Carriage Services, Inc. (NYSE: CSV) today announced results for the
third quarter ended September 30, 2018, shown below:
Three Months Ended September 30, 2018 compared
to Three Months Ended September 30, 2017
- Total Revenue of $64.2 million, an increase of 5.2%;
- Net Income of $2.2 million, a decrease of 27.6%;
- GAAP Diluted Earnings Per Share of $0.11, a decrease of
35.3%;
- Total Field EBITDA of $23.2 million, an increase of 1.0%;
- Total Field EBITDA Margin down 150 basis points to 36.2%;
- Adjusted Consolidated EBITDA of $15.7 million, an increase of
11.1%;
- Adjusted Consolidated EBITDA Margin up 130 basis points to
24.4%;
- Adjusted Net Income of $2.7 million, a decrease of 38.0%;
- Adjusted Diluted Earnings Per Share of $0.14, a decrease of
44.0%; and
- Adjusted Free Cash Flow of $10.0 million, an increase of
6.4%.
Nine Months Ended September 30, 2018 compared to
Nine Months Ended September 30, 2017
- Total Revenue of $201.5 million, an increase of 4.4%;
- Net Income of $14.3 million, a decrease of 1.6%;
- GAAP Diluted Earnings Per Share of $0.78, a decrease of
3.7%;
- Total Field EBITDA of $78.5 million, an increase of 0.9%;
- Total Field EBITDA Margin down 130 basis points to 39.0%;
- Adjusted Consolidated EBITDA of $53.4 million, an increase of
4.3%;
- Adjusted Consolidated EBITDA Margin remained flat at
26.5%;
- Adjusted Net Income of $17.3 million, a decrease of 3.9%;
- Adjusted Diluted Earnings Per Share of $0.94, a decrease of
6.0%; and
- Adjusted Free Cash Flow of $32.5 million, an increase of
30.6%.
Mel Payne, Chief Executive Officer, stated, “The
following quotes by me are from our second quarter earnings
release:
‘We view the disappointing second quarter as a
temporary performance aberration related to challenging revenue and
margin vagaries in our funeral portfolio which is not historically
symptomatic of long term operating trends. . . . We have complete
confidence that our operating leadership is effectively dealing
with the revenue and margin challenges in our funeral portfolio and
that we will experience broadly higher performance during the
latter part of the second half of the year compared to our second
quarter.’
Everything I said in the above quote I believed
at the time, but after continued operating performance weakness in
July and August I led a comprehensive analysis by our operating
leadership and support teams of each of our businesses since 2011
using both operating and financial data trends as well as the
corresponding Standards Achievement trends in each case.
On October 1st I wrote a Memorandum to all of
our Managing Partners, Sales Managers, Field Operating Leadership
Teams, as well as Houston Support Center Leaders explaining that
our many long term high performance winners were subsidizing “too
many” businesses with underperformance trends. Our Board of
Directors is also fully informed and supportive of our analysis of
the underperformance challenges and issues (85% - 90%
self-inflicted) and of the plans we have developed and are
executing to quickly restore the GAAP Earnings and Free Cash Flow
Value Creation Power to our company.
We have developed detailed plans of action for
each underperforming business that are being executed weekly, a
program that began on October 2nd and will continue through the end
of this year but will be essentially complete by the end of
November. The simple goal of the underperformance turnaround plans
on a case by case business basis is to have each business in our
portfolio positioned for High and Sustainable Standards Achievement
success in 2019 and thereafter. In other words, we fully expect to
head into next year with our operating and financial performance
substantially higher than the recent past and to have performance
trends again being our friend.
We have also completed an outreach program to
our Standards Council Members, Field Operating Leaders and members
of our Operations and Strategic Growth Leadership Team and
Operations Analysis and Planning Group. I have confidentially asked
each for feedback on how best to reorganize our operating
leadership and update our Funeral and Cemetery Performance
Standards to achieve and sustain high operating and financial
performance for a five year timeframe beginning
January 1, 2019 and ending December 31, 2023.
After reviewing all the feedback and collaborating with members of
our Operations and Strategic Growth Leadership Team and Board, I am
announcing the following elements of our high performance and value
creation trends restoration program with the annual theme:
Carriage Services 2019: Back To The
Future - A New Beginning - Part II:
- I have assumed the role of Chief Operating Officer and Peggy
Schappaugh the interim role of Head of the Operations Analysis and
Planning Group. Peggy and I have worked together since she joined
Carriage in August 2003 “to do budgets”, and she has been involved
since inception in the evolution of the idea and concepts related
to our Standards Operating Model.
- We will have a Standards Council special meeting on November
30th to update and reboot (last major update / reboot end of 2011)
both our Funeral and Cemetery Standards to make them more relevant
given the changing preferences of client families in our industry
and the associated revenue challenges from higher rates of
cremation versus traditional burials. The likely outcome of this
individual standards update will be moving toward compounded long
term revenue growth as a highly weighted performance standard for
each business and away from the granularity of highly weighted
individual annual revenue metrics such as Funeral Revenue Per
Contract and Preneed Cemetery Interment Average.
- Our annual Being The Best and five year
Good To Great Managing Partner Incentive Awards
will be rebooted to align more completely with our updated
Performance Standards and the updated goal of operations of
compounded annual revenue growth of 1% - 2% or higher for each
business with substantial incentive differentiation between
businesses compounding annual revenue between 0%-1%, 1%-2%, 2%-3%
and over 3% annually.
- Reorganized and focused cemetery sales and operating leadership
attention on our ten largest cemeteries to drive and sustain higher
preneed property sales.
- Reorganization of the reporting structure of both field
operations and Houston Support Center which is estimated to reduce
annual overhead and incentive stock compensation expense by $5 - $6
million equal to 19ȼ - 23ȼ per share.
