Carriage Services Inc (CSV) 2012 Q1 法說會逐字稿

Hello and welcome to the Carriage Services first quarter 2012 earnings conference call. All participants will be in listen-only mode. There will be an opportunity to ask questions at the end of today's presentation. (Operator Instructions) Please note this conference is being recorded. Now, I would like to turn the conference over to Matt Steinberg of FTI Consulting. Please go ahead, sir.

Thank you and good morning, everyone. I'd like to welcome you to the Carriage Services conference call. We are here to discuss the Company's 2012 first quarter results, which were released after the close of the market yesterday.

Additionally, Carriage Services has posted supplemental financial tables and information on its website at www.carriageservices.com. If you would like to be on the e-mail distribution list for future Carriage Services releases or if you would like to receive a copy of the press release, please call my offices at FTI Consulting at 212-850-5600 or visit the Carriage Services website.

This conference is being recorded live over the Internet on Carriage's website and a subsequent archive will be made available. Additionally, in a few hours, a telephonic replay of this call will be made available and active through May 16. The replay information for the call can be found in the news release distributed yesterday.

With us from management are Mel Payne, Chairman and Chief Executive Officer; and Bill Heiligbrodt, Vice Chairman. Today's call will begin with formal remarks from management, followed by a question-and-answer period. Please note that in this morning's call, management may make forward-looking statements in accordance with the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995. I would like to call your attention to the risks associated with these statements which are more fully described in the Company's Annual Report filed on Form 10-K and other filings with the Securities and Exchange Commission.

Forward-looking statements, assumptions, or factors stated or referred to on this conference call are based on information available to Carriage Services as of today. Carriage Services expressly disclaims any duty to provide updates to these forward-looking statements, assumptions or other factors after the date of this call to reflect the occurrence of events, circumstances, or changes in expectations.

In addition, during the course of this morning's call, management will reference certain non-GAAP financial performance measures. Management's opinion regarding the usefulness of such measures, together with a reconciliation of such measures for the most useful -- for the most directly comparable GAAP measures for historical periods are included in the press release and the Company's filings with the Securities and Exchange Commission.

With these formalities out of the way, I would like to turn the call over to Mel Payne, Chairman and Chief Executive Officer. Mel, please go ahead.

Thank you, Matt. Would like to welcome everyone on the call to our first quarter earnings release and conference call. I want to first hit on some highlights of the quarter and there were so many that we only could list the main ones.

We had total record revenue of $52.3 million which was an increase of 3.2%. The acquisition Funeral Field EBITDA was $2.5 million, another record, an increase of 208%. These are businesses that we've owned since the end of 2007. In other words, we acquired in 2008, 2009, 2010 and 2011 and the first quarter of 2011. We do it that way for long-term trends, but that same group increased their profit by triple year-over-year. Part of that was the revenue from acquisitions, but a lot of it was total acquisition Funeral Field EBITDA margin was 38.9%, an increase of 1,260 basis points. We've never come close to that performance with our acquisition portfolio in the history of the Company. In fact, quite a few of the businesses we bought and are in that portfolio have high rents.

EBITDA as shown here is after rent. On an apples-to-apples basis, looking at the same-store portfolio and the acquisition portfolio, for the first time in the history of the company, the acquisition Funeral Field EBITDAR for rent margin was higher than the same store, 45% and change versus 44% and change.

The total Funeral Field EBITDA which includes the acquisition and the same store was $15.5 million, another record, an increase of 19%. Our total Funeral revenue increase was only 4.5%. The total Funeral Field EBITDA margin of 39.9% was an increase of 480 basis points, another record. Total field EBITDA, this includes both cemetery and financial, was $21.4 million, an increase of 11.2%.

Total field EBITDA margin of 41%, another record, was an increase of 300 basis points. Total adjusted consolidated EBITDA of $16 million, another record, was an increase of 9.5%. Total adjusted consolidated EBITDA margin of 30.5% was an increase of 180 points and the highest in the history of the Company per quarter. Our total GAAP EPS of $0.23 increased over last year by 28%. But because there were special items in there, we use adjusted EPS to measure the earnings of the Company, that was $0.29 and it was an increase of 26% over the prior year, another record.

