STON StoneMor Inc

StoneMor Inc. (NYSE: STON) (“StoneMor” or the “Company”), a leading owner and operator of cemeteries and funeral homes, today reported operating and financial results for the fourth quarter and year ended December 31, 2020. Investors are encouraged to read the Company’s annual report on Form 10-K when it is filed with the Securities and Exchange Commission (the “SEC”), which will contain additional details, and will be posted at www.stonemor.com.

FOURTH QUARTER AND FULL YEAR 2020 FINANCIAL PERFORMANCE

• Revenues for the fourth quarter were $74.9 million compared to $58.3 million in the fourth quarter in the prior year. Full year revenues were $279.5 million compared to $257.2 million in the prior year period. 
• Cemetery segment operating income for the fourth quarter was $10.9 million compared to an operating loss of $0.6 million in the fourth quarter in the prior year, representing an increase of $11.5 million. Full year cemetery segment operating income was $35.0 million compared to $8.0 million in the prior year period, representing an increase of $27.0 million. 
• Funeral home segment operating income for the fourth quarter was $1.5 million compared to $0.9 million in the fourth quarter in the prior year, representing an increase of $0.6 million. Full year funeral home segment operating income was $5.0 million compared to $4.0 million in the prior year period, representing an increase of $1.0 million.
• Corporate overhead expense decreased to $9.0 million in the fourth quarter compared to $13.0 million in the fourth quarter in the prior year. Full year corporate overhead expense decreased to $36.0 million compared to $51.1 million in the prior year period.
• Fourth quarter operating income was $3.4 million, compared to an operating loss of $17.4 million in the fourth quarter in the prior year. Full year operating income was $3.3 million, compared to an operating loss of $47.9 million in the prior year period.
• Fourth quarter net loss from continuing operations was $5.7 million compared to $52.4 million in the fourth quarter in the prior year. Full year net loss from continuing operations was $37.3 million compared to $154.7 million in the prior year period. Full year net loss from continuing operations in the prior year period included a loss on impairment of goodwill of $24.9 million and a loss on debt extinguishment of $8.5 million.

Joe Redling, StoneMor’s President and Chief Executive Officer said, “The groundwork that was laid with our transformation initiatives, allowed StoneMor to produce another very strong quarter financially, while weathering the surge in the COVID-19 pandemic. We saw 29% year-over-year revenue growth, driven by a strong sales performance including a 20% increase in pre-need sales production. The revenue growth coupled with the continued focus on our operating initiatives and cost structure resulted in Adjusted EBITDA of $5.5 million in the fourth quarter, an improvement of $16.1 million versus the prior year.”

LIQUIDITY UPDATE

As of December 31, 2020, the Company had $60.1 million of cash, including $20.8 million of restricted cash, and $321.0 million of total debt.

“During the fourth quarter of 2020, StoneMor generated unlevered free cash flow of $4.9 million and increased the value of its trust assets by $45.6 million (net of income and principal distributions) resulting in a further deleveraging of our balance sheet,” said Jeff DiGiovanni, StoneMor’s Senior Vice President and Chief Financial Officer. “For 2021, we have set targets of $40 million in unlevered free cash flow and $50 million in growth in our trust assets (net of income and principal distributions). From a financial standpoint, we are focused on cash generation and trust asset growth as our key drivers of long-term stockholder value creation.”

Redling added “With the recent financial success, we are excited about our opportunity for future growth. A great deal of thanks and appreciation to the StoneMor team that has persevered through a difficult environment and delivered this high level of performance for the company and the communities and families we serve.”

CONFERENCE CALL INFORMATION

StoneMor will conduct a conference call to discuss this news release today, March 23, 2021 at 4:30 p.m. Eastern Time. The conference call can be accessed by calling (877) 308-6987. No reservation number is necessary; however, due to the on-going pandemic, it is advised that interested parties access the call-in number 5 to 10 minutes prior to the scheduled start time to avoid delays.   StoneMor will also host a live webcast of this conference call. Investors may access the live webcast via the Investors page of the StoneMor website www.stonemor.com under Events & Presentations.

About StoneMor Inc.

StoneMor Inc., headquartered in Bensalem, Pennsylvania, is an owner and operator of cemeteries and funeral homes in the United States, with 313 cemeteries and 80 funeral homes in 26 states and Puerto Rico. 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 Inc. please visit StoneMor’s website, and the investors section, at http://www.stonemor.com.

