StoneMor Partners L.P. Reports Operating and Financial Results for the Third Quarter 2015


  • Adjusted EBITDA, a non-GAAP measure, was $23.5 million(1) for the 3rd quarter 2015,  an increase of over 20% compared with the prior year 3rd quarter 
  • Generated Distributable Available Cash, a non-GAAP measure, of $32.2 million(1) for the 3rd quarter 2015, a 13% increase  compared with the prior year 3rd quarter
  • Increased quarterly cash distribution to $0.66 per limited partner unit for the 3rd quarter 2015, a 7% increase from the prior year 3rd quarter
  • Number of cemetery contracts written in the 3rd quarter reached 30,722, a 4% increase compared with the prior year 3rd quarter 
  • Third quarter 2015 operational and financial results will be discussed on a conference call at 10AM ET on Monday, November 9th

LEVITTOWN, Pa., Nov. 09, 2015 (GLOBE NEWSWIRE) -- StoneMor Partners L.P. (NYSE:STON) (“StoneMor” or the “Partnership”) has reported operating and financial results for the third quarter 2015. 

Larry Miller, StoneMor’s President and CEO, commented, “This quarter’s results reflect the continued strength of our core businesses, as we generated 20% growth in both cemetery and funeral home quarterly margin on a year over year basis.  Not only are we executing on our acquisition strategy, whereby we’ve added 3 cemeteries and 5 funeral homes year over year, but our team continues to drive value by moderating costs and increasing revenue efficiency, as evidenced by our record revenue per written contract for pre-need sales. We expect to continue to enhance unitholder value through organic enhancement of our business as well as being acquisitive in coming periods, and believe we are well positioned to take advantage of opportunities as they arise.”

Financial Highlights

 Three Months Ended Nine Months Ended
 September 30, September 30,
  2015   2014   2015   2014 
        
Adjusted EBITDA(1)$23,457  $19,533  $71,754  $68,458 
        
Distributable Available Cash(1)$32,214  $28,474  $64,320  $59,974 
        
Net loss$(3,402) $(3,268) $(17,133) $(2,977)
        
Cash Distributions$20,392  $17,072  $56,689  $45,297 
per unit$0.66  $0.62  $1.95  $1.83 
        
 At September 30,    
  2015   2014     
Backlog(2)$607,272  $529,544     
        
Quarterly distribution asset coverage(3)6.3x      

(1) Non-GAAP financial measures used by the Partnership should not be considered as alternatives to GAAP financial measures, and you should not consider such non-GAAP measures in isolation or as a substitute for the Partnership’s results as reported under GAAP.  A reconciliation of the non-GAAP financial measures of Adjusted EBITDA, Distributable Cash Flow and Distributable Available Cash to net loss attributable to the Partnership, the most directly comparable GAAP financial measure, is provided in the financial tables of this release.  Please see footnote 1 to the Financial Information table of this release.

(2) Amounts as of period end.  Backlog is defined as deferred cemetery revenues and investment income less deferred selling and obtaining costs.  It does not include deferred unrealized gains and losses on merchandise trust assets.

(3) Ratio of selected net assets to quarterly cash distributions paid during the most recent quarterly period as of the date noted.  Please see the Distribution Asset Coverage table of this release.

  • Adjusted EBITDA, a non-GAAP measure, was $23.5 million(1) for the third quarter 2015 compared with $19.5 million for the prior year 3rd quarter, an increase of over 20%. The increase from the prior year period was primarily the result of increased sales activity, partially offset by lower investment income from trusts.
  • Distributable Available Cash, a non-GAAP measure, was $32.2 million(1) for the third quarter 2015, compared with $28.5 million for the prior year third quarter, a 13% increase. 
  • Backlog(2) increased by $77.7 million, or 15%, to $607.3 million at September 30, 2015 compared with September 30, 2014, and by $19.8 million, or 3%, compared with June 30, 2015. 
  • The Partnership declared a cash distribution for the 3rd quarter 2015 of $0.66 per common limited partner unit, a 7% increase compared with the prior year 3rd quarter and a 2% increase compared with the 2nd quarter 2015.  The Partnership’s 3rd quarter 2015 cash distribution will be paid on November 13, 2015 to holders of record as of November 6, 2015.  As previously announced, it is the Partnership’s intention to continue to increase cash distributions by $0.01 per limited partner unit per quarter through the end of 2015.
  • On a GAAP basis, net loss for the 3rd quarter 2015 was $3.4 million compared with a net loss of $3.3 million for the prior year 3rd quarter.  The loss in the current period was driven principally by the recognition of a $3.0 million legal settlement and associated costs.

