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brachiosaurus

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  • StoneMor's Misleading Press Release: The Short Case Continued [View article]
    I think you misinterpreted :) I love dividends myself, and for the most part, only invest in companies that have a history of returning cash to shareholders.

    My point is this, they claim obscenely high IRR on the acquisitions they pursue (much higher than an investor could reasonably hope to achieve in the market), and are apparently only limited by cash. If what they are saying is correct, dividends would be a "waste" of capital if that capital could otherwise be deployed on these acquisitions. Even if they didn't have sufficient acquisitions in the pipeline, buying back the 10.25% notes below par would obviously be a better use of capital than dividends. I'd love to hear you argue otherwise.

    Again, I think you misunderstood what I wrote.
    Aug 14 12:56 AM | 2 Likes Like |Link to Comment
  • StoneMor's Misleading Press Release: The Short Case Continued [View article]
    Another thing is, they like to portray the people they cemeteries from as noobs. However, they are often buying from top-notch cemetery businesses like SCI. Or other times, they are paying more for cemetery businesses than SCI or STEI are willing to pay, despite SCI and STEI having clear competitive advantages. On conference calls, they claim absurd returns on investment for these acquisitions. But if rates of return are so high, then why are they wasting cash on distributions they aren't obligated to make? Further along this point, why do they spend a dime on distributions when they are frequently able to buy their 10.25% coupon bonds below par.
    They are very obviously pumping up their distribution to (1) attract yield-chasing retail investors, in order to amp their ability to place secondary offerings, and (2) because of the conflicts of interest in their distribution policy.
    Aug 13 01:50 AM | 1 Like Like |Link to Comment
  • StoneMor's Misleading Press Release: The Short Case Continued [View article]
    Did you listen to Colin Stewart on the conference call? That is Colin Stewart of Stewart Enterprises, who was cut off during the call when he pointed out that the "adjusted operating profit" would instantly fall if Stonemor stopped making acquisitions. I suspect he knows more about the cemetery business than you.

    I don't fully agree with Valuesleuth, but I've gone through the 10Ks and 10Qs and what is very clear is that Stonemor's "distributable cash flow" is a deceptive and worthless number. Half of that number is generated by ignoring the cost of property and assets that they've accumulated in acquisitions.
    Aug 13 01:17 AM | 2 Likes Like |Link to Comment
  • StoneMor's Misleading Press Release: The Short Case Continued [View article]
    bottom line, if you really think stonemor is undervalued, buy more of it.
    Stop whining. Valuesleuth has done nothing unethical.
    Aug 9 08:32 AM | 2 Likes Like |Link to Comment
  • StoneMor Partners' CEO Discusses Q2 2012 Results - Earnings Call Transcript [View article]
    Furthermore, if their acquisitions have such a high IRR, why do they bother wasting cash on distributions? God this conference call had so many red flags. It was hilarious when they cut Stewart off, after he pointed out that adjusted operating profit would instantly decline if they shut off acquisitions.
    Aug 9 05:47 AM | Likes Like |Link to Comment
  • StoneMor Partners' CEO Discusses Q2 2012 Results - Earnings Call Transcript [View article]
    They are not obligated to make the distribution that they make. It is completely discretionary, and apparently not limited by their bank covenants. Instead they should use that cash to go on the open-market to buy debt at a discount to par. Their response to the bond questions is total obfuscation.
    Aug 9 05:44 AM | Likes Like |Link to Comment
  • StoneMor's Misleading Press Release: The Short Case Continued [View article]
    Dear valuesleuth, the way the company computes "net liquid assets" is probably more accurate than the way you present it. The merchandise liability already includes a reasonable estimate of the future cost of labor and goods. When looking at liquidity it is best to just ignore both the deferred selling costs and the deferred revenue.
    Aug 7 01:46 AM | Likes Like |Link to Comment
  • StoneMor's Misleading Press Release: The Short Case Continued [View article]
    The problem with the author's reliance on operating cash flows is that it neglects net inflows into merchandise trusts, which are genuine assets of the company. If Stonemor is properly estimating merchandise liabilities, then adding back the net inflows into the merchandise trust net of liabilities, when calculating distributable cash flow (DCF) is very reasonable. Think of it as a flow of restricted cash, which investors can't immediately touch, but which ultimately belongs to them.

    The real problem with the way Stonemor calculates DCF is that it gets artificially inflated by acquisitions. Stonemor's DCF ignores the cost of cemetery lots sold, and other property accumulated through acquisitions, because these things get capitalized as investments rather than subtracted from operating cash flow. I think DCF is inflated in other ways, but it is hard to verify because the company's public filings are inscrutable in many important places. For example, what about investment income from trust assets that the company acquires in acquisitions? This income doesn't come for free! Yet DCF ignores the costs related to this income.

