Carriage Services Reports Fourth Quarter and Year End 2006 Results and Reaffirms 2007 Outlook
HOUSTON, March 7, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Carriage Services, Inc. (NYSE: CSV) today reported financial results for the quarter and year ended December 31, 2006. Results for the fourth quarter 2006 were as follows:
* Revenues of $37.7 million compared to $37.3 million in the prior year
quarter
* EBITDA from continuing operations of $9.0 million compared to EBITDA
of $8.0 million in the prior year quarter
* Diluted EPS from continuing operations of $0.08 compared to $0.02(1)
for the fourth quarter of 2005
* Free cash flow totaled $7.9 million compared to $8.3 million for the
fourth quarter of 2005
Results for the year ended December 31, 2006 were as follows:
* Revenues of $151.1 million compared to $149.2 million in the prior
year
* EBITDA from continuing operations of $33.1 million compared to EBITDA
of $33.4. million in the prior year
* Diluted EPS from continuing operations of $0.20 compared to $(0.05)
for 2005
* Free cash flow totaled $11.0 million compared to $8.9 million for 2005
(1) Previously reported as $0.03 because of tax reclassification between
continuing operations and discontinued operations
"We ended 2006 on a positive note by repositioning the company for growth and more profitable operating results in 2007," stated Melvin Payne, Chairman and Chief Executive Officer. "Our financial results for the fourth quarter were significantly better than 2005, and we finished the year strong from a liquidity and cash flow perspective by meeting our goal of ending the year with $41 million of cash and corporate investments." Carriage generated $7.9 million of free cash flow during the fourth quarter and $11 million of free cash flow for the full year. Carriage defines free cash flow as cash provided by operating activities less all capital expenditures.
Consolidated Operating Results
Diluted earnings per share from continuing operations for the fourth quarter increased from $0.02 in 2005 to $0.08 in the current year. For the year, the diluted earnings per share from continuing operations was $0.20 compared to pro forma diluted earnings per share from continuing operations of $0.20 in 2005 (excluding a charge equal to $0.25 per share related to the additional interest costs incurred in connection with the senior debt refinancing in the first quarter).
Reconciliations of EBITDA and other non-GAAP financial measures are located at the end of this press release.
Funeral Operations
Key indicators for Carriage's funeral operations and financial results for the fourth quarter when compared to the same period the previous year are as follows:
* Funeral revenues from continuing operations increased 1.9 percent,
from $28.4 million to $29.0 million
* Same store funeral revenues increased 2.2 percent, from $28.3 million
to $28.9 million
* Same store funeral contracts increased 0.5 percent, from 5,528 to
5,557
* Same store average revenue per contract increased by $83, or 1.6
percent, from $5,121 to $5,204
The Company's operations are organized into three distinct geographic regions; East, Central and West. During the first nine months of 2006, the Central Region experienced lower revenues and declining profitability. In recognition of these issues, initiatives were implemented in September 2006 to increase pricing, reduce discretionary discounts and reduce costs. New leadership was also recruited for certain businesses in the region. The result in the fourth quarter was a year over year increase in field level EBITDA of $0.9 million on increased revenues of $0.3 million.
For the fourth quarter, the average revenue per burial contract increased 5.0 percent to $7,238 and the average revenue per cremation contract increased 5.3 percent to $2,650. The cremation rate for the fourth quarter of 2006 was 34.8 percent, a 200 basis point increase over the fourth quarter of 2005.
For the full year, funeral revenues increased $3.3 million or 2.9 percent. Same store revenue increased 2.6 percent, consisting of a 0.5 percent decrease in same store contracts from 22,342 to 22,235 and a 3.1 percent increase in the same store revenue per contract from $4,995 to $5,149. The cremation rate increased from 32.8 percent to 34.3 percent, and the average revenue per cremation service increased 8.4 percent from $2,431 to $2,636. Preneed commission income totaled $2.3 million for 2006 and 2005. Funeral gross margin increased slightly from 26.1 percent to 26.2 percent.
Cemetery Operations
Key indicators for Carriage's cemetery operations and financial results for the fourth quarter when compared to the same period last year are as follows:
* Cemetery revenues declined 1.5 percent to $8.7 million
* Preneed sales of property declined 4.9 percent to $3.0 million
* Atneed revenues increased 5.0 percent to $3.1 million
* Financial revenues (trust fund earnings and finance charges) increased
$0.4 million to $1.4 million)
* Cemetery gross profit increased from $1.0 million to $1.5 million
Cemetery income from operations (income before financial revenues and overhead) was relatively flat compared to the fourth quarter of 2005 as controllable costs in the cemetery businesses were managed in line with the lower revenue. Lower earnings from Rolling Hills Memorial Park, the Company's largest business, continued to negatively impact the field level EBITDA of the cemetery operations in the quarter by $0.3 million. Cemetery gross profit for the current year quarter increased because financial revenues were higher. Financial revenues increased $0.4 million due to higher investment returns in the preneed trusts and higher interest earned on financial preneed contracts.
