8-K - CSV Q2 2014 PRESS RELEASE


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 5 , 2014
 
Carriage Services, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware
 
1-11961
 
76-0423828
   (State or other jurisdiction
   of incorporation)
 
   (Commission
   File Number)
 
   (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 (see General Instruction A.2. below):

¨
Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨
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 5, 2014, Carriage Services, Inc. (“the Company”) announced and commented on its financial results for its quarter ended June 30, 2014. 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 5, 2014 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 STATMENTS AND EXHIBITS.

(d)     Exhibits. The following are furnished as part of this current report on Form 8-K:
    
99.1 Press Release dated August 5, 2014





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 5, 2014
By:
 
/s/ L. William Heiligbrodt
 
 
 
L. William Heiligbrodt
 
 
 
Executive Vice President and Secretary
 
 
 
(Principal Financial Officer)







INDEX TO EXHIBITS

Exhibit 
  
Description
 
 
99.1

  
Press Release dated August 5, 2014.



PRESS RELEASE - Q2 2014


FOR IMMEDIATE RELEASE

CARRIAGE SERVICES ANNOUNCES RECORD RESULTS FOR SECOND QUARTER 2014, RAISES ROLLING FOUR QUARTER OUTLOOK

HOUSTON – August 5, 2014 – Carriage Services, Inc. (NYSE: CSV) today announced results for the quarter ended June 30, 2014.

Mel Payne, Chief Executive Officer, stated, “Our second quarter performance continued our trend of outstanding results as we achieved strong revenue growth of 5% to a record $56.5 million, Adjusted Diluted Earnings Per Share growth of 28% to a second quarter record $0.32 per share, and Adjusted Free Cash Flow growth of 12.8% to a record $13.2 million. This outstanding performance was driven by higher year over year revenue and Field EBITDA growth in our acquisition funeral and cemetery segments, substantially lower overhead, and materially reduced interest costs on our recent refinancings. Our record second quarter performance more than offset the relative weakness in the first quarter, resulting in record revenue of $112.2 million and record Adjusted Diluted Earnings Per Share of $0.63 for the six months ended June 30, 2014. With our earnings performance outlook improving in all major areas, we are substantially raising our Rolling Four Quarter Outlook of Adjusted Diluted Earnings Per Share to a range of $1.42 - $1.48.

Three Months Ended June 30, 2014
Total Revenue of $56.5 million, an increase of 5.0%;
Non-GAAP Adjusted Consolidated EBITDA of $16.3 million, an increase of 11.7%;
Non-GAAP Adjusted Consolidated EBITDA Margin up 180 basis points to 28.9%;
Non-GAAP Diluted Earnings Per Share of $0.32, an increase of 28.0%; and
Non-GAAP Adjusted Free Cash Flow of $13.2 million, an increase of 12.8%.    
        
Six Months Ended June 30, 2014
Total Revenue of $112.2 million, an increase of 1.1%;
Non-GAAP Adjusted Consolidated EBITDA of $31.4 million, an increase of 1.0%;
Non-GAAP Adjusted Consolidated EBITDA Margin remained flat at 28.0%;
Non-GAAP Diluted Earnings Per Share of $0.63, an increase of 12.5%; and
Non-GAAP Adjusted Free Cash Flow of $15.5 million, a decrease of 21.7%.    
   
“On May 15th, we announced that we closed the acquisition of six businesses in New Orleans and Alexandria, Virginia from Service Corporation International. We had a goal of being the first buyer in our industry to close on the large number of Service Corporation International divestitures resulting from their acquisition of Stewart Enterprises, and we achieved that goal through a team effort by a group of high performance 4E Leaders.
This high quality group of operating businesses includes the following:
Garden of Memories Funeral Home and Cemetery, Metairie, LA;
Schoen Funeral Home, New Orleans, LA;
Greenwood Funeral Home, New Orleans, LA;
Tharp-Sontheimer-Tharp Funeral Home, Metairie, LA;
Everly Community Funeral Care, Falls Church, VA; and
Everly-Wheatley Funeral Home, Alexandria, VA.

1



The four businesses in New Orleans, Louisiana and two in Alexandria / Falls Church, Virginia (Fairfax County), provide Carriage strong franchises from which we can build a track record of success and reputation in these two large, demographically attractive strategic markets.
With the successful completion of the new convertible subordinated debt and the amendments to the bank credit facilities, our cost of debt and total cost of capital has been materially reduced and was immediately accretive in the second quarter. Our interest expense in the second quarter of 2014 decreased $1.0 million, or 27.1% compared to the second quarter of 2013. Combined with our growing Free Cash Flow, we are well positioned to accelerate our earning power growth over the balance of 2014 and for the full year of 2015, as reflected by our record second quarter performance and raised Four Quarter Outlook. Moreover, our selective acquisition strategy will now be financed with a lower cost of capital at a time when our acquisition pipeline is growing larger with high quality candidates,” concluded Mr. Payne.

2



TOTAL FIELD OPERATIONS

For the Three Months Ended June 30, 2013 compared to Three Months Ended June 30, 2014
Total Field Revenue increased 5.0% to $56.5 million;
Total Field EBITDA increased 2.1% to $22.4 million; and
Total Field EBITDA Margin decreased 110 basis points to 39.6%.

Total Funeral Operating Revenue increased 5.5% to $39.8 million;
Same Store Funeral Revenue decreased 1.5% with same store volume decreasing 1.1%;
Acquisition Funeral Revenue increased 31.2% with acquisition volume increasing 25.0%;
Total Funeral Field EBITDA Margin decreased 130 basis points to 35.2%;

Total Cemetery Operating Revenue increased 7.5% to $11.7 million;
Cemetery preneed property sale contracts increased 9.3% to 2,212;
Preneed property revenue recognized increased 6.7% and At-need revenue increased 9.7%;
Total Cemetery Field EBITDA Margin increased 120 basis points to 31.6%;

Total Financial Revenue decreased 4.0% to $5.0 million;
Funeral Financial Revenue decreased 12.2% to $2.4 million;
Cemetery Financial Revenue increased 4.9% to $2.6 million;
Total Financial EBITDA Margin increased 60 basis points to 93.3%.

