Carriage Services Reports 2007 Full Year Results
HOUSTON, March 6, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- Carriage Services, Inc. (NYSE: CSV) today confirmed full year and fourth quarter 2007 results and the 2008 Outlook that was previously announced on February 4, 2008. Highlight results of continuing operations for 2007 compared to results of continuing operations for 2006 were as follows:
-- Revenues of $167.8 million
compared to revenues of $150.3 million for 2006.
-- Total Field EBITDA of $61.6 million
compared to Total Field EBITDA of $52.3 million for 2006.
-- Total Field EBITDA Margin of 36.7%
compared to Total Field EBITDA Margin of 34.8% for 2006.
-- Consolidated EBITDA of $39.3 million
compared to Consolidated EBITDA of $32.8 million for 2006.
-- Consolidated EBITDA Margin of 23.4%
compared to Consolidated EBITDA Margin of 21.8% for 2006.
-- Diluted earnings per share of $0.39
compared to diluted earnings per share of $0.20 for 2006.
Melvin C. Payne, Chairman and Chief Executive, stated, "We had an outstanding year of execution of all three of our models, including our Standards Operating Model, 4E Leadership Model and Strategic Portfolio Optimization Model. As a result, we were able to leverage an 11.6% increase in Total Revenues from continuing operations into a 17.8% increase in Total Field EBITDA, a 20% increase in Consolidated EBITDA and a 95% increase in Diluted EPS. This leveraging dynamic of converting smaller revenue increases into much larger earnings increases was made possible by expanding margins as Total Field EBITDA Margin increased 190 basis points to 36.7% and Consolidated EBITDA Margin increased 160 basis points to 23.4%."
UNAUDITED INCOME STATEMENT FROM CONTINUING OPERATIONS
Annual Trend
For the Five Years Ended December 31, 2007
($000's)
Pro forma(1) Pro forma(1)
Year Year
2003 2004
CONTINUING OPERATIONS
Same Store Contracts
Atneed Contracts 17,880 79.8% 17,402 79.8%
Preneed Contracts 4,515 20.2% 4,412 20.2%
Total Same Store Funeral
Contracts 22,395 100.0% 21,814 100.0%
Acquisition Contracts
Atneed Contracts - -
Preneed Contracts - -
Total Acquisition Funeral
Contracts - -
New Store Openings - -
Total Funeral Contracts 22,395 21,814
Same Store Interments
Atneed Interments 2,506 27.7% 2,324 26.3%
Preneed Interments 6,554 72.3% 6,529 73.7%
Total Same Store Cemetery
Interments 9,060 100.0% 8,853 100.0%
Acquisition Interments
Atneed Interments - -
Preneed Interments - -
Total Acquisition Cemetery
Interments - -
Total Cemetery Interments 9,060 8,853
Same Store Revenue
Funeral Operations Revenue $105,499 75.3% $106,399 74.0%
Preneed Commission and
Other Revenue 1,608 1.1% 1,319 0.9%
Total Funeral Same Store
Revenue 107,107 76.4% 107,718 74.9%
Cemetery Operations Revenue 29,755 21.2% 33,203 23.1%
Cemetery Financial Revenue 3,304 2.4% 2,912 2.0%
Total Same Store Cemetery
Revenue 33,059 23.6% 36,115 25.1%
Total Same Store Revenue 140,166 100.0% 143,833 100.0%
Acquisition Revenue
Funeral Operations Revenue - -
Cemetery Operations Revenue - -
Cemetery Financial Revenue - -
Total Acquisition Revenue - -
Total Revenue from
Continuing Operations $140,166 100.0% $143,833 100.0%
Field EBITDA from
Continuing Operations
Same Store Funeral Field
EBITDA $37,201 77.2% $37,382 76.5%
Same Store Funeral Field
EBITDA Margin 34.7% 34.7%
Same Store Cemetery Field
EBITDA 11,011 22.8% 11,458 23.5%
Same Store Cemetery Field
EBITDA Margin 33.3% 31.7%
Total Same Store Field
EBITDA 48,212 100.0% 48,840 100.0%
Total Same Store Field
EBITDA Margin 34.4% 34.0%
Acquisition Funeral Field