CONTACTInvestor RelationsStoneMor Inc.(215) 826-4438

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained in this press release, including, but not limited to, information regarding unlevered free cash flow and trust asset growth targets, are forward-looking statements. Generally, the words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “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 current business and economic disruptions resulting from the recent coronavirus pandemic, including the effect of government regulations issued in connection therewith, its ability to identify, and negotiate acceptable agreements with, purchasers of additional properties, 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 and service its debt, as well as with StoneMor’s ability to maintain an effective system of internal control over financial reporting and disclosure controls and procedures.

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 Quarterly Reports on Form 10-Q 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.

Non-GAAP Financial Measures

This release includes certain non-GAAP financial measures, including adjusted operating income, EBITDA, adjusted EBITDA, field EBITDA, unlevered cash provided by operating activities and unlevered free cash flow, which are intended as supplemental measures of the Company’s performance that are not required by or presented in accordance with GAAP. All business results presented in this release are not prepared in accordance with Article 11 of Regulation S-X.

Management uses these non-GAAP measures internally to evaluate and manage the Company’s operations and to better understand its business because they facilitate a comparative assessment of the Company's operating performance relative to its performance based on results calculated under GAAP. These non-GAAP measures also isolate the effects of some items that vary from period to period without any correlation to core operating performance and eliminate certain charges that management believes do not reflect the Company's operations and underlying operational performance. The Compensation, Nominating and Governance Committee of the Company’s board of directors also uses certain of these measures to evaluate management's performance and set its compensation. The Company believes that these non-GAAP measures also provide useful information to investors regarding certain financial and business trends relating to the Company’s financial condition and operating results facilitates an evaluation of the financial performance of the Company and its operations on a consistent basis. Providing this information therefore allows investors to make independent assessments of the Company’s financial performance, results of operation and trends while viewing the information through the eyes of management.

These non-GAAP measures are subject to limitations. The non-GAAP measures presented in this release may not be comparable to similarly titled measures used by other companies because other companies may not calculate one or more in the same manner. Additionally, the non-GAAP performance measures exclude significant expenses and income that are required by GAAP to be recorded in the Company’s financial statements; do not reflect changes in, or cash requirements for, working capital needs; and do not reflect interest expense, or the requirements necessary to service interest or principal payments on debt. Further, our historical adjusted results are not intended to project our adjusted results of operations or financial position for any future period. To compensate for these limitations, management presents and considers these non-GAAP measures in conjunction with the Company’s GAAP results; no non-GAAP measure should be considered in isolation from or as alternatives to net income, earnings per share or any other measure determined in accordance with GAAP. Readers should review the reconciliations included below, and should not rely on any single financial measure to evaluate the Company’s business.

A reconciliation of each non-GAAP measure to the most directly comparable GAAP measure is set forth below (in thousands):

ADJUSTED OPERATING INCOME (LOSS)

		Three Months Ended December 31,								Year Ended December 31,
		2020				2019				2020				2019
Operating income (loss) from continuing operations		$	3,386			$	(17,374	)		$	3,341			$	(47,928	)
Less: Other gains (losses), net			129				(4,355	)			129				(7,913	)
Adjusted operating income (loss)		$	3,257			$	(13,019	)		$	3,212			$	(40,015	)

EBITDA, ADJUSTED EBITDA AND FIELD EBITDA

		Three Months Ended December 31,								Year Ended December 31,
		2020				2019				2020				2019
Net loss from continuing operations		$	(5,677	)		$	(52,373	)		$	(37,341	)		$	(154,718	)
Income tax benefit (expense)			(1,522	)			23,363				(4,855	)			28,204
Interest expense			10,585				11,636				45,537				45,246
Depreciation and amortization			2,277				2,498				9,152				10,154
EBITDA			5,663				(14,876	)			12,493				(71,114	)
Less: Other gains (losses), net			129				(4,355	)			129				(7,913	)
Less: Loss on debt extinguishment			—				—				—				(8,478	)
Less: Loss on impairment of goodwill			—				—				—				(24,862	)
Adjusted EBITDA			5,534				(10,521	)			12,364				(29,861	)
Less: Investment and other income			14,168				10,072				43,732				36,998
Plus: Corporate overhead			8,956				12,962				35,975				51,107
Field EBITDA		$	322			$	(7,631	)		$	4,607			$	(15,752	)

