HOUSTON, Feb. 14, 2018 /PRNewswire/ -- Carriage
Services, Inc. (NYSE: CSV) today announced results for the year
ending December 31, 2017.
Mel Payne, Chief Executive
Officer, stated, "After eight consecutive years of record
performance, our 2017 consolidated operational and financial
performance did not meet our reported high performance
expectations, as Adjusted Diluted Earnings Per Share declined
14.2% to $1.39, Adjusted Consolidated
EBITDA declined 6.8% to $68.7
million, Adjusted Consolidated EBITDA Margin declined
310 basis points to 26.6% and Adjusted Free Cash Flow declined
21.4% to $37.4 million.
Many of the reasons behind the decline in our operating
performance were addressed in our Second and Third quarter earnings
releases, e.g. weak cemetery preneed sales, lower Field EBITDA
Margins of funeral home acquisitions made in 2016 not yet
integrated under our Standards Operating Model, and investment in
overhead infrastructure and people. However, beneath the
covers of the reported performance our company was
continuously improving in many areas during the year. We were
encouraged by the fourth quarter results from our Acquisition
Funeral Home and Cemetery segments as these businesses achieved
year over year improvement in both organic revenue growth and Field
EBITDA Margins. The momentum shown in these segments in the
fourth quarter has accelerated into 2018.
Year to date and fourth quarter comparative highlights are shown
below:
Year Ended December 31, 2017
compared to Year Ended December 31,
2016
- Record Total Revenue of $258.1
million, an increase of 4.0%;
- Record Net Income of $37.2
million, an increase of 89.9%;
- Record GAAP Diluted Earnings Per Share of $2.09, an increase of 86.6%;
- Record Total Field EBITDA of $104.5
million, an increase of 0.1%;
- Total Field EBITDA Margin down 160 basis points to 40.5%;
- Adjusted Consolidated EBITDA of $68.7
million, a decrease of 6.8%;
- Adjusted Consolidated EBITDA Margin down 310 basis points to
26.6%;
- Adjusted Diluted Earnings Per Share of $1.39, a decrease of 14.2%; and
- Adjusted Free Cash Flow of $37.4
million, a decrease of 21.4%.
Three Months Ended December 31,
2017 compared to Three Months Ended December 31, 2016
- Record Total Revenue of $65.1
million, an increase of 3.5%;
- Record Net Income of $22.7
million, an increase of 449.1%;
- Record GAAP Diluted Earnings Per Share of $1.31, an increase of 495.5%;
- Total Field EBITDA of $26.7
million, a decrease of 1.7%;
- Total Field EBITDA Margin down 220 basis points to 41.0%;
- Adjusted Consolidated EBITDA of $17.5
million, a decrease of 7.4%;
- Adjusted Consolidated EBITDA Margin down 320 basis points to
26.9%;
- Adjusted Diluted Earnings Per Share of $0.39, an increase of 8.3%; and
- Adjusted Free Cash Flow of $12.5
million, a decrease of 3.3%.
At the beginning of 2012 we launched what we now refer to as the
Carriage Good To Great Journey that never ends. We think
about and lead the company in terms of a Ten Year Vision and Five
Year Strategy with our Rolling Four Quarter Outlook within a
'Roughly Right Range' of outcomes over time as we execute our three
core models. Having produced extraordinary performance during
the first five year timeframe of our Good To Great Journey
that ended in 2016, we believe in hindsight that 2017 was clearly a
year of transition and continued transformation which was evident
across the Carriage Operating and Consolidation Platform.
We upgraded leadership talent in both operations and home office
support teams, achieved the best Same Store Funeral volume and
revenue trends in years, and established a surge of acquisition
activity and momentum into 2018 from a larger and more effective
Corporate Development Team. The continuous improvement
transformation that occurred during 2017 coupled with the major tax
reform legislation passed at year end has set the table for our
Company to achieve a much higher plateau of performance in the
future as compared to the past, starting in 2018. Therefore we
consider the first quarter of 2018 to be the beginning of the
second five year timeframe of Carriage's Good To Great
Journey that never ends.
We are increasing our Rolling Four Quarter 'Roughly Right
Outlook Range' of Adjusted Diluted EPS to $2.00 - $2.05, a
16% increase compared to the previous Outlook. The Rolling
Four Quarter Outlook includes the impact from the recently enacted
tax reform legislation and a continuation of the positive
operating momentum we experienced in the latter part of
2017 that has continued into 2018. The Outlook does not
include any future acquisition activity, although we are more
excited than ever about the industry consolidation landscape and
the pipeline of high quality candidates produced by our
Corporate Development Team. We expect our effective GAAP tax rate
to be in a range of 26%-28% in 2018, compared to our historic
rate of 40%.
All of our leaders and employees have accepted the challenge of
making 2018 a historic year of operating and financial performance
for our Company. Additionally, all of our senior leaders have
accepted the challenge of Executing on eleven
'Big Ideas' that will accelerate the Carriage Good To
Great Journey during our second five year
timeframe. And most importantly, each of our Managing Partners
has accepted the challenge of leading the successful
realization of a Ten Year Vision of growth and success for
their individual business. Therefore I am pleased to announce
our annual theme: Carriage Services 2018: Our Guiding Principles
and Shared 'Being The Best' Ten Year Vision and Execution of Each
Business!," concluded Mr. Payne.
HIGH PERFORMANCE HEROES
Carriage 2017 Pinnacle of Service Award
Winners
As an important part of our High Performance Culture
tradition and language, and because we have a passionate conviction
that RECOGNITION is the highest form of motivation, listed below
are 29 Carriage Being The Best Pinnacle Of Service
Award winners and 12 managing partners who achieved 100% Of
Standards for 2017:
"Being The
Best" Pinnacle of Service Award
|
|
|
Curtis
Ottinger
|
Heritage Funeral
Home; Chattanooga, TN
|
Matthew
Simpson
|
Fry Memorial Chapel;
Tracy, CA
|
Michael
Nicosia
|
Ouimet Brothers
Concord Funeral Chapel; Concord, CA
|
Andy
Shemwell
|
Maddux-Fuqua-Hinton
Funeral Homes; Hopkinsville, KY
|
Justin
Luyben
|
Evans-Brown
Mortuaries & Crematory; Sun City, CA
|
Verdo
Werre
|
McNary-Moore Funeral
Service; Colusa, CA
|
James
Terry
|
James J. Terry
Funeral Home; Downingtown, PA
|
Tim Miller
|
Fuller Funeral Home –
Cremation Service (East); Naples, FL
|
John
Fitzpatrick
|
Donohue Cecere
Funeral Directors; Westbury, NY
