StoneMor Partners, L.P. issued a press release the other day expressing some of the movements they are making as they execute their self-termed “turnaround” of the company. As you may know, StoneMor Partners operates 321 cemeteries and 90 funeral homes and has incurred several consecutive quarters of losses in their operation. You can read their press release here:
In essence, here are some of their moves as they continue to execute their plan to bring the company back to business health.
- They have elevated Chief Accounting Officer Jeffrey DiGiovanni to Senior Vice President and Chief Financial Officer, thus combining those roles.
- Former CFO Garry Herdler is being transitioned to a consulting role with responsibilities for cost reduction and productivity improvements.
- Chief Operating Officer Jim Ford will be leaving the company and the three Divisional Presidents that reported to him will now report directly to StoneMor Partners CEO Joe Redling.
- StoneMore Partners has hired Johnson Consulting Group to “engage in a comprehensive review of the StoneMor asset base and explore various options to optimize the StoneMor portfolio while at the same time deleveraging the company’s balance sheet.”
CEO Redling made the following comment in the press release, “These actions are aligned with our turnaround plan as we continue to execute on progressing our core initiatives of reducing costs and improving sales and operational efficiency.”
Funeral Director Daily take: We believe that StoneMor is making all the right moves in their strategy. The biggest question that we have is if they can recapitalize and find cash as they need it as the company continues to lose money. At some point, they have to start moving into the black again.
Our belief, from that presentation, is that StoneMor believes it has about 35% of its properties that it called Tier 3 which were under performing funeral or cemetery properties. 35% of their properties would number about 140 properties that we believe Johnson Consulting may suggest moving to raise capital and bring the remaining portfolio into a more profitable position for StoneMor. There is no doubt that a move of that magnitude (divesting of those 140 properties) would go a long way towards “rightsizing” the company for continued operations and also generate some cash to operate with.
In the investor presentation we noticed that StoneMor Partners interments at their cemeteries have grown between 2014 and 2018. While they are in this turnaround mode that is good news and is probably indicative of aggressive pre-need sales from previous years. Contrast that with many cemeteries around the country that are reporting lower and lower interments.
Like any turnaround, the executives at StoneMor need to identify their assets, liabilities, and opportunities. They obviously have a plan and if they can successfully execute that plan the result of a profitable going concern is a possibility.
Finally, a note to individual funeral home and/or cemetery operators. You may want to be on the lookout if there is a StoneMor Partners property in your area. Maybe it would be a good time for an acquisition by you and even under performing properties can be great additions if you can reduce their cost structure by capitalizing on the shared assets of two or more units in the same area.