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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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): August 8, 2007
Carriage Services, Inc.
(Exact name of registrant as specified in is charter)
| Delaware (State or other jurisdiction of incorporation) |
1-11961 (Commission File Number) |
76-0423828 (IRS Employer Identification No.) |
3040 Post Oak Boulevard, Suite 300
Houston, Texas 77056
(Address, including zip code, of principal executive offices)
Houston, Texas 77056
(Address, including zip code, of principal executive offices)
Registrant’s telephone number, including area code:
(713) 332-8400
(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 | ||||||||
Table of Contents
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
In the press release dated August 8, 2007, the Company announced and commented on its
financial results for its fiscal quarter ended June 30, 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 August 8, 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 August 8, 2007. |
-2-
Table of Contents
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, Carriage Services, Inc.
has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CARRIAGE SERVICES, INC. |
||||
| Dated: August 9, 2007 | By: | /s/ Joseph Saporito | ||
| Joseph Saporito | ||||
| Executive Vice President and Chief Financial Officer |
||||
-3-
Table of Contents
Exhibit 99.1
 |
Press Release |
|||
| Contacts: | Mel Payne, Chairman & CEO | |||
| Joe Saporito, CFO | ||||
| Carriage Services, Inc. | ||||
| 713-332-8400 | ||||
IMMEDIATE RELEASE |
||||
| Ken Dennard / ksdennard@drg-e.com | ||||
| Lisa Elliott / lelliott@drg-e.com | ||||
| DRG&E / 713-529-6600 | ||||
CARRIAGE SERVICES REPORTS SECOND QUARTER 2007 RESULTS
Revenue Increases 12%
Consolidated EBITDA Margin Increases 250 basis points
Consolidated EBITDA Increases 26%
Diluted EPS Increases 333 %
Rolling Four Quarter Earnings Outlook Increased
Consolidated EBITDA Margin Increases 250 basis points
Consolidated EBITDA Increases 26%
Diluted EPS Increases 333 %
Rolling Four Quarter Earnings Outlook Increased
August 8, 2007 — HOUSTON — Carriage Services, Inc. (NYSE: CSV) today announced second quarter
results and increased its Rolling Four Quarter Outlook. Please go to the Investor homepage of
Carriage’s web site at www.carriageservices.com for a link to the Press Release that includes
properly formatted Annual and Quarterly Trend Reports. Results of continuing operations for the
second quarter of 2007 were as follows:
| • | Revenues of $41.7 million | ||
| compared to revenues of $37.3 million for the second quarter of 2006. | |||
| • | Consolidated EBITDA of $9.6 million | ||
| compared to Consolidated EBITDA of $7.6 million for the second quarter of 2006. | |||
| • | Consolidated EBITDA Margin of 23.0% | ||
| compared to Consolidated EBITDA Margin of 20.5% for the second quarter of 2006. | |||
| • | Diluted earnings per share from continuing operations of $0.10 | ||
| compared to diluted earnings per share from continuing operations of $0.03 for the second quarter of 2006. |
Melvin C. Payne, Chairman and Chief Executive Officer, stated, “Both our same store funeral
and cemetery operations had a good second quarter, primarily attributable to the continuing
improvement of our Central Region funeral operations and Rolling Hills Memorial Park and to broader
performance in our Eastern Region cemetery operations. Additionally, the acquisition during the
first four months of 2007 of two premier combination businesses proved to be immediately accretive
to earnings in the second quarter. As a result of a 340 basis point increase in our Total Field
EBITDA Margin, a relatively fixed consolidation platform overhead structure and our attractive low
cost fixed
1
capital structure, we were able to operationally and financially leverage a 12% increase in
revenue during the second quarter into a 26% increase in Consolidated EBITDA and a 333% increase in
diluted EPS from continuing operations. We expect the financial dynamic of leveraging relatively
small revenue increases into strong earnings momentum to continue for the balance of 2007 and into
2008.” Please refer to our Company and Investment Profile at www.carriageservices.com for a more
detailed discussion of the financial dynamics that result from the execution of the Company’s
Standards Operating Model, 4E Leadership Model and Strategic Portfolio Optimization Model.
Trend Reporting
“We now report our consolidated 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”, continued Mr. Payne. “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). 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 businesses.
“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 Carriage Services over time.”
“Since this is only the second quarter under our new reporting format, we will comment more
extensively each quarter during 2007 in order to point out what we believe are the most substantive
observations and conclusions. Just as we are still adjusting to our new reporting format, we
realize that it will take time and continued explanation and discussion for our stockholders to
fully understand and appreciate this new trend reporting approach.”
As mentioned previously, please go to the Investor homepage of Carriage’s web site at
www.carriageservices.com for a link to the Press release that includes properly formatted Annual
and Quarterly Trend Reports.
