, we perform either a qualitative or quantitative assessment. If we choose to perform a qualitative assessment, we evaluate economic, industry and company-specific factors in assessing the fair value of the related reporting unit. If we determine that it is more likely than not that the fair value of the reporting unit is less that its carrying value, a quantitative test is the performed. For those reporting units tested using a quantitative approach, we compare the fair value of a reporting unit to its carrying amount, including goodwill. We determine fair value of each reporting unit using an income approach. The income approach, which is a discounted cash flow method, uses projections of future cash flows and includes assumptions concerning future operating performance and economic conditions that may differ from actual future cash flows. We do not record an impairment of goodwill in instances where the fair value of a reporting unit exceeds its carrying amount. If the aggregate fair value is less than the related carrying amount for a reporting unit, we compare the implied fair value of goodwill to the carrying amount of goodwill. If the carrying amount of reporting unit goodwill exceeds the implied fair value of that goodwill, an impairment is recognized in an amount equal to that excess.
For more information related to goodwill, see Notes 2 and 4 in Part II, Item 8. Financial Statements and Supplementary Data.
Valuation of Intangible Assets
Our intangible assets include covenants-not-to-compete, customer relationships, trademarks and tradenames, and other intangible assets primarily resulting from acquisitions. Certain of our trademark and tradenames and other intangible assets are considered to have an indefinite life and are not subject to amortization. We test for impairment of intangible assets annually during the fourth quarter.
Our intangible asset impairment tests involve estimates and management judgment. For trademark and tradenames, our test uses the relief from royalty method whereby we determine the fair value of the assets by discounting the cash flows that represent a savings over having to pay a royalty fee for use of the trademark and tradenames. The discounted cash flow valuation uses projections of future cash flows and includes assumptions concerning future operating performance and economic conditions that may differ from actual future cash flows.
For more information related to intangible assets, see Notes 2 and 4 in Part II, Item 8. Financial Statements and Supplementary Data.
Fair Value Measurements
We measure the securities held by our funeral merchandise and service, cemetery merchandise and service, and cemetery perpetual care trusts at fair value on a recurring basis. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. We utilize a three-level valuation hierarchy for disclosure of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:
• Where quoted prices are available in an active market, securities held by the trusts are classified as Level 1 investments.
• Where quoted market prices are not available for the specific security, fair values are estimated by using either quoted prices of securities with similar characteristics or an income approach fair value model with observable inputs that include a combination of interest rates, yield curves, credit risks, prepayment speeds, ratings, and tax-exempt status. These securities are classified as Level 2 investments.
• The valuation of other investments requires management judgment due to the absence of quoted market prices, inherent lack of liquidity, and the long-term nature of such assets. These securities are classified as Level 3 investments.
Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Certain securities held by our funeral merchandise and service, cemetery merchandise and service, and cemetery perpetual care trusts have been classified as Level 3 of the hierarchy due to the significant management judgment required because of the absence of quoted market prices, inherent lack of liquidity, or the long-term nature of the securities. For more information related to our fair value measurements, see Notes 2 , 3 , and 7 in Part II, Item 8. Financial Statements and Supplementary Data.
Use of Estimates
The preparation of financial statements in conformity with Generally Accepted Accounting Principles in the United States (GAAP) requires management to make certain estimates and assumptions. These estimates and assumptions affect the carrying values of assets and liabilities and disclosures of contingent assets and liabilities at the balance sheet date. Actual results could differ from such estimates due to uncertainties associated with the methods and assumptions underlying our critical accounting measurements. Critical estimates used by management include:
Reserves and Allowances
We provide reserves for credit losses on our receivables. These reserves are based on an analysis of historical trends of collection activity adjusted for current conditions and forecasts. We also record an estimate of general agency revenue that may be canceled in its first year and revenue would be charged back by the insurance company. These estimates are impacted by a number of factors, including changes in the economy and demographic or competitive changes in our areas of operation.
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Valuation of Trust Investments
When available, we use quoted market prices for specific securities. When quoted market prices are not available for the specific security, fair values are estimated by using either quoted market prices for securities with similar characteristics or a fair value model with observable inputs that include a combination of interest rates, yield curves, credit risks, prepayment terms, rating, and tax exempt status. The valuation of certain investments requires significant management judgment due to the absence of quoted market prices, inherent lack of liquidity, and the long-term nature of such assets.
Legal Liability Reserves
Contingent liabilities, principally for legal matters, are recorded when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. Liabilities accrued for legal matters require judgments regarding projected outcomes and a range of loss based on historical experience and recommendations of legal counsel. However, litigation is inherently unpredictable and excessive verdicts do occur. As disclosed in Note 9 in Part II, Item 8. Financial Statements and Supplementary Data, our legal exposures and the ultimate outcome of these legal proceedings could be material to operating results or cash flows in any given quarter or year.
Income Taxes
We compute income taxes using the liability method. Our ability to realize the benefit of our deferred tax assets requires us to achieve certain future earnings levels. We have established a valuation allowance against a portion of our deferred tax assets in certain jurisdictions, and we could be required to further adjust that valuation allowance in the near term if market conditions change materially and future earnings are, or are projected to be, significantly different than our current estimates. An increase in the valuation allowance would result in additional income tax expense in such period.
As of December 31, 2025, foreign withholding taxes have not been provided on the estimated $306.5 million of undistributed earnings and profits ("E&P") of our foreign subsidiaries as we intend to permanently reinvest these foreign E&P in the respective businesses outside the United States. However, if we were to repatriate such foreign E&P, the foreign withholding tax liability is estimated to be $15.8 million. Additionally, if we were to repatriate E&P in excess of our previously taxed income under the Tax Cuts and Jobs Act of 2017, such excess repatriation may cause us to incur an additional U.S. federal income tax of approximately $7.7 million related to our hybrid debt structure between Canada and the United States that was eliminated in 2022.
We file income tax returns, including tax returns for our subsidiaries, with federal, state, local, and foreign jurisdictions. We consider the United States to be our most significant jurisdiction; however, all tax returns are subject to routine compliance review by the taxing authorities in the jurisdictions in which we file tax returns in the ordinary course of business.
The federal statutes of limitations have expired for all tax years prior to 2022. Our 2022 federal income tax return is currently under audit by the IRS. Various state and foreign jurisdictions are auditing years 2020 through 2023. The outcome of each of these audits cannot be predicted at this time.
Insurance Loss Reserves
We purchase comprehensive general liability, morticians and cemetery professional liability, automobile liability, and workers’ compensation insurance coverages structured with high deductibles. This high-deductible insurance program means we are primarily self-insured for claims and associated costs and losses covered by these policies. Historical insurance industry experience indicates a high degree of inherent variability in assessing the ultimate amount of losses associated with casualty insurance claims. This is especially true with respect to liability and workers’ compensation exposures due to the extended period of time that transpires between the time claim occurs and the full settlement of such claim, which may be many years. We continually evaluate loss estimates associated with claims and losses related to these insurance coverages falling within the deductible of each coverage. Assumptions based on factors such as claim settlement patterns, claim development trends, claim frequency, severity patterns, inflationary trends, and data reasonableness will generally affect the analysis and determination of the “best estimate” of the projected ultimate claim . The results of these evaluations are used to both analyze and adjust our insurance reserves. As of December 31, 2025, insurance reserves were $108.4 million.
Recent Accounting Pronouncements and Accounting Changes
For discussion of recent accounting pronouncements and accounting changes, see Note 2 in Part II, Item 8. Financial Statements and Supplementary Data.
