Carriage Services Announces Second Quarter 2019 Results and Reaffirms 2019 Rolling Four Quarter Outlook
In order to present an accurate comparative second quarter and six months financial performance profile that reflects on a proforma basis the current “normalized” earning power of Carriage, as shown below, we have excluded from 2018 second quarter and six months results the large Ft. Lauderdale city cemetery business management contract which we divested in the third quarter of 2018; reduced 2019 second quarter and six months Total Overhead for all changes that have been completed as of June 30, 2019 as if they had been effective December 31, 2018; and increased interest for the second quarter and first six months of 2018 to reflect the balance sheet recapitalization that was completed at the end of May 2018 as if it had been effective December 31, 2017. The Pro Forma Adjusted results shown below are simply outstanding:
Second Quarter 2019 versus Second Quarter 2018
- Total Revenue increased
$5 .5 million or 8.9% to$67 .8 million; - Total Field EBITDA increased
$3 .9 million or 16.7% to$27 .5 million; - Total Field EBITDA Margin increased 270 basis points to 40.5%;
- Total Overhead decreased
$0.6 million or 6.3% to$8.2 million ; - Total Overhead Margin decreased 190 basis points to 12.1%;
- Consolidated EBITDA increased
$4 .5 million or 30.3% to$19 .3 million; - Consolidated EBITDA Margin increased 460 basis points to 28.4%; and
- Diluted EPS increased
$0.17 or 121.4% to$0.31 .
First Six Months of 2019 versus First Six Months of 2018
- Total Revenue increased
$2 .8 million or 2.1% to$136 .8 million; - Total Field EBITDA increased
$1 .6 million or 3.0% to$55 .9 million; - Total Field EBITDA Margin increased 40 basis points to 40.9%;
- Total Overhead decreased
$1.8 million or 10.0% to$15.8 million ; - Total Overhead Margin decreased 160 basis points to 11.5%;
- Consolidated EBITDA increased
$3 .4 million or 9.2% to$40 .1 million; - Consolidated EBITDA Margin increased 190 basis points to 29.3%; and
- Diluted EPS increased
$0.08 or 13.1% to$0.69 .
Consistent with the five year uptrend in our performance from 2012 through 2016 after a major management restructuring at the end of 2011, we are highly confident that the 2019 second quarter performance is the beginning of another long term uptrend that will be sustainable through our five year planning timeframe ending 2023. Our goal now is to finish this year strong with focused execution throughout our portfolio. In doing so we will have achieved the 2019 Year of Renewal Mission of our High Performance and Value Creation Trends Restoration Program by restoring the sustainable earnings and Free Cash Flow power of Carriage as a value creation platform for operating and consolidating premier funeral homes and cemeteries”, concluded Mr. Payne.
Second quarter GAAP highlights are shown below:
Second Quarter 2019 versus Second Quarter 2018
- Total Revenue of
$67.8 million , an increase of 6.1%; - Net Income of
$4.9 million , an increase of 77.0%; and - GAAP Diluted Earnings Per Share of
$0.27 , an increase of 80.0%.
First Six Months of 2019 versus First Six Months of 2018
- Total Revenue of
$136.8 million , a decrease of 0.3%; - Net Income of
$11.4 million , a decrease of 5.9%; and - GAAP Diluted Earnings Per Share of
$0.63 , a decrease of 6.0%.
HIGH PERFORMANCE HEROES
The following are
| Dean Marnell | Covenant Funeral Service; Fredericksburg, VA |
| Victor Logiudice | Thomas F. Dalton Funeral Homes; Floral Park, NY |
| Jason Higginbotham | Lakeland Funeral Home; Lakeland, FL |
| David Keller | Lane Funeral Home - Coulter Chapel; Chattanooga, TN |
| Michael Redgate | Redgate Funeral Home; CT |
| Bob Prindiville | Bright Funeral Home; Wake Forest, NC |
| Courtney Charvet | North Brevard Funeral Home; Titusville, FL |
| Tim Hauck | Harvey-Engelhardt Funeral & Cremation Service; Fort Meyers, FL |
| Brian Binion | Steen Funeral Homes; Ashland, KY |
| Jim Pitts | Buck Ashcraft Funeral Home; Harlingen, TX |
| Cyndi Hoots | Schmidt Funeral Homes; Katy, TX |
| Kevin Latham | Maddux Fuqua-Hinton Funeral Homes; Hopkinsville, KY |
| Christine Amittone | Greer Family Mortuary; Alameda, CA |
| Larry Davis | Bunkers Mortuary and Cemeteries, Las Vegas, NV |
| Anthony Rodriguez | Higgins Chapel; Antioch, CA |
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) |
||||||||
| 6 months ended 6/30/19 | 17.4% | 15.9% | 18.5% | 9.4% | 12.1% | |||||||
| 1 year ended 12/31/18 | (8.3%) | (7.4%) | (4.2%) | (2.1%) | (2.7%) | |||||||
| 2 years ended 12/31/18 | 3.6% | 4.0% | 16.5% | 5.3% | 8.6% | |||||||
| 3 years ended 12/31/18 | 24.0% | 23.0% | 30.4% | 23.3% | 25.4% | |||||||
| 4 years ended 12/31/18 | 20.2% | 19.7% | 32.2% | 17.8% | 22.1% | |||||||
| 5 years ended 12/31/18 | 30.3% | 29.2% | 50.3% | 20.7% | 29.5% | |||||||
| (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 June 30, 2019 (in thousands) |
||||||||||||||
| Discretionary Trust Funds |
Total Trust Funds |
|||||||||||||
| Asset Class | MV | % | MV | % | ||||||||||
| Equities | $ | 71,505 | 36 | % | $ | 74,051 | 32 | % | ||||||
| Fixed Income | 96,685 | 51 | % | 109,536 | 48 | % | ||||||||
| Cash | 23,048 | 12 | % | 44,228 | 19 | % | ||||||||
| Other/Insurance | 2,780 | 1 | % | 2,964 | 1 | % | ||||||||
| Total Portfolios | $ | 194,018 | 100 | % | $ | 230,779 | 100 | % | ||||||
The total return for our Discretionary Preneed Funeral and Cemetery Trusts through the first six months was 17.4% and primarily tracked the performance of the overall equity market while maintaining a higher weighting to fixed income and cash. We currently anticipate the portfolio to maintain an equal weighting between equity and fixed income securities as well as an increase in the amount of recurring income generated by the portfolio throughout the rest of the year.
