SOURCE: StoneMor Partners L.P.

November 09, 2006 07:00 ET

StoneMor Partners L.P. Announces 2006 Third Quarter Results

BRISTOL, PA -- (MARKET WIRE) -- November 9, 2006 -- StoneMor Partners L.P. (NASDAQ: STON) today announced its operating results for the third quarter ended September 30, 2006.

The following table summarizes selected comparative items that the Partnership believes are representative of its operating performance for the periods presented.

                               Three Months Ended       Nine Months Ended
                                  September 30,           September 30,
                                2005        2006        2005        2006
                             ----------  ----------  ----------  ----------
                                 (in thousands)          (in thousands)
Total Revenues               $   24,821  $   26,785  $   71,015  $   81,729
Operating Profit             $    2,746  $    3,342  $    8,454  $    9,546
Net Income                   $      656  $    1,059  $    2,676  $    3,080
Distributable Free Cash
 Flow (a)                    $    4,214  $    9,667

(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.
The Company is pleased to announce improvements in its Total Revenues, Operating Profit, Net Income, and Distributable Free Cash Flow for the third quarter and nine months ended September 30, 2006. These improvements show the positive result of the Company's program of growth through acquisition. During November 2005, the Company acquired 22 cemeteries and 6 funeral homes, the results of which significantly contributed to these quarter and year-to-date improvements. Revenues increased over 8% for the quarter from 2005 levels and 15% for the nine months, while Operating Profit increased almost 22% for the quarter and 13% for the nine months. Net Income increased 61% for the quarter and 15% for the nine months. Distributable Free Cash Flow increased over 129% to $9.667 million for the quarter. The calculation of distributable free cash flow was positively affected by a program instituted during the third quarter, which encouraged our customers to accelerate the timing of their payments. The net cash retained by the Company in the third quarter as a result of this program was approximately $4.8 million. As a result of these collections, the Company's cash position has improved to in excess of $14 million. Also, as a result of this program, the Company is required to pay into its merchandise trust fund approximately $1.8 million. These funds will be paid in the fourth quarter 2006. This program was initiated for a short time and the Company does not expect future periods to have similar benefit. Through changes in product mix and control of product cost and price increases, the Company was able to improve its gross margin percentage (the percentage of Cost of Goods Sold to Cemetery Revenues) by 1% during the quarter. Year to date this percentage also improved. Selling Expense, which is evaluated as a percentage of Cemetery Revenues, also improved during the third quarter, while still being slightly higher for the year. The cost increases in General and Administrative Expenses and Corporate Overhead are due to the additional properties acquired in 2005. While the Company is organized as a master limited partnership and as such is taxed at a reduced rate, it has many subsidiaries that are corporations and taxed as such. The distribution of income by state is a main factor in the fluctuation of income tax expense for many reasons, one of which includes utilization of operating loss carry-forwards.

Operating Statistics

Operating statistics are important in the Company's evaluation of the success of its performance. The Company believes the following statistics are the most important.

                                                       Three Months Ended
                                                          September 30,
                                                        2005        2006
                                                     ----------  ----------
Interments performed                                      5,007       6,116
Cemetery revenues per interment performed           $     4,855  $    4,197
Aggregate value of contracts written (in thousands) $    23,804  $   27,126
The improvement in interments performed is primarily related to the Company's acquisitions completed in November 2005, the properties of which were not included in the third-quarter 2005 operating results. The decrease in cemetery revenues per interment performed reflects the moving of this statistic back to normal levels. Additionally, the new cemeteries acquired have a product revenue mix different than the same-store properties. This different product mix has the effect of lowering cemetery revenues per interment. The Company has been experiencing a decrease in this statistic and expects it to stabilize at current levels. The Company does not expect major fluctuations in cemetery revenues per interment performed in the future; it does, however, expect this statistic to fluctuate with acquisitions, depending on the various state trusting laws. The aggregate value of contracts written increased primarily as a result of additional contracts written related to the acquisitions the company consummated in November of last year. The aggregate value of contracts written adds to the Company's deferred revenue, which increases the backlog of revenue to be recognized in the future. During the nine months ended September 30, 2006, interments performed and the aggregate value of contracts written improved from the similar 2005 period.

