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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     .

Commission File Number: 001-39172

STONEMOR INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

80-0103152

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

3331 Street Road, Suite 200

Bensalem, Pennsylvania

 

19020

(Address of principal executive offices)

 

(Zip Code)

 

(Registrant’s telephone number, including area code): (215) 826-2800

__________________________________

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.01 par value per share

 

STON

 

New York Stock Exchange

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

 

 

 

Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes      No  

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.     Yes      No  

The number of shares of the registrant’s common stock outstanding at August 10, 2021 was 118,011,766.

 

 

 

 


 

FORM 10-Q OF STONEMOR INC.

TABLE OF CONTENTS

 

 

 

 

 

 

PART I

 

Financial Information

 

 

 

 

 

 

 

Item 1.

 

Financial Statements (Unaudited)

 

3

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

37

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

49

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

50

 

 

 

 

 

 

 

 

 

 

PART II

 

Other Information

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

52

 

 

 

 

 

Item 1A.

 

Risk Factors

 

52

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

54

 

 

 

 

 

Item 3.

 

Defaults upon Senior Securities

 

54

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

54

 

 

 

 

 

Item 5.

 

Other Information

 

54

 

 

 

 

 

Item 6.

 

Exhibits

 

55

 

 

 

 

 

 

 

Signatures

 

56

 

 

 

2


Table of Contents

 

 

PART 1 – FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS

 

STONEMOR INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share and per share amounts)

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents, excluding restricted cash

 

$

90,398

 

 

$

39,244

 

Restricted cash

 

 

16,575

 

 

 

20,846

 

Accounts receivable, net of allowance

 

 

58,661

 

 

 

57,869

 

Prepaid expenses

 

 

6,911

 

 

 

5,290

 

Assets held for sale

 

 

 

 

 

28,575

 

Other current assets

 

 

15,178

 

 

 

16,884

 

Total current assets

 

 

187,723

 

 

 

168,708

 

 

 

 

 

 

 

 

 

 

Long-term accounts receivable, net of allowance

 

 

76,599

 

 

 

75,301

 

Cemetery property

 

 

296,529

 

 

 

299,526

 

Property and equipment, net of accumulated depreciation

 

 

80,392

 

 

 

83,496

 

Merchandise trusts, restricted, at fair value

 

 

544,268

 

 

 

501,453

 

Perpetual care trusts, restricted, at fair value

 

 

326,958

 

 

 

312,228

 

Deferred selling and obtaining costs

 

 

120,229

 

 

 

116,900

 

Deferred tax assets

 

 

7

 

 

 

9

 

Intangible assets, net

 

 

54,559

 

 

 

55,094

 

Other assets

 

 

24,924

 

 

 

22,248

 

Total assets

 

$

1,712,188

 

 

$

1,634,963

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

45,943

 

 

$

51,718

 

Liabilities held for sale

 

 

 

 

 

23,406

 

Accrued interest

 

 

4,722

 

 

 

95

 

Current portion, long-term debt

 

 

1,859

 

 

 

317

 

Total current liabilities

 

 

52,524

 

 

 

75,536

 

 

 

 

 

 

 

 

 

 

Long-term debt, net of deferred financing costs

 

 

389,559

 

 

 

320,715

 

Deferred revenues

 

 

1,013,653

 

 

 

949,164

 

Deferred tax liabilities

 

 

18,127

 

 

 

29,652

 

Perpetual care trust corpus

 

 

326,958

 

 

 

312,228

 

Other long-term liabilities

 

 

42,776

 

 

 

40,081

 

Total liabilities

 

 

1,843,597

 

 

 

1,727,376

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock, par value $0.01 per share, 200,000,000 shares authorized, 117,964,891

  and 117,871,141 shares issued and outstanding, respectively

 

 

1,180

 

 

 

1,178

 

Paid-in capital in excess of par value

 

 

(84,221

)

 

 

(85,232

)

Accumulated deficit

 

 

(48,368

)

 

 

(8,359

)

Total stockholders' equity

 

 

(131,409

)

 

 

(92,413

)

Total liabilities and stockholders' equity

 

$

1,712,188

 

 

$

1,634,963

 

 

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

3


Table of Contents

 

STONEMOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share amounts)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cemetery:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interments

 

$

22,906

 

 

$

16,467

 

 

$

43,425

 

 

$

31,226

 

Merchandise

 

 

17,787

 

 

 

14,591

 

 

 

34,069

 

 

 

28,969

 

Services

 

 

17,698

 

 

 

16,551

 

 

 

34,979

 

 

 

31,578

 

Investment and other

 

 

13,737

 

 

 

9,254

 

 

 

26,635

 

 

 

19,887

 

Funeral home:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merchandise

 

 

5,449

 

 

 

4,825

 

 

 

11,422

 

 

 

10,211

 

Services

 

 

5,404

 

 

 

4,913

 

 

 

10,764

 

 

 

