StoneMor Partners L.P. Announces Second Quarter 2014 Financial Results and Reaffirms Intent to Raise Future Distributions

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| Source: StoneMor Partners L.P.

LEVITTOWN, Pa., Aug. 8, 2014 (GLOBE NEWSWIRE) -- StoneMor Partners L.P. (NYSE:STON) ("StoneMor") announced its results from operations for the three months ended June 30, 2014.

Financial Highlights

  • Reaffirms its intent to increase quarterly distribution at least $0.01 per unit each quarter through the end of 2015.
  • Revenues (GAAP) for the three months ended June 30, 2014 were $71.5 million versus $62.4 million in the prior-year period, a 14.6% increase.
  • Production-based revenues (non-GAAP) for the three months ended June 30, 2014 increased by $7.3 million, or 9.2 %, to $86.9 million from $79.6 million during the prior-year period.
  • Operating profits (GAAP) were $3.3 million for the three months ended June 30, 2014, as compared to the $2.3 million in the prior-year period, a 40.5% increase.
  • Adjusted operating profits (non-GAAP) increased by $0.6 million, or 4.4%, to $14.3 million for the three-month period ended June 30, 2014 from $13.7 million in the same period last year.
  • Distributable free cash flow (non-GAAP) for the three-month period ended June 30, 2014 was $15.4 million, compared to $24.9 million in the same period last year. The decrease was primarily the result of a large non-recurring legal settlement which contributed $11.9 million to cash flow for the 2013 second quarter. Excluding the impact of this non-recurring contribution, Distributable Cash Flow would have increased $2.4 million from $13 million in the 2013 second quarter period to $15.4 million in the second quarter of 2014. See note to table Reconciliation of Adjusted Operating Cash Flows (non-GAAP) and Distributable Free Cash Flow (non-GAAP) to Operating Cash Flows (GAAP).
  • Operating cash flows (GAAP) in the 2014 second quarter and the second quarter of 2013 were approximately $9.6 million.
  • Backlog increased $16.7 million sequentially during the period ended June 30, 2014 to $514.4 million from the first quarter period ended March 31, 2014 and increased $64.4 million on a year over year basis.
  • Cash, accounts receivable and merchandise trusts, net of merchandise liabilities reached $507.0 million at the end of June 30, 2014.
  • Net loss (GAAP) for the three months ended June 30, 2014 was approximately $0.1 million, as compared to $11.8 million in the prior-year period.

Investors are encouraged to read the Company's quarterly report on Form 10-Q to be filed with the SEC, which contains additional details, as well as financial tables, and can be found at www.stonemor.com.

The Company reports its financial results in accordance with U.S. GAAP. However, management believes that certain non-GAAP financial measures used in managing the business may provide investors with additional information regarding underlying trends and ongoing results on a comparable basis. Specifically, management believes that production-based revenues and adjusted operating profit allow the investor to gain insight into the current operating performance of the Company. Please see the section of this press release "Non-GAAP Financial Measures" to view the reconciliation. Non-GAAP financial measures used by the Company should not be considered as alternatives to GAAP financial measures, and you should not consider such non-GAAP financial measures in isolation or as a substitute for an analysis of the Company's results as reported under U.S. GAAP. Certain 2013 information has been adjusted to include the effects of retrospective adjustments resulting from the Company's 2013 first quarter acquisition.

Commenting on the quarter, Larry Miller, StoneMor's President and CEO said, "Our financial results for the second quarter exhibited the strength of our base business as the effects of our recent acquisitions had very little impact on the quarter due to the timing of when they were closed. GAAP-based revenue and Production-based revenue (non-GAAP) both showed solid gains reflecting increases in pre-need cemetery sales, at-need cemetery sales as well as continued strength from our funeral homes. Operating profit, both GAAP and Adjusted (non-GAAP), saw solid increases in the quarter. At the end of the second quarter, our cash, accounts receivable and merchandise trusts net of merchandise liabilities, reached $507 million dollars, an increase of more than $44 million from the period ended March 31, 2014. Our back log continues to grow and investment returns from our trust funds remain strong. This is a very solid financial foundation and the visibility this provides is behind out intent to increase our distribution.

