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 2019 Annual Results and Introduces Three Year Roughly Right Scenario

February 19, 2020 at 5:04 PM EST

HOUSTON, Feb. 19, 2020 (GLOBE NEWSWIRE) -- Carriage Services, Inc. (NYSE: CSV) today announced results for the year ended December 31, 2019.

Mel Payne, Chairman and Chief Executive Officer, stated, “Our performance in the fourth quarter and full year of 2019 was dramatically better than 2018, as we reversed the broadly declining performance trends in our funeral and cemetery portfolios.  While we still have much work to do to achieve the optimum performance potential in our existing portfolio, we made two bold and strategic moves in the last quarter of 2019 by recruiting Bill Goetz as President and COO and acquiring four large high quality businesses in great strategic markets with about $50 million in new high margin revenue once fully integrated into Carriage’s operating model framework.

We believe that in 2019 we positioned Carriage for unprecedented performance and valuation success over the next five years.  But no doubt the continuing work to improve performance in our existing portfolio combined with the year-end acquisition and integration of four large businesses in new markets has intensely focused our Operational Leadership and Houston Support Center Leadership Teams on Execution, Execution, Execution.  We have therefore determined that the proper way to present our company over the next 3 years is as follows:

  1. January 1, 2020 - June 30, 2020 - Integration & Transition. 
    • Integrate new acquisitions;
    • Improve funeral and cemetery portfolio performance;
    • Recruit dedicated senior leadership to build and support a high performance cemetery preneed sales culture and system;
    • Divest low performing funeral homes; and
    • Reduce debt from increasing Adjusted Free Cash Flow and divestment proceeds.
  2. July 1, 2020 - June 30, 2021 - Normalize increased earnings and Adjusted Free Cash Flow, reducing debt and improving credit profile.
    • Leadership of new acquisitions (existing and newly recruited) fully integrated into high performance framework of Standards Operating Model;
    • Increase Revenue and Total Field and Adjusted Consolidated EBITDA Margin growth trends;
    • Divest any low performing businesses that no longer fit Carriage’s future growth performance profile and apply proceeds to reduction of debt;
    • Refinance our $400 million of 6.625% eight year senior notes that are callable after June 1, 2021 at 104.969; and
    • Optimize our capital structure and Adjusted Free Cash Flow earning power by issuing new eight to ten year senior notes at a coupon rate in the range around 5% based on current rate environment, saving an estimated $7 million in annual cash interest expense equivalent to an additional 28ȼ of EPS.
  3. July 1, 2021 - December 31, 2022 and thereafter - Optimize performance potential within existing portfolio.
    • Achieve annual company milestones in Total Revenue of over $325 million, Adjusted Consolidated EBITDA of over $100 million, Adjusted Diluted EPS of over $2.25 per share and Adjusted Free Cash Flow of over $60 million; and
    • Achieve leverage ratio of approximately 4 times Total Debt/Adjusted Consolidated EBITDA and return to growth by highly selective acquisitions financed primarily with increasing Adjusted Free Cash Flow.

Reflecting back on Carriage’s performance decline in 2018, the performance turnaround we have already achieved, and the performance milestones we will achieve over the next three years, our company will have executed what we believe in hindsight will be viewed as a complete Carriage Leadership, Portfolio High Performance, Balance Sheet, Earnings and Free Cash Flow Transformation as a Value Creation Platform.

Shown below is an expanded Milestone Three Year Roughly Right Scenario demonstrating the shareholder value creation opportunity as we enter into the next five year timeframe of our Good To Great Journey, beginning with:

Carriage Services 2020: Transformative High Performance - Good To Great Journey Part II

The scenario below includes our best “roughly right” estimates regarding our performance in the three distinct time periods as explained above. We will update Carriage’s Rolling Four Quarter Outlook when we report our first quarter 2020 performance results,” concluded Mr. Payne.

MILESTONE THREE YEAR SCENARIO

Performance Outlook Scenario   Roughly Right Ranges
    Years Ending December 31 (millions)
    2020   2021   2022
Total Revenue   $315 - $319   $320 - $324   $328 - $332
Total Field EBITDA   $127 - $131   $133 - $137   $139 - $144
Total Field EBITDA Margin   40% - 41%   41% - 42%   42% - 43%
Adjusted Consolidated EBITDA   $92 - $96   $97 - $101   $102 - $106
Adjusted Consolidated EBITDA Margin   29% - 30%   30% - 31%   31% - 32%
Adjusted Diluted EPS   $1.55 - $1.65   $1.92 - $2.10   $2.25 - $2.40
Adjusted Free Cash Flow   $42 - $45   $53 - $56   $60 - $63
Total Debt Outstanding   $480 - $490   $440 - $450   $390 - $440
Total Debt to EBITDA Multiple   5.0 - 5.2   4.3 - 4.5   3.8 - 4.0

The Pro Forma Adjusted results for the comparative periods of year end December 31, 2019 versus year ended December 31, 2018 and fourth quarter 2019 versus fourth quarter 2018 are shown below:

Year Ended December 31, 2019 versus Year Ended December 31, 2018

  • Total Revenue increased $11.0 million or 4.2% to $273.3 million;
  • Total Field EBITDA increased $7.4 million or 7.2% to $110.3 million;
  • Total Field EBITDA Margin increased 120 basis points to 40.4%;
  • Total Overhead decreased $0.8 million or 2.3% to $33.8 million;
  • Total Overhead Margin decreased 80 basis points to 12.4%;
  • Consolidated EBITDA increased $8.2 million or 12.0% to $76.5 million;
  • Consolidated EBITDA Margin increased 200 basis points to 28.0%; and
  • Diluted Earnings Per Share increased $0.27 or 29.0% to $1.20.

Fourth Quarter 2019 versus Fourth Quarter 2018

  • Total Revenue increased $4.8 million or 7.3% to $71.1 million;
  • Total Field EBITDA increased $2.9 million or 11.4% to $28.7 million;
  • Total Field EBITDA Margin increased 150 basis points to 40.4%;
  • Total Overhead increased $0.1 million or 0.5% to $9.5 million;
  • Total Overhead Margin decreased 90 basis points to 13.4%;
  • Consolidated EBITDA increased $2.9 million or 17.7% to $19.2 million;
  • Consolidated EBITDA Margin increased 240 basis points to 27.0%; and
  • Diluted Earnings Per Share increased $0.06 or 26.1% to $0.29.

