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) March 31, 2009

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

 
					
Delaware	 	000-50910	 	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 March 31, 2009, 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 March 31, 2009.	
 
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: March 31, 2009	 	By:	 	/s/ William R. Shane	
	 	Name:	 	William R. Shane	
	 	Title:	 	Executive Vice President and Chief Financial Officer	
 
3

Exhibit Index

Exhibit No.	  	Description	
99.1	  	Press Release dated March 31, 2009.	

Exhibit 99.1
StoneMor Partners L.P. Announces Improved 2008 Year End Results
Levittown, PA, March 31 , 2009 – StoneMor Partners L.P. (NASDAQ: STON) is pleased to announce increases in revenues, operating cash flows, distributable free cash flows, adjusted operating profits, operating profits and net income for the year ended December 31, 2008, as compared to the year ended December 31, 2007, as noted in the table below:

 	  	Three months ended December 31,	  	Year ended December 31,	
 	  	2007	 	 	2008	  	2007	  	2008	
 	  	(In thousands)	
Total revenues	  	$	38,734	 	 	$	46,315	  	$	145,314	  	$	183,448	
Operating cash flow	  	 	4,196	 	 	 	2,049	  	 	18,973	  	 	21,144	
Distributable free cash flow (a)	  	 	4,803	 	 	 	3,971	  	 	20,610	  	 	29,511	
Adjusted operating profit (a)	  	 	6,563	 	 	 	6,504	  	 	26,597	  	 	33,692	
Operating profit	  	 	1,507	 	 	 	4,236	  	 	12,643	  	 	17,350	
Net income (loss)	  	$	(1,219	)	 	$	1,531	  	$	2,786	  	$	4,556	

(a)	This is a non-GAAP financial measure as defined by the Securities and Exchange Commission. Please see the reconciliation to GAAP measures within this press release.	
The improvements in our operating measures demonstrate our success in executing our operating strategy of achieving growth through accretive acquisitions, improving upon these properties with our pre-need sales program, and installing and servicing the products we sell as soon as possible.
Revenues
Revenues increased by $38.1 million, or 26.2%, to $183.4 million in 2008, as compared to $145.3 million during 2007. Revenues increased by $7.6 million, or 19.6%, to $46.3 million in the fourth quarter of 2008, as compared to $38.7 million during the same period last year.
GAAP accounting requires that we defer the value of contracts written and investment income earned from trusts until such time as the underlying merchandise is delivered or service is performed. Accordingly, periodic changes in GAAP revenue are not necessarily indicative of changes in either the volume or pricing on contracts originated during the period, but rather changes in the timing of when merchandise is delivered or services are performed.
From a business perspective, we believe that the value of contracts written provides for an extremely important measure of economic value added during any period and is the production measure that we use internally to evaluate performance. We believe that it is critical that our unit-holders are provided with this information.

The following table reconciles total revenues to the value of funeral home revenues, cemetery contracts written plus interest income earned from pre-need installment contracts and investment income earned from trusts for 2007 and 2008:

 	  	Three months ended December 31,	 	 	Increase	 	 	Increase	 	
 	  	2007	  	2008	 	 	(Decrease) ($)	 	 	(Decrease) (%)	 	
 	  	(In thousands)	 	 	 	 	
Total cemetery revenues	  	$	35,758	  	$	39,964	 	 	$	4,206	 	 	11.8	%	
Total funeral home revenues	  	 	2,976	  	 	6,351	 	 	 	3,375	 	 	113.4	%	

Total revenues	  	 	38,734	  	 	46,315	 	 	 	7,581	 	 	19.6	%	

Add:	  			  				 				 			
					
Increase in deferred sales revenue	  	 	2,115	  	 	5,260	 	 	$	3,144	 	 	148.7	%	
Increase (decrease) in deferred investment income	  	 	3,578	  	 	(936	)	 	 	(4,515	)	 	n/a	 	

Total value of funeral home revenues, cemetery contracts written, interest income and investment income earned	  	 	44,427	  	 	50,638	 	 	$	6,211	 	 	14.0	%	

Components:	  			  				 				 			
					
