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): November 3, 2011

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)

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 November 3, 2011 Carriage Services, Inc. (“the Company”) announced and commented on its financial results for its quarter ended September 30, 2011. 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 November 3, 2011 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 November 3, 2011.

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.

INDEX TO EXHIBITS

Exhibit		Description
99.1		Press release dated November 3, 2011.

Exhibit 99.1

				Press Release
		Contact:		Terry Sanford, EVP & CFO
FOR IMMEDIATE RELEASE				Carriage Services, Inc.
				(713) 332-8400
		Investors:		Alexandra Tramont/Matt Steinberg
				FTI Consulting, Inc.
				(212) 850-5600

CARRIAGE SERVICES ANNOUNCES 2011 THIRD QUARTER RESULTS

HOUSTON — November 3, 2011 — Carriage Services, Inc. (NYSE: CSV) today announced results for the three and nine months ended September 30, 2011, compared to the periods of 2010, as follows (amounts in millions, except per share amounts):

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2010				2011				2010				2011
Revenues		$	45.5			$	44.1			$	136.8			$	142.8
Net income attributable to common shareholders		$	0.9			$	0.8			$	5.9			$	6.7
Diluted earnings per share		$	0.05			$	0.04			$	0.33			$	0.36
Special items (pre-tax)		$	1.5			$	1.8			$	2.6			$	5.8
Non-GAAP net income attributable to common shareholders including special items		$	1.7			$	1.9			$	7.5			$	10.1
Non-GAAP diluted earnings per share including special items		$	0.10			$	0.10			$	0.42			$	0.55
Diluted weighted average shares outstanding			17.7				18.5				17.8				18.4
Free Cash Flow		$	0.4			$	7.2			$	11.5			$	19.9

MANAGEMENT REORGANIZATION

          Mel Payne, Chief Executive Officer, stated, “Beginning early this year, I communicated that Carriage had a goal of 2011 being a “breakout performance” year in celebration of Carriage’s 20th Anniversary from its founding in June 1991. And while we will have our third straight year of record EPS achievement (much larger on a Non-GAAP basis), we have not executed anywhere close to the sustainable earning power potential of our portfolio of operating businesses.”

          “Two months ago Bill Heiligbrodt joined Carriage full time as Vice Chairman of the Board and Dave DeCarlo assumed the position of Lead Director, with the three of us comprising

the Executive Committee of the Board. With our company facing unprecedented opportunity but needing to take a “big step up” in 2012 performance, we are announcing the following executive management reorganization.”

Mel Payne will head operations and long term vision and strategy

              Near Term Goals:

	1)		Lead an updating and roll out of Carriage’s Standards Operating Model with a goal over the next five years of achieving same store revenue growth of 3% annually at sustainable Field EBITDA Margins as appropriate for each business.
	2)		Lead a portfolio optimization process whereby businesses that cannot grow revenue over time at the standard portfolio growth rate will be sold and the proceeds allocated to our acquisition program for reinvestment in higher revenue growth and return businesses.
	3)		Lead a complete revamping of Training and Development as a strategic function focused more heavily on recruiting and/or developing Managing Partners with 4E Leadership skills and local staff with motivations and skills to provide high value personal services and sales to our client families.

Bill Heiligbrodt will head growth and financing strategies, legal and investor relations

              Near Term Goals:

	1)		Lead the development and execution of a much more advanced Strategic Acquisition Model that will directly link to our Standards Operating Model to create a long term Value Creation Model within the Carriage portfolio of funeral and cemetery businesses.
	2)		Lead the investor relations effort to attract new long term shareholders by explaining the value of Carriage’s Operating Model when properly executed and the compounding value creation dynamic of adding high quality acquisitions that can quickly be integrated successfully into the Standards Operating Model framework.
	3)		Lead the revision of our external reporting to a consistent Non-GAAP valuation format that is transparently reconciled to GAAP in press releases and in our Company and Investment Profile.

