e10vqza
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
10-Q/A
Amendment No. 1
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended March 31, 2007
OR
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 1-11961
CARRIAGE SERVICES, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE
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76-0423828 |
(State or other jurisdiction of incorporation or organization)
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(I.R.S. Employer Identification No.) |
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3040 Post Oak Boulevard, Suite 300, Houston
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77056 |
(Address of principal executive offices)
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(Zip Code) |
Registrants telephone number, including area code: (713) 332-8400
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated
filer or a non-accelerated filer. See definition of accelerated filer and large accelerated
filer in Rule 12b-2 of the Securities Exchange Act of 1934. (Check one):
Large accelerated filer o Accelerated filer þ Non-Accelerated filer o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).
Yes o No þ
The number of shares of the Registrants Common Stock, $.01 par value per share, outstanding
as of May 1, 2007 was 18,940,190.
Explanatory
Note
This
Amendment No. 1 on Form 10-Q/A (this Amendment)
amends our quarterly report on Form 10-Q for the fiscal quarter
ended March 31, 2007 as filed with the Securities and Exchange
Commission on May 10, 2007, and is being filed to amend the
Consolidated Statements of Cash Flows to correct a classification
error solely between Net cash provided by operating activities and
Net cash provided by investing activities, Note 4 to the
Consolidated Financial Statements to correct the cash used for
acquisition and the first paragraph within the Liquidity and Capital
Resources section of our Management's Discussion and Analysis of Financial Condition and Results
of Operations in Item 2 of Part I.
This
Amendment contains the complete text of the original report with the
corrected information appearing in the Consolidated Statements of
Cash Flows, Note 4 and the first paragraph under Liquidity and
Capital Resources section of our Management's Discussion and Analysis of Financial Condition and Results
of Operations in Item 2 of Part I and does not
change our previously reported Consolidated Balance Sheet and
Consolidated Statement of Operations or any other section of the original Form 10-Q .
CARRIAGE SERVICES, INC.
INDEX
- 2 -
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
CARRIAGE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
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December 31, |
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March 31, |
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2006 |
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2007 |
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(unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
22,820 |
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$ |
25,431 |
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Short term investments |
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10,303 |
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Accounts receivable, net of allowance for doubtful accounts of $925 in 2006
and $831 in 2007 |
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13,822 |
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15,202 |
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Assets held for sale |
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2,634 |
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Inventories and other current assets |
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11,883 |
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12,072 |
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Total current assets |
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61,462 |
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52,705 |
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Restricted cash |
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2,888 |
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2,888 |
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Federal agency bonds |
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5,000 |
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5,000 |
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Preneed cemetery trust investments |
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55,483 |
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56,687 |
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Preneed funeral trust investments |
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44,851 |
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62,836 |
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Preneed receivables, net of allowance for bad debts of $492 in 2006 and $574 in 2007 |
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15,127 |
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19,440 |
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Receivables from preneed funeral trusts |
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15,649 |
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15,309 |
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Property, plant and equipment, at cost, net of accumulated
depreciation of $47,250 in 2006 and $48,777 in 2007 |
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99,894 |
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102,806 |
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Cemetery property |
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57,798 |
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61,373 |
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Goodwill |
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148,845 |
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153,155 |
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Deferred charges and other non-current assets |
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25,459 |
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23,291 |
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Cemetery perpetual care trust investments |
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32,540 |
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35,130 |
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Total assets |
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$ |
564,996 |
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$ |
590,620 |
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LIABILITIES AND STOCKHOLDERS EQUITY |
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Current liabilities: |
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Current portion of senior long-term debt and capital leases obligations |
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$ |
1,610 |
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$ |
1,690 |
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Accounts payable |
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7,148 |
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7,991 |
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Accrued liabilities |
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15,888 |
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10,428 |
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Liabilities associated with assets held for sale |
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1,061 |
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Total current liabilities |
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25,707 |
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20,109 |
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Senior long-term debt, net of current portion |
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133,841 |
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133,656 |
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Convertible junior subordinated debenture due in 2029 to an affiliated trust |
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93,750 |
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93,750 |
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Obligations under capital leases, net of current portion |
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4,728 |
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4,711 |
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Deferred preneed cemetery revenue |
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50,785 |
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52,064 |
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Deferred preneed funeral revenue |
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28,289 |
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32,529 |
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Non-controlling interests in cemetery trust investments |
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55,483 |
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56,687 |
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Non-controlling interests in funeral trust investments |
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44,851 |
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62,836 |
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Total liabilities |
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437,434 |
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456,342 |
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Commitments and contingencies |
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Non-controlling interests in perpetual care trust investments |
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31,189 |
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33,976 |
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Stockholders equity: |
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Common Stock, $.01 par value; 80,000,000 shares authorized;18,608,000 and
18,913,000 shares issued and outstanding at December 31, 2006 and March 31,
2007, respectively |
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186 |
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189 |
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Additional paid-in capital |
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190,524 |
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191,269 |
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Accumulated deficit |
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(94,337 |
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(91,156 |
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Total stockholders equity |
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96,373 |
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100,302 |
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Total liabilities and stockholders equity |
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$ |
564,996 |
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$ |
590,620 |
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The accompanying condensed notes are an integral part of these consolidated financial statements.
- 3 -
CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share data)
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For the three months |
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ended March 31, |
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2006 |
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2007 |
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Revenues: |
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Funeral |
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$ |
30,988 |
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$ |
32,571 |
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Cemetery |
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10,054 |
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10,087 |
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41,042 |
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42,658 |
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Field costs and expenses: |
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Funeral |
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18,776 |
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19,676 |
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Cemetery |
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6,814 |
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6,296 |
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Depreciation
and amortization |
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1,913 |
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2,122 |
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Regional and
unallocated funeral and cemetery costs |
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1,463 |
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1,439 |
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28,966 |
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29,533 |
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Gross profit |
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12,076 |
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13,125 |
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Corporate
costs and expenses: |
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General,
administrative and other |
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3,669 |
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3,664 |
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Home office depreciation and amortization |
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366 |
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364 |
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4,035 |
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4,028 |
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Operating income |
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8,041 |
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9,097 |
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Interest expense |
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(4,636 |
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(4,620 |
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Interest income and other, net |
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216 |
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445 |
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Total interest and other |
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(4,420 |
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(4,175 |
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Income from continuing operations before income taxes |
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3,621 |
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4,922 |
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Provision for income taxes |
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(1,358 |
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(1,895 |
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Net income from continuing operations |
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2,263 |
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3,027 |
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Income (loss) from discontinued operations, net of tax |
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(3,998 |
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395 |
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Net income (loss) |
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$ |
(1,735 |
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$ |
3,422 |
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Basic earnings (loss) per common share: |
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Continuing operations |
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$ |
0.12 |
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$ |
0.16 |
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Discontinued operations |
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(0.21 |
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0.02 |
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Net income (loss) |
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$ |
(0.09 |
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$ |
0.18 |
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Diluted earnings (loss) per common share: |
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Continuing operations |
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$ |
0.12 |
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$ |
0.16 |
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Discontinued operations |
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(0.21 |
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0.02 |
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Net income (loss) |
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$ |
(0.09 |
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$ |
0.18 |
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Weighted average number of common and common
equivalent shares outstanding: |
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Basic |
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18,484 |
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18,763 |
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Diluted |
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18,874 |
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19,285 |
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The accompanying condensed notes are an integral part of these consolidated financial statements.
- 4 -
CARRIAGE SERVICES, INC
CONSOLIDATED STATEMENTS OF CASH FLOWS.
