Carriage Services, Inc.
May 5, 2015

Carriage Services Announces Record Results For First Quarter 2015

HOUSTON, May 5, 2015 /PRNewswire/ -- Carriage Services, Inc. (NYSE: CSV) today announced results for the quarter ending March 31, 2015.

Melvin C. Payne, Chief Executive Officer, stated, "Our 2015 First Quarter Performance set numerous earning power milestone records with Adjusted Net Income of $8.0 million equal to Adjusted Diluted EPS of $0.42 and Adjusted Net Income Margin of 12.6% on record Revenue of $63.3 million.  The four simultaneous leveraging dynamics (operating, overhead, capital structure and consolidation platform) of Carriage's consolidation and operating platform for funeral homes and cemeteries contributed to the leveraging of a 13.7% Total Revenue increase into much larger increases of 20.7% in Total Field EBITDA, 30.2% in Adjusted Consolidated EBITDA, 35.5% in Adjusted Diluted EPS, and 368.9% in Adjusted Free Cash Flow.

The cash earning power of Carriage, as defined by Adjusted Consolidated EBITDA Margin, reached a record 31.1% of Total Revenue in the first quarter, an increase of 390 basis points from 27.2% in the first quarter of 2014.  This cash earning power milestone was primarily driven by the $4.7 million increase in Total Field EBITDA, an increase of 20.7% of which about 50% was contributed by our same store funeral and cemetery portfolio (owned prior to January 1, 2011) and 50% from our acquisition funeral and cemetery portfolio (owned since January 1, 2011).  Moreover, we were able to produce a record Total Field EBITDA Margin of 43.5% of Total Revenue while substantially reducing Total Overhead by $1.6 million (15.8%), which combined with lower interest and financial transaction fees from previous capital structure improvements, resulted in record Free Cash Flow of $10.8 million.

Shown below are the highlights of our first quarter performance (in millions):

Three Months ended March 31, 2015

  • Total Revenue of $63.3 million, an increase of 13.7%;
  • Adjusted Consolidated EBITDA of $19.7 million, an increase of 30.2%;
  • Adjusted Consolidated EBITDA Margin up 390 basis points to 31.1%;
  • Adjusted Diluted Earnings Per Share of $0.42, an increase of 35.5%;
  • Adjusted Net Profit Margin up 230 basis points to 12.6%; and  
  • Adjusted Free Cash Flow of $10.8 million, an increase of 368.9%.

We recently published and made available to all shareholders through our website a Carriage Investor Reference Book which included a personal introduction that offered my executive summary editorial comments about the enclosed materials because I believed that each had substantive investment merit that a longer term shareholder would appreciate learning about.  From time to time I will use our public press releases to supplement the contents of our Carriage Investor Reference Book, including today on the subject of Capital Allocation.

As CEO of  Carriage over the last twenty-four years, I have learned that our rapidly increasing Free Cash Flow represents precious internally generated equity capital that should be allocated among various options (dividends, share repurchases, debt reduction, acquisitions and internal growth projects) to create maximum shareholder value "per share" over long periods of time.  To achieve this goal, we must be judicious in the management of our dilutive shares outstanding, which at the end of 2014 were 1.2 million less (6.4%) than at the end of 2007 while Total Revenue has increased by 50%, primarily through acquisitions funded mostly from Free Cash Flow.  Moreover, over the last seven years we have substantially improved the credit profile of our company and currently enjoy the lowest cost of capital in our history.

While we will continue to grow selectively by acquisition, we are also capitalizing on a record number of wonderful internal growth opportunities by allocating our capital to build high quality cemetery product at a handful of our largest cemeteries, to construct new "first in class" funeral homes where our brand is dominant and the market is growing, and to acquire currently leased property that is immediately accretive and provides the flexibility to invest in expanding our facilities to increase market share.  Our revised acquisition methodology was specifically designed to identify the best remaining businesses in the best strategic markets, creating future internal opportunities to deploy additional capital for growth at high rates of long-term returns on invested capital.

