SOURCE: StoneMor Partners L.P.

November 09, 2007 07:00 ET

StoneMor Partners L.P. Announces Operating Results for the 2007 Third Quarter

BRISTOL, PA--(Marketwire - November 9, 2007) - StoneMor Partners L.P. (NASDAQ: STON) today announced its operating results for the third quarter ended September 30, 2007.

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

                                    Three Months Ended   Nine Months Ended
         (in thousands)                September 30,       September 30,
                                      2006     2007       2006      2007
                                   --------- --------  --------- ---------
Total Revenues                     $  26,785 $ 35,376  $  81,729 $ 106,580
Operating Profit                   $   3,342 $  2,495  $   9,546 $  11,137
Net Income (loss)                  $   1,059 $     (7) $   3,080 $   4,005
Distributable Free Cash Flow (a)   $   6,867 $  4,435  $  12,578 $  15,195


(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 report significant improvements in all aspects of our operations during the third quarter 2007. The total revenue increase for the quarter was approximately 32% and, for the nine months, approximately 30%. The increase in revenues is primarily attributable to the large acquisition the Company consummated during September 2006 and two smaller acquisitions consummated during 2007. Even though operating profits declined from $3.3 million in the third quarter of 2006 to $2.5 million in the third quarter of 2007, there were three items of significance included in the 2007 operating results that are not included in the 2006 operating results.

--  As indicated in previous quarters, the Company has been accruing a non-
    cash charge for compensation in the form of units that were issued to its
    employees in the fourth quarter of 2006. Under current GAAP, the Company is
    required to accrue a non-cash charge against its earnings over the
    anticipated vesting benefit period. This non-cash charge commenced in the
    fourth quarter 2006 and continues through the third quarter of 2009. That
    charge for the September 2007 quarter is $1.8 million, with no comparable
    2006 amount.
--  Additionally, the company refinanced its debt obligations with its
    major banks during August 2007 and, as such, was required to write off
    $157,000 in non-cash loan acquisition costs for its previous debt issuance.
    There is no similar 2006 charge.
--  The Company is consistently searching out new companies to acquire. In
    this connection, we have for the past year and a half been actively engaged
    in the process of attempting to acquire 28 cemeteries from the state of
    Michigan. In that regard, we spent considerable costs in the legal due
    diligence effort and were not successful in acquiring those properties. As
    a result, we have taken a charge of $551,000 in the third quarter 2007,
    with no comparable 2006 amounts.  While this amount is non-cash in the
    quarter, it does represent cash expended in prior periods.
    

These three items total $2.5 million. When added to the Company's operating profit of $2.4 million, they indicate an improvement in normal operations of 49% over the comparable period in 2006. As part of this improvement in operating profit, our funeral homes improved by more than 90%. This improvement is also related to acquisitions consummated during the fourth quarter 2006. While still small (less than 10% of our overall operating profit), we expect our funeral homes to be greater contributors to operating profit in the future. The majority of cost increases in the quarterly financial statements are related to acquisitions.

As discussed previously, much of the Company's growth has been and will be related to future acquisitions of cemeteries and funeral homes. When these entities are acquired, most of the expenses flow through into the earnings statement, but most of the revenues fall into the deferred revenue category on the balance sheet. As products are purchased, revenues are realized. The Company is now starting to realize the revenues from the major acquisitions consummated last year, as it takes six to nine months for this process to evolve.

Many of the factors previously indicated for the September quarter also affect the year-to-date operating results. While the Company's revenues increased approximately 30%, including over 100% increase in funeral home revenues, operating profits increased only 17%. Included in the nine-month numbers (as included in the quarterly numbers) is $157,000 in financing costs, $4.113 million in non-cash compensation costs, and $551,000 in costs related to the Michigan acquisition. There were no similar costs during 2006. Excluding those items, operating profits increased in excess of 67%. Interest expense increased both for the quarter and the nine months, primarily related to borrowings for acquisitions and an increase in interest rate. Recognition of non-cash compensation has no current income tax benefit, which is one of the reasons we have a disproportionate tax provision.

