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UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM 8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d)
of
The Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported): February 21, 2024
Carriage Services, Inc.
(Exact
name of registrant as specified in its charter)
Delaware |
|
1-11961 |
|
76-0423828 |
(State
or other jurisdiction
of incorporation) |
|
(Commission
File Number) |
|
(IRS Employer
Identification No.) |
3040 Post Oak Boulevard, Suite 300
Houston,
Texas 77056
(Address
of Principal Executive Offices) (Zip Code)
(713)
332-8400
(Registrant’s
telephone number, including area code)
Not
Applicable
(Former
name or former address, if changed since last report)
Check
the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under
any of the following provisions:
| ☐ | Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ☐ | Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities
registered pursuant to Section 12(b) of the Act:
Title
of each class |
|
Trading
Symbol(s) |
|
Name
of each exchange on which registered |
Common Stock, par value $0.01 |
|
CSV |
|
New York Stock Exchange |
Indicate
by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405
of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging
growth company ☐
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 Entry into a Material Definitive Agreement.
The
description of Melvin C. Payne’s Transition Agreement provided in Item 5.02 is incorporated by reference into this Item 1.01.
Item 1.02 Termination of a Material Definitive Agreement.
The
information regarding the termination of the Employment Agreement of Melvin C. Payne set forth in Item 5.02 below is incorporated
by reference into this Item 1.02.
Item 2.02 Results of Operations and Financial Condition.
In
a press release dated February 21, 2024 (the “February 21st Press Release”), Carriage Services, Inc. (the
“Company”) announced and commented on its financial results for its year ended December 31, 2023. A copy
of the February 21st Press Release issued by the Company is attached hereto as Exhibit 99.1 and incorporated by this reference.
The
February 21st Press Release contains non-GAAP financial measures. Generally, a non-GAAP financial measure is a numerical measure
of a company’s performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded
or included in the most directly comparable measure calculated and presented in accordance with United States generally accepted accounting
principles, or GAAP. Pursuant to the requirements of Regulation G, the Company has provided quantitative reconciliations within
the February 21st Press Release of the non-GAAP financial measures to the most directly comparable GAAP financial measures.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
As
also described in the February 21st Press Release, on February 22, 2024 (the “Transition Date”), Melvin
C. Payne, the Company’s founder and former Chief Executive Officer, will cease to serve as Executive Chairman of the Board of the
Company. Beginning on the Transition Date, Mr. Payne will begin serving as a special advisor to the Board of Directors of the Company
(the “Board”) and senior management in a consulting role. In addition, Mr. Payne will remain on the Board until
the Company’s 2024 annual meeting of stockholders, when the term for the Class I directors is scheduled to expire.
In
connection with Mr. Payne’s termination of employment, the employment-related provisions of his Employment Agreement,
dated as of November 5, 2019, with the Company (as amended prior to the date hereof, the “Employment
Agreement”) will terminate on the Transition Date. On February 21, 2024, Mr. Payne and the Company
entered into a Transition Agreement (the “Transition Agreement”),
setting forth the terms of his severance benefits and his consulting arrangement. Under the Transition Agreement, Mr. Payne is
entitled to receive the following benefits, subject to the timely execution and non-revocation by Mr. Payne and his spouse of
waiver and release agreements in connection with the Transition Date and the end of the 12-month consulting term set forth in the
Transition Agreement (the “Releases”):
| ● | A
prorated payment of his 2024 $1.25 million annual target bonus (approximately $181,500),
payable in a lump sum on the first payroll date after any applicable revocation periods have
expired (“Initial Payment Date”); |
| ● | Payment
of his 2023 $1,250,000 annual bonus (which had been previously awarded at target), payable
in a lump sum at such time 2023 annual bonus payments are paid to similarly situated employees
of the Company, currently scheduled for February 23, 2024; |
| ● | Salary
continuation severance payments totaling $2 million, payable on regular payroll dates
over 24 months; |
| ● | Cash
settlement of Mr. Payne’s 140,476 share Good to Great performance award on an
83.33% prorated basis (117,063.33 shares of the Company’s common stock), payable in
cash based on the closing price of the Company’s common stock on the Transition Date
(the “Good to Great Settlement Amount”), as follows: |
| ● | $1 million
on the Initial Payment Date; |
| ● | 1/24th
of the remaining Good to Great Settlement Amount at the end of each month from March 2024
until February 2025; and |
| ● | The
balance of the remaining Good to Great Settlement Amount will be paid on March 14, 2025; |
| ● | Reimbursement or equivalent cash payments for the
monthly cost of maintaining health benefits for Mr. Payne and his spouse as of the date of his termination for a period of up
to 36 months; and |
| ● | Reimbursement
of Mr. Payne’s reasonable legal expenses in connection with the negotiation and
implementation of the Transition Agreement and actions contemplated by that agreement, up
to a maximum of $35,000. |
All
of the payments and benefits provided under the Transition Agreement are subject to Mr. Payne’s continued compliance with
certain confidentiality, non-competition, non-solicitation and non-disparagement provisions of the Employment Agreement, as well as to
compliance by Mr. Payne and his spouse with their respective Releases.
Under
the Transition Agreement, Mr. Payne has also agreed to serve as a special advisor to the Board and senior management for a transition
period of 12 months, commencing on the Transition Date. In consideration for those services, the Company has agreed to pay Mr. Payne
a consulting fee equal to $83,333 per month. The Transition Agreement may be terminated by the Company upon the material breach
of the Transition Agreement, the Employment Agreement or either of the Releases. Upon Mr. Payne’s death, any consulting fee
payments would be paid to his estate.
This
summary is qualified in its entirety by reference to:
| ● | the
Employment Agreement dated as of November 5, 2019, which was filed as Exhibit 10.6
to that Current Report on Form 8-K filed by the Company on November 8, 2019
and incorporated by reference herein; |
| ● | the
First Amendment to Employment Agreement dated as of February 17, 2021, which was
filed as Exhibit 10.1 to that Current Report on Form 8-K filed on February 17, 2021
and incorporated by reference herein; |
| ● | the
Second Amendment to Employment Agreement dated as of June 21, 2023, which was filed
as Exhibit 10.1 to the Quarter Report on 10-Q filed by the Company on August 7, 2023
and incorporated by reference herein; and |
| ● | the
Transition Agreement, which is attached hereto as Exhibit 99.2 and incorporated by reference
herein. |
Item 7.01 Regulation FD Disclosure.
Completion
of the Company’s Strategic Review
The
February 21st Press Release also announced that the Board has completed the exploration of strategic alternatives that the Company
publicly announced on June 29, 2023.
Initiation
of the Strategic Review. On June 15, 2023, following an unsolicited bid submitted confidentially by Park Lawn Corporation
(“Park Lawn”), the Board initiated a strategic process to explore, review and evaluate a range of transactions and
strategic alternatives, including a sale, merger or other potential strategic or financial transactions, with the goal to maximize stockholder
value (the “Strategic Review”). In connection with the Strategic Review, the Board selected Lazard Frères &
Co. LLC (“Lazard”) as financial advisor for the Company and engaged Sidley Austin LLP (“Sidley”)
to act as special M&A counsel on behalf of the Company.
On
June 29, 2023, the Company publicly announced that it had initiated the Strategic Review. On the same day, shortly after
the Company’s announcement, Park Lawn publicly announced that it had submitted an unsolicited confidential proposal to acquire
the Company.
Outreach
to Potential Counterparties. At the direction of the Board, in mid-June 2023, Lazard began contacting potential counterparties,
ultimately contacting approximately 70 potential counterparties (including Park Lawn), approximately 30 of which parties executed a confidentiality
agreement and reviewed a confidential information memorandum. Participants in the Strategic Review process were invited to submit a proposal
for the acquisition of 100% of the Company’s common stock.
Initial
Indications of Interest and the Second Round. In late August 2023, the Company received three non-binding indications of interest
to purchase all of the equity of the Company, consisting of two strategic potential counterparties (including Park Lawn) and one financial
sponsor. In addition to the acquisition proposals, the Company also received two financing proposals and one proposal to acquire certain
assets of the Company.
The
Board invited each of the three parties that submitted acquisition proposals into the second round of the Strategic Review process, and
each of those parties was (i) granted access to a virtual data room to conduct diligence, (ii) given access to management via
management meetings, and (iii) provided with a draft merger agreement that had been prepared by Sidley. On October 2, 2023,
Park Lawn publicly announced that it was withdrawing from the strategic review process.
Second
Round Bids. A total of four second-round bids were received from three second-round potential counterparties (including two alternative
proposals from one of the three parties). However, each of the three parties reduced its second-round acquisition proposal below its
first round indication of interest. The Company and its financial and legal advisors conducted merger agreement discussions and analyzed
the regulatory and financing risks for each of the potential counterparties for a number of weeks.
Cessation
of the Strategic Review Process. On February 21, 2024, the Board voted to bring the Strategic Review process to a close.
The Board unanimously determined that continuing to execute on the Company’s strategic plan as an independent public company is
in the best interests of the Company and its stockholders at this time. In this regard, the Board’s determination took into account
positive trends described above in the Company’s financial and operating results toward the end of 2023, as reflected in the full-year
2023 financial results announced in the February 21st Press Release.
While
the Company received executable proposals for transactions involving the Company in the course of the Strategic Review process, following
a thorough review and evaluation of the proposals and alternatives available to the Company, the Board was not able to conclude that
any of those proposals would be in the best interests of the Company and its stockholders. The Board endorsed the Company’s continued
execution of its standalone business plan as an independent, publicly held company under the leadership of Carlos Quezada as CEO, Steve
Metzger as President and Kian Granmayeh as CFO, as well as leadership from the Board, which added three talented new directors during
the summer of 2023.
In
accordance with General Instruction B.2 of Form 8-K, the foregoing information, including the February 21st Press Release filed
herewith as Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), or otherwise subject to liabilities of that Section, nor shall such information,
including Exhibit 99.1, be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended or the Exchange
Act, except as shall be expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
February 21, 2024 |
CARRIAGE
SERVICES, INC. |
|
|
|
|
By: |
/s/
Steve D. Metzger |
|
|
Steve
D. Metzger |
|
|
President
and Secretary |
4
Exhibit 99.1
Carriage Services Announces Fourth Quarter and
Full Year 2023 Results
Conference call on Thursday, February 22, 2024
at 9:30 a.m. central time.
HOUSTON - February 21, 2024 - (GLOBE NEWSWIRE)
Carriage Services, Inc. (NYSE: CSV) today announced results for the fourth quarter and year ended December 31, 2023.
Company Highlights:
| ● | Exceeded full year 2023 guidance ranges for total revenue, adjusted consolidated
EBITDA and adjusted earnings per share, driven by strong fourth quarter performance; |
| ● | 5.2% growth in total revenue over the prior year quarter and 3.3% growth over the prior full year; |
| ● | Preneed sales deliver 16.1% growth in cemetery operating revenue over the prior year quarter and 13.5%
growth over the prior full year; |
| ● | 41.6% increase in GAAP net income and 41.5% increase in diluted earnings per share over the prior year
quarter; |
| ● | Founder and Executive Chairman, Mel Payne, to transition to special advisor to the Board of Directors; |
| ● | The Board of Directors concludes the previously announced review of strategic alternatives; and |
| ● | Management announces 2024 outlook. |
Carlos Quezada, Vice Chairman and CEO,
stated, “We are pleased to announce our strong fourth quarter and full year 2023 results. Total revenue grew by 5.2% in the
fourth quarter and 3.3% for the full year, despite the COVID “pull forward” impact resulting in modest declines in
funeral contract volume experienced during the year. This success in growing our top line stems from our targeted efforts to better
leverage our pricing power, which drove improved average revenue per contract, in addition to our preneed cemetery sales
team’s exceptional performance, which resulted in a surge in preneed cemetery sales production of 25.0% for the fourth quarter
and 19.6% for the full year. This increase in revenue, coupled with disciplined cost management, resulted in a year-over-year
increase in adjusted consolidated EBITDA of 3.5%, and a significant 13.2% growth over the prior year quarter, which also included
margin expansion of 230 basis points. This momentum, marking four out of five consecutive quarters of solid performance, instills
confidence and excitement in our core initiatives as we advance into 2024 and focus on fulfilling our new purpose statement, which
is ‘Creating premier experiences through innovation, empowered partnership, and elevated service.’ For those interested
in learning more, we invite you to explore our newly launched website and discover our refreshed Carriage image, which aligns with
our vision of the Carriage of the future,” concluded Mr. Quezada.
FINANCIAL HIGHLIGHTS
| |
Three Months Ended
December 31, | | |
Years Ended
December 31, | |
(in millions except margins and EPS) | |
2022 | | |
2023 | | |
2022 | | |
2023 | |
| |
| | |
| | |
| | |
| |
GAAP Metrics: | |
| | |
| | |
| | |
| |
Total revenue | |
$ | 93.9 | | |
$ | 98.8 | | |
$ | 370.2 | | |
$ | 382.5 | |
Operating income | |
$ | 19.6 | | |
$ | 23.9 | | |
$ | 79.7 | | |
$ | 81.0 | |
Operating income margin | |
| 20.9 | % | |
| 24.2 | % | |
| 21.5 | % | |
| 21.2 | % |
Net income | |
$ | 8.2 | | |
$ | 11.6 | | |
$ | 41.4 | | |
$ | 33.4 | |
Diluted EPS | |
$ | 0.53 | | |
$ | 0.75 | | |
$ | 2.63 | | |
$ | 2.14 | |
Cash provided by operating activities | |
$ | 11.0 | | |
$ | 13.7 | | |
$ | 61.0 | | |
$ | 75.6 | |
| |
| | | |
| | | |
| | | |
| | |
Non-GAAP Metrics(1): | |
| | | |
| | | |
| | | |
| | |
Adjusted consolidated EBITDA | |
$ | 28.7 | | |
$ | 32.4 | | |
$ | 109.3 | | |
$ | 113.2 | |
Adjusted consolidated EBITDA margin | |
| 30.5 | % | |
| 32.8 | % | |
| 29.5 | % | |
| 29.6 | % |
Adjusted diluted EPS | |
$ | 0.64 | | |
$ | 0.77 | | |
$ | 2.61 | | |
$ | 2.19 | |
Adjusted free cash flow | |
$ | 8.9 | | |
$ | 12.8 | | |
$ | 49.8 | | |
$ | 55.1 | |
(1) |
We present both GAAP and Non-GAAP measures
to provide investors with additional information and to allow for the increased comparability of our ongoing performance from period
to period. The most comparable GAAP measures to the Non-GAAP measures presented in this table can be found in the Reconciliation of Non-GAAP
Financial Measures section of this earnings release. |
| ● | Revenue for the three months ended December 31, 2023 increased
$4.9 million compared to the three months ended December 31, 2022, primarily as a result of a 23.6% increase in the number of preneed
interment rights (property) sold, a 1.2% increase in the average price per interment right sold and a 0.7% increase in the average revenue
per funeral contract, offset by a 3.3% decrease in the funeral contract volume. |
| ● | Revenue for the year ended December 31, 2023 increased $12.3
million compared to the year ended December 31, 2022, primarily as a result of a 9.4% increase in the average price per preneed interment
right sold, an 8.6% increase in the number of preneed interment rights (property) sold and a 0.9% increase in the average revenue per
funeral contract, offset by a 2.4% decrease in the funeral contract volume. |
| ● | Net income for the three months ended December 31, 2023 increased
$3.4 million compared to the three months ended December 31, 2022, primarily due to a $3.2 million increase in profit contribution from
our businesses and a $2.9 million decrease in loss on divestitures, disposals and impairment charges, offset by a $1.4 million increase
in interest expense and a $1.1 million increase in general, administrative and other expenses. |
| ● | Net income for the year ended December 31, 2023 decreased
$8.0 million compared to the year ended December 31, 2022, as the $5.1 million increase in profit contribution from our businesses was
offset by a $10.4 million increase in interest expense and a $4.7 million increase in general, administrative and other expenses. |
MEL PAYNE TRANSITIONS TO ADVISORY ROLE
After 32 years of founding and building Carriage,
Mel Payne, has chosen to step down from his role as Executive Chairman of the Board and transition to a new role as special advisor to
the Board of Directors, which will allow him to be available and share his wealth of knowledge and insights with the Board of Directors
and the senior leadership team. Mel will continue as a member of the Board until his current term expires at the May 2024 annual meeting
of stockholders.
