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Carriage Services Announces Third Quarter 2008 Results

Company has completed its share repurchase program

HOUSTON, Nov. 4 /PRNewswire-FirstCall/ -- Carriage Services, Inc. (NYSE: CSV) today announced results for the third quarter ended September 30, 2008. Highlights from continuing operations for the third quarter of 2008 compared to the third quarter of 2007 were as follows:

Third Quarter Selected Financial Results

(amounts in millions, except per share amounts)

Q3 Q3

2007 2008 Change

Total Revenues $40.4 $43.2 $2.8

Consolidated EBITDA $8.1 $7.4 $ (0.7)

Diluted Earnings per Share $0.04 $0.01 $ (0.03)


Melvin C. Payne, Chairman and Chief Executive Officer, stated, "Net income from continuing operations was $158,000, or $0.01 diluted earnings per share, compared to $703,000, or $0.04 diluted earnings per share, in the third quarter of 2007. While revenues for our third quarter increased as a result of increases in both volumes and average revenue per contract, we experienced a decline in Consolidated EBITDA, Consolidated EBITDA Margin and Net Income due to higher costs and expenses.

"Consolidated EBITDA Margin was 17.1% compared to 20% in the third quarter last year, largely due to higher self-insurance costs, labor costs and bad debt expense. We are diligently working to lower our costs as well as improve the leadership and sales staff at several of our cemeteries to drive good quality sales and increase margins."


