HOUSTON, Oct. 25, 2017 /PRNewswire/ -- Carriage
Services, Inc. (NYSE: CSV) today announced results for the third
quarter ended September 30, 2017.
Mel Payne, Chief Executive
Officer, stated, "The third quarter marked a challenging time for
our company and many of the communities we serve as Hurricanes
Harvey and Irma swept across southern Texas and Florida. What we witnessed over the past few
months was the remarkable and inspiring CAN DO SPIRIT of the
affected communities whose leadership at all levels including
federal, state and local showed the country strength and resilience
at its best under difficult circumstances. I want to especially
express my heartfelt appreciation and gratitude to all the
employees in our home office support center and operating
businesses that were affected, some of whom suffered personal
devastation in their homes, but all of whom demonstrated what
Carriage's High Performance Culture is all about
during the storms and historic floods by continuing to serve their
client families and local communities.
Remarkably, our home office support teams and systems continued
to remain online serving our businesses throughout the crisis, a
qualitative testimonial to our Mission of Being The Best. I
want to take this opportunity on behalf of our senior leadership
and Board to publicly thank all of the members of the Carriage
Family of businesses and the many friends of our Carriage Family
who reached out with their thoughts, prayers, sympathies and offers
of support.
Third quarter highlights are shown below:
Three Months Ended September 30,
2017 compared to Three Months Ended September 30, 2016
- Record Total Revenue of $61.1
million, an increase of 1.5%;
- Net Income of $3.0 million, a
decrease of 46.5%;
- GAAP Diluted Earnings Per Share of $0.17, a decrease of 48.5%;
- Total Field EBITDA of $23.0
million, a decrease of 5.9%;
- Total Field EBITDA Margin down 300 basis points to 37.7%;
- Adjusted Consolidated EBITDA of $14.1
million, a decrease of 17.4%;
- Adjusted Consolidated EBITDA Margin down 540 basis points to
23.1%;
- Adjusted Net Income of $4.4
million, a decrease of 41.1%; and
- Adjusted Diluted Earnings Per Share of $0.25, a decrease of 41.9%.
Nine Months Ended September 30,
2017 compared to Nine Months Ended September 30, 2016
- Record Total Revenue of $193.1
million, an increase of 4.2%;
- Net Income of $14.5 million, a
decrease of 6.0%;
- GAAP Diluted Earnings Per Share of $0.81, a decrease of 11.0%;
- Record Total Field EBITDA of $77.8
million, an increase of .7%;
- Total Field EBITDA Margin down 140 basis points to 40.3%;
- Adjusted Consolidated EBITDA of $51.2
million, a decrease of 6.5%;
- Adjusted Consolidated EBITDA Margin down 310 basis points to
26.5%;
- Adjusted Net Income of $18.0
million, a decrease of 17.2%; and
- Adjusted Diluted Earnings Per Share of $1.00, a decrease of 21.9%.
Our third quarter and year to date operating and financial
results have been disappointing as year to date Adjusted Diluted
Earnings Per Share declined 21.9% to $1.00, Adjusted Consolidated EBITDA declined 6.5%
to $51.2 million and Adjusted
Consolidated EBITDA Margin declined 310 basis points to 26.5% from
the historically high company and industry milestone levels in
2016. The decline in our results can be attributed to weak cemetery
preneed sales, lower Field EBITDA Margins of funeral home
acquisitions made in 2016 not yet integrated under our Standards
Operating Model, and a decrease in Non-GAAP add backs due to our
simplified reporting that aligns more closely with GAAP.
Additionally, a favorable tax benefit in 2016 and an increase in
diluted share count in 2017 (varies by quarter based on average
share price for each period) from our outstanding Convertible Notes
negatively impacted our year to date Diluted EPS by $0.13 compared to last year.
Beginning with my 2015 shareholder letter, continuing with our
four quarterly earnings press releases from 2016 and concluding
with my 2016 shareholder letter, I provided a comprehensive amount
of in-depth data that was supported by explanations of
Carriage's High Performance Culture Framework whose
effective execution drives long-term value creation. In particular,
I described the operational discipline related to our innovative
Standards Operating Model that since 2011 has successfully driven
and sustained both short and long-term revenue growth at
sustainable Field EBITDA Margins. Moreover, I explained the
importance of leadership versus management (First Who!) in our
decentralized organizational structure, the goal of which is to
grow revenue from gradual increases over time in our same store
funeral contracts and preneed cemetery property sales. My efforts
to explain and educate for a deeper understanding of our company by
shareholders will continue selectively when it seems necessary or
appropriate including in this release.
We have been encouraged year to date by the 0.9% growth in Same
Store Funeral contract volume and 1.9% growth in Same Store Funeral
revenue as there is broad evidence across our portfolio of local
market share gains driven by our Managing Partners and their teams.
On a comparative basis, adjusting for two small divestitures we
made last year and the decision to end an unprofitable contract
providing removal services for a local coroner in a major
metropolitan market, our year to date Same Store Funeral contract
volume and revenue have both increased 3.1% versus 2016, an
enviable achievement within the industry given current secular
trends in death rates and cremations.
The Funeral Market Share Standard in a new year compares the
rolling twelve month number of funerals performed to the past three
full calendar year average number of funerals performed. Standard
Achievement is simply serving more families in the current year
than the average of the last three. We have learned from
experience that market share growth (volume without distinction
between burial and cremation) is the key to achieving high and
sustainable operating and financial results over a long period of
time. Therefore, the Market Share Standard is the largest weighting
in our Standards Operating Model at 30% of 100%. We have learned
from mistakes and material market share losses within our funeral
home portfolio in the past that focusing too heavily on maximizing
short term profitability more often than not leads inevitably to
losses in market share that are extremely difficult to reverse
(refer to Ten Truths Of A Service Business on page 17 of
my 2016 Shareholder Letter).
Revenue in our Acquisition Funeral portfolio increased 42.9% to
$24.7 million, Acquisition
Funeral Field EBITDA grew 30.5% to $9.5
million and Acquisition Funeral Field EBITDA Margin declined
by 360 basis points to 38.5%, reversing an upward margin trend in
our Acquisition Funeral Portfolio since 2011. The decline in
Acquisition Funeral Field EBITDA Margin was due to the slower than
expected integration of some of our 2016 acquisitions and a
seasonally weak quarter this year. The remaining funeral home
businesses that were acquired between 2013-2015 have grown year to
date revenue by 2% and EBITDA by 4% because of an increase in Field
EBITDA Margin of 80 basis points to 43.2%, consistent with the
positive impact of the financial dynamic of operating leverage in a
high fixed cost funeral home business. We fully expect to see
improved margin performance of our high quality recent funeral
business acquisitions in 2018 and thereafter.
The almost $1 million quarter over
quarter decline in cemetery revenue performance was a result of a
continuation of weak operating trends from the first half of the
year, a $300,000 decline in preneed
property sales at our cemeteries in Corpus Christi, TX and Ft. Lauderdale, FL due to Hurricanes Harvey
and Irma, and the absence this year of approximately $400,000 of large private estate sales we had in
the third quarter of last year.
