Carriage Services Inc (CSV) 2012 Q3 法說會逐字稿

Good morning and welcome to the Carriage Service third-quarter 2012 earnings conference call. All participants will be in listen-only mode. (Operator Instructions). After today's presentation, there will be an opportunity to ask questions. (Operator Instructions).

Please note this conference is being recorded.

I would now like to turn the conference over to Matt Steinberg of FTI Consulting. Please go ahead, sir.

Thank you and good morning, everyone. I would like to welcome you to the Carriage Services conference call. We are here to discuss the Company's 2012 third-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 November 19. 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 the 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 the reconciliation of such measures to 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. Please go ahead, sir.

Thank you, Matt. Our outstanding performance in the third quarter was broad and deep. Really quite amazing in a seasonably low quarter. I would like to thank all of our field and support leaders and employees for making 2012 a very special year for our Company as reflected year-to-date at yesterday's closing price of a greater than 100% rise in our stock price.

With that, I would like to turn it over for Bill for his comments.

Well, I want to join Mel in saying that our numbers in the third-quarter release are truly outstanding and really speak for themselves. Quite a bit of detail is available to you in that release and report and, especially, the trend statements or our non-GAAP unaudited income statements.

I wanted however to discuss a few details of our report and comment on five items.

The first, revenue growth, is a major key for Carriage performance and, for that matter, performance in this industry. We believe if we can produce revenue growth in and around 8%, we should be able to produce 18% to 20% consistent compound earnings per share growth. To perform in excess of 8% revenue growth will move earnings-per-share much higher. For the third quarter, our revenue growth was 14%, exceeding the previously mentioned 8% in our initial expectations.

Included in that number was same-store funeral revenue growth of 3.5%. All other revenue components, acquisitions, cemetery, and financial were as well in excess of the numbers in our business model. For the nine months, revenue growth is slightly less than 8%, but with the trends we are seeing, we have a good opportunity to move revenues for Carriage for 2012 in excess of 8%. Included in that number would be positive same-store funeral revenue growth in a very difficult 2012 funeral market.

Second point. One of the significant contributors to Carriage growth through three quarters has been our acquisition program. We have added five new businesses since the last of the fourth quarter of 2011 and during 2012. All of these businesses have been very -- and I am going to emphasize very -- accretive to earnings per share.

We are hopefully positioned to close to more businesses in the fourth quarter of 2012 and we see no reason why we can't achieve acquisitions of that number or more in 2013. Our acquisition pipeline is very active and opportunities exist.

Third point. I would like to remind everyone, again, we put a new credit facility of $235 million in place during the third quarter. Financial benefit from this refinancing will begin in the fourth quarter of 2012 and was not present in the third quarter we are reporting today.

Fourth point. GAAP earnings-per-share for the quarter and year-to-date 2012 were affected by the cost associated with the refinancing which totaled $3 million or $0.10 per share on an after-tax basis. Excluding these costs on GAAP earnings-per-share for the third quarter, our earnings per share would have been $0.13 per share for 2012 versus $0.04 per share in 2011, an increase of 225%.

Likewise, that GAAP earnings-per-share year to date nine months 2012 would have been $0.52 versus $0.36 per share last year or 44% growth.

The fifth point. Adjusted earnings per share for the third quarter increased 60% from $0.10 per share in 2011 to $0.16 in 2012. 60% growth rate. Nine-month 2012 adjusted earnings per share or non-GAAP earnings was up 11% to $0.61 versus $0.55 for 2011. This doesn't tell the whole story however, because in these non-GAAP adjusted numbers shown under special items is withdrawable trust income. There is a large difference in this number 2011 versus 2012 in both the third quarter and the nine-month 2012 numbers. Smoothing that number and difference to make it equal to 2012 would change our adjusted earnings per share growth rate for the third quarter to 113% and the nine-month year-to-date 2012 number to 42%.

In closing, these five points and results for the three quarters of 2012 combined with management's operational opinions for the next rolling four quarters have enabled us to move our range for a adjusted earnings per share to $1.03 to $1.05. Remember, again, the fourth quarter of 2012 will benefit from all five acquisitions being present in our numbers with hopefully two more closing in the quarter, plus the financial benefit from the new credit facility.

