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Carriage Services Announces Record 2012 Fourth Quarter And Annual Results And Raises Rolling Four Quarter Outlook

HOUSTON, Feb. 25, 2013 /PRNewswire/ -- Carriage Services, Inc. (NYSE: CSV) today announced record results for the quarter and full year ending December 31, 2012.

Mel Payne, Chief Executive Officer, stated, "Our fourth quarter performance was outstanding, as we achieved strong revenue growth of 13.1% to a record $53.3 million, and Adjusted Earnings Per Share growth of 140% to $0.24 per share.  Our full year results were also outstanding as we achieved strong revenue growth of 8.8% to a record $204.1 million and Adjusted Earnings Per Share growth of 30.8% to a record $0.85 per share.  This record performance was driven by substantially higher year over year revenue growth and margin expansion in each of our four major profit segments, the consolidated impact of which is reflected in the 2012 quarterly and full year comparative highlights shown below."

Three Months Ending December 31, 2012

  • Total Revenue up 13.1% to $53.3 million;
  • Total Field EBITDA up 25.7% to $22.1 million;
  • Total Field EBITDA Margin up 420 basis points to 41.5%;
  • Consolidated EBITDA up 56.0% to $12.5 million;
  • Consolidated EBITDA Margin up 650 basis points to 23.5%;
  • Adjusted Consolidated EBITDA up 24.8% to $13.6 million;
  • Adjusted Consolidated EBITDA Margin up 240 basis points to 25.5%;
  • Adjusted Earnings Per Share up 140.0% to $0.24 from $0.10 in 2011; and
  • GAAP Diluted EPS from Continuing Operations up 1050% to $0.23 in 2012 from $0.02 in 2011.

Twelve Months Ending December 31, 2012

  • Total Revenue up 8.8% to $204.1 million;
  • Total Field EBITDA up 16.1% to $80.9 million;
  • Total Field EBITDA Margin up 250 basis points to 39.6%;
  • Consolidated EBITDA up 24.2% to $50.6 million;
  • Consolidated EBITDA Margin up 310 basis points to 24.8%;
  • Adjusted Consolidated EBITDA up 9.4% to $54.9 million;
  • Adjusted Consolidated EBITDA Margin up 20 basis points to 26.9%;
  • Adjusted Earnings Per Share up 30.8% to $0.85 from $0.65 in 2011; and
  • GAAP Diluted EPS from Continuing Operations up 73.0% to $0.64 from $0.37 in 2011.

Adjusted Earnings Per Share, Adjusted Net Income, Consolidated EBITDA, Adjusted Consolidated EBITDA, Field EBITDA, Free Cash Flow are all non-GAAP financial measures management believes are important financial measurements to understand the company's operations and financial results.  These items are defined and reconciled to GAAP later in the press release.

"Our record fourth quarter and full year performance was the result of rapid and transformative change throughout 2012, starting with a major management reorganization and an updated Funeral Standards Operating Model in the fourth quarter of 2011.  As the year progressed, we positioned Carriage in four other major fundamental areas to have a strong 2012 fourth quarter finish and to enter 2013 with a higher capacity of sustainable earnings power."

"First, we completed and rolled out an updated Cemetery Standards Operating Model effective January 1, 2013, and recruited the organizational leadership both at the corporate and field level to take our Cemetery Portfolio performance to a much higher and sustainable level over time.  Second, we made substantial structural changes in how we manage and receive compensation from our trust funds, which should result in higher sustainable financial revenue over time.  Third, we completed the refinancing of our $130 million of 7.875% senior notes due 2015 with a $235 million syndicated bank financing comprised of a $130 million five year term loan and a $105 million five year revolving credit facility, with interest savings of over 400 basis points on the refinanced term loan.  And finally, we  increased our acquisition activity by closing three transactions in December whose full impact will be reflected beginning in January 2013. Our active acquisition program will continue to drive acquisition revenue and earnings growth."

"Accordingly, as a result of the effectiveness of the many organizational leadership changes over the past year and the success of our renewed focus on all the drivers of sustainable high performance, we are substantially raising our Rolling Four Quarter Outlook of Adjusted EPS to $1.11 to $1.14 from our previous guidance of $1.03 to $1.05.  This is the first time in our twenty-one year history that we will have achieved the milestone of earnings in excess of $1.00 per share during a calendar year."

"As we entered 2012 after concluding our 20th anniversary year in 2011, we established extraordinarily challenging goals over the five year period ending with 2016, consistent with the five year theme of taking Carriage from a Good company in 2012 to one considered Great by 2016.  We more than met the standard of high performance captured by our yearly theme for 2012, "Carriage Services 2012 - A NEW BEGINNING!"  Our yearly theme for 2013, "Carriage Services 2013- Raising the Standard – All In!", speaks to the confidence we have in our corporate and field leaders and employees to execute our models individually and as teams so as to bring "Being the Best" distinction upon themselves and our company," concluded Mr. Payne.

