Carriage Services, Inc.

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'd like to call your attention to the risks associated with these statements, which are more fully described in the company's annual report filed on Form 10-K and other filings with the Securities and Exchange Commission.

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

In addition, during the course of this morning's call, management will reference certain non-GAAP financial performance measures. Management's opinion regarding the usefulness of such measures, together with 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'd 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, our greater than 100% rise on our stock price.

With that, I'd 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 statement.

I wanted, however, to discuss a few details of our report and comment on 5 items. First, revenue growth is a major key for Carriage's performance, and for that matter, performance in this industry.

We believe that we can produce revenue growth in and around 8%. We should be able to produce 18% to 20% consistent compound earnings per share growth.

acquisitions, cemetery and financial, were as well in excess of the numbers in our business model. The 9-months revenue growth is slightly less than 8%, but with the trends we are seeing, we have a good opportunity to move revenue 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's growth through the 3 quarters has been our acquisition program.

We have added 5 new businesses since the last of the fourth quarter of 2011 and during 2012. All of these businesses have been very -- and I want to emphasize, very accretive to earnings per share.

We are hopefully positioned to close 2 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've 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 costs 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, the GAAP earnings per share year-to-date 9 months 2012 would have been $0.52 versus 36% -- $0.36, excuse me, 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, a 60% growth rate.

9-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's a large difference in this number 2011 versus 2012 in both the third quarter and the 9 months 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 9-month year-to-date 2012 number to 42%.

In closing, these 5 points and results for the 3 quarters of 2012, combined with management's operational opinions for the next rolling 4 quarters, have enabled us to move our range for adjusted earnings per share to $1.03 to $1.05. Remember again, the fourth quarter of 2012 will benefit from all 5 acquisitions being present in our numbers, with hopefully 2 more closing in the quarter, plus the financial benefits from the new credit facility.

Thank you, and I'll 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'll turn it over for the questions, by saying that even in a crowded field of Standards Achievement 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 3 regions.

They are as follows.

Ken Summers, P.L. Fry & Son; Bob Finley, Darling & Fischer Mortuary Group; and Bob Finley, Managing Partner of Margarita Hernandez, Los Gatos Memorial Park; Steve Mora, Managing Partner, Conejo Mountain Memorial Park and Funeral Home; Alex Criter, Sales Manager, Conejo Mountain Memorial Park; Dorn Rademacher, Relyea Funeral Chapel and Cremations Society of Idaho; and last but not the least, Ken Pearce, Alameda Mortuary Group.

Randy Valentine, Hirsch's Lain-Sullivan Funeral Group and Dieterle Memorial Funeral Home; Pam Parramore, Baker-Stevens-Parramore Funeral Home; Jim Sheridan, Dwayne Spence Funeral Homes; Kendall Hale [ph], Graham -- Grantham Funeral Homes, and Kendall [ph] and Grantham are new to our company and our team. Awesome job.

James Bass, Emerald Coast Funeral Home, MacLaughlin Mortuary and Twin Cities Cremation Services.

Ken Duffy, Siden Group [ph] and John E. Day Funeral Home, Red Bank, New Jersey; Frank Forastiere, Central Springfield Group and the Forastiere Smith Funeral Home; John Fitzpatrick, Donohue-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're having a great year, but it's not over.

We have work to do, and we will do it.

With that, I'd like to turn it over for questions.

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 guys currently own and operate, as well as, I guess, 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 and being able to handle the funerals in those that died 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're going to miss a blip.

It couldn't make scheduling more difficult for a week or so or 2 weeks, but I don't think -- I think it'll-- 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.

Okay. And then you mentioned in your prepared remarks a 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 I guess, has the way you received compensation from that changed at all?

Yes. We began to co-direct 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 de-risked the portfolio, but 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 to $3 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've been doing since October 14 of '08, 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 trust are housed in, we are regions as the trustee, and we're 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 to pre-need administration in the third quarter.

