UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) November 6, 2012

StoneMor Partners L.P.
(Exact Name of Registrant as Specified in Its Charter)

 
					
Delaware	 	001-32270	 	80-0103159	
(State or other jurisdiction
of incorporation)	 	(Commission
File Number)	 	(IRS Employer
Identification No.)	
		
311 Veterans Highway, Suite B, Levittown, PA	 	19056	
(Address of principal executive offices)	 	(Zip Code)	
Registrant’s telephone number, including area code (215) 826-2800
Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):
 
¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
 
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
 
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
 
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

 

Item 2.02.	Results of Operations and Financial Condition	
On November 6, 2012, the Registrant issued a press release. A copy of the press release is furnished as Exhibit 99.1 to this report.
 
ITEM 9.01	FINANCIAL STATEMENTS AND EXHIBITS.	
 
 	(a)	Financial statements of businesses acquired.	
None.
 
 	(b)	Pro forma financial information.	
None.
 
 	(c)	Exhibits.	
The following exhibit is filed herewith:

Exhibit
No.	  	Description	
		
99.1	  	Press Release dated November 6, 2012.	
 
2

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	 	STONEMOR PARTNERS L.P.	
			
	 	By:	 	StoneMor GP LLC	
	 		 	its general partner	
			
Date: November 6, 2012	 	By:	 	/s/    Timothy K. Yost        	
	 	Name:	 	Timothy K. Yost	
	 	Title:	 	Chief Financial Officer and Secretary	
 
3

Exhibit Index

Exhibit
No.	  	Description	
		
99.1	  	Press Release dated November 6, 2012.	

Exhibit 99.1
StoneMor Partners L.P. Announces Third Quarter 2012 Results
Levittown, PA, November 6, 2012 – StoneMor Partners L.P. (NYSE: STON) announced its results of operations for the three months ended September 30, 2012. Investors are encouraged to read the Company’s quarterly report on Form 10-Q to be filed with the SEC which contains additional details as well as financial tables and can be found at www.stonemor.com .
Financial Highlights
 
 	•	 	Revenues (GAAP) for the three months ended September 30, 2012 increased by $1.9 million, or 3.1%, to $62.2 million from $60.3 million during the three months ended September 30, 2011.	
 
 	•	 	Production based revenue (non-GAAP) for the three months ended September 30, 2012 increased by $7.7 million, or 11.4%, to $75.1 million from $67.4 million during the prior year period.	
 
 	•	 	Operating profits (GAAP) increased during the three months ended September 30, 2012 to $5.1 million, or 27.5% as compared to $4.0 million in the same period last year.	
 
 	•	 	Adjusted operating profits (non-GAAP) increased during the three months ended September 30, 2012 to $14.6 million as compared to $9.1 million in the same period last year.	
 
 	•	 	Operating cash flows (GAAP) for the three months ended September 30, 2012 increased to $16.6 million, or 17% versus $14.2 million in the prior year period.	
 
 	•	 	Distributable free cash flow (non-GAAP) for the third quarter of 2012 was $15.3 million compared to $8.8 million for the same period last year.	
 
 	•	 	Distributable cash available during the period (non-GAAP) was greater than distributions by $11.2 million, or 94.5%, for the three months ended September 30, 2012.	
 
 	•	 	Net income (GAAP) was $1.1 million versus a net loss of ($0.2 million) in the prior year period.	
“This was a very strong quarter for StoneMor,” said Lawrence Miller, President and Chief Executive Officer. “We experienced double digit percentage increases in our key performance metrics on a year over year basis, with production based revenue rising 11.4%, adjusted operating profits rising 60.7%, and distributable free cash flow increasing 74%. Backlog increased by $9.8 million since June of 2012 to $406.3 million and our distributable cash available exceeded our distributions by $11.2 million.
“We previously announced that we have increased our distribution to $0.59 per unit from $0.585 per unit. The increase reflects the strength of our business and our commitment to generate increasing returns for our unit holders. We continue to see opportunities for growth in our industry and we look forward to capitalizing on these opportunities as they present themselves.”
The Partnership reports its financial results in accordance with U.S. GAAP. However, management believes that certain non-GAAP financial measures used in managing the business
 
1

may provide investors with additional information regarding underlying trends and ongoing results on a comparable basis. Specifically, management believes that production based revenues and adjusted operating profit allow the investor to gain insight into the current operating performance of the company. Please see the section of this press release “Non-GAAP Financial Measures” to view the tables previously presented in the body of the press release. Non-GAAP financial measures used by the company should not be considered as alternatives to GAAP financial measures, and you should not consider such non-GAAP financial measures in isolation or as a substitute for an analysis of the company’s results as reported under U.S. GAAP.
Investor Conference Call and Webcast
StoneMor will conduct a conference call to discuss the third quarter 2012 results today, Tuesday November 6, 2012 at 11:00 a.m. Eastern Time. The conference call can be accessed by calling (800) 630-4153. An audio replay of the conference call will be available by calling (800) 633-8284 through 1:00 p.m. Eastern Time on November 20, 2012. The reservation number for the audio replay is as follows: 21609161. A live webcast and audio replay of the conference call will also be archived on StoneMor’s website at http://www.stonemor.com.
About StoneMor Partners L.P.
StoneMor Partners L.P., headquartered in Levittown, Pennsylvania, is an owner and operator of cemeteries and funeral homes in the United States, with 276 cemeteries and 85 funeral homes in 28 states and Puerto Rico. StoneMor is the only publicly traded deathcare company structured as a partnership. 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 Partners L.P., please visit StoneMor’s website, and the Investor Relations section, at http://stonemor.com .
Forward-Looking Statements
Certain statements contained in this press release, including, but not limited to, information regarding the status and progress of our operating activities, the plans and objectives of our management, assumptions regarding our future performance and plans, and any financial guidance provided, as well as certain information in other filings with the SEC and elsewhere are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “project,” “expect,” “predict” and similar expressions identify these forward-looking statements. These forward-looking statements are made subject to certain risks and uncertainties that could cause actual results to differ materially from those stated, including, but not limited to, the following: uncertainties associated with future revenue and revenue growth; the effect of the current economic downturn; the impact of our significant leverage on our operating plans; our ability to service our debt and pay distributions; the decline in the fair value of certain equity and debt securities held in our trusts; our ability to attract, train and retain an adequate number of sales people; uncertainties associated with the volume and timing of pre-need sales of cemetery services and products; increased use of cremation; changes in the death rate; changes in the political or regulatory environments,
 
