StoneMor Partners L.P. Announces First Quarter 2014 Financial Results

By GlobeNewswire,  May 08, 2014, 07:00:00 AM EDT


LEVITTOWN, Pa., May 8, 2014 (GLOBE NEWSWIRE) -- StoneMor Partners L.P. (NYSE:STON) ("StoneMor") announced its results from operations for the three months ended March 31, 2014. Investors are encouraged to read the Company's quarterly report on Form 10-Q to be filed with the SEC, which contains additional details, as well as financial tables, and can be found at www.stonemor.com.

Commenting on the quarter, Larry Miller, StoneMor's President and CEO said, "Despite a very harsh winter, StoneMor continues to successfully execute its business plan. While our pre-need sales were impacted by the severe weather we experienced between January and March, we generated increases in both our GAAP revenue and production based revenue (non-GAAP) during the period. At the same time we saw strong increases in both operating profits and adjusted operating profits (non-GAAP ) while generating a solid increase in distributable free cash flow. Lastly, we also generated stronger than usual returns from our trust fund investments."

Financial Highlights

  • Revenues (GAAP) for the three months ended March 31, 2014 were $64.4 million versus $59.6 million in prior year period, an 8.0% increase.
  • Production-based revenue (non-GAAP) for the three months ended March 31, 2014 increased by $5.5 million, or 6.9%, to $85.7 million from $80.2 million during the prior-year period.
  • Operating profits (GAAP) increased by $3.9 million to $5.3 million for the three months ended March 31, 2014, as compared to the $1.4 million in the prior-year period.
  • Adjusted operating profits (non-GAAP) increased by $4.3 million, or 24.3%, to $22.0 million for the three-month period ended March 31, 2014 from $17.7 million in the same period last year.
  • Distributable free cash flow (non-GAAP) for the three-month period ended March 31, 2014 increased to $22.1 million from $17.6 million in the same period last year, a 25.6% increase.                                              
  • Net cash used in operations was $2.9 million in the 2014 first quarter versus $6.9 million provided by operations in the prior year period, a decline of $9.8 million.  The decline was primarily the result of changes in the timing of accounts payable and accrued liabilities plus an increase in the flow of funds into the merchandise trust.
  • Backlog increased $16.8 million during the period ended March 31, 2014 to $497.7 million from $480.9 million at the end of December 31, 2013, and $61.0 million compared to the prior year period.
  • Cash, accounts receivable and merchandise trusts, net of merchandise liabilities reached $462.6 million at the end of March 31, 2014.
  • Net income (GAAP) for the three months ended March 31, 2014 was approximately $0.4 million, as compared to net loss of $2.2 million in the prior-year period.

The Company reports its financial results in accordance with U.S. GAAP. However, management believes that certain non-GAAP financial measures used in managing the business may provide investors with additional information regarding underlying trends and ongoing results on a comparable basis. Specifically, management believes that production-based revenues and adjusted operating profit allow the investor to gain insight into the current operating performance of the Company. Please see the section of this press release "Non-GAAP Financial Measures" to view the reconciliation. Non-GAAP financial measures used by the Company should not be considered as alternatives to GAAP financial measures, and you should not consider such non-GAAP financial measures in isolation or as a substitute for an analysis of the Company's results as reported under U.S. GAAP. Certain 2013 information has been adjusted to include the effects of retrospective adjustments resulting from the Company's 2013 first quarter acquisition.

"We continued to expand our business with the announcement that we were the successful bidder to acquire a substantial number of funeral homes and cemeteries that were made available as a result of the acquisition of Stewart Enterprises, Inc. by Service Corporation International (NYSE:SCI)," said Miller. "We have since signed definitive agreements to acquire these properties. While the transaction is subject to closing conditions, including FTC approval, as we previously reported, we expect them to be immediately accretive and we look forward to their future contributions.