Pre-need value of cemetery contracts written	  	 	16,220	  	 	21,814	 	 	$	5,595	 	 	34.5	%	
At-need value of cemetery contracts written and other revenues	  	 	12,676	  	 	15,445	 	 	 	2,769	 	 	21.8	%	
Funeral home revenues	  	 	2,976	  	 	6,351	 	 	 	3,375	 	 	113.4	%	
Interest income earned	  	 	1,067	  	 	1,038	 	 	 	(29	)	 	-2.7	%	
Investment income earned on trust assets	  	 	11,488	  	 	5,989	 	 	 	(5,499	)	 	-47.9	%	
	  	 	 	  	 	 	 	 	 	 	 	 	 	 	
Total	  	$	44,427	  	$	50,638	 	 	$	6,211	 	 	14.0	%	

 	  	Year ended December 31,	 	 	Increase	 	 	Increase	 	
 	  	2007	  	2008	 	 	(Decrease) ($)	 	 	(Decrease) (%)	 	
 	  	(In thousands)	 	 	 	 	
Total cemetery revenues	  	$	134,532	  	$	159,485	 	 	$	24,952	 	 	18.5	%	
Total funeral home revenues	  	 	10,782	  	 	23,963	 	 	 	13,181	 	 	122.3	%	

Total revenues	  	 	145,314	  	 	183,448	 	 	 	38,133	 	 	26.2	%	

Add:	  			  				 				 			
					
Increase in deferred sales revenue	  	 	8,680	  	 	22,482	 	 	$	13,801	 	 	159.0	%	
Increase (decrease) in deferred investment income	  	 	8,748	  	 	3,236	 	 	 	(5,511	)	 	-63.0	%	

Total value of funeral home revenues, cemetery contracts written, interest income and investment income earned	  	 	162,743	  	 	209,166	 	 	 	46,423	 	 	28.5	%	

Components:	  			  				 				 			
					
Pre-need value of cemetery contracts written	  	 	71,428	  	 	91,053	 	 	 	19,626	 	 	27.5	%	
At-need value of cemetery contracts written and other revenues	  	 	46,448	  	 	65,247	 	 	 	18,799	 	 	40.5	%	
Funeral home revenues	  	 	10,782	  	 	23,963	 	 	 	13,181	 	 	122.3	%	
Interest income earned	  	 	4,710	  	 	5,384	 	 	 	674	 	 	14.3	%	
Investment income earned on trust assets	  	 	29,375	  	 	23,518	 	 	 	(5,857	)	 	-19.9	%	
	  	 	 	  	 	 	 	 	 	 	 	 	 	 	
	  	$	162,743	  	$	209,166	 	 	$	46,423	 	 	28.5	%	
	  	 	 	  	 	 	 	 	 	 	 	 	 	 	
While cemetery revenues increased by $4.2 million, or 11.8%, and $25.0 million, or 18.5%, for the three months and year ended December 31, 2008 compared to 2007, the increase in the actual value of cemetery contracts written exceeded these percentage increases. The actual value of pre-need contracts written increased by $5.6 million, or 34.5%, and $19.6 million, or 27.5%, while the actual value of at-need contracts written and other revenues increased by $2.8 million, or 21.8% and $18.8 million, or 40.5% for the three months and year ended December 31, 2008. These increases are primarily related to the acquisitions the company made in the fourth quarter of 2007. Although all sales revenue measures increased, the Company did notice during November and December some softening in pre-need sales in certain areas of the country. This softening, which is probably a result of the current economic condition, resulted in reduced grave marker and mausoleum sales in these areas. While the Company had expected this trend to continue into 2009, it has experienced an increase in the total value of contracts written during the months of January through March 2009 compared to 2008 somewhat offset by a decrease in the death rate during the 2009 first quarter. This makes us cautiously optimistic about 2009.
The substantial buildup of deferred cemetery revenues that occurred in 2008 ($25.7 million) will eventually be reflected in our income statement as we meet the criteria for revenue recognition in the future.
The decrease in investment income earned on trust assets for both the full year and fourth quarter 2008 as compared to 2007 is primarily due to significant capital gains realized in 2007 and not realized in 2008. This is discussed in the adjusted operating profit section below.

