Improvements to sales revenue impacted by increased corporate overhead and one-time non-operating expenses

To maintain financial flexibility, Partnership will not pay second or third quarter distributions

TREVOSE, Pa., Dec. 12, 2017 (GLOBE NEWSWIRE) -- StoneMor Partners L.P. (NYSE:STON) (“StoneMor” or the “Partnership”) today announced it has reported financial results for the second quarter 2017.  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.

Revenues were $86.0 million for the three months ended June 30, 2017, an increase of $7.0 million over the prior year period.  The increase was primarily due to growth in the sales of cemetery merchandise and services and an increase in investment and other income.  Revenues were $168.9 million for the six months ended June 30, 2017, an increase of $11.7 million over the prior year period.  The increase was also due to growth in the sales of cemetery merchandise and services,  a reduction in the number of contract cancellations, as well as revenues from properties acquired in August 2016.

Year-to-date net cash from operating activities was $15.5 million, an increase of $7.0 million from $8.5 million during the prior year period.  This was primarily due to a $14.3 million increase in working capital resulting from increased focus on delivery of pre-need merchandise, offset by a $7.3 million decrease in net income excluding non-cash items. 

Second quarter net loss was $11.6 million, compared to a net loss of $8.1 million for the prior year restated period.  Net loss was $20.1 million for the six months ended June 30, 2017 compared to a net loss of $14.5 million for the prior year restated period.  The increased loss for the three- and six- month periods was driven largely by increases in corporate overhead costs resulting from the Partnership's accounting review and delayed filing of its Annual Report on Form 10-K for 2016, as well as certain one-time non-operating expenses such as litigation costs offset partially by reductions in funeral home costs.

Unitholder Distributions

As of June 30, 2017, the Partnership had $6.8 million of cash and cash equivalents and $309.9 million of total debt, including $142.9 million outstanding under its revolving credit facility. Given the Partnership’s current level of cash and cash equivalents, to preserve capital resources and liquidity, the Board of Directors of the General Partner has concluded that it is not in the best interest of unitholders to pay a second or third quarter 2017 distribution. The decision provides additional liquidity in future periods and the Board expects to consider appropriate levels of distributions if and as conditions improve. 

Paul Grady, StoneMor's President and Chief Executive Officer, commented, "This difficult but prudent decision has been made in light of our commitment to live within the four corners of our balance sheet and ensure the Partnership has sufficient liquidity and funds available.  We look forward to sharing information about our operational and financial performance on our investor conference call following the announcement of our third quarter results.”

The Partnership noted that it is continuing to work to complete the delayed filing of its report on Form 10-Q for the Third Quarter ended September 30, 2017.  Consistent with the terms of its recently amended credit facility, the Partnership anticipates filing its Third Quarter 10-Q on or before January 25, 2018.

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 316 cemeteries and 94 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 Third Quarter 10-Q, providing information about unitholder distributions, and its next investor call are forward-looking statements. Generally, the words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend (including, but not limited to StoneMor’s intent to maintain or increase its distributions),” “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 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, pay distributions, and increase its 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, risks and uncertainties related to the following: the consequences of the Partnership’s delinquent filing of its Third Quarter Form 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 within the specified period 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 within the period prescribed by the Partnership’s amended credit facility or 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; uncertainties associated with future revenue and revenue growth; uncertainties associated with the integration or anticipated benefits of recent acquisitions or any future acquisitions; StoneMor’s ability to complete and fund additional acquisitions; 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 implement a strategic plan relating to achieving operating improvements, including improving sales productivity and reversing negative trends in costs of goods sold, certain expenses, cemetery billings and investment income from trusts, strong cash flows, further deleveraging and liquidity enhancement; 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
(in thousands)
 
 June 30, 2017 December 31, 2016
Assets(Unaudited)  
Current assets:   
Cash and cash equivalents$6,826  $12,570 
Accounts receivable, net of allowance77,127  77,253 
Prepaid expenses7,708  5,532 
Assets held for sale1,169  — 
Other current assets22,883  23,466 
Total current assets115,713  118,821 
    
Long-term accounts receivable, net of allowance100,710  98,886 
Cemetery property334,456  337,315 
Property and equipment, net of accumulated depreciation113,058  118,281 
Merchandise trusts, restricted, at fair value512,423  507,079 
Perpetual care trusts, restricted, at fair value337,684  333,780 
Deferred selling and obtaining costs123,177  116,890 
Deferred tax assets67  64 
Goodwill70,436  70,436 
Intangible assets64,266  65,438 
Other assets20,660  20,023 
Total assets$1,792,650  $1,787,013 
    
Liabilities and Partners' Capital   
Current liabilities:   
Accounts payable and accrued liabilities$39,642  $35,547 
Accrued interest1,815  1,571 
Current portion, long-term debt3,251  1,775 
Total current liabilities44,708  38,893 
    
Long-term debt, net of deferred financing costs306,696  300,351 
Deferred revenues898,256  866,633 
Deferred tax liabilities21,004  20,058 
Perpetual care trust corpus337,684  333,780 
Other long-term liabilities38,148  36,944 
Total liabilities1,646,496  1,596,659 
Commitments and contingencies   
Partners' capital (deficit):   
General partner interest(2,387) (1,914)
Common limited partners' interest148,541  192,268 
Total partners' capital146,154  190,354 
Total liabilities and partners' capital$1,792,650  $1,787,013 
        

See accompanying notes to the Unaudited Condensed Consolidated Financial Statements in the Quarterly Report on Form 10-Q for the quarter ended June 30, 2017 (the "Second Quarter 10-Q").