- We will take one time charges to earnings in the fourth quarter
related to our organizational restructuring, losses to a small
group of businesses that don’t fit the size and quality profile of
our existing portfolio and will be divested, cancellation of our
performance awards incentive program, etc. We want the future
earnings of Carriage beginning on January 1, 2019 not only to be
dramatically higher but also of unquestionable quality without
frequent adjustments.
- We will be flexible on allocation of our capital, principally
in the form of increasing Free Cash Flow, as our goal remains
maximization of intrinsic value per share over time while
maintaining a lower leverage profile than over the last several
years.
- Toward the end of 2019 after our cash earning power as defined
by Consolidated EBITDA Margin has been restored and our operating
and financial performance trends are again supportive of the
Carriage Good to Great Journey, I will recruit a
President and COO who would also be a later candidate for
Carriage’s CEO Succession Plan.
We believe that the above actions will restore
strong GAAP Earnings and Free Cash Flow Value Creation Power to our
company by the end of this year and position our leadership at all
levels to better execute our three core defining models (Standards
Operating, Strategic Acquisition and 4E Leadership) that in turn
will produce high and sustainable performance to drive compounded
annual shareholder returns of at least 15% over the five year
timeframe 2019 - 2023. We are fully aware that we have lost
credibility with many of you based on weak operating leadership
execution over the last two years and especially this year, so we
are committed to restoring our high performance and value creation
trends reputation by what we produce and sustain in results and not
by what we say.
We will be able to measure the success of our
high performance and value creation trends restoration program over
the next few months, and while we are highly confident of success
within a “Roughly Right Range” of outcomes, nevertheless we are
delaying publication of another Rolling Four Quarter Outlook until
early 2019 at which time we plan an early 2018 full year earnings
release in which we will also communicate our performance outlook
for the full year 2019.
I would like to especially thank members of our
Standards Council and Board of Directors as well as our wonderful
funeral and cemetery business leaders and all those in operating
and support leadership roles for their renewed and unwavering
commitment to achieve our Mission/Vision of
Being The Best while always being 100% aligned
with our Five Guiding Principles,” concluded Mr.
Payne.
ACQUISITIONS
We announced the completion of three
acquisitions in the third quarter of 2018: Covenant Funeral Homes
in Fredericksburg and Stafford Virginia, Presley Funeral Home in
Cookeville, Tennessee and L. Harold Poole
Funeral Service and Crematory in
Knightdale, North Carolina. These are all businesses
with stellar reputations that provide high value personal services
in high growth markets. We are excited about having these top
independent businesses join our Carriage family.
TRUST FUND PERFORMANCE
Shown below are consolidated performance metrics
for the combined trust fund portfolios (preneed funeral, preneed
cemetery and cemetery perpetual care) at key dates.
Investment Performance |
|
|
Investment Performance(1) |
|
Index Performance |
|
|
Discretionary |
Total Trust |
|
S&P 500 StockIndex |
High YieldIndex |
70/30 indexBenchmark(2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
9 months ended 09/30/2018 |
|
(0.5%) |
(0.5%) |
|
10.5% |
2.6% |
4.9% |
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
September 30, 2018 (in thousands) |
|
|
|
|
DiscretionaryTrust Funds |
|
TotalTrust Funds |
Asset Class |
|
|
|
|
|
MV |
|
% |
|
|
|
MV |
|
% |
Equities |
|
|
|
$ |
77,835 |
40 |
% |
|
$ |
80,870 |
35 |
% |
Fixed Income |
|
|
|
95,349 |
49 |
% |
|
106,287 |
46 |
% |
Cash |
|
|
|
19,459 |
10 |
% |
|
41,590 |
18 |
% |
Other/Insurance |
|
|
|
1,946 |
1 |
% |
|
2,311 |
1 |
% |
Total Portfolios |
|
|
|
$ |
194,589 |
100 |
% |
|
$ |
231,058 |
100 |
% |
The total return for our Discretionary Preneed
Funeral and Cemetery Trusts through the first nine months was
