SEC Filing - Carriage Services, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 15, 2005

Carriage Services, Inc.

(Exact Name of Registrant as specified in its charter)

Delaware		1-11961		76-0423828
(State or other jurisdiction of incorporation)		(Commission File Number)		(IRS Employer Identification No.)

1900 St. James Place, 4^th Floor
Houston, Texas 77056

(Address, including zip code, of principal executive offices)

Registrant’s telephone number, including area code: (713) 332-8400

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01. Regulation FD Disclosure

On February 15, 2005, the Company is making a presentation at the UBS Global Healthcare Services Conference in New York City. Copies of both the Company Fact Sheet and slide presentation, which will be presented at the conference, are attached hereto as Exhibit 99.1 and 99.2. The Fact Sheet and the slide presentation are available at the Company's website www.carriageservices.com.

The presentation, fact sheet and the information in this report are being furnished in accordance with Regulation FD and not "filed" with the Securities and Exchange Commission. Accordingly, the information in this report is not incorporated by reference into any registration statement filed by the Company under the Securities Act of 1933, as amended, and will not be so incorporated by reference into any future registration statement unless specifically identified as being incorporated by reference.

Item 9.01. Financial Statements and Exhibits.

Item		Description
99.1		Company Fact Sheet dated February 2005 to be presented at the UBS Global Healthcare Services Conference on February 15, 2005

99.2		Slide Presentation to be presented at the UBS Global Healthcare Services Conference on February 15, 2005

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, Carriage Services, Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CARRIAGE SERVICES, INC


Date: February 15, 2005	By:	/s/ Joseph Saporito
		Joseph Saporito Executive Vice President and Chief Financial Officer

INDEX TO EXHIBITS

Exhibit		Description
99.1		Company Fact Sheet dated February 2005 to be presented at the UBS Global Healthcare Services Conference on February 15, 2005

99.2		Slide Presentation to be presented at the UBS Global Healthcare Services Conference on February 15, 2005

Exhibit 99.1

February 2005
*Company Fact Sheet*

CARRIAGE SERVICES, INC.
NYSE: CSV

SIMPLY PUT … BECOMING THE BEST

WWW.CARRIAGESERVICES.COM

INVESTOR CONSIDERATIONS:

• Market Leader in its Markets - Carriage has #1 or #2 market share in over 70% of the suburban and rural markets in which the company operates.

• Stable & Predictable Business — Carriage’s business can be described as one of relatively stable and predictable revenue and cash flows. Carriage has the second most profitable funeral home and cemetery operations versus its public peers, as measured by funeral gross margin.

• Positive Long-Term Demographic Trends — The aging of the “Baby Boom” generation should result in favorable future death rate trends for Carriage and the Death Care industry. According to the US Census Bureau, the number of people in the United States aged 65 and over is expected to increase from 36.7 million in 2005 to 40.2 million in 2010 and to 54.6 million in 2020, increases of 9.5% and 48.8%, respectively.

• Capital Structure Positions Carriage for Growth — Carriage’s recently completed $130 million senior note offering and subsequent debt refinancing resulted in a low cost capital structure that provides the capital and flexibility to execute a disciplined growth strategy.

• “Being the Best” Yielding Positive Results — On January 1, 2004, Carriage implemented significant changes in its funeral organization and operations to improve operating and financial results by incentivizing the growth of market share and profitability. The execution of its “Being the Best” standards based funeral operating model resulted in operational and financial improvements in Carriage’s funeral segment in 2004 that are expected to continue through 2005 and beyond. Carriage intends to implement a similar operating model in its cemetery organization which will promote the key success drivers that are unique to that business.

• Proven Management Team — Carriage’s senior management team is characterized by a dynamic and entrepreneurial culture that reacts quickly and proactively to address changing market conditions and emerging trends. This culture, with a focus on leadership, will provide an important advantage as the Death Care industry evolves.