To say that I am proud of what our leaders and employees accomplished with our first-quarter performance would be the understatement of my life. Even in an adverse industry environment, we are told by many in the industry, our people performed like champions. If ever there was an opportunity to establish credibility of Carriage's three core models and business strategies that are designed around people and leadership to produce high and sustainable performance over time, this quarter was that opportunity and our operating and support organization came through with a performance so differentiating that it almost looks like we were in a different industry.

In fact, I can finally say that after nine years of evolutionary change, our Company took a great leap forward in the first quarter of 2011 with transformative changes executed quickly and effectively. We then see this year as Carriage Services 2012 a new beginning and challenged our people at all levels to make 2012 a breakout performance year and what a beginning it has been, as our people are energized as like never before and for the first time in our history, our funeral business portfolio achieved close to its normalized and sustainable earning power potential, as defined by our funeral standards operating model.

Our cemetery performance backed up a little bit, but all of that occurred in January and February. In March, we made more money than the other two months combined. And the performance and the activity in the teams improved throughout the quarter which was very encouraging as to the prospects for the rest of 2012.

Our acquisition portfolio which is now all funerals, for the first time, as I mentioned earlier, achieved a higher field EBITDAR margin before rents in our same-store funeral portfolio. Not only that, our pipeline is full of quality candidates, which Bill will cover in his remarks. Our trust funds are now positioned to do well no matter what happens in the markets. Our Board of Directors is new over the last three years. Each one is now highly engaged and supportive over our five-year vision of Carriage.

So in summary, we expect to have a great performance year under the theme Carriage Services 2012, a new beginning. Now, would like to recognize real heroes of the quarter, 20 performance individuals across our country in our field operations.

In our Western region, these are the funeral homes, Justin Luyben, Cesar Gutierrez, Matt Simpson, all in California. In our cemetery combo, Steve Mora and Alex Crider, and Margarita Hernandez in California. In our Central region, funeral homes, Phil Zehms in Ohio, Kyndall Hale in Oklahoma; in our combo, Greg Schoonmake, Vince Rocha. And in our Eastern region, funeral homes first, Frank Forastiere in Massachusetts, Jason Cox in Georgia, Chuck Williamson in Tennessee, Tim Hauck in Florida. Our cemeteries, [John Dennis], Justin March, and Gerard Polite. These are all in existing businesses.

Now, I would like to specifically mention the most three recent acquisitions. Fred Bryant, New York; Jim Terry, Pennsylvania; Mike Connor in Georgia. These are the stars of this performance along with others, too numerous to mention. I've never seen such a broad and deep performance throughout our portfolio. It would take me two days to finish talking about how great a job they did.

So, that's my remarks. I will probably mention a few people every quarter. They deserve it, that's the people who do the work and create the performance. We just reported and talked to you about it. With that, I would like to turn it over to Bill.

Thank you, Mel. And in keeping with what Mel mentioned as the highlights in the first quarter, today, I would like to take you through a progression of categories of our income statement for the first quarter of 2012. Total revenue was up $52.286 million. That is what it was and that is up $1.617 million or 3.2%. Total field EBITDA was $21.436 million, up $2 million or 11% and again at a 41% margin.

Overhead were $7.174 million, up slightly under $800,000 or 12%. The largest component of overhead were variable expenses, reflecting accrued incentive compensation for operating performance in this quarter. This leaves EBITDA from continuing operations of $14.200 million, up almost $1.4 million or 11%. Adjusting for non-recurring expenses shown as special items and adding slightly over $0.02 per share or $694,000 from Withdrawable Trust Income leaves adjusted EBITDA of $15.951 million, just under $16 million, that would be non-GAAP, an increase of approximately $1.4 million or 10%. The resulting margin, 31%.

Okay. Our report card at that performance. GAAP earnings per share, $0.23 per share versus $0.18 last year, a 28% increase. Non-GAAP earnings per share, again after adjustments for non-recurring expenses and special items and adding Withdrawable Trust Income, was $0.29 versus $0.23 last year, up $0.26. The resulting non-GAAP net income margin is 10%, one comment that Mel forgot to put in there.

Let's look at a -- at some of the components of our income statement. Our funeral operations were exemplary in the first quarter. Despite a low volume environment or unusual market for our industry in the first quarter, we grew same-store funeral EBITDA on increasing margins by almost $800,000, 7% same-store EBITDA. This will have us to completely benefit from the over 100% increase in funeral acquisition revenue.

