2014

Carriage Services Announces Record Results For Third Quarter 2013 And Raises Rolling Four Quarter Outlook

HOUSTON, Nov. 5, 2013 /PRNewswire/ -- Carriage Services, Inc. (NYSE: CSV) today announced record results for the quarter ending September 30, 2013.

Mel Payne, Chief Executive Officer, stated, "Our third quarter performance continued our trend of record quarterly results, as we achieved revenue growth of 3.3% to a record $49.7 million, Field EBITDA growth of 4.0% to a record $18.9 million, Field EBITDA Margin increase of 30 basis points to a record 38.1% and strong Free Cash Flow growth of 588.0% to a record $6.6 million. This outstanding performance was driven by substantially higher Revenue and Field EBITDA growth in our Acquired Funeral Home, Same Store Cemetery, and Financial Trust segments.  Our Same Store Funeral segment had a relatively weak quarterly revenue and Field EBITDA Margin performance, which combined with our substantial overhead growth, temporarily reduced our Consolidated and Adjusted Consolidated EBITDA Margins for the quarter."

"Because of our expectation that the strong growth in our field operating and financial results during 2013 will continue into 2014, and in anticipation of a resumption of acquisitions in the fourth quarter, we are raising our Rolling Four Quarter Adjusted Earnings Per Share Outlook by $0.02 cents per share to $1.20 - $1.22.  Also, we are pleased to report that our Rolling Four Quarter Outlook includes a reduction in cash taxes of approximately $7.25 million due to favorable adjustments from approved accounting method changes and thus we have raised our Cash Flow from Operations and Free Cash Flow Outlook to reflect this amount."

Our third quarter and year to date comparative highlights are shown below:

Three Months Ended September 30, 2013

  • Total Revenue up 3.3% to $49.7 million in 2013 from $48.1 in 2012;
  • GAAP Diluted EPS from Continuing Operations up 900.0% to $0.10 in 2013 from $0.01 in 2012;
  • Adjusted Diluted Earnings Per Share remained flat at $0.16;
  • Free Cash Flow up 588.0% to $6.6 million in 2013 from $1.0 million in 2012.

Nine Months Ended September 30, 2013

  • Total Revenue up 9.4% to $161.1 million in 2013 from $147.3 in 2012;
  • GAAP Diluted EPS from Continuing Operations up 68.6% to $0.59 in 2013 from $0.35 in 2012;
  • Adjusted Diluted Earnings Per Share up 28.1% to $0.73 in 2013 from $0.57 in 2012;
  • Free Cash Flow up 128.2% to $27.6 million in 2013 from $12.1 million in 2012.

The above tables reference certain Non-GAAP financial measurements that are defined and reconciled at the end of the press release.

"Since our major management reorganization along with an upgrading of our operating and growth models at the end of 2011, we have consistently achieved high quality growth through acquisitions, higher sustainable operating performance, substantially lower capital structure costs, and a substantial and growing trust fund revenue and earnings contribution, all of which have combined to rapidly increase shareholder value as our stock price has moved from $5.60 at December 31, 2011 to $19.66 at the close of the market today.  This year we have made no acquisitions to date while substantially paying down our debt and improving the credit profile and financial flexibility of our company.  We are now prepared for what we believe will be a period of maximum opportunity to grow our company by high quality acquisitions over the remainder of this year and 2014.  We will review carefully all such opportunities, including any divestitures from the SCI / Stewart transaction, through the same strategic growth criteria and disciplined selection process that we believe differentiates our company.  We have a full acquisition pipeline of top quality independents in great markets, so we are in a wonderful position to continue to be smart about how we operate and grow our company."

"As the acquisition landscape takes on more clarity over the next several months, we will also take a fresh look at the permanent financing requirements related to those acquisitions that meet our strict selection criteria and will develop a capital structure strategy that aligns with the amount of permanent capital needed.  We believe the current capital market environment of low rate monetary policy and supportive equity markets will enable us to be very opportunistic on executing key components of our capital structure strategy that will add to the long term value creation dynamic of our operating and growth models by creating a strongly capitalized balance sheet with substantial financial flexibility," concluded Mr. Payne.

Our Total Field EBITDA increased $0.7 million or 4.0% in the quarter on a revenue increase of 3.3%, as our Total Field EBITDA Margin increased 30 basis points to a record 38.1% for a third quarter. We continue to invest in upgrading our organizational overhead structure and talent in anticipation of substantially higher acquisition growth over the next 18 months. As a consequence, our Total Overhead increased $1.5 million or 21.1% in the quarter, materially offsetting the Total Field EBITDA growth.

Adjusted Diluted Earnings per Share for the third quarter of 2013 and 2012 remained flat at $0.16.  We incurred approximately $3.0 million of costs, or $0.11 diluted earnings per share, in the third quarter of 2012 related to the new Credit Facility which is included in the Adjusted Diluted Earnings Per Share. Excluding these costs, Adjusted Diluted Earnings Per Share for Q3 2012 would have been $0.05 thus achieving a 220.0% increase year over year. The benefit of the lower interest cost from the new Credit Facility resulted in approximately $1.3 million, or 29.3%, reduction of interest expense quarter over quarter and $4.1 million, or 30.4%, year to date.

