Carriage Services, Inc. (NYSE: CSV) today announced results for the
year ended December 31, 2018, shown below:
Year Ended December 31, 2018 compared to Year
Months Ended December 31, 2017
- Total Revenue of $268.0 million, an increase of 3.8%;
- Net Income of $11.6 million, a decrease of 68.7%;
- GAAP Diluted Earnings Per Share of $0.63, a decrease of
69.9%;
- Total Field EBITDA of $104.3 million, a decrease of 0.2%;
- Total Field EBITDA Margin down 160 basis points to 38.9%;
- Adjusted Consolidated EBITDA of $70.2 million, an increase of
2.2%;
- Adjusted Consolidated EBITDA Margin down 40 basis points to
26.2%;
- Adjusted Net Income of $21.6 million, a decrease of 12.9%;
- Adjusted Diluted Earnings Per Share of $1.17, a decrease of
15.8%; and
- Adjusted Free Cash Flow of $42.7 million, an increase of
14.2%.
Three Months Ended December 31, 2018 compared to
Three Months Ended December 31, 2017
- Total Revenue of $66.5 million, an increase of 2.2%;
- Net Loss of $2.7 million, a decrease of 111.7%;
- GAAP Diluted Loss Per Share of $0.14, a decrease of
110.7%;
- Total Field EBITDA of $25.8 million, a decrease of 3.3%;
- Total Field EBITDA Margin down 220 basis points to 38.8%;
- Adjusted Consolidated EBITDA of $16.8 million, a decrease of
4.0%;
- Adjusted Consolidated EBITDA Margin down 170 basis points to
25.2%;
- Adjusted Net Income of $4.3 million, a decrease of 36.6%;
- Adjusted Diluted Earnings Per Share of $0.23, a decrease of
41.0%; and
- Adjusted Free Cash Flow of $10.2 million, a decrease of
18.4%.
Mel Payne, Chief Executive Officer, stated, “I will repeat my
opening paragraph in our Earnings Pre-Release dated January 16,
2019, ‘Over the course of the past five months Carriage has
embarked on a rapid and transformative High Performance and Value
Creation Trends Restoration Program. Our goal was to first identify
the root causes of the declining performance trends over the last
two years in too many of our portfolio businesses and then to
quickly make the necessary changes to restore positive performance
trends beginning in the first quarter of 2019 and continuing
thereafter for a five year time-frame ending in 2023.’
There was a lot of ‘meat on the bone’ that was covered in detail
in the January 16, 2019 Earnings Pre-Release and transcript of our
conference call on January 17, 2019 about the transformative
process that has occurred at Carriage over the last five months.
None of that will be repeated in this release.
Across Carriage our teams are focused on executing for high and
sustainable operating performance and well aware that the only way
we can regain our credibility with shareholders on our Standards
Operating Model is through substantially improved operating and
financial results. I am confident in our ability to produce those
improved results as we progress through 2019. But there is still
much leadership and execution work to be done selectively business
by business within our portfolio to restore the 320 basis points of
Field EBITDA Margin that we have lost since 2016.
Yet I remain excited and passionate about leading Carriage
during the next five year time-frame of our Good To Great
Journey that never ends. I plan to sign a new five year
employment agreement as Chairman and CEO and am committed to
leading Carriage to unparalleled shareholder value creation success
over the second five years from 2019 - 2023 compared to the first
five year Good To Great time-frame from 2012-2016,
during which our share price increased at a compounded annual rate
of 38.6% from $5.60 at 12/31/11 to $28.64 at 12/31/16 equal to a
five year total increase of 411%.
Carriage’s Board and I believe it is important to have the 2019
long term incentive program for the current leaders of the company
aligned with long term shareholder value creation. Accordingly we
have created a one-time, “Believe It or Not”
(BION) Shareholder Value Creation Incentive Program for
certain operating and support leaders and myself. Performance
shares awarded from BION will only vest after five
years if Carriage’s share price compounds at a 25% rate of return
or higher from our closing price of $15.50 on December 31, 2018,
which equates to a CSV minimum share price of $47.30 on December
31, 2023 and a five year total increase of at least 205%.
The program will also award additional performance shares at
compound rates of share price increases of 30% or higher (minimum
$57.55) and 35% or higher (minimum $69.50), five year total
increases of 271% and 348%, respectively. The BION
program is purposefully designed to provide one-time rewards for
the participants only if there is significant long term shareholder
value created, and because there is no performance award below a
25% compounded return, the current cost to EPS over the five year
time-frame is only about 2.5¢/share annually. Moreover, because
awards are paid in appreciated shares, the maximum potential
dilution to shareholders is about 2% at the 25% compound share
price growth category, 3% at the 30% compound category and 4% at
the 35% compound category. Carriage’s long term shareholders will
be the big winners of this program.
The achievement of these ‘stretch’ shareholder value creation
performance goals over the next five years will only come from
consistent execution of our three core models (Standards Operating
Model, Strategic Acquisition Model and 4E Leadership Model), much
higher returns on invested capital from our capital allocation
decisions compared to the last three years, and a return to the
high performance operating standards we have previously achieved.
We are confident that the recent reboot of our Standards Operating
Model and the changes in our operating and corporate leadership has
positioned all of our field and support leaders for a successful
New Beginning in 2019 and thereafter,” concluded
Mr. Payne.
