Press Release Details

 

Carriage Services is a leading consolidator and provider of deathcare services and merchandise in the United States, operating funeral homes and cemeteries nationwide.

Carriage Services Announces 2011 Fourth Quarter and Record 2011 Annual Results

February 22, 2012 at 4:15 PM EST

HOUSTON, Feb. 22, 2012 /PRNewswire/ -- Carriage Services, Inc. (NYSE: CSV) today announced results for the fourth quarter and year ended December 31, 2011, as follows:

Mel Payne, Chief Executive Officer, stated, "After reporting record results in 2009 and 2010, we are pleased to report our third straight record performance in 2011 for Total Revenue and Total Field EBITDA, as well as Non-GAAP records for Consolidated EBITDA, Earnings Per Share and Free Cash Flow.  Moreover, after the management reorganization in October 2011 and the roll out of an updated Funeral Standards Operating Model with new long term incentives, our funeral operating performance increased substantially and sequentially during the fourth quarter, positioning our funeral portfolio for a strong 2012 starting in January."

"As a result, our 2012 Outlook reflects another record performance based on substantially higher funeral operational performance, recent acquisitions and significant earnings from our trust portfolios.  Our achievement of consistently higher and sustainable revenue, earnings and Free Cash Flow provided the financial strength and flexibility to initiate a quarterly dividend and stock repurchase plan in 2011."

Highlights of the 2011 year were as follows:

  • Total Revenue of $190.6 million, an increase of 3.1%;
  • Total Field EBITDA of $69.9 million, an increase of 10.0%;
  • Non-GAAP Consolidated EBITDA of $50.6 million, an increase of 10.0%;
  • Non-GAAP EPS of $0.66 per diluted share, an increase of 22.2%; and
  • Free Cash Flow of $24.4 million, an increase of 31.2%.

"The record 2011 performance was driven primarily by substantially higher Field EBITDA Margins in our funeral and cemetery portfolios, funeral business acquisitions and a continued strong GAAP and Non-GAAP contribution from our trust portfolios.  The revenue increase of $5.7 million for 2011 was comprised of an $8.3 million increase in Funeral Acquisition Revenue, offset by a decline of about $2.8 million in our Same Store funeral and cemetery revenues.  The combination of a 270 basis point increase in our Total Funeral Field EBITDA Margin and $8.3 million increase in Funeral Acquisition Revenue produced an increase in Total Field EBITDA of $6.4 million, which was 12% greater than the Total Revenue increase of $5.7 million."

"GAAP diluted earnings per share for 2011 was $0.38, down from $0.45 in 2010 because of Special Items of expense totaling $4.2 million ($0.13 per share) not including the $4.5 million of Withdrawable Trust Income as shown in the attached Non-GAAP Unaudited Income Statement.  These Non-GAAP adjustments in the view of Management produce a relevant enterprise earning power comparison (diluted earnings per share) of $0.51 for 2011 versus $0.45 for 2010.  Included in Special Items are termination expenses of $1.9 million that were related to the management reorganization discussed in the third quarter 2011 earnings release, as these positions are not being replaced.  Additionally, the stock performance based executive incentive compensation of $1.1 million is related to a discontinued Plan that was based on the increase in the Company's common stock price since early 2009 relative to two peer groups through 2011."

"A significant component of our Non-GAAP results and cash flow is Withdrawable Trust Income, which is cemetery preneed merchandise and service trust income that is withdrawable in certain states when the income and gains have been realized.  The entire amount attaching to the underlying contracts is not withdrawn, only the amounts in excess of a certain threshold as determined by the states allowing the withdrawal.  The state mandated amounts remain in the trusts, which ensures that sufficient funds are realizable and withdrawn upon maturity of the contract.  Under GAAP, the Company cannot recognize the excess funding withdrawals as revenue until the delivery of the merchandise and service.  Withdrawable Trust Income, primarily from California cemetery merchandise and service trusts, totaled $4.5 million in 2011 compared to $3.4 million in 2010, both as a result of large realized fixed income and equity gains in 2010 and the first half of 2011."

