Carriage Services Reports Third Quarter Results
HOUSTON, Nov 09, 2005 /PRNewswire-FirstCall via COMTEX News Network/ -- Carriage Services, Inc. (NYSE: CSV) today reported financial results for the three- and nine-month periods ended September 30, 2005. Results for the third quarter 2005 were as follows:
* Revenues of $36.5 million compared to previous estimate of $35 to $37
million and $35.8 million in the prior year.
* EBITDA from continuing operations of $7.3 million compared to previous
estimate of $7.5 to $7.9 million and pro forma EBITDA of $6.6 million
in the prior year.
* Diluted EPS of $0.04 compared to pro forma earnings of $0.05 per
diluted share for third quarter of 2004.
* Earnings from continuing operations of $0.01 per share compared to
previous estimates of $0.01 to $0.02 and compared to pro forma
earnings of $0.00 for third quarter of 2004.
* Reconciliations of EBITDA and other non-GAAP financial measures are
located at the end of this press release.
Pro forma comparisons are provided because of the accounting change for preneed selling costs as previously announced in the Company's second quarter earnings release. Prior to the change which was effective January 1, 2005, commissions and other costs that were related to the origination of prearranged funeral and cemetery service and merchandise sales were deferred and amortized with the objective of recognizing selling costs in the same period that the related revenue is recognized. Under the new method which was not applied in 2004, the commissions and other costs are expensed as incurred. Comparisons are made of the current period results to the 2004 period on a pro forma basis for comparability purposes.
"The third quarter is typically our slowest quarter for seasonal reasons. While we are pleased that we met revenue estimates, we experienced higher general and administrative expenses which had a negative impact on our operating performance and earnings in the quarter," stated Melvin C. Payne, Chairman and Chief Executive Officer. General and administrative expenses included additional costs of implementing a new cemetery accounting system, higher audit and consulting fees to comply with the requirements of Sarbanes- Oxley, and the costs of relocating our home office at the end of the third quarter.
Carriage reported diluted EPS of $0.04 for the quarter ended September 30, 2005 which consisted of earnings from continuing operations of $0.01 per share and gains from the sale of a cemetery business in southern California of approximately $0.8 million, equal to $0.03 per diluted share compared to pro forma diluted earnings of $0.05 per share for the third quarter of 2004.
Income from continuing operations for the third quarter of 2005 decreased from the $0.03 per diluted share reported in 2004 for the following reasons (in thousands, except per share amounts):
Amount, net of Earnings per
Income Tax Diluted Shares
Income from continuing operations
for the third quarter of 2004 $ 471 $ 0.03
Decrease in gross profit from funeral and
cemetery operations (including the change
in accounting for preneed selling costs) (124) (0.01)
Change in other income (expense), primarily
a charge to write off systems costs in 2004 358 0.02
Higher interest expense (316) (0.02)
Higher general and administrative expenses
in 2005, primarily to document and evaluate
internal controls and upgrade systems
and processes (249) (0.01)
Income from continuing operations for the
third quarter of 2005 $ 140 $ 0.01
On a year-to-date basis, Carriage reported diluted EPS of $0.01, excluding the cumulative effect of the accounting change, which consisted of a loss from continuing operations of $0.04 per share and earnings from discontinued operations of $0.05 per share. Excluding debt refinancing costs of $0.25 per diluted share, diluted earnings from continuing operations was $0.21 per diluted share for the nine months ending September 30, 2005 compared to $0.20 per diluted share on a pro forma basis for the same period in 2004.
Carriage reported negative free cash flow of $4.5 million in the third quarter of 2005, which consisted of the following (in thousands):
EBITDA from continuing operations $ 7,344
Less: Interest paid (6,714)
Income taxes paid (51)
Capital expenditures (2,032)
Noncash expenses 795
Uses of working capital (3,808)
Free cash flow $ (4,466)
The Company expects interest payments to total approximately $1.7 million for the fourth quarter of 2005 as compared to $6.7 million in the third quarter of 2005. Changes in working capital are expected to provide positive free cash flow of approximately $3.0 million in the fourth quarter, primarily from trust withdrawals, as compared to negative free cash flow of $3.8 million for the third quarter of 2005.
