HOUSTON, April 25, 2016 /PRNewswire/ -- Carriage
Services, Inc. (NYSE: CSV) today announced record results for the
first quarter ended March 31, 2016 as
highlighted below:
Three Months Ended March 31, 2016
compared to Three Months Ended March 31,
2015
- Total Revenue of $63.3 million,
an increase of 0.1%;
- Total Field EBITDA of $27.7
million, an increase of 0.6%;
- Total Field EBITDA Margin up 20 basis points to 43.7%;
- Adjusted Consolidated EBITDA of $19.9
million, an increase of 1.1%;
- Adjusted Consolidated EBITDA Margin up 30 basis points to
31.4%;
- Adjusted Diluted Earnings Per Share of $0.47, an increase of 11.9%; and
- Adjusted Free Cash Flow of $11.7
million, an increase of 1.2%.
Mel Payne, Chief Executive
Officer, stated, "Notwithstanding a challenging industry deathrate
and revenue environment, the first quarter of 2016 was the best in
our history with record revenue of $63.3
million, record Field EBITDA and Field EBITDA Margin of
$27.7 million and 43.7%, record
Adjusted Consolidated EBITDA and Adjusted Consolidated EBITDA
Margin of $19.9 million and 31.4%,
record Adjusted Diluted EPS of $0.47,
an increase of 11.9% from the prior record of $0.42 in the first quarter of 2015, and record
Adjusted Free Cash Flow of $11.7
million.
The first quarter of 2015 was our previous best quarter
historically, but it was substantially aided by 4.6% higher same
store funeral volumes compared to the first quarter of 2014 because
of an unusually strong flu season last year. Our performance
in the first quarter of 2016 was simply extraordinary because of
outstanding execution of our Standards Operating Model by our
Managing Partners and their employee teams in the face of 5.4%
lower same store funeral volumes, as there was a very weak flu
season this year relative to last year starting in December and
continuing through the first quarter.
As I have stated recently on quarterly conference calls and
again in my recently published 2015 Shareholder Letter, our
results over longer periods of time are no longer highly correlated
to whether we make frequent acquisitions, just the right ones,
normal economic and market cycles, or to when baby boomers start to
die. Moreover, as clearly exhibited in the first quarter of 2016,
our short term financial performance is no longer as highly
correlated as in the past to short term uncontrollable vagaries of
our industry such as death rates, timing and degree of the flu
season, cremation versus burial mix trends, quarterly seasonality,
financial market volatility, etc.
To adequately understand the high performance cultural reasons
for the historic performance by our leaders and employees in the
first quarter, especially as a leading indicator of our future long
term performance, I highly recommend that you read and reflect upon
my 2015 Shareholder Letter, which has been delivered to all our
shareholders and is available on our website. While it is long at
22 pages, it was written and supported by Five Year Trend Report
data (we like to say "the data don't lie") to explain in a
comprehensive way the long term value creation dynamics of all
elements of Carriage's Consolidation and Operating Platform.
And why we now refer to Carriage as a High Performance Culture
Company that just happens to be in the funeral and cemetery
industry, and most importantly, why Carriage now represents a
unique and compelling investment opportunity for long term
investors.
All of the Carriage High Performance Culture ideas,
concepts, vision, strategies and models are explained even more
comprehensively than in my Shareholder Letter in our self-published
Company and Investment Profile, also available on our website. For
those of you who want to ask a question on our conference call
tomorrow, we simply ask that you read our Shareholder Letter and/or
our Company and Investment Profile in advance. Otherwise we
do not believe you would be adequately qualified or prepared to ask
good and relevant questions about long term shareholder value
creation at our company.
We have long held the view that short term thinking about
financial performance for public companies with mandatory quarterly
SEC filings has little to do with long term value creation. Such
short term thinking by managements encouraged with the wrong
incentives by boards for achievement of short term "finish
line" targets can lead to bad business practices or worse just to
"meet or beat" the consensus estimate numbers and temporarily juice
the stock price, but the longer term outcome is too often
enterprise value destruction (deathcare consolidation mania and
crash of the 1990's!). So we enthusiastically joined Larry Fink's public company CEO call to action
last year against the "quarterly results hysteria" practiced by too
many on Wall Street, as we as shareowner leaders of Carriage have
been following since 2011 his recommendation that management teams
supported by their boards should articulate a clear and compelling
vision and strategy for long term value creation over multiple
years.
We also took note that the SEC must have been listening to a
group of large institutional shareholders about
their concerns, with Larry Fink
in the lead, as this past week the SEC indicated that it would
review its quarterly filing mandate and consider the European model
of one annual fiscal year filing supplemented by one mid-year
progress filing. While we doubt that these well intentioned
initiatives will lead to meaningful change in the short termism
culture of our markets because of the enormous pools of capital
seeking to maximize short term returns, I was honored to do our
part by asking myself on our February conference call eight highly
relevant questions about long term value creation at Carriage, all
of which were answered in my Shareholder Letter.
Finally, to end my comments on a really high note, listed below
are fourteen first quarter High Performance Hero Managing Partners
that were leading the rest of us by high performance culture
example in the first quarter, consistent with our Good To Great
Journey annual theme: "Carriage Services 2016: We
Choose To Be Great!"," concluded Mr. Payne.
