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 1, 2018 (October 29, 2018)
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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
In the press release dated October 31, 2018, the Company announced and commented on its financial results for its quarter ended September 30, 2018. 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 October 31, 2018, 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 5.02 DEPARTURE OF DIRECTORS OR CERTAIN OFFICERS; ELECTION OF DIRECTORS; APPOINTMENT OF CERTAIN OFFICERS; COMPENSATORY ARRANGEMENTS OF CERTAIN OFFICERS
On October 29, 2018, Mark R. Bruce informed the Company that he would resign from his position as Executive Vice President and Chief Operating Officer of the Company, effective November 1, 2018.
In connection with his resignation, Mr. Bruce and the Company entered into a separation and release agreement (the “Separation Agreement”) which provides for (i) continuation of Mr. Bruce’s base salary for 18 months; and (ii) payment by the Company of continued coverage under the Consolidated Omnibus Budget Reconciliation Act for up to 18 months, to the extent Mr. Bruce makes such an election. The Separation Agreement, which terminates Mr. Bruce’s employment agreement with the Company, contains customary release, confidentiality, non-competition, non-solicitation and non-disparagement provisions.
ITEM 9.01 FINANCIAL STATMENTS AND EXHIBITS.
The following are furnished as part of this Current Report on Form 8-K:
99.1 Press Release dated October 31, 2018
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: November 1, 2018 | By: | /s/ Viki K. Blinderman | |
Viki K. Blinderman | |||
Senior Vice President, Principal Financial Officer and Secretary | |||
INDEX TO EXHIBITS
Exhibit | Description | ||
99.1 | |||
 | |
CARRIAGE SERVICES ANNOUNCES THIRD QUARTER 2018 RESULTS
HOUSTON – October 31, 2018 – Carriage Services, Inc. (NYSE: CSV) today announced results for the third quarter ended September 30, 2018, shown below:
Three Months Ended September 30, 2018 compared to Three Months Ended September 30, 2017
• Total Revenue of $64.2 million, an increase of 5.2%;
• Net Income of $2.2 million, a decrease of 27.6%;
• GAAP Diluted Earnings Per Share of $0.11, a decrease of 35.3%;
• Total Field EBITDA of $23.2 million, an increase of 1.0%;
• Total Field EBITDA Margin down 150 basis points to 36.2%;
• Adjusted Consolidated EBITDA of $15.7 million, an increase of 11.1%;
• Adjusted Consolidated EBITDA Margin up 130 basis points to 24.4%;
• Adjusted Net Income of $2.7 million, a decrease of 38.0%;
• Adjusted Diluted Earnings Per Share of $0.14, a decrease of 44.0%; and
• Adjusted Free Cash Flow of $10.0 million, an increase of 6.4%.
Nine Months Ended September 30, 2018 compared to Nine Months Ended September 30, 2017
• Total Revenue of $201.5 million, an increase of 4.4%;
• Net Income of $14.3 million, a decrease of 1.6%;
• GAAP Diluted Earnings Per Share of $0.78, a decrease of 3.7%;
• Total Field EBITDA of $78.5 million, an increase of 0.9%;
• Total Field EBITDA Margin down 130 basis points to 39.0%;
• Adjusted Consolidated EBITDA of $53.4 million, an increase of 4.3%;
• Adjusted Consolidated EBITDA Margin remained flat at 26.5%;
• Adjusted Net Income of $17.3 million, a decrease of 3.9%;
• Adjusted Diluted Earnings Per Share of $0.94, a decrease of 6.0%; and
• Adjusted Free Cash Flow of $32.5 million, an increase of 30.6%.
Mel Payne, Chief Executive Officer, stated, “The following quotes by me are from our second quarter earnings release:
‘We view the disappointing second quarter as a temporary performance aberration related to challenging revenue and margin vagaries in our funeral portfolio which is not historically symptomatic of long term operating trends. . . . We have complete confidence that our operating leadership is effectively dealing with the revenue and margin challenges in our funeral portfolio and that we will experience broadly higher performance during the latter part of the second half of the year compared to our second quarter.’
Everything I said in the above quote I believed at the time, but after continued operating performance weakness in July and August I led a comprehensive analysis by our operating leadership and support teams of each of our businesses since 2011 using both operating and financial data trends as well as the corresponding Standards Achievement trends in each case.
On October 1st I wrote a Memorandum to all of our Managing Partners, Sales Managers, Field Operating Leadership Teams, as well as Houston Support Center Leaders explaining that our many long term high performance winners
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were subsidizing “too many” businesses with underperformance trends. Our Board of Directors is also fully informed and supportive of our analysis of the underperformance challenges and issues (85% - 90% self-inflicted) and of the plans we have developed and are executing to quickly restore the GAAP Earnings and Free Cash Flow Value Creation Power to our company.
We have developed detailed plans of action for each underperforming business that are being executed weekly, a program that began on October 2nd and will continue through the end of this year but will be essentially complete by the end of November. The simple goal of the underperformance turnaround plans on a case by case business basis is to have each business in our portfolio positioned for High and Sustainable Standards Achievement success in 2019 and thereafter. In other words, we fully expect to head into next year with our operating and financial performance substantially higher than the recent past and to have performance trends again being our friend.
