Carriage Services (CSV) risk factors, FY2024 10-K

RISKS RELATED TO OUR BUSINESS

1. 01The success of our businesses is typically dependent upon one or a few key employees for success because of the localized and personal nature of our business
2. 02Our “Good to Great” incentive program could result in significant future payments to our Managing Partners
3. 03Improved performance in our funeral and cemetery segments is dependent upon successful execution of our Standards Operating Model
4. 04Our ability to execute our growth strategy is highly dependent upon our ability to successfully identify suitable acquisition candidates and negotiate transactions on favorable terms
5. 05Divestitures could negatively impact our business and retained liabilities from businesses that we sell could adversely affect our financial results
6. 06The funeral and cemetery industry is competitive
7. 07Marketing and sales activities by existing and new competitors could cause us to lose market share and lead to lower revenue and margins
8. 08Price competition could also reduce our market share or cause us to reduce prices to retain or recapture market share, either of which could reduce revenue and margins
9. 09Significant declines in preneed sales would reduce our backlog and future revenue and could reduce our future market share. On the other hand, a significant increase in preneed sales can have a negative impact on cash flow as a result of commissions and other costs incurred initially without corresponding revenue
10. 10Increased preneed sales could have a negative impact on our cash flows
11. 11Our funeral and cemetery trust funds own investments in equity securities, fixed income securities, and mutual funds, which are affected by market conditions that are beyond our control
12. 12Perpetual care trust funds 13.2 % 20.2 % (0.2) %
13. 13Earnings from and principal of trust funds could be reduced by changes in financial markets and the mix of securities owned
14. 14We may be required to replenish our funeral and cemetery trust funds in order to meet minimum funding requirements, which would have a negative effect on our earnings and cash flow
15. 15Increasing death benefits related to preneed funeral contracts funded through life insurance contracts may not cover future increases in the cost of providing a price-guaranteed funeral service
16. 16The financial condition of third-party insurance companies that fund our preneed funeral contracts may impact our future revenue
17. 17Changes in taxation, or the interpretations of tax laws or regulations, 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
18. 18New tax laws or regulations could be enacted at any time, and existing tax laws or regulations could be interpreted, amended, or applied in a manner that has a material effect on us, which could materially impact our business and financial condition
19. 19Unfavorable results of litigation could have a material adverse impact on our financial statements

RISKS RELATED TO THE FUNERAL AND CEMETERY INDUSTRY

1. 20Declines in the number of deaths in our markets can cause a decrease in revenue. Changes in the number of deaths are not predictable from market to market or over the short term
2. 21The increasing number of cremations in the United States could cause revenue to decline because we could lose market share to firms specializing in cremations and because our average revenue for cremations is lower than that for traditional burials
3. 22If we are not able to respond effectively to changing consumer preferences, our market share, revenue and profitability could decrease
4. 23Because the funeral and cemetery businesses are high fixed-cost businesses, changes in revenue can have a disproportionately large effect on cash flow and profits
5. 24Changes or increases in, or failure to comply with, regulations applicable to our business could increase costs or decrease cash flows
6. 25Embalming and cremation facilities are subject to stringent environmental and health regulations. Compliance with these regulations is burdensome, and we are always at risk of not complying with the regulations or facing costly and burdensome investigations from regulatory authorities
7. 26We are subject to environmental and worker health and safety laws and regulations that may expose us to significant costs and liabilities

RISKS RELATED TO OUR CREDIT FACILITY AND FINANCIAL ACTIVITIES

1. 27Credit Facility and Debt Obligations
2. 28Covenant restrictions in our debt instruments may limit our flexibility to operate and grow our business, and if we are not able to comply with such covenants, our lenders could accelerate our indebtedness, proceed against certain collateral or exercise other remedies, which could have a material adverse effect on us
3. 29Our level of indebtedness could adversely affect our financial condition and prevent us from fulfilling our debt obligations
4. 30Despite our current levels of indebtedness, we may still incur additional indebtedness. This could further exacerbate the risks associated with our indebtedness

GENERAL RISKS

1. 31Economic Conditions and Natural Disasters
2. 32Changes in U.S. foreign trade policies, including the imposition of additional tariffs and other trade barriers, and efforts to withdraw from or materially modify international trade agreements, may materially and adversely affect our business, operations and financial condition
3. 33We may be adversely affected by the effects of inflation
4. 34Adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults, or non-performance by financial institutions, could adversely affect our business, financial condition, or results of operations
5. 35Unfavorable economic conditions, including those resulting from health and safety concerns, could adversely affect our business, financial condition or results of operations
6. 36Economic, financial and stock market fluctuations could affect future potential earnings and cash flows and could result in future goodwill, intangible assets and long-lived asset impairments
7. 37Significant weather events, natural disasters, or catastrophic events could adversely affect our business, financial condition or results of operations
8. 38We rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cybersecurity incidents could harm our ability to operate our business effectively
9. 39approved Proposition 24 (Consumer Personal Information Law and Agency Initiative), which went into effect as of January 1, 2023 and has increased the data privacy requirements for our business. Despite our efforts, any noncompliance could result in our incurring substantial penalties and reputational damage
10. 40Failure to maintain effective internal control over financial reporting could adversely affect our results of operations, investor confidence, and our stock price