HOUSTON, Feb. 26 /PRNewswire-FirstCall/ -- Carriage Services, Inc.
(NYSE: CSV) today announced results for the fourth quarter and year
ended December 31, 2008. Highlights from continuing operations for
the fourth quarter of 2008 compared to the fourth quarter of 2007
were as follows: Fourth Quarter Selected Financial Results (amounts
in millions, except per share amounts) Q4 Q4 Change 2007 2008 Total
Revenues $43.0 $43.8 $0.8 Adjusted Consolidated EBITDA $10.7
$8.9(a) $(1.8) GAAP Diluted Earnings (Loss) per Share $0.09 $(0.09)
$(0.18) Adjusted Diluted Earnings per Share $0.09 $0.04(a)(b)
$(0.05) (a) excludes a one-time $3.3 million charge related to a
tentative class action settlement and $0.2 million in related legal
fees, equal to $0.10 per diluted share. (b) excludes the $0.5
million increase in income taxes due to a higher effective tax rate
for the first nine months of 2008, equal to $0.03 per diluted
share. HIGHLIGHTS Melvin C. Payne, Chairman and Chief Executive
Officer, stated, "Adjusted diluted earnings per share in the fourth
quarter of 2008, which excludes a one-time charge for a litigation
settlement and an increase in our effective tax rate for 2008, both
of which were recorded in the fourth quarter, was $0.04 per diluted
share. Adjusted Consolidated EBITDA Margin was 20.2% in the four
quarter of 2008 compared to 24.9% in the fourth quarter of 2007 and
22.1% for the year 2008 compared to 24.8% for the year 2007,
largely due to weak results in our cemetery segment. We have
continued our focus to lower our costs company-wide and improve the
leadership and sales staff at several of our larger cemeteries to
drive good quality sales and profit margins. "This past year and
especially the last quarter were challenging to say the least, but
we finished with a strong December primarily because of our funeral
operations. We have positioned our company for improved performance
in 2009 on the strength of our funeral operations and the
repositioning of our trust fund portfolio during the fourth quarter
and early 2009. We do not expect to repeat the large amount of
special charges that impacted our 2008 performance, and
notwithstanding the extraordinarily difficult economic environment,
we expect modestly improved cemetery performance in 2009. All in
all, we believe we are in position to not only survive this unusual
period, but to thrive and exploit any opportunities that come our
way." UNAUDITED INCOME STATEMENT FROM CONTINUING OPERATIONS Period
Ended December 31, 2008 ($000s) Actual Actual Actual Actual Qtr 4
Qtr 4 YTD YTD 2007 2008 2007 2008 ------ ---- ---- ---- CONTINUING
OPERATIONS Same Store Contracts Atneed Contracts 4,211 4,144 16,367
16,881 Preneed Contracts 1,047 964 4,395 4,019 ------- -------
-------- -------- Total Same Store Funeral Contracts 5,258 5,108
20,762 20,900 ------- ------- -------- -------- Acquisition
Contracts Atneed Contracts 561 664 1,439 2,858 Preneed Contracts
237 247 643 903 ------- ------- -------- -------- Total Acquisition
Funeral Contracts 798 911 2,082 3,761 ------- ------- --------
-------- New Store Openings 144 238 522 870 ------- -------
-------- -------- Total Funeral Contracts 6,200 6,257 23,366 25,531
======= ====== ======= ======= Same Store Revenue Funeral
Operations Revenue $28,024 $28,349 $111,092 $113,034 Preneed
Commission and Other Revenue 444 617 2,198 2,670 ------- -------
-------- -------- Total Funeral Same Store Revenue 28,468 28,966
113,290 115,704 Cemetery Operations Revenue 7,764 8,138 34,299
32,726 Cemetery Financial Revenue 1,543 695 4,526 3,723 -------
------- -------- -------- Total Cemetery Same Store Revenue 9,307