Period Ended September 30, 2008


Actual Actual Actual Actual

Qtr 3 Qtr 3 YTD YTD

2007 2008 2007 2008


Same Store Contracts

Atneed Contracts 3,897 3,994 12,156 12,737

Preneed Contracts 974 922 3,348 3,055

Total Same Store Funeral

Contracts 4,871 4,916 15,504 15,792

Acquisition Contracts

Atneed Contracts 410 671 870 2,194

Preneed Contracts 187 187 414 656

Total Acquisition Funeral

Contracts 597 858 1,284 2,850

New Store Openings 132 190 378 632

Total Funeral Contracts 5,600 5,964 17,166 19,274

Same Store Revenue

Funeral Operations Revenue $25,884 $26,657 $83,066 $84,685

Preneed Commission and Other

Revenue 502 626 1,754 2,053

Total Funeral Same Store

Revenue 26,386 27,283 84,820 86,738

Cemetery Operations Revenue 8,360 8,903 26,535 24,586

Cemetery Financial Revenue 1,321 1,020 2,983 3,028

Total Cemetery Same Store

Revenue 9,681 9,923 29,518 27,614

Total Same Store Revenue 36,067 37,206 114,338 114,352

Acquisition Revenue

Funeral Operations Revenue 3,092 4,313 6,805 14,026

Cemetery Operations Revenue 1,193 1,623 2,579 4,524

Cemetery Financial Revenue 50 70 158 190

Total Acquisition Revenue 4,335 6,006 9,542 18,740

Total Revenue from Continuing

Operations $40,402 $43,212 $123,880 $133,092

26,297 29,521 77,303 87,210

Field EBITDA from Continuing


Same Store Funeral Field

EBITDA $9,081 $8,807 $31,799 $31,586

Same Store Funeral Field

EBITDA Margin 34.4% 32.3% 37.5% 36.4%

Same Store Cemetery Field

EBITDA 3,159 2,600 10,339 7,180

Same Store Cemetery Field

EBITDA Margin 32.6% 26.2% 35.0% 26.0%

Total Same Store Field

EBITDA 12,240 11,407 42,138 38,766

Total Same Store Field

EBITDA Margin 33.9% 30.7% 36.9% 33.9%

Acquisition Funeral Field

EBITDA 1,195 1,260 2,444 4,353

Acquisition Funeral Field

EBITDA Margin 38.6% 29.2% 35.9% 31.0%

Acquisition Cemetery Field

EBITDA 212 542 603 1,533

Acquisition Cemetery Field

EBITDA Margin 17.9% 33.5% 23.4% 33.9%

Total Acquisition Field

EBITDA 1,407 1,802 3,047 5,886

Total Acquisition Field

EBITDA Margin 32.5% 30.0% 31.9% 31.4%

Total Field EBITDA from

Continuing Operations 13,647 13,209 45,185 44,652

Total Field EBITDA Margin

from Continuing Operations 33.8% 30.6% 36.5% 33.5%


Total Variable Overhead 1,135 1,544 3,426 5,109

Total Regional Fixed Overhead 886 831 2,396 2,497

Total Corporate Fixed Overhead 3,553 3,461 10,354 10,112

Total Overhead 5,574 5,836 16,176 17,718

13.8% 13.5% 13.1% 13.3%

Consolidated EBITDA from

Continuing Operations $8,073 $7,373 $29,009 $26,934

Consolidated EBITDA Margin

from Continuing Operations 20.0% 17.1% 23.4% 20.2%

Total Depreciation &

Amortization 2,398 2,670 7,153 7,744

Interest, Net 4,388 4,442 12,719 13,477

Pretax Income 1,287 261 9,137 5,713

Income tax 584 103 3,607 2,256

Net income from Continuing

Operations $703 $158 $5,530 $3,457

1.7% 0.4% 4.5% 2.6%

Diluted EPS-from continuing

operations $0.04 $0.01 $0.28 $0.18

Net income from Discontinued

Operations (9) - 538 (1,390)

Diluted EPS-from discontinued

operations $- $- $0.03 $(0.07)


Same store Funeral Operations Revenue increased $0.8 million or 3.0% as a result of a 0.9% increase in contracts and a 2.1% increase in the average revenue per contract. Funeral operations revenue from acquired businesses contributed an additional increase of $1.2 million. The cremation rate for the third quarter of 2008 was 39.8% compared to 37.0% in the third quarter of 2007 and the growth in the volumes came in the form of cremation contracts. Increased operating costs across the portfolio worked against us, resulting in a decline of $0.3 million in our same store Funeral Field EBITDA and a decline of $0.1 million in our Acquisition Funeral Field EBITDA.


Same store Cemetery Operating Revenue increased $0.5 million or 6.5% from last year, while financial revenue was down $0.3 million or 22.8%. Same store Cemetery Field EBITDA declined $0.6 million to $2.6 million, while acquired cemeteries added $0.3 million in Acquisition Cemetery Field EBITDA. The decline in same store Cemetery Field EBITDA and Cemetery Field EBITDA Margin to 26.2% from 32.6% was due to higher bad debt, labor and transportation costs. We are making good progress in rebuilding the sales leadership and teams at our larger parks and expect this process to be complete by year end. General economic weakness in some of our key markets is having a negative impact on our revenues, particularly preneed sales, where customers may not have the confidence or the discretionary income, which has also impacted collection efforts on outstanding contracts. Therefore, we do not expect a return to our 2007 performance levels until economic conditions in some of our local markets improve.


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. The Trend Reports highlight trends in volumes, revenues, Field EBITDA (controllable profit), Field EBITDA Margin (controllable profit margin) and the components of our overhead. Trend reporting allows us to focus on the key operational and financial drivers relevant to the longer term performance and valuation of our portfolio of deathcare businesses. Please go to the Investor Relations homepage of Carriage's web site at for a link to our consolidated Annual and Quarterly Trend Reports.


During June 2008 the Board of Directors approved the repurchase of up to an aggregate of $5 million of the Company's common stock. The repurchases were executed in the open market and through privately negotiated transactions. Through September 30, 2008, the Company repurchased 854,700 shares of common stock at an aggregate cost of $3,381,631 and an average cost per share of $3.93. During October 2008 Carriage completed its $5.0 million repurchase program by acquiring an additional 492,769 shares for a total of 1,347,469 shares of common stock and an average cost per share of $3.68.


Total overhead increased $0.3 million to $5.8 million as the Company experienced an increase in legal costs and termination costs in the quarter of $0.2 million each.


Carriage experienced negative free cash flow (defined as cash flow from continuing operations less maintenance capital expenditures) of $1.0 million during the third quarter of 2008 compared to negative free cash flow of $3.3 million during the same period in 2007. In addition to being seasonally the lowest quarter for deaths, the semiannual interest payments on the Senior debt of $5.1 million are payable in the third quarter. The elements of Cash Flow for the first nine months of 2008 consisted of the following (in millions):

Cash flow from continuing operations $12.1

Cash used for maintenance capital expenditures (4.6)

Free Cash Flow for first nine months of 2008 7.5

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 (2.4)

Cash used for growth capital expenditures - cemeteries (2.6)

Financing activities, primarily share repurchases (3.8)

Cash at September 30, 2008 $3.3


The Rolling Four Quarter Outlook ranges for the period ending September 30, 2009 are intended to approximate what the Company believes will be the sustainable earning power of its portfolio of deathcare assets over the next four quarters as the three models are effectively executed. Performance drivers include funeral contract volumes, cremation mix, preneed sales, preneed maturities and deliveries, average revenue per service and sale, Field EBITDA Margins, acquisition size, timing and performance, and variable overhead items. In the Four Quarter Outlook ending September 30, 2009, the Company has assumed no additional acquisitions.

