SEC Filing - Carriage Services, Inc.

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e8vk

UNITED STATES 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): May 9, 2007

Carriage Services, Inc.

(Exact name of registrant as specified in is charter)


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

3040 Post Oak Boulevard, Suite 300
Houston, Texas 77056
(Address, including zip code, of principal executive offices)

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

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

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))

TABLE OF CONTENTS


ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
SIGNATURE
INDEX TO EXHIBITS
Press Release

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.

In the press release dated May 9, 2007, the Company announced and commented on its financial results for its fiscal quarter ended March 31, 2007. A copy of the press release issued by the Company is attached hereto as Exhibit 99.1 and incorporated by this reference. The information being furnished under Item 9.01 Financial Statements and Exhibits, including the press release attached hereto as Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities of that Section.

The Company’s press release dated May 9, 2007 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 has provided quantitative reconciliations within the press release of the non-GAAP financial measures to the most directly comparable GAAP financial measures.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

(c)

Exhibits. The following exhibits are furnished as part of this current report on Form 8-K:


99.1		Press Release dated May 9, 2007.

-2-

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.

-3-

INDEX TO EXHIBITS


Exhibit		Description
99.1		Press release dated May 9, 2007.

-4-

exv99w1

Exhibit 99.1


		Press *Release*

	Contacts:	Mel Payne, Chairman & CEO
		Joe Saporito, CFO
		Carriage Services, Inc.
		713-332-8400
FOR IMMEDIATE RELEASE
		Ken Dennard / ksdennard@drg-e.com
		Lisa Elliott / lelliott@drg-e.com
		DRG^&E / 713-529-6600

CARRIAGE SERVICES REPORTS FIRST QUARTER 2007 RESULTS
Diluted EPS Increases 33 Percent

May 9, 2007 – HOUSTON – Carriage Services, Inc. (NYSE: CSV) today announced first quarter results and introduced its new trend reporting format. Results of continuing operations for the first quarter of 2007 were as follows:

	§		*Revenues of $42.7 million* compared to revenues of $41.0 million for the first quarter of 2006.

	§		*Consolidated EBITDA of $11.6 million* compared to Consolidated EBITDA of $10.3 million for the first quarter of 2006.

	§		*Consolidated EBITDA Margin of 27.2%* compared to Consolidated EBITDA Margin of 25.1% for the first quarter of 2006.

	§		*Diluted earnings per share from continuing operations of $0.16* compared to diluted earnings per share from continuing operations of $0.12 for the first quarter of 2006.

Melvin C. Payne, Chairman and Chief Executive Officer, stated, “Both our same store funeral and cemetery operations had a strong first quarter, primarily attributable to the turnaround of our Central Region funeral operations and Rolling Hills Memorial Park in Richmond, California. We also are well along toward operational integration of the Corpus Christi businesses we acquired in early January and which made a significant contribution to our first quarter performance. As a result of a 150 basis point increase in our Total Field EBITDA Margin, a relatively fixed consolidation platform overhead structure and our attractive low cost fixed capital structure, we were able to operationally and financially leverage a 3.9% increase in revenue during the first quarter into a 12.2% increase in Consolidated EBITDA, a 210 basis point increase in Consolidated EBITDA Margin and a 33% increase in diluted EPS from

continuing operations. We expect the dynamic of relatively small revenue increases producing strong margin and earnings momentum to continue for the balance of 2007.”

Transformed Reporting

“We now report our consolidated same store field operating and financial results both on a multi-year and most recent rolling four quarters basis to reflect long term trends and by quarter for the most recent five quarters to reflect short term trends and seasonality. Just as we report internally for each of our businesses under the Standards Operating Model, these field level results highlight trends in volumes, revenues, Field EBITDA (controllable profit) and Field EBITDA Margin (controllable profit margin). We believe that our trend reporting allows us to focus on the key operational and financial results relevant to the longer term performance and valuation of our portfolio of deathcare assets.

“We will maintain separate reporting for our same store continuing operations (adjusted for dispositions as they occur) and our new acquisition portfolio to show how the execution of both our Standards Operating Model and our Strategic Portfolio Optimization Model will change the sustainable revenue and earning power profile of our deathcare portfolio over time.

“Since this first quarter release is the first under our new reporting format, we will comment more extensively than in the future in order to point out what we believe are the most substantive observations and conclusions. We realize that it will take time and more education and discussion for our audience to fully understand and appreciate this new reporting approach.”