While we have had a strong start to 2015 due to broad based High Performance by our Managing Partners and their employee teams, coupled with a higher relative death rate compared to 2014, we remain committed to getting better over time in all areas of our Company. Our two major areas of focus for 2015 are cremation revenue averages and cemetery preneed property sales, both of which have improved materially thus far. This year marks the fourth year in our Five Year Good To Great Journey with the annual theme of:

"Carriage Services 2015:  High Performance through Passion and Partnership!"

Our high performance in the first quarter was consistent with our 2015 theme, but we remain focused on sustaining a high performance for the remainder of the year and thereafter," concluded Mr. Payne.

FIELD OPERATIONS

Three Months Ended March 31, 2015 compared to Three Months Ended March 31, 2014

  • Total Field Revenue increased 13.7% to $63.3 million;
  • Total Field EBITDA increased 20.7% to $27.5 million;
  • Total Field EBITDA Margin increased 250 basis points to 43.5%;

  • Total Funeral Operating Revenue increased 14.7% to $47.6 million;
  • Same Store Funeral Revenue increased 6.4% with same store volume increasing 4.6%;
  • Acquisition Funeral Revenue increased 50.2% with acquisition volume increasing 49.8%;
  • Total Funeral Field EBITDA increased 22.7% to $19.5 million;
  • Total Funeral Field EBITDA Margin increased 270 basis points to 40.9%;

  • Total Cemetery Operating Revenue increased 13.5% to $11.1 million;
  • Cemetery pre-need property sale contracts increased 30.2% to 2,140;
  • Preneed property revenue recognized increased 27.7% and At-need revenue increased 6.5%;
  • Total Cemetery Field EBITDA increased 36.0% to $3.9 million;
  • Total Cemetery Field EBITDA Margin increased 570 basis points to 34.7%;

  • Total Financial Revenue increased 4.0% to $4.6 million;
  • Funeral Financial Revenue increased 2.9% to $2.6 million;
  • Cemetery Financial Revenue increased 5.5% to $2.0 million;
  • Total Financial EBITDA increased 2.7% to $4.2 million;
  • Total Financial EBITDA Margin decreased 120 basis points to 92.5%.

FREE CASH FLOW  

We produced Adjusted Free Cash Flow from operations for the three months ended March 31, 2015 of $10.8 million compared to Free Cash Flow from operations of $2.3 million for the corresponding period in 2014. The sources and uses of cash for the three months ended March 31, 2014 and 2015 consisted of the following (in millions):


Three Months Ended March 31,


2014


2015

Cash flow provided by (used in) operating activities

$

(1.6)



$

12.6


Adjustment for tax benefit of Good to Great stock awards

4.8




Cash used for maintenance capital expenditures

(0.9)



(1.8)


Adjusted Free Cash Flow

$

2.3



$

10.8


Cash at beginning of period

1.4



0.4


Acquisitions



(4.3)


Proceeds from the sale of businesses and other assets

0.2




Net payments on our revolving credit facility, term loan and long-term debt obligations

(40.1)



(2.2)


Proceeds from issuance of convertible subordinated notes

143.7




Payment of issuance costs related to the convertible subordinated notes

(4.4)




Redemption of convertible junior subordinated debentures

(61.9)




Payments for performance awards

(16.2)




Excess tax benefit of equity compensation

0.8



0.4


Growth capital expenditures

(4.1)



(4.6)


Dividends on common stock

(0.4)



(0.5)


Other investing and financing activities, net

0.6



0.3


Cash at March 31st

$

21.9



$

0.3


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, plus likely acquisitions for the Rolling Four Quarter Outlook period ending March 31, 2016. This Outlook is not intended to be management estimates or forecasts of our future performance, as we believe such precise rolling 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.

