SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  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): June 9, 2005

Carriage Services, Inc.

(Exact name of registrant as specified in is charter)

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 communication 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 June 9, 2004, the Company issued a press release announcing its Company and Investment Profile dated June 2005.  A copy of the press release and the profile issued by the Company are attached hereto as Exhibits 99.1 and 99.2, respectively.  The Company and Investment Profile is available on the Company’s website   www.carriageservices.com.

The press release and 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.

The Company and Investment Profile contains non-GAAP financial measures.  Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with United States generally accepted accounting principles, or GAAP. Pursuant to the requirements of Regulation G, the Company provides quantitative reconciliations as well as qualitative information within the Company and Investment Profile and on the Company’s website www.carriageservices.com.

Item 9.01.  Financial Statements and Exhibits.

(c)                                  Exhibits

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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.

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INDEX TO EXHIBITS

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Exhibit 99.1

CARRIAGE SERVICES UPDATES

COMPANY & INVESTMENT PROFILE

JUNE 9, 2005 – HOUSTON – Carriage Services, Inc. (NYSE: CSV) today announced that it has updated its “Company & Investment Profile”, which can be found on Carriage’s website at http://www.carriageservices.com.

Carriage’s updated Company & Investment Profile includes updated discussions of Carriage’s business, operating and growth strategies, historical financial information, outlook for future periods, industry information, and more.  The updated Company & Investment Profile is being furnished on Form 8-K with the Securities and Exchange Commission.

The Company & Investment Profile is being published and updated by Carriage in continuation of its stated goal to provide more disclosure and transparency to the investment community regarding Carriage’s operations, goals, industry dynamics and conditions. It is Carriage’s intent to continue to be proactive in communicating with investors. Investors and interested parties are encouraged to visit the website, http://www.carriageservices.com to read or download the Company and Investment Profile.

Carriage Services in the fourth largest publicly traded death care company.  As of June 9, 2005, Carriage operates 133 funeral homes and 30 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. A copy of the company’s Form 10-K, and other Carriage Services information and news releases, are available at http://www.carriageservices.com.

# # #

Exhibit 99.2

Company & Investment Profile                                                                                                                                                                                                                                                                                                         
60;                                                                                                                June 2005

Simply Put … Becoming the Best

www.CarriageServices.com

KEY POINTS

•                  Strong 1Q05 Results - Carriage Services reported 1Q05 financial results that exceeded its original estimates. The 1Q05 results were more impressive considering the difficult comparison to 1Q04’s strong results. See page 17 for a more detailed discussion of Carriage’s 1Q05 results and financial outlook.

•                  Capital Structure Positions Carriage for Growth – In 1Q05 Carriage completed its $130 million senior note offering and its subsequent debt refinancing resulted in a low cost capital structure that provides the capital 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 replacing its “budget and control” model with a “best practice” standards based model which rewards the growth of market share and long-term 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.

•                  New Five-Year Goals - Now that Carriage’s existing operations are improving and its financial flexibility has been restored due to its senior note offering, Carriage is positioned for growth and has established five year goals that include new acquisitions. See page 20 for more details on Carriage’s five year goals.

•                  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.

Stock Data

Financial Data (As of 3/31/05 - Amounts in Millions)

(1) Excludes a charge for early debt retirement of $6.7 million, or $0.22/dil. Share after tax

Carriage Services is a leading provider of death care services and products in the United States. As of June 8, 2005, Carriage operated 133 funeral homes and 30 cemeteries in 28 states. Carriage provides a complete range of funeral and cremation services and sells a wide variety of related products and merchandise.

Forward-looking statements contained herein are subject to certain risks and uncertainties as further described at the end of this Company & Investment Profile. Please refer to the Appendix on page 36 that discusses and reconciles non-GAAP financial measures to GAAP financial measures.

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Carriage Services, Inc. – Summary Financial Data

Summary Income Statement

(In Thousands, Except Per Share Data)

Margin Analysis

(As a Percentage of Revenues)

Selected Historical Balance Sheet Data & Ratios

(In Thousands Except Ratios)

Selected Historical Statement of Cash Flows Data

(In Thousands)

Historical Stock Data

* Through June 7, 2005.

Carriage Services Financial Outlook

$ Estimates in Millions Except Per Share Data

(1) For full year 2005, excludes interest & other costs in connection with the early retirement of senior debt totaling $6.7 million ($4.2 million after tax, or $0.22 per diluted share) in 1Q05

(2) Excludes payment of cumulative deferred distributions associated with our TIDES and additional interest paid on our senior debt retired early.

Five Year Run-Rate Financial Goals

(1) Carriage presently expects that the majority of the acquisitions will occur during the latter part of the five year period.

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This document is being published by Carriage Services in continuation of the Company’s stated goal to provide more disclosure and transparency to the investment community regarding Carriage’s operations, strategies and industry conditions. It is Carriage’s intent to take greater responsibility for and a more proactive role in communicating with the investment community and in providing greater operating and financial transparency.

EXECUTIVE SUMMARY & SELECTED HIGHLIGHTS

MISSION STATEMENT: We are committed to being the most professional, ethical, and highest quality funeral and cemetery service organization in our industry.

GUIDING PRINCIPLES: Honesty, integrity and quality in all that we do. Hard work, pride of accomplishment and shared success through employee ownership. Belief in the power of people through individual initiative and teamwork. Outstanding service and profitability go hand-in-hand. Growth of the Company is driven by decentralization and partnership.

