Release Details

HOUSTON, Feb. 25, 2013 /PRNewswire/ -- Carriage Services, Inc. (NYSE: CSV) today announced record results for the quarter and full year ending December 31, 2012.

Mel Payne, Chief Executive Officer, stated, "Our fourth quarter performance was outstanding, as we achieved strong revenue growth of 13.1% to a record $53.3 million, and Adjusted Earnings Per Share growth of 140% to $0.24 per share.  Our full year results were also outstanding as we achieved strong revenue growth of 8.8% to a record $204.1 million and Adjusted Earnings Per Share growth of 30.8% to a record $0.85 per share.  This record performance was driven by substantially higher year over year revenue growth and margin expansion in each of our four major profit segments, the consolidated impact of which is reflected in the 2012 quarterly and full year comparative highlights shown below."

Three Months Ending December 31, 2012

• Total Revenue up 13.1% to $53.3 million;
• Total Field EBITDA up 25.7% to $22.1 million;
• Total Field EBITDA Margin up 420 basis points to 41.5%;
• Consolidated EBITDA up 56.0% to $12.5 million;
• Consolidated EBITDA Margin up 650 basis points to 23.5%;
• Adjusted Consolidated EBITDA up 24.8% to $13.6 million;
• Adjusted Consolidated EBITDA Margin up 240 basis points to 25.5%;
• Adjusted Earnings Per Share up 140.0% to $0.24 from $0.10 in 2011; and
• GAAP Diluted EPS from Continuing Operations up 1050% to $0.23 in 2012 from $0.02 in 2011.

Twelve Months Ending December 31, 2012

• Total Revenue up 8.8% to $204.1 million;
• Total Field EBITDA up 16.1% to $80.9 million;
• Total Field EBITDA Margin up 250 basis points to 39.6%;
• Consolidated EBITDA up 24.2% to $50.6 million;
• Consolidated EBITDA Margin up 310 basis points to 24.8%;
• Adjusted Consolidated EBITDA up 9.4% to $54.9 million;
• Adjusted Consolidated EBITDA Margin up 20 basis points to 26.9%;
• Adjusted Earnings Per Share up 30.8% to $0.85 from $0.65 in 2011; and
• GAAP Diluted EPS from Continuing Operations up 73.0% to $0.64 from $0.37 in 2011.

Adjusted Earnings Per Share, Adjusted Net Income, Consolidated EBITDA, Adjusted Consolidated EBITDA, Field EBITDA, Free Cash Flow are all non-GAAP financial measures management believes are important financial measurements to understand the company's operations and financial results.  These items are defined and reconciled to GAAP later in the press release.

"Our record fourth quarter and full year performance was the result of rapid and transformative change throughout 2012, starting with a major management reorganization and an updated Funeral Standards Operating Model in the fourth quarter of 2011.  As the year progressed, we positioned Carriage in four other major fundamental areas to have a strong 2012 fourth quarter finish and to enter 2013 with a higher capacity of sustainable earnings power."

"First, we completed and rolled out an updated Cemetery Standards Operating Model effective January 1, 2013, and recruited the organizational leadership both at the corporate and field level to take our Cemetery Portfolio performance to a much higher and sustainable level over time.  Second, we made substantial structural changes in how we manage and receive compensation from our trust funds, which should result in higher sustainable financial revenue over time.  Third, we completed the refinancing of our $130 million of 7.875% senior notes due 2015 with a $235 million syndicated bank financing comprised of a $130 million five year term loan and a $105 million five year revolving credit facility, with interest savings of over 400 basis points on the refinanced term loan.  And finally, we  increased our acquisition activity by closing three transactions in December whose full impact will be reflected beginning in January 2013. Our active acquisition program will continue to drive acquisition revenue and earnings growth."

"Accordingly, as a result of the effectiveness of the many organizational leadership changes over the past year and the success of our renewed focus on all the drivers of sustainable high performance, we are substantially raising our Rolling Four Quarter Outlook of Adjusted EPS to $1.11 to $1.14 from our previous guidance of $1.03 to $1.05.  This is the first time in our twenty-one year history that we will have achieved the milestone of earnings in excess of $1.00 per share during a calendar year."

"As we entered 2012 after concluding our 20^th anniversary year in 2011, we established extraordinarily challenging goals over the five year period ending with 2016, consistent with the five year theme of taking Carriage from a Good company in 2012 to one considered Great by 2016.  We more than met the standard of high performance captured by our yearly theme for 2012, "Carriage Services 2012 - A NEW BEGINNING!"  Our yearly theme for 2013, "Carriage Services 2013- Raising the Standard — All In!", speaks to the confidence we have in our corporate and field leaders and employees to execute our models individually and as teams so as to bring "Being the Best" distinction upon themselves and our company," concluded Mr. Payne.

