SYS-CON MEDIA Authors: Carmen Gonzalez, Sean Houghton, Glenn Rossman, Ignacio M. Llorente, Xenia von Wedel

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Carriage Services Announces Record 2013 Annual Results, Acquisitions From SCI Subject To FTC Approval, Capital Structure Strategy And Execution Timeframe, David J. DeCarlo Joins Carriage Leadership Team, And Increased Full Year Outlooks For 2014 And 2015

HOUSTON, March 5, 2014 /PRNewswire/ -- Carriage Services, Inc. (NYSE: CSV) today announced record results for the year ending December 31, 2013 along with major near term events that will significantly impact Carriage's intermediate term Outlook.

Melvin C. Payne, Chief Executive Officer, stated, "On January 8, 2014, we issued a press release announcing the termination of Carriage's Good To Great Stock Award Program with an early cash-out and gave notice that the industry acquisition landscape was becoming more attractive and visible.  Moreover, we also stated that we would likely soon look at the optimum capital structure strategy required to finance an accelerating growth strategy over the next five years.  I am now extremely proud to announce the following major milestone events for our company."

I.    Another year of record financial performance in 2013, consistent with our annual Good To Great theme of Carriage Services 2013 - Raising the Standard - ALL IN!

  • Total Revenue of $214.0 million, an increase of 7.3%;
  • Non-GAAP Adjusted Consolidated EBITDA of $56.1 million, an increase of 5.8%;
  • Non-GAAP Basic Earnings Per Share of $1.00, an increase of 23.5%; and
  • Non-GAAP Free Cash Flow of $33.2 million, an increase of 60.0%.

II.    Agreement to acquire six businesses from SCI

  • Enter two new large strategic markets, New Orleans and Washington, D.C.;
  • Four businesses in New Orleans and two in Alexandria, VA; and
  • Subject to FTC approval, such approval and closing expected early in the second quarter.

III.    Financing Strategy and Execution Timeframe

  • Plan developed with Bank of America, agent for our Bank Group, to expand our existing Revolving Credit Facility and extend our Bank Term Loan simultaneously with closing of SCI divestitures; and
  • Plan developed to refinance the TIDES Convertible Security with a new Convertible Issue in conjunction with refinancing of Bank Revolving Credit and Term Loan Facilities.

IV.    Increased Revenue Growth and Earning Power Outlook for 2014 and 2015

  • Strong pipeline of quality independent acquisition candidates, creating visibility of an acceleration of revenue and earnings over the next two full years;
  • Full year 2014 Outlook range of $231 - $235 million Revenue and Adjusted Basic EPS of $1.18 - $1.22;
  • Full year 2015 Outlook range of $254 - $262 million Revenue and Adjusted Basic EPS of $1.42 - $1.48;
  • Full Year Outlooks are not "precisely wrong management estimates," but rather "roughly right performance ranges" that will be updated with Rolling Four Quarter Outlooks as we move through these two years.

V.    Dave DeCarlo joins Bill Heiligbrodt and Mel Payne as Executive Officer Leadership Team

  • Bill, Dave and Mel will comprise new Operations and Strategic Growth Executive Committee;
  • Bill heads Treasury and Finance, Accounting and Reporting, Legal, Investor Relations; and
  • Dave heads Strategic and Corporate Development, Supply and Project Development, Operations Support including IT and HR, with a special focus on challenges and opportunities.

"On November 4, 2011, twenty years after Carriage was founded, we finalized a major Board and Executive Management reorganization, which we refer to internally as our Good To Great Transition Date, then launched a five year Good To Great Journey to take Carriage from a "Good" deathcare and consolidation company in 2012 to one considered "Great" by the end of 2016, using equity market valuation as a benchmark.  We assigned 2012 the theme of Carriage Services 2012 - A NEW BEGINNING!, and challenged and empowered our entire field and home office support teams "to own" the five year Good To Great Journey with broadly higher and sustainable operating and financial performance.  We assigned 2013 the theme of Carriage Services 2013 - Raising the Standard - ALL IN!

The results after two full years of this five year Good To Great Journey have been remarkable, as reflected in the Total Shareholder Return graph below comparing the five full years (since January 1, 2009) and YTD 2014 Total Shareholder Returns of Carriage (up 949.5%), SCI (up 317.5%) and the Russell 3000 Index (up 138.9%).  Moreover, approximately 80% of Carriage's Total Shareholder Return over the last five plus years has been realized since we launched our Good To Great Journey on January 1, 2012, as our stock price has increased 265% from $5.60 per share on December 31, 2011 to $20.43 per share on February 28, 2014.

Carriage Services “Good to Great”

*Total Return includes stock price appreciation and dividend reinvestment

While we have well executed our Standards Operating Model, Strategic Acquisition Model and 4E Leadership Model over the last two years, we believe that we are now well positioned to accelerate the high and sustainable earnings power of Carriage as an operating and consolidation platform in the still highly fragmented funeral and cemetery industry.  While it took 22 years from its founding for Carriage to achieve $1.02 per share in Non-GAAP Adjusted EPS in 2013 ($1.00 Basic plus $0.02 from divested operations), we are poised to expand our earnings power as defined by Non-GAAP Adjusted EPS by over 40% over the 2014 and 2015 Full Year Outlook Periods, as shown below:



Five Year Trend ($Millions Except Per Share and Percentage Amounts)












Actual


Outlook Midpoint





Actual


Good To Great


 Good To Great


Percent



2011


2012


2013


2014


2015


CAGR

Total Revenue


$

183.5



$

199.4



$

214.0



$

233.0



$

258.0



8.9%


Total Field EBITDA


68.4



79.1



84.6



93.4



104.5



11.2%


Total Field EBITDA Margin


37.3%



39.7%



39.5%



40.1%



40.5%



2.1%















Total Overhead


$

28.9



$

30.3



$

33.0



$

35.0



$

37.0



6.4%


Total Overhead Margin


15.7%



15.2%



15.4%



15.0%



14.3%



(2.3)%















Adjusted Consolidated EBITDA


$

48.9



$

53.1



$

56.1



$

62.9



$

71.0



9.8%


Adjusted Consolidated EBITDA Margin


26.7%



26.6%



26.2%



27.0%



27.5%



0.8%















Adjusted Net Income


$

12.0



$

14.8



$

18.2



$

21.8



$

26.8



22.2%


Adjusted Net Income Margin


6.5%



7.4%



8.5%



9.4%



10.4%



12.5%















Adjusted Basic EPS


$

0.65



$

0.81



$

1.00



$

1.20



$

1.45



22.2%


Basic Shares Outstanding


18.4



18.2



18.2



18.2



18.5



Flat


The above tables reference certain Non-GAAP financial measurements that are defined and reconciled at the end of this press release.

