Carriage Services, Inc. (CSV) Q2 2012 Earnings Report, Transcript and Summary

Good morning, and welcome to the Carriage Services Second Quarter 2012 Earnings Conference Call. [Operator Instructions] Please note this event 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 second 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'd 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 August 17. 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 the 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 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'd like to turn the call over to Mel Payne, Chairman and Chief Executive Officer. Mel, please go ahead.

Thank you, Matt. I won't say anything to get this call off, but I will say something a little later and I'll turn it over to Bill.

Okay, today, I'm going to take a little bit different approach and not spend as much time on our trend reports on line item by line item. We did that very adequately, I think, in the first quarter and that will carry over. Should you have any questions, we will have ample time for you to ask them. If they come up later, I'll be happy to take any questions you have on anything as it relates to our trend reports, which we view as being quite complete and quite informative for you to be able to analyze our company. So today, what I'd like to do is to address, really, 3 things: first is acquisitions; second is financial performance of both GAAP and non-GAAP EPS; and the third thing is our rolling fourth quarter forecast. First, looking at acquisitions, during the second quarter, we closed one new business consisting of 2 funeral homes and 1 cemetery in Lawton, Oklahoma. This business serves approximately 400 families in that market. On a trailing 12-month basis, Carriage has acquired 12 funeral homes and 1 cemetery. Okay, looking at our funeral acquisition revenue of $5,948,000 for the quarter, that is an increase of $2,775,000 also for the second quarter, or a percentage increase of 88% over the second quarter of 2011. Likewise, our funeral acquisition field EBITDA of $1,791,000 was up $1,086,000 or 155%. Looking at the 6-month period, we see the same type trend acquisition funeral revenue of $12,352,000, up 98% or $6,103,000, followed by acquisition EBITDA year-to-date for the first 6 months this year of being up against $4,282,000 or a substantial increase of $2,766,000 or 182%. The second quarter felt the full benefit of the acquisitions completed in the first quarter, and the performance numbers show the effect these acquisitions have on Carriage. Our pipeline remains good. We're continuing to look at some very nice businesses and we think the outlook for continued acquisition growth is strong. Now let's take a look at financial performance of both GAAP and non-GAAP income. Financial performance at the GAAP and non-GAAP level were both affected by unusual items not reoccurring year-to-year. GAAP other income for the second quarter of 2011 included a gain on the repurchase of junior convertible securities of $357,000, approximately $0.01 a share that was not comparable to 2012. Adjusting for the $0.01 in 2011, the second quarter GAAP earnings per share would've been up 15% to $0.15 a share. Again, up 15% to $0.15 a share. Year-to-date, the GAAP EPS, $0.01 a share adjustment, rose GAAP EPS for 6-month period by $0.07 a share, or 23%, to $0.38 a share. Again, 23% to $0.38 a share. I might mention also, while we're talking about this, we really have no future plans to repurchase junior convertible subordinated debt again. This is the way we, as management of Carriage, view our GAAP performance. Now let's look at non-GAAP EPS, okay? Two comparable numbers need explanation. First is taxes, which the accrual rate was increased in -- to 40.4% year-to-date. To accomplish this, the second quarter tax rate had to be 42.8% to average the increase over the 6-month period. That's the first noncomparable issue to discuss. The second one is the withdrawable trust income was $2,172,000 higher for the quarter in 2011; and for the 6 months, $2,810,000 higher in 2011. The withdrawable trust income adjusted -- adjustments reduces non-GAAP EPS to $0.15 per share for the quarter in 2011, and the adjustment or the catch-up for taxes in the second quarter of 2012 moves non-GAAP earnings per share to $0.17 this year, leaving an increase of $0.02, or 13%, for 2012 second quarter over second quarter 2011. Now looking at the year-to-date adjustment for withdrawable trust income in 2011, moves EPS down to $0.36 per share for 2011. The tax rate is correct in 2012 for year-to-date. It was averaged out in the second quarter, leaving EPS unadjusted at $0.44. The year-to-date increase on this basis for non-GAAP EPS is 22%. I hope this information proves helpful so that you can better understand our numbers. And again, we'll be more than happy to take personal questions from you in this regard. Now finally, the third thing that I mentioned and I want to talk about today is our rolling fourth quarter forecast. The rolling -- the new rolling fourth quarter forecast ranges show the following: we show GAAP earnings per share in a range of $0.70 to $0.73; non-GAAP earnings per share, $0.83 $0.85; and we raised free cash flow to $22 million to $24 million. All of those are slight increases. These -- I want to make one thing very certain here on these changes. They are all slight and small to a certain extent and these do not, in any way, reflect any changes for balance sheet adjustments or refinancing. Okay, we're ready to take turn it back over to Mel and we'll be ready for questions. Mel?

