Carriage Services Announces Fourth Quarter 2008 Results
Fourth Quarter Selected Financial Results
(amounts in millions, except per share amounts)
Q4 Q4 Change
2007 2008
Total Revenues $43.0 $43.8 $0.8
Adjusted Consolidated EBITDA $10.7 $8.9(a) $(1.8)
GAAP Diluted Earnings (Loss) per Share $0.09 $(0.09) $(0.18)
Adjusted Diluted Earnings per Share $0.09 $0.04(a)(b) $(0.05)
(a) excludes a one-time $3.3 million charge related to a tentative
class action settlement and $0.2 million in related legal fees,
equal to $0.10 per diluted share.
(b) excludes the $0.5 million increase in income taxes due to a higher
effective tax rate for the first nine months of 2008, equal to
$0.03 per diluted share.
HIGHLIGHTS
“This past year and especially the last quarter were challenging to say the least, but we finished with a strong December primarily because of our funeral operations. We have positioned our company for improved performance in 2009 on the strength of our funeral operations and the repositioning of our trust fund portfolio during the fourth quarter and early 2009. We do not expect to repeat the large amount of special charges that impacted our 2008 performance, and notwithstanding the extraordinarily difficult economic environment, we expect modestly improved cemetery performance in 2009. All in all, we believe we are in position to not only survive this unusual period, but to thrive and exploit any opportunities that come our way.”
UNAUDITED INCOME STATEMENT FROM CONTINUING OPERATIONS
Period Ended December 31, 2008
($000s)
Actual Actual Actual Actual
Qtr 4 Qtr 4 YTD YTD
2007 2008 2007 2008
------ ---- ---- ----
CONTINUING OPERATIONS
Same Store Contracts
Atneed Contracts 4,211 4,144 16,367 16,881
Preneed Contracts 1,047 964 4,395 4,019
------- ------- -------- --------
Total Same Store
Funeral Contracts 5,258 5,108 20,762 20,900
------- ------- -------- --------
Acquisition Contracts
Atneed Contracts 561 664 1,439 2,858
Preneed Contracts 237 247 643 903
------- ------- -------- --------
Total Acquisition
Funeral Contracts 798 911 2,082 3,761
------- ------- -------- --------
New Store Openings 144 238 522 870
------- ------- -------- --------
Total Funeral Contracts 6,200 6,257 23,366 25,531
======= ====== ======= =======
Same Store Revenue
Funeral Operations Revenue $28,024 $28,349 $111,092 $113,034
Preneed Commission and
Other Revenue 444 617 2,198 2,670
------- ------- -------- --------
Total Funeral Same
Store Revenue 28,468 28,966 113,290 115,704
Cemetery Operations Revenue 7,764 8,138 34,299 32,726
Cemetery Financial Revenue 1,543 695 4,526 3,723
------- ------- -------- --------
Total Cemetery Same
Store Revenue 9,307 8,833 38,825 36,449
------- ------- -------- --------
Total Same Store Revenue 37,775 37,799 152,115 152,153
Acquisition Revenue
Funeral Operations Revenue 3,745 4,516 10,549 18,542
Cemetery Operations Revenue 1,296 1,447 3,875 5,971
Cemetery Financial Revenue 161 72 317 262
------- ------- -------- --------
Total Acquisition Revenue 5,202 6,035 14,741 24,775
------- ------- -------- --------
Total Revenue from
Continuing Operations $42,977 $43,834 $166,856 $176,928
======= ====== ======= =======
26,401 29,510 77,303 87,210
Field EBITDA from
Continuing Operations
Same Store Funeral Field
EBITDA $11,382 $11,001 $43,183 $42,587
Same Store Funeral Field
EBITDA Margin 40.0% 38.0% 38.1% 36.8%
Same Store Cemetery Field
EBITDA 3,133 1,786 13,405 8,966
Same Store Cemetery Field
EBITDA Margin 33.7% 20.2% 34.5% 24.6%
------- ------- -------- --------
Total Same Store Field
EBITDA 14,515 12,787 56,588 51,553