Our credit profile continues to rapidly improve throughout 2013.  Our senior debt to Adjusted EBITDA ratio, based on our credit facility covenants, declined from 3.06 at the beginning of the year to 2.67 at September 30th because our Adjusted Consolidated EBITDA increased $2.9 million, or 7.2%, to $42.7 million while our senior debt and lease obligations decreased $26.6 million, or 14.9%, to $152.1 million. Our Free Cash Flow that funded the first nine months deleveraging increased 128.2% to $27.6 million compared to 2012.

In accordance with our Strategic Acquisition Model, we review businesses and excess land to determine whether they should be sold and the proceeds redeployed elsewhere.  During the nine months ended September 30, 2013, we have sold four businesses, three funeral homes and one cemetery, and two parcels of land.  Collectively, these businesses had earned $1.0 million before-tax, or $0.03 diluted earnings per share, for the nine months ended September 30, 2012 which are no longer reported within our continuing operations on a comparative basis.  We received $8.3 million for the sale of these assets during 2013.  For the nine months ended September 30, 2013, these businesses reported $0.5 million in earnings, before-tax, and $6.4 million net gain related to the disposition, or $0.19 diluted earnings per share.  A gain of $6.3 million was from a cemetery in Richmond, VA sold in the third quarter of 2013.

FIELD OPERATIONS
Three Months Ended September 30, 2013

  • Total Field Revenue increased 3.3% to $49.7 million;
  • Total Field EBITDA increased 4.0% to $18.9 million
  • Total Field EBITDA Margin increased 30 basis points to 38.1%;
  • Total Funeral Operating Revenue increased 2.3% to $35.2 million;
  • Acquisition Funeral Revenue increased 29.0% with acquisition volume increasing 18.7%;
  • Total Cemetery Operating Revenue increased 3.5% to $10.1 million;
  • Cemetery preneed property sale contracts increased 6.5% to 1,669;
  • Preneed property revenue recognized increased 5.4% and At-need revenue increased 7.7%;
  • Total Financial Revenue increased 10.4% to $4.4 million;
  • Funeral Financial Revenue increased 17.2% to $2.1 million;
  • Cemetery Financial Revenue increased 4.8% to $2.3 million.

FREE CASH FLOW
We produced Free Cash Flow from operations in the nine months of 2013 of $27.6 million compared to Free Cash Flow from operations of $12.1 million for the corresponding period in 2012. The sources and uses of cash for the first nine months of 2012 and 2013 consisted of the following (in millions):


Nine Months Ended September 30,



2012



2013








Cash flow provided by operations

$

15.3



$

32.2


Cash used for maintenance capital expenditures


(3.2)




(4.6)


Free Cash Flow

$

12.1



$

27.6


Cash at beginning of period


1.1




1.7


Cash used for growth capital expenditures


(4.7)




(2.8)


Cash dividends paid


(1.4)




(1.4)


Proceeds from sale of business


0.6




8.3


Cash used for acquisitions and new construction


(24.8)




(6.0)


Repurchase of common stock


(4.5)





Cash borrowed from (paid against) the credit facility


26.6




(26.2)


Payment of loan origination costs


(3.0)





Payment of call premium associated with the senior notes redemption


(1.7)





Other investing and financing activities


0.2




(0.3)


Cash at end of period

$

0.5



$

0.9


ROLLING FOUR QUARTER OUTLOOK RAISED

The Rolling Four Quarter Outlook ("Outlook") reflects management's opinion on the performance of the portfolio of businesses for the rolling four quarter period ending September 30, 2014, and the performance of the trusts. This Outlook does not reflect dilution from conversion related to our existing convertible subordinated debentures.

                  ROLLING FOUR QUARTER OUTLOOK – Period Ending September 30, 2014


Range

(in millions, except per share amounts)

Revenues

$234.4 - $236.4

Consolidated EBITDA

$60.7 - $62.7

Adjusted Consolidated EBITDA

$63.9 - $65.9

Net Income

$19.1 - $21.1

Adjusted Net Income

$21.3 - $23.3

Basic GAAP Earnings Per Share

$1.08 - $1.10

Basic Adjusted Earnings Per Share

$1.20 - $1.22

Cash Flow from Operations

$45.2 - $47.2

Free Cash Flow

$38.9 - $40.9

Factors affecting our analysis include, among others, acquisitions, funeral contract volumes, average revenue per funeral service, cemetery interment volumes, preneed cemetery sales, capital expenditures, execution of our funeral and cemetery Standards Operating Model, Strategic Acquisition Model and Withdrawable Trust Income. Revenues, Consolidated EBITDA, Adjusted Consolidated EBITDA, Net Income, Adjusted Net Income, GAAP Earnings Per Share, Adjusted Earnings Per Share and Free Cash Flow for the four quarter period ending September 30, 2014 are expected to improve relative to the same period in the previous period for the following reasons:

  • Increases in Acquired Funeral Revenue and Acquired Funeral Field EBITDA;
  • Modest increases in Same Store Funeral Revenue and Same Store Funeral Field EBITDA;
  • Increases in Cemetery Revenue and Cemetery Field EBITDA;
  • Increases in Financial Revenue and Financial EBITDA from trust funds; and
  • Reduced interest expense as a result of the refinancing in September 2012 and the recent reduction in interest rate terms in conjunction with the third amendment to our credit facility, effective April 24, 2013.

