| x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
March 31, 2017
| ¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| Delaware | 80-0103159 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
3600 Horizon Boulevard Trevose, Pennsylvania | 19053 | |
| (Address of principal executive offices) | (Zip Code) | |
| Large accelerated filer | x | Accelerated filer | ¨ | ||||
| Non-accelerated filer | ¨ | ||||||
| Smaller reporting company | ¨ | Emerging growth company | ¨ | ||||
Explanatory Note
37,957,482.
The filing of this Form 10-Q for the period ended September 30, 2016 is inclusive of a restatement of the Partnership’s consolidated financial statements as of December 31, 2015, and for each of the threetwo years in the period ended December 31, 2015 and nine months ended September 30, 2015 as well as the related notes included inthereto. This Form 10-Q amends the Original Filing (“Restatement”).
The Restatement of thePartnership’s unaudited condensed consolidated financial statementsinformation for the three and nine months ended corrects accountingMarch 31, 2016 and the related notes thereto, included on Form 10-Q/A filed on November 9, 2016 ("Original Filing").
| 1. | The allocation of net loss to the General Partner and the limited partners for the purposes of determining the general partner’s and limited partners’ capital accounts presented within “Partners’ |
| 2. | The presentation of certain components of “Cemetery property”, “Property and equipment, net of accumulated depreciation”, “Deferred cemetery revenues, net”, “Merchandise liability”, “Accounts payable and accrued liabilities” and “Common limited partners’ interest” as of March 31, 2016 and December 31, 2015; |
| 3. | The presentation of “Cemetery merchandise revenues”, Cemetery service revenues” |
| 4. | The recording of incorrect amounts of investment revenues and expenses related to merchandise and perpetual care trusts on the condensed consolidated |
| 5. | The recognition of incorrect amounts of revenue from deferred pre-acquisition contracts in the condensed consolidated statements of operations based on inaccurate system inputs; |
| 6. | Other adjustments principally relating to the recognition, accuracy and/or classification of certain amounts in “Deferred cemetery revenues, net”, “Merchandise |
| 7. | The corresponding effect of the foregoing accounting errors on the Partnership’s income tax accounts, condensed consolidated statement of partners’ capital, condensed consolidated |
| 1) | The timing and accuracy of the |
| 2) | The presentation of certain components of “Other current assets” and “Accounts payable and accrued liabilities” in the condensed consolidated balance sheet; |
| 3) | The corresponding effect of the foregoing accounting errors on the Partnership’s condensed consolidated statement of cash flows and the related notes thereto; |
| 4) | The recording and presentation of incorrect amounts of individual cemetery and funeral home location-level equity and intercompany balances—the impact of which is limited to Note 11, Supplemental Condensed Consolidating Financial |
| 5) | The presentation of changes in “Accounts receivable, net of allowance” and “Deferred revenues” on a gross versus net basis in the Partnership’s condensed consolidated statement of cash flows and Note 2, Accounts Receivable, Net of Allowance, and omission of related disclosures. |
| Page | ||||||
| Part I | ||||||
| Item 1. | ||||||
| Item 2. | ||||||
| Item 3. | ||||||
| Item 4. | ||||||
| Part II | ||||||
| Item 1A. | ||||||
| Item 6. | ||||||
(UNAUDITED) Assets Current assets: Cash and cash equivalents Accounts receivable, net of allowance Prepaid expenses Other current assets Total current assets Long-term accounts receivable, net of allowance Cemetery property Property and equipment, net of accumulated depreciation Merchandise trusts, restricted, at fair value Perpetual care trusts, restricted, at fair value Deferred selling and obtaining costs Deferred tax assets Goodwill Intangible assets Other assets Total assets Liabilities and Partners’ Capital Current liabilities: Accounts payable and accrued liabilities Accrued interest Current portion, long-term debt Total current liabilities Long-term debt, net of deferred financing costs Deferred revenues Deferred tax liabilities Perpetual care trust corpus Other long-term liabilities Total liabilities Commitments and contingencies Partners’ Capital General partner interest Common limited partners’ interests Total partners’ capital Total liabilities and partners’ capital �� (UNAUDITED) Revenues: Cemetery: Merchandise Services Investment and other Funeral home: Merchandise Services Total revenues Costs and Expenses: Cost of goods sold Cemetery expense Selling expense General and administrative expense Corporate overhead Depreciation and amortization Funeral home expenses: Merchandise Services Other Total cost and expenses Operating income (loss) Other gains (losses), net Interest expense Loss before income taxes Income tax benefit (expense) Net loss General partner’s interest Limited partners’ interest Net loss per limited partner unit (basic and diluted) Weighted average number of limited partners’ units outstanding (basic and diluted) (UNAUDITED) December 31, 2015 (See Note 1) Issuance of common units Common unit awards under incentive plans Net loss Cash distributions Unit distributions paid in kind September 30, 2016 (UNAUDITED) Cash Flows From Operating Activities: Net loss Adjustments to reconcile net loss to net cash provided by operating activities: Cost of lots sold Depreciation and amortization Non-cash compensation expense Non-cash interest expense Other gains (losses), net Changes in assets and liabilities: Accounts receivable, net of allowance Merchandise trust fund Other assets Deferred selling and obtaining costs Deferred revenue Deferred taxes (net) Payables and other liabilities Net cash provided by operating activities Cash Flows From Investing Activities: Cash paid for capital expenditures Cash paid for acquisitions Proceeds from asset sales Net cash used in investing activities Cash Flows From Financing Activities: Cash distributions Proceeds from borrowings Repayments of debt Proceeds from issuance of common units Cost of financing activities Net cash provided by financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents - Beginning of period Cash and cash equivalents - End of period Supplemental disclosure of cash flow information: Cash paid during the period for interest Cash paid during the period for income taxes Non-cash investing and financing activities: Acquisition of assets by financing Acquisition of assets by assumption of directly related liability Cemetery revenues: Merchandise Services Investment and other Total revenues Cost of goods sold Total cost and expenses Operating income (loss) Loss before income taxes Income tax benefit (expense) Net loss General partner’s interest for the period Limited partners’ interest for the period Net loss per limited partner unit (basic and diluted) Net loss Changes in assets and liabilities: Other assets Deferred revenues Deferred taxes (net) Payables and other liabilities Net cash provided by operating activities 2017. Partnership has a variable interest and is the primary beneficiary. The Partnership operates 31 cemeteries under long-term lease, operating or management contracts. The operations of 16 of these managed cemeteries have been consolidated. impacted. policies. Net loss Less: Incentive distribution right (“IDR”) payments to general partner Net loss to allocate to general and limited partners General partner’s interest excluding IDRs Net loss attributable to common limited partners plan. Weighted average number of common limited partner units - basic Add effect of dilutive incentive awards (1) Weighted average number of common limited partner units - diluted Financial InformationFINANCIAL INFORMATION(unaudited) September 30, 2016 December 31, 2015 (See Note 1) $ 15,610 $ 15,153 75,324 68,415 7,048 5,367 26,531 22,241 124,513 111,176 97,982 95,167 337,245 334,457 118,158 116,127 504,604 464,676 334,923 307,804 122,249 111,542 181 181 70,572 69,851 66,028 67,209 17,684 16,167 $ 1,794,139 $ 1,694,357 $ 35,920 $ 29,989 4,990 1,503 2,144 2,440 43,054 33,932 314,032 316,399 896,752 815,421 17,876 17,747 334,923 307,804 25,955 21,508 1,632,592 1,512,811 (2,220 ) 15 163,767 181,531 161,547 181,546 $ 1,794,139 $ 1,694,357 March 31, 2017 December 31, 2016 Assets Current assets: Cash and cash equivalents $ 13,723 $ 12,570 Accounts receivable, net of allowance 76,430 77,253 Prepaid expenses 6,072 5,532 Other current assets 21,739 23,466 Total current assets 117,964 118,821 Long-term accounts receivable, net of allowance 98,879 98,886 Cemetery property 335,290 337,315 Property and equipment, net of accumulated depreciation 116,906 118,281 Merchandise trusts, restricted, at fair value 523,858 507,079 Perpetual care trusts, restricted, at fair value 341,479 333,780 Deferred selling and obtaining costs 120,113 116,890 Deferred tax assets 64 64 Goodwill 70,436 70,436 Intangible assets 64,852 65,438 Other assets 21,429 20,023 Total assets $ 1,811,270 $ 1,787,013 Liabilities and Partners' Capital Current liabilities: Accounts payable and accrued liabilities $ 39,035 $ 35,547 Accrued interest 5,443 1,571 Current portion, long-term debt 1,617 1,775 Total current liabilities 46,095 38,893 Long-term debt, net of deferred financing costs 303,618 300,351 Deferred revenues 891,356 866,633 Deferred tax liabilities 20,556 20,058 Perpetual care trust corpus 341,479 333,780 Other long-term liabilities 38,019 36,944 Total liabilities 1,641,123 1,596,659 Commitments and contingencies Partners' capital (deficit): General partner interest (2,135 ) (1,914 ) Common limited partners' interest 172,282 192,268 Total partners' capital 170,147 190,354 Total liabilities and partners' capital $ 1,811,270 $ 1,787,013 (unaudited) Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 (As restated - See Note 1) (As restated - See Note 1) $ 36,314 $ 37,570 $ 106,937 $ 105,972 13,928 14,945 41,067 44,869 14,302 15,011 40,689 42,937 6,656 6,588 20,681 19,913 7,336 7,654 24,373 23,083 78,536 81,768 233,747 236,774 11,721 12,195 34,483 35,357 19,926 18,245 53,267 53,789 15,931 14,647 46,898 44,326 9,522 8,819 27,719 27,340 10,058 9,115 30,106 28,627 2,927 3,311 9,147 9,207 2,322 1,002 6,306 5,444 6,070 5,432 18,672 16,728 5,433 4,774 15,319 13,335 83,910 77,540 241,917 234,153 (5,374 ) 4,228 (8,170 ) 2,621 (506 ) (1,460 ) (1,579 ) (1,460 ) (5,934 ) (5,669 ) (17,431 ) (16,902 ) (11,814 ) (2,901 ) (27,180 ) (15,741 ) 170 (357 ) (590 ) (671 ) $ (11,644 ) $ (3,258 ) $ (27,770 ) $ (16,412 ) $ (130 ) $ 1,021 $ 2,043 $ 2,605 $ (11,514 ) $ (4,279 ) $ (29,813 ) $ (19,017 ) $ (0.32 ) $ (0.14 ) $ (0.87 ) $ (0.63 ) 35,470 31,491 34,287 30,011 Three Months Ended March 31, 2017 2016 Revenues: Cemetery: Merchandise $ 38,003 $ 33,690 Services 14,949 13,719 Investment and other 12,575 14,414 Funeral home: Merchandise 7,836 7,482 Services 9,583 8,867 Total revenues 82,946 78,172 Costs and Expenses: Cost of goods sold 13,519 10,720 Cemetery expense 16,697 15,856 Selling expense 16,459 14,733 General and administrative expense 9,957 9,204 Corporate overhead 11,104 10,311 Depreciation and amortization 3,455 3,065 Funeral home expenses: Merchandise 1,760 2,149 Services 5,699 6,455 Other 5,345 5,140 Total costs and expenses 83,995 77,633 Other gains (losses), net — (882 ) Interest expense (6,706 ) (5,790 ) Loss from continuing operations before income taxes (7,755 ) (6,133 ) Income tax expense (806 ) (260 ) Net loss $ (8,561 ) $ (6,393 ) General partner's interest $ (89 ) $ 1,101 Limited partners' interest $ (8,472 ) $ (7,494 ) Net loss per limited partner unit (basic and diluted) $ (0.22 ) $ (0.23 ) Weighted average number of limited partners' units outstanding (basic and diluted) 37,918 32,539 (unaudited) Partners’ Capital Outstanding Common General Common Units Limited Partners Partner Total 32,108,782 $ 181,531 $ 15 $ 181,546 3,203,682 78,832 — 78,832 12,067 1,468 — 1,468 — (29,813 ) 2,043 (27,770 ) — (63,784 ) (4,278 ) (68,062 ) 176,214 (4,467 ) — (4,467 ) 35,500,745 $ 163,767 $ (2,220 ) $ 161,547 Partners' Capital Outstanding Common Units Common Limited Partners General Partner Total December 31, 2016 37,863,496 $ 192,268 $ (1,914 ) $ 190,354 Issuance of common units — 744 — 744 Common unit awards under incentive plans 15,644 241 — 241 Net loss — (8,472 ) (89 ) (8,561 ) Cash distributions — (11,755 ) (132 ) (11,887 ) Unit distributions paid in kind 78,342 (744 ) — (744 ) March 31, 2017 37,957,482 $ 172,282 $ (2,135 ) $ 170,147 (unaudited) Nine months ended September 30, 2016 2015 (As restated - See Note 1) $ (27,770 ) $ (16,412 ) 6,773 7,506 9,147 9,207 1,468 824 2,510 2,207 975 (1,540 ) (9,167 ) (4,838 ) (13,248 ) (33,403 ) (6,270 ) (6,740 ) (10,716 ) (10,959 ) 53,996 60,516 (245 ) (40 ) 11,034 5,702 18,487 12,030 (9,655 ) (11,033 ) (10,550 ) (13,100 ) 1,896 — (18,309 ) (24,133 ) (68,062 ) (56,689 ) 207,868 102,323 (207,700 ) (99,945 ) 74,535 67,871 (6,362 ) (66 ) 279 13,494 457 1,391 15,153 10,401 $ 15,610 $ 11,792 $ 11,434 $ 10,918 $ 3,114 $ 4,167 $ 505 $ 593 $ — $ 876 Three Months Ended March 31, 2017 2016 Cash Flows From Operating Activities: Net loss $ (8,561 ) $ (6,393 ) Adjustments to reconcile net loss to net cash provided by operating activities: Cost of lots sold 3,551 2,006 Depreciation and amortization 3,455 3,065 Provision for cancellations 1,828 2,718 Non-cash compensation expense 241 407 Non-cash interest expense 1,085 757 Other (gains) losses, net — 882 Changes in assets and liabilities: Accounts receivable, net of allowance (1,284 ) (3,945 ) Merchandise trust fund (3,430 ) (11,613 ) Other assets (809 ) (2,469 ) Deferred selling and obtaining costs (3,223 ) (3,220 ) Deferred revenues 12,802 15,711 Deferred taxes, net 498 17 Payables and other liabilities 6,198 7,311 Net cash provided by operating activities 12,351 5,234 Cash Flows From Investing Activities: Cash paid for capital expenditures (1,496 ) (4,560 ) Proceeds from asset sales — 138 Net cash used in investing activities (1,496 ) (4,422 ) Cash Flows From Financing Activities: Cash distributions (11,887 ) (21,387 ) Proceeds from borrowings 24,000 10,500 Repayments of debt (21,072 ) (10,355 ) Proceeds from issuance of common units, net of costs — 18,763 Cost of financing activities (743 ) — Net cash used in financing activities (9,702 ) (2,479 ) Net increase (decrease) in cash and cash equivalents 1,153 (1,667 ) Cash and cash equivalents - Beginning of period 12,570 15,153 Cash and cash equivalents - End of period $ 13,723 $ 13,486 Supplemental disclosure of cash flow information: Cash paid during the period for interest $ 1,802 $ 1,513 Cash paid during the period for income taxes $ 2,371 $ 376 Non-cash investing and financing activities: Acquisition of assets by financing $ 652 $ 56 September 30, 2016(Unaudited)1. GENERAL September 30, 2016,March 31, 2017, the Partnership operated 317316 cemeteries in 2827 states and Puerto Rico, of which 286285 are owned and 31 are operated under lease, management or operating agreements. The Partnership also owned and operated 10599 funeral homes, including 45 located on the grounds of cemetery properties that we own, in 18 states and Puerto Rico.2015,2016, which is derived from audited financial statements, are presentedhave been prepared in accordance with the requirements of Form 10-Q and accounting principles generally accepted in the United States (“GAAP”) for interim reporting. They do not include all disclosures normally made in financial statements contained in Form 10-K. In management’s opinion, all adjustments necessary for a fair presentation of the Partnership’s financial position, results of operations and cash flows for the periods disclosed have been made. These interim condensed consolidated financial statements should be read in conjunction with the audited financial statements and the related notes thereto presented in the Partnership’s Annual Report on Form 10-K/A10-K for the year ended December 31, 2015. Certain amounts in the prior year’s financial statements have been reclassified to conform to the current year presentation.2016. The results of operations for the three and nine months ended September 30, 2016March 31, 2017 may not necessarily be indicative of the results of operations for the full year ending December 31, 2016.On November 9, 2016, the Partnership amended its most recent Form 10-K for the year ended December 31, 2015 and itsForm 10-Qs for the periods ended March 31, 2016 and June 30, 2016. The consolidated financial statements and related notes included in this Form 10-Q reflect the restatement for the same errors described in the Partnership’s amended filings. Refer to the explanatory note and Note 2 to the audited consolidated financial statements to the Form 10-K/A for more information on the effects of the restatement on the Partnership’s consolidated financial statements as of December 31, 2015.The effect of the adjustments on the Partnership’s consolidated statements of operations for each of the three and nine months ended September 30, 2015 is summarized below for each affected caption:A.The Partnership allocates net loss to the General Partner and its limited partners for the purposes of determining the General Partner’s and limited partners’ capital accounts within “Partners’ capital”, and to calculate net loss per limited partner unit (basic and diluted). However, the historical allocation of the Partnership’s net losses did not appropriately consider available cash that had been (or will be) distributed to the separate class of nonvoting limited partner interest (the incentive distribution rights) held by the General Partner. While this misallocation had no impact on the Partnership’s consolidated net loss for both the three and nine months ended September 30, 2015, the revised calculation to correctly allocate net losses increased the limited partners’ historical share of allocated net loss and decreased the General Partner’s historical share of allocated net loss. As a result, the accompanying consolidated statements of operations have been restated to increase the limited partners’ share of allocated net loss and decrease the General Partner’s share of allocated net loss by approximately $1.1 million and $2.8 million for the three