Stock Price (February 10, 2005)		$5.05

Stock Data
Fiscal Year-End:	December
Symbol / Exchange:	CSV / NYSE
52 - Week Trading Range:	$4.15 – $5.50
Diluted Common Shares O/S (In Mill.):	18.3
Market Capitalization (In Mill.):	$	92.32
Total Enterprise Value (In Mill.):	$	319.57
Avg. Daily Volume (3 Mos.):	26,545.0
Float (In Mill.):	15.8
Insider Ownership:	11.8		%
Institutional Ownership:	43.7		%



Financial Data (Pro Forma As of 9/30/04, Unaudited)
(Amounts in Millions - Pro Forma for Recent $130 million Senior Note Offering)
Cash & Equivalents:	$	11.1
Total Assets:	$	569.2
Total Senior Debt:	$	144.6
Total Subordinated Debt:	$	93.8
Total Debt:	$	238.4
Stockholders’ Equity:	$	105.9
Trailing Twelve Mos. Revenue:	$	152.1
Trailing Twelve Mos. EBITDA from Cont. Ops.:	$	39.0
Trailing Twelve Mos. Diluted EPS from Cont. Ops.:	$	0.36
Trailing Twelve Mos. Diluted EPS:	$	0.29
Trailing Twelve Mos. Cash Flow from Operations:	$	21.6
Trailing Twelve Mos. Capital Expenditures:	$	4.6
Trailing Twelve Mos. Free Cash Flow:	$	17.0

Company Estimate		2004E
Revenue:		$150 – $152
EBITDA:		$39 – $40
Dil. EPS from Cont. Operations:		$0.37 – $0.38

Stock Price Chart

COMPANY OVERVIEW:

Carriage Services is a leading provider of Death Care services and products in the United States and is the fourth largest publicly traded Death Care company. As of December 31, 2004, Carriage operated 135 funeral homes in 28 states and 30 cemeteries (including 5 combination locations) in 12 states. Carriage provides a complete range of funeral and cremation services and sells a wide variety of related products and merchandise. Carriage’s business can be characterized as one of relative stability, reflected by predictable revenue and cash flow, with incremental growth opportunities through selective acquisitions.

“BEING THE BEST” GAINING TRACTION:

Carriage recognized that to increase value for shareholders, it must improve the operating results of its funeral operations by growing market share and increasing internal profitability and earnings growth. After an extensive review of its funeral operations in 2003, Carriage announced and began to implement a number of operational changes that are intended to help the Company grow its market share and improve operating and financial performance in the future.

The execution of its “Being the Best” standards based funeral operating model resulted in operational and financial improvements in Carriage’s funeral segment in 2004 that are expected to continue through 2005 and beyond. Carriage intends to implement a similar operating model in its cemetery organization which will promote the key success drivers that are unique to that business.

“Being the Best” is based upon lessons the Company has learned from its best businesses and its best operators. Carriage analyzed its best businesses over a four year period according to size and cremation mix, and then developed operating and financial standards that are organized around three primary areas — market share, people and operating and financial metrics. Carriage introduced a more decentralized, entrepreneurial and local operating model and has overhauled its incentive compensation structure to align with its new standards. These new standards and incentives will challenge and reward its managing partners who thrive on growing their local business and taking responsibility for results.

CARRIAGE’S STRATEGY POSITIONS COMPANY FOR DISCIPLINED GROWTH:

Carriage’s business strategy is based on strong, local leadership and entrepreneurial principles that the Company believes drives market share, revenue growth, and profitability in its local markets. Carriage’s operating model emphasizes:

• decentralized management of its local businesses;

• financial and operational standards based upon drivers of success of its best businesses;

• variable compensation that rewards its funeral home managers as if they are owners;

• finding, developing and retaining the best people in the industry; and

• information technology designed to support local business and corporate management in operating, managing and monitoring its business.

Carriage’s near-term objectives for 2005 and 2006 include:

• continuing to improve its operating and financial performance by executing its Being the Best funeral operating model and implementing a similar strategy in its cemetery business;

• increasing its profitability and cash flow, and continuing to improve its credit profile; and

• initiating a disciplined acquisition program of funeral businesses that match a profile based on its Being the Best standards.

Carriage’s longer-term objectives over the next five years include:

• continuous improvement and portfolio optimization driven by its Being the Best operating model;

• increasing market share and profitability;

• formalizing and implementing a disciplined acquisition program; and

• raising equity proceeds to enhance its capital structure and support its growth strategy as appropriate opportunities arise.

CARRIAGE SERVICES STRENGTHS:

Market Leader in its Markets - Carriage has #1 or #2 market share in over 70% of the suburban and rural markets that the company operates in.

