CARRIAGE SERVICES, INC. HOUSTON, Feb. 15, 2017 /PRNewswire/ -- Carriage Services, Inc. (NYSE: CSV) today announced record results for the year ending December 31, 2016, as highlighted below:
Mel Payne, Chief Executive Officer, stated, "Consistent with our annual Good To Great theme of 'Carriage Services 2016: We Choose To Be Great!', our 2016 performance was our eighth straight record annual performance with Total Revenue growth of 2.3% to $248.2 million, Adjusted Consolidated EBITDA growth of 3.6% to $73.7 million, Adjusted Diluted EPS growth of 9.5% to $1.62 and Adjusted Free Cash Flow growth of 7.8% to $47.0 million. Since we launched the Carriage Good To Great Journey at the end of 2011, our initial five year timeframe performance trends have been extraordinary and have produced a Total Shareholder Return of 417% including dividends.
Base Carriage Good To Great Journey(1) CAGR
Year(1)
------
2011 2012 2013 2014 2015 2016 %
---- ---- ---- ---- ---- ---- ---
Total Revenue $182.3 $198.2 $213.1 $226.1 $242.5 $248.2 6.4%
Adjusted Consolidated
EBITDA $48.6 $52.6 $56.0 $61.7 $71.1 $73.7 8.7%
Adjusted Consolidated
EBITDA Margin 26.6% 26.5% 26.3% 27.3% 29.3% 29.7% 2.2%
Adjusted Diluted Earnings
Per Share $0.64 $0.80 $0.98 $1.24(2) $1.48 $1.62 20.4%
Adjusted Free Cash Flow $29.1 $22.9 $36.2 $38.6 $43.7 $47.0 10.1%
Share Price at December 31 $5.60 $11.87 $19.53 $20.95 $24.10 $28.64 38.6%
(1) Data shown for the years ended December 31 in millions except per share and percentage amounts
(2) Adjusted for one time tax benefit of 10 cents per share
In mid-November of 2011 after a major management reorganization on November 4, 2011, which we now refer to as our Good To Great Transition Date, we convened a large group of senior leaders and field operating and Houston support personnel to discuss whether the high performance ideas and concepts related to our Standards Operating Model had evolved over the prior eight years to a degree that could define Carriage as a "Good Company" if led and executed well by our operating leadership at all levels. In preparation for this strategic meeting on Carriage's Ten Year Vision, we all had to read the bestselling business book Good To Great by Jim Collins which was published in 2001.
There was a unanimous and exciting view at this meeting that we had indeed reached an early phase of "Good Company" and that our Managing Partners, Sales Managers and employees across our portfolio of businesses would be inspired to achieve higher levels of sustained operating and financial performance by the launching of a five year Good To Great Journey beginning in 2012 in combination with a new long term (five year) Good To Great value creation incentive program to complement our annual Being The Best Pinnacle Award. Accordingly, we established and then communicated companywide extraordinarily challenging goals over the five year timeframe beginning in 2012 and ending with 2016 consistent with the five year theme of taking Carriage from a Good company in 2012 to one considered Great by 2016 based on total equity market value growth and total shareholder returns over time.
Despite the dynamic and transformational changes in all areas of our company over the past five years, including the turnover, shrinkage and improved alignment of our senior leadership team and Board of Directors, a much lower cost capital structure, and the huge growth in our earning power and equity market value, we nevertheless realized over the last two years that the Good To Great Journey should not cross some artificial finish line at the end of 2016. Instead, we concluded that such a special journey of learning among likeminded individuals in a quest for excellence should never end because there are still so many ways we can get better in every operational and support function area of our company. Our thinking now is that every time we might cross a high performance threshold of "goodness" and be approaching "great," we will redefine what greatness means for our industry and company and simply continue our Good To Great Journey that never ends.
Our year to date and fourth quarter comparative highlights are shown below:
Year Ended December 31, 2016 compared to Year Ended December 31, 2015
-- Record Total Revenue of $248.2 million, an increase of 2.3%;
-- Net Income of $19.6 million, a decrease of 6.1%;
-- GAAP Diluted Earnings Per Share remained flat at $1.12;
-- Record Total Field EBITDA of $104.4 million, an increase of 2.8%;
-- Record Total Field EBITDA Margin up 20 basis points to 42.1%;
-- Record Adjusted Consolidated EBITDA of $73.7 million, an increase of
3.6%;
-- Record Adjusted Consolidated EBITDA Margin up 40 basis points to 29.7%;
-- Record Adjusted Diluted Earnings Per Share of $1.62, an increase of
9.5%; and
-- Record Adjusted Free Cash Flow of $47.0 million, an increase of 7.8%.
Three Months Ended December 31, 2016 compared to Three Months Ended December 31, 2015
-- Record Total Revenue of $62.9 million, an increase of 2.0%;
-- Net Income of $4.1 million, a decrease of 24.1%;
-- GAAP Diluted Earnings Per Share of $0.22, a decrease of 29.0%;
-- Total Field EBITDA remained flat at $27.2 million;
-- Total Field EBITDA Margin down 90 basis points to 43.2%;
-- Record Adjusted Consolidated EBITDA of $18.9 million, an increase of
5.9%;
-- Record Adjusted Consolidated EBITDA Margin up 110 basis points to 30.1%;
-- Adjusted Diluted Earnings Per Share of $0.36, a decrease of 7.7%; and
-- Record Adjusted Free Cash Flow of $12.9 million, an increase of 166.0%.
STANDARDS OPERATING MODEL/CONSOLIDATION PLATFORM CASH EARNING POWER
During the 2008/2009 financial and market crisis, we took control of our preneed trust fund management and initiated an investment repositioning strategy that was enormously successful and led to huge capital gains and much higher levels of recurring income, resulting in substantial overfunding of our trusts compared to regulatory and economic requirements. So in 2011 we made the decision to report Withdrawable Trust Income in our Non-GAAP Trend Reporting as it was not recognizable as GAAP because no death had occurred. After seeking and receiving feedback from institutional investors during 2015 about the complexity and confusion related to our Non-GAAP reporting, we ended beginning in 2016 the practice of reporting Withdrawable Trust Income as well as the adding back of other items to our Non-GAAP results so that our GAAP and Non-GAAP performance would converge as much as possible.
We believe the achievement of an Adjusted Consolidated EBITDA Margin of 29.7% in 2016 is a level that has never been reached in the history of deathcare consolidation by any mature, public company using current accounting methodology. This company and industry milestone confirms our conviction that Carriage has evolved into a superior consolidation, operating and value creation platform for the funeral and cemetery industry.
Yet it turns out that the reflection of Withdrawable Trust Income in our Non-GAAP performance beginning in 2011 also masked the remarkable degree of Carriage's cash earning power transformation as shown below in our five year Good To Great performance trends without the inclusion of Withdrawable Trust Income.