"Earlier in the quarter we strengthened our balance sheet by paying down borrowings on our credit facility with the proceeds of a unit offering. We continue to grow our backlog while improving the liquidity provided by our aggregate cash, accounts receivable and merchandise trust value less merchandise liabilities, which reached $462.6 million at the end of March 31, 2014. All in all, we believe it was a solid quarter and a good start to 2014."

Investor Conference Call and Webcast

StoneMor will conduct a conference call to discuss 2014 first quarter results today, Thursday, May 8, 2014 at 10:00 a.m. ET. The conference call can be accessed by calling (800) 954-0643. An audio replay of the conference call will be available by calling (800) 633-8284 through 12:00 p.m. ET on May 22, 2014. The reservation number for the audio replay is as follows: 21715199. A live webcast of the conference call will also be available to investors who may access the call through the Investors section of www.stonemor.com. An audio replay of the conference call will also be archived on StoneMor's website at www.stonemor.com.

About StoneMor Partners L.P.

StoneMor Partners L.P., headquartered in Levittown, Pennsylvania, is an owner and operator of cemeteries and funeral homes in the United States, with 278 cemeteries and 90 funeral homes in 28 states and Puerto Rico. StoneMor is the only publicly traded deathcare 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 Investor Relations section, at http://www.stonemor.com.

Forward-Looking Statements

Certain statements contained in this press release including, but not limited to, information regarding the status and progress of the Company's operating activities, the plans and objectives of management, assumptions regarding our future performance and plans, and any financial guidance provided, as well as certain information in the Company's other filings with the Securities and Exchange Commission (the "SEC") and elsewhere are forward-looking statements. The words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "project," "expect," "predict" and similar expressions identify these forward-looking statements. These forward-looking statements are made subject to certain risks and uncertainties that could cause actual results to differ materially from those stated or implied, including, but not limited to, the following: uncertainties associated with future revenue and revenue growth; the effect of economic downturns; the impact of the Company's significant leverage on our operating plans; our ability to service our debt and pay distributions; the decline in the fair value of certain equity and debt securities held in our trusts; our 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; our ability to successfully implement a strategic plan relating to achieving operating improvements, strong cash flows and further deleveraging; our ability to successfully compete in the cemetery and funeral home industry; uncertainties associated with the integration or anticipated benefits of our recent acquisitions or any future acquisitions; our ability to complete and fund additional acquisitions; litigation or legal proceedings that could expose us to significant liabilities and damage our reputation; the effects of cyber security attacks due to our significant reliance on information technology; uncertainties relating to the financial condition of third-party insurance companies that fund our pre-need funeral contracts; and various other uncertainties associated with the death care industry and our operations in particular.

When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements set forth in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013 and our other reports filed with the SEC. Except as required under applicable law, we assume no obligation to update or revise any forward-looking statements made herein or any other forward-looking statements made by us, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

Production Based Revenue

We present production based revenue because management believes it provides for a useful measure of both the value of contracts written and investment and other income generated during a given period and is a critical component of adjusted operating profit.

Production based revenue is a non-GAAP financial measure that may not be consistent with other similar non-GAAP financial measures presented by other publicly traded companies.

Adjusted Operating Profit

We present Adjusted Operating Profit because management believes it provides for a useful measure of economic value added by presenting an effective matching of the value of current and future revenue sources generated within a given period to the cost of producing such revenue and managing our day to day operations within that same period. It is a significant measure that we believe is an indicator of eventual profit generated within a given period of time.

Adjusted Operating Profit is a non-GAAP financial measure that may not be consistent with other similar non-GAAP financial measures presented by other publicly traded companies.

Adjusted Operating Cash Generated

We present adjusted operating cash generated revenue because management believes it provides for a useful measure of the amount of cash generated that is available to make capital expenditures and partner distributions once all cash flow timing issues have been settled.

Adjusted operating cash generated is a non-GAAP financial measure that may not be consistent with other similar non-GAAP financial measures presented by other publicly traded companies.

