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BRISTOL, PA --
(MARKET WIRE)
-- 03/16/2007 --
StoneMor Partners L.P. (
The following table summarizes selected comparative items relating to the Partnership's operating performance for the periods presented.
Three Months Ended Year Ended
December 31, December 31,
------------------------- --------------------------
2005 2006 2005 2006
----------- ----------- ----------- ------------
As restated As restated
(in thousands) (in thousands)
Total Revenues $ 28,712 $ 33,263 $ 100,660 $ 115,113
Operating Profit 3,931 2,295 12,999 11,958
Net Income (Loss) 1,415 (157) 4,705 3,040
Cash Flow from
Operations 5,983 1,896 17,589 18,339
Distributable
Free Cash Flow (a) 4,166 16,259
(a) This is a non-GAAP financial measure, as defined by the Securities
and Exchange Commission. Please see the reconciliation to GAAP
measures within this press release.
2006 was a very good year for the company. Revenues were up in both the
fourth quarter (16%) and year (14%). The company acquired a number of
cemeteries and funeral homes that will contribute to overall improvements
in cash flow and operating results. However, the financial statements
indicate increasing revenues for both the 2006 fourth quarter and year, but
decreasing operating profits and net income. Cash flow from operations
also decreased during the fourth quarter. There are very specific reasons
why revenues were up and operating profits and net income were down. These
are as follows:
-- During 2006, the company incurred and paid $1 million relating to the
special investigation of the installation of burial vaults problem that
occurred during 2005, for which there was no corresponding 2005 expense.
This $1 million is included within the Corporate Overhead category for
2006.
-- During the fourth quarter, the company's Compensation Committee
approved a non-cash equity grant to management and the Board of Directors
under the company's long-term incentive plan. The fourth quarter charge
was $1.2 million. This grant more closely aligns management with the goals
of our unit holders. There will be additional non-cash charges each
quarter through 2009 relating to the amortization of the charge for this
grant.
-- A bonus of $2 million (of which $1 million was paid in the fourth
quarter) was earned by company management and company employees for
exceeding corporate goals during 2006. This amount was expensed during the
fourth quarter. The 2005 year did not have any similar stock grants or
bonus charges.
-- Even though revenue increased in both the 2006 fourth quarter and year
(by 16% and 14%), Cemetery Expenses increased 25% for the fourth quarter
and 16% for the year; and General & Administrative Expenses increased 22%
for the fourth quarter and 21% for the year. The majority of the increase
in both categories is due to acquisitions that were consummated in the
fourth quarter of both 2005 and 2006. The revenues from these acquisitions
have not yet reached their full financial-reporting operating potential;
however, the full level of expenses accrued immediately. These
acquisitions are operating as expected, with their full operating potential
anticipated to be achieved during 2007. As with most acquisitions, it
takes a short period of time before they are fully integrated.
-- Interest Expense for the 2006 fourth quarter and year is higher than
the prior year due primarily to acquisitions consummated at the end of 2005
and in the fourth quarter of 2006 and working capital borrowings related to
the increased level of maintenance capital expenditures. Interest Expense
was $459,000 higher in the fourth quarter than last year and $1 million
higher for the year.
-- For some time, we have been negotiating with the Board of Directors of
one of the cemeteries that we manage to terminate our management contract.
On February 28, 2007, we reached agreement and terminated that management
contract. As a result, the company will write off approximately $883,000
in its non-cash investment in this management contract in the first quarter
of 2007. We have recorded a reserve in the 2006 financial statements for
that amount. No similar charges are in the 2005 financial statements.
-- Acquisitions played a large part in the improvements in funeral home
revenues and profitability. Funeral home revenues doubled during the
fourth quarter and increased by approximately 119% for the year. We had
similar improvements in funeral home operating profits, which increased
from $120,000 to $574,000 during the fourth quarter and from $416,000 to $1
million for the year.
-- The effective tax rate is higher because the company received no tax
benefit from the management contract reserve or the non-cash equity grant
to management.
-- The decrease in net income for the quarter from $1.4 million to a net
loss of $0.2 million and the decrease in net income for the year from $4.7
million to $3.0 million is a result of the previously indicated factors.
Operating StatisticsThe company uses its operating data as an additional method for evaluating its performance. The following approximate percentage increases relate to the quarter and year ended December 31, 2006.