Acquisition Funeral Field EBITDA margins increased from 26% in 2011 to 40% in 2004, leaving acquisition Field EBITDA up over 200%, approaching $2.5 million, an increase of $1.680 million. Our new acquisitions performed especially well in the first quarter, complementing the outstanding performances in our existing businesses. Cemetery EBITDA was down slightly in the quarter. We expect improvement in this number, again as Mel mentioned, as we move through 2012.

Now, let's look at overhead or expense control. We were up 12%, but adjusting overhead for non-recurring expenses, again listed in special items, the increase was 2% which was after incentive compensation accruals for the outstanding performance in our businesses. Great expense control and what we wanted.

Cash flow from operations was up slightly at $3.5 million. Free cash flow from operations increased from $2.1 million to $2.6 million, a 24% increase and is in line with cash flow expectations in our outlook statement. Our pipeline for new acquisitions remains very active and we are currently evaluating several meaningful properties. We feel acquisition opportunities will continue to be very abundant. All acquisition prospects are evaluated on our strategic acquisition model, just as we have done in the first fourth quarter of 2011 and the first quarter of 2012. As of today, we will close at least one new acquisition in the second quarter of 2012.

Now, looking at the rolling four-quarters outlook, we adjusted our range of performance to $0.67 to $0.70 for GAAP earnings per share and $0.80 to $0.83 for non-GAAP earnings per share. These adjustments represent nice improvement over the comparable numbers for 2011. With this range of outlook in non-GAAP earnings per share, we will be approaching 12% returns on equity and 4% returns on assets. As management, we are dedicated to improving our performance ratios as we move forward on a yearly basis.

All in all, very good start for our new beginning in 2012. The results for the first quarter reflect the hard work of our Houston support staff, our group in acquisitions and of course, all our operating personnel across the US. In this tough business environment for the first quarter, all our employees performed at their best when the best was needed. Thank you.

With that, would like to open it up to questions.

Thank you, sir. (Operator Instructions) Nick Halen, Sidoti & Company.

Good morning, guys.

Hey, Nick.

So the first question I had was just, how should we look at acquisition spending going forward? I know you mentioned in the past, you were looking to spend roughly $20 million a year. But the pipeline looks particularly strong right now. And I guess you guys already spent $11.5 million in the first quarter and obviously, you will be spending more in the second. So I guess just going forward, I mean how should we look at that on an annual basis?

Well, I think we don't set targets, we look for the right businesses that fit our model. Based on where we are today, we could easily do $30 million in acquisitions, provided again that we're able to negotiate transactions that complement what we've already done. And we would be willing to do more than that. I think it's a factor of what businesses are available and how soon we can get these accomplished. But certainly more than $20 million and probably certainly more than $30 million.

Yes. Nick, this is Mel. I think that number you're using is kind of the one we used over the last couple of years, but with Bill coming and revising everything and looking at what we've done with the Standards Operating Model, we're seeing a lot of interest in our Company and we're seeing a lot of owners thinking taxes are not going down, probably will go up; how much? Not quite clear.

So we've seen a real increase in the amount of interest, not just in a transition or succession planning transaction, but in our Company, specifically in our Company. Words getting out with different people who joined us like it, like once they get under the covers, what they see and the value that can be added to local businesses. So I think we've grown into a bigger opportunity to grow without being stupid about it.

Okay. Now, I guess as that pipeline grows and like you said, word does get out and I guess more and more opportunities present themselves, if you guys don't have the free cash flow available to fund these acquisitions, I guess how would -- I mean have you thought about how you would approach funding needs?

Well, we do have probably enough to fund on a free cash basis as much as $20 million. We have adequate financing that is in place to more than adequately take care of the numbers that we've mentioned today for at least two years to three years. Okay?

Okay.

And the capital markets are -- they keep calling us for some reason. We just keep being patient about it. Are calling us, calling now, we will say, wait, wait, wait. So I don't -- I think we got plenty of opportunity to change the capital structure a little bit to get more capacity if we needed and not adding lot of additional cost.

And one point I'd like to add to that, every time we make an acquisition on the basis that we've been doing these transaction, our credit gets better and our cash flow gets better. So the whole plan is designed about making Carriage better, both from a credit standpoint and an earnings standpoint.

