Carriage Services Reports First Quarter 2008 Results
-- Revenue Increases 11% -- Consolidated EBITDA Increases 8.5% -- Diluted EPS Increases to $0.17 -- Rolling Four Quarter Outlook Maintained
HOUSTON, May 8 /PRNewswire-FirstCall/ -- Carriage Services, Inc. (NYSE: CSV) today announced first quarter results and maintained its Rolling Four Quarter Outlook. Please go to the Investor homepage of Carriage's web site at http://www.carriageservices.com for a link to the Press Release that includes properly formatted Annual and Quarterly Trend Reports as well as the data tables, which are downloadable in Excel® format. Results of continuing operations for the first quarter of 2008 compared to the first quarter of 2007 were as follows:
-- Revenues of $47.2 million compared to $42.5 million
-- Consolidated EBITDA of $12.5 million compared to $11.5 million.
-- Consolidated EBITDA Margin of 26.5% compared to 27.1%.
-- Diluted earnings per share of $0.17 compared to $0.16.Melvin C. Payne, Chairman and Chief Executive Officer, stated, "It was an outstanding quarter for our same store funeral operations and our recently acquired portfolio, but our performance increase over last year was materially impacted by weakness in our same store cemetery portfolio and by extra variable legal costs on a few litigation cases, which together resulted in a hit to EPS of $0.065 compared to the first quarter of 2007. We expect the weak cemetery performance, which was caused by the termination of the sales leadership and programs at several of our larger businesses late in 2007, to trend higher during the balance of 2008 and into 2009 as we rebuild these programs under new leadership.
"We were especially pleased by our margin performance. Despite the 1,390 basis points decline to 24.5% in same store cemetery Field EBITDA Margin, Consolidated EBITDA Margin declined only 60 basis points to a still high 26.5% due to a 180 basis point increase to 42.5% in same store funeral Field EBITDA Margin, a 760 basis point increase to 35.5% in acquisition portfolio Field EBITDA Margin and a decline of 60 basis points to 11.9% in total overhead as a percent of revenue. As we define the sustainable earning power of the company by Consolidated EBITDA Margin, there was much to celebrate in the first quarter and a few areas on which to focus that will improve the Consolidated EBITDA Margin trend over the next four quarters. Accordingly, we are maintaining our Rolling Four Quarter Outlook through March 31, 2009.
"This first quarter of 2008 was an unusually good quarter to highlight how effective execution of our three models will produce shareholder returns over time. I will use our conference call to discuss the four unique financial leveraging dynamics that will convert long term single digit revenue growth into sustainable long term double digit Consolidated EBITDA and diluted EPS growth consistent with our Long Term Outlook."
Trend Reporting
"We report consolidated same store field operating and financial results both on a multi-year and most recent rolling four quarters basis to reflect long term trends, and by quarter for the most recent five quarters to reflect short term trends and seasonality. Just as we report internally for each of our businesses under the Standards Operating Model, these field level results highlight trends in volumes, revenues, Field EBITDA (controllable profit) and Field EBITDA Margin (controllable profit margin). Trend reporting allows us to focus on the key operational and financial drivers relevant to the longer term performance and valuation of our portfolio of deathcare businesses," added Payne.
"We maintain separate reporting of same store continuing operations (adjusted for dispositions as they occur) and acquisition portfolio operations to show how the execution of both our Standards Operating Model and our Strategic Portfolio Optimization Model will change the sustainable revenue and earning power profile of Carriage Services over time. The following trend reports reflect results through the first quarter of 2008:
UNAUDITED INCOME STATEMENT FROM CONTINUING OPERATIONS
Annual Trend
For the Five Years Ended March 31, 2008
($000's)
Pro forma (1) Actual
Year Year
2004 2005
CONTINUING OPERATIONS
Same Store Contracts
Atneed Contracts 17,402 79.8% 17,353 79.6%
Preneed Contracts 4,412 20.2% 4,436 20.4%