ROLLING FOUR QUARTER OUTLOOK - Period Ending March 31, 2016




Range
(in millions, except per share amounts)

Revenues


$244 - $248

Adjusted Consolidated EBITDA


$70 - $72

Adjusted Net Income


$28 - $30

Adjusted Diluted Earnings Per Share(1)


$1.55 - $1.59

Factors affecting our analysis include, among others, number, size and timing of closing of acquisitions, 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, Strategic Acquisition Model, Withdrawable Trust Income and changes in Federal Reserve monetary policy. Revenues, Adjusted Consolidated EBITDA, Adjusted Net Income and Adjusted Diluted Earnings Per Share for the four quarter period ending March 31, 2016 are expected to improve relative to the trailing four quarter period ending March 31, 2015 for the following reasons:

  • Increases in Acquired Funeral Revenue and Acquired Funeral Field EBITDA;
  • Increases in Acquired Cemetery Revenue and Acquired Cemetery Field EBITDA;
  • Modest increases in Same Store Funeral Revenue and Same Store Funeral Field EBITDA;
  • Increases in Same Store Cemetery Revenue and Same Store Cemetery Field EBITDA; and
  • Increases in Financial Revenue and Financial EBITDA from trust funds.

(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 a share price increase and EPS dilution calculations related to our convertible notes.

TRUST FUND PERFORMANCE

For the three months ended March 31, 2015, Carriage's discretionary trust funds gained 2.7% compared to our 70/30 index benchmark of 2.1%.  The current yield on Carriage's discretionary fixed income portfolio, which comprises 73% of discretionary trust assets, is 7.0% and the estimated annual income for the discretionary portfolio is approximately $10.7 million.

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)









3 months ended 3/31/15


2.7%

2.5%


1.0%

2.5%

2.1%

1 year ended 12/31/14


8.3%

7.9%


13.7%

2.5%

5.8%

2 years ended 12/31/14


23.8%

22.7%


50.4%

10.1%

22.2%

3 years ended 12/31/14


48.9%

43.7%


74.5%

27.5%

41.6%

4 years ended 12/31/14


44.6%

41.0%


78.1%

33.8%

47.1%

5 years ended 12/31/14


74.5%

66.6%


105.0%

54.1%

69.3%



(1)

Investment performance includes realized income and unrealized appreciation (depreciation).

(2)

The 70/30 Benchmark is 70% weighted to the High Yield Index and 30% weighted to the S&P 500 Stock Index.

 

Asset Allocation as of March 31, 2015
(in thousands)




Discretionary
Trust Funds


Total
Trust Funds

Asset Class



MV


%


MV


%

Cash



$

2,501

1

%


$

17,778

7

%

Equities



46,598

25

%


64,611

27

%

Fixed Income



135,845

72

%


151,356

64

%

Other/Insurance



3,365

2

%


3,599

2

%

Total Portfolios



$

188,309

100

%


$

237,344

100

%

 

CONFERENCE CALL AND INVESTOR RELATIONS CONTACT

Carriage Services has scheduled a conference call for tomorrow, May 6, 2015 at 9:30 a.m. central time. To participate in the call, please dial 866-516-3867 (ID-33629228) and ask for the Carriage Services conference call.  A replay of the conference call will be available through May 10, 2015 and may be accessed by dialing 855-859-2056 (ID-33629228). The conference call will also be available at www.carriageservices.com. For any investor relations questions, please contact Bill Heiligbrodt at 713-332-8553.

 


CARRIAGE SERVICES, INC.

OPERATING AND FINANCIAL TREND REPORT

FROM CONTINUING OPERATIONS (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)