8,833 38,825 36,449 ------- ------- -------- -------- Total Same
Store Revenue 37,775 37,799 152,115 152,153 Acquisition Revenue
Funeral Operations Revenue 3,745 4,516 10,549 18,542 Cemetery
Operations Revenue 1,296 1,447 3,875 5,971 Cemetery Financial
Revenue 161 72 317 262 ------- ------- -------- -------- Total
Acquisition Revenue 5,202 6,035 14,741 24,775 ------- -------
-------- -------- Total Revenue from Continuing Operations $42,977
$43,834 $166,856 $176,928 ======= ====== ======= ======= 26,401
29,510 77,303 87,210 Field EBITDA from Continuing Operations Same
Store Funeral Field EBITDA $11,382 $11,001 $43,183 $42,587 Same
Store Funeral Field EBITDA Margin 40.0% 38.0% 38.1% 36.8% Same
Store Cemetery Field EBITDA 3,133 1,786 13,405 8,966 Same Store
Cemetery Field EBITDA Margin 33.7% 20.2% 34.5% 24.6% -------
------- -------- -------- Total Same Store Field EBITDA 14,515
12,787 56,588 51,553 Total Same Store Field EBITDA Margin 38.4%
33.8% 37.2% 33.9% Acquisition Funeral Field EBITDA 1,173 1,383
3,617 5,736 Acquisition Funeral Field EBITDA Margin 31.3% 30.6%
34.3% 30.9% Acquisition Cemetery Field EBITDA 452 461 1,053 1,994
Acquisition Cemetery Field EBITDA Margin 31.0% 30.3% 25.1% 32.0%
------- ------- -------- -------- Total Acquisition Field EBITDA
1,625 1,844 4,670 7,730 Total Acquisition Field EBITDA Margin 31.2%
30.6% 31.7% 31.2% ------- ------- -------- -------- Total Field
EBITDA from Continuing Operations 16,140 14,631 61,258 59,283 Total
Field EBITDA Margin from Continuing Operations 37.6% 33.4% 36.7%
33.5% Overhead Total Variable Overhead 1,408 1,449 3,406 3,403
Total Regional Fixed Overhead 731 916 3,122 3,413 Total Corporate
Fixed Overhead 3,287 3,413 13,408 13,311 ------- ------- --------
-------- Total Overhead 5,426 5,778 19,936 20,127 12.6% 13.2% 11.9%
11.4% ------- ------- -------- -------- Adjusted Consolidated
EBITDA from Continuing Operations $10,714 $8,853 $41,322 $39,156
======= ====== ======= ======= Adjusted Consolidated EBITDA Margin
from Continuing Operations 24.9% 20.2% 24.8% 22.1% Special Charges
Litigation Settlement - 3,300 - 3,300 Litigation Related Legal
Costs 337 241 861 1,638 Termination Expenses - - - 977 Other
Special Charges 165 - 739 246 ------- ------- -------- -------- Sum
of Special Charges 502 3,541 1,600 6,161 ------- ------- --------
-------- Consolidated EBITDA from Continuing Operations $10,212
$5,312 $39,722 $32,995 23.8% 12.1% 23.8% 18.6% Property
Depreciation & Amortization 2,336 2,624 9,488 10,368 Restricted
Stock Amortization 222 246 723 996 Interest, Net 4,474 4,624 17,193
18,102 ------- ------- -------- -------- Pretax Income $3,180
$(2,182) $12,318 $3,529 Income tax 1,352 (531) 4,960 1,725 -------
------- -------- -------- Net income from Continuing Operations
$1,828 $(1,651) $7,358 $1,804 ======= ====== ======= ======= 4.3%
(3.8)% 4.4% 1.0% Diluted EPS-from continuing operations $0.09
$(0.09) $0.38 $0.09 Net income (Loss) from Discontinued Operations
$383 $(156) $921 $(1,546) Diluted EPS-from discontinued operations
$0.02 $(0.01) $0.05 $(0.08) TREND REPORTING Management monitors
consolidated same store and acquisition field operating and
financial results both on a year over year and most recent rolling
four quarters ("Trend Reports") basis to reflect long term and
short term trends and seasonality. "Acquisition" is defined as
businesses acquired since January 2005 (date of refinancing our
Senior Notes). The Trend Reports highlight trends in volumes,
revenues, Field EBITDA (controllable profit), Field EBITDA Margin
(controllable profit margin) and the components of our overhead.
