Carriage Services Announces Results For First Quarter 2014

          Carriage Services Announces Results For First Quarter 2014

PR Newswire

HOUSTON, May 7, 2014

HOUSTON, May 7, 2014 /PRNewswire/ -- Carriage Services, Inc. (NYSE: CSV) today
announced results for the quarter ending March 31, 2014.

Melvin C. Payne, Chief Executive Officer, stated, "Our first quarter 2014
operating and financial performance was slightly lower than the comparative
2013 quarter primarily because of lower same store funeral and cemetery
volumes and revenues due to a more normal flu season this year compared to the
unusually strong flu season last year. We made one acquisition in November
2013 whose contribution will now be reflected for the full 2014 year.
Notwithstanding the slightly lower comparative dollar and EPS performance, the
quarter was still one of our highest relative profit margin quarters with a
Field EBITDA Margin of 40.9%, an Adjusted Consolidated EBITDA Margin of 27.1%,
and an Adjusted Net Profit Margin of 9.6%. Shown below are the highlights of
our 2014 first quarter performance (amounts in millions):"

Three Months ended March 31, 2014

  oTotal Revenue of $55.8 million, a decrease of 2.6%;
  oNon-GAAP Adjusted Consolidated EBITDA of $15.2 million, a decrease of
    8.3%;
  oNon-GAAP Adjusted Consolidated EBITDA Margin down 170 basis points to
    27.1%;
  oNon-GAAP Basic Earnings Per Share of $0.30, a decrease of 9.1%; and
  oNon-GAAP Adjusted Free Cash Flow of $2.3 million, a decrease of 71.6%.

"On March 5, 2014, we issued a comprehensive press release announcing our 2013
full year results and three other milestone elements that would materially
impact Carriage's Revenue and Earnings Power Outlook over the two full years
2014 and 2015. An update on these three elements is as follows:"

  I. Agreement to acquire six businesses from SCI.

  We are entering two new large strategic markets by acquiring four businesses
  in New Orleans and two in Alexandria, Virginia. The FTC approval process is
  in the final stage and we expect to close this transaction in the next 30
  days. Our regional and operational support teams have spent extensive time
  in these businesses both prior to our offer on due diligence and afterwards
  on pre-integration matters including local leadership and employee alignment
  with Carriage's Standards Operating Model. Upon closing, these businesses
  will be immediately accretive and should add materially to our performance
  in the second half of 2014 and for the full year of 2015.

  II. Financing Strategy and Execution Timeframe.

  We have refinanced convertible junior subordinated debt and bank credit
  facilities totaling $345 million ($257 million outstanding as of 3/5/14)
  with new convertible subordinated debt and bank credit facilities totaling
  $469 million to support our operating and acquisition strategy, as follows:

                       Capital Structure Debt Components
                       March 5, 2014           Pro forma after SCI Acquisition
                       Committed  Outstanding  Committed        Outstanding
7% Convertible Junior
Subordinated           $  90.0    $  90.0      $    0.0         $   0.0
Debentures
2.75% Convertible         0          0              143.8           143.8
Subordinated Notes
Bank Term Loan            130.0      117.0          125.0           125.0
Bank Revolving Credit     125.0      50.0           200.0           48.5
Total                  $  345.0   $  257.0     $    468.8       $   317.3

  We will have additional financial capacity of about $150 million on highly
  favorable terms under our bank revolving credit facility after the closing
  of the SCI divestiture transaction. The successful completion of this
  financing strategy has materially reduced our cost of debt capital and
  therefore our total cost of capital and will be immediately accretive
  starting in the second quarter and thereafter. Combined with our growing
  Free Cash Flow, we are well positioned to accelerate our earning power
  growth over the balance of 2014 and for the full year of 2015 as our
  selective acquisition strategy will now be financed with a lower cost of
  capital.

  The refinancing of the 7% Convertible Junior Subordinated Debenture
  eliminated the dilutive impact of 4.4 million common shares under the "if
  converted" method of accounting, which had previously led to some confusion
  with our investors. Additionally on January 8th, we terminated the Good To
  Great Stock Award Program with an early cash out which saved the company at
  least $4 million cash and potential dilution of 1.6 million common shares,
  as the full vesting criteria was met eight days later on January 16, 2014.

  III. Renewed focus on StrategicAcquisitions under Dave DeCarlo.

  With Dave DeCarlo joining Carriage full time, we have increased our
  corporate development activity in order to fully realize the potential of an
  industry landscape that offers Carriage as a highly differentiated family
  succession plan solution to remaining high quality independents in some of
  the best strategic markets. Our acquisition pipeline is growing larger with
  high quality candidates, which should accelerate our acquisition growth over
  the next few years.

"Finally, we recently published our 2013 Annual Report with my annual
shareholder letter. If you have not read it, I encourage you to do so to
better understand why Carriage as a deathcare industry operating and
consolidation platform will continue to be an outstanding investment and a
wonderful place for high performance talent to spend a career, as we continue
our Good To Great Journey," concluded Mr. Payne.