Total Same Store Funeral
Contracts 21,814 100.0% 21,789 100.0%
Acquisition Contracts
Atneed Contracts - 53 64.6%
Preneed Contracts - 29 35.4%
Total Acquisition Funeral
Contracts - 82 100.0%
New Store Openings - -
Total Funeral Contracts 21,814 21,871
Same Store Interments
Atneed Interments 2,324 26.3% 2,006 24.4%
Preneed Interments 6,529 73.7% 6,213 75.6%
Total Same Store Cemetery
Interments 8,853 100.0% 8,219 100.0%
Acquisition Interments
Atneed Interments - -
Preneed Interments - -
Total Acquisition Cemetery
Interments - -
Total Cemetery Interments 8,853 8,219
Same Store Revenue
Funeral Operations Revenue $106,399 74.0% $108,284 72.9%
Preneed Commission and Other
Revenue 1,319 0.9% 2,295 1.5%
Total Funeral Same Store
Revenue 107,718 74.9% 110,579 74.5%
Cemetery Operations Revenue 33,203 23.1% 33,940 22.9%
Cemetery Financial Revenue 2,912 2.0% 3,615 2.4%
Total Same Store Cemetery
Revenue 36,115 25.1% 37,555 25.3%
Total Same Store Revenue 143,833 100.0% 148,134 99.8%
Acquisition Revenue
Funeral Operations Revenue - 303 0.2%
Cemetery Operations Revenue - -
Cemetery Financial Revenue - -
Total Acquisition Revenue - 303 0.2%
Total Revenue from Continuing
Operations $143,833 100.0% $148,437 100.0%
Field EBITDA from Continuing
Operations
Same Store Funeral Field EBITDA $37,382 76.5% $39,323 75.7%
Same Store Funeral Field EBITDA
Margin 34.7% 35.6%
Same Store Cemetery Field EBITDA 11,458 23.5% 12,545 24.1%
Same Store Cemetery Field EBITDA
Margin 31.7% 33.4%
Total Same Store Field EBITDA 48,840 100.0% 51,868 99.8%
Total Same Store Field EBITDA
Margin 34.0% 35.0%
Acquisition Funeral Field EBITDA - 92 0.2%
Acquisition Funeral Field EBITDA
Margin - 30.4%
Acquisition Cemetery Field EBITDA - -
Acquisition Cemetery Field EBITDA
Margin - -
Total Acquisition Field EBITDA - 92 0.2%
Total Acquisition Field EBITDA
Margin - 30.4%
Total Field EBITDA from Continuing
Operations 48,840 100.0% 51,960 100.0%
Total Field EBITDA Margin from
Continuing Operations 34.0% 35.0%
Overhead
Total Variable Overhead 1,910 11.5% 2,245 12.5%
Total Regional Fixed Overhead 2,892 17.4% 3,247 18.0%
Total Corporate Fixed Overhead 11,825 71.1% 12,501 69.5%
Total Overhead 16,627 100.0% 17,993 100.0%
11.6% 12.1%
Consolidated EBITDA from
Continuing Operations $32,213 (2) $33,967 (2)
Consolidated EBITDA Margin from
Continuing Operations 22.4% 22.9%
Total Depreciation & Amortization 9,285 9,053
Interest, Net 16,908 18,090
Refinancing Costs - 6,933
Special Charges/Other (Gains)
Losses (940) 1,268
Team Partners Incentive Expense 110 276
Pretax Income 6,850 (1,653)
Benefit for Income Taxes due to a
Valuation Adjustment (810) -
Income Tax 2,643 (532)
Net income from Continuing
Operations $5,017 $(1,121)
3.5% -0.8%
Diluted EPS-from continuing
operations $0.29 $(0.06)
Actual Actual
Year Year
2006 2007
CONTINUING OPERATIONS
Same Store Contracts
Atneed Contracts 16,870 78.6% 16,475 78.8%
Preneed Contracts 4,597 21.4% 4,437 21.2%
Total Same Store Funeral
Contracts 21,467 100.0% 20,912 100.0%
Acquisition Contracts
Atneed Contracts 194 67.1% 1,476 69.8%
Preneed Contracts 95 32.9% 638 30.2%
Total Acquisition Funeral
Contracts 289 100.0% 2,114 100.0%
New Store Openings 104 522
Total Funeral Contracts 21,860 23,548
Same Store Interments
Atneed Interments 2,100 25.0% 2,055 27.2%
Preneed Interments 6,285 75.0% 5,506 72.8%
Total Same Store Cemetery
Interments 8,385 100.0% 7,561 100.0%
Acquisition Interments
Atneed Interments - 273 23.6%
Preneed Interments - 886 76.4%
Total Acquisition Cemetery
Interments - 1,159 100.0%
Total Cemetery Interments 8,385 8,720
Same Store Revenue
Funeral Operations Revenue $110,581 73.6% $111,899 66.7%
Preneed Commission and Other
Revenue 2,267 1.5% 2,197 1.3%
Total Funeral Same Store
Revenue 112,848 75.1% 114,096 68.0%
Cemetery Operations Revenue 32,107 21.4% 34,300 20.4%
Cemetery Financial Revenue 4,052 2.7% 4,526 2.7%
Total Same Store Cemetery
Revenue 36,159 24.1% 38,826 23.1%
Total Same Store Revenue 149,007 99.1% 152,922 91.1%
Acquisition Revenue
Funeral Operations Revenue 1,339 0.9% 10,710 6.4%
Cemetery Operations Revenue - 3,873 2.3%
Cemetery Financial Revenue - 318 0.2%
Total Acquisition Revenue 1,339 0.9% 14,901 8.9%
Total Revenue from Continuing
Operations $150,346 100.0% $167,823 100.0%
Field EBITDA from Continuing
Operations
Same Store Funeral Field EBITDA $41,343 79.0% $43,392 70.4%