And we informed an investment advisory subsidiary, where we can actually get some compensation from the work we've done. You can't go back and do any compensation historically.

But going forward, you will 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's another thing that will hit full in the fourth quarter.

Nick, this is Bill Heiligbrodt. I want to emphasize one other point in that regard.

While we talked a little about what we're doing here on the financial revenue, it's broken out for you in the trend report. But the purpose of what Mel and his group and the company has done, it has increased our operational earnings.

That's 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's the purpose.

And so kind of all of this is designed to create operational earnings for the company. And that's what we're doing.

I just want 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 got some really incredible people we recruited over the last 3 to 4 months. But you can see on our cemetery local reporting that the financial profit we made through the merchandise and service and the 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 our competitive team spirit that is going to create the most value here going forward, and it's a lot of fun.

Okay, great. And just lastly for me.

I know historically, you guys did give guidance in regards to interest expense for the rolling 4 quarters. And you just mentioned that is kind of going to be substantially lower.

I'm just wondering if you can maybe give us somewhat a guidance, I guess, in terms of what you're 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.

And we were -- we refinanced with 7 7/8%. Currently, the rate on our term loan is approximately a number below 4% currently.

So as we move forward, there is a huge differential on financing rates there.

We got more than 4% on $130 million. Was that $5.2 plus million.

So if we -- it's interesting, since '05, when we did our senior notes, the interest was $18 million, $18.3 million every year. So it's not hard to take $5-or-so million off of that and see...

It's a substantial number moving forward.

Yes.

Joe Janssen filling in for Alex Paris. In your prepared remarks in the funeral home segment, it sounded like same-store sales revenue increased a pretty healthy cliff, I guess, what you described as an overall difficult operating environment.

Can you give me a sense on kind of what you're seeing in the field level as kind of what's driving it?

Well, I'm going to say planned hard work. Okay?

I'll let Mel comment. He's in charge of operations.

But let me say before he comments, these are pretty large numbers from -- and I'm speaking from a guy that's been around this business for a long time. And I did make the comment.

I want to reemphasize that, that we're seeing these trends continue in the fourth quarter. That's 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're down currently about 1% for the 9 months. But with what I'm seeing , I think that's going to change.

I've never seen a rallying of the troops addressing our business the way we're doing it today. So with that, I'll really emphasize those 2 points because that's very significant in any funeral operation because what that does, Joe, is allows us to fully benefit from what we're doing in the trust funds, in our financial and from the acquisitions.

That means that we get every penny of our acquisitional revenue growth and benefit in terms of accretion of earnings per share to the bottom line. So with that, I'll let Mel give a better description.

Well, I'll-- Joe, I won't go into the details of how the Standards model works, but 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 the local market, regardless of the death rate.

So our people are recognized and incentivized on their ability to grow their business locally, with great people getting better all the time at sustainable margins. Every month in every business, we show on the left side, 5 years of history, operating and financial.

Then on the right side, we show 3 rolling months compared 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 that 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 5-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 5 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's not easy to do in this industry. Historically, it's been almost impossible, with people living longer.

But we're seeing our better people, and we have the best talent we've ever had at the location, really doing a wonderful job, and all the employees are linked into these 5-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 morale, in the esprit de corps, and the competitiveness locally.

You don't -- you just have to sit back and cheerlead them, primarily. And it's been a wonderful thing to witness this year, and you're going to see more of that.

I'm hearing nothing but raves about our people and their attitudes and the work they're doing. And you just -- it's going to keep on keeping on.

I hope that answers...

Can you talk maybe about the cemetery segment along the same lines. I know it's early.

I know it's a new leadership team. They're just starting to operate on 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 for your -- and now we're a quarter later -- versus internal expectations, maybe can you just give me some color what's going on there?

We invented this Standards operating model for the funeral home business in late 2003. It's 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've 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 from year to year.

So after Dave DeCarlo joined our board in May of '11, I committed to getting his 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 look like and what that meant in terms of performance.

We suspended the cemetery standards model, and then we went up -- 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 in the field. And then it was a matter of going and finding the players.