For The Years Ended December 31, CAGR
----
2011 2012 2013 2014 2015 2016 %
---- ---- ---- ---- ---- ---- ---
(in millions except percentage amounts)
Adjusted Consolidated
EBITDA (as reported) $48.6 $52.6 $56.0 $61.7 $71.1 $73.7 8.7%
Withdrawable Trust Income
(pre-tax) $(4.5) $(1.9) $(1.5) $(1.8) $(0.6) $ - n/a
Proforma Adjusted
Consolidated EBITDA $44.1 $50.7 $54.5 $59.9 $70.5 $73.7 10.8%
Proforma Adjusted
Consolidated EBITDA
Margin 24.2% 25.6% 25.6% 26.5% 29.1% 29.7% 4.2%
Adjusted Free Cash Flow
(as reported) $29.1 $22.9 $36.2 $38.6 $43.7 $47.0 10.1%
Withdrawable Trust Income
(actual cash withdrawn/
after-tax) $(6.8) $(0.9) $(1.1) $(0.4) $ - $ - n/a
Proforma Adjusted Free
Cash Flow $22.3 $22.0 $35.1 $38.2 $43.7 $47.0 16.1%
CSV Equity Market Value at
Dec. 31 $103.2 $215.5 $356.6 $387.8 $401.2 $476.6 35.8%
Proforma Adjusted Free
Cash Flow Equity Yield 21.6% 10.2% 9.8% 9.8% 10.9% 9.9%
Over the first five year Good To Great timeframe we have demonstrated the ability to convert approximately 45% of incremental revenue into Proforma Adjusted Consolidated EBITDA (Revenue up $65.9 million equal to 36.1%, and Proforma Adjusted Consolidated EBITDA up $29.6 million equal to 67.1%) and other value creation metrics (Adjusted EPS and Free Cash Flow) because of a 550 basis point increase from 24.2% to 29.7% in our Proforma Adjusted Consolidated EBITDA Margin equal to a remarkable increase of 22.7%. So what does the five year cash earning power trend that culminated in 2016 with the milestone achievement of a Consolidation Platform EBITDA Margin of 29.7% mean for current and prospective long term shareholders of Carriage?
Key five year investment merit takeaways include the following:
-- Increased by almost 23% our debt leverage capacity on the same revenue
base;
-- Increased by 111% our ability to self-finance from Free Cash Flow a more
rapid pace of acquisitions;
-- Substantially increased returns on invested capital of both our existing
Same Store and Acquisition Funeral and Cemetery Portfolios;
-- Increasing margin trends will materially benefit long term investment
returns on future acquisitions that rank high using our Strategic
Methodology whose criteria are predictive of future revenue growth; and
-- Substantially increased our financial flexibility to pursue additional
opportunistic value creation capital allocation decisions.
Key Adjusted Free Cash Flow Equity Yield takeaways:
-- While our Equity Market Value increased 362% and Proforma Adjusted
Consolidated EBITDA Margin improved by 550 basis points, Proforma
Adjusted Free Cash Flow Equity Yield averaged 10.1% in a relatively flat
range over the past five years;
-- Cash earning power Adjusted Consolidated EBITDA Margin of 29.7% is more
than 300 basis points higher than our much larger benchmark competitor;
and
-- Carriage's superior and higher growth consolidation platform, as of
year-end, produces FCF Equity Yield that is over 400 basis points higher
than our much larger benchmark competitor, implying a substantial
valuation discount.
Our ability to increase the cash earning power on each dollar of revenue is directly correlated to the improved execution of our three core models across our consolidation and operating platform by our 4E High Performance Leaders over the last five years. The company and industry milestone of our increasing cash earning power margin is not due to any top-down corporate initiatives to cut costs, under investment in earning power maintenance capital expenditures at our local businesses, or our decision to eliminate a broadly aggressive preneed funeral selling program when we initiated the Standards Operating Model in 2004.
While it is generally accepted within our industry and much of the investment community as "a matter of faith" that an aggressive preneed funeral selling program has positive long term performance benefits, we have seen no specific business data evidence that aggressive preneed funeral selling programs in stand-alone funeral homes (as apposed to funeral and cemetery combination businesses or stand-alone cemeteries) grow funeral market share volumes, revenues and Field EBITDA Margins over the long term. We believe that the sustained high level of execution by our stand-alone funeral business Managing Partners and the increasing funeral field operational and financial performance that has been achieved over the past five years only further validates our business strategy.
A much more comprehensive understanding of the superior cash earning power of Carriage's Consolidation and Operating Platform will best be achieved by a visit to our offices in Houston and/or to some of our wonderful operating businesses for personal engagement with our Managing Partners and employees. But in an attempt to make a breakthrough in investor understanding of Carriage using my 2015 shareholder letter and 2016 quarterly earnings releases, I wrote extensively for the first time this past year about the evolution since 2003 of our highly innovative Standards Operating Model (Second and Third Quarter Earnings Releases) and the conceptual research on "a coherent yet radically decentralized model" begun in the late 1990's by Jeremy Hope, Robin Fraser and Peter Bunce in the United Kingdom whose work was published in the book Beyond Budgeting co-authored by Mr. Fraser and Mr. Hope in 2003 which is continued today by the Beyond Budgeting Round Table.
CARRIAGE GOOD TO GREAT JOURNEY BECOMES BUILT TO LAST COMPANY
During the last quarter of 2016 we reorganized our senior leadership team to capitalize on what we believe will be the greatest strategic opportunity for value creation in our industry over the next five and ten years. There has not been rapid consolidation of our still highly fragmented industry since the mania of the 1990's except for SCI's consolidation of primarily other large consolidators (Alderwoods, Stewart Enterprises, etc.) over the last ten years. Yet we sense that across the country the industry secular revenue challenges caused by people living longer and increasingly choosing cremations compared to traditional burials will lead to an acceleration of consolidation over the next ten years by owners needing a succession plan solution.
We believe that Carriage offers a unique consolidation and operating framework as a succession plan solution - one so different from any company during the past sixty years of consolidation in our industry that many high quality owners and top industry talent think its "Too Good To Be True!"
So at the end of 2016 we reorganized the Strategic and Corporate Development function to achieve highly focused execution of our Strategic Acquisition Model by promoting Shawn Phillips, one of our top operating leaders who is able to credibly explain our unique Standards Operating Model to "best in class" independent business owners across the country using our high performance culture operating language. Shawn joined Carriage ten years ago, has served as Regional Partner of both our Western and Central Regions, and is now leading and building a first class corporate development team and a pipeline of quality acquisition candidates that fit our higher future revenue profile strategic criteria and also align with our Mission and Vision of Being The Best and Five Guiding Principles. As industry consolidation accelerates over the next ten years, we are extraordinarily well positioned to affiliate with more than our fair share of the best remaining independents in the best markets across the country.
