Park Lawn Corporation

Thank you for Jacqueline. Good morning everybody and thank you for joining us on today's call.

Today's call is being recorded and a replay will be available after the call is completed. Please be aware that certain information discussed today is forward-looking in nature.

Any such information is subject to risks, uncertainties, and assumptions that could cause actual results to differ materially. Please see our public filings for more information regarding forward-looking statements.

During the call, we will reference non-IFRS financial measures. Although we believe these measures provide useful supplemental information about our financial performance, they're not recognized measures and do not have standardized meanings under IFRS.

Please see our public filings for additional information regarding our non-IFRS financial measures, including for reconciliations to the nearest IFRS measures. I will now hand the call over to Park Lawn's Interim CEO and President, Brad Green to open our discussion today.

Thanks Jennifer and good morning everyone. In addition to Jennifer with me on the call is our Chief Financial Officer, Joe Leeder.

I am going to begin the discussion today by going over our Q1 business highlights. Joe will follow it up with a more detailed review of the financial results and outlook and I will then switch our conversation over to our response to the COVID-19 virus and its anticipated effect on the second quarter.

After our prepared remarks we will of course take your questions. As you guys saw from the press release yesterday we had a solid first quarter especially considering the challenges that started to emerge the last couple of weeks in March due to the virus.

Revenue of $74 million, adjusted EBITDA of 17.1 million, and an adjusted EBITDA margin of 23.3% were direct result of our intense focus on our operations and continued integration of our businesses. We continue this operational focus into Q2 along with some temporary financial measures to make sure that the company emerges from this global pandemic well positioned for the continued growth that we are used to.

While it feels like a long time away -- a long time ago it cannot be forgotten that we've added a significant business on January 31st to our portfolio of companies when Family Legacy and Harpeth Hills joined the company. Both of those businesses are located in the Greater Nashville market and have a long history of shared management.

These acquisitions added four onsite operations or combos as they're known in the U.S., seven standalone funeral homes, and two standalone cemeteries. Since they have joined Park Lawn their community has dealt not only with the pandemic but as many of you probably remember there were some deadly tornadoes about a week or two before the shelter-in-place started for everyone else.

Despite this their strong leadership of these businesses with the continued support of the former owner Bill Gregory has kept our integration efforts in line with our expectations. I would now like to turn the call over to Joe to review our first quarter financial results in more detail.

Joe.

Thanks Brad and good morning everyone. You'll find a detailed breakdown of our first quarter operating results in our financial statements and then DA which are available on our website and on SEDAR.

As Brad said our total revenue for the three month period ended March 31, 2020 was $74 million compared with $50.2 million in the same quarter in 2019 and this represents an increase of $23.4 million or 47.5% over the same period in 2019. After adjusting for the impact of foreign exchange, revenue growth from comparable business units in Q1 2020 was 3.2% over the same period last year.

This revenue growth in the quarter was primarily attributable to our cemetery operations in the U.S. We experienced strong pre-need property sales across several regions along with some large bulk sales in the New Jersey market.

Some of our cemetery properties in markets that were impacted more significantly from COVID such as properties in New Jersey and in the Detroit area, our year-over-year pre-need sales were negatively impacted. And in the Canadian market we were again impacted by COVID in the month of March and end of the quarter marginally down in cemetery revenue year-over-year.

Our revenue from comparable funeral homes quarter-over-quarter was up in the U.S. but a little lower in Canada and in both markets the trend was similar and that call volumes were up but at a slightly lower average revenue per call.

We attribute the lower revenue per call to smaller gatherings due to social distancing from March forward -- from March 1st forward. Our gross profit increased approximately $20 million, gross profit margin increased slightly from 80% to 82% from 81.4%.

Our overall operating expenses for Q1 increased to approximately $52.8 million from $34.6 million last year. This overall increase of $19 million is again primarily related to the inclusion of our acquired businesses.

If we look at specifically at general, admin, maintenance and selling expenses from comparable business operations and adjusted for foreign currency, there was a net increase in these expenses of approximately $2.8 million in the current quarter compared to last year. Our field level general and admin expenses contributed about $600,000 of this increase.