Thanks, Bill. As we covered in some detail on the first page of our press release, our leadership teams across the company are moving rapidly to furnish the inherent earnings power of our portfolio of operating businesses and trust funds, which, when coupled with intermediate-term bank financing that is proposed and we are pursuing with Bank of America and our syndicate, that exploits the current historically low rate environment. This financing, if and when closed, will provide the financing flexibility to grow opportunistically at very low cost, while preserving all of our financing options if and when we are faced with a larger volume of quality and, therefore, compelling acquisition candidates. Carriage has reached what I refer to internally as a sweet spot inflection point, where large increases in earnings are possible without taking huge risk. To put that statement in a numerical perspective, after years of saying internally that our earnings power should be above $0.50 per share GAAP, we now believe that we have the leadership and the operating and growth models in place to achieve the above $1 per share in GAAP earnings by the year 2014. That's not a promise and that's not a forecast. That's a core belief of our leadership team. We have themed this year as Carriage Services 2012 - A NEW BEGINNING, with a vision of taking Carriage on a journey from a good company this year to a great company by the end of 2016. Every one of us who are on the Carriage team are committed to making that journey not only fun, but rewarding for all of those who contribute to it. We hope you will join us on that journey. With that, I'd like to open it up for questions.

[Operator Instructions] And our first question is from Nick Halen of Sidoti & Company.

I apologize. I actually had to get on the call a little late, so I may have missed it. But I was just wondering, I know it's obviously very new, but I was wondering if you could talk a little bit about the proprietary cemetery system that you guys rolled out in February and, I guess, what you've seen so far and really how it's affected your operations, I guess, through the first half of the year.

Well, the first half of the year has been weak on the cemetery side, but it hadn't been because of the systems. As part of our new beginning, we rolled out a new operating model, standards operating model in the funeral home side at the end of November and that had instant traction. We saw it in December and we've seen it through the first half. We suspended the old cemetery set of standards until we had a better idea of what they actually should be. So we recruited some, what I'd call, top professionals in the industry, starting in April, May. We wanted to see out of the gate what we were doing right, what we were doing wrong, what the trends were in our Cemetery business. So we did a lot of experimenting in the first 3 to 4 months, trying different things in different places. We actually saw some of the fruit growing in some places and determined that we needed to change the way we were organized in our Cemetery portfolio. So I recruited a National Director of Sales here in Houston and a National Director of Product Development and Management that will be centrally directed, but supporting field operations. We have developed new cemetery standards. This group has had an incredible amount of contribution to that. That will be rolled out in meetings here in Houston in the first 2 weeks of September to be effective by year end. In the meantime, we are moving very rapidly to recruit top-notch cemetery operators in our regions and in our parks, as well as sales leaders, to make sure that by January 1, we're operating on new, sustainable standards that will take this portfolio to a much higher level. The system has been continually upgraded, debugged and is working, but the system is not what caused the performance in the first half of the year. The system is fine. It's going to be a great system, and it's -- we've got a lot of compliments about it. We've also had some things that were -- that could be improved in terms of functionality and ease of use and we're quickly making those.

Okay. Now in terms of headcount additions, I mean, what can we expect, I guess, by January 1, as you said? I mean, is it -- do you plan on adding? Or is it pretty leverageable, what you guys already have in place?

I don't think in terms of headcount. I think in terms of A player leadership and A player people. So -- that's determined by -- we don't make those retiring decisions here. If we need people, they add them in the field but we make sure they're good ones. And if we don't have good ones, we get rid of those and get some better ones.

Okay. And then just one more for me. I know you've been mentioning a very strong M&A pipeline for some time now and I would imagine, I guess, some of your competitors may also feel the same as well. And can you just talk little bit about valuations right now, what you're seeing and, I guess, what your expectations are going forward?

This is Bill Heiligbrodt. I don't know what you mean by valuations. Each property is different from the other one, so it's pretty hard to discuss valuations. Again, as you remember in our discussions, all of our potential acquisitions are valued on a discounted cash flow basis based on the individual properties. We look for high performers, and there's a lot of funeral homes in the United States left to be acquired. So I don't know what I need to say beyond that. I'd be happy to be specific, if you wish me to.

