Attached files
| file | filename |
|---|---|
| 8-K - 8-K - STONEMOR PARTNERS LP | d24678d8k.htm |
Exhibit 99.1
| CONTACT: |
John McNamara | |
| Director - Investor Relations | ||
| StoneMor Partners L.P. | ||
| (215) 826-2945 |
STONEMOR PARTNERS L.P. REPORTS OPERATING AND FINANCIAL
RESULTS FOR THE THIRD QUARTER 2015
| • | Adjusted EBITDA, a non-GAAP measure, was $23.5 million(1) for the 3rd quarter 2015, an increase of over 20% compared with the prior year 3rd quarter |
| • | Generated Distributable Available Cash, a non-GAAP measure, of $32.2 million(1) for the 3rd quarter 2015, a 13% increase compared with the prior year 3rd quarter |
| • | Increased quarterly cash distribution to $0.66 per limited partner unit for the 3rd quarter 2015, a 7% increase from the prior year 3rd quarter |
| • | Number of cemetery contracts written in the 3rd quarter reached 30,722, a 4% increase compared with the prior year 3rd quarter |
| • | Third quarter 2015 operational and financial results will be discussed on a conference call at 10AM ET on Monday, November 9th |
LEVITTOWN, PA – November 9, 2015 —StoneMor Partners L.P. (NYSE: STON) (“StoneMor” or the “Partnership”) has reported operating and financial results for the third quarter 2015.
Larry Miller, StoneMor’s President and CEO, commented, “This quarter’s results reflect the continued strength of our core businesses, as we generated 20% growth in both cemetery and funeral home quarterly margin on a year over year basis. Not only are we executing on our acquisition strategy, whereby we’ve added 3 cemeteries and 5 funeral homes year over year, but our team continues to drive value by moderating costs and increasing revenue efficiency, as evidenced by our record revenue per written contract for pre-need sales. We expect to continue to enhance unitholder value through organic enhancement of our business as well as being acquisitive in coming periods, and believe we are well positioned to take advantage of opportunities as they arise.”
Financial Highlights
| Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Adjusted EBITDA(1) |
$ | 23,457 | $ | 19,533 | $ | 71,754 | $ | 68,458 | ||||||||
| Distributable Available Cash(1) |
$ | 32,214 | $ | 28,474 | $ | 64,320 | $ | 59,974 | ||||||||
| Net loss |
$ | (3,402 | ) | $ | (3,268 | ) | $ | (17,133 | ) | $ | (2,977 | ) | ||||
| Cash Distributions |
$ | 20,392 | $ | 17,072 | $ | 56,689 | $ | 45,297 | ||||||||
| per unit |
$ | 0.66 | $ | 0.62 | $ | 1.95 | $ | 1.83 | ||||||||
| At September 30, | ||||||||||||||||
| 2015 | 2014 | |||||||||||||||
| Backlog(2) |
$ | 607,272 | $ | 529,544 | ||||||||||||
| Quarterly distribution asset coverage(3) |
6.3x | |||||||||||||||
| (1) | Non-GAAP financial measures used by the Partnership should not be considered as alternatives to GAAP financial measures, and you should not consider such non-GAAP measures in isolation or as a substitute for the Partnership’s results as reported under GAAP. A reconciliation of the non-GAAP financial measures of Adjusted EBITDA, Distributable Cash Flow and Distributable Available Cash to net loss attributable to the Partnership, the most directly comparable GAAP financial measure, is provided in the financial tables of this release. Please see footnote 1 to the Financial Information table of this release. |
| (2) | Amounts as of period end. Backlog is defined 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. |
| (3) | Ratio of selected net assets to quarterly cash distributions paid during the most recent quarterly period as of the date noted. Please see the Distribution Asset Coverage table of this release. |
1
| • | Adjusted EBITDA, a non-GAAP measure, was $23.5 million(1) for the third quarter 2015 compared with $19.5 million for the prior year 3rd quarter, an increase of over 20%. The increase from the prior year period was primarily the result of increased sales activity, partially offset by lower investment income from trusts. |
| • | Distributable Available Cash, a non-GAAP measure, was $32.2 million(1) for the third quarter 2015, compared with $28.5 million for the prior year third quarter, a 13% increase. |
| • | Backlog(2) increased by $77.7 million, or 15%, to $607.3 million at September 30, 2015 compared with September 30, 2014, and by $19.8 million, or 3%, compared with June 30, 2015. |
| • | The Partnership declared a cash distribution for the 3rd quarter 2015 of $0.66 per common limited partner unit, a 7% increase compared with the prior year 3rd quarter and a 2% increase compared with the 2nd quarter 2015. The Partnership’s 3rd quarter 2015 cash distribution will be paid on November 13, 2015 to holders of record as of November 6, 2015. As previously announced, it is the Partnership’s intention to continue to increase cash distributions by $0.01 per limited partner unit per quarter through the end of 2015. |