"The second quarter was also an exciting time for StoneMor as we concluded three significant transactions which we believe ideally position us to benefit from ongoing industry trends. Each transaction was also unique in the way it highlights the flexibility of our growth model and access to capital for both near term and longer term impact. For example, we announced that we expected the acquisition of properties from Service Corporation International to be immediately accretive. We also announced the $130 million commitment by a private investor fund, of which an investment of $55 million helped us finance the closing of the transaction with the Archdiocese of Philadelphia and also enabled us to bridge the longer term operating cash deficit created by the build-out of the Archdiocese pre-need sales program.

"In addition, now that the transaction with the Archdiocese of Philadelphia has closed, we are uniquely positioned to generate incremental growth from these properties as we market additional products and services to the large Catholic population in the Philadelphia metropolitan area, and to the broader non-Catholic population in future years to the extent permitted under our agreement with the Archdiocese.

"As we previously announced, these transactions, in combination with our existing core business, provided us the ability not only to increase our distribution, but to also for the first time give guidance that we intend to increase our distribution by $0.01 per quarter at least through the end of 2015. That will make our distribution at the end of 2015 $0.66 per quarter or $2.64 per year. That is an increase of approximately ten percent from today's levels," Miller concluded.

Investor Conference Call and Webcast

StoneMor will conduct a conference call to discuss 2014 second quarter results today, Friday, August 8, 2014 at 10:00 a.m. ET. The conference call can be accessed by calling (800) 741-4871. An audio replay of the conference call will be available by calling (800) 633-8284 through 12:00 p.m. ET on August 22, 2014. The reservation number for the audio replay is as follows: 21728932. 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 StoneMor'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 303 cemeteries and 99 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.

Forward-Looking Statements

Certain statements contained in this press release, including, but not limited to, information regarding the status and progress of our operating activities, the plans and objectives of our management, assumptions regarding our future performance and plans, and any financial guidance or guidance related to our future distributions are forward-looking statements.

Generally, the words "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "(including, but not limited to, our intent to maintain or increase our distributions)," "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 or implied. Our major risk is related to uncertainties 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.

Our additional risks and uncertainties include, but are not limited to, the following: uncertainties associated with future revenue and revenue growth; uncertainties associated with 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 significant 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; uncertainties associated with 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; our ability to successfully implement a strategic plan relating to achieving operating improvements, strong cash flows and further deleveraging; our ability to successfully compete in the cemetery and funeral home industry; 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; uncertainties relating to the financial condition of third-party insurance companies that fund our pre-need funeral contracts; and various other uncertainties associated with the death care industry and our 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 for the fiscal year ended December 31, 2013 and our other reports filed with the SEC. Except as required under applicable law, we assume no obligation to 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.

Non-GAAP Financial Measures

Production Based Revenue

We present production based revenue because management believes it provides for a useful measure of both the value of contracts written and investment and other income generated during a given period and is a critical component of adjusted operating profit.

Production based revenue is a non-GAAP financial measure that may not be consistent with other similar non-GAAP financial measures presented by other publicly traded companies.

Adjusted Operating Profit

We present Adjusted Operating Profit because management believes it provides for a useful measure of economic value added by presenting an effective matching of the value of current and future revenue sources generated within a given period to the cost of producing such revenue and managing our day to day operations within that same period. It is a significant measure that we believe is an indicator of eventual profit generated within a given period of time.

Adjusted Operating Profit is a non-GAAP financial measure that may not be consistent with other similar non-GAAP financial measures presented by other publicly traded companies.

Adjusted Operating Cash Generated

We present adjusted operating cash generated revenue because management believes it provides for a useful measure of the amount of cash generated that is available to make capital expenditures and partner distributions once all cash flow timing issues have been settled.

Adjusted operating cash generated is a non-GAAP financial measure that may not be consistent with other similar non-GAAP financial measures presented by other publicly traded companies.

Distributable Free Cash Flow

We present Distributable Free Cash Flow because management believes this information is a useful adjunct to Net Cash Provided by (Used in) Operating Activities under GAAP. Distributable Free Cash Flow is a significant liquidity metric that we believe is an indicator of our ability to generate cash flow during any quarter at a level sufficient to pay the quarterly distribution to the holders of our common units and for other purposes, such as repaying debt and expanding through strategic investments.

