StoneMor Inc. Reports Second Quarter Financial Results

TREVOSE, Pa., Aug. 13, 2020 (GLOBE NEWSWIRE) -- StoneMor Inc. (NYSE: STON) (“StoneMor” or the “Company”), a leading owner and operator of cemeteries and funeral homes, today reported operating and financial results for the second quarter and six-month period ended June 30, 2020. Investors are encouraged to read the Company's quarterly report on Form 10-Q when it is filed with the Securities and Exchange Commission (the “SEC”), which will contain additional details, and will be posted at www.stonemor.com.

SECOND QUARTER FINANCIAL PERFORMANCE

  • Revenues for the second quarter were $70.7 million compared to $78.5 million in the second quarter in the prior year. Six-month revenues were $142.0 million compared to $150.0 million in the prior year period. When adjusted to exclude revenues from properties divested since January 1, 2019, revenues for the quarter and six months ended June 30, 2020 were $70.7 million and $140.5 million, respectively, compared to revenues of $73.9 million and $141.8 million, respectively, for the prior year periods.
  • Cemetery segment operating income for the second quarter was $7.4 million compared to $4.8 million in the second quarter in the prior year, representing an increase of $2.6 million. Six-month cemetery segment operating profit was $12.7 million compared to $7.6 million in the prior year period, representing an increase of $5.1 million. 
  • Funeral home segment operating income for the second quarter was $1.4 million compared to $1.8 million in the second quarter in the prior year, representing a decrease of $0.4 million. Six-month funeral home segment operating profit was $3.3 million which was unchanged from the prior year period.
  • Corporate overhead expense decreased to $8.8 million in the second quarter compared to $13.1 million in the second quarter in the prior year.
  • Second quarter net loss was $3.9 million compared to $34.4 million in the second quarter in the prior year. Second quarter net loss in 2020 included a gain on sale of business of $7.0 million and other losses of $2.2 million.
  • Second quarter operating income was $4.7 million, including a $7.0 million gain on sale of business and $2.2 million in other losses, compared to an operating loss of $10.2 million in the second quarter in the prior year, which included other losses of $3.4 million.

Joe Redling, StoneMor’s President and Chief Executive Officer said, “After a strong first quarter, our second quarter continued that trend, particularly as it relates to our cemetery sales production1 and expense management initiatives. During the quarter we experienced a 6% year-over-year increase in cemetery sales production – rebounding in May and June after an initial decline in April, brought upon by the COVID-19 pandemic. The upward trajectory of our sales, which continued into July, is driven by strong growth in both our Pre-Need and At-Need Sales categories. This sales production growth was generated while reducing our expenses across the board, most notably by a $4.4 million reduction in corporate overhead expenses.”

Cemetery sales production represents dollar volume associated with new contracts executed during the period

LIQUIDITY UPDATE

As of June 30, 2020, the Company had $63.6 million of cash, including $20.7 million of restricted cash, and $323.3 million of total debt.

“Through our cost reduction and transformation initiatives, including those related directly to our COVID-19 response, StoneMor produced a second quarter that generated adjusted EBITDA of $2.2 million and operating cash flow of $6.4 million, which includes a $6.5 million cash interest payment,” said Jeff DiGiovanni, StoneMor’s Senior Vice President and Chief Financial Officer. “In addition, StoneMor reduced its debt by $22 million in the second quarter with the continued execution on its divestiture strategy. We remain focused on generating operating cash flow through effective management of our operations and related treasury functions, our corporate cost reduction initiatives and continuing to evaluate opportunities to further reduce debt through additional divestitures.”

CONFERENCE CALL INFORMATION

StoneMor will conduct a conference call to discuss this news release today, August 13, 2020 at 4:30 p.m. Eastern Time. The conference call can be accessed by calling (877) 256-6190. No reservation number is necessary. StoneMor will also host a live webcast of this conference call. Investors may access the live webcast via the Investors page of the StoneMor website www.stonemor.com under Events & Presentations.

About StoneMor Inc.

