StoneMor Partners L.P. (NYSE:STON)
(“StoneMor” or the “Partnership”) today announced
it has reported financial results for the 2016 fourth quarter and
full year and filed its 2016 Annual Report on Form 10-K, which
includes restatements of financial statements previously issued for
fiscal years 2014 and 2015. The filing follows the completion of a
review of certain historical transactions undertaken by the
Partnership. Since StoneMor initiated its accounting review,
the Partnership has appointed a new chief executive officer and
chief financial officer, each of whom has extensive operational and
financial experience. New management is committed to the
remediation of material weaknesses that the Partnership has
identified, as well as the continued improvement of internal
control over financial reporting.
Paul Grady, StoneMor’s President and CEO commented, “We’re
pleased to have completed the review of our prior financial
statements and the results were largely in line with our
expectations. With our 2016 Form 10-K now filed, we are
focused on finalizing the financial statements for the first and
second quarters of 2017 and the related Forms 10-Q, which we will
file as soon as possible.”
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Financial
Highlights |
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Three Months Ended December 31, |
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Years Ended December 31, |
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2016 |
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2015 |
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|
2016 |
|
|
2015 |
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(As Restated)* |
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(As Restated)* |
|
|
(in thousands, except per unit data) |
Revenues |
$ |
88,307 |
|
$ |
82,873 |
|
$ |
326,230 |
|
$ |
320,319 |
Net
loss |
$ |
(5,997) |
|
$ |
(8,021) |
|
$ |
(30,483) |
|
$ |
(23,391) |
Net cash
provided by (used in) operating activities |
$ |
4,280 |
|
$ |
(7,968) |
|
$ |
22,767 |
|
$ |
4,062 |
Growth
in accounts receivable |
$ |
2,968 |
|
$ |
4,035 |
|
$ |
12,135 |
|
$ |
8,873 |
Growth
in merchandise trust fund |
$ |
3,853 |
|
$ |
18,929 |
|
$ |
17,101 |
|
$ |
44,640 |
Cash
distributions |
$ |
11,887 |
|
$ |
21,387 |
|
$ |
69,665 |
|
$ |
80,950 |
per unit |
$ |
0.33 |
|
$ |
0.66 |
|
$ |
1.98 |
|
$ |
2.61 |
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*Refer to
Note 2 in Part II, Item 8 of the filed Form 10-K for the year ended
December 31, 2016 for further detail regarding the
restatement. |
Mark Miller, StoneMor’s CFO, commented, “As we have previously
stated, during the normal review of financial results for the
fiscal year ended December 31, 2016, management discovered
that the Partnership had under-reported cemetery revenues and
over-reported net deferred revenues in prior reporting
periods. Specifically, we discovered errors in a number of
data entries associated with the servicing of customer
contracts. We immediately initiated a comprehensive analysis
of more than one million customer obligations spread out over a
number of years. We regret the length of time required to
complete this review, but a thorough review meant devoting the
necessary time and resources to assure ourselves that the reports
we ultimately file are accurate and complete.”
The primary impact of the restatements is seen in adjustments
and changes in the timing of revenue recognition, a net decrease in
deferred revenue and a net increase in partners’ capital.
Total revenues for 2015 were restated to $320.3 million from $319.6
million as filed in 2015. Deferred revenues were restated to
$791.5 million from $815.4 million as filed in 2015.
Partner’s capital was restated to $204.7 million from $181.5
million as filed in 2015. Investors can find a complete
description and quarterly impact of the restatements in Notes 2 and
20, respectively, in Part II, Item 8 of the 2016 Form 10-K filed
today.
Continued Grady, “As previously noted, 2016 was a challenging
year for StoneMor as the Partnership struggled to align costs and
optimize the performance of its salesforce to better capture the
market opportunity. Cash from operations improved in 2016
from 2015, largely through a combination of cost cuts and more
effective management of the working capital associated with the
trust funds. While a positive, there is more to be done.
New management is comprehensively analyzing the business in
order to implement the best strategies to successfully grow the
Partnership and provide economic value to our unitholders.
Rebuilding and upgrading our salesforce is a top priority, as is
improving cash from operations, establishing strong financial and
operating controls, and managing the strategic growth of the
business.
“As we work to complete our first and second quarter 2017
financial statements,” Grady added, “the Board of Directors and
management are reviewing preliminary data from the second quarter,
as we stated we would, prior to making a determination regarding
our unitholder distribution. We are working to strike the
correct balance between distributions, leverage and cash
flow. Our goal is to create a capital structure which aligns
with our business plan going forward. We look forward to
discussing this and other matters in more detail on our next
investor call.”
