þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
DELAWARE
(State or other jurisdiction of incorporation or organization) |
76-0423828
(I.R.S. Employer Identification No.) |
|||
3040 Post Oak Boulevard, Suite 300, Houston, TX | 77056 | |||
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer o
|
Accelerated filer þ | Non-Accelerated filer o | Smaller reporting company o |
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31 | ||||||||
EX-11.1 | ||||||||
EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT |
- 2 -
December 31, | September 30, | |||||||
2010 | 2011 | |||||||
(unaudited) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 1,279 | $ | 4,264 | ||||
Accounts receivable, net of allowance for bad debts of $979 in 2010 and $822 in 2011 |
15,587 | 13,393 | ||||||
Inventories and other current assets |
10,828 | 11,281 | ||||||
Total current assets |
27,694 | 28,938 | ||||||
Preneed cemetery trust investments |
79,691 | 62,322 | ||||||
Preneed funeral trust investments |
81,143 | 70,798 | ||||||
Preneed receivables, net of allowance for bad debts of $1,933 in 2010 and $1,774 in 2011 |
24,099 | 24,224 | ||||||
Receivables from preneed funeral trusts |
21,866 | 22,380 | ||||||
Property, plant and equipment, net of accumulated depreciation of $71,700 in 2010 and
$76,223 in 2011 |
128,472 | 131,493 | ||||||
Cemetery property |
71,128 | 71,450 | ||||||
Goodwill |
183,324 | 190,430 | ||||||
Deferred charges and other non-current assets |
7,860 | 11,844 | ||||||
Cemetery perpetual care trust investments |
45,735 | 37,933 | ||||||
Total assets |
$ | 671,012 | $ | 651,812 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Current portion of senior long-term debt and capital lease obligations |
$ | 563 | $ | 574 | ||||
Accounts payable and other liabilities |
9,700 | 14,963 | ||||||
Accrued liabilities |
14,896 | 13,402 | ||||||
Total current liabilities |
25,159 | 28,939 | ||||||
Senior long-term debt, net of current portion |
132,416 | 131,471 | ||||||
Convertible junior subordinated debentures due in 2029 to an affiliate |
92,858 | 89,770 | ||||||
Obligations under capital leases, net of current portion |
4,289 | 4,187 | ||||||
Deferred preneed cemetery revenue |
50,125 | 58,914 | ||||||
Deferred preneed funeral revenue |
39,517 | 40,331 | ||||||
Deferred preneed cemetery receipts held in trust |
79,691 | 62,322 | ||||||
Deferred preneed funeral receipts held in trust |
81,143 | 70,798 | ||||||
Care trusts corpus |
45,941 | 37,927 | ||||||
Total liabilities |
551,139 | 524,659 | ||||||
Commitments and contingencies |
||||||||
Redeemable preferred stock |
200 | 200 | ||||||
Stockholders equity: |
||||||||
Common Stock, $.01 par value; 80,000,000 shares authorized; 21,311,000 and
21,546,000 shares issued at December 31, 2010 and September 30, 2011, respectively |
213 | 216 | ||||||
Additional paid-in capital |
200,987 | 201,020 | ||||||
Accumulated deficit |
(70,951 | ) | (64,283 | ) | ||||
Treasury stock, at cost; 3,153,000 and 3,108,000 shares at December 31, 2010 and
September 30, 2011, respectively |
(10,576 | ) | (10,000 | ) | ||||
Total stockholders equity |
119,673 | 126,953 | ||||||
Total liabilities and stockholders equity |
$ | 671,012 | $ | 651,812 | ||||
- 3 -
For the three months | For the nine months | |||||||||||||||
ended September 30, | ended September 30, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Revenues: |
||||||||||||||||
Funeral |
$ | 33,292 | $ | 33,689 | $ | 101,817 | $ | 108,361 | ||||||||
Cemetery |
12,193 | 10,389 | 35,032 | 34,482 | ||||||||||||
45,485 | 44,078 | 136,849 | 142,843 | |||||||||||||
Field costs and expenses: |
||||||||||||||||
Funeral |
22,866 | 21,546 | 65,956 | 68,378 | ||||||||||||
Cemetery |
8,329 | 7,351 | 23,462 | 22,160 | ||||||||||||
Depreciation and amortization |
2,184 | 2,035 | 6,417 | 6,459 | ||||||||||||
Regional and unallocated funeral and cemetery costs |
2,047 | 2,501 | 5,405 | 6,532 | ||||||||||||
35,426 | 33,433 | 101,240 | 103,529 | |||||||||||||
Gross profit |
10,059 | 10,645 | 35,609 | 39,314 | ||||||||||||
Corporate costs and expenses: |
||||||||||||||||
General and administrative costs and expenses |
3,808 | 4,788 | 11,375 | 14,390 | ||||||||||||
Home office depreciation and amortization |
314 | 255 | 1,038 | 750 | ||||||||||||
4,122 | 5,043 | 12,413 | 15,140 | |||||||||||||
Operating income |
5,937 | 5,602 | 23,196 | 24,174 | ||||||||||||
Interest expense |
(4,571 | ) | (4,564 | ) | (13,696 | ) | (13,628 | ) | ||||||||
Gain on repurchase of junior subordinated debentures |
| 481 | 316 | 846 | ||||||||||||
Loss on early extinguishment of debt |
| (201 | ) | | (201 | ) | ||||||||||
Interest income and other, net |
1 | 13 | 154 | 34 | ||||||||||||
Total interest and other |
(4,570 | ) | (4,271 | ) | (13,226 | ) | (12,949 | ) | ||||||||
Income before income taxes |
1,367 | 1,331 | 9,970 | 11,225 | ||||||||||||
Provision for income taxes |
(508 | ) | (539 | ) | (4,038 | ) | (4,546 | ) | ||||||||
Net income |
859 | 792 | 5,932 | 6,679 | ||||||||||||
Preferred stock dividend |
4 | 5 | 11 | 12 | ||||||||||||
Net income available to common stockholders |
$ | 855 | $ | 787 | $ | 5,921 | $ | 6,667 | ||||||||
Basic earnings per common share: |
$ | 0.05 | $ | 0.04 | $ | 0.34 | $ | 0.36 | ||||||||
Diluted earnings per common share: |
$ | 0.05 | $ | 0.04 | $ | 0.33 | $ | 0.36 | ||||||||
Dividends declared per share |
$ | | $ | 0.025 | $ | | $ | 0.05 | ||||||||
Weighted average number of common and common
equivalent shares outstanding: |
||||||||||||||||
Basic |
17,520 | 18,414 | 17,549 | 18,339 | ||||||||||||
Diluted |
17,726 | 18,461 | 17,775 | 18,381 | ||||||||||||
- 4 -
For the nine months ended September 30, | ||||||||
2010 | 2011 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 5,932 | $ | 6,679 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
7,455 | 7,209 | ||||||
Amortization of deferred financing costs |
545 | 534 | ||||||
Gain on repurchase of convertible junior subordinated debentures |
(316 | ) | (846 | ) | ||||
Loss on early extinguishment of debt |
| 201 | ||||||
Provision for losses on accounts receivable |
2,813 | 2,360 | ||||||
Stock-based compensation expense |
1,396 | 1,558 | ||||||
Deferred income taxes |
500 | (3,642 | ) | |||||
Other |
(149 | ) | (37 | ) | ||||
Changes in operating assets and liabilities that provided (required) cash: |
||||||||
Accounts and preneed receivables |
(2,252 | ) | 250 | |||||
Inventories and other current assets |
2,015 | (775 | ) | |||||
Deferred charges and other |
| (38 | ) | |||||
Preneed funeral and cemetery trust investments |
(987 | ) | 3,604 | |||||
Accounts payable and accrued liabilities |
(1,799 | ) | 3,321 | |||||
Deferred preneed funeral and cemetery revenue |
316 | 8,708 | ||||||
Deferred preneed funeral and cemetery receipts held in trust |
1,080 | (3,816 | ) | |||||
Net cash provided by operating activities |
16,549 | 25,270 | ||||||
Cash flows from investing activities: |
||||||||
Acquisitions |
(16,792 | ) | (10,300 | ) | ||||
Net proceeds from the sale of assets |
400 | | ||||||
Capital expenditures |
(6,892 | ) | (7,774 | ) | ||||
Net cash used in investing activities |
(23,284 | ) | (18,074 | ) | ||||
Cash flows from financing activities: |
||||||||
Borrowings under (payments on) the bank credit facility |
5,000 | (600 | ) | |||||
Payments on senior long-term debt and obligations under capital leases |
(346 | ) | (436 | ) | ||||
Proceeds from the exercise of stock options and employee stock purchase plan |
441 | 325 | ||||||
Dividends on common stock |
| (920 | ) | |||||
Dividends on redeemable preferred stock |
(11 | ) | (12 | ) | ||||
Repurchase of convertible junior subordinated debentures |
(576 | ) | (2,241 | ) | ||||
Payment of loan origination fees |
| (333 | ) | |||||
Other financing costs |
(43 | ) | 6 | |||||
Net cash provided by (used in) financing activities |
4,465 | (4,211 | ) | |||||
Net (decrease) increase in cash and cash equivalents |
(2,270 | ) | 2,985 | |||||
Cash and cash equivalents at beginning of period |
3,616 | 1,279 | ||||||
Cash and cash equivalents at end of period |
$ | 1,346 | $ | 4,264 | ||||
- 5 -
- 6 -
- 7 -
- 8 -
| Size of business |
| Size of market |
| Competitive standing |
| Demographics |