SUMMARY

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. Carriage Services’ shares trade on the New York Stock Exchange under the symbol CSV. As of June 8, 2005, Carriage operated 133 funeral homes and 30 cemeteries in 28 states. Carriage’s business can be characterized as one of relative stability, reflected by predictable revenue and cash flow, with incremental growth opportunities via selective acquisitions.

Carriage continues to focus on improving its operations and its capital structure in order to reposition the Company for future growth. Carriage’s focus is to grow the market share and improve the operating and financial performance of its funeral and cemetery operations and strengthen its capital structure. In line with that focus and after an extensive review of the Company’s funeral operations, on January 1, 2004 Carriage implemented a more decentralized and entrepreneurial standards based funeral operating model called “Being the Best”. The execution of its Being the Best funeral operating model resulted in operational and financial improvements in its funeral segment in 2004 and Carriage intends to implement a similar operating model in its cemetery operations that will promote the key success drivers that are unique to that business.  Carriage will continue to improve its organizational leadership and quality of personnel. Carriage may divest additional businesses in the future, where those businesses are not meeting its standards.

Carriage’s 1Q05 was one of the best quarters the Company has had in several years. Carriage was particularly pleased with the consistent level of profitability in its funeral operations throughout the quarter, despite funeral volume volatility on a monthly basis. The results from continuing operations described below were particularly strong given the very strong quarter Carriage had in the comparable period last year.

•                  Total revenue of $42.0 million versus original estimate of $39 to $41 million.

•                  EBITDA of $13.2 million versus original estimate of $11.8 to $12.8 million.

•                  GAAP EPS of ($0.04) per diluted share including additional interest costs related to the senior debt refinancing equal to $0.23 per diluted share.

•                  Diluted EPS of $0.19, excluding the additional interest costs related to the senior debt refinancing, compared to original estimate of $0.14 to $0.17 per share and prior year of $0.16.

In January 2005 Carriage completed a $130 million, ten-year Senior Notes offering. The proceeds were used to refinance all of the Company’s senior debt, to bring current the deferred distributions on its TIDES securities and to increase its cash balance by approximately $11 million. The refinancing strengthened Carriage’s capital structure and enables the Company to focus on investing its considerable free cash flow in new earning assets through selective acquisitions. Subsequent to the end of 1Q05, Carriage entered into a new $35 million senior secured revolving credit facility to replace its existing unsecured credit facility that was scheduled to mature in 2006. The facility is currently undrawn and no borrowings are anticipated during 2005.

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Table of Contents

(Noteworthy new or updated information in this edition versus the previous edition in bold)

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OPERATING STRATEGY OVERVIEW

Carriage Services is a leading provider of professional funeral and cemetery services and products in the United States and is the fourth largest publicly traded death care company. As of June 8, 2005, Carriage operated 133 funeral homes and 30 cemeteries in 28 states. Carriage primarily serves suburban markets and the Company believes it is a market leader (first or second) in most of these markets.

Over the last four years Carriage and its public death care peers have been restructuring their organizations and improving their financial condition, liquidity and balance sheets by reducing debt. During the second half of 2003 Carriage implemented significant changes in its funeral organization and operations to improve operating and financial results by growing 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. 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.

Carriage Historical Overview

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.

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Key elements of Carriage’s overall business strategy include the following:

•                  Decentralized Funeral Operating Model – Carriage believes a decentralized funeral operating model is best suited to grow market share and improve financial performance in the funeral industry. The Company’s Being the Best operating model focuses on the key drivers of a successful funeral business, organized around three primary areas – market share, people and operational and financial metrics. Successful execution of its Being the Best operating model is highly dependent on strong local leadership, entrepreneurial empowerment and corporate support. In order to align this model with financial performance across the organization, Carriage developed a set of customized standards for each funeral business based on the financial results and attributes of its best properties, adjusting for size and percentage of cremations. Under the program, Carriage believes its managing partners have the opportunity to be compensated at close to the same level as if they owned the business.

•                  Family Service Cemetery Operating Model – Carriage views its cemetery business, which has traditionally been more sales oriented, as a different business from its funeral business, which is more service oriented. Carriage is focusing the efforts of its cemetery operations on building heritage among new client families. A principal initiative has been to emphasize property sales, which strengthen the ties between the Company’s cemeteries and its clients. Carriage is also in the process of developing a standards based operating model for its cemetery operation. The Company expects to implement a limited standards based operating model in 2005 and a fully developed standards based operating model in 2006.

•                  Presentation and Packaging of Services and Merchandise – Carriage believes packaging funeral services and merchandise offers both simplicity and convenience for its client families. Well conceived and thoughtful packages eliminate much of the effort and discomfort experienced by client families concerning matters about which they do not have much experience during a very stressful and emotional time. Carriage has entered into agreements with four primary casket suppliers to support its strategy and control wholesale costs. The Company also believes that its package strategy will result in increased revenue per cremation service over time as more families select packages that provide services and merchandise.

•                  Preneed Funeral Sales Program – Carriage operates under a local, decentralized preneed sales strategy whereby each business location customizes its preneed program to its local needs. The Company emphasizes insurance funded contracts over trusted contracts in most markets, as insurance products allow Carriage to earn commission income to improve its cash flow and offset a significant amount of the up-front costs associated with preneed sales. In addition, the cash flow and earnings from insurance contracts are more stable than traditional trust fund investments. In markets that depend on preneed sales for market share, Carriage supplements the arrangements written by funeral directors with sales sourced by sales counselors and third party sellers.