These expenses relate to increased people to support our growth initiatives in local markets as well as cost relating to the integration of payroll benefits, health benefit plans as we integrate the businesses and rationalize our payroll benefit plans across the country. The balance of the year-over-year increase was approximately $2.2 million related to the expansion of our corporate infrastructure to support the company's growth and the these investments in our corporate infrastructure were made throughout 2019.

You may recall that last quarter we mentioned that this investment in our corporate infrastructure in 2019 was having a short-term drag on profit margins as we invested ahead of adding new businesses and taking costs out of the field. With our enhanced corporate infrastructure we were able to absorb the acquisition of our new Tennessee businesses without additional corporate expenses and this along with better performance from previous acquisitions contributed towards the improvement in our adjusted EBITDA profit margin to 23.3% this quarter versus 19.5% in the fourth quarter of 2019.

And we were pleased to see this margin improvement materialize this quarter. Interest expense in the quarter was higher as we used our credit facility to acquire new businesses.

We also had increased amortization expense for intangible assets and higher non-cash compensation expense relating to the issuance of the awards under our employee incentive plans during the year. Our acquisition growth has been significant contributor to our overall growth in our business.

In 2019 we spent approximately $180 million to acquire six businesses including a segment of Journey Group, Horan, Baue and Cress. And then again in the first quarter of 2020 we spent roughly a third of that amount to acquire Family Legacy and Harpeth Hills businesses in Tennessee.

Within the industry all of these are considered to be marquee businesses and most are considered to be material acquisitions to Park Lawn. This has resulted in an additional $3.5 million of acquisition integration costs in the first quarter and these acquisition integration expenses include amounts we spend for legal, financial, tax, due diligence, some post closing audit work, and valuation work -- independent valuation work to support our purchase price allocations and regulatory reports in compliance where appropriate and necessary.

Our net expense during the quarter relates to additional expenses incurred in connection with the establishment of a special committee of the Board which was formed to assess leadership governance and succession planning matters and these matters are fully explained in our financial statements and in the MD&A and amounted to approximately $3 million. You will notice that our effective tax rate for the quarter was higher at 44.1%, this is because of an increase in the quarter of certain permanent timing differences such as share based compensation expenses.

These are not reflective of what we would expect going forward. We would expect that we would revert back to our sort of more historical effective tax rates which are largely in line with Canadian and U.S.

statutory rates of approximately 26%. So as a result of the above our net earnings attributable to our PLC shareholders was $734,000 or $2.5 per share in Q1 of 2020 compared to $3.4 million or $0.14 per share in 2019.

And as you know we report two non -IFRS earnings measures you in our financial statements and MD&A and the purpose of these non-IFRS measures is to adjust for the after tax impact of certain non-operating and non-recurring or non-cash related expenses. And so after making adjustments for these items our net earnings attributable to PLC shareholders this year this quarter was $7.6 million or $0.26 per share compared to the $5.3 million or $0.23 per share last year.

This represents an increase of 43% in adjusted earnings and 13% in our adjusted per share earnings. Our adjusted EBITDA for PLC shareholders in the current quarter was $17.1 million or $0.58 per share compared to $11.7 million or $0.50 per share last year.

Again this represents a 46% increase in our adjusted EBITDA and a 16% increase in the adjusted EBITDA per share for the same period in 2019. And a few words about our balance sheet, we ended the first quarter with approximately 217 million outstanding under our revolving credit facility compared with 174 million at December 31, 2019.

The increase in the facility was principally related to the acquisition of Family Legacy during the quarter. Cash on hand at the end of the quarter increased to $27.9 million resulting in net debt of $189 million after adjusting for this cash.

In addition we had another $11.3 million in other debt that primarily includes notes payable to former owners of businesses we've acquired that are held largely as security against on compete agreements and a small amount of a mortgage loan. We have two covenant tests associated with our revolving credit facility.

