Carriage Services Announces 2012 First Quarter Results
HIGHLIGHTS OF THE 2012 FIRST QUARTER:
- Total Revenue of
$52.3 million , an increase of 3.2%; - Total Acquisition Funeral Field EBITDA of
$2.5 million , an increase of 208%; - Total Acquisition Funeral Field EBITDA Margin of 38.9%, an increase of 1,260 basis points;
- Total Funeral Field EBITDA of
$15.5 million , an increase of 19.0%; - Total Funeral Field EBITDA Margin of 39.9%, an increase of 480 basis points;
- Total Field EBITDA of
$21.4 million , an increase of 11.2%; - Total Field EBITDA Margin of 41.0%, an increase of 300 basis points;
- Total Adjusted Consolidated EBITDA of
$16.0 million , an increase of 9.5%; - Total Adjusted Consolidated EBITDA Margin of 30.5%, an increase of 180 basis points;
- Total GAAP EPS of
$0.23 , an increase of 28%; and - Total Adjusted EPS of
$0.29 , an increase of 26%.
The record 2012 first quarter performance was driven by record high Field EBITDA Margins in our funeral business portfolio, funeral business acquisitions and a continued strong GAAP and Non-GAAP contribution from our trust portfolios. The revenue increase of
After
The combination of a 480 basis point increase in our Total Funeral Field EBITDA Margin and
GAAP diluted earnings per share for the quarter was
Withdrawable Trust Income was higher last year because of
NON- GAAP UNAUDITED INCOME STATEMENT | ||
Period Ended | ||
( | ||
Three Months Ended |
Three Months Ended | |
|
| |
Same Store Contracts |
||
Atneed Contracts |
5,162 |
4,911 |
Preneed Contracts |
1,434 |
1,279 |
Total Same Store Funeral Contracts |
6,596 |
6,190 |
Acquisition Contracts |
||
Atneed Contracts |
716 |
1,240 |
Preneed Contracts |
139 |
188 |
Total Acquisition Funeral Contracts |
855 |
1,428 |
Total Funeral Contracts |
7,451 |
7,618 |
Funeral Operating Revenue |
||
Same Store Revenue |
|
|
Acquisition Revenue |
3,077 |
6,404 |
Total Funeral Operating Revenue |
|
|
Total Cemetery Operating Revenue |
|
|
Financial Revenue |
||
Preneed Funeral Commission Income |
|
|
Preneed Funeral Trust Earnings |
1,473 |
1,719 |
Cemetery Trust Earnings |
1,657 |
1,516 |
Preneed Cemetery Finance Charges |
348 |
368 |
Total Financial Revenue |
|
|
Total Revenue |
|
|
Field EBITDA |
||
Same Store Funeral Field EBITDA |
|
|
Same Store Funeral Field EBITDA Margin |
35.9% |
40.2% |
Acquisition Funeral Field EBITDA |
810 |
2,491 |
Acquisition Funeral Field EBITDA Margin |
26.3% |
38.9% |
Total Funeral Field EBITDA |
|
|
Total Funeral Field EBITDA Margin |
35.1% |
39.9% |
Total Cemetery Field EBITDA |
|
|
Total Cemetery Field EBITDA Margin |
27.5% |
23.6% |
Funeral Financial EBITDA |
1,604 |
1,819 |
Cemetery Financial EBITDA |
2,005 |
1,884 |
Total Financial EBITDA |
|
|
Total Financial EBITDA Margin |
91.3% |
91.3% |
Total Field EBITDA |
|
|
Total Field EBITDA Margin |
38.0% |
41.0% |
NON- GAAP UNAUDITED INCOME STATEMENT | ||
Period Ended | ||
( | ||
Three Months Ended |
Three Months Ended | |
|
| |
Overhead |
||
Total Variable Overhead |
|
|
Total Regional Fixed Overhead |
906 |
783 |
Total Corporate Fixed Overhead |
3,940 |
4,200 |
Total Overhead |
|
|
12.6% |
13.7% | |
Other Income |
7 |
- |
Consolidated EBITDA |
|
|
Consolidated EBITDA Margin |
25.5% |
27.3% |
GAAP Diluted EPS |
|
|
Special Items |
||
Withdrawable Trust Income(Loss) |
|
|
Gain on Repurchase of Convertible Junior Subordinated Debentures |
(7) |
- |
Securities Transactions Expenses |