For the Six Months Ended June 30, 2013 compared to Six Months Ended June 30, 2014
Total Field Revenue increased 1.1% to $112.2 million;
Total Field EBITDA decreased 1.8% to $45.2 million; and
Total Field EBITDA Margin decreased 120 basis points to 40.3%.

Total Funeral Operating Revenue increased 1.2% to $81.3 million;
Same Store Funeral Revenue decreased 4.2% with same store volume decreasing 3.7%;
Acquisition Funeral Revenue increased 20.7% with acquisition volume increasing 14.7%;
Total Funeral Field EBITDA Margin decreased 140 basis points to 36.7%;

Total Cemetery Operating Revenue increased 4.0% to $21.5 million;
Cemetery preneed property sale contracts increased 2.2% to 3,856;
Preneed property revenue recognized increased 1.2% and At-need revenue increased 9.0%;
Total Cemetery Field EBITDA Margin decreased 10 basis points to 30.4%;

Total Financial Revenue decreased 5.4% to $9.4 million;
Funeral Financial Revenue decreased 1.5% to $4.8 million;
Cemetery Financial Revenue decreased 9.3% to $4.5 million;
Total Financial EBITDA Margin increased 190 basis points to 93.5%.
 

3



ADJUSTED FREE CASH FLOW
Carriage produced Adjusted Free Cash Flow from operations in the first half of 2014 of $15.5 million compared to $19.8 million for the corresponding period in 2013. The sources and uses of cash for the six months ended June 30, 2013 and 2014 consisted of the following (in millions):
 
June 30,
 
2013
 
 
2014
 
 
 
 
 
 
 
Cash flow provided by operations
$
22.8

 
$
13.3

Adjustment for tax benefit from Good to Great stock awards
 

 
 
4.8

Cash used for maintenance capital expenditures
 
(3.0
)
 
 
(2.6
)
Adjusted Free Cash Flow
$
19.8

 
$
15.5

Cash at beginning of period
 
1.7

 
 
1.4

Acquisitions and land for new construction
 
(6.0
)
 
 
(54.9
)
Proceeds from sale of businesses and other assets
 
2.7

 
 
0.2

Net (payments) borrowings on our revolving credit facility, term loan and long-term debt obligations
 
(15.4
)
 
 
13.0

Proceeds from issuance of convertible subordinated notes
 

 
 
143.7

Payment of debt issuance costs related to the convertible subordinated notes
 

 
 
(4.7
)
Redemption of convertible junior subordinated debentures
 

 
 
(89.7
)
Payments for performance-based stock awards
 

 
 
(16.2
)
Excess tax benefit of equity compensation, net of benefit from Good to Great stock awards
 
1.2

 
 
0.3

Payment of loan origination costs related to the credit facility
 
(0.6
)
 
 
(0.8
)
Cash used for growth capital expenditures
 
(1.5
)
 
 
(7.1
)
Dividends on common stock
 
(0.9
)
 
 
(0.9
)
Other investing and financing activities
 
0.5

 
 
0.9

Cash at end of period
$
1.5

 
$
0.7




4



ROLLING FOUR QUARTER OUTLOOK RAISED

The Rolling Four Quarter Outlook “(Outlook)” reflects management’s opinion on the performance of our existing portfolio of businesses for the rolling four quarter period ending June 30, 2015, the performance of the trusts, and our view of the activity within the industry acquisition landscape. This Outlook is not intended to be management estimates or forecasts of our future performance, as we believe such precise rolling estimates will be precisely wrong all the time. Rather our intent and goal is to reflect a “roughly right range” most of the time of future “Rolling Four Quarter Outlook” performance as we execute our Standards Operating, Strategic Acquisition and 4E Leadership Models over time.

ROLLING FOUR QUARTER OUTLOOK – Period Ending June 30, 2015
 
Range
(in millions, except per share amounts)
Revenues
$237 - $242
Adjusted Consolidated EBITDA
$65 - $68
Adjusted Net Income
$26 - $28
Adjusted Diluted Earnings Per Share
$1.42 - $1.48

Factors affecting our analysis include, among others, number, size and timing of closing of acquisitions, funeral contract volumes, average revenue per funeral service, cemetery interment volumes, preneed cemetery sales, capital expenditures, execution of our funeral and cemetery Standards Operating Model, Strategic Acquisition Model, Withdrawable Trust Income and changes in Federal Reserve monetary policy. Revenues, Adjusted Consolidated EBITDA, Adjusted Net Income and Adjusted Earnings Per Share for the four quarter period ending June 30, 2015 are expected to improve relative to the same period in the previous period for the following reasons:

Increases in Acquired Funeral Revenue and Acquired Funeral Field EBITDA;
Increases in Acquired Cemetery Revenue and Acquired Cemetery Field EBITDA;
Modest increases in Same Store Funeral Revenue and Same Store Funeral Field EBITDA;
Increases in Same Store Cemetery Revenue and Same Store Cemetery Field EBITDA;
Increases in Financial Revenue and Financial EBITDA from trust funds; and
Reduced interest expense in conjunction with the fourth and fifth amendments to our bank credit facilities and the redemption of our $90 million 7% convertible junior subordinated debentures.



5



CONFERENCE CALL AND INVESTOR RELATIONS CONTACT

Carriage Services has scheduled a conference call for tomorrow, August 6, 2014 at 9:30 a.m. CDT. To participate in the call, please dial 866-516-3867 (ID-73181607) and ask for the Carriage Services conference call. A replay of the conference call will be available through August 8, 2014 and may be accessed by dialing 855-859-2056 (ID-73181607). The conference call will also be available at www.carriageservices.com. For any investor relations questions, please contact Bill Heiligbrodt at 713-332-8553.