FUNERAL FIELD OPERATIONS

For the Three Months Ending December 31, 2012

  • Total Funeral Operating Revenue increased 10.1% to $37.9 million;
  • Same Store Funeral Revenue increased 2.8% with same store volume increasing 4.0%;
  • Acquisition Funeral Revenue increased 57.7% with acquisition volume increasing 35.5%;
  • Total Funeral Field EBITDA increased 17.6%  to $14.4 million;
  • Total Funeral Field EBITDA Margin increased 250 basis points to 38.0%;
  • Average revenue per contract increased 0.3% to $5,347; and
  • Cremation rate increased 130 basis points to 46.5%.

For the Twelve Months Ending December 31, 2012

  • Total Funeral Operating Revenue increased 8.4% to $146.4 million;
  • Same Store Funeral Revenue decreased 0.2% with same store volume decreasing 1.4%;
  • Acquisition Funeral Revenue increased 81.6% with acquisition volume increasing 52.6%;
  • Total Funeral Field EBITDA increased 16.2% to $54.6 million;
  • Total Funeral Field EBITDA Margin increased 250 basis points to 37.3%;
  • Average revenue per contract excluding trust earnings increased 1.6% to $5,369; and
  • Cremation rate increased 100 basis points to 46.0%.

CEMETERY FIELD OPERATIONS

For the Three Months Ending December 31, 2012

  • Total Cemetery Operating Revenue increased 9.0% to $10.1 million;
  • Total Cemetery Field EBITDA increased 28.4% to $2.8 million;
  • Total Cemetery Field EBITDA Margin increased 410 basis points to 27.4%;
  • Cemetery pre-need property sale contracts declined 8.9% to 1,433; and
  • Average Cemetery pre-need property sale per contract increased 7.6% to $2,747.

For the Twelve Months Ending December 31, 2012

  • Total Cemetery Operating Revenue increased 5.0% to $40.1 million;
  • Total Cemetery Field EBITDA increased 6.0% to $10.1 million;
  • Total Cemetery Field EBITDA Margin increased 20 basis points to 25.2%;
  • Cemetery pre-need property sale contracts increased 1.0% to 6,600; and
  • Average Cemetery pre-need property sale per contract increased 6.0% to $2,765.

FINANCIAL OPERATIONS

For the Three Months Ending December 31, 2012

  • Total Financial Revenue increased 52.6% to $5.3 million;
  • Total Financial EBITDA increased 54.5% to $5.0 million;
  • Total Financial EBITDA Margin increased 120 basis points to 93.4%;
  • Funeral Financial Revenue decreased 2.7% to $1.9 million; and
  • Cemetery Financial Revenue increased 124.4% to $3.4 million.

For the Twelve Months Ending December 31, 2012

  • Total Financial Revenue increased 21.7% to $17.7 million;
  • Total Financial EBITDA increased 23.3% to $16.2 million;
  • Total Financial EBITDA Margin increased 130 basis points to 91.8%;
  • Funeral Financial Revenue decreased 6.0% to $7.7 million; and
  • Cemetery Financial Revenue increased 57.1% to $10.0 million.

FREE CASH FLOW

Carriage generated Free Cash Flow from continuing operations for the year 2012 of $20.6 million compared to Free Cash Flow from continuing operations of $24.2 million for the corresponding period in 2011 as summarized below (in millions):


2011


2012

Cash flow provided by continuing operations

$

30,959


(1)

$

25,624


Cash used for maintenance capital expenditures

(6,776)



(5,066)


Free Cash Flow

$

24,183



$

20,558




(1)

Cash flow provided by continuing operations and Free Cash Flow for the year ended December 31, 2011 included $8.5 million cash withdrawal from its affiliated preneed cemetery trusts previously disclosed in our press release dated July 21, 2011. 

ACQUISITIONS

Carriage is focused on acquiring additional funeral homes and cemetery businesses through a highly disciplined Strategic Acquisition Model as a core strategy to grow revenues and earnings.  Since the implementation of this updated and revised model late in the fourth quarter of 2011, we have acquired eight funeral homes and one cemetery that are expected to generate approximately $18.0 million in annual revenue.  However, these acquisitions contributed only $6.9 million in revenue for the full year 2012 due to the timing of the purchases.  The full revenue and earnings impact of the recent acquisitions will be realized on a full year basis in 2013. All of these acquisitions have been accretive to earnings per share and the combined Field EBITDA Margin on these eight acquisitions was at 38.1% for the full year 2012. We expect to complete six to eight acquisitions with total annualized revenue of $15 to $16 million in fiscal 2013.  These anticipated acquisitions will be spread throughout the year and there are no specific acquisitions under a letter of intent at this point in time.