HIGH PERFORMANCE HEROES
Carriage 2018 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 28 Carriage Being The
Best Pinnacle Of Service Award winners
and 9 managing partners who achieved 100% Of
Standards for 2018:
“Being The Best” Pinnacle of Service Award |
|
|
Jeff Seaman |
Dwayne R. Spence
Funeral Homes |
Justin Luyben |
Evans-Brown Mortuaries
& Crematory |
Jeff Hardwick |
Bryan & Hardwick
Funeral Home |
Andy Shemwell |
Maddux-Fuqua-Hinton
Funeral Homes |
James Bass |
Emerald
Coast/McLaughlin Mortuary |
*Steven Mora |
Conejo Mountain Funeral
Home Conejo Mountain Memorial Park |
Brian Binion |
Steen Funeral
Homes |
Curtis Ottinger |
Heritage Funeral
Home |
Sue Keenan |
Byron Keenan Funeral
Home & Cremation |
Alan Kerrick |
Dakan Funeral
Chapel |
Bob Prindiville |
Bright Funeral Home
& Cremation Center |
Mike Conner |
Conner-Westbury Funeral
Home |
Ashley Vella |
Deegan Funeral
Chapels |
Kim Borselli |
Fuller Funeral
Home-Cremation Service (Pine Ridge) |
Brad Shemwell |
Latham Funeral
Home |
Kyle Incardona |
Hillier Funeral
Homes |
John Fitzpatrick |
Donohue Cecere Funeral
Directors |
James Terry |
James J. Terry Funeral
Home |
Bob Pollard |
Lotz Funeral
Home-Salem |
Wayne Lovelace |
Lotz Funeral
Home-Vinton |
Todd Muller |
All Cremation
Options |
Verdo Werre |
McNary-Moore Funeral
Service |
Bill Martinez |
Stanfill Funeral
Home |
Jason Cox |
Lane Funeral Home-South
Crest |
Roger Allen |
LaGrone-Blackburn-Shaw
Funeral Homes |
Dan Simons |
Everly Community
Funeral Care |
Robert Maclary |
Kent-Forest Lawn
Funeral Home |
*Nicholas Welzenbach |
Darling Fischer Funeral
Homes |
|
|
*Qualified
for 2 Businesses |
|
|
“Being The Best” Pinnacle of Service Award & 100% of
Standards Award |
|
|
*Nicholas
Welzenbach |
Los Gatos Memorial
Park |
Ken Summers |
P.L. Fry & Son
Funeral Home |
Matthew Simpson |
Fry Memorial
Chapel |
Courtney Charvet |
North Brevard Funeral
Home |
Jeff Steadman |
Sansone Funeral
Home |
Patrick Schoen |
Jacob Schoen &
Son |
*Tim Hauck |
Harvey-Engelhardt/Fuller Metz |
|
|
*Qualified
for 2 Businesses |
|
“Being The Best” 100% of Standards Award |
|
|
*Tim Hauck |
Lee County Cremation
Services |
Cyndi Hoots |
Schmidt Funeral
Homes |
Carriage Good to Great Award
Winners
Our five year incentive award, called the
Good To Great Award, is 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 in
2012 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 third group of Good To Great Award winners for
the five year time-frame that began in 2014 and ended at year end
2018, as listed below:
Sue Keenan |
Byron Keenan Funeral
Home & Cremation |
Matt Simpson |
Fry Memorial
Chapel |
Mike Conner |
Conner-Westbury Funeral
Home |
Curtis Ottinger |
Heritage Funeral
Home |
Ben Friberg |
Heritage Funeral
Home |
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) |
|
|
|
|
|
|
|
|
1 year ended
12/31/18 |
|
(8.3%) |
(7.4%) |
|
(4.2%) |
(2.1%) |
(2.7%) |
2 years ended
12/31/18 |
|
3.6% |
4.0% |
|
16.5% |
5.3% |
8.6% |
3 years ended
12/31/18 |
|
24.0% |
23.0% |
|
30.4% |
23.3% |
25.4% |
4 years ended
12/31/18 |
|
20.2% |
19.7% |
|
32.2% |
17.8% |
22.1% |
5 years ended
12/31/18 |
|
30.3% |
29.2% |
|
50.3% |
20.7% |
29.5% |
|
|
|
|
|
|
|
|
(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, 2018 (in
thousands) |
|
|
|
|
DiscretionaryTrust Funds |
|
TotalTrust Funds |
Asset
Class |
|
|
|
MV |
% |
|
MV |
% |
Equities |
|
|
|
$ |
54,099 |
31 |
% |
|
$ |
56,977 |
27 |
% |
Fixed Income |
|
|
|
76,786 |
44 |
% |
|
88,630 |
42 |
% |
Cash |
|
|
|
41,883 |
24 |
% |
|
63,307 |
30 |
% |
Other/Insurance |
|
|
|
1,745 |
1 |
% |
|
2,110 |
1 |
% |
Total Portfolios |
|
|
|
$ |
174,513 |
100 |
% |
|
$ |
211,024 |
100 |
% |
The annual return for our Discretionary Preneed
Funeral and Cemetery Trusts was (8.3%). The majority of the decline
occurred in the fourth quarter coinciding with the downturn in the
equity and credit markets. Our discretionary trust portfolio has
primarily recovered during the first six weeks of 2019, with a
total return of approximately 10% through February
15th. Currently, cash and cash equivalents account for 15% of
the assets in our discretionary portfolio.
ADJUSTED FREE CASH FLOW
We produced Adjusted Free Cash Flow from
operations for the three months and year ended December 31, 2018 of
$10.2 million and $42.7 million, respectively, compared to Adjusted
Free Cash Flow from operations of $12.5 million and $37.4 million
for the corresponding periods in 2017. A reconciliation of Cash
Flow Provided by Operations to Adjusted Free Cash Flow for the
three months and year ended December 31, 2017 and 2018 is as
follows (in thousands):
|
For the Three MonthsEnded December
31, |
|
For the Years EndedDecember
31, |
|
|
2017 |
|
2018 |
|
2017 |
|
2018 |
Cash flow provided by
operations |
$ |
14,405 |
|
|
$ |
10,416 |
|
|
$ |
45,230 |
|
|
$ |
49,133 |
|
Cash used for
maintenance capital expenditures |
(2,100 |
) |
|
(3,070 |
) |
|
(8,422 |
) |
|
(9,266 |
) |
Free Cash Flow |
$ |
12,305 |
|
|
$ |
7,346 |
|
|
$ |
36,808 |
|
|
$ |
39,867 |
|
|
|
|
|
|
|
|
|
Plus: Incremental
Special Items: |
|
|
|
|
|
|
|
Severance and
Retirement Costs |
— |
|
|
1,435 |
|
|
— |
|
|
1,435 |
|
Litigation Reserve |
— |
|
|
1,000 |
|
|
— |
|
|
1,000 |
|
Natural Disaster
Costs |
222 |
|
|
437 |
|
|
620 |
|
|
437 |
|
Adjusted Free Cash
Flow |
$ |
12,527 |
|
|
$ |
10,218 |
|
|
$ |
37,428 |
|
|
$ |
42,739 |
|
ROLLING FOUR QUARTER
OUTLOOK
The Company published the Rolling Four Quarter
Outlook (“Outlook”) for the year ending December 31, 2019 on its
year end pre-press release dated January 15, 2019. We are
reaffirming the Outlook range and the factors associated with
the performance to achieve the Outlook. The 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, 2019 unless we have a
signed Letter of Intent with a 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 Outlook performance as we execute our Standards Operating,
Strategic Acquisition and 4E Leadership Models over time.
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 our cemetery
Standards Operating Model. Revenues, Consolidated EBITDA, Adjusted
Net Income, Adjusted Diluted Earnings Per Share and Free Cash Flow
for the four quarter period ending December 31, 2019 are expected
to improve relative to the trailing four quarter period ended
December 31, 2018 due to improved operating performance in our
existing Funeral Home and Cemetery portfolio, full year results
from funeral homes acquired in 2018 and a decrease in Overhead
expenses, offset by the loss of a cemetery management agreement
that occurred at the end of the third quarter 2018. Net Income and
Adjusted Diluted Earnings Per Share have been adjusted for
accretion on our convertible notes.