and nine months ended September 30, 2015, respectively.B.The Partnership had historically presented revenue related to assumed obligations from acquisitions on a net basis in the Partnership’s consolidated statement of operations. However, the Partnership determined that revenue recognition on such pre-acquisition revenue was understated. Accordingly, the accompanying consolidated financial statements for the three and nine months ended September 30, 2015 have been restated to present this revenue on a gross basis. This classification resulted in an increase in “Cemetery merchandise revenues” of approximately $1.3 million and $3.8 million, an increase in “Cemetery services revenue” of approximately $0.2 million and $0.4 million and an increase “Cost of goods sold” of approximately $1.5 million and $4.2 million for the respective three and nine months ended September 30, 2015.C.The Partnership had historically recognized incorrect amounts of investment revenues and expenses related to its merchandise and perpetual care trusts on its consolidated statement of operations and was incorrectly tracking its perpetual care-trusting obligations on its consolidated balance sheets. Accordingly, the accompanying consolidated statements of operations for the three and nine months ended September 30, 2015 have been restated for these adjustments. The adjustments resulted in an increase in “Cost of goods sold” of $0.4 million and $1.1 million for the three and nine months ended September 30, 2015, respectively.D.The Partnership had historically recognized incorrect amounts of revenue from deferred pre-acquisition contracts in its consolidated statement of operations based on inaccurate system inputs. Accordingly,the accompanying consolidated financial statements for the three and nine months ended September 30, 2015 have been restated to reflect the correction of the system inputs. The adjustments resulted in an increase in “Cemetery merchandise revenues” of $0.4 million and $1.2 million for the respective three and nine months ended September 30, 2015 and an increase in “Cemetery services revenues” of $0.1 million for the three and nine months ended September 30, 2015.E.Remaining adjustments principally relate to the recognition, accuracy and/or classification of certain amounts in deferred cemetery revenues, net, merchandise liabilities, and “Other current assets”, Accordingly, the accompanying consolidated financial statements for the three and nine months ended September 30, 2015 have been restated for these adjustments. The adjustments resulted in an increase in “Cemetery merchandise revenues” of $1.1 million and $3.3 million, an increase in “Cemetery services revenues” of $0.5 million and $1.6 million, and an increase in “Cost of goods sold” of $1.6 million and $4.4 million in the three and nine months ended September 30, 2015, respectively.F.The Partnership calculated the effect on income taxes associated with the foregoing accounting errors and, as such, the accompanying statement of operations has been restated to recognize “Income tax benefit (expense)” of approximately $0.1 million for the three and nine months ended September 30, 2015.The effect of these adjustments on the Partnership’s consolidated statements of operations and cash flows for the three and nine months ended September 30, 2015 is summarized below for each affected caption: September 30, 2015 Three months ended Nine months ended As Restatement As As Restatement As Reference Filed Adjustments Restated Filed Adjustments Restated (in thousands, except per unit data) B, D, E $ 34,709 $ 2,861 $ 37,570 $ 97,688 $ 8,284 $ 105,972 B, D, E 14,195 750 14,945 42,696 2,173 44,869 C 15,054 (43 ) 15,011 43,062 (125 ) 42,937 78,200 3,568 81,768 226,442 10,332 236,774 B, C, E 8,728 3,467 12,195 25,618 9,739 35,357 74,073 3,467 77,540 224,414 9,739 234,153 4,127 101 4,228 2,028 593 2,621 (3,002 ) 101 (2,901 ) (16,334 ) 593 (15,741 ) F (400 ) 43 (357 ) (799 ) 128 (671 ) (3,402 ) 144 (3,258 ) (17,133 ) 721 (16,412 ) A, C, D, E, F (42 ) 1,063 1,021 (227 ) 2,832 2,605 A, C, D, E, F (3,360 ) (919 ) (4,279 ) (16,906 ) (2,111 ) (19,017 ) A, C, D, E, F $ (0.11 ) $ (0.03 ) $ (0.14 ) $ (0.56 ) $ (0.07 ) $ (0.63 ) Nine months ended September 30, 2015 As Restatement As Reference Filed Adjustments Restated C, D, E, F $ (17,133 ) $ 721 $ (16,412 ) E (11,551 ) 4,811 (6,740 ) D, E 60,572 (56 ) 60,516 F 106 (146 ) (40 ) C 11,032 (5,330 ) 5,702 $ 12,030 $ — $ 12,030 The Restatement adjustments affecting the consolidated statement of cash flows for the periods noted are included in the Partnership’s net loss from operations and offset by changes in operating assets and liabilities. There were no adjustments related to cash provided by (used in) investing and financing activities.wholly-owned100% owned subsidiaries. These statements also include the accounts of the merchandise and perpetual care trusts in which theNew Accounting PronouncementsInsecond quarterPartnership filed its Annual Report on Form 10-K for the year ended December 31, 2016, which amended the Partnership's audited consolidated financial statements as of 2014,December 31, 2015, and for each of the Financial Accounting Standards Board (“FASB”) issued Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which supersedestwo years in the revenue recognition requirements in “Topic 605 - Revenue Recognition”period ended December 31, 2015 and most industry-specific guidance.the related notes thereto. This Form 10-Q amends the Partnership’s unaudited condensed consolidated financial statements for the three months ended March 31, 2016 and the related notes thereto, included on Form 10-Q/A filed on November 9, 2016 ("Original Filing"). The core principle of ASU 2014-09 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount thatRestatement reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. During the third quarter of 2015, Update No. 2015-14, “Revenue from Contracts with Customers (Topic 606)” was released, deferring the effective datecorrection of the amendmentsfollowing errors identified subsequent to annualthe Original Filing:A. The Partnership understated recognized revenues from the satisfaction of cemetery and funeral home performance obligations in its condensed consolidated statement of operations. The understatement was primarily due to lags in or omissions of the data entry of a contract servicing event. The adjustments to correct these accounting errors resulted in a net increase of $1.2 million in revenues, of which $1.0 million related to merchandise revenues, for the three months ended March 31, 2016. B. In conjunction with the foregoing revenue recognition errors, on its condensed consolidated balance sheet, the Partnership had historically (i) deferred incorrect and imprecise amounts of investment revenues and expenses related to its merchandise trusts, (ii) reserved incorrect amounts for future cancellations related to its cemetery and funeral home performance obligations, and (iii) deferred incorrect amounts of selling costs. The correction of these accounting errors resulted in a net increase in “Cemetery investment and other revenues” of $0.1 million for the three months ended March 31, 2016 due to changes in the inputs used to calculate trust income recognition. This also resulted in a decrease in “Cemetery merchandise revenues” of $0.1 million for the three months ended March 31, 2016 due to an increase in cancellation reserve expense, and an increase in “Selling expense” of $0.2 million for the three months ended March 31, 2016. C. Certain components of “Other current assets” and “Accounts payable and accrued liabilities” on its condensed consolidated balance sheet were determined to be inappropriate in the Partnership’s review of accounting policies during its ongoing remediation. The Partnership had historically presented intercompany deposits due to its merchandise and perpetual care trust funds within “Other current assets” and presented intercompany payables to its merchandise and perpetual care trusts in “Accounts payable and accrued liabilities”. The Partnership has determined the intercompany payables and liabilities to its consolidated trust funds should be eliminated. The correction of the error resulted in a reclassification of $0.4 million in the condensed consolidated statements of cash flows between "Other assets" and "Payables and other liabilities" for the three months ended March 31, 2016. D. E. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS Three Months Ended March 31, 2016 Reference As Filed Restatement
Adjustments As Restated Cemetery revenues: Merchandise A, B $ 32,768 $ 922 $ 33,690 Services A 13,463 256 13,719 Investment and other B 14,375 39 14,414 Funeral home revenues: Merchandise A 7,456 26 7,482 Total revenues 76,929 1,243 78,172 Selling expense B 14,576 157 14,733 Funeral home expenses: Services B 6,451 4 6,455 Total costs and expenses 77,472 161 77,633 Net loss (7,475 ) 1,082 (6,393 ) General partner's interest for the period 1,088 13 1,101 Limited partners' interest for the period (8,563 ) 1,069 (7,494 ) Net loss per limited partner unit (basic and diluted) $ (0.26 ) $ 0.03 $ (0.23 ) CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS Three Months Ended March 31, 2016 Reference As Filed Restatement
Adjustments As Restated Net loss $ (7,475 ) $ 1,082 $ (6,393 ) Provision for cancellations E — 2,718 2,718 Changes in assets and liabilities: Accounts receivable, net of allowance E (1,227 ) (2,718 ) (3,945 ) Other assets B, C (2,847 ) 378 (2,469 ) Deferred selling and obtaining costs B (3,379 ) 159 (3,220 ) Deferred revenues A, B 16,952 (1,241 ) 15,711 Payables and other liabilities C 7,689 (378 ) 7,311 Net cash provided by operating activities $ 5,234 $ — $ 5,234 beginning after Decemberin this Form 10-Q, and the Consolidated Leverage Ratio under the credit facility has been nearing the maximum allowed ratio under existing covenants as disclosed in Note 7.including interim periods within that reporting period. Early application is permitted, only as of an annual reporting period beginning after December 15, 2016. During the first quarter of 2016, Update No. 2016-08, “Revenue from Contracts with Customers (Topic 606)” was released, which clarifies the implementation guidance on principal versus agent considerations. During the second quarter of 2016, Update No. 2016-10, “Revenue from Contracts with Customers (Topic 606)” was released, which clarifies the implementation guidance on identifying performance obligations. The FASB also issued Update No. 2016-12, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2016-12”), which clarifies the guidance on assessing collectability, presenting sales taxes, measuring non-cash consideration,will enhance its liquidity and certain transition matters.financial flexibility. The Partnership will adoptlikely seek to continue to supplement cash generation with proceeds from financing activities, including borrowings under the requirementscredit facility and other borrowings, the issuance of these updates uponadditional limited partner units, capital contributions from the effective dategeneral partner and the sale of January 1, 2018,assets and other transactions. As of March 31, 2017, the Partnership had $12.8 million of total available borrowing capacity under its revolving credit facility.evaluatingnot able to generate additional liquidity through the potentialmechanisms described above or through some combination of other actions, while not expected, the Partnership may be in breach of its covenants under the credit facility, and may not be able to access additional funds and the Partnership might need to secure additional sources of funds, which may or may not be available to the Partnership. Additionally, a failure to generate additional liquidity could negatively impact our access to inventory or services that are important to the operation of the adoption on its financial position, results of operationsour business. Moreover, our ability to declare or related disclosures.In the first quarter of 2016, the FASB issued Update No. 2016-01, “Financial Instruments (Subtopic 825-10)” (“ASU 2016-01”). The core principle of ASU 2016-01 is that equity investments shouldpay future distributions may be measured at fair value with changes in the fair value recognized through net income. The amendment is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early application is not permitted for the key aspects of the amendment. The Partnership will adopt the requirements of ASU 2016-01 upon its effective date of January 1, 2018, and is evaluating the potential impact of the adoption on its financial position, results of operations and related disclosures.In the first quarter of 2016, the FASB issued Update No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). The core principle of ASU 2016-02 is that all leases create an asset and a liability for lessees and recognition of those lease assets and lease liabilities represents an improvement over previous GAAP, which did not require lease assets and lease liabilities to be recognized for most leases. The amendment is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Partnership plans to adopt the requirements of ASU 2016-02 upon its effective date of January 1, 2019, and is evaluating the potential impact of the adoption on its financial position, results of operations and related disclosures.In the second quarter of 2016, the FASB issued Update No. 2016-13, “Credit Losses (Topic 326)” (“ASU 2016-13”). The core principle of ASU 2016-13 is that all assets measured at amortized cost basis should be presented at the net amount expected to be collected using historical experience, current conditions, and reasonable and supportable forecasts as a basis for credit loss estimates, instead of the probable initial recognition threshold used under current GAAP. The amendment is effective for annual reporting periods beginning after December 15, 2019, including interim periods within those fiscal years. Early application is permitted. The Partnership plans to adopt the requirements of ASU 2016-13 upon its effective date of January 1, 2020, and is evaluating the potential impact of the adoption on its financial position, results of operations and related disclosures.In 2015, the FASB issued Update No. 2015-07, “Fair Value Measurement (Topic 820).” The amendments in this update removed the requirement to categorize within the fair value hierarchy investments for which fair value is measured using the net asset value per share practical expedient. The entity adopted this guidance in the current period pertaining to its new investment funds (see Notes 6, 7 and 14).In the third quarter of 2016, the FASB issued Update No. 2016-15, “Statement of Cash flows (Topic 230)” (“ASU 2016-15”). The core principle of ASU 2016-15 is to provide cash flow statement classification guidance. The amendment is effective for annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years. Early application is permitted. The Partnership plans to adopt the requirements of ASU 2016-15 upon its effective date of January 1, 2018, and is evaluating the potential impact of the adoption on its financial position, results of operations and related disclosures.2015 10K/A2016 for the complete summary of significant accounting policies, including those pertaining to cemetery merchandise and services sales, which has been expanded in the subsequent paragraph.The cost of goods sold related to merchandise and services reflects the actual cost of purchasing products and performing services, and the value of cemetery property depleted through the recognized sales of interment rights. The costs related to the sales of lots and crypts are determined systematically using a specific identification method under which the total value of the underlying cemetery property and the spaces available to be sold at the location are used to determine the cost per space.truststrust and perpetual care truststrust asset valuation, allowance for cancellations, unit-based compensation, deferred revenues, deferred merchandise trust investment earnings, deferred selling and obtaining costs, assets and liabilities obtained viathrough business combinations and income taxes. As a result, actual results could differ from those estimates.ownership interestunits and incentive distributions to be distributed for the quarter, with a priority allocation of net income to the general partner’s incentive distributions, if any, in accordance with the partnership agreement, and the remaining net income (loss) allocated with respect to the general partner’s and limited partners’ ownership interests.thousands, except unit data)thousands): Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 $ (11,644 ) $ (3,258 ) $ (27,770 ) $ (16,412 ) — 1,074 2,387 2,860 (11,644 ) (4,332 ) (30,157 ) (19,272 ) (130 ) (53 ) (344 ) (255 ) $ (11,514 ) $ (4,279 ) $ (29,813 ) $ (19,017 ) Three Months Ended March 31, 2017 2016 Net loss $ (8,561 ) $ (6,393 ) Less: Incentive distribution right (“IDR”) payments to general partner — 1,192 Net loss to allocate to general and common limited partners (8,561 ) (7,585 ) Less: General partner’s interest excluding IDRs (89 ) (91 ) Net loss attributable to common limited partners $ (8,472 ) $ (7,494 ) appreciation rights and otheroption awards, as calculated by the treasury stock or if converted methods, as applicable. These awards consist of common units issuable upon payment of an exercise price by the participant under the terms of the Partnership’s long-term incentive plan (see Note 12). Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 35,470 31,491 34,287 30,011 — — — — 35,470 31,491 34,287 30,011 Three Months Ended March 31, 2017 2016 Weighted average number of common limited partner units - basic 37,918 32,539 Add effect of dilutive incentive awards (1) — — Weighted average number of common limited partner units - diluted 37,918 32,539 (1) The diluted weighted average number of limited partners’ units outstanding presented on the condensed consolidated statement of operations does not include 383,091328,914 units and 192,482292,670 units for the three months ended September 30,March 31, 2017 and 2016, and 2015, respectively, and 374,649 units and 187,640 units for the nine months ended September 30, 2016 and 2015, as their effects would be anti-dilutive.