SCI has pioneered the consolidation of the highly fragmented funeral and cemetery industry over the last fifty years, and has been especially opportunistic over the last eight years with the acquisition of Alderwoods in 2006 (second largest consolidator at the time) and Stewart Enterprises in late 2013 (second largest at the time), leaving only SCI and Carriage as remaining long term, well established and capitalized consolidators with a similar portfolio revenue profile of funeral and cemetery businesses.  We are extraordinarily well positioned to benefit as a highly differentiated family succession planning solution over the next five to ten years, as we have developed an innovative high performance culture operating and consolidation framework that is uniquely attractive to the remaining large, quality independents in 15-20 large, demographically strong strategic markets.

Bill and I are therefore thrilled to have Dave DeCarlo joining our Executive Officer Leadership Team to head the Strategic Development function in order to focus on and realize the full potential of the current industry acquisition landscape. I speak for Dave, Bill and I on behalf of our Senior Leadership Team and Board of Directors when I say that we believe that Carriage is entering a "sweet spot" period of rapidly accelerating earnings power, Free Cash Flow and shareholder value creation as we leverage Carriage's high performance Standards Operating Model, Consolidation and Overhead Platform, and low share count with selective high quality acquisitions vetted by our proprietary Strategic Acquisition Model.  Our Good To Great Journey should continue to produce exceptional shareholder returns in future years and hard earned and well deserved recognition for our company and its Being The Best field operating and home office support leaders and employees.

Lastly and importantly for our company leadership and employees, I am extremely proud to publicly announce our Good To Great annual theme for this year, "Carriage Services 2014 : Being The Best - One Team, One Vision!," concluded Mr. Payne.

FIELD OPERATIONS

Year Ended December 31, 2013 compared to Year Ended December 31, 2012

  • Total Field Revenue increased 7.3% to $214.0 million;
  • Total Field EBITDA increased 7.0% to $84.6 million;
  • Total Field EBITDA Margin decreased 20 basis points to 39.5%;
  • Total Funeral Operating Revenue increased 7.2% to $154.7 million;
  • Same Store Funeral Revenue increased 0.2% with same store volume increasing 1.6%;
  • Acquisition Funeral Revenue increased 39.1% with acquisition volume increasing 28.9%;
  • Total Funeral Field EBITDA Margin decreased 150 basis points to 35.9%;
  • Total Cemetery Operating Revenue increased 5.7% to $40.5 million;
  • Cemetery pre-need property sale contracts increased 11.7% to 7,020;
  • Preneed property revenue recognized increased 10.8% and At-need revenue increased 6.5%;
  • Total Cemetery Field EBITDA Margin increased 320 basis points to 28.9%;
  • Total Financial Revenue increased 12.1% to $18.8 million;
  • Funeral Financial Revenue increased 21.3% to $9.3 million;
  • Cemetery Financial Revenue increased 4.4% to $9.5 million;
  • Total Financial EBITDA Margin increased 100 basis points to 92.3%.

FREE CASH FLOW

We produced Free Cash Flow from operations for the year 2013 of $33.2 million compared to Free Cash Flow from operations of $20.8 million for the corresponding period in 2012. The sources and uses of cash for the year 2012 and 2013 consisted of the following (in millions):


December 31,


2012


2013







Cash flow provided by operations

$

25.8



$

39.8


Cash used for maintenance capital expenditures


(5.0)




(6.6)


Free Cash Flow

$

20.8



$

33.2


Cash at beginning of period


1.1




1.7


Cash used for growth capital expenditures


(5.4)




(4.1)


Cash used for acquisitions and new construction


(45.1)




(19.7)


Proceeds from sale of business


0.6




10.2


Borrowings (payments) on the Credit Facility and debt


40.1




(19.0)


Cash used for dividends on common stock and redeemable preferred stock


(1.8)




(1.8)


Repurchase of common stock


(4.5)





Payment of loan origination costs and call premium on our Senior Notes


(4.9)





Other investing and financing activities, net


0.8




0.9


Cash at end of period

$

1.7



$

1.4


ROLLING FOUR QUARTER OUTLOOK RAISED AND INCREASED TO TWO FULL YEARS

The Rolling Four Quarter Outlooks ("Outlooks") reflects management's opinion on the performance of the portfolio of businesses, plus visible and likely acquisitions, for the rolling four quarter periods ending December 31, 2014, and December 31, 2015, and the performance of trusts during the corresponding periods. These Outlooks do not reflect dilution from conversion related to our existing convertible subordinated debentures, as we intend to refinance this security in the near term based on market conditions.

These yearly Outlooks are not intended to be management estimates or forecasts of our future performance, as we believe such precise quarterly and annual estimates will be precisely wrong all the time.  Rather, our intent and goal is to reflect a "roughly right range" most of the time of future "Rolling Four Quarters Outlook" performance as we execute our Standards Operating, Strategic Acquisition and 4E Leadership Models over time.

