Print this Article
RSSMARKET WIRE
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: Tim Yost 215-826-2800
SOURCE: StoneMor Partners L.P.