UNAUDITED STATEMENT OF CONSOLIDATED EBITDA FROM CONTINUING OPERATIONS
Annual Trend
For the Four Years Ended December 31, 2006 and Four Quarters Ended March 31, 2007
($000’s)


	Pro forma⁽¹⁾					Pro forma⁽¹⁾					Actual					Actual					Actual
	Year					Year					Year					Year					Trailing 4 Qtrs.
	2003					2004					2005					2006					3/31/2007
CONTINUING OPERATIONS

Same Store Contracts
Atneed Contracts		17,999		79.9	%		17,520		79.9	%		17,461		79.7	%		17,062		78.8	%		16,963		78.7	%
Preneed Contracts		4,515		20.1	%		4,412		20.1	%		4,436		20.3	%		4,597		21.2	%		4,588		21.3	%

Total Same Store Funeral Contracts		22,514		100.0	%		21,932		100.0	%		21,897		100.0	%		21,659		100.0	%		21,551		100.0	%
Acquisition Contracts
Atneed Contracts		—					—					53		64.6	%		194		67.1	%		322		66.5	%
Preneed Contracts		—					—					29		35.4	%		95		32.9	%		162		33.5	%

Total Acquisition Funeral Contracts		—					—					82		100.0	%		289		100.0	%		484		100.0	%

Total Funeral Contracts		22,514					21,932					21,979					21,948					22,035


Same Store Interments
Atneed Interments		2,506		27.7	%		2,324		26.3	%		2,006		24.4	%		2,100		25.0	%		2,122		25.6	%
Preneed Interments		6,554		72.3	%		6,529		73.7	%		6,213		75.6	%		6,285		75.0	%		6,183		74.4	%

Total Same Store Cemetery Interments		9,060		100.0	%		8,853		100.0	%		8,219		100.0	%		8,385		100.0	%		8,305		100.0	%
Acquisition Interments
Atneed Interments		—					—					—					—					39		24.5	%
Preneed Interments		—					—					—					—					120		75.5	%

Total Acquisition Cemetery Interments		—					—					—					—					159		100.0	%

Total Cemetery Interments		9,060					8,853					8,219					8,385					8,464


Same Store Revenue
Funeral Operations Revenue	$	106,242		75.4	%	$	107,159		74.1	%	$	109,045		73.1	%	$	111,448		73.8	%	$	111,925		73.3	%
Preneed Commission and Other Revenue		1,608		1.1	%		1,319		0.9	%		2,295		1.5	%		2,267		1.5	%		2,322		1.5	%

Total Funeral Same Store Revenue		107,850		76.5	%		108,478		75.0	%		111,340		74.6	%		113,715		75.3	%		114,247		74.8	%

Cemetery Operations Revenue		29,755		21.1	%		33,203		23.0	%		33,940		22.8	%		32,107		21.2	%		31,901		20.9	%
Cemetery Financial Revenue		3,304		2.4	%		2,912		2.0	%		3,615		2.4	%		4,052		2.7	%		3,919		2.6	%

Total Same Store Cemetery Revenue		33,059		23.5	%		36,115		25.0	%		37,555		25.2	%		36,159		23.9	%		35,820		23.5	%


Total Same Store Revenue		140,909		100.0	%		144,593		100.0	%		148,895		99.8	%		149,874		99.2	%		150,067		98.3	%

Acquisition Revenue
Funeral Operations Revenue		—					—					303		0.2	%		1,212		0.8	%		2,265		1.5	%
Cemetery Operations Revenue		—					—					—					—					371		0.2	%

Total Acquisition Revenue		—					—					303		0.2	%		1,212		0.8	%		2,636		1.7	%


Total Revenue from Continuing Operations	$	140,909		100.0	%	$	144,593		100.0	%	$	149,198		100.0	%	$	151,086		100.0	%	$	152,703		100.0	%


Field EBITDA from Continuing Operations
Same Store Funeral Field EBITDA	$	37,404		77.3	%	$	37,580		76.6	%	$	39,551		76.8	%	$	41,972		80.4	%	$	42,211		79.0	%
Same Store Funeral Field EBITDA Margin		34.7	%				34.6	%				35.5	%				36.9	%				36.9	%

Same Store Cemetery Field EBITDA		11,011		22.7	%		11,458		23.4	%		11,850		23.0	%		9,800		18.8	%		10,296		19.3	%
Same Store Cemetery Field EBITDA Margin		33.3	%				31.7	%				31.6	%				27.1	%				28.7	%


Total Same Store Field EBITDA		48,415		100.0	%		49,038		100.0	%		51,401		99.8	%		51,772		99.2	%		52,507		98.3	%
Total Same Store Field EBITDA Margin		*34.4*	%				*33.9*	%				*34.5*	%				*34.5*	%				*35.0*	%

Acquisition Funeral Field EBITDA		—					—					92		0.2	%		407		0.8	%		853		1.6	%
Acquisition Funeral Field EBITDA Margin		—					—					30.4	%				33.6	%				37.7	%