Recent Events

Acquisition activity

  • During the third quarter 2015, the Partnership acquired 3 cemeteries in Illinois, 3 funeral homes in Illinois and 2 funeral homes in Florida for an aggregate purchase price of $14.0 million. The funeral homes have performed approximately 1,375 funeral services in the aggregate annually, and the cemeteries have performed approximately 503 interments in the aggregate annually.  After these acquisitions, the Partnership operates 306 cemeteries and 103 funeral homes in 28 states and Puerto Rico.

Public offering of common units

  • On July 10, 2015, the Partnership completed a follow-on public offering of 2,415,000 common units at a public offering price of $29.63 per unit. Net proceeds of the offering, after deducting underwriting discounts and offering expenses, were approximately $67.9 million. The proceeds were utilized to pay down outstanding borrowings under the Partnership’s credit facility.

Operating Highlights

Cemetery Operations

  • Cemetery contracts written for the 3rd quarter were 30,722, compared with 29,633 contracts written for the prior year 3rd quarter, an increase of 1,089 contracts or 4%.  The increase in cemetery contracts written was principally attributable to acquisitions and other transactions completed by the Partnership since the second quarter of 2014, including its agreements with the Archdiocese of Philadelphia.
  • Average revenue per written contract was $2,802 for the 3rd quarter 2015, an increase of 7% compared with the 3rd quarter 2014.  In addition, pre-need contracts, which accounted for 50% of total contracts written for the 3rd quarter 2015 compared with 48% for the 2nd quarter 2015, reached a record $3,815 revenue per written contract for the 3rd quarter, up from $3,813 from the 2nd quarter 2015.
  • Cemetery margin(3) increased to $41.8 million for the 3rd quarter 2015, compared with $35.3 million for the prior year 3rd quarter, an increase of $6.5 million or 19%.  Cemetery margin percentage was approximately 61% for the 3rd quarter 2015, compared to 57% for the prior year 3rd quarter. The increase in cemetery margin between periods was principally attributable to an increase in contracts written as noted previously. 

(1) A reconciliation of GAAP net loss to Adjusted EBITDA, Distributable Cash Flow and Distributable Available Cash is provided in the financial tables of this release.  Please see footnote 1 to the Financial Information table of this release.

(2) Backlog is defined as deferred cemetery revenues and investment income less deferred selling and obtaining costs.  It does not include deferred unrealized gains and losses on merchandise trust assets.

(3) See the Supplemental Adjusted EBITDA, Distributable Cash Flow and Distributable Available Cash Summary in the Financial and Operating Highlights table and related footnotes in this release for information regarding the calculation of Cemetery margin, which is defined as non-deferred cemetery revenues less cost of goods sold and cemetery expenses.

Funeral Home Operations

  • Funeral home calls for the 3rd quarter were 3,814, compared with 3,595 calls for the prior year 3rd quarter, an increase of 219 calls or 6%. The increase in funeral home calls from the prior year quarter was attributable to a combination of organic growth and growth from acquisitions.
  • Funeral Home margin(1) was $5.5 million for the 3rd quarter 2015, compared with $3.8 million for the prior year 3rd quarter, an increase of $1.7 million or 44%.  Funeral Home margin percentage was approximately 32% for the 3rd quarter 2015, compared with 26% for the prior year 3rd quarter. The increase in funeral home margin and margin percentage was principally attributable to revenues related to insurance contracts.

Trust Investment and Interest Income

  • Combined Trust Investment and Interest Income(1) was $10.9  million for the 3rd quarter 2015 compared with $15.8 million for the prior year 3rd quarter, an decrease of $4.9 million or 31%.  The decrease was largely the result of the timing of realized trust gains.
  • Trust fund investment returns, including realized gains and losses and dividends (excluding realized gains on perpetual care trusts), net of fees, were 1.1% (4.2% annualized) for the 3rd quarter 2015, compared with 1.6% (6.4% annualized) for the prior year 3rd quarter and 1.9% (7.5% annualized) for the 2nd quarter 2015. The decrease in the rate of return in the current period compared to the comparable prior year period and 2nd quarter 2015 was a result of the timing of realized merchandise trust gains. 