ADJUSTED FREE CASH FLOW
We produced Adjusted Free Cash Flow from operations for the three and six months ended
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
| 2018 | 2019 | 2018 | 2019 | ||||||||||||
| Cash flow provided by operations | $ | 11,398 | $ | 10,918 | $ | 26,281 | $ | 21,912 | |||||||
| Cash used for maintenance capital expenditures | (2,268 | ) | (2,482 | ) | (3,714 | ) | (4,175 | ) | |||||||
| Free Cash Flow | $ | 9,130 | $ | 8,436 | $ | 22,567 | $ | 17,737 | |||||||
| Plus: Incremental Special Items: | |||||||||||||||
| Severance and Retirement Costs | — | 611 | — | 828 | |||||||||||
| Litigation Reserve | — | 356 | — | 481 | |||||||||||
| Adjusted Free Cash Flow | $ | 9,130 | $ | 9,403 | $ | 22,567 | $ | 19,046 | |||||||
ROLLING FOUR QUARTER OUTLOOK
The Rolling Four Quarter Outlook (“Outlook”) reflects management’s opinion on the performance of the portfolio of existing businesses, including performance of existing trusts, and excludes size and timing of acquisitions for the Rolling Four Quarter Outlook period ending June 30, 2020 unless we have a signed Letter of Intent and high likelihood of a closing within 90 days. This Outlook is not intended to be management estimates or forecasts of our future performance, as we believe precise estimates will be precisely wrong all the time. Rather our intent and goal is to reflect a “Roughly Right Range” most of the time of future Outlook 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 Adjusted Diluted Earnings Per Share have been adjusted for accretion on our convertible notes.
The Outlook on Adjusted Diluted Earnings Per Share does not include any changes to our fully diluted share count that could occur related to additional share repurchases or a stock price increase and EPS dilution calculations related to our convertible notes and outstanding and exercisable stock options.
| Range (in millions, except per share amounts) |
||
| Revenues | $270 - $274 |
|
| Consolidated EBITDA | $77 - $79 | |
| Adjusted Net Income | $24 - $26 | |
| Adjusted Diluted Earnings Per Share | $1.34 - $1.44 | |
| Free Cash Flow | $37 - $40 |
CONFERENCE CALL AND INVESTOR RELATIONS CONTACT
| CARRIAGE SERVICES, INC. | |||||||||||||||||
| OPERATING AND FINANCIAL TREND REPORT | |||||||||||||||||
| (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS) | |||||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||
| 2018 | 2019 | % Change | 2018 | 2019 | % Change | ||||||||||||
| Same Store Contracts | |||||||||||||||||
| Atneed Contracts | 6,249 | 6,496 | 4.0 | % | 13,543 | 13,463 | (0.6 | %) | |||||||||
| Preneed Contracts | 1,454 | 1,497 | 3.0 | % | 3,162 | 3,020 | (4.5 | %) | |||||||||
| Total Same Store Funeral Contracts | 7,703 | 7,993 | 3.8 | % | 16,705 | 16,483 | (1.3 | %) | |||||||||
| Acquisition Contracts | |||||||||||||||||
| Atneed Contracts | 857 | 1,209 | 41.1 | % | 1,874 | 2,443 | 30.4 | % | |||||||||
| Preneed Contracts | 93 | 164 | 76.3 | % | 186 | 321 | 72.6 | % | |||||||||
| Total Acquisition Funeral Contracts | 950 | 1,373 | 44.5 | % | 2,060 | 2,764 | 34.2 | % | |||||||||
| Total Funeral Contracts | 8,653 | 9,366 | 8.2 | % | 18,765 | 19,247 | 2.6 | % | |||||||||
| Funeral Operating Revenue | |||||||||||||||||
| Same Store Revenue | $ | 40,653 | $ | 42,127 | 3.6 | % | $ | 89,773 | $ | 87,629 | (2.4 | %) | |||||
| Acquisition Revenue | 5,666 | 8,182 | 44.4 | % | 12,828 | 16,622 | 29.6 | % | |||||||||
| Total Funeral Operating Revenue | $ | 46,319 | $ | 50,309 | 8.6 | % | $ | 102,601 | $ | 104,251 | 1.6 | % | |||||
| Cemetery Operating Revenue | |||||||||||||||||
| Same Store Revenue | $ | 11,886 | $ | 13,227 | 11.3 | % | $ | 23,137 | $ | 24,516 | 6.0 | % | |||||
| Acquisition Revenue | — | — | — | % | — | — | — | % | |||||||||
| Total Cemetery Operating Revenue | $ | 11,886 | $ | 13,227 | 11.3 | % | $ | 23,137 | $ | 24,516 | 6.0 | % | |||||
| Financial Revenue | |||||||||||||||||
| Preneed Funeral Commission Income | $ | 354 | $ | 329 | (7.1 | %) | $ | 614 | $ | 688 | 12.1 | % | |||||
| Preneed Funeral Trust Earnings | 1,859 | 1,869 | 0.5 | % | 3,911 | 3,731 | (4.6 | %) | |||||||||
| Cemetery Trust Earnings | 1,383 | 1,623 | 17.4 | % | 2,935 | 2,874 | (2.1 | %) | |||||||||