•                  Decrease Overhead Costs – Carriage periodically performs targeted reviews of its systems and support services with the objective of improving efficiencies and decreasing overhead costs. The Company recently completed an upgrade of its funeral services system to improve its features and functions and expects to roll out its new cemetery system in mid-2005. Carriage will continue to review and change corporate processes to improve efficiency and effectiveness.

•                  Renew Corporate Development Efforts – As a result of its successful senior notes offering, Carriage believes its improved capital structure positions the Company to purse a strategy of disciplined growth, affording Carriage the flexibility to redeploy its free cash flow toward selective acquisitions. Carriage believes it will continue to improve its credit profile as it invests its cash flow into businesses that contribute to revenue and EBITDA. Carriage will apply the standards and practices established under its Being the Best operating model to qualify acquisition candidates, ensuring that they are a proper fit and can be readily integrated into Carriage’s business portfolio. (See page 13 for a detailed discussion of Carriage’s corporate development strategy)

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Characteristics & Goals of Being the Best

“BEING THE BEST”

Carriage recognized that to become the best and increase value for shareholders, it must improve the operating results of its funeral operations by growing market share and increasing 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 future operating and financial performance.

Carriage’s new funeral operating model, called “Being the Best”, is based upon lessons the Company has learned from its best businesses and its best operators. Carriage analyzed its best businesses (approximately 20% by number) and developed operating and financial standards, taking into consideration size and cremation mix, organized around three primary areas – market share, people and operating and financial metrics. Carriage introduced a more decentralized, entrepreneurial and local operating model and aligned its incentive compensation structure with the 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.

Key elements of Carriage’s Being the Best funeral operating strategy and model include the following:

•                  Balanced Operating Model –Carriage believes a decentralized structure works best in the death care industry. The Being the Best operating model focuses on key drivers of a successful funeral business, organized around three primary areas – market share, people and operating and financial metrics. Successful execution of Being the Best is highly dependent on strong local leadership, intelligent risk taking, entrepreneurial empowerment and corporate support aligned with the key drivers.

•                  Incentives Aligned with Standards – Empowering managing partners to do the right things in their operations and local communities, and providing appropriate support with operating and financial practices, will enable growth and profitability. Each managing partner will participate in a variable bonus plan whereby they will earn a fixed percentage of their business’ earnings based upon the actual standards achieved. Carriage believes each managing partner has the opportunity to be compensated at close to the same level as if they owned the business themselves.

•                  The Right Local Leadership - Successful execution of the new operating model is highly dependent on strong local leadership, intelligent risk taking and entrepreneurial empowerment.

“Being the Best” Standards

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Over time, Carriage believes how a managing partner executes against the Being the Best standards set forth will be the primary performance indicator.

•                  Cycle of Service – Carriage is reviewing the various steps in its Cycle of Service in order to align processes and activities with the Company’s strategy to build a meaningful and lasting relationship with each client family. The Company has also developed a “Best Practices” website where innovative new service ideas will be shared throughout the organization.

•                  Presentation and Packaging of Services and Merchandise – Carriage believes packaging funeral services and merchandise offers both simplicity and convenience for its client families. Well conceived and thoughtful packages eliminate much of the effort and discomfort experienced by client families about matters where they do not have much experience during a very stressful and emotional time. While client families will always have the option of purchasing services and merchandise separately, Carriage believes the emphasis on personalized services and appropriate merchandise will be valued by many families.

•                  Merchandise Strategy & Supplier Arrangements – Carriage is conducting a review of its merchandise strategy for its selection floors. Merchandise selections will be aligned with package options. In addition, the selection floor will be evaluated to determine if it is effective. Key elements of an effective floor are balanced retail prices with appropriate mark-ups, intelligent layout and choices supported by good presentation. Carriage has entered into arrangements with four primary casket suppliers to support its new strategy and control wholesale costs.

•                  Overhead Costs – Carriage is performing targeted reviews of its systems and support services with the objective of improving effectiveness and decreasing overhead costs. The Company recently completed an upgrade of its funeral services system to improve its features and functions and plans to implement a new cemetery system. As Carriage implements new systems, it is reviewing and changing corporate processes to improve efficiency and effectiveness.

OPERATIONS OVERVIEW

Carriage Services is a leading provider of professional funeral and cemetery services and products in the United States and is the fourth largest publicly traded death care company. As of June 8, 2005, Carriage operated 133 funeral homes and 30 cemeteries in 28 states. Carriage primarily serves suburban markets where the Company believes it is a market leader (first or second) in most of these markets.

Carriage Owns & Operates 133 Funeral Homes & 30 Cemeteries in 28 States

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Carriage serves families from diverse cultural and religious backgrounds and provides a complete range of funeral and cremation services including planning and coordinating personalized funerals, conducting memorial services, performing cemetery interment services, and managing and maintaining cemetery properties. The Company also sells products and merchandise including caskets, urns, burial vaults, cemetery interment rights, and monuments and markers. Carriage’s business can be characterized as one of relative stability, recurring revenue and cash flow, with incremental growth opportunities via selective acquisitions.

Carriage’s local funeral home operations, cemetery operations, and preneed programs are managed by individuals with extensive death care experience. The local operators continue to have responsibility for the business, but are required to follow operational and financial standards. This strategy allows each local business to maintain its unique style of operation and to capitalize on its reputation and heritage while Carriage maintains supervisory controls and provides support services from its corporate headquarters.