As we successfully execute our three core models over the next five to ten years, we fully expect that our share price and equity valuation will reflect our achievements over time as a superior value creation platform in our industry. Our Being The Best Mission and Vision is for "Mr. Market" to increasingly put a premium valuation on our "Compounder Company" shares so that we get recognized publicly by investors as a Built To Last Company.
So I am honored to announce that our next five year Good To Great Journey timeframe theme is Carriage Services 2017 - 2021: From Good To Great to Built To Last.
Lastly and importantly for our company leadership and employees, I am extremely proud to publicly announce our Good To Great annual theme for this year, "Carriage Services 2017: Owning the Future, Accelerating the Good To Great Journey!", concluded Mr. Payne.
CARRIAGE "ROUGHLY RIGHT" SCENARIO 2017 - 2021
Shown below using 2016 full year performance as our new base year is our updated five year financial performance scenario from 2017 through 2021. This scenario is not intended to be a formal management estimate or forecast of future performance because of the large number of unpredictable variables involved in the prediction of just about anything in the future, including uncontrollable and/or unknowable external events. Rather, the intent and goal of this scenario is to reflect the midpoint of a "roughly right" range of future performance as we execute our Standards Operating, 4E Leadership and Strategic Acquisition Models. Consistent with our performance over the first five years of our Good To Great Journey, the 2017 - 2021 scenario clearly demonstrates the future value creation dynamics of the Carriage Operating and Consolidation Platform, i.e, the "trend has been our friend but the best is yet to come!"
Base CARRIAGE "ROUGHLY RIGHT" SCENARIO CAGR
Year(1) 2017 - 2021(1)
------
2016 2017 2018 2019 2020 2021 %
---- ---- ---- ---- ---- ----
Total Revenue $248.2 $272.4 $291.0 $311.1 $332.2 $356.5 7.5%
Adjusted Consolidated
EBITDA $73.7 $83.0 $89.7 $97.1 $105.2 $113.7 9.1%
Adjusted Consolidated
EBITDA Margin 29.7% 30.4% 30.8% 31.2% 31.7% 31.9% 1.4%
(1) Data shown for the years ended December 31 in millions except percentage amounts
The Carriage "Roughly Right" Financial Performance Scenario over the five year timeframe 2017 - 2021 shown above reflects a continuation of the high performance trends of our Good To Great Journey from 2012 - 2016. We believe these High and Sustainable Quantitative Performance Trends are driven by the Qualitative Elements of our company, i.e. the ideas and concepts of Carriage's High Performance Culture Framework highlighted in the next three sections of this release. The Qualitative Elements of Carriage are the "center of the universe" reasons we have evolved over the last thirteen years into a high performance culture company that "just happens to be in the funeral and cemetery business!"
CARRIAGE FRAMEWORK OF HIGH PERFORMANCE IDEAS AND CONCEPTS
Carriage's High Performance Culture Framework is designed around a few simple high performance concepts related to our view that over the last fifty plus years the consolidation and operation of family owned funeral homes and cemeteries by public companies has been over managed for short term yet unsustainable maximum profit and under led for long term and sustainable market share and profitability growth. Our three core models, comprised of our Standards Operating, 4E Leadership, and Strategic Acquisition Models, are premised on the following passionate convictions about our company, business and industry:
-- High Performance Ideas and Concepts of Carriage are 100% aligned with
our Mission of Being The Best and Five Guiding Principles, which are the
Qualitative Elements that drive our High and Sustainable Quantitative
Performance;
-- Words in the form of ideas, concepts, high performance standards,
recognition, Mission, Vision and Guiding Principles matter greatly to
people with exceptional talent, especially those who are part of high
performance teams - so over time we have developed a unique Carriage
High Performance Culture Language;
-- Nature of each of our businesses is high value personal service and
sales delivered locally through highly motivated, skilled and culturally
aligned leaders and employees fully involved in their communities;
-- Nature of each market in which we operate is highly competitive for
market share with each market and Carriage business being unique as to
its competitive opportunities and challenges that are not prone to
centralized solutions or top down initiatives;
-- Weak leadership locally will make a healthy and/or dominant business
weaker in competitive standing (market share) over time, whereas strong
4E Leadership and the "Right Quality of Staff" in a Carriage business
will produce high and sustainable performance from a good business
almost overnight, consistent with the high performance concept of First
Who, Then What;
-- A few simple high operating performance standards that do not change
over time weighted heavily toward long term growth in funeral volumes
and preneed cemetery property sales, which are the primary drivers of
locally produced economic value creation through the financial dynamic
of operating leverage, attracts the top entrepreneurial and competitive
talent to Carriage businesses that do not need to be managed - just
supported, recognized and rewarded like a partner; and
-- Nature of our industry is akin to "birds of a feather flock together",
as we have found that making Carriage highly selective on acquisitions
and talent is attractive to the best remaining independent businesses
and top entrepreneurial talent who want to join an elite club of "Only
The Best" Carriage businesses and Managing Partners.
CARRIAGE GOOD TO GREAT HIGH PERFORMANCE HEROES
At the beginning of 2012 we created a new five year incentive award with the name Good To Great Award that was 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 over the last five years 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 first Good To Great Award winners for the five year timeframe that began in 2012 and ended at year-end 2016, as listed below:
Kristi Ah You Franklin & Downs Funeral Home; Modesto,
CA
James Bass Twin Cities Cremation Services and
Funeral Home; Niceville, FL; and Emerald
Coast Funeral Home/McLaughlin Mortuary;
Fort Walton Beach, FL
Kyle Incardona Hillier Funeral Homes; Bryan, TX
Steve Mora Conejo Mountain Funeral Home; Camarillo,
CA
Ken Summers P.L. Fry & Son Funeral Home; Manteca, CA
Robert Maclary Kent-Forest Lawn Funeral Home; Panama
City, FL
Chad Woody Watson-King Funeral Homes; Rockingham, NC
Brad Shemwell Latham Funeral Home; Elkton, KY
Michael Page Allison Funeral Home; Liberty, TX
Patty Drake Drake Whaley McCarty Funeral Home;
Cynthiana, KY
Andy Shemwell Maddux-Fuqua-Hinton Funeral Homes;
Hopkinsville, KY
Tim Hauck Cape Coral Group; Cape Coral, FL
The above group of Good To Great Award winners along with spouses/significant others or a guest will be hosted by our senior leadership team and spouses on our first Good To Great Awards trip on Wednesday, March 1, 2017 to Sunday, March 5, 2017 to the world class and unique (built into the tree tops of a tropical rain forest next to the active Arenal Volcano) Nayara Springs Villas in Arenal Nayara, Costa Rica. Congratulations to all, as you deserve to be treated as the Kings and Queens of sustained high Being The Best Standards Achievement that you are! You have led us as high performance role models over the past five years and have truly set the Performance Standard for what the Carriage Good To Great Journey is all about.