FIELD OPERATIONS

Three Months Ended March 31, 2014 compared to Three Months Ended March 31,
2013

  oTotal Field Revenue decreased 2.6% to $55.8 million;
  oTotal Field EBITDA decreased 5.4% to $22.8 million;
  oTotal Field EBITDA Margin decreased 120 basis points to 40.9%;

  oTotal Funeral Operating Revenue decreased 2.7% to $41.7 million;
  oSame Store Funeral Revenue decreased 6.5% with same store volume
    decreasing 6.0%;
  oAcquisition Funeral Revenue increased 11.3% with acquisition volume
    increasing 5.7%;
  oTotal Funeral Field EBITDA Margin decreased 130 basis points to 38.1%;

  oTotal Cemetery Operating Revenue increased 0.1% to $9.8 million;
  oCemetery pre-need property sale contracts decreased 5.9% to 1,644;
  oPreneed property revenue recognized decreased 5.7% and At-need revenue
    increased 8.2%;
  oTotal Cemetery Field EBITDA Margin decreased 170 basis points to 29.0%;

  oTotal Financial Revenue decreased 6.7% to $4.4 million;
  oFuneral Financial Revenue increased 11.9% to $2.5 million;
  oCemetery Financial Revenue decreased 23.3% to $1.9 million;
  oTotal Financial EBITDA Margin increased 340 basis points to 93.7%.

FREE CASH FLOW

We produced Adjusted Free Cash Flow from operations for the three months ended
March 31, 2014 of $2.3 million compared to Free Cash Flow from operations of
$8.1 million for the corresponding period in 2013. The sources and uses of
cash for the three months ended March 31, 2013 and 2014 consisted of the
following (in millions):



                                                  March 31,
                                                  2013          2014
Cash flow from operating activities               $    9.9  $    (1.6)
Adjustment for tax benefit of Good to Great stock —             4.8
awards
Cash used for maintenance capital expenditures    (1.8)         (0.9)
Adjusted free cash flow                           $    8.1   $     2.3
Cash at beginning of period                       1.7           1.4
Acquisitions and new construction                 (6.0)         —
Proceeds from the sale of businesses and other    2.0           0.2
assets
Net payments on our revolving credit facility,    (4.4)         (40.1)
term loan and long-term debt obligations
Proceeds from issuance of convertible             —             143.7
subordinated notes
Payment of issuance costs related to the          —             (4.4)
convertible subordinated notes
Redemption of convertible junior subordinated     —             (61.9)
debentures
Payments for performance awards                   —             (16.2)
Excess tax benefit of equity compensation, net of 0.9           0.8
benefit from Good to Great stock awards
Growth capital expenditures                       (0.8)         (4.1)
Dividends on common stock                         (0.4)         (0.4)
Other investing and financing activities, net     0.2           0.6
Cash at March 31st                                $    1.3   $    21.9



AMENDMENT TO CREDIT FACILITY

On April 14, 2014, we entered into a fifth amendment to the Credit Agreement
(the "Fifth Amendment") which provides for an increase, in total, from $235
million to $325 million and continues to be administered by Bank of America,
N.A. The Fifth Amendment will become effective upon consummation of that
certain Asset Sale Agreement, by certain subsidiaries of each of the Company
and Service Corporation International, which was previously announced on March
5, 2014. Following effectiveness of the Fifth Amendment, obligations under
the Credit Agreement will mature on March 31, 2019. The Fifth Amendment
provides for an increase in the revolving credit facility from $125 million to
$200 million. Borrowings under the term loan facility of $125 million are
subject to amortization payments of 7.5% of the principal amount in the first
two years following the Fifth Amendment effective date, 10.0% for the third
and fourth years following the Fifth Amendment effective date and 12.5% per
year thereafter. The Fifth Amendment also modifies certain financial
covenants pertaining to the Company.

ROLLING FOUR QUARTER OUTLOOK

The Rolling Four Quarter Outlook ("Outlook") reflects management's opinion on
the performance of the portfolio of businesses, plus visible and likely
acquisitions, for the rolling four quarter period ending March 31,2015, and
the performance of trusts during the corresponding period. This Outlook is
not intended to be management estimates or forecasts of our future
performance, as we believe such precise rolling 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.



ROLLING FOUR QUARTER OUTLOOK – Period Ending March 31, 2015
                                   Range (in millions, except per share
                                   amounts)
                                   March 31, 2015
Revenues                           $236.8 - $238.8
Consolidated EBITDA                $59.0 - $61.0
Adjusted Consolidated EBITDA       $62.9 - $64.9
Net Income                         $18.3 - $19.5
Adjusted Net Income                $23.0 - $24.2
Adjusted Basic Earnings Per Share  $1.25 - $1.31

Factors affecting our analysis include, among others, number, size and timing
of closing of acquisitions, 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,
Strategic Acquisition Model and Withdrawable Trust Income. Revenues,
Consolidated EBITDA, Adjusted Consolidated EBITDA, Net Income, Adjusted Net
Income and Adjusted Earnings Per Share for the four quarter period ending
March 31,2015 are expected to improve relative to the same period in the
previous period for the following reasons:

  oIncreases in Acquired Funeral Revenue and Acquired Funeral Field EBITDA;
  oIncreases in Acquired Cemetery Revenue and Acquired Cemetery Field EBITDA;
  oModest increases in Same Store Funeral Revenue and Same Store Funeral
    Field EBITDA;
  oIncreases in Same Store Cemetery Revenue and Same Store Cemetery Field
    EBITDA;
  oIncreases in Financial Revenue and Financial EBITDA from trust funds; and
  oReduced interest expense in conjunction with the fourth and fifth
    amendments to our bank credit facilities and the redemption of our $90
    million 7% convertible junior subordinated debentures.