Thank you and I will turn it back to Mel for questions.

Thank you, Bill. I thanked our people in my first comments and I want to end and then we turn it over for questions by saying that, even in a crowded field of standards achievements winners, which we have in abundance across our portfolio of businesses, there are always those who stand out. I am honored to publicly recognize a few of our standards performance heroes in the third quarter and year to date from each of our three regions.

They are as follows -- in the Western region, Ken Summers, PL Fry and Sons; Bob Finley, Darling and Fischer Mortuary Group; and Bob Finley, Managing Partner, and Margarita Hernandez, Los Gatos Memorial Park; Steve Morrow, Managing Partner, Cannell Hill Mountain Memorial Park and Funeral Home]; Alex Crider, Sales Manager, Cannell Mountain Memorial Park; Dorn Rademacher, Relyea Funeral Chapel and Cremation Society of Idaho; and last, but not least, Ken Pierce, Alameda Mortuary Group.

In the Central region -- Randy Valentine, Hershline Sullivan Funeral Group and Dieterle Memorial Funeral Home; Pam Paramore, Baker Stevens Paramore Funeral Home; Jim Sheridan, Dwayne Spence Funeral Homes; Kendall Hale, Grantham Funeral Homes and Kendall and Grantham are new to our Company and our team. Awesome job.

In the Eastern region -- James Bass, Emerald Coast Funeral Home, McLaughlin Mortuary and Twin Cities Cremation Services.

Now I am going to get to a few in the Northeast. All hit by Sandy and all basically doing unbelievable work for our Company -- Kim Duffy, Seiden Group and John E. Day Funeral Home, Red Bank, New Jersey; Frank Forastiere, Central Springfield Group and the Forastiere Smith Funeral Home; John Fitzpatrick, Donahue Cecere Funeral Home on Long Island. Fred Bryant, Bryant Funeral Home on Long Island; Jim Terry, James Terry Funeral Home and Fred and Jim are new to our portfolio with their businesses and doing an incredible job. We are honored by their performance and their affiliation, much as we are honored by all of our people working so hard across the country.

We are having a great year, but it is not over. We have work to do and we will do it. With that I would like to turn it over for questions.

(Operator Instructions). Nick Halen, Sidoti.

Good morning. Bill, how much exposure do you guys currently have to the Eastern Seaboard? And I guess how will Hurricane Sandy affect you guys, I guess, if at all? I guess both in terms of homes you currently own and operate as well as potential M&A targets?

We got -- we were blessed. I don't think we got water in any of our places. Red Bank, I was very worried about across the southern tip from Manhattan and, of course, Long Island. We might have had minor damage, but I haven't heard of any major damage.

The real issue is lack of power in being able to handle the funerals and those that die in a way that is honorable and respectful and satisfies the family. Everybody understands the nature of the storm and the aftermath. And all of our people are working together and I don't think we are going to miss a blip. It could make scheduling more difficult for a week or so or two weeks, but I don't think -- I think it will, by the end of the quarter you won't be able to see that it made a difference. And as far as acquisitions, I don't see that as having any impact at all.

I know that you mentioned in your prepared remarks little bit about structural changes you guys recently made in terms of managing your trust funds. And can you talk a little bit about that? And has the way you received compensation from that changed at all?

Yes, we began to codirect our portfolio in the middle of the crisis, October 14, 2008, at 1.30 p.m. I remember it well. And since then, we have an unbelievable record and we built our own team in-house. We do all of our own work, credit work in particular, as well as equity. And as you can see in our portfolio, we derisked the portfolio. We have a huge stream of recurring income now. We think that fits the nature of our portfolio and our business. We probably have $2.00 to $3.00 of overfunding still in our trust funds in spite of withdrawing a lot. Some of it non-GAAP, big chunks in 2011.

So we were never compensated for any of the work we have been doing since October 14 of 2008 where some of the other companies we discovered were. So we went to work on a number of fronts and have restructured how we do it. Now we have a partnership that most of our trusts are housed in, where Regions is the trustee. And we are able to have much more flexibility on how we allocate income and gains across the various types of trust in the various states.