138 |
- |
Acquisition Expenses |
88 |
377 |
Severance Costs |
117 |
483 |
Non-recurring Legal Fees |
- |
135 |
Total of Special Items |
|
|
Adjusted Consolidated EBITDA |
|
|
Adjusted Consolidated EBITDA Margin |
28.7% |
30.5% |
Property Depreciation & Amortization |
|
|
Non Cash Stock Compensation |
447 |
402 |
Interest Expense |
4,554 |
4,572 |
Interest Income |
(22) |
(17) |
Pretax Income |
|
|
Income tax |
2,912 |
3,323 |
Adjusted Net Income |
|
|
8.4% |
10.0% | |
Adjusted Diluted EPS |
|
|
OVERHEAD
Total Overhead increased
TRUST FUND PERFORMANCE
During the first quarter of 2012, Carriage continued to realize the benefit of the major asset reallocation of the discretionary trust portfolio that was completed during the second half of 2011. Carriage's discretionary trust fund portfolio had a total return of 9.4% in the first quarter compared to 12.6% for the S&P 500, 5.3% for the Barclay's High Yield Bond Index, and 6.4% for our 50/50 index benchmark. We believe that the current structure of our portfolio is unique in the industry and will provide substantial but less volatile returns in the future because of the large amount of recurring current income that should increase over time. This growing, recurring current income from the fixed income portfolio will continue to be recognized on preneed funeral and cemetery contracts upon maturity and in our cemetery perpetual care trusts on a monthly basis. Carriage continued to actively manage the equity portion of the trust fund portfolio in the first quarter by decreasing the allocation to large-cap cyclical companies and increasing the allocation to large-cap growth companies.
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 | ||||||
Timeframe |
Discretionary |
|
DJIA |
S&P 500 |
50/50 index Benchmark | ||
5 years ended |
51.2% |
49.0% |
12.4% |
(1.2)% |
0.9% | ||
3 years ended |
68.7% |
63.4% |
51.7% |
48.6% |
32.0% | ||
1 year ended |
(3.1)% |
(2.5)% |
8.3% |
2.1% |
5.0% | ||
3 months ended |
9.4% |
8.1% |
8.8% |
12.6% |
6.4% | ||
(1)Investment performance includes realized income and unrealized appreciation (depreciation). |
Asset Allocation as of | |||||||||||
Discretionary Trust Funds |
Total Trust Funds | ||||||||||
Asset Class |
MV |
% |
MV |
% | |||||||
Equities |
|
19% |
$ 47,871 |
21% | |||||||
Fixed Income |
138,133 |
80% |
161,445 |
72% | |||||||
Cash |
2,106 |
1% |
16,035 |
7% | |||||||
Total Portfolios |
$ 173,616 |
100% |
$ 225,351 |
100% | |||||||
ACQUISITIONS
Carriage acquired two funeral home businesses during the first quarter of 2012; the
FREE
Carriage achieved a Free Cash Flow from continuing operations in the first quarter of 2012 of
2011 |
2012 | ||
Cash flow provided by operations |
$ 3.4 |
$ 3.5 | |
Cash used for maintenance capital expenditures |
(1.3) |
(0.9) | |
Free |
$ 2.1 |
$ 2.6 | |
Cash at beginning of year |
1.3 |
1.1 | |
Acquisitions |
— |
(11.6) | |
Net (payments) borrowings under credit facility |
(0.6) |
13.9 | |
Cash used for growth capital expenditures |
(0.6) |
(2.2) | |
Cash used for dividends |
— |
(0.4) | |
Repurchase of common stock |
— |
(2.7) | |
Cash provided by discontinued operations |
0.2 |
— | |
Other investing and financing activities, net |
(0.1) |
0.2 | |
Cash at |
$ 2.3 |
$ 0.9 | |
Credit Facility borrowings at |
$ — |
$ 17.0 |
FOUR QUARTER OUTLOOK