CONFERENCE CALL AND INVESTOR RELATIONS CONTACT

Carriage Services has scheduled a conference call for tomorrow, May 8, 2014 at
9:30 a.m. central time. To participate in the call, please dial 866-516-3867
(ID-32261141) and ask for the Carriage Services conference call. A replay of
the conference call will be available through May 12,2014 and may be accessed
by dialing 855-859-2056 (ID-32261141). The conference call will also be
available at www.carriageservices.com. 

TRUST FUND PERFORMANCE

For the three months ended March 31, 2014, Carriage's discretionary trust
funds gained 4.3%. The current yield on Carriage's discretionary fixed income
portfolio, which comprises 73% of discretionary trust assets, is 8.9% and the
estimated annual income for the discretionary portfolio is approximately $11.3
million.

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
                                            Index Performance
                  Performance^(1)
                                            S&P 500    High      80/20 index
                  Discretionary Total                  Yield
                                Trust       Stock                Benchmark^(2)
                                            Index      Index
3 months ended    4.3 %         3.8 %       1.8 %      3.0 %     2.7 %
3/31/14
1 year ended      14.2 %        13.7 %      32.4 %     7.5 %     12.4 %
12/31/13
2 years ended     37.5 %        33.2 %      53.0 %     24.4 %    30.2 %
12/31/13
3 years ended     33.5 %        30.7 %      56.2 %     30.6 %    35.7 %
12/31/13
4 years ended     61.1 %        54.4 %      79.4 %     50.4 %    56.2 %
12/31/13
5 years ended     150.6 %       127.1 %     125.8 %    137.9 %   135.5 %
12/31/13

(1) Investment performance includes realized income and unrealized
    appreciation (depreciation).
(2) The 80/20 Benchmark is 80% weighted to the High Yield Index and 20%
    weighted to the S&P 500 Stock Index.



Asset Allocation as of March 31, 2014
(in thousands)
                  Discretionary       Total

                  Trust Funds         Trust Funds
Asset Class       MV          %       MV         %
Cash              $   3,153 2 %     $  19,090 8 %
Equities          41,759      23 %    58,881     26 %
Fixed Income      133,505     73 %    147,810    64 %
Other/Insurance   4,232       2 %     4,463      2 %
Total Portfolios  $ 182,649   100 %   $ 230,244  100 %



CARRIAGE SERVICES, INC.
FIVE QUARTER OPERATING AND FINANCIAL TREND REPORT
FROM CONTINUING OPERATIONS (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)
                       QTR 1       QTR 2       QTR 3      QTR 4     QTR 1
                       2013        2013        2013       2013      2014
Same Store Contracts
Atneed Contracts       5,035       4,460       4,338      4,427     4,820
Preneed Contracts      1,400       1,199       1,141      1,199     1,229
Total Same Store       6,435       5,659       5,479      5,626     6,049
Funeral Contracts
Acquisition Contracts
Atneed Contracts       1,557       1,377       1,242      1,513     1,659
Preneed Contracts      301         249         278        280       304
Total Acquisition      1,858       1,626       1,520      1,793     1,963
Funeral Contracts
Total Funeral          8,293       7,285       6,999      7,419     8,012
Contracts
Funeral Operating
Revenue
Same Store Revenue     $        $        $         $     $ 
                       33,671      29,866     27,725    29,779    31,482
Acquisition Revenue    9,146       8,121       7,513      8,880     10,178
Total Funeral          $         $         $ 35,238  $      $  41,660
Operating Revenue      42,817     37,987                38,659
Cemetery Operating
Revenue
Same Store Revenue     $       $        $        $     $  
                       9,691       10,827     9,968     9,698    9,712
Acquisition Revenue    69          74          89         66        55
Total Cemetery         $        $         $ 10,057  $     $  
Operating Revenue      9,760      10,901                9,764     9,767
Financial Revenue
Preneed Funeral        $      $      $       $     $   
Commission Income      508        481        446         418   564
Preneed Funeral Trust  1,726       2,231       1,654      1,796     1,935
Earnings
Cemetery Trust         2,194       2,087       1,940      1,875     1,584
Earnings
Preneed Cemetery       310         388         372        348       337
Finance Charges
Total Financial        $        $        $  4,412 $     $  4,420
Revenue                4,738      5,187                 4,437
Total Revenue          $         $         $ 49,707  $      $ 55,847
                       57,315     54,075                52,860
Field EBITDA
Same Store Funeral     $        $        $        $     $ 
Field EBITDA           13,664      11,387     9,984     10,043    12,103
Same Store Funeral     40.6 %      38.1 %      36.0 %     33.7 %    38.4 %
Field EBITDA Margin
Acquisition Funeral    3,213       2,432       2,098      2,743     3,772
Field EBITDA
Acquisition Funeral    35.1 %      29.9 %      27.9 %     30.9 %    37.1 %
Field EBITDA Margin
Total Funeral Field    $         $         $ 12,082  $      $  15,875
EBITDA                 16,877     13,819                12,786
Total Funeral Field    39.4 %      36.4 %      34.3 %     33.1 %    38.1 %
EBITDA Margin
Same Store Cemetery    $       $       $        $     $  
Field EBITDA           3,020       3,328       2,724     2,687    2,839
Same Store Cemetery    31.2 %      30.7 %      27.3 %     27.7 %    29.2 %
Field EBITDA Margin
Acquisition Cemetery   (27)        (20)        13         (11)      (9)
Field EBITDA
Acquisition Cemetery   -39.1 %     -27.0 %     14.6 %     -16.7 %   -16.4 %
Field EBITDA Margin
Total Cemetery Field   $        $        $        $     $  
EBITDA                 2,993      3,308      2,737      2,676     2,830
Total Cemetery Field   30.7 %      30.3 %      27.2 %     27.4 %    29.0 %
EBITDA Margin
Funeral Financial      $       $       $        $     $  
EBITDA                 1,822       2,380       1,825     1,960    2,245
Cemetery Financial     2,456       2,429       2,275      2,180     1,898
EBITDA
Total Financial EBITDA $        $        $        $     $  
                       4,278      4,809      4,100      4,140     4,143
Total Financial EBITDA 90.3 %      92.7 %      92.9 %     93.3 %    93.7 %
Margin
Total Field EBITDA     $         $         $ 18,919  $      $ 22,848
                       24,148     21,936                19,602
Total Field EBITDA     42.1 %      40.6 %      38.1 %     37.1 %    40.9 %
Margin