| • | On a GAAP basis, net loss for the 3rd quarter 2015 was $3.4 million compared with a net loss of $3.3 million for the prior year 3rd quarter. The loss in the current period was driven principally by the recognition of a $3.0 million legal settlement and associated costs. |
Recent Events
Acquisition activity
| • | During the third quarter 2015, the Partnership acquired 3 cemeteries in Illinois, 3 funeral homes in Illinois and 2 funeral homes in Florida for an aggregate purchase price of $14.0 million. The funeral homes have performed approximately 1,375 funeral services in the aggregate annually, and the cemeteries have performed approximately 503 interments in the aggregate annually. After these acquisitions, the Partnership operates 306 cemeteries and 103 funeral homes in 28 states and Puerto Rico. |
Public offering of common units
| • | On July 10, 2015, the Partnership completed a follow-on public offering of 2,415,000 common units at a public offering price of $29.63 per unit. Net proceeds of the offering, after deducting underwriting discounts and offering expenses, were approximately $67.9 million. The proceeds were utilized to pay down outstanding borrowings under the Partnership’s credit facility. |
Operating Highlights
Cemetery Operations
| • | Cemetery contracts written for the 3rd quarter were 30,722, compared with 29,633 contracts written for the prior year 3rd quarter, an increase of 1,089 contracts or 4%. The increase in cemetery contracts written was principally attributable to acquisitions and other transactions completed by the Partnership since the second quarter of 2014, including its agreements with the Archdiocese of Philadelphia. |
| • | Average revenue per written contract was $2,802 for the 3rd quarter 2015, an increase of 7% compared with the 3rd quarter 2014. In addition, pre-need contracts, which accounted for 50% of total contracts written for the 3rd quarter 2015 compared with 48% for the 2nd quarter 2015, reached a record $3,815 revenue per written contract for the 3rd quarter, up from $3,813 from the 2nd quarter 2015. |
| • | Cemetery margin(3) increased to $41.8 million for the 3rd quarter 2015, compared with $35.3 million for the prior year 3rd quarter, an increase of $6.5 million or 19%. Cemetery margin percentage was approximately 61% for the 3rd quarter 2015, compared to 57% for the prior year 3rd quarter. The increase in cemetery margin between periods was principally attributable to an increase in contracts written as noted previously. |
| (1) | A reconciliation of GAAP net loss to Adjusted EBITDA, Distributable Cash Flow and Distributable Available Cash is provided in the financial tables of this release. Please see footnote 1 to the Financial Information table of this release. |
| (2) | Backlog is defined 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. |
| (3) | See the Supplemental Adjusted EBITDA, Distributable Cash Flow and Distributable Available Cash Summary in the Financial and Operating Highlights table and related footnotes in this release for information regarding the calculation of Cemetery margin, which is defined as non-deferred cemetery revenues less cost of goods sold and cemetery expenses. |
2
Funeral Home Operations
| • | Funeral home calls for the 3rd quarter were 3,814, compared with 3,595 calls for the prior year 3rd quarter, an increase of 219 calls or 6%. The increase in funeral home calls from the prior year quarter was attributable to a combination of organic growth and growth from acquisitions. |
| • | Funeral Home margin(1) was $5.5 million for the 3rd quarter 2015, compared with $3.8 million for the prior year 3rd quarter, an increase of $1.7 million or 44%. Funeral Home margin percentage was approximately 32% for the 3rd quarter 2015, compared with 26% for the prior year 3rd quarter. The increase in funeral home margin and margin percentage was principally attributable to revenues related to insurance contracts. |
Trust Investment and Interest Income
| • | Combined Trust Investment and Interest Income(1) was $10.9 million for the 3rd quarter 2015 compared with $15.8 million for the prior year 3rd quarter, an decrease of $4.9 million or 31%. The decrease was largely the result of the timing of realized trust gains. |