    Fortunately, in the 10Q's and 10-K's the company provides what it emphasizes is the most reliable measure of its operating profitability: the non-GAAP "segment" operating income. In the press releases, this is called adjusted operating profit. To convert this into a reasonable number, one should add back acquisition related costs, subtract interest and cash taxes. For 2011 and 2010, you get $34M and $22M. Notice that these numbers are significantly smaller than the DCF. Any amount of distributions greater than this are unjustified by the operations of the company.

    Like the author or others have pointed out, there is probably a reason that they only discuss DCF in press releases-- I think they wouldn't risk submitting such a manipulation to the SEC.
    Aug 7 12:25 AM | Likes Like |Link to Comment
  • Knight Capital (KCG) will reportedly receive a $400M financing lifeline from a group of investors that includes Blackstone (BX), TD Ameritrade (AMTD), Stifel Nicolas (SF) and Jefferies Group (JEF). The consortium is expected to receive convertible preferred stock with a conversion price of $1.50/share and carry a coupon of 2%, giving it 70-75% of Knight Capital.  [View news story]
    another common private equity business model. Rape the existing shareholders without giving them a say about the recap. Make sure to appease the current management with job assurances.
    This is not capitalism, but parasitism.
    Aug 6 02:39 PM | Likes Like |Link to Comment
  • Knight Capital (KCG) announces a $440M loss from yesterday's glitch which was the result of the installation of trading software (now removed). Shares disappearing, -50% premarket after a 33% decline yesterday. (PR)  [View news story]
    I know several people who had limit sell orders (the sort of pie in the sky sell orders that you'd never imagine getting filled) out on a certain stock that rocketed yesterday morning. They said they were drowning in money.
    Aug 3 12:24 AM | 1 Like Like |Link to Comment
  • Corporate finance managers are enjoying this rate environment, Unilever moves $450M of 3-year notes with a 0.45% coupon and $550M of 5-year notes with a $0.85% coupon. Texas Instruments joins the fun, selling (reportedly about $1B) in 3-year paper, also with a 0.45% coupon. (IBM previously)  [View news story]
    yeah... and they pay less in interest than they do on the dividends of retired shares so its actually cash flow positive. And interest is tax-deductible, while dividends are not.
    Jul 31 12:56 AM | 1 Like Like |Link to Comment
  • The Impending Implosion Of StoneMor Partners [View article]
    The answer to my 2nd question is yes, it is net of changes in merchandise liabilities. Would like to hear from anyone about the 1st question. I'm trying to figure it out by tracking the numbers in cash flow statements.
    Jul 28 11:09 PM | Likes Like |Link to Comment
  • The Impending Implosion Of StoneMor Partners [View article]
    Brian Harper or Value Sleuth or any other people long or short who may be in the know, I'm unsure about one important aspect of "distributable cash flow." When considering the net inflows into the merchandise trust, does this include merchandise trust assets acquired in acquisitions? This is a very important point, because they actually had to pay money upfront to acquire these assets, and generally at a premium to the net asset value (!). It would be extremely shady if Stonemor included these in the distributable cash flow. Also, in the distributable cash flow calculation, when they include inflows into the merchandise trusts, is this net of changes in merchandise liabilities?
    Jul 28 09:01 PM | Likes Like |Link to Comment
  • The Impending Implosion Of StoneMor Partners [View article]
    The essential problem of GAAP income is that a lot of costs are recognized upfront but revenues are largely deferred. The problem with distributable cash flow, as STON has defined it, is exactly the reverse. All of the profits are recognized upfront, but many of the recurring costs are ignored.

    Let me give you an example.
    Service Corp, in their measures of profitability, consider cemetery development cap ex as a recurring cost, while Stonemor only includes maintenance capex. This is especially egregious because for a company writing a large number of new contracts, maintenance capex will completely neglect the recurring costs associated with servicing those new contracts.

    Stonemor, itself, recognizes that "distributable cash flow" is not a valid measure of financial performance, nor is it an alternative to operating cash flow.
    Jul 28 07:49 PM | 1 Like Like |Link to Comment
  • The Impending Implosion Of StoneMor Partners [View article]
    they are underfunded. The investment returns from the perp care trust don't cover the maintenance costs. Look at the 10Qs
    Even worse, the trusts' investment returns are way lower than Stonemor's cost of capital.
    The stock pumpers are really out in force for this piece of trash. I think management realizes that the Ponzi scheme will crash if they can't maintain the stock price. It was comical to see them come out with a defense of their stock. Who does that except the most desperate managements? They are being compensated to execute on the MLP's operations, not to waste time putting out fraudulent press releases.
    Jul 27 07:42 PM | 1 Like Like |Link to Comment
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