Key indicators in cemetery operations include the number and average price for our preneed property sales because the sale of preneed property builds heritage in the cemetery. For the full year, Carriage sold 8.5 percent fewer preneed interments, but at a 1.4 percent higher sales price compared to 2005. Cemetery revenues declined $1.4 million, or 3.7 percent. Financial revenues exceeded the prior year amount by $0.2 million. Cemetery gross profit for the year declined $2.6 million to $3.9 million because the profitability of Rolling Hills declined by $2.6 million due to less revenue from preneed sales of interments and one-time environmental remediation costs of $0.8 million.
Other
General and administrative expenses decreased $0.3 million and $1.1 million compared to the fourth quarter of 2005 and prior year, respectively; because the Company has reduced professional fees related to compliance with the Sarbanes-Oxley Act and eliminated the costs to implement a new cemetery system in 2005.
The Company sustained a loss from discontinued operations of $1.3 million in the fourth quarter of 2006 compared to income of $0.3 million in the fourth quarter of 2005 primarily due to a pretax impairment change totaling $2.1 for a funeral business that was sold in the first quarter of 2007. For the year 2006, the loss from discontinued operations totaled $5.2 million, the result of impairment changes for businesses sold and held for sale compared to income of $1.9 million for the year 2005.
Retirement of Director
"Mark Wilson has decided to retire and is not standing for re-election in May 2007 to our Board of Directors," stated Melvin Payne, Chairman and Chief executive Officer. "Mark joined our Board in 1997 when he merged his businesses in California into our company and has been an important source of counsel as we grew our presence in the West. I would like to personally thank Mark for his ten years of service to Carriage."
2007 Outlook
Carriage's 2007 Outlook was published in the Company's press release dated February 8, 2007 and is repeated here for ease of reference.
Carriage's 2007 Outlook is intended to estimate results from continuing operations based upon same-store funeral volumes and preneed cemetery property sales. Management believes it is appropriate to present a range of outcomes because of the uncertainties in estimating volumes, preneed sales, average revenue per service and other key factors.
The 2007 Outlook is based upon the following key assumptions:
* The upper end of the Outlook range assumes funeral same-store volumes
are flat compared to 2006 and the lower end assumes a 2 percent
decrease.
* The average revenue per funeral contract is assumed to increase
approximately 3.0 percent. This increase assumes the cremation rate
for our businesses will increase by 100 basis points.
* Cemetery net operating profit increases by 8-10% and cemetery
operating margin by 500 basis points compared to 2006.
* Includes estimated results from the recently acquired businesses in
Corpus Christi, Texas and the pending acquisition of a combination
business in Ventura County, California (currently expected to close in
the first quarter of 2007). Excludes divestitures identified as of
December 31, 2006 and classified as Discontinued Operations.
* No borrowings on our $35 million bank credit facility during 2007.
* Approximately $6.5 million of capital expenditures, which does not
include any growth opportunities.
* Management expects to use free cash flow (cash flow from operations
less capital expenditures) to acquire additional businesses if and
when available on acceptable terms. In the Outlook, free cash flow is
invested in short-term investments which are expected to increase to
approximately $38-40 million by December 31, 2007.
2007 Outlook
New Reporting Format
(in millions, except per share amounts)
Range Range Midpoint %Midpoint
Revenue
Revenues $162 - $165 $163.5 100%
Field level EBITDA $59 - $61 $60 36.7%
Variable overhead $4.5 - $5.5 $5.0 3.0%
Regional fixed overhead $5.4 $5.4 3.3%
Corporate fixed overhead $9.7 $9.7 5.9%
Total overhead $19.6 - $20.6 $20.1 12.3%
Consolidated EBITDA $38 - $40 $39 23.9%
Interest $17 $17 10.4%
Depreciation and amortization $10 $10 6.1%
Income taxes $4 - $5 $4.5 2.8%
Net earnings from continuing
operations $7 - $8 $7.5 4.6%
Diluted earnings
per share $0.38 - 0.42 $0.40 NA
Free Cash Flow $14 - $16 $15 9.2%
The primary drivers of dramatically improved year over year financial results will be increases in 2007 field level EBITDA as follows:
* The turnaround plan for the Central Region is on track and should be
substantially complete by the end of the first quarter. We expect the
Central Region to generate at least an additional $2 million of field
level EBITDA during 2007 compared to 2006 and to achieve a field level
EBITDA margin of approximately 36%.