| • | Trust fund investment returns, including realized gains and losses and dividends (excluding realized gains on perpetual care trusts), net of fees, were 1.1% (4.2% annualized) for the 3rd quarter 2015, compared with 1.6% (6.4% annualized) for the prior year 3rd quarter and 1.9% (7.5% annualized) for the 2nd quarter 2015. The decrease in the rate of return in the current period compared to the comparable prior year period and 2nd quarter 2015 was a result of the timing of realized merchandise trust gains. |
Corporate Expenses, Liquidity and Capital Structure
| • | Combined cash selling, general and administrative, and corporate overhead expenses for the 3rd quarter 2015 were $34.7 million, a decrease of $0.6 million or 2% from $35.3 million for the prior year 3rd quarter, and a decrease of $4.0 million or 10% from the 2nd quarter 2015. The decrease from the prior year third quarter was the result of reduced professional fees. The decrease from the 2nd quarter of 2015 resulted from decreased commission expense, professional fees and advertising costs. |
| • | Cash interest expense was $4.9 million for the 3rd quarter 2015 compared with $4.4 million for the prior year 3rd quarter and $5.0 million for the sequential quarter. The change from period to period is primarily driven by changes in the amounts outstanding under our credit facility. |
| • | As of September 30, 2015, the Partnership had $291.0 million of total debt, including $113.5 million outstanding under its revolving credit facility. The Partnership had approximately $66.5 million available on its revolving credit facility and $11.8 million of cash and cash equivalents as of September 30, 2015. |
* * *
| (1) | See the Supplemental Adjusted EBITDA, Distributable Cash Flow and Distributable Available Cash Summary in the Financial and Operating Highlights table and related footnotes in this release for information regarding the calculation of Funeral Home margin, which is defined as non-deferred Funeral Home revenues less associated expenses, and Trust Investment and Interest Income, which is defined as non-deferred Investment income from trusts and interest income. |
3
Investor Conference Call and Webcast
The Partnership will conduct a conference call to discuss 2015 third quarter financial results today, Monday, November 9, 2015 at 10:00 a.m. ET. The conference call can be accessed by calling (800) 698-0460. An audio replay of the conference call will be available by calling (800) 633-8284 through 12:00 p.m. ET on November 23, 2015. The reservation number for the audio replay is 21783749. 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 the Partnership’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 306 cemeteries and 103 funeral homes in 28 states and Puerto Rico.
StoneMor is the only publicly traded death care 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 investors section, at http://www.stonemor.com.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements that involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. The Partnership cautions readers that any forward-looking information is not a guarantee of future performance. Such forward-looking statements include, but are not limited to, statements about future financial and operating results, the Partnership’s plans, objectives, expectations and intentions and other statements that are not historical facts. Risks, assumptions and uncertainties that could cause actual results to materially differ from the forward-looking statements include, but are not limited to, those associated with the cash flow from our pre-need and at-need sales, our trusts, and financings, which may impact our ability to meet our financial projections, our ability to service our debt and pay distributions, and our ability to increase our distributions; future revenue and revenue growth; the integration or anticipated benefits of our recent acquisitions or any future acquisitions; our ability to complete and fund additional acquisitions; the effect of economic downturns; the impact of our leverage on our operating plans; 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; 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; 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; the financial condition of third-party insurance companies that fund our pre-need funeral contracts; and other risks, assumptions and uncertainties detailed from time to time in the Partnership’s reports filed with the U.S. Securities and Exchange Commission, including quarterly reports on Form 10-Q, reports on Form 8-K and annual reports on Form 10-K. Forward-looking statements speak only as of the date hereof, and the Partnership assumes no obligation to update such statements, except as may be required by applicable law.
4
STONEMOR PARTNERS L.P.