TRUST FUND PERFORMANCE

For the six months ended June 30, 2014, Carriage’s discretionary trust funds gained 10.0%. Over the same period in the discretionary portfolio, the fixed income return was 7.6%, beating the High Yield index of 5.5% while the equity return was 16.7%, beating the S&P 500 at 7.1%. The current yield on Carriage's discretionary fixed income portfolio, which comprises 70% of discretionary trust assets, is 7.9% and the estimated annual income for the discretionary portfolio is approximately $11.0 million.
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(1)
 
Index Performance
 
 
Discretionary
Total Trust
 
S&P 500 Stock Index
High Yield Index
80/20 index
Benchmark(2)
6 months ended 6/30/14
 
10.0
%
9.0
%
 
7.1
%
5.5
%
5.8
%
1 year ended 12/31/13
 
14.2
%
13.7
%
 
32.4
%
7.5
%
12.4
%
2 years ended 12/31/13
 
37.5
%
33.2
%
 
53.0
%
24.4
%
30.2
%
3 years ended 12/31/13
 
33.5
%
30.7
%
 
56.2
%
30.6
%
35.7
%
4 years ended 12/31/13
 
61.1
%
54.4
%
 
79.4
%
50.4
%
56.2
%
5 years ended 12/31/13
 
150.6
%
127.1
%
 
125.8
%
137.9
%
135.5
%
(1) Investment performance includes realized income and unrealized appreciation (depreciation).
(2)
The 80/20 Benchmark is 80% weighted to the High Yield Index and 20% weighted to the S&P 500 Stock Index.
Asset Allocation as of June 30, 2014
(in thousands)
 
 
 
Discretionary
Trust Funds
 
Total
Trust Funds
Asset Class
 
 
MV

%

 
MV

%

Cash
 
 
$
5,909

3
%
 
$
20,648

8
%
Equities
 
 
50,710

26
%
 
68,478

28
%
Fixed Income
 
 
139,016

70
%
 
154,289

63
%
Other/Insurance
 
 
2,656

1
%
 
2,904

1
%
Total Portfolios
 
 
$
198,291

100
%
 
$
246,319

100
%


6




CARRIAGE SERVICES, INC.
OPERATING AND FINANCIAL TREND REPORT
FROM CONTINUING OPERATIONS (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
2014
% Change
 
2013
2014
% Change
 
 
 
 
 
 
 
 
Same Store Contracts
 
 
 
 
 
 
 
Atneed Contracts
4,431

4,428

-0.1
%
 
9,440

9,223

-2.3
%
Preneed Contracts
1,193

1,136

-4.8
%
 
2,585

2,353

-9.0
%
Total Same Store Funeral Contracts
5,624

5,564

-1.1
%
 
12,025

11,576

-3.7
%
Acquisition Contracts
 
 
 
 
 
 
 
Atneed Contracts
1,377

1,712

24.3
%
 
2,934

3,371

14.9
%
Preneed Contracts
249

321

28.9
%
 
550

625

13.6
%
Total Acquisition Funeral Contracts
1,626

2,033

25.0
%
 
3,484

3,996

14.7
%
Total Funeral Contracts
7,250

7,597

4.8
%
 
15,509

15,572

0.4
%
 
 
 
 
 
 
 
 
Funeral Operating Revenue
 
 
 
 
 
 
 
Same Store Revenue
$
29,612

$
29,163

-1.5
%
 
$
63,103

$
60,469

-4.2
%
Acquisition Revenue
8,121

10,657

31.2
%
 
17,267

20,836

20.7
%
Total Funeral Operating Revenue
$
37,733

$
39,820

5.5
%
 
$
80,370

$
81,305

1.2
%
 
 
 
 
 
 
 
 
Cemetery Operating Revenue
 
 
 
 
 
 
 
Same Store Revenue
$
10,827

$
11,382

5.1
%
 
$
20,518

$
21,094

2.8
%
Acquisition Revenue
74

334

351.4
%
 
143

389

172.0
%
Total Cemetery Operating Revenue
$
10,901

$
11,716

7.5
%
 
$
20,661

$
21,483

4.0
%
 
 
 
 
 
 
 
 
Financial Revenue
 
 
 
 
 
 
 
Preneed Funeral Commission Income
$
481

$
563

17.0
%
 
$
989

$
1,127

14.0
%
Preneed Funeral Trust Earnings
2,222

1,809

-18.6
%
 
3,936

3,725

-5.4
%
Cemetery Trust Earnings
2,086

2,276

9.1
%
 
4,280

3,860

-9.8
%
Preneed Cemetery Finance Charges
388

320

-17.5
%
 
698

657

-5.9
%
Total Financial Revenue
$
5,177

$
4,968

-4.0
%
 
$
9,903

$
9,369

-5.4
%
Total Revenue
$
53,811

$
56,504

5.0
%
 
$
110,934

$
112,157

1.1
%
 
 
 
 
 
 
 
 
Field EBITDA
 
 
 
 
 
 
 
Same Store Funeral Field EBITDA
$
11,344

$
10,388

-8.4
%
 
$
24,999

$
22,471

-10.1
%
Same Store Funeral Field EBITDA Margin
38.3
%
35.6
%
-270 bp

 
39.6
%
37.2
%
-240 bp

Acquisition Funeral Field EBITDA
2,432

3,632

49.3
%
 
5,645

7,405

31.2
%
Acquisition Funeral Field EBITDA Margin
29.9
 %
34.1
%
420 bp

 
32.7
%
35.5
%
280 bp

Total Funeral Field EBITDA
$
13,776

$
14,020

1.8
%
 
$
30,644

$
29,876

-2.5
%
Total Funeral Field EBITDA Margin
36.5
 %
35.2
%
-130 bp

 
38.1
 %
36.7
%
-140 bp

 
 
 
 
 
 
 
 
Same Store Cemetery Field EBITDA
$
3,329

$
3,568

7.2
%
 
$
6,349

$
6,408

0.9
%
Same Store Cemetery Field EBITDA Margin
30.7
 %
31.3
%
60 bp

 
30.9
%
30.4
%
-50 bp

Acquisition Cemetery Field EBITDA
(19
)
134

805.3
%
 
(46
)
125

371.7
%
Acquisition Cemetery Field EBITDA Margin
-25.7
%
40.1
%
6,580 bp

 
-32.2
%
32.1
%
6,430 bp

Total Cemetery Field EBITDA
$
3,310

$
3,702

11.8
%
 
$
6,303

$
6,533

3.6
%
Total Cemetery Field EBITDA Margin
30.4
 %
31.6
%
120 bp

 
30.5
 %
30.4
%
-10 bp

 
 
 
 
 
 
 
 
