StoneMor Inc. Reports First Quarter Financial Results

TREVOSE, Pa., May 14, 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 first quarter ended March 31, 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.

FIRST QUARTER FINANCIAL PERFORMANCE

  • Revenues for the first quarter were $71.2 million compared to $71.5 million in the first quarter in the prior year.
  • Cemetery segment operating income for the first quarter was $5.2 million compared to $2.8 million in the first quarter in the prior year, representing an increase of $2.4 million.
  • Funeral home segment operating income for the first quarter was $2.0 million compared to $1.5 million in the first quarter in the prior year, representing an increase of $0.5 million.
  • Corporate overhead expense decreased to $8.5 million in the first quarter compared to $13.4 million in the first quarter in the prior year.
  • First quarter net income was $9.0 million compared to net loss of $22.5 million in the first quarter in the prior year. First quarter net income in 2020 included a gain on sale of businesses of $24.1 million.
  • Excluding the gain on sale of business of $24.1 million, the operating loss was $1.5 million compared to a loss of $9.4 million in the first quarter in the prior year, representing an improvement of $7.9 million.

Joe Redling, StoneMor’s President and Chief Executive Officer said, “With the completion of the first quarter, we are continuing to see the impact of our company-wide cost reduction initiatives, particularly as it relates to our corporate overhead spend. Those efforts produced significant improvement in our operating results this quarter. We continue to pursue and execute on our strategic initiatives, both those previously planned and additional measures in response to COVID-19. During April, we made the difficult decision to reduce our corporate team by another 15%, as well as execute upon a temporary compensation reduction for the corporate executive team and our Board of Directors.”

“I am proud of the way our employees are responding to the challenges associated with the COVID-19 pandemic. We have taken appropriate steps to protect the health and safety of our employees and the families we serve. COVID-19 continues to create personal and economic disruption at a global level. While this has been a challenging time, our team remains highly productive and committed to servicing our communities at the highest level. The initial impact – particularly in terms of pre-need and at-need sales declines – have been countered with successful adoption of new processes to better serve our customers in this changing environment. Our ability to execute on these initiatives in this challenging environment is a testament to the character and resolve of our greatest organizational asset – our people.”

LIQUIDITY UPDATE

As of March 31, 2020, the Company had $47.5 million of cash, including $20.4 million of restricted cash, and $343.6 million of total debt.

“The Company responded quickly to the challenges of COVID-19 and, combined with the on-going strategic initiatives, StoneMor produced a first quarter that generated an adjusted EBITDA of $0.9 million and an adjusted operating cash flow of $1.7 million (operating cash flow before cash interest expense),” said Jeff DiGiovanni, StoneMor’s Senior Vice President and Chief Financial Officer. “In addition, StoneMor reduced its debt by nearly $25 million in the first quarter thanks to the successful execution of its divestiture strategy. We are focused on our 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, May 14, 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 319 cemeteries and 88 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 EBITDA and adjusted EBITDA, adjusted operating cash flow and adjusted 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.


ADJUSTED OPERATING INCOME
(in thousands)

  Three Months Ended 
  March 31, 2020  December 31,
2019
  March 31, 2019 
Operating income (loss) $22,575  $(15,758) $(9,363)
Less: Gain on sale of businesses  24,086       
Less: Other (losses), net     (4,548)   
Adjusted operating loss $(1,511) $(11,210) $(9,363)


EBITDA AND ADJUSTED EBITDA
(in thousands)

  Three Months Ended 
  March 31, 2020  December 31,
2019
  March 31, 2019 
Net income (loss) $9,003  $(52,358) $(22,534)
Income tax expense  1,288   23,363    
Interest expense  12,284   13,237   13,171 
Depreciation and amortization  2,459   2,662   2,757 
EBITDA  25,034   (13,096)  (6,606)
Less: Gain on sale of businesses  24,086       
Less: Other (losses), net     (4,548)   
Adjusted EBITDA $948  $(8,548) $(6,606)


ADJUSTED CASH FROM OPERATIONS
(in thousands)

  Three Months Ended March 31, 
  2020  2019 
Cash used in operations $(5,238) $(13,103)
Add: Interest expense   12,284   13,171 
Less: Non-cash interest  (5,260)  (4,429)
Adjusted cash from operations $1,786  $(4,361)

  

STONEMOR INC.