Throughout the past two quarters, our operating teams have
focused on making the necessary changes in our sales leadership and
examining the preneed property sales programs at our
underperforming cemetery businesses to ensure sales and margin
performance return to our previous standard. While future operating
performance will be the true test of success of these changes, we
have seen progress across our cemetery portfolio and believe we
will have positive operating momentum in our cemetery portfolio as
we move into 2018.
Capital Allocation
I am pleased to announce we executed four signed letters of
intent in the third quarter and plan to close all four businesses
within the next 90 days. None of these businesses were among the
three letters of intent mentioned on our second quarter conference
call. Three of these businesses will be in large new strategic
markets for Carriage including a new state and all of these markets
have other high quality acquisition candidates. The four
businesses under letters of intent will collectively add over 3000
funerals to our portfolio and each has a strong competitive
standing and market share growth opportunity in its respective
market.
We are excited by the level of relationship building activity
with the top remaining independent businesses by the Corporate
Development Team as evidenced by the fact that the four letters of
intent recently executed are the most we ever executed in a
quarter. The continued effectiveness of our Corporate
Development Team in building a larger pipeline of high quality
acquisition candidates reaffirms our favorable relative assessment
of Carriage's competitive positioning in the current industry
landscape and confidence in our ability to execute our Strategic
Acquisition Model at a high level over the course of the next
several years.
We repurchased approximately 675,000 shares at an average
purchase price of $24.28 in the third
quarter and have now repurchased 2.6 million shares or
approximately 14% of our shares outstanding since the end of the
second quarter of 2015. Today our Board of Directors authorized an
additional $15 million share
repurchase program in addition to the $11
million still available under a previous authorization.
Additionally, our Board of Directors approved an increase of our
annual dividend to $0.30 per share,
an increase of 50% over our prior dividend, that will be payable on
December 1st.
High Performance Heroes
The following are High Performance Hero Managing Partners
leading us during the third quarter on our Good To Great
Journey that never ends.
Frank
Forastiere
|
Forastiere Funeral
Homes; Springfield, MA
|
Sue Keenan
|
Byron Keenan Funeral
Home & Cremation; Springfield, MA
|
Ken Duffy
|
John E. Day Funeral
Home; Red Bank, NJ
|
Todd
Muller
|
Muller-Thompson
Funeral Chapel & Cremation Services; Naples, FL
|
Rohaema
Smith
|
Baird-Case Funeral
Home & Cremation Service; Tamarac, FL
|
Randy
Valentine*
|
Dieterle Memorial
Home & Cremation Ceremonies; Montgomery, IL
|
Jeff Moore
|
Sterling-White
Funeral Home; Crosby, TX
|
Andy
Shemwell*
|
Maddux-Fuqua-Hinton
Funeral Homes; Hopkinsville, KY
|
Joseph
Newkirk*
|
Wilson & Kratzer
Mortuaries; Richmond, CA
|
Alan
Kerrick
|
Dakan Funeral Chapel;
Caldwell, ID
|
Ken
Summers
|
P.L. Fry & Son
Funeral Home; Manteca, CA
|
|
|
* Notes High
Performance Heroes from First or Second Quarter 2017.
|
Our country, the communities we serve and too many of our
amazing employees have had to endure and persevere through
tremendously difficult circumstances related to natural disasters
and other tragedies this past quarter. We couldn't be more proud of
the resiliency and grit that has been shown by our employee teams
throughout this challenging period, and for that reason, I would
like to acknowledge all our Carriage employees at the following
businesses as Carriage's Super High Performance Heroes
for the third quarter.
Baird-Case Funeral
Home; Ft Lauderdale, FL
|
Oaklawn Memorial Gardens;
Titusville, FL
|
Baird-Case Funeral
Home; Tamarac, FL
|
Stanfill Funeral Home; Miami,
FL
|
Conrad & Thompson
Funeral Home; Kissimmee, FL
|
Sunset Memorial Gardens; Ft
Lauderdale, FL
|
Evergreen Cemetery; Ft
Lauderdale, FL
|
Allison Funeral Home;
Liberty, TX
|
Fuller
Funeral-Cremation Service; Naples, FL
|
Crespo & Jirrels;
Baytown, TX
|
Harvey-Engelhardt
Funeral & Cremation; Fort Meyer, FL
|
Cypress-Fairbanks
Funeral Home; Houston, TX
|
Fuller Metz Cremation
& Funeral Services; Cape Coral, FL
|
Bradshaw-Carter
Memorial & Funeral Services; Houston, TX
|
Lakeland Funeral Home
& Memorial Gardens; Lakeland, FL
|
Seaside Funeral Home
& Memorial Park; Corpus Christi, TX
|
Lauderdale Memorial
Park; Ft Lauderdale, FL
|
Rose Hill Memorial
Park; Corpus Christi, TX
|
Muller-Thompson
Funeral Chapel; Naples, FL
|
Schmidt Funeral
Homes; Katy, TX
|
North Brevard Funeral
Home; Titusville, FL
|
Bunkers Mortuaries;
Las Vegas, NV
|
Ten Year Vision, Five Year Strategy, One Year
Plan
Despite our disappointing performance thus far in 2017, there is
nothing but optimism among our leadership at all levels of the
company about the bright prospects for the future related to our
Ten Year Vision and Five Year Strategy. We are only in the first
year of the second five year timeframe of Carriage's Good
To Great Journey that never ends, a year that brought
challenges but also creative and dynamic change to our company
that has seeded continuous improvement in areas that will be
engines of growth and profitability over the next five years. Like
night follows day, long-term value creation produced by effective
execution of all elements of Carriage's High Performance
Culture Framework will continue over time to benefit our
shareholders," concluded Mr. Payne.
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
09/30/2017
|
|
8.6%
|
8.1%
|
|
14.2%
|
7.0%
|
9.2%
|
1 year ended
12/31/2016
|
|
19.7%
|
18.3%
|
|
12.0%
|
17.6%
|
15.9%
|
2 years ended
12/31/2016
|
|
16.0%
|
15.1%
|
|
13.5%
|
12.0%
|
12.4%
|
3 years ended
12/31/2016
|
|
25.7%
|
24.2%
|
|
28.9%
|
14.8%
|
19.0%
|
4 years ended
12/31/2016
|
|
43.6%
|
41.2%
|
|
70.6%
|
23.4%
|
37.6%
|
5 years ended
12/31/2016
|
|
72.8%
|
65.4%
|
|
97.8%
|
42.6%
|
59.2%
|
|
|
|
|
|
|
|
|
(1) Investment
performance includes realized income and unrealized
appreciation.
|
(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, 2017 (in thousands)
|
|
|
|
Discretionary Trust Funds
|
|
Total Trust
Funds
|
Asset
Class
|
|
|
MV
|
%
|
|
MV
|
%
|
Cash
|
|
|
$
|
11,465
|
6%
|
|
|
$
|
27,191
|
12%
|
|
Equities
|
|
|
65,443
|
32%
|
|
|
67,873
|
29%
|
|
Fixed
Income
|
|
|
120,535
|
60%
|
|
|
132,016
|
57%
|
|
Other/Insurance
|
|
|
3,226
|
2%
|
|
|
3,419
|
2%
|
|
Total
Portfolios
|
|
|
$
|
200,669
|
100%
|
|
|
$
|
230,499
|
100%
|
|
For the nine months ended September 30,
2017, Carriage's discretionary trust funds returned 8.6%
versus 9.2% for the 70/30 index benchmark. The performance of our
preneed trust fund portfolio during the year has been in line with
our expectations and has reflected no significant change in our
overall portfolio strategy.