FUNERAL FIELD OPERATIONS

For the Three Months Ending December 31, 2012

• Total Funeral Operating Revenue increased 10.1% to $37.9 million;
• Same Store Funeral Revenue increased 2.8% with same store volume increasing 4.0%;
• Acquisition Funeral Revenue increased 57.7% with acquisition volume increasing 35.5%;
• Total Funeral Field EBITDA increased 17.6%  to $14.4 million;
• Total Funeral Field EBITDA Margin increased 250 basis points to 38.0%;
• Average revenue per contract increased 0.3% to $5,347; and
• Cremation rate increased 130 basis points to 46.5%.

For the Twelve Months Ending December 31, 2012

• Total Funeral Operating Revenue increased 8.4% to $146.4 million;
• Same Store Funeral Revenue decreased 0.2% with same store volume decreasing 1.4%;
• Acquisition Funeral Revenue increased 81.6% with acquisition volume increasing 52.6%;
• Total Funeral Field EBITDA increased 16.2% to $54.6 million;
• Total Funeral Field EBITDA Margin increased 250 basis points to 37.3%;
• Average revenue per contract excluding trust earnings increased 1.6% to $5,369; and
• Cremation rate increased 100 basis points to 46.0%.

CEMETERY FIELD OPERATIONS

For the Three Months Ending December 31, 2012

• Total Cemetery Operating Revenue increased 9.0% to $10.1 million;
• Total Cemetery Field EBITDA increased 28.4% to $2.8 million;
• Total Cemetery Field EBITDA Margin increased 410 basis points to 27.4%;
• Cemetery pre-need property sale contracts declined 8.9% to 1,433; and
• Average Cemetery pre-need property sale per contract increased 7.6% to $2,747.

For the Twelve Months Ending December 31, 2012

• Total Cemetery Operating Revenue increased 5.0% to $40.1 million;
• Total Cemetery Field EBITDA increased 6.0% to $10.1 million;
• Total Cemetery Field EBITDA Margin increased 20 basis points to 25.2%;
• Cemetery pre-need property sale contracts increased 1.0% to 6,600; and
• Average Cemetery pre-need property sale per contract increased 6.0% to $2,765.

FINANCIAL OPERATIONS

For the Three Months Ending December 31, 2012

• Total Financial Revenue increased 52.6% to $5.3 million;
• Total Financial EBITDA increased 54.5% to $5.0 million;
• Total Financial EBITDA Margin increased 120 basis points to 93.4%;
• Funeral Financial Revenue decreased 2.7% to $1.9 million; and
• Cemetery Financial Revenue increased 124.4% to $3.4 million.

For the Twelve Months Ending December 31, 2012

• Total Financial Revenue increased 21.7% to $17.7 million;
• Total Financial EBITDA increased 23.3% to $16.2 million;
• Total Financial EBITDA Margin increased 130 basis points to 91.8%;
• Funeral Financial Revenue decreased 6.0% to $7.7 million; and
• Cemetery Financial Revenue increased 57.1% to $10.0 million.

FREE CASH FLOW

Carriage generated Free Cash Flow from continuing operations for the year 2012 of $20.6 million compared to Free Cash Flow from continuing operations of $24.2 million for the corresponding period in 2011 as summarized below (in millions):

ACQUISITIONS

Carriage is focused on acquiring additional funeral homes and cemetery businesses through a highly disciplined Strategic Acquisition Model as a core strategy to grow revenues and earnings.  Since the implementation of this updated and revised model late in the fourth quarter of 2011, we have acquired eight funeral homes and one cemetery that are expected to generate approximately $18.0 million in annual revenue.  However, these acquisitions contributed only $6.9 million in revenue for the full year 2012 due to the timing of the purchases.  The full revenue and earnings impact of the recent acquisitions will be realized on a full year basis in 2013. All of these acquisitions have been accretive to earnings per share and the combined Field EBITDA Margin on these eight acquisitions was at 38.1% for the full year 2012. We expect to complete six to eight acquisitions with total annualized revenue of $15 to $16 million in fiscal 2013.  These anticipated acquisitions will be spread throughout the year and there are no specific acquisitions under a letter of intent at this point in time.

SENIOR SECURED CREDIT FACILITY

As previously disclosed in the third quarter  press release, we completed a transaction to restructure our debt agreements with a new $235 million secured bank credit facility (the "Credit Facility") with $105 million available under a revolving credit facility and $130 million available as a term loan. The new Credit Facility also contains an accordion provision to borrow up to an additional $40 million in revolving loans.  The Term Loan was used to redeem and replace our existing 7.875% Senior Notes. The revolver portion of the Credit Facility refinanced our then existing Revolving Credit, paid other transaction related expenses and will provide for future corporate needs.  The Credit Facility has a five year maturity and is collateralized by all personal property and funeral home real property in certain states. Interest under the new Credit Facility is payable at prime or LIBOR options.  As of December 31, 2012, $44.7 million was drawn under the revolving credit facility and $127.5 million is outstanding on the term loan.