"Finally, we produced Free Cash Flow of $24.4 million in 2011 compared to $18.6 million in 2010, which along with $2.5 million borrowed on our new credit facility, enabled us to self-finance the $18.6 million in cash used for funeral home acquisitions in 2011, invest $3.8 million in existing business growth projects, repurchase $3.1 million of the face amount of the convertible subordinated debentures for $2.2 million in cash, repurchase 126,592 shares of our common stock and pay $1.4 million in common stock dividends.  As previously announced, the Board has approved a quarterly cash dividend of 2.5 cents payable on March 1, 2012."

Highlights of the fourth quarter of 2011 were as follows:

  • Total Revenue of $47.8 million, a slight decrease of less than 1%;
  • Total Field EBITDA of $17.6 million, an increase of 9.2%;
  • Non-GAAP Consolidated EBITDA of $10.9 million, a decrease of 13.6%; and
  • Non-GAAP EPS of $0.11 per diluted share, a decrease of $0.06.

"The Company experienced a slight decline in Total Revenue in the fourth quarter.  Funeral Acquisition Revenue was very strong, growing 23% compared to the fourth quarter of 2010.  Same Store Funeral contracts were down 5.5% while Same Store Funeral Revenue was down 3.6%, consistent with trends experienced by other funeral service providers and vendors.  Funeral Field EBITDA Margins increased 420 basis points from 30.9% to 35.1% in the quarter. Although we experienced an 8% decrease in Cemetery Revenue because of a decline in preneed property sales, our Cemetery Field EBITDA Margin increased 210 basis points from 20.5% to 22.6%.  Total Field EBITDA Margins increased 330 basis points from 33.6% to 36.9% in the quarter."  

"GAAP diluted earnings per share for the fourth quarter of 2011 declined to $0.02 from $0.12 in 2010 because of previously discussed Special Items of expense totaling $3.2 million ($0.11 per share), which for GAAP purposes are included in Variable Overhead.  The decline in Non-GAAP EPS to $0.11 from $0.17 in 2010 was primarily the result of a decline in Withdrawable Trust Income of $2.4 million in the California M&S trusts, equal to $0.08 per diluted share, as we executed a major asset reallocation from equities to fixed income during the last five months of 2011."

"As stated in our third quarter earnings release, Management views Non-GAAP Consolidated EBITDA, EPS and Free Cash Flow metrics as the more relevant metrics for valuation of the market value of the Company's equity.  We also believe Non-GAAP accounting, since it adjusts for income and expense items that are not part of continuing operations, provides for better performance comparison between accounting periods and also makes our five Quarter and five Year Trend Reports more transparent for investors.  The Non-GAAP reporting format is especially relevant for 2011 as we had a lot of GAAP noise pass through the Company, especially in the fourth quarter, as we made major strides in positioning Carriage to achieve a higher and sustainable operating and financial performance in 2012 and thereafter," concluded Mr. Payne.

NON- GAAP UNAUDITED INCOME STATEMENT

Period Ended December 31, 2011

($000's)