| Preneed Cemetery Finance Charges | 424 | 395 | (6.8 | %) | 803 | 773 | (3.7 | %) | |||||||||
| Total Financial Revenue | $ | 4,020 | $ | 4,216 | 4.9 | % | $ | 8,263 | $ | 8,066 | (2.4 | %) | |||||
| Total Divested Revenue | $ | 1,622 | $ | — | $ | 3,233 | $ | — | |||||||||
| Total Revenue | $ | 63,847 | $ | 67,752 | 6.1 | % | $ | 137,234 | $ | 136,833 | (0.3 | %) | |||||
| Field EBITDA | |||||||||||||||||
| Same Store Funeral EBITDA | $ | 14,254 | $ | 15,370 | 7.8 | % | $ | 34,577 | $ | 33,338 | (3.6 | %) | |||||
| Same Store Funeral EBITDA Margin | 35.1 | % | 36.5 | % | 140 bp | 38.5 | % | 38.0 | % | (50 bp) | |||||||
| Acquisition Funeral EBITDA | 1,721 | 3,091 | 79.6 | % | 4,446 | 6,336 | 42.5 | % | |||||||||
| Acquisition Funeral EBITDA Margin | 30.4 | % | 37.8 | % | 740 bp | 34.7 | % | 38.1 | % | 340 bp | |||||||
| Total Funeral EBITDA | $ | 15,975 | $ | 18,461 | 15.6 | % | $ | 39,023 | $ | 39,674 | 1.7 | % | |||||
| Total Funeral EBITDA Margin | 34.5 | % | 36.7 | % | 220 bp | 38.0 | % | 38.1 | % | 10 bp | |||||||
| Same Store Cemetery EBITDA | $ | 3,883 | $ | 4,808 | 23.8 | % | $ | 7,746 | $ | 8,469 | 9.3 | % | |||||
| Same Store Cemetery EBITDA Margin | 32.7 | % | 36.3 | % | 360 bp | 33.5 | % | 34.5 | % | 100 bp | |||||||
| Acquisition Cemetery EBITDA | — | — | — | % | — | — | — | % | |||||||||
| Acquisition Cemetery EBITDA Margin | — | % | — | % | — bp | — | % | — | % | — bp | |||||||
| Total Cemetery EBITDA | $ | 3,883 | $ | 4,808 | 23.8 | % | $ | 7,746 | $ | 8,469 | 9.3 | % | |||||
| Total Cemetery EBITDA Margin | 32.7 | % | 36.3 | % | 360 bp | 33.5 | % | 34.5 | % | 100 bp | |||||||
| Funeral Financial EBITDA | $ | 1,978 | $ | 1,959 | (1.0 | %) | $ | 4,025 | $ | 3,913 | (2.8 | %) | |||||
| Cemetery Financial EBITDA | 1,688 | 1,872 | 10.9 | % | 3,478 | 3,367 | (3.2 | %) | |||||||||
| Total Financial EBITDA | $ | 3,666 | $ | 3,831 | 4.5 | % | $ | 7,503 | $ | 7,280 | (3.0 | %) | |||||
| Total Financial EBITDA Margin | 91.2 | % | 90.9 | % | (30 bp) | 90.8 | % | 90.3 | % | (50 bp) | |||||||
| Total Divested EBITDA | $ | 472 | $ | — | $ | 966 | $ | — | |||||||||
| Total Divested EBITDA Margin | 29.1 | % | — | % | 29.9 | % | — | % | |||||||||
| Total Field EBITDA | $ | 23,996 | $ | 27,100 | 12.9 | % | $ | 55,238 | $ | 55,423 | 0.3 | % | |||||
| Total Field EBITDA Margin | 37.6 | % | 40.0 | % | 240 bp | 40.3 | % | 40.5 | % | 20 bp | |||||||
| Overhead | |||||||||||||||||
| Total Variable Overhead | $ | 2,696 | $ | 3,042 | 12.8 | % | $ | 5,256 | $ | 4,980 | (5.3 | %) | |||||
| Total Regional Fixed Overhead | 1,063 | 1,028 | (3.3 | %) | 2,140 | 2,029 | (5.2 | %) | |||||||||
| Total Corporate Fixed Overhead | 4,979 | 4,726 | (5.1 | %) | 10,141 | 9,603 | (5.3 | %) | |||||||||
| Total Overhead | $ | 8,738 | $ | 8,796 | 0.7 | % | $ | 17,537 | $ | 16,612 | (5.3 | %) | |||||
| Overhead as a percentage of Revenue | 13.7 | % | 13.0 | % | (70 bp) | 12.8 | % | 12.1 | % | (70 bp) | |||||||
| Consolidated EBITDA | $ | 15,258 | $ | 18,304 | 20.0 | % | $ | 37,701 | $ | 38,811 | 2.9 | % | |||||
| Consolidated EBITDA Margin | 23.9 | % | 27.0 | % | 310 bp | 27.5 | % | 28.4 | % | 90 bp | |||||||
| Other Expenses and Interest | |||||||||||||||||
| Depreciation & Amortization | $ | 4,368 | $ | 4,597 | 5.2 | % | $ | 8,584 | $ | 8,920 | 3.9 | % | |||||
| Non-Cash Stock Compensation | 909 | 518 | (43.0 | %) | 2,009 | 1,103 | (45.1 | %) | |||||||||
| Interest Expense | 4,743 | 6,296 | 32.7 | % | 8,478 | 12,624 | 48.9 | % | |||||||||
| Accretion of Discount on Convertible Subordinated Notes | 555 | 60 | (89.2 | %) | 1,715 | 117 | (93.2 | %) | |||||||||
| Net Loss on Early Extinguishment of Debt | 936 | — | (100.0 | %) | 936 | — | (100.0 | %) | |||||||||
| Other, Net | — | (175 | ) | — | % | (2 | ) | (162 | ) | — | % | ||||||
| Pre-Tax Income | $ | 3,747 | $ | 7,008 | 87.0 | % | $ | 15,981 | $ | 16,209 | 1.4 | % | |||||
| Provision for Income Taxes | 1,030 | 2,043 | 4,395 | 4,620 | |||||||||||||
| Tax Adjustment Related to Certain Discrete Items | (30 | ) | 103 | (517 | ) | 202 | |||||||||||
| Net Tax Provision | 1,000 | 2,146 | 3,878 | 4,822 | |||||||||||||