Jason Cox
|
Lane Funeral
Home-South Crest Chapel; Rossville, GA
|
Tim Hauck
|
Cape Coral Group;
Cape Coral, FL
|
John
Fitzpatrick
|
Donahue-Cecere
Funeral Homes; Westbury, NY
|
Scott
Sanderford
|
Everly Wheatley
Funeral Home; Alexandria, VA
|
Jim Terry
|
James J. Terry
Funeral Home; Downingtown, PA
|
Scott
Drzewiecki
|
Ft. Lauderdale
Cemeteries; Ft. Lauderdale, FL
|
Roger
Allen
|
LaGrone-Blackburn-Shaw Funeral Homes; Amarillo,
TX
|
Mike
Conner
|
Conner-Westbury
Funeral Home; Griffin, GA
|
Randy
Valentine
|
Dieterle Memorial
Home; Montgomery, IL
|
Ken
Summers
|
P.L. Fry & Son
Funeral Home; Manteca, CA
|
Michael
Nicosia
|
Ouimet Brothers
Concord Funeral Home; Concord, CA
|
Steven
Mora
|
Conejo Mountain
Memorial Park; Camarillo, CA
|
Alan
Kerrick
|
Dakan Funeral Chapel;
Caldwell, ID
|
Nicholas
Welzenbach
|
Los Gatos Memorial
Park; San Jose, CA
|
ROLLING FOUR QUARTER OUTLOOK
The Rolling Four Quarter Outlook ("Outlook") reflects
management's opinion on the performance of the portfolio of
existing businesses, including performance of existing trusts, and
excludes size and timing of acquisitions for the Rolling Four
Quarter Outlook period ending March 31, 2017 unless we have a
signed Letter of Intent and high likelihood of a closing within 90
days. This Outlook is not intended to be management estimates or
forecasts of our future performance, as we believe precise
estimates will be precisely wrong all the time. Rather our intent
and goal is to reflect a "roughly right range" most of the time of
future Rolling Four Quarter Outlook performance as we execute our
Standards Operating, Strategic Acquisition and 4E Leadership Models
over time. Similarly, we self-publish a Company and Investment
Profile, available on our website, that includes a Five Year
"Roughly Right Scenario" of our future performance which together
with our Five Year Trend Report provides investors a ten year past
and future profile of our financial value creation dynamics and
condition, making it easier to judge whether our "trends will
continue to be the friend" of long term investors.
The Rolling Four Quarter Outlook ending March 31, 2017
includes one business under Letter of Intent expected to close by
the end of May 2016. As such, we are raising our Rolling Four
Quarter Outlook of Adjusted Diluted Earnings Per Share by
$0.02 to a range of $1.71 - $1.75 for the period ending March 31, 2017.
ROLLING FOUR QUARTER OUTLOOK – Period Ending March 31, 2017
|
|
Range
(in millions, except
per share amounts)
|
Revenues
|
|
$251 -
$255
|
Adjusted Consolidated
EBITDA
|
|
$74 - $78
|
Adjusted Net
Income
|
|
$29 - $31
|
Adjusted Diluted
Earnings Per Share(1)
|
|
$1.71 -
$1.75
|
Factors affecting our analysis include, among others, 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,
market volatility and changes in Federal Reserve monetary policy.
Revenues, Adjusted Consolidated EBITDA, Adjusted Net Income and
Adjusted Diluted Earnings Per Share for the four quarter period
ending March 31, 2017 are expected to improve relative to the
trailing four quarter period ending March
31, 2016 due to increases in our existing Funeral Home and
Cemetery portfolio and modest decreases in overhead as a percentage
of revenue.
(1)
|
The Rolling Four
Quarter Outlook on Adjusted Diluted Earnings Per Share does not
include any changes to our fully diluted share count that could
occur related to additional share repurchases or a stock price
increase and EPS dilution calculations related to our convertible
subordinated notes and outstanding and exercisable stock
options.
|
TRUST FUND PERFORMANCE
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
|
|
|
Discretionary
|
Total
Trust
|
|
S&P
500
Stock
Index
|
High Yield
Index
|
70/30
index
Benchmark(2)
|
|
|
|
|
|
|
|
|
3 months ended
03/31/16
|
|
(2.2)%
|
(1.8)%
|
|
1.3%
|
3.2%
|
2.7%
|
1 year ended
12/31/15
|
|
(3.1)%
|
(2.7)%
|
|
1.4%
|
(4.7)%
|
(2.9)%
|
2 years ended
12/31/15
|
|
5.0%
|
5.0%
|
|
15.2%
|
(2.3)%
|
3.0%
|
3 years ended
12/31/15
|
|
20.0%
|
19.4%
|
|
52.5%
|
5.0%
|
19.3%
|
4 years ended
12/31/15
|
|
44.4%
|
39.9%
|
|
76.9%
|
21.4%
|
38.0%
|
5 years ended
12/31/15
|
|
40.2%
|
37.2%
|
|
80.6%
|
26.7%
|
42.8%
|
|
|
(1)
|
Investment
performance includes realized income and unrealized appreciation
(depreciation).
|
(2)
|
The 70/30 Benchmark
is 70% weighted to the High Yield Index and 30% weighted to the
S&P 500 Stock Index.
|
Asset Allocation as
of March 31, 2016 (in
thousands)
|
|
|
|
|
Discretionary Trust Funds
|
|
Total Trust
Funds
|
|
Asset
Class
|
|
|
MV
|
%
|
|
MV
|
%
|
|
Cash
|
|
|
$
|
12,013
|
|
7%
|
|
$
|
28,877
|
|
14%
|
|
Equities
|
|
|
28,818
|
|
17%
|
|
31,295
|
|
15%
|
|
Fixed
Income(1)
|
|
|
129,049
|
|
74%
|
|
139,544
|
|
69%
|
|
Other/Insurance
|
|
|
3,398
|
|
2%
|
|
3,588
|
|
2%
|
|
Total
Portfolios
|
|
|
$
|
173,278
|
|
100%
|
|
$
|
203,304
|
|
100%
|
|
|
|
(1)
|
Discretionary Trust -
Fixed Income Portfolio Profile.
|
Industry/Sector
|
|
%
|
Communications
|
|
8.9%
|
Consumer
|
|
11.5%
|
Energy
|
|
11.8%
|
Financial
|
|
45.8%
|
Government
|
|
0.9%
|
Industrial
|
|
0.7%
|
Media
|
|
10.1%
|
Technology
|
|
2.9%
|
Utilities
|
|
7.4%
|
Total
|
|
100%
|
For the quarter ended March 31, 2016, Carriage's
discretionary trust funds returned (2.2)% versus 2.7% for the 70/30
index benchmark. The overall performance for the quarter was
particularly affected by weakness in our 10 year warrant portfolio
of five "Too Big To Fail" banks and insurance companies, while the
performance of our fixed income portfolio generally tracked the
recovery in the high yield market in the quarter.