We have not included in our Rolling Four Quarter Outlook a potentially fully diluted EPS calculation using the 4.4 million underlying shares of the TIDES security. 

CONFERENCE CALL AND INVESTOR RELATIONS CONTACT

Carriage Services has scheduled a conference call for tomorrow, November 6, 2013 at 9:30 a.m. central time. To participate in the call, please dial 866-516-3867 (ID-86892088) and ask for the Carriage Services conference call.  A replay of the conference call will be available through November 10, 2013 and may be accessed by dialing 855-859-2056 (ID-86892088). The conference call will also be available at www.carriageservices.com.

TRUST FUND PERFORMANCE

For the nine months ended September 30, 2013, Carriage's discretionary trust funds gained 8.9% compared to a gain of 19.8% for the S&P 500 and a 3.8% gain for the High Yield Index. The current yield on Carriage's discretionary fixed income portfolio is 9.5% and the estimated annual income for the entire discretionary portfolio is approximately $11.6 million

The year to date performance of Carriage's discretionary trust portfolio continues to benefit Carriage through higher income earned from preneed funeral and cemetery contracts that have been serviced and through increased income from the cemetery perpetual care trusts. These benefits are evident in the increase in financial revenue year to date.  Given the recurring nature of the income generated by the fixed income portfolio, we expect the performance of the discretionary trust portfolio to benefit Carriage for the foreseeable future.

The total discretionary portfolio performance has lagged the 50/50 index benchmark year to date due to a higher allocation to fixed income securities in the portfolio. Taken separately, both the fixed income and equity components of the discretionary portfolio have outperformed their respective benchmarks (S&P 500 & High Yield Index) year to date. 

Shown below are consolidated performance metrics for the combined trust fund portfolios (preneed funeral, cemetery merchandise and services and cemetery perpetual care) at key dates.

Investment Performance




Investment Performance(1)



Index Performance




Discretionary

Total Trust


S&P 500 Stock Index

High Yield Index

50/50 index

Benchmark(2)









9 months ended 9/30/13


8.9%

8.5%


19.8%

3.8%

11.8%

1 year ended 12/31/12


20.3%

17.1%


16.0%

15.8%

15.9%

2 years ended 12/31/12


16.8%

14.9%


18.4%

21.6%

20.0%

3 years ended 12/31/12


41.0%

35.8%


36.3%

40.0%

38.1%

4 years ended 12/31/12


119.4%

99.8%


72.3%

121.4%

96.9%

 

(1)

Investment performance includes realized income and unrealized appreciation (depreciation).

(2)

The 50/50 Benchmark is 50% weighted to the S&P 500 Stock Index and 50% weighted to the High Yield Index.

 

Asset Allocation as of September 30, 2013

(in thousands)




Discretionary

Trust Funds


Total

Trust Funds

Asset Class



MV

%


MV

%

Cash



$

4,122


2%


$

19,880


9%

Equities



31,439


18%


48,217


22%

Fixed Income



134,249


78%


150,612


67%

Other/Insurance



3,615


2%


3,811


2%

Total Portfolios



$

173,425


100%


$

222,520


100%

 

CARRIAGE SERVICES, INC.

OPERATING AND FINANCIAL METRICS TREND REPORT

FROM CONTINUING OPERATIONS (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)