Fourth Quarter Year End
-------------- --------------
Number of Interments +24% +17%
Revenue per Interment +5% +3%
Number of Contracts Written 23% 18%
Average Dollar Amount per Contract -- (1) -- (1)
Number of Pre-need Contracts Written +17% +17%
Average Dollar Amount per Pre-need
Contract -- (1) -- (1)
(1) Not a meaningful change.
All increases pertain to the same period in the prior year and increases in
number of interments and number of contracts primarily result from
acquisitions.
Distributable Free Cash Flow
The company defines distributable free cash flow as net cash provided by operating activities before appropriate reserves, if any, adjusted for expenditures related to its initial public offering, less maintenance capital expenditures and debt payments not funded by the proceeds of that offering, and other expenditures not related to normal operating activities during the period presented. A reconciliation between net cash provided by operating activities (the GAAP financial measure the company believes is most directly comparable to distributable free cash flow) and distributable free cash flow for the quarter and year ended December 31, 2006 follows:
Three Months Ended Year Ended
(in thousands) December 31, 2006 December 31, 2006
------------------ ------------------
Net cash provided by operating
activities $ 1,896 $ 18,339
Maintenance capital expenditures (760) (3,203)
Excess 2005 taxes paid in 2006 1,123
Quarterly executive bonus
adjustment 485
Quarterly reserve for the payment
of income taxes (255)
Trust payments in the fourth
quarter on account of
third-quarter receivable
collection program 2,800
------------------ ------------------
Distributable free cash flow $ 4,166 $ 16,259
================== ==================
The preceding table indicates maintenance capital expenditures of
approximately $1 million greater than last year. The company has drawn
down on its working capital line to finance certain of these expenditures.
The nature of these expenditures is defined as maintenance in our
Partnership Agreement, but in many cases results in increased sales through
visual improvements in our cemeteries.
The excess 2005 taxes paid in 2006 represent the amount by which federal, state, and franchise taxes on 2005 income that were paid during the first and second quarters of 2006 exceeded those same estimated taxes for 2006 income that will be paid during the first quarter of 2007.
The quarterly excess bonus adjustment represents the difference between the actual bonus charge for the quarter compared to the amount that was paid in the quarter.
The quarterly reserve for the payment of income taxes represents the unaccrued balance of federal, state, and franchise taxes for 2006 not previously deducted in prior quarters' distributable free cash flow calculations.
During the third quarter, the company instituted a special receivable collection program whereby its rate of collection of accounts receivable was significantly greater than normal. Due to these increased collections in the third quarter, the company paid $2.8 million into its perpetual care and merchandise trust funds in the fourth quarter, with the corresponding cash receipt realized in the third quarter.
Acquisitions
During 2006, StoneMor Partners L.P. completed an acquisition of 23 cemeteries and 14 funeral homes for approximately $7 million in cash and $5.9 million in partnership units. Primarily as a result of anticipated acquisition results, the company was able to increase its quarterly distribution per unit from $0.49 to $0.50, which was paid in February 2006. The company believes that the operations of these properties and acquisition of additional properties will enable it to continue increasing unit holder distributions.
Investors' Conference Call
An investors' conference call to review the 2006 fourth quarter and year-end results will be held on Friday, March 16, 2007, at 11:00 AM Eastern Time. The conference call can be accessed by calling (888) 662-9069. An audio replay of the conference call will be available by calling (800) 633-8284 through 1:00 PM Eastern Time on March 30, 2007. The reservation number for the audio replay is as follows: 21326647. The audio replay of the conference call will also be archived on StoneMor's website at http://stonemor.com.
Restatement
During the fourth quarter of 2006, the company determined that its computer processing system for recognizing revenue related to the installation of burial vaults lacked certain functionality. As a result, revenue (in certain situations), including burial vaults installed from storage, was not recognized.
Even though the company believes the adjustment to record these additional revenues and additional profits to be immaterial, the company has elected to restate its 2005 and third-quarter 2006 financial statements.