Assets: Accounts receivable Cemetery property Property and equipment Inventory Merchandise trusts, restricted Perpetual care trusts, restricted Intangible assets Other assets Total assets Liabilities: Deferred revenues Perpetual care trust corpus Deferred taxes Total liabilities Fair value of net assets acquired Consideration paid - cash Total consideration paid Gain on bargain purchase Goodwill from purchase Assets: Accounts receivable Cemetery property Property and equipment Inventory Merchandise trusts, restricted Perpetual care trusts, restricted Intangible assets Total assets Liabilities: Deferred revenues Perpetual care trust corpus Other liabilities Total liabilities Fair value of net assets acquired Consideration paid - cash Deferred cash consideration Total consideration paid Gain on bargain purchase Goodwill from purchase Revenue Net loss Net loss per limited partner unit (basic and diluted) exceeds its fair value, up to the total amount of goodwill. The related disclosures. Customer receivables Unearned finance income Allowance for contract cancellations Accounts receivable, net of allowance Less: current portion, net of allowance Long-term portion, net of allowance Balance, beginning of period Provision for cancellations Charge-offs, net Balance, end of period Cemetery land Mausoleum crypts and lawn crypts Cemetery property Building and improvements Furniture and equipment Funeral home land Property and equipment, gross Less: accumulated depreciation Property and equipment, net of accumulated depreciation Balance, beginning of period Contributions Distributions Interest and dividends Capital gain distributions Realized gains and losses Other than temporary impairment Taxes Fees Unrealized change in fair value Balance, end of period $27.1 million and $12.6 million, respectively. Cash flows from pre-need customer contracts are presented as operating cash flows in our condensed consolidated statement of cash flows. September 30, 2016 Short-term investments Fixed maturities: U.S. governmental securities Corporate debt securities Other debt securities Total fixed maturities Mutual funds - debt securities Mutual funds - equity securities Other investment funds (1) Equity securities Other invested assets Total managed investments Assets acquired via acquisition West Virginia Trust Receivable Total AcquisitionDuringthe FASB issued ASU 2016-08, acquiredplans to adopt the assets, netrequirements of certain assumed liabilitiesASU 2016-13 upon its effective date of three direct service cremation businesses for $1.5 million. DuringJanuary 1, 2020, and is evaluating the potential impact of the adoption on its financial position, results of operations and related disclosures.Partnership acquired the assets, netFASB issued Update No. 2016-15, Statement of certain assumed liabilitiesCash Flows (Topic 230): Classification of ten cemeteriesCertain Cash Receipts and one granite companyCash Payments (“ASU 2016-15”). The core principle of ASU 2016-15 is to provide cash flow statement classification guidance. The amendment is effective for $9.0 million.annual reporting periods beginning after December 15, 2017, including interim periods within those fiscal years. Early application is permitted. The Partnership accounted for these transactions underplans to adopt the acquisition methodrequirements of accounting. Accordingly, the Partnership evaluated the identifiable assets acquired and liabilities assumed at the acquisitionASU 2016-15 upon its effective date fair values. All other costs associated with the acquisition of the assets noted were expensed as incurred. The following table presents the Partnership’s values assigned to the assets acquired and liabilities assumed in the acquisitions, based on their estimated fair values at the date of the acquisition, which may be prospectively adjusted as additional information is received (in thousands): $ 791 4,612 4,527 1,900 4,424 5,631 508 13 22,406 4,204 5,631 375 10,210 12,196 10,550 10,550 $ 2,704 $ 1,058 The Partnership recorded goodwill of $1.1 million in the Funeral Home reporting unit for the properties acquired in 2016. The third quarter acquisition resulted in the recognition of a gain of $2.7 million based on provisional amounts. This gain was recorded within “Other gains (losses), net” in the consolidated statement of operations.2015 AcquisitionsDuring the year ended December 31, 2015, the Partnership acquired the following properties’ assets, net of certain assumed liabilities:One funeral home for cash consideration of $0.9 million on July 21, 2015;Three funeral homes and one cemetery for cash consideration of $5.7 million on August 6, 2015;Two cemeteries for cash consideration of $1.5 million on August 20, 2015;•One funeral home for cash consideration of $5.0 million on August 31, 2015, and an additional $1.0 million paid in five annual installments beginning on the 1st anniversary of the closing date; andOne cemetery and two funeral homes for cash consideration of $5.7 million on December 1, 2015.The Partnership accounted for these transactions under the acquisition method of accounting. Accordingly, the Partnership evaluated the identifiable assets acquired and liabilities assumed at their respective acquisition date fair values. All other costs incurred associated with the acquisition of the assets noted were expensed as incurred. The following table presents the Partnership’s values assigned to the assets acquired and liabilities assumed in the acquisitions, based on their estimated and revised fair values, as applicable, which may be prospectively adjusted as additional information is received (in thousands): $ 2,690 5,249 7,710 53 15,075 4,134 406 35,317 21,243 4,134 21 25,398 9,919 18,800 876 19,676 $ 921 $ 10,678 Certain provisional amounts pertaining to the 2015 acquisitions were adjusted in the second and third quarters of 2016 as the Company obtained additional information related to three of the acquisitions. The changes resulted in an adjustment to the gains on acquisition recognized during the year ended December 31, 2015, reducing the gain by $0.6 million via a loss recognized in the current period in accordance with GAAP. The amounts shown may be adjusted as additional information is received. The Partnership recorded goodwill of $1.1 million and $9.6 million in the Cemetery and Funeral Home reporting units, respectively, with regard to the properties acquired during the year ended December 31, 2015. The original gains and related adjustments pertaining to the 2015 acquisitions were recorded within “Other gains (losses), net” in the consolidated statement of operations.The following data presents pro forma revenues, net income (loss) and basic and diluted net income (loss) per unit for the Partnership as if the acquisitions consummated during the nine months ended September 30, 2016 and the year ended December 31, 2015 had occurred as of January 1, 2015.2018, and is evaluating the potential impact of the adoption on its financial position, results of operations and related disclosures.prepared these pro forma unaudited financial results for comparative purposes only. The results may not be indicativeplans to adopt the requirements of the results that would have occurred if the acquisitions consummated during the nine months ended September 30, 2016 and 2015 had occurred asASU 2016-18 upon its effective date of January 1, 20152018, and is evaluating the potential impact of the adoption on its financial position, results of operations and related disclosures.that will be attained in future periods (in thousands, except perof operations and related disclosures.data): Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 $ 78,713 $ 82,209 $ 234,731 $ 238,135 (15,085 ) (4,449 ) (33,544 ) (17,061 ) $ (0.42 ) $ (0.17 ) $ (1.04 ) $ (0.66 ) properties acquired in 2016 have contributed $0.3 millionPartnership plans to adopt the requirements of ASU 2017-04 upon its effective date of January 1, 2020, and $0.4 millionis evaluating the impact, if any, on its financial position, results of revenue for the threeoperations and nine months ended September 30, 2016, respectively and $0.6 million of operating losses for both the three and nine months ended September 30, 2016. The properties acquired in 2015 have contributed $1.7 million and $6.5 million of revenue and $0.6 million of operating loss and $0.3 million of operating profit for the three and nine months ended September 30, 2016 respectively.3.2. ACCOUNTS RECEIVABLE, NET OF ALLOWANCE Accountsof allowance, consistsconsisted of the following at the dates indicated (in thousands): September 30, 2016 December 31, 2015 $ 222,238 $ 207,645 (20,730 ) (20,078 ) (28,202 ) (23,985 ) 173,306 163,582 75,324 68,415 $ 97,982 $ 95,167 March 31, 2017 December 31, 2016 Customer receivables $ 223,113 $ 223,326 Unearned finance income (20,803 ) (21,034 ) Allowance for contract cancellations (27,001 ) (26,153 ) Accounts receivable, net of allowance 175,309 176,139 Less: Current portion, net of allowance 76,430 77,253 Long-term portion, net of allowance $ 98,879 $ 98,886 iswas as follows (in thousands): Nine months ended September 30, 2016 2015 $ 23,985 $ 22,138 20,301 19,054 (16,084 ) (17,489 ) $ 28,202 $ 23,703 Three Months Ended March 31, 2017 2016 Balance, beginning of period $ 26,153 $ 23,985 Provision for cancellations 1,828 2,718 Cancellations (980 ) (1,682 ) Balance, end of period $ 27,001 $ 25,021 4.3. CEMETERY PROPERTY consistsconsisted of the following at the dates indicated (in thousands): September 30, 2016 December 31, 2015 $ 256,627 $ 253,955 80,618 80,502 $ 337,245 $ 334,457 March 31, 2017 December 31, 2016 Cemetery land $ 256,482 $ 257,914 Mausoleum crypts and lawn crypts 78,808 79,401 Cemetery property $ 335,290 $ 337,315 5.4. PROPERTY AND EQUIPMENT consistsconsisted of the following at the dates indicated (in thousands): September 30, 2016 December 31, 2015 $ 123,670 $ 117,034 55,184 54,346 11,707 11,797 190,561 183,177 (72,403 ) (67,050 ) $ 118,158 $ 116,127 March 31, 2017 December 31, 2016 Buildings and improvements $ 126,025 $ 125,442 Furniture and equipment 56,106 56,408 Funeral home land 11,505 11,527 Property and equipment, gross 193,636 193,377 Less: Accumulated depreciation (76,730 ) (75,096 ) Property and equipment, net of accumulated depreciation $ 116,906 $ 118,281 $2.3$2.9 million and $2.8$2.5 million for the three months ended September 30,March 31, 2017 and 2016, and 2015, respectively, and $7.4 million and $7.5 million for nine months ended September 30, 2016 and 2015, respectively.6.5. MERCHANDISE TRUSTS September 30, 2016March 31, 2017 and December 31, 2015,2016, the Partnership’s merchandise trusts consisted of investments in debt and equity marketable securities and cash equivalents, both directly as well as through mutual and investment funds. Certain assets acquired in connection with the Partnership’s 2015 and 2016 acquisitions (see Note 2) are based upon preliminary estimated values assigned to the assets by the Partnership at the date of acquisition, and will be adjusted when additional information is received.Availableavailable for Salesale and accordingly, all of the assets are carried at fair value. All of the investments subject to the fair value hierarchy (see Note 1) are considered either Level 1 or Level 2 assets pursuant to the three-level hierarchy described in Note 14.10. There were no Level 3 assets.(VIE) for("VIE") of which the Partnership is the primary beneficiary. The assets held in the merchandise trusts are required to be used to purchase the merchandise and provide the services to which they relate. If the value of these assets falls below the cost of purchasing such merchandise and providing such services, the Partnership may be required to fund this shortfall.$8.5$8.7 million and $8.2$8.6 million of investments held in trust by the West Virginia Funeral Directors Association at September 30, 2016March 31, 2017 and December 31, 2015,2016, respectively, in its merchandise trust assets. As required by law, the Partnership deposits a portion of certain funeral merchandise sales in West Virginia into a trust that is held by the West Virginia Funeral Directors Association. These trusts are recognized at their account value, which approximates fair value.ninethree months ended September 30,March 31, 2017 and 2016 and 2015 is presented below (in thousands): Nine months ended September 30, 2016 2015 $ 464,676 $ 484,820 49,841 60,875 (49,168 ) (34,477 ) 17,657 13,642 264 (738 ) 3,727 14,190 (7,278 ) — (1,721 ) (3,441 ) (2,234 ) (2,474 ) 28,840 (73,077 ) $ 504,604 $ 459,320 Three Months Ended March 31, 2017 2016 Balance, beginning of period $ 507,079 $ 464,676 Contributions 14,916 13,305 Distributions (16,728 ) (7,797 ) Interest and dividends 6,284 5,773 Capital gain distributions 237 219 Realized gains and losses 1,810 1,270 Taxes (1,675 ) (37 ) Fees (708 ) (383 ) Unrealized change in fair value 12,643 2,982 Balance, end of period $ 523,858 $ 480,008 ninethree months ended September 30,March 31, 2017 and 2016, purchases of available for sale securities were $82.6$22.1 million and $6.4 million, respectively, while sales, maturities and paydowns of available for sale securities were $65.9 million.September 30, 2016March 31, 2017 and December 31, 20152016 were as follows (in thousands): Gross Gross Fair Value Unrealized Unrealized Fair Hierarchy Level Cost Gains Losses Value 1 $ 29,928 $ — $ — $ 29,928 2 41 2 — 43 2 7,017 347 (323 ) 7,041 2 — — — — 7,058 349 (323 ) 7,084 1 241,048 2,885 (4,156 ) 239,777 1 131,331 5,813 (2,079 ) 135,065 41,447 892 — 42,339 1 38,711 2,782 (1,753 ) 39,740 2 2,457 (255 ) — 2,202 $ 491,980 $ 12,466 $ (8,311 ) $ 496,135 — — — — 8,469 — — 8,469 $ 500,449 $ 12,466 $ (8,311 ) $ 504,604 March 31, 2017 Fair Value
Hierarchy Level Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
ValueShort-term investments 1 $ 26,925 $ — $ — $ 26,925 Fixed maturities: U.S. governmental securities 2 172 1 (52 ) 121 Corporate debt securities 2 5,673 306 (303 ) 5,676 Total fixed maturities 5,845 307 (355 ) 5,797 Mutual funds - debt securities 1 229,609 4,845 (133 ) 234,321 Mutual funds - equity securities 1 111,335 11,349 (160 ) 122,524 Other investment funds (1) 75,498 597 (564 ) 75,531 Equity securities 1 35,203 5,047 (289 ) 39,961 Other invested assets 2 10,100 — — 10,100 Total investments $ 494,515 $ 22,145 $ (1,501 ) $ 515,159 West Virginia Trust Receivable 8,699 — — 8,699 Total $ 503,214 $ 22,145 $ (1,501 ) $ 523,858 (1) Other investment funds are measured at fair value using the net asset value per share practical expedient and have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the balance sheet. This asset class is composed of fixed income funds and equity funds, which have redemption periods ranging from 30 to 90 days, and private credit funds, which have lockup periods of five years with two potential one year extensions at the discretion of the funds’ general partners. As of March 31, 2017, there were $3.7 million in unfunded commitments to the private credit funds, which are callable at any time. December 31, 2016 Fair Value
Hierarchy Level Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
ValueShort-term investments 1 $ 17,317 $ — $ — $ 17,317 Fixed maturities: U.S. governmental securities 2 172 2 (44 ) 130 Corporate debt securities 2 6,311 269 (202 ) 6,378 Total fixed maturities 6,483 271 (246 ) 6,508 Mutual funds - debt securities 1 236,159 1,580 (96 ) 237,643 Mutual funds - equity securities 1 126,215 3,361 (533 ) 129,043 Other investment funds (1) 60,017 603 (387 ) 60,233 Equity securities 1 35,079 3,640 (192 ) 38,527 Other invested assets 2 9,239 — — 9,239 Total investments $ 490,509 $ 9,455 (1,454 ) $ 498,510 West Virginia Trust Receivable 8,569 — — 8,569 Total $ 499,078 $ 9,455 $ (1,454 ) $ 507,079 (1) Other investment funds are measured at fair value using the net asset value per share practical expedient and have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the balance sheet. This asset class is composed of fixed income funds and equity funds, which have redemption periods ranging from 30 to 90 days.
| Gross | Gross | |||||||||||||||||||
| Fair Value | Unrealized | Unrealized | Fair | |||||||||||||||||
December 31, 2015 | Hierarchy Level | Cost | Gains | Losses | Value | |||||||||||||||
Short-term investments | 1 | $ | 35,150 | $ | — | $ | — | $ | 35,150 | |||||||||||
Fixed maturities: | ||||||||||||||||||||
U.S. governmental securities | 2 | 98 | 6 | (3 | ) | 101 | ||||||||||||||
Corporate debt securities | 2 | 11,922 | 8 | (546 | ) | 11,384 | ||||||||||||||
Other debt securities | 2 | 7,150 | 11 | (7 | ) | 7,154 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total fixed maturities | 19,170 | 25 | (556 | ) | 18,639 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Mutual funds - debt securities | 1 | 232,096 | 86 | (10,713 | ) | 221,469 | ||||||||||||||
Mutual funds - equity securities | 1 | 139,341 | 69 | (12,249 | ) | 127,161 | ||||||||||||||
Equity securities | 1 | 49,563 | 1,127 | (2,474 | ) | 48,216 | ||||||||||||||
Other invested assets | 2 | 1,681 | — | — | 1,681 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total managed investments | $ | 477,001 | $ | 1,307 | $ | (25,992 | ) | $ | 452,316 | |||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Assets acquired via acquisition | 4,185 | — | — | 4,185 | ||||||||||||||||
West Virginia Trust Receivable | 8,175 | — | — | 8,175 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 489,361 | $ | 1,307 | $ | (25,992 | ) | $ | 464,676 | |||||||||||
|
|
|
|
|
|
|
| |||||||||||||
| Less than | 1 year through | 6 years through | More than | |||||||||||||
| 1 year | 5 years | 10 years | 10 years | |||||||||||||
U.S. governmental securities | $ | 5 | $ | 23 | $ | 15 | $ | — | ||||||||
Corporate debt securities | — | 6,261 | 780 | — | ||||||||||||
Other debt securities | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total fixed maturities | $ | 5 | $ | 6,284 | $ | 795 | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
(in thousands):
Less than 1 year | 1 year through 5 years | 6 years through 10 years | More than 10 years | ||||||||||||
| U.S. governmental securities | $ | — | $ | 56 | $ | 65 | $ | — | |||||||
| Corporate debt securities | 369 | 4,547 | 746 | 14 | |||||||||||
| Total fixed maturities | $ | 369 | $ | 4,603 | $ | 811 | $ | 14 | |||||||
| Less than 12 months | 12 Months or more | Total | ||||||||||||||||||||||
| Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
September 30, 2016 | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
U.S. governmental securities | $ | 4 | $ | — | $ | 2 | $ | — | $ | 6 | $ | — | ||||||||||||
Corporate debt securities | 2,275 | 175 | 2,724 | 148 | 4,999 | 323 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total fixed maturities | 2,279 | 175 | 2,726 | 148 | 5,005 | 323 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Mutual funds - debt securities | 15,642 | 312 | 131,966 | 3,844 | 147,608 | 4,156 | ||||||||||||||||||
Mutual funds - equity securities | 2,204 | 33 | 27,098 | 2,046 | 29,302 | 2,079 | ||||||||||||||||||
Equity securities | 10,304 | 869 | 4,763 | 884 | 15,067 | 1,753 | ||||||||||||||||||
Other invested assets | — | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 30,429 | $ | 1,389 | $ | 166,553 | $ | 6,922 | $ | 196,982 | $ | 8,311 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Less than 12 months | 12 Months or more | Total | ||||||||||||||||||||||
| Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
December 31, 2015 | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
U.S. governmental securities | $ | — | $ | — | $ | 33 | $ | 3 | $ | 33 | $ | 3 | ||||||||||||
Corporate debt securities | 7,247 | 411 | 1,513 | 135 | 8,760 | 546 | ||||||||||||||||||
Other debt securities | 2,883 | 7 | — | — | 2,883 | 7 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total fixed maturities | 10,130 | 418 | 1,546 | 138 | 11,676 | 556 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Mutual funds - debt securities | 121,777 | 6,938 | 36,682 | 3,775 | 158,459 | 10,713 | ||||||||||||||||||
Mutual funds - equity securities | 58,467 | 10,994 | 5,465 | 1,255 | 63,932 | 12,249 | ||||||||||||||||||
Equity securities | 21,480 | 2,275 | 649 | 199 | 22,129 | 2,474 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 211,854 | $ | 20,625 | $ | 44,342 | $ | 5,367 | $ | 256,196 | $ | 25,992 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Less than 12 months | 12 months or more | Total | |||||||||||||||||||||
| March 31, 2017 | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||
| Fixed maturities: | |||||||||||||||||||||||
| U.S. governmental securities | $ | — | $ | — | $ | 102 | $ | 52 | $ | 102 | $ | 52 | |||||||||||
| Corporate debt securities | 1,040 | 116 | 370 | 187 | 1,410 | 303 | |||||||||||||||||
| Total fixed maturities | 1,040 | 116 | 472 | 239 | 1,512 | 355 | |||||||||||||||||
| Mutual funds - debt securities | 9,529 | 126 | 20 | 7 | 9,549 | 133 | |||||||||||||||||
| Mutual funds - equity securities | 15,641 | 127 | 1,287 | 33 | 16,928 | 160 | |||||||||||||||||
| Other investment funds | 33,259 | 564 | — | — | 33,259 | 564 | |||||||||||||||||
| Equity securities | 3,278 | 216 | 429 | 73 | 3,707 | 289 | |||||||||||||||||
| Total | $ | 62,747 | $ | 1,149 | $ | 2,208 | $ | 352 | $ | 64,955 | $ | 1,501 | |||||||||||
| Less than 12 months | 12 months or more | Total | |||||||||||||||||||||
| December 31, 2016 | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||
| Fixed maturities: | |||||||||||||||||||||||
| U.S. governmental securities | $ | — | $ | — | $ | 87 | $ | 44 | $ | 87 | $ | 44 | |||||||||||
| Corporate debt securities | 556 | 6 | 871 | 196 | 1,427 | 202 | |||||||||||||||||
| Total fixed maturities | 556 | 6 | 958 | 240 | 1,514 | 246 | |||||||||||||||||
| Mutual funds - debt securities | 6,040 | 61 | 754 | 35 | 6,794 | 96 | |||||||||||||||||
| Mutual funds - equity securities | 7,475 | 357 | 2,578 | 176 | 10,053 | 533 | |||||||||||||||||
| Other investment funds | 37,357 | 387 | — | — | 37,357 | 387 | |||||||||||||||||
| Equity securities | 1,292 | 89 | 413 | 103 | 1,705 | 192 | |||||||||||||||||
| Total | $ | 52,720 | $ | 900 | $ | 4,703 | $ | 554 | $ | 57,423 | $ | 1,454 | |||||||||||
| 6. | PERPETUAL CARE TRUSTS |
| Nine months ended September 30, | ||||||||
| 2016 | 2015 | |||||||
Balance, beginning of period | $ | 307,804 | $ | 345,105 | ||||
Contributions | 13,111 | 12,058 | ||||||
Distributions | (10,923 | ) | (10,254 | ) | ||||
Interest and dividends | 13,609 | 13,236 | ||||||
Capital gain distributions | 477 | 41 | ||||||
Realized gains and losses | (413 | ) | 13,942 | |||||
Other than temporary impairment | (466 | ) | — | |||||
Taxes | (566 | ) | (637 | ) | ||||
Fees | (2,189 | ) | (1,654 | ) | ||||
Unrealized change in fair value | 14,479 | (60,056 | ) | |||||
|
|
|
| |||||
Balance, end of period | $ | 334,923 | $ | 311,781 | ||||
|
|
|
| |||||
| Three Months Ended March 31, | |||||||
| 2017 | 2016 | ||||||
| Balance, beginning of period | $ | 333,780 | $ | 307,804 | |||
| Contributions | 2,115 | 2,474 | |||||
| Distributions | (3,031 | ) | (3,723 | ) | |||
| Interest and dividends | 3,871 | 4,149 | |||||
| Capital gain distributions | 216 | 81 | |||||
| Realized gains and losses | 2,065 | 74 | |||||
| Taxes | (165 | ) | (97 | ) | |||
| Fees | (608 | ) | (287 | ) | |||
| Unrealized change in fair value | 3,236 | (268 | ) | ||||
| Balance, end of period | $ | 341,479 | $ | 310,207 | |||
$64.1 million and $0.3 million, respectively. Cash flows from perpetual care trust related contracts are presented as operating cash flows in our condensed consolidated statement of cash flows.