Funeral Financial EBITDA
$
2,373

$
2,079

-12.4
%
 
$
4,188

$
4,305

2.8
%
Cemetery Financial EBITDA
2,428

2,556

5.3
%
 
4,884

4,454

-8.8
%
Total Financial EBITDA
$
4,801

$
4,635

-3.5
%
 
$
9,072

$
8,759

-3.5
%
Total Financial EBITDA Margin
92.7
 %
93.3
%
60 bp

 
91.6
 %
93.5
%
190 bp

 
 
 
 
 
 
 
 
Total Field EBITDA
$
21,887

$
22,357

2.1
%
 
$
46,019

$
45,168

-1.8
%
Total Field EBITDA Margin
40.7
 %
39.6
%
-110 bp

 
41.5
 %
40.3
%
-120 bp

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

7



OPERATING AND FINANCIAL TREND REPORT
FROM CONTINUING OPERATIONS (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2013
2014
% Change
 
2013
2014
% Change
 
 
 
 
 
 
 
 
Overhead
 
 
 
 
 
 
 
Total Variable Overhead
$
2,373

$
1,411

-40.5
%
 
$
4,402

$
5,274

19.8
%
Total Regional Fixed Overhead
882

781

-11.5
%
 
1,848

1,567

-15.2
%
Total Corporate Fixed Overhead
5,156

5,085

-1.4
%
 
10,556

10,659

1.0
%
Total Overhead
$
8,411

$
7,277

-13.5
%
 
$
16,806

$
17,500

4.1
%
Overhead as a percent of sales
15.6
%
12.9
%
-270 bp

 
15.1
%
15.6
%
50 bp

 
 
 
 
 
 
 
 
Consolidated EBITDA
$
13,476

$
15,080

11.9
%
 
$
29,213

$
27,668

-5.3
%
Consolidated EBITDA Margin
25.0
%
26.7
%
170 bp

 
26.3
%
24.7
%
-160 bp

 
 
 
 
 
 
 
 
Other Expenses and Interest
 
 
 
 
 
 
 
Property Depreciation & Amortization
$
3,066

$
3,029

-1.2
%
 
$
5,881

$
5,785

-1.6
%
Non Cash Stock Compensation
978

1,263

29.1
%
 
1,624

1,993

22.7
%
Interest Expense
3,693

2,691

-27.1
%
 
7,121

5,536

-22.3
%
Accretion on Convertible Subordinated Notes

694


 

865

 
Loss on Early Extinguishment of Debt

1,042

 
 

1,042

 
Loss on Redemption of Convertible Junior Subordinated Notes


 
 

3,779

 
Other, Net
(29
)
(5
)
-82.8
%
 
(862
)
(373
)
-56.7
%
Pretax Income
$
5,768

$
6,366

10.4
%
 
$
15,449

$
9,041

-41.5
%
Tax Provision
2,192

2,483

 
 
6,469

3,526

 
GAAP Net Income
$
3,576

$
3,883

8.6
%
 
$
8,980

$
5,515

-38.6
%
 
 
 
 
 
 
 
 
Special Items, Net of tax
 
 
 
 
 
 
 
Withdrawable Trust Income
$
141

$
366

 
 
$
469

$
515

 
Acquisition and Divestiture Expenses
102

168

 
 
107

659

 
Severance Costs
325

268

 
 
451

477

 
Consulting Fees
168

6

 
 
168

165

 
Other Incentive Compensation


 
 

660

 
Accretion on Convertible Subordinated Notes

458

 
 

571

 
Costs Related to Credit Facility
248

688

 
 
248

688

 
Loss on Redemption of Convertible Junior Subordinated Notes


 
 

2,493

 
Gain on Asset Purchase


 
 

(746
)
 
Other Special Items


 
 
(484
)
503

 
Tax Adjustment from Prior Period


 
 
598


 
Sum of Special Items, Net of tax
$
984

$
1,954

98.6
%
 
$
1,557

$
5,985

284.4
%
 
 
 
 
 
 
 
 
Adjusted Net Income
$
4,560

$
5,837

28.0
%
 
$
10,537

$
11,500

9.1
%
Adjusted Net Profit Margin
8.5
%
10.3
%
180 bp

 
9.5
%
10.3
%
80 bp

 
 
 
 
 
 
 
 
Adjusted Basic Earnings Per Share
$
0.26

$
0.32

23.1
%
 
$
0.59

$
0.63

6.8
%
Adjusted Diluted Earnings Per Share
$
0.25

$
0.32

28.0
%
 
$
0.56

$
0.63

12.5
%
 
 
 
 
 
 
 
 
GAAP Basic Earnings Per Share
$
0.20

$
0.21

5.0
%
 
$
0.50

$
0.30

-40.0
%
GAAP Diluted Earnings Per Share
$
0.20

$
0.21

5.0
%
 
$
0.46

$
0.30

-34.8
%
 
 
 
 
 
 
 
 
Effective Tax Rate
38.0
%
39.0
%
100 bp

 
41.9
%
39.0
%
-290 bp

Reconciliation to Adjusted Consolidated EBITDA
 
 
 
 
 
 
 
Consolidated EBITDA
$
13,476

$
15,080

11.9
%
 
$
29,213

$
27,668

-5.3
%
Withdrawable Trust Income
213

554

 
 
710

779

 
Acquisition and Divestiture Expenses
155

255

 
 
163

999

 
Severance Costs
493

406

 
 
684

723

 
Consulting Fees
255

9

 
 
255

250

 
Other Incentive Compensation


 
 

1,000

 
Other Special Items


 
 
83


 
Adjusted Consolidated EBITDA
$
14,592

$
16,304

11.7
%
 
$
31,108

$
31,419

1.0
%
Adjusted Consolidated EBITDA Margin
27.1
 %
28.9
%
180 bp

 
28.0
 %
28.0
%
0 bp


8



CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
 
 
(unaudited)
 
December 31, 2013
 
June 30, 2014
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
1,377

 
$
731

Accounts receivable, net
17,950

 
18,252

Assets held for sale
3,544

 
1,354

Inventories
5,300

 
5,345

Prepaid expenses
4,421

 
3,345

Other current assets
3,525

 
3,130

Total current assets
36,117

 
32,157

Preneed cemetery trust investments
68,341

 
75,646

Preneed funeral trust investments
97,144

 
100,347

Preneed receivables, net
24,521

 
26,439

Receivables from preneed trusts
11,166

 
11,780

Property, plant and equipment, net
160,690

 
176,283

Cemetery property
72,911

 
75,459

Goodwill
221,087

 
253,573

Deferred charges and other non-current assets
12,280

 
18,657

Cemetery perpetual care trust investments
42,342

 
52,812

Total assets
$
746,599

 
$
823,153

 
 