(unaudited and in thousands)
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For the three months |
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ended March 31, |
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2006 |
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2007 |
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Cash flows from operating activities: |
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Net income (loss) |
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$ |
(1,735 |
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$ |
3,422 |
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Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities: |
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(Income) loss from discontinued operations |
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3,998 |
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(395 |
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Depreciation and amortization |
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2,279 |
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2,493 |
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Loan cost amortization |
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179 |
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179 |
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Provision for losses on accounts receivable |
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839 |
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662 |
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Loss on sale or disposition of business assets |
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175 |
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Stock-based compensation expense |
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238 |
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251 |
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Deferred income taxes |
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1,358 |
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1,723 |
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Other |
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(35 |
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59 |
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Changes in operating assets and liabilities that provided (required) cash, net of
effects from acquisitions and dispositions: |
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Accounts receivable |
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(741 |
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(884 |
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Inventories and other current assets |
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(11 |
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(174 |
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Deferred charges and other |
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(15 |
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22 |
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Preneed funeral and cemetery trust investments |
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(4,924 |
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(2,041 |
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Accounts payable and accrued liabilities |
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(5,242 |
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(5,724 |
) |
Deferred preneed funeral and cemetery revenue |
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7,588 |
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(400 |
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Non-controlling interests in preneed funeral and cemetery trusts |
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(3,030 |
) |
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2,752 |
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Net cash provided by (used in) operating activities of continuing operations |
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921 |
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1,945 |
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Net cash provided by operating activities of discontinued operations |
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260 |
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3 |
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Net cash provided by (used in) operating activities |
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1,181 |
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1,948 |
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Cash flows from investing activities: |
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Acquisitions |
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(9,992 |
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Proceeds from sales of businesses and other assets |
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65 |
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Purchase of corporate investments |
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(13,790 |
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Maturities of corporate investments |
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11,501 |
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10,303 |
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Capital expenditures |
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(1,116 |
) |
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(2,169 |
) |
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Net cash provided by (used in) investing activities of continuing operations |
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(3,340 |
) |
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(1,858 |
) |
Net cash provided by investing activities of discontinued operations |
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6 |
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2,420 |
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Net cash provided by (used in) investing activities |
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(3,334 |
) |
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562 |
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Cash flows from financing activities: |
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Payments on senior long-term debt and obligations under capital leases |
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(749 |
) |
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(394 |
) |
Proceeds from the exercise of stock options and employee stock purchase plan |
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156 |
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323 |
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Tax benefit from stock-based compensation |
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35 |
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172 |
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Net cash provided by (used in) financing activities of continuing operations |
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(558 |
) |
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101 |
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Net cash used in financing activities of discontinued operations |
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(34 |
) |
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Net cash provided by (used in) financing activities |
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(592 |
) |
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101 |
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Net increase (decrease) in cash and cash equivalents |
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(2,745 |
) |
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|
2,611 |
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Cash and cash equivalents at beginning of period |
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7,949 |
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22,820 |
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Cash and cash equivalents at end of period |
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$ |
5,204 |
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$ |
25,431 |
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The accompanying condensed notes are an integral part of these consolidated financial statements.
- 5 -
CARRIAGE SERVICES, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) The Company
Carriage Services, Inc. (Carriage or the Company) is a leading provider of products and
services in the death care industry in the United States. As of March 31, 2007, the Company owned
and operated 129 funeral homes in 27 states and 29 cemeteries in 11 states.
(b) Principles of Consolidation
The accompanying consolidated financial statements include the Company and its subsidiaries.
All significant intercompany balances and transactions have been eliminated.
(c) Interim Condensed Disclosures
The information for the three months ended March 31, 2006 and 2007 is unaudited, but in the
opinion of management, reflects all adjustments which are normal, recurring and necessary for a
fair presentation of financial position and results of operations for the interim periods. Certain
information and footnote disclosures, normally included in annual financial statements, have been
condensed or omitted. The accompanying consolidated financial statements have been prepared
consistent with the accounting policies described in our annual report on Form 10-K for the year
ended December 31, 2006, and should be read in conjunction therewith.
(d) Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.
(e) Use of Estimates
The preparation of the consolidated financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an
on-going basis, we evaluate estimates and judgments, including those related to revenue
recognition, realization of accounts receivable, intangible assets, property and equipment and
deferred tax assets. We base our estimates on historical experience, third party data and
assumptions that we believe to be reasonable under the circumstances. The results of these
considerations form the basis for making judgments about the amount and timing of revenues and
expenses, the carrying value of assets and the recorded amounts of liabilities. Actual results may
differ from these estimates and such estimates may change if the underlying conditions or
assumptions change. Historical performance should not be viewed as indicative of future
performance, as there can be no assurance the margins, operating income and net earnings as a
percentage of revenues will be consistent from year to year.
(f) Discontinued Operations
In accordance with the Companys strategic portfolio policy, non-strategic businesses are
reviewed to determine whether the business should be sold and proceeds redeployed elsewhere. A
marketing plan is then developed for those locations which are identified as held for sale. When
the Company receives a letter of intent and financing commitment from the buyer and the sale is
expected to occur within one year, the location is no longer reported within the Companys
continuing operations. The assets and liabilities associated with the held for sale location are
reclassified on the balance sheet and the operating results, as well as impairments, are presented
on a comparative basis in the discontinued operations section of the Consolidated Statements of
Operations, along with the income tax effect.
(g) Stock Plans and Stock-Based Compensation
The Company has stock-based employee compensation plans in the form of restricted stock, stock
option and employee stock purchase plans, which are described in more detail in Note 16 to the
consolidated financial statements in our Form 10-K for the year ended December 31, 2006. The
Company accounts for stock-based compensation under SFAS No. 123R, Share-Based Payment (FAS No.
123R). FAS No. 123R requires companies to recognize compensation expense in an amount equal to
the fair value of the share-based awards issued to employees over the period of vesting and applies
to all transactions involving issuance of equity by a company in exchange for goods and services,
including employee services. The fair value of awards for options or awards containing options is
determined using the Black-Scholes valuation model. The Company adopted FAS No. 123R in the first
quarter of 2006, using the modified prospective application method.
- 6 -
(h) Accounting Changes and Error Corrections
The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting No.
154, Accounting Changes and Error Corrections (FAS No. 154). This statement is a replacement
of Accounting Principles Board Opinion No. 20 and FAS No. 3. FAS No. 154 changes the requirements
for the accounting for and reporting of a change in accounting principle and error corrections. It
establishes, unless impracticable and absence of explicit transition requirements, retrospective
application as the required method of a change in accounting principle to the newly adopted
accounting principle. Also, it establishes guidance for reporting corrections of errors as
reporting errors involves adjustments to previously issued financial statements similar to those
generally applicable to reporting accounting changes retrospectively. FAS No. 154 also provides
guidance for determining and reporting a change when retrospective application is impracticable.
FAS No. 154 is effective for accounting changes and corrections of errors made in the fiscal years
beginning after December 15, 2005. The Company adopted the requirements beginning January 1, 2006,
which had no affect on the Companys presentation and disclosure.
(i) Consideration of Misstatements
In September 2006, the SEC released Staff Accounting Bulletin No. 108, Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial
Statements (SAB 108), which provides interpretive guidance on how the effects of the carryover or
reversal of prior year misstatements should be considered in quantifying a current year
misstatement. The SEC staff believes that registrants should quantify errors using both a balance
sheet and an income statement approach and evaluate whether either approach results in quantifying
a misstatement that, when all relevant quantitative and qualitative factors are considered, is
material. The provisions of SAB 108 is effective for financial statements as of the beginning of
the first fiscal year ending after November 15, 2006. The Company adopted the requirements at the
beginning of the first quarter of 2007, which had no effect on the financial statements.
2. RECENTLY ISSUED ACCOUNTING STANDARDS
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (SFAS No. 157),
which establishes a framework for measuring fair value in accordance with Generally Accepted
Accounting Principles (GAAP) and expands disclosures about fair value measurements. This
statement is effective as of the beginning of the entitys first fiscal year that begins after
November 15, 2007. The Company is currently evaluating the impact, if any, the adoption of SFAS
No. 157 will have on its consolidated financial statements.
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial
Assets and Financial Liabilities Including an Amendment of FASB Statement No. 115 (SFAS No.
159). This statement permits entities to choose to measure many financial assets and liabilities
and certain other items at fair value. The objective is to improve financial reporting by providing
entities with the opportunity to mitigate volatility in reported earnings caused by measuring
related assets and liabilities differently without having to apply complex hedge accounting
provisions. This statement is effective as of the beginning of the entitys first fiscal year
beginning after November 15, 2007. The Company is currently evaluating the impact, if any, the
adoption of SFAS No. 159 will have on its consolidated financial statements.
3. CHANGE IN ACCOUNTING FOR INCOME TAX UNCERTAINTIES
In June 2006, FASB issued FASB Interpretation No. 48 Accounting for Uncertainty in Income
Taxes (FIN 48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprises financial statements in accordance with FASB Statement No. 109, Accounting for Income
Taxes. FIN 48 prescribes how tax benefits for uncertain tax positions are to be recognized,
measured, and derecognized in financial statements; requires certain disclosures of uncertain tax
matters; specifies how reserves for uncertain tax position should be classified on the balance
sheet; and provides transition and interim period guidance, among other provisions. FIN 48 is
effective for fiscal years beginning after December 15, 2006 and was adopted by the Company at the
beginning of the first quarter of 2007. The Company has reviewed its income tax positions and
identified certain tax deductions, primarily related to business acquisitions that are not certain.