Corporate Expenses, Liquidity and Capital Structure

  • Combined cash selling, general and administrative, and corporate overhead expenses for the 3rd quarter 2015 were $34.7 million, a decrease of $0.6 million or 2% from $35.3 million for the prior year 3rd quarter, and a decrease of $4.0 million or 10% from the 2nd quarter 2015.  The decrease from the prior year third quarter was the result of reduced professional fees. The decrease from the 2nd quarter of 2015 resulted from decreased commission expense, professional fees and advertising costs.
     
  • Cash interest expense was $4.9 million for the 3rd quarter 2015 compared with $4.4 million for the prior year 3rd quarter and $5.0 million for the sequential quarter.  The change from period to period is primarily driven by changes in the amounts outstanding under our credit facility.
     
  • As of September 30, 2015, the Partnership had $291.0 million of total debt, including $113.5 million outstanding under its revolving credit facility.  The Partnership had approximately $66.5 million available on its revolving credit facility and $11.8 million of cash and cash equivalents as of September 30, 2015. 

(1) See the Supplemental Adjusted EBITDA, Distributable Cash Flow and Distributable Available Cash Summary in the Financial and Operating Highlights table and related footnotes in this release for information regarding the calculation of Funeral Home margin, which is defined as non-deferred Funeral Home revenues less associated expenses, and Trust Investment and Interest Income, which is defined as non-deferred Investment income from trusts and interest income.

Investor Conference Call and Webcast

The Partnership will conduct a conference call to discuss 2015 third quarter financial results today, Monday, November 9, 2015 at 10:00 a.m. ET.  The conference call can be accessed by calling (800) 698-0460.  An audio replay of the conference call will be available by calling (800) 633-8284 through 12:00 p.m. ET on November 23, 2015.  The reservation number for the audio replay is 21783749.  A live webcast of the conference call will also be available to investors who may access the call through the investors section of www.stonemor.com.  An audio replay of the conference call will also be archived on the Partnership’s website at www.stonemor.com.   

About StoneMor Partners L.P.

StoneMor Partners L.P., headquartered in Levittown, Pennsylvania, is an owner and operator of cemeteries and funeral homes in the United States, with 306 cemeteries and 103 funeral homes in 28 states and Puerto Rico. 

StoneMor is the only publicly traded death care company structured as a partnership.  StoneMor’s cemetery products and services, which are sold on both a pre-need (before death) and at-need (at death) basis, include:  burial lots, lawn and mausoleum crypts, burial vaults, caskets, memorials, and all services which provide for the installation of this merchandise. For additional information about StoneMor Partners L.P., please visit StoneMor’s website, and the investors section, at http://www.stonemor.com.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements that involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements.  The Partnership cautions readers that any forward-looking information is not a guarantee of future performance.  Such forward-looking statements include, but are not limited to, statements about future financial and operating results, the Partnership’s plans, objectives, expectations and intentions and other statements that are not historical facts. Risks, assumptions and uncertainties that could cause actual results to materially differ from the  forward-looking statements include, but are not limited to, those associated with the cash flow from our pre-need and at-need sales, our trusts, and financings, which may impact our ability to meet our financial projections, our ability to service our debt and pay distributions, and our ability to increase our distributions; future revenue and revenue growth; the integration or anticipated benefits of our recent acquisitions or any future acquisitions; our ability to complete and fund additional acquisitions; the effect of economic downturns; the impact of our leverage on our operating plans; the decline in the fair value of certain equity and debt securities held in our trusts; our ability to attract, train and retain an adequate number of sales people; the volume and timing of pre-need sales of cemetery services and products; increased use of cremation; changes in the death rate; changes in the political or regulatory environments, including potential changes in tax accounting and trusting policies; litigation or legal proceedings that could expose us to significant liabilities and damage our reputation; the effects of cyber security attacks due to our significant reliance on information technology; the financial condition of third-party insurance companies that fund our pre-need funeral contracts; and other risks, assumptions and uncertainties detailed from time to time in the Partnership’s reports filed with the U.S. Securities and Exchange Commission, including quarterly reports on Form 10-Q, reports on Form 8-K and annual reports on Form 10-K. Forward-looking statements speak only as of the date hereof, and the Partnership assumes no obligation to update such statements, except as may be required by applicable law.