ROLLING FOUR QUARTER OUTLOOK – Periods Ending December 31, 2014 and December 31, 2015



Range (in millions, except per share amounts)



2014


2015

Revenues


$231.0 - $235.0


$254.0 - $262.0

Consolidated EBITDA


$57.9 - $59.0


$65.9 - $69.0

Adjusted Consolidated EBITDA


$62.4 - $63.5


$69.4 - $72.5

Net Income


$18.5 - $19.2


$23.1 - $25.9

Adjusted Net Income


$21.5 - $22.2


$25.4 - $28.2

Adjusted Basic Earnings Per Share


$1.18 - $1.22


$1.42 - $1.48

Factors affecting our analysis include, among others, number and size of acquisitions, and timing of closing, funeral contract volumes, average revenue per funeral service, cemetery interment volumes, preneed cemetery sales, capital expenditures, execution of our funeral and cemetery Standards Operating Model, Strategic Acquisition Model and Withdrawable Trust Income. Revenues, Consolidated EBITDA, Adjusted Consolidated EBITDA, Net Income, Adjusted Net Income, GAAP Earnings Per Share and Adjusted Earnings Per Share for the four quarter periods ending December 31, 2014 and 2015 are expected to improve relative to the same period in the previous period for the following reasons:

  • Increases in Acquired Funeral Revenue and Acquired Funeral Field EBITDA;
  • Increases in Acquired Cemetery Revenue and Acquired Cemetery Field EBITDA;
  • Modest increases in Same Store Funeral Revenue and Same Store Funeral Field EBITDA;
  • Increases in Same Store Cemetery Revenue and Same Store Cemetery Field EBITDA;
  • Increases in Financial Revenue and Financial EBITDA from trust funds; and
  • Reduced interest expense in conjunction with the fourth amendment to our bank credit facilities and the refinancing of our $90 million 7% convertible subordinated debentures.

We have not included in our Rolling Four Quarter Outlook a potentially fully diluted EPS calculation using the 4.4 million underlying shares of the TIDES security due to our intent to refinance this security in the near term. Our 2014 Rolling Four Quarter Outlook includes a reduction in cash taxes of approximately $7.25 million due to favorable adjustments from approved accounting method changes. This benefit will not occur in 2015.   The 2015 Rolling Four Quarter Outlook cash flow will be approximately the same as 2014 without the tax benefit.

CONFERENCE CALL AND INVESTOR RELATIONS CONTACT

Carriage Services has scheduled a conference call for tomorrow, March 6, 2014 at 9:30 a.m. central time. To participate in the call, please dial 866-516-3867 (ID-77317838) and ask for the Carriage Services conference call.  A replay of the conference call will be available through March 10, 2014 and may be accessed by dialing 855-859-2056 (ID-77317838). The conference call will also be available at www.carriageservices.com.

TRUST FUND PERFORMANCE

During 2013, Carriage's discretionary trust funds gained 14.2%. The current yield on Carriage's discretionary fixed income portfolio, which comprises 75% of discretionary trust assets, is 8.7% and the estimated annual income for the discretionary portfolio is approximately $11.3 million.

The total discretionary portfolio performance of 14.2% exceeded the 80/20 index benchmark performance of 12.4% in 2013 due to each of the fixed income and equity components of Carriage's  discretionary portfolio outperforming their respective benchmarks (S&P 500 & High Yield Index).  The discretionary portfolio equity and high yield performance in 2013 of 45% and 8.2%, respectively, exceeded  the 32.4% for the S&P 500 and a 7.5% gain for the High Yield Index.   

The 2013 performance of Carriage's discretionary trust portfolio continued to benefit Carriage through higher income earned from preneed funeral and cemetery contracts that have been serviced and through increased income from the cemetery perpetual care trusts. These benefits are evident in the increase in recognized financial revenue in our Trend Reports.  Given the recurring nature of the income generated by the fixed income portfolio, we expect the performance of the discretionary trust portfolio to benefit Carriage for the foreseeable future.

Shown below are consolidated performance metrics for the combined trust fund portfolios (preneed funeral, cemetery merchandise and services and cemetery perpetual care) at key dates.

Investment Performance



Investment Performance(1)


Index Performance



Discretionary

Total Trust


S&P 500
Stock Index

High Yield
Index

80/20 index

Benchmark(2)









1 year ended 12/31/13


14.2%


13.7%



32.4%


7.5%


12.4%


2 years ended 12/31/13


37.5%


33.2%



53.0%


24.4%


30.2%


3 years ended 12/31/13


33.5%


30.7%



56.2%


30.6%


35.7%


4 years ended 12/31/13


61.1%


54.4%



79.4%


50.4%


56.2%


5 years ended 12/31/13


150.6%


127.1%



125.8%


137.9%


135.5%















(1) Investment performance includes realized income and unrealized appreciation (depreciation).

(2) The 80/20 Benchmark is 80% weighted to the High Yield Index and 20% weighted to the S&P 500 Stock Index.


 

Asset Allocation as of December 31, 2013

(in thousands)




Discretionary

Trust Funds


Total

Trust Funds

Asset Class



MV

%


MV

%

Cash



$

5,539

3%



$

19,986

9%


Equities



36,255

20%



53,126

24%


Fixed Income



133,530

75%



147,412

65%


Other/Insurance



3,521

2%



3,720

2%


Total Portfolios



$

178,845

100%



$

224,244

100%







CARRIAGE SERVICES, INC.

