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 28, 2005

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

 
					
Delaware	 	80-0103159	 	000-50910	
(State or other jurisdiction
of incorporation)	 	(Commission File Number)	 	(IRS Employer
Identification No.)	

155 Rittenhouse Circle, Bristol, PA	 	19007	
(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 28, the Registrant issued a press release. A copy of the press release is furnished as Exhibit 99.1 to this report.
 
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 28, 2004	 	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 28, 2004.	
 
4
 
Exhibit 99.1
 
Press Release
 
StoneMor Partners L.P. Announces 2004 Fourth Quarter and Year-End Results
 
Bristol, PA , March 28, 2005 —StoneMor Partners L.P. (NASDAQ: STON) today announced its operating results for the fourth quarter and year ended December 31, 2004. On September 20, 2004, the business of Cornerstone Family Services, Inc. and its subsidiaries was contributed to StoneMor Partners L.P. in connection with the initial public offering of common units representing limited partner interests in StoneMor Partners L.P. Operating results for the year ended December 31, 2004 include the operating results of Cornerstone Family Services, Inc., the predecessor to StoneMor Partners L.P., up to September 20, 2004, at which time StoneMor Partners L.P. commenced operations.
 
The following table summarizes selected comparative items that the Partnership believes is representative of its operating performance for the periods presented.
 
(in thousands)

 	  	Three Months Ended
December 31,
	  	Year Ended
December 31,
	 	
 	  	2003
	  	2004
	  	2003
	 	 	2004
	 	
Total Revenues	  	$	22,679	  	$	24,061	  	$	79,702	 	 	$	89,258	 	
Operating Profit	  	$	2,799	  	$	2,557	  	$	7,832	 	 	$	9,564	 	
Net Income (Loss)	  	$	36	  	$	1,476	  	$	(6,009	)	 	$	(3,838	)	
EBITDA, as Adjusted (a)	  	$	7,157	  	$	7,287	  	$	29,627	 	 	$	29,400	 	

(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.	
 
Lawrence Miller, Chief Executive Officer of StoneMor GP LLC, the general partner of StoneMor Partners L.P., stated: “We are pleased to announce our results for the fourth quarter and year ended December 31, 2004. These operating results for both the fourth quarter and 2004 year indicate that the Company is succeeding in its business strategies. This year was an extremely important year in our company’s history. We completed a public equity offering that served to reduce our leverage and debt rates, establish working capital and acquisition lines of credit, and provide us with an acquisition currency that will allow us to grow through acquisitions.”
 
Mr. Miller continued: “Our company has a focus different than the other deathcare companies. We manage primarily for cash flows that generate Operating Surplus, as defined in our Partnership Agreement, which are used primarily to pay distributions to our unitholders, and secondarily for operating profits and revenues. We have paid our initial distribution for the period ended December 31, 2004 on February 14, 2005 to both our common and subordinated unitholders. The $4.4 million distribution ($0.5128 per unit) was adjusted to cover the period from September 20, 2004 (the completion date of our initial public offering) to December 31, 2004 and was paid out of operating cash flow. The Partnership recognized a net loss of $3.8 million in 2004 as compared to a net loss of $6.0 million in 2003. The nature of GAAP revenue

recognition accounting principles for cemeteries makes it possible for us to generate operating losses because of our inability to record revenues from pre-need sales until the merchandise is delivered or the services are performed. The company generated adequate cash to pay its first unitholder distribution and has not as of yet borrowed from its working capital facility.
 
William R. Shane, Executive Vice President and Chief Financial Officer of StoneMor GP LLC, stated: “The improvements in revenues, operating profit and net loss for the year ended December 31, 2004 are attributable to the Partnership’s continuing commitment to its business strategy of purchasing and delivering products and performing services in advance of the time of need.”
 
The Company closely monitors its revenue and other operating data. Interments performed for the year were essentially the same as 2003. Cemetery revenues per interment performed, however, increased $448 or 12.8%. The number of contracts written decreased in 2004 from 2003 by 3.7%, while the average revenue per contract increased 5.5%. These results are consistent with the company’s strategy of employing more experienced sales personnel.
 
Total revenues for the fourth quarter 2004 increased by $1.4 million (as a result of increased contract servicing), or 6.2%, as compared to the same period in 2003, while operating profit decreased slightly. The two primary reasons for the decrease in operating profit are: an adjustment of $0.9 million made in the fourth quarter of 2003 to reduce the estimated provision for cancellations, and increased employee medical benefit costs experienced in 2004. Additionally, the Company generated a $2.5 million increase in mausoleum sales during the fourth quarter of 2004, which changed sales mix and resulted in a lower net sales income margin (cemetery revenues less cost of sales and selling expenses).
 