2
UNAUDITED INCOME STATEMENT FROM CONTINUING OPERATIONS
Annual Trend
For the Four Years Ended December 31, 2006 and Four Quarters Ended June 30, 2007
($000’s)
Annual Trend
For the Four Years Ended December 31, 2006 and Four Quarters Ended June 30, 2007
($000’s)
| Pro forma(1) | Pro forma(1) | Actual | Actual | Actual | ||||||||||||||||||||||||||||||||||||
| Year | Year | Year | Year | Trailing 4 Qtrs. | ||||||||||||||||||||||||||||||||||||
| 2003 | 2004 | 2005 | 2006 | 6/30/2007 | ||||||||||||||||||||||||||||||||||||
CONTINUING OPERATIONS |
||||||||||||||||||||||||||||||||||||||||
Same Store Contracts |
||||||||||||||||||||||||||||||||||||||||
Atneed Contracts |
17,999 | 79.9 | % | 17,520 | 79.9 | % | 17,461 | 79.7 | % | 16,958 | 78.7 | % | 16,600 | 78.2 | % | |||||||||||||||||||||||||
Preneed Contracts |
4,515 | 20.1 | % | 4,412 | 20.1 | % | 4,436 | 20.3 | % | 4,597 | 21.3 | % | 4,617 | 21.8 | % | |||||||||||||||||||||||||
Total Same Store Funeral Contracts |
22,514 | 100.0 | % | 21,932 | 100.0 | % | 21,897 | 100.0 | % | 21,555 | 100.0 | % | 21,217 | 100.0 | % | |||||||||||||||||||||||||
Acquisition Contracts |
||||||||||||||||||||||||||||||||||||||||
Atneed Contracts |
— | — | 53 | 64.6 | % | 194 | 67.1 | % | 532 | 67.7 | % | |||||||||||||||||||||||||||||
Preneed Contracts |
— | — | 29 | 35.4 | % | 95 | 32.9 | % | 254 | 32.3 | % | |||||||||||||||||||||||||||||
Total Acquisition Funeral Contracts |
— | — | 82 | 100.0 | % | 289 | 100.0 | % | 786 | 100.0 | % | |||||||||||||||||||||||||||||
New Store Openings |
— | — | — | 104 | 350 | |||||||||||||||||||||||||||||||||||
Total Funeral Contracts |
22,514 | 21,932 | 21,979 | 21,948 | 22,353 | |||||||||||||||||||||||||||||||||||
Same Store Interments |
||||||||||||||||||||||||||||||||||||||||
Atneed Interments |
2,506 | 27.7 | % | 2,324 | 26.3 | % | 2,006 | 24.4 | % | 2,100 | 25.0 | % | 2,154 | 26.6 | % | |||||||||||||||||||||||||
Preneed Interments |
6,554 | 72.3 | % | 6,529 | 73.7 | % | 6,213 | 75.6 | % | 6,285 | 75.0 | % | 5,932 | 73.4 | % | |||||||||||||||||||||||||
Total Same Store Cemetery Interments |
9,060 | 100.0 | % | 8,853 | 100.0 | % | 8,219 | 100.0 | % | 8,385 | 100.0 | % | 8,086 | 100.0 | % | |||||||||||||||||||||||||
Acquisition Interments |
||||||||||||||||||||||||||||||||||||||||
Atneed Interments |
— | — | — | — | 120 | 28.0 | % | |||||||||||||||||||||||||||||||||
Preneed Interments |
— | — | — | — | 308 | 72.0 | % | |||||||||||||||||||||||||||||||||
Total Acquisition Cemetery Interments |
— | — | — | — | 428 | 100.0 | % | |||||||||||||||||||||||||||||||||
Total Cemetery Interments |
9,060 | 8,853 | 8,219 | 8,385 | 8,514 | |||||||||||||||||||||||||||||||||||
Same Store Revenue |
||||||||||||||||||||||||||||||||||||||||
Funeral Operations Revenue |
$ | 106,242 | 75.4 | % | $ | 107,159 | 74.1 | % | $ | 109,045 | 73.1 | % | 111,448 | 73.8 | % | 112,734 | 71.8 | % | ||||||||||||||||||||||
Preneed Commission and Other Revenue |
1,608 | 1.1 | % | 1,319 | 0.9 | % | 2,295 | 1.5 | % | 2,267 | 1.5 | % | 2,351 | 1.5 | % | |||||||||||||||||||||||||
Total Funeral Same Store Revenue |
107,850 | 76.5 | % | 108,478 | 75.0 | % | 111,340 | 74.6 | % | 113,715 | 75.3 | % | 115,085 | 73.2 | % | |||||||||||||||||||||||||
Cemetery Operations Revenue |
29,755 | 21.1 | % | 33,203 | 23.0 | % | 33,940 | 22.7 | % | 32,107 | 21.3 | % | 32,913 | 20.9 | % | |||||||||||||||||||||||||
Cemetery Financial Revenue |
3,304 | 2.3 | % | 2,912 | 2.0 | % | 3,615 | 2.4 | % | 4,052 | 2.7 | % | 3,849 | 2.4 | % | |||||||||||||||||||||||||
Total Same Store Cemetery Revenue |
33,059 | 23.5 | % | 36,115 | 25.0 | % | 37,555 | 25.2 | % | 36,159 | 23.9 | % | 36,762 | 23.4 | % | |||||||||||||||||||||||||
Total Same Store Revenue |
140,909 | 100.0 | % | 144,593 | 100.0 | % | 148,895 | 99.8 | % | 149,874 | 99.2 | % | 151,847 | 96.6 | % | |||||||||||||||||||||||||
Acquisition Revenue |
||||||||||||||||||||||||||||||||||||||||
Funeral Operations Revenue |
— | — | 303 | 0.2 | % | 1,212 | 0.8 | % | 3,774 | 2.4 | % | |||||||||||||||||||||||||||||
Cemetery Operations Revenue |
— | — | — | — | 1,385 | 0.9 | % | |||||||||||||||||||||||||||||||||
Cemetery Financial Revenue |
— | — | — | — | 107 | |||||||||||||||||||||||||||||||||||
Total Acquisition Revenue |
— | — | 303 | 0.2 | % | 1,212 | 0.8 | % | 5,266 | 3.4 | % | |||||||||||||||||||||||||||||
