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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): August 7, 2008
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))
 
 

 

 

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
     In the press release dated August 7, 2008, the Company announced and commented on its financial results for its fiscal quarter ended June 30, 2008. 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 7, 2008 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.
     (d) Exhibits. The following exhibits are furnished as part of this current report on Form 8-K:
               99.1      Press Release dated August 7, 2008.

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SIGNATURE
     Pursuant to the requirements of the Securities Exchange Act of 1934, Carriage Services, Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
         
CARRIAGE SERVICES, INC.
  
 
Dated: August 8, 2008  By:   /s/ Terry E. Sanford    
    Terry E. Sanford   
    Senior Vice President, Chief Accounting Officer
and Treasurer 		  
 

-3-

 

INDEX TO EXHIBITS
     
Exhibit   Description
 
    
99.1
  Press release dated August 7, 2008.

-4-

exv99w1
Exhibit 99.1
(CARRIAGE LOGO)
         
 
      Press Release
 
        
 
  Contacts:   Mel Payne, Chairman & CEO
 
      Billy Dixon, Sr. Vice President & CFO
 
      Carriage Services, Inc.
 
      713-332-8400
FOR IMMEDIATE RELEASE
        
 
      Ken Dennard / ksdennard@drg-e.com
 
      Kip Rupp / krupp@drg-e.com
 
      DRG&E / 713-529-6600
CARRIAGE SERVICES REPORTS SECOND QUARTER 2008 RESULTS
Revenue from Continuing Operations Increases 3.3%
Consolidated EBITDA from Continuing Operations Decreases 25.3%
Diluted EPS from Continuing Operations Decreases to $0.00
Free Cash Flow from Continuing Operations of $0.32 per Diluted Share
Rolling Four Quarter Outlook Lowered
August 7, 2008 — HOUSTON — Carriage Services, Inc. (NYSE: CSV) today announced second quarter results and revised 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 as well as the data tables, which are downloadable in Excel® format. Results from continuing operations for the second quarter of 2008 compared to the second quarter of 2007 were as follows:
  §   Revenues of $42.7 million compared to $41.3 million
 
  §   Consolidated EBITDA of $7.1 million compared to $9.5 million.
 
  §   Consolidated EBITDA Margin of 16.7% compared to 23.1%.
 
  §   Diluted earnings per share of $0.00 compared to $0.10.
     Melvin C. Payne, Chairman and Chief Executive Officer, stated, “Our second quarter performance was disappointing. We like to say that there are no excuses for underperformance, only reasons that should be viewed as opportunities. Needless to say, we have plenty of opportunities on which to focus during the remainder of 2008 in order to reverse this recent decline in our performance so that we enter 2009 with strong positive momentum. Our near term priorities are rebuilding key cemetery sales leadership and holding costs in line with revenue across our entire portfolio consistent with our Standards Operating Model. We view the second quarter as a wake-up call for our leadership at all levels in a weak revenue environment and are confident that our performance will improve quickly notwithstanding a slowing economy and selective cost inflation.

- 1 -

 

     “Our Field EBITDA Margin was lower in all areas compared to last year. After an exceptionally strong first quarter for our same store funeral operations, the second quarter was very weak, especially in our Western and Central regions where many of our businesses were revenue challenged due to weaker death rates and lower averages primarily because of a spike in cremation rates. Lower revenue in these two regions combined with broadly higher operating costs across all regions caused our same store Funeral Field EBITDA Margin to decline to 33.2%, which was 420 basis points lower than last year. Our same store cemetery performance remained weak for the second straight quarter as we continue the process of rebuilding the sales leadership and teams in our larger cemetery and combination businesses. While our same store cemetery revenue was higher than the first quarter, the Cemetery Field EBITDA Margin remained low at 25%, which was 900 basis points lower than last year. And our acquisition portfolio showed operating weakness as well, as our Acquisition Field EBITDA Margin was only 28.4%, which was 710 basis points lower than the first quarter.
     “Our Total Field EBITDA Margin was 30.8%, a decline of 510 basis points compared to last year, leading to a decrease of $1.7 million in Total Field EBITDA. When combined with an increase of $0.6 million in non-recurring variable overhead, our weak operating performance resulted in a decline of $2.4 million in Consolidated EBITDA to $7.1 million and a decline of 640 basis points in Consolidated EBITDA Margin to 16.7%.
     “Our Free Cash Flow was strong in the Second Quarter generating $6.4 million, equal to $0.32 per diluted share. For the Second Quarter, our Cemetery and Funeral trust performance was flat compared to a decline of 2.7% for the S&P 500. For the first half through June 30, 2008, our Cemetery and Funeral trust performance was down 1.6% which is an outstanding performance compared to the 11.9% decline in S&P 500.
     “Given the weakness in the second quarter, we are lowering our Rolling Four Quarter Outlook through June 30, 2009 for diluted earnings per share from $0.48 — $0.52 to $0.38 — $0.42, while maintaining our Long Term Outlook through 2012. It is important to note that starting with the fourth quarter of 2006 we experienced six straight quarters of excellent year over year performance. We prefer to view our performance on a longer term basis through our annual trend reports, but will be focused on improving results during the balance of 2008 and positioning the Company for 2009 performance in the range of what we believe is our sustainable earning power of $0.48 — $0.52 per diluted share with our existing portfolio of operating assets.”
Trend Reporting