CONSOLIDATED BALANCE SHEETS
(unaudited; in thousands)
| September 30, 2015 |
December 31, 2014 |
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| ASSETS |
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| Current assets: |
||||||||
| Cash and cash equivalents |
$ | 11,792 | $ | 10,401 | ||||
| Accounts receivable, net of allowance |
66,099 | 62,503 | ||||||
| Prepaid expenses. |
7,064 | 4,708 | ||||||
| Other current assets |
33,448 | 24,266 | ||||||
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|
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| Total current assets |
118,403 | 101,878 | ||||||
| Long-term accounts receivable, net of allowance |
93,273 | 89,536 | ||||||
| Cemetery Property |
344,662 | 339,848 | ||||||
| Property and equipment, net of accumulated depreciation |
102,671 | 100,391 | ||||||
| Merchandise trusts, restricted, at fair value |
459,320 | 484,820 | ||||||
| Perpetual care trusts, restricted, at fair value |
311,781 | 345,105 | ||||||
| Deferred financing costs, net of accumulated amortization |
7,907 | 9,089 | ||||||
| Deferred selling and obtaining costs |
108,754 | 97,795 | ||||||
| Deferred tax assets |
42 | 40 | ||||||
| Goodwill |
64,048 | 58,836 | ||||||
| Intangible assets |
67,681 | 68,990 | ||||||
| Other assets |
3,158 | 3,136 | ||||||
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| Total assets |
$ | 1,681,700 | $ | 1,699,464 | ||||
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| LIABILITIES AND PARTNERS’ CAPITAL |
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| Current liabilities: |
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| Accounts payable and accrued liabilities |
$ | 37,448 | $ | 35,382 | ||||
| Accrued interest |
4,868 | 1,219 | ||||||
| Long-term debt, current portion |
3,294 | 2,251 | ||||||
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| Total current liabilities |
45,610 | 38,852 | ||||||
| Other long-term liabilities |
2,003 | 1,292 | ||||||
| Obligation for lease and management agreements, net |
9,307 | 8,767 | ||||||
| Long-term debt |
287,724 | 285,378 | ||||||
| Deferred cemetery revenues, net |
645,233 | 643,408 | ||||||
| Deferred tax liabilities |
17,815 | 17,708 | ||||||
| Merchandise liability |
158,592 | 150,192 | ||||||
| Perpetual care trust corpus |
311,781 | 345,105 | ||||||
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| Total liabilities |
1,478,065 | 1,490,702 | ||||||
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| Partners’ capital |
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| General partner’s interest |
(8,612 | ) | (5,113 | ) | ||||
| Common limited partners’ interests |
212,247 | 213,875 | ||||||
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| Total partners’ capital |
203,635 | 208,762 | ||||||
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| Total liabilities and partners’ capital |
$ | 1,681,700 | $ | 1,699,464 | ||||
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5
STONEMOR PARTNERS L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except per unit data)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Revenues: |
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| Cemetery: |
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| Merchandise |
$ | 34,709 | $ | 37,812 | $ | 97,688 | $ | 98,452 | ||||||||
| Services |
14,195 | 14,971 | 42,696 | 37,760 | ||||||||||||
| Investment and other |
15,054 | 13,152 | 43,062 | 42,418 | ||||||||||||
| Funeral home: |
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| Merchandise |
6,588 | 4,752 | 19,913 | 14,770 | ||||||||||||
| Services |
7,654 | 7,487 | 23,083 | 20,694 | ||||||||||||
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| Total revenues |
78,200 | 78,174 | 226,442 | 214,094 | ||||||||||||
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| Costs and expenses: |
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| Cost of goods sold: |
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| Perpetual care |
1,993 | 1,898 | 5,727 | 5,110 | ||||||||||||
| Merchandise |
6,735 | 7,164 | 19,891 | 20,106 | ||||||||||||
| Cemetery expense |
18,245 | 18,076 | 53,789 | 47,546 | ||||||||||||
| Selling expense |
14,647 | 16,494 | 44,326 | 42,544 | ||||||||||||
| General and administrative expense |
8,819 | 9,808 | 27,340 | 26,333 | ||||||||||||
| Corporate overhead |
8,152 | 8,392 | 26,979 | 22,394 | ||||||||||||
| Depreciation and amortization |
3,311 | 3,112 | 9,207 | 7,993 | ||||||||||||
| Funeral home expense: |
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| Merchandise |
1,002 | 1,441 | 5,444 | 4,691 | ||||||||||||
| Services |
5,432 | 5,522 | 16,728 | 15,023 | ||||||||||||
| Other |
4,774 | 3,396 | 13,335 | 9,367 | ||||||||||||
| Acquisition related costs, net of recoveries |
963 | 451 | 1,648 | 2,040 | ||||||||||||
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| Total costs and expenses |
