Carriage Services Announces Third Quarter 2008 Results
HOUSTON, Nov 04, 2008 /PRNewswire-FirstCall via COMTEX News Network/ -- Carriage Services, Inc. (NYSE: CSV) today announced results for the third quarter ended September 30, 2008. Highlights from continuing operations for the third quarter of 2008 compared to the third quarter of 2007 were as follows:
Third Quarter Selected Financial Results
(amounts in millions, except per share amounts)
Q3 Q3
2007 2008 Change
Total Revenues $40.4 $43.2 $2.8
Consolidated EBITDA $8.1 $7.4 $ (0.7)
Diluted Earnings per Share $0.04 $0.01 $ (0.03)
THIRD QUARTER HIGHLIGHTS
Melvin C. Payne, Chairman and Chief Executive Officer, stated, "Net income from continuing operations was $158,000, or $0.01 diluted earnings per share, compared to $703,000, or $0.04 diluted earnings per share, in the third quarter of 2007. While revenues for our third quarter increased as a result of increases in both volumes and average revenue per contract, we experienced a decline in Consolidated EBITDA, Consolidated EBITDA Margin and Net Income due to higher costs and expenses.
"Consolidated EBITDA Margin was 17.1% compared to 20% in the third quarter last year, largely due to higher self-insurance costs, labor costs and bad debt expense. We are diligently working to lower our costs as well as improve the leadership and sales staff at several of our cemeteries to drive good quality sales and increase margins."
UNAUDITED INCOME STATEMENT FROM CONTINUING OPERATIONS
Period Ended September 30, 2008
($000's)
Actual Actual Actual Actual
Qtr 3 Qtr 3 YTD YTD
2007 2008 2007 2008
CONTINUING OPERATIONS
Same Store Contracts
Atneed Contracts 3,897 3,994 12,156 12,737
Preneed Contracts 974 922 3,348 3,055
Total Same Store Funeral
Contracts 4,871 4,916 15,504 15,792
Acquisition Contracts
Atneed Contracts 410 671 870 2,194
Preneed Contracts 187 187 414 656
Total Acquisition Funeral
Contracts 597 858 1,284 2,850
New Store Openings 132 190 378 632
Total Funeral Contracts 5,600 5,964 17,166 19,274
Same Store Revenue
Funeral Operations Revenue $25,884 $26,657 $83,066 $84,685
Preneed Commission and Other
Revenue 502 626 1,754 2,053
Total Funeral Same Store
Revenue 26,386 27,283 84,820 86,738
Cemetery Operations Revenue 8,360 8,903 26,535 24,586
Cemetery Financial Revenue 1,321 1,020 2,983 3,028
Total Cemetery Same Store
Revenue 9,681 9,923 29,518 27,614
Total Same Store Revenue 36,067 37,206 114,338 114,352
Acquisition Revenue
Funeral Operations Revenue 3,092 4,313 6,805 14,026
Cemetery Operations Revenue 1,193 1,623 2,579 4,524
Cemetery Financial Revenue 50 70 158 190
Total Acquisition Revenue 4,335 6,006 9,542 18,740
Total Revenue from Continuing
Operations $40,402 $43,212 $123,880 $133,092
26,297 29,521 77,303 87,210
Field EBITDA from Continuing
Operations
Same Store Funeral Field
EBITDA $9,081 $8,807 $31,799 $31,586
Same Store Funeral Field
EBITDA Margin 34.4% 32.3% 37.5% 36.4%
Same Store Cemetery Field
EBITDA 3,159 2,600 10,339 7,180
Same Store Cemetery Field
EBITDA Margin 32.6% 26.2% 35.0% 26.0%
Total Same Store Field
EBITDA 12,240 11,407 42,138 38,766
Total Same Store Field
EBITDA Margin 33.9% 30.7% 36.9% 33.9%
Acquisition Funeral Field
EBITDA 1,195 1,260 2,444 4,353
Acquisition Funeral Field
EBITDA Margin 38.6% 29.2% 35.9% 31.0%
Acquisition Cemetery Field
EBITDA 212 542 603 1,533
Acquisition Cemetery Field
EBITDA Margin 17.9% 33.5% 23.4% 33.9%
Total Acquisition Field
EBITDA 1,407 1,802 3,047 5,886
Total Acquisition Field
EBITDA Margin 32.5% 30.0% 31.9% 31.4%
Total Field EBITDA from
Continuing Operations 13,647 13,209 45,185 44,652
Total Field EBITDA Margin
from Continuing Operations 33.8% 30.6% 36.5% 33.5%
Overhead
Total Variable Overhead 1,135 1,544 3,426 5,109
Total Regional Fixed Overhead 886 831 2,396 2,497
Total Corporate Fixed Overhead 3,553 3,461 10,354 10,112