Distributable Free Cash Flow

We present Distributable Free Cash Flow because management believes this information is a useful adjunct to Net Cash Provided by (Used in) Operating Activities under GAAP. Distributable Free Cash Flow is a significant liquidity metric that we believe is an indicator of our ability to generate cash flow during any quarter at a level sufficient to pay the quarterly distribution to the holders of our common units and for other purposes, such as repaying debt and expanding through strategic investments.

Distributable Free Cash Flow is similar to quantitative standards of free cash flow used throughout the deathcare industry and to quantitative standards of distributable cash flow used throughout the investment community with respect to publicly traded partnerships, but is not intended to be a prediction of the future. However, our calculation of distributable free cash flow may not be consistent with calculations of free cash flow, distributable cash flow or other similarly titled measures of other companies. Distributable Free Cash Flow should not be used as a substitute for the GAAP measure of cash flows from operating, investing, or financing activities.

Production Based Partners' Capital

We present production based partners' capital as a means to provide better insight into the value that our activities contribute to the enterprise. Because a portion of our revenues and direct selling expenses are captured on our balance sheet until we deliver the underlying goods or services, we believe that by including these items in our view of partners' capital, we gain better insight into the value creation. 

Backlog

We define backlog as deferred cemetery revenues and investment income less deferred selling and obtaining costs. It does not include deferred unrealized gains and losses on merchandise trust assets.

Reconciliation of Production Based Revenue (non-GAAP) and Adjusted

Operating Profit (non-GAAP) to Revenue (GAAP) and Operating Profit (GAAP)
                 
  Three months ended Three months ended    
  March 31, 2014 March 31, 2013    
  (in thousands) (in thousands)    
                 
  Segment     Segment     Change in Change in
  Results GAAP GAAP Results GAAP GAAP GAAP results GAAP results
  (non-GAAP) Adjustments Results (non-GAAP) Adjustments Results ($) (%)
Revenues                
Pre-need cemetery revenues  $ 29,976  $ (9,268)  $ 20,708  $ 30,941  $ (9,429)  $ 21,512  $ (804) -3.7%
At-need cemetery revenues  19,848  (1,225)  18,623  20,743  (1,364)  19,379  (756) -3.9%
Investment income from trusts  15,628  (9,651)  5,977  13,102  (8,472)  4,630  1,347 29.1%
Interest income  2,007  --  2,007  1,865  --  1,865  142 7.6%
Funeral home revenues  13,254  (1,507)  11,747  12,827  (1,409)  11,418  329 2.9%
Other cemetery revenues  5,026  299  5,325  741  67  808  4,517 559.0%
                 
Total revenues  85,739  (21,352)  64,387  80,219  (20,607)  59,612  4,775 8.0%
                 
Costs and expenses                
                 
Cost of goods sold  9,247  (1,743)  7,504  7,753  (1,463)  6,290  1,214 19.3%
Cemetery expense  13,329  --  13,329  12,785  --  12,785  544 4.3%
Selling expense  13,829  (2,640)  11,189  13,835  (2,611)  11,224  (35) -0.3%
General and administrative expense  7,645  --  7,645  7,582  --  7,582  63 0.8%
Corporate overhead  7,456  --  7,456  7,988  --  7,988  (532) -6.7%
Depreciation and amortization  2,368  --  2,368  2,330  --  2,330  38 1.6%
Funeral home expense  9,504  (218)  9,286  8,923  (187)  8,736  550 6.3%
Acquisition related costs, net of recoveries  349  --  349  1,283  --  1,283  (934) -72.8%
                 
Total costs and expenses  63,727  (4,601)  59,126  62,479  (4,261)  58,218  908 1.6%
                 
Operating profit  $ 22,012  $ (16,751)  $ 5,261  $ 17,740  $ (16,346)  $ 1,394  $ 3,867 277.4%

The table above analyzes our results of operations and the changes therein for the three months ended March 31, 2014, as compared to the same period last year. The table is structured so that our readers can determine whether changes were based upon changes in the level of merchandise and services and other revenues generated during the period and/ or changes in the timing when merchandise and services were delivered.