StoneMor Inc., headquartered in Trevose, Pennsylvania, is an owner and operator of cemeteries and funeral homes in the United States, with 318 cemeteries and 87 funeral homes in 27 states and Puerto Rico.

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 Inc. please visit StoneMor’s website, and the investors section, at http://www.stonemor.com.

CONTACT
Investor Relations
StoneMor Inc.
(215) 826-4438

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained in this press release, including, but not limited to, information regarding continued implementation of the Company’s performance and cost structure improvement efforts and the anticipated financial impact thereof, are forward-looking statements. Generally, the words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “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 current business and economic disruptions resulting from the recent coronavirus pandemic, including the effect of government regulations issued in connection therewith, its ability to identify, and negotiate acceptable agreements with, purchasers of additional properties, 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 and service its debt, as well as with StoneMor’s ability to maintain an effective system of internal control over financial reporting and disclosure controls and procedures.

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 Quarterly Reports on Form 10-Q 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.

Non-GAAP Financial Measures

This release includes certain non-GAAP financial measures, including comparable location revenues, EBITDA and adjusted EBITDA and adjusted and adjusted comparable location operating income, which are intended as supplemental measures of the Company’s performance that are not required by or presented in accordance with GAAP. All business results presented in this release are not prepared in accordance with Article 11 of Regulation S-X.

Management uses these non-GAAP measures internally to evaluate and manage the Company’s operations and to better understand its business because they facilitate a comparative assessment of the Company's operating performance relative to its performance based on results calculated under GAAP. These non-GAAP measures also isolate the effects of some items that vary from period to period without any correlation to core operating performance and eliminate certain charges that management believes do not reflect the Company's operations and underlying operational performance. The compensation committee of the Company’s board of directors also uses certain of these measures to evaluate management's performance and set its compensation. The Company believes that these non-GAAP measures also provide useful information to investors regarding certain financial and business trends relating to the Company’s financial condition and operating results facilitates an evaluation of the financial performance of the Company and its operations on a consistent basis. Providing this information therefore allows investors to make independent assessments of the Company’s financial performance, results of operation and trends while viewing the information through the eyes of management.

These non-GAAP measures are subject to limitations. The non-GAAP measures presented in this release may not be comparable to similarly titled measures used by other companies because other companies may not calculate one or more in the same manner. Additionally, the non-GAAP performance measures exclude significant expenses and income that are required by GAAP to be recorded in the Company’s financial statements; do not reflect changes in, or cash requirements for, working capital needs; and do not reflect interest expense, or the requirements necessary to service interest or principal payments on debt. Further, our historical adjusted results are not intended to project our adjusted results of operations or financial position for any future period. To compensate for these limitations, management presents and considers these non-GAAP measures in conjunction with the Company’s GAAP results; no non-GAAP measure should be considered in isolation from or as alternatives to net income, earnings per share or any other measure determined in accordance with GAAP. Readers should review the reconciliations included below, and should not rely on any single financial measure to evaluate the Company’s business.

A reconciliation of each non-GAAP measure to the most directly comparable GAAP measure is set forth below.

COMPARABLE LOCATION REVENUES
(in thousands)

 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Total revenues$70,707 $78,495 $141,952 $149,964
Less: Revenue associated with divested properties 7  4,627  1,445  8,194
Comparable location revenues$70,700 $73,868 $140,507 $141,770

ADJUSTED OPERATING LOSS AND ADJUSTED COMPARABLE LOCATION OPERATING INCOME (LOSS)
(in thousands)

 Three Months Ended June 30,  Six Months Ended June 30, 
 2020  2019  2020  2019 
Operating income (loss)$4,689  $(10,188) $27,264  $(19,551)
Less: Gain on sale of businesses 7,034      31,120    
Less: Other (losses), net (2,169)  (3,429)  (2,169)  (3,429)
Adjusted operating loss (176)  (6,759)  (1,687)  (16,122)
Less: operating (loss) profit associated with divested properties (205)  1,596   (330)  2,087 
Adjusted comparable location operating income (loss)$29  $(8,355) $(1,357) $(18,209)

