HOUSTON, July 26, 2016 /PRNewswire/ -- Carriage
Services, Inc. (NYSE: CSV) today announced results for the second
quarter ended June 30, 2016 as
highlighted below:
Three Months Ended June 30, 2016
compared to Three Months Ended June 30,
2015
- Record Total Revenue of $61.9
million, an increase of 4.4%;
- Record Net Income of $5.2
million, an increase of 14.1%;
- Record GAAP Diluted Earnings Per Share of $0.30, an increase of 25.0%;
- Record Total Field EBITDA of $25.1
million, an increase of 6.5%;
- Total Field EBITDA Margin up 90 basis points to 40.6%;
- Record Adjusted Consolidated EBITDA of $17.8 million, an increase of 3.5%;
- Adjusted Consolidated EBITDA Margin down 30 basis points to
28.7%;
- Record Adjusted Diluted Earnings Per Share of $0.37, an increase of 8.8%; and
- Adjusted Free Cash Flow of $13.2
million, a decrease of 5.1%.
Six Months Ended June 30, 2016
compared to Six Months Ended June 30,
2015
- Record Total Revenue of $125.2
million, an increase of 2.2%;
- Net Income of $9.8 million, a
decrease of 11.0%;
- GAAP Diluted Earnings Per Share remained flat at $0.57;
- Record Total Field EBITDA of $52.8
million, an increase of 3.3%;
- Record Total Field EBITDA Margin up 50 basis points to
42.2%;
- Record Adjusted Consolidated EBITDA of $37.7 million, an increase of 2.2%;
- Adjusted Consolidated EBITDA Margin remained flat at 30.1%
- Record Adjusted Diluted Earnings Per Share of $0.84, an increase of 10.5%; and
- Adjusted Free Cash Flow of $24.9
million, a decrease of 2.2%.
Mel Payne, Chief Executive
Officer, stated, "Our record second quarter results reflected
a return to a more normal death rate environment and continued
excellent execution of our Standards Operating Model broadly across
our funeral and cemetery portfolios. Our Same Store Funeral
and Cemetery Portfolios along with our Acquisition Funeral
Portfolio all delivered strong performances with
respective Revenue and Total Field EBITDA growth of 2.0% and
6.1% for Same Store Funeral, 9.6% and 14.5% for Same Store Cemetery
and 16.8% and 22.3% for Acquisition Funeral. Our Managing
Partners and their teams took advantage of the operating leverage
in their businesses by substantially increasing Total Field EBITDA
Margins, enabling us to convert a Total Revenue increase in the
second quarter of $2.6 million or
4.4% into a Total Field EBITDA increase of $1.5 million or 6.5%.
Our record second quarter field operating performance
fueled an exceptionally strong consolidated earnings performance
with the least 'Non-GAAP noise' in years, as record GAAP Diluted
EPS of $0.30 was up 25% from
$0.24 last year and record Non-GAAP
Adjusted Diluted EPS of $0.37 was up
8.8% from $0.34 last year. Our
practice of adding back the accretion of the discount on our
Convertible Subordinated Notes was 6¢ of the 7¢ difference between
our second quarter GAAP and Non-GAAP Diluted EPS performance.
Starting in 2016 we eliminated any Non-GAAP add-backs related to
withdrawable trust income, recurring acquisition and divestiture
expenses, and non-material severance and consulting fees related to
terminations.
Our performance for the first six months of 2016 was simply
extraordinary and achieved numerous records, including Total
Revenue of $125.2 million and
Adjusted Diluted EPS of $0.84, Total
Field EBITDA and Total Field EBITDA Margin of $52.8 million and 42.2%, and Adjusted
Consolidated EBITDA of $37.7 million.
These performance records for our first six months were all the
more amazing because they were in the face of revenue headwinds
related to a 150 basis point increase in the funeral cremation rate
to 50.3% as well as 2.4% lower same store funeral volumes and 1.9%
lower interment volumes because of the seasonably weak death rates
in the first quarter.
Our Adjusted Consolidated EBITDA Margin of 30.1% for the first
six months, which we consider the "cash earning power margin" of
each dollar of revenue, was equal to last year's record but would
have been 120 basis points higher this year if last year was
adjusted on an apples-to-apples basis using our new Non-GAAP
reporting methodology. Looking forward as we have cleaner Non-GAAP
reporting, our goal is to achieve a 30% Adjusted Consolidated
EBITDA Margin which has never been done by any public consolidation
company in the sixty year history of deathcare consolidation using
current accounting methodology.
Our change in corporate Non-GAAP performance reporting policy is
consistent with recent SEC presentation guidelines related to
concerns about the overuse of Non-GAAP performance reporting.
However, our specific changes preceded the SEC guidelines and are
related to us listening to our institutional investors and
responding to their concerns. Our Non-GAAP and GAAP Diluted EPS
performance will continue to converge for the balance of 2016 and
thereafter because over the last several years we have completed a
debt structure transformation as well as a radical transformation
and shrinkage of our Operations and Strategic Growth Leadership
Team. During this process we have become much more collaborative,
efficient and effective as a senior leadership team, the benefit of
which will now be fully realized going forward without "Non-GAAP
overhead turnover noise" and a substantially lower ratio of Total
Overhead to Total Revenue over time adding to our consolidation
platform value creation dynamic.
Some of our investors and investor candidates have voiced
concern that our current Total Leverage Ratio of five times
Adjusted Consolidated EBITDA seems too high and implies a high risk
credit profile, which in turn creates an obstacle with some
institutional investors for meaningful investment in our common
shares. However, this view misses three fundamental leverage
capacity points specific only to Carriage.
First, our annualized Adjusted Consolidated EBITDA Margin is 300
- 400 basis points higher than our much larger industry benchmark
comparison, a cash earning power margin spread that has been
widening over the last several years and which produces
approximately 15% greater capacity relative to dollars of revenue
to handle leverage. Secondly, our total debt is comprised of
$204 million of senior secured bank
facilities maturing in March 2021
(2.99 times senior debt ratio) and $143.75
million of subordinated convertible notes
convertible beginning at $22.56
per share on a sliding scale up to a maximum of 20% dilution at
$53 per share and maturing in
May 2021 (4.99 times total debt
ratio). Lastly, the cash interest rate structure on our total debt
is extremely low at about 3% in an extraordinarily low interest
rate environment which should continue globally for several more
years. In summary, we believe our current credit profile and debt
structure components combined with our increasing cash earning
power is highly beneficial to all of our common shareholders for
maximum value creation via wise and opportunistic Free Cash Flow
Capital Allocation over the next several years.
With respect to our acquisition activity, our focus is on
partnering with the best remaining independent funeral and cemetery
owners in the best remaining major markets around the country.
Accordingly, we are proud to announce that on May 31st, Bradshaw
Carter Memorial & Funeral Services and Cypress Fairbanks
Funeral Home, both in our home office market in
Houston, TX, joined the Carriage
family as our newest members. Both are great businesses in separate
high growth submarkets, and Bradshaw
Carter has a national reputation within our industry as one
of the top funeral homes in Houston and one of the nation's best providers
of high quality personalized service. These two businesses together
with our west Houston
(Katy) Schmidt Funeral Home and
its new showcase facility provide us with a strong presence and
platform to grow in the large strategic market of Houston.
We are optimistic about the opportunity to partner with one or
more premier firms in the second half of 2016 consistent with our
view that the next several years will have more growth from high
quality acquisitions as the seeds of our corporate development
activity reach fruition. We believe our ten Strategic Acquisition
Criteria along with an assessment of cultural fit provide a highly
disciplined and selective process that will add businesses to our
Acquisition Portfolio over the next five years that have a
relatively higher revenue and earnings growth profile compared to
our same store portfolio, portfolio performance characteristics
that are clearly evident in our existing funeral same store and
acquisition portfolios for the first six months of 2016.