| Strength of brand |
| Barriers to entry |
Assets | ||||||||||||||||||||
Acquired | Liabilities | |||||||||||||||||||
(Excluding | Goodwill | and Debt | ||||||||||||||||||
Acquisition Date | Type of Business | Market | Goodwill) | Recorded | Assumed | |||||||||||||||
August 2011 |
Funeral Home | Duncan, OK | $ | 1.6 | $ | 2.4 | | |||||||||||||
September 2011 |
3 Funeral Homes | Modesto, CA | $ | 0.1 | $ | 1.1 | |
- 9 -
Current assets |
55 | |||
Property, plant & equipment |
1,638 | |||
Goodwill |
3,514 | |||
Preneed funeral trust investment |
104 | |||
Deferred preneed receipts held in trust |
(104 | ) | ||
Accrued liabilities |
(7 | ) | ||
Total consideration |
$ | 5,200 | ||
September 30, 2011 | ||||
Goodwill at beginning of year |
$ | 183,324 | ||
Acquisitions and changes in previous estimates |
7,106 | |||
Goodwill at end of period |
$ | 190,430 | ||
December 31, 2010 | September 30, 2011 | |||||||
Preneed cemetery trust investments |
$ | 81,771 | $ | 64,580 | ||||
Less: allowance for contract cancellation |
(2,080 | ) | (2,258 | ) | ||||
$ | 79,691 | $ | 62,322 | |||||
- 10 -
Unrealized | Unrealized | |||||||||||||||
Cost | Gains | Losses | Fair Market Value | |||||||||||||
Cash and money market accounts |
$ | 1,139 | $ | | $ | | $ | 1,139 | ||||||||
Fixed income securities: |
||||||||||||||||
Corporate debt |
39,016 | 405 | (3,264 | ) | 36,157 | |||||||||||
Other |
2 | | | 2 | ||||||||||||
Common stock |
31,326 | 49 | (8,808 | ) | 22,567 | |||||||||||
Mutual funds: |
||||||||||||||||
Equity |
3,769 | 33 | | 3,802 | ||||||||||||
Trust securities |
$ | 75,252 | $ | 487 | $ | (12,072 | ) | $ | 63,667 | |||||||
Accrued investment income |
$ | 913 | $ | 913 | ||||||||||||
Preneed cemetery trust investments |
$ | 64,580 | ||||||||||||||
Fair market value as a percentage of cost |
84.6 | % | ||||||||||||||
Due in one year or less |
$ | | ||
Due in one to five years |
2,576 | |||
Due in five to ten years |
12,273 | |||
Thereafter |
21,310 | |||
$ | 36,159 | |||
For the three months | For the nine months | |||||||||||||||
ended September 30, | ended September 30, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Investment income |
$ | 844 | $ | 840 | $ | 2,423 | $ | 2,704 | ||||||||
Realized gains |
3,182 | 3,779 | 8,938 | 13,871 | ||||||||||||
Realized losses |
(27 | ) | (597 | ) | (733 | ) | (1,143 | ) | ||||||||
Expenses and taxes |
(130 | ) | (252 | ) | (449 | ) | (1,105 | ) | ||||||||
Increase in deferred preneed
cemetery receipts
held in trust |
(3,869 | ) | (3,770 | ) | (10,179 | ) | (14,327 | ) | ||||||||
$ | | $ | | $ | | $ | | |||||||||
For the three months | For the nine months | |||||||||||||||
ended September 30, | ended September 30, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Purchases |
$ | (10,449 | ) | $ | (42,832 | ) | $ | (42,818 | ) | $ | (87,897 | ) | ||||
Sales |
10,028 | 51,730 | 41,214 | 97,406 |
- 11 -
December 31, 2010 | September 30, 2011 | |||||||
Preneed funeral trust investments |
$ | 83,324 | $ | 73,245 | ||||
Less: allowance for contract cancellation |
(2,181 | ) | (2,447 | ) | ||||
$ | 81,143 | $ | 70,798 | |||||
Unrealized | Unrealized | Fair Market | ||||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Cash and money market accounts |
$ | 10,173 | $ | | $ | | $ | 10,173 | ||||||||
Fixed income securities: |
||||||||||||||||
U.S. Treasury debt |
5,657 | 127 | (36 | ) | 5,748 | |||||||||||
Mortgage backed securities |
540 | 16 | (3 | ) | 553 | |||||||||||
Corporate debt |
26,291 | 464 | (1,886 | ) | 24,869 | |||||||||||
Common stock |
22,908 | 116 | (6,079 | ) | 16,945 | |||||||||||
Mutual funds: |
||||||||||||||||
Equity |
9,301 | | (1,681 | ) | 7,620 | |||||||||||
Fixed income |
4,405 | 151 | (88 | ) | 4,468 | |||||||||||
Other investments |
2,268 | | | 2,268 | ||||||||||||
Trust securities |
$ | 81,543 | $ | 874 | $ | (9,773 | ) | $ | 72,644 | |||||||
Accrued investment income |
$ | 601 | $ | 601 | ||||||||||||
Preneed funeral trust investments |
$ | 73,245 | ||||||||||||||
Fair market value as a percentage of cost |
89.1 | % | ||||||||||||||
Due in one year or less |
$ | 1,402 | ||
Due in one to five years |
4,636 | |||
Due in five to ten years |
10,071 | |||
Thereafter |
15,061 | |||
$ | 31,170 | |||
- 12 -
For the three months | For the nine months | |||||||||||||||
ended September 30, | ended September 30, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Investment income |
$ | 845 | $ | 625 | $ | 2,425 | $ | 2,177 | ||||||||
Realized gains |
4,469 | 2,241 | 9,645 | 10,611 | ||||||||||||
Realized losses |
(20 | ) | (608 | ) | (496 | ) | (1,096 | ) | ||||||||
Expenses and taxes |
(154 | ) | (259 | ) | (662 | ) | (987 | ) | ||||||||
Increase
in deferred preneed
funeral receipts
held in trust |
(5,140 | ) | (1,999 | ) | (10,912 | ) | (10,705 | ) | ||||||||
$ | | $ | | $ | | $ | | |||||||||
For the three months | For the nine months | |||||||||||||||
ended September 30, | ended September 30, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Purchases |
$ | (1,520 | ) | $ | (26,857 | ) | $ | (3,972 | ) | $ | (71,560 | ) | ||||
Sales |
17 | 25,867 | 2,791 | 68,404 |
September 30, 2011 | ||||
Beginning balance |
$ | 1,488 | ||
Write-offs and cancellations |
| |||
Recoveries |
| |||
Provision |
187 | |||
Ending balance |
$ | 1,301 | ||
31-60 | 61-90 | 91-120 | >120 | Total Financing | ||||||||||||||||||||||||
Past Due | Past Due | Past Due | Past Due | Total Past Due | Current | Receivables | ||||||||||||||||||||||
Recognized revenue |
$ | 713 | $ | 421 | $ | 204 | $ | 379 | $ | 1,717 | $ | 17,801 | $ | 19,518 | ||||||||||||||
Deferred revenue |
290 | 168 | 84 | 164 | 706 | 7,715 | 8,421 | |||||||||||||||||||||
Total contracts |
$ | 1,003 | $ | 589 | $ | 288 | $ | 543 | $ | 2,423 | $ | 25,516 | $ | 27,939 | ||||||||||||||
- 13 -
December 31, 2010 | September 30, 2011 | |||||||
Preneed funeral trust funds |
$ | 22,542 | $ | 23,071 | ||||
Less: allowance for contract cancellation |
(676 | ) | (691 | ) | ||||
$ | 21,866 | $ | 22,380 | |||||
December 31, 2010 | September 30, 2011 | |||||||
Trust assets, at fair value |
$ | 45,735 | $ | 37,933 | ||||
Pending withdrawals of income from trust |
| (6 | ) | |||||
Obligations due to trust |
206 | | ||||||
Care trusts corpus |
$ | 45,941 | $ | 37,927 | ||||
Unrealized | Unrealized | Fair Market | ||||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
Cash and money market accounts |
$ | 216 | $ | | $ | | $ | 216 | ||||||||
Fixed income securities: |
||||||||||||||||
Corporate debt |
25,586 | 250 | (2,224 | ) | 23,612 | |||||||||||
Common stock |
18,815 | 29 | (5,341 | ) | 13,503 | |||||||||||
Other |
1 | | | 1 | ||||||||||||
Trust securities |
$ | 44,618 | $ | 279 | $ | (7,565 | ) | $ | 37,332 | |||||||
Accrued investment income |
$ | 601 | $ | 601 | ||||||||||||
Cemetery perpetual care trust investments |
$ | 37,933 | ||||||||||||||
Fair market value as a percentage of cost |
83.7 | % | ||||||||||||||
Due in one year or less |
$ | | ||
Due in one to five years |
1,475 | |||
Due in five to ten years |
8,811 | |||
Thereafter |
13,326 | |||
$ | 23,612 | |||
- 14 -
For the three months | For the nine months | |||||||||||||||
ended September 30, | ended September 30, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Undistributable realized gains |
$ | 1,037 | $ | 1,350 | $ | 3,579 | $ | 7,032 | ||||||||
Undistributable realized losses |
(3 | ) | (330 | ) | (741 | ) | (645 | ) | ||||||||
Increase in Care trusts corpus |
(1,034 | ) | (1,020 | ) | (2,838 | ) | (6,387 | ) | ||||||||
$ | | $ | | $ | | $ | | |||||||||
For the three months | For the nine months | |||||||||||||||
ended September 30, | ended September 30, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Investment income |
$ | 288 | $ | 605 | $ | 1,521 | $ | 1,782 | ||||||||
Realized gains |
682 | | 1,532 | 1,085 | ||||||||||||
Expenses |
| (37 | ) | (21 | ) | | ||||||||||
Total |
$ | 970 | $ | 568 | $ | 3,032 | $ | 2,867 | ||||||||
For the three months | For the nine months | |||||||||||||||
ended September 30, | ended September 30, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Purchases |
$ | (6,757 | ) | $ | (2,609 | ) | $ | (29,831 | ) | $ | (26,539 | ) | ||||
Sales |
7,498 | 17,463 | 31,060 | 40,121 |