The impact of the restatement on the 2005 financial statements, which is disclosed in more detail in footnote 2 to the audited 2006 financial statements, follows:
Consolidated Statement of Income
(in thousands, except per unit data)
As Previously
Reported Adjustment As Restated
------------- ------------- -------------
Year ended December 31, 2005:
Cemetery revenues $ 96,927 $ 935 $ 97,862
Cost of goods sold, merchandise 5,337 126 5,463
Selling expense 19,878 194 20,072
Operating profit 12,384 615 12,999
Net income $ 4,090 $ 615 $ 4,705
General partners’ interest in net
income for the period 82 12 94
Limited partners’ interest in net
income for the period, common 2,015 303 2,318
Limited partners’ interest in net
income for the period,
subordinated 1,993 300 2,293
Net income per limited partner
(common) unit (basic and
diluted) $ 0.47 $ 0.07 $ 0.54
Nine months ended September 30,
2006:
Cemetery revenues $ 78,025 $ 121 $ 78,146
Cost of goods sold, merchandise 4,146 2 4,148
Selling expense 16,689 2 16,691
Operating profit 9,546 117 9,663
Net income $ 3,080 $ 117 $ 3,197
General partners’ interest in net
income for the period 62 2 64
Limited partners’ interest in net
income for the period, common 1,558 59 1,618
Limited partners’ interest in net
income for the period,
subordinated 1,460 55 1,515
Net income per limited partner
(common) unit (basic and
diluted) $ 0.34 $ 0.01 $ 0.36
Consolidated Balance Sheet
(in thousands)
As Previously
Reported Adjustment As Restated
------------- ------------ -------------
At December 31, 2005:
Deferred selling and obtaining
costs $ 30,554 $ (194) $ 30,360
Total assets 550,835 (194) 550,641
Deferred cemetery revenues, net 167,844 (809) 167,035
Total liabilities 305,131 (809) 304,322
General partners' equity 1,537 12 1,549
Limited partners' equity, common 72,750 303 73,053
Limited partners' equity,
subordinated 34,698 300 34,998
Total liabilities and partners
equity $ 550,835 $ (194) $ 550,641
At September 30, 2006:
Deferred selling and obtaining
costs $ 33,082 $ (196) $ 32,886
Total assets 615,915 (196) 615,719
Deferred cemetery revenues, net 191,396 (928) 190,468
Total liabilities 349,088 (928) 348,160
General partners' equity 1,461 15 1,476
Limited partners' equity, common 73,693 362 74,055
Limited partners' equity,
subordinated 30,077 355 30,432
Total liabilities and partners
equity $ 615,915 $ (196) $ 615,719
Consolidated Statement of Cash Flow
(in thousands)
As Previously
Reported Adjustment As Restated
------------- ------------ -------------
Year ended December 31, 2005:
Operating activities
Net Income $ 4,090 $ 615 $ 4,705
Deferred cemetery revenue
and deferred
selling and obtaining costs 3,977 (615) 3,362
Net cash provided in operating
activities 17,589 --- 17,589
Nine months ended September 30,
2006:
Operating activities
Net Income $ 3,080 $ 117 $ 3,197
Deferred cemetery revenue
and deferred selling
and obtaining costs 6,619 (117) 6,502
Net cash provided in operating
activities 16,443 --- 16,443
About StoneMor Partners L.P.
StoneMor Partners L.P., headquartered in Bristol, Pennsylvania, is an owner and operator of cemeteries in the United States, with 177 cemeteries and 27 funeral homes in 21 states. StoneMor is the only publicly traded deathcare company focused almost exclusively on cemeteries and is the only publicly held deathcare company structured as a master limited 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 StoneMor's operating activities, the plans and objectives of StoneMor's management, assumptions regarding StoneMor's 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(i) of the Securities Act of 1933 and Section 21E(i) of the Securities Exchange Act of 1934. The words "believe," "may," "will," "estimate," "continues," "anticipate," "intend," "project," "expect," "anticipate," "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 impact of StoneMor's significant leverage on its operating plans; the ability of StoneMor to service its debt; 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; variances in death rates; variances in the use of cremation; 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 producing operating improvement, strong cash flows and further deleveraging; uncertainties associated with the integration or the anticipated benefits of the acquisition of assets from Service Corporation International, disclosed within this press release; and various other uncertainties associated with the deathcare 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 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.
StoneMor Partners L.P.