Same Store Funeral Field EBITDA
Margin 36.6% 38.0%
Same Store Cemetery Field EBITDA 10,645 20.4% 13,468 21.9%
Same Store Cemetery Field EBITDA
Margin 29.4% 34.7%
Total Same Store Field EBITDA 51,988 99.4% 56,860 92.3%
Total Same Store Field EBITDA
Margin 34.9% 37.2%
Acquisition Funeral Field EBITDA 313 0.6% 3,724 6.0%
Acquisition Funeral Field EBITDA
Margin 23.4% 34.8%
Acquisition Cemetery Field EBITDA - 1,054 1.7%
Acquisition Cemetery Field EBITDA
Margin - 25.2%
Total Acquisition Field EBITDA 313 0.6% 4,778 7.8%
Total Acquisition Field EBITDA
Margin 23.4% 32.1%
Total Field EBITDA from
Continuing Operations 52,301 100.0% 61,637 100.0%
Total Field EBITDA Margin from
Continuing Operations 34.8% 36.7%
Overhead
Total Variable Overhead 3,402 17.4% 5,278 23.6%
Total Regional Fixed Overhead 2,977 15.2% 3,127 14.0%
Total Corporate Fixed Overhead 13,170 67.4% 13,921 62.4%
Total Overhead 19,549 100.0% 22,326 100.0%
13.0% 13.3%
Consolidated EBITDA from
Continuing Operations $32,752 (2) $39,311 (2)
Consolidated EBITDA Margin from
Continuing Operations 21.8% 23.4%
Total Depreciation & Amortization 8,664 9,526
Interest, Net 17,106 17,192
Refinancing Costs - -
Special Charges/Other (Gains)
Losses (188) -
Team Partners Incentive Expense 1,151 -
Pretax Income 6,019 12,593
Benefit for Income Taxes due to a
Valuation Adjustment - -
Income Tax 2,305 5,068
Net income from Continuing
Operations $3,714 $7,525
2.5% 4.5%
Diluted EPS-from continuing
operations $0.20 $0.39
Actual
Trailing 4 Qtrs
2008
CONTINUING OPERATIONS
Same Store Contracts
Atneed Contracts 16,755 79.4%
Preneed Contracts 4,355 20.6%
Total Same Store Funeral Contracts 21,110 100.0%
Acquisition Contracts
Atneed Contracts 2,092 72.5%
Preneed Contracts 792 27.5%
Total Acquisition Funeral Contracts 2,884 100.0%
New Store Openings 612
Total Funeral Contracts 24,606
Same Store Interments
Atneed Interments 1,965 26.0%
Preneed Interments 5,602 74.0%
Total Same Store Cemetery
Interments 7,567 100.0%
Acquisition Interments
Atneed Interments 341 24.0%
Preneed Interments 1,079 76.0%
Total Acquisition Cemetery
Interments 1,420 100.0%
Total Cemetery Interments 8,987
Same Store Revenue
Funeral Operations Revenue $113,170 65.6%
Preneed Commission and Other
Revenue 2,322 1.3%
Total Funeral Same Store Revenue 115,492 66.9%
Cemetery Operations Revenue 32,813 19.0%
Cemetery Financial Revenue 4,601 2.7%
Total Same Store Cemetery Revenue 37,414 21.7%
Total Same Store Revenue 152,906 88.6%
Acquisition Revenue
Funeral Operations Revenue 14,189 8.2%
Cemetery Operations Revenue 5,037 2.9%
Cemetery Financial Revenue 380 0.2%
Total Acquisition Revenue 19,606 11.4%
Total Revenue from Continuing
Operations $172,512 100.0%
Field EBITDA from Continuing
Operations
Same Store Funeral Field EBITDA $44,548 70.8%
Same Store Funeral Field EBITDA
Margin 38.6%
Same Store Cemetery Field EBITDA 11,778 18.7%
Same Store Cemetery Field EBITDA
Margin 31.5%
Total Same Store Field EBITDA 56,326 89.5%
Total Same Store Field EBITDA
Margin 36.8%
Acquisition Funeral Field EBITDA 5,012 8.0%
Acquisition Funeral Field EBITDA
Margin 35.3%
Acquisition Cemetery Field EBITDA 1,579 2.5%
Acquisition Cemetery Field EBITDA
Margin 29.2%
Total Acquisition Field EBITDA 6,591 10.5%
Total Acquisition Field EBITDA
Margin 33.6%
Total Field EBITDA from Continuing
Operations 62,918 100.0%
Total Field EBITDA Margin from
Continuing Operations 36.5%
Overhead
Total Variable Overhead 5,906 26.1%
Total Regional Fixed Overhead 3,173 14.0%
Total Corporate Fixed Overhead 13,552 59.9%
Total Overhead 22,631 100.0%
13.1%
Consolidated EBITDA from Continuing
Operations $40,287 (2)
Consolidated EBITDA Margin from
Continuing Operations 23.4%
Total Depreciation & Amortization 9,577
Interest, Net 17,547
Refinancing Costs -
Special Charges/Other (Gains)
Losses -
Team Partners Incentive Expense -
Pretax Income 13,163
Benefit for Income Taxes due to a
Valuation Adjustment -
Income Tax 5,340
Net income from Continuing
Operations $7,823
4.5%
Diluted EPS-from continuing
operations $0.41
(1) Effective January 1, 2005, the company changed its accounting method
to expense preneed selling costs incurred for the origination of
prearranged funeral and cemetery sales contracts. Results of
operations for the years ended December 31, 2004 are presented on a
pro forma basis applying the new accounting method.
