Carriage Services Q4 2007 Earnings Call Transcript

Mar.10.08 | About: Carriage Services (CSV)

Carriage Services, Inc. (NYSE:CSV)

Q4 2007 Earnings Call

March 7, 2008 10:00 am ET

Executives

Kip Rupp – Managing Director, DRG&E

Melvin C. Payne - Chairman of the Board, President & Chief Executive Officer

Joseph Saporito - Chief Financial Officer, Executive Vice President & Secretary

Analysts

James Clement – Sidoti & Company, LLC

Drew [Gaputes] – Davenport & Company

Alan Webber – Sidoti & Company

[Darnell Zasis] – Lord, Abbett & Co.

Igor [Latsin] – Summa Capital Management, LLC

Frank Bianco – Argent Capital Management, LLC

Operator

Good morning ladies and gentlemen. Thank you for standing by and welcome to the Carriage Services’ fourth quarter and full year 2007 earnings conference call. During today’s presentation all parties will be in a listen only mode. Following the presentation, the conference will be open for questions. (Operator Instructions) As a reminder this conference is being recorded today on Friday, the 7th of March, 2008. I’ll now turn the conference to Mr. Kip Rupp, Managing Partner of DRG&E. Please go ahead.

Kip Rupp

Good morning everyone, we appreciate you joining us for the Carriage Services’ conference call to review yesterday afternoon’s earnings release. Before I turn the call over to management, I have the normal housekeeping details to run though. If you would like to be on the email distribution or fax list for future Carriage Services’ news releases or if you had any technical problems and did not receive your copy of the news release yesterday afternoon, please call our offices at DRG&E and we will be happy to help you out. That number is 713-529-6600. Also if you’d like to listen to a replay of today’s call one will be available via webcast by going to Carriage’s website at www.CarriageServices.com. Additionally in a few hours there will be a telephonic instant replay available that will be available for the next seven days. The replay at this number and code are in the press release that was released yesterday afternoon.

Please note that information reported on this call speaks only as of today, March 7th, 2008 and therefore you are advised that time sensitive information may no longer be accurate at the time of any replay listening. As you know certain statements made today in the 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 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 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 on 10-K for the year December 31st, 2006 and subsequent SEC filings could cause the company’s results in the future to differ materially from the forward-looking statements made today in other documents or oral presentations made by or on behalf of the company. A copy of the company’s Form 10-K and 10-Qs and other information and news releases are available for free on the Carriage Services’ website.

Now, with me today are Mel Payne, Carriage Services’ Chairman and Chief Executive Officer and Joe Saporito, Carriage Services’ Chief Financial Officer. I would now like to turn the call over to Mel.

Melvin C. Payne

Well, how does everybody like our bikini reporting after one year? Because we worked out a lot in the gym before rolling it out about one year ago and our results for the year show that we are a very fit company. More seriously our reporting is the most transparent in the industry and the most transparent probably in most companies, no matter what the industry. There is simply no place to hide from our field operating and acquisition results and beneficially our managing partners can see the impact their individual business is having on Carriage’s total performance. We like it that way and they like it that way.

Our company theme for 2007 was 2007 The Year of Being the Best, No Excuses and I am extremely proud that our employees and leaders lived up to the promise of that theme with consistently broad and deep execution of all three of our models. It was truly a breakout year for Carriage in numerous ways which got reflected in a stock price increase of 73% to $8.80 per share on December 31, 2007 and while the stock is backed up quite a bit in the current market correction, we do not concern ourselves with that. We’re not buying any stock back in as the stock should follow the progress of the company over time and I can tell you our company continues to get better. We made seven great acquisitions during 2007, each of which was consistent with our ten-year vision for Carriage. As part of the vision we have established five and ten-year goals to grow the financial performance contribution from our acquisition portfolio by focusing our capital investment in 10 to 15 strategic markets where demographic trends are positive and strong independent brands that fit our six strategic criteria are available for expansion and consolidation.

Our trend reports isolate the impact this growing acquisition portfolio is having on our performance over time. We believe that our commitment to making the individual experience of our client families highly valuable and unique within a decentralized framework of it being the best entrepreneurial culture offers an attractive succession planning solution to the remaining large quality independence in our industry. Specifically we want to be known for hiring and retaining only the best talent and for acquiring only the best operations in large demographically attractive markets. A being the best, not the biggest, reputation and culture is a compelling vision for our company and reflects our view of the very serious and noble nature of our work. Taking great care of the deceased, while serving the celebration of life, grief of loss and memorialization needs of the living, our direction and strategies are clear and our dedication to this vision is strong and unwavering. Now it’s all about execution.