Distributable Free Cash Flow is similar to quantitative standards of free cash flow used throughout the deathcare industry and to quantitative standards of distributable cash flow used throughout the investment community with respect to publicly traded partnerships, but is not intended to be a prediction of the future. However, our calculation of distributable free cash flow may not be consistent with calculations of free cash flow, distributable cash flow or other similarly titled measures of other companies. Distributable Free Cash Flow should not be used as a substitute for the GAAP measure of cash flows from operating, investing, or financing activities.

Production Based Partners' Capital

We present production based partners' capital as a means to provide better insight into the value that our activities contribute to the enterprise. Because a portion of our revenues and direct selling expenses are captured on our balance sheet until we deliver the underlying goods or services, we believe that by including these items in our view of partners' capital, we gain better insight into the value creation. 

Backlog

We define backlog 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.

Reconciliation of Production Based Revenue (non-GAAP) and Adjusted 
Operating Profit (non-GAAP) to Revenue (GAAP) and Operating Profit 
(GAAP)
                 
  Three months ended Three months ended    
  June 30, 2014 June 30, 2013    
  (in thousands) (in thousands)    
                 
                 
  Segment     Segment     Change in Change in
  Results GAAP GAAP Results GAAP GAAP GAAP results GAAP results
  (non-GAAP) Adjustments Results (non-GAAP) Adjustments Results ($) (%)
Revenues                
Pre-need cemetery revenues  $ 38,409  $ (12,659)  $ 25,750  $ 36,796  $ (12,961)  $ 23,835  $ 1,915 8.0%
At-need cemetery revenues  23,110  1,595  24,705  20,595  (1,570)  19,025  5,680 29.9%
Investment income from trusts  9,612  (3,138)  6,474  7,403  (1,405)  5,998  476 7.9%
Interest income  2,034  --  2,034  1,860  --  1,860  174 9.4%
Funeral home revenues  13,066  (1,588)  11,478  11,983  (1,307)  10,676  802 7.5%
Other cemetery revenues  682  410  1,092  960  68  1,028  64 6.2%
                 
Total revenues  86,913  (15,380)  71,533  79,597  (17,175)  62,422  9,111 14.6%
                 
Costs and expenses                
                 
Cost of goods sold  10,510  (1,860)  8,650  10,145  (2,433)  7,712  938 12.2%
Cemetery expense  16,141  --  16,141  15,408  --  15,408  733 4.8%
Selling expense  17,198  (2,337)  14,861  15,497  (3,279)  12,218  2,643 21.6%
General and administrative expense  8,880  --  8,880  7,898  --  7,898  982 12.4%
Corporate overhead  6,546  --  6,546  5,672  --  5,672  874 15.4%
Depreciation and amortization  2,513  --  2,513  2,451  --  2,451  62 2.5%
Funeral home expense  9,635  (199)  9,436  9,498  (134)  9,364  72 0.8%
Acquisition related costs, net of recoveries  1,240  --  1,240  (625)  --  (625)  1,865 -298.4%
                 
Total costs and expenses  72,663  (4,396)  68,267  65,944  (5,846)  60,098  8,169 13.6%
                 
Operating profit  $ 14,250  $ (10,984)  $ 3,266  $ 13,653  $ (11,329)  $ 2,324  $ 942 40.5%
                 
  Six months ended Six months ended    
  June 30, 2014 June 30, 2013    
  (in thousands) (in thousands)    
                 
  Segment     Segment     Change in Change in
  Results GAAP GAAP Results GAAP GAAP GAAP results GAAP results
  (non-GAAP) Adjustments Results (non-GAAP) Adjustments Results ($) (%)
Revenues                
Pre-need cemetery revenues  $ 68,385  $ (21,927)  $ 46,458  $ 67,739  $ (22,390)  $ 45,349  $ 1,109 2.4%
At-need cemetery revenues  42,958  370  43,328  41,337  (2,934)  38,403  4,925 12.8%
Investment income from trusts  25,240  (12,789)  12,451  20,505  (9,878)  10,627  1,824 17.2%
Interest income  4,041  --   4,041  3,725  --  3,725  316 8.5%
Funeral home revenues  26,320  (3,095)  23,225  24,810  (2,716)  22,094  1,131 5.1%
Other cemetery revenues  5,708  709  6,417  1,702  134  1,836  4,581 249.5%
                 
