CARRIAGE SERVICES ANNOUNCES
- ACQUISITION OF FAIRFAX MEMORIAL PARK AND FUNERAL HOME;
- COMPANY MILESTONE TWO YEAR SCENARIO;
- WILLIAM (BILL) GOETZ JOINS AS PRESIDENT AND CHIEF OPERATING OFFICER AND BOARD MEMBER; AND
- CONFERENCE CALL SCHEDULED FOR
TUESDAY, DECEMBER 3RD AT 9:30 AM CT
ACQUISITION OF FAIRFAX MEMORIAL PARK AND FUNERAL HOME
I had long been aware of the pristine and wonderful reputation of
We secured Carriage’s first presence in the
|MILESTONE TWO YEAR SCENARIO|
|Performance Outlook Scenario||Roughly Right Ranges|
|Years Ending December 31 (millions)|
|Total Revenue||$274 - $276||$318 - $322||$326 - $330|
|Total Field EBITDA||$109 - $111||$129 - $133||$134 - $138|
|Total Field EBITDA Margin||39% - 40%||40% - 41%||41% - 42%|
|Adjusted Consolidated EBITDA||$76 - $78||$94 - $98||$98 - $102|
|Adjusted Consolidated EBITDA Margin||28% - 29%||29% - 30%||30% - 31%|
|Adjusted Diluted EPS||$1.30 - $1.35||$1.62 - $1.72||$1.86 - $1.96|
|Adjusted Free Cash Flow||$42 - $44||$46 - $48||$51 - $53|
|Total Debt Outstanding||$520 - $530||$485 - $495||$445 - $455|
|Total Debt to Proforma EBITDA Multiple||5.5 - 5.7||5.0 - 5.2||4.3 - 4.5|
The performance milestones reflected in the Roughly Right Scenario above that should be achievable during 2021 after full operational integration in 2020 of
- Total Revenue of over
- Adjusted Consolidated EBITDA of about
- Adjusted Consolidated EBITDA Margin of over 30%;
- Adjusted Diluted EPS of almost
- Adjusted Free Cash Flow of over
$51 million; and
- Total Debt to EBITDA Ratio of less than 4.5 times.
The most important high performance conceptual milestone for Carriage is that we will have achieved Total Revenue and Consolidated EBITDA Margin critical mass as a deathcare operating and consolidation platform, enabling us to have quickly leveraged about
We have a strong conviction that being bold now will pay huge performance and valuation dividends later. We are planning to finance the four acquisitions with our existing bank syndicate through an increased bank revolving credit facility. We can now pause our acquisition growth for a year or two while we integrate, operate and optimize our newly acquired earnings and free cash flow power toward a goal of rapidly reducing debt to achieve moderate leverage of less than 4.5 times Total Debt to EBITDA by the end of calendar year 2021.
Our leadership teams throughout the company have never been as deeply skilled and aligned toward the mutually inclusive goals over the next two years of substantially increasing book and cash earnings from broadly higher and sustainable operating and financial performance while simultaneously and substantially reducing debt. We believe that this near term strategy, well executed, will be well received and rewarded by our shareholders, bondholders and banks, who have been wonderfully supportive of our recent bold moves.
WILLIAM (BILL) GOETZ JOINS AS PRESIDENT AND CHIEF OPERATING OFFICER AND BOARD MEMBER
To put a Being The Best ending to this press release, I am honored and excited to announce that
Bill is a first class human being both personally and professionally and has a proven record of being an exemplary leader of people. He comes with extraordinary references as to his character and natural leadership abilities and has a long history of success with only three different companies, most recently as Senior Vice President of Sales and Marketing at
While at Cintas Bill was heavily grounded in the high performance ideas and concepts from Jim Collins’ bestselling book, Good To Great, as well as the leadership principles of
We look forward to a conference call tomorrow morning during which we will explain more comprehensively why Carriage has never had such a bright future both in the short and long term,” concluded Mr. Payne.
CONFERENCE CALL AND INVESTOR RELATIONS CONTACT
NON-GAAP FINANCIAL MEASURES
This press release uses Non-GAAP financial measures to present the financial performance of the Company. Our non-GAAP reporting provides a transparent framework of our operating and financial performance that reflects the earning power of the Company as an operating and consolidation platform. Reconciliations of the Non-GAAP financial measures to GAAP measures are provided in this press release.
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 to compare our results to previous periods, to provide insight into the underlying long-term performance trends in our business and to provide the opportunity to differentiate ourselves as the best consolidation platform in the industry against the performance of other funeral and cemetery companies.