Mel, who served as Carriage’s only CEO and
Chairman of the Board for the Company’s first 32 years, started with a vision in 1991 that was born out of a very personal and impactful
experience he had following the loss of a loved one. He turned that experience and vision into a team of more than 2,700 employees and
200 businesses, all driven by a collective mission of serving families during the most challenging time of their lives.
“Next to my family, Carriage has been and
continues to be, the greatest love of my life. The friendships I have made over the years are priceless, and watching the growth and development
of so many wonderful leaders throughout the organization has been a true highlight of my career. I have complete confidence in Carlos’
vision and ability to lead Carriage into its next chapter of growth, and, as still a large shareholder, I will be cheering on the team
and offering support,” stated Mr. Payne.
“Mel has built a special company and is
one of the true pioneers in this profession. He has handpicked an incredibly talented senior leadership team, and the Board is excited
for the future of Carriage and our stockholders,” stated Lead Independent Director, Don Patteson.
CONCLUSION OF REVIEW OF STRATEGIC ALTERNATIVES
The Board of Directors (the “Board”)
has concluded the Company’s strategic review process, first announced on June 29, 2023, which was overseen by the Board with assistance
from experienced financial and legal advisors. The Board has unanimously determined that continuing to execute on the Company’s
strategic plan as an independent public company is in the best interest of the Company and its stockholders at this time. In this regard,
the Board’s determination took into account positive trends described above in the Company’s financial and operating results
toward the end of 2023. The Board remains committed to maximizing stockholder value.
While the Company received a number of proposals
for transactions involving the Company in the course of the strategic review process, following a thorough review and evaluation of the
proposals and alternatives available to the Company, the Board concluded that none of those proposals would be in the best interest of
the Company’s stockholders. The Board endorsed the Company’s continued execution of its standalone business plans as an independent,
publicly held company under the leadership of Carlos Quezada as CEO, Steve Metzger as President and Kian Granmayeh as CFO, as well as
leadership from the Company’s Board, which added three talented new directors during the summer of 2023.
OUTLOOK FOR 2024
The Company’s 2024 outlook incorporates
previously stated organic growth initiatives around preneed sales, both in the cemetery and funeral businesses, and expected cost discipline
while the Company continues to deleverage the balance sheet. Additionally, in the first quarter of 2024, the Company expects to close
two transactions to divest certain non-core businesses, reducing 2024 revenue and field EBITDA by ~$5.5 million and $1.5 million, respectively
– the 2024 Outlook reflects the expected impact of these two divestitures.
| |
| 2024 Outlook(1) | |
(in millions - except per share amounts) | |
| | |
| |
| | |
Total revenue | |
| $380 - $390 | |
Adjusted consolidated EBITDA | |
| $112 - $118 | |
Adjusted diluted EPS | |
| $2.20 - $2.30 | |
Adjusted free cash flow | |
| $55 - $65 | |
| (1) | Includes two transactions to divest certain non-core businesses. |
CALL AND INVESTOR RELATIONS CONTACT
Carriage Services has scheduled a conference call
for tomorrow, February 22, 2024 at 9:30 a.m. central time. To participate in the call, please dial 888-208-1711 (Conference ID - 1315299)
or live over the Internet via webcast click link. An audio archive of the call will be available on demand via the Company’s website
at www.carriageservices.com. For any investor relations questions, please email InvestorRelations@carriageservices.com.
CARRIAGE SERVICES, INC.
CONDENSED OPERATING AND FINANCIAL TREND REPORT
(in thousands - except per share amounts)
| |
2019 | | |
2020 | | |
2021 | | |
2022 | | |
2023 | |
Funeral operating revenue | |
$ | 196,475 | | |
$ | 226,819 | | |
$ | 252,926 | | |
$ | 251,396 | | |
$ | 249,180 | |
Cemetery operating revenue | |
| 49,317 | | |
| 69,083 | | |
| 91,330 | | |
| 90,033 | | |
| 102,216 | |
Financial revenue | |
| 15,878 | | |
| 19,689 | | |
| 22,708 | | |
| 22,452 | | |
| 26,259 | |
Ancillary revenue | |
| 748 | | |
| 4,661 | | |
| 4,437 | | |
| 4,193 | | |
| 4,588 | |
Divested revenue | |
| 11,689 | | |
| 9,196 | | |
| 4,485 | | |
| 2,100 | | |
| 277 | |
Total revenue | |
$ | 274,107 | | |
$ | 329,448 | | |
$ | 375,886 | | |
$ | 370,174 | | |
$ | 382,520 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Funeral operating EBITDA | |
$ | 75,553 | | |
$ | 93,480 | | |
$ | 109,204 | | |
$ | 101,951 | | |
$ | 94,949 | |
Funeral operating EBITDA margin | |
| 38.5 | % | |
| 41.2 | % | |
| 43.2 | % | |
| 40.6 | % | |
| 38.1 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Cemetery operating EBITDA | |
| 17,164 | | |
| 26,627 | | |
| 42,158 | | |
| 37,509 | | |
| 41,096 | |
Cemetery operating EBITDA margin | |
| 34.8 | % | |
| 38.5 | % | |
| 46.2 | % | |
| 41.7 | % | |
| 40.2 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Financial EBITDA | |
| 14,272 | | |
| 18,357 | | |
| 21,156 | | |
| 20,767 | | |
| 24,561 | |
Financial EBITDA margin | |
| 89.9 | % | |
| 93.2 | % | |
| 93.2 | % | |
| 92.5 | % | |
| 93.5 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Ancillary EBITDA | |
| 298 | | |
| 1,186 | | |
| 1,006 | | |
| 841 | | |
| 455 | |
Ancillary EBITDA margin | |
| 39.8 | % | |
| 25.4 | % | |
| 22.7 | % | |
| 20.1 | % | |
| 9.9 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Divested EBITDA | |
| 2,480 | | |
| 2,292 | | |
| 1,117 | | |
| 293 | | |
| 15 | |
Divested EBITDA margin | |
| 21.2 | % | |
| 24.9 | % | |
| 24.9 | % | |
| 14.0 | % | |
| 5.4 | % |
Total EBITDA | |
$ | 109,767 | | |
$ | 141,942 | | |
$ | 174,641 | | |
$ | 161,361 | | |
$ | 161,076 | |
Total EBITDA margin | |
| 40.0 | % | |
| 43.1 | % | |
| 46.5 | % | |
| 43.6 | % | |
| 42.1 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Total overhead | |
$ | 37,554 | | |
$ | 40,514 | | |
$ | 54,282 | | |
$ | 53,848 | | |
$ | 50,086 | |
Overhead as a percentage of revenue | |
| 13.7 | % | |
| 12.3 | % | |
| 14.4 | % | |
| 14.5 | % | |
| 13.1 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Consolidated EBITDA | |
$ | 72,213 | | |
$ | 101,428 | | |
$ | 120,359 | | |
$ | 107,513 | | |
$ | 110,990 | |
Consolidated EBITDA margin | |
| 26.3 | % | |
| 30.8 | % | |
| 32.0 | % | |
| 29.0 | % | |
| 29.0 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Other expenses and interest | |
| | | |
| | | |
| | | |
| | | |
| | |
Depreciation & amortization | |
$ | 17,771 | | |
$ | 19,389 | | |
$ | 20,520 | | |
$ | 19,799 | | |
$ | 21,117 | |
Non-cash stock compensation | |
| 2,153 | | |
| 3,370 | | |
| 5,513 | | |
| 5,959 | | |
| 7,703 | |
Interest expense | |
| 25,522 | | |
| 32,515 | | |
| 25,445 | | |
| 25,895 | | |
| 36,266 | |
Loss on extinguishment of debt | |
| — | | |
| 6 | | |
| 23,807 | | |
| 190 | | |
| — | |
Other | |
| 4,351 | | |
| 21,506 | | |
| 770 | | |
| (1,524 | ) | |
| (525 | ) |
Pretax income | |
$ | 22,416 | | |
$ | 24,642 | | |
$ | 44,304 | | |
$ | 57,194 | | |
$ | 46,429 | |
Net tax expense | |
| 7,883 | | |
| 8,552 | | |
| 11,145 | | |
| 15,813 | | |
| 13,016 | |
Net income | |
$ | 14,533 | | |
$ | 16,090 | | |
$ | 33,159 | | |
$ | 41,381 | | |
$ | 33,413 | |
Special items(1) | |
$ | 9,821 | | |
$ | 25,579 | | |
$ | 30,607 | | |
$ | (200 | ) | |
$ | 1,003 | |
Tax effect on special items | |
| 1,822 | | |
| 7,986 | | |
| 8,503 | | |
| 95 | | |
| 285 | |
Adjusted net income | |
$ | 22,532 | | |
$ | 33,683 | | |
$ | 55,263 | | |
$ | 41,086 | | |
$ | 34,131 | |
Adjusted net income margin | |
| 8.2 | % | |
| 10.2 | % | |
| 14.7 | % | |
| 11.1 | % | |
| 8.9 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Adjusted basic earnings per share | |
$ | 1.26 | | |
$ | 1.88 | | |
$ | 3.17 | | |
$ | 2.76 | | |
$ | 2.29 | |
Adjusted diluted earnings per share | |
$ | 1.25 | | |
$ | 1.86 | | |
$ | 3.02 | | |
$ | 2.61 | | |
$ | 2.19 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
GAAP basic earnings per share | |
$ | 0.81 | | |
$ | 0.90 | | |
$ | 1.90 | | |
$ | 2.78 | | |
$ | 2.24 | |
GAAP diluted earnings per share | |
$ | 0.80 | | |
$ | 0.89 | | |
$ | 1.81 | | |
$ | 2.63 | | |
$ | 2.14 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Weighted average shares o/s - basic | |
| 17,877 | | |
| 17,872 | | |
| 17,409 | | |
| 14,857 | | |
| 14,803 | |
Weighted average shares o/s - diluted | |
| 18,005 | | |
| 18,077 | | |
| 18,266 | | |
| 15,710 | | |
| 15,455 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Reconciliation of Consolidated EBITDA to Adjusted consolidated EBITDA | |
| | | |
| | | |
| | | |
| | | |
| | |
Consolidated EBITDA | |
$ | 72,213 | | |
$ | 101,428 | | |
$ | 120,359 | | |
$ | 107,513 | | |
$ | 110,990 | |
Special items(1) | |
| 4,374 | | |
| 2,822 | | |
| 5,802 | | |
| 1,799 | | |
| 2,192 | |
Adjusted consolidated EBITDA | |
$ | 76,587 | | |
$ | 104,250 | | |
$ | 126,161 | | |
$ | 109,312 | | |
$ | 113,182 | |
Adjusted consolidated EBITDA margin | |
| 27.9 | % | |
| 31.6 | % | |
| 33.6 | % | |
| 29.5 | % | |
| 29.6 | % |
| (1) | A detail of our Special items
presented in this table can be found in the Reconciliation of Non-GAAP Financial Measures section of this earnings release. |
CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited and in thousands)
| |
December 31,
2022 | | |
December 31,
2023 | |
ASSETS | |
| | |
| |
Current assets: | |
| | |
| |
Cash and cash equivalents | |
$ | 1,170 | | |
$ | 1,523 | |
Accounts receivable, net | |
| 24,458 | | |
| 27,060 | |
Inventories | |
| 7,613 | | |
| 8,347 | |
Prepaid and other current assets | |
| 4,733 | | |
| 4,791 | |
Total current assets | |
| 37,974 | | |
| 41,721 | |
Preneed cemetery trust investments | |
| 95,065 | | |
| 96,374 | |
Preneed funeral trust investments | |
| 104,553 | | |
| 107,842 | |
Preneed cemetery receivables, net | |
| 26,672 | | |
| 35,575 | |
Receivables from preneed funeral trusts, net | |
| 19,976 | | |
| 21,530 | |
Property, plant and equipment, net | |
| 278,106 | | |
| 287,484 | |
Cemetery property, net | |
| 104,170 | | |
| 114,580 | |
Goodwill | |
| 410,137 | | |
| 423,643 | |
Intangible and other non-current assets, net | |
| 32,930 | | |
| 37,677 | |
Operating lease right-of-use assets | |
| 17,060 | | |
| 16,295 | |
Cemetery perpetual care trust investments | |
| 66,307 | | |
| 85,331 | |
Total assets | |
$ | 1,192,950 | | |
$ | 1,268,052 | |
LIABILITIES AND STOCKHOLDERS’ EQUITY | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Current portion of debt and lease obligations | |
$ | 3,172 | | |
$ | 3,842 | |
Accounts payable | |
| 11,675 | | |
| 11,866 | |
Accrued and other liabilities | |
| 30,621 | | |
| 35,362 | |
Total current liabilities | |
| 45,468 | | |
| 51,070 | |
Acquisition debt, net of current portion | |
| 3,438 | | |
| 5,461 | |
Credit facility | |
| 188,836 | | |
| 177,794 | |
Senior notes | |
| 395,243 | | |
| 395,905 | |
Obligations under finance leases, net of current portion | |
| 4,743 | | |
| 5,831 | |
Obligations under operating leases, net of current portion | |
| 17,315 | | |
| 15,797 | |
Deferred preneed cemetery revenue | |
| 51,746 | | |
| 61,048 | |
Deferred preneed funeral revenue | |
| 32,029 | | |
| 39,537 | |
Deferred tax liability | |
| 48,820 | | |
| 52,127 | |
Other long-term liabilities | |
| 3,065 | | |
| 1,855 | |
Deferred preneed cemetery receipts held in trust | |
| 95,065 | | |
| 96,374 | |
Deferred preneed funeral receipts held in trust | |
| 104,553 | | |
| 107,842 | |
Care trusts’ corpus | |
| 65,495 | | |
| 84,351 | |
Total liabilities | |
| 1,055,816 | | |
| 1,094,992 | |
Commitments and contingencies: | |
| | | |
| | |
Stockholders’ equity: | |
| | | |
| | |
Common stock | |
| 264 | | |
| 266 | |
Additional paid-in capital | |
| 238,780 | | |
| 241,291 | |
Retained earnings | |
| 176,843 | | |
| 210,256 | |
Treasury stock | |
| (278,753 | ) | |
| (278,753 | ) |
Total stockholders’ equity | |
| 137,134 | | |
| 173,060 | |
Total liabilities and stockholders’ equity | |
$ | 1,192,950 | | |
$ | 1,268,052 | |
CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share
data)
| |
Three months ended
December 31, | | |
Years Ended
December 31, | |
| |
2022 | | |
2023 | | |
2022 | | |
2023 | |
| |
| | |
| | |
| | |
| |
Revenue: | |
| | |
| | |
| | |
| |
Service revenue | |
$ | 45,992 | | |
$ | 45,729 | | |
$ | 181,271 | | |
$ | 182,166 | |
Property and merchandise revenue | |
| 41,475 | | |
| 43,562 | | |
| 161,970 | | |
| 169,490 | |
Other revenue | |
| 6,449 | | |
| 9,543 | | |
| 26,933 | | |
| 30,864 | |
| |
| 93,916 | | |
| 98,834 | | |
| 370,174 | | |