Strong Field Level Operating Margins — Carriage believes its field level operating margins are among the highest reported by public death care companies. Carriage’s strong margins and its ability to control costs are important advantages in its business, which is characterized by a high fixed cost structure.

Stable Cash Flow & Debt Reduction — Since November 2000, Carriage has demonstrated the ability to generate stable free cash flow and to repay debt with cash flow from operations and asset sales. The Company has also demonstrated its ability to generate strong and consistent EBITDA margins. Carriage has reduced its senior debt and contingent obligations from previous acquisitions by $80.9 million, or 41% from $197.2 million at December 31, 2000 to $116.3 million at September 30, 2004. Carriage is committed to using free cash flow to continue to improve its credit profile and to fund its selective growth strategy.

Flexible Capital Structure — Carriage’s capital structure from mid-1999 to January 2005 enabled the Company to

focus its efforts on improving its operations and credit profile. Carriage recently completed a $130 million, ten year, 7.875% senior note offering which refinanced its existing debt and further improved its capital structure and flexibility, enabling Carriage to invest its free cash flow in disciplined growth opportunities.

Partnership Culture — Carriage’s funeral homes and cemeteries are managed by individuals with extensive death care experience. Carriage’s funeral home managing partners have responsibility for day-to-day operations but are required to follow its Being the Best operating and financial standards. This strategy allows each local business to maintain its unique identity within its local market and to capitalize on its reputation and heritage while Carriage’s senior management team maintains supervisory controls and provides support services from its corporate headquarters.

Proven Management Team — Carriage’s senior management team, headed by Mel Payne, is characterized by a dynamic culture that reacts quickly and proactively to address changing market conditions and emerging trends. This culture was critical to Carriage’s successful previous restructuring efforts and will provide an important advantage as the death care industry evolves.

INDUSTRY OVERVIEW & TRENDS:

Relatively Stable Death Rates — Death rates in the United States have been relatively stable on a long-term historical basis. The number of deaths in the United States has increased at a compound annual rate of approximately 1% from 1980 to 2000. From 2001 to 2003, death rates deviated from the long-term historical trend and declined year-over-year for a three year period; the first year-over-year declines since the mid-1970’s. Despite the recent year-over-year decline in deaths, deaths are expected to increase 5% from 2004 to 2010, or approximately 1% per year.

Aging Population and Increasing Death Rate - The U.S. population is getting older as the “Baby Boom” generation begins to age. The number and percentage of the population age 65 and over is expected to increase from 36.7 million in 2005 to 40.2 million in 2010 and to 54.6 million in 2020, increases of 9.5% and 48.8%, respectively. The growth in the 65 and older portion of the U.S. population is significant because approximately 68% of deaths in the U.S. have occurred when people are age 65 and older.

Growing Demand for Cremation — In recent years, there has been a steady, gradual increase in cremation as an alternative to traditional methods of burial. It is estimated that cremation accounted for approximately 10% of the U.S. burial market in 1980 and for approximately 29% in 2003. It is estimated that the cremation rate will increase to 35% by 2010. Cremation services and products generate less revenue per event than traditional burial events. To mitigate this and to even capitalize on the growing cremation trend, Carriage has developed innovative, high quality funeral and memorializing packages and additional products to increase its cremation revenue per funeral.

Population Age Distribution: 2000 – 2040

	2000A		2005E		2010E		2020E		2030E		2040E
Total Population	281,422		295,507		308,936		335,805		363,584		391,946
% Change	—		5.0	%	4.5	%	8.7	%	8.3	%	7.8	%

Under 15	21.4	%	20.6	%	20.0	%	20.0	%	19.7	%	19.6	%
15 to 24	13.9	%	14.2	%	14.2	%	12.6	%	12.8	%	12.7	%
25 to 44	30.2	%	28.2	%	26.8	%	26.3	%	25.2	%	24.7	%
45 to 64	22.0	%	24.7	%	26.2	%	24.9	%	22.6	%	22.6	%
65 to 74	6.5	%	6.3	%	6.8	%	9.4	%	10.4	%	9.0	%
75 to 84	4.4	%	4.4	%	4.1	%	4.6	%	6.6	%	7.4	%
85 and over	1.5	%	1.7	%	2.0	%	2.2	%	2.6	%	3.9	%
*65 and over*	*12.4*	%	*12.4*	%	*13.0*	%	*16.3*	%	*19.7*	%	*20.4*	%