Critical Financial Measures  
       
  Three months ended  
  March 31,  
  2014 2013  
  (in thousands)  
       
Total revenues (a)  $ 64,387  $ 59,612  
Production based revenue consisting of the total value of cemetery contracts written, funeral home revenues and investment and other income (b)  85,739  80,219  
       
Operating profit (a)  5,261  1,394  
Adjusted operating profit (b)  22,012  17,740  
       
Net income (loss) (a)  409  (2,200)  
       
Operating cash flows (a)  (2,940)  6,867  
Adjusted operating cash generated (b)  23,068  18,119  
Distributable free cash flow generated (b)  $ 22,087  $ 17,631  
       
       
  As of As of  
  March 31,

2014
December 31,

2013
 
       
Distribution coverage quarters (b)  11.18  7.65  
       
       
(a) This is a GAAP financial measure.   
(b) This is a non-GAAP financial measure as defined by the Securities and Exchange Commission. Please see the reconciliation to GAAP measures or support calculation within this press release.
 
Reconciliation of Adjusted Operating Profit (non-GAAP) to Operating Profit (GAAP)
   
  Three months ended
  March 31,
  2014 2013
  (in thousands)
     
GAAP operating profit   $ 5,261  $ 1,394
     
Increase in applicable deferred revenues  21,352 20,607
     
Increase in deferred cost of goods sold and selling and obtaining costs (4,601) (4,261)
     
Adjusted operating profit  $ 22,012  $ 17,740
 
 
Reconciliation of Production Based Revenues (non-GAAP) to Revenues (GAAP)
 
  Three months ended March 31, Increase Increase
  2014 2013 (Decrease) ($) (Decrease) (%)
  (in thousands)
         
Value of pre-need cemetery contracts written  $ 29,976  $ 30,941  $ (965) -3.1%
Value of at-need cemetery contracts written  19,848  20,743  (895) -4.3%
Investment income from trusts  15,628  13,102  2,526 19.3%
Interest income  2,007  1,865  142 7.6%
Funeral home revenues  13,254  12,827  427 3.3%
Other cemetery revenues  5,026  741  4,285 578.3%
         
Total production based revenues  85,739  80,219  5,520 6.9%
         
Less:        
Increase in deferred sales revenue and investment income  (21,352)  (20,607)  (745) 3.6%
         
Total GAAP revenues  $ 64,387  $ 59,612  $ 4,775 8.0%
 
 
Reconciliation of Adjusted Operating Cash Flows (non-GAAP) and Distributable Free Cash Flow (Non-GAAP) to Operating Cash Flows (GAAP)
 
  Three months ended March 31,
  2014 2013
  (in thousands)
     
GAAP operating cash flows  $ (2,940)  $ 6,867
     
Add net cash inflows into the merchandise trust  16,420  12,161
Add net increase (decrease) in accounts receivable  3,168  1,385
Add net decrease (increase) in merchandise liabilities  829  1,004
     
Add net decrease (deduct net increase) in accounts payable and accrued expenses  9,564  (5,278)
Other float related changes  (3,973)  1,980
     
Adjusted operating cash flow generated  23,068  18,119
     
Less: maintenance capital expenditures  (1,330)  (1,771)
     
Plus: growth capital expenditures reclassified as operating expenses and deducted from adjusted operating cash generated (a)  349  1,283
     
Distributable free cash flow generated  22,087  17,631
Cash on hand - beginning of the period  12,175  7,946
     
Distributable cash available for the period  34,262  25,577
     
Partner distributions made  $ 13,391  $ 12,025
     
     
(a) We maintain a credit facility from which to make acquisitions and pay acquisition related costs. We utilize this line for these costs. Accordingly, distributable free cash flow is not negatively impacted by amounts spent on acquisitions that are recorded as expenses.
 