GAAP highlights are shown below:

Year Ended December 31, 2019 versus Year Ended December 31, 2018

  • Total Revenue of $274.1 million, an increase of 2.3%;
  • Net Income of $14.5 million, an increase of 24.8%; and
  • GAAP Diluted Earnings Per Share of $0.80, an increase of 27.0%.

Fourth Quarter 2019 versus Fourth Quarter 2018

  • Total Revenue of $71.1 million, an increase of 7.0%;
  • Net Income of $2.6 million, an increase of 196.7%; and
  • GAAP Diluted Earnings Per Share of $0.14, an increase of 200.0%.

HIGH PERFORMANCE HEROES

Carriage 2019 Pinnacle of Service Award Winners

I am delighted to announce that we had 39 businesses (36 funeral homes and 3 cemeteries) which earned Pinnacle Awards and Being The Best Standards Achievement Incentive Bonuses for the Managing Partners and employees of each business. This group of winners represented the Company’s High Performance Culture well as their businesses contributed $82.0 million in revenue (30% of Total of $274.1 million), $36.1 million in Field EBITDA (33% of Company Total of $109.8 million) and a EBITDA Margin of 44.1% (Total Company Field EBITDA Margin of 40.0%).

The 39 Pinnacle Award winners included 34 businesses (33 funeral homes and 1 cemetery) which averaged 70% Standards Achievement over the 3 year period 2017-2019 (5 of these businesses also achieved 100% in 2019 under the updated/rebooted Performance Standards), and 5 businesses (3 funeral homes and 2 cemeteries) which had 100% Standards Achievement in 2019.

As an important part of our High Performance Culture tradition and language, and because we have a passionate conviction that RECOGNITION is the highest form of motivation, listed below are Carriage’s Being The Best Pinnacle Of Service Award winners for 2019:

“Being The Best” Pinnacle of Service Award

Courtney Charvet North Brevard Funeral Home
Patrick Schoen Jacob Schoen & Son
Matthew Simpson Fry Memorial Chapel
Justin Luyben Evans-Brown Mortuaries & Crematory
Alan Kerrick Dakan Funeral Chapel
Jeff Hardwick Bryan & Hardwick Funeral Home
James Bass Emerald Coast/McLaughlin Mortuary
Randy Valentine Dieterle Memorial Home & Cremation
Sue Keenan Byron Keenan Funeral Home & Cremation
Todd Muller All Cremation Options
Jason Cox Lane Funeral Home - South Crest
Jeff Seaman Dwayne R. Spence Funeral Homes
Dan Simons Everly Community Funeral Care
Mike Conner Conner-Westbury Funeral Home
Ashley Vella Deegan Funeral Chapels
Jason Higginbotham Lakeland Funeral Home
Joseph Newkirk Civic Center Chapel
Robert Maclary Kent-Forest Lawn Funeral Home
Ken Duffy John E. Day Funeral Home
Scott Sanderford Everly Wheatley Funeral Home
Phil Appell Keenan Funeral Home
Joseph Waterwash Baird-Case Jordan-Fannin Funeral Home & Cremation Center
Jeff Steadman Sansone Funeral Home
Tom O’Brien O’Brien Funeral Home
Chris Chetsas Cataudella Funeral Home
*Nicholas Welzenbach Darling & Fischer Funeral Homes
Los Gatos Memorial Park
*Tim Hauck Harvey-Engelhardt/Fuller Metz
Lee County Cremation
   
*Qualified for 2 Businesses  

“Being The Best” Pinnacle of Service Award & 100% of Standards Award

Ken Summers P.L. Fry & Son Funeral Home
Steven Mora Conejo Mountain Funeral Home
Brian Binion Steen Funeral Homes
James Terry James J. Terry Funeral Homes
Cyndi Hoots Schmidt Funeral Homes

“Being The Best” 100% of Standards Award

JoAnna DiSibio Oak View Memorial Park
Anthony Rodriguez Higgins Mortuary
Ben Friberg Heritage Funeral Home & Crematory
David Keller Lane Funeral Home - Coulter Chapel
Michael Page Sterling-White Cemetery

Carriage Good to Great Award Winners

Our five year incentive award, called the Good To Great Award, is directly linked to our annual Being The Best Pinnacle Award which itself is linked to High Funeral Standards Achievement over a full year, i.e. our Good To Great Awards require high and sustained Being The Best Standards Achievement over a full five years.  We have had many wonderful performances since the start of our Good To Great Journey in 2012 by High Performance Hero Funeral and Cemetery Managing Partners and Sales Managers and their teams of winning employees, so I am more than honored to announce our fourth group of Good To Great Award winners that sustained a high level of Standards Achievement and Financial Performance while compounding revenue at 3.1% for the five year timeframe that began in 2015 and ended at year end 2019, as listed below:

Todd Muller Muller-Thompson Funeral Chapel & Cremation Services
Alan Kerrick Dakan Funeral Chapels
Nicholas Welzenbach Darling Fischer Funeral Homes
Scott Sanderford Everly Wheatley Funeral Home
Patrick Schoen Jacob Schoen & Son
Charlie Eagan Greenwood Funeral Home

TRUST FUND PERFORMANCE

Shown below are consolidated performance metrics for the combined trust fund portfolios (preneed funeral, preneed cemetery 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)
               
1 year ended 12/31/19   25.9% 23.6%   31.5% 14.3% 19.5%
2 years ended 12/31/19   15.4% 14.5%   25.7% 11.9% 16.1%
3 years ended 12/31/19   30.5% 28.6%   53.1% 20.3% 30.2%
4 years ended 12/31/19   56.2% 52.1%   71.4% 41.0% 50.1%
5 years ended 12/31/19   51.4% 48.0%   73.8% 34.7% 46.4%
               
(1) Investment performance includes realized income and unrealized appreciation (depreciation).
(2) The 70/30 Benchmark is 70% weighted to the High Yield Index and 30% weighted to the S&P 500 Stock Index.