We have also completed an outreach program to our Standards Council Members, Field Operating Leaders and members of our Operations and Strategic Growth Leadership Team and Operations Analysis and Planning Group. I have confidentially asked each for feedback on how best to reorganize our operating leadership and update our Funeral and Cemetery Performance Standards to achieve and sustain high operating and financial performance for a five year timeframe beginning January 1, 2019 and ending December 31, 2023. After reviewing all the feedback and collaborating with members of our Operations and Strategic Growth Leadership Team and Board, I am announcing the following elements of our high performance and value creation trends restoration program with the annual theme:
Carriage Services 2019: Back To The Future - A New Beginning - Part II:
• | I have assumed the role of Chief Operating Officer and Peggy Schappaugh the interim role of Head of the Operations Analysis and Planning Group. Peggy and I have worked together since she joined Carriage in August 2003 “to do budgets”, and she has been involved since inception in the evolution of the idea and concepts related to our Standards Operating Model. |
• | We will have a Standards Council special meeting on November 30th to update and reboot (last major update / reboot end of 2011) both our Funeral and Cemetery Standards to make them more relevant given the changing preferences of client families in our industry and the associated revenue challenges from higher rates of cremation versus traditional burials. The likely outcome of this individual standards update will be moving toward compounded long term revenue growth as a highly weighted performance standard for each business and away from the granularity of highly weighted individual annual revenue metrics such as Funeral Revenue Per Contract and Preneed Cemetery Interment Average. |
• | Our annual Being The Best and five year Good To Great Managing Partner Incentive Awards will be rebooted to align more completely with our updated Performance Standards and the updated goal of operations of compounded annual revenue growth of 1% - 2% or higher for each business with substantial incentive differentiation between businesses compounding annual revenue between 0%-1%, 1%-2%, 2%-3% and over 3% annually. |
• | Reorganized and focused cemetery sales and operating leadership attention on our ten largest cemeteries to drive and sustain higher preneed property sales. |
• | Reorganization of the reporting structure of both field operations and Houston Support Center which is estimated to reduce annual overhead and incentive stock compensation expense by $5 - $6 million equal to 19¢ - 23¢ per share. |
• | We will take one time charges to earnings in the fourth quarter related to our organizational restructuring, losses to a small group of businesses that don’t fit the size and quality profile of our existing portfolio and will be divested, cancellation of our performance awards incentive program, etc. We want the future earnings of Carriage beginning on January 1, 2019 not only to be dramatically higher but also of unquestionable quality without frequent adjustments. |
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• | We will be flexible on allocation of our capital, principally in the form of increasing Free Cash Flow, as our goal remains maximization of intrinsic value per share over time while maintaining a lower leverage profile than over the last several years. |
• | Toward the end of 2019 after our cash earning power as defined by Consolidated EBITDA Margin has been restored and our operating and financial performance trends are again supportive of the Carriage Good to Great Journey, I will recruit a President and COO who would also be a later candidate for Carriage’s CEO Succession Plan. |
We believe that the above actions will restore strong GAAP Earnings and Free Cash Flow Value Creation Power to our company by the end of this year and position our leadership at all levels to better execute our three core defining models (Standards Operating, Strategic Acquisition and 4E Leadership) that in turn will produce high and sustainable performance to drive compounded annual shareholder returns of at least 15% over the five year timeframe 2019 - 2023. We are fully aware that we have lost credibility with many of you based on weak operating leadership execution over the last two years and especially this year, so we are committed to restoring our high performance and value creation trends reputation by what we produce and sustain in results and not by what we say.
We will be able to measure the success of our high performance and value creation trends restoration program over the next few months, and while we are highly confident of success within a “Roughly Right Range” of outcomes, nevertheless we are delaying publication of another Rolling Four Quarter Outlook until early 2019 at which time we plan an early 2018 full year earnings release in which we will also communicate our performance outlook for the full year 2019.
I would like to especially thank members of our Standards Council and Board of Directors as well as our wonderful funeral and cemetery business leaders and all those in operating and support leadership roles for their renewed and unwavering commitment to achieve our Mission/Vision of Being The Best while always being 100% aligned with our Five Guiding Principles,” concluded Mr. Payne.
ACQUISITIONS
We announced the completion of three acquisitions in the third quarter of 2018: Covenant Funeral Homes in Fredericksburg and Stafford Virginia, Presley Funeral Home in Cookeville, Tennessee and L. Harold Poole Funeral Service and Crematory in Knightdale, North Carolina. These are all businesses with stellar reputations that provide high value personal services in high growth markets. We are excited about having these top independent businesses join our Carriage family.
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TRUST FUND PERFORMANCE
Shown below are consolidated performance metrics for the combined trust fund portfolios (preneed funeral, preneed cemetery 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 | 70/30 index Benchmark(2) | |||
9 months ended 09/30/2018 | (0.5%) | (0.5%) | 10.5% | 2.6% | 4.9% | ||
1 year ended 12/31/17 | 13.1% | 12.3% | 21.8% | 7.5% | 11.8% | ||
2 years ended 12/31/17 | 35.3% | 32.9% | 36.4% | 25.9% | 29.1% | ||
3 years ended 12/31/17 | 31.2% | 29.3% | 38.3% | 20.3% | 25.7% | ||
4 years ended 12/31/17 | 42.1% | 39.5% | 58.6% | 23.2% | 33.8% | ||
5 years ended 12/31/17 | 62.4% | 58.6% | 102.3% | 32.4% | 53.4% | ||
(1) Investment performance includes realized income and unrealized appreciation (depreciation). | |||||||
(2) The 70/30 Benchmark is 70% weighted to the High Yield Index and 30% weighted to the S&P 500 Stock Index. | |||||||
Asset Allocation as of September 30, 2018 (in thousands) | |||||||||||||||
Discretionary Trust Funds | Total Trust Funds | ||||||||||||||
Asset Class | MV | % | MV | % | |||||||||||
Equities | $ | 77,835 | 40 | % | $ | 80,870 | 35 | % | |||||||
Fixed Income | 95,349 | 49 | % | 106,287 | 46 | % | |||||||||
Cash | 19,459 | 10 | % | 41,590 | 18 | % | |||||||||
Other/Insurance | 1,946 | 1 | % | 2,311 | 1 | % | |||||||||
Total Portfolios | $ | 194,589 | 100 | % | $ | 231,058 | 100 | % | |||||||
The total return for our Discretionary Preneed Funeral and Cemetery Trusts through the first nine months was (0.5%). Our fixed income portfolio performance continued to track the High Yield index for the year while our equity portfolio has underperformed the broader market through the first three quarters. Currently, cash and cash equivalents account for 20% of the assets in our discretionary portfolio.