EBITDA - -
Acquisition Funeral Field
EBITDA Margin - -
Acquisition Cemetery Field
EBITDA - -
Acquisition Cemetery Field
EBITDA Margin - -
Total Acquisition Field
EBITDA - -
Total Acquisition Field
EBITDA Margin - -
Total Field EBITDA from
Continuing Operations 48,212 100.0% 48,840 100.0%
Total Field EBITDA Margin
from Continuing Operations 34.4% 34.0%
Overhead
Total Variable Overhead (2) 1,846 11.6% 1,910 11.5%
Total Regional Fixed
Overhead 2,721 17.1% 2,892 17.4%
Total Corporate Fixed
Overhead 11,378 71.4% 11,825 71.1%
Total Overhead 15,945 100.0% 16,627 100.0%
11.4% 11.6%
Consolidated EBITDA from
Continuing Operations $32,267 (2) $32,213 (2)
Consolidated EBITDA Margin
from Continuing Operations 23.0% 22.4%
Total Depreciation &
Amortization 9,159 9,285
Interest, Net 17,773 16,908
Refinancing Costs - -
Special Charges/Other
(Gains) Losses (2) (657) (940)
Team Partners Incentive
Expense (2) 60 110
Pretax Income 5,932 6,850
Benefit for Income Taxes
due to a Valuation
Adjustment - (810)
Income Tax 2,301 2,643
Net income from Continuing
Operations $3,631 $5,017
2.6% 3.5%
Diluted EPS-from continuing
operations $0.22 $0.29
Actual Actual
Year Year
2005 2006
CONTINUING OPERATIONS
Same Store Contracts
Atneed Contracts 17,353 79.6% 16,870 78.6%
Preneed Contracts 4,436 20.4% 4,597 21.4%
Total Same Store Funeral Contracts 21,789 100.0% 21,467 100.0%
Acquisition Contracts
Atneed Contracts 53 64.6% 194 67.1%
Preneed Contracts 29 35.4% 95 32.9%
Total Acquisition Funeral
Contracts 82 100.0% 289 100.0%
New Store Openings - 104
Total Funeral Contracts 21,871 21,860
Same Store Interments
Atneed Interments 2,006 24.4% 2,100 25.0%
Preneed Interments 6,213 75.6% 6,285 75.0%
Total Same Store Cemetery
Interments 8,219 100.0% 8,385 100.0%
Acquisition Interments
Atneed Interments - -
Preneed Interments - -
Total Acquisition Cemetery
Interments - -
Total Cemetery Interments 8,219 8,385
Same Store Revenue
Funeral Operations Revenue $108,284 72.9% 110,581 73.6%
Preneed Commission and Other
Revenue 2,295 1.5% 2,267 1.5%
Total Funeral Same Store Revenue 110,579 74.5% 112,848 75.1%
Cemetery Operations Revenue 33,940 22.9% 32,107 21.4%
Cemetery Financial Revenue 3,615 2.4% 4,052 2.7%
Total Same Store Cemetery Revenue 37,555 25.3% 36,159 24.1%
Total Same Store Revenue 148,134 99.8% 149,007 99.1%
Acquisition Revenue
Funeral Operations Revenue 303 0.2% 1,339 0.9%
Cemetery Operations Revenue - -
Cemetery Financial Revenue - -
Total Acquisition Revenue 303 0.2% 1,339 0.9%
Total Revenue from Continuing
Operations $148,437 100.0% $150,346 100.0%
Field EBITDA from Continuing
Operations
Same Store Funeral Field EBITDA $39,323 75.7% $41,343 79.0%
Same Store Funeral Field EBITDA
Margin 35.6% 36.6%
Same Store Cemetery Field EBITDA 12,545 24.1% 10,645 20.4%
Same Store Cemetery Field EBITDA
Margin 33.4% 29.4%
Total Same Store Field EBITDA 51,868 99.8% 51,988 99.4%
Total Same Store Field EBITDA
Margin 35.0% 34.9%
Acquisition Funeral Field EBITDA 92 0.2% 313 0.6%
Acquisition Funeral Field EBITDA
Margin 30.4% 23.4%
Acquisition Cemetery Field EBITDA - -
Acquisition Cemetery Field EBITDA
Margin - -
Total Acquisition Field EBITDA 92 0.2% 313 0.6%
Total Acquisition Field EBITDA
Margin 30.4% 23.4%
Total Field EBITDA from Continuing
Operations 51,960 100.0% 52,301 100.0%
Total Field EBITDA Margin from
Continuing Operations 35.0% 34.8%
Overhead
Total Variable Overhead (2) 2,245 12.5% 3,402 17.4%
Total Regional Fixed Overhead 3,247 18.0% 2,977 15.2%
Total Corporate Fixed Overhead 12,501 69.5% 13,170 67.4%
Total Overhead 17,993 100.0% 19,549 100.0%