Total Revenue from Continuing Operations |
$ | 140,909 | 100.0 | % | $ | 144,593 | 100.0 | % | $ | 149,198 | 100.0 | % | $ | 151,086 | 100.0 | % | $ | 157,113 | 100.0 | % | ||||||||||||||||||||
Field
EBITDA from Continuing Operations |
||||||||||||||||||||||||||||||||||||||||
Same Store Funeral Field EBITDA |
$ | 37,404 | 77.3 | % | $ | 37,580 | 76.6 | % | $ | 39,551 | 76.6 | % | 41,974 | 79.2 | % | 43,468 | 75.9 | % | ||||||||||||||||||||||
Same Store Funeral Field EBITDA Margin |
34.7 | % | 34.6 | % | 35.5 | % | 36.9 | % | 37.8 | % | ||||||||||||||||||||||||||||||
Same Store Cemetery Field EBITDA |
11,011 | 22.7 | % | 11,458 | 23.4 | % | 11,963 | 23.2 | % | 10,645 | 20.1 | % | 12,055 | 21.0 | % | |||||||||||||||||||||||||
Same Store Cemetery Field EBITDA Margin |
33.3 | % | 31.7 | % | 31.9 | % | 29.4 | % | 32.8 | % | ||||||||||||||||||||||||||||||
Total Same Store Field EBITDA |
48,415 | 100.0 | % | 49,038 | 100.0 | % | 51,514 | 99.8 | % | 52,619 | 99.2 | % | 55,523 | 96.9 | % | |||||||||||||||||||||||||
Total Same Store Field EBITDA Margin |
34.4 | % | 33.9 | % | 34.6 | % | 35.1 | % | 36.6 | % | ||||||||||||||||||||||||||||||
Acquisition Funeral Field EBITDA |
— | — | 92 | 0.2 | % | 407 | 0.8 | % | 1,377 | 2.4 | % | |||||||||||||||||||||||||||||
Acquisition Funeral Field EBITDA Margin |
— | — | 30.4 | % | 33.6 | % | 36.5 | % | ||||||||||||||||||||||||||||||||
Acquisition Cemetery Field EBITDA |
— | — | — | — | 401 | 0.7 | % | |||||||||||||||||||||||||||||||||
Acquisition Cemetery Field EBITDA Margin |
— | — | — | — | 29.0 | % | ||||||||||||||||||||||||||||||||||
Total Acquisition Field EBITDA |
— | — | 92 | 0.2 | % | 407 | 0.8 | % | 1,778 | 3.1 | % | |||||||||||||||||||||||||||||
Total Acquisition Field EBITDA Margin |
— | — | 30.4 | % | 33.6 | % | 33.8 | % | ||||||||||||||||||||||||||||||||
Total
Field EBITDA from Continuing Operations |
48,415 | 100.0 | % | 49,038 | 100.0 | % | 51,606 | 100.0 | % | 53,026 | 100.0 | % | 57,301 | 100.0 | % | |||||||||||||||||||||||||
Total Field EBITDA Margin from Continuing Operations |
34.4 | % | 33.9 | % | 34.6 | % | 35.1 | % | 36.5 | % | ||||||||||||||||||||||||||||||
Total Variable Overhead |
1,846 | 11.6 | % | 1,910 | 11.5 | % | 2,245 | 12.5 | % | 3,282 | 16.8 | % | 3,885 | 18.8 | % | |||||||||||||||||||||||||
Total Regional Fixed Overhead |
2,721 | 17.1 | % | 2,892 | 17.4 | % | 3,247 | 18.0 | % | 2,977 | 15.2 | % | 3,022 | 14.6 | % | |||||||||||||||||||||||||
Total Corporate Fixed Overhead |
11,378 | 71.4 | % | 11,825 | 71.1 | % | 12,501 | 69.5 | % | 13,290 | 68.0 | % | 13,801 | 66.6 | % | |||||||||||||||||||||||||
Total Overhead |
15,945 | 100.0 | % | 16,627 | 100.0 | % | 17,993 | 100.0 | % | 19,549 | 100.0 | % | 20,708 | 100.0 | % | |||||||||||||||||||||||||
| 11.3 | % | 11.5 | % | 12.1 | % | 12.9 | % | 13.2 | % | |||||||||||||||||||||||||||||||
Consolidated EBITDA from Continuing Operations |
$ | 32,470 | (2) | $ | 32,411 | (2) | $ | 33,613 | (2) | $ | 33,477 | (2) | $ | 36,593 | (2) | |||||||||||||||||||||||||
Consolidated EBITDA Margin from Continuing Operations |
23.0 | % | 22.4 | % | 22.5 | % | 22.2 | % | 23.3 | % | ||||||||||||||||||||||||||||||
Total Depreciation & Amortization |
9,159 | 9,285 | 9,065 | 8,688 | 8,968 | |||||||||||||||||||||||||||||||||||
Interest, Net |
17,773 | 16,908 | 18,090 | 17,106 | 16,737 | |||||||||||||||||||||||||||||||||||
Refinancing Costs |
— | — | 6,933 | — | ||||||||||||||||||||||||||||||||||||
Special Charges/Other (Gains) Losses |
(657 | ) | (940 | ) | 698 | 331 | 301 | |||||||||||||||||||||||||||||||||
Team Partners Incentive Expense |
60 | 110 | 276 | 1,151 | 965 | |||||||||||||||||||||||||||||||||||
Pretax Income |
6,135 | 7,048 | (1,449 | ) | 6,201 | 9,622 | ||||||||||||||||||||||||||||||||||
Benefit for Income Taxes due to a Valuation Adjustment |
— | (810 | ) | — | — | — | ||||||||||||||||||||||||||||||||||
Income Tax |
2,301 | 2,643 | (456 | ) | 2,375 | 3,738 | ||||||||||||||||||||||||||||||||||
Net income from Continuing Operations |
$ | 3,834 | $ | 5,215 | $ | (993 | ) | $ | 3,826 | $ | 5,884 | |||||||||||||||||||||||||||||
| 2.7 | % | 3.6 | % | -0.7 | % | 2.5 | % | 3.7 | % | |||||||||||||||||||||||||||||||
Diluted EPS-from continuing operations |
$ | 0.22 | $ | 0.29 | $ | 0.05 | $ | 0.20 | $ | 0.31 | ||||||||||||||||||||||||||||||