ADJUSTED FREE CASH FLOW
We produced Adjusted Free Cash Flow from operations for the three and nine months ended September 30, 2018 of $10.0 million and $32.5 million, respectively, compared to Adjusted Free Cash Flow from operations of $9.4 million and $24.9 million for the corresponding periods in 2017. A reconciliation of Cash Flow Provided by Operations to Adjusted Free Cash Flow for the three and nine months ended September 30, 2017 and 2018 is as follows (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
Cash flow provided by operations | $ | 10,579 | $ | 12,436 | $ | 30,825 | $ | 38,717 | |||||||
Cash used for maintenance capital expenditures | (1,620 | ) | (2,482 | ) | (6,322 | ) | (6,196 | ) | |||||||
Free Cash Flow | $ | 8,959 | $ | 9,954 | $ | 24,503 | $ | 32,521 | |||||||
Plus: Incremental Special Items: | |||||||||||||||
Natural Disaster Costs | 398 | — | 398 | — | |||||||||||
Adjusted Free Cash Flow | $ | 9,357 | $ | 9,954 | $ | 24,901 | $ | 32,521 | |||||||
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CONFERENCE CALL AND INVESTOR RELATIONS CONTACT
Carriage Services has scheduled a conference call for tomorrow, November 1, 2018 at 9:30 a.m. central time. To participate in the call, please dial 866-516-3867 (ID-1078097) and ask for the Carriage Services conference call. A replay of the conference call will be available through November 6, 2018 and may be accessed by dialing 855-859-2056 (ID-1078097). The conference call will also be available at www.carriageservices.com. For any investor relations questions, please contact Viki Blinderman at 713-332-8568 or Ben Brink at 713-332-8441 or email InvestorRelations@carriageservices.com.
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CARRIAGE SERVICES, INC. | |||||||||||||||||
OPERATING AND FINANCIAL TREND REPORT | |||||||||||||||||
(IN THOUSANDS - EXCEPT PER SHARE AMOUNTS) | |||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2017 | 2018 | % Change | 2017 | 2018 | % Change | ||||||||||||
Same Store Contracts | |||||||||||||||||
Atneed Contracts | 5,816 | 5,681 | (2.3 | %) | 18,359 | 18,309 | (0.3 | %) | |||||||||
Preneed Contracts | 1,404 | 1,287 | (8.3 | %) | 4,350 | 4,271 | (1.8 | %) | |||||||||
Total Same Store Funeral Contracts | 7,220 | 6,968 | (3.5 | %) | 22,709 | 22,580 | (0.6 | %) | |||||||||
Acquisition Contracts | |||||||||||||||||
Atneed Contracts | 878 | 1,507 | 71.6 | % | 2,839 | 4,296 | 51.3 | % | |||||||||
Preneed Contracts | 137 | 197 | 43.8 | % | 500 | 561 | 12.2 | % | |||||||||
Total Acquisition Funeral Contracts | 1,015 | 1,704 | 67.9 | % | 3,339 | 4,857 | 45.5 | % | |||||||||
Total Funeral Contracts | 8,235 | 8,672 | 5.3 | % | 26,048 | 27,437 | 5.3 | % | |||||||||
Funeral Operating Revenue | |||||||||||||||||
Same Store Revenue | $ | 38,787 | $ | 37,456 | (3.4 | %) | $ | 121,914 | $ | 120,449 | (1.2 | %) | |||||
Acquisition Revenue | 6,467 | 10,300 | 59.3 | % | 21,687 | 29,908 | 37.9 | % | |||||||||
Total Funeral Operating Revenue | $ | 45,254 | $ | 47,756 | 5.5 | % | $ | 143,601 | $ | 150,357 | 4.7 | % | |||||
Cemetery Operating Revenue | |||||||||||||||||
Same Store Revenue | $ | 9,688 | $ | 10,439 | 7.8 | % | $ | 29,820 | $ | 31,698 | 6.3 | % | |||||
Acquisition Revenue | 761 | 652 | (14.3 | %) | 2,370 | 2,530 | 6.8 | % | |||||||||
Total Cemetery Operating Revenue | $ | 10,449 | $ | 11,091 | 6.1 | % | $ | 32,190 | $ | 34,228 | 6.3 | % | |||||
Financial Revenue | |||||||||||||||||
Preneed Funeral Commission Income | $ | 315 | $ | 360 | 14.3 | % | $ | 951 | $ | 974 | 2.4 | % | |||||
Preneed Funeral Trust Earnings | 1,616 | 1,727 | 6.9 | % | 5,286 | 5,638 | 6.7 | % | |||||||||
Cemetery Trust Earnings | 1,556 | 1,392 | (10.5 | %) | 4,815 | 4,327 | (10.1 | %) | |||||||||
Preneed Cemetery Finance Charges | 382 | 436 | 14.1 | % | 1,167 | 1,239 | 6.2 | % | |||||||||
Total Financial Revenue | $ | 3,869 | $ | 3,915 | 1.2 | % | $ | 12,219 | $ | 12,178 | (0.3 | %) | |||||
Total Divested Revenue | $ | 1,482 | $ | 1,479 | $ | 5,053 | $ | 4,712 | |||||||||
Total Revenue | $ | 61,054 | $ | 64,241 | 5.2 | % | $ | 193,063 | $ | 201,475 | 4.4 | % | |||||
Field EBITDA | |||||||||||||||||
Same Store Funeral EBITDA | $ | 14,196 | $ | 12,735 | (10.3 | %) | $ | 47,172 | $ | 44,462 | (5.7 | %) | |||||
Same Store Funeral EBITDA Margin | 36.6 | % | 34.0 | % | (260 bp) | 38.7 | % | 36.9 | % | (180 bp) | |||||||
Acquisition Funeral EBITDA | 2,093 | 3,588 | 71.4 | % | 8,242 | 10,884 | 32.1 | % | |||||||||
Acquisition Funeral EBITDA Margin | 32.4 | % | 34.8 | % | 240 bp | 38.0 | % | 36.4 | % | (160 bp) | |||||||
Total Funeral EBITDA | $ | 16,289 | $ | 16,323 | 0.2 | % | $ | 55,414 | $ | 55,346 | (0.1 | %) | |||||