 
Production Based Partners' Capital
     
  As of As of
  March 31, 2014 December 31, 2013
  (in thousands)
Partners' capital  $ 147,987  $ 107,520
     
Deferred selling and obtaining costs  (90,801)  (87,998)
Deferred cemetery revenues, net  598,159  579,993
     
Production based partners' capital  $ 655,345  $ 599,515
 
 
Selected Net Assets
     
  As of As of
  March 31, 2014 December 31, 2013
  (in thousands)
     
Selected assets:    
     
Cash and cash equivalents  $ 8,240  $ 12,175
Accounts receivable, net of allowance  55,809  55,415
Long-term accounts receivable, net of allowance  80,484  78,367
Merchandise trusts, restricted, at fair value  449,853  431,556
     
Total selected assets  594,386  577,513
     
Selected liabilities:    
     
Accounts payable and accrued liabilities  24,273  37,269
Accrued interest  5,013  1,512
Current portion, long-term debt  1,555  2,916
Other long-term liabilities  1,457  1,527
Long-term debt  252,054  289,016
Deferred tax liabilities  12,498  12,407
Merchandise liability  131,817  130,412
     
Total selected liabilities  428,667  475,059
     
Total selected net assets  $ 165,719  $ 102,454
     
Distribution coverage quarters (a) 11.18 7.65
     
     
(a) This is a measure of the ratio of selected net assets to a quarterly distribution amount. The quarterly distribution amount is calculated by taking the end of the period outstanding common units (23,696,975 at March 31, 2014 and 21,377,102 at December 31, 2013, respectively) and multiplying these units by the declared distribution. This total is then added to the distribution due to the General Partner based upon the same variables.
 
 
StoneMor Partners L.P.
Condensed Consolidated Balance Sheet
(in thousands)
(unaudited)
     
  March 31, December 31,
  2014 2013
Assets    
Current assets:    
Cash and cash equivalents $ 8,240 $ 12,175
Accounts receivable, net of allowance 55,809 55,415
Prepaid expenses 2,480 3,622
Other current assets 19,199 22,667
Total current assets 85,728 93,879
     
Long-term accounts receivable, net of allowance 80,484 78,367
Cemetery property 314,909 316,469
Property and equipment, net of accumulated depreciation 84,555 85,007
Merchandise trusts, restricted, at fair value 449,853 431,556
Perpetual care trusts, restricted, at fair value 318,154 311,771
Deferred financing costs, net of accumulated amortization 7,836 8,308
Deferred selling and obtaining costs 90,801 87,998
Deferred tax assets 42 42
Goodwill 48,737 48,737
Other assets 11,868 12,209
Total assets $ 1,492,967 $ 1,474,343
     
Liabilities and partners' capital    
Current liabilities:    
Accounts payable and accrued liabilities $ 24,273 $ 37,269
Accrued interest 5,013 1,512
Current portion, long-term debt 1,555 2,916
Total current liabilities 30,841 41,697
     
Other long-term liabilities 1,457 1,527
Long-term debt 252,054 289,016
Deferred cemetery revenues, net 598,159 579,993
Deferred tax liabilities 12,498 12,407
Merchandise liability 131,817 130,412
Perpetual care trust corpus 318,154 311,771
Total liabilities 1,344,980 1,366,823
     
Commitments and contingencies    
Partners' capital    
General partner (2,693) (2,137)
Common partners 150,680 109,657
Total partners' capital 147,987 107,520
     
Total liabilities and partners' capital $ 1,492,967 $ 1,474,343

See accompanying notes to the Unaudited Condensed Consolidated Financial Statements on the Quarterly Report to be filed on Form 10-Q for the quarter ended March 31, 2014.

StoneMor Partners L.P.
Condensed Consolidated Statement of Operations
(in thousands, except per unit data)
(unaudited)
     
  Three months ended
  March 31,
  2014 2013
   
Revenues:    
Cemetery    
Merchandise $ 26,068 $ 26,652
Services  10,297  11,299
Investment and other  16,275  10,243
Funeral home    
Merchandise  5,052  4,953
Services  6,695  6,465
Total revenues 64,387 59,612
     