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 quarters ended September 30, 2005 and 2006 follows:

                                                      Three Months Ended
                                                         September 30,
                                                       2005        2006
(in thousands)                                      ----------  ----------
Net cash provided by operating activities           $    4,429  $   10,984
Maintenance capital expenditures                          (215)       (703)
Quarterly reserve for payment of income taxes              ---        (614)
                                                    ----------  ----------
Distributable free cash flow                        $    4,214  $    9,667
                                                    ==========  ==========
The increase in distributable cash flow during the quarter primarily resulted from the initiation of a program wherein we encouraged our customers to accelerate the timing of their payments. This program yielded approximately $4.8 million in additional cash flow from operations during the third quarter of 2006 and is reflected as part of the reduction during the quarter in both accounts receivable and accounts payable. This program was initiated for a short time and the Company does not expect future periods to have similar benefit.

The quarterly reserve for payment of income taxes is the Company's estimate of one quarter's tax charge.

Distributable free cash flow is a non-GAAP financial measure, as defined by the Securities and Exchange Commission. Please see the discussion of non-GAAP financial measures within this press release.

Acquisitions

On September 29, 2006, we completed the acquisition of 21 cemeteries and 14 funeral homes for the aggregate purchase price of $11.750 million. We paid $5.875 million in cash and issued 275,046 common units representing limited partner interests in StoneMor Partners L.P. In addition, we will assume the merchandise and service liabilities associated with certain pre- arranged bonded contracts valued at approximately $2.8 million related to the properties.

The properties are located in Alabama (5 cemeteries and 3 funeral homes), Oregon (5 cemeteries and 6 funeral homes), Michigan (3 cemeteries), Kansas (2 cemeteries and 1 funeral home), Colorado (2 cemeteries), Washington (1 cemetery and 2 funeral homes), West Virginia (2 funeral homes), Kentucky (1 cemetery), Illinois (1 cemetery), and Missouri (1 cemetery). In conjunction with this transaction, StoneMor received control of merchandise and funeral trusts of approximately $30.0 million and perpetual care trusts of approximately $16.0 million related to these locations. The acquisition of these properties is consistent with StoneMor's growth strategy and provides for an expansion of its national operating platform.

In the aggregate, the 21 cemeteries and 14 funeral homes annually perform approximately 4,300 interments and 2,000 calls, respectively. In 2005, these locations produced annual cemetery revenues of approximately $9.9 million and annual funeral home revenues of approximately $6.1 million. The Company anticipates these acquisitions to have a positive effect on distributable free cash flow in the future.

Investors' Conference Call

An investors' conference call to review the 2006 third-quarter results (which will be released before this call) on Thursday, November 9, 2006, at 11:00 a.m. 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 p.m. Eastern Time on November 23, 2006. The reservation number for the audio replay is as follows: 2130751. The audio replay of the conference call will also be archived on StoneMor's website at http://stonemor.com.

About StoneMor Partners L.P.

StoneMor Partners L.P., headquartered in Bristol, Pennsylvania, is an owner and operator of cemeteries and funeral homes in the United States, with 175 cemeteries and 27 funeral homes in 21 states. StoneMor is the only publicly traded deathcare company structured as a partnership. StoneMor's cemetery products and services, which are sold on both a pre-need (before death) and at-need (at death) basis, include: burial lots, lawn and mausoleum crypts, burial vaults, caskets, memorials, and all services which provide for the installation of this merchandise.

For additional information about StoneMor Partners L.P., please visit StoneMor's website, and the Investor Relations section, at http://stonemor.com.