The cumulative effect of adopting FIN 48 has been recorded as a reduction to the 2007 opening
balance of Retained Earnings and an increase in noncurrent liabilities in the amount of $241,000,
which includes accrued interest and penalties totaling $86,000. The Companys policy with respect
to potential penalties and interest is to record them as other expense and interest expense,
respectively.
The Company has unrecognized tax benefits for Federal and state income tax purposes totaling
$5.0 million at January 1, 2007, resulting from deductions totaling $13.4 million on Federal
returns and $7.9 million on various state returns. The effect of applying FIN 48 for the three
months ended March 31, 2007 was not material to operations. The Company has net operating loss
carryforwards exceeding these deductions, and has accounted for these unrecognized tax benefits by
reducing the net operating loss carryforwards by the amount of these unrecognized deductions. In
certain states, the Company has previously reduced its taxes payable by deductions that are not
considered more likely than not. The cumulative effect of adopting FIN 48 specifically relates to
those state income tax returns.
The Companys Federal income tax returns for 2001 through 2006 are open tax years that may be
examined by the Internal Revenue Service. The Companys unrecognized state tax benefits are
related to state returns open from 2001 through 2006. The Company believes it is reasonably
possible it will recognize the unrecognized tax benefits upon the expiration of statutes of
limitations of previously deducted expenses.
- 7 -
4. ACQUISITION
Effective January 1, 2007, the Company acquired a combination funeral home and cemetery
business and a funeral home business in Texas for cash in the amount of $10.0 million, the
assumption of liabilities totaling $0.3 million and $0.8 million held in escrow subject to the
terms of the agreement. The Company acquired substantially all the assets
and assumed certain operating liabilities including obligations associated with existing preneed
contracts. The assets and liabilities were recorded at fair value and included goodwill in the
amount of $4.3 million. The results of the acquired businesses are included in the Companys
results from the date of acquisition. The proforma impact of the acquisition on the prior period
is not presented as the impact is not material to reported results.
The effect of the acquisition on the consolidated balance sheet at March 31, 2007 was as
follows (in thousands):
|
|
|
|
|
Current Assets |
|
$ |
1,177 |
|
Cemetery property |
|
|
3,859 |
|
Property, plant & equipment |
|
|
2,887 |
|
Goodwill |
|
|
4,310 |
|
Preneed Assets |
|
|
19,282 |
|
Non-current assets |
|
|
295 |
|
Current liabilities |
|
|
(850 |
) |
Deferred preneed revenues |
|
|
(1,433 |
) |
Other liabilities |
|
|
(310 |
) |
Non-controlling interest in trusts |
|
|
(19,225 |
) |
|
|
|
|
|
|
|
|
|
Cash used for acquisition |
|
$ |
9,992 |
|
|
|
|
|
5. DISCONTINUED OPERATIONS
The Company continually reviews locations to optimize the sustainable earning power and return
on invested capital of the Company. The Companys strategy, the Strategic Portfolio Optimization
Model, uses strategic ranking criteria to identify disposition candidates. The execution of this
strategy entails selling non-strategic businesses.
In the first quarter of 2007, the Company sold two funeral home businesses for approximately
$2.4 million and recognized a gain of $0.7 million. During 2006, the Company
recorded impairment charges totaling $6.1 million, which is related to specifically identified
goodwill, for these businesses that were subsequently sold in 2006.
At December 31, 2006, assets and liabilities associated with the funeral home businesses held
for sale in the accompanying balance sheet consisted of the following (in thousands). The assets
and liabilities associated with the funeral home business held for sale at March 31, 2006 were not
material.
|
|
|
|
|
|
|
December 31, |
|
|
|
2006 |
|
Assets: |
|
|
|
|
Current assets |
|
$ |
124 |
|
Property, plant and equipment, net |
|
|
1,406 |
|
Preneed receivables and trust investments |
|
|
634 |
|
Goodwill |
|
|
324 |
|
Deferred charges and other assets |
|
|
146 |
|
|
|
|
|
Total |
|
$ |
2,634 |
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
Current liabilities |
|
$ |
229 |
|
Deferred preneed funeral contracts revenue |
|
|
78 |
|
Senior long-term debt, net of current portion |
|
|
54 |
|
Non-controlling interests in funeral and cemetery
trust investments |
|
|
700 |
|
|
|
|
|
Total |
|
$ |
1,061 |
|
|
|
|
|
- 8 -
The operating results of businesses discontinued during the periods presented, as well as
impairments and gains or losses on the disposal, are presented on a comparative basis in the
discontinued operations section of the consolidated statements of operations, along with the income
tax effect. Likewise, the operating results, impairment charges and gains or losses from businesses
sold in the prior year have been similarly reported for comparability. Revenues and operating
income for the businesses presented in the discontinued operations section are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
For the three months |
|
|
|
ended March 31, |
|
|
|
2006 |
|
|
2007 |
|
Revenues |
|
$ |
1,332 |
|
|
$ |
145 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
$ |
222 |
|
|
$ |
(35 |
) |
Impairment and gain on sale,
respectively |
|
|
(6,102 |
) |
|
|
677 |
|
(Provision) benefit for income taxes |
|
|
1,882 |
|
|
|
(247 |
) |
|
|
|
|
|
|
|
Income (loss) from discontinued
operations |
|
$ |
(3,998 |
) |
|
$ |
395 |
|
|
|
|
|
|
|
|
6. GOODWILL
Many of the acquired funeral homes, former owners and staff have provided high quality service
to families for generations. The resulting loyalty often represents a substantial portion of the
value of a funeral business. The excess of the purchase price over the fair value of net
identifiable assets acquired, as determined by management in transactions accounted for as
purchases, is recorded as goodwill.
The following table presents the changes in goodwill in the accompanying consolidated balance sheet
(in thousands):
|
|
|
|
|
|
|
March 31, |
|
|
|
2007 |
|
Goodwill at beginning of year |
|
$ |
148,845 |
|
Divestitures |
|
|
|
|
Acquisitions |
|
|
4,310 |
|
|
|
|
|
Goodwill at end of period |
|
$ |
153,155 |
|
|
|
|
|
7. PRENEED TRUST INVESTMENTS
Cemetery preneed trust investments
Cemetery preneed trust investments represent trust fund assets that the Company will withdraw
when the merchandise or services are provided. The cost and market values associated with
cemetery preneed trust investments at March 31, 2007 are detailed below (in thousands). The Company
believes the unrealized losses related to trust investments are temporary in nature.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
Unrealized |
|
|
|
|
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Market |
|
Cash and money market accounts |
|
$ |
2,757 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,757 |
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Agency obligations |
|
|
20,629 |
|
|
|
29 |
|
|
|
(40 |
) |
|
|
20,618 |
|
State obligations |
|
|
379 |
|
|
|
9 |
|
|
|
|
|
|
|
388 |
|
Corporate |
|
|
2,425 |
|
|
|
19 |
|
|
|
(12 |
) |
|
|
2,432 |
|
Other |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
9,994 |
|
|
|
1,748 |
|
|
|
(104 |
) |
|
|
11,638 |
|
Mutual funds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
11,835 |
|
|
|
1,543 |
|
|
|
(114 |
) |
|
|
13,264 |
|
Fixed income |
|
|
5,199 |
|
|
|
111 |
|
|
|
(11 |
) |
|
|
5,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
53,224 |
|
|
$ |
3,459 |
|
|
$ |
(281 |
) |
|
$ |
56,402 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued investment income |
|
$ |
285 |
|
|
|
|
|
|
|
|
|
|
$ |
285 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
56,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value as a percentage of cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
- 9 -
The estimated maturities of the fixed income securities included above are as follows:
|
|
|
|
|
Due in one year or less |
|
$ |
2,947 |
|
Due in one to five years |
|
|
15,400 |
|
Due in five to ten years |
|
|
4,936 |
|
Thereafter |
|
|
161 |
|
|
|
|
|
|
|
$ |
23,444 |
|
|
|
|
|
Preneed funeral trust investments
Preneed funeral trust investments represent trust fund assets that the Company expects to
withdraw when the services and merchandise are provided. Such contracts are secured by funds paid
by the customer to the Company. Preneed funeral receivables and trust investments are reduced by
the trust investment earnings the Company has been allowed to withdraw prior to performance by the
Company and amounts received from customers that are not required to be deposited into trust,
pursuant to various state laws.