Carriage is committed to a strong information systems infrastructure. All of its funeral homes and cemeteries are connected to a centralized database that allows management to monitor and evaluate operating and financial performance in order to analyze the performance of its businesses on a timely basis and to implement any necessary corrective actions.

Funeral Home Operations

As of June 8, 2005, Carriage operated 133 funeral homes in 28 states. Funeral home revenues accounted for approximately 76% of total revenues for both 1Q05 and 1Q04. Funeral home revenues accounted for approximately 75% and 77% of total revenues for the years 2004 and 2003, respectively. Carriage’s funeral home operations are managed by a team of experienced death care industry professionals. These individuals have proven leadership and financial skills with best operating and high financial standards that are relevant to the death care industry.

Carriage’s funeral homes offer a complete suite of services to meet families’ funeral needs, including consultation, removal and preparation of remains, sale of caskets and related funeral merchandise, use of funeral homes for visitation and religious services, and transportation services. Most of Carriage’s funeral homes have a non-denominational chapel on premises, which accommodates family visitation and religious services to take place on site if a family chooses, reducing inconvenience to the family.

Funeral Home Service Offerings

Given the high fixed cost structure associated with funeral home operations, carriage believes the following key factors affect its profitability:

•                  Favorable demographic trends in terms of population growth and average age, which impact death rates and number of deaths;

•                  Leading market share positions supported by strong local heritage and relationships;

•                  Effectively responding to increasing cremation trends by packaging complimentary services and merchandise;

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•                  Controlling salary and merchandise costs; and

•                  Exercising pricing leverage related to our at-need business to increase average revenues per contract.

Despite the decline in national death rates over the past three years and losses of market share in certain markets, Carriage’s funeral home operations remain some of the most profitable in the industry. Carriage has been able to maintain superior funeral home profitability due to its lean operating structure and focus on best practices. Carriage is focused on regaining market share in markets where it is an issue through its focus on building relationships in the local community, installing the right leadership, and hiring and training the best people.

Funeral Home Gross Margin Peer Comparison

Profitable Funeral Homes ($ in Millions)

* From continuing operations

Cemetery Operations

As of June 8, 2005, Carriage operated 30 cemeteries in 12 states. All Carriage cemeteries are perpetual care cemeteries. Cemetery revenue accounted for approximately 24% of total revenue in both 1Q05 and 1Q04. Cemetery revenue accounted for approximately 25% and 23% of total revenues for the years 2004 and 2003, respectively. Carriage sales counselors consult with clients either at the cemetery or in the client’s home. Arrangements can be selected in advance of need and payment options are available. Carriage’s cemetery products and services include: mausoleum crypts, private estates, lawn crypt gardens, grave sites and burial vaults. Cremation options include columbarium, mausoleum niches and ground burial.

Cemetery operations generate revenues through sales of interment rights, memorials and installations, fees for interment and cremation services, finance charges from sales contracts, and investment income from preneed cemetery merchandise and perpetual care trusts. Carriage’s cemetery revenues are primarily driven by pre-need product sales. Since Carriage focused its cemetery business on its Family Service Model, cemetery gross margins have steadily improved.

Cemeteries are primarily a sales business. Carriage’s cemetery operating results are impacted by the success of its sales organization because approximately 35%-45% of Carriage’s cemetery revenues have been generated from preneed sales of interment rights. Carriage believes that changes in the level of consumer confidence (a measure of whether consumers will spend money on discretionary items) also impacts the amount of such preneed sales. Cemetery revenues generated from at-need services and merchandise sales generally are subject to many of the same key profitability factors as in Carriage’s funeral home business.

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3 Mos. Ending 3/31/05 Cemetery Revenue Mix

Cemetery Revenue & Gross Profit

In addition to owned locations, Carriage has been selected to be the managing partner of municipal and not for profit cemeteries. Carriage’s success in these operations comes from utilizing the same operating model used for its owned operations.

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Preneed Programs

In addition to the sales of funeral merchandise and services, cemetery interment rights and cemetery merchandise and services at the time of need, Carriage also markets funeral and cemetery services and products on a preneed basis. Preneed funeral and cemetery contracts enable families to establish, in advance, the type of service to be performed, the products to be used and the costs for such products and services, in accordance with prices prevailing at the time the contract is signed, rather than when the products and services are delivered. Preneed contracts permit families to eliminate the emotional strain of making death care plans at the time of need and enable Carriage to build future market share. Proceeds of preneed funeral contracts are not recognized as revenue until the time the funeral service is performed.

3 Mos. Ending 3/31/05 Funeral Revenue: Pre-Need vs. At Need

3 Mos. Ending 3/31/05 Cemetery Revenue: Pre-Need vs. At Need

Preneed funeral contracts are usually paid on an installment basis. The performance of preneed funeral contracts is usually secured by placing the funds collected in trust for the benefit of the customer or by the purchase of a life insurance policy, the proceeds of which will pay for such services at the time of need. Insurance policies, intended to fund preneed funeral contracts, cover the original contract price and generally include an element of growth (earnings) designed to offset future inflationary cost increases. Proceeds from the sale of preneed funeral contracts, along with accumulated earnings, are not recognized as revenue until the time the funeral service is performed. Additionally, Carriage generally earns a commission from the insurance company from the sale of insurance funded contracts.  Although commissions incurred from the sale of preneed funeral contracts are a current use of cash, such costs are also deferred and amortized on an actuarial method to match the expected maturity of the preneed contracts. The commission income is recognized as revenue when the period of refund expires (generally one year) and helps Carriage defray the costs incurred, which are primarily commissions paid to its sales counselors.