Three Months Ended March 31,


2014

2015

% Change





Same Store Contracts




Atneed Contracts

5,336


5,544


3.9

%

Preneed Contracts

1,313


1,413


7.6

%

Total Same Store Funeral Contracts

6,649


6,957


4.6

%

Acquisition Contracts




Atneed Contracts

1,118


1,643


47.0

%

Preneed Contracts

208


343


64.9

%

Total Acquisition Funeral Contracts

1,326


1,986


49.8

%

Total Funeral Contracts

7,975


8,943


12.1

%





Funeral Operating Revenue




Same Store Revenue

$

33,664


$

35,835


6.4

%

Acquisition Revenue

7,820


11,749


50.2

%

Total Funeral Operating Revenue

$

41,484


$

47,584


14.7

%





Cemetery Operating Revenue




Same Store Revenue

$

9,712


$

10,268


5.7

%

Acquisition Revenue

55


822


1,394.5

%

Total Cemetery Operating Revenue

$

9,767


$

11,090


13.5

%





Financial Revenue




Preneed Funeral Commission Income

$

564


$

355


-37.1

%

Preneed Funeral Trust Earnings

1,916


2,198


14.7

%

Cemetery Trust Earnings

1,584


1,641


3.6

%

Preneed Cemetery Finance Charges

337


385


14.2

%

Total Financial Revenue

$

4,401


$

4,579


4.0

%

Total Revenue

$

55,652


$

63,253


13.7

%





Field EBITDA




Same Store Funeral Field EBITDA

$

12,900


$

14,556


12.8

%

Same Store Funeral Field EBITDA Margin

38.3

%

40.6

%

230 bp


Acquisition Funeral Field EBITDA

2,955


4,895


65.7

%

Acquisition Funeral Field EBITDA Margin

37.8

%

41.7

%

390 bp


Total Funeral Field EBITDA

$

15,855


$

19,451


22.7

%

Total Funeral Field EBITDA Margin

38.2

%

40.9

%

270 bp






Same Store Cemetery Field EBITDA

$

2,838


$

3,550


25.1

%

Same Store Cemetery Field EBITDA Margin

29.2

%

34.6

%

540 bp


Acquisition Cemetery Field EBITDA

(8)


300


3,850.0

%

Acquisition Cemetery Field EBITDA Margin

-14.5

%

36.5

%

5,100 bp

Total Cemetery Field EBITDA

$

2,830


$

3,850


36.0

%

Total Cemetery Field EBITDA Margin

29.0

%

34.7

%

570 bp






Funeral Financial EBITDA

$

2,226


$

2,271


2.0

%

Cemetery Financial EBITDA

1,898


1,964


3.5

%

Total Financial EBITDA

$

4,124


$

4,235


2.7

%

Total Financial EBITDA Margin

93.7

%

92.5

%

-120 bp






Total Field EBITDA

$

22,809


$

27,536


20.7

%

Total Field EBITDA Margin

41.0

%

43.5

%

250 bp






 

OPERATING AND FINANCIAL TREND REPORT

FROM CONTINUING OPERATIONS (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)






Three Months Ended March 31,


2014

2015

% Change





Overhead




Total Variable Overhead

$

3,863


$

2,430


-37.1

%

Total Regional Fixed Overhead

786


823


4.7

%

Total Corporate Fixed Overhead

5,574


5,353


-4.0

%

Total Overhead

$

10,223


$

8,606


-15.8

%

Overhead as a percent of sales

18.4

%

13.6

%

-480 bp





Consolidated EBITDA

$

12,586


$

18,930


50.4

%

Consolidated EBITDA Margin

22.6

%

29.9

%

730 bp





Other Expenses and Interest




Property Depreciation & Amortization

$

2,757


$

3,322


20.5

%

Non Cash Stock Compensation

729


1,089


49.4

%

Interest Expense

2,844


2,550


-10.3

%

Accretion of Discount on Convertible Subordinated Notes

171


827


383.6

%

Loss on Redemption of Convertible Junior Subordinated Debentures

3,779



-100.0

%

Other, Net

(368)


119


-132.3

%

Pretax Income

$

2,674


$

11,023


312.2

%

Net Tax Provision

1,043


4,605


341.5

%

GAAP Net Income

$

1,631


$

6,418


293.5

%





Special Items, Net of tax except for **




Withdrawable Trust Income

$

149


$



Acquisition and Divestiture Expenses

491


335



Severance Costs

209


84



Consulting Fees

159


76



Other Incentive Compensation

660




Accretion of Discount on Convertible Subordinated Notes **

171


827



Loss on Redemption of Convertible Junior Subordinated Debentures

2,493




Gain on Asset Purchase

(746)