Trend reporting allows us to focus on the key operational and
financial drivers relevant to the longer term performance and
valuation of our portfolio of deathcare businesses. Please go to
the Investor Relations homepage of Carriage's web site at
http://www.carriageservices.com/ for a link to our consolidated
Annual and Quarterly Trend Reports. FUNERAL OPERATIONS Fourth
quarter Same Store Funeral Operations Revenue increased 1.2% as the
average revenue per contract increased 4.1% while the number of
contracts declined 2.9%. Revenue from the Acquisition portfolio
increased $0.8 million primarily because of a full quarter of
revenue from two large businesses acquired in the fourth quarter of
2007. The overall cremation rate for the fourth quarter of 2008 was
39.2%, which represents a slight decline from the third quarter. A
recent initiative to increase the average revenue per cremation
contract largely by converting direct cremations to cremations with
services is getting traction and helping not only our cremation
average, but customer satisfaction levels with our cremation
families. As a result of this initiative, which includes new
training and presentation options for client families, the average
revenue per cremation contract increased 3.4% from the third
quarter to the fourth quarter of 2008 and the proportion of
cremations with services increased in each of our three regions.
Same Store Funeral Field EBITDA declined by $0.4 million, equal to
3.3%, compared to the fourth quarter of 2007, while the related
EBITDA Margin declined to 38% from 40%, primarily the result of
higher labor costs. Our funeral Acquisitions portfolio contributed
an additional $0.2 million of Field EBITDA compared to the prior
year quarter. For the full year, Same Store Funeral Revenue
increased $2.4 million, equal to 2.1%, to $115.7 million. Total
Same Store Funeral contract volume increased 0.7% and the atneed
contract volume increased 3.1% compared to 2007. Growing market
share is the highest weighted performance standard in our Standards
Operating Model and serves as an incentive motivator for the local
managing partners to grow their contract volumes. This was the
first year we have grown Same Store Funeral Contracts since rolling
out the Standards Operating Model in 2004 and is an indication that
this model combined with strong, operating leadership with 4E
Leadership skills is proving effective at growing local market
share. Same Store Funeral Field EBITDA decreased $0.6 million,
equal to 1.4%, from $43.2 million for the year 2007 to $42.6
million for the year 2008 primarily as a result of higher labor
costs. Our Acquisition portfolio provided an additional $8.0
million in revenue and $2.1 million in Field EBITDA in 2008
compared to 2007. CEMETERY OPERATIONS Same Store Cemetery
Operations Revenue increased $0.4 million, equal to 4.8%, to $8.1
million in the fourth quarter. However, because Cemetery Same Store
Financial Revenue from trust funds declined by $0.8 million, Total
Cemetery Same Store Revenue declined almost $0.5 million, equal to
5.1% quarter over quarter. The decline in Same Store Cemetery
Financial Revenue was due to financial market conditions and
repositioning of the trust fund portfolio in the fourth quarter. In
the fourth quarter, the Company recognized losses on a substantial
number of investments within its cemetery trust fund portfolio in
order to reinvest the proceeds in high quality, income oriented
securities that are and will continue to yield much higher earnings
and cash flow for the intermediate and long-term. Same Store
Cemetery Field EBITDA declined by $1.3 million for the fourth
quarter, in part because of the $0.8 million decline in financial
revenue, as previously discussed. Additionally, because of the
weakening economy we are increasing our bad debt reserves against
our portfolio of cemetery receivables. For the full year Cemetery
Same Store Operations Revenue declined by $1.6 million to $32.7
million and Cemetery Same Store Field EBITDA declined by $4.4
million. A large portion of the underperformance occurred at
Rolling Hills Memorial Park where a new sales manager has been busy
rebuilding a sales organization that can execute our product sales
program more effectively. Our Acquisition Cemetery portfolio
provided an incremental $2.1 million in revenues and $0.9 million
in Field EBITDA in 2008 compared to 2007. In order to increase
revenues from preneed property sales, Carriage began an initiative
in the third quarter of 2008 to increase both the quantity and
quality of the cemetery sales counselors at our major parks.