Total Overhead 5,574 5,836 16,176 17,718
13.8% 13.5% 13.1% 13.3%
Consolidated EBITDA from
Continuing Operations $8,073 $7,373 $29,009 $26,934
Consolidated EBITDA Margin
from Continuing Operations 20.0% 17.1% 23.4% 20.2%
Total Depreciation &
Amortization 2,398 2,670 7,153 7,744
Interest, Net 4,388 4,442 12,719 13,477
Pretax Income 1,287 261 9,137 5,713
Income tax 584 103 3,607 2,256
Net income from Continuing
Operations $703 $158 $5,530 $3,457
1.7% 0.4% 4.5% 2.6%
Diluted EPS-from continuing
operations $0.04 $0.01 $0.28 $0.18
Net income from Discontinued
Operations (9) - 538 (1,390)
Diluted EPS-from discontinued
operations $- $- $0.03 $(0.07)
FUNERAL OPERATIONS
Same store Funeral Operations Revenue increased $0.8 million or 3.0% as a result of a 0.9% increase in contracts and a 2.1% increase in the average revenue per contract. Funeral operations revenue from acquired businesses contributed an additional increase of $1.2 million. The cremation rate for the third quarter of 2008 was 39.8% compared to 37.0% in the third quarter of 2007 and the growth in the volumes came in the form of cremation contracts. Increased operating costs across the portfolio worked against us, resulting in a decline of $0.3 million in our same store Funeral Field EBITDA and a decline of $0.1 million in our Acquisition Funeral Field EBITDA.
CEMETERY OPERATIONS
Same store Cemetery Operating Revenue increased $0.5 million or 6.5% from last year, while financial revenue was down $0.3 million or 22.8%. Same store Cemetery Field EBITDA declined $0.6 million to $2.6 million, while acquired cemeteries added $0.3 million in Acquisition Cemetery Field EBITDA. The decline in same store Cemetery Field EBITDA and Cemetery Field EBITDA Margin to 26.2% from 32.6% was due to higher bad debt, labor and transportation costs. We are making good progress in rebuilding the sales leadership and teams at our larger parks and expect this process to be complete by year end. General economic weakness in some of our key markets is having a negative impact on our revenues, particularly preneed sales, where customers may not have the confidence or the discretionary income, which has also impacted collection efforts on outstanding contracts. Therefore, we do not expect a return to our 2007 performance levels until economic conditions in some of our local markets improve.
TREND REPORTING
Management monitors consolidated same store and acquisition field operating and financial results both on a year over year and most recent rolling four quarters ("Trend Reports") basis to reflect long term and short term trends and seasonality. The Trend Reports highlight trends in volumes, revenues, Field EBITDA (controllable profit), Field EBITDA Margin (controllable profit margin) and the components of our overhead. 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. Please go to the Investor Relations homepage of Carriage's web site at http://www.carriageservices.com for a link to our consolidated Annual and Quarterly Trend Reports.
SHARE REPURCHASE PROGRAM
During June 2008 the Board of Directors approved the repurchase of up to an aggregate of $5 million of the Company's common stock. The repurchases were executed in the open market and through privately negotiated transactions. Through September 30, 2008, the Company repurchased 854,700 shares of common stock at an aggregate cost of $3,381,631 and an average cost per share of $3.93. During October 2008 Carriage completed its $5.0 million repurchase program by acquiring an additional 492,769 shares for a total of 1,347,469 shares of common stock and an average cost per share of $3.68.
OVERHEAD
Total overhead increased $0.3 million to $5.8 million as the Company experienced an increase in legal costs and termination costs in the quarter of $0.2 million each.