| Gross | Gross | |||||||||||||||||||
| Fair Value | Unrealized | Unrealized | Fair | |||||||||||||||||
September 30, 2016 | Hierarchy Level | Cost | Gains | Losses | Value | |||||||||||||||
Short-term investments | 1 | $ | 16,470 | $ | — | $ | — | $ | 16,470 | |||||||||||
Fixed maturities: | ||||||||||||||||||||
U.S. governmental securities | 2 | 183 | 17 | (1 | ) | 199 | ||||||||||||||
Corporate debt securities | 2 | 12,504 | 468 | (370 | ) | 12,602 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total fixed maturities | 12,687 | 485 | (371 | ) | 12,801 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Mutual funds - debt securities | 1 | 130,598 | 1,604 | (1,722 | ) | 130,480 | ||||||||||||||
Mutual funds - equity securities | 1 | 30,788 | 3,070 | (237 | ) | 33,621 | ||||||||||||||
Other investment funds (1) | 116,466 | 2,238 | — | 118,704 | ||||||||||||||||
Equity securities | 1 | 21,473 | 1,487 | (186 | ) | 22,774 | ||||||||||||||
Other invested assets | 2 | 73 | 73 | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total managed investments | $ | 328,555 | $ | 8,884 | $ | (2,516 | ) | $ | 334,923 | |||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Assets acquired via acquisition | — | — | — | — | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 328,555 | $ | 8,884 | $ | (2,516 | ) | $ | 334,923 | |||||||||||
|
|
|
|
|
|
|
| |||||||||||||
| March 31, 2017 | Fair Value Hierarchy Level | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
| Short-term investments | 1 | $ | 9,671 | $ | — | $ | — | $ | 9,671 | ||||||||
| Fixed maturities: | |||||||||||||||||
| U.S. governmental securities | 2 | 457 | 5 | (27 | ) | 435 | |||||||||||
| Corporate debt securities | 2 | 6,785 | 214 | (190 | ) | 6,809 | |||||||||||
| Total fixed maturities | 7,242 | 219 | (217 | ) | 7,244 | ||||||||||||
| Mutual funds - debt securities | 1 | 145,648 | 1,962 | (658 | ) | 146,952 | |||||||||||
| Mutual funds - equity securities | 1 | 17,800 | 3,296 | (21 | ) | 21,075 | |||||||||||
| Other investment funds (1) | 127,371 | 3,463 | (720 | ) | 130,114 | ||||||||||||
| Equity securities | 1 | 24,007 | 2,782 | (451 | ) | 26,338 | |||||||||||
| Other invested assets | 2 | 85 | — | — | 85 | ||||||||||||
| Total investments | $ | 331,824 | $ | 11,722 | $ | (2,067 | ) | $ | 341,479 | ||||||||
| (1) | Other investment funds are measured at fair value using the net asset value per share practical expedient and have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the balance sheet. This asset class is composed of fixed income funds and equity funds, which have a redemption period ranging from 30 to 90 days, and private credit funds, which have lockup periods ranging from five to ten years with three potential one year extensions at the discretion of the funds’ general partners. As of March 31, 2017, there were $56.2 million in unfunded commitments to the private credit funds, which are callable at any time. |
| December 31, 2016 | Fair Value Hierarchy Level | Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
| Short-term investments | 1 | $ | 16,113 | $ | — | $ | — | $ | 16,113 | ||||||||
| Fixed maturities: | |||||||||||||||||
| U.S. governmental securities | 2 | 483 | 14 | (23 | ) | 474 | |||||||||||
| Corporate debt securities | 2 | 12,598 | 380 | (152 | ) | 12,826 | |||||||||||
| Total fixed maturities | 13,081 | 394 | (175 | ) | 13,300 | ||||||||||||
| Mutual funds - debt securities | 1 | 127,033 | 1,187 | (669 | ) | 127,551 | |||||||||||
| Mutual funds - equity securities | 1 | 30,708 | 1,940 | (26 | ) | 32,622 | |||||||||||
| Other investment funds (1) | 119,196 | 2,672 | (622 | ) | 121,246 | ||||||||||||
| Equity securities | 1 | 20,978 | 2,150 | (432 | ) | 22,696 | |||||||||||
| Other invested assets | 2 | 252 | — | — | 252 | ||||||||||||
| Total investments | $ | 327,361 | $ | 8,343 | $ | (1,924 | ) | $ | 333,780 | ||||||||
| (1) | Other investment funds are measured at fair value using the net asset value per share practical expedient and have not been categorized in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the balance sheet. This asset class is composed of fixed income funds and equity funds, which have a redemption period ranging from 30 to 90 days, and private credit funds, which have lockup periods ranging from six to ten years with three potential one year extensions at the discretion of the funds’ general partners. As of |
| Gross | Gross | |||||||||||||||||||
| Fair Value | Unrealized | Unrealized | Fair | |||||||||||||||||
December 31, 2015 | Hierarchy Level | Cost | Gains | Losses | Value | |||||||||||||||
Short-term investments | 1 | $ | 36,618 | $ | — | $ | — | $ | 36,618 | |||||||||||
Fixed maturities: | ||||||||||||||||||||
U.S. governmental securities | 2 | 126 | 14 | — | 140 | |||||||||||||||
Corporate debt securities | 2 | 22,837 | 57 | (845 | ) | 22,049 | ||||||||||||||
Other debt securities | 2 | 36 | — | (1 | ) | 35 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total fixed maturities | 22,999 | 71 | (846 | ) | 22,224 | |||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Mutual funds - debt securities | 1 | 184,866 | 35 | (7,180 | ) | 177,721 | ||||||||||||||
Mutual funds - equity securities | 1 | 68,079 | 1,054 | (1,713 | ) | 67,420 | ||||||||||||||
Equity securities | 1 | 2,319 | 636 | (7 | ) | 2,948 | ||||||||||||||
Other invested assets | 2 | 473 | 1 | (162 | ) | 312 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total managed investments | $ | 315,354 | $ | 1,797 | $ | (9,908 | ) | $ | 307,243 | |||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Assets acquired via acquisition | 561 | — | — | 561 | ||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 315,915 | $ | 1,797 | $ | (9,908 | ) | $ | 307,804 | |||||||||||
|
|
|
|
|
|
|
| |||||||||||||
| Less than | 1 year through | 6 years through | More than | |||||||||||||
| 1 year | 5 years | 10 years | 10 years | |||||||||||||
U.S. governmental securities | $ | 111 | $ | — | $ | 37 | $ | 51 | ||||||||
Corporate debt securities | 121 | 11,162 | 1,319 | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total fixed maturities | $ | 232 | $ | 11,162 | $ | 1,356 | $ | 51 | ||||||||
|
|
|
|
|
|
|
| |||||||||
(in thousands):
| Less than 1 year | 1 year through 5 years | 6 years through 10 years | More than 10 years | ||||||||||||
| U.S. governmental securities | $ | — | $ | 226 | $ | 165 | $ | 44 | |||||||
| Corporate debt securities | 633 | 5,319 | 783 | 74 | |||||||||||
| Total fixed maturities | $ | 633 | $ | 5,545 | $ | 948 | $ | 118 | |||||||
| Less than 12 months | 12 Months or more | Total | ||||||||||||||||||||||
| Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
September 30, 2016 | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
U.S. governmental securities | $ | — | $ | — | $ | 24 | $ | 1 | $ | 24 | $ | 1 | ||||||||||||
Corporate debt securities | 2,787 | 190 | 2,972 | 180 | 5,759 | 370 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total fixed maturities | 2,787 | 190 | 2,996 | 181 | 5,783 | 371 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Mutual funds - debt securities | 11,485 | 93 | 50,053 | 1,629 | 61,538 | 1,722 | ||||||||||||||||||
Mutual funds - equity securities | 977 | 47 | 2,874 | 190 | 3,851 | 237 | ||||||||||||||||||
Equity securities | 4,991 | 186 | 3 | 4,994 | 186 | |||||||||||||||||||
Other invested assets | — | — | 73 | — | 73 | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 20,240 | $ | 516 | $ | 55,999 | $ | 2,000 | $ | 76,239 | $ | 2,516 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Less than 12 months | 12 Months or more | Total | ||||||||||||||||||||||
| Fair | Unrealized | Fair | Unrealized | Fair | Unrealized | |||||||||||||||||||
December 31, 2015 | Value | Losses | Value | Losses | Value | Losses | ||||||||||||||||||
Fixed maturities: | ||||||||||||||||||||||||
U.S. governmental securities | $ | — | $ | — | $ | 112 | $ | — | $ | 112 | $ | — | ||||||||||||
Corporate debt securities | 12,482 | 535 | 4,505 | 310 | 16,987 | 845 | ||||||||||||||||||
Other debt securities | 35 | 1 | — | — | 35 | 1 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total fixed maturities | 12,517 | 536 | 4,617 | 310 | 17,134 | 846 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Mutual funds - debt securities | 81,215 | 4,263 | 50,774 | 2,917 | 131,989 | 7,180 | ||||||||||||||||||
Mutual funds - equity securities | 16,514 | 1,363 | 4,308 | 350 | 20,822 | 1,713 | ||||||||||||||||||
Equity securities | 488 | 6 | 1,137 | 1 | 1,625 | 7 | ||||||||||||||||||
Other invested assets | — | — | 315 | 162 | 315 | 162 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 110,734 | $ | 6,168 | $ | 61,151 | $ | 3,740 | $ | 171,885 | $ | 9,908 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Less than 12 months | 12 months or more | Total | |||||||||||||||||||||
| March 31, 2017 | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||
| Fixed maturities: | |||||||||||||||||||||||
| U.S. governmental securities | $ | — | $ | — | $ | 363 | $ | 27 | $ | 363 | $ | 27 | |||||||||||
| Corporate debt securities | 960 | 67 | 2,388 | 123 | 3,348 | 190 | |||||||||||||||||
| Total fixed maturities | 960 | 67 | 2,751 | 150 | 3,711 | 217 | |||||||||||||||||
| Mutual funds - debt securities | 43,199 | 631 | 536 | 27 | 43,735 | 658 | |||||||||||||||||
| Mutual funds - equity securities | 1,168 | 17 | 113 | 4 | 1,281 | 21 | |||||||||||||||||
| Other investment funds | 39,059 | 720 | — | — | 39,059 | 720 | |||||||||||||||||
| Equity securities | 6,880 | 438 | 156 | 13 | 7,036 | 451 | |||||||||||||||||
| Total | $ | 91,266 | $ | 1,873 | $ | 3,556 | $ | 194 | $ | 94,822 | $ | 2,067 | |||||||||||
| Less than 12 months | 12 months or more | Total | |||||||||||||||||||||
| December 31, 2016 | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | |||||||||||||||||
| Fixed maturities: | |||||||||||||||||||||||
| U.S. governmental securities | $ | — | $ | — | $ | 283 | $ | 23 | $ | 283 | $ | 23 | |||||||||||
| Corporate debt securities | 747 | 10 | 2,980 | 142 | 3,727 | 152 | |||||||||||||||||
| Total fixed maturities | 747 | 10 | 3,263 | 165 | 4,010 | 175 | |||||||||||||||||
| Mutual funds - debt securities | 24,026 | 620 | 1,908 | 49 | 25,934 | 669 | |||||||||||||||||
| Mutual funds - equity securities | 3,836 | 16 | 452 | 10 | 4,288 | 26 | |||||||||||||||||
| Other investment funds | 37,577 | 622 | — | — | 37,577 | 622 | |||||||||||||||||
| Equity securities | 4,532 | 409 | 145 | 23 | 4,677 | 432 | |||||||||||||||||
| Total | $ | 70,718 | $ | 1,677 | $ | 5,768 | $ | 247 | $ | 76,486 | $ | 1,924 | |||||||||||
Goodwill
The Partnership has recorded goodwill of approximately $70.6 million as of September 30, 2016 and $69.9 million as of December 31, 2015. This amount represents the excess of the purchase price over the fair value of identifiable net assets acquired.
A rollforward of goodwill by reporting unit is as follows (in thousands):
| Cemeteries | Funeral Homes | Total | ||||||||||
Balance at December 31, 2015 | $ | 25,320 | $ | 44,531 | $ | 69,851 | ||||||
Goodwill from acquisitions during 2015 | — | (337 | ) | (337 | ) | |||||||
Goodwill from acquisitions during 2016 | — | 1,058 | 1,058 | |||||||||
|
|
|
|
|
| |||||||
Balance at September 30, 2016 | $ | 25,320 | $ | 45,252 | $ | 70,572 | ||||||
|
|
|
|
|
| |||||||
The Partnership adjusted preliminary amounts relating to 2015 acquisitions during the second quarter of 2016 as the Company obtained additional information. These updates resulted in a decrease in goodwill acquired from 2015 acquisitions.
The Partnership tests goodwill for impairment at each year end by comparing its reporting units’ estimated fair values to carrying values. There were no goodwill impairments recognized by the Partnership during the periods presented. Management will continue to evaluate goodwill at least annually or when impairment indicators arise.
Intangible Assets
The Partnership has intangible assets with finite lives recognized in connection with acquisitions and long-term lease, management and operating agreements. The Partnership amortizes these intangible assets over their estimated useful lives.
The following table reflects the components of intangible assets as of September 30, 2016 and December 31, 2015 (in thousands):
| September 30, 2016 | December 31, 2015 | |||||||||||||||||||||||
| Gross Carrying | Accumulated | Net Intangible | Gross Carrying | Accumulated | Net Intangible | |||||||||||||||||||
| Amount | Amortization | Asset | Amount | Amortization | Asset | |||||||||||||||||||
Lease and management agreements | $ | 59,758 | $ | (2,324 | ) | $ | 57,434 | $ | 59,758 | $ | (1,577 | ) | $ | 58,181 | ||||||||||
Underlying contract value | 6,239 | (1,131 | ) | 5,108 | 6,239 | (1,014 | ) | 5,225 | ||||||||||||||||
Non-compete agreements | 5,656 | (3,705 | ) | 1,951 | 5,656 | (3,112 | ) | 2,544 | ||||||||||||||||
Other intangible assets | 1,777 | (242 | ) | 1,535 | 1,439 | (180 | ) | 1,259 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total intangible assets | $ | 73,430 | $ | (7,402 | ) | $ | 66,028 | $ | 73,092 | $ | (5,883 | ) | $ | 67,209 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Amortization expense for intangible assets was $0.6 million for both the three months ended September 30, 2016 and 2015 and $1.7 million for both the nine months ended September 30, 2016 and 2015. The following is estimated amortization expense related to intangible assets with finite lives for the periods noted below (in thousands):
2016 (remainder) | $ | 590 | ||
2017 | $ | 2,194 | ||
2018 | $ | 1,769 | ||
2019 | $ | 1,451 | ||
2020 | $ | 1,278 |
| LONG-TERM DEBT |
| September 30, 2016 | December 31, 2015 | |||||||
Credit facility | $ | 151,125 | $ | 149,500 | ||||
7.875% Senior Notes, due June 2021 | 172,510 | 172,186 | ||||||
Notes payable - acquisition debt | 549 | 687 | ||||||
Notes payable - acquisition non-competes | 937 | 1,629 | ||||||
Insurance and vehicle financing | 2,291 | 2,336 | ||||||
Less deferred financing costs, net of accumulated amortization | (11,236 | ) | (7,499 | ) | ||||
|
|
|
| |||||
Total debt | 316,176 | 318,839 | ||||||
Less current maturities | (2,144 | ) | (2,440 | ) | ||||
|
|
|
| |||||
Total long-term debt | $ | 314,032 | $ | 316,399 | ||||
|
|
|
| |||||
| March 31, 2017 | December 31, 2016 | ||||||
| Credit facility | $ | 140,625 | $ | 137,125 | |||
| 7.875% Senior Notes, due June 2021 | 172,738 | 172,623 | |||||
| Notes payable - acquisition debt | 453 | 502 | |||||
| Notes payable - acquisition non-competes | 721 | 928 | |||||
| Insurance and vehicle financing | 1,657 | 1,807 | |||||
| Less deferred financing costs, net of accumulated amortization | (10,959 | ) | (10,859 | ) | |||
| Total debt | 305,235 | 302,126 | |||||
| Less current maturities | (1,617 | ) | (1,775 | ) | |||
| Total long-term debt | $ | 303,618 | $ | 300,351 | |||
The New Agreements, replacedas amended.
The Credit Agreement providesprovided for up to $210.0 million initial aggregate amount of Revolving Commitments, which may be increased, from time to time, in minimum increments of $5.0 million so long as the aggregate amount of such increases does not exceed $100.0 million. The Operating Company may also request the issuance of Letters of Credit for up to $15.0 million in the aggregate, of which there were $6.5$8.1 million outstanding at September 30, 2016March 31, 2017 and none$6.8 million outstanding at December 31, 2015.2016. The Maturity Date under the Original Credit Agreement is the earlier of (i) August 4, 2021 and (ii) the date that is six months prior to the earliest scheduled maturity date of any outstanding Permitted Unsecured Indebtedness (at present, such date is December 1, 2020, which is six months prior to June 1, 2021 maturity date of outstanding 7.875% senior notes).
facility.
March 31, 2017.
| ◦ | the Partnership is entitled to add back: |
| ▪ | non-cash compensation or other expense attributable to equity compensation awards and certain other non-cash expenses; |
| ▪ | unrealized losses (less unrealized gains) and non-cash expenses arising from or attributable to the early termination of any swap agreement; |
| ▪ | other non-recurring cash expenses, losses, costs and charges subject to a limit of $14.3 million for the period ended June 30, 2017, $12.0 million for the period ended September 30, 2017 and periods ending December 31, 2017, March 31, 2018 and June 30, 2018, $4.0 million for the period ending September 30, 2018 and $2.0 million for periods thereafter; |
| ▪ | non-recurring cash expenses, costs and charges relating to the previously announced Securities and Exchange Commission investigation and related actions, ongoing class action litigation and any other non-ordinary course of business legal matters in an aggregate amount for all periods not to exceed $5.0 million; and |
| ▪ | certain cash expenses, costs and charges with respect to liability or casualty events to the extent insurance or indemnity recovery from a third party is actually received or is reasonably expected to be received within 90 days following the end of the applicable period; and |
| ◦ | require the Partnership to subtract the following: |
| ▪ | non-cash items increasing Consolidated Net Income for the applicable period; |
| ▪ | federal, state, local and foreign income tax credits or refunds during such period; |
| ▪ | certain cash payments made during the applicable period in respect of any noncash accrual, reserve or other non-cash charge that is accounted for in a prior period which was added to Consolidated Net Income to determine Consolidated EBITDA for such prior period and which does not otherwise reduce Consolidated Net Income for the current period; and |
| ▪ | the amount of any insurance or indemnity recovery not so received within the 90 day period (or such longer period) set forth above and any recovery payments which are made by third parties within the 90 day period (or such longer period) set forth above, in each case to the extent added back to consolidated net income in the prior period; |
| ◦ | establish a minimum Consolidated Fixed Charge Coverage Ratio (as described below), as of the last day of any fiscal quarter, commencing on September 30, 2017, determined for the period of four (4) consecutive fiscal quarters ending on such date, of 1.20:1.00 for the four fiscal quarter period ending on such measurement date; |
| ◦ | define “Consolidated Fixed Charge Ratio” as the ratio of (i) Consolidated EBITDA for the four fiscal quarter period ending on the applicable measurement date, minus (x) the aggregate of all expenditures by the Partnership and its Subsidiaries for a specified period which are included in “Maintenance Capital Expenditures” or “Growth Capital Expenditures” reflected in the consolidated statement of cash flows of the Partnership, but excluding any such expenditures to the extent financed from the proceeds of Indebtedness (other than Revolving Loans) or insurance proceeds or other similar recoveries paid on account of the loss of or damage to the assets being replaced or restored or other assets and that are made during such period, (y) any federal, state, local and foreign taxes paid by the Partnership and its Subsidiaries during such period (net of any tax credits or refunds during such period), and (z) all Restricted Payments (which includes distributions) paid in cash by the Partnership during such period, to (ii) Consolidated Fixed Charges for the four fiscal quarter period ending on such measurement date; and |
| ◦ | define “Consolidated Fixed Charges” as the sum of (i) Consolidated Interest Expense paid or payable in cash plus (ii) the aggregate amount of all scheduled principal payments with respect to all Consolidated Funded Indebtedness, but excluding any such payments to the extent refinanced through the incurrence of additional Indebtedness permitted under the Amended Credit Agreement; |
Year | Percentage | |||
2016 | 105.906 | % | ||
2017 | 103.938 | % | ||
2018 | 101.969 | % | ||
2019 and thereafter | 100.000 | % | ||
| Year | Percentage |
| 2017 | 103.938% |
| 2018 | 101.969% |
| 2019 and thereafter | 100.000% |
The Partnership is not subject to U.S. federal and most state income taxes. The partners of the Partnership are liable for income tax in regard to their distributive share of the Partnership’s taxable income. Such taxable income may vary substantially from net income reported in the accompanying unaudited consolidated financial statements. Certain corporate subsidiaries are subject to federal and state income tax. Deferred tax assets and liabilities are recognized for future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and tax carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Partnership records a valuation allowance against its deferred tax assets if it deems that it is more likely than not that some portion or all of the recorded deferred tax assets will not be realizable in future periods.