(0.5%). Our fixed income portfolio performance continued to track
the High Yield index for the year while our equity portfolio has
underperformed the broader market through the first three quarters.
Currently, cash and cash equivalents account for 20% of the assets
in our discretionary portfolio.
ADJUSTED FREE CASH FLOW
We produced Adjusted Free Cash Flow from
operations for the three and nine months ended September 30, 2018
of $10.0 million and $32.5 million, respectively, compared to
Adjusted Free Cash Flow from operations of $9.4 million and $24.9
million for the corresponding periods in 2017. A reconciliation of
Cash Flow Provided by Operations to Adjusted Free Cash Flow for the
three and nine months ended September 30, 2017 and 2018 is as
follows (in thousands):
|
Three Months EndedSeptember
30, |
|
Nine Months EndedSeptember
30, |
|
2017 |
|
|
2018 |
|
|
2017 |
|
|
2018 |
|
Cash flow provided by operations |
$ |
10,579 |
|
|
$ |
12,436 |
|
|
$ |
30,825 |
|
|
$ |
38,717 |
|
Cash used for maintenance capital expenditures |
(1,620 |
) |
|
(2,482 |
) |
|
(6,322 |
) |
|
(6,196 |
) |
Free Cash Flow |
$ |
8,959 |
|
|
$ |
9,954 |
|
|
$ |
24,503 |
|
|
$ |
32,521 |
|
|
|
|
|
|
|
|
|
Plus: Incremental Special Items: |
|
|
|
|
|
|
|
Natural Disaster Costs |
|
398 |
|
|
— |
|
|
|
398 |
|
|
— |
|
Adjusted Free Cash Flow |
$ |
9,357 |
|
|
$ |
9,954 |
|
|
$ |
24,901 |
|
|
$ |
32,521 |
|
CONFERENCE CALL AND INVESTOR RELATIONS
CONTACT
Carriage Services has scheduled a conference
call for tomorrow, November 1, 2018 at 9:30 a.m. central time. To
participate in the call, please dial 866-516-3867 (ID-1078097) and
ask for the Carriage Services conference call. A replay of the
conference call will be available through November 6, 2018 and may
be accessed by dialing 855-859-2056 (ID-1078097). 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 September
30, |
|
Nine Months Ended
September 30, |
|
2017 |
2018 |
% Change |
|
2017 |
2018 |
% Change |
|
|
|
|
|
|
|
|
Same Store Contracts |
|
|
|
|
|
|
|
Atneed Contracts |
5,816 |
|
5,681 |
|
(2.3 |
%) |
|
18,359 |
|
18,309 |
|
(0.3 |
%) |
Preneed Contracts |
1,404 |
|
1,287 |
|
(8.3 |
%) |
|
4,350 |
|
4,271 |
|
(1.8 |
%) |
Total Same Store Funeral Contracts |
7,220 |
|
6,968 |
|
(3.5 |
%) |
|
22,709 |
|
22,580 |
|
(0.6 |
%) |
Acquisition Contracts |
|
|
|
|
|
|
|
Atneed Contracts |
878 |
|
1,507 |
|
71.6 |
% |
|
2,839 |
|
4,296 |
|
51.3 |
% |
Preneed Contracts |
137 |
|
197 |
|
43.8 |
% |
|
500 |
|
561 |
|
12.2 |
% |
Total Acquisition Funeral Contracts |
1,015 |
|
1,704 |
|
67.9 |
% |
|
3,339 |
|
4,857 |
|
45.5 |
% |
Total Funeral Contracts |
8,235 |
|
8,672 |
|
5.3 |
% |
|
26,048 |
|
27,437 |
|
5.3 |
% |
|
|
|
|
|
|
|
|
Funeral Operating Revenue |
|
|
|
|
|
|
|
Same Store Revenue |
$ |
38,787 |
|
$ |
37,456 |
|
(3.4 |
%) |
|
$ |
121,914 |
|
$ |
120,449 |
|
(1.2 |
%) |
Acquisition Revenue |
6,467 |
|
10,300 |
|
59.3 |
% |
|
21,687 |
|
29,908 |
|
37.9 |
% |
Total Funeral Operating Revenue |
$ |
45,254 |
|
$ |
47,756 |
|
5.5 |
% |
|
$ |
143,601 |
|
$ |
150,357 |
|
4.7 |
% |
|
|
|
|
|
|
|
|
Cemetery Operating Revenue |
|
|
|
|
|
|
|
Same Store Revenue |
$ |
9,688 |
|
$ |
10,439 |
|
7.8 |
% |
|
$ |
29,820 |
|
$ |
31,698 |
|
6.3 |
% |
Acquisition Revenue |
761 |
|
652 |
|
(14.3 |
%) |
|
2,370 |
|
2,530 |
|
6.8 |
% |
Total Cemetery Operating Revenue |
$ |
10,449 |
|
$ |
11,091 |
|
6.1 |
% |
|
$ |
32,190 |
|
$ |
34,228 |
|
6.3 |
% |
|
|
|
|
|
|
|
|
Financial Revenue |
|
|
|
|
|
|
|
Preneed Funeral Commission Income |
$ |
315 |
|
$ |
360 |
|
14.3 |
% |
|
$ |
951 |
|
$ |
974 |
|
2.4 |
% |
Preneed Funeral Trust Earnings |
1,616 |
|
1,727 |
|
6.9 |
% |
|
5,286 |
|
5,638 |
|
6.7 |
% |
Cemetery Trust Earnings |
1,556 |
|
1,392 |
|
(10.5 |
%) |
|
4,815 |
|
4,327 |
|
(10.1 |
%) |
Preneed Cemetery Finance Charges |
382 |
|
436 |
|
14.1 |
% |
|
1,167 |
|
1,239 |
|
6.2 |
% |
Total Financial Revenue |
$ |
3,869 |
|
$ |
3,915 |
|
1.2 |
% |
|
$ |
12,219 |
|
$ |
12,178 |
|
(0.3 |
%) |
|
|
|
|
|
|
|
|
Total Divested Revenue |
$ |
1,482 |
|
$ |
1,479 |
|
|
|
$ |
5,053 |
|
$ |
4,712 |
|
|
|
|
|
|
|
|
|
|
Total Revenue |
$ |
61,054 |
|
$ |
64,241 |
|
5.2 |
% |
|
$ |
193,063 |
|
$ |
201,475 |
|
4.4 |
% |
|
|
|
|
|
|
|
|
Field EBITDA |
|
|
|
|
|
|
|
Same Store Funeral EBITDA |
$ |
14,196 |
|
$ |
12,735 |
|
(10.3 |
%) |
|
$ |
47,172 |