Other Business Matters
The Partnership noted today that it anticipates that future
press releases discussing financial results will include
substantially fewer non-GAAP financial measures, and where they do
occur will continue to be reconciled to GAAP measures. This
decision was made by new management in light of the guidance issued
by the Securities and Exchange Commission (the “SEC”) in May 2016
regarding the use of non-GAAP financial measures.
StoneMor also disclosed in its 2016 Form 10-K that it has
received two subpoenas from the SEC in connection with fact-finding
as to whether violations of federal securities laws have
occurred. The subpoenas themselves state that the
fact-finding should not be construed as an indication that any
violations of law have occurred. The first SEC subpoena
sought information relating to, among other items, the
Partnership’s prior restatements, financial statements, internal
control over financial reporting, public disclosures, use of
non-GAAP financial measures and matters pertaining to unitholder
distributions and the sources of funds therefor, while the second,
more limited subpoena requested information relating to protection
of the Partnership’s confidential information and the Partnership’s
policies regarding insider trading. StoneMor is cooperating
fully with the SEC staff.
The Partnership reiterated that it expects to issue preliminary
financial information for the 2017 second quarter as soon as
practical, and will host an investor conference call in conjunction
with the release of that preliminary information.
* * *
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 in 27 states and
Puerto Rico and 98 funeral homes in 18 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
expected timing of filings, the status and progress of StoneMor’s
operating activities, the plans and objectives of StoneMor’s
management regarding operating activities and continuing
remediation of material weaknesses in internal control over
financial reporting, the future use of non-GAAP financial measures,
the timing of its next investor call and the information to be
discussed thereon and the timing of the determination of the second
quarter unitholder distribution 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
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 consequences of the Partnership’s delinquent
filing of its Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 2017 and June 30, 2017 (the “Form 10-Q
Reports”), including that the U.S. Securities and Exchange
Commission 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 remains delinquent
in its required filings with 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 Form 10-Q Reports are
not filed within specified periods or the indenture governing its
senior notes if the Partnership fails to file them within 120 days
after notice from the trustee under the indenture; the
Partnership’s ability to obtain relief from its creditors if it
cannot file the Form 10-Q Reports 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 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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STONEMOR PARTNERS L.P. |
CONSOLIDATED BALANCE SHEETS |
(in thousands) |
|
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|
December 31, |
|
|
|
2016 |
|
|
2015 |
Assets |
|
|
|
|
|
(As restated)* |
Current
assets: |
|
|
|
|
|
|
Cash and
cash equivalents |
|
$ |
12,570 |
|
$ |
15,153 |
Accounts
receivable, net of allowance |
|
|
77,253 |
|
|
68,415 |
Prepaid
expenses |
|
|
5,532 |
|
|
5,367 |
Other
current assets |
|
|
23,466 |
|
|
20,799 |
Total
current assets |
|
|
118,821 |
|
|
109,734 |
|
|
|
|
|
|
|
Long-term accounts receivable, net of allowance |
|
|
98,886 |
|
|
95,167 |
Cemetery
property |
|
|
337,315 |
|
|
334,457 |
Property
and equipment, net of accumulated depreciation |