| 382,520 | |
Field costs and expenses: | |
| | | |
| | | |
| | | |
| | |
Cost of service | |
| 21,517 | | |
| 22,597 | | |
| 87,322 | | |
| 91,799 | |
Cost of merchandise | |
| 29,149 | | |
| 31,562 | | |
| 116,453 | | |
| 123,817 | |
Cemetery property amortization | |
| 1,545 | | |
| 1,628 | | |
| 5,859 | | |
| 6,039 | |
Field depreciation expense | |
| 3,485 | | |
| 3,620 | | |
| 13,316 | | |
| 14,166 | |
Regional and unallocated funeral and cemetery costs | |
| 5,551 | | |
| 3,237 | | |
| 22,960 | | |
| 16,576 | |
Other expenses | |
| 1,231 | | |
| 1,564 | | |
| 5,038 | | |
| 5,828 | |
| |
| 62,478 | | |
| 64,208 | | |
| 250,948 | | |
| 258,225 | |
Gross profit | |
| 31,438 | | |
| 34,626 | | |
| 119,226 | | |
| 124,295 | |
| |
| | | |
| | | |
| | | |
| | |
Corporate costs and expenses: | |
| | | |
| | | |
| | | |
| | |
General, administrative and other | |
| 9,348 | | |
| 10,443 | | |
| 37,471 | | |
| 42,125 | |
Net loss on divestitures, disposals and impairment charges | |
| 2,462 | | |
| 262 | | |
| 2,029 | | |
| 1,191 | |
Operating income | |
| 19,628 | | |
| 23,921 | | |
| 79,726 | | |
| 80,979 | |
| |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| 7,687 | | |
| 9,053 | | |
| 25,895 | | |
| 36,266 | |
Loss on extinguishment of debt | |
| 190 | | |
| — | | |
| 190 | | |
| — | |
Net gain on property damage, net of insurance claims | |
| (196 | ) | |
| — | | |
| (3,471 | ) | |
| (343 | ) |
Other, net | |
| (4 | ) | |
| (737 | ) | |
| (82 | ) | |
| (1,373 | ) |
Income before income taxes | |
| 11,951 | | |
| 15,605 | | |
| 57,194 | | |
| 46,429 | |
Expense for income taxes | |
| 3,665 | | |
| 4,287 | | |
| 16,243 | | |
| 13,186 | |
Tax adjustment related to discrete items | |
| 66 | | |
| (320 | ) | |
| (430 | ) | |
| (170 | ) |
Total expense for income taxes | |
| 3,731 | | |
| 3,967 | | |
| 15,813 | | |
| 13,016 | |
Net income | |
$ | 8,220 | | |
$ | 11,638 | | |
$ | 41,381 | | |
$ | 33,413 | |
| |
| | | |
| | | |
| | | |
| | |
Basic earnings per common share: | |
$ | 0.56 | | |
$ | 0.78 | | |
$ | 2.78 | | |
$ | 2.24 | |
Diluted earnings per common share: | |
$ | 0.53 | | |
$ | 0.75 | | |
$ | 2.63 | | |
$ | 2.14 | |
| |
| | | |
| | | |
| | | |
| | |
Dividends declared per common share: | |
$ | 0.1125 | | |
$ | 0.1125 | | |
$ | 0.4500 | | |
$ | 0.4500 | |
| |
| | | |
| | | |
| | | |
| | |
Weighted average number of common and common equivalent shares outstanding: | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 14,707 | | |
| 14,838 | | |
| 14,857 | | |
| 14,803 | |
Diluted | |
| 15,418 | | |
| 15,448 | | |
| 15,710 | | |
| 15,455 | |
CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
| |
Years Ended December 31, | |
| |
2022 | | |
2023 | |
Cash flows from operating activities: | |
| | |
| |
Net income | |
$ | 41,381 | | |
$ | 33,413 | |
Adjustments to reconcile net income to net cash provided by operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 19,799 | | |
| 21,117 | |
Provision for credit losses | |
| 2,818 | | |
| 3,050 | |
Stock-based compensation expense | |
| 5,959 | | |
| 7,703 | |
Deferred income tax expense | |
| 3,036 | | |
| 3,307 | |
Amortization of intangibles | |
| 1,286 | | |
| 1,401 | |
Amortization of debt issuance costs | |
| 552 | | |
| 699 | |
Amortization and accretion of debt | |
| 493 | | |
| 515 | |
Loss on extinguishment of debt | |
| 190 | | |
| — | |
Net loss on divestitures, disposals and impairment charges | |
| 2,029 | | |
| 1,191 | |
Net gain on property damage, net of insurance claims | |
| (3,471 | ) | |
| (343 | ) |
Gain on sale of excess land | |
| (155 | ) | |
| (1,407 | ) |
| |
| | | |
| | |
Changes in operating assets and liabilities that provided (used) cash: | |
| | | |
| | |
Accounts and preneed receivables | |
| (5,358 | ) | |
| (8,122 | ) |
Inventories, prepaid and other current assets | |
| 2,295 | | |
| (72 | ) |
Intangible and other non-current assets | |
| (1,917 | ) | |
| (3,246 | ) |
Preneed funeral and cemetery trust investments | |
| (17,679 | ) | |
| (775 | ) |
Accounts payable | |
| (101 | ) | |
| 169 | |
Accrued and other liabilities | |
| (9,120 | ) | |
| 2,988 | |
Incentive payment from vendor | |
| — | | |
| 6,000 | |
Deferred preneed funeral and cemetery revenue | |
| 1,302 | | |
| 8,968 | |
Deferred preneed funeral and cemetery receipts held in trust | |
| 17,685 | | |
| (966 | ) |
Net cash provided by operating activities | |
| 61,024 | | |
| 75,590 | |
| |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | |
Acquisitions of businesses and real estate | |
| (33,876 | ) | |
| (47,050 | ) |
Proceeds from divestitures and sale of other assets | |
| 5,027 | | |
| 4,132 | |
Proceeds from insurance claims | |
| 2,440 | | |
| 1,403 | |
Capital expenditures | |
| (26,081 | ) | |
| (18,039 | ) |
Net cash used in investing activities | |
| (52,490 | ) | |
| (59,554 | ) |
| |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | |
Borrowings from the credit facility | |
| 155,400 | | |
| 86,100 | |
Payments against the credit facility | |
| (120,100 | ) | |
| (97,700 | ) |
Payment of debt issuance costs for the credit facility and senior notes | |
| (922 | ) | |
| — | |
Payments on acquisition debt and obligations under finance leases | |
| (882 | ) | |
| 1,383 | |
Proceeds from the exercise of stock options and employee stock purchase plan contributions | |
| 1,745 | | |
| 1,494 | |
Taxes paid on restricted stock vestings and exercise of stock options | |
| (327 | ) | |
| (252 | ) |
Dividends paid on common stock | |
| (6,763 | ) | |
| (6,708 | ) |
Purchase of treasury stock | |
| (36,663 | ) | |
| — | |
Net cash used in financing activities | |
| (8,512 | ) | |
| (15,683 | ) |
| |
| | | |
| | |
Net increase in cash and cash equivalents | |
| 22 | | |
| 353 | |
Cash and cash equivalents at beginning of period | |
| 1,148 | | |
| 1,170 | |
Cash and cash equivalents at end of period | |
$ | 1,170 | | |
$ | 1,523 | |
NON-GAAP FINANCIAL MEASURES
This earnings release uses Non-GAAP financial
measures to present the financial performance of the Company. Non-GAAP financial measures should be viewed in addition to, and not as
an alternative for, the Company’s reported operating results or cash flow from operations or any other measure of performance as
determined in accordance with GAAP. We believe the Non-GAAP results are useful to investors to compare our results to previous periods,
to provide insight into the underlying long-term performance trends in our business and to provide the opportunity to differentiate ourselves
as the best consolidation platform in the industry against the performance of other funeral and cemetery companies.
Reconciliations of the Non-GAAP financial measures
to GAAP measures are also provided in this earnings release.
The Non-GAAP financial measures used in this earnings
release and the definitions of them used by the Company for our internal management purposes in this earnings release are described below.
| ● | Special items are defined as charges or credits included in our GAAP financial statements that can vary
from period to period and are not reflective of costs incurred in the ordinary course of our operations. The change in uncertain tax reserves
was not tax effected. Special items were taxed at the operating tax rate. |
| ● | Adjusted net income is defined as net income after adjustments for special items that we believe do not
directly reflect our core operations and may not be indicative of our normal business operations. Adjusted net income margin is defined
as adjusted net income as a percentage of total revenue. |
| ● | Consolidated EBITDA is defined as operating income, plus depreciation and amortization expense, non-cash
stock compensation and net loss on divestitures, disposals and impairment charges. Consolidated EBITDA margin is defined as consolidated
EBITDA as a percentage of total revenue. |
| ● | Adjusted consolidated EBITDA is defined as consolidated EBITDA after adjustments for acquisition expenses,
severance and separation costs, litigation reserves, disaster recovery and pandemic costs and other special items. Adjusted consolidated
EBITDA margin is defined as adjusted consolidated EBITDA as a percentage of total revenue. |
| ● | Adjusted free cash flow is defined as cash provided by operating activities, adjusted by special items
as deemed necessary, less cash for maintenance capital expenditures, which include facility repairs and improvements, equipment, furniture
and vehicle purchases and information technology infrastructure improvements. Adjusted free cash flow margin is defined as adjusted free
cash flow as a percentage of total revenue. |
| ● | Funeral operating EBITDA is defined as funeral gross profit, plus depreciation and amortization and regional
and unallocated costs, less financial EBITDA, ancillary EBITDA and divested EBITDA related to the Funeral Home segment. Funeral operating
EBITDA margin is defined as funeral operating EBITDA as a percentage of funeral operating revenue. |
| ● | Cemetery operating EBITDA is defined as cemetery gross profit, plus depreciation and amortization and
regional and unallocated costs, less financial EBITDA and divested EBITDA related to the Cemetery segment. Cemetery operating EBITDA margin
is defined as cemetery operating EBITDA as a percentage of cemetery operating revenue. |
| ● | Preneed cemetery sales production is defined as cemetery property, merchandise and services sold prior
to death. |
| ● | Financial EBITDA is defined as financial revenue, less the related expenses. Financial revenue and the
related expenses are presented within Other revenue and Other expenses, respectively, on the Consolidated Statement of Operations.
Financial EBITDA margin is defined as financial EBITDA as a percentage of financial revenue. |
| ● | Ancillary revenue is defined as revenues from our ancillary businesses, which include a flower shop, a
monument company, a pet cremation business and our online cremation businesses. Ancillary revenue and the related expenses are presented
within Other revenue and Other expenses, respectively, on the Consolidated Statement of Operations. |
| ● | Ancillary EBITDA is defined as ancillary revenue, less expenses related to our ancillary businesses noted
above. Ancillary EBITDA margin is defined as ancillary EBITDA as a percentage of ancillary revenue. |
| ● | Divested revenue is defined as revenues from certain funeral home and cemetery businesses that we have
divested. |
| ● | Divested EBITDA is defined as divested revenue, less field level and financial expenses related to the
divested businesses noted above. Divested EBITDA margin is defined as divested EBITDA as a percentage of divested revenue. |
| ● | Overhead expenses are defined as regional and unallocated funeral and cemetery costs and general,
administrative and other costs, excluding home office depreciation and non-cash stock compensation. |
| ● | Adjusted basic earnings per share (EPS) is defined as GAAP basic earnings per share, adjusted for special
items. |
| ● | Adjusted diluted earnings per share (EPS) is defined as GAAP diluted earnings per share, adjusted for
special items. |
Funeral Operating EBITDA and Cemetery Operating EBITDA
Our operations are reported in two business segments:
Funeral Home operations and Cemetery operations. Our operating level results highlight trends in volumes, revenue, operating EBITDA (the
individual business’ cash earning power/locally controllable business profit) and operating EBITDA margin (the individual business’
controllable profit margin).
Funeral operating EBITDA and cemetery operating
EBITDA are defined above. Funeral and cemetery gross profit is defined as revenue less “field costs and expenses” —
a line item encompassing these areas of costs: i) funeral and cemetery field costs, ii) field depreciation and amortization expense, and
iii) regional and unallocated funeral and cemetery costs. Funeral and cemetery field costs include cost of service, funeral and cemetery
merchandise costs, operating expenses, labor and other related expenses incurred at the business level.
Regional and unallocated funeral and cemetery
costs presented in our GAAP statement consist primarily of salaries and benefits of our regional leadership, incentive compensation opportunity
to our field employees and other related costs for field infrastructure. These costs, while necessary to operate our businesses as currently
operated within our unique, decentralized platform, are not controllable operating expenses at the field level as the composition, structure
and function of these costs are determined by executive leadership in the Houston Support Center. These costs are components of our overall
overhead platform presented within consolidated EBITDA and adjusted consolidated EBITDA. We do not directly or indirectly “push
down” any of these expenses to the individual business’ field level margins.