ADJUSTED FREE CASH FLOW
We produced Adjusted Free Cash Flow from operations for the
three and nine months ended September 30,
2017 of $9.4 million and
$24.9 million, respectively, compared
to Adjusted Free Cash Flow from operations of $9.3 million and $34.7
million for the corresponding periods in 2016. The year over
year decrease in Adjusted Free Cash Flow was due to weak operating
performance, the reduction of Non-GAAP "cash items" and timing and
amount of certain severance, incentive and federal tax payments
during the first half of 2017.
A reconciliation of Cash Flow Provided by Operations to Adjusted
Free Cash Flow for the three and nine months ended September 30, 2017 and 2016 is as follows (in
thousands):
|
For the Three
Months
Ended September 30,
|
|
For the Nine
Months
Ended September 30,
|
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
Cash Flow Provided by
Operations
|
$
|
9,854
|
|
|
$
|
10,579
|
|
|
$
|
34,840
|
|
|
$
|
30,825
|
|
Cash Used for
Maintenance Capital Expenditures
|
(1,790)
|
|
|
(1,620)
|
|
|
(5,163)
|
|
|
(6,322)
|
|
Free Cash
Flow
|
$
|
8,064
|
|
|
$
|
8,959
|
|
|
$
|
29,677
|
|
|
$
|
24,503
|
|
|
|
|
|
|
|
|
|
Plus: Incremental
Special Items:
|
|
|
|
|
|
|
|
Acquisition and
Divestiture Expenses
|
—
|
|
|
—
|
|
|
516
|
|
|
—
|
|
Severance
Costs
|
1,220
|
|
|
—
|
|
|
3,979
|
|
|
—
|
|
Consulting
Fees
|
—
|
|
|
—
|
|
|
496
|
|
|
—
|
|
Natural Disaster
Costs
|
—
|
|
|
398
|
|
|
—
|
|
|
398
|
|
Adjusted Free Cash
Flow
|
$
|
9,284
|
|
|
$
|
9,357
|
|
|
$
|
34,668
|
|
|
$
|
24,901
|
|
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,
2018 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.
In light of current operating trends and acquisitions expected
to close in the next 90 days, we are raising our Rolling Four
Quarter Outlook of Adjusted Diluted Earnings Per Share by
$0.08 to a range of $1.73 - $1.77 for the period ending September 30, 2018.
ROLLING FOUR QUARTER OUTLOOK – Period Ending September 30, 2018
|
|
Range (in
millions, except per share amounts)
|
Revenues
|
|
$273 -
$277
|
Adjusted Consolidated
EBITDA
|
|
$79 - $83
|
Adjusted Net
Income
|
|
$30 - $32
|
Adjusted Basic
Earnings Per Share
|
|
$1.85 -
$1.89
|
Adjusted Diluted
Earnings Per Share(1)
|
|
$1.73 -
$1.77
|
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,
Adjusted Basic Earnings Per Share and Adjusted Diluted Earnings Per
Share for the four quarter period ending September 30, 2018 are expected to improve
relative to the trailing four quarter period ended September 30, 2017 due to increases in our
existing Funeral Home and Cemetery operating portfolio.
(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.
|
CONFERENCE CALL AND INVESTOR RELATIONS CONTACT
Carriage Services has scheduled a conference call for tomorrow,
October 26, 2017 at 9:30 a.m. central time. To participate in the
call, please dial 866-516-3867 (ID-99303249) and ask for the
Carriage Services conference call. A replay of the conference
call will be available through October 30,
2017 and may be accessed by dialing 855-859-2056
(ID-99303249). 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,
|
|
|
2016
|
2017
|
%
Change
|
|
2016
|
2017
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
Same Store
Contracts
|
|
|
|
|
|
|
|
|
Atneed
Contracts
|
5,720
|
|
5,718
|
|
—%
|
|
|
17,885
|
|
18,041
|
|
0.9%
|
|
|
Preneed
Contracts
|
1,321
|
|
1,375
|
|
4.1%
|
|
|
4,204
|
|
4,255
|
|
1.2%
|
|
|
Total Same Store
Funeral Contracts
|
7,041
|
|
7,093
|
|
0.7%
|
|
|
22,089
|
|
22,296
|
|
0.9%
|
|
|
Acquisition
Contracts
|
|
|
|
|
|
|
|
|
Atneed
Contracts
|
790
|
|
989
|
|
25.2%
|
|
|
2,279
|
|
3,193
|
|
40.1%
|
|
|
Preneed
Contracts
|
153
|
|
167
|
|
9.2%
|
|
|
419
|
|
597
|
|
42.5%
|
|
|
Total Acquisition
Funeral Contracts
|
943
|
|
1,156
|
|
22.6%
|
|
|
2,698
|
|
3,790
|
|
40.5%
|
|
|
Total Funeral
Contracts
|
7,984
|
|
8,249
|
|
3.3%
|
|
|
24,787
|
|
26,086
|
|
5.2%
|
|
|
|
|
|
|
|
|
|
|
|
Funeral Operating
Revenue
|
|
|
|
|
|
|
|
|
Same Store
Revenue
|
$
|
37,094
|
|
$
|
38,032
|
|
2.5%
|
|
|
$
|
117,029
|
|
$
|
119,310
|
|
1.9%
|
|
|
Acquisition
Revenue
|
5,996
|
|
7,363
|
|
22.8%
|
|
|
17,303
|
|
24,727
|
|
42.9%
|
|
|
Total Funeral
Operating Revenue
|
$
|
43,090
|
|
$
|
45,395
|
|
5.3%
|
|
|
$
|
134,332
|
|
$
|
144,037
|
|
7.2%
|
|
|
|
|
|
|
|
|
|
|
|
Cemetery Operating
Revenue
|
|
|
|
|
|
|
|
|
Same Store
Revenue
|
$
|
11,467
|
|
$
|
10,748
|
|
(6.3%)
|
|
|
$
|
35,093
|
|
$
|
33,522
|
|
(4.5%)
|
|
|
Acquisition
Revenue
|
978
|
|
761
|
|
(22.2%)
|
|
|
2,312
|
|
2,370
|
|
2.5%
|
|
|
Total Cemetery
Operating Revenue
|
$
|
12,445
|
|
$
|
11,509
|
|
(7.5%)
|
|
|
$
|
37,405
|
|
$
|
35,892
|
|
(4.0%)
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Revenue
|
|
|
|
|
|
|
|
|
Preneed Funeral
Commission Income
|
$
|
361
|
|
$
|
315
|
|
(12.7%)
|
|
|
$
|
1,138
|
|
$
|
951
|
|
(16.4%)
|
|
|
Preneed Funeral Trust
Earnings
|
1,732
|
|
1,618
|
|
(6.6%)
|
|