Okay, great. And then, just lastly, I know you guys mentioned on the last call that you launched a few new programs in the Cemetery business. And I know you mentioned that January and February of this year, kind of struggled; in March, things seemed to pick up on that side and I was kind of wondering what was different in March from, I guess, first two months of the year?

Well, when you change everything which we did at year-end -- in November, when I say everything, we changed everything. I suspended the Cemetery Standards Operating Model and we are going to recreate that in the third quarter and roll it back out, just like we quickly did the funeral one and had it approved November 17, rolled it out by the end of November. And you think we have rolled it out five months before because December looked completely different than any other month of last year and volumes were way down. Profits were up. So that's when we knew this was going to be a good quarter from a funeral point of view.

On the Cemetery, it's a little difficult because we're building our sales strategy, sales team, sales leaders and we planted a lot of seeds on how we do this systematically and activity wise and monitor it. We also rolled out a proprietary cemetery system, February 1, no one else in the industry has anything like it. We're working through the bugs on that. So I think you will see trends.

There are a lot of reasons, March was the month things really began to show some fruit where the seeds were growing into fruit. And I see more of that in April. I expect to see more of that throughout the remainder of the year, as we rebuild a broader performance portfolio in our cemeteries and we were adding some talent recently and will add some key people to really talk about it or rather wait till the fruit gets a little more clear and then we will talk about it the next call. But just no, the cemetery business is not going to hold us back.

Great. Thanks, guys.

Clint Fendley, Davenport.

Thank you. Mel, Bill, good morning.

Hi.

On the -- first question on the field EBITDA. Obviously some great results there. I mean, how should we think about the sustainability of this going forward throughout the year?

Let me -- one of the things I've learned doing this now for 21 years is that the funeral business is kind of a weird business. I went back and looked at the first quarter. Over the last 12 years and I had our people and they are all in this room, if you want to know who the real stars of this quarter are, they're sitting around this table in this room supporting our field operations with analysis and planning.

But I said, look, let's -- this is really unbelievable almost, down 6.2% on volumes and we do this. Well, we went back and looked at the first quarter and correlated volume to the margin, EBITDAR margin and we did it on the businesses we only owned on December 31, 1999, so that you had apples to apples to apples to apples through a 12-year cycle and it was very interesting, fascinating.

For the first 10 years, the correlation was perfect. If volumes went down, and we did have three years, six years were up, six years were down, but there were three years where the volume was down between 8% and 9% on that group of businesses. Now, 10 years, the volume went down, the margin went down; the volume went up, the margin went up. The only two exceptions to the correlation which you would think is logical have been the last two years. Last year, the volume went up and the margin went down. This year, the volume went down a lot and we hit an all-time margin record.

Now, there are some reasons for that, specifically reasons. First of all, the new Standards Operating Model and incentive programs were rolled out and communicated not only to the managing partners but to all employees at every business, hadn't been done before. Everybody has a stake in this in their standards achievement, all employees and they came through like champions. You can see a difference in December, but we got a couple of other things working --

I think when you say every employee, I mean, is that at every level of the Company that you had not done before?

We had rolled it out at the end of the last year, in fact to 2011, but it wasn't fully understood or communicated to all employees.

Okay.

A fact. That's not true any more. Now, the things that improved year-over-year were some things that came with the volume decline turned out to be good things. We didn't have snow removal; we didn't have utility bills in the Midwest, in the Northeast, like we had in prior years, that was a $450,000 savings. But the other thing that speaks to sustainability is anytime I see a volume decline like this, and we talked to our suppliers and we hear others, what I found is that oftentimes, it's highly concentrated.

So we just started thinking where -- is there a concentration of the volume decline? There was. It turns out that less than a third of our businesses, 32 out of 98 same-store businesses is where all the volume decline occurred, less than a third. And if you look at the total contracts, same-store contracts in that third, it's only 28% of our businesses suffered the entire loss on the volumes, everybody else 72%, were actually up. Our West was up, all the decline occurred in the Midwest, Kentucky North and the Mid-Atlantic and Northeast where there was no winter, no flu season, and that's where our businesses suffered. Everybody else didn't have that wind in their face.

So my conclusion on that is I don't know if we can repeat this margin, it was so good. It was also aided by huge decline in medical claims. We have rolled out a new medical program and I have to give some kudos here to Lorie Parmeter and her team of HR people. They rolled out a new program that made our people more accountable for their spending, given all that's going on in healthcare and it made a huge difference, a huge difference.

