Carriage Services Inc (CSV) 2004 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Carriage Services first-quarter earnings conference call. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded today, Friday, May 14th, 2004. I would now like to turn the conference over to Ms. Lisa Elliott, Vice President of DRG&E. Please go ahead, ma'am.

Thank you, Jeff, and good morning, everyone. We appreciate you joining us for Carriage Services conference call to review 2004 first-quarter results. Before I turn the call over to management, I have the normal items to go over. If you would like to be on the e-mail distribution list or fax list to receive future Carriage Services releases, or if you experienced any technical difficulties or did not receive your e-mail or fax yesterday afternoon, please call our offices at DRG&E and relay that information to our folks. That numbers is 713-529-6600. If you would like to listen to a replay of today's call, it will be available via Webcast by going to www.carriageservices.com.

Additionally, there is a telephonic replay for the next seven days, 24 hours a day. The information on how to access that feature is in the press release.

Please note that information reported on this call speaks only as of today, May 14, 2004, and therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening. Also, as you know, certain statements made in today's conference call 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 the Section 27-A of the Securities Act of 1933 as amended and Section 21-E in the Securities Act of 1934 as amended. These statements are based upon the assumptions that the Company believes are reasonable. However, many factors that are discussed under "Forward-looking Statements" and "Cautionary Statements" in the Company's annual report and Form 10-K for the year ended December 31, 2003 could cause the Company's results in the future to differ materially from the forward-looking statements made today and in other documents or oral presentations made by or on behalf of the Company. A copy of the Company's Form 10-K, Form 10-Q and other Carriage Services information and news releases are available at the Company's Website.

Now with me today is Mel Payne, Carriage Services' Chairman and Chief Executive Officer, and Joe Saporito, the Chief Financial Officer. Let me now turn the call over to Mel Payne.

Thank you, Lisa. It is my honor and pleasure to be here today to report our first-quarter results. Our first quarter was a good one. In fact, it was the best quarter we have had in a number of years as it was broad and deep across all business lines. It was operationally solid. And if anything, it was actually somewhat better than the numbers show because of improvements in funeral and cemetery operations that were also somewhat burdened by severance costs and unusual items like the realized securities loss in our perpetual care funds.

I would like to comment on some of the highlights of the quarter that are not all in the release.

Funeral operations. While we experienced high death rates in the first quarter that were more in line with historical seasonality, we are also gaining or regaining market share in quite a few markets. We also are continuing to lose market share in some markets, mostly smaller and more rural markets, and we are reviewing this group for strategic purposes. I would like to say, however, that where we are gaining market share, those gains are substantially higher than where we are losing market share.

Secondly, our funeral average increased by 1.6 percent but would have been about 2.5 percent if not for the increase in cremations with most of the increase being direct cremations with no products or services associated with those services. We have an opportunity in Carriage to do a much better job with our cremation business and are working hard on packages and training that will help our arrangers, which is also intended to lead to greater customer satisfaction by our cremation families and higher averages for our funeral homes.

We have a new funeral home operating model and this is big. We have alluded to this in our annual report. We alluded to it in some of our filings. We have not talked much about it because we wanted to wait and get some results and then explain it a little better. We call this new funeral home operating model the Being the Best model.

What it is all about, we have changed effective the beginning of this year from a budget and control model in our funeral home division to a more decentralized standards-based model. We did this based on a lot of history and a strong belief that this is an entrepreneurial business that needs to be more local and entrepreneurial, and our managers need to be empowered to run their business according to the needs of that market in that business.

The new model is focused on ten drivers of success, around which ten standards have been developed by our best operators and former owners. These ten standards fall in the three major categories -- market share, people, and operating and financial metrics. In the old budget and control model, we only focused on EBITDA. One metric. Now we have ten, and our people are talking and looking at their business in a different way.

Each business boss of a funeral home operation is accountable for his or her standards achievement and is now called a managing partner because we are treating them like partners. A new incentive program went into effect on January 1 that enabled a managing partner to earn substantial bonuses on top of salary based on the level of overall profitability and the number of standards achieved. In doing surveys around the industry, we believe that the maximum level of bonus possibilities here is close to what a managing partner could earn if they were a private independent. We believe this over time will help us not only perform better, but attract better talent into our Company.