2

including potential changes in tax accounting and trusting policies; our ability to successfully implement a strategic plan relating to producing operating improvements, strong cash flows and further deleveraging; our ability to successfully compete in the cemetery and funeral home industry; uncertainties associated with the integration or anticipated benefits of our recent acquisitions or any future acquisitions; our ability to complete and fund additional acquisitions; our ability to maintain effective disclosure controls and procedures and internal control over financial reporting; the effect of cybersecurity attacks due to our significant reliance on information technology; uncertainties relating to the financial condition of third-party insurance companies that fund our pre-need funeral contracts; and various other uncertainties associated with the death care industry and our operations in particular.
When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements set forth in our Annual Report on Form 10-K and our Quarterly Reports on Form 10-Q filed with the SEC. We assume no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by us, whether as a result of new information, future events, or otherwise.
 
3

Non-GAAP Financial Measures
Production Based Revenue
We present production based revenue because management believes it provides for a useful measure of both the value of contracts written and investment and other income generated during a given period and is a critical component of adjusted operating profit.
Production based revenue is a non-GAAP financial measure that may not be consistent with other similar non-GAAP financial measures presented by other publicly traded companies.
Adjusted Operating Profit
We present Adjusted Operating Profit because management believes it provides for a useful measure of economic value added by presenting an effective matching of the value of current and future revenue sources generated within a given period to the cost of producing such revenue and managing our day to day operations within that same period. It is a significant measure that we believe is an indicator of eventual profit generated within a given period of time.
Adjusted Operating Profit is a non-GAAP financial measure that may not be consistent with other similar non-GAAP financial measures presented by other publicly traded companies.
Adjusted Operating Cash Generated
We present adjusted operating cash generated revenue because management believes it provides for a useful measure of the amount of cash generated that is available to make capital expenditures and partner distributions once all cash flow timing issues have been settled.
Adjusted operating cash generated is a non-GAAP financial measure that may not be consistent with other similar non-GAAP financial measures presented by other publicly traded companies.
Distributable Free Cash Flow
We present Distributable Free Cash Flow because management believes this information is a useful adjunct to Net Cash Provided by (Used in) Operating Activities under GAAP. Distributable Free Cash Flow is a significant liquidity metric that we believe is an indicator of our ability to generate cash flow during any quarter at a level sufficient to pay the [minimum] quarterly cash distribution to the holders of our common units and for other purposes, such as repaying debt and expanding through strategic investments.
Distributable Free Cash Flow is similar to quantitative standards of free cash flow used throughout the deathcare industry and to quantitative standards of distributable cash flow used throughout the investment community with respect to publicly traded partnerships, but is not intended to be a prediction of the future. However, our calculation of distributable free cash flow may not be consistent with calculations of free cash flow, distributable cash flow or other similarly titled measures of other companies. Distributable Free Cash Flow should not be used as a substitute for the GAAP measure of cash flows from operating, investing, or financing activities.
 
4

Production Based Partners’ Capital
We present production based partners’ capital as a means to provide better insight into the value that our activities contribute to the enterprise. Because a portion of our revenues and direct selling expenses are captured on our balance sheet until we deliver the underlying goods or services, we believe that by including these items in our view of partners’ capital, we gain better insight into the value creation.
 
5

Reconciliation of Production Based Revenue and Adjusted Operating Profit (non-GAAP) to Revenue and Operating Profit (GAAP)

 	 	Three months ended
September 30, 2012	 	 	Three months ended
September 30, 2011	 	 	 	 	 	 	 	
 	 	(in thousands)	 	 	(in thousands)	 	 	 	 	 	 	 	
 	 	Segment
Results
(non-GAAP)	 	 	GAAP
Adjustments	 	 	GAAP
Results	 	 	Segment
Results
(non-GAAP)	 	 	GAAP
Adjustments	 	 	GAAP
Results	 	 	Change in
GAAP results
($)	 	 	Change in
GAAP results
(%)	 	
Revenues	 				 				 				 				 				 				 				 				
									