SENIOR SECURED CREDIT FACILITY

As previously disclosed in the third quarter  press release, we completed a transaction to restructure our debt agreements with a new $235 million secured bank credit facility (the "Credit Facility") with $105 million available under a revolving credit facility and $130 million available as a term loan. The new Credit Facility also contains an accordion provision to borrow up to an additional $40 million in revolving loans.  The Term Loan was used to redeem and replace our existing 7.875% Senior Notes. The revolver portion of the Credit Facility refinanced our then existing Revolving Credit, paid other transaction related expenses and will provide for future corporate needs.  The Credit Facility has a five year maturity and is collateralized by all personal property and funeral home real property in certain states. Interest under the new Credit Facility is payable at prime or LIBOR options.  As of December 31, 2012, $44.7 million was drawn under the revolving credit facility and $127.5 million is outstanding on the term loan.

In connection with the repayment of the previously outstanding senior debt, the Company incurred a call premium payment to the former debtholders in the amount of $1.7 million and recorded a pre-tax charge in the amount of $1.3 million to write off the related unamortized loan costs. GAAP diluted earnings per share from continuing operations in the current year were affected by the above mentioned costs that totaled $0.10 per share on an after-tax basis.  The benefits of the new Credit Facility include substantially lower interest costs and increased capacity for financing acquisition growth.

TRUST FUND PERFORMANCE

During the fourth quarter of 2012, Carriage's discretionary trust funds gained 3.1% compared to a loss of 0.4% for the S&P 500 and a 3.2% gain for the Barclay's U.S. Corporate High Yield Index.  For the year ending December 31, 2012, Carriage's discretionary trust funds gained 20.3% versus a gain of 16.0% for the S&P 500 and 15.8% for the High Yield Index. 

The current yield on Carriage's discretionary fixed income portfolio is 8.46% and the estimated annual income for the entire discretionary portfolio is $12.4 million.  Over the past four years, Carriage has grown the estimated annual income by 128% while realizing approximately $84 million in net income in our discretionary trust accounts. 

The high amount of recurring current income combined with the realized net income in our discretionary trust portfolio will continue to benefit Carriage through the increased value of preneed funeral and cemetery contracts at maturity.  Carriage will also benefit from the recurring income from our cemetery perpetual care accounts which is recognized as GAAP revenue and earnings in the current period.

Shown below are consolidated performance metrics for the combined trust fund portfolios (preneed funeral, cemetery merchandise and services, and cemetery perpetual care) at key dates.

 Investment Performance



Investment Performance(1)


Index Performance

Timeframe


Discretionary

Total Trust


S&P 500 Stock Index

Barclay's U.S. Corporate High
Yield Index

50/50 index

Benchmark(2)

3 months ended 12/31/12


3.1%

2.5%


-0.4%

3.2%

1.4%

1 year ended 12/31/12


20.3%

17.1%


16.0%

15.8%

15.9%

2 years ended 12/31/12


16.8%

14.9%


18.4%

21.6%

20.0%

3 years ended 12/31/12


41.0%

35.8%


36.3%

40.0%

38.1%

4 years ended 12/31/12


119.4%

99.8%


72.3%

121.4%

96.9%

5 years ended 12/31/12


57.8%

53.9%


8.6%

63.5%

36.0%



(1)         

Investment performance includes realized income and unrealized appreciation (depreciation).

(2)         

The 50/50 Benchmark is 50% weighted to the S&P 500 Stock Index and 50% weighted to the Barclay's U.S. Corporate High Yield Index

 

Asset Allocation as of December 31, 2012

(in thousands)



Discretionary Trust Funds



Total Trust Funds

Asset Class


MV


%


MV


%

Cash


3,568


2%


18,144


8%

Equities


18,929


11%


35,450


15%

Fixed Income


154,985


87%


178,160


77%

Total Portfolios


$

177,482


100%


$

231,754


100%














ROLLING FOUR QUARTER OUTLOOK RAISED

As a result of the effectiveness of the many organizational leadership changes over the past year and the success of our renewed focus on all the drivers of sustainable high performance, we are substantially raising our Rolling Four Quarter Outlook of Adjusted EPS to $1.11 to $1.14 from our previous guidance of $1.03 to $1.05.  This is the first time in our twenty-one year history that we will have achieved the milestone of earnings in excess of $1.00 per share during a calendar year.

The Rolling Four Quarter Outlook "(Outlook)" reflects management's current opinion on the performance of the portfolio of businesses for the rolling four quarter period ending December 31, 2013, and the performance of the trusts as well as our view of the financial markets.  Factors affecting our analysis include, among others, acquisitions, funeral contract volumes, average revenue per funeral service, cemetery interment volumes, preneed cemetery sales, capital expenditures, execution of our funeral and cemetery Standards Operating Model, Strategic Acquisition Model and Withdrawable Trust Income. 

