Carriage Services 8K Updates Company & Investment Profile | CSV 27 Sep 05

Exhibit 99.2


Company & Investment Profile		September 2005


Carriage Services, Inc. (NYSE: CSV)		3040 Post Oak Boulevard • Suite 300 • Houston, TX 77056 Phone: 713-332-8400 • Fax: 713-332-8401

Simply Put ... Becoming the Best

www.CarriageServices.com

INVESTMENT CONSIDERATIONS

•		Dominant Market Presence– Carriage has #1 or #2 market share positions in over 70% of its mostly suburban markets.

•		Superior Profitability– Carriage has the highest gross profit and second highest EBITDA margins of the public death care companies.

•		Capital Structure Positions Carriage for Growth –In 1Q05 Carriage completed its $130 million senior note offering and its simultaneous debt refinancing which resulted in a low cost and long maturity capital structure that provides the financial flexibility to execute a disciplined growth strategy.

•		Significant & Growing Free Cash Flow –The deathcare business is relatively stable and Carriage has generated significant and growing free cash flow since 2003.

•		Small is Beautiful –Carriage’s smaller size and share count, relative to its public peers, creates growth opportunities for its shareholders. Carriage can use its free cash flow to selectively purchase quality funeral and/or cemetery properties that can have a material positive impact on operating and financial results.

•		New Five-Year Goals —Now that Carriage’s existing operations are improving and its financial flexibility has been restored, Carriage is positioned for growth and has established five year goals that include new acquisitions.See page 3 for more details on Carriage’s five year goals.

•		Attractive Valuation –Based on Carriage’s current cash flow yield and going forward based on achieving the Company’s five year goals.

Carriage Servicesis a leading provider of death care services and products in the United States. As of August 10, 2005, Carriage operated 133 funeral homes and 29 cemeteries in 28 states. Carriage provides a complete range of funeral and cremation services and sells a wide variety of related products and merchandise


Stock Price (September 22, 2005)	$	6.41

Stock Data

Fiscal Year-End:	December
Symbol / Exchange:	CSV / NYSE
52 - Week Trading Range:	$	4.30 - $6.75
Weighted Avg. Diluted Common Shares (In Mill.):		18.8
Market Capitalization (In Mill.):	$	120.67
Total Enterprise Value (In Mill.):	$	336.13
Avg. Daily Volume (3 Mos.):		20,085
Float (In Mill.):		15.8
Insider Ownership:		14.3	%
Other Ownership:		32.5	%
Institutional Ownership:		53.2	%

*Financial Data(As of 6/30/05 - Amounts in Millions)***
Cash & Short-Term Investments:	$	21.2
Total Assets:	$	567.0
Total Senior Debt:	$	142.9
Total Subordinated Debt:	$	93.8
Total Debt:	$	236.7
Stockholders’ Equity:	$	94.2

Trailing Twelve Mos. Revenue from Cont. Ops:	$	151.9
Trailing Twelve Mos. EBITDA from Cont. Ops.:	$	34.8
Trailing Twelve Mos. Diluted EPS from Cont. Ops.:	$	0.29
Trailing Twelve Mos. Diluted EPS:	($	0.93	)

Trailing Twelve Mos. Adjusted CF from Operations:	$	15.6
Trailing Twelve Mos. Capital Expenditures:	$	7.0
Trailing Twelve Mos. Adjusted Free Cash Flow:	$	8.6

*Company Financial Outlook*		*2005E*
Revenue:	$	153.0 - $157.0
EBITDA⁽¹⁾:	$	35.8 - $37.3
Adjusted Dil. EPS from Cont. Operations⁽¹⁾:	$	0.24 - $0.28
Adjusted Free Cash Flow:	$	11.6 - $13.1

*Valuation Data (Using Outlook Midpoint)*
Price / 2005(E) EPS:		24.7X
Enterprise Value / 2005(E) EBITDA:		9.2X
Equity Market Cap / Adjusted Free Cash Flow:		9.7X


(1)		Excludes a charge for early debt retirement of $6.7 million, or $0.22/dil. Share after tax


Carriage Services		*©2005 Carriage Services, Inc. All rights reserved.*		*Page 1*

NYSE: CSV

Forward-looking statements contained herein are subject to certain risks and uncertainties as further described at the end of this Company & Investment Profile. Please refer to the Appendix on page 29 that discusses and reconciles non-GAAP financial measures to GAAP financial measures.


Company & Investment Profile		September 2005

Table of Contents

(Noteworthy new or updated information in this edition versus the previous edition in bold)


SECTION			PAGE
	•	Investment Considerations		1
	•	*Executive Summary & Selected Highlights –Includes Five Year Outlook***		3
	•	Capital Structure Analysis		4
	•	Financial Outlook		5
	•	Operating Strategy Overview		6
	•	“Being the Best”		8
	•	Renewed Corporate Development Efforts		9
	•	Flexible Capital Structure Facilitates Growth		10
	•	Attractive Valuation vs. Peers – Closing the Valuation Gap		11
	•	Operations Overview		13
	•	Deathcare Industry Overview		17
	•	Peer Analysis & Comparison		20
	•	Carriage Services Recent Results		21
	•	Management Bios		23
	•	Historical Earnings & Operating Data		24
	•	Income Statement		25
	•	Balance Sheet		26
	•	Cash Flow Statement		27
	•	Selected Financial Data		28
	•	Forward Looking & Cautionary Statements		28
	•	Appendix: Disclosure of Non-GAAP Performance Measures		29


Carriage Services		*©2005 Carriage Services, Inc. All rights reserved.*		*Page 2*

NYSE: CSV


Company & Investment Profile		September 2005

This document is being published by Carriage Services in continuation of the Company’s stated goal to provide more disclosure and transparency to the investment community regarding Carriage’s operations, strategies and industry conditions. It is Carriage’s intent to take greater responsibility for and a more proactive role in communicating with the investment community and in providing greater operating and financial transparency.

EXECUTIVE SUMMARY & SELECTED HIGHLIGHTS

MISSION STATEMENT:We are committed to being the most professional, ethical, and highest quality funeral and cemetery service organization in our industry.

GUIDING PRINCIPLES:Honesty, integrity and quality in all that we do. Hard work, pride of accomplishment and shared success through employee ownership. Belief in the power of people through individual initiative and teamwork. Outstanding service and profitability go hand-in-hand. Growth of the Company is driven by decentralization and partnership.

SUMMARY

Carriage Services is a leading provider of Death Care services and products in the United States and is the fourth largest publicly traded Death Care company. Carriage Services’ shares trade on the New York Stock Exchange under the symbol CSV. As of August 10, 2005, Carriage operated 133 funeral homes and 29 cemeteries in 28 states. Carriage’s business can be characterized as one of relative stability, reflected by predictable revenue and cash flow, with incremental growth opportunities via selective acquisitions.

Carriage’s focus is to grow its market share and improve the operating and financial performance of its funeral and cemetery operations. To that end, on January 1, 2004, Carriage implemented a more decentralized and entrepreneurial standards based funeral operating model called “Being the Best”.Since implementation, the execution of its Being the Best funeral operating model has resulted in operational and financial improvements that the Company believes will continue through 2005 and beyond.Carriage intends to implement a similar operating model in its cemetery operations that will promote the key success drivers that are unique to that business. Carriage will continue to improve its organizational leadership and quality of personnel. Carriage may divest additional businesses in the future, where those businesses are not meeting its standards.

Carriage has established five year financial goals (see accompanying table) based on continuous improvement and portfolio optimization driven by its “Being the Best” operating model, increasing market share and profitability and formalizing and implementing a disciplined acquisition program.

Five Year Run-Rate Financial Goals

(In Millions, Except Per Share Amounts)


Revenues from Existing Operations	$	170.0
Revenues from Future Acquisitions⁽¹⁾		25.0

Total Revenues	$	195.0
EBITDA	$	49.0
Diluted Earnings Per Share	$	0.60
Free Cash Flow	$	20.0


(1)		Carriage presently expects that the majority of the acquisitions will occur during the latter part of the five year period.

Of the five year run-rate revenue goal of $195 million, the Company estimates approximately $25 million will come from future acquisitions. Of the $49 million EBITDA goal, approximately $10 million will come from acquisitions. Carriage does not anticipate incurring additional debt over this period.

In January 2005 Carriage completed a $130 million, ten-year Senior Notes offering. In 2Q05, Carriage entered into a new $35 million senior secured revolving credit facility to replace its existing unsecured credit facility that was scheduled to mature in 2006. The facility is currently undrawn and no borrowings are anticipated during 2005. The subordinated debt (TIDES) represents a convertible preferred security that matures in 2029 and the Company may defer distributions at its option.The debt refinancing and existing TIDES result in a long-term, low cost capital structure that provides the financial flexibility for future growth. This enables the Company to focus on investing its considerable free cash flow in new earning assets through selective acquisitions.


Carriage Services		*©2005 Carriage Services, Inc. All rights reserved.*		*Page 3*

NYSE: CSV

Forward-looking statements contained herein are subject to certain risks and uncertainties as further described at the end of this Company & Profile. Please refer to the Appendix on page 29 that discusses and reconciles non-GAAP financial measures to GAAP financial measures.



Company & Investment Profile		September 2005

Capital Structure Analysis

Capital Structure as of June 30, 2005 (In Millions)

x 2005E

Interest

Balance

EBITDA

Rate

Comments

Cash & Equivalents

21.2

Approx. $20.4 mm invested in ST interest bearing investments yielding approx. 3%

Senior Debt:

Secured Credit Facility Due 2010

—

L + 3

Commitment of $35 mm, approx. X% available. Secured by personal property & funeral home real property in certain states.

Senior Notes Due 2015

130.0

3.6x

7.875

Rated B2/B- with a stable outlook.

Acquisition Debt

7.4

0.2x

Deferred purchase price payable to former owners discounted at rates from 6% - 8.5% with maturities from 3 - 15 years.

Capital Leases

5.5

0.1x

Total Senior Debt

142.9

3.9x

Convertible Jr. Sub. Debt Due 2029

93.8

2.6x

7.00

Term Income Deferrable Equity Securities (TIDES).
Convertible into common stock at $20.44 per share.

Total Debt

236.7

6.5x

Stockholders’ Equity

94.2

Total Capitalization

330.9

Selected Credit Statistics ($ in Millions)


	LTM			Outlook
	6/30/05			12/31/05 E
EBITDA from Cont. Operations	$	34.8		$	36.5
Net Senior Debt / EBITDA		3.5x			3.2x
Net Total Debt / EBITDA		6.2x			5.8x
Net Senior Debt / Capitalization		36.8	%		35.4	%
Net Total Debt / Capitalization		65.1	%		63.8	%



Carriage Services NYSE: CSV	*©2005 Carriage Services, Inc. All rights reserved.*	*Page 4*



Company & Investment Profile		September 2005

Financial Outlook

Carriage updated its Outlook to reflect both better than expected operating results for the first six months of 2005 and the announced accounting change (see detailed discussion in a following section called, “Carriage Services Recent Results”). The accounting change has the effect of reducing Carriage’s previous estimates for EBITDA and net earnings for the year. The accounting change does not affect cash flow from operations or free cash flow. Carriage’s 2005 Financial Outlook is based upon the following key assumptions:

•		The upper end of the Outlook range assumes funeral same-store volumes are flat compared to 2004 and the lower end assumes a 2% decrease.

•		The average revenue per funeral contract is assumed to increase approximately 2.5%.

•		Carriage expects no borrowings on its $35 million bank credit facility during 2005.

•		The distributions on the convertible junior subordinated debentures are paid currently.

•		Carriage expects to fund approximately $6.5 million of capital expenditures.