The cost and market values associated with preneed funeral trust investments at March 31, 2007
are detailed below (in thousands). The Company believes the unrealized losses related to trust
investments are temporary in nature.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
Unrealized |
|
|
|
|
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Market |
|
Cash and money market accounts |
|
$ |
17,768 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
17,768 |
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
|
|
8,123 |
|
|
|
15 |
|
|
|
(14 |
) |
|
|
8,124 |
|
State obligations |
|
|
10,965 |
|
|
|
90 |
|
|
|
|
|
|
|
11,055 |
|
Corporate |
|
|
2,180 |
|
|
|
27 |
|
|
|
(21 |
) |
|
|
2,186 |
|
Mortgage Backed Securities |
|
|
1,061 |
|
|
|
1 |
|
|
|
(16 |
) |
|
|
1,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock |
|
|
5,608 |
|
|
|
1,750 |
|
|
|
(17 |
) |
|
|
7,341 |
|
Mutual funds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
10,576 |
|
|
|
1,352 |
|
|
|
(65 |
) |
|
|
11,863 |
|
Fixed income |
|
|
3,206 |
|
|
|
269 |
|
|
|
(22 |
) |
|
|
3,453 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust investments |
|
$ |
59,487 |
|
|
$ |
3,504 |
|
|
$ |
(155 |
) |
|
$ |
62,836 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value as a percentage of cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
105.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated maturities of the fixed income securities included above are as follows:
|
|
|
|
|
Due in one year or less |
|
$ |
3,169 |
|
Due in one to five years |
|
|
14,235 |
|
Due in five to ten years |
|
|
4,760 |
|
Thereafter |
|
|
247 |
|
|
|
|
|
|
|
$ |
22,411 |
|
|
|
|
|
Upon cancellation of a preneed funeral or cemetery contract, a customer is generally entitled
to receive a refund of the corpus and some or all of the earnings held in trust. In certain
jurisdictions, the Company is obligated to fund any shortfall if the amounts deposited by the
customer exceed the funds in trust including some or all investment income. As a result, when
realized or unrealized losses of a trust result in the trust being under-funded, the Company
assesses whether it is responsible for replenishing the corpus of the trust, in which case a loss
provision would be recorded. No loss amounts have been required to be recognized for the periods
presented in the Consolidated Financial Statements.
- 10 -
Trust Investment Security Transactions
Cemetery and funeral trust investment security transactions recorded in Other income in the
Consolidated Statement of Operations for the three months ended March 31, 2006 and 2007 are as
follows (in thousands).
|
|
|
|
|
|
|
|
|
|
|
For the three months |
|
|
|
ended March 31, |
|
|
|
2006 |
|
|
2007 |
|
Investment income |
|
$ |
777 |
|
|
$ |
865 |
|
Realized gains |
|
|
1,356 |
|
|
|
378 |
|
Realized losses |
|
|
(556 |
) |
|
|
(174 |
) |
Expenses |
|
|
(295 |
) |
|
|
(172 |
) |
Increase in non-controlling
interests in trust investments |
|
|
(1,282 |
) |
|
|
(897 |
) |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
8. RECEIVABLES FROM PRENEED FUNERAL TRUSTS
The receivables from preneed funeral trusts represent assets in trusts which are controlled
and operated by third parties in which the Company does not have a controlling financial interest
(less than 50%) in the trust assets. The Company accounts for these investments at cost.
9. CONTRACTS SECURED BY INSURANCE
Certain preneed funeral contracts are secured by life insurance contracts. Generally, the
proceeds of the life insurance policies have been assigned to the Company and will be paid upon the
death of the insured. The proceeds will be used to satisfy the beneficiarys obligations under the
preneed contract for services and merchandise. The preneed funeral contracts secured by insurance
totaled $170 million at March 31, 2007, and are not included in the Companys consolidated balance
sheet.
10. CEMETERY PERPETUAL CARE TRUST INVESTMENTS
The Company is required by state law to pay a portion of the proceeds from the sale of
cemetery property interment rights into perpetual care trust funds. The cost and market values
associated with the trust investments held in perpetual care trust funds at March 31, 2007 are
detailed below (in thousands). The Company believes the unrealized losses related to the trust
investments are temporary in nature.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized |
|
|
Unrealized |
|
|
|
|
|
|
Cost |
|
|
Gains |
|
|
Losses |
|
|
Market |
|
Cash and money market accounts |
|
$ |
2,117 |
|
|
$ |
|
|
|
$ |
|
|
|
$ |
2,117 |
|
Fixed income securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S. Treasury |
|
|
202 |
|
|
|
|
|
|
|
(2 |
) |
|
|
200 |
|
U.S. Agency obligation |
|
|
6,080 |
|
|
|
10 |
|
|
|
(31 |
) |
|
|
6,059 |
|
State obligations |
|
|
609 |
|
|
|
14 |
|
|
|
|
|
|
|
623 |
|
Corporate |
|
|
1,049 |
|
|
|
26 |
|
|
|
(1 |
) |
|
|
1,074 |
|
Other |
|
|
351 |
|
|
|
|
|
|
|
(9 |
) |
|
|
342 |
|
Common stock |
|
|
9,224 |
|
|
|
1,682 |
|
|
|
(99 |
) |
|
|
10,807 |
|
Mutual funds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity |
|
|
6,650 |
|
|
|
1,023 |
|
|
|
(104 |
) |
|
|
7,569 |
|
Fixed income |
|
|
6,119 |
|
|
|
149 |
|
|
|
(5 |
) |
|
|
6,263 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
32,401 |
|
|
$ |
2,904 |
|
|
$ |
(251 |
) |
|
$ |
35,054 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued investment income |
|
$ |
76 |
|
|
|
|
|
|
|
|
|
|
|
76 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trust investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
$ |
35,130 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Market value as a percentage of cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The estimated maturities of the fixed income securities included above are as follows:
|
|
|
|
|
Due in one year or less |
|
$ |
2,162 |
|
Due in one to five years |
|
|
4,448 |
|
Due in five to ten years |
|
|
1,434 |
|
Thereafter |
|
|
252 |
|
|
|
|
|
|
|
$ |
8,296 |
|
|
|
|
|
- 11 -
Non-controlling interests in cemetery perpetual care trusts represent the corpus of those
trusts plus undistributed income. The components of non-controlling interests in cemetery
perpetual care trusts as of December 31, 2006 and March 31, 2007 are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
March 31, |
|
|
|
2006 |
|
|
2007 |
|
Trust assets, at market value |
|
$ |
32,540 |
|
|
$ |
35,130 |
|
Pending withdrawals of income |
|
|
(1,351 |
) |
|
|
(1,154 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests |
|
$ |
31,189 |
|
|
$ |
33,976 |
|
|
|
|
|
|
|
|
Trust Investment Security Transactions
Perpetual care trust investment security transactions recorded in Other income in the
Consolidated Statement of Operations for the three months ended March 31, 2006 and 2007 are as
follows (in thousands).