With that I’d like to turn it over to Joe for some brief remarks about our year.

Joseph Saporito

Good morning everyone. I wanted to remind you that if you’re looking at the version of the press release that appears on the wire services, the trend reports are not properly formatted on those versions. Therefore we will post, as we have in prior quarters, the press release on our website and you can go there to get properly formatted trend reports.

Many of you have told us that you have a much better understanding of our annual and quarterly trend reports. Rather than step you through the reports like I’ve done in the prior three quarters, I would like to focus my comments on a dynamic that we have discussed in our company investment profile and press releases for almost a year and now is becoming very apparent in our annual trend reporting. That is, our ability to leverage smaller revenue increases into much larger earnings increases. Ultimately we believe this will drive superior investment returns as we continue to benefit from the consolidation growth cycle that is just beginning. We benefit from operating leverage whereby modest increases and same store revenue and field EBITDA margins result in greater increases in same store field EBITDA. The increases in same store revenue and field EBITDA is driven by our outstanding and consistent execution of our Sanders operating model which we experienced in 2007. As a result we were able to leverage a 2.6% increase in same store revenues and a 230 basis point increase in field EBITDA margin into a 9.4% increase in same store field EBITDA. Same store revenue increased $3.9 million and our same store field EBITDA increased $4.9 million which means our controllable same store field earnings increased 126% over the increase in same store revenues. Substantially all the earnings improvement came from our Central region and Rolling Hills Memorial Park.

We also benefit from consolidation platform leverage whereby acquired field EBITDA is fully accretive to both consolidated EBITDA and EPS. In 2007 our seven acquired business generated an incremental $4.5 million of field EBITDA and a 32.1% field EBITDA margin. As we fully integrate these businesses we expect their field EBITDA margins to eventually exceed the average of our same store portfolio because the acquired businesses tend to be larger, higher margin businesses which is consistent with our strategic optimization model.

Finally we benefit from organizational overhead leverage and capital structure leverage. Organization overhead leverage results from our relatively fixed cost regional and corporate organizations. Approximately two-thirds of our $2.8 million increase in total overhead resulted from increases in variable costs such as incentive compensation, recruiting fees and legal expenses related to four specific lawsuits. Our fixed regional and corporate overhead increased 5.7% or approximately $900,000 slightly higher than inflation because we upgraded our capabilities in several corporate departments this year. Capital structure leverage results from our low cost fixed rate debt and a low number of common shares outstanding. As a result we leveraged an 11.6% increase in total revenue from continuing operations into a 17.8% increase in total field EBITDA, a 20% increase in consolidated EBITDA and a 95% increase in diluted EPS. We expect these trends to continue in 2008 even without additional acquisitions. Based on our 2008 outlook, which assumes no acquisitions, we expect to leverage a 7.9% increase in total revenue from continuing operations into an 8.8% increase in field EBITDA, a 12% increase in consolidated EBITDA and a 28% increase in diluted EPS. We would expect any incremental acquired revenue to enhance the leverage effects on our 2008 financial results.

Melvin C. Payne

I want to make one comment before opening it up for questions. As many of you know we put out a release a while back that Joe would be leaving Carriage and the death care industry and I wanted to express my sincere thanks and those of the rest of the leadership team at Carriage and all the employees and our Board for his five and a half years of service in our company. He came a t a time when we needed some really deep thinking and we would not be where we are today without Joe Saporito. I personally want to thank him and wish him the best wherever he winds up and his friendship will be missed, but it will also continue.

With that, I’d like to open it up for questions.

Joseph Saporito

Thank you, Mel.

Question-And-Answer Session

Operator

(Operator Instructions) Our first question will be coming from Jamie Clement with Sidoti & Company. Please go ahead.

James Clement – Sidoti & Company, LLC

Joe, first of all on behalf of the Wall Street community, thanks very much for over the years helping us better understand the Carriage Services’ story and for all the work you did.

Joseph Saporito

You’re quite welcome, Jamie. It was a pleasure.

James Clement – Sidoti & Company, LLC

Mel, looking at some of the overhead expenses in the quarter I think your press release refers to the variable line item as an anomaly or an aberration, can you give us a little bit more feel on why that number came in a little higher than it has in previous quarters?