12.1% 13.0%
Consolidated EBITDA from
Continuing Operations $33,967 (2) $32,752 (2)
Consolidated EBITDA Margin from
Continuing Operations 22.9% 21.8%
Total Depreciation & Amortization 9,053 8,664
Interest, Net 18,090 17,106
Refinancing Costs 6,933 -
Special Charges/Other (Gains)
Losses (2) 1,268 (188)
Team Partners Incentive Expense
(2) 276 1,151
Pretax Income (1,653) 6,019
Benefit for Income Taxes due to a
Valuation Adjustment - -
Income Tax (532) 2,305
Net income from Continuing
Operations $(1,121) $3,714
-0.8% 2.5%
Diluted EPS-from continuing
operations $(0.06) $0.20
Actual
Year
2007
CONTINUING OPERATIONS
Same Store Contracts
Atneed Contracts 16,475 78.8%
Preneed Contracts 4,437 21.2%
Total Same Store Funeral Contracts 20,912 100.0%
Acquisition Contracts
Atneed Contracts 1,476 69.8%
Preneed Contracts 638 30.2%
Total Acquisition Funeral Contracts 2,114 100.0%
New Store Openings 522
Total Funeral Contracts 23,548
Same Store Interments
Atneed Interments 2,055 27.2%
Preneed Interments 5,506 72.8%
Total Same Store Cemetery
Interments 7,561 100.0%
Acquisition Interments
Atneed Interments 273 23.6%
Preneed Interments 886 76.4%
Total Acquisition Cemetery
Interments 1,159 100.0%
Total Cemetery Interments 8,720
Same Store Revenue
Funeral Operations Revenue 111,899 66.7%
Preneed Commission and Other
Revenue 2,197 1.3%
Total Funeral Same Store Revenue 114,096 68.0%
Cemetery Operations Revenue 34,300 20.4%
Cemetery Financial Revenue 4,526 2.7%
Total Same Store Cemetery Revenue 38,826 23.1%
Total Same Store Revenue 152,922 91.1%
Acquisition Revenue
Funeral Operations Revenue 10,710 6.4%
Cemetery Operations Revenue 3,874 2.3%
Cemetery Financial Revenue 318 0.2%
Total Acquisition Revenue 14,902 8.9%
Total Revenue from Continuing
Operations $167,824 100.0%
Field EBITDA from Continuing
Operations
Same Store Funeral Field EBITDA 43,392 70.4%
Same Store Funeral Field EBITDA
Margin 38.0%
Same Store Cemetery Field EBITDA 13,468 21.9%
Same Store Cemetery Field EBITDA
Margin 34.7%
Total Same Store Field EBITDA 56,860 92.3%
Total Same Store Field EBITDA
Margin 37.2%
Acquisition Funeral Field EBITDA 3,724 6.0%
Acquisition Funeral Field EBITDA
Margin 34.8%
Acquisition Cemetery Field EBITDA 1,054 1.7%
Acquisition Cemetery Field EBITDA
Margin 27.2%
Total Acquisition Field EBITDA 4,778 7.8%
Total Acquisition Field EBITDA
Margin 32.1%
Total Field EBITDA from Continuing
Operations 61,637 100.0%
Total Field EBITDA Margin from
Continuing Operations 36.7%
Overhead
Total Variable Overhead (2) 5,278 23.6%
Total Regional Fixed Overhead 3,127 14.0%
Total Corporate Fixed Overhead 13,921 62.4%
Total Overhead 22,326 100.0%
13.3%
Consolidated EBITDA from Continuing
Operations $39,311 (2)
Consolidated EBITDA Margin from
Continuing Operations 23.4%
Total Depreciation & Amortization 9,526
Interest, Net 17,192
Refinancing Costs -
Special Charges/Other (Gains)
Losses (2) -
Team Partners Incentive Expense (2) -
Pretax Income 12,593
Benefit for Income Taxes due to a
Valuation Adjustment -
Income Tax 5,068
Net income from Continuing
Operations $7,525
4.5%
Diluted EPS-from continuing
operations $0.39
(1) Effective January 1, 2005, the company changed its accounting method
to expense preneed selling costs incurred for the origination of
prearranged funeral and cemetery sales contracts. Results of
operations for the years ended December 31, 2003 and 2004 are
presented on a proforma basis applying the new accounting method.
(2) Reclassified special charges (gains) and Team Partner Incentive
expense to improve comparability of periods presented.