After hosting our Annual Partnership Meeting during the week of
June 13-17 and witnessing the energy,
quality and cultural leadership alignment of our Managing Partners
and Cemetery Sales Managers from across our portfolio of businesses
(many new over the last few years), there is no doubt whatsoever
that our greatest achievement since launching our Carriage Good
To Great Journey at the beginning of 2012 has been to build an
industry reputation as a career home where the most talented and
entrepreneurial operational and sales leaders can thrive and make a
difference. Some of these leaders are listed below as Carriage High
Performance Heroes for our second quarter:
East
Region:
|
|
Charlie
Eagan
|
Greenwood Funeral
Home; New Orleans, LA
|
Curtis
Ottinger
|
Heritage Funeral
Home; Chattanooga, TN
|
Sue Keenan
|
Byron Keenan Funeral
Home & Cremation; Springfield, MA
|
Scott
Sanderford*
|
Everly-Wheatley
Funeral Home; Alexandria, VA
|
Courtney
Charvet
|
North Brevard Funeral
Home; Titusville, FL
|
Dan Simons
|
Everly Community
Funeral Care; Falls Church, VA
|
Phil
Appell
|
Keenan Funeral Homes;
West Haven, CT
|
|
|
Central
Region:
|
|
Jeff
Seaman
|
Dwayne R. Spence
Funeral Home; Canal Winchester, OH
|
Mike
Conner*
|
Conner-Westbury
Funeral Home; Griffin, GA
|
Brad
Shemwell
|
Latham Funeral Home;
Elkton, KY
|
|
|
West
Region:
|
|
Ashley
Vella
|
Deegan Funeral
Chapels; Escalon, CA
|
Michael
Nicosia*
|
Ouimet Brothers
Concord Funeral Chapel; Concord, CA
|
Rick Davis
|
Rolling Hills
Memorial Park; Richmond, CA
|
Alan
Kerrick*
|
Dakan Funeral Chapel;
Caldwell, ID
|
|
|
Houston Support
Office:
|
|
Jennifer
Flores
|
Houston
Support-Treasury
|
Megan
Bartels
|
Houston
Support-PreNeed Administration
|
|
|
*Notes High
Performance Heroes from 1st Quarter 2016.
|
After becoming active again last fall (inactive since 2007) with
institutional investor meetings and presentations both to existing
shareholders and new candidates, I was frankly surprised at the
confusion and lack of understanding of the three core models that
define our company and make it so unique compared to any other
company that has ever consolidated the funeral and cemetery
industry. So rather than wait to explain more comprehensively
to institutional investors the high performance culture ideas,
concepts and models that define our company in my annual
shareholder letters, as I have done over the last four years, I
will elaborate on one of our three core models in more detail in
each quarterly earnings release, starting this second quarter with
the Standards Operating Model.
STANDARDS OPERATING MODEL
Our ability as a consolidator and operator of funeral homes and
cemeteries to produce cash from revenue at a margin of about 30%
has never been done before because no other company (public or
private) would take the risk of launching a radically innovative
business model that has been continuously evolving since
2003. When we developed and rolled out our Funeral Standards
Operating Model at the beginning of 2004, I got skeptically
questioned by our Board of Directors as to the source of this
'crazy idea' to eliminate the budget and control methodology used
throughout Corporate America and to replace this well understood
business model with eight simple 'Funeral Operating Standards' that
would not change from year to year.
Literally no one in our company at that time understood or
believed in this idea and its component standards other than me and
about fifteen of our best field funeral home managers and former
owners. So we formed our first "Being The Best" Standards
Council comprised of twelve highly respected operators and former
owners (four for each of three regions) and assigned to them total
control on the oversight and evolution of this new operating model.
As a group they now meet at the beginning of each year to approve
Standards Achievement for each business which determines the annual
Being The Best Bonus compensation for each Managing Partner
and their employees. The eight simple Funeral Standards evolved
over time but have not been tweaked (and approved by our Standards
Council) for better portfolio performance alignment since 2011. We
now categorize our entire portfolio of businesses into four
groupings related to size (number of funerals) and average revenue
per funeral (ARPC) with all businesses within each grouping having
the same eight standards.
We have found through experience and sophisticated data
correlation analysis that the "normalized Field EBITDA Margin" as
well as all the other desirable financial outcome characteristics
can be determined (assume top notch management) with great
predictability and consistency within a tight range of performance
for each of our funeral and cemetery groupings. It was through
evolution of our Standards Operating Model that we determined
around 2006 that we needed a Leadership Model to profile
entrepreneurial leaders who were more than just managers and caring
service providers, i.e. they were not satisfied with their market
share and had a burning passion to grow market share by taking it
from their local competitors (hunters rather than just
gatherers).
The very essence of the Standards Operating Model is that its
simplicity is designed around the financial concept of operating
leverage, which means that our Managing Partners are self-driven
and incentivized to grow their funeral volumes and revenues through
their high fixed cost facility at sustainable Field EBITDA Margins
for their grouping. All of our Managing Partners know that even
modest revenue growth will produce a higher growth rate in Field
EBITDA which we share generously with our Managing Partners and
their employees.
However, operating leverage is a two-edged sword, so if market
share and revenues are declining, the Field EBITDA Margin and Field
EBITDA will decline at a faster rate than revenues. When "Standards
Achievement" falls below 50% for more than two quarters, our
Managing Partners also know that they will likely be replaced, as
Below Minimum Standards of 50% is equivalent to failure within the
Carriage portfolio of businesses and means you are being subsidized
by other Managing Partners and their employee teams who are
producing high and sustainable results in alignment with our high
performance culture. The Standards Operating Model is primarily
about driving revenue and profit growth through market share
growth, as we have learned that you can't manage profitably market
share that you don't have!
Rather than continue on in this earnings release or repeat the
more comprehensive explanation of our Standards Operating Model
contained in our Company and Investment Profile and in past
shareholder letters and industry articles, I will refer those
interested in learning more about the high performance concepts
underpinning all the elements and linkages of our High Performance
Culture Framework to the Beyond Budgeting Round Table (BBRT)
founded in the UK in 1998 by Jeremy
Hope, Robin Fraser and
Peter Bunce. Jeremy Hope (1948-2011) and Robin Fraser subsequently co-authored the book
Beyond Budgeting (2003) as well as the article
"Who Needs Budgets" in the Harvard Business Review
(February 2003). Robin Fraser in particular recognized early in
their research on innovative management and business model concepts
to replace the "budget and control" model that an incremental
approach was doomed to failure and that success depended on first
using a transformational process to build a coherent yet radically
decentralized model, thereafter followed by longterm continuous
improvement.
The above summary explanation of the pioneering business model
research done by Robin Fraser and
Jeremy Hope is exactly what has been
successfully introduced and evolved at Carriage since 2003,
although we knew nothing of their research at the time we
launched our Standards Operating Model. We simply "dove off a high
cliff" when expectations in the public markets for our sector were
close to zero with no assurance that we would land safely or
whether this idea would work a little or not at all. When we
finally did read about and study their research in the 2004-2007
timeframe, we were highly encouraged that we were on to something
that just might work. The evolutionary path forward since 2003 has
been slow and involved trial and error in many areas that now in
hindsight are more than a little humorous.
For many years in the 1990's and thereafter I studied the
leadership lessons and techniques of Jack
Welch, and later adopted and customized his 4E Leadership
Model for Carriage in 2006 so that it might lead to higher
performance through better leadership and execution of our
Standards Operating Model. The huge irony is that Jack Welch more than any great leader I have
ever studied railed against what rigid budgets and the bureaucratic
processes related to them do to suck the entrepreneurial spirit and
dynamism out of corporate enterprises. But Jack Welch never could shake loose from their
grip at General Electric.
Unlike Jack Welch, we took the
leap of faith toward a radical yet profoundly simple business
model, first with our funeral homes and later with our cemeteries.
Our Standards Operating Model not only worked with "trend is your
friend" operating and financial results as we continuously improved
it by focusing relentlessly on market share through 4E Leadership
and high quality employees - it keeps getting better over time just
like Robin Fraser predicted it
would.
Our Standards Operating Model does not
automatically produce sustainable and superior operating and
financial results from a funeral or cemetery business. Each
business must have a Managing Partner with 4E Leadership
characteristics and highly motivated and skilled employees
consistent with our two people standards - Right Quality of Staff
and Continuous Upgrading of Staff. While we have been criticized
and Monday morning quarterbacked over the years about the
"subjectiveness and undefineability" of 4E Leadership and our two
people standards, we stayed the course seeking to continuously
improve how we define and calibrate these high performance people
characteristics with differentiating individual business and
employee performance data. Consequently, we are light years ahead
of where we used to be with our ability to find, develop, support
and unleash more leadership and people power in all of our
operating businesses. I will cover the 4E Leadership Model, our
people standards and the leadership and people high performance
concepts of Good To Great in more detail in our third
quarter earnings release.