|
Tim Hauck
|
Harvey-Engelhardt/Fuller Metz; Ft. Myers,
FL
|
David
Rogers
|
Garden of Memories
Funeral Home; Metairie, LA
|
Alan
Kerrick
|
Dakan Funeral Chapel;
Caldwell, ID
|
Bill
Martinez
|
Stanfill Funeral
Home; Miami, FL
|
Wayne
Lovelace
|
Lotz Funeral Home;
Vinton, VA
|
Brad
Shemwell
|
Latham Funeral Home;
Elkton, KY
|
Brian
Binion
|
Steen Funeral Homes;
Ashland, KY
|
*Steven
Mora
|
Conejo Mountain
Funeral Home and Memorial Park; Camarillo, CA
|
Jason Cox
|
Lane Funeral Home –
South Crest; Rossville, GA
|
Kim
Borselli
|
Fuller Funeral Home –
Cremation Service (Pine Ridge); Naples, FL
|
Charlie
Eagan
|
Greenwood Funeral
Home; New Orleans, LA
|
Sue Keenan
|
Byron Keenan Funeral
Home & Cremation; Springfield, MA
|
*James
Bass
|
Emerald
Coast/McLaughlin Mortuary; Ft. Walton Beach, FL; McLaughlin Twin
Cities Funeral Home; Niceville, FL
|
|
|
*Qualified for
2 Businesses
|
|
|
"Being The
Best" Pinnacle of Service Award & 100% of Standards
Award
|
|
|
Ken
Summers
|
P.L. Fry & Son
Funeral Home; Manteca, CA
|
Nicholas
Welzenbach
|
Darling & Fischer
Funeral Homes; Los Gatos, CA
|
Jeff Moore
|
Sterling-White
Funeral Home; Crosby, TX
|
Bob
Pollard
|
Lotz Funeral Home;
Salem, VA
|
Patrick
Schoen
|
Jacob Schoen &
Son; New Orleans, LA
|
Scott
Griffith
|
Woodtick/Frigon
Funeral Homes; Wolcott, CT
|
Scott
Sanderford
|
Everly-Wheatley
Funeral Home; Alexandria, VA
|
|
|
"Being The
Best" 100% of Standards Award
|
|
|
Jeff
Seaman
|
Dwayne R. Spence
Funeral Home; Canal Winchester, OH
|
Courtney
Charvet
|
North Brevard Funeral
Home; Titusville, FL
|
David
DeRubeis
|
Cody-White Funeral
Service; Milford, CT
|
Joseph
Newkirk
|
West Contra Costa
Group; Richmond, CA
|
Jeff
Hardwick
|
Bryan & Hardwick
Funeral Home; Zanesville, OH
|
Carriage Good to Great Award Winners
At the beginning of 2012 we created a new five year incentive
award with the name Good To Great Award that was directly
linked to our annual Being The Best Pinnacle Award
which itself is linked to High Funeral Standards Achievement over a
full year, i.e. our Good To Great Awards require high
and sustained Being The Best Standards Achievement over a
full five years. We have had many wonderful performances since the
start of our Good To Great Journey by High
Performance Hero Funeral and Cemetery Managing Partners and Sales
Managers and their teams of winning employees, so I am more than
honored on behalf of our Standards Council members, senior
leadership team and Board of Directors to announce our second group
of Good To Great Award winners for the five year timeframe
that began in 2013 and ended at year end 2017, as listed below:
Cindy
Hoots
|
Schmidt Funeral
Homes; Katy, TX
|
Jim Terry
|
James J. Terry
Funeral Home; Downingtown, PA
|
Michael
Nicosia
|
Chapel of San Ramon
Valley; Danville, CA
|
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)
|
|
|
|
|
|
|
|
|
1 year ended
12/31/17
|
|
13.1%
|
12.3%
|
|
21.8%
|
7.5%
|
11.8%
|
2 years ended
12/31/17
|
|
35.3%
|
32.9%
|
|
36.4%
|
25.9%
|
29.1%
|
3 years ended
12/31/17
|
|
31.2%
|
29.3%
|
|
38.3%
|
20.3%
|
25.7%
|
4 years ended
12/31/17
|
|
42.1%
|
39.5%
|
|
58.6%
|
23.2%
|
33.8%
|
5 years ended
12/31/17
|
|
62.4%
|
58.6%
|
|
102.3%
|
32.4%
|
53.4%
|
|
|
|
|
|
|
|
|
(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 December 31, 2017
(in thousands)
|
|
|
|
|
Discretionary Trust Funds
|
|
Total Trust
Funds
|
Asset
Class
|
|
|
|
MV
|
|
%
|
|
MV
|
|
%
|
Cash
|
|
|
|
$
|
76,712
|
|
37%
|
|
$
|
79,188
|
|
34%
|
Equities
|
|
|
|
117,750
|
|
57%
|
|
129,282
|
|
55%
|
Fixed
Income
|
|
|
|
7,946
|
|
4%
|
|
23,477
|
|
10%
|
Other/Insurance
|
|
|
|
3,190
|
|
2%
|
|
3,374
|
|
1%
|
Total
Portfolios
|
|
|
|
$
|
205,598
|
|
100%
|
|
$
|
235,321
|
|
100%
|
|
Our total annual return for our Discretionary Preneed Funeral
and Cemetery Trusts was 13.1% compared to a total return of 11.8%
for the 70/30 High Yield/S&P 500 benchmark. Throughout the
year, we slowly shifted the portfolio allocation to equity
securities, as we found better relative value opportunities versus
the high yield market. Given current market conditions, we
expect to allocate a lower portion of our portfolio to fixed income
throughout 2018.
Reported Financial Revenue declined 5.9% to $17.5 million and Financial EBITDA declined 7.2%
to $16.2 million. The decline in
Financial Revenue and EBITDA was primarily due to the
reduction of realized income from a lower allocation to fixed
income in our Cemetery Perpetual Care Trusts.
ADJUSTED FREE CASH FLOW
We produced Adjusted Free Cash Flow from operations for the
three months and year ended December 31,
2017 of $12.5 million and
$37.4 million, respectively, compared
to Adjusted Free Cash Flow from operations of $13.0 million and $47.6
million for the corresponding periods in 2016. A
reconciliation of Cash Flow Provided by Operations to Adjusted Free
Cash Flow for the three months and years ended December 31, 2016 and 2017 is as follows (in
thousands):
|
For the Three
Months
Ended December 31,
|
|
For the Years
Ended
December 31,
|
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
Cash flow provided by
operations
|
$
|
15,195
|
|
|
$
|
14,405
|
|
|
$
|
50,035
|
|
|
$
|
45,230
|
|
Cash used for
maintenance capital expenditures
|
(2,239)
|
|
|
(2,100)
|
|
|
(7,402)
|
|
|
(8,422)
|
|
Free Cash
Flow
|
$
|
12,956
|
|
|
$
|
12,305
|
|
|
$
|
42,633
|
|
|
$
|
36,808
|
|
|
|
|
|
|
|
|
|
Plus: Incremental
Special Items:
|
|
|
|
|
|
|
|
Acquisition and
divestiture expenses
|
—
|
|
|
—
|
|
|
516
|
|
|
—
|
|
Severance
costs
|
—
|
|
|
—
|
|
|
3,979
|
|
|
—
|
|
Consulting
fees
|
—
|
|
|
—
|
|
|
496
|
|
|
—
|
|
Natural Disaster
Costs
|
—
|
|
|
222
|
|
|
—
|
|
|
620
|
|
Adjusted Free Cash
Flow
|
$
|
12,956
|
|
|
$
|
12,527
|
|
|
$
|
47,624
|
|
|
$
|
37,428
|
|
|
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 December 31, 2018 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.
ROLLING FOUR QUARTER OUTLOOK – Period Ending December 31, 2018
|
|
Range
(in millions, except
per share amounts)
|
Revenues
|
|
$280 -
$285
|
Adjusted Consolidated
EBITDA
|
|
$80 - $85
|
Adjusted Net
Income
|
|
$34 - $36
|
Adjusted Basic
Earnings Per Share(1)
|
|
$2.18 -
$2.22
|
Adjusted Diluted
Earnings Per Share(1)
|
|
$2.00 -
$2.05
|
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,
Adjusted Basic Earnings Per Share and Adjusted Diluted Earnings Per
Share for the four quarter period ending December 31, 2018 are
expected to improve relative to the trailing four quarter period
ended December 31, 2017 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 Basic Earnings Per Share and 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.