UNAUDITED INCOME STATEMENT FROM CONTINUING OPERATIONS
Quarter Trend
For the Five Quarters Ended December 31, 2007
($000's)
Actual Actual
Qtr 4 Qtr 1
2006 2007
CONTINUING OPERATIONS
Same Store Contracts
Atneed Contracts 4,148 78.2% 4,400 78.0%
Preneed Contracts 1,155 21.8% 1,238 22.0%
Total Same Store Funeral Contracts 5,303 100.0% 5,638 100.0%
Acquisition Contracts
Atneed Contracts 52 65.8% 184 68.1%
Preneed Contracts 27 34.2% 86 31.9%
Total Acquisition Funeral Contracts 79 100.0% 270 100.0%
New Store Openings 86 120
Total Funeral Contracts 5,468 6,028
Same Store Interments
Atneed Interments 508 24.1% 583 28.0%
Preneed Interments 1,602 75.9% 1,502 72.0%
Total Same Store Cemetery Interments 2,110 100.0% 2,085 100.0%
Acquisition Interments
Atneed Interments - 39 24.5%
Preneed Interments - 120 75.5%
Total Acquisition Cemetery
Interments - 159 100.0%
Total Cemetery Interments 2,110 2,244
Same Store Revenue
Funeral Operations Revenue $27,750 74.1% $30,268 71.3%
Preneed Commission and Other Revenue 448 1.2% 627 1.5%
Total Funeral Same Store Revenue 28,198 75.3% 30,895 72.8%
Cemetery Operations Revenue 7,285 19.5% 8,768 20.6%
Cemetery Financial Revenue 1,423 3.8% 929 2.2%
Total Cemetery Same Store Revenue 8,708 23.3% 9,697 22.8%
Total Same Store Revenue 36,906 98.6% 40,592 95.6%
Acquisition Revenue
Funeral Operations Revenue 521 1.4% 1,482 3.5%
Cemetery Operations Revenue - 371 0.9%
Cemetery Financial Revenue - 20 0.0%
Total Acquisition Revenue 521 1.4% 1,873 4.4%
Total Revenue from Continuing
Operations $37,427 100.0% $42,465 100.0%
23,014 25,181
Field EBITDA from Continuing
Operations
Same Store Funeral Field EBITDA $11,114 78.9% $12,580 74.8%
Same Store Funeral Field EBITDA
Margin 39.4% 40.7%
Same Store Cemetery Field EBITDA 2,856 20.3% 3,723 22.1%
Same Store Cemetery Field EBITDA
Margin 32.8% 38.4%
Total Same Store Field EBITDA 13,970 99.1% 16,303 96.9%
Total Same Store Field EBITDA Margin 37.9% 40.2%
Acquisition Funeral Field EBITDA 125 0.9% 457 2.7%
Acquisition Funeral Field EBITDA
Margin 24.0% 30.8%
Acquisition Cemetery Field EBITDA - 65 0.4%
Acquisition Cemetery Field EBITDA
Margin - 17.5%
Total Acquisition Field EBITDA 125 0.9% 522 3.1%
Total Acquisition Field EBITDA
Margin 24.0% 27.9%
Total Field EBITDA from Continuing
Operations 14,095 100.0% 16,825 100.0%
Total Field EBITDA Margin from
Continuing Operations 37.7% 39.6%
Overhead
Total Variable Overhead (2) 955 18.9% 1,061 20.0%
Total Regional Fixed Overhead 764 15.1% 787 14.8%
Total Corporate Fixed Overhead 3,343 66.0% 3,456 65.2%
Total Overhead 5,062 100.0% 5,304 100.0%
13.5% 12.5%
Consolidated EBITDA from Continuing
Operations $9,033 $11,521
Consolidated EBITDA Margin from
Continuing Operations 24.1% 27.1%
Total Depreciation & Amortization 2,153 2,479
Interest, Net 4,188 4,174
Special Charges/Other (Gains)
Losses(1) 113 -
Team Partners Incentive Expense (2) 255 -
Pretax Income 2,324 4,868
Income tax 943 1,876
Net income from Continuing
Operations $1,381 $2,992
3.7% 7.0%
Diluted EPS-from continuing
operations $0.07 $0.16
Actual Actual
Qtr 2 Qtr 3
2007 2007
CONTINUING OPERATIONS
Same Store Contracts
Atneed Contracts 3,966 77.2% 3,906 80.1%
Preneed Contracts 1,173 22.8% 972 19.9%
Total Same Store Funeral Contracts 5,139 100.0% 4,878 100.0%
Acquisition Contracts
Atneed Contracts 248 67.4% 437 69.1%
Preneed Contracts 120 32.6% 195 30.9%
Total Acquisition Funeral Contracts 368 100.0% 632 100.0%
New Store Openings 126 132
Total Funeral Contracts 5,633 5,642
Same Store Interments
Atneed Interments 537 27.9% 492 27.9%
Preneed Interments 1,391 72.1% 1,271 72.1%
Total Same Store Cemetery Interments 1,928 100.0% 1,763 100.0%
Acquisition Interments
Atneed Interments 81 30.1% 76 21.7%
Preneed Interments 188 69.9% 275 78.3%
Total Acquisition Cemetery
Interments 269 100.0% 351 100.0%
Total Cemetery Interments 2,197 2,114
Same Store Revenue
Funeral Operations Revenue $27,700 66.7% $25,898 63.8%
Preneed Commission and Other Revenue 625 1.5% 502 1.2%
Total Funeral Same Store Revenue 28,325 68.2% 26,400 65.0%
Cemetery Operations Revenue 9,408 22.7% 8,360 20.6%
Cemetery Financial Revenue 733 1.8% 1,321 3.3%
Total Cemetery Same Store Revenue 10,141 24.4% 9,681 23.8%
Total Same Store Revenue 38,466 92.7% 36,081 88.8%
Acquisition Revenue
Funeral Operations Revenue 1,943 4.7% 3,290 8.1%