STONEMOR PARTNERS L.P.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per unit data)
 
 Three Months Ended June 30, Six Months Ended June 30,
 2017 2016 2017 2016
   (As restated)*   (As restated)*
Revenues:       
Cemetery:       
Merchandise$40,895  $38,420  $78,898  $72,110 
Services16,340  13,733  31,289  27,452 
Investment and other13,511  12,051  26,086  26,465 
Funeral home:       
Merchandise6,749  6,604  14,585  14,086 
Services8,457  8,170  18,040  17,037 
Total revenues85,952  78,978  168,898  157,150 
        
Costs and Expenses:       
Cost of goods sold12,043  12,042  25,562  22,762 
Cemetery expense20,124  17,485  36,821  33,341 
Selling expense15,623  16,575  32,082  31,308 
General and administrative expense9,753  8,993  19,710  18,197 
Corporate overhead16,067  9,737  27,171  20,048 
Depreciation and amortization3,391  3,155  6,846  6,220 
Funeral home expenses:       
Merchandise1,623  1,835  3,383  3,984 
Services5,454  6,156  11,153  12,611 
Other4,987  4,746  10,332  9,886 
Total costs and expenses89,065  80,724  173,060  158,357 
        
Other gains (losses), net(1,071) (191) (1,071) (1,073)
Interest expense(6,741) (5,707) (13,447) (11,497)
Loss from continuing operations before income taxes(10,925) (7,644) (18,680) (13,777)
Income tax expense(657) (500) (1,463) (760)
Net loss$(11,582) $(8,144) $(20,143) $(14,537)
General partner's interest$(121) $1,091  $(210) $2,192 
Limited partners' interest$(11,461) $(9,235) $(19,933) $(16,729)
Net loss per limited partner unit (basic and diluted)$(0.30) $(0.27) $(0.53) $(0.50)
Weighted average number of limited partners' units outstanding (basic and diluted)37,957  34,837  37,938  33,688 
            

*Refer to Note 1 in Part I, Item 1 of the Second Quarter 10-Q for further detail regarding the restatement.

See accompanying notes to the Unaudited Condensed Consolidated Financial Statements in the Second Quarter Form 10-Q

STONEMOR PARTNERS L.P.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
 
 Six Months Ended June 30,
 2017 2016
   (As restated)*
Cash Flows From Operating Activities:   
Net loss$(20,143) $(14,537)
Adjustments to reconcile net loss to net cash provided by operating activities:   
Cost of lots sold5,661  4,443 
Depreciation and amortization6,846  6,220 
Provision for cancellations2,682  6,324 
Non-cash compensation expense488  819 
Non-cash interest expense2,195  1,534 
Other (gains) losses, net872  1,073 
Changes in assets and liabilities:   
Accounts receivable, net of allowance(4,946) (12,191)
Merchandise trust fund43,915  (10,517)
Other assets(3,125) (2,715)
Deferred selling and obtaining costs(6,287) (6,519)
Deferred revenues(17,633) 30,579 
Deferred taxes, net944  81 
Payables and other liabilities4,031  3,865 
Net cash provided by operating activities15,500  8,459 
Cash Flows From Investing Activities:   
Cash paid for capital expenditures(3,311) (7,504)
Cash paid for acquisitions—  (1,500)
Proceeds from divestitures451  — 
Proceeds from asset sales401  1,848 
Net cash used in investing activities(2,459) (7,156)
Cash Flows From Financing Activities:   
Cash distributions(24,545) (44,703)
Proceeds from borrowings62,792  38,744 
Repayments of debt(56,256) (75,247)
Proceeds from issuance of common units, net of costs—  74,537 
Cost of financing activities(776) (351)
Net cash used in financing activities(18,785) (7,020)
Net decrease in cash and cash equivalents(5,744) (5,717)
Cash and cash equivalents - Beginning of period12,570  15,153 
Cash and cash equivalents - End of period$6,826  $9,436 
Supplemental disclosure of cash flow information:   
Cash paid during the period for interest$11,118  $9,994 
Cash paid during the period for income taxes$2,630  $2,325 
Non-cash investing and financing activities:   
Acquisition of assets by financing$1,384  $137 
Classification of assets as held for sale$1,169  $— 
        

*Refer to Note 1 in Part I, Item 1 of the Second Quarter 10-Q for further detail regarding the restatement.

See accompanying notes to the Unaudited Condensed Consolidated Financial Statements in the Second Quarter Form 10-Q

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

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