These two tests are leverage ratio which compares our total debt to trailing pro forma adjusted EBITDA and it must be less than 3.5 to 1 and interest coverage test which compares the interest expense to this same adjusted pro forma EBITDA and must be greater than 3.3 -- 3.1 -- 3 to 1 times, excuse me. We are in compliance with both of these tests at the end of the quarter with our leverage ratio being 2.8 times and our interest coverage 10.7 times.

And as we announced yesterday in late March we requested that our lending syndicate [ph] make a couple of temporary changes to the terms of our credit facility namely an expansion of our leverage ratio from 3.5 times to 4.4 times to 4 times for a period of 12 months to March 31, 2021 and reducing over the following six months back to 3.5 times by September 30, 2021. We also requested a $25 million increase in our committed credit facility for a one year period.

These changes were requested out of abundance of caution and will provide the company with greater flexibility and increase liquidity as we move through uncertain economic times in the coming months. We are pleased that our lenders were supportive and approved of our requests on May 8th and we thank them for their support as we grow our business.

Also a pipeline of future revenue currently sits on our balance sheet in the form of preferred revenue and cash in our pre-need trust and pre-need insurance contracts and this backlog of future revenue currently sits at $833 million representing a significant source of future revenue for the company. During the first quarter of 2020 we spent approximately $4.6 million on growth orientated capital expenditure projects, includes $2.6 million on a new funeral -- onsite funeral home in Toronto and in Houston as well as a $2 million on expansion of cemetery inventory at various properties in the U.S.

The cemetery expansion expenditures include amounts to spend on additional mausoleum product and additional burial spaces throughout the U.S. Our maintenance capital expenditures for Q1 were approximately $1.2 million which is well below our depreciation expense during the quarter and we try and keep our maintenance capital expenditures below that amount.

And as part of our COVID contingency planning we took steps to curtail some of our planned expansion and maintenance capital expenditure programs in the coming months. Some of these expenditures are being deferred or in other cases the programs are being slowed until we have a better visibility on the economic impact to our business.

We think this is a prudent way to manage these capital expenditure programs. With respect to various trust funds, market volatility in March put pressure on the market value of our perpetual care and merchandise trust balances.

Our perpetual care trust funds had unrealized losses of approximately 19.6 million representing a 9.2% decline from book value as at March 31st. And with respect to our pre-need merchandise and service trust funds we had unrealized losses of $2.9 million representing a decline of approximately 1.4% from book value at March 31st.

This overall decline in market value within the merchandise trust funds is somewhat muted because of the higher cash and cash equivalent GIC investments included in that portfolio. And then as I previously had noted our pre-need book of business is supported by about $388 million of insurance contracts that have predetermined pay out values and so this also helps us limit exposure to our market volatility within these trusts.

I will now turn the call back to Brad for some closing remarks.

Thank you, Joe. While the challenges resulting from the COVID-19 pandemic are certainly unique, our employees and by the extension of that our businesses are adjusting to the new normal.

As you know all of our businesses have remained open to serve our families. The same applies to our support office here in Houston.

We were fortunate in Houston that given that our business is essential we could keep this office open. Add an abundance of caution we asked most of our support office employees to work from home for several weeks.

However, all of our executive leadership team continued to work from the office so that we could jointly navigate the ever changing environment with our field operators. That's basically a fancy way of saying we could sit in a war room and be on the same video conference call with the folks out in the field.

To our leadership team it seems disingenuous to expect our employees to work not only in funeral homes and cemeteries but also in hospitals, hospices, and nursing homes while we wish them well from our homes. Said another way I can guarantee you that the strong successful independent owners that we often talk about either because we compete against them, we want to acquire them, or we like to operate like them, those owners did not work from home during the height of the crisis.

Fortunately we've been able to bring back our full team as of Monday, May 4th so it's business as usual for the support office aside from mass social distancing, cost of cleaning the things we've all become accustomed to. This is how we show support for our employees in the field.

None of us can predict the severity or the duration of the impact of COVID-19 but we do recognize it's going to have a financial impact in the coming weeks and months. Having said that the impact has been less significant than we anticipated at least as of today.