|
$ |
44,462 |
|
(5.7 |
%) |
Same Store Funeral EBITDA Margin |
36.6 |
% |
34.0 |
% |
(260 bp) |
|
38.7 |
% |
36.9 |
% |
(180 bp) |
Acquisition Funeral EBITDA |
2,093 |
|
3,588 |
|
71.4 |
% |
|
8,242 |
|
10,884 |
|
32.1 |
% |
Acquisition Funeral EBITDA Margin |
32.4 |
% |
34.8 |
% |
240 bp |
|
38.0 |
% |
36.4 |
% |
(160 bp) |
Total Funeral EBITDA |
$ |
16,289 |
|
$ |
16,323 |
|
0.2 |
% |
|
$ |
55,414 |
|
$ |
55,346 |
|
(0.1 |
%) |
Total Funeral EBITDA Margin |
36.0 |
% |
34.2 |
% |
(180 bp) |
|
38.6 |
% |
36.8 |
% |
(180 bp) |
|
|
|
|
|
|
|
|
Same Store Cemetery EBITDA |
$ |
2,669 |
|
$ |
2,891 |
|
8.3 |
% |
|
$ |
8,991 |
|
$ |
9,901 |
|
10.1 |
% |
Same Store Cemetery EBITDA Margin |
27.5 |
% |
27.7 |
% |
20 bp |
|
30.2 |
% |
31.2 |
% |
100 bp |
Acquisition Cemetery EBITDA |
200 |
|
116 |
|
(42.0 |
%) |
|
743 |
|
852 |
|
14.7 |
% |
Acquisition Cemetery EBITDA Margin |
26.3 |
% |
17.8 |
% |
(850 bp) |
|
31.4 |
% |
33.7 |
% |
230 bp |
Total Cemetery EBITDA |
$ |
2,869 |
|
$ |
3,007 |
|
4.8 |
% |
|
$ |
9,734 |
|
$ |
10,753 |
|
10.5 |
% |
Total Cemetery EBITDA Margin |
27.5 |
% |
27.1 |
% |
(40 bp) |
|
30.2 |
% |
31.4 |
% |
120 bp |
|
|
|
|
|
|
|
|
Funeral Financial EBITDA |
$ |
1,703 |
|
$ |
1,786 |
|
4.9 |
% |
|
$ |
5,531 |
|
$ |
5,811 |
|
5.1 |
% |
Cemetery Financial EBITDA |
1,828 |
|
1,716 |
|
(6.1 |
%) |
|
5,700 |
|
5,194 |
|
(8.9 |
%) |
Total Financial EBITDA |
$ |
3,531 |
|
$ |
3,502 |
|
(0.8 |
%) |
|
$ |
11,231 |
|
$ |
11,005 |
|
(2.0 |
%) |
Total Financial EBITDA Margin |
91.3 |
% |
89.5 |
% |
(180 bp) |
|
91.9 |
% |
90.4 |
% |
(150 bp) |
|
|
|
|
|
|
|
|
Total Divested EBITDA |
$ |
329 |
|
$ |
407 |
|
|
|
$ |
1,424 |
|
$ |
1,373 |
|
|
Total Divested EBITDA Margin |
22.2 |
% |
27.5 |
% |
|
|
28.2 |
% |
29.1 |
% |
|
|
|
|
|
|
|
|
|
Total Field EBITDA |
$ |
23,018 |
|
$ |
23,239 |
|
1.0 |
% |
|
$ |
77,803 |
|
$ |
78,477 |
|
0.9 |
% |
Total Field EBITDA Margin |
37.7 |
% |
36.2 |
% |
(150 bp) |
|
40.3 |
% |
39.0 |
% |
(130 bp) |
|
|
|
|
|
|
|
|
OPERATING AND FINANCIAL
TREND REPORT |
(IN THOUSANDS - EXCEPT
PER SHARE AMOUNTS) |
|
|
|
|
|
|
|
|
|
Three Months Ended September
30, |
|
Nine Months Ended
September 30, |
|
2017 |
2018 |
% Change |
|
2017 |
2018 |
% Change |
|
|
|
|
|
|
|
|
Overhead |
|
|
|
|
|
|
|
Total Variable Overhead |
$ |
3,057 |
|
$ |
1,410 |
|
(53.9 |
%) |
|
$ |
7,765 |
|
$ |
6,666 |
|
(14.2 |
%) |
Total Regional Fixed Overhead |
995 |
|
903 |
|
(9.2 |
%) |
|
2,888 |
|
3,043 |
|
5.4 |
% |
Total Corporate Fixed Overhead |
5,234 |
|
5,230 |
|
(0.1 |
%) |
|
16,347 |
|
15,371 |
|
(6.0 |
%) |
Total Overhead |
$ |
9,286 |
|
$ |
7,543 |
|
(18.8 |
%) |
|
$ |
27,000 |
|
$ |
25,080 |
|
(7.1 |
%) |
Overhead as a percentage of Revenue |
15.2 |
% |
11.7 |
% |
(350 bp) |
|
14.0 |
% |
12.4 |
% |
(160 bp) |
|
|
|
|
|
|
|
|
Consolidated EBITDA |
$ |
13,732 |
|
$ |
15,696 |
|
14.3 |
% |
|
$ |
50,803 |
|
$ |
53,397 |
|
5.1 |
% |
Consolidated EBITDA Margin |
22.5 |
% |
24.4 |
% |
190 bp |
|
26.3 |
% |
26.5 |
% |
20 bp |
|
|
|
|
|
|
|
|
Other Expenses and Interest |
|
|
|
|
|
|
|
Depreciation & Amortization |
$ |
4,002 |
|
$ |
4,516 |
|
12.8 |
% |
|
$ |
11,874 |
|
$ |
13,100 |
|
10.3 |
% |
Non-Cash Stock Compensation |
785 |
|
915 |
|
16.6 |
% |
|
2,394 |
|
2,924 |
|
22.1 |
% |
Interest Expense |
3,282 |
|
6,285 |
|
91.5 |
% |
|
9,517 |
|
14,763 |
|
55.1 |
% |
Accretion of Discount on Convertible Subordinated
Notes |
1,097 |
|
246 |
|
(77.6 |
%) |
|
3,200 |
|
1,961 |
|
(38.7 |
%) |
Net Loss on Early Extinguishment of Debt |
— |
|
— |
|
|
|
— |
|
936 |
|
|
Other, Net |
6 |
|
347 |
|
|
|
3 |
|
345 |
|
|
Pre-Tax Income |
$ |
4,560 |
|
$ |
3,387 |
|
(25.7 |
%) |
|
$ |
23,815 |
|
$ |
19,368 |
|
(18.7 |
%) |
Provision for Income Taxes |
1,824 |
|
1,028 |
|
|
|
9,526 |
|
5,423 |
|
|
Tax Adjustment Related to Certain Discrete Items |
(302 |
) |
159 |
|
|
|
(243 |
) |
(358 |
) |
|
Total Provision for Income Taxes |
1,522 |
|
1,187 |
|
|
|
9,283 |
|
5,065 |
|
|
GAAP Net Income |
$ |
3,038 |
|
$ |
2,200 |
|
(27.6 |
%) |
|
$ |
14,532 |
|
$ |
14,303 |
|
(1.6 |
%) |
|
|
|
|
|
|
|
|
Special Items, Net of Tax, except for ** |
|
|
|
|
|
|
|
Accretion of Discount on Convertible Subordinated
Notes ** |
$ |
1,097 |
|
$ |
246 |
|
|
|
$ |
3,200 |
|
$ |
1,961 |
|
|
Net Loss on Early Extinguishment of Debt |
— |
|
— |
|
|
|
— |
|
740 |
|
|