Total Same Store Field
EBITDA Margin 38.4% 33.8% 37.2% 33.9%
Acquisition Funeral Field
EBITDA 1,173 1,383 3,617 5,736
Acquisition Funeral Field
EBITDA Margin 31.3% 30.6% 34.3% 30.9%
Acquisition Cemetery Field
EBITDA 452 461 1,053 1,994
Acquisition Cemetery Field
EBITDA Margin 31.0% 30.3% 25.1% 32.0%
------- ------- -------- --------
Total Acquisition Field
EBITDA 1,625 1,844 4,670 7,730
Total Acquisition Field
EBITDA Margin 31.2% 30.6% 31.7% 31.2%
------- ------- -------- --------
Total Field EBITDA from
Continuing Operations 16,140 14,631 61,258 59,283
Total Field EBITDA Margin from
Continuing Operations 37.6% 33.4% 36.7% 33.5%
Overhead
Total Variable Overhead 1,408 1,449 3,406 3,403
Total Regional Fixed Overhead 731 916 3,122 3,413
Total Corporate Fixed Overhead 3,287 3,413 13,408 13,311
------- ------- -------- --------
Total Overhead 5,426 5,778 19,936 20,127
12.6% 13.2% 11.9% 11.4%
------- ------- -------- --------
Adjusted Consolidated EBITDA
from Continuing Operations $10,714 $8,853 $41,322 $39,156
======= ====== ======= =======
Adjusted Consolidated EBITDA
Margin from Continuing Operations 24.9% 20.2% 24.8% 22.1%
Special Charges
Litigation Settlement - 3,300 - 3,300
Litigation Related Legal Costs 337 241 861 1,638
Termination Expenses - - - 977
Other Special Charges 165 - 739 246
------- ------- -------- --------
Sum of Special Charges 502 3,541 1,600 6,161
------- ------- -------- --------
Consolidated EBITDA from
Continuing Operations $10,212 $5,312 $39,722 $32,995
23.8% 12.1% 23.8% 18.6%
Property Depreciation &
Amortization 2,336 2,624 9,488 10,368
Restricted Stock Amortization 222 246 723 996
Interest, Net 4,474 4,624 17,193 18,102
------- ------- -------- --------
Pretax Income $3,180 $(2,182) $12,318 $3,529
Income tax 1,352 (531) 4,960 1,725
------- ------- -------- --------
Net income from Continuing
Operations $1,828 $(1,651) $7,358 $1,804
======= ====== ======= =======
4.3% (3.8)% 4.4% 1.0%
Diluted EPS-from continuing
operations $0.09 $(0.09) $0.38 $0.09
Net income (Loss) from Discontinued
Operations $383 $(156) $921 $(1,546)
Diluted EPS-from discontinued
operations $0.02 $(0.01) $0.05 $(0.08)
TREND REPORTING
Management monitors consolidated same store and acquisition field operating and financial results both on a year over year and most recent rolling four quarters (“Trend Reports”) basis to reflect long term and short term trends and seasonality. “Acquisition” is defined as businesses acquired since
FUNERAL OPERATIONS
Fourth quarter Same Store Funeral Operations Revenue increased 1.2% as the average revenue per contract increased 4.1% while the number of contracts declined 2.9%. Revenue from the Acquisition portfolio increased
Same Store Funeral Field EBITDA declined by
For the full year, Same Store Funeral Revenue increased
CEMETERY OPERATIONS
Same Store Cemetery Operations Revenue increased
Same Store Cemetery Field EBITDA declined by
For the full year Cemetery Same Store Operations Revenue declined by
In order to increase revenues from preneed property sales, Carriage began an initiative in the third quarter of 2008 to increase both the quantity and quality of the cemetery sales counselors at our major parks. Management believes that this hiring initiative was approximately 80% complete at year end and continued hiring emphasis should achieve appropriate staffing by the end of the first quarter of 2009. General economic weakness continued in some of the Company’s key markets and is having a negative impact on revenues, particularly preneed property sales.
