Carriage Services, Inc.
CARRIAGE SERVICES INC (Form: 8-K, Received: 10/25/2017 16:50:00)


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): October 25, 2017
 
Carriage Services, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
 
1-11961
 
76-0423828
   (State or other jurisdiction
   of incorporation)
 
   (Commission
   File Number)
 
   (IRS Employer
   Identification No.)
3040 Post Oak Boulevard, Suite 300
Houston, Texas 77056
(Address, including zip code, of principal executive offices)

Registrant's telephone number, including area code:
(713) 332-8400
 


Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨
Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨






ITEM 2.02    RESULTS OF OPERATIONS AND FINANCIAL CONDITION .

In the press release dated October 25, 2017, Carriage Services, Inc. (“the Company”) announced and commented on its financial results for its quarter ended September 30, 2017. A copy of the press release issued by the Company is attached hereto as Exhibit 99.1 and incorporated by this reference. The information being furnished under Item 9.01 Financial Statements and Exhibits, including the press release attached hereto as Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to liabilities of that Section.
The Company’s press release dated October 25, 2017 contains non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with United States generally accepted accounting principles, or GAAP. Pursuant to the requirements of Regulation G, the Company has provided quantitative reconciliations within the press release of the non-GAAP financial measures to the most directly comparable GAAP financial measures.
ITEM 8.01    OTHER EVENTS

On October 25, 2017, the Company’s Board of Directors approved a $15.0 million increase in its previously authorized share repurchase program for repurchases of the Company's common stock. Currently, as increased, the Company now may purchase up to $26.0 million of its common stock. The share repurchase program is in accordance with Rule 10b-18 of the Exchange Act. Subject to applicable rules and regulations, the shares may be purchased from time to time in the open market or in privately negotiated transactions. Such purchases will be at times and in amounts as the Company deems appropriate, based on factors such as market conditions, legal requirements and other business considerations.
On October 25, 2017, the Company issued a press release announcing that its Board of Directors approved this $15.0 million increase in its authorization for repurchases of the Company's common stock. A copy of the press release is attached as Exhibit 99.2 to this Current Report on Form 8-K.
On October 25, 2017 , the Company issued a press release announcing that its Board of Directors has approved the increase of its quarterly cash dividend policy for its common stock from $0.05 per share to $0.075 per share, effective to payments payable on December 1, 2017 and later. A copy of the press release is attached to this Current Report on Form 8-K as Exhibit 99.3

ITEM 9.01    FINANCIAL STATMENTS AND EXHIBITS .

(d)     Exhibits. The following are furnished or filed as part of this current report on Form 8-K:            







SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, Carriage Services, Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
CARRIAGE SERVICES, INC.
 
 
 
 
Dated: October 25, 2017
By:
 
/s/ Viki K. Blinderman
 
 
 
Viki K. Blinderman
 
 
 
Senior Vice President, Principal Financial Officer and Secretary
 
 
 
 







INDEX TO EXHIBITS

Exhibit No.
  
Description of Exhibit
 
 
99.1
 
 
 
 
99.2
  
 
 
 
99.3
 
 
 
 







CSVLOGOA12.JPG
 
CARRIAGE SERVICES ANNOUNCES THIRD QUARTER 2017 RESULTS AND
RAISES ROLLING FOUR QUARTER OUTLOOK
HOUSTON – October 25, 2017 – 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%.


1



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.

2



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.







3



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.

4



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.

5



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 .


6



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)

 
 
 
 
 
 
 
 

7



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)


8



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


9



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




         

10



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

 
 
 
 

11



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.


12



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
%

13



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


14



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

 
 






15



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

 
 
 

 
 
 
 


16



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;