We believe that our “regional and unallocated
funeral and cemetery costs” are necessary to support our decentralized, high performance culture operating framework, and as such,
are included in consolidated EBITDA and adjusted consolidated EBITDA, which more accurately reflects the cash earning power of the Company
as an operating and consolidation platform.
Usefulness and Limitations of These Measures
When used in conjunction with GAAP financial measures,
our total EBITDA, consolidated EBITDA and adjusted consolidated EBITDA are supplemental measures of operating performance that we believe
are useful measures to facilitate comparisons to our historical consolidated and business level performance and operating results.
We believe our presentation of adjusted consolidated
EBITDA, a key metric used internally by our management, provides investors with a supplemental view of our operating performance that
facilitates analysis and comparisons of our ongoing business operations because it excludes items that may not be indicative of our ongoing
operating performance.
Our total field EBITDA, consolidated EBITDA and
adjusted consolidated EBITDA are not necessarily comparable to similarly titled measures used by other companies due to different methods
of calculation. Our presentation is not intended to be considered in isolation or as a substitute for, or superior to, the financial information
prepared and presented in accordance with GAAP. Funeral operating EBITDA, cemetery operating EBITDA, financial EBITDA, ancillary EBITDA
and divested EBITDA are not consolidated measures of profitability.
Our total field EBITDA excludes certain costs
presented in our GAAP statement that we do not allocate to the individual business’ field level margins, as noted above. Consolidated
EBITDA excludes certain items that we believe do not directly reflect our core operations and may not be indicative of our normal business
operations. A reconciliation to operating income, the most directly comparable GAAP measure, is set forth below.
Therefore, these measures may not provide a complete
understanding of our performance and should be reviewed in conjunction with our GAAP financial measures. We strongly encourage investors
to review the Company’s consolidated financial statements and publicly filed reports in their entirety and not rely on any single
financial measure.
RECONCILIATION OF NON-GAAP FINANCIAL
MEASURES
The Non-GAAP financial measures are presented
for additional information and are reconciled to their most comparable GAAP measures, all of which are reflected in the tables below.
Reconciliation of Operating income to Consolidated
EBITDA, Adjusted consolidated EBITDA (in thousands) and Adjusted consolidated EBITDA margin for the three months and years ended December
31, 2022 and 2023:
| |
Three Months Ended
December 31, | | |
Years Ended
December 31, | |
| |
2022 | | |
2023 | | |
2022 | | |
2023 | |
Operating income | |
$ | 19,628 | | |
$ | 23,921 | | |
$ | 79,726 | | |
$ | 80,979 | |
Depreciation & amortization | |
| 5,188 | | |
| 5,494 | | |
| 19,799 | | |
| 21,117 | |
Non-cash stock compensation | |
| 1,381 | | |
| 1,548 | | |
| 5,959 | | |
| 7,703 | |
Net loss on divestitures, disposals and impairment charges | |
| 2,462 | | |
| 262 | | |
| 2,029 | | |
| 1,191 | |
Consolidated EBITDA | |
$ | 28,659 | | |
$ | 31,225 | | |
$ | 107,513 | | |
$ | 110,990 | |
Adjusted for: | |
| | | |
| | | |
| | | |
| | |
Severance and Separation Costs | |
$ | — | | |
$ | — | | |
$ | 1,431 | | |
$ | — | |
Litigation reserve | |
| — | | |
| — | | |
| 200 | | |
| — | |
Disaster recovery and pandemic costs | |
| — | | |
| — | | |
| 168 | | |
| — | |
Other special items(1) | |
| — | | |
| 1,219 | | |
| — | | |
| 2,192 | |
Adjusted consolidated EBITDA | |
$ | 28,659 | | |
$ | 32,444 | | |
$ | 109,312 | | |
$ | 113,182 | |
| |
| | | |
| | | |
| | | |
| | |
Total revenue | |
$ | 93,916 | | |
$ | 98,834 | | |
$ | 370,174 | | |
$ | 382,520 | |
| |
| | | |
| | | |
| | | |
| | |
Operating income margin | |
| 20.9 | % | |
| 24.2 | % | |
| 21.5 | % | |
| 21.2 | % |
| |
| | | |
| | | |
| | | |
| | |
Adjusted consolidated EBITDA margin | |
| 30.5 | % | |
| 32.8 | % | |
| 29.5 | % | |
| 29.6 | % |
(1) |
Other special items represents expenses related
to our strategic review process. |
Reconciliation of Operating income to Consolidated
EBITDA, Adjusted consolidated EBITDA (in thousands) and Adjusted consolidated EBITDA margin for the years ended December 31, 2019, 2020,
and 2021:
| |
2019 | | |
2020 | | |
2021 | |
Operating income | |
$ | 47,443 | | |
$ | 57,227 | | |
$ | 93,660 | |
Depreciation & amortization | |
| 17,771 | | |
| 19,389 | | |
| 20,520 | |
Non-cash stock compensation | |
| 2,153 | | |
| 3,370 | | |
| 5,513 | |
Net loss on divestitures, disposals and impairment charges | |
| 4,846 | | |
| 21,442 | | |
| 666 | |
Consolidated EBITDA | |
$ | 72,213 | | |
$ | 101,428 | | |
$ | 120,359 | |
Adjusted for: | |
| | | |
| | | |
| | |
Special items(1) | |
| 4,374 | | |
| 2,822 | | |
| 5,802 | |
Adjusted consolidated EBITDA | |
$ | 76,587 | | |
$ | 104,250 | | |
$ | 126,161 | |
| |
| | | |
| | | |
| | |
Total revenue | |
$ | 274,107 | | |
$ | 329,448 | | |
$ | 375,886 | |
| |
| | | |
| | | |
| | |
Adjusted consolidated EBITDA margin | |
| 27.9 | % | |
| 31.6 | % | |
| 33.6 | % |
(1) |
| |
2019 | | |
2020 | | |
2021 | |
|
Acquisition expenses | |
$ | 2,083 | | |
$ | (11 | ) | |
$ | — | |
|
Severance and separation costs | |
| 1,205 | | |
| 563 | | |
| 1,575 | |
|
Litigation reserve | |
| 750 | | |
| 270 | | |
| 1,050 | |
|
Disaster recovery and pandemic costs | |
| — | | |
| 1,627 | | |
| 2,157 | |
|
Other special items(2) | |
| 336 | | |
| 373 | | |
| 1,020 | |
|
Total | |
$ | 4,374 | | |
$ | 2,822 | | |
$ | 5,802 | |
(2) |
In 2019, the special item represents the cost associated with the recruitment of a former member of the senior leadership team. In 2020, the special item represents the cost associated with a state audit assessment, excluding interest. In 2021, the special item represents a one-time $1.0 million payment for residual insurance claims. |
Special items affecting Adjusted net income
(in thousands) for the years ended December 31, 2019, 2020, 2021, 2022 and 2023:
| |
2019 | | |
2020 | | |
2021 | | |
2022 | | |
2023 | |
Acquisition expenses | |
$ | 2,083 | | |
$ | (11 | ) | |
$ | — | | |
$ | — | | |
$ | — | |
Severance and separation costs | |
| 1,205 | | |
| 563 | | |
| 1,575 | | |
| 1,431 | | |
| — | |
Performance awards cancellation and exchange | |
| — | | |
| 288 | | |
| — | | |
| — | | |
| — | |
Accretion of discount on convert. sub. notes | |
| 241 | | |
| 216 | | |
| 20 | | |
| — | | |
| — | |
Net loss on extinguishment of debt | |
| — | | |
| — | | |
| 23,807 | | |
| 190 | | |
| — | |
Net (gain) loss on divestitures and sale of real property | |
| 4,217 | | |
| 6,864 | | |
| (856 | ) | |
| (543 | ) | |
| (1,300 | ) |
Impairment of goodwill, intangibles and PPE | |
| 963 | | |
| 14,952 | | |
| 500 | | |
| 2,358 | | |
| 454 | |
Litigation reserve | |
| 750 | | |
| 270 | | |
| 1,050 | | |
| 200 | | |
| — | |
Tax expense related to divested business | |
| 911 | | |
| — | | |
| — | | |
| — | | |
| — | |
Net gain on property damage, net of insurance claims | |
| (885 | ) | |
| — | | |
| — | | |
| (3,471 | ) | |
| (343 | ) |
Disaster recovery and pandemic costs | |
| — | | |
| 1,627 | | |
| 2,157 | | |
| 168 | | |
| — | |
Change in uncertain tax reserves and other | |
| — | | |
| — | | |
| — | | |
| (533 | ) | |
| — | |
Tax adjustment related to certain discrete items | |
| — | | |
| 400 | | |
| — | | |
| — | | |
| — | |
Other special items(1) | |
| 336 | | |
| 410 | | |
| 2,354 | | |
| — | | |
| 2,192 | |
Total | |
$ | 9,821 | | |
$ | 25,579 | | |
$ | 30,607 | | |
$ | (200 | ) | |
$ | 1,003 | |
(1) |
In 2019, the special item represents the
cost associated with the recruitment of a former member of the senior leadership team. In 2020, the special item represents the cost
associated with a state audit assessment. In 2021, the special item represents: (1) write-off of certain fixed assets; (2) a one-time
$1.0 million payment for residual insurance claims; and (3) interest paid on our senior notes due 2026 for the two-week period prior
to their redemption during which they were outstanding at the same time as our senior notes due 2029. In 2023, special item represents
expenses related to our strategic review process. |
Special items affecting Adjusted consolidated
EBITDA (in thousands) for the years ended December 31, 2019, 2020, 2021, 2022 and 2023:
| |
2019 | | |
2020 | | |
2021 | | |
2022 | | |
2023 | |
Acquisition expenses | |
$ | 2,083 | | |
$ | (11 | ) | |
$ | — | | |
$ | — | | |
$ | — | |
Severance and separation costs | |
| 1,205 | | |
| 563 | | |
| 1,575 | | |
| 1,431 | | |
| — | |
Litigation reserve | |
| 750 | | |
| 270 | | |
| 1,050 | | |
| 200 | | |
| — | |
Disaster recovery and pandemic costs | |
| — | | |
| 1,627 | | |
| 2,157 | | |
| 168 | | |
| — | |
Other special items(1) | |
| 336 | | |
| 373 | | |
| 1,020 | | |
| — | | |
| 2,192 | |
Total | |
$ | 4,374 | | |
$ | 2,822 | | |
$ | 5,802 | | |
$ | 1,799 | | |
$ | 2,192 | |
(1) |
In 2019, the special item represents the
cost associated with the recruitment of a former member of the senior leadership team. In 2020, the special item represents the cost
associated with a state audit assessment, excluding interest. In 2021, the special item represents a one-time $1.0 million payment for
residual insurance claims. In 2023, the special items represents expenses related to our strategic review process. |
Reconciliation of GAAP basic earnings per
share to Adjusted basic earnings per share for the three months and years ended December 31, 2022 and 2023:
| |
Three Months Ended
December 31, | | |
Years Ended
December 31, | |
| |
2022 | | |
2023 | | |
2022 | | |
2023 | |
GAAP basic earnings per share | |
$ | 0.56 | | |
$ | 0.78 | | |
$ | 2.78 | | |
$ | 2.24 | |
Special items | |
| 0.12 | | |
| 0.02 | | |
| (0.02 | ) | |
| 0.05 | |
Adjusted basic earnings per share | |
$ | 0.68 | | |
$ | 0.80 | | |
$ | 2.76 | | |
$ | 2.29 | |
Reconciliation of GAAP basic earnings per
share to Adjusted basic earnings per share for the years ended December 31, 2019, 2020 and 2021:
| |
2019 | | |
2020 | | |
2021 | |
GAAP basic earnings per share | |
$ | 0.81 | | |
$ | 0.90 | | |
$ | 1.90 | |
Special items | |
| 0.45 | | |
| 0.98 | | |
| 1.27 | |
Adjusted basic earnings per share | |
$ | 1.26 | | |
$ | 1.88 | | |
$ | 3.17 | |
Reconciliation of GAAP diluted earnings per share to Adjusted
diluted earnings per share for the three months and years ended December 31, 2022 and 2023:
| |
Three Months Ended
December 31, | | |
Years Ended
December 31, | |
| |
2022 | | |
2023 | | |
2022 | | |
2023 | |
GAAP diluted earnings per share | |
$ | 0.53 | | |
$ | 0.75 | | |
$ | 2.63 | | |
$ | 2.14 | |
Special items | |
| 0.11 | | |
| 0.02 | | |
| (0.02 | ) | |
| 0.05 | |
Adjusted diluted earnings per share | |
$ | 0.64 | | |
$ | 0.77 | | |
$ | 2.61 | | |
$ | 2.19 | |
Reconciliation of GAAP diluted earnings
per share to Adjusted diluted earnings per share for the years ended December 31, 2019, 2020 and 2021:
| |
2019 | | |
2020 | | |
2021 | |
GAAP diluted earnings per share | |
$ | 0.80 | | |
$ | 0.89 | | |
$ | 1.81 | |
Special items | |
| 0.45 | | |
| 0.97 | | |
| 1.21 | |
Adjusted diluted earnings per share | |
$ | 1.25 | | |
$ | 1.86 | | |
$ | 3.02 | |
Reconciliation of Cash provided by operating
activities to Adjusted free cash flow (in thousands) for the three months and years ended December 31, 2022 and 2023:
| |
Three Months Ended
December 31, | | |
Years Ended
December 31, | |
| |
2022 | | |
2023 | | |
2022 | | |
2023 | |
Cash provided by operating activities | |
$ | 10,978 | | |
$ | 13,741 | | |
$ | 61,024 | | |
$ | 75,590 | |
Cash used for maintenance capital expenditures | |
| (2,074 | ) | |
| (2,150 | ) | |
| (11,784 | ) | |
| (8,076 | ) |
Free cash flow | |
$ | 8,904 | | |
$ | 11,591 | | |
$ | 49,240 | | |
$ | 67,514 | |
| |
| | | |
| | | |
| | | |
| | |
Plus: incremental special items: | |
| | | |
| | | |
| | | |
| | |
Withdrawal from preneed funeral and cemetery trust investments(1) | |
$ | — | | |
$ | — | | |
$ | — | | |
$ | (8,599 | ) |
Vendor incentive payment(2) | |
| — | | |
| — | | |
| — | | |
| (6,000 | ) |
Severance and separation costs | |
| — | | |
| — | | |
| 384 | | |
| — | |
Disaster recovery and pandemic costs | |
| — | | |
| — | | |
| 168 | | |
| — | |
Other special items(3) | |
| — | | |
| 1,219 | | |
| — | | |
| 2,192 | |
Adjusted free cash flow | |
$ | 8,904 | | |
$ | 12,810 | | |
$ | 49,792 | | |
$ | 55,107 | |
(1) |
During the year ended December 31, 2023, we withdrew $8.6 million of realized capital gains and earnings from our preneed funeral and cemetery trust investments. In certain states, we are allowed to withdraw these funds prior to the delivery of preneed merchandise and service contracts. While the realized capital gains and earnings are not recognized as revenue, they increase our cash flow from operations. |
(2) |
During the year ended December 31, 2023, we received a $6.0 million incentive payment from a vendor for entering into a strategic partnership agreement to market and sell prearranged funeral services in the future. While we only recognized $0.2 million of the incentive payment as Other revenue during the year ended December 31, 2023, this payment increased our cash flow from operations. |
(3) |
Other special items represents expenses related to our strategic review process. |
2024 Outlook for the estimated year ended
December 31, 2024:
Reconciliation of Operating income to Consolidated
EBITDA, Adjusted consolidated EBITDA (in thousands) and Adjusted consolidated EBITDA margin for the estimated year ended December 31,
2024:
| |
| 2024E | |
Operating income | |
$ | 81,550 | |
Depreciation & amortization | |
| 23,500 | |
Non-cash stock compensation | |
| 9,500 | |
Other | |
| — | |
Consolidated EBITDA | |
$ | 114,550 | |
Adjusted for: | |
| | |
Special items | |
| — | |
Adjusted consolidated EBITDA | |
$ | 114,550 | |
| |
| | |
Total revenue | |
$ | 385,000 | |
| |
| | |
Adjusted consolidated EBITDA margin | |
| 29.8 | % |
Reconciliation of GAAP diluted earnings
per share to Adjusted diluted earnings per share for the estimated year ended December 31, 2024:
| |
| 2024E | |
GAAP diluted earnings per share | |
$ | 2.25 | |
Special items | |
| — | |
Adjusted diluted earnings per share | |
$ | 2.25 | |
Reconciliation of Cash provided by operating activities to Adjusted
free cash flow (in thousands) for the estimated year ended December 31, 2024:
| |
| 2024E | |
Cash provided by operating activities | |
$ | 70,000 | |
Cash used for maintenance capital expenditures | |
| (10,000 | ) |
Free cash flow | |
$ | 60,000 | |
Special items | |
| — | |
Adjusted free cash flow | |
$ | 60,000 | |
CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS
This earnings release contains forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended, and contains certain statements and information that may constitute forward-looking statements within the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. All statements made herein or elsewhere by us, or on our behalf, other
than statements of historical information, should be deemed to be forward-looking statements, which include, but are not limited to, statements
regarding any expectations and projections of earnings, revenue, cash flow, investment returns, capital allocation, debt levels, equity
performance, death rates, market share growth, cost inflation, overhead, preneed sales or other financial items; any statements of the
plans, strategies, objectives, and expectations of management for future operations or financing activities, including, but not limited
to, capital allocation, organizational performance, execution of our strategic initiatives and growth plan, planned divestitures, anticipated
integration, performance and other benefits of recently completed acquisitions, and cost management and debt reductions; any statements
regarding the expectations and successful management of executive transitions; any projections or expectations related to the conclusion
of the Board’s strategic review; any statements regarding future economic conditions or performance; any statements of belief; and
any statements of assumptions underlying any of the foregoing and are based on our current expectations and beliefs concerning future
developments and their potential effect on us. Words such as “may”, “will”, “estimate”, “intend”,
“believe”, “expect”, “seek”, “project”, “forecast”, “foresee”,
“should”, “would”, “could”, “plan”, “anticipate” and other similar words may
be used to identify forward-looking statements; however, the absence of these words does not mean that the statements are not forward-looking.