Other Special Items

503


98



Tax Adjustment from Prior Period **


141



Sum of Special Items, Net of tax

$

4,089


$

1,561


-61.8

%





Adjusted Net Income

$

5,720


$

7,979


39.5

%

Adjusted Net Profit Margin

10.3

%

12.6

%

230 bp






Adjusted Basic Earnings Per Share

$

0.31


$

0.43


38.7

%

Adjusted Diluted Earnings Per Share

$

0.31


$

0.42


35.5

%





GAAP Basic Earnings Per Share

$

0.09


$

0.35


288.9

%

GAAP Diluted Earnings Per Share

$

0.09


$

0.34


277.8

%





Effective Tax Rate

39.0

%

41.8

%


Reconciliation to Adjusted Consolidated EBITDA




Consolidated EBITDA

$

12,586


$

18,930


50.4

%

Withdrawable Trust Income

225




Acquisition and Divestiture Expenses

744


508



Severance Costs

317


127



Consulting Fees

241


115



Other Incentive Compensation

1,000




Adjusted Consolidated EBITDA

$

15,113


$

19,680


30.2

%

Adjusted Consolidated EBITDA Margin

27.2

%

31.1

%

390 bp


 

CARRIAGE SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)





(unaudited)


December 31, 2014


March 31, 2015

ASSETS




Current assets:




Cash and cash equivalents

$

413



$

317


Accounts receivable, net

19,264



18,637


Inventories

5,294



5,432


Prepaid expenses

4,590



4,556


Other current assets

7,144



2,369


Total current assets

36,705



31,311


Preneed cemetery trust investments

71,972



72,534


Preneed funeral trust investments

97,607



97,240


Preneed receivables, net

26,284



26,431


Receivables from preneed trusts

12,809



12,795


Property, plant and equipment, net

186,211



193,984


Cemetery property

75,564



75,264


Goodwill

257,442



261,291


Deferred charges and other non-current assets

14,264



15,136


Cemetery perpetual care trust investments

48,670



49,249


Total assets

$

827,528



$

835,235






LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Current portion of long-term debt and capital lease obligations

$

9,838



$

10,624


Accounts payable

6,472



6,463


Other liabilities

1,437



788


Accrued liabilities

15,203



12,211


Total current liabilities

32,950



30,086


Long-term debt, net of current portion

111,887



112,972


Revolving credit facility

40,500



41,000


Convertible subordinated notes due 2021

114,542



115,369


Obligations under capital leases, net of current portion

3,098



3,044


Deferred preneed cemetery revenue

56,875



56,871


Deferred preneed funeral revenue

31,265



31,187


Deferred tax liability

36,414



36,487


Other long-term liabilities

2,401



3,086


Deferred preneed cemetery receipts held in trust

71,972



72,534


Deferred preneed funeral receipts held in trust

97,607



97,240


Care trusts' corpus

48,142



49,184


Total liabilities

647,653



649,060


Commitments and contingencies:




Stockholders' equity:




Common stock, $.01 par value; 80,000,000 shares authorized; 22,434,000 shares issued at December 31, 2014 and March 31, 2015

224



224


Additional paid-in capital

212,386



212,268


Accumulated deficit

(17,468)



(11,050)


Treasury stock, at cost; 3,922,000 shares at December 31, 2014 and March 31, 2015

(15,267)



(15,267)


Total stockholders' equity

179,875



186,175


Total liabilities and stockholders' equity

$

827,528



$

835,235


 

CARRIAGE SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)



(unaudited)


For the Three Months Ended March 31,


2014


2015





Revenues

$

55,652



$

63,253


Field costs and expenses

37,637



41,044


Gross profit

18,015



22,209


General and administrative expenses

9,677



7,690


Operating income

8,338



14,519


Interest expense, net

(3,015)