After learning so much in the 1990's about what not to do, and
then evolving our three core models into a superior high
performance culture framework for operating and consolidating
funeral homes and cemeteries, we as a senior leadership team are
excited to think about what the performance of our portfolio will
look like five and ten years from now as we add larger, higher
growth businesses to our portfolio. So stay tuned, as we believe
the best is yet to come because as a company "We Choose To
Be Great" on the Carriage Good To Great Journey
that never ends! In other words, we believe it is a very good time
to be a long term shareholder of our Company," concluded Mr.
Payne.
ADJUSTED FREE CASH FLOW
We produced Adjusted Free Cash Flow from operations for the
three and six months ended June 30,
2016 of $13.2 million and
$24.9 million, respectively, compared
to Adjusted Free Cash Flow from operations of $13.9 million and $25.4
million for the corresponding periods in 2015. A
reconciliation of Cash Flow Provided by Operations to Adjusted Free
Cash Flow for the three and six months ended June 30, 2015 and 2016 is as follows (in
thousands):
|
|
For the Three
Months
Ended June 30,
|
|
For the Six
Months
Ended June 30,
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
Cash Flow Provided by
Operations
|
$
|
15,708
|
|
|
$
|
14,716
|
|
|
$
|
28,330
|
|
|
$
|
24,458
|
|
Cash used for
Maintenance Capital Expenditures
|
(3,002)
|
|
|
(1,755)
|
|
|
(4,848)
|
|
|
(3,373)
|
|
Free Cash
Flow
|
$
|
12,706
|
|
|
$
|
12,961
|
|
|
$
|
23,482
|
|
|
$
|
21,085
|
|
|
|
|
|
|
|
|
|
Plus: Incremental
Special Items:
|
|
|
|
|
|
|
|
Acquisition and
Divestiture Expenses
|
29
|
|
|
—
|
|
|
537
|
|
|
516
|
|
Severance
Costs
|
489
|
|
|
—
|
|
|
616
|
|
|
2,759
|
|
Consulting
Fees
|
673
|
|
|
228
|
|
|
788
|
|
|
496
|
|
Adjusted Free Cash
Flow
|
$
|
13,897
|
|
|
$
|
13,189
|
|
|
$
|
25,423
|
|
|
$
|
24,856
|
|
ROLLING FOUR QUARTER OUTLOOK
The Rolling Four Quarter Outlook ("Outlook") reflects
management's opinion on the performance of the portfolio of
existing businesses, including performance of existing trusts, and
excludes size and timing of acquisitions for the Rolling Four
Quarter Outlook period ending June 30, 2017 unless we have a
signed Letter of Intent and high likelihood of a closing within 90
days. This Outlook is not intended to be management estimates or
forecasts of our future performance, as we believe precise
estimates will be precisely wrong all the time. Rather our intent
and goal is to reflect a "roughly right range" most of the time of
future Rolling Four Quarter Outlook performance as we execute our
Standards Operating, Strategic Acquisition and 4E Leadership Models
over time. Similarly, we self-publish a Company and Investment
Profile, available on our website, that includes a Five Year
"Roughly Right Scenario" of our future performance which together
with our Five Year Trend Report provides investors a ten year past
and future profile of our financial value creation dynamics and
condition, making it easier to judge whether our "trends will
continue to be the friend" of long term investors.
ROLLING FOUR QUARTER OUTLOOK – Period Ending June 30, 2017
|
|
Range (in
millions, except per share amounts)
|
Revenues
|
|
$251 -
$255
|
Adjusted Consolidated
EBITDA
|
|
$74 - $78
|
Adjusted Net
Income
|
|
$29 - $31
|
Adjusted Diluted
Earnings Per Share(1)
|
|
$1.71 -
$1.75
|
Factors affecting our analysis include, among others, 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,
market volatility and changes in Federal Reserve monetary policy.
Revenues, Adjusted Consolidated EBITDA, Adjusted Net Income and
Adjusted Diluted Earnings Per Share for the four quarter period
ending June 30, 2017 are expected to improve relative to the
trailing four quarter period ended June 30,
2016 due to increases in our existing Funeral Home and
Cemetery portfolio and modest decreases in overhead as a percentage
of revenue.
(1)
|
The Rolling Four
Quarter Outlook on Adjusted Diluted Earnings Per Share does not
include any changes to our fully diluted share count that could
occur related to additional share repurchases or a stock price
increase and EPS dilution calculations related to our convertible
subordinated notes and outstanding and exercisable stock
options.
|
TRUST FUND PERFORMANCE
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
|
70/30
index Benchmark(2)
|
|
|
|
|
|
|
|
|
6 months ended
06/30/16
|
|
1.9%
|
1.9%
|
|
3.8%
|
9.3%
|
7.7%
|
1 year ended
12/31/15
|
|
(3.1%)
|
(2.7%)
|
|
1.4%
|
(4.7%)
|
(2.9%)
|
2 years ended
12/31/15
|
|
5.0%
|
5.0%
|
|
15.2%
|
(2.3%)
|
3.0%
|
3 years ended
12/31/15
|
|
20.0%
|
19.4%
|
|
52.5%
|
5.0%
|
19.3%
|
4 years ended
12/31/15
|
|
44.4%
|
39.9%
|
|
76.9%
|
21.4%
|
38.0%
|
5 years ended
12/31/15
|
|
40.2%
|
37.2%
|
|
80.6%
|
26.7%
|
42.8%
|
(1)
|
Investment
performance includes realized income and unrealized appreciation
(depreciation).
|
(2)
|
The 70/30 Benchmark
is 70% weighted to the High Yield Index and 30% weighted to the
S&P 500 Stock Index.
|
Asset Allocation
as of June 30, 2016
|
(in thousands)
|
|
|
|
Discretionary Trust Funds
|
|
Total
Trust Funds
|
Asset
Class
|
|
|
MV
|
%
|
|
|
MV
|
%
|
|
Cash
|
|
|
$
|
7,663
|
4%
|
|
|
$
|
24,663
|
12%
|
|
Equities
|
|
|
23,716
|
14%
|
|
|
26,166
|
13%
|
|
Fixed
Income(1)
|
|
|
141,108
|
80%
|
|
|
151,496
|
73%
|
|
Other/Insurance
|
|
|
3,353
|
2%
|
|
|
3,543
|
2%
|
|
Total
Portfolios
|
|
|
$
|
175,840
|
100%
|
|
|
$
|
205,868
|
100%
|
|
(1)
|
Discretionary Trust -
Fixed Income Portfolio Profile.
|
Industry/Sector
|
|
%
|
Basic
Materials
|
|
0.7%
|
Communications
|
|
8.1%
|
Consumer
|
|
12.8%
|
Energy
|
|
12.2%
|
Financial
|
|
42.1%
|
Government
|
|
1.1%
|
Media
|
|
9.6%
|
Technology
|
|
7.7%
|
Utilities
|
|
5.7%
|
Total
|
|
100%
|
For the quarter ended June 30, 2016, Carriage's
discretionary trust funds returned 1.9% versus 7.7% for the 70/30
index benchmark.
As with the first quarter our overall trust fund performance for
the first six months of 2016 was particularly affected by weakness
in our 10 year warrant portfolio of five "Too Big To Fail" banks
and insurance companies, which in the past has acted as a hedge
against our high fixed income allocation. Our fixed income
portfolio tracked the performance of the high yield bond market and
was up over 10% year to date. The strong performance of our
fixed income portfolio was predominantly driven by the investment
decisions we made during the first quarter.
While we will no longer report Withdrawable Trust Income in our
Non-GAAP Trend reporting, for the sake of full transparency we will
disclose the total throughout 2016 in this section. The
Withdrawable Trust Income for the first six months of 2016 would
have been approximately ($1.1)
million. While negative, this will have no
impact on our Adjusted Free Cash Flow for 2016.