Total revenues  172,652  (36,732)  135,920  159,818  (37,784)  122,034  13,886 11.4%
                 
Costs and expenses                
                 
Cost of goods sold  19,757  (3,603)  16,154  17,898  (3,896)  14,002  2,152 15.4%
Cemetery expense  29,470  --   29,470  28,193  --  28,193  1,277 4.5%
Selling expense  31,027  (4,977)  26,050  29,332  (5,890)  23,442  2,608 11.1%
General and administrative expense  16,525  --   16,525  15,480  --  15,480  1,045 6.8%
Corporate overhead  14,002  --   14,002  13,660  --  13,660  342 2.5%
Depreciation and amortization  4,881  --   4,881  4,781  --  4,781  100 2.1%
Funeral home expense  19,139  (417)  18,722  18,421  (321)  18,100  622 3.4%
Acquisition related costs, net of recoveries  1,589  --   1,589  658  --  658  931 141.5%
                 
Total costs and expenses  136,390  (8,997)  127,393  128,423  (10,107)  118,316  9,077 7.7%
                 
Operating profit  $ 36,262  $ (27,735)  $ 8,527  $ 31,395  $ (27,677)  $ 3,718  $ 4,809 129.3%
 
The table above analyzes our results of operations and the changes therein for the three months and six months ended June 30, 2014, as compared to the same period last year. The table is structured so that our readers can determine whether changes were based upon changes in the level of merchandise and services and other revenues generated during the period and/ or changes in the timing when merchandise and services were delivered.
 
Critical Financial Measures
         
  Three months ended Six months ended
  June 30, June 30,
  2014 2013 2014 2013
  (in thousands) (in thousands)
         
Total revenues (a)  $ 71,533  $ 62,422  $ 135,920  $ 122,034
         
Production based revenue consisting of the total value of cemetery contracts written, funeral home revenues and investment and other income (b)  86,913  79,597  172,652  159,818
         
Operating profit (a)  3,266  2,324  8,527  3,718
Adjusted operating profit (b)  14,250  13,653  36,262  31,395
         
Net income loss (a)  (118)  (11,809)  291  (14,009)
         
Operating cash flows (a)  9,691  9,616  6,751  16,483
Adjusted operating cash generated (b)  16,917  27,663  39,985  45,784
Distributable free cash flow generated (b)  $ 15,383  $ 24,889  $ 37,470  $ 42,522
         
         
  As of As of    
  June 30, 2014 December 31, 2013    
         
Distribution coverage quarters (b)  10.91  7.65    
         
(a) This is a GAAP financial measure. 
(b) This is a non-GAAP financial measure as defined by the Securities and Exchange Commission. Please see the reconciliation to GAAP measures or support calculation within this press release.
 
Reconciliation of Adjusted Operating Profit (non-GAAP) to Operating Profit (GAAP)
         
  Three months ended Six months ended
  June 30, June 30,
  2014 2013 2014 2013
  (in thousands) (in thousands)
         
GAAP operating profit  $ 3,266  $ 2,324  $ 8,527  $ 3,718
         
Increase in applicable deferred revenues 15,380 17,175 36,732 37,784
         
Increase in deferred cost of goods sold and selling and obtaining costs (4,396) (5,846) (8,997) (10,107)
         
Adjusted operating profit  $ 14,250  $ 13,653  $ 36,262  $ 31,395
 
Reconciliation of Production Based Revenues (non-GAAP) to Revenues (GAAP)
         
  Three months ended June 30, Increase Increase
  2014 2013 (Decrease) ($) (Decrease) (%)
  (in thousands)
         
Value of pre-need cemetery contracts written  $ 38,409  $ 36,796  $ 1,613 4.4%
Value of at-need cemetery contracts written  23,110  20,595  2,515 12.2%
Investment income from trusts  9,612  7,403  2,209 29.8%
Interest income  2,034  1,860  174 9.4%
Funeral home revenues  13,066  11,983  1,083 9.0%
Other cemetery revenues  682  960  (278) -29.0%
         
Total production based revenues  86,913  79,597  7,316 9.2%
         
Less:        
         
