HOUSTON, Oct. 25, 2016 /PRNewswire/ -- Carriage
Services, Inc. (NYSE: CSV) today announced results for the third
quarter ended September 30, 2016 as
highlighted below:
Three Months Ended September 30,
2016 compared to Three Months Ended September 30, 2015
- Record Total Revenue of $60.1
million, an increase of 3.0%;
- Record Net Income of $5.7
million, an increase of 27.9%;
- Record GAAP Diluted Earnings Per Share of $0.33, an increase of 37.5%;
- Record Total Field EBITDA of $24.5
million, an increase of 5.0%;
- Record Total Field EBITDA Margin up 80 basis points to
40.7%;
- Record Adjusted Consolidated EBITDA of $17.1 million, an increase of 4.2%;
- Record Adjusted Consolidated EBITDA Margin up 40 basis points
to 28.5%;
- Record Adjusted Diluted Earnings Per Share of $0.43, an increase of 30.3%; and
- Adjusted Free Cash Flow of $9.2
million, a decrease of 30.8%.
Nine Months Ended September 30,
2016 compared to Nine Months Ended September 30, 2015
- Record Total Revenue of $185.3
million, an increase of 2.5%;
- Net Income remained flat at $15.4
million;
- Record GAAP Diluted Earnings Per Share of $0.91, an increase of 11.0%;
- Record Total Field EBITDA of $77.2
million, an increase of 3.9%;
- Record Total Field EBITDA Margin up 60 basis points to
41.7%;
- Record Adjusted Consolidated EBITDA of $54.8 million, an increase of 2.8%;
- Record Adjusted Consolidated EBITDA Margin up 10 basis points
to 29.6%;
- Record Adjusted Diluted Earnings Per Share of $1.28, an increase of 17.4%; and
- Adjusted Free Cash Flow of $34.1
million, a decrease of 12.1%.
Mel Payne, Chief Executive
Officer, stated, "This year represents the last year of the first
five year timeframe of the Carriage Good To Great Journey
that never ends, and we are finishing strong with several notable
highlights for the third quarter that relate to our exciting
prospects for the future. First, our record third quarter and year
to date Adjusted EPS were simply exceptional given the modest
revenue growth, which reflected fewer shares outstanding this year
because of our share repurchase program last year, a lower tax
provision due to accelerated depreciation taken on the large amount
of growth capital expenditures completed in 2015, but most
importantly the outstanding execution of our Standards Operating
Model broadly across our funeral and cemetery portfolios in
complete alignment with our 2016 theme of We Choose to be
Great!.
Secondly, Dave DeCarlo retired on
September 30th after over five years
of outstanding service and contribution as both a Board Member and
Officer, but the quality acquisition candidate relationships that
he seeded in collaboration with other leaders across the company
will be harvested as "join in to get even better" acquisitions for
years to come. We closed one top quality funeral home acquisition
in September in a new strategic California market and should close two more
first class funeral home acquisitions pursuant to letters of intent
in November, one in a large new strategic market in a new state,
and the other a large business in a large strategic area/market and
state where we already have a significant and growing presence.
And finally and most importantly our leadership team has never
been as strong, talented and collaboratively aligned as leader
owners or the company as well positioned for faster and higher
margined consolidated revenue growth and shareholder value creation
over the next five year timeframe of our Good To Great
Journey. Accordingly, we are raising our Rolling Four Quarter
Outlook of Adjusted EPS by $0.10 to a
range of $1.81-$1.85 for the period
ending September 30, 2017.
Our Same Store Funeral and Cemetery Portfolios along with our
Acquisition Funeral and Cemetery Portfolios all delivered strong
performances in the third quarter with respective Revenue and Field
EBITDA growth of -0.8% and 2.4% for Same Store Funeral, 5.8% and
8.4% for Same Store Cemetery, 18.5% and 22.5% for Acquisition
Funeral and 41.3% and 131.2% for Acquisition Cemetery. 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 Operating Revenue increase
in the third quarter of $2.2 million
or 4.1% (excludes $0.4 million
decline in Financial Revenue) into a Total Funeral and Cemetery
Field EBITDA increase of $1.6 million
or 8.4% (excludes $0.4 million
decline in Financial EBITDA).
Our record third quarter field operating performance together
with a lower tax provision fueled an exceptionally strong
consolidated earnings performance with record GAAP Diluted EPS of
$0.33 up 37.5% from $0.24 last year, and record Non-GAAP Adjusted
Diluted EPS of $0.43 up 30.3% from
$0.33 last year. Our practice of
adding back the accretion of the discount on our Convertible
Subordinated Notes was 5.7¢ of the 10¢ difference between our third
quarter GAAP and Non-GAAP Diluted EPS performance with the balance
representing the one time retirement costs of Dave DeCarlo. 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.
Our performance for the first nine months of 2016 was simply
extraordinary and achieved numerous records, including Total
Revenue of $185.3 million and
Adjusted Diluted EPS of $1.28, Total
Field EBITDA and Total Field EBITDA Margin of $77.2 million and 41.7%, and Adjusted
Consolidated EBITDA and Adjusted Consolidated EBITDA Margin
of $54.8 million and 29.6%. These
performance records for our first nine months were all the more
amazing because they were in the face of revenue headwinds related
to a 180 basis point increase in the funeral cremation rate to
50.6% as well as 1.4% lower same store funeral volumes and 2.6%
lower interment volumes because of the seasonably weak death rates
primarily in the first quarter.
Our Adjusted Consolidated EBITDA Margin, which we consider the
"cash earning power margin" of each dollar of revenue, was 29.6%
for the first nine months and while a record by 10 basis points
would have had a higher basis point spread this year over last year
if last year was adjusted on an apples-to-apples basis using our
new Non-GAAP reporting methodology. Looking forward into 2017
as we have clean Non-GAAP reporting for the full year, we are
confident in our ability to exceed our goal of achieving a 30%
Adjusted Consolidated EBITDA Margin, which will be a company and
industry milestone that has never been achieved by any public
consolidation company in the sixty year history of deathcare
consolidation using current accounting methodology.
CARRIAGE HIGH PERFORMANCE CULTURE FRAMEWORK
Since launching the Carriage Good To Great Journey on
January 1, 2012, we have evolved
rapidly and often in dynamic spurts into what we now refer to as
the Carriage High Performance Culture Framework. This unique
framework (visual schematic found in our Company and Investment
Profile) has a "high performance culture engine" comprised of our
three core models whose execution is designed to achieve four
primary long term goals in alignment with our Ten Year Being The
Best Vision:
- Being The Best at operating funeral homes and cemeteries
by Being The Best at providing high value personalized
services and sales to the client families and communities in which
we operate;
- Being The Best at providing succession plan solutions to
the best remaining independent family businesses in the best
strategic markets;
- Being The Best at attracting and retaining the best and
most entrepreneurial management talent (4E Leadership
Characteristics) and employees that align with our Being The
Best Mission and Five Guiding Principles;
- Being The Best at allocating our precious capital over
the next ten years for maximum long term value creation in
alignment with our Vision of becoming a Built To Last
Company.