|
CONFERENCE CALL AND INVESTOR RELATIONS CONTACT
Carriage Services has scheduled a conference call for tomorrow,
February 15, 2018 at 9:30 a.m. central time. To participate in the
call, please dial 866-516-3867 (ID-3978299) and ask for the
Carriage Services conference call. A replay of the conference
call will be available through February 19,
2018 and may be accessed by dialing 855-859-2056
(ID-3978299). 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
|
|
(IN THOUSANDS -
EXCEPT PER SHARE AMOUNTS)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Years Ended
December 31,
|
|
|
2016
|
2017
|
%
Change
|
|
2016
|
2017
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
Same Store
Contracts
|
|
|
|
|
|
|
|
|
Atneed
Contracts
|
5,689
|
|
5,906
|
|
3.8%
|
|
|
23,104
|
|
23,947
|
|
3.6%
|
|
|
Preneed
Contracts
|
1,383
|
|
1,385
|
|
0.1%
|
|
|
5,568
|
|
5,640
|
|
1.3%
|
|
|
Total Same Store
Funeral Contracts
|
7,072
|
|
7,291
|
|
3.1%
|
|
|
28,672
|
|
29,587
|
|
3.2%
|
|
|
Acquisition
Contracts
|
|
|
|
|
|
|
|
|
Atneed
Contracts
|
1,010
|
|
1,295
|
|
28.2%
|
|
|
3,289
|
|
4,488
|
|
36.5%
|
|
|
Preneed
Contracts
|
178
|
|
222
|
|
24.7%
|
|
|
597
|
|
819
|
|
37.2%
|
|
|
Total Acquisition
Funeral Contracts
|
1,188
|
|
1,517
|
|
27.7%
|
|
|
3,886
|
|
5,307
|
|
36.6%
|
|
|
Total Funeral
Contracts
|
8,260
|
|
8,808
|
|
6.6%
|
|
|
32,558
|
|
34,894
|
|
7.2%
|
|
|
|
|
|
|
|
|
|
|
|
Funeral Operating
Revenue
|
|
|
|
|
|
|
|
|
Same Store
Revenue
|
$
|
38,449
|
|
$
|
38,796
|
|
0.9%
|
|
|
$
|
154,130
|
|
$
|
158,106
|
|
2.6%
|
|
|
Acquisition
Revenue
|
7,611
|
|
9,567
|
|
25.7%
|
|
|
24,914
|
|
34,294
|
|
37.6%
|
|
|
Total Funeral
Operating Revenue
|
$
|
46,060
|
|
$
|
48,363
|
|
5.0%
|
|
|
$
|
179,044
|
|
$
|
192,400
|
|
7.5%
|
|
|
|
|
|
|
|
|
|
|
|
Cemetery Operating
Revenue
|
|
|
|
|
|
|
|
|
Same Store
Revenue
|
$
|
10,800
|
|
$
|
11,522
|
|
6.7%
|
|
|
$
|
45,894
|
|
$
|
45,044
|
|
(1.9%)
|
|
|
Acquisition
Revenue
|
742
|
|
824
|
|
11.1%
|
|
|
3,053
|
|
3,194
|
|
4.6%
|
|
|
Total Cemetery
Operating Revenue
|
$
|
11,542
|
|
$
|
12,346
|
|
7.0%
|
|
|
$
|
48,947
|
|
$
|
48,238
|
|
(1.4%)
|
|
|
|
|
|
|
|
|
|
|
|
Financial
Revenue
|
|
|
|
|
|
|
|
|
Preneed Funeral
Commission Income
|
$
|
291
|
|
$
|
303
|
|
4.1%
|
|
|
$
|
1,429
|
|
$
|
1,254
|
|
(12.2%)
|
|
|
Preneed Funeral Trust
Earnings
|
1,865
|
|
1,942
|
|
4.1%
|
|
|
7,308
|
|
7,232
|
|
(1.0%)
|
|
|
Cemetery Trust
Earnings
|
2,382
|
|
1,681
|
|
(29.4%)
|
|
|
8,004
|
|
7,193
|
|
(10.1%)
|
|
|
Preneed Cemetery
Finance Charges
|
491
|
|
441
|
|
(10.2%)
|
|
|
1,848
|
|
1,822
|
|
(1.4%)
|
|
|
Total Financial
Revenue
|
$
|
5,029
|
|
$
|
4,367
|
|
(13.2%)
|
|
|
$
|
18,589
|
|
$
|
17,501
|
|
(5.9%)
|
|
|
|
|
|
|
|
|
|
|
|
Total Divested
Revenue
|
$
|
233
|
|
$
|
—
|
|
(100.0%)
|
|
|
$
|
1,620
|
|
$
|
—
|
|
(100.0%)
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenue
|
$
|
62,864
|
|
$
|
65,076
|
|
3.5%
|
|
|
$
|
248,200
|
|
$
|
258,139
|
|
4.0%
|
|
|
|
|
|
|
|
|
|
|
|
Field
EBITDA
|
|
|
|
|
|
|
|
|
Same Store Funeral
Field EBITDA
|
$
|
15,545
|
|
$
|
14,753
|
|
(5.1%)
|
|
|
$
|
60,042
|
|
$
|
60,864
|
|
1.4%
|
|
|
Same Store Funeral
Field EBITDA Margin
|
40.4%
|
|
38.0%
|
|
(240 bp)
|
|
39.0%
|
|
38.5%
|
|
(50 bp)
|
|
Acquisition Funeral
Field EBITDA
|
3,126
|
|
4,050
|
|
29.6%
|
|
|
10,421
|
|
13,565
|
|
30.2%
|
|
|
Acquisition Funeral
Field EBITDA Margin
|
41.1%
|
|
42.3%
|
|
120 bp
|
|
41.8%
|
|
39.6%
|
|
(220 bp)
|
|
Total Funeral
Field EBITDA
|
$
|
18,671
|
|
$
|
18,803
|
|
0.7%
|
|
|
$
|
70,463
|
|
$
|
74,429
|
|
5.6%
|
|
|
Total Funeral
Field EBITDA Margin
|
40.5%
|
|
38.9%
|
|
(160
bp)
|
|
39.4%
|
|
38.7%
|
|
(70
bp)
|
|
|
|
|
|
|
|
|
|
|
Same Store Cemetery
Field EBITDA
|
$
|
3,330
|
|
$
|
3,577
|
|
7.4%
|
|
|
$
|
14,618
|
|
$
|
12,864
|
|
(12.0%)
|
|
|
Same Store Cemetery
Field EBITDA Margin
|
30.8%
|
|
31.0%
|
|
20 bp
|
|
31.9%
|
|
28.6%
|
|
(330 bp)
|
|
Acquisition Cemetery
Field EBITDA
|
263
|
|
296
|
|
12.5%
|
|
|
1,049
|
|
1,039
|
|
(1.0%)
|
|
|
Acquisition Cemetery
Field EBITDA Margin
|
35.4%
|
|
35.9%
|
|
50 bp
|
|
34.4%
|
|
32.5%
|
|
(190 bp)
|
|
Total Cemetery
Field EBITDA
|
$
|
3,593
|
|
$
|
3,873
|
|
7.8%
|
|
|
$
|
15,667
|
|
$
|
13,903
|
|
(11.3%)
|
|
|
Total Cemetery
Field EBITDA Margin
|
31.1%
|
|
31.4%
|
|
30
bp
|
|
32.0%
|
|
28.8%
|
|
(320
bp)
|
|
|
|
|
|
|
|
|
|
|
Funeral Financial
EBITDA
|
$
|
1,946
|
|
$
|
2,017
|
|
3.6%
|
|
|
$
|
7,880
|
|
$
|
7,552
|
|
(4.2%)
|
|
|
Cemetery Financial
EBITDA
|
2,799
|
|
2,016
|
|
(28.0%)
|
|
|
9,563
|
|
8,628
|
|
(9.8%)
|
|
|
Total Financial
EBITDA
|
$
|
4,745
|
|
$
|
4,033
|
|
(15.0%)
|
|
|
$
|
17,443
|
|
$
|
16,180
|
|
(7.2%)
|
|
|
Total Financial
EBITDA Margin
|
94.4%
|
|
92.4%
|
|
(200
bp)
|
|
93.8%
|
|
92.5%
|
|
(130
bp)
|
|
|
|
|
|
|
|
|
|
|
Total Divested
EBITDA
|
$
|
160
|
|
$
|
—
|
|
(100.0%)
|
|
|
$
|
840
|
|
$
|
—
|
|
(100.0%)
|
|
|
Total Divested
EBITDA Margin
|
68.7%
|
|
—%
|
|
|
|
51.9%
|
|
—%
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Field
EBITDA
|
$
|
27,169
|
|
$
|
26,709
|
|
(1.7%)
|
|
|