ROLLING FOUR QUARTER OUTLOOK - Period Ending September 30, 2009

(amounts in millions, except per share amounts)


Revenues $175.0 - $181.0

Field EBITDA $63.0 - $65.0

Field EBITDA Margin 34.8% - 37.1%

Total Overhead $22.5 - $23.5

Consolidated EBITDA $39.5 - $42.5

Consolidated EBITDA Margin 21.8% - 24.3%

Interest $18.0

Depreciation & Amortization $10.0

Cash Taxes $1.0

Net Earnings from Continuing Operations $7.5 - $8.3

Diluted Earnings Per Share $0.38 - $0.42

Free Cash Flow $12.0 - $14.0

Long Term Outlook - Through 2012 (Base Year 2006)

Revenue growth of 7-9% annually, including acquisitions

Consolidated EBITDA growth of 9-11% annually, including acquisitions

Consolidated EBITDA Margin range of 24-26%

Growth internally funded without new debt or equity


Carriage Services has scheduled a conference call for tomorrow, Wednesday, November 5, 2008 at 10:30 a.m. Eastern Time. To participate in the call, dial 303-228-2960 at least ten minutes before the conference call begins and ask for the Carriage Services conference call. A telephonic replay of the conference call will be available through November 12, 2008 and may be accessed by dialing 303-590-3000 and using pass code 11121172#. An audio archive will also be available on the company's website at shortly after the call and will be accessible for approximately 90 days. For more information, please contact Karen Roan at DRG&E at 713-529-6600 or email

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.


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.


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 December 31, 2007, could cause the Company's results in the future to differ materially from the forward-looking statements made herein and in any other documents or oral presentations made by, or on behalf of, the Company. The Company assumes no obligation to update or publicly release any revisions to forward-looking statements made herein or any other forward-looking statements made by, or on behalf of, the Company. A copy of the Company's Form 10-K, and other Carriage Services information and news releases, are available at


Selected Financial Data

September 30, 2008


Selected Balance Sheet Data: 12/31/2007 9/30/2008

Cash and short-term investments $3,446 $3,257

Total Senior Debt (a) 138,913 137,935

Days sales in funeral accounts receivable 22.9 21.7

Senior Debt to total capitalization 40.9 40.7

Senior Debt to EBITDA from continuing

operations (rolling twelve months) 3.53 3.74

a) Senior debt does not include the convertible junior subordinated


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 following periods (in 000s). Rolling twelve months ended 9/30/2009 is presented at the midpoint of the range identified in the release:

Three Three Twelve

months months months

ended ended ended

9/30/2007 9/30/2008 9/30/2009 E

Net income from continuing operations $703 $158 $8,100

Provision for income taxes 584 103 4,900

Pre-tax earnings from continuing operations 1,287 261 13,000

Net interest expense, including loan cost

amortization 4,388 4,443 18,000

Depreciation & amortization 2,398 2,670 10,000

EBITDA from continuing operations $8,073 $7,374 $41,000

Revenue from continuing operations $40,402 $43,212 $178,000

EBITDA margin from continuing operations 20.0% 17.1% 22.6%

Reconciliation of Non-GAAP Financial Measures Continued:

Reconciliation of cash provided by operating activities from continuing operations to free cash flow (in 000's):

Three months Three months

ended ended

9/30/2007 9/30/2008

Cash provided by (used in) operating

activities from continuing operations $(815) $201

Less maintenance capital expenditures

from continuing operations (2,513) (1,212)

Negative free cash flow from continuing

operations $(3,328) $(1,011)

Nine months Nine months

ended ended

9/30/2007 9/30/2008

Cash provided by operating activities

from continuing operations $9,317 $12,055

Less maintenance capital expenditures from

continuing operations (5,903) (4,597)

Free cash flow from continuing operations $3,414 $7,458

Reconciliation of estimated net income to free cash flow for the twelve months ending September 30, 2009 (in 000's):

Net income $8,100

Tax expense 4,900

Interest expense, net 18,000

Depreciation and amortization 10,000

EBITDA $41,000

Interest paid 18,000

Cash taxes 1,000

Maintenance capital expenditures 9,000

Free cash flow $13,000

Contacts: Terry Sanford, SVP & CFO

Carriage Services, Inc.


Ken Dennard /

Kip Rupp /

DRG&E / 713-529-6600

SOURCE Carriage Services, Inc.
Copyright©2008 PR Newswire.
All rights reserved

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