(3,377)


Loss on redemption of convertible junior subordinated notes

(3,779)




Other

1,130



(119)


Income from continuing operations before income taxes

2,674



11,023


Provision for income taxes

(1,043)



(4,605)


Net income from continuing operations

1,631



6,418


Net income from discontinued operations, net of tax

587




Net income available to common stockholders

$

2,218



$

6,418






Basic earnings per common share:




Continuing operations

$

0.09



$

0.35


Discontinued operations

0.03




Basic earnings per common share

$

0.12



$

0.35






Diluted earnings per common share:




Continuing operations

$

0.09



$

0.34


Discontinued operations

0.03




Diluted earnings per common share

$

0.12



$

0.34






Dividends declared per common share

$

0.025



$

0.025






Weighted average number of common and common equivalent shares outstanding:




Basic

17,984



18,208


Diluted

18,143



18,804


 

CARRIAGE SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)



For the Three Months Ended March 31,


2014


2015

Cash flows from operating activities:




Net income

$

2,218



$

6,418


Adjustments to reconcile net income to net cash provided by operating activities:




Gain on sale of businesses and purchase of other assets

(2,039)




Depreciation and amortization

2,764



3,322


Amortization of deferred financing costs

232



226


Accretion of discount on convertible subordinated notes

171



827


Provision for losses on accounts receivable

700



424


Stock-based compensation expense

1,491



1,089


Deferred income tax (benefit) expense

(4,780)



1,559


Loss on redemption of convertible junior subordinated debentures

2,932




Other

(3)




Changes in operating assets and liabilities that provided (required) cash:




Accounts and preneed receivables

(245)



56


Inventories and other current assets

299



3,224


Deferred charges and other

(318)



111


Preneed funeral and cemetery trust investments

(5,258)



(760)


Accounts payable

(2,566)



(9)


Accrued and other liabilities

(2,387)



(5,020)


Deferred preneed funeral and cemetery revenue

(37)



(82)


Deferred preneed funeral and cemetery receipts held in trust

5,208



1,237


Net cash provided by (used in) operating activities

(1,618)



12,622






Cash flows from investing activities:




Acquisitions



(4,250)


Net proceeds from the sale of businesses and other assets

200




Capital expenditures

(5,048)



(6,398)


Net cash used in investing activities

(4,848)



(10,648)






Cash flows from financing activities:




Net (payments) borrowings on the revolving credit facility

(36,900)



500


Net payments on the term loan

(3,000)



(2,344)


Payments on other long-term debt and obligations under capital leases

(185)



(370)


Proceeds from the exercise of stock options and employee stock purchase plan contributions

652



212


Dividends on common stock

(456)



(463)


Payment of loan origination costs related to the credit facility



(13)


Excess tax benefit of equity compensation

5,596



408


Proceeds from the issuance of convertible subordinated notes

143,750




Payment of debt issuance costs related to the convertible subordinated notes

(4,355)




Redemption of convertible junior subordinated debentures

(61,905)




Payments for performance-based stock awards

(16,150)




Net cash provided by (used in) financing activities

27,047



(2,070)






Net increase (decrease) in cash and cash equivalents

20,581



(96)


Cash and cash equivalents at beginning of period

1,377



413


Cash and cash equivalents at end of period

$

21,958



$

317


 

CARRIAGE SERVICES, INC.

CALCULATION OF EARNINGS PER SHARE

(in thousands, except share and per share data)



(unaudited)


For the Three Months Ended March 31,


2014


2015

Numerator for basic and diluted earnings per share:




Numerator from continuing operations




Income from continuing operations

$

1,631



$

6,418


  Less: Earnings allocated to unvested restricted stock

(37)



(100)


  Income attributable to continuing operations

$

1,594



$

6,318






Numerator from discontinued operations




Income from discontinued operations

$

587



$


  Less: Earnings allocated to unvested restricted stock

(13)