| Level 1Fair value of securities based on unadjusted quoted prices for identical assets or liabilities in active markets. Our investments classified as Level 1 securities include common stock, certain fixed income securities, and equity mutual funds; |
| Level 2Fair value of securities estimated based on quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs other than quoted market prices that are observable or that can be corroborated by observable market data by correlation. These inputs include interest rates, yield curves, credit risk, prepayment speeds, rating and tax-exempt status. Our investments classified as Level 2 securities include certain fixed income securities and fixed income mutual funds. |
| Level 3Unobservable inputs based upon the reporting entitys internally developed assumptions which market participants would use in pricing the asset or liability. As of September 30, 2011, the Company did not have any assets that had fair values determined by Level 3 inputs and no liabilities measured at fair value. |
- 15 -
Significant Other | Significant | |||||||||||||||
Quoted Prices in | Observable | Unobservable | ||||||||||||||
Active Markets | Inputs | Inputs | September 30, | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | 2011 | |||||||||||||
Assets: |
||||||||||||||||
Fixed income securities: |
||||||||||||||||
U.S. Treasury debt |
$ | 5,748 | $ | | $ | | $ | 5,748 | ||||||||
Mortgage backed
securities |
| 556 | | 556 | ||||||||||||
Corporate debt |
| 84,638 | | 84,638 | ||||||||||||
Common stock |
53,015 | | | 53,015 | ||||||||||||
Mutual funds: |
||||||||||||||||
Equity |
11,423 | | | 11,423 | ||||||||||||
Fixed income |
| 6,735 | | 6,735 | ||||||||||||
Total Assets |
$ | 70,186 | $ | 91,929 | $ | | $ | 162,115 | ||||||||
- 16 -
2010 | 2011 | |||||||
Dividend yield |
0 | % | 0 | % | ||||
Expected volatility |
70 | % | 29 | % | ||||
Risk-free interest rate |
0.08%, 0.18%, 0.31%, 0.45 | % | 0.15%, 0.19%, 0.24%, 0.29 | % | ||||
Expected life (years) |
.25, .50, .75, 1 | .25, .50, .75, 1 |
- 17 -
Funeral | Cemetery | Corporate | Consolidated | |||||||||||||
Revenues from operating activities: |
||||||||||||||||
Nine months ended September 30, 2011 |
$ | 108,361 | $ | 34,482 | $ | | $ | 142,843 | ||||||||
Nine months ended September 30, 2010 |
$ | 101,817 | $ | 35,032 | $ | | $ | 136,849 | ||||||||
Income (loss) before income taxes: |
||||||||||||||||
Nine months ended September 30, 2011 |
$ | 32,509 | $ | 8,063 | $ | (29,347 | ) | $ | 11,225 | |||||||
Nine months ended September 30, 2010 |
$ | 28,218 | $ | 7,115 | $ | (25,363 | ) | $ | 9,970 | |||||||
Total assets: |
||||||||||||||||
September 30, 2011 |
$ | 407,388 | $ | 216,928 | $ | 27,496 | $ | 651,812 | ||||||||
December 31, 2010 |
$ | 409,329 | $ | 242,461 | $ | 19,222 | $ | 671,012 |
- 18 -
For the three months | For the nine months | |||||||||||||||
ended September 30, | ended September 30, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Revenues |
||||||||||||||||
Goods |
||||||||||||||||
Funeral |
$ | 13,077 | $ | 13,323 | $ | 40,729 | $ | 42,913 | ||||||||
Cemetery |
8,260 | 6,683 | 23,248 | 22,140 | ||||||||||||
Total goods |
$ | 21,337 | $ | 20,006 | $ | 63,977 | $ | 65,053 | ||||||||
Services |
||||||||||||||||
Funeral |
$ | 18,030 | $ | 18,327 | $ | 54,729 | $ | 59,192 | ||||||||
Cemetery |
2,440 | 2,388 | 7,212 | 7,446 | ||||||||||||
Total services |
$ | 20,470 | $ | 20,715 | $ | 61,941 | $ | 66,638 | ||||||||
Financial revenue |
||||||||||||||||
Preneed funeral commission income |
$ | 632 | $ | 513 | $ | 1,817 | $ | 1,400 | ||||||||
Preneed funeral trust earnings |
1,553 | 1,526 | 4,542 | 4,856 | ||||||||||||
Cemetery trust earnings |
1,121 | 983 | 3,369 | 3,872 | ||||||||||||
Cemetery finance charges |
372 | 335 | 1,203 | 1,024 | ||||||||||||
Total financial revenue |
$ | 3,678 | $ | 3,357 | $ | 10,931 | $ | 11,152 | ||||||||
Total revenues |
$ | 45,485 | $ | 44,078 | $ | 136,849 | $ | 142,843 | ||||||||
Cost of revenues |
||||||||||||||||
Goods |
||||||||||||||||
Funeral |
$ | 11,816 | $ | 11,264 | $ | 34,948 | $ | 35,818 | ||||||||
Cemetery |
6,613 | 5,583 | 18,460 | 17,107 | ||||||||||||
Total goods |
$ | 18,429 | $ | 16,847 | $ | 53,408 | $ | 52,925 | ||||||||
Services |
||||||||||||||||
Funeral |
$ | 10,637 | $ | 9,910 | $ | 29,937 | $ | 31,455 | ||||||||
Cemetery |
1,716 | 1,768 | 5,002 | 5,053 | ||||||||||||
Total services |
$ | 12,353 | $ | 11,678 | $ | 34,939 | $ | 36,508 | ||||||||
Financial expenses |
||||||||||||||||
Preneed funeral commissions |
$ | 413 | $ | 372 | $ | 1,071 | $ | 1,105 | ||||||||
Total financial expenses |
$ | 413 | $ | 372 | $ | 1,071 | $ | 1,105 | ||||||||
Total cost of revenues |
$ | 31,195 | $ | 28,897 | $ | 89,418 | $ | 90,538 | ||||||||
- 19 -
For the nine months | ||||||||
ended September 30, | ||||||||
2010 | 2011 | |||||||
Cash paid for interest and financing costs |
$ | 15,914 | $ | 15,958 | ||||
Cash paid for income taxes |
684 | 1,258 | ||||||
Fair value of stock issued to directors, officers and certain employees |
1,097 | 1,591 | ||||||
Restricted common stock withheld for payroll taxes |
90 | 352 | ||||||
Net (deposits)/withdrawals into/from preneed funeral trusts |
1,111 | (3,795 | ) | |||||
Net (deposits)/withdrawals into/from preneed cemetery trusts |
(2,119 | ) | 7,052 | |||||
Net (deposits)/withdrawals into/from perpetual care trusts |
(75 | ) | 347 | |||||
Net decrease in preneed funeral receivables |
666 | 291 | ||||||
Net (increase)/decrease in preneed cemetery receivables |
(1,093 | ) | 105 | |||||
Net (deposits)/withdrawals of receivables into/from preneed funeral trusts |
96 | (139 | ) | |||||
Net change in preneed funeral receivables increasing deferred revenue |
69 | 403 | ||||||
Net change in preneed cemetery receivables increasing deferred revenue |
247 | 8,305 | ||||||
Net deposits/(withdrawals) from preneed funeral trust accounts
increasing/(decreasing) deferred preneed funeral receipts |
(1,111 | ) | 3,795 | |||||
Net deposits/(withdrawals) in cemetery trust accounts
increasing/(decreasing) deferred cemetery receipts |
2,119 | (7,052 | ) | |||||
Net deposits/(withdrawals) in perpetual care trust accounts
increasing/(decreasing) perpetual care trusts corpus |
72 | (559 | ) |
- 20 -
- 21 -
- 22 -
| Size of business; | ||
| Size of market; | ||
| Competitive standing; | ||
| Demographics; | ||
| Strength of brand; and | ||
| Barriers to entry. |
Three Months Ended September 30, | ||||||||||||||||
2010 | 2011 | |||||||||||||||
Net | Diluted | Net | Diluted | |||||||||||||
Income | EPS | Income | EPS | |||||||||||||
Net income available to common stockholders, as reported |
$ | 0.9 | $ | 0.05 | $ | 0.8 | $ | 0.04 | ||||||||
After-tax special items: |
||||||||||||||||
Withdrawable trust income(1) |
0.7 | 0.04 | 0.8 | 0.04 | ||||||||||||
Gain on repurchase of convertible junior subordinated
debenture |
| | (0.2 | ) | (0.01 | ) | ||||||||||
Losses on early extinguishment of debt |
| | 0.1 | 0.01 | ||||||||||||
Acquisition expenses |
0.1 | 0.01 | 0.4 | 0.02 | ||||||||||||
Non-GAAP Net income including special items |
$ | 1.7 | $ | 0.10 | $ | 1.9 | $ | 0.10 | ||||||||
Diluted weighted average shares outstanding (in thousands) |
17,726 | 18,461 |
- 23 -
Nine Months Ended September 30, | ||||||||||||||||
2010 | 2011 | |||||||||||||||
Net | Diluted | Net | Diluted | |||||||||||||
Income | EPS | Income | EPS | |||||||||||||
Net income available to common stockholders, as reported |
$ | 5.9 | $ | 0.33 | $ | 6.7 | $ | 0.36 | ||||||||
After-tax special items: |
||||||||||||||||
Withdrawable trust income(1) |
1.8 | 0.10 | 2.9 | 0.16 | ||||||||||||
Gain on repurchase of convertible junior subordinated
debenture |
(0.2 | ) | (0.01 | ) | (0.5 | ) | (0.03 | ) | ||||||||
Securities transactions expenses |
| | 0.3 | 0.02 | ||||||||||||
Losses on early extinguishment of debt |
| | 0.1 | 0.01 | ||||||||||||
Acquisition expenses |
0.4 | 0.02 | 0.6 | 0.03 | ||||||||||||
Recovery of legal fees |
(0.4 | ) | (0.02 | ) | | | ||||||||||
Non-GAAP Net income including special items |
$ | 7.5 | $ | 0.42 | $ | 10.1 | $ | 0.55 | ||||||||
Diluted weighted average shares outstanding (in thousands) |
17,775 | 18,381 |