Acquisition
"We are pleased to report that we acquired the assets of a funeral home business (two funeral chapels) in Northern Florida for $1.3 million in cash in September," stated Mr. Payne. "We evaluated this transaction using our 'Being the Best' standards and as a result we expect the acquisition to be immediately accretive to earnings and the integration of the business into the Carriage family to be seamless. The business is within close proximity to one of our existing businesses which allows sharing of resources and management."
Funeral Operations
Key indicators and financial results for Carriage's funeral operations for the third quarter of 2005 when compared to the same period last year are as follows:
* Funeral revenues were flat at $26.6 million
* Same store funeral revenues declined 0.9 percent from $26.2 million to
$26.0 million
* Same store funeral contracts decreased 0.5 percent from 5,335 to 5,309
* Same store average revenue per contract decreased by $23, or 0.4
percent from $4,910 to $4,887
* Preneed commission income increased from $0.4 million to $0.6 million
* Funeral gross profit was flat at $6.1 million
"While the third quarter is seasonally the weakest volume quarter of the year, our average revenue per contract was down slightly because of mix changes after being up in the first two quarters," commented Mr. Payne. Cremation services represented 33.3 percent of the number of funeral services performed during the third quarter of 2005 compared to 31.0 percent in the third quarter of 2004. The average revenue for burial contracts increased 2.7 percent to $6,726 while the average revenue for cremation contracts declined 0.4 percent to $2,389. The change in burial versus cremation mix had the effect of reducing revenues by $0.5 million because the cremation rate increased and we experienced lower average revenue from each cremation service.
On a year-to-date basis, funeral revenues increased $1.8 million, equal to 2.1 percent and same-store revenue increased 1.4 percent, consisting of a 0.1 percent decline in the number of contracts and an increase in the average revenue per contract of 1.5 percent. The cremation rate has increased year over year from 31.2 percent to 32.9 percent. Preneed commission income increased by $0.6 million, or 60 percent compared to 2004. Funeral gross margin increased from 25.8 percent to 26.7 percent, primarily on the strength of the higher revenues.
Cemetery Operations
Key indicators for Carriage's cemetery operations and financial results for the third quarter when compared to the same period last year are as follows:
* Cemetery revenues increased 6.8 percent, from $9.2 million to
$9.9 million
* The number of preneed contracts written decreased 2.1 percent to 1,883
* Average revenue per preneed contract written decreased 4.0 percent to
$2,729 and the average preneed property rights increased 7.9 percent
to $1,972
* The number of interments performed decreased 10.9 percent to 1,993
* Cemetery gross profit decreased 9.3 percent to $1.8 million
"Though we experienced an increase in revenues, a substantial portion of that increase was related to the completion of mausoleums sold in prior periods," stated Mr. Payne. "We experienced declines in at-need revenues and interments and preneed contracts written. Cemetery gross profit decreased $0.1 million which was attributable to the changes in accounting for preneed selling costs."
Financial revenues (trust earnings and finance charges on the installment contracts) totaled approximately $750,000, approximately the same as the third quarter of the prior year. Cemetery gross margin percentage declined by 260 basis points to 18.4 percent because our product revenue mix changed to a higher proportion of merchandise and services which have lower margins and the change in accounting for preneed selling costs.
On a year-to-date basis, cemetery revenues increased 4.0 percent and cemetery gross margin decreased 410 basis points to 19.2 percent primarily because of the change in accounting for preneed selling costs.
Other
General and administrative expenses increased $0.4 million compared to the third quarter of 2004, as previously stated, because of higher audit and professional fees related to compliance with the Sarbanes-Oxley Act of 2002, a cemetery systems implementation process and the home office relocation.
Interest expense increased $0.5 million compared to the prior year quarter because outstanding senior debt increased when the Company refinanced its senior debt earlier in 2005. Interest income, which is included in Other income, increased $140,000 because excess funds from the recent debt refinancing were invested in short-term instruments.
Discontinued operations consisted primarily of a gain on the sale of a cemetery in the amount of $0.8 million.
Outlook
For the fourth quarter of 2005, Carriage expects revenues to range between $37 million and $39 million, EBITDA to range between $8 million and $9 million, and earnings from continuing operations to range between $0.04 and $0.06 per diluted share. Carriage expects its revenues for the full year 2005 to range between $154 million and $156 million, adjusted EBITDA to range between $35.8 million and $37.3 million and has narrowed earnings from continuing operations to range between $0.25 to $0.27 per share. The Company has revised its estimates for adjusted free cash flow to the range of $9 million to $10 million and capital expenditures to approximately $7.5 million.