While we believe these assumptions concerning future events are reasonable as and when made, there can be no assurance that future developments
affecting us will be those that we anticipate. All comments concerning our expectations for future revenue and operating results are based
on our forecasts for our existing operations and do not include the potential impact of any future acquisitions, except where specifically
noted. Our forward-looking statements involve significant risks and uncertainties (some of which are beyond our control) and assumptions
that could cause actual results to differ materially from our historical experience and our present expectations or projections. Important
factors that could cause actual results to differ materially from those in the forward-looking statements include but are not limited
to: our ability to find and retain skilled personnel; the effects of our talent recruitment efforts, incentive and compensation plans
and programs, including such effects on our Standards Operating Model and the Company’s operational and financial performance; our
ability to execute our strategic initiatives and growth plan, if at all; the potential adverse effects on the Company’s business,
financial and equity performance if management fails to meet the expectations of its strategic initiatives and growth plan; our ability
to execute and meet the objectives of our High Performance and Credit Profile Restoration Plan, if at all; the execution of our Standards
Operating, 4E Leadership and Strategic Acquisition Models; the effects of competition; changes in the number of deaths in our markets,
which are not predictable from market to market or over the short term; changes in consumer preferences and our ability to adapt to or
meet those changes; our ability to generate preneed sales, including implementing our cemetery portfolio sales strategy, product development
and optimization plans; the investment performance of our funeral and cemetery trust funds; fluctuations in interest rates, including,
but not limited to, the effects of increased borrowing costs under our Credit Facility and our ability to minimize such costs, if at all;
the effects of inflation on our operational and financial performance, including the increased overall costs for our goods and services,
the impact on customer preferences as a result of changes in discretionary income, and our ability, if at all, to mitigate such effects;
our ability to obtain debt or equity financing on satisfactory terms to fund additional acquisitions, expansion projects, working capital
requirements and the repayment or refinancing of indebtedness; our ability to meet the timing, objectives and expectations related to
our capital allocation framework, including our forecasted rates of return, planned uses of free cash flow and future capital allocation,
including share repurchases, potential strategic acquisitions, internal growth projects, dividend increases, or debt repayment plans;
our ability to meet the projected financial and equity performance goals to our full year outlook, if at all; the timely and full payment
of death benefits related to preneed funeral contracts funded through life insurance contracts; the financial condition of third-party
insurance companies that fund our preneed funeral contracts; increased or unanticipated costs, such as merchandise, goods, insurance or
taxes, and our ability to mitigate or minimize such costs, if at all; our level of indebtedness and the cash required to service our indebtedness;
changes in federal income tax laws and regulations and the implementation and interpretation of these laws and regulations by the Internal
Revenue Service; effects of the application of other applicable laws and regulations, including changes in such regulations or the interpretation
thereof; the potential impact of epidemics and pandemics, such as the COVID-19 coronavirus, including any new or emerging public health
threats, on customer preferences and on our business; government, social, business and other actions that have been and will be taken
in response to pandemics, such as the COVID-19 coronavirus, including potential responses to any new or emerging public health threats;
effects and expense of litigation; consolidation in the funeral and cemetery industry; our ability to identify and consummate strategic
acquisitions, if at all, and successfully integrate acquired businesses with our existing businesses, including expected performance and
financial improvements related thereto; potential adverse impacts resulting from the announcement of the conclusion of the Board’s
strategic review; economic, financial and stock market fluctuations; interruptions or security lapses of our information technology, including
any cybersecurity or ransomware incidents; adverse developments affecting the financial services industry; acts of war or terrorists acts
and the governmental or military response to such acts; our failure to maintain effective control over financial reporting; and other
factors and uncertainties inherent in the funeral and cemetery industry.
For additional information regarding known material
factors that could cause our actual results to differ from our projected results, please see “Risk Factors” in our Annual
Report on Form 10-K for the year ended December 31, 2022, and in other filings with the SEC, available at www.carriageservices.com. Investors
are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of the applicable communication
and we undertake no obligation to publicly update or revise any forward-looking statements except to the extent required by applicable
law.
Exhibit 99.2
TRANSITION AGREEMENT
This TRANSITION AGREEMENT
and exhibits (collectively, this “Agreement”) is made and entered into by Melvin C. Payne (“Employee”)
and Carriage Services, Inc. (the “Company”). The Company and Employee may sometimes hereafter be referred to singularly
as a “Party” or collectively as the “Parties.”
WHEREAS, Employee and the
Company entered into an Employment Agreement dated November 5, 2019, as amended by the First Amendment thereto, dated February 17, 2021,
and the Second Amendment thereto, dated June 21, 2023 (as so amended, the “Employment Agreement”); and
WHEREAS, both Employee and
the Company hereto desire to enter into this Agreement in order to set forth the terms of the Employee’s separation from employment
with the Company and to resolve fully any and all issues and obligations arising out of Employee’s employment and separation from
employment including under the Employment Agreement.
NOW, THEREFORE, Employee and
the Company agree as follows, in consideration of the mutual covenants and obligations contained herein, and intending to be legally held
bound:
1. Employee’s
Separation.
(a) Employee
hereby will cease to be employed by the Company effective as of February 22, 2024 (the “Separation Date”).
In addition, Employee hereby resigns, as of the Separation Date, his positions as Executive Chairman of the Board of Directors of the
Company and, except as provided in the following sentence, any other position Employee may hold for the Company’s subsidiaries and
affiliates, in each case as of the Separation Date, or earlier if effectuated by a separate action. Employee will remain as a member of
the Board of Directors of the Company (the “Board”) until the end of the current three-year term for Class I members
of the Board, which term expires at the Company’s 2024 annual meeting of stockholders.
(b) As
of the Separation Date, Employee specifically waives all rights to any additional bonus and/or awards, vesting or payment under the Company’s
2017 Omnibus Incentive Plan, the Second Amended and Restated 2006 Long-Term Incentive Plan (the “Equity Plans”), or
any other current or past plan or policy of the Company, except as may otherwise be expressly set out in this Agreement. As of the Separation
Date, all of Employee’s rights under the Employment Agreement are terminated and Employee hereby waives any and all such rights
he may have had under the Employment Agreement prior to the Separation Date.
(c) As
of the Separation Date, the Parties hereto agree that Employee shall have incurred a separation from service from the Company and its
affiliates within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”).
Page 1 of 19
Melvin C. Payne Transition Agreement 2/22/24
(d) Employee
acknowledges and agrees that he was paid Employee’s regular base salary earned through the Separation Date. Employee agrees that,
except as may otherwise by expressly set out in this Agreement and except for any benefits listed on Schedule 2 attached hereto,
Employee is entitled to no other compensation or benefits from the Company of any kind, and that Employee shall not be entitled to receive
any other payment, benefit, equity, or other form of compensation as a result of the Employment or the cessation thereof, including but
not limited to sick time, bonus, deferred compensation, additional employer 401(k) plan contributions for periods following the Separation
Date, life insurance, accidental death and dismemberment insurance, short and long-term disability insurance, equity interests, or severance.
Reimbursement of reasonable business expenses incurred by Employee during the 90-day period preceding the Separation Date may be processed
in accordance with Company policy for a period of 30 days following the Separation Date, provided that such business expenses are
submitted in accordance with Company policy. Notwithstanding the foregoing, Employee shall be entitled to any benefits due to Employee
or his spouse for claims incurred under the Company’s medical plan on or prior to the Separation Date and to his benefits under
the Company’s 401(k) plan that have accrued as of the Separation Date.
2. Special
Consideration.
(a) Provided
Employee executes this Agreement without revocation, Employee’s spouse executes and complies with the general release agreement
attached as Exhibit 1 (the “Exhibit Release”), Employee executes without revocation the general release
attached as Exhibit 2 at the conclusion of the Consulting Period (as defined below), and Employee complies with all terms
of this Agreement, including, without limitation, the Ongoing Restrictive Covenants (as defined below) (collectively, the “Special
Consideration Conditions”), conditioned upon the lapse of the applicable period for revocation as specified in Section
3(d), the Company agrees to provide Employee the following rights and benefits in Sections 2(a)(i) through 2(a)(viii)
below (collectively, the “Special Consideration”):
(i) The
Company will continue to pay Employee’s base salary at the bi-weekly rate of $38,461.54,
less all tax withholdings and authorized deductions, for 52 bi-weekly pay periods following the Separation Date (the “Continued
Salary”). The Continued Salary shall total $2,000,000.00. The first payment will
be paid on the first regular, bi-weekly Company payroll date following the Effective Date (as defined below) (the “First Payroll
Date”).
(ii) The
Company will pay Employee a lump sum amount of $1,250,000.00, less all tax withholdings and authorized deductions, in respect of Employee’s
annual bonus that relates to the 2023 calendar year, which amount shall be payable when annual bonuses in respect of the 2023 calendar
year are paid to similarly situated employees of the Company, currently scheduled for February 23, 2024.
(iii) The
Company will pay Employee a lump sum amount of $181,507.00, less all tax withholdings and authorized deductions, in respect of Employee’s
pro-rated target annual bonus that relates to the 2024 calendar year (i.e., for the period commencing on January 1, 2024 and
ending on the Separation Date), which amount shall be payable on the First Payroll Date.
Page 2 of 19
Melvin C. Payne Transition Agreement 2/22/24
(iv) If
Employee becomes eligible to elect continuation coverage under the Company’s medical plan pursuant to the Consolidated Omnibus Budget
Reconciliation Act (“COBRA”) and properly elects such coverage, the Company shall pay on Employee’s behalf, 100%
of applicable medical continuation premiums for the benefit of Employee and his spouse under the Employee’s then-current plan election
as of the Separation Date, for so long as Employee and his spouse, as applicable, remain eligible for, and elect, COBRA coverage under
applicable law following the Separation Date (i.e., up to 18 months for Employee and up to 36 months for Employee’s spouse,
as such periods may be reduced under applicable law). In addition, for the “extended period,” as hereafter defined, and as
applied to each of Employee and his spouse separately (i.e., up to 18 months for Employee and up to 36 months for Employee’s
spouse), the Company shall pay to Employee, on the first business day of each calendar month, a fully taxable cash payment equal to the
applicable COBRA premiums for that month had Employee and his spouse been eligible for, elected and remained enrolled in COBRA coverage
under the Company’s medical plan based upon Employee’s plan election as of the Separation Date, subject to applicable tax
withholdings. For this purpose, the “extended period” shall be the 36-month period following the Separation Date, but only
for those months that Employee or his spouse, as applicable, are alive during such period, and reduced by the number of months that the
Company made COBRA continuation payments on behalf of Employee or his spouse, as applicable, pursuant to the first sentence of this paragraph.
(v) Employee
shall retain all outstanding vested equity awards previously granted to Employee under the Equity Plans, subject to the terms and conditions
set forth in such vested equity awards and in the applicable Equity Plans. For the avoidance of doubt, 10,260 Restricted Stock Units
from the February 22, 2023 grant from the Company to Employee will vest on February 22, 2024, as a result of which
a corresponding number of shares of the Company’s common stock will be issued to Employee upon settlement of such Restricted Stock
Units in accordance with the terms of such grant. Except as provided in the following Section 2(a)(vi), all unvested equity
awards previously granted to Employee under the Equity Plans will be cancelled as of the Separation Date and Employee shall have no rights
or claims with respect to any unvested equity awards.