 
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt and capital lease obligations
$
13,424

 
$
9,908

Accounts payable
7,046

 
6,162

Other liabilities
9,939

 
9,329

Accrued liabilities
12,854

 
13,301

Liabilities associated with assets held for sale
4,357

 
360

Total current liabilities
47,620

 
39,060

Long-term debt, net of current portion
105,642

 
116,699

Revolving credit facility
36,900

 
42,400

Convertible junior subordinated debentures due in 2029 to an affiliate
89,770

 

Convertible subordinated notes due 2021

 
112,955

Obligations under capital leases, net of current portion
3,786

 
3,201

Deferred preneed cemetery revenue
55,479

 
57,394

Deferred preneed funeral revenue
30,588

 
30,597

Deferred tax liability
11,915

 
21,890

Other long-term liabilities
1,548

 
1,220

Deferred preneed cemetery receipts held in trust
68,341

 
75,646

Deferred preneed funeral receipts held in trust
97,144

 
100,347

Care trusts’ corpus
41,893

 
52,304

Total liabilities
590,626

 
653,713

 
 
 
 
Commitments and contingencies:

 

 
 
 
 
Stockholders’ equity:
 
 
 
Common stock, $.01 par value; 80,000,000 shares authorized; 22,183,000 and 22,427,000 shares issued at December 31, 2013 and June 30, 2014, respectively
222

 
224

Additional paid-in capital
204,324

 
212,325

Accumulated deficit
(33,306
)
 
(27,842
)
Treasury stock, at cost; 3,922,000 shares at December 31, 2013 and June 30, 2014
(15,267
)
 
(15,267
)
Total stockholders’ equity
155,973

 
169,440

Total liabilities and stockholders’ equity
$
746,599

 
$
823,153


9



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

 
For the Three Months Ended June 30,
 
For the Six Months
 Ended June 30,
 
2013
 
2014
 
2013
 
2014
 
 
 
 
 
 
 
 
Revenues
$
53,811

 
$
56,504

 
$
110,934

 
$
112,157

Field costs and expenses
36,931

 
38,515

 
75,149

 
76,152

Gross profit
$
16,880

 
$
17,989

 
$
35,785

 
$
36,005

General and administrative expenses
7,448

 
7,201
 
14,077

 
16,877
Operating income
$
9,432

 
$
10,788

 
$
21,708

 
$
19,128

Interest expense, net
(3,664
)
 
(2,686
)
 
(6,259
)
 
(5,531
)
Accretion of discount on convertible subordinated notes

 
(694
)
 

 
(865
)
Loss on early extinguishment of debt and other costs

 
(1,042
)
 

 
(1,042
)
Loss on redemption of convertible junior subordinated debentures

 

 

 
(3,779
)
Other income

 

 

 
1,130

Income from continuing operations before income taxes
$
5,768

 
$
6,366

 
$
15,449

 
$
9,041

Provision for income taxes
(2,192
)
 
(2,483
)
 
(6,469
)
 
(3,526
)
Net income from continuing operations
$
3,576

 
$
3,883

 
$
8,980

 
$
5,515

Net income (loss) from discontinued operations, net of tax
568

 
(637
)
 
423

 
(51
)
Net income
$
4,144

 
$
3,246

 
$
9,403

 
$
5,464

Preferred stock dividend

 

 
(4
)
 

Net income available to common stockholders
$
4,144

 
$
3,246

 
$
9,399

 
$
5,464

 
 
 
 
 
 
 
 
Basic earnings (loss) per common share:
 
 
 
 
 
 
 
Continuing operations
$
0.20

 
$
0.21

 
$
0.50

 
$
0.30

Discontinued operations
0.03

 
(0.03
)
 
0.02

 

Basic earnings per common share
$
0.23

 
$
0.18

 
$
0.52

 
$
0.30

Diluted earnings (loss) per common share:
 
 
 
 
 
 
 
Continuing operations
$
0.20

 
$
0.21

 
$
0.46

 
$
0.30

Discontinued operations
0.03

 
(0.04
)
 
0.02

 
(0.01
)
Diluted earnings per common share
$
0.23

 
$
0.17

 
$
0.48

 
$
0.29

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.025

 
$
0.025

 
$
0.05

 
$
0.05

 
 
 
 
 
 
 
 
Weighted average number of common and common equivalent shares outstanding:
 
 
 
 
 
 
 
Basic
17,830

 
18,123

 
17,744

 
18,054

Diluted
17,994

 
18,247

 
22,316

 
18,195


The GAAP Diluted EPS and Adjusted Diluted EPS for the six months ended June 30, 2013 includes 4.4 million shares that
would be issued upon conversion of our convertible subordinated debentures (TIDES) as a result of the if-converted method
prescribed by accounting standards.

10



CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
 
For the Six Months Ended June 30,
 
2013
 
2014
Cash flows from operating activities:
 
 
 
Net income
$
9,403

 
$
5,464

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Gain on sale of businesses and purchase of other assets
(146
)
 
(2,039
)
Impairment of goodwill
100

 
1,180

Loss on early extinguishment of debt and other costs

 
1,042

Depreciation and amortization
5,953

 
5,801

Amortization of deferred financing costs
(36
)
 
456

Accretion of discount on convertible subordinated notes

 
865

Provision for losses on accounts receivable
782

 
1,338

Stock-based compensation expense
1,624

 
2,782

Deferred income tax expense (benefit)
1,894

 
(1,884
)
Loss on redemption of convertible junior subordinated debentures

 
2,932

Other
210

 
(8
)
Changes in operating assets and liabilities that provided (required) cash:
 
 
 
Accounts and preneed receivables
(2,070
)
 
(1,783
)
Inventories and other current assets
1,211

 
818

Deferred charges and other
24

 
(174
)
Preneed funeral and cemetery trust investments
(1,363
)
 