The new funeral home software system rolled out at the beginning of the year has gone over extremely well, and it has made the administrative burden much easier at our funeral homes and allowed us to know what is going on on a real-time basis so we can support our managing partners with ideas and improvement actions on a timely basis. This new operating model is still at its early stages. I believe it will take a year or so to fully realize the benefits, but should set up well 2005 and beyond for improved performance over time. It has been extremely well received by our managing partners, leading to more entrepreneurial thought and in many cases more entrepreneurial actions about how to grow the business and not just take care of the families that have traditionally been served.

Our cemetery division had an outstanding quarter. The performance was broadened and deep, broader and deeper than we have seen in years. We have new leadership in many of our businesses that have been put in in the last year or so, and our incentives and focus is on heritage property sales. The strategy is working as you can see in the press release. Our revenues were up 17 percent in the first quarter, our profit margins remain one of the highest in the industry, and our cemetery organization is stronger than it has ever been.

Our home office is also stronger than it has ever been. We have leadership in many spots that have been at work over the last year, 18 months, and we are making tremendous strides in processes, simplifying our processes, becoming more efficient but even more effective in supporting our field operations. We have increased our analytical capacity at Carriage to support the field, and we have improved in many many areas like cash management, trust management and so on. I expect these improvements to continue to increase over time.

And lastly but importantly, the first quarter lead to a substantial improvement in our credit profile. Our debt went down $6.3 million in the quarter. Our EBITDA went up 11 percent, leading to a debt to EBITDA multiple decline from 3.44 to 3.13 in just one quarter or 9 percent. We will continue to focus not only on operational improvements but financial improvements and credit profile improvements as well. I think we are off to a great start, but I think the rest of the year can continue to show improvement so we will will be communicating those on a quarter to quarter basis.

With that, I would like to turn it over to Joe Saporito.

Thank you, Mel. As Mel said, we did have a great start to the year. The improved business conditions continued from December of 2003 into the first quarter. We experienced a return to more normal seasonal pattern has a result of a spike in death rates from an early and harsh winter flu season. We are very pleased that we met or exceeded our estimates for the first quarter and reported significant increases in financial results over our rather poor first-quarter performance in 2003.

Moreover, as Mel said, we have continued to rapidly reduce our debt and improve our credit profile, which is very important to us.

During the first quarter of 2004, total revenues increased 6.4 percent because both our funeral and cemetery operations reported strong revenue growth. Our gross profit increased 8.5 percent, and our gross margin increased from 28.5 percent to 29 percent due to improved operating leverage and cost control. Carriage generated free cash flow of 4.7 million, which included the benefit of deferring the interest payments on the 1.7 million on the TIDES preferred securities as compared to 2.1 million of free cash flow in the prior year first quarter.

Carriage reduced total debt from 135.5 million at year-end 2003 to 129.2 million as of the end of the first quarter. As a result, interest expense decreased by approximately 200,000 in the first quarter compared to the prior year quarter because the overall debt has decreased $19 million or 12.8 percent over this period.

Diluted earnings per share in the current quarter of 17 cents per share increased 21 percent over the 14 cents per share in the first quarter of 2003, and this was excluding the special charges that we reported in the prior year first quarter because we limited increases in overhead and reduced interest expenses, thereby realizing a substantial portion of improvement on our gross profit.

As Mel said, the financial results in our funeral division were much improved in the first quarter compared to last year. As we have said, we have experienced a more seasonal increase in funeral volumes, and as an indicator, the death rate for the first quarter reported by the Center for Disease Control indicated a 5.6 percent increase in their survey compared to a 2.1 percent decrease in the comparable quarter and the prior year.

We were also able to control our operating costs, resulting in positive operating leverage, higher gross profit dollars and an improvement in our gross margin from 28.4 percent to 30.1 percent. Same-store funeral revenue increased 5.6 percent, which consisted of increases in contracts of 3.9 percent and an increase in our average revenue of 1.6 percent.

The average revenue per contract during the first quarter was negatively impacted by the increase in cremation rate of 210 basis points, and our cremation rate during the first quarter was 30.9 percent. But this in part resulted from the marketing opportunities that Mel discussed earlier for lower-priced direct cremations in certain of our markets.

The average revenue for burial contracts increased 3.4 percent to $6416, and this is significant. This was an area that we have been putting a lot of focus on, while the average revenue for cremation contracts declined 2.8 percent to $2276.