Melvin C. Payne

We’ve always had litigation but we’ve got four cases that popped up during 2007 that we have separated of what I call recurring type litigation which we’ve always had. Two of these are class action in nature. Some of the other companies have suffered from some of these type suits. We were blessed until 2007 in avoiding that. Some of this relates to past leadership and issues and we think it will be resolved. We don’t think these four based on how we’re organized today and the strong leadership we had in place will occur in the future to the same degree, so we’ve separated them into variable overhead. They are now, they will pass and after they pass I think you’ll see that trend down materially. So I don’t see this, and this is the language we use around here, I don’t see the variable overhead increase as a sustainable overhead hit against a sustainable earning power of the company which we define as consolidated EBITDA margin.

James Clement – Sidoti & Company, LLC

I hear you. Mel, in looking back at 2007, did you call out seven acquisitions? Is that the right number?

Melvin C. Payne

Seven.

James Clement – Sidoti & Company, LLC

Heading into 2007, was the number seven, was that a lot higher than you thought you’d end up with? Or did you have enough visibility that that was the number that you kind of expected? In other words, was this a – I think you all said probably you don’t expect any deals to close in the first half of 2008, so was there anything unusual about the circumstances of 2007?

Melvin C. Payne

I think it was a little unusual. I think there have been seven or eight years of no consolidation to speak of and so some of the large independents has succession planning on their mind and as I’ve explained on these calls before, unless they’re a true seller with proper motivations, health, age, other interest, unless the motivations align they’re not a true seller and the price expectations therefore won’t be in range for what we’re willing to do. In these cases, I was a little surprised to be honest at how much activity there was and how little competition there was for it. Now three of these acquisitions were from places that Service Corp so one of those we knew about going into 07 but the other two we didn’t because they weren’t FDC divestitures. The other four were independents and they’re all fantastic businesses. We feel very honored with those affiliations and we think there are more out there like that.

James Clement – Sidoti & Company, LLC

Mel, how long do these deals in your industry take to come together? In other words if you all have said that you don’t expect anything to close in the first half, are there properties that you’re taking a look at right now that you think could be second half deals or can you give us a sense of how long the process takes and how these things come together?

Melvin C. Payne

With the right business and I paint a picture in here of our vision and so we’re not interested in just buying places. We did that in the 90’s and it didn’t turn out very well. So we want to build relationships and be there and be explaining what our company has become, the culture, the framework, our models and what we find is that the large independents still remaining in the country relate very well to what we have invented, what we’ve perfected. Their issues are how to deal with leadership, how to deal with people, how to grow their business, how to take care of their client families and our models all speak to that kind of alignment. We’re finding a kinship so to speak in what we have done and how we do it with some of the best, highest quality independents. So you build a relationship and you wait for the motivations to align and we’re building those relationships. To say that the second half or this or that, all I can tell you is we put out a plan with some ranges through 2012 and we will do that. Now the timing I’m not going to get into quarter or half or this or that, but we will do that.

James Clement – Sidoti & Company, LLC

I hear you, it’s just some industries deals come together pretty quickly and if you say, okay well nothing in the first half, we want to make sure that that just doesn’t mean that oh, there’s no pipeline. You know what I mean? And I think the way you answered the question, you explained it 100%.

Melvin C. Payne

There’s a pipeline but we’re not out turning over rocks looking for deals.

James Clement – Sidoti & Company, LLC

I hear you, I hear you loud and clear.

Operator

Our next question is coming from Clint Fendley with Davenport & Company. Please go ahead.

Drew Gaputes – Davenport & Company

This is Drew Gaputes for Clint. Just a question here about, it looks like in 2007 you guys benefited some from pre-need cemetery property sales. I was wondering what your thoughts on that was going forward and especially in light maybe of an environment with less consumer discretionary spending?

Melvin C. Payne

We hear that’s an issue, we read the papers but you will have to understand I can’t predict what the consumer is going to do, but in our company and in a high-performance culture there are no excuses. If you have eight players and your park’s running them and they have an eight player sales organization with the right kind of maintenance and the property looks great, there are no excuses. So I’m not into predicting consumer behavior, we’re into hiring the best talent and putting them in the right spots to be successful. How that will affect us in the short term, what happens in the economy and the consumer, don’t know and don’t care.