|
5,482
|
|
5,290
|
|
(3.5%)
|
|
|
Cemetery Trust
Earnings
|
2,025
|
|
1,768
|
|
(12.7%)
|
|
|
5,622
|
|
5,512
|
|
(2.0%)
|
|
|
Preneed Cemetery
Finance Charges
|
487
|
|
449
|
|
(7.8%)
|
|
|
1,357
|
|
1,381
|
|
1.8%
|
|
|
Total Financial
Revenue
|
$
|
4,605
|
|
$
|
4,150
|
|
(9.9%)
|
|
|
$
|
13,599
|
|
$
|
13,134
|
|
(3.4%)
|
|
|
Total
Revenue
|
$
|
60,140
|
|
$
|
61,054
|
|
1.5%
|
|
|
$
|
185,336
|
|
$
|
193,063
|
|
4.2%
|
|
|
|
|
|
|
|
|
|
|
|
Field
EBITDA
|
|
|
|
|
|
|
|
|
Same Store Funeral
Field EBITDA
|
$
|
13,894
|
|
$
|
13,938
|
|
0.3%
|
|
|
$
|
45,119
|
|
$
|
46,111
|
|
2.2%
|
|
|
Same Store Funeral
Field EBITDA Margin
|
37.5%
|
|
36.6%
|
|
(90 bp)
|
|
|
38.6%
|
|
38.6%
|
|
0 bp
|
|
|
Acquisition Funeral
Field EBITDA
|
2,431
|
|
2,419
|
|
(0.5%)
|
|
|
7,293
|
|
9,515
|
|
30.5%
|
|
|
Acquisition Funeral
Field EBITDA Margin
|
40.5%
|
|
32.9%
|
|
(760 bp)
|
|
42.1%
|
|
38.5%
|
|
(360 bp)
|
|
Total Funeral
Field EBITDA
|
$
|
16,325
|
|
$
|
16,357
|
|
0.2%
|
|
|
$
|
52,412
|
|
$
|
55,626
|
|
6.1%
|
|
|
Total Funeral
Field EBITDA Margin
|
37.9%
|
|
36.0%
|
|
(190
bp)
|
|
39.0%
|
|
38.6%
|
|
(40
bp)
|
|
|
|
|
|
|
|
|
|
|
Same Store Cemetery
Field EBITDA
|
$
|
3,342
|
|
$
|
2,649
|
|
(20.7%)
|
|
|
$
|
11,283
|
|
$
|
9,287
|
|
(17.7%)
|
|
|
Same Store Cemetery
Field EBITDA Margin
|
29.1%
|
|
24.6%
|
|
(450 bp)
|
|
32.2%
|
|
27.7%
|
|
(450 bp)
|
|
Acquisition Cemetery
Field EBITDA
|
479
|
|
200
|
|
(58.2%)
|
|
|
791
|
|
743
|
|
(6.1%)
|
|
|
Acquisition Cemetery
Field EBITDA Margin
|
49.0%
|
|
26.3%
|
|
(2,270 bp)
|
|
34.2%
|
|
31.4%
|
|
(280 bp)
|
|
Total Cemetery
Field EBITDA
|
$
|
3,821
|
|
$
|
2,849
|
|
(25.4%)
|
|
|
$
|
12,074
|
|
$
|
10,030
|
|
(16.9%)
|
|
|
Total Cemetery
Field EBITDA Margin
|
30.7%
|
|
24.8%
|
|
(590
bp)
|
|
32.3%
|
|
27.9%
|
|
(440
bp)
|
|
|
|
|
|
|
|
|
|
|
Funeral Financial
EBITDA
|
$
|
1,876
|
|
$
|
1,705
|
|
(9.1%)
|
|
|
$
|
5,994
|
|
$
|
5,535
|
|
(7.7%)
|
|
|
Cemetery Financial
EBITDA
|
2,441
|
|
2,107
|
|
(13.7%)
|
|
|
6,764
|
|
6,612
|
|
(2.2%)
|
|
|
Total Financial
EBITDA
|
$
|
4,317
|
|
$
|
3,812
|
|
(11.7%)
|
|
|
$
|
12,758
|
|
$
|
12,147
|
|
(4.8%)
|
|
|
Total Financial
EBITDA Margin
|
93.7%
|
|
91.9%
|
|
(180
bp)
|
|
93.8%
|
|
92.5%
|
|
(130
bp)
|
|
|
|
|
|
|
|
|
|
|
Total Field
EBITDA
|
$
|
24,463
|
|
$
|
23,018
|
|
(5.9%)
|
|
|
$
|
77,244
|
|
$
|
77,803
|
|
0.7%
|
|
|
Total Field EBITDA
Margin
|
40.7%
|
|
37.7%
|
|
(300
bp)
|
|
41.7%
|
|
40.3%
|
|
(140
bp)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING AND
FINANCIAL TREND REPORT
|
|
(in thousands,
except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30,
|
|
Nine Months Ended
September 30,
|
|
|
2016
|
2017
|
%
Change
|
|
2016
|
2017
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
Overhead
|
|
|
|
|
|
|
|
|
Total Variable
Overhead
|
$
|
3,086
|
|
$
|
3,057
|
|
(0.9%)
|
|
|
$
|
10,672
|
|
$
|
7,765
|
|
(27.2%)
|
|
|
Total Regional Fixed
Overhead
|
940
|
|
995
|
|
5.9%
|
|
|
2,659
|
|
2,888
|
|
8.6%
|
|
|
Total Corporate Fixed
Overhead
|
4,545
|
|
5,234
|
|
15.2%
|
|
|
14,118
|
|
16,347
|
|
15.8%
|
|
|
Total
Overhead
|
$
|
8,571
|
|
$
|
9,286
|
|
8.3%
|
|
|
$
|
27,449
|
|
$
|
27,000
|
|
(1.6%)
|
|
|
Overhead as a
Percentage of Revenue
|
14.3%
|
|
15.2%
|
|
90
bp
|
|
|
14.8%
|
|
14.0%
|
|
(80
bp)
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
EBITDA
|
$
|
15,892
|
|
$
|
13,732
|
|
(13.6%)
|
|
|
$
|
49,795
|
|
$
|
50,803
|
|
2.0%
|
|
|
Consolidated
EBITDA Margin
|
26.4%
|
|
22.5%
|
|
(390
bp)
|
|
|
26.9%
|
|
26.3%
|
|
(60
bp)
|
|
|
Other Expenses and
Interest
|
|
|
|
|
|
|
|
|
Depreciation &
Amortization
|
$
|
3,807
|
|
$
|
4,002
|
|
5.1%
|
|
|
$
|
11,498
|
|
$
|
11,874
|
|
3.3%
|
|
|
Non-Cash Stock
Compensation
|
342
|
|
785
|
|
129.5%
|
|
|
2,306
|
|
2,394
|
|
3.8%
|
|
|
Interest
Expense
|
2,903
|
|
3,282
|
|
13.1%
|
|
|
8,722
|
|
9,517
|
|
9.1%
|
|
|
Accretion of Discount
on Convertible Subordinated Notes
|
981
|
|
1,097
|
|
11.8%
|
|
|
2,862
|
|
3,200
|
|
11.8%
|
|
|
Loss on Early
Extinguishment of Debt
|
—
|
|
—
|
|
|
|
567
|
|
—
|
|
|
|
Other, Net
|
285
|
|
6
|
|
|
|
(20)
|
|
3
|
|
|
|
Pretax
Income
|
$
|
7,574
|
|
$
|
4,560
|
|
(39.8%)
|
|
|
$
|
23,860
|
|
$
|
23,815
|
|
(0.2%)
|
|
|
Provision for Income
Taxes
|
3,030
|
|
1,824
|
|
|
|
9,545
|
|
9,526
|
|
|
|
Tax Adjustment
Related to Certain Discrete Items
|
(1,139)
|
|
(302)
|
|
|
|
(1,139)
|
|
(243)
|
|
|
|
Total Tax
Provision
|
$
|
1,891
|
|
$
|
1,522
|
|
|
|
$
|
8,406
|
|
$
|
9,283
|
|
|
|
GAAP Net
Income
|
$
|
5,683
|
|
$
|
3,038
|
|
(46.5%)
|
|
|
$
|
15,454
|
|
$
|
14,532
|
|
(6.0%)
|
|
|
|
|
|
|
|
|
|
|
|
Special Items, Net
of Tax except for **
|
|
|
|
|
|
|
|
|
Acquisition and
Divestiture Expenses
|
$
|
—
|
|
$
|
—
|
|
|
|
$
|
336
|
|
$
|
—
|
|
|
|
Severance and
Retirement Costs
|
793
|
|
—
|
|
|
|
2,587
|
|
—
|
|
|
|
Consulting
Fees
|
—
|
|
—
|
|
|
|
323
|
|
—
|
|
|
|
Accretion of Discount
on Convertible Subordinated Notes **
|
981
|
|
1,097
|