(2) Reclassified special charges (gains) and Team Partner Incentive
expense to improve comparability of periods presented.
UNAUDITED INCOME STATEMENT FROM CONTINUING OPERATIONS
Quarter Trend
For the Five Quarters Ended March 31, 2008
($000's)
Actual Actual
Qtr 1 Qtr 2
2007 2007
CONTINUING OPERATIONS
Same Store Contracts
Atneed Contracts 4,400 78.0% 3,966 77.2%
Preneed Contracts 1,238 22.0% 1,173 22.8%
Total Same Store Funeral Contracts 5,638 100.0% 5,139 100.0%
Acquisition Contracts
Atneed Contracts 184 68.1% 248 67.4%
Preneed Contracts 86 31.9% 120 32.6%
Total Acquisition Funeral Contracts 270 100.0% 368 100.0%
New Store Openings 120 126
Total Funeral Contracts 6,028 5,633
Same Store Interments
Atneed Interments 583 28.0% 537 27.9%
Preneed Interments 1,502 72.0% 1,391 72.1%
Total Same Store Cemetery
Interments 2,085 100.0% 1,928 100.0%
Acquisition Interments
Atneed Interments 39 24.5% 81 30.1%
Preneed Interments 120 75.5% 188 69.9%
Total Acquisition Cemetery
Interments 159 100.0% 269 100.0%
Total Cemetery Interments 2,244 2,197
Same Store Revenue
Funeral Operations Revenue $30,268 71.3% $27,700 66.7%
Preneed Commission and Other Revenue 627 1.5% 625 1.5%
Total Funeral Same Store Revenue 30,895 72.8% 28,325 68.2%
Cemetery Operations Revenue 8,768 20.6% 9,408 22.7%
Cemetery Financial Revenue 929 2.2% 733 1.8%
Total Cemetery Same Store Revenue 9,697 22.8% 10,141 24.4%
Total Same Store Revenue 40,592 95.6% 38,466 92.7%
Acquisition Revenue
Funeral Operations Revenue 1,482 3.5% 1,943 4.7%
Cemetery Operations Revenue 371 0.9% 1,014 2.4%
Cemetery Financial Revenue 20 0.0% 87 0.2%
Total Acquisition Revenue 1,873 4.4% 3,044 7.3%
Total Revenue from Continuing
Operations $42,465 100.0% $41,510 100.0%
Field EBITDA from Continuing
Operations
Same Store Funeral Field EBITDA $12,580 74.8% $10,539 70.9%
Same Store Funeral Field EBITDA
Margin 40.7% 37.2%
Same Store Cemetery Field EBITDA 3,723 22.1% 3,453 23.2%
Same Store Cemetery Field EBITDA
Margin 38.4% 34.0%
Total Same Store Field EBITDA 16,303 96.9% 13,992 94.1%
Total Same Store Field EBITDA
Margin 40.2% 36.4%
Acquisition Funeral Field EBITDA 457 2.7% 545 3.7%
Acquisition Funeral Field EBITDA
Margin 30.8% 28.0%
Acquisition Cemetery Field EBITDA 65 0.4% 325 2.2%
Acquisition Cemetery Field EBITDA
Margin 17.5% 32.1%
Total Acquisition Field EBITDA 522 3.1% 870 5.9%
Total Acquisition Field EBITDA
Margin 27.9% 28.6%
Total Field EBITDA from Continuing
Operations 16,825 100.0% 14,862 100.0%
Total Field EBITDA Margin from
Continuing Operations 39.6% 35.8%
Overhead
Total Variable Overhead 1,061 20.0% 1,226 23.2%
Total Regional Fixed Overhead 787 14.8% 723 13.7%
Total Corporate Fixed Overhead 3,456 65.2% 3,345 63.2%
Total Overhead 5,304 100.0% 5,294 100.0%
12.5% 12.8%
Consolidated EBITDA from Continuing
Operations $11,521 $9,568
Consolidated EBITDA Margin from
Continuing Operations 27.1% 23.0%
Total Depreciation & Amortization 2,479 2,294
Interest, Net 4,174 4,158
Pretax Income 4,868 3,116
Income tax 1,876 1,200
Net income from Continuing Operations $2,992 $1,916
7.0% 4.6%
Diluted EPS-from continuing
operations $0.16 $0.10
Actual Actual Actual
Qtr 3 Qtr 4 Qtr 1
2007 2007 2008
CONTINUING OPERATIONS
Same Store Contracts
Atneed Contracts 3,906 80.1% 4,203 80.0% 4,680 80.2%
Preneed Contracts 972 19.9% 1,054 20.0% 1,156 19.8%
Total Same Store
Funeral Contracts 4,878 100.0% 5,257 100.0% 5,836 100.0%
Acquisition Contracts
Atneed Contracts 437 69.1% 607 71.9% 800 76.9%
Preneed Contracts 195 30.9% 237 28.1% 240 23.1%
Total Acquisition
Funeral Contracts 632 100.0% 844 100.0% 1,040 100.0%
New Store Openings 132 144 210
Total Funeral Contracts 5,642 6,245 7,086
Same Store Interments
Atneed Interments 492 27.9% 443 24.8% 493 23.6%
Preneed Interments 1,271 72.1% 1,342 75.2% 1,598 76.4%
Total Same Store
Cemetery Interments 1,763 100.0% 1,785 100.0% 2,091 100.0%
Acquisition Interments