* As new cemetery leadership settles in and gains traction, we expect
our cemetery preneed property sales and operating margins to improve
substantially in 2007 over 2006, starting out with gradual improvement
that gains momentum during the year. We revised and simplified our
cemetery Standards to begin 2007 with heavy weightings on preneed
property sales and operating margin ranges customized for the size and
market profile of each business. And importantly, we expect Rolling
Hills to show a year over year increase in field level EBITDA of at
least $2 million, as our turnaround program gains traction under new
operational and administrative leadership and a revitalized and
strengthened sales organization.
* We closed on our Seaside acquisition effective January 1, 2007 and
will likely close on our Conejo Mountain acquisition before the end of
the first quarter. We expect these larger 'A' strategically ranked
combination businesses to add at least $2 million to our field level
EBITDA performance in 2007.
Investment Information
Investors, analysts and the general public may visit the Investor Relations section on Carriage's website http://www.carriageservices.com to obtain additional information on the Company. The Company has not scheduled a conference call to discuss the press release primarily because the information was the subject of the conference call held on February 9, 2007.
Carriage Services is the fourth largest publicly traded death care company. As of March 7, 2007, Carriage operates 133 funeral homes and 29 cemeteries in 28 states.
Use of Non-GAAP Financial Measures
This press release uses the following Non-GAAP financial measures "free cash flow and EBITDA". Both free cash flow and EBITDA are used by investors to value common stock. The Company considers free cash flow to be an important indicator of its ability to generate cash for acquisitions and other strategic investments. The Company has included EBITDA in this press release because it is widely used by investors to compare the Company's financial performance with the performance of other deathcare companies. The Company also uses EBITDA to monitor and compare the financial performance of its operations. EBITDA does not give effect to the cash the Company must use to service its debt or pay its income taxes and thus does not reflect the funds actually available for capital expenditures. In addition, the Company's presentation of EBITDA may not be comparable to similarly titled measures other companies report. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported operating results or cash flow from operations or any other measure of performance as determined in accordance with GAAP.
Certain statements made herein or elsewhere by, or on behalf of, the Company that are not historical facts are intended to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on assumptions that the Company believes are reasonable; however, many important factors, as discussed under "Forward- Looking Statements and Cautionary Statements" in the Company's Annual Report and Form 10-K for the year ended December 31, 2005, could cause the Company's results in the future to differ materially from the forward-looking statements made herein and in any other documents or oral presentations made by, or on behalf of, the Company. The Company assumes no obligation to update or publicly release any revisions to forward-looking statements made herein or any other forward-looking statements made by, or on behalf of, the Company. A copy of the Company's Form 10-K, and other Carriage Services information and news releases, are available at http://www.carriageservices.com .
-- tables to follow --
CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share amounts)
For the Three Months Ended For the Twelve Months Ended
12/31/05 12/31/06 12/31/05 12/31/06
Funeral revenues $28,420 $28,958 $111,643 $114,927
Funeral costs and
expenses 21,442 20,741 82,451 84,818
Funeral gross profit 6,978 8,217 29,192 30,109
Funeral gross margin 24.6% 28.4% 26.1% 26.2%
Cemetery revenues 8,840 8,708 37,555 36,159
Cemetery costs and
expenses 7,813 7,242 31,030 32,216
Cemetery gross profit 1,027 1,466 6,525 3,943
Cemetery gross margin 11.6% 16.8% 17.4% 10.9%
Total revenues 37,260 37,666 149,198 151,086
Total costs and expenses 29,255 27,983 113,481 117,034
Total gross profit 8,005 9,683 35,717 34,052
Total gross margin 21.5% 25.7% 23.9% 22.5%
General and
administrative expenses 3,463 3,115 12,383 11,258
Other (income) (822) --- (822) ---
Operating income 5,364 6,568 24,156 22,794
Operating margin 14.4% 17.4% 16.2% 15.1%
Interest expense 4,649 4,638 18,599 18,514
Additional interest
costs of debt refinancing --- --- 6,933 ---
Other expense (income),
net (176) (447) 73 (1,921)
Total interest expense
and other 4,473 4,191 25,605 16,593
Income (loss) before
income taxes from
continuing operations 891 2,377 (1,449) 6,201
(Provision) benefit for
income taxes (430) (941) 456 (2,375)
Net income (loss) from
continuing operations
before cumulative effect
of change in accounting
principle 461 1,436 (993) 3,826
Discontinued operations:
Income (loss) from
discontinued operations
before income taxes 364 (2,082) 2,839 (7,943)
Income tax (provision)
benefit (32) 827 (955) 2,701
Income (loss) from
discontinued
operations 332 (1,255) 1,884 (5,242)
Cumulative effect of
change in accounting
principle, net of tax
benefit of $13,078 --- --- (22,756) ---
Net income (loss) $793 $181 $(21,865) $(1,416)
Basic earnings (loss)
per share:
Continuing operations $0.02 $0.08 $(0.05) $0.21
Discontinued operations 0.02 (0.07) 0.10 (0.29)
Cumulative effect of
change in accounting
principle --- --- (1.24) ---
Net income (loss) $0.04 $0.01 $(1.19) $ (0.08)
Diluted earnings (loss)
per share:
Continuing operations $0.02 $0.08 $(0.05) $0.20
Discontinued operations 0.02 (0.07) 0.10 (0.27)
Cumulative effect of
change in accounting
principle --- --- (1.24) ---
Net income (loss) $0.04 $0.01 $(1.19) $ (0.07)
Weighted average number
of common shares
outstanding:
Basic 18,453 18,584 18,334 18,545
Diluted 18,914 18,959 18,334 18,912
CARRIAGE SERVICES, INC.