74,073 | 75,754 | 224,414 | 203,147 | ||||||||||||
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| Operating profit |
4,127 | 2,420 | 2,028 | 10,947 | ||||||||||||
| Gain on acquisition/dispositions |
1,540 | 244 | 1,540 | 656 | ||||||||||||
| Gain (loss) on settlement agreement, net |
(3,000 | ) | — | (3,000 | ) | 888 | ||||||||||
| Interest expense |
(5,669 | ) | (5,268 | ) | (16,902 | ) | (15,990 | ) | ||||||||
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| Net loss before income taxes |
(3,002 | ) | (2,604 | ) | (16,334 | ) | (3,499 | ) | ||||||||
| Income tax benefit (expense) |
(400 | ) | (664 | ) | (799 | ) | 522 | |||||||||
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| Net loss |
$ | (3,402 | ) | $ | (3,268 | ) | $ | (17,133 | ) | $ | (2,977 | ) | ||||
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| Allocation of net loss attributable to limited partners and the general partner: |
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| General partner’s interest |
$ | (42 | ) | $ | (44 | ) | $ | (227 | ) | $ | (49 | ) | ||||
| Limited partners’ interest |
(3,360 | ) | (3,224 | ) | (16,906 | ) | (2,928 | ) | ||||||||
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| Net loss |
$ | (3,402 | ) | $ | (3,268 | ) | $ | (17,133 | ) | $ | (2,977 | ) | ||||
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| Net loss attributable to common limited partners per unit |
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| (basic and diluted) |
$ | (0.11 | ) | $ | (0.11 | ) | $ | (0.56 | ) | $ | (0.11 | ) | ||||
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| Weighted average limited partner units outstanding: |
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| Basic and diluted |
31,491 | 29,018 | 30,011 | 25,712 | ||||||||||||
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6
STONEMOR PARTNERS L.P.
FINANCIAL AND OPERATING HIGHLIGHTS
(unaudited)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
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| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Financial Data: |
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| Net loss per limited partners per unit – basic and diluted |
$ | (0.11 | ) | $ | (0.11 | ) | $ | (0.56 | ) | $ | (0.11 | ) | ||||
| Adjusted EBITDA (in thousands)(1) |
$ | 23,457 | $ | 19,533 | $ | 71,754 | $ | 68,458 | ||||||||
| Distributable Available Cash (in thousands)(1) |
$ | 32,214 | $ | 28,474 | $ | 64,320 | $ | 59,974 | ||||||||
| per limited partner unit(1) |
$ | 1.02 | $ | 0.98 | $ | 2.14 | $ | 2.33 | ||||||||
| Cash distributions paid per unit(2) |
$ | 0.66 | $ | 0.62 | $ | 1.95 | $ | 1.83 | ||||||||
| Operating Data: |
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| Interments Performed |
12,878 | 13,079 | 41,514 | 36,580 | ||||||||||||
| Interment rights sold (3): |
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| Lots |
8,086 | 8,613 | 23,980 | 24,360 | ||||||||||||
| Mausoleum crypts (including pre-construction) |
446 | 494 | 1,779 | 1,697 | ||||||||||||
| Niches |
441 | 363 | 1,285 | 1,144 | ||||||||||||
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| Net interment rights sold(3) |
8,973 | 9,470 | 27,044 | 27,201 | ||||||||||||
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| Number of cemetery contracts written |
30,722 | 29,633 | 92,664 | 82,286 | ||||||||||||
| Aggregate contract amount (in thousands, excluding interest) |
$ | 86,092 | $ | 77,568 | $ | 254,600 | $ | 219,178 | ||||||||
| Average amount per contract (excluding interest) |
$ | 2,802 | $ | 2,618 | $ | 2,748 | $ | 2,664 | ||||||||
| Pre-need cemetery contracts written |
15,257 | 14,215 | 44,687 | 40,474 | ||||||||||||
| Aggregate pre-need contract amount (in thousands, excluding interest) |
$ | 58,211 | $ | 50,222 | $ | 168,216 | $ | 144,233 | ||||||||
| Average amount per pre-need contract (excluding interest) |
$ | 3,815 | $ | 3,533 | $ | 3,764 | $ | 3,564 | ||||||||
| At-need cemetery contracts written |
15,465 | 15,418 | 47,977 | 41,812 | ||||||||||||
| Aggregate at-need contract amount (in thousands excluding interest) |
$ | 27,881 | $ | 27,346 | $ | 86,384 | $ | 74,945 | ||||||||
| Average amount per at-need contract (excluding interest) |
$ | 1,803 | $ | 1,774 | $ | 1,801 | $ | 1,792 | ||||||||
| Funeral home calls |
3,814 | 3,595 | 11,792 | 10,292 | ||||||||||||
| (1) | A reconciliation of GAAP net loss to Adjusted EBITDA, Distributable Cash Flow and Distributable Available Cash is provided in the financial tables of this release. Please see footnote 1 to the Financial Information table of this release. |
| (2) | Represents the cash distributions declared for the respective period and paid by the Partnership within 45 days after the end of each quarter, utilizing the distributable cash flow generated during the respective period. |
| (3) | Net of cancellations. Sales of double-depth burial lots are counted as two sales. |
7
STONEMOR PARTNERS L.P.