Atneed Interments 76 21.7% 77 20.3% 107 25.5%
Preneed Interments 275 78.3% 303 79.7% 313 74.5%
Total Acquisition
Cemetery Interments 351 100.0% 380 100.0% 420 100.0%
Total Cemetery
Interments 2,114 2,165 2,511
Same Store Revenue
Funeral Operations
Revenue $25,898 63.8% $28,033 64.8% $31,539 66.9%
Preneed Commission
and Other Revenue 502 1.2% 443 1.0% 752 1.6%
Total Funeral Same
Store Revenue 26,400 65.0% 28,476 65.9% 32,291 68.5%
Cemetery Operations
Revenue 8,360 20.6% 7,764 18.0% 7,281 15.4%
Cemetery Financial
Revenue 1,321 3.3% 1,543 3.6% 1,004 2.1%
Total Cemetery Same
Store Revenue 9,681 23.8% 9,307 21.5% 8,285 17.6%
Total Same Store
Revenue 36,081 88.8% 37,783 87.4% 40,576 86.1%
Acquisition Revenue
Funeral Operations
Revenue 3,290 8.1% 3,995 9.2% 4,961 10.5%
Cemetery Operations
Revenue 1,193 2.9% 1,296 3.0% 1,534 3.3%
Cemetery Financial
Revenue 51 0.1% 161 0.4% 81 0.2%
Total Acquisition
Revenue 4,534 11.2% 5,452 12.6% 6,576 13.9%
Total Revenue from
Continuing
Operations $40,615 100.0% $43,235 100.0% $47,152 100.0%
Field EBITDA from
Continuing Operations
Same Store Funeral
Field EBITDA $9,041 65.9% $11,232 69.2% $13,736 75.9%
Same Store Funeral
Field EBITDA Margin 34.2% 39.4% 42.5%
Same Store Cemetery
Field EBITDA 3,159 23.0% 3,133 19.3% 2,033 11.2%
Same Store Cemetery
Field EBITDA Margin 32.6% 33.7% 24.5%
Total Same Store
Field EBITDA 12,200 89.0% 14,365 88.5% 15,769 87.1%
Total Same Store
Field EBITDA
Margin 33.8% 38.0% 38.9%
Acquisition Funeral
Field EBITDA 1,298 9.5% 1,423 8.8% 1,746 9.6%
Acquisition Funeral
Field EBITDA Margin 39.5% 35.6% 35.2%
Acquisition Cemetery
Field EBITDA 213 1.6% 452 2.8% 589 3.3%
Acquisition Cemetery
Field EBITDA Margin 18.0% 35.0% 38.4%
Total Acquisition
Field EBITDA 1,511 11.0% 1,875 11.5% 2,335 12.9%
Total Acquisition
Field EBITDA
Margin 33.3% 34.4% 35.5%
Total Field EBITDA
from Continuing
Operations 13,712 100.0% 16,240 100.0% 18,104 100.0%
Total Field EBITDA
Margin from
Continuing Operations 33.8% 37.6% 38.4%
Overhead
Total Variable
Overhead(2) 1,137 20.4% 1,854 30.1% 1,689 30.1%
Total Regional Fixed
Overhead 886 15.9% 731 11.9% 833 14.9%
Total Corporate Fixed
Overhead 3,553 63.7% 3,567 58.0% 3,087 55.0%
Total Overhead 5,576 100.0% 6,152 100.0% 5,609 100.0%
13.7% 14.2% 11.9%
Consolidated EBITDA
from Continuing
Operations $8,136 $10,088 $12,495
Consolidated EBITDA
Margin from
Continuing Operations 20.0% 23.3% 26.5%
Total Depreciation &
Amortization 2,408 2,345 2,530
Interest, Net 4,387 4,473 4,529
Pretax Income 1,341 3,270 5,436
Income tax 609 1,384 2,147
Net income from
Continuing Operations $732 $1,886 $3,289
1.8% 4.4% 7.0%
Diluted EPS-from
continuing operations $0.04 $0.10 $0.17Same Store Portfolio
While same store funeral contracts increased 3.5% during the quarter because of a more severe flu season, same store funeral revenue increased $1.4 million or only 4.5% due to a 290 point spike in our cremation rate to 37.5% from 34.6%. However, same store funeral Field EBITDA increased $1.1 million or 9.2% as funeral Field EBITDA Margin increased 180 basis points to a historically high 42.5% for a quarterly performance. The operating leverage financial dynamic of higher volumes and revenues over a relatively fixed cost business resulted in the higher Field EBITDA Margin, but the performance was driven by outstanding execution of our funeral Standards Operating Model by an increasingly talented group of 4E 'A player' Managing Partners who are motivated and incentivized to achieve more of their Being the Best Standards over time.
Same store cemetery performance was weak, as revenues declined $1.4 million or 14.6% primarily due to lower preneed property sales, and cemetery Field EBITDA declined $1.7 million or 45% as cemetery Field EBITDA Margin declined 1,390 basis points to 24.5%. The decline in same store cemetery Field EBITDA impacted EPS by $0.045 and was greater than the decline in revenues because of significantly higher bad debt reserves against preneed sales booked primarily during 2007 under sales teams and programs that have been eliminated, which are currently being rebuilt to align with our cemetery Standards Operating Model.