Selected Financial Data
December 31, 2006
(unaudited)
Selected Balance Sheet Data: 12/31/05 12/31/2006
Cash and short-term investments $24,857 $36,011
Long-term corporate investments --- 5,000
Total seniordebt [a] 141,421 140,179
Days sales in funeral accounts receivable 24.4 23.2
Net Senior Debt to total capitalization [b] 38.0 35.4
Net Senior Debt to EBITDA from continuing
operations (rolling twelve months) [b] 3.31 3.12
[a] -- Senior debt does not include the convertible junior subordinated
debentures.
[b] -- Net Senior debt is Senior Debt less cash and short term
investments
Reconciliation of Non-GAAP Financial Measures:
This press release includes the use of certain financial measures that are
not GAAP measures. The non-GAAP financial measures are presented for
additional information and are reconciled to their most comparable GAAP
measures below.
Three months Three months
ended ended
12/31/05 12/31/06
Net income from continuing operations
before change in accounting principle $461 $1,436
Interest expense, net of interest income 4,467 4,188
Depreciation and amortization 2,612 2,441
Income taxes (benefit) 430 941
EBITDA from continuing operations $7,970 $9,006
Twelve months Twelve months
ended ended
12/31/05 12/31/06
Net income (loss) from continuing operations
before change in accounting principle $ (993) $3,826
Interest expense, net of interest income 25,023 17,107
Depreciation and amortization 9,861 9,834
Income taxes (benefit) (456) 2,375
EBITDA from continuing operations $33,435 $33,142
Reconciliation of Non-GAAP Financial Measures Continued:
Three months Three months
ended ended
12/31/05 12/31/06
Cash provided by operating activities
from continuing operations $10,813 $9,380
Less capital expenditures from
continuing operations (2,537) (1,511)
Free cash flow from continuing operations $8,276 $7,869
Twelve months Twelve months
ended ended
12/31/05 12/31/06
Cash provided by (used in) operating
activities from continuing operations $700 $17,431
Additional interest paid on the early
retirement of the old senior notes [c] 5,955 ---
Deferred distributions on subordinated
debentures [c] 10,345 ---
Adjusted cash provided by operating
activities 17,000 17,431
Less capital expenditures from
continuing operations (8,125) (6,387)
Adjusted free cash flow and free cash
flow, respectively, from continuing operations $8,875 $11,044
[c] -- For the period ended 12/31/05, we added the additional interest
paid on the senior notes and the payment of the cumulative
deferred distributions on the subordinated debentures when we
refinanced our senior debt during the quarter ended 3/31/05.
Contacts: Mel Payne, Chairman & CEO
Joe Saporito, CFO
Carriage Services, Inc.
713-332-8400
Ken Dennard / ksdennard@drg-e.com
Lisa Elliott / lelliott@drg-e.com
DRG&E / 713-529-6600
SOURCE Carriage Services, Inc.
Mel Payne, Chairman & CEO, or Joe Saporito, CFO, both of Carriage Services, Inc., +1-713-332-8400; or Ken Dennard, ksdennard@drg-e.com , or Lisa Elliott, lelliott@drg-e.com , both of DRG&E, +1-713-529-6600, for Carriage Services, Inc.
http://www.carriageservices.com
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