8-K
CARRIAGE SERVICES INC (CSV)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 20, 2020 (February 19, 2020)
Carriage Services, Inc.
(Exact name of registrant as specified in its charter)
| Delaware | 1-11961 | 76-0423828 |
|---|---|---|
| (State or other jurisdiction<br><br>of incorporation) | (Commission<br><br>File Number) | (IRS Employer<br><br>Identification No.) |
3040 Post Oak Boulevard, Suite 300
Houston, Texas 77056
(Address, including zip code, of principal executive offices)
Registrant's telephone number, including area code:
(713) 332-8400
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| --- | --- |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| --- | --- |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| --- | --- |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
| Securities registered pursuant to Section 12(b) of the Act: | Title of each class | Trading Symbol | Name of each exchange on which registered |
|---|---|---|---|
| Common Stock, par value $.01 per share | CSV | New York Stock Exchange |
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
In the press release dated February 19, 2020, the Company announced and commented on its financial results for its year ended December 31, 2019. A copy of the press release issued by the Company is attached hereto as Exhibit 99.1 and incorporated by this reference. The information being furnished under Item 9.01 Financial Statements and Exhibits, including the press release attached hereto as Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liabilities of that Section.
The Company’s press release dated February 19, 2020, contains non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure of a company’s performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with United States generally accepted accounting principles, or GAAP. Pursuant to the requirements of Regulation G, the Company has provided quantitative reconciliations within the press release of the non-GAAP financial measures to the most directly comparable GAAP financial measures.
ITEM 9.01 FINANCIAL STATMENTS AND EXHIBITS.
The following are furnished as part of this Current Report on Form 8-K:
99.1 Press Release dated February 19, 2020
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, Carriage Services, Inc. has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| CARRIAGE SERVICES, INC. | ||
|---|---|---|
| Dated: February 20, 2020 | By: | /s/ Viki K. Blinderman |
| Viki K. Blinderman | ||
| Senior Vice President, Chief Accounting Officer, Principal Financial Officer and Secretary |
INDEX TO EXHIBITS
| Exhibit | Description |
|---|---|
| 99.1 | Press Release dated February 19, 2020. |
Exhibit
CARRIAGE SERVICES ANNOUNCES 2019 ANNUAL RESULTS AND
INTRODUCES THREE YEAR ROUGHLY RIGHT SCENARIO
HOUSTON – February 19, 2020 – Carriage Services, Inc. (NYSE: CSV) today announced results for the year ended December 31, 2019.
Mel Payne, Chairman and Chief Executive Officer, stated, “Our performance in the fourth quarter and full year of 2019 was dramatically better than 2018, as we reversed the broadly declining performance trends in our funeral and cemetery portfolios. While we still have much work to do to achieve the optimum performance potential in our existing portfolio, we made two bold and strategic moves in the last quarter of 2019 by recruiting Bill Goetz as President and COO and acquiring four large high quality businesses in great strategic markets with about $50 million in new high margin revenue once fully integrated into Carriage’s operating model framework.
We believe that in 2019 we positioned Carriage for unprecedented performance and valuation success over the next five years. But no doubt the continuing work to improve performance in our existing portfolio combined with the year-end acquisition and integration of four large businesses in new markets has intensely focused our Operational Leadership and Houston Support Center Leadership Teams on Execution, Execution, Execution. We have therefore determined that the proper way to present our company over the next 3 years is as follows:
| 1. | January 1, 2020 - June 30, 2020 - Integration & Transition. |
|---|---|
| ▪ | Integrate new acquisitions; |
| --- | --- |
| ▪ | Improve funeral and cemetery portfolio performance; |
| --- | --- |
| ▪ | Recruit dedicated senior leadership to build and support a high performance cemetery preneed sales culture and system; |
| --- | --- |
| ▪ | Divest low performing funeral homes; and |
| --- | --- |
| ▪ | Reduce debt from increasing Adjusted Free Cash Flow and divestment proceeds. |
| --- | --- |
| 2. | July 1, 2020 - June 30, 2021 - Normalize increased earnings and Adjusted Free Cash Flow, reducing debt and improving credit profile. |
| --- | --- |
| ▪ | Leadership of new acquisitions (existing and newly recruited) fully integrated into high performance framework of Standards Operating Model; |
| --- | --- |
| ▪ | Increase Revenue and Total Field and Adjusted Consolidated EBITDA Margin growth trends; |
| --- | --- |
| ▪ | Divest any low performing businesses that no longer fit Carriage’s future growth performance profile and apply proceeds to reduction of debt; |
| --- | --- |
| ▪ | Refinance our $400 million of 6.625% eight year senior notes that are callable after June 1, 2021 at 104.969; and |
| --- | --- |
| ▪ | Optimize our capital structure and Adjusted Free Cash Flow earning power by issuing new eight to ten year senior notes at a coupon rate in the range around 5% based on current rate environment, saving an estimated $7 million in annual cash interest expense equivalent to an additional 28¢ of EPS. |
| --- | --- |
| 3. | July 1, 2021 - December 31, 2022 and thereafter - Optimize performance potential within existing portfolio. |
| --- | --- |
| ▪ | Achieve annual company milestones in Total Revenue of over $325 million, Adjusted Consolidated EBITDA of over $100 million, Adjusted Diluted EPS of over $2.25 per share and Adjusted Free Cash Flow of over $60 million; and |
| --- | --- |
| ▪ | Achieve leverage ratio of approximately 4 times Total Debt/Adjusted Consolidated EBITDA and return to growth by highly selective acquisitions financed primarily with increasing Adjusted Free Cash Flow. |
| --- | --- |
1
Reflecting back on Carriage’s performance decline in 2018, the performance turnaround we have already achieved, and the performance milestones we will achieve over the next three years, our company will have executed what we believe in hindsight will be viewed as a complete Carriage Leadership, Portfolio High Performance, Balance Sheet, Earnings and Free Cash Flow Transformation as a Value Creation Platform.
Shown below is an expanded Milestone Three Year Roughly Right Scenario demonstrating the shareholder value creation opportunity as we enter into the next five year timeframe of our Good To Great Journey, beginning with:
Carriage Services 2020: Transformative High Performance - Good To Great Journey Part II
The scenario below includes our best “roughly right” estimates regarding our performance in the three distinct time periods as explained above. We will update Carriage’s Rolling Four Quarter Outlook when we report our first quarter 2020 performance results”, concluded Mr. Payne.