Payne added, "Our Standards Operating Model for cemeteries is designed to achieve sustainable growth in preneed property sales within standardized ranges of operating margin. As we reviewed cemetery operations and results during 2007, which was the first year of our simplified cemetery standards, we began to take a more strategic and long term view of our larger cemeteries. Accordingly, we recruited new 4E 'A players' as Managing Partners in our largest businesses and have supported them with the difficult decision to move away from a short term sales focus to a 'Being the Best' long term vision strategy taking into consideration demographics, master land planning and development, facility expansion and capital investment, and short, intermediate and long term product planning and development. Not surprisingly, this change in direction resulted in a dramatic transformation of the sales leadership and teams at these parks, including Rolling Hills, which has hurt performance in the short term but will take these businesses to new and higher levels of sustainable performance in the intermediate and long term."
Acquisition Portfolio
The first quarter of 2008 was the first full quarter of ownership for all of the seven acquisitions made during 2007. The Company's acquisition portfolio revenue now represents almost 14% of total revenue and increased to $6.6 million in this year's first quarter compared to $1.9 million last year, an increase of 250%. The integration of these businesses under new operating leadership in six of the seven acquisitions continues to improve their financial performance, as acquired funeral Field EBITDA Margin increased 440 basis points to 35.2% and acquired cemetery Field EBITDA Margin increased 2,090 basis points to 38.4%. Total acquisition Field EBITDA increased to $2.3 million from only $0.5 million last year, an increase of $1.8 million that added about $0.05 of incremental EPS during the first quarter of 2008.
This outstanding performance by the acquisition portfolio reflects the financial dynamic of consolidation platform leverage whereby acquired Field EBITDA falls substantially to Consolidated EBITDA and is highly accretive to EPS as well because of our relatively small share count of 19.7 million shares," added Payne. "Moreover, our net interest expense was only $355,000 higher than last year's first quarter, equal to a capital structure cost to EPS of $0.012, reflecting the financial dynamic benefit of our capital structure leverage and showing that the best use of our Free Cash Flow and balance sheet financial flexibility and leverage is for strategic acquisitions and internal growth projects that have ROIC well in excess of our cost of capital.
"We have established five and ten year goals to grow the financial performance contribution from the acquisition portfolio through execution of the Strategic Portfolio Optimization Model by focusing capital investment in ten to fifteen strategic markets where demographic trends are positive and strong independent brands are available for expansion and consolidation. Our five year goal is to acquire the equivalent of about $10 million of annualized revenue each year over the next five years, which would produce total company annualized revenue of about $250 million by the end of 2012 and which we believe can be financed internally from Free Cash Flow. We exceeded this goal in 2007 by acquiring about $23 million in annualized revenue, so we are not planning on any acquisitions in the first half of 2008 while we continue to focus on integration, operations and on internal growth projects."