Our view of the very nature of Carriage as a high performance
culture company in our industry is outlined specifically on pages 3
and 4 of my 2015 Shareholder Letter in the section titled "Carriage
Framework of High Performance Ideas and Concepts." All of the major
elements of our High Performance Culture Framework have been linked
and sequenced so that superior execution by our leadership will
achieve long term sustainable high operating and financial
performance in the face of all the "bad revenue challenges" that we
get asked about, i.e. lower death rates (mild flu season,
longevity, etc.), higher cremation rates, volatile financial
markets, seasonal unpredictability, etc. All of these revenue and
earnings challenges have been present throughout the first nine
months of 2016 yet we continue to achieve consistently record
performance as a High Performance Culture Company "that just
happens to be in the funeral and cemetery industry."
Thus our High Performance Culture conviction is WHO
CARES! about the mostly short term uncontrollable vagaries of
our industry that have little or nothing to do with long term value
creation at Carriage. We prefer to focus on "glass half full"
matters over which we have some control, i.e. Market Share, a
higher value (and revenue) experience for every client family every
time (especially cremation families), Managing Partner Leadership
Characteristics, Right Quality and Continuous Upgrading of Staff
(both in each business and support departments in Houston), leadership team cultural fit and
passion about collaboration (leader owners), improving transparency
in our public reporting, incentives that recognize and reward high
performing leaders and employees, user friendly advanced
proprietary information and reporting systems, innovative out of
the box thinking at all levels for continuous improvement, taking
risks and experimenting with new ideas, and last but not least
allocating our capital wisely with a long term bias toward adding
bigger and more revenue and profit growth potential businesses to
our acquisition portfolios faster and more effectively than in the
past.
Well, that's a lot to digest, especially for institutional
investors who only get the benefit of quarterly updates on our
performance, so maybe it would be helpful from a "big picture"
perspective to share a recent email excerpt from a very progressive
owner of a first class business (over 400 funerals and growing) in
a bedroom community of a major metropolitan area that has not been
consolidated much over the last sixty years.
"It is not required that I be much clearer to simply say
Thank you. My thanks are not only for your hospitality but more
importantly for my being able to take a little deeper look at
Carriage Services.
We will certainly be talking in much greater detail at
some point. However, I need to commend you and your team on
two things that are evident to me based on this first visit. (1)
You are passionate about business enough to have figured out what
superficially makes sense is not always the correct path. (2) You
appear to be in the midst of assembling a team and process by which
you can not only dominate Funeral Service but CHANGE Funeral
Service as most know it and that idea in itself is something I
absolutely LOVE about the company."
This top quality business owner observed by taking "a deeper
look" that we have innovated and evolved a "process by which you
(Carriage) can not only dominate Funeral Service but CHANGE Funeral
Service as most know it", a reference to our Standards Operating
Model and how we have linked the longer term Qualitative Standards
(Market Share, Leadership, People) with shorter term Quantitative
Standards through detailed analytical data correlations and trends
in each business. This proprietary "process" is intended to enable
a top quality local business that ranks high on our Ten Strategic
Criteria (plus or minus 70%) and which is located in a Strategic
Market to embark on it's own Good To Great Journey over
time, joining other elite firms in what is essentially a
"continuous improvement ideas and support services laboratory"
(Carriage Being The Best Brand) of how to consolidate
and operate within our industry better than it's ever been done
before.
And finally, consistent with our growth strategy and Ten Year
Being The Best Vision of affiliating with the best
remaining independent businesses in the best strategic markets, we
are proud to announce that on September
20th Jay Chapel in
Madera, California joined the
Carriage family as the newest member of our family of elite firms.
Carriage has entered this 4 new strategic market and area with a
business that has a top quality reputation, enabling us to execute
our strategy of building a portfolio of elite businesses over time
in this market.
CARRIAGE HIGH PERFORMANCE HEROES
As an important part of our High Performance Culture tradition
and language, listed below are Carriage High Performance Heroes for
our third quarter:
East
Region:
|
|
Robert
Maclary
|
Kent-Forest Lawn
Funeral Home; Panama City, FL
|
Courtney
Charvet
|
North Brevard Funeral
Home & Crematory; Titusville, FL
|
Sue
Keenan*
|
Byron Keenan Funeral
Home & Cremation; Springfield, MA
|
Kim
Borselli
|
Fuller Funeral
Home-Cremation Service; Naples, FL
|
|
|
Central
Region:
|
|
Michael
Page
|
Allison Funeral
Service; Liberty, TX
|
Andy
Shemwell
|
Maddux-Fuqua-Hinton
Funeral Homes; Hopkinsville, KY
|
Brian
Binion
|
Steen Funeral Homes;
Ashland, KY
|
Kyle
Incardona
|
Hillier Funeral
Homes; Bryan/College Station, TX
|
|
|
West
Region:
|
|
Justin
Luyben
|
Evans Brown
Mortuaries; Sun City, CA
|
Ken
Summers*
|
P.L. Fry & Son
Funeral Home; Manteca, CA
|
Verdo
Werre
|
McNary-Moore Funeral
Service; Colusa, CA
|
Steve
Mora*
|
Conejo Mountain
Memorial Park; Camarillo, CA
|
|
|
Houston Support
Office:
|
|
Marisol
Britton
|
Houston
Support-Information Technology
|
|
|
*Notes High
Performance Heroes from First or Second Quarter
2016.
|
STANDARDS OPERATING MODEL
As I mentioned in our second quarter earnings release, I will
elaborate on one of our three core models in more detail in each
quarterly earnings release. While I covered the Standards Operating
Model in our second quarter release, we believe it is still not
well understood by some institutional investors who have been
honest with their constructive feedback to us, so I will cover it
again from a slightly different angle. Once again, we highly
recommend that any investor that is seriously considering CSV as a
long term investment should read (and study) our Company and
Investment Profile, my 2015 Shareholder Letter and the section in
our second quarter earnings release titled Standards Operating
Model. You should then come to visit us in Houston as our special guest, as we take
seriously the allocation of your precious time and capital just as
we do our own.
The two major perception issues expressed by investors about our
Standards Operating Model are that (1) decentralized execution
implies a lack of rigorous analytical discipline (no centralized
control) and therefore is not likely to produce consistently high
and sustainable financial outcomes broadly across the portfolio;
(2) it does not seem plausible that high and gradually increasing
Field EBITDA Margins from new acquisitions that have been
integrated into our Standards Operating Model could be sustained
and consistently and effectively leveraged over our consolidation
platform given our expectation of more rapid growth by acquisitions
in the future and therefore would not likely accelerate shareholder
value creation.
What our history of operating and financial performance has
proved since 2011 is that the exact opposite of the above negative
perceptions is the reality. Therefore we will continue to try new
ways of explaining the extreme counterintuitive and quantitative
nature (Darwinian Discipline) of our High Performance Culture
Framework whose core is our Standards Operating Model.
In our second quarter earnings release, I publicly mentioned for
the first time the high performance ideas and concepts covered
in the book Beyond Budgeting co-authored and
published in 2003 by Robin Fraser
and Jeremy Hope, which were also
summarized in the February 2003
Harvard Business Review article "Who Needs Budgets."