Operating Cash Flow
Operating cash flows increased by $2.2 million, or 11.4%, to $21.1 million in 2008, as compared to $18.9 million during 2007. Operating cash flows decreased by $2.2 million, or 51.1%, to $2.0 million in the fourth quarter of 2008, as compared to $4.2 million during the same period last year.
The percentage increase in year over year operating cash flows is consistent with the increase in adjusted operating profit and is reflective of the increase in the total value of contracts written outpacing the associated increase in expenses incurred combined with no significant change in collection patterns.
The fourth quarter decrease in operating cash flows for 2008 compared to 2007 was primarily caused by timing in the receipt of trust investment income, the lack of capital gains on trust assets and the softening of pre-need cemetery sales experienced during November and December of 2008.
Distributable Free Cash Flow
We define Distributable Free Cash Flow as net cash provided by operating activities before changes in appropriate reserves, if any, less maintenance capital expenditures and other expenditures not related to normal operating activities, plus working capital borrowings to fund pre-need growth during the period presented. Distributable free cash flows increased by $8.9 million, or 43.2%, to $29.5 million in 2008, as compared to $20.6 million during 2007 but decreased by approximately 17.3% during the fourth quarter. This decrease in mainly attributable to the reasons discussed above.
A reconciliation between net cash provided by operating activities (the GAAP financial measure the company believes is most directly comparable to distributable free cash flow) and distributable free cash flow for the three months ended December 31, 2008 and 2007 follows:

 	  	Three months ended December 31,	 	 	Year ended December 31,	 	
 	  	2007	 	 	2008	 	 	2007	 	 	2008	 	
 	  	(In thousands)	 	
Net cash provided by operating activities	  	$	4,196	 	 	$	2,049	 	 	$	18,973	 	 	$	21,144	 	
Maintenance capital expenditures	  	 	(933	)	 	 	(1,096	)	 	 	(2,153	)	 	 	(3,666	)	
Working capital borrowings to fund pre-need growth	  	 	1,000	 	 	 	2,879	 	 	 	2,420	 	 	 	9,579	 	
Annual expenses paid, less quarterly reserves	  	 	540	 	 	 	139	 	 	 	1,370	 	 	 	2,454	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Distributable free cash flow (a)	  	$	4,803	 	 	$	3,971	 	 	$	20,610	 	 	$	29,511	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Distributions paid during the period	  	$	4,752	 	 	$	6,762	 	 	$	18,724	 	 	$	25,658	 	

(a)	This is a non-GAAP financial measure as defined by the Securities and Exchange Commission. Please see the reconciliation to GAAP measures within this press release.	
Annual expenses paid, less quarterly reserves as shown in the chart above reflects an attempt to normalize certain items where more than one quarter’s expense was included in the current quarter. We usually pay bonuses and taxes once a year and we have attempted to show the effect of these items on the fourth quarter and annual cash flows. No bonuses were paid in 2008.
During the fourth quarter of 2008 we determined that Distributable Free Cash Flow reported for the nine months ended September 30, 2008 had been slightly understated. Accordingly, the annual Distributable Free Cash Flow shown herein is approximately $0.3 million greater than the sum of the quarterly amounts shown in all 2008 press releases.

Distributable Free Cash Flow is a non-GAAP financial measure, as defined by the Securities and Exchange Commission. Please see the discussion of non-GAAP financial measures within this press release.
Adjusted Operating Profit
We define adjusted operating profit as operating profit before the change in deferred revenues and deferred selling and obtaining costs (excluding adjustments to deferred revenues related to the mark to market adjustment of merchandise trust assets).
Adjusted operating profit provides for a production-based view of our business insomuch that the revenues relate to the value of contracts entered into and current revenue streams on our trust funds. This is the measure we use in evaluating our business. Operating profit (the GAAP financial measure shown in our financial statements) provides for a delivery-based view of our business insomuch that revenues are recognized as we deliver products and services to our customers.
We believe that adjusted operating profit provides an effective view of the economic value added in any given period.
The table below reconciles operating profit (the GAAP financial measure the company believes is most directly comparable to adjusted operating profit) to adjusted operating profit.