Asset Allocation as of December 31, 2019
(in thousands)
        Discretionary
Trust Funds
  Total
Trust Funds
Asset Class       MV %   MV %
Equities       $ 94,404
43
%   $ 96,844
38
%
Fixed Income       104,894
49
%   117,637
46
%
Cash       15,454 7 %   39,059 15 %
Other/Insurance       2,722 1 %   2,906 1 %
Total Portfolios       $ 217,474 100 %   $ 256,446 100 %

The performance of our Discretionary Trust Fund Portfolio was 25.9% for 2019 compared to 31.5% for the S&P 500 and 19.5% for our 70% High Yield/30% S&P 500 benchmark. The outperformance versus our benchmark is attributable to asset allocation decisions made in the back half of 2018 and the first part of this year along with individual security selections made throughout 2019.

We also added approximately $27 million of Discretionary Trust Assets through the four previously announced acquisitions.

The performance of our Discretionary Trust Fund Portfolio in 2019 compares favorably to our long term 11 year compound average annual return of approximately 13.5% since Carriage took over the management of these trust assets in the fall of 2008. This long-term track record of performance will continue to accrue to benefit Carriage through the increased value of the underlying preneed funeral and cemetery contracts and the recurring income generated through our cemetery perpetual care trusts.

ADJUSTED FREE CASH FLOW

We produced Adjusted Free Cash Flow from operations for the three months and years ended December 31, 2019 of $5.8 million and $37.4 million, respectively, compared to Adjusted Free Cash Flow from operations of $10.2 million and $42.7 million for the corresponding periods in 2018. A reconciliation of Cash Flow Provided by Operations to Adjusted Free Cash Flow for the three months and years ended December 31, 2018 and 2019 is as follows (in thousands):

  For the Three Months Ended
December 31,
  For the Years Ended
December 31,
 
  2018   2019   2018   2019
Cash flow provided by operations $ 10,416     $ 759     $ 49,133     $ 36,820  
Cash used for maintenance capital expenditures (3,070 )   (2,614 )   (9,266 )   (8,795 )
Free Cash Flow $ 7,346     $ (1,855 )   $ 39,867     $ 28,025  
               
Plus: Incremental Special Items:              
Down Payment for Potential Acquisition     5,000         5,000  
Acquisition and Divestiture Costs     2,083         2,083  
Severance and Retirement Costs 1,435     79     1,435     1,205  
Litigation Reserve 1,000     175     1,000     750  
Natural Disaster Costs 437         437      
Other Special Items     336         336  
Adjusted Free Cash Flow $ 10,218     $ 5,818     $ 42,739     $ 37,399  

Adjusted Free Cash Flow decreased $5.3 million to $37.4 million for the year ended December 31, 2019. We paid $5.0 million more of cash interest plus we had other working capital changes. The increase in cash interest paid primarily relates to a full year of interest paid on the Senior Notes versus seven months in 2018. Additionally we paid $3.2 million less cash taxes in 2019.

Adjusted Free Cash Flow decreased $4.4 million to $5.8 million for the three months ended December 31, 2019. The decrease is primarily due to the timing of working capital payments in conjunction with $2.6 million of additional tax refund after filing our 2018 tax return.

ROUGHLY RIGHT SCENARIO

The Roughly Right Scenario (“Scenario”) (or also called Rolling Four Quarter Outlook for the immediate rolling twelve months) 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 (LOI) and high likelihood of a closing within 90 days. This 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. Rather our intent and goal are to reflect a “Roughly Right Range” most of the time of future Scenario performance as we execute our Standards Operating, Strategic Acquisition and 4E Leadership Models over time.

Factors affecting our analysis include, among others, funeral contract volumes, average revenue per funeral service, cemetery interment volumes, preneed cemetery sales, capital expenditures and the execution of our funeral and our cemetery Standards Operating Model. Adjusted Net Income and hence, Adjusted Diluted Earnings Per Share have been adjusted for accretion on our convertible notes.

The Scenario 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 notes and outstanding and exercisable stock options.

CONFERENCE CALL AND INVESTOR RELATIONS CONTACT

Carriage Services has scheduled a conference call for tomorrow, February 20, 2020 at 9:30 a.m. central time. To participate in the call, please dial 866-516-3867 (ID-2874313) and ask for the Carriage Services conference call. A replay of the conference call will be available through February 25, 2020 and may be accessed by dialing 855-859-2056 (ID-2874313). 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.


CARRIAGE SERVICES, INC.
OPERATING AND FINANCIAL TREND REPORT
(IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)
           
  Three Months Ended December 31,   Years Ended December 31,
  2018 2019 % Change   2018 2019 % Change
               
Same Store Contracts              
Atneed Contracts 6,287   6,647   5.7 %   25,117   25,844   2.9 %
Preneed Contracts 1,415   1,466   3.6 %   5,721   5,700   (0.4 %)
Total Same Store Funeral Contracts 7,702   8,113   5.3 %   30,838   31,544   2.3 %
Acquisition Contracts              
Atneed Contracts 1,021   1,753   71.7 %   3,404   4,896   43.8 %
Preneed Contracts 151   154   2.0 %   450   586   30.2 %
Total Acquisition Funeral Contracts 1,172   1,907   62.7 %   3,854   5,482   42.2 %
Total Funeral Contracts 8,874   10,020   12.9 %   34,692   37,026   6.7 %
               
Funeral Operating Revenue              
Same Store Revenue $ 41,648   $ 42,410   1.8 %   $ 166,934   $ 167,246   0.2 %
Acquisition Revenue 7,846   9,886   26.0 %   26,835   33,146   23.5 %
Total Funeral Operating Revenue $ 49,494   $ 52,296   5.7 %   $ 193,769   $ 200,392   3.4 %
               
Cemetery Operating Revenue              
Same Store Revenue $ 10,907   $ 12,122   11.1 %   $ 45,135   $ 49,455   9.6 %
Acquisition Revenue   295   %     295   %
Total Cemetery Operating Revenue $ 10,907   $ 12,417   13.8 %   $ 45,135   $ 49,750   10.2 %
               