Cemetery Operations Revenue 1,014 2.4% 1,193 2.9%
Cemetery Financial Revenue 87 0.2% 50 0.1%
Total Acquisition Revenue 3,044 7.3% 4,533 11.2%
Total Revenue from Continuing
Operations $41,510 100.0% $40,614 100.0%
26,173 26,447
Field EBITDA from Continuing
Operations
Same Store Funeral Field EBITDA $10,539 70.9% $9,041 65.9%
Same Store Funeral Field EBITDA
Margin 37.2% 34.2%
Same Store Cemetery Field EBITDA 3,453 23.2% 3,159 23.0%
Same Store Cemetery Field EBITDA
Margin 34.0% 32.6%
Total Same Store Field EBITDA 13,992 94.1% 12,200 89.0%
Total Same Store Field EBITDA Margin 36.4% 33.8%
Acquisition Funeral Field EBITDA 545 3.7% 1,298 9.5%
Acquisition Funeral Field EBITDA
Margin 28.0% 39.5%
Acquisition Cemetery Field EBITDA 325 2.2% 212 1.5%
Acquisition Cemetery Field EBITDA
Margin 32.1% 17.8%
Total Acquisition Field EBITDA 870 5.9% 1,510 11.0%
Total Acquisition Field EBITDA
Margin 28.6% 33.3%
Total Field EBITDA from Continuing
Operations 14,862 100.0% 13,710 100.0%
Total Field EBITDA Margin from
Continuing Operations 35.8% 33.8%
Overhead
Total Variable Overhead (2) 1,226 23.2% 1,137 20.4%
Total Regional Fixed Overhead 723 13.7% 886 15.9%
Total Corporate Fixed Overhead 3,345 63.2% 3,553 63.7%
Total Overhead 5,294 100.0% 5,576 100.0%
12.8% 13.7%
Consolidated EBITDA from Continuing
Operations $9,568 $8,134
Consolidated EBITDA Margin from
Continuing Operations 23.0% 20.0%
Total Depreciation & Amortization 2,294 2,408
Interest, Net 4,158 4,387
Special Charges/Other (Gains)
Losses(1) - -
Team Partners Incentive Expense(2) - -
Pretax Income 3,116 1,339
Income tax 1,200 608
Net income from Continuing
Operations $1,916 $731
4.6% 1.8%
Diluted EPS-from continuing
operations $0.10 $0.04
Actual
Qtr 4
2007
CONTINUING OPERATIONS
Same Store Contracts
Atneed Contracts 4,203 80.0%
Preneed Contracts 1,054 20.0%
Total Same Store Funeral Contracts 5,257 100.0%
Acquisition Contracts
Atneed Contracts 607 71.9%
Preneed Contracts 237 28.1%
Total Acquisition Funeral Contracts 844 100.0%
New Store Openings 144
Total Funeral Contracts 6,245
Same Store Interments
Atneed Interments 443 24.8%
Preneed Interments 1,342 75.2%
Total Same Store Cemetery
Interments 1,785 100.0%
Acquisition Interments
Atneed Interments 77 20.3%
Preneed Interments 303 79.7%
Total Acquisition Cemetery
Interments 380 100.0%
Total Cemetery Interments 2,165
Same Store Revenue
Funeral Operations Revenue $28,033 64.8%
Preneed Commission and Other
Revenue 443 1.0%
Total Funeral Same Store Revenue 28,476 65.9%
Cemetery Operations Revenue 7,764 18.0%
Cemetery Financial Revenue 1,543 3.6%
Total Cemetery Same Store Revenue 9,307 21.5%
Total Same Store Revenue 37,783 87.4%
Acquisition Revenue
Funeral Operations Revenue 3,995 9.2%
Cemetery Operations Revenue 1,296 3.0%
Cemetery Financial Revenue 161 0.4%
Total Acquisition Revenue 5,452 12.6%
Total Revenue from Continuing
Operations $43,235 100.0%
Field EBITDA from Continuing
Operations
Same Store Funeral Field EBITDA $11,232 69.2%
Same Store Funeral Field EBITDA
Margin 39.4%
Same Store Cemetery Field EBITDA 3,133 19.3%
Same Store Cemetery Field EBITDA
Margin 33.7%
Total Same Store Field EBITDA 14,365 88.5%
Total Same Store Field EBITDA
Margin 38.0%
Acquisition Funeral Field EBITDA 1,424 8.8%
Acquisition Funeral Field EBITDA
Margin 35.6%
Acquisition Cemetery Field EBITDA 452 2.8%
Acquisition Cemetery Field EBITDA
Margin 35.0%
Total Acquisition Field EBITDA 1,876 11.6%
Total Acquisition Field EBITDA
Margin 34.4%
Total Field EBITDA from Continuing
Operations 16,240 100.0%
Total Field EBITDA Margin from
Continuing Operations 37.6%
Overhead
Total Variable Overhead(2) 1,854 30.1%
Total Regional Fixed Overhead 731 11.9%
Total Corporate Fixed Overhead 3,567 58.0%
Total Overhead 6,152 100.0%
14.2%
Consolidated EBITDA from Continuing
Operations $10,088
Consolidated EBITDA Margin from
Continuing Operations 23.3%
Total Depreciation & Amortization 2,345
Interest, Net 4,473
Special Charges/Other (Gains)
Losses(1) -
Team Partners Incentive Expense(2) -
Pretax Income 3,270
Income tax 1,384
Net income from Continuing
Operations $1,886
4.4%
Diluted EPS-from continuing
operations $0.10
(1) Includes charges for remediation at Rolling Hills Cemetery of
$704K (Q3) 2006 and $110K (Q4) 2006 which were reclassified from
field expenses.