We continued to execute our portfolio repositioning strategy
throughout the first quarter with a priority of purchasing fixed
income securities of companies that were either specifically
distressed or in distressed industry sectors with their debt
trading at a discount to par, but based on our internal specific
company credit analysis should be able to pay their principal and
interest when due. During 2016, we have purchased $36.2 million face amount of new fixed income
securities at an average discount to par of about 16%, equivalent
to an average price of approximately $84 with a cash yield on cost of 9.6%, i.e. a net
increase in our recurring estimated annual income of $2.2 million to $12.0
million annually.
While we will no longer report Withdrawable Trust Income in our
Non-GAAP Trend reporting, for the sake of full transparency we will
disclose the total throughout 2016 in this section. The
Withdrawable Trust Income for the first quarter would have been
approximately ($0.7) million.
While negative, this will have no impact to our Adjusted Free Cash
Flow for 2016.
NON-GAAP TREND REPORTING
Our Non-GAAP trend reporting is intended to provide investors
with a transparent view of the recurring earning power of Carriage.
Historically, the dynamic nature of the evolutionary process of
building our High Performance Culture, especially since launching
the Carriage Good To Great Journey in the beginning of 2012,
has led to a large number of charges such as severance, consulting
and other balance sheet activities that we view as non-recurring in
nature and as such have been added back to GAAP earnings as
"Special Items". The senior leadership Special Items are important
to add back because of the transformational nature of major changes
over the last four years within our Operations and Strategic Growth
Leadership Team, culminating during 2015 in a reduction from
fifteen members to nine members. The number of non-recurring
charges related to leadership and balance sheet component changes
should be minimal during 2016 and thereafter over our normal five
year planning timeframe.
Accordingly, beginning in the first quarter of 2016, these
Non-GAAP special charges will be comprised of only those charges
materially outside the normal course of business, which should
result in major shrinkage of "the gap" between our GAAP and
Non-GAAP reported performance.
The Non-GAAP Withdrawable Trust Income in our Trend Reports
reflects the change in the available income we are able to withdraw
from Preneed Cemetery Trusts in three states that allow cash income
to be withdrawn prior to maturity of the contract. The intent of
this presentation was to show the true cash earning power of
Carriage. The amount of reported Withdrawable Trust Income has been
steadily declining over the past five years while our Adjusted
Consolidated EBITDA and Margin have been materially increasing. As
its financial impact to Carriage is diminishing and the intrinsic
value of reporting such Non-GAAP affect is insignificant, we will
no longer reflect Withdrawable Trust Income within the Special
Items section of our Trend Reports.
CONFERENCE CALL AND INVESTOR RELATIONS CONTACT
Carriage Services has scheduled a conference call for tomorrow,
April 26, 2016 at 9:30 a.m. central time. To participate in the
call, please dial 866-516-3867 (ID-90851311) and ask for the
Carriage Services conference call. A replay of the conference
call will be available through April
30, 2016 and may be accessed by dialing 855-859-2056
(ID-90851311). The conference call will also be available at
www.carriageservices.com. For any investor relations questions,
please contact Viki Blinderman at
713-332-8568 or Ben Brink at
713-332-8441 or email InvestorRelations@carriageservices.com.
CARRIAGE SERVICES,
INC.
|
OPERATING AND
FINANCIAL TREND REPORT
|
FROM OPERATIONS
(IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2015
|
2016
|
%
Change
|
|
|
|
|
Same Store
Contracts
|
|
|
|
Atneed
Contracts
|
6,010
|
|
5,684
|
|
-5.4
|
%
|
Preneed
Contracts
|
1,497
|
|
1,418
|
|
-5.3
|
%
|
Total Same Store
Funeral Contracts
|
7,507
|
|
7,102
|
|
-5.4
|
%
|
Acquisition
Contracts
|
|
|
|
Atneed
Contracts
|
1,177
|
|
1,334
|
|
13.3
|
%
|
Preneed
Contracts
|
259
|
|
225
|
|
-13.1
|
%
|
Total Acquisition
Funeral Contracts
|
1,436
|
|
1,559
|
|
8.6
|
%
|
Total Funeral
Contracts
|
8,943
|
|
8,661
|
|
-3.2