Three Months Ended

Three Months Ended

Twelve Months Ended

Twelve Months Ended


December 31, 2010

December 31, 2011

December 31, 2010

December 31, 2011






Same Store Contracts





Atneed Contracts

4,123

3,848

16,243

15,763

Preneed Contracts

1,026

1,017

3,922

4,135

Total Same Store Funeral Contracts

5,149

4,865

20,165

19,898

Acquisition Contracts





Atneed Contracts

1,413

1,724

4,497

6,253

Preneed Contracts

340

375

1,139

1,512

Total Acquisition Funeral Contracts

1,753

2,099

5,636

7,765

Total Funeral Contracts

6,902

6,964

25,801

27,663






Funeral Operating Revenue





Same Store Revenue

$ 27,568

$ 26,571

$ 107,680

$ 106,679

Acquisition Revenue

6,749

8,308

22,063

30,307

Total Funeral Operating Revenue

$ 34,317

$ 34,879

$ 129,743

$ 136,986






Cemetery Operating Revenue





Same Store Revenue

$ 8,508

$ 7,824

$ 34,211

$ 32,407

Acquisition Revenue

1,482

1,572

$ 6,239

6,574

Total Cemetery Operating Revenue

$ 9,990

$ 9,396

$ 40,450

$ 38,981






Financial Revenue





Preneed Funeral Commission Income

$ 448

$ 412

$ 2,265

$ 1,811

Preneed Funeral Trust Earnings

1,543

1,569

6,117

6,425

Cemetery Trust Earnings

1,446

1,200

4,815

5,073

Preneed Cemetery Finance Charges

354

337

1,557

1,360

Total Financial Revenue

$ 3,791

$ 3,518

$ 14,754

$ 14,669

Total Revenue

$ 48,098

$ 47,793

$ 184,947

$ 190,636






Field EBITDA





Same Store Funeral Field EBITDA

$ 9,087

$ 9,712

$ 36,035

$ 38,152

Same Store Funeral Field EBITDA Margin

33.0%

36.6%

33.5%

35.8%






Acquisition Funeral Field EBITDA

1,524

2,542

5,123

8,938

Acquisition Funeral Field EBITDA Margin

22.6%

30.6%

23.2%

29.5%






Total Funeral Field EBITDA

$ 10,611

$ 12,254

$ 41,158

$ 47,090

Total Funeral Field EBITDA Margin

30.9%

35.1%

31.7%

34.4%






Same Store Cemetery Field EBITDA

$ 1,709

$ 1,785

$ 7,340

$ 7,603

Same Store Cemetery Field EBITDA Margin

20.1%

22.8%

21.5%

23.5%






Acquisition Cemetery Field EBITDA

339

337

1,707

1,944

Acquisition Cemetery Field EBITDA Margin

22.9%

21.4%

27.4%

29.6%






Total Cemetery Field EBITDA

$ 2,048

$ 2,122

$ 9,047

$ 9,547

Total Cemetery Field EBITDA Margin

20.5%

22.6%

22.4%

24.5%






Funeral Financial EBITDA

1,674

1,710

6,993

6,859

Cemetery Financial EBITDA

1,805

1,537

6,372

6,433

Total Financial EBITDA

$ 3,479

$ 3,247

$ 13,365

$ 13,292

Total Financial EBITDA Margin

91.8%

92.3%

90.6%

90.6%






Total Field EBITDA

$ 16,138

$ 17,623

$ 63,570

$ 69,929

Total Field EBITDA Margin

33.6%

36.9%

34.4%

36.7%








NON- GAAP UNAUDITED INCOME STATEMENT

Period Ended December 31, 2011

($000's)








Three Months Ended

Three Months Ended

Twelve Months Ended

Twelve Months Ended


December 31, 2010

December 31, 2011

December 31, 2010

December 31, 2011






Overhead





Total Variable Overhead

$ 1,049

$ 4,759

$ 3,554

$ 9,422

Total Regional Fixed Overhead

792

794

3,370

3,766

Total Corporate Fixed Overhead

3,973

4,012

14,306

15,712

Total Overhead

$ 5,814

$ 9,565

$ 21,230

$ 28,900


12.1%

20.0%

11.5%

15.2%






Other Income

580

-

828

845

Consolidated EBITDA

$ 10,904

$ 8,058

$ 43,168

$ 41,874

Consolidated EBITDA Margin

22.7%

16.9%

23.3%

22.0%






GAAP Diluted EPS

$ 0.12

$ 0.02

$ 0.45

$ 0.38






Special Items





Withdrawable Trust Income(Loss)

$ 2,040

$ (368)

$ 3,438

$ 4,513

Stock Performance Based Executive Incentive Compensation

-

1,064

-

1,064

Nonrecurring Professional Fees

-

141

-

141

Gain on Repurchase of Convertible Junior Subordinated Debentures

-

-

(317)

(846)