Net earnings for the fourth quarter of 2004 increased by $1.5 million from the fourth quarter of 2003 as a result of decreased interest expense of $1.1 million resulting from the pay-off of our old credit facility with a portion of the net proceeds of our initial public offering and senior secured note offering, reduced home office expenses of $0.6 million due to a reduction in stock-based compensation partially offset by increases in salaries and medical benefits, and lower income taxes as a result of the Company now being a master limited partnership.
 
The net loss for the year ended December 31, 2004, even though significantly improved from 2003, included $4.2 million attributable to the non-recurring expenses of restructuring our credit facility, $0.4 million in stock-based compensation paid to certain officers and directors, and the higher interest expense of our old credit facility for the first nine months of 2004.
 
The Company continues to monitor its deferred cemetery revenue, net. This account increased $12.2 million during 2004 and represents a backlog of cemetery revenue less costs of sales and direct selling expenses to be recognized as contracts are serviced. As previously indicated, many of these contracts can be fully paid, as cash collected is not a factor in revenue recognition.
 
The Company defines distributable free cash flow as net cash provided by operating activities before appropriate reserves, if any, adjusted for expenditures related to its initial public offering less maintenance capital expenditures and debt payments not funded by the proceeds of that offering. 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 quarter ended December 31, 2004 follows:

Net cash provided by operating activities	  	$	3,973	 	
Public offering expenditures included in the 2004 fourth quarter reduction of accounts payable	  	 	1,837	 	
Maintenance capital expenditures not funded by the public offering proceeds	  	 	(238	)	
Debt payments not funded by the public offering proceeds	  	 	—  	 	
 	  				
Distributable free cash flow	  	$	5,572	 	

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.
 
Cash flow results were also positive. Net cash provided by operations in 2004 was $7.5 million, an increase of $0.4 million or 5.6%, from $7.1 million in 2003. Both the 2003 and 2004 cash flows have been negatively affected by costs associated with the Company’s public offering. In 2003, among other effects, other assets increased due to capitalized legal fees paid in 2003. In 2004, accounts payable decreased for the payments of legal and accounting fees accrued in 2003, but paid in 2004.
 
Investors’ Conference Call
 
An investors’ conference call to review the 2004 fourth quarter and year end results will be held on Monday, March 28, 2005, 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 through April 11, 2004. The access number for the audio replay is as follows: (800) 633-8284. The reservation number for the audio replay is 21235224. The audio replay of the conference call will be archived on StoneMor’s website at http://stonemor.com.
 
About StoneMor Partners L.P.
 
StoneMor Partners L.P., headquartered in Bristol, Pennsylvania, is an owner and operator of cemeteries in the United States, with 132 cemeteries in 12 states. StoneMor is the only publicly traded death care company focused almost exclusively on cemeteries and is the only publicly held death care 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,” “anticipate,” “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 impact of the Company’s significant leverage on its operating plans; the ability of the Company to service its debt; 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 the 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; and various other uncertainties associated with the death care 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 SEC filings. 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.

StoneMor Partners L.P.
Successor to Cornerstone Family Services, Inc. (Predecessor)
Consolidated Balance Sheets
(in thousands, except share data)

 	  	December 31,
2003
	 	 	December 31,
2004
	
ASSETS	  	 	 	 	 	 	 	
CURRENT ASSETS:	  	 	 	 	 	 	 	
Cash and cash equivalents	  	$	5,554	 	 	$	14,474	
Accounts receivable, net of allowance	  	 	22,447	 	 	 	25,479	
Prepaid expenses	  	 	1,476	 	 	 	1,778	
Merchandise trust receivable	  	 	1,861	 	 	 	—  	
Other current assets	  	 	779	 	 	 	861	
 	  				 			
Total current assets	  	 	32,117	 	 	 	42,592	
			
LONG-TERM ACCOUNTS RECEIVABLE - net of allowance	  	 	33,720	 	 	 	32,402	
CEMETERY PROPERTY	  	 	151,200	 	 	 	150,215	
PROPERTY AND EQUIPMENT	  	 	23,411	 	 	 	22,616	
DUE FROM MERCHANDISE TRUSTS	  	 	109,785	 	 	 	—  	
MERCHANDISE TRUSTS, restricted, at fair value	  	 	—  	 	 	 	114,798	
PERPETUAL CARE TRUSTS, restricted, at fair value	  	 	—  	 	 	 	127,949	
DEFERRED FINANCING COSTS - net of accumulated amortization	  	 	3,450	 	 	 	2,551	
OTHER ASSETS	  	 	2,002	 	 	 	1,344	
 	  				 			