| (1) | Effective January 1, 2005, the company changed its accounting method to expense preneed selling costs incurred for the origination of prearranged funeral and cemetery sales contracts. Results of operations for the years ended December 31, 2003 and 2004 are presented on a proforma basis applying the new accounting method. | |
| (2) | Reclassified special charges (gains) and Team Partner Incentive expense to improve comparability of periods presented. |
3
UNAUDITED INCOME STATEMENT FROM CONTINUING OPERATIONS
Quarter Trend
For the Five Quarters Ended June 30, 2007
($000’s)
Quarter Trend
For the Five Quarters Ended June 30, 2007
($000’s)
| Actual | Actual | Actual | Actual | Actual | ||||||||||||||||||||||||||||||||||||
| Qtr 2 | Qtr 3 | Qtr 4 | Qtr 1 | Qtr 2 | ||||||||||||||||||||||||||||||||||||
| 2006 | 2006 | 2006 | 2007 | 2007 | ||||||||||||||||||||||||||||||||||||
CONTINUING OPERATIONS |
||||||||||||||||||||||||||||||||||||||||
Same Store Contracts |
||||||||||||||||||||||||||||||||||||||||
Atneed Contracts |
4,145 | 78.8 | % | 4,031 | 79.4 | % | 4,174 | 78.3 | % | 4,389 | 77.5 | % | 4,006 | 77.8 | % | |||||||||||||||||||||||||
Preneed Contracts |
1,117 | 21.2 | % | 1,044 | 20.6 | % | 1,155 | 21.7 | % | 1,272 | 22.5 | % | 1,146 | 22.2 | % | |||||||||||||||||||||||||
Total Same Store Funeral Contracts |
5,262 | 100.0 | % | 5,075 | 100.0 | % | 5,329 | 100.0 | % | 5,661 | 100.0 | % | 5,152 | 100.0 | % | |||||||||||||||||||||||||
Acquisition Contracts |
||||||||||||||||||||||||||||||||||||||||
Atneed Contracts |
43 | 60.6 | % | 43 | 67.2 | % | 52 | 65.8 | % | 184 | 68.1 | % | 253 | 67.8 | % | |||||||||||||||||||||||||
Preneed Contracts |
28 | 39.4 | % | 21 | 32.8 | % | 27 | 34.2 | % | 86 | 31.9 | % | 120 | 32.2 | % | |||||||||||||||||||||||||
Total Acquisition Funeral Contracts |
71 | 100.0 | % | 64 | 100.0 | % | 79 | 100.0 | % | 270 | 100.0 | % | 373 | 100.0 | % | |||||||||||||||||||||||||
New Store Openings |
— | 18 | 86 | 120 | 126 | |||||||||||||||||||||||||||||||||||
Total Funeral Contracts |
5,333 | 5,157 | 5,494 | 6,051 | 5,651 | |||||||||||||||||||||||||||||||||||
Same Store Interments |
||||||||||||||||||||||||||||||||||||||||
Atneed Interments |
543 | 26.0 | % | 526 | 26.8 | % | 508 | 24.1 | % | 583 | 28.0 | % | 537 | 27.9 | % | |||||||||||||||||||||||||
Preneed Interments |
1,549 | 74.0 | % | 1,437 | 73.2 | % | 1,602 | 75.9 | % | 1,502 | 72.0 | % | 1,391 | 72.1 | % | |||||||||||||||||||||||||
Total Same Store Cemetery Interments |
2,092 | 100.0 | % | 1,963 | 100.0 | % | 2,110 | 100.0 | % | 2,085 | 100.0 | % | 1,928 | 100.0 | % | |||||||||||||||||||||||||
Acquisition Interments |
||||||||||||||||||||||||||||||||||||||||
Atneed Interments |
— | — | — | 39 | 24.5 | % | 81 | 30.1 | % | |||||||||||||||||||||||||||||||
Preneed Interments |
— | — | — | 120 | 75.5 | % | 188 | 69.9 | % | |||||||||||||||||||||||||||||||
Total Acquisition Cemetery Interments |
— | — | — | 159 | 100.0 | % | 269 | 100.0 | % | |||||||||||||||||||||||||||||||
Total Cemetery Interments |
2,092 | 1,963 | 2,110 | 2,244 | 2,197 | |||||||||||||||||||||||||||||||||||
Same Store Revenue |
||||||||||||||||||||||||||||||||||||||||
Funeral Operations Revenue |
$ | 27,198 | 73.0 | % | $ | 26,022 | 74.1 | % | $ | 28,097 | 74.6 | % | $ | 30,608 | 71.7 | % | $ | 28,007 | 67.2 | % | ||||||||||||||||||||
Preneed Commission and Other Revenue |
596 | 1.6 | % | 636 | 1.8 | % | 448 | 1.2 | % | 642 | 1.5 | % | 625 | 1.5 | % | |||||||||||||||||||||||||
Total Funeral Same Store Revenue |
27,794 | 74.6 | % | 26,658 | 75.9 | % | 28,545 | 75.8 | % | 31,250 | 73.3 | % | 28,632 | 68.7 | % | |||||||||||||||||||||||||
Cemetery Operations Revenue |
8,396 | 22.5 | % | 7,452 | 21.2 | % | 7,285 | 19.3 | % | 8,768 | 20.6 | % | 9,408 | 22.6 | % | |||||||||||||||||||||||||
Cemetery Financial Revenue |
786 | 2.1 | % | 763 | 2.2 | % | 1,423 | 3.8 | % | 930 | 2.2 | % | 733 | 1.8 | % | |||||||||||||||||||||||||
Total Cemetery Same Store Revenue |
9,182 | 24.6 | % | 8,215 | 23.4 | % | 8,708 | 23.1 | % | 9,698 | 22.7 | % | 10,141 | 24.3 | % | |||||||||||||||||||||||||
Total Same Store Revenue |
36,976 | 99.3 | % | 34,873 | 99.3 | % | 37,253 | 98.9 | % | 40,948 | 96.0 | % | 38,773 | 93.1 | % | |||||||||||||||||||||||||
Acquisition Revenue |