Pre-need cemetery revenues	 	$	32,976	  	 	$	(7,211	) 	 	$	25,765	  	 	$	29,794	  	 	$	(4,103	) 	 	$	25,691	  	 	$	74	  	 	 	0.3	% 	
At-need cemetery revenues	 	 	19,256	  	 	 	(1,218	) 	 	 	18,038	  	 	 	19,565	  	 	 	(746	) 	 	 	18,819	  	 	 	(781	) 	 	 	-4.2	% 	
Investment income from trusts	 	 	9,809	  	 	 	(4,023	) 	 	 	5,786	  	 	 	8,315	  	 	 	(2,155	) 	 	 	6,160	  	 	 	(374	) 	 	 	-6.1	% 	
Interest income	 	 	1,238	  	 	 	—  	  	 	 	1,238	  	 	 	1,442	  	 	 	—  	  	 	 	1,442	  	 	 	(204	) 	 	 	-14.1	% 	
Funeral home revenues	 	 	9,603	  	 	 	(777	) 	 	 	8,826	  	 	 	7,705	  	 	 	(206	) 	 	 	7,499	  	 	 	1,327	  	 	 	17.7	% 	
Other cemetery revenues	 	 	2,188	  	 	 	356	  	 	 	2,544	  	 	 	544	  	 	 	170	  	 	 	714	  	 	 	1,830	  	 	 	256.3	% 	

Total revenues	 	 	75,070	  	 	 	(12,873	) 	 	 	62,197	  	 	 	67,365	  	 	 	(7,040	) 	 	 	60,325	  	 	 	1,872	  	 	 	3.1	% 	

Costs and expenses	 				 				 				 				 				 				 				 				
									
Cost of goods sold	 	 	9,044	  	 	 	(1,398	) 	 	 	7,646	  	 	 	8,148	  	 	 	(988	) 	 	 	7,160	  	 	 	486	  	 	 	6.8	% 	
Cemetery expense	 	 	14,252	  	 	 	—  	  	 	 	14,252	  	 	 	15,312	  	 	 	—  	  	 	 	15,312	  	 	 	(1,060	) 	 	 	-6.9	% 	
Selling expense	 	 	13,156	  	 	 	(1,866	) 	 	 	11,290	  	 	 	13,130	  	 	 	(938	) 	 	 	12,192	  	 	 	(902	) 	 	 	-7.4	% 	
General and administrative expense	 	 	7,015	  	 	 	—  	  	 	 	7,015	  	 	 	7,111	  	 	 	—  	  	 	 	7,111	  	 	 	(96	) 	 	 	-1.4	% 	
Corporate overhead	 	 	6,546	  	 	 	—  	  	 	 	6,546	  	 	 	5,628	  	 	 	—  	  	 	 	5,628	  	 	 	918	  	 	 	16.3	% 	
Depreciation and amortization	 	 	2,199	  	 	 	—  	  	 	 	2,199	  	 	 	1,886	  	 	 	—  	  	 	 	1,886	  	 	 	313	  	 	 	16.6	% 	
Funeral home expense	 	 	7,161	  	 	 	(65	) 	 	 	7,096	  	 	 	5,868	  	 	 	—  	  	 	 	5,868	  	 	 	1,228	  	 	 	20.9	% 	
Acquisition related costs	 	 	1,085	  	 	 	—  	  	 	 	1,085	  	 	 	1,189	  	 	 	—  	  	 	 	1,189	  	 	 	(104	) 	 	 	-8.7	% 	

Total costs and expenses	 	 	60,458	  	 	 	(3,329	) 	 	 	57,129	  	 	 	58,272	  	 	 	(1,926	) 	 	 	56,346	  	 	 	783	  	 	 	1.4	% 	

Operating profit	 	$	14,612	  	 	$	(9,544	) 	 	$	5,068	  	 	$	9,093	  	 	$	(5,114	) 	 	$	3,979	  	 	$	1,089	  	 	 	27.4	% 	

 	 	Nine months ended
September 30, 2012	 	 	Nine months ended
September 30, 2011	 	 	 	 	 	 	 	
 	 	(in thousands)	 	 	(in thousands)	 	 	 	 	 	 	 	
 	 	Segment
Results
(non-GAAP)	 	 	GAAP
Adjustments	 	 	GAAP
Results	 	 	Segment
Results
(non-GAAP)	 	 	GAAP
Adjustments	 	 	GAAP
Results	 	 	Change in
GAAP results
($)	 	 	Change in
GAAP results
(%)	 	
Revenues	 				 				 				 				 				 				 				 				
									
Pre-need cemetery revenues	 	$	96,595	  	 	$	(22,936	) 	 	$	73,659	  	 	$	90,451	  	 	$	(21,314	) 	 	$	69,137	  	 	$	4,522	  	 	 	6.5	% 	
At-need cemetery revenues	 	 	60,113	  	 	 	(3,198	) 	 	 	56,915	  	 	 	59,772	  	 	 	(4,207	) 	 	 	55,565	  	 	 	1,350	  	 	 	2.4	% 	
Investment income from trusts	 	 	30,214	  	 	 	(12,931	) 	 	 	17,283	  	 	 	25,582	  	 	 	(9,596	) 	 	 	15,986	  	 	 	1,297	  	 	 	8.1	% 	
Interest income	 	 	4,972	  	 	 	—  	  	 	 	4,972	  	 	 	4,580	  	 	 	—  	  	 	 	4,580	  	 	 	392	  	 	 	8.6	% 	
Funeral home revenues	 	 	27,065	  	 	 	(1,447	) 	 	 	25,618	  	 	 	22,749	  	 	 	(555	) 	 	 	22,194	  	 	 	3,424	  	 	 	15.4	% 	
Other cemetery revenues	 	 	3,981	  	 	 	864	  	 	 	4,845	  	 	 	1,631	  	 	 	570	  	 	 	2,201	  	 	 	2,644	  	 	 	120.1	% 	