(vi) Reference
is made to that certain Good to Great II Shareholder Valuation Creation Performance Award Agreement by and between Employee and the Company,
dated May 19, 2020, as amended from time to time (the “Good to Great Award”), and capitalized terms used
in this Section 2(a)(vi) shall have the respective meanings ascribed thereto in the Good to Great Award. Notwithstanding the
preceding Section 2(a)(v), an amount of 117,063.33 Target Performance Shares (i.e., the pro rata portion of the Target
Performance Shares attributable to Tier 3 performance under the Good to Great Award for the period within the Performance Period
commencing on the Grant Date and ending on the Separation Date) (“Covered Shares”), shall vest as of the Effective
Date and be payable, in any event prior to March 15, 2025, as follows:
(A) The
Company will pay Employee a lump sum cash amount of $1,000,000.00, less all tax withholdings and authorized deductions, in respect of
a number of Covered Shares (rounded to the nearest two decimal places), based on the Separation Date Closing Price (as defined below),
which amount shall be payable on the First Payroll Date;
(B) With
respect to each calendar month from March 2024 through February 2025, the Company will pay Employee a cash payment for 12 calendar
months from March 2024 through February 2025 equal to (1) the number of Covered Shares remaining after the payment made
pursuant to Section 2(a)(vi)(A), multiplied by (2) the Separation Date Closing Price, divided by (3) 24,
less all tax withholdings and authorized deductions, which monthly amount shall be payable on the last business day of each such month;
and
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Melvin C. Payne Transition Agreement 2/22/24
(C) On
March 14, 2025, the Company will pay Employee a cash payment equal to (1) the number of Covered Shares remaining after
the payments made pursuant to Section 2(a)(vi)(A) and Section 2(a)(vi)(B), multiplied by (2) the Separation
Date Closing Price, less all tax withholdings and authorized deductions.
The term “Separation
Date Closing Price” means the closing price of the Company’s common stock on the New York Stock Exchange on the Separation
Date, as reported by Bloomberg, L.P.
(vii) Employee
agrees to serve as a consultant for the Company, as requested and directed by the Company in writing, for 12 months following the
Separation Date unless terminated earlier by the Company as provided in this Section 2(a)(vii) (the “Consulting Period”).
During the Consulting Period, Employee shall be eligible to earn total potential consulting pay of up to $1,000,000.00 (“Consulting
Pay”) for Employee to provide counsel to the Company’s Board of Directors and senior management team as a special advisor,
as may be requested by the Board of Directors or senior management team during the Consulting Period. Such Consulting Pay shall be provided
to Employee with respect to the 12 months following the Separation Date, payable in 12 equal installments of $83,333.33; provided,
however, that the Company may terminate the above-described consulting arrangement, at which time no further installment payments
of Consulting Pay shall be payable or provided to Employee, in the event Employee breaches or threatens to breach this Agreement, including,
without limitation, the Ongoing Restrictive Covenants, or fails to satisfy any of the Special Consideration Conditions. During the Consulting
Period, Employee shall have no authority to bind or to purport to bind, or to act, make any representation, or incur any liability on
behalf of, the Company or its affiliates in any way whatsoever. Within 21 days of the termination of the Consulting Period for any
reason, Employee shall execute without revocation the general release attached as Exhibit 2; in the event Employee fails to
so execute such release without revocation, Employee shall not be entitled to any further Special Consideration.
(viii) Employee
shall be reimbursed by the Company for actual legal expenses reasonably incurred in connection with Employee’s transition, subject
to a maximum amount of $35,000. Such reimbursement shall be supported by third party invoices and shall be paid within 60 days of the
Separation Date or, if later, within 10 days after all such invoices have been received by the Company.
(ix) Solely
for the convenience of Employee, the Parties also agree to certain non-compensatory matters listed on Schedule 1.
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Melvin C. Payne Transition Agreement 2/22/24
(b) If
Employee dies at any time while the Company is paying consideration pursuant to this Section 2, the Company shall continue
making the remaining payments under this Section 2 to the Employee’s estate. Such payments to the Employee’s estate
shall be made in the same manner and at the same times as they would have been paid to the Employee had he not died. Employee acknowledges
and agrees that the Special Consideration outlined above constitutes fair and adequate compensation for the promises and covenants of
Employee set forth in this Agreement. Employee acknowledges and agrees that the Company may deduct from any of the foregoing payments
and benefits in Sections 2(a)(i) through 2(a)(viii): (i) any federal, state or local taxes required by law to
be withheld with respect the foregoing payments and benefits, (ii) all other normal employee deductions made with respect to the
Company’s employees generally, and (iii) any other amounts specifically authorized to be withheld or deducted by the Employee
in accordance with applicable law, it being understood that all such determinations shall be made by the Company. Employee acknowledges
that the consideration described in this Section 2 is in lieu of and in full satisfaction of any amounts (or pro rata portions
thereof) that might otherwise be payable under any contract, plan, policy or practice, past or present, of the Company, including, without
limitation, the Employment Agreement, as well as any other offer letter or employment agreement or understanding, and Employee will have
no right or entitlement to any additional compensation, bonus payments, equity grants, severance or benefits of any kind after the Separation
Date except as expressly specified in this Agreement. Without limiting the foregoing, Employee acknowledges and agrees that the payments
and arrangements described in this Section 2 are in excess of any amounts (or pro rata portions thereof) to which she may
be entitled or that otherwise may be due and owed to Employee from the Company. Employee further agrees that any and all past, present
or future rights he had, has or hereafter may have, arising out of or relating to any bonus, performance, or incentive compensation plan
or programs of the Company, have been permanently extinguished and are of no further force and effect with respect to Employee, except
as expressly provided in this Agreement. Employee shall be solely responsible for any taxes related to the Special Compensation under
this Section 2 and agrees that neither the Company nor the Releasees (as defined below) have any liability for such tax obligations.
3. General
Release and Waiver of Claims.
(a) In
consideration of the Company’s obligations set forth in this Agreement, Employee, on behalf of himself and his spouse, heirs, executors,
administrators, beneficiaries, successors and assigns, hereby voluntarily, knowingly, willingly, unconditionally, and irrevocably releases
and forever discharges (i) the Company and the Trust of Carriage Services Capital Trust, (ii) all of their respective subsidiaries
and affiliates and their each of their predecessors, successors and assigns, (iii) together with the respective present or former
officers, directors, partners, managers, trustees, shareholders, employees, attorneys, and agents of all of the foregoing entities and
any and all employee pension or welfare benefits plans, including current and former trustees and administrators of these plans (collectively,
the “Releasees”), both individually and in their official capacities, from any and all rights, claims, causes of action,
charges, demands, damages, liabilities, losses, debts, and expenses (including attorneys’ fees and costs actually incurred) of every
kind, type, nature, or description whatsoever, in law or equity, known or unknown, suspected or unsuspected, vested or contingent, accrued
or yet to accrue, that Employee or Employee’s heirs, executors, administrators, beneficiaries, successors or assigns ever had, now
have or hereafter can, shall or may have by reason of any matter, cause or thing whatsoever arising from the beginning of time to the
Effective Date. This Release includes, but is not limited to, any rights or claims relating in any way to Employee’s employment
relationship with the Company or any of the Releasees, the cessation thereof; any claims for unpaid commissions, bonuses, compensation,
fees, expenses, wages, back pay, equity, salary, incentive pay, vacation pay, legal fees, fringe benefits, severance, contractor payments,
termination payments, or other compensation; any rights or claims arising under any legally waivable federal, state or local constitution,
statute, ordinance, or regulation, including without limitation the Age Discrimination in Employment Act of 1967 (the “ADEA”),
the Older Workers Benefit Protection Act (the “OWBPA”), Title VII of the Civil Rights Act of 1964, the Civil Rights
Act of 1991, the Americans with Disabilities Act of 1990, the Family and Medical Leave Act of 1993, the Genetic Information Nondiscrimination
Act of 2008, the Equal Pay Act, the anti-retaliation provisions of the Fair Labor Standards Act, the Rehabilitation Act of 1973, the Employee
Retirement Income Security Act of 1974, the Sarbanes-Oxley Act of 2002, the Dodd-Frank Wall Street Reform and Consumer Protection Act,
the Worker Adjustment Retraining and Notification (“WARN”) Act and any state WARN statutes, Section 1981 of the
Civil Rights Act of 1866, the National Labor Relations Act, the Fair Credit Reporting Act, the Occupational Safety and Health Act, any
rights or claims arising under the common law or under any plan, program, policy, agreement, contract, understanding or promise, written
or oral, express or implied, formal or informal, between the Company or any of the Releasees and Employee, as well as any other offer
letter, award agreement, or employment agreement or understanding; and any and all claims for alleged tortious, defamatory or fraudulent
conduct, including without limitation intentional infliction of emotional distress, defamation, fraud, and breach of duty (collectively,
the “Released Claims”). Notwithstanding the foregoing, nothing in this Agreement shall (u) waive any claim that
arises after the Effective Date, (v) waive any claim for contractual payments under this Agreement, (w) waive any rights to
payments under the Company’s medical plan and 401(k) plan, (x) be construed to prohibit Employee from bringing appropriate
proceedings to enforce this Agreement; (y) waive any rights that, pursuant to law, cannot be waived or subject to a release of this
kind, such as rights to unemployment or workers’ compensation benefits; or (z) waive any rights to indemnification that Employee
may have under any organizational documents of the Company or any directors and officers liability insurance policy of the Company or
any individual indemnity agreement with the Company.
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Melvin C. Payne Transition Agreement 2/22/24
(b) The
Company acknowledges that the Indemnity Agreement between the Company and Employee dated December 18, 2000 (“Indemnity
Agreement”) is in full force and effect. The Company also acknowledges that the Employee is covered by indemnity provisions
as provided under both the Indemnity Agreement and Article VII of the Company’s By-Laws, whichever provides the broadest protections
to Employee. The Company covenants that any D&O Insurance Policies in effect for the period of six years after the date Employee is
no longer a member of the Board will provide Employee with the same benefits as the benefits provided to the then-current members of the
Board and the then-serving Chief Executive Officer.
(c) Nothing
in this Agreement is intended to (i) interfere with Employee’s right to testify or assist in an investigation, hearing, or
proceeding by the Equal Employment Opportunity Commission or a comparable state or local agency (“EEOC”), the Securities
and Exchange Commission (“SEC”), the Department of Justice, the Congress, any agency Inspector General; or any other
federal, state, or local governmental or self-regulatory authority or entity, (ii) prohibit Employee from reporting possible violations
of federal and/or state law or regulation to any federal, state, or local governmental agency or entity, including with respect to alleged
criminal conduct or unlawful employment practices, or from making other disclosures that are protected under the whistleblower provisions
of federal and/or state law or regulation, (iii) making truthful statements or disclosures regarding alleged unlawful employment
practices; or (iv) seek a determination of the validity of the waiver of Employee’s rights under the ADEA or the OWBPA. Employee
does not need the prior authorization of the Company to make any such reports or disclosures and Employee is not required to notify the
Company that Employee made such reports or disclosures. To the maximum extent permitted by law, Employee agrees that if such a charge
or complaint is made, Employee shall not be entitled to recover any individual monetary relief or other individual remedies. Subject
to the foregoing, Employee agrees that Employee will not voluntarily bring or assist others in bringing claims against any of the Releasees
and will not cooperate with, supply information to or on behalf of, or assist any litigant or their agents or attorneys in any proceeding
against any of the Releasees. For the avoidance of doubt, nothing in this Agreement shall be construed to prohibit Employee from engaging
in protected concerted activity under the National Labor Relations Act for the purpose of collective bargaining or other mutual aid or
protection, including, without limitation, (w) making disclosures concerning this Agreement in aid of such concerted activities;
(x) filing unfair labor practice charges; (y) assisting others who are filing such charges; and (z) cooperating with the
investigative process of the National Labor Relations Board or other government agencies.
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Melvin C. Payne Transition Agreement 2/22/24
(d) Employee
acknowledges that Section 3(a) includes a waiver of any rights and claims arising under the ADEA and the OWBPA (the “ADEA
Release”). Employee acknowledges that the consideration that he is receiving in exchange for this waiver of the rights and claims
specified in Section 2 exceeds anything of value to which Employee is already entitled. Employee acknowledges that he has
been given a period of at least 21 days within which to consider the release contained in this Section 3 or has knowingly
and voluntarily waived the right to do so, with the execution of this Agreement constituting a voluntary waiver. Employee understands
that he may revoke the ADEA Release during the seven days following the execution of this Agreement by providing written notice,
signed by Employee and received by the Company no later than 5:00 p.m. Central Time on the seventh day of the revocation period
by delivering to the Company written notice of revocation by e-mail to Steve Metzger, President, at Steve.Metzger@carriageservices.com.
Employee understands that if he revokes the ADEA Release, Employee will not be entitled to any portion of the Special Consideration set
forth in Section 2. This Agreement shall become effective on the eighth day after Employee executes this Agreement without
revocation (the “Effective Date”).
(e) Employee
understands and agrees that he is not entitled to the Special Consideration unless his spouse executes the Exhibit Release concurrently
with the execution of this Agreement.
4. Return
of Company Property. Employee shall return, in good working order, any
and all property of the Company that is in his possession, custody or control within 30 days after the Separation Date. Such property
includes, but is not limited to, keys, computers, cell phones, software, calculators, equipment, credit cards, forms, files, manuals,
correspondence, business cards, personnel data, lists of or other information regarding customers, contacts and/or employees, contracts,
contract information, agreements, leases, plans, brochures, catalogues, training materials, computer tapes and diskettes or other portable
media.
5. Non-Admission.
Employee and the Company agree that this Agreement and the consideration provided to Employee by the Company is not an admission by either
Party of any violation of the other Party’s rights or of any violation of contract or statutory or common law.
6. Non-Disparagement.
Employee specifically covenants and agrees not to, directly or indirectly,
make, publish or communicate or cause to be made, published or communicated, to anyone any remark, statement or comment, orally or in
writing, falsely criticizing or disparaging the Company.
7. Continuing
Obligations. Employee acknowledges that in the course of his employment
with the Company he has obtained (and during the Consulting Period, he will obtain) confidential and proprietary information including,
but not limited to, financial, accounting, business, product, customer and marketing information, plans, lists, agreements, forecasts,
trade secrets, management methods, operating techniques, strategies, prospective acquisitions, reports, studies, analyses, this Agreement,
and other confidential information and knowledge concerning the business of the Company (collectively “Confidential Information”).