The Outlook on Adjusted Diluted Earnings Per
Share does not include any changes to our fully diluted share count
that could occur related to additional share repurchases or a stock
price increase and EPS dilution calculations related to our
convertible notes and outstanding and exercisable stock
options.
|
|
Range(in millions,
except per share amounts) |
Revenues |
|
$270 -
$274 |
Consolidated
EBITDA |
|
$77 -
$79 |
Adjusted Net
Income |
|
$24 -
$26 |
Adjusted Diluted
Earnings Per Share |
|
$1.34
- $1.44 |
Free Cash Flow |
|
$37 -
$40 |
CONFERENCE CALL AND INVESTOR RELATIONS
CONTACT
Carriage Services has scheduled a conference
call for tomorrow, February 21, 2019 at 9:30 a.m. central time. To
participate in the call, please dial 866-516-3867 (ID-4857099) and
ask for the Carriage Services conference call. A replay of the
conference call will be available through February 26, 2019 and may
be accessed by dialing 855-859-2056 (ID-4857099). 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, |
|
2017 |
2018 |
%Change |
|
2017 |
2018 |
%Change |
|
|
|
|
|
|
|
|
Same Store
Contracts |
|
|
|
|
|
|
|
Atneed
Contracts |
6,034 |
|
6,113 |
|
1.3 |
% |
|
24,393 |
|
24,422 |
|
0.1 |
% |
Preneed
Contracts |
1,419 |
|
1,395 |
|
(1.7 |
%) |
|
5,769 |
|
5,666 |
|
(1.8 |
%) |
Total Same Store
Funeral Contracts |
7,453 |
|
7,508 |
|
0.7 |
% |
|
30,162 |
|
30,088 |
|
(0.2 |
%) |
Acquisition
Contracts |
|
|
|
|
|
|
|
Atneed
Contracts |
1,154 |
|
1,635 |
|
41.7 |
% |
|
3,993 |
|
5,931 |
|
48.5 |
% |
Preneed
Contracts |
187 |
|
236 |
|
26.2 |
% |
|
687 |
|
797 |
|
16.0 |
% |
Total Acquisition
Funeral Contracts |
1,341 |
|
1,871 |
|
39.5 |
% |
|
4,680 |
|
6,728 |
|
43.8 |
% |
Total Funeral
Contracts |
8,794 |
|
9,379 |
|
6.7 |
% |
|
34,842 |
|
36,816 |
|
5.7 |
% |
|
|
|
|
|
|
|
|
Funeral
Operating Revenue |
|
|
|
|
|
|
|
Same Store
Revenue |
$ |
39,776 |
|
$ |
40,010 |
|
0.6 |
% |
|
$ |
161,690 |
|
$ |
160,459 |
|
(0.8 |
%) |
Acquisition
Revenue |
8,421 |
|
11,539 |
|
37.0 |
% |
|
30,108 |
|
41,447 |
|
37.7 |
% |
Total Funeral
Operating Revenue |
$ |
48,197 |
|
$ |
51,549 |
|
7.0 |
% |
|
$ |
191,798 |
|
$ |
201,906 |
|
5.3 |
% |
|
|
|
|
|
|
|
|
Cemetery
Operating Revenue |
|
|
|
|
|
|
|
Same
Store Revenue |
$ |
10,227 |
|
$ |
10,042 |
|
(1.8 |
%) |
|
$ |
40,047 |
|
$ |
41,740 |
|
4.2 |
% |
Acquisition Revenue |
825 |
|
865 |
|
5.0 |
% |
|
3,195 |
|
3,395 |
|
6.3 |
% |
Total Cemetery
Operating Revenue |
$ |
11,052 |
|
$ |
10,907 |
|
(1.3 |
%) |
|
$ |
43,242 |
|
$ |
45,135 |
|
4.4 |
% |
|
|
|
|
|
|
|
|
Financial
Revenue |
|
|
|
|
|
|
|
Preneed
Funeral Commission Income |
$ |
303 |
|
$ |
320 |
|
5.6 |
% |
|
$ |
1,254 |
|
$ |
1,294 |
|
3.2 |
% |
Preneed
Funeral Trust Earnings |
1,942 |
|
1,887 |
|
(2.8 |
%) |
|
7,228 |
|
7,525 |
|
4.1 |
% |
Cemetery
Trust Earnings |
1,485 |
|
1,434 |
|
(3.4 |
%) |
|
6,300 |
|
5,761 |
|
(8.6 |
%) |
Preneed
Cemetery Finance Charges |
371 |
|
420 |
|
13.2 |
% |
|
1,538 |
|
1,659 |
|
7.9 |
% |
Total Financial
Revenue |
$ |
4,101 |
|
$ |
4,061 |
|
(1.0 |
%) |
|
$ |
16,320 |
|
$ |
16,239 |
|
(0.5 |
%) |
|
|
|
|
|
|
|
|
Total Divested
Revenue |
$ |
1,726 |
|
$ |
— |
|
|
|
$ |
6,779 |
|
$ |
4,712 |
|
|
|
|
|
|
|
|
|
|
Total
Revenue |
$ |
65,076 |
|
$ |
66,517 |
|
2.2 |
% |
|
$ |
258,139 |
|
$ |
267,992 |
|
3.8 |
% |
|
|
|
|
|
|
|
|
Field
EBITDA |
|
|
|
|
|
|
|
Same Store
Funeral EBITDA |
$ |
15,189 |
|
$ |
14,514 |
|
(4.4 |
%) |
|
$ |
62,361 |
|
$ |
58,976 |
|
(5.4 |
%) |
Same Store
Funeral EBITDA Margin |
38.2 |
% |
36.3 |
% |
(190
bp) |
|
|
38.6 |
% |
36.8 |
% |
(180
bp) |
|
Acquisition
Funeral EBITDA |
3,528 |
|
4,513 |
|
27.9 |
% |
|
11,770 |
|
15,397 |
|
30.8 |
% |
Acquisition
Funeral EBITDA Margin |
41.9 |
% |
39.1 |
% |
(280 bp) |
|
|
39.1 |
% |
37.1 |
% |
(200 bp) |
|
Total Funeral
EBITDA |
$ |
18,717 |
|
$ |
19,027 |
|
1.7 |
% |
|
$ |
74,131 |
|
$ |
74,373 |
|
0.3 |
% |
Total Funeral
EBITDA Margin |
38.8 |
% |
36.9 |
% |
(190 bp) |
|
|
38.7 |
% |
36.8 |
% |
(190 bp) |
|
|
|
|
|
|
|
|
|
Same
Store Cemetery EBITDA |
$ |
3,377 |
|
$ |
2,832 |
|
(16.1 |
%) |
|
$ |
12,368 |
|
$ |
12,733 |
|
3.0 |
% |
Same
Store Cemetery EBITDA Margin |
33.0 |
% |
28.2 |
% |
(480
bp) |
|
|
30.9 |
% |
30.5 |
% |
(40
bp) |
|
Acquisition Cemetery EBITDA |
295 |
|
295 |
|
— |
% |
|
1,038 |
|
1,147 |
|
10.5 |
% |
Acquisition Cemetery EBITDA Margin |
35.8 |
% |
34.1 |
% |
(170 bp) |
|
|
32.5 |
% |
33.8 |
% |
130 bp |
|
Total Cemetery
EBITDA |
$ |
3,672 |
|
$ |
3,127 |
|
(14.8 |
%) |
|
$ |
13,406 |
|
$ |