| GAAP Net Income | $ | 2,747 | $ | 4,862 | 77.0 | % | $ | 12,103 | $ | 11,387 | (5.9 | %) | |||||
| Special Items, Net of Tax, except for ** | |||||||||||||||||
| Severance and Retirement Costs | $ | — | $ | 483 | $ | — | $ | 654 | |||||||||
| Accretion of Discount on Convertible Subordinated Notes ** | 555 | 60 | 1,715 | 117 | |||||||||||||
| Net Loss on Early Extinguishment of Debt | 740 | — | 740 | — | |||||||||||||
| Litigation Reserve | — | 281 | — | 380 | |||||||||||||
| Adjusted Net Income | $ | 4,042 | $ | 5,686 | 40.7 | % | $ | 14,558 | $ | 12,538 | (13.9 | %) | |||||
| Adjusted Net Profit Margin | 6.3 | % | 8.4 | % | 210 bp | 10.6 | % | 9.2 | % | (140 bp) | |||||||
| Adjusted Basic Earnings Per Share | $ | 0.22 | $ | 0.31 | 40.9 | % | $ | 0.85 | $ | 0.69 | (18.8 | %) | |||||
| Adjusted Diluted Earnings Per Share | $ | 0.22 | $ | 0.31 | 40.9 | % | $ | 0.81 | $ | 0.69 | (14.8 | %) | |||||
| GAAP Basic Earnings Per Share | $ | 0.15 | $ | 0.27 | 80.0 | % | $ | 0.71 | $ | 0.63 | (11.3 | %) | |||||
| GAAP Diluted Earnings Per Share | $ | 0.15 | $ | 0.27 | 80.0 | % | $ | 0.67 | $ | 0.63 | (6.0 | %) | |||||
| Weighted Average Basic Shares Outstanding | 17,916 | 17,959 | 17,010 | 18,008 | |||||||||||||
| Weighted Average Diluted Shares Outstanding | 18,245 | 17,988 | 17,924 | 18,043 | |||||||||||||
| Reconciliation to Adjusted Consolidated EBITDA | |||||||||||||||||
| Consolidated EBITDA | $ | 15,258 | $ | 18,304 | 20.0 | % | $ | 37,701 | $ | 38,811 | 2.9 | % | |||||
| Severance and Retirement Costs | — | 611 | — | 828 | |||||||||||||
| Litigation Reserve | — | 356 | — | 481 | |||||||||||||
| Adjusted Consolidated EBITDA | $ | 15,258 | $ | 19,271 | 26.3 | % | $ | 37,701 | $ | 40,120 | 6.4 | % | |||||
| Adjusted Consolidated EBITDA Margin | 23.9 | % | 28.4 | % | 450 bp | 27.5 | % | 29.3 | % | 180 bp | |||||||
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
| (unaudited) | |||||||
| December 31, 2018 | June 30, 2019 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 644 | $ | 685 | |||
| Accounts receivable, net | 18,897 | 16,794 | |||||
| Inventories | 6,751 | 6,756 | |||||
| Prepaid and other current assets | 3,011 | 1,412 | |||||
| Total current assets | 29,303 | 25,647 | |||||
| Preneed cemetery trust investments | 62,432 | 69,970 | |||||
| Preneed funeral trust investments | 82,074 | 88,696 | |||||
| Preneed receivables, net | 18,441 | 19,458 | |||||
| Receivables from preneed trusts | 17,073 | 17,654 | |||||
| Property, plant and equipment, net | 260,838 | 259,835 | |||||
| Cemetery property, net | 74,958 | 75,427 | |||||
| Goodwill | 303,887 | 303,887 | |||||
| Intangible and other non-current assets, net | 24,425 | 24,360 | |||||
| Operating lease right-of-use assets | — | 23,485 | |||||
| Cemetery perpetual care trust investments | 44,071 | 48,969 | |||||
| Total assets | $ | 917,502 | $ | 957,388 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities: | |||||||
| Current portion of long-term debt | $ | 2,015 | $ | 1,895 | |||
| Current portion of finance lease obligations | 312 | 284 | |||||
| Current portion of operating lease obligations | — | 1,541 | |||||
| Accounts payable | 9,987 | 6,831 | |||||
| Accrued and other liabilities | 22,644 | 21,916 | |||||
| Total current liabilities | 34,958 | 32,467 | |||||
| Long-term debt, net of current portion | 6,925 | 6,307 | |||||
| Credit facility | 26,145 | 23,753 | |||||
| Convertible subordinated notes due 2021 | 5,732 | 5,835 | |||||
| Senior notes due 2026 | 319,108 | 319,418 | |||||
| Obligations under finance leases, net of current portion | 6,143 | 5,999 | |||||
| Obligations under operating leases, net of current portion | — | 22,673 | |||||
| Deferred preneed cemetery revenue | 45,997 | 45,540 | |||||
| Deferred preneed funeral revenue | 28,606 | 29,236 | |||||
| Deferred tax liability | 31,263 | 32,572 | |||||
| Other long-term liabilities | 3,133 | 1,920 | |||||
| Deferred preneed cemetery receipts held in trust | 62,432 | 69,970 | |||||
| Deferred preneed funeral receipts held in trust | 82,074 | 88,696 | |||||
| Care trusts’ corpus | 43,494 | 48,442 | |||||
| Total liabilities | 696,010 | 732,828 | |||||
| Commitments and contingencies: | |||||||
| Stockholders’ equity: | |||||||