||||||||||||||||||||||||||||||||||||||||
Funeral Operations Revenue |
278 | 0.7 | % | 252 | 0.7 | % | 413 | 1.1 | % | 1,322 | 3.1 | % | 1,787 | 4.3 | % | |||||||||||||||||||||||||
Cemetery Operations Revenue |
— | — | — | 371 | 0.9 | % | 1,014 | 2.4 | % | |||||||||||||||||||||||||||||||
Cemetery Financial Revenue |
20 | 87 | ||||||||||||||||||||||||||||||||||||||
Total Acquisition Revenue |
278 | 0.7 | % | 252 | 0.7 | % | 413 | 1.1 | % | 1,713 | 4.0 | % | 2,888 | 6.9 | % | |||||||||||||||||||||||||
Total Revenue from Continuing Operations |
$ | 37,254 | 100.0 | % | $ | 35,125 | 100.0 | % | $ | 37,666 | 100.0 | % | $ | 42,661 | 100.0 | % | $ | 41,661 | 100.0 | % | ||||||||||||||||||||
Field EBITDA from Continuing Operations |
||||||||||||||||||||||||||||||||||||||||
Same Store Funeral Field EBITDA |
$ | 9,437 | 78.4 | % | $ | 9,316 | 81.8 | % | $ | 11,086 | 78.3 | % | $ | 12,570 | 74.4 | % | $ | 10,496 | 70.5 | % | ||||||||||||||||||||
Same Store Funeral Field EBITDA Margin |
34.0 | % | 34.9 | % | 38.8 | % | 40.2 | % | 36.7 | % | ||||||||||||||||||||||||||||||
Same Store Cemetery Field EBITDA |
2,522 | 21.0 | % | 2,028 | 17.8 | % | 2,856 | 20.2 | % | 3,717 | 22.0 | % | 3,454 | 23.2 | % | |||||||||||||||||||||||||
Same Store Cemetery Field EBITDA Margin |
27.5 | % | 24.7 | % | 32.8 | % | 38.3 | % | 34.1 | % | ||||||||||||||||||||||||||||||
Total Same Store Field EBITDA |
11,959 | 99.3 | % | 11,344 | 99.6 | % | 13,942 | 98.5 | % | 16,287 | 96.4 | % | 13,950 | 93.8 | % | |||||||||||||||||||||||||
Total Same Store Field EBITDA Margin |
32.3 | % | 32.5 | % | 37.4 | % | 39.8 | % | 36.0 | % | ||||||||||||||||||||||||||||||
Acquisition Funeral Field EBITDA |
79 | 0.7 | % | 42 | 0.4 | % | 208 | 1.5 | % | 524 | 3.1 | % | 603 | 4.1 | % | |||||||||||||||||||||||||
Acquisition Funeral Field EBITDA Margin |
28.4 | % | 16.7 | % | 50.4 | % | 39.6 | % | 33.7 | % | ||||||||||||||||||||||||||||||
Acquisition Cemetery Field EBITDA |
— | — | — | 76 | 0.5 | % | 325 | 2.2 | % | |||||||||||||||||||||||||||||||
Acquisition Cemetery Field EBITDA Margin |
20.5 | % | 32.1 | % | ||||||||||||||||||||||||||||||||||||
Total Acquisition Field EBITDA |
79 | 0.7 | % | 42 | 0.4 | % | 208 | 1.5 | % | 600 | 3.6 | % | 928 | 6.2 | % | |||||||||||||||||||||||||
Total Acquisition Field EBITDA Margin |
28.4 | % | 16.7 | % | 50.4 | % | 35.0 | % | 32.1 | % | ||||||||||||||||||||||||||||||
Total Field EBITDA from Continuing Operations |
12,038 | 100.0 | % | 11,386 | 100.0 | % | 14,150 | 100.0 | % | 16,887 | 100.0 | % | 14,878 | 100.0 | % | |||||||||||||||||||||||||
Total Field EBITDA Margin from Continuing Operations |
32.3 | % | 32.4 | % | 37.6 | % | 39.6 | % | 35.7 | % | ||||||||||||||||||||||||||||||
Overhead |
||||||||||||||||||||||||||||||||||||||||
Total Variable Overhead(2) |
359 | 8.1 | % | 953 | 18.9 | % | 932 | 18.4 | % | 981 | 18.5 | % | 1,019 | 19.2 | % | |||||||||||||||||||||||||
Total Regional Fixed Overhead |
707 | 16.0 | % | 748 | 14.8 | % | 764 | 15.1 | % | 786 | 14.8 | % | 724 | 13.7 | % | |||||||||||||||||||||||||
Total Corporate Fixed Overhead |
3,343 | 75.8 | % | 3,347 | 66.3 | % | 3,366 | 66.5 | % | 3,537 | 66.7 | % | 3,551 | 67.1 | % | |||||||||||||||||||||||||
Total Overhead |
4,409 | 100.0 | % | 5,048 | 100.0 | % | 5,062 | 100.0 | % | 5,304 | 100.0 | % | 5,294 | 100.0 | % | |||||||||||||||||||||||||
| 11.8 | % | 14.4 | % | 13.4 | % | 12.4 | % | 12.7 | % | |||||||||||||||||||||||||||||||
Consolidated EBITDA from Continuing Operations |
7,629 | 6,338 | 9,088 | 11,583 | 9,584 | |||||||||||||||||||||||||||||||||||
Consolidated EBITDA Margin from Continuing Operations |
20.5 | % | 18.0 | % | 24.1 | % | 27.2 | % | 23.0 | % | ||||||||||||||||||||||||||||||
Total Depreciation & Amortization |
2,226 | 6.0 | % | 2,030 | 5.8 | % | 2,153 | 5.7 | % | 2,486 | 5.8 | % | 2,299 | 5.5 | % | |||||||||||||||||||||||||
Interest, Net |
4,282 | 11.5 | % | 4,216 | 12.0 | % | 4,188 | 11.1 | % | 4,175 | 9.8 | % | 4,158 | 10.0 | % | |||||||||||||||||||||||||
Special Charges/Other (Gains) Losses(1) |
30 | 0.1 | % | 188 | 0.5 | % | 113 | 0.3 | % | — | 0.0 | % | — | 0.0 | % | |||||||||||||||||||||||||
Team Partners Incentive Expense(2) |
84 | 0.2 | % | 710 | 2.0 | % | 255 | 0.7 | % | — | 0.0 | % | — | 0.0 | % | |||||||||||||||||||||||||
Pretax Income |