(2) Reclassified Team Partners expense from Total Variable Overhead
in 2006.
Same Store Operations
Our same store volumes continued to decline in a weak death rate environment during the full year of 2007 as our funeral contracts declined 2.6% and our cemetery interments declined 9.8%. However, for the year we had modest same store revenue increases of 1.1% in funeral operations and a stronger 7.4% increase in total cemetery revenues because of higher preneed property sales. These revenue increases were leveraged into Field EBITDA growth of 5% in funeral operations and 26.5% in cemetery operations as Funeral Field EBITDA Margin expanded by 140 basis points to 38% and Cemetery Field EBITDA Margin by 530 basis points to 34.7%, both full year historical highs, primarily because of excellent performance in our Central Region funeral operations and Rolling Hills, our premier cemetery in northern California.
As our Standards Operating Model has gained traction, first in funeral operations starting in 2004 and in cemetery operations starting in 2007, we have accelerated the development and recruitment of 4E "A players" who can grow their businesses at sustainable Field EBITDA Margins over long periods of time notwithstanding secular trends, demographics or the local competitive environment. The financial performance of our total same store portfolio has improved each year since 2004 and has become highly predictable with gradual year over year increases in revenues, Field EBITDA and Field EBITDA Margins. The credit for our improving performance goes to the Managing Partners of our businesses, and in 2007 special recognition goes to the Managing Partners in our Central Region headed by Jay Dodds and to Todd Dashley, Managing Partner of Rolling Hills Memorial Park. Our theme for this past year was "2007-The Year of Being the Best-NO EXCUSES!!" These two outstanding leaders were responsible for a combined $4.6 million increase in same store Field EBITDA and never looked for an excuse not to be successful. After years of relative underperformance, our Central Region under Jay had the highest Standards achievement of any region during 2007, and while new to Carriage, Todd has recently joined his top performing peers on the Standards Council of our Western Region. I'm sure that I speak for all of our shareholders when I say "Thank You" for an exceptional performance.
Strategic Acquisitions
We made seven acquisitions during 2007, five of which were stand-alone individual or cluster operations in strategic markets and two were "tuck-ins" in markets where we already had the dominant brand and there were significant consolidation synergies. Four of our stand-alone and one of our tuck-in acquisitions were in the west or southwest where demographic trends are highly favorable for the businesses we own and operate. Moreover, three of these stand-alone operations in the west/southwest are highly desirable large combination businesses. The fifth stand-alone acquisition was by far the dominant funeral brand and business in a large bedroom market near Boston where longer term demographic trends and a highly fragmented competitive landscape present excellent future market share growth opportunities.
All of our acquisition candidates were profiled and ranked A, B or C using the six Strategic Ranking Criteria in our Strategic Portfolio Optimization Model. Guided by the discipline of this selection and pricing model, we declined to acquire numerous candidates during 2007 that did not fit. The operating and financial results of this growing acquisition portfolio are being reported separately to reflect how investment of our Free Cash Flow into our acquisition strategy is adding sustainable financial performance and shareholder value over time. The Strategic Ranking Criteria relate to long term performance potential whereas short term performance correlates perfectly with the quality of local leadership. In fact, we acquired six of our seven new businesses knowing that new operating leadership would be recruited consistent with our 4E Leadership Model and only two positions remain open.
Total Acquisition Revenue increased to $14.9 million in 2007 from $1.3 million in 2006, and Total Acquisition Field EBITDA increased to $4.8 million from $0.3 million in 2006. Total Acquisition Field EBITDA Margin increased 870 basis points in 2007 to 32.1%. As we fully integrate the acquisition portfolio over time, we would expect the Total Acquisition Field EBITDA Margin to trend toward and likely exceed the same store Field EBITDA Margin because our newly acquired operations tend to be larger and higher margin individual businesses on average compared to our same store portfolio.
We have established five and ten year goals to grow the financial performance contribution from our acquisition portfolio by focusing our capital investment in ten to fifteen strategic markets where demographic trends are positive and strong independent brands that fit our criteria are available for expansion and consolidation. Our five year goal is to acquire about $10 million of annualized revenue each year over the next five years, which would produce annualized revenue of about $250 million by the end of 2012 and which we believe can be financed internally from Free Cash Flow. We exceeded this goal in 2007 by acquiring about $23 million in annualized revenue, so we are slowing the acquisition pace in the first half of 2008 to focus on integration, operations and on internal growth projects.