FINANCIAL AND OPERATING HIGHLIGHTS
(unaudited; in thousands, except per unit amounts)
| Three Months Ended September 30, |
Nine Months Ended September 30, |
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| Reconciliation of net loss to non-GAAP measures(1): | 2015 | 2014 | 2015 | 2014 | ||||||||||||
| Net loss |
$ | (3,402 | ) | $ | (3,268 | ) | $ | (17,133 | ) | $ | (2,977 | ) | ||||
| Acquisition and related costs |
963 | 451 | 1,648 | 2,040 | ||||||||||||
| Depreciation and amortization |
3,311 | 3,112 | 9,207 | 7,993 | ||||||||||||
| Cost of cemetery lots sold |
2,589 | 1,525 | 7,506 | 7,181 | ||||||||||||
| Non-cash interest expense |
740 | 830 | 2,207 | 2,127 | ||||||||||||
| Non-cash stock compensation expense |
277 | 265 | 824 | 802 | ||||||||||||
| Maintenance capital expenditures(2) |
(1,632 | ) | (2,326 | ) | (5,011 | ) | (6,430 | ) | ||||||||
| Non-cash income tax expense |
550 | 1,082 | 905 | (1,776 | ) | |||||||||||
| Gain on acquisition/dispositions |
(1,540 | ) | (244 | ) | (1,540 | ) | (656 | ) | ||||||||
| Net operating profit deferral from non-delivered merchandise and services(3) |
12,190 | 11,760 | 50,541 | 39,495 | ||||||||||||
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| Distributable Cash Flow (1) |
$ | 14,046 | $ | 13,187 | $ | 49,154 | $ | 47,799 | ||||||||
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| Supplemental Adjusted EBITDA, Distributable Cash Flow and Distributable Available Cash Summary(3): |
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| Revenues |
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| Pre-need cemetery revenues |
$ | 42,492 | $ | 36,170 | $ | 122,397 | $ | 104,555 | ||||||||
| At-need cemetery revenues |
25,151 | 24,746 | 78,562 | 67,704 | ||||||||||||
| Investment income from trusts |
8,691 | 13,985 | 36,317 | 39,225 | ||||||||||||
| Interest income |
2,233 | 1,807 | 6,617 | 5,848 | ||||||||||||
| Funeral home revenues |
17,077 | 14,457 | 50,226 | 40,777 | ||||||||||||
| Other cemetery revenues |
1,154 | 455 | 4,198 | 6,163 | ||||||||||||
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| Total revenues |
96,798 | 91,620 | 298,317 | 264,272 | ||||||||||||
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| Costs and expenses |
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| Cost of goods sold(4) |
8,743 | 8,025 | 26,092 | 22,126 | ||||||||||||
| Cemetery expense |
18,245 | 18,076 | 53,789 | 47,546 | ||||||||||||
| Selling expense |
18,034 | 17,377 | 56,276 | 48,404 | ||||||||||||
| General and administrative expense |
8,819 | 9,808 | 27,340 | 26,333 | ||||||||||||
| Cash corporate overhead(5) |
7,875 | 8,127 | 26,155 | 21,592 | ||||||||||||
| Funeral home expense |
11,625 | 10,674 | 36,911 | 29,813 | ||||||||||||
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|
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| Total costs and expenses |
73,341 | 72,087 | 226,563 | 195,814 | ||||||||||||
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|
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| Adjusted EBITDA(1) |
23,457 | 19,533 | 71,754 | 68,458 | ||||||||||||
| Cash interest expense(6) |
(4,929 | ) | (4,438 | ) | (14,695 | ) | (13,863 | ) | ||||||||
| Cash income taxes |
150 | 418 | 106 | (1,254 | ) | |||||||||||
| Cash gain (loss) on settlement and acquisition/disposition(7) |
(3,000 | ) | — | (3,000 | ) | 888 | ||||||||||
| Maintenance capital expenditures(2) |
(1,632 | ) | (2,326 | ) | (5,011 | ) | (6,430 | ) | ||||||||
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| Distributable Cash Flow(1) |
14,046 | 13,187 | 49,154 | 47,799 | ||||||||||||
| Discretionary adjustments considered by the Board of Directors of the General Partner in the determination of quarterly cash distributions: |
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| Non-recurring legal settlement(7) |
3,000 | — | 3,000 | — | ||||||||||||
| Non-recurring impact from early repayment marketing program(8) |
1,765 | — | 1,765 | — | ||||||||||||
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| Distributable Cash Flow with discretionary adjustments by the Board of Directors of the General Partner |
18,811 | 13,187 | 53,919 | 47,799 | ||||||||||||
| Cash on hand – beginning of period |
13,403 | 15,287 | 10,401 | 12,175 | ||||||||||||
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| Distributable Available Cash(1)(9) |
$ | 32,214 | $ | 28,474 | $ | 64,320 | $ | 59,974 | ||||||||
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| Cash distributions paid(10) |
$ | 20,392 | $ | 17,072 | $ | 56,689 | $ | 45,297 | ||||||||