Total Financial Revenue $ 3,975   $ 4,179   5.1 %   $ 15,977   $ 16,022   0.3 %
               
Other Revenue $   $ 748       $   $ 748    
               
Total Divested/Planned Divested Revenue $ 2,141   $ 1,509       $ 13,111   $ 7,195    
               
Total Revenue $ 66,517   $ 71,149   7.0 %   $ 267,992   $ 274,107   2.3 %
               
Field EBITDA              
Same Store Funeral EBITDA $ 15,487   $ 16,335   5.5 %   $ 63,119   $ 63,938   1.3 %
Same Store Funeral EBITDA Margin 37.2 % 38.5 % 130 bp   37.8 % 38.2 % 40 bp
Acquisition Funeral EBITDA 3,108   3,733   20.1 %   9,732   12,547   28.9 %
Acquisition Funeral EBITDA Margin 39.6 % 37.8 % (180 bp)   36.3 % 37.9 % 160 bp
Total Funeral EBITDA $ 18,595   $ 20,068   7.9 %   $ 72,851   $ 76,485   5.0 %
Total Funeral EBITDA Margin 37.6 % 38.4 % 80 bp   37.6 % 38.2 % 60 bp
               
Same Store Cemetery EBITDA $ 3,127   $ 4,147   32.6 %   $ 13,880   $ 17,055   22.9 %
Same Store Cemetery EBITDA Margin 28.7 % 34.2 % 550 bp   30.8 % 34.5 % 370 bp
Acquisition Cemetery EBITDA   73   %     73   %
Acquisition Cemetery EBITDA Margin % 24.7 % 2,470 bp   % 24.7 % 2,470 bp
Total Cemetery EBITDA $ 3,127   $ 4,220   35.0 %   $ 13,880   $ 17,128   23.4 %
Total Cemetery EBITDA Margin 28.7 % 34.0 % 530 bp   30.8 % 34.4 % 360 bp
               
Total Financial EBITDA $ 3,597   $ 3,774   4.9 %   $ 14,427   $ 14,419   (0.1 %)
Total Financial EBITDA Margin 90.5 % 90.3 % (20 bp)   90.3 % 90.0 % (30 bp)
               
Other EBITDA $   $ 298       $
  $ 298    
Other EBITDA Margin % 39.8 %     % 39.8 %  
               
Total Divested/Planned Divested EBITDA $ 517   $ 253       $ 3,155   $ 1,437    
Total Divested/Planned Divested EBITDA Margin 24.1 % 16.8 %     24.1 % 20.0 %  
               
Total Field EBITDA $ 25,836   $ 28,613   10.7 %   $ 104,313   $ 109,767   5.2 %
Total Field EBITDA Margin 38.8 % 40.2 % 140 bp   38.9 % 40.0 % 110 bp
 
OPERATING AND FINANCIAL TREND REPORT
(IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)
               
  Three Months Ended December 31,   Years Ended December 31,
  2018 2019 % Change   2018 2019 % Change
               
Total Overhead $ 11,913   $ 12,103   1.6 %   $ 36,993   $ 37,554   1.5 %
Overhead as a percentage of Revenue 17.9 % 17.0 % (90 bp)   13.8 % 13.7 % (10 bp)
               
Consolidated EBITDA $ 13,923   $ 16,510   18.6 %   $ 67,320   $ 72,213   7.3 %
Consolidated EBITDA Margin 20.9 % 23.2 % 230 bp   25.1 % 26.3 % 120 bp
               
Other Expenses and Interest              
Depreciation & Amortization $ 4,330   $ 4,416   2.0 %   $ 17,430   $ 17,771   2.0 %
Non-Cash Stock Compensation 3,659   537   (85.3 %)   6,583   2,153   (67.3 %)
Interest Expense 6,346   6,615   4.2 %   21,109   25,522   20.9 %
Accretion of Discount on Convertible Subordinated Notes 231   63   (72.7 %)   2,192   241   (89.0 %)
Net Loss on Early Extinguishment of Debt (434 )       502      
Other, Net 893   196       1,238   4,110    
Pre-Tax Income (Loss) $ (1,102 ) $ 4,683   525.0 %   $ 18,266   $ 22,416   22.7 %
Provision for Income Taxes 331   1,845       5,754   7,395    
Tax Adjustment Related to Certain Discrete Items 1,225   269       867   488    
Net Tax Provision 1,556   2,114       6,621   7,883    
GAAP Net Income (Loss) $ (2,658 ) $ 2,569   196.7 %   $ 11,645   $ 14,533   24.8 %
               
Special Items, Net of Tax, except for **              
Acquisition and Divestiture Expenses $   $ 1,646       $   $ 1,646    
Severance and Retirement Costs 1,134   62       1,134   951    
Performance Awards Cancellation Write-off 2,594         2,594      
Accretion of Discount on Convertible Subordinated Notes ** 231   63       2,192   241    
Net Loss (Gain) on Early Extinguishment of Debt (343 )       397      
Loss on Sale of Business and Other Costs 162   188       439   3,331    
Goodwill and Other Impairments 805   184       805   761    
Litigation Reserve 790   138       790   592    
Natural Disaster Costs 345         345      
Tax Expense Related to Divested Business**   51         911    
Gain on Insurance Reimbursements   (195 )       (699 )  
Other Special Items   265         265    
Tax Adjustment Related to Certain Discrete Items** 1,225         1,225      
               
Adjusted Net Income $ 4,285   $ 4,971   16.0 %   $ 21,566   $ 22,532   4.5 %
Adjusted Net Profit Margin 6.4 % 7.0 % 60 bp   8.0 % 8.2 % 20 bp
               
Adjusted Basic Earnings Per Share $ 0.23   $ 0.28   21.7 %   $ 1.19   $ 1.26   5.9 %
Adjusted Diluted Earnings Per Share $ 0.23   $ 0.28   21.7 %   $ 1.17   $ 1.25   6.8 %
               
GAAP Basic Earnings (Loss) Per Share $ (0.14 ) $ 0.14   200.0 %   $ 0.64   $ 0.81   26.6 %
GAAP Diluted Earnings (Loss) Per Share $ (0.14 ) $ 0.14   200.0 %   $ 0.63   $ 0.80   27.0 %
               