THIRD QUARTER, YEAR TO DATE RESULTS

          Mr. Payne added, “While our third quarter revenue declined by $1.4 million, our year to date revenue increased by $6 million or 4.4% to $142.8 million. Our year to date same store funeral volumes and revenues were flat, as was the same store average revenue per funeral contract. Revenue from funeral operations acquired during 2010 and 2011 increased funeral acquisition revenue by $1.6 million in the third quarter and $6.7 million in the first nine months of 2011. Cemetery revenue declined by $1.6 million or 15.2% in the third quarter and $0.9 million or 2.9% for the nine months. Financial revenue declined by $321,000 for the third quarter but increased by almost $200,000 year to date.”

          “Funeral Field EBITDA Margins increased substantially in the third quarter and nine months in both our same store and acquisition portfolios, resulting in an increase in Total Funeral Field EBITDA of $1.8 million or 21% in the third quarter and $4.3 million or 14% for the first nine months. Total Cemetery Field EBITDA and Cemetery Field EBITDA Margins declined in the third quarter but increased by $400,000 and 210 basis points (to 25.1%) respectively for the nine months. Financial EBITDA declined by $280,000 in the third quarter but increased slightly for the nine months. Total Field EBITDA increased by $0.9 million for the third quarter primarily due to an increase of 300 basis points in Field EBITDA Margin, while Total Field EBITDA for the nine months increased $4.9 million or 10.3% due to higher funeral acquisition revenue and an increase of 190 basis points in the Total Field EBITDA Margin to 36.6%.”

          “Overhead increased substantially in the third quarter and nine months, in large part due to special items that are included in GAAP results that will now be specifically scheduled below our GAAP reported results and reconciled, along with Non-GAAP withdrawable trust income, with our Non-GAAP reported results. Starting with this release, we will report Non-GAAP and GAAP results, but believe the recurring Non-GAAP performance to be more relevant for valuation purposes.”

          “Non-GAAP Consolidated EBITDA increased $100,000 for the quarter but increased $4.4 million or 12.6% for the nine months to $39.4 million from $35.0 million. The Non-GAAP Consolidated EBITDA Margin increased 200 basis points in the 2011 nine month period to 27.6% from 25.6% in 2010. Management views Non-GAAP Consolidated EBITDA as the approximate cash earning power of our portfolio of operating assets, which is available to service debt and tax obligations, to invest in maintenance of our existing portfolio and acquisition of new operating businesses, and to return capital to shareholders through dividends and share repurchases.”

          “Our Non-GAAP EPS performance of 10¢ in the third quarter was equal to last year. However, the Non-GAAP EPS of 55¢ for the nine months was 13¢ or 31% higher than last year’s same period, primarily as a result of much higher withdrawable trust income this year of $4.9 million compared to $2.9 million last year.”

          “Lastly, and most importantly, we produced Free Cash Flow of $19.9 million in the first nine months of 2011 compared to $11.5 in 2010, enabling us to self-finance the $10.3 million cash used for funeral acquisitions in 2011, repurchase $2.2 million of convertible subordinated debentures at a significant discount, invest $2.4 million in existing portfolio growth projects, and still build cash by $3 million during the first nine months to $4.3 million at September 30, 2011. Because of our confidence in our ability to produce strong and growing Free Cash Flow, our Board earlier today approved a $5 million stock repurchase program and our regular quarterly cash dividend.”

          “Management strongly views the Non-GAAP Consolidated EBITDA, EPS and Free Cash Flow metrics as the more relevant metrics for valuation of the intrinsic market value of the Company’s equity. We will therefore be referring only to these metrics as we report our results in the future,” concluded Mr. Payne.