Management believes that this hiring initiative was approximately
80% complete at year end and continued hiring emphasis should
achieve appropriate staffing by the end of the first quarter of
2009. General economic weakness continued in some of the Company's
key markets and is having a negative impact on revenues,
particularly preneed property sales. LITIGATION Carriage has
reached a tentative settlement in a class action matter alleging
violations of state and federal wage and hour laws. As a result of
the settlement, there was a $3.5 million charge, including related
legal fees, in the fourth quarter of 2008. OVERHEAD Total Overhead,
excluding special charges, increased to $5.8 million in the fourth
quarter of 2008 from $5.4 million in the fourth quarter of 2007.
For the full year, Total Overhead increased $0.2 million, equal to
1.0%, to $20.1 million, but declined as a percent of total revenue
by 50 basis points to 11.4%. The year over year increases in
overhead were primarily related to upgrading of regional operating
leadership during the last two years. In order to effectively
manage our largest cost during the current economic crisis, the
Company froze the salaries and wages of all employees during
December 2008. INCOME TAXES During the fourth quarter Carriage
revised its effective tax rate for the year 2008 from approximately
39.5% to 48.8%. This change in estimate was due to the lower
taxable income compared to that estimated earlier in the year. The
lower taxable income was due primarily to the litigation charge
previously discussed. A portion ($0.5 million) of the income tax
expense recorded in the fourth quarter represents the additional
amount that would have been recorded during the first three
quarters of 2008 had the revised rate been used. CASH FLOW Carriage
produced Free Cash Flow (defined as cash flow from continuing
operations less maintenance capital expenditures) of $5.6 million
during the fourth quarter of 2008 compared to $8.0 million for the
corresponding 2007 period. The sources and uses of cash for 2008
consisted of the following (in millions): Cash flow from continuing
operations $19.5 Cash used for maintenance capital expenditures
(6.0) Free Cash Flow for 2008 13.5 Cash and liquid investments at
beginning of year 3.4 Cash flow from discontinued operations 0.2
Proceeds from sales of businesses 1.0 Cash used for growth capital
expenditures - funeral homes (3.5) Cash used for growth capital
expenditures - cemeteries (3.4) Financing activities, primarily
share repurchases and debt reduction (6.2) Cash at December 31,
2008 $5.0 SHARE REPURCHASE PROGRAM During June 2008, the Board of
Directors approved the repurchase of $5.0 million of the Company's
common stock. During October 2008 Carriage completed the $5.0
million repurchase program for which it acquired a total of
1,347,469 shares of common stock and an average cost per share of
$3.71. During November 2008 the Board of Directors approved an
additional $5.0 million share repurchase plan. Through January
2009, Carriage had repurchased a total of 522,190 shares of common
stock at an average cost per share of $2.05 under the new plan.
BOARD OF DIRECTORS Joe R. Davis and Gary L. Forbes resigned their
positions as Class I and Class II directors, respectively,
effective February 25, 2009, in order to focus their time and
energy on other matters during the current environment. The Board
of Directors accepted the recommendation of the Corporate
Governance Committee and appointed Richard W. Scott as a Class I
director of the Company and L. William Heiligbrodt as a Class II
director of the Company, effective as of February 25, 2009. Mr.
Scott is a seasoned financial services executive with over thirty
years of capital markets experience. He is currently Vice President
and Chief Investment Officer of Loews Corporation and formerly
Chief Investment Officer, Insurance Portfolio Management, with AIG
Investments. Mr. Heiligbrodt is a private investor and managing
partner in a family business, and also serves on the Board of
Directors of BJ Services. He served in various management positions
with Service Corporation International ("SCI") beginning in
February 1990, including President and Chief Operating Officer
until February 1999. Prior to joining SCI, Mr. Heiligbrodt served
as Vice Chairman and Chief Executive Officer of Wedge Group, Inc.
for five years, which he joined in 1983 after a long career in
banking with Texas Commerce Bank including as President and Chief
Credit Officer. "I want to thank Joe Davis and Gary Forbes for
their service on Carriage's Board of Directors and welcome Richard
Scott and Bill Heiligbrodt, who bring substantial deathcare
operational and financial experience and expertise to our board as
we expect to be faced with substantial opportunity over the next
five years," added Payne. 2009 OUTLOOK The Four Quarter Outlook
ranges for the period ending December 31, 2009 are intended to
approximate what the Company believes will be the sustainable
earning power of its portfolio of deathcare assets over the next
four quarters as our three models are effectively executed.