Securities Transactions Expenses

-

2

-

504

Loss on Early Extinguishment of Debt

-

-

-

201

Acquisition Expenses

86

265

667

1,237

Termination Expenses

237

1,768

237

1,935

Recovery of Legal Fees

(32)

-

(682)

-

Net Gain on Disposition of Assets

(580)

-

(511)

-

Total of Special Items

$ 1,751

$ 2,872

$ 2,832

$ 8,749






Non-GAAP Consolidated EBITDA

$ 12,655

$ 10,930

$ 46,000

$ 50,623

Non-GAAP Consolidated EBITDA Margin

26.3%

22.9%

24.9%

26.6%






Property Depreciation & Amortization

$ 2,522

$ 2,403

$ 9,977

$ 9,613

Non Cash Stock Compensation

357

283

1,722

$ 1,870

Interest Expense

4,566

4,477

18,262

18,305

Interest Income

(18)

(16)

(240)

(52)

Pretax Income

$ 5,228

$ 3,783

$ 16,279

$ 20,887






Income tax

2,000

1,776

6,512

8,703

Non-GAAP Net Income

$ 3,228

$ 2,007

$ 9,767

$ 12,184


6.7%

4.2%

5.3%

6.4%






Non-GAAP Diluted EPS

$ 0.17

$ 0.11

$ 0.54

$ 0.66



ACQUISITIONS

Carriage acquired six businesses during 2011, including two in the fourth quarter, for a total cash cost of $18.6 million.  These businesses contributed $3.3 million in revenue in 2011, but on an annualized basis are expected to generate revenue of approximately $10.8 million.

The Company acquired James J. Terry Funeral Home in Downingtown, Pennsylvania during the first quarter of 2012.  The Terry Funeral Home is forecasted to provide annualized revenue of approximately $1.8 million.

TRUST FUND PERFORMANCE

A major asset reallocation into fixed income securities from equities was executed starting in early August 2011 after the U.S. credit rating downgrade by Standard & Poor's on August 5th and the reemergence of the European sovereign debt crisis, resulting in five months of risk aversion by investors and a flight to safety in U.S. Treasuries.  During this volatile market period, we reduced our discretionary equity portfolio cost basis by $60.6 million, realizing about $7.7 million in losses which caused a $0.4 million loss in M&S Withdrawable Trust Income in the fourth quarter.  The $7.7 million of realized losses incurred in the asset reallocation reduced our total capital gains in the discretionary portfolio to $21.1 million for the full year.  The $53 million proceeds from the reallocation were reinvested primarily into high yield bonds and preferred stocks of "too big to fail" financial institutions, the result of which increased the annualized recurring income from our discretionary portfolio by 54% from $7.9 million on August 8, 2011 to $12.2 million on December 31, 2011.

Shown below are consolidated performance metrics for the combined trust fund portfolios (preneed funeral, cemetery merchandise and services, and cemetery perpetual care) at key dates.




Investment Performance



Investment Performance(1)


Index Performance


Timeframe



Discretionary


Total Trust



DJIA


S&P 500


NASDAQ

50/50 index

Benchmark

5 years ended 12/31/11


51.2%

49.0%


13.6%

12.1%

28.3%

7.6%

3 years ended 12/31/11


68.7%

63.4%


41.0%

43.6%

59.0%

32.0%

1 year ended 12/31/11


(3.1)%

(2.5)%


5.5%

2.1%

(1.8)%

5.0%


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





Asset Allocation as of December 31, 2011



Discretionary Trust Funds


Total Trust Funds

Asset Class


MV


%


MV


%

Equities


$    25,449


15.9%


$  38,407


18%

Fixed Income


131,777


82.5%


155,622


74%

Cash


2,487


1.6%


17,423


8%

Total Portfolios


$    159,713


100%


$  211,451


100%




FREE CASH FLOW

Carriage achieved record Free Cash Flow in 2011 of $24.4 million, of which $4.4 million was produced during the fourth quarter of 2011.  Our record Free Cash Flow for the year represents an increase of $5.8 million or 31.2% compared to Free Cash Flow of $18.6 million for 2010.  The sources and uses of cash for 2010 and 2011 consisted of the following (in millions):