MILESTONE THREE YEAR SCENARIO
| Performance Outlook Scenario | Roughly Right Ranges | ||
|---|---|---|---|
| Years Ending December 31 (millions) | |||
| 2020 | 2021 | 2022 | |
| Total Revenue | $315 - $319 | $320 - $324 | $328 - $332 |
| Total Field EBITDA | $127 - $131 | $133 - $137 | $139 - $144 |
| Total Field EBITDA Margin | 40% - 41% | 41% - 42% | 42% - 43% |
| Adjusted Consolidated EBITDA | $92 - $96 | $97 - $101 | $102 - $106 |
| Adjusted Consolidated EBITDA Margin | 29% - 30% | 30% - 31% | 31% - 32% |
| Adjusted Diluted EPS | $1.55 - $1.65 | $1.92 - $2.10 | $2.25 - $2.40 |
| Adjusted Free Cash Flow | $42 - $45 | $53 - $56 | $60 - $63 |
| Total Debt Outstanding | $480 - $490 | $440 - $450 | $390 - $440 |
| Total Debt to EBITDA Multiple | 5.0 - 5.2 | 4.3 - 4.5 | 3.8 - 4.0 |
2
The Pro Forma Adjusted results for the comparative periods of year end December 31, 2019 versus year ended December 31, 2018 and fourth quarter 2019 versus fourth quarter 2018 are shown below:
Year Ended December 31, 2019 versus Year Ended December 31, 2018
| • | Total Revenue increased $11.0 million or 4.2% to $273.3 million; |
|---|---|
| • | Total Field EBITDA increased $7.4 million or 7.2% to $110.3 million; |
| --- | --- |
| • | Total Field EBITDA Margin increased 120 basis points to 40.4%; |
| --- | --- |
| • | Total Overhead decreased $0.8 million or 2.3% to $33.8 million; |
| --- | --- |
| • | Total Overhead Margin decreased 80 basis points to 12.4%; |
| --- | --- |
| • | Consolidated EBITDA increased $8.2 million or 12.0% to $76.5 million; |
| --- | --- |
| • | Consolidated EBITDA Margin increased 200 basis points to 28.0%; and |
| --- | --- |
| • | Diluted Earnings Per Share increased $0.27 or 29.0% to $1.20. |
| --- | --- |
Fourth Quarter 2019 versus Fourth Quarter 2018
| • | Total Revenue increased $4.8 million or 7.3% to $71.1 million; |
|---|---|
| • | Total Field EBITDA increased $2.9 million or 11.4% to $28.7 million; |
| --- | --- |
| • | Total Field EBITDA Margin increased 150 basis points to 40.4%; |
| --- | --- |
| • | Total Overhead increased $0.1 million or 0.5% to $9.5 million; |
| --- | --- |
| • | Total Overhead Margin decreased 90 basis points to 13.4%; |
| --- | --- |
| • | Consolidated EBITDA increased $2.9 million or 17.7% to $19.2 million; |
| --- | --- |
| • | Consolidated EBITDA Margin increased 240 basis points to 27.0%; and |
| --- | --- |
| • | Diluted Earnings Per Share increased $0.06 or 26.1% to $0.29. |
| --- | --- |
GAAP highlights are shown below:
Year Ended December 31, 2019 versus Year Ended December 31, 2018
• Total Revenue of $274.1 million, an increase of 2.3%;
• Net Income of $14.5 million, an increase of 24.8%; and
• GAAP Diluted Earnings Per Share of $0.80, an increase of 27.0%.
Fourth Quarter 2019 versus Fourth Quarter 2018
• Total Revenue of $71.1 million, an increase of 7.0%;
• Net Income of $2.6 million, an increase of 196.7%; and
• GAAP Diluted Earnings Per Share of $0.14, an increase of 200.0%.
3
HIGH PERFORMANCE HEROES
Carriage 2019 Pinnacle of Service Award Winners
I am delighted to announce that we had 39 businesses (36 funeral homes and 3 cemeteries) which earned Pinnacle Awards and Being The Best Standards Achievement Incentive Bonuses for the Managing Partners and employees of each business. This group of winners represented the Company’s High Performance Culture well as their businesses contributed $82.0 million in revenue (30% of Total of $274.1 million), $36.1 million in Field EBITDA (33% of Company Total of $109.8 million) and a EBITDA Margin of 44.1% (Total Company Field EBITDA Margin of 40.0%).
The 39 Pinnacle Award winners included 34 businesses (33 funeral homes and 1 cemetery) which averaged 70% Standards Achievement over the 3 year period 2017-2019 (5 of these businesses also achieved 100% in 2019 under the updated/rebooted Performance Standards), and 5 businesses (3 funeral homes and 2 cemeteries) which had 100% Standards Achievement in 2019.
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 Carriage’s Being The Best Pinnacle Of Service Award winners for 2019:
“Being The Best” Pinnacle of Service Award
| Courtney Charvet | North Brevard Funeral Home |
|---|---|
| Patrick Schoen | Jacob Schoen & Son |
| Matthew Simpson | Fry Memorial Chapel |
| Justin Luyben | Evans-Brown Mortuaries & Crematory |
| Alan Kerrick | Dakan Funeral Chapel |
| Jeff Hardwick | Bryan & Hardwick Funeral Home |
| James Bass | Emerald Coast/McLaughlin Mortuary |
| Randy Valentine | Dieterle Memorial Home & Cremation |
| Sue Keenan | Byron Keenan Funeral Home & Cremation |
| Todd Muller | All Cremation Options |
| Jason Cox | Lane Funeral Home - South Crest |
| Jeff Seaman | Dwayne R. Spence Funeral Homes |
| Dan Simons | Everly Community Funeral Care |
| Mike Conner | Conner-Westbury Funeral Home |
| Ashley Vella | Deegan Funeral Chapels |
| Jason Higginbotham | Lakeland Funeral Home |
| Joseph Newkirk | Civic Center Chapel |
| Robert Maclary | Kent-Forest Lawn Funeral Home |
| Ken Duffy | John E. Day Funeral Home |
| Scott Sanderford | Everly Wheatley Funeral Home |
| Phil Appell | Keenan Funeral Home |
| Joseph Waterwash | Baird-Case Jordan-Fannin Funeral Home & Cremation Center |
| Jeff Steadman | Sansone Funeral Home |
| Tom O’Brien | O’Brien Funeral Home |
| Chris Chetsas | Cataudella Funeral Home |
| *Nicholas Welzenbach | Darling & Fischer Funeral Homes<br><br>Los Gatos Memorial Park |
| *Tim Hauck | Harvey-Engelhardt/Fuller Metz<br><br>Lee County Cremation |
| *Qualified for 2 Businesses |
4
| “Being The Best” Pinnacle of Service Award & 100% of Standards Award | Ken Summers | P.L. Fry & Son Funeral Home |
|---|---|---|
| Steven Mora | Conejo Mountain Funeral Home | |
| Brian Binion | Steen Funeral Homes | |
| James Terry | James J. Terry Funeral Homes | |
| Cyndi Hoots | Schmidt Funeral Homes |
“Being The Best” 100% of Standards Award
| JoAnna DiSibio | Oak View Memorial Park |
|---|---|
| Anthony Rodriguez | Higgins Mortuary |
| Ben Friberg | Heritage Funeral Home & Crematory |
| David Keller | Lane Funeral Home - Coulter Chapel |
| Michael Page | Sterling-White Cemetery |
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 to announce our fourth group of Good To Great Award winners that sustained a high level of Standards Achievement and Financial Performance while compounding revenue at 3.1% for the five year timeframe that began in 2015 and ended at year end 2019, as listed below:
| Todd Muller | Muller-Thompson Funeral Chapel & Cremation Services |
|---|---|
| Alan Kerrick | Dakan Funeral Chapels |
| Nicholas Welzenbach | Darling Fischer Funeral Homes |
| Scott Sanderford | Everly Wheatley Funeral Home |
| Patrick Schoen | Jacob Schoen & Son |
| Charlie Eagan | Greenwood Funeral Home |
5
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 Stock Index | High Yield Index | 70/30 index<br><br>Benchmark^(2)^ | |||||||||||
| 1 year ended 12/31/19 | 25.9% | 23.6% | 31.5% | 14.3% | 19.5% | ||||||||||
| 2 years ended 12/31/19 | 15.4% | 14.5% | 25.7% | 11.9% | 16.1% | ||||||||||
| 3 years ended 12/31/19 | 30.5% | 28.6% | 53.1% | 20.3% | 30.2% | ||||||||||
| 4 years ended 12/31/19 | 56.2% | 52.1% | 71.4% | 41.0% | 50.1% | ||||||||||
| 5 years ended 12/31/19 | 51.4% | 48.0% | 73.8% | 34.7% | 46.4% | ||||||||||
| (1) Investment performance includes realized income and unrealized appreciation (depreciation). | |||||||||||||||
| (2) The 70/30 Benchmark is 70% weighted to the High Yield Index and 30% weighted to the S&P 500 Stock Index. | Asset Allocation as of December 31, 2019<br>(in thousands) | ||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | |||||||
| Discretionary<br><br>Trust Funds | Total<br><br>Trust Funds | ||||||||||||||
| Asset Class | MV | % | MV | % | |||||||||||
| Equities | $ | 94,404 | 43 | % | $ | 96,844 | 38 | % | |||||||
| Fixed Income | 104,894 | 49 | % | 117,637 | 46 | % | |||||||||
| Cash | 15,454 | 7 | % | 39,059 | 15 | % | |||||||||
| Other/Insurance | 2,722 | 1 | % | 2,906 | 1 | % | |||||||||
| Total Portfolios | $ | 217,474 | 100 | % | $ | 256,446 | 100 | % |
The performance of our Discretionary Trust Fund Portfolio was 25.9% for 2019 compared to 31.5% for the S&P 500 and 19.5% for our 70% High Yield/30% S&P 500 benchmark. The outperformance versus our benchmark is attributable to asset allocation decisions made in the back half of 2018 and the first part of this year along with individual security selections made throughout 2019.