CONFERENCE CALL AND INVESTOR RELATIONS CONTACT
Carriage Services has scheduled a conference call for tomorrow,
July 27, 2016 at 9:30 a.m. central time. To participate in the
call, please dial 866-516-3867 (ID-50479978) and ask for the
Carriage Services conference call. A replay of the conference
call will be available through July 31,
2016 and may be accessed by dialing 855-859-2056
(ID-50479978). The conference call will also be available at
www.carriageservices.com. For any investor relations questions,
please contact Viki Blinderman at
713-332-8568 or Ben Brink at
713-332-8441 or email InvestorRelations@carriageservices.com.
CARRIAGE SERVICES,
INC.
|
OPERATING AND
FINANCIAL TREND REPORT
|
(IN THOUSANDS -
EXCEPT PER SHARE AMOUNTS)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2015
|
2016
|
%
Change
|
|
2015
|
2016
|
%
Change
|
|
|
|
|
|
|
|
|
Same Store
Contracts
|
|
|
|
|
|
|
|
Atneed
Contracts
|
5,257
|
|
5,345
|
|
1.7%
|
|
|
11,267
|
|
11,029
|
|
(2.1%)
|
|
Preneed
Contracts
|
1,289
|
|
1,267
|
|
(1.7%)
|
|
|
2,786
|
|
2,685
|
|
(3.6%)
|
|
Total Same Store
Funeral Contracts
|
6,546
|
|
6,612
|
|
1.0%
|
|
|
14,053
|
|
13,714
|
|
(2.4%)
|
|
Acquisition
Contracts
|
|
|
|
|
|
|
|
Atneed
Contracts
|
1,096
|
|
1,291
|
|
17.8%
|
|
|
2,273
|
|
2,625
|
|
15.5%
|
|
Preneed
Contracts
|
243
|
|
239
|
|
(1.6%)
|
|
|
502
|
|
464
|
|
(7.6%)
|
|
Total Acquisition
Funeral Contracts
|
1,339
|
|
1,530
|
|
14.3%
|
|
|
2,775
|
|
3,089
|
|
11.3%
|
|
Total Funeral
Contracts
|
7,885
|
|
8,142
|
|
3.3%
|
|
|
16,828
|
|
16,803
|
|
(0.1%)
|
|
|
|
|
|
|
|
|
|
Funeral Operating
Revenue
|
|
|
|
|
|
|
|
Same Store
Revenue
|
$
|
34,169
|
|
$
|
34,856
|
|
2.0%
|
|
|
$
|
73,160
|
|
$
|
72,093
|
|
(1.5%)
|
|
Acquisition
Revenue
|
8,113
|
|
9,472
|
|
16.8%
|
|
|
16,706
|
|
19,149
|
|
14.6%
|
|
Total Funeral
Operating Revenue
|
$
|
42,282
|
|
$
|
44,328
|
|
4.8%
|
|
|
$
|
89,866
|
|
$
|
91,242
|
|
1.5%
|
|
|
|
|
|
|
|
|
|
Cemetery Operating
Revenue
|
|
|
|
|
|
|
|
Same Store
Revenue
|
$
|
11,266
|
|
$
|
12,345
|
|
9.6%
|
|
|
$
|
21,534
|
|
$
|
23,420
|
|
8.8%
|
|
Acquisition
Revenue
|
930
|
|
774
|
|
(16.8%)
|
|
|
1,752
|
|
1,540
|
|
(12.1%)
|
|
Total Cemetery
Operating Revenue
|
$
|
12,196
|
|
$
|
13,119
|
|
7.6%
|
|
|
$
|
23,286
|
|
$
|
24,960
|
|
7.2%
|
|
|
|
|
|
|
|
|
|
Financial
Revenue
|
|
|
|
|
|
|
|
Preneed Funeral
Commission Income
|
$
|
370
|
|
$
|
356
|
|
(3.8%)
|
|
|
$
|
725
|
|
$
|
777
|
|
7.2%
|
|
Preneed Funeral Trust
Earnings
|
1,849
|
|
1,783
|
|
(3.6%)
|
|
|
4,047
|
|
3,750
|
|
(7.3%)
|
|
Cemetery Trust
Earnings
|
2,176
|
|
1,831
|
|
(15.9%)
|
|
|
3,817
|
|
3,597
|
|
(5.8%)
|
|
Preneed Cemetery
Finance Charges
|
388
|
|
448
|
|
15.5%
|
|
|
773
|
|
870
|
|
12.5%
|
|
Total Financial
Revenue
|
$
|
4,783
|
|
$
|
4,418
|
|
(7.6%)
|
|
|
$
|
9,362
|
|
$
|
8,994
|
|
(3.9%)
|
|
Total
Revenue
|
$
|
59,261
|
|
$
|
61,865
|
|
4.4%
|
|
|
$
|
122,514
|
|
$
|
125,196
|
|
2.2%
|
|
|
|
|
|
|
|
|
|
Field
EBITDA
|
|
|
|
|
|
|
|
Same Store Funeral
Field EBITDA
|
$
|
12,117
|
|
$
|
12,855
|
|
6.1%
|
|
|
$
|
28,015
|
|
$
|
28,007
|
|
—%
|
|
Same Store Funeral
Field EBITDA Margin
|
35.5%
|
|
36.9%
|
|
140 bp
|
|
|
38.3%
|
|
38.8%
|
|
50 bp
|
|
Acquisition Funeral
Field EBITDA
|
3,196
|
|
3,908
|
|
22.3%
|
|
|
6,749
|
|
8,080
|
|
19.7%
|
|
Acquisition Funeral
Field EBITDA Margin
|
39.4%
|
|
41.3%
|
|
190 bp
|
|
|
40.4%
|
|
42.2%
|
|
180 bp
|
|
Total Funeral
Field EBITDA
|
$
|
15,313
|
|
$
|
16,763
|
|
9.5%
|
|
|
$
|
34,764
|
|
$
|
36,087
|
|
3.8%
|
|
Total Funeral
Field EBITDA Margin
|
36.2%
|
|
37.8%
|
|
160
bp
|
|
|
38.7%
|
|
39.6%
|
|
90
bp
|
|
|
|
|
|
|
|
|
|
Same Store Cemetery
Field EBITDA
|
$
|
3,537
|
|
$
|
4,049
|
|
14.5%
|
|
|
$
|
7,087
|
|
$
|
7,892
|
|
11.4%
|
|
Same Store Cemetery
Field EBITDA Margin
|
31.4%
|
|
32.8%
|
|
140 bp
|
|
|
32.9%
|
|
33.7%
|
|
80 bp
|
|
Acquisition Cemetery
Field EBITDA
|
288
|
|
140
|
|
(51.4%)
|
|
|
588
|
|
361
|
|
(38.6%)
|
|
Acquisition Cemetery
Field EBITDA Margin
|
31.0%
|
|
18.1%
|
|
(1,290 bp)
|
|
|
33.6%
|
|
23.4%
|
|
(1,020 bp)
|
|
Total Cemetery
Field EBITDA
|
$
|
3,825
|
|
$
|
4,189
|
|
9.5%
|
|
|
$
|
7,675
|
|
$
|
8,253
|
|
7.5%
|
|
Total Cemetery
Field EBITDA Margin
|
31.4%
|
|
31.9%
|
|
50
bp
|
|
|
33.0%
|
|
33.1%
|
|
10
bp
|
|
|
|
|
|
|
|
|
|
Funeral Financial
EBITDA
|
$
|
1,925
|
|
$
|
1,921
|
|
(0.2%)
|
|
|
$
|
4,196
|
|
$
|
4,118
|
|
(1.9%)
|
|
Cemetery Financial
EBITDA
|
2,489
|
|
2,220
|
|
(10.8%)
|
|
|
4,453
|
|
4,323
|
|
(2.9%)
|
|
Total Financial
EBITDA
|
$
|
4,414
|
|
$
|
4,141
|
|
(6.2%)
|
|
|
$
|
8,649
|
|
$
|
8,441
|
|
(2.4%)
|
|
Total Financial
EBITDA Margin
|
92.3%
|
|
93.7%
|
|
140
bp
|
|
|
92.4%
|
|
93.9%
|
|
150
bp
|
|
|
|
|
|
|
|
|
|
Total Field
EBITDA
|
$
|
23,552
|
|
$
|
25,093
|
|
6.5%
|
|
|
$
|
51,088
|
|
$
|
52,781
|
|
3.3%
|
|
Total Field EBITDA
Margin
|
39.7%
|
|
40.6%
|
|
90
bp
|
|
|
41.7%
|
|
42.2%
|
|
50
bp
|
|
|
|
|
|
|
|
|
|
OPERATING AND
FINANCIAL TREND REPORT
|
(IN THOUSANDS -
EXCEPT PER SHARE AMOUNTS)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
June 30,
|
|
Six Months Ended
June 30,
|
|
2015
|
2016
|
%
Change
|
|
2015
|
2016
|
%
Change
|
|
|
|
|
|
|
|
|
Overhead
|
|
|
|
|
|
|
|
Total Variable
Overhead
|
$
|
1,766
|
|
$
|
2,186
|
|
23.8%
|
|
|
$
|
4,196
|
|
$
|
7,586
|
|
80.8%
|
|
Total Regional Fixed
Overhead
|
884
|
|
844
|
|
(4.5%)
|
|
|
1,707
|
|
1,719
|
|
0.7%
|
|
Total Corporate Fixed
Overhead
|
5,260
|
|
4,510
|
|
(14.3%)
|
|
|
10,613
|
|
9,573
|
|
(9.8%)
|
|
Total
Overhead
|
$
|
7,910
|
|
$
|
7,540
|
|
(4.7%)
|
|
|
$
|
16,516
|
|
$
|
18,878
|
|
14.3%
|
|
Overhead as a
percentage of Revenue
|
13.3%
|
|
12.2%
|
|
(110
bp)
|
|
|
13.5%
|
|
15.1%
|
|
160
bp
|
|
|
|
|
|
|
|
|
|
Consolidated
EBITDA