In our first quarter release, we introduced a number of new operating metrics for the cemetery operations to improve transparency of our cemetery operating result. Just to highlight the new metrics. We are now reporting the number of preneed contracts originated. The number of preneed contracts originated that included property rights, average revenue per preneed contract and number of them interments performed. We believe a key success factor in the cemetery business is the advanced sale of property rights, which as Mel said creates heritage for the business. And we are very pleased that 93 percent of our preneed contracts originated in the first quarter included property rights as compared to 71 percent in the prior year. And that was the primary reason that our average revenue per contract increased almost 28 percent in the first quarter.

Cemetery revenues increased 17.1 percent due to a 1.1 million increase in the sale of preneed property rights, and we also completed two mausoleums which contributed about $40,000 in revenue compared to the prior year.

Financial revenues declined $400,000 compared to the first quarter of the prior year, primarily due to lower earnings on our perpetual care trust and realized losses of about $235,000 on sales and investment securities as Carriage repositioned certain investments in our perpetual care trust.

Cemetery gross profit, excluding investment losses, increased by 15.3 percent, primarily on the strength of higher preneed sales. Gross margin percentage declined 110 basis points from 28.6 percent to 27.5 percent because property sales generally carry a higher cost for sales commissions and amortization of the cost of the property sold, and these two factors result in about a $600,000 increase over the prior year quarter. And in addition, we experienced an increase in bad debt expense, and that was approximately $300,000.

As we have commented in a couple of the prior quarters, we are continuing to work on applying a new accounting standard interpretation of FIN 46, which involved the consolidation of variable interest entities, and this was effective for Carriage on March 31, 2004. Carriage will provide complete disclosures of the accounting change when we file our quarterly report on Form 10-Q next week. The accounting change will not affect the Company's earnings or free cash flow for the first quarter of 2004. Additionally, the Company believes that the accounting change will principally affect classifications within the balance sheet, statement of operations and statement of cash flows, but will not affect cash flow or the manner in which we recognize and report revenues or net income in future periods.

Another significant event that occurred after the end of the quarter was the increase in the commitment available on our bank credit facility. We exercised the option within our existing bank credit facility to increase the available commitment by $5 million to $45 million. Otherwise, the terms and conditions of the credit facility remained unchanged.

Currently Carriage has $16 million drawn on its revolving credit facility, and that is as of today. Carriage believes that the borrowing capacity under our credit facility will be sufficient to meet our working capital needs and to pay the maturities of the Series A of our senior notes, which have a current balance of $22 million, and that becomes due on July 30, 2004.

As Mel said, one of the key metrics that we and our lenders use to monitor our credit profile is debt to EBITDA, and this improved significantly for the quarter from 3.44 at year-end to 3.13 at the end of the quarter or a 9 percent decrease. And we are obviously very focused on continuing to improve our credit profile and improve our balance sheet.

Lastly, I will turn to our outlook for the second quarter. For the second quarter, Carriage expects revenues to range between 36 and 38 million, EBITDA to range between 8 and 10 million, and diluted earnings per share to range from 7 to 10 cents per share. Our outlook for the full year remains unchanged from what we discussed in our year-end conference call, and just to refresh your memory, we expect our revenues to be between 150 and 154 million, EBITDA to range between 39 and 41 million, earnings to range between 38 and 43 cents per share, and free cash flow to range between 14 and 17 million. We would expect by year-end that our debt would be in the range of $114 to $118 million. Mel?

Thank you, Joe. It was a good quarter, but it was just a quarter. Believe me, we are hard at work here every day to try to make every quarter a good quarter, and with that, I would like to open it up to questions.

(OPERATOR INSTRUCTIONS). James Clements, Sidoti & Co..

Good morning, gentlemen. First of all, I wanted to say congratulations. Mel, I think it was pretty obvious from all of the listeners of your last earnings conference call, the frustration in your voice on the last one. Clearly a lot of your hard work seems to be paying off a little bit, particularly on the funeral side.

I did want to ask you a question about your cemetery operations and particularly the margin in it. I know, Joe, that you ran it down a little bit; you did it kind of quickly. But I know that a couple hundred thousand dollars at the gross profit line obviously affects your margin a great deal. But when I see that average revenue per premium contract increased almost 28 percent, I guess, first of all, that number seems enormous. So can you give us a little bit of background on that?

Also, you talked about the increase in the bad debt expense and that sort of thing. Can you give us a sense of where you think cemetery margins should be over the next quarter or so?

I don't think the margins are going to different substantially -- I don't think so; I guess I could be surprised -- from what they have been over the last year or so, and they have all been in a pretty high range. Could it vary two or three percentage points? Absolutely.