|
|
|
|
|
|
|
|
|
|
|
For the three months |
|
|
|
ended March 31, |
|
|
|
2006 |
|
|
2007 |
|
Investment income |
|
|
460 |
|
|
$ |
330 |
|
Realized gains |
|
|
805 |
|
|
|
373 |
|
Realized losses |
|
|
(304 |
) |
|
|
(27 |
) |
Expenses |
|
|
(10 |
) |
|
|
42 |
|
Increase in non-controlling
interests in trust investments |
|
|
(951 |
) |
|
|
(718 |
) |
|
|
|
|
|
|
|
|
|
$ |
|
|
|
$ |
|
|
|
|
|
|
|
|
|
11. MAJOR SEGMENTS OF BUSINESS
Carriage conducts funeral and cemetery operations only in the United States. The following
table presents revenue, pre-tax income from continuing operations and total assets by segment (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funeral |
|
Cemetery |
|
Corporate |
|
Consolidated |
Revenues from continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2007 |
|
$ |
32,571 |
|
|
$ |
10,087 |
|
|
$ |
|
|
|
$ |
42,658 |
|
Three months ended March 31, 2006 |
|
$ |
30,988 |
|
|
$ |
10,054 |
|
|
$ |
|
|
|
$ |
41,042 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) from continuing
operations before income taxes: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2007 |
|
$ |
10,418 |
|
|
$ |
2,137 |
|
|
$ |
(7,633 |
) |
|
$ |
4,922 |
|
Three months ended March 31, 2006 |
|
$ |
9,091 |
|
|
$ |
1,622 |
|
|
$ |
(7,092 |
) |
|
$ |
3,621 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2007 |
|
$ |
329,612 |
|
|
$ |
196,158 |
|
|
$ |
64,850 |
|
|
$ |
590,620 |
|
December 31, 2006 |
|
$ |
309,140 |
|
|
$ |
181,225 |
|
|
$ |
74,631 |
|
|
$ |
564,996 |
|
- 12 -
12. SUPPLEMENTAL DISCLOSURE OF STATEMENT OF OPERATIONS INFORMATION
|
|
|
|
|
|
|
|
|
|
|
For the three months |
|
|
|
ended March 31, |
|
|
|
2006 |
|
|
2007 |
|
Revenues |
|
|
|
|
|
|
|
|
Goods |
|
|
|
|
|
|
|
|
Funeral |
|
$ |
13,306 |
|
|
$ |
13,649 |
|
Cemetery |
|
|
7,006 |
|
|
|
7,023 |
|
|
|
|
|
|
|
|
Total goods |
|
$ |
20,312 |
|
|
$ |
20,672 |
|
|
|
|
|
|
|
|
|
|
Services |
|
|
|
|
|
|
|
|
Funeral |
|
$ |
17,682 |
|
|
$ |
18,922 |
|
Cemetery |
|
|
3,048 |
|
|
|
3,064 |
|
|
|
|
|
|
|
|
Total services |
|
$ |
20,730 |
|
|
$ |
21,986 |
|
|
|
|
|
|
|
|
Total revenues |
|
$ |
41,042 |
|
|
$ |
42,658 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues |
|
|
|
|
|
|
|
|
Goods |
|
|
|
|
|
|
|
|
Funeral |
|
$ |
10,618 |
|
|
$ |
11,028 |
|
Cemetery |
|
|
5,073 |
|
|
|
4,574 |
|
|
|
|
|
|
|
|
Total goods |
|
$ |
15,691 |
|
|
$ |
15,602 |
|
|
|
|
|
|
|
|
|
|
Services |
|
|
|
|
|
|
|
|
Funeral |
|
$ |
8,126 |
|
|
$ |
8,648 |
|
Cemetery |
|
|
1,773 |
|
|
|
1,722 |
|
|
|
|
|
|
|
|
Total services |
|
$ |
9,899 |
|
|
$ |
10,370 |
|
|
|
|
|
|
|
|
Total cost of revenues |
|
$ |
25,590 |
|
|
$ |
25,972 |
|
|
|
|
|
|
|
|
- 13 -
13. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The following information is supplemental disclosure for the Consolidated Statement of Cash
Flows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
|
March 31, |
|
|
2006 |
|
2007 |
Cash paid for interest and financing costs |
|
|
7,151 |
|
|
|
7,083 |
|
Cash paid for income taxes (state) |
|
|
87 |
|
|
|
255 |
|
Restricted common stock issued to officers |
|
|
|
|
|
|
1,155 |
|
Net deposits (withdrawals) in preneed funeral trust
investments |
|
|
57 |
|
|
|
(335 |
) |
Net deposits in preneed cemetery trust investments |
|
|
(3,064 |
) |
|
|
(1,204 |
) |
Net deposits into perpetual care trusts |
|
|
(2,154 |
) |
|
|
(958 |
) |
Net withdrawals from preneed funeral trust receivables |
|
|
37 |
|
|
|
175 |
|
Net (deposits) withdrawals in cemetery trust receivables |
|
|
368 |
|
|
|
(62 |
) |
Net withdrawals (deposits) in preneed funeral receivables |
|
|
(168 |
) |
|
|
343 |
|
Net deposits (withdrawals) in preneed funeral trust
accounts increasing deferred revenue |
|
|
1,830 |
|
|
|
(189 |
) |
Net deposits (withdrawals) in cemetery trust accounts
increasing (decreasing) deferred revenue |
|
|
5,758 |
|
|
|
(211 |
) |
Net deposits (withdrawals) in preneed funeral trust
accounts increasing (decreasing) noncontrolling
interests |
|
|
(1,787 |
) |
|
|
335 |
|
Net deposits (withdrawals) in cemetery trust accounts
increasing (decreasing) noncontrolling interests |
|
|
(1,925 |
) |
|
|
1,204 |
|
Deposits in perpetual care trust accounts increasing
noncontrolling interests |
|
|
682 |
|
|
|
1,213 |
|
|
|
|
|
|
|
|
|
|
Restricted cash investing and financing activities: |
|
|
|
|
|
|
|
|
|
Proceeds from the sale of available for sale
securities of the funeral and cemetery trusts |
|
|
14,418 |
|
|
|
13,868 |
|
Purchase of available for sale securities of the
funeral and cemetery trusts |
|
|
10,579 |
|
|
|
14,223 |
|
Net deposits (withdrawals) in trust accounts
increasing (decreasing) noncontrolling interests |
|
|
(7,573 |
) |
|
|
11,702 |
|
14. DEBT
The Company has outstanding $130 million of 7.875 % Senior Notes, due in 2015 and $93.75
million of 7.00% subordinated debt payable to an unconsolidated affiliate, Carriage Services
Capital Trust, due in 2029. The Company also has a $35 million senior secured revolving credit
facility in which borrowings under credit facility bear interest at prime or LIBOR options with the
current LIBOR option set at LIBOR plus 300 basis points and is collateralized by all personal
property and by funeral home real property in certain states. The facility is currently undrawn.
Carriage, the parent entity, has no material assets or operations independent of its
subsidiaries. All assets and operations are held and conducted by subsidiaries, each of which
(except for Carriage Services Capital Trust which is a single purpose entity that holds the
debentures issued in connection with our TIDES) have fully and unconditionally guaranteed our
obligations under the Senior Notes. Additionally, the Company does not currently have any
significant restrictions on our ability to receive dividends or loans from any subsidiary guarantor
under the Senior Notes.
15. STOCK-BASED COMPENSATION
Stock options and employee stock purchase plan
No stock options were awarded during the first quarter of 2007. During the first
quarter of 2007, employees purchased a total of 19,758 shares of common stock through the employee
stock purchase plan (ESPP) at a weighted average price of $4.33 per share. The Company recorded
pre-tax stock-based compensation expense for the stock options and the ESPP totaling $51,000 and
$39,000 for the three months ended March 31, 2006 and 2007. As of March 31, 2007, there was
$21,000 of total unrecognized compensation costs, net of estimated forfeitures, related to
nonvested stock options that are expected to be recognized over a weighted-average period of
approximately one year.
- 14 -
The fair value of the right (option) to purchase shares under the ESPP during 2006 and 2007,
respectively, is estimated on the date of grant using the Black-Sholes option-pricing model with
the following weighted average assumptions:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Three Months Ended |
Employee Stock Purchase Plan |
|
March 31, 2006 |
|
March 31, 2007 |
Dividend yield |
|
None |
|
None |
Expected volatility |
|
|
58.0 |
% |
|
|
23.7 |
% |
Risk-free interest rate |
|
|
4.25 |
% |
|
|
4.96 |
% |
Expected life (in years) |
|
|
0.25 |
|
|
|
0.25 |
|
Expected volatilities are based on the historical volatility for the last twelve months of our
stock. The risk-free rate for periods within the contractual life of the option is based on the
U.S. Treasury yields in effect at the time of grant.
Restricted stock
The Company granted 180,500 shares of restricted stock to certain officers and employees
during the first quarter of 2007, with a four-year vesting period. The Company recorded
$152,000 and $141,000 in pre-tax compensation expense for the three months ended March 31, 2006 and
2007, respectively, related to the vesting of restricted stock awards. As of March 31, 2007, there
was $1,748,000 of total unrecognized compensation costs related to unvested restricted stock
awards, which is expected to be recognized over a weighted average period of approximately two
years.
Directors compensation
During the three months ended March 31, 2006 and 2007, the Company issued unrestricted common
stock to directors totaling 6,909 and 7,822 shares respectively, in lieu of payment in cash for
their fees, the value of which totaled $35,000 and $40,000, respectively.
16. SUBSEQUENT ACQUISITION
The Company acquired substantially all the assets and assumed liabilities of a combination
funeral home and cemetery business in California on April 2, 2007 in exchange for a cash payment at
closing in the amount of $8.0 million.
- 15 -
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
In addition to historical information, this Quarterly Report contains forward-looking
statements within the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. These statements include any projections of earnings, revenues, asset sales, acquisitions,
cash balances and 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. Forward-looking statements may include the words may, will,
estimate, intend, believe, expect, project, forecast, plan, anticipate and other
similar words.
Cautionary Statements
We caution readers that the following important factors, among others, in some cases have
affected, and in the future could affect, our actual consolidated results and could cause our
actual consolidated results in the future to differ materially from the goals and expectations
expressed herein and in any other forward-looking statements made by or on behalf of us. For
further information regarding risks associated with our business and the death care industry, see
Item 1A Risk Factors in our annual report filed on Form 10-K for the year ended December 31,
2006.