Subject to Section 3(b), Employee acknowledges and agrees that he has a continuing obligation to maintain the confidentiality
of all such non-public information, even after the Separation Date and that he remains bound by the restrictive covenants contained in
Sections 10, 13, 14, 15, 16, 17 and 18 of the Employment Agreement, and that those obligations are reasonable and enforceable (collectively,
the “Ongoing Restrictive Covenants”). Employee understands and acknowledges that the Employee’s obligations
under this Agreement regarding Confidential Information begin immediately and shall continue until the Confidential Information has become
public knowledge other than as a result of the Employee’s breach of this Agreement or a breach by those acting in concert with
the Employee or on the Employee’s behalf. As an inducement to the Company to enter into this Agreement and as a condition to the
Company’s obligation to provide any benefits to Employee under this Agreement, Employee represents to, and covenants with or in
favor of, the Company that Employee will comply with all of Employee’s obligations under this Agreement, including, without limitation,
his obligations regarding non-disparagement, Confidential Information and the Ongoing Restrictive Covenants, subject to Section 3(b).
Employee is hereby notified in accordance with the Defend Trade Secrets Act of 2016 that Employee will not be held criminally or civilly
liable under any federal or state trade secret law for the disclosure of a trade secret that (a) is made (i) in confidence
to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose
of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed under
seal in a lawsuit or other proceeding. If Employee files a lawsuit for retaliation against the Company for reporting a suspected violation
of law, Employee may disclose the Company’s trade secrets to Employee’s attorney and use the trade secret information in
the court proceeding if Employee files any document containing the trade secret under seal, and does not disclose the trade secret, except
pursuant to court order.
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Melvin C. Payne Transition Agreement 2/22/24
8. Cooperation.
Employee acknowledges and agrees that from and after the Separation Date, he will
cooperate fully with the Company, its officers, employees, agents, affiliates and attorneys in the defense or prosecution of, or in preparation
for the defense or prosecution of any lawsuit, dispute, investigation or other legal proceedings (“Proceedings”).
Employee further acknowledges and agrees that he will cooperate fully with the Company, its officers, employees, agents, affiliates and
attorneys on any matter related to Company business (“Matters”) that occurred during the period of Employee’s
employment or were otherwise impacted by Employee’s employment. Such cooperation shall include providing true and accurate information
or documents concerning, or affidavits or testimony about, all or any matters at issue in any Proceedings/Matters as shall from time
to time be requested by the Company, and shall be with the knowledge of Employee. Such cooperation shall be provided by Employee without
remuneration, but Employee shall be entitled to reimbursement for all reasonable and appropriate out of pocket expenses incurred by him
in so cooperating, including, by way of example and not by way of limitation, airplane fares, hotel accommodations, meal charges and
other similar expenses to attend Proceedings/Matters outside of the city of Employee’s residence. The proposed reasonable fees
and expenses of Employee shall be submitted by the Employee in writing to the Company in advance, and only after pre-approval by the
Company in writing shall be reimbursed by the Company on a regular, periodic basis upon presentation by Employee of a statement and receipts
in accordance with the Company’s customary practices and policies; provided, however, that such reimbursement will
be paid no later than December 31st of the calendar year following the calendar year in which Employee incurred the expense. In
the event Employee is asked by a third party to provide information regarding the Company, or is called other than by the Company to
testify in any Proceeding/Matter related to the Company, he will notify the Company as soon as possible in order to give the Company
a reasonable opportunity to respond and/or participate in such Proceeding/Matter.
9. Remedies.
In the event of a breach or threatened breach by Employee of any of the provisions of this Agreement, including, without limitation,
the Ongoing Restrictive Covenants, Employee hereby consents and agrees that the Company shall be entitled to seek, in addition to all
other available remedies, a temporary restraining order, a temporary or permanent injunction or other equitable relief against such breach
or threatened breach from any court of competent jurisdiction, without the necessity of providing notice, paying bond, or showing any
actual damages or that money damages would not afford an adequate remedy, to the maximum extent permitted by law. Any equitable relief
shall be in addition to, not in lieu of, legal remedies, monetary damages, or other available relief. Employee further agrees that, in
the event Employee breaches or threatens to breach this Agreement, including, without limitation, the Ongoing Restrictive Covenants,
or fails to satisfy any of the Special Consideration Conditions, in addition to any other remedies it may have, Employee shall have no
right to any Special Consideration and shall forfeit and reimburse the Company for any portion of any previously paid Special Consideration,
without waiving the releases provided herein. Company and Employee acknowledge and agree that the prevailing Party shall be entitled
to payment of its attorneys’ fees and other costs and expenses incurred in enforcing this provision of this Agreement and/or in
prosecuting any counterclaim or cross-claim based on this provision of this Agreement.
10. Reformation.
If a court rules that any of the restrictions in this Agreement or any of the Ongoing Restrictive Covenants are unenforceable, then
such restriction shall be reduced or modified by the court so that the restriction may be enforced to the maximum extent permitted
by law.
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Melvin C. Payne Transition Agreement 2/22/24
11. Consultation
with Attorney; Voluntary Agreement. The Company advises Employee to consult
with an attorney of his choosing prior to signing this Agreement. Employee understands and agrees that he has the right and has been
given the opportunity to review this Agreement and, specifically, the Release in Section 3, with an attorney. Employee also
understands and agrees that she is under no obligation to consent to the Release set forth in Section 3. Employee acknowledges
and agrees that the promises set forth this Agreement, including but not limited to the Special Consideration, are sufficient consideration
to require him to abide with his obligations under this Agreement, including but not limited to the Release in Section 3.
Employee represents that he has read this Agreement, including the Release in Section 3 and understands its terms and that
he enters into this Agreement freely, voluntarily, and without coercion. By executing this Agreement, Employee acknowledges that Employee:
(a) is not relying upon any statements, understandings, representations, expectations, or agreements other than those expressly
set forth in this Agreement; (b) has made Employee’s own investigation of the facts and is relying solely upon Employee’s
own knowledge; (c) knowingly waives any claim that this Agreement was induced by any misrepresentation or nondisclosure and any
right to rescind or avoid this Agreement based upon presently existing facts, known or unknown; (d) is entering into this Agreement
freely and voluntarily; (e) has carefully read and understood all of the provisions of this Agreement; and (f) was provided
the opportunity to discuss and did discuss all aspects of this Agreement with his legal counsel of Employee’s choosing, including
Alan J. Robin Esq. The Parties stipulate that the Company is relying upon these representations and warranties in entering into this
Agreement. These representations and warranties shall survive the execution of this Agreement.
12. Fees
and Costs. Except as otherwise set forth in this Agreement, the Parties shall
bear their own attorneys’ fees and costs.
13. Company
Non-Disparagement. The Company will direct its directors and officers not to,
directly or indirectly, make, publish or communicate or cause to be made, published or communicated, to anyone any remark, statement
or comment, orally or in writing, falsely criticizing or disparaging Employee.
14. Successors
and Assigns. This Agreement shall inure to the benefit of the Company and its
affiliates (and its and their successors and assigns).
15. Section 409A.
This Agreement shall be interpreted and administered in a manner so that any compensation or benefit payable hereunder shall be paid
or provided in a manner that is either exempt from or compliant with the requirements of Section 409A. Nevertheless, the tax treatment
of the compensation and benefits provided under this Agreement is not warranted or guaranteed to Employee, who is responsible for all
taxes assessed on any payments made pursuant to this Agreement, whether under Section 409A or otherwise. Neither the Company nor
its directors, officers, employees, or advisors shall be held liable for any taxes, interest, penalties, or other monetary amounts owed
by Employee, including as a result of the application of Section 409A. Any installment payment hereunder shall be deemed to be a
separate payment, as described in Treas. Reg. Section 1.409A-2(b)(2), for purposes of Section 409A. To the extent that any
reimbursements payable to Employee are subject to the provisions of Section 409A: (a) any such reimbursements will be paid
no later than December 31 of the year following the year in which the expense was incurred, (b) the amount of expenses reimbursed
in one year will not affect the amount eligible for reimbursement in any subsequent year, and (c) the right to reimbursement under
this Agreement will not be subject to liquidation or exchange for another benefit. Notwithstanding any provisions of this Agreement to
the contrary, if Employee is a “specified employee” (within the meaning of Section 409A and determined pursuant to any
policies adopted by the Company consistent with Section 409A), at the time of Employee’s separation from service, and if any
portion of the payments or benefits to be received by Employee upon separation from service would be considered deferred compensation
under Section 409A and cannot be paid or provided to Employee without Employee incurring taxes, interest or penalties under Section 409A
of the Code, amounts that would otherwise be payable pursuant to this Agreement and benefits that would otherwise be provided pursuant
to this Agreement, in each case, during the six-month period immediately following Employee’s separation from service shall instead
be paid or made available on the earlier of (x) the first business day of the seventh month following the date of Employee’s
separation from service and (y) Employee’s death.
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Melvin C. Payne Transition Agreement 2/22/24
16. Choice
of Law; Venue. This Agreement and all matters or issues relating to the interpretation,
construction, validity, and enforcement of this Agreement, Employee’s employment, the termination thereof, the restrictive covenants
relating to non-disparagement, Confidential Information and the Ongoing Restrictive Covenants, and any other matter between Employee
and the Company (or its affiliates) shall be governed by the laws of the State of Texas, without giving effect to any choice-of-law principle
that would cause the application of the laws of any jurisdiction other than Texas, and jurisdiction and venue of any action or proceeding
must be brought exclusively in a state district court in Harris County, Texas or federal district court in the Southern District of Texas,
Houston Division. Each Party submits to the exclusive jurisdiction of such courts and agrees not to raise any objection to such jurisdiction.
17. Headings.
The headings of the sections hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect
the meaning thereof.
18. Entire
Agreement.
(a) This
Agreement, together with the Ongoing Restrictive Covenants, replaces and merges all previous agreements, amendments and discussions between
Employee and Company (or any of its affiliates) and constitutes the entire agreement between the Employee and the Company (and any of
its affiliates). Any existing employment agreement between the Employee and the Company (or any of its affiliates), including the Employment
Agreement, is hereby terminated and no longer of any force or effect. This Agreement may be amended, waived or terminated only by a written
instrument that is identified as an amendment, waiver or termination hereto, and is executed on behalf of both Parties.
(b) No
oral understandings, statements, promises, terms, conditions, obligations, or agreements contrary or in addition to the terms of this
Agreement exist. This Agreement may not be changed by oral representations, and may be amended only by written instrument executed by
a duly authorized representative of each of the Parties, or their respective successors or assigns. If any part of this Agreement is found
to be illegal or unenforceable by any agency or court, the remaining provisions shall continue in full force and effect.
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Melvin C. Payne Transition Agreement 2/22/24
19. Notices.
Subject to Section 3(d), each notice or other communication required or permitted under this Agreement shall be in writing
and transmitted by personal delivery or prepaid courier or messenger service (whether overnight or same-day) and by electronic mail,
delivery and read receipt required, addressed (in any case) to the other Party at the address below:
To the Company:
Steven D. Metzger
President
Carriage Services, Inc.
3040 Post Oak Blvd.
Houston, TX 77056
Steve.Metzger@carriageservices.com
With a courtesy copy,
which does not constitute notice, to:
J. Mark Metts
Sidley Austin LLP
1000 Louisiana St., Suite
5900
Houston, TX 77002
mmetts@sidley.com
To Employee:
Melvin C. Payne
1922 North Boulevard
Houston, TX 77098
mlvnpayne@yahoo.com
With a courtesy copy,
which does not constitute notice, to:
Alan J. Robin
2450 Fondren Road, Suite
309
Houston, Texas 77063-2316
alan@alanrobinlaw.com
20. Counterparts.
This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute
one and the same agreement.
[Signature Page Follows; Remainder of Page Left
Intentionally Blank]
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Melvin C. Payne Transition Agreement 2/22/24
We the undersigned do hereby
sign and agree to the terms set forth in this Agreement, on the dates set forth below.
EMPLOYEE: |
|
|
|
/s/
Melvin C. Payne |
|
Melvin C. Payne |
|
|
|
THE COMPANY: |
|
|
|
CARRIAGE SERVICES, INC. |
|
|
|
By: |
/s/ Steven D. Metzger |
|
|
Name: |
Steven D. Metzger |
|
|
Title: |
President |
|
[Signature Page to Transition Agreement]
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Melvin C. Payne Transition Agreement 2/22/24
EXHIBIT 1
GENERAL RELEASE
THIS GENERAL RELEASE (this
“Release”) is made and entered into as of February 21, 2024 (the “Effective Date”),
by and between Carriage Services, Inc., a Delaware corporation (the “Company”), and Karen Payne (hereafter “Individual”).
The Company and Individual may sometimes hereafter be referred to singularly as a “Party” or collectively as the “Parties.”
1. Consideration.
Individual acknowledges and agrees that she is receiving consideration from the Company pursuant to that certain Transition Agreement
by and between Melvin C. Payne and the Company dated as of February 21, 2024 (the “Transition Agreement”),
including but not limited to monetary renumeration to provide for COBRA coverage as provided in Section 2(a)(iv) of the Transition
Agreement.
2. General
Release and Waiver of Claims. In consideration of the Company’s obligations
set forth in this Release, Individual, on behalf of herself and her spouse, heirs, executors, administrators, beneficiaries, successors
and assigns, hereby voluntarily, knowingly, willingly, unconditionally, and irrevocably releases and forever discharges (a) the
Company and the Trust of Carriage Services Capital Trust, (b) all of their respective subsidiaries and affiliates and their each
of their predecessors, successors and assigns, (c) together with the respective present or former officers, directors, partners,
managers, trustees, shareholders, employees, attorneys, and agents of all of the foregoing entities and any and all employee pension
or welfare benefits plans, including current and former trustees and administrators of these plans (collectively, the “Releasees”),
both individually and in their official capacities, from any and all rights, claims, causes of action, charges, demands, damages, liabilities,
losses, debts, and expenses (including attorneys’ fees and costs actually incurred) of every kind, type, nature, or description
whatsoever, in law or equity, known or unknown, suspected or unsuspected, vested or contingent, accrued or yet to accrue, that Individual
or Individual’s heirs, executors, administrators, beneficiaries, successors or assigns ever had, now have or hereafter can, shall
or may have by reason of any matter, cause or thing whatsoever arising from the beginning of time to the Effective Date (“Release”).