 

ROLLING FOUR QUARTER OUTLOOK – Period Ending December 31, 2013



Range

(in millions, except per share amounts)

Revenues

$224 – $226

Consolidated EBITDA

$57 – $59

Adjusted Consolidated EBITDA

$60 – $62

Net Income

$17 – $19

Adjusted Net Income

$19 – $21

GAAP Earnings Per Share

$1.02 – $1.04

Adjusted Earnings Per Share

$1.11 – $1.14

Free Cash Flow

$28 – $30

 

Revenues, Consolidated EBITDA, Adjusted Consolidated EBITDA, Net Income, Adjusted Net Income, GAAP Earnings Per Share, Adjusted Earnings Per Share and Free Cash Flow for the four quarter period ending December 31, 2013 are expected to improve relative to the same period ended December 31, 2012, for the following reasons:

  • The new Credit Facility will allow for increased financial capacity for acquisitions and substantially reduced interest costs;
  • Increases in Acquired Funeral Revenue and Acquired Funeral Field EBITDA;
  • Modest increases in Same Store Funeral Revenue  and Same Store Funeral Field EBITDA;
  • Increases in Cemetery Revenue and Cemetery Field EBITDA; and
  • Increases in Financial Revenue and Financial EBITDA from trust funds.

 

CARRIAGE SERVICES, INC.

NON-GAAP UNAUDITED TREND OPERATING AND FINANCIAL METRICS

FROM CONTINUING OPERATIONS (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)










Three Months Ended
December 31


Twelve Months Ended
 December 31


2011

2012

% Change


2011

2012

%
Change









Same Store Contracts








Atneed Contracts

4,424

4,612

4.2%


18,075

18,007

-0.4%

Preneed Contracts

1,215

1,250

2.9%


5,006

4,755

-5.0%

Total Same Store Funeral Contracts

5,639

5,862

4.0%


23,081

22,762

-1.4%

Acquisition Contracts








Atneed Contracts

945

1,246

31.9%


3,067

4,773

55.6%

Preneed Contracts

168

262

56.0%


599

821

37.1%

Total Acquisition Funeral Contracts

1,113

1,508

35.5%


3,666

5,594

52.6%

Total Funeral Contracts

6,752

7,370

9.2%


26,747

28,356

6.0%









Funeral Operating Revenue








Same Store Revenue

$29,802

$30,624

2.8%


$120,766

$120,576

-0.2%

Acquisition Revenue

4,619

7,286

57.7%


14,210

25,802

81.6%

Total Funeral Operating Revenue

$34,420

$37,910

10.1%


$134,976

$146,378

8.4%









Cemetery Operating Revenue








Same Store Revenue

$9,231

$9,958

7.9%


$38,152

$39,902

4.6%

Acquisition Revenue

105



166


Total Cemetery Operating Revenue

$9,231

$10,064

9.0%


$38,152

$40,068

5.0%









Financial Revenue








Preneed Funeral Commission Income

412

348

-15.5%


1,811

1,711

-5.5%

Preneed Funeral Trust Earnings

1,563

1,574

0.7%


6,357

5,968

-6.1%

Cemetery Trust Earnings

1,187

3,188

168.6%


5,041

8,506

68.7%

Preneed Cemetery Finance Charges

331

218

-34.1%


1,341

1,518

13.2%

Total Financial Revenue

$3,492

$5,328

52.6%


$14,550

$17,703

21.7%

Total Revenue

$47,143

$53,301

13.1%


$187,678

$204,149

8.8%









Field EBITDA








Same Store Funeral Field EBITDA

$10,959

$12,185

11.2%


$43,288

$46,231

6.8%

Same Store Funeral Field EBITDA Margin

36.8%

39.8%

300 bp


35.8%

38.3%

250 bp

Acquisition Funeral Field EBITDA

1,273

2,203

73.1%


3,681

8,339

126.5%

Acquisition Funeral Field EBITDA Margin

27.6%

30.2%

260 bp


25.9%

32.3%

640 bp

Total Funeral Field EBITDA

$12,232

$14,388

17.6%


$46,969

$54,570

16.2%

Total Funeral Field EBITDA Margin

35.5%

38.0%

250 bp


34.8%

37.3%

250 bp









Same Store Cemetery Field EBITDA

$2,147

$2,767

28.9%


$9,525

$10,176

6.8%

Same Store Cemetery Field EBITDA Margin

23.3%

27.8%

450 bp


25.0%

25.5%

20 bp

Acquisition Cemetery Field EBITDA

(12)



(76)


Acquisition Cemetery Field EBITDA Margin

-11.4%



-45.8%


Total Cemetery Field EBITDA

$2,147

$2,756

28.4%


$9,525

$10,100

6.0%

Total Cemetery Field EBITDA Margin

23.3%

27.4%

410 bp


25.0%

25.2%

20 bp









Funeral Financial EBITDA

$1,703

$1,591

-6.6%


$6,793

$6,272

-7.7%

Cemetery Financial EBITDA

1,518

3,385

123.0%


6,382

9,975

56.3%

Total Financial EBITDA

$3,221

$4,976

54.5%


$13,175

$16,247

23.3%

Total Financial EBITDA Margin

92.2%

93.4%

120 bp


90.5%

91.8%

130 bp









Total Field EBITDA

17,599

22,120

25.7%


69,669

80,917

16.1%

Total Field EBITDA Margin

37.3%

41.5%

420 bp


37.1%

39.6%

250 bp

 

CARRIAGE SERVICES, INC.