Costs and expenses:    
Cost of goods sold (exclusive of depreciation shown separately below):    
Perpetual care 1,391 1,281
Merchandise 6,113 5,009
Cemetery expense 13,329 12,785
Selling expense 11,189 11,224
General and administrative expense 7,645 7,582
Corporate overhead (including $271 and $330 in unit-based compensation for the three months ended March 31, 2014 and 2013, respectively) 7,456 7,988
Depreciation and amortization 2,368 2,330
Funeral home expense    
Merchandise 1,646 1,522
Services 4,787 4,557
Other 2,853 2,657
Acquisition related costs, net of recoveries 349 1,283
Total cost and expenses 59,126 58,218
     
Operating profit 5,261 1,394
     
Gain on acquisition 412 --
Gain on settlement agreement -- 912
Interest expense 5,574 5,463
     
Net income (loss) before income taxes 99 (3,157)
     
Income tax expense (benefit) (310) (957)
     
Net income (loss) $ 409 $ (2,200)
     
General partner's interest in net income (loss) for the period $ 4 $ (40)
Limited partners' interest in net income (loss) for the period $ 405 $ (2,160)
     
Net income (loss) per limited partner unit (basic and diluted) $ .02 $ (.11)
     
Weighted average number of limited partners' units outstanding - basic 22,493 19,729
Weighted average number of limited partners' units outstanding - diluted 22,787 19,729
     
Distributions declared per unit $ .600 $ .590

See accompanying notes to the Unaudited Condensed Consolidated Financial Statements on the Quarterly Report to be filed on Form 10-Q for the quarter ended March 31, 2014.

StoneMor Partners L.P.
Condensed Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
     
  For the three months ended March 31,
  2014 2013
   
Operating activities:    
Net income (loss) $ 409 $ (2,200)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:    
Cost of lots sold 3,057 1,735
Depreciation and amortization 2,368 2,330
Unit-based compensation 271 330
Accretion of debt discounts 624 490
Gain on settlement agreement -- (912)
Gain on acquisition (412) --
Changes in assets and liabilities that provided (used) cash:    
Accounts receivable  (3,168)  (1,385)
Allowance for doubtful accounts  705  (1,317)
Merchandise trust fund  (16,420)  (12,161)
Prepaid expenses  1,142  566
Other current assets  3,394  696
Other assets  (44)  (770)
Accounts payable and accrued and other liabilities  (9,564)  5,278
Deferred selling and obtaining costs  (2,803)  (2,745)
Deferred cemetery revenue  18,881  18,987
Deferred taxes (net)  (551)  (1,051)
Merchandise liability  (829)  (1,004)
Net cash provided by (used in) operating activities (2,940) 6,867
Investing activities:    
Cash paid for cemetery property (748) (1,076)
Purchase of subsidiaries (200) (9,100)
Cash paid for property and equipment (1,330) (1,771)
Net cash used in investing activities (2,278) (11,947)
Financing activities:    
Cash distributions (13,391) (12,025)
Additional borrowings on long-term debt 17,000 20,948
Repayments of long-term debt (55,504) (41,522)
Proceeds from public offering 53,178 38,377
Cost of financing activities -- (108)
Net cash provided by financing activities 1,283 5,670
Net increase (decrease) in cash and cash equivalents (3,935) 590
Cash and cash equivalents - Beginning of period 12,175 7,946
Cash and cash equivalents - End of period $ 8,240 $ 8,536
     
Supplemental disclosure of cash flow information:    
Cash paid during the period for interest $ 1,423 $ 1,245
Cash paid during the period for income taxes $ -- $ 451
     
Non-cash investing and financing activities:    
Acquisition of assets by financing $ 30 $ 62
Issuance of limited partner units for cemetery acquisition $ -- $ 3,592
Acquisition of assets by assumption of directly related liability $ -- $ 3,924

See accompanying notes to the Unaudited Condensed Consolidated Financial Statements on the Quarterly Report to be filed on Form 10-Q for the quarter ended March 31, 2014.

CONTACT: John McNamara
         (215) 826-2800
Source: StoneMor Partners L.P.

This article appears in: News Headlines

Referenced Stocks: STON


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