STONEMOR PARTNERS L.P.
CONSOLIDATED BALANCE SHEETS
(unaudited; in thousands)
 
  September 30, December 31,
ASSETS  2015   2014 
Current assets:    
Cash and cash equivalents $11,792  $10,401 
Accounts receivable, net of allowance  66,099   62,503 
Prepaid expenses  7,064   4,708 
Other current assets  33,448   24,266 
Total current assets  118,403   101,878 
     
Long-term accounts receivable, net of allowance  93,273   89,536 
Cemetery Property  344,662   339,848 
Property and equipment, net of accumulated depreciation  102,671   100,391 
Merchandise trusts, restricted, at fair value  459,320   484,820 
Perpetual care trusts, restricted, at fair value  311,781   345,105 
Deferred financing costs, net of accumulated amortization  7,907   9,089 
Deferred selling and obtaining costs  108,754   97,795 
Deferred tax assets  42   40 
Goodwill  64,048   58,836 
Intangible assets  67,681   68,990 
Other assets  3,158   3,136 
Total assets $1,681,700  $1,699,464 
     
LIABILITIES AND PARTNERS’ CAPITAL    
     
Current liabilities:    
Accounts payable and accrued liabilities $37,448  $35,382 
Accrued interest  4,868   1,219 
Long-term debt, current portion  3,294   2,251 
Total current liabilities  45,610   38,852 
     
Other long-term liabilities  2,003   1,292 
Obligation for lease and management agreements, net  9,307   8,767 
Long-term debt  287,724   285,378 
Deferred cemetery revenues, net  645,233   643,408 
Deferred tax liabilities  17,815   17,708 
Merchandise liability  158,592   150,192 
Perpetual care trust corpus  311,781   345,105 
Total liabilities  1,478,065   1,490,702 
     
Partners’ capital    
General partner’s interest  (8,612)  (5,113)
Common limited partners’ interests  212,247   213,875 
Total partners’ capital  203,635   208,762 
Total liabilities and partners’ capital $1,681,700  $1,699,464 


STONEMOR PARTNERS L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except per unit data)
 
 Three Months Ended Nine Months Ended
 September 30, September 30,
  2015   2014   2015   2014 
Revenues:       
Cemetery:       
Merchandise$34,709  $37,812  $97,688  $98,452 
Services 14,195   14,971   42,696   37,760 
Investment and other 15,054   13,152   43,062   42,418 
Funeral home:       
Merchandise 6,588   4,752   19,913   14,770 
Services 7,654   7,487   23,083   20,694 
Total revenues 78,200   78,174   226,442   214,094 
        
Costs and expenses:       
Cost of goods sold:       
Perpetual care 1,993   1,898   5,727   5,110 
Merchandise 6,735   7,164   19,891   20,106 
Cemetery expense 18,245   18,076   53,789   47,546 
Selling expense 14,647   16,494   44,326   42,544 
General and administrative expense 8,819   9,808   27,340   26,333 
Corporate overhead 8,152   8,392   26,979   22,394 
Depreciation and amortization 3,311   3,112   9,207   7,993 
Funeral home expense:       
Merchandise 1,002   1,441   5,444   4,691 
Services 5,432   5,522   16,728   15,023 
Other 4,774   3,396   13,335   9,367 
Acquisition related costs, net of recoveries 963   451   1,648   2,040 
Total costs and expenses 74,073   75,754   224,414   203,147 
        
Operating profit 4,127   2,420   2,028   10,947 
        
Gain on acquisition/dispositions 1,540   244   1,540   656 
Gain (loss) on settlement agreement, net (3,000)  -   (3,000)  888 
Interest expense (5,669)  (5,268)  (16,902)  (15,990)
        
Net loss before income taxes (3,002)  (2,604)  (16,334)  (3,499)
        
Income tax benefit (expense) (400)  (664)  (799)  522 
Net loss$(3,402) $(3,268) $(17,133) $(2,977)
        
Allocation of net loss attributable to limited partners and the general partner:    
General partner’s interest$(42) $(44) $(227) $(49)
Limited partners’ interest (3,360)  (3,224)  (16,906)  (2,928)
Net loss$(3,402) $(3,268) $(17,133) $(2,977)
        