13,880 |
|
3.5 |
% |
Total Cemetery
EBITDA Margin |
33.2 |
% |
28.7 |
% |
(450 bp) |
|
|
31.0 |
% |
30.8 |
% |
(20 bp) |
|
|
|
|
|
|
|
|
|
Funeral
Financial EBITDA |
$ |
2,017 |
|
$ |
1,973 |
|
(2.2 |
%) |
|
$ |
7,548 |
|
$ |
7,784 |
|
3.1 |
% |
Cemetery
Financial EBITDA |
1,750 |
|
1,709 |
|
(2.3 |
%) |
|
7,450 |
|
6,903 |
|
(7.3 |
%) |
Total Financial
EBITDA |
$ |
3,767 |
|
$ |
3,682 |
|
(2.3 |
%) |
|
$ |
14,998 |
|
$ |
14,687 |
|
(2.1 |
%) |
Total Financial
EBITDA Margin |
91.9 |
% |
90.7 |
% |
(120 bp) |
|
|
91.9 |
% |
90.4 |
% |
(150 bp) |
|
|
|
|
|
|
|
|
|
Total Divested
EBITDA |
$ |
553 |
|
$ |
— |
|
|
|
$ |
1,977 |
|
$ |
1,373 |
|
|
Total Divested
EBITDA Margin |
32.0 |
% |
— |
% |
|
|
29.2 |
% |
29.1 |
% |
|
|
|
|
|
|
|
|
|
Total Field
EBITDA |
$ |
26,709 |
|
$ |
25,836 |
|
(3.3 |
%) |
|
$ |
104,512 |
|
$ |
104,313 |
|
(0.2 |
%) |
Total Field
EBITDA Margin |
41.0 |
% |
38.8 |
% |
(220 bp) |
|
|
40.5 |
% |
38.9 |
% |
(160 bp) |
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING AND FINANCIAL TREND
REPORT |
(IN THOUSANDS - EXCEPT PER SHARE
AMOUNTS) |
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
Years Ended December 31, |
|
2017 |
2018 |
% Change |
|
2017 |
2018 |
% Change |
|
|
|
|
|
|
|
|
Overhead |
|
|
|
|
|
|
|
Total
Variable Overhead |
$ |
3,573 |
|
$ |
6,006 |
|
68.1 |
% |
|
$ |
11,338 |
|
$ |
12,672 |
|
11.8 |
% |
Total
Regional Fixed Overhead |
995 |
|
977 |
|
(1.8 |
%) |
|
3,883 |
|
4,020 |
|
3.5 |
% |
Total
Corporate Fixed Overhead |
4,862 |
|
4,930 |
|
1.4 |
% |
|
21,209 |
|
20,301 |
|
(4.3 |
%) |
Total
Overhead |
$ |
9,430 |
|
$ |
11,913 |
|
26.3 |
% |
|
$ |
36,430 |
|
$ |
36,993 |
|
1.5 |
% |
Overhead as a
percentage of Revenue |
14.5 |
% |
17.9 |
% |
340 bp |
|
|
14.1 |
% |
13.8 |
% |
(30 bp) |
|
|
|
|
|
|
|
|
|
Consolidated
EBITDA |
$ |
17,279 |
|
$ |
13,923 |
|
(19.4 |
%) |
|
$ |
68,082 |
|
$ |
67,320 |
|
(1.1 |
%) |
Consolidated
EBITDA Margin |
26.6 |
% |
20.9 |
% |
(570 bp) |
|
|
26.4 |
% |
25.1 |
% |
(130 bp) |
|
|
|
|
|
|
|
|
|
Other Expenses
and Interest |
|
|
|
|
|
|
|
Depreciation & Amortization |
$ |
4,105 |
|
$ |
4,330 |
|
5.5 |
% |
|
$ |
15,979 |
|
$ |
17,430 |
|
9.1 |
% |
Non-Cash
Stock Compensation |
768 |
|
3,659 |
|
376.4 |
% |
|
3,162 |
|
6,583 |
|
108.2 |
% |
Interest
Expense |
3,431 |
|
6,346 |
|
85.0 |
% |
|
12,948 |
|
21,109 |
|
63.0 |
% |
Accretion
of Discount on Convertible Subordinated Notes |
1,129 |
|
231 |
|
(79.5 |
%) |
|
4,329 |
|
2,192 |
|
(49.4 |
%) |
Net Loss
on Early Extinguishment of Debt |
— |
|
(434 |
) |
|
|
— |
|
502 |
|
|
Other,
Net |
(1,121 |
) |
893 |
|
|
|
(1,118 |
) |
1,238 |
|
|
Pre-Tax
Income/(Loss) |
$ |
8,967 |
|
$ |
(1,102 |
) |
(112.3 |
%) |
|
$ |
32,782 |
|
$ |
18,266 |
|
(44.3 |
%) |
Provision for Income
Taxes |
3,574 |
|
331 |
|
|
|
13,100 |
|
5,754 |
|
|
Tax Adjustment Related
to Certain Discrete Items |
(17,268 |
) |
1,225 |
|
|
|
(17,511 |
) |
867 |
|
|
Net Tax
(Benefit)/Provision |
(13,694 |
) |
1,556 |
|
|
|
(4,411 |
) |
6,621 |
|
|
GAAP Net
Income/(Loss) |
$ |
22,661 |
|
$ |
(2,658 |
) |
(111.7 |
%) |
|
$ |
37,193 |
|
$ |
11,645 |
|
(68.7 |
%) |
|
|
|
|
|
|
|
|
Special Items,
Net of Tax, except for ** |
|
|
|
|
|
|
|
Severance
and Retirement Costs |
$ |
— |
|
$ |
1,134 |
|
|
|
$ |
— |
|
$ |
1,134 |
|
|
Performance Awards Cancellation Write-off |
— |
|
2,594 |
|
|
|
— |
|
2,594 |
|
|
Accretion
of Discount on Convertible Subordinated Notes ** |
1,129 |
|
231 |
|
|
|
4,329 |
|
2,192 |
|
|
Net
(Gain) Loss on Early Extinguishment of Debt |
— |
|
(343 |
) |
|
|
— |
|
397 |
|
|
Loss on
Sale of Business and Other Costs |
— |
|
162 |
|
|
|
— |
|
439 |
|
|
Goodwill
and Other Impairments |
— |
|
805 |
|
|
|
— |
|
805 |
|
|
Litigation Reserve |
— |
|
790 |
|
|
|
— |
|
790 |
|
|
Natural
Disaster Costs |
144 |
|
345 |
|
|
|
403 |
|
345 |
|
|
Tax
Adjustment Related to Certain Discrete Items ** |
(17,176 |
) |
1,225 |
|
|
|
(17,176 |
) |
1,225 |
|
|
|
|
|
|
|
|
|
|
Adjusted Net
Income |
$ |
6,758 |
|
$ |
4,285 |
|
(36.6 |
%) |
|
$ |
24,749 |
|
$ |
21,566 |
|
(12.9 |
%) |
Adjusted Net
Profit Margin |
10.4 |
% |
6.4 |
% |
(400 bp) |
|
|
9.6 |
% |
8.0 |
% |
(160 bp) |
|
|
|
|
|
|
|
|
|
Adjusted Basic Earnings
Per Share |
$ |
0.42 |
|
$ |
0.23 |
|
(45.2 |
%) |
|
$ |
1.50 |
|
$ |
1.19 |
|
(20.7 |
%) |
Adjusted Diluted
Earnings Per Share |
$ |
0.39 |
|
$ |
0.23 |
|
(41.0 |
%) |
|
$ |
1.39 |
|
$ |
1.17 |
|
(15.8 |
%) |
|
|
|
|
|
|
|
|
GAAP Basic Earnings Per
Share |
$ |
1.41 |
|
$ |
(0.14 |
) |
(109.9 |
%) |
|
$ |