- 2 -

 

     “We report 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). Trend reporting allows us to focus on the key operational and financial drivers relevant to the longer term performance and valuation of our portfolio of deathcare businesses,” added Payne.
     “We maintain separate reporting of same store continuing operations (adjusted for dispositions as they occur) and acquisition portfolio operations 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.” The following trend reports reflect results through the second quarter of 2008:

- 3 -

 

UNAUDITED INCOME STATEMENT FROM CONTINUING OPERATIONS
Annual Trend
For the Five Years Ended June 30, 2008
($000’s)
                                                                                 
    Pro forma(1)             Actual             Actual             Actual             Actual        
    Year             Year             Year             Year             Trailing 4 Qtrs        
    2004             2005             2006             2007             2008        
 
CONTINUING OPERATIONS
                                                              
Same Store Contracts
                                                                                
Atneed Contracts
     17,212       79.7 %     17,163       79.6 %     16,712       78.6 %     16,330       78.8 %     16,778       80.2 %
Preneed Contracts
     4,376       20.3 %     4,405       20.4 %     4,560       21.4 %     4,400       21.2 %     4,146       19.8 %
 
                                                                      
Total Same Store Funeral Contracts
     21,588       100.0 %     21,568       100.0 %     21,272       100.0 %     20,730       100.0 %     20,924       100.0 %
Acquisition Contracts
                                                                                
Atneed Contracts
     —               53       64.6 %     194       67.1 %     1,476       69.8 %     2,567       74.0 %
Preneed Contracts
     —               29       35.4 %     95       32.9 %     638       30.2 %     901       26.0 %
 
                                                                      
Total Acquisition Funeral Contracts
     —               82       100.0 %     289       100.0 %     2,114       100.0 %     3,468       100.0 %
 
                                                                      
 
New Store Openings
     —               —               —               522               718          
 
                                                                      
Total Funeral Contracts
     21,588               21,650               21,561               23,366               25,110          
 
                                                                      
 
                                                                                
Same Store Interments
                                                                                
Atneed Interments
     2,324       26.3 %     2,006       24.4 %     2,100       25.0 %     2,055       27.2 %     1,878       25.0 %
Preneed Interments
     6,529       73.7 %     6,213       75.6 %     6,285       75.0 %     5,506       72.8 %     5,627       75.0 %
 
                                                                      
Total Same Store Cemetery Interments
     8,853       100.0 %     8,219       100.0 %     8,385       100.0 %     7,561       100.0 %     7,505       100.0 %
Acquisition Interments
                                                                                
Atneed Interments
     —               —               —               273       23.6 %     298       20.5 %
Preneed Interments
     —               —               —               886       76.4 %     1,157       79.5 %
 
                                                                      
Total Acquisition Cemetery Interments
     —               —               —               1,159       100.0 %     1,455       100.0 %
 
                                                                      
Total Cemetery Interments
     8,853               8,219               8,385               8,720               8,960          
 
                                                                      
 
                                                                                
Same Store Revenue
                                                                                
Funeral Operations Revenue
   $ 105,221       73.8 %   $ 107,139       72.7 %   $ 109,592       73.4 %     110,932       66.5 %     111,490       64.4 %
Preneed Commission and Other Revenue
     1,319       0.9 %     2,295       1.6 %     2,267       1.5 %     2,197       1.3 %     2,372       1.4 %
 