Operator

(Operator Instructions) Next question is coming from the line of Alan Webber with Sidoti & Company.

Alan Webber – Sidoti & Company

Just two quick questions, one is when you talked about the 08 assumptions and you talked about maintenance cap ex of $9 million, can you just kind of explain is that like a – what does that really mean in your case?

Joseph Saporito

What we term maintenance cap ex would primarily be capital expenditures that we make to maintain our facilities and fleet. It’s a little bit higher than what you’ve seen in the past from us because there will be some what we term maintenance cap ex. In other words cap ex that we expect to spend to maintain facilities and whatnot related to some of the acquisitions we made this year. For example, we acquired some businesses in the Massachusetts market, we’ll be making some improvements to some of those facilities but those improvements will allow us to close two or three of those facilities and sell them so that we’ll be doing more business through fewer facilities when we get through with that. So that’s the kind of thing we call maintenance cap ex versus something like spending money to build cemetery inventories or to build new facilities which we will likely be doing some of that in 08. At this point though we couldn’t really give you a hard dollar figure.

Melvin C. Payne

Let me give you a little more color on maintenance cap ex and what that means. We have a language now in Carriage that is obviously very different than accounting language. What we want to do is to maintain the sustainable earning power of our operating businesses wherever. That’s not growth, that’s maintain the sustainable earning power which we define in our standards operating model. Every one of our managing partners knows what that means. The amount of cap ex required to maintain the sustainable earning power of our operating businesses is going up in part because of what Joe just said. However there are some places that we have that had been shorted on maintenance cap ex because our managing partners, and there are only a few, ran the business to maximize short term profits and not to build it for the long term. So we’re going to do a little catch up, most of this is in the Western region which has new leadership in the middle of 2007 and those managing partners who did that – we knew they would not make the cut. Those are what we call budgetmeisters. What we’re looking for are business builders that build it over time with the best people and it is built to last so that the earning power is sustainable. So it’s a temporary up tick for the one reason Joe mentioned and the other I just mentioned.

Alan Webber – Sidoti & Company

Just curiosity then, when you talk about your five year goals, is arbitrarily assuming some small increase to $9 million a reasonable assumption?

Melvin C. Payne

I don’t know that I would do that on a permanent basis. I think it’s what we need to do in the short term. And by the way, we are a budget free company. Freedom at last. We have no budgets. We do have capital plans. We have no budgets at the location level, we have no budgets in the home office, we have no overhead budgets. But we do have capital plans that are three year plans and they’re all prioritized what you’re seeing is short term priorities. I don’t even know what the maintenance cap ex looks like if you went out to 2009, but it could drop a little bit.

Alan Webber – Sidoti & Company

And then my other question, can you just quickly update on your cash tax expenses? I just forgot how far out your NOL goes out like that?

Joseph Saporito

In 2007 our cash taxes were about $300,000. This year our estimate is about $1 million. Substantially all of that difference is because of state income taxes in some of the states that we operate. We have an NOL that we would expect to last at least through 2008 at this point. It could go beyond that but obviously we firm that up each year as we file our tax return. But you can certainly expect it to go through at least 2008.

Operator

Our next question is coming from the line of Darnell Zasis with Lord, Abbett. Please go ahead with your question.

Darnell Zasis – Lord, Abbett & Co.

Just one quick question in regards to acquisitions, I know we did a lot last year and not going to be pushing it in 08. In terms of how confident are you guys in financing, your own financing that you’ll be able to finance an attractive deal or multiple deals that come along?

Melvin C. Payne

We are 100% confident that we can finance anything that comes along. We have a lot of free cash flow, we’ve estimated $15 to $17 million this year and we have a $35 million undrawn line of credit and unlike what you read in the papers we actually have people that want to lend us money. We have great relationships with our creditors, always have. We’re proud of that relationship, throughout thick and thin we’ve never been in default of a covenant. I think our credit profile speaks for itself. I don’t know how our high yield bonds are trading these days with all this turmoil in the market, but the last time I looked while the spread had widened over Treasuries it was only about 500 basis points.

Joseph Saporito

And I think one thing I didn’t mention in my comments but is certainly true, I think if you look at our credit profile and look at it, say at the end of last year, at the end of 2007 and project out what it’s going to be at 2008, another benefit of the leverage that we’re seeing in our business is a significantly improving credit profile and I think that’s important for everyone to keep in mind. As we grow the business and grow our consolidated EBITDA, our credit profile is just going to continue to improve and I think, as Mel said, our banks are very happy with our performance and are very supportive.