CASH FLOW
Carriage experienced negative free cash flow (defined as cash flow from continuing operations less maintenance capital expenditures) of $1.0 million during the third quarter of 2008 compared to negative free cash flow of $3.3 million during the same period in 2007. In addition to being seasonally the lowest quarter for deaths, the semiannual interest payments on the Senior debt of $5.1 million are payable in the third quarter. The elements of Cash Flow for the first nine months of 2008 consisted of the following (in millions):
Cash flow from continuing operations $12.1
Cash used for maintenance capital expenditures (4.6)
Free Cash Flow for first nine months of 2008 7.5
Cash and liquid investments at beginning of year 3.4
Cash flow from discontinued operations 0.2
Proceeds from sales of businesses 1.0
Cash used for growth capital expenditures - funeral homes (2.4)
Cash used for growth capital expenditures - cemeteries (2.6)
Financing activities, primarily share repurchases (3.8)
Cash at September 30, 2008 $3.3
ROLLING FOUR QUARTER OUTLOOK
The Rolling Four Quarter Outlook ranges for the period ending September 30, 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. Performance drivers include funeral contract volumes, cremation mix, preneed sales, preneed maturities and deliveries, average revenue per service and sale, Field EBITDA Margins, acquisition size, timing and performance, and variable overhead items. In the Four Quarter Outlook ending September 30, 2009, the Company has assumed no additional acquisitions.
ROLLING FOUR QUARTER OUTLOOK - Period Ending September 30, 2009
(amounts in millions, except per share amounts)
Range
Revenues $175.0 - $181.0
Field EBITDA $63.0 - $65.0
Field EBITDA Margin 34.8% - 37.1%
Total Overhead $22.5 - $23.5
Consolidated EBITDA $39.5 - $42.5
Consolidated EBITDA Margin 21.8% - 24.3%
Interest $18.0
Depreciation & Amortization $10.0
Cash Taxes $1.0
Net Earnings from Continuing Operations $7.5 - $8.3
Diluted Earnings Per Share $0.38 - $0.42
Free Cash Flow $12.0 - $14.0
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
CONFERENCE CALL
Carriage Services has scheduled a conference call for tomorrow, Wednesday, November 5, 2008 at 10:30 a.m. Eastern Time. To participate in the call, dial 303-228-2960 at least ten minutes before the conference call begins and ask for the Carriage Services conference call. A telephonic replay of the conference call will be available through November 12, 2008 and may be accessed by dialing 303-590-3000 and using pass code 11121172#. An audio archive will also be available on the company's website at http://www.carriageservices.com 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. Carriage operates 136 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.
FORWARD-LOOKING STATEMENTS
Certain statements made herein or elsewhere by, or on behalf of, the Company that are not historical facts are intended to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on assumptions that the Company believes are reasonable; however, many important factors, as discussed under "Forward- Looking Statements 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
September 30, 2008
(unaudited)
Selected Balance Sheet Data: 12/31/2007 9/30/2008
Cash and short-term investments $3,446 $3,257
Total Senior Debt (a) 138,913 137,935
Days sales in funeral accounts receivable 22.9 21.7
Senior Debt to total capitalization 40.9 40.7
Senior Debt to EBITDA from continuing
operations (rolling twelve months) 3.53 3.74
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 9/30/2009 is presented at the midpoint of the range identified in
the release:
Three Three Twelve
months months months
ended ended ended
9/30/2007 9/30/2008 9/30/2009 E
Net income from continuing operations $703 $158 $8,100
Provision for income taxes 584 103 4,900
Pre-tax earnings from continuing operations 1,287 261 13,000
Net interest expense, including loan cost
amortization 4,388 4,443 18,000
Depreciation & amortization 2,398 2,670 10,000
EBITDA from continuing operations $8,073 $7,374 $41,000
Revenue from continuing operations $40,402 $43,212 $178,000
EBITDA margin from continuing operations 20.0% 17.1% 22.6%
Reconciliation of Non-GAAP Financial Measures Continued:
Reconciliation of cash provided by operating activities from continuing operations to free cash flow (in 000's):
Three months Three months
ended ended
9/30/2007 9/30/2008
Cash provided by (used in) operating
activities from continuing operations $(815) $201
Less maintenance capital expenditures
from continuing operations (2,513) (1,212)
Negative free cash flow from continuing
operations $(3,328) $(1,011)
Nine months Nine months
ended ended
9/30/2007 9/30/2008
Cash provided by operating activities
from continuing operations $9,317 $12,055
Less maintenance capital expenditures from
continuing operations (5,903) (4,597)
Free cash flow from continuing operations $3,414 $7,458
Reconciliation of estimated net income to free cash flow for the twelve months ending September 30, 2009 (in 000's):
Net income $8,100
Tax expense 4,900
Interest expense, net 18,000
Depreciation and amortization 10,000
EBITDA $41,000
Interest paid 18,000
Cash taxes 1,000
Maintenance capital expenditures 9,000
Free cash flow $13,000
Contacts: Terry Sanford, SVP & CFO
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.
http://www.carriageservices.com
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