																	
 	  	Three months ended December 31,	 	 	Year ended December 31,	 	
 	  	2007	 	 	2008	 	 	2007	 	 	2008	 	
 	  	(In thousands)	 	
Operating profit	  	$	1,507	 	 	$	4,236	 	 	$	12,643	 	 	$	17,350	 	
					
Increase (decrease) in applicable deferred revenues	  	 	5,556	 	 	 	3,566	 	 	 	16,312	 	 	 	22,301	 	
					
(Increase) decrease in deferred selling and obtaining costs	  	$	(500	)	 	$	(1,298	)	 	$	(2,358	)	 	$	(5,959	)	

Adjusted operating profit	  	$	6,563	 	 	$	6,504	 	 	$	26,597	 	 	$	33,692	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted operating profit increased by $7.1 million, or 27.4%, to $33.7 million in 2008, as compared to $26.6 million during 2007. Adjusted operating profit decreased by $0.1 million, or 0.9%, to $6.5 million in the fourth quarter of 2008, as compared to $6.6 million during the same period last year.
The increase in adjusted operating profit for the year ended December 31, 2008, as compared to 2007 was primarily caused by a:
 
•	 	$39.2 million increase in the value of pre-need and at-need contracts written;	
 
•	 	$13.2 million increase in funeral home revenues;	
 
•	 	$0.7 million increase in interest income on pre-need sales contracts.	
These positive developments were offset by a:
 
•	 	$5.9 million reduction in investment income earned on trust assets; this was primarily due to 2007 realized gains on asset sales;	
 
•	 	$0.8 million reduction in other cemetery revenues.	
 
•	 	$10.6 million increase in funeral home expenses;	
 
•	 	$28.7 million increase in cemetery operating expense.	
The slight change in adjusted operating profit for the 4 th quarter of 2008 as compared to 2007 was primarily caused by a:
 
•	 	$9.5 million increase in the value of pre-need and at-need contracts written.	
 
•	 	$3.4 million increase in funeral home revenues.	
These positive developments were offset by a:
 
•	 	$5.5 million decrease in investment income on trust assets, which was primarily due to 2007 realized gains on the sale of trust assets. There were no realized gains in the fourth quarter of 2008.	
 
•	 	$1.2 million decrease in other cemetery revenues.	
 
•	 	$2.7 million increase in funeral home expenses;	
 
•	 	a $3.5 million increase in cemetery operating expense.	

Adjusted Operating Profit is a non-GAAP financial measure, as defined by the Securities and Exchange Commission. Please see the discussion of non-GAAP financial measures within this press release.
Operating Profit
Operating profit increased by $4.7 million, or 37.2%, to $17.3 million in 2008, as compared to $12.6 million during 2008. Operating profit increased by $2.7 million, or 181.1%, to $4.2 million as compared to $1.5 million during the same period last year.
The 2008 improvement was in large part due to a reduction in share-based compensation ($2.5 million). Not including this change, operating profit improved by approximately $2.2 million for the year.
The difference in operating profit and adjusted operating profit is caused by periodic changes in deferred revenues net of their associated deferred expenses. A substantial portion of our 2008 sales increases are still deferred and not as of yet recognized in operating profit. In time, these deferred revenues will be recognized in operating profit as we meet the revenue recognition criteria, which is generally the delivery of merchandise or performance of services.
Net Income (Loss)
Net income increased by $1.8 million, or 64.3%, to $4.6 million in 2008, as compared to $2.8 million during 2008. Net income was $1.5 million in the fourth quarter of 2008, as compared to a $1.2 million net loss during the same period last year.
The increase in 2008 net income was primarily caused by the aforementioned $4.7 million operating profit along with a $0.2 million reduction in refinancing expenses and $0.5 million decrease in tax expense offset by a $3.7 million increase in interest expense.
The $2.7 million improvement in the 4 th quarter 2008 was primarily caused by the aforementioned $2.7 million increase in operating profit and $0.6 million decrease in tax expense offset by a $0.6 million increase in interest expense.
Backlog
At December 31, 2008 our backlog was $217.8 million. Backlog is a measurement of the future operating profit benefit that will be derived from customer contracts that have been executed for which we have not as of yet met the GAAP-based revenue recognition criteria and is equal to:
 
•	 	deferred revenue net of deferred revenue on unrealized investment gains or losses;	
 
•	 	less deferred selling and obtaining costs.	
We believe there are no material costs or significant uncertainties remaining to be determined or accrued for us to be able to realize the cash benefit of this future operating profit.