NON-GAAP UNAUDITED TREND OPERATING AND FINANCIAL METRICS

FROM CONTINUING OPERATIONS (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)










Three Months Ended
 December 31


Twelve Months Ended
December 31


2011

2012

% Change


2011

2012

%
Change









Overhead








Total Variable Overhead

$4,760

$3,706

-22.1%


$9,422

$9,450

0.3%

Total Regional Fixed Overhead

794

1,257

58.3%


3,766

4,187

11.2%

Total Corporate Fixed Overhead

4,012

4,626

15.3%


15,699

16,635

6.0%

Total Overhead

$9,566

$9,589

0.2%


$28,887

$30,272

4.8%


20.3%

18.0%

-230 bp


15.4%

14.8%

-60 bp









Consolidated  EBITDA

$8,034

$12,530

56.0%


$40,781

$50,645

24.2%

Consolidated  EBITDA Margin

17.0%

23.5%

650 bp


21.7%

24.8%

310 bp









Special Items Affecting EBITDA








Withdrawable Trust Income (loss)

$(368)

$627



$4,513

$1,916


Acquisition Expenses

265

425



1,237

1,340


Severance Costs

1,769

33



1,936

802


Non-Recurring legal fees/Settlements



195


Incentive Compensation - Corporate

810



810


Other Incentive Compensation

254



254


Professional Fees

141



141


Securities Transactions Expenses

2



504


Sum of Special Items

$2,873

$1,085

-62.2%


$9,395

$4,253

-54.7%









Adjusted Consolidated EBITDA

$10,907

$13,615

$24.8%


$50,176

$54,898

9.4%

Adjusted Consolidated EBITDA Margin

23.1%

25.5%

240 bp


26.7%

26.9%

20 bp









Property Depreciation & Amortization

$2,413

$2,505

3.8%


$9,585

$10,054

4.9%

Non Cash Stock Compensation

284

553

94.7%


1,870

2,174

16.3%

Interest Expense

4,477

3,421

-23.6%


18,104

17,100

-5.5%

Interest Income and Other, Net

(16)

(911)



(696)

2,068


Pretax Income before Special Item Adjustment

$3,748

$8,048

114.7%


$21,314

$23,502

10.3%









Special Items Affecting Pretax Income








Refinancing Related Costs



201

3,031


Gain on Repurchase of TIDES



(846)


Reduction of Litigation Reserve

(900)



(900)


Adjusted Pretax Income

$3,748

$7,148

90.7%


$20,668

$25,633

24.0%

Tax Provision

$1,928

$2,721

41.1%


$8,781

$10,176

15.9%

Adjusted Net Income

$1,820

$4,427

143.2%


$11,887

$15,457

30.0%

Adjusted Net Profit Margin

3.9%

8.2%

430 bp


6.3%

7.6%

130 bp









Adjusted Earnings Per Share

$0.10

$0.24

140.0%


$0.65

$0.85

30.8%









GAAP Earnings Per Share

$0.02

$0.23

1050.0%


$0.37

$0.64

73.0%









 Average Shares Outstanding

18,420

18,264

-0.8%


18,397

18,226

-0.9%

CONFERENCE CALL AND INVESTOR RELATIONS CONTACTS

Carriage Services has scheduled a conference call for tomorrow, February 26, 2013 at 9:30 a.m. CST.  To participate in the call, please dial 866-516-3867 (code - 10408333) and ask for the Carriage Services conference call.  A telephonic replay of the conference call will be available through March 8, 2013 and may be accessed by dialing 404-537-3406 (code - 10408333). An audio archive will also be available on the company's website at www.carriageservices.com after the call.  For more information on any investor relations questions, please contact Bill Heiligbrodt at 713-332-8553.

NON-GAAP FINANCIAL MEASURES

This press release uses Non-GAAP financial measures to present the financial performance of the Company.  Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company's reported operating results or cash flow from operations or any other measure of performance as determined in accordance with GAAP.  The Company's GAAP financial statements accompany this release.  Reconciliations of the Non-GAAP financial measures to GAAP measures are provided at the end of the press release.

The Non-GAAP financial measures include "Free Cash Flow", "Funeral and Cemetery Field EBITDA", "Total Field EBITDA", "Consolidated EBITDA", "Adjusted Consolidated EBITDA", "Special Items", "Adjusted Net Income" and "Adjusted Earnings Per Share" in this press release.  These financial measurements are defined as similar GAAP items adjusted for Special Items itemized and reconciled to GAAP later 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.  These financial measures are used by management to understand and explain the Company's operations and financial results.