|
%
|
|
|
|
|
Funeral Operating
Revenue
|
|
|
|
Same Store
Revenue
|
$
|
38,991
|
|
$
|
37,237
|
|
-4.5
|
%
|
Acquisition
Revenue
|
8,593
|
|
9,677
|
|
12.6
|
%
|
Total Funeral
Operating Revenue
|
$
|
47,584
|
|
$
|
46,914
|
|
-1.4
|
%
|
|
|
|
|
Cemetery Operating
Revenue
|
|
|
|
Same Store
Revenue
|
$
|
10,268
|
|
$
|
11,075
|
|
7.9
|
%
|
Acquisition
Revenue
|
822
|
|
766
|
|
-6.8
|
%
|
Total Cemetery
Operating Revenue
|
$
|
11,090
|
|
$
|
11,841
|
|
6.8
|
%
|
|
|
|
|
Financial
Revenue
|
|
|
|
Preneed Funeral
Commission Income
|
$
|
355
|
|
$
|
421
|
|
18.6
|
%
|
Preneed Funeral Trust
Earnings
|
2,198
|
|
1,967
|
|
-10.5
|
%
|
Cemetery Trust
Earnings
|
1,641
|
|
1,766
|
|
7.6
|
%
|
Preneed Cemetery
Finance Charges
|
385
|
|
422
|
|
9.6
|
%
|
Total Financial
Revenue
|
$
|
4,579
|
|
$
|
4,576
|
|
-0.1
|
%
|
Total
Revenue
|
$
|
63,253
|
|
$
|
63,331
|
|
0.1
|
%
|
|
|
|
|
Field
EBITDA
|
|
|
|
Same Store Funeral
Field EBITDA
|
$
|
15,898
|
|
$
|
15,152
|
|
-4.7
|
%
|
Same Store Funeral
Field EBITDA Margin
|
40.8
|
%
|
40.7
|
%
|
-10 bp
|
|
Acquisition Funeral
Field EBITDA
|
3,553
|
|
4,172
|
|
17.4
|
%
|
Acquisition Funeral
Field EBITDA Margin
|
41.3
|
%
|
43.1
|
%
|
180 bp
|
|
Total Funeral
Field EBITDA
|
$
|
19,451
|
|
$
|
19,324
|
|
-0.7
|
%
|
Total Funeral
Field EBITDA Margin
|
40.9
|
%
|
41.2
|
%
|
30
bp
|
|
|
|
|
|
Same Store Cemetery
Field EBITDA
|
$
|
3,550
|
|
$
|
3,843
|
|
8.3
|
%
|
Same Store Cemetery
Field EBITDA Margin
|
34.6
|
%
|
34.7
|
%
|
10 bp
|
|
Acquisition Cemetery
Field EBITDA
|
300
|
|
221
|
|
-26.3
|
%
|
Acquisition Cemetery
Field EBITDA Margin
|
36.5
|
%
|
28.9
|
%
|
-760 bp
|
|
Total Cemetery
Field EBITDA
|
$
|
3,850
|
|
$
|
4,064
|
|
5.6
|
%
|
Total Cemetery
Field EBITDA Margin
|
34.7
|
%
|
34.3
|
%
|
-40
bp
|
|
|
|
|
|
Funeral Financial
EBITDA
|
$
|
2,271
|
|
$
|
2,197
|
|
-3.3
|
%
|
Cemetery Financial
EBITDA
|
1,964
|
|
2,103
|
|
7.1
|
%
|
Total Financial
EBITDA
|
$
|
4,235
|
|
$
|
4,300
|
|
1.5
|
%
|
Total Financial
EBITDA Margin
|
92.5
|
%
|
94.0
|
%
|
150
bp
|
|
|
|
|
|
Total Field
EBITDA
|
$
|
27,536
|
|
$
|
27,688
|
|
0.6
|
%
|
Total Field EBITDA
Margin
|
43.5
|
%
|
43.7
|
%
|
20
bp
|
|
|
|
|
|
OPERATING AND
FINANCIAL TREND REPORT
|
FROM OPERATIONS
(IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
2015
|
2016
|
%
Change
|
|
|
|
|
Overhead
|
|
|
|
Total Variable
Overhead
|
$
|
2,430
|
|
$
|
5,400
|
|
122.2
|
%
|
Total Regional Fixed
Overhead
|
823
|
|
875
|
|
6.3
|
%
|
Total Corporate Fixed
Overhead
|
5,353
|
|
5,063
|
|
-5.4
|
%
|
Total
Overhead
|
$
|
8,606
|
|
$
|
11,338
|
|
31.7
|
%
|
Overhead as a
percent of sales
|
13.6
|
%
|
17.9
|
%
|
430
bp
|
|
|
|
|
|
Consolidated
EBITDA
|
$
|
18,930
|
|
$
|
16,350
|
|
-13.6
|
%
|
Consolidated
EBITDA Margin
|
29.9
|
%
|
25.8
|
%
|
-410
bp
|
|
|
|
|
|
Other Expenses and
Interest
|
|
|
|
Depreciation &
Amortization
|
$
|
3,322
|
|
$
|
3,734
|
|
12.4
|
%
|
Non-Cash Stock
Compensation
|
1,089
|
|
958
|
|
-12.0
|
%
|
Interest
Expense
|
2,550
|
|
2,851
|
|
11.8
|
%
|
Accretion of Discount
on Convertible Subordinated Notes
|
827
|
|
927
|
|
12.1
|
%
|
Loss on Early
Extinguishment of Debt
|
—
|
|
567
|
|
|
Other, Net
|
119
|
|
(305)
|
|
-356.3
|
%
|
Pretax
Income
|
$
|
11,023
|
|
$
|
7,618
|
|
-30.9
|
%
|
Net Tax
Provision
|
4,605
|
|
3,047
|
|
|
GAAP Net
Income
|
$
|
6,418
|
|
$
|
4,571
|
|
-28.8
|
%
|
|
|
|
|
Special Items, Net
of tax except for**
|
|
|
|
Withdrawable Trust
Income
|
$
|
—
|
|
$
|
|
Acquisition and
Divestiture Expenses
|
335
|
|
336
|
|
|
Severance
Costs
|
84
|
|
1,794
|
|
|
Consulting
Fees
|
76
|
|
175
|
|
|
Accretion on
Convertible Subordinated Notes**
|
827
|
|
927
|
|
|
Costs Related to Credit Facility
|
—
|
|
369
|
|
|
Gain on Sale of
Asset
|
—
|
|
(198)
|
|
|
Other Special
Items
|
98
|
|
—
|
|
|
Tax Adjustment from
Prior Period**
|
141
|
|
—
|
|
|
Sum of Special
Items, Net of tax
|
$
|
1,561
|
|
$
|
3,403
|
|
118.0
|
%
|
|
|
|
|
Adjusted Net
Income
|
$
|
7,979
|
|
$
|
7,974
|
|
-0.1
|
%
|
Adjusted Net
Profit Margin
|
12.6
|
%
|
12.6
|
%
|
0
bp
|
|
|
|
|
|
Adjusted Basic
Earnings Per Share
|
$
|
0.43
|
|
$
|
0.48
|
|
11.6
|
%
|
Adjusted Diluted
Earnings Per Share
|
$
|
0.42
|
|
$
|
0.47
|
|
11.9
|
%
|
|
|
|
|
GAAP Basic Earnings
Per Share
|
$
|
0.35
|
|
$
|
0.27
|
|
-22.9
|
%
|
GAAP Diluted Earnings
Per Share
|
$
|
0.34
|
|
$
|
0.27
|
|
-20.6
|
%
|
|
|
|
|
Weighted Average
Basic Shares Outstanding
|
18,208
|
|
16,459