| Common stock | 257 | 258 | |||||
| Additional paid-in capital | 243,849 | 243,285 | |||||
| Retained earnings | 71,680 | 83,067 | |||||
| Treasury stock | (94,294 | ) | (102,050 | ) | |||
| Total stockholders’ equity | 221,492 | 224,560 | |||||
| Total liabilities and stockholders’ equity | $ | 917,502 | $ | 957,388 | |||
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
| (unaudited) | |||||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| 2018 | 2019 | 2018 | 2019 | ||||||||||||
| Revenues: | |||||||||||||||
| Service revenue | $ | 31,972 | $ | 34,659 | $ | 70,657 | $ | 71,311 | |||||||
| Property and merchandise revenue | 27,531 | 28,877 | 57,715 | 57,456 | |||||||||||
| Other revenue | 4,344 | 4,216 | 8,862 | 8,066 | |||||||||||
| 63,847 | 67,752 | 137,234 | 136,833 | ||||||||||||
| Field costs and expenses: | |||||||||||||||
| Cost of service | 17,329 | 17,955 | 35,946 | 36,052 | |||||||||||
| Cost of merchandise | 22,168 | 22,311 | 45,291 | 44,572 | |||||||||||
| Cemetery property amortization | 891 | 1,169 | 1,799 | 2,018 | |||||||||||
| Field depreciation expense | 3,013 | 3,059 | 5,878 | 6,144 | |||||||||||
| Regional and unallocated funeral and cemetery costs | 3,267 | 3,622 | 6,548 | 6,411 | |||||||||||
| Other expenses | 354 | 386 | 759 | 786 | |||||||||||
| 47,022 | 48,502 | 96,221 | 95,983 | ||||||||||||
| Gross profit | 16,825 | 19,250 | 41,013 | 40,850 | |||||||||||
| Corporate costs and expenses: | |||||||||||||||
| General, administrative and other | 6,380 | 5,692 | 12,998 | 11,304 | |||||||||||
| Home office depreciation and amortization | 464 | 369 | 907 | 758 | |||||||||||
| 6,844 | 6,061 | 13,905 | 12,062 | ||||||||||||
| Operating income | 9,981 | 13,189 | 27,108 | 28,788 | |||||||||||
| Interest expense | (4,743 | ) | (6,296 | ) | (8,478 | ) | (12,624 | ) | |||||||
| Accretion of discount on convertible subordinated notes | (555 | ) | (60 | ) | (1,715 | ) | (117 | ) | |||||||
| Net loss on early extinguishment of debt | (936 | ) | — | (936 | ) | — | |||||||||
| Other, net | — | 175 | 2 | 162 | |||||||||||
| Income before income taxes | 3,747 | 7,008 | 15,981 | 16,209 | |||||||||||
| Provision for income taxes | (1,030 | ) | (2,043 | ) | (4,395 | ) | (4,620 | ) | |||||||
| Tax adjustment related to certain discrete items | 30 | (103 | ) | 517 | (202 | ) | |||||||||
| Total provision for income taxes | (1,000 | ) | (2,146 | ) | (3,878 | ) | (4,822 | ) | |||||||
| Net income | $ | 2,747 | $ | 4,862 | $ | 12,103 | $ | 11,387 | |||||||
| Basic earnings per common share: | $ | 0.15 | $ | 0.27 | $ | 0.71 | $ | 0.63 | |||||||
| Diluted earnings per common share: | $ | 0.15 | $ | 0.27 | $ | 0.67 | $ | 0.63 | |||||||
| Dividends declared per common share | $ | 0.075 | $ | 0.075 | $ | 0.150 | $ | 0.150 | |||||||
| Weighted average number of common and common equivalent shares outstanding: | |||||||||||||||
| Basic | 17,916 | 17,959 | 17,010 | 18,008 | |||||||||||
| Diluted | 18,245 | 17,988 | 17,924 | 18,043 | |||||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| (unaudited) | |||||||
| Six Months Ended June 30, | |||||||
| 2018 | 2019 | ||||||
| Cash flows from operating activities: | |||||||
| Net income | $ | 12,103 | $ | 11,387 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 8,584 | 8,920 | |||||
| Provision for losses on accounts receivable | 883 | 724 | |||||
| Stock-based compensation expense | 2,009 | 1,103 | |||||
| Deferred income tax expense | 2,044 | 1,309 | |||||
| Amortization of deferred financing costs | 320 | 189 | |||||
| Amortization of capitalized commissions on preneed contracts | 293 | 277 | |||||
| Accretion of discount on convertible subordinated notes | 1,715 | 117 | |||||
| Accretion of discount on senior notes | 38 | 242 | |||||
| Net loss on early extinguishment of debt | 936 | — | |||||
| Net loss on sale and disposal of other assets | 45 | 168 | |||||
| Other | 145 | 121 | |||||
| Changes in operating assets and liabilities that provided (used) cash: | |||||||
| Accounts and preneed receivables | (779 | ) | (1,116 | ) | |||
| Inventories, prepaid and other current assets | (1,139 | ) | 1,446 | ||||