Certain state regulations allow the withdrawal of financial income from preneed cemetery merchandise and services trust funds when realized in the trust.  Under current generally accepted accounting principles, trust income is only recognized in the Company's financial statements at a later time when the related merchandise and services sold on the preneed contract is delivered at the time of death.  Carriage has provided financial income from the trusts, termed "Withdrawable Trust Income (loss)" and reported on a Non-GAAP proforma basis within Special Items in the accompanying Non-GAAP Unaudited Income Statement, to reflect the current cash results.  Management believes that the Withdrawable Trust Income provides useful information to investors because it presents income and cash flow when earned by the trusts. 

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" in the Company's Annual Report on Form 10-K for the year ended December 31, 2011, 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 www.carriageservices.com.

 

CARRIAGE SERVICES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

(in thousands)

 



December 31,


2011


2012

ASSETS




Current assets:




Cash and cash equivalents

$

1,137


$

1,698

Accounts receivable, net

16,321


17,812

Assets held for sale

4,230


1,466

Inventories and other current assets

13,396


12,163

Total current assets

35,084


33,139

Preneed cemetery trust investments

65,705


70,960

Preneed funeral trust investments

75,812


82,896

Preneed receivables, net

22,614


23,222

Receivables from preneed trusts

22,165


25,871

Property, plant and equipment, net

135,513


152,433

Cemetery property

71,515


75,156

Goodwill

192,778


218,442

Deferred charges and other non-current assets

10,106


9,424

Cemetery perpetual care trust investments

41,485


46,542

Total assets

$

672,777


$

738,085

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Current portion of senior long-term debt and capital lease obligations

$

628


$

718

Accounts payable and other liabilities

13,856


18,310

Accrued liabilities

17,809


12,278

Liabilities associated with assets held for sale

2,260


369

Total current liabilities

34,553


31,675

Long-term debt, net of current portion

131,900


129,341

Line of credit

3,100


44,700

Convertible junior subordinated debenture due in 2029 to an affiliate

89,770


89,770

Obligations under capital leases, net of current portion

4,155


4,013

Deferred preneed cemetery revenue

58,809


63,997

Deferred preneed funeral revenue

40,639


39,795

Deferred preneed cemetery receipts held in trust

65,682


70,960

Deferred preneed funeral receipts held in trust

75,812


82,896

Care trusts' corpus

41,379


45,920

Total liabilities

545,799


603,067

Commitments and contingencies




Redeemable Preferred Stock

200


200

Stockholders' equity:




Common Stock, $.01 par value; 80,000,000 shares authorized; 21,663,000 and 22,078,000 issued as of December 31, 2011 and 2012, respectively

217


221

Additional paid-in capital

201,284


204,652

Accumulated deficit

(63,987)


(54,788)

Treasury stock, at cost; 3,236,000 and 3,922,000 shares at December 31, 2011 and 2012, respectively

(10,736)


(15,267)

Total stockholders' equity

126,778


134,818

Total liabilities and stockholders' equity

$

672,777


$

738,085

 

 

CARRIAGE SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

(in thousands, except share and per share data)

 



For the three months ended

December 31,


 

For the twelve months ended

December 31,


2011


2012


2011


2012









Revenues

$

47,143


$

53,301


$

187,678


$

204,149

Field costs and expenses

34,116


36,422


135,606


142,274

Gross profit

13,027


16,879


52,072


61,875

General and administrative expenses

7,690


7,407


22,745


23,458

Operating income

5,337


9,472


29,327


38,417

Interest expense

(4,477)


(3,421)


(18,104)


(17,100)

Interest income and other, net

16


911


51


963

Gain on repurchase of junior subordinated debenture



846


Loss on early extinguishment of debt and other costs



(201)


(3,031)

Income from continuing operations before income taxes

876


6,962


11,919


19,249

Provision for income taxes

(582)


(2,673)


(5,066)


(7,642)

Net income from continuing operations

294


4,289


6,853


11,607

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

14


(615)


125


(204)

Net income

308


3,674


6,978


11,403

Preferred stock dividend

2


4


14


14

Net income available to common stockholders

$

306


$

3,670


$

6,964


$

11,389









Basic earnings per common share:









Continuing operations

$

0.02


$

0.24


$

0.37


$

0.64

Discontinued operations


(0.03)


0.01


(0.01)

Basic earnings per common share

$

0.02


$

0.20


$

0.38


$

0.63

 

Diluted earnings per common share:








Continuing operations

$

0.02


$

0.23


$

0.37


$

0.64

Discontinued operations


(0.03)


0.01


(0.01)

Diluted earnings per common share

$

0.02


$

0.21


$

0.38


$

0.63









Dividends declared per common share

$

0.025


$

0.025


$

0.075


$

0.100









Weighted average number of common and common equivalent shares outstanding:








Basic

18,393


18,114


18,359


18,126

Diluted

18,420


18,264


18,397


18,226

 

CARRIAGE SERVICES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

(in thousands)