|
|
|
Weighted Average
Diluted Shares Outstanding
|
18,804
|
|
16,650
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to
Adjusted Consolidated EBITDA
|
|
|
|
Consolidated
EBITDA
|
$
|
18,930
|
|
$
|
16,350
|
|
-13.6
|
%
|
Withdrawable Trust
Income
|
—
|
|
|
|
Acquisition and
Divestiture Expenses
|
508
|
|
516
|
|
|
Severance
Costs
|
127
|
|
2,759
|
|
|
Consulting
Fees
|
115
|
|
268
|
|
|
Adjusted
Consolidated EBITDA
|
$
|
19,680
|
|
$
|
19,893
|
|
1.1
|
%
|
Adjusted
Consolidated EBITDA Margin
|
31.1
|
%
|
31.4
|
%
|
30
bp
|
|
CARRIAGE SERVICES,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(in thousands,
except share data)
|
|
|
|
|
(unaudited)
|
|
December 31,
2015
|
|
March
31, 2016
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
535
|
|
|
$
|
871
|
|
Accounts receivable,
net
|
18,181
|
|
|
17,911
|
|
Inventories
|
5,654
|
|
|
5,782
|
|
Prepaid
expenses
|
4,684
|
|
|
4,770
|
|
Other current
assets
|
4,707
|
|
|
3,853
|
|
Total current
assets
|
33,761
|
|
|
33,187
|
|
Preneed cemetery
trust investments
|
63,291
|
|
|
60,432
|
|
Preneed funeral trust
investments
|
85,553
|
|
|
83,132
|
|
Preneed receivables,
net
|
27,998
|
|
|
28,224
|
|
Receivables from
preneed trusts, net
|
13,544
|
|
|
13,050
|
|
Property, plant and
equipment, net
|
214,874
|
|
|
216,864
|
|
Cemetery property,
net
|
75,597
|
|
|
75,784
|
|
Goodwill
|
264,416
|
|
|
264,416
|
|
Deferred charges and
other non-current assets
|
10,978
|
|
|
10,748
|
|
Cemetery perpetual
care trust investments
|
43,127
|
|
|
41,341
|
|
Total
assets
|
$
|
833,139
|
|
|
$
|
827,178
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Current portion of
long-term debt and capital lease obligations
|
$
|
12,236
|
|
|
$
|
12,533
|
|
Accounts
payable
|
7,917
|
|
|
6,162
|
|
Other
liabilities
|
524
|
|
|
2,535
|
|
Accrued
liabilities
|
16,541
|
|
|
14,623
|
|
Total current
liabilities
|
37,218
|
|
|
35,853
|
|
Long-term debt, net
of current portion
|
103,495
|
|
|
139,413
|
|
Revolving credit
facility
|
91,514
|
|
|
52,633
|
|
Convertible
subordinated notes due 2021
|
115,227
|
|
|
116,278
|
|
Obligations under
capital leases, net of current portion
|
2,875
|
|
|
2,816
|
|
Deferred preneed
cemetery revenue
|
56,721
|
|
|
56,692
|
|
Deferred preneed
funeral revenue
|
31,748
|
|
|
31,209
|
|
Deferred tax
liability
|
39,956
|
|
|
38,968
|
|
Other long-term
liabilities
|
5,531
|
|
|
5,782
|
|
Deferred preneed
cemetery receipts held in trust
|
63,291
|
|
|
60,432
|
|
Deferred preneed
funeral receipts held in trust
|
85,553
|
|
|
83,132
|
|
Care trusts'
corpus
|
42,416
|
|
|
41,292
|
|
Total
liabilities
|
675,545
|
|
|
664,500
|
|
Commitments and
contingencies:
|
|
|
|
Stockholders'
equity:
|
|
|
|
Common stock, $.01
par value; 80,000,000 shares authorized; 22,497,873 and 22,481,301
issued as of December 31, 2015 and March 31, 2016,
respectively
|
225
|
|
|
225
|
|
Additional paid-in
capital
|
214,250
|
|
|
214,763
|
|
Retained
earnings
|
3,385
|
|
|
7,956
|
|
Treasury stock, at
cost; 5,849,316 shares at December 31, 2015 and March 31,
2016
|
(60,266)
|
|
|
(60,266)
|
|
Total stockholders'
equity
|
157,594
|
|
|
162,678
|
|
Total liabilities and
stockholders' equity
|
$
|
833,139
|
|
|
$
|
827,178
|
|
CARRIAGE SERVICES,
INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(UNAUDITED)
|
(in thousands,
except per share data)
|
|
|
For the Three
Months
Ended March 31,
|
|
2015
|
|
2016
|
Revenues:
|
|
|
|
Funeral
|
$
|
50,137
|
|
|
$
|
49,302
|
|
Cemetery
|
13,116
|
|
|
14,029
|
|
|
63,253
|
|
|
63,331
|
|
Field costs and
expenses:
|
|
|
|
Funeral
|
28,415
|
|
|
27,781
|
|
Cemetery
|
7,302
|
|
|
7,862
|
|
Depreciation and
amortization
|
2,802
|
|
|
3,336
|
|
Regional and
unallocated funeral and cemetery costs
|
2,525
|
|
|
3,049
|
|
|
41,044
|
|
|
42,028
|
|
Gross
profit
|
22,209
|
|
|
21,303
|
|
Corporate costs and
expenses:
|
|
|
|
|
General and
administrative costs and expenses
|
7,170
|
|
|
9,247
|
|
Home office
depreciation and amortization
|
520
|
|
|
398
|
|
|
7,690
|
|
|
9,645
|
|
Operating
income
|
14,519
|
|
|
11,658
|
|
Interest
expense
|
(2,550)
|
|
|
(2,851)
|
|
Accretion of discount
on convertible subordinated notes
|
(827)
|
|
|
(927)
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
(567)
|
|
Other income
(loss)
|
(119)
|
|
|
305
|
|
Income before income
taxes
|
11,023
|
|
|
7,618
|
|
Provision for income
taxes
|
(4,605)
|
|
|
(3,047)