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

   March 31,  December 31, 
  2020  2019 
Assets        
Current assets:        
Cash and cash equivalents, excluding restricted cash $27,066  $34,867 
Restricted cash  20,400   21,900 
Accounts receivable, net of allowance  55,516   55,794 
Prepaid expenses   6,649   4,778 
Assets held for sale  77,850   23,858 
Other current assets  13,593   17,142 
Total current assets  201,074   158,339 
         
Long-term accounts receivable, net of allowance  71,474   75,549 
Cemetery property  303,628   320,605 
Property and equipment, net of accumulated depreciation  93,472   103,400 
Merchandise trusts, restricted, at fair value  437,638   517,192 
Perpetual care trusts, restricted, at fair value  284,832   343,619 
Deferred selling and obtaining costs  113,611   114,944 
Deferred tax assets  87   81 
Intangible assets  55,942   56,246 
Other assets  26,661   29,393 
Total assets $1,588,419  $1,719,368 
         
Liabilities and Owners' Equity        
Current liabilities:        
Accounts payable and accrued liabilities $49,941  $55,134 
Liabilities held for sale  52,437   20,668 
Accrued interest  117   125 
Current portion, long-term debt  2,139   374 
Total current liabilities  104,634   76,301 
         
Long-term debt, net of deferred financing costs  341,443   367,963 
Deferred revenues  867,407   949,375 
Deferred tax liabilities  35,847   34,613 
Perpetual care trust corpus  284,832   343,619 
Other long-term liabilities  47,368   49,987 
Total liabilities  1,681,531   1,821,858 
Commitments and contingencies        
         
Owners' equity:        
Common stock, par value $0.01 per share, 200,000,000 shares authorized, 94,477,102
  and 94,447,356 shares issued and outstanding, respectively
  944   944 
Paid-in capital in excess of par value  (103,059)  (103,434)
Retained earnings  9,003    
Total owners' equity  (93,112)  (102,490)
Total liabilities and owners' equity $1,588,419  $1,719,368 


STONEMOR INC.

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

   Three Months Ended March 31, 
  2020  2019 
Revenues:        
Cemetery:        
Interments $15,954  $15,944 
Merchandise  15,166   16,541 
Services   15,560   15,967 
Investment and other  11,386   9,458 
Funeral home:        
Merchandise  6,568   6,275 
Services  6,611   7,284 
Total revenues  71,245   71,469 
Costs and Expenses:        
Cost of goods sold  9,925   9,743 
Cemetery expense  17,848   17,247 
Selling expense  13,049   14,733 
General and administrative expense  10,316   11,439 
Corporate overhead  8,501   13,413 
Depreciation and amortization  2,459   2,757 
Funeral home expenses:        
Merchandise  1,776   2,317 
Services  5,397   5,553 
Other  3,485   3,630 
Total costs and expenses  72,756   80,832 
         
Gain on sale of businesses  24,086    
Operating income (loss)  22,575   (9,363)
Interest expense  (12,284)  (13,171)
Income (loss) from operations before income taxes  10,291   (22,534)
Income tax expense  (1,288)   
Net income (loss) $9,003  $(22,534)
Net income (loss) per common share (basic)(1) $0.10  $(0.59)
Net income (loss) per common share (diluted)(1) $0.10  $(0.59)
Weighted average number of common shares outstanding - basic(2)  94,472   38,031 
Weighted average number of common shares outstanding - diluted(2)  94,472   38,031 


STONEMOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 (in thousands)

   Three Months Ended March 31,
  2020  2019  
Cash Flows From Operating Activities:         
Net income (loss) $9,003  $(22,534) 
Adjustments to reconcile net income (loss) to net cash used in operating
  activities:
         
Cost of lots sold  1,296   1,522  
Depreciation and amortization  2,459   2,757  
Provision for bad debt  1,144   2,042  
Non-cash compensation expense  375   277  
Non-cash interest expense  5,260   4,429  
Gain on sale of businesses  (24,086)    
Changes in assets and liabilities:         
Accounts receivable, net of allowance  (1,595)  (1,965) 
Merchandise trust fund  (1,829)  (5,990) 
Other assets  2,338   (4,382) 
Deferred selling and obtaining costs  (1,178)  17  
Deferred revenues  6,434   8,584  
Deferred taxes, net  1,228     
Payables and other liabilities  (6,087)  2,140  
Net cash used in operating activities  (5,238)  (13,103) 
Cash Flows From Investing Activities:         
Cash paid for capital expenditures  (2,073)  (1,903) 
Proceeds from divestitures  28,190     
Net cash provided by (used in) investing activities  26,117   (1,903) 
Cash Flows From Financing Activities:         
Proceeds from borrowings  2,639   24,562  
Repayments of debt  (32,181)  (253) 
Principal payment on finance leases  (425)  (366) 
Cost of financing activities  (213)  (2,636) 
Net cash (used in) provided by financing activities  (30,180)  21,307  
Net (decrease) increase in cash, cash equivalents and restricted cash  (9,301)  6,301  
Cash, cash equivalents and restricted cash—Beginning of period  56,767   18,147  
Cash, cash equivalents and restricted cash—End of period $47,466  $24,448  
Supplemental disclosure of cash flow information:         
Cash paid during the period for interest $7,015  $2,842  
Cash paid during the period for income taxes     41  
Cash paid for amounts included in the measurement of lease liabilities:         
Operating cash flows from operating leases $848  $932  
Operating cash flows from finance leases  116   116  
Financing cash flows from finance leases  425   366  
Non-cash investing and financing activities:         
Acquisition of assets by financing $  $1,314  
Net transfers within assets held for sale  80,822     
Accrued paid-in-kind interest on Senior Secured Notes  3,615     

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