The major takeaway point from their research on business
models to replace budgets was 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 long-term continuous
improvement. Shown below is an excerpted table from the
Harvard Business Review article that provides an accurate and
relevant comparison of the primary "budget and control" model
characteristics (left column) to the Beyond Budgeting
concept characteristics (middle column) to the analogous more
specific characteristics of our Standards Operating Model. A
detailed and comprehensive explanation of our Standards
Operating Model can be found in our Company and Investment
Profile," concluded Mr. Payne.
Photo -
http://photos.prnewswire.com/prnh/20161021/431426-INFO
ADJUSTED FREE CASH FLOW
We produced Adjusted Free Cash Flow from operations for the
three and nine months ended September 30,
2016 of $9.2 million and
$34.1 million, respectively, compared
to Adjusted Free Cash Flow from operations of $13.4 million and $38.8
million for the corresponding periods in 2015. A
reconciliation of Cash Flow Provided by Operations to Adjusted Free
Cash Flow for the three and nine months ended September 30, 2015 and 2016 is as follows (in
thousands):
|
For the Three
Months
Ended September 30,
|
|
For the Nine
Months
Ended September 30,
|
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
Cash Flow Provided by
Operations
|
$
|
14,658
|
|
|
$
|
9,822
|
|
|
$
|
42,988
|
|
|
$
|
34,280
|
|
Cash used for
Maintenance Capital Expenditures
|
(2,092)
|
|
|
(1,790)
|
|
|
(6,940)
|
|
|
(5,163)
|
|
Free Cash
Flow
|
$
|
12,566
|
|
|
$
|
8,032
|
|
|
$
|
36,048
|
|
|
$
|
29,117
|
|
|
|
|
|
|
|
|
|
Plus: Incremental
Special Items:
|
|
|
|
|
|
|
|
Acquisition and
Divestiture Expenses
|
40
|
|
|
—
|
|
|
577
|
|
|
516
|
|
Severance
Costs
|
192
|
|
|
1,220
|
|
|
808
|
|
|
3,979
|
|
Consulting
Fees
|
570
|
|
|
—
|
|
|
1,358
|
|
|
496
|
|
Adjusted Free Cash
Flow
|
$
|
13,368
|
|
|
$
|
9,252
|
|
|
$
|
38,791
|
|
|
$
|
34,108
|
|
The decline in 2016 Free Cash Flow is directly attributable to
the timing of tax payments. We anticipate our Adjusted Free Cash
Flow for 2016 to be flat to slightly higher than 2015 levels.
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 September 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.
The Rolling Four Quarter Outlook ending September 30, 2017
includes two businesses under Letter of Intent expected to close by
the end of November 2016. As such, we are raising our Rolling
Four Quarter Outlook of Adjusted Diluted Earnings Per Share by
$0.10 to a range of $1.81 - $1.85 for the period ending September 30, 2017.
ROLLING FOUR QUARTER OUTLOOK – Period Ending September 30, 2017
|
|
Range
(in millions, except
per share amounts)
|
Revenues
|
|
$259 -
$263
|
Adjusted Consolidated
EBITDA
|
|
$78 - $82
|
Adjusted Net
Income
|
|
$30 - $32
|
Adjusted Diluted
Earnings Per Share(1)
|
|
$1.81 -
$1.85
|
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 September 30, 2017 are expected to improve relative to
the trailing four quarter period ended September 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)
|
|
|
|
|
|
|
|
|
9 months ended
09/30/16
|
|
10.2%
|
9.3%
|
|
7.8%
|
15.5%
|
13.2%
|
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 September 30, 2016
(in thousands)
|
|
|
|
Discretionary Trust Funds
|
|
Total Trust
Funds
|
Asset
Class
|
|
|
MV
|
%
|
|
MV
|
%
|
Cash
|
|
|
$
|
20,576
|
|
11%
|
|
|
$
|
37,371
|
|
17%
|
|
Equities
|
|
|
24,609
|
|
13%
|
|
|
27,010
|
|
13%
|
|
Fixed
Income(1)
|
|
|
136,845
|
|
74%
|
|
|
147,700
|
|
68%
|
|
Other/Insurance
|
|
|
3,333
|
|
2%
|
|
|
3,524
|
|
2%
|
|
Total
Portfolios
|
|
|
$
|
185,363
|
|
100%
|
|
|
$
|
215,605
|
|
100%
|
|
|
|
(1)
|
Discretionary Trust -
Fixed Income Portfolio Profile..
|
Industry/Sector
|
|
%
|
Basic
Materials
|
|
1.5%
|
Communications
|
|
8.9%
|
Consumer
|
|
8.0%
|
Energy
|
|
12.0%
|
Financial
|
|
46.2%
|
Government
|
|
1.0%
|
Media
|
|
10.6%
|
Mortgage
Securities
|
|
0.5%
|
Technology
|
|
8.5%
|
Utilities
|
|
2.8%
|
Total
|
|
100%
|
For the nine months ended September 30, 2016, Carriage's
discretionary trust funds returned 10.2% versus 13.2% for the 70/30
index benchmark.
Our overall trust fund performance for the first nine months of
2016 was driven by our fixed income portfolio and by a rebound in
our 10 year warrant portfolio of five "Too Big To Fail" banks and
insurance companies. The performance of our fixed income portfolio
was largely attributable to the execution of our portfolio
repositioning strategy of individual credit selection and rotation
we began at the beginning of the year. Through individual security
selection we have increased the recurring annual income by
$1.6 million from our discretionary
portfolio, while improving overall credit quality and liquidity of
the portfolio. As of the end of the third quarter, our fixed income
portfolio has returned 17.2%, which is 170 bps ahead of the High
Yield Bond Index.
