Carriage Services Announces 2011 First Quarter Results
FIRST QUARTER FINANCIAL RESULTS
- Total Revenue of
$50.9 million , an increase of 8.6% compared to$46.8 million ; - Adjusted Consolidated EBITDA of
$13.2 million , an increase of 12.1% compared to$11.8 million ; - Net Income of
$3.3 million , an increase of 18.5% compared to$2.8 million ; - Diluted EPS of
$0.18 per share, and, after adjusting for special charges, Adjusted Diluted EPS of$0.19 , an increase of 18.8% compared to$0.16 per diluted share; - Free Cash Flow of
$2.3 million , an increase of 64.3% compared to Free Cash Flow of$1.4 million .
"After two straight record performance years in 2009 and 2010, we have set our operational, financial and growth goals high for 2011, consistent with my challenge to our entire organization to make 2011, Carriage's 20th year anniversary, a breakout performance year. With a strong first quarter and two recent quality acquisitions, we are modestly raising our Four Quarter Revenue Outlook to
"Reflecting the progress we have made as a public company over the last several years and the confidence we feel about the future, we are initiating a
"Our acquisition pipeline remains active, enabling us to be highly selective and to allocate capital where we can achieve organic growth and superior returns over the long-term. With strong and growing Free Cash Flow, no long-term debt maturities until 2015, and no borrowings under our bank revolving credit, we have ample balance sheet strength and financial flexibility to capitalize on what appears to be an acceleration of consolidation in our industry compared to the last twelve years," concluded Mr. Payne.
FINANCIAL REPORTING UPDATE
We continue to increase the transparency of our operational and financial performance. Beginning with the first quarter of 2011, Carriage is reporting Financial Revenue, Financial EBITDA and Financial EBITDA Margin as one of our three reporting profit centers within our trend reports, including retroactively in our rolling Five Year Annual and
TREND REPORTING
Management monitors consolidated same store and acquisition field operating and financial results both on a most recent rolling five year and five quarters basis ("Trend Reports") to reflect long-term and short term trends and seasonality. "Acquisition" is defined as businesses acquired since
The Company categorizes its general and administrative expenses into three categories of overhead: (1) variable overhead, (2) regional fixed overhead and (3) corporate fixed overhead. Variable overhead consists of costs and expenses such as incentive compensation and legal expenses unrelated to day to day operations. Regional fixed overhead and corporate fixed overhead represent the costs and expenses of our regional operations organization and the home office. Each of the corporate and field operational leaders is the "owner" of his/her "fixed" overhead costs, which are primarily related to headcount, salary level and benefits, as well as department specific "variable" costs, all of which are reviewed monthly.
Trend reporting allows management to focus on the key operational and financial drivers relevant to the longer term performance and valuation of the Company's portfolio of death care businesses. Please visit the Investor Relations homepage of
UNAUDITED INCOME STATEMENT FROM CONTINUING OPERATIONS | |||
For the Three Month Periods Ended March 31, 2010 and March 31, 2011 | |||
($000's) | |||
Quarter 1 | Quarter 1 | ||
2010 | 2011 | ||
CONTINUING OPERATIONS | |||
Same Store Contracts | |||
Atneed Contracts | 4,260 | 4,247 | |
Preneed Contracts | 1,038 | 1,145 | |
Total Same Store Funeral Contracts | 5,298 | 5,392 | |
Acquisition Contracts | |||