Overhead
Total overhead increased $300,000 during the first quarter compared to last year but included an increase of $600,000 of variable litigation expense equal to $0.02 per share that wasn't in last year's results and which we consider out of the ordinary course. Litigation expenses will continue higher than normal until we conclude the litigation involved, which we expect to occur within 2008 or early 2009. Total overhead of $5.6 million was 11.9% of total revenue which was 60 basis points lower than the 12.5% last year, a decline that reflects the overhead leverage financial dynamic which should continue as the Company adds acquisition revenue to our relatively fixed regional and corporate organizational cost structure over time.
Cash Flow
Carriage generated $2.0 million of Free Cash Flow (defined as cash flow from operations less maintenance capital expenditures) during the first quarter of 2008. The elements of Free Cash Flow for the first quarter of 2008 consisted of the following (in millions):
Cash and liquid investments at beginning of year $3.4
Cash flow from operations 3.3
Proceeds from sales of businesses --
Cash used for business acquisitions --
Cash used for maintenance capital expenditures (1.3)
Cash used for growth capital expenditures (0.4)
Other investing and financing activities (0.2)
Cash at end of year first quarter $4.8
Rolling Four Quarter Outlook
The Rolling Four Quarter Outlook ranges for the period ending March 31, 2009 are intended to approximate what the Company believes will be the sustainable earning power of its portfolio of deathcare assets over the next four quarters as the three models are effectively executed. Payne added, "We have learned that it is better to be 'roughly right' most of the time rather than 'precisely wrong' all of the time when forecasting our future results due to the uncertainties in estimating key drivers of near term performance. These drivers include funeral contract volumes, preneed sales, preneed maturities and deliveries, average revenue per service and sale, Field EBITDA Margins, acquisition size, timing and performance, and variable overhead items, just to name a few.
"We believe that Rolling Four Quarter Outlook performance ranges updated for acquisitions and dispositions will result in a more accurate near term assessment of the company's prospects that is not constrained by a fixed and arbitrary 'finish line' at the end of each quarter or calendar year. In our Four Quarter Outlook ending March 31, 2009, we have assumed no additional acquisitions. Although we are in the market evaluating candidates, we do not plan to close an acquisition in the first half of 2008 and will follow our policy of updating our Outlook when the closing of a transaction is certain."
ROLLING FOUR QUARTER OUTLOOK - Period Ending March 31, 2009
(Amounts in Millions, Except per Share Amounts)
Range
Revenues $178.0 - $184.0
Field EBITDA $66.0 - $68.0
Field EBITDA Margin 35.9% - 38.2%
Total Overhead $22.5 - $23.5
Consolidated EBITDA $43.0 - $45.0
Consolidated EBITDA Margin 23.4% - 25.3%
Interest $18.0
Depreciation & Amortization $10.0
Cash Taxes $1.0
Net Earnings from Cont. Operations $9.5 - $10.5
Diluted Earnings Per Share $0.48 - $0.52
Free Cash Flow $15.0 - $17.0
Long Term Outlook -- Through 2012 (Base Year 2006)
Revenue growth of 7-9% annually, including acquisitions
Consolidated EBITDA growth of 9-11% annually, including acquisitions
Consolidated EBITDA Margin range of 24-26%
Growth internally funded without new debt or equity
First Quarter Conference Call Information
Carriage Services has scheduled a conference call for tomorrow, May 9, 2008 at 10:30 a.m. Eastern Time. To participate in the call, dial 303-262-2142 at least ten minutes before the conference call begins and ask for the Carriage Services conference call. A replay of the call will be available approximately two hours after the live broadcast ends and will be accessible until May 16, 2008. To access the replay, dial 303-590-3000 and enter pass code 11113713#.
Investors, analysts and the general public will also have the opportunity to listen to the conference call free over the Internet by visiting http://www.carriageservices.com. To listen to the live call on the web, please visit the website at least fifteen minutes early to register, download and install any necessary audio software. For those who cannot listen to the live webcast, an audio archive will be available shortly after the call and will be accessible for approximately 90 days. For more information, please contact Karen Roan at DRG&E at (713) 529-6600 or email kcroan@drg-e.com.
Carriage Services is a leading provider of death care services and products. As of May 8, 2008, Carriage operates 139 funeral homes in 25 states and 32 cemeteries in 11 states.