Performance drivers include funeral contract volumes, cremation
mix, preneed sales, preneed maturities and deliveries, average
revenue per service and sale, Field EBITDA Margins and overhead
items. The Company has assumed no additional acquisitions. Other
variables include the effective tax rate, which is currently
estimated to be in the range of 39% to 42% and the estimated number
of diluted shares outstanding which is currently estimated to be in
the range of 16.5 to 17 million and is subject to changes in the
share price and activity in the share repurchase plan. ROLLING FOUR
QUARTER OUTLOOK - Period Ending December 31, 2009 (amounts in
millions, except per share amounts) Range Revenues $175.0 - $180.0
Field EBITDA $59.5 - $63.0 Field EBITDA Margin 34.0% - 35.0% Total
Overhead $22.0 - $23.0 Consolidated EBITDA $37.0 - $41.0
Consolidated EBITDA Margin 21.1% - 22.8% Interest $18.1
Depreciation & Amortization $11.0 Cash Taxes $1.0 Net Income
$6.4 - $7.1 Diluted Earnings Per Share $0.36 - $0.40 Free Cash Flow
$13.0 - $15.0 Consolidated EBITDA in 2009 is expected to increase
from 2008 for the following reasons: -- Increase in Funeral Field
EBITDA with better execution of the Standards Operating Model --
Increase in Same Store Cemetery EBITDA with higher preneed sales
and less bad debt expense. -- Higher cemetery financial revenue --
Tighter Management of overhead expenses -- Lower special charges
due primarily to elimination of most litigation. Long Term Outlook
- Through 2013 (Base Year 2008) Revenue growth of 6-8% annually,
including acquisitions Consolidated EBITDA growth of 9-11%
annually, including acquisitions Consolidated EBITDA Margin range
of 23-26% Growth internally funded without new debt or equity
CONFERENCE CALL Carriage Services has scheduled a conference call
for tomorrow, Friday, February 27, 2009 at 10:30 a.m. eastern time.
To participate in the call, dial 303-262-2130 at least ten minutes
before the conference call begins and ask for the Carriage Services
conference call. A telephonic replay of the conference call will be
available through March 6, 2009 and may be accessed by dialing
303-590-3000 and using pass code 11126225#. An audio archive will
also be available on the company's website at
http://www.carriageservices.com/ shortly after the call and will be
accessible for approximately 90 days. For more information, please
contact Karen Roan at DRG&E at 713-529-6600 or email . Carriage
Services is a leading provider of death care services and products.
Carriage operates 136 funeral homes in 25 states and 32 cemeteries
in 11 states. USE OF NON-GAAP FINANCIAL MEASURES This press release
uses the following Non-GAAP financial measures "free cash flow and
EBITDA". Both free cash flow and EBITDA are used by investors to
value common stock. The Company considers free cash flow to be an
important indicator of its ability to generate cash for
acquisitions and other strategic investments. The Company has
included EBITDA in this press release because it is widely used by
investors to compare the Company's financial performance with the
performance of other deathcare companies. The Company also uses
Field EBITDA and Field EBITDA Margin to monitor and compare the
financial performance of the individual funeral and cemetery field
businesses. EBITDA does not give effect to the cash the Company
must use to service its debt or pay its income taxes and thus does
not reflect the funds actually available for capital expenditures.
In addition, the Company's presentation of EBITDA may not be
comparable to similarly titled measures other companies report.
Non-GAAP financial measures should be viewed in addition to, and
not as an alternative for, the Company's reported operating results
or cash flow from operations or any other measure of performance as
determined in accordance with GAAP. The Company categorizes its
general and administrative expenses into three categories of
overhead: (1) variable overhead, (2) regional fixed overhead and
(3) corporate fixed overhead. Variable overhead consists of cost
and expense such as incentive compensation which will vary with
profitability or legal expense unrelated to our day to day
operations. Regional fixed overhead and corporate fixed overhead
represent the cost and expenses of our regional operations leaders
and the home office and will not vary as a result of profitability.