We also began to get reimbursement on pre-need administration in the third quarter, and we formed an investment advisory subsidiary where we can actually get some compensation from the work we have done. You can't go back and do any compensation historically, but going forward, you'll see it making a difference. And I think this is going to add materially to our financial revenue and profit starting -- you'll see it all in the fourth quarter. That is another thing that will hit full in the fourth quarter.

And,

I want to emphasize one other point in that regard. While we talk a lot about what we are doing here on financial revenue, it is broken out for you in the trend report. But the purpose of what Mel and his group and the Company has done has increased our operational earnings. That is the purpose of the investment portfolio to add more revenue to our funeral and cemetery pre-need accounts that are moving in an at-need fashion. So that is the purpose. And so all of this is designed to create operational earnings for the Company. And that is what we are doing. I just wanted to add that to that point.

We actually have a -- we like doing this in Carriage. I call it a high-performance culture. And we challenge our cemetery people and leaders, and now we have got some really incredible people we recruited over the last three or four months.

But you can see on our cemetery local reporting that the financial profit we make through the merchandise and service and perpetual care exceeded the operating profit without the financial for the first time in 2012. So we have a challenge of the in-house team in charge of our trust, competing on producing incremental sustainable profit in our cemeteries. And so, we have a competitive team spirit about who is going to create the most value here going forward. And it is a lot of fun.

Great. And just lastly for me, I know historically you guys did give guidance in regards to interest expense for the rolling four quarters. And you just mentioned this segment would be essentially lower. I was just wondering if you could maybe give us somewhat a guidance I guess in terms of what you are expecting going forward.

Well, we reported all the information relative to our financial -- for our new financing has been reported, including the terms. So there is the rate on the high-yield notes that we refinanced with 7 7/8%. Currently, the rate on our term loan is approximately 300 -- is approximately a number below 4% currently. So as we move forward, there is a huge differential on financing rates there.

We've got more than 4% on 130, what's that? 5.2 plus. So we -- it's interesting. Since 2005 when we did our senior notes, the interest was $18 million $18.3 million every year -- million. So it's not hard to take $5 million or so off of that and see. It's what it is.

It is a substantial number moving forward.

[Joe Janssen], Barrington Research.

Joe Janssen filling in for Alex Parrish. Good quarter. In your prepared remarks in the funeral home segment, it sounded like same store sales revenue increased at a pretty healthy clip in, I guess what you described as an overall difficult operating environment. Can you give a sense in kind of what you are seeing on the field level, what is driving that?

Well, I am going to say planned hard work. I will let Mel comment. He's in charge of operations. But let me say before he comments, these are pretty large numbers from -- and I am speaking from a guy who has been around this business for a long time. And I didn't make the comment, I want to reemphasize that, that we are seeing these trends continue in the fourth quarter. That is why I was bold enough to say that there's a pretty good chance I think that we will be positive on our same-store funeral revenue for the year 2012. We were down -- we are down currently about 1% for the nine months. But, with what I am seeing, I think that is going to change.

I have never seen a rallying of the troops addressing our business the way we are doing it today. So with that, I will -- I really emphasize those two points. Because that is very significant in any funeral operation. Because what that does is allows us to fully benefit from what we are doing in the trust funds and the financial and from the acquisitions. That means we get every $0.01 of our acquisitional revenue growth and benefit in terms of accretion earnings per share to the bottom line.

So with that, I will let Mel give a better description.

Well, I won't go into the details of how the standards model works, but you know the industry has experienced a drop in the death rate especially in the first half of the year. And it was kind of a historic drop from what everybody said about it.

What you will find with us is we don't talk about death rate much internally. The model we have is driven by volumes and market share gains in a local market, regardless of the death rate. So our people are recognized and incentivized on their ability to grow their business locally. We are great people getting better all the time at sustainable margins. Every month, in every business, we show on the left side five years of history operating and financial. And then the right side we show three rolling months comparative year over year.

And then at the beginning of this year, when we freshened up the standards operating model, we put together big picture goals for the Company. They go through 2016.