Total Funeral EBITDA Margin | 36.0 | % | 34.2 | % | (180 bp) | 38.6 | % | 36.8 | % | (180 bp) | |||||||
Same Store Cemetery EBITDA | $ | 2,669 | $ | 2,891 | 8.3 | % | $ | 8,991 | $ | 9,901 | 10.1 | % | |||||
Same Store Cemetery EBITDA Margin | 27.5 | % | 27.7 | % | 20 bp | 30.2 | % | 31.2 | % | 100 bp | |||||||
Acquisition Cemetery EBITDA | 200 | 116 | (42.0 | %) | 743 | 852 | 14.7 | % | |||||||||
Acquisition Cemetery EBITDA Margin | 26.3 | % | 17.8 | % | (850 bp) | 31.4 | % | 33.7 | % | 230 bp | |||||||
Total Cemetery EBITDA | $ | 2,869 | $ | 3,007 | 4.8 | % | $ | 9,734 | $ | 10,753 | 10.5 | % | |||||
Total Cemetery EBITDA Margin | 27.5 | % | 27.1 | % | (40 bp) | 30.2 | % | 31.4 | % | 120 bp | |||||||
Funeral Financial EBITDA | $ | 1,703 | $ | 1,786 | 4.9 | % | $ | 5,531 | $ | 5,811 | 5.1 | % | |||||
Cemetery Financial EBITDA | 1,828 | 1,716 | (6.1 | %) | 5,700 | 5,194 | (8.9 | %) | |||||||||
Total Financial EBITDA | $ | 3,531 | $ | 3,502 | (0.8 | %) | $ | 11,231 | $ | 11,005 | (2.0 | %) | |||||
Total Financial EBITDA Margin | 91.3 | % | 89.5 | % | (180 bp) | 91.9 | % | 90.4 | % | (150 bp) | |||||||
Total Divested EBITDA | $ | 329 | $ | 407 | $ | 1,424 | $ | 1,373 | |||||||||
Total Divested EBITDA Margin | 22.2 | % | 27.5 | % | 28.2 | % | 29.1 | % | |||||||||
Total Field EBITDA | $ | 23,018 | $ | 23,239 | 1.0 | % | $ | 77,803 | $ | 78,477 | 0.9 | % | |||||
Total Field EBITDA Margin | 37.7 | % | 36.2 | % | (150 bp) | 40.3 | % | 39.0 | % | (130 bp) | |||||||
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OPERATING AND FINANCIAL TREND REPORT | |||||||||||||||||
(IN THOUSANDS - EXCEPT PER SHARE AMOUNTS) | |||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2017 | 2018 | % Change | 2017 | 2018 | % Change | ||||||||||||
Overhead | |||||||||||||||||
Total Variable Overhead | $ | 3,057 | $ | 1,410 | (53.9 | %) | $ | 7,765 | $ | 6,666 | (14.2 | %) | |||||
Total Regional Fixed Overhead | 995 | 903 | (9.2 | %) | 2,888 | 3,043 | 5.4 | % | |||||||||
Total Corporate Fixed Overhead | 5,234 | 5,230 | (0.1 | %) | 16,347 | 15,371 | (6.0 | %) | |||||||||
Total Overhead | $ | 9,286 | $ | 7,543 | (18.8 | %) | $ | 27,000 | $ | 25,080 | (7.1 | %) | |||||
Overhead as a percentage of Revenue | 15.2 | % | 11.7 | % | (350 bp) | 14.0 | % | 12.4 | % | (160 bp) | |||||||
Consolidated EBITDA | $ | 13,732 | $ | 15,696 | 14.3 | % | $ | 50,803 | $ | 53,397 | 5.1 | % | |||||
Consolidated EBITDA Margin | 22.5 | % | 24.4 | % | 190 bp | 26.3 | % | 26.5 | % | 20 bp | |||||||
Other Expenses and Interest | |||||||||||||||||
Depreciation & Amortization | $ | 4,002 | $ | 4,516 | 12.8 | % | $ | 11,874 | $ | 13,100 | 10.3 | % | |||||
Non-Cash Stock Compensation | 785 | 915 | 16.6 | % | 2,394 | 2,924 | 22.1 | % | |||||||||
Interest Expense | 3,282 | 6,285 | 91.5 | % | 9,517 | 14,763 | 55.1 | % | |||||||||
Accretion of Discount on Convertible Subordinated Notes | 1,097 | 246 | (77.6 | %) | 3,200 | 1,961 | (38.7 | %) | |||||||||
Net Loss on Early Extinguishment of Debt | — | — | — | 936 | |||||||||||||
Other, Net | 6 | 347 | 3 | 345 | |||||||||||||
Pre-Tax Income | $ | 4,560 | $ | 3,387 | (25.7 | %) | $ | 23,815 | $ | 19,368 | (18.7 | %) | |||||
Provision for Income Taxes | 1,824 | 1,028 | 9,526 | 5,423 | |||||||||||||
Tax Adjustment Related to Certain Discrete Items | (302 | ) | 159 | (243 | ) | (358 | ) | ||||||||||
Total Provision for Income Taxes | 1,522 | 1,187 | 9,283 | 5,065 | |||||||||||||
GAAP Net Income | $ | 3,038 | $ | 2,200 | (27.6 | %) | $ | 14,532 | $ | 14,303 | (1.6 | %) | |||||
Special Items, Net of Tax, except for ** | |||||||||||||||||
Accretion of Discount on Convertible Subordinated Notes ** | $ | 1,097 | $ | 246 | $ | 3,200 | $ | 1,961 | |||||||||
Net Loss on Early Extinguishment of Debt | — | — | — | 740 | |||||||||||||
Loss on Expired Management Agreement | — | 277 | — | 277 | |||||||||||||
Natural Disaster Costs | 259 | — | 259 | — | |||||||||||||
Adjusted Net Income | $ | 4,394 | $ | 2,723 | (38.0 | %) | $ | 17,991 | $ | 17,281 | (3.9 | %) | |||||
Adjusted Net Profit Margin | 7.2 | % | 4.2 | % | (300 bp) | 9.3 | % | 8.6 | % | (70 bp) | |||||||
Adjusted Basic Earnings Per Share | $ | 0.26 | $ | 0.14 | (46.2 | %) | $ | 1.08 | $ | 0.97 | (10.2 | %) | |||||
Adjusted Diluted Earnings Per Share | $ | 0.25 | $ | 0.14 | (44.0 | %) | $ | 1.00 | $ | 0.94 | (6.0 | %) | |||||
GAAP Basic Earnings Per Share | $ | 0.18 | $ | 0.11 | (38.9 | %) | $ | 0.87 | $ | 0.80 | (8.0 | %) | |||||
GAAP Diluted Earnings Per Share | $ | 0.17 | $ | 0.11 | (35.3 | %) | $ | 0.81 | $ | 0.78 | (3.7 | %) | |||||
Weighted Average Basic Shares Outstanding | 16,476 | 19,060 | 16,575 | 17,701 | |||||||||||||
Weighted Average Diluted Shares Outstanding | 17,598 | 19,161 | 17,887 | 18,273 | |||||||||||||