Acquisition Cemetery Field EBITDA		—					—					—					—					56		0.1	%
Acquisition Cemetery Field EBITDA Margin		—					—					—					—					15.1	%


Total Acquisition Field EBITDA		—					—					92		0.2	%		407		0.8	%		909		1.7	%
Total Acquisition Field EBITDA Margin		—					—					*30.4*	%				*33.6*	%				*34.5*	%


Total Field EBITDA from Continuing Operations		48,415		100.0	%		49,038		100.0	%		51,493		100.0	%		52,179		100.0	%		53,416		100.0	%
Total Field EBITDA Margin from Continuing Operations		*34.4*	%				*33.9*	%				*34.5*	%				*34.5*	%				*35.0*	%

Total Variable Overhead		1,906		11.9	%		2,020		12.1	%		2,521		13.8	%		4,432		21.4	%		4,135		20.0	%

Total Regional Fixed Overhead		2,721		17.0	%		2,892		17.3	%		3,247		17.8	%		2,978		14.4	%		2,949		14.3	%

Total Corporate Fixed Overhead		11,378		71.1	%		11,825		70.6	%		12,501		68.4	%		13,288		64.2	%		13,587		65.7	%

Total Overhead		16,005		100.0	%		16,737		100.0	%		18,269		100.0	%		20,698		100.0	%		20,671		100.0	%
		*11.4*	%				*11.6*	%				*12.2*	%				*13.7*	%				*13.5*	%


Consolidated EBITDA from Continuing Operations	$	32,410				$	32,301				$	33,224				$	31,481				$	32,745

Consolidated EBITDA Margin from Continuing Operations		*23.0*	%				*22.3*	%				*22.3*	%				*20.8*	%				*21.4*	%


Footnotes

⁽¹⁾		Effective January 1, 2005, the company changed its accounting method to expense preneed selling costs incurred for the origination of prearranged funeral and cemetery sales contracts. Results of operations for the years ended December 31, 2003 and 2004 are presented on a proforma basis applying the new accounting method.

UNAUDITED INCOME STATEMENT FROM CONTINUING OPERATIONS
Quarter Trend
For the Five Quarters Ended March 31, 2007
($000’s)


	Actual					Actual					Actual					Actual					Actual
	Qtr 1					Qtr 2					Qtr 3					Qtr 4					Qtr 1
	2006					2006					2006					2006					2007
CONTINUING OPERATIONS

Same Store Contracts
Atneed Contracts		4,608		78.2	%		4,145		78.8	%		4,049		79.5	%		4,260		78.7	%		4,509		78.0	%
Preneed Contracts		1,281		21.8	%		1,117		21.2	%		1,044		20.5	%		1,155		21.3	%		1,272		22.0	%

Total Same Store Funeral Contracts		5,889		100.0	%		5,262		100.0	%		5,093		100.0	%		5,415		100.0	%		5,781		100.0	%
Acquisition Contracts
Atneed Contracts		56		74.7	%		43		60.6	%		43		67.2	%		52		65.8	%		184		68.1	%
Preneed Contracts		19		25.3	%		28		39.4	%		21		32.8	%		27		34.2	%		86		31.9	%

Total Acquisition Funeral Contracts		75		100.0	%		71		100.0	%		64		100.0	%		79		100.0	%		270		100.0	%

Total Funeral Contracts		5,964					5,333					5,157					5,494					6,051


Same Store Interments
Atneed Interments		523		23.6	%		543		26.0	%		526		26.8	%		508		24.1	%		545		25.5	%
Preneed Interments		1,697		76.4	%		1,549		74.0	%		1,437		73.2	%		1,602		75.9	%		1,595		74.5	%

Total Same Store Cemetery Interments		2,220		100.0	%		2,092		100.0	%		1,963		100.0	%		2,110		100.0	%		2,140		100.0	%
Acquisition Interments
Atneed Interments		—					—					—					—					39		24.5	%
Preneed Interments		—					—					—					—					120		75.5	%

Total Acquisition Cemetery Interments		—					—					—					—					159		100.0	%

Total Cemetery Interments		2,220					2,092					1,963					2,110					2,299


Same Store Revenue
Funeral Operations Revenue	$	30,132		73.4	%	$	27,198		73.0	%	$	26,022		74.1	%	$	28,097		74.6	%	$	30,608		71.7	%
Preneed Commission and Other Revenue		587		1.4	%		596		1.6	%		636		1.8	%		448		1.2	%		642		1.5	%

Total Funeral Same Store Revenue		30,719		74.8	%		27,794		74.6	%		26,658		75.9	%		28,545		75.8	%		31,250		73.2	%