                                                                      
Total Funeral Same Store Revenue
     106,540       74.7 %     109,434       74.3 %     111,859       74.9 %     113,129       67.8 %     113,862       65.8 %
 
                                                                                
Cemetery Operations Revenue
     33,203       23.3 %     33,940       23.0 %     32,107       21.5 %     34,300       20.6 %     31,543       18.2 %
Cemetery Financial Revenue
     2,912       2.0 %     3,615       2.5 %     4,052       2.7 %     4,526       2.7 %     4,872       2.8 %
 
                                                                      
Total Same Store Cemetery Revenue
     36,115       25.3 %     37,555       25.5 %     36,159       24.2 %     38,826       23.3 %     36,415       21.0 %
 
                                                                      
 
                                                                                
Total Same Store Revenue
     142,655       100.0 %     146,989       99.8 %     148,018       99.1 %     151,955       91.1 %     150,277       86.9 %
 
                                                                                
Acquisition Revenue
                                                                                
Funeral Operations Revenue
     —       0.0 %     303       0.2 %     1,339       0.9 %     10,710       6.4 %     16,998       9.8 %
Cemetery Operations Revenue
     —       0.0 %     —       0.0 %     —       0.0 %     3,874       2.3 %     5,390       3.1 %
Cemetery Financial Revenue
     —               —               —               317       0.2 %     331       0.2 %
 
                                                                      
Total Acquisition Revenue
     —       0.0 %     303       0.2 %     1,339       0.9 %     14,901       8.9 %     22,719       13.1 %
 
                                                                      
 
                                                                                
Total Revenue from Continuing Operations
   $ 142,655       100.0 %   $ 147,292       100.0 %   $ 149,357       100.0 %   $ 166,856       100.0 %   $ 172,996       100.0 %
 
                                                                      
 
                                                                                
Field EBITDA from Continuing Operations
                                                                                
Same Store Funeral Field EBITDA
   $ 37,061       76.4 %   $ 38,973       75.5 %   $ 41,127       79.0 %     43,080       70.3 %     42,890       70.3 %
Same Store Funeral Field EBITDA Margin
     34.8 %             35.6 %             36.8 %             38.1 %             37.7 %        
 
                                                                                
Same Store Cemetery Field EBITDA
     11,458       23.6 %     12,545       24.3 %     10,645       20.4 %     13,466       22.0 %     10,608       17.4 %
Same Store Cemetery Field EBITDA Margin
     31.7 %             33.4 %             29.4 %             34.7 %             29.1 %        
 
                                                                      
 
                                                                                
Total Same Store Field EBITDA
     48,519       100.0 %     51,518       99.8 %     51,772       99.4 %     56,546       92.2 %     53,498       87.7 %
Total Same Store Field EBITDA Margin
     34.0 %             35.0 %             35.0 %             37.2 %             35.6 %        
Acquisition Funeral Field EBITDA
     —       0.0 %     92       0.2 %     313       0.6 %     3,724       6.1 %     5,814       9.5 %
Acquisition Funeral Field EBITDA Margin
     —               30.4 %             23.4 %             34.8 %             34.2 %        
 
                                                                                
Acquisition Cemetery Field EBITDA
     —       0.0 %     —       0.0 %     —       0.0 %     1,053       1.7 %     1,655       2.7 %
Acquisition Cemetery Field EBITDA Margin
     —               —               —               25.1 %             28.9 %        
 
                                                                      
 
                                                                                
Total Acquisition Field EBITDA
     —       0.0 %     92       0.2 %     313       0.6 %     4,777       7.8 %     7,469       12.3 %
Total Acquisition Field EBITDA Margin
     —               30.4 %             23.4 %             32.1 %             32.9 %        
 
                                                                      
Total Field EBITDA from Continuing Operations
     48,519       100.0 %     51,610       100.0 %     52,085       100.0 %     61,322       100.0 %     60,967       100.0 %
Total Field EBITDA Margin from Continuing Operation
     34.0 %             35.0 %             34.9 %             36.8 %             35.2 %        
 
                                                                                
Overhead
                                                                                
Total Variable Overhead
     1,910       11.5 %     2,245       12.5 %     3,402       17.4 %     5,107       22.9 %     6,289       26.9 %
 
                                                                                
Total Regional Fixed Overhead
     2,892       17.4 %     3,247       18.0 %     2,977       15.2 %     3,217       14.4 %     3,283       14.1 %
 