Weighted Average Basic Shares Outstanding 18,772   17,760       17,971   17,877    
Weighted Average Diluted Shares Outstanding 18,838   17,901       18,374   18,005    
               
Adjusted Consolidated EBITDA $ 16,795   $ 19,183   14.2 %   $ 70,192   $ 76,587   9.1 %
Adjusted Consolidated EBITDA Margin 25.2 % 27.0 % 180 bp   26.2 % 27.9 % 170 bp


CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)

  December 31,
  2018   2019
ASSETS      
Current assets:      
Cash and cash equivalents $ 644     $ 716  
Accounts receivable, net 18,897     21,478  
Inventories 6,751     6,989  
Prepaid and other current assets 3,011     10,667  
Total current assets 29,303     39,850  
Preneed cemetery trust investments 62,432     72,382  
Preneed funeral trust investments 82,074     96,335  
Preneed cemetery receivables, net 18,441     20,173  
Receivables from preneed trusts 17,073     18,024  
Property, plant and equipment, net 260,838     279,200  
Cemetery property, net 74,958     87,032  
Goodwill 303,887     398,292  
Intangible and other non-current assets, net 24,425     32,116  
Operating lease right-of-use assets     22,304  
Cemetery perpetual care trust investments 44,071     64,047  
Total assets $ 917,502     $ 1,129,755  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Current portion of long-term debt $ 2,015     $ 1,306  
Current portion of finance lease obligations 312     290  
Current portion of operating lease obligations     1,554  
Accounts payable 9,987     8,413  
Accrued and other liabilities 22,644     24,026  
Total current liabilities 34,958     35,589  
Long-term debt, net of current portion 6,925     5,658  
Credit facility 26,145     82,182  
Convertible subordinated notes due 2021 5,732     5,971  
Senior notes due 2026 319,108     395,447  
Obligations under finance leases, net of current portion 6,143     5,854  
Obligations under operating leases, net of current portion     21,533  
Deferred preneed cemetery revenue 45,997     46,569  
Deferred preneed funeral revenue 28,606     29,145  
Deferred tax liability 31,263     41,368  
Other long-term liabilities 3,133     1,737  
Deferred preneed cemetery receipts held in trust 62,432     72,382  
Deferred preneed funeral receipts held in trust 82,074     96,335  
Care trusts’ corpus 43,494     63,416  
Total liabilities 696,010     903,186  
Commitments and contingencies      
Stockholders’ equity:      
Common stock 257     259  
Additional paid-in capital 243,849     242,147  
Retained earnings 71,680     86,213  
Treasury stock (94,294 )   (102,050 )
Total stockholders’ equity 221,492     226,569  
Total liabilities and stockholders’ equity $ 917,502     $ 1,129,755  


CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)

  (unaudited)        
  Three Months Ended December 31,   Years Ended December 31,
  2018   2019   2018   2019
               
Revenue:              
Service revenue 34,944     37,110     138,604     142,554  
Property and merchandise revenue 27,512     29,056     112,253     114,514  
Other revenue 4,061     4,983     17,135     17,039  
  66,517     71,149     267,992     274,107  
Field costs and expenses:              
Cost of service 18,092     18,928     72,123     72,991  
Cost of merchandise 22,212     22,750     90,008     89,294  
Cemetery property amortization 839     995     3,602     3,985  
Field depreciation expense 3,090     3,120     12,015     12,370  
Regional and unallocated funeral and cemetery costs 4,087     3,819     12,749     13,827  
Other expenses 377     858     1,548     2,055  
  48,697     50,470     192,045     194,522  
Gross profit 17,820     20,679     75,947     79,585  
               
Corporate costs and expenses:              
General, administrative and other 11,485     8,821     30,827     25,880  
Home office depreciation and amortization 401     301     1,813     1,416  
  11,886     9,122     32,640     27,296  
Operating income 5,934     11,557     43,307     52,289  
Interest expense (6,346 )   (6,615 )   (21,109 )   (25,522 )
Accretion of discount on convertible subordinated notes (231 )   (63 )   (2,192 )   (241 )
Loss on early extinguishment of debt 434         (502 )    
Other, net (893 )   (196 )   (1,238 )   (4,110 )
Income (loss) before income taxes (1,102 )   4,683     18,266     22,416  
Provision for income taxes (331 )   (1,845 )   (5,754 )   (7,395 )
Tax adjustment related to certain discrete items (1,225 )   (269 )   (867 )   (488 )
Total provision for income taxes (1,556 )   (2,114 )   (6,621 )   (7,883 )
Net income (loss) $ (2,658 )   $ 2,569     $ 11,645     $ 14,533  
                               
Basic earnings (loss) per common share $ (0.14 )   $ 0.14     $ 0.64     $ 0.81  
Diluted earnings (loss) per common share $ (0.14 )   $ 0.14     $ 0.63     $ 0.80  
               
Dividends declared per share: $ 0.075     $ 0.075     $ 0.300     $ 0.300  
Weighted average number of common and common equivalent shares outstanding:              
Basic 18,772     17,760     17,971     17,877  
Diluted 18,838     17,901     18,374     18,005  


CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

  For the Years Ended December 31,
  2018   2019
Cash flows from operating activities:      
Net income $ 11,645     $ 14,533  
Adjustments to reconcile net income to net cash provided by operating activities:      
Depreciation and amortization 17,430     17,771  
Provision for losses on accounts receivable 1,841     1,618  
Stock-based compensation expense 6,583     2,153  
Deferred income tax expense 3,823     10,117  
Amortization of deferred financing costs 532     392  
Amortization of capitalized commissions on preneed contracts 599     558  
Accretion of discount on convertible subordinated notes 2,192     241  
Accretion of discount on senior notes 272     492  
Net loss on early extinguishment of debt 502      
Net loss on sale of businesses and disposal of other assets 1,052     4,096  
Goodwill and other Impairments 1,019     963  
Gain on insurance reimbursements     (879 )
Other     121  
Changes in operating assets and liabilities that provided (required) cash:      
Accounts and preneed receivables (5,061 )   (5,801 )
Inventories and other current assets (159 )   (7,762 )
Intangible and other non-current assets (390 )   (251 )
Preneed funeral and cemetery trust investments 488     (6,500 )
Accounts payable 2,044     (1,976 )
Accrued and other liabilities 3,990     1,271  
Deferred preneed funeral and cemetery revenue 6,546     168  
Deferred preneed funeral and cemetery receipts held in trust (5,954 )   5,495  
Net cash provided by operating activities 48,994     36,820  
       