Risks related to our business
(1) Marketing and sales activities by existing and new competitors could cause us to lose
market share and lead to lower revenues and margins.
(2) Our ability to generate preneed sales depends on a number of factors, including sales
incentives and local and general economic conditions.
(3) Price competition could also reduce our market share or cause us to reduce prices to
retain or recapture market share, either of which could reduce revenues and margins.
(4) Our ability to execute our growth strategy is highly dependent upon our ability to
successfully identify suitable acquisition candidates and negotiate transactions on favorable
terms.
(5) Increased or unanticipated costs, such as insurance, taxes and new computer systems
implementations, may have a negative impact on our earnings and cash flows.
(6) Improved performance in our funeral and cemetery segments is highly dependent upon
successful execution of our standards-based Being the Best operating model.
(7) Our smaller businesses are typically dependent upon one or a few key employees for
success.
(8) Earnings from and principal of trust funds and insurance contracts could be reduced by
changes in financial markets and the mix of securities owned.
(9) Covenant restrictions under our debt instruments may limit our flexibility in operating
our business.
Risks related to the death care industry
(1) Declines in the number of deaths in our markets can cause a decrease in revenues. Changes
in the number of deaths are not predictable from market to market or over the short term.
(2) The increasing number of cremations in the United States could cause revenues to decline
because we could lose market share to firms specializing in cremations. In addition, direct
cremations produce minimal revenues for cemetery operations and lower funeral revenues.
(3) If we are not able to respond effectively to changing consumer preferences, our market
share, revenues and profitability could decrease.
(4) Because the funeral and cemetery businesses are high fixed-cost businesses, changes in
revenues can have a disproportionately large effect on cash flow and profits.
(5) Changes or increases in, or failure to comply with, regulations applicable to our
business could increase costs or decrease cash flows.
- 16 -
OVERVIEW
General
We operate two types of businesses: funeral homes, which account for approximately 75% of our
revenues, and cemeteries, which account for approximately 25% of our revenues. Funeral homes are
principally a service business that provide funeral services (burial and cremation) and sell
related merchandise, such as caskets and urns. Cemeteries are primarily a sales business that sells
interment rights (grave sites and mausoleums) and related merchandise such as markers and
memorials. As of March 31, 2007, we operated 129 funeral homes in 27 states and 29 cemeteries in 11
states within the United States. Substantially all administrative activities are conducted in our
home office in Houston, Texas.
Factors affecting our funeral operating results include: demographic trends in terms of
population growth and average age, which impact death rates and number of deaths; establishing and
maintaining leading market share positions supported by strong local heritage and relationships;
effectively responding to increasing cremation trends by packaging complementary services and
merchandise; controlling salary and merchandise costs; and exercising pricing leverage related to
our at-need business to increase average revenues per contract. In simple terms, volume and price
are the two variables that affect funeral revenues. The average revenue per contract is influenced
by the mix of traditional and cremation services because our average cremation service revenue is
approximately 39% of the average revenue earned from a traditional burial service. Funeral homes
have a relatively fixed cost structure. Thus, small changes in revenues, up or down, normally cause
significant changes to our profitability.
The cemetery operating results are affected by the size and success of our sales organization.
Approximately 53% of our cemetery revenues for the three months ended March 31, 2007 relate to
sales of grave sites and mausoleums and related merchandise and services before the time of need.
We believe that changes in the level of consumer confidence (a measure of whether consumers will
spend for discretionary items) also affect the amount of cemetery revenues. Approximately 9% of our
cemetery revenues for the three months ended March 31, 2007 are attributable to investment earnings
on trust funds and finance charges on installment contracts. Changes in the capital markets and
interest rates affect this component of our cemetery revenues.
We have implemented several significant long-term initiatives in our operations designed to
improve operating and financial results by growing market share and increasing profitability. We
introduced a more decentralized, entrepreneurial and local operating model that included operating
and financial standards developed from our best operations, along with an incentive compensation
plan to reward business managers for successfully meeting or exceeding the standards. The model
essentially eliminated the use of financial budgets. The operating model and standards, which we
refer to as Being the Best, focus on the key drivers of a successful operation, organized around
three primary areas market share, people and operating and financial metrics. The model and
standards are the measures by which we judge the success of each business. To date, the Being the
Best operating model and standards have driven significant changes in our organization, leadership
and operating practices. In certain businesses we have determined that the business managers do
not possess the characteristics to succeed in this type of culture, and we have been actively
recruiting new managers who do. We have also determined that this model is most effective in
larger businesses. Being the best is not something that occurs easily and quickly, but we believe
execution of the model should result in improving performance in 2007 and beyond.
Financial Highlights
Net income from continuing operations for the three months ended March 31, 2007 totaled $3.0
million, equal to $0.16 per diluted share as compared to net income from continuing operations of
$2.3 million for the first quarter of 2006 or $0.12 per diluted share. The improvement is due in
large part to the success of three initiatives in which we have focused our attention to improve
operating results for 2007: (1) the turnaround of existing Central Region funeral homes, (2) new
leadership and sales growth at Rolling Hills Memorial Park and (3) operating results from 2007
acquisitions. The existing Central Region funeral homes generated 4.5% higher revenues and $0.4
million in additional net income, equal to $0.02 per diluted share in the first quarter of 2007
when compared to the same period in 2006. A new general manger was hired at the beginning of 2007
at Rolling Hills Memorial Park, and with the influence of that new leadership and other
improvements, revenues at Rolling Hills Memorial Park increased 28.9% which helped generate $0.3
million in additional net earnings, equal to $0.015 per diluted share. The acquisition of a
combination funeral home and cemetery and a stand-alone funeral home in Corpus Christi, Texas in
January 2007 generated revenues totaling $1.3 million and net income of $0.2 million, equal to
$0.012 per diluted share.
Income from discontinued operations for the three months ended March 31, 2007 totaled $0.4
million, equal to $0.02 per diluted share. During January 2007, the Company completed the sale of
a funeral home business, resulting in a pre-tax gain of $0.7 million. Loss from discontinued
operations for the three months ended March 31, 2006 totaled $4.0 million, equal to $0.21 per
diluted share. In March 2006, we entered into a plan to sell a funeral home business and a
combination funeral home and cemetery business in the State of Indiana, both of which were in small
markets not strategic to our future plans. We recorded pre-tax impairment charges of approximately
$6.1 million to write down the current book value to the estimated net proceeds. The sales of
these businesses were completed in the third quarter of 2006.
- 17 -
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of the consolidated financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an
on-going basis, we evaluate estimates and judgments, including those related to revenue
recognition, realization of accounts receivable, intangible assets, property and equipment and
deferred tax assets. We base our estimates on historical experience, third party data and
assumptions that we believe to be reasonable under the circumstances. The results of these
considerations form the basis for making judgments about the amount and timing of revenues and
expenses, the carrying value of assets and the recorded amounts of liabilities. Actual results may
differ from these estimates and such estimates may change if the underlying conditions or
assumptions change. Historical performance should not be viewed as indicative of future
performance, as there can be no assurance the margins, operating income and net earnings as a
percentage of revenues will be consistent from year to year.
Managements discussion and analysis of financial condition and results of operations are
based upon our consolidated financial statements presented herewith, which have been prepared in
accordance with accounting principles generally accepted in the United States excluding certain
year end adjustments because of the interim nature of the consolidated financial statements. Our
significant accounting policies are more fully described in Note 1 to the Consolidated Financial
Statements included in our annual report on Form 10-K for the year ended December 31, 2006. We
believe the following critical accounting policies affect our more significant judgments and
estimates used in the preparation of our consolidated financial statements.
Funeral and Cemetery Operations
We record the sales of funeral and cemetery merchandise and services when the merchandise is
delivered or service is performed. Sales of cemetery interment rights are recorded as revenue in
accordance with the retail land sales provisions of Statement of Financial Accounting Standards
(FAS) No. 66, Accounting for Sales of Real Estate. This method generally provides for the
recognition of revenue in the period in which the customers cumulative payments exceed 10% of the
contract price related to the real estate. Costs related to the sales of interment rights, which
include property and other costs related to cemetery development activities, are charged to
operations using the specific identification method in the period in which the sale of the
interment right is recognized as revenue. Revenues to be recognized from the delivery of
merchandise and performance of services related to contracts that were acquired in acquisitions are
typically lower than those originated by the Company.
Allowances for bad debts and customer cancellations are provided at the date that the sale is
recognized as revenue. In addition, we monitor changes in delinquency rates and provide additional
bad debt and cancellation reserves when warranted.