Okay. And just wondering in general, I guess, the pipeline that you guys are looking at. I mean, how anxious are these operators to actually sell the funeral homes that they own? Or -- I mean, are they being more patient these days or is it...

No, they're -- anybody -- it's like any other business. If somebody's for sale, they sell. If they don't want to sell, they don't sell. But there are a lot of funeral homes that are trading hands today. I gave, in my presentation in the last -- in the trailing 12-month basis, we've acquired 12 funeral homes and 1 cemetery. So each of those properties are different. They range from Long Island to Lawton, Oklahoma by way of Georgia. So they're all across the United States in very different places and in very different markets.

Nick, this is Mel. I mean, Bill has updated the Strategic Acquisition Model, you can't trick it. You cannot trick it, and it's going to pick out the winners from the ones that are mediocre. The losers don't even get to first base in -- through this model. And the better-quality, higher-quality businesses, I haven't seen a single owner suffering from anxiety. I do see them needing to have succession planning solutions because of age or heirs or things like that. But these are people who are quality people, reputable people in their businesses and communities and they go slow when they're talking about a generational legacy and reputation. We think that's a good thing. If they're anxious, we probably won't buy them. It'd have to be a fit for us and we're very picky about people and business fit.

And the next question is from Clint Fendley of Davenport.

I wondered on the potential new credit facility, do you have an expectation for when this could be finalized?

Well, we're early in the process, Clint. We have our wishes, but it's determined -- we still have a long way to go and there's absolutely no final situation completed at this time. So if you would ask the question what would be my druthers, I would say that probably I'd like to close it in August. And you know me, I like to do things as quick as we can do it, but we're still in the early stages here. And as the press release stated, we have a commitment to put the transaction together by Bank of America and our commitment from them for a piece -- of what we want to do. So I do think it will be very good for the company. It gives us a great deal of flexibility. With the recombination, it would reverse difficult requirements in certain of our debt instruments that are somewhat old and aren't current with the current company. And obviously, we're trying to be more efficient and pick up earnings per share in everything we do, as you well know. So that's about really all I can say at this time.

Would you expect that once it's completed, that it would potentially change the pace at which you're planning to do some of your M&A activities?

No, no, I think it just does it in a more efficient way and in a more flexible way, giving us an opportunity without limitations on the size of transactions that we can do on an absolute basis. We would, in essence, have a partner who we could talk to and a very, very well structured credit that will allow us to move forward in a more efficient manner with our acquisition program.

Clint, this is Mel. Bill's being modest. I think this will close. If it does close, I think it will close in the third quarter or shortly thereafter. And as you know, we were very close to what's going on in the credit markets long term, intermediate and short through our trust fund investment portfolio. We monitor that on a daily basis, and we're in a lot of high-yield securities. So we see the spreads come and go. We see what's going on all over the world, Europe and the U.S. And while we may have our problems domestically, it's the safest place in a dangerous world at a moment and a lot of excess reserves sitting around. Last I heard, $1.5 trillion at the Federal Reserve from banks earning 0.25%. So when you say an environment like that for the foreseeable future, you try to come up with a plan that will put that environment to the benefit of our company. And I think Bill and his team have done a magnificent job designing a strategy that preserves all the options for either equity or long-term fixed rate financing, while doing something that could be quite powerful for a year or 2 in terms of a pickup in EPS and free cash flow.

Okay. I'm wondering also, Mel, changing gears a minute, just any commentary on your same-store volumes for the second quarter.

Well, I mean, we don't use that as an excuse not to perform. I hear that that's an industry thing, but our models don't give many people excuses, and we think we can grow our company. We don't think that will continue, by the way. We see better trends already in July than we did through 7 months, starting in December. So we -- I don't know if the July thing is indicative of some uptick in death rates, but believe me, it was -- we are waiting for a month where it got better. And so I don't -- we don't spend a lot of time worrying about that around here, Clint. We're concerned about operating whatever the environment at a sustained high performance and then adding great businesses into our portfolio that have demographics and volume characteristics historically and into the future that will offset any kind of secular trend, either cremation or death rate, and it's working.

Clint, let me just add to that. This is Bill. I think we anticipated that the comparisons in the first 6 months of the year would be more difficult than the last 6 months of the year, let me put it that way. The other thing is, we're still highly confident enough that we have, in our rolling 4 quarters, at least flat expectations on same-store volume. So I think that kind of speaks to our confidence level there, okay?