(1) | Withdrawable trust income is realized income from cemetery preneed trust funds in certain states in which the income can be withdrawn currently but will be recognized in future periods when the death has occurred and the products delivered. |
- 24 -
Three Months Ended | ||||||||||||||||
September 30, | Change | |||||||||||||||
2010 | 2011 | Amount | % | |||||||||||||
Revenues: |
||||||||||||||||
Same store operating revenue |
$ | 25,478 | $ | 24,388 | $ | (1,090 | ) | (4.3 | )% | |||||||
Acquired operating revenue |
5,629 | 7,262 | 1,633 | 29.0 | % | |||||||||||
Preneed funeral insurance commissions |
632 | 513 | (119 | ) | (18.8 | )% | ||||||||||
Preneed funeral trust earnings |
1,553 | 1,526 | (27 | ) | (1.7 | )% | ||||||||||
Total |
$ | 33,292 | $ | 33,689 | $ | 397 | 1.2 | % | ||||||||
Operating profit: |
||||||||||||||||
Same store operating profit |
$ | 7,807 | $ | 8,254 | $ | 447 | 5.7 | % | ||||||||
Acquired operating profit |
847 | 2,221 | 1,374 | 162.2 | % | |||||||||||
Preneed funeral insurance commissions |
219 | 142 | (77 | ) | (35.2 | )% | ||||||||||
Preneed funeral trust earnings |
1,553 | 1,526 | (27 | ) | (1.7 | )% | ||||||||||
Total |
$ | 10,426 | $ | 12,143 | $ | 1,717 | 16.5 | % | ||||||||
- 25 -
Nine Months Ended | ||||||||||||||||
September 30, | Change | |||||||||||||||
2010 | 2011 | Amount | % | |||||||||||||
Revenues: |
||||||||||||||||
Same store operating revenue |
$ | 80,113 | $ | 80,105 | $ | (8 | ) | | ||||||||
Acquired operating revenue |
15,313 | 22,000 | 6,687 | 43.7 | % | |||||||||||
Preneed funeral insurance commissions |
1,817 | 1,400 | (417 | ) | (22.9 | )% | ||||||||||
Preneed funeral trust earnings |
4,574 | 4,856 | 282 | 6.2 | % | |||||||||||
Total |
$ | 101,817 | $ | 108,361 | $ | 6,544 | 6.4 | % | ||||||||
Operating profit: |
||||||||||||||||
Same store operating profit |
$ | 26,943 | $ | 28,437 | $ | 1,494 | 5.5 | % | ||||||||
Acquired operating profit |
3,599 | 6,397 | 2,798 | 77.7 | % | |||||||||||
Preneed funeral insurance commissions |
745 | 293 | (452 | ) | (60.7 | )% | ||||||||||
Preneed funeral trust earnings |
4,574 | 4,856 | 282 | 6.2 | % | |||||||||||
Total |
$ | 35,861 | $ | 39,983 | $ | 4,122 | 11.5 | % | ||||||||
- 26 -
Three Months Ended | ||||||||||||||||
September 30, | Change | |||||||||||||||
2010 | 2011 | Amount | % | |||||||||||||
Revenues: |
||||||||||||||||
Same store operating revenue |
$ | 9,030 | $ | 7,430 | $ | (1,600 | ) | (17.7 | )% | |||||||
Acquired operating revenue |
1,670 | 1,641 | (29 | ) | (1.7 | )% | ||||||||||
Cemetery trust earnings |
1,121 | 983 | (138 | ) | (12.3 | )% | ||||||||||
Preneed cemetery finance charges |
372 | 335 | (37 | ) | (9.9 | )% | ||||||||||
Total |
$ | 12,193 | $ | 10,389 | $ | (1,804 | ) | (14.8 | )% | |||||||
Operating profit: |
||||||||||||||||
Same store operating profit |
$ | 1,885 | $ | 1,190 | $ | (695 | ) | (36.9 | )% | |||||||
Acquired operating profit |
486 | 530 | 44 | 9.1 | % | |||||||||||
Cemetery trust earnings |
1,121 | 983 | (138 | ) | (12.3 | )% | ||||||||||
Preneed cemetery finance charges |
372 | 335 | (37 | ) | (9.9 | )% | ||||||||||
Total |
$ | 3,864 | $ | 3,038 | $ | (826 | ) | (21.4 | )% | |||||||
- 27 -
Nine Months Ended | ||||||||||||||||
September 30, | Change | |||||||||||||||
2010 | 2011 | Amount | % | |||||||||||||
Revenues: |
||||||||||||||||
Same store operating revenue |
$ | 25,702 | $ | 24,583 | $ | (1,119 | ) | (4.4 | )% | |||||||
Acquired operating revenue |
4,758 | 5,003 | 245 | 5.1 | % | |||||||||||
Cemetery trust earnings |
3,369 | 3,872 | 503 | 14.9 | % | |||||||||||
Preneed cemetery finance charges |
1,203 | 1,024 | (179 | ) | (14.9 | )% | ||||||||||
Total |
$ | 35,032 | $ | 34,482 | $ | (550 | ) | (1.6 | )% | |||||||
Operating profit: |
||||||||||||||||
Same store operating profit |
$ | 5,629 | $ | 5,819 | $ | 190 | 3.4 | % | ||||||||
Acquired operating profit |
1,369 | 1,607 | 238 | 17.4 | % | |||||||||||
Cemetery trust earnings |
3,369 | 3,872 | 503 | 14.9 | % | |||||||||||
Preneed cemetery finance charges |
1,203 | 1,024 | (179 | ) | (14.9 | )% | ||||||||||
Total |
$ | 11,570 | $ | 12,322 | $ | 752 | 6.5 | % | ||||||||
- 28 -
Cash and liquid investments at beginning of year |
$ | 1.3 | ||
Cash flow from operations |
25.3 | |||
Acquisitions |
(10.3 | ) | ||
Paydown on the bank credit facility |
(0.6 | ) | ||
Maintenance capital expenditures |
(5.4 | ) | ||
Dividends on common stock |
(0.9 | ) | ||
Repurchase of convertible junior subordinated debentures |
(2.2 | ) | ||
Growth capital expenditures funeral homes |
(0.7 | ) | ||
Growth capital expenditures cemeteries |
(1.7 | ) | ||
Payment of loan origination fees |
(0.3 | ) | ||
Others, net |
(0.2 | ) | ||
Cash at September 30, 2011 |
$ | 4.3 | ||
- 29 -
- 30 -
10.1
|
Credit Agreement, dated August 11, 2011 and effective as of August 12, 2011, by and among the Company and Wells Fargo Bank, N.A. (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form-8 filed August 16, 2011 (film no. 111040855)) | |
10.2
|
Employment Agreement, dated September 1, 2011, between the Company and L. William Heiligbrodt (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed September 15, 2011) | |
*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 Terry E. Sanford in satisfaction of Section 302 of the Sarbanes-Oxley Act of 2002 | |
*32
|
Certification of Periodic Financial Reports by Melvin C. Payne and Terry E. Sanford in satisfaction of Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. Section 1350 | |
**101
|
Interactive Data Files |
* | Filed herewith | |
** | Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability. |
- 31 -
CARRIAGE SERVICES, INC. |
||||
Date: November 7, 2011 | /s/ Terry E. Sanford | |||
Terry E. Sanford | ||||
Executive Vice President and Chief Financial Officer |
||||
10.1
|
Credit Agreement, dated August 11, 2011 and effective as of August 12, 2011, by and among the Company and Wells Fargo Bank, N.A. (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form-8 filed August 16, 2011 (film no. 111040855)) | |
10.2
|
Employment Agreement, dated September 1, 2011, between the Company and L. William Heiligbrodt (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed September 15, 2011) | |
*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 Terry E. Sanford in satisfaction of Section 302 of the Sarbanes-Oxley Act of 2002 | |
*32
|
Certification of Periodic Financial Reports by Melvin C. Payne and Terry E. Sanford in satisfaction of Section 906 of the Sarbanes-Oxley Act of 2002 and 18 U.S.C. Section 1350 | |
**101
|
Interactive Data Files |
* | Filed herewith | |
** | Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, or Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability. |
Three months | Nine months | |||||||||||||||
ended September 30, | ended September 30, | |||||||||||||||
2010 | 2011 | 2010 | 2011 | |||||||||||||
Net income |
$ | 859 | $ | 792 | $ | 5,932 | $ | 6,679 | ||||||||
Net income allocated to non-vested share awards |
(36 | ) | (26 | ) | (230 | ) | (291 | ) | ||||||||
Preferred stock dividend |
(4 | ) | (5 | ) | (11 | ) | (12 | ) | ||||||||
Undistributed earnings available to common
stockholders |
$ | 819 | $ | 761 | $ | 5,691 | $ | 6,376 | ||||||||
Weighted average number of common shares
outstanding for basic EPS computation |
17,520 | 18,414 | 17,549 | 18,339 | ||||||||||||
Effect of dilutive securities: |
||||||||||||||||
Stock options |
206 | 47 | 226 | 42 | ||||||||||||
Weighted average number of common and common
equivalent shares outstanding for diluted EPS
computation |
17,726 | 18,461 | 17,775 | 18,381 | ||||||||||||
Basic earnings per common share: |
||||||||||||||||
Undistributed earnings |
$ | 0.05 | $ | 0.04 | $ | 0.33 | $ | 0.35 | ||||||||
Allocation of earnings to non-vested share awards |
| | 0.01 | 0.02 | ||||||||||||
Total |
$ | 0.05 | $ | 0.04 | $ | 0.34 | $ | 0.37 | ||||||||
Diluted earnings per common share: |
||||||||||||||||
Undistributed earnings |
$ | 0.05 | $ | 0.04 | $ | 0.32 | $ | 0.35 | ||||||||
Allocation of earnings to non-vested share awards |
| | 0.01 | 0.02 | ||||||||||||
Total |
$ | 0.05 | $ | 0.04 | $ | 0.33 | $ | 0.37 | ||||||||
1. | I have reviewed this report on Form 10-Q of Carriage Services, Inc.; | ||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Dated: November 7, 2011 | /s/ Melvin C. Payne | |||