We also added approximately $27 million of Discretionary Trust Assets through the four previously announced acquisitions.
The performance of our Discretionary Trust Fund Portfolio in 2019 compares favorably to our long term 11 year compound average annual return of approximately 13.5% since Carriage took over the management of these trust assets in the fall of 2008. This long-term track record of performance will continue to accrue to benefit Carriage through the increased value of the underlying preneed funeral and cemetery contracts and the recurring income generated through our cemetery perpetual care trusts.
6
ADJUSTED FREE CASH FLOW
We produced Adjusted Free Cash Flow from operations for the three months and years ended December 31, 2019 of $5.8 million and $37.4 million, respectively, compared to Adjusted Free Cash Flow from operations of $10.2 million and $42.7 million for the corresponding periods in 2018. A reconciliation of Cash Flow Provided by Operations to Adjusted Free Cash Flow for the three months and years ended December 31, 2018 and 2019 is as follows (in thousands):
| For the Three Months Ended December 31, | For the Years Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2018 | 2019 | 2018 | 2019 | |||||||||
| Cash flow provided by operations | $ | 10,416 | $ | 759 | $ | 49,133 | $ | 36,820 | ||||
| Cash used for maintenance capital expenditures | (3,070 | ) | (2,614 | ) | (9,266 | ) | (8,795 | ) | ||||
| Free Cash Flow | $ | 7,346 | $ | (1,855 | ) | $ | 39,867 | $ | 28,025 | |||
| Plus: Incremental Special Items: | ||||||||||||
| Down Payment for Potential Acquisition | — | 5,000 | — | 5,000 | ||||||||
| Acquisition and Divestiture Costs | — | 2,083 | — | 2,083 | ||||||||
| Severance and Retirement Costs | 1,435 | 79 | 1,435 | 1,205 | ||||||||
| Litigation Reserve | 1,000 | 175 | 1,000 | 750 | ||||||||
| Natural Disaster Costs | 437 | — | 437 | — | ||||||||
| Other Special Items | — | 336 | — | 336 | ||||||||
| Adjusted Free Cash Flow | $ | 10,218 | $ | 5,818 | $ | 42,739 | $ | 37,399 |
Adjusted Free Cash Flow decreased $5.3 million to $37.4 million for the year ended December 31, 2019. We paid $5.0 million more of cash interest plus we had other working capital changes. The increase in cash interest paid primarily relates to a full year of interest paid on the Senior Notes versus seven months in 2018. Additionally we paid $3.2 million less cash taxes in 2019.
Adjusted Free Cash Flow decreased $4.4 million to $5.8 million for the three months ended December 31, 2019. The decrease is primarily due to the timing of working capital payments in conjunction with $2.6 million of additional tax refund after filing our 2018 tax return.
ROUGHLY RIGHT SCENARIO
The Roughly Right Scenario (“Scenario”) (or also called Rolling Four Quarter Outlook for the immediate rolling twelve months) 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 unless we have a signed Letter of Intent (LOI) and high likelihood of a closing within 90 days. This Scenario 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 are to reflect a “Roughly Right Range” most of the time of future Scenario 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 and the execution of our funeral and our cemetery Standards Operating Model. Adjusted Net Income and hence, Adjusted Diluted Earnings Per Share have been adjusted for accretion on our convertible notes.
The Scenario 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.
CONFERENCE CALL AND INVESTOR RELATIONS CONTACT
Carriage Services has scheduled a conference call for tomorrow, February 20, 2020 at 9:30 a.m. central time. To participate in the call, please dial 866-516-3867 (ID-2874313) and ask for the Carriage Services conference call. A replay of the conference call will be available through February 25, 2020 and may be accessed by dialing 855-859-2056 (ID-2874313). 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.
7
| CARRIAGE SERVICES, INC. | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| OPERATING AND FINANCIAL TREND REPORT | ||||||||||||||||
| (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS) | ||||||||||||||||
| Three Months Ended December 31, | Years Ended December 31, | |||||||||||||||
| 2018 | 2019 | % Change | 2018 | 2019 | % Change | |||||||||||
| Same Store Contracts | ||||||||||||||||
| Atneed Contracts | 6,287 | 6,647 | 5.7 | % | 25,117 | 25,844 | 2.9 | % | ||||||||
| Preneed Contracts | 1,415 | 1,466 | 3.6 | % | 5,721 | 5,700 | (0.4 | %) | ||||||||
| Total Same Store Funeral Contracts | 7,702 | 8,113 | 5.3 | % | 30,838 | 31,544 | 2.3 | % | ||||||||
| Acquisition Contracts | ||||||||||||||||
| Atneed Contracts | 1,021 | 1,753 | 71.7 | % | 3,404 | 4,896 | 43.8 | % | ||||||||
| Preneed Contracts | 151 | 154 | 2.0 | % | 450 | 586 | 30.2 | % | ||||||||
| Total Acquisition Funeral Contracts | 1,172 | 1,907 | 62.7 | % | 3,854 | 5,482 | 42.2 | % | ||||||||
| Total Funeral Contracts | 8,874 | 10,020 | 12.9 | % | 34,692 | 37,026 | 6.7 | % | ||||||||
| Funeral Operating Revenue | ||||||||||||||||
| Same Store Revenue | $ | 41,648 | $ | 42,410 | 1.8 | % | $ | 166,934 | $ | 167,246 | 0.2 | % | ||||
| Acquisition Revenue | 7,846 | 9,886 | 26.0 | % | 26,835 | 33,146 | 23.5 | % | ||||||||
| Total Funeral Operating Revenue | $ | 49,494 | $ | 52,296 | 5.7 | % | $ | 193,769 | $ | 200,392 | 3.4 | % | ||||
| Cemetery Operating Revenue | ||||||||||||||||
| Same Store Revenue | $ | 10,907 | $ | 12,122 | 11.1 | % | $ | 45,135 | $ | 49,455 | 9.6 | % | ||||
| Acquisition Revenue | — | 295 | — | % | — | 295 | — | % | ||||||||
| Total Cemetery Operating Revenue | $ | 10,907 | $ | 12,417 | 13.8 | % | $ | 45,135 | $ | 49,750 | 10.2 | % | ||||
| Total Financial Revenue | $ | 3,975 | $ | 4,179 | 5.1 | % | $ | 15,977 | $ | 16,022 | 0.3 | % | ||||
| Other Revenue | $ | — | $ | 748 | $ | — | $ | 748 | ||||||||
| Total Divested/Planned Divested Revenue | $ | 2,141 | $ | 1,509 | $ | 13,111 | $ | 7,195 | ||||||||
| Total Revenue | $ | 66,517 | $ | 71,149 | 7.0 | % | $ | 267,992 | $ | 274,107 | 2.3 | % | ||||
| Field EBITDA | ||||||||||||||||
| Same Store Funeral EBITDA | $ | 15,487 | $ | 16,335 | 5.5 | % | $ | 63,119 | $ | 63,938 | 1.3 | % | ||||