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   Nine Months Ended
                                       September 30,       September 30,
                                      2006      2007      2006      2007
                                   --------- --------- --------- ---------
Interments performed                   6,116     6,992    18,704    21,740
Cemetery revenues per interment
 performed                         $   4,197 $   4,734 $   4,172 $   4,543
Aggregate value of contracts
 written*                          $  27,126 $  33,797 $  85,390 $ 104,178
Average dollar amount per contract $   2,138 $   2,212 $   2,135 $   2,202
Total interment rights sold            4,105     4,811    11,994    16,538

         *in thousands

The improvement in interments performed is primarily related to the Company's acquisitions completed in September 2006, the properties of which were not included in the third quarter 2006 operating results. The increase in cemetery revenues per interment performed reflects the implementation of the Company's operating policies on the newly acquired properties. The aggregate value of contracts written increased primarily as a result of additional contracts written related to the acquisition mentioned above. 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.

The increase in the average dollar amount per contract is primarily a result of inflation on our prices over the past year. We generally find that inflation around 3% is reasonable for the Company's business.

Distributable Free Cash Flow

The company defines distributable free cash flow as net cash provided by operating activities before appropriate reserves, if any, less maintenance capital expenditures 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, 2006 and 2007 follows:

                                    Three Months Ended   Nine Months Ended
(in thousands)                         September 30,       September 30,
                                      2006      2007      2006      2007
                                   --------- --------- --------- ---------
Net cash provided by operating
 activities                        $ 10,984  $   5,046 $  16,443 $  14,777
Maintenance capital expenditures   $   (703) $    (251)$  (2,443)$  (1,412)
Payments on account of 2006
 receivable collection program     $ (2,800)           $  (2,800)
Annual expenses paid, less
 quarterly reserves                $   (614) $    (360)$   1,378 $   1,830
                                   --------- --------- --------- ---------
Distributable free cash flow       $   6,867 $   4,435 $  12,578 $  15,195
                                   ========= ========= ========= =========

Annual expenses paid, less quarterly reserves in the chart above reflect an attempt to normalize certain items where more than one quarter's expense was included in the third quarter. Included in the amount are allocations for bonuses and taxes, the total of which is usually paid annually, and other expenses in which annual expenses are paid in one quarter. During the third quarter of 2006, the Company conducted a special receivables collection effort and collected over $6mm. During the fourth quarter 2006, $2.8mm was deposited into trust related to this collection effort.

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.

Investors' Conference Call

An investors' conference call to review the 2007 third quarter results (which will be released before this call) will be held on Friday, November 9, 2007, at 4:00 p.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 6:00 p.m. Eastern Time on November 23, 2007. The reservation number for the audio replay is as follows: 21352610. 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 178 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 in September 2006; 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)


                                                        Dec. 31,  Sept. 30,
                                                          2006      2007
                                                        --------- ---------

ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                            $   9,914 $  13,228
   Accounts receivable, net of allowance                   22,968    23,058
   Prepaid expenses                                         2,801     3,498
   Other current assets                                     2,533     3,966
                                                        --------- ---------
     Total current assets                                  38,216    43,750

LONG-TERM ACCOUNTS RECEIVABLE - net of allowance           36,878    39,156
CEMETERY PROPERTY                                         171,714   173,110
PROPERTY AND EQUIPMENT, net of accumulated depreciation    29,027    28,307
MERCHANDISE TRUSTS, restricted, at fair value             147,788   147,487
PERPETUAL CARE TRUSTS, restricted, at fair value          168,631   166,245
DEFERRED FINANCING COSTS - net of accumulated
 amortization                                               1,242     3,471
DEFERRED SELLING AND OBTAINING COSTS                       33,478    35,336
OTHER ASSETS                                                   51       371
                                                        --------- ---------
TOTAL ASSETS                                            $ 627,025 $ 637,233
                                                        ========= =========

LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
   Accounts payable and accrued liabilities             $  11,345 $  11,588
   Accrued interest                                           361       501
   Current portion, long-term debt                          1,388       667
                                                        --------- ---------
     Total current liabilities                             13,094    12,756

LONG-TERM DEBT                                            102,104   115,034
DEFERRED CEMETERY REVENUES, net                           196,103   201,742
MERCHANDISE LIABILITY                                      45,805    49,528
                                                        --------- ---------
TOTAL LIABILITIES                                         357,106   379,060
                                                        --------- ---------

COMMITMENTS AND CONTINGENCIES
NON-CONTROLLING INTEREST IN PERPETUAL CARE TRUSTS         168,631   166,245

PARTNERS' EQUITY
   General partner                                          1,382     1,785
   Limited partners:
    Common                                                 71,700    66,518
    Subordinated                                           28,206    23,625
                                                        --------- ---------
     Total partners' equity                               101,288    91,928
                                                        --------- ---------

TOTAL LIABILITIES AND PARTNERS' EQUITY                  $ 627,025 $ 637,233
                                                        ========= =========


See accompanying notes to the Condensed Consolidated Financial Statements
in Form 10-Q Report for the quarter ended September 30, 2007.



                          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,
                                    --------- --------  --------- ---------
                                       2006     2007       2006      2007
                                    --------- --------  --------- ---------
Revenues:
   Cemetery
    Merchandise                     $  13,303 $ 19,477  $  41,458 $  57,338
    Services                            6,182    7,188     18,524    21,523
    Investment and other                6,185    6,438     18,043    19,913
   Funeral home
    Merchandise                           477    1,110      1,656     3,442
    Services                              638    1,163      2,048     4,364
                                    --------- --------  --------- ---------
     Total revenues                    26,785   35,376     81,729   106,580
                                    --------- --------  --------- ---------

Costs and Expenses:
 Cemetery cost of goods sold
  (exclusive of depreciation shown
   separately below):
    Perpetual care                        794      845      2,377     2,685
    Merchandise and Services            2,735    4,054      8,287    11,802
 Cemetery expense                       5,983    7,933     17,985    22,593
 Selling expense                        5,270    7,145     16,689    21,860
 General and administrative expense     3,105    4,031      9,255    11,462
 Corporate overhead (including
  $1,774 and $4,113 in stock-based
   compensation for the three and
    nine months ended September 30,
    2007)                               3,772    5,821     12,006    16,054
 Depreciation and amortization            842    1,111      2,588     2,900
 Funeral home expense
    Merchandise                           186      344        589     1,198
    Services                              426    1,041      1,374     3,057
    Other                                 330      556      1,033     1,833
                                    --------- --------  --------- ---------
    Total cost and expenses            23,443   32,881     72,183    95,444
                                    --------- --------  --------- ---------

OPERATING PROFIT                        3,342    2,495      9,546    11,136

EXPENSES RELATED TO REFINANCING             -      157          -       157

INTEREST EXPENSE                        1,860    2,263      5,375     6,441
                                    --------- --------  --------- ---------

INCOME BEFORE INCOME TAXES              1,482       75      4,171     4,538

INCOME TAXES:
   State                                  130      106        385       384
   Federal                                293      (24)       706       149
                                    --------- --------  --------- ---------
     Total income taxes                   423       82      1,091       533
                                    --------- --------  --------- ---------

NET INCOME (LOSS)                   $   1,059 $     (7) $   3,080 $   4,005
                                    ========= ========  ========= =========

General partner's interest in net
 income for the period              $      21 $     ()  $      62 $      81

Limited partners' interest in net
 income for the period
   Common                           $     536 $     (4) $   1,558 $   2,083
   Subordinated                     $     502 $     (3) $   1,460 $   1,840

Net income per limited partner unit
 (basic and diluted)                $     .12 $   (.00) $     .34 $     .46

Weighted average number of limited
 partners' units
 outstanding (basic and diluted)        8,767    9,036      8,763     9,036


See accompanying notes to the Condensed Consolidated Financial Statements
in Form 10-Q Report for the quarter ended September 30, 2007.