So we had less medical claims and less utilities and less extra expense related to the strong traditional winters that offset to a large degree the volume decline in only 28% of our businesses. So I do think you're going to see a sustained high performance. Will it be this good compared to the year before? I can't promise you that, Clint, but you could put it into bank that we are not going to volatile like we were before.

Okay. That's fair enough.

Clint, this is Bill. Again, part of our Funeral Field EBITDA, our acquisitions, the last three acquisitions we made were not part of our operations for the full quarter. In fact, one of them only joined us late in March, the other one late in -- and one other one late in February. We were still up 207% in Field EBITDA in acquisitions. So those businesses will be with us for the full quarter.

We have one additional acquisition, for sure, that we will close in the second quarter as well and we did see some unusual trends relative to same-store volumes in those new acquisitions as well. So we have a lot going for us in that particular category. So I'm looking for our Funeral Field EBITDA to be very strong moving forward and as Mel mentioned --

When you say unusual trends in same-store, you mean they were much --

Favorable, favorable, right. They were favorable. And as you know, we have conditioned some of these acquisitions and looked at them in that regard. So we are looking for that.

Should we expect a deal that you are anticipating closing in the second quarter to contribute about on a comparable basis to the Georgia deal that you recently completed?

It won't be quite as much as the Georgia deal, but it is a very good acquisition.

Okay.

And it's not that much smaller.

And I guess, the second quarter is also -- it's always a big quarter for the cemetery. And Mel, I know, you spoke to that just a second ago, but I'm just wondering, as you sort of rebuild your business there, I mean how do you expect that to impact your results in this upcoming quarter?

Well, April was pretty good on our cemetery sales, pretty neat sales, best so far this year. May, of course, Memorial Day, I would expect to be a good month. And we've got a lot of momentum going in the cemeteries and the seeds have been planted and teams put together takes a little time along with product, but I'm encouraged, very encouraged by what I see there and I think -- I don't think we will back up in the second quarter a little bit like we did in the first quarter, but I think it'll be additive by the time we get through the end of the year and it'll get better during the year.

Clint, this is Bill again. The second quarter offered some tough comparisons. We've got the performance [found on a day] in the second quarter. When we reached the third and fourth quarter, the comparisons become very much easier and we are highly confident as we look out for the whole year.

Okay. Good deal. And last question here. I know the run rate for your Withdrawable Trust Income appears as if it will be a bit higher than the $1.5 million to $2 million that you projected in your guidance. I mean are you all expecting it to be less in the next few quarters?

What we've done there, Clint, is we made this rotation starting August 8 of last year and we had to realize $7 million or $8 million of losses in the equities, [get it over] to fixed income. Now, I will tell you, we've more than made up that those losses by gains and what we've bought in the fixed income, now we have the [recurring] income, plus the gains, because we bought them so cheaply at the time. We've done some more rotation here in April.

We are doing a little bit more in early May, getting out of our remaining cyclicals and it's not much, but they do have some losses. So that might temporarily show a slight decline in the Withdrawable Trust Income, but it won't stay that way. And then, it'll normalize and be very predictable and we are still growing the fixed income portfolio. It's -- we are about 80% now, 17% equities; I think at quarter end, we were 19% equities. So in the equities we have, we have seven core equities and we have a small but a substantial portfolio in these long-term bank warrants, TARP warrants just in a couple of banks, the best banks.

Okay.

So they're already in the black. So we think, the portfolio is uniquely designed to benefit our Company and our field operations going forward. No matter what happens in Europe or anywhere else, to be honest, because our credits we give, we've never had a default.

Okay. Thank you, guys. Appreciate it.

You bet.

Nicholas Jansen, Raymond James.

Yes. Just have two quick questions. First, on cash flow. Obviously, you had a very good consolidated EBITDA performance in the quarter, but cash flow was perhaps a little bit lower than what we were looking for. So maybe any commentary on cash flow? And then, secondly, as you guys have updated the standards model in the funeral side, what's kind of the one thing that you think that has really made the biggest change under the new standards model versus the others? Thanks.

[Do you want to take this, Bill]?