But we also put together what we call a good to great value creation plan for each business. And that is a five-year plan. And they are judged on the standards they achieve each year and then, they get rewarded on that in a major way along with our employees. But they have to grow the business to really be a winner. And so do the employees.

So you get a lot of buy-in from the bottom up, given this model. And over five years, they get judged on how well they grow the business and they can't really win that value creation award and get paid a whole lot unless they can grow same-store revenues of their business 2% compounded annually. And that is not easy to do in this industry. Historically, it has been almost impossible with people living longer.

But we are seeing our better people and we have the best talent we have ever had at the location really doing a wonderful job, and all of the employees are linked into these five-year plans and understand what it takes to get recognized and rewarded as being the best over a very long period of time.

This is making a huge difference in the moral, in l'esprit de corps and the competitiveness locally. You don't really -- you just have to sit back and cheerlead them primarily. And it has been a wonderful thing to witness this year. And you are going to see more of that. I am hearing nothing but raves about our people and their attitudes and the work they are doing and you just -- it is going to keep on keeping on. (multiple speakers) I hope that answered --

(multiple speakers) about the cemetery segment along the same lines? I know it is early. I know there's a new leadership team, they are just starting to operate under the new model and it was really more of a 2013 story.

But in terms of what you're seeing, I know it was talked about in the last quarter, but you are now a correlator versus internal expectations again, okay, maybe just give me some color what is going on there?

We invented this standards operating model for the funeral home business in late 2003. It has been evolving ever since. We took a huge leap forward this year. You see the results. Both same-store and acquisitions.

Now on the cemetery side, even though we have been in that business since the beginning of '97, we weren't really any good at it in a way that was sustainable. And it looked like a yo-yo go from year to year. So after Dave DeCarlo joined our Board in May of 2011, I committed to getting as good in the cemetery business as we were -- as we are this year in the funeral business.

It took a while to figure out what that looked like and what that meant in terms of performance. We suspended the cemetery standards model. And then we went starting about May -- late April, May of this year, it became obvious what we needed in place, the organizational structure, both at the home office and the field. And then it was a matter of going and finding the players.

So we didn't mess around. We moved quickly and I think quite boldly to bring in talent.

We brought in a national cemetery sales person here, national product salesperson here. We got someone in charge of the West now that has an incredible background and cemetery as well as funeral. And then we added some more assets in the regions. So I think what you're going to find is, starting in 2013, you saw some of the low-hanging fruit in the third quarter. You'll see more of that in the fourth quarter.

But starting in 2013, you are going to see this fruit start to really bloom into major trees and it is going to last this time. And it is going to add a lot over time without trying to tell you what quarter. It is going to be there. And our people are incredibly challenged and excited by getting to be the best in the cemetery business.

Great. And one last question just switching gears a bit. Just trying to gauge the depth of the pipeline in terms of acquisitions. Can you give me a sense of acknowledge that the acquisition strategy model, how big your target universe is and where you're at and how many in terms of relationship and then what you would deem as core prospects? Can you kind of give me a sense?

Let me address that. I would like just to add one point to Mel's comments related to the cemetery. In our forecast, our rolling four quarters forecast and in the model that I have spoken to, our business model, cemetery revenue growth in that model is 4%. For the third quarter we did 15.7% and for the year-to-date we are sitting at about 3.7%.

So to the extent that we exceed this 4%, you are going to look for more compounding on the earnings per share. So I just want to make that comment relative to the cemetery. That is a number that we have used. So that ties into what Mel said.

In terms of the acquisitions, you know there's about 20,000 unconsolidated funeral businesses out there. So if you took let's say a universe of the top businesses of 2,000 -- I don't know what the number of top business they are, but certainly 2,000 -- we tied all the standards and all of our operational models to our acquisition program. In other words we are buying businesses that are already operating at our standards and businesses that are in good economic and markets that we believe are safe, for at least five years. That includes demographics and other concerns.

That gives us the opportunity to not be as concerned as others might be of what happens to the death rate. Most of these businesses are growing, death rate or no death rate. So that is it.