Total revenues	 	 	222,940	  	 	 	(39,648	) 	 	 	183,292	  	 	 	204,765	  	 	 	(35,102	) 	 	 	169,663	  	 	 	13,629	  	 	 	8.0	% 	

Costs and expenses	 				 				 				 				 				 				 				 				
									
Cost of goods sold	 	 	25,463	  	 	 	(4,161	) 	 	 	21,302	  	 	 	23,152	  	 	 	(3,783	) 	 	 	19,369	  	 	 	1,933	  	 	 	10.0	% 	
Cemetery expense	 	 	41,819	  	 	 	—  	  	 	 	41,819	  	 	 	42,860	  	 	 	—  	  	 	 	42,860	  	 	 	(1,041	) 	 	 	-2.4	% 	
Selling expense	 	 	41,769	  	 	 	(5,569	) 	 	 	36,200	  	 	 	39,899	  	 	 	(5,976	) 	 	 	33,923	  	 	 	2,277	  	 	 	6.7	% 	
General and administrative expense	 	 	21,403	  	 	 	—  	  	 	 	21,403	  	 	 	20,569	  	 	 	—  	  	 	 	20,569	  	 	 	834	  	 	 	4.1	% 	
Corporate overhead	 	 	20,905	  	 	 	—  	  	 	 	20,905	  	 	 	17,572	  	 	 	—  	  	 	 	17,572	  	 	 	3,333	  	 	 	19.0	% 	
Depreciation and amortization	 	 	6,759	  	 	 	—  	  	 	 	6,759	  	 	 	6,374	  	 	 	—  	  	 	 	6,374	  	 	 	385	  	 	 	6.0	% 	
Funeral home expense	 	 	20,648	  	 	 	(181	) 	 	 	20,467	  	 	 	16,875	  	 	 	—  	  	 	 	16,875	  	 	 	3,592	  	 	 	21.3	% 	
Acquisition related costs	 	 	2,198	  	 	 	—  	  	 	 	2,198	  	 	 	3,147	  	 	 	—  	  	 	 	3,147	  	 	 	(949	) 	 	 	-30.2	% 	

Total costs and expenses	 	 	180,964	  	 	 	(9,911	) 	 	 	171,053	  	 	 	170,448	  	 	 	(9,759	) 	 	 	160,689	  	 	 	10,364	  	 	 	6.4	% 	

Operating profit	 	$	41,976	  	 	$	(29,737	) 	 	$	12,239	  	 	$	34,317	  	 	$	(25,343	) 	 	$	8,974	  	 	$	3,265	  	 	 	36.4	% 	
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
The table above analyzes results of operations and the changes therein for the three and nine months ended September 30, 2012 as compared to the same period last year. The table is structured so that our readers can determine whether changes were based upon changes in the level of merchandise and services and other revenues generated during each period and/ or changes in the timing of when merchandise and services were delivered.
 
6

Critical Financial Measures

 	  	Three months ended	 	
 	  	September 30,	 	
 	  	2012	 	  	2011	 	
 	  	(In thousands)	 	
			
Total revenues (a)	  	$	62,197	  	  	$	60,325	  	
Production based revenue consisting of the total value of cemetery contracts written, funeral home revenues and investment and other income (b)	  	 	75,070	  	  	 	67,365	  	
			
Operating profit (a)	  	 	5,068	  	  	 	3,979	  	
Adjusted operating profit (b)	  	 	14,612	  	  	 	9,093	  	
			
Net income (loss) (a)	  	 	1,061	  	  	 	(223	) 	
			
Operating cash flows (a)	  	 	16,602	  	  	 	14,195	  	
Adjusted operating cash generated (b)	  	 	15,728	  	  	 	9,020	  	
Distributable free cash flow generated (b)	  	$	15,327	  	  	$	8,812	  	
			
 	  	As of	 	  	As of	 	
 	  	September 30,
2012	 	  	December 31,
2011	 	
			
Distribution coverage quarters (b)	  	 	7.21	  	  	 	8.63	  	

(a)	This is a GAAP financial measure.	
(b)	This is a non-GAAP financial measure as defined by the Securities and Exchange Commission. Please see the reconciliation to GAAP measures or support calculation within this press release.	
 
7

The following tables reconcile GAAP to Non-GAAP Measures:
Production Based Revenue (non-GAAP)

 	  	Three months ended
September 30,	 	 	Increase	 	 	Increase	 	
 	  	2012	 	 	2011	 	 	(Decrease) ($)	 	 	(Decrease) (%)	 	
 	  	(In thousands)	 	
					
Value of pre-need cemetery contracts written	  	$	32,976	  	 	$	29,794	  	 	$	3,182	  	 	 	10.7	% 	
Value of at-need cemetery contracts written	  	 	19,256	  	 	 	19,565	  	 	 	(309	) 	 	 	-1.6	% 	
Investment income from trusts	  	 	9,809	  	 	 	8,315	  	 	 	1,494	  	 	 	18.0	% 	
Interest income	  	 	1,238	  	 	 	1,442	  	 	 	(204	) 	 	 	-14.1	% 	
Funeral home revenues	  	 	9,603	  	 	 	7,705	  	 	 	1,898	  	 	 	24.6	% 	
Other cemetery revenues	  	 	2,188	  	 	 	544	  	 	 	1,644	  	 	 	302.2	% 	

Total production based revenues	  	$	75,070	  	 	$	67,365	  	 	$	7,705	  	 	 	11.4	% 	