Yes. I mean, if you look back, and this is how the way we look at it, we look at 5 years and we get monthly statements. On each business, they go back 5 years, operating data and financial data, trends. We also have volume trends going back 10 years on every business, every month, so in every competitor in the defined market every month so that we see trends and market share and volumes over long periods of time. And I've learned, after 21 years, that it's an unpredictable thing on a monthly basis. Sometimes, the death rates are up in the west, while they're down severely in the central and east, even in local areas. So our models do not, and we do not, concern ourselves with things we cannot control, but we're learning better how to do more with what we can control. And we can control an awful lot, and that's why our model emphasizes entrepreneurial local leadership and market share. We have the most stable same-store volumes of any company that I know of in the industry and we're very proud of that. I don't think that's going to change. It might even get better.

So does that mean they were flat for the second quarter then?

Flat, no, they're not flat, but it's in our -- they were down. Down, what, 4-point something same-store volumes?

No, no, no. Same-store volumes in the second quarter were down 1.7%.

That's revenue, Bill.

Revenue. You want profits, the EBITDA?

No, he wanted volumes.

Volumes, you need revenue.

Volumes were down 4.7% in the second quarter, same store.

Okay. So kind of in line with what we've seen from the other industry?

Absolutely.

[Operator Instructions] Our next question is from Alan Weber of Robotti & Company.

A quick question. When you show on the numbers, acquisition Funeral Field EBITDA of approximately $4.3 million for the first 6 months, is it fair if we annualize that? Obviously, it's $8.6 million or so. What is the -- what was the cost of those acquisitions for that particular amount of EBITDA?

Alan, it's like I said to an earlier question. We show -- unfortunately, we can't show on the public statements 3 months and 6 months, the 5-year trend report, which I have here in front of me. And we don't report like a typical retail store where we own a business for a year and then it goes in same store. The reason we don't do that is we've learned that this is a very long-term trend volumetric business. And so what we do is we look at 5 years of data. And until we've owned the business 5 years, it doesn't go into same store. So the businesses that are in the acquisition group are businesses that we started buying in '08, continued in '09, '10, '11 and year-to-date '12. We would have to go back and look at what we paid for all those businesses and I don't have that number off the top of my head.

Yes. Alan, I'd be kind of be willing, if you want to, maybe after the call. It's probably be a longer discussion than what we can do here. But as you remember in our discussions, again, we work off of a discounted cash flow model that creates different ranges of multiples relative to revenue and to EBITDA. I do think when you look at this in the part of the conversations in the report that I gave, we do see a leveraging effect and a percentage increase greater at EBITDA level than at the revenue level, which is a characteristic of the Funeral business. I think all of our acquisitions that have been purchased, the last 12 acquisitions that have been purchased, are all performing as a group above our initial calculations. So I think the -- that part of our business is very strong, and we're continuing to pursue that on as an aggressive basis as we can. And yet, being aggressive, that probably means looking forward 6 to 8 businesses a year unless something really changes in terms of our ability to find deals that will really fit Carriage Services.

Okay. I just asked the question because that way, at some point, it really does equal the acquisition to becoming a bigger part of the company, which is actually a way to just check to see what the return -- what the real return on investment really ends up being.

Okay, the return on investment on the acquisitions that we're doing now on an after-tax basis, cash on cash, none of them have been less than 10%, and we're doing better than that in terms of how they're being reflected in your numbers as a shareholder.

Yes. I mean, the real important point here is that we had a major reorganization last November. And Bill joined the company in September and updated what we refer to as the Strategic Acquisition Model. And you'd have to look at what he and his team have done, it's unbelievably sophisticated. So anything we bought before that has a different level of -- heading criteria were different. The people who did it were different. And so anything we bought since September, I mean, you'd really have to split the portfolio into the pre-September, post-September group. That's not to say that the businesses we bought before that are not working out, that's not saying that. I'm saying the ones that we bought since then are working out better than expected, for sure.

And Alan, you remember in our conversation and we talked to people a lot about this, the first thing that we did in establishing a new acquisition program was to prequalify these businesses on the operating model that our operating people used to manage the company. So all these businesses that we've acquired in this period of time have all been prequalified and were actually operating on what we call our operating standards before we acquired them. So the rest of the portfolio is not bad. But those businesses that were not acquired, being prequalified, on those standards and that's a major difference. And we're actually, from an internal standpoint, probably turning down more acquisitions than we're doing, and we're passing on a lot of them just because of our economic evaluations and our -- what we could call -- what we call our Strategic Acquisition Model descriptions of certain markets are. So it's a very conservative movement, Alan.