As of September 30, 2016, the Partnership had available approximately less than $0.1 million of alternative minimum tax credit carryforwards, which are available indefinitely, and $264.5 million of federal net operating loss carryforwards, which will begin to expire in 2017 and $321.8 million in state net operating loss carryforwards, a portion of which expires annually.
In assessing the realizability of deferred tax assets, management considers whether it’s more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. As of September 30, 2016, based on the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Partnership will realize a partial benefit of these deductible differences. The amount of deferred tax assets considered realizable could be reduced in the future if estimates of future taxable income during the carryforward period are reduced.
In accordance with applicable accounting standards, the Partnership recognizes only the impact of income tax positions that, based upon their merits, are more likely than not to be sustained upon audit by a taxing authority. To evaluate its current tax positions in order to identify any material uncertain tax positions, the Partnership developed a policy of identifying and evaluating uncertain tax positions that considers support for each tax position, industry standards, tax return disclosures and schedules and the significance of each position. It is the Partnership’s policy to recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense. At September 30, 2016 and December 31, 2015, the Partnership had no material uncertain tax positions.
The Partnership is not currently under examination by any federal or state jurisdictions. The federal statute of limitations and certain state statutes of limitations are open from 2012 forward.
| DEFERRED REVENUES |
At September 30, 2016
| September 30, 2016 | December 31, 2015 | |||||||
Deferred contract revenues | $ | 806,322 | $ | 759,812 | ||||
Deferred merchandise trust revenue | 86,275 | 80,294 | ||||||
Deferred merchandise trust unrealized gains (losses) | 4,155 | (24,685 | ) | |||||
|
|
|
| |||||
Deferred revenues | $ | 896,752 | $ | 815,421 | ||||
|
|
|
| |||||
Deferred selling and obtaining costs | $ | 122,249 | $ | 111,542 | ||||
2014 Long-Term Incentive Plan
During
| March 31, 2017 | December 31, 2016 | ||||||
| Deferred contract revenues | $ | 788,477 | $ | 782,120 | |||
| Deferred merchandise trust revenue | 82,235 | 76,512 | |||||
| Deferred merchandise trust unrealized gains | 20,644 | 8,001 | |||||
| Deferred revenues | $ | 891,356 | $ | 866,633 | |||
| Deferred selling and obtaining costs | $ | 120,113 | $ | 116,890 | |||
Phantom Unit Awards
Phantom units represent rights to receive a common unit or an amount of cash, or a combination of either, based upon the value of a common unit. Phantom units become payable, in cash or common units, at the Partnership’s election, upon the separation of directors and executives from service or upon the occurrence of certain other events specified in the underlying agreements. Phantom units are subject to terms and conditions determined by the Compensation Committee. In tandem with phantom unit grants, the compensation committee may grant distribution equivalent rights (“DERs”), which are the right to receive an amount in cash or common units equal to the cash distributions made by the Partnership with respect to common unit during the period that the underlying phantom unit is outstanding. All phantom units outstanding under the 2014 LTIP at September 30, 2016 contain tandem DERs.
The following table sets forth the 2014 LTIP phantom unit award activity for the three and nine months ended September 30, 2016 and 2015, respectively:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
Outstanding, beginning of period | 110,090 | 6,281 | 102,661 | 2,189 | ||||||||||||
Granted (1) | 102,715 | 2,566 | 110,144 | 6,658 | ||||||||||||
Settled in common units or cash (1) | (2,774 | ) | — | (2,774 | ) | — | ||||||||||
Forfeiture | (23,185 | ) | — | (23,185 | ) | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Outstanding, end of period (2) | 186,846 | 8,847 | 186,846 | 8,847 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
2004 Long-Term Incentive Plan
The Compensation Committee administers the Partnership’s 2004 Long-Term Incentive Plan (“2004 LTIP”). The 2004 LTIP permitted the grant of awards, which may be in the form of phantom units, restricted units, or unit appreciation rights (“UAR”). At September 30, 2016, the estimated number of common units to be issued upon vesting and exercise of outstanding rights under this plan was 199,919, based upon the closing price of our common units at September 30, 2016. A cumulative number of 626,188 common units have been issued under the 2004 LTIP. There were no awards available for grant under the 2004 LTIP at September 30, 2016 because the plan expired in 2014.
Phantom Unit Awards
Phantom units were credited to participants’ mandatory deferred compensation accounts in connection with DERs accruing on phantom units received under the 2004 LTIP. These DERs continue to accrue until the underlying securities are issued. The following table sets forth the 2004 LTIP activity related to DERs credited as phantom units to the participant’s accounts for the three and nine months ended September 30, 2016 and 2015, respectively:
Outstanding, beginning of period Granted (1) Outstanding, end of period (2) Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 194,085 176,349 184,457 169,122 5,108 4,188 14,736 11,415 199,193 180,537 199,193 180,537
Total compensation expense for phantom units credited under both the 2004 and 2014 plans was approximately $0.2 million and $0.3 million for the three months ended September 30, 2016 and 2015, respectively, and $0.6 million and $0.8 million for the nine months ended September 30, 2016 and 2015, respectively.
Unit Appreciation Rights Awards
UAR awards represent a right to receive an amount equal to the closing price of the Partnership’s common units on the date preceding the exercise date less the exercise price of the UARs, to the extent the closing price of the Partnership’s common units on the date preceding the exercise date is in excess of the exercise price. This amount is then divided by the closing price of the Partnership’s common units on the date preceding the exercise date to determine the number of common units to be issued to the participant. UAR awards granted through September 30, 2016 have a five-year contractual term beginning on the grant date and vest ratably over a period of 48 months beginning on the grant date. Of the UARs outstanding at September 30, 2016, 14,583 UARs will vest within the following twelve months. The following table sets forth the UAR award activity for the three and nine months ended September 30, 2016 and 2015, respectively:
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
Outstanding, beginning of period | 66,793 | 87,021 | 66,793 | 123,000 | ||||||||||||
Exercised | — | (19,791 | ) | — | (50,040 | ) | ||||||||||
Forfeited | (438 | ) | — | (438 | ) | (5,730 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Outstanding, end of period (1) | 66,355 | 67,230 | 66,355 | 67,230 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Exercisable, end of period | 48,750 | 27,562 | 48,750 | 27,562 | ||||||||||||
At September 30, 2016, the Partnership had approximately $0.1 million of unrecognized compensation expense related to unvested UAR awards that will be recognized through the year ended December 31, 2018. The Partnership recognized total compensation expense for UAR awards of less than $0.1 million for the three and nine months ended September 30, 2016 and 2015. The Partnership issued 3,067 common units for the three months ended September 30, 2015 and 7,631 common units for the nine months ended September 30, 2015 due to exercised UAR awards. There were no UAR exercises during the three and nine months ended September 30, 2016.
| COMMITMENTS AND CONTINGENCIES |
Lease Years 1-5 | (May 28, 2014 - May 31, 2019) | None |
Lease Years 6-20 | (June 1, 2019 - May 31, 2034) | $1,000,000 per Lease Year |
Lease Years 21-25 | (June 1, 2034 - May 31, 2039) | $1,200,000 per Lease Year |
Lease Years 26-35 | (June 1, 2039 - May 31, 2049) | $1,500,000 per Lease Year |
Lease Years 36-60 | (June 1, 2049 - May 31, 2074) | None |
| 10. | FAIR VALUE OF FINANCIAL INSTRUMENTS |
These funds are measured at fair value using the net asset value per share practical expedient and have not been categorized in the fair value hierarchy.
| 11. | SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION |
accounting:
| Subsidiary | Guarantor | Non-Guarantor | ||||||||||||||||||||||
| September 30, 2016 | Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Assets | ||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | — | $ | 13,165 | $ | 2,445 | $ | — | $ | 15,610 | ||||||||||||
Other current assets | — | 4,336 | 87,620 | 16,947 | — | 108,903 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total current assets | — | 4,336 | 100,785 | 19,392 | — | 124,513 | ||||||||||||||||||
Long-term accounts receivable | — | 1,564 | 84,767 | 11,651 | — | 97,982 | ||||||||||||||||||
Cemetery property and equipment | — | 940 | 422,761 | 31,702 | — | 455,403 | ||||||||||||||||||
Merchandise trusts | — | — | — | 504,604 | — | 504,604 | ||||||||||||||||||
Perpetual care trusts | — | — | — | 334,923 | — | 334,923 | ||||||||||||||||||
Deferred selling and obtaining costs | — | 6,240 | 97,414 | 18,595 | — | 122,249 | ||||||||||||||||||
Goodwill and intangible assets | — | — | 78,510 | 58,090 | — | 136,600 | ||||||||||||||||||
Other assets | — | — | 15,505 | 2,360 | — | 17,865 | ||||||||||||||||||
Investments in and amounts due from affiliates eliminated upon consolidation | 229,565 | 138,604 | 485,550 | — | (853,719 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total assets | $ | 229,565 | $ | 151,684 | $ | 1,285,292 | $ | 981,317 | $ | (853,719 | ) | $ | 1,794,139 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Liabilities and Equity | ||||||||||||||||||||||||
Current liabilities | $ | — | $ | 27 | $ | 42,070 | $ | 957 | $ | — | $ | 43,054 | ||||||||||||
Long-term debt, net of deferred financing costs | 68,018 | 104,492 | 141,522 | — | — | 314,032 | ||||||||||||||||||
Deferred revenues | — | 37,489 | 769,930 | 89,333 | — | 896,752 | ||||||||||||||||||
Perpetual care trust corpus | — | — | — | 334,923 | — | 334,923 | ||||||||||||||||||
Other long-term liabilities | — | — | 33,758 | 10,073 | — | 43,831 | ||||||||||||||||||
Due to affiliates | — | — | 172,510 | 492,234 | (664,744 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total liabilities | 68,018 | 142,008 | 1,159,790 | 927,520 | (664,744 | ) | 1,632,592 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Partners' capital | 161,547 | 9,676 | 125,502 | 53,797 | (188,975 | ) | 161,547 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total liabilities and partners' capital | $ | 229,565 | $ | 151,684 | $ | 1,285,292 | $ | 981,317 | $ | (853,719 | ) | $ | 1,794,139 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Subsidiary | Guarantor | Non-Guarantor | ||||||||||||||||||||||
| December 31, 2015 | Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Assets | ||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | — | $ | 11,869 | $ | 3,284 | $ | — | $ | 15,153 | ||||||||||||
Other current assets | — | 4,858 | 78,464 | 12,701 | — | 96,023 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total current assets | — | 4,858 | 90,333 | 15,985 | — | 111,176 | ||||||||||||||||||
Long-term accounts receivable | — | 2,888 | 80,969 | 11,310 | — | 95,167 | ||||||||||||||||||
Cemetery property and equipment | — | 1,084 | 418,400 | 31,100 | — | 450,584 | ||||||||||||||||||
Merchandise trusts | — | — | — | 464,676 | — | 464,676 | ||||||||||||||||||
Perpetual care trusts | — | — | — | 307,804 | — | 307,804 | ||||||||||||||||||
Deferred selling and obtaining costs | — | 5,967 | 91,275 | 14,300 | — | 111,542 | ||||||||||||||||||
Goodwill and intangible assets | — | — | 78,223 | 58,837 | — | 137,060 | ||||||||||||||||||
Other assets | — | — | 14,153 | 2,195 | — | 16,348 | ||||||||||||||||||
Investments in and amounts due from affiliates eliminated upon consolidation | 249,436 | 165,639 | 436,811 | — | (851,886 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total assets | $ | 249,436 | $ | 180,436 | $ | 1,210,164 | $ | 906,207 | $ | (851,886 | ) | $ | 1,694,357 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Liabilities and Equity | ||||||||||||||||||||||||
Current liabilities | $ | — | $ | 12 | $ | 33,083 | $ | 837 | $ | — | $ | 33,932 | ||||||||||||
Long-term debt, net of deferred financing costs | 67,890 | 104,295 | 144,214 | — | — | 316,399 | ||||||||||||||||||
Deferred revenues | — | 40,467 | 697,516 | 77,438 | — | 815,421 | ||||||||||||||||||
Perpetual care trust corpus | — | — | — | 307,804 | — | 307,804 | ||||||||||||||||||
Other long-term liabilities | — | — | 29,761 | 9,494 | — | 39,255 | ||||||||||||||||||
Due to affiliates | — | — | 172,185 | 454,605 | (626,790 | ) | — | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total liabilities | 67,890 | 144,774 | 1,076,759 | 850,178 | (626,790 | ) | 1,512,811 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Partners’ capital | 181,546 | 35,662 | 133,405 | 56,029 | (225,096 | ) | 181,546 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total liabilities and partners’ capital | $ | 249,436 | $ | 180,436 | $ | 1,210,164 | $ | 906,207 | $ | (851,886 | ) | $ | 1,694,357 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
(in thousands)
| March 31, 2017 | Parent | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||
| Assets | |||||||||||||||||||||||
| Current assets: | |||||||||||||||||||||||
| Cash and cash equivalents | $ | — | $ | — | $ | 10,531 | $ | 3,192 | $ | — | $ | 13,723 | |||||||||||
| Other current assets | — | 3,325 | 83,711 | 17,205 | — | 104,241 | |||||||||||||||||
| Total current assets | — | 3,325 | 94,242 | 20,397 | — | 117,964 | |||||||||||||||||
| Long-term accounts receivable | — | 1,886 | 83,847 | 13,146 | — | 98,879 | |||||||||||||||||
| Cemetery property and equipment | — | 925 | 417,124 | 34,147 | — | 452,196 | |||||||||||||||||
| Merchandise trusts | — | — | — | 523,858 | — | 523,858 | |||||||||||||||||
| Perpetual care trusts | — | — | — | 341,479 | — | 341,479 | |||||||||||||||||
| Deferred selling and obtaining costs | — | 5,843 | 93,754 | 20,516 | — | 120,113 | |||||||||||||||||
| Goodwill and intangible assets | — | — | 72,665 | 62,623 | — | 135,288 | |||||||||||||||||
| Other assets | — | — | 18,665 | 2,828 | — | 21,493 | |||||||||||||||||
| Investments in and amounts due from affiliates eliminated upon consolidation | 238,255 | 159,173 | 577,374 | — | (974,802 | ) | — | ||||||||||||||||
| Total assets | $ | 238,255 | $ | 171,152 | $ | 1,357,671 | $ | 1,018,994 | $ | (974,802 | ) | $ | 1,811,270 | ||||||||||
| Liabilities and Equity | |||||||||||||||||||||||
| Current liabilities | $ | — | $ | 474 | $ | 45,455 | $ | 166 | $ | — | $ | 46,095 | |||||||||||
| Long-term debt, net of deferred financing costs | 68,108 | 104,630 | 130,880 | — | — | 303,618 | |||||||||||||||||
| Deferred revenues | — | 30,182 | 764,839 | 96,335 | — | 891,356 | |||||||||||||||||
| Perpetual care trust corpus | — | — | — | 341,479 | — | 341,479 | |||||||||||||||||
| Other long-term liabilities | — | — | 47,191 | 11,384 | — | 58,575 | |||||||||||||||||
| Due to affiliates | — | — | 172,738 | 598,250 | (770,988 | ) | — | ||||||||||||||||
| Total liabilities | 68,108 | 135,286 | 1,161,103 | 1,047,614 | (770,988 | ) | 1,641,123 | ||||||||||||||||
| Partners' capital | 170,147 | 35,866 | 196,568 | (28,620 | ) | (203,814 | ) | 170,147 | |||||||||||||||
| Total liabilities and partners' capital | $ | 238,255 | $ | 171,152 | $ | 1,357,671 | $ | 1,018,994 | $ | (974,802 | ) | $ | 1,811,270 | ||||||||||
| December 31, 2016 | Parent | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||
| Assets | |||||||||||||||||||||||
| Current assets: | |||||||||||||||||||||||