NON- GAAP UNAUDITED INCOME STATEMENT
Period Ended September 30, 2011
($000’s)

		Three Months Ended				Three Months Ended				Nine Months Ended				Nine Months Ended
		September 30, 2010				September 30, 2011				September 30, 2010				September 30, 2011
Same Store Contracts
Atneed Contracts			3,964				3,696				12,120				11,915
Preneed Contracts			890				941				2,896				3,118
Total Same Store Funeral Contracts			4,854				4,637				15,016				15,033
Acquisition Contracts
Atneed Contracts			1,233				1,470				3,084				4,529
Preneed Contracts			295				383				799				1,137
Total Acquisition Funeral Contracts			1,528				1,853				3,883				5,666
Total Funeral Contracts			6,382				6,490				18,899				20,699
Funeral Operating Revenue
Same Store Revenue		$	25,478			$	24,388			$	80,113			$	80,105
Acquisition Revenue			5,630				7,262				15,314				22,000
Total Funeral Operating Revenue		$	31,108			$	31,650			$	95,427			$	102,105
Cemetery Operating Revenue
Same Store Revenue		$	9,030			$	7,430			$	25,702			$	24,583
Acquisition Revenue			1,670				1,641				4,758				5,003
Total Cemetery Operating Revenue		$	10,700			$	9,071			$	30,460			$	29,586
Financial Revenue
Preneed Funeral Commission Income		$	632			$	513			$	1,817			$	1,400
Preneed Funeral Trust Earnings			1,553				1,526				4,574				4,856
Cemetery Trust Earnings			1,121				983				3,369				3,872
Preneed Cemetery Finance Charges			372				335				1,203				1,024
Total Financial Revenue		$	3,678			$	3,357			$	10,963			$	11,152
Total Revenue		$	45,486			$	44,078			$	136,850			$	142,843
Field EBITDA from Continuing Operations
Same Store Funeral Field EBITDA		$	7,807			$	8,254			$	26,943			$	28,437
Same Store Funeral Field EBITDA Margin			30.6	%			33.8	%			33.6	%			35.5	%
Acquisition Funeral Field EBITDA			847				2,221				3,599				6,396
Acquisition Funeral Field EBITDA Margin			15.0	%			30.6	%			23.5	%			29.1	%
Total Funeral Field EBITDA		$	8,654			$	10,475			$	30,542			$	34,833
Total Funeral Field EBITDA Margin			27.8	%			33.1	%			32.0	%			34.1	%
Same Store Cemetery Field EBITDA		$	1,885			$	1,190			$	5,629			$	5,819
Same Store Cemetery Field EBITDA Margin			20.9	%			16.0	%			21.9	%			23.7	%
Acquisition Cemetery Field EBITDA			486				530				1,369				1,605
Acquisition Cemetery Field EBITDA Margin			29.1	%			32.3	%			28.8	%			32.1	%
Total Cemetery Field EBITDA		$	2,371			$	1,720			$	6,998			$	7,424
Total Cemetery Field EBITDA Margin			22.2	%			19.0	%			23.0	%			25.1	%
Funeral Financial EBITDA			1,772				1,667				5,320				5,151
Cemetery Financial EBITDA			1,493				1,318				4,572				4,896
Total Financial EBITDA		$	3,265			$	2,985			$	9,892			$	10,047
Total Financial EBITDA Margin			88.8	%			88.9	%			90.2	%			90.1	%
Total Field EBITDA		$	14,290			$	15,180			$	47,432			$	52,304
Total Field EBITDA Margin			31.4	%			34.4	%			34.7	%			36.6	%

NON- GAAP UNAUDITED INCOME STATEMENT
Period Ended September 30, 2011
($000’s)