$
|
104,413
|
|
$
|
104,512
|
|
0.1%
|
|
|
Total Field EBITDA
Margin
|
43.2%
|
|
41.0%
|
|
(220
bp)
|
|
42.1%
|
|
40.5%
|
|
(160
bp)
|
|
|
|
|
|
|
|
|
|
OPERATING AND
FINANCIAL TREND REPORT
|
|
(IN THOUSANDS -
EXCEPT PER SHARE AMOUNTS)
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
December 31,
|
|
Years Ended
December 31,
|
|
|
2016
|
2017
|
%
Change
|
|
2016
|
2017
|
%
Change
|
|
|
|
|
|
|
|
|
|
|
Overhead
|
|
|
|
|
|
|
|
|
Total Variable
Overhead
|
$
|
2,450
|
|
$
|
3,573
|
|
45.8%
|
|
|
$
|
13,122
|
|
$
|
11,338
|
|
(13.6%)
|
|
|
Total Regional Fixed
Overhead
|
1,008
|
|
995
|
|
(1.3%)
|
|
|
3,667
|
|
3,883
|
|
5.9%
|
|
|
Total Corporate Fixed
Overhead
|
4,991
|
|
4,862
|
|
(2.6%)
|
|
|
19,109
|
|
21,209
|
|
11.0%
|
|
|
Total
Overhead
|
$
|
8,449
|
|
$
|
9,430
|
|
11.6%
|
|
|
$
|
35,898
|
|
$
|
36,430
|
|
1.5%
|
|
|
Overhead as a
percentage of Revenue
|
13.4%
|
|
14.5%
|
|
110
bp
|
|
14.5%
|
|
14.1%
|
|
(40
bp)
|
|
|
|
|
|
|
|
|
|
|
Consolidated
EBITDA
|
$
|
18,720
|
|
$
|
17,279
|
|
(7.7%)
|
|
|
$
|
68,515
|
|
$
|
68,082
|
|
(0.6%)
|
|
|
Consolidated
EBITDA Margin
|
29.8%
|
|
26.6%
|
|
(320
bp)
|
|
27.6%
|
|
26.4%
|
|
(120
bp)
|
|
|
|
|
|
|
|
|
|
|
Other Expenses and
Interest
|
|
|
|
|
|
|
|
|
Depreciation &
Amortization
|
$
|
3,923
|
|
$
|
4,105
|
|
4.6%
|
|
|
$
|
15,421
|
|
$
|
15,979
|
|
3.6%
|
|
|
Non-Cash Stock
Compensation
|
584
|
|
768
|
|
31.5%
|
|
|
2,890
|
|
3,162
|
|
9.4%
|
|
|
Interest
Expense
|
3,016
|
|
3,431
|
|
13.8%
|
|
|
11,738
|
|
12,948
|
|
10.3%
|
|
|
Accretion of Discount
on Convertible Subordinated Notes
|
1,008
|
|
1,129
|
|
12.0%
|
|
|
3,870
|
|
4,329
|
|
11.9%
|
|
|
Loss on Early
Extinguishment of Debt
|
—
|
|
—
|
|
|
|
567
|
|
—
|
|
|
|
Other, Net
|
1,808
|
|
(1,121)
|
|
|
|
1,788
|
|
(1,118)
|
|
|
|
Pre-Tax
Income
|
$
|
8,381
|
|
$
|
8,967
|
|
7.0%
|
|
|
$
|
32,241
|
|
$
|
32,782
|
|
1.7%
|
|
|
Provision for Income
Taxes
|
3,137
|
|
3,574
|
|
|
|
12,682
|
|
13,100
|
|
|
|
Tax Adjustment
Related to Certain Discrete Items
|
1,117
|
|
(17,268)
|
|
|
|
(22)
|
|
(17,511)
|
|
|
|
Net Tax Provision
(Benefit)
|
4,254
|
|
(13,694)
|
|
|
|
12,660
|
|
(4,411)
|
|
|
|
GAAP Net
Income
|
$
|
4,127
|
|
$
|
22,661
|
|
449.1%
|
|
|
$
|
19,581
|
|
$
|
37,193
|
|
89.9%
|
|
|
|
|
|
|
|
|
|
|
|
Special Items, Net
of Tax except for **
|
|
|
|
|
|
|
|
|
Acquisition and
Divestiture Expenses
|
$
|
120
|
|
$
|
—
|
|
|
|
$
|
456
|
|
$
|
—
|
|
|
|
Severance and
Retirement Costs
|
—
|
|
—
|
|
|
|
2,587
|
|
—
|
|
|
|
Consulting
Fees
|
—
|
|
—
|
|
|
|
323
|
|
—
|
|
|
|
Accretion of Discount
on Convertible Subordinated Notes **
|
1,008
|
|
1,129
|
|
|
|
3,870
|
|
4,329
|
|
|
|
Loss on Early
Extinguishment of Debt
|
—
|
|
—
|
|
|
|
369
|
|
—
|
|
|
|
Net Loss on Sale of
Assets
|
1,350
|
|
—
|
|
|
|
1,152
|
|
—
|
|
|
|
Natural Disaster
Costs
|
—
|
|
144
|
|
|
|
—
|
|
403
|
|
|
|
Tax Adjustment
Related to Certain Discrete Items **
|
—
|
|
(17,176)
|
|
|
|
—
|
|
(17,176)
|
|
|
|
Sum of Special
Items, Net of Tax
|
$
|
2,478
|
|
$
|
(15,903)
|
|
|
|
|
$
|
8,757
|
|
$
|
(12,444)
|
|
|
|
|
Adjusted Net
Income
|
$
|
6,605
|
|
$
|
6,758
|
|
2.3%
|
|
|
$
|
28,338
|
|
$
|
24,749
|
|
(12.7%)
|
|
|
Adjusted Net
Profit Margin
|
10.5%
|
|
10.4%
|
|
(10
bp)
|
|
11.4%
|
|
9.6%
|
|
(180
bp)
|
|
|
|
|
|
|
|
|
|
|
Adjusted Basic
Earnings Per Share
|
$
|
0.40
|
|
$
|
0.42
|
|
5.0%
|
|
|
$
|
1.71
|
|
$
|
1.50
|
|
(12.3%)
|
|
|
Adjusted Diluted
Earnings Per Share
|
$
|
0.36
|
|
$
|
0.39
|
|
8.3%
|
|
|
$
|
1.62
|
|
$
|
1.39
|
|
(14.2%)
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Basic Earnings
Per Share
|
$
|
0.25
|
|
$
|
1.41
|
|
464.0%
|
|
|
$
|
1.18
|
|
$
|
2.25
|
|
90.7%
|
|
|
GAAP Diluted Earnings
Per Share
|
$
|
0.22
|
|
$
|
1.31
|
|
495.5%
|
|
|
$
|
1.12
|
|
$
|
2.09
|
|
86.6%
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average
Basic Shares Outstanding
|
16,554
|
|
16,031
|
|
|
|
16,515
|
|
16,438
|
|
|
|
Weighted Average
Diluted Shares Outstanding
|
18,370
|
|
17,193
|
|
|
|
17,460
|
|
17,715
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation to
Adjusted Consolidated EBITDA
|
|
|
|
|
|
|
|
|
Consolidated
EBITDA
|
$
|
18,720
|
|
$
|
17,279
|
|
(7.7%)
|
|
|
$
|
68,515
|
|
$
|
68,082
|
|
(0.6%)
|
|
|
Acquisition and
Divestiture Expenses
|
185
|
|
—
|
|
|
|
701
|
|
—
|
|
|
|
Severance and
Retirement Costs
|
—
|
|
—
|
|
|
|
3,979
|
|
—
|
|
|
|
Consulting
Fees
|
—
|
|
—
|
|
|
|
496
|
|
—
|
|
|
|
Natural Disaster
Costs
|
—
|
|
222
|
|
|
|
—
|
|
620
|
|
|
|
Adjusted
Consolidated EBITDA
|
$
|
18,905
|
|
$
|
17,501
|
|
(7.4%)
|
|
|
$
|
73,691
|
|
$
|
68,702
|
|
(6.8%)
|
|
|
Adjusted
Consolidated EBITDA Margin
|
30.1%
|
|
26.9%
|
|
(320
bp)
|
|
29.7%
|
|
26.6%
|
|
(310
bp)
|
|
|
|
|
|
|
CARRIAGE SERVICES,
INC.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(in thousands,
except share data)
|
|
|
December 31,
|
|
2016
|
|
2017
|
ASSETS
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
3,286
|
|
|
$
|
952
|
|
Accounts receivable,
net
|
18,860
|
|
|
19,655
|
|
Inventories
|
6,147
|
|
|
6,519
|
|
Prepaid
expenses