EBITDA AND ADJUSTED EBITDA
(in thousands)

 Three Months Ended June 30,  Six Months Ended June 30, 
 2020  2019  2020  2019 
Net income (loss)$(3,914) $(34,398) $5,089  $(56,932)
Income tax expense (3,492)  6,386   (2,204)  6,386 
Interest expense 12,095   9,346   24,379   22,517 
Depreciation and amortization 2,334   2,716   4,793   5,473 
EBITDA 7,023   (15,950)  32,057   (22,556)
Less: Gain on sale of businesses 7,034      31,120    
Less: Other (losses), net (2,169)  (3,429)  (2,169)  (3,429)
Less: Loss on debt extinguishment    (8,478)     (8,478)
Adjusted EBITDA$2,158  $(4,043) $3,106  $(10,649)


STONEMOR INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
(in thousands, except share and per share data)

 June 30,  December 31, 
 2020  2019 
Assets       
Current assets:       
Cash and cash equivalents, excluding restricted cash$42,862  $34,867 
Restricted cash 20,698   21,900 
Accounts receivable, net of allowance 55,963   55,794 
Prepaid expenses 4,630   4,778 
Assets held for sale 31,751   23,858 
Other current assets 13,877   17,142 
Total current assets 169,781   158,339 
        
Long-term accounts receivable, net of allowance 73,106   75,549 
Cemetery property 303,502   320,605 
Property and equipment, net of accumulated depreciation 91,892   103,400 
Merchandise trusts, restricted, at fair value 472,500   517,192 
Perpetual care trusts, restricted, at fair value 298,221   343,619 
Deferred selling and obtaining costs 115,401   114,944 
Deferred tax assets 29   81 
Intangible assets 55,652   56,246 
Other assets 25,966   29,393 
Total assets$1,606,050  $1,719,368 
        
Liabilities and Owners' Equity       
Current liabilities:       
Accounts payable and accrued liabilities$49,624  $55,134 
Liabilities held for sale 24,274   20,668 
Accrued interest 111   125 
Current portion, long-term debt 1,291   374 
Total current liabilities 75,300   76,301 
        
Long-term debt, net of deferred financing costs 322,038   367,963 
Deferred revenues 910,870   949,375 
Deferred tax liabilities 32,220   34,613 
Perpetual care trust corpus 298,221   343,619 
Other long-term liabilities 47,110   49,987 
Total liabilities 1,685,759   1,821,858 
Commitments and contingencies       
        
Owners' equity:       
Common stock, par value $0.01 per share, 200,000,000 shares authorized, 117,794,520
  and 94,447,356 shares issued and outstanding, respectively
 1,177   944 
Paid-in capital in excess of par value (85,975)  (103,434)
Retained earnings 5,089    
Total owners' equity (79,709)  (102,490)
Total liabilities and owners' equity$1,606,050  $1,719,368 

STONEMOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(in thousands, except per share and per unit data)

 Three Months Ended June 30,  Six Months Ended June 30, 
 2020  2019  2020  2019 
Revenues:               
Cemetery:               
Interments$17,392  $20,995  $33,346  $36,939 
Merchandise 15,073   17,315   30,239   33,856 
Services 16,928   17,365   32,488   33,332 
Investment and other 9,539   9,953   20,925   19,411 
Funeral home:               
Merchandise 5,609   6,073   12,177   12,348 
Services 6,166   6,794   12,777   14,078 
Total revenues 70,707   78,495   141,952   149,964 
Costs and Expenses:               
Cost of goods sold 9,562   10,843   19,487   20,586 
Cemetery expense 17,907   21,636   35,755   38,883 
Selling expense 12,609   15,497   25,658   30,230 
General and administrative expense 9,795   10,958   20,111   22,397 
Corporate overhead 8,756   13,137   17,257   26,550 
Depreciation and amortization 2,334   2,716   4,793   5,473 
Funeral home expenses:               
Merchandise 1,538   1,014   3,314   3,331 
Services 5,297   5,459   10,694   11,012 
Other 3,085   3,994   6,570   7,624 
Total costs and expenses 70,883   85,254   143,639   166,086 
                