		Three Months Ended				Three Months Ended				Nine Months Ended				Nine Months Ended
		September 30, 2010				September 30, 2011				September 30, 2010				September 30, 2011
Overhead
Total Variable Overhead		$	835			$	2,167			$	2,193			$	4,870
Total Regional Fixed Overhead			1,021				974				2,578				2,970
Total Corporate Fixed Overhead			3,552				3,856				10,651				11,698
Total Overhead		$	5,408			$	6,997			$	15,422			$	19,538
			11.9	%			15.9	%			11.3	%			13.7	%
Other Income			—				481				465				846
Consolidated EBITDA from Continuing Operations		$	8,882			$	8,664			$	32,475			$	33,612
Consolidated EBITDA Margin from Continuing Operations			19.5	%			19.7	%			23.7	%			23.5	%
GAAP diluted EPS		$	0.05			$	0.04			$	0.33			$	0.36
Special Items
Withdrawable trust income		$	1,295			$	1,300			$	2,939			$	4,882
Gain on Repurchase of Convertible Junior Subordinated Debenture			—				(481	)			(316	)			(846	)
Securities Transactions Expenses			—				40				—				501
Loss on Early Extinguishment of Debt			—				201				—				201
Acquisition Expenses			192				728				581				971
Recovery of Legal fees			—				—				(650	)			—
Termination Expenses			—				—				—				117
Sum of Special Items		$	1,487			$	1,788			$	2,554			$	5,826
Non-GAAP Consolidated EBITDA		$	10,369			$	10,452			$	35,029			$	39,438
Non-GAAP Consolidated EBITDA Margin			22.8	%			23.7	%			25.6	%			27.6	%
Property Depreciation & Amortization		$	2,498			$	2,290			$	7,455			$	7,209
Non Cash Stock Compensation			447				491				1,359				1,584
Interest Expense			4,570				4,551				13,691				13,594
Pretax Income		$	2,854			$	3,120			$	12,524			$	17,051
Income tax			1,156				1,264				5,072				6,906
Non-GAAP Net Income		$	1,698			$	1,856			$	7,452			$	10,145
			3.7	%			4.2	%			5.4	%			7.1	%
Non-GAAP Diluted EPS from Continuing Operations		$	0.10			$	0.10			$	0.42			$	0.55

TRUST FUND PERFORMANCE

     We executed a major asset reallocation starting in early August 2011 after the U.S. downgrade by S&P and the European sovereign debt crisis reemerged. We reduced our discretionary equity portfolio cost basis by $26.1 million, realizing about $2.0 million in losses. The proceeds were invested primarily into high yield fixed income and preferred stocks, which increased by 23% the recurring income on our discretionary portfolio from $7.9 million on August 5, 2011 to $9.7 million on November 2, 2011.

     Shown below are consolidated performance metrics for the combined trust fund portfolios (preneed funeral, cemetery merchandise and services, and cemetery perpetual care) at key dates.

		Investment Performance
		Investment Performance								Index Performance
																						50/50 index
Timeframe		Discretionary				Total Trust				DJIA				S&P 500				NASDAQ				Benchmark
5 years ended 12/31/10			64.7	%			60.7	%			24.4	%			25.8	%			39.6	%			12.4	%
3 years ended 12/31/10			47.7	%			44.6	%			1.7	%			4.5	%			20.3	%			11.3	%
1 year ended12/31/10			21.2	%			18.4	%			16.7	%			15.1	%			16.9	%			10.8	%
9 months ended 9/30/11			-10.2	%			-10.8	%			-5.7	%			-8.7	%			-9.0	%			-1.0	%

		CSV Trust Funds: Portfolio Profile
		9/30/2011								9/30/2011
		Discretionary Trust Funds								Total Trust Funds
Asset Class		MV				%				MV				%
Equities		$	59,638				40	%		$	71,967				35	%
Fixed Income		$	87,781				59	%		$	111,944				58	%
Cash		$	2,141				1	%		$	14,916				7	%
Total Portfolios		$	149,560				100	%		$	198,827				100	%

FREE CASH FLOW

     Carriage produced Free Cash Flow of $7.2 million for the three months ended September 30, 2011, an increase of $6.8 million compared to $0.4 for the corresponding period in 2010. The increase in Free Cash Flow is primarily due to the $8.5 million cash withdrawal from its affiliated preneed cemetery trusts as previously disclosed. The sources and uses of cash for the nine months ended September 30, 2010 and 2011 consisted of the following (in millions):