1,007 | 2.7 | % | (806 | ) | -2.3 | % | 2,379 | 6.3 | % | 4,922 | 11.5 | % | 3,127 | 7.5 | % | ||||||||||||||||||||||||
Income tax |
378 | 1.0 | % | (304 | ) | -0.9 | % | 943 | 2.5 | % | 1,895 | 4.4 | % | 1,204 | 2.9 | % | ||||||||||||||||||||||||
Net income from Continuing Operations |
$ | 629 | $ | (502 | ) | $ | 1,436 | $ | 3,027 | $ | 1,923 | |||||||||||||||||||||||||||||
| 1.7 | % | -1.4 | % | 3.8 | % | 7.1 | % | 4.6 | % | |||||||||||||||||||||||||||||||
Diluted EPS-from continuing operations |
$ | 0.03 | $ | (0.03 | ) | $ | 0.08 | $ | 0.16 | $ | 0.10 | |||||||||||||||||||||||||||||
| (1) | Includes charges for remediation at Rolling Hills Cemetery of $30K (02), $704K (03) and $110K (04) which were reclassified from field expenses. | |
| (2) | Reclassified Team Partners expense from Total Variable Overhead |
4
Same Store Funeral Operations
Our Central Region made a substantial incremental contribution to our results in the fourth
quarter of 2006 and this trend has continued to accelerate during the first two quarters of 2007.
While 90% of the elements of the turnaround are in place, including strong new leadership in
approximately half of our businesses, we are achieving about 70% of the current sustainable earning
power of the businesses in this region, which exceeds our original expectations. We now expect an
increase of approximately $2.5 million in Central Region same store Field EBITDA in 2007 over 2006
compared to our original estimate of $2.0 million.
Our same store volumes have declined gradually each year from 22,514 in 2003 to 21,555 in 2006
(compound annual decline of 1.4%) consistent with a period of weak death rates nationally and the
loss of market share primarily in our Central Region funeral operations. We have continued to
experience lower volumes in 2007, primarily in our Eastern and Western Regions, while the Central
Region has reversed its previous trend by reporting slightly higher volumes. 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. During the second quarter, our same store
revenue increased 3.0% notwithstanding a 2.1% decrease in same store funeral contracts compared to
the second quarter of 2006. Since we maintain atneed pricing power on approximately 80% 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 weak death rates and higher cremation rates.
After implementing our funeral Standards Operating Model in 2004, our same store funeral Field
EBITDA Margin increased by 220 basis points over two years from 34.6% in 2004 to 36.9% in 2006.
This multi-year increasing same store funeral Field EBITDA Margin trend has not only continued in
the first two quarters of 2007, but is accelerating. Our second quarter same store funeral Field
EBITDA Margin was 270 basis points higher than the comparable period in 2006 which was primarily
attributable to our Central Region performance.
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 approximately
20% of our funeral contracts originated from a preneed sale, consistent with our selective preneed
funeral strategy,
5
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.
Our cemetery interments declined by over 800 interments (9.3%) from 2003 to 2005 but
stabilized at about 8,300 interments in 2006, although the annualized rate of 8,100 through the
first six months of 2007 reflects the weak death rate environment. Approximately 80% of the
historical 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 declined during 2006 for reasons we 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 24.7% in the third quarter of 2006 (excluding the remediation
charge at Rolling Hills). The second quarter 2007 increases in our same store cemetery Field
EBITDA of $1.0 million and Field EBITDA Margin of 660 basis points to 34.1% was primarily
attributable to continued excellent performance by Rolling Hills, which is now under strong new
leadership, and our Eastern Region cemeteries. 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 year 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 2007 quarterly Total Field EBITDA Margin trend has turned materially positive compared to
2006, as we achieved a 340 basis point increase in Total Field EBITDA Margin in the second quarter
compared to 2006. We expect continued positive Total Field EBITDA Margin trend comparisons during
the balance of 2007.
