GlobeNewswire Inc | Aug 13, 2020 04:01PM EDT

August 13, 2020

TREVOSE, Pa., Aug. 13, 2020 (GLOBE NEWSWIRE) -- 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 period. -- Corporate overhead expense decreased to $8.8 million in the second quarter compared to $13.1 million in the second quarter in the prior year. -- Second quarter net loss was $3.9 million compared to $34.4 million in the second quarter in the prior year. 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 million.

Joe Redling, StoneMors 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.

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

LIQUIDITY UPDATE

As of June30, 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, StoneMors 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 at4:30 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.

StoneMors 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 StoneMors 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 continued implementation of the Companys 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 managements 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. StoneMors major risks are related to uncertainties associated withcurrent 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 frompre-need andat-needsales, trusts and financings, which may impact StoneMors ability to meet its financial projections and service its debt, as well as with StoneMors 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 StoneMors Annual Report on Form10-Kand Quarterly Reports on Form10-Qand 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 and adjusted comparable location operating income, which are intended as supplemental measures of the Companys 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys 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 Companys 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 Six Months Ended June June30, 30, 2020 2019 2020 2019Total revenues $ 70,707 $ 78,495 $ 141,952 $ 149,964Less: Revenue associated 7 4,627 1,445 8,194with divestedpropertiesComparable 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 Six Months Ended June June30, 30, 2020 2019 2020 2019 Operating income (loss) $ 4,689 $ (10,188 ) $ 27,264 $ (19,551 )Less: Gain on sale of 7,034 ? 31,120 ? businessesLess: Other (losses), net (2,169 ) (3,429 ) (2,169 ) (3,429 )Adjusted operating loss (176 ) (6,759 ) (1,687 ) (16,122 )Less: operating (loss)profit associated with (205 ) 1,596 (330 ) 2,087 divested propertiesAdjusted comparablelocation operating income $ 29 $ (8,355 ) $ (1,357 ) $ (18,209 )(loss)

EBITDA AND ADJUSTED EBITDA(in thousands)

Three Months Ended Six Months Ended June June30, 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 2,334 2,716 4,793 5,473 amortizationEBITDA 7,023 (15,950 ) 32,057 (22,556 )Less: Gain on sale of 7,034 ? 31,120 ? businessesLess: Other (losses), net (2,169 ) (3,429 ) (2,169 ) (3,429 )Less: Loss on debt ? (8,478 ) ? (8,478 )extinguishmentAdjusted EBITDA $ 2,158 $ (4,043 ) $ 3,106 $ (10,649 )

STONEMOR INC.

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

June30, December 31, 2020 2019 Assets Current assets: Cash and cash equivalents, excluding restricted $ 42,862 $ 34,867 cashRestricted 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 91,892 103,400 depreciationMerchandise 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 1,177 944 and 94,447,356 shares issued and outstanding,respectivelyPaid-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 Six Months Ended June 30, 30, 2020 2019 2020 2019 Revenues: 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 9,795 10,958 20,111 22,397 expenseCorporate overhead 8,756 13,137 17,257 26,550 Depreciation and 2,334 2,716 4,793 5,473 amortizationFuneral 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 ? (8,478 ) ? (8,478 )extinguishment(Loss) income fromoperations before income (7,406 ) (28,012 ) 2,885 (50,546 )taxesIncome tax benefit 3,492 (6,386 ) 2,204 (6,386 )(expense)Net (loss) income $ (3,914 ) $ (34,398 ) $ 5,089 $ (56,932 )Net (loss) income per $ (0.04 ) $ (0.87 ) $ 0.05 $ (1.46 )common share (basic)^(1)Net (loss) income per $ (0.04 ) $ (0.87 ) $ 0.05 $ (1.46 )common share (diluted)^(1)Weighted average number ofcommon shares 97,572 39,329 96,022 39,115 outstanding - basic^(2)Weighted average number ofcommon shares 97,572 39,329 96,022 39,115 outstanding - diluted^(2)



For the three and six months ended June 30, 2020, represents net (loss) income divided by weighted average number of common shares outstanding and(1) 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(2) 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 outstanding.

STONEMOR INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

Six Months Ended June30, 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 ? 57,500 preferred units, netProceeds 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 (35 ) ? compensationNet cash (used in) provided by financing activities (38,953 ) 78,967 Net increase in cash, cash equivalents and 6,793 43,807 restricted cashCash, cash equivalents and restricted cash?Beginning 56,767 18,147 of periodCash, cash equivalents and restricted cash?End of $ 63,560 $ 61,954 periodSupplemental 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 7,077 ? Notes