FIVE YEAR OPERATING AND FINANCIAL METRICS TREND REPORT

FROM CONTINUING OPERATIONS (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)








2009

2010

2011

2012

2013







Same Store Contracts






Atneed Contracts

18,307


18,299


17,792


17,735


17,958


Preneed Contracts

4,634


4,695


4,957


4,699


4,825


Total Same Store Funeral Contracts

22,941


22,994


22,749


22,434


22,783








Acquisition Contracts






Atneed Contracts

52


1,307


3,067


4,773


5,991


Preneed Contracts

17


284


599


821


1,222


Total Acquisition Funeral Contracts

69


1,591


3,666


5,594


7,213


Total Funeral Contracts

23,010


24,585


26,415


28,028


29,996








Funeral Operating Revenue






Same Store Revenue

$

120,309


$

119,799


$

118,801


$

118,571


$

118,813


Acquisition Revenue

310


5,705


14,210


25,801


35,891


Total Funeral Operating Revenue

$

120,619


$

125,504


$

133,011


$

144,372


$

154,704








Cemetery Operating Revenue






Same Store Revenue

$

39,316


$

37,797


$

36,481


$

38,113


$

40,181


Acquisition Revenue




166


298


Total Cemetery Operating Revenue

$

39,316


$

37,797


$

36,481


$

38,279


$

40,479








Financial Revenue






Preneed Funeral Commission Income

$

2,023


$

2,265


$

1,811


$

1,711


$

1,853


Preneed Funeral Trust Earnings

3,817


5,965


6,290


5,921


7,408


Cemetery Trust Earnings

2,436


4,507


4,627


7,647


8,095


Preneed Cemetery Finance Charges

1,445


1,479


1,294


1,462


1,418


Total Financial Revenue

$

9,721


$

14,216


$

14,022


$

16,741


$

18,774


Total Revenue

$

169,656


$

177,517


$

183,514


$

199,392


$

213,957








Field EBITDA






Same Store Funeral Field EBITDA

$

42,992


$

39,979


$

42,728


$

45,634


$

44,682


Same Store Funeral Field EBITDA Margin

35.7%


33.4%


36.0%


38.5%


37.6%


Acquisition Funeral Field EBITDA

105


624


3,681


8,339


10,886


Acquisition Funeral Field EBITDA Margin

33.9%


10.9%


25.9%


32.3%


30.3%


Total Funeral Field EBITDA

$

43,097


$

40,603


$

46,409


$

53,973


$

55,568


Total Funeral Field EBITDA Margin

35.7%


32.4%


34.9%


37.4%


35.9%








Same Store Cemetery Field EBITDA

$

9,152


$

8,938


$

9,370


$

9,897


$

11,757


Same Store Cemetery Field EBITDA Margin

23.3%


23.6%


25.7%


26.0%


29.3%


Acquisition Cemetery Field EBITDA




(76)


(43)


Acquisition Cemetery Field EBITDA Margin

—%


—%


—%


-45.8%


-14.4%


Total Cemetery Field EBITDA

$

9,152


$

8,938


$

9,370


$

9,821


$

11,714


Total Cemetery Field EBITDA Margin

23.3%


23.6%


25.7%


25.7%


28.9%








Funeral Financial EBITDA

$

4,131


$

6,854


$

6,728


$

6,224


$

7,987


Cemetery Financial EBITDA

3,881


5,986


5,921


9,060


9,338


Total Financial EBITDA

$

8,012


$

12,840


$

12,649


$

15,284


$

17,325


Total Financial EBITDA Margin

82.4%


90.3%


90.2%


91.3%


92.3%








Total Field EBITDA

$

60,261


$

62,381


$

68,428


$

79,078


$

84,607


Total Field EBITDA Margin

35.5%


35.1%


37.3%


39.7%


39.5%






































FIVE YEAR OPERATING AND FINANCIAL METRICS TREND REPORT

FROM CONTINUING OPERATIONS (IN THOUSANDS - EXCEPT PER SHARE AMOUNTS)








2009

2010

2011

2012

2013







Overhead






Total Variable Overhead

$

3,254


$

3,555


$

9,422


$

9,623


$

8,845


Total Regional Fixed Overhead

2,693


2,868


3,028


2,581


3,346


Total Corporate Fixed Overhead

13,989


14,794


16,436


18,068


20,829


Total Overhead

$

19,936


$

21,217


$

28,886


$

30,272


$

33,020


Overhead as a percent of sales

11.8%


12.0%


15.7%


15.2%


15.4%








Consolidated EBITDA

$

40,325


$

41,164


$

39,542


$

48,806


$

51,587


Consolidated EBITDA Margin

23.8%


23.2%


21.5%


24.5%


24.1%








Other Expenses and Interest






Property Depreciation & Amortization

$

10,199


$

9,849


$

9,480


$

9,948


$

11,668


Non Cash Stock Compensation

1,169


1,722


1,870


2,174


2,916


Interest Expense, Net

18,071


17,178


17,191


16,125


12,541


Additional Interest and Costs of the Credit Facility

180



201


3,031



Pretax Income

$

10,706


$

12,415


$

10,800


$

17,528


$

24,462


Tax Provision

4,336


4,954


4,590


6,960


9,277


GAAP Net Income

$

6,370


$

7,461


$

6,210


$

10,568


$

15,185








Tax rate

40.5%


39.9%


42.5%


39.7%


37.9%


Special Items, Net of Tax






Withdrawable Trust Income

$

156


$

2,269


$

2,979


$

1,265


$

960


Acquisition/Divestiture Expenses


440


816


884


496


Severance Costs


156


1,278


529


965


Litigation Settlements and Other Related Costs


(450)



(465)



Additional Interest & Other Costs of the Credit Facility



133


2,000


248


Consulting Fees





368


Securities Transaction Expenses



333



160


Other Special Items


(337)


795



54


Gain on Repurchase of TIDES


(209)


(558)




Prior Period Amortization Adjustment for TIDES





(538)


Tax Adjustment from Prior Period





260


Sum of Special Items, net of tax

$

156


$

1,869


$

5,776


$

4,213


$

2,973








Adjusted Net Income

$

6,526


$

9,330


$

11,986


$

14,781


$

18,158


Adjusted Net Profit Margin

3.8%


5.3%


6.5%


7.4%


8.5%








GAAP Basic Earnings Per Share

$

0.36


$

0.42


$

0.34


$

0.58


$

0.83


GAAP Diluted Earnings Per Share

$

0.36


$

0.42


$

0.34


$

0.58


$

0.82








Adjusted Basic Earnings Per Share

$

0.37


$

0.53


$

0.65


$

0.81


$

1.00


Adjusted Diluted Earnings Per Share

$

0.37


$

0.52


$

0.65


$

0.81


$

0.98








Reconciliation of Consolidated EBITDA to Adjusted Consolidated EBITDA






Consolidated EBITDA

$

40,325


$

41,164


$

39,542


$

48,806


$

51,587


Withdrawable Trust Income

236


3,438


4,513


1,916


1,454


Acquisition/Divestiture Expenses


667


1,237


1,340


752


Severance Costs


237


1,936


802


1,462


Litigation Settlements and Other Related Costs


(682)