•		Carriage expects to use free cash flow to acquire businesses if and when available on acceptable terms, In the Outlook the Company assumes free cash flow is invested in short-term investments that are expected to increase to approximately $25 million by 12/31/05.

Year 2005 Outlook
(In Millions, Except Per Share Amounts)


			Updated for
	As		Better Than		Updated for
	Previously		Expected		Accounting			Updated
	Reported		Results		Change			Outlook
Revenues	$	151.0 - $155.0	$	2.0		—		$	153.0 - $157.0

Adjusted Diluted EPS⁽¹⁾	$	0.31 - $0.36	$	0.03 - $0.02	($	0.10	)	$	0.24 - $0.28

Adjusted Net Earnings⁽¹⁾	$	5.8 - $6.7	$	0.04 - $0.01	($	1.7	)	$	4.5 - $5.3
Add: Depreciation & Amortization	$	12.6 - $12.8		—	($	1.7	)	$	10.9 - $11.1
Add: Interest Expense, Net	$	18.1 - $18.1		—		—		$	18.1 - $18.1
Add: Income Taxes	$	3.5 - $4.0		—	($	1.2	)	$	2.3 - $2.8

Adjusted EBITDA⁽¹⁾	$	40.0 - $41.6	$	0.4 - $0.1	($	4.6	)	$	35.8 - $37.3


(1)		Excludes a charge in connection with the senior debt refinancing in January 2005 of $6.7 million ($4.2 million after tax, or $0.22 per diluted share), and excludes any gains or losses associated with asset dispositions.


Cash Flow Measures
Cash Provided by Operating Activities	$	7.2 - $8.9
Payment of Cumulative Deferred Distributions	$	10.9 - $10.9


Adjusted Cash Provided by Operating Activities	$	18.1 - $19.6
Less: Capital Expenditures	$	6.5 - $6.5


Adjusted Free Cash Flow	$	11.6 - $13.1



Carriage Services NYSE: CSV	*©2005 Carriage Services, Inc. All rights reserved.*	*Page 5*



Company & Investment Profile		September 2005

OPERATING STRATEGY OVERVIEW

Carriage Services is a leading provider of professional funeral and cemetery services and products in the United States and is the fourth largest publicly traded death care company. As of August 10, 2005, Carriage operated 133 funeral homes and 29 cemeteries in 28 states. Carriage primarily serves suburban markets and the Company believes it is a market leader (first or second) in most of these markets.

Over the last four years Carriage and its public death care peers have been restructuring their organizations and improving their financial condition, liquidity and balance sheets by reducing debt. During the second half of 2003 Carriage implemented significant changes in its funeral organization and operations to improve operating and financial results by growing market share and profitability. The execution of its “Being the Best” standards based funeral operating model resulted in operational and financial improvements in Carriage’s funeral segment in 2004. Carriage intends to implement a similar operating model in its cemetery organization, which will promote the key success drivers that are unique to that business.

Carriage’s near-term objectives for 2005 and 2006 include:

•		continuing to improve its operating and financial performance by executing its Being the Best funeral operating model and implementing a similar strategy in its cemetery business;

•		increasing its profitability and cash flow, and continuing to improve its credit profile; and

•		initiating a disciplined acquisition program of funeral businesses that match a profile based on its Being the Best standards.

Carriage’s longer-term objectives over the next five years include:

•		continuous improvement and portfolio optimization driven by its Being the Best operating model;

•		increasing market share and profitability;

•		formalizing and implementing a disciplined acquisition program; and

•		raising non-dilutive equity proceeds to enhance its capital structure and support its growth strategy as appropriate opportunities arise.



Carriage Services NYSE: CSV	*©2005 Carriage Services, Inc. All rights reserved.*	*Page 6*



Company & Investment Profile		September 2005

Key elements of Carriage’s overall business strategy include the following:

•		Decentralized Funeral Operating Model –Carriage believes a decentralized funeral operating model is best suited to grow market share and improve financial performance in the funeral industry. The Company’s Being the Best operating model focuses on the key drivers of a successful funeral business, organized around three primary areas – market share, people and operational and financial metrics. Successful execution of its Being the Best operating model is highly dependent on strong local leadership, entrepreneurial empowerment and corporate support. In order to align this model with financial performance across the organization, Carriage developed a set of customized standards for each funeral business based on the financial results and attributes of its best properties, adjusting for size and percentage of cremations. Under the program, Carriage believes its managing partners have the opportunity to be compensated at close to the same level as if they owned the business.

•		Family Service Cemetery Operating Model –Carriage views its cemetery business, which has traditionally been more sales oriented, as a different business from its funeral business, which is more service oriented. Carriage is focusing the efforts of its cemetery operations on building heritage among new client families. A principal initiative has been to emphasize property sales, which strengthen the ties between the Company’s cemeteries and its clients. Carriage is also in the process of developing a standards based operating model for its cemetery operation. The Company expects to implement a limited standards based operating model in 2005 and a fully developed standards based operating model in 2006.

•		Presentation and Packaging of Services and Merchandise –Carriage believes packaging funeral services and merchandise offers both simplicity and convenience for its client families. Well conceived and thoughtful packages eliminate much of the effort and discomfort experienced by client families concerning matters about which they do not have much experience during a very stressful and emotional time. Carriage has entered into agreements with four primary casket suppliers to support its strategy and control wholesale costs. The Company also believes that its package strategy will result in increased revenue per cremation service over time as more families select packages that provide services and merchandise.

•		Preneed Funeral Sales Program –Carriage operates under a local, decentralized preneed sales strategy whereby each business location customizes its preneed program to its local needs. The Company emphasizes insurance funded contracts over trusted contracts in most markets, as insurance products allow Carriage to earn commission income to improve its cash flow and offset a significant amount of the up-front costs associated with preneed sales. In addition, the cash flow and earnings from insurance contracts are more stable than traditional trust fund investments. In markets that depend on preneed sales for market share, Carriage supplements the arrangements written by funeral directors with sales sourced by sales counselors and third party sellers.

•		Decrease Overhead Costs –Carriage periodically performs targeted reviews of its systems and support services with the objective of improving efficiencies and decreasing overhead costs. The Company recently completed an upgrade of its funeral services system to improve its features and functions and rolled out its new cemetery system in mid-2005. Carriage will continue to review and change corporate processes to improve efficiency and effectiveness.

•		Renew Corporate Development Efforts –As a result of its successful senior notes offering, Carriage believes its improved capital structure positions the Company to purse a strategy of disciplined growth, affording Carriage the flexibility to redeploy its free cash flow toward selective acquisitions. Carriage believes it will continue to improve its credit profile as it invests its cash flow into businesses that contribute to revenue and EBITDA. Carriage will apply the standards and practices established under its Being the Best operating model to qualify acquisition candidates, ensuring that they are a proper fit and can be readily integrated into Carriage’s business portfolio.(See page 9 for a detailed discussion of Carriage’s corporate development strategy)



Carriage Services NYSE: CSV	*©2005 Carriage Services, Inc. All rights reserved.*	*Page 7*



Company & Investment Profile		September 2005

“BEING THE BEST”

Carriage recognized that to become the best and increase value for shareholders, it must improve the operating results of its funeral operations by growing market share and thereby increasing profitability and earnings growth. After an extensive review of its funeral operations in 2003, Carriage announced and began to implement a number of operational changes that are intended to help the Company grow its market share and improve future operating and financial performance.

Carriage’s new funeral operating model, called “Being the Best”, is based upon lessons the Company has learned from its best businesses and its best operators. Carriage analyzed its best businesses (approximately 20% by number) and developed operating and financial standards, taking into consideration size and cremation mix, organized around three primary areas – market share, people and operating and financial metrics. Carriage introduced a more decentralized, entrepreneurial and local operating model and aligned its incentive compensation structure with the new standards. These new standards and incentives will challenge and reward its managing partners who thrive on growing their local business and being accountable for results.

Key elements of Carriage’s Being the Best funeral operating strategy and model include the following:

•		Balanced Operating Model –Carriage believes a decentralized structure works best in the death care industry. The Being the Best operating model focuses on key drivers of a successful funeral business, organized around three primary areas – market share, people and operating and financial metrics. Successful execution of Being the Best is highly dependent on strong local leadership, intelligent risk taking, entrepreneurial empowerment and corporate support aligned with the key drivers.

•		Incentives Aligned with Standards –Empowering managing partners to do the right things in their operations and local communities, and providing appropriate support with operating and financial practices, will enable growth and profitability. Each managing partner will participate in a variable bonus plan whereby they will earn a fixed percentage of their business’ earnings based upon the actual standards achieved. Carriage believes each managing partner has the opportunity to be compensated at close to the same level as if they owned the business themselves.

“Being the Best” Standards


	Weighting
Market Share
- Increase familes served over time		30	%
- Take away market share from competitors		5	%

Quality and Structure of Staff
- Right quality personnel		10	%
- Upgrade staff continuously		10	%
- Manage salary and benefits costs		12	%

Financial and Operating
- Grow average revenue per contract		10	%
- Maintain strong gross margins		10	%
- Maintain strong EBITDA margins		10	%
- Control bad debts and accounts receivable aging		3	%

•

The Right Local Leadership —Successful execution of the new operating model is highly dependent on strong local leadership, intelligent risk taking and entrepreneurial empowerment.



Carriage Services NYSE: CSV	*©2005 Carriage Services, Inc. All rights reserved.*	*Page 8*



Company & Investment Profile		September 2005

		Over time, Carriage believes how a managing partner executes against the Being the Best standards set forth will be the primary performance indicator.

•		Cycle of Service –Carriage is reviewing the various steps in its Cycle of Service in order to align processes and activities with the Company’s strategy to build a meaningful and lasting relationship with each client family. The Company has also developed a “Best Practices” website where innovative new service ideas will be shared throughout the organization.

•		Presentation and Packaging of Services and Merchandise – Carriage believes packaging funeral services and merchandise offers both simplicity and convenience for its client families. Well conceived and thoughtful packages eliminate much of the effort and discomfort experienced by client families about matters where they do not have much experience during a very stressful and emotional time. While client families will always have the option of purchasing services and merchandise separately, Carriage believes the emphasis on personalized services and appropriate merchandise will be valued by many families.

•		Merchandise Strategy & Supplier Arrangements –Carriage is conducting a review of its merchandise strategy for its selection floors. Merchandise selections will be aligned with package options. In addition, the selection floor will be evaluated to determine if it is effective. Key elements of an effective floor are balanced retail prices with appropriate mark-ups, intelligent layout and choices supported by good presentation. Carriage has entered into arrangements with four primary casket suppliers to support its new strategy and control wholesale costs.

•		Overhead Costs –Carriage is performing targeted reviews of its systems and support services with the objective of improving effectiveness and decreasing overhead costs. The Company recently completed an upgrade of its funeral services system to improve its features and functions and plans to implement a new cemetery system. As Carriage implements new systems, it is reviewing and changing corporate processes to improve efficiency and effectiveness.

RENEWED CORPORATE DEVELOPMENT EFFORTS

Carriage believes its improved capital structure positions the Company to purse a strategy of disciplined growth, affording Carriage the flexibility to redeploy its free cash flow toward selective acquisitions that meet its criteria. Carriage believes it will continue to improve its credit profile as it invests its cash flow into businesses that contribute to revenue and EBITDA.

There has not been any significant acquisition activity in the death care industry for at least five years. Carriage believes this lack of acquisition activity has created an attractive environment for buyers because acquisition multiples appear reasonable, the inventory of potential sellers with succession issues is building and the bank financing environment for independent operators is difficult. Given Carriage’s excellent reputation within the industry for operating style, culture and integrity, the Company believes it can selectively capitalize on this attractive acquisition environment.

