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StoneMor Partners L.P. Announces Second Quarter 2012 Results

LEVITTOWN, Pa., Aug. 7, 2012 (GLOBE NEWSWIRE) -- StoneMor Partners L.P. (NYSE:STON) announced its results of operations for the three months ended June 30, 2012. 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.

Financial Highlights

"Our second quarter results continue to demonstrate our ability to perform well in a difficult macro environment," said Lawrence Miller, President and Chief Executive Officer. "Our cemetery and funeral home operations both saw strong contributions from acquisitions made in 2011 and the first half of 2012, as well as an overall increase in the value of contracts written.

"The gains in production based revenue and adjusted operating profit underscore our commitment to growth and profitability despite the economic background. Backlog increased by $10 million to $396.5 million at June 30, 2012 versus $386.5 million at March 31, 2012 and we continue to be well positioned to take advantage of acquisition opportunities that present themselves," concluded Miller.

The Partnership 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 tables previously presented in the body of the press release. 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.

Investor Conference Call

An investors' conference call to review the second quarter 2012 results will be held on Tuesday August 7, 2012 at 11:00 a.m. Eastern Time. The conference call can be accessed by calling (800) 410-4177. An audio replay of the conference call will be available by calling (800) 633-8284 through 12:00 a.m. Eastern Time on August 21, 2012. The reservation number for the audio replay is as follows: 21600554. The audio replay of the conference call will also be archived on StoneMor's website at http://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 276 cemeteries and 85 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://stonemor.com.

Forward-Looking Statements

Certain statements contained in this press release, including, but not limited to, information regarding the status and progress of our operating activities, the plans and objectives of our management, assumptions regarding our future performance and plans, and any financial guidance provided, as well as certain information in other filings with the SEC and elsewhere are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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, including, but not limited to, the following: uncertainties associated with future revenue and revenue growth; the effect of the current economic downturn; the impact of our 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 producing 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; our ability to maintain effective disclosure controls and procedures and internal control over financial reporting; the effect of cybersecurity 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 and our Quarterly Reports on Form 10-Q filed with the SEC. We assume no obligation to publicly 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 [minimum] quarterly cash 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.

Critical Financial Measures
     
  Three months ended
  June 30,
  2012 2011
  (In thousands)
     
Total revenues (a)  $ 61,508  $ 60,107
Production based revenue consisting of the total value of cemetery contracts written, funeral home revenues and investment and other income (b)  75,604  69,977
     
Operating profit (a)  1,796  3,460
Adjusted operating profit (b)  12,612  10,580
     
Net income (loss) (a)  (2,169)  815
     
Operating cash flows (a)  6,005  (3,764)
Adjusted operating cash generated (b)  13,482  12,214
Distributable free cash flow generated (b)  $ 13,327  $ 11,794
     
     
  As of As of
  June 30, 2012 December 31, 2011
     
Distribution coverage quarters (b)  7.80  8.62
     
(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.
 
The following tables reconcile GAAP to Non-GAAP Measures:
 
Production Based Revenue (non-GAAP)
         
  Three months ended June 30, Increase Increase
  2012 2011 (Decrease) ($) (Decrease) (%)
  (In thousands)
         
Value of pre-need cemetery contracts written  $ 33,773  $ 32,836  $ 937 2.9%
Value of at-need cemetery contracts written  20,428  20,562  (134) -0.7%
Investment income from trusts  10,542  6,977  3,565 51.1%
Interest income  1,799  1,596  203 12.7%
Funeral home revenues  8,189  7,563  626 8.3%
Other cemetery revenues  873  443  430 97.1%
         
Total production based revenues  $ 75,604  $ 69,977  $ 5,627 8.0%
         
Less:        
Increase in deferred sales revenue and investment income  (14,096)  (9,870)  (4,226) 42.8%
         
Total GAAP revenues  $ 61,508  $ 60,107  $ 1,401 2.3%
 
Adjusted Operating Profit (non-GAAP)
     
  Three months ended June 30,
  2012 2011
  (In thousands)
     