This Release includes, but is not limited to, any rights or claims relating in any way to any rights or claims arising under the common
law or under any plan, program, policy, agreement, contract, understanding or promise, written or oral, express or implied, formal or
informal, between the Company or any of the Releasees and Individual or Individual’s spouse, as well as any other offer letter,
award agreement, or employment agreement or understanding; and any and all claims for alleged tortious, defamatory or fraudulent conduct,
including without limitation intentional infliction of emotional distress, defamation, fraud, and breach of duty (collectively, the “Released
Claims”). Individual covenants and agrees (i) that she will not commence, maintain or participate in any suit or proceeding
against the Releasees, (ii) that she has not filed any such suit or proceeding, and (iii) that she has not assigned or otherwise
transferred any interest in any Released Claim or any interest related to the Company to a third party. Notwithstanding the foregoing,
nothing in this Release shall (u) waive any claim that arises after the date Individual signs this Release, (v) waive any claim
for contractual payments under the Transition Agreement, (w) waive any rights to payments under the Company’s medical plan,
(x) be construed to prohibit Individual from bringing appropriate proceedings to enforce this Release; or (y) waive any rights
that, pursuant to law, cannot be waived or subject to a release of this kind.
Page 13 of 19
Melvin C. Payne Transition Agreement 2/22/24
3. Consultation
with Attorney; Voluntary Agreement. The Company advises Individual to consult with an attorney of her choosing prior to signing
this Release. Individual understands and agrees that she has the right and has been given the opportunity to review this Release with
an attorney. Individual also understands and agrees that she is under no obligation to consent to this Release. Individual acknowledges
and agrees that the promises set forth in Section 1 of this Release and in the Transition Agreement are sufficient consideration
to require her to abide with his obligations under this Release. Individual represents that she has read this Release, and understands
its terms and that she enters into this Release freely, voluntarily, and without coercion. By executing this Release, Individual acknowledges
that Individual: (a) is not relying upon any statements, understandings, representations, expectations, or agreements other than
those expressly set forth in this Release; (b) has made her own investigation of the facts and is relying solely upon her own knowledge;
(c) knowingly waives any claim that this Release was induced by any misrepresentation or nondisclosure and any right to rescind
or avoid this Release based upon presently existing facts, known or unknown; (d) is entering into this Release freely and voluntarily;
(e) has carefully read and understood all of the provisions of this Release; and (f) was provided the opportunity to discuss
and did discuss all aspects of this Release and of the Transition Agreement with his legal counsel of Individual’s choosing, including
Alan J. Robin, Esq. The Parties stipulate that the Company is relying upon these representations and warranties in entering into
this Release and the Transition Agreement. These representations and warranties shall survive the execution of this Release.
4. Entire
Agreement; Amendment and Termination. This Release replaces and merges all
previous agreements, amendments and discussions between Individual and the Company (or any of its affiliates) and constitutes the entire
agreement between the Individual and the Company (and any of its affiliates). This Release may be amended, waived or terminated only
by a written instrument that is identified as an amendment, waiver or termination hereto, and is executed on behalf of both Parties.
5. Governing
Law; Exclusive Jurisdiction. All matters or issues relating to the interpretation,
construction, validity, and enforcement of this Release shall be governed by the laws of the State of Texas, without giving effect to
any choice-of-law principle that would cause the application of the laws of any jurisdiction other than Texas, and jurisdiction and venue
of any action or proceeding must be brought exclusively in a state district court in Harris County, Texas or federal district court in
the Southern District of Texas, Houston Division. Each Party submits to the exclusive jurisdiction of such courts and agrees not to raise
any objection to such jurisdiction.
6. Counterparts.
This Release may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all
such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a copy hereof containing multiple
signature pages, each signed by one Party hereto, but together signed by both Parties.
[Signature Page Follows; Remainder of Page Left
Intentionally Blank]
Page 14 of 19
Melvin C. Payne Transition Agreement 2/22/24
IN WITNESS WHEREOF, Individual
has executed this Release, the Company has caused this Release to be executed in its name and on its behalf by its duly authorized officer,
to be effective as of the Effective Date.
INDIVIDUAL: |
|
|
|
/s/
Karen Payne |
|
Karen Payne |
|
|
|
THE COMPANY: |
|
|
|
CARRIAGE SERVICES, INC. |
|
|
|
By: |
/s/ Steven D. Metzger |
|
|
Name: |
Steven D. Metzger |
|
|
Title: |
President |
|
Page 15 of 19
Melvin C. Payne Transition Agreement 2/22/24
EXHIBIT 2
GENERAL RELEASE
THIS GENERAL RELEASE (this
“Release”) is made and entered into as of [●] [●], [●] (the “Effective Date”),
by and between Carriage Services, Inc., a Delaware corporation (the “Company”), and Melvin C. Payne (hereafter “Individual”).
The Company and Individual may sometimes hereafter be referred to singularly as a “Party” or collectively as the “Parties.”
Capitalized terms not otherwise defined herein shall have the respective meanings ascribed in that certain Transition Agreement by and
between Individual and the Company dated as of February 21, 2024 (the “Transition Agreement”).
1. General
Release and Waiver of Claims.
(a) In
consideration of the Company’s obligations set forth in the Transition Agreement, Individual, on behalf of himself and his spouse,
heirs, executors, administrators, beneficiaries, successors and assigns, hereby voluntarily, knowingly, willingly, unconditionally, and
irrevocably releases and forever discharges (i) the Company and the Trust of Carriage Services Capital Trust, (ii) all of their
respective subsidiaries and affiliates and their each of their predecessors, successors and assigns, (iii) together with the respective
present or former officers, directors, partners, managers, trustees, shareholders, employees, attorneys, and agents of all of the foregoing
entities and any and all employee pension or welfare benefits plans, including current and former trustees and administrators of these
plans (collectively, the “Releasees”), both individually and in their official capacities, from any and all rights,
claims, causes of action, charges, demands, damages, liabilities, losses, debts, and expenses (including attorneys’ fees and costs
actually incurred) of every kind, type, nature, or description whatsoever, in law or equity, known or unknown, suspected or unsuspected,
vested or contingent, accrued or yet to accrue, that Individual or Individual’s heirs, executors, administrators, beneficiaries,
successors or assigns ever had, now have or hereafter can, shall or may have by reason of any matter, cause or thing whatsoever arising
from the beginning of time to the Effective Date. This Release includes, but is not limited to, any rights or claims relating in any way
to the Transition Agreement, the Consulting Period, the Consulting Pay, any rights or claims arising under the common law or under any
plan, program, policy, agreement, contract, understanding or promise, written or oral, express or implied, formal or informal, between
the Company or any of the Releasees and Individual or Individual’s spouse, as well as any other offer letter, award agreement, or
employment agreement or understanding; any and all claims for alleged tortious, defamatory or fraudulent conduct, including without limitation
intentional infliction of emotional distress, defamation, fraud, and breach of duty; and any rights or claims arising under any legally
waivable federal, state or local constitution, statute, ordinance, or regulation, including without limitation the Age Discrimination
in Employment Act of 1967 (the “ADEA”), the Older Workers Benefit Protection Act (the “OWBPA”),
Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the Americans with Disabilities Act of 1990, the Family and Medical
Leave Act of 1993, the Genetic Information Nondiscrimination Act of 2008, the Equal Pay Act, the anti-retaliation provisions of the Fair
Labor Standards Act, the Rehabilitation Act of 1973, the Employee Retirement Income Security Act of 1974, the Sarbanes-Oxley Act of 2002,
the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Worker Adjustment Retraining and Notification (“WARN”)
Act and any state WARN statutes, Section 1981 of the Civil Rights Act of 1866, the National Labor Relations Act, the Fair Credit
Reporting Act, the Occupational Safety and Health Act, any rights or claims arising under the common law or under any plan, program, policy,
agreement, contract, understanding or promise, written or oral, express or implied, formal or informal, between the Company or any of
the Releasees and Employee, as well as any other offer letter, award agreement, or employment agreement or understanding; and any and
all claims for alleged tortious, defamatory or fraudulent conduct, including without limitation intentional infliction of emotional distress,
defamation, fraud, and breach of duty (collectively, the “Released Claims”). Notwithstanding the foregoing, nothing
in this Release shall (i) waive any claim that arises after the date Individual signs this Release, (ii) waive any rights to
payments under the Company’s medical plan and 401(k) plan, (iii) be construed to prohibit Individual from bringing appropriate
proceedings to enforce this Release; (iv) waive any rights that, pursuant to law, cannot be waived or subject to a release of this
kind; or (v) waive any rights to indemnification that Individual may have under any organizational documents of the Company or any
directors or officers liability insurance policy of the Company or any individual indemnity agreement with the Company.
Page 16 of 19
Melvin C. Payne Transition Agreement 2/22/24
(b) Nothing
in this Release is intended to (i) interfere with Individual’s right to testify or assist in an investigation, hearing, or
proceeding by the Equal Employment Opportunity Commission or a comparable state or local agency (“EEOC”), the Securities
and Exchange Commission (“SEC”), the Department of Justice, the Congress, any agency Inspector General; or any other
federal, state, or local governmental or self-regulatory authority or entity, (ii) prohibit Individual from reporting possible violations
of federal and/or state law or regulation to any federal, state, or local governmental agency or entity, including with respect to alleged
criminal conduct or unlawful employment practices, or from making other disclosures that are protected under the whistleblower provisions
of federal and/or state law or regulation, (iii) making truthful statements or disclosures regarding alleged unlawful employment
practices; or (iv) seek a determination of the validity of the waiver of Employee’s rights under the ADEA or the OWBPA. Individual
does not need the prior authorization of the Company to make any such reports or disclosures and Individual is not required to notify
the Company that Individual made such reports or disclosures. To the maximum extent permitted by law, Individual agrees that if such a
charge or complaint is made, Individual shall not be entitled to recover any individual monetary relief or other individual remedies.
Subject to the foregoing, Individual agrees that Individual will not voluntarily bring or assist others in bringing claims against any
of the Releasees and will not cooperate with, supply information to or on behalf of, or assist any litigant or their agents or attorneys
in any proceeding against any of the Releasees. For the avoidance of doubt, nothing in this Release shall be construed to prohibit Individual
from engaging in protected concerted activity under the National Labor Relations Act for the purpose of collective bargaining or other
mutual aid or protection, including, without limitation, (A) making disclosures concerning this Release in aid of such concerted
activities; (B) filing unfair labor practice charges; (C) assisting others who are filing such charges; and (D) cooperating
with the investigative process of the National Labor Relations Board or other government agencies.
(c) Individual
acknowledges that Section 1 includes a waiver of any rights and claims arising under the ADEA and the OWBPA (the “ADEA
Release”). Individual acknowledges that the consideration that he is receiving in exchange for this waiver of the rights and
claims specified in this Section 1 exceeds anything of value to which Individual is already entitled. Individual acknowledges
that he has been given a period of at least 21 days within which to consider the release contained in this Section 1
or has knowingly and voluntarily waived the right to do so, with the execution of this Release constituting a voluntary waiver. Individual
understands that he may revoke the ADEA Release during the seven days following the execution of this Release by providing written
notice, signed by Individual and received by the Company no later than 5:00 p.m. Central Time on the seventh day of the
revocation period by delivering to the Company written notice of revocation by e-mail to Steve Metzger, President, at Steve.Metzger@carriageservices.com.
Individual understands that if he revokes the ADEA Release, Individual will not be entitled to any portion of the Special Consideration
set forth in Section 2 of the Transition Agreement and will be deemed to have breached the Transition Agreement. This Release shall
become effective on the eighth day after Employee executes this Release without revocation (the “Effective Date”).
Page 17 of 19
Melvin C. Payne Transition Agreement 2/22/24
2. Consultation
with Attorney; Voluntary Agreement. The Company advises Individual to consult with an attorney of his choosing prior to signing
this Release. Individual understands and agrees that he has the right and has been given the opportunity to review this Release with
an attorney. Individual also understands and agrees that he is under no obligation to consent to this Release. Individual acknowledges
and agrees that the promises set forth in Section 1 of this Release and the Transition Agreement are sufficient consideration
to require her to abide with his obligations under this Release. Individual represents that she has read this Release, and understands
its terms and that she enters into this Release freely, voluntarily, and without coercion. By executing this Release, Individual acknowledges
that Individual: (a) is not relying upon any statements, understandings, representations, expectations, or agreements other than
those expressly set forth in this Release; (b) has made his own investigation of the facts and is relying solely upon her own knowledge;
(c) knowingly waives any claim that this Release was induced by any misrepresentation or nondisclosure and any right to rescind
or avoid this Release based upon presently existing facts, known or unknown; (d) is entering into this Release freely and voluntarily;
(e) has carefully read and understood all of the provisions of this Release; and (f) was provided the opportunity to discuss
and did discuss all aspects of this Release and the Transition Agreement with his legal counsel of Individual’s choosing, including
Alan J. Robin, Esq. The Parties stipulate that the Company is relying upon these representations and warranties in entering into
this Release and the Transition Agreement. These representations and warranties shall survive the execution of this Release.
3. Governing
Law; Exclusive Jurisdiction. All matters or issues relating to the interpretation,
construction, validity, and enforcement of this Release shall be governed by the laws of the State of Texas, without giving effect to
any choice-of-law principle that would cause the application of the laws of any jurisdiction other than Texas, and jurisdiction and venue
of any action or proceeding must be brought exclusively in a state district court in Harris County, Texas or federal district court in
the Southern District of Texas, Houston Division. Each Party submits to the exclusive jurisdiction of such courts and agrees not to raise
any objection to such jurisdiction.
4. Representations.
Individual represents that he has returned all property of the Company and its affiliates and that he has fully complied with all terms
of the Transition Agreement and the Ongoing Restrictive Covenants. Individual also acknowledges and agrees that the Company has fully
complied with all terms of the Transition Agreement and that Individual has received all Consulting Pay (and any other Special Consideration)
to which he is entitled.
5. Counterparts.
This Release may be executed in any number of counterparts, each of which when so executed and delivered shall be an original, but all
such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a copy hereof containing multiple
signature pages, each signed by one Party hereto, but together signed by both Parties.
[Signature Page Follows;
Remainder of Page Left Intentionally Blank]
Page 18 of 19
Melvin C. Payne Transition Agreement 2/22/24
IN WITNESS WHEREOF, Individual
has executed this Release, the Company has caused this Release to be executed in its name and on its behalf by its duly authorized officer,
to be effective as of the Effective Date.
INDIVIDUAL: |
|
|
|
|
|
Melvin C. Payne |
|
|
|
THE COMPANY: |
|
|
|
CARRIAGE SERVICES, INC. |
|
|
|
By: |
|
|
|
Name: |
|
|
|
Title: |
|
|
Page 19 of 19
Melvin C. Payne Transition Agreement 2/22/24
v3.24.0.1
Cover
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Feb. 21, 2024 |
Cover [Abstract] |
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Amendment Flag |
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Carriage Services, Inc.
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DE
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Houston
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Carriage Services (NYSE:CSV)
過去 株価チャート
から 4 2024 まで 5 2024
Carriage Services (NYSE:CSV)
過去 株価チャート
から 5 2023 まで 5 2024