In connection with the repayment of the previously outstanding senior debt, the Company incurred a call premium payment to the former debtholders in the amount of $1.7 million and recorded a pre-tax charge in the amount of $1.3 million to write off the related unamortized loan costs. GAAP diluted earnings per share from continuing operations in the current year were affected by the above mentioned costs that totaled $0.10 per share on an after-tax basis.  The benefits of the new Credit Facility include substantially lower interest costs and increased capacity for financing acquisition growth.

TRUST FUND PERFORMANCE

During the fourth quarter of 2012, Carriage's discretionary trust funds gained 3.1% compared to a loss of 0.4% for the S&P 500 and a 3.2% gain for the Barclay's U.S. Corporate High Yield Index.  For the year ending December 31, 2012, Carriage's discretionary trust funds gained 20.3% versus a gain of 16.0% for the S&P 500 and 15.8% for the High Yield Index. 

The current yield on Carriage's discretionary fixed income portfolio is 8.46% and the estimated annual income for the entire discretionary portfolio is $12.4 million.  Over the past four years, Carriage has grown the estimated annual income by 128% while realizing approximately $84 million in net income in our discretionary trust accounts. 

The high amount of recurring current income combined with the realized net income in our discretionary trust portfolio will continue to benefit Carriage through the increased value of preneed funeral and cemetery contracts at maturity.  Carriage will also benefit from the recurring income from our cemetery perpetual care accounts which is recognized as GAAP revenue and earnings in the current period.

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.

 

ROLLING FOUR QUARTER OUTLOOK RAISED

As a result of the effectiveness of the many organizational leadership changes over the past year and the success of our renewed focus on all the drivers of sustainable high performance, we are substantially raising our Rolling Four Quarter Outlook of Adjusted EPS to $1.11 to $1.14 from our previous guidance of $1.03 to $1.05.  This is the first time in our twenty-one year history that we will have achieved the milestone of earnings in excess of $1.00 per share during a calendar year.

The Rolling Four Quarter Outlook "(Outlook)" reflects management's current opinion on the performance of the portfolio of businesses for the rolling four quarter period ending December 31, 2013, and the performance of the trusts as well as our view of the financial markets.  Factors affecting our analysis include, among others, acquisitions, funeral contract volumes, average revenue per funeral service, cemetery interment volumes, preneed cemetery sales, capital expenditures, execution of our funeral and cemetery Standards Operating Model, Strategic Acquisition Model and Withdrawable Trust Income. 

 

 

Revenues, Consolidated EBITDA, Adjusted Consolidated EBITDA, Net Income, Adjusted Net Income, GAAP Earnings Per Share, Adjusted Earnings Per Share and Free Cash Flow for the four quarter period ending December 31, 2013 are expected to improve relative to the same period ended December 31, 2012, for the following reasons:

• The new Credit Facility will allow for increased financial capacity for acquisitions and substantially reduced interest costs;
• Increases in Acquired Funeral Revenue and Acquired Funeral Field EBITDA;
• Modest increases in Same Store Funeral Revenue  and Same Store Funeral Field EBITDA;
• Increases in Cemetery Revenue and Cemetery Field EBITDA; and
• Increases in Financial Revenue and Financial EBITDA from trust funds.

 

 

CONFERENCE CALL AND INVESTOR RELATIONS CONTACTS

Carriage Services has scheduled a conference call for tomorrow, February 26, 2013 at 9:30 a.m. CST.  To participate in the call, please dial 866-516-3867 (code - 10408333) and ask for the Carriage Services conference call.  A telephonic replay of the conference call will be available through March 8, 2013 and may be accessed by dialing 404-537-3406 (code - 10408333). An audio archive will also be available on the company's website at www.carriageservices.com after the call.  For more information on any investor relations questions, please contact Bill Heiligbrodt at 713-332-8553.

NON-GAAP FINANCIAL MEASURES

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

The Non-GAAP financial measures include "Free Cash Flow", "Funeral and Cemetery Field EBITDA", "Total Field EBITDA", "Consolidated EBITDA", "Adjusted Consolidated EBITDA", "Special Items", "Adjusted Net Income" and "Adjusted Earnings Per Share" in this press release.  These financial measurements are defined as similar GAAP items adjusted for Special Items itemized and reconciled to GAAP later 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.  These financial measures are used by management to understand and explain the Company's operations and financial results.

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. 

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, 2011, 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.

 

 

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.  We define our Non-GAAP measures as "Adjusted" which is reflected on our Non-GAAP Unaudited Income Statement presented herein.

 

 

 

 

 

 

 

 

 

SOURCE Carriage Services, Inc.