Cemetery Operations Revenue		8,974		21.9	%		8,396		22.5	%		7,452		21.2	%		7,285		19.3	%		8,768		20.6	%
Cemetery Financial Revenue		1,080		2.6	%		786		2.1	%		763		2.2	%		1,423		3.8	%		947		2.2	%

Total Cemetery Same Store Revenue		10,054		24.5	%		9,182		24.6	%		8,215		23.4	%		8,708		23.1	%		9,715		22.8	%


Total Same Store Revenue		40,773		99.3	%		36,976		99.2	%		34,873		99.3	%		37,253		98.9	%		40,965		96.0	%

Acquisition Revenue
Funeral Operations Revenue		269		0.7	%		278		0.8	%		252		0.7	%		413		1.1	%		1,322		3.1	%
Cemetery Operations Revenue		—					—					—					—					371		0.9	%

Total Acquisition Revenue		269		0.7	%		278		0.8	%		252		0.7	%		413		1.1	%		1,693		4.0	%


Total Revenue from Continuing Operations	$	41,042		100.0	%	$	37,254		100.0	%	$	35,125		100.0	%	$	37,666		100.0	%	$	42,658		100.0	%


Field EBITDA from Continuing Operations
Same Store Funeral Field EBITDA	$	12,135		78.5	%	$	9,437		78.6	%	$	9,316		87.2	%	$	11,086		79.0	%	$	12,372		74.1	%
Same Store Funeral Field EBITDA Margin		39.5	%				34.0	%				34.9	%				38.8	%				39.6	%

Same Store Cemetery Field EBITDA		3,239		21.0	%		2,492		20.7	%		1,324		12.4	%		2,746		19.5	%		3,734		22.4	%
Same Store Cemetery Field EBITDA Margin		32.2	%				27.1	%				16.1	%				31.5	%				38.4	%


Total Same Store Field EBITDA		15,374		99.5	%		11,929		99.3	%		10,640		99.6	%		13,832		98.5	%		16,106		96.5	%
Total Same Store Field EBITDA Margin		*37.7*	%				*32.3*	%				*30.5*	%				*37.1*	%				*39.3*	%

Acquisition Funeral Field EBITDA		78		0.5	%		79		0.7	%		42		0.4	%		208		1.5	%		524		3.1	%
Acquisition Funeral Field EBITDA Margin		29.0	%				28.4	%				16.7	%				50.4	%				39.6	%

Acquisition Cemetery Field EBITDA		—					—					—					—					56		0.4	%
Acquisition Cemetery Field EBITDA Margin																						15.1	%


Total Acquisition Field EBITDA		78		0.5	%		79		0.7	%		42		0.4	%		208		1.5	%		580		3.5	%
Total Acquisition Field EBITDA Margin		*29.0*	%				*28.4*	%				*16.7*	%				*50.4*	%				*34.3*	%


Total Field EBITDA from Continuing Operations		15,452		100.0	%		12,008		100.0	%		10,682		100.0	%		14,040		100.0	%		16,686		100.0	%
Total Field EBITDA Margin from Continuing Operations		*37.6*	%				*32.2*	%				*30.4*	%				*37.3*	%				*39.1*	%

Overhead
Total Variable Overhead		1,140		22.2	%		443		9.9	%		1,663		28.9	%		1,187		22.3	%		842		16.5	%

Total Regional Fixed Overhead		758		14.8	%		707		15.7	%		748		13.0	%		764		14.4	%		730		14.3	%

Total Corporate Fixed Overhead		3,234		63.0	%		3,343		74.4	%		3,347		58.1	%		3,366		63.3	%		3,531		69.2	%

Total Overhead		5,132		100.0	%		4,493		100.0	%		5,758		100.0	%		5,317		100.0	%		5,103		100.0	%
		*12.5*	%				*12.1*	%				*16.4*	%				*14.1*	%				*12.0*	%

Consolidated EBITDA from Continuing Operations		10,320					7,515					4,924					8,723					11,583
Consolidated EBITDA Margin from Continuing Operations		*25.1*	%				*20.2*	%				*14.0*	%				*23.2*	%				*27.2*	%

Total Depreciation & Amortization		2,279		5.6	%		2,226		6.0	%		2,030		5.8	%		2,153		5.7	%		2,486		5.8	%

Total Net Interest & Other		4,420		10.8	%		4,282		11.5	%		3,700		10.5	%		4,191		11.1	%		4,175		9.8	%

Pretax Income		3,621		8.8	%		1,007		2.7	%		(806	)	-2.3%			2,379		6.3	%		4,922		11.5	%
Income tax		1,358		3.3	%		378		1.0	%		(304	)	-0.9%			943		2.5	%		1,895		4.4	%


Net income from Continuing Operations	$	2,263				$	629				$	(502	)			$	1,436				$	3,027