| Intangible and other non-current assets | (102 | ) | (212 | ) | |||
| Preneed funeral and cemetery trust investments | (5,986 | ) | (5,033 | ) | |||
| Accounts payable | (758 | ) | (3,156 | ) | |||
| Accrued and other liabilities | (964 | ) | 61 | ||||
| Deferred preneed funeral and cemetery revenue | 2,007 | 863 | |||||
| Deferred preneed funeral and cemetery receipts held in trust | 4,887 | 4,502 | |||||
| Net cash provided by operating activities | 26,281 | 21,912 | |||||
| Cash flows from investing activities: | |||||||
| Net proceeds from the sale of business and other assets | — | 100 | |||||
| Capital expenditures | (5,080 | ) | (8,654 | ) | |||
| Net cash used in investing activities | (5,080 | ) | (8,554 | ) | |||
| Cash flows from financing activities: | |||||||
| Payments against the term loan | (127,500 | ) | — | ||||
| Borrowings from the credit facility | 96,000 | 23,300 | |||||
| Payments against the credit facility | (188,000 | ) | (25,800 | ) | |||
| Payment of debt issuance costs related to long-term debt | (1,551 | ) | — | ||||
| Redemption of the 2.75% convertible subordinated notes | (75,229 | ) | (27 | ) | |||
| Payment of transaction costs related to the redemption of the 2.75% convertible subordinated notes | (845 | ) | — | ||||
| Proceeds from the issuance of the 6.625% senior notes | 320,125 | — | |||||
| Payments of debt issuance costs related to the 6.625% senior notes | (1,367 | ) | — | ||||
| Payments on other long-term debt and obligations under finance leases | (828 | ) | (910 | ) | |||
| Payments on contingent consideration recorded at acquisition date | (138 | ) | (162 | ) | |||
| Proceeds from the exercise of stock options and employee stock purchase plan contributions | 846 | 942 | |||||
| Taxes paid on restricted stock vestings and exercises of non-qualified options | (495 | ) | (179 | ) | |||
| Dividends on common stock | (2,640 | ) | (2,725 | ) | |||
| Purchase of treasury stock | — | (7,756 | ) | ||||
| Net cash used in (provided by) financing activities | 18,378 | (13,317 | ) | ||||
| Net increase in cash and cash equivalents | 39,579 | 41 | |||||
| Cash and cash equivalents at beginning of period | 952 | 644 | |||||
| Cash and cash equivalents at end of period | $ | 40,531 | $ | 685 | |||
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 release. Reconciliations of the Non-GAAP financial measures to GAAP measures are provided in this press release.
The Non-GAAP financial measures include “Special Items”, “Adjusted Net Income”, “Consolidated EBITDA”, “Adjusted Consolidated EBITDA”, “Adjusted Consolidated EBITDA Margin”, “Adjusted Free Cash Flow”, “Funeral, Cemetery and Financial EBITDA”, “Total Field EBITDA”, “Total Field EBITDA Margin”, “Divested Revenue”, “Divested EBITDA”, “Divested EBITDA Margin”, “Adjusted Basic Earnings Per Share” and “Adjusted Diluted Earnings Per Share” in this press release. These financial measurements are defined as similar GAAP items adjusted for Special Items and are reconciled to GAAP in this press release. In addition, the Company’s presentation of these measures may not be comparable to similarly titled measures in other companies’ reports. The definitions used by the Company for our internal management purposes and in this press release are as follows:
- Special Items are defined as charges or credits included in our GAAP financial statements that can vary from period to period and are not reflective of costs incurred in the ordinary course of our operations. Special Items are 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.
- 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 Revenue is defined as revenues from three cemetery businesses that we ceased to operate on
September 30, 2018 , as a result of an expired management agreement. - Divested EBITDA is defined as Divested Revenue, less field level and financial expenses related to one funeral home business that was sold in 2017 and three cemetery businesses related to the expired management agreement noted above.
- Divested EBITDA Margin is defined as Divested EBITDA as a percentage of 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.
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.