Reconciliation to Adjusted Consolidated EBITDA | |||||||||||||||||
Consolidated EBITDA | $ | 13,732 | $ | 15,696 | 14.3 | % | $ | 50,803 | $ | 53,397 | 5.1 | % | |||||
Natural Disaster Costs | 398 | — | 398 | — | |||||||||||||
Adjusted Consolidated EBITDA | $ | 14,130 | $ | 15,696 | 11.1 | % | $ | 51,201 | $ | 53,397 | 4.3 | % | |||||
Adjusted Consolidated EBITDA Margin | 23.1 | % | 24.4 | % | 130 bp | 26.5 | % | 26.5 | % | 0 bp | |||||||
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CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited) | |||||||
December 31, 2017 | September 30, 2018 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 952 | $ | 9,474 | |||
Accounts receivable, net | 19,655 | 17,067 | |||||
Inventories | 6,519 | 6,938 | |||||
Prepaid expenses | 2,028 | 1,778 | |||||
Other current assets | 986 | 2,798 | |||||
Total current assets | 30,140 | 38,055 | |||||
Preneed cemetery trust investments | 73,853 | 69,953 | |||||
Preneed funeral trust investments | 90,682 | 90,051 | |||||
Preneed receivables, net | 31,644 | 18,510 | |||||
Receivables from preneed trusts | 15,287 | 16,815 | |||||
Property, plant and equipment, net | 247,294 | 261,565 | |||||
Cemetery property, net | 76,331 | 74,887 | |||||
Goodwill | 287,956 | 304,733 | |||||
Intangible and other non-current assets | 18,117 | 25,338 | |||||
Cemetery perpetual care trust investments | 50,229 | 48,813 | |||||
Total assets | $ | 921,533 | $ | 948,720 | |||
LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Current portion of long-term debt and capital lease obligations | $ | 17,251 | $ | 2,445 | |||
Accounts payable | 6,547 | 5,810 | |||||
Other liabilities | 1,361 | 898 | |||||
Accrued liabilities | 17,559 | 21,665 | |||||
Total current liabilities | 42,718 | 30,818 | |||||
Long-term debt, net of current portion | 212,154 | 7,648 | |||||
Convertible subordinated notes due 2021 | 124,441 | 25,697 | |||||
Senior notes due 2026 | — | 318,956 | |||||
Obligations under capital leases, net of current portion | 6,361 | 6,211 | |||||
Deferred preneed cemetery revenue | 54,690 | 46,156 | |||||
Deferred preneed funeral revenue | 34,585 | 28,153 | |||||
Deferred tax liability | 31,159 | 31,694 | |||||
Other long-term liabilities | 3,378 | 3,155 | |||||
Deferred preneed cemetery receipts held in trust | 73,853 | 69,953 | |||||
Deferred preneed funeral receipts held in trust | 90,682 | 90,051 | |||||
Care trusts’ corpus | 49,856 | 48,396 | |||||
Total liabilities | 723,877 | 706,888 | |||||
Commitments and contingencies: | |||||||
Stockholders’ equity: | |||||||
Common stock | 226 | 257 | |||||
Additional paid-in capital | 216,158 | 243,869 | |||||
Retained earnings | 57,904 | 74,338 | |||||
Treasury stock | (76,632 | ) | (76,632 | ) | |||
Total stockholders’ equity | 197,656 | 241,832 | |||||
Total liabilities and stockholders’ equity | $ | 921,533 | $ | 948,720 | |||
8
CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share data)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
Revenues: | |||||||||||||||
Funeral | $ | 47,329 | $ | 49,843 | $ | 150,279 | $ | 156,969 | |||||||
Cemetery | 13,725 | 14,398 | 42,784 | 44,506 | |||||||||||
61,054 | 64,241 | 193,063 | 201,475 | ||||||||||||
Field costs and expenses: | |||||||||||||||
Funeral | 29,267 | 31,734 | 89,118 | 95,815 | |||||||||||
Cemetery | 8,769 | 9,268 | 26,142 | 27,183 | |||||||||||
Depreciation and amortization | 3,601 | 4,011 | 10,719 | 11,688 | |||||||||||
Regional and unallocated funeral and cemetery costs | 3,937 | 2,114 | 9,845 | 8,662 | |||||||||||
45,574 | 47,127 | 135,824 | 143,348 | ||||||||||||
Gross profit | 15,480 | 17,114 | 57,239 | 58,127 | |||||||||||
Corporate costs and expenses: | |||||||||||||||
General, administrative and other | 6,134 | 6,344 | 19,549 | 19,342 | |||||||||||
Home office depreciation and amortization | 401 | 505 | 1,155 | 1,412 | |||||||||||
6,535 | 6,849 | 20,704 | 20,754 | ||||||||||||
Operating income | 8,945 | 10,265 | 36,535 | 37,373 | |||||||||||
Interest expense | (3,282 | ) | (6,285 | ) | (9,517 | ) | (14,763 | ) | |||||||
Accretion of discount on convertible subordinated notes | (1,097 | ) | (246 | ) | (3,200 | ) | (1,961 | ) | |||||||
Net loss on early extinguishment of debt | — | — | — | (936 | ) | ||||||||||
Other, net | (6 | ) | (347 | ) | (3 | ) | (345 | ) | |||||||
Income before income taxes | 4,560 | 3,387 | 23,815 | 19,368 | |||||||||||
Provision for income taxes | (1,824 | ) | (1,028 | ) | (9,526 | ) | (5,423 | ) | |||||||
Tax adjustment related to certain discrete items | 302 | (159 | ) | 243 | 358 | ||||||||||
Net provision for income taxes | (1,522 | ) | (1,187 | ) | (9,283 | ) | (5,065 | ) | |||||||