So let's say, if there is a universe of 2,000, our business model calls for us to buy 5 to 7 businesses a year. I think there's no way that we won't exceed that amount. But to do what we want to do, we need to buy about 5 to 7 businesses a year. So I have got to believe with financing in place, with the momentum we have got, with the type of businesses we have already acquired, that we should be able to buy that number of businesses moving forward easily. And that is really our plan.

And if we do and are lucky enough to add substantially more good businesses, it is going to do nothing but again compound earnings-per-share growth.

We buy everything on a discounted cash flow method. It is designed to, at least, return first-year cash on cash our cost of capital. Most times, we are exceeding that. Therefore we are continuing to reduce our cost of capital which we have reduced about 0.5% since September of last year which we hope is going to translate and we know will translate into growth in our stock price and benefits to our shareholders.

And that is what we are trying to do with the acquisition program. It will drive topline growth. And it is very accretive and we are doing a lot of work in determining those values. Thank you.

Great. Thank you and I'll jump back in queue.

Nicholas Jansen, Raymond James.

Nice quarter. Speaking of the M&A environment, seems like a lot of the players are discussing the robustness of the pipeline. Are you guys seeing anything from a competitive standpoint that would perhaps limit that opportunity?

And then looking at your expectations for M&A of 5 to 7 per year, can you remind us of what you have included in your trail -- in your four-quarter outlook or do you have no acquisitions other than what you'd expect to complete in the December quarter? Thanks.

We have two letters of intent that are expected to close in the fourth quarter. We have numerous businesses in the -- that we are currently working on. There's always competition. We are finding that people like our decentralized management model. And we are fully intentional of being competitive, but we are also very mindful of our responsibilities to our shareholders.

So, all that is taken into account. And we are not having any trouble buying a number of businesses that I talked about.

Let me just add the following. What we are finding is that given where we have evolved to with this operating framework called a standards operating model both on the cemetery and funeral home, when that is explained to people, and I don't mean -- we are very selective. Bill has got this incredible model against which it is hard to measure up. So, you have to be one of the better businesses around the country to even make it through that model and come out so that you make the -- we would like that business cut.

And the reason is, we are finding that if you want to be attractive, both to individual businesses and talent, you have to require high standards. And the people, the businesses we are looking at have a history of high standards performance in growing their business.

So when they see our framework, it is all designed around continuing that and even making it better. We become a really great choice, all other things being equal financially. And so, we don't find it difficult when it comes down to a great business to measure up to anybody else no matter what they do or what they say. And our own people and former owners are the best reference check you can have.

So, we are an open book. And what we find is a great business and a great talent wants to make a difference. When they join our Company, they make a difference. And in the case of some of these businesses that Bill and his team have added over the last year, made a big difference. And we expect that to continue.

And let me also comment. I mean just to buy is really no gain. Where you can buy and continue to reduce your cost of capital, all of you can calculate those numbers. That is what the acquisition program is designed. Just like same-store funeral revenue growth, just like increases in cemetery sales, just like growth in our financial revenue we have to do. All of those pieces have to be hitting on all cylinders to produce reductions in cost of capital so this company, which will translate into shareholder growth and that is what we are all designed to do, everybody is working on their individual part. Nobody is working on the good of the overall. We are all working on our individual part to make the overall better. And the acquisitions is a major component of revenue growth which is the number that drives your earnings-per-share and your growth in the funeral industry.

It is very simple. And that is what we are doing. And as I've told many of you and many of you have seen, I would be more than willing to share what we are doing in terms of analysis on these acquisitions and be willing to show you how we come up with our returns and what we're doing.

So it's an open book and I think the proof's in the pudding because the numbers are beginning to reflect all these components that I am talking about. The acquisitions were a little easier to get in place early, but it is now all coming together and that is what is creating what we're doing and why we have been able to significantly change that rolling four quarters forecast. And I want to again emphasize it is rolling four quarters, ending with the third quarter of 2013.

So I think you have to stay tuned for the fourth quarter to see what our expectations will be for the full year of 2013. And we'll take a look at that after we know where we stand in the fourth quarter.