		2010				2011
Cash flow provided by operations		$	16.5			$	25.3
Cash used for maintenance capital expenditures			(5.0	)			(5.4	)
Free Cash Flow		$	11.5			$	19.9
Cash at beginning of year			3.6				1.3
Borrowing (payments) against bank credit facility			5.0				(0.6	)
Acquisitions			(16.8	)			(10.3	)
Cash used for dividends			—				(0.9	)
Cash used for the repurchase of convertible junior subordinated debenture			(0.6	)			(2.2	)
Cash used for growth capital expenditures — funeral homes			(0.2	)			(0.5	)
Cash used for growth capital expenditures — cemeteries			(1.6	)			(1.9	)
Payment of loan origination fees			—				(0.3	)
Other investing and financing activities, net			0.4				(0.2	)
Cash at September 30th		$	1.3			$	4.3

     At September 30, 2011, no amounts were outstanding on the bank credit facility.

     Effective August 11, 2011, the Company entered into a new secured revolving credit facility with Wells Fargo Bank, N.A. which contains commitments for an aggregate of $60.0 million with an accordion provision for up to an additional $15.0 million. Prior to this transaction, the Company had a $40 million senior secured revolving credit facility that was scheduled to mature in November 2012. The new credit facility matures in October 2014 and under certain conditions may be extended to October 2016. During the third quarter of 2011, the Company recorded a charge of approximately $201,000 to write-off the remaining unamortized loan fees on the prior credit facility.

FOUR QUARTER OUTLOOK

     The Four Quarter Outlook ranges for the rolling four quarter period ending September 30, 2012 are intended to approximate what the Company believes will be the sustainable earning power of its portfolio of operating businesses over the next four quarters as its three models are effectively executed. Performance drivers include funeral contract volumes, cremation mix, cemetery preneed property sales, preneed maturities and deliveries, average revenue per service, financial revenue, overhead items, and the timing and integration of new acquisitions. Other variables that affect earnings and Free Cash Flow include the outstanding amounts under our bank credit facility, our effective tax rate which is currently estimated to be approximately 40%, preneed trust fund income withdrawals, and the estimated number of diluted shares outstanding which is currently estimated to be approximately 18.4 million.

     The Four Quarter Outlook ending September 30, 2012 includes the Carmen and Roberson acquisition that closed in October, an acquisition that is expected to close in December and an acquisition that is expected to close in January 2012.

ROLLING FOUR QUARTER OUTLOOK — Period Ending September 30, 2012

     (amounts in millions, except per share amounts)

		Range
Revenues		$208 — $212
Field EBITDA		$74.9 — $76.3
Field EBITDA Margin		36.0%
Total Overhead		$25.0 — $25.5
Consolidated EBITDA		$49.9 — $50.8
Consolidated EBITDA Margin		24.0%
Interest		$18.2
Depreciation, Amortization and Stock Compensation		$12.2
Income Taxes		$7.9 — $8.3
Net Income		$11.6 — $12.1
Diluted Earnings Per Share		$0.63 — $0.66
Free Cash Flow		$20.5 — $21.5

     Revenue, earnings and Consolidated Free Cash Flow for the four quarter period ending September 30, 2012 are expected to increase materially relative to the full calendar year ended December 31, 2010, in which Carriage earned $0.45 per diluted share, for the following reasons:

•		Increase in same store Funeral Revenue averages and same store Funeral Field EBITDA Margins;
•		Increase in acquired Funeral Revenue and acquired Funeral Field EBITDA from the 2010 and 2011 acquisitions;
•		Increase in Financial Revenue and Financial EBITDA from trust funds; and
•		Increase in Cemetery Revenue, Cemetery Field EBITDA and Cemetery Field EBITDA Margins.