2010


2011

Cash flow provided by operations

$  25.7


$  31.2

Cash used for maintenance capital expenditures

(7.1)


(6.8)

Free Cash Flow

$  18.6


$  24.4

Cash at beginning of year

3.6


1.3

Acquisitions

(19.0)


(18.6)

Net borrowings under credit facility

0.6


2.5

Cash used for growth capital expenditures

(3.6)


(3.8)

Cash used for dividends


(1.4)

Repurchase of common stock


(0.7)

Repurchase of convertible junior subordinated debentures


(2.2)

Other investing and financing activities, net

1.1


(0.4)

Cash at December 31st

$  1.3


$  1.1

Credit Facility borrowing at December 31st

$  0.6


$  3.1




2012 OUTLOOK

The 2012 Outlook reflects management's current opinion on the performance of the portfolio of businesses for the year ending December 31, 2012.  Management takes into consideration the performance of the trusts and incorporates our view of the economy and the financial markets.  Factors affecting our analysis include, among others, funeral contract volumes, average revenue per funeral service, cemetery interment volumes, preneed cemetery sales, capital expenditures, execution of our funeral Standards Operating Model, acquisitions and Withdrawable Trust Income.

The 2012 Outlook includes the Carmen and Roberson acquisition that closed in October, the Bryant acquisition that closed in December and the Terry acquisition that closed in the first quarter of 2012.

2012 OUTLOOK

(amounts in millions, except per share amounts)



Range

Revenues

$200$202



Consolidated EBITDA

$49.5$50.5



Net Income

$11.7$12.3

GAAP Diluted EPS

$0.64$0.67

Non-GAAP EPS

$0.79$0.81

Cash Flow from Operations

$26$28




Revenues, Consolidated EBITDA and Net Income for the four quarter period ending December 31, 2012 are expected to improve relative to the year ended December 31, 2011, for the following reasons:

  • Increases in Same Store Funeral Revenue averages and Same Store Funeral Field EBITDA Margins;
  • Increases in Acquired Funeral Revenue and Acquired Funeral Field EBITDA from the 2011 and first quarter 2012 acquisitions; and
  • Increases in Financial Revenue from all three categories of trust funds.

The Outlook also includes the Company's new policy of withdrawing realized gains and income in excess of regulatory mandated amounts on a monthly basis from certain cemetery merchandise and services trust funds which are estimated to be in the range of $1.5 million to $2.0 million for the rolling four quarter period.

CONFERENCE CALL

Carriage Services has scheduled a conference call for tomorrow, Thursday, February 23, 2012 at 10:30 a.m. eastern time.  To participate in the call, please dial 800-860-2442 at least ten minutes before the conference call begins and ask for the Carriage Services conference call.  A telephonic replay of the conference call will be available through March 5, 2012 and may be accessed by dialing 877-344-7529 and using pass code 10009850.  An audio archive will also be available on the company's website at www.carriageservices.com shortly after the call and will be accessible for approximately 90 days.  For more information, please contact Terry Sanford at terry.sanford@carriageservices.com or 713-332-8475.

Carriage Services is a leading provider of death care services and products.  Carriage operates 160 funeral homes in 25 states and 32 cemeteries in 11 states.

USE OF NON-GAAP FINANCIAL MEASURES

This press release uses Non-GAAP financial measures to present the financial earnings of the Company.  Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported operating results or cash flow from operations or any other measure of performance as determined in accordance with GAAP.  The Company's GAAP financial statements accompany this release.  Reconciliations of the Non-GAAP financial measures to GAAP measures are provided at the end of the press release.

Certain state regulations allow the withdrawal of financial income from preneed cemetery merchandise and services trust funds when realized in the trust.  Under current generally accepted accounting principles, trust income is only recognized in the Company's financial statements at a later time when the related merchandise and services sold on the preneed contract is delivered at the time of death.  Carriage has provided financial income from the trusts, termed Withdrawable Trust Income (loss) and reported on a Non-GAAP proforma basis within Special Items in the accompanying Non-GAAP Unaudited Income Statement, to reflect the current cash results.  Management believes that the Withdrawable Trust Income provides useful information to investors because it presents income and cash flow when earned by the trusts.  