CARRIAGE 2016 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 35 Carriage Being The Best Pinnacle Of Service Award winners for 2016:
James Terry James J. Terry Funeral Home; Downingtown,
PA
James Bass McLaughlin Twin Cities Funeral Home;
Niceville, FL; and Emerald Coast/
McLaughlin Mortuary; Ft. Walton Beach, FL
Bill Martinez Stanfill Funeral Home; Miami, FL
Richard Munoz Connolly & Taylor Funeral Directors;
Martinez, CA
Benjamin Friberg Heritage Funeral Home and Crematory; Ft.
Oglethorpe, GA
Brad Shemwell Latham Funeral Home; Elkton, KY
Joseph Waterwash Baird-Case Jordan-Fannin Funeral Home &
Cremation Service; Ft. Lauderdale, FL
Jason Higginbotham Lakeland Funeral Home; Lakeland, FL
Jeff Moore Sterling-White Funeral Home; Crosby, TX
Kristi AhYou Franklin & Downs Funeral Homes; Modesto,
CA
Kyle Incardona Hillier Funeral Home; Bryan, TX
Jason Cox Lane Funeral Home -South Crest Chapel;
Rossville, GA
Michael Nicosia Chapel of San Ramon Valley, Danville, CA;
and Ouimet Brothers Concord Funeral
Directors; Concord, CA
Robert Maclary Kent-Forest Lawn Funeral Home; Panama
City, FL
Tim Hauck Cape Coral Group; Cape Coral, FL
Andrew Cumby Cumby Family Funeral Homes; High Point, NC
Chris Duhaime Funk Funeral Home; Bristol, CT
Chris Chetsas Cataudella Funeral Home; Methuen, MA
John Fitzpatrick Donohue Cecere Funeral Directors;
Westbury, NY
Chad Woody Richmond County Memorial Park; Rockingham,
NC
Ken Summers P.L. Fry & Son Funeral Home; Manteca, CA
Matthew Simpson Fry Memorial Chapel; Tracy, CA
Justin Luyben Evans-Brown Mortuaries & Crematory; Sun
City, CA
Curtis Ottinger Heritage Funeral Home; Chattanooga, TN
Verdo Werre McNary-Moore Funeral Service; Colusa, CA
Andy Shemwell Maddux-Fuqua-Hinton Funeral Home;
Hopkinsville, KY
Steve Mora Conejo Mountain Memorial Park; Camarillo,
CA; and Conejo Mountain Funeral Home;
Camarillo, CA
Patty Drake Drake Whaley McCarty Funeral Home;
Cynthiana, KY
Brian Binion Steen Funeral Homes; Ashland, KY
Roger Allen LaGrone-Blackburn-Shaw Funeral
Directors; Amarillo, TX
Jeff Seaman Dwayne R. Spence Funeral Home; Canal
Winchester, OH
Ashley Vella Deegan Funeral Chapels; Escalon, CA
Mike Conner Conner-Westbury Funeral Home; Griffin, CA
Tim Miller Fuller Funeral Home & Cremation Service
(East); Naples, FL
Kim Borselli Fuller Funeral Home & Cremation Service
(Pine Ridge); Naples, FL
The above group of Pinnacle Of Service Award winners along with spouses/significant others or a guest will be hosted by our senior leadership team and spouses on a trip on Thursday, May 4, 2017 to Sunday, May 7, 2017 to Playa del Carmen, Mexico. Congratulations to all, as you deserve to be treated as the Kings and Queens of Being The Best Standards Achievement that you are! You have led us as high performance role models during 2016 and have truly set the Performance Standard for what the Carriage Good To Great Journey is all about.
TRUST FUND PERFORMANCE
Shown below are consolidated performance metrics for the combined trust fund portfolios (preneed funeral, cemetery merchandise and services and cemetery perpetual care) at key dates.
Investment Performance
Investment
Performance(1) Index Performance
Discretionary Total Trust S&P 500 High Yield Index 70/30 index
Stock Index
Benchmark(2)
-----------
1 year ended 12/31/16 19.7% 18.3% 12.0% 17.6% 15.9%
2 years ended 12/31/16 16.0% 15.7% 13.5% 12.0% 12.4%
3 years ended 12/31/16 25.7% 24.8% 28.9% 14.8% 19.0%
4 years ended 12/31/16 43.6% 42.0% 70.6% 23.4% 37.6%
5 years ended 12/31/16 72.8% 66.3% 97.8% 42.6% 59.2%
(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, 2016
(in thousands)
Discretionary Total
Trust Funds Trust Funds
Asset Class MV % MV %
----------- --- --- --- ---
Cash $28,612 14% $43,924 19%
Equities 36,546 19% 38,975 17%
Fixed Income 127,813 65% 138,952 62%
Other/Insurance 3,317 2% 3,510 2%
Total Portfolios $196,288 100% $225,361 100%
======== === ======== ===
The performance of our preneed trust fund portfolio in 2016 marked the successful completion of our portfolio repositioning strategy that we implemented at the beginning of the year. Our strategy of selecting individual securities for a long-term investment horizon was the primary driver of our performance for the year. Our long-term holdings in regional bank and insurance company TARP warrants and energy infrastructure companies significantly outperformed in 2016, particularly after the election.
Our trust fund portfolio repositioning strategy enabled us to accomplish our goals to improve the credit quality and liquidity of our fixed income portfolio, while increasing the amount of recurring current income in the portfolio. Recurring annual income increased by 15% or roughly $1.5 million in our discretionary trust fund portfolio in 2016. The majority of our repositioning strategy within our fixed income portfolio was executed in the first half of the year and proved to be successful with an average total return of 22% for new fixed income purchases during 2016.
2016 also marked the eighth full year that Carriage has directly managed our discretionary trust fund portfolio and the sixth year we outperformed our reported benchmark. The performance of our discretionary trust fund portfolio has exceeded our 70/30 High Yield/S&P 500 benchmark by 33% for the eight year period. Given our successful long term relative investment returns, we believe we have developed an investment process that will benefit Carriage into the future.