9,832

 

Total revenues

 

 

82,981

 

 

 

66,601

 

 

 

161,294

 

 

 

131,703

 

Costs and Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

12,435

 

 

 

9,269

 

 

 

23,619

 

 

 

18,683

 

Cemetery expense

 

 

18,090

 

 

 

17,229

 

 

 

36,251

 

 

 

34,177

 

Selling expense

 

 

14,776

 

 

 

12,206

 

 

 

28,983

 

 

 

24,257

 

General and administrative expense

 

 

10,650

 

 

 

9,130

 

 

 

20,843

 

 

 

18,645

 

Corporate overhead

 

 

9,534

 

 

 

8,756

 

 

 

19,075

 

 

 

17,257

 

Depreciation and amortization

 

 

2,027

 

 

 

2,293

 

 

 

4,129

 

 

 

4,607

 

Funeral home expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Merchandise

 

 

1,478

 

 

 

1,364

 

 

 

3,139

 

 

 

2,700

 

Services

 

 

4,477

 

 

 

4,425

 

 

 

9,138

 

 

 

8,819

 

Other

 

 

3,239

 

 

 

2,490

 

 

 

6,258

 

 

 

5,250

 

Total costs and expenses

 

 

76,706

 

 

 

67,162

 

 

 

151,435

 

 

 

134,395

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on sale of business and other impairments

 

 

(2,220

)

 

 

 

 

 

(2,220

)

 

 

 

Other gains

 

 

69

 

 

 

 

 

 

69

 

 

 

 

Operating income (loss)

 

 

4,124

 

 

 

(561

)

 

 

7,708

 

 

 

(2,692

)

Interest expense

 

 

(9,977

)

 

 

(11,729

)

 

 

(20,450

)

 

 

(23,082

)

Loss on debt extinguishment

 

 

(40,128

)

 

 

 

 

 

(40,128

)

 

 

 

Loss from continuing operations before income taxes

 

 

(45,981

)

 

 

(12,290

)

 

 

(52,870

)

 

 

(25,774

)

Income tax benefit

 

 

9,736

 

 

 

3,492

 

 

 

11,412

 

 

 

2,204

 

Net loss from continuing operations

 

 

(36,245

)

 

 

(8,798

)

 

 

(41,458

)

 

 

(23,570

)

Discontinued operations (Note 2):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations of discontinued businesses

 

 

860

 

 

 

4,884

 

 

 

1,449

 

 

 

28,659

 

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

 

Net income from discontinued operations

 

 

860

 

 

 

4,884

 

 

 

1,449

 

 

 

28,659

 

Net (loss) income

 

$

(35,385

)

 

$

(3,914

)

 

$

(40,009

)

 

$

5,089

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations per common share (basic)

 

$

(0.31

)

 

$

(0.09

)

 

$

(0.35

)

 

$

(0.25

)

Net income from discontinued operations per common share (basic)

 

 

0.01

 

 

 

0.05

 

 

 

0.01

 

 

 

0.30

 

Net (loss) income per common share (basic)

 

$

(0.30

)

 

$

(0.04

)

 

$

(0.34

)

 

$

0.05

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations per common share (diluted)

 

$

(0.31

)

 

$

(0.09

)

 

$

(0.35

)

 

$

(0.25

)

Net income from discontinued operations per common share (diluted)

 

 

0.01

 

 

 

0.05

 

 

 

0.01

 

 

 

0.30

 

Net (loss) income per common share (diluted)

 

$

(0.30

)

 

$

(0.04

)

 

$

(0.34

)

 

$

0.05

 

Weighted average number of common shares outstanding - basic

 

 

117,956

 

 

 

97,572

 

 

 

117,933

 

 

 

96,022

 

Weighted average number of common shares outstanding - diluted

 

 

117,956

 

 

 

97,572

 

 

 

117,933

 

 

 

96,022

 

 

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

 

 

4


Table of Contents

 

 

STONEMOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

(in thousands, except shares)

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Common Shares

 

 

Par Value of Common Shares

 

 

Paid-in Capital in Excess of Par Value

 

 

Accumulated Deficit

 

 

Total

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

117,871,141

 

 

$

1,178

 

 

$

(85,232

)

 

$

(8,359

)

 

$

(92,413

)

Common stock awards under incentive plans

 

 

46,875

 

 

 

1

 

 

 

504

 

 

 

 

 

 

505

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(4,624

)

 

 

(4,624

)

March 31, 2021

 

 

117,918,016

 

 

$

1,179

 

 

$

(84,728

)

 

$

(12,983

)

 

$

(96,532

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2021

 

 

117,918,016

 

 

$

1,179

 

 

$

(84,728

)

 

$

(12,983

)

 

$

(96,532

)

Common stock awards under incentive plans

 

 

46,875

 

 

 

1

 

 

 

507

 

 

 

 

 

 

508

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(35,385

)

 

 

(35,385

)