The Non-GAAP financial measures include "Free Cash Flow", "Funeral and Cemetery Field EBITDA", "Total Field EBITDA", "Consolidated EBITDA", and "Non-GAAP Consolidated EBITDA" are reflected in this press release.  Both Free Cash Flow and Non-GAAP Consolidated EBITDA are used by investors to value common stock.  The Company considers Free Cash Flow to be an important indicator of its ability to generate cash for acquisitions and other strategic investments.  The Company has included Non-GAAP Consolidated EBITDA in this press release because it is widely used by investors to compare the Company's financial performance with the performance of other death care companies.  Non-GAAP Consolidated EBITDA does not give effect to the cash the Company must use to service its debt or pay its income taxes and thus does not reflect the funds actually available for capital expenditures.  In addition, the Company's presentation of Non-GAAP Consolidated EBITDA may not be comparable to similarly titled measures other companies report.

FORWARD-LOOKING STATEMENTS

Certain statements made herein or elsewhere by, or on behalf of, the Company that are not historical facts are intended to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  These statements are based on assumptions that the Company believes are reasonable; however, many important factors, as discussed under "Forward-Looking Statements" in the Company's Annual Report on Form 10-K for the year ended December 31, 2010, could cause the Company's results in the future to differ materially from the forward-looking statements made herein and in any other documents or oral presentations made by, or on behalf of, the Company.  The Company assumes no obligation to update or publicly release any revisions to forward-looking statements made herein or any other forward-looking statements made by, or on behalf of, the Company.  A copy of the Company's Form 10-K, and other Carriage Services information and news releases, are available at www.carriageservices.com.

— Financial Statements and Tables to Follow —

CARRIAGE SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands, except share data)




December 31,


December 31,

ASSETS


2010


2011






Current assets:





  Cash and cash equivalents


$        1,279


$  1,137

  Accounts receivable, net of allowance for bad debts


15,587


16,605

  Inventories and other current assets


10,828


13,530

     Total current assets


27,694


31,272






Preneed cemetery and funeral trust investments


160,834


142,231

Preneed receivables, net of allowance for bad debts


24,099


22,800

Receivables from preneed funeral trusts


21,866


22,487

Property, plant and equipment, net of accumulated depreciation


128,472


136,469

Cemetery property


71,128


71,620

Goodwill


183,324


193,962

Deferred charges and other non-current assets


7,860


10,451

Cemetery perpetual care trust investments


45,735


41,485

     Total assets


$    671,012


$  672,777






LIABILITIES AND STOCKHOLDERS' EQUITY





Current liabilities:





  Current portion of long-term debt and obligations under capital leases


$           563


$  628

  Accounts payable and accrued liabilities


24,596


31,741

     Total current liabilities


25,159


32,369






Senior long-term debt, net of current portion


132,416


135,000

Convertible junior subordinated debenture due in 2029 to an affiliated trust


92,858


89,770

Obligations under capital leases, net of current portion


4,289


4,155

Deferred preneed cemetery and funeral revenue


89,642


100,895

Deferred preneed cemetery and funeral receipts held in trust


160,834


142,231

Care trusts' corpus


45,941


41,379

     Total liabilities


551,139


545,799











Commitments and contingencies





Redeemable Preferred Stock


200


200






Stockholders' equity





Common Stock


213


217

Additional paid-in capital


200,987


201,284

Accumulated deficit


(70,951)


(63,987)

Treasury stock


(10,576)


(10,736)

  Total stockholders' equity


119,673


126,778

     Total liabilities and stockholders' equity


$    671,012


$  672,777









CARRIAGE SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except per share data)