What we're seeing, few things, there is definitely a decrease in the cemetery pre-need property sales. We saw a drop then a stabilization, and now we're seeing a slight recovery.

Our sales staff has adapted by the continued use of technology to communicate and interact with the customer and our backlog of appointments continues to grow nicely. There has been a decrease in the average funeral sales sized -- sale due to size restriction imposed by regulatory mandates that effectively means less people at funerals.

This is being counteracted in part by our incredible employees using creative methods to help families mourn such as webcasting, drive up funeral services, neighborhood processions, things of that nature. We also have many families that are choosing to schedule services for a later date once the restrictions are lifted which are of course being tracked and logged for execution.

We did see a significant increase in our at-need volume in New Jersey, Colorado, and Michigan businesses for the obvious reasons that those were hot spots here in the States. Well our employees did nothing short of an incredible job keeping up with this volume during the peak of the crisis is truly impressive work.

Those are some of the things we're seeing based on the COVID-19 virus. Now a couple of comments on our employees, they definitely have received well deserved recognition from both inside and outside of PLC for their unwavering commitment to their job and the families we serve.

And they deserve every bit of that -- every bit of those comments and more. But as I said in the press release I absolutely expected it from them.

This is what they do all day every day; pandemics, tornadoes, super storms, floods, hurricanes, they go to work. They did not become essential during this pandemic, they were essential before the pandemic and they will be essential when the pandemic subsides.

It is one of the core values we have, the third one, respect for the profession. With that being said I do not have the words to express the amount of gratitude that I have for the employees and what they have done during this time, it is truly impressive.

In closing although part of our strategy is to grow through acquisitions, our shareholders can rest assured that PLC is an operating company not a consulting company. That means something during challenging times such as a pandemic.

Our operation leaders work in the businesses just like everyone else and rely on decades of experience. Said another way we run funeral homes and cemeteries, we don't sit around in a conference room rereading old management treaties coming up with empty initiatives and catch phrases.

Although we cannot predict what is to come, the PLC team will continue to operate our businesses as if we personally own each and every one of them. And with that I'll turn it over to the operator and Joe and I will be happy to take your questions.

Yeah, good morning guys. To apply for the CEWS, the again A program I believe revenues need to be down 30%, is that kind of general order of magnitude of what you expect for Q2?

Hi George, it is Joe. And the decline is not 30% in the first period and so it's I believe it was 20%.

And you look at across the Board the comparison to the prior March, those are the tests. And so we met that test in the first measuring period, by measure -- and automatically if you need it in the first measuring period you will need it in the second period as well.

So we'll get the first two months, I think the percentage decline increases to the 30% in the third month, George.

It is okay, that is helpful. On the -- you guys called out the lower funeral revenue per call obviously because of social distancing, can you give us a sense of what the magnitude was and did it get worse, or how much worse I guess did it get in Q2?

So it's similar to what happened with the pre-need sales, we saw a dip at the beginning and then it stabilized fairly quickly. I would attribute that to people calm down and our employees were able to deal with it in a different manner.

Basically you saw a dip the first couple of weeks and then a stabilization just like we did in the pre-need sales.

Okay, and just you guys did note some integration issues last quarter, seems that some of that is behind. Can you just maybe give us an update in terms of where that fits today?

Yes, so as we said I think several times both in the earnings call and several calls thereafter. Those large businesses that we bought in the middle of the year last year we expected to take 6 to 12 months to integrate them properly and we were -- coming up on a 12 month period here this summer and we suggested everyone that it was going along fine and that there was nothing to be concerned about and I think you see that in the Q1 numbers.

The integrations are going along fine and there's nothing to worry about. So that's why you saw that pop up in the in the margin.

Okay, one last one if I may, just for Joe, what do you expect CAPEX to be for the year? Thanks.

That is something George that we are monitoring very closely and as well it is almost by request-by-request during the year. But our maintenance capital expenditures would typically be around $9 million and we would have on our growth capital expenditures I think we're looking at another $10 million or so there as we see today.

But we would just monitor that as we move through the period and we have the flexibility to slow those expenditures down. We don't plan on canceling permanently anything, we would just slow things down to defer expenses as we move through the next six to nine months.