Gain on sale of businesses 7,034      31,120    
Other losses (2,169)  (3,429)  (2,169)  (3,429)
Operating income (loss) 4,689   (10,188)  27,264   (19,551)
Interest expense (12,095)  (9,346)  (24,379)  (22,517)
Loss on debt extinguishment    (8,478)     (8,478)
(Loss) income from operations before income taxes (7,406)  (28,012)  2,885   (50,546)
Income tax benefit (expense) 3,492   (6,386)  2,204   (6,386)
Net (loss) income$(3,914) $(34,398) $5,089  $(56,932)
Net (loss) income per common share (basic)(1)$(0.04) $(0.87) $0.05  $(1.46)
Net (loss) income per common share (diluted)(1)$(0.04) $(0.87) $0.05  $(1.46)
Weighted average number of common shares
  outstanding - basic(2)
 97,572   39,329   96,022   39,115 
Weighted average number of common shares
  outstanding - diluted(2)
 97,572   39,329   96,022   39,115 

 

(1)For the three and six months ended June 30, 2020, represents net (loss) income divided by weighted average number of common shares outstanding and for the three and six months ended June 30, 2019, represents net loss divided by weighted average number of common limited partner units outstanding.
(2)For the three and six months ended June 30, 2020, represents weighted average number of common shares outstanding and for the three and six months ended June 30, 2019, represents weighted average number of common limited partner units outstanding.

STONEMOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 Six Months Ended June 30,
 2020  2019 
Cash Flows From Operating Activities:       
Net income (loss)$5,089  $(56,932)
Adjustments to reconcile net income (loss) to net cash used in operating activities:       
Cost of lots sold 2,843   3,718 
Depreciation and amortization 4,793   5,473 
Provision for bad debt 3,807   4,219 
Non-cash compensation expense 727   2,566 
Loss on debt extinguishment    8,478 
Non-cash interest expense 10,506   6,684 
Gain on sale of businesses (31,120)   
Other losses, net 2,169   3,433 
Changes in assets and liabilities:       
Accounts receivable, net of allowance (8,234)  (8,611)
Merchandise trust fund (2,242)  (9,482)
Other assets 4,746   (4,522)
Deferred selling and obtaining costs (2,968)  (1,165)
Deferred revenues 19,663   15,126 
Deferred taxes, net (2,340)  6,227 
Payables and other liabilities (6,238)  (6,784)
Net cash provided by (used in) operating activities 1,201   (31,572)
Cash Flows From Investing Activities:       
Cash paid for capital expenditures (3,791)  (4,838)
Proceeds from divestitures 48,336   1,250 
Net cash provided by (used in) investing activities 44,545   (3,588)
Cash Flows From Financing Activities:       
Proceeds from issuance of Series A Preferred Stock 8,800    
Proceeds from issuance of Common Stock 8,200    
Proceeds from issuance of redeemable convertible preferred units, net    57,500 
Proceeds from borrowings 2,639   406,087 
Repayments of debt (53,572)  (366,470)
Principal payment on finance leases (749)  (713)
Cost of financing activities (4,236)  (17,437)
Shares repurchased related to share-based compensation (35)   
Net cash (used in) provided by financing activities (38,953)  78,967 
Net increase in cash, cash equivalents and restricted cash 6,793   43,807 
Cash, cash equivalents and restricted cashBeginning of period 56,767   18,147 
Cash, cash equivalents and restricted cashEnd of period$63,560  $61,954 
Supplemental disclosure of cash flow information:       
Cash paid during the period for interest$13,675  $16,981 
Cash paid during the period for income taxes    1,402 
Cash paid for amounts included in the measurement of lease liabilities:       
Operating cash flows from operating leases$1,611  $1,858 
Operating cash flows from finance leases 225   238 
Financing cash flows from finance leases 749   713 
Non-cash investing and financing activities:       
Acquisition of assets by financing$  $1,731 
Net transfers within assets held for sale 80,781   (408)
Accrued paid-in-kind interest on Senior Secured Notes 7,077    

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