|
|
|
2,862
|
|
3,200
|
|
|
|
Loss on Early
Extinguishment of Debt
|
—
|
|
—
|
|
|
|
369
|
|
—
|
|
|
|
Gain on Sale of
Assets
|
—
|
|
—
|
|
|
|
(198)
|
|
—
|
|
|
|
Natural Disaster
Costs
|
—
|
|
259
|
|
|
|
—
|
|
259
|
|
|
|
Sum of Special
Items, Net of Tax
|
$
|
1,774
|
|
$
|
1,356
|
|
(23.6%)
|
|
|
$
|
6,279
|
|
$
|
3,459
|
|
(44.9%)
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Net
Income
|
$
|
7,457
|
|
$
|
4,394
|
|
(41.1%)
|
|
|
$
|
21,733
|
|
$
|
17,991
|
|
(17.2%)
|
|
|
Adjusted Net
Profit Margin
|
12.4%
|
|
7.2%
|
|
(520
bp)
|
|
|
11.7%
|
|
9.3%
|
|
(240
bp)
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted Basic
Earnings Per Share
|
$
|
0.45
|
|
$
|
0.26
|
|
(42.2%)
|
|
|
$
|
1.31
|
|
$
|
1.08
|
|
(17.6%)
|
|
|
Adjusted Diluted
Earnings Per Share
|
$
|
0.43
|
|
$
|
0.25
|
|
(41.9%)
|
|
|
$
|
1.28
|
|
$
|
1.00
|
|
(21.9%)
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Basic Earnings
Per Share
|
$
|
0.34
|
|
$
|
0.18
|
|
(47.1%)
|
|
|
$
|
0.93
|
|
$
|
0.87
|
|
(6.5%)
|
|
|
GAAP Diluted Earnings
Per Share
|
$
|
0.33
|
|
$
|
0.17
|
|
(48.5%)
|
|
|
$
|
0.91
|
|
$
|
0.81
|
|
(11.0%)
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Basic Shares Outstanding
|
16,529
|
|
16,476
|
|
|
|
16,502
|
|
16,575
|
|
|
|
Weighted Average
Diluted Shares Outstanding
|
17,101
|
|
17,598
|
|
|
|
16,862
|
|
17,887
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to
Adjusted Consolidated EBITDA
|
|
|
|
|
|
|
|
|
Consolidated
EBITDA
|
$
|
15,892
|
|
$
|
13,732
|
|
(13.6%)
|
|
|
$
|
49,795
|
|
$
|
50,803
|
|
2.0%
|
|
|
Acquisition and
Divestiture Expenses
|
—
|
|
—
|
|
|
|
516
|
|
—
|
|
|
|
Severance and
Retirement Costs
|
1,220
|
|
—
|
|
|
|
3,979
|
|
—
|
|
|
|
Consulting
Fees
|
—
|
|
—
|
|
|
|
496
|
|
—
|
|
|
|
Natural Disaster
Costs
|
—
|
|
398
|
|
|
|
—
|
|
398
|
|
|
|
Adjusted
Consolidated EBITDA
|
$
|
17,112
|
|
$
|
14,130
|
|
(17.4%)
|
|
|
$
|
54,786
|
|
$
|
51,201
|
|
(6.5%)
|
|
|
Adjusted
Consolidated EBITDA Margin
|
28.5%
|
|
23.1%
|
|
(540
bp)
|
|
|
29.6%
|
|
26.5%
|
|
(310
bp)
|
|
|
CARRIAGE SERVICES,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(in thousands,
except share data)
|
|
|
|
|
(unaudited)
|
|
December 31,
2016
|
|
September 30,
2017
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
3,286
|
|
|
$
|
759
|
|
Accounts receivable,
net
|
18,860
|
|
|
18,821
|
|
Inventories
|
6,147
|
|
|
6,346
|
|
Prepaid
expenses
|
2,640
|
|
|
1,355
|
|
Other current
assets
|
2,034
|
|
|
764
|
|
Total current
assets
|
32,967
|
|
|
28,045
|
|
Preneed cemetery
trust investments
|
69,696
|
|
|
71,728
|
|
Preneed funeral trust
investments
|
89,240
|
|
|
89,444
|
|
Preneed receivables,
net
|
30,383
|
|
|
31,279
|
|
Receivables from
preneed trusts
|
14,218
|
|
|
15,306
|
|
Property, plant and
equipment, net
|
235,113
|
|
|
235,501
|
|
Cemetery property,
net
|
76,119
|
|
|
76,961
|
|
Goodwill
|
275,487
|
|
|
275,487
|
|
Intangible and other
non-current assets
|
14,957
|
|
|
14,616
|
|
Cemetery perpetual
care trust investments
|
46,889
|
|
|
48,679
|
|
Total
assets
|
$
|
885,069
|
|
|
$
|
887,046
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Current portion of
long-term debt and capital lease obligations
|
$
|
13,267
|
|
|
$
|
16,323
|
|
Accounts
payable
|
10,198
|
|
|
6,686
|
|
Other
liabilities
|
717
|
|
|
1,811
|
|
Accrued
liabilities
|
20,091
|
|
|
15,294
|
|
Total current
liabilities
|
44,273
|
|
|
40,114
|
|
Long-term debt, net
of current portion
|
137,862
|
|
|
125,442
|
|
Revolving credit
facility
|
66,542
|
|
|
74,550
|
|
Convertible
subordinated notes due 2021
|
119,596
|
|
|
123,182
|
|
Obligations under
capital leases, net of current portion
|
2,630
|
|
|
2,492
|
|
Deferred preneed
cemetery revenue
|
54,631
|
|
|
55,275
|
|
Deferred preneed
funeral revenue
|
33,198
|
|
|
34,652
|
|
Deferred tax
liability
|
42,810
|
|
|
44,025
|
|
Other long-term
liabilities
|
2,567
|
|
|
2,723
|
|
Deferred preneed
cemetery receipts held in trust
|
69,696
|
|
|
71,728
|
|
Deferred preneed
funeral receipts held in trust
|
89,240
|
|
|
89,444
|
|
Care trusts'
corpus
|
46,290
|
|
|
48,186
|
|
Total
liabilities
|
709,335
|
|
|
711,813
|
|
Commitments and
contingencies:
|
|
|
|
Stockholders'
equity:
|
|
|
|
Common stock, $.01
par value; 80,000,000 shares authorized; 22,490,855 and 22,609,120
shares issued at December 31, 2016 and September 30, 2017,
respectively
|
225
|
|
|
226
|
|
Additional paid-in
capital
|
215,064
|
|
|
216,396
|
|
Retained
earnings
|
20,711
|
|
|
35,243
|
|
Treasury stock, at
cost; 5,849,316 and 6,523,370 shares at December 31, 2016 and
September 30, 2017, respectively
|
(60,266)
|
|
|
(76,632)
|
|
Total stockholders'
equity
|
175,734
|
|
|
175,233
|
|
Total liabilities and
stockholders' equity
|
$
|
885,069
|
|
|
$
|
887,046
|
|
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,
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Funeral
|
$
|
45,183
|
|
|
$
|
47,329
|
|
|
$
|
140,952