| Same Store Funeral EBITDA Margin | 37.2 | % | 38.5 | % | 130 bp | 37.8 | % | 38.2 | % | 40 bp | ||||||
| Acquisition Funeral EBITDA | 3,108 | 3,733 | 20.1 | % | 9,732 | 12,547 | 28.9 | % | ||||||||
| Acquisition Funeral EBITDA Margin | 39.6 | % | 37.8 | % | (180 bp) | 36.3 | % | 37.9 | % | 160 bp | ||||||
| Total Funeral EBITDA | $ | 18,595 | $ | 20,068 | 7.9 | % | $ | 72,851 | $ | 76,485 | 5.0 | % | ||||
| Total Funeral EBITDA Margin | 37.6 | % | 38.4 | % | 80 bp | 37.6 | % | 38.2 | % | 60 bp | ||||||
| Same Store Cemetery EBITDA | $ | 3,127 | $ | 4,147 | 32.6 | % | $ | 13,880 | $ | 17,055 | 22.9 | % | ||||
| Same Store Cemetery EBITDA Margin | 28.7 | % | 34.2 | % | 550 bp | 30.8 | % | 34.5 | % | 370 bp | ||||||
| Acquisition Cemetery EBITDA | — | 73 | — | % | — | 73 | — | % | ||||||||
| Acquisition Cemetery EBITDA Margin | — | % | 24.7 | % | 2,470 bp | — | % | 24.7 | % | 2,470 bp | ||||||
| Total Cemetery EBITDA | $ | 3,127 | $ | 4,220 | 35.0 | % | $ | 13,880 | $ | 17,128 | 23.4 | % | ||||
| Total Cemetery EBITDA Margin | 28.7 | % | 34.0 | % | 530 bp | 30.8 | % | 34.4 | % | 360 bp | ||||||
| Total Financial EBITDA | $ | 3,597 | $ | 3,774 | 4.9 | % | $ | 14,427 | $ | 14,419 | (0.1 | %) | ||||
| Total Financial EBITDA Margin | 90.5 | % | 90.3 | % | (20 bp) | 90.3 | % | 90.0 | % | (30 bp) | ||||||
| Other EBITDA | — | $ | 298 | — | $ | 298 | ||||||||||
| Other EBITDA Margin | — | % | 39.8 | % | — | % | 39.8 | % | ||||||||
| Total Divested/Planned Divested EBITDA | $ | 517 | $ | 253 | $ | 3,155 | $ | 1,437 | ||||||||
| Total Divested/Planned Divested EBITDA Margin | 24.1 | % | 16.8 | % | 24.1 | % | 20.0 | % | ||||||||
| Total Field EBITDA | $ | 25,836 | $ | 28,613 | 10.7 | % | $ | 104,313 | $ | 109,767 | 5.2 | % | ||||
| Total Field EBITDA Margin | 38.8 | % | 40.2 | % | 140 bp | 38.9 | % | 40.0 | % | 110 bp |
8
| OPERATING AND FINANCIAL TREND REPORT | ||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS) | ||||||||||||||||
| Three Months Ended December 31, | Years Ended December 31, | |||||||||||||||
| 2018 | 2019 | % Change | 2018 | 2019 | % Change | |||||||||||
| Total Overhead | $ | 11,913 | $ | 12,103 | 1.6 | % | $ | 36,993 | $ | 37,554 | 1.5 | % | ||||
| Overhead as a percentage of Revenue | 17.9 | % | 17.0 | % | (90 bp) | 13.8 | % | 13.7 | % | (10 bp) | ||||||
| Consolidated EBITDA | $ | 13,923 | $ | 16,510 | 18.6 | % | $ | 67,320 | $ | 72,213 | 7.3 | % | ||||
| Consolidated EBITDA Margin | 20.9 | % | 23.2 | % | 230 bp | 25.1 | % | 26.3 | % | 120 bp | ||||||
| Other Expenses and Interest | ||||||||||||||||
| Depreciation & Amortization | $ | 4,330 | $ | 4,416 | 2.0 | % | $ | 17,430 | $ | 17,771 | 2.0 | % | ||||
| Non-Cash Stock Compensation | 3,659 | 537 | (85.3 | %) | 6,583 | 2,153 | (67.3 | %) | ||||||||
| Interest Expense | 6,346 | 6,615 | 4.2 | % | 21,109 | 25,522 | 20.9 | % | ||||||||
| Accretion of Discount on Convertible Subordinated Notes | 231 | 63 | (72.7 | %) | 2,192 | 241 | (89.0 | %) | ||||||||
| Net Loss on Early Extinguishment of Debt | (434 | ) | — | 502 | — | |||||||||||
| Other, Net | 893 | 196 | 1,238 | 4,110 | ||||||||||||
| Pre-Tax Income (Loss) | $ | (1,102 | ) | $ | 4,683 | 525.0 | % | $ | 18,266 | $ | 22,416 | 22.7 | % | |||
| Provision for Income Taxes | 331 | 1,845 | 5,754 | 7,395 | ||||||||||||
| Tax Adjustment Related to Certain Discrete Items | 1,225 | 269 | 867 | 488 | ||||||||||||
| Net Tax Provision | 1,556 | 2,114 | 6,621 | 7,883 | ||||||||||||
| GAAP Net Income (Loss) | $ | (2,658 | ) | $ | 2,569 | 196.7 | % | $ | 11,645 | $ | 14,533 | 24.8 | % | |||
| Special Items, Net of Tax, except for ** | ||||||||||||||||
| Acquisition and Divestiture Expenses | $ | — | $ | 1,646 | $ | — | $ | 1,646 | ||||||||
| Severance and Retirement Costs | 1,134 | 62 | 1,134 | 951 | ||||||||||||
| Performance Awards Cancellation Write-off | 2,594 | — | 2,594 | — | ||||||||||||
| Accretion of Discount on Convertible Subordinated Notes ** | 231 | 63 | 2,192 | 241 | ||||||||||||
| Net Loss (Gain) on Early Extinguishment of Debt | (343 | ) | — | 397 | — | |||||||||||
| Loss on Sale of Business and Other Costs | 162 | 188 | 439 | 3,331 | ||||||||||||
| Goodwill and Other Impairments | 805 | 184 | 805 | 761 | ||||||||||||
| Litigation Reserve | 790 | 138 | 790 | 592 | ||||||||||||
| Natural Disaster Costs | 345 | — | 345 | — | ||||||||||||
| Tax Expense Related to Divested Business** | — | 51 | — | 911 | ||||||||||||
| Gain on Insurance Reimbursements | — | (195 | ) | — | (699 | ) | ||||||||||
| Other Special Items | — | 265 | — | 265 | ||||||||||||
| Tax Adjustment Related to Certain Discrete Items** | 1,225 | — | 1,225 | — | ||||||||||||
| Adjusted Net Income | $ | 4,285 | $ | 4,971 | 16.0 | % | $ | 21,566 | $ | 22,532 | 4.5 | % | ||||
| Adjusted Net Profit Margin | 6.4 | % | 7.0 | % | 60 bp | 8.0 | % | 8.2 | % | 20 bp | ||||||
| Adjusted Basic Earnings Per Share | $ | 0.23 | $ | 0.28 | 21.7 | % | $ | 1.19 | $ | 1.26 | 5.9 | % | ||||
| Adjusted Diluted Earnings Per Share | $ | 0.23 | $ | 0.28 | 21.7 | % | $ | 1.17 | $ | 1.25 | 6.8 | % | ||||
| GAAP Basic Earnings (Loss) Per Share | $ | (0.14 | ) | $ | 0.14 | 200.0 | % | $ | 0.64 | $ | 0.81 | 26.6 | % | |||
| GAAP Diluted Earnings (Loss) Per Share | $ | (0.14 | ) | $ | 0.14 | 200.0 | % | $ | 0.63 | $ | 0.80 | 27.0 | % | |||
| Weighted Average Basic Shares Outstanding | 18,772 | 17,760 | 17,971 | 17,877 | ||||||||||||
| Weighted Average Diluted Shares Outstanding | 18,838 | 17,901 | 18,374 | 18,005 | ||||||||||||
| Adjusted Consolidated EBITDA | $ | 16,795 | $ | 19,183 | 14.2 | % | $ | 70,192 | $ | 76,587 | 9.1 | % | ||||
| Adjusted Consolidated EBITDA Margin | 25.2 | % | 27.0 | % | 180 bp | 26.2 | % | 27.9 | % | 170 bp |
9
CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
| (in thousands) | December 31, | ||||||
|---|---|---|---|---|---|---|---|
| 2018 | 2019 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 644 | $ | 716 | |||
| Accounts receivable, net | 18,897 | 21,478 | |||||
| Inventories | 6,751 | 6,989 | |||||
| Prepaid and other current assets | 3,011 | 10,667 | |||||
| Total current assets | 29,303 | 39,850 | |||||
| Preneed cemetery trust investments | 62,432 | 72,382 | |||||
| Preneed funeral trust investments | 82,074 | 96,335 | |||||
| Preneed cemetery receivables, net | 18,441 | 20,173 | |||||