Alright, thanks guys. Stay safe.

Hi, good morning. Just a couple of questions on M&A realizing that you have pulled back on the reins, but just wondering if there is any view on competitor's M&A activity levels both public and private players?

So, I am aware of one business that came on the market for lack of a better way to put it that was a broker deal right at the beginning of the crisis. So, I don’t remember the exact time Scott, but let's call it late March or early April and this would have been a business that we would have been very interested in as well as our main competitors.

My understanding as of a couple of weeks ago that the marketing of that business has been halted because I think everyone else kind of did what we did and that's hunkered down a little bit to see how this -- how this situation was going to play out. If things continue as we are seeing through them through the second quarter we will -- we are definitely looking very strongly at picking up our acquisition activity as we had always intended to in the third and fourth quarter of this year because if you remember we had no intention of closing anything in the first and second quarter of this year anyway as we focused on the integration of our businesses.

So to answer your question I haven't seen or heard of any acquisition activity but we plan on if things continue down the path that they're on right now I would expect us to be back in that market as we intended in the third and fourth quarter of this year.

Recognizing that it's still early, do you see any of the acquisition multiples changing or different levels of capital seeking deals?

I hadn’t -- nothing's happened for me to be able to say that. So no, I haven't seen anything.

I don't expect it to change, they were good businesses going into the pandemic and most strong independent operators that were interested in joining Park Lawn. We will be able to run their businesses through the pandemic and then our competitor out there really the one being SCI they will be very active in this market as well.

Those are smart guys and they know how to run their business. So we can expect to bump into them on the same acquisition.

So I haven't seen anything Scott but I wouldn't expect there to be much change if we come out of this, this year. I mean if we have a year of this then that's a different answer, right.

Yeah, do you see a change in the split between cemetery and funeral home, obviously recognizing that SCI is trying to bulk up on cemetery?

Yeah, I haven't seen that. I think we normally see each other on the same businesses whether they're funeral homes, cemeteries, or combos.

They go after primary businesses as well. So, that's the distinction between funeral homes and cemeteries.

Thanks, that's helpful and I like your catch phrase, free commentary.

Its beginning but do you have a sense as to what comparable business revenue would be for a funeral home versus cemeteries?

Johann, you cut out for the first part of your question, do you mind, at least you did on my end. Do you mind repeating that, I am sorry?

Yeah, no worries. What would comparable business revenue have been like if it was 3.2 for the overall portfolio, what was the split funeral homes or cemeteries?

Yeah Johann, the split was higher in the -- higher in the cemetery business, so we would -- we expect that the cemetery business typically would grow in the sort of 4% to 5% range I would say historically and over the longer-term and then the funeral business kind of 1% to 2% it would have been in consistent [Multiple Speaker].

Okay, perfect. And then I am just trying to get a sense of the EBITDA run rate and Brad you talked about it, Q4 being a bit softer than expected just because of the drag of integration.

And then commentary was that in Q1 premium sales were very strong particularly in the U.S. So is Q1 representative of the run rate or should we kind of be blending Q4 and Q1 either at the run rate, you know the run rate better than Q1 given that you don’t have partial revenue from Family and the other presence?

Yes, I understand, I would definitely say that Q1 is more of what we expect out of this company in Q4. If you ask me to look forward, based on the openings as it looks it's going today and by openings I mean the market, the overall economy in both countries.

You can expect that in quarter two or quarter three but I would expect quarter four to look a lot more like Q1 than it did the last Q4 which is the answer to your question, Q1 would hopefully be the new normal.

Okay, and just to clarify Joe, you commented at the beginning about businesses or revenues being down 20% in the first period, would that be April through kind of to I mean, first half of May, you are saying revenues were down 20% year-over-year or quarter-over-quarter?

Well, it's a calculation that the program from the government has put out Johann. So, it is really not a quarter, it is specifically comparing the month of March to the month of March last year.