TOTAL ASSETS	  	 	355,685	 	 	 	494,467	
 	  				 			
LIABILITIES, PREFERRED STOCK AND COMMON STOCKHOLDERS’ / PARTNERS’ EQUITY	  	 	 	 	 	 	 	
CURRENT LIABILITIES:	  	 	 	 	 	 	 	
Accounts payable and accrued liabilities	  	 	5,988	 	 	 	6,136	
Accrued interest	  	 	735	 	 	 	162	
Current portion of long-term debt	  	 	7,814	 	 	 	—  	
 	  				 			
Total current liabilities	  	 	14,537	 	 	 	6,298	
			
LONG-TERM DEBT	  	 	122,894	 	 	 	80,000	
DEFERRED INCOME TAXES	  	 	1,415	 	 	 	—  	
DEFERRED CEMETERY REVENUES, net	  	 	115,233	 	 	 	127,426	
MERCHANDISE LIABILITY	  	 	44,112	 	 	 	37,477	
 	  				 			
Total liabilities	  	 	298,191	 	 	 	251,201	
 	  				 			
COMMITMENTS AND CONTINGENCIES	  	 	 	 	 	 	 	
NON-CONTROLLING INTEREST IN PERPETUAL CARE TRUSTS	  	 	—  	 	 	 	127,949	
			
REDEEMABLE PREFERRED STOCK (par value $0.01; 15,514 shares issued and outstanding at December 31, 2003)	  	 	15,514	 	 	 	—  	
			
COMMON STOCKHOLDERS’ / PARTNERS’ EQUITY	  	 	 	 	 	 	 	
Common stock (par value $0.01; 880,000 shares issued and outstanding at December 31, 2003)	  	 	9	 	 	 	—  	
Additional paid-in capital	  	 	91,213	 	 	 	—  	
Accumulated other comprehensive income	  	 	—  	 	 	 	—  	
Employee stock loans	  	 	(150	)	 	 	—  	
Retained deficit	  	 	(49,092	)	 	 	—  	
General partner	  	 	—  	 	 	 	1,663	
Limited partners:	  	 	 	 	 	 	 	
Common	  	 	—  	 	 	 	72,892	
Subordinated	  	 	—  	 	 	 	40,762	
 	  				 			
Total common stockholders’ / partners’ equity	  	 	41,980	 	 	 	115,317	
 	  				 			
TOTAL LIABILITIES, PREFERRED STOCK AND COMMON STOCKHOLDERS’ / PARTNERS’ EQUITY	  	$	355,685	 	 	$	494,467	

See accompanying notes to the Consolidated Financial Statements in Form 10-K Report for the year ended December 31, 2004.

StoneMor Partners L.P.
Successor to Cornerstone Family Services, Inc. (Predecessor)
Consolidated Statement of Operations
(in thousands, except unit data)

 	  	Cornerstone Family
Services Inc.
	  	StoneMor
Partners L.P.
	 	 	Cornerstone Family
Services Inc.
	 	 	StoneMor
Partners L.P.(2)
	 	
	  	Unaudited
	 	 			 			
 	  	Three Months Ended
December 31,
2003
	  	Three Months Ended
December 31,
2004
	 	 	Year Ended
December 31,
2003
	 	 	Year Ended
December 31,
2004
	 	
Revenues:	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Cemetery	  	$	22,239	  	$	23,515	 	 	$	77,978	 	 	$	87,305	 	
Funeral home	  	 	440	  	 	546	 	 	 	1,724	 	 	 	1,953	 	
 	  			  				 				 				