|
$
|
15,642
|
|
$
|
17,553
|
|
12.2%
|
|
|
$
|
34,572
|
|
$
|
33,903
|
|
(1.9%)
|
|
Consolidated
EBITDA Margin
|
26.4%
|
|
28.4%
|
|
200
bp
|
|
|
28.2%
|
|
27.1%
|
|
(110
bp)
|
|
|
|
|
|
|
|
|
|
Other Expenses and
Interest
|
|
|
|
|
|
|
|
Depreciation &
Amortization
|
$
|
3,365
|
|
$
|
3,957
|
|
17.6%
|
|
|
$
|
6,687
|
|
$
|
7,691
|
|
15.0%
|
|
Non-Cash Stock
Compensation
|
1,287
|
|
1,006
|
|
(21.8%)
|
|
|
2,376
|
|
1,964
|
|
(17.3%)
|
|
Interest
Expense
|
2,492
|
|
2,968
|
|
19.1%
|
|
|
5,042
|
|
5,819
|
|
15.4%
|
|
Accretion of Discount
on Convertible Subordinated Notes
|
851
|
|
954
|
|
12.1%
|
|
|
1,678
|
|
1,881
|
|
12.1%
|
|
Loss on Early
Extinguishment of Debt
|
—
|
|
—
|
|
—%
|
|
|
—
|
|
567
|
|
—%
|
|
Other, Net
|
(13)
|
|
—
|
|
(100.0%)
|
|
|
106
|
|
(305)
|
|
(387.7%)
|
|
Pretax
Income
|
$
|
7,660
|
|
$
|
8,668
|
|
13.2%
|
|
|
$
|
18,683
|
|
$
|
16,286
|
|
(12.8%)
|
|
Net Tax
Provision
|
3,103
|
|
3,468
|
|
|
|
7,708
|
|
6,515
|
|
|
GAAP Net
Income
|
$
|
4,557
|
|
$
|
5,200
|
|
14.1%
|
|
|
$
|
10,975
|
|
$
|
9,771
|
|
(11.0%)
|
|
|
|
|
|
|
|
|
|
Special Items, Net
of tax except for **
|
|
|
|
|
|
|
|
Withdrawable Trust
Income
|
$
|
230
|
|
n/a
|
|
|
|
$
|
230
|
|
n/a
|
|
|
Acquisition and
Divestiture Expenses
|
19
|
|
—
|
|
|
|
354
|
|
336
|
|
|
Severance
Costs
|
323
|
|
—
|
|
|
|
407
|
|
1,794
|
|
|
Consulting
Fees
|
445
|
|
148
|
|
|
|
521
|
|
323
|
|
|
Accretion of Discount
on Convertible Subordinated Notes **
|
851
|
|
954
|
|
|
|
1,678
|
|
1,881
|
|
|
Loss on Early
Extinguishment of Debt
|
—
|
|
—
|
|
|
|
—
|
|
369
|
|
|
Gain on Asset
Purchase
|
—
|
|
—
|
|
|
|
—
|
|
(198)
|
|
|
Other Special
Items
|
—
|
|
—
|
|
|
|
98
|
|
—
|
|
|
Tax Adjustment from
Prior Period **
|
—
|
|
—
|
|
|
|
141
|
|
—
|
|
|
Sum of Special
Items, Net of tax
|
$
|
1,868
|
|
$
|
1,102
|
|
(41.0%)
|
|
|
$
|
3,429
|
|
$
|
4,505
|
|
31.4%
|
|
|
|
|
|
|
|
|
|
Adjusted Net
Income
|
$
|
6,425
|
|
$
|
6,302
|
|
(1.9%)
|
|
|
$
|
14,404
|
|
$
|
14,276
|
|
(0.9%)
|
|
Adjusted Net
Profit Margin
|
10.8%
|
|
10.2%
|
|
(60
bp)
|
|
|
11.8%
|
|
11.4%
|
|
(40
bp)
|
|
|
|
|
|
|
|
|
|
Adjusted Basic
Earnings Per Share
|
$
|
0.35
|
|
$
|
0.38
|
|
8.6%
|
|
|
$
|
0.78
|
|
$
|
0.86
|
|
10.3%
|
|
Adjusted Diluted
Earnings Per Share
|
$
|
0.34
|
|
$
|
0.37
|
|
8.8%
|
|
|
$
|
0.76
|
|
$
|
0.84
|
|
10.5%
|
|
|
|
|
|
|
|
|
|
GAAP Basic Earnings
Per Share
|
$
|
0.25
|
|
$
|
0.31
|
|
24.0%
|
|
|
$
|
0.59
|
|
$
|
0.59
|
|
—%
|
|
GAAP Diluted Earnings
Per Share
|
$
|
0.24
|
|
$
|
0.30
|
|
25.0%
|
|
|
$
|
0.57
|
|
$
|
0.57
|
|
—%
|
|
|
|
|
|
|
|
|
|
Weighted Average
Basic Shares Outstanding
|
18,268
|
|
16,516
|
|
|
|
18,238
|
|
16,488
|
|
|
Weighted Average
Diluted Shares Outstanding
|
18,880
|
|
17,075
|
|
|
|
18,844
|
|
16,862
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to
Adjusted Consolidated EBITDA
|
|
|
|
|
|
|
|
Consolidated
EBITDA
|
$
|
15,642
|
|
$
|
17,553
|
|
12.2%
|
|
|
$
|
34,572
|
|
$
|
33,903
|
|
(1.9%)
|
|
Withdrawable Trust
Income
|
348
|
|
n/a
|
|
|
|
348
|
|
n/a
|
|
|
Acquisition and
Divestiture Expenses
|
29
|
|
—
|
|
|
|
537
|
|
516
|
|
|
Severance
Costs
|
489
|
|
—
|
|
|
|
616
|
|
2,759
|
|
|
Consulting
Fees
|
673
|
|
228
|
|
|
|
788
|
|
496
|
|
|
Adjusted
Consolidated EBITDA
|
$
|
17,181
|
|
$
|
17,781
|
|
3.5%
|
|
|
$
|
36,861
|
|
$
|
37,674
|
|
2.2%
|
|
Adjusted
Consolidated EBITDA Margin
|
29.0%
|
|
28.7%
|
|
(30
bp)
|
|
|
30.1%
|
|
30.1%
|
|
0
bp
|
|
CARRIAGE SERVICES,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(unaudited and in
thousands, except share data)
|
|
|
|
|
|
December 31,
2015
|
|
June 30,
2016
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
535
|
|
|
$
|
883
|
|
Accounts receivable,
net
|
18,181
|
|
|
18,246
|
|
Inventories
|
5,654
|
|
|
5,792
|
|
Prepaid
expenses
|
4,684
|
|
|
2,988
|
|
Other current
assets
|
4,707
|
|
|
809
|
|
Total current
assets
|
33,761
|
|
|
28,718
|
|
Preneed cemetery
trust investments
|
63,291
|
|
|
61,775
|
|
Preneed funeral trust
investments
|
85,553
|
|
|
83,429
|
|
Preneed receivables,
net
|
27,998
|
|
|
29,152
|
|
Receivables from
preneed trusts
|
13,544
|
|
|
12,865
|
|
Property, plant and
equipment, net
|
214,874
|
|
|
228,898
|
|
Cemetery property,
net
|
75,597
|
|
|
75,878
|
|
Goodwill
|
264,416
|
|
|
265,249
|
|
Intangible and other
non-current assets
|
10,978
|
|
|
14,307
|
|
Cemetery perpetual
care trust investments
|
43,127
|
|
|
42,505
|
|
Total
assets
|
$
|
833,139
|
|
|
$
|
842,776
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Current portion of
long-term debt and capital lease obligations
|
$
|
12,236
|
|
|
$
|
12,605
|
|
Accounts
payable
|
7,917
|
|
|
6,858
|
|
Other
liabilities
|
524
|
|
|
2,497
|
|
Accrued
liabilities
|
16,541
|
|
|
16,021
|
|
Total current
liabilities
|
37,218
|
|
|
37,981
|
|
Long-term debt, net
of current portion
|
103,495
|
|
|
139,693
|
|
Revolving credit
facility
|
91,514
|
|
|
58,703
|
|
Convertible
subordinated notes due 2021
|
115,227
|
|
|
117,355
|
|
Obligations under
capital leases, net of current portion
|
2,875
|
|
|
2,757
|
|
Deferred preneed
cemetery revenue
|
56,721
|
|
|
56,669
|
|
Deferred preneed
funeral revenue
|
31,748
|
|
|
31,131
|
|
Deferred tax
liability
|
39,956
|
|
|
36,816
|
|
Other long-term
liabilities
|
5,531
|
|
|
5,813
|
|
Deferred preneed
cemetery receipts held in trust
|
63,291
|
|
|
61,775
|
|
Deferred preneed
funeral receipts held in trust
|
85,553
|
|
|
83,429
|
|
Care trusts'
corpus
|
42,416
|
|
|
42,117
|
|
Total
liabilities
|
675,545
|
|
|
674,239
|
|
Commitments and
contingencies:
|
|
|
|
Stockholders'
equity:
|
|
|
|
Common stock, $.01
par value; 80,000,000 shares authorized; 22,497,873 and 22,492,315
issued at December 31, 2015 and June 30, 2016,