     Estimates involved in forecasting Free Cash Flow for the four quarter period ending September 30, 2012 include approximately $6.8 million in maintenance capital expenditures and approximately $4.8 million in cash taxes. The estimates also include Company’s new policy of withdrawing realized gains and income on a monthly basis from certain cemetery merchandise and services trust funds which are estimated to be $1.2 million for the rolling four quarter period.

CONFERENCE CALL

     Carriage Services has scheduled a conference call for tomorrow, Friday, November 4, 2011 at 10:30 a.m. eastern time. To participate in the call, please dial 800-860-2442 at least ten minutes before the conference call begins and ask for the Carriage Services conference call, or participants can listen live via the internet by logging into the Company’s website at www.carriageservices.com. A telephonic replay of the conference call will be available through November 11, 2011 and may be accessed by dialing 877-344-7529 and using passcode 445590. An audio archive will also be available on the company’s website at www.carriageservices.com shortly after the call and will be accessible for approximately 90 days. For more information, please contact Terry Sanford, Executive Vice President and Chief Financial Officer, at terry.sanford@carriageservices.com or 713-332-8475.

     Carriage Services is a leading provider of death care services and products. Carriage operates 158 funeral homes in 25 states and 33 cemeteries in 12 states.

USE OF NON-GAAP FINANCIAL MEASURES

     This press release uses Non-GAAP financial measures to present the financial earnings of the Company. 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. Reconciliations of the Non-GAAP financial measures to GAAP measures are provided at the end of the press release.

     Certain state regulations allow the withdrawal of financial income from preneed cemetery merchandise and services trust funds when realized in the trust. Under current generally accepted

accounting principles, trust income is only recognized in the Company’s financial statements at a later time when the related merchandise and services sold on the preneed contract is delivered at the time of death. Carriage has provided financial income from the trusts on a Non-GAAP proforma basis that are withdrawable at the time that the income is realized in the trusts instead of at the time of delivery to reflect the current cash results.

     The Non-GAAP financial measures “Free Cash Flow” and “EBITDA” are also reflected in the press release. 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 death care companies. 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.

FORWARD-LOOKING STATEMENTS

     Certain statements made herein or elsewhere by, or on behalf of, the Company that are not historical facts are intended to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on assumptions that the Company believes are reasonable; however, many important factors, as discussed under “Forward-Looking Statements” in the Company’s Annual Report and Form 10-K for the year ended December 31, 2010, 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.

– Financial Statements and Tables to Follow —

CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands, expect share data)

		December 31,				September 30,
		2010				2011
ASSETS
Current assets:
Cash and cash equivalents		$	1,279			$	4,264
Accounts receivable, net of allowance for bad debts			15,587				13,393
Inventories and other current assets			10,828				11,281
Total current assets			27,694				28,938
Preneed cemetery and funeral trust investments			206,569				171,053
Preneed receivables, net of allowance for bad debts			24,099				24,224
Receivables from preneed funeral trusts			21,866				22,380
Property, plant and equipment, net of accumulated depreciation			128,472				131,493
Cemetery property			71,128				71,450
Goodwill			183,324				190,430
Deferred charges and other non-current assets			7,860				11,844
Total assets		$	671,012			$	651,812
LIABILITIES AND STOCKHOLDER’S EQUITY
Current liabilities:
Current portion of long-term debt and obligations under capital leases		$	563			$	574
Accounts payable and accrued liabilities			24,596				28,365
Total current liabilities			25,159				28,939
Senior long-term debt, net of current portion			132,416				131,471
Convertible junior subordinated debenture due in 2029 to an affiliated trust			92,858				89,770
Obligations under capital leases, net of current portion			4,289				4,187
Deferred preneed cemetery and funeral revenue			89,642				99,245
Deferred preneed cemetery and funeral receipts held in trust			160,834				133,120
Care trusts’ corpus			45,941				37,927
Total liabilities			551,139				524,659
Redeemable Preferred Stock			200				200
Stockholders’ equity
Common Stock			213				216
Additional paid-in capital			200,987				201,020
Accumulated deficit			(70,951	)			(64,283	)
Treasury stock			(10,576	)			(10,000	)
Total stockholders’ equity			119,673				126,953
Total liabilities and stockholders’ equity		$	671,012			$	651,812

CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)

		For the three months ended								For the nine months ended
		September 30,								September 30,
		2010				2011				2010				2011
Revenues		$	45,485			$	44,078			$	136,849			$	142,843
Field costs and expenses			35,426				33,433				101,240				103,529
Gross profit			10,059				10,645				35,609				39,314
General and administrative expenses			4,122				5,043				12,413				15,140
Operating income			5,937				5,602				23,196				24,174
Interest expense			(4,571	)			(4,564	)			(13,696	)			(13,628	)
Gain on repurchase of subordinated debenture			—				481				316				846
Loss on early extinguishment of debt			—				(201	)			—				(201	)
Other income			1				13				154				34
Income before income taxes			1,367				1,331				9,970				11,225
Provision for income taxes			(508	)			(539	)			(4,038	)			(4,546	)
Net income			859				792				5,932				6,679
Preferred stock dividend			4				5				11				12
Net income attributable to common stockholders		$	855			$	787			$	5,921			$	6,667
Basic earnings per common share:		$	0.05			$	0.04			$	0.34			$	0.36
Diluted earnings per common share:		$	0.05			$	0.04			$	0.33			$	0.36
Weighted average number of common and common equivalent shares outstanding:
Basic			17,520				18,414				17,549				18,339
Diluted			17,726				18,461				17,775				18,381

CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands, except per share data)

		For the nine months ended
		September 30,
		2010				2011
Cash flows from operating activities:
Net income		$	5,932			$	6,679
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			8,000				7,743
Provision for losses on accounts receivable			2,813				2,360
Stock-based compensation expense			1,396				1,558
Gain on repurchase convertible junior subordinated debenture			(316	)			(846	)
Deferred income taxes			500				(3,642	)
Loss on early extinguishment of debt			—				201
Other			(149	)			(37	)
Changes in operating assets and liabilities that provided (required) cash:
Accounts and preneed receivables			(2,252	)			250
Inventories and other current assets			2,015				(775	)
Deferred charges and other			—				(38	)
Preneed funeral and cemetery trust investments			(987	)			3,465
Accounts payable and accrued liabilities			(1,799	)			3,460
Deferred preneed funeral and cemetery revenue			316				8,708
Deferred preneed funeral and cemetery receipts held in trust			1,080				(3,816	)
Net cash provided by operating activities			16,549				25,270
Cash flows from investing activities:
Acquisitions			(16,792	)			(10,300	)
Growth capital expenditures			(1,843	)			(2,409	)
Maintenance capital expenditures			(5,049	)			(5,365	)
Net proceeds from the sale of assets			400				—
Net cash used in investing activities			(23,284	)			(18,074	)
Cash flows from financing activities:
Net borrowings (payments) under credit facility			5,000				(600	)
Payments on senior long-term debt and obligations under capital leases			(346	)			(436	)
Repurchase of convertible junior subordinated debenture			(576	)			(2,241	)
Proceeds from the exercise of stock options and employee stock purchase plan			441				325
Dividends on common stock			—				(920	)
Dividends on redeemable preferred stock			(11	)			(12	)
Payment of loan origination fees			—				(333	)
Other financing expenses			(43	)			6
Net cash provided by (used in) financing activities			4,465				(4,211	)
Net decrease in cash and cash equivalents			(2,270	)			2,985
Cash and cash equivalents at beginning of period			3,616				1,279
Cash and cash equivalents at end of period		$	1,346			$	4,264