We look forward to -- Bill looks forward to showing you, pulling out 1 or 2 and showing it to you. You'll be impressed, I promise.

And our next question comes from Nicholas Jansen of Raymond James.

A quick question on the refinancing. I know it's early in the process, but is there kind of a target out there in terms of potential cash flow savings from this transaction?

Of course, it's big.

Okay. So I guess we'll expect more details once everything's finalized?

Yes, you will. Hopefully, it's in the next 10 days to 2 weeks, we should be a lot farther down the road and I don't want to give any indication that we've got this thing completed because we don't. We're in the early stages. I know Mel's aggressive, and I love that, but we still got a lot of work to do and -- but it is a little bit different. And fairly soon, we should be able to talk to you individually, if you call in, to kind of give you an indication of what we're trying to accomplish and what's evolved, I think, if you wish. Okay?

Certainly. And then maybe on -- back to the kind of cemetery operations...

Before we leave that, I'm known around here as the glass half-full guy, but on that one, I'd say I'm about 80% full.

Going back to the cemetery kind of new standards operations, I know you look at kind of cemetery revenue and EBITDA performance over the last 3 years. It certainly hasn't -- it's been -- it hasn't grown and maybe even subtracted a little bit. So maybe what do you think is the real underlying opportunity within the cemetery operations as you have the mix today in terms of what level of potential growth should we see in '13 and '14 as some of these initiatives begin to take hold like they have on the funeral side?

Okay. I wish I could give you a percentage growth. I will tell you that we're attracting some real talent into this company. After I took over operations last November, I knew it would take some time and a little bit of experimentation, so we were patient. We tried this, we tried that through the first quarter. Then, it became obvious what we needed in the company and we went looking and found the talent. We're sitting here in this room today and I'm more excited about what they are finding in terms of low-hanging fruit and then intermediate and longer-term ideas, product, sales. And so we're now recruiting some talent and putting in place some standards. We're having everybody come here in the 2nd week of September. I think they'll start the year and you'll think our Cemetery portfolio was acquired and was not the old portfolio. That's the goal, whether that will show up in the first quarter of 2012, '13 or take a little longer. I don't know yet, but I will tell you it will happen. And over the next 2 or 3 years, I think the Cemetery portfolio has huge upside. I don't know how much. I know it's going to be big, and we're putting in place the leadership to make that happen.

Nick, it's Bill again. I'll give you the numbers that we've been using which are not aggressive. And I, personally, as a member or a person that's been sitting in on our cemetery evolvement meetings, we have, on average, built in, in our fourth quarter's rolling projection 2.5% revenue growth, which I am absolutely, I'll be the 80% glass this time, and say possibly that I really think we're going to be much beyond that. But that's what's in those numbers that you're looking at in the fourth quarter projection.

Yes. And Mel again, look, it's not my job anymore to do forecast and things like that and work with you guys. Bill's doing that and he's doing a wonderful job. My job is to think big and lead big and lead fast and furious and find people who actually can pass me up because they're really good at what they do and they're excited about the vision we have for the company, and we're attracting some talent which I never even knew existed. I didn't even know this existed before and it's coming, it's showing up, it's staying, it's having an impact, more qualitative at this point than you can quantify, that's Bill's job. But I would tell you, you're going to see a difference. It's going to be good.

And our last question today will come from Duncan Brown of Wells Fargo.

I just wanted to clarify one thing. Did you say that, in your rolling fourth quarter guidance, that you have an expectation of flat or better funeral volumes?

Not volumes, revenue.

Revenue, okay. And then the last...

It's very -- I mean, I've been in this business 40 years and I don't even personally look at contracts. I mean, there's totally different changes by funeral home relative to the kind of business that you're doing. You can -- you make changes on whether you're going to do certain types of cremation, certain types of other services, and the mere change in that can change contracts. So to me, the number you have to look at is revenue and you just can't do it any other way, I don't think. But I know that we release the information in that regard, so...

Well, as a volumetric guy and knowing this business is driven by volumes, we do -- the model is designed around stable to growing volumes over time. And -- but you can't control death rate. No doubt, the first 6 months, starting in December, the last 7 months, have been some of the weakest death rates, well, weakest since I've been in this industry 21 years. But having said that, if you look at the 6 months' results, same-store Funeral Field EBITDA is actually up and the margin is up 220 basis points over the last -- the first 6 months of last year. To me, that's an incredible performance in a very weak death rate environment where, let's see, the first 6 months, 11,823, divided right there on your press release. Our volumes were down 5.5% for the 6 months, but the profit was up and the margin was up 220 basis points. That is due to having great operators, and they're operating their businesses at sustainable margins regardless of the death rate, which means if the death rate improves, it gets good fast. We do see an improvement, and we expect the second quarter to be much better than the first half year-over-year.