|
|
118,281 |
|
|
116,127 |
Merchandise trusts, restricted, at fair value |
|
|
507,079 |
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|
472,368 |
Perpetual care trusts, restricted, at fair value |
|
|
333,780 |
|
|
307,804 |
Deferred
selling and obtaining costs |
|
|
116,890 |
|
|
106,124 |
Deferred
tax assets |
|
|
64 |
|
|
61 |
Goodwill |
|
|
70,436 |
|
|
69,851 |
Intangible assets |
|
|
65,438 |
|
|
67,209 |
Other
assets |
|
|
20,023 |
|
|
20,618 |
Total
assets |
|
$ |
1,787,013 |
|
$ |
1,699,520 |
|
|
|
|
|
|
|
Liabilities and Partners' Capital |
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
Accounts
payable and accrued liabilities |
|
$ |
35,547 |
|
$ |
28,547 |
Accrued
interest |
|
|
1,571 |
|
|
1,503 |
Current
portion, long-term debt |
|
|
1,775 |
|
|
2,440 |
Total
current liabilities |
|
|
38,893 |
|
|
32,490 |
|
|
|
|
|
|
|
Long-term debt, net of deferred financing costs |
|
|
300,351 |
|
|
316,399 |
Deferred
revenues |
|
|
866,633 |
|
|
791,450 |
Deferred
tax liabilities |
|
|
20,058 |
|
|
18,999 |
Perpetual care trust corpus |
|
|
333,780 |
|
|
307,804 |
Other
long-term liabilities |
|
|
36,944 |
|
|
27,667 |
Total
liabilities |
|
|
1,596,659 |
|
|
1,494,809 |
|
|
|
|
|
|
|
Commitments and contingencies |
|
|
|
|
|
|
Partners' capital
(deficit): |
|
|
|
|
|
|
General
partner interest |
|
|
(1,914) |
|
|
480 |
Common
limited partners' interest |
|
|
192,268 |
|
|
204,231 |
Total
partners' capital |
|
|
190,354 |
|
|
204,711 |
|
|
|
|
|
|
|
Total
liabilities and partners' capital |
|
$ |
1,787,013 |
|
$ |
1,699,520 |
|
|
|
|
|
|
|
*Refer to Note 2 in Part II, Item 8 of the filed Form 10-K for
the year ended December 31, 2016 for further detail regarding the
restatement. |
See accompanying notes to the Consolidated Financial Statements
in the Annual Report on Form 10-K for the year ended December 31,
2016 filed on September 15, 2017. |
|
STONEMOR PARTNERS L.P. |
CONSOLIDATED STATEMENTS OF
OPERATIONS |
(in thousands, except per unit
data) |
|
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|
Years Ended December 31, |
|
|
|
2016 |
|
|
|
2015 |
|
|
|
|
` |
|
|
|
|
|
Revenues: |
|
|
|
|
|
|
(As restated)* |
Cemetery: |
|
|
|
|
|
|
|
|
Merchandise |
|
$ |
150,439 |
|
|
$ |
143,543 |
|
Services |
|
|
57,781 |
|
|
|
59,935 |
|
Investment and other |
|
|
57,506 |
|
|
|
58,769 |
|
Funeral home: |
|
|
|
|
|
|
|
|
Merchandise |
|
|
27,625 |
|
|
|
27,024 |
|
Services |
|
|
32,879 |
|
|
|
31,048 |
|
Total
revenues |
|
|
326,230 |
|
|
|
320,319 |
|
|
|
|
|
|
|
|
|
|
Costs and Expenses: |
|
|
|
|
|
|
|
|
Cost of
goods sold |
|
|
45,577 |
|
|
|
50,870 |
|
Cemetery
expense |
|
|
72,736 |
|
|
|
71,296 |
|
Selling
expense |
|
|
67,267 |
|
|
|
59,569 |
|
General
and administrative expense |
|
|
37,749 |
|
|
|
37,451 |
|
Corporate
overhead |
|
|
39,618 |
|
|
|
38,609 |
|
Depreciation and amortization |
|
|
12,899 |
|
|
|
12,803 |
|
Funeral
home expenses: |
|
|
|
|
|
|
|
|
Merchandise |
|
|
8,193 |
|
|
|
6,928 |
|
Services |
|
|
24,772 |
|
|
|
22,969 |
|
Other |
|
|
20,305 |
|
|
|
17,806 |
|
Total costs and
expenses |
|
|
329,116 |
|
|
|
318,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gain on
acquisitions and divestitures |
|
|
2,614 |
|
|
|
1,540 |
|
Legal
settlement |
|
|
- |
|
|
|
(3,135) |
|
Loss on
early extinguishment of debt |
|
|
(1,234) |
|
|
|
- |
|
Other
losses, net |
|
|
(2,900) |
|
|
|
(296) |
|
Interest
expense |
|
|
(24,488) |
|
|
|
(22,585) |
|
|
|
|
|
|
|
|
|
|
Loss
from continuing operations before income taxes |
|
|
(28,894) |
|
|
|
(22,458) |
|
|
|
|
|
|
|
|
|
|
Income
tax benefit (expense) |
|
|
(1,589) |
|
|
|
(933) |
|
|
|
|
|
|
|
|
|
|
Net
loss |
|
$ |
(30,483) |
|
|
$ |
(23,391) |
|
|
|
|
|
|
|
|
|
|
General
partner's interest |
|
$ |
2,016 |
|
|
$ |
$ 3,607 |
|
|
|
|
|
|
|
|
|
|
Limited
partners' interest |
|
$ |
(32,499) |
|
|
$ |
(26,998) |
|
|
|
|
|