 





For the twelve months ended December 31,



2011


2012

Cash flows from operating activities:





Net income


$

6,978


$

11,403

Adjustments to reconcile net income to net cash provided by operating activities:





(Income) loss from discontinued operations


(125)


204

Depreciation and amortization


9,585


10,054

Amortization of deferred financing costs


653


685

Gain on repurchase of convertible junior subordinated debentures


(846)


Provision for losses on accounts receivable


2,756


1,826

Stock-based compensation expense


1,867


2,174

Deferred income taxes (benefit)


(3,462)


3,930

Loss on early extinguishment of debt


201


1,323

Other


38


252

Changes in operating assets and liabilities that provided (required) cash:





Accounts and preneed receivables


(1,933)


(3,850)

Inventories and other current assets


(1,509)


5,334

Deferred charges and other


(38)


(38)

Preneed funeral and cemetery trust investments


10,956


6,658

Accounts payable and accrued liabilities


7,003


(7,201)

Deferred preneed funeral and cemetery revenue


10,316


3,720

Deferred preneed funeral and cemetery receipts held in trust


(11,481)


(10,850)

Net cash provided by continuing  operating activities


30,959


25,624

Net cash provided by discontinuing  operating activities


196


137

Net cash provided by operating activities


31,155


25,761

Cash flows from investing activities:





Acquisitions


(18,574)


(42,709)

Capital expenditures


(10,625


(12,857)

Net cash used in continuing investing activities


(29,199))


(55,566)

Net cash provided by (used in) discontinuing investing activities


(19)


592

Net cash used in investing activities


(29,218)


(54,974)

Cash flows from financing activities:





Borrowings under the bank credit facility


2,500


43,307

Payments on long-term debt and obligations under capital leases


(625)


(3,173)

Proceeds from the exercise of stock options and employee stock purchase plan


719


896

Dividends on common stock


(1,376)


(1,804)

Dividends on redeemable preferred stock


(14)


(14)

Tax benefit from stock-based compensation


25


36

Repurchase of convertible junior subordinated debentures


(2,241)


Payment of debt amendment and loan origination costs


(333)


(3,236)

Payment of call premium associated with the senior note redemption



(1,707)

Purchase of treasury stock


(736)


(4,531)

Other financing costs


2


Net cash provided by (used) in financing activities


(2,079)


29,774

Net increase (decrease) in cash and cash equivalents


(142)


561

Cash and cash equivalents at beginning of year


1,279


1,137

Cash and cash equivalents at end of year


$

1,137


$

1,698

 

CARRIAGE SERVICES, INC.

Selected Financial Data


December 31,


December 31,


2011


2012

Selected Balance Sheet Data:

(unaudited)

Cash and short-term investments

$

1,137



$

1,698


Total Senior Debt (a)

139,783



178,772


Senior Debt to total capitalization

39.7%



44.3%


Senior Debt to EBITDA (rolling 12 mos.)

3.4



3.5


Senior Debt to Adjusted Consolidated EBITDA (rolling 12 mos.)

2.8



3.3


(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.  We define our Non-GAAP measures as "Adjusted" which is reflected on our Non-GAAP Unaudited Income Statement presented herein.

 

Reconciliation of Net Income from continuing operations to Adjusted Net Income from continuing operations for the three and twelve months ended December 31, 2011 and 2012 (thousands):



 

Three months ended

December 31,



 

Twelve months ended

December 31,




2011



2012



2011



2012


Net Income from continuing operations

$

294



$

4,289



$

6,853



$

11,607


Special items, net of tax

1,526



138



5,034



3,850


Adjusted Net Income from continuing operations

$

1,820



$

4,427



$

11,887



$

15,457


 

Reconciliation of Diluted Earnings Per Share from continuing operations to Adjusted Earnings per Share from continuing operations for the three and twelve months ended December 31, 2011 and 2012:



 

Three months ended

December 31,



 

Twelve months ended

December 31,




2011



2012



2011



2012


Diluted EPS from continuing operations

$

0.02



$

0.23



$

0.37



$

0.64


Effect of special items

0.08



0.01



0.28



0.21


Adjusted EPS from continuing operations

$

0.10



$

0.24



$

0.65



$

0.85


 

Summary of Special Itemsfor the three and twelve months ended December 31, 2011 and 2012 on a pre-tax basis (thousands):



 

Three months ended

December 31,


 

 

Twelve months ended

December 31,



2011


2012


2011


2012

Items affecting EBITDA








Withdrawable Trust Income (loss)

$

(368)


$

627


$

4,513


$

1,916

Acquisition Expenses

265


425



1,237


1,340

Severance Costs

1,769


33


1,936


802

Non-recurring Legal Fees / Settlements

-


-


-


195

Incentive Compensation - Corporate

810


-


810


-

Other Incentive Compensation

254


-


254


-

Professional Fees

141


-


141


-

Securities Transaction Expense

2


-


504


-

Items Affecting Pre-Tax Income








Refinancing  Related Costs

-


-


201


3,031

Reduction of Litigation Reserve

-


(900)