Consolidated Balance Sheets
(in thousands)
December 31, December 31,
2005 2006
-------------- --------------
(as restated,
see Note 2)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 6,925 $ 9,914
Accounts receivable, net of allowance 29,991 22,968
Prepaid expenses 2,420 2,801
Other current assets 1,316 2,535
-------------- --------------
Total current assets 40,652 38,218
LONG-TERM ACCOUNTS RECEIVABLE - net of
allowance 33,672 36,878
CEMETERY PROPERTY 164,772 171,714
PROPERTY AND EQUIPMENT, net 27,091 29,027
MERCHANDISE TRUSTS, restricted, at fair value 113,432 147,788
PERPETUAL CARE TRUSTS, restricted, at fair
value 136,719 168,631
DEFERRED FINANCING COSTS - net of accumulated
amortization 1,985 1,242
DEFERRED SELLING AND OBTAINING COSTS 30,360 33,478
OTHER ASSETS 1,958 50
-------------- --------------
TOTAL ASSETS $ 550,641 $ 627,026
============== ==============
LIABILITIES and PARTNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 7,461 $ 11,345
Accrued interest 260 361
Current portion, long-term debt 641 1,388
-------------- --------------
Total current liabilities 8,362 13,094
LONG-TERM DEBT 86,304 102,104
DEFERRED CEMETERY REVENUES, net 167,035 196,103
MERCHANDISE LIABILITY 42,621 45,805
-------------- --------------
Total liabilities 304,322 357,106
-------------- --------------
COMMITMENTS AND CONTINGENCIES
NON-CONTROLLING INTEREST IN PERPETUAL CARE
TRUSTS 136,719 168,631
PARTNERS' EQUITY
General partner 1,549 1,382
Limited partners:
Common 73,053 71,690
Subordinated 34,998 28,217
-------------- --------------
Total partners' equity 109,600 101,289
-------------- --------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 550,641 $ 627,026
============== ==============
StoneMor Partners L.P.
Consolidated Statements of Operations
(in thousands, except per unit data)
StoneMor Partners L.P.
Unaudited StoneMor Partners L.P.
------------------------ -------------------------
Three Months Three Months
Ended Ended
December December Year Ended Year Ended
31, 31, December 31, December 31,
----------- ----------- ------------ ------------
2005 2006 2005 2006
----------- ----------- ------------ ------------
(as restated, (as restated,
see Note 2) see Note 2)
Revenues:
Cemetery $ 27,576 $ 30,849 $ 97,862 $ 108,995
Funeral home 1,136 2,414 2,798 6,118
----------- ----------- ------------ ------------
Total revenues 28,712 33,263 100,660 115,113
----------- ----------- ------------ ------------
Costs and Expenses:
Cost of goods sold
(exclusive of
depreciation shown
seperately below):
Land and crypts 1,651 1,146 5,860 5,287
Perpetual care 481 732 2,575 3,109
Merchandise 1,541 2,148 5,463 6,296
Cemetery expense 5,070 6,359 20,942 24,344
Selling expense 5,283 6,495 20,072 23,186
General and
administrative
expense 2,896 3,546 10,553 12,801
Corporate overhead
(including $1,212 in
stock-based
compensation in 2006) 5,913 7,789 16,304 19,795
Depreciation and
amortization 930 913 3,510 3,501
Funeral home expense 1,016 1,840 2,382 4,836
----------- ----------- ------------ ------------
Total cost and
expenses 24,781 30,968 87,661 103,155
----------- ----------- ------------ ------------
OPERATING PROFIT 3,931 2,295 12,999 11,958
EXPENSE RELATED TO
REFINANCING - - - -
INTEREST EXPENSE 1,657 2,116 6,457 7,491
----------- ----------- ------------ ------------
INCOME / (LOSS) BEFORE
INCOME TAXES 2,274 179 6,542 4,467
INCOME TAXES (BENEFIT):
State (33) 53 587 438
Federal 892 283 1,250 989
----------- ----------- ------------ ------------
Total income taxes
(benefit) 859 336 1,837 1,427
----------- ----------- ------------ ------------
NET INCOME (LOSS) $ 1,415 $ (157) $ 4,705 $ 3,040
=========== =========== ============ ============
Supplemental
Information:
General partner's
interest in net income
for the period $ 29 $ (4) $ 94 $ 61
Limited partners'
interest in net income
for the period
Common $ 707 $ (78) $ 2,318 $ 1,538
Subordinated $ 682 $ (74) $ 2,293 $ 1,441
Net income per limited
partner (common) unit
(basic
and diluted) $ .16 $ (.02) $ .54 $ .34
Weighted average number
of limited partners'
units outstanding
(basic and diluted) 8,844 8,760 8,526 8,760
StoneMor Partners L.P.