And Duncan, let me add one thing to that because this always comes up, but I haven't checked back exactly every number in the last 2 weeks, but let me say that, if you look back at these acquisitions that we talked about, there wasn't one of those acquisitions that was down in contracts or down in revenue, okay? So there are funeral businesses that don't just go down with death rate because of the markets they're in and so forth. That's part of our overall acquisition plans to identify those businesses, if we can, to offset some of these trends. And as we can do this over a number of years, it will -- we hope that, that will make an effect and insulate us from some of these changes that you're talking about now.

I could not echo that strongly enough. One of the reasons we report same-store for 5 years without bringing the acquisition portfolio up is the point Bill made. We're buying businesses right now, that's why we're so selective in where we buy them. And we look at 10 years of history, volumetric history, by competitor. And when you buy businesses that are dominant and the characteristics locally, demographically and otherwise, are not the same as what the national trends are, and you pay for that business and you operate it well. Over time, the whole profile of your portfolio will change to a higher growth portfolio regardless of the death rate. That's the idea about our model on the growth side and it's working.

Got it. And just last one for me. In the press release, you talked about major modifications to management and compensation arrangements for your trust funds. And can you just give us a little flavor of what's changing there and what the new strategy is?

Yes, we got involved in our trust funds back in October of '08. We still have an outside money manager, but we do a lot of -- we've built our own team here internally. We do all of our own work, whether it's credit work, we do a lot of credit work. We built a particular expertise, I would say, on the credit analysis side, fixed income securities. I don't have the data in front of me, but we're probably $2 to $3 of shareholder funded in our trust funds right now based on the strategies we employed during the crisis in '08 to rotate out of everything we had been and put it in something else that would go way, way up and also provide much more recurring income. So we started doing that in the fall of '08. We really reloaded, had another big bite at that apple, some in 2010, but really starting August 8 of last year when the market fell 600-some points and everybody ran for a rock. We devised another strategy to rotate out of equities to mostly fixed income. That's continued through the first half of this year and into the end of July. So you see in the trust fund write-up that we now have what we call de-risked the portfolio from a sudden event perspective, locked in a lot of recurring income, it's up to $12.7 million. I think before we got involved, before October of '08, we were less than $4 million of recurring income in our portfolio. And so we've had, I don't know, $50 million, $60 million in gains, fixed income gains, while we built this portfolio and it's still -- still have some large unrealized gains. So what we've done internally is build a team and we had not been getting paid by our trust and we started exploring that. And so we've done some structural changes where we have more of our trust money coming into our team rather than being directed somewhere else. And that's going to add more to our discretionary trust fund. And it -- we've also begun reimbursement out of our trust for pre-need administration contracts. And we've also just been approved by the SEC, and the other companies already do this, to have an investment advisory subsidiary so we will begin to charge a fee for the work our team here does for the trust. All of that -- and we have a partnership structure in place that we put in place last year, I think around August, so we can allocate a little bit here or there disproportionately among the discretionary trust to the various funds based on the profile, whether it's cemetery perpetual care, funeral and cemetery pre-need. And the perpetual care gets a little bit more allocation of the recurring income, whereas the others get a little bit better allocation of gains, capital short- and long-term gains. All of that incrementally, for the next 12 months, all of that will be effective, I think, sometime the end of August. So there are 3 major pieces to that: reimbursement, advisory fees and some more funds coming into that, which we will direct that will add an incremental amount of revenue and earnings that will be material, light [ph] material.

This concludes our question-and-answer session. I would now like to turn the conference back over to management for any closing remarks.

Yes, I'd like to close by saying we're halfway through the year we themed as Carriage Services 2012 - A NEW BEGINNING. This was not going to be the year where we reached the maximum earning power of our enterprise, both as a consolidation company and an operating company, but I do think the earning power is quickly emerging, a lot of new leadership with a lot of new ideas. It's fun to be around them. And I think as we finish this year, that earning power will begin to show itself, especially if we get this new financing in place, and Carriage will be a great investment over the next 5 years. With that, I'd like to close the call. Thank you.

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