StoneMor Partners L.P. (NYSE:STON)
(“StoneMor” or the “Partnership”) today provided
preliminary and unaudited financial information for the first
quarter 2017 and the fourth quarter 2016. As previously
reported, the Board of Directors of StoneMor GP LLC, the general
partner of the Partnership, upon the recommendation of management,
concluded that certain of the Partnership’s previously issued
consolidated financial statements contained errors and should no
longer be relied upon, and the Partnership delayed the filing of
its Annual Report on Form 10-K for the fiscal year ended
December 31, 2016 pending the completion of its review of
those previously filed consolidated financial statements. The
review is ongoing and any information herein is therefore subject
to change and those changes could be material. The
Partnership has also delayed the filing of its Form 10-Q for the
period ended March 31, 2017 and the financial information in this
release pertaining to such period has not been subject to review
procedures by the Partnership’s independent registered public
accounting firm.
Preliminary Unaudited Financial
Information
|
Three Months Ended March 31,
2017 |
|
Three Months Ended December
31, 2016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities1 |
$ |
12,351 |
|
|
$ |
4,280 |
|
|
|
|
Growth (reduction) in accounts receivable2 |
$ |
(822 |
) |
|
$ |
1,614 |
|
|
|
|
Growth in merchandise trust fund2 |
$ |
3,430 |
|
|
$ |
3,853 |
|
|
|
|
Cash distributions declared3 |
$ |
12,658 |
|
|
$ |
11,887 |
per unit3 |
$ |
0.33 |
|
|
$ |
0.33 |
|
|
|
|
Paul Grady, StoneMor’s President and CEO commented, “Cash
from operating activities reached $12.4 million in the first
quarter of 2017. Fiscal year 2016 was a challenging
year of course, but one in which we took some initial steps to
establish a foundation from where we can move forward. We
took decisive action to preserve and enhance our liquidity by
reducing cash distributions. We amended our credit facility
which not only extended the deadline for reporting fiscal year 2016
financial results to July 15, 2017, but also provides for
additional leverage flexibility through September 30, 2017.
These steps also involve an ongoing effort to identify and address
any other operational issues that may be impacting our
business. We are working to remediate the control issues that
gave rise to the discovery that we have been under-reporting GAAP
revenues and over-reporting GAAP deferred revenue. While we
do not have a specific date for completion of this review, we aim
to file our 2016 Form 10-K by July 15, 2017, and our Form 10-Q for
the period ended March 31, 2017 within 45 days after that.”
(1) The Partnership pays 7.875% interest per annum on the
principal amount of $175.0 million of Senior Notes, payable in cash
semi-annually in arrears on June 1 and December 1 of each
year. These payments have an unfavorable impact on operating
cash flows in the second and fourth quarters of the year.
(2) These figures represent the net growth (reduction) in
accounts receivable and merchandise trusts as typically reported on
our consolidated statements of cash flows.
(3) Represents the cash distributions
declared for the respective period and paid by the Partnership
within 45 days after the end of that period. The cash
distribution declared for the first quarter 2017 includes amounts
paid in cash that were previously paid-in-kind via common unit
issuance, as was the case in the distribution declared for the
fourth quarter 2016.
Information Regarding Preliminary Unaudited
Information
The financial information presented in this release is
preliminary and unaudited and this information is subject to
change upon completion of the review of the Partnership’s
previously issued consolidated financial statements and preparation
of the Partnership’s financial statements for the fiscal year ended
December 31, 2016 and for the period ended March 31, 2017,
including the effects of any subsequent events and the audit by
StoneMor’s independent registered public accounting firm of the
Partnership’s 2016 consolidated financial statements. This
preliminary unaudited information includes estimates that have been
prepared by StoneMor’s management and there can be no assurance
that StoneMor’s actual financial information will not materially
differ from the preliminary unaudited financial data presented
herein. In addition, the preliminary unaudited financial data
presented here is summary in nature and should not be viewed as a
substitute for the full financial information prepared in
accordance with accounting principles generally accepted in the
United States of America (“GAAP”), which will be filed with the
U.S. Securities and Exchange Commission (the “SEC”) at a later
date. Please see the “Cautionary Note Regarding Forward-Looking
Statements” section of this release for further information.