Three Months Ended September 30,


Nine Months Ended September 30,


2012

2013

% Change


2012

2013

% Change









Same Store Contracts








Atneed Contracts

4,276


4,277


—%


13,195


13,609


3.1%

Preneed Contracts

1,079


1,114


3.2%


3,462


3,659


5.7%

Total Same Store Funeral Contracts

5,355


5,391


0.7%


16,657


17,268


3.7%









Acquisition Contracts








Atneed Contracts

1,186


1,303


9.9%


3,527


4,400


24.8%

Preneed Contracts

169


305


80.5%


559


909


62.6%

Total Acquisition Funeral Contracts

1,355


1,608


18.7%


4,086


5,309


29.9%

Total Funeral Contracts

6,710


6,999


4.3%


20,743


22,577


8.8%









Funeral Operating Revenue








Same Store Revenue

$

28,239


$

27,253


-3.5%


$

88,425


$

89,610


1.3%

Acquisition Revenue

6,192


7,985


29.0%


18,516


26,432


42.8%

Total Funeral Operating Revenue

$

34,431


$

35,238


2.3%


$

106,941


$

116,042


8.5%









Cemetery Operating Revenue








Same Store Revenue

$

9,653


$

9,968


3.3%


$

28,601


$

30,485


6.6%

Acquisition Revenue

60


89




60


232



Total Cemetery Operating Revenue

$

9,713


$

10,057


3.5%


$

28,661


$

30,717


7.2%









Financial Revenue








Preneed Funeral Commission Income

$

462


$

446


-3.5%


$

1,363


$

1,435


5.3%

Preneed Funeral Trust Earnings

1,330


1,654


24.4%


4,362


5,613


28.7%

Cemetery Trust Earnings

1,769


1,940


9.7%


4,714


6,220


31.9%

Preneed Cemetery Finance Charges

437


372


-14.9%


1,257


1,070


-14.9%

Total Financial Revenue

$

3,998


$

4,412


10.4%


$

11,696


$

14,338


22.6%

Total Revenue

$

48,142


$

49,707


3.3%


$

147,298


$

161,097


9.4%









Field EBITDA








Same Store Funeral Field EBITDA

$

10,439


$

9,929


-4.9%


$

33,522


$

34,711


3.5%

Same Store Funeral Field EBITDA Margin

37.0%


36.4%


-60 bp


37.9%


38.7%


80 bp

Acquisition Funeral Field EBITDA

1,889


2,153


14.0%


6,136


8,066


31.5%

Acquisition Funeral Field EBITDA Margin

30.5%


27.0%


-350 bp


33.1%


30.5%


-260 bp

Total Funeral Field EBITDA

$

12,328


$

12,082


-2.0%


$

39,658


$

42,777


7.9%

Total Funeral Field EBITDA Margin

35.8%


34.3%


-150 bp


37.1%


36.9%


-20 bp









Same Store Cemetery Field EBITDA

$

2,318


$

2,724


17.5%


$

7,197


$

9,072


26.1%

Same Store Cemetery Field EBITDA Margin

24.0%


27.3%


330 bp


25.2%


29.8%


460 bp

Acquisition Cemetery Field EBITDA

(56)


13




(64)


(32)



Acquisition Cemetery Field EBITDA Margin

-93.3%


14.6%




-106.7%


-13.8%



Total Cemetery Field EBITDA

$

2,262


$

2,737


21.0%


$

7,133


$

9,040


26.7%

Total Cemetery Field EBITDA Margin

23.3%


27.2%


390 bp


24.9%


29.4%


450 bp









Funeral Financial EBITDA

$

1,415


$

1,825


29.0%


$

4,648


$

6,028


29.7%

Cemetery Financial EBITDA

2,179


2,275


4.4%


5,944


7,159


20.4%

Total Financial EBITDA

$

3,594


$

4,100


14.1%


$

10,592


$

13,187


24.5%

Total Financial EBITDA Margin

89.9%


92.9%


300 bp


90.6%


92.0%


140 bp









Total Field EBITDA

$

18,184


$

18,919


4.0%


$

57,383


$

65,004


13.3%

Total Field EBITDA Margin

37.8%


38.1%


30 bp


39.0%


40.4%


140 bp





OPERATING AND FINANCIAL METRICS TREND REPORT

FROM CONTINUING OPERATIONS (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)










Three Months Ended September 30,


Nine Months Ended September 30,


2012

2013

% Change


2012

2013

% Change









Overhead








Total Variable Overhead

$

2,317


$

2,499


7.9%


$

5,917


$

6,901


16.6%

Total Regional Fixed Overhead

636


960


50.9%


1,867


2,808


50.4%

Total Corporate Fixed Overhead

4,408


5,454


23.7%


12,900


16,009


24.1%

Total Overhead

$

7,361


$

8,913


21.1%


$

20,684


$

25,718


24.3%

Overhead as a percent of sales

15.3%


17.9%


260 bp


14.0%


16.0%


200 bp









Consolidated EBITDA

$

10,823


$

10,006


-7.5%


$

36,699


$

39,286


7.0%

Consolidated EBITDA Margin

22.5%


20.1%


-240 bp


24.9%


24.4%


-50 bp









Other Expenses and Interest








Property Depreciation & Amortization

$

2,487


$

2,939


18.2%


$

7,472


$

8,836


18.3%

Non Cash Stock Compensation

439


675


53.8%


1,621


2,299


41.8%

Interest Expense, Net

4,547


3,216


-29.3%


13,618


9,475


-30.4%

Loss on Early Extinguishment of Debt and Other Costs

3,031



n/a


3,031


$


n/a

Pretax Income

$

319


$

3,176


895.6%


$

10,957


$

18,676


70.4%

Tax Provision

129


1,262




4,429


7,751



GAAP Net Income

$

190


$

1,914


907.4%


$

6,528


$

10,925


67.4%









Special Items, Net of Tax








Withdrawable Trust Income

$

342


$

210




$

851


$

678



Acquisition/Divestiture Expenses

198


143




604


251



Severance Costs

183


409




508


860



Loss on Early Extinguishment of Debt and Other costs

2,000





2,000


248



Consulting Fees


110





278



Non-Recurring Securities Transactions


160





160



Other Special Items





129


54



Prior Period Amortization Adjustment for TIDES






(538)



Tax Adjustment from Prior Period






598



Sum of Special Items, net of tax

$

2,723


$

1,032


-62.1%


$

4,092


$

2,589


-36.7%









Adjusted Net Income

$

2,913


$

2,946


1.1%


$

10,620


$

13,514


27.3%

Adjusted Net Profit Margin

6.1%


5.9%


-20 bp


7.2%


8.4%


120 bp









Adjusted Basic Earnings Per Share

$

0.16


$

0.16


—%


$

0.59


$

0.74


25.4%

Adjusted Diluted Earnings Per Share

$

0.16


$

0.16


—%


$

0.57


$

0.73


28.1%









GAAP Basic Earnings Per Share

$

0.01


$

0.10


900.0%


$

0.36


$

0.60


66.7%

GAAP Diluted Earnings Per Share

$

0.01


$

0.10


900.0%


$

0.35


$

0.59


68.6%









Tax rate

40.4%


39.7%


-70 bp


40.4%


41.5%


110 bp









Reconciliation to Adjusted Consolidated EBITDA








Consolidated EBITDA

$

10,823


$

10,006


-7.5%


$

36,699


$

39,286


7.0%

Withdrawable Trust Income

518


318




1,289


1,028



Acquisition/Divestiture Expenses

300


217




915


380



Severance Costs

278


620




769


1,305



Consulting Fees


166





421



Non-Recurring Securities Transactions


242





242



Other Special Items





195


83



Adjusted Consolidated EBITDA

$

11,919


$

11,569


-2.9%


$

39,867


$

42,745


7.2%

Adjusted Consolidated EBITDA Margin

24.8%


23.3%


-150 bp


27.1%


26.5%


-60 bp

 