GAAP operating profit  $ 1,796  $ 3,460
     
Increase in applicable deferred revenues 14,096 9,870
Increase in deferred cost of goods sold and selling and obtaining costs (3,280) (2,750)
     
Adjusted operating profit  $ 12,612  $ 10,580
 
Adjusted Operating Cash Flows and Distributable Free Cash Flow (Non-GAAP)
     
  Three months ended June 30,
  2012 2011
  (In thousands)
     
GAAP operating cash flows  $ 6,005  $ (3,764)
     
Add: net cash inflows (out of) into the merchandise trust  (773)  2,605
Add: net increase in accounts receivable  6,806  6,595
Add: net decrease in merchandise liabilities  1,715  215
     
Deduct: net (increase) decrease in accounts payable and accrued expenses  929  5,039
Other float related changes  (1,200)  1,524
     
Adjusted operating cash flow generated  13,482  12,214
     
Less: maintenance capital expenditures  (937)  (1,445)
Plus: growth capital expenditures reclassified as operating expenses and deducted from adjusted operating cash generated (a)  782  1,025
     
Distributable free cash flow generated  13,327  11,794
Cash on hand - beginning of the period  8,778  27,494
     
Distributable cash available for the period  22,105  39,288
     
Partner distributions made  $ 11,783  $ 11,763
     
(a)  We maintain a line of credit 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.
     
  Six months  
  ended June 30,   
  2012  
  (in thousands)  
     
GAAP operating cash flows  $ 14,195  
     
Add: net cash inflows into the merchandise trust  1,917  
Add: net increase in accounts receivable  8,180  
Add: net decrease in merchandise liabilities  4,451  
Add (deduct): net decrease in accounts payable and accrued expenses  (348)  
Other float related changes  (527)  
     
Adjusted operating cash generated  27,868  
     
Less: maintenance capital expenditures  (1,835)  
     
Plus: growth capital expenditures reclassified as operating expenses and deducted from adjusted operating cash generated (a)  1,113  
     
Distributable free cash flow generated  27,146  
Cash on hand - beginning of the period  12,058  
     
Distributable cash available for the period  39,204  
     
Partner distributions made  $ 23,563  
 
Other Information
Capital Base
       
    As of As of
    June 30, 2012 December 31, 2011
    (in thousands)
       
Debt on lines of credit    $ 61,950  $ 43,750
Debt due within three years (a)  5,091  4,792
Debt due between three and five years    -  -
Debt due between five and ten years    150,000  150,000
       
Availability under credit lines:      
Availability under the acquisition line of credit    -  54,250
Availability under the revolving line of credit    $ 68,050  $ 22,000
       
(a)  Debt due within three years includes smaller notes payable related to recent acquisitions. 
       
The combined long and short-term debt on the balance sheet at June 30, 2012 and December 31, 2011 includes an unamortized bond discount of $3,015 and $3,220, respectively, which is not reflected in the table above.
 
Selected Net Assets
     
  As of As of
  June 30, 2012 December 31, 2011
  (In thousands)
     
Selected assets:    
     
Cash and cash equivalents  $ 7,787  $ 12,058
Accounts receivable, net of allowance  51,908  48,837
Long-term accounts receivable, net of allowance  71,098  68,394
Merchandise trusts, restricted, at fair value  345,884  344,515
     
Total selected assets  476,677  473,804
     
Selected liabilities:    
     
Accounts payable and accrued liabilities  25,663  26,428
Accrued interest  1,654  1,632
Current portion, long-term debt  2,035  1,487
Other long-term liabilities  1,977  2,830
Long-term debt  211,991  193,835
Deferred tax liabilities  16,347  16,968
Merchandise liability  125,024  129,109
     
Total selected liabilities  384,691  372,289
     
Total selected net assets  $ 91,986  $ 101,515
     
Distribution coverage quarters (a) 7.80 8.62
     
(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 (19,394,036 at June 30, 2012 and 19,368,261 at December 31, 2011, 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 Sheets
(in thousands)
(unaudited)
     
  June 30, December 31,
  2012 2011
     
Assets    
Current assets:    
Cash and cash equivalents $ 7,787 $ 12,058
Accounts receivable, net of allowance 51,908 48,837
Prepaid expenses 5,899 4,266
Other current assets 15,990 16,670
Total current assets 81,584 81,831
     