                                                                                
Total Corporate Fixed Overhead
     11,825       71.1 %     12,501       69.5 %     13,170       67.4 %     13,997       62.7 %     13,771       59.0 %
 
                                                                      
Total Overhead
     16,627       100.0 %     17,993       100.0 %     19,549       100.0 %     22,321       100.0 %     23,343       100.0 %
 
     11.7 %             12.2 %             13.1 %             13.4 %             13.5 %        
 
                                                                      
 
                                                                                
Consolidated EBITDA from Continuing Operations
   $ 31,892 (2)           $ 33,617 (2)           $ 32,536             $ 39,001             $ 37,624          
 
                                                                      
Consolidated EBITDA Margin from Continuing Operations
     22.4 %             22.8 %             21.8 %             23.4 %             21.7 %        
 
                                                                                
Total Depreciation & Amortization
     9,208               8,838               8,627               9,488               9,809          
 
                                                                                
Interest, Net
     16,908               18,591               17,106               17,195               17,896          
 
                                                                      
Refinancing Costs
     —               6,933               —               —               —          
Special Charges/Other (Gains) Losses
     (940 )             1,268                                               —          
Team Partners Incentive Expense
     110               276                                               —          
 
                                                                      
Pretax Income
     6,606               (2,289 )             6,803               12,319               9,919          
 
                                                                                
Benefit for Income Taxes due to a Valuation Adjustment
     (810 )             —               —               —               —          
Income Tax
     2,549               (736 )             2,237               4,960               4,089          
 
                                                                                
 
                                                                      
Net income from Continuing Operations
   $ 4,867             $ (1,553 )           $ 4,566             $ 7,359             $ 5,830          
 
                                                                      
 
     3.4 %             -1.1 %             3.1 %             4.4 %             3.4 %        
 
                                                                                
Diluted EPS-from continuing operations
   $ 0.27             $ (0.07 )           $ 0.19             $ 0.38             $ 0.30          
 
(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 year ended December 31, 2004 is 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.

- 4 -

 

UNAUDITED INCOME STATEMENT FROM CONTINUING OPERATIONS
Quarter Trend
For the Five Quarters Ended June 30, 2008
($000’s)
                                                                                 
    Actual             Actual             Actual             Actual             Actual          
    Qtr 2             Qtr 3             Qtr 4             Qtr 1             Qtr 2          
    2007             2007             2007             2008             2008          
 
CONTINUING OPERATIONS
                                                              
Same Store Contracts
                                                                                
Atneed Contracts
     3,933       77.1 %     3,870       80.0 %     4,165       79.9 %     4,640       80.1 %     4,103       80.7 %
Preneed Contracts
     1,165       22.9 %     966       20.0 %     1,047       20.1 %     1,150       19.9 %     983       19.3 %
 
                                                                      
Total Same Store Funeral Contracts
     5,098       100.0 %     4,836       100.0 %     5,212       100.0 %     5,790       100.0 %     5,086       100.0 %
Acquisition Contracts
                                                                                
Atneed Contracts
     248       67.4 %     437       69.1 %     607       71.9 %     800       76.9 %     723       75.9 %
Preneed Contracts
     120       32.6 %     195       30.9 %     237       28.1 %     240       23.1 %     229       24.1 %
 
                                                                      
Total Acquisition Funeral Contracts
     368       100.0 %     632       100.0 %     844       100.0 %     1,040       100.0 %     952       100.0 %
 
                                                                      
 
                                                                                
New Store Openings
     126               132               144               210               232          
 
                                                                      
Total Funeral Contracts
     5,592               5,600               6,200               7,040               6,270          
 
                                                                      
 
                                                                                
Same Store Interments
                                                                                
Atneed Interments
     537       27.9 %     492       27.9 %     443       24.8 %     493       23.6 %     450       24.1 %
Preneed Interments
     1,391       72.1 %     1,271       72.1 %     1,342       75.2 %     1,598       76.4 %     1,416       75.9 %
 
                                                                      
Total Same Store Cemetery Interments
     1,928       100.0 %     1,763       100.0 %     1,785       100.0 %     2,091       100.0 %     1,866       100.0 %
Acquisition Interments
                                                                                
Atneed Interments
     81       30.1 %     76       21.7 %     77       20.3 %     83       21.0 %     62       18.9 %
Preneed Interments
     188       69.9 %     275       78.3 %     303       79.7 %     313       79.0 %     266       81.1 %
 