FIVE QUARTER OPERATING AND FINANCIAL TREND REPORT
FROM CONTINUING OPERATIONS (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)
                              QTR 1     QTR 2     QTR 3     QTR 4    QTR 1
                              2013      2013      2013      2013     2014
Overhead
Total Variable Overhead       $     $     $       $     $  
                              2,029     2,373     2,499     1,944 3,863
Total Regional Fixed Overhead 966       882       960       538      786
Total Corporate Fixed         5,400     5,156     5,454     4,819    5,574
Overhead
Total Overhead                $      $      $        $     $ 
                              8,395    8,411    8,913     7,301  10,223
Overhead as a percent of      14.6 %    15.6 %    17.9 %    13.8 %   18.3 %
revenue
Consolidated EBITDA           $       $       $ 10,006 $     $ 
                              15,753   13,525             12,301   12,625
Consolidated EBITDA Margin    27.5 %    25.0 %    20.1 %    23.3 %   22.6 %
Other Expenses and Interest
Property Depreciation &       $     $     $       $     $  
Amortization                  2,823     3,074     2,939     2,833 2,764
Non Cash Stock Compensation   646       978       675       617      729
Interest Expense              3,428     3,693     3,250     3,066    2,845
Accretion for Convertible     —         —         —         —        171
Subordinated Notes
Loss on Redemption of
Convertible Junior            —         —         —         —        3,778
Subordinated Debentures
Other, net                    (833)     (29)      (34)      —        (368)
Pretax Income                $      $      $        $     $ 
                              9,689    5,809    3,176     5,785  2,706
Tax Provision                 4,280     2,207     1,262     1,528    1,055
GAAP Net Income               $      $      $        $     $ 
                              5,409    3,602    1,914     4,257  1,651
Special Items, Net of Tax
                              $     $     $      $     $   
Withdrawable Trust Income      328     141    210            137
                                                            281
Acquisition/Divestiture       5         102       143       246      454
Expenses
Severance Costs               126       325       409       104      193
Consulting Fees               —         168       110       90       147
Gain on Asset Purchase        —         —         —         —        (689)
Loss on Redemption of
Convertible Junior            —         —         —         —        2,305
Subordinated Debentures
Accretion for Convertible     —         —         —         —        104
Subordinated Notes
Additional Interest and Costs —         248       —         —        —
of the Credit Facility
Tax Adjustment from Prior     598       —         —         (338)    —
Period
Securities Transaction        —         —         160       —        —
Expenses
Other Incentive Compensation  —         —         —         —        610
Other Special Items           (484)     —         —         —        465
Sum of Special Items, net of  $     $     $        $     $ 
tax                            573      984     1,032      383 3,726
Adjusted Net Income           $      $      $        $     $ 
                              5,982    4,586    2,946     4,640  5,377
Adjusted Net Profit Margin    10.4%     8.5%      5.9%      8.8%     9.6%
                              $     $     $      $     $   
GAAP Basic Earnings Per Share  0.33     0.26    0.16             0.30
                                                            0.25
GAAP Diluted Earnings Per     $     $     $      $     $   
Share                          0.31     0.25    0.16             0.29
                                                            0.25
Adjusted Basic Earnings Per   $     $     $      $     $   
Share                          0.30     0.20    0.10             0.09
                                                            0.23
Adjusted Diluted Earnings Per $     $     $      $     $   
Share                          0.26     0.20    0.10             0.09
                                                            0.23
Tax rate                      44.2%     38.0%     39.7%     26.4%    39.0%
Reconciliation of
Consolidated EBITDA to
Adjusted Consolidated EBITDA
Consolidated EBITDA           $       $       $ 10,006 $     $ 12,625
                              15,753   13,525             12,301
Withdrawable Trust Income     497       213       318       426      225
Acquisition/Divestiture       8         155       217       372      744
Expenses
Severance Costs               191       493       620       158      317
Consulting Fees               —         255       166       136      241
Securities Transaction        —         —         242       —        —
Expenses
Other Incentive Compensation  —         —         —         —        1,000
Other Special Items           83        —         —         —        —
Adjusted Consolidated EBITDA  $       $       $ 11,569 $     $ 15,152
                              16,532   14,641             13,393
Adjusted Consolidated EBITDA  28.8 %    27.1 %    23.3 %    25.3 %   27.1 %
Margin



CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
                                                              (unaudited)
                                           December 31, 2013  March 31, 2014
ASSETS
Current assets:
Cash and cash equivalents                  $            $     21,958
                                           1,377
Accounts receivable, net                   17,950             17,715
Assets held for sale                       3,544              —
Inventories                                5,300              5,348
Prepaid expenses                           4,421              4,387
Other current assets                       3,525              1,754
Total current assets                       36,117             51,162
Preneed cemetery trust investments         68,341             69,475
Preneed funeral trust investments          97,144             100,204
Preneed receivables, net                   24,521             24,282
Receivables from preneed trusts            11,166             11,738
Property, plant and equipment, net         160,690            161,829
Cemetery property                          72,911             72,852
Goodwill                                   221,087            220,945
Deferred charges and other non-current     12,280             13,416
assets
Cemetery perpetual care trust investments  42,342             43,529
Total assets                               $             $    769,432
                                           746,599
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of senior long-term debt   $             $     14,078
and capital lease obligations              13,424
Accounts payable                           7,046              5,231
Other liabilities                          9,939              9,350
Accrued liabilities                        12,854             12,558
Liabilities associated with assets held    4,357              —
for sale
Total current liabilities                  47,620             41,217
Long-term debt, net of current portion     105,642            101,783
Revolving credit facility                  36,900             —
Convertible junior subordinated debentures 89,770             27,860
due in 2029 to an affiliate
Convertible subordinated notes due 2021    —                  112,261
Obligations under capital leases, net of   3,786              1,343
current portion
Deferred preneed cemetery revenue          55,479             55,019
Deferred preneed funeral revenue           30,588             31,102
Deferred tax liability                     11,915             18,290
Other long-term liabilities                1,548              1,612
Deferred preneed cemetery receipts held in 68,341             69,475
trust
Deferred preneed funeral receipts held in  97,144             100,204
trust
Care trusts' corpus                        41,893             43,566
Total liabilities                          590,626            603,732
Commitments and contingencies:
Stockholders' equity:
Common stock, $.01 par value; 80,000,000
shares authorized; 22,183,000 and          222                224
22,408,000 shares issued at December31,
2013 and March 31, 2014, respectively
Additional paid-in capital                 204,324            211,831
Accumulated deficit                        (33,306)           (31,088)
Treasury stock, at cost; 3,922,000 shares  (15,267)           (15,267)
at December31, 2013 and March 31, 2014
Total stockholders' equity                 155,973            165,700
Total liabilities and stockholders' equity 746,599            769,432



CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
                                          For the Three Months Ended March 31,
                                          2013                 2014
Revenues                                  $  57,315           $  55,847
Field costs and expenses                  38,402               37,800
Gross profit                              18,913               $  18,047
General and administrative expenses       6,629                9,677
Operating income                          12,284               $   8,370
Interest expense, net                     (2,595)              (3,016)
Loss on redemption of convertible junior  —                    (3,778)
subordinated notes
Other                                     —                    1,130
Income from continuing operations before  9,689                $   2,706
income taxes
Provision for income taxes                (4,280)              (1,055)
Net income from continuing operations     5,409                $   1,651
Net income (loss) from discontinued       (151)                567
operations, net of tax
Net income                                5,258                2,218
Preferred stock dividend                  (4)                  —
Net income available to common            $   5,254          $   2,218
stockholders
Basic earnings (loss) per common share:
Continuing operations                     $   0.30          $   0.09
Discontinued operations                   (0.01)               0.03
Basic earnings per common share           $   0.29          $   0.12
Diluted earnings (loss) per common share:
Continuing operations                     $   0.26          $   0.09
Discontinued operations                   (0.01)               0.03
Diluted earnings per common share         $   0.25          $   0.12
Dividends declared per common share       $  0.025           $  0.025
Weighted average number of common and
common equivalent shares outstanding:
Basic                                     17,657               17,984
Diluted                                   22,246               18,143



The GAAP Diluted EPS for the three months ended March 31, 2013 includes 4.4
million shares that would be issued upon conversion of our convertible junior
subordinated debentures as a result of the if-converted method prescribed by
accounting standards. 



CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
                                              For the Three Months Ended March
                                              31,
                                              2013                2014
Cash flows from operating activities:
Net income                                    $    5,258      $   2,218
Adjustments to reconcile net income to net
cash provided by operating activities:
Loss (gain) on sale / purchase of businesses  389                 (2,039)
and other assets
Impairment of goodwill                        100                 —
Depreciation and amortization                 2,848               2,764
Amortization of deferred financing costs      (638)               232
Accretion of debt discount on convertible     —                   171
subordinated notes
Provision for losses on accounts receivable   456                 700
Stock-based compensation expense              646                 1,491
Deferred income taxes                         1,354               (4,780)
Loss on redemption of convertible junior      —                   2,932
subordinated debentures
Other                                         (34)                (3)
Changes in operating assets and liabilities
that provided (required) cash:
Accounts and preneed receivables              (1,904)             (245)
Inventories and other current assets          478                 299
Deferred charges and other                    21                  (318)
Preneed funeral and cemetery trust            1,410               (5,258)
investments
Accounts payable                              (874)               (2,566)
Accrued and other liabilities                 (280)               (2,387)
Deferred preneed funeral and cemetery revenue 2,617               (37)
Deferred preneed funeral and cemetery         (1,934)             5,208
receipts held in trust
Net cash provided by (used in) operating      9,913               (1,618)
activities
Cash flows from investing activities:
Acquisitions and new construction             (6,051)             —
Net proceeds from the sale of businesses and  2,011               200
other assets
Capital expenditures                          (2,602)             (5,048)
Net cash used in investing activities         (6,642)             (4,848)
Cash flows from financing activities:
Net payments on the revolving credit facility (1,700)             (36,900)
Payments on term loan                         (2,500)             (3,000)
Proceeds from the issuance of convertible     —                   143,750
subordinated notes
Payment of debt issuance costs related to the —                   (4,355)
convertible subordinated notes
Payments on other long-term debt and          (168)               (185)
obligations under capital leases
Redemption of convertible junior subordinated —                   (61,905)
debentures
Payments for performance-based stock awards   —                   (16,150)
Proceeds from the exercise of stock options
and employee stock purchase plan              318                 652
contributions
Dividends on common stock                     (452)               (456)
Dividend on redeemable preferred stock        (4)                 —
Payment of loan origination costs             (98)                —
Excess tax benefit of equity compensation     925                 5,596
Net cash provided by (used in) financing      (3,679)             27,047
activities
Net increase (decrease) in cash and cash      (408)               20,581
equivalents
Cash and cash equivalents at beginning of     1,698               1,377
period
Cash and cash equivalents at end of period    $    1,290      $  21,958



CARRIAGE SERVICES, INC.
CALCULATION OF EARNINGS PER SHARE
(in thousands, except share and per share data)
                                              For the Three Months Ended March
                                              31,
                                              2013              2014
Numerator for basic earnings per share:
Numerator from continuing operations
Income from continuing operations             $           $    1,651
                                              5,409
Less: Earnings allocated to unvested          (139)             (37)
restricted stock
Income attributable to continuing operations  $           $    1,614
                                              5,270
Numerator from discontinued operations
Income (loss) from discontinued operations    $          $     567
                                              (151)
Less: Earnings allocated to unvested          3                 (13)
restricted stock
Income (loss) attributable to discontinued    $          $     554
operations                                    (148)
Numerator for diluted earnings per share:
Adjustment for diluted earnings per share:
Interest on convertible junior subordinated   485               —
debentures, net of tax
                                              $          $      —
                                              485
Income attributable to continuing operations  $           $    1,614
                                              5,756
Income (loss) attributable to discontinued    $          $     554
operations                                    (148)
Denominator
Denominator for basic earnings per common     17,657            17,984
share - weighted average shares outstanding
Effect of dilutive securities:
Stock options                                 197               159
Convertible junior subordinated debentures    4,392             —
Denominator for diluted earnings per common   22,246            18,143
share - weighted average shares outstanding
Basic earnings (loss) per common share:
Continuing operations                         $          $     0.09
                                              0.30
Discontinued operations                       (0.01)            0.03
Basic earnings per common share               $          $     0.12
                                              0.29
Diluted earnings (loss) per common share:
Continuing operations                         $          $     0.09
                                              0.26
Discontinued operations                       (0.01)            0.03
Diluted earnings per common share             $          $     0.12
                                              0.25



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 "Adjusted Net Income", "Adjusted Basic
Earnings Per Share", "Adjusted Diluted Earnings Per Share", "Consolidated
EBITDA", "Adjusted Consolidated EBITDA", "Free Cash Flow", "Funeral, Cemetery
and Financial EBITDA", "Total Field EBITDA" and "Special Items" 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:

  oAdjusted Net Income is defined as net income from continuing operations
    plus adjustments for special items and other non-recurring expenses or
    credits.
  oConsolidated EBITDA is defined as net income from continuing operations
    before income taxes, interest expenses, non-cash stock compensation,
    depreciation and amortization, and interest income and other, net.
  oAdjusted Consolidated EBITDA is defined as Consolidated EBITDA plus
    adjustments for special items and non-recurring expenses or credits.
  oFree Cash Flow is defined as net cash provided by operations, adjusted by
    special items as deemed necessary,less cash for maintenance capital
    expenditures.
  oFuneral Field EBITDA is defined as Funeral Gross Profit less depreciation
    and amortization, regional and unallocated overhead expenses and net
    financial income.
  oCemetery Field EBITDA is defined as Cemetery Gross Profit less
    depreciation and amortization, regional and unallocated overhead expenses
    and net financial income.
  oFinancial EBITDA is defined as Financial Revenue less Financial Expenses.
  oTotal Field EBITDA is defined as Gross Profit less depreciation and
    amortization, regional and unallocated overhead expenses.
  oSpecial Items is defined as charges or credits that are deemed as Non-GAAP
    items such as withdrawable trust income, acquisition and divestiture
    expenses, litigation settlements, severance costs, loss on early
    retirement of debt and other costs, discrete tax items and other
    non-recurring amounts.
  oAdjusted Basic Earnings Per Share is defined as GAAP Basic Earnings Per
    Share, adjusted for special items.
  oAdjusted Diluted Earnings Per Share is defined as GAAP Diluted Earnings
    Per Share, adjusted for special items.