		*5.5*	%				*1.7*	%				*-1.4*	%				*3.8*	%				*7.1*	%

*Diluted EPS-from continuing operations*	$	*0.12*				$	*0.04*				$	*(0.03*	)			$	*0.08*				$	*0.16*

Same Store Funeral Operations

“We have moved aggressively over the past seven months to place strong new leadership in approximately 50% of our Central Region funeral businesses and have broadly executed revenue enhancement and cost reduction initiatives to improve financial performance. As a result, our Central Region made a substantial incremental contribution to our results in both the fourth quarter of 2006 and the first quarter of 2007. We continue to expect an increase of approximately $2 million in Central Region same store Field EBITDA in 2007 over 2006.

“Our same store volumes have declined steadily each year from 22,514 in 2003 to 21,659 in 2006 (compound annual decline of 1.3%) consistent with a period of weak death rates nationally and the loss of market share primarily in our Central Region funeral operations. As our Standards Operating Model and Managing Partner “Being the Best” incentive program is heavily weighted on growth in the number of client families served (funeral contracts), we expect the modest historical same store decline to stabilize and volumes to increase with favorable future demographic trends which would produce substantial operating leverage benefits to our financial performance.

“Our same store funeral operations have increased revenue steadily from $107.9 million in 2003 to $113.7 million in 2006 (compound annual increase of 1.8%). We expect to achieve at least a 2 — 2.5% annual revenue increase in the future from our same store portfolio as volumes stabilize and our average revenue per funeral increases over time. Since we maintain atneed pricing power on 79% of our services, our goal is to continuously improve the quality and skill set of our personnel and the value of their services to our client family customers so that a modest growth rate in revenues should be possible even in the face of higher cremation rates.

“After implementing our funeral Standards Operating Model in 2004, our same store funeral Field EBITDA Margin increased by 220 basis points from 34.7% in 2004 to 36.9% in 2006. We expect our increasing same store funeral Field EBITDA Margin trend to continue in the near term and to be reflected in our quarterly Field EBITDA Margin trend as we achieve broader and more effective execution of our Standards Operating Model during 2007, especially in our Central Region.”

Same Store Cemetery Operations

“We believe that cemetery interments reflect the market share of our cemetery portfolio much like funeral contracts reflect market share of our funeral home portfolio. Whereas only 21% of our funeral contracts are currently preneed, consistent with our selective preneed funeral strategy, cemetery preneed contracts represent 75% of our interments. Therefore, it is imperative to have a consistent and high level of preneed property sales performance over time to build new cemetery heritage and future market share. We have not historically achieved this result which is why our cemetery sales and operations were reorganized into our three geographic regions in August 2006.

“Our cemetery interments declined by over 800 interments (9.3%) from 2003 to 2005 but have since stabilized at about 8,300 interments. Approximately 80% of the decline was concentrated in two modestly profitable operations which we manage pursuant to term contracts and was caused by local factors not under our control. Otherwise our cemetery interment volumes and market share are relatively stable and produce a consistent stream of atneed revenue at high gross margins.

“Our same store cemetery financial performance from 2003 through 2005 was characterized by increasing revenues but slightly declining Field EBITDA Margins. However, this performance was highly concentrated in only two of our California cemeteries, including Rolling Hills, whose performance plunged during 2006 for multiple reasons as previously reported and which created a volatile short term same store cemetery Field EBITDA Margin trend that declined from 32.2% in the first quarter of 2006 and bottomed at 16.1% in the third quarter. The first quarter 2007 increase in our same store cemetery Field EBITDA and Field EBITDA Margin to 38.4% was primarily attributable to an excellent first quarter sales and margin performance by Rolling Hills, which is now under strong new leadership. We continue to expect at least a $2 million Field EBITDA increase for Rolling Hills in 2007 over 2006.

“We have moved quickly over the last nine months to recruit and support new operating and sales leadership in our larger and more strategically located cemeteries, and we are not finished with this initiative. Our goal is to build broader and deeper teams of “A player” sales leaders and counselors that can sustain consistent, modest growth in preneed property sales over time and to diversify and substantially increase our cemetery operating and financial results. We believe a more broadly balanced and less volatile same store cemetery revenue and financial performance will be evident in positive quarterly trend comparisons during the balance of 2007.”

Total Continuing Same Store and Acquired Operations

“Our quarterly Total Field EBITDA Margin trend over the past five quarters mirrors our cemetery Field EBITDA Margin trend, having bottomed in the third quarter of 2006 at 30.4% and then increasing to 39.1% in first quarter 2007, 150 basis points higher than first quarter 2006. We expect continued positive Total Field EBITDA Margin trend comparisons during the balance of 2007 primarily from improved performance in our same store cemetery operations.