Loss on Expired Management Agreement |
— |
|
277 |
|
|
|
— |
|
277 |
|
|
Natural Disaster Costs |
259 |
|
— |
|
|
|
259 |
|
— |
|
|
Adjusted Net Income |
$ |
4,394 |
|
$ |
2,723 |
|
(38.0 |
%) |
|
$ |
17,991 |
|
$ |
17,281 |
|
(3.9 |
%) |
Adjusted Net Profit Margin |
7.2 |
% |
4.2 |
% |
(300 bp) |
|
9.3 |
% |
8.6 |
% |
(70 bp) |
|
|
|
|
|
|
|
|
Adjusted Basic Earnings Per Share |
$ |
0.26 |
|
$ |
0.14 |
|
(46.2 |
%) |
|
$ |
1.08 |
|
$ |
0.97 |
|
(10.2 |
%) |
Adjusted Diluted Earnings Per Share |
$ |
0.25 |
|
$ |
0.14 |
|
(44.0 |
%) |
|
$ |
1.00 |
|
$ |
0.94 |
|
(6.0 |
%) |
|
|
|
|
|
|
|
|
GAAP Basic Earnings Per Share |
$ |
0.18 |
|
$ |
0.11 |
|
(38.9 |
%) |
|
$ |
0.87 |
|
$ |
0.80 |
|
(8.0 |
%) |
GAAP Diluted Earnings Per Share |
$ |
0.17 |
|
$ |
0.11 |
|
(35.3 |
%) |
|
$ |
0.81 |
|
$ |
0.78 |
|
(3.7 |
%) |
|
|
|
|
|
|
|
|
Weighted Average Basic Shares Outstanding |
16,476 |
|
19,060 |
|
|
|
16,575 |
|
17,701 |
|
|
Weighted Average Diluted Shares Outstanding |
17,598 |
|
19,161 |
|
|
|
17,887 |
|
18,273 |
|
|
|
|
|
|
|
|
|
|
Reconciliation to Adjusted Consolidated
EBITDA |
|
|
|
|
|
|
|
Consolidated EBITDA |
$ |
13,732 |
|
$ |
15,696 |
|
14.3 |
% |
|
$ |
50,803 |
|
$ |
53,397 |
|
5.1 |
% |
Natural Disaster Costs |
398 |
|
— |
|
|
|
398 |
|
— |
|
|
Adjusted Consolidated EBITDA |
$ |
14,130 |
|
$ |
15,696 |
|
11.1 |
% |
|
$ |
51,201 |
|
$ |
53,397 |
|
4.3 |
% |
Adjusted Consolidated EBITDA Margin |
23.1 |
% |
24.4 |
% |
130 bp |
|
26.5 |
% |
26.5 |
% |
0 bp |
|
|
|
|
|
|
|
|
CARRIAGE SERVICES,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(in thousands)
|
|
|
(unaudited) |
|
December 31,
2017 |
|
September 30,
2018 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
952 |
|
|
$ |
9,474 |
|
Accounts receivable, net |
19,655 |
|
|
17,067 |
|
Inventories |
6,519 |
|
|
6,938 |
|
Prepaid expenses |
2,028 |
|
|
1,778 |
|
Other current assets |
986 |
|
|
2,798 |
|
Total current assets |
30,140 |
|
|
38,055 |
|
Preneed cemetery trust investments |
73,853 |
|
|
69,953 |
|
Preneed funeral trust investments |
90,682 |
|
|
90,051 |
|
Preneed receivables, net |
31,644 |
|
|
18,510 |
|
Receivables from preneed trusts |
15,287 |
|
|
16,815 |
|
Property, plant and equipment, net |
247,294 |
|
|
261,565 |
|
Cemetery property, net |
76,331 |
|
|
74,887 |
|
Goodwill |
287,956 |
|
|
304,733 |
|
Intangible and other non-current assets |
18,117 |
|
|
25,338 |
|
Cemetery perpetual care trust investments |
50,229 |
|
|
48,813 |
|
Total assets |
$ |
921,533 |
|
|
$ |
948,720 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Current portion of long-term debt and capital lease
obligations |
$ |
17,251 |
|
|
$ |
2,445 |
|
Accounts payable |
6,547 |
|
|
5,810 |
|
Other liabilities |
1,361 |
|
|
898 |
|
Accrued liabilities |
17,559 |
|
|
21,665 |
|
Total current liabilities |
42,718 |
|
|
30,818 |
|
Long-term debt, net of current portion |
212,154 |
|
|
7,648 |
|
Convertible subordinated notes due 2021 |
124,441 |
|
|
25,697 |
|
Senior notes due 2026 |
— |
|
|
318,956 |
|
Obligations under capital leases, net of current portion |
6,361 |
|
|
6,211 |
|
Deferred preneed cemetery revenue |
54,690 |
|
|
46,156 |
|
Deferred preneed funeral revenue |
34,585 |
|
|
28,153 |
|
Deferred tax liability |
31,159 |
|
|
31,694 |
|
Other long-term liabilities |
3,378 |
|
|
3,155 |
|
Deferred preneed cemetery receipts held in trust |
73,853 |
|
|
69,953 |
|
Deferred preneed funeral receipts held in trust |
90,682 |
|
|
90,051 |
|
Care trusts’ corpus |
49,856 |
|
|
48,396 |
|
Total liabilities |
723,877 |
|
|
706,888 |
|
Commitments and contingencies: |
|
|
|
Stockholders’ equity: |
|
|
|
Common stock |
226 |
|
|
257 |
|
Additional paid-in capital |
216,158 |
|
|
243,869 |
|
Retained earnings |
57,904 |
|
|
74,338 |
|
Treasury stock |
(76,632 |
) |
|
(76,632 |
) |
Total stockholders’ equity |
197,656 |
|
|
241,832 |
|
Total liabilities and
stockholders’ equity |
$ |
921,533 |
|
|
$ |
948,720 |
|
|
CARRIAGE SERVICES,
INC.CONSOLIDATED STATEMENTS OF
OPERATIONS(unaudited and in thousands, except per
share data)
|
Three Months EndedSeptember
30, |
|
Nine Months
EndedSeptember 30, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
Funeral |
$ |
47,329 |
|
|
$ |
49,843 |
|
|
$ |
150,279 |
|
|
$ |
156,969 |
|
Cemetery |
13,725 |
|
|
14,398 |
|
|
42,784 |
|
|
44,506 |
|
|