Net loss attributable to common limited partners per unit    
(basic and diluted)$(0.11) $(0.11) $(0.56) $(0.11)
        
Weighted average limited partner units outstanding:    
Basic and diluted 31,491   29,018   30,011   25,712 


STONEMOR PARTNERS L.P.
FINANCIAL AND OPERATING HIGHLIGHTS
(unaudited)
 
 Three Months Ended Nine Months Ended
 September 30, September 30,
  2015   2014   2015   2014 
        
Financial Data:       
Net loss per limited partners per unit – basic and diluted$(0.11) $(0.11) $(0.56) $(0.11)
        
Adjusted EBITDA (in thousands)(1)$23,457  $19,533  $71,754  $68,458 
        
Distributable Available Cash (in thousands)(1)$32,214  $28,474  $64,320  $59,974 
per limited partner unit(1)$1.02  $0.98  $2.14  $2.33 
        
Cash distributions paid per unit(2)$0.66  $0.62  $1.95  $1.83 
        
Operating Data:       
Interments Performed 12,878   13,079   41,514   36,580 
        
Interment rights sold (3):       
Lots 8,086   8,613   23,980   24,360 
Mausoleum crypts (including pre-construction) 446   494   1,779   1,697 
Niches 441   363   1,285   1,144 
Net interment rights sold(3) 8,973   9,470   27,044   27,201 
        
Number of cemetery contracts written 30,722   29,633   92,664   82,286 
Aggregate contract amount (in thousands, excluding interest)$86,092  $77,568  $254,600  $219,178 
Average amount per contract (excluding interest)$2,802  $2,618  $2,748  $2,664 
        
Pre-need cemetery contracts written 15,257   14,215   44,687   40,474 
Aggregate pre-need contract amount (in thousands, excluding  interest)$58,211  $50,222  $168,216  $144,233 
Average amount per pre-need contract (excluding interest)$3,815  $3,533  $3,764  $3,564 
        
At-need cemetery contracts written 15,465   15,418   47,977   41,812 
Aggregate at-need contract amount (in thousands excluding  interest) $27,881  $27,346  $86,384  $74,945 
Average amount per at-need contract (excluding interest)$1,803  $1,774  $1,801  $1,792 
        
Funeral home calls 3,814   3,595   11,792   10,292 

_______________________________________________________

  (1)A reconciliation of GAAP net loss to Adjusted EBITDA, Distributable Cash Flow and Distributable Available Cash is provided in the financial tables of this release.  Please see footnote 1 to the Financial Information table of this release.
  (2)Represents the cash distributions declared for the respective period and paid by the Partnership within 45 days after the end of each quarter, utilizing the distributable cash flow generated during the respective period.
  (3)Net of cancellations.  Sales of double-depth burial lots are counted as two sales.  



STONEMOR PARTNERS L.P.
FINANCIAL AND OPERATING HIGHLIGHTS
(unaudited; in thousands, except per unit amounts)
 
 Three Months Ended Nine Months Ended
 September 30, September 30,
Reconciliation of net loss to non-GAAP measures(1): 2015   2014   2015   2014 
Net loss$(3,402) $(3,268) $(17,133) $(2,977)
Acquisition and related costs 963   451   1,648   2,040 
Depreciation and amortization 3,311   3,112   9,207   7,993 
Cost of cemetery lots sold 2,589   1,525   7,506   7,181 
Non-cash interest expense 740   830   2,207   2,127 
Non-cash stock compensation expense 277   265   824   802 
Maintenance capital expenditures(2) (1,632)  (2,326)  (5,011)  (6,430)
Non-cash income tax expense 550   1,082   905   (1,776)
Gain on acquisition/dispositions (1,540)  (244)  (1,540)  (656)
Net operating profit deferral from non-delivered merchandise and services(3) 12,190   11,760   50,541   39,495 
Distributable Cash Flow (1)$14,046  $13,187  $49,154  $47,799 
Supplemental Adjusted EBITDA, Distributable Cash Flow and Distributable Available Cash Summary(3):
Revenues       
Pre-need cemetery revenues$42,492  $36,170  $122,397  $104,555 
At-need cemetery revenues 25,151   24,746   78,562   67,704 
Investment income from trusts 8,691   13,985   36,317   39,225 
Interest income 2,233   1,807   6,617   5,848 
Funeral home revenues 17,077   14,457   50,226   40,777 
Other cemetery revenues 1,154   455   4,198   6,163 
Total revenues 96,798   91,620   298,317   264,272 
Costs and expenses         
Cost of goods sold(4) 8,743   8,025   26,092   22,126 
Cemetery expense 18,245   18,076   53,789   47,546 
Selling expense 18,034   17,377   56,276   48,404 
General and administrative expense 8,819   9,808   27,340   26,333 
Cash corporate overhead(5) 7,875   8,127   26,155   21,592 
Funeral home expense 11,625   10,674   36,911   29,813 
Total costs and expenses 73,341   72,087   226,563   195,814 
Adjusted EBITDA(1) 23,457   19,533   71,754   68,458 
Cash interest expense(6) (4,929)  (4,438)  (14,695)  (13,863)
Cash income taxes 150   418   106   (1,254)
Cash gain (loss) on settlement and acquisition/disposition(7) (3,000)  -   (3,000)  888 
Maintenance capital expenditures(2) (1,632)  (2,326)  (5,011)  (6,430)
Distributable Cash Flow(1) 14,046   13,187   49,154   47,799 
        