Increase in deferred sales revenue and investment income  (15,380)  (17,175)  1,795 -10.5%
         
Total GAAP revenues  $ 71,533  $ 62,422  $ 9,111 14.6%
 
Reconciliation of Adjusted Operating Cash Flows (non-GAAP) and Distributable Free Cash Flow (Non-GAAP) to Operating Cash Flows (GAAP)
         
  Three months ended June 30, Six months ended June 30,
  2014 2013 2014 2013
  (in thousands) (in thousands)
         
GAAP operating cash flows  $ 9,691  $ 9,616  $ 6,751  $ 16,483
         
Add net cash inflows into the merchandise trust  (128)  10,450  16,292  22,611
Add net increase (decrease) in accounts receivable  6,855  5,814  10,023  7,199
Add net decrease (increase) in merchandise liabilities  923  608  1,752  1,612
         
Add net decrease (deduct net increase) in accounts payable and accrued expenses  (10,089)  1,601  (525)  (3,677)
Other float related changes  9,665  (426)  5,692  1,556
         
Adjusted operating cash flow generated  16,917  27,663  39,985  45,784
         
Less: maintenance capital expenditures  (2,774)  (2,149)  (4,104)  (3,920)
Plus: growth capital expenditures reclassified as operating expenses and deducted from adjusted operating cash generated (a)  1,240  (625)  1,589  658
         
Distributable free cash flow generated (b)  15,383  24,889  37,470  42,522
Cash on hand - beginning of the period  8,240  8,536  12,175  7,946
         
Distributable cash available for the period  23,623  33,425  49,645  50,468
         
Partner distributions made  $ 14,834  $ 13,242  $ 28,225  $ 25,267
         
         
(a) We maintain a credit facility from which to make acquisitions and pay acquisition related costs. We utilize this line for these costs. Accordingly, distributable free cash flow is not negatively impacted by amounts spent on acquisitions that are recorded as expenses.
(b) Results for the three and six months ended June 30, 2013 include the impact of a legal settlement, which added $11.9 million to distributable free cash flow generated.
 
Production Based Partners' Capital
     
  As of As of
  June 30, 2014 December 31, 2013
  (in thousands)
Partners' capital  $ 254,291  $ 107,520
     
Deferred selling and obtaining costs  (93,372)  (87,998)
Deferred cemetery revenues, net  638,436  579,993
     
Production based partners' capital  $ 799,355  $ 599,515
Selected Net Assets
     
  As of As of
  June 30, 2014 December 31, 2013
  (in thousands)
     
Selected assets:    
     
Cash and cash equivalents  $ 15,287  $ 12,175
Accounts receivable, net of allowance  58,454  55,415
Long-term accounts receivable, net of allowance  90,309  78,367
Merchandise trusts, restricted, at fair value  499,770  431,556
     
Total selected assets  663,820  577,513
     
Selected liabilities:    
     
Accounts payable and accrued liabilities  37,329  37,269
Accrued interest  1,500  1,512
Current portion, long-term debt  4,022  2,916
Other long-term liabilities  1,390  1,527
Long-term debt  252,981  289,016
Deferred tax liabilities  12,692  12,407
Merchandise liability  156,819  130,412
     
Total selected liabilities  466,733  475,059
     
Total selected net assets  $ 197,087  $ 102,454
     
Distribution coverage quarters (a) 10.91 7.65
     
     
(a) This is a measure of the ratio of selected net assets to a quarterly distribution amount. The quarterly distribution amount is calculated by taking the end of the period outstanding common units (28,958,497 at June 30, 2014 and 21,377,102 at December 31, 2013, respectively) and multiplying these units by the declared distribution. This total is then added to the distribution due to the General Partner based upon the same variables.
 