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


                                    Three months ended   Nine months ended
                                       September 30,       September 30,
                                    --------  --------  --------  --------
                                      2006      2007      2006      2007
                                    --------  --------  --------  --------

OPERATING ACTIVITIES:
   Net income  (loss)               $  1,059  $     (7) $  3,080  $  4,005
   Adjustments to reconcile net
    income to net cash provided by
    operating activity:
    Cost of lots sold                  1,048     1,186     3,258     3,536
    Depreciation and amortization        842     1,111     2,588     2,900
    Stock-based compensation               -     1,774         -     4,113
    Other non cash                        73         -       376         -
    Changes in assets and
     liabilities that provided
     (used) cash:                                                        -
     Accounts receivable               9,703     2,211     9,828    (2,940)
     Allowance for doubtful
      accounts                          (284)     (720)      500       804
     Merchandise trust fund             (550)      154    (1,419)     (138)
     Prepaid expenses                   (263)     (379)     (583)     (696)
     Other current assets             (1,071)     (192)   (1,085)     (644)
     Other assets                          -       (24)      (57)     (140)
     Accounts payable and accrued
      and other liabilities              185       116    (1,755)   (2,493)
     Deferred selling and obtaining
      costs                             (842)     (370)   (2,528)   (1,662)
     Deferred cemetery revenue         2,748     2,317     9,147    10,465
     Merchandise liability            (1,664)   (2,131)   (4,907)   (2,333)
                                    --------  --------  --------  --------
      Net cash provided by
       operating activities           10,984     5,046    16,443    14,777
                                    --------  --------  --------  --------
INVESTING ACTIVITIES:
   Cost associated with potential
    acquisitions                         864      (287)      (20)   (1,323)
   Purchase of Subsidiaries, net of
    common units issued               (9,214)   (2,501)   (9,214)   (2,501)
   Additions to cemetery property       (452)     (515)   (2,920)   (1,676)
   Divestiture of funeral home             -         -     2,091         -
   Additions to property and
    equipment                           (251)     (251)   (1,778)   (1,223)
                                    --------  --------  --------  --------
      Net cash used in investing
       activities                     (9,053)   (3,554)  (11,841)   (6,723)
                                    --------  --------  --------  --------
FINANCING ACTIVITIES:
   Cash distribution                  (4,290)   (4,752)  (12,828)  (13,972)
   Additional borrowings on
    long-term debt                    11,848    40,431    16,224    45,921
   Repayments of long-term debt          (51)  (32,788)     (661)  (33,709)
   Sale of partner units                 120         -       120         -
   Cost of financing activities            -    (2,714)        -    (2,980)
                                    --------  --------  --------  --------
      Net cash provided by (used
       in) financing activities        7,627       177     2,855    (4,740)
                                    --------  --------  --------  --------
NET INCREASE (DECREASE) IN CASH AND
 CASH EQUIVALENTS                      9,558     1,669     7,457     3,314
CASH AND CASH EQUIVALENTS -
 Beginning of period                   4,824    11,559     6,925     9,914
                                    --------  --------  --------  --------
CASH AND CASH EQUIVALENTS - End of
 period                             $ 14,382  $ 13,228  $ 14,382  $ 13,228
                                    ========  ========  ========  ========

SUPPLEMENTAL DISCLOSURE OF CASH
 FLOW INFORMATION
   Cash paid during the period for
    interest                        $  1,870  $  2,135  $  5,330  $  6,721
                                    ========  ========  ========  ========
   Cash paid during the period for
    income taxes                    $     11  $  1,378  $  3,035  $  3,257
                                    ========  ========  ========  ========

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


See accompanying notes to the Condensed Consolidated Financial Statements
in Form 10-Q Report for the quarter ended September 30, 2007.

Contact Information

  • Contact:

    Tim Yost
    215-826-2800