The Four Quarter Outlook reflects management's current opinion on the performance of the portfolio of businesses for the rolling four quarter period ending March 31, 2013, and the performance of the trusts as well as our view of the financial markets. 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 Standards Operating Model, acquisitions and Withdrawable Trust Income. The Four Quarter Outlook includes the
ROLLING FOUR QUARTER OUTLOOK — Period Ending
(amounts in millions, except per share amounts)
Range | |
Revenues |
|
Consolidated EBITDA |
|
Net Income |
|
GAAP Diluted EPS |
|
Non-GAAP EPS |
|
|
|
Free |
|
Revenues, Consolidated EBITDA and Net Income for the four quarter period ending March 31, 2013 are expected to improve relative to the same period ended March 31, 2012, for the following reasons:
- Increases in Same Store Funeral Revenue averages and Same Store Funeral Field EBITDA Margins;
- Increases in Acquired Funeral Revenue and Acquired Funeral Field EBITDA from the 2011 and first quarter 2012 acquisitions; and
- Increases in Financial Revenue from all three categories of trust funds.
The Outlook also includes the Company's new policy of withdrawing realized gains and income in excess of regulatory mandated amounts on a monthly basis from certain cemetery merchandise and services trust funds, which are estimated to be in the range of
CONFERENCE CALL
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. The Company's GAAP financial statements accompany this release. Reconciliations of the Non-GAAP financial measures to GAAP measures are provided at the end of the press release.
Certain state regulations allow the withdrawal of financial income from preneed cemetery merchandise and services trust funds when realized in the trust. Under current generally accepted accounting principles, trust income is only recognized in the Company's financial statements at a later time when the related merchandise and services sold on the preneed contract is delivered at the time of death. Carriage has provided financial income from the trusts, termed Withdrawable Trust Income (loss) and reported on a Non-GAAP proforma basis within Special Items in the accompanying Non-GAAP Unaudited Income Statement, to reflect the current cash results. Management believes that the Withdrawable Trust Income provides useful information to investors because it presents income and cash flow when earned by the trusts.
The Non-GAAP financial measures include "Free Cash Flow", "Funeral and Cemetery Field EBITDA", "Total Field EBITDA", "Consolidated EBITDA", and "Adjusted Consolidated EBITDA" are reflected in this press release. Both Free Cash Flow and Adjusted Consolidated EBITDA are used by investors to value common stock. The Company considers Free Cash Flow to be an important indicator of its ability to generate cash for acquisitions and other strategic investments. The Company has included Adjusted Consolidated EBITDA in this press release because it is widely used by investors to compare the Company's financial performance with the performance of other death care companies. Adjusted Consolidated EBITDA does not give effect to the cash the Company must use to service its debt or pay its income taxes and thus does not reflect the funds actually available for capital expenditures. In addition, the Company's presentation of Adjusted Consolidated EBITDA may not be comparable to similarly titled measures other companies report.