Just to add one thing to that. What you're seeing now and we've talked about this in some of the material in the past, but it hadn't really fully played out in all ways until now after we reorganized in a major way last year and improved everything this year. But what you are going to see going forward are the four leveraging dynamics. The operating leverage, the consolidation platform leverage where the acquisition EBITDA, field EBITDA drops straight down through the overhead because we don't build a platform overhead to the same degree that we add revenue. And you are going to see so the overhead leverage, the capital structure leverage now with a new capital structure on all of our senior debt in place. You are going to see a powerful force.

And then, all of these working together create a lot of incremental earnings and free cash flow, much greater growth compared to the revenue growth because of all of these leveraging dynamics happening simultaneously. And you are going to see that over the next year.

The other thing -- let me add one point again, I apologize. But one point that we have been emphasizing when we've had the opportunities to visit personally with each of you is the fact that where we are in the new credit agreement, we do have the opportunity under the covenants of this credit agreement to further reduce our interest and expense and interest spreads end under that credit by improving our leverage ratio.

One of the phenomena that I learned early and that we have shown to both our lenders and have shown to the people that we have been able to discuss this with, is that as we buy acquisitions, even though we are under this model, even though we are financing 100% of those acquisitions, every time we do it our leverage ratios get a little better. And that is the reflection of what Mel talked about in terms of the leveraging, plus high operating profits in those acquisitions.

So it is a phenomenon that is not really present in a lot of business, but is unique to the funeral industry. And we are obviously tying that together with our models on the acquisitions so that we are continuing, we hope, as we look in the future to continue to reduce our risk ratios and hopefully we will be able to gain more capital leverage as we continue to grow. Thank you.

Thanks for the call, guys. Great quarter.

(Operator Instructions). Clint Fendley, Davenport.

Thank you. Good morning. Congratulations on getting over the third-quarter curse here. It seems like the last few years we have always seen a dip in the earnings on the third quarter, so it is nice to see the good numbers here.

Yes, it is.

I have a few questions around the guidance. I wondered are any of the acquisitions that you've talked about that have not closed yet in the numbers yet, I guess, especially the ones that we would be looking at for the upcoming fourth quarter?

Yes they are.

And would it be just the ones that you anticipate on maybe the fourth quarter that you have the letter of intent for?

No, we are actually putting in in our business model that we will acquire similar type numbers to this year, 5 to 7 businesses. Obviously the full effect of that wouldn't be in all of the '13 numbers. But all the acquisitions for 2012 will be in the 2013 numbers.

So, but I think we wouldn't be doing that if we weren't pretty confident that that was the case. And I'm hoping that as we move into 2013, we will be reporting that we are ahead of our expectations, relative to acquisitions.

So just to be clear, the one -- you do have numbers in there for acquisitions that have not closed yet, but that --?

Yes, we do. Yes. Yes, we do. But we are with -- obviously the ones we have under a letter of intent we are very close to closing. And I feel pretty comfortable with the other numbers being in there based on revenue somewhere in the range of $15 million.

How many of the ones for 2013, the 5 to 7, are all of them in there, or are just (multiple speakers) --?

We have already closed five businesses. We have two more to close this year. The timing differences on that, there was about $11 million in revenue on the acquisitions that we've closed during 2012. So far through four months, we have only picked up about $4.4 million of that revenue. So we have a lot of those acquisitions are going to start running through that are already closed.

The other two will be put in in the fourth quarter. We are, I think we are projecting those going in by December. That is about $5.5 million in revenue. That will be spread into 2013.

We have signed letters of intent on those acquisitions. So, those are committed transactions.

So, we are also putting in on a staggered basis compared to this year, an additional $15 million in revenue for 2013, which is pretty minimal. Starting the new program this year, and we accomplished more than that amount and we did have some startup time involved in getting it done.

Right now, we are getting a lot more efficient at what we are doing. As you well know, I have a person with a Masters in demographics on my staff plus two analysts plus a Director of Finance and a new Principal Accounting Officer, all of which are going to help in acquisitions. So we are gearing up to do more. We have more opportunities. Where we were dealing this last year with one acquisition, we are probably dealing with 10 today in terms of opportunity.