Forward-Looking Statements

Certain statements contained in this press release, including, but not limited to, information regarding the status and progress of the Company's operating activities, the plans and objectives of the Company's management, assumptions regarding the Company'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," "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 the Company's significant leverage on its operating plans; the ability of the Company to service its debt; the Company'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 political or regulatory environments, including potential changes in tax accounting and trusting policies; the Company'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 the Company'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.
                  Condensed Consolidated Balance Sheets
                              (in thousands)
                                (unaudited)

                                                December 31,  September 30,
                                                    2005          2006
                                                ------------- -------------

ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                    $       6,925 $      14,382
   Accounts receivable, net of allowance               29,991        27,842
   Prepaid expenses                                     2,420         3,003
   Other current assets                                 1,316         2,165
                                                ------------- -------------
     Total current assets                              40,652        47,392

LONG-TERM ACCOUNTS RECEIVABLE - net of
 allowance                                             33,672        30,896
CEMETERY PROPERTY                                     164,772       164,588
PROPERTY AND EQUIPMENT, net of accumulated
 depreciation                                          27,091        30,428
MERCHANDISE TRUSTS, restricted, at fair value         113,432       144,488
PERPETUAL CARE TRUSTS, restricted, at fair
 value                                                136,719       161,596
DEFERRED FINANCING COSTS - net of accumulated
 amortization                                           1,985         1,428
DEFERRED SELLING AND OBTAINING COSTS                   30,554        33,082
OTHER ASSETS                                            1,958         2,017
                                                ------------- -------------
TOTAL ASSETS                                    $     550,835 $     615,915
                                                ============= =============

LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable and accrued liabilities     $       7,461 $       5,714
   Accrued interest                                       260           306
   Current portion, long-term debt                        641           823
                                                ------------- -------------
     Total current liabilities                          8,362         6,843

LONG-TERM DEBT                                         86,304       101,684
DEFERRED CEMETERY REVENUES, net                       167,844       191,396
MERCHANDISE LIABILITY                                  42,621        49,165
                                                ------------- -------------
TOTAL LIABILITIES                                     305,131       349,088
                                                ------------- -------------

COMMITMENTS AND CONTINGENCIES
NON-CONTROLLING INTEREST IN PERPETUAL CARE
 TRUSTS                                               136,719       161,596

PARTNERS' EQUITY
   General partner                                      1,537         1,461
   Limited partners:
     Common                                            72,750        73,693
     Subordinated                                      34,698        30,077
                                                ------------- -------------
       Total partners' equity                         108,985       105,231
                                                ------------- -------------

TOTAL LIABILITIES AND PARTNERS' EQUITY          $     550,835 $     615,915
                                                ============= =============

See accompanying notes to the Condensed Consolidated Financial Statements
in Form 10-Q Report for the quarter ended September 30, 2006.


                          StoneMor Partners L.P.
              Condensed Consolidated Statement of Operations
                     (in thousands, except unit data)
                                (unaudited)


                                  Three months ended    Nine months ended
                                     September 30,         September 30,
                                ---------- ---------- ---------- ----------
                                  2005       2006       2005       2006
                                ---------- ---------- ---------- ----------

Revenues:
  Cemetery                      $   24,309 $   25,670 $   69,353 $   78,025
  Funeral home                         512      1,115      1,662      3,704
                                ---------- ---------- ---------- ----------
    Total revenues                  24,821     26,785     71,015     81,729
                                ---------- ---------- ---------- ----------

Costs and Expenses:
  Cost of goods sold
   (exclusive of depreciation
   shown separately below):
    Land and crypts                  1,621      1,278      4,209      4,141
    Perpetual care                     687        794      2,094      2,377
    Merchandise                      1,346      1,457      3,796      4,146
  Cemetery expense                   5,544      5,983     15,872     17,985
  Selling expense                    5,134      5,270     14,595     16,689
  General and administrative
   expense                           2,736      3,105      7,658      9,255
  Corporate overhead                 3,799      3,772     10,391     12,006
  Depreciation and amortization        712        842      2,580      2,588
  Funeral home expense                 496        942      1,366      2,996
                                ---------- ---------- ---------- ----------
    Total cost and expenses         22,075     23,443     62,561     72,183
                                ---------- ---------- ---------- ----------

OPERATING PROFIT                     2,746      3,342      8,454      9,546

INTEREST EXPENSE                     1,631      1,860      4,800      5,375
                                ---------- ---------- ---------- ----------