					V Aging of the Baby Boomers

Source: U.S. Census Bureau

Population Age Distribution: 2000 - 2040

Highly Fragmented Ownership — Reports indicate that there are approximately 22,000 funeral homes and 10,000 cemeteries in the U.S., and that the domestic funeral service industry generated approximately $15 billion in revenue in 2003. Based on information provided by public companies, it is estimated that approximately 80% of the funeral service industry’s revenue is generated by businesses that are independently owned. While many of these businesses would not fit our profile of acquisition candidates, we believe there are sufficient attractive independent businesses that would meet our profile.

Heritage & Tradition — Death care businesses have traditionally been family-owned businesses that have built a local heritage and tradition through successive generations, providing a foundation for ongoing business opportunities from established client family relationships and related referrals. Given the sensitive nature of Carriage’s business, the relationships fostered at the local level build trust in the community and are a key driver of market share. While new entrants may enter any given market, the time and resources required to develop local heritage and tradition serve as important barriers to entry.

NYSE: CSV

COMPANY HEADQUARTERS

1900 St. James Place, 4^th Floor

Houston, TX 77056

Phone: 713-332-8400 · Fax: 713-332-8401

www.CarriageServices.com

READER ADVISORY & FORWARD LOOKING STATEMENTS

Certain statements made herein or elsewhere by, or on behalf of, the Company that are not historical facts are intended to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on assumptions that the Company believes are reasonable; however, many important factors, as discussed under “Forward-Looking Statements and Cautionary Statements” in the Company’s Annual Report and Form 10-K for the year ended December 31, 2003, could cause the Company’s results in the future to differ materially from the forward-looking statements made herein and in any other documents or oral presentations made by, or on behalf of, the Company. The Company assumes no obligation to update or publicly release any revisions to forward-looking statements made herein or any other forward-looking statements made by, or on behalf of, the Company. A copy of the Company’s Form 10-K, and other Carriage Services information and news releases, are available at www.carriageservices.com.

DISCLOSURE OF NON-GAAP PERFORMANCE MEASURES

We report our financial results in accordance with generally accepted accounting principles (“GAAP”). However, management believes that certain non-GAAP performance measures and ratios, which management uses in managing our business, may provide users of this financial information additional meaningful comparisons regarding results in historical periods.

We refer to the term “EBITDA” in various places of our financial discussion. EBITDA is defined by us as net income before interest expense, other income (expense), income tax expense, and depreciation and amortization expense. EBITDA is not a measure of operating performance under generally accepted accounting principles, or GAAP, and should not be considered in isolation nor construed as an alternative to operating profit, net income (loss) or cash flows from operating, investing or financing activities, each as determined in accordance with GAAP. You should also not consider EBITDA as a measure of liquidity. Moreover, since EBITDA is not a measure determined in accordance with GAAP and thus is susceptible to varying interpretations and calculations, EBITDA, as presented, may not be comparable to similarly titled measures presented by other companies.

Reconciliation of the estimate of 2004 Net Income from continuing operations to the estimate of 2004 EBITDA from continuing operations ($ in 000s):

	2004 Estimate Range
	Low		High
Net income from continuing operations	$	16,000	$	17,600
Provision (benefit) for income taxes	$	6,000	$	6,600
Pre-tax earnings from continuing operations	$	10,000	$	11,000
Interest expense, including loan cost amortization	$	18,000	$	18,000
Depreciation & amortization	$	11,000	$	11,000
Total estimated EBITDA from continuing operations	$	39,000	$	40,000
Total estimated revenue	$	150,000	$	152,000

Reconciliation of last twelve months ending 9/30/04 net income from continuing operations to last twelve months ending 9/30/04 EBITDA from continuing operations ($ in 000s):

	Last Twelve Months Ended 9/30/2004
Net income from continuing operations	$	6,537
Provision (benefit) for income taxes	$	3,921
Pre-tax earnings from continuing operations	$	10,458
Other (income) expense	$	(511	)
Interest expense, including loan cost amortization	$	17,389
Depreciation & amortization	$	11,643
Total estimated EBITDA from continuing operations	$	38,979

We define free cash flow as cash provided by operating activities less capital expenditures for property, plant and equipment. We consider free cash flow to be an important indicator of our ability to pay down our debt while we are in loss carryforward position for tax purposes.