For the three months ended

December 31,


For the years ended

December 31,



2010


2011


2010


2011










Revenues


$  48,098


$  47,793


$    184,947


$    190,636

Field costs and expenses


36,260


34,731


137,500


138,332

Gross profit


11,838


13,062


47,447


52,304

General and administrative expenses


4,393


7,690


16,806


22,758

Operating income


7,445


5,372


30,641


29,546

Interest expense


(4,566)


(4,477)


(18,262)


(18,305)

Other income


598


16


1,068


897

Income before income taxes


3,477


911


13,447


12,138

Provision for income taxes


(1,330)


(613)


(5,368)


(5,160)

Net income


2,147


298


8,079


6,978

Preferred stock dividend


(4)


(2)


(14)


(14)

Net income available to common stockholders


$  2,143


$  296


$    8,065


$    6,964



















Basic earnings per common share:


$           0.12


$           0.02


$    0.46


$             0.38

Diluted earnings per common share:


$           0.12


$           0.02


$    0.45


$             0.38










Weighted average number of common and common

  equivalent shares outstanding:









Basic


17,890


18,393


17,635


18,358

Diluted


18,424


18,420


17,938


18,396













CARRIAGE SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands, except per share data)




For the years ended December 31,



2010


2011






Cash flows from operating activities:





  Net income


$    8,079


$  6,978

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





     Depreciation and amortization


10,704


10,266

     Provision for losses on accounts receivable


4,031


2,788

     Gain on repurchase of convertible subordinated debentures


(317)


(846)

     Stock-based compensation expense


1,759


1,941

     Deferred income taxes


1,521


(3,462)

     Other


(153)


165

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





     Accounts and preneed receivables


(4,761)


(1,921)

     Inventories and other current assets


1,830


(1,513)

     Preneed funeral and cemetery trust investments


(1,369)


10,918

     Accounts payable and accrued liabilities


2,975


7,006

     Deferred preneed funeral and cemetery revenue


168


10,316

     Deferred preneed funeral and cemetery receipts held in trust


1,212


(11,481)

     Net cash provided by operating activities


25,679


31,155






Cash flows from investing activities:





     Net proceeds from the sale of assets


400


     Acquisitions


(19,007)


(18,574)

     Growth capital expenditures


(3,559)


(3,849)

     Maintenance capital expenditures


(7,102)


(6,795)

     Net cash used in investing activities


(29,268)


(29,218)






Cash flows from financing activities:





     Net borrowings under credit facility


600


2,500

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


(474)


(625)

     Purchase of convertible junior subordinated debentures


(576)


(2,241)

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


1,759


745

     Purchase of treasury stock



(736)

     Dividends on common stock



(1,375)

     Payment of loan origination and other fees


(43)


(333)

     Dividend on redeemable preferred stock


(14)


(14)

     Net cash provided by (used in) financing activities


1,252


(2,079)











Net decrease in cash and cash equivalents


(2,337)


(142)

Cash and cash equivalents at beginning of period


3,616


1,279

Cash and cash equivalents at end of period


$    1,279


$  1,137





CARRIAGE SERVICES, INC.

Selected Financial Data

December 31, 2011

(unaudited)








December 31,


December 31,

Selected Balance Sheet Data:


2010


2011

Cash and short-term investments


$          1,279


$  1,137

Total Senior Debt (a)


137,268


139,783

Days sales in funeral accounts receivable


20.3


19.1

Senior Debt to total capitalization


39.2


39.2

Senior Debt to EBITDA (rolling twelve months)


3.3


3.3

Senior Debt to Non-GAAP Consolidated EBITDA (rolling 12 mos.)


3.0


2.8


a) - Senior debt does not include the convertible junior subordinated debentures.