Certain state regulations allow the withdrawal of financial income from
preneed cemetery merchandise and services trust funds when realized in the
trust. Under current generally accepted accounting principles, trust income
is only recognized in the Company's financial statements at a later time when
the related merchandise and services sold on the preneed contract is delivered
at the time of death. Carriage has provided financial income from the trusts,
termed "Withdrawable Trust Income" and reported on a Non-GAAP proforma basis
within Special Items in the accompanying Operating and Financial Trend Report
(a Non-GAAP Unaudited Income Statement), to reflect the current cash results.
Management believes that the Withdrawable Trust Income provides useful
information to investors because it presents income and cash flow when earned
by the trusts.

Reconciliation of Non-GAAP Financial Measures:

This press release includes the use of certain financial measures that are not
GAAP measures. The Non-GAAP financial measures are presented for additional
information and are reconciled to their most comparable GAAP measures below.



Reconciliation of Net Income from continuing operations to Adjusted Net Income
for the five quarters ended March 31, 2014 (in thousands):
                                   QTR 1       QTR 2   QTR 3   QTR 4   QTR 1
                                   2013        2013    2013    2013    2014
Net Income from continuing         $  5,409   $      $      $      $ 
operations                                     3,602   1,914   4,257   1,651
Special items, net of tax
Withdrawable Trust Income          328         141     210     281     137
Acquisition/Divestiture Expenses   5           102     143     246     454
Severance Costs                    126         325     409     104     193
Consulting Fees                    —           168     110     90      147
Gain on Asset Purchase             —           —       —       —       (689)
Loss on Redemption of Convertible  —           —       —       —       2,305
Junior Subordinated Debentures
Accretion for Convertible          —           —       —       —       104
Subordinated Notes
Additional Interest and Costs of   —           248     —       —       —
the Credit Facility
Tax Adjustment from Prior Period   598         —       —       (338)   —
Securities Transactions Expenses   —           —       160     —       —
Other Incentive Compensation       —           —       —       —       610
Other Special Items                (484)       —       —       —       465
Sum of Special items affecting net $   573   $     $      $     $ 
income, net of tax                             984     1,032   383     3,726
Adjusted Net Income                $  5,982   $      $      $      $ 
                                               4,586   2,946   4,640   5,377





Reconciliation of Net Income from continuing operations to Consolidated EBITDA
and Adjusted Consolidated EBITDA for the five quarters ended March 31, 2014
(in thousands):
                               QTR 1    QTR 2      QTR 3    QTR 4    QTR 1
                               2013     2013       2013     2013     2014
Net income from continuing     $     $      $     $     $    
operations                     5,409   3,602      1,914          1,651
                                                            4,257
Provision for income taxes     4,280    2,207      1,262    1,528    1,055
Pre-tax earnings from          $     $      $     $     $    
continuing operations          9,689   5,809      3,176          2,706
                                                            5,785
Interest expense, net          3,428    3,693      3,250    3,066    3,016
Loss on redemption of
convertible junior             —        —          —        —        3,778
subordinated debentures
Non-cash stock compensation    646      978        675      617      729
Depreciation & amortization    2,823    3,074      2,939    2,833    2,764
Other, net                     (833)    (29)       (34)     —        (368)
Consolidated EBITDA           $     $       $     $     $   
                               15,753   13,525    10,006    12,301 12,625
Adjusted For:
Withdrawable Trust Income      497      213        318      426      225
Acquisition/Divestiture        8        155        217      372      744
Expenses
Severance Costs                191      493        620      158      317
Consulting Fees                —        255        166      136      241
Securities Transaction         —        —          242      —        —
Expenses
Other Incentive Compensation   —        —          —        —        1,000
Other Special Items            83       —          —        —        —
Adjusted Consolidated EBITDA  $     $       $     $     $   
                               16,532   14,641    11,569    13,393 15,152
Revenue                        $     $       $     $     $   
                               57,315   54,075    49,707    52,860 55,847
Adjusted Consolidated EBITDA   28.8%    27.1%      23.3%    25.3%    27.1%
Margin