Use of Non-GAAP Financial Measures
This press release uses the following Non-GAAP financial measures "free cash flow and EBITDA." Both free cash flow and EBITDA are used by investors to value common stock. The Company considers free cash flow to be an important indicator of its ability to generate cash for acquisitions and other strategic investments. The Company has included EBITDA in this press release because it is widely used by investors to compare the Company's financial performance with the performance of other deathcare companies. The Company also uses Field EBITDA and Field EBITDA Margin to monitor and compare the financial performance of the individual funeral and cemetery field businesses. EBITDA does not give effect to the cash the Company must use to service its debt or pay its income taxes and thus does not reflect the funds actually available for capital expenditures. In addition, the Company's presentation of EBITDA may not be comparable to similarly titled measures other companies report. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported operating results or cash flow from operations or any other measure of performance as determined in accordance with GAAP.
The Company categorizes its general and administrative expenses into three categories of overhead: (1) variable overhead, (2) regional fixed overhead and (3) corporate fixed overhead. Variable overhead consists of cost and expense such as incentive compensation which will vary with profitability or legal expense unrelated to our day to day operations. Regional fixed overhead and corporate fixed overhead represent the cost and expenses of our regional operations leaders and the home office and will not vary as a result of profitability.
Certain statements made herein or elsewhere by, or on behalf of, the Company that are not historical facts are intended to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on assumptions that the Company believes are reasonable; however, many important factors, as discussed under "Forward-Looking Statements and Cautionary Statements" in the Company's Annual Report and Form 10-K for the year ended December 31, 2007, could cause the Company's results in the future to differ materially from the forward-looking statements made herein and in any other documents or oral presentations made by, or on behalf of, the Company. The Company assumes no obligation to update or publicly release any revisions to forward-looking statements made herein or any other forward-looking statements made by, or on behalf of, the Company. A copy of the Company's Form 10-K, and other Carriage Services information and news releases, are available at http://www.carriageservices.com.
CARRIAGE SERVICES, INC.
Selected Financial Data
March 31, 2008
(unaudited)
Selected Balance Sheet Data: 12/31/07 03/31/08
Cash and short-term investments $3,446 $4,843
Total Senior Debt (a) 138,913 138,454
Days sales in funeral accounts receivable 22.9 23.0
Senior Debt to total capitalization 40.9 40.4
Senior Debt to EBITDA from continuing
operations (rolling twelve months) 3.53 3.43
(a) - Senior debt does not include the convertible junior subordinated
debentures.
Reconciliation of Non-GAAP Financial Measures:
This press release includes the use of certain financial measures that are not GAAP measures. The non-GAAP financial measures are presented for additional information and are reconciled to their most comparable GAAP measures below.
Reconciliation of Net Income from continuing operations to EBITDA from
continuing operations for the following periods (in 000s). Rolling twelve
months ended 3/31/2009 is presented at the midpoint of the range identified in
the release:
Three Three Twelve
months months months
ended ended ended
3/31/2007 3/31/2008 3/31/2009 E
Net income from continuing
operations $2,992 $3,289 $10,000
Provision for income taxes 1,873 2,147 6,000
Pre-tax earnings from continuing
operations 4,865 5,436 16,000
Net interest expense, including
loan coast amortization 4,175 4,529 18,000
Depreciation & amortization 2,480 2,530 10,000
EBITDA from continuing operations $11,520 $12,495 $44,000
Revenue from continuing operations $42,465 $47,152 $181,000
EBITDA margin from continuing
operations 27.1% 26.5% 24.3%
Reconciliation of Non-GAAP Financial Measures Continued:
Reconciliation of cash provided by (used in) operating activities from continuing operations to free cash flow (in 000's):
Three months Three months
ended ended
03/31/2007 03/31/2008
Cash provided by operating activities from
continuing operations $1,948 $3,307
Less maintenance capital expenditures from
continuing operations (1,618) (1,315)
Free cash flow from continuing operations $330 $1,992
Reconciliation of estimated net income to free cash flow for the twelve months ending March 31, 2009(in 000's):
2008 E
Net income $10,000
Tax expense 6,000
Interest expense, net 18,000
Depreciation and amortization 10,000
EBITDA $44,000
Interest paid 18,000
Cash taxes 1,000
Maintenance capital expenditures 9,000
Free cash flow $16,000
Contacts: Mel Payne, Chairman & CEO
Terry Sanford, CAO and Treasurer
Carriage Services, Inc.
713-332-8400
Ken Dennard / ksdennard@drg-e.com
Kip Rupp / krupp@drg-e.com
DRG&E / 713-529-6600
SOURCE Carriage Services, Inc.
-0- 05/08/2008
/CONTACT: Mel Payne, Chairman & CEO, or Terry Sanford, CAO and Treasurer,
both of Carriage Services, Inc., +1-713-332-8400; or Ken Dennard,
ksdennard@drg-e.com, or Kip Rupp, krupp@drg-e.com, both of DRG&E,
+1-713-529-6600, for Carriage Services, Inc./
/Web site: http://www.carriageservices.com /
(CSV)