| Cash and cash equivalents | $ | — | $ | — | $ | 9,145 | $ | 3,425 | $ | — | $ | 12,570 | |||||||||||
| Other current assets | — | 4,567 | 83,765 | 17,919 | — | 106,251 | |||||||||||||||||
| Total current assets | — | 4,567 | 92,910 | 21,344 | — | 118,821 | |||||||||||||||||
| Long-term accounts receivable | — | 1,725 | 83,993 | 13,168 | — | 98,886 | |||||||||||||||||
| Cemetery property and equipment | — | 930 | 420,077 | 34,589 | — | 455,596 | |||||||||||||||||
| Merchandise trusts | — | — | — | 507,079 | — | 507,079 | |||||||||||||||||
| Perpetual care trusts | — | — | — | 333,780 | — | 333,780 | |||||||||||||||||
| Deferred selling and obtaining costs | — | 5,668 | 91,252 | 19,970 | — | 116,890 | |||||||||||||||||
| Goodwill and intangible assets | — | — | 72,963 | 62,911 | — | 135,874 | |||||||||||||||||
| Other assets | — | — | 17,244 | 2,843 | — | 20,087 | |||||||||||||||||
| Investments in and amounts due from affiliates eliminated upon consolidation | 258,417 | 182,060 | 557,455 | — | (997,932 | ) | — | ||||||||||||||||
| Total assets | $ | 258,417 | $ | 194,950 | $ | 1,335,894 | $ | 995,684 | $ | (997,932 | ) | $ | 1,787,013 | ||||||||||
| Liabilities and Equity | |||||||||||||||||||||||
| Current liabilities | $ | — | $ | 320 | $ | 38,336 | $ | 237 | $ | — | $ | 38,893 | |||||||||||
| Long-term debt, net of deferred financing costs | 68,063 | 104,560 | 127,728 | — | — | 300,351 | |||||||||||||||||
| Deferred revenues | — | 30,321 | 738,184 | 98,128 | — | 866,633 | |||||||||||||||||
| Perpetual care trust corpus | — | — | — | 333,780 | — | 333,780 | |||||||||||||||||
| Other long-term liabilities | — | — | 45,802 | 11,200 | — | 57,002 | |||||||||||||||||
| Due to affiliates | — | — | 172,623 | 581,427 | (754,050 | ) | — | ||||||||||||||||
| Total liabilities | 68,063 | 135,201 | 1,122,673 | 1,024,772 | (754,050 | ) | 1,596,659 | ||||||||||||||||
| Partners’ capital | 190,354 | 59,749 | 213,221 | (29,088 | ) | (243,882 | ) | 190,354 | |||||||||||||||
| Total liabilities and partners’ capital | $ | 258,417 | $ | 194,950 | $ | 1,335,894 | $ | 995,684 | $ | (997,932 | ) | $ | 1,787,013 | ||||||||||
| Subsidiary | Guarantor | Non-Guarantor | ||||||||||||||||||||||
| Three months ended September 30, 2016 | Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Total revenues | $ | — | $ | 2,198 | $ | 68,936 | $ | 11,858 | $ | (4,456 | ) | $ | 78,536 | |||||||||||
Total cost and expenses | — | (3,069 | ) | (70,790 | ) | (14,507 | ) | 4,456 | (83,910 | ) | ||||||||||||||
Other income (loss) | — | — | (506 | ) | — | — | (506 | ) | ||||||||||||||||
Net loss from equity investment in subsidiaries | (10,286 | ) | (8,418 | ) | — | — | 18,704 | — | ||||||||||||||||
Interest expense | (1,358 | ) | (2,087 | ) | (2,296 | ) | (193 | ) | — | (5,934 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income (loss) before income taxes | (11,644 | ) | (11,376 | ) | (4,656 | ) | (2,842 | ) | 18,704 | (11,814 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income tax benefit (expense) | — | — | 170 | — | — | 170 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income (loss) | $ | (11,644 | ) | $ | (11,376 | ) | $ | (4,486 | ) | $ | (2,842 | ) | $ | 18,704 | $ | (11,644 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Subsidiary | Guarantor | Non-Guarantor | ||||||||||||||||||||||
| Three months ended September 30, 2015 | Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Total revenues | $ | — | $ | 1,333 | $ | 71,344 | $ | 12,628 | $ | (3,537 | ) | $ | 81,768 | |||||||||||
Total cost and expenses | — | (2,883 | ) | (65,285 | ) | (12,909 | ) | 3,537 | (77,540 | ) | ||||||||||||||
Other income (loss) | — | — | (1,460 | ) | — | — | (1,460 | ) | ||||||||||||||||
Net loss from equity investment in subsidiaries | (1,900 | ) | (1,877 | ) | — | — | 3,777 | — | ||||||||||||||||
Interest expense | (1,358 | ) | (2,087 | ) | (2,041 | ) | (183 | ) | — | (5,669 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income (loss) before income taxes | (3,258 | ) | (5,514 | ) | 2,558 | (464 | ) | 3,777 | (2,901 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income tax benefit (expense) | — | — | (357 | ) | — | — | (357 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income (loss) | $ | (3,258 | ) | $ | (5,514 | ) | $ | 2,201 | $ | (464 | ) | $ | 3,777 | $ | (3,258 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Subsidiary | Guarantor | Non-Guarantor | ||||||||||||||||||||||
| Nine months ended September 30, 2016 | Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Total revenues | $ | — | $ | 5,084 | $ | 199,637 | $ | 38,214 | $ | (9,188 | ) | $ | 233,747 | |||||||||||
Total cost and expenses | — | (8,161 | ) | (204,438 | ) | (38,506 | ) | 9,188 | (241,917 | ) | ||||||||||||||
Other income (loss) | — | — | (1,579 | ) | — | — | (1,579 | ) | ||||||||||||||||
Net loss from equity investment in subsidiaries | (23,695 | ) | (24,873 | ) | — | — | 48,568 | — | ||||||||||||||||
Interest expense | (4,075 | ) | (6,261 | ) | (6,516 | ) | (579 | ) | — | (17,431 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income (loss) before income taxes | (27,770 | ) | (34,211 | ) | (12,896 | ) | (871 | ) | 48,568 | (27,180 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income tax benefit (expense) | — | — | (590 | ) | — | — | (590 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income (loss) | $ | (27,770 | ) | $ | (34,211 | ) | $ | (13,486 | ) | $ | (871 | ) | $ | 48,568 | $ | (27,770 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| Subsidiary | Guarantor | Non-Guarantor | ||||||||||||||||||||||
| Nine months ended September 30, 2015 | Parent | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | ||||||||||||||||||
Total revenues | $ | — | $ | 4,118 | $ | 206,289 | $ | 36,298 | $ | (9,931 | ) | $ | 236,774 | |||||||||||
Total cost and expenses | — | (8,159 | ) | (198,399 | ) | (37,526 | ) | 9,931 | (234,153 | ) | ||||||||||||||
Other income (loss) | — | — | (1,460 | ) | — | — | (1,460 | ) | ||||||||||||||||
Net loss from equity investment in subsidiaries | (12,337 | ) | (13,262 | ) | — | — | 25,599 | — | ||||||||||||||||
Interest expense | (4,075 | ) | (6,261 | ) | (6,026 | ) | (540 | ) | — | (16,902 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income (loss) before income taxes | (16,412 | ) | (23,564 | ) | 404 | (1,768 | ) | 25,599 | (15,741 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Income tax benefit (expense) | — | — | (671 | ) | — | — | (671 | ) | ||||||||||||||||
| �� |
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net income (loss) | $ | (16,412 | ) | $ | (23,564 | ) | $ | (267 | ) | $ | (1,768 | ) | $ | 25,599 | $ | (16,412 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Net cash provided by (used in) operating activities Cash Flows From Investing Activities: Cash paid for acquisitions and capital expenditures Payments to affiliates Net cash used in investing activities Cash Flows From Financing Activities: Cash distributions Payments from affiliates Net borrowings and repayments of debt Proceeds from issuance of common units Other financing activities Net cash provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents - Beginning of period Cash and cash equivalents - End of period Net cash provided by (used in) operating activities Cash Flows From Investing Activities: Cash paid for acquisitions and capital expenditures Payments to affiliates Net cash used in investing activities Cash Flows From Financing Activities: Cash distributions Payments to affiliates Net borrowings and repayments of debt Proceeds from issuance of common units Other financing activities Net cash provided by (used in) financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents - Beginning of period Cash and cash equivalents - End of period Subsidiary Guarantor Non-Guarantor Nine months ended September 30, 2016 Parent Issuer Subsidiaries Subsidiaries Eliminations Consolidated $ 2,624 $ 86 $ 27,172 $ 1,565 $ (12,960 ) $ 18,487 — (86 ) (15,819 ) (2,404 ) — (18,309 ) (9,097 ) — — — 9,097 — (9,097 ) (86 ) (15,819 ) (2,404 ) 9,097 (18,309 ) (68,062 ) — — — — (68,062 ) — — (3,863 ) — 3,863 — — — 168 — — 168 74,535 — — — — 74,535 — — (6,362 ) — — (6,362 ) 6,473 — (10,057 ) — 3,863 279 — — 1,296 (839 ) — 457 — — 11,869 3,284 — 15,153 $ — $ — $ 13,165 $ 2,445 $ — $ 15,610 Subsidiary Guarantor Non-Guarantor Nine months ended September 30, 2015 Parent Issuer Subsidiaries Subsidiaries Eliminations Consolidated $ 36,297 $ 225 $ 18,725 $ 3,416 $ (46,633 ) $ 12,030 — (225 ) (21,385 ) (2,523 ) — (24,133 ) (47,479 ) — — — 47,479 — (47,479 ) (225 ) (21,385 ) (2,523 ) 47,479 (24,133 ) (56,689 ) — — — — (56,689 ) — — 846 — (846 ) — — — 2,378 — — 2,378 67,871 — — — — 67,871 — — (66 ) — — (66 ) 11,182 — 3,158 — (846 ) 13,494 — — 498 893 — 1,391 — — 7,059 3,342 — 10,401 $ — $ — $ 7,557 $ 4,235 $ — $ 11,792
(in thousands)
| Three Months Ended March 31, 2017 | Parent | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||
| Total revenues | $ | — | $ | 2,045 | $ | 68,642 | $ | 14,942 | $ | (2,683 | ) | $ | 82,946 | ||||||||||
| Total costs and expenses | — | (3,404 | ) | (69,482 | ) | (13,792 | ) | 2,683 | (83,995 | ) | |||||||||||||
| Net loss from equity investment in subsidiaries | (7,203 | ) | (8,214 | ) | — | — | 15,417 | — | |||||||||||||||
| Interest expense | (1,358 | ) | (2,087 | ) | (3,036 | ) | (225 | ) | — | (6,706 | ) | ||||||||||||
| Net income (loss) before income taxes | (8,561 | ) | (11,660 | ) | (3,876 | ) | 925 | 15,417 | (7,755 | ) | |||||||||||||
| Income tax benefit (expense) | — | — | (806 | ) | — | — | (806 | ) | |||||||||||||||
| Net income (loss) | $ | (8,561 | ) | $ | (11,660 | ) | $ | (4,682 | ) | $ | 925 | $ | 15,417 | $ | (8,561 | ) | |||||||
| Three Months Ended March 31, 2016 (As restated, see A) | Parent | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||
| B | B | ||||||||||||||||||||||
| Total revenues | $ | — | $ | 1,269 | $ | 64,346 | $ | 14,921 | $ | (2,364 | ) | $ | 78,172 | ||||||||||
| Total costs and expenses | — | (2,526 | ) | (65,023 | ) | (12,448 | ) | 2,364 | (77,633 | ) | |||||||||||||
| Other income (loss) | — | — | (882 | ) | — | — | (882 | ) | |||||||||||||||
| Net loss from equity investment in subsidiaries | (5,035 | ) | (6,252 | ) | — | — | 11,287 | — | |||||||||||||||
| Interest expense | (1,358 | ) | (2,087 | ) | (2,154 | ) | (191 | ) | — | (5,790 | ) | ||||||||||||
| Net income (loss) before income taxes | (6,393 | ) | (9,596 | ) | (3,713 | ) | 2,282 | 11,287 | (6,133 | ) | |||||||||||||
| Income tax benefit (expense) | — | — | (260 | ) | — | — | (260 | ) | |||||||||||||||
| Net income (loss) | $ | (6,393 | ) | $ | (9,596 | ) | $ | (3,973 | ) | $ | 2,282 | $ | 11,287 | $ | (6,393 | ) | |||||||
| A. | See Note 1 for a summary of those accounting adjustments and the impact on the unaudited condensed consolidated financial statements for the three months ended March 31, 2016. |
| B. | The Partnership incorrectly presented the accounts of certain cemeteries owned by other entities but which we operate under long-term lease, operating or management agreements, as guarantor subsidiaries instead of non-guarantor subsidiaries. The adjustments to correctly present these cemeteries as non-guarantor subsidiaries resulted in a $1.0 million increase in non-guarantor revenues and a $0.8 million increase in non-guarantor costs and expenses and corresponding reductions to guarantor revenues and costs and expenses. |
| Three Months Ended March 31, 2017 | Parent | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||
| Net cash provided by (used in) operating activities | $ | 11,887 | $ | 11 | $ | 15,826 | $ | (41 | ) | $ | (15,332 | ) | $ | 12,351 | |||||||||
| Cash Flows From Investing Activities: | |||||||||||||||||||||||
| Cash paid for acquisitions and capital expenditures | — | (11 | ) | (1,293 | ) | (192 | ) | — | (1,496 | ) | |||||||||||||
| Net cash used in investing activities | — | (11 | ) | (1,293 | ) | (192 | ) | — | (1,496 | ) | |||||||||||||
| Cash Flows From Financing Activities: | |||||||||||||||||||||||
| Cash distributions | (11,887 | ) | — | — | — | — | (11,887 | ) | |||||||||||||||
| Payments to affiliates | — | — | (15,332 | ) | — | 15,332 | — | ||||||||||||||||
| Net borrowings and repayments of debt | — | — | 2,928 | — | — | 2,928 | |||||||||||||||||
| Other financing activities | — | — | (743 | ) | — | — | (743 | ) | |||||||||||||||
| Net cash provided by (used in) financing activities | (11,887 | ) | — | (13,147 | ) | — | 15,332 | (9,702 | ) | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents | — | — | 1,386 | (233 | ) | — | 1,153 | ||||||||||||||||
| Cash and cash equivalents - Beginning of period | — | — | 9,145 | 3,425 | — | 12,570 | |||||||||||||||||
| Cash and cash equivalents - End of period | $ | — | $ | — | $ | 10,531 | $ | 3,192 | $ | — | $ | 13,723 | |||||||||||
| Three Months Ended March 31, 2016 (As restated, see A) | Parent | Subsidiary Issuer | Guarantor Subsidiaries | Non-Guarantor Subsidiaries | Eliminations | Consolidated | |||||||||||||||||
| B | B | ||||||||||||||||||||||
| Net cash provided by (used in) operating activities | $ | 2,624 | $ | 5 | $ | 7,950 | $ | 724 | $ | (6,069 | ) | $ | 5,234 | ||||||||||
| Cash Flows From Investing Activities: | |||||||||||||||||||||||
| Cash paid for acquisitions and capital expenditures, net of proceeds from asset sales | — | (5 | ) | (3,774 | ) | (643 | ) | — | (4,422 | ) | |||||||||||||
| Net cash used in investing activities | — | (5 | ) | (3,774 | ) | (643 | ) | — | (4,422 | ) | |||||||||||||
| Cash Flows From Financing Activities: | |||||||||||||||||||||||
| Cash distributions | (21,387 | ) | — | — | — | — | (21,387 | ) | |||||||||||||||
| Payments to affiliates | — | — | (6,069 | ) | — | 6,069 | — | ||||||||||||||||
| Net borrowings and repayments of debt | — | — | 145 | — | — | 145 | |||||||||||||||||
| Proceeds from issuance of common units | 18,763 | — | — | — | — | 18,763 | |||||||||||||||||
| Net cash provided by (used in) financing activities | (2,624 | ) | — | (5,924 | ) | — | 6,069 | (2,479 | ) | ||||||||||||||
| Net increase (decrease) in cash and cash equivalents | — | — | (1,748 | ) | 81 | — | (1,667 | ) | |||||||||||||||
| Cash and cash equivalents - Beginning of period | — | — | 11,809 | 3,344 | — | 15,153 | |||||||||||||||||
| Cash and cash equivalents - End of period | $ | — | $ | — | $ | 10,061 | $ | 3,425 | $ | — | $ | 13,486 | |||||||||||
| A. | See Note 1 for a summary of those accounting adjustments and the impact on the unaudited condensed consolidated financial statements for the three months ended March 31, 2016. |
| B. | The Partnership incorrectly presented the accounts of certain cemeteries owned by other entities but which we operate under long-term lease, operating or management agreements, as guarantor subsidiaries instead of non-guarantor subsidiaries. The adjustments to correctly present these cemeteries as non-guarantor subsidiaries resulted in a $0.2 million decrease in non-guarantor cash provided by operating activities, with a corresponding increase in guarantor cash provided by operating activities. |
| 12. | ISSUANCES OF LIMITED PARTNER UNITS |
On November 19, 2015, the Partnership entered into an equity distribution agreement (“ATM Equity Program”) with a group of banks (the “Agents”) whereby it may sell, from time to time, common units representing limited partner interests having an aggregate offering price of up to $100,000,000. During the three months ended September 30, 2016, the Partnership did not issue common units under the ATM Equity Program. During the nine months ended September 30, 2016, the Partnership issued 903,682 common units under the ATM Equity Program for net proceeds of $23.0 million.
On April 20, 2016, the Partnership completed a follow-on public offering of 2,000,000 common units at a public offering price of $23.65 per unit. Additionally, the underwriters exercised their option to purchase an additional 300,000 common units. The offering resulted in net proceeds, after deducting underwriting discounts and offering expenses, of $51.5 million. The proceeds from the offering were used to pay down outstanding indebtedness under the Credit Facility.