Information Regarding Pre-need Operations and Cash
Distributions
Since our initial public offering, the Partnership’s business
thesis has been that our unitholders should, subject to capital
resource limitations, receive the economic benefits of our sales of
interment rights, merchandise and services, interest income and
trust returns as promptly as practicable. Thus, we
historically have sought to include in our distributions to
unitholders for a particular financial reporting period the profit
we anticipate the Partnership will generate with respect to the
sales, including pre-need sales, of interment rights, merchandise
and services, and trust returns during the applicable period.
We generally recognize revenue from our sales of merchandise and
services when the merchandise is delivered or the service is
performed. Typically, we recognize revenue from an at-need sale
shortly after the sale. In contrast, pre-need sales typically
are sold on an installment plan, and we do not typically recognize
revenue from pre-need sales of interment rights, merchandise and
services until some period of time after the sale, which period in
some instances and for certain elements could be many years.
In order to allow our distributions for a particular period to
confer upon our unitholders the economic benefits of our sales
during the period, we historically have financed the increases in
our accounts receivable and merchandise trust funds through
borrowings (net of repayments) and the issuance of common
units. Since our initial public offering, our historical
consolidated statements of cash flows for the applicable periods
have shown these increases in our accounts receivable and
merchandise trust funds in our cash flows from operating activities
and the proceeds from borrowings (net of repayments) and proceeds
from issuance of common units in our cash flows from financing
activities.
Information Regarding Liquidity and Capital
Resources
The Partnership faced adverse conditions during the year
ended December 31, 2016, including negative
financial trends due to a decline in billings largely
associated with a reduction in its sales force. This resulted
in a tightened liquidity position and a reduction in
its quarterly cash distribution.
The Partnership believes that it will have sufficient liquid
assets, cash from operations and borrowing capacity to meet its
financial commitments, debt service obligations, contingencies and
anticipated capital expenditures for at least the next twelve-month
period. However, it is subject to business, operational and
other risks that could adversely affect its cash flows. The
Partnership has supplemented and will likely seek to continue to
supplement cash generation with proceeds from financing activities,
including borrowings under the revolving credit facility and other
borrowings, the issuance of additional limited partner units,
capital contributions from the general partner and the sale of
assets and other transactions. The Partnership continually monitors
its financial position, liquidity and credit facility
financial covenants to determine the likelihood of shortfalls
in future reporting periods.
Our primary sources of liquidity are cash generated from
operations, borrowings under our revolving credit facility and
capital raised through the issuance of additional limited partner
units. As a master limited partnership, our primary cash
requirements, in addition to normal operating expenses, are for
capital expenditures, net contributions to the merchandise trust
funds, debt service, and cash distributions. We cannot be certain
that additional capital will be available to us to the extent
required and on acceptable terms. In general, we expect to
fund:
- working capital deficits through cash generated from operations
and additional borrowings;
- expansion capital expenditures, net contributions to the
merchandise trust funds and debt service obligations through
additional borrowings, the issuance of additional limited partner
units or asset sales. Amounts contributed to the merchandise
trust funds will be withdrawn at the time of the delivery of the
product or service sold to which the contribution relates, which
will allow the Partnership to reduce the amount of additional
borrowings, issuance of additional limited partner units or asset
sales needed; and
- cash distributions in accordance with our partnership agreement
and maintenance capital expenditures through available cash and
cash flows from operations.
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 316 cemeteries and 98 funeral
homes in 27 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
restatement of StoneMor’s consolidated financial statements,
expected timing of filings, status and progress of StoneMor’s
operating activities, the plans and objectives of StoneMor’s
management, and assumptions regarding StoneMor’s future performance
and plans 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 statements are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of
1995.