Melvin C. Payne | ||||
Chairman of the Board and Chief Executive Officer |
1. | I have reviewed this report on Form 10-Q of Carriage Services, Inc.; | ||
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; | ||
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; | ||
4. | The registrants other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a. | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | ||
b. | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | ||
c. | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and | ||
d. | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a. | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and | ||
b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Dated: November 7, 2011 | /s/ Terry E. Sanford | |||
Terry E. Sanford | ||||
Executive Vice President and Chief Financial Officer |
Dated: November 7, 2011 | /s/ Melvin C. Payne | |||
Melvin C. Payne | ||||
Chairman of the Board and Chief Executive Officer |
||||
/s/ Terry E. Sanford | ||||
Terry E. Sanford | ||||
Executive Vice President and Chief Financial Officer |
||||
Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data | Sep. 30, 2011 | Dec. 31, 2010 |
---|---|---|
Current assets: | ||
Accounts receivable, allowance for bad debts | $ 822 | $ 979 |
Preneed receivables, allowance for bad debts | 1,774 | 1,933 |
Accumulated depreciation of property, plant and equipment | $ 76,223 | $ 71,700 |
Stockholders' equity: | ||
Common stock, par value | $ 0.01 | $ 0.01 |
Common stock, shares authorized | 80,000,000 | 80,000,000 |
Common stock, shares issued | 21,546,000 | 21,311,000 |
Treasury stock, shares | 3,108,000 | 3,153,000 |
Subsequent Events | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS |
18. SUBSEQUENT EVENTS
On October 20, 2011 the Company acquired a funeral home business in Northeast Kentucky for
$2.5 million. In the acquisition, the Company acquired substantially all the assets and assumed
certain operating liabilities, including obligations associated with existing preneed contracts.
|
Document and Entity Information (USD $) In Millions, except Share data | 9 Months Ended | ||
---|---|---|---|
Sep. 30, 2011 | Nov. 02, 2011 | Jun. 30, 2010 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | CARRIAGE SERVICES INC | ||
Entity Central Index Key | 0001016281 | ||
Document Type | 10-Q | ||
Document Period End Date | Sep. 30, 2011 | ||
Amendment Flag | false | ||
Document Fiscal Year Focus | 2011 | ||
Document Fiscal Period Focus | Q3 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Accelerated Filer | ||
Entity Public Float | $ 70.0 | ||
Entity Common Stock, Shares Outstanding | 18,447,452 |
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Receivables From Preneed Funeral Trusts | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables From Preneed Funeral Trusts [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
RECEIVABLES FROM PRENEED FUNERAL TRUSTS |
7. 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. As of
September 30, 2011, receivables from preneed funeral trusts was as follows (in thousands):
|
Commitments and Contingencies | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Commitments and Contingencies [Abstract] | |
COMMITMENTS AND CONTINGENCIES |
12. COMMITMENTS AND CONTINGENCIES
Litigation
We are a party to various litigation matters and proceedings. For each of our outstanding
legal matters, we evaluate the merits of the case, our exposure to the matter, possible legal or
settlement strategies, and the likelihood of an unfavorable outcome. We intend to defend ourselves
in the lawsuits described herein. If we determine that an unfavorable outcome is probable and can
be reasonably estimated, we establish the necessary accruals. We hold certain insurance policies
that may reduce cash outflows with respect to an adverse outcome of certain of these litigation
matters.
Leathermon, et al. v. Grandview Memorial Gardens, Inc., et al., United States District Court,
Southern District of Indiana, Case No. 4:07-cv-137. On August 17, 2007, five plaintiffs filed a
putative class action against the current and past owners of Grandview Cemetery in Madison,
Indiana, including the Carriage subsidiaries that owned the cemetery from January 1997 until
February 2001, on behalf of all individuals who purchased cemetery and burial goods and services at
Grandview Cemetery. Plaintiffs claim that the cemetery owners performed burials negligently,
breached Plaintiffs’ contracts, and made misrepresentations regarding the cemetery. The Plaintiffs
also allege that the claims occurred prior, during and after the Company owned the cemetery. On
October 15, 2007, the case was removed from Jefferson County Circuit Court, Indiana to the Southern
District of Indiana. On April 24, 2009, shortly before Defendants had been scheduled to file their
briefs in opposition to Plaintiffs’ motion for class certification, Plaintiffs moved to amend their
complaint to add new class representatives and claims, while also seeking to abandon other claims.
The Company, as well as several other Defendants, opposed Plaintiffs’ motion to amend their
complaint and add parties. In April 2009, two Defendants moved to disqualify Plaintiffs’ counsel
from further representing Plaintiffs in this action. On March 31, 2010, the Court granted the
Defendants’ motion to disqualify Plaintiffs’ counsel. In that order, the Court gave Plaintiffs 60
days within which to retain new counsel. On May 6, 2010, Plaintiffs filed a petition for writ of
mandamus with the Seventh Circuit Court of Appeals seeking relief from the trial court’s order of
disqualification of counsel. On May 19, 2010, the Defendants responded to the petition of
mandamus. On July 8, 2010, the Seventh Circuit denied Plaintiffs’ petition for writ of mandamus.
Thus, pursuant to the trial court’s order, Plaintiffs were given 60 days from July 8, 2010 in which
to retain new counsel to prosecute this action on their behalf. Plaintiffs retained new counsel
and the trial Court granted the newly retained Plaintiffs’ counsel 90 days to review the case and
advise the Court whether or not Plaintiffs would seek leave to amend their complaint to add and/or
change the allegations as are currently stated therein and whether or not they would seek leave to
amend the proposed class representatives for class certification. Plaintiffs moved for leave to
amend both the class representatives and the allegations stated within the complaint. Defendants
filed oppositions to such amendments. The Court issued an order permitting the Plaintiffs to
proceed with amending the class representatives and a portion of their claims; however, certain of
Plaintiffs’ claims have been dismissed. Discovery in this matter will now proceed. Carriage
intends to defend this action vigorously. Because the lawsuit is in its preliminary stages, we are
unable to evaluate the likelihood of an unfavorable outcome to the Company or to estimate the
amount or range of any potential loss, if any, at this time.
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Acquisitions | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Acquisitions [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITIONS |
3. ACQUISITIONS
Our growth strategy includes the execution of our Strategic Acquisition Model. The goal of
that model is to build concentrated groups of businesses in ten to fifteen strategic markets. We
assess acquisition candidates using six strategic ranking criteria and to differentiate the price
we are willing to pay. Those criteria are:
During the third quarter of 2011, the Company completed two acquisitions. The consideration
paid for those businesses was $5.2 million in cash. The Company acquired substantially all the
assets and assumed certain operating liabilities, including obligations associated with existing
preneed contracts of a funeral business in Oklahoma. The second acquisition was a funeral business
in California in which the Company is leasing the funeral home facilities for approximately
$142,000 annually. The assets and liabilities were recorded at fair value and included goodwill.