The Company’s GAAP financial statements are included in its Annual Report on Form 10-K for the year ended
The Non-GAAP financial measures include “Special Items”, “Total Field EBITDA”, “Adjusted Net Income”, “Consolidated EBITDA”, “Adjusted Consolidated EBITDA”, “Proforma Adjusted Consolidated EBITDA”, “Adjusted Consolidated EBITDA Margin”, “Adjusted Free Cash Flow” 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 typically taxed at the federal statutory rate, except for the accretion of the discount on Convertible Subordinated Notes, as this is a non-tax deductible item.
- Total Field EBITDA is defined as Gross Profit, excluding field depreciation, cemetery property amortization and regional and unallocated funeral and cemetery costs.
- Total Field EBITDA Margin is defined as Total Field EBITDA as a percentage of revenue.
- Adjusted Net Income is defined as net income plus adjustments for Special Items and other expenses or gains that we believe do not directly reflect our core operations and may not be indicative of our normal business operations.
- Consolidated EBITDA is defined as net income before income taxes, interest expenses, non-cash stock compensation, depreciation and amortization, and interest income.
- Adjusted Consolidated EBITDA is defined as Consolidated EBITDA plus adjustments for Special Items and other expenses or gains that we believe do not directly reflect our core operations and may not be indicative of our normal business operations.
- Proforma Adjusted Consolidated EBITDA is defined as Adjusted Consolidated EBITDA plus annualized EBITDA based on actual EBITDA for the nine months ended
September 30, 2019for two businesses we acquired in the fourth quarter of 2019 and current businesses under a definitive agreement and letter of intent for the 2019 period. Proforma Adjusted Consolidated EBITDA does not reflect proforma adjustments made in compliance with Article 11 of the SEC’s Regulation S-X, and the amounts used to calculate it were derived from internal unaudited accounts.
- 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.
- Adjusted Diluted Earnings Per Share is defined as GAAP Diluted Earnings Per Share, adjusted for Special Items.
- Total Debt to EBITDA Ratio is defined as Long Term Debt (net of current portion), indebtedness under our bank credit facility, indebtedness under our Convertible Subordinated Notes due 2021 and indebtedness under our Senior Notes due 2026, to Adjusted Consolidated EBITDA.
- Total Debt to Proforma EBITDA Multiple is defined as Long Term Debt (net of current portion), indebtedness under our bank credit facility, indebtedness under our Convertible Subordinated Notes due 2021 and indebtedness under our Senior Notes due 2026, to Proforma Adjusted Consolidated EBITDA.
Funeral Field EBITDA and Cemetery Field EBITDA
Our operations are conducted in two business segments: Funeral Home Operations and Cemetery Operations. Our Field level results highlight trends in volumes, Revenue, Field EBITDA (the individual business’ cash earning power / locally controllable business profit) and Field EBITDA Margin (the individual business’ controllable profit margin).
Regional and unallocated funeral and cemetery costs presented in our GAAP statement consist primarily of salaries and benefits of our Regional leadership, incentive compensation opportunity to our Field employees and other related costs for field infrastructure. These costs, while necessary to operate our businesses as currently operated within our unique, decentralized platform, are not controllable operating expenses at the Field level as the composition, structure and function of these costs are determined by Executive leadership in the Houston Support Center. These costs are components of our overall overhead platform presented within Consolidated EBITDA and Adjusted Consolidated EBITDA. We do not openly or indirectly “push down” any of these expenses to the individual business’ field level margins.
We believe that our “Regional and unallocated funeral and cemetery costs” are necessary to support our decentralized, high performance culture operating framework, and as such, are included in Consolidated EBITDA and Adjusted Consolidated EBITDA, which more accurately reflects the cash earning power of the Company as an operating and consolidation platform.
Consolidated EBITDA and Adjusted Consolidated EBITDA
Consolidated EBITDA and Adjusted Consolidated EBITDA are defined above. Our Adjusted Consolidated EBITDA include adjustments for Special Items and other expenses or gains that we believe do not directly reflect our core operations and may not be indicative of our normal business operations.
How These Measures Are Useful
When used in conjunction with GAAP financial measures, our Field EBITDA, Consolidated EBITDA and Adjusted Consolidated EBITDA are supplemental measures of operating performance that we believe are useful measures to facilitate comparisons to our historical consolidated and business level performance and operating results.
We believe our presentation of Adjusted Consolidated EBITDA, key metric used internally by our management, provides investors with a supplemental view of our operating performance that facilitates analysis and comparisons of our ongoing business operations because they exclude items that may not be indicative of our ongoing operating performance.