But we have a lot of momentum in the cemetery division. We have hired quite a few new general managers, sales managers, and I will tell you in the past we have some large cemeteries that have been extremely outperforming and carrying the whole division.

This first quarter was the first quarter we have ever had where we have really kicked in what I call a much broader and deeper performance in most of our cemeteries. We still have some underperformers, but most have had a very good quarter. We hired some new leadership in this division that focuses purely on sales, sales programs, sales incentives, and he has been with us now for five months. I would say that this particular guy is making a difference, but the difference is still early, so there is more to come.

I am really excited about the cemetery division and what they are doing. I don't think the margins are going to fall down to a much lower level, and I think the sales will continue to be good.

On the average for the contracts, frankly I was surprised myself. I even had our people go back and look at this to make sure it was not too good to be true. It turned out that it was not.

Now I just got back from a trip where we took all the top salespeople from our Company and all they are talking about is property sales. You know, two a week, 10 percent down. I mean it is just the culture of the Company now is to sell property. We went to a nice place, turned out to be nicer than I thought, but we got a good deal. So all of our salespeople just fell in love with this place and said, we really want to come back here next year. I said, well, maybe you can, but how about selling three pieces of property a week rather than two?

So it is what we are talking about. We are applying resources to it. We have got new leadership, and there is just a lot going on.

If I may ask a follow-up question, something you did not address in the release one way or another. Obviously metal prices have been up substantially over the last six to nine months, and particularly I have got some knowledge about the bronze memorial market that there are some surcharges that are being put in to cover the increase in cost of bronze and that sort of thing. I have heard similar things are perhaps quite on with the metal casket market.

Can you all pass those surcharges 100 percent onto your customers, or are you at a little bit of a margin risk with regard to any potential price increases?

Let me comment on that because I have been in the middle of it. We had some noise on the casket side about metal prices and how the casket companies were really suffering some big increases in the cost of their sales. My view is that is their problem. I said to all of them, and we now have four vendors versus two last year, so there is more competition for our business. In my view, it is real simple. You can not make money on business you do not have.

So if you get a cost increase on your cost of materials and you want to run it up through us and make it difficult for us to pass it on to our families, then we are going to go to somebody else that wants our business worse, can still give us a quality product and good service. But it is incremental business to them, and they don't care about the higher metal costs. They are still going to make money on the deal. So we have not had any of that problem on the casket side.

On the cemetery side, we have had some surcharges there as you point out, and to be honest, we are looking at alternative sources. We don't intend to be jammed by anybody. It is hard to gain market share as we found out on the front lines, and our suppliers need to know the same thing.

Fair point. I will let somebody else get on the call and ask some questions. Thanks a lot for your time.

Bill Burns, Johnson Rice.

Good morning, Mel and Joe. I want to go to the cremation. The average revenue for the cremation contracts declined this is the second quarter in a row here now. I wonder if you could help me explain and see the big picture of -- we know that cremation is one of those long-term trends; the mix is headed our way. But maybe give me some insight on what you are trying to accomplish here?

There are several points. First of all, we have not done a good job on dealing with cremation families. Where you have to start that good job is when the first call comes in and they say they are interested in cremation. There are too many of our people that think direct cremation because they are traditional in their thinking, and in many cases, they are traditional in their markets. That is what the families have always wanted, and cremation is something new. Pretty new on a relative basis.

So we do have some markets that are increasing in their cremation rate, the Northeast in particular, but also in the West. But it is to different things. In the Northeast, what we are seeing there is people are increasingly accepting cremation and that is new. You know it has been, I would not say blessed by the Catholic Church, but accepted. So we are seeing some increase in cremations where we used not to see it in the Northeast. But we are learning how to deal with that better through training, development of cremation packages that include various options for merchandise and services, and we are training our people on how to deal with those costs. So there is a lot of work to be done there, Bill.

In the West, it is different. Typically high cremation markets, and in the West we have purposely -- and also I would say Florida, which is also high cremation markets -- we have purposely with this new model created incentives for people to grow market share. In several big businesses, we have reduced the price of our cremation services to a level that competes -- maybe it still a little higher -- but it competes with the direct cremation marketers in those markets who have been getting the bottom end of the cremation business. That has led to a fairly substantial increase in cremations in some of our businesses that have low averages. That has caused the total average on our cremation business to decline.