Cash flows from investing activities:      
Acquisitions and land for new construction (37,970 )   (140,907 )
Proceeds from insurance reimbursements     1,433  
Net proceeds from sale of businesses and other assets     967  
Capital expenditures (13,526 )   (15,379 )
Net cash used in investing activities (51,496 )   (153,886 )
       
Cash flows from financing activities:      
Payments against the term loan (127,500 )    
Borrowings from the credit facility 124,500     174,961  
Payments against the credit facility (189,400 )   (118,261 )
Payment of debt issuance costs related to the credit facility (1,751 )   (891 )
Acquisition of 2.75% convertible subordinated notes (98,266 )   (27 )
Transaction costs related to the acquisition of 2.75% convertible subordinated notes (885 )    
Proceeds from the issuance of the 6.625% senior notes 320,125     76,688  
Payment of debt issuance costs related to the 6.625% senior notes (1,367 )   (980 )
Payments on long-term debt and obligations under capital leases (1,940 )   (2,287 )
Payments on contingent consideration recorded at acquisition date (138 )   (162 )
Proceeds from the exercise of stock options and employee stock purchase plan contributions 1,246     1,445  
Taxes paid on restricted stock vestings and exercises of non-qualified options (651 )   (194 )
Dividends paid on common stock (5,513 )   (5,398 )
Purchase of treasury stock (16,266 )   (7,756 )
Net cash provided by financing activities 2,194     117,138  
       
Net increase (decrease) in cash and cash equivalents (308 )   72  
Cash and cash equivalents at beginning of year 952     644  
Cash and cash equivalents at end of year $ 644     $ 716  
               

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.

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 accompany this press release. Reconciliations of the Non-GAAP financial measures to GAAP measures are also 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”, “Divested/Planned Divested Revenue”, “Divested/Planned Divested EBITDA”, “Divested/Planned Divested EBITDA Margin”, “Adjusted Basic Earnings Per Share”, “Adjusted Diluted Earnings Per Share”, and “Total Debt to EBITDA Multiple” 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 and the Tax Expense Related to a Divested Business.
  • 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 and other, net.
  • 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.
  • 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, excluding depreciation and amortization, regional and unallocated costs and Financial EBITDA related to the Funeral Home segment.
  • Cemetery Field EBITDA is defined as Cemetery Gross Profit, excluding depreciation and amortization, regional and unallocated costs and Cemetery Financial EBITDA related to the Cemetery segment.
  • 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, 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.
  • Divested/Planned Divested Revenue is defined as revenue from three cemetery businesses that we divested as a result of  a management agreement that expired in 2018 and five funeral home businesses that we divested as of December 31, 2019. Additionally, it includes 14 funeral home businesses we intend to divest.
  • Divested/Planned Divested EBITDA is defined as Divested/Planned Divested Revenue, less field level and financial expenses related to the Divested/Planned Divested businesses noted above.
  • Divested/Planned Divested EBITDA Margin is defined as Divested/Planned Divested EBITDA as a percentage of Divested/Planned Divested 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.
  • Total Debt to 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 Adjusted Consolidated EBITDA.

Funeral Field EBITDA and Cemetery Field EBITDA

Our operations are reported 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).

Funeral Field EBITDA and Cemetery Field EBITDA are defined above. Gross Profit is defined as Revenue less “Field costs and expenses” - a line item encompassing these areas of costs: i) Funeral and cemetery field costs, ii) Field depreciation and amortization expense, and iii) Regional and unallocated funeral and cemetery costs. Funeral and cemetery field costs include cost of service, funeral and cemetery merchandise costs, operating expenses, labor and other related expenses incurred at the business level.

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 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.

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. Carriage Services strongly encourages investors to review the Company's consolidated financial statements and publicly filed reports in their entirety and not rely on any single financial measure.

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, all of which are reflected in the tables below.

Reconciliation of Net Income (Loss) to Adjusted Net Income for the three months ended and years ended December 31, 2018 and 2019 (in thousands):

  For the Three Months Ended
December 31,
  For the Years Ended
December 31,
  2018   2019   2018   2019
Net Income (Loss) $ (2,658 )   $ 2,569     $ 11,645     $ 14,533  
Special Items, Net of Tax, except for **              
Acquisition and Divestiture Expenses     1,646         1,646  
Severance and Retirement Costs 1,134     62     1,134     951  
Performance Awards Cancellation Write-off 2,594         2,594      
Accretion of Discount on Convertible Subordinated Notes ** 231     63     2,192     241  
Net Loss (Gain) on Early Extinguishment of Debt (343 )       397      
Loss on Sale of Business and Other Costs 162     188     439     3,331  
Goodwill and Other Impairments 805     184     805     761  
Litigation Reserve 790     138     790     592  
Natural Disaster Costs 345         345      
Tax Expense Related to Divested Business**     51         911  
Gain on Insurance Reimbursements     (195 )       (699 )
Other Special Items     265         265  
Tax Adjustment Related to Certain Discrete Items ** 1,225         1,225      
Adjusted Net Income $ 4,285     $ 4,971     $ 21,566     $ 22,532  
               
 ** 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 and the Tax Expense Related to a Divested Business and the Tax Adjustment Related to Certain Discrete Items.