So I am very confident of what we are showing in these numbers and feel very confident that that can be done. Otherwise, obviously we wouldn't be putting out this kind of information.

And, Bill, just for our modeling purposes, when we look at your acquisition revenue detail line that you provide in the releases, I know this -- your numbers there extend beyond one year. I mean, you are still going to continue that going forward, right?

We are going to continue that going forward until we see some reason to change if necessary. For now, we don't see that. It actually is five years.

Obviously, I will tell you that if we broke out the acquisitions that we did in 2012, the financial numbers would be much better on those acquisitions. So but that's the way we do it and so, rather than change that, we are leaving at all as it is for now.

And then lastly here, what are your assumptions for same-store volumes that are implicit within your guidance?

In the model we are based on 0.5%. Half -- I'll give you.

Revenue.

On terms of revenue, 0.5% revenue growth. We are projecting in our model $14 million to $15 million in acquisition growth revenue, 4% cemetery growth and 5% financial revenue growth -- all of which we are exceeding. So that's designed at about a 20% compounded rate of growth in earnings per share on a consistent basis. We feel that that's the kind of the way that we want to look at it and that should be sustainable over a five-year basis. That is what we are trying to do. So to the extent that we exceed any of those numbers I previously gave you, our earnings per share is going to be better.

We don't forecast volume growth, Clint. This option is that Bill's group made for this purpose is 0.5% same-store funeral revenue growth. That's something I think will turn out to be conservative. (laughter)

Well, all the numbers are conservative and I think they are realistic. So let's put it that way. I gain, 0.5% same-store funeral revenue growth, $14 million to $15 million acquisition growth with an after-tax first-year cash on cash returns equal to the cost of capital or better, 4% cemetery revenue growth total, and 5% revenue growth total.

So those are the numbers. That is what we have been talking about. You can translate those in your model. I think it would come out the same as what we are showing. So that is what has to be done here to be a high-performance business.

I think we can exceed those numbers, but that is where we are.

Those are not operational numbers. (laughter).

They are not operational numbers, they are not budgets --

We had nothing to do with them except going okay, yes, we can do that. (laughter).

So, that --

Couple of last questions just on the cemetery site. I mean of the 5 to 7 businesses that you are looking to acquire next year, are any of them cemeteries? And if you could just comment the 4% growth that you are projecting in cemetery, how much do you intend to focus on pre-need in order to get to that 4%?

Well, that would be probably 15% pre-need revenue growth. And somewhat similar same-store cemetery growth to what we're doing in funeral. So these are just the ways we are answering the questions that we get asked just like you are asking us right now. So that is what it is. So if you translate that 15% in pre-need into absolute revenue growth for the cemeteries, it comes out to about 4%. So as far as acquisitions in cemetery probably this year, I wasn't really excited about acquisitions in cemetery with the people we have in place today.

And what we have done in terms of cemetery of which I have participated personally with Mel, and what we are doing in terms of our accounting and our planning in terms of how what we are selling and how we are selling, I feel very comfortable in considering cemetery acquisitions.

Currently, I don't have a major cemetery, for example, in our house to be analyzed, but we have been analyzing cemeteries during 2012 and we are prepared to consider them at that time. I am only saying today, based on where our management is, based on where our systems are and based on how we are handling our sales program, I would feel very comfortable in having a nice cemetery added.

We've begun to look at some really nice combination operations build relationships with a few that would be very attractive. We now have the talent -- to say that we are focusing on pre-need cemetery sales would be an understatement. The organization we put together is -- they are pros. And they know how to play in a championship game.

So, we are prepared now to do something in the cemetery business like you haven't seen us do before. We didn't put it in the numbers because we didn't want -- we want to do it first and talk about it later. But we have the organization.

Great. Thank you.

Having no further questions, this does conclude our question-and-answer session. I would like to turn the conference back over to management for any closing remarks.

I do have one closing remark. It's a remark to our people, many of whom are listening. I want to thank you again. This is our new beginning, but it is only a beginning. We have work to do and a journey to make. So thank you again and let's keep up the great work. That concludes this call.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.