Third Quarter Conference Call Information
Carriage Services has scheduled a conference call tomorrow, November 10, 2005 at 10:30 a.m. eastern time. To participate in the call, dial 303-262-2194 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 November 17, 2005. To access the replay, dial 303-590-3000 and enter the pass code 11043887.
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 archive will be available shortly after the call. For more information, please contact Karen Roan at DRG&E at (713) 529-6600 or email kcroan@drg-e.com .
Carriage Services is the fourth largest publicly traded death care company. As of November 9, 2005, Carriage operates 135 funeral homes and 29 cemeteries in 28 states.
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, 2004, 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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)
For the Three Months For the Nine Months
Ended Ended
09/30/04 09/30/05 09/30/04 09/30/05
Funeral revenues $26,582 $26,603 $85,054 $86,858
Funeral costs and expenses 20,475 20,506 63,097 63,668
Funeral gross profit 6,107 6,097 21,957 23,190
Funeral gross margin 23.0% 22.9% 25.8% 26.7%
Cemetery revenues 9,226 9,855 28,576 29,722
Cemetery costs and expenses 7,233 8,047 21,931 24,015
Cemetery gross profit 1,933 1,808 6,645 5,707
Cemetery gross margin 21.0% 18.4% 23.3% 19.2%
Total revenues 35,808 36,458 113,630 116,580
Total costs and expenses 27,708 28,553 85,028 87,683
Total gross profit 8,100 7,905 28,602 28,897
Total gross margin 22.6% 21.7% 25.2% 24.8%
General and administrative
expenses 2,748 3,142 7,976 8,921
Operating income 5,352 4,763 20,627 19,976
Operating margin 15.0% 13.1% 18.2% 17.1%
Interest expense 4,175 4,682 12,952 14,059
Additional interest costs
on debt refinancings --- --- --- 6,933
Other expense (income), net 423 (140) (468) 249
Total interest expense
and other 4,598 4,542 12,484 21,241
Income (loss) before income
taxes from continuing
operations 754 221 8,143 (1,265)
(Provision) benefit for
income taxes (283) (81) (3,054) 483
Net income (loss) from
continuing operations before
cumulative effect of change
in accounting principle 471 140 5,089 (782)
Discontinued operations:
Operating income from
discontinued operations 58 3 404 101
Gain (loss) on sale of
discontinued operations 1,039 836 (2,011) 1,302
Income tax (provision) benefit (411) (309) 269 (522)
Income (loss) from
discontinued operations 686 530 (1,338) 881
Cumulative effect of change in
accounting principle, net
of tax benefit of $13,078 --- --- --- (22,756)
Net income (loss) $1,157 $670 $3,751 $(22,657)
Basic earnings (loss) per
share:
Continuing operations $0.03 $0.01 $0.29 $(0.04)
Discontinued operations 0.04 0.03 (0.08) 0.05
Cumulative effect of change
in accounting principle --- --- --- (1.25)
Net income (loss) $0.07 $0.04 $0.21 $(1.24)
Diluted earnings (loss) per
share:
Continuing operations $0.03 $0.01 $0.28 $(0.04)
Discontinued operations 0.03 0.03 (0.07) 0.05
Cumulative effect of change
in accounting principle --- --- --- (1.25)
Net income (loss) $0.06 $0.04 $0.21 $(1.24)
Weighted average number of
common shares outstanding:
Basic 17,834 18,426 17,751 18,294
Diluted 18,281 18,938 18,226 18,294
CARRIAGE SERVICES, INC.
Selected Financial Data
September 30, 2005
(unaudited)
Selected Balance Sheet Data: 12/31/04 9/30/05
Cash and Short Term Investments $ 1,948 $ 16,314
Total Senior Debt (A) 110,293 142,437
Deferred Interest on Convertible Junior
Subordinated Debentures 10,891 ---
Days sales in funeral accounts receivable 26.1 24.7
Net Senior Debt to total capitalization (B) 34.0 40.0
Net Senior Debt to EBITDA from continuing
operations (rolling twelve months) (B) 2.58 3.55
(A) - Senior debt does not include the convertible junior subordinated
debentures.