2.25 |
|
$ |
0.64 |
|
(71.6 |
%) |
GAAP Diluted Earnings
Per Share |
$ |
1.31 |
|
$ |
(0.14 |
) |
(110.7 |
%) |
|
$ |
2.09 |
|
$ |
0.63 |
|
(69.9 |
%) |
|
|
|
|
|
|
|
|
Weighted Average Basic
Shares Outstanding |
16,031 |
|
18,772 |
|
|
|
16,438 |
|
17,971 |
|
|
Weighted Average
Diluted Shares Outstanding |
17,193 |
|
18,838 |
|
|
|
17,715 |
|
18,374 |
|
|
|
|
|
|
|
|
|
|
Reconciliation
to Adjusted Consolidated EBITDA |
|
|
|
|
|
|
|
Consolidated
EBITDA |
$ |
17,279 |
|
$ |
13,923 |
|
(19.4 |
%) |
|
$ |
68,082 |
|
$ |
67,320 |
|
(1.1 |
%) |
Severance
and Retirement Costs |
— |
|
1,435 |
|
|
|
— |
|
1,435 |
|
|
Litigation Reserve |
— |
|
1,000 |
|
|
|
— |
|
1,000 |
|
|
Natural
Disaster Costs |
222 |
|
437 |
|
|
|
620 |
|
437 |
|
|
Adjusted
Consolidated EBITDA |
$ |
17,501 |
|
$ |
16,795 |
|
(4.0 |
%) |
|
$ |
68,702 |
|
$ |
70,192 |
|
2.2 |
% |
Adjusted
Consolidated EBITDA Margin |
26.9 |
% |
25.2 |
% |
(170 bp) |
|
|
26.6 |
% |
26.2 |
% |
(40 bp) |
|
CARRIAGE SERVICES,
INC.CONDENSED CONSOLIDATED BALANCE
SHEETS(in thousands)
|
December 31, |
|
2017 |
|
2018 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
952 |
|
|
$ |
644 |
|
Accounts
receivable, net |
19,655 |
|
|
18,897 |
|
Inventories |
6,519 |
|
|
6,751 |
|
Prepaid
expenses |
2,028 |
|
|
1,456 |
|
Other
current assets |
986 |
|
|
1,555 |
|
Total current assets |
30,140 |
|
|
29,303 |
|
Preneed cemetery trust
investments |
73,853 |
|
|
62,432 |
|
Preneed funeral trust
investments |
90,682 |
|
|
82,074 |
|
Preneed receivables,
net |
31,644 |
|
|
18,441 |
|
Receivables from preneed
trusts |
15,287 |
|
|
17,073 |
|
Property, plant and
equipment, net |
247,294 |
|
|
260,838 |
|
Cemetery property,
net |
76,331 |
|
|
74,958 |
|
Goodwill |
287,956 |
|
|
303,887 |
|
Intangible and other
non-current assets |
18,117 |
|
|
24,425 |
|
Cemetery perpetual care
trust investments |
50,229 |
|
|
44,071 |
|
Total
assets |
$ |
921,533 |
|
|
$ |
917,502 |
|
LIABILITIES AND STOCKHOLDERS’ EQUITY |
|
|
|
Current liabilities: |
|
|
|
Current
portion of long-term debt and capital lease obligations |
$ |
17,251 |
|
|
$ |
2,327 |
|
Accounts
payable |
6,547 |
|
|
9,987 |
|
Other
liabilities |
1,361 |
|
|
1,236 |
|
Accrued
liabilities |
17,559 |
|
|
21,408 |
|
Total current liabilities |
42,718 |
|
|
34,958 |
|
Long-term debt, net of
current portion |
121,034 |
|
|
6,925 |
|
Revolving credit
facility |
91,120 |
|
|
26,145 |
|
Convertible subordinated
notes due 2021 |
124,441 |
|
|
5,732 |
|
Senior notes due 2026 |
— |
|
|
319,108 |
|
Obligations under capital
leases, net of current portion |
6,361 |
|
|
6,143 |
|
Deferred preneed cemetery
revenue |
54,690 |
|
|
45,997 |
|
Deferred preneed funeral
revenue |
34,585 |
|
|
28,606 |
|
Deferred tax
liability |
31,159 |
|
|
31,263 |
|
Other long-term
liabilities |
3,378 |
|
|
3,133 |
|
Deferred preneed cemetery
receipts held in trust |
73,853 |
|
|
62,432 |
|
Deferred preneed funeral
receipts held in trust |
90,682 |
|
|
82,074 |
|
Care trusts’ corpus |
49,856 |
|
|
43,494 |
|
Total
liabilities |
723,877 |
|
|
696,010 |
|
Commitments and
contingencies: |
|
|
|
Stockholders’ equity: |
|
|
|
Common
stock |
226 |
|
|
257 |
|
Additional
paid-in capital |
216,158 |
|
|
243,849 |
|
Retained
earnings |
57,904 |
|
|
71,680 |
|
Treasury
stock |
(76,632 |
) |
|
(94,294 |
) |
Total stockholders’ equity |
197,656 |
|
|
221,492 |
|
Total liabilities and stockholders’
equity |
$ |
921,533 |
|
|
$ |
917,502 |
|
CARRIAGE SERVICES,
INC.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS(in thousands, except per share
data)
|
(unaudited) |
|
|
|
|
|
Three Months EndedDecember 31, |
|
Years EndedDecember 31, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
|
|
|
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
|
Funeral |
$ |
50,607 |
|
|
$ |
53,756 |
|
|
$ |
200,886 |
|
|
$ |
210,725 |
|
Cemetery |
14,469 |
|
|
12,761 |
|
|
57,253 |
|
|
57,267 |
|
|
65,076 |
|
|
66,517 |
|
|
258,139 |
|
|
267,992 |
|
Field costs and
expenses: |
|
|
|
|
|
|
|
Funeral |
29,787 |
|
|
32,756 |
|
|
118,905 |
|
|
128,571 |
|
Cemetery |
8,580 |
|
|
7,925 |
|
|
34,722 |
|
|
35,108 |
|
Depreciation and amortization |
3,655 |
|
|
3,929 |
|
|
14,374 |
|
|
15,617 |
|
Regional
and unallocated funeral and cemetery costs |
3,494 |
|
|
4,087 |
|
|
13,339 |
|
|
12,749 |
|
|
45,516 |
|
|
48,697 |
|
|
181,340 |
|
|
192,045 |
|
Gross profit |
19,560 |
|
|
17,820 |
|
|
76,799 |
|
|
75,947 |
|
|
|
|
|
|
|
|
|
Corporate costs and
expenses: |
|
|
|
|
|
|
|