Atneed Contracts | 952 | 1,631 | |
Preneed Contracts | 281 | 428 | |
Total Acquisition Funeral Contracts | 1,233 | 2,059 | |
Total Funeral Contracts | 6,531 | 7,451 | |
Funeral Operating Revenue | |||
Same Store Revenue | $ 28,682 | $ 29,320 | |
Acquisition Revenue | 5,138 | 7,842 | |
Total Funeral Operating Revenue | $ 33,820 | $ 37,162 | |
Cemetery Operating Revenue | |||
Same Store Revenue | $ 7,756 | $ 8,064 | |
Acquisition Revenue | 1,540 | 1,672 | |
Total Cemetery Operating Revenue | $ 9,296 | $ 9,736 | |
Financial Field Revenue | |||
Preneed Funeral Commission Income | $ 688 | $ 473 | |
Preneed Funeral Trust Earnings | 1,582 | 1,473 | |
Cemetery Trust Earnings | 1,037 | 1,661 | |
Preneed Cemetery Finance Charges | 424 | 353 | |
Total Financial Field Revenue | $ 3,731 | $ 3,960 | |
Total Revenue | $ 46,847 | $ 50,858 | |
29,268 | 31,240 | ||
Field EBITDA | |||
Same Store Funeral Field EBITDA | $ 10,360 | $ 10,777 | |
Same Store Funeral Field EBITDA Margin | 36.1% | 36.8% | |
Acquired Funeral Field EBITDA | 1,471 | 2,261 | |
Acquired Funeral Field EBITDA Margin | 28.6% | 28.8% | |
Total Funeral Field EBITDA | $ 11,831 | $ 13,038 | |
Total Funeral Field EBITDA Margin | 35.0% | 35.1% | |
Same Store Cemetery Field EBITDA | $ 1,552 | $ 2,074 | |
Same Store Cemetery Field EBITDA Margin | 20.0% | 25.7% | |
Acquired Cemetery Field EBITDA | 465 | 546 | |
Acquired Cemetery Field EBITDA Margin | 30.2% | 32.7% | |
Total Cemetery Field EBITDA | $ 2,017 | $ 2,620 | |
Total Cemetery Field EBITDA Margin | 21.7% | 26.9% | |
Funeral Financial Field EBITDA | $ 1,924 | $ 1,603 | |
Cemetery Financial Field EBITDA | 1,461 | 2,014 | |
Total Financial Field EBITDA | $ 3,385 | $ 3,617 | |
Total Financial Field EBITDA Margin | 90.7% | 91.3% | |
Total Field EBITDA | $ 17,233 | $ 19,275 | |
Total Field EBITDA Margin | 36.8% | 37.9% | |
Overhead | |||
Total Variable Overhead | $ 984 | $ 1,201 | |
Total Regional Fixed Overhead | 777 | 906 | |
Total Corporate Fixed Overhead | 3,669 | 3,942 | |
Total Overhead | $ 5,430 | $ 6,049 | |
11.6% | 11.9% | ||
Adjusted Consolidated EBITDA | $ 11,803 | $ 13,226 | |
Adjusted Consolidated EBITDA Margin | 25.2% | 26.0% | |
Special Charges | |||
Securities Transactions Expenses | - | 138 | |
Termination Expenses | - | 117 | |
Other Expenses | - | 80 | |
Sum of Special Charges | - | 335 | |
Consolidated EBITDA | $ 11,803 | $ 12,891 | |
Consolidated EBITDA Margin | 25.2% | 25.3% | |
Property Depreciation & Amortization | $ 2,469 | $ 2,398 | |
Non Cash Stock Compensation | 336 | 445 | |
Interest Expense | 4,554 | 4,554 | |
Other (Income) | (218) | (29) | |
Pretax Income | $ 4,662 | $ 5,523 | |
Income tax | 1,888 | 2,237 | |
Net income | $ 2,774 | $ 3,286 | |
5.9% | 6.5% | ||
Adjusted Diluted EPS from Continuing Operations | $ 0.16 | $ 0.19 | |
Diluted EPS from Continuing Operations | $ 0.16 | $ 0.18 | |
Diluted Shares Outstanding | 17,600 | 18,268 | |
FUNERAL OPERATIONS
Total Funeral Operating Revenue for the first quarter increased 9.9% to
Funeral Operating Revenue from the Acquired Portfolio for the first quarter increased
CEMETERY OPERATIONS
Total Cemetery Operating Revenue for the first quarter increased
FINANCIAL OPERATIONS
Total Financial Revenue includes preneed funeral insurance commission income, earnings from three types of trust funds and preneed insurance policies, and finance charges on our preneed cemetery receivables portfolio. During the first quarter Total Financial Revenue increased by approximately
ACQUISITIONS
We acquired
TRUST FUND PERFORMANCE
We have previously reported on the significant increase in the market value and income in our three types of trust funds that was a result of a highly successful repositioning strategy coordinated with our investment advisor during the 2008/2009 financial and market crisis. After realizing approximately