| 13. | SEGMENT INFORMATION |
Cemetery Operations: Revenues Operating costs and expenses Depreciation and amortization Segment income Funeral Homes: Revenues Operating costs and expenses Depreciation and amortization Segment income Reconciliation of segment income to net loss: Cemeteries Funeral homes Total segment income Corporate overhead Corporate depreciation and amortization Other gains (losses), net Interest expense Income tax benefit (expense) Net loss Capital expenditures: Cemeteries Funeral homes Corporate Total capital expenditures Balance sheet information: Assets: Cemetery Operations Funeral Homes Corporate Total assets Goodwill: Cemetery Operations Funeral Homes Total goodwill Three months ended September 30, Nine months ended September 30, 2016 2015 2016 2015 $ 64,544 $ 67,526 $ 188,693 $ 193,778 (57,100 ) (53,906 ) (162,367 ) (160,812 ) (2,058 ) (1,933 ) (6,042 ) (5,743 ) $ 5,386 $ 11,687 $ 20,284 $ 27,223 $ 13,992 $ 14,242 $ 45,054 $ 42,996 (13,825 ) (11,208 ) (40,297 ) (35,507 ) (692 ) (780 ) (2,427 ) (2,381 ) $ (525 ) $ 2,254 $ 2,330 $ 5,108 $ 5,386 $ 11,687 $ 20,284 $ 27,223 (525 ) 2,254 2,330 5,108 4,861 13,941 22,614 32,331 (10,058 ) (9,115 ) (30,106 ) (28,627 ) (177 ) (598 ) (678 ) (1,083 ) (506 ) (1,460 ) (1,579 ) (1,460 ) (5,934 ) (5,669 ) (17,431 ) (16,902 ) 170 (357 ) (590 ) (671 ) $ (11,644 ) $ (3,258 ) $ (27,770 ) $ (16,412 ) $ 1,696 $ 3,225 $ 6,328 $ 9,918 305 79 800 461 150 479 2,527 654 $ 2,151 $ 3,783 $ 9,655 $ 11,033 September 30, 2016 December 31, 2015 $ 1,568,829 $ 1,481,926 200,073 190,443 25,237 21,988 $ 1,794,139 $ 1,694,357 $ 25,320 $ 25,320 45,252 44,531 $ 70,572 $ 69,851
| Three Months Ended March 31, | |||||||
| STATEMENT OF OPERATIONS DATA: | 2017 | 2016 | |||||
(As restated - see Note 1) | |||||||
| Cemetery Operations: | |||||||
| Revenues | $ | 65,527 | $ | 61,823 | |||
| Operating costs and expenses | (56,632 | ) | (50,513 | ) | |||
| Depreciation and amortization | (2,261 | ) | (1,970 | ) | |||
| Segment income | $ | 6,634 | $ | 9,340 | |||
| Funeral Home Operations: | |||||||
| Revenues | $ | 17,419 | $ | 16,349 | |||
| Operating costs and expenses | (12,804 | ) | (13,744 | ) | |||
| Depreciation and amortization | (806 | ) | (877 | ) | |||
| Segment income | $ | 3,809 | $ | 1,728 | |||
| Reconciliation of segment income to net loss: | |||||||
| Cemetery Operations | $ | 6,634 | $ | 9,340 | |||
| Funeral Home Operations | 3,809 | 1,728 | |||||
| Total segment income | 10,443 | 11,068 | |||||
| Corporate overhead | (11,104 | ) | (10,311 | ) | |||
| Corporate depreciation and amortization | (388 | ) | (218 | ) | |||
| Other gains (losses), net | — | (882 | ) | ||||
| Interest expense | (6,706 | ) | (5,790 | ) | |||
| Income tax benefit (expense) | (806 | ) | (260 | ) | |||
| Net loss | $ | (8,561 | ) | $ | (6,393 | ) | |
| CASH FLOW DATA: | |||||||
| Capital expenditures: | |||||||
| Cemetery Operations | $ | 1,309 | $ | 1,941 | |||
| Funeral Home Operations | 47 | 451 | |||||
| Corporate | 140 | 2,168 | |||||
| Total capital expenditures | $ | 1,496 | $ | 4,560 | |||
| BALANCE SHEET DATA | March 31, 2017 | December 31, 2016 | |||||
| Assets: | |||||||
| Cemetery Operations | $ | 1,596,167 | $ | 1,573,494 | |||
| Funeral Home Operations | 200,127 | 198,200 | |||||
| Corporate | 14,976 | 15,319 | |||||
| Total assets | $ | 1,811,270 | $ | 1,787,013 | |||
| Goodwill: | |||||||
| Cemetery Operations | $ | 24,862 | $ | 24,862 | |||
| Funeral Home Operations | 45,574 | 45,574 | |||||
| Total goodwill | $ | 70,436 | $ | 70,436 | |||
| 14. | SUPPLEMENTAL CONDENSED CONSOLIDATED CASH FLOW INFORMATION |
| Three Months Ended March 31, | |||||||
| 2017 | 2016 | ||||||
| Pre-need/at-need contract originations (sales on credit) | $ | (26,911 | ) | $ | (26,220 | ) | |
| Cash receipts from sales on credit (post-origination) | 25,627 | 22,275 | |||||
| Changes in Accounts receivable, net of allowance | $ | (1,284 | ) | $ | (3,945 | ) | |
| Deferrals: | |||||||
| Cash receipts from customer deposits at origination, net of refunds | $ | 37,342 | $ | 35,950 | |||
| Withdrawals of realized income from merchandise trusts during the period | 3,608 | 3,130 | |||||
| Pre-need/at-need contract originations (sales on credit) | 26,911 | 26,220 | |||||
| Undistributed merchandise trust investment earnings, net | 3,310 | 3,488 | |||||
| Recognition: | |||||||
| Merchandise trust investment income, net withdrawn as of end of period | (1,900 | ) | (2,022 | ) | |||
| Recognized maturities of customer contracts collected as of end of period | (46,179 | ) | (42,079 | ) | |||
| Recognized maturities of customer contracts uncollected as of end of period | (10,290 | ) | (8,976 | ) | |||
| Changes in Deferred revenues | $ | 12,802 | $ | 15,711 | |||
| 15. | SUBSEQUENT EVENTS |
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
As discussed in the Explanatory Note to this Form 10-Q and Note 1 to the Partnership’s consolidated financial statements included in Item 1 of this Form 10-Q, such financial statements reflect the Restatement of the Partnership’s consolidated financial statements as of December 31, 2015 and for the three and nine months ended September 30, 2015.
Unless the context otherwise requires, references to “we,” “us,” “our,” “StoneMor,” the “Company,” or the “Partnership” are to StoneMor Partners L.P. and its subsidiaries.
We believe the assumptions underlying the condensed consolidated financial statements are reasonable.
FINANCIAL PRESENTATION
SUBSEQUENT EVENTS
On October 27, 2016, we announced a quarterly cash distribution of $0.33 per common unit pertaining to the results for the third quarter of 2016. The distribution is scheduledservices required to be paid November 14, 2016 to common unit holders of record as of the close of business on November 7, 2016. A part of or all of this quarterly cash distribution may be deemed to be a return of capital for our limited partners if such quarterly cash distribution, when combined with all other cash distributions made during the calendar year, exceeds the partner’s share of taxable income for the corresponding period, depending upon the individual limited partner’s specific tax position. Because the Partnership’s general and limited partner interests have cumulative net losses as of the end of the period, the distribution represented a return of capital to those interestsmaintained in accordance with US GAAP.
REVENUE RECOGNITION
Cemetery Operations
trust by state law. Our cemetery revenues are principally derived from sales of interment rights, merchandise and services, and our funeral home revenues are principally derived from sales of caskets and related items and funeral home services including family consultation, the removal and preparation of remains and the use of funeral home facilities for visitation and prayer services. These sales occur both at the time of death, which we refer to as at-need, and prior to the time of death, which we refer to as pre-need. Pre-need sales are typically sold on an installment plan. At-need cemetery sales and pre-need merchandise and services sales are recognized as revenue when the merchandise is delivered or the service is performed. For pre-need sales of interment rights, we recognize the associated revenue when we have collected 10% of the sales price from the customer. We consider our cemetery merchandise delivered to our customer when it is either installed or ready to be installed and delivered to a third-party storage facility until it is needed, with ownership transferred to the customer at that time. Pre-need sales that have not yet been recognized as revenue are recognized as deferred revenues, a liability on our consolidated balance sheet. Direct costs associated with pre-need sales that are recognized as deferred revenues, such as sales commissions, are recognized as deferred selling and obtaining costs, an asset on our consolidated balance sheet, until the merchandise is delivered or the services are performed.
Funeral Home Operations
Our funeral home revenues are principally derived from at-need and pre-need sales of merchandise and services. Pre-need sales are typically sold on an installment plan. Both at-need and pre-need funeral home sales are recognized as revenue when the merchandise is delivered or the service is performed. Pre-need sales that have not yet been recognized as revenue are recognized as deferred revenues, a liability on our consolidated balance sheet. Direct costs associated with pre-need sales that are recognized as deferred revenues, such as sales commissions, are recognized as deferred selling and obtaining costs, an asset on our consolidated balance sheet, until the merchandise is delivered or the services are performed. Our funeral home operations also include revenues related to the sale of term and final expense whole life insurance. As an agent for these insurance sales, weon agency basis. We earn and recognize commission-related revenue streams from the sales of these policies.
Trust Investment Income
Sales
Capital Resources sections below.
March 31, 2016
March 31, 2017.
(As Restated)
| Three months ended September 30, | ||||||||
| 2016 | 2015 | |||||||
Merchandise | $ | 36,314 | $ | 37,570 | ||||
Services | 13,928 | 14,945 | ||||||
Interest income | 2,197 | 2,233 | ||||||
Investment and other | 12,105 | 12,778 | ||||||
|
|
|
| |||||
Total revenue | 64,544 | 67,526 | ||||||
|
|
|
| |||||
Cost of goods sold | 11,721 | 12,195 | ||||||
Cemetery expense | 19,926 | 18,245 | ||||||
Selling expense | 15,931 | 14,647 | ||||||
General and administrative expense | 9,522 | 8,819 | ||||||
Depreciation and amortization | 2,058 | 1,933 | ||||||
|
|
|
| |||||
Total cost and expenses | 59,158 | 55,839 | ||||||
|
|
|
| |||||
Operating income | $ | 5,386 | $ | 11,687 | ||||
|
|
|
| |||||
| Three Months Ended March 31, | |||||||
| 2017 | 2016 | ||||||
| (As restated) | |||||||
| Merchandise | $ | 38,003 | $ | 33,690 | |||
| Services | 14,949 | 13,719 | |||||
| Interest income | 2,228 | 2,229 | |||||
| Investment and other | 10,347 | 12,185 | |||||
| Total revenues | 65,527 | 61,823 | |||||
| Cost of goods sold | 13,519 | 10,720 | |||||
| Cemetery expense | 16,697 | 15,856 | |||||
| Selling expense | 16,459 | 14,733 | |||||
| General and administrative expense | 9,957 | 9,204 | |||||
| Depreciation and amortization | 2,261 | 1,970 | |||||
| Total costs and expenses | 58,893 | 52,483 | |||||
| Segment income | $ | 6,634 | $ | 9,340 | |||
Cost of goods sold was $11.7$10.7 million for the three months ended September 30, 2016,March 31, 2016. This increase was primarily attributable to a decrease$1.4 million increase in costs associated with serviced marker orders and a $0.9 million increase in amortization of $0.5 million from $12.2cemetery property, an expense associated with recognizing sales of cemetery interment spaces.
Cemetery expenses were $19.9from $15.9 million for the three months ended September 30, 2016, an increase of $1.7 million from $18.2 million for the three months ended September 30, 2015.March 31, 2016. This increase was principally due to a $1.7$0.4 million increase in overhead costs and a $0.3 million increase in repair and maintenance expenses.
expenses, both of which were largely due to costs associated with properties acquired in August 2016.
cemetery merchandise revenues.
| Three Months Ended March 31, | |||||||
| 2017 | 2016 | ||||||
| (As restated) | |||||||
| Merchandise | $ | 7,836 | $ | 7,482 | |||
| Services | 9,583 | 8,867 | |||||
| Total revenues | 17,419 | 16,349 | |||||
| Merchandise | 1,760 | 2,149 | |||||
| Services | 5,699 | 6,455 | |||||
| Depreciation and amortization | 806 | 877 | |||||
| Other | 5,345 | 5,140 | |||||
| Total expenses | 13,610 | 14,621 | |||||
| Segment income | $ | 3,809 | $ | 1,728 | |||
fees and recruiting costs resulting from the delayed filing of our 10-K and various changes in our senior management.
Funeral Home Operations
Overview
At September 30, 2016, we owned and operated 105 funeral homes. These properties are located in 18 states and Puerto Rico. Revenues from funeral home operations accounted for approximately 17.8% of our total revenues during three months ended September 30, 2016.
Operating Results
The following table presents operating results for our funeral home operations for the respective reporting periods (in thousands):
| Three months ended September 30, | ||||||||
| 2016 | 2015 | |||||||
Merchandise | $ | 6,656 | $ | 6,588 | ||||
Services | 7,336 | 7,654 | ||||||
|
|
|
| |||||
Total revenue | 13,992 | 14,242 | ||||||
|
|
|
| |||||
Merchandise | 2,322 | 1,002 | ||||||
Service | 6,070 | 5,432 | ||||||
Depreciation and amortization | 692 | 780 | ||||||
Other | 5,433 | 4,774 | ||||||
|
|
|
| |||||
Total expenses | 14,517 | 11,988 | ||||||
|
|
|
| |||||
Operating income | $ | (525 | ) | $ | 2,254 | |||
|
|
|
| |||||
Funeral home merchandise revenues were consistent with the prior period with $6.7 million for the three months ended September 30, 2016, an increase of $0.1 million from $6.6 million for the three months ended September 30, 2015. Funeral home service revenues were $7.3 million for the three months ended September 30, 2016, a decrease of $0.4 million from $7.7 million for the three months ended September 30, 2015. The decrease is principally due to a decrease in cremations and other related service revenues.
Funeral home expenses were $14.5 million for the three months ended September 30, 2016, an increase of $2.5 million from $12.0 million for the three months ended September 30, 2015. This increase principally consists of a $1.3 million increase in merchandise costs, primarily driven by higher merchandise procurement costs, $0.6 million increase in personnel costs and a $0.1 million increase in costs associated with insurance-related sales with the remaining increase in other funeral home related expenses.
Corporate Overhead
Corporate overhead was $10.1 million for the three months ended September 30, 2016, an increase of $1.0 million from $9.1 million for the three months ended September 30, 2015. This increase was principally due to a $0.7 million increase in professional fees and a $0.3 million increase in acquisition-related costs. Acquisition costs may vary from period to period depending on the amount of acquisition activity that takes place.
Corporate Depreciation and Amortization
Depreciation and amortization expense was consistent with the prior period, with $0.2 million for the three months ended September 30, 2016, a decrease of $0.4 million from $0.6 millionMarch 31, 2016.
Other GainsMarch 31, 2017. For the three months ended March 31, 2016, other gains and Losses
During the third quarterlosses included a cease-use expense of 2016, we obtained additional information related to one of the acquisitions$0.5 million that closed during 2015. The change resulted in an adjustment to the gain on acquisition recognized during the year ended December 31, 2015, increasing the gain by $0.2 million via a gain recognized in the current period in accordance with GAAP. In addition, there was a $2.7 million gain from our most recent acquisition as of September 30, 2016. We sold two funeral home buildings and related property during the period resulting in a loss on sale of $0.2 million. Also, we incurred a charge related to deferred financing costs related to our prior line of credit in the amount of $1.2 million and a loss of $2.0 million related to the revision of our cease-use expenserecorded due to the relocation of corporate headquarters to Trevose, PennsylvaniaPennsylvania. We also sold a funeral home building and other realignment charges.
related real property for a net loss of $0.4 million in the three months ended March 31, 2016.
three months ended March 31, 2016.
Nine Months Ended September 30, 2016 Compared to Nine Months Ended September 30, 2015
Cemetery Operations
Operating Results
Revenues from cemetery operations accounted for approximately 80.7% of our total revenues during the nine months ended September 30, 2016. The following table presents operating results for our cemetery operations for the respective reporting periods (in thousands):
Merchandise Services Interest income Investment and other Total revenue Cost of goods sold Cemetery expense Selling expense General and administrative expense Depreciation and amortization Total cost and expenses Operating income Nine months ended September 30, 2016 2015 $ 106,937 $ 105,972 41,067 44,869 6,678 6,617 34,011 36,320 188,693 193,778 34,483 35,357 53,267 53,789 46,898 44,326 27,719 27,340 6,042 5,743 168,409 166,555 $ 20,284 $ 27,223
Cemetery merchandise revenues were $106.9 million for the nine months ended September 30, 2016, an increase of $0.9 million from $106.0 million for the nine months ended September 30, 2015. The increase is principally due to a $1.8 million increase in recognized sales of markers and mausoleums, partially offset by decreases in recognized sales of vaults, crypts and niches of approximately $0.9 million. Cemetery services revenues were $41.1 million for the nine months ended September 30, 2016, a decrease of $3.8 million from $44.9 million for the nine months ended September 30, 2015. This decrease was primarily due to a reduction in opening and closing service revenues. Investment and other income was $34.0 million for the nine months ended September 30, 2016, a decrease of $2.3 million from $36.3 million for the nine months ended September 30, 2015. This decrease was primarily attributable to merchandise trust income, which was $5.5 million for the nine months ended September 30, 2016, representing a $5.1 million decrease from $10.6 million earned during the nine months ended September 30, 2015. This change is primarily attributable to a decrease in net income earned by the trust and a decrease in the recognition of deferred merchandise trust revenue resulting from impairment of trust assets. A portion of deferred trust income is recognized as underlying merchandise is delivered or underlying services are performed. This decrease in merchandise trust income was partially offset by perpetual care trust income, which was $11.9 million for the nine months ended September 30, 2016, representing a $0.4 million increase from $11.5 million earned during the nine months ended September 30, 2015. The remaining $2.4 million change in investment and other income is attributed to a net increase in permanent record fee revenue, travel care insurance fee revenue, and other miscellaneous cemetery revenue. Interest income remained consistent for both the nine months ended September 30, 2016 and 2015.
Cost of goods sold was $34.5 million for the nine months ended September 30, 2016, a decrease of $0.9 million from $35.4 million for the nine months ended September 30, 2015. This decrease consisted principally of a $1.7 million decrease in merchandise costs partially offset by a $0.8 million increase in perpetual care costs.
Cemetery expenses were $53.3 million for the nine months ended September 30, 2016, a decrease of $0.5 million from $53.8 million for the nine months ended September 30, 2015. This decrease was principally due to a $2.0 million decrease in personnel costs partially offset by a $1.5 million increase in repair and maintenance expenses.
Selling expenses were $46.9 million for the nine months ended September 30, 2016, an increase of $2.6 million from $44.3 million for the nine months ended September 30, 2015. This increase was primarily due to a $1.3 million increase in personnel costs and a $1.3 million increase in advertising and marketing costs.
General and administrative expenses were $27.7 million for the nine months ended September 30, 2016, an increase of $0.4 million from $27.3 million for the nine months ended September 30, 2015. This increase was primarily due to a $0.9 million increase in professional fees and a $0.7 million increase in overhead expenses partially offset by a $1.2 million decrease in personnel costs.
Depreciation and amortization expense was relatively consistent with the prior period, with $6.0 million for the nine months ended September 30, 2016 compared to $5.7 million for the nine months ended September 30, 2015.
Funeral Home Operations
Operating Results
Revenues from funeral home operations accounted for approximately 19.3% of our total revenues during nine months ended September 30, 2016. The following table presents operating results for our funeral home operations for the respective reporting periods (in thousands):
| Nine months ended September 30, | ||||||||
| 2016 | 2015 | |||||||
Merchandise | $ | 20,681 | $ | 19,913 | ||||
Services | 24,373 | 23,083 | ||||||
|
|
|
| |||||
Total revenue | 45,054 | 42,996 | ||||||
|
|
|
| |||||
Merchandise | 6,306 | 5,444 | ||||||
Service | 18,672 | 16,728 | ||||||
Depreciation and amortization | 2,427 | 2,381 | ||||||
Other | 15,319 | 13,335 | ||||||
|
|
|
| |||||
Total expenses | 42,724 | 37,888 | ||||||
|
|
|
| |||||
Operating income | $ | 2,330 | $ | 5,108 | ||||
|
|
|
| |||||
Funeral home merchandise revenues were $20.7 million for the nine months ended September 30, 2016, an increase of $0.8 million from $19.9 million for the nine months ended September 30, 2015. Funeral home service revenues were $24.4 million for the nine months ended September 30, 2016, an increase of $1.3 million from $23.1 million for the nine months ended September 30, 2015. The overall increase was largely due to the locations acquired in the last twelve months, specifically with increases in casket and at-need service revenue.
Funeral home expenses were $42.7 million for the nine months ended September 30, 2016, an increase of $4.8 million from $37.9 million for the nine months ended September 30, 2015. This increase principally consists of a $2.0 million increase in personnel costs, $2.0 million increase in other costs and $0.8 million in merchandise costs, all primarily due to the locations acquired in the last twelve months and an increase in costs associated with insurance and merchandise related sales.
Corporate Overhead
Corporate overhead was $30.1 million for the nine months ended September 30, 2016, an increase of $1.5 million from $28.6 million for the nine months ended September 30, 2015. This increase was principally due to a $2.9 million increase in acquisition-related costs, partially offset by a $1.4 million decrease in personnel costs. Acquisition costs may vary from period to period depending on the amount of acquisition activity that takes place.