Long-term accounts receivable, net of allowance 71,098 68,394
Cemetery property 302,986 298,938
Property and equipment, net of accumulated depreciation 72,948 73,777
Merchandise trusts, restricted, at fair value 345,884 344,515
Perpetual care trusts, restricted, at fair value 269,223 254,679
Deferred financing costs, net of accumulated amortization 9,667 8,817
Deferred selling and obtaining costs 71,921 68,542
Deferred tax assets 420 415
Goodwill 34,091 32,299
Other assets 13,608 16,918
Total assets $ 1,273,430 $ 1,249,125
     
Liabilities and partners' capital    
Current liabilities:    
Accounts payable and accrued liabilities $ 25,663 $ 26,428
Accrued interest 1,654 1,632
Current portion, long-term debt 2,035 1,487
Total current liabilities 29,352 29,547
     
Other long-term liabilities 1,977 2,830
Long-term debt 211,991 193,835
Deferred cemetery revenues, net 462,088 441,878
Deferred tax liabilities 16,347 16,968
Merchandise liability 125,024 129,109
Perpetual care trust corpus 269,223 254,679
Total liabilities 1,116,002 1,068,846
     
Commitments and contingencies    
     
Partners' capital    
General partner 1,288 2,192
Common partners 156,140 178,087
Total partners' capital 157,428 180,279
     
Total liabilities and partners' capital $ 1,273,430 $ 1,249,125

See accompanying notes to the Condensed Consolidated Financial Statements on the Quarterly Report to be filed on Form 10-Q for the quarter ended June 30, 2012.

StoneMor Partners L.P.
Condensed Consolidated Statement of Operations
(in thousands, except unit data)
         
  Three months ended June 30, Six months ended June 30,
  2012 2011 2012 2011
  (Unaudited) (Unaudited)
Revenues:        
Cemetery        
Merchandise $ 30,337 $ 31,104 $ 57,481 $ 52,539
Services  11,265  11,604  23,347  22,402
Investment and other  12,051  10,036  23,475  19,702
Funeral home        
Merchandise 3,569 2,957 7,587 6,096
Services 4,286 4,406 9,205 8,599
Total revenues 61,508 60,107 121,095 109,338
         
Costs and Expenses:        
Cost of goods sold (exclusive of depreciation shown separately below):        
Perpetual care 1,415 1,399 2,782 2,724
Merchandise 5,821 5,817 10,874 9,485
Cemetery expense 14,775 15,462 27,567 27,548
Selling expense 13,123 12,187 24,910 21,731
General and administrative expense 7,195 7,031 14,388 13,458
Corporate overhead (including $210 and $191 in unit-based compensation for the three months ended June 30, 2012 and 2011, and $409 and $381 for the six months ended June 30, 2012 and 2011, respectively) 7,756 5,986 14,359 11,944
Depreciation and amortization 2,230 2,042 4,560 4,488
Funeral home expense        
Merchandise 1,107 1,009 2,530 2,215
Services 3,302 2,803 6,707 5,349
Other 2,206 1,886 4,134 3,443
Acquisition related costs 782 1,025 1,113 1,958
Total cost and expenses 59,712 56,647 113,924 104,343
         
Operating profit 1,796 3,460 7,171 4,995
         
Expenses related to refinancing - - - 453
Gain (loss) on termination of operating agreement (83) - 1,737 -
Gain on acquisition 122 - 122 -
Early extinguishment of debt - - - 4,010
Interest expense 4,870 4,352 9,836 9,442
         
Net income (loss) before income taxes (3,035) (892) (806) (8,910)
         
Income tax expense (benefit)        
State  97 (902) 242 (898)
Federal (963) (805) (909) (1,613)
Total income tax expense (benefit) (866) (1,707) (667) (2,511)
         
Net income (loss)  $ (2,169)  $ 815  $ (139)  $ (6,399)
         
General partner's interest in net income (loss) for the period $ (43) $ 16 $ (3) $ (128)
Limited partners' interest in net income (loss) for the period $ (2,126) $ 799 $ (136) $ (6,271)
         
Net income (loss) per limited partner unit (basic and diluted) $ (.11) $ .04 $ (.01) $ (.34)
         
Weighted average number of limited partners' units outstanding (basic and diluted) 19,375 19,341 19,372 18,529
         
Distributions declared per unit $ .585 $ .585 $ 1.17 $ 1.17

See accompanying notes to the Condensed Consolidated Financial Statements on the Quarterly Report to be filed on Form 10-Q for the quarter ended June 30, 2012. 