($ in 000's) | ||||||
Discretionary Accounts | ||||||
CSV Trust Funds Market Value, Income, Yield and Gain (Loss) | ||||||
Date | Market Value | Est. Annual Income* | Yield on Cost | Unrealized Gain / (Loss) | ||
12/31/09 | $155,053 | $7,170 | 7.65% | $34,965 | ||
12/31/10 | $182,970 | $8,420 | 6.10% | $26,965 | ||
3/31/11 | $189,333 | $7,843 | 5.15% | $27,569 | ||
($ in 000's) | |||||
Total Trust Funds | |||||
CSV Trust Funds Market Value, Income, Yield and Gain (Loss) | |||||
Date | Market Value | Est. Annual Income* | Yield on Cost | Unrealized Gain / (Loss) | |
12/31/09 | $198,113 | $8,221 | 5.04% | $35,034 | |
12/31/10 | $233,371 | $9,749 | 4.74% | $27,698 | |
3/31/11 | $239,319 | $9,000 | 4.25% | $27,644 | |
Investment Performance | |||||||||
Investment Performance | Index Performance(1) | ||||||||
Timeframe | Discretionary | Total Trust | DJIA | S&P 500 | NASDAQ | 50/50 index Benchmark | |||
5 years ended 12/31/10 | 64.7% | 60.7% | 24.4% | 25.8% | 39.6% | 12.4% | |||
3 years ended 12/31/10 | 47.7% | 44.6% | 1.7% | 4.5% | 20.3% | 11.3% | |||
1 year ended 12/31/10 | 21.2% | 18.4% | 16.7% | 15.1% | 16.9% | 10.8% | |||
3 months ended 3/31/11 | 5.2% | 4.4% | 6.4% | 5.9% | 4.8% | 3.2% | |||
(1) Investment performance includes realized income and unrealized appreciation. | |||||||||
CSV Trust Funds: Portfolio Profile | |||||||||||
3/31/2011 | 3/31/2011 | ||||||||||
Discretionary Trust Funds | Total Trust Funds | ||||||||||
Asset Class | MV | % | MV | % | |||||||
Equities | $ 95,016 | 50% | $109,019 | 46% | |||||||
Fixed Income | 89,280 | 47% | 111,224 | 46% | |||||||
Cash | 5,037 | 3% | 19,076 | 8% | |||||||
Total Portfolios | $189,333 | 100% | $239,319 | 100% | |||||||
OVERHEAD
Total Overhead increased
FREE CASH FLOW
Carriage produced Free Cash Flow of
2010 | 2011 | |||
Cash flow provided by operations | $ 2.9 | $ 3.6 | ||
Cash used for maintenance capital expenditures | (1.5) | (1.3) | ||
Free Cash Flow | $ 1.4 | $ 2.3 | ||
Cash at beginning of year | 3.6 | 1.3 | ||
Payments against bank credit facility | - | (0.6) | ||
Cash used for growth capital expenditures — funeral homes | - | (0.1) | ||
Cash used for growth capital expenditures — cemeteries | (0.4) | (0.5) | ||
Other investing and financing activities, net | - | (0.1) | ||
Cash at March 31st | $ 4.6 | $ 2.3 | ||
At
FOUR QUARTER OUTLOOK
The Four Quarter Outlook ranges for the rolling four quarter period ending
We have revised upward our Rolling Four Quarter Outlook primarily because of the acquisitions that closed during 2010 and year to date 2011. Though we expect to acquire additional businesses during the next twelve months, we have not forecast any acquisitions in the Four Quarter Outlook ending
ROLLING FOUR QUARTER OUTLOOK — Period Ending March 31, 2012 (amounts in millions, except per share amounts) | ||
Range | ||
Revenues | $198 - $203 | |
Field EBITDA | $69.3 - $71.0 | |
Field EBITDA Margin | 35% | |
Total Overhead | $23.3 - $23.8 | |
Consolidated EBITDA | $46 — $47.2 | |
Consolidated EBITDA Margin | 23.2% | |
Interest | $18.5 | |
Depreciation, Amortization and Stock Compensation | $11.5 | |
Income Taxes | $6.4 — $6.9 | |
Net Income | $9.6 — $10.3 | |
Diluted Earnings Per Share | $0.52 — $0.56 | |
Free Cash Flow | $19.0 — $21.0 | |
Revenue and earnings for the four quarter period ending
- Increase in same store Funeral Revenue averages and same store Funeral Field EBITDA Margins;
- Increase in acquired Funeral Revenue and acquired Funeral Field EBITDA from the 2010 and 2011 acquisitions;
- Increase in Financial Revenue from three categories of trust funds.