Discretionary adjustments considered by the Board of Directors of the General Partner
in the determination of quarterly cash distributions:
Non-recurring legal settlement(7) 3,000   -   3,000   - 
Non-recurring impact from early repayment marketing program(8) 1,765   -   1,765   - 
Distributable Cash Flow with discretionary adjustments by the Board of Directors of the General Partner 18,811   13,187   53,919   47,799 
Cash on hand – beginning of period 13,403   15,287   10,401   12,175 
Distributable Available Cash(1)(9)$32,214  $28,474  $64,320  $59,974 
        
Cash distributions paid(10)$20,392  $17,072  $56,689  $45,297 
per limited partner unit$0.66  $0.62  $1.95  $1.83 
        
Excess of Distributable Available Cash after cash distributions paid(11)$11,822  $11,402  $7,631  $14,677 
        

(1) Although not prescribed under generally accepted accounting principles (“GAAP”), the Partnership’s management believes the presentation of Adjusted EBITDA, Distributable Cash Flow (“DCF”) and Distributable Available Cash is relevant and useful because it helps the Partnership’s investors understand its operating performance, allows for easier comparison of its results with other master limited partnerships (“MLP”), and is a critical component in the determination of quarterly cash distributions. As a MLP, the Partnership is required to distribute 100% of available cash, subject to cash reserves established by its general partner and as defined in its limited partnership agreement (“Available Cash”), to investors on a quarterly basis, in compliance with applicable Delaware law. The Partnership refers to Available Cash prior to the establishment of cash reserves as Distributable Available Cash.  Adjusted EBITDA, DCF and Distributable Available Cash should not be considered in isolation of, or as a substitute for, net income as an indicator of operating performance or cash flows from operating activities as a measure of liquidity. While the Partnership’s management believes that its methodology of calculating Adjusted EBITDA, DCF and Distributable Available Cash is generally consistent with the common practice of other MLPs, such metrics may not be consistent and, as such, may not be comparable to measures reported by other MLPs, who may use other adjustments related to their specific businesses. Adjusted EBITDA, DCF and Distributable Available Cash are supplemental financial measures used by the Partnership’s management and by external users of the Partnership’s financial statements such as investors, lenders under the Partnership’s credit facility, research analysts, rating agencies and others to assess its:

  • Operating performance as compared to other publicly traded partnerships, without regard to financing methods, historical cost basis or capital structure;
  • Ability to generate sufficient cash flows to support its distributions to unitholders;
  • Ability to incur and service debt and fund acquisitions and growth opportunities; and 
  • Ability to comply with financial covenants in its Credit Facility, which is calculated based upon Adjusted EBITDA with certain adjustments.

DCF is determined by calculating EBITDA, which is defined as net income (loss) plus interest expense, income tax, and depreciation and amortization, then adjusting it for non-cash, non-recurring and other items to achieve Adjusted EBITDA, and then deducting cash interest expense, net cash income tax, maintenance capital expenditures and other items. Distributable Available Cash is then determined by adjusting DCF for discretionary adjustments considered by the Board of Directors of the General Partner in determination of the quarterly cash distribution, and then adding cash on hand at the beginning of the period.  The Partnership defines Adjusted EBITDA as net income (loss) plus the following adjustments:

  • Interest expense;
  • Income tax expense; 
  • Depreciation and amortization.
  • Asset impairments;
  • Acquisition and related costs;
  • Non-cash stock compensation;
  • (Gains) losses on asset disposal; and
  • Other items.