|
|
Net income
|
$
|
6,418
|
|
|
$
|
4,571
|
|
|
|
|
|
Basic earnings per
common share:
|
$
|
0.35
|
|
|
$
|
0.27
|
|
Diluted earnings per
common share:
|
$
|
0.34
|
|
|
$
|
0.27
|
|
Dividends declared
per common share
|
$
|
0.025
|
|
|
$
|
0.025
|
|
|
|
|
|
Weighted average
number of common and common equivalent shares
outstanding:
|
|
|
|
Basic
|
18,208
|
|
|
16,459
|
|
Diluted
|
18,804
|
|
|
16,650
|
|
CARRIAGE SERVICES,
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(unaudited and in
thousands)
|
|
|
For the Three
Months Ended March
31,
|
|
2015
|
|
2016
|
Cash flows from
operating activities:
|
|
|
|
Net income
|
$
|
6,418
|
|
|
$
|
4,571
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
Net gain on sale and
disposal of assets
|
—
|
|
|
(187)
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
567
|
|
Depreciation and
amortization
|
3,322
|
|
|
3,734
|
|
Amortization of
deferred financing costs
|
226
|
|
|
221
|
|
Accretion of discount
on convertible subordinated notes
|
827
|
|
|
927
|
|
Provision for losses
on accounts receivable
|
424
|
|
|
523
|
|
Stock-based
compensation expense
|
1,089
|
|
|
1,297
|
|
Deferred income tax
expense
|
1,559
|
|
|
379
|
|
Changes in operating
assets and liabilities that provided (required) cash:
|
|
|
|
Accounts and preneed
receivables
|
56
|
|
|
(479)
|
|
Inventories and other
current assets
|
3,224
|
|
|
(727)
|
|
Deferred charges and
other
|
111
|
|
|
230
|
|
Preneed funeral and
cemetery trust investments
|
(760)
|
|
|
7,560
|
|
Accounts
payable
|
(9)
|
|
|
(1,755)
|
|
Accrued and other
liabilities
|
(5,020)
|
|
|
(147)
|
|
Deferred preneed
funeral and cemetery revenue
|
(82)
|
|
|
(568)
|
|
Deferred preneed
funeral and cemetery receipts held in trust
|
1,237
|
|
|
(6,404)
|
|
Net cash provided by
operating activities
|
12,622
|
|
|
9,742
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
Acquisitions and land
for new construction
|
(4,250)
|
|
|
(2,685)
|
|
Purchase of land and
buildings previously leased
|
(600)
|
|
|
—
|
|
Net proceeds from the
sale of assets
|
—
|
|
|
555
|
|
Capital
expenditures
|
(5,798)
|
|
|
(3,595)
|
|
Net cash used in
investing activities
|
(10,648)
|
|
|
(5,725)
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
Borrowings on the
revolving credit facility
|
10,600
|
|
|
11,500
|
|
Payments against the
revolving credit facility
|
(10,100)
|
|
|
(50,100)
|
|
Borrowings on the
term loan
|
—
|
|
|
39,063
|
|
Payments against the
term loan
|
(2,344)
|
|
|
(2,813)
|
|
Payments on other
long-term debt and obligations under capital leases
|
(370)
|
|
|
(321)
|
|
Proceeds from the
exercise of stock options and employee stock purchase plan
contributions
|
212
|
|
|
228
|
|
Dividends on common
stock
|
(463)
|
|
|
(415)
|
|
Payment of loan
origination costs related to the credit facility
|
(13)
|
|
|
(717)
|
|
Excess tax benefit
(deficiency) of equity compensation
|
408
|
|
|
(106)
|
|
Net cash used in
financing activities
|
(2,070)
|
|
|
(3,681)
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents
|
(96)
|
|
|
336
|
|
Cash and cash
equivalents at beginning of period
|
413
|
|
|
535
|
|
Cash and cash
equivalents at end of period
|
$
|
317
|
|
|
$
|
871
|
|
|
|
|
|
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. We believe the Non-GAAP results are
useful to investors because such results help investors compare our
results to previous periods and provide insights into underlying
trends in our business. The Company's GAAP financial statements
accompany this release. Reconciliations of the Non-GAAP
financial measures to GAAP measures are provided in this press
release.
The Non-GAAP financial measures include "Adjusted Net Income",
"Adjusted Basic Earnings Per Share", "Adjusted Diluted Earnings Per
Share", "Consolidated EBITDA", "Adjusted Consolidated EBITDA",
"Adjusted Free Cash Flow", "Funeral, Cemetery and Financial
EBITDA", "Total Field EBITDA" and "Special Items" in this
press release. These financial measurements are defined as
similar GAAP items adjusted for Special Items and are reconciled to
GAAP 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. The definitions used
by the Company for our internal management purposes and in this
press release are as follows:
- Adjusted Net Income is defined as net income from continuing
operations plus adjustments for special items and other
non-recurring expenses or credits.