Carriage utilizes a local, decentralized strategy whereby each business location customized a preneed program to its local needs. The Company sells insurance-funded funeral contracts in most markets that allow Carriage to earn commission income and improve its cash flow. The focus is such that in markets that depend on preneed for market share, the Company will supplement the arrangements written by funeral directors with sales sourced by sales counselors and third party sellers. Carriage plans to continue using insurance-funded contracts because cash from the commissions earned offsets a significant amount of the up-front costs and because the earnings on the insurance contracts are more stable than traditional trust fund investments. As of March 31, 2005, the composition of preneed funeral contracts is 65% insurance contracts and 35% trust contracts.

In addition to preneed funeral contracts, Carriage also offers “preplanned” funeral arrangements whereby the client determines in advance substantially all of the details of a funeral service without any financial commitment or other obligation on the part of the client until the actual time of need. Preplanned funeral arrangements permit a family to avoid the emotional strain of making death care plans at the time of need and enable a funeral home to establish relationships with a client that may eventually lead to an at-need sale.

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Preneed cemetery sales are usually financed through interest bearing installment sales contracts, generally with terms of up to five years. Interest rates generally range from 12%-14%. Preneed sales of cemetery interment rights are recorded as revenue when 10% of the contract price related to the real estate has been collected. Merchandise and services revenue is recorded when delivery has occurred. Costs related to cemetery preneed contracts and delivery of products and services is recorded concurrent with related revenue. Carriage always receives an initial payment at the time the contract is signed. Allowances for customer cancellations and refunds are accrued at the date of sale and periodically evaluated thereafter based upon historical experience.

RENEWED CORPORATE DEVELOPMENT EFFORTS

As a result of its successful senior notes offering, Carriage believes its improved capital structure positions the Company to purse a strategy of disciplined growth, affording Carriage the flexibility to redeploy its free cash flow toward selective acquisitions that meet its criteria. Carriage believes it will continue to improve its credit profile as it invests its cash flow into businesses that contribute to revenue and EBITDA.

There has not been any significant acquisition activity in the death care industry for approximately the last five years. Carriage believes this lack of acquisition activity has created an attractive environment for buyers because acquisition multiples appear reasonable, the inventory of potential sellers with succession issues is building and the bank financing environment for independent operators is difficult. Given Carriage’s excellent reputation within the industry for operating style, culture and integrity, the Company believes it can selectively capitalize on this attractive acquisition environment.

Carriage will apply the standards and practices established under its Being the Best operating model to qualify acquisition candidates, ensuring that they are a proper fit and can be readily integrated into Carriage’s business portfolio. Ideal candidates will be those that:

•                  are demonstrated market leaders;

•                  have strong local management;

•                  have owners and family members whose objectives are aligned with Carriage; and

•                  have field level operating margins consistent with Carriage’s best performing properties.

Carriage will look to geographic areas that compliment their existing markets, with primary focus on suburban markets with growing populations of 100,000 or more. Carriage expects to give the most serious consideration to firms with at least 300 calls annually, or at least $2 million in annual revenue.

Using the criteria that define Carriage’s Being the Best standards based operating model, Carriage believes that only the best qualified independent funeral home and cemetery businesses will become a part of Carriage’s operations. Further, Carriage will take a measured and disciplined approach to its acquisition program. This is a stark contrast to the previous period of industry wide acquisitions from 1996 through 1999, which were characterized by excessive purchase prices and debt. Carriage learned a lot from the industry’s prior acquisition period; valuable experience that it will apply to its new smart acquisition strategy.

Five Year Run-Rate Financial Goals

(In Millions, Except Per Share Amounts)

(1) Carriage presently expects that the majority of the acquisitions will occur during the latter part of the five year period.

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ATTRACTIVE VALUATION VS. PEERS – CLOSING THE VALUATION GAP

Carriage believes its “Being the Best” funeral operating strategies and model will enable the Company to increase market share and improve financial results. With the anticipated success of these initiatives and continuing improvement of its credit profile, Carriage believes the current equity valuation gap between it and its peers could close, and at current prices, CSV shares offer an attractive valuation.

While the Company has made significant progress on improving its operations and reducing its level of debt, Carriage continues to focus on its operations and its capital structure in order to position the Company for future growth. The Company’s focus is to grow its market share and improve operating and financial performance of its funeral operations; increase preneed property sales and cash flow in its cemetery operations; continue to improve its credit profile and strengthen its capital structure. Carriage may divest additional businesses in the future, where those businesses are not meeting its standards. Further, Carriage will continue to improve its organizational leadership and quality of personnel.

The following are several valuation comparisons of Carriage Services versus its public death care industry peers:

Peer Valuation Comparison

Death Care Industry

PE Multiple Comparison

(1) First Call mean estimates from continuing operations.

(2) 2005 EPS estimate is midpoint of company outlook.

EBITDA Multiple Comparison

(1) Enterprise value data from Yahoo Finance, except Carriage Services.

(2) First Call mean estimate unless noted.

(3) 2005 EBITDA estimate is midpoint of Company outlook.

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FCF Yield & Multiple Comparison

(1) 2005 FCF estimate from Johnson Rice & Company.Uses 2005E FCF per share of $1.27 X shares outstanding of 40.09 million.