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 nine months of 2016 would
have been approximately ($1.0)
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,
October 26, 2016 at 9:30 a.m. central time. To participate in the
call, please dial 866-516-3867 (ID-98211636) and ask for the
Carriage Services conference call. A replay of the conference
call will be available through October 30,
2016 and may be accessed by dialing 855-859-2056
(ID-98211636). 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
September 30,
|
|
Nine Months Ended
September 30,
|
|
2015
|
2016
|
%
Change
|
|
2015
|
2016
|
%
Change
|
|
|
|
|
|
|
|
|
Same Store
Contracts
|
|
|
|
|
|
|
|
Atneed
Contracts
|
5,067
|
|
5,129
|
|
1.2%
|
|
|
16,334
|
|
16,158
|
|
(1.1%)
|
|
Preneed
Contracts
|
1,251
|
|
1,235
|
|
(1.3%)
|
|
|
4,037
|
|
3,920
|
|
(2.9%)
|
|
Total Same Store
Funeral Contracts
|
6,318
|
|
6,364
|
|
0.7%
|
|
|
20,371
|
|
20,078
|
|
(1.4%)
|
|
Acquisition
Contracts
|
|
|
|
|
|
|
|
Atneed
Contracts
|
1,044
|
|
1,381
|
|
32.3%
|
|
|
3,317
|
|
4,006
|
|
20.8%
|
|
Preneed
Contracts
|
255
|
|
239
|
|
(6.3%)
|
|
|
757
|
|
703
|
|
(7.1%)
|
|
Total Acquisition
Funeral Contracts
|
1,299
|
|
1,620
|
|
24.7%
|
|
|
4,074
|
|
4,709
|
|
15.6%
|
|
Total Funeral
Contracts
|
7,617
|
|
7,984
|
|
4.8%
|
|
|
24,445
|
|
24,787
|
|
1.4%
|
|
|
|
|
|
|
|
|
|
Funeral Operating
Revenue
|
|
|
|
|
|
|
|
Same Store
Revenue
|
$
|
33,617
|
|
$
|
33,356
|
|
(0.8%)
|
|
|
$
|
106,777
|
|
$
|
105,449
|
|
(1.2%)
|
|
Acquisition
Revenue
|
8,214
|
|
9,734
|
|
18.5%
|
|
|
24,920
|
|
28,883
|
|
15.9%
|
|
Total Funeral
Operating Revenue
|
$
|
41,831
|
|
$
|
43,090
|
|
3.0%
|
|
|
$
|
131,697
|
|
$
|
134,332
|
|
2.0%
|
|
|
|
|
|
|
|
|
|
Cemetery Operating
Revenue
|
|
|
|
|
|
|
|
Same Store
Revenue
|
$
|
10,726
|
|
$
|
11,351
|
|
5.8%
|
|
|
$
|
32,260
|
|
$
|
34,771
|
|
7.8%
|
|
Acquisition
Revenue
|
774
|
|
1,094
|
|
41.3%
|
|
|
2,526
|
|
2,634
|
|
4.3%
|
|
Total Cemetery
Operating Revenue
|
$
|
11,500
|
|
$
|
12,445
|
|
8.2%
|
|
|
$
|
34,786
|
|
$
|
37,405
|
|
7.5%
|
|
|
|
|
|
|
|
|
|
Financial
Revenue
|
|
|
|
|
|
|
|
Preneed Funeral
Commission Income
|
$
|
346
|
|
$
|
361
|
|
4.3%
|
|
|
$
|
1,071
|
|
$
|
1,138
|
|
6.3%
|
|
Preneed Funeral Trust
Earnings
|
1,912
|
|
1,732
|
|
(9.4%)
|
|
|
5,959
|
|
5,482
|
|
(8.0%)
|
|
Cemetery Trust
Earnings
|
2,385
|
|
2,025
|
|
(15.1%)
|
|
|
6,202
|
|
5,622
|
|
(9.4%)
|
|
Preneed Cemetery
Finance Charges
|
404
|
|
487
|
|
20.5%
|
|
|
1,177
|
|
1,357
|
|
15.3%
|
|
Total Financial
Revenue
|
$
|
5,047
|
|
$
|
4,605
|
|
(8.8%)
|
|
|
$
|
14,409
|
|
$
|
13,599
|
|
(5.6%)
|
|
Total
Revenue
|
$
|
58,378
|
|
$
|
60,140
|
|
3.0%
|
|
|
$
|
180,892
|
|
$
|
185,336
|
|
2.5%
|
|
|
|
|
|
|
|
|
|
Field
EBITDA
|
|
|
|
|
|
|
|
Same Store Funeral
Field EBITDA
|
$
|
12,108
|
|
$
|
12,403
|
|
2.4%
|
|
|
$
|
40,123
|
|
$
|
40,410
|
|
0.7%
|
|
Same Store Funeral
Field EBITDA Margin
|
36.0%
|
|
37.2%
|
|
120 bp
|
|
|
37.6%
|
|
38.3%
|
|
70 bp
|
|
Acquisition Funeral
Field EBITDA
|
3,201
|
|
3,922
|
|
22.5%
|
|
|
9,950
|
|
12,002
|
|
20.6%
|
|
Acquisition Funeral
Field EBITDA Margin
|
39.0%
|
|
40.3%
|
|
130 bp
|
|
|
39.9%
|
|
41.6%
|
|
170 bp
|
|
Total Funeral
Field EBITDA
|
$
|
15,309
|
|
$
|
16,325
|
|
6.6%
|
|
|
$
|
50,073
|
|
$
|
52,412
|
|
4.7%
|
|
Total Funeral
Field EBITDA Margin
|
36.6%
|
|
37.9%
|
|
130
bp
|
|
|
38.0%
|
|
39.0%
|
|
100
bp
|
|
|
|
|
|
|
|
|
|
Same Store Cemetery
Field EBITDA
|
$
|
3,066
|
|
$
|
3,324
|
|
8.4%
|
|
|
$
|
10,153
|
|
$
|
11,216
|
|
10.5%
|
|
Same Store Cemetery
Field EBITDA Margin
|
28.6%
|
|
29.3%
|
|
70 bp
|
|
|
31.5%
|
|
32.3%
|
|
80 bp
|
|
Acquisition Cemetery
Field EBITDA
|
215
|
|
497
|
|
131.2%
|
|
|
803
|
|
858
|
|
6.8%
|
|
Acquisition Cemetery
Field EBITDA Margin
|
27.8%
|
|
45.4%
|
|
1,760 bp
|
|
|
31.8%
|
|
32.6%
|
|
80 bp
|
|
Total Cemetery
Field EBITDA
|
$
|
3,281
|
|
$
|
3,821
|
|
16.5%
|
|
|
$
|
10,956
|
|
$
|
12,074
|
|
10.2%
|
|
Total Cemetery
Field EBITDA Margin
|
28.5%
|
|
30.7%
|
|
220
bp
|
|
|
31.5%
|
|
32.3%
|
|
80
bp
|
|
|
|
|
|
|
|
|
|
Funeral Financial
EBITDA
|
$
|
1,982
|
|
$
|
1,876
|
|
(5.3%)
|
|
|
$
|
6,178
|
|
$
|
5,994
|
|
(3.0%)
|
|
Cemetery Financial
EBITDA
|
2,716
|
|
2,441
|
|
(10.1%)
|
|
|
7,169
|
|
6,764
|
|
(5.6%)
|
|
Total Financial
EBITDA
|
$
|
4,698
|
|
$
|
4,317
|
|
(8.1%)
|
|
|
$
|
13,347
|
|
$
|
12,758
|
|
(4.4%)
|
|
Total Financial
EBITDA Margin
|
93.1%
|
|
93.7%
|
|
60
bp
|
|
|
92.6%
|
|
93.8%
|
|
120
bp
|
|
|
|
|
|
|
|
|
|
Total Field
EBITDA
|
$
|
23,288
|
|
$
|
24,463
|
|
5.0%
|
|
|
$
|
74,376
|
|
$
|
77,244
|
|
3.9%
|
|
Total Field EBITDA
Margin
|
39.9%
|
|
40.7%
|
|
80
bp
|
|
|
41.1%
|
|
41.7%
|
|
60
bp
|
|
|
|
|
|
|
|
|
|
OPERATING AND
FINANCIAL TREND REPORT
|
(IN THOUSANDS -
EXCEPT PER SHARE AMOUNTS)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
2015
|
2016
|
%
Change
|
|
2015
|
2016
|
%
Change
|
|
|
|
|
|
|
|
|
Overhead
|
|
|
|
|
|
|
|
Total Variable
Overhead
|
$
|
2,573
|
|
$
|
3,086
|
|
19.9%