CARRIAGE SERVICES, INC.
Selected Financial Data

						(unaudited)
		December 31,				September 30,
Selected Balance Sheet Data:		2010				2011
Cash and short-term investments		$	1,279			$	4,264
Total Senior Debt (a)		$	137,268			$	136,232
Days sales in funeral accounts receivable			20.3				18.9
Senior Debt to Total Capitalization			39.2	%			38.6	%
Senior Debt to Consolidated EBITDA (rolling twelve months)			3.3x				3.1x
Senior Debt to Non-GAAP Consolidated EBITDA (rolling twelve months)			2.9x				2.6x

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

Reconciliation of Non-GAAP Financial Measures (unaudited):

     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 to Non-GAAP Net Income for the three and nine months ended September 30, 2010 and 2011:

		Three months ended								Nine months ended
		September 30,								September 30,
		2010				2011				2010				2011
Net Income		$	859			$	792			$	5,932			$	6,679
Special items, net of tax			839				1,064				1,520				3,466
Non-GAAP Net Income		$	1,698			$	1,856			$	7,452			$	10,145

Reconciliation of Non-GAAP Financial Measures (unaudited), Continued:

Reconciliation of Net Income to Non-GAAP Consolidated EBITDA for the three and nine months ended September 30, 2010 and 2011 and the estimated rolling four quarters ended September 30, 2012 (presented at approximately the midpoint of the range identified in the release)(in 000’s):

		Three months ended								Nine months ended
		September 30,								September 30,
		2010				2011				2010				2011
Net income		$	859			$	792			$	5,932			$	6,679
Provision for income taxes			508				539				4,038				4,546
Pre-tax earnings			1,367				1,331				9,970				11,225
Interest expense, including loan cost amortization			4,570				4,551				13,696				13,594
Noncash stock compensation			447				491				1,359				1,584
Depreciation & amortization			2,498				2,290				7,450				7,209
Special items			1,487				1,788				2,554				5,826
Non-GAAP Consolidated EBITDA		$	10,369			$	10,452			$	35,029			$	39,438

		Rolling
		Four Quarter
		Outlook
		September 30,
		2012 E
Net income		$	11,900
Provision for income taxes			8,100
Pre-tax earnings			20,000
Interest expense, including loan cost amortization			18,200
Depreciation & amortization, including stock compensation			12,200
Consolidated EBITDA		$	50,400
Revenue		$	210,000
Consolidated EBITDA Margin			24.0	%

Reconciliation of Diluted EPS to Non-GAAP Diluted EPS for the three and nine months ended September 30, 2010 and 2011:

		Three months ended								Nine months ended
		September 30,								September 30,
		2010				2011				2010				2011
Diluted EPS		$	0.05			$	0.04			$	0.33			$	0.36
Effect of special items			0.05				0.06				0.09				0.19
Non-GAAP Diluted EPS		$	0.10			$	0.10			$	0.42			$	0.55

Reconciliation of Non-GAAP Financial Measures (unaudited), Continued:

Reconciliation of cash provided by operating activities to Free Cash Flow (in 000’s):

		Three months ended September 30,
		2010				2011
Cash provided by operating activities		$	2,032			$	9,176
Less maintenance capital expenditures			(1,611	)			(2,002	)
Free Cash Flow		$	421			$	7,174

Reconciliation of cash provided by operating activities to Free Cash Flow (in 000’s):

		Nine months ended September 30,
		2010				2011
Cash provided by operating activities		$	16,549			$	25,270
Less maintenance capital expenditures			(5,049	)			(5,365	)
Free Cash Flow		$	11,500			$	19,905

Reconciliation of Consolidated EBITDA to Free Cash Flow for the estimated rolling four quarters ending September 30, 2012 (in 000’s):

		Rolling
		Four Quarter
		Outlook
		September 30,
		2012 E
Consolidated EBITDA		$	50,400
Interest paid			(17,800	)
Cash Income taxes			(4,800	)
Maintenance capital expenditures			(6,800	)
Free Cash Flow		$	21,000