Consolidated Statements of Cash Flows
(in thousands)
StoneMor Partners L.P.
Unaudited StoneMor Partners L.P.
------------------------ ------------------------
Three Months Three Months
Ended Ended Year Ended Year Ended
December December December December
31, 31, 31, 31,
----------- ----------- ----------- -----------
2005 2006 2005 2006
----------- ----------- ----------- -----------
(as restated, (as restated,
see Note 2) see Note 2)
OPERATING ACTIVITIES:
Net Income (Loss) $ 1,415 $ (157) $ 4,705 $ 3,040
Adjustments to
reconcile net loss
to net cash (used
in) provided by
operating
activities:
Cost of lots sold 1,418 1,347 4,274 4,605
Depreciation and
amortization 930 913 3,510 3,501
Stock-based
compensation - 1,212 - 1,212
Deferred income tax
(benefit) (459) - - -
Other non cash - 77 - 453
Changes in assets
and liabilities
that provided
(used) cash:
Accounts
receivable (1,886) (3,838) (1,565) 5,990
Allowance for
doubtful accounts - 725 - 1,225
Merchandise trusts 3,735 (2,098) 10,473 (3,517)
Prepaid expenses 224 198 (642) (385)
Other current
assets 202 (214) (54) (1,299)
Other assets (266) 919 (274) 862
Accounts payable
and accrued and
other liabilities 2,782 4,475 1,024 2,720
Deferred cemetery
revenue and
deferred selling
and obtaining
costs (237) 1,539 3,362 8,041
Merchandise
liability (1,875) (3,202) (7,224) (8,109)
----------- ----------- ----------- -----------
Net cash
provided
by operating
activities 5,983 1,896 17,589 18,339
----------- ----------- ----------- -----------
INVESTING ACTIVITIES:
Costs associated
with potential
acquisitions 1,563 (199) (143) (219)
Additions to
cemetery property (763) (478) (2,850) (3,398)
Purchase of
subsidiaries, net
of common units
issued (10,101) (1,826) (10,101) (11,040)
Divestiture of
Funeral Home - - - 2,091
Acquisitions of
property and
equipment (349) (281) (2,192) (2,059)
----------- ----------- ----------- -----------
Net cash used in
investing
activities (9,650) (2,784) (15,286) (14,625)
----------- ----------- ----------- -----------
FINANCING ACTIVITIES:
Cash distribution (4,001) (4,518) (16,442) (17,346)
Additional
borrowings on
long-term debt 5,648 1,298 8,048 17,522
Repayments of
long-term debt (1,400) (360) (1,400) (1,021)
Sale of limited
partner units 120 - 120 120
Purchase of CFSI LLC
common units - - - -
Cost of financing
activities - - (178) -
----------- ----------- ----------- -----------
Net cash provided
by (used in)
financing
activities 367 (3,580) (9,852) (725)
----------- ----------- ----------- -----------
NET INCREASE (DECREASE)
IN CASH AND CASH
EQUIVALENTS (3,300) (4,468) (7,549) 2,989
CASH AND CASH
EQUIVALENTS -
Beginning of period 10,225 14,382 14,474 6,925
----------- ----------- ----------- -----------
CASH AND CASH
EQUIVALENTS - End of
period $ 6,925 $ 9,914 $ 6,925 $ 9,914
=========== =========== =========== ===========
SUPPLEMENTAL DISCLOSURE
OF CASH FLOW
INFORMATION
Cash paid during the
period for interest $ 1,619 $ 2,060 $ 6,354 $ 7,390
=========== =========== =========== ===========
Cash paid during the
period for income
taxes $ 98 $ (527) $ 1,068 $ 2,508
=========== =========== =========== ===========
NON-CASH INVESTING AND
FINANCING ACTIVITIES
Issuance of limited
partner units to
fund cemetery
acquisition $ 5,900 $ - $ 5,900 $ 5,875
=========== =========== =========== ===========
Non-GAAP Financial Measures
Distributable Free Cash Flow
We present distributable free cash flow because management believes this information is a useful adjunct to net cash provided by 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 subordinated 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 is not a measure of financial performance and should not be considered as an alternative to cash flows from operating, investing, or financing activities.
Contact: Tim Yost 215-826-2800