Reconciliation of cash provided by operations to free cash flow is provided in the following table (in 000s):

	Last Twelve Months Ended 9/30/2004
Cash provided by operations	$	21,595
Capital expenditures	$	(4,633	)
Free cash flow	$	16,962

Reconciliation of pro forma capitalization as of 9/30/2004 ($ in millions)

	Actual		As Adjusted
	9/30/2004		9/30/2004
Cash and Equivalents	$	2.3	$	11.1

Senior Debt:
Existing Unsecured Credit Facility	$	28.6	—
Existing Senior Notes	73.1		—
Senior Notes offered hereby	—		130.0
Acquisition Debt	9.1		9.1
Capital Leases	5.5		5.5
Total Senior Debt	$	116.3	$	144.6

Subordinated Debt:
Subordinated Debt to Affiliate (TIDES)	$	93.8	$	93.8
TIDES Deferred Interest	9.1		—
Total Subordinated Debt	$	102.9	$	93.8

Total Debt	$	219.2	$	238.4
Total Stockholders’ Equity	$	110.6	$	105.9
Total Capitalization	$	329.8	$	344.3

(1) As adjusted cash and cash equivalents balance reflects: (i) a decrease of $2.6 million in outstanding borrowings under the existing credit facility; (ii) a repayment of $2.6 million on the existing senior notes; (iii) the payment of an additional $1.7 million deferred interest related to the TIDES and (iv) the payment of $9.4 million of unpaid interest related to the existing senior notes and the “make-whole” payment.

(2) For the last twelve months ended September 30, 2004.

Forward-looking statements contained herein are subject to certain risks and uncertainties as further described at the end of this Fact Sheet

Exhibit 99.2

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[LOGO]

Carriage Services

(NYSE: CSV)

2005 UBS Global Healthcare Services Conference

February 15, 2005

Forward-Looking Statements

The statements in this presentation that are not historical facts are forward-looking statements made in reliance on the “safe harbor” protections provided under the Private Securities Litigation Reform Act of 1995. These statements may be accompanied by words that convey the uncertainty of future events or outcomes. These statements are based on assumptions that we believe are reasonable; however, many important factors could cause our actual 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. For further information on these risks and uncertainties, see the Company’s Securities and Exchange Commission filings, including our 2003 Annual Report on Form 10-K. We assume no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by the Company, whether as a result of new information, future events or otherwise.

Introduction

		Experience

Mel Payne, Chairman and CEO		Founder of Carriage, CEO since 1991 and Chairman since December 1996.

Joseph Saporito, EVP and CFO		EVP, CFO and Secretary of Carriage since September 2002. Prior to joining Carriage, Mr. Saporito was a partner at Arthur Andersen for 15 years.

Industry Overview

Industry Landscape

	North American Properties		Volume of Funeral Contracts 2003	EBITDA(1) Margin LTM 9/30/04		Cremation Rate 9 Months 2004

[LOGO]	[CHART]		263,952	16.8	%	40	%

[LOGO]	[CHART]		127,964	15.9	%	35	%

[LOGO]	[CHART]		71,934	33.2	%(2)	37	%

[LOGO]	[CHART]	(3)	24,121	25.6	%	31	%

Industry margins are largely driven by product mix and operating efficiencies

Source: Company filings and public documents.

(1) EBITDA equal to net income from continuing operations plus income taxes, interest expense, non-recurring items and depreciation and amortization.

(2) As of October 31, 2004.

(3) Properties data as of December 31, 2004.

Death Care Industry

• Highly fragmented industry

• Approximately 22,000 funeral homes and 10,000 cemeteries in the U.S.

• Dominated by independent operators

• Death care businesses traditionally transferred to successive family generations, but this trend is diminishing

• Public companies are dominated by 4 players who tend to own larger, institutional and urban businesses

• Public companies divesting non-core properties and de-leveraging

• Local heritage and tradition are critical to maintain and grow market share

• Growing demand for cremations

• Only minimal acquisitions completed in last five years

Industry Revenue Share

[CHART]

Trends: Death Rates and Demographics

• National death rate declined year-over-year from 2001 to 2003, the first back to back to back decline since the mid-1970s

• Decrease in births from 1921 – 1936 may have contributed to decline

• Impact of past birth decrease may have run its course?