General,
administrative and other |
6,704 |
|
|
11,485 |
|
|
26,253 |
|
|
30,827 |
|
Home
office depreciation and amortization |
450 |
|
|
401 |
|
|
1,605 |
|
|
1,813 |
|
|
7,154 |
|
|
11,886 |
|
|
27,858 |
|
|
32,640 |
|
Operating income |
12,406 |
|
|
5,934 |
|
|
48,941 |
|
|
43,307 |
|
Interest expense |
(3,431 |
) |
|
(6,346 |
) |
|
(12,948 |
) |
|
(21,109 |
) |
Accretion of discount
on convertible subordinated notes |
(1,129 |
) |
|
(231 |
) |
|
(4,329 |
) |
|
(2,192 |
) |
Gain (loss) on
extinguishment of debt and other costs |
— |
|
|
434 |
|
|
— |
|
|
(502 |
) |
Other, net |
1,121 |
|
|
(893 |
) |
|
1,118 |
|
|
(1,238 |
) |
Income (loss) before
income taxes |
8,967 |
|
|
(1,102 |
) |
|
32,782 |
|
|
18,266 |
|
Total benefit
(provision) for income taxes |
13,694 |
|
|
(1,556 |
) |
|
4,411 |
|
|
(6,621 |
) |
Net income (loss) |
$ |
22,661 |
|
|
$ |
(2,658 |
) |
|
$ |
37,193 |
|
|
$ |
11,645 |
|
|
|
|
|
|
|
|
|
Basic earnings per
common share |
$ |
1.41 |
|
|
$ |
(0.14 |
) |
|
$ |
2.25 |
|
|
$ |
0.64 |
|
Diluted earnings per
common share |
$ |
1.31 |
|
|
$ |
(0.14 |
) |
|
$ |
2.09 |
|
|
$ |
0.63 |
|
|
|
|
|
|
|
|
|
Dividends declared per
share: |
$ |
0.075 |
|
|
$ |
0.075 |
|
|
$ |
0.225 |
|
|
$ |
0.300 |
|
Weighted average number
of common and common equivalent shares outstanding: |
|
|
|
|
|
|
|
Basic |
16,031 |
|
|
18,772 |
|
|
16,438 |
|
|
17,971 |
|
Diluted |
17,193 |
|
|
18,838 |
|
|
17,715 |
|
|
18,374 |
|
CARRIAGE SERVICES, INC.CONSOLIDATED
STATEMENTS OF CASH FLOWS(in
thousands)
|
Year Ended December 31, |
|
2017 |
|
2018 |
Cash flows from operating
activities: |
|
|
|
Net
income |
$ |
37,193 |
|
|
$ |
11,645 |
|
Adjustments to reconcile
net income to net cash provided by operating activities: |
|
|
|
Depreciation
and amortization |
15,979 |
|
|
17,430 |
|
Provision
for losses on accounts receivable |
2,198 |
|
|
1,841 |
|
Stock-based
compensation expense |
3,162 |
|
|
6,583 |
|
Deferred
income tax (benefit) expense |
(11,651 |
) |
|
3,823 |
|
Amortization
of deferred financing costs |
820 |
|
|
532 |
|
Amortization
of capitalized commissions on preneed contracts |
— |
|
|
599 |
|
Accretion of
discount on convertible subordinated notes |
4,329 |
|
|
2,192 |
|
Accretion of
discount on senior notes |
— |
|
|
272 |
|
Net loss on
early extinguishment of debt |
— |
|
|
641 |
|
Net (gain)
loss on sale of businesses and disposal of other assets |
(710 |
) |
|
1,052 |
|
Impairment
of intangible and other assets |
— |
|
|
1,019 |
|
Changes in operating
assets and liabilities that provided (required) cash: |
|
|
|
Accounts and
preneed receivables |
(4,254 |
) |
|
(5,061 |
) |
Inventories
and other current assets |
1,446 |
|
|
(159 |
) |
Intangible
and other non-current assets |
149 |
|
|
(390 |
) |
Preneed
funeral and cemetery trust investments |
(10,008 |
) |
|
24,401 |
|
Accounts
payable |
(3,649 |
) |
|
2,044 |
|
Accrued and
other liabilities |
(385 |
) |
|
3,990 |
|
Deferred
preneed funeral and cemetery revenue |
1,446 |
|
|
6,546 |
|
Deferred
preneed funeral and cemetery receipts held in trust |
9,165 |
|
|
(29,867 |
) |
Net cash
provided by operating activities |
45,230 |
|
|
49,133 |
|
|
|
|
|
Cash flows from investing
activities: |
|
|
|
Acquisition
and land for new construction |
(28,799 |
) |
|
(37,970 |
) |
Net proceeds
from the sale of business and other assets |
5,731 |
|
|
— |
|
Capital
expenditures |
(16,395 |
) |
|
(13,526 |
) |
Net cash
used in investing activities |
(39,463 |
) |
|
(51,496 |
) |
|
|
|
|
Cash flows from financing
activities: |
|
|
|
Payments
against the term loan |
(11,250 |
) |
|
(127,500 |
) |
Borrowings
from the revolving credit facility |
106,900 |
|
|
124,500 |
|
Payments
against the revolving credit facility |
(82,600 |
) |
|
(189,400 |
) |
Payment of
debt issuance costs related to long-term debt |
— |
|
|
(1,751 |
) |
Redemption
of the 2.75% convertible subordinated notes |
— |
|
|
(98,405 |
) |
Payment of
transaction costs related to the redemption of the 2.75%
convertiblesubordinated notes |
— |
|
|
(885 |
) |
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 |
(1,962 |
) |
|
(1,940 |
) |
Payments on
contingent consideration recorded at acquisition date |
(101 |
) |
|
(138 |
) |
Proceeds
from the exercise of stock options and employee stock purchase
plancontributions |
1,496 |
|
|
1,246 |
|
Taxes paid
on restricted stock vestings and exercises of non-qualified
options |
(509 |
) |
|
(651 |
) |
Dividends on
common stock |
(3,709 |
) |
|
(5,513 |