LITIGATION
Carriage has reached a tentative settlement in a class action matter alleging violations of state and federal wage and hour laws. As a result of the settlement, there was a
OVERHEAD
Total Overhead, excluding special charges, increased to
INCOME TAXES
During the fourth quarter Carriage revised its effective tax rate for the year 2008 from approximately 39.5% to 48.8%. This change in estimate was due to the lower taxable income compared to that estimated earlier in the year. The lower taxable income was due primarily to the litigation charge previously discussed. A portion (
CASH FLOW
Carriage produced Free Cash Flow (defined as cash flow from continuing operations less maintenance capital expenditures) of
Cash flow from continuing operations $19.5
Cash used for maintenance capital expenditures (6.0)
Free Cash Flow for 2008 13.5
Cash and liquid investments at beginning of year 3.4
Cash flow from discontinued operations 0.2
Proceeds from sales of businesses 1.0
Cash used for growth capital expenditures - funeral homes (3.5)
Cash used for growth capital expenditures - cemeteries (3.4)
Financing activities, primarily share repurchases
and debt reduction (6.2)
Cash at December 31, 2008 $5.0
SHARE REPURCHASE PROGRAM
During
During
BOARD OF DIRECTORS
Mr. Scott is a seasoned financial services executive with over thirty years of capital markets experience. He is currently Vice President and Chief Investment Officer of Loews Corporation and formerly Chief Investment Officer, Insurance Portfolio Management, with AIG Investments.
Mr. Heiligbrodt is a private investor and managing partner in a family business, and also serves on the Board of Directors of BJ Services. He served in various management positions with Service Corporation International (“SCI”) beginning in
“I want to thank
2009 OUTLOOK
The Four Quarter Outlook ranges for the period ending
ROLLING FOUR QUARTER OUTLOOK - Period Ending December 31, 2009
(amounts in millions, except per share amounts)
Range
Revenues $175.0 - $180.0
Field EBITDA $59.5 - $63.0
Field EBITDA Margin 34.0% - 35.0%
Total Overhead $22.0 - $23.0
Consolidated EBITDA $37.0 - $41.0
Consolidated EBITDA Margin 21.1% - 22.8%
Interest $18.1
Depreciation & Amortization $11.0
Cash Taxes $1.0
Net Income $6.4 - $7.1
Diluted Earnings Per Share $0.36 - $0.40
Free Cash Flow $13.0 - $15.0
Consolidated EBITDA in 2009 is expected to increase from 2008 for the following reasons:
- Increase in Funeral Field EBITDA with better execution of the Standards Operating Model
- Increase in Same Store Cemetery EBITDA with higher preneed sales and less bad debt expense.
- Higher cemetery financial revenue
- Tighter Management of overhead expenses
- Lower special charges due primarily to elimination of most litigation.
Long Term Outlook - Through 2013 (Base Year 2008)
Revenue growth of 6-8% annually, including acquisitions
Consolidated EBITDA growth of 9-11% annually, including acquisitions
Consolidated EBITDA Margin range of 23-26%
Growth internally funded without new debt or equity
CONFERENCE CALL
Carriage Services has scheduled a conference call for tomorrow,
Carriage Services is a leading provider of death care services and products. Carriage operates 136 funeral homes in 25 states and 32 cemeteries in 11 states.
USE OF NON-GAAP FINANCIAL MEASURES
This press release uses the following Non-GAAP financial measures “free cash flow and EBITDA”. Both free cash flow and EBITDA are used by investors to value common stock. The Company considers free cash flow to be an important indicator of its ability to generate cash for acquisitions and other strategic investments. The Company has included EBITDA in this press release because it is widely used by investors to compare the Company’s financial performance with the performance of other deathcare companies. The Company also uses Field EBITDA and Field EBITDA Margin to monitor and compare the financial performance of the individual funeral and cemetery field businesses. EBITDA does not give effect to the cash the Company must use to service its debt or pay its income taxes and thus does not reflect the funds actually available for capital expenditures. In addition, the Company’s presentation of EBITDA may not be comparable to similarly titled measures other companies report. Non-GAAP financial measures should be viewed in addition to, and not as an alternative for, the Company’s reported operating results or cash flow from operations or any other measure of performance as determined in accordance with GAAP.