Our Total Field EBITDA increased each year from $48.4 million in 2003 to $53.0 million in 2006
(excluding the remediation charge at Rolling Hills), a compound annual increase of 3.2% over the
three year period. We expect our Total Field EBITDA growth trend to accelerate over the next few
6
years because of a gradual increase in same store revenues, improving Field EBITDA Margins and
the increasing contribution of acquisitions.
Acquisitions
We acquired Seaside Memorial Park and Funeral Home and Corpus Christi Funeral Home in early
January 2007 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 in their
markets. We expect that generally it will take up to one year to complete the integration of newly
acquired businesses and make the necessary changes to bring them to a level of performance that
aligns with our Standards Operating Model.
During the second quarter of 2007 we closed on two stand-alone acquisitions: Conejo Mountain
Funeral Home and Memorial Park (Conejo Mountain) in Camarillo, California on April 1, 2007, and
Cloverdale Funeral Home and Memorial Park and Terrace Lawn Memorial Gardens (Cloverdale) in Boise,
Idaho on June 12, 2007. Conejo Mountain performs approximately 390 cemetery interments and 275
funeral services annually. This acquisition represents our entry into Southern California and
positions us to pursue other opportunities in the greater Los Angeles market where we are
interested in acquiring a group of high performing businesses. Cloverdale performs approximately
600 funeral services and 400 cemetery interments annually. This acquisition will complement our
existing funeral operations in Boise and the adjacent markets of Caldwell, Meridian and Nampa which
together perform approximately 1,050 funeral services annually. We have also recently closed on
two “tuck-in” acquisitions, which complement our “Best in Market” existing businesses in Santa Fe,
New Mexico (June 2007) and in the Springfield, Massachusetts market (August 2007). The Cloverdale,
Santa Fe and Springfield acquisitions are expected to add materially to our new acquisition
portfolio performance during the four quarter outlook period ending June 30, 2008, so we increased
our Outlook performance accordingly.
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 second quarter of 2007, 7% of our total revenue
and 6.2% of our Total Field EBITDA was primarily from three businesses acquired since the fourth
quarter of 2005. The Cloverdale and Santa Fe acquisitions closed too late in the second quarter to
have a material impact.
7
We are encouraged by the current level of acquisition activity and the quality and size of the
candidates. Our selection process is rigorous using our six Strategic Ranking Criteria and ROIC
Model and as a result we have declined numerous opportunities to acquire 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 we will integrate
expected proforma results on newly announced acquisitions into our rolling four quarter outlook in
conjunction with our quarterly earnings release.
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, thereby eliminating the heads of
funeral and cemetery operations in our corporate office. 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 our legal functions in house under a new General Counsel; 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
our Standards Operating Model while maintaining a flat regional operations organization. In
addition, we are now well positioned to execute a growth strategy while supporting newly acquired
businesses to improve their operations, people, market share and financial results consistent with
our Standards Operating Model.
During 2006, a long-term incentive arrangement with one of the Company’s directors ended and
we expensed $1.2 million in connection with the final year’s incentive payment. We reclassified
the expenses from variable overhead in our first quarter trend reports to a separate line in the
second quarter trend reports so that variable expenses between periods would be comparable.
8
Near term, 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 also believe that
after 2007 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. During the second quarter of 2007, variable overhead also included
an unusually large amount of leadership recruiting and relocation costs, non-recurring project
consulting fees and director stock compensation that aggregated approximately $400,000.
Carriage Consolidation Platform
Because of the improved same store operating performance and the addition of accretive
acquisitions, we achieved a Consolidated EBITDA Margin of 23.0% in the second quarter of 2007
compared to 20.5% in the second 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 and acquisitions.
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%.
Cash Flow
Free cash flow was $4.8 million and $4.6 million for the three and six months ended June 30,
2007, respectively. Though cash flow from operating activities has increased year to date by $0.9
million to $10.1 million compared to the prior year period, cash used for capital expenditures
totaled $5.6 million compared to $2.4 million in the prior year. Growth capital expenditures
totaled $2.2 million for the six months ended June 30, 2007 and include amounts spent on new
funeral home properties, cemetery property development and improvements to the businesses acquired
in 2007. Maintenance capital expenditures totaled $3.4 million year to date 2007, slightly more
than one-half of the $6.5 million in our original estimate for 2007. Cash flow from operating
activities was negatively affected by working capital items such as our preneed activities where
certain trust withdrawals were delayed until the second half of 2007. For the year, we continue to
believe that working capital will have a neutral effect on cash flow.