Historical Births & Possible Death Trends

[CHART]*

*Assumes 72 Year Average Life from 1910 - 2010

• The U.S. population and “baby boom” generation are aging, leading to an expected future increase in the death rate

• Historically, approximately 68% of deaths occur at age 65 and older

• Number of people age 65 and over is expected to increase from 36.7 million in 2005 to 40.2 million in 2010 and to 54.6 million in 2020; 9.5% and 48.8% increases, respectively

Population Age Distribution: 2000 – 2040 P

[CHART]

65 Years & Older: Demographics

[CHART]

Source: U.S. Census Bureau.

Trends: Cremation Rates

Cremation as a percentage of total funerals increasing and trend will continue

• Higher margin versus burial services, but lower revenue per service

• Carriage has developed innovative, high quality cremation packages to offer client families choices and to capitalize on rising cremation trend

Cremations vs. Burials

[CHART]

Source: Cremation Assoc. of North America

US Cremations: As A Percent of Total Funerals

[CHART]

Source: Cremation Assoc. of North America

Company Overview

Carriage History

1991-1998

1999

2000 - 2003

2004

• Founded in 1991; initial public offering in 1996

• Aggressive growth, spending $400 million at peak of market to acquire businesses

• Acquisitions curtailed and Corporate Development activities ceased

• Fresh Start –financial and organizational restructuring

• Improved or disposed of under performing businesses

• Reduced debt and contingent liabilities by $94 million

• Increased and better aligned earnings and free cash flow

• Changed from budget and control model to “Being the Best” standards model

• Rebuilt funeral systems infrastructure

• New funeral service, pricing and merchandizing strategies

• Funeral incentives aligned with standards

• “Being the Best” standards model for cemetery operations under development

Business Strategy – Focus on Leadership and Entrepreneurial Principles

“Being the Best”

Decentralized Management

Entrepreneurial Spirit

Standards not Budgets

Variable Compensation

Upgrade People and Systems

Increase Market Share

Increase Profits and Cash Flow

Disciplined Acquisition Strategy

• Decentralized and entrepreneurial operating model

• Alignment of incentives and drivers of success

• Focus on upgrading people and effective use of technology

• Grow market share and improve profitability

• Strategic model to evaluate acquisition candidates

Funeral Operations – Drivers of Success

	Weighting
• Market Share
• Increase families served over time	30	%
• Take away market share from competitors	5	%

• Quality and Structure of Staff
• Right quality personnel	10	%
• Upgrade staff continuously	10	%
• Manage salary and benefits costs	12	%

• Financial and Operating
• Grow average revenue per contract	10	%
• Maintain strong gross margins	10	%
• Maintain strong EBITDA margins	10	%
• Control bad debts and accounts receivable aging	3	%

Established standards are used to determine variable compensation and are tailored to reflect size of business and cremation mix

Carriage Services Today

[GRAPHIC]

• Operations in 28 states

• Focus on attractive suburban markets

• 135 Funeral Homes

• 30 Cemeteries (includes 5 Combos)

• Market leader (#1 or #2) in over 70% of locations

• 2^nd most profitable funeral and cemetery operations among public companies

• 2004E financial overview

• Revenue: $150 - $152 million

• EBITDA: $39 - $40 million

• Diluted EPS: $0.37-$0.38(1)

Carriage Services is the 4th largest funeral and cemetery services company in the U.S., with strong positions in East and West regions

(1) From continuing operations

Strong and Consistent Financial Performance

Revenue & EBITDA from Continuing Operations

[CHART](1)

EBITDA & EBIT Margins from Continuing Operations

[CHART](1)

Carriage has historically generated the 2nd highest EBITDA margins in the industry

(1) Based on midpoint of Company guidance for the fourth quarter of 2004

Funeral Home Operations

Profitable Funeral Homes: From Continuing Operations ($ in Millions)

[CHART]

Contracts from Continuing Operations

[CHART]