Carriage will apply the standards and practices established under its Being the Best operating model to qualify acquisition candidates, ensuring that they are a proper fit and can be readily integrated into Carriage’s business portfolio. Ideal candidates will be those that:

•		are demonstrated market leaders;

•		have strong local management;

•		have owners and family members whose objectives are aligned with Carriage; and

•		have field level operating margin potential consistent with Carriage’s best performing properties.

Carriage will first look to geographic areas that compliment its existing markets, with primary focus on suburban markets with growing populations of 100,000 or more. Carriage expects to give the most serious consideration to firms with at least 300 calls annually, or at least $2 million in annual revenue out of one facility.



Carriage Services NYSE: CSV	*©2005 Carriage Services, Inc. All rights reserved.*	*Page 9*


Company & Investment Profile				September 2005

Using the criteria that define Carriage’s Being the Best standards based operating model, Carriage believes that only the best qualified independent funeral home and cemetery businesses will become a part of Carriage’s operations. Further, Carriage will take a measured and disciplined approach to its acquisition program. This is a stark contrast to the previous period of industry wide acquisitions from 1996 through 1999, which were characterized by excessive purchase prices funded by debt, followed by inadequate operating integration. Carriage learned many lessons from the industry’s prior acquisition period in which it participated, valuable experience that it will apply to its new acquisition strategy.

FLEXIBLE CAPITAL STRUCTURE FACILITATES GROWTH

In January 2005, Carriage issued $130 million of 7.875% of Senior Notes due in 2015. The proceeds of the notes were used to refinance all then outstanding senior debt, including payments for accrued interest and make-whole payments, to bring current the cumulative deferred distributions on the convertible junior subordinated debenture (TIDES), and for general corporate purposes.

Pro Forma Capitalization for Senior Note Offering


	Actual		As Adjusted		Actual
	12/31/2004		12/31/2004		6/30/2005
Cash & Equivalents	$	1.9	$	10.7	$	21.2

Senior Debt:
Existing Unsecured Credit Facility	$	25.6	$	—	$	—
Existing Senior Notes	$	70.5	$	—	$	—
New Senior Notes	$	—	$	130.0	$	130.0
Acquisition Debt & Capital Leases	$	14.2	$	14.2	$	12.9

Total Senior Debt	$	110.3	$	144.2	$	142.9

Subordinated Debt:
Subordinated Debt to Affiliate (TIDES)	$	93.8	$	93.8	$	93.8
TIDES Deferred Interest	$	10.9	$	—	$	—

Total Subordinated Debt	$	104.7	$	93.8	$	93.8

Total Debt	$	215.0	$	238.0	$	236.7
Total Stockholders’ Equity	$	116.4	$	112.2	$	94.2

Total Capitalization	$	331.4	$	350.2	$	330.9

The refinancing improved the Company’s liquidity because debt totaling approximately $96 million due in 2006 and 2008 was replaced by debt maturing in ten years. Carriage’s current capital structure is flexible and gives the Company the ability to focus on operating execution, selectively acquiring funeral and cemetery properties and growth.

While the benefits of the recent senior note offering are easily understood, Carriage does not believe the attributes of and the flexibility afforded by its subordinated debt (TIDES) are fully understood by the investment community. The TIDES mature in 2029, bear interest at 7% and are contractually convertible to CSV common shares at $20.44 per share. Attributes associated with the TIDES include:

•		They are unsecured and subordinate to the Company’s senior debt. Further, they are not guaranteed by the Company’s subsidiaries, meaning they are effectively subordinate to all trade and borrowed money liabilities of Carriage’s subsidiaries, not just borrowed money of the parent holding company.

•		Carriage has the right to defer the payment of interest on the debentures for up to 20 calendar quarters – at its option. The Company can catch up deferred interest and then re-start another deferral period prior to maturity. During a deferral period, the only rights of the holders of the TIDES are to restrict the Company from making distributions to common shareholders or repurchasing any common stock, but Carriage is not subject to any other restrictions which would normally be associated with non-payment of debt securities, such as acceleration of maturity, limits on acquisitions or dispositions of assets, or any changes in the debt capital structure, such as incurring new debt, restructuring existing debt, changing debt terms, or granting security.

•		The TIDES are convertible into common stock at a fixed price well above the common stock’s current trading price. Carriage believes the market value of the TIDES will continue to primarily be impacted by its unusually long-term maturity, the right to defer distributions and the subordination to all other outstanding liabilities, rather than the Company’s credit profile or level of interest rates.

•		As a result of the equity-like characteristics of the TIDES and debentures, the Company was able to have them treated as equity, rather than debt, under its bank credit and senior note agreements. Given CSV’s current price of $6.41 and the conversion price of $20.44, the securities are effectively a low cost, long-term instrument with very flexible interest payments and characteristics biased more toward equity than debt.


Carriage Services		*©2005 Carriage Services, Inc. All rights reserved.*		*Page 10*

NYSE: CSV


Company & Investment Profile				September 2005

Carriage’s capital structure, with its long-term maturities and flexibility, coupled with its $21.2 million cash and cash equivalents balance enables the Company to use its cash and free cash flow to selectively acquire companies that, over time, will delever the Company while increasing earnings and cash flow growth. This capital structure flexibility and Carriage’s size makes it unique in the deathcare sector. Carriage is the only company that has a relatively low number of shares outstanding and relatively smaller size such that selective acquisitions can have a meaningful positive impact on operating and financial results.

ATTRACTIVE VALUATION VS. PEERS – CLOSING THE VALUATION GAP

Carriage believes its “Being the Best” funeral operating strategies and model will enable the Company to increase market share and improve financial results. With the anticipated success of these initiatives and continuing improvement of its credit profile, Carriage believes the current equity valuation gap between it and its peers could close, and at current prices, CSV shares offer an attractive valuation.

While the Company has made significant progress on improving its operations and reducing its level of debt, Carriage continues to focus on its operations and its capital structure in order to position the Company for future growth. The Company’s focus is to grow its market share and improve operating and financial performance of its funeral operations; increase preneed property sales and cash flow in its cemetery operations; continue to improve its credit profile and strengthen its capital structure. Carriage may divest additional businesses in the future, where those businesses are not meeting its standards. Further, Carriage will continue to improve its organizational leadership and quality of personnel.

The following are several valuation comparisons of Carriage Services versus its public death care industry peers:

Peer Valuation Comparison
Death Care Industry

PE Multiple Comparison

EPS

Symbol

FYE

Price

2005E

PE Multiple

Alderwoods Group⁽¹⁾

AWGI

Dec.

16.29

0.71

22.9X

Service Corp. Intl.⁽¹⁾

SCI

Dec.

8.49

0.31

27.4X

Stewart Enterprises⁽¹⁾

STEI

Oct.

6.51

0.45

14.5X

Peer Average

10.43

0.49

21.6X

Carriage Services⁽²⁾

CSV

Dec.

6.41

0.26

24.7X


(1)		First Call mean estimates from continuing operations.

(2)		2005 EPS estimate is midpoint of company outlook.


Carriage Services		*©2005 Carriage Services, Inc. All rights reserved.*		*Page 11*

NYSE: CSV


Company & Investment Profile		September 2005

EBITDA Multiple Comparison

Enterprise

EBITDA

Symbol

FYE

Value⁽¹⁾

2005E⁽²⁾

Multiple

Alderwoods Group

AWGI

Dec.

1,050.0

123.0

8.5X

Service Corp. Intl.

SCI

Dec.

3,490.0

318.7

11.0X

Stewart Enterprises⁽³⁾

STEI

Oct.

1,100.0

132.0

8.3X

Peer Average

1,880.00

191.22

9.3X

Carriage Services⁽³⁾

CSV

DEC.

333.5

36.6

9.1X


(1)		Enterprise value data from Yahoo Finance, except Carriage Services.

(2)		First Call mean estimate unless noted.

(3)		2005 EBITDA estimate is midpoint of Company outlook.

FCF Yield & Multiple Comparison


			Equity		2005E		FCF			FCF
	Symbol	FYE	Market Cap		FCF		Yield			Multiple

Alderwoods Group⁽¹⁾	AWGI	Dec.	$	654.6	$	50.6		7.7	%		12.9X
Service Corp. Intl.⁽²⁾	SCI	Dec.	$	2,530.0	$	162.5		6.4	%		15.6X
Stewart Enterprises⁽³⁾	STEI	Oct.	$	714.1	$	38.0		5.3	%		18.8X

*Peer Average*			$	*1,299.57*	$	*83.71*		*6.5*	%		*15.8X*

Carriage Services⁽⁴⁾	CSV	DEC.	$	118.1	$	12.4		10.5	%		9.6X


(1)		2005 FCF estimate from Johnson Rice & Company.Uses 2005E FCF per share of $1.26 X shares outstanding of 40.184 million.

(2)		2005 FCF estimate uses mid-point of company outlook, uses total capex.

(3)		2005 FCF estimate uses mid-point of company outlook, uses maintenance capex.

(4)		2005 FCF estimate uses mid-point of company outlook, using total capex. Excludes additional interest paid on senior notes of $5.6 million and payment of deferred distributions on subordinated debentures of $10.9 million.


Carriage Services		*©2005 Carriage Services, Inc. All rights reserved.*		*Page 12*

NYSE: CSV


Company & Investment Profile				September 2005

OPERATIONS OVERVIEW

Carriage Services is a leading provider of professional funeral and cemetery services and products in the United States and is the fourth largest publicly traded death care company. As of August 10, 2005, Carriage operated 133 funeral homes and 29 cemeteries in 28 states. Carriage primarily serves suburban markets where the Company believes it is a market leader (first or second) in most of these markets.

Carriage Owns & Operates 133 Funeral Homes & 29 Cemeteries in 28 States

Carriage serves families from diverse cultural and religious backgrounds and provides a complete range of funeral and cremation services including planning and coordinating personalized funerals, conducting memorial services, performing cemetery interment services, and managing and maintaining cemetery properties. The Company also sells products and merchandise including caskets, urns, burial vaults, cemetery interment rights, and monuments and markers. Carriage’s business can be characterized as one of relative stability, recurring revenue and cash flow, with incremental growth opportunities via selective acquisitions.

Carriage’s local funeral home operations, cemetery operations, and preneed programs are managed by individuals with extensive death care experience. The local operators continue to have responsibility for the business, but are required to follow operational and financial standards. This strategy allows each local business to maintain its unique style of operation and to capitalize on its reputation and heritage while Carriage maintains supervisory controls and provides support services from its corporate headquarters.

Carriage is committed to a strong information systems infrastructure. All of its funeral homes and cemeteries are connected to a centralized database that allows management to monitor and evaluate operating and financial performance in order to analyze the performance of its businesses on a timely basis and to implement any necessary corrective actions.

Funeral Home Operations

As of August 10, 2005, Carriage operated 133 funeral homes in 28 states. Funeral home revenues accounted for approximately 75% of total revenues for both of the first six months of 2005 and 2004. Carriage’s funeral home operations are managed by a team of experienced death care industry professionals. These individuals have proven leadership and financial skills with best operating and high financial standards that are relevant to the death care industry.


Carriage Services		*©2005 Carriage Services, Inc. All rights reserved.*		*Page 13*

NYSE: CSV


Company & Investment Profile				September 2005

Carriage’s funeral homes offer a complete suite of services to meet families’ funeral needs, including consultation, removal and preparation of remains, sale of caskets and related funeral merchandise, use of funeral homes for visitation and religious services, and transportation services. Most of Carriage’s funeral homes have a non-denominational chapel on premises, which accommodates family visitation and religious services to take place on site if a family chooses, reducing inconvenience to the family.