61,054 |
|
|
64,241 |
|
|
193,063 |
|
|
201,475 |
|
Field costs and expenses: |
|
|
|
|
|
|
|
Funeral |
29,267 |
|
|
31,734 |
|
|
89,118 |
|
|
95,815 |
|
Cemetery |
8,769 |
|
|
9,268 |
|
|
26,142 |
|
|
27,183 |
|
Depreciation and amortization |
3,601 |
|
|
4,011 |
|
|
10,719 |
|
|
11,688 |
|
Regional and unallocated funeral and cemetery
costs |
3,937 |
|
|
2,114 |
|
|
9,845 |
|
|
8,662 |
|
|
45,574 |
|
|
47,127 |
|
|
135,824 |
|
|
143,348 |
|
Gross profit |
15,480 |
|
|
17,114 |
|
|
57,239 |
|
|
58,127 |
|
|
|
|
|
|
|
|
|
Corporate costs and expenses: |
|
|
|
|
|
|
|
General, administrative and other |
6,134 |
|
|
6,344 |
|
|
19,549 |
|
|
19,342 |
|
Home office depreciation and amortization |
401 |
|
|
505 |
|
|
1,155 |
|
|
1,412 |
|
|
6,535 |
|
|
6,849 |
|
|
20,704 |
|
|
20,754 |
|
Operating income |
8,945 |
|
|
10,265 |
|
|
36,535 |
|
|
37,373 |
|
Interest expense |
(3,282 |
) |
|
(6,285 |
) |
|
(9,517 |
) |
|
(14,763 |
) |
Accretion of discount on convertible subordinated notes |
(1,097 |
) |
|
(246 |
) |
|
(3,200 |
) |
|
(1,961 |
) |
Net loss on early extinguishment of debt |
— |
|
|
— |
|
|
— |
|
|
(936 |
) |
Other, net |
(6 |
) |
|
(347 |
) |
|
(3 |
) |
|
(345 |
) |
Income before income taxes |
4,560 |
|
|
3,387 |
|
|
23,815 |
|
|
19,368 |
|
Provision for income taxes |
(1,824 |
) |
|
(1,028 |
) |
|
(9,526 |
) |
|
(5,423 |
) |
Tax adjustment related to certain discrete items |
302 |
|
|
(159 |
) |
|
243 |
|
|
358 |
|
Net provision for income taxes |
(1,522 |
) |
|
(1,187 |
) |
|
(9,283 |
) |
|
(5,065 |
) |
Net income |
$ |
3,038 |
|
|
$ |
2,200 |
|
|
$ |
14,532 |
|
|
$ |
14,303 |
|
|
|
|
|
|
|
|
|
Basic earnings per common share: |
$ |
0.18 |
|
|
$ |
0.11 |
|
|
$ |
0.87 |
|
|
$ |
0.80 |
|
Diluted earnings per common share: |
$ |
0.17 |
|
|
$ |
0.11 |
|
|
$ |
0.81 |
|
|
$ |
0.78 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share |
$ |
0.050 |
|
|
$ |
0.075 |
|
|
$ |
0.150 |
|
|
$ |
0.225 |
|
|
|
|
|
|
|
|
|
Weighted average number of common and common equivalent shares
outstanding: |
|
|
|
|
|
|
|
Basic |
16,476 |
|
|
19,060 |
|
|
16,575 |
|
|
17,701 |
|
Diluted |
17,598 |
|
|
19,161 |
|
|
17,887 |
|
|
18,273 |
|
|
CARRIAGE SERVICES, INC.CONSOLIDATED
STATEMENTS OF CASH FLOWS(unaudited and in
thousands)
|
Nine Months EndedSeptember
30, |
|
2017 |
|
2018 |
Cash flows from operating activities: |
|
|
|
Net income |
$ |
14,532 |
|
|
$ |
14,303 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
11,874 |
|
|
13,100 |
|
Provision for losses on accounts receivable |
1,737 |
|
|
1,511 |
|
Stock-based compensation expense |
2,394 |
|
|
2,924 |
|
Deferred income tax expense |
1,215 |
|
|
3,547 |
|
Amortization of deferred financing costs |
614 |
|
|
420 |
|
Amortization of capitalized commissions on preneed
contracts |
3,200 |
|
|
1,961 |
|
Accretion of discount on convertible subordinated
notes |
— |
|
|
154 |
|
Amortization of debt discount on senior notes |
— |
|
|
449 |
|
Net loss on early extinguishment of debt |
— |
|
|
936 |
|
Net loss on sale of businesses and disposal of other
assets |
341 |
|
|
408 |
|
Changes in operating assets and liabilities that provided
(required) cash: |
|
|
|
Accounts and preneed receivables |
(2,594 |
) |
|
(3,010 |
) |
Inventories and other current assets |
2,356 |
|
|
(1,911 |
) |
Intangible and other non-current assets |
340 |
|
|
(345 |
) |
Preneed funeral and cemetery trust investments |
(5,114 |
) |
|
4,419 |
|
Accounts payable |
(3,510 |
) |
|
(735 |
) |
Accrued and other liabilities |
(2,790 |
) |
|
3,761 |
|
Deferred preneed funeral and cemetery revenue |
2,098 |
|
|
6,292 |
|
Deferred preneed funeral and cemetery receipts held
in trust |
4,132 |
|
|
(9,467 |
) |
Net cash provided by operating activities |
30,825 |
|
|
38,717 |
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
Acquisition and land for new construction |
(723 |
) |
|
(37,970 |
) |
Net proceeds from the sale of other assets |
405 |
|
|
— |
|
Capital expenditures |
(13,129 |
) |
|
(9,037 |
) |
Net cash used in investing activities |
(13,447 |
) |
|
(47,007 |
) |
|
|
|
|
Cash flows from financing activities: |
|
|
|
Payments against the term loan |
(8,438 |
) |
|
(127,500 |
) |
Borrowings from the revolving credit facility |
75,100 |
|
|
96,000 |
|
Payments against the revolving credit facility |
(67,300 |