Current Market Conditions and Economic Developments
During the months of November and December, the Company experienced a reduction in the value of contracts written, which we believed resulted from the current economic condition. While this trend seems to have reversed itself in January through March 2009, the Company has taken a proactive approach and implemented expense reduction initiatives.
Our overall business model is strong and is expected to remain strong. This business model is constructed so that revenues are generated from pre-need sales of cemetery merchandise and services, at-need sales of cemetery merchandise and services, and funeral home merchandise and services.
We would not expect the current projected economic downturn to have any material effect on either our at-need sales of cemetery merchandise and services or funeral home merchandise and services. These revenue streams accounted for 48.1% of total revenue in 2008 compared to 38.2% in 2007.
A critical issue for us has been the recent decline in the fair value of equity and (to a lesser degree) fixed maturity debt securities.
We have a substantial portfolio of invested assets in both our Merchandise Trust and the Perpetual Care Trust. Both trusts have a mix of cash and cash equivalents, fixed maturity debt securities and equity securities. Based on the nature of our business, we primarily invest these funds for income generation rather than for capital appreciation. As such, we are able to hold securities for long periods of time and our cash flow is generally not impacted by market fluctuations. Generally, all of the securities in our trust funds have paid their current distributions and have indicated their intention to continue to do so.
We have completed substantial evaluations of our invested assets and have determined that those assets that are other-than-temporarily impaired, and recorded as a reduction in deferred revenues on the balance sheet, do not represent a significant portion of our asset base.
Operating Initiatives
So that we may help protect our cash balances, we have recently instituted our 2009 Expense Reduction Initiative, as previously mentioned. This initiative is a proactive measure designed to reduce our overall expense base in 2009 by approximately $5 million.
We have carefully designed this plan so that there is no negative impact on our ability to market and sell our merchandise and services or service the needs of our customer base.
Amongst the more material components of the 2009 Expense Reduction Initiative are the following:
 
•	 	reductions in personnel costs by implementing targeted cutbacks in full-time equivalent employee counts;	
 
•	 	reductions in various sales incentive programs;	
 
•	 	reductions in various commissions and overrides;	
 
•	 	reductions in advertising expenses;	
 
•	 	reductions in certain corporate overhead items.	

Maturation of Debt
Our Series A Notes ($80 million in principal) mature and become due on September 20, 2009.
On February 25, 2009, we, along with certain of our affiliates, entered into a commitment letter dated February 24, 2009 (the “Commitment Letter”) with Bank of America and certain of its affiliates. Pursuant to the Commitment Letter, Bank of America agreed to act as the sole administrative agent for up to a $90 million increase in our current lines of credit (the “Increase”), consisting of (i) up to an additional $80 million in our acquisition line of credit and (ii) an additional $10 million in our revolving line of credit.
Through March 26, 2009, a syndicate of lenders has committed sufficient funds so that along with the current availability under our current acquisition facility we will be able to pay down the principal on our Series A Notes when they become due. If we use our acquisition facility, we will have limited availability to continue our acquisition program. We plan to continue expanding our refinancing efforts as the credit market improves.
Investors’ Conference Call
An investors’ conference call to review the 2008 results (which will be released before this call) will be held on Tuesday, March 31, 2009, at 11:00 a.m. Eastern Time. The conference call can be accessed by calling (888) 662-9069. An audio replay of the conference call will be available by calling (800) 633-8284 through 1:00 p.m. Eastern Time on April 14, 2009. The reservation number for the audio replay is as follows: 21419309. The 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 232 cemeteries and 60 funeral homes in 26 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 the company’s operating activities, the plans and objectives of the company’s management, assumptions regarding the company’s 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(i) of the Securities Act of 1933 and Section 21E(i) of the Securities Exchange Act of 1934. The words “believe,” “may,” “will,” “estimate,” “continues,” “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 the company’s significant leverage on its operating plans; the ability of the company to service its debt; the decline in the fair value of certain equity and debt securities held in the company’s merchandise trust; the company’s 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; variances in death rates; variances in the use of cremation; changes in political or regulatory environments, including potential changes in tax accounting and trusting policies; the company’s ability to successfully implement a strategic plan relating to producing operating improvement, strong cash flows and further deleveraging; uncertainties associated with the integration or the anticipated benefits of the acquisition of assets in September 2006; and various other uncertainties associated with the deathcare industry and the company’s 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.
Non-GAAP Financial Measures
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.
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 subordinated 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 is not a measure of financial performance and should not be considered as an alternative to cash flows from operating, investing, or financing activities.