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. These statements are based on assumptions that the Company believes are reasonable; however, many important factors, as discussed under "Forward-Looking Statements" in the Company's Annual Report on Form 10-K for the year ended December 31, 2011, could cause the Company's results in the future to differ materially from the forward-looking statements made herein and in any other documents or oral presentations made by, or on behalf of, the Company. The Company assumes no obligation to update or publicly release any revisions to forward-looking statements made herein or any other
forward-looking statements made by, or on behalf of, the Company. A copy of the Company's Form 10-K, and other
— Financial Statements and Tables to Follow —
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands) | ||||
|
| |||
ASSETS |
2011 |
2012 | ||
Current assets: |
||||
Cash and cash equivalents |
$ 1,137 |
$ 869 | ||
Accounts receivable, net of allowance for bad debts |
16,497 |
16,850 | ||
Assets held for sale |
1,229 |
— | ||
Inventories and other current assets |
13,439 |
14,535 | ||
Total current assets |
32,302 |
32,254 | ||
Preneed cemetery and funeral trust investments |
141,494 |
152,425 | ||
Preneed receivables, net of allowance for bad debts |
22,614 |
22,894 | ||
Receivables from preneed funeral trusts |
22,487 |
22,440 | ||
Property, plant and equipment, net of accumulated depreciation |
136,467 |
142,254 | ||
Cemetery property |
71,515 |
71,610 | ||
Goodwill |
193,962 |
200,300 | ||
Deferred charges and other non-current assets |
10,451 |
7,138 | ||
Cemetery perpetual care trust investments |
41,485 |
45,193 | ||
Total assets |
$ 672,777 |
$ 696,508 | ||
LIABILITIES AND STOCKHOLDERS' EQUITY |
||||
Current liabilities: |
||||
Current portion of long-term debt and obligations under capital leases |
$ 628 |
$ 658 | ||
Accounts payable and accrued liabilities |
31,735 |
26,499 | ||
Liabilities associated with assets held for sale |
1,868 |
— | ||
Total current liabilities |
34,231 |
27,157 | ||
Senior long-term debt, net of current portion |
131,900 |
131,935 | ||
Line of credit |
3,100 |
17,000 | ||
Convertible junior subordinated debenture due in 2029 to an affiliated trust |
89,770 |
89,770 | ||
Obligations under capital leases, net of current portion |
4,155 |
4,119 | ||
Deferred preneed cemetery and funeral revenue |
99,770 |
97,339 | ||
Deferred preneed cemetery and funeral receipts held in trust |
141,494 |
152,425 | ||
Care trusts' corpus |
41,379 |
45,073 | ||
Total liabilities |
545,799 |
564,818 | ||
Commitments and contingencies |
||||
Redeemable Preferred Stock |
200 |
200 | ||
Stockholders' equity |
||||
Common Stock |
217 |
219 | ||
Additional paid-in capital |
202,769 |
204,418 | ||
Accumulated deficit |
(63,987) |
(56,660) | ||
Deferred compensation |
(1,485) |
(3,020) | ||
Treasury stock |
(10,736) |
(13,467) | ||
Total stockholders' equity |
126,778 |
131,490 | ||
Total liabilities and stockholders' equity |
$ 672,777 |
$ 696,508 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except share and per share data) | ||||
For the three months ended March 31, | ||||
2011 |
2012 | |||
Revenues |
$ 50,669 |
$ 52,286 | ||
Field costs and expenses |
35,621 |
35,358 | ||
Gross profit |
15,048 |
16,928 | ||
General and administrative expenses |
5,002 |
5,495 | ||
Operating income |
10,046 |
11,433 | ||
Interest expense |
(4,554) |
(4,572) | ||
Other income |
29 |
17 | ||
Income from continuing operations before income taxes |
5,521 |
6,878 | ||
Provision for income taxes |
(2,236) |
(2,668) | ||
Net income from continuing operations |
3,285 |
4,210 | ||
Net income from discontinued operations, net of tax |
1 |
249 | ||
Net income |
3,286 |
4,459 | ||
Preferred stock dividend |