respectively
|
225
|
|
|
225
|
|
Additional paid-in
capital
|
214,250
|
|
|
215,422
|
|
Retained
earnings
|
3,385
|
|
|
13,156
|
|
Treasury stock, at
cost; 5,849,316 shares at December 31, 2015 and June 30,
2016
|
(60,266)
|
|
|
(60,266)
|
|
Total stockholders'
equity
|
157,594
|
|
|
168,537
|
|
Total liabilities and
stockholders' equity
|
$
|
833,139
|
|
|
$
|
842,776
|
|
CARRIAGE SERVICES,
INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(unaudited and in
thousands, except per share data)
|
|
|
For the Three
Months
Ended June 30,
|
|
For the Six
Months
Ended June 30,
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Funeral
|
$
|
44,501
|
|
|
$
|
46,467
|
|
|
$
|
94,638
|
|
|
$
|
95,769
|
|
Cemetery
|
14,760
|
|
|
15,398
|
|
|
27,876
|
|
|
29,427
|
|
|
59,261
|
|
|
61,865
|
|
|
122,514
|
|
|
125,196
|
|
Field costs and
expenses:
|
|
|
|
|
|
|
|
Funeral
|
27,263
|
|
|
27,783
|
|
|
55,678
|
|
|
55,564
|
|
Cemetery
|
8,446
|
|
|
8,989
|
|
|
15,748
|
|
|
16,851
|
|
Depreciation and
amortization
|
2,993
|
|
|
3,571
|
|
|
5,795
|
|
|
6,907
|
|
Regional and
unallocated funeral and cemetery costs
|
2,311
|
|
|
2,715
|
|
|
4,836
|
|
|
5,764
|
|
|
41,013
|
|
|
43,058
|
|
|
82,057
|
|
|
85,086
|
|
Gross
profit
|
18,248
|
|
|
18,807
|
|
|
40,457
|
|
|
40,110
|
|
Corporate costs and
expenses:
|
|
|
|
|
|
|
|
General and
administrative costs and expenses
|
6,886
|
|
|
5,831
|
|
|
14,056
|
|
|
15,078
|
|
Home office
depreciation and amortization
|
372
|
|
|
386
|
|
|
892
|
|
|
784
|
|
|
7,258
|
|
|
6,217
|
|
|
14,948
|
|
|
15,862
|
|
Operating
income
|
10,990
|
|
|
12,590
|
|
|
25,509
|
|
|
24,248
|
|
Interest
expense
|
(2,479)
|
|
|
(2,968)
|
|
|
(5,148)
|
|
|
(5,819)
|
|
Accretion of discount
on convertible subordinated notes
|
(851)
|
|
|
(954)
|
|
|
(1,678)
|
|
|
(1,881)
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(567)
|
|
Other
income
|
—
|
|
|
—
|
|
|
—
|
|
|
305
|
|
Income before income
taxes
|
7,660
|
|
|
8,668
|
|
|
18,683
|
|
|
16,286
|
|
Provision for income
taxes
|
(3,103)
|
|
|
(3,468)
|
|
|
(7,708)
|
|
|
(6,515)
|
|
Net income
|
$
|
4,557
|
|
|
$
|
5,200
|
|
|
$
|
10,975
|
|
|
$
|
9,771
|
|
|
|
|
|
|
|
|
|
Basic earnings per
common share:
|
$
|
0.25
|
|
|
$
|
0.31
|
|
|
$
|
0.59
|
|
|
$
|
0.59
|
|
Diluted earnings per
common share:
|
$
|
0.24
|
|
|
$
|
0.30
|
|
|
$
|
0.57
|
|
|
$
|
0.57
|
|
|
|
|
|
|
|
|
|
Dividends declared
per common share
|
$
|
0.025
|
|
|
$
|
0.025
|
|
|
$
|
0.050
|
|
|
$
|
0.050
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common and common equivalent shares
outstanding:
|
|
|
|
|
|
|
|
Basic
|
18,268
|
|
|
16,516
|
|
|
18,238
|
|
|
16,488
|
|
Diluted
|
18,880
|
|
|
17,075
|
|
|
18,844
|
|
|
16,862
|
|
CARRIAGE SERVICES,
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(unaudited and in
thousands)
|
|
|
For the Six Months
Ended
June 30,
|
|
2015
|
|
2016
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
10,975
|
|
|
$
|
9,771
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
6,687
|
|
|
7,691
|
|
Provision for losses
on accounts receivable
|
833
|
|
|
1,052
|
|
Stock-based
compensation expense
|
2,376
|
|
|
2,303
|
|
Deferred income tax
expense
|
1,452
|
|
|
1,116
|
|
Amortization of
deferred financing costs
|
460
|
|
|
420
|
|
Accretion of discount
on convertible subordinated notes
|
1,678
|
|
|
1,881
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
567
|
|
Net gain on sale and
disposal of assets
|
—
|
|
|
(67)
|
|
Changes in operating
assets and liabilities that provided (required) cash:
|
|
|
|
Accounts and preneed
receivables
|
1,358
|
|
|
(2,271)
|
|
Inventories and other
current assets
|
4,062
|
|
|
1,303
|
|
Intangible and other
non-current assets
|
117
|
|
|
300
|
|
Preneed funeral and
cemetery trust investments
|
1,603
|
|
|
4,941
|
|
Accounts
payable
|
167
|
|
|
(1,148)
|
|
Accrued and other
liabilities
|
(953)
|
|
|
1,207
|
|
Deferred preneed
funeral and cemetery revenue
|
(814)
|
|
|
(669)
|
|
Deferred preneed
funeral and cemetery receipts held in trust
|
(1,671)
|
|
|
(3,939)
|
|
Net cash provided by
operating activities
|
28,330
|
|
|
24,458
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Acquisitions and land
for new construction
|
(4,250)
|
|
|
(9,406)
|
|
Purchase of land and
buildings previously leased
|
(6,080)
|
|
|
(6,258)
|
|
Net proceeds from the
sale of other assets
|
—
|
|
|
555
|
|
Capital
expenditures
|
(15,285)
|
|
|
(7,830)
|
|
Net cash used in
investing activities
|
(25,615)
|
|
|
(22,939)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Borrowings from the
revolving credit facility
|
24,500
|
|
|
27,100
|
|
Payments against the
revolving credit facility
|
(18,600)
|
|
|
(59,700)
|
|
Borrowings from the
term loan
|
—
|
|
|
39,063
|
|
Payments against
the term loan
|
(4,688)
|
|
|
(5,625)
|
|
Payments on other
long-term debt and obligations under capital leases
|
(401)
|
|
|
(689)
|
|
Proceeds from the
exercise of stock options and employee stock purchase plan
contributions
|
410
|
|
|
457
|
|
Dividends on common
stock
|
(925)
|
|
|
(831)
|
|
Payment of loan
origination costs related to the credit facility
|
(13)
|
|
|
(717)
|
|
Purchase of treasury
stock
|
(3,082)
|
|
|
—
|
|
Excess tax benefit
(deficiency) of equity compensation
|
229
|
|
|
(229)
|
|
Net cash used in
financing activities
|
(2,570)
|
|
|
(1,171)
|
|
|
|
|
|
Net increase in cash
and cash equivalents
|
145
|
|
|
348
|
|
Cash and cash
equivalents at beginning of period
|
413
|
|
|
535
|
|
Cash and cash
equivalents at end of period
|
$
|
558
|
|
|
$
|
883
|
|
|
|
|
|
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 "Special Items",
"Adjusted Net Income", "Consolidated EBITDA", "Adjusted