UNLEVERED CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES AND UNLEVERED FREE CASH FLOW

		Three Months Ended December 31,								Year Ended December 31,
		2020				2019				2020				2019
Net cash provided by (used in) operating activities		$	(2,425	)		$	(11,231	)		$	1,360			$	(37,986	)
Cash interest payments			8,851				7,795				29,212				32,239
Unlevered cash provided by (used in) operating activities			6,426				(3,436	)			30,572				(5,747	)
Less: cash paid for capital expenditures			1,576				675				6,360				6,418
Unlevered free cash flow		$	4,850			$	(4,111	)		$	24,212			$	(12,165	)

STONEMOR INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)(in thousands, except share and per share data)

		December 31,				December 31,
		2020				2019
Assets
Current assets:
Cash and cash equivalents, excluding restricted cash		$	39,244			$	34,867
Restricted cash			20,846				21,900
Accounts receivable, net of allowance			57,869				54,014
Prepaid expenses			5,290				4,619
Assets held for sale			28,575				136,695
Other current assets			16,884				16,882
Total current assets			168,708				268,977
Long-term accounts receivable, net of allowance			75,301				72,808
Cemetery property			299,526				300,486
Property and equipment, net of accumulated depreciation			83,496				91,611
Merchandise trusts, restricted, at fair value			501,453				477,165
Perpetual care trusts, restricted, at fair value			312,228				314,400
Deferred selling and obtaining costs			116,900				110,684
Deferred tax assets			9				81
Intangible assets, net			55,094				56,246
Other assets			22,248				26,910
Total assets		$	1,634,963			$	1,719,368
Liabilities and Owners' Equity
Current liabilities:
Accounts payable and accrued liabilities		$	51,718			$	54,854
Liabilities held for sale			23,406				101,704
Accrued interest			95				125
Current portion, long-term debt			317				374
Total current liabilities			75,536				157,057
Long-term debt, net of deferred financing costs			320,715				367,963
Deferred revenues			949,164				899,989
Deferred tax liabilities			29,652				34,613
Perpetual care trust corpus			312,228				314,400
Other long-term liabilities			40,081				47,836
Total liabilities			1,727,376				1,821,858
Commitments and contingencies
Owners' equity:
Common stock, par value $0.01 per share, 200,000,000 shares authorized, 117,871,141 and 94,447,356 shares issued and outstanding, respectively			1,178				944
Paid-in capital in excess of par value			(85,232	)			(103,434	)
Accumulated deficit			(8,359	)			—
Total owners' equity			(92,413	)			(102,490	)
Total liabilities and owners' equity		$	1,634,963			$	1,719,368

STONEMOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)(in thousands, except per share data)