Reconciliation of funeral and cemetery income before income taxes to Field
EBITDA for the five quarters ended March 31, 2014 (in thousands):
Funeral Field       QTR 1       QTR 2       QTR 3       QTR 4       QTR 1
EBITDA
                    2013        2013        2013        2013        2014
Gross Profit (GAAP) $  14,839  $  12,816  $  10,225  $  11,090  $  14,553
Depreciation &      1,610       1,620       1,462       1,779       1,621
amortization
Regional &          2,250       1,763       2,220       1,877       1,946
unallocated costs
Net financial       (1,822)     (2,380)     (1,825)     (1,960)     (2,245)
income
Funeral Field       $  16,877  $  13,819  $  12,082  $  12,786  $  15,875
EBITDA
Funeral Field       $  42,817  $  37,987  $  35,238  $  38,659  $  41,660
Operating Revenue
Funeral Field       39.4 %      36.4 %      34.3 %      33.1 %      38.1 %
EBITDA Margin
Cemetery Field      QTR 1       QTR 2       QTR 3       QTR 4       QTR 1
EBITDA
                    2013        2013        2013        2013        2014
Gross Profit (GAAP) $   4,074 $   4,106 $   3,887 $   3,346 $  
                                                                    3,494
Depreciation &      866         1,082       625         1,166       801
amortization
Regional &          509         549         500         344         433
unallocated costs
Net financial       (2,456)     (2,429)     (2,275)     (2,180)     (1,898)
income
Cemetery Field      $   2,993 $   3,308 $   2,737 $   2,676 $  
EBITDA                                                              2,830
Cemetery Field      $   9,760 $  10,901  $  10,057  $   9,764 $  
Operating Revenue                                                   9,767
Cemetery Field      30.7 %      30.3 %      27.2 %      27.4 %      29.0 %
EBITDA Margin
Total Field EBITDA  QTR 1       QTR 2       QTR 3       QTR 4       QTR 1
                    2013        2013        2013        2013        2014
Funeral Field       $  16,877  $  13,819  $  12,082  $  12,786  $  15,875
EBITDA
Cemetery Field      2,993       3,308       2,737       2,676       2,830
EBITDA
Funeral Financial   1,822       2,380       1,825       1,960       2,245
EBITDA
Cemetery Financial  2,456       2,429       2,275       2,180       1,898
EBITDA
Total Field EBITDA  $  24,148  $  21,936  $  18,919  $  19,602  $  22,848



Reconciliation of GAAP basic earnings per share to Adjusted basic earnings per
share for the five quarters ended March 31, 2014:
                           QTR 1      QTR 2      QTR 3     QTR 4     QTR 1
                           2013       2013       2013      2013      2014
GAAP basic earnings per    $       $       $      $      $   
share from continuing      0.30       0.20       0.10      0.23      0.09
operations
Special items affecting    0.03       0.06       0.06      0.02      0.21
net income
Adjusted basic earnings    $       $       $      $      $   
per share                 0.33       0.26       0.16      0.25      0.30



Reconciliation of GAAP diluted earnings per share to Adjusted diluted earnings
per share for the five quarters ended March 31, 2014:
                          QTR 1        QTR 2      QTR 3     QTR 4     QTR 1
                          2013         2013       2013      2013      2014
GAAP diluted earnings per $       $      $     $    
share from continuing       0.26      0.20      0.10    0.23     $  0.09
operations
Special items affecting   0.03         0.05       0.06      0.02      0.20
net income
Dilution effect of
convertible junior        0.02         —          —         —         —
subordinated debentures
Adjusted diluted earnings $       $      $     $     $  0.29
per share                 0.31       0.25      0.16    0.25

On page 4 of this press release, we present the Rolling Four Quarter Outlook
("Outlook") which reflects management's opinion on the performance of the
portfolio of businesses, plus visible and likely acquisitions, for the rolling
four quarter period ending March 31, 2015, and the performance of trusts
during the corresponding period.This Outlook is not intended to be management
estimates or forecasts of our future performance, as we believe such precise
rolling estimates will be precisely wrong all the time. The following three
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 March 31, 2015 (in
thousands):
                                  Rolling Four Quarter Outlook
                                  March 31, 2015E
Net income                                      $ 18,900
Provision for income taxes                       11,600
Pre-tax earnings                                 $  30,500
Net interest expense, including                  14,100
loan cost amortization
Depreciation & amortization,                     15,400
including stock compensation
Consolidated EBITDA                              $  60,000
Adjusted for special items                       3,900
Adjusted Consolidated EBITDA                     $  63,900



Reconciliation of Net Income from Adjusted Net Income for the estimated
rolling four quarters ending March 31, 2015 (in thousands):
                                 Rolling Four Quarter Outlook
                                 March 31, 2015E
Net income                                      $  18,900
Special items, net of tax                        4,700
Adjusted Net Income                              $  23,600



Reconciliation of GAAP basic earnings per share to Adjusted basic earnings per
share for the estimated rolling four quarters ending March 31, 2015:
                             Rolling Four Quarter Outlook
                             March 31, 2015E
GAAP basic earnings per                       $    1.03
share
Special items affecting net                   0.25
income
Adjusted basic earnings per                   $    1.28
share



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 statements regarding the consummation of
the SCI acquisition, 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", "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:

  othe execution of our Standards Operating Model;
  ochanges in the number of deaths in our markets;
  ochanges in consumer preferences;
  oability to find and retain skilled personnel;
  othe effects of competition;
  othe investment performance of our funeral and cemetery trust funds;
  ofluctuations in interest rates;
  oour 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;
  odeath benefits related to preneed funeral contracts funded through life
    insurance contracts;
  oour ability to generate preneed sales;
  othe financial condition of third-party insurance companies that fund our
    preneed funeral contracts;
  oincreased or unanticipated costs, such as insurance or taxes;
  oeffects of the application of applicable laws and regulations, including
    changes in such regulations or the interpretation thereof;
  oconsolidation of the deathcare industry;
  oour ability to consummate the SCI acquisition; and
  oother 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 Annual Report on Form 10-K for the year ended December31,
2013. 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. 

SOURCE Carriage Services, Inc.

Website: http://www.carriageservices.com
Contact: Investor Relations, Bill Heiligbrodt, 713-332-8553
 
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