ADJUSTED FREE CASH FLOW
We produced Adjusted Free Cash Flow from operations for the three months and years ended December 31, 2016 of $12.9 million and $47.0 million, respectively, compared to Adjusted Free Cash Flow from operations of $4.9 million and $43.7 million for the corresponding periods in 2015. A reconciliation of Cash Flow Provided by Operations to Adjusted Free Cash Flow for the three months and years ended December 31, 2015 and 2016 is as follows (in thousands):
Three Months Ended Years Ended
December 31, December 31,
2015 2016 2015 2016
---- ---- ---- ----
Cash flow
provided by
operations $6,916 $15,177 $49,904 $49,457
Cash used for
maintenance
capital
expenditures (2,795) (2,239) (9,735) (7,402)
------ ------ ------ ------
Free Cash Flow $4,121 $12,938 $40,169 $42,055
Plus: Incremental
Special Items:
Acquisition and
divestiture
expenses 37 - 614 516
Severance costs 151 - 959 3,979
Consulting fees 555 - 1,913 496
Adjusted Free
Cash Flow $4,864 $12,938 $43,655 $47,046
====== ======= ======= =======
ROLLING FOUR QUARTER OUTLOOK
The Rolling Four Quarter Outlook ("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, 2017 unless we have a signed Letter of Intent and 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 Rolling Four Quarter Outlook performance as we execute our Standards Operating, Strategic Acquisition and 4E Leadership Models over time. Similarly, we self-publish a Company and Investment Profile, available on our website, that includes a Five Year "Roughly Right Scenario" of our future performance which together with our Five Year Trend Report provides investors a ten year past and future profile of our financial value creation dynamics and condition, making it easier to judge whether our "trends will continue to be the friend" of long term investors.
ROLLING FOUR QUARTER OUTLOOK - Period Ending December 31, 2017
Range
(in millions, except per share amounts)
--------------------------------------
Revenues $263 - $267
Adjusted
Consolidated
EBITDA $79 - $83
Adjusted Net
Income $30 - $32
Adjusted Basic
Earnings Per
Share(1) $1.84 - $1.88
Adjusted Diluted
Earnings Per
Share(1) $1.73 - $1.77
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 cemetery Standards Operating Model, market volatility and changes in Federal Reserve monetary policy. Revenues, Adjusted Consolidated EBITDA, Adjusted Net Income, Adjusted Basic Earnings Per Share and Adjusted Diluted Earnings Per Share for the four quarter period ending December 31, 2017 are expected to improve relative to the trailing four quarter period ended December 31, 2016 due to increases in our existing Funeral Home and Cemetery portfolio and modest decreases in overhead as a percentage of revenue.
(1) The Rolling Four Quarter Outlook
on Adjusted Basic Earnings Per
Share and 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 subordinated
notes and outstanding and
exercisable stock options.
CONFERENCE CALL AND INVESTOR RELATIONS CONTACT
Carriage Services has scheduled a conference call for tomorrow, February 16, 2017 at 9:30 a.m. central time. To participate in the call, please dial 866-516-3867 (ID-64210285) and ask for the Carriage Services conference call. A replay of the conference call will be available through February 20, 2017 and may be accessed by dialing 855-859-2056 (ID-64210285). 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,
2015 2016 % Change 2015 2016 % Change
---- ---- -------- ---- ---- --------
Same Store Contracts
Atneed Contracts 5,468 5,270 (3.6%) 21,802 21,428 (1.7%)
Preneed Contracts 1,309 1,288 (1.6%) 5,346 5,208 (2.6%)
----- ----- ----- ----- ----- -----
Total Same Store Funeral
Contracts 6,777 6,558 (3.2%) 27,148 26,636 (1.9%)
Acquisition Contracts
Atneed Contracts 1,180 1,549 31.3% 4,497 5,555 23.5%
Preneed Contracts 225 266 18.2% 982 969 (1.3%)
--- --- ---- --- --- -----
Total Acquisition Funeral
Contracts 1,405 1,815 29.2% 5,479 6,524 19.1%
Total Funeral Contracts 8,182 8,373 2.3% 32,627 33,160 1.6%
===== ===== === ====== ====== ===
Funeral Operating Revenue
Same Store Revenue $35,913 $35,010 (2.5%) $142,690 $140,459 (1.6%)
Acquisition Revenue 8,758 11,282 28.8% 33,678 40,165 19.3%
----- ------ ---- ------ ------ ----
Total Funeral Operating
Revenue $44,671 $46,292 3.6% $176,368 $180,624 2.4%
Cemetery Operating Revenue
Same Store Revenue $11,076 $10,670 (3.7%) $43,336 $45,441 4.9%
Acquisition Revenue 795 872 9.7% 3,321 3,506 5.6%
--- --- --- ----- ----- ---
Total Cemetery Operating
Revenue $11,871 $11,542 (2.8%) $46,657 $48,947 4.9%
Financial Revenue
Preneed Funeral Commission
Income $413 $291 (29.5%) $1,484 $1,429 (3.7%)
Preneed Funeral Trust
Earnings 2,007 1,866 (7.0%) 7,966 7,348 (7.8%)
Cemetery Trust Earnings 2,238 2,382 6.4% 8,440 8,004 (5.2%)
Preneed Cemetery Finance
Charges 410 491 19.8% 1,587 1,848 16.4%
Total Financial Revenue $5,068 $5,030 (0.7%) $19,477 $18,629 (4.4%)
Total Revenue $61,610 $62,864 2.0% $242,502 $248,200 2.3%
======= ======= === ======== ======== ===
Field EBITDA
Same Store Funeral Field
EBITDA $14,497 $14,296 (1.4%) $54,620 $54,706 0.2%
Same Store Funeral Field
EBITDA Margin 40.4% 40.8% 40 bp 38.3% 38.9% 60 bp
Acquisition Funeral Field
EBITDA 3,743 4,534 21.1% 13,693 16,536 20.8%
Acquisition Funeral Field
EBITDA Margin 42.7% 40.2% (250 bp) 40.7% 41.2% 50 bp
---- ---- ------- ---- ---- -----
Total Funeral Field EBITDA $18,240 $18,830 3.2% $68,313 $71,242 4.3%
Total Funeral Field EBITDA
Margin 40.8% 40.7% (10 bp) 38.7% 39.4% 70 bp
---- ---- ------ ---- ---- -----
Same Store Cemetery Field
EBITDA $3,892 $3,283 (15.6%) $14,045 $14,499 3.2%
Same Store Cemetery Field
EBITDA Margin 35.1% 30.8% (430 bp) 32.4% 31.9% (50 bp)
Acquisition Cemetery Field
EBITDA 285 310 8.8% 1,088 1,168 7.4%
Acquisition Cemetery Field
EBITDA Margin 35.8% 35.6% (20 bp) 32.8% 33.3% 50 bp
---- ---- ------ ---- ---- -----
Total Cemetery Field
EBITDA $4,177 $3,593 (14.0%) $15,133 $15,667 3.5%
Total Cemetery Field
EBITDA Margin 35.2% 31.1% (410 bp) 32.4% 32.0% (40 bp)