“Our Total Field EBITDA increased each year from $48.4 million in 2003 to $52.2 million in 2006, a compound annual increase of 2.5% over the three year period while Total Field EBITDA Margin was relatively stable except for 2004 at about 34.4% — 34.5%. We expect our Total Field EBITDA growth trend to accelerate over the next few years because of a gradual increase in same store performance and the increasing contribution of acquisitions.”

Strategic Portfolio Optimization Model

“We acquired Seaside Memorial Park and Funeral Home and Corpus Christi Funeral Home in early January and are well along with integration of operations with our existing Rose Hill Cemetery operation. These businesses complement each other and are producing synergies that should lead to market share, revenue and profit growth at sustainable Field EBITDA Margins, especially in the Hispanic market segment which is forecast to grow substantially over the next ten years.

“We divested one small Michigan funeral home and one funeral home business (three small facilities) in Iowa during the quarter in a move to exit the non-strategic Iowa market. We will continuously review our portfolio for dispositions where we are not able to have a competitive advantage and are not in a position to build a group of complementary operations in attractive demographic markets.

“We have established five year goals to change the sustainable revenue and earning power profile of our deathcare portfolio through effective execution of our Strategic Portfolio Optimization Model. We will report on this progress by showing the trends in revenue and Field EBITDA from same store operations that we acquired in the early growth phase of Carriage in the 1990’s versus the trends in our new acquisition portfolio. We will report results from acquired businesses in the acquisition section for at least three full years if not longer to ensure consistent comparable long-term trends. As of the first quarter of 2007, 4% of our total revenue and 3.5% of our Total Field EBITDA was from two acquired businesses, one in September 2005 and one in January 2007, both in growing markets where we already had a strong presence.

“We are encouraged by the current level of acquisition activity and the quality and size of the candidates. We are also considering several “tuck-in” candidates where we have strong branded existing operations and leadership that can realize combined operating synergies. Our selection process is rigorous using our six Strategic Ranking Criteria and ROIC Model and as a result we are declining on numerous opportunities of both independents and smaller consolidators, not because of price but because of strategic fit. We have established a general policy of announcing acquisitions when we have closed the transaction and only then in conjunction with our quarterly release of results, at which time we will integrate expected proforma results on newly announced acquisitions into our rolling twelve month forecast.”

Overhead

“We have organized corporate and regional overhead and all incentive compensation (including field operations) into three categories, two of which are primarily fixed and one of which is variable based on performance (primarily incentive compensation). Our corporate fixed overhead increased approximately $1.9 million between 2003 and 2006 because of two significant and opposite trends. First, we reorganized and streamlined our operations organization over this period, culminating in the

combination of our funeral and cemetery sales and operations into three geographic regions in August 2006 within our regional structure and eliminated the heads of funeral and cemetery operations. This streamlined organization process has allowed us to effectively use a single operations support group now included in corporate fixed overhead rather than maintaining a separate corporate support organization for funeral and cemetery operations each with a division head in Houston. We estimate that the new operations organizational structure resulted in an approximate $1.2 million decrease in corporate fixed overhead from 2003 to 2006. Second, during this period we significantly upgraded our IT systems; successfully prepared to publicly report on internal controls; developed a fully staffed internal audit department; upgraded our Human Resources and brought in house under a new General Counsel our legal functions; and reorganized our preneed trust and investment activities. As a result, costs of our corporate support departments increased approximately $3.1 million during this period which resulted in a net increase in corporate fixed overhead of $1.9 million. However, these costs and investments were necessary additions to our support infrastructure which are allowing us to more effectively execute the Standards Operation Model while maintaining a flat regional operations organization. In addition, we are positioned to execute our Mission of Being the Best by supporting newly acquired businesses to improve their operations, people, market share and financial results.

“During 2007 our focus will be on our major activity centers, Accounting and Human Resources, to ensure that our processes are efficient, responsive and effective. However, we believe that our Regional and Corporate fixed overhead categories will increase no more than merit increases and inflation over time and will not grow as a fixed percent of revenue as we add new acquisitions to our portfolio.

“Variable overhead consists primarily of incentive compensation for the field, regions and corporate. During 2006, variable overhead increased $1.9 million primarily because a long-term incentive arrangement with one of the Company’s directors ended and we expensed the final year’s incentive payment of $1.4 million, more than half of which was expensed in the third quarter. Given our expected level of profitability, we expect our incentive compensation and other variable overhead expenses to be approximately $3.9 million in 2007.

“As we add acquisitions, new Field EBITDA acquired should substantially fall to Consolidated EBITDA and Pre-Tax Free Cash Flow and be accretive to EPS as well. As we leverage our new growth over our mostly fixed cost platform, we expect our Consolidated EBITDA Margin to increase to within our annual sustainable earning power range of 24 — 26%.”