                                                                      
Total Acquisition Cemetery Interments
     269       100.0 %     351       100.0 %     380       100.0 %     396       100.0 %     328       100.0 %
 
                                                                      
Total Cemetery Interments
     2,197               2,114               2,165               2,487               2,194          
 
                                                                      
 
                                                                                
Same Store Revenue
                                                                                
Funeral Operations Revenue
   $ 27,506       66.6 %   $ 25,686       63.6 %   $ 27,776       64.6 %   $ 31,304       66.7 %   $ 26,724       62.6 %
Preneed Commission and Other Revenue
     625       1.5 %     502       1.2 %     443       1.0 %     752       1.6 %     675       1.6 %
 
                                                                      
Total Funeral Same Store Revenue
     28,131       68.1 %     26,188       64.8 %     28,219       65.7 %     32,056       68.3 %     27,399       64.2 %
 
                                                                                
Cemetery Operations Revenue
     9,408       22.8 %     8,360       20.7 %     7,764       18.1 %     7,281       15.5 %     8,138       19.1 %
Cemetery Financial Revenue
     733       1.8 %     1,321       3.3 %     1,543       3.6 %     1,004       2.1 %     1,004       2.4 %
 
                                                                      
Total Cemetery Same Store Revenue
     10,141       24.5 %     9,681       24.0 %     9,307       21.7 %     8,285       17.7 %     9,142       21.4 %
 
                                                                      
Total Same Store Revenue
     38,272       92.6 %     35,869       88.8 %     37,526       87.3 %     40,341       86.0 %     36,541       85.6 %
 
                                                                                
Acquisition Revenue
                                                                                
Funeral Operations Revenue
     1,943       4.7 %     3,290       8.1 %     3,995       9.3 %     4,961       10.6 %     4,752       11.1 %
Cemetery Operations Revenue
     1,014       2.5 %     1,193       3.0 %     1,296       3.0 %     1,534       3.3 %     1,367       3.2 %
Cemetery Financial Revenue
     87       0.2 %     50       0.1 %     161       0.4 %     81       0.2 %     39       0.1 %
 
                                                                      
 
                                                                                
Total Acquisition Revenue
     3,044       7.4 %     4,533       11.2 %     5,452       12.7 %     6,576       14.0 %     6,158       14.4 %
 
                                                                      
Total Revenue from Continuing Operations
   $ 41,316       100.0 %   $ 40,402       100.0 %   $ 42,978       100.0 %   $ 46,917       100.0 %   $ 42,699       100.0 %
 
                                                                      
 
                                                                                
 
     26,010               26,297               26,399               28,497               29,192          
Field EBITDA from Continuing Operations
                                                                                
Same Store Funeral Field EBITDA
   $ 10,509       70.9 %   $ 8,978       65.8 %   $ 11,133       69.0 %   $ 13,680       75.8 %   $ 9,099       69.3 %
Same Store Funeral Field EBITDA Margin
     37.4 %             34.3 %             39.5 %             42.7 %             33.2 %        
 
                                                                                
Same Store Cemetery Field EBITDA
     3,451       23.3 %     3,159       23.1 %     3,133       19.4 %     2,033       11.3 %     2,283       17.4 %
Same Store Cemetery Field EBITDA Margin
     34.0 %             32.6 %             33.7 %             24.5 %             25.0 %        
 
                                                                      
Total Same Store Field EBITDA
     13,960       94.1 %     12,137       88.9 %     14,266       88.4 %     15,713       87.1 %     11,382       86.7 %
Total Same Store Field EBITDA Margin
     36.5 %             33.8 %             38.0 %             39.0 %             31.1 %        
 
                                                                                
Acquisition Funeral Field EBITDA
     545       3.7 %     1,298       9.5 %     1,423       8.8 %     1,746       9.7 %     1,347       10.3 %
Acquisition Funeral Field EBITDA Margin
     28.0 %             39.5 %             35.6 %             35.2 %             28.3 %        
 
                                                                                
Acquisition Cemetery Field EBITDA
     325       2.2 %     212       1.6 %     452       2.8 %     589       3.3 %     402       3.1 %
Acquisition Cemetery Field EBITDA Margin
     32.1 %             17.9 %             35.0 %             38.4 %             29.4 %        
 