(10,057
)
Accounts payable
(160
)
 
(871
)
Accrued and other liabilities
1,265

 
(2,117
)
Deferred preneed funeral and cemetery revenue
(9,755
)
 
345

Deferred preneed funeral and cemetery receipts held in trust
13,879

 
9,229

Net cash provided by operating activities
22,815

 
13,319

 
 
 
 
Cash flows from investing activities:
 
 
 
Acquisitions and land for new construction
(6,051
)
 
(54,850
)
Net proceeds from the sale of businesses and other assets
2,736

 
200

Capital expenditures
(4,468
)
 
(9,693
)
Net cash used in investing activities
(7,783
)
 
(64,343
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Net (payments) borrowings on the revolving credit facility
(10,100
)
 
5,500

Net (payments) borrowings on the term loan
(5,000
)
 
8,000

Proceeds from the issuance of convertible subordinated notes

 
143,750

Payment of debt issuance costs related to the convertible subordinated notes

 
(4,650
)
Payments on other long-term debt and obligations under capital leases
(307
)
 
(542
)
Redemption of convertible junior subordinated debentures

 
(89,748
)
Payments for performance-based stock awards

 
(16,150
)
Proceeds from the exercise of stock options and employee stock purchase plan contributions
492

 
863

Dividends on common stock
(906
)
 
(917
)
Dividend on redeemable preferred stock
(4
)
 

Payment of loan origination costs related to the credit facility
(565
)
 
(797
)
Excess tax benefit of equity compensation
1,178

 
5,069

Net cash provided by (used in) financing activities
(15,212
)
 
50,378

 
 
 
 
Net decrease in cash and cash equivalents
(180
)
 
(646
)
Cash and cash equivalents at beginning of period
1,698

 
1,377

Cash and cash equivalents at end of period
$
1,518

 
$
731



11



CARRIAGE SERVICES, INC.
CALCULATION OF EARNINGS PER SHARE
(in thousands, except share and per share data)
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2013
 
2014
 
2013
 
2014
Numerator for basic earnings per share:
 
 
 
 
 
 
 
Numerator from continuing operations
 
 
 
 
 
 
 
Income from continuing operations
$
3,576

 
$
3,883

 
$
8,980

 
$
5,515

Less: Earnings allocated to unvested restricted stock
(72
)
 
(76
)
 
(209
)
 
(115
)
Income attributable to continuing operations
$
3,504

 
$
3,807

 
8,771

 
5,400

 
 
 
 
 
 
 
 
Numerator from discontinued operations
 
 
 
 
 
 
 
Income (loss) from discontinued operations
$
568

 
$
(637
)
 
$
423

 
$
(51
)
Less: (Earnings) loss allocated to unvested restricted stock
(11
)
 
13

 
(10
)
 
1

Income (loss) attributable to discontinued operations
$
557

 
$
(624
)
 
$
413

 
$
(50
)
 
 
 
 
 
 
 
 
Numerator for diluted earnings per share:
 
 
 
 
 
 
 
Adjustment for diluted earnings per share:
 
 
 
 
 
 
 
Interest on convertible junior subordinated debentures, net of tax
$

 
$

 
$
1,472

 
$

 
$

 
$

 
$
1,472

 
$

 
 
 
 
 
 
 
 
Income attributable to continuing operations
$
3,504

 
$
3,807

 
$
10,243

 
$
5,400

Income (loss) attributable to discontinued operations
$
557

 
$
(624
)
 
$
413

 
$
(50
)
 
 
 
 
 
 
 
 
Denominator
 
 
 
 
 
 
 
Denominator for basic earnings per common share - weighted average shares outstanding
17,830

 
18,123

 
17,744

 
18,054

Effect of dilutive securities:
 
 
 
 
 
 
 
Stock options
164

 
124

 
180

 
141

Convertible junior subordinated debentures

 

 
4,392

 

Denominator for diluted earnings per common share - weighted average shares outstanding
17,994

 
18,247

 
22,316

 
18,195

 
 
 
 
 
 
 
 
Basic earnings (loss) per common share:
 
 
 
 
 
 
 
Continuing operations
$
0.20

 
$
0.21

 
$
0.50

 
$
0.30

Discontinued operations
0.03

 
(0.03
)
 
0.02

 

Basic earnings per common share
$
0.23

 
$
0.18

 
$
0.52

 
$
0.30

 
 
 
 
 
 
 
 
Diluted earnings (loss) per common share:
 
 
 
 
 
 
 
Continuing operations
$
0.20

 
$
0.21

 
$
0.46

 
$
0.30

Discontinued operations
0.03

 
(0.04
)
 
0.02

 
(0.01
)
Diluted earnings per common share
$
0.23

 
$
0.17

 
$
0.48

 
$
0.29




12



NON-GAAP FINANCIAL MEASURES

This press release uses Non-GAAP financial measures to present the financial performance 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. We believe the Non-GAAP results are useful to investors because such results help investors compare our results to previous periods and provide insights into underlying trends in our business. The Company’s GAAP financial statements accompany this release. Reconciliations of the Non-GAAP financial measures to GAAP measures are provided in this press release.