---- ---- ------- ---- ---- ------
Funeral Financial EBITDA $2,161 $1,947 (9.9%) $8,339 $7,941 (4.8%)
Cemetery Financial EBITDA 2,585 2,799 8.3% 9,754 9,563 (2.0%)
----- ----- --- ----- ----- -----
Total Financial EBITDA $4,746 $4,746 -% $18,093 $17,504 (3.3%)
Total Financial EBITDA
Margin 93.6% 94.4% 80 bp 92.9% 94.0% 110 bp
---- ---- ----- ---- ---- ------
Total Field EBITDA $27,163 $27,169 -% $101,539 $104,413 2.8%
Total Field EBITDA Margin 44.1% 43.2% (90 bp) 41.9% 42.1% 20 bp
OPERATING AND FINANCIAL TREND REPORT
(IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)
Three Months Ended December 31, Years Ended December 31
2015 2016 % Change 2015 2016 % Change
---- ---- -------- ---- ---- --------
Overhead
Total Variable Overhead $4,109 $2,450 (40.4%) $10,878 $13,122 20.6%
Total Regional Fixed
Overhead 886 1,008 13.8% 3,435 3,667 6.8%
Total Corporate Fixed
Overhead 5,081 4,991 (1.8%) 20,354 19,109 (6.1%)
----- ----- ----- ------ ------ -----
Total Overhead $10,076 $8,449 (16.1%) $34,667 $35,898 3.6%
Overhead as a percentage
of Revenue 16.4% 13.4% (300 bp) 14.3% 14.5% 20 bp
Consolidated EBITDA $17,087 $18,720 9.6% $66,872 $68,515 2.5%
Consolidated EBITDA Margin 27.7% 29.8% 210 bp 27.6% 27.6% 0 bp
---- ---- ------ ---- ---- ----
Other Expenses and Interest
Depreciation &
Amortization $3,656 $3,923 7.3% $13,780 $15,421 11.9%
Non-Cash Stock
Compensation 996 584 (41.4%) 4,444 2,890 (35.0%)
Interest Expense 2,888 3,016 4.4% 10,559 11,738 11.2%
Accretion of Discount on
Convertible Subordinated
Notes 900 1,008 12.0% 3,454 3,870 12.0%
Loss on Early
Extinguishment of Debt - - - 567
Other, Net (9) 1,808 45 1,788
--- ----- --- -----
Pre-Tax Income $8,656 $8,381 (3.2%) $34,590 $32,241 (6.8%)
Provision for Income Taxes 3,222 3,137 13,737 12,682
Tax Adjustment Related to
Certain Discrete Items - 1,117 - (22)
--- ----- --- ---
Net Tax Provision 3,222 4,254 13,737 12,660
----- ----- ------ ------
GAAP Net Income $5,434 $4,127 (24.1%) $20,853 $19,581 (6.1%)
====== ====== ====== ======= ======= =====
Special Items, Net of Tax except for **
Withdrawable Trust Income $ - n/a $366 n/a
Acquisition and
Divestiture Expenses 24 120 405 456
Severance and Retirement
Costs 100 - 633 2,587
Consulting Fees 367 - 1,265 323
Accretion of Discount on
Convertible Subordinated
Notes ** 900 1,008 3,454 3,870
Loss on Early
Extinguishment of Debt - - - 369
Gain/Loss on Sale of
Assets - 1,350 - 1,152
Other Special Items 14 - 244 -
Tax Adjustment from Prior
Period ** - - 141 -
--- --- --- ---
Sum of Special Items, Net
of Tax $1,405 $2,478 76.4% $6,508 $8,757 34.6%
Adjusted Net Income $6,839 $6,605 (3.4%) $27,361 $28,338 3.6%
Adjusted Net Profit Margin 11.1% 10.5% (60 bp) 11.3% 11.4% 10 bp
---- ---- ------ ---- ---- -----
Adjusted Basic Earnings
Per Share $0.40 $0.40 -% $1.52 $1.71 12.5%
Adjusted Diluted Earnings
Per Share $0.39 $0.36 (7.7%) $1.48 $1.62 9.5%
GAAP Basic Earnings Per
Share $0.32 $0.25 (21.9%) $1.16 $1.18 1.7%
GAAP Diluted Earnings Per
Share $0.31 $0.22 (29.0%) $1.12 $1.12 -%
Weighted Average Basic
Shares Outstanding 16,828 16,554 17,791 16,515
Weighted Average Diluted
Shares Outstanding 17,499 18,370 18,313 17,460
Reconciliation to Adjusted Consolidated
EBITDA
Consolidated EBITDA $17,087 $18,720 9.6% $66,872 $68,515 2.5%
Withdrawable Trust Income - n/a 555 n/a
Acquisition and
Divestiture Expenses 37 185 614 701
Severance and Retirement
Costs 151 - 959 3,979
Consulting Fees 555 - 1,913 496
Other Special Items 20 - 220 -
Adjusted Consolidated
EBITDA $17,850 $18,905 5.9% $71,133 $73,691 3.6%
Adjusted Consolidated
EBITDA Margin 29.0% 30.1% 110 bp 29.3% 29.7% 40 bp
---- ---- ------ ---- ---- -----
CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31,
2015 2016
---- ----
ASSETS
Current assets:
Cash and cash equivalents $535 $3,286
Accounts receivable, net 18,181 18,860
Inventories 5,654 6,147
Prepaid expenses 4,684 2,640
Other current assets 4,707 2,034
----- -----
Total current assets 33,761 32,967
Preneed cemetery trust investments 63,291 69,696
Preneed funeral trust investments 85,553 89,240
Preneed receivables, net 27,998 30,383
Receivables from preneed trusts 13,544 14,218
Property, plant and equipment, net 214,874 235,113
Cemetery property, net 75,597 76,119
Goodwill 264,416 275,487
Intangible and other non-current assets 10,978 14,957
Cemetery perpetual care trust investments 43,127 46,889
------ ------
Total assets $833,139 $885,069
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt and capital
lease obligations $12,236 $13,267
Accounts payable 7,917 10,198
Other liabilities 524 717
Accrued liabilities 16,541 20,091
Total current liabilities 37,218 44,273
Long-term debt, net of current portion 103,495 137,862
Revolving credit facility 91,514 66,542
Convertible subordinated notes due 2021 115,227 119,596
Obligations under capital leases, net of current
portion 2,875 2,630
Deferred preneed cemetery revenue 56,721 54,631
Deferred preneed funeral revenue 31,748 33,198
Deferred tax liability 39,956 40,555
Other long-term liabilities 5,531 2,567
Deferred preneed cemetery receipts held in trust 63,291 69,696
Deferred preneed funeral receipts held in trust 85,553 89,240
Care trusts' corpus 42,416 46,290
------ ------
Total liabilities 675,545 707,080
------- -------
Commitments and contingencies:
Stockholders' equity:
Common stock, $.01 par value; 80,000,000 shares
authorized; 22,497,873 and 22,490,855 issued as
of December 31, 2015 and 2016, respectively 225 225
Additional paid-in capital 214,250 215,064
Retained earnings 3,385 22,966
Treasury stock, at cost; 5,849,316 shares at
December 31, 2015 and 2016, respectively (60,266) (60,266)
------- -------
Total stockholders' equity 157,594 177,989
------- -------
Total liabilities and stockholders' equity $833,139 $885,069
======== ========
CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
----------
Three Months Ended Years Ended
December 31,
December 31,
2015 2016 2015 2016
---- ---- ---- ----
Revenues:
Funeral $47,091 $48,449 $185,818 $189,401