|
2,640
|
|
|
2,028
|
|
Other current
assets
|
2,034
|
|
|
986
|
|
Total current
assets
|
32,967
|
|
|
30,140
|
|
Preneed cemetery
trust investments
|
69,696
|
|
|
73,853
|
|
Preneed funeral trust
investments
|
89,240
|
|
|
90,682
|
|
Preneed receivables,
net
|
30,383
|
|
|
31,644
|
|
Receivables from
preneed trusts
|
14,218
|
|
|
15,287
|
|
Property, plant and
equipment, net
|
235,113
|
|
|
247,294
|
|
Cemetery property,
net
|
76,119
|
|
|
76,331
|
|
Goodwill
|
275,487
|
|
|
287,956
|
|
Intangible and other
non-current assets
|
14,957
|
|
|
18,117
|
|
Cemetery perpetual
care trust investments
|
46,889
|
|
|
50,229
|
|
Total
assets
|
$
|
885,069
|
|
|
$
|
921,533
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
Current
liabilities:
|
|
|
|
Current portion of
long-term debt and capital lease obligations
|
$
|
13,267
|
|
|
$
|
17,251
|
|
Accounts
payable
|
10,198
|
|
|
6,547
|
|
Other
liabilities
|
717
|
|
|
1,361
|
|
Accrued
liabilities
|
20,091
|
|
|
17,559
|
|
Total current
liabilities
|
44,273
|
|
|
42,718
|
|
Long-term debt, net
of current portion
|
137,862
|
|
|
121,034
|
|
Revolving credit
facility
|
66,542
|
|
|
91,120
|
|
Convertible
subordinated notes due 2021
|
119,596
|
|
|
124,441
|
|
Obligations under
capital leases, net of current portion
|
2,630
|
|
|
6,361
|
|
Deferred preneed
cemetery revenue
|
54,631
|
|
|
54,690
|
|
Deferred preneed
funeral revenue
|
33,198
|
|
|
34,585
|
|
Deferred tax
liability
|
42,810
|
|
|
31,159
|
|
Other long-term
liabilities
|
2,567
|
|
|
3,378
|
|
Deferred preneed
cemetery receipts held in trust
|
69,696
|
|
|
73,853
|
|
Deferred preneed
funeral receipts held in trust
|
89,240
|
|
|
90,682
|
|
Care trusts'
corpus
|
46,290
|
|
|
49,856
|
|
Total
liabilities
|
709,335
|
|
|
723,877
|
|
Commitments and
contingencies:
|
|
|
|
Stockholders'
equity:
|
|
|
|
Common stock, $.01
par value; 80,000,000 shares authorized; 22,490,855 and 22,622,242
shares issued as of December 31, 2016 and 2017,
respectively
|
225
|
|
|
226
|
|
Additional paid-in
capital
|
215,064
|
|
|
216,158
|
|
Retained
earnings
|
20,711
|
|
|
57,904
|
|
Treasury stock, at
cost; 5,849,316 and 6,523,370 shares at December 31, 2016 and 2017,
respectively
|
(60,266)
|
|
|
(76,632)
|
|
Total stockholders'
equity
|
175,734
|
|
|
197,656
|
|
Total liabilities and
stockholders' equity
|
$
|
885,069
|
|
|
$
|
921,533
|
|
CARRIAGE SERVICES,
INC.
|
CONSOLIDATED
STATEMENTS OF OPERATIONS
|
(in thousands,
except per share data)
|
|
|
(unaudited)
|
|
|
|
|
|
Three Months
Ended
December 31,
|
|
Years
Ended December
31,
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
Funeral
|
$
|
48,449
|
|
|
$
|
50,607
|
|
|
$
|
189,401
|
|
|
$
|
200,886
|
|
Cemetery
|
14,415
|
|
|
14,469
|
|
|
58,799
|
|
|
57,253
|
|
|
62,864
|
|
|
65,076
|
|
|
248,200
|
|
|
258,139
|
|
Field costs and
expenses:
|
|
|
|
|
|
|
|
Funeral
|
27,672
|
|
|
29,787
|
|
|
110,218
|
|
|
118,905
|
|
Cemetery
|
8,023
|
|
|
8,580
|
|
|
33,569
|
|
|
34,722
|
|
Depreciation and
amortization
|
3,560
|
|
|
3,655
|
|
|
13,919
|
|
|
14,374
|
|
Regional and
unallocated funeral and cemetery costs
|
2,297
|
|
|
3,494
|
|
|
10,844
|
|
|
13,339
|
|
|
41,552
|
|
|
45,516
|
|
|
168,550
|
|
|
181,340
|
|
Gross
profit
|
21,312
|
|
|
19,560
|
|
|
79,650
|
|
|
76,799
|
|
|
|
|
|
|
|
|
|
Corporate costs and
expenses:
|
|
|
|
|
|
|
|
General,
administrative and other
|
6,736
|
|
|
6,704
|
|
|
27,944
|
|
|
26,253
|
|
Home office
depreciation and amortization
|
363
|
|
|
450
|
|
|
1,502
|
|
|
1,605
|
|
|
7,099
|
|
|
7,154
|
|
|
29,446
|
|
|
27,858
|
|
Operating
income
|
14,213
|
|
|
12,406
|
|
|
50,204
|
|
|
48,941
|
|
Interest
expense
|
(3,016)
|
|
|
(3,431)
|
|
|
(11,738)
|
|
|
(12,948)
|
|
Accretion of discount
on convertible subordinated notes
|
(1,008)
|
|
|
(1,129)
|
|
|
(3,870)
|
|
|
(4,329)
|
|
Loss on early
extinguishment of debt
|
—
|
|
|
—
|
|
|
(567)
|
|
|
—
|
|
Other, net
|
(1,808)
|
|
|
1,121
|
|
|
(1,788)
|
|
|
1,118
|
|
Income before income
taxes
|
8,381
|
|
|
8,967
|
|
|
32,241
|
|
|
32,782
|
|
Provision for income
taxes
|
(3,137)
|
|
|
(3,574)
|
|
|
(12,682)
|
|
|
(13,100)
|
|
Income tax
(provision) benefit related to certain discrete items
|
(1,117)
|
|
|
17,268
|
|
|
22
|
|
|
17,511
|
|
Net (provision)
benefit for income taxes
|
(4,254)
|
|
|
13,694
|
|
|
(12,660)
|
|
|
4,411
|
|
Net income
|
$
|
4,127
|
|
|
$
|
22,661
|
|
|
$
|
19,581
|
|
|
$
|
37,193
|
|
|
|
|
|
|
|
|
|
Basic earnings per
common share:
|
$
|
0.25
|
|
|
$
|
1.41
|
|
|
$
|
1.18
|
|
|
$
|
2.25
|
|
Diluted earnings per
common share:
|
$
|
0.22
|
|
|
$
|
1.31
|
|
|
$
|
1.12
|
|
|
$
|
2.09
|
|
|
|
|
|
|
|
|
|
Dividends declared
per common share
|
$
|
0.050
|
|
|
$
|
0.075
|
|
|
$
|
0.150
|
|
|
$
|
0.225
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common and common equivalent shares
outstanding:
|
|
|
|
|
|
|
|
Basic
|
16,554
|
|
|
16,031
|
|
|
16,515
|
|
|
16,438
|
|
Diluted
|
18,370
|
|
|
17,193
|
|
|
17,460
|
|
|
17,715
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CARRIAGE SERVICES,
INC.