) |
|
(188,000 |
) |
Payment of debt issuance costs related to long-term
debt |
— |
|
|
(1,551 |
) |
Redemption of the 2.75% convertible subordinated
notes |
— |
|
|
(75,229 |
) |
Payment of transaction costs related to the
redemption of the 2.75% convertible subordinated notes |
— |
|
|
(845 |
) |
Proceeds from the issuance of the 6.625% senior
notes |
— |
|
|
320,125 |
|
Payments of debt issuance costs related to the
6.625% senior notes |
— |
|
|
(1,367 |
) |
Payments on other long-term debt and obligations
under capital leases |
(1,084 |
) |
|
(1,031 |
) |
Payments on contingent consideration recorded at
acquisition date |
(101 |
) |
|
(138 |
) |
Proceeds from the exercise of stock options and
employee stock purchase plan contributions |
1,296 |
|
|
1,075 |
|
Purchase of treasury stock |
(16,366 |
) |
|
— |
|
Taxes paid on restricted stock vestings and
exercises of non-qualified options |
(509 |
) |
|
(651 |
) |
Dividends on common stock |
(2,503 |
) |
|
(4,076 |
) |
Net cash provided by (used in) financing
activities |
(19,905 |
) |
|
16,812 |
|
|
|
|
|
Net increase (decrease) in cash and cash
equivalents |
(2,527 |
) |
|
8,522 |
|
Cash and cash equivalents at beginning of period |
3,286 |
|
|
952 |
|
Cash and cash equivalents at end of period |
$ |
759 |
|
|
$ |
9,474 |
|
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”, “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 typically taxed at the federal
statutory rate, except for the accretion of the discount on
Convertible Subordinated 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 one funeral home
business sold during 2017 and three cemetery businesses that we
ceased to operate on September 30, 2018, as a result of an expired
management agreement.
- Divested EBITDA is defined as Divested Revenue, less field
level and financial expenses related to the funeral home business
sold and the three cemetery businesses related to the expired
management agreement 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 excludes 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 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 and nine months ended September 30, 2017
and 2018 (in thousands): |
|
|
Three Months EndedSeptember 30, |
|
Nine Months EndedSeptember 30, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
Net Income |
$ |
3,038 |
|
|
$ |
2,200 |
|
|
$ |
14,532 |
|
|
$ |
14,303 |
|
Special Items, Net of
Tax, except for ** |
|
|
|
|
|
|
|
Accretion
of Discount on Convertible Subordinated Notes ** |
1,097 |
|
|
246 |
|
|
3,200 |
|
|
1,961 |
|
Net Loss
on Early Extinguishment of Debt |
— |
|
|
— |
|
|
— |
|
|
740 |
|
Loss on
Expired Management Agreement |
— |
|
|
277 |
|
|
— |
|
|
277 |
|
Natural
Disaster Costs |
259 |
|
|
— |
|
|
259 |
|
|
— |
|
Adjusted Net
Income |
$ |
4,394 |
|
|
$ |
2,723 |
|
|
$ |
17,991 |
|
|
$ |
17,281 |
|
|
|
|
|
|
|
|
|
** Special items are typically taxed at the
federal statutory rate, except for the Accretion of the Discount on
Convertible Subordinated Notes, as this is a non-tax deductible
item. |
|
|
|
Reconciliation of Net Income to Consolidated
EBITDA and Adjusted Consolidated EBITDA for the three and nine
months ended September 30, 2017 and 2018 (in
thousands): |
|
|
Three Months EndedSeptember 30, |
|
Nine Months EndedSeptember 30, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
Net Income |
$ |
3,038 |
|
|
$ |
2,200 |
|
|
$ |
14,532 |
|
|
$ |
14,303 |
|
Net Tax Provision |
1,522 |
|
|
1,187 |
|
|
9,283 |
|
|
5,065 |
|
Pre-Tax Income |
4,560 |
|
|
3,387 |
|
|
23,815 |
|
|
19,368 |
|
Interest Expense |
3,282 |
|
|
6,285 |
|
|
9,517 |
|
|
14,763 |
|
Accretion of Discount
on Convertible Subordinated Notes |
1,097 |
|
|
246 |
|
|
3,200 |
|
|
1,961 |
|
Net Loss on Early
Extinguishment of Debt |
— |
|
|
— |
|
|
— |
|
|
936 |
|
Non-Cash Stock
Compensation |
785 |
|
|
915 |
|
|
2,394 |
|
|
2,924 |
|
Depreciation &
Amortization |
4,002 |
|
|
4,516 |
|
|
11,874 |
|
|
13,100 |
|
Other, Net |
6 |
|
|
347 |
|
|
3 |
|
|
345 |
|
Consolidated
EBITDA |
$ |
13,732 |
|
|
$ |
15,696 |
|
|
$ |
50,803 |
|
|
$ |
53,397 |
|
Adjusted For: |
|
|
|
|
|
|
|
Natural
Disaster Costs |
398 |
|
|
— |
|
|
398 |
|
|
— |
|
Adjusted
Consolidated EBITDA |
$ |
14,130 |
|
|
$ |
15,696 |
|
|
$ |
51,201 |
|
|
$ |
53,397 |
|
|
|
|
|
|
|
|
|
Revenue |
$ |