Rolling Four Quarter Outlook
Management is providing an Outlook for the four quarter period ending June 30, 2008, based
upon the following key assumptions:
9
| • | 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 for the full year 2007 compared to 2006 and for such margin gains to be sustainable through the first half of 2008 on modest year over year revenue gains. | |
| • | Includes estimated results from acquired businesses in Corpus Christi, Texas (closed January 2007), Camarillo, California (closed April 2007), Boise, Idaho (closed June 2007), Santa Fe, New Mexico (closed June 2007) and Springfield, Massachusetts (closed August 2007). Excludes divestitures identified as of June 30, 2007 and classified as Discontinued Operations. | |
| • | No borrowings on our $35 million bank credit facility. | |
| • | Approximately $9.7 million of capital expenditures, of which $2.8 million is designated for 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. |
| Millions except EPS | Midpoint Range | |||||||||
| Range | Midpoint | % Revenue | ||||||||
Revenues |
$168 — $172 | $ | 170 | $ | 170 | |||||
Field EBITDA |
$61 — $63 | $ | 62 | 36.5 | % | |||||
Variable overhead |
$3.7 — $4.1 | $ | 3.9 | 2.3 | % | |||||
Regional fixed overhead |
$3.1 | $ | 3.1 | 1.8 | % | |||||
Corporate fixed overhead |
$14.0 | $ | 14.0 | 8.2 | % | |||||
Total overhead |
$21.0 | $ | 21.0 | 12.4 | % | |||||
Consolidated EBITDA |
$40 — $42 | $ | 41 | 24.1 | % | |||||
Interest |
$17 | $ | 17 | 10.0 | % | |||||
Depreciation and
amortization |
$10.5 | $ | 10.5 | 6.4 | % | |||||
Income taxes |
$4.5 — $5.5 | $ | 5.0 | 3.1 | % | |||||
Net earnings from
continuing operations |
$8 — $9 | $ | 8.5 | 5.0 | % | |||||
Diluted earnings per share |
$0.43 — $0.47 | $ | 0.44 | NA | ||||||
Free Cash Flow |
$13.0 — $14.5 | $ | 13.8 | 8.1 | % | |||||
10
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 have had three consecutive quarters of considerably stronger year over year profitability
in an industry where our performance should be predictable, profitable and sustainable when our
three models are being executed broadly and effectively”, stated Mr. Payne. “Our 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 way that will become apparent in our trend
reporting and which will be more valuable over time for long term investors who see the beginnings
of a long term up cycle in deathcare and believe that Carriage is the right operating and
investment platform. The “trend is our friend” and we will work hard to keep it that way. I want
to thank all of our employees and leaders for our first half 2007 performance, which was in total
alignment with our company’s theme of “2007 — The Year Of Being The Best — No Excuses!” concluded
Mr. Payne.
Second Quarter Conference Call Information
Carriage Services has scheduled a conference call for tomorrow, August 9, 2007 at 10:00 a.m.
Eastern time. To participate in the call, dial (303) 262-2211 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 August 16, 2007. To access the replay, dial (303) 590-3000 and enter pass code 11094377#.
Investors, analysts and the general public will also have the opportunity to listen to the
conference call free over the Internet by visiting http://www.carriageservices.com. To listen to
the live call on the web, please visit the website at least fifteen minutes early to register,
download and install any necessary audio software. For those who cannot listen to the live
webcast, an audio archive will be available shortly after the call and will be accessible for
approximately 90 days. For more information, please contact Karen Roan at DRG&E at (713) 529-6600
or email kcroan@drg-e.com.
Carriage Services is a leading provider of death care services and products. As of August 9,
2007, Carriage operates 135 funeral homes in 27 states and 32 cemeteries in 11 states.
11
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 or acquisitions. 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-
12
CARRIAGE SERVICES, INC.
Selected Financial Data
June 30, 2007
(unaudited)
Selected Financial Data
June 30, 2007
(unaudited)
| Selected Balance Sheet Data: | 12/31/06 | 6/30/07 | ||||||
Cash and short-term investments |
$ | 36,011 | $ | 14,342 | ||||
Long-term corporate investments |
5,000 | 5,000 | ||||||
Total Senior Debt (a) |
140,179 | 139,649 | ||||||
Days sales in funeral accounts receivable |
23.2 | 23.8 | ||||||
Net Senior Debt to total capitalization (b) |
35.4 | 38.9 | ||||||
Net Senior Debt to EBITDA from continuing operations
(rolling twelve months) (b) |
3.12 | 3.42 | ||||||
| (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). Twelve months ended June 30, 2008 is presented at the midpoint of the
range identified in the release:
| Three months | Three months | 12 Months | ||||||||||
| ended | ended | Ended | ||||||||||
| 6/30/2006 | 6/30/2007 | 6/30/2008 | ||||||||||
Net income from continuing operations |
$ | 629 | $ | 1,923 | $ | 8,500 | ||||||
Provision for income taxes |
378 | 1,204 | 5,000 | |||||||||
Pre-tax earnings from continuing
operations |
1,007 | 3,127 | 13,500 | |||||||||
Net interest expense, including loan
cost amortization |
4,282 | 4,158 | 17,000 | |||||||||
Depreciation & amortization |
2,226 | 2,299 | 10,500 | |||||||||
Other |
114 | — | — | |||||||||
EBITDA from continuing operations |
$ | 7,629 | $ | 9,584 | $ | 41,000 | ||||||
Revenue from continuing operations |
$ | 37,254 | $ | 41,661 | $ | 170,000 | ||||||
EBITDA margin from continuing
operations |
20.5 | % | 23.0 | % | 24.1 | % | ||||||
13
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 | |||||||
| 6/30/2006 | 6/30/2007 | |||||||
Cash provided by operating activities from continuing operations |
$ | 8,326 | $ | 8,204 | ||||
Less capital expenditures from continuing operations |
(1,272 | ) | (3,429 | ) | ||||
Free cash flow from continuing operations |
$ | 7,054 | $ | 4,775 | ||||
| Six months | Six months | |||||||
| ended | ended | |||||||
| 6/30/2006 | 6/30/2007 | |||||||
Cash provided by operating activities from continuing operations |
$ | 9,247 | $ | 10,149 | ||||
Less capital expenditures from continuing operations |
(2,388 | ) | (5,598 | ) | ||||
Free cash flow from continuing operations |
$ | 6,859 | $ | 4,551 | ||||
Reconciliation of estimated net income to free cash flow for the twelve months ending June 30,
2008 (in 000’s):
Net income |
$ | 8,500 | ||
Tax expense |
5,000 | |||
Interest expense, net |
17,000 | |||
Depreciation and amortization |
10,500 | |||
EBITDA |
$ | 41,000 | ||
Interest paid |
17,200 | |||
Cash taxes |
300 | |||
Capital expenditures |
9.700 | |||
Free cash flow |
$ | 13,800 | ||
14