Carriage Consolidation Platform

“Because of the solid same store operating performance and the addition of an accretive acquisition, we achieved a Consolidated EBITDA Margin of 27.2% in the first quarter of 2007 compared to 25.1% in the first quarter of 2006. We expect positive quarterly Consolidated EBITDA Margin trend comparisons to continue for the balance of 2007 because of improved same store operating results, acquisitions and lower variable overhead in 2007 versus 2006.”

Cash Flow

“Free cash flow deficit for the three months ended March 31, 2007 was $(3.8) million compared to $(0.2) million for the same period in 2006. During the first and third quarter the semiannual interest on the Company’s Senior Notes are paid. A significant portion of the increase in cash used in operations related to a $1.4 million long-term incentive payment to one of the Company’s directors, who is a former owner of businesses that Carriage acquired in 1997. Additionally, cash used for capital expenditures was approximately $1.0 million higher year over year. Uses of working capital, which we expect to be neutral over the entire year, accounted for the remainder.”

Rolling Four Quarter Outlook

Management is providing an Outlook for the four quarter period ending March 31, 2008, based upon the following key assumptions:

•		The upper end of the Outlook range assumes funeral same-store volumes are flat compared to most recent four quarters and the lower end assumes a 2 percent decrease.

•		The average revenue per funeral contract is assumed to increase approximately 3.0 percent. This increase assumes the cremation rate for our businesses will increase by 100 basis points.

•		Cemetery same store field EBITDA increases by 8-10% and cemetery field EBITDA margin by 500 basis points compared to 2006.

•		Includes estimated results from acquired businesses in Corpus Christi, Texas (closed January 2007) and in Ventura County, California (closed April 2007). Excludes divestitures identified as of March 31, 2006 and classified as Discontinued Operations.

•		No borrowings on our $35 million bank credit facility.

•		Approximately $6.5 million of capital expenditures, which does not include any growth opportunities.

•

Management expects to use free cash flow (cash flow from operations less capital expenditures) to acquire additional businesses if and when available on acceptable terms.


			Midpoint Range
	Range		% Revenue
Revenues	$	162 - $165	$	163.5
Field EBITDA	$	59 - $61		36.7	%
Variable overhead	$	3.9		2.4	%
Regional fixed overhead	$	3.1		1.9	%
Corporate fixed overhead	$	13.1		8.0	%

Total overhead	$	20.1		12.3	%
Consolidated EBITDA	$	38 - $40		23.9	%
Interest	$	17		10.4	%
Depreciation and amortization	$	10.5		6.4	%
Income taxes	$	4 - $5		2.8	%
Net earnings from continuing operations	$	7 - $8		4.6	%
Diluted earnings per share	$	0.38 - $0.42	NA
Free Cash Flow	$	14-$16		9.2	%

Long Term Outlook (Through 2012)

	•		Revenue growth of 7-9% annually, including acquisitions

	•		Consolidated EBITDA growth of 9-11% annually, including acquisitions

	•		Consolidated EBITDA Margin range of 24-26%

	•		Growth internally funded without new debt or equity

Summary

“We had a good first quarter but it was only one quarter in an industry that should be predictable and profitable when the operating and growth models are being executed effectively by the right leadership. Our transformed reporting format provides a clear picture of our long and short term operating and financial trends which in turn show a healthy portfolio of operating deathcare businesses and a consolidation platform well positioned to operationally and financially leverage new internal and external revenue growth into attractive long term rates of growth in Consolidated EBITDA, Consolidated EBITDA Margin, EPS and Free Cash Flow.

“We look forward to executing our strategies in a different way that will become apparent in our trend reporting and also highly valuable to long term smallcap investors who see the beginnings of a long term up cycle in deathcare and believe that Carriage is the right operating and investment platform.

I want to thank all of our employees and leaders for getting us off to a good start consistent with our company’s theme of “2007 — The Year Of Being The Best — No Excuses!” concluded Mr. Payne.

First Quarter Conference Call Information

Carriage Services has scheduled a conference call for tomorrow, May 10, 2007 at 10:30 a.m. Eastern time. To participate in the call, dial 303-262-2075 at least ten minutes before the conference call begins and ask for the Carriage Services conference call. A replay of the call will be available approximately two hours after the live broadcast ends and will be accessible until May 10, 2007. To access the replay, dial 303-590-3000 and enter pass code 11088546#.