| Receivables from preneed trusts | 17,073 | 18,024 | |||||
| Property, plant and equipment, net | 260,838 | 279,200 | |||||
| Cemetery property, net | 74,958 | 87,032 | |||||
| Goodwill | 303,887 | 398,292 | |||||
| Intangible and other non-current assets, net | 24,425 | 32,116 | |||||
| Operating lease right-of-use assets | — | 22,304 | |||||
| Cemetery perpetual care trust investments | 44,071 | 64,047 | |||||
| Total assets | $ | 917,502 | $ | 1,129,755 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities: | |||||||
| Current portion of long-term debt | $ | 2,015 | $ | 1,306 | |||
| Current portion of finance lease obligations | 312 | 290 | |||||
| Current portion of operating lease obligations | — | 1,554 | |||||
| Accounts payable | 9,987 | 8,413 | |||||
| Accrued and other liabilities | 22,644 | 24,026 | |||||
| Total current liabilities | 34,958 | 35,589 | |||||
| Long-term debt, net of current portion | 6,925 | 5,658 | |||||
| Credit facility | 26,145 | 82,182 | |||||
| Convertible subordinated notes due 2021 | 5,732 | 5,971 | |||||
| Senior notes due 2026 | 319,108 | 395,447 | |||||
| Obligations under finance leases, net of current portion | 6,143 | 5,854 | |||||
| Obligations under operating leases, net of current portion | — | 21,533 | |||||
| Deferred preneed cemetery revenue | 45,997 | 46,569 | |||||
| Deferred preneed funeral revenue | 28,606 | 29,145 | |||||
| Deferred tax liability | 31,263 | 41,368 | |||||
| Other long-term liabilities | 3,133 | 1,737 | |||||
| Deferred preneed cemetery receipts held in trust | 62,432 | 72,382 | |||||
| Deferred preneed funeral receipts held in trust | 82,074 | 96,335 | |||||
| Care trusts’ corpus | 43,494 | 63,416 | |||||
| Total liabilities | 696,010 | 903,186 | |||||
| Commitments and contingencies | |||||||
| Stockholders’ equity: | |||||||
| Common stock | 257 | 259 | |||||
| Additional paid-in capital | 243,849 | 242,147 | |||||
| Retained earnings | 71,680 | 86,213 | |||||
| Treasury stock | (94,294 | ) | (102,050 | ) | |||
| Total stockholders’ equity | 221,492 | 226,569 | |||||
| Total liabilities and stockholders’ equity | $ | 917,502 | $ | 1,129,755 |
10
CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
| (unaudited) | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Three Months Ended December 31, | Years Ended December 31, | |||||||||||
| 2018 | 2019 | 2018 | 2019 | |||||||||
| Revenue: | ||||||||||||
| Service revenue | 34,944 | 37,110 | 138,604 | 142,554 | ||||||||
| Property and merchandise revenue | 27,512 | 29,056 | 112,253 | 114,514 | ||||||||
| Other revenue | 4,061 | 4,983 | 17,135 | 17,039 | ||||||||
| 66,517 | 71,149 | 267,992 | 274,107 | |||||||||
| Field costs and expenses: | ||||||||||||
| Cost of service | 18,092 | 18,928 | 72,123 | 72,991 | ||||||||
| Cost of merchandise | 22,212 | 22,750 | 90,008 | 89,294 | ||||||||
| Cemetery property amortization | 839 | 995 | 3,602 | 3,985 | ||||||||
| Field depreciation expense | 3,090 | 3,120 | 12,015 | 12,370 | ||||||||
| Regional and unallocated funeral and cemetery costs | 4,087 | 3,819 | 12,749 | 13,827 | ||||||||
| Other expenses | 377 | 858 | 1,548 | 2,055 | ||||||||
| 48,697 | 50,470 | 192,045 | 194,522 | |||||||||
| Gross profit | 17,820 | 20,679 | 75,947 | 79,585 | ||||||||
| Corporate costs and expenses: | ||||||||||||
| General, administrative and other | 11,485 | 8,821 | 30,827 | 25,880 | ||||||||
| Home office depreciation and amortization | 401 | 301 | 1,813 | 1,416 | ||||||||
| 11,886 | 9,122 | 32,640 | 27,296 | |||||||||
| Operating income | 5,934 | 11,557 | 43,307 | 52,289 | ||||||||
| Interest expense | (6,346 | ) | (6,615 | ) | (21,109 | ) | (25,522 | ) | ||||
| Accretion of discount on convertible subordinated notes | (231 | ) | (63 | ) | (2,192 | ) | (241 | ) | ||||
| Loss on early extinguishment of debt | 434 | — | (502 | ) | — | |||||||
| Other, net | (893 | ) | (196 | ) | (1,238 | ) | (4,110 | ) | ||||
| Income (loss) before income taxes | (1,102 | ) | 4,683 | 18,266 | 22,416 | |||||||
| Provision for income taxes | (331 | ) | (1,845 | ) | (5,754 | ) | (7,395 | ) | ||||
| Tax adjustment related to certain discrete items | (1,225 | ) | (269 | ) | (867 | ) | (488 | ) | ||||
| Total provision for income taxes | (1,556 | ) | (2,114 | ) | (6,621 | ) | (7,883 | ) | ||||
| Net income (loss) | $ | (2,658 | ) | $ | 2,569 | $ | 11,645 | $ | 14,533 | |||
| Basic earnings (loss) per common share | $ | (0.14 | ) | $ | 0.14 | $ | 0.64 | $ | 0.81 | |||
| Diluted earnings (loss) per common share | $ | (0.14 | ) | $ | 0.14 | $ | 0.63 | $ | 0.80 | |||
| Dividends declared per share: | $ | 0.075 | $ | 0.075 | $ | 0.300 | $ | 0.300 | ||||
| Weighted average number of common and common equivalent shares outstanding: | ||||||||||||
| Basic | 18,772 | 17,760 | 17,971 | 17,877 | ||||||||
| Diluted | 18,838 | 17,901 | 18,374 | 18,005 |
11
CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| For the Years Ended December 31, | ||||||
|---|---|---|---|---|---|---|
| 2018 | 2019 | |||||
| Cash flows from operating activities: | ||||||
| Net income | $ | 11,645 | $ | 14,533 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation and amortization | 17,430 | 17,771 | ||||
| Provision for losses on accounts receivable | 1,841 | 1,618 | ||||
| Stock-based compensation expense | 6,583 | 2,153 | ||||
| Deferred income tax expense | 3,823 | 10,117 | ||||
| Amortization of deferred financing costs | 532 | 392 | ||||
| Amortization of capitalized commissions on preneed contracts | 599 | 558 | ||||
| Accretion of discount on convertible subordinated notes | 2,192 | 241 | ||||
| Accretion of discount on senior notes | 272 | 492 | ||||
| Net loss on early extinguishment of debt | 502 | — | ||||
| Net loss on sale of businesses and disposal of other assets | 1,052 | 4,096 | ||||
| Goodwill and other Impairments | 1,019 | 963 | ||||
| Gain on insurance reimbursements | — | (879 | ) | |||
| Other | — | 121 | ||||
| Changes in operating assets and liabilities that provided (required) cash: | ||||||
| Accounts and preneed receivables | (5,061 | ) | (5,801 | ) | ||
| Inventories and other current assets | (159 | ) | (7,762 | ) | ||
| Intangible and other non-current assets | (390 | ) | (251 | ) | ||