When preneed funeral services and merchandise are funded through third-party insurance
policies, we earn a commission on the sale of the policies. Insurance commissions earned by the
Company are recognized as revenues when the commission is no longer subject to refund, which is
usually one year after the policy is issued. Preneed selling costs consist of sales commissions
that we pay our sales counselors and other direct related costs of originating preneed sales
contracts and are expensed as incurred.
Goodwill
The excess of the purchase price over the fair value of net identifiable assets acquired, as
determined by management in transactions accounted for as purchases, is recorded as goodwill. Many
of the acquired funeral homes have provided high quality service to families for generations. The
resulting loyalty often represents a substantial portion of the value of a funeral business.
Goodwill is typically not associated with or recorded for the cemetery businesses. In accordance
with SFAS No. 142, we review the carrying value of goodwill at least annually on reporting units
(aggregated geographically) to determine if facts and circumstances exist which would suggest that
this intangible asset might be carried in excess of fair value. Fair value is determined by
discounting the estimated future cash flows of the businesses in each reporting unit at the
Companys weighted average cost of capital less debt allocable to the reporting unit and by
reference to recent sales transactions of similar businesses. The calculation of fair value can
vary dramatically with changes in estimates of the number of future services performed, inflation
in costs, and the Companys cost of capital, which is impacted by long-term interest rates. If
impairment is indicated, then an adjustment will be made to reduce the carrying amount of goodwill
to fair value.
Income Taxes
The Company and its subsidiaries file a consolidated U.S. Federal income tax return and
separate income tax returns in the states in which we operate. We record deferred taxes for
temporary differences between the tax basis and financial reporting basis of assets and
liabilities, in accordance with SFAS 109, Accounting for Income Taxes and account for uncertain
tax positions in accordance with FASB Interpretation No. 48 Accounting for Uncertainty in Income
Taxes. The Company records a valuation allowance to reflect the estimated amount of deferred tax
assets for which realization is uncertain. Management reviews the valuation allowance at the end
of each quarter and makes adjustments if it is determined that it is more likely than not that the
tax benefits will be realized.
Stock Compensation Plans
The Company has stock-based employee compensation plans in the form of restricted stock, stock
option and employee stock purchase plans. The Company accounts for stock-based compensation under
Statement of Financial Accounting Standards No. 123R, Share-Based Payment (FAS No. 123R). FAS
No. 123R requires companies to recognize compensation expense in
- 18 -
an amount equal to the fair value of the share-based payment issued to employees over the
period of vesting. The fair value of share based payment is determined using the Black-Scholes
valuation model. FAS No. 123R applies to all transactions involving issuance of equity by a
company in exchange for goods and services, including employee services. The Company adopted FAS
No. 123R in the first quarter of 2006, using the modified prospective application method.
We have granted restricted stock to certain officers and key employees of the Company, which
vest over a period of four years. These shares are valued at the dates granted and the value is
charged to operations as the shares vest.
Discontinued Operations
In accordance with the Companys strategic portfolio policy, non-strategic businesses are
reviewed to determine whether the businesses should be sold and the proceeds redeployed elsewhere.
A marketing plan is then developed for those locations which are identified as held for sale. When
the Company receives a letter of intent and financing commitment from the buyer and the sale is
expected to occur within one year, the location is no longer reported within the Companys
continuing operations. The assets and liabilities associated with the held for sale location are
reclassified on the balance sheet and the operating results, as well as impairments, are presented
on a comparative basis in the discontinued operations section of the Consolidated Statements of
Operations, along with the income tax effect.
RESULTS OF OPERATIONS
The following is a discussion of the Companys results of operations for the three month
periods ended March 31, 2006 and 2007. Funeral homes and cemeteries owned and operated for the
entirety of each period being compared are referred to as
same-store or existing operations. Gross
profit for purposes of this analysis does not include regional and
unallocated funeral and cemetery costs which total $1.5 million
and $1.4 million, respectively.
Funeral Home Segment. The following table sets forth certain information regarding
the revenues and gross profit of the Company from the funeral home operations for the three months
ended March 31, 2006 compared to the three months ended March 31, 2007(dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
March 31, |
|
|
Change |
|
|
|
2006 |
|
|
2007 |
|
|
Amount |
|
|
% |
|
Total same-store revenue |
|
$ |
30,401 |
|
|
$ |
30,977 |
|
|
$ |
576 |
|
|
|
1.9 |
% |
Acquired |
|
|
|
|
|
|
952 |
|
|
|
952 |
|
|
|
* |
|
Preneed insurance commissions revenue |
|
|
587 |
|
|
|
642 |
|
|
|
55 |
|
|
|
9.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from continuing operations |
|
$ |
30,988 |
|
|
$ |
32,571 |
|
|
$ |
1,583 |
|
|
|
5.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from discontinued operations |
|
$ |
1,142 |
|
|
$ |
145 |
|
|
$ |
(997 |
) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total same-store gross profit |
|
$ |
10,354 |
|
|
$ |
10,598 |
|
|
$ |
244 |
|
|
|
2.4 |
% |
Acquired |
|
|
|
|
|
|
367 |
|
|
|
367 |
|
|
|
* |
|
Preneed insurance commissions revenue |
|
|
587 |
|
|
|
642 |
|
|
|
55 |
|
|
|
9.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit from continuing operations |
|
$ |
10,941 |
|
|
$ |
11,607 |
|
|
$ |
666 |
|
|
|
6.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit from discontinued operations |
|
$ |
314 |
|
|
$ |
(35 |
) |
|
$ |
(349 |
) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funeral same-store revenues for the three months ended March 31, 2007 increased $0.6 million,
or 1.9%, when compared to the three months ended March 31, 2006 as we experienced a decrease of
1.7% in the number of contracts and an increase of 3.6% to $5,285 in the average revenue per
contract for those existing operations. Total funeral same-store gross profit for the three months
ended March 31, 2007 increased $0.2 million from the comparable three months of 2006, and as a
percentage of funeral same-store revenue, increased from 34.1% to 34.2%. The Central Region
accounted for $419,000 of the increase in same-store revenues and
provided most of the increase in
same-store profits. The improvement in the Central Region was due to the ability to realize a 6.4%
increase in the average revenue per contract and more aggressive expense management.
Acquired revenue and gross profit is related primarily to the businesses acquired at the
beginning of 2007 in Corpus Christi, Texas.
Cremation services represented 35.0 % of the number of funeral services during the first
quarter of 2007, an increase from 33.4 % in the first quarter of 2006. The average revenue for
burial contracts increased 5.4 % to $7,309, and the average revenue for cremation contracts
increased 6.7% to $2,817. The Company has addressed the growing demand for cremation by training
the funeral directors to present multiple merchandise and service options to families, resulting in
choices that produce higher revenues. The average revenue for other contracts, which make up
approximately nine percent of the number of contracts, declined 8.4% to $2,132. Other contracts
consist of charges for merchandise or services for which we do not perform a funeral service for
the deceased during the period.
- 19 -
Cemetery Segment. The following table sets forth certain information regarding the
revenues and gross profit of the Company from the cemetery operations for the three months ended
March 31, 2006 compared to the three months ended March 31, 2007(dollars in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
|
|
|
|
March 31, |
|
|
Change |
|
|
|
2006 |
|
|
2007 |
|
|
Amount |
|
|
% |
|
Total same-store revenue |
|
$ |
10,054 |
|
|
$ |
9,699 |
|
|
$ |
(355 |
) |
|
|
(3.5 |
)% |
Acquired |
|
|
|
|
|
|
388 |
|
|
|
388 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from continuing operations |
|
$ |
10,054 |
|
|
$ |
10,087 |
|
|
$ |
33 |
|
|
|
0.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from discontinued operations |
|
$ |
190 |
|
|
$ |
|
|
|
$ |
(190 |
) |
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total same-store gross profit |
|
$ |
2,599 |
|
|
$ |
2,901 |
|
|
$ |
302 |
|
|
|
11.6 |
% |
Acquired |
|
|
|
|
|
|
56 |
|
|
|
56 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit from continuing operations |
|
$ |
2,599 |
|
|
$ |
2,957 |
|
|
$ |
358 |
|
|
|
13.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit from discontinued operations |
|
$ |
(92 |
) |
|
$ |
|
|
|
$ |
92 |
|
|
|
* |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cemetery same-store revenues for the three months ended March 31, 2007 decreased $0.4 million,
or 3.5% compared to the three months ended March 31, 2006, the majority of which was due to the
recognition of the sale of a private mausoleum in the 2006 period. Total atneed revenues increased
from $3.5 million to $3.8 million. Total revenue from preneed property sales increased $0.2
million. Though the number of interments sold on a preneed basis remained the same, the average
price per space increased 5.0%.