StoneMor Partners L.P.
Condensed Consolidated Balance Sheet
(in thousands)
(unaudited)
     
  June 30, December 31,
  2014 2013
Assets    
Current assets:    
Cash and cash equivalents $ 15,287 $ 12,175
Accounts receivable, net of allowance 58,454 55,415
Prepaid expenses 6,198 3,622
Other current assets 25,123 22,667
Total current assets 105,062 93,879
     
Long-term accounts receivable, net of allowance 90,309 78,367
Cemetery property 340,655 316,469
Property and equipment, net of accumulated depreciation 100,708 85,007
Merchandise trusts, restricted, at fair value 499,770 431,556
Perpetual care trusts, restricted, at fair value 348,902 311,771
Deferred financing costs, net of accumulated amortization 7,364 8,308
Deferred selling and obtaining costs 93,372 87,998
Deferred tax assets 42 42
Goodwill 57,128 48,737
Intangible assets 68,572 9,655
Other assets 4,902 2,554
Total assets $ 1,716,786 $ 1,474,343
     
Liabilities and partners' capital    
Current liabilities:    
Accounts payable and accrued liabilities $ 37,329 $ 37,269
Accrued interest 1,500 1,512
Current portion, long-term debt 4,022 2,916
Total current liabilities 42,851 41,697
     
Other long-term liabilities 1,390 1,527
Obligation for lease and management agreements, net 8,424 --
Long-term debt 252,981 289,016
Deferred cemetery revenues, net 638,436 579,993
Deferred tax liabilities 12,692 12,407
Merchandise liability 156,819 130,412
Perpetual care trust corpus 348,902 311,771
Total liabilities 1,462,495 1,366,823
     
Commitments and contingencies    
Partners' capital (deficit)    
General partner deficit (3,309) (2,137)
Common partners, 28,958 and 21,377 units outstanding as of June 30, 2014 and December 31, 2013, respectively 257,600 109,657
Total partners' capital 254,291 107,520
     
Total liabilities and partners' capital $ 1,716,786 $ 1,474,343
     
See accompanying notes to the Unaudited Condensed Consolidated Financial Statements on the Quarterly Report to be filed on Form 10-Q for the quarter ended June 30, 2014.
 
StoneMor Partners L.P.
Condensed Consolidated Statement of Operations
(in thousands, except per unit data)
(unaudited)
         
  Three months ended Six months ended
  June 30, June 30,
  2014 2013 2014 2013
         
Revenues:        
Cemetery        
Merchandise $ 34,572 $ 28,669 $ 60,640 $ 55,321
Services  12,492  11,072  22,789  22,371
Investment and other  12,991  12,005  29,266  22,248
Funeral home        
Merchandise  4,966  4,517 10,018 9,470
Services  6,512  6,159 13,207 12,624
Total revenues 71,533 62,422 135,920 122,034
         
Costs and expenses:        
Cost of goods sold (exclusive of depreciation shown separately below):        
Perpetual care 1,821 1,500 3,212 2,781
Merchandise 6,829 6,212 12,942 11,221
Cemetery expense 16,141 15,408 29,470 28,193
Selling expense 14,861 12,218 26,050 23,442
General and administrative expense 8,880 7,898 16,525 15,480
Corporate overhead (including $266 and $360 in unit-based compensation for the three months ended June 30, 2014 and 2013, and $537 and $690 for the six months ended June 30, 2014 and 2013, respectively) 6,546 5,672 14,002 13,660
Depreciation and amortization 2,513 2,451 4,881 4,781
Funeral home expense        
Merchandise 1,604 1,703 3,250 3,225
Services 4,714 4,768 9,501 9,325
Other 3,118 2,893 5,971 5,550
Acquisition related costs, net of recoveries 1,240 (625) 1,589 658
Total cost and expenses 68,267 60,098 127,393 118,316
         
Operating profit 3,266 2,324 8,527 3,718
         
         
Gain on acquisition -- -- 412 --
Gain on settlement agreement, net 888 11,349 888 12,261
Gain on sale of other assets -- 155 -- 155
Loss on early extinguishment of debt -- 21,595 -- 21,595
Interest expense 5,148 5,132 10,722 10,595
         
Net loss before income taxes (994) (12,899) (895) (16,056)
         
Income tax expense (benefit) (876) (1,090) (1,186) (2,047)
         
Net income (loss) $ (118) $ (11,809)  $ 291  $ (14,009)
         
General partner's interest in net income (loss) for the period $ (9) $ (218)  $ (5)  $ (258)
Limited partners' interest in net income (loss) for the period $ (109) $ (11,591)  $ 296  $ (13,751)
         
Net income (loss) per limited partner unit (basic and diluted) $ -- $ (.54) $ .01 $ (.67)
         
Weighted average number of limited partners' units outstanding - basic 25,552 21,345 24,031 20,541
Weighted average number of limited partners' units outstanding - diluted 25,552 21,345 24,312 20,541
         
Distributions declared per unit $ .600 $ .595 $ 1.200 $ 1.185
         
See accompanying notes to the Unaudited Condensed Consolidated Financial Statements on the Quarterly Report to be filed on Form 10-Q for the quarter ended June 30, 2014.
         