|
|
|
$
|
6,769
|
|
$
|
10,672
|
|
57.7%
|
|
Total Regional Fixed
Overhead
|
842
|
|
940
|
|
11.6%
|
|
|
2,549
|
|
2,659
|
|
4.3%
|
|
Total Corporate Fixed
Overhead
|
4,660
|
|
4,545
|
|
(2.5%)
|
|
|
15,273
|
|
14,118
|
|
(7.6%)
|
|
Total
Overhead
|
$
|
8,075
|
|
$
|
8,571
|
|
6.1%
|
|
|
$
|
24,591
|
|
$
|
27,449
|
|
11.6%
|
|
Overhead as a
percentage of Revenue
|
13.8%
|
|
14.3%
|
|
50
bp
|
|
|
13.6%
|
|
14.8%
|
|
120
bp
|
|
|
|
|
|
|
|
|
|
Consolidated
EBITDA
|
$
|
15,213
|
|
$
|
15,892
|
|
4.5%
|
|
|
$
|
49,785
|
|
$
|
49,795
|
|
—%
|
|
Consolidated
EBITDA Margin
|
26.1%
|
|
26.4%
|
|
30
bp
|
|
|
27.5%
|
|
26.9%
|
|
(60
bp)
|
|
|
|
|
|
|
|
|
|
Other Expenses and
Interest
|
|
|
|
|
|
|
|
Depreciation &
Amortization
|
$
|
3,437
|
|
$
|
3,807
|
|
10.8%
|
|
|
$
|
10,124
|
|
$
|
11,498
|
|
13.6%
|
|
Non-Cash Stock
Compensation
|
1,072
|
|
342
|
|
(68.1%)
|
|
|
3,448
|
|
2,306
|
|
(33.1%)
|
|
Interest
Expense
|
2,629
|
|
2,903
|
|
10.4%
|
|
|
7,671
|
|
8,722
|
|
13.7%
|
|
Accretion of Discount
on Convertible Subordinated Notes
|
876
|
|
981
|
|
12.0%
|
|
|
2,554
|
|
2,862
|
|
12.1%
|
|
Loss on Early
Extinguishment of Debt
|
—
|
|
—
|
|
|
|
|
—
|
|
567
|
|
|
|
Other, Net
|
(52)
|
|
285
|
|
|
|
|
54
|
|
(20)
|
|
|
|
Pretax
Income
|
$
|
7,251
|
|
$
|
7,574
|
|
4.5%
|
|
|
$
|
25,934
|
|
$
|
23,860
|
|
(8.0%)
|
|
Provision for income
taxes
|
2,807
|
|
3,030
|
|
|
|
10,515
|
|
9,545
|
|
|
Income tax benefit
related to state tax returns
|
—
|
|
(1,139)
|
|
|
|
—
|
|
(1,139)
|
|
|
Net Tax
Provision
|
2,807
|
|
1,891
|
|
|
|
10,515
|
|
8,406
|
|
|
GAAP Net
Income
|
$
|
4,444
|
|
$
|
5,683
|
|
27.9%
|
|
|
$
|
15,419
|
|
$
|
15,454
|
|
0.2%
|
|
|
|
|
|
|
|
|
|
Special Items, Net
of tax except for **
|
|
|
|
|
|
|
|
Withdrawable Trust
Income
|
$
|
136
|
|
n/a
|
|
|
|
$
|
366
|
|
n/a
|
|
|
Acquisition and
Divestiture Expenses
|
27
|
|
—
|
|
|
|
381
|
|
336
|
|
|
Severance and
Retirement Costs
|
126
|
|
793
|
|
|
|
533
|
|
2,587
|
|
|
Consulting
Fees
|
377
|
|
—
|
|
|
|
898
|
|
323
|
|
|
Accretion of Discount
on Convertible Subordinated Notes **
|
876
|
|
981
|
|
|
|
2,554
|
|
2,862
|
|
|
Loss on Early
Extinguishment of Debt
|
—
|
|
—
|
|
|
|
—
|
|
369
|
|
|
Gain on Asset
Purchase
|
—
|
|
—
|
|
|
|
—
|
|
(198)
|
|
|
Other Special
Items
|
132
|
|
—
|
|
|
|
230
|
|
—
|
|
|
Tax Adjustment from
Prior Period **
|
—
|
|
—
|
|
|
|
141
|
|
—
|
|
|
Sum of Special
Items, Net of tax
|
$
|
1,674
|
|
$
|
1,774
|
|
6.0%
|
|
|
$
|
5,103
|
|
$
|
6,279
|
|
23.0%
|
|
|
|
|
|
|
|
|
|
Adjusted Net
Income
|
$
|
6,118
|
|
$
|
7,457
|
|
21.9%
|
|
|
$
|
20,522
|
|
$
|
21,733
|
|
5.9%
|
|
Adjusted Net
Profit Margin
|
10.5%
|
|
12.4%
|
|
190
bp
|
|
|
11.3%
|
|
11.7%
|
|
40
bp
|
|
|
|
|
|
|
|
|
|
Adjusted Basic
Earnings Per Share
|
$
|
0.33
|
|
$
|
0.45
|
|
36.4%
|
|
|
$
|
1.12
|
|
$
|
1.31
|
|
17.0%
|
|
Adjusted Diluted
Earnings Per Share
|
$
|
0.33
|
|
$
|
0.43
|
|
30.3%
|
|
|
$
|
1.09
|
|
$
|
1.28
|
|
17.4%
|
|
|
|
|
|
|
|
|
|
GAAP Basic Earnings
Per Share
|
$
|
0.24
|
|
$
|
0.34
|
|
41.7%
|
|
|
$
|
0.84
|
|
$
|
0.93
|
|
10.7%
|
|
GAAP Diluted Earnings
Per Share
|
$
|
0.24
|
|
$
|
0.33
|
|
37.5%
|
|
|
$
|
0.82
|
|
$
|
0.91
|
|
11.0%
|
|
|
|
|
|
|
|
|
|
Weighted Average
Basic Shares Outstanding
|
17,874
|
|
16,529
|
|
|
|
18,115
|
|
16,502
|
|
|
Weighted Average
Diluted Shares Outstanding
|
18,083
|
|
17,101
|
|
|
|
18,588
|
|
16,962
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to
Adjusted Consolidated EBITDA
|
|
|
|
|
|
|
|
Consolidated
EBITDA
|
$
|
15,213
|
|
$
|
15,892
|
|
4.5%
|
|
|
$
|
49,785
|
|
$
|
49,795
|
|
—%
|
|
Withdrawable Trust
Income
|
207
|
|
n/a
|
|
|
|
555
|
|
n/a
|
|
|
Acquisition and
Divestiture Expenses
|
40
|
|
—
|
|
|
|
577
|
|
516
|
|
|
Severance
and Retirement Costs
|
192
|
|
1,220
|
|
|
|
808
|
|
3,979
|
|
|
Consulting
Fees
|
570
|
|
—
|
|
|
|
1,358
|
|
496
|
|
|
Other Special
Items
|
200
|
|
—
|
|
|
|
200
|
|
—
|
|
|
Adjusted
Consolidated EBITDA
|
$
|
16,422
|
|
$
|
17,112
|
|
4.2%
|
|
|
$
|
53,283
|
|
$
|
54,786
|
|
2.8%
|
|
Adjusted
Consolidated EBITDA Margin
|
28.1%
|
|
28.5%
|
|
40
bp
|
|
|
29.5%
|
|
29.6%
|
|
10
bp
|
|
CARRIAGE SERVICES,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(unaudited and in
thousands, except share data)
|
|
|
|
|
|
|
December 31,
2015
|
|
September 30,
2016
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
535
|
|
|
$
|
855
|
|
Accounts receivable,
net
|
18,181
|
|
|
18,023
|
|
Inventories
|
5,654
|
|
|
5,853
|
|
Prepaid
expenses
|
4,684
|
|
|
3,599
|
|
Other current
assets
|
4,707
|
|
|
838
|
|
Total current
assets
|
33,761
|
|
|
29,168
|
|
Preneed cemetery
trust investments
|
63,291
|
|
|
65,896
|
|
Preneed funeral trust
investments
|
85,553
|
|
|
85,560
|
|
Preneed receivables,
net
|
27,998
|
|
|
30,579
|
|
Receivables from
preneed trusts
|
13,544
|
|
|
13,839
|
|
Property, plant and
equipment, net
|
214,874
|
|
|
231,465
|
|
Cemetery property,
net
|
75,597
|
|
|
75,692
|
|
Goodwill
|
264,416
|
|
|
267,788
|