And so if you had [Multiple Speaker] yes, so that's -- we sort of qualify there because the last half of March was impacted by COVID. We had a relatively good start to the year so it's not easy to just make that comparison of like oh, it's down 20% so just take over the quarter and the year.

And the good thing is because we qualified in March we are qualified for the next measuring period and then we will see what happens in the third measuring period and any period after that.

What would it have looked like for April?

Pardon me.

What would it have looked like for April, like on the treat you had expected to decline if you hadn’t measured April versus April last year?

We haven’t, we haven’t done that yet Johann so, because we qualified in March we just were automatically in April. So we have had to do that over the coming weeks to measure that.

Okay, and then the last question Brad, just on taking up on your comments about acquisitions. You said if things continued to go the way you expect you'd expect some pickup in M&A in the back half of the year.

Was there a comment on it if things going the way -- continuing the way softness and possible targets or is that strength internally that gives you the ability to maybe use some of the cash reserves?

It has strengthened our current operations to be able to go back to focusing on acquisitions. I think it's smart to plan for the worst and hope for the best and when we started this in late -- well we actually started planning for this in early March but when things started looking the way they were looking towards the end of March and the first week of April, you have seen and we've discussed some of the measures that we took to plan for the worst and that hasn't happened.

So if the business continues to operate the way it is in the first six weeks of this quarter then I will be strongly suggesting to our Board of Directors to let us get back on the acquisition trail.

Okay, great. Thanks, I'll turn it back.

Thank you and thanks for taking my question. Will the bulk cemetery property sales continue into Q2 or was that more of a one timer?

So we expect there's a particular cemetery that's in New Jersey and the expectation as we budget is for bulk sales in that cemetery throughout the year. So you can't say our business unfortunately and we preach this over and over you can't look at it from quarter-to-quarter because you're right, you can have above bulk sales come in the first and the second quarter and nothing in the third and the fourth.

But we plan for that over -- in a budget over a year so yes, you can expect bulk sales to continue out of that cemetery. But I can't tell you which quarter they are going to fall into.

Got you, thanks. And then thinking about the corporate infrastructure and their redeeming cost in the field, how much of those costs will be rationalized speaking in dollars or margin basis points in Q2 and beyond?

So I can't put a dollar figure on that for you and Joe may be able to. Last conference call I found myself talking about the Houston infrastructure versus the infrastructure that was in Toronto.

And at the end of the day it is all corporate or support office infrastructure. So you will hear us referring to that more now.

I mean, we're one team, not two different offices. So I will tell you that both in the first quarter and already in the second quarter, we're starting to rationalize some of those costs and by that I mean because of the people that we added in Houston, there are people that are coming out of the organization.

Other places are being assigned to other roles and that definitely has a positive impact on our expenses. And I expect that to continue throughout the year, but it's measured and its planned and it was, as we discussed, we had to build some of the infrastructure in order for us to fold some of it out of both the field and in other places as we centralize our accounting, IT, HR, legal, functions like that.

So yes, we had -- we saw some of that in Q1. We're going to see some of that again in Q2 and I would expect throughout the year.

I don't have a dollar figure on that though because that's not something I track. It's not what's motivating it but Joe may have to put some numbers around that, I am not sure.

Well, I would look Zach, at our profit margin, the 23% and so on and we've returned to that level. And that's a level that in a steady state, non-COVID environment that we would expect to achieve that, and then gradually improve that towards our 2022 target which is more in the mid 25% to 26% profit margins.

But we're pleased with the 23% and that the fourth quarter over the first quarter, those increases in expenses did not take place, this is a year-over-year thing. So I just look at it in terms of the margin, the EBITDA profit margin and we're sort of on track there where we would like to be in the sort of 23% to 24% profit margins.

That's helpful, thanks. And then looking at the net loss position in the trust, can you walk us through the likely net impact on the business as a whole and when that might be felt?

Well, yeah. So it won't be felt in the current maintenance trust because it is a long term investment, we're not allowed to touch the capital as you know.

And so that drop in market value won't be -- won't flow through to Park Lawn. Although I would say we were down 9% in March and the markets have come back.

And so we've seen this before. It's a long term, a long term proposition with our trust funds and so we're down 9%.