So we are looking at that and making sure that that increased business is leading to a higher level of profitability, and it is also leading to the chance that we will get more market share in the future that may or may not be cremation business because you just have more families coming to your operation.

So there are several things going on here, but I do not see this as a major problem. I do see it as a major opportunity over the next year or two as we get better at handling it.

And then, Joe, the perpetual care trust, the charge you took, that is not related to FIN 46 now is it?

No. It is not directly related to FIN 46. We have been going through a process the last several months of trying to consolidate the number of trust fees that we have handling our trust business. We would like to have fewer trust fees with larger balances. We are also trying to put in an overarching investment policy with an investment advisor we are working with, and we are going down the road of trying to reposition that portfolio. So this was just some initial work that we needed to do on some of the cemetery trusts to start repositioning those portfolios, and these were equities that were well under water that we knew were not going to recover in the foreseeable future and that we wanted to sell and redeploy those assets -- those funds in other assets.

Fair enough. Thank you very much.

(OPERATOR INSTRUCTIONS). Richard Grelig (ph), William Witter.

I have a question regarding the trust funds. Right now how are they postured in terms of an investment, and what is the return you have been getting?

Right now we have three major categories of trust funds -- preneed funeral; our cemetery funds, which are merchandise and services funds, and the perpetual care funds. In terms of how they are positioned, the preneed funeral funds are approximately 40 percent in equities and the balance in fixed-income and cash. Cemetery merchandise funds are about half in equities and the balance in fixed-income and cash. And the perpetual care funds are about 35 percent in equities and the balance in fixed-income and cash.

How would you characterize the performance of the equity portion over a period of time? What has been your experience relative to what the equity markets have done?

I think we have largely seen results consistent with what you see in the equity markets. I think at this point we have got overall gains in our portfolios, in our total portfolios. But I do not think we have differed dramatically from what you have seen in the market.

But the difference was that during the worst of the market we were underweighted in equities and had more waiting in cash.

Jerry Heffernan, Lord Abbott.

Good morning, gentlemen, and thank you very much for a very nice report here. I was wondering if we could go back to the commentary again on the average revenue per premium contract being up so large and the fact that such a greater percentage of the contracts are containing property sales you are commenting on two weeks? While certainly the results are fantastic and we are very happy that it is that way, I am still not sure why the business was able to change or the salespeople would be able to do change the way they are doing their business here so dramatically. Has there been a change to the incentive comp that has just made them focus on this more, a change to the contractual way the deal is set up for the customer so it is more favorable? It is hard to believe that just because someone said property that all of the sudden they said okay, we will sell that.

That is a good point. We completely changed our incentive programs, the commission structures so that people get paid a lot more for selling property than any other thing. We have also emphasized our lead programs through our family service counselors to incentive bringing in business that has property associated with that.

So everything we are doing now is focused on property sales, and the people are responding. It is amazing. If you motivate, incentive and recognize, you get the result you want. To be honest, I have been surprised at the response. Being around some of our top salespeople, it is amazing. They are energized, excited, and they are selling property. But they get paid more for it.

I understand that. It is an old tested and true method. Let me ask you this. The incentive-based compensation for selling these, is this something that is going to show up as part of a cost of goods sold issue, or is this going to show up in the G&A line?

This is showing up in the operating costs on our cemetery operations or it is impacting the margins.

On our financial statements that are associated with the cemetery, it shows up in promotional costs.

Okay. But on the statements that I am looking at right now, I see the cemetery cost and expenses, cemetery gross margin -- okay, it says cemetery gross margin falling down to 25.8. That is where I would be seeing the increased incentive costs here?

225,000 of that increase was in the securities losses.

That is correct.

So the margin would have been higher. We only really struck 110 basis points on our margin on a going forward basis recurring, and that shrinkage was primarily due to higher compensation commissions and promotional expenses, along with some bad debts and some other costs associated with higher property sales. There are greater expenses related to the property sales.

Okay. How does this play out on a longer-term, understanding that we have only been working on this for really, say, two quarters now? On a longer-term basis, do you see this plan resulting in a return to a gross margin pre this new incentive plan being put in? Or on a longer-term basis, does this have lags so that we have an expansion of the gross margin and cemetery business?

That is a good question. The margins are higher on property sales than any other category of sale. So how that gets offset with higher cost of putting those contracts on the books is something we will monitor. But I would not expect the margins to go down as we have more and more of this and deeper and deeper and broader and broader. I think it's going to be a high-level margin. Now whether it picks up over time, I would not want to promise that either.