Consolidated EBITDA", "Adjusted Consolidated EBITDA Margin",
"Adjusted Free Cash Flow", "Funeral, Cemetery and Financial
EBITDA", "Total Field EBITDA", "Total Field EBITDA Margin",
"Adjusted Basic Earnings Per Share" and "Adjusted Diluted Earnings
Per Share" 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:
- Special Items are defined as charges or credits such as
withdrawable trust income (prior to 2016), acquisition and
divestiture expenses, severance costs, loss on early retirement of
debt and other costs, discrete tax items and other non-recurring
amounts. Special Items are taxed at the federal statutory rate of
34 percent for the three and six months ended June 30, 2015 and 35 percent for the three and
six months ended June 30, 2016,
except for the accretion of the discount on Convertible Notes as
this is a non-tax deductible item and the tax adjustment from prior
period.
- Adjusted Net Income is defined as net income plus adjustments
for Special Items and other non-recurring expenses or credits.
- Consolidated EBITDA is defined as net income before income
taxes, interest expenses, non-cash stock compensation, depreciation
and amortization, and interest income and other, net.
- Adjusted Consolidated EBITDA is defined as Consolidated EBITDA
plus adjustments for Special Items and non-recurring expenses or
credits.
- Adjusted Consolidated EBITDA Margin is defined as Adjusted
Consolidated EBITDA as a percentage of revenue.
- Adjusted Free Cash Flow is defined as net cash provided by
operations, adjusted by Special Items as deemed necessary, less
cash for maintenance capital expenditures.
- Funeral Field EBITDA is defined as Funeral Gross Profit, which
is funeral revenue minus funeral field costs and
expenses, less depreciation and amortization, regional and
unallocated funeral overhead expenses and Funeral Financial
EBITDA.
- Cemetery Field EBITDA is defined as Cemetery Gross Profit,
which is cemetery revenue minus cemetery field costs and expenses,
less depreciation and amortization, regional and unallocated
cemetery overhead expenses and Cemetery Financial EBITDA.
- Funeral Financial EBITDA is defined as Funeral Financial
Revenue less Funeral Financial Expenses.
- Cemetery Financial EBITDA is defined as Cemetery Financial
Revenue less Cemetery Financial Expenses.
- Total Field EBITDA is defined as Gross Profit less depreciation
and amortization, regional and unallocated overhead expenses.
- Total Field EBITDA Margin is defined as Total Field EBITDA as a
percentage of revenue.
- 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.
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 to Adjusted Net Income for the three and six months
ended June 30, 2015 and 2016 (in
thousands):
|
|
|
For the Three
Months
Ended June 30,
|
|
For the Six
Months
Ended June 30,
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
Net Income
|
$
|
4,557
|
|
|
$
|
5,200
|
|
|
$
|
10,975
|
|
|
$
|
9,771
|
|
Special Items, net of
tax except for **
|
|
|
|
|
|
|
|
Withdrawable Trust
Income
|
230
|
|
|
n/a
|
|
230
|
|
|
n/a
|
Acquisition and
Divestiture Expenses
|
19
|
|
|
—
|
|
|
354
|
|
|
336
|
|
Severance
Costs
|
323
|
|
|
—
|
|
|
407
|
|
|
1,794
|
|
Consulting
Fees
|
445
|
|
|
148
|
|
|
521
|
|
|
323
|
|
Accretion of Discount
on Convertible Subordinated Notes **
|
851
|
|
|
954
|
|
|
1,678
|
|
|
1,881
|
|
Costs Related to the
Credit Facility
|
—
|
|
|
—
|
|
|
—
|
|
|
369
|
|
Gain on Sale of
Asset
|
—
|
|
|
—
|
|
|
—
|
|
|
(198)
|
|
Other Special
Items
|
—
|
|
|
—
|
|
|
98
|
|
|
—
|
|
Tax Adjustment from
Prior Period **
|
—
|
|
|
—
|
|
|
141
|
|
|
—
|
|
Total Special Items
affecting Net Income
|
$
|
1,868
|
|
|
$
|
1,102
|
|
|
$
|
3,429
|
|
|
$
|
4,505
|
|
Adjusted Net
Income
|
$
|
6,425
|
|
|
$
|
6,302
|
|
|
$
|
14,404
|
|
|
$
|
14,276
|
|
Reconciliation
of Net Income to Consolidated EBITDA and Adjusted Consolidated
EBITDA for the three and six months ended June 30, 2015 and
2016 (in thousands):
|
|
|
For the Three
Months
Ended June 30,
|
|
For the Six
Months
Ended June 30,
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
Net Income
|
$
|
4,557
|
|
|
$
|
5,200
|
|
|
$
|
10,975
|
|
|
$
|
9,771
|
|
Net Tax
Provision
|
3,103
|
|
|
3,468
|
|
|
7,708
|
|
|
6,515
|
|
Pretax
Income
|
$
|
7,660
|
|
|
$
|
8,668
|
|
|
$
|
18,683
|
|
|
$
|
16,286
|
|
Interest
Expense
|
2,492
|
|
|
2,968
|
|
|
5,042
|
|
|
5,819
|
|
Accretion of Discount
on Convertible Subordinated Notes
|
851
|
|
|
954
|
|
|
1,678
|
|
|
1,881
|
|
Loss on Early
Extinguishment of Debt
|
—
|
|
|
—
|
|
|
—
|
|
|
567
|
|
Non-cash Stock
Compensation
|
1,287
|
|
|
1,006
|
|
|
2,376
|
|
|
1,964
|
|
Depreciation &
Amortization
|
3,365
|
|
|
3,957
|
|
|
6,687
|
|
|
7,691
|
|
Other, net
|
(13)
|
|
|
—
|
|
|
106
|
|
|
(305)
|
|
Consolidated
EBITDA
|
$
|
15,642
|
|
|
$
|
17,553
|
|
|
$
|
34,572
|
|
|
$
|
33,903
|
|
Adjusted
For:
|
|
|
|
|
|
|
|
Withdrawable Trust
Income
|
348
|
|
|
n/a
|
|
|
348
|
|
|
n/a
|
|
Acquisition and
Divestiture Expenses
|
29
|
|
|
—
|
|
|
537
|
|
|
516
|
|
Severance
Costs
|
489
|
|
|
—
|
|
|
616
|
|
|
2,759
|
|
Consulting
Fees
|
673
|
|
|
228
|
|
|
788
|
|
|
496
|
|
Adjusted Consolidated
EBITDA
|
$
|
17,181
|
|
|
$
|
17,781
|
|
|
$
|
36,861
|
|
|
$
|
37,674
|
|
Revenue
|
$
|
59,261
|
|
|
$
|
61,865
|
|
|
$
|
122,514
|
|
|
$
|
125,196
|
|
|
|
|
|
|
|
|
|
Adjusted Consolidated
EBITDA Margin
|
29.0%
|
|
|
28.7%
|
|
|
30.1%
|
|
|
30.1%
|
|
Reconciliation
of funeral and cemetery income before income taxes to Field EBITDA
for the three and six months ended June 30, 2015 and 2016 (in
thousands):
|
|
Funeral Field
EBITDA
|
For the Three
Months
Ended June 30,
|
|
For the Six
Months
Ended June 30,
|