| Preneed funeral and cemetery trust investments | 488 | (6,500 | ) | |||
| Accounts payable | 2,044 | (1,976 | ) | |||
| Accrued and other liabilities | 3,990 | 1,271 | ||||
| Deferred preneed funeral and cemetery revenue | 6,546 | 168 | ||||
| Deferred preneed funeral and cemetery receipts held in trust | (5,954 | ) | 5,495 | |||
| Net cash provided by operating activities | 48,994 | 36,820 | ||||
| Cash flows from investing activities: | ||||||
| Acquisitions and land for new construction | (37,970 | ) | (140,907 | ) | ||
| Proceeds from insurance reimbursements | — | 1,433 | ||||
| Net proceeds from sale of businesses and other assets | — | 967 | ||||
| Capital expenditures | (13,526 | ) | (15,379 | ) | ||
| Net cash used in investing activities | (51,496 | ) | (153,886 | ) | ||
| Cash flows from financing activities: | ||||||
| Payments against the term loan | (127,500 | ) | — | |||
| Borrowings from the credit facility | 124,500 | 174,961 | ||||
| Payments against the credit facility | (189,400 | ) | (118,261 | ) | ||
| Payment of debt issuance costs related to the credit facility | (1,751 | ) | (891 | ) | ||
| Acquisition of 2.75% convertible subordinated notes | (98,266 | ) | (27 | ) | ||
| Transaction costs related to the acquisition of 2.75% convertible subordinated notes | (885 | ) | — | |||
| Proceeds from the issuance of the 6.625% senior notes | 320,125 | 76,688 | ||||
| Payment of debt issuance costs related to the 6.625% senior notes | (1,367 | ) | (980 | ) | ||
| Payments on long-term debt and obligations under capital leases | (1,940 | ) | (2,287 | ) | ||
| Payments on contingent consideration recorded at acquisition date | (138 | ) | (162 | ) | ||
| Proceeds from the exercise of stock options and employee stock purchase plan contributions | 1,246 | 1,445 | ||||
| Taxes paid on restricted stock vestings and exercises of non-qualified options | (651 | ) | (194 | ) | ||
| Dividends paid on common stock | (5,513 | ) | (5,398 | ) | ||
| Purchase of treasury stock | (16,266 | ) | (7,756 | ) | ||
| Net cash provided by financing activities | 2,194 | 117,138 | ||||
| Net increase (decrease) in cash and cash equivalents | (308 | ) | 72 | |||
| Cash and cash equivalents at beginning of year | 952 | 644 | ||||
| Cash and cash equivalents at end of year | $ | 644 | $ | 716 |
12
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 press release. Reconciliations of the Non-GAAP financial measures to GAAP measures are also 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/Planned Divested Revenue”, “Divested/Planned Divested EBITDA”, “Divested/Planned Divested EBITDA Margin”, “Adjusted Basic Earnings Per Share”, “Adjusted Diluted Earnings Per Share”, and “Total Debt to EBITDA Multiple” 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 and the Tax Expense Related to a Divested Business. |
|---|---|
| • | 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 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 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 field depreciation, cemetery property amortization and regional and unallocated funeral and cemetery costs. |
| --- | --- |
| • | Total Field EBITDA Margin is defined as Total Field EBITDA as a percentage of revenue. |
| --- | --- |
| • | Divested/Planned Divested Revenue is defined as revenues from three cemetery businesses that we divested as a result of a management agreement that expired in 2018 and five funeral home businesses that we divested as of December 31, 2019. Additionally, it includes fourteen funeral home businesses we intend to divest. |
| --- | --- |
| • | Divested/Planned Divested EBITDA is defined as Divested Revenue, less field level and financial expenses related to the divested/planned divested businesses noted above. |
| --- | --- |
13
| • | Divested/Planned Divested EBITDA Margin is defined as Divested/Planned Divested EBITDA as a percentage of Divested/Planned 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. |
| --- | --- |
| • | Total Debt to EBITDA Multiple is defined as Long Term Debt (net of current portion), indebtedness under our bank credit facility, indebtedness under our Convertible Subordinated Notes due 2021 and indebtedness under our Senior Notes due 2026, to Adjusted Consolidated EBITDA. |
| --- | --- |
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, Revenue, 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 these areas of costs: i) Funeral and cemetery field costs, ii) Field depreciation and amortization expense, and iii) Regional and unallocated funeral and cemetery costs. Funeral and cemetery field costs include cost of service, funeral and 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.
14
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. Carriage Services strongly encourages investors to review the Company's consolidated financial statements and publicly filed reports in their entirety and not rely on any single financial measure.
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, all of which are reflected in the tables below.
Reconciliation of Net Income (Loss) to Adjusted Net Income for the three months ended and years ended December 31, 2018 and 2019 (in thousands):
| For the Three Months Ended December 31, | For the Years Ended December 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2018 | 2019 | 2018 | 2019 | ||||||||
| Net Income (Loss) | $ | (2,658 | ) | $ | 2,569 | $ | 11,645 | $ | 14,533 | ||
| Special Items, Net of Tax, except for ** | |||||||||||
| Acquisition and Divestiture Expenses | — | 1,646 | — | 1,646 | |||||||
| Severance and Retirement Costs | 1,134 | 62 | 1,134 | 951 | |||||||
| Performance Awards Cancellation Write-off | 2,594 | — | 2,594 | — | |||||||
| Accretion of Discount on Convertible Subordinated Notes ** | 231 | 63 | 2,192 | 241 | |||||||
| Net Loss (Gain) on Early Extinguishment of Debt | (343 | ) | — | 397 | — | ||||||
| Loss on Sale of Business and Other Costs | 162 | 188 | 439 | 3,331 | |||||||
| Goodwill and Other Impairments | 805 | 184 | 805 | 761 | |||||||
| Litigation Reserve | 790 | 138 | 790 | 592 | |||||||
| Natural Disaster Costs | 345 | — | 345 | — | |||||||
| Tax Expense Related to Divested Business** | — | 51 | — | 911 | |||||||