Long-Term Outlook — Through 2015 (Base Year 2010) | |
Revenue growth of 6-7% annually, including acquisitions Consolidated EBITDA growth of 8-10% annually, including acquisitions Consolidated EBITDA Margin range of 24-26% EPS growth of 14-16% annually, including acquisitions | |
CONFERENCE CALL
USE OF NON-GAAP FINANCIAL MEASURES
This press release uses the following Non-GAAP financial measures "free cash flow" and "EBITDA". Both free cash flow and 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 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. The Company also uses Field EBITDA and Field EBITDA Margin to monitor and compare the financial performance of the individual funeral and cemetery field businesses. 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 EBITDA may not be comparable to similarly titled measures other companies report. 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. Reconciliations of the Non-GAAP financial measures to GAAP measures are provided at the back of the press release.
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 and Form 10-K for the year ended
— Financial Statements and Tables to Follow —
CARRIAGE SERVICES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) (in thousands, expect share data) | |||||
December 31, | March 31, | ||||
ASSETS | 2010 | 2011 | |||
Current assets: | |||||
Cash and cash equivalents | $ 1,279 | $ 2,265 | |||
Accounts receivable, net of allowance for bad debts | 15,587 | 15,213 | |||
Inventories and other current assets | 10,828 | 10,850 | |||
Total current assets | 27,694 | 28,328 | |||
Preneed cemetery and funeral trust investments | 206,569 | 212,394 | |||
Preneed receivables, net of allowance for bad debts | 24,099 | 23,639 | |||
Receivables from preneed funeral trusts | 21,866 | 21,815 | |||
Property, plant and equipment, net of accumulated depreciation | 128,472 | 127,998 | |||
Cemetery property | 71,128 | 71,139 | |||
Goodwill | 183,324 | 183,322 | |||
Deferred charges and other non-current assets | 7,860 | 8,353 | |||
Total assets | $ 671,012 | $ 676,988 | |||
LIABILITIES AND STOCKHOLDER'S EQUITY | |||||
Current liabilities: | |||||
Current portion of long-term debt and obligations under capital leases | $ 563 | $ 574 | |||
Accounts payable and accrued liabilities | 24,596 | 21,809 | |||
Total current liabilities | 25,159 | 22,383 | |||
Senior long-term debt, net of current portion | 132,416 | 131,668 | |||
Convertible junior subordinated debenture due in 2029 to an affiliated trust | 92,858 | 92,830 | |||
Obligations under capital leases, net of current portion | 4,289 | 4,253 | |||
Deferred preneed cemetery and funeral revenue | 89,642 | 90,046 | |||
Deferred preneed cemetery and funeral receipts held in trust | 160,834 | 165,936 | |||
Care trusts' corpus | 45,941 | 46,364 | |||
Total liabilities | 551,139 | 553,480 | |||
Redeemable Preferred Stock | 200 | 200 | |||
Stockholders' equity | |||||
Common Stock | 213 | 215 | |||
Additional paid-in capital | 200,987 | 201,357 | |||
Accumulated deficit | (70,951) | (67,669) | |||
Treasury stock | (10,576) | (10,595) | |||
Total stockholders' equity | 119,673 | 123,308 | |||
Total liabilities and stockholders' equity | $ 671,012 | $ 676,988 | |||
CARRIAGE SERVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands, except per share data) | ||||
For the three months ended March 31, | ||||
2010 | 2011 | |||
Revenues | $ 46,847 | $ 50,858 | ||
Field costs and expenses | 33,330 | 35,736 | ||
Gross profit | 13,517 | 15,122 | ||
General and administrative expenses | 4,519 | 5,074 | ||
Operating income | 8,998 | 10,048 | ||
Interest expense | (4,554) | (4,554) | ||
Other income | 218 | 29 | ||
Income before income taxes | 4,662 | 5,523 | ||
Provision for income taxes | (1,888) | (2,237) | ||
Net income | 2,774 | 3,286 | ||
Preferred stock dividend | 4 | 4 | ||
Net income available to common stockholders | $ 2,770 | $ 3,282 | ||
Basic earnings per common share: | $ 0.16 | $ 0.18 | ||
Diluted earnings per common share: | $ 0.16 | $ 0.18 | ||
Weighted average number of common and common equivalent shares outstanding: | ||||
Basic | 17,379 | 18,230 | ||
Diluted | 17,600 | 18,268 | ||
CARRIAGE SERVICES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands, except per share data) | ||||
