Carriage Services, Inc. · NYSE:CSV
Carriage Services — 2005 UBS Global Healthcare Services Conference
29 slides from Carriage Services's conference presentation, Feb 15, 2005
Slide 1: Carriage Services Conference
Carriage Services (NYSE: CSV} Conference
Slide 2: Forward-Looking Statements
d-Looking)S' The statements in this presentation that are not historical facts are forwardlooking statements made in reliance of the "safe arbor” protections provided under the Private Securities Litigation Reform Act of 1995, These statements may be accompanied by words that convey the Uncertainty
Slide 3: Management team
a Folinder off Carriage, CES since 1991 and charrman Mel Payne, Charman and ceo Gee ee EVP, GEO and Secretary of Carriage since September Joseph Saporito, EVP and CFO 2002, Prior to joining Carriage, IMr. Saporite was.a partner at Arthur Andersen for 15 years,
Slide 4: Industry Overview
Industry Overview
Slide 5: Landscape
Landscape ae See) ee EE Eee) ee [oye \enue SB pomm 263,952 16.8% 40% = A 127,964 15.9% 35% 71,934 33.2%” 37% | Industry margins are largely driven by product mix and operating efficiencies Source: Company slings and public documents (1) EBITDA equal net nceme from continuing operations plus Income t
Slide 6: Highly fragmented industry
Highly fragmented industry: — Approximately 22,000 funeral homes Companies and 10,000 cemeteries in the U.S. 20% — Dominated by independent operators — Death care businesses traditionally transferred|to successive family, generations, but this trend is diminishing tependente 20% Public companies are
Slide 7: National death rate decline and historical births
= National death rate declined year-over-year from 2001 to 2003, the first back to back to back decline since the mid-1970s = Decrease in births from 1921 — 1936 may have contributed to decline = Impact of pact birth decease may have run its course? Historical Births & Possible Death Trends *Assumes
Slide 8: Aging U.S. population expected to increase death rate
= he U.S, population and “batsy boom’ generation are aging, leading to an expected future increase i the deat rate = Historically, approximately 68% of deatiis occur at age 65 andiolder = Number of people age 65 and over |s expected to increase from 36.7 million in 2005. to.40,2 million in 2010 and
Slide 9: Cremation as percentage of total funerals increasing
(Cremation as 4 percentage of total funerals increasing and trend will continue — Higher margin versus burial services, but lower revenue per service — Carrlage has developed innovative, high quality cremation packages to offer Client families choices and to capitalize on rising cremation trend a 20
Slide 10: Company Overview
Company Overview
Slide 11: Company history: founded 1991, IPO 1996
1 Founded in 199% ital public offering in 1996 Aogresive row, spending $400 millon at peak of market to scauite Businesses
Slide 12: Operating model
= Decentralized and entrepreneurial operating model = Alignment of incentives and chivers of success = Foctls on upgrading people and. effective ube of teclinology = Grow market share and improve profitability, = Strategic model to evaluate aoquisition candidates
Slide 13: Variable compensation standards
= Market Share Weighting — Increase families servediover time 30% = Take away market share from competttors 5% = Quality and Structure of Staff = Right quality personne! 10% = Upgrade staff continuously, 10% = Manage salary and benefits costs 1256 = Financial and Operating — Grow average revenue per
Slide 14: Funeral and cemetery locations
FUNERAL Locario} @CemereRy Locations (1) From continuing operations 14 Carriage Services is the 4th largest funeral and cemetery services company in the U.S., with strong positions in East and West regions Operations in 28 states = Focus on attractive suburban markets = 185 Funeral Homes = 30 Cemete
Slide 15: Revenue and EBITDA
sen 15 am ome me ame ® Ravens EBITDA (1) Based on midpoint of Company guidance tortie foul qonieene eee ote 202 BITDA ago _ ETT Wargin anoae?