| Gain on Insurance Reimbursements | — | (195 | ) | — | (699 | ) | |||||
| Other Special Items | — | 265 | — | 265 | |||||||
| Tax Adjustment Related to Certain Discrete Items ** | 1,225 | — | 1,225 | — | |||||||
| Adjusted Net Income | $ | 4,285 | $ | 4,971 | $ | 21,566 | $ | 22,532 | |||
| ** 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 and the Tax Expense Related to a Divested Business and the Tax Adjustment Related to Certain Discrete Items. |
15
Reconciliation of Net Income (Loss) to Consolidated EBITDA and Adjusted Consolidated EBITDA for the three months ended and years ended December 31, 2018 and 2019 (in thousands):
| For the Three Months Ended December 31, | For the Years Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2018 | 2019 | 2018 | 2019 | |||||||||
| Net Income (Loss) | $ | (2,658 | ) | $ | 2,569 | $ | 11,645 | $ | 14,533 | |||
| Total Provision for Income Taxes | 1,556 | 2,114 | 6,621 | 7,883 | ||||||||
| Income (Loss) Before Income Taxes | (1,102 | ) | 4,683 | 18,266 | 22,416 | |||||||
| Interest Expense | 6,346 | 6,615 | 21,109 | 25,522 | ||||||||
| Accretion of Discount on Convertible Subordinated Notes | 231 | 63 | 2,192 | 241 | ||||||||
| Net Loss on Early Extinguishment of Debt | (434 | ) | — | 502 | — | |||||||
| Non-Cash Stock Compensation | 3,659 | 537 | 6,583 | 2,153 | ||||||||
| Depreciation & Amortization | 4,330 | 4,416 | 17,430 | 17,771 | ||||||||
| Other, Net | 893 | 196 | 1,238 | 4,110 | ||||||||
| Consolidated EBITDA | $ | 13,923 | $ | 16,510 | $ | 67,320 | $ | 72,213 | ||||
| Adjusted For: | ||||||||||||
| Acquisition and Divestiture Expenses | — | 2,083 | — | 2,083 | ||||||||
| Severance and Retirement Costs | 1,435 | 79 | 1,435 | 1,205 | ||||||||
| Litigation Reserve | 1,000 | 175 | 1,000 | 750 | ||||||||
| Natural Disaster Costs | 437 | — | 437 | — | ||||||||
| Other Special Items | — | 336 | — | 336 | ||||||||
| Adjusted Consolidated EBITDA | $ | 16,795 | $ | 19,183 | $ | 70,192 | $ | 76,587 | ||||
| Revenue | $ | 66,517 | $ | 71,149 | $ | 267,992 | $ | 274,107 | ||||
| Adjusted Consolidated EBITDA Margin | 25.2 | % | 27.0 | % | 26.2 | % | 27.9 | % |
Reconciliation of Funeral and Cemetery Gross Profit to Field EBITDA for the three months ended and years ended December 31, 2018 and 2019 (in thousands):
| For the Three Months Ended December 31, | For the Years Ended December 31, | |||||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2018 | 2019 | 2018 | 2019 | |||||||||||||||||||||||
| Funeral Gross Profit (GAAP) | $ | 14,919 | $ | 16,778 | $ | 60,881 | $ | 63,602 | ||||||||||||||||||
| Depreciation & Amortization | 2,790 | 2,806 | 10,726 | 11,128 | ||||||||||||||||||||||
| Regional & Unallocated Costs | 3,291 | 2,919 | 10,547 | 11,007 | ||||||||||||||||||||||
| Funeral Financial EBITDA | (1,888 | ) | (1,884 | ) | (7,524 | ) | (7,517 | ) | ||||||||||||||||||
| Other Funeral EBITDA | — | (298 | ) | — | (298 | ) | ||||||||||||||||||||
| Funeral Divested/Planned Divested EBITDA | (517 | ) | (253 | ) | (1,779 | ) | (1,437 | ) | ||||||||||||||||||
| Funeral Field EBITDA | $ | 18,595 | $ | 20,068 | $ | 72,851 | $ | 76,485 | For the Three Months Ended December 31, | For the Years Ended December 31, | ||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||||||||||||
| 2018 | 2019 | 2018 | 2019 | |||||||||||||||||||||||
| Cemetery Gross Profit (GAAP) | $ | 2,901 | $ | 3,901 | $ | 15,066 | $ | 15,983 | ||||||||||||||||||
| Depreciation & Amortization | 1,139 | 1,309 | 4,891 | 5,227 | ||||||||||||||||||||||
| Regional & Unallocated Costs | 796 | 900 | 2,202 | 2,820 | ||||||||||||||||||||||
| Cemetery Financial EBITDA | (1,709 | ) | (1,890 | ) | (6,903 | ) | (6,902 | ) | ||||||||||||||||||
| Cemetery Divested/Planned Divested EBITDA | — | — | (1,376 | ) | — | |||||||||||||||||||||
| Cemetery Field EBITDA | $ | 3,127 | $ | 4,220 | $ | 13,880 | $ | 17,128 |
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| Components of Total Field EBITDA for the three months ended and years ended December 31, 2018 and 2019 (in thousands): | For the Three Months Ended December 31, | For the Years Ended December 31, | |||||||
|---|---|---|---|---|---|---|---|---|---|
| 2018 | 2019 | 2018 | 2019 | ||||||
| Funeral Field EBITDA | $ | 18,595 | $ | 20,068 | $ | 72,851 | $ | 76,485 | |
| Cemetery Field EBITDA | 3,127 | 4,220 | 13,880 | 17,128 | |||||
| Funeral Financial EBITDA | 1,888 | 1,884 | 7,524 | 7,517 | |||||
| Cemetery Financial EBITDA | 1,709 | 1,890 | 6,903 | 6,902 | |||||
| Other Funeral EBITDA | — | 298 | — | 298 | |||||
| Funeral Divested/Planned Divested EBITDA | 517 | 253 | 1,779 | 1,437 | |||||
| Cemetery Divested/Planned Divested EBITDA | — | — | 1,376 | — | |||||
| Total Field EBITDA | $ | 25,836 | $ | 28,613 | $ | 104,313 | $ | 109,767 |
Reconciliation of GAAP Basic Earnings (Loss) Per Share to Adjusted Basic Earnings Per Share for the three months ended and years ended December 31, 2018 and 2019:
| For the Three Months Ended December 31, | For the Years Ended December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2018 | 2019 | 2018 | 2019 | ||||||
| GAAP Basic Earnings (Loss) Per Share | $ | (0.14 | ) | $ | 0.14 | $ | 0.64 | $ | 0.81 |
| Special Items | 0.37 | 0.14 | 0.55 | 0.45 | |||||
| Adjusted Basic Earnings Per Share | $ | 0.23 | $ | 0.28 | $ | 1.19 | $ | 1.26 |
Reconciliation of GAAP Diluted Earnings (Loss) Per Share to Adjusted Diluted Earnings Per Share for the three months ended and years ended December 31, 2018 and 2019:
| For the Three Months Ended December 31, | For the Years Ended December 31, | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2018 | 2019 | 2018 | 2019 | ||||||
| GAAP Diluted Earnings (Loss) Per Share | $ | (0.14 | ) | $ | 0.14 | $ | 0.63 | $ | 0.80 |
| Special Items | 0.37 | 0.14 | 0.54 | 0.45 | |||||
| Adjusted Diluted Earnings Per Share | $ | 0.23 | $ | 0.28 | $ | 1.17 | $ | 1.25 |
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Reconciliation of Pro Forma Adjusted Financial Measures:
This press release includes the use of certain financial measures that are not GAAP measures. The Pro Forma Adjusted results presented earlier in this press release are reconciled to their most comparable GAAP measures, all of which are reflected in the tables below.