INCOME BEFORE INCOME TAXES           1,115      1,482      3,654      4,171

INCOME TAXES:
  State                                376        130        620        385
  Federal                               83        293        358        706
                                ---------- ---------- ---------- ----------
    Total income taxes                 459        423        978      1,091
                                ---------- ---------- ---------- ----------

NET INCOME                      $      656 $    1,059 $    2,676 $    3,080
                                ========== ========== ========== ==========

General partner's interest in
 net income for the period      $       14 $       21 $       54 $       62

Limited partners' interest in
 net income for the period
  Common                        $      321 $      536 $    1,311 $    1,558
  Subordinated                  $      321 $      502 $    1,311 $    1,460

Net income per limited partner
 unit (basic and diluted)       $      .08 $      .12 $      .31 $      .34

Weighted average number of
 limited partners' units
 outstanding (basic and
  diluted)                           8,480      8,767      8,480      8,763

See accompanying notes to the Condensed Consolidated Financial Statements
in Form 10-Q Report for the quarter ended September 30, 2006.


                          StoneMor Partners L.P.
              Condensed Consolidated Statement of Cash Flows
                              (in thousands)
                                (unaudited)

                                                     Nine months ended
                                                       September  30,
                                                  -----------  -----------
                                                      2005         2006
                                                  -----------  -----------

OPERATING ACTIVITIES:
   Net income                                     $     2,676  $     3,080
   Adjustments to reconcile net income to net
    cash provided by operating activity:
     Cost of lots sold                                  2,856        3,258
     Depreciation and amortization                      2,580        2,588
     Deferred income tax                                  459            -
     Other non cash                                         -          376
     Changes in assets and liabilities that
      provided (used) cash:
       Accounts receivable                                321        9,828
       Allowance for doubtful accounts                      -          500
       Merchandise trust fund                           6,738       (1,419)
       Prepaid expenses                                  (866)        (583)
       Other current assets                              (256)      (1,085)
       Other assets                                        (8)         (57)
       Accounts payable and accrued and other
        liabilities                                    (1,758)      (1,755)
       Deferred selling and obtaining costs            (1,292)      (2,528)
       Deferred cemetery revenue                        5,505        9,147
       Merchandise liability                           (5,349)      (4,907)
                                                  -----------  -----------
         Net cash provided by operating
          activities                                   11,606       16,443
                                                  -----------  -----------
INVESTING ACTIVITIES:
   Cost associated with potential acquisitions         (1,706)         (20)
   Purchase of Subsidiaries, net of common units
    issued                                                  -       (9,214)
   Additions to cemetery property                      (2,087)      (2,920)
   Divestiture of funeral home                              -        2,091
   Additions to property and equipment                 (1,843)      (1,778)
                                                  -----------  -----------
         Net cash used in investing activities         (5,636)     (11,841)
                                                  -----------  -----------
FINANCING ACTIVITIES:
   Cash distribution                                  (12,441)     (12,828)
   Additional borrowings on long-term debt              2,400       16,224
   Repayments of long-term debt                             -         (661)
   Sale of partner units                                    -          120
   Cost of financing activities                          (178)           -
                                                  -----------  -----------
         Net cash used in financing activities        (10,219)       2,855
                                                  -----------  -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS              (4,249)       7,457
CASH AND CASH EQUIVALENTS - Beginning of period        14,474        6,925
                                                  -----------  -----------
CASH AND CASH EQUIVALENTS - End of period         $    10,225  $    14,382
                                                  ===========  ===========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
   Cash paid during the period for interest       $     4,735  $     5,330
                                                  ===========  ===========
   Cash paid during the period for income taxes   $       970  $     3,035
                                                  ===========  ===========

NON-CASH INVESTING AND FINANCING ACTIVITIES
  Issuance of limited partner units to fund
   cemetery acquisition                           $         -  $     5,875
                                                  ===========  ===========

See accompanying notes to the Condensed Consolidated Financial Statements
in Form 10-Q Report for the quarter ended September 30, 2006.

Contact Information

  • Contact:
    Tim Yost
    215-826-2800