(2) Maintenance capital expenditures include those capitalized costs which the Partnership incurs to maintain its properties and equipment as well as corporate expenditures.

(3) Includes adjustments to add back certain revenues and related expenses deferred in accordance with GAAP. The Partnership’s management has provided this data so as to present its results in a manner consistent with its internal managerial accounting practices, which recognizes certain revenue and related expenses when contracts are signed by the customer and accepted by the Partnership.  Under GAAP, the Partnership recognizes pre-need cemetery sales for sales of burial lots and mausoleum crypts when the product is constructed and at least 10% of the sales price is collected, while other products are recognized when the criteria for delivery under GAAP are met, which include purchase of the product, delivery and installation, and transfer of title, among other items.  The Partnership’s management believes that this data is relevant and useful to its investors so as to better understand its operating performance and allow for easier comparison to other MLPs.

(4) Excludes non-cash amortization of cemetery property.

(5) Excludes non-cash stock compensation expense.

(6) Excludes non-cash amortization of deferred finance costs and other non-cash items.

(7) Consists of the estimated non-recurring settlement cost and associated legal fees of a litigation matter.  The Board of Directors and management of the General Partner deemed this item as non-recurring and excluded the impact in its determination of DCF and Distributable Available Cash for the period after consideration of the item’s characteristics, including, but not limited to, the type of litigation and the amount of the settlement.

(8) Consists of the non-recurring reduction of pre-need cemetery revenues resulting from the Partnership’s early payment marketing program, which offers certain discounts for installment pre-need sales if paid in full within specific dates.   The Board of Directors and management of the General Partner considered this item as non-recurring and excluded the impact in its determination of DCF and Distributable Available Cash for the period as they do not expect to offer such programs in future periods.

(9) Including the discretionary adjustments by the Board of Directors of the General Partner in the determination of quarterly cash distributions, Adjusted EBITDA would have been $25.2 million and $73.5 million for the three and nine months ended September 30, 2015.

(10) Represents cash distributions declared for the respective period and paid by the Partnership within 45 days after the end of each quarter, utilizing the DCF and Distributable Available Cash generated during the respective period.

(11) The Partnership seeks to at least maintain its current cash distribution in future quarterly periods, and expects to only increase such cash distributions when future DCF and Distributable Available Cash amounts allow for it and are expected to be sustained. The Partnership’s determination of quarterly cash distributions and its resulting determination of the amount of excess (shortfall) those cash distributions generate in comparison to DCF and Distributable Available Cash are based upon its assessment of numerous factors, including but not limited to the variability of cash flow from the Partnership’s pre-need and at-need sales and its trust investments performance, interest rate movements, and financial leverage.  The Partnership also considers its historical trailing four quarters of excess or shortfalls and future forecasted excess or shortfalls that its cash distributions generate in comparison to DCF and Distributable Available Cash due to the variability of its DCF and Distributable Available Cash generated each quarter, which could have more or less excess (shortfalls) generated quarter to quarter.
       

STONEMOR PARTNERS L.P.
DISTRIBUTION ASSET COVERAGE
(unaudited; in thousands, except ratios)
 
  September 30, December 31,
   2015   2014 
Selected assets:    
Cash and cash equivalents $11,792  $10,401 
Accounts receivable, net of allowance  66,099   62,503 
Long-term accounts receivable, net of allowance  93,273   89,536 
Merchandise trusts, restricted, at fair value  459,320   484,820 
Total selected assets  630,484   647,260 
     
     
Selected liabilities:    
Accounts payable and accrued liabilities  37,448   35,382 
Accrued interest  4,868   1,219 
Long-term debt, current portion  3,294   2,251 
Long-term debt  287,724   285,378 
Merchandise liability  158,592   150,192 
Total selected liabilities  491,926   474,422 
Total selected net assets $138,558  $172,838 
Distribution asset coverage(1) 6.3x 9.1x
     

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(1) Ratio of selected net assets to quarterly cash distributions paid during the most recent quarterly period as of the date noted. 


            

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