CARRIAGE SERVICES, INC. 
By 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 20(th) 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 Barclay's
Stock U.S.
Index Corporate
High 50/50 index
Yield
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 Twelve Months Ended
December 31 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 Twelve Months Ended
December 31 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 Twelve months ended
December 31, 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 Twelve months ended
December 31, 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 Twelve months ended
December 31, 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 Twelve months ended
December 31, 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 $10,907 $13,615 $50,176 $54,898
continuing
operations
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 Twelve months ended
December 31, 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 Twelve months ended
December 31, 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.