(4) |
(4) | ||
Net income available to common stockholders |
$ 3,282 |
$ 4,455 | ||
|
||||
Continuing operations |
$ 0.18 |
$ 0.23 | ||
Discontinued operations |
0.00 |
0.01 | ||
|
$ 0.18 |
$ 0.24 | ||
Diluted earnings per common share: |
||||
Continuing operations |
$ 0.18 |
$ 0.23 | ||
Discontinued operations |
0.00 |
0.01 | ||
Diluted earnings per common share |
$ 0.18 |
$ 0.24 | ||
Dividends declared per common share |
$ — |
$ 0.025 | ||
Weighted average number of common and common equivalent shares outstanding: |
||||
|
18,230 |
18,265 | ||
Diluted |
18,268 |
18,320 | ||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands) | ||||
For the three months ended | ||||
2011 |
2012 | |||
Cash flows from operating activities: |
||||
Net income |
$ 3,286 |
$ 4,459 | ||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||
Income from discontinued operations |
(1) |
(249) | ||
Depreciation and amortization |
2,398 |
2,428 | ||
Amortization of deferred financing costs |
183 |
174 | ||
Provision for losses on accounts receivable |
633 |
501 | ||
Stock-based compensation expense |
445 |
269 | ||
Deferred income taxes |
2,232 |
2,104 | ||
Other |
(27) |
(9) | ||
Changes in operating assets and liabilities that provided (required) cash: |
||||
Accounts and preneed receivables |
359 |
(1,108) | ||
Inventories and other current assets |
(24) |
(28) | ||
Deferred charges and other |
(42) |
(37) | ||
Preneed funeral and cemetery trust investments |
1,881 |
(2,299) | ||
Accounts payable and accrued liabilities |
(5,895) |
(5,199) | ||
Deferred preneed funeral and cemetery revenue |
177 |
184 | ||
Deferred preneed funeral and cemetery receipts held in trust |
(2,186) |
2,333 | ||
Net cash provided by continuing operating activities |
3,420 |
3,523 | ||
Net cash provided by discontinued operating activities |
165 |
— | ||
Net cash provided by operating activities |
3,584 |
3,523 | ||
Cash flows from investing activities: |
||||
Acquisitions |
— |
(11,589) | ||
Capital expenditures |
(1,907) |
(3,081) | ||
Net cash used in continuing investing activities |
(1,907) |
(14,670) | ||
Cash flows from financing activities: |
||||
Net borrowings under (payments on) the bank credit facility |
(600) |
13,900 | ||
Payments on senior long-term debt and obligations under capital leases |
(173) |
(171) | ||
Proceeds from the exercise of stock options and employee stock purchase plan |
105 |
318 | ||
Stock option benefit |
— |
21 | ||
Dividend on redeemable preferred stock |
(4) |
(4) | ||
Dividend on common stock |
— |
(454) | ||
Repurchase of convertible junior subordinated debentures |
(19) |
— | ||
Purchase of treasury stock |
— |
(2,731) | ||
Net cash provided by (used in) continuing financing activities |
(691) |
10,879 | ||
Net increase (decrease) in cash and cash equivalents |
986 |
(268) | ||
Cash and cash equivalents at beginning of period |
1,279 |
1,137 | ||
Cash and cash equivalents at end of period |
$ 2,265 |
$ 869 |
Selected Financial Data
| ||||
(unaudited) | ||||
|
| |||
Selected Balance Sheet Data: |
2011 |
2012 | ||
Cash and short-term investments |
$ 1,137 |
$ 869 | ||
Total Senior Debt (a) |
139,783 |
153,712 | ||
Days sales in funeral accounts receivable |
19.1 |
18.3 | ||
Senior Debt to total capitalization |
39.2 |
41.0 | ||
Senior Debt to EBITDA (rolling twelve months) |
3.3 |
3.6 | ||
Senior Debt to Adjusted Consolidated EBITDA (rolling 12 mos.) |
2.8 |
3.0 | ||
(a) - Senior debt does not include the convertible junior subordinated debentures. |
Reconciliation of Non-GAAP Financial Measures:
This press release includes the use of certain financial measures that are not GAAP measures. The Non-GAAP financial measures are presented for additional information and are reconciled to their most comparable GAAP measures below.