61,054 |
|
|
$ |
64,241 |
|
|
$ |
193,063 |
|
|
$ |
201,475 |
|
|
|
|
|
|
|
|
|
Adjusted Consolidated
EBITDA Margin |
23.1 |
% |
|
24.4 |
% |
|
26.5 |
% |
|
26.5 |
% |
|
|
Reconciliation of Funeral and Cemetery Gross
Profit to Field EBITDA for the three and nine months ended
September 30, 2017 and 2018 (in thousands): |
|
|
Three Months EndedSeptember 30, |
|
Nine Months EndedSeptember 30, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
Funeral Gross Profit
(GAAP) |
$ |
12,570 |
|
|
$ |
13,644 |
|
|
$ |
45,951 |
|
|
$ |
45,962 |
|
Depreciation &
Amortization |
2,431 |
|
|
2,732 |
|
|
7,329 |
|
|
7,936 |
|
Regional &
Unallocated Costs |
3,061 |
|
|
1,733 |
|
|
7,881 |
|
|
7,256 |
|
Funeral Financial
EBITDA |
(1,703 |
) |
|
(1,786 |
) |
|
(5,531 |
) |
|
(5,811 |
) |
Funeral Divested
EBITDA |
(70 |
) |
|
— |
|
|
(216 |
) |
|
3 |
|
Funeral Field
EBITDA |
$ |
16,289 |
|
|
$ |
16,323 |
|
|
$ |
55,414 |
|
|
$ |
55,346 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months EndedSeptember 30, |
|
Nine Months EndedSeptember 30, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
Cemetery Gross Profit
(GAAP) |
$ |
2,910 |
|
|
$ |
3,470 |
|
|
$ |
11,288 |
|
|
$ |
12,165 |
|
Depreciation &
Amortization |
1,170 |
|
|
1,279 |
|
|
3,390 |
|
|
3,752 |
|
Regional &
Unallocated Costs |
876 |
|
|
381 |
|
|
1,964 |
|
|
1,406 |
|
Cemetery Financial
EBITDA |
(1,828 |
) |
|
(1,716 |
) |
|
(5,700 |
) |
|
(5,194 |
) |
Cemetery Divested
EBITDA |
(259 |
) |
|
(407 |
) |
|
(1,208 |
) |
|
(1,376 |
) |
Cemetery Field
EBITDA |
$ |
2,869 |
|
|
$ |
3,007 |
|
|
$ |
9,734 |
|
|
$ |
10,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of Total Field EBITDA for the three and nine
months ended September 30, 2017 and 2018 (in
thousands): |
|
|
|
|
Three Months EndedSeptember 30, |
|
Nine Months EndedSeptember 30, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
Funeral Field
EBITDA |
$ |
16,289 |
|
|
$ |
16,323 |
|
|
$ |
55,414 |
|
|
$ |
55,346 |
|
Cemetery Field
EBITDA |
2,869 |
|
|
3,007 |
|
|
9,734 |
|
|
10,753 |
|
Funeral Financial
EBITDA |
1,703 |
|
|
1,786 |
|
|
5,531 |
|
|
5,811 |
|
Cemetery Financial
EBITDA |
1,828 |
|
|
1,716 |
|
|
5,700 |
|
|
5,194 |
|
Funeral Divested
EBITDA |
70 |
|
|
— |
|
|
216 |
|
|
(3 |
) |
Cemetery Divested
EBITDA |
259 |
|
|
407 |
|
|
1,208 |
|
|
1,376 |
|
Total Field EBITDA |
$ |
23,018 |
|
|
$ |
23,239 |
|
|
$ |
77,803 |
|
|
$ |
78,477 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP Basic Earnings Per
Share to Adjusted Basic Earnings Per Share for the three and nine
months ended September 30, 2017 and 2018: |
|
|
Three Months EndedSeptember 30, |
|
Nine Months EndedSeptember 30, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
GAAP Basic Earnings Per
Share |
$ |
0.18 |
|
|
$ |
0.11 |
|
|
$ |
0.87 |
|
|
$ |
0.80 |
|
Special Items |
0.08 |
|
|
0.03 |
|
|
0.21 |
|
|
0.17 |
|
Adjusted Basic Earnings
Per Share |
$ |
0.26 |
|
|
$ |
0.14 |
|
|
$ |
1.08 |
|
|
$ |
0.97 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of GAAP Diluted Earnings Per
Share to Adjusted Diluted Earnings Per Share for the three and nine
months ended September 30, 2017 and 2018: |
|
|
Three Months EndedSeptember 30, |
|
Nine Months EndedSeptember 30, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
GAAP Diluted Earnings
Per Share |
$ |
0.17 |
|
|
$ |
0.11 |
|
|
$ |
0.81 |
|
|
$ |
0.78 |
|
Special Items |
0.08 |
|
|
0.03 |
|
|
0.19 |
|
|
0.16 |
|
Adjusted Diluted
Earnings Per Share |
$ |
0.25 |
|
|
$ |
0.14 |
|
|
$ |
1.00 |
|
|
$ |
0.94 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Information: |
|
|
Funeral homes and cemeteries purchased after
December 31, 2013 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
2013 Acquired Portfolio that moved from Acquired to Same Store
beginning January 1, 2018 (in thousands): |
|
|
Three Months EndedSeptember 30,
2017 |
|
Nine Months EndedSeptember 30,
2017 |
|
Revenue |
|
EBITDA |
|
Revenue |
|
EBITDA |
2013 Acquired
Portfolio |
$ |
897 |
|
|
$ |
327 |
|
|
$ |
3,041 |
|
|
$ |
1,275 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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;
- our level of indebtedness and the cash required to service our
indebtedness;
- 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.
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