Investors, analysts and the general public will also have the opportunity to listen to the conference call free over the Internet by visiting http://www.carriageservices.com. To listen to the live call on the web, please visit the website at least fifteen minutes early to register, download and install any necessary audio software. For those who cannot listen to the live webcast, an audio archive will be available shortly after the call and will be accessible for approximately 90 days. For more information, please contact Karen Roan at DRG&E at (713) 529-6600 or email kcroan@drg-e.com.

Carriage Services is the fourth largest publicly traded death care company. As of May 2, 2007, Carriage operates 130 funeral homes in 27 states and 30 cemeteries in 11 states.

Use of Non-GAAP Financial Measures

This press release uses the following Non-GAAP financial measures “free cash flow and EBITDA”. Both free cash flow and EBITDA are used by investors to value common stock. The Company considers free cash flow to be an important indicator of its ability to generate cash for acquisitions and other strategic investments. The Company has included EBITDA in this press release because it is widely used by investors to compare the Company’s financial performance with the performance of other deathcare companies. The Company also uses EBITDA to monitor and compare the financial performance of its operations. EBITDA does not give effect to the cash the Company must use to service its debt or pay its income taxes and thus does not reflect the funds actually available for capital expenditures. In addition, the Company’s presentation of EBITDA may not be comparable to similarly titled measures other companies report. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported operating results or cash flow from operations or any other measure of performance as determined in accordance with GAAP.

Certain statements made herein or elsewhere by, or on behalf of, the Company that are not historical facts are intended to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on assumptions that the Company believes are reasonable; however, many important factors, as discussed under “Cautionary Note,” “Risk Factors” and “Forward-Looking Statements” in the Company’s Annual Report and Form 10-K for the year ended December 31, 2006, could cause the Company’s results in the future to differ materially from the forward-looking statements made herein and in any other documents or oral presentations made by, or on behalf of, the Company. The Company assumes no obligation to update or publicly release any revisions to forward-looking statements made herein or any other forward-looking statements made by, or on behalf of, the Company. A copy of the Company’s Form 10-K, and other Carriage Services information and news releases, are available at www.carriageservices.com.

-Tables to follow-

CARRIAGE SERVICES, INC.
Selected Financial Data
March 31, 2007
(unaudited)

Selected Balance Sheet Data:


	12/31/06		03/31/07
Cash and short-term investments	$	36,011	$	28,319
Long-term corporate investments		5,000		5,000
Total Senior Debt (a)		140,179		140,057
Days sales in funeral accounts receivable		23.2		23.3
Net Senior Debt to total capitalization(b)		35.4		36.5
Net Senior Debt to EBITDA from continuing operations (rolling twelve months) (b)		3.12		3.41


(a)		- Senior debt does not include the convertible junior subordinated debentures.

(b)		- Net Senior debt is Senior Debt less cash and short term investments

Reconciliation of Non-GAAP Financial Measures:

This press release includes the use of certain financial measures that are not GAAP measures. The non-GAAP financial measures are presented for additional information and are reconciled to their most comparable GAAP measures below.

Reconciliation of Net Income from continuing operations to EBITDA from continuing operations for the following periods (in 000s). Year ended 12/31/2007 is presented at the midpoint of the range identified in the release:


	Three months			Three months			Year
	ended			ended			ended
	3/31/2006			3/31/2007			12/31/2007 E
Net income from continuing operations	$	2,263		$	3,027		$	7,500
Provision (benefit) for income taxes		1,358			1,895			4,500

Pre-tax earnings from continuing operations		3,621			4,922			12,000
Net interest expense, including loan coast amortization		4,420			4,175			17,000
Depreciation & amortization		2,279			2,486			10,000

EBITDA from continuing operations	$	10,320		$	11,583		$	39,000

Revenue from continuing operations	$	41,042		$	42,658		$	163,500
EBITDA margin from continuing operations		25.1	%		27.2	%		23.9	%

Reconciliation of Non-GAAP Financial Measures Continued:

Reconciliation of cash provided by (used in) operating activities from continuing operations to free cash flow (in 000’s):


	Three months			Three months
	ended			ended
	03/31/2006			03/31/2007
Cash provided by (used in) operating activities from continuing operations	$	921		$	(1,628	)
Less capital expenditures from continuing operations		(1,116	)		(2,169	)

Free cash flow deficit from continuing operations	$	(195	)	$	(3,797	)

Reconciliation of net income to free cash flow for 2007 (in 000’s):


	2007 E
Net income	$	7,500
Tax expense		4,500
Interest expense, net		17,000
Depreciation and amortization		10,000

EBITDA	$	39,000
Interest paid		17,200
Cash taxes		300
Capital expenditures		6,500

Free cash flow	$	15,000

CARRIAGE SERVICES, INC.

Dated: May 10, 2007

/s/ Joseph Saporito

Joseph Saporito

Executive Vice President and Chief Financial Officer