|
|
|
|
|
Net loss
per limited partner unit (basic and diluted) |
|
$ |
(0.94) |
|
|
$ |
(0.89) |
|
|
|
|
|
|
|
|
|
|
Weighted
average number of limited partners' units outstanding (basic and
diluted) |
|
|
34,602 |
|
|
|
30,472 |
|
|
|
|
|
|
|
|
|
|
*Refer to
Note 2 in Part II, Item 8 of the filed Form 10-K for the year ended
December 31, 2016 for further detail regarding the
restatement. |
|
See
accompanying notes to the Consolidated Financial Statements in the
Annual Report on Form 10-K for the year ended December 31, 2016
filed on September 15, 2017. |
|
|
|
|
|
|
|
|
|
|
|
STONEMOR PARTNERS L.P. |
CONSOLIDATED STATEMENTS OF CASH
FLOWS |
(in thousands) |
|
|
Years Ended December 31, |
|
|
2016 |
|
|
2015 |
|
Cash Flows From Operating Activities: |
|
|
|
|
(As restated)* |
|
Net
loss |
$ |
(30,483) |
|
$ |
(23,391) |
|
Adjustments to reconcile net loss to net cash provided by operating
activities: |
|
|
|
|
|
|
Cost of
lots sold |
|
9,581 |
|
|
13,103 |
|
Depreciation and amortization |
|
12,899 |
|
|
12,803 |
|
Provision
for cancellations |
|
10,681 |
|
|
9,430 |
|
Non-cash
compensation expense |
|
1,147 |
|
|
1,516 |
|
Non-cash
interest expense |
|
4,430 |
|
|
2,949 |
|
Gain on
acquisitions and divestitures |
|
(2,614) |
|
|
(1,540) |
|
Loss on
early extinguishment of debt |
|
1,234 |
|
|
- |
|
Other
losses, net |
|
1,947 |
|
|
296 |
|
Changes
in assets and liabilities: |
|
|
|
|
|
|
Accounts
receivable, net of allowance |
|
(22,816) |
|
|
(18,303) |
|
Merchandise trust
fund |
|
(17,101) |
|
|
(44,640) |
|
Other
assets |
|
(562) |
|
|
(4,216) |
|
Deferred selling
and obtaining costs |
|
(10,775) |
|
|
(13,052) |
|
Deferred
revenues |
|
54,135 |
|
|
66,673 |
|
Deferred taxes,
net |
|
743 |
|
|
(18) |
|
Payables and other
liabilities |
|
10,321 |
|
|
2,452 |
|
Net cash provided
by operating activities |
|
22,767 |
|
|
4,062 |
|
|
|
|
|
|
|
|
Cash Flows From Investing Activities: |
|
|
|
|
|
|
Cash paid
for capital expenditures |
|
(11,382) |
|
|
(15,339) |
|
Cash paid
for acquisitions |
|
(10,550) |
|
|
(18,800) |
|
Consideration for lease and management agreements |
|
- |
|
|
- |
|
Proceeds
from asset sales |
|
2,803 |
|
|
- |
|
Net cash used in investing
activities |
|
(19,129) |
|
|
(34,139) |
|
|
|
|
|
|
|
|
Cash Flows From Financing Activities: |
|
|
|
|
|
|
Cash
distributions |
|
(79,164) |
|
|
(77,512) |
|
Proceeds
from borrowings |
|
229,595 |
|
|
148,295 |
|
Repayments of debt |
|
(243,984) |
|
|
(111,034) |
|
Proceeds
from issuance of common units, net of costs |
|
94,314 |
|
|
75,156 |
|
Cost of
financing activities |
|
(6,982) |
|
|
(76) |
|
Net cash provided by (used in)
financing activities |
|
(6,221) |
|
|
34,829 |
|
Net increase (decrease) in cash and cash
equivalents |
|
(2,583) |
|
|
4,752 |
|
Cash and cash equivalents - Beginning of
period |
|
15,153 |
|
|
10,401 |
|
Cash and cash equivalents - End of
period |
$ |
12,570 |
|
$ |
15,153 |
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow
information: |
|
|
|
|
|
|
Cash paid
during the period for interest |
$ |
20,124 |
|
$ |
19,352 |
|
Cash paid
during the period for income taxes |
$ |
2,875 |
|
$ |
4,294 |
|
|
|
|
|
|
|
|
Non-cash investing and financing activities: |
|
|
|
|
|
|
Acquisition of assets by financing |
$ |
3,829 |
|
$ |
874 |
|
Acquisition of assets by assumption of directly related
liability |
$ |
- |
|
$ |
876 |
|
|
|
|
|
|
|
|
*Refer to
Note 2 in Part II, Item 8 of the filed Form 10-K for the year ended
December 31, 2016 for further detail regarding the
restatement. |
|
See
accompanying notes to the Consolidated Financial Statements in the
Annual Report on Form 10-K for the year ended December 31, 2016
filed on September 15, 2017. |
|
|
|
CONTACT: |
|
John McNamara |
|
|
Director - Investor
Relations |
|
|
StoneMor Partners
L.P. |
|
|
(215) 826-2945 |
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