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 to Adjusted Net Income for the three and six months ended June 30, 2018 and 2019 (in thousands):
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
| 2018 | 2019 | 2018 | 2019 | ||||||||||||
| Net Income | $ | 2,747 | $ | 4,862 | $ | 12,103 | $ | 11,387 | |||||||
| Special Items, Net of Tax, except for ** | |||||||||||||||
| Severance and Retirement Costs | — | 483 | — | 654 | |||||||||||
| Accretion of Discount on Convertible Subordinated Notes ** | 555 | 60 | 1,715 | 117 | |||||||||||
| Net Loss on Early Extinguishment of Debt | 740 | — | 740 | — | |||||||||||
| Litigation Reserve | — | 281 | — | 380 | |||||||||||
| Adjusted Net Income | $ | 4,042 | $ | 5,686 | $ | 14,558 | $ | 12,538 | |||||||
| ** 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. | |||||||||||||||
Reconciliation of Net Income to Consolidated EBITDA and Adjusted Consolidated EBITDA for the three and six months ended June 30, 2018 and 2019 (in thousands):
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
| 2018 | 2019 | 2018 | 2019 | ||||||||||||
| Net Income | $ | 2,747 | $ | 4,862 | $ | 12,103 | $ | 11,387 | |||||||
| Total Provision for Income Taxes | 1,000 | 2,146 | 3,878 | 4,822 | |||||||||||
| Income Before Income Taxes | 3,747 | 7,008 | 15,981 | 16,209 | |||||||||||
| Interest Expense | 4,743 | 6,296 | 8,478 | 12,624 | |||||||||||
| Accretion of Discount on Convertible Subordinated Notes | 555 | 60 | 1,715 | 117 | |||||||||||
| Net Loss on Early Extinguishment of Debt | 936 | — | 936 | — | |||||||||||
| Non-Cash Stock Compensation | 909 | 518 | 2,009 | 1,103 | |||||||||||
| Depreciation & Amortization | 4,368 | 4,597 | 8,584 | 8,920 | |||||||||||
| Other, Net | — | (175 | ) | (2 | ) | (162 | ) | ||||||||
| Consolidated EBITDA | $ | 15,258 | $ | 18,304 | $ | 37,701 | $ | 38,811 | |||||||
| Adjusted For: | |||||||||||||||
| Severance and Retirement Costs | — | 611 | — | 828 | |||||||||||
| Litigation Reserve | — | 356 | — | 481 | |||||||||||
| Adjusted Consolidated EBITDA | $ | 15,258 | $ | 19,271 | $ | 37,701 | $ | 40,120 | |||||||
| Revenue | $ | 63,847 | $ | 67,752 | $ | 137,234 | $ | 136,833 | |||||||
| Adjusted Consolidated EBITDA Margin | 23.9 | % | 28.4 | % | 27.5 | % | 29.3 | % | |||||||
Reconciliation of Funeral and Cemetery Gross Profit to Field EBITDA for the three and six months ended June 30, 2018 and 2019 (in thousands):
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
| 2018 | 2019 | 2018 | 2019 | ||||||||||||
| Funeral Gross Profit (GAAP) | $ | 12,654 | $ | 14,624 | $ | 32,318 | $ | 32,700 | |||||||
| Depreciation & Amortization | 2,640 | 2,760 | 5,204 | 5,531 | |||||||||||
| Regional & Unallocated Costs | 2,659 | 3,036 | 5,523 | 5,356 | |||||||||||
| Funeral Financial EBITDA | (1,978 | ) | (1,959 | ) | (4,025 | ) | (3,913 | ) | |||||||
| Funeral Divested EBITDA | — | — | 3 | — | |||||||||||
| Funeral Field EBITDA | $ | 15,975 | $ | 18,461 | $ | 39,023 | $ | 39,674 | |||||||
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
| 2018 | 2019 | 2018 | 2019 | ||||||||||||
| Cemetery Gross Profit (GAAP) | $ | 4,171 | $ | 4,626 | $ | 8,695 | $ | 8,150 | |||||||
| Depreciation & Amortization | 1,264 | 1,468 | 2,473 | 2,631 | |||||||||||
| Regional & Unallocated Costs | 608 | 586 | 1,025 | 1,055 | |||||||||||
| Cemetery Financial EBITDA | (1,688 | ) | (1,872 | ) | (3,478 | ) | (3,367 | ) | |||||||
| Cemetery Divested EBITDA | (472 | ) | — | (969 | ) | — | |||||||||
| Cemetery Field EBITDA | $ | 3,883 | $ | 4,808 | $ | 7,746 | $ | 8,469 | |||||||
Components of Total Field EBITDA for the three and six months ended June 30, 2018 and 2019 (in thousands):
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
| 2018 | 2019 | 2018 | 2019 | ||||||||||||
| Funeral Field EBITDA | $ | 15,975 | $ | 18,461 | $ | 39,023 | $ | 39,674 | |||||||
| Cemetery Field EBITDA | 3,883 | 4,808 | 7,746 | 8,469 | |||||||||||
| Funeral Financial EBITDA | 1,978 | 1,959 | 4,025 | 3,913 | |||||||||||
| Cemetery Financial EBITDA | 1,688 | 1,872 | 3,478 | 3,367 | |||||||||||
| Funeral Divested EBITDA | — | — | (3 | ) | — | ||||||||||
| Cemetery Divested EBITDA | 472 | — | 969 | — | |||||||||||
| Total Field EBITDA | $ | 23,996 | $ | 27,100 | $ | 55,238 | $ | 55,423 | |||||||
Reconciliation of GAAP Basic Earnings Per Share to Adjusted Basic Earnings Per Share for the three and six months ended June 30, 2018 and 2019:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
| 2018 | 2019 | 2018 | 2019 | ||||||||||||
| GAAP Basic Earnings Per Share | $ | 0.15 | $ | 0.27 | $ | 0.71 | $ | 0.63 | |||||||
| Special Items | 0.07 | 0.04 | 0.14 | 0.06 | |||||||||||
| Adjusted Basic Earnings Per Share | $ | 0.22 | $ | 0.31 | $ | 0.85 | $ | 0.69 | |||||||
Reconciliation of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share for the three and six months ended June 30, 2018 and 2019:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
| 2018 | 2019 | 2018 | 2019 | ||||||||||||
| GAAP Diluted Earnings Per Share | $ | 0.15 | $ | 0.27 | $ | 0.67 | $ | 0.63 | |||||||
| Special Items | 0.07 | 0.04 | 0.14 | 0.06 | |||||||||||
| Adjusted Diluted Earnings Per Share | $ | 0.22 | $ | 0.31 | $ | 0.81 | $ | 0.69 | |||||||
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 on page one are reconciled to their most comparable GAAP measures, all of which are reflected in the tables below.