  Income attributable to discontinued operations

$

574



$










Denominator




Denominator for basic earnings per common share - weighted average shares outstanding

17,984



18,208


Effect of dilutive securities:




Stock options

159



248


Convertible subordinated notes



348


Denominator for diluted earnings per common share - weighted average shares outstanding

18,143



18,804






Basic earnings per common share:




Continuing operations

$

0.09



$

0.35


Discontinued operations

0.03




Basic earnings per common share

$

0.12



$

0.35






Diluted earnings per common share:




Continuing operations

$

0.09



$

0.34


Discontinued operations

0.03




Diluted earnings per common share

$

0.12



$

0.34


 

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  "Adjusted Net Income", "Adjusted Basic Earnings Per Share", "Adjusted Diluted Earnings Per Share", "Consolidated EBITDA", "Adjusted Consolidated EBITDA", "Adjusted Free Cash Flow", "Funeral, Cemetery and Financial EBITDA", "Total Field EBITDA" and  "Special Items" 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:

  • Adjusted Net Income is defined as net income from continuing operations plus adjustments for special items and other non-recurring expenses or credits. 
  • Consolidated EBITDA is defined as net income from continuing operations 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 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 less depreciation and amortization, regional and unallocated overhead expenses and net financial income.
  • Cemetery Field EBITDA is defined as Cemetery Gross Profit less depreciation and amortization, regional and unallocated overhead expenses and net financial income.
  • Financial EBITDA is defined as Financial Revenue less Financial Expenses.
  • Total Field EBITDA is defined as Gross Profit less depreciation and amortization and regional and unallocated overhead expenses. 
  • Special Items is defined as charges or credits that are deemed as Non-GAAP items such as withdrawable trust income, acquisition and divestiture expenses, severance costs, loss on early retirement of debt and other costs, discrete tax items and other non-recurring amounts. Special items are taxed at the federal statutory rate of 34 percent for the three months ended March 31, 2014 and 2015, except for the accretion of the discount on Convertible Notes as this is a non-tax deductible item and the tax adjustment from prior period.
  • Adjusted 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.

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" and reported on a Non-GAAP proforma basis within Special Items in the accompanying Operating and Financial Trend Report (a 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.

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 Adjusted Net Income for the three months ended March 31, 2014 and 2015 (in thousands):



Three Months Ended March 31,



2014


2015

Net Income from continuing operations

$

1,631



$

6,418


Special items, net of tax except for **




Withdrawable Trust Income

$

149



$


Acquisition and Divestiture Expenses

491



335


Severance Costs

209



84


Consulting Fees

159



76


Other Incentive Compensation

660




Accretion of Discount on Convertible Subordinated Notes **

171



827


Loss on Redemption of Convertible Junior Subordinated Debentures

2,493




Gain on Asset Purchase

(746)




Other Special Items

503



98


Tax Adjustment from Prior Period **



141


   Total Special items affecting net income

$

4,089



$

1,561


Adjusted Net Income

$

5,720



$

7,979


 

Reconciliation of Net Income from continuing operations to Consolidated EBITDA and Adjusted Consolidated EBITDA for the three months ended March 31, 2014 and 2015 (in thousands):



Three Months Ended March 31,



2014


2015

Net income from continuing operations

$

1,631



$

6,418


Net provision for income taxes

1,043



4,605


Pre-tax earnings from continuing operations

$

2,674



$

11,023


Interest expense

2,844



2,550


Accretion of discount on convertible subordinated notes

171



827


Loss on redemption of convertible junior subordinated debentures

3,779




Non-cash stock compensation

729



1,089


Depreciation & amortization

2,757



3,322


Other, net

(368)



119


Consolidated EBITDA

$

12,586



$

18,930


Adjusted For:




Withdrawable Trust Income

$

225



$


Acquisition and Divestiture Expenses

744



508


Severance Costs

317



127


Consulting Fees

241



115


Other Incentive Compensation

1,000




Adjusted Consolidated EBITDA

$

15,113



$

19,680


Revenue

$

55,652



$

63,253






Adjusted Consolidated EBITDA Margin

27.2

%


31.1

%

 