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS
|
(in
thousands)
|
|
|
|
Years Ended
December 31,
|
|
|
2016
|
|
2017
|
Cash flows from
operating activities:
|
|
|
|
|
Net income
|
|
$
|
19,581
|
|
|
$
|
37,193
|
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
Depreciation and
amortization
|
|
15,421
|
|
|
15,979
|
|
Provision for losses
on accounts receivable
|
|
2,098
|
|
|
2,198
|
|
Stock-based
compensation expense
|
|
3,229
|
|
|
3,162
|
|
Deferred income tax
expense (benefit)
|
|
4,855
|
|
|
(11,651)
|
|
Amortization of
deferred financing costs
|
|
824
|
|
|
820
|
|
Accretion of discount
on convertible subordinated notes
|
|
3,870
|
|
|
4,329
|
|
Loss on early
extinguishment of debt
|
|
567
|
|
|
—
|
|
Net (gain) loss on
sale of businesses and disposal of other assets
|
|
2,077
|
|
|
(710)
|
|
Impairment of
intangible assets
|
|
145
|
|
|
—
|
|
Changes in operating
assets and liabilities that provided (required) cash:
|
|
|
|
|
Accounts and preneed
receivables
|
|
(5,162)
|
|
|
(4,254)
|
|
Inventories and other
current assets
|
|
1,995
|
|
|
1,446
|
|
Intangible and other
non-current assets
|
|
(1,155)
|
|
|
149
|
|
Preneed funeral and
cemetery trust investments
|
|
(14,528)
|
|
|
(10,008)
|
|
Accounts
payable
|
|
2,112
|
|
|
(3,649)
|
|
Accrued and other
liabilities
|
|
780
|
|
|
(385)
|
|
Deferred preneed
funeral and cemetery revenue
|
|
(640)
|
|
|
1,446
|
|
Deferred preneed
funeral and cemetery receipts held in trust
|
|
13,966
|
|
|
9,165
|
|
Net cash provided by
operating activities
|
|
50,035
|
|
|
45,230
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
Acquisitions and land
for new construction
|
|
(26,556)
|
|
|
(28,799)
|
|
Purchase of land and
buildings previously leased
|
|
(6,258)
|
|
|
—
|
|
Net proceeds from
sale of businesses and other assets
|
|
4,385
|
|
|
5,731
|
|
Capital
expenditures
|
|
(16,846)
|
|
|
(16,395)
|
|
Net cash used in
investing activities
|
|
(45,275)
|
|
|
(39,463)
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
Borrowings from the
revolving credit facility
|
|
71,200
|
|
|
106,900
|
|
Payments against the
revolving credit facility
|
|
(96,100)
|
|
|
(82,600)
|
|
Borrowings from the
term loan
|
|
39,063
|
|
|
—
|
|
Payments against the
term loan
|
|
(11,250)
|
|
|
(11,250)
|
|
Payments on long-term
debt and obligations under capital leases
|
|
(1,789)
|
|
|
(1,962)
|
|
Payments on
contingent consideration recorded at acquisition date
|
|
—
|
|
|
(101)
|
|
Proceeds from the
exercise of stock options and employee stock purchase plan
contributions
|
|
870
|
|
|
1,496
|
|
Taxes paid on
restricted stock vestings and exercises of non-qualified
options
|
|
(578)
|
|
|
(509)
|
|
Dividends on common
stock
|
|
(2,492)
|
|
|
(3,709)
|
|
Purchase of treasury
stock
|
|
—
|
|
|
(16,366)
|
|
Payment of loan
origination costs related to the credit facility
|
|
(717)
|
|
|
—
|
|
Excess tax deficiency
of equity compensation
|
|
(216)
|
|
|
—
|
|
Net cash used in
financing activities
|
|
(2,009)
|
|
|
(8,101)
|
|
|
|
|
|
|
Net increase
(decrease) in cash and cash equivalents
|
|
2,751
|
|
|
(2,334)
|
|
Cash and cash
equivalents at beginning of year
|
|
535
|
|
|
3,286
|
|
Cash and cash
equivalents at end of year
|
|
$
|
3,286
|
|
|
$
|
952
|
|
NON-GAAP FINANCIAL MEASURES
This press release uses Non-GAAP financial measures to present
the financial performance of the Company. Our non-GAAP
reporting provides a transparent framework of our operating and
financial performance that reflects the earning power of the
Company as an operating and consolidation platform.
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 to compare our results to previous
periods, to provide insight into the underlying long-term
performance trends in our business and to provide the opportunity
to differentiate ourselves as the best consolidation platform in
the industry against the performance of other funeral and cemetery
companies.
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 "Special Items",
"Adjusted Net Income", "Consolidated EBITDA", "Adjusted
Consolidated EBITDA", "Adjusted Consolidated EBITDA Margin",
"Adjusted Free Cash Flow", "Funeral, Cemetery and Financial
EBITDA", "Total Field EBITDA", "Total Field EBITDA Margin",
"Divested Revenue", "Divested EBITDA", "Divested EBITDA
Margin", "Adjusted Basic Earnings Per Share" and "Adjusted
Diluted Earnings Per Share" 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:
- Special Items are defined as charges or credits included in our
GAAP financial statements that can vary from period to period and
are not reflective of costs incurred in the ordinary course of our
operations. Special Items are taxed at the federal statutory rate
of 35 percent for both the three months and years ended
December 31, 2016 and 2017, except
for the accretion of the discount on the Convertible Notes as this
is a non-tax deductible item.
- Adjusted Net Income is defined as net income plus adjustments
for Special Items and other expenses or gains that we believe do
not directly reflect our core operations and may not be indicative
of our normal business operations.
- Consolidated EBITDA is defined as net income 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 other expenses or gains that
we believe do not directly reflect our core operations and may not
be indicative of our normal business operations.
- Adjusted Consolidated EBITDA Margin is defined as Adjusted
Consolidated EBITDA as a percentage of revenue.
- 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,
excluding depreciation and amortization, regional and unallocated
funeral costs and Financial EBITDA related to the Funeral Home
segment.
- Cemetery Field EBITDA is defined as Cemetery Gross Profit,
excluding depreciation and amortization, regional and unallocated
cemetery costs and Cemetery Financial EBITDA related to the
Cemetery segment.
- Funeral Financial EBITDA is defined as Funeral Financial
Revenue less Funeral Financial Expenses.
- Cemetery Financial EBITDA is defined as Cemetery Financial
Revenue less Cemetery Financial Expenses.
- Total Field EBITDA is defined as Gross Profit, excluding
depreciation and amortization, regional and unallocated funeral and
cemetery costs.
- Total Field EBITDA Margin is defined as Total Field EBITDA as a
percentage of revenue.
- Divested Revenue is defined as revenues from sold businesses
and revenues lost as a result of the termination of a municipal
contract in 2017.
- Divested EBITDA is defined as Divested Revenue, less field
level and financial expenses related to the sold businesses and the
terminated municipal contract noted above.
- Divested EBITDA Margin is defined as Divested EBITDA as a
percentage of Divested Revenue.
- 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.
Funeral Field EBITDA and Cemetery Field EBITDA
Our operations are reported in two business segments: Funeral
Home Operations and Cemetery Operations. Our Field level results
highlight trends in volumes, Revenues, Field EBITDA (the individual
business' cash earning power / locally controllable business
profit) and Field EBITDA Margin (the individual business'
controllable profit margin).
Funeral Field EBITDA and Cemetery Field EBITDA are defined
above. Gross Profit is defined as Revenue less "Field costs
and expenses" - a line item encompassing four areas of costs: i)
Funeral field costs, ii) Cemetery field costs, iii) depreciation
and amortization and iv) regional and unallocated costs. Funeral
and Cemetery field costs include funeral merchandise costs,
cemetery merchandise costs, operating expenses, labor and other
related expenses incurred at the business level.