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

 	  	December 31,
2007	  	December 31,
2008	
Assets	  			  			
Current assets:	  			  			
Cash and cash equivalents	  	$	13,800	  	$	7,068	
Accounts receivable, net of allowance	  	 	32,063	  	 	33,090	
Prepaid expenses	  	 	2,707	  	 	3,422	
Other current assets	  	 	5,193	  	 	5,633	
	  	 	 	  	 	 	
Total current assets	  	 	53,763	  	 	49,213	
			
Long-term accounts receivable - net of allowance	  	 	40,081	  	 	42,309	
Cemetery property	  	 	187,552	  	 	228,499	
Property and equipment, net of accumulated depreciation	  	 	53,929	  	 	49,615	
Merchandise trusts, restricted, at fair value	  	 	228,615	  	 	161,605	
Perpetual care trusts, restricted, at fair value	  	 	208,579	  	 	152,797	
Deferred financing costs - net of accumulated amortization	  	 	3,317	  	 	2,425	
Deferred selling and obtaining costs	  	 	35,836	  	 	41,795	
Deferred tax assets	  	 	—  	  	 	138	
Other assets	  	 	85	  	 	1,000	
	  	 	 	  	 	 	
Total assets	  	$	811,757	  	$	729,396	

Liabilities and partners’ capital	  			  			
Current liabilities	  			  			
Accounts payable and accrued liabilities	  	$	19,075	  	$	16,858	
Accrued interest	  	 	677	  	 	659	
Current portion, long-term debt	  	 	386	  	 	80,478	
	  	 	 	  	 	 	
Total current liabilities	  	 	20,138	  	 	97,995	
			
Other long-term liabilities	  	 	—  	  	 	1,837	
Long-term debt	  	 	145,778	  	 	80,456	
Deferred cemetery revenues, net	  	 	220,942	  	 	193,017	
Deferred tax liabilities	  	 	—  	  	 	7,928	
Merchandise liability	  	 	79,574	  	 	75,977	
	  	 	 	  	 	 	
Total liabilities	  	 	466,432	  	 	457,210	

Commitments and contingencies	  			  			
Non-controlling interest in perpetual care trusts	  	 	208,579	  	 	152,797	
			
Partners’ capital	  			  			
General partner	  	 	2,737	  	 	2,271	
Limited partners:	  			  			
Common	  	 	118,598	  	 	111,052	
Subordinated	  	 	15,411	  	 	6,066	
	  	 	 	  	 	 	
Total partners’ capital	  	 	136,746	  	 	119,389	

Total liabilities and partners’ capital	  	$	811,757	  	$	729,396	
	  	 	 	  	 	 	
See accompanying notes to the Consolidated Financial Statements in Form 10-K Report for the year ended December 31, 2008.

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

 	  	Three months ended December 31,	 	 	Year ended December 31,	 	
 	  	2007	 	 	2008	 	 	2007	  	2008	 	
Revenues:	  				 				 			  				
Cemetery	  				 				 			  				
Merchandise	  	$	17,171	 	 	$	21,762	 	 	$	74,509	  	$	90,968	 	
Services	  	 	7,024	 	 	 	8,828	 	 	 	28,547	  	 	36,894	 	
Investment and other	  	 	11,563	 	 	 	9,374	 	 	 	31,476	  	 	31,623	 	
Funeral home	  				 				 			  				
Merchandise	  	 	1,213	 	 	 	2,483	 	 	 	4,655	  	 	9,249	 	
Services	  	 	1,763	 	 	 	3,868	 	 	 	6,127	  	 	14,714	 	
	  	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
Total revenues	  	 	38,734	 	 	 	46,315	 	 	 	145,314	  	 	183,448	 	