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
Gross Profit
(GAAP)
|
$
|
13,644
|
|
|
$
|
14,388
|
|
|
$
|
31,640
|
|
|
$
|
31,356
|
|
Depreciation &
Amortization
|
1,876
|
|
|
2,138
|
|
|
3,665
|
|
|
4,216
|
|
Regional &
Unallocated Costs
|
1,718
|
|
|
2,158
|
|
|
3,655
|
|
|
4,633
|
|
Funeral Financial
EBITDA
|
(1,925)
|
|
|
(1,921)
|
|
|
(4,196)
|
|
|
(4,118)
|
|
Funeral Field
EBITDA
|
$
|
15,313
|
|
|
$
|
16,763
|
|
|
$
|
34,764
|
|
|
$
|
36,087
|
|
|
|
|
|
Cemetery Field
EBITDA
|
For the Three
Months
Ended June 30,
|
|
For the Six
Months
Ended June 30,
|
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
Gross Profit
(GAAP)
|
$
|
4,604
|
|
|
$
|
4,419
|
|
|
$
|
8,817
|
|
|
$
|
8,754
|
|
Depreciation &
Amortization
|
1,117
|
|
|
1,433
|
|
|
2,130
|
|
|
2,691
|
|
Regional &
Unallocated Costs
|
593
|
|
|
557
|
|
|
1,181
|
|
|
1,131
|
|
Cemetery Financial
EBITDA
|
(2,489)
|
|
|
(2,220)
|
|
|
(4,453)
|
|
|
(4,323)
|
|
Cemetery Field
EBITDA
|
$
|
3,825
|
|
|
$
|
4,189
|
|
|
$
|
7,675
|
|
|
$
|
8,253
|
|
|
|
|
|
Total Field
EBITDA
|
For the Three
Months
Ended June 30,
|
|
For the Six
Months
Ended June 30,
|
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
Funeral Field
EBITDA
|
$
|
15,313
|
|
|
$
|
16,763
|
|
|
$
|
34,764
|
|
|
$
|
36,087
|
|
Cemetery Field
EBITDA
|
3,825
|
|
|
4,189
|
|
|
7,675
|
|
|
8,253
|
|
Funeral Financial
EBITDA
|
1,925
|
|
|
1,921
|
|
|
4,196
|
|
|
4,118
|
|
Cemetery Financial
EBITDA
|
2,489
|
|
|
2,220
|
|
|
4,453
|
|
|
4,323
|
|
Total Field
EBITDA
|
$
|
23,552
|
|
|
$
|
25,093
|
|
|
$
|
51,088
|
|
|
$
|
52,781
|
|
Reconciliation
of GAAP Basic Earnings Per Share to Adjusted Basic Earnings Per
Share for the three and six months ended June 30, 2015 and
2016:
|
|
|
For the Three
Months
Ended June 30,
|
|
For the Six
Months
Ended June 30,
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
GAAP Basic Earnings
Per Share
|
$
|
0.25
|
|
|
$
|
0.31
|
|
|
$
|
0.59
|
|
|
$
|
0.59
|
|
Special Items
Affecting Net Income
|
0.10
|
|
|
0.07
|
|
|
0.19
|
|
|
0.27
|
|
Adjusted Basic
Earnings Per Share
|
$
|
0.35
|
|
|
$
|
0.38
|
|
|
$
|
0.78
|
|
|
$
|
0.86
|
|
Reconciliation
of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per
Share for the three and six months ended June 30, 2015 and
2016:
|
|
|
For the Three
Months
Ended June 30,
|
|
For the Six
Months
Ended June 30,
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
GAAP Diluted Earnings
Per Share
|
$
|
0.24
|
|
|
$
|
0.30
|
|
|
$
|
0.57
|
|
|
$
|
0.57
|
|
Special Items
Affecting Net Income
|
0.10
|
|
|
0.07
|
|
|
0.19
|
|
|
0.27
|
|
Adjusted Diluted
Earnings Per Share
|
$
|
0.34
|
|
|
$
|
0.37
|
|
|
$
|
0.76
|
|
|
$
|
0.84
|
|
On page six of this press release, we present the Rolling Four
Quarter Outlook ("Outlook") which reflects management's opinion on
the performance of the portfolio of existing businesses, including
performance of existing trusts, and excludes size and timing of
acquisitions for the Rolling Four Quarter Outlook period ending
June 30, 2017 unless we have a signed
Letter of Intent and high likelihood of a closing within 90 days.
This Outlook is not intended to be management estimates or
forecasts of our future performance, as we believe precise
estimates will be precisely wrong all the time. The following three
reconciliations are presented at the midpoint of the range in this
Outlook.
Reconciliation
of Net Income to Consolidated EBITDA and Adjusted Consolidated
EBITDA for the estimated Rolling Four Quarters ending June 30, 2017
(in thousands):
|
|
|
Rolling Four
Quarter Outlook
|
|
|
June,
2017E
|
|
Net Income
|
|
|
$
|
25,900
|
|
|
|
Net Tax
Provision
|
|
|
17,200
|
|
|
|
Pretax
Income
|
|
|
$
|
43,100
|
|
|
|
Net Interest Expense,
including Accretion of Discount on Convertible Subordinated
Notes
|
|
|
14,900
|
|
|
|
Depreciation &
Amortization, including Non-cash Stock Compensation
|
|
|
18,500
|
|
|
|
Consolidated
EBITDA
|
|
|
$
|
76,500
|
|
|
|
Adjusted for Special
Items
|
|
|
—
|
|
|
|
Adjusted Consolidated
EBITDA
|
|
|
$
|
76,500
|
|
|
|
Reconciliation
of Net Income from Adjusted Net Income for the estimated Rolling
Four Quarters ending June 30, 2017 (in
thousands):
|
|
|
Rolling Four
Quarter Outlook
|
|
|
June 30,
2017E
|
|
Net Income
|
|
|
$
|
25,900
|
|
|
|
Special
Items
|
|
|
4,100
|
|
|
|
Adjusted Net
Income
|
|
|
$
|
30,000
|
|
|
|
Reconciliation
of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per
Share for the estimated Rolling Four Quarters ending June 30,
2017:
|
|
|
Rolling Four
Quarter Outlook
|
|
|
June 30,
2017E
|
|
GAAP Diluted Earnings
Per Share
|
|
|
$
|
1.49
|
|
|
|
Special Items
Affecting Net Income
|
|
|
0.24
|
|
|
|
Adjusted Diluted
Earnings Per Share
|
|
|
$
|
1.73
|
|
|
|
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,
but are not limited to, statements regarding 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",
"seek", "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 ability to find and retain skilled personnel;
- the effects of competition;
- the execution of our Standards Operating, 4E Leadership and
Strategic Acquisition Models;
- changes in the number of deaths in our markets;
- changes in consumer preferences;
- our ability to generate preneed sales;
- 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;
- 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 most recent Annual Report
on Form 10-K. 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, 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.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/carriage-services-announces-record-2016-second-quarter-results-reaffirms-rolling-four-quarter-outlook-300303795.html
SOURCE Carriage Services, Inc.