The Company categorizes its general and administrative expenses into three categories of overhead: (1) variable overhead, (2) regional fixed overhead and (3) corporate fixed overhead. Variable overhead consists of cost and expense such as incentive compensation which will vary with profitability or legal expense unrelated to our day to day operations. Regional fixed overhead and corporate fixed overhead represent the cost and expenses of our regional operations leaders and the home office and will not vary as a result of profitability. Special charges are considered by management to be unusual in nature, unique and not expected to occur in the normal course of business.
FORWARD-LOOKING STATEMENTS
Certain statements made herein or elsewhere by, or on behalf of, the Company that are not historical facts are intended to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on assumptions that the Company believes are reasonable; however, many important factors, as discussed under “Forward-Looking Statements and Cautionary Statements” in the Company’s Annual Report and Form 10-K for the year ended
Contacts: Terry Sanford, SVP & CFO
Carriage Services, Inc.
713-332-8400
Ken Dennard / ksdennard@drg-e.com
Kip Rupp / krupp@drg-e.com
DRG&E / 713-529-6600
- Tables to Follow -
CARRIAGE SERVICES, INC.
Selected Financial Data
December 31, 2008
(unaudited)
Selected Balance Sheet Data: 12/31/2007 12/31/2008
Cash and short-term investments $3,446 $5,007
Total Senior Debt (a) 138,913 137,732
Days sales in funeral accounts receivable 22.9 21.3
Senior Debt to total capitalization 40.9 41.1
Senior Debt to EBITDA from continuing
operations (rolling twelve months) 3.5 4.3
a) Senior debt does not include the convertible junior subordinated
debentures.
Reconciliation of Non-GAAP Financial Measures:
This press release includes the use of certain financial measures that
are not GAAP measures. The non-GAAP financial measures are presented
for additional information and are reconciled to their most comparable
GAAP measures below.
Reconciliation of Net Income from continuing operations to EBITDA from
continuing operations for the rolling twelve months ended 12/31/2009
presented at the midpoint of the range identified in the release:
Twelve months
ended
12/31/2009 E
Net income from continuing operations $6,800
Provision for income taxes 3,100
Pre-tax earnings from continuing operations 9,900
Net interest expense, including loan cost amortization 18,100
Depreciation & amortization 11,000
EBITDA from continuing operations $39,000
Revenue from continuing operations $177,500
Adjusted EBITDA margin from continuing operations 22.0%
Reconciliation of Non-GAAP Financial Measures, Continued:
Reconciliation of cash provided by operating activities from continuing
operations to free cash flow (in 000s):
Three months Three months
ended Ended
12/31/2007 12/31/2008
---------- ----------
Cash provided by operating activities from
continuing operations $9,960 $7,441
Less maintenance capital expenditures from
continuing operations (1,930) (1,794)
Free cash flow from continuing operations $8,030 $5,647
Twelve months Twelve months
ended Ended
12/31/2007 12/31/2008
---------- ----------
Cash provided by operating activities from
continuing operations $19,277 $19,497
Less maintenance capital expenditures from
continuing operations (7,833) (5,984)
Free cash flow from continuing operations $11,444 $13,513
Reconciliation of diluted earnings per share to adjusted diluted
earnings per share for the fourth quarter of 2008 (in 000s):
As Litigation Tax Rate
Reported Charges Change Adjusted
Pre-tax income (loss) from
continuing operations $(2,182) $3,541 $-- $1,359
Income tax (expense) benefit 531 (1,728) 532 (665)
Net income (loss) $(1,651) $1,813 $532 $694
Diluted earnings (loss) per share $(0.09) $0.10 $0.03 $0.04
SOURCE Carriage Services, Inc.