StoneMor Inc. Reports Second Quarter Financial Results

August 13, 2020

TREVOSE, PA - August 13, 2020 - 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 second quarter and six-month period ended June 30, 2020. Investors are encouraged to read the Company's quarterly report on Form 10-Q 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.

SECOND QUARTER FINANCIAL PERFORMANCE

  • Revenues for the second quarter were $70.7 million compared to $78.5 million in the second quarter in the prior year. Six-month revenues were $142.0 million compared to $150.0 million in the prior year period. When adjusted to exclude revenues from properties divested since January 1, 2019, revenues for the quarter and six months ended June 30, 2020 were $70.7 million and $140.5 million, respectively, compared to revenues of $73.9 million and $141.8 million, respectively, for the prior year periods.
  • Cemetery segment operating income for the second quarter was $7.4 million compared to $4.8 million in the second quarter in the prior year, representing an increase of $2.6 million. Six-month cemetery segment operating profit was $12.7 million compared to $7.6 million in the prior year period, representing an increase of $5.1 million.
  • Funeral home segment operating income for the second quarter was $1.4 million compared to $1.8 million in the second quarter in the prior year, representing a decrease of $0.4 million. Six-month funeral home segment operating profit was $3.3 million which was unchanged from the prior year
  • Corporate overhead expense decreased to $8.8 million in the second quarter compared to $13.1 million in the second quarter in the prior
  • Second quarter net loss was $3.9 million compared to $34.4 million in the second quarter in the prior Second quarter net loss in 2020 included a gain on sale of business of $7.0 million and other losses of $2.2 million.
  • Second quarter operating income was $4.7 million, including a $7.0 million gain on sale of business and $2.2 million in other losses, compared to an operating loss of $10.2 million in the second quarter in the prior year, which included other losses of $3.4

Joe Redling, StoneMor's President and Chief Executive Officer said, "After a strong first quarter, our second quarter continued that trend, particularly as it relates to our cemetery sales production1 and expense management initiatives. During the quarter we experienced a 6% year-over-year increase in cemetery sales production - rebounding in May and June after an initial decline in April, brought upon by the COVID-19 pandemic. The upward trajectory of our sales, which continued into July, is driven by strong growth in both our Pre-Need and At- Need Sales categories. This sales production growth was generated while reducing our expenses across the board, most notably by a $4.4 million reduction in corporate overhead expenses."

1 Cemetery sales production represents dollar volume associated with new contracts executed during the period.

LIQUIDITY UPDATE

As of June 30, 2020, the Company had $63.6 million of cash, including $20.7 million of restricted cash, and $323.3 million of total debt.

"Through our cost reduction and transformation initiatives, including those related directly to our COVID-19 response, StoneMor produced a second quarter that generated adjusted EBITDA of $2.2 million and operating cash flow of $6.4 million, which includes a $6.5 million cash interest payment," said Jeff DiGiovanni, StoneMor's Senior Vice President and Chief Financial Officer. "In addition, StoneMor reduced its debt by $22 million in the second quarter with the continued execution on its divestiture strategy. We remain focused on generating operating cash flow through effective management of our operations and related treasury functions, our corporate cost reduction initiatives and continuing to evaluate opportunities to further reduce debt through additional divestitures."

CONFERENCE CALL INFORMATION

StoneMor will conduct a conference call to discuss this news release today, August 13, 2020 at 4:30 p.m. Eastern Time. The conference call can be accessed by calling (877) 256-6190. No reservation number is necessary.

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 Trevose, Pennsylvania, is an owner and operator of cemeteries and funeral homes in the United States, with 318 cemeteries and 87 funeral homes in 27 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.

CONTACT

Investor Relations StoneMor Inc. (215) 826-4438

Cautionary Note Regarding Forward-Looking Statements

Certain statements contained in this press release, including, but not limited to, information regarding continued implementation of the Company's performance and cost structure improvement efforts and the anticipated financial impact thereof, 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 comparable location revenues, EBITDA and adjusted EBITDA and adjusted operating loss and adjusted comparable location operating income (loss), 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 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.