                                                                      
Total Acquisition Field EBITDA
     870       5.9 %     1,510       11.1 %     1,875       11.6 %     2,335       12.9 %     1,749       13.3 %
Total Acquisition Field EBITDA Margin
     28.6 %             33.3 %             34.4 %             35.5 %             28.4 %        
 
                                                                      
Total Field EBITDA from Continuing Operations
     14,830       100.0 %     13,647       100.0 %     16,141       100.0 %     18,048       100.0 %     13,131       100.0 %
Total Field EBITDA Margin from Continuing Operations
     35.9 %             33.8 %             37.6 %             38.5 %             30.8 %        
 
                                                                                
Overhead
                                                                                
Total Variable Overhead
     1,059       20.0 %     1,135       20.4 %     1,852       30.1 %     1,689       30.1 %     1,613       26.8 %
 
                                                                                
Total Regional Fixed Overhead
     813       15.4 %     886       15.9 %     731       11.9 %     833       14.9 %     833       13.9 %
 
                                                                                
Total Corporate Fixed Overhead
     3,421       64.6 %     3,553       63.7 %     3,567       58.0 %     3,087       55.0 %     3,564       59.3 %
 
                                                                      
Total Overhead
     5,293       100.0 %     5,574       100.0 %     6,150       100.0 %     5,609       100.0 %     6,010       100.0 %
 
     12.8 %             13.8 %             14.3 %             12.0 %             14.1 %        
 
                                                                      
Consolidated EBITDA from Continuing Operations
   $ 9,537             $ 8,073             $ 9,991             $ 12,439             $ 7,121          
 
                                                                      
Consolidated EBITDA Margin from Continuing Operations
     23.1 %             20.0 %             23.2 %             26.5 %             16.7 %        
 
                                                                                
Total Depreciation & Amortization
     2,285               2,398               2,336               2,530               2,545          
 
                                                                                
Interest, Net
     4,157               4,388               4,474               4,529               4,505          
 
                                                                      
Pretax Income
     3,095               1,287               3,181               5,380               71          
 
                                                                                
Income tax
     1,192               584               1,352               2,125               28          
 
                                                                      
Net income from Continuing Operations
   $ 1,903             $ 703             $ 1,829             $ 3,255             $ 43          
 
                                                                      
 
     4.6 %             1.7 %             4.3 %             6.9 %             0.1 %        
 
                                                                                
Diluted EPS-from continuing operations
   $ 0.10             $ 0.04             $ 0.10             $ 0.16             $ —          

- 5 -

 

Same Store Portfolio
     “While same store funeral contracts were flat with last year’s second quarter, same store funeral revenue decreased 2.6% primarily because of a 280 basis point spike in our cremation rate to 36.2% from 33.4%. The spike in cremation rate was comparable to the 290 basis point spike in the first quarter and was broadly evident across all regions. Moreover, we had a slight decline in our second quarter atneed burial and cremation averages for the first time since we started tracking atneed and preneed contracts separately in 2006. With our funeral businesses challenged for revenue during the second quarter, the operating leverage dynamic worked against us and was compounded by increased operating costs across our portfolio, resulting in a decline of 420 basis points to 33.2% in our same store Funeral Field EBITDA Margin. However, our same store Funeral Field EBITDA Margin on a trailing four quarter basis only declined by 40 basis points to 37.7% when compared to calendar year 2007, which remains a high level of Field EBITDA Margin when viewed historically over a period of years. We estimate that the weaker revenue accounted for about 2.4 cents per share and higher costs of 1.9 cents per share compared to the second quarter of last year. We can and will do better — starting in the third quarter.
     “Same store cemetery performance improved slightly over the first quarter, but operating revenue was down 13.5% or $1.3 million from last year, while financial revenue was up 37% or $0.3 million and Cemetery Field EBITDA Margin declined 900 basis points to 25%, resulting in a 34% decrease in same store Cemetery Field EBITDA to $2.3 million. We estimate that the weaker cemetery performance accounted for about 3.6 cents per share compared to the second quarter of last year. We are making good progress in rebuilding the sales leadership and teams at our larger parks and expect this process to be complete by year end. However, we do not expect a return to the 2007 performance level until sometime in 2009. We also now believe that general economic weakness in some of our key markets is having a negative impact on our preneed and atneed cemetery sales, which together with the cremation spike and lower funeral revenue averages are the primary reasons for lowering the Rolling Four Quarter Outlook.
Acquisition Portfolio
     “This quarter was the second full quarter of ownership for all of the seven acquisitions made during 2007, which accounted for an increase of $3.1 million in Total Acquisition Revenue and a $0.9 million increase in Acquisition Field EBITDA which added more than $0.02 per share to our quarterly earnings per share. However, the large decline from the first quarter of 710 basis points in the Total Acquisition