Slide 16: Revenue, EBITDA and EBITDA margin
20 2002 2008 200d Revenue ESITOA EBITDA Waray) ss as as ae| ee eco. [levis co ‘sa | ti 5.000 $8500 = Future upside from new operating model = Increasing market share, = ivity and) lower: ee = Improved merchandise strategy = Margins increased in 2004 = Average revenue increased 3.3% — Decreasing oper
Slide 17: At need and preneed sales
= Maximize at need sales to maintain pricing leverage = Preneed sales program based on local market needs bese = Tatget investments to retforce market share | Benefits of prenteed contracts secured by insurance = Terms range from single pay to three to five year installments = Commission earned subs
Slide 18: Preneed sales: right kind of sales in the right way
LIONS — Preneed sales —ridht kindlof sales in the right way = Emphasis on nebyorking with satlefied families = Sales result from defining family’s need = Revenue arowih standard based on property sales = Emphasie on ales to new families = Maintain or grow at need business (Interments) = General Mana
Slide 19: Cemetery gross margins have improved
Cemetery gross margins have improved: — Management shifted focus to a. family service model ~ Gommission structure and incentives: aligned Revenue mix has shifted to interment: rights since 2001. = Emphasis on building heritage: — Strengthens ties between our cemeteries and our clients — Gommission
Slide 20: At need and preneed sales drivers
At Need 4190 Prensed 906 Preneed sales key crivers of success = Fociis on sale of property to new families Property rights sold on installment basis = Bown payment required and usually 2 five yew term = Revenue recosnized when 10% of sales price collected = Property right repossessed upon default =
Slide 21: Financial Strategy to Facilitate Growth
Financial Strategy to Facilitate Growth
Slide 22: Debt reduction accomplishments
= Debt reduction accomplishments = Redliced|serior debt by an estimated 424. million since 2000, = Majority of cash flow from operations = Stable Core business and predictable cash flow with potential for improvement = Impact of new operating model = Foctis on crowing merket sere = Positive operatin
Slide 23: Pro Forma Capitalization
23 (Gin millions) | Pro Forma Capitalization Actual As Adjusted 9730/2004 9730/2004 ‘Cash andequivatents, ig Senior Debt: Existing Unsecured Credit Faciity 9288 Existing Senior Notes 7A Senior Notes atfered hereby : ‘Acyistion Debt CapitalLeases Total Senior Debt ‘Subordinated Debt: ‘Subordinated De
Slide 24: Convertible preferred securities (TIDES)
24 Oa ble Eqt sl = Carriage Iesued|$98,75 million of 796 convertible preferred securities in June 1999 = Matures in 2023 = Subordinated to all indebtedness = Distributions may be deferredfor up to 5 years at Carriage’s option = By bringing distributions cument, deferral|period can be reset unlimited
Slide 25: Acquisition environment
25 Isition) No meaningful acquisitions for the last five years Inventory of potential sellers with succession issues is building Bank financing for independents difficult Price expectations from quality operators lowered to 5 to 6x EBITDA Sellers are extremely wary of operating style and|reputation
Slide 26: Selective acquisition criteria
= Selective acquisition of fh quality Independent businesses = leading market share = "Being the Best! standards (quantitative and qualitative) = Funded from free casi flow and/or equity Issuance = "Sweet spot! in 300-400 calls per facility businesses (atleast $1.5 milion in annual reverie) = Growin
Slide 27: Investment considerations
27 ment Gonsiderati Stable and predictable free cash flow and favorable outlook for industry fundamentals: Already strong EBITDA margins increasing as new funeral operating model gains traction and|is extended to cemetery business: Market leader in suburban and rural markets Committed to strengtheni
Slide 28: Non-GAAP measures and EBITDA
28 ‘We report aurfinancal result in accordance with generally aovepted accounting pinciples GAAP", However, management believes that certain non- GAAP performance measures and ratios, which management uses in managing out business, may provide users ofthis fnandal information addtional ‘meaningfi! c
Slide 29: Searchable text section of graphics
Searchable text section of graphics shown above [ LOG O] Carriage Services (NYSE: CSV) 2005 UBS Global Healthcare Services Conference February 15, 2005 For ward-Looking Statements The statements in this presentation that are not historical facts are forward-looking statements made in reliance on the
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