COMPARABLE LOCATION REVENUES

(in thousands)

Three Months Ended June 30, Six Months Ended June 30,

2020

2019

2020

2019

Total revenues

Less: Revenue associated with divested

$ 70,707

$ 78,495

$ 141,952

$ 149,964

properties

7

4,627

1,445

8,194

Comparable location revenues

$ 70,700

$ 73,868

$ 140,507

$ 141,770

ADJUSTED OPERATING LOSS AND ADJUSTED COMPARABLE LOCATION OPERATING INCOME (LOSS)

(in thousands)

Three Months Ended June 30, Six Months Ended June 30,

2020

2019

2020

2019

Operating income (loss)

$ 4,689

$ (10,188)

$ 27,264

$ (19,551)

Less: Gain on sale of businesses

7,034

31,120

Less: Other (losses), net

(2,169)

(3,429)

(2,169)

(3,429)

Adjusted operating loss

(176)

(6,759)

(1,687)

(16,122)

Less: Operating (loss) income associated divested properties

(205)

1,596

(330)

2,087

Adjusted comparable location operating income (loss)

$ 29

$

(8,355)

$

(1,357)

$

(18,209)

EBITDA AND ADJUSTED EBITDA

(in thousands)

Three Months Ended June 30, Six Months Ended June 30,

2020

2019

2020

2019

Net income (loss)

$ (3,914)

$ (34,398)

$ 5,089

$ (56,932)

Income tax expense

(3,492)

6,386

(2,204)

6,386

Interest expense

12,095

9,346

24,379

22,517

Depreciation and amortization 2,334

2,716

4,793

5,473

EBITDA 7,023

(15,950)

32,057

(22,556)

Less: Gain on sale of businesses

7,034

31,120

Less: Other (losses), net

(2,169)

(3,429)

(2,169)

(3,429)

Less: Loss on debt extinguishment

(8,478)

(8,478)

Adjusted EBITDA

$ 2,158

$ (4,043)

$ 3,106

$ (10,649)

STONEMOR INC.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands, except share and per share data)

June 30,

2020

December 31,

2019

Assets

Current assets:

Cash and cash equivalents, excluding restricted cash

$ 42,862

$ 34,867

Restricted cash

20,698

21,900

Accounts receivable, net of allowance

55,963

55,794

Prepaid expenses

4,630

4,778

Assets held for sale

31,751

23,858

Other current assets

13,877

17,142

Total current assets

169,781

158,339

Long-term accounts receivable, net of allowance

73,106

75,549

Cemetery property

303,502

320,605

Property and equipment, net of accumulated depreciation

91,892

103,400

Merchandise trusts, restricted, at fair value

472,500

517,192

Perpetual care trusts, restricted, at fair value

298,221

343,619

Deferred selling and obtaining costs

115,401

114,944

Deferred tax assets

29

81

Intangible assets

55,652

56,246

Other assets

25,966

29,393

Total assets

$ 1,606,050

$ 1,719,368

Liabilities and Owners' Equity

Current liabilities:

Accounts payable and accrued liabilities

$ 49,624

$ 55,134

Liabilities held for sale

24,274

20,668

Accrued interest

111

125

Current portion, long-term debt

1,291

374

Total current liabilities

75,300

76,301

Long-term debt, net of deferred financing costs

322,038

367,963

Deferred revenues

910,870

949,375

Deferred tax liabilities

32,220

34,613

Perpetual care trust corpus

298,221

343,619

Other long-term liabilities

47,110

49,987

Total liabilities

1,685,759

1,821,858

Commitments and contingencies

Owners' equity:

Common stock, par value $0.01 per share, 200,000,000 shares authorized, 117,794,520

and 94,447,356 shares issued and outstanding, respectively

1,177

944

Paid-in capital in excess of par value

(85,975

) (103,434)

Retained earnings

5,089

Total owners' equity

(79,709

) (102,490)

Total liabilities and owners' equity

$ 1,606,050

$ 1,719,368

STONEMOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per share and per unit data)

Three Months Ended June 30, Six Months Ended June 30,

2020 2019 2020 2019

Cemetery:

Interments

$ 17,392

$ 20,995

$ 33,346

$ 36,939

Merchandise

15,073

17,315

30,239

33,856

Services

16,928

17,365

32,488

33,332

Investment and other

9,539

9,953

20,925

19,411

Funeral home:

Merchandise

5,609

6,073

12,177

12,348

Services

6,166

6,794

12,777

14,078

Total revenues

70,707

78,495

141,952

149,964

Costs and Expenses:

Cost of goods sold

9,562

10,843

19,487

20,586

Cemetery expense

17,907

21,636

35,755

38,883

Selling expense

12,609

15,497

25,658

30,230

General and administrative expense

9,795

10,958

20,111

22,397

Corporate overhead

8,756

13,137

17,257

26,550

Depreciation and amortization

2,334

2,716

4,793

5,473

Funeral home expenses:

Merchandise

1,538

1,014

3,314

3,331

Services

5,297

5,459

10,694

11,012

Other

3,085

3,994

6,570

7,624

Total costs and expenses

70,883

85,254

143,639

166,086

Gain on sale of businesses

7,034

31,120

Other losses

(2,169)

(3,429)

(2,169)

(3,429)

Operating income (loss)

4,689

(10,188)

27,264

(19,551)

Interest expense

(12,095)

(9,346)

(24,379)

(22,517)

Loss on debt extinguishment

(8,478)

(8,478)

(Loss) income from operations before income taxes

(7,406)

(28,012)

2,885

(50,546)

Income tax benefit (expense)

3,492

(6,386)

2,204

(6,386)

Net (loss) income

$ (3,914)

$ (34,398)

$ 5,089

$ (56,932)

Net (loss) income per common share (basic)(1)

$ (0.04)

$ (0.87)

$ 0.05

$ (1.46)

Net (loss) income per common share (diluted)(1)

$ (0.04)

$ (0.87)

$ 0.05

$ (1.46)

Weighted average number of common shares outstanding - basic(2)

97,572

39,329

96,022

39,115

Weighted average number of common shares outstanding - diluted(2)

97,572

39,329

96,022

39,115

  • For the three and six months ended June 30, 2020, represents net (loss) income divided by weighted average number of common shares outstanding and for the three and six months ended June 30, 2019, represents net loss divided by weighted average number of common limited partner units outstanding.
  • For the three and six months ended June 30, 2020, represents weighted average number of common shares outstanding and for the three and six months ended June 30, 2019, represents weighted average number of common limited partner units

STONEMOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

Six Months Ended June 30,

2020

2019

Cash Flows From Operating Activities:

Net income (loss)

$ 5,089

$ (56,932)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Cost of lots sold

2,843

3,718

Depreciation and amortization

4,793

5,473

Provision for bad debt

3,807

4,219

Non-cash compensation expense

727

2,566

Loss on debt extinguishment

8,478

Non-cash interest expense

10,506

6,684

Gain on sale of businesses

(31,120)

Other losses, net

2,169

3,433

Changes in assets and liabilities:

Accounts receivable, net of allowance

(8,234)

(8,611 )

Merchandise trust fund

(2,242)

(9,482 )

Other assets

4,746

(4,522 )

Deferred selling and obtaining costs

(2,968)

(1,165 )

Deferred revenues

19,663

15,126

Deferred taxes, net

(2,340)

6,227

Payables and other liabilities

(6,238)

(6,784)

Net cash provided by (used in) operating activities

1,201

(31,572)

Cash Flows From Investing Activities:

Cash paid for capital expenditures

(3,791)

(4,838 )

Proceeds from divestitures

48,336

1,250

Net cash provided by (used in) investing activities

44,545

(3,588 )

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 issuance of redeemable convertible preferred units, net

57,500

Proceeds from borrowings

2,639

406,087

Repayments of debt

(53,572)

(366,470 )

Principal payment on finance leases

(749)

(713 )

Cost of financing activities

(4,236)

(17,437)

Shares repurchased related to share-based compensation

(35)

Net cash (used in) provided by financing activities

(38,953)

78,967

Net increase in cash, cash equivalents and restricted cash

6,793

43,807

Cash, cash equivalents and restricted cash—Beginning of period

56,767

18,147

Cash, cash equivalents and restricted cash—End of period

$ 63,560

$ 61,954

Supplemental disclosure of cash flow information:

Cash paid during the period for interest

$ 13,675

$ 16,981

Cash paid during the period for income taxes

1,402

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows from operating leases

$ 1,611

$ 1,858

Operating cash flows from finance leases

225

238

Financing cash flows from finance leases

749

713

Non-cash investing and financing activities:

Acquisition of assets by financing

$ —

$ 1,731

Net transfers within assets held for sale

80,781

(408 )

Accrued paid-in-kind interest on Senior Secured Notes

7,077