Reconciliation of Non-GAAP Financial Measures:

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

Reconciliation of Net Income to Non-GAAP Net Income for the three and twelve months ended December 31, 2010 and 2011:



Three months ended

December 31,


Twelve months ended

December 31,




2010


2011


2010


2011

Net Income

$    2,147


$    298


$    8,079


$    6,978

Special items, net of tax

1,081


1,709


1,688


5,206

Non-GAAP Net Income

$    3,228


$    2,007


$    9,767


$    12,184




Reconciliation of Non-GAAP Financial Measures (unaudited), Continued:

Reconciliation of Net Income to Consolidated EBITDA and Non-GAAP Consolidated EBITDA for the three and twelve months ended December 31, 2010 and 2011 and the 2012 Outlook (presented at approximately the midpoint of the range identified in the release)(in 000's):



Three months ended

December 31,


Twelve months ended

December 31,




2010


2011


2010


2011

Net income

$    2,147


$  298


$  8,079


$  6,978

Provision for income taxes

1,330


613


5,368


5,160

Pre-tax earnings

3,477


911


13,447


12,138

Net interest expense, including loan

   cost amortization

4,548


4,461


18,022


18,253

Noncash stock compensation

357


283


1,722


1,870

Depreciation & amortization

2,522


2,403


9,977


9,613

Consolidated EBITDA

10,904


8,058


43,168


41,874

Special items

1,751


2,872


2,832


8,749

Non-GAAP Consolidated EBITDA

$    12,655


$  10,930


$  46,000


$  50,623








2012 Outlook

Net income


$    12,000

Provision for income taxes


8,100

Pre-tax earnings


20,100

Interest expense, including loan cost amortization


18,500

Depreciation & amortization, including stock compensation


11,400

Consolidated EBITDA


$    50,000




Reconciliation of Field income from continuing operations before income taxes to field EBITDA for the three and twelve months ended December 31, 2010 and 2011:



Funeral Home


Three months ended

December 31,


Twelve months ended

December 31,




2010


2011


2010


2011

Income from continuing operations

before income taxes

$    9,505


$  10,904


$  37,940


$  42,134

Depreciation & amortization

1,357


1,446


5,362


5,746

Regional & unallocated costs

1,423


1,614


4,849


6,069

Net financial income

(1,674)


(1,710)


(6,993)


(6,859)

Funeral Home EBITDA

$    10,611


$  12,254


$  41,158


$  47,090

Funeral Home Revenue

$    34,317


$  34,879


$  129,743


$  136,986

Funeral Home EBITDA Margin

30.9%


35.1%


31.7%


34.4%




Reconciliation of Non-GAAP Financial Measures (unaudited), Continued:



Cemetery


Three months ended

December 31,


Twelve months ended

December 31,




2010


2011


2010


2011

Income from continuing operations

before income taxes

$    2,333


$  2,158


$  9,506


$  10,170

Depreciation & amortization

847


694


3,259


2,853

Regional & unallocated costs

673


807


2,654


2,957

Net financial income

(1,805)


(1,537)


(6,372)


(6,433)

Cemetery EBITDA

$    2,048


$  2,122


$  9,047


$  9,547

Cemetery Revenue

$    9,990


$  9,396


$  40,450


$  39,981

Cemetery EBITDA Margin

20.5%


22.6%


22.4%


23.9%




Reconciliation of Diluted EPS to Non-GAAP Diluted EPS for the three and twelve months ended December 31, 2010 and 2011:



Three months ended

December 31,


Twelve months ended

December 31,




2010


2011


2010


2011

Diluted EPS

$    0.12


$    0.02


$    0.45


$    0.38

Effect of Special Items

0.05


0.09


0.09


0.28

Non-GAAP Diluted EPS

$    0.17


$    0.11


$    0.54


$    0.66




Reconciliation of cash provided by operating activities to Free Cash Flow (in 000's):



Three months ended December 31,


2010


2011

Cash provided by operating activities

$      9,131


$    5,880

Less maintenance capital expenditures

(2,053)


(1,430)

Free Cash Flow

$     7,078


$    4,450




Reconciliation of cash provided by operating activities to Free Cash Flow (in 000's):



Twelve months ended December 31,


2010


2011

Cash provided by operating activities

$    25,679


$    31,155

Less maintenance capital expenditures

(7,102)


(6,795)

Free Cash Flow

$     18,577


$    24,360




SOURCE Carriage Services, Inc.

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