(2) 2005 FCF estimate uses mid-point of company outlook, uses total capex.

(3) 2005 FCF estimate uses mid-point of company outlook, uses maintenance capex.

(4) 2005 FCF per share mean estimate from First Call of $2.02 X units outstanding of 8.48 million.

(5) 2005 FCF estimate uses mid-point of company outlook, using total capex. Excludes additional interest paid on senior notes of $5.6 million and deferred distributions on subordinated debentures of $10.3 million.

Key Investment Considerations

•                  Dominant Market Presence - Carriage has #1 or #2 market share positions in over 70% of its markets;

•                  Superior Profitability - Carriage has the second highest gross profit and EBITDA margins of the public death care companies;

•                  Strong and Flexible Capital Structure - With low cost, long-term liabilities;

•                  Predictable and Growing Free Cash Flow;

•                  Small is Beautiful - Small size enables material performance increase from future acquisitions;

•                  Substantial Long-Term Appreciation Potential – Due to small share count and ability to use FCF for growth versus issuing equity or debt; and

•                  Attractive Valuation.

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CARRIAGE SERVICES RECENT RESULTS & FINANCIAL OUTLOOK

Carriage Services reported 1Q05 financial results that were above the Company’s estimates previously released to the public after it reported 4Q04 and full year 2004 results. Carriage’s 1Q05 was one of the best quarters the Company has had in several years, as Carriage was able to improve performance in every area of the Company. The results were particularly strong given the very strong quarter Carriage had in the same period last year. Carriage was particularly pleased with the consistent level of profitability in its funeral operations throughout the quarter, despite funeral volume volatility on a monthly basis.

Despite an excellent 1Q05, Carriage views the deathcare business is a long-term, year-over-year business versus a quarter to quarter business. The Company continues to see its Being the Best standards based operating model yield results that it believes will continue to benefit Carriage in both the near- and long-term.

In January 2005 Carriage completed a $130 million, ten-year Senior Notes offering. The proceeds were used to refinance all of the Company’s senior debt, to bring current the deferred distributions on its TIDES securities and to increase its cash balance by approximately $11 million. The refinancing strengthened Carriage’s capital structure and enables the Company to focus on investing its considerable free cash flow in new earning assets through selective acquisitions.

Subsequent to the end of 1Q05, Carriage entered into a new $35 million senior secured revolving credit facility to replace its existing unsecured credit facility that was scheduled to mature in 2006. Borrowings under the new facility bear interest at prime or LIBOR operations with the initial LIBOR option set at LIBOR plus 3%, matures un five years and is collateralized by all personal property and funeral home real property in certain states. The facility is currently undrawn and no borrowings are anticipated during 2005.

Results of continuing operations for 1Q05 were as follows:

•                  Total revenue of $42.0 million versus original estimate of $39 to $41 million.

•                  EBITDA of $13.2 million versus original estimate of $11.8 to $12.8 million.

•                  GAAP EPS of ($0.04) per diluted share including additional interest costs related to the senior debt refinancing equal to $0.23 per diluted share.

•                  Diluted EPS of $0.19, excluding the additional interest costs related to the senior debt refinancing, compared to original estimate of $0.14 to $0.17 per share and prior year of $0.16.

In 1Q05, Carriage generated $0.6 million of adjusted free cash flow, consisting of cash flow used by continuing operating activities of $14.0 million, plus additional interest paid on senior notes of $6.0 million, plus deferred distributions on subordinated debentures of $10.3 million, less capital expenditures of $1.7 million. Higher capital expenditures and working capital increases, which were due to increased receivables because of higher revenues toward the end of the quarter, accounted for the decrease in cash flow. Cash and short-term investments totaled $16 million at the end of 1Q05. After paying total refinancing costs of $10.2 million and cumulative deferred distributions on the TIDES of $10.3 million, Carriage’s senior debt increased from $110.3 million at December 31, 2004 to $143.5 million at March 31, 2005.

Funeral Operations – Key Financial & Operating Data Comparison vs. 4Q03

•                  Funeral revenues from continuing operations increased 3.4% from $30.8 million to $31.8 million.

•                  Same store funeral contracts increased 1.0% from 6,278 to 6,343.

•                  Same store average revenue per contract increased 1.9% from $4,851 to $4,942.

•                  Average revenue per burial contract increased 3.3% to $6,694.

•                  Average revenue per cremation contract increased 3.7% to $2,394.

•                  Carriage’s cremation rate increased to 32.8%, up versus 30.9% in 1Q04.

Carriage experienced weak volumes in January, which were a carryover from December, but much higher volumes in February and March due to a later flu season and improved market share in certain markets. Funeral gross margins were

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higher due to better execution of its Being the Best standards-based operating model. As indicated, Carriage experienced a significant increase in its cremation rate in 1Q05 versus the same period last year. Carriage does not expect such dramatic increases in its cremation rate going forward because most of the increase was isolated to select markets and funeral home operations.

Cemetery Operations – Key Financial & Operating Data Comparison vs. 1Q04

•                  Cemetery revenues from continuing operations increased 6.1% from $9.6 million to $10.2 million.

•                  The number of preneed contracts written decreased 1.7% to 2,404.

•                  Average revenue per preneed contract written increased 10.2% to $2,884 and the average interment site sold for $2,023, which was 14.7% greater than the same period last year.

•                  The number of interments performed decreased 3.6% while at-need property revenue increased 7.8%.