| per limited partner unit |
$ | 0.66 | $ | 0.62 | $ | 1.95 | $ | 1.83 | ||||||||
| Excess of Distributable Available Cash after cash distributions paid(11) |
$ | 11,822 | $ | 11,402 | $ | 7,631 | $ | 14,677 | ||||||||
8
| (1) | Although not prescribed under generally accepted accounting principles (“GAAP”), the Partnership’s management believes the presentation of Adjusted EBITDA, Distributable Cash Flow (“DCF”) and Distributable Available Cash is relevant and useful because it helps the Partnership’s investors understand its operating performance, allows for easier comparison of its results with other master limited partnerships (“MLP”), and is a critical component in the determination of quarterly cash distributions. As a MLP, the Partnership is required to distribute 100% of available cash, subject to cash reserves established by its general partner and as defined in its limited partnership agreement (“Available Cash”), to investors on a quarterly basis, in compliance with applicable Delaware law. The Partnership refers to Available Cash prior to the establishment of cash reserves as Distributable Available Cash. Adjusted EBITDA, DCF and Distributable Available Cash should not be considered in isolation of, or as a substitute for, net income as an indicator of operating performance or cash flows from operating activities as a measure of liquidity. While the Partnership’s management believes that its methodology of calculating Adjusted EBITDA, DCF and Distributable Available Cash is generally consistent with the common practice of other MLPs, such metrics may not be consistent and, as such, may not be comparable to measures reported by other MLPs, who may use other adjustments related to their specific businesses. Adjusted EBITDA, DCF and Distributable Available Cash are supplemental financial measures used by the Partnership’s management and by external users of the Partnership’s financial statements such as investors, lenders under the Partnership’s credit facility, research analysts, rating agencies and others to assess its: |
| • | Operating performance as compared to other publicly traded partnerships, without regard to financing methods, historical cost basis or capital structure; |
| • | Ability to generate sufficient cash flows to support its distributions to unitholders; |
| • | Ability to incur and service debt and fund acquisitions and growth opportunities; and |
| • | Ability to comply with financial covenants in its Credit Facility, which is calculated based upon Adjusted EBITDA with certain adjustments. |
DCF is determined by calculating EBITDA, which is defined as net income (loss) plus interest expense, income tax, and depreciation and amortization, then adjusting it for non-cash, non-recurring and other items to achieve Adjusted EBITDA, and then deducting cash interest expense, net cash income tax, maintenance capital expenditures and other items. Distributable Available Cash is then determined by adjusting DCF for discretionary adjustments considered by the Board of Directors of the General Partner in determination of the quarterly cash distribution, and then adding cash on hand at the beginning of the period. The Partnership defines Adjusted EBITDA as net income (loss) plus the following adjustments:
| • | Interest expense; |
| • | Income tax expense; |
| • | Depreciation and amortization. |
| • | Asset impairments; |
| • | Acquisition and related costs; |
| • | Non-cash stock compensation; |
| • | (Gains) losses on asset disposal; and |
| • | Other items. |
| (2) | Maintenance capital expenditures include those capitalized costs which the Partnership incurs to maintain its properties and equipment as well as corporate expenditures. |
| (3) | Includes adjustments to add back certain revenues and related expenses deferred in accordance with GAAP. The Partnership’s management has provided this data so as to present its results in a manner consistent with its internal managerial accounting practices, which recognizes certain revenue and related expenses when contracts are signed by the customer and accepted by the Partnership. Under GAAP, the Partnership recognizes pre-need cemetery sales for sales of burial lots and mausoleum crypts when the product is constructed and at least 10% of the sales price is collected, while other products are recognized when the criteria for delivery under GAAP are met, which include purchase of the product, delivery and installation, and transfer of title, among other items. The Partnership’s management believes that this data is relevant and useful to its investors so as to better understand its operating performance and allow for easier comparison to other MLPs. |