-


(900)

Gain or Repurchase of Tides

-


-


(846)


-

Sum of special items

$

2,873


$

185


$

8,750


$

6,384

 

Summary of Special Itemsfor the three and twelve months ended December 31, 2011 and 2012 on an after-tax basis (thousands):



 

Three months ended

December 31,


 

Twelve months ended

December 31,




2011


2012


2011


2012

Items affecting EBITDA








Withdrawable Trust Income (loss)

$

(195)


$

394


$

2,596


$

1,155

Acquisition Expenses

141


267


712


808

Severance Costs

939


20


1,114


484

Non-recurring Legal Fees / Settlements

-


-


-


118

Incentive Compensation - Corporate

430


-


466


-

Other Incentive Compensation

135


-


146


-

Professional Fees

75


-


81


-

Securities Transaction Expense

1


-


290


-

Items Affecting Pre-Tax Income








Refinancing  Related Costs

-


-


116


1,828

Reduction of Litigation Reserve

-


(543)


-


(543)

Gain or Repurchase of Tides

-


-


(487)


-

Sum of special items, net of tax

$

1,526


$

138


$

5,034


$

3,850

 

Reconciliation of Net Income from continuing operations to Adjusted Consolidated EBITDA from continuing operations for the three and twelve months ended December 31, 2011 and 2012 (in thousands):

 



 

Three months ended

December 31,


 

Twelve months ended

December 31,



2011


2012


2011


2012

Net income from continuing operations

$

294


$

4,289


$

6,853


$

11,607

Provision for income taxes

582


2,673


5,066


7,642

Pre-tax earnings from continuing operations

876


6,962


11,919


19,249









Interest expense, net

4,477


3,421


18,104


17,100

Interest income

(16)


(11)


(52)


(63)

Non-cash stock compensation

284


553


1,870


2,174

Depreciation & amortization

2,413


2,505


9,585


10,054

Special items

2,873


185


8,750


6,384

Adjusted Consolidated EBITDA from

continuing operations

$

10,907


$

13,615


$

50,176


$

54,898

Revenue from continuing operations

$

47,143


$

53,301


$

187,678


$

204,149

Adjusted Consolidated EBITDA Margin

23.1%


25.5%


26.7$


26.9%

 

Reconciliation of Net Income from continuing operations to Adjusted Consolidated EBITDA for the estimated rolling four quarters ended December 31, 2013 (in thousands):



Rolling

Four Quarter Outlook


December 31, 2013E

Net income from continuing operations


$

19,300



Provision for income taxes


13,200



Pre-tax earnings from continuing operations


32,500



Net interest expense, including loan cost amortization


13,800



Depreciation & amortization, including stock compensation


13,000



Consolidated EBITDA from continuing operations


$

59,300



 

Reconciliation of Consolidated EBITDA to Free Cash Flow for the estimated rolling four quarters ending December 31, 2013 (in 000's):




Rolling

Four Quarter Outlook



December 31, 2013E

Consolidated EBITDA



$

59,300

Interest paid



(13,200)

Cash Income taxes



(13,200)

Maintenance capital expenditures



(4,000)

Withdrawable trust income



1,300

Free Cash Flow



$

30,200

 

Reconciliation of funeral and cemetery income from continuing operations before income taxes to Field EBITDA from continuing operations for the three and twelve months ended December 31, 2011 and 2012 (in thousands):

 


Funeral

 

Three months ended

December 31,


 

Twelve months ended

December 31,



2011


2012


2011


2012

Gross Profit (GAAP)

$

10,882


$

12,083


$

41,975


$

47,482

Depreciation & amortization

1,440


1,542


5,719


5,974

Regional &unallocated costs

1,613


2,354


6,067


7,386

Net financial income

(1,703)


(1,591)


(6,793)


(6,272)

Funeral Field EBITDA

$

12,232


$

14,388


$

46,969


$

54,570

Funeral Field Operating Revenue

$

34,420


$

37,910


$

134,976


$

146,378

Funeral Field EBITDA Margin

35.5%


38.0%


34.8%


37.3%

 

Cemetery

 

Three months ended

December 31,


 

Twelve months ended

December 31,



2011


2012


2011


2012

Gross Profit (GAAP)

$

2,145


$

4,796


$

10,097


$

14,393

Depreciation & amortization

711


718


2,853


3,116

Regional & unallocated costs

808


625


2,957


2,566

Net financial income

(1,518)


(3,385)


(6,382)


(9,975)

Cemetery Field EBITDA

$

2,147


$

2,756


$

9,525


$

10,100

Cemetery Field Operating Revenue

$

9,231


$

10,064


$

38,152


$

40,068

Cemetery Field EBITDA Margin

23.3


27.4


25.0


25.2

SOURCE Carriage Services, Inc.

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