|
|
|
$
|
150,279
|
|
Cemetery
|
14,957
|
|
|
13,725
|
|
|
44,384
|
|
|
42,784
|
|
|
60,140
|
|
|
61,054
|
|
|
185,336
|
|
|
193,063
|
|
Field costs and
expenses:
|
|
|
|
|
|
|
|
Funeral
|
26,982
|
|
|
29,267
|
|
|
82,546
|
|
|
89,118
|
|
Cemetery
|
8,695
|
|
|
8,769
|
|
|
25,546
|
|
|
26,142
|
|
Depreciation and
amortization
|
3,452
|
|
|
3,601
|
|
|
10,359
|
|
|
10,719
|
|
Regional and
unallocated funeral and cemetery costs
|
2,783
|
|
|
3,937
|
|
|
8,547
|
|
|
9,845
|
|
|
41,912
|
|
|
45,574
|
|
|
126,998
|
|
|
135,824
|
|
Gross
profit
|
18,228
|
|
|
15,480
|
|
|
58,338
|
|
|
57,239
|
|
Corporate costs and
expenses:
|
|
|
|
|
|
|
|
General,
administrative and other
|
6,130
|
|
|
6,134
|
|
|
21,208
|
|
|
19,549
|
|
Home office
depreciation and amortization
|
355
|
|
|
401
|
|
|
1,139
|
|
|
1,155
|
|
|
6,485
|
|
|
6,535
|
|
|
22,347
|
|
|
20,704
|
|
Operating
income
|
11,743
|
|
|
8,945
|
|
|
35,991
|
|
|
36,535
|
|
Interest
expense
|
(2,903)
|
|
|
(3,282)
|
|
|
(8,722)
|
|
|
(9,517)
|
|
Accretion of discount
on convertible subordinated notes
|
(981)
|
|
|
(1,097)
|
|
|
(2,862)
|
|
|
(3,200)
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
—
|
|
|
(567)
|
|
|
—
|
|
Other, net
|
(285)
|
|
|
(6)
|
|
|
20
|
|
|
(3)
|
|
Income before income
taxes
|
7,574
|
|
|
4,560
|
|
|
23,860
|
|
|
23,815
|
|
Provision for income
taxes
|
(3,030)
|
|
|
(1,824)
|
|
|
(9,545)
|
|
|
(9,526)
|
|
Tax adjustment
related to certain discrete items
|
1,139
|
|
|
302
|
|
|
1,139
|
|
|
243
|
|
Total provision for
income taxes
|
(1,891)
|
|
|
(1,522)
|
|
|
(8,406)
|
|
|
(9,283)
|
|
Net income
|
$
|
5,683
|
|
|
$
|
3,038
|
|
|
$
|
15,454
|
|
|
$
|
14,532
|
|
|
|
|
|
|
|
|
|
Basic earnings per
common share:
|
$
|
0.34
|
|
|
$
|
0.18
|
|
|
$
|
0.93
|
|
|
$
|
0.87
|
|
Diluted earnings per
common share:
|
$
|
0.33
|
|
|
$
|
0.17
|
|
|
$
|
0.91
|
|
|
$
|
0.81
|
|
|
|
|
|
|
|
|
|
Dividends declared
per common share:
|
$
|
0.050
|
|
|
$
|
0.050
|
|
|
$
|
0.100
|
|
|
$
|
0.150
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common and common equivalent shares
outstanding:
|
|
|
|
|
|
|
|
Basic
|
16,529
|
|
|
16,476
|
|
|
16,502
|
|
|
16,575
|
|
Diluted
|
17,101
|
|
|
17,598
|
|
|
16,962
|
|
|
17,887
|
|
CARRIAGE SERVICES,
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(unaudited and in
thousands)
|
|
|
For the Nine
Months
Ended September 30,
|
|
2016
|
|
2017
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
15,454
|
|
|
$
|
14,532
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Depreciation and
amortization
|
11,498
|
|
|
11,874
|
|
Provision for losses
on accounts receivable
|
1,522
|
|
|
1,737
|
|
Stock-based
compensation expense
|
2,645
|
|
|
2,394
|
|
Deferred income tax
expense
|
3,618
|
|
|
1,215
|
|
Amortization of
deferred financing costs
|
622
|
|
|
614
|
|
Accretion of discount
on convertible subordinated notes
|
2,862
|
|
|
3,200
|
|
Loss on early
extinguishment of debt
|
567
|
|
|
—
|
|
Net loss on sale and
disposal of other assets
|
186
|
|
|
341
|
|
Impairment of intangible
assets
|
145
|
|
|
—
|
|
|
|
|
|
Changes in operating
assets and liabilities that provided (required) cash:
|
|
|
|
Accounts and preneed
receivables
|
(3,945)
|
|
|
(2,594)
|
|
Inventories and other
current assets
|
682
|
|
|
2,356
|
|
Intangible and other
non-current assets
|
386
|
|
|
340
|
|
Preneed funeral and
cemetery trust investments
|
(4,828)
|
|
|
(5,114)
|
|
Accounts
payable
|
(2,149)
|
|
|
(3,510)
|
|
Accrued and other
liabilities
|
292
|
|
|
(2,790)
|
|
Deferred preneed
funeral and cemetery revenue
|
742
|
|
|
2,098
|
|
Deferred preneed
funeral and cemetery receipts held in trust
|
4,541
|
|
|
4,132
|
|
Net cash provided by
operating activities
|
34,840
|
|
|
30,825
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Acquisitions and land
for new construction
|
(15,056)
|
|
|
(723)
|
|
Purchase of land and
buildings previously leased
|
(6,258)
|
|
|
—
|
|
Net proceeds from the
sale of other assets
|
955
|
|
|
405
|
|
Capital
expenditures
|
(12,039)
|
|
|
(13,129)
|
|
Net cash used in
investing activities
|
(32,398)
|
|
|
(13,447)
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Borrowings from the
revolving credit facility
|
45,500
|
|
|
75,100
|
|
Payments against the
revolving credit facility
|
(74,800)
|
|
|
(67,300)
|
|
Borrowings from the
term loan
|
39,063
|
|
|
—
|
|
Payments against the
term loan
|
(8,438)
|
|
|
(8,438)
|
|
Payments on other
long-term debt and obligations under capital leases
|
(987)
|
|
|
(1,084)
|
|
Payments on
contingent consideration recorded at acquisition date
|
—
|
|
|
(101)
|
|
Proceeds from the
exercise of stock options and employee stock purchase plan
contributions
|
686
|
|
|
1,296
|
|
Taxes paid on
restricted stock vestings and exercise of non-qualified
options
|
(560)
|
|
|
(509)
|
|
Dividends paid on
common stock
|
(1,662)
|
|
|
(2,503)
|
|
Purchase of treasury
stock
|
—
|
|
|
(16,366)
|
|