Overhead
Our Total Overhead has been increasing steadily over the past four years as we upgraded our consolidation platform systems, infrastructure and people. During 2007 Corporate Fixed Overhead increased 5.7% as we made significant improvements in numerous home office departments including Legal, Human Resources, Payroll, Training and Internal Audit, all of which are under new leadership. We view any controllable overhead above our individual businesses as a support cost that needs to be value added to our field operating leadership, our employees and to our client families. Thus, minimizing overhead while continuing to provide value added support will be a goal in 2008, especially as we now have the heavy infrastructure and organizational investments behind us.
Our Variable Overhead increased $1.9 million or 55% to $5.3 million during 2007 with almost all of the increase related to four areas: unusually high litigation costs in four cases; higher employee matching benefits under our 401K program; higher recruiting fees related to successful operating leadership searches; and incentive compensation based on performance. We paid out more field incentive compensation during 2007 than at any time in our history and have converted 100% of our Managing Partner Incentive Compensation to Standards achievement.
Our Total Overhead as a percent of revenue increased to 13.3% from 13% in 2006. Our near term goal is to restrain our Total Overhead growth to the 3-4% range while growing our revenues in the 7-9% range, thereby reducing Total Overhead as a percent of revenue to about 12% over the next few years.
Cash Flow
Carriage began 2007 with $41.0 million in cash and other liquid investments and ended the year with $3.4 million in cash and an undrawn $35 million line of credit. The elements of cash flow for 2007 consisted of the following (in millions):
Cash and liquid investments at beginning of year $41.0
Cash flow from operations 19.6
Proceeds from sales of businesses 3.2
Cash used for business acquisitions (48.6)
Cash used for maintenance capital expenditures (7.9)
Cash used for growth capital expenditures (3.8)
Other investing and financing activities (0.1)
Cash at end of year $3.4
Fourth Quarter 2007 Results
Fourth Quarter 2007 versus Fourth Quarter 2006 highlight results from continuing operations:
-- Revenues of $43.2 million in 2007 versus $37.4 million in 2006.
-- Total Field EBITDA of $16.2 million in 2007 versus $14.1 million in
2006.
-- Total Field EBITDA Margin of 37.6% in 2007 versus 37.7% in 2006.
-- Consolidated EBITDA of $10.1 million in 2007 versus $9.0 million in
2006.
-- Consolidated EBITDA Margin of 23.3% in 2007 versus 24.1% in 2006.
-- Diluted EPS of $0.10 versus $0.07 in 2006.
Our fourth quarter operating performance was excellent as Total Revenue increased 15.5% and Total Field EBITDA increased $2.1 million, or 15.2%, over the fourth quarter of 2006 primarily as a result of our acquisition portfolio adding $4.9 million in revenue and $1.8 million in Field EBITDA to the modest growth in same store revenues and Field EBITDA. However, our variable overhead increased $0.9 million or 94%, offsetting 42% of Total Field EBITDA increase from operations and causing our Consolidated EBITDA Margin to decline 80 basis points to 23.3%, a decline that we consider a short term aberration.
Short and Long Term Outlooks
Our Short Term Rolling Four Quarter Outlook and Long Term Five Year Outlook ranges are intended to approximate what we believe will be the sustainable earning power of our portfolio of deathcare assets over time as our three models are effectively executed. We have learned that it is better to be "roughly right" than "precisely wrong" when forecasting our future results because of the uncertainties in estimating key drivers of short term and long term performance, including volumes, preneed sales, preneed maturities and deliveries, average revenue per service and sale, Field EBITDA Margins, acquisition timing and performance, just to name a few.
Both in the short term and long term management expects to use Free Cash Flow (cash flow from operations less maintenance capital expenditures) to acquire additional businesses if and when available on acceptable terms and to invest in internal projects that will result in revenue and earnings growth and that provide a ROIC in excess of our cost of capital. In our Four Quarter Outlook ending December 31, 2008, we have assumed no additional acquisitions. Although we are in the market evaluating candidates, we do not plan to close an acquisition in the first half of 2008 and will follow our policy of updating our Outlook when the closing of a transaction is certain. We do expect to invest more heavily over the near term in internal growth projects, such as cemetery inventory and new facilities for strong local brands in select funeral markets.
The primary drivers of the improved year over year financial results will be full year 2008 performance from businesses acquired during 2007 and improved execution of our Standards Operating Model in our same store portfolio. The primary drivers of our long term growth in revenues, margins and earnings will be acquisitions and modest growth in our same store revenues at sustainable margins.
Four Quarter Outlook ending 12-31-2008
Revenues in the range of $178 million to $184 million
Field EBITDA in the range of $66 million to $68 million
Field EBITDA Margin in the range of 36% to 37.5%
Total Overhead in the range of $22.5 million to $23.5 million
Consolidated EBITDA in the range of $43 million to $45 million
Consolidated EBITDA Margin in the range of 23.7% to 24.5%
Net earnings from continuing operations in the range of $9.5 million to
$10.5 million
Diluted earnings per share in the range of $0.48 to $0.52
Free cash flow in the range of $15 million to $17 million
Long Term Outlook - Through 2012 (Base Year 2006)
Revenue growth of 7-9% annually, including acquisitions
Consolidated EBITDA growth of 9-11% annually, including acquisitions
Consolidated EBITDA Margin range of 24-26%
Acquisition growth internally funded without new debt or equity
Fourth Quarter Conference Call Information
Carriage Services has scheduled a conference call for tomorrow, March 7, 2008 at 10:00 a.m. Eastern time. To participate in the call, dial (303) 262-2125 at least ten minutes before the conference call begins and ask for the Carriage Services conference call. A replay of the call will be available approximately two hours after the live broadcast ends and will be accessible until March 14, 2008. To access the replay, dial (303) 590-3000 and enter pass code 11109690#.