• Funeral home operations are some of the most profitable among public companies

• Higher percentage of at-need business

• Lower cremation rate

• Flat organization

• Future upside from new operating model

• Increasing market share

• Higher productivity and lower people costs

• Improved merchandise strategy

• Margins increased in 2004

• Average revenue increased 3.3%

• Decreasing operating costs

Funeral Preneed Strategy

Preneed as a Percent of Funeral Sales

[CHART]

1999		2004

[CHART]		[CHART]

• Maximize at need sales to maintain pricing leverage

• Preneed sales program based on local market needs

• Target investments to reinforce market share

• Benefits of preneed contracts secured by insurance

• Terms range from single pay to three to five year installments

• Commission earned substantially offsets selling costs

• Collection and investment risk shifted to insurance company

• Characteristics of trust arrangements

• Similar terms offered

• Varying percentage of proceeds must be deposited in trust

• Retainage substantially offsets selling costs

• Assume investment and collections risk

Cemetery Operations – Drivers of Success

• Preneed sales – right kind of sales in the right way

• Emphasis on networking with satisfied families

• Sales result from defining family’s need

• Revenue growth standard based on property sales

• Emphasis on sales to new families

• Maintain or grow at need business (interments)

• General Managers lead the business and accountable for results

• Sales Managers critical to creating heritage and value

• Build stable sales team – reduce costly turnover

• Recruit outside the industry – reduce “retreads”

• Training and monitor daily activity that drives sales

• Emphasis on family service counselors

• Grounds personnel key to appearance, image and reputation

• Superintendent must have ownership mentality

• Focus on collections and promotional costs

Plan to fully implement operating model and standards by 2006

Cemetery Operations

Profitable Cemeteries: From Continuing Operations ($ in Millions)

[CHART]

2004 Cemetery Revenue Mix

[CHART]

• Cemetery gross margins have improved

• Management shifted focus to a family service model

• Commission structure and incentives aligned

• Revenue mix has shifted to interment rights since 2001

• Emphasis on building heritage

• Strengthens ties between our cemeteries and our clients

• Commission structure and incentives aligned

• Financial Revenue decreased because investment returns have been lower

Cemetery Preneed Strategy

Cemetery Preneed vs. At Need

[CHART]

• Preneed sales key drivers of success

• Focus on sale of property to new families

• Property rights sold on installment basis

• Down payment required and usually a five year term

• Revenue recognized when 10% of sales price collected

• Property right repossessed upon default

• Merchandise and services contracts

• Similar terms offered

• Varying percentage of payments must be deposited in trust

• Revenue recognized when service performed or merchandise delivered

Financial Strategy to Facilitate Growth

Key Financial Themes

• Debt reduction accomplishments

• Reduced senior debt by an estimated $94 million since 2000

• Majority of cash flow from operations

• Stable core business and predictable cash flow with potential for improvement

• Impact of new operating model

• Focus on growing market share

• Positive operating leverage

• Ongoing financial strategy

• Continue to improve credit profile

• Execute growth strategy without incurring additional debt

• Issue equity when not dilutive to enhance capital structure and support growth strategy

Sources of Debt Reduction

[CHART]

Pro Forma Capitalization and Credit Statistics

($ in millions)

Pro Forma Capitalization

	Actual 9/30/2004		As Adjusted 9/30/2004
Cash and Equivalents	$	2.3	$	11.1	(1)

Senior Debt:
Existing Unsecured Credit Facility	$	28.6	—
Existing Senior Notes	73.1		—
Senior Notes offered hereby	—		130.0
Acquisition Debt	9.1		9.1
Capital Leases	5.5		5.5
Total Senior Debt	$	116.3	$	144.6

Subordinated Debt:
Subordinated Debt to Affiliate (TIDES)	$	93.8	$	93.8
TIDES Deferred Interest	9.1		—
Total Subordinated Debt	$	102.9	$	93.8

Total Debt	$	219.2	$	238.4
Total Stockholders’ Equity	$	110.6	$	105.9
Total Capitalization	$	329.8	$	344.3

Credit Ratios(2):
Senior Debt / EBITDA			3.6		x
Net Debt / EBITDA			5.7

(2) For the last twelve months ended September 30, 2004.

