Carriage Services, Inc. (CSV)

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Carriage Services, Inc. (CSV)

Q2 2008 Earnings Call

August 8, 2008 10:30 am ET


Ken Dennard - Managing Director, DRG&E

Melvin C. Payne - Chairman, President and Chief Executive Officer

Billy Dixon - Chief Financial Officer and Executive Vice President


James Clement - Sidoti & Company, LLC

Clinton D. Fendley - Davenport & Co. of Virginia, Inc.

Alan Webber - Sidoti & Company

Mike Scarangella - Merrill Lynch

Chris Sims - Shenkman Capital Management

Robert Kosowsky - OFI Institutional Asset Management

[Mark Effersade - Pimco]

Gerry Heffernan - Lord Abbett & Co.

[Mitch Almay - McAdams Company]



Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Carriage Services second quarter earnings conference call. (Operator Instructions)

This conference is being recorded today, Friday, August 8, 2008, and at this time I'd like to turn the conference over to Ken Dennard of DRG&E. Please go ahead, sir.

Ken Dennard

Thanks, [Francia], and good morning, everyone. We appreciate you joining us for Carriage Services conference call to discuss second quarter 2008 results.

Before I turn the call over to management I have the normal housekeeping details to run through. If you'd like to be on the e-mail distribution list, fax list for future Carriage Services releases or if you had technical problems and didn't receive your copy yesterday afternoon, please call our offices at DRG&E and we'll be happy to assist you. That number's 713-529-6600.

Additionally, due to the fact the financial tables are very long and are wide for formatting for the wire services to have it one page or formatted correctly, we recommend that you download the *.pdf of the table that is on the Carriage website or it could be on my e-mail that I sent you yesterday.

If you'd like to listen to a replay of today's call, one will be available via webcast by going to Carriage's website at

Additionally, in a few hours there will be a telephonic instant replay that'll be available 24 hours a day for the next week. The replay and access code are in the release yesterday afternoon.

Please note that information reported on this call speaks only as of today, August 8, 2008, and therefore you are advised that any time-sensitive information may not be accurate as of the time of any replay listing.

Also, as you know, certain statements made today on the conference call or elsewhere by or on behalf of the company that are not historical facts are intended to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended.

These statements are based upon assumptions that the company believes are reasonable, however many factors that are discussed under forward-looking statements and cautionary statements in the company's annual report on Form 10K for the year ended December 31, 2007 and any subsequent SEC filings could cause the company's results in the future to differ materially from the forward-looking statements made today or in other documents or oral presentations made by or on behalf of the company.

A copy of the company's Form 10-K and 10-Q, news releases and other information are available for free on the Carriage Services website.

Now with that, I'd like to turn the call over to Mel Payne, Chairman and Chief Executive Officer.


Melvin C. Payne

Thank you, Ken.

I would characterize our second quarter as the perfect storm of reported underperformance. And once again I find that perfect storms are very interesting. You don't know how bad they are until they're past, but that's my main point. This perfect storm has passed and will not be repeated.

After six straight quarters of excellent year-over-year performance, starting with the fourth quarter of 2006, we had a very weak quarter, with zero earnings per share. This underperformance was broad across our portfolio and reflected poor execution of our standards operating model in too many businesses in our portfolio, but also a difficult economic environment.

Some of the issues related to our underperformance were controllable, for example, salaries and benefits weren't managed to the actual weaker revenue, and some of the issues were not, for example, the spike in cremation rate. We are moving fast to take specific action to improve performance and have total confidence that our performance will improve sequentially in the third and fourth quarter and position 2009 for a return to positive revenue and margin trends.

Because of the weakness in the second quarter, however, we have lowered our rolling four-quarter outlook ending June 30, 2009 to reflect a reduction of $0.10 a share in the EPS range to $0.38 to $0.42 from $0.48 to $0.52 and a reduction of about $3 million in the consolidated EBITDA range to $39.5 million to $42.5 million from $43 to $45 million.

However, I want to emphasize that within the next 12 to 18 months we fully expect our performance to improve to a degree that our rolling four-quarter outlook will return to the $0.48 to $0.52 per share and the $43 to $45 million consolidated EBITDA.

Let me now walk you through some details of our trend reports to give a little more color. While I think we adequately cover the details of the quarter in the press release, what I would prefer to cover is the recent performance using the annual trend reports so that I can crystallize the path of improved performance expectations over the next 12 to 18 months much more specifically.

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