Regional and unallocated funeral and cemetery costs presented in
our GAAP statement consist primarily of salaries and benefits of
our Regional leadership, incentive compensation opportunity to our
Field employees and other related costs for field infrastructure.
These costs, while necessary to operate our businesses as currently
operated within our unique, decentralized platform, are not
controllable operating expenses at the Field level as the
composition, structure and function of these costs are
determined by Executive leadership in the Houston Support Center.
These costs are components of our overall overhead platform
presented within Consolidated EBITDA and Adjusted Consolidated
EBITDA. We do not openly or indirectly "push down" any of
these expenses to the individual business' field level margins.
We believe that our "Regional and unallocated funeral and
cemetery costs" are necessary to support our decentralized, high
performance culture operating framework, and as such, are included
in Consolidated EBITDA and Adjusted Consolidated EBITDA, which more
accurately reflects the cash earning power of the Company as an
operating and consolidation platform.
Consolidated EBITDA and Adjusted Consolidated
EBITDA
Consolidated EBITDA and Adjusted Consolidated EBITDA are
defined above. Our Adjusted Consolidated EBITDA include adjustments
for Special Items and other expenses or gains that we believe do
not directly reflect our core operations and may not be indicative
of our normal business operations.
How These Measures Are Useful
When used in conjunction with GAAP financial measures, our Field
EBITDA, Consolidated EBITDA and Adjusted Consolidated EBITDA are
supplemental measures of operating performance that we believe are
useful measures to facilitate comparisons to our historical
consolidated and business level performance and operating
results.
We believe our presentation of Adjusted Consolidated EBITDA, key
metric used internally by our management, provides investors with a
supplemental view of our operating performance that facilitates
analysis and comparisons of our ongoing business operations because
they exclude items that may not be indicative of our ongoing
operating performance.
Limitations of the Usefulness of These
Measures
Our Field EBITDA, Consolidated EBITDA and Adjusted Consolidated
EBITDA are not necessarily comparable to similarly titled measures
used by other companies' due to different methods of calculation.
Our presentation is not intended to be considered in isolation or
as a substitute for, or superior to, the financial information
prepared and presented in accordance with GAAP. Funeral Field
EBITDA and Cemetery Field EBITDA are not consolidated measures of
profitability.
Field EBITDA excludes certain costs presented in our GAAP
statement that we do not allocate to the individual business' field
level margins, as noted above. A reconciliation of Field EBITDA to
gross profit, the most directly comparable GAAP measure, is set
forth below.
Consolidated EBITDA and Adjusted Consolidated EBITDA exclude
certain items that we believe do not directly reflect our core
operations and may not be indicative of our normal business
operations. A reconciliation of Consolidated EBITDA and Adjusted
Consolidated EBITDA to net income, the most directly comparable
GAAP measure, is set forth below.
Therefore, these measures may not provide a complete
understanding of our performance and should be reviewed in
conjunction with our GAAP financial measures.
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 and years
ended December 31, 2016 and 2017 (in
thousands):
|
|
|
For the Three
Months
Ended December 31,
|
|
For the Years
Ended
December 31,
|
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
Net Income
|
$
|
4,127
|
|
|
$
|
22,661
|
|
|
$
|
19,581
|
|
|
$
|
37,193
|
|
Special Items, Net of
Tax, except for **
|
|
|
|
|
|
|
|
Acquisition and
Divestiture Expenses
|
120
|
|
|
—
|
|
|
456
|
|
|
—
|
|
Severance and
Retirement Costs
|
—
|
|
|
—
|
|
|
2,587
|
|
|
—
|
|
Consulting
Fees
|
—
|
|
|
—
|
|
|
323
|
|
|
—
|
|
Accretion of Discount
on Convertible Subordinated Notes **
|
1,008
|
|
|
1,129
|
|
|
3,870
|
|
|
4,329
|
|
Loss on Early
Extinguishment of Debt
|
—
|
|
|
—
|
|
|
369
|
|
|
—
|
|
Net Loss on Sale of
Assets
|
1,350
|
|
|
—
|
|
|
1,152
|
|
|
—
|
|
Natural Disaster
Costs
|
—
|
|
|
144
|
|
|
—
|
|
|
403
|
|
Tax Adjustment
Related to Certain Discrete Items**
|
—
|
|
|
(17,176)
|
|
|
—
|
|
|
(17,176)
|
|
Total Special Items
affecting Net Income
|
$
|
2,478
|
|
|
$
|
(15,903)
|
|
|
$
|
8,757
|
|
|
$
|
(12,444)
|
|
Adjusted Net
Income
|
$
|
6,605
|
|
|
$
|
6,758
|
|
|
$
|
28,338
|
|
|
$
|
24,749
|
|
|
Reconciliation
of Net Income to Consolidated EBITDA and Adjusted Consolidated
EBITDA for the three months and years ended December 31, 2016
and 2017 (in thousands):
|
|
|
For the Three
Months
Ended December 31,
|
|
For the Years
Ended
December 31,
|
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
Net Income
|
$
|
4,127
|
|
|
$
|
22,661
|
|
|
$
|
19,581
|
|
|
$
|
37,193
|
|
Net Tax Provision
(Benefit)
|
4,254
|
|
|
(13,694)
|
|
|
12,660
|
|
|
(4,411)
|
|
Pre-Tax
Income
|
$
|
8,381
|
|
|
$
|
8,967
|
|
|
$
|
32,241
|
|
|
$
|
32,782
|
|
Interest
Expense
|
3,016
|
|
|
3,431
|
|
|
11,738
|
|
|
12,948
|
|
Accretion of Discount
on Convertible Subordinated Notes
|
1,008
|
|
|
1,129
|
|
|
3,870
|
|
|
4,329
|
|
Loss on Early
Extinguishment of Debt
|
—
|
|
|
—
|
|
|
567
|
|
|
—
|
|
Non-Cash Stock
Compensation
|
584
|
|
|
768
|
|
|
2,890
|
|
|
3,162
|
|
Depreciation &
Amortization
|
3,923
|
|
|
4,105
|
|
|
15,421
|
|
|
15,979
|
|
Other, Net
|
1,808
|
|
|
(1,121)
|
|
|
1,788
|
|
|
(1,118)
|
|
Consolidated
EBITDA
|
$
|
18,720
|
|
|
$
|
17,279
|
|
|
$
|
68,515
|
|
|
$
|
68,082
|
|
Adjusted
For:
|
|
|
|
|
|
|
|
Acquisition and
Divestiture Expenses
|
185
|
|
|
—
|
|
|
701
|
|
|
—
|
|
Severance and
Retirement Costs
|
—
|
|
|
—
|
|
|
3,979
|
|
|
—
|
|
Consulting
Fees
|
—
|
|
|
—
|
|
|
496
|
|
|
—
|
|
Natural Disaster
Costs
|
—
|
|
|
222
|
|
|
—
|
|
|
620
|
|
Adjusted Consolidated
EBITDA
|
$
|
18,905
|
|
|
$
|
17,501
|
|
|
$
|
73,691
|
|
|
$
|
68,702
|
|
|
|
|
|
|
|
|
|
Revenue
|
$
|
62,864
|
|
|
$
|
65,076
|
|
|
$
|
248,200
|
|
|
$
|
258,139
|
|
Adjusted Consolidated
EBITDA Margin
|
30.1%
|
|
|
26.9%
|
|
|
29.7%
|
|
|
26.6%
|
|
|
Reconciliation
of Funeral and Cemetery Gross Profit to Field EBITDA for the three
months and years ended December 31, 2016 and 2017 (in
thousands):
|
|
Funeral Field
EBITDA
|
For the Three
Months
Ended December 31,
|
|
For the Years
Ended
December 31,