Yes. Let me take the -- your last question first. What we did that it had not been updated really since 2007 and it [might have jumped up] a little bit. I had been out of operations since then and they've done a few little things surrounding there with wrinkles here and there, conditions on that standard on this one. And I think over time, it became a little bit too complicated and people were focusing on one or two and not looking at the big picture.

And so what we did was take a step back and your portfolio changes over that period of time too. And the way this works is the standards of certain businesses are the same across the country, no matter what geography, but the two criteria that now we change the groupings. So we put everybody in a group depending on their size, not the number of funerals per year, only the funerals they performed, not pre-need sales or anything like that.

And then, the other criteria is the average revenue per contract. Those two things really define the profile of a funeral business. And so, the standards, we have four groupings depending on the size and the average revenue. The standards are different for each grouping and the main one that are different are the gross margins, are the SMB as a percent of revenue. For example, if you have a high cremation business, the SMB as a percent of revenue is going to be less, have a high service, traditional service business, the SMB will be higher. It requires more people, more service. So those are the kinds of things that we look at. So if everybody is in a group, they can relate to and the standards are approved by a council.

Now, we have nine standards on the funeral business. This is one of the main things we did that has made a huge difference. We broke the short-term controllable standards into one group and called them the quantitative standards. We've put the three other standards which were market share and the two people standards into qualitative and we have two departments now. One is called [OAPG] and they only support the field and the quantitative standards. These are all controllable in the short term and they have to do with the average, the gross margin range, the SMB range, the EBITDA range and the bad debt. All of those are percentages other than the average in their ranges, the qualitative, market share, longer-term, intermediate-term and people.

And now, we get two groups focused on each set of those. It has made a huge difference, with people focusing on short-term with the quantitative group and qualitative leadership and development in the quality of the people a little more long-term and intermediate, made a huge difference in the performance of the Company overnight because it made sense to our people and they responded to it. And that's going to continue, that's why I do think this is sustainable, the margin improvement although I can't predict the degree quarter-by-quarter.

Nick, this is Bill. Looking at cash flow, number one, our cash flow numbers were up slightly for the month and I think they will continue to improve throughout the year, but our free cash flow in the first quarter was up 24%. We may be a hair bit conservative on our cash flow projections that we have in our outlook, but the reasons -- some of the reasons for the difference obviously is the fact that the Withdrawable Trust Income was projected slightly down this year and compared to last year where we had a huge amount of Withdrawable Income from our trust. So that's the only difference, but our cash flow remains exceedingly strong and we've taken a fresh look at what is free cash flow. And so I'm pretty confident that you'll be happy with our cash flow numbers.

That's [okay] and maybe just one last one in terms of guidance for the next rolling four quarters. It doesn't -- going to your comments, it doesn't look like you've assumed that the kind of the strength of the margin in the first quarter continues, so there could perhaps be upside if some of that does weaken through the next four quarters. Is that correct?

We have opportunity for improvement.

Fair enough. Thanks, guys.

On this outlook, we're trying to present something that's realistic. Those are huge increases when you look at them. And hopefully, we will be looking at that on a quarterly basis as we move forward, so that you'll be getting a fresh look all the time. So we are pretty excited.

That's all from me. Thanks.

(Operator Instructions) Duncan Brown, Wells Fargo.

Hey, good morning. Just wanted to go back to the M&A pipeline, I think you said, maybe you're looking at $30 million worth of opportunities now. Can you give us the time frame on that? Is that something you guys think you could close on this year or is that over the next maybe two to three years?

Oh!, no. Now, we are looking at -- if we could do every acquisition we have in-house today, I would be well in excess of $50 million. But I mean, we have some nice start in that we do meet our criteria on these acquisitions. They are the lifeblood of our funeral operation in terms of additions to our Field EBITDA numbers.

We are looking for our unusual situations that fit a model that I would be happy to discuss with any of you if you like to learn about it. I know some of you know what we're doing, but what I said was I thought we could easily do $30 million this year and we're not going to have a budget for how many acquisitions we can do nor will we make foolish X -- give some kind of foolish guidance to you that says what we're going to do because it depends on the businesses, the opportunity and our ability to close it.