) |
Purchase of
treasury stock |
(16,366 |
) |
|
(16,266 |
) |
Net cash
(used in) provided by financing activities |
(8,101 |
) |
|
2,055 |
|
|
|
|
|
Net
(decrease) in cash and cash equivalents |
(2,334 |
) |
|
(308 |
) |
Cash and cash equivalents
at beginning of year |
3,286 |
|
|
952 |
|
Cash and cash equivalents
at end of year |
$ |
952 |
|
|
$ |
644 |
|
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 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 months and years ended December
31, 2017 and 2018 (in thousands):
|
For the Three MonthsEnded December
31, |
|
For the YearsEnded December 31, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
Net Income (Loss) |
$ |
22,661 |
|
|
$ |
(2,658 |
) |
|
$ |
37,193 |
|
|
$ |
11,645 |
|
Special Items, Net of
Tax, except for ** |
|
|
|
|
|
|
|
Severance
and Retirement Costs |
— |
|
|
1,134 |
|
|
— |
|
|
1,134 |
|
Performance Awards Cancellation Write-off |
— |
|
|
2,594 |
|
|
— |
|
|
2,594 |
|
Accretion
of Discount on Convertible Subordinated Notes ** |
1,129 |
|
|
231 |
|
|
4,329 |
|
|
2,192 |
|
Net
(Gain) Loss on Early Extinguishment of Debt |
— |
|
|
(343 |
) |
|
— |
|
|
397 |
|
Loss on
Sale of Business and Other Costs |
— |
|
|
162 |
|
|
— |
|
|
439 |
|
Goodwill
and Other Impairments |
— |
|
|
805 |
|
|
— |
|
|
805 |
|
Litigation Reserve |
— |
|
|
790 |
|
|
— |
|
|
790 |
|
Natural
Disaster Costs |
144 |
|
|
345 |
|
|
403 |
|
|
345 |
|
Tax
Adjustment Related to Certain Discrete Items ** |
(17,176 |
) |
|
1,225 |
|
|
(17,176 |
) |
|
1,225 |
|
Adjusted Net
Income |
$ |
6,758 |
|
|
$ |
4,285 |
|
|
$ |
24,749 |
|
|
$ |
21,566 |
|
|
|
|
|
|
|
|
|
** Special items are typically taxed at the
federal statutory rate, except for the Accretion of the Discount on
Convertible Subordinated Notes and the Tax Adjustment Related to
Certain Discrete Items, as these are non-tax deductible items. |
Reconciliation of Net Income to
Consolidated EBITDA and Adjusted Consolidated EBITDA for the three
months and years ended December 31, 2017 and 2018 (in
thousands):
|
For the Three MonthsEnded December
31, |
|
For the Years EndedDecember 31, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
Net Income (Loss) |
$ |
22,661 |
|
|
$ |
(2,658 |
) |
|
$ |
37,193 |
|
|
$ |
11,645 |
|
Total Benefit
(Provision) for Income Taxes |
(13,694 |
) |
|
1,556 |
|
|
(4,411 |
) |
|
6,621 |
|
Income (Loss) Before
Income Taxes |
8,967 |
|
|
(1,102 |
) |
|
32,782 |
|
|
18,266 |
|
Interest Expense |
3,431 |
|
|
6,346 |
|
|
12,948 |
|
|
21,109 |
|
Accretion of Discount
on Convertible Subordinated Notes |
1,129 |
|
|
231 |
|
|
4,329 |
|
|
2,192 |
|
Gain (Loss) on
Extinguishment of Debt and Other Costs |
— |
|
|
(434 |
) |
|
— |
|
|
502 |
|
Non-Cash Stock
Compensation |
768 |
|
|
3,659 |
|
|
3,162 |
|
|
6,583 |
|
Depreciation &
Amortization |
4,105 |
|
|
4,330 |
|
|
15,979 |
|
|
17,430 |
|
Other, Net |
(1,121 |
) |
|
893 |
|
|
(1,118 |
) |
|
1,238 |
|
Consolidated
EBITDA |
$ |
17,279 |
|
|
$ |
13,923 |
|
|
$ |
68,082 |
|
|
$ |
67,320 |
|
Adjusted For: |
|
|
|
|
|
|
|
Severance
and Retirement Costs |
— |
|
|
1,435 |
|
|
— |
|
|
1,435 |
|
Litigation Reserve |
— |
|
|
1,000 |
|
|
— |
|
|
1,000 |
|
Natural
Disaster Costs |
222 |
|
|
437 |
|
|
620 |
|
|
437 |
|
Adjusted
Consolidated EBITDA |
$ |
17,501 |
|
|
$ |
16,795 |
|
|
$ |
68,702 |
|
|
$ |
70,192 |
|
|
|
|
|
|
|
|
|
Revenue |
$ |
65,076 |
|
|
$ |
66,517 |
|
|
$ |
258,139 |
|
|
$ |
267,992 |
|
|
|
|
|
|
|
|
|
Adjusted Consolidated
EBITDA Margin |
26.9 |
% |
|
25.2 |
% |
|
26.6 |
% |
|
26.2 |
% |
Reconciliation of Funeral and Cemetery
Gross Profit to Field EBITDA for the three months and years ended
December 31, 2017 and 2018 (in thousands):
|
For the Three MonthsEnded December
31, |
|
For the Years EndedDecember 31, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
Funeral Gross Profit
(GAAP) |
$ |
15,418 |
|
|
$ |
14,919 |
|
|
$ |
61,369 |
|
|
$ |
60,881 |
|
Depreciation &
Amortization |
2,456 |
|
|
2,790 |
|
|
9,785 |
|
|
10,726 |
|
Regional &
Unallocated Costs |
2,946 |
|
|
3,291 |
|
|
10,827 |
|
|
10,547 |
|
Funeral Financial
EBITDA |
(2,017 |
) |
|
(1,973 |
) |
|
(7,548 |
) |
|
(7,784 |
) |
Funeral Divested
EBITDA |
(86 |
) |
|
— |
|
|
(302 |
) |
|
3 |
|
Funeral Field
EBITDA |
$ |
18,717 |
|
|
$ |
19,027 |
|
|
$ |
74,131 |
|
|
$ |
74,373 |
|
|
For the Three MonthsEnded December
31, |
|
For the Years EndedDecember 31, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
Cemetery Gross Profit
(GAAP) |
$ |
4,142 |
|