Net income | $ | 3,038 | $ | 2,200 | $ | 14,532 | $ | 14,303 | |||||||
Basic earnings per common share: | $ | 0.18 | $ | 0.11 | $ | 0.87 | $ | 0.80 | |||||||
Diluted earnings per common share: | $ | 0.17 | $ | 0.11 | $ | 0.81 | $ | 0.78 | |||||||
Dividends declared per common share | $ | 0.050 | $ | 0.075 | $ | 0.150 | $ | 0.225 | |||||||
Weighted average number of common and common equivalent shares outstanding: | |||||||||||||||
Basic | 16,476 | 19,060 | 16,575 | 17,701 | |||||||||||
Diluted | 17,598 | 19,161 | 17,887 | 18,273 | |||||||||||
9
CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
Nine Months Ended September 30, | |||||||
2017 | 2018 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 14,532 | $ | 14,303 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 11,874 | 13,100 | |||||
Provision for losses on accounts receivable | 1,737 | 1,511 | |||||
Stock-based compensation expense | 2,394 | 2,924 | |||||
Deferred income tax expense | 1,215 | 3,547 | |||||
Amortization of deferred financing costs | 614 | 420 | |||||
Amortization of capitalized commissions on preneed contracts | 3,200 | 1,961 | |||||
Accretion of discount on convertible subordinated notes | — | 154 | |||||
Amortization of debt discount on senior notes | — | 449 | |||||
Net loss on early extinguishment of debt | — | 936 | |||||
Net loss on sale of businesses and disposal of other assets | 341 | 408 | |||||
Changes in operating assets and liabilities that provided (required) cash: | |||||||
Accounts and preneed receivables | (2,594 | ) | (3,010 | ) | |||
Inventories and other current assets | 2,356 | (1,911 | ) | ||||
Intangible and other non-current assets | 340 | (345 | ) | ||||
Preneed funeral and cemetery trust investments | (5,114 | ) | 4,419 | ||||
Accounts payable | (3,510 | ) | (735 | ) | |||
Accrued and other liabilities | (2,790 | ) | 3,761 | ||||
Deferred preneed funeral and cemetery revenue | 2,098 | 6,292 | |||||
Deferred preneed funeral and cemetery receipts held in trust | 4,132 | (9,467 | ) | ||||
Net cash provided by operating activities | 30,825 | 38,717 | |||||
Cash flows from investing activities: | |||||||
Acquisition and land for new construction | (723 | ) | (37,970 | ) | |||
Net proceeds from the sale of other assets | 405 | — | |||||
Capital expenditures | (13,129 | ) | (9,037 | ) | |||
Net cash used in investing activities | (13,447 | ) | (47,007 | ) | |||
Cash flows from financing activities: | |||||||
Payments against the term loan | (8,438 | ) | (127,500 | ) | |||
Borrowings from the revolving credit facility | 75,100 | 96,000 | |||||
Payments against the revolving credit facility | (67,300 | ) | (188,000 | ) | |||
Payment of debt issuance costs related to long-term debt | — | (1,551 | ) | ||||
Redemption of the 2.75% convertible subordinated notes | — | (75,229 | ) | ||||
Payment of transaction costs related to the redemption of the 2.75% convertible subordinated notes | — | (845 | ) | ||||
Proceeds from the issuance of the 6.625% senior notes | — | 320,125 | |||||
Payments of debt issuance costs related to the 6.625% senior notes | — | (1,367 | ) | ||||
Payments on other long-term debt and obligations under capital leases | (1,084 | ) | (1,031 | ) | |||
Payments on contingent consideration recorded at acquisition date | (101 | ) | (138 | ) | |||
Proceeds from the exercise of stock options and employee stock purchase plan contributions | 1,296 | 1,075 | |||||
Purchase of treasury stock | (16,366 | ) | — | ||||
Taxes paid on restricted stock vestings and exercises of non-qualified options | (509 | ) | (651 | ) | |||
Dividends on common stock | (2,503 | ) | (4,076 | ) | |||
Net cash provided by (used in) financing activities | (19,905 | ) | 16,812 | ||||
Net increase (decrease) in cash and cash equivalents | (2,527 | ) | 8,522 | ||||
Cash and cash equivalents at beginning of period | 3,286 | 952 | |||||
Cash and cash equivalents at end of period | $ | 759 | $ | 9,474 | |||
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NON-GAAP FINANCIAL MEASURES
This press release uses Non-GAAP financial measures to present the financial performance of the Company. Our non-GAAP reporting provides a transparent framework of our operating and financial performance that reflects the earning power of the Company as an operating and consolidation platform.
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 to compare our results to previous periods, to provide insight into the underlying long-term performance trends in our business and to provide the opportunity to differentiate ourselves as the best consolidation platform in the industry against the performance of other funeral and cemetery companies.
