StoneMor Partners L.P. Reports Operating and Financial Results for the 2016 First Quarter

• Adjusted EBITDA, a non-GAAP measure, was $21.9 million⁽¹⁾ for the 1^st  quarter 2016 compared with $21.7 million for the prior year 1^st quarter 
  
• Generated Distributable Available Cash, a non-GAAP measure, of $29.0 million⁽¹⁾ for the 1^st  quarter 2016 compared to $25.9 million in the prior year period, an increase of more than $3 million, or 12%
  
• Declared a quarterly cash distribution of $0.66 per limited partner unit for the 1^st quarter 2016, a 3% increase over the prior year 1^st quarter
  
• Number of cemetery contracts written during the first quarter was 26,031 compared with 27,399 in the prior year 
  
• Same store cemetery margin was $11.9 million, representing an increase of 7% compared to the 1^st quarter 2015
  
• First quarter operational and financial results will be discussed on a conference call at 11a.m ET on Monday, May 9^th

TREVOSE, Pa., May 09, 2016 (GLOBE NEWSWIRE) -- StoneMor Partners L.P. (NYSE:STON) (“StoneMor” or the “Partnership”) has reported operating and financial results for the first quarter 2016. 

Larry Miller, StoneMor’s President and CEO, commented, “The first quarter is traditionally our most challenging, particularly in the area of pre-need sales.  Winter weather generally reduces cemetery visits, reducing potential walk-in sales, and if we experience a harsh storm in one of our main regions, that can prevent our sales force from getting out and meeting potential customers.  To that point, many of our east coast properties were shut down for nearly a week in January with a major blizzard.  An approximate 4% to 6% decline in the death rate quarter-over-quarter also contributed to the overall volume decline.  In spite of these headwinds, we achieved a combined cemetery and funeral home margin of $17.2 million, which represents an 8% increase from the prior year first quarter.  While we underperformed our own expectations for the 1st quarter, we continue to believe that we will accomplish our goals for 2016, which include achieving Adjusted EBITDA of at least $26 million for the 2nd quarter 2016, and full year Adjusted EBITDA between $106 million and $115 million.  In addition, our acquisition pipeline continues to be strong, with active acquisition opportunities currently exceeding our recent annual pace.”

• Adjusted EBITDA, a non-GAAP measure, was $21.9 million⁽¹⁾ for the first quarter 2016 compared with $21.7 million for the prior year first quarter.  The increase from the prior year period includes a $1.2 million, or 11%, increase in cemetery margin, which is offset by $1.3 million lower trust investment income.
• Distributable Available Cash, a non-GAAP measure, was $29.0 million⁽¹⁾ for the first quarter 2016 compared with $25.9 million for the prior year first quarter, a 12% increase.
• Backlog⁽²⁾ increased by $52.7 million, or 9% compared with March 31, 2015.
• The Partnership declared a cash distribution for the 1^st quarter 2016 of $0.66 per common limited partner unit, a 3% increase compared with the prior year 1^st quarter.  The Partnership’s 1^st quarter 2016 cash distribution will be paid on May 13, 2016 to holders of record as of May 6, 2016. 

• On a GAAP basis, net loss for the 1^st quarter 2016 was $7.7 million compared with a net loss of $8.9 million for the prior year 1^st quarter.  The GAAP losses in both periods were driven principally by deferral of revenues, cost of goods sold and selling expenses associated with the Partnership’s pre-need sales, while other period operating costs, such as cemetery and general and administrative expenses, were expensed as incurred. 
• On April 20, 2016, the Partnership completed a follow-on public offering of 2,000,000 common units at a public offering price of $23.65 per unit. Net proceeds of the offering, after deducting underwriting discounts and offering expenses, were approximately $44.7 million.  Additionally, the underwriters of the follow-on public offering exercised their option to purchase an additional 300,000 common units at the public offering price of $23.65 per unit, resulting in net proceeds of $6.8 million, after deducting underwriting discounts and offering expenses.  The proceeds from the issuances were used to pay down outstanding indebtedness under the Credit Facility.

Recent Events

• During the three months ended March 31, 2016, the Partnership issued 727,474 common units for net proceeds of $18.8 million under an equity distribution agreement it has with a group of banks (“ATM Equity Program”). Subsequent to March 31, 2016, the Partnership issued 176,208 common units under the ATM Equity Program for net proceeds of approximately $4.2 million.

Operating Highlights

Cemetery Operations

• Cemetery contracts written for the 1^st quarter 2016 were 26,031 compared to 27,399 in the prior year 1^st quarter. The decline in cemetery contracts was primarily due to the impact from winter storms in the recent period, which restricted the sales force’s ability to reach customers in the Partnership’s core operating areas, and an approximate 4% to 6% decline in the death rate from the prior year.  
• Cemetery margin⁽¹⁾ was $12.3 million for the 1^st quarter 2016 compared with $11.1 million for the prior year 1st quarter.  Cemetery margin percentage was approximately 20% for the 1^st quarter 2016 compared to 18% for the prior year 1^st quarter as revenues remained consistent while expenses decreased 2% between periods.
• Excluding the contributions from the 4 properties acquired during the 2^nd half of 2015, same store cemetery margin was $11.9 million from 303 properties for the 1^st quarter 2016 compared with $11.1 million for the prior year 1^st quarter, an increase of 7% between periods.

Funeral Home Operations

• Funeral home calls for the 1^st quarter 2016 were 4,544 compared with 4,200 in the prior year period.    
• Funeral Home margin⁽¹⁾ was $4.9 million for the 1^st quarter 2016 compared with $4.8 million for the prior year 1^st quarter. Funeral Home margin percentage was approximately 25% for the 1^st quarter 2016, compared with 28% in the prior year 1^st quarter. 
• Excluding the contributions from the 7 properties acquired during the 2^nd half of 2015, same store funeral home margin was $3.5 million from 97 properties for the 1^st quarter 2016 compared with $4.8 million for the prior year 1^st quarter, a decrease of 27% between periods resulting from a 7% decrease in revenues due to the death rate decline, while expenses remained relatively consistent.

Trust Investment and Interest Income

• Combined trust investment and interest income⁽¹⁾ was $12.8 million for the 1^st quarter 2016 compared with $14.2 million for the prior year 1^st quarter, a decline of $1.4 million.  The decline 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 1.5% (5.9% annualized) for the 1^st quarter 2016, compared with 1.8% (7.2% annualized) for the prior year 1^st quarter and 2.2% (8.9% annualized) for the 4^th quarter 2015.

Corporate Expenses, Liquidity and Capital Structure

• Corporate overhead expenses for the 1^st quarter 2016 were $8.2 million, a decrease of $0.3 million, or 4% from the $8.5 million for the prior year 1^st quarter.
  
• Cash interest expense was $5.0 million for the 1^st quarter 2016 compared with $4.7 million in the prior year 1^st quarter.
  
• As of March 31, 2016, the Partnership had $319.6 million of total debt, including $151.0 million outstanding under its revolving credit facility.  The Partnership had approximately $29.0 million available on its revolving credit facility and $13.5 million of cash and cash equivalents as of March 31, 2016.  Pro forma for the follow-on public offering and the ATM Equity Offering issuances subsequent to March 31, 2016 mentioned previously, the Partnership’s total debt outstanding was $263.9 million, including $95.3 million outstanding on its revolving credit facility.

Working Capital Requirements

• In addition to cash paid for acquisitions, the Partnership’s principal working capital need is to fund contributions to its Merchandise and Perpetual Care trusts and expansion capital expenditures.  These amounts are funded temporarily through borrowings under the Partnership’s revolving credit facility until they can be financed long-term through issuance of additional limited partner units or senior unsecured notes.  In particular, contributions to the Partnership’s Merchandise Trust result from individual state requirements that cause it to contribute approximately 70% of the merchandise and service portion of its pre-need sales into the trust, which must remain in the trust until the time of delivery of the merchandise or service.  The table below reflects the amount of net cash received from the issuance of limited partner units compared to the net cash paid for acquisitions and net contributions to the Partnership’s Merchandise and Perpetual Care trusts for the three years ended December 31, 2015:

• While the Partnership’s operating cash flow on a GAAP basis has always been much less than how it characterizes distributable cash flow, this is due to the negative working capital movements associated with the net contributions to its Merchandise and Perpetual Care trusts as noted above.   So while GAAP operating cash flow may appear weak, this is because its balance sheet continues to growth in strength.    The Partnership has significant net assets, including its Merchandise Trust and Accounts Receivable, less the associated Merchandise Liabilities, which is net cash to its account when the merchandise or services are delivered to the customer.  The table below presents this data as of March 31, 2016.

Investor Conference Call and Webcast
The Partnership will conduct a conference call to discuss first quarter 2016 financial results today, Monday, May 9, 2016 at 11:00 a.m. ET.  The conference call can be accessed by calling (800) 659-3814.  An audio replay of the conference call will be available by calling (800) 633-8284 through 1:00 p.m. ET on May 23, 2016.  The reservation number for the audio replay is 21810417.  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 Trevose, Pennsylvania, is an owner and operator of cemeteries and funeral homes in the United States, with 307 cemeteries and 104 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

Certain statements contained in this press release, including, but not limited to, information regarding the status and progress of StoneMor’s operating activities, the plans and objectives of StoneMor’s management, assumptions regarding StoneMor’s future performance and plans, and any financial guidance provided or guidance related to StoneMor’s future distributions, as well as certain information in StoneMor’s other filings with the SEC and elsewhere, are forward-looking statements. Generally, the words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend (including, but not limited to StoneMor’s intent to maintain or increase its 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.  StoneMor’s major risk is related to uncertainties associated with the cash flow from pre-need and at-need sales, trusts and financings, which may impact StoneMor’s ability to meet its financial projections, its ability to service its debt and pay distributions, and its ability to increase its distributions.

StoneMor’s 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 recent acquisitions or any future acquisitions; StoneMor’s ability to complete and fund additional acquisitions; the effect of economic downturns; the impact of StoneMor’s significant leverage on its operating plans; the decline in the fair value of certain equity and debt securities held in StoneMor’s trusts; StoneMor’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; 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; StoneMor’s ability to successfully implement a strategic plan relating to achieving operating improvements, strong cash flows and further deleveraging; StoneMor’s ability to successfully compete in the cemetery and funeral home industry; litigation or legal proceedings that could expose StoneMor to significant liabilities and damage StoneMor’s reputation; the effects of cyber security attacks due to StoneMor’s significant reliance on information technology; uncertainties relating to the financial condition of third-party insurance companies that fund StoneMor’s pre-need funeral contracts; and various other uncertainties associated with the death care industry and StoneMor’s operations in particular.

When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements set forth in StoneMor’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 29, 2016 and the other reports that StoneMor files with the Securities and Exchange Commission, from time to time. Except as required under applicable law, StoneMor assumes no obligation to update or revise any forward-looking statements made herein or any other forward-looking statements made by it, whether as a result of new information, future events or otherwise.
                                                                 

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• 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 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.