Reconciliation of Net Income from continuing operations to Non-GAAP Net Income from continuing operations for the three months ended March 31, 2011 and 2012:
Three months ended March 31, | |||
2011 |
2012 | ||
Net Income from continuing operations |
$ 3,285 |
$ 4,210 | |
Special items, net of tax |
993 |
1,034 | |
Non-GAAP Net Income from continuing operations |
$ 4,278 |
$ 5,244 |
Reconciliation of Diluted EPS from continuing operations to Non-GAAP Diluted EPS from continuing operations for the three months ended March 31, 2011 and 2012:
Three months ended March 31, | |||
2011 |
2012 | ||
Diluted EPS from continuing operations |
$ 0.18 |
$ 0.23 | |
Effect of special items |
0.05 |
0.06 | |
Non-GAAP Diluted EPS from continuing operations |
$ 0.23 |
$ 0.29 |
Reconciliation of Non-GAAP Financial Measures (unaudited), Continued:
Reconciliation of Net Income from continuing operations to Adjusted Consolidated EBITDA from continuing operations for the three months ended March 31, 2011 and 2012 and the estimated rolling four quarters ended
Three months ended March 31, | |||
2011 |
2012 | ||
Net income from continuing operations |
$ 3,285 |
$ 4,210 | |
Provision for income taxes |
2,236 |
2,668 | |
Pre-tax earnings from continuing operations |
5,521 |
6,878 | |
Net interest expense, including loan cost amortization |
4,554 |
4,572 | |
Other income |
(21) |
(17) | |
Noncash stock compensation |
447 |
402 | |
Depreciation & amortization |
2,397 |
2,428 | |
Special items |
1,668 |
1,689 | |
Adjusted Consolidated EBITDA from continuing operations |
$ 14,566 |
$ 15,952 | |
Revenue from continuing operations |
$ 50,669 |
$ 52,286 | |
Adjusted EBITDA Margin |
28.7% |
30.5% |
Rolling Four Quarter | ||
| ||
Net income from continuing operations |
$ 12,500 | |
Provision for income taxes |
8,100 | |
Pre-tax earnings from continuing operations |
20,600 | |
Net interest expense, including loan cost amortization |
18,500 | |
Depreciation & amortization, including stock compensation |
11,400 | |
Consolidated EBITDA from continuing operations |
$ 50,500 |
Reconciliation of Non-GAAP Financial Measures (unaudited), Continued:
Reconciliation of Field income from continuing operations before income taxes to field EBITDA from continuing operations for the three months ended March 31, 2011 and 2012:
Funeral Home | |||||
Three months ended March 31, | |||||
2011 |
2012 | ||||
Income from continuing operations before income taxes |
$ 11,829 |
$ 14,103 | |||
Depreciation & amortization |
1,400 |
1,454 | |||
Regional & unallocated costs |
1,413 |
1,773 | |||
Net financial income |
(1,604) |
(1,819) | |||
Funeral Home EBITDA |
$ 13,038 |
$ 15,511 | |||
Funeral Home Revenue |
$ 37,162 |
$ 38,828 | |||
Funeral Home EBITDA Margin |
35.1% |
39.9% | |||
Cemetery | |||||
Three months ended March 31, | |||||
2011 |
2012 | ||||
Income from continuing operations before income taxes |
$ 3,220 |
$ 2,826 | |||
Depreciation & amortization |
744 |
721 | |||
Regional & unallocated costs |
667 |
559 | |||
Net financial income |
(2,005) |
(1,884) | |||
Cemetery EBITDA |
$ 2,626 |
$ 2,222 | |||
Cemetery Revenue |
$ 9,556 |
$ 9,404 | |||
Cemetery EBITDA Margin |
27.5% |
23.6% | |||
Reconciliation of cash provided by continuing operating activities to Free Cash Flow from continuing operations (in 000's):
Three months ended March 31, | |||
2011 |
2012 | ||
Cash provided by continuing operating activities |
$ 3,420 |
$ 3,523 | |
Less maintenance capital expenditures |
(1,335) |
(919) | |
Free |
$ 2,085 |
$ 2,604 |
Reconciliation of Non-GAAP Financial Measures (unaudited), Continued:
Reconciliation of Consolidated EBITDA from continuing operations to Free Cash Flow from continuing operations for the estimated rolling four quarters ending
Rolling Four Quarter | ||
Outlook | ||
| ||
Consolidated EBITDA from continuing operations |
$ 50,500 | |
Interest paid |
(17,800) | |
Cash Income taxes |
(5,300) | |
Maintenance capital expenditures |
(6,400) | |
Free |
$ 21,000 |
SOURCE
News Provided by Acquire Media