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 “Special Items”, “Adjusted Net Income”, “Consolidated EBITDA”, “Adjusted Consolidated EBITDA”, “Adjusted Consolidated EBITDA Margin”, “Free Cash Flow”, “Funeral, Cemetery and Financial EBITDA”, “Total Field EBITDA”, “Total Field EBITDA Margin”, “Divested Revenue”, “Divested EBITDA”, “Divested EBITDA Margin”, “Adjusted Basic Earnings Per Share” and “Adjusted Diluted Earnings Per Share” 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:
• | Special Items are defined as charges or credits included in our GAAP financial statements that can vary from period to period and are not reflective of costs incurred in the ordinary course of our operations. Special Items are typically taxed at the federal statutory rate, except for the accretion of the discount on Convertible Subordinated Notes, as this is a non-tax deductible item. |
• | Adjusted Net Income is defined as net income plus adjustments for Special Items and other expenses or gains that we believe do not directly reflect our core operations and may not be indicative of our normal business operations. |
• | Consolidated EBITDA is defined as net income 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 other expenses or gains that we believe do not directly reflect our core operations and may not be indicative of our normal business operations. |
• | Adjusted Consolidated EBITDA Margin is defined as Adjusted Consolidated EBITDA as a percentage of revenue. |
• | 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, excluding depreciation and amortization, regional and unallocated funeral costs and Financial EBITDA related to the Funeral Home segment. |
• | Cemetery Field EBITDA is defined as Cemetery Gross Profit, excluding depreciation and amortization, regional and unallocated cemetery costs and Cemetery Financial EBITDA related to the Cemetery segment. |
• | Funeral Financial EBITDA is defined as Funeral Financial Revenue less Funeral Financial Expenses. |
• | Cemetery Financial EBITDA is defined as Cemetery Financial Revenue less Cemetery Financial Expenses. |
• | Total Field EBITDA is defined as Gross Profit, excluding depreciation and amortization, regional and unallocated funeral and cemetery costs. |
• | Total Field EBITDA Margin is defined as Total Field EBITDA as a percentage of revenue. |
• | Divested Revenue is defined as revenues from one funeral home business sold during 2017 and three cemetery businesses that we ceased to operate on September 30, 2018, as a result of an expired management agreement. |
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• | Divested EBITDA is defined as Divested Revenue, less field level and financial expenses related to the funeral home business sold and the three cemetery businesses related to the expired management agreement noted above. |
• | Divested EBITDA Margin is defined as Divested EBITDA as a percentage of Divested Revenue. |
• | 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. |
Funeral Field EBITDA and Cemetery Field EBITDA
Our operations are reported in two business segments: Funeral Home Operations and Cemetery Operations. Our Field level results highlight trends in volumes, Revenues, Field EBITDA (the individual business’ cash earning power / locally controllable business profit) and Field EBITDA Margin (the individual business’ controllable profit margin).
Funeral Field EBITDA and Cemetery Field EBITDA are defined above. Gross Profit is defined as Revenue less “Field costs and expenses” - a line item encompassing four areas of costs: i) Funeral field costs, ii) Cemetery field costs, iii) depreciation and amortization and iv) regional and unallocated costs. Funeral and Cemetery field costs include funeral merchandise costs, cemetery merchandise costs, operating expenses, labor and other related expenses incurred at the business level.
Regional and unallocated funeral and cemetery costs presented in our GAAP statement consist primarily of salaries and benefits of our Regional leadership, incentive compensation opportunity to our Field employees and other related costs for field infrastructure. These costs, while necessary to operate our businesses as currently operated within our unique, decentralized platform, are not controllable operating expenses at the Field level as the composition, structure and function of these costs are determined by Executive leadership in the Houston Support Center. These costs are components of our overall overhead platform presented within Consolidated EBITDA and Adjusted Consolidated EBITDA. We do not openly or indirectly “push down” any of these expenses to the individual business’ field level margins.
We believe that our “Regional and unallocated funeral and cemetery costs” are necessary to support our decentralized, high performance culture operating framework, and as such, are included in Consolidated EBITDA and Adjusted Consolidated EBITDA, which more accurately reflects the cash earning power of the Company as an operating and consolidation platform.
Consolidated EBITDA and Adjusted Consolidated EBITDA
Consolidated EBITDA and Adjusted Consolidated EBITDA are defined above. Our Adjusted Consolidated EBITDA include adjustments for Special Items and other expenses or gains that we believe do not directly reflect our core operations and may not be indicative of our normal business operations.
How These Measures Are Useful
When used in conjunction with GAAP financial measures, our Field EBITDA, Consolidated EBITDA and Adjusted Consolidated EBITDA are supplemental measures of operating performance that we believe are useful measures to facilitate comparisons to our historical consolidated and business level performance and operating results.
We believe our presentation of Adjusted Consolidated EBITDA, key metric used internally by our management, provides investors with a supplemental view of our operating performance that facilitates analysis and comparisons of our ongoing business operations because they exclude items that may not be indicative of our ongoing operating performance.
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Limitations of the Usefulness of These Measures
Our Field EBITDA, Consolidated EBITDA and Adjusted Consolidated EBITDA are not necessarily comparable to similarly titled measures used by other companies due to different methods of calculation. Our presentation is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. Funeral Field EBITDA and Cemetery Field EBITDA are not consolidated measures of profitability.
Field EBITDA excludes certain costs presented in our GAAP statement that we do not allocate to the individual business’ field level margins, as noted above. A reconciliation of Field EBITDA to Gross Profit, the most directly comparable GAAP measure, is set forth below.
Consolidated EBITDA excludes certain items that we believe do not directly reflect our core operations and may not be indicative of our normal business operations. A reconciliation of Consolidated EBITDA to Net Income, the most directly comparable GAAP measure, is set forth below.
Therefore, these measures may not provide a complete understanding of our performance and should be reviewed in conjunction with our GAAP financial measures.