•                  Distributable capital gains from trust investments totaled $0.6 million compared to capital losses of $0.2 million in the prior year period.

•                  Cemetery gross margin, including investment gains and losses, increased 410 basis points from 25.7% to 29.8%.

Success in the cemetery business is primarily driven by advanced sales of property rights, which creates heritage for Carriage’s business. This success was evident in Carriage’s 1Q05 results as 89% of its preneed contracts included property. Carriage’s operating performance was broad and deep across its cemetery portfolio, which resulted in an increase in its already high cemetery margins with gains from trust investments.

Carriage completed two mausoleums in 1Q04 that generated $358,000 of revenue, while none were completed in 1Q05. In addition, Carriage deferred preconstruction revenue totaling $579,000 in 1Q05, which was twice the amount for 1Q04. This revenue will be recognized when construction is completed either later this year or in early 2006. Financial revenues increased $818,000 compared to 1Q04 because Carriage recognized $571,000 of gains on sales of securities in the perpetual care trust funds this year compared to recognized losses of $235,000 last year. Carriage may sell certain securities in its cemetery trust portfolio during the remainder of the year and realize investment gains or losses as it diversifies its investment portfolio.

In 2005, Carriage plans to develop and begin to implement a standards based operating model for its cemetery operations, similar to the implementation of Being the Best in Carriage’s funeral operations. The new cemetery standards based operating model will be structured around the key drivers of the cemetery business.

Other

Interest expense increased $0.3 million, or 6.4%, because outstanding senior debt increased when Carriage refinanced its senior debt as previously discussed. Carriage expects net interest expense (interest expense less investment income on temporary cash investments) to be approximately 6% higher than the comparable period of the prior year. In connection with the new credit facility, Carriage wrote off unamortized loan costs totaling $0.2 million, equal to $0.01 per diluted share, in 2Q05. Discontinued operations included the sale of a funeral home during 1Q05 resulting in a gain of $0.3 million, equal to $0.01 per diluted share.

Debt

Carriage’s senior debt, which excludes the convertible junior subordinated debentures, totaled $110.3 million at December 31, 2004, versus senior debt of $135.3 million at December 31, 2003, a reduction of $25 million or 18.5%. Senior debt to total capitalization during the year declined to 34% at the end of 2004 from 41% at year-end 2003.

Subsequent to 4Q04, in January 2005 Carriage completed a $130 million, ten-year Senior Notes offering. The proceeds were used to refinance all of the Company’s senior debt, to bring current the deferred distributions on its TIDES securities and to increase its cash balance by approximately $11 million. The refinancing strengthened Carriage’s capital structure and enables the Company to focus on investing its considerable free cash flow in new earning assets through selective acquisitions.

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Financial Outlook

Carriage’s 2005 Financial Outlook is based upon the following key assumptions:

•                  The upper end of the Outlook range assumes funeral same-store volumes are flat compared to 2004 and the lower end assumes a 2% decrease.

•                  The average revenue per funeral contract is assumed to increase approximately 2.5%.

•                  Senior debt outstanding is assumed to increase from $110.3 million at 12/31/04 to $143 million after the issuance of new Senior Notes and refinancing of the Company’s old senior debt, which occurred on January 27, 3005. Carriage expects no borrowings on its $35 million bank credit facility during 2005.

•                  The cumulative deferred distributions on the convertible junior subordinated debentures, which totaled $10.9 million at 12/31/04, was paid on 3/1/05 and distributions are assumed to be paid concurrently thereafter.

•                  Carriage expects to fund approximately $6 million of capital expenditures.

•                  Carriage expects to use free cash flow to acquire businesses if and when available on acceptable terms, In the Outlook the Company assumes free cash flow is invested in short-term investments that are expected to increase to approximately $25 million by 12/31/05.

Carriage Services Financial Outlook

$ Estimates in Millions Except Per Share Data

(1) Excludes a charge in connection with the senior debt refinancing in January 2005 of $6.7 million ($4.2 million after tax, or $0.22 per diluted share), and excludes any gains or losses associated with asset dispositions.

Carriage expects cash results from operations to improve in 2005. However, a number of factors may negatively affect EPS. The following summarizes the factors that are anticipated to impact 2005 diluted EPS, which are not intended to be all inclusive:

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Five Year Goals

Carriage’s existing operations are improving and the Company’s Being the Best standards based operating model is taking hold. Carriage’s financial flexibility has been restored because of its recent senior note financing, and the Company is repositioned for growth. As a result, Carriage has established five year goals that include new selected acquisitions. Assuming Carriage achieves its five year goals, the Company would expect its run-rate annual operating results by the end of 2009 to be as follows (in thousands except per share amounts):

(1)          Assumes that the majority of the acquisitions will occur during the latter part of the five year period.

(2)          Assumes that Carriage will not issue any new debt or equity and that its cash taxes will total approximately $5.0 million.

Change in Accounting

Carriage adopted accounting changes mandated by the Financial Accounting Standards Board relating to Interpretation No. 46, as revised (“FIN 46R”), “Consolidation of Variable Interest Entities”, effective March 31, 2004.  FIN 46R clarifies the circumstances in which certain entities that do not have equity investors with a controlling financial interest must be consolidated by its sponsor.

The adoption of FIN 46R affects Carriage’s financial statements in two fundamental ways:

(1) The Company is consolidating preneed and perpetual care trusts in which it is the primary beneficiary of the trust assets.  The accounting related to such trusts was agreed to among Carriage and the other public deathcare companies, their auditors, and the staff at the Securities and Exchange Commission.

