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StoneMor Partners L.P. Reports Financial Results for 2018 Third Quarter

TREVOSE, Pa., Feb. 15, 2019 (GLOBE NEWSWIRE) -- StoneMor Partners L.P. (STON) (“StoneMor” or the “Partnership”), a leading owner and operator of cemeteries and funeral homes, today reported financial results for the three and nine month periods ended September 30, 2018.  Investors are encouraged to read the Partnership's quarterly report on Form 10-Q which it expects to file with the Securities and Exchange Commission (the “SEC”) later today.  That report, which will contain additional details, will be able to be found at www.stonemor.com after it is filed.

Joe Redling, StoneMor’s President and Chief Executive Officer, said, “Soon after joining StoneMor in July of 2018, we began to implement changes that we believed lay the foundation for improvements in 2019 and beyond.  We established a new operating structure to drive greater accountability, and we executed a comprehensive cost reduction plan, which has continued into 2019.  Our third quarter financial results do not yet reflect the benefits of these efforts, which, as we have previously stated, will take time to deliver the desired financial results.  With the filing of our interim financial statements we are pleased to be up to date with our financial reporting.  With this behind us, we can now focus on the work of improving operational and financial performance.”

THIRD QUARTER AND NINE MONTH FINANCIAL PERFORMANCE

  • For the three months ended September 30, 2018, revenues were $73.2 million compared to $84.0 million in the prior year period.  2018 nine-month revenues were $232.7 million compared to $252.9 million in the prior year period.  As previously reported, in 2017, revenues benefited from a large backlog of preneed cemetery merchandise that became available to be serviced.  Third quarter and year-to-date revenues were also impacted by decreases of $4.7 million and $9.5 million, respectively, in investment and other income, primarily due to the adoption of ASC 606.
  • Third quarter net loss was $17.2 million compared to $9.6 million in the prior year period.  Year-to-date net loss was $52.2 million compared to $29.7 million in the prior year period.  The increased losses were driven largely by the unfavorable comparisons previously mentioned and lower overall sales resulting from the impact of cost cutting and implementation of the general manager operating model.  Overall expenses increased as a result of adoption of ASC 606, as well as higher corporate overhead related to professional fees associated with delayed SEC filings, work related to our planned conversion to a C-Corp, and legal costs. 
  • For the nine months ended September 30, 2018, cash from operating activities was $19.4 million, compared to $24.7 million in the prior year period.
  • Merchandise trust value at September 30, 2018 was $520.0 million compared to $515.5 million at December 31, 2017. 
  • Deferred revenue at September 30, 2018 was $943.8 million compared to $912.6 million at December 31, 2017. 
  • As of September 30, 2018, the Partnership had $8.0 million of cash and cash equivalents and $315.3 million of total debt, including $150.0 million outstanding under its revolving credit facility.

About StoneMor Partners L.P.

StoneMor Partners L.P., headquartered in Trevose, Pennsylvania, is an owner and operator of cemeteries and funeral homes in the United States, with 322 cemeteries and 90 funeral homes in 27 states and Puerto Rico.

StoneMor is the only publicly traded death care company structured as a partnership. StoneMor’s cemetery products and services, which are sold on both a pre-need (before death) and at-need (at death) basis, include: burial lots, lawn and mausoleum crypts, burial vaults, caskets, memorials, and all services which provide for the installation of this merchandise. For additional information about StoneMor Partners L.P., please visit StoneMor’s website, and the investors section, at http://www.stonemor.com

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained in this press release, including, but not limited to, information regarding the expected timing of filing the Form 10-Q Report for the Quarter Ended September 30, 2018 (the “Third Quarter 10-Q”) and operational improvements, are forward-looking statements. Generally, the words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “project,” “expect,” “predict” and similar expressions identify these forward-looking statements. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements are based on management’s current expectations and estimates. These statements are neither promises nor guarantees and are made subject to certain risks and uncertainties that could cause actual results to differ materially from the results stated or implied in this press release. StoneMor’s major risks are related to our substantial secured and unsecured indebtedness, our ability to refinance our secured indebtedness in the near term, uncertainties associated with the cash flow from pre-need and at-need sales, trusts and financings, which may impact StoneMor’s ability to meet its financial projections, service its debt and resume paying distributions, as well as with StoneMor’s ability to maintain an effective system of internal control over financial reporting and disclosure controls and procedures.

StoneMor’s additional risks and uncertainties include, but are not limited to: the consequences of the Partnership’s delinquent filing of its Third Quarter 10-Q, including that the U.S. Securities and Exchange Commission could institute an administrative proceeding seeking the revocation of the registration of the Partnership’s common units under the Exchange Act, and that the Partnership remains delinquent in its required filings with the New York Stock Exchange (“NYSE”) and could ultimately face the possible delisting of its common units from the NYSE; the potential for defaults under the Partnership’s amended credit facility if the Third Quarter 10-Q is not filed today or the indenture governing its senior notes if the Partnership fails to file it within 120 days after notice from the trustee under the indenture; the Partnership’s ability to obtain relief from its creditors if it cannot file the Third Quarter 10-Q today or within 120 days after notice from the trustee under the indenture governing its senior notes, the terms on which such relief might be granted and any restrictions that might be imposed in connection with any relief that might be obtained; uncertainty associated with the consummation of the Partnership’s reorganization transactions; StoneMor’s ability to successfully implement its strategic plan relating to achieving operating improvements, including improving sales productivity and reducing operating expenses; the effect of economic downturns; the impact of StoneMor’s significant leverage on its operating plans; the decline in the fair value of certain equity and debt securities held in StoneMor’s trusts; StoneMor’s ability to attract, train and retain an adequate number of sales people; uncertainties associated with the volume and timing of pre-need sales of cemetery services and products; increased use of cremation; changes in the death rate; changes in the political or regulatory environments, including potential changes in tax accounting and trusting policies; StoneMor’s ability to successfully compete in the cemetery and funeral home industry; litigation or legal proceedings that could expose StoneMor to significant liabilities and damage StoneMor’s reputation, including but not limited to litigation and governmental investigations or proceedings arising out of or related to accounting and financial reporting matters; the effects of cyber security attacks due to StoneMor’s significant reliance on information technology; uncertainties relating to the financial condition of third-party insurance companies that fund StoneMor’s pre-need funeral contracts; and various other uncertainties associated with the death care industry and StoneMor’s operations in particular.

When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements set forth in StoneMor’s Annual Report on Form 10-K and the other reports that StoneMor files with the Securities and Exchange Commission, from time to time. Except as required under applicable law, StoneMor assumes no obligation to update or revise any forward-looking statements made herein or any other forward-looking statements made by it, whether as a result of new information, future events or otherwise.

 
STONEMOR PARTNERS L.P.
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands)
 
  September 30, 2018   December 31, 2017
Assets      
Current assets:      
Cash and cash equivalents $ 8,043     $ 6,821  
Accounts receivable, net of allowance 64,150     79,116  
Prepaid expenses 9,218     4,580  
Assets held for sale 1,083     1,016  
Other current assets 19,145     21,453  
Total current assets 101,639     112,986  
       
Long-term accounts receivable, net of allowance 89,765     105,935  
Cemetery property 333,724     333,404  
Property and equipment, net of accumulated depreciation 113,674     114,090  
Merchandise trusts, restricted, at fair value 520,027     515,456  
Perpetual care trusts, restricted, at fair value 345,022     339,928  
Deferred selling and obtaining costs 112,621     126,398  
Deferred tax assets 95     84  
Goodwill 24,862     24,862  
Intangible assets, net 61,905     63,244  
Other assets 24,549     19,695  
Total assets $ 1,727,883     $ 1,756,082  
       
Liabilities and Partners' Capital      
Current liabilities:      
Accounts payable and accrued liabilities $ 56,472     $ 43,023  
Accrued interest 5,331     1,781  
Current portion, long-term debt 1,184     1,002  
Total current liabilities 62,987     45,806  
       
Long-term debt, net of deferred financing costs 314,103     317,693  
Deferred revenues, net 943,805     912,626  
Deferred tax liabilities 6,730     9,638  
Perpetual care trust corpus 345,022     339,928  
Other long-term liabilities 41,776     38,695  
Total liabilities 1,714,423     1,664,386  
Commitments and contingencies      
Partners' capital (deficit):      
General partner interest (3,794 )   (2,959 )
Common limited partners' interest 17,254     94,655  
Total partners' capital 13,460     91,696  
Total liabilities and partners' capital $ 1,727,883     $ 1,756,082  
               

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

 
STONEMOR PARTNERS L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per unit data)
 
  Three Months Ended September 30,   Nine Months Ended September 30,
  2018   2017   2018   2017
Revenues:              
Cemetery:              
Interments $ 17,716     $ 17,841     $ 58,130     $ 55,460  
Merchandise 18,023     20,051     51,766     57,182  
Services 16,419     17,729     50,647     52,861  
Investment and other 9,247     13,922     30,785     40,313  
Funeral home:              
Merchandise 5,581     6,591     19,532     21,176  
Services 6,199     7,900     21,841     25,940  
     Total revenues 73,185     84,034     232,701     252,932  
               
Costs and Expenses:              
Cost of goods sold 12,866     11,910     39,387     37,472  
Cemetery expense 19,407     19,984     57,828     56,805  
Selling expense 14,251     17,082     47,673     49,164  
General and administrative expense 10,916     9,752     32,037     29,462  
Corporate overhead 12,876     11,887     39,868     39,058  
Depreciation and amortization 2,737     3,186     8,853     10,032  
Funeral home expenses:              
Merchandise 1,341     1,793     4,927     5,176  
Services 5,493     5,442     16,593     16,595  
Other 3,314     5,346     12,315     15,678  
     Total costs and expenses 83,201     86,382     259,481     259,442  
               
Other (losses) gains, net 702     338     (4,503 )   (733 )
Interest expense (7,638 )   (6,944 )   (22,858 )   (20,391 )
Loss before income taxes (16,952 )   (8,954 )   (54,141 )   (27,634 )
Income tax benefit (expense) (273 )   (622 )   1,976     (2,085 )
Net loss $ (17,225 )   $ (9,576 )   $ (52,165 )   $ (29,719 )
General partner's interest $ (179 )   $ (99 )   $ (543 )   $ (309 )
Limited partners' interest $ (17,046 )   $ (9,477 )   $ (51,622 )   $ (29,410 )
Net loss per limited partner unit (basic and diluted) $ (0.45 )   $ (0.25 )   $ (1.36 )   $ (0.78 )
Weighted average number of limited partners' units outstanding (basic and diluted) 37,959     37,958     37,959     37,945  
                       

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

 
STONEMOR PARTNERS L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) 
(in thousands)
  Nine Months Ended September 30,
  2018   2017
Cash Flows From Operating Activities:      
Net loss $ (52,165 )   $ (29,719 )
Adjustments to reconcile net loss to net cash provided by operating activities:      
Cost of lots sold 5,850     7,823  
Depreciation and amortization 8,853     10,032  
Provision for bad debt 3,776     5,123  
Non-cash compensation expense 2,026     656  
Non-cash interest expense 4,576     3,318  
Non-cash impairment charge and other losses 4,503     517  
Changes in assets and liabilities:      
Accounts receivable, net of allowance 5,574     (8,576 )
Merchandise trust fund (6,917 )   44,251  
Other assets (2,047 )   (5,053 )
Deferred selling and obtaining costs (4,780 )   (7,246 )
Deferred revenues, net 40,361     (12,119 )
Deferred taxes, net (2,545 )   1,425  
Payables and other liabilities 12,346     14,269  
     Net cash provided by operating activities 19,411     24,701  
Cash Flows From Investing Activities:      
Cash paid for capital expenditures (10,164 )   (7,960 )
Cash paid for acquisitions (1,667 )    
Proceeds from divestitures     701  
Proceeds from asset sales 954     401  
     Net cash used in investing activities (10,877 )   (6,858 )
Cash Flows From Financing Activities:      
Cash distributions     (24,545 )
Proceeds from borrowings 23,880     78,792  
Repayments of debt (27,924 )   (74,627 )
Cost of financing activities (3,268 )   (1,573 )
     Net cash used in financing activities (7,312 )   (21,953 )
Net increase (decrease) in cash and cash equivalents 1,222     (4,110 )
Cash and cash equivalents - Beginning of period 6,821     12,570  
Cash and cash equivalents - End of period $ 8,043     $ 8,460  
Supplemental disclosure of cash flow information:      
Cash paid during the period for interest $ 15,809     $ 13,653  
Cash paid during the period for income taxes $ 1,517     $ 2,884  
Non-cash investing and financing activities:      
Acquisition of assets by financing $ 1,620     $ 2,285  
Classification of assets as held for sale $ 543     $ 1,169  
               

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

 
SUPPLEMENTAL OPERATING DATA
 
  Three Months Ended
September 30,
  Nine Months Ended
September 30,
  2018   2017   2018   2017
Interments performed 12,876     12,859     41,550     40,916  
Interment rights sold (1)              
Lots 4,787     5,644     20,264     21,497  
Mausoleum crypts (including pre-construction) 235     275     1,082     1,358  
Niches 336     443     1,195     1,405  
Net interment rights sold (1) 5,358     6,362     22,541     24,260  
               
Number of pre-need cemetery contracts written 9,067     10,411     30,776     33,934  
Number of at-need cemetery contracts written 13,892     14,211     43,895     45,070  
Number of cemetery contracts written 22,959     24,622     74,671     79,004  
                       

______________________________

(1) Net of cancellations. Sales of double-depth burial lots are counted as two sales 

CONTACT: John McNamara
  Director - Investor Relations
  StoneMor Partners L.P.
  (215) 826-2945