CARRIAGE SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)



December 31, 2012


September 30, 2013






(UNAUDITED)

ASSETS








Current assets:








Cash and cash equivalents

$

1,698




$

882



Accounts receivable, net


17,812





16,278



Assets held for sale


1,466





5,770



Inventories


5,133





4,787



Prepaid expenses


5,107





3,918



Other current assets


1,923





1,162



Total current assets

$

33,139




$

32,797



Preneed cemetery trust investments


70,960





66,919



Preneed funeral trust investments


82,896





94,573



Preneed receivables, net


23,222





24,717



Receivables from preneed trusts


25,871





12,298



Property, plant and equipment, net


152,433





154,547



Cemetery property


75,156





73,117



Goodwill


218,442





217,244



Deferred charges and other non-current assets


9,424





8,347



Cemetery perpetual care trust investments


46,542





40,261



Total assets

$

738,085




$

724,820











LIABILITIES AND STOCKHOLDERS' EQUITY








Current liabilities:








Current portion of senior long-term debt and capital lease obligations

$

11,218




$

12,672



Accounts payable


5,243





3,677



Other liabilities


13,067





11,829



Accrued liabilities


12,278





14,710



Liabilities associated with assets held for sale


369





4,510



Total current liabilities

$

42,175




$

47,398



Long-term debt, net of current portion


118,841





109,514



Revolving credit facility


44,700





26,000



Convertible junior subordinated debentures due in 2029 to an affiliate


89,770





89,770



Obligations under capital leases, net of current portion


4,013





3,844



Deferred preneed cemetery revenue


63,998





56,218



Deferred preneed funeral revenue


39,794





31,596



Deferred tax liability






6,961



Deferred preneed cemetery receipts held in trust


70,960





66,919



Deferred preneed funeral receipts held in trust


82,896





94,573



Care trusts' corpus


45,920





40,056



Total liabilities

$

603,067




$

572,849











Commitments and contingencies
















Redeemable preferred stock

$

200




$











Stockholders' equity:








Common stock, $.01 par value; 80,000,000 shares authorized; 22,078,000 and 22,166,000 shares issued at December 31, 2012 and September 30, 2013, respectively

$

221




$

222



Additional paid-in capital


202,462





204,322



Accumulated deficit


(52,598)





(37,306)



Treasury stock, at cost; 3,922,000 shares at December 31, 2012 and September 30, 2013


(15,267)





(15,267)



Total stockholders' equity

$

134,818




$

151,971



Total liabilities and stockholders' equity

$

738,085




$

724,820



 

 

CARRIAGE SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except share and per share data)



For the Three Months Ended
September 30,


For the Nine Months Ended
September 30,


2012


2013


2012


2013









Revenues

$

48,142



$

49,707



$

147,298



$

161,097


Field costs and expenses

34,793



35,596



103,640



111,150


Gross profit

$

13,349



$

14,111



$

43,658



$

49,947


General and administrative expenses

5,452



7,719



16,052



21,796


Operating income

$

7,897



$

6,392



$

27,606



$

28,151


Interest expense, net

(4,547)



(3,216)



(13,618)



(9,475)


Loss on early extinguishment of debt and other costs

(3,031)





$

(3,031)




Income from continuing operations before income taxes

$

319



$

3,176



$

10,957



$

18,676


Provision for income taxes

(129)



(1,262)



(4,429)



(7,751)


Net income from continuing operations

$

190



$

1,914



$

6,528



$

10,925


Net income from discontinued operations, net of tax

416



3,980



1,202



4,371


Net income

606



5,894



7,730



15,296


Preferred stock dividend

3





10



4


Net income available to common stockholders

$

603



$

5,894



$

7,720



$

15,292










Basic earnings per common share:








Continuing operations

$

0.01



$

0.10



$

0.36



$

0.60


Discontinued operations

0.02



0.22



0.07



0.24


Basic earnings per common share

$

0.03



$

0.32



$

0.43



$

0.84


 

Diluted earnings per common share:








Continuing operations

$

0.01



$

0.10



$

0.35



$

0.59


Discontinued operations

0.02



0.22



0.07



0.19


Diluted earnings per common share

$

0.03



$

0.32



$

0.42



$

0.78










Dividends declared per common share

$

0.025



$

0.025



$

0.075



$

0.075










Weighted average number of common and common equivalent shares outstanding:








Basic

18,051



17,892



18,129



17,794


Diluted

18,170



18,057



18,212



22,361


The GAAP Diluted EPS and Adjusted Diluted EPS for the nine months ended September 30, 2013 includes 4.4 million shares that would be issued upon conversion of our convertible subordinated debentures (TIDES) as a result of the if-converted method prescribed by accounting standards.