Limitations of the Usefulness of These Measures
Our Total Field EBITDA, Consolidated EBITDA and Adjusted Consolidated EBITDA are not necessarily comparable to similarly titled measures used by other companies due to different methods of calculation. Our presentation is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Funeral Field EBITDA and Cemetery Field EBITDA are not consolidated measures of profitability.
Total Field EBITDA excludes certain costs presented in our GAAP statement that we do not allocate to the individual business’ field level margins, as noted above. A reconciliation of Field EBITDA to Gross Profit, the most directly comparable GAAP measure, is set forth below.
Consolidated EBITDA excludes certain items that we believe do not directly reflect our core operations and may not be indicative of our normal business operations. A reconciliation of Consolidated EBITDA to Net Income, the most directly comparable GAAP measure, is set forth below.
Therefore, these measures may not provide a complete understanding of our performance and should be reviewed in conjunction with our GAAP financial measures.
RECONCILIATION OF PERFORMANCE OUTLOOK SCENARIO
Earlier in this press release, we present the Performance Outlook Scenario 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 unless we have a signed Letter of Intent with a high likelihood of a closing within 90 days. This Performance Outlook Scenario 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 five reconciliations are presented at the approximate midpoint of the range in this Performance Outlook Scenario.
Reconciliation of Net Income to Consolidated EBITDA and Field EBITDA for the Estimated Years Ending 2019, 2020 and 2021(in thousands):
|Years Ending December 31,|
|Total Tax Provision||8,400||11,600||13,300|
|Net Interest Expense, including Accretion of Discount on Convertible Subordinated Notes||25,200||31,500||30,000|
|Depreciation & Amortization, including Non-cash Stock Compensation||23,900||22,900||23,400|
|Total Field EBITDA||$||110,000||$||131,000||$||136,900|
|Total Field EBITDA Margin||40.0||%||40.8||%||41.6||%|
Reconciliation of Consolidated EBITDA to Adjusted Consolidated EBITDA for the Estimated Years Ending 2019, 2020 and 2021(in thousands):
|Years Ending December 31,|
|Adjusted Consolidated EBITDA||$||77,800||$||96,000||$||100,900|
|Adjusted Consolidated EBITDA Margin||28.3||%||29.9||%||30.7||%|
Reconciliation of Net Income to Adjusted Net Income for the Estimated Years Ending 2019, 2020 and 2021(in thousands):
|Years Ending December 31,|
|Adjusted Net Income||$||24,200||$||30,000||$||34,200|
Reconciliation of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share for the Estimated Years Ending 2019, 2020 and 2021(in thousands):
|Years Ending December 31,|
|GAAP Diluted Earnings Per Share||$||1.04||$||1.67||$||1.91|
|Adjusted Diluted Earnings Per Share||$||1.35||$||1.67||$||1.91|
Reconciliation of Cash Flow Provided by Operating Activities to Adjusted Free Cash Flow for the Estimated Years Ending 2019, 2020 and 2021(in thousands):
|Years Ending December 31,|
|Cash Flow Provided by Operating Activities||$||52,000||$||56,000||$||61,000|
|Cash used for Maintenance Capital Expenditures||(9,000||)||(9,000||)||(9,000||)|
|Adjusted Free Cash Flow||$||43,000||$||47,000||$||52,000|
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. All statements, other than statements of historical information, should be deemed to be forward-looking statements. These statements include, but are not limited to, statements regarding the pending acquisition of
- our ability to find and retain skilled personnel;
- our ability to execute our growth strategy;
- the effects of competition;
- the execution of our Standards Operating, 4E Leadership and Strategic Acquisition Models;
- changes in the number of deaths in our markets;
- changes in consumer preferences;
- our ability to generate preneed sales;
- the investment performance of our funeral and cemetery trust funds;
- fluctuations in interest rates;
- our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;
- the timely and full payment of death benefits related to preneed funeral contracts funded through life insurance contracts;
- the financial condition of third-party insurance companies that fund our preneed funeral contracts;
- increased or unanticipated costs, such as insurance or taxes;
- our level of indebtedness and the cash required to service our indebtedness;
- changes in federal income tax laws and regulations and the implementation and interpretation of these laws and regulations by the
Internal Revenue Service;
- effects of the application of other applicable laws and regulations, including changes in such regulations or the interpretation thereof;
- consolidation of the funeral and cemetery industry;
- our ability to close the pending acquisitions as anticipated;
- our ability to integrate the acquired businesses with our existing business; and
- other factors and uncertainties inherent in the funeral and cemetery 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
Source: Carriage Services, Inc.