Funeral Home Service Offerings

Given the high fixed cost structure associated with funeral home operations, carriage believes the following key factors affect its profitability:

•

Favorable demographic trends in terms of population growth and average age, which impact death rates and number of deaths;

•

Leading market share positions supported by strong local heritage and relationships;

•

Effectively responding to increasing cremation trends by packaging complimentary services and merchandise;

•

Controlling salary and merchandise costs; and

•

Exercising pricing leverage related to our at-need business to increase average revenues per contract.

Despite the decline in national death rates over the past three years and losses of market share in certain markets, Carriage’s funeral home operations remain some of the most profitable in the industry. Carriage has been able to maintain superior funeral home profitability due to its lean operating structure and focus on best practices. Carriage is focused on regaining market share in markets where it is an issue through its focus on building relationships in the local community, installing the right leadership, and hiring and training the best people.


Carriage Services		*©2005 Carriage Services, Inc. All rights reserved.*		*Page 14*

NYSE: CSV


Company & Investment Profile		September 2005

Cemetery Operations

As of August 10, 2005, Carriage operated 29 cemeteries in 12 states. All Carriage cemeteries are perpetual care cemeteries. Cemetery revenue accounted for approximately 25% for both of the first six months of 2004 and 2005, respectively. Carriage sales counselors consult with clients either at the cemetery or in the client’s home. Arrangements can be selected in advance of need and payment options are available. Carriage’s cemetery products and services include: mausoleum crypts, private estates, lawn crypt gardens, grave sites and burial vaults. Cremation options include columbarium, mausoleum niches and ground burial.

Cemetery operations generate revenues through sales of interment rights, memorials and installations, fees for interment and cremation services, finance charges from sales contracts, and investment income from preneed cemetery merchandise and perpetual care trusts. Carriage’s cemetery revenues are primarily driven by pre-need product sales. Since Carriage focused its cemetery business on its Family Service Model, cemetery gross margins have steadily improved.

Cemeteries are primarily a sales business. Carriage’s cemetery operating results are impacted by the success of its sales organization because approximately 45% of Carriage’s cemetery revenues have been generated from preneed sales of interment rights. Carriage believes that changes in the level of consumer confidence (a measure of whether consumers will spend money on discretionary items) also impacts the amount of such preneed sales. Cemetery revenues generated from at-need services and merchandise sales generally are subject to many of the same key profitability factors as in Carriage’s funeral home business.

In addition to owned locations, Carriage has been selected to be the managing partner of municipal and not for profit cemeteries. Carriage’s success in these operations comes from utilizing the same operating model used for its owned operations.

Preneed Programs

In addition to the sales of funeral merchandise and services, cemetery interment rights and cemetery merchandise and services at the time of need, Carriage also markets funeral and cemetery services and products on a preneed basis. Preneed funeral and cemetery contracts enable an individual to establish, in advance, the type of funeral or cemetery to be performed, the merchandise to be used and the costs at prevailing prices. Preneed contracts permit individuals to eliminate the emotional and financial burden on their families of arranging funeral and cemetery services and enable Carriage to


Carriage Services	*(C)2005 Carriage Services, Inc. All rights reserved.*	*Page 15*
NYSE: CSV


Company & Investment Profile		September 2005

secure existing and build future market share. Approximately 20% of Carriage’s funeral revenues and approximately 63% of its cemetery revenues are generated from preneed contracts.

In Carriage’s cemetery segment, preneed sales are a primary strategy to grow the Company’s market share and heritage. Each of Carriage’s cemetery locations conducts an active preneed program. In Carriage’s funeral segment, preneed sales programs complement the Company’s primary service strategies to grow market share. Carriage customizes such programs to the local market and competitive environment. Carriage believes this selective approach balances the current up-front costs and loss of future pricing power with the benefit of building future market share.

Carriage sells insurance-funded funeral contracts in most local markets that allow Carriage to earn commission income and improve its cash flow. Carriage plans to continue using insurance-funded contracts because cash from the commissions earned offsets a significant amount of the up-front costs and because the earnings on the insurance contracts are more stable than traditional trust fund investments. As of June 30, 2005, the composition of preneed funeral contracts was approximately 67% insurance contracts and 33% trust contracts.

Preneed funeral contracts are usually paid on an installment basis. The performance of preneed funeral contracts is usually secured by placing the funds collected in trust for the benefit of the customer or by the purchase of a life insurance policy, the proceeds of which will pay for such services at the time of need. Insurance policies, intended to fund preneed funeral contracts, cover the original contract price and generally include an element of growth (earnings) designed to offset future inflationary cost increases. Proceeds from the sale of preneed funeral contracts, along with accumulated earnings, are not recognized as revenue until the time the funeral service is performed. Additionally, Carriage generally earns a commission from the insurance company from the sale of insurance funded contracts. The commission income is recognized as revenue when the period of refund expires (generally one year) and helps Carriage defray the costs incurred, which are primarily commissions paid to its sales counselors.

Preneed cemetery sales are usually financed through interest bearing installment sales contracts, generally with terms of up to five years. Interest rates generally range from 12%-14%. Preneed sales of cemetery interment rights are recorded as revenue when 10% of the contract price related to the real estate has been collected. Merchandise and services revenue is recorded when delivery has occurred. Costs related to cemetery preneed contracts and delivery of products and services is recorded concurrent with related revenue. Carriage always receives an initial payment at the time the contract is signed. Allowances for customer cancellations and refunds are accrued at the date of sale and periodically evaluated thereafter based upon historical experience.


Carriage Services	*(C)2005 Carriage Services, Inc. All rights reserved.*	*Page 16*
NYSE: CSV


Company & Investment Profile		September 2005

DEATH CARE INDUSTRY OVERVIEW

Death Care Industry Landscape

Despite a period of rapid consolidation of smaller, private funeral and cemetery businesses by the public Death Care companies in 1996 through 1999, the industry remains fragmented. Reports indicate that there are approximately 22,000 funeral homes and 10,000 cemeteries in the United States. Based on information provided by public companies, it is estimated that Carriage Services and the three other largest publicly traded domestic Death Care companies represented approximately 20% of the 2004 domestic Death Care industry revenues. Though Carriage and the rest of its public peers have significantly reduced or eliminated an active acquisition program, there remains the opportunity for consolidation of smaller, privately held businesses to supplement internal growth.

Established death care businesses have a number of advantages over insurgent death care service providers in a given market, but barriers to entry are not prohibitive. Death care businesses have traditionally been transferred to successive generations within a family and in most cases have developed a local heritage and tradition that afford an established funeral home or cemetery a local franchise and provide the opportunity for repeat business. In addition, established firms’ backlog of preneed, prefunded funerals or presold cemetery and mausoleum spaces provides a base of future revenue. Additional barriers to entry include the difficulty of local zoning restrictions, increasing regulatory burdens, and scarcity of cemetery land in certain urban areas.

However, since 1999, Carriage has seen new independent competitors capture some local market share. In many cases, these new independent businesses are started by personnel who have left public death care consolidators or family owned businesses. Often, such businesses are attempting to build market share by competing on price rather than heritage and tradition.

Historical Death Rate Trends & Forecasts — Still Valid?

The national death rate in the United States has grown at a compound annual rate of approximately 1% from 1980 through 2000, with annual variation of 1%-2%. National government statistics are predicting an annual compounded rate of growth in the number of deaths of .75% through 2010, after which the rate of growth is expected to gradually increase due to the aging population. However, based on data from the CDC (adjusted for non-reporting cities) death rates declined approximately 2.4% in 2001, 1.6% in 2002, and 1.4% in 2003 — an unprecedented three year consecutive decline in death rates. Death rates were essentially flat in 2004.

It is uncertain if the three years of sequential declines in death rates is indicative of a fundamental change in future death rates trends, or what specific factors caused the sequential declines. While the number of deaths typically varies from year to year, it is believed by some that major medical advances in treating heart, cancer and other major diseases that cause death are resulting in an increase in the average age of the population. With several years of unprecedented sequential declines in death rates, is the improvement in healthcare beginning to have a secular impact on mortality rates that call into question historical mortality trends and projections? At this point that cannot be determined.

Estimated US Deaths


	Deaths in
	000s		CAGR
2004		2,462		0.7	%
2005		2,480		0.7	%
2006		2,499		0.8	%
2007		2,518		0.8	%
2008		2,537		0.8	%
2009		2,558		0.8	%
2010		2,578		0.8	%
2015		2,695		0.9	%
2020		2,840		1.1	%
2030		3,257		1.4	%
2040		3,702		1.3	%


Carriage Services	*(C)2005 Carriage Services, Inc. All rights reserved.*	*Page 17*
NYSE: CSV


Company & Investment Profile		September 2005

The Death Care industry tends to experience some seasonal biases in the winter months due to increases in cold weather induced deaths, or occasionally in extreme heat conditions in the summer. Despite a period of unusual decreases in death rates, the Death Care business can generally be characterized as one of relative stability, reliability, and a very low failure rate.Carriage views the long-term stability and reliability of the Death Care business, through good times and bad, as an attractive investment attribute.

Historical Decline in Births May Partially Explain Recent Decline in Death Rates

There may be a demographic influence at work that has caused annual death rates to deviate from their historically predictable trend. Birth rates began an extended period of decline from approximately 3 million births in 1924 to 2.3 million births in 1933, a 22.6% decline. If you assume a 72 year average life per person from 1910 to 2010 and roll historical birth data forward by 72 years, the data implies that the period of declining births from 1924 to 1933 may partially account for the sequential decline in death rates over the past few years. The data also may indicate that downward pressure on death rates may subside in the coming years and an upward trend in death rates may be on the horizon.

(HISTORICAL BIRTHS AND POSSIBLE DEATH TRENDS-GRAPH)

Source data: US Census Bureau, Statistical Abstract of the United States: 2003

The Aging Population & the Baby Boomers

The U.S. population is getting older as the “Baby Boom” generation begins to age. The number and percentage of the population age 65 and over is expected to increase from 36.7 million in 2005 to 40.2 million in 2010 and to 54.6 million in 2020, increases of 9.5% and 48.8%, respectively.The growth in the 65 and older portion of the U.S. population is significant because approximately 68% of deaths in the U.S. have occurred when people are age 65 and older.

Source: U.S. Census Bureau


Carriage Services	*(C)2005 Carriage Services, Inc. All rights reserved.*	*Page 18*
NYSE: CSV


Company & Investment Profile		September 2005

The first of the Baby Boom generation begin to turn age 65 in 2011 and the last of the Baby Boom generation will turn age 65 in 2029. Given the number of people in the Baby Boom generation, the absolute number of deaths and the year-over-year growth in deaths is expected to increase until 2029, at which time the rate of change in deaths is expected to decelerate.

(PROJECTED YEAR-OVER-YEAR CHANGE IN THE NUMBER OF DEATH IN U.S. PERFORMANCE GRAPH)

Cremation Trends

The aging of the large number of Baby Boomers over the next ten to twenty years could raise the national mortality rate slightly above its historic average, generating enhanced growth opportunities for the death care industry. However, a rising trend in cremations poses some risk for the death care industry to fully realize the benefit from the shift in the population to the +65 years of age category. It is estimated that cremations accounted for approximately 10% of the U.S. burial market in 1980 and has grown to approximately 29% in 2003. The cremation trend is expected to increase to 35% of the U.S. burial market in 2010. While cremation services and products are higher margin than traditional burial proceedings, they are typically less in absolute dollar terms. To mitigate this and to even capitalize on the growing cremation trend, Carriage has developed innovative, high quality funeral and memorializing services and additional products to increase its cremation revenue per funeral.

