Acquisition Level 1 (Notes)

12 Months Ended

Dec. 31, 2021

Business Combination Disclosure [Text Block]

Acquisitions

In December 2021, we acquired twenty-one funeral homes and one cemetery in two states as part of two acquisitions (the "Ohio and California Businesses") for $94.8 million in cash. This amount includes the use of $6.1 million in IRS Section 1031 exchange funds.

The primary reasons for the acquisitions and the principal factors that contributed to the recognition of goodwill in these acquisitions were:

•the acquisitions enhance our network footprint, enabling us to serve a number of new, complementary areas; and

•the acquisitions of the preneed backlog of deferred revenues enhance our long-term stability.

The following table summarizes the preliminary fair values of the assets acquired and liabilities assumed in the acquisitions (in thousands):




Other current assets	$	140
Cemetery property	2,918
Property and equipment, net	36,768
Preneed receivables, net and trust investments	7,732
Finite-lived intangible assets	3,900
Indefinite-lived intangible assets	24,734
Deferred charges and other assets	128
Cemetery perpetual care trust investments	1,484
Goodwill	29,683
Total assets acquired	107,487

Current liabilities	660
Deferred revenue and deferred receipts held in trust	7,204
Care trusts' corpus	1,484
Other liabilities	3,336
Total liabilities assumed	12,684

Net assets acquired	$	94,803

The purchase accounting is preliminary because we have not finalized our assessment of the fair value because there has been insufficient time between the acquisition date and the issuance of these financial statements to complete our review and final determination of fair value.

Goodwill, land, and certain identifiable intangible assets recorded in the acquisitions are not subject to amortization; however, the goodwill and intangible assets will be tested periodically for impairment. Of the $29.7 million in goodwill recognized, all of which is deductible for tax purposes, $1.5 million was allocated to our cemetery segment and $28.2 million was allocated to our funeral segment. The identified intangible assets comprise the following:


	Useful Life	Fair Value
	(Years)	(In thousands)
Preneed customer relationships to insurance claims	10	$	3,900
Tradenames	Indefinite	24,734
Total intangible assets		$	28,634

We incurred acquisition costs of $0.3 million, which is included in Corporate general and administrative expenses in our Consolidated Statement of Operations. The Ohio and California Businesses contributed revenue of $1.1 million and net income of $0.3 million from acquisition through December 31, 2021.

The following unaudited pro forma summary presents financial information as if the acquisition of the Ohio and California Businesses had occurred on January 1, 2020 and the acquisition costs of $0.3 million were included in 2020:


	2021		2020
	(In thousands) (Unaudited)
Revenue	$	4,172,574	$	3,536,915
Net income	$	807,040	$	517,933

Excluding the December 2021 acquisitions described above, we spent $26.3 million, $64.2 million, and $55.6 million, net of cash acquired, for several business acquisitions, and $26.6 million, $52.1 million, and $51.4 million, net of cash acquired, for several real estate acquisitions for the three years ended December 31, 2021, 2020, and 2019, respectively. These amounts include the use of $10.9 million, $55.1 million, and $13.6 million in IRS Section 1031 exchange funds for the three years ended December 31, 2021, 2020, and 2019, respectively.

Divestiture-Related Activities

As divestitures occur in the normal course of business, gains or losses on the sale of such locations are recognized in the Consolidated Statement of Operations line item Gains on divestitures and impairment charges, net, which consist of the following:


	Years Ended December 31,
	2021		2020		2019
	(In thousands)
Gains on divestitures, net	$	28,573	$	11,962	$	41,835
Impairment losses	(3,404)		(4,953)		(8,916)
Gains on divestitures and impairment charges, net	$	25,169	$	7,009	$	32,919