Costs and Expenses:	  				 				 			  				
Cost of goods sold (exclusive of depreciation shown separately below):	  				 				 			  				
Perpetual care	  	 	868	 	 	 	1,085	 	 	 	3,553	  	 	4,326	 	
Merchandise	  	 	4,316	 	 	 	4,793	 	 	 	16,118	  	 	18,556	 	
Cemetery expense	  	 	8,174	 	 	 	10,284	 	 	 	30,767	  	 	41,651	 	
Selling expense	  	 	7,385	 	 	 	9,006	 	 	 	29,245	  	 	34,806	 	
General and administrative expense	  	 	4,222	 	 	 	5,359	 	 	 	15,684	  	 	21,372	 	
Corporate overhead (including $628 and $373 in unit-based compensation for the three months ended December 31, 2007 and 2008 and $4,741 and $2,262 for the year ended December 31, 2007 and 2008)	  	 	8,937	 	 	 	4,850	 	 	 	24,991	  	 	21,293	 	
Depreciation and amortization	  	 	991	 	 	 	1,635	 	 	 	3,891	  	 	5,029	 	
Funeral home expense	  				 				 			  				
Merchandise	  	 	377	 	 	 	979	 	 	 	1,575	  	 	3,684	 	
Services	  	 	1,141	 	 	 	2,277	 	 	 	4,198	  	 	9,073	 	
Other	  	 	816	 	 	 	1,811	 	 	 	2,649	  	 	6,308	 	
	  	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
Total cost and expenses	  	 	37,227	 	 	 	42,079	 	 	 	132,671	  	 	166,098	 	

Operating profit	  	 	1,507	 	 	 	4,236	 	 	 	12,643	  	 	17,350	 	
					
Expenses related to refinancing	  	 	—  	 	 	 	—  	 	 	 	157	  	 	—  	 	
Interest expense	  	 	2,634	 	 	 	3,193	 	 	 	9,075	  	 	12,714	 	

Income before income taxes	  	 	(1,127	)	 	 	1,043	 	 	 	3,411	  	 	4,636	 	
					
Income taxes	  				 				 			  				
State	  	 	14	 	 	 	(175	)	 	 	398	  	 	304	 	
Federal	  	 	78	 	 	 	(313	)	 	 	227	  	 	(224	)	
	  	 	 	 	 	 	 	 	 	 	 	  	 	 	 	
Total income taxes	  	 	92	 	 	 	(488	)	 	 	625	  	 	80	 	

Net income (loss)	  	$	(1,219	)	 	$	1,531	 	 	$	2,786	  	$	4,556	 	

General partner’s interest in net income (loss) for the period	  	$	(25	)	 	$	11	 	 	$	56	  	$	91	 	
					
Limited partners’ interest in net income (loss) for the period	  				 				 			  				
Common	  	$	(571	)	 	$	443	 	 	$	1,512	  	$	3,325	 	
Subordinated	  	$	(622	)	 	$	93	 	 	$	1,218	  	$	1,140	 	
					
Net income (loss) per limited partner unit (basic and diluted)	  	$	(.13	)	 	$	.05	 	 	$	.30	  	$	.38	 	
					
Weighted average number of limited partners’ units outstanding (basic and diluted)	  	 	9,321	 	 	 	11,801	 	 	 	9,107	  	 	11,809	 	
See accompanying notes to the Consolidated Financial Statements in Form 10-K Report for the year ended December 31, 2008.