 

Reconciliation of Net Income (Loss) to Consolidated EBITDA and Adjusted Consolidated EBITDA for the three months ended and years ended December 31, 2018 and 2019 (in thousands):

  For the Three Months Ended
December 31,
  For the Years Ended
December 31,
  2018   2019   2018   2019
Net Income (Loss) $ (2,658 )   $ 2,569     $ 11,645     $ 14,533  
Total Provision for Income Taxes 1,556     2,114     6,621     7,883  
Income (Loss) Before Income Taxes (1,102 )   4,683     18,266     22,416  
Interest Expense 6,346     6,615     21,109     25,522  
Accretion of Discount on Convertible Subordinated Notes 231     63     2,192     241  
Net Loss on Early Extinguishment of Debt (434 )       502      
Non-Cash Stock Compensation 3,659     537     6,583     2,153  
Depreciation & Amortization 4,330     4,416     17,430     17,771  
Other, Net 893     196     1,238     4,110  
Consolidated EBITDA $ 13,923     $ 16,510     $ 67,320     $ 72,213  
Adjusted For:              
Acquisition and Divestiture Expenses     2,083         2,083  
Severance and Retirement Costs 1,435     79     1,435     1,205  
Litigation Reserve 1,000     175     1,000     750  
Natural Disaster Costs 437         437      
Other Special Items     336         336  
Adjusted Consolidated EBITDA $ 16,795     $ 19,183     $ 70,192     $ 76,587  
               
Revenue $ 66,517     $ 71,149     $ 267,992     $ 274,107  
               
Adjusted Consolidated EBITDA Margin 25.2 %   27.0 %   26.2 %   27.9 %

 

Reconciliation of Funeral and Cemetery Gross Profit to Field EBITDA for the three months ended and years ended December 31, 2018 and 2019 (in thousands):

  For the Three Months Ended
December 31,
  For the Years Ended
December 31,
  2018   2019   2018   2019
Funeral Gross Profit (GAAP) $ 14,919     $ 16,778     $ 60,881     $ 63,602  
Depreciation & Amortization 2,790     2,806     10,726     11,128  
Regional & Unallocated Costs 3,291     2,919     10,547     11,007  
Funeral Financial EBITDA (1,888 )   (1,884 )   (7,524 )   (7,517 )
Other Funeral EBITDA     (298 )       (298 )
Funeral Divested/Planned Divested EBITDA (517 )   (253 )   (1,779 )   (1,437 )
Funeral Field EBITDA $ 18,595     $ 20,068     $ 72,851     $ 76,485  
                               

 

  For the Three Months Ended
December 31,
  For the Years Ended
December 31,
  2018   2019   2018   2019
Cemetery Gross Profit (GAAP) $ 2,901     $ 3,901     $ 15,066     $ 15,983  
Depreciation & Amortization 1,139     1,309     4,891     5,227  
Regional & Unallocated Costs 796     900     2,202     2,820  
Cemetery Financial EBITDA (1,709 )   (1,890 )   (6,903 )   (6,902 )
Cemetery Divested/Planned Divested EBITDA         (1,376 )    
Cemetery Field EBITDA $ 3,127     $ 4,220     $ 13,880     $ 17,128  
                               

 

Components of Total Field EBITDA for the three months ended and years ended December 31, 2018 and 2019 (in thousands):

  For the Three Months Ended
December 31,
  For the Years Ended
December 31,
  2018   2019   2018   2019
Funeral Field EBITDA $ 18,595     $ 20,068     $ 72,851     $ 76,485  
Cemetery Field EBITDA 3,127     4,220     13,880     17,128  
Funeral Financial EBITDA 1,888     1,884     7,524     7,517  
Cemetery Financial EBITDA 1,709     1,890     6,903     6,902  
Other Funeral EBITDA     298         298  
Funeral Divested/Planned Divested EBITDA 517     253     1,779     1,437  
Cemetery Divested/Planned Divested EBITDA         1,376      
Total Field EBITDA $ 25,836     $ 28,613     $ 104,313     $ 109,767  
                               

 

Reconciliation of GAAP Basic Earnings (Loss) Per Share to Adjusted Basic Earnings Per Share for the three months ended and years ended December 31, 2018 and 2019:

  For the Three Months Ended
December 31,
  For the Years Ended
December 31,
  2018   2019   2018   2019
GAAP Basic Earnings (Loss) Per Share $ (0.14 )   $ 0.14     $ 0.64     $ 0.81  
Special Items 0.37     0.14     0.55     0.45  
Adjusted Basic Earnings Per Share $ 0.23     $ 0.28     $ 1.19     $ 1.26  
                               

 

Reconciliation of GAAP Diluted Earnings (Loss) Per Share to Adjusted Diluted Earnings Per Share for the three months ended and years ended December 31, 2018 and 2019:

  For the Three Months Ended
December 31,
  For the Years Ended
December 31,
  2018   2019   2018   2019
GAAP Diluted Earnings (Loss) Per Share $ (0.14 )   $ 0.14     $ 0.63     $ 0.80  
Special Items 0.37     0.14     0.54     0.45  
Adjusted Diluted Earnings Per Share $ 0.23     $ 0.28     $ 1.17     $ 1.25  
                               

 

Reconciliation of Pro Forma Adjusted Financial Measures:

This press release includes the use of certain financial measures that are not GAAP measures. The Pro Forma Adjusted results presented earlier in this press release are reconciled to their most comparable GAAP measures, all of which are reflected in the tables below.

Reconciliation of Net Income (Loss) to Pro Forma Adjusted Net Income for the three months ended and years ended December 31, 2018 and 2019 (in thousands):

  For the Three Months Ended
December 31,
  For the Years Ended
December 31,
  2018   2019   2018   2019
Net Income (Loss) $ (2,658 )   $ 2,569     $ 11,645     $ 14,533  
Total Provision for Income Taxes 1,556     2,114     6,621     7,883  
Income (Loss) Before Income Taxes (1,102 )   4,683     18,266     22,416  
Adjusted For:              
Interest Expense         (4,000 )    
Acquisition Expense     2,083         2,083  
Recruiting Expense     336         336  
Severance and Retirement Costs 1,435     79     1,435     1,205  
Non-Cash Stock Compensation 3,283         3,283      
Litigation Reserve 1,000     175     1,000     750  
Divestiture of Funeral Home Business             3,840  
Divested EBITDA (28 )   32     (1,422 )   (56 )
Pro Forma Adjusted Income Before Income Taxes $ 4,588     $ 7,388     $ 18,562     $ 30,574  
Pro Forma Adjusted Total Provision for Income Taxes 2,670     2,404     6,714     9,324  
Pro Forma Adjusted Net Income $ 1,918     $ 4,984     $ 11,848     $ 21,250  
                               

