The low-speculative-grade rating on Carriage Services Inc. reflects the funeral home operator's significant financial burden, aggressive financial policy, and sensitivity to economic trends in an industry that, although relatively predictable, is subject to operating uncertainties. Carriage's network of 136 funeral homes in 25 states and 32 cemeteries in 11 states makes the company the third-largest rated operator in North America, but still only 10% of the size of the largest operator, Service Corp. International (BB/Stable/--). Although Carriage has maintained a focus on increasing net revenue per funeral and improving margins, its margins have been pressured as its strategy to pursue cremations helped drive its cremation rate to 41% from 36% in 2007, amid relatively flat death rates. In addition, weak