| (4) | Excludes non-cash amortization of cemetery property. |
| (5) | Excludes non-cash stock compensation expense. |
| (6) | Excludes non-cash amortization of deferred finance costs and other non-cash items. |
| (7) | Consists of the estimated non-recurring settlement cost and associated legal fees of a litigation matter. The Board of Directors and management of the General Partner deemed this item as non-recurring and excluded the impact in its determination of DCF and Distributable Available Cash for the period after consideration of the item’s characteristics, including, but not limited to, the type of litigation and the amount of the settlement. |
| (8) | Consists of the non-recurring reduction of pre-need cemetery revenues resulting from the Partnership’s early payment marketing program, which offers certain discounts for installment pre-need sales if paid in full within specific dates. The Board of Directors and management of the General Partner considered this item as non-recurring and excluded the impact in its determination of DCF and Distributable Available Cash for the period as they do not expect to offer such programs in future periods. |
| (9) | Including the discretionary adjustments by the Board of Directors of the General Partner in the determination of quarterly cash distributions, Adjusted EBITDA would have been $25.2 million and $73.5 million for the three and nine months ended September 30, 2015. |
| (10) | Represents cash distributions declared for the respective period and paid by the Partnership within 45 days after the end of each quarter, utilizing the DCF and Distributable Available Cash generated during the respective period. |
| (11) | The Partnership seeks to at least maintain its current cash distribution in future quarterly periods, and expects to only increase such cash distributions when future DCF and Distributable Available Cash amounts allow for it and are expected to be sustained. The Partnership’s determination of quarterly cash distributions and its resulting determination of the amount of excess (shortfall) those cash distributions generate in comparison to DCF and Distributable Available Cash are based upon its assessment of numerous factors, including but not limited to the variability of cash flow from the Partnership’s pre-need and at-need sales and its trust investments performance, interest rate movements, and financial leverage. The Partnership also considers its historical trailing four quarters of excess or shortfalls and future forecasted excess or shortfalls that its cash distributions generate in comparison to DCF and Distributable Available Cash due to the variability of its DCF and Distributable Available Cash generated each quarter, which could have more or less excess (shortfalls) generated quarter to quarter. |
9
STONEMOR PARTNERS L.P.
DISTRIBUTION ASSET COVERAGE
(unaudited; in thousands, except ratios)
| September 30, 2015 |
December 31, 2014 |
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| Selected assets: |
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| Cash and cash equivalents |
$ | 11,792 | $ | 10,401 | ||||
| Accounts receivable, net of allowance |
66,099 | 62,503 | ||||||
| Long-term accounts receivable, net of allowance |
93,273 | 89,536 | ||||||
| Merchandise trusts, restricted, at fair value |
459,320 | 484,820 | ||||||
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| Total selected assets |
630,484 | 647,260 | ||||||
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| Selected liabilities: |
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| Accounts payable and accrued liabilities |
37,448 | 35,382 | ||||||
| Accrued interest |
4,868 | 1,219 | ||||||
| Long-term debt, current portion |
3,294 | 2,251 | ||||||
| Long-term debt |
287,724 | 285,378 | ||||||
| Merchandise liability |
158,592 | 150,192 | ||||||
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| Total selected liabilities |
491,926 | 474,422 | ||||||
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| Total selected net assets |
$ | 138,558 | $ | 172,838 | ||||
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|
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| Distribution asset coverage(1) |
6.3x | 9.1x | ||||||
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| (1) | Ratio of selected net assets to quarterly cash distributions paid during the most recent quarterly period as of the date noted. |
10