Reconciliation of Net Income to Pro Forma Adjusted Net Income for the three and six months ended June 30, 2018 and 2019 (in thousands):
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
| 2018 | 2019 | 2018 | 2019 | ||||||||||||
| Net Income | $ | 2,747 | $ | 4,862 | $ | 12,103 | $ | 11,387 | |||||||
| Total Provision for Income Taxes | 1,000 | 2,146 | 3,878 | 4,822 | |||||||||||
| Income Before Income Taxes | 3,747 | 7,008 | 15,981 | 16,209 | |||||||||||
| Adjusted For: | |||||||||||||||
| Interest Expense | (1,600 | ) | — | (4,000 | ) | — | |||||||||
| Severance and Retirement Costs | — | 611 | — | 828 | |||||||||||
| Litigation Reserve | — | 356 | — | 481 | |||||||||||
| Divested EBITDA | (472 | ) | — | (966 | ) | — | |||||||||
| Pro Forma Adjusted Income Before Income Taxes | $ | 1,675 | $ | 7,975 | $ | 11,015 | $ | 17,518 | |||||||
| Pro Forma Adjusted Total Provision for Income Taxes | 431 | 2,428 | 2,512 | 5,195 | |||||||||||
| Pro Forma Adjusted Net Income | $ | 1,244 | $ | 5,547 | $ | 8,503 | $ | 12,323 | |||||||
Reconciliation of Field EBITDA to Pro Forma Adjusted Field EBITDA and Pro Forma Adjusted Consolidated EBITDA for the three and six months ended June 30, 2018 and 2019 (in thousands):
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
| 2018 | 2019 | 2018 | 2019 | ||||||||||||
| Field EBITDA | $ | 23,996 | $ | 27,100 | $ | 55,238 | $ | 55,423 | |||||||
| Adjusted For: | |||||||||||||||
| Litigation Reserve | — | 356 | — | 481 | |||||||||||
| Divested EBITDA | (472) | — | (966) | — | |||||||||||
| Pro Forma Adjusted Field EBITDA | $ | 23,524 | $ | 27,456 | $ | 54,272 | $ | 55,904 | |||||||
| Total Overhead Costs | 8,738 | 8,796 | 17,537 | 16,612 | |||||||||||
| Adjusted For: | |||||||||||||||
| Severance and Retirement Costs | — | (611) | — | (828) | |||||||||||
| Pro Forma Adjusted Consolidated EBITDA | $ | 14,786 | $ | 19,271 | $ | 36,735 | $ | 40,120 | |||||||
| Revenue | $ | 63,847 | $ | 67,752 | $ | 137,234 | $ | 136,833 | |||||||
| Adjusted For: | |||||||||||||||
| Divested Revenue | (1,622) | — | (3,233) | — | |||||||||||
| Pro Forma Adjusted Revenue | $ | 62,225 | $ | 67,752 | $ | 134,001 | $ | 136,833 | |||||||
| Pro Forma Adjusted Field EBITDA Margin | 37.8% | 40.5% | 40.5% | 40.9% | |||||||||||
| Pro Forma Adjusted Consolidated EBITDA Margin | 23.8% | 28.4% | 27.4% | 29.3% | |||||||||||
Reconciliation of GAAP Diluted Earnings Per Share to Pro Forma Adjusted Diluted Earnings Per Share for the three and six months ended June 30, 2018 and 2019:
| For the Three Months Ended June 30, | For the Six Months Ended June 30, | ||||||||||||||
| 2018 | 2019 | 2018 | 2019 | ||||||||||||
| GAAP Diluted Earnings Per Share | $ | 0.15 | $ | 0.27 | $ | 0.67 | $ | 0.63 | |||||||
| Special Items | 0.07 | 0.00 | 0.14 | 0.01 | |||||||||||
| Pro Forma Adjustments | (0.08 | ) | 0.04 | (0.20 | ) | 0.05 | |||||||||
| Pro Forma Adjusted Diluted Earnings Per Share | $ | 0.14 | $ | 0.31 | $ | 0.61 | $ | 0.69 | |||||||
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
| Three Months Ended June 30, 2018 | Twelve Months Ended December 31, 2018 | ||||||||||||||
| Revenue | EBITDA | Revenue | EBITDA | ||||||||||||
| 2014 Acquired Portfolio | $ | 3,169 | $ | 1,284 | $ | 12,989 | $ | 5,254 | |||||||
Reconciliation of Rolling Four Quarter Outlook:
Earlier in this press release, we present the Rolling Four Quarter Outlook (“Outlook”) which reflects management’s opinion on the performance of the portfolio of existing businesses, including performance of existing trusts, and excludes size and timing of acquisitions for the Rolling Four Quarter Outlook period ending
Reconciliation of Net Income to Consolidated EBITDA for the Rolling Four Quarters ending
| June 30, 2020E | |||
| Net Income | $ | 24,800 | |
| Total Tax Provision | 9,400 | ||
| Pretax Income | 34,200 | ||
| Net Interest Expense, including Accretion of Discount on Convertible Notes | 24,400 | ||
| Depreciation & Amortization, including Non-cash Stock Compensation | 19,600 | ||
| Consolidated EBITDA | $ | 78,200 | |
Reconciliation of Net Income to Adjusted Net Income for the Rolling Four Quarters ending
| June 30, 2020E | |||
| Net Income | $ | 24,800 | |
| Special Items | 200 | ||
| Adjusted Net Income | $ | 25,000 | |
Reconciliation of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share for the Rolling Four Quarters ending
| June 30, 2020E | |||
| GAAP Diluted Earnings Per Share | $ | 1.38 | |
| Special Items | 0.01 | ||
| Adjusted Diluted Earnings Per Share | $ | 1.39 |
Reconciliation of Cash Flow Provided by Operations to Free Cash Flow for the Rolling Four Quarters ending
| June 30, 2020E |
|||
| Cash flow Provided by Operations | $ | 48,500 | |
| Cash used for Maintenance Capital Expenditures | |
(10,000 | ) |
| Free Cash Flow | $ | 38,500 | |
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 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;
- 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
Source: Carriage Services, Inc.