		Three Months Ended December 31,								Year Ended December 31,
		2020				2019				2020				2019
Revenues:
Cemetery:
Interments		$	16,311			$	12,345			$	67,853			$	57,010
Merchandise			15,682				11,497				60,600				59,938
Services			18,045				14,361				65,701				62,676
Investment and other			14,168				10,072				43,732				36,998
Funeral home:
Merchandise			5,536				4,792				21,637				19,682
Services			5,164				5,213				20,016				20,938
Total revenues			74,906				58,280				279,539				257,242
Costs and Expenses:
Cost of goods sold			11,812				8,216				40,119				37,088
Cemetery expense			18,279				16,010				68,654				69,828
Selling expense			12,292				13,279				49,668				53,710
General and administrative expense			9,298				9,764				37,970				40,830
Corporate overhead			8,956				12,962				35,975				51,107
Depreciation and amortization			2,277				2,498				9,152				10,154
Funeral home expenses:
Merchandise			1,602				1,418				5,872				5,725
Services			4,398				4,255				18,078				17,144
Other			2,735				2,897				10,839				11,671
Total costs and expenses			71,649				71,299				276,327				297,257
Other gains (losses), net			129				(4,355	)			129				(7,913	)
Operating income (loss)			3,386				(17,374	)			3,341				(47,928	)
Interest expense			(10,585	)			(11,636	)			(45,537	)			(45,246	)
Loss on debt extinguishment			—				—				—				(8,478	)
Loss on goodwill impairment			—				—				—				(24,862	)
Loss from continuing operations before income taxes			(7,199	)			(29,010	)			(42,196	)			(126,514	)
Income tax benefit (expense)			1,522				(23,363	)			4,855				(28,204	)
Net loss from continuing operations			(5,677	)			(52,373	)			(37,341	)			(154,718	)
Discontinued operations:
Income from operations of discontinued businesses			86				15				28,982				2,776
Income tax expense			—				—				—				—
Net income from discontinued operations			86				15				28,982				2,776
Net loss		$	(5,591	)		$	(52,358	)		$	(8,359	)		$	(151,942	)
Net loss from continuing operations per common share (basic)		$	(0.05	)		$	(1.24	)		$	(0.35	)		$	(3.91	)
Net income from discontinued operations per common share (basic)			0.00				0.00				0.27				0.07
Net loss per common share (basic)		$	(0.05	)		$	(1.23	)		$	(0.08	)		$	(3.84	)
Net loss from continuing operations per common share (diluted)		$	(0.05	)		$	(1.24	)		$	(0.35	)		$	(3.90	)
Net income from discontinued operations per common share (diluted)			0.00				0.00				0.27				0.07
Net loss per common share (diluted)		$	(0.05	)		$	(1.23	)		$	(0.08	)		$	(3.83	)
Weighted average number of common shares outstanding - basic			117,862				42,401				106,991				39,614
Weighted average number of common shares outstanding - diluted			117,955				42,401				107,001				39,677

STONEMOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (in thousands)

		Year Ended December 31,
		2020				2019
Cash Flows From Operating Activities:
Net loss		$	(8,359	)		$	(151,942	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Cost of lots sold			5,796				7,027
Depreciation and amortization			9,395				10,782
Provision for bad debt			6,275				7,559
Non-cash compensation expense			1,481				3,623
Loss on debt extinguishment			—				8,478
Loss on goodwill impairment			—				24,862
Non-cash interest expense			17,884				18,095
Gain on sale of businesses			(29,429	)			—
Other (gains) losses, net			(129	)			8,106
Changes in assets and liabilities:
Accounts receivable, net of allowance			(20,453	)			(8,633	)
Merchandise trust fund			(25,988	)			(17,916	)
Other assets			1,675				(56	)
Deferred selling and obtaining costs			(6,376	)			(3,598	)
Deferred revenues			61,611				36,656
Deferred taxes, net			(4,888	)			27,943
Payables and other liabilities			(7,135	)			(8,972	)
Net cash provided by (used in) operating activities			1,360				(37,986	)
Cash Flows From Investing Activities:
Cash paid for capital expenditures			(6,360	)			(6,418	)
Proceeds from divestitures			57,343				6,255
Net cash provided by (used in) investing activities			50,983				(163	)
Cash Flows From Financing Activities:
Proceeds from issuance of Series A Preferred Stock - related party			8,800				—
Proceeds from issuance of Common Stock - related party			8,200				—
Proceeds from issuance of redeemable convertible preferred units			—				12,500
Proceeds from issuance of redeemable convertible preferred units - related party			—				45,000
Proceeds from borrowings			3,672				406,087
Repayments of debt			(63,915	)			(366,905	)
Principal payment on finance leases			(1,561	)			(1,464	)
Cost of financing activities			(4,170	)			(17,396	)
Reduction to GP Holdings' Merger consideration due to SEC settlement - related party			—				(250	)
Units repurchased related to unit-based compensation			(46	)			(803	)
Net cash (used in) provided by financing activities			(49,020	)			76,769
Net increase in cash, cash equivalents and restricted cash			3,323				38,620
Cash, cash equivalents and restricted cash—Beginning of period			56,767				18,147
Cash, cash equivalents and restricted cash—End of period		$	60,090			$	56,767
Supplemental disclosure of cash flow information:
Cash paid during the period for interest		$	29,212			$	32,239
Cash paid during the period for income taxes			1,154				1,419
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases		$	3,187			$	3,638
Operating cash flows from finance leases			421				495
Financing cash flows from finance leases			1,561				1,464
Non-cash investing and financing activities:
Acquisition of assets by financing		$	62			$	2,277
Accrued paid-in-kind interest on Senior Secured Notes (defined within)			10,572				7,867