The Non-GAAP financial measures include “Adjusted Net Income”, “Adjusted Basic Earnings Per Share”, “Adjusted Diluted Earnings Per Share”, “Consolidated EBITDA”, “Adjusted Consolidated EBITDA”, “Adjusted Free Cash Flow”, “Funeral, Cemetery and Financial EBITDA”, “Total Field EBITDA” and “Special Items” in this press release.  These financial measurements are defined as similar GAAP items adjusted for Special Items and are reconciled to GAAP in this press release. In addition, the Company’s presentation of these measures may not be comparable to similarly titled measures in other companies’ reports. The definitions used by the Company for our internal management purposes and in this press release are as follows:
Adjusted Net Income is defined as net income from continuing operations plus adjustments for special items and other non-recurring expenses or credits.
Consolidated EBITDA is defined as net income from continuing operations before income taxes, interest expenses, non-cash stock compensation, depreciation and amortization, and interest income and other, net.
Adjusted Consolidated EBITDA is defined as Consolidated EBITDA plus adjustments for special items and non-recurring expenses or credits.
Adjusted Free Cash Flow is defined as net cash provided by operations, adjusted by special items as deemed necessary, less cash for maintenance capital expenditures.
Funeral Field EBITDA is defined as Funeral Gross Profit less depreciation and amortization, regional and unallocated overhead expenses and net financial income.
Cemetery Field EBITDA is defined as Cemetery Gross Profit less depreciation and amortization, regional and unallocated overhead expenses and net financial income.
Financial EBITDA is defined as Financial Revenue less Financial Expenses.
Total Field EBITDA is defined as Gross Profit less depreciation and amortization, regional and unallocated overhead expenses.
Special Items is defined as charges or credits that are deemed as Non-GAAP items such as withdrawable trust income, acquisition and divestiture expenses, litigation settlements, severance costs, loss on early retirement of debt and other costs, discrete tax items and other non-recurring amounts. Special items are taxed at the federal statutory rate of 34 percent for the three and six months ended June 30, 2013 and 2014.
Adjusted Basic Earnings Per Share is defined as GAAP Basic Earnings Per Share, adjusted for special items.
Adjusted Diluted Earnings Per Share is defined as GAAP Diluted Earnings Per Share, adjusted for special items.

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, termed “Withdrawable Trust Income” and reported on a Non-GAAP proforma basis within Special Items in the accompanying Operating and Financial Trend Report (a Non-GAAP Unaudited Income Statement), to reflect the current cash results. Management believes that the Withdrawable Trust Income provides useful information to investors because it presents income and cash flow when earned by the trusts.


13



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 Adjusted Net Income for the three and six months ended June 30, 2013 and 2014 (thousands):
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
 
2013
 
2014
 
2013
 
2014
Net Income from continuing operations
$
3,576

 
$
3,883

 
$
8,980

 
$
5,515

Special items, net of tax
 
 
 
 
 
 
 
Withdrawable Trust Income
141

 
366

 
469

 
515

Acquisition and Divestiture Expenses
102

 
168

 
107

 
659

Severance Costs
325

 
268

 
451

 
477

Consulting Fees
168

 
6

 
168

 
165

Other Incentive Compensation

 

 

 
660

Accretion of Discount on Convertible Subordinated Notes

 
458

 

 
571

Costs Related to the Credit Facility
248

 
688

 
248

 
688

Loss on Redemption of Convertible Junior Subordinated Debentures

 

 

 
2,493

Gain on Asset Purchase

 

 

 
(746
)
Other Special Items

 

 
(484
)
 
503

Tax Adjustment from Prior Period

 

 
598

 

     Total Special items affecting net income
$
984

 
$
1,954

 
$
1,557

 
$
5,985

Adjusted Net Income
$
4,560

 
$
5,837

 
$
10,537

 
$
11,500



14



Reconciliation of Net Income from continuing operations to Consolidated EBITDA and Adjusted Consolidated EBITDA for the three and six months ended June 30, 2013 and 2014 (in thousands):
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
 
2013
 
2014
 
2013
 
2014
Net income from continuing operations
$
3,576

 
$
3,883

 
$
8,980

 
$
5,515

Provision for income taxes
2,192

 
2,483

 
6,469

 
3,526

Pre-tax earnings from continuing operations
$
5,768

 
$
6,366

 
$
15,449

 
$
9,041

Interest expense
3,693

 
2,691

 
7,121

 
5,536

Accretion of discount on convertible subordinated notes

 
694

 

 
865

Loss on early extinguishment of debt and other costs

 
1,042

 

 
1,042

Loss on redemption of convertible junior subordinated debentures

 

 

 
3,779

Non-cash stock compensation
978

 
1,263

 
1,624

 
1,993

Depreciation & amortization
3,066

 
3,029

 
5,881

 
5,785

Other, net
(29
)
 
(5
)
 
(862
)
 
(373
)
Consolidated EBITDA
$
13,476

 
$
15,080

 
$
29,213

 
$
27,668

Adjusted For:
 
 
 
 
 
 
 
Withdrawable Trust Income
$
213

 
$
554

 
$
710

 
$
779

Acquisition and Divestiture Expenses
155

 
255

 
163

 
999

Severance Costs
493

 
406

 
684

 
723

Consulting Fees
255

 
9

 
255

 
250

Other Incentive Compensation

 

 

 
1,000

Other Special Items

 

 
83

 

Adjusted Consolidated EBITDA
$
14,592

 
$
16,304

 
$
31,108

 
$
31,419

Revenue
$
53,811

 
$
56,504

 
$
110,934

 
$
112,157

 
 
 
 
 
 
 
 
Adjusted Consolidated EBITDA Margin
27.1
%
 
28.9
%
 
28.0
%
 
28.0
%


15



Reconciliation of funeral and cemetery income before income taxes to Field EBITDA for the three and six months ended June 30, 2013 and 2014 (in thousands):
Funeral Field EBITDA
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
 
2013
 
2014
 
2013
 
2014
Gross Profit (GAAP)
$
12,773

 
$
13,214

 
$
27,604

 
$
27,735

Depreciation & amortization
1,612

 
1,683

 
3,214

 
3,297

Regional & unallocated costs
1,764

 
1,202

 
4,014

 
3,149

Net financial income
(2,373
)
 
(2,079
)
 
(4,188
)
 
(4,305
)
Funeral Field EBITDA
$
13,776

 
$
14,020

 
$
30,644

 
$
29,876

Funeral Field Operating Revenue
$
37,733

 
$
39,820

 
$
80,370

 
$
81,305

Funeral Field EBITDA Margin
36.5
%
 
35.2
%
 
38.1
%
 
36.7
%

Cemetery Field EBITDA
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
 
2013

 
2014

 
2013

 
2014

Gross Profit (GAAP)
$
4,107

 
$
4,775

 
$
8,181

 
$
8,270

Depreciation & amortization
1,082

 
992

 
1,948

 
1,793

Regional & unallocated costs
549

 
491

 
1,058

 
924

Net financial income
(2,428
)
 
(2,556
)
 
(4,884
)
 