195



Consulting Fees





557


Securities Transaction Expenses



504



242


Other Special Items



1,205



83


Adjusted Consolidated EBITDA

$

40,561


$

44,824


$

48,937


$

53,059


$

56,137


Adjusted Consolidated EBITDA Margin

23.9%


25.3%


26.7%


26.6%


26.2%








CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)




December 31,


2012


2013

ASSETS




Current assets:




Cash and cash equivalents

$

1,698


$

1,377

Accounts receivable, net

17,812


17,950

Assets held for sale

1,466


3,544

Inventories

5,133


5,300

Prepaid expenses

5,107


4,421

Other current assets

1,923


3,525

Total current assets

33,139


36,117

Preneed cemetery trust investments

70,960


68,341

Preneed funeral trust investments

82,896


97,144

Preneed receivables, net

23,222


24,521

Receivables from preneed trusts

25,871


11,166

Property, plant and equipment, net

152,433


160,690

Cemetery property

75,156


72,911

Goodwill

218,442


221,087

Deferred charges and other non-current assets

9,424


12,280

Cemetery perpetual care trust investments

46,542


42,342

Total assets

$

738,085


$

746,599

LIABILITIES AND STOCKHOLDERS' EQUITY




Current liabilities:




Current portion of long-term debt and capital lease obligations

$

11,218


$

13,424

Accounts payable

5,243


7,046

Other liabilities

13,067


9,939

Accrued liabilities

12,278


12,854

Liabilities associated with assets held for sale

369


4,357

Total current liabilities

42,175


47,620

Long-term debt, net of current portion

118,841


105,642

Line of credit

44,700


36,900

Convertible junior subordinated debenture due in 2029 to an affiliate

89,770


89,770

Obligations under capital leases, net of current portion

4,013


3,786

Deferred preneed cemetery revenue

63,998


55,479

Deferred preneed funeral revenue

39,794


30,588

Deferred tax liability


11,915

Other long-term liabilities


1,548

Deferred preneed cemetery receipts held in trust

70,960


68,341

Deferred preneed funeral receipts held in trust

82,896


97,144

Care trusts' corpus

45,920


41,893

Total liabilities

603,067


590,626

Commitments and contingencies:




Redeemable Preferred Stock

200



Stockholders' equity:




Common stock, $.01 par value; 80,000,000 shares authorized; 22,078,000 and 22,183,000 issued as of December 31, 2012 and 2013, respectively

221


222

Additional paid-in capital

202,462


204,324

Accumulated deficit

(52,598)


(33,306)

Treasury stock, at cost; 3,922,000 shares at December 31, 2012 and 2013

(15,267)


(15,267)

Total stockholders' equity

134,818


155,973

Total liabilities and stockholders' equity

$

738,085


$

746,599

 





CARRIAGE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)




Year Ended December 31,


2012


2013





Revenues

$

199,392


$

213,957

Field costs and expenses

139,250


149,576

Gross profit

60,142


64,381

General and administrative expenses

23,458


27,378

Operating income

36,684


37,003

Interest expense, net

(16,125)


(12,541)

Loss on early extinguishment of debt and other costs

(3,031)


Income from continuing operations before income taxes

17,528


24,462

Provision for income taxes

(6,960)


(9,277)

Net income from continuing operations

10,568


15,185

Net income from discontinued operations, net of tax

835


4,111

Net income

11,403


19,296

Preferred stock dividend

14


4

Net income available to common stockholders

$

11,389


$

19,292





Basic earnings per common share:




Continuing operations

$

0.58


$

0.83

Discontinued operations

0.05


0.23

Basic earnings per common share

$

0.63


$

1.06

Diluted earnings per common share:




Continuing operations

$

0.58


$

0.82

Discontinued operations

0.05


0.18

Diluted earnings per common share

$

0.63


$

1.00





Dividends declared per common share

$

0.10


$

0.10





Weighted average number of common and common equivalent shares outstanding:




Basic

18,126


17,826

Diluted

18,226


22,393

The GAAP Diluted EPS for the year ended December 31, 2013 includes 4.4 million shares that would be issued upon conversion of our convertible subordinated debentures (TIDES) as a result of the if-converted method prescribed by accounting standards.

 




CARRIAGE SERVICES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)




Year Ended December 31,


2012


2013

Cash flows from operating activities:




Net income

$

11,403



$

19,296

Adjustments to reconcile net income to net cash provided by operating activities:




Depreciation and amortization

10,076



11,748

Impairment of goodwill

1,100



100

Gain on sale of business

(610)



(6,091)

Amortization of deferred financing costs

685



362

Provision for losses on accounts receivable

2,589



2,005

Stock-based compensation expense

2,174



3,583

Deferred income taxes

3,930



12,572

Loss on early extinguishment of debt

1,323



Other

88



85

Changes in operating assets and liabilities that provided (required) cash:




Accounts and preneed receivables

(4,623)



(3,329)

Inventories and other current assets

5,332



(337)

Deferred charges and other

(38)



(35)

Preneed funeral and cemetery trust investments

6,659



(1,415)

Accounts payable

(1,002)



1,142

Accrued and other liabilities

(6,195)



(3,294)

Deferred preneed funeral and cemetery revenue

3,720



1,187

Deferred preneed funeral and cemetery receipts held in trust

(10,850)