Operator

Our next question is coming from the line of Igor Latsin with Suma Asset Management. Please go ahead.

Igor Latsin – Summa Capital Management, LLC

I’m somewhat new to the story so forgive me if the question is too basic, in terms of the performance of the trust investments, if you can give us a little color on that?

Joseph Saporito

We basically have three categories of trust investments and two of those categories of trust investments relate to funeral products and services and cemetery products and services and the third is something we call perpetual care which is related to, essentially you could think of it as an endowment for the benefit of the maintenance of our cemetery properties. We basically use independent advisors to help us set the allocation strategies and investment policies for those portfolios and we’ve had very good performance over the last year. The investment policies are set up so that we minimize and want to minimize our downside risk in those portfolios. We’re not necessarily looking for every basis point of return that we could possibly get out of those portfolios because the objective there is for us to at least cover inflation and cover our price increases and if we do better than that, that’s gravy as far as we’re concerned but we’re not to set up to milk every basis point out of that. On the contrary what we’re trying to do is protect our downside risk. So the cemetery portfolios which are probably the largest, our returns last year were right around 8%. Our funeral portfolio was a little bit lower than that, it was probably in the 6% range but we’re very, very pleased with that performance and it certainly meets our objectives.

Igor Latsin – Summa Capital Management, LLC

And how have they been doing year to date?

Joseph Saporito

January is the only month we have data on right now and basically our cemetery portfolios were close to break even. They were slightly negative but I think they were very close to break even. So again, consistent with our policy, our strategy we want to protect the downside risk and I think our advisors are doing a good job of that.

Melvin C. Payne

Our view of the investment side of this is we’re in the operating business, not the investment business even though we have large investment trust funds. Just like Joe said, we are very conservative in how that gets managed. We’re not trying to beat the market but we want to make sure we get steady returns that allow us to live up to our obligations and then have some return left over for us.

Igor Latsin – Summa Capital Management, LLC

This is great and very helpful, but so I understand who manages the trusts for you? Is it several advisors, is it internally managed?

Melvin C. Payne

Look, we’re not smart enough to internally manage. We know what we’re good at and we try to get better at it but we turn it over to outside advisors and, Joe, I don’t know, is that public?

Joseph Saporito

We don’t normally talk about the specific advisors but the cemetery trust funds are managed by one advisor and then we have the funeral trust funds are under several different investment scenarios. But in all cases most of the money is discretionary as to the investment allocations and we obviously work side by side with the advisors in looking at the investment policies and the investment allocations. There is a portion that is non-discretionary but that’s definitely the minority of the funds that we have.

Melvin C. Payne

Yeah, it’s managed by professionals, pros. Names you would recognize.

Operator

(Operator Instructions) Next question is coming from the line of Frank Bianco with Argent. Please go ahead.

Frank Bianco – Argent Capital Management, LLC

Forgive me, I got on the call late. Can you reiterate what your cap ex spend plans are for 08 and 08?

Joseph Saporito

For 08 what we’re saying basically is that we’ll spend about $9 million primarily at maintenance cap ex. We haven’t really published anything with respect to 09 at this point.

Melvin C. Payne

Let me comment because I don’t know that we said a whole lot about this in the press release. We do have some internal investment opportunities, growth opportunities and since 06 in rolling out a new set of standards for our cemetery business we’ve really gone to school on the cemetery business and we like it. However we’re looking at it completely differently than what we used to with much longer term strategy, master planning, demographics, product planning to meet those demographics and then building a sales organization that’s customized to sell unique products to those customers. That takes a little longer and we acquired three large combinations last year and then we have some already. So we’re doing a lot of work on our cemetery side that is much longer term strategic. It will take some time and it will take some investment in new inventory to really reach some of the upside sustainable potential in our cemetery side. But it’s a side that we’re really excited about. What you saw in 07 was really the low hanging fruit. What you’ll see, and it’s beginning now in 08, 09, 2010, I think you’ll see sustainable increases in our sales, no matter what the environment in the country and it will be good and it will be sustainable. So we’re telling our people do it right and make it last. Now we’re also looking at internal opportunities to expand some existing funeral brands in really strong markets where we have existed but have not capitalized on that before. So we paused number one to integrate what we bought last year, to recruit eight players where we’re missing them and then to look at some of these internal investment opportunities which are timely.