Forward-looking statements are based on
management’s current expectations and estimates. These statements
are neither promises nor guarantees and are made subject to certain
risks and uncertainties that could cause actual results to differ
materially from the results stated or implied in this press
release. StoneMor’s major risks are 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, service its debt, pay distributions, and
maintain or increase its distributions, as well as with StoneMor’s
ability to maintain an effective system of internal control over
financial reporting and disclosure controls and
procedures.
StoneMor’s additional risks and uncertainties
include, but are not limited to, risks and uncertainties related to
the following: the difficulty of predicting the timing of the
completion of the continuing analysis and review and the
restatement of our consolidated financial statements for the
periods disclosed in our Current Report on Form 8-K filed with the
SEC on February 27, 2017; the impact of such analysis, review
and restatement on our financial results and the related reports of
our independent registered public accounting firm and on the timing
of the related filings; additional information arising from this
continuing analysis and review and the performance of additional
work in this regard, as well as the review and audit by the
Partnership’s registered independent public accounting firm of the
Partnership’s prior financial statements; the consequences of the
Partnership’s delinquent filing of its Annual Report on Form 10-K
for the fiscal year ended December 31, 2016 (“2016 Form 10-K”) and
Quarterly Report on Form 10-Q for the period ended March 31, 2017
(“March 2017 Form 10-Q”), including that the SEC could institute an
administrative proceeding seeking the revocation of the
registration of the Partnership’s common units under the Exchange
Act, and that the Partnership has received a notification of
delinquent status from the New York Stock Exchange (“NYSE”) and
could ultimately face the possible delisting of its common units
from the NYSE; the potential for defaults under the Partnership’s
amended credit facility if the 2016 Form 10-K is not filed by July
15, 2017 or the March 2017 Form 10-Q is not filed within 45 days
thereafter; the potential for a default under the indenture
governing its senior notes if such reports are not filed within 120
days after notice from the trustee under the indenture regarding
such filing delinquencies; the Partnership’s ability to obtain
relief from its creditors if it cannot file its 2016 Form 10-K or
March 2017 Form 10-Q within the periods prescribed by the
Partnership’s amended credit facility or the indenture governing
its senior notes, the terms on which such relief might be granted
and any restrictions that might be imposed in connection with any
relief that might be obtained; 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, including
improving sales productivity and reversing negative trends in costs
of goods sold, certain expenses, cemetery billings and investment
income from trusts, strong cash flows, further deleveraging and
liquidity enhancement; 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, including but not limited to
litigation and governmental investigations or proceedings arising
out of or related to accounting and financial reporting matters;
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 and
the other reports that StoneMor files with the SEC, 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.
STONEMOR PARTNERS L.P. |
|
PRELIMINARY SELECTED BALANCE SHEET
DISCLOSURES |
|
(unaudited; in thousands) |
|
|
|
|
|
March 31, 2017 |
|
December 31, 2016 |
|
Cash
and cash equivalents |
|
$ |
13,723 |
|
$ |
12,570 |
|
Accounts receivable,
net of allowance |
|
|
76,430 |
|
|
77,253 |
|
Long-term accounts receivable, net of allowance |
|
|
97,616 |
|
|
97,615 |
|
Merchandise trusts, restricted, at fair value |
|
|
523,858 |
|
|
507,079 |
|
|
|
|
|
|
|
Current liabilities |
|
|
47,060 |
|
|
41,076 |
|
Long-term debt, net of deferred financing costs1
|
|
|
303,618 |
|
|
300,351 |
|
(1) The Consolidated Leverage Ratio (as defined in the
Credit Agreement), calculated over a period of the most recent four
fiscal quarters is currently determined to be 3.92 and 4.14 for the
periods ended December 31, 2016 and March 31, 2017,
respectively. In accordance with the Partnership’s Credit
Agreement, the Consolidated Leverage Ratio was not to be greater
than 4.00 to 1.00 for the period ended December 31, 2016 and was
not to be greater than 4.25 to 1.00 for the period ended March 31,
2017.