Cemetery 14,519 14,415 56,684 58,799
------ ------ ------
61,610 62,864 242,502 248,200
Field costs and expenses:
Funeral 26,690 27,672 109,166 110,218
Cemetery 7,757 8,023 31,797 33,569
Depreciation and
amortization 3,220 3,560 12,034 13,919
Regional and unallocated
funeral and cemetery costs 4,252 2,297 11,997 10,844
41,919 41,552 164,994 168,550
------ ------ ------- -------
Gross profit 19,691 21,312 77,508 79,650
Corporate costs and expenses:
General, administrative and
other 6,820 6,736 27,114 27,944
Home office depreciation
and amortization 436 363 1,746 1,502
7,256 7,099 28,860 29,446
----- ----- ------ ------
Operating income 12,435 14,213 48,648 50,204
Interest expense (2,888) (3,016) (10,559) (11,738)
Accretion of discount on
convertible subordinated
notes (900) (1,008) (3,454) (3,870)
Loss on early
extinguishment of debt - - - (567)
Other, net 9 (1,808) (45) (1,788)
Income before income taxes 8,656 8,381 34,590 32,241
Provision for income taxes (3,222) (3,137) (13,737) (12,682)
Income tax (expense)
benefit related to certain
discrete items - (1,117) - 22
--- ------ --- ---
Net provision for income
taxes (3,222) (4,254) (13,737) (12,660)
------ ------- -------
Net income $5,434 $4,127 $20,853 $19,581
====== ====== ======= =======
Basic earnings per common
share: $0.32 $0.25 $1.16 $1.18
===== ===== ===== =====
Diluted earnings per common
share: $0.31 $0.22 $1.12 $1.12
===== ===== ===== =====
Dividends declared per
common share $0.025 $0.050 $0.100 $0.150
====== ====== ====== ======
Weighted average number of common and common
equivalent shares outstanding:
Basic 16,828 16,554 17,791 16,515
Diluted 17,499 18,370 18,313 17,460
CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
2015 2016
---- ----
Cash flows from operating activities:
Net income $20,853 $19,581
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 13,780 15,421
Provision for losses on accounts
receivable 1,679 2,098
Stock-based compensation expense 4,444 3,229
Deferred income tax expense 3,035 4,855
Amortization of deferred financing
costs 921 824
Accretion of discount on convertible
subordinated notes 3,454 3,870
Loss on early extinguishment of debt - 567
Net (gain) loss on sale of businesses
and disposal of other assets (49) 2,077
Impairment of intangible assets - 145
Changes in operating assets and
liabilities that provided (required)
cash:
Accounts and preneed receivables (2,310) (5,162)
Inventories and other current assets 2,582 1,995
Intangible and other non-current assets 150 (1,155)
Preneed funeral and cemetery trust
investments 25,543 (14,528)
Accounts payable 1,445 2,112
Accrued and other liabilities 509 202
Deferred preneed funeral and cemetery
revenue 329 (640)
Deferred preneed funeral and cemetery
receipts held in trust (26,461) 13,966
------- ------
Net cash provided by operating
activities 49,904 49,457
Cash flows from investing activities:
Acquisitions and land for new
construction (9,725) (26,556)
Purchase of land and buildings
previously leased (6,080) (6,258)
Net proceeds from sale of businesses
and other assets 65 4,385
Capital expenditures (29,744) (16,846)
------- -------
Net cash used in investing activities (45,484) (45,275)
Cash flows from financing activities:
Borrowings from the revolving credit
facility 103,600 71,200
Payments against the revolving credit
facility (51,500) (96,100)
Borrowings from the term loan 1,562 39,063
Payments against the term loan (10,937) (11,250)
Payments on long-term debt and
obligations under capital leases (1,014) (1,789)
Proceeds from the exercise of stock
options and employee stock purchase
plan contributions 758 870
Dividends on common stock (1,819) (2,492)
Payment of loan origination costs (13) (717)
Purchase of treasury stock (44,999) -
Excess tax benefit (deficiency) of
equity compensation 64 (216)
--- ----
Net cash used in financing activities (4,298) (1,431)
Net increase in cash and cash
equivalents 122 2,751
Cash and cash equivalents at beginning
of year 413 535
--- ---
Cash and cash equivalents at end of
year $535 $3,286
==== ======
NON-GAAP FINANCIAL MEASURES
This press release uses Non-GAAP financial measures to present the financial performance of the Company. 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 because such results help investors compare our results to previous periods and provide insights into underlying trends in our business. 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", "Adjusted Basic Earnings Per Share" and "Adjusted Diluted Earnings Per Share" in this press release. These financial measurements are defined as 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 taxed at the federal statutory rate of 34 percent for
the three months and year ended December 31, 2015 and 35 percent for the
three months and year ended December 31, 2016, except for the accretion
of the discount on Convertible Notes as this is a non-tax deductible
item and the tax adjustment from prior period.
-- Adjusted Net Income is defined as net income plus adjustments for
Special Items.
-- 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.
-- 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 cash-related Special Items, less cash for maintenance
capital expenditures.
-- Funeral Field EBITDA is defined as Funeral Gross Profit, which is
funeral revenue minus funeral field costs and expenses, less
depreciation and amortization, regional and unallocated funeral overhead
expenses and Funeral Financial EBITDA.
-- Cemetery Field EBITDA is defined as Cemetery Gross Profit, which is
cemetery revenue minus cemetery field costs and expenses, less
depreciation and amortization, regional and unallocated cemetery
overhead expenses and Cemetery Financial EBITDA.
-- 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 less depreciation and
amortization, regional and unallocated overhead expenses.
-- Total Field EBITDA Margin is defined as Total Field EBITDA as a
percentage of 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.