One day we could be down only 4% or 5%, a few weeks later sort of thing. But we won't see that market value translate to us out of the current maintenance fund and out of the pre-need merchandise fund it would come to us over a longer period of time.

But once again, we don't think the decline in the market value is going to be a longer-term thing. Once again, we've seen the capital markets come back.

And also, as I pointed out, we had such a -- we had such a large position in cash, cash equivalents, and GICs that that was somewhat due to the impact there.

That's very clear, thanks. We've seen a number of companies cut or suspend their dividend and then in the maintenance fund you guys rely on income more than capital gains for sure.

So is that a concern that you have or is that non-material?

Well, I would say that when we were looking at that and doing our contingency planning we expected that there would be something that would come of it. And, of course, there will be.

But at the same time, what we use that money to offset some of our operating expenses at the cemetery properties, it doesn't totally eliminate or cover all of the expenses. So we will -- we have some flexibility there in terms of our maintenance expenses at the cemetery properties to protect us from declines in distributions.

And also we have ability at a corporate level as well, and we are making adjustments there and taking cost out to offset that. So there will be deterioration in the distributions but we'll also be able to cover a significant portion of that with managing expenses as well there.

Got you, thanks. And just one last one for me, how are specifically your pre-need volumes in May so far comparing to last year?

In May, do you have any color for the May pre-need sales, Brad?

Yeah, I got that. So it's basically -- it's basically like what we saw in April except for its bouncing back right, so with what happened in the hot spots and then just the general market we saw the pre-need sales drop but our at-need sales increased.

That too -- they basically inverted and that's beginning to go back to what we would normally see a norm, with the at-needs dropping, especially in those markets that got hit. I mean, not like dropping to the floor but beginning to go back to norms.

And you see the pre-need cemetery sales being able -- slowly getting back to its norm. So they're kind of inverting again, so it's May -- it's like April, but a little bit in reverse.

Perfect, thanks very much. Absolutely, I will turn it over.

Operator just before the next call, if I could, I just had a note slipped to me that the decline in the March-to-March revenues for the government testing is 15% in March and not the 20% that I have quoted, so I just want to make that clarification to everybody.

Hello and thank you for taking my question. I have two questions.

One is since your industry is more of works on statistics I was just wondering what led to a revenue decline of 15% in March because definitely the industry shouldn't decline that much, so I was wondering what led to the decline and I have a follow-up later?

Edward, it was the combination of funding the funeral home, the average revenue per call impacting our revenue from March-to-March and March of last year being stronger than March of the current year. So it's not -- you have to look at each month individually to do this particular test.

So it was a combination of the funeral side, the lower average call volume, and then in the month of March on the cemetery side lower pre-need sales than the previous year.

Okay, thanks. And about the acquisitions, since you recently amended your leverage ratios by your lenders and considering the decline in revenue and potentially the pre-need maybe in the future because of the recession, it is prudent, isn't it or wouldn't it be more prudent to halt the acquisition trail for I know maybe for rest of the year especially considering that you did increase the leverage due to financial risks and not due to the acquisition?

So we increased the leverage, I would probably unprofessionally refer to it as that was an insurance policy more than a need. And so that I didn't -- maybe I came across too strong on the acquisitions, what I was trying to convey is that if things continue the way that they're doing in the second quarter, and I think that we'll have the opportunity, if we choose to continue with acquisitions, whether that be at a free cash flow or going back to the capital markets in one form or another.

I was just merely conveying that as I'm sitting here right now, there's no reason to say that we will not be active in the acquisition market in the third and fourth quarter. To the contrary, I would hope that we are active.

But to your question, if -- towards the end of this quarter to use your word, if it becomes not prudent or it looks like it's part of the effort to remain in the acquisition market because of the reasons that -- we will tell you that and we'll stay out of it. But right now, it certainly looks to me like that's a possibility.

Thank you.

Thank you guys for joining the call this morning. We appreciate your continued support and we look forward to talking to you all at the next quarterly earnings call.

Thank you very much.

Thank you. Bye.