StoneMor Partners L.P.
Condensed Consolidated Statement of Cash Flows
(in thousands)
 
  Three months ended June 30, Six months ended June 30,
  2012 2011 2012 2011
  (Unaudited) (Unaudited)
Operating activities:        
Net income (loss) $ (2,169) $ 815 $ (139) $ (6,399)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:        
Cost of lots sold 2,146 1,803 3,979 3,281
Depreciation and amortization 2,230 2,042 4,560 4,488
Unit-based compensation 211 192 409 381
Accretion of debt discount 287 242 723 625
Gain on acquisition (122) - (122) -
Gain on termination of operating agreement 83 - (1,737) -
Write-off of deferred financing fees - - - 453
Fees paid related to early extinguishment of debt - - - 4,010
Changes in assets and liabilities that provided (used) cash:        
Accounts receivable (6,806) (6,595) (8,180) (9,430)
Allowance for doubtful accounts 1,930 1,802 3,293 2,473
Merchandise trust fund 773 (2,605) (1,917) (11,217)
Prepaid expenses 302 (1,002) (1,169) (331)
Other current assets (2,041) (1,395) (860) (1,505)
Other assets 1,967 1 139 198
Accounts payable and accrued and other liabilities (929) (5,039) 348 (7,549)
Deferred selling and obtaining costs (1,192) (1,984) (3,380) (5,263)
Deferred cemetery revenue 12,081 9,039 23,699 25,358
Deferred taxes (net) (1,031) (865) (1,000) (1,745)
Merchandise liability (1,715) (215) (4,451) (954)
Net cash provided by (used in) operating activities 6,005 (3,764) 14,195 (3,126)
Investing activities:        
Cash paid for cemetery property (2,383) (1,564) (3,600) (2,270)
Purchase of subsidiaries (1,774) (2,150) (3,426) (3,850)
Cash paid for property and equipment (937) (1,445) (1,835) (3,204)
Net cash used in investing activities (5,094) (5,159) (8,861) (9,324)
Financing activities:        
Cash distribution (11,783) (11,763) (23,563) (21,056)
Additional borrowings on long-term debt 21,850 8,000 29,200 12,300
Repayments of long-term debt (12,136) (607) (13,422) (73,924)
Proceeds from public offering - (357) - 103,207
Proceeds from general partner contribution - 4 - 2,246
Fees paid related to early extinguishment of debt - - - (4,010)
Cost of financing activities 167 (1,114) (1,820) (1,114)
Net cash provided by (used in) financing activities (1,902) (5,837) (9,605) 17,649
Net increase (decrease) in cash and cash equivalents (991) (14,760) (4,271) 5,199
Cash and cash equivalents - Beginning of period 8,778 27,494 12,058 7,535
Cash and cash equivalents - End of period $ 7,787 $ 12,734 $ 7,787 $ 12,734
         
Supplemental disclosure of cash flow information        
Cash paid during the period for interest  $ 8,425  $ 8,080  $ 9,048  $ 9,552
Cash paid during the period for income taxes  $ 3,552  $ 1,623  $ 3,655  $ 1,710
         
Non-cash investing and financing activities        
Acquisition of assets by financing  $ 25  $ 91  $ 53  $ 143
Issuance of limited partner units for cemetery acquisition  $ 603  $ 264  $ 603  $ 264
Acquisition of assets by assumption of directly related liability  $ 544  $ -  $ 544  $ -

See accompanying notes to the Condensed Consolidated Financial Statements on the Quarterly Report to be filed on Form 10-Q for the quarter ended June 30, 2012.

CONTACT: John McNamara

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

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