In the last quarter, we did mention that the Connor Westbury acquisition in Georgia, we closed that transaction in 31 days. We're concentrating not only on acquiring them, but we have to integrate them into our system and we have to keep performance going. Otherwise, you don't get 40% margins in your acquisition businesses. That's hard to do when you bring in a new business online. And again, as Mel pointed out, a test to the people and the businesses that we did acquire and that's what we're looking for, but we are looking for acquisitions where that's part of our business plan and models and we will -- we're actively soliciting and we do have a lot of opportunities right now to make selections in that regard.

What we find and I have to tell you when Bill joined the Company in September and put to -- he went to work on revising and updating the strategic acquisition model. I have no idea that what he would come out of that with in a very short amount of time was the most advanced statistically 10 years of data, demographics, a ranking system of one to ten, and the three deals that he put through that system all ranked very high. And what that means is that not only do they have a history of growth -- organic growth but volumes averaged, they dominate their market.

There is upside and it's very predictive of what we'll have over the next five years. And the best part of all is these are owners who are primo, primo quality people in their communities with reputations to match and they've been running their businesses much like we have designed in the Standards Operating Model. So when they look at this model, even though they didn't know about it specifically, they totally comprehend it and fall in love with it. And say, this is where we belong and so they already operate like that. So there is really no challenge with changes.

And I think this model and Bill's team now has been very selective and though we have all this activity in here. It's now easy to screen what really doesn't work, what -- there is no guessing. So what that does, because you're known by the Company you keep and it attracts even more quality, quality of [like] kind want to join quality of [like] kind. So we are finding the works getting out in the industry and we are getting a lot of calls. Capital structure wise, I mean, we don't have a spending budget. We could spend $100 million if we wanted to, but then would be just stupid again. So we're not going to do that.

Okay, Mel. That's very helpful. I guess following onto that, obviously the focus is finding the right acquisitions, but can you give us a flavor of where purchase multiples stand today?

When you say purchase multiple?

Like a multiple to EBITDA?

Oh!, well, that's just one criteria. We really don't -- we don't buy on any kind of EBITDA multiple. We buy based on cash return on funds invested, on a discounted cash flow model and an earnings per share contribution model, as well as criteria that relates to our revenue growth, numbers of funerals, and control of expenses and quality of assets that we are acquiring. So there is a lot of criteria going in, but the financial model is the discounted cash flow model, not a price times EBITDA multiple. They all -- they come out all kinds of numbers when it relates to EBITDA. So --

Let me try to answer your question in a different way. With what Bill and his team have created and are now soliciting in certain areas of the country and they do focus because what they're finding is the profile that fits this model is not everywhere in the country. There are places in the country where it's more concentrated, I don't want to go into where that is, that's proprietary, but whatever the price, let's say, that comes out of the model and it is a valuation model as well, you could say there is an EBITDA multiple there, but that's not the important part, whatever that multiple looks like today, in five years, it'll be a lot less with more certainty than what we used to do before. That's how you create value over time.

Right. We are looking -- most of the acquisitions we are getting are purchase [priced] back in five years. And the businesses continue to get better every year that we own them with the first year probably be in the worst performance year even though it is a very good performance year.

So maybe the way we should think about it is a five-year cash on cash? Is that the right way to think about it?

That's close to it, right.

Five to six years, [we will get it right].

Okay.

[Close to], five, take out the six, [that was a million].

And then, the last one.

We'll be happy to go over that with you, with any of you that wants to, down with us and talk about it. We're -- we'll be happy to show it to you.

It's much better if you sit and apply it -- see him apply it to specific businesses because then you will totally give.

Sure. That will be great. I will take you up on that. And then, the last one from me, I think you bought back some stock in the quarter. Can you remind us what your authority is from the Board? And then, your outlook on share repurchases going forward for the rest of the year?

We have been buying our stock through the first quarter and we have not resented any programs in that regard. So we are continuing to buy. We bought slightly under 600,000 so far this year, probably somewhere below average 500,000 to 650,000. We still have some room on our $5 million approved amount from our Board. I will be discussing that later in the year as we move forward and that price and what we do there will obviously be dependent on what we think the value of our Company is.

We think our stock is cheap and we are biased.

All right. Appreciate the color.

And that will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Payne for any closing remarks.

Bill and I appreciate as well as everybody in our Company the interest in what we're doing. And I would say our new beginning is off to a great start. It is only a beginning of the new beginning and there is a lot more to come and a lot more of celebration to occur. I can promise you that. Thank you for calling.

Ladies and gentlemen, the conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.