But we are pretty happy with where we are. These margins we have -- there are two companies that in the industry that have high margins like this, and we are one of them.

I understand that. Quite aware of that, thank you. Let me as one other question. Certainly in the fourth-quarter release, you talked about executing using new practices, and we reviewed it again today, and certainly it sounded with some great pride there given the results that you have put forth with the ten principles -- managing partner, having people work more in a entrepreneurial way at the local level. You also commented on some cemeteries showing margin share gain, while others you used margin share loss. To what extent has your new practice efforts been rolled out across all properties versus -- it is just that some -- and if it is only as some so far, do you see a consistency between where we have put in the new practices and new operation methods, we saw market share gain or loss there versus what happened at the ones that have not had a full rollout?

We have rolled this out to all locations effective as of early December 2003. That was the concept. The actual use of this model and the standards to measure performance did not take effect until January 1, 2004. This is still a very different animal to what we used to be looking at where we compared actual performance every month to budget. This really is a longer-term -- these standards are not changed -- they don't change. These were developed using 20 percent of our businesses that over a four-year period had consistent performance in every category -- market share, profitability and so on, averages.

So the former owners, the best operators in our Company, were on a team to put together the standards. We broke the portfolio down into four sized groupings with smaller sizes, all the way up to the biggest, because what we found is the characteristics in a funeral home of 100 calls is very different from the characteristics in a funeral home in 300 calls. It is also very different in a cluster, but operated as one business.

So we spent a lot of time developing the groupings and developing the standards in each group, and a lot of time explaining it to our people when we rolled it out.

They just got their first scorecard -- we send these out quarterly -- about how many standards they achieved in the first quarter. All I can tell you is that it is changing the way they think about their business. It is also changing the way we think about their business. And rather than talking about financial statements and comparisons to budget, we are talking about the elements of the business that lead to those results. And so we are getting beneath the covers, talking about fundamental things that matter, market share being the most important. We have that that market share is the greatest single determinant of profit performance. Average is second. Of course, cost controls have to be there, but we're looking at lots of different things related to these ten standards.

But they are grouped under market share, people -- and when I say people, the right number of people for a given size business, the right quality of people for a different size business and continuous upgrading of your people. These are all separate standards. Those are not related to financial metrics. We still have salaries and benefits as a percentage of revenues.

So we are looking at a lot of different things, and I think our people are responding, but it is still early. This is all very new. But I am very encouraged about what is going on.

I would not say the first-quarter performance is primarily due to the new standards in this new model. But I would say it is having some effect because I am seeing a lot of actions whether it is eliminating weak staff or extra staff, or trying to do something specific to get into a certain niche in your market that you did not serve before. There is a lot a good thinking. Over time I view this new operating model as not just operational. I view it as a very strategic model, and it will tell us what really fits in our Company, what we should be looking at with respect to this position, and also when we start growing again what kind of businesses should we be looking at. So we are excited about it. Hope it shows.

Bill Burns.

Joe, when you have an employee selling preneed property, the commission that he is paid, would you remind me again how do you allocate that expense? How does it flow through the P&L?

I am sorry. What do you mean by allocate, Bill?

You don't expense -- if the salesman does a preneed property sale and he has a commission that is due him, do you expense all that commission off?

If the property --

In the period?

If the property is sold and recognized, and again we are talking here about the cemetery operations, that commission is expensed immediately.

So there is no amortization of the expense?

Not for the property sale. We are not spanking anything on our balance sheet if that is what you are (multiple speakers)

I thought so. (multiple speakers)

If it is recognized as revenue, all the associated costs are expensed (multiple speakers)

Expensed 100 percent. Got you. I just wanted to double-check.

At this time, we have no further questions. I would like to turn the conference back over for any concluding comments.

Thank you. We appreciate your listening to the results of our first quarter. We hope you can sense that we feel the Company is on the right track, headed in the right direction, and that the future holds a lot of promise. We have made a lot of changes over the last year operationally. We are seeing some of the fruits of that labor, but we expect there to be more over time. We look forward to reporting those results to you as they happen. Thank you very much and have a good day.

Thank you, sir. Ladies and gentlemen, thank you for participating in the Carriage Services first-quarter earnings conference call. If you would like to listen to the replay of today's conference, please dial 303-590-3000, and you will need to enter the access code of 578520 followed by the #.

Once again, thank you for participating. At this time, you may now disconnect.