 

CARRIAGE SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)



For the Nine Months Ended September 30,


2012


2013

Cash flows from operating activities:



Net income

$

7,730



$

15,296


Adjustments to reconcile net income to net cash provided (used) by operating activities:




Gain on sale of assets

(606)



(6,546)


Impairment of goodwill



100


Depreciation and amortization

7,567



8,910


Loss on early extinguishment of debt

1,324




Amortization and write-off of deferred financing costs

520



150


Provision for losses on accounts receivable

1,429



1,274


Stock-based compensation expense

1,621



2,952


Deferred income taxes

2,390



9,389


Other

300



81


Changes in operating assets and liabilities that provided (required) cash:




Accounts and preneed receivables

(3,109)



(1,765)


Inventories and other current assets

581



934


Deferred charges and other

(38)



(19)


Preneed funeral and cemetery trust investments

5,982



3,566


Accounts payable and accrued liabilities

(5,139)



(972)


Deferred preneed funeral and cemetery revenue

823



2,490


Deferred preneed funeral and cemetery receipts held in trust

(6,095)



(3,601)


Net cash provided by operating activities

15,280



32,239






Cash flows from investing activities:




Acquisitions and new construction

(24,831)



(6,051)


Capital expenditures

(7,842)



(7,425)


Proceeds from the sale of businesses

603



8,321


Net cash used in investing activities

(32,070)



(5,155)






Cash flows from financing activities:




Net borrowings from (payments against) the bank credit facility

26,607



(18,700)


Payments on term loan



(7,500)


Payment of call premium associated with the senior notes redemption

(1,707)




Payments on other long-term debt and obligations under capital leases

(480)



(445)


Proceeds from the exercise of stock options and employee stock purchase plan

680



685


Dividends on common stock and redeemable preferred stock

(1,363)



(1,366)


Payment of loan origination costs

(3,004)



(574)


Purchase of treasury stock

(4,531)




Net cash provided by (used in) financing activities

16,202



(27,900)






Net decrease in cash and cash equivalents

(588)



(816)


Cash and cash equivalents at beginning of period

1,137



1,698


Cash and cash equivalents at end of period

$

549



$

882


 

 

CARRIAGE SERVICES, INC.

CALCULATION OF EARNINGS PER SHARE

(UNAUDITED)

(in thousands, except share and per share data)



For the Three Months Ended
September 30, 2013


For the Nine Months Ended
September 30, 2013







Numerator for basic earnings per share:






Numerator from continuing operations






Income from continuing operations

$

1,914


$

10,925

Less: Earnings allocated to unvested restricted stock


(35)



(237)

Income attributable to continuing operations

$

1,879


$

10,688







Numerator from discontinued operations






Income from discontinued operations

$

3,980


$

4,371

Less: Earnings allocated to unvested restricted stock


(74)



(95)

Income attributable to discontinued operations

$

3,906


$

4,276







Adjustment for diluted earnings per share:






  Interest on convertible junior subordinated debentures, net of tax




2,463


$


$

2,463

Numerator for diluted earnings per share:






Income attributable to continuing operations

$

1,879


$

13,151

Income attributable to discontinued operations


3,906



4,276


$

5,785


$

17,427







Denominator






Denominator for Basic earnings per common share - weighted average shares outstanding


17,892



17,794

Effect of dilutive securities:






Stock options


165



175

Convertible junior subordinated debentures




4,392

Denominator for Diluted earnings per common share - weighted average shares outstanding


18,057



22,361







Basic earnings per common share:






Continuing operations

$

0.10


$

0.60

Discontinued operations

$

0.22


$

0.24

Basic earnings per common share

$

0.32


$

0.84







Diluted earnings per common share:






Continuing operations

$

0.10


$

0.59

Discontinued operations

$

0.22


$

0.19

Diluted earnings per common share

$

0.32


$

0.78

 

NON-GAAP FINANCIAL MEASURES

This press release uses Non-GAAP financial measures to present the financial performance of the Company.  Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported operating results or cash flow from operations or any other measure of performance as determined in accordance with GAAP.  We believe the non-GAAP results are useful to investors because such results help investors compare our results to previous periods and provide insights into underlying trends in our business. The Company's GAAP financial statements accompany this release.  Reconciliations of the Non-GAAP financial measures to GAAP measures are provided in this press release.

The Non-GAAP financial measures include "Adjusted Net Income", "Adjusted Basic Earnings Per Share", "Adjusted Diluted Earnings Per Share", "Consolidated EBITDA", "Adjusted Consolidated EBITDA", "Free Cash Flow", "Funeral, Cemetery and Financial EBITDA", "Total Field EBITDA" and  "Special Items" in this press release.  These financial measurements are defined as similar GAAP items adjusted for Special Items and are reconciled to GAAP in this press release.  In addition, the Company's presentation of these measures may not be comparable to similarly titled measures in other companies' reports. The definitions used by the Company for our internal management purposes and in this press release are as follows:

  • Adjusted Net Income is defined as net income from continuing operations plus adjustments for special items and other non-recurring expenses or credits.
  • Consolidated EBITDA is defined as net income from continuing operations before income taxes, interest expenses, non-cash stock compensation, depreciation and amortization, and interest income and other, net.
  • Adjusted Consolidated EBITDA as Consolidated EBITDA plus adjustments for special items and non-recurring expenses or credits.
  • Free Cash Flow as net cash provided by operations less cash for maintenance capital expenditures.
  • Funeral Field EBITDA is defined as Funeral Gross Profit less depreciation and amortization, regional and unallocated overhead expenses and net financial income.
  • Cemetery Field EBITDA is defined as Cemetery Gross Profit less depreciation and amortization, regional and unallocated overhead expenses and net financial income.
  • Financial EBITDA is defined as Financial Revenue less Financial expenses.
  • Total Field EBITDA is defined as Gross Profit less depreciation and amortization, regional and unallocated overhead expenses.
  • Special Items is defined as charges or credits that are non-GAAP yet can be non-recurring such as withdrawable trust income, acquisition and divestiture expenses, litigation settlements, severance costs, loss on early retirement of debt and other costs, discrete tax items and other non-recurring amounts.
  • Adjusted Basic Earnings Per Share is defined as GAAP Basic Earnings Per Share, adjusted for special items.
  • Adjusted Diluted Earnings Per Share is defined as GAAP Diluted Earnings Per Share, adjusted for special items.

Certain state regulations allow the withdrawal of financial income from preneed cemetery merchandise and services trust funds when realized in the trust.  Under current generally accepted accounting principles, trust income is only recognized in the Company's financial statements at a later time when the related merchandise and services sold on the preneed contract is delivered at the time of death.  Carriage has provided financial income from the trusts, termed "Withdrawable Trust Income" and reported on a Non-GAAP proforma basis within Special Items in the accompanying Operating and Financial Metrics Trend Report (a Non-GAAP Unaudited Income Statement), to reflect the current cash results. Management believes that the Withdrawable Trust Income provides useful information to investors because it presents income and cash flow when earned by the trusts.

Reconciliation of Non-GAAP Financial Measures:

This press release includes the use of certain financial measures that are not GAAP measures.  The Non-GAAP financial measures are presented for additional information and are reconciled to their most comparable GAAP measures below. 

Reconciliation of Net Income from continuing operations to Adjusted Net Income for the three and nine months ended September 30, 2012 and 2013 (thousands):


Three Months Ended

September 30,



Nine Months Ended

September 30,






2012



2013



2012



2013

Net Income from continuing operations

$

190



$

1,914



$

6,528



$

10,925


Special items, net of tax












Withdrawable Trust Income


342




210




851




678


Acquisition/Divestiture Expenses


198




143




604




251


Severance Costs


183




409




508




860


Loss on Early Extinguishment of Debt and Other Costs


2,000







2,000




248


Consulting Fees





110







278


Non-Recurring Securities Transactions





160







160


Other Special Items








129




54


Prior Period Amortization Adjustment for TIDES











(538)


Tax Adjustment from Prior Period











598


Total Special items affecting net income

$

2,723



$

1,032



$

4,092



$

2,589


Adjusted Net Income

$

2,913



$

2,946



$

10,620



$

13,514


Reconciliation of Net Income from continuing operations to Consolidated EBITDA and Adjusted Consolidated EBITDA for the three and nine months ended September 30, 2012 and 2013 (in thousands):



Three Months Ended

September 30,




Nine Months Ended

September 30,




2012


2013


2012


2013

Net income from continuing operations

$

190



$

1,914



$

6,528



$

10,925


Provision for income taxes

129



1,262



4,429



7,751


Pre-tax earnings from continuing operations

$

319



$

3,176



$

10,957



$

18,676


Interest expense, net

4,547



3,216



13,618



9,475


Loss on early extinguishment of debt and other costs

3,031





3,031




Non-cash stock compensation

439



675



1,621



2,299


Depreciation & amortization

2,487



2,939



7,472



8,836


Consolidated EBITDA

$

10,823



$

10,006



$

36,699



$

39,286


Adjusted For:








Withdrawable Trust Income

$

518



$

318



$

1,289



$

1,028


Acquisition/Divestiture Expenses

300



217



915



380


Severance Costs

278



620



769



1,305


Consulting Fees



166





421


Non-Recurring Securities Transactions



242





242


Other Special Items





195



83


Adjusted Consolidated EBITDA

$

11,919



$

11,569



$

39,867



$

42,745


Revenue

$

48,142



$

49,707



$

147,298



$

161,097










Adjusted Consolidated EBITDA Margin

24.8%



23.3%



27.1%



26.5%


Reconciliation of funeral and cemetery income before income taxes to Field EBITDA for the three and nine months ended September 30, 2012 and 2013 (in thousands):

Funeral Field EBITDA


Three Months Ended

September 30,




Nine Months Ended

September 30,




2012


2013


2012


2013

Gross Profit (GAAP)

$

10,523



$

10,225



$

34,887



$

37,881


Depreciation & amortization

1,485



1,462



4,388



4,691


Regional & unallocated costs

1,735



2,220



5,031



6,233


Net financial income

(1,415)



(1,825)



(4,648)



(6,028)


Funeral Field EBITDA

$

12,328



$

12,082



$

39,658



$

42,777


Funeral Field Operating Revenue

$

34,431



$

35,238



$

106,941



$

116,042


Funeral Field EBITDA Margin

35.8%



34.3%



37.1%



36.9%


 

Cemetery Field EBITDA


Three Months Ended

September 30,




Nine Months Ended

September 30,




2012


2013


2012


2013

Gross Profit (GAAP)