(B) - Net Senior debt is Senior Debt less cash and short term investments
Reconciliation of Non-GAAP Financial Measures:
Three months Nine months
ended ended
9/30/05 9/30/05
Cash provided (used) by operating activities $ (2,405) $ (9,434)
Additional interest paid for early retirement
of old Senior Notes (C) --- 5,955
Deferred distributions on subordinated
debentures (C) --- 10,345
Adjusted cash provided by operating activities (2,405) 6,866
Less capital expenditures (2,032) (5,487)
Adjusted free cash flow $ (4,466) $ 1,379
Net income (loss) from continuing operations
before change in accounting principle $ 140 $ (782)
Interest expense, net of interest income 4,540 20,665
Depreciation and amortization 2,583 7,432
Income taxes (benefit) 81 (483)
EBITDA from continuing operations $ 7,344 $ 26,832
(C) - For the nine months ended 9/30/05, we added the additional interest
paid on the senior notes and the payment of the cumulative deferred
distributions on the subordinated debentures when we refinanced our
senior debt during the quarter ended 3/31/05.
Reconciliation of Non-GAAP Financial Measures (continued):
Three months
ended
9/30/04
Net income from continuing operations
before change in accounting principle $ 471
Interest expense, net of interest income 4,175
Depreciation and amortization 2,880
Income taxes 283
EBITDA from continuing operations $ 7,809
Preneed costs (1,163)
Pro forma EBITDA from continuing operations $ 6,646
CARRIAGE SERVICES, INC.
Effect of Change in Accounting Principle
(unaudited)
(in thousands, except per share amounts)
As of January 1, 2005, the Company recorded a cumulative effect of change in accounting method of $35.8 million pretax or $22.8 million after tax (net of income tax benefit of $13.0 million), or $1.21 per diluted share, which represents the cumulative balance of deferred preneed selling costs in the Company's consolidated balance sheet. The table below presents the Company's income (loss) from continuing operations before cumulative effect of change in accounting method, net income (loss), diluted earnings (loss) per share from continuing operations before cumulative effect of change in accounting method and diluted net earnings (loss) per share for the three and nine months ended September 30, 2005 had the Company not made this accounting change (in thousands, except per share amounts).
Three Months Ended Nine Months Ended
September 30, 2005 September 30, 2005
Results Results
under under
As Effect of Prior As Effect of Prior
Reported Change Method Reported Change Method
Income (loss) from
continuing operations
before cumulative
effect of change in
accounting method $140 $137 $277 $(782) $1,579 $797
Net income (loss) 670 86 756 (22,657) 23,722 1,065
Diluted earnings
(loss) per common
share from continuing
operations before
cumulative effect
of change in
accounting method 0.01 0.01 0.02 (0.04) 0.08 0.04
Diluted earnings
(loss) per common
share 0.04 0.00 0.04 (1.24) 1.30 0.06
The table below presents the pro forma amounts for the three and nine months ended September 30, 2004 as if the accounting change had been in effect during those periods (in thousands, except per share amounts).
Three Months Ended Nine Months Ended
September 30, 2004 September 30, 2004
As As
Previously Effect of Previously Effect of
Reported Change Pro forma Reported Change Pro forma
Gross profit:
Funeral $6,101 $(281) $5,820 $21,942 $(826) $21,116
Cemetery 2,031 (542) 1,489 6,783 (1,580) 5,203
$8,132 $(823) $7,309 $28,725 $(2,406) $26,319
Income from
continuing
operations $ 489 $(514) $ (25) $ 5,162 $(1,504) $ 3,658
Net income
(loss) 1,157 (255) 902 3,751 (1,258) 2,493
Diluted earnings
per common share
from continuing
operations 0.03 (0.03) 0.00 0.28 (0.08) 0.20
Diluted earnings
(loss) per common
share 0.06 (0.01) 0.05 0.21 (0.07) 0.14
Contacts: Mel Payne, Chairman & CEO
Joe Saporito, CFO
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.
Mel Payne, Chairman & CEO, or Joe Saporito, CFO, both of Carriage Services, Inc., +1-713-332-8400; or Ken Dennard, ksdennard@drg-e.com , or Lisa Elliott, lelliott@drg-e.com , both of DRG&E, +1-713-529-6600, for Carriage Services, Inc.
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