Special charges are considered by management to be unusual in
nature, unique and not expected to occur in the normal course of
business. FORWARD-LOOKING STATEMENTS Certain statements made herein
or elsewhere by, or on behalf of, the Company that are not
historical facts are intended to be forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. These statements are based on assumptions that the Company
believes are reasonable; however, many important factors, as
discussed under "Forward-Looking Statements and Cautionary
Statements" in the Company's Annual Report and Form 10-K for the
year ended December 31, 2007, could cause the Company's results in
the future to differ materially from the forward-looking statements
made herein and in any other documents or oral presentations made
by, or on behalf of, the Company. The Company assumes no obligation
to update or publicly release any revisions to forward-looking
statements made herein or any other forward-looking statements made
by, or on behalf of, the Company. A copy of the Company's Form
10-K, and other Carriage Services information and news releases,
are available at http://www.carriageservices.com/. Contacts: Terry
Sanford, SVP & CFO Carriage Services, Inc. 713-332-8400 Ken
Dennard / Kip Rupp / DRG&E / 713-529-6600 - Tables to Follow -
CARRIAGE SERVICES, INC. Selected Financial Data December 31, 2008
(unaudited) Selected Balance Sheet Data: 12/31/2007 12/31/2008 Cash
and short-term investments $3,446 $5,007 Total Senior Debt (a)
138,913 137,732 Days sales in funeral accounts receivable 22.9 21.3
Senior Debt to total capitalization 40.9 41.1 Senior Debt to EBITDA
from continuing operations (rolling twelve months) 3.5 4.3 a)
Senior debt does not include the convertible junior subordinated
debentures. Reconciliation of Non-GAAP Financial Measures: This
press release includes the use of certain financial measures that
are not GAAP measures. The non-GAAP financial measures are
presented for additional information and are reconciled to their
most comparable GAAP measures below. Reconciliation of Net Income
from continuing operations to EBITDA from continuing operations for
the rolling twelve months ended 12/31/2009 presented at the
midpoint of the range identified in the release: Twelve months
ended 12/31/2009 E Net income from continuing operations $6,800
Provision for income taxes 3,100 Pre-tax earnings from continuing
operations 9,900 Net interest expense, including loan cost
amortization 18,100 Depreciation & amortization 11,000 EBITDA
from continuing operations $39,000 Revenue from continuing
operations $177,500 Adjusted EBITDA margin from continuing
operations 22.0% Reconciliation of Non-GAAP Financial Measures,
Continued: Reconciliation of cash provided by operating activities
from continuing operations to free cash flow (in 000s): Three
months Three months ended Ended 12/31/2007 12/31/2008 ----------
---------- Cash provided by operating activities from continuing
operations $9,960 $7,441 Less maintenance capital expenditures from
continuing operations (1,930) (1,794) Free cash flow from
continuing operations $8,030 $5,647 Twelve months Twelve months
ended Ended 12/31/2007 12/31/2008 ---------- ---------- Cash
provided by operating activities from continuing operations $19,277
$19,497 Less maintenance capital expenditures from continuing
operations (7,833) (5,984) Free cash flow from continuing
operations $11,444 $13,513 Reconciliation of diluted earnings per
share to adjusted diluted earnings per share for the fourth quarter
of 2008 (in 000s): As Litigation Tax Rate Reported Charges Change
Adjusted Pre-tax income (loss) from continuing operations $(2,182)
$3,541 $-- $1,359 Income tax (expense) benefit 531 (1,728) 532
(665) Net income (loss) $(1,651) $1,813 $532 $694 Diluted earnings
(loss) per share $(0.09) $0.10 $0.03 $0.04 DATASOURCE: Carriage
Services, Inc. CONTACT: Terry Sanford, SVP & CFO of Carriage
Services, Inc., +1-713-332-8400; or Ken Dennard, , or Kip Rupp, ,
both of DRG&E, +1-713-529-6600, for Carriage Services, Inc. Web
Site: http://www.carriageservices.com/
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