Less:	  				 				 				 				
Increase in deferred sales revenue and investment income	  	 	(12,873	) 	 	 	(7,040	) 	 	 	(5,833	) 	 	 	82.9	% 	

Total GAAP revenues	  	$	62,197	  	 	$	60,325	  	 	$	1,872	  	 	 	3.1	% 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted Operating Profit (non-GAAP)

 	  	Three months ended
September 30,	 	
 	  	2012	 	 	2011	 	
 	  	(In thousands)	 	
			
GAAP operating profit	  	$	5,068	  	 	$	3,979	  	
			
Increase in applicable deferred revenues	  	 	12,873	  	 	 	7,040	  	
Increase in deferred cost of goods sold and selling and obtaining costs	  	 	(3,329	) 	 	 	(1,926	) 	

Adjusted operating profit	  	$	14,612	  	 	$	9,093	  	

8

Adjusted Operating Cash Flows and Distributable Free Cash Flow (Non-GAAP)

 	  	Three months ended
September 30,	 	
 	  	2012	 	 	2011	 	
 	  	(In thousands)	 	
			
GAAP operating cash flows	  	$	16,602	  	 	$	14,195	  	

Add: net cash inflows (out of) into the merchandise trust	  	 	6,260	  	 	 	464	  	
Deduct: net decrease in accounts receivable	  	 	(5,847	) 	 	 	(3,921	) 	
Add: net decrease in merchandise liabilities	  	 	1,198	  	 	 	1,331	  	
			
Deduct: net (increase) decrease in accounts payable and accrued expenses	  	 	(1,859	) 	 	 	(6,259	) 	
Other float related changes	  	 	(626	) 	 	 	3,210	  	

Adjusted operating cash flow generated	  	 	15,728	  	 	 	9,020	  	

Less: maintenance capital expenditures	  	 	(1,486	) 	 	 	(1,397	) 	
Plus: growth capital expenditures reclassified as operating expenses and deducted from adjusted operating cash generated (a)	  	 	1,085	  	 	 	1,189	  	

Distributable free cash flow generated	  	 	15,327	  	 	 	8,812	  	
	  	 	 	 	 	 	 	 	
Cash on hand - beginning of the period	  	 	7,787	  	 	 	12,734	  	
			
Distributable cash available for the period	  	 	23,114	  	 	 	21,546	  	

Partner distributions made	  	$	11,884	  	 	$	11,771	  	

(a)	We maintain a line of credit from which to make acquisitions and pay acquisition related costs. We utilize this line for these costs. Accordingly, distributable free cash flow is not negatively impacted by amounts spent on acquisitions that are recorded as expenses.	

 	  	Nine months ended
September 30, 2012	 	
 	  	(in thousands)	 	
		
GAAP operating cash flows	  	$	30,797	  	

Add: net cash inflows into the merchandise trust	  	 	8,177	  	
Add: net increase in accounts receivable	  	 	2,333	  	
Add: net decrease in merchandise liabilities	  	 	5,649	  	
Add (deduct): net decrease in accounts payable and accrued expenses	  	 	(2,207	) 	
Other float related changes	  	 	(1,155	) 	

Adjusted operating cash generated	  	 	43,594	  	

Less: maintenance capital expenditures	  	 	(3,321	) 	
Plus: growth capital expenditures reclassified as operating expenses and deducted from adjusted operating cash generated (a)	  	 	2,198	  	

Distributable free cash flow generated	  	 	42,471	  	
	  	 	 	 	
Cash on hand - beginning of the period	  	 	12,058	  	
		
Distributable cash available for the period	  	 	54,529	  	

Partner distributions made	  	$	35,447	  	

9

Production Based Partners’ Capital

 	  	As of	 	 	 	 	 	 	 	
 	  	September 30,	 	 	As of December 31,	 	
 	  	2012	 	 	2011	 	 	2010	 	
				
Partners’ Capital	  	$	150,328	  	 	$	180,279	  	 	$	128,191	  	
				
Deferred selling and obtaining costs	  	 	(73,904	) 	 	 	(68,542	) 	 	 	(59,422	) 	
Deferred cemetery revenues, net	  	 	484,941	  	 	 	441,678	  	 	 	386,465	  	

Production based partners’ capital	  	$	561,365	  	 	$	553,415	  	 	$	455,234	  	
	  	 	 	 	 	 	 	 	 	 	 	 	
Other Information
Capital Base

 	  	 	 	 	As of	 	  	As of	 	
 	  	 	 	 	September 30,
2012	 	  	December 31,
2011	 	
 	  	 	 	 	(in thousands)	 	
				
Debt on lines of credit	  				 	$	84,700	  	  	$	43,750	  	
Debt due within three years	  	 	(a	) 	 	 	6,096	  	  	 	4,792	  	
Debt due between three and five years	  				 	 	—  	  	  	 	—  	  	
Debt due between five and ten years	  				 	 	150,000	  	  	 	150,000	  	
				
Availability under credit lines:	  				 				  				
Availability under the acquisition line of credit	  				 	 	—  	  	  	 	54,250	  	
Availability under the revolving line of credit	  				 	$	45,300	  	  	$	22,000	  	

(a)	Debt due within three years includes smaller notes payable related to recent acquisitions.	
The combined long and short-term debt on the balance sheet at September 30, 2012 and December 31, 2011 includes an unamortized bond discount of $2,908 and $3,220, respectively, which is not reflected in the table above.
 