|
Intangible and other
non-current assets
|
10,978
|
|
|
14,476
|
|
Cemetery perpetual
care trust investments
|
43,127
|
|
|
45,048
|
|
Total
assets
|
$
|
833,139
|
|
|
$
|
859,511
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Current portion of
long-term debt and capital lease obligations
|
$
|
12,236
|
|
|
$
|
12,633
|
|
Accounts
payable
|
7,917
|
|
|
5,857
|
|
Other
liabilities
|
524
|
|
|
2,546
|
|
Accrued
liabilities
|
16,541
|
|
|
17,714
|
|
Total current
liabilities
|
37,218
|
|
|
38,750
|
|
Long-term debt, net
of current portion
|
103,495
|
|
|
136,628
|
|
Revolving credit
facility
|
91,514
|
|
|
62,073
|
|
Convertible
subordinated notes due 2021
|
115,227
|
|
|
118,461
|
|
Obligations under
capital leases, net of current portion
|
2,875
|
|
|
2,689
|
|
Deferred preneed
cemetery revenue
|
56,721
|
|
|
55,953
|
|
Deferred preneed
funeral revenue
|
31,748
|
|
|
33,258
|
|
Deferred tax
liability
|
39,956
|
|
|
39,318
|
|
Other long-term
liabilities
|
5,531
|
|
|
2,629
|
|
Deferred preneed
cemetery receipts held in trust
|
63,291
|
|
|
65,896
|
|
Deferred preneed
funeral receipts held in trust
|
85,553
|
|
|
85,560
|
|
Care trusts'
corpus
|
42,416
|
|
|
44,345
|
|
Total
liabilities
|
675,545
|
|
|
685,560
|
|
Commitments and
contingencies:
|
|
|
|
Stockholders'
equity:
|
|
|
|
Common stock, $.01
par value; 80,000,000 shares authorized; 22,497,873 and 22,458,007
issued at December 31, 2015 and September 30, 2016,
respectively
|
225
|
|
|
225
|
|
Additional paid-in
capital
|
214,250
|
|
|
215,153
|
|
Retained
earnings
|
3,385
|
|
|
18,839
|
|
Treasury stock, at
cost; 5,849,316 shares at December 31, 2015 and September 30,
2016
|
(60,266)
|
|
|
(60,266)
|
|
Total stockholders'
equity
|
157,594
|
|
|
173,951
|
|
Total liabilities and
stockholders' equity
|
$
|
833,139
|
|
|
$
|
859,511
|
|
CARRIAGE SERVICES,
INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(unaudited and in
thousands, except per share data)
|
|
|
For the Three
Months
Ended September 30,
|
|
For the Nine
Months
Ended September 30,
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Funeral
|
$
|
44,089
|
|
|
$
|
45,183
|
|
|
$
|
138,727
|
|
|
$
|
140,952
|
|
Cemetery
|
14,289
|
|
|
14,957
|
|
|
42,165
|
|
|
44,384
|
|
|
58,378
|
|
|
60,140
|
|
|
180,892
|
|
|
185,336
|
|
Field costs and
expenses:
|
|
|
|
|
|
|
|
Funeral
|
26,798
|
|
|
26,982
|
|
|
82,476
|
|
|
82,546
|
|
Cemetery
|
8,292
|
|
|
8,695
|
|
|
24,040
|
|
|
25,546
|
|
Depreciation and
amortization
|
3,019
|
|
|
3,452
|
|
|
8,814
|
|
|
10,359
|
|
Regional and
unallocated funeral and cemetery costs
|
2,909
|
|
|
2,783
|
|
|
7,745
|
|
|
8,547
|
|
|
41,018
|
|
|
41,912
|
|
|
123,075
|
|
|
126,998
|
|
Gross
profit
|
17,360
|
|
|
18,228
|
|
|
57,817
|
|
|
58,338
|
|
Corporate costs and
expenses:
|
|
|
|
|
|
|
|
General and
administrative costs and expenses
|
6,238
|
|
|
6,130
|
|
|
20,294
|
|
|
21,208
|
|
Home office
depreciation and amortization
|
418
|
|
|
355
|
|
|
1,310
|
|
|
1,139
|
|
|
6,656
|
|
|
6,485
|
|
|
21,604
|
|
|
22,347
|
|
Operating
income
|
10,704
|
|
|
11,743
|
|
|
36,213
|
|
|
35,991
|
|
Interest
expense
|
(2,629)
|
|
|
(2,903)
|
|
|
(7,671)
|
|
|
(8,722)
|
|
Accretion of discount
on convertible subordinated notes
|
(876)
|
|
|
(981)
|
|
|
(2,554)
|
|
|
(2,862)
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
—
|
|
|
—
|
|
|
(567)
|
|
Other income
(expense)
|
52
|
|
|
(285)
|
|
|
(54)
|
|
|
20
|
|
Income before income
taxes
|
7,251
|
|
|
7,574
|
|
|
25,934
|
|
|
23,860
|
|
Provision for income
taxes
|
(2,807)
|
|
|
(3,030)
|
|
|
(10,515)
|
|
|
(9,545)
|
|
Income tax benefit
related to state tax returns
|
—
|
|
|
1,139
|
|
|
|
—
|
|
|
1,139
|
|
Net provision for
income taxes
|
(2,807)
|
|
|
(1,891)
|
|
|
(10,515)
|
|
|
(8,406)
|
|
Net income
|
$
|
4,444
|
|
|
$
|
5,683
|
|
|
$
|
15,419
|
|
|
$
|
15,454
|
|
|
|
|
|
|
|
|
|
Basic earnings per
common share:
|
$
|
0.24
|
|
|
$
|
0.34
|
|
|
$
|
0.84
|
|
|
$
|
0.93
|
|
Diluted earnings per
common share:
|
$
|
0.24
|
|
|
$
|
0.33
|
|
|
$
|
0.82
|
|
|
$
|
0.91
|
|
|
|
|
|
|
|
|
|
Dividends declared
per common share
|
$
|
0.025
|
|
|
$
|
0.050
|
|
|
$
|
0.075
|
|
|
$
|
0.100
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common and common equivalent shares
outstanding:
|
|
|
|
|
|
|
|
Basic
|
17,874
|
|
|
16,529
|
|
|
18,115
|
|
|
16,502
|
|
Diluted
|
18,083
|
|
|
17,101
|
|
|
18,588
|
|
|
16,962
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CARRIAGE SERVICES,
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(unaudited and in
thousands)
|
|
|
For the Nine
Months
Ended September 30,
|
|
2015
|
|
2016
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
15,419
|
|
|
$
|
15,454
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
10,124
|
|
|
11,498
|
|
Provision for losses
on accounts receivable
|
1,332
|
|
|
1,522
|
|
Stock-based
compensation expense
|
3,448
|
|
|
2,645
|
|
Deferred income tax
expense
|
2,065
|
|
|
3,618
|
|