$

2,834



$

3,886



$

8,779



$

12,066


Depreciation & amortization

790



626



2,365



2,575


Regional & unallocated costs

817



500



1,933



1,558


Net financial income

(2,179)



(2,275)



(5,944)



(7,159)


Cemetery Field EBITDA

$

2,262



$

2,737



$

7,133



$

9,040


Cemetery Field Operating Revenue

$

9,713



$

10,057



$

28,661



$

30,717


Cemetery Field EBITDA Margin

23.3%



27.2%



24.9%



29.4%


Reconciliation of cash provided by operating activities to Free Cash Flow from operations for the three and nine months ended September 30, 2012 and 2013 (in thousands):



Three Months Ended

September 30,




Nine Months Ended

September 30,




2012


2013


2012


2013

Cash provided by operating activities

$

1,906



$

8,246



$

15,280



$

32,239


Less maintenance capital expenditures

(940)



(1,600)



(3,170)



(4,600)


Free Cash Flow from operating activities

$

966



$

6,646



$

12,110



$

27,639


Reconciliation of GAAP basic earnings per share to Adjusted basic earnings per share for the three and nine months ended September 30, 2012 and 2013:


Three Months Ended

September 30,




Nine Months Ended

September 30,




2012


2013


2012


2013

GAAP basic earnings per share from continuing operations

$

0.01



$

0.10



$

0.36



$

0.60


Special items affecting net income

0.15



0.06



0.23



0.14


Adjusted basic earnings per share

$

0.16



$

0.16



$

0.59



$

0.74


Reconciliation of GAAP diluted earnings per share to Adjusted diluted earnings per share for the three and nine months ended September 30, 2012 and 2013:


Three Months Ended

September 30,




Nine Months Ended

September 30,




2012


2013


2012


2013

GAAP diluted earnings per share from continuing operations

$

0.01



$

0.10



$

0.35



$

0.59


Special items affecting net income

0.15



0.06



0.22



0.11


Dilution effect of convertible junior subordinated debentures

-



-



-



0.03


Adjusted diluted earnings per share

$

0.16



$

0.16



$

0.57



$

0.73


Reconciliation of Net Income from continuing operations to Consolidated EBITDA and Adjusted Consolidated EBITDA for the estimated rolling four quarters ending September 30, 2014 (in thousands):



Rolling
Four Quarter Outlook



September 30, 2014E

Net income from continuing operations



$

20,100



Provision for income taxes




12,300



Pre-tax earnings from continuing operations




32,400



Net interest expense, including loan cost amortization




12,300



Depreciation & amortization, including stock compensation




17,000



Consolidated EBITDA



$

61,700



Adjusted for special items



$

3,200



Adjusted Consolidated EBITDA



$

64,900



Reconciliation of Net Income from continuing operations to Adjusted Net Income for the estimated rolling four quarters ending September 30, 2014 (in thousands):




Rolling
Four Quarter Outlook




September 30, 2014E

Net income from continuing operations




$

20,100



Special items, net of tax




2,100



Adjusted Net Income




$

22,200



Reconciliation of GAAP basic earnings per share to Adjusted basic earnings per share for the estimated rolling four quarters ending September 30, 2014:


Rolling
Four Quarter Outlook


September 30, 2014E

GAAP basic earnings per share from continuing operations


$

1.09



Special items affecting net income


0.12



Adjusted basic earnings per share


$

1.21



Reconciliation of Cash Flow from Operations to Free Cash Flow for the estimated rolling four quarters ending September 30, 2014 (in 000's):




Rolling
Four Quarter Outlook




September 30, 2014E

Cash flow from operations




$

46,200


Maintenance Capital Expenditures




(6,300)


Free Cash Flow




$

39,900










CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

Certain statements made herein or elsewhere by, or on behalf of, the Company that are not historical facts are intended to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  In addition to historical information, this Press Release contains certain statements and information that may constitute forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include any projections of earnings, revenues, asset sales, cash flow, debt levels or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing and are based on our current expectations and beliefs concerning future developments and their potential effect on us. The words "may", "will", "estimate", "intend", "believe", "expect", "project", "forecast", "foresee", "should", "would", "could", "plan", "anticipate" and other similar words or expressions are intended to identify forward-looking statements, which are generally not historical in nature. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:

  • the execution of our Standards Operating Model;
  • changes in the number of deaths in our markets;
  • changes in consumer preferences;
  • ability to find and retain skilled personnel;
  • the effects of competition;
  • the investment performance of our funeral and cemetery trust funds;
  • fluctuations in interest rates;
  • our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;
  • death benefits related to preneed funeral contracts funded through life insurance contracts;
  • our ability to generate preneed sales;
  • the financial condition of third-party insurance companies that fund our preneed funeral contracts;
  • increased or unanticipated costs, such as insurance or taxes;
  • effects of the application of applicable laws and regulations, including changes in such regulations or the interpretation thereof;
  • consolidation of the deathcare industry; and
  • other factors and uncertainties inherent in the deathcare industry.

For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see "Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2012. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise. A copy of the Company's Form 10-K, and other Carriage Services information and news releases, are available at www.carriageservices.com.

This press release includes the use of certain financial measures that are not GAAP measures.  The Non-GAAP financial measures are presented for additional information and are reconciled to their most comparable GAAP measures in the tables presented above.

SOURCE Carriage Services, Inc.



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