Payment of loan
origination costs related to the credit facility
|
(717)
|
|
|
—
|
|
Excess tax deficiency
of equity compensation
|
(207)
|
|
|
—
|
|
Net cash used in
financing activities
|
(2,122)
|
|
|
(19,905)
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents
|
320
|
|
|
(2,527)
|
|
Cash and cash
equivalents at beginning of period
|
535
|
|
|
3,286
|
|
Cash and cash
equivalents at end of period
|
$
|
855
|
|
|
$
|
759
|
|
|
|
|
|
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 included in our
GAAP financial statements that can vary from period to period and
are not reflective of costs incurred in the ordinary course of our
operations. Special Items are taxed at the federal statutory rate
of 35 percent for both the three and nine months ended September 30, 2016 and 2017, except for the
accretion of the discount on the Convertible Notes as this is a
non-tax deductible item.
- 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
costs 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 costs 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 funeral and cemetery
costs.
- 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, 2016 and 2017
(in thousands):
|
For the Three
Months
Ended September 30,
|
|
For the Nine
Months
Ended September 30,
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
Net Income
|
$
|
5,683
|
|
|
$
|
3,038
|
|
|
$
|
15,454
|
|
|
$
|
14,532
|
|
Special Items, Net of
Tax except for **
|
|
|
|
|
|
|
|
|
|
Acquisition and
Divestiture Expenses
|
—
|
|
|
—
|
|
|
336
|
|
|
—
|
|
Severance and
Retirement Costs
|
793
|
|
|
—
|
|
|
2,587
|
|
|
—
|
|
Consulting
Fees
|
—
|
|
|
—
|
|
|
323
|
|
|
—
|
|
Accretion of Discount
on Convertible Subordinated Notes **
|
981
|
|
|
1,097
|
|
|
2,862
|
|
|
3,200
|
|
Loss on Early
Extinguishment of Debt
|
—
|
|
|
—
|
|
|
369
|
|
|
—
|
|
Gain on Sale of
Assets
|
—
|
|
|
—
|
|
|
(198)
|
|
|
—
|
|
Natural Disaster
Costs
|
—
|
|
|
259
|
|
|
—
|
|
|
259
|
|
Total
Special Items affecting Net Income
|
$
|
1,774
|
|
|
$
|
1,356
|
|
|
$
|
6,279
|
|
|
$
|
3,459
|
|
Adjusted Net
Income
|
$
|
7,457
|
|
|
$
|
4,394
|
|
|
$
|
21,733
|
|
|
$
|
17,991
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Net Income to Consolidated EBITDA and
Adjusted Consolidated EBITDA for the three and nine months ended
September 30, 2016 and 2017 (in thousands):
|
For the Three
Months
Ended September
30,
|
|
For the Nine
Months
Ended September 30,
|
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
Net Income
|
$
|
5,683
|
|
|
$
|
3,038
|
|
|
$
|
15,454
|
|
|
$
|
14,532
|
|
|
Total Tax
Provision
|
1,891
|
|
|
1,522
|
|
|
8,406
|
|
|
9,283
|
|
|
Pretax
Income
|
$
|
7,574
|
|
|
$
|
4,560
|
|
|
$
|
23,860
|
|
|
$
|
23,815
|
|
|
Interest
Expense
|
2,903
|
|
|
3,282
|
|
|
8,722
|
|
|
9,517
|
|
|
Accretion of Discount
on Convertible Subordinated Notes
|
981
|
|
|
1,097
|
|
|
2,862
|
|
|
3,200
|
|
|
Loss on Early
Extinguishment of Debt
|
—
|
|
|
—
|
|
|
567
|
|
|
—
|
|
|
Non-Cash Stock
Compensation
|
342
|
|
|
785
|
|
|
2,306
|
|
|
2,394
|
|
|
Depreciation &
Amortization
|
3,807
|
|
|
4,002
|
|
|
11,498
|
|
|
11,874
|
|
|
Other, Net
|
285
|
|
|
6
|
|
|
(20)
|
|
|
3
|
|
|
Consolidated
EBITDA
|
$
|
15,892
|
|
|
$
|
13,732
|
|
|
$
|
49,795
|
|
|
$
|
50,803
|
|
|
Adjusted
For:
|
|
|
|
|
|
|
|
|
Acquisition and
Divestiture Expenses
|
—
|
|
|
—
|
|
|
516
|
|
|
—
|
|
|
Severance and
Retirement Costs
|
1,220
|
|
|
—
|
|
|
3,979
|
|
|
—
|
|
|
Consulting
Fees
|
—
|
|
|
—
|
|
|
496
|
|
|
—
|
|
|
Natural Disaster
Costs
|
—
|
|
|
398
|
|
|
—
|
|
|
398
|
|
|
Adjusted Consolidated
EBITDA
|
$
|
17,112
|
|
|
$
|
14,130
|
|
|
$
|
54,786
|
|
|
$
|
51,201
|
|
|
Revenue
|
$
|
60,140
|
|
|
$
|
61,054
|
|
|
$
|
185,336
|
|
|
$
|
193,063
|
|
|
Adjusted Consolidated
EBITDA Margin
|
28.5%
|
|
|
23.1%
|
|
|
29.6%
|
|
|
26.5%
|
|
|
Reconciliation of Funeral and Cemetery Gross Profit to
Field EBITDA for the three and nine months ended September
30, 2016 and 2017 (in thousands):
Funeral Field
EBITDA
|
For the Three
Months
Ended September 30,
|
|
For the Nine
Months
Ended September 30,
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
Gross Profit
(GAAP)
|
$
|
13,786
|
|
|
$
|
12,570
|
|
|
$
|
45,142
|
|
|
$
|
45,951
|
|
Depreciation &
Amortization
|
2,238
|
|
|
2,431
|
|
|
6,454
|
|
|
7,329
|
|
Regional &
Unallocated Costs
|
2,177
|
|
|
3,061
|
|
|
6,810
|
|
|
7,881
|
|
Funeral Financial
EBITDA
|
(1,876)
|
|
|
(1,705)
|
|
|
(5,994)
|
|
|
(5,535)
|
|
Funeral Field
EBITDA
|
$
|
16,325
|
|
|
$
|
16,357
|
|
|
$
|
52,412
|
|
|
$
|
55,626
|
|
|
Cemetery Field
EBITDA
|
For the Three
Months
Ended September 30,
|
|
For the Nine
Months
Ended September 30,
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
Gross Profit
(GAAP)
|
$
|
4,442
|
|
|
$
|
2,910
|
|
|
$
|
13,196
|
|
|
$
|
11,288
|
|
Depreciation &
Amortization
|
1,214
|
|
|
1,170
|
|
|
3,905
|
|
|
3,390
|
|
Regional &
Unallocated Costs
|
606
|
|
|
876
|
|
|
1,737