(U.S. CREMATION RATES: AS A % OF TOTAL DEATHS PERFORMANCE GRAPH)


Carriage Services	*(C)2005 Carriage Services, Inc. All rights reserved.*	*Page 19*
NYSE: CSV



Company & Investment Profile		September 2005

Carriage Services Peer Analysis
Selected Historical Financial & Operating Data & Valuation Data

In Thousands Except Per Share and Percentage Data


	Carriage Services (CSV)									Service Corp. Intl. (SCI)									Stewart Enterprises (STEI)⁽²⁾									Alderwoods Group (AWGI)
	2003			2004			6 Mos. ’05			2003⁽¹⁾			2004⁽¹⁾			6 Mos. ’05			2003			2004			6 Mos. ’05			2003			2004			6 Mos. ’05

Selected Historical Financial Data
Funeral Revenues		112,588			112,815			60,255			1,740,954			1,259,695			603,907			298,569			278,426			147,026			491,612			472,935			234,514
Cemetery Revenues & Other⁽³⁾		34,351			37,391			19,590			587,471			599,613			291,772			223,489			236,227			115,786			228,669			243,855			126,149

Total Revenues		146,939			150,206			79,845			2,328,425			1,859,308			895,679			522,058			514,653			262,812			720,281			716,790			360,663
																													��
Funeral Gross Profit		29,098			29,426			17,093			281,875			226,123			129,698			70,682			78,394			38,600			113,417			96,289			49,985
Cemetery & Other Gross Profit		8,521			8,877			3,903			80,090			108,375			46,035			49,689			56,371			27,083			30,527			28,521			14,507

Total Gross Profit		37,619			38,303			20,996			361,965			334,498			175,733			120,371			134,765			65,683			143,944			124,810			64,492

G&A Expenses		10,492			10,665			5,779			178,105			130,896			41,210			20,183			17,097			8,798			56,281			51,218			12,346

EBITDA⁽⁴⁾		38,176			39,775			20,056			446,118			371,009			176,918			158,800			170,488			67,712			131,065			125,795			63,183

Special Charges, (Income) & Other Items		—			—			—			49,366			25,628			(2,723	)		(107,300	)		(3,082	)		(1,147	)		(4,395	)		(1,922	)		1,627
Other Operating Expenses (Income)		432			495			—			9,004			(416	)		—			—			(2,099	)		(505	)		—			—			—

Operating Income		26,695			27,143			15,217			224,222			229,646			131,800			(7,112	)		116,685			58,537			83,268			71,670			53,773

Interest Expense		17,935			17,058			16,310			138,625			118,188			50,531			53,478			47,335			49,755			76,453			78,079			14,528

Net Income (Loss) from Continuing Operations		5,898			10,954			(922	)		82,553			117,011			46,821			(51,074	)		43,340			4,993			9,244			(3,793	)		26,895
Income (Loss) from Discontinued Operations		727			(1,720	)		350			2,529			43,762			(650	)		(22,394	)		2,822			2			1,563			13,142			(1,678	)

Net Income (Loss)		6,624			9,234			(572	)		85,082			113,699			(141,367	)		(73,468	)		46,162			(136,323	)		10,807			9,349			25,217
Non-Recurring Items		—			—			(22,756	)		—			(47,074	)		(187,538	)		—			—			(141,318	)		—			—			—

Net Income (Loss) Excluding Non-Recurring Items		6,624			9,234			(23,328	)		85,082			160,773			46,171			(73,468	)		46,162			4,995			10,807			9,349			25,217

Diluted EPS from Continuing Operations	$	0.33		$	0.60		$	(0.05	)	$	0.28		$	0.36		$	0.15		$	(0.47	)	$	0.40		$	0.05		$	0.23		$	(0.09	)	$	0.65
Diluted EPS from Discontinued Operations	$	0.04		$	(0.09	)	$	0.02		$	—		$	0.13		$	—		$	(0.21	)	$	0.03		$	—		$	0.04		$	0.32		$	0.04

Diluted EPS	$	0.37		$	0.51		$	(0.03	)	$	0.28		$	0.35		$	(0.45	)	$	(0.68	)	$	0.43		$	(1.24	)	$	0.27		$	0.23		$	0.61
Non-Recurring Items	$	—		$	—		$	(1.25	)	$	—		$	(0.14	)	$	(0.60	)	$	—		$	—		$	(1.29	)	$	—		$	—		$	—

Diluted EPS Excluding Non-Recurring Items	$	0.37		$	0.51		$	(1.28	)	$	0.28		$	0.49		$	0.15		$	(0.68	)	$	0.43		$	0.05		$	0.27		$	0.23		$	0.61

Average Diluted Shares		17,808			18,260			18,227			300,790			344,675			311,986			108,220			108,159			109,506			40,465			41,132			41,375

Cash Flow from Continuing Operations⁽⁵⁾		14,079			23,305			(7,327	)		371,147			106,101			202,818			69,820			93,656			29,019			137,297			103,727			70,941
Deferred Distributions & Other⁽⁶⁾		(3,329	)		(7,015	)		16,300			—			—			—			—			—			—			—			—			—
Capital Expenditures		6,204			5,746			3,456			115,563			96,007			43,907			18,439			20,423			12,968			25,186			37,183			16,314

Free cash Flow from Continuing Operations		4,546			10,544			5,517			255,584			10,094			158,911			51,381			73,233			16,051			112,111			66,544			54,627

% of Revenues
Funeral Revenues		76.6	%		75.1	%		75.5	%		74.8	%		67.8	%		67.4	%		57.2	%		54.1	%		55.9	%		68.3	%		66.0	%		65.0	%
Cemetery Revenues		23.4	%		24.9	%		24.5	%		25.2	%		32.2	%		32.6	%		42.8	%		45.9	%		44.1	%		31.7	%		34.0	%		35.0	%

Total Revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Funeral Gross Profit		25.8	%		26.1	%		28.4	%		16.2	%		18.0	%		21.5	%		23.7	%		28.2	%		26.3	%		23.1	%		20.4	%		21.3	%
Cemetery Gross Profit		24.8	%		23.7	%		19.9	%		13.6	%		18.1	%		15.8	%		22.2	%		23.9	%		23.4	%		13.3	%		11.7	%		11.5	%

Total Gross Profit		25.6	%		25.5	%		26.3	%		15.5	%		18.0	%		19.6	%		23.1	%		26.2	%		25.0	%		20.0	%		17.4	%		17.9	%

G&A Expenses		7.1	%		7.1	%		7.2	%		7.6	%		7.0	%		4.6	%		3.9	%		3.3	%		3.3	%		7.8	%		7.1	%		3.4	%

EBITDA(Excluding Special Charges & Other Items)⁽⁴⁾		26.0	%		26.5	%		25.1	%		19.2	%		20.0	%		19.8	%		30.4	%		33.1	%		25.8	%		18.2	%		17.5	%		17.5	%

Operating Income		18.2	%		18.1	%		19.1	%		9.6	%		12.4	%		14.7	%		-1.4	%		22.7	%		22.3	%		11.6	%		10.0	%		14.9	%

Net Income (Loss) before Non-Recurring Items		4.5	%		6.1	%		-0.7	%		3.7	%		6.1	%		-15.8	%		-14.1	%		9.0	%		-51.9	%		1.5	%		1.3	%		7.0	%

Net Income (Loss)		4.5	%		6.1	%		-29.2	%	��	3.7	%		8.6	%		5.2	%		-14.1	%		9.0	%		1.9	%		1.5	%		1.3	%		7.0	%

Selected Operating Data
# of Funeral Properties		139			135			133			1,239			1,216			1,126			299			242			235			730			648			623
# of Cemetery & Other Properties		30			30			30			547			400			388			148			147			147			210			142			133

Total Properties		169			165			163			1,786			1,616			1,514			447			389			382			940			790			756
# of North American Funeral Services Performed⁽⁷⁾		23,740			23,081			11,855			252,232			252,232			130,633			71,082			66,433			31,988			124,798			117,525			56,451
Avg.Rev. Per Funeral - North America⁽⁷⁾	$	4,743		$	4,903		$	4,995		$	4,260		$	4,159		$	4,304		NA			NA			NA			$	3,939		$	4,024		$	4,137
North America Company Cremation Rate⁽⁸⁾		31	%		32	%		32	%		39	%		40	%		41	%		39	%		37	%		37	%		34	%		35	%		36	%

Selected Balance Sheet Data
Cash & Cash Equivalents		2,024			1,948			21,201			239,431			287,785			319,955			20,931			21,514			19,742			41,612			9,379			11,990
Total Current Assets		36,106			31,725			53,507			673,324			533,963			557,621			216,282			145,995			126,960			584,256			205,315			110,830
Property, Plant & Equipment, Net		107,257			104,893			105,201			1,277,583			970,547			947,450			481,861			296,684			508,272			548,518			539,879			534,200
Cemetery Property		63,658			62,649			61,237			1,524,847			1,506,782			1,481,202			377,118			369,434			370,519			117,362			118,619			117,589
Goodwill		159,672			156,983			156,983			1,195,422			1,169,040			1,150,143			403,790			404,014			405,627			320,640			321,134			321,075
Total Assets		538,917			565,156			566,979			7,725,204			8,195,674			7,731,969			2,573,522			2,565,360			2,407,459			2,453,003			2,372,428			2,292,701

Total Current Liabilities		50,391			26,792			29,457			669,355			311,913			312,643			108,589			80,230			61,964			478,437			213,071			132,615
Total Senior Debt (Including Current Portion)		135,259			110,293			142,908			1,701,871			1,253,960			1,263,295			502,115			416,805			418,464			630,852			463,640			409,867
Subordinated Debt		—			93,750			93,750			—			—			—			—			—			—			—			—			—
Total Debt		135,259			204,043			236,658			1,701,871			1,253,960			1,263,295			502,115			416,805			418,464			630,852			463,640			409,867
Total Liabilities		342,660			415,983			438,267			6,198,246			6,349,581			6,161,242			1,834,663			1,572,209			1,542,882			1,908,110			1,559,375			1,468,393
Preferred Securities		90,327			—			—			—			—			—			—			—			—			—			—			—
Convertible Securities		—			—			—			—			—			—			—			—			—			—			—			—
Stockholders’ Equity		105,930			116,438			94,213			1,526,958			1,846,093			1,570,727			738,859			784,258			654,744			544,893			555,912			579,704
Total Liabilities & Stockholders’ Equity		538,917			565,156			566,979			7,725,204			8,195,674			7,731,969			2,573,522			2,565,360			2,407,459			2,453,003			2,372,428			2,292,701

Selected Leverage Ratios
Current Assets / Current Liabilities		0.72			1.18			1.82			1.01			1.71			1.78			1.99			1.82			2.05			1.22			0.96			0.84
Total Assets / Total Liabilities		1.57			1.36			1.29			1.25			1.29			1.25			1.40			1.63			1.56			1.29			1.52			1.56
Senior Debt / Total Assets		0.25			0.20			0.25			0.22			0.15			0.16			0.20			0.16			0.17			0.26			0.20			0.18
Senior Debt / Stockholders’ Equity		1.28			0.95			1.52			1.11			0.68			0.80			0.68			0.53			0.64			1.16			0.83			0.71
Senior Debt / EBITDA(Excluding Special Charges & Other Items)		3.54			2.77			7.13			3.81			3.38			7.14			3.16			2.44			6.18			4.81			3.69			6.49
Senior Debt / Capitalization		40.8	%		34.4	%		43.2	%		52.7	%		40.4	%		44.6	%		40.5	%		34.7	%		39.0	%		53.7	%		45.5	%		41.4	%

Selected Valuation Data
Stock Price @ September 22, 2005							$	6.41								$	8.49								$	6.51								$	16.29
Shares Outstanding (Per Most Recent 10K or 10Q Filing)								18,421									302,363									109,699									40,184
Equity Market Value								118,079									2,567,062									714,140									654,594
Preferred Securities								—									—									—									—
Convertible Securities & Deferred Interest								—									—									—									—
Total Debt								236,658									1,263,295									418,464									409,867
Cash & Cash Equivalents								21,201									319,955									19,742									11,990

Enterprise Value							$	333,536								$	3,510,402								$	1,112,862								$	$1,052,471
Price / 2004 EPS before Chg. in Acctg. Principle and/or Other Items								12.7									24.3									15.3									71.7
Price / 2004 EPS								12.7									17.4									15.3									71.7
Price / Book Value Per Share								1.3									1.6									1.1									1.1
Enterprise Value / 2004 EBITDA(Excluding Special Charges & Other Items)								8.4									9.5									6.5									8.4


(1)		Income and cash flow statement data for 2003 and 2004 does not reflect the Company’s recent restatement. These figures will be adjusted once SCI files the restatement with the SEC.

		The 2003 balance sheet data does not reflect the restatement but the 2004 balance sheet data does.

(2)		Fiscal year ending October 31.

(3)		Cemetery Revenues/Gross Profit & Other for Alderwoods includes revenue/gross profit from Insurance operations.

(4)		EBITDA from continuing operations for Alderwoods Group

(5)		From continuing operations for all, except Stewart is from consolidated operations.

(6)		For Carriage, excludes deferred distributions on subordinated debentures in 2003 and 2004. For the three months 2005, the cumulative deferred distributions on the subordinated debentures that was paid and the additional interest paid on the senior notes was added.

(7)		On a comparable or “same store” basis for Carriage Services and Service Corp. Data from continuing operations for Alderwoods Group. Stewarts’ Annual number of funeral services performed on a consolidated basis.

(8)		All cremation rate data for Carriage, Service Corp. & Stewart on a same store basis. For Alderwoods, cremation data is from continuing operations.

Source: Carriage Services, Service Corp. Intl., Stewart Enterprises, & Alderwoods Group public documents.



Carriage Services	*©2005 Carriage Services, Inc. All rights reserved.*	*Page 20*


NYSE: CSV		Forward-looking statements contained herein are subject to certain risks and uncertainties as further described at the end of this Company & Investment Profile. Please refer to the Appendix on page 29 that discusses and reconciles non-GAAP financial measures to GAAP financial measures.


Company & Investment Profile		September 2005

CARRIAGE SERVICES RECENT RESULTS

Carriage Services reported solid 2Q05 financial results that were within the Company’s estimates previously released to the public. Carriage’s Being the Best standards based model continued to gain traction during the quarter, which contributed to solid average revenue per funeral contract, controlled operating costs and expanded gross margins. Carriage remains pleased with the consistent level of year-to-date profitability in its funeral operations, despite funeral volume volatility on a monthly basis.

Results of continuing operations for 2Q05 were as follows:

•

Total revenue of $38.0 million versus previous estimate of $36.5 to $38.0 million.

•

EBITDA of $8.1 million versus pervious estimate of $8.0 to $8.7 million.

•

GAAP EPS of $0.01 per diluted share, which includes special charges equal to $0.03 per share related to the refinancing of the Company’s credit facility and a loss on the sale of excess real estate, and a $0.02 reduction in EPS
related to an accounting change.

•

Diluted EPS of $0.06, excluding the special charges and accounting change, compared to previous estimate of $0.05 to $0.07 per share.

In 2Q05, Carriage generated $5.3 million of free cash flow, consisting of cash flow provided by continuing operating activities of $7.0 million, less capital expenditures of $1.7 million. Cash and short-term investments increased $5.2 million to $21.2 million. The Company is well on its way to achieve its goal of building its cash and short-term investments to $25 million by the end of 2005.

Funeral Operations — Key Financial & Operating Data Comparison vs. 2Q04

•

Funeral gross margin increased 200 basis points from 23.6% to 25.6%.

•

Funeral revenues from continuing operations increased 2.7% from $27.7 million to $28.4 million.

•

Same store funeral contracts declined 1.0% from 5,570 to 5,512.

•

Same store average revenue per contract increased 2.9% from $4,915 to $5,055.

•

Average revenue per burial contract increased 4.0% to $6,804.

•

Average revenue per cremation contract increased 1.6% to $2,442.

•

Carriage’s cremation rate increased to 32.5%, up versus 31.9% in 2Q04.

Cemetery Operations — Key Financial & Operating Data Comparison vs. 2Q04

•

Cemetery revenues from continuing operations were $9.6 million, flat versus the same quarter last year.

•

Average revenue per preneed contract written increased 19.8% to $2,953 and the average revenue per interment site sold increased 38.6% to $2,093.

•

The number of interments performed decreased 7.2%, but at-need property revenues remained flat because the volume decline was offset by an increase in the average revenue per at-need interment.

•

Deliveries of advance sales of merchandise and services increased $0.4 million, 25.8% greater than the prior year quarter.

•

Cemetery gross margin decreased $0.6 million, substantially all of which is attributable to the accounting change.

Sales of a few large private estates and family mausoleums during 2Q05 significantly increased the average value of Carriage’s preneed contracts and average interment site sales. Revenue related to advance mausoleum and private estate sales of $900,000 was not recognized in 2Q05 but will be recognized when construction is completed in either late 2005 or early 2006. The Company completed several mausoleums in 2Q04 that generated $300,000 in revenue, while no mausoleums were completed in 2Q05.


Carriage Services		*©2005 Carriage Services, Inc. Alt rights reserved.*		*Page 21*

NYSE: CSV


Company & Investment Profile		September 2005

Other

Special items recorded in 2Q05 consisted of a $600,000 loss on the sale of undeveloped cemetery property and a $200,000 charge to write-off unamortized loan costs related to the refinancing of the Company’s bank credit facility. These special items reduced diluted EPS by $0.03. Special items in 2Q04, primarily after-tax gains from the sales of assets, increased diluted EPS by $0.03. General and administrative expenses increased $55,000 compared to 2Q04 primarily due to professional fees related to Carriage’s on-going effort to comply with the internal control reporting requirements of Sarbanes-Oxley for the first time and the related upgrading of systems and processes. Such costs are expected to result in higher general and administrative expenses during the remainder of 2005, but should decline somewhat thereafter.

Change in Accounting

On June 30, 2005, Carriage changed its method of accounting for deferred obtaining costs, which are preneed selling costs, incurred for the origination of prearranged funeral and cemetery service and merchandise sales contracts. Prior to the accounting change, commissions and other costs that were related to the origination of prearranged funeral and cemetery service and merchandise sales were deferred and amortized with the objective of recognizing the selling costs in the same period that the related revenue is recognized. Under the prior accounting method, the commissions and other direct selling costs, which are current obligations that are paid and use operating cash flow, are not recognized currently in the income statement. The Company believes it is preferable to expense the current obligation for the commissions and other costs rather than defer these costs. The Company also believes the new accounting method will improve the comparability of its reported earnings to the other deathcare companies.

Carriage has applied this change in accounting principle effective January 1, 2005. Therefore, the Company’s results of operations for the three and six months ended June 30, 2005 are reported on the basis of the changed method.


Carriage Services		*©2005 Carriage Services, Inc. All rights reserved.*		*Page 22*

NYSE: CSV

Forward-looking statements contained herein are subject to certain risks and uncertainties as further described at the end of this Company & Investment Profile. Please refer to the Appendix on page 29 thai discusses and reconciles non-GAAP financial measures to GAAP financial measures.


Company & Investment Profile		September 2005

MANAGEMENT BIOS

Melvin C. Payne,a management founder of Carriage, has been Chairman of the Board and Chief Executive Officer since December 1996. In 2003, Mr. Payne assumed the additional role of leading Carriage’s funeral operations. Prior to December 1996, he had been the Chief Executive Officer and a director of Carriage since its inception in 1991. Mr. Payne resumed the additional position of President in December 2000. Mr. Payne serves on the Board of Directors of Sovereign Business Forms, Inc., a private company in the business forms manufacturing industry.

Joseph Saporitohas been Senior Vice President, Chief Financial Officer and Secretary of Carriage since September 2002. Mr. Saporito, a certified public accountant, has responsibility for the financial and administrative functions of Carriage. Prior to joining Carriage, he served as Division Head of the Commercial Audit Division of the Houston office of Arthur Andersen LLP, where he was a partner for 15 years.

Charles D. Sidunhas been Senior Vice President of Funeral Operations since December 2004. He had served as Regional Vice President and Regional Managing Partner of certain of Carriage’s subsidiaries since May 2004. Mr. Sidun joined the Carriage organization when he and his family sold the Sidun Funeral Group in Red Bank, New Jersey to Carriage in 1997. From 2000 to 2002, Mr. Sidun operated a yacht charter service, which included a cremated remains scattering service. From 2002 to May 2004, Mr. Sidun was director of sales and administration of a mausoleum project in Keyport, New Jersey, and also owned and operated a property management firm.

James J. Benardhas been Senior Vice President of Sales and Cemetery Operations for Carriage since November 2001. Mr. Benard joined Carriage in 1998 as a Regional Vice President of Sales. He has over 22 years of professional funeral home and cemetery experience. Prior to joining Carriage, he was affiliated with Service Corporation International in various roles for ten years. Mr. Benard is a member of the International Cemetery and Funeral Association.

George Klughas been Senior Vice President and Chief Information Officer since May 2002. He joined Carriage in July 2001 to align the technology functions with the company’s business plan. Before joining Carriage, Mr. Klug served from 1997 to 2000 as Vice President of Information Technology at Allright Corporation, an owner operator of parking facilities both national and international. Prior to Allright, Mr. Klug served as Vice President of Information Technology for various retail companies including Oshmans, Sportstown, and Zaks. He also has a background in operations and accounting and has been in management positions for 30 years.


Carriage Services		*©2005 Carriage Services, Inc. All rights reserved.*		*Page 23*

NYSE: CSV

Forward-looking statements contained herein are subject to certain risks and uncertainties as further described at The end of this Company & Investment Profile. Please refer to the Appendix on page 29 that discusses and reconciles non-GAAP financial measures to GAAP financial measures.


Company & Investment Profile		September 2005

Carriage Services, Inc.
Historical Earnings & Operating Data
Pro Forma for Change in Accounting Method for Deferred Obtaining Costs
(In Thousands $, Except Per Share & Margin Analysis Data)


	2003			Mar-04			Jun-04			Sep-04			Dec-04			2004			Mar-05			Jun-05
Revenues:
Funeral		112,588			30,775			27,697			26,582			27,761			112,815			31,817			28,438
Cemetery		33,612			9,477			9,594			9,092			8,660			36,823			10,026			9,564

Total Revenues		146,200			40,252			37,290			35,674			36,421			149,637			41,843			38,002

Gross Profit:
Funeral		28,514			9,057			6,246			5,827			7,284			28,415			9,811			7,282
Cemetery		6,447			1,938			1,636			1,445			1,691			6,710			2,393			1,510

Total Gross Profit		34,960			10,995			7,882			7,272			8,975			35,123			12,204			8,792

Selling, General & Admin. Expense		10,492			2,683			2,545			2,748			2,689			10,664			2,779			3,000
Other Operating Expense (Income)		432			—			—			495			—			495			—			—

Operating Income		24,035			8,312			5,338			4,029			6,286			23,964			9,425			5,792

Interest Expense, Net		17,934			4,382			4,395			4,175			4,107			17,059			4,608			4,585
Other Expense (Income)		(657	)		—			(891	)		(72	)		23			(940	)		(2	)		576
Additional Interest & Other Costs of Sr. Debt Financing		—			—			—			—			—			—			6,693			240

Income (Loss) Before Income Taxes		6,759			3,930			1,833			(75	)		2,157			7,845			(1,874	)		391
Provision (Benefit) for Income Taxes		2,535			1,474			687			(28	)		(3,255	)		(1,121	)		(714	)		153

Net Income (Loss) from Continuing Operations		4,224			2,456			1,146			(47	)		5,411			8,967			(1,160	)		238

Discontinued Operations:
Operating Income from Discontinued Operations		741			171			196			479			51			896			112			(16	)
Gain on Sales & (Impairments) of Disc. Operations		499			—			(3,051	)		1,039			(619	)		(2,631	)		460			5
Income Tax Provision (Benefit)		465			64			(737	)		569			(213	)		(317	)		216			(4	)

Income (Loss) from Discontinued Operations		775			107			(2,118	)		949			(356	)		(1,417	)		356			(7	)

Cumulative Effect of Change in Accounting Method, Net		—			—			—			—			—			—			(22,756	)		—

Net Income (Loss)		5,000			2,563			(972	)		902			5,056			7,549			(23,559	)		231

Basic EPS:
Continuing Operations	$	0.24		$	0.14		$	0.06		($	0.00	)	$	0.30		$	0.50		($	0.06	)	$	0.01
Discontinued Operations	$	0.04		$	0.00		($	0.12	)	$	0.05		($	0.02	)	($	0.08	)	$	0.02		($	0.00	)
Cumulative Effect of Change in Accounting Method, Net	$	0.00		$	0.00		$	0.00		$	0.00		$	0.00		$	0.00		($	1.26	)	$	0.00

Net Income (Loss)	$	0.29		$	0.15		($	0.05	)	$	0.06		$	0.28		$	0.42		($	1.30	)	$	0.01

Diluted EPS:
Continuing Operations	$	0.24		$	0.14		$	0.06		($	0.00	)	$	0.29		$	0.49		($	0.06	)	$	0.01
Discontinued Operations	$	0.04		$	0.01		($	0.12	)	$	0.05		($	0.02	)	($	0.08	)	$	0.02		($	0.00	)
Cumulative Effect of Change in Accounting Method, Net	$	0.00		$	0.00		$	0.00		$	0.00		$	0.00		$	0.00		($	1.22	)	$	0.00

Net Income (Loss)	$	0.28		$	0.14		($	0.05	)	$	0.06		$	0.28		$	0.41		($	1.26	)	$	0.01

Weighted Average Shares Outstanding:
Basic		17,444			17,656			17,764			17,834			17,886			17,786			18,128			18,332
Diluted		17,809			18,139			18,258			18,281			18,359			18,260			18,666			18,833

Margin Analysis		2003		Mar-04			Jun-04			Sep-04			Dec-04				2003		Mar-04			Jun-05
Revenues:
Funeral		77.0	%		76.5	%		74.3	%		74.5	%		76.2	%		75.4	%		76.0	%		74.8	%
Cemetery		23.0	%		23.5	%		25.7	%		25.5	%		23.8	%		24.6	%		24.0	%		25.2	%

Total Revenues		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%		100.0	%

Gross Profit:
Funeral		19.5	%		22.5	%		16.8	%		16.3	%		20.0	%		19.0	%		23.4	%		19.2	%
Cemetery		4.4	%		4.8	%		4.4	%		4.1	%		4.6	%		4.5	%		5.7	%		4.0	%

Total Gross Profit		23.9	%		27.3	%		21.1	%		20.4	%		24.6	%		23.5	%		29.2	%		23.1	%

Selling, General & Admin. Expense		7.2	%		6.7	%		6.8	%		7.7	%		7.4	%		7.1	%		6.6	%		7.9	%
Other Operating Expense (Income)		0.3	%		0.0	%		0.0	%		1.4	%		0.0	%		0.3	%		0.0	%		0.0	%

Operating Income		16.4	%		20.7	%		14.3	%		11.3	%		17.3	%		16.0	%		22.5	%		15.2	%

Interest Expense, Net		12.3	%		10.9	%		11.8	%		11.7	%		11.3	%		11.4	%		11.0	%		12.1	%
Special Charges & Other Expense (Benefit)		-0.4	%		0.0	%		-2.4	%		-0.2	%		0.1	%		-0.6	%		0.0	%		1.5	%

Income Before Income Taxes		4.6	%		9.8	%		4.9	%		-0.2	%		5.9	%		5.2	%		-4.5	%		1.0	%
Provision (Benefit) for Income Taxes		1.7	%		3.7	%		1.8	%		-0.1	%		-8.9	%		-0.7	%		-1.7	%		0.4	%

Net Income from Continuing Operations		2.9	%		6.1	%		3.1	%		-0.1	%		14.9	%		6.0	%		-2.8	%		0.6	%

Year-Over-Year Percentage Change
Funeral Revenues		—			4.9	%		-0.5	%		1.2	%		-4.8	%		0.2	%		3.4	%		2.7	%
Cemetery Revenues		—			16.0	%		7.6	%		4.8	%		0.8	%		9.6	%		5.8	%		-0.3	%
Total Revenues		—			7.4	%		1.5	%		2.1	%		-3.5	%		2.4	%		4.0	%		1.9	%
Selling, General & Admin. Expense		—			5.9	%		5.5	%		8.0	%		-10.5	%		1.6	%		3.6	%		17.9	%
Operating Income		—			7.4	%		-23.4	%		-25.9	%		-4.0	%		-0.3	%		13.4	%		8.5	%
Income Before Income Taxes		—			31.6	%		-42.8	%		-107.1	%		-0.4	%		16.1	%		-147.7	%		-78.7	%
Net Income from Continuing Operations		—			31.3	%		-42.9	%		-107.1	%		299.6	%		112.3	%		-147.2	%		-79.2	%


Carriage Services		*©2005 Carriage Services, Inc. All rights reserved.*		*Page 24*

NYSE: CSV


Company & Investment Profile		September 2005

Carriage Services, Inc.
Consolidated Statement of Operations
(In Thousands, Except Per Share Data)


	(Unaudited)						(Unaudited)
	For the Three Months						For the Six Months
	Ended June 30,						Ended June 30,
	2004			2005			2004			2005
Revenues, Net
Funeral	$	27,697		$	28,438		$	58,472		$	60,255
Cemetery		9,593			9,564			19,070			19,590

		37,290			38,002			77,542			79,845

Costs & Expenses
Funeral		21,167			21,156			42,623			43,162
Cemetery		7,451			8,054			14,492			15,687

		28,618			29,210			57,115			58,849

Gross Profit
Funeral		6,530			7,282			15,849			17,093
Cemetery		2,142			1,510			4,578			3,903

Gross Profit		8,672			8,792			20,427			20,996
Gross Profit Margin		23.3	%		23.1	%		26.3	%		26.3	%

General & Admin. Expenses		2,545			3,000			5,228			5,779

Operating Income		6,127			5,792			15,199			15,217

Interest Expense		4,395			4,714			8,777			9,377
Additional Interest & Other Costs on Senior Debt Refinancing		—			240			—			6,933
Other (Income) Expense		(891	)		447			(891	)		390

Total Interest & Other (Income) Expense		3,504			5,401			7,886			16,700

Income (Loss) from Continuing Operations Before Income Taxes		2,623			391			7,313			(1,483	)
Provision (Benefit) for Income Taxes		984			153			2,742			(561	)

Net Income (Loss) from Continuing Operations		1,639			238			4,571			(922	)

Discontinued Operations:
Operating Income (Loss) from Discontinued Operations		228			(16	)		420			96
Gain on Sales & (Impairments) of Discontinued Operations		(3,050	)		5			(3,050	)		465
Income Tax Provision (Benefit)		725			4			653			(211	)

Income (Loss) from Discontinued Operations		(2,097	)		(7	)		(1,977	)		350


Cumulative Effect of Change in Accounting Method, Net of Tax Benefit		—			—			—			(22,756	)

Net Income (Loss)	$	(458	)	$	231		$	2,594		$	(23,328	)


Basic Earnings (Loss) Per Common Share
Continuing Operations	$	0.09		$	0.01		$	0.26		$	(0.05	)
Discontinued Operations	$	(0.12	)	$	—		$	(0.11	)	$	0.02
Cumulative Effect of Change in Accounting Method, Net of Tax Benefit	$	—		$	—		$	—		$	(1.25	)

Net Income (Loss)	$	(0.03	)	$	0.01		$	0.15		$	(1.28	)


Diluted Earnings (Loss) Per Common Share
Continuing Operations	$	0.09		$	0.01		$	0.25		$	(0.05	)
Discontinued Operations	$	(0.11	)	$	—		$	(0.11	)	$	0.02
Cumulative Effect of Change in Accounting Method, Net of Tax Benefit	$	—		$	—		$	—		$	(1.26	)

Net Income (Loss)	$	(0.03	)	$	0.01		$	0.14		$	(1.29	)


Weighted Avg. Basic Shares Outstanding:		17,764			18,325			17,710			18,227

Weighted Avg. Diluted Shares Outstanding:		18,258			18,826			18,199			18,227


Carriage Services		*©2005 Carriage Services, Inc. All rights reserved.*		*Page 25*

NYSE: CSV


Company & Investment Profile		September 2005

Carriage Services, Inc.

ConsolidatedBalance Sheets
(In Thousands)


				(Unaudited)
	December 31,			June 30,
	2004			2005
ASSETS
Current Assets:
Cash & Cash Equivalents	$	1,948		$	8,352
Short Term Investments		—			12,849
Accounts Receivable — Trade, Net of Allowance for Doubtful Accounts		12,941			12,562
Assets Held for Sale		4,021			6,546
Inventories & Other Current Assets		12,815			13,198

Total Current Assets		31,725			53,507


Preneed Receivables & Trust Investments:
Cemetery		65,855			66,300
Funeral		49,494			48,288
Receivable from Funeral Trusts		18,074			17,483
Property, Plant & Equip. at Cost, Net of Accum. Dep.		104,893			105,201
Cemetery Property at Cost		62,649			61,237
Goodwill		156,983			156,983
Deferred Obtaining Costs		35,701			—
Deferred Charges & Other Non-Current Assets		8,581			25,325
Cemetery Perpetual Care Trust Investments		31,201			32,655

Total Assets	$	565,156		$	566,979


LIABILITIES & STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts Payable	$	5,991		$	4,233
Accrued Liabilities		16,048			16,944
Liabilities Associated with Assets Held for Sale		2,598			6,100
Current Portion of Long-Term Debt & Capital Leases Obligations		2,155			2,180

Total Current Liabilities		26,792			29,457

Senior Long-Term Debt, Net of Current Portion		102,714			135,342
Convertible Junior Sub. Debentures due 2029 to an Affiliated Trust		93,750			93,750
Obligations Under Capital Leases, Net of Current Portion		5,424			5,386
Deferred Interest on Convertible Junior Subordinated Debentures		10,891			—
Preneed Obligations:
Deferred Cemetery Revenue		46,787			46,163
Deferred Preneed Funeral Contracts Revenue		30,973			30,053
Non-Controlling Interests in Funeral & Cemetery Trust Investments		98,652			98,116

Total Liabilities		415,983			438,267


Commitments & Contingencies
Non-Controlling Interests in Perpetual Care Trust Investments		32,212			33,511
Non-Controlling Interests in Perpetual Care Trust Investments		523			988
Associated with Assets Held for Sale
Stockholders’ Equity:
Common Stock		179			184
Contributed Capital		188,029			190,175
Accumulated Deficit		(71,056	)		(94,384	)
Deferred Compensation		(714	)		(1,762	)

Total Stockholders’ Equity		116,438			94,213


Total Liabilities & Stockholders’ Equity	$	565,156		$	566,979


Carriage Services	*©2005 Carriage Services, Inc. All rights reserved.*	*Page 26*
NYSE: CSV


Company & Investment Profile		September 2005

Carriage Services, Inc.

Consolidated Statement of Cash Flows
(In Thousands)


	For the Six Months
	Ended June 30,
	2004			2005
Cash Flows from Operating Activities:
Net Income (Loss) from Continuing Operations	$	4,571		$	(922	)
Adjustments to Reconcile Net Income (Loss) from Continuing Operations to Net Cash Provided By (Used In) Operating Activities:
Depreciation		3,500			3,374
Amortization		2,639			1,472
Provision for Losses on Accounts Receivable		1,187			1,503
Net (Gain) Loss on the Sale of Business Assets		(891	)		574
Stock Related Compensation		259			354
Loss on Early Extinguishment of Debt		—			978
Loss on Sale of Trust Investments		235			—
Deferred Income Taxes		2,742			(561	)
Other		9			(49	)
Changes in Assets & Liabilities, Net of Effect from Acquisitions & Dispositions:
(Increase) in Accounts Receivable		(331	)		(2,258	)
(Increase) in Inventories & Other Current Assets		(50	)		(785	)
(Increase) in Deferred Charges & Other		(176	)		(593	)
(Increase) in Deferred Obtaining Costs		(2,238	)		—
(Increase) in Preneed Trust Investments		(459	)		(2,472	)
(Decrease) in Accounts Payable & Accrued Liabilities		(1,392	)		(1,503	)
Increase in Deferred Preneed Revenue		943			3,906
Increase (Decrease) in Deferred Interest on Convertible Junior Subordinated Debentures		3,447			(10,345	)

Net Cash Provided by (Used In) Continuing Operating Activities		13,995			(7,327	)
Net Cash Provided by Discontinued Operating Activities		313			327

Net Cash Provided by (Used In) Operating Activities		14,308			(7,000	)

Cash Flows from Investing Activities:
Net Proceeds from Sales of Businesses & Other Assets		845			182
Purchase of Short-Term Investments		—			(12,849	)
Capital Expenditures		(2,165	)		(3,456	)

Net Cash Used In Provided By Continuing Investing Activities		(1,320	)		(16,123	)
Net Cash Provided By (Used In) Discontinued Investing Activities		(63	)		505

Net Cash Used In Investing Activities		(1,383	)		(15,618	)

Cash Flows from Financing Activities:
Payments On Bank Line of Credit		(10,200	)		(25,600	)
Proceeds from the Issuance of Senior Notes		—			130,000
Net Payments on Long-Term Debt & Obligations Under Capital Leases		(2,658	)		(71,794	)
Proceeds from Issuance of Common Stock		162			211
Proceeds from the Exercise of Stock Options		184			379
Payment of Financing Costs		—			(4,175	)

Net Cash Provided By (Used In) Continuing Financing Activities		(12,512	)		29,021
Net Cash Used In Discontinued Financing Activities		—			—

Net Cash Provided By (Used In) Financing Activities		(12,512	)		29,021


Net Increase in Cash & Cash Equivalents		413			6,404
Cash & Cash Equivalents at Beginning of Period		2,024			1,948

Cash & Cash Equivalents at End of Period	$	2,437		$	8,352


Carriage Services	*©2005 Carriage Services, Inc. All rights reserved.*	*Page 27*
NYSE: CSV


Company & Investment Profile		September 2005

Selected Financial Data

The operating results of the businesses held for sale, as well as the impairment charges and gains on disposal are presented in the discontinued operations section, along with the income tax effect, in the consolidated statements of operations on a comparative basis. Likewise, the operating results and gains or losses from businesses sold in the prior year have been similarly reported for comparability. Revenues and operating income for the businesses presented in the discontinued operations section are as follows (in thousands):


	For the Years Ended December 31,						For the Three Months
	2002		2003		2004		Ending June 30, 2005
Revenues, Net	$	4,859	$	3,884	$	2,300	$	267
Operating Income	$	1,167	$	682	$	412	$	(16	)

Forward-Looking Statements

In addition to historical information, this Company & Investment Profile contains forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements include any projections of earnings, revenues, asset sales, cash flow, debt levels or other financial items; any statements of the plans, strategies and objectives of management for future operation; any statements regarding future economic conditions or performance; any statements of belief; and any statements of assumptions underlying any of the foregoing. Forward-looking statements may include the words “may”, “will”, “estimate”, “intend”, “believe”, “expect”, “project”, “forecast”, “plan”, “anticipate” and other similar words. Readers should carefully review the Cautionary Statements described in this and other documents we file from time to time with the Securities and Exchange Commission, including Annual Reports on Form 10-K and Current Reports on Form 8-K filed by Carriage in the future.

Cautionary Statements

The Company cautions readers that the following important factors, among others, in some cases have affected, and in the future could affect, the Company’s actual consolidated results and could cause the Company’s actual consolidated results in the future to differ materially from the goals and expectations expressed herein and in any other forward-looking statements made by or on behalf of the Company. For further information regarding risks related to the Company’s business and the industry, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s 2004 annual report filed on Form 10-K.

Risks related to our business

(1) Marketing and sales activities by existing and new competitors could cause us to lose market share and lead to lower revenues and margins.

(2) Price competition could also reduce our market share or cause us to reduce prices to retain or recapture market share, either of which could reduce revenues and margins.

(3) Improved performance in our funeral segment is highly dependent upon successful execution of our standards-based Being the Best operating model.

(4) Our ability to generate preneed sales depends on a number of factors, including sales incentives and local and general economic conditions.

(5) Earnings from and principal of trust funds and insurance contracts could be reduced by changes in financial markets.

(6) Our ability to execute our growth strategy is highly dependent upon our ability to successfully identify suitable acquisition candidates and negotiate transactions on favorable terms.

(7) Increased costs may have a negative impact on our earnings and cash flows.

(8) Increases in interest rates would increase interest costs on our variable-rate indebtedness and could have a material adverse effect on our net income.

(9) Covenant restrictions under our debt instruments may limit our flexibility in operating our business.

Risks related to the death care industry

(1) Declines in the number of deaths in our markets can cause a decrease in revenues. Changes in the number of deaths are not predictable from market to market or over the short term.

(2) The increasing number of cremations in the United States could cause revenues to decline because we could lose market share to firms specializing in cremations. In addition, direct cremations produce no revenues for cemetery operations and lower funeral


Carriage Services		*©2005 Carriage Services, Inc. All rights reserved.*		*Page 28*

NYSE: CSV


Company & Investment Profile		September 2005

revenues.

(3) If we are not able to respond effectively to changing consumer preferences, our market share, revenues and profitability could decrease.

(4) Because the funeral and cemetery businesses are high fixed-cost businesses, changes in revenue can have a disproportionately large effect on cash flow and profits.

(5) Changes or increases in, or failure to comply with, regulations applicable to our business could increase costs or decrease cash flows.

Disclosure of Non-GAAP Performance Measures

We report our financial results in accordance with generally accepted accounting principles (“GAAP”). However, management believes that certain non-GAAP performance measures and ratios, which management uses in managing our business, may provide users of this financial information additional meaningful comparisons between results in historical periods.

We refer to the term “EBITDA” and “free cash flow” in various places of our financial discussion. EBITDA is defined by us as net income from continuing operations before interest expense and other financing costs, income tax expense, and depreciation and amortization expense. Free cash flow is defined by us as cash provided by continuing operations less capital expenditures. EBITDA and free cash flow are not measures of operating performance under generally accepted accounting principles, or GAAP, and should not be considered in isolation nor construed as an alternative to operating profit, net income (loss) or cash flows from operating, investing or financing activities, each as determined in accordance with GAAP. You should also not consider EBITDA or free cash flow as measures of liquidity. Moreover, since EBITDA and free cash flow are not measures determined in accordance with GAAP and thus are susceptible to varying interpretations and calculations, EBITDA and free cash flow are as presented, may not be comparable to similarly titled measures presented by other companies.

Reconciliation of Net Income from continuing operations to EBITDA from continuing operations for the following periods (in 000s):


	2002			2003			2004			YTD Q2 2005			2005E
Net income from continuing operations	$	19,779		$	5,898		$	10,954		$	(922	)	$	17,180
Provision (benefit) for income taxes	$	(8,429	)	$	3,519		$	71		$	(561	)	$	(9,780	)

Pre-tax earnings from continuing operations	$	11,350		$	9,417		$	11,025		$	(1,483	)	$	7,400
Interest expense, including loan cost amortization	$	19,715		$	17,935		$	17,058		$	16,126		$	18,100
Depreciation & amortization	$	10,305		$	10,824		$	11,689		$	4,839		$	11,000
Non-cash losses	$	—		$	—		$	—		$	574		$	—

EBITDA from continuing operations	$	41,370		$	38,176		$	39,772		$	20,056		$	36,500

Revenue from continuing operations	$	149,317		$	146,939		$	150,206		$	79,845		$	155,000
EBITDA margin from continuing operations		27.77	%		25.98	%		26.47	%		25.12	%		23.55	%

Reconciliation of EBITDA from continuing operations for the trailing twelve months ending June 30, 2005 (in 000s):


	Trailing Twelve
	Months Ending
	June 30, 2005
EBITDA from continuing operations at December 31, 2004	$	35,233
EBITDA from continuing operations at June 30, 2004	$	(19,930	)
EBITDA from continuing operations at June 30, 2005	$	19,536


Trailing twelve months EBITDA from continuing operations at June 30, 2005	$	34,839


Carriage Services		*©2005 Carriage Services, Inc. All rights reserved.*		*Page 29*

NYSE: CSV


Company & Investment Profile		September 2005

Reconciliation of net income to free cash flow for the five year goals (in 000s):


	Five Year
	Goals
Net income	$	12.5
Tax expense		7.4
Interest expense		16.2
Depreciation and amortization		12.9

EBITDA	$	49.0
Interest paid		(16.2	)
Cash taxes		(5.0	)
Capital expenditures		(7.1	)
Deferred obtaining costs and other		(0.7	)

Free cash flow	$	20.0

We define free cash flow as cash provided by continuing operating activities less capital expenditures for property, plant and equipment. Additionally, to remove the impact from the deferrals and payment of interest on the convertible junior subordinated debenture, free cash flow has been adjusted.

Reconciliations of cash provided by continuing operations to free cash flow (in 000s):


	2002			2003			2004			YTD Q2 2005			2005E
Cash provided by continuing operations	$	16,942		$	14,079		$	23,305		$	(7,000	)	$	1,900
Capital expenditures	$	(6,031	)	$	(6,204	)	$	(5,746	)	$	(3,455	)	$	(6,500	)

Free cash flow deficit from continuing operations	$	10,911		$	7,875		$	17,559		$	(10,455	)	$	(4,600	)
Additional Interest on Senior Notes	$	—		$	—		$	—		$	5,955		$	5,955
Deferred interest on convertible junior subordinated debenture	$	—		$	(3,329	)	$	(7,015	)	$	10,345		$	10,345

Adjusted free cash flow from continuing operations	$	10,911		$	4,546		$	10,544		$	5,845		$	11,700

Reconciliation of adjusted free cash flow for the trailing twelve months ending June 30, 2005 (in 000s):


	Trailing Twelve
	Months Ending
	June 30, 2005
Adjusted free cash flow as of December 31, 2004	$	11,435
Adjusted free cash flow as of June 30, 2004	$	(8,696	)
Adjusted free cash flow as of June 30, 2005	$	5,844


Trailing twelve months adjusted free cash flow as of June 30, 2005	$	8,583


Carriage Services		*©2005 Carriage Services, Inc. All rights reserved.*		*Page 30*

NYSE: CSV

Carriage Services (CSV) 8-KCarriage Services Updates Company & Investment Profile