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 to Adjusted Net Income for the three and nine months ended September 30, 2017 and 2018 (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
Net Income | $ | 3,038 | $ | 2,200 | $ | 14,532 | $ | 14,303 | |||||||
Special Items, Net of Tax, except for ** | |||||||||||||||
Accretion of Discount on Convertible Subordinated Notes ** | 1,097 | 246 | 3,200 | 1,961 | |||||||||||
Net Loss on Early Extinguishment of Debt | — | — | — | 740 | |||||||||||
Loss on Expired Management Agreement | — | 277 | — | 277 | |||||||||||
Natural Disaster Costs | 259 | — | 259 | — | |||||||||||
Adjusted Net Income | $ | 4,394 | $ | 2,723 | $ | 17,991 | $ | 17,281 | |||||||
** Special items are typically taxed at the federal statutory rate, except for the Accretion of the Discount on Convertible Subordinated Notes, as this is a non-tax deductible item. | |||||||||||||||
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Reconciliation of Net Income to Consolidated EBITDA and Adjusted Consolidated EBITDA for the three and nine months ended September 30, 2017 and 2018 (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
Net Income | $ | 3,038 | $ | 2,200 | $ | 14,532 | $ | 14,303 | |||||||
Net Tax Provision | 1,522 | 1,187 | 9,283 | 5,065 | |||||||||||
Pre-Tax Income | 4,560 | 3,387 | 23,815 | 19,368 | |||||||||||
Interest Expense | 3,282 | 6,285 | 9,517 | 14,763 | |||||||||||
Accretion of Discount on Convertible Subordinated Notes | 1,097 | 246 | 3,200 | 1,961 | |||||||||||
Net Loss on Early Extinguishment of Debt | — | — | — | 936 | |||||||||||
Non-Cash Stock Compensation | 785 | 915 | 2,394 | 2,924 | |||||||||||
Depreciation & Amortization | 4,002 | 4,516 | 11,874 | 13,100 | |||||||||||
Other, Net | 6 | 347 | 3 | 345 | |||||||||||
Consolidated EBITDA | $ | 13,732 | $ | 15,696 | $ | 50,803 | $ | 53,397 | |||||||
Adjusted For: | |||||||||||||||
Natural Disaster Costs | 398 | — | 398 | — | |||||||||||
Adjusted Consolidated EBITDA | $ | 14,130 | $ | 15,696 | $ | 51,201 | $ | 53,397 | |||||||
Revenue | $ | 61,054 | $ | 64,241 | $ | 193,063 | $ | 201,475 | |||||||
Adjusted Consolidated EBITDA Margin | 23.1 | % | 24.4 | % | 26.5 | % | 26.5 | % | |||||||
Reconciliation of Funeral and Cemetery Gross Profit to Field EBITDA for the three and nine months ended September 30, 2017 and 2018 (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
Funeral Gross Profit (GAAP) | $ | 12,570 | $ | 13,644 | $ | 45,951 | $ | 45,962 | |||||||
Depreciation & Amortization | 2,431 | 2,732 | 7,329 | 7,936 | |||||||||||
Regional & Unallocated Costs | 3,061 | 1,733 | 7,881 | 7,256 | |||||||||||
Funeral Financial EBITDA | (1,703 | ) | (1,786 | ) | (5,531 | ) | (5,811 | ) | |||||||
Funeral Divested EBITDA | (70 | ) | — | (216 | ) | 3 | |||||||||
Funeral Field EBITDA | $ | 16,289 | $ | 16,323 | $ | 55,414 | $ | 55,346 | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
Cemetery Gross Profit (GAAP) | $ | 2,910 | $ | 3,470 | $ | 11,288 | $ | 12,165 | |||||||
Depreciation & Amortization | 1,170 | 1,279 | 3,390 | 3,752 | |||||||||||
Regional & Unallocated Costs | 876 | 381 | 1,964 | 1,406 | |||||||||||
Cemetery Financial EBITDA | (1,828 | ) | (1,716 | ) | (5,700 | ) | (5,194 | ) | |||||||
Cemetery Divested EBITDA | (259 | ) | (407 | ) | (1,208 | ) | (1,376 | ) | |||||||
Cemetery Field EBITDA | $ | 2,869 | $ | 3,007 | $ | 9,734 | $ | 10,753 | |||||||
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Components of Total Field EBITDA for the three and nine months ended September 30, 2017 and 2018 (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
Funeral Field EBITDA | $ | 16,289 | $ | 16,323 | $ | 55,414 | $ | 55,346 | |||||||
Cemetery Field EBITDA | 2,869 | 3,007 | 9,734 | 10,753 | |||||||||||
Funeral Financial EBITDA | 1,703 | 1,786 | 5,531 | 5,811 | |||||||||||
Cemetery Financial EBITDA | 1,828 | 1,716 | 5,700 | 5,194 | |||||||||||
Funeral Divested EBITDA | 70 | — | 216 | (3 | ) | ||||||||||
Cemetery Divested EBITDA | 259 | 407 | 1,208 | 1,376 | |||||||||||
Total Field EBITDA | $ | 23,018 | $ | 23,239 | $ | 77,803 | $ | 78,477 | |||||||
Reconciliation of GAAP Basic Earnings Per Share to Adjusted Basic Earnings Per Share for the three and nine months ended September 30, 2017 and 2018:
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
GAAP Basic Earnings Per Share | $ | 0.18 | $ | 0.11 | $ | 0.87 | $ | 0.80 | |||||||
Special Items | 0.08 | 0.03 | 0.21 | 0.17 | |||||||||||
Adjusted Basic Earnings Per Share | $ | 0.26 | $ | 0.14 | $ | 1.08 | $ | 0.97 | |||||||
Reconciliation of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share for the three and nine months ended September 30, 2017 and 2018:
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||
2017 | 2018 | 2017 | 2018 | ||||||||||||
GAAP Diluted Earnings Per Share | $ | 0.17 | $ | 0.11 | $ | 0.81 | $ | 0.78 | |||||||
Special Items | 0.08 | 0.03 | 0.19 | 0.16 | |||||||||||
Adjusted Diluted Earnings Per Share | $ | 0.25 | $ | 0.14 | $ | 1.00 | $ | 0.94 | |||||||
Supplemental Information:
Funeral homes and cemeteries purchased after December 31, 2013 are referred to as “Acquired” in our Trend Report. This classification of acquisitions has been important to management and investors in monitoring the results of these businesses and to gauge the leveraging performance contribution that a selective acquisition program can have on total company performance.
The presentation below highlights the impact of our 2013 Acquired Portfolio that moved from Acquired to Same Store beginning January 1, 2018 (in thousands):
Three Months Ended September 30, 2017 | Nine Months Ended September 30, 2017 | ||||||||||||||
Revenue | EBITDA | Revenue | EBITDA | ||||||||||||
2013 Acquired Portfolio | $ | 897 | $ | 327 | $ | 3,041 | $ | 1,275 | |||||||
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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, but are not limited to, statements regarding 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”, “seek”, “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:
• | our ability to find and retain skilled personnel; |
• | our ability to execute our growth strategy; |
• | the effects of competition; |
• | the execution of our Standards Operating, 4E Leadership and Strategic Acquisition Models; |
• | changes in the number of deaths in our markets; |
• | changes in consumer preferences; |
• | our ability to generate preneed sales; |
• | 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; |
• | the timely and full payment of death benefits related to preneed funeral contracts funded through life insurance contracts; |
• | the financial condition of third-party insurance companies that fund our preneed funeral contracts; |
• | increased or unanticipated costs, such as insurance or taxes; |
• | our level of indebtedness and the cash required to service our indebtedness; |
• | recent changes in federal income tax laws and regulations and the implementation and interpretation of these laws and regulations by the Internal Revenue Service; |
• | effects of the application of other 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 most recent Annual Report on Form 10-K. 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.
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