Total revenues	  	 	22,679	  	 	24,061	 	 	 	79,702	 	 	 	89,258	 	
 	  			  				 				 				
Costs and Expenses:	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Cost of goods sold (exclusive of depreciation shown seperately below):	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Land and crypts	  	 	468	  	 	917	 	 	 	4,346	 	 	 	4,539	 	
Perpetual care	  	 	664	  	 	656	 	 	 	2,585	 	 	 	2,692	 	
Merchandise	  	 	830	  	 	1,509	 	 	 	3,123	 	 	 	5,143	 	
Cemetery expense	  	 	4,644	  	 	4,883	 	 	 	17,732	 	 	 	19,648	 	
Selling expense	  	 	3,975	  	 	5,200	 	 	 	15,584	 	 	 	19,158	 	
General and administrative expense	  	 	2,497	  	 	2,444	 	 	 	9,407	 	 	 	9,797	 	
Corporate overhead (including $1,178 in stock-based compensation in 2003 and $433 in 2004)	  	 	5,055	  	 	4,499	 	 	 	12,579	 	 	 	12,458	 	
Depreciation and amortization	  	 	1,334	  	 	993	 	 	 	5,001	 	 	 	4,547	 	
Funeral home expense	  	 	413	  	 	403	 	 	 	1,513	 	 	 	1,712	 	
 	  			  				 				 				
Total cost and expenses	  	 	19,880	  	 	21,504	 	 	 	71,870	 	 	 	79,694	 	
 	  			  				 				 				
OPERATING PROFIT	  	 	2,799	  	 	2,557	 	 	 	7,832	 	 	 	9,564	 	
					
EXPENSE RELATED TO REFINANCING	  	 	—  	  	 	—  	 	 	 	—  	 	 	 	4,200	 	
					
INTEREST EXPENSE	  	 	2,680	  	 	1,573	 	 	 	11,376	 	 	 	9,480	 	
 	  			  				 				 				
INCOME / (LOSS) BEFORE INCOME TAXES AND	  	 	119	  	 	984	 	 	 	(3,544	)	 	 	(4,116	)	
					
INCOME TAXES (BENEFIT):	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
State and franchise taxes	  	 	49	  	 	656	 	 	 	1,455	 	 	 	863	 	
Federal	  	 	34	  	 	(1,148	)	 	 	1,010	 	 	 	(1,141	)	
 	  			  				 				 				
Total income taxes (benefit)	  	 	83	  	 	(492	)	 	 	2,465	 	 	 	(278	)	
 	  			  				 				 				
NET INCOME / (LOSS)	  	 	36	  	 	1,476	 	 	 	(6,009	)	 	 	(3,838	)	
 	  			  				 				 				
Supplemental Information:	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
General partner’s interest in net income for the period	  	 	 	  	$	30	 	 	 	 	 	 	 	 	(1)	
					
Limited partners’ interest in net income for the period	  	 	 	  	 	 	 	 	 	 	 	 	 	 	 	
Common	  	 	 	  	$	723	 	 	 	 	 	 	 	 	(1)	
Subordinated	  	 	 	  	$	723	 	 	 	 	 	 	 	 	(1)	
					
Net income per limited partner (common) unit (basic and diluted)	  	 	 	  	$	.17	 	 	 	 	 	 	 	 	(1)	
					
Weighted average number of limited partners’ units outstanding (basic and diluted)	  	 	 	  	 	8,480	 	 	 	 	 	 	 	8,480	 	

(1)	StoneMor completed its initial public offering on September 20, 2004. Data for the period from September 20, 2004 through December 31, 2004 is as follows:	
 
General partner’s interest in net income $47, Limited partners’ ( common) interest in net income $1,159, Limited partners’ ( subordinated) interest in net income $1,159, and Net income per limited partner (common) unit (basic and diluted) $.27.
(2)	Represents the operations of Cornerstone Family Services, Inc. from January 31, 2004 through September 19, 2004.	
 
See accompanying notes to the Consolidated Financial Statements in Form 10-K Report for the year ended December 31, 2004.

StoneMor Partners L.P.
Successor to Cornerstone Family Services, Inc. (Predecessor)
Consolidated Statement of Cash Flows
(in thousands)

 	  	Cornerstone Family
Services Inc.
	 	 	StoneMor
Partners L.P.
	 	 	Cornerstone Family
Services Inc.
	 	 	StoneMor
Partners L.P.
	 	
	  	Unaudited
	 	 			 			
 	  	Three Months Ended
December 31,
2003
	 	 	Three Months Ended
December 31,
2004
	 	 	Year Ended
December 31,
2003
	 	 	Year Ended
December 31,
2004
	 	