- Consolidated EBITDA is defined as net income from continuing
operations before income taxes, interest expenses, non-cash stock
compensation, depreciation and amortization, and interest income
and other, net.
- Adjusted Consolidated EBITDA is defined as Consolidated EBITDA
plus adjustments for special items and non-recurring expenses or
credits.
- Adjusted Free Cash Flow is defined as net cash provided by
operations, adjusted by special items as deemed necessary, less
cash for maintenance capital expenditures.
- Funeral Field EBITDA is defined as Funeral Gross Profit less
depreciation and amortization, regional and unallocated overhead
expenses and net financial income.
- Cemetery Field EBITDA is defined as Cemetery Gross Profit less
depreciation and amortization, regional and unallocated overhead
expenses and net financial income.
- Financial EBITDA is defined as Financial Revenue less Financial
Expenses.
- Total Field EBITDA is defined as Gross Profit less depreciation
and amortization, regional and unallocated overhead
expenses.
- Special Items are defined as charges or credits such as
withdrawable trust income (prior to 2016), acquisition and
divestiture expenses, severance costs, loss on early retirement of
debt and other costs, discrete tax items and other non-recurring
amounts. Special items are taxed at the federal statutory rate of
34 percent for the three months ended March 31, 2015 and 35
percent for the three months ended March 31, 2016, except for
the accretion of the discount on Convertible Notes as this is a
non-tax deductible item and the tax adjustment from prior
period.
- Adjusted Basic Earnings Per Share is defined as GAAP Basic
Earnings Per Share, adjusted for special items.
- Adjusted Diluted Earnings Per Share is defined as GAAP Diluted
Earnings Per Share, adjusted for special items.
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 to Adjusted Net Income for the three months ended
March 31, 2015 and 2016 (in thousands):
|
|
|
Three Months
Ended March
31,
|
|
|
2015
|
|
|
2016
|
|
Net Income
|
$
|
6,418
|
|
|
$
|
4,571
|
|
|
|
|
|
|
|
|
|
Special items, net of
tax except for **
|
|
|
|
Withdrawable Trust Income
|
$
|
—
|
|
|
$
|
|
|
Acquisition and Divestiture Expenses
|
335
|
|
|
336
|
|
Severance Costs
|
84
|
|
|
1,794
|
|
Consulting Fees
|
76
|
|
|
175
|
|
Accretion of Discount on Convertible Subordinated Notes
**
|
827
|
|
|
927
|
|
Costs Related to the Credit Facility
|
—
|
|
|
369
|
|
Gain on Sale of Asset
|
—
|
|
|
(198)
|
|
Other Special Items
|
98
|
|
|
—
|
|
Tax Adjustment from Prior Period **
|
141
|
|
|
—
|
|
Total Special items
affecting net income
|
$
|
1,561
|
|
|
$
|
3,403
|
|
Adjusted Net
Income
|
$
|
7,979
|
|
|
$
|
7,974
|
|
Reconciliation
of Net Income to Consolidated EBITDA and Adjusted Consolidated
EBITDA for the three months ended March 31, 2015 and 2016 (in
thousands):
|
|
|
Three Months
Ended March
31,
|
|
|
2015
|
|
|
2016
|
|
Net Income
|
$
|
6,418
|
|
|
$
|
4,571
|
|
Net Tax
Provision
|
4,605
|
|
|
3,047
|
|
Pretax
Income
|
$
|
11,023
|
|
|
$
|
7,618
|
|
Interest
expense
|
2,550
|
|
|
2,851
|
|
Accretion of Discount
on Convertible Subordinated Notes
|
827
|
|
|
927
|
|
Loss on Early
Extinguishment of Debt
|
—
|
|
|
567
|
|
Non-cash Stock
Compensation
|
1,089
|
|
|
958
|
|
Depreciation &
Amortization
|
3,322
|
|
|
3,734
|
|
Other, net
|
119
|
|
|
(305)
|
|
Consolidated
EBITDA
|
$
|
18,930
|
|
|
$
|
16,350
|
|
Adjusted
For:
|
|
|
|
Withdrawable Trust
Income
|
$
|
—
|
|
|
$
|
|
|
Acquisition and
Divestiture Expenses
|
508
|
|
|
516
|
|
Severance
Costs
|
127
|
|
|
2,759
|
|
Consulting
Fees
|
115
|
|
|
268
|
|
Adjusted Consolidated
EBITDA
|
$
|
19,680
|
|
|
$
|
19,893
|
|
Revenue
|
$
|
63,253
|
|
|
$
|
63,331
|
|
|
|
|
|
|
|
|
|
Adjusted Consolidated
EBITDA Margin
|
|
31.1%
|
|
|
|
31.4%
|
|
|
|
|
|
Reconciliation
of funeral and cemetery income before income taxes to Field EBITDA
for the three months ended March 31, 2015 and 2016 (in
thousands):
|
|
Funeral Field
EBITDA
|
Three Months
Ended March
31,
|
|
|
2015
|
|
|
2016
|
|
Gross Profit
(GAAP)
|
$
|
17,996
|
|
|
$
|
16,968
|
|
Depreciation &
Amortization
|
1,789
|
|
|
2,078
|
|
Regional &
Unallocated Costs
|
1,937
|
|
|
2,475
|
|
Net Financial
Income
|
(2,271)
|
|
|
(2,197)
|
|
Funeral Field
EBITDA
|
$
|
19,451
|
|
|
$
|
19,324
|
|
|
|
Cemetery Field
EBITDA
|
Three Months
Ended March
31,
|
|
|
2015
|
|
|
2016
|
|
Gross Profit
(GAAP)
|
$
|
4,213
|
|
|
$
|
4,335
|
|
Depreciation &
Amortization
|
1,013
|
|
|
1,258
|
|
Regional &
Unallocated Costs
|
588
|
|
|
574
|
|
Net Financial
Income
|
(1,964)
|
|
|
(2,103)
|
|
Cemetery Field
EBITDA
|
$
|
3,850
|
|
|
$
|
4,064
|
|
|
|
Total Field
EBITDA
|
Three Months
Ended March
31,
|
|
|
2015
|
|
|
2016
|
|
Funeral Field
EBITDA
|
$
|
19,451
|
|
|
$
|
19,324
|
|
Cemetery Field
EBITDA
|
3,850
|
|
|
4,064
|
|
Funeral Financial
EBITDA
|
2,271
|
|
|
2,197
|
|
Cemetery Financial
EBITDA
|
1,964
|
|
|
2,103
|
|
Total Field
EBITDA
|
$
|
27,536
|
|
|
$
|
27,688
|
|
Reconciliation
of Cash flow provided by operations to Adjusted Free Cash Flow for
the three months ended March 31, 2015 and 2016 (in
thousands):
|
|
|
Three Months
Ended March
31,
|
|
|
2015
|
|
|
2016
|
|