Cemetery same-store gross
profit for the three months ended March 31, 2007 increased $0.3 million
from the comparable three months of 2006 and as a percentage of revenues increased from
25.9% to 30.0%, the primary reason was an increase of pre-tax
earnings of $476,000 at
Rolling Hills Memorial Park. Secondarily, improvements in collection efforts resulted in lower bad
debt expense.
Acquired revenue and gross profit represents the results of Seaside Cemetery in Corpus
Christi, Texas.
Other.
General, administrative and other expenses totaled $3.7 million for the three months ended March 31, 2007
and the three months ended March 31, 2006. Included in this
category are the costs to integrate the
businesses acquired in Corpus Christi.
Income Taxes
The Company recorded income taxes on earnings from continuing operations at the effective rate
of 38.5% during 2007. For Federal income tax reporting purposes, Carriage has net operating loss
carryforwards totaling $6.9 million (excluding $13.3 million of unrecognized deductions) available
at March 31, 2007 to offset future Federal taxable income, which expire between 2021 and 2025 if not
utilized. Carriage also has approximately $72.3 million of state net operating loss carryforwards
that will expire between 2006 and 2025, if not utilized. Based on managements assessment of the
various state net operating losses, it was determined that it is more likely than not that the
Company will not be able to realize tax benefits on a substantial amount of the state losses.
Accordingly, the Company established a valuation allowance against a substantial portion of the
deferred tax asset related to the state operating losses.
LIQUIDITY AND CAPITAL RESOURCES
Cash and corporate investments at March 31, 2007 totaled $33.3 million and consisted of $25.4
million in cash, $2.9 million in restricted cash and $5.0 million in Federal agency bonds. Cash
and corporate investments totaled $41.0 million at December 31, 2006. The decrease of $7.7 million
since year end 2006 is primarily attributable to the $10.0 million used in the acquisition in the
first quarter of 2007. For the three months ended March 31, 2007, cash provided by operating
activities was $1.9 million as compared to $1.2 million for the three months ended March 31, 2006.
Additionally, capital expenditures totaled $2.2 million compared to $1.1 million in the prior year.
In accordance with the terms of our credit facility, a portion of the cash proceeds from the
sale of funeral home and cemetery businesses are pledged to the benefit of the lenders and are
restricted for use only for acquisitions of similar businesses, capital expenditures, or paydowns
of debt. At March 31, 2007, $2.9 million was pledged for that purpose, and $1.5 million was
released back to the Company during April 2007.
- 20 -
The Companys senior debt at March 31, 2007 totaled $140.1 million and consisted of $130.0
million in Senior Notes, described below, and $10.1 million in acquisition indebtedness and capital
lease obligations. Additionally, $0.4 million in letters of credit were issued under the credit
facility and were outstanding at March 31, 2007.
The Company has a $35 million senior secured revolving credit facility that matures in 2010
and is collateralized by all personal property and funeral home real property in certain states.
Borrowings under the new credit facility will bear interest at prime or LIBOR options with the
current LIBOR option set at LIBOR plus 300 basis points. The revolving line of credit is
currently undrawn.
The outstanding principal amount of the Companys convertible junior subordinated debenture is
$93.75 million, is payable to the Companys unconsolidated affiliate, Carriage Services Capital
Trust, bears interest at 7% and matures in 2029. Substantially all the assets of the Trust consist
of the convertible junior subordinated debenture of the Company. The Trust issued 1.875 million
shares of convertible preferred term income deferrable equity securities (TIDES). The rights of
the debenture are functionally equivalent to those of the TIDES.
The convertible junior subordinated debenture payable to the affiliated trust and the TIDES
each contain a provision for the deferral of interest payments and distributions for up to 20
consecutive quarters. During the period in which distribution payments are deferred, distributions
continue to accumulate at the 7% annual rate. Also, the deferred distributions themselves
accumulate distributions at the annual rate of 7%. During the deferral period, Carriage is
prohibited from paying dividends on the common stock or repurchasing its common stock, subject to
limited exceptions. The Company currently expects to continue paying the distributions as due.
The Company intends to use its cash and short-term investments, cash flow provided by
operations (which is expected to total $14 to $16 million in 2007) and proceeds from the sale of
businesses, to acquire funeral home and cemetery businesses. The Company also has the ability to
draw on its revolving credit facility, subject to customary terms and conditions of the credit
agreement, to finance acquisitions.
SEASONALITY
The Companys business can be affected by seasonal fluctuations in the death rate. Generally,
the rate is higher during the winter months because the incidences of deaths from influenza and
pneumonia are higher during this period than other periods of the year.
INFLATION
Inflation has not had a significant impact on the results of operations of the Company.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Carriage is currently exposed to market risk primarily related to changes in interest rates
related to the Companys debt, decreases in interest rates related to the Companys short-term
investments and changes in the values of securities associated with the preneed and perpetual care
trusts. For information regarding the Companys exposure to certain market risks, see Item 7A.
Quantitative and Qualitative Market Risk Disclosure in the Companys annual report filed on Form
10-K for the year ended December 31, 2006. There have been no significant changes in the Companys
market risk from that disclosed in the Form 10-K for the year ended December 31, 2006.
Item 4. Controls and Procedures
In accordance with the Securities Exchange Act of 1934 Rules 13a-15 and 15d-15, we carried out
an evaluation under the supervision and with the participation of management, including our Chief
Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and
procedures as of the end of the period covered by this report. Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures
were effective as of March 31, 2007 to provide reasonable assurance that information required to
be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed,
summarized, and reported within the time periods specified in the Securities and Exchange
Commissions rules and forms. Our disclosure controls and procedures include controls and
procedures designed to ensure that information required to be disclosed in reports filed or
submitted under the Exchange Act is accumulated and communicated to our management, including our
Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure.
There has been no change in our internal control over financial reporting that occurred during
the three months ended March 31, 2007 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
- 21 -
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Carriage and our subsidiaries are parties to a number of legal proceedings that arise from
time to time in the ordinary course of business. While the outcome of these proceedings cannot be
predicted with certainty, we do not expect these matters to have a material adverse effect on the
financial statements.
We carry insurance with coverage and coverage limits consistent with our assessment of risks
in our business and of an acceptable level of financial exposure. Although there can be no
assurance that such insurance will be sufficient to mitigate all damages, claims or contingencies,
we believe that our insurance provides reasonable coverage for known asserted or unasserted claims.
In the event the Company sustained a loss from a claim and the insurance carrier disputed coverage
or coverage limits, the Company may record a charge in a different period than the recovery, if
any, from the insurance carrier.
Item 1A. Risk Factors
There have been no material changes in our risk factors from those disclosed in Item 1A of our
Annual Report on Form 10-K for the year ended December 31, 2006.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None
Issuance of Unregistered Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
The Company reported on Form 8-K during the quarter covered by this report all information
required to be reported on such form.
Item 6. Exhibits
|
|
|
11.1
|
|
Computation of Per Share Earnings |
|
|
|
31.1
|
|
Certification of Periodic Financial Reports by Melvin C. Payne in satisfaction of Section 302 of
the Sarbanes-Oxley Act of 2002 |
|
|
|
31.2
|
|
Certification of Periodic Financial Reports by Joseph Saporito in satisfaction of Section 302 of
the Sarbanes-Oxley Act of 2002 |
|
|
|
32
|
|
Certification of Periodic Financial Reports by Melvin C. Payne and Joseph Saporito in
satisfaction of Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. Section 1350 |
- 22 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
CARRIAGE SERVICES, INC. |
|
|
|
|
|
|
|
May 15, 2007
|
|
/s/ Joseph Saporito
|
|
|
Date
|
|
Joseph Saporito, |
|
|
|
|
Executive Vice President, Chief Financial Officer and
Secretary (Authorized Officer and Principal Financial
Officer) |
|
|
- 23 -
CARRIAGE SERVICES, INC.
INDEX OF EXHIBITS
|
|
|
11.1
|
|
Computation of Per Share Earnings |
|
|
|
31.1
|
|
Certification of Periodic Financial Reports by Melvin C. Payne in satisfaction of Section 302 of
the Sarbanes-Oxley Act of 2002 |
|
|
|
31.2
|
|
Certification of Periodic Financial Reports by Joseph Saporito in satisfaction of Section 302 of
the Sarbanes-Oxley Act of 2002 |
|
|
|
32
|
|
Certification of Periodic Financial Reports by Melvin C. Payne and Joseph
Saporito in satisfaction of Section 906 of the Sarbanes-Oxley Act of 2002 and 18
U.S.C. Section 1350 |
- 24 -