Amortization of
deferred financing costs
|
688
|
|
|
622
|
|
Accretion of discount
on convertible subordinated notes
|
2,554
|
|
|
2,862
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
567
|
|
Net (gain) loss on
sale and disposal of other assets
|
(49)
|
|
|
186
|
|
Impairment of
intangible assets
|
—
|
|
|
145
|
|
Changes in operating
assets and liabilities that provided (required) cash:
|
|
|
|
Accounts and preneed
receivables
|
(779)
|
|
|
(3,945)
|
|
Inventories and other
current assets
|
3,277
|
|
|
682
|
|
Intangible and other
non-current assets
|
114
|
|
|
386
|
|
Preneed funeral and
cemetery trust investments
|
21,234
|
|
|
(4,828)
|
|
Accounts
payable
|
368
|
|
|
(2,149)
|
|
Accrued and other
liabilities
|
4,408
|
|
|
(268)
|
|
Deferred preneed
funeral and cemetery revenue
|
432
|
|
|
742
|
|
Deferred preneed
funeral and cemetery receipts held in trust
|
(21,647)
|
|
|
4,541
|
|
Net cash provided by
operating activities
|
42,988
|
|
|
34,280
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Acquisitions and land
for new construction
|
(4,250)
|
|
|
(15,056)
|
|
Purchase of land and
buildings previously leased
|
(6,080)
|
|
|
(6,258)
|
|
Net proceeds from the
sale of other assets
|
65
|
|
|
955
|
|
Capital
expenditures
|
(22,823)
|
|
|
(12,039)
|
|
Net cash used in
investing activities
|
(33,088)
|
|
|
(32,398)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Borrowings from the
revolving credit facility
|
56,200
|
|
|
45,500
|
|
Payments against the
revolving credit facility
|
(33,700)
|
|
|
(74,800)
|
|
Borrowings from the
term loan
|
—
|
|
|
39,063
|
|
Payments against the
term loan
|
(7,032)
|
|
|
(8,438)
|
|
Payments on other
long-term debt and obligations under capital leases
|
(679)
|
|
|
(987)
|
|
Proceeds from the
exercise of stock options and employee stock purchase plan
contributions
|
575
|
|
|
686
|
|
Dividends on common
stock
|
(1,385)
|
|
|
(1,662)
|
|
Payment of loan
origination costs related to the credit facility
|
(13)
|
|
|
(717)
|
|
Purchase of treasury
stock
|
(23,940)
|
|
|
—
|
|
Excess tax benefit
(deficiency) of equity compensation
|
57
|
|
|
(207)
|
|
Net cash used in
financing activities
|
(9,917)
|
|
|
(1,562)
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents
|
(17)
|
|
|
320
|
|
Cash and cash
equivalents at beginning of period
|
413
|
|
|
535
|
|
Cash and cash
equivalents at end of period
|
$
|
396
|
|
|
$
|
855
|
|
|
|
|
|
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 nine months ended September 30, 2015 and 35 percent for the three
and nine months ended September 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 nine months ended September 30, 2015 and 2016
(in thousands):
|
For the Three
Months
Ended September 30,
|
|
For the Nine
Months
Ended September 30,
|
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
Net Income
|
$
|
4,444
|
|
|
$
|
5,683
|
|
|
$
|
15,419
|
|
|
$
|
15,454
|
|
Special Items, net of
tax except for **
|
|
|
|
|
|
|
|
Withdrawable Trust Income
|
136
|
|
|
n/a
|
|
366
|
|
|
n/a
|
Acquisition and Divestiture Expenses
|
27
|
|
|
—
|
|
|
381
|
|
|
336
|
|
Severance and Retirement Costs
|
126
|
|
|
793
|
|
|
533
|
|
|
2,587
|
|
Consulting Fees
|
377
|
|
|
—
|
|
|
898
|
|
|
323
|
|
Accretion of Discount on Convertible Subordinated Notes
**
|
876
|
|
|
981
|
|
|
2,554
|
|
|
2,862
|
|
Loss on
Early Extinguishment of Debt
|
—
|
|
|
—
|
|
|
—
|
|
|
369
|
|
Gain on
Sale of Asset
|
—
|
|
|
—
|
|
|
—
|
|
|
(198)
|
|
Other
Special Items
|
132
|
|
|
—
|
|
|
230
|
|
|
—
|
|
Tax
Adjustment from Prior Period **
|
—
|
|
|
—
|
|
|
141
|
|
|
—
|
|
Total Special Items
affecting Net Income
|
$
|
1,674
|
|
|
$
|
1,774
|
|
|
$
|
5,103
|
|
|
$
|
6,279
|
|
Adjusted Net
Income
|
$
|
6,118
|
|
|
$
|
7,457
|
|
|
$
|
20,522
|
|
|
$
|
21,733
|
|
Reconciliation of Net Income to Consolidated EBITDA and
Adjusted Consolidated EBITDA for the three and nine months ended
September 30, 2015 and 2016 (in thousands):
|
For the Three
Months
Ended September 30,
|
|
|
For the Nine
Months
Ended September 30,
|
|
2015
|
|
2016
|
|
|
2015
|
|
|
2016
|
Net Income
|
$
|
4,444
|
|
$
|
5,683
|
|
$
|
15,419
|
|
$
|
15,454
|
Net Tax
Provision
|
2,807
|
|
1,891
|
|
10,515
|
|
8,406
|
Pretax
Income
|
$
|
7,251
|
|
$
|
7,574
|
|
$
|
25,934
|
|
$
|
23,860
|
Interest
Expense
|
2,629
|
|
2,903
|
|
7,671
|
|
8,722
|
Accretion of Discount
on Convertible Subordinated Notes
|
876
|
|
981
|
|
2,554
|
|
2,862
|
Loss on Early
Extinguishment of Debt
|
—
|
|
—
|
|
—
|
|
567
|
Non-cash Stock
Compensation
|
1,072
|
|
342
|
|
3,448
|
|
2,306
|
Depreciation &
Amortization
|
3,437
|
|
3,807
|
|
10,124
|
|
11,498
|
Other, Net
|
(52)
|
|
285
|
|
54
|
|
(20)
|
Consolidated
EBITDA
|
$
|
15,213
|
|
$
|
15,892
|
|
$
|
49,785
|
|
$
|
49,795
|
Adjusted
For:
|
|
|
|
|
|
Withdrawable Trust
Income
|
207
|
|
n/a
|
555
|
|
n/a
|
Acquisition and
Divestiture Expenses
|
40
|
|
—
|
|
577
|
|
516
|
Severance and
Retirement Costs
|
192
|
|
1,220
|