The results of the acquired businesses are included in the Company’s results from the date of
acquisition. Selected information on the acquisitions follows (in millions):
The effect of the acquisitions on the Consolidated Balance Sheets at September 30, 2011 was as
follows (in thousands):
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Cemetery Perpetual Care Trust Investments | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Cemetery Perpetual Care Trust Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CEMETERY PERPETUAL CARE TRUST INVESTMENTS |
9. CEMETERY PERPETUAL CARE TRUST INVESTMENTS
Cemetery Care trusts’ corpus on the Consolidated Balance Sheets represent the corpus of those
trusts plus undistributed income. The components of Cemetery Care trusts’ corpus as of December
31, 2010 and September 30, 2011 are as follows (in thousands):
The Company is required by various state laws to pay a portion of the proceeds from the sale
of cemetery property interment rights into perpetual care trust funds. The following table
reflects the cost and fair market values associated with the trust investments held in perpetual
care trust funds at September 30, 2011 (in thousands). The Company determines whether or not the
assets in the cemetery perpetual care trusts have an other-than-temporary impairment on a
security-by-security basis. This assessment is made based upon a number of criteria, including the
length of time a security has been in a loss position, changes in market conditions and concerns
related to the specific issuer. If a loss is considered to be other-than-temporary, the cost basis
of the security is adjusted downward to its fair market value. Any reduction in the cost basis due
to an other-than-temporary impairment is recorded as a reduction to Care trusts’ corpus.
The estimated maturities of the fixed income securities included above are as follows (in
thousands):
Perpetual care trust investment security transactions recorded in Interest income and other,
net in the Consolidated Statements of Operations (unaudited) for the three and nine months ended
September 30, 2010 and 2011 are as follows (in thousands):
Perpetual care trust investment security transactions recorded in Cemetery revenue for the
three and nine months ended September 30, 2010 and 2011 are as follows (in thousands):
Purchases and sales of investments in the perpetual care trusts were as follows (in
thousands):
|
Related Party Transactions | 9 Months Ended |
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Sep. 30, 2011 | |
Related Party Transactions [Abstract] | |
RELATED PARTY TRANSACTIONS |
14. RELATED PARTY TRANSACTIONS
A member of the Company’s Board of Directors is a key member of management and Chief
Investment Officer of an otherwise unrelated company that holds $7.3 million of the Company’s 7⅞%
Senior Notes for investment purposes.
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Fair Value Measurements | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Measurements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS |
10. FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received from the sale of an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date
applicable for items that are recognized or disclosed at fair value in the financial statements on
a recurring basis. We disclose the extent to which fair value is used to measure financial assets
and liabilities, the inputs utilized in calculating valuation measurements, and the effect of the
measurement of significant unobservable inputs on earnings, or changes in net assets, as of the
measurement date.
The Company evaluated its assets and liabilities for those financial assets and liabilities
that met the criteria of the disclosure requirements and fair value framework. The Company
identified investments in fixed income securities, common stock and mutual funds presented within
the preneed and perpetual trust investments categories on the Consolidated Balance Sheets as having
met such criteria. The following three-level valuation hierarchy based upon the transparency of
inputs is utilized in the measurement and valuation of financial assets or liabilities as of the
measurement date:
The Company accounts for its investments as available-for-sale and measures them at fair
value under standards of financial accounting and reporting for investments in equity instruments
that have readily determinable fair values and for all investments in debt securities.
The following table summarizes the fair value hierarchy of the valuation techniques
utilized by us to determine the fair values as of September 30, 2011 (in thousands). Certain fixed
income and other securities are reported at fair value using Level 2 inputs. For these securities,
the Company uses pricing services and dealer quotes. As of September 30, 2011, the Company did not
have any liabilities measured at fair value.
There were no significant transfers between Levels 1 and 2 for the three and nine months ended
September 30, 2011.
|
Contracts Secured by Insurance | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Contracts Secured by Insurance [Abstract] | |
CONTRACTS SECURED BY INSURANCE |
8. 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 beneficiary’s obligations under the
preneed contract for services and merchandise. Preneed funeral contracts secured by insurance
totaled $205.0 million and $214.7 million at December 31, 2010 and September 30, 2011,
respectively, and are not included in the Company’s Consolidated Balance Sheets.
|
Basis of Presentation and Summary of Significant Accounting Policies | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Basis of Presentation and Summary of Significant Accounting Policies [Abstract] | |
BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
Carriage Services, Inc. (“Carriage”, the “Company”, “we”, “us” or “our”) is a leading provider
of deathcare services and merchandise in the United States. As of September 30, 2011, the Company
owned and operated 155 funeral homes in 25 states and 33 cemeteries in 12 states.
Principles of Consolidation
The accompanying Consolidated Financial Statements include the Company and its subsidiaries.
All significant intercompany balances and transactions have been eliminated.
Interim Condensed Disclosures
The information for the three and nine month periods ended September 30, 2010 and 2011 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 as of and for
the interim periods presented. 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, 2010 and should be read in conjunction
therewith.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.
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 our estimates and judgments, including those related to revenue
recognition, realization of accounts receivable, goodwill, 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.
Business Combinations
Tangible and intangible assets acquired and liabilities assumed are recorded at fair value and
goodwill is recognized for any difference between the price of the acquisition and fair value. We
customarily estimate related transaction costs known at closing. To the extent that information
not available to us at the closing date subsequently becomes available during the allocation
period, we may adjust goodwill, assets, or liabilities associated with the acquisition.
Acquisition related costs are recognized separately from the acquisition and are expensed as
incurred.
During the third quarter of 2010, the Company acquired a funeral home business in Huntington
Beach, California. During the third quarter of 2011, the Company completed two funeral home
acquisitions, one located in Duncan, Oklahoma and the other in Modesto, California. See Note 3 to the Consolidated
Financial Statements herein for further information on the 2011 acquisitions.
Stock Plans and Stock-Based Compensation
The Company has stock-based employee and director compensation plans in the form of restricted
stock, performance units, stock options and employee stock purchase plans, which are described in
more detail in Note 17 to the Consolidated Financial Statements in our Annual Report on Form 10-K
for the year ended December 31, 2010. The Company recognizes compensation expense in an amount
equal to the fair value of the share-based awards issued over the period of vesting. Fair value is
determined on the date of the grant. The fair value of options or awards containing options is
determined using the Black-Scholes valuation
model. See Note 13 to the Consolidated Financial Statements included herein for additional
information on the Company’s stock-based compensation plans.
Computation of Earnings Per Common Share
Basic earnings per share are computed using the weighted average number of common shares
outstanding during the period. Diluted earnings per share are computed using the weighted average
number of common and dilutive common equivalent shares outstanding during the period. Dilutive
common equivalent shares consist of stock options.
Share-based awards that contain nonforfeitable rights to dividends or dividend equivalents,
whether paid or unpaid, are recognized as participating securities and included in the computation
of both basic and diluted earnings per share. Our grants of restricted stock awards to our
employees and directors are considered participating securities and we have prepared our earnings
per share calculations to include outstanding unvested restricted stock awards in both the basic
and diluted weighted average shares outstanding calculation. See Exhibit 11.1 to this Quarterly
Report on Form 10-Q for the computation of per share earnings.
Preneed Funeral and Cemetery Trust Funds
The Company’s preneed and perpetual care trust funds are reported in accordance with the
principles of consolidating Variable Interest Entities (“VIEs”). In the case of preneed trusts,
the customers are the legal beneficiaries. In the case of perpetual care trusts, the Company does
not have a right to access the corpus in the perpetual care trusts. For these reasons, the Company
has recognized financial interests of third parties in the trust funds in our financial statements
as Deferred preneed funeral and cemetery receipts held in trust and Care trusts’ corpus. The
investments of such trust funds are classified as available-for-sale and are reported at fair
market value; therefore, the unrealized gains and losses, as well as accumulated and undistributed
income and realized gains and losses are recorded to Deferred preneed funeral and cemetery receipts
held in trust and Care trusts’ corpus in the Company’s Consolidated Balance Sheets. The Company’s
future obligations to deliver merchandise and services are reported at estimated settlement
amounts. Preneed funeral and cemetery trust investments are reduced by the trust investment
earnings that we have been allowed to withdraw in certain states prior to maturity. These
earnings, along with preneed contract collections not required to be placed in trust, are recorded
in Deferred preneed funeral revenue and Deferred preneed cemetery revenue until the service is
performed or the merchandise is delivered.
In accordance with respective state laws, the Company is required to deposit a specified
amount into perpetual and memorial care trust funds for each interment/entombment right and
memorial sold. Income from the trust funds is distributed to Carriage and used to provide care and
maintenance for the cemeteries and mausoleums. Such trust fund income is recognized as revenue
when realized by the trust and distributable to the Company. The Company is restricted from
withdrawing any of the principal balances of these funds.
An enterprise is required to perform an analysis to determine whether the enterprise’s
variable interest(s) give it a controlling financial interest in a VIE. This
analysis identifies the primary beneficiary of a VIE as the enterprise that has both the power to
direct the activities of a VIE that most significantly impact the entity’s economic performance and
the obligation to absorb losses of the entity that could potentially be significant to the VIE or
the right to receive benefits from the entity that could potentially be significant to the VIE.
The Company’s analysis continues to support its position as the primary beneficiary in certain of
our funeral and cemetery trust funds.