Reconciliation of Net Income (Loss) to Pro Forma Adjusted Net Income for the three months ended and years ended December 31, 2018 and 2019 (in thousands):
| For the Three Months Ended December 31, | For the Years Ended December 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2018 | 2019 | 2018 | 2019 | ||||||||
| Net Income (Loss) | $ | (2,658 | ) | $ | 2,569 | $ | 11,645 | $ | 14,533 | ||
| Total Provision for Income Taxes | 1,556 | 2,114 | 6,621 | 7,883 | |||||||
| Income (Loss) Before Income Taxes | (1,102 | ) | 4,683 | 18,266 | 22,416 | ||||||
| Adjusted For: | |||||||||||
| Interest Expense | — | — | (4,000 | ) | — | ||||||
| Acquisition Expense | — | 2,083 | — | 2,083 | |||||||
| Recruiting Expense | — | 336 | — | 336 | |||||||
| Severance and Retirement Costs | 1,435 | 79 | 1,435 | 1,205 | |||||||
| Non-Cash Stock Compensation | 3,283 | — | 3,283 | — | |||||||
| Litigation Reserve | 1,000 | 175 | 1,000 | 750 | |||||||
| Divestiture of Funeral Home Business | — | — | — | 3,840 | |||||||
| Divested EBITDA | (28 | ) | 32 | (1,422 | ) | (56 | ) | ||||
| Pro Forma Adjusted Income Before Income Taxes | $ | 4,588 | $ | 7,388 | $ | 18,562 | $ | 30,574 | |||
| Pro Forma Adjusted Total Provision for Income Taxes | 2,670 | 2,404 | 6,714 | 9,324 | |||||||
| Pro Forma Adjusted Net Income | $ | 1,918 | $ | 4,984 | $ | 11,848 | $ | 21,250 |
Reconciliation of Field EBITDA to Pro Forma Adjusted Field EBITDA and Pro Forma Adjusted Consolidated EBITDA for the three months ended and years ended December 31, 2018 and 2019 (in thousands):
| For the Three Months Ended December 31, | For the Years Ended December 31, | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2018 | 2019 | 2018 | 2019 | |||||||||
| Field EBITDA | $ | 25,836 | $ | 28,613 | $ | 104,313 | $ | 109,767 | ||||
| Adjusted For: | ||||||||||||
| Litigation Reserve | 100 | 581 | ||||||||||
| Divested EBITDA | (28 | ) | 32 | (1,422 | ) | (56 | ) | |||||
| Pro Forma Adjusted Field EBITDA | $ | 25,808 | $ | 28,745 | $ | 102,891 | $ | 110,292 | ||||
| Total Overhead Costs | 11,913 | 12,103 | 36,993 | 37,554 | ||||||||
| Adjusted For: | ||||||||||||
| Litigation Reserve | (1,000 | ) | (75 | ) | (1,000 | ) | (170 | ) | ||||
| Severance and Retirement Costs | (1,435 | ) | (79 | ) | (1,435 | ) | (1,205 | ) | ||||
| Acquisition Expense | — | (2,083 | ) | — | (2,083 | ) | ||||||
| Recruiting Expense | — | (336 | ) | — | (336 | ) | ||||||
| Natural Disaster Costs | (437 | ) | — | (437 | ) | — | ||||||
| Pro Forma Adjusted Consolidated EBITDA | $ | 16,767 | $ | 19,215 | $ | 68,770 | $ | 76,532 | ||||
| Revenue | $ | 66,517 | $ | 71,149 | $ | 267,992 | $ | 274,107 | ||||
| Adjusted For: | ||||||||||||
| Divested Revenue | (249 | ) | (63 | ) | (5,677 | ) | (805 | ) | ||||
| Pro Forma Adjusted Revenue | $ | 66,268 | $ | 71,086 | $ | 262,315 | $ | 273,302 | ||||
| Pro Forma Adjusted Field EBITDA Margin | 38.9 | % | 40.4 | % | 39.2 | % | 40.4 | % | ||||
| Pro Forma Adjusted Consolidated EBITDA Margin | 25.3 | % | 27.0 | % | 26.2 | % | 28.0 | % |
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Reconciliation of GAAP Diluted Earnings (Loss) Per Share to Pro Forma Adjusted Diluted Earnings Per Share for the three months ended and years ended December 31, 2018 and 2019:
| For the Three Months Ended December 31, | For the Years Ended December 31, | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| 2018 | 2019 | 2018 | 2019 | ||||||||
| GAAP Diluted Earnings (Loss) Per Share | $ | (0.14 | ) | $ | 0.14 | $ | 0.63 | $ | 0.80 | ||
| Special Items | 0.37 | 0.14 | 0.54 | 0.45 | |||||||
| Pro Forma Adjustments | — | 0.01 | (0.24 | ) | (0.05 | ) | |||||
| Pro Forma Adjusted Diluted Earnings Per Share | $ | 0.23 | $ | 0.29 | $ | 0.93 | $ | 1.20 |
Supplemental Information:
Funeral homes and cemeteries purchased after December 31, 2014 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 2014 Acquired Portfolio that moved from Acquired to Same Store beginning January 1, 2019 (in thousands):
| For the Three Months Ended December 31, 2018 | For the Year Ended December 31, 2018 | |||||||
|---|---|---|---|---|---|---|---|---|
| Revenue | EBITDA | Revenue | EBITDA | |||||
| 2014 Acquired Portfolio | $ | 3,310 | $ | 1,339 | $ | 12,989 | $ | 5,254 |
Reconciliation of Performance Outlook Scenario
Earlier in this press release, we present the Performance Outlook Scenario 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 unless we have a signed Letter of Intent with a high likelihood of a closing within 90 days. This Performance Outlook Scenario 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 reconciliations are presented at the approximate midpoint of the range in this Performance Outlook Scenario.
Reconciliation of Net Income to Consolidated EBITDA and Field EBITDA for the Estimated Years Ending December 31, 2020, 2021 and 2022 (in thousands):
| Years Ending December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2020E | 2021E | 2022E | |||||||
| Net Income | $ | 28,600 | $ | 37,200 | $ | 44,000 | |||
| Total Tax Provision | 11,100 | 14,500 | 17,100 | ||||||
| Pretax Income | 39,700 | 51,700 | 61,100 | ||||||
| Net Interest Expense, including Accretion of Discount on Convertible Subordinated Notes | 32,000 | 24,200 | 23,500 | ||||||
| Depreciation & Amortization, including Non-cash Stock Compensation | 22,900 | 23,900 | 19,700 | ||||||
| Consolidated EBITDA | $ | 94,600 | $ | 99,800 | $ | 104,300 | |||
| Overhead | 35,400 | 36,000 | 37,900 | ||||||
| Total Field EBITDA | $ | 130,000 | $ | 135,800 | $ | 142,200 | |||
| Revenue | $ | 317,000 | $ | 323,000 | $ | 331,000 | |||
| Total Field EBITDA Margin | 41.0 | % | 42.0 | % | 43.0 | % |
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Reconciliation of Consolidated EBITDA to Adjusted Consolidated EBITDA for the Estimated Years Ending December 31, 2020, 2021 and 2022 (in thousands):
| Years Ending December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2020E | 2021E | 2022E | |||||||
| Consolidated EBITDA | $ | 94,600 | $ | 99,800 | $ | 104,300 | |||
| Special Items | — | — | — | ||||||
| Adjusted Consolidated EBITDA | $ | 94,600 | $ | 99,800 | $ | 104,300 | |||
| Revenue | $ | 317,000 | $ | 323,000 | $ | 331,000 | |||
| Adjusted Consolidated EBITDA Margin | 29.8 | % | 30.9 | % | 31.5 | % |
Reconciliation of Net Income to Adjusted Net Income for the Estimated Years Ending December 31, 2020, 2021 and 2022 (in thousands):
| Years Ending December 31, | ||||||
|---|---|---|---|---|---|---|
| 2020E | 2021E | 2022E | ||||
| Net Income | $ | 28,600 | $ | 37,200 | $ | 44,000 |
| Special Items | — | — | — | |||
| Adjusted Net Income | $ | 28,600 | $ | 37,200 | $ | 44,000 |
Reconciliation of GAAP Diluted Earnings Per Share to Adjusted Diluted Earnings Per Share for the Estimated Years Ending December 31, 2020, 2021 and 2022 (in thousands):
| Years Ending December 31, | ||||||
|---|---|---|---|---|---|---|
| 2020E | 2021E | 2022E | ||||
| GAAP Diluted Earnings Per Share | $ | 1.59 | $ | 2.07 | $ | 2.44 |
| Special Items | — | — | — | |||
| Adjusted Diluted Earnings Per Share | $ | 1.59 | $ | 2.07 | $ | 2.44 |
Reconciliation of Cash Flow Provided by Operating Activities to Adjusted Free Cash Flow for the Estimated Years December 31, 2020, 2021 and 2022 (in thousands):
| Years Ending December 31, | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 2020E | 2021E | 2022E | |||||||
| Cash Flow Provided by Operating Activities | $ | 52,000 | $ | 63,000 | $ | 71,000 | |||
| Cash used for Maintenance Capital Expenditures | (9,000 | ) | (9,000 | ) | (9,000 | ) | |||
| Adjusted Free Cash Flow | $ | 43,000 | $ | 54,000 | $ | 62,000 |
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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 of the plans, timing and objectives of management for acquisition and divestiture activities; any statements of the plans, timing, expectations and objectives of management for future financing activities; 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; |
| --- | --- |
| • | our ability to consummate the divestiture of low performing businesses as currently expected, if at all; |
| --- | --- |
| • | our ability to meet the timing, objectives and cost saving expectations related to anticipated financing activities; |
| --- | --- |
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 funeral and cemetery industry; and |
| --- | --- |
| • | other factors and uncertainties inherent in the funeral and cemetery 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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