2,266

Net cash provided by operating activities

25,761



39,845





Cash flows from investing activities:




Acquisitions and new construction

(45,141)



(19,701)

Net proceeds from sales of businesses and other assets

603



10,184

Capital expenditures

(10,436)



(10,695)

Net cash used in investing activities

(54,974)



(20,212)





Cash flows from financing activities:




Net borrowings from (payments against) the revolving credit facility

43,307



(7,800)

Payments on long-term debt and obligations under capital leases

(3,174)



(11,219)

Proceeds from the exercise of stock options and employee stock purchase plan contributions

896



894

Dividends on common stock

(1,804)



(1,817)

Dividends on redeemable preferred stock

(14)



(4)

Payment of loan origination costs

(3,235)



(621)

Excess tax benefit of equity compensation

36



613

Payment of call premium associated with the senior note redemption

(1,707)



Purchase of treasury stock

(4,531)



Net cash provided by (used in) financing activities

29,774



(19,954)





Net increase (decrease) in cash and cash equivalents

561



(321)

Cash and cash equivalents at beginning of year

1,137



1,698

Cash and cash equivalents at end of year

$

1,698



$

1,377

 




CARRIAGE SERVICES, INC.

CALCULATION OF EARNINGS PER SHARE

(in thousands, except share and per share data)




Year Ended December 31,


2012


2013



Numerator for basic earnings per share:




Numerator from continuing operations




Income from continuing operations

$

10,568



$

15,185

   Less: Earnings allocated to unvested restricted stock

(361)



(314)

   Income attributable to continuing operations

$

10,207



$

14,871





Numerator from discontinued operations




Income from discontinued operations

$

835



$

4,111

   Less: Earnings allocated to unvested restricted stock



(85)

   Income attributable to discontinued operations

$

835



$

4,026





Numerator for diluted earnings per share:




Adjustment for diluted earnings per share:




Interest on convertible junior subordinated debentures, net of tax



3,452


$



$

3,452





   Income attributable to continuing operations

$

10,207



$

18,323

   Income attributable to discontinuing operations

$

835



$

4,026





Denominator




Denominator for basic earnings per common share - weighted average shares outstanding

18,126



17,826

Effect of dilutive securities:




Stock options

100



175

Convertible junior subordinated debentures



4,392

Denominator for diluted earnings per common share - weighted average shares outstanding

18,226



22,393





Basic earnings per common share:




Continuing operations

$

0.58



$

0.83

Discontinued operations

0.05



0.23

Basic earnings per common share

$

0.63



$

1.06





Diluted earnings per common share:




Continuing operations

$

0.58



$

0.82

Discontinued operations

0.05



0.18

Diluted earnings per common share

$

0.63



$

1.00





NON-GAAP FINANCIAL MEASURES

This press 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 because such results help investors compare our results to previous periods and provide insights into underlying trends in our business. The Company's GAAP financial statements accompany this release.  Reconciliations of the Non-GAAP financial measures to GAAP measures are provided in this press release.

The Non-GAAP financial measures include "Adjusted Net Income", "Adjusted Basic Earnings Per Share", "Adjusted Diluted Earnings Per Share", "Consolidated EBITDA", "Adjusted Consolidated EBITDA", "Free Cash Flow", "Funeral, Cemetery and Financial EBITDA", "Total Field EBITDA" and  "Special Items" in this press release.  These financial measurements are defined as similar GAAP items adjusted for Special Items and are reconciled to GAAP in this press release.  In addition, the Company's presentation of these measures may not be comparable to similarly titled measures in other companies' reports. The definitions used by the Company for our internal management purposes and in this press release are as follows:

  • Adjusted Net Income is defined as net income from continuing operations plus adjustments for special items and other non-recurring expenses or credits. 
  • Consolidated EBITDA is defined as net income from continuing operations before income taxes, interest expenses, non-cash stock compensation, depreciation and amortization, and interest income and other, net. 
  • Adjusted Consolidated EBITDA is defined as Consolidated EBITDA plus adjustments for special items and non-recurring expenses or credits. 
  • Free Cash Flow is defined as net cash provided by operations less cash for maintenance capital expenditures. 
  • Funeral Field EBITDA is defined as Funeral Gross Profit less depreciation and amortization, regional and unallocated overhead expenses and net financial income.
  • Cemetery Field EBITDA is defined as Cemetery Gross Profit less depreciation and amortization, regional and unallocated overhead expenses and net financial income.
  • Financial EBITDA is defined as Financial Revenue less Financial expenses.
  • Total Field EBITDA is defined as Gross Profit less depreciation and amortization, regional and unallocated overhead expenses. 
  • Special Items is defined as charges or credits that are non-GAAP yet can be non-recurring such as withdrawable trust income, acquisition and divestiture expenses, litigation settlements, severance costs, loss on early retirement of debt and other costs, discrete tax items and other non-recurring amounts. 
  • Adjusted Basic Earnings Per Share is defined as GAAP Basic Earnings Per Share, adjusted for special items. 
  • Adjusted Diluted Earnings Per Share is defined as GAAP Diluted Earnings Per Share, adjusted for special items.

Certain state regulations allow the withdrawal of financial income from preneed cemetery merchandise and services trust funds when realized in the trust.  Under current generally accepted accounting principles, trust income is only recognized in the Company's financial statements at a later time when the related merchandise and services sold on the preneed contract is delivered at the time of death.  Carriage has provided financial income from the trusts, termed "Withdrawable Trust Income" and reported on a Non-GAAP proforma basis within Special Items in the accompanying Operating and Financial Metrics Trend Report (a Non-GAAP Unaudited Income Statement), to reflect the current cash results. Management believes that the Withdrawable Trust Income provides useful information to investors because it presents income and cash flow when earned by the trusts.

Reconciliation of Non-GAAP Financial Measures:

This press release includes the use of certain financial measures that are not GAAP measures.  The Non-GAAP financial measures are presented for additional information and are reconciled to their most comparable GAAP measures below.