Fair Value Measurements
We define fair value as the price that would be received in the sale of an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date
for items that are recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). We disclose the extent to which fair value is used to measure financial
assets and liabilities, the inputs utilized in calculating valuation measurements, and the effect
of the measurement of significant unobservable inputs on earnings, or changes in net assets, as of
the measurement date. Additional required disclosures are provided in
Note 10 to the Consolidated
Financial Statements. The fair value disclosures to disclose transfers in and out of Levels 1 and
2 and the gross presentation of purchases, sales, issuances and settlements in the Level 3
reconciliation of the three-tier fair value hierarchy are also presented herein in Note 10 to the
Consolidated Financial Statements. The Company currently does not have any assets that have fair
values determined by Level 3 inputs and no liabilities measured at fair value. We have not elected
to measure any additional financial instruments and certain other items at fair value that are not
currently required to be measured at fair value.
To determine the fair value of assets and liabilities in an environment where the volume and
level of activity for the asset or liability have significantly decreased, the exit price is used
as the fair value measurement. For the three months ended September 30, 2011, we did
not incur significant decreases in the volume or level of activity of any asset or liability. The
Company considers an impairment of debt and equity securities other-than-temporary unless (a) the
investor has the ability and intent to hold an investment and (b) evidence indicating the cost of
the investment is recoverable before the Company is more
likely than not required to sell the investment. If impairment is indicated, then an adjustment will be made to reduce the carrying
amount to fair value. As of September 30, 2011, no impairment has been identified.
In the ordinary course of business, we are typically exposed to a variety of market risks.
Currently, these are primarily related to changes in fair market values related to outstanding
debts and changes in the values of securities associated with the preneed and perpetual care
trusts. Management is actively involved in monitoring exposure to market risk and developing and
utilizing appropriate risk management techniques when appropriate and when available for a
reasonable price. Our 7⅞% Senior Notes were issued to the public at par in January 2005 and are
carried at a cost of $130 million. At September 30, 2011, these securities were typically trading
at a price of approximately $98.0, indicating a fair market value of approximately $127.4 million.
Our convertible junior subordinated debentures, payable to Carriage Services Capital Trust (the
“Trust”), pay interest at the fixed rate of 7% and are carried on our Consolidated Balance Sheets
at a cost of approximately $90 million. The fair value of these securities is estimated to be
approximately $79 million at September 30, 2011 based on available broker quotes of the
corresponding preferred securities issued by the Trust.
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. 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.
The Company analyzes tax benefits for uncertain tax positions and how they are to be
recognized, measured, and derecognized in financial statements; provides certain disclosures of
uncertain tax matters; and specifies how reserves for uncertain tax positions should be classified
on the Consolidated Balance Sheets. The Company has reviewed its income tax positions and
identified certain tax deductions, primarily related to business acquisitions that are not certain.
Our policy with respect to potential penalties and interest is to record them as “Other” expense
and “Interest” expense, respectively. The entire balance of unrecognized tax benefits, if
recognized, would affect the Company’s effective tax rate. The Company does not anticipate a
significant increase or decrease in its unrecognized tax benefits during the next twelve months.
|
Goodwill | 9 Months Ended | |||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||
Goodwill [Abstract] | ||||||||||||||||||||||||||||||||||||
GOODWILL |
4. GOODWILL
Many of the former owners and staff of 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. The excess of the purchase price over the fair value of net
identifiable assets acquired, as determined by management in business acquisition transactions
accounted for as purchases, is recorded as goodwill.
The following table presents the changes in goodwill in the accompanying Consolidated Balance
Sheets (in thousands):
Changes in previous estimates are related to adjustments for inventory values.
|
Preneed Trust Investments | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preneed Trust Investments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRENEED TRUST INVESTMENTS |
5. PRENEED TRUST INVESTMENTS
Preneed Cemetery Trust Investments
Preneed cemetery trust investments represent trust fund assets that the Company will withdraw
when the merchandise or services are provided. The components of preneed cemetery trust
investments in our Consolidated Balance Sheets at December 31, 2010 and September 30, 2011 are as
follows (in thousands):
Upon cancellation of a preneed 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.
The cost and fair market values associated with preneed cemetery trust investments at
September 30, 2011 are detailed below (in thousands). The Company determines whether or not the
assets in the preneed cemetery trusts have an other-than-temporary impairment on a
security-by-security basis. This assessment is made based upon a number of criteria, including the
length of time a security has been in a loss position, changes in market conditions and concerns
related to the specific issuer. If a loss is considered to be other-than-temporary, the cost basis
of the security is adjusted downward to its fair market value. Any reduction in the cost basis due
to an other-than-temporary impairment is recorded in Deferred preneed cemetery receipts held in
trust. There will be no impact on earnings unless and until such time that this asset is withdrawn
from the trust in accordance with state regulations at an amount that is less than its original
basis.
The estimated maturities of the fixed income securities included above are as follows (in
thousands):
Preneed cemetery trust investment security transactions recorded in Interest income and other,
net in the Consolidated Statements of Operations (unaudited) for the three and nine months ended
September 30, 2010 and 2011 are as follows (in thousands):
Purchases and sales of investments in the preneed cemetery trusts were as follows (in
thousands):
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. Preneed funeral contracts are secured by
funds paid by the customer to the Company. Preneed funeral trust investments are reduced by the
trust 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 components of preneed funeral trust investments in our Consolidated
Balance Sheets at December 31, 2010 and September 30, 2011 are as follows (in thousands):
Upon cancellation of a preneed funeral 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.
The cost and fair market values associated with preneed funeral trust investments at September
30, 2011 are detailed below (in thousands). The Company determines whether or not the assets in
the preneed funeral trusts have an other-than-temporary impairment on a security-by-security basis.
This assessment is made based upon a number of criteria including the length of time a security
has been in a loss position, changes in market conditions and concerns related to the specific
issuer. If a loss is considered to be other-than-temporary, the cost basis of the security is
adjusted downward to its fair market value. Any reduction in the cost basis due to an
other-than-temporary impairment is recorded as a reduction to Deferred preneed funeral receipts
held in trust. There will be no impact on earnings unless and until such time that this asset is
withdrawn from the trust in accordance with state regulations at an amount that is less than its
original basis.
The estimated maturities of the fixed income securities included above are as follows (in
thousands):
Preneed funeral trust investment security transactions recorded in Interest income and other,
net in the Consolidated Statements of Operations (unaudited) for the three and nine months ended
September 30, 2010 and 2011 are as follows (in thousands):
Purchases and sales of investments in the preneed funeral trusts were as follows (in
thousands):
|
Stock-Based Compensation | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock-Based Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
STOCK-BASED COMPENSATION |
13. STOCK-BASED COMPENSATION
Stock Options and Employee Stock Purchase Plan
During the third quarter of 2011, 3,000 stock options were awarded to an employee. The value
of these options was $15,630. The stock options vest in 33⅓% increments over a three
year period and expire August 10, 2021. As of September 30, 2011, 628,000 stock options
are outstanding and 338,000 stock options remain unvested.
For the third quarter of 2011, employees purchased a total of 23,998 shares of common stock
through the employee stock purchase plan (“ESPP”) at a weighted average price of $4.18 per share.
The Company recorded pre-tax stock-based compensation expense for the ESPP and for stock options
totaling $75,000 and $100,000 for the three months ended
September 30, 2010 and 2011, respectively,
and $199,000 and $272,000 for the nine months ended September 30, 2010 and 2011, respectively.
The fair value of the right (option) to purchase shares under the ESPP is estimated on the
date of grant (January 1, 2011) associated with the four quarterly purchase dates using the
following assumptions:
Expected volatilities are based on the historical volatility during the previous twelve months
of the underlying common stock. The risk-free rate for the quarterly purchase periods is based on
the U.S. Treasury yields in effect at the time of grant (January 1). The expected life of the ESPP
grants represents the calendar quarters from the grant date (January 1) to the purchase date (end
of each quarter).
Common Stock Grants
The Company, from time to time, issues shares of restricted common stock to certain
officers, directors and key employees of the Company from its stock benefit plans. The restricted
stock issued to officers and key employees vest in either 25% or 33⅓% increments over four or three
year periods, respectively. On September 1, 2011, L. William Heiligbrodt was appointed to serve as
a full-time executive officer as the Vice Chairman of the Board of Directors of the Company. In
connection with his appointment, Mr. Heiligbrodt was granted 22,500 shares of common stock valued
at $130,725 which vest over a three year period. Related to the vesting of restricted stock awards
previously awarded to our officers and employees, the Company recorded $366,000 and $330,000 in
pre-tax compensation expense, included in general, administrative and other expenses, for the three
months ended September 30, 2010 and 2011, respectively, and $977,000 and $1,081,000 in pre-tax
compensation expense for the nine months ended September 30, 2010 and 2011, respectively.
Effective March 22, 2010, and as subsequently revised on July 14, 2010, the Board of Directors
approved a Director Compensation Policy in which the directors no longer have an option to elect to
receive all or a portion of their fees in stock. Consequently, all meeting fees after March 22,
2010 have been paid in cash. A new director joined the Board of Directors during the third quarter of
2011, at which time he was granted 19,193 shares valued in total at $100,000. One-half of those
shares vested immediately; the remainder vest over two years. The Company recorded $66,000 and
$160,000 in pre-tax compensation expense, included in general, administrative and other expenses,
for the three months ended September 30, 2010 and 2011, respectively, and $392,000 and $503,000 in
pretax compensation expense for the nine months ended September 30, 2010 and 2011, respectively,
related to the director fees, annual retainers and stock compensation amortization.