Reconciliation of funeral and cemetery income before income taxes to Field EBITDA for the three months ended March 31, 2014 and 2015 (in thousands):


Funeral Field EBITDA

Three Months Ended March 31,



2014


2015

Gross Profit (GAAP)

$

14,521



$

17,996


Depreciation & amortization

1,614



1,789


Regional & unallocated costs

1,946



1,937


Net financial income

(2,226)



(2,271)


Funeral Field EBITDA

$

15,855



$

19,451




Cemetery Field EBITDA

Three Months Ended March 31,



2014


2015

Gross Profit (GAAP)

$

3,494



$

4,213


Depreciation & amortization

801



1,013


Regional & unallocated costs

433



588


Net financial income

(1,898)



(1,964)


Cemetery Field EBITDA

$

2,830



$

3,850




Total Field EBITDA

Three Months Ended March 31,



2014


2015

Funeral Field EBITDA

$

15,855



$

19,451


Cemetery Field EBITDA

2,830



3,850


Funeral Financial EBITDA

2,226



2,271


Cemetery Financial EBITDA

1,898



1,964


Total Field EBITDA

$

22,809



$

27,536


 

Reconciliation of cash provided by operating activities to Adjusted Free Cash Flow from operations for the three months ended March 31, 2014 and 2015 (in thousands):



Three Months Ended March 31,



2014


2015

Cash flow provided by operations

$

(1,618)



$

12,622


Adjustment for tax benefit from Good to Great stock awards

4,800




Cash used for maintenance capital expenditures

(884)



(1,846)


Adjusted Free Cash Flow

$

2,298



$

10,776



Reconciliation of GAAP basic earnings per share to Adjusted basic earnings per share for the three months ended March 31, 2014 and 2015:



Three Months Ended March 31,



2014


2015

GAAP basic earnings per share from continuing operations

$

0.09



$

0.35


Special items affecting net income

0.22



0.08


Adjusted basic earnings per share

$

0.31



$

0.43



Reconciliation of GAAP diluted earnings per share to Adjusted diluted earnings per share for the three months ended March 31, 2014 and 2015:



Three Months Ended March 31,



2014


2015

GAAP diluted earnings per share from continuing operations

$

0.09



$

0.34


Special items affecting net income

0.22



0.08


Adjusted diluted earnings per share

$

0.31



$

0.42


 

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 statements regarding the consummation of the SCI acquisition, 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", "project", "forecast", "foresee", "should", "would", "could", "plan", "anticipate" and other similar words or expressions are intended to identify forward-looking statements, which are generally not historical in nature. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:

  • the execution of our Standards Operating, 4E leadership and Standard Acquisition Models;
  • changes in the number of deaths in our markets;
  • changes in consumer preferences;
  • ability to find and retain skilled personnel;
  • the effects of competition;
  • the investment performance of our funeral and cemetery trust funds;
  • fluctuations in interest rates;
  • our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;
  • death benefits related to preneed funeral contracts funded through life insurance contracts;
  • our ability to generate preneed sales;
  • the financial condition of third-party insurance companies that fund our preneed funeral contracts;
  • increased or unanticipated costs, such as insurance or taxes;
  • effects of the application of applicable laws and regulations, including changes in such regulations or the interpretation thereof;
  • consolidation of the deathcare industry; and
  • other factors and uncertainties inherent in the deathcare industry.

For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see "Risk Factors" in our most recent Annual Report on Form 10-K. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise. A copy of the Company's Form 10-K, other Carriage Services information and news releases are available at www.carriageservices.com.

This press release includes the use of certain financial measures that are not GAAP measures.  The Non-GAAP financial measures are presented for additional information and are reconciled to their most comparable GAAP measures in the tables presented above.

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/carriage-services-announces-record-results-for-first-quarter-2015-300077828.html

SOURCE Carriage Services, Inc.

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