OPERATING ACTIVITIES:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net Loss	  	$	36	 	 	$	1,476	 	 	$	(6,009	)	 	$	(3,838	)	
Adjustments to reconcile net loss to net cash (used in) provided by operating activity:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cost of lots sold	  	 	1,263	 	 	 	1,192	 	 	 	5,141	 	 	 	5,071	 	
Depreciation and amortization	  	 	1,334	 	 	 	993	 	 	 	5,001	 	 	 	4,547	 	
Expenses related to refinancing	  	 	—  	 	 	 	—  	 	 	 	 	 	 	 	3,889	 	
Stock-based compensation	  	 	1,178	 	 	 	—  	 	 	 	1,178	 	 	 	433	 	
Deferred income tax (benefit)	  	 	(1,824	)	 	 	268	 	 	 	(138	)	 	 	(1,415	)	
Changes in assets and liabilities that provided (used) cash:	  	 	—  	 	 	 	—  	 	 	 	 	 	 	 	 	 	
Accounts receivable	  	 	361	 	 	 	(506	)	 	 	(1,900	)	 	 	(2,388	)	
Merchandise trust receivable	  	 	(159	)	 	 	—  	 	 	 	(128	)	 	 	—  	 	
Due from merchandise trusts	  	 	2,486	 	 	 	—  	 	 	 	(170	)	 	 	—  	 	
Merchandise trusts	  	 	—  	 	 	 	3,013	 	 	 	—  	 	 	 	(1,333	)	
Prepaid expenses	  	 	469	 	 	 	(199	)	 	 	(49	)	 	 	(237	)	
Other current assets	  	 	(341	)	 	 	(16	)	 	 	(168	)	 	 	(75	)	
Other assets	  	 	(1,237	)	 	 	482	 	 	 	(1,674	)	 	 	450	 	
Accounts payable and accrued and other liabilities	  	 	1,821	 	 	 	(2,493	)	 	 	(2,367	)	 	 	(440	)	
Deferred cemetery revenue	  	 	1,761	 	 	 	2,544	 	 	 	11,653	 	 	 	10,218	 	
Merchandise liability	  	 	(2,060	)	 	 	(2,781	)	 	 	(3,224	)	 	 	(7,397	)	
 	  				 				 				 				
Net cash provided by operating activities	  	 	5,088	 	 	 	3,973	 	 	 	7,146	 	 	 	7,485	 	
 	  				 				 				 				
INVESTING ACTIVITIES:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Additions to cemetery property	  	 	14	 	 	 	(457	)	 	 	(1,945	)	 	 	(3,267	)	
Acquisitions of property and equipment	  	 	(395	)	 	 	(1,341	)	 	 	(1,184	)	 	 	(2,620	)	
 	  				 				 				 				
Net cash used in investing activities	  	 	(381	)	 	 	(1,798	)	 	 	(3,129	)	 	 	(5,887	)	
 	  				 				 				 				
FINANCING ACTIVITIES:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Additional borrowings on long-term debt	  	 	—  	 	 	 	48	 	 	 	1,543	 	 	 	85,048	 	
Repayments of long-term debt	  	 	(1,393	)	 	 	(217	)	 	 	(5,565	)	 	 	(135,763	)	
Sale of limited partner units	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	81,383	 	
Cost of financing activities	  	 	—  	 	 	 	(1,169	)	 	 	—  	 	 	 	(23,346	)	
 	  				 				 				 				
Net cash provided by (used in) financing activities	  	 	(1,393	)	 	 	(1,338	)	 	 	(4,022	)	 	 	7,322	 	
 	  				 				 				 				
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	  	 	3,314	 	 	 	837	 	 	 	(5	)	 	 	8,920	 	
					
CASH AND CASH EQUIVALENTS - Beginning of period	  	 	2,240	 	 	 	13,637	 	 	 	5,559	 	 	 	5,554	 	
 	  				 				 				 				
CASH AND CASH EQUIVALENTS - End of period	  	$	5,554	 	 	$	14,474	 	 	$	5,554	 	 	$	14,474	 	
 	  				 				 				 				
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash paid during the period for interest	  	$	5,179	 	 	$	2,205	 	 	$	12,918	 	 	$	9,980	 	
 	  				 				 				 				
Cash paid during the period for income taxes	  	$	221	 	 	$	(55	)	 	$	814	 	 	$	777	 	

See accompanying notes to the Consolidated Financial Statements in Form 10-K Report for the year ended December 31, 2004.

Non-GAAP Financial Measures
 
Calculation of EBITDA, as Adjusted
 
We present EBITDA, as adjusted, because this information is relevant to our business. We define EBITDA, as adjusted, as net income (loss) before:
 
 	•	 	interest;	
 
 	•	 	taxes;	
 
 	•	 	depreciation and amortization;	
 
 	•	 	cost of land and crypts sold;	
 
 	•	 	change in deferred cemetery revenues, net; and	
 
 	•	 	one-time items relating to our September 2004 refinancing.	
 