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

 	  	Three months ended December 31,	 	 	Year ended December 31,	 	
 	  	2007	 	 	2008	 	 	2007	 	 	2008	 	
OPERATING ACTIVITIES:	  				 				 				 				
Net income (loss)	  	$	(1,219	)	 	$	1,531	 	 	$	2,786	 	 	$	4,556	 	
Adjustments to reconcile net income to net cash provided by operating activity:	  				 				 				 				
Cost of lots sold	  	 	846	 	 	 	326	 	 	 	4,382	 	 	 	5,306	 	
Depreciation and amortization	  	 	991	 	 	 	1,635	 	 	 	3,891	 	 	 	5,029	 	
Stock-based compensation	  	 	628	 	 	 	373	 	 	 	4,741	 	 	 	2,262	 	
Changes in assets and liabilities that provided (used) cash:	  	 	—  	 	 	 	—  	 	 				 				
Accounts receivable	  	 	510	 	 	 	(1,678	)	 	 	(2,430	)	 	 	(6,678	)	
Allowance for doubtful accounts	  	 	(794	)	 	 	(1,192	)	 	 	10	 	 	 	513	 	
Merchandise trust fund	  	 	(5,085	)	 	 	(519	)	 	 	(5,223	)	 	 	(453	)	
Prepaid expenses	  	 	892	 	 	 	421	 	 	 	196	 	 	 	963	 	
Other current assets	  	 	(409	)	 	 	(576	)	 	 	(1,053	)	 	 	(900	)	
Other assets	  	 	299	 	 	 	27	 	 	 	159	 	 	 	(696	)	
Accounts payable and accrued and other liabilities	  	 	7,672	 	 	 	3,416	 	 	 	5,179	 	 	 	717	 	
Deferred selling and obtaining costs	  	 	(500	)	 	 	(1,298	)	 	 	(2,162	)	 	 	(5,959	)	
Deferred cemetery revenue	  	 	5,203	 	 	 	3,714	 	 	 	15,668	 	 	 	22,414	 	
Deferred taxes (net)	  	 	—  	 	 	 	(564	)	 	 	—  	 	 	 	(564	)	
Merchandise liability	  	 	(4,838	)	 	 	(3,567	)	 	 	(7,171	)	 	 	(5,366	)	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by operating activities	  	 	4,196	 	 	 	2,049	 	 	 	18,973	 	 	 	21,144	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
INVESTING ACTIVITIES:	  				 				 				 				
Cost associated with potential acquisitions	  	 	(907	)	 	 	498	 	 	 	(2,230	)	 	 	(1,579	)	
Additions to cemetery property	  	 	(913	)	 	 	(1,108	)	 	 	(2,589	)	 	 	(4,376	)	
Purchase of subsidiaries, net of common units issued	  	 	(76,406	)	 	 	(3,395	)	 	 	(78,907	)	 	 	(5,621	)	
Acquisition unit-price guarantee	  	 	—  	 	 	 	(661	)	 	 	—  	 	 	 	(661	)	
Additions to property and equipment	  	 	(1,828	)	 	 	(1,096	)	 	 	(3,051	)	 	 	(4,809	)	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in investing activities	  	 	(80,054	)	 	 	(5,762	)	 	 	(86,777	)	 	 	(17,046	)	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
FINANCING ACTIVITIES:	  				 				 				 				
Cash distribution	  	 	(4,752	)	 	 	(6,762	)	 	 	(18,724	)	 	 	(25,658	)	
Additional borrowings on long-term debt	  	 	30,753	 	 	 	12,879	 	 	 	76,674	 	 	 	33,188	 	
Repayments of long-term debt	  	 	(291	)	 	 	(8,709	)	 	 	(34,000	)	 	 	(18,446	)	
Sale of partner units	  	 	50,788	 	 	 	18	 	 	 	50,788	 	 	 	86	 	
Cost of financing activities	  	 	(68	)	 	 	—  	 	 	 	(3,048	)	 	 	—  	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in financing activities	  	 	76,430	 	 	 	(2,574	)	 	 	71,690	 	 	 	(10,830	)	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	  	 	572	 	 	 	(6,287	)	 	 	3,886	 	 	 	(6,732	)	
CASH AND CASH EQUIVALENTS - Beginning of period 	  	 	13,228	 	 	 	13,355	 	 	 	9,914	 	 	 	13,800	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
CASH AND CASH EQUIVALENTS - End of period 	  	$	13,800	 	 	$	7,068	 	 	$	13,800	 	 	$	7,068	 	

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION	  				 				 				 				
Cash paid during the period for interest	  	$	1,805	 	 	$	3,372	 	 	$	8,526	 	 	$	12,732	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash paid during the period for income taxes	  	$	227	 	 	$	1,510	 	 	$	3,484	 	 	$	4,820	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
NON-CASH INVESTING AND FINANCING ACTIVITIES	  				 				 				 				
Issuance of limited partner units to fund cemetery acquisitions	  	$	—  	 	 	$	—  	 	 	$	—  	 	 	$	500	 	
	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
See accompanying notes to the Consolidated Financial Statements on Form 10-K Report for the year ended December 31, 2008.