|
$ |
2,901 |
|
|
$ |
15,430 |
|
|
$ |
15,066 |
|
Depreciation &
Amortization |
1,199 |
|
|
1,139 |
|
|
4,589 |
|
|
4,891 |
|
Regional &
Unallocated Costs |
548 |
|
|
796 |
|
|
2,512 |
|
|
2,202 |
|
Cemetery Financial
EBITDA |
(1,750 |
) |
|
(1,709 |
) |
|
(7,450 |
) |
|
(6,903 |
) |
Cemetery Divested
EBITDA |
(467 |
) |
|
— |
|
|
(1,675 |
) |
|
(1,376 |
) |
Cemetery Field
EBITDA |
$ |
3,672 |
|
|
$ |
3,127 |
|
|
$ |
13,406 |
|
|
$ |
13,880 |
|
Components of Total Field EBITDA for the three months
and years ended December 31, 2017 and 2018 (in
thousands):
|
For the Three MonthsEnded December
31, |
|
For the Years EndedDecember 31, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
Funeral Field
EBITDA |
$ |
18,717 |
|
|
$ |
19,027 |
|
|
$ |
74,131 |
|
|
$ |
74,373 |
|
Cemetery Field
EBITDA |
3,672 |
|
|
3,127 |
|
|
13,406 |
|
|
13,880 |
|
Funeral Financial
EBITDA |
2,017 |
|
|
1,973 |
|
|
7,548 |
|
|
7,784 |
|
Cemetery Financial
EBITDA |
1,750 |
|
|
1,709 |
|
|
7,450 |
|
|
6,903 |
|
Funeral Divested
EBITDA |
86 |
|
|
— |
|
|
302 |
|
|
(3 |
) |
Cemetery Divested
EBITDA |
467 |
|
|
— |
|
|
1,675 |
|
|
1,376 |
|
Total Field EBITDA |
$ |
26,709 |
|
|
$ |
25,836 |
|
|
$ |
104,512 |
|
|
$ |
104,313 |
|
Reconciliation of GAAP Basic Earnings
Per Share to Adjusted Basic Earnings Per Share for the three months
and years ended December 31, 2017 and 2018:
|
For the Three MonthsEnded December
31, |
|
For the Years EndedDecember 31, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
GAAP Basic Earnings Per
Share |
$ |
1.41 |
|
|
$ |
(0.14 |
) |
|
$ |
2.25 |
|
|
$ |
0.64 |
|
Special Items |
(0.99 |
) |
|
0.37 |
|
|
(0.75 |
) |
|
0.55 |
|
Adjusted Basic Earnings
Per Share |
$ |
0.42 |
|
|
$ |
0.23 |
|
|
$ |
1.50 |
|
|
$ |
1.19 |
|
Reconciliation of GAAP Diluted Earnings
Per Share to Adjusted Diluted Earnings Per Share for the three
months and years ended December 31, 2017 and
2018:
|
For the Three MonthsEnded December
31, |
|
For the Years EndedDecember 31, |
|
2017 |
|
2018 |
|
2017 |
|
2018 |
GAAP Diluted Earnings
Per Share |
$ |
1.31 |
|
|
$ |
(0.14 |
) |
|
$ |
2.09 |
|
|
$ |
0.63 |
|
Special Items |
(0.92 |
) |
|
0.37 |
|
|
(0.70 |
) |
|
0.54 |
|
Adjusted Diluted
Earnings Per Share |
$ |
0.39 |
|
|
$ |
0.23 |
|
|
$ |
1.39 |
|
|
$ |
1.17 |
|
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 EndedDecember 31,
2017 |
|
Twelve Months EndedDecember 31,
2017 |
|
Revenue |
|
EBITDA |
|
Revenue |
|
EBITDA |
2013 Acquired
Portfolio |
$ |
1,144 |
|
|
$ |
519 |
|
|
$ |
4,185 |
|
|
$ |
1,794 |
|
Reconciliation of Rolling Four Quarter
Outlook:
Earlier in 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, 2019 unless we have a
signed Letter of Intent with a 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 approximate midpoint of
the range in this Outlook.
Reconciliation of Net Income to
Consolidated EBITDA for the Rolling Four Quarters ending December
31, 2019 (in thousands):
|
December 31, 2019E |
Net Income |
$ |
24,800 |
|
Total Tax
Provision |
9,400 |
|
Pretax Income |
34,200 |
|
Net Interest Expense,
including Accretion of Discount on Convertible Notes |
24,400 |
|
Depreciation &
Amortization, including Non-cash Stock Compensation |
19,600 |
|
Consolidated
EBITDA |
$ |
78,200 |
|
Reconciliation of Net Income to Adjusted
Net Income for the Rolling Four Quarters ending December 31, 2019
(in thousands):
|
December 31, 2019E |
Net Income |
$ |
24,800 |
|
Special Items |
200 |
|
Adjusted Net
Income |
$ |
25,000 |
|
Reconciliation of GAAP Diluted Earnings
Per Share to Adjusted Diluted Earnings Per Share for the Rolling
Four Quarters ending December 31, 2019:
|
December 31, 2019E |
GAAP Diluted Earnings
Per Share |
$ |
1.38 |
|
Special Items |
0.01 |
|
Adjusted Diluted
Earnings Per Share |
$ |
1.39 |
|
Reconciliation of Cash Flow Provided by
Operations to Free Cash Flow for the Rolling Four Quarters ending
December 31, 2019 (in thousands):
|
December 31, 2019E |
Cash flow Provided by
Operations |
$ |
48,500 |
|
Cash used for
Maintenance Capital Expenditures |
(10,000 |
) |
Free Cash Flow |
$ |
38,500 |
|
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. All statements, other
than statements of historical information, should be deemed to be
forward-looking statements. 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 and market 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;
- 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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