10

Selected Net Assets

 	  	As of	 	  	As of	 	
 	  	September 30,
2012	 	  	December 31,
2011	 	
 	  	(In thousands)	 	
			
Selected assets:	  				  				
			
Cash and cash equivalents	  	$	8,128	  	  	$	12,058	  	
Accounts receivable, net of allowance	  	 	48,109	  	  	 	48,837	  	
Long-term accounts receivable, net of allowance	  	 	69,631	  	  	 	68,419	  	
Merchandise trusts, restricted, at fair value	  	 	372,775	  	  	 	344,515	  	

Total selected assets	  	 	498,643	  	  	 	473,829	  	

Selected liabilities:	  				  				
			
Accounts payable and accrued liabilities	  	 	22,914	  	  	 	26,428	  	
Accrued interest	  	 	5,688	  	  	 	1,632	  	
Current portion, long-term debt	  	 	1,770	  	  	 	1,487	  	
Other long-term liabilities	  	 	1,884	  	  	 	2,830	  	
Long-term debt	  	 	236,118	  	  	 	193,835	  	
Deferred tax liabilities	  	 	15,191	  	  	 	16,968	  	
Merchandise liability	  	 	128,452	  	  	 	128,942	  	

Total selected liabilities	  	 	412,017	  	  	 	372,122	  	

Total selected net assets	  	$	86,626	  	  	$	101,707	  	

Distribution coverage quarters (a)	  	 	7.21	  	  	 	8.63	  	

(a)	This is a measure of the ratio of selected net assets to a quarterly distribution amount. The quarterly distribution amount is calculated by taking the end of the period outstanding common units (19,538,051 at September 30, 2012 and 19,368,261 at December 31, 2011, respectively) and multiplying these units by the declared distribution. This total is then added to the distribution due to the General Partner based upon the same variables.	
 
11

StoneMor Partners L.P.
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)

 	  	September 30,
2012	 	  	December 31,
2011	 	
			
Assets	  				  				
Current assets:	  				  				
Cash and cash equivalents	  	$	8,128	  	  	$	12,058	  	
Accounts receivable, net of allowance	  	 	48,109	  	  	 	48,837	  	
Prepaid expenses	  	 	4,727	  	  	 	4,266	  	
Other current assets	  	 	15,548	  	  	 	16,670	  	
	  	 	 	 	  	 	 	 	
Total current assets	  	 	76,512	  	  	 	81,831	  	
			
Long-term accounts receivable, net of allowance	  	 	69,631	  	  	 	68,419	  	
Cemetery property	  	 	309,340	  	  	 	298,938	  	
Property and equipment, net of accumulated depreciation	  	 	79,567	  	  	 	73,777	  	
Merchandise trusts, restricted, at fair value	  	 	372,775	  	  	 	344,515	  	
Perpetual care trusts, restricted, at fair value	  	 	282,651	  	  	 	254,679	  	
Deferred financing costs, net of accumulated amortization	  	 	9,681	  	  	 	8,817	  	
Deferred selling and obtaining costs	  	 	73,904	  	  	 	68,542	  	
Deferred tax assets	  	 	605	  	  	 	415	  	
Goodwill	  	 	40,393	  	  	 	31,907	  	
Other assets	  	 	14,878	  	  	 	16,918	  	
	  	 	 	 	  	 	 	 	
Total assets	  	$	1,329,937	  	  	$	1,248,758	  	

Liabilities and partners’ capital	  				  				
Current liabilities:	  				  				
Accounts payable and accrued liabilities	  	$	22,914	  	  	$	26,428	  	
Accrued interest	  	 	5,688	  	  	 	1,632	  	
Current portion, long-term debt	  	 	1,770	  	  	 	1,487	  	
	  	 	 	 	  	 	 	 	
Total current liabilities	  	 	30,372	  	  	 	29,547	  	
			
Other long-term liabilities	  	 	1,884	  	  	 	2,830	  	
Long-term debt	  	 	236,118	  	  	 	193,835	  	
Deferred cemetery revenues, net	  	 	484,941	  	  	 	441,678	  	
Deferred tax liabilities	  	 	15,191	  	  	 	16,968	  	
Merchandise liability	  	 	128,452	  	  	 	128,942	  	
Perpetual care trust corpus	  	 	282,651	  	  	 	254,679	  	
	  	 	 	 	  	 	 	 	
Total liabilities	  	 	1,179,609	  	  	 	1,068,479	  	

Commitments and contingencies	  				  				
			
Partners’ capital	  				  				
General partner	  	 	944	  	  	 	2,192	  	
Common partners	  	 	149,384	  	  	 	178,087	  	
	  	 	 	 	  	 	 	 	
Total partners’ capital	  	 	150,328	  	  	 	180,279	  	

Total liabilities and partners’ capital	  	$	1,329,937	  	  	$	1,248,758	  	
	  	 	 	 	  	 	 	 	
See accompanying notes to the Condensed Consolidated Financial Statements on the Quarterly Report to be filed on Form 10-Q for the quarter ended September 30, 2012.
 