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

We brought in a national cemetery salesperson here, a national product salesperson here. We got someone in charge of the West now, who has an incredible background in 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're going to see this fruit start to really move into major trees, and it's going to last this time.

And it's going to add a lot over time without trying to tell you what quarter. It's 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 pushing 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, like how big your target universe is and kind of where you're at, how many like in terms of relationships, and then what you would kind of deem as core prospects?

Can you kind of give me a sense?

Well, let me address that. I'd like to just add one point to Mel's comments related to cemetery.

In our forecast, our rolling 4 quarters forecast, and in the model that I've spoken to, our business model, cemetery revenue growth in that model is 4%, okay? For the third quarter, we did 15.7%.

And for the year-to-date, we're sitting at about 3.7%. So to the extent that we exceed this 4%, you're going to look for more compounding on the earnings per share.

So I just want to make that comment relative to cemetery. That's the number that we use, so that ties in to what Mel said.

In terms of the acquisitions, 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 businesses there are but certainly, 2,000.

We tap all the standards and all of our operational models to our acquisition program. In other words, we're 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 5 years.

That includes demographics and other concerns. That gives us the opportunities 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's it.

So let's say if there's a universe of 2,000, we are -- 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 got to believe, with financing in place, with the momentum we've got, with the type of businesses we've already acquired, that we should be able to buy that number of businesses moving forward easily.

And that's really our plan. And if we do and are lucky enough to add substantially more good businesses, it's going to do nothing but, again, compound earnings per share growth.

We buy everything on a discounted cash flow method. It's designed to at least return first-year cash on cash at the cost of capital.

Most times, we're exceeding that. Therefore, we're continuing to reduce our cost of capital, which we've 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's what we're trying to do with the acquisition program. It will drive top line growth.

And it is very accretive, and we are doing a lot of work in determining those values. Thank you.

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

And then kind of looking at your expectations for M&A of 5 to 7 per year, can you just remind us what you have included in your trailing -- in your fourth quarter outlook? Or do you have no acquisitions other than what you expect to complete in the December quarter?

We have 2 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're 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's taken into account, and we are not having any trouble buying the number of businesses that I talked about.

Let me just add the following. What we're finding is that, given where we have evolved to with this operating framework called the Standards Operating Model on the cemetery and funeral home, when that's explained to people -- and I don't mean -- we're very selective.

Bill's got this incredible model against which it's 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're 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're looking at have a history of high standards performance in growing their business.

So when they see our framework 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're an open book.

And what we find is a great business and a great talent who wants to make a difference. When they join our company, they make a difference.

In the case of some of these businesses that Bill and his team have added over the last year, it made a big difference, and we expect that to continue.

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's 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, has to be hitting on all cylinders to produce reductions in cost of capital for this company, which will translate into shareholder growth. And that's what we're all designed to do.

Everybody's working on their individual part. Nobody is working on the good of the overall.

We're all working on our individual part to make the overall better. And the acquisitions is a major component for revenue growth, which is the number that drives your earnings per share and your growth in the funeral industry.

It's very simple, and that's what we're doing. And as I've told many of you and maybe you've seen, I'd be more than willing to share what we're 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 our -- it's an open book, and I [indiscernible] because the numbers are beginning to reflect all of these components that I'm talking about. The acquisitions were a little easier to get in place early, but it's now all coming together, and that's what's creating what we're doing and why we've been able to significantly change that rolling 4 quarters forecast.

And I want to, again, emphasize this rolling 4 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've reorganized in a major way last year and improved everything this year.

But you -- what you're going to see going forward are the 4 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 our platform overhead to the same degree that we add a revenue; and you're going to see -- so the overhead leverage; the capital structure leverage, now with the new capital structure on all of our senior debt in place, you're 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 these leveraging dynamics happening simultaneously, and you're going to see that over the next year.

The other thing -- let me add one point again, I apologize. But one point that we've had the opportunity 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 expense and the interest spreads under that credit by improving our leverage ratios.