For the three months ended March 31, | ||||
2010 | 2011 | |||
Cash flows from operating activities: | ||||
Net income | $ 2,774 | $ 3,286 | ||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||
Depreciation and amortization | 2,649 | 2,581 | ||
Provision for losses on accounts receivable | 1,109 | 647 | ||
Stock-based compensation expense | 544 | 445 | ||
Deferred income taxes | 1,676 | 2,232 | ||
Other | (217) | (27) | ||
Changes in operating assets and liabilities that provided (required) cash: | ||||
Accounts and preneed receivables | (908) | 349 | ||
Inventories and other current assets | (215) | (19) | ||
Deferred charges and other | - | (38) | ||
Preneed funeral and cemetery trust investments | (1,161) | 1,904 | ||
Accounts payable and accrued liabilities | (5,032) | (5,886) | ||
Deferred preneed funeral and cemetery revenue | 541 | 296 | ||
Deferred preneed funeral and cemetery receipts held in trust | 1,164 | (2,186) | ||
Net cash provided by operating activities | 2,924 | 3,584 | ||
Cash flows from investing activities: | ||||
Growth capital expenditures | (364) | (572) | ||
Maintenance capital expenditures | (1,538) | (1,335) | ||
Net cash used in investing activities | (1,902) | (1,907) | ||
Cash flows from financing activities: | ||||
Net payments under credit facility | - | (600) | ||
Payments on senior long-term debt and obligations under capital leases | (110) | (173) | ||
Purchase of convertible junior subordinated debenture | - | (19) | ||
Proceeds from the exercise of stock options and employee stock purchase plan | 87 | 105 | ||
Dividend on redeemable preferred stock | (4) | (4) | ||
Other financing expenses | (43) | - | ||
Net cash used in financing activities | (70) | (691) | ||
Net decrease in cash and cash equivalents | 952 | 986 | ||
Cash and cash equivalents at beginning of period | 3,616 | 1,279 | ||
Cash and cash equivalents at end of period | $ 4,568 | $ 2,265 | ||
CARRIAGE SERVICES, INC. Selected Financial Data | |||||
(unaudited) | |||||
December 31, | March 31, | ||||
Selected Balance Sheet Data: | 2010 | 2011 | |||
Cash and short-term investments | $ 1,279 | $ 2,265 | |||
Total Senior Debt (a) | $ 137,268 | $ 136,495 | |||
Days sales in funeral accounts receivable | 20.3 | 19.7 | |||
Senior Debt to total capitalization | 39.2% | 38.7% | |||
Senior Debt to EBITDA (rolling twelve months) | 3.3x | 3.2x | |||
(a) Senior debt does not include the convertible junior subordinated debentures. | |||||
Reconciliation of Non-GAAP Financial Measures (unaudited):
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 EBITDA for the three months ended
Three months ended March 31, | ||||
2010 | 2011 | |||
Net income | $ 2,774 | $ 3,286 | ||
Provision for income taxes | 1,888 | 2,237 | ||
Pre-tax earnings | 4,662 | 5,523 | ||
Interest expense, including loan cost amortization | 4,554 | 4,554 | ||
Other income | (218) | (29) | ||
Noncash stock compensation | 336 | 445 | ||
Depreciation & amortization | 2,469 | 2,398 | ||
Special charges | - | 335 | ||
Adjusted EBITDA | $ 11,803 | $ 13,226 | ||
Revenue | $ 46,847 | $ 50,858 | ||
Adjusted EBITDA margin | 25.2% | 26.0% | ||
Reconciliation of Diluted EPS to Adjusted Diluted EPS for the three months ended
Three months ended March 31, | ||||
2010 | 2011 | |||
Diluted EPS | $ 0.16 | $ 0.18 | ||
Effect of special charges | - | $ 0.01 | ||
Adjusted Diluted EPS | $ 0.16 | $ 0.19 | ||
Reconciliation of Non-GAAP Financial Measures (unaudited), Continued:
Rolling Four Quarter | |||
Outlook | |||
March 31, 2012 E | |||
Net income | $ 9,900 | ||
Provision for income taxes | 6,600 | ||
Pre-tax earnings | 16,500 | ||
Interest expense, including loan cost amortization | 18,500 | ||
Depreciation & amortization, including stock compensation | 11,500 | ||
EBITDA | $ 46,500 | ||
Revenue | $ 200,500 | ||
EBITDA margin | 23.2% | ||
Reconciliation of cash provided by operating activities to free cash flow (in 000's):
Three months ended March 31, | ||||
2010 | 2011 | |||
Cash provided by operating activities | $ 2,924 | $ 3,584 | ||
Less maintenance capital expenditures | (1,538) | (1,335) | ||
Free cash flow | $ 1,386 | $ 2,249 | ||
SOURCE
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