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TWST: What is Carriage Services?
Mr. Sanford: Carriage provides a complete range of funeral, cemetery, and
cremation services, and sells a wide variety of related products and
merchandise. Currently, we operate 131 funeral homes in 27 states, and 28
cemeteries in 11 states.
The company was founded in 1991. The company has grown almost exclusively
through acquisitions, the first occurring in 1992. Carriage went public in
August 1996. We moved the listing to the New York Stock Exchange in the spring
of 1998 in connection with a secondary offering of common stock. The period from
1992 through 1999 was a period of relatively rapid growth, characterized by a
frenzy of competition among the public death care companies in the industry to
acquire independent funeral homes and cemeteries. The consolidation models were
typically accretive and Wall Street rewarded that type of growth.
It has been a relatively fragmented industry and it continues to be today in
that approximately 80% of the funeral homes in the United States are still
independently owned, operating as family-owned businesses or are relatively
small companies.
Beginning in 2000 Carriage and the other public companies embarked on a
rationalization program because the companies picked up some businesses along
the way that just didn't really fit into the long-term strategic plans, and
because the companies had issued a lot of debt to acquire businesses. Some of
those were businesses that came in packages that were in geographic areas that
just don't work for us; for instance, in rural markets in which the demographics
are not growing in a death care company's favor. The industry went through a
period of selling off businesses, paying down debt and right-sizing the balance
sheet.
At this point, Carriage has completed that process and its balance sheet is in
good shape. We completed a senior note offering in early 2005, which took out
all the near-term maturities of our debt. Those notes are due in approximately
nine years. Carriage is currently positioned with excess cash and an unused line
of credit to begin a new phase of growth.
We operate in a decentralized manner. The managers in our funeral homes and
cemeteries have an earned autonomy to make business decisions as long as they
meet or exceed Carriage's business standards. We've developed a number of
standards for which we expect each of our businesses to meet or exceed in lieu
of budgets. Those standards include market share improvements, people standards
and financial performance metrics. Obviously, we want to grow our market share
in the communities we serve. Our employees are probably the most important
factor in the success of the business, and they also represent our single
largest expense category. The last category of the standards has to do with the
financial performance measures such as increasing the average price per funeral
service or interment that we provide to the public year-over-year, achieving
desired EBITDA levels, maintaining salaries and benefits below a certain
percentage of revenue. These help position each of our businesses to generate
both short-term and long-term growth. We implemented these standards
approximately two years ago and we are beginning to see very positive results in
two of our three regions.
Our plans for the future are to further the performance of the standards-based
operating model that we just referred to, and to grow through acquisitions. Our
acquisition focus will be toward fairly large businesses in growing demographic
areas. The focal size is somewhere around 300 services a year or greater. We are
trying to identify businesses in suburban markets that are growing, and when I
use the term suburban, we consider cities like Las Vegas and Phoenix in the
Southwest to be largely suburban. They must be experiencing a high degree of
growth and be attractive to senior citizens. We expect these to be primarily on
the West Coast and in the Southwest.
We also have interest in the East Coast as it relates to Florida, New England
and parts of the Atlantic Seaboard where we have a presence. We are also
interested in acquiring businesses that are in the same geographic areas in
which some of our successful firms currently operate, the idea being that we are
able to share best practices on a face-to-face basis and possibly share some of
the resources as we operate those businesses.
Tickers included in this excerpt: CSV
For more information call (212) 952 7433. The
Wall Street Transcript does not endorse any of the comments made by interviewees, and does
not make stock recommendations.
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