|
|
|
1,964
|
|
Cemetery Financial
EBITDA
|
(2,441)
|
|
|
(2,107)
|
|
|
(6,764)
|
|
|
(6,612)
|
|
Cemetery Field
EBITDA
|
$
|
3,821
|
|
|
$
|
2,849
|
|
|
$
|
12,074
|
|
|
$
|
10,030
|
|
|
Total Field
EBITDA
|
For the Three
Months
Ended September 30,
|
|
For the Nine
Months
Ended September 30,
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
Funeral Field
EBITDA
|
$
|
16,325
|
|
|
$
|
16,357
|
|
|
$
|
52,412
|
|
|
$
|
55,626
|
|
Cemetery Field
EBITDA
|
3,821
|
|
|
2,849
|
|
|
12,074
|
|
|
10,030
|
|
Funeral Financial
EBITDA
|
1,876
|
|
|
1,705
|
|
|
5,994
|
|
|
5,535
|
|
Cemetery Financial
EBITDA
|
2,441
|
|
|
2,107
|
|
|
6,764
|
|
|
6,612
|
|
Total Field
EBITDA
|
$
|
24,463
|
|
|
$
|
23,018
|
|
|
$
|
77,244
|
|
|
$
|
77,803
|
|
Reconciliation of GAAP Basic Earnings Per Share to
Adjusted Basic Earnings Per Share for the three and nine months
ended September 30, 2016 and 2017:
|
For the Three
Months
Ended September 30,
|
|
For the Nine
Months
Ended September 30,
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
GAAP Basic Earnings
Per Share
|
$
|
0.34
|
|
|
$
|
0.18
|
|
|
$
|
0.93
|
|
|
$
|
0.87
|
|
Special Items
Affecting Net Income
|
0.11
|
|
|
0.08
|
|
|
0.38
|
|
|
0.21
|
|
Adjusted Basic
Earnings Per Share
|
$
|
0.45
|
|
|
$
|
0.26
|
|
|
$
|
1.31
|
|
|
$
|
1.08
|
|
Reconciliation of GAAP Diluted Earnings Per Share to
Adjusted Diluted Earnings Per Share for the three and nine months
ended September 30, 2016 and 2017:
|
For the Three
Months
Ended September 30,
|
|
For the Nine
Months
Ended September 30,
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
GAAP Diluted Earnings
Per Share
|
$
|
0.33
|
|
|
$
|
0.17
|
|
|
$
|
0.91
|
|
|
$
|
0.81
|
|
Special Items
Affecting Net Income
|
0.10
|
|
|
0.08
|
|
|
0.37
|
|
|
0.19
|
|
Adjusted Diluted
Earnings Per Share
|
$
|
0.43
|
|
|
$
|
0.25
|
|
|
$
|
1.28
|
|
|
$
|
1.00
|
|
On page five 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, 2018 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
four 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, 2018
(in thousands):
|
Rolling Four
Quarter Outlook
|
|
|
September 30,
2018E
|
|
Net Income
|
|
|
$
|
25,700
|
|
|
|
Total Tax
Provision
|
|
|
17,000
|
|
|
|
Pretax
Income
|
|
|
$
|
42,700
|
|
|
|
Net Interest Expense,
including Accretion of Discount on Convertible Subordinated
Notes
|
|
|
17,800
|
|
|
|
Depreciation &
Amortization, including Non-cash Stock Compensation
|
|
|
20,000
|
|
|
|
Consolidated
EBITDA
|
|
|
$
|
80,500
|
|
|
|
Adjusted for Special
Items
|
|
|
—
|
|
|
|
Adjusted Consolidated
EBITDA
|
|
|
$
|
80,500
|
|
|
|
Reconciliation of Net Income to Adjusted Net Income for
the estimated Rolling Four Quarters ending September 30, 2018 (in thousands):
|
Rolling Four
Quarter Outlook
|
|
|
September 30,
2018E
|
|
Net Income
|
|
|
$
|
25,700
|
|
|
|
Special
Items
|
|
|
4,800
|
|
|
|
Adjusted Net
Income
|
|
|
$
|
30,500
|
|
|
|
Reconciliation of GAAP Basic Earnings Per Share to
Adjusted Basic Earnings Per Share for the estimated Rolling Four
Quarters ending September 30,
2018:
|
Rolling Four
Quarter Outlook
|
|
|
September 30,
2018E
|
|
GAAP Basic Earnings
Per Share
|
|
|
$
|
1.57
|
|
|
|
Special Items
Affecting Net Income
|
|
|
0.30
|
|
|
|
Adjusted Basic
Earnings Per Share
|
|
|
$
|
1.87
|
|
|
|
Reconciliation of GAAP Diluted Earnings Per Share to
Adjusted Diluted Earnings Per Share for the estimated Rolling Four
Quarters ending September 30,
2018:
|
Rolling Four
Quarter Outlook
|
|
|
September 30,
2018E
|
|
GAAP Diluted Earnings
Per Share
|
|
|
$
|
1.47
|
|
|
|
Special Items
Affecting Net Income
|
|
|
0.28
|
|
|
|
Adjusted Diluted
Earnings Per Share
|
|
|
$
|
1.75
|
|
|
|
Supplemental Information:
Funeral homes and cemeteries purchased after
December 31, 2012 are referred to as "Acquired" in our
Trend Report. This classification of acquisitions has been
important to management and investors in monitoring the results of
these businesses and to gauge the leveraging performance
contribution that a selective acquisition program can have on total
company performance.
The presentation below highlights the impact of our 2012
Acquired Portfolio that moved from Acquired to Same Store beginning
January 1, 2017 (in thousands):
|
For the Three
Months
Ended September 30, 2016
|
|
For the Nine
Months
Ended September 30, 2016
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
EBITDA
|
|
Revenue
|
|
EBITDA
|
2012 Acquired
Portfolio
|
$
|
3,740
|
|
|
$
|
1,492
|
|
|
$
|
11,583
|
|
|
$
|
4,711
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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:
- our ability to find and retain skilled personnel;
- our ability to execute our growth strategy;
- 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;
- the timely and full payment of 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.
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SOURCE Carriage Services, Inc.