12

StoneMor Partners L.P.
Condensed Consolidated Statement of Operations
(in thousands, except unit data)

 	  	Three months ended
September 30,	 	 	Nine months ended
September 30,	 	
 	  	2012	 	 	2011	 	 	2012	 	 	2011	 	
 	  	(Unaudited)	 	 	(Unaudited)	 	
Revenues:	  				 				 				 				
Cemetery	  				 				 				 				
Merchandise	  	$	29,943	  	 	$	28,738	  	 	$	87,424	  	 	$	81,277	  	
Services	  	 	11,134	  	 	 	13,295	  	 	 	34,481	  	 	 	35,697	  	
Investment and other	  	 	12,294	  	 	 	10,793	  	 	 	35,769	  	 	 	30,495	  	
Funeral home	  				 				 				 				
Merchandise	  	 	3,548	  	 	 	3,041	  	 	 	11,135	  	 	 	9,137	  	
Services	  	 	5,278	  	 	 	4,458	  	 	 	14,483	  	 	 	13,057	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total revenues	  	 	62,197	  	 	 	60,325	  	 	 	183,292	  	 	 	169,663	  	

Costs and Expenses:	  				 				 				 				
Cost of goods sold (exclusive of depreciation shown separately below):	  				 				 				 				
Perpetual care	  	 	1,616	  	 	 	1,373	  	 	 	4,398	  	 	 	4,097	  	
Merchandise	  	 	6,030	  	 	 	5,787	  	 	 	16,904	  	 	 	15,272	  	
Cemetery expense	  	 	14,252	  	 	 	15,312	  	 	 	41,819	  	 	 	42,860	  	
Selling expense	  	 	11,290	  	 	 	12,192	  	 	 	36,200	  	 	 	33,923	  	
General and administrative expense	  	 	7,015	  	 	 	7,111	  	 	 	21,403	  	 	 	20,569	  	
Corporate overhead (including $216 and $195 in unit-based compensation for the three months ended September 30, 2012 and 2011, and $625 and $576 for the nine months ended September 30, 2012 and 2011, respectively)	  	 	6,546	  	 	 	5,628	  	 	 	20,905	  	 	 	17,572	  	
Depreciation and amortization	  	 	2,199	  	 	 	1,886	  	 	 	6,759	  	 	 	6,374	  	
Funeral home expense	  				 				 				 				
Merchandise	  	 	1,196	  	 	 	982	  	 	 	3,726	  	 	 	3,197	  	
Services	  	 	3,739	  	 	 	3,107	  	 	 	10,446	  	 	 	8,456	  	
Other	  	 	2,161	  	 	 	1,779	  	 	 	6,295	  	 	 	5,222	  	
Acquisition related costs	  	 	1,085	  	 	 	1,189	  	 	 	2,198	  	 	 	3,147	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total cost and expenses	  	 	57,129	  	 	 	56,346	  	 	 	171,053	  	 	 	160,689	  	

Operating profit	  	 	5,068	  	 	 	3,979	  	 	 	12,239	  	 	 	8,974	  	
					
Expenses related to refinancing	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	453	  	
Gain on termination of operating agreement	  	 	—  	  	 	 	—  	  	 	 	1,737	  	 	 	—  	  	
Gain on acquisition	  	 	—  	  	 	 	—  	  	 	 	122	  	 	 	—  	  	
Early extinguishment of debt	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	4,010	  	
Interest expense	  	 	5,273	  	 	 	4,824	  	 	 	15,109	  	 	 	14,266	  	

Net loss before income taxes	  	 	(205	) 	 	 	(845	) 	 	 	(1,011	) 	 	 	(9,755	) 	
					
Income tax expense (benefit)	  				 				 				 				
State	  	 	(18	) 	 	 	69	  	 	 	224	  	 	 	(829	) 	
Federal	  	 	(1,248	) 	 	 	(691	) 	 	 	(2,157	) 	 	 	(2,304	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Total income tax expense (benefit)	  	 	(1,266	) 	 	 	(622	) 	 	 	(1,933	) 	 	 	(3,133	) 	

Net income (loss)	  	$	1,061	  	 	$	(223	) 	 	$	922	  	 	$	(6,622	) 	

General partner’s interest in net income (loss) for the period	  	$	21	  	 	$	(4	) 	 	$	18	  	 	$	(132	) 	
Limited partners’ interest in net income (loss) for the period	  	$	1,040	  	 	$	(219	) 	 	$	904	  	 	$	(6,490	) 	
					
Net income (loss) per limited partner unit (basic and diluted)	  	$	.05	  	 	$	(.01	) 	 	$	.05	  	 	$	(.35	) 	
					
Weighted average number of limited partners’ units outstanding -basic	  	 	19,491	  	 	 	19,353	  	 	 	19,412	  	 	 	18,807	  	
					
Weighted average number of limited partners’ units outstanding -diluted	  	 	19,743	  	 	 	19,353	  	 	 	19,672	  	 	 	18,807	  	
					
Distributions declared per unit	  	$	.590	  	 	$	.585	  	 	$	1.760	  	 	$	1.755	  	
See accompanying notes to the Condensed Consolidated Financial Statements on the Quarterly Report to be filed on Form 10-Q for the quarter ended September 30, 2012.
 