|
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
Gross Profit
(GAAP)
|
$
|
16,478
|
|
|
$
|
15,418
|
|
|
$
|
61,620
|
|
|
$
|
61,369
|
|
Depreciation &
Amortization
|
2,437
|
|
|
2,456
|
|
|
8,891
|
|
|
9,785
|
|
Regional &
Unallocated Costs
|
1,862
|
|
|
2,946
|
|
|
8,672
|
|
|
10,827
|
|
Funeral Financial
EBITDA
|
(1,946)
|
|
|
(2,017)
|
|
|
(7,880)
|
|
|
(7,552)
|
|
Divested
EBITDA
|
(160)
|
|
|
—
|
|
|
(840)
|
|
|
—
|
|
Funeral Field
EBITDA
|
$
|
18,671
|
|
|
$
|
18,803
|
|
|
$
|
70,463
|
|
|
$
|
74,429
|
|
|
|
|
|
Cemetery Field
EBITDA
|
For the Three
Months
Ended December 31,
|
|
For the Years
Ended
December 31,
|
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
Gross Profit
(GAAP)
|
$
|
4,834
|
|
|
$
|
4,142
|
|
|
$
|
18,030
|
|
|
$
|
15,430
|
|
Depreciation &
Amortization
|
1,123
|
|
|
1,199
|
|
|
5,028
|
|
|
4,589
|
|
Regional &
Unallocated Costs
|
435
|
|
|
548
|
|
|
2,172
|
|
|
2,512
|
|
Cemetery Financial
EBITDA
|
(2,799)
|
|
|
(2,016)
|
|
|
(9,563)
|
|
|
(8,628)
|
|
Cemetery Field
EBITDA
|
$
|
3,593
|
|
|
$
|
3,873
|
|
|
$
|
15,667
|
|
|
$
|
13,903
|
|
|
|
|
|
Total Field
EBITDA
|
For the Three
Months
Ended December 31,
|
|
For the Years
Ended
December 31,
|
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
Funeral Field
EBITDA
|
$
|
18,671
|
|
|
$
|
18,803
|
|
|
$
|
70,463
|
|
|
$
|
74,429
|
|
Cemetery Field
EBITDA
|
3,593
|
|
|
3,873
|
|
|
15,667
|
|
|
13,903
|
|
Funeral Financial
EBITDA
|
1,946
|
|
|
2,017
|
|
|
7,880
|
|
|
7,552
|
|
Cemetery Financial
EBITDA
|
2,799
|
|
|
2,016
|
|
|
9,563
|
|
|
8,628
|
|
Divested
EBITDA
|
160
|
|
|
—
|
|
|
840
|
|
|
—
|
|
Total Field
EBITDA
|
$
|
27,169
|
|
|
$
|
26,709
|
|
|
$
|
104,413
|
|
|
$
|
104,512
|
|
|
Reconciliation
of GAAP Basic Earnings Per Share to Adjusted Basic Earnings Per
Share for the three months and years ended December 31, 2016
and 2017:
|
|
|
For the Three
Months
Ended December 31,
|
|
For the Years
Ended
December 31,
|
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
GAAP Basic Earnings
Per Share
|
$
|
0.25
|
|
|
$
|
1.41
|
|
|
$
|
1.18
|
|
|
$
|
2.25
|
|
Special Items
Affecting Net Income
|
0.15
|
|
|
(0.99)
|
|
|
0.53
|
|
|
(0.75)
|
|
Adjusted Basic
Earnings Per Share
|
$
|
0.40
|
|
|
$
|
0.42
|
|
|
$
|
1.71
|
|
|
$
|
1.50
|
|
|
Reconciliation
of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per
Share for the three months and years ended December 31, 2016
and 2017:
|
|
|
For the Three
Months
Ended December 31,
|
|
For the Years
Ended
December 31,
|
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
GAAP Diluted Earnings
Per Share
|
$
|
0.22
|
|
|
$
|
1.31
|
|
|
$
|
1.12
|
|
|
$
|
2.09
|
|
Special Items
Affecting Net Income
|
0.14
|
|
|
(0.92)
|
|
|
0.50
|
|
|
(0.70)
|
|
Adjusted Diluted
Earnings Per Share
|
$
|
0.36
|
|
|
$
|
0.39
|
|
|
$
|
1.62
|
|
|
$
|
1.39
|
|
On page five of this press release, we present the Rolling Four
Quarter Outlook ("Outlook") which 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
December 31, 2018 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. The following
four reconciliations are presented at the midpoint of the range in
this Outlook.
Reconciliation
of Net Income to Consolidated EBITDA and Adjusted Consolidated
EBITDA for the estimated
Rolling Four Quarters ending December 31, 2018 (in
thousands):
|
|
|
Rolling Four
Quarter Outlook
|
|
|
December 31,
2018E
|
|
Net Income
|
|
|
$
|
30,500
|
|
|
|
Total Tax
Provision
|
|
|
|
11,500
|
|
|
|
Pretax
Income
|
|
|
$
|
42,000
|
|
|
|
Net Interest Expense,
including Accretion of Discount on Convertible Subordinated
Notes
|
|
|
|
18,050
|
|
|
|
Depreciation &
Amortization, including Non-cash Stock Compensation
|
|
|
|
20,500
|
|
|
|
Consolidated
EBITDA
|
|
|
$
|
80,550
|
|
|
|
Adjusted for Special
Items
|
|
|
—
|
|
|
|
Adjusted Consolidated
EBITDA
|
|
|
$
|
80,550
|
|
|
|
|
|
Reconciliation
of Net Income to Adjusted Net Income for the estimated Rolling Four
Quarters ending December
31, 2018 (in thousands):
|
|
|
Rolling Four
Quarter Outlook
|
|
|
December 31,
2018E
|
|
Net Income
|
|
|
|
30,500
|
|
|
|
Special
Items
|
|
|
|
4,800
|
|
|
|
Adjusted Net
Income
|
|
|
$
|
35,300
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of GAAP Basic Earnings Per Share to Adjusted Basic Earnings Per
Share for the estimated
Rolling Four Quarters ending December 31, 2018:
|
|
|
Rolling Four
Quarter Outlook
|
|
|
December 31,
2018E
|
|
GAAP Basic Earnings
Per Share
|
|
|
|
1.90
|
|
|
|
Special Items
Affecting Net Income
|
|
|
|
0.30
|
|
|
|
Adjusted Basic
Earnings Per Share
|
|
|
$
|
2.20
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per
Share for the estimated
Rolling Four Quarters ending December 31, 2018:
|
|
|
Rolling Four
Quarter Outlook
|
|
|
December 31,
2018E
|
|
GAAP Diluted Earnings
Per Share
|
|
|
|
1.77
|
|
|
|
Special Items
Affecting Net Income
|
|
|
|
0.27
|
|
|
|
Adjusted Diluted
Earnings Per Share
|
|
|
$
|
2.04
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Information:
Funeral homes and cemeteries purchased after
December 31, 2012 are referred to as "Acquired" in our
Trend Report. This classification of acquisitions has been
important to management and investors in monitoring the results of
these businesses and to gauge the leveraging performance
contribution that a selective acquisition program can have on total
company performance.
The presentation below highlights the impact of our 2012
Acquired Portfolio that moved from Acquired to Same Store beginning
January 1, 2017 (in thousands):
|
For the Three
Months
Ended December 31, 2016
|
|
For the Year
Ended
December 31, 2016
|
|
|
Revenue
|
|
EBITDA
|
|
Revenue
|
|
EBITDA
|
2012 Acquired
Portfolio
|
$
|
3,670
|
|
|
$
|
1,405
|
|
|
$
|
15,253
|
|
|
$
|
6,116
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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",
"seek", "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:
- our ability to find and retain skilled personnel;
- our ability to execute our growth strategy;
- 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;
- the timely and full payment of 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;
- recent changes in federal income tax laws and regulations and
the implementation and interpretation of these laws and regulations
by the Internal Revenue Service;
- effects of the application of other 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.
View original
content:http://www.prnewswire.com/news-releases/carriage-services-announces-2017-annual-results-and-raises-rolling-four-quarter-outlook-300599022.html
SOURCE Carriage Services, Inc.