Reconciliation of Net Income from continuing operations to Adjusted Net Income for the years ended December 31, 2009, 2010, 2011, 2012 and 2013 (thousands):




Year Ended December 31,


2009

2010

2011

2012

2013

Net Income from continuing operations

$

6,370


$

7,461


$

6,210


$

10,568


$

15,185


Special items, net of tax






Withdrawable Trust Income

156


2,269


2,979


1,265


960


Acquisition/Divestiture Expenses


440


816


884


496


Severance Costs


156


1,278


529


965


Litigation Settlements and Other Related Costs


(450)



(465)



Additional Interest and Other costs of the Credit Facility



133


2,000


248


Consulting Fees





368


Securities Transaction Expenses



333



160


Other Special Items


(337)


795



54


Gain on Repurchase of TIDES


(209)


(558)




Prior Period Amortization Adjustment for TIDES





(538)


Tax Adjustment from Prior Period





260


Sum of Special items affecting net income, net of tax

$

156


$

1,869


$

5,776


$

4,213


$

2,973


Adjusted Net Income

$

6,526


$

9,330


$

11,986


$

14,781


$

18,158


 




Reconciliation of Net Income from continuing operations to Consolidated EBITDA and Adjusted Consolidated EBITDA for the years ended December 31, 2009, 2010, 2011, 2012 and 2013 (in thousands):




Year Ended December 31,


2009


2010


2011


2012


2013

Net income from continuing operations

$

6,370


$

7,461


$

6,210


$

10,568


$

15,185

Provision for income taxes

4,336


4,954


4,590


6,960


9,277

Pre-tax earnings from continuing operations

$

10,706


$

12,415


$

10,800


$

17,528


$

24,462

Interest expense, net

18,071


17,178


17,191


16,125


12,541

Loss on early extinguishment of debt and other costs

180



201


3,031


Non-cash stock compensation

1,169


1,722


1,870


2,174


2,916

Depreciation & amortization

10,199


9,849


9,480


9,948


11,668

Consolidated EBITDA

$

40,325


$

41,164


$

39,542


$

48,806


$

51,587

Adjusted For:









Withdrawable Trust Income

$

236


$

3,438


$

4,513


$

1,916


$

1,454

Acquisition/Divestiture Expenses


667


1,237


1,340


752

Severance Costs


237


1,936


802


1,462

Litigation Settlements and Other Related Costs


(682)



195


Consulting Fees





557

Securities Transaction Expenses



504



242

Other Special Items



1,205



83

Adjusted Consolidated EBITDA

$

40,561


$

44,824


$

48,937


$

53,059


$

56,137

Revenue

$

169,656


$

177,517


$

183,514


$

199,392


$

213,957











Adjusted Consolidated EBITDA Margin

23.9%


25.3%


26.7%


26.6%


26.2%











 




Reconciliation of funeral and cemetery income before income taxes to Field EBITDA for the years ended December 31, 2009, 2010, 2011, 2012 and 2013 (in thousands):



Funeral Field EBITDA

Year Ended December 31,


2009

2010

2011

2012

2013

Gross Profit (GAAP)

$

37,774


$

37,321


$

41,401


$

46,886


$

48,973


Depreciation & amortization

5,454


5,287


5,668


5,925


6,471


Regional & unallocated costs

4,000


4,849


6,068


7,386


8,111


Net financial income

(4,131)


(6,854)


(6,728)


(6,224)


(7,987)


Funeral Field EBITDA

$

43,097


$

40,603


$

46,409


$

53,973


$

55,568


Funeral Field Operating Revenue

$

120,619


$

125,504


$

133,011


$

144,372


$

154,704


Funeral Field EBITDA Margin

35.7%


32.4%


34.9%


37.4%


35.9%



































Cemetery Field EBITDA

Year Ended December 31,


2009

2010

2011

2012

2013

Gross Profit (GAAP)

$

7,172


$

9,065


$

9,536


$

13,256


$

15,408


Depreciation & amortization

3,154


3,206


2,798


3,059


3,741


Regional & unallocated costs

2,707


2,653


2,957


2,566


1,903


Net financial income

(3,881)


(5,986)


(5,921)


(9,060)


(9,338)


Cemetery Field EBITDA

$

9,152


$

8,938


$

9,370


$

9,821


$

11,714


Cemetery Field Operating Revenue

$

39,316


$

37,797


$

36,481


$

38,279


$

40,479


Cemetery Field EBITDA Margin

23.3%


23.6%


25.7%


25.7%


28.9%



































Total Field EBITDA

Year Ended December 31,


2009

2010

2011

2012

2013

Funeral Field EBITDA

$

43,097


$

40,603


$

46,409


$

53,973


$

55,568


Cemetery Field EBITDA

9,152


8,938


9,370


9,821


11,714


Funeral Financial EBITDA

4,131


6,854


6,728


6,224


7,987


Cemetery Financial EBITDA

3,881


5,986


5,921


9,060


9,338


Total Field EBITDA

$

60,261


$

62,381


$

68,428


$

79,078


$

84,607


 


Reconciliation of GAAP basic earnings per share to Adjusted basic earnings per share for the years ended December 31, 2009, 2010, 2011, 2012 and 2013:




Year Ended December 31,


2009

2010

2011

2012

2013

GAAP basic earnings per share from continuing operations

$

0.36


$

0.42


$

0.34


$

0.58


$

0.83


Special items affecting net income

0.01


0.11


0.31


0.23


0.17


Adjusted basic earnings per share

$

0.37


$

0.53


$

0.65


$

0.81


$

1.00


 


Reconciliation of GAAP diluted earnings per share to Adjusted diluted earnings per share for the years ended December 31, 2009, 2010, 2011, 2012 and 2013:




Year Ended December 31,


2009

2010

2011

2012

2013

GAAP diluted earnings per share from continuing operations

$

0.36


$

0.42


$

0.34


$

0.58


$

0.82


Special items affecting net income

0.01


0.10


0.31


0.23


0.13


Dilution effect of convertible junior subordinated debentures





0.03


Adjusted diluted earnings per share

$

0.37


$

0.52


$

0.65


$

0.81


$

0.98


 


Reconciliation of Net Income to Consolidated EBITDA and Adjusted Consolidated EBITDA for the estimated rolling four quarters ending December 31, 2014 and 2015 (in thousands):




Rolling Four Quarter Outlook


December 31,


2014E

2015E

Net income

$

18,850


$

24,500


Provision for income taxes

12,050


15,000


Pre-tax earnings

$

30,900


$

39,500


Net interest expense, including loan cost amortization

12,200


12,600


Depreciation & amortization, including stock compensation

15,300


15,400


Consolidated EBITDA

$

58,400


$

67,500


Adjusted for special items

4,500


3,500


Adjusted Consolidated EBITDA

$

62,900


$

71,000


 


Reconciliation of Net Income from Adjusted Net Income for the estimated rolling four quarters ending December 31, 2014 and 2015 (in thousands):




Rolling Four Quarter Outlook


December 31,


2014E

2015E

Net income

$

18,850


$

24,500


Special items, net of tax

3,000


2,300


Adjusted Net Income

$

21,850


$

26,800


 


Reconciliation of GAAP basic earnings per share to Adjusted basic earnings per share for the estimated rolling four quarters ending December 31, 2014 and 2015:




Rolling Four Quarter Outlook


December 31,


2014E

2015E

GAAP basic earnings per share

$

1.04


$

1.33


Special items affecting net income

0.16


0.12


Adjusted basic earnings per share

$

1.20


$

1.45


CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

Certain statements made herein or elsewhere by, or on behalf of, the Company that are not historical facts are intended to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  In addition to historical information, this Press Release 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. These statements include any projections of earnings, revenues, asset sales, cash flow, debt levels or other financial items; any statements of the plans, strategies and objectives of management for future operations; 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. The words "may", "will", "estimate", "intend", "believe", "expect", "project", "forecast", "foresee", "should", "would", "could", "plan", "anticipate" and other similar words or expressions are intended to identify forward-looking statements, which are generally not historical in nature. While management believes that these forward-looking statements 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 revenues and operating results are based on our forecasts for our existing operations and do not include the potential impact of any future acquisitions. 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, those summarized below:

  • the execution of our Standards Operating Model;
  • changes in the number of deaths in our markets;
  • changes in consumer preferences;
  • ability to find and retain skilled personnel;
  • the effects of competition;
  • the investment performance of our funeral and cemetery trust funds;
  • fluctuations in interest rates;
  • 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;
  • death benefits related to preneed funeral contracts funded through life insurance contracts;
  • our ability to generate preneed sales;
  • the financial condition of third-party insurance companies that fund our preneed funeral contracts;
  • increased or unanticipated costs, such as insurance or taxes;
  • effects of the application of applicable laws and regulations, including changes in such regulations or the interpretation thereof;
  • consolidation of the deathcare industry; and
  • other factors and uncertainties inherent in the deathcare 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, 2012. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date hereof. We undertake no obligation to publicly update or revise any forward-looking statements after the date they are made, whether as a result of new information, future events or otherwise. A copy of the Company's Form 10-K, and other Carriage Services information and news releases, are available at www.carriageservices.com.

This press release includes the use of certain financial measures that are not GAAP measures.  The Non-GAAP financial measures are presented for additional information and are reconciled to their most comparable GAAP measures in the tables presented above.

 

Photo - http://photos.prnewswire.com/prnh/20140305/DA77557

SOURCE Carriage Services, Inc.

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Connected devices and the Internet of Things are getting significant momentum in 2014. In his session at Internet of @ThingsExpo, Jim Hunter, Chief Scientist & Technology Evangelist at Greenwave Systems, examined three key elements that together will drive mass adoption of the IoT before the end of 2015. The first element is the recent advent of robust open source protocols (like AllJoyn and WebRTC) that facilitate M2M communication. The second is broad availability of flexible, cost-effective ...
Scott Jenson leads a project called The Physical Web within the Chrome team at Google. Project members are working to take the scalability and openness of the web and use it to talk to the exponentially exploding range of smart devices. Nearly every company today working on the IoT comes up with the same basic solution: use my server and you'll be fine. But if we really believe there will be trillions of these devices, that just can't scale. We need a system that is open a scalable and by using ...
"SAP had made a big transition into the cloud as we believe it has significant value for our customers, drives innovation and is easy to consume. When you look at the SAP portfolio, SAP HANA is the underlying platform and it powers all of our platforms and all of our analytics," explained Thorsten Leiduck, VP ISVs & Digital Commerce at SAP, in this SYS-CON.tv interview at 15th Cloud Expo, held Nov 4-6, 2014, at the Santa Clara Convention Center in Santa Clara, CA.
The 3rd International Internet of @ThingsExpo, co-located with the 16th International Cloud Expo - to be held June 9-11, 2015, at the Javits Center in New York City, NY - announces that its Call for Papers is now open. The Internet of Things (IoT) is the biggest idea since the creation of the Worldwide Web more than 20 years ago.
How do APIs and IoT relate? The answer is not as simple as merely adding an API on top of a dumb device, but rather about understanding the architectural patterns for implementing an IoT fabric. There are typically two or three trends: Exposing the device to a management framework Exposing that management framework to a business centric logic Exposing that business layer and data to end users. This last trend is the IoT stack, which involves a new shift in the separation of what stuff happe...
DevOps is all about agility. However, you don't want to be on a high-speed bus to nowhere. The right DevOps approach controls velocity with a tight feedback loop that not only consists of operational data but also incorporates business context. With a business context in the decision making, the right business priorities are incorporated, which results in a higher value creation. In his session at DevOps Summit, Todd Rader, Solutions Architect at AppDynamics, discussed key monitoring techniques...