Corporate Depreciation and Amortization
Corporate depreciation and amortization expense was consistent with the prior period, with $0.7 million for the nine months ended September 30, 2016 compared to $1.1 million for nine months ended September 30, 2015.
Other Gains and Losses
We obtained additional information related to two of the acquisitions that closed during 2015. The changes resulted in an adjustment to the gain on acquisition recognized during the year ended December 31, 2015, reducing the gain by $0.6 million via a loss recognized in the current period in accordance with GAAP. In addition, there was a $2.7 million gain from our most recent acquisition as of September 30, 2016. We sold a warehouse and three funeral home businesses during the year for a net gain of $0.1 million. Also, we wrote off deferred financing related to our prior line of credit in the amount of $1.2 million and incurred a loss of $2.4 million related to our cease-use expense due to the relocation of corporate headquarters to Trevose, Pennsylvania and other realignment charges.
Interest Expense
Interest expense was $17.4 million for the nine months ended September 30, 2016, an increase of $0.5 million from $16.9 million for the nine months ended September 30, 2015. This increase was principally due to an increase in interest expense on amounts outstanding under the credit facility, which had higher average amounts outstanding during the current period than the comparable period.
Income Tax Expense
Income tax expense was $0.6 million for the nine months ended September 30, 2016, as compared to $0.7 million for the nine months ended September 30, 2015. Our effective tax rate differs from our statutory tax rate primarily because our legal entity structure includes different tax filing entities, including a significant number of partnerships that are not subject to paying tax.
| Three Months Ended March 31, | |||||
| 2017 | 2016 | ||||
| Interments performed | 14,430 | 13,633 | |||
| Interment rights sold (1) | |||||
| Lots | 6,856 | 6,606 | |||
| Mausoleum crypts (including pre-construction) | 489 | 470 | |||
| Niches | 441 | 352 | |||
| Net interment rights sold (1) | 7,786 | 7,428 | |||
| Number of pre-need cemetery contracts written | 11,435 | 11,376 | |||
| Number of at-need cemetery contracts written | 15,285 | 14,655 | |||
| Number of cemetery contracts written | 26,720 | 26,031 | |||
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
Interments performed | 13,127 | 12,878 | 40,161 | 41,514 | ||||||||||||
Interment rights sold (1) | ||||||||||||||||
Lots | 8,469 | 8,086 | 23,710 | 23,980 | ||||||||||||
Mausoleum crypts (including pre-construction) | 419 | 446 | 1,471 | 1,779 | ||||||||||||
Niches | 426 | 441 | 1,181 | 1,285 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net interment rights sold (1) | 9,314 | 8,973 | 26,362 | 27,044 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Number of cemetery contracts written | 27,404 | 28,890 | 81,800 | 86,516 | ||||||||||||
Number of pre-need cemetery contracts written | 12,795 | 13,799 | 36,955 | 39,847 | ||||||||||||
Number of at-need cemetery contracts written | 14,609 | 15,091 | 44,845 | 46,669 | ||||||||||||
| (1) | Net of cancellations. Sales of double-depth burial lots are counted as two sales. |
The Partnership continually monitors its financial position, liquidity and credit facility financial covenants to determine the likelihood of shortfalls in future reporting periods.
March 31, 2016 (As Restated)
of proceeds from asset sales.
borrowings.
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2016 | 2015 | 2016 | 2015 | |||||||||||||
Maintenance capital expenditures | $ | 1,129 | $ | 1,632 | $ | 5,422 | $ | 5,011 | ||||||||
Expansion capital expenditures | 1,022 | 2,151 | 4,233 | 6,022 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total capital expenditures | $ | 2,151 | $ | 3,783 | $ | 9,655 | $ | 11,033 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Issuance of Common Units
During the nine months ended September 30, 2016, we issued 903,682 common units under the ATM program for net proceeds of $23.0 million.
On April 20, 2016, we completed a follow-on public offering of 2,000,000 common units at a public offering price of $23.65 per unit. Additionally, the underwriters exercised their option to purchase an additional 300,000 common units. The offering resulted in net proceeds, after deducting underwriting discounts and offering expenses, of $51.5 million. The proceeds from the offering were used to pay down outstanding indebtedness under the Credit Facility.
| Three Months Ended March 31, | |||||||
| 2017 | 2016 | ||||||
| Maintenance capital expenditures | $ | 829 | $ | 3,004 | |||
| Expansion capital expenditures | 667 | 1,556 | |||||
| Total capital expenditures | $ | 1,496 | $ | 4,560 | |||
The New Agreements replaced
The Credit Agreement provides for up to $210.0$200.0 million initial aggregate amount of Revolving Commitments, which may be increased, from time to time, in minimum increments of $5.0 million so long as the aggregate amount of such increases does not exceed $100.0 million. The Operating Company may also request the issuance of Letters of Credit for up to $15.0 million in the aggregate, of which there were $6.5$8.1 million outstanding at September 30, 2016March 31, 2017 and none$6.8 million outstanding at December 31, 2015.2016. The Maturity Date under the Amended Credit Agreement is the earlier of (i) August 4, 2021 and (ii) the date that is six months prior to the earliest scheduled maturity date of any outstanding Permitted Unsecured Indebtedness (at present, such date is December 1, 2020, which is six months prior to June 1, 2021 maturity date of outstanding 7.875% senior notes).
based on a preliminary calculation of its Consolidated Leverage Ratio.
On
2017.
Year 2016 2017 2018 2019 and thereafter Percentage 105.906 % 103.938 % 101.969 % 100.000 %
| Year | Percentage |
| 2017 | 103.938% |
| 2018 | 101.969% |
| 2019 and thereafter | 100.000% |
Distributions
Lease Years 1-5 Lease Years 6-20 Lease Years 21-25 Lease Years 26-35 Lease Years 36-60 2024. $140.6 million of borrowings outstanding under our Amended Credit Facility, which generally bears interest at a variable rate. Holding all other variables constant, a hypothetical 1% change in variable interest rates would change our consolidated interest expense for the to the Archdiocese aggregate fixed rent of $36.0 million in the following amounts: (May 28, 2014 - May 31, 2019) None (June 1, 2019 - May 31, 2034) $1,000,000 per Lease Year (June 1, 2034 - May 31, 2039) $1,200,000 per Lease Year (June 1, 2039 - May 31, 2049) $1,500,000 per Lease Year (June 1, 2049 - May 31, 2074) None shall bean aggregate of $6.0 million, is deferred. If, prior to May 31, 2024, the Archdiocese terminates the agreements pursuant to aits right to do so in its sole discretion during lease year 11 termination or we terminate the agreements as a result of a default by the Archdiocese, priorwe are entitled to the end of lease year 11,retain the deferred fixed rent shall be retained by us.rent. If the agreements are not terminated, the deferred fixed rent shallwill become due and payable on or before June 30, days after the end of lease year 11.truststrust assets and the allocation of purchase price to the fair value of assets acquired. A discussion of our significant accounting policies we have adopted and followed in the preparation of our condensed consolidated financial statements was included in our Annual Report onForm 10-K/A10-K for the year ended December 31, 2015,2016, and we summarize our significant accounting policies and any updates within our consolidated financial statements included in Note 1 under “Item 1” of this Form 10-Q.September 30, 2016,March 31, 2017, the fair value of fixed-income securities in our merchandise trusts and perpetual care trusts represented 1.4%1.1% and 3.8%2.1%, respectively, of the fair value of total trust assets. The aggregate of the quoted fair value of these fixed-income securities was $7.1$5.8 million and $12.8$7.2 million in the merchandise trusts and perpetual care trusts, respectively, as of September 30, 2016.March 31, 2017. Holding all other variables constant, a hypothetical 1% change in variable interest rates on these fixed-income securities would change the fair market value of the assets in our merchandise trusts and perpetual care trusts each by approximately $0.1 million, based on discounted expected future cash flows. If these securities are held to maturity, no change in fair market value will be realized. Our money market and other short-term investments subject to market risk consist primarily of certain investments in our merchandise trusts and perpetual care trusts. As of September 30, 2016,March 31, 2017, the fair value of money market and short-term investments in our merchandise trusts and perpetual care trusts represented 5.9%5.1% and 4.9%2.8%, respectively, of the fair value of total trust assets. The aggregate of the quoted fair value of these money market and short-term investments was $29.9$26.9 million and $16.5$9.7 million in the merchandise trusts and perpetual care trusts, respectively, as of September 30, 2016.March 31, 2017. Holding all other variables constant, a hypothetical 1% change in variable interest rates on these money market and short-term investments would change the fair market value of the assets in our merchandise trusts and perpetual care trusts by approximately $0.3 million and $0.2$0.1 million, respectively, based on discounted expected future cash flows.September 30, 2016,March 31, 2017, the fair value of marketable equity securities in our merchandise trusts and perpetual care trusts represented 7.9%7.6% and 6.8%7.7%, respectively, of the fair value of total trust assets. The aggregate of the quoted fair market value of these marketable equity securities was $39.7$40.0 million and $22.8$26.3 million in our merchandise trusts and perpetual care trusts, respectively, as of September 30, 2016,March 31, 2017, based on final quoted sales prices. Holding all other variables constant, a hypothetical 10% change in average market pricesvariable interest rates of the equity securities would change the fair market value of the assets in our merchandise trusts and perpetual care trusts each by approximately $4.0 million and $2.3$2.6 million, respectively.based on discounted expected future cash flows. As of September 30, 2016,March 31, 2017, the fair value of marketable closed and open-ended mutual funds in our merchandise trusts represented 74.3%68.1% of the fair value of total trust assets, 64.0%65.7% of which pertained to fixed-income mutual funds. As of September 30, 2016,March 31, 2017, the fair value of marketable closed and open-ended mutual funds in our perpetual care trusts represented 49.0%49.2% of total trust assets, 79.5%87.5% of which pertained to fixed-income mutual funds. The aggregate of the quoted fair market value of these closed and open-ended mutual funds was $374.8$356.8 million and $164.1$168.0 million, respectively, in the merchandise trusts and perpetual care trusts as of September 30, 2016,March 31, 2017, based on final quoted sales prices, of which $240.0$234.3 million and $130.5$147.0 million, respectively, pertained to fixed-income mutual funds. Holding all other variables constant, a hypothetical 10% change in the average market prices of the closed and open-ended mutual funds would change the fair market value of the assets in our merchandise trusts and perpetual care trusts by approximately $37.5$35.7 million and $16.4$16.8 million, respectively.respectively, based on discounted expected future cash flows.September 30, 2016,March 31, 2017, the fair value of other investment funds in our merchandise trusts and perpetual care trusts represented 8.4%14.4% and 35.4%38.1%, respectively, of the fair value of total trust assets. The fair market value of the holdings in these funds was $42.3$75.5 million and $118.7$130.1 million in our merchandise trusts and perpetual care trusts, respectively, as of September 30, 2016,March 31, 2017, based on net asset value quotes. Holding all other variables constant, a hypothetical 10% change in the average net asset value quotes would change the fair market value of the assets inmerchandise trusts and perpetual care trusts by approximately $4.2 million and $11.9 million, respectively.DEBT INSTRUMENTSOurAmended Credit Facility bearsbear interest at a floating rate, based on LIBOR, which is adjusted quarterly. This subjects us to increases in interest expense resulting from movements in interest rates. As of September 30, 2016,March 31, 2017, we had $151.1nine-monththree-month period ending September 30, 2016March 31, 2017 by approximately $1.1$0.4 million.theour reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our Disclosure Committee and management, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b) as to whether they provide reasonable assurance that information we are required to disclose in our reportsfiled under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’sSEC rules and forms and that such information is accumulated and communicated to our management, including ourthe Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.thatsuch evaluation, the Chief Executive Officerour CEO and Chief Financial OfficerCFO concluded that as a result of management’s identification of the material weaknesses described below, our failures related to disclosure controls and procedures were not yet remediatedeffective due to the material weaknesses in internal control over financial reporting described below.September 30, 2016.As discussedDecember 31, 2016 in our Annual Report on Form 10-K related to the Explanatory Notefollowing:a. control environment, control activities and monitoring; b. establishment and review of certain accounting policies; c. reconciliation of certain general ledger accounts to supporting details; d. accurate and timely relief of deferred revenues and corresponding recognition of income statement impacts; and e. review of financial statement disclosures. Note 1,General,other post-closing procedures performed, management believes that the financial statements included in this Form 10-Q,report fairly present in all material respects our financial position, results of operations, capital position, and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States (“GAAP”).determinedcontinue to restate our previously issued financial statements to correct for errors associated with the recognition and presentation of certain revenues, expenses, assets, and liabilities, both recognized and deferred, the allocation of income and lossmake improvements to our partners,internal control over financial reporting related to the material weaknesses described above, material weaknesses continue to exist, and errors inwe believe that the processing of transactions. As a result ofmaterial weaknesses referenced above accurately reflect the restatement, management identified deficiencies in our processes and procedures that constitute material weaknesses in our internal control over financial reporting as follows:A.The Partnership did not design and maintain effective controls over establishing accounting policies nor did they periodically review them for appropriate application in the financial statements.B.The Partnership did not design and maintain effective controls over the review of certain recorded balances within “Deferred cemetery revenues, net,” “Merchandise liability,” “Investment and other” revenues, “Cemetery property,” and “Partners’ Capital”.C.The Partnership did not design and maintain effective controls over the reconciliation of amounts recorded in the general ledger to relevant supporting details.In connectionof March 31, 2017. Management, with oversight from our Audit Committee, has identified and begun executing actions we believe will remediate the restatementmaterial weaknesses described above once fully implemented and operating for a sufficient period of our consolidated financial statements, management re-evaluatedtime, and we will continue to devote significant time and attention, including internal and external resources, to these remedial efforts.our internal control over financial reporting. Based on that re-assessment, management concluded thatthe new controls subsequent to implementation and consider the material weaknesses remediated after the applicable remedial controls operate effectively for a sufficient period of time.was not effective as of December 31, 2015, duewith respect to the material weaknesses described above.Management is committed to thethat had been identified at that time, and those remediation of the material weaknesses,efforts as well as the continued improvement of our internal control over financial reporting (“ICFR”). We are in the process of implementing measuresother remediation efforts relating to remediate the underlying causes of the control deficiencies that gave rise to the material weaknesses, which primarily include:1.Reevaluating and establishing, on a periodic basis, accounting policies and the appropriate application thereof;2.Enhancing control procedures related to the review of certain recorded balances affected by the material weaknesses to ensure the appropriateness of such balances; and3.Enhancing the control procedures related to the reconciliation of amounts recorded in the general ledger to relevant supporting details.We believe these measures will remediate the material weaknesses noted. While we have completed some of these measures as of the date of this report, we have not completed and tested all of the planned corrective processes, enhancements, procedures and related evaluation that we believe are necessary to determine whether the material weaknesses have been fully remediated. We believe the corrective actions and controls need to be in operation for a sufficient period of time for management to conclude that the control environment is operating effectively and has been adequately tested through audit procedures. Therefore, the material weaknesses have not been fully remediated as of the date of this report. As we continue to evaluate and work to remediate the control deficiencies that gave rise to the material weaknesses we may determine that additional measures or time are requiredidentified subsequent to addressMarch 31, 2017 remain ongoing. Other than as described above and in greater detail in our Annual Report on Form 10-K for the control deficiencies or that we need to modify or otherwise adjust the remediation measures described above. We will continue to assess the effectiveness of our remediation efforts in connection with our evaluation of our ICFR.CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTINGExcept as set fourth above,fiscal year ended December 31, 2016, there have beenwere no changes in our internal control over financial reporting that occurredas defined in Rules 13a-15(d) and 15d-15(d) of the Exchange Act during our most recent fiscal quarterthe three months ended September 30, 2016March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.PartOther InformationOTHER INFORMATIONITEM 1A. RISK FACTORS Item 6.ExhibitsExhibits are listed in the Exhibit Index, which is incorporated herein by reference.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 thereunto duly authorized.ITEM 6. STONEMOR PARTNERS L.P.EXHIBITSBy: StoneMor GP LLCits general partnerNovember 9, 2016 Description 10.1 /s/ Lawrence MillerLawrence MillerChief Executive Officer, PresidentNovember 9, 2016 /s/ Sean P. McGrathSean P. McGrathChief Financial Officer (Principal Financial Officer)EXHIBIT INDEXExhibitNumberDescription 4.1Supplemental Indenture No. 2,Limited Waiver to Credit Agreement, dated as of September 1, 2016,March 15, 2017, by and among StoneMor WisconsinOperating LLC, StoneMor Wisconsin Subsidiary LLC, subsidiaries of StoneMor Partners L.P., and Cornerstone Family Services of West Virginia Subsidiary, Inc., the Guarantors under the Indenture, and Wilmington Trust,other Borrowers party thereto, Capital One, National Association, as trustee. 10.1 †Key Employee Unit Agreement underAdministrative Agent, and the StoneMor Partners L.P. 2014 Long-Term Incentive Plan, entered into as of September 28, 2016, by and between StoneMor GP LLC and Sean McGrath. 10.2 †Key Employee Unit Agreement under the StoneMor Partners L.P. 2014 Long-Term Incentive Plan, entered into as of July 5, 2016, by and between StoneMor GP LLC and Lawrence Miller. 10.3 †Key Employee Unit Agreement under the StoneMor Partners L.P. 2014 Long-Term Incentive Plan, entered into as of July 5, 2016, by and between StoneMor GP LLC and Austin So. 10.4 †Employment Separation Agreement, effective as of August 5, 2016, by and between StoneMor GP LLC and David MeyersRequired Lenders party thereto (incorporated by reference to Exhibit 10.1 of Registrant’s Current Report on Form 8-K filed on August 10, 2016)March 16, 2017). 10.510.2 CreditRegistrant’s Current Report on Form 8-K filed on March 3, 2017). 10.6 Guaranty10.3 Lawrence Miller (incorporated by reference to Exhibit 10.1 of Registrant’s Current Report on Form 8-K filed on March 28, 2017). 10.4 31.1 31.2 Officer and Senior Vice President. 32.1 32.2 101 Attached as Exhibit 101 to this report are the following Interactive Data Files formatted in XBRL (eXtensible Business Reporting Language): (i) Unaudited Condensed Consolidated Balance Sheets as of September 30, 2016,March 31, 2017, and December 31, 2015;2016; (ii) Unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2016March 31, 2017 and 2015;2016; (iii) Unaudited Condensed Consolidated Statement of Partners’ Capital (Deficit); (iv) Unaudited Condensed Consolidated Statement of Cash Flows for the three and nine months ended September 30, 2016March 31, 2017 and 2015;2016; and (v) Notes to the Unaudited Condensed Consolidated Financial Statements. Users of this data are advised that the information contained in the XBRL documents is unaudited and these are not the official publicly filed financial statements of StoneMor Partners L.P.†Management contract, compensatory plan or arrangementSTONEMOR PARTNERS L.P. By: StoneMor GP LLC its general partner Date: October 27, 2017 R. Paul Grady President, Chief Executive Officer and Member of the Board of Directors (Principal Executive Officer) Date: October 27, 2017 Mark L. Miller Chief Financial Officer and Senior Vice President (Principