StoneMor Partners L.P. (NYSE: STON) (“StoneMor” or
the “Partnership”), a leading owner and
operator of cemeteries and funeral homes, today reported operating
and financial results for the 2019 first quarter period ended March
31, 2019. Investors are encouraged to read the Partnership's
quarterly report on Form 10-Q filed with the Securities and
Exchange Commission (the “SEC”), which contains additional details,
and can be found at www.stonemor.com.
FIRST QUARTER FINANCIAL PERFORMANCE
- Revenues for the first quarter were $71.5 million compared to
$77.9 million in the prior year period. Revenue declines were
driven primarily by a decrease in interment revenues, while sales
of merchandise and services were slightly lower than the prior year
period. Investment and other income was consistent with prior
year levels.
- First quarter net loss was $22.5 million compared to $17.9
million in the prior year period. The increased losses in the
quarter were driven primarily by lower sales of cemetery and
funeral home merchandise and services, as well as higher interest
expense related to the amendment of our debt agreement and higher
rates associated with higher average credit facility balances.
- Cemetery segment income for the first quarter was $2.8 million
compared to $2.1 million for the prior year period. The
improvement in segment income was driven primarily by a decrease in
cost of goods sold and reduced selling expense.
- Funeral segment income was $1.5 million for the first quarter
compared to $2.0 million in the prior year period. The
decrease in segment income was due primarily to lower sales of
funeral related merchandise and services.
- Cash used in operating activities for the first quarter was
$13.1 million compared to cash provided in the prior year period of
$6.2 million. The reduction in cash from operating activities
was primarily due to a $13.7 million outflow to fund changes in
working capital and a $5.6 million increase in net loss excluding
non-cash items, primarily related to increased costs associated
with consulting and professional fees arising from the potential
C-Corp conversion, debt refinancing, various employee severance and
other ongoing management initiatives.
- Merchandise trust value at March 31, 2019 was $515.1 million
compared to $488.2 million at December 31, 2018.
- Deferred revenue at March 31, 2019 was $941.0 million compared
to $914.3 million at December 31, 2018.
- As of March 31, 2019, the Partnership had $24.4 million of cash
and cash equivalents and $357.1 million of total debt, including
$180.7 million outstanding under its revolving credit
facility.
Joe Redling, StoneMor’s President and Chief Executive Officer
said, “We have noted in previous press releases that our management
team, beginning in July 2018 when I arrived at StoneMor, undertook
a deep analysis and operational reorganization of the company, with
many new initiatives put in place during the fourth quarter.
With the recent addition of our new SVP & CFO, Garry P.
Herdler, the full management team is now in place. The
overall aim of our operational reorganization is to:
- Drive asset-level accountability and profitability;
- Target at least $25 million in cost reductions by the end of
2019, the majority of which have been undertaken or are in
implementation;
- Increase sales productivity and effectiveness; and
- Improve financial reporting efficiencies.
“These efforts are well underway but, as we have said, it will
take time to deliver the desired financial results. First
quarter revenues declined by $6.5 million from the prior year
period, or approximately 8%. We expected to see some decline
in the year-over-year comparisons. We also expected that our
reorganization efforts would have a near term impact as the sales
force absorbed some of the organizational changes and certain cost
cutting measures put in place during the fourth quarter of 2018 and
continuing into this year.
“We believe that there is significant value embedded in our
asset base, and the portfolio evaluation we performed late last
year continues to inform our efforts. As we have previously
noted, we grouped our cemetery and funeral home assets into three
tiers based on their volume and contributions. The portfolio
evaluation demonstrated that the majority of our cash flow comes
from what are now Tier 1 and Tier 2 properties. So we created
a plan to drive operational and financial improvement in Tier 1 and
Tier 2 properties by prioritizing resources to optimize their
performance. At the same time we are taking a more strategic
approach to Tier 3 properties, where the goal is to minimize the
cost impact of these properties, and, if appropriate, divest these
non-strategic assets.
“An example of how the tier structure is enabling improved
management focus is how we responded to the sales shortfall in the
first quarter. Even though we expected a little softness,
sales were down more than we anticipated. Our tier structure
revealed that the majority of the sales decline was confined to a
select subset of properties in Tier 1 and 2. It was not an
across the board decline, but limited to less 10% than of our
properties. Further analysis revealed it was not a macro
trend, but more related to misaligned sales resources. By
focusing on our sales leadership and prioritizing hiring efforts in
these areas, we have already seen improvement through the month of
April. The tier structure allows us to quickly identify needs
and solutions in high volume locations.
“It’s also worth noting that in our first quarter results, while
sales were lower, our expenses during the period were also lower by
a nearly equivalent percentage amount. The improvement in our
cemetery segment income is a reflection of our ongoing focus on
expenses. We continue to work towards aligning our cost
structure with our revenues, the refinancing of our credit
facility, and converting to a C-corporation.”
Garry P. Herdler, StoneMor’s new SVP and Chief Financial
Officer, said, “I joined StoneMor as CFO on April 15,
2019, and set a framework for a turnaround plan in four key areas:
liquidity/cash flow, capital structure, balance sheet/portfolio
review, and performance improvement through cost reductions and
revenue enhancement. We will track our progress on each of
these key areas in subsequent quarters. We also intend to
improve both operating processes and reporting controls, and to
enhance customer service. The objective of my first 100 days
is to understand, align and prioritize the goals of our CEO
and Executive Leadership Team. This will involve a
more detailed analysis, determination of resource needs and
timetables for an integrated action plan. Prior to my start,
I met with Joe Redling and members of the Board to confirm the
turnaround framework, their alignment with the CEO’s goals and our
mandate for change. I was confident there were a number
of performance improvement opportunities in addition to those
previously identified, and I remain confident these opportunities
exist. In addition, as previously announced
by StoneMor in April 2019, we are working to refinance
our existing credit facility. Given the timing of my arrival,
we currently believe the most appropriate time to conduct our next
investor call will be in connection with the announcement of our
second quarter financial results, which we expect to be filed on
time later this summer.”
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
announcing financial results for the quarter ending June 30, 2019
and the related investor call together with the implementation and
achievement of operational and reporting improvements, are
forward-looking statements. Generally, the words “believe,” “may,”
“will,” “estimate,” “continue,” “anticipate,” “intend,” “project,”
“expect,” “predict,” “focus,” “review,” “cash flow,” “confident,”
“filed timely,” 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: StoneMor’s ability to successfully implement its
strategic plan relating to achieving operating improvements,
including driving asset-level accountability and profitability,
improving sales productivity and effectiveness, reducing operating
expenses and improving financial reporting efficiencies; 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 for the Year Ended December
31, 2018 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)
|
March 31, |
|
|
December 31, |
|
|
2019 |
|
|
2018 |
|
Assets |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ |
24,448 |
|
|
$ |
18,147 |
|
Accounts receivable, net of allowance |
|
58,398 |
|
|
|
57,928 |
|
Prepaid expenses |
|
9,398 |
|
|
|
4,475 |
|
Assets held for sale |
|
757 |
|
|
|
757 |
|
Other current assets |
|
17,136 |
|
|
|
17,009 |
|
Total current assets |
|
110,137 |
|
|
|
98,316 |
|
|
|
|
|
|
|
|
|
Long-term accounts receivable,
net of allowance |
|
83,578 |
|
|
|
87,148 |
|
Cemetery property |
|
330,968 |
|
|
|
330,841 |
|
Property and equipment, net of
accumulated depreciation |
|
112,142 |
|
|
|
112,716 |
|
Merchandise trusts, restricted,
at fair value |
|
515,065 |
|
|
|
488,248 |
|
Perpetual care trusts,
restricted, at fair value |
|
344,825 |
|
|
|
330,562 |
|
Deferred selling and obtaining
costs |
|
112,643 |
|
|
|
112,660 |
|
Deferred tax assets |
|
86 |
|
|
|
86 |
|
Goodwill |
|
24,862 |
|
|
|
24,862 |
|
Intangible assets |
|
59,950 |
|
|
|
61,421 |
|
Other assets |
|
33,223 |
|
|
|
22,241 |
|
Total assets |
$ |
1,727,479 |
|
|
$ |
1,669,101 |
|
|
|
|
|
|
|
|
|
Liabilities and
Partners’ Deficit |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable and accrued liabilities |
$ |
57,921 |
|
|
$ |
59,035 |
|
Accrued interest |
|
7,751 |
|
|
|
1,967 |
|
Current portion, long-term debt |
|
953 |
|
|
|
798 |
|
Total current liabilities |
|
66,625 |
|
|
|
61,800 |
|
|
|
|
|
|
|
|
|
Long-term debt, net of deferred
financing costs |
|
345,933 |
|
|
|
320,248 |
|
Deferred revenues |
|
941,040 |
|
|
|
914,286 |
|
Deferred tax liabilities |
|
6,675 |
|
|
|
6,675 |
|
Perpetual care trust corpus |
|
344,825 |
|
|
|
330,562 |
|
Other long-term liabilities |
|
51,216 |
|
|
|
42,108 |
|
Total liabilities |
|
1,756,314 |
|
|
|
1,675,679 |
|
Commitments and
contingencies |
|
|
|
|
|
|
|
Partners’ deficit : |
|
|
|
|
|
|
|
General partner interest |
|
(4,242 |
) |
|
|
(4,008 |
) |
Common limited partners’ interest |
|
(24,593 |
) |
|
|
(2,570 |
) |
Total partners’ deficit |
|
(28,835 |
) |
|
|
(6,578 |
) |
Total liabilities and partners’
deficit |
$ |
1,727,479 |
|
|
$ |
1,669,101 |
|
STONEMOR PARTNERS
L.P.CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS (UNAUDITED)(in thousands, except per
unit data)
|
Three Months Ended March 31, |
|
|
2019 |
|
|
2018 |
|
Revenues: |
|
|
|
|
|
|
|
Cemetery: |
|
|
|
|
|
|
|
Interments |
$ |
15,944 |
|
|
$ |
19,625 |
|
Merchandise |
|
16,541 |
|
|
|
16,627 |
|
Services |
|
15,967 |
|
|
|
16,491 |
|
Investment and other |
|
9,458 |
|
|
|
9,500 |
|
Funeral home: |
|
|
|
|
|
|
|
Merchandise |
|
6,275 |
|
|
|
7,429 |
|
Services |
|
7,284 |
|
|
|
8,273 |
|
Total revenues |
|
71,469 |
|
|
|
77,945 |
|
Costs and
Expenses: |
|
|
|
|
|
|
|
Cost of goods sold |
|
9,743 |
|
|
|
13,435 |
|
Cemetery expense |
|
17,247 |
|
|
|
17,414 |
|
Selling expense |
|
14,733 |
|
|
|
16,256 |
|
General and administrative expense |
|
11,439 |
|
|
|
10,958 |
|
Corporate overhead |
|
13,413 |
|
|
|
11,827 |
|
Depreciation and amortization |
|
2,757 |
|
|
|
3,045 |
|
Funeral home expenses: |
|
|
|
|
|
|
|
Merchandise |
|
2,317 |
|
|
|
2,478 |
|
Services |
|
5,553 |
|
|
|
5,518 |
|
Other |
|
3,630 |
|
|
|
5,040 |
|
Total costs and expenses |
|
80,832 |
|
|
|
85,971 |
|
|
|
|
|
|
|
|
|
Other losses |
|
— |
|
|
|
(5,205 |
) |
Operating loss |
|
(9,363 |
) |
|
|
(13,231 |
) |
Interest expense |
|
(13,171 |
) |
|
|
(7,113 |
) |
Loss from operations before
income taxes |
|
(22,534 |
) |
|
|
(20,344 |
) |
Income tax benefit |
|
— |
|
|
|
2,421 |
|
Net loss |
$ |
(22,534 |
) |
|
$ |
(17,923 |
) |
General partner’s interest |
$ |
(234 |
) |
|
$ |
(187 |
) |
Limited partners’ interest |
$ |
(22,300 |
) |
|
$ |
(17,736 |
) |
Net loss per limited partner unit
(basic and diluted) |
$ |
(0.59 |
) |
|
$ |
(0.47 |
) |
Weighted average number of
limited partners’ units outstanding (basic and diluted) |
|
38,031 |
|
|
|
37,959 |
|
STONEMOR PARTNERS
L.P.CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS (UNAUDITED)(in thousands)
|
Three Months Ended
March 31, |
|
2019 |
|
|
2018 |
|
Cash Flows From Operating Activities: |
|
|
|
|
|
|
|
Net loss |
$ |
(22,534 |
) |
|
$ |
(17,923 |
) |
Adjustments to reconcile net loss to net cash provided by
operating activities: |
|
|
|
|
|
|
|
Cost of lots sold |
|
1,522 |
|
|
|
1,830 |
|
Depreciation and amortization |
|
2,757 |
|
|
|
3,045 |
|
Provision for bad debt |
|
2,042 |
|
|
|
600 |
|
Non-cash compensation expense |
|
277 |
|
|
|
158 |
|
Non-cash interest expense |
|
4,429 |
|
|
|
1,167 |
|
Other losses, net |
|
— |
|
|
|
5,205 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable, net of allowance |
|
(1,965 |
) |
|
|
(3,668 |
) |
Merchandise trust fund |
|
(5,990 |
) |
|
|
(3,818 |
) |
Other assets |
|
(4,382 |
) |
|
|
(3,055 |
) |
Deferred selling and obtaining costs |
|
17 |
|
|
|
(1,866 |
) |
Deferred revenues |
|
8,584 |
|
|
|
15,791 |
|
Deferred taxes, net |
|
— |
|
|
|
(2,596 |
) |
Payables and other liabilities |
|
2,140 |
|
|
|
11,280 |
|
Net cash (used in) provided by operating activities |
|
(13,103 |
) |
|
|
6,150 |
|
Cash Flows From
Investing Activities: |
|
|
|
|
|
|
|
Cash paid for capital expenditures |
|
(1,903 |
) |
|
|
(4,369 |
) |
Cash paid for acquisitions |
|
— |
|
|
|
(833 |
) |
Net cash used in investing activities |
|
(1,903 |
) |
|
|
(5,202 |
) |
Cash Flows From
Financing Activities: |
|
|
|
|
|
|
|
Proceeds from borrowings |
|
24,562 |
|
|
|
14,380 |
|
Repayments of debt |
|
(253 |
) |
|
|
(11,530 |
) |
Principal payment on finance leases |
|
(366 |
) |
|
|
— |
|
Cost of financing activities |
|
(2,636 |
) |
|
|
(207 |
) |
Net cash provided by financing activities |
|
21,307 |
|
|
|
2,643 |
|
Net increase in cash,
cash equivalents and restricted cash |
|
6,301 |
|
|
|
3,591 |
|
Cash, cash equivalents
and restricted cash—Beginning of
period |
|
18,147 |
|
|
|
6,821 |
|
Cash, cash equivalents
and restricted cash—End of
period |
$ |
24,448 |
|
|
$ |
10,412 |
|
Supplemental
disclosure of cash flow information: |
|
|
|
|
|
|
|
Cash paid during the period for interest |
$ |
2,842 |
|
|
$ |
2,478 |
|
Cash paid during the period for income taxes |
|
41 |
|
|
|
39 |
|
Cash paid for amounts
included in the measurement of lease liabilities: |
|
|
|
|
|
|
|
Operating cash flows from operating leases |
$ |
932 |
|
|
$ |
— |
|
Operating cash flows from finance leases |
|
116 |
|
|
|
— |
|
Non-cash investing and
financing activities: |
|
|
|
|
|
|
|
Acquisition of assets by financing |
$ |
1,314 |
|
|
$ |
278 |
|
Classification of assets as held for sale |
|
— |
|
|
|
283 |
|
SUPPLEMENTAL OPERATING DATA
|
Three Months Ended
March 31, |
|
SUPPLEMENTAL
DATA: |
2019 |
|
|
2018 |
|
Interments performed |
|
12,995 |
|
|
|
14,572 |
|
Net interment rights sold
(1) |
|
|
|
|
|
|
|
Lots |
|
4,485 |
|
|
|
6,536 |
|
Mausoleum crypts (including pre-construction) |
|
215 |
|
|
|
546 |
|
Niches |
|
338 |
|
|
|
429 |
|
Total net interment rights sold (1) |
|
5,038 |
|
|
|
7,511 |
|
Number of pre-need cemetery
contracts written |
|
8,434 |
|
|
|
10,162 |
|
Number of at-need cemetery
contracts written |
|
13,249 |
|
|
|
14,727 |
|
Number of cemetery contracts written |
|
21,683 |
|
|
|
24,889 |
|
______________________________
(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 |
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