Investors, analysts and the general public will also have the opportunity to listen to the conference call free over the Internet by visiting http://www.carriageservices.com. To listen to the live call on the web, please visit the website at least fifteen minutes early to register, download and install any necessary audio software. For those who cannot listen to the live webcast, an audio archive will be available shortly after the call and will be accessible for approximately 90 days. For more information, please contact Karen Roan at DRG&E at (713) 529-6600 or email kcroan@drg-e.com.
Carriage Services is a leading provider of death care services and products. As of March 6, 2008, Carriage operates 139 funeral homes in 25 states and 32 cemeteries in 11 states.
Use of Non-GAAP Financial Measures
This press release uses the following Non-GAAP financial measures "free cash flow and EBITDA". Both free cash flow and EBITDA are used by investors to value common stock. The Company considers free cash flow to be an important indicator of its ability to generate cash for acquisitions and other strategic investments. The Company has included EBITDA in this press release because it is widely used by investors to compare the Company's financial performance with the performance of other deathcare companies. The Company also uses Field EBITDA and Field EBITDA Margin to monitor and compare the financial performance of the individual funeral and cemetery field businesses. EBITDA does not give effect to the cash the Company must use to service its debt or pay its income taxes and thus does not reflect the funds actually available for capital expenditures. In addition, the Company's presentation of EBITDA may not be comparable to similarly titled measures other companies report. 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.
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 and Cautionary Statements" in the Company's Annual Report and Form 10-K for the year ended December 31, 2006, 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 http://www.carriageservices.com.
CARRIAGE SERVICES, INC.
Selected Financial Data
December 31, 2007
(unaudited)
Selected Balance Sheet Data: 12/31/06 12/31/07
Cash and short-term investments $36,011 $3,446
Long-term corporate investments 5,000 -
Total Senior Debt (a) 140,179 138,913
Days sales in funeral accounts
receivable 23.2 22.9
Senior Debt to total capitalization 42.4 40.9
Senior Debt to EBITDA from continuing
operations (rolling twelve months) 4.24 3.53
(a) - Senior debt does not include the convertible junior subordinated
debentures.
Reconciliation of Non-GAAP Financial Measures:
This press release includes the use of certain financial measures that are not GAAP measures. The non-GAAP financial measures are presented for additional information and are reconciled to their most comparable GAAP measures below.
Reconciliation of Net Income from continuing operations to EBITDA from continuing operations for the following periods (in 000s):
Three months Three months
ended ended
12/31/2006 12/31/2007
Net income from continuing operations $1,381 $1,886
Provision for income taxes 943 1,384
Pre-tax earnings from continuing operations 2,324 3,270
Net interest expense, including
loan cost amortization 4,188 4,473
Depreciation & amortization 2,153 2,345
Other 368 -
EBITDA from continuing operations $9,033 $10,088
Revenue from continuing operations $37,427 $43,235
EBITDA margin from continuing operations 24.1% 23.3%
Twelve months Twelve months Twelve months
ended ended ending
12/31/2006 12/31/2007 12/31/08E
Net income from
continuing operations $3,714 $7,525 $10,000
Provision for income taxes 2,305 5,068 6,000
Pre-tax earnings from
continuing operations 6,019 12,593 16,000
Net interest expense, including
loan cost amortization 17,106 17,192 18,000
Depreciation & amortization 8,664 9,526 10,000
Other 963 - -
EBITDA from continuing
operations $32,752 $39,311 $44,000
Revenue from continuing
operations $150,346 $167,824 $181,000
EBITDA margin from continuing
operations 21.8% 23.4% 24.3%
Reconciliation of Non-GAAP Financial Measures Continued:
Reconciliation of estimated net income to free cash flow for the twelve months ending December 31, 2008 (in 000's):
Net income $10,000
Tax expense 6,000
Interest expense, net 18,000
Depreciation and amortization 10,000
EBITDA $44,000
Interest paid 18,000
Cash taxes 1,000
Maintenance capital expenditures 9,000
Free cash flow $16,000
Contacts: Mel Payne, Chairman & CEO
Terry Sanford, CAO and Treasurer
Carriage Services, Inc.
713-332-8400
Ken Dennard / ksdennard@drg-e.com
Lisa Elliott / lelliott@drg-e.com
DRG&E / 713-529-6600
SOURCE Carriage Services, Inc.
http://www.carriageservices.com
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