StoneMor Partners L.P.
Condensed Consolidated Statement of Cash Flows
(in thousands)
(unaudited)
         
  For the three months ended June 30, For the six months ended June 30,
  2014 2013 2014 2013
         
Operating activities:        
Net income (loss) $ (118) $ (11,809) $ 291 $ (14,009)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:        
Cost of lots sold 2,599 2,459 5,656 4,194
Depreciation and amortization 2,513 2,451 4,881 4,781
Unit-based compensation 266 360 537 690
Accretion of debt discounts 673 521 1,297 1,011
Gain on settlement agreement, net -- 912 -- --
Gain on acquisition -- -- (412) --
Gain on sale of other assets -- (155) -- (155)
Loss on early extinguishment of debt -- 21,595 -- 21,595
Changes in assets and liabilities that provided (used) cash:        
Accounts receivable  (6,855)  (5,814) (10,023) (7,199)
Allowance for doubtful accounts  2,186  1,234 2,891 (83)
Merchandise trust fund  128  (10,450) (16,292) (22,611)
Prepaid expenses  (3,718)  (2,299) (2,576) (1,733)
Other current assets  (5,695)  (1,957) (2,301) (1,261)
Other assets  (1,085)  4,742 (1,129) 3,972
Accounts payable and accrued and other liabilities  10,089  (1,601) 525 3,677
Deferred selling and obtaining costs  (2,571)  (3,439) (5,374) (6,184)
Deferred cemetery revenue  13,323  14,779 32,204 33,766
Deferred taxes (net)  (1,121)  (1,305) (1,672) (2,356)
Merchandise liability  (923)  (608) (1,752) (1,612)
Net cash provided by operating activities 9,691 9,616 6,751 16,483
Investing activities:        
         
Cash paid for cemetery property (2,166) (1,176) (2,914) (2,252)
Purchase of subsidiaries (53,800) -- (54,000) (9,100)
Consideration for lease and management agreements (53,000) -- (53,000) --
Cash paid for property and equipment (2,774) (2,149) (4,104) (3,920)
Proceeds from sales of other assets -- 155 -- 155
Net cash used in investing activities (111,740) (3,170) (114,018) (15,117)
Financing activities:        
Cash distributions (14,834) (13,242) (28,225) (25,267)
Additional borrowings on long-term debt 22,872 196,158 39,872 217,106
Repayments of long-term debt (19,645) (164,278) (75,149) (205,800)
Proceeds from public offering 67,273 -- 120,451 38,377
Proceeds from issuance of common units 53,430 -- 53,430 --
Fees paid related to early extinguishment of debt -- (14,920) -- (14,920)
Cost of financing activities -- (4,625) -- (4,733)
Net cash provided by (used in) financing activities 109,096 (907) 110,379 4,763
Net increase (decrease) in cash and cash equivalents 7,047 5,539 3,112 6,129
Cash and cash equivalents - Beginning of period 8,240 8,536 12,175 7,946
Cash and cash equivalents - End of period $ 15,287 $ 14,075 $ 15,287 $ 14,075
         
Supplemental disclosure of cash flow information:        
Cash paid during the period for interest $ 7,972 $ 8,509  $ 9,395  $ 9,754
Cash paid during the period for income taxes $ 3,152 $ 2,681  $ 3,152  $ 3,132
         
Non-cash investing and financing activities:        
Acquisition of assets by financing $ 20 $ 30  $ 50  $ 92
Issuance of limited partner units for cemetery acquisition $ -- $ 126  $ --  $ 3,718
Acquisition of assets by assumption of directly related liability $ 8,368 $ --  $ 8,368  $ 3,924
         
See accompanying notes to the Unaudited Condensed Consolidated Financial Statements on the Quarterly Report to be filed on Form 10-Q for the quarter ended June 30, 2014.
John McNamara
(215) 826-2800