In our presentation of EBITDA, as adjusted, we adjusted EBITDA (defined as earnings before interest, taxes, depreciation and amortization) for the following items:
 
 	•	 	Cost of land and crypts sold, an expense item resulting from our sales of burial lots, lawn crypts and mausoleum crypts, which is based on the historical allocation of our original cemetery acquisition and construction costs to individual burial lots and crypts. Management considers this expense to represent the depletion of our interment spaces that are available for sale.	
 
 	•	 	Increase (decrease) in deferred cemetery revenues, net, which represents the net change in pre-need cemetery products and services sold that have not been delivered or performed during the period presented and therefore not recognized as revenues. Because it includes the change in deferred cemetery revenues, net, EBITDA, as adjusted, is able to reflect the deferred revenues from contracts written and their related expenses generated in a particular period.	
 
 	•	 	One-time items relating to the September 2004 refinancing reflect loan acquisition costs and other charges of the debt paid off on September 20, 2004. Management considers these charges to represent full amortization of these items.	
 
Management and external users of our financial statements, such as our investors, use EBITDA, as adjusted, as an important financial measure to assess the ability of our assets to generate cash sufficient to pay interest on our indebtedness, meet capital expenditure and working capital requirements, pay quarterly distributions on the common and subordinated units and otherwise meet our obligations as they become due.
 
There are material limitations to using a measure such as EBITDA, as adjusted, including the difficulty associated with using it as the sole measure to compare the results of one company to another and the inability to analyze significant items that directly affect a company’s net income (loss) or operating income. In addition, our calculation of EBITDA, as adjusted, may not be consistent with similarly titled measures of other companies and should be viewed in conjunction with measures that are computed in accordance with GAAP. Management compensates for these limitations in considering EBITDA, as adjusted, in conjunction with its analysis of other GAAP financial measures, such as net income (loss) and net cash provided by (used in) operating activities.

The following table presents a reconciliation of EBITDA, as adjusted, to net cash provided by operating activities, its most directly comparable GAAP financial measure, on a historical basis, for the periods presented (in thousands):

 	  	Three months ended
December 31,
	 	 	Year ended
December 31,
	 	
 	  	2003
	 	 	2004
	 	 	2003
	 	 	2004
	 	
Reconciliation of “EBITDA, as adjusted” to “Net cash provided by operating activities”:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by (used in) operating activities	  	$	5,088	 	 	$	3,973	 	 	$	7,146	 	 	$	7,485	 	
Interest paid	  	 	5,179	 	 	 	2,205	 	 	 	12,918	 	 	 	9,980	 	
Income taxes paid	  	 	221	 	 	 	(55	)	 	 	814	 	 	 	777	 	
Refinancing expense	  	 	—  	 	 	 	—  	 	 	 	—  	 	 	 	311	 	
Stock compensation	  	 	(1,178	)	 	 	—  	 	 	 	(1,178	)	 	 	(433	)	
Changes in operating working capital:	  	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts receivable	  	 	(361	)	 	 	506	 	 	 	1,900	 	 	 	2,388	 	
Deferred income taxes (benefit)	  	 	1,824	 	 	 	(268	)	 	 	138	 	 	 	1,415	 	
Merchandise trusts receivable	  	 	(2,528	)	 	 	—  	 	 	 	128	 	 	 	—  	 	
Due from merchandise trust	  	 	201	 	 	 	—  	 	 	 	170	 	 	 	—  	 	
Merchandise trust	  	 	—  	 	 	 	(3,013	)	 	 	—  	 	 	 	1,333	 	
Prepaid expenses	  	 	(469	)	 	 	199	 	 	 	49	 	 	 	237	 	
Other current assets	  	 	341	 	 	 	16	 	 	 	168	 	 	 	75	 	
Other assets	  	 	1,237	 	 	 	(482	)	 	 	1,674	 	 	 	(450	)	
Accounts payable and other liabilities	  	 	(4,458	)	 	 	1,425	 	 	 	2,476	 	 	 	(1,115	)	
Merchandise liability	  	 	2,060	 	 	 	2,781	 	 	 	3,224	 	 	 	7,397	 	
 	  				 				 				 				
EBITDA, as adjusted	  	$	7,157	 	 	$	7,287	 	 	$	29,627	 	 	$	29,400	 	

Distributable Free Cash Flow
 
We present distributable free cash flow because management believes this information is a useful adjunct to net cash provided by 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 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 death care 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.