|
808
|
|
3,979
|
Consulting
Fees
|
570
|
|
—
|
|
1,358
|
|
496
|
Other Special
Items
|
200
|
|
—
|
|
200
|
|
—
|
Adjusted Consolidated
EBITDA
|
$
|
16,422
|
|
$
|
17,112
|
|
$
|
53,283
|
|
$
|
54,786
|
Revenue
|
$
|
58,378
|
|
$
|
60,140
|
|
$
|
180,892
|
|
$
|
185,336
|
|
|
|
|
|
|
Adjusted Consolidated
EBITDA Margin
|
28.1%
|
|
28.5%
|
|
29.5%
|
|
29.6%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of funeral and cemetery income before
income taxes to Field EBITDA for the three and nine months ended
September 30, 2015 and 2016 (in thousands):
Funeral Field
EBITDA
|
For the Three
Months
Ended September 30,
|
|
For the Nine
Months
Ended September 30,
|
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
Gross Profit
(GAAP)
|
$
|
12,909
|
|
|
$
|
13,786
|
|
|
$
|
44,549
|
|
|
$
|
45,142
|
|
Depreciation &
Amortization
|
1,911
|
|
|
2,238
|
|
|
5,576
|
|
|
6,454
|
|
Regional &
Unallocated Costs
|
2,471
|
|
|
2,177
|
|
|
6,126
|
|
|
6,810
|
|
Funeral Financial
EBITDA
|
(1,982)
|
|
|
(1,876)
|
|
|
(6,178)
|
|
|
(5,994)
|
|
Funeral Field
EBITDA
|
$
|
15,309
|
|
|
$
|
16,325
|
|
|
$
|
50,073
|
|
|
$
|
52,412
|
|
Cemetery Field
EBITDA
|
For the Three
Months
Ended September 30,
|
|
For the Nine
Months
Ended September 30,
|
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
Gross Profit
(GAAP)
|
$
|
4,451
|
|
|
$
|
4,442
|
|
|
$
|
13,268
|
|
|
$
|
13,196
|
|
Depreciation &
Amortization
|
1,108
|
|
|
1,214
|
|
|
3,238
|
|
|
3,905
|
|
Regional &
Unallocated Costs
|
438
|
|
|
606
|
|
|
1,619
|
|
|
1,737
|
|
Cemetery Financial
EBITDA
|
(2,716)
|
|
|
(2,441)
|
|
|
(7,169)
|
|
|
(6,764)
|
|
Cemetery Field
EBITDA
|
$
|
3,281
|
|
|
$
|
3,821
|
|
|
$
|
10,956
|
|
|
$
|
12,074
|
|
Total Field
EBITDA
|
For the Three
Months
Ended September 30,
|
|
For the Nine
Months
Ended September 30,
|
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
Funeral Field
EBITDA
|
$
|
15,309
|
|
|
$
|
16,325
|
|
|
$
|
50,073
|
|
|
$
|
52,412
|
|
Cemetery Field
EBITDA
|
3,281
|
|
|
3,821
|
|
|
10,956
|
|
|
12,074
|
|
Funeral Financial
EBITDA
|
1,982
|
|
|
1,876
|
|
|
6,178
|
|
|
5,994
|
|
Cemetery Financial
EBITDA
|
2,716
|
|
|
2,441
|
|
|
7,169
|
|
|
6,764
|
|
Total Field
EBITDA
|
$
|
23,288
|
|
|
$
|
24,463
|
|
|
$
|
74,376
|
|
|
$
|
77,244
|
|
Reconciliation of GAAP Basic Earnings Per Share to
Adjusted Basic Earnings Per Share for the three and nine months
ended September 30, 2015 and 2016:
|
For the Three
Months
Ended September 30,
|
|
For the Nine
Months
Ended September 30,
|
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
GAAP Basic Earnings
Per Share
|
$
|
0.24
|
|
|
$
|
0.34
|
|
|
$
|
0.84
|
|
|
$
|
0.93
|
|
Special Items
Affecting Net Income
|
0.09
|
|
|
0.11
|
|
|
0.28
|
|
|
0.38
|
|
Adjusted Basic
Earnings Per Share
|
$
|
0.33
|
|
|
$
|
0.45
|
|
|
$
|
1.12
|
|
|
$
|
1.31
|
|
Reconciliation of GAAP Diluted Earnings Per Share to
Adjusted Diluted Earnings Per Share for the three and nine months
ended September 30, 2015 and 2016:
|
For the Three
Months
Ended September 30,
|
|
For the Nine
Months
Ended September 30,
|
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
GAAP Diluted Earnings
Per Share
|
$
|
0.24
|
|
|
$
|
0.33
|
|
|
$
|
0.82
|
|
|
$
|
0.91
|
|
Special Items
Affecting Net Income
|
0.09
|
|
|
0.10
|
|
|
0.27
|
|
|
0.37
|
|
Adjusted Diluted
Earnings Per Share
|
$
|
0.33
|
|
|
$
|
0.43
|
|
|
$
|
1.09
|
|
|
$
|
1.28
|
|
On page seven 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
September 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 September 30, 2017
(in thousands):
|
Rolling Four
Quarter Outlook
|
|
|
September 30,
2017E
|
|
Net Income
|
|
|
$
|
27,200
|
|
|
|
Net Tax
Provision
|
|
|
17,400
|
|
|
|
Pretax
Income
|
|
|
$
|
44,600
|
|
|
|
Net Interest Expense,
including Accretion of Discount on Convertible Subordinated
Notes
|
|
|
16,300
|
|
|
|
Depreciation &
Amortization, including Non-cash Stock Compensation
|
|
|
19,100
|
|
|
|
Consolidated
EBITDA
|
|
|
$
|
80,000
|
|
|
|
Adjusted for Special
Items
|
|
|
—
|
|
|
|
Adjusted Consolidated
EBITDA
|
|
|
$
|
80,000
|
|
|
|
Reconciliation of Net Income to Adjusted Net Income
for the estimated Rolling Four Quarters ending September 30, 2017 (in thousands):
|
Rolling Four
Quarter Outlook
|
|
|
September 30,
2017E
|
|
Net Income
|
|
|
$
|
27,200
|
|
|
|
Special
Items
|
|
|
4,250
|
|
|
|
Adjusted Net
Income
|
|
|
$
|
31,450
|
|
|
|
Reconciliation of GAAP Diluted Earnings Per Share to
Adjusted Diluted Earnings Per Share for the estimated Rolling Four
Quarters ending September 30,
2017:
|
Rolling Four
Quarter Outlook
|
|
|
September 30,
2017E
|
|
GAAP Diluted Earnings
Per Share
|
|
|
$
|
1.58
|
|
|
|
Special Items
Affecting Net Income
|
|
|
0.25
|
|
|
|
Adjusted Diluted
Earnings Per Share
|
|
|
$
|
1.83
|
|
|
|
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-third-quarter-and-nine-months-2016-results-and-raises-rolling-four-quarter-outlook-300351051.html
SOURCE Carriage Services, Inc.