- 6 -

 

Field EBITDA Margin to 28.4% was disappointing and reflects that the acquisition portfolio experienced challenging conditions similar to our same store portfolio, but also that we have not yet effectively integrated most of this group to be in alignment with our Standards Operating Model. Our goal is to have this group with the right leadership in place and aligned with our operating and leadership models by year end so that we achieve Acquisition Field EBITDA Margin performance for all of 2009 equal to or better than our same store performance.”
Dispositions
     “Carriage will report a total loss of $0.07 per share for the second quarter of 2008 as we completed two small, non strategic funeral home dispositions during the quarter that resulted in non-cash losses of $2.4 million equal to $0.07 per share and which produced $1.0 million of cash proceeds.”
Overhead
     “Total overhead increased $0.7 million to $6 million with almost all of the increase in this year’s quarter related to severance for Joe Saporito, who resigned as CFO effective April 30, 2008. When the severance expense of over $0.02 per share is excluded, Total Overhead was up only 1.8% from last year and declined 20 basis points as a percent of revenue to 12.6%. The second quarter also included $260,000 of variable litigation expense equal to almost $0.01 per share that will wind down as the specific litigation is concluded, which we now expect to be sometime in 2009.”

- 7 -

 

Free Cash Flow
     “Carriage generated $6.4 million of Free Cash Flow (defined as cash flow from continuing operations less maintenance capital expenditures) during the second quarter of 2008. The elements of Cash Flow for the first half of 2008 consisted of the following (in millions):
         
Cash flow from continuing operations
   $ 11.9  
Cash used for maintenance capital expenditures
     (3.4 )
 
      
Free Cash Flow for first half of 2008
     8.5  
Cash and liquid investments at beginning of year
     3.4  
Cash flow from discontinued operations
     0.2  
Proceeds from sales of businesses
     1.0  
Cash used for growth capital expenditures — funeral homes
     (2.5 )
Cash used for growth capital expenditures — cemeteries
     (1.4 )
Financing activities
     (0.4 )
 
      
Cash at June 30, 2008
   $ 8.8  
 
      
Rolling Four Quarter Outlook
     The Rolling Four Quarter Outlook ranges for the period ending June 30, 2009 are intended to approximate what the Company believes will be the sustainable earning power of its portfolio of deathcare assets over the next four quarters as the three models are effectively executed. Payne added, “We have learned that it is better to be ‘roughly right’ most of the time rather than ‘precisely wrong’ all of the time when forecasting our future results due to the uncertainties in estimating key drivers of near term performance. These drivers include funeral contract volumes, cremation mix, preneed sales, preneed maturities and deliveries, average revenue per service and sale, Field EBITDA Margins, acquisition size, timing and performance, and variable overhead items, just to name a few. Because we are dealing with several recent negative trends with some of these performance drivers, we have less visibility of our near term results and do not want to be ‘roughly wrong’ about our guidance. Therefore we are lowering our Rolling Four Quarter Outlook until there is more near term certainty in the drivers of our performance and better execution of our models that leads to sustainable performance.
     “We believe that Rolling Four Quarter Outlook performance ranges updated for acquisitions and dispositions will result in a more accurate near term assessment of the company’s prospects that is not constrained by a fixed and arbitrary ‘finish line’ at the end of each quarter or calendar year. In our Four Quarter Outlook ending June 30, 2009, we have assumed no additional acquisitions. Although we are in

- 8 -

 

the market evaluating candidates, we do not plan to close an acquisition in 2008 and will follow our policy of updating our Outlook when the closing of a transaction is certain.”
     ROLLING FOUR QUARTER OUTLOOK — Period Ending June 30, 2009
     (Amounts in Millions, Except per Share Amounts)
     
    Range
Revenues
   $175.0 - $181.0
Field EBITDA
   $63.0 - $65.0
Field EBITDA Margin
   34.8% - 37.1%
Total Overhead
   $22.5 - $23.5
Consolidated EBITDA
   $39.5 - $42.5
Consolidated EBITDA Margin
   21.8% - 24.3%
 