Term Income Deferrable Equity Securities (TIDES)

• Carriage Issued $93.75 million of 7% convertible preferred securities in June 1999

• Matures in 2029

• Subordinated to all indebtedness

• Distributions may be deferred for up to 5 years at Carriage’s option

• By bringing distributions current, deferral period can be reset unlimited number of times

• Practical implications of the TIDES include:

• Inexpensive capital (7% tax-deductible coupon)

• No call provision, even upon change in control

• Possible future exchange for common equity, if accretive

Views on Acquisition Environment

• No meaningful acquisitions for the last five years

• Inventory of potential sellers with succession issues is building

• Bank financing for independents difficult

• Price expectations from quality operators lowered to 5 to 6 x EBITDA

• Sellers are extremely wary of operating style and reputation of buyer

• Carriage Services – excellent reputation re: operating style and integrity

Disciplined Growth Strategy

• Selective acquisition of high quality independent businesses

• Leading market share

• “Being the Best” standards (quantitative and qualitative)

• Funded from free cash flow and/or equity issuance

• “Sweet spot” in 300-400 calls per facility businesses (at least $1.5 million in annual revenue)

• Growing markets of 100,000+ with favorable demographic trends

• Regional preferences: Northeast and West Coast

1-2 years

3-5 years

• Execute “Being the Best” operating model

• Focus on operational improvements and increasing cash flow

• Initiate disciplined acquisition strategy

• Fully implement disciplined acquisition program

• Continuous improvement and portfolio optimization

• Access equity markets to support growth strategy and enhance capital structure

Key Investment Considerations

• Stable and predictable free cash flow and favorable outlook for industry fundamentals

• Already strong EBITDA margins increasing as new funeral operating model gains traction and is extended to cemetery business

• Market leader in suburban and rural markets

• Committed to strengthening capital structure

• Disciplined growth strategy funded through free cash flow and/or equity issuance

• Flexible capital structure with extended debt maturities and right to defer TIDES distributions

• Experienced and proven management team

Presentation of Financial Information

Reconciliation of Net Income from continuing operations to EBITDA from continuing operations:

	2001				2002			2003			Last Twelve Months Ended 9/30/2004
Net income from continuing operations	$		9,002		$	19,533		$	5,898		$	6,537
Provision (benefit) for income taxes	$		2,251		$	(8,583	)	$	3,519		$	3,921
Pre-tax earnings from continuing operations	$		11,253		$	10,950		$	9,417		$	10,458 $
Other (income) expense	$	—			$	361		$	(577	)	$	(511	)
Interest expense, including loan cost amortization	$	20,344			$	19,715		$	17,787		$	17,389
Depreciation & amortization	$	17,095			$	10,446		$	10,859		$	11,643
EBITDA from continuing operations	$	48,692			$	41,472		$	37,486		$	38,979
Revenue from continuing operations	$	162,493			$	149,317		$	146,939		$	152,051
EBITDA margin from continuing operations	29.97			%	27.77		%	25.51		%	25.64		%

Reconciliation of Gross Profit from funeral home operations to EBITDA from continuing funeral home operations:

	2001			2002			2003			2004E
Gross profit from funeral home operations	$	31,471		$	33,407		$	29,098		$	29,429
Depreciation & amortization	$	11,872		$	6,723		$	6,894		$	7,242
EBITDA from funeral home operations	$	43,343		$	40,130		$	35,992		$	36,671
Revenue from funeral home operations	$	124,284		$	115,100		$	112,588		$	112,816
EBITDA margin from continuing funeral home operations	34.87		%	34.87		%	31.97		%	32.51		%

Reconciliation of Gross Profit from cemetery operations to EBITDA from continuing cemetery operations:

	2001			2002			2003			2004E
Gross profit from cemetery operations	$	8,824		$	8,221		$	8,521		$	8,874
Depreciation & amortization	$	4,489		$	2,848		$	2,850		$	3,199
EBITDA from cemetery operations	$	13,313		$	11,069		$	11,371		$	12,073
Revenue from cemetery operations	$	38,209		$	34,217		$	34,351		$	37,390
EBITDA margin from continuing cemetery operations	34.84		%	32.35		%	33.10		%	32.29		%

Carriage Services

(NYSE: CSV)

2005 UBS Global Healthcare Services Conference

February 15, 2005