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, 2015 and 2016 (in thousands):
Three Months Ended Years Ended
December 31,
December 31,
2015 2016 2015 2016
---- ---- ---- ----
Net Income $5,434 $4,127 $20,853 $19,581
Special Items, Net of Tax,
except for **
Withdrawable Trust Income - n/a 366 n/a
Acquisition and Divestiture
Expenses 24 120 405 456
Severance and Retirement Costs 100 - 633 2,587
Consulting Fees 367 - 1,265 323
Accretion of Discount on
Convertible Subordinated
Notes ** 900 1,008 3,454 3,870
Loss on Early Extinguishment
of Debt - - - 369
Gain/Loss on Sale of Assets - 1,350 - 1,152
Other Special Items 14 - 244 -
Tax Adjustment from Prior
Period ** - - 141 -
Total Special Items affecting
Net Income $1,405 $2,478 $6,508 $8,757
------ ------ ------ ------
Adjusted Net Income $6,839 $6,605 $27,361 $28,338
====== ====== ======= =======
Reconciliation of Net Income to Consolidated EBITDA and Adjusted Consolidated EBITDA for the three months and years ended December 31, 2015 and 2016 (in thousands):
Three Months Ended Years Ended
December 31,
December 31,
2015 2016 2015 2016
---- ---- ---- ----
Net Income $5,434 $4,127 $20,853 $19,581
Net Tax Provision 3,222 4,254 13,737 12,660
----- ----- ------ ------
Pre-Tax Income $8,656 $8,381 $34,590 $32,241
Interest Expense 2,888 3,016 10,559 11,738
Accretion of Discount on
Convertible Subordinated
Notes 900 1,008 3,454 3,870
Loss on Early
Extinguishment of Debt - - - 567
Non-Cash Stock Compensation 996 584 4,444 2,890
Depreciation & Amortization 3,656 3,923 13,780 15,421
Other, Net (9) 1,808 45 1,788
Consolidated EBITDA $17,087 $18,720 $66,872 $68,515
------- ------- ------- -------
Adjusted For:
Withdrawable Trust Income - n/a 555 n/a
Acquisition and Divestiture
Expenses 37 185 614 701
Severance and Retirement
Costs 151 - 959 3,979
Consulting Fees 555 - 1,913 496
Other Special Items 20 - 220 -
---
Adjusted Consolidated
EBITDA $17,850 $18,905 $71,133 $73,691
======= ======= ======= =======
Revenue $61,610 $62,864 $242,502 $248,200
Adjusted Consolidated
EBITDA Margin 29.0% 30.1% 29.3% 29.7%
Reconciliation of Funeral and Cemetery Gross Profit to Field EBITDA for the three months and years ended December 31, 2015 and 2016 (in thousands):
Funeral Field
EBITDA Three Months Ended Years Ended
December 31,
December 31,
2015 2016 2015 2016
---- ---- ---- ----
Gross Profit
(GAAP) $14,885 $16,478 $59,434 $61,620
Depreciation &
Amortization 2,038 2,437 7,614 8,891
Regional &
Unallocated
Costs 3,478 1,862 9,604 8,672
Funeral
Financial
EBITDA (2,161) (1,947) (8,339) (7,941)
------ ------ ------ ------
Funeral Field
EBITDA $18,240 $18,830 $68,313 $71,242
======= ======= ======= =======
Cemetery Field
EBITDA Three Months Ended Years Ended
December 31,
December 31,
2015 2016 2015 2016
---- ---- ---- ----
Gross Profit
(GAAP) $4,806 $4,834 $18,074 $18,030
Depreciation &
Amortization 1,182 1,123 4,420 5,028
Regional &
Unallocated
Costs 774 435 2,393 2,172
Cemetery
Financial
EBITDA (2,585) (2,799) (9,754) (9,563)
------ ------ ------ ------
Cemetery Field
EBITDA $4,177 $3,593 $15,133 $15,667
====== ====== ======= =======
Total Field
EBITDA Three Months Ended Years Ended
December 31,
December 31,
2015 2016 2015 2016
---- ---- ---- ----
Funeral Field
EBITDA $18,240 $18,830 $68,313 $71,242
Cemetery Field
EBITDA 4,177 3,593 15,133 15,667
Funeral
Financial
EBITDA 2,161 1,947 8,339 7,941
Cemetery
Financial
EBITDA 2,585 2,799 9,754 9,563
----- ----- ----- -----
Total Field
EBITDA $27,163 $27,169 $101,539 $104,413
======= ======= ======== ========
Reconciliation of GAAP Basic Earnings Per Share to Adjusted Basic Earnings Per Share for the three months and years ended December 31, 2015 and 2016:
Three Months Ended Years Ended
December 31,
December 31,
2015 2016 2015 2016
---- ---- ---- ----
GAAP
Basic
Earnings
Per
Share $0.32 $0.25 $1.16 $1.18
Special
Items
Affecting
Net
Income 0.08 0.15 0.36 0.53
---- ---- ---- ----
Adjusted
Basic
Earnings
Per
Share $0.40 $0.40 $1.52 $1.71
===== ===== ===== =====
Reconciliation of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share for the three months and years ended December 31, 2015 and 2016:
Three Months Ended Years Ended
December 31,
December 31,
2015 2016 2015 2016
---- ---- ---- ----
GAAP
Diluted
Earnings
Per
Share $0.31 $0.22 $1.12 $1.12
Special
Items
Affecting
Net
Income 0.08 0.14 0.36 0.50
----
Adjusted
Diluted
Earnings
Per
Share $0.39 $0.36 $1.48 $1.62
===== ===== ===== =====
On page nine of 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, 2017 unless we have a signed Letter of Intent and 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 midpoint of the range in this Outlook.
Reconciliation of Net Income to Consolidated EBITDA and Adjusted Consolidated EBITDA for the estimated Rolling Four Quarters ending December 31, 2017 (in thousands):
Rolling Four Quarter Outlook
December 31, 2017E
Net Income $26,800
Net Tax Provision 17,800
------
Pre-Tax Income $44,600
Net Interest Expense, including
Accretion of Discount on
Convertible Subordinated Notes 16,500
Depreciation & Amortization,
including Non-cash Stock
Compensation 19,600
------
Consolidated EBITDA $80,700
Adjusted for Special Items -
Adjusted Consolidated EBITDA $80,700
=======
Reconciliation of Net Income to Adjusted Net Income for the estimated Rolling Four Quarters ending December 31, 2017 (in thousands):
Rolling Four Quarter Outlook
December 31, 2017E
Net Income $26,800
Special Items 4,300
Adjusted Net Income $31,100
=======
Reconciliation of GAAP Basic Earnings Per Share to Adjusted Basic Earnings Per Share for the estimated Rolling Four Quarters ending December 31, 2017:
Rolling Four Quarter Outlook
December 31, 2017E
GAAP Basic Earnings Per Share $1.60
Special Items Affecting Net Income 0.26
----
Adjusted Basic Earnings Per Share $1.86
=====
Reconciliation of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share for the estimated Rolling Four Quarters ending December 31, 2017:
Rolling Four Quarter Outlook
December 31, 2017E
GAAP Diluted Earnings Per
Share $1.50
Special Items Affecting
Net Income 0.25
----
Adjusted Diluted Earnings
Per Share $1.75
=====
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:
-- the 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;
-- 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;
-- effects of the application of 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.
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 in the tables presented above.
To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/carriage-services-announces-record-2016-annual-results-increases-rolling-four-quarter-outlook-300408250.html
SOURCE Carriage Services, Inc.