(2) The Company is deconsolidating for accounting purposes Carriage Services Capital Trust (the “Trust”) which results in the removal of the preferred securities from the balance sheet and the addition of convertible junior subordinated debentures payable to the Trust.

The accounting changes did not affect Carriage’s earnings or cash flows upon adoption.  No cumulative effect of an accounting change was recognized by Carriage as a result of implementing of FIN 46R.  Additionally, the accounting changes principally affect classifications within the financial statements, but do not affect cash flow or the manner in which the Company recognizes and reports revenue or net income in future periods.

Preneed and Perpetual Care Trusts

Carriage implemented FIN 46R on March 31, 2004, which resulted in the consolidation of the Company’s preneed and perpetual care trust funds. The investments of such trust funds are now reported at fair value and the Company’s future obligations to deliver merchandise and services are now reported at estimated settlement amounts, which are equal and offsetting amounts.

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Although FIN 46R requires consolidation of preneed and perpetual care trusts, it does not change the legal relationships among the trusts, Carriage and its customers. In the case of preneed, the customers are the legal beneficiaries. In the case of perpetual care trusts, Carriage does not have a right to access the corpus in the perpetual care trusts. For these reasons, the Company has recognized non-controlling interests in its financial statements to reflect third party interests in these consolidated trust funds.

Both the preneed trusts and the cemetery perpetual care trusts hold investments in marketable securities which have been classified as available-for-sale. The investments are reported at fair value, with unrealized gains and losses allocated to Non-controlling interests in trust investments in Carriage’s consolidated balance sheet. Unrealized gains and losses attributable to the Company, but that have not been earned through the performance of services or delivery of merchandise is allocated to deferred revenues.

Also beginning March 31, 2004, the Company recognizes realized income, gains and losses of the preneed trusts and cemetery perpetual care trusts. Carriage recognizes a corresponding expense equal to the realized earnings of these trusts attributable to the non-controlling interest holders. When such earnings attributable to the Company have not been earned through the performance of services or delivery of merchandise, Carriage will record such earnings as deferred revenue.

For preneed trusts, Carriage recognizes as revenues amounts attributed to the non-controlling interest holders and the Company, including accumulated realized earnings, when the contracted services have been performed and merchandise delivered. For cemetery perpetual care trusts, Carriage recognizes investment earnings in cemetery revenues when such earnings are realized and distributable. Such earnings are intended to defray cemetery maintenance costs incurred by the Company.

Redeemable Convertible Preferred Securities

Carriage also was required to deconsolidate for accounting purposes Carriage Services Capital Trust (the “Trust”), a trust established in 1999 to issue convertible preferred term income deferrable equity securities (TIDES).  The TIDES were previously classified as temporary equity in the consolidated balance sheet.  The Company’s obligation to the Trust consists of convertible junior subordinated debentures due in 2029. As a result of deconsolidating the Trust, the Company now reports its obligation to the Trust, the convertible junior subordinated debentures, as a long-term liability. The reclassification of the amount ($93.75 million) has no effect on net income or on Carriage’s covenants with its senior lenders, because the obligations to the Trust are not classified as indebtedness for purposes of calculating financial ratios.

Substantially all the assets of the Trust consist of the convertible junior subordinated debentures of the Company.  Such debentures possess substantial characteristics of equity.  The rights of the debentures are functionally equivalent to those of the TIDES.  When issued in 1999, the conversion price was at a premium to the then-existing trading price of the Common Stock. The expectation was that holders would convert the TIDES into Common Stock well before their maturity in 2029, when the Company’s performance and improving conditions in the death care industry resulted in an appreciated stock price.  As a result of deteriorating conditions in the industry and Carriage’s own disappointing performance in the preceding four years, the TIDES have been trading substantially below their par value, which Carriage believes to be a reflection of the valuation and prospects of the Company’s common stock.  In management’s view, the debentures have a predominance of equity-like characteristics which are not normally found in debt securities (including traditional subordinated debt), such as:

•                  The debentures are unsecured and subordinate to the Company’s senior debt, which includes the revolving credit facility, the senior notes and any other borrowed money obligations.  The debentures are not guaranteed by the Company’s subsidiaries, meaning that they are effectively subordinated to all liabilities of the subsidiaries, not just borrowed money debt.

•                  Carriage has the right to defer the payment of interest on the debentures for up to 20 calendar quarters.  The Company can catch up deferred interest and then re-start another deferral period prior to maturity.  During a deferral period, the only rights of the holders of the TIDES and debentures are to restrict the Company from making distributions to or

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repurchasing any stock, but Carriage is not subject to any other restrictions which would normally be associated with non-payment of debt securities, such as acceleration of maturity, limits on acquisitions or dispositions of assets, or any changes in the debt capital structure, such as incurring new debt, restructuring existing debt, changing debt terms, or granting security.

•                  The TIDES are convertible into common stock at a fixed price well above the common stock’s current trading price.  Carriage believes the market value of the TIDES will continue to primarily be impacted by its unusually long-term maturity, the right to defer distributions and the subordination to all other outstanding debt for borrowed money, rather than the Company’s credit profile or level of interest rates.

•                  As a result of the equity-like characteristics of the TIDES and debentures, the Company was able to have them treated as equity, rather than debt, under its credit and senior note agreements.

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Carriage Services, Inc.

Historical Earnings & Operating Data

(In Thousands $, Except Per Share & Margin Analysis Data)