Frank Bianco – Argent Capital Management, LLC

Just so I understand this, so all in the cap ex number for 08 should be around $9 million or is there going to be a growth?

Joseph Saporito

No, the all in, the cap ex number would likely be higher than $9 million. We’re saying that $9 million would be the maximum for what we would term maintenance cap ex. But anything else above and beyond that would be clear growth opportunities like Mel described, new facilities, new markets, inventory and cemeteries which obviously will produce incremental revenues. So we view those as investment opportunities just like we would view an acquisition and it has to meet the return on investment criteria that we have set for our capital.

Melvin C. Payne

And we’re going to do a better job of segregating the cap ex into pure maintenance cap ex to maintain the existing sustainable earning power of our operating businesses versus cemetery inventory and expansion of funeral brand opportunities. We’ll make that real clear.

Frank Bianco – Argent Capital Management, LLC

Can you give us a range as to what you think cap ex might be?

Melvin C. Payne

Nope. Not ready to do that.

Frank Bianco – Argent Capital Management, LLC

Will it be materially different than 07?

Melvin C. Payne

Yeah, it could be materially different than 07 because 07 we didn’t really look at any internal growth prospects.

Frank Bianco – Argent Capital Management, LLC

So directionally it’s going to be higher, right?

Joseph Saporito

Directionally it’s going to be higher. But if it’s higher it will be because we expect growth and/or incremental revenues.

Frank Bianco – Argent Capital Management, LLC

And then along those lines, when will you be publishing the 10-K?

Joseph Saporito

Next week.

Frank Bianco – Argent Capital Management, LLC

And then lastly, in terms of leverage where are you guys comfortable going with your leverage number?

Melvin C. Payne

We were comfortable before, we’re comfortable now and we’ll be comfortable in the future.

Joseph Saporito

It’s going down as we continue to grow our consolidated EBITDA and I think that from our perspective that’s a good thing. But as Mel said, we’d be comfortable taking on additional leverage if there was an appropriate growth opportunity out there that would provide the kinds of returns that we would expect on our capital.

Melvin C. Payne

There’s still I think sometimes is a mis-perception about our balance sheet because our book equity, a little better than $100 million, compared to our total debt of $230 million or so includes $94 million of the convertible preferred debentures which the banks and all of our senior lenders view as equity-like security because of the features related to that. So the company’s credit profile is strong. The estimate for 08 is $44 million of consolidated EBITDA, that’s pretty much all cash. We have no principal maturities until 2015 so we’re just paying interest. What’s not to like? This is not a booked leverage deal. This industry is a really strong cash flow industry, it carries leverage. If you want to ask me what might keep me up at night, it hasn’t been leverage, it’s not leverage and it won’t be leverage. It will be finding the best talent.

Operator

We have a follow up from the line of Jamie Clement. Please go ahead.

James Clement – Sidoti & Company, LLC

Mel, I’m sorry I have to ask this question, just listening to the last couple of questions, I just wanted to make sure that I wasn’t getting confused here or anything like that. I assume investors saw you, you spent a big number on acquisitions in 2007 but you also acquired a lot of companies and you had some cash on the balance sheet, my understanding in terms of your long term acquisition program or goals for the next four or five years was that really to hit your numbers you’re really talking about funding acquisitions out of free cash flow. Am I wrong about that?

Melvin C. Payne

We could $10 million in annualized revenue a year, out of free cash flow, through 2012. That would put us up to about $240 million, $250 million in annualized revenue over the next five years all out of free cash flow. If we do that and we’re in our sustainable earning power range which we’ve defined as $24 million to $26 million consolidated EBITDA margin, I would think it would be on the high side of that. We’d have $60 plus million in consolidated EBIDTA by 2012 and we wouldn’t have any more debt than we have today. So we’d be in my view probably under leveraged from a shareholder point of view.

Operator

Management, there are no further questions. Please continue with any closing comments.

Melvin C. Payne

I have no closing comments. It was one great year but I think it was the first of many to come. So we appreciate your support.

Operator

Ladies and gentlemen, this does conclude the Carriage Services’ fourth quarter and full year 2007 earnings conference call. At this time you may disconnect. We thank you very much for using AT&T conferencing. Wish you a very pleasant rest of your day and a wonderful weekend as well.

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