Interest
   $18.0
Depreciation & Amortization
   $10.0
Cash Taxes
   $1.0
Net Earnings from Cont. Operations
   $7.5 - $8.3
Diluted Earnings Per Share
   $0.38 - $0.42
Free Cash Flow
   $12.0 - $14.0
Long Term Outlook — Through 2012 (Base Year 2006)
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
Second Quarter Conference Call Information
     Carriage Services has scheduled a conference call for tomorrow, Friday, August 8, 2008 at 10:30 a.m. Eastern Time. To participate in the call, dial 303-262-2142 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 15, 2008. To access the replay, dial 303-590-3000 and enter pass code 11118040#.
     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

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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 7, 2008, Carriage operates 136 funeral homes in 25 states and 32 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 Field EBITDA and Field EBITDA Margin to monitor and compare the financial performance of the individual funeral and cemetery field businesses. 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.
     The Company categorizes its general and administrative expenses into three categories of overhead: (1) variable overhead, (2) regional fixed overhead and (3) corporate fixed overhead. Variable overhead consists of cost and expense such as incentive compensation which will vary with profitability or legal expense unrelated to our day to day operations. Regional fixed overhead and corporate fixed overhead represent the cost and expenses of our regional operations leaders and the home office and will not vary as a result of profitability.
Certain statements made herein or elsewhere by, or on behalf of, the Company that are not historical facts are intended to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on assumptions that the Company believes are reasonable; however, many important factors, as discussed under “Forward-Looking Statements and Cautionary Statements” in the Company’s Annual Report and Form 10-K for the year ended December 31, 2007, 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.

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CARRIAGE SERVICES, INC.
Selected Financial Data
June 30, 2008
(unaudited)
                 
    12/31/07     06/30/08  
Selected Balance Sheet Data:
                
 
Cash and short-term investments
   $ 3,446     $ 8,764  
Total Senior Debt (a)
     138,913       138,179  
Days sales in funeral accounts receivable
     22.9       22.1  
Senior Debt to total capitalization
    40.9       40.4  
Senior Debt to EBITDA from continuing operations (rolling twelve months)
     3.53       3.67  
 
(a)  —  Senior debt does not include the convertible junior subordinated debentures.
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). Rolling twelve months ended 6/30/2009 is presented at the midpoint of the range identified in the release:
                         
    Three months     Three months     Twelve months  
    ended     ended     Ended  
    6/30/2007     6/30/2008     6/30/2009 E  
Net income from continuing operations
   $ 1,903     $ 43     $ 8,100  
Provision for income taxes
     1,192       28       4,900  
 
                  
Pre-tax earnings from continuing operations
     3,095       71       13,000  
Net interest expense, including loan cost amortization
     4,157       4,505       18,000  
Depreciation & amortization
     2,285       2,545       10,000  
 
                  
EBITDA from continuing operations
   $ 9,537     $ 7,121     $ 41,000  
 
                  
Revenue from continuing operations
   $ 41,316     $ 42,699     $ 178,000  
EBITDA margin from continuing operations
     23.1 %     16.7 %     22.6 %

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Reconciliation of Non-GAAP Financial Measures Continued:
Reconciliation of cash provided by operating activities from continuing operations to free cash flow (in 000’s):
                 
    Three months     Three months  
    ended     ended  
    6/30/2007     6/30/2008  
Cash provided by operating activities from continuing operations
   $ 8,356     $ 8,507  
Less maintenance capital expenditures from continuing operations
     (1,772 )     (2,071 )
 
            
Free cash flow from continuing operations
   $ 6,584     $ 6,436  
 
            
                 
    Six months     Six months  
    ended     ended  
    6/30/2007     6/30/2008  
Cash provided by operating activities from continuing operations
   $ 10,132     $ 11,854  
Less capital expenditures from continuing operations
     (3,390 )     (3,385 )
 
            
Free cash flow from continuing operations
   $ 6,742     $ 8,469  
 
            
Reconciliation of estimated net income to free cash flow for the twelve months ending June 30, 2009(in 000’s):
         
Net income
   $ 8,100  
Tax expense
     4,900  
Interest expense, net
     18,000  
Depreciation and amortization
     10,000  
 
      
EBITDA
   $ 41,000  
Interest paid
     18,000  
Cash taxes
     1,000  
Maintenance capital expenditures
     9,000  
 
      
Free cash flow
   $ 13,000  
 
      

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