As of September 30, 2011, the Company had $2.1 million of total unrecognized compensation
costs related to unvested restricted stock awards, which are expected to be recognized over a
weighted average period of approximately 1.8 years.
Cash Dividends
On
May 17, 2011, our Board of Directors approved the initiation of a quarterly cash dividend
policy for our common stock. The Board declared a quarterly dividend of $0.025 per share, totaling
approximately $460,000, which was paid on September 1, 2011 to
record holders of our common stock as of
August 12, 2011. For the nine months ended September 30, 2011, the Company has declared dividends
of $0.05 per share, totaling $920,000. The Company has a dividend reinvestment program so that
stockholders may elect to reinvest their dividends into additional shares of the Company’s common
stock.
|
Preneed Cemetery Receivables | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Preneed Cemetery Receivables [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
PRENEED CEMETERY RECEIVABLES |
6. PRENEED CEMETERY RECEIVABLES
Preneed sales of cemetery interment rights and related products and services are usually
financed through interest-bearing installment sales contracts, generally with terms of up to five
years with such interest income reflected as Preneed Cemetery Finance Charges. In substantially
all cases, we receive an initial down payment at the time the contract is signed. The interest
rates generally range between 9.5% and 12%. Occasionally, we have offered zero percent interest
financing to promote sales for limited-time offers. At September 30, 2011, the balance of preneed
receivables for cemetery interment rights and for merchandise and services was $18.3 million and
$9.6 million, respectively, of which $8.2 million is presented in Accounts Receivable and $19.7
million is presented in Preneed Receivables.
The Company determines an allowance for customer cancellations and refunds on contracts in
which revenue has been recognized on sales of cemetery interment rights. We reserve 100% of the
receivables on contracts in which the revenue has been recognized and payments are 120 days past
due or more, which was approximately 1.9% of the total receivables on recognized sales at September
30, 2011. An allowance is recorded at the date that the contract is executed and periodically
adjusted thereafter based upon actual collection experience at the business level. For the nine
months ended September 30, 2011, changes in the allowance for contract cancellations was as follows (in
thousands):
The Company has a collections policy where past due notifications are sent to the customer
beginning at 15 days past due and thereafter periodically until 90 days past due. Any items on
contracts that are past due 120 days are sent to a third-party collector.
The aging of past due financing receivables as of September 30, 2011 is as follows (in
thousands):
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Supplemental Disclosure of Statement of Operations Information | 9 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Supplemental Disclosure of Statement of Operations Information [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUPPLEMENTAL DISCLOSURE OF STATEMENT OF OPERATIONS INFORMATION |
16. SUPPLEMENTAL DISCLOSURE OF STATEMENT OF OPERATIONS INFORMATION
The following information is supplemental disclosure for the Consolidated Statements of
Operations (in thousands):
The costs of revenues, for purposes of this supplemental disclosure, include only field costs
and expenses that are directly allocable between the goods, services and financial categories in
the funeral and cemetery segments. Depreciation and amortization and regional and unallocated
funeral and cemetery costs are not included in this disclosure.
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Supplemental Disclosure of Cash Flow Information | 9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2011 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Disclosure of Cash Flow Information [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |
17. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
The following information is supplemental disclosure for the Consolidated Statements of Cash
Flows (in thousands):
|
Recently Issued Accounting Standards | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Recently Issued Accounting Standards [Abstract] | |
RECENTLY ISSUED ACCOUNTING STANDARDS |
2. RECENTLY ISSUED ACCOUNTING STANDARDS
Allowance for Credit Losses of Financing Receivables
In July 2010, new guidance was issued which increased the disclosure requirements about the
credit quality of financing receivables and the allowance for credit losses. The intent of the
disclosure is to provide additional information about the nature of credit risks inherent in our
financing receivables, how credit risk is analyzed and assessed when determining the allowance for
credit losses, and the reasons for the change in the allowance for credit losses. The disclosures
related to period-end information were required for annual reporting periods ending after December
15, 2010, and thus effective for the Company at December 31, 2010. Disclosures of activity that
occurs during the reporting period are required for interim periods beginning after December 15,
2010, and thus was effective for the Company for the period beginning January 1, 2011. The
additional required disclosures are provided in Note 6 to the Consolidated Financial Statements.
Goodwill Impairment Testing
In September 2011, new guidance was issued to modify the method used to perform the first step
of the two step process for the annual goodwill impairment test. The guidance permits an entity to
first assess qualitative factors to determine whether it is more-likely-than-not that the fair
value of a reporting unit is less than its carrying amount as a basis for determining whether it is
necessary to perform the two-step goodwill impairment test. The more-likely-than-not threshold is
defined as having a likelihood of more than 50 percent. The guidance is effective for annual and
interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011.
Early adoption is permitted, including for annual and interim goodwill impairment tests
performed as of a date before September 15, 2011, if an entity’s financial statements for the most recent
annual or interim period have not yet been issued. The Company adopted this update early for its
annual impairment testing as of August 31, 2011.
Pro Forma Information for Business Combinations
In December 2010, new guidance was issued for disclosing supplementary pro forma information
for business combinations that are material on an individual or aggregate basis. The guidance
specifies that if a public entity presents comparative financial statements, the entity should
disclose revenue and earnings of the combined entity as though the business combination(s) that
occurred during the current year had occurred as of the beginning of the comparable prior annual
reporting period only. The guidance also expands the supplemental pro forma disclosures to include
a description of the nature and amount of material, nonrecurring pro forma adjustments directly
attributable to the business combination included in the reported pro forma revenue and earnings.
This guidance is effective prospectively for business combinations for which the acquisition date
is on or after the beginning of the first annual reporting period beginning on or after December
15, 2010, and thus was effective for the Company for the period beginning January 1, 2011. The
adoption of this accounting standard update will apply to material business combinations and
is not expected to have a material impact on our Consolidated Financial Statements.
Fair Value Measurements
In May 2011, additional guidance was issued regarding how fair value measurements and
disclosures should be applied where it is already required or permitted under International
Financial Reporting Standards or United States Generally Accepted Accounting Principles. This new
guidance clarifies and aligns the existing application of fair value measurement guidance and
revises certain language. This guidance is effective for the first interim or annual period
beginning after December 15, 2011, thus effective for the Company for the period beginning January
1, 2012. The Company is currently evaluating the impact the adoption will have on its Consolidated
Financial Statements.
Comprehensive Income
In June 2011, new guidance was issued regarding the reporting of comprehensive income in the
financial statements. Entities will have the option to present the components of net income and
comprehensive income in either a single continuous statement or two separate but consecutive
statements. This new guidance eliminates the option to report other comprehensive income and its
components in the statement of changes in stockholder’s equity. This guidance requires
retrospective application and is effective for fiscal years, and interim periods within those
years, beginning after December 15, 2011, thus effective for the Company for the period beginning
January 1, 2012. The Company is currently evaluating the impact, if any, the adoption will have on
its Consolidated Financial Statements.
|
Long-Term Debt | 9 Months Ended |
---|---|
Sep. 30, 2011 | |
Long-Term Debt [Abstract] | |
LONG-TERM DEBT |
11. LONG-TERM DEBT
The
Company has outstanding a principal amount of $130.0 million of 7⅞% unsecured Senior Notes,
due in 2015, with interest payable semi-annually. The Company had a
$40.0 million senior secured
revolving credit facility with a $20.0 million accordion feature that was to mature in November 2012
and was collateralized by all personal property and funeral home real property in certain states.
Effective August 11, 2011, the Company entered into a new secured revolving credit facility with
Wells Fargo Bank, N.A. which contains commitments for an aggregate of $60.0 million with an
accordion provision for up to an additional $15.0 million. The credit facility matures in October
2014 and under certain conditions may be extended to October 2016. The credit facility is
collateralized by the accounts receivable and all personal property of the Company. Borrowings
under the credit facility bear interest at either prime or LIBOR options. At September 30, 2011
the prime rate option was equivalent to 4.125% and the LIBOR margin was 1.875%. During the third
quarter of 2011, the Company recorded a charge of approximately $201,000 to write-off the remaining
unamortized fees on the prior credit facility. The fees related to
the new credit facility
were approximately $334,000 and are being amortized over the life of the facility.
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 our 7%
debentures issued in connection with the issuance of the Trust’s term income deferrable equity
securities (“TIDES”) 7% convertible preferred securities) have fully and unconditionally guaranteed
the Company’s obligations under the 7⅞% Senior Notes. Additionally, the Company does not currently
have any significant restrictions on its ability to receive dividends or loans from any subsidiary
guarantor under the 7⅞% Senior Notes. In August 2011, the Company repurchased 35,000 shares of
these TIDES for approximately $1,269,000 and recorded a gain of $481,000. The Company converted
and immediately cancelled these preferred shares at the current conversion rate of 2.4465 into
shares of common stock equal to 85,628 shares. No repurchases were made in the third quarter of
2010. For the nine months ended September 30, 2010, the Company had repurchased 17,850 shares of
TIDES for approximately $576,000 and recorded gains of $316,000. For the nine months ended
September 30, 2011, the Company has repurchased 61,742 shares of TIDES for approximately $2,241,000
and recorded gains totaling $846,000. At September 30, 2011, amounts outstanding under the
convertible junior subordinated debenture totaled $89.8 million.
The
Company was in compliance with the covenants contained in the
previous and new credit facilities, as applicable, and the
Senior Notes as of September 30, 2010 and 2011.
|
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