 

Reconciliation of Field EBITDA to Pro Forma Adjusted Field EBITDA and Pro Forma Adjusted Consolidated EBITDA for the three months ended and years ended December 31, 2018 and 2019 (in thousands):

  For the Three Months
Ended December 31,
  For the Years
Ended December 31,
  2018   2019   2018   2019
Field EBITDA $ 25,836     $ 28,613     $ 104,313     $ 109,767  
Adjusted For:              
Litigation Reserve     100         581  
Divested EBITDA (28 )   32     (1,422 )   (56 )
Pro Forma Adjusted Field EBITDA $ 25,808     $ 28,745     $ 102,891     $ 110,292  
Total Overhead Costs 11,913     12,103     36,993     37,554  
Adjusted For:              
Litigation Reserve (1,000 )   (75 )   (1,000 )   (170 )
Severance and Retirement Costs (1,435 )   (79 )   (1,435 )   (1,205 )
Acquisition Expense     (2,083 )       (2,083 )
Recruiting Expense     (336 )       (336 )
Natural Disaster Costs (437 )       (437 )    
Pro Forma Adjusted Consolidated EBITDA $ 16,767     $ 19,215     $ 68,770     $ 76,532  
               
Revenue $ 66,517     $ 71,149     $ 267,992     $ 274,107  
Adjusted For:              
Divested Revenue (249 )   (63 )   (5,677 )   (805 )
Pro Forma Adjusted Revenue $ 66,268     $ 71,086     $ 262,315     $ 273,302  
               
               
Pro Forma Adjusted Field EBITDA Margin 38.9 %   40.4 %   39.2 %   40.4 %
Pro Forma Adjusted Consolidated EBITDA Margin 25.3 %   27.0 %   26.2 %   28.0 %

 

Reconciliation of GAAP Diluted Earnings (Loss) Per Share to Pro Forma Adjusted Diluted Earnings Per Share for the three months ended and years ended December 31, 2018 and 2019:

  For the Three Months
Ended December 31,
  For the Years Ended
December 31,
  2018   2019   2018   2019
GAAP Diluted Earnings (Loss) Per Share $ (0.14 )   $ 0.14     $ 0.63     $ 0.80  
Special Items 0.37     0.14     0.54     0.45  
Pro Forma Adjustments     0.01     (0.24 )   (0.05 )
Pro Forma Adjusted Diluted Earnings Per Share $ 0.23     $ 0.29     $ 0.93     $ 1.20  
                               

 

Supplemental Information:

Funeral homes and cemeteries purchased after December 31, 2014 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 2014 Acquired Portfolio that moved from Acquired to Same Store beginning January 1, 2019 (in thousands):

  For the Three Months
Ended December 31, 2018
  For the Year Ended
December 31, 2018
  Revenue   EBITDA   Revenue   EBITDA
2014 Acquired Portfolio $ 3,310     $ 1,339     $ 12,989     $ 5,254  

 

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 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 December 31, 2020, 2021 and 2022 (in thousands):

  Years Ending December 31,
    2020E       2021E       2022E  
Net Income $ 28,600     $ 37,200     $ 44,000  
Total Tax Provision 11,100     14,500     17,100  
Pretax Income 39,700     51,700     61,100  
Net Interest Expense, including Accretion of Discount on Convertible Subordinated Notes 32,000     24,200     23,500  
Depreciation & Amortization, including Non-cash Stock Compensation 22,900     23,900     19,700  
Consolidated EBITDA $ 94,600     $ 99,800     $ 104,300  
Overhead 35,400     36,000     37,900  
Total Field EBITDA $ 130,000     $ 135,800     $ 142,200  
           
Revenue $ 317,000     $ 323,000     $ 331,000  
Total Field EBITDA Margin 41.0 %   42.0 %   43.0 %

 

Reconciliation of Consolidated EBITDA to Adjusted Consolidated EBITDA for the Estimated Years Ending December 31, 2020, 2021 and 2022 (in thousands):

  Years Ending December 31,
    2020E       2021E       2022E  
Consolidated EBITDA $ 94,600     $ 99,800     $ 104,300  
Special Items          
Adjusted Consolidated EBITDA $ 94,600     $ 99,800     $ 104,300  
           
Revenue $ 317,000     $ 323,000     $ 331,000  
Adjusted Consolidated EBITDA Margin 29.8 %   30.9 %   31.5 %

 

Reconciliation of Net Income to Adjusted Net Income for the Estimated Years Ending December 31, 2020, 2021 and 2022 (in thousands):

  Years Ending December 31,
    2020E       2021E       2022E  
Net Income $ 28,600     $ 37,200     $ 44,000  
Special Items          
Adjusted Net Income $ 28,600     $ 37,200     $ 44,000  
                       

 

Reconciliation of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share for the Estimated Years Ending December 31, 2020, 2021 and 2022 (in thousands):

  Years Ending December 31,
    2020E       2021E       2022E  
GAAP Diluted Earnings Per Share $ 1.59     $ 2.07     $ 2.44  
Special Items          
Adjusted Diluted Earnings Per Share $ 1.59     $ 2.07     $ 2.44  
                       

 

Reconciliation of Cash Flow Provided by Operating Activities to Adjusted Free Cash Flow for the Estimated Years December 31, 2020, 2021 and 2022 (in thousands):

  Years Ending December 31,
    2020E       2021E       2022E  
Cash Flow Provided by Operating Activities $ 52,000     $ 63,000     $ 71,000  
Cash used for Maintenance Capital Expenditures (9,000 )   (9,000 )   (9,000 )
Adjusted Free Cash Flow $ 43,000     $ 54,000     $ 62,000  
                       

 

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 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 of the plans, timing and objectives of management for acquisition and divestiture activities; any statements of the plans, timing, expectations and objectives of management for future financing activities; any statements regarding future economic and market 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;
  • 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;
  • our ability to consummate the divestiture of low performing businesses as currently expected, if at all;
  • our ability to meet the timing, objectives and cost saving expectations related to anticipated financing activities;
  • 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; 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 Carriage Services information and news releases are available at www.carriageservices.com.

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Source: Carriage Services, Inc.