Cash Flow Provided by
Operations
|
$
|
12,622
|
|
|
$
|
9,742
|
|
Cash used for
Maintenance Capital Expenditures
|
(1,846)
|
|
|
(1,618)
|
|
Free Cash
Flow
|
$
|
10,776
|
|
|
$
|
8,124
|
|
|
|
|
|
Plus: Incremental
Special Items:
|
|
|
|
Acquisition and
Divestiture Expenses
|
508
|
|
|
516
|
|
Severance
Costs
|
127
|
|
|
2,759
|
|
Consulting
Fees
|
115
|
|
|
268
|
|
Adjusted Free Cash
Flow
|
$
|
11,526
|
|
|
$
|
11,667
|
|
|
|
Reconciliation
of GAAP basic earnings per share to Adjusted basic earnings per
share for the three months ended March 31, 2015 and
2016:
|
|
|
Three Months
Ended March
31,
|
|
|
2015
|
|
|
2016
|
|
GAAP Basic Earnings
Per Share
|
$
|
0.35
|
|
|
$
|
0.27
|
|
Special Items
Affecting Net Income
|
0.08
|
|
|
0.21
|
|
Adjusted Basic
Earnings Per Share
|
$
|
0.43
|
|
|
$
|
0.48
|
|
|
|
Reconciliation
of GAAP diluted earnings per share to Adjusted diluted earnings per
share for the three months ended March 31, 2015 and
2016:
|
|
|
Three Months
Ended March
31,
|
|
|
2015
|
|
|
2016
|
|
GAAP Diluted Earnings
Per Share
|
$
|
0.34
|
|
|
$
|
0.27
|
|
Special Items
Affecting Net Income
|
0.08
|
|
|
0.20
|
|
Adjusted Diluted
Earnings Per Share
|
$
|
0.42
|
|
|
$
|
0.47
|
|
CAUTIONARY STATEMENT ON 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. In addition to
historical information, this Press Release contains certain
statements and information that may constitute forward-looking
statements within the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These statements include,
but are not limited to, statements regarding any projections of
earnings, revenues, asset sales, cash flow, debt levels or other
financial items; any statements of the plans, strategies and
objectives of management for future operations; any statements
regarding future economic conditions or performance; any statements
of belief; and any statements of assumptions underlying any of the
foregoing and are based on our current expectations and beliefs
concerning future developments and their potential effect on us.
The words "may", "will", "estimate", "intend", "believe", "expect",
"project", "forecast", "foresee", "should", "would", "could",
"plan", "anticipate" and other similar words or expressions are
intended to identify forward-looking statements, which are
generally not historical in nature. While management believes that
these forward-looking statements are reasonable as and when made,
there can be no assurance that future developments affecting us
will be those that we anticipate. All comments concerning our
expectations for future revenues and operating results are based on
our forecasts for our existing operations and do not include the
potential impact of any future acquisitions. Our forward-looking
statements involve significant risks and uncertainties (some of
which are beyond our control) and assumptions that could cause
actual results to differ materially from our historical experience
and our present expectations or projections. Important factors that
could cause actual results to differ materially from those in the
forward-looking statements include, but are not limited to, those
summarized below:
- the ability to find and retain skilled personnel;
- the effects of competition;
- the execution of our Standards Operating, 4E Leadership and
Strategic Acquisition Models;
- changes in the number of deaths in our markets;
- changes in consumer preferences;
- our ability to generate preneed sales;
- the investment performance of our funeral and cemetery trust
funds;
- fluctuations in interest rates;
- our ability to obtain debt or equity financing on satisfactory
terms to fund additional acquisitions, expansion projects, working
capital requirements and the repayment or refinancing of
indebtedness;
- death benefits related to preneed funeral contracts funded
through life insurance contracts;
- the financial condition of third-party insurance companies that
fund our preneed funeral contracts;
- increased or unanticipated costs, such as insurance or
taxes;
- effects of the application of applicable laws and regulations,
including changes in such regulations or the interpretation
thereof;
- consolidation of the deathcare industry; and
- other factors and uncertainties inherent in the deathcare
industry.
For additional information regarding known material factors that
could cause our actual results to differ from our projected
results, please see "Risk Factors" in our most recent Annual Report
on Form 10-K. Readers are cautioned not to place undue reliance on
forward-looking statements, which speak only as of the date hereof.
We undertake no obligation to publicly update or revise any
forward-looking statements after the date they are made, whether as
a result of new information, future events or otherwise. A copy of
the Company's Form 10-K, other Carriage Services information and
news releases are available at www.carriageservices.com.
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 in the tables
presented above.
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/carriage-services-announces-record-2016-first-quarter-results-raises-rolling-four-quarter-outlook-300256997.html
SOURCE Carriage Services, Inc.