13

StoneMor Partners L.P.
Condensed Consolidated Statement of Cash Flows
(in thousands)

 	  	Three months ended
September 30,	 	 	Nine months ended
September 30,	 	
 	  	2012	 	 	2011	 	 	2012	 	 	2011	 	
 	  	(Unaudited)	 	 	(Unaudited)	 	
Operating activities:	  				 				 				 				
Net income (loss)	  	$	1,061	  	 	$	(223	) 	 	$	922	  	 	$	(6,622	) 	
Adjustments to reconcile net income (loss) to net cash provided by operating activities:	  				 				 				 				
Cost of lots sold	  	 	2,201	  	 	 	1,723	  	 	 	6,180	  	 	 	5,004	  	
Depreciation and amortization	  	 	2,199	  	 	 	1,886	  	 	 	6,759	  	 	 	6,374	  	
Unit-based compensation	  	 	216	  	 	 	195	  	 	 	625	  	 	 	576	  	
Accretion of debt discount	  	 	507	  	 	 	325	  	 	 	1,230	  	 	 	950	  	
Gain on acquisition	  	 	—  	  	 	 	—  	  	 	 	(122	) 	 	 	—  	  	
Gain on termination of operating agreement	  	 	—  	  	 	 	—  	  	 	 	(1,737	) 	 	 	—  	  	
Write-off of deferred financing fees	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	453	  	
Fees paid related to early extinguishment of debt	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	4,010	  	
Changes in assets and liabilities that provided (used) cash:	  				 				 				 				
Accounts receivable	  	 	5,847	  	 	 	3,921	  	 	 	(2,333	) 	 	 	(5,509	) 	
Allowance for doubtful accounts	  	 	450	  	 	 	1,124	  	 	 	3,743	  	 	 	3,597	  	
Merchandise trust fund	  	 	(6,260	) 	 	 	(464	) 	 	 	(8,177	) 	 	 	(11,681	) 	
Prepaid expenses	  	 	801	  	 	 	917	  	 	 	(368	) 	 	 	586	  	
Other current assets	  	 	516	  	 	 	(4,519	) 	 	 	(344	) 	 	 	(6,024	) 	
Other assets	  	 	(14	) 	 	 	46	  	 	 	125	  	 	 	244	  	
Accounts payable and accrued and other liabilities	  	 	1,859	  	 	 	6,259	  	 	 	2,207	  	 	 	(1,290	) 	
Deferred selling and obtaining costs	  	 	(1,983	) 	 	 	(1,135	) 	 	 	(5,363	) 	 	 	(6,398	) 	
Deferred cemetery revenue	  	 	11,741	  	 	 	6,202	  	 	 	35,440	  	 	 	31,560	  	
Deferred taxes (net)	  	 	(1,341	) 	 	 	(731	) 	 	 	(2,341	) 	 	 	(2,476	) 	
Merchandise liability	  	 	(1,198	) 	 	 	(1,331	) 	 	 	(5,649	) 	 	 	(2,285	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by operating activities	  	 	16,602	  	 	 	14,195	  	 	 	30,797	  	 	 	11,069	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Investing activities:	  				 				 				 				
					
Cash paid for cemetery property	  	 	(1,817	) 	 	 	(1,988	) 	 	 	(5,417	) 	 	 	(4,258	) 	
Purchase of subsidiaries	  	 	(22,250	) 	 	 	(6,450	) 	 	 	(25,676	) 	 	 	(10,300	) 	
Cash paid for property and equipment	  	 	(1,486	) 	 	 	(1,397	) 	 	 	(3,321	) 	 	 	(4,601	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in investing activities	  	 	(25,553	) 	 	 	(9,835	) 	 	 	(34,414	) 	 	 	(19,159	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Financing activities:	  				 				 				 				
Cash distribution	  	 	(11,884	) 	 	 	(11,771	) 	 	 	(35,447	) 	 	 	(32,827	) 	
Additional borrowings on long-term debt	  	 	34,300	  	 	 	15,500	  	 	 	63,500	  	 	 	27,800	  	
Repayments of long-term debt	  	 	(12,715	) 	 	 	(566	) 	 	 	(26,137	) 	 	 	(74,490	) 	
Proceeds from public offering	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	103,207	  	
Proceeds from general partner contribution	  	 	89	  	 	 	—  	  	 	 	89	  	 	 	2,246	  	
Fees paid related to early extinguishment of debt	  	 	—  	  	 	 	—  	  	 	 	—  	  	 	 	(4,010	) 	
Cost of financing activities	  	 	(498	) 	 	 	(122	) 	 	 	(2,318	) 	 	 	(1,236	) 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) financing activities	  	 	9,292	  	 	 	3,041	  	 	 	(313	) 	 	 	20,690	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net increase (decrease) in cash and cash equivalents	  	 	341	  	 	 	7,401	  	 	 	(3,930	) 	 	 	12,600	  	
Cash and cash equivalents - Beginning of period	  	 	7,787	  	 	 	12,734	  	 	 	12,058	  	 	 	7,535	  	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents - End of period	  	$	8,128	  	 	$	20,135	  	 	$	8,128	  	 	$	20,135	  	

Supplemental disclosure of cash flow information	  				 				 				 				
Cash paid during the period for interest	  	$	683	  	 	$	345	  	 	$	9,731	  	 	$	9,897	  	
Cash paid during the period for income taxes	  	$	323	  	 	$	532	  	 	$	3,978	  	 	$	2,242	  	
					
Non-cash investing and financing activities	  				 				 				 				
Acquisition of assets by financing	  	$	146	  	 	$	94	  	 	$	199	  	 	$	237	  	
Issuance of limited partner units for cemetery acquisition	  	$	3,500	  	 	$	—  	  	 	$	4,103	  	 	$	264	  	
Acquisition of assets by assumption of directly related liability	  	$	1,504	  	 	$	—  	  	 	$	2,048	  	 	$	—  	  	
See accompanying notes to the Condensed Consolidated Financial Statements on the Quarterly Report to be filed on Form 10-Q for the quarter ended September 30, 2012.
 
14