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

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

Thank you.

I have a few questions around the guidance. I wondered, are any of 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.

Okay. And would it be just the ones for that you anticipate on the fourth quarter that you have the Letter of Intent for?

No. We're actually putting 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 of 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, if that was the case. And I'm hoping that as we move into 2013, we'll be reporting that we're ahead of our expectations relative to acquisitions.

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

Yes, we do. Yes, yes, we do, but we're -- obviously, the ones we have on that Letter of Intent were very close to closing.

And I feel pretty comfortable with the other numbers being in there based on revenues somewhere in the range of $15 million.

Okay. How many of the ones for 2013, the 5 to 7, or are all of them in there or just a...?

We've already closed 5 businesses, Clint. We have 2 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 4 months, we've only picked up about $4.4 million in -- of that revenue.

So we have a lot of those acquisitions -- or are going to start running through that are already closed. Okay?

The other 2 will be put in, in the fourth quarter. We're -- I think we're projecting those going in by December.

That's 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're 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 if we accomplish more than that amount, and we did have some start-up time involved in getting it done.

Right now, we're getting a lot more efficient at what we're doing. As you well know, I have a person with a masters in demographics on my staff, plus 2 analysts, plus a director of finance and a new personnel accounting officer, all of which are going to help in acquisitions.

So we're gearing up to be more. We have more opportunities, where we were dealing this time last year with 1 acquisition, we're probably dealing with 10 today in terms of opportunity.

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

And just for our modeling purposes, when we look at your acquisition revenue detail line that you provide in the releases, I know that it's said your numbers there extend beyond 1 year. I mean, you're still going to continue that going forward, right?

We're 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 5 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're leaving it all as it is for now.

Okay. And then lastly here, what are your assumptions for same-store volumes that are going to be pushed within your guidance?

In the model, we're based on 0.5% in terms of revenue, 0.5% revenue growth, okay? We're 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're 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 -- kind of the way that we want to look at it, and that should be sustainable over a 5-year basis.

That's what we're 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, okay?

We don't forecast volume growth, Clint. The assumption is that those growth made for this purpose is 0.5% same-store funeral revenue growth.

That's something I think will turn out to be conservative.

Well, all the numbers are conservative, and I think they're realistic. Let's put it that way.

Again, 0.5% same-store funeral revenue growth, $14 million to $15 million acquisition growth with an after-tax first year cash-on-cash return equal to our cost of capital or better, 4% cemetery revenue growth total, and 5% revenue growth total, so those are the numbers. That's what we've been talking about.

You can translate those in your model. I think you've come out the same as what we're showing.

So that's what has to be done here to be a high-performance business. I think we can exceed those numbers, but that's where we are.

Those are not budget. Those are not operations numbers.

They're not operational numbers. They're not budget.

We have nothing to do with them but except going, okay, yes, we can do that.

A couple of last questions just on the cemetery side. I mean, how is the 5 to 7 businesses that you're looking to acquire next year, are any of them cemeteries?

And if you could just comment, the 4% growth that you're projecting in cemetery, I mean, 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 with what we're doing in funeral. So these are just ways that we're answering the questions that we get asked just like you're asking us right now.

So that's what it is. So if you translate the 15% in pre-need into absolute revenue growth from cemeteries, it comes out to about 4%.

So I -- 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've done in terms of cemetery, of which I have participated personally with Mel, and what we're doing in terms of our accounting and our planning in terms of what we're selling and how we're 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're prepared to consider them at that time. I'm only saying, today, based on where our management is, based on where our systems are, and based on how we're handling our sales program, I would feel very comfortable in having the nice cemeteries added.

We've begun to look at some really nice combination operations, build relationships with a few that are -- would be very attractive. We now have the talent to say that we're focusing on pre-need cemetery sales would be an understatement.

The organization we've put together is their pros, and they know how to play in the championship games. So we're 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 don't want -- we want to do it first and talk about it later. But we have the organization.

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's 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.