(4,454
)
Cemetery Field EBITDA
$
3,310

 
$
3,702

 
$
6,303

 
$
6,533

Cemetery Field Operating Revenue
$
10,901

 
$
11,716

 
$
20,661

 
$
21,483

Cemetery Field EBITDA Margin
30.4
%
 
31.6
%
 
30.5
%
 
30.4
%

Total Field EBITDA
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
 
2013

 
2014

 
2013

 
2014

Funeral Field EBITDA
$
13,776

 
$
14,020

 
$
30,644

 
$
29,876

Cemetery Field EBITDA
3,310

 
3,702

 
6,303

 
6,533

Funeral Financial EBITDA
2,373

 
2,079

 
4,188

 
4,305

Cemetery Financial EBITDA
2,428

 
2,556

 
4,884

 
4,454

Total Field EBITDA
$
21,887

 
$
22,357

 
$
46,019

 
$
45,168





16



Reconciliation of cash provided by operating activities to Adjusted Free Cash Flow from operations for the three and six months ended June 30, 2013 and 2014 (in thousands):
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
 
2013

 
2014

 
2013

 
2014

Cash flow provided by operations
$
12,902

 
$
14,937

 
$
22,815

 
$
13,319

Adjustment for tax benefit from Good to Great stock awards

 

 

 
4,802

Cash used for maintenance capital expenditures
(1,238
)
 
(1,689
)
 
(3,025
)
 
(2,572
)
Adjusted Free Cash Flow
$
11,664

 
$
13,248

 
$
19,790

 
$
15,549


Reconciliation of GAAP basic earnings per share to Adjusted basic earnings per share for the three and six months ended June 30, 2013 and 2014:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
 
2013

 
2014

 
2013

 
2014

GAAP basic earnings per share from continuing operations
$
0.20

 
$
0.21

 
$
0.50

 
$
0.30

Special items affecting net income
0.06

 
0.11

 
0.09

 
0.33

Adjusted basic earnings per share
$
0.26

 
$
0.32

 
$
0.59

 
$
0.63


Reconciliation of GAAP diluted earnings per share to Adjusted diluted earnings per share for the three and six months ended June 30, 2013 and 2014:
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
 
2013

 
2014

 
2013

 
2014

GAAP diluted earnings per share from continuing operations
$
0.20

 
$
0.21

 
$
0.46

 
$
0.30

Special items affecting net income
0.05

 
0.11

 
0.07

 
0.33

Dilution effect of convertible junior subordinated debentures

 

 
0.03

 

Adjusted diluted earnings per share
$
0.25

 
$
0.32

 
$
0.56

 
$
0.63



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On page 5 of this press release, we present the Rolling Four Quarter Outlook (“Outlook”) which reflects management’s opinion on the performance of the portfolio of businesses, plus visible and likely acquisitions, for the rolling four quarter period ending June 30, 2015, and the performance of trusts during the corresponding period.  This Outlook is not intended to be management estimates or forecasts of our future performance, as we believe such precise rolling estimates will be precisely wrong all the time.  The following three reconciliations are presented at the midpoint of the range in this Outlook.

Reconciliation of Net Income from continuing operations to Consolidated EBITDA and Adjusted Consolidated EBITDA for the estimated rolling four quarters ending June 30, 2015 (in thousands):
 
 
Rolling
Four Quarter Outlook
 
 
 
June 30, 2015E
 
Net income from continuing operations
 
 
$
19,000

 
 
Provision for income taxes
 
 
12,300


 
Pre-tax earnings from continuing operations
 
 
$
31,300

 
 
Net interest expense, including loan cost amortization
 
 
14,200

 
 
Depreciation & amortization, including stock compensation
 
 
16,000

 
 
Consolidated EBITDA
 
 
$
61,500

 
 
Adjusted For:
 
 
 
 
 
Special items
 
 
5,000

 
 
Adjusted Consolidated EBITDA
 
 
$
66,500

 
 

Reconciliation of Net Income from continuing operations to Adjusted Net Income for the estimated rolling four quarters ending June 30, 2015 (in thousands):
 
 
Rolling
Four Quarter Outlook
 
 
 
June 30, 2015E
 
Net income from continuing operations
 
 
$
19,000

 
 
Special items, net of tax
 
 
8,000

 
 
Adjusted Net Income
 
 
$
27,000


 

Reconciliation of GAAP diluted earnings per share to Adjusted diluted earnings per share for the estimated rolling four quarters ending June 30, 2015:
 
 
Rolling
Four Quarter Outlook
 
 
 
June 30, 2015E
 
GAAP diluted earnings per share from continuing operations
 
 
$
1.04

 
 
Special items affecting net income
 
 
0.41

 
 
Adjusted diluted earnings per share
 

$
1.45

 
 








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CAUTIONARY STATEMENT ON 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. In addition to historical information, this Press Release contains certain statements and information that may constitute forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include statements regarding the consummation of the SCI acquisition, any projections of earnings, revenues, asset sales, cash flow, debt levels or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing and are based on our current expectations and beliefs concerning future developments and their potential effect on us. The words “may”, “will”, “estimate”, “intend”, “believe”, “expect”, “project”, “forecast”, “foresee”, “should”, “would”, “could”, “plan”, “anticipate” and other similar words or expressions are intended to identify forward-looking statements, which are generally not historical in nature. While management believes that these forward-looking statements are reasonable as and when made, there can be no assurance that future developments affecting us will be those that we anticipate. All comments concerning our expectations for future revenues and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to, those summarized below:
the execution of our Standards Operating Model;
changes in the number of deaths in our markets;
changes in consumer preferences;
ability to find and retain skilled personnel;
the effects of competition;
the investment performance of our funeral and cemetery trust funds;
fluctuations in interest rates;
our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital requirements and the repayment or refinancing of indebtedness;
death benefits related to preneed funeral contracts funded through life insurance contracts;
our ability to generate preneed sales;
the financial condition of third-party insurance companies that fund our preneed funeral contracts;
increased or unanticipated costs, such as insurance or taxes;
effects of the application of applicable laws and regulations, including changes in such regulations or the interpretation thereof;
consolidation of the deathcare industry; and
other factors and uncertainties inherent in the deathcare industry.
For additional information regarding known material factors that could cause our actual results to differ from our projected results, please see “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2013. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise. A copy of the Company’s Form 10-K, other Carriage Services information and news releases are available at www.carriageservices.com.

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 in the tables presented above.


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