June 30, 2021

 

 

117,964,891

 

 

$

1,180

 

 

$

(84,221

)

 

$

(48,368

)

 

$

(131,409

)

 

 

 

 

Series A Preferred Stock

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Number of Series A Preferred Shares

 

 

Par Value of Series A Preferred Shares

 

 

Number of Common Shares

 

 

Par Value of Common Shares

 

 

Paid-in Capital in Excess of Par Value

 

 

Retained Earnings

 

 

Total

 

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

$

 

 

 

94,447,356

 

 

$

944

 

 

$

(103,434

)

 

$

 

 

$

(102,490

)

Common stock awards under incentive

  plans

 

 

 

 

 

 

 

 

29,746

 

 

 

 

 

 

375

 

 

 

 

 

 

375

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9,003

 

 

 

9,003

 

March 31, 2020

 

 

 

 

$

 

 

 

94,477,102

 

 

$

944

 

 

$

(103,059

)

 

$

9,003

 

 

$

(93,112

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2020

 

 

 

 

$

 

 

 

94,477,102

 

 

$

944

 

 

$

(103,059

)

 

$

9,003

 

 

$

(93,112

)

Issuance of Series A Preferred Stock

 

 

176

 

 

 

 

 

 

 

 

 

 

 

 

8,800

 

 

 

 

 

 

8,800

 

Exchange of Series A Preferred Stock for

  Common Stock

 

 

(176

)

 

 

 

 

 

12,054,795

 

 

 

121

 

 

 

(121

)

 

 

 

 

 

 

Issuance of Common Stock

 

 

 

 

 

 

 

 

11,232,877

 

 

 

112

 

 

 

8,088

 

 

 

 

 

 

8,200

 

Common stock awards under incentive

  plans

 

 

 

 

 

 

 

 

29,746

 

 

 

 

 

 

317

 

 

 

 

 

 

317

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,914

)

 

 

(3,914

)

June 30, 2020

 

 

 

 

$

 

 

 

117,794,520

 

 

$

1,177

 

 

$

(85,975

)

 

$

5,089

 

 

$

(79,709

)

 

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

5


Table of Contents

 

STONEMOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

 

 

 

Six Months Ended June 30,

 

 

2021

 

 

2020

 

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

 

 

 

Net (loss) income

 

$

(40,009

)

 

$

5,089

 

 

Adjustments to reconcile net (loss) income to net cash (used in) provided by

   operating activities:

 

 

 

 

 

 

 

 

 

Cost of lots sold

 

 

3,651

 

 

 

2,843

 

 

Depreciation and amortization

 

 

4,169

 

 

 

4,793

 

 

Provision for bad debt

 

 

3,519

 

 

 

3,807

 

 

Non-cash compensation expense

 

 

1,013

 

 

 

727

 

 

Loss on debt extinguishment

 

 

40,128

 

 

 

 

 

Non-cash interest expense

 

 

3,160

 

 

 

10,506

 

 

Loss (gain) on sale of businesses

 

 

1,353

 

 

 

(28,951

)

 

Other gains

 

 

(69

)

 

 

 

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

 

Payment of paid-in-kind interest

 

 

(18,440

)

 

 

 

 

Accounts receivable, net of allowance

 

 

(11,522

)

 

 

(8,234

)

 

Merchandise trust fund

 

 

(17,378

)

 

 

(2,242

)

 

Other assets

 

 

(2,942

)

 

 

4,746

 

 

Deferred selling and obtaining costs

 

 

(4,229

)

 

 

(2,968

)

 

Deferred revenues

 

 

45,652

 

 

 

19,663

 

 

Deferred taxes, net

 

 

(11,523

)

 

 

(2,340

)

 

Payables and other liabilities

 

 

1,900

 

 

 

(6,238

)

 

Net cash (used in) provided by operating activities

 

 

(1,567

)

 

 

1,201

 

 

Cash Flows From Investing Activities:

 

 

 

 

 

 

 

 

 

Cash paid for capital expenditures

 

 

(3,361

)

 

 

(3,791

)

 

Proceeds from divestitures

 

 

6,578

 

 

 

48,336

 

 

Net cash provided by investing activities

 

 

3,217

 

 

 

44,545

 

 

Cash Flows From Financing Activities:

 

 

 

 

 

 

 

 

 

Proceeds from issuance of Series A Preferred Stock

 

 

 

 

 

8,800

 

 

Proceeds from issuance of Common Stock

 

 

 

 

 

8,200

 

 

Proceeds from borrowings

 

 

404,433

 

 

 

2,639

 

 

Repayments of debt

 

 

(329,294

)

 

 

(53,572

)

 

Principal payment on finance leases

 

 

(796

)

 

 

(749

)

 

Early redemption premium

 

 

(18,478

)

 

 

 

 

Cost of financing activities

 

 

(10,632

)

 

 

(4,236

)

 

Shares repurchased related to share-based compensation