The foregoing financial information is preliminary and may be
subject to change when the 2016 Form 10-K and March 2017 Form 10-Q
are filed with the SEC. The financial information in this
release has not been subject to independent auditor review
procedures. Please see the “Information Regarding Preliminary
Unaudited Information” section of this press release for further
information.
STONEMOR PARTNERS
L.P. |
PRELIMINARY CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(unaudited; in thousands) |
|
|
Three Months Ended March 31,
2017 |
|
Three Months Ended December
31, 2016 |
Cash Flows From Operating Activities: |
|
|
|
Net cash provided by operating activities |
$ |
12,351 |
|
|
$ |
4,280 |
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
Cash paid for capital expenditures |
|
(1,496 |
) |
|
|
(1,727 |
) |
Proceeds from asset sales |
|
- |
|
|
|
907 |
|
Net cash used in investing activities |
|
(1,496 |
) |
|
|
(820 |
) |
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
Cash distributions |
|
(11,887 |
) |
|
|
(11,102 |
) |
Proceeds from borrowings |
|
24,000 |
|
|
|
21,727 |
|
Repayments of debt |
|
(21,072 |
) |
|
|
(36,284 |
) |
Proceeds from issuance of common units, net of costs |
|
- |
|
|
|
19,779 |
|
Cost of financing activities |
|
(743 |
) |
|
|
(620 |
) |
Net cash used in financing activities |
|
(9,702 |
) |
|
|
(6,500 |
) |
Net
increase (decrease) in cash and cash equivalents |
|
1,153 |
|
|
|
(3,040 |
) |
Cash and cash equivalents - Beginning of
period |
|
12,570 |
|
|
|
15,610 |
|
Cash and cash equivalents - End of period |
$ |
13,723 |
|
|
$ |
12,570 |
|
|
|
|
|
Cash flows from operating activities1 |
$ |
12,351 |
|
|
$ |
4,280 |
|
Growth (reduction) in accounts receivable, net of
allowance2 |
|
(822 |
) |
|
|
1,614 |
|
Growth in merchandise trust
fund2 |
|
3,430 |
|
|
|
3,853 |
|
Cash distributions declared 2, 3 |
$ |
12,658 |
|
|
$ |
11,887 |
|
(1) The Partnership pays 7.875% interest per annum on the
principal amount of $175.0 million of Senior Notes, payable in cash
semi-annually in arrears on June 1st and December 1st of each
year. These payments have an unfavorable impact on operating
cash flows in the second and fourth quarters of the year.
(2) In connection with the Partnership’s pre-need cemetery
and funeral home billing activities, the Partnership generally
incurs net unfavorable cash flow movements in the short term, due
to the net growth in accounts receivable and merchandise trust
assets, which are typically offset by growth in deferred revenues.
The Partnership funds such pre-need related cash flow
deficits through cash on hand or 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. When delivery and performance requirements
for certain deferred revenues and related direct expenses have
occurred and the Partnership receives the associated cash inflows
from the related receivables and trust funds, the proceeds increase
cash on hand or reduce borrowings outstanding on the Partnership’s
revolving credit facility. Thus, the amount of the
Partnership’s financing activities depends on the Partnership’s
pre-need sales activity during a financial reporting period, and
the Partnership’s distribution for a particular financial reporting
period in turn reflects current and prior period sales, operations,
and trust returns, including the Partnership’s funding of pre-need
related cash flow deficits as described above. Absent the
Partnership’s ability to fund pre-need related cash flow deficits,
the Partnership may be unable to maintain its current distribution
levels.
(3) Represents the cash distributions declared for the
respective period and paid by the partnership within 45 days after
the end of that period.
The foregoing financial information is preliminary and may be
subject to change when the 2016 Form 10-K and March 2017 Form 10-Q
are filed with the SEC. The financial information in this release
has not been subject to independent auditor review
procedures. Please see the “Information Regarding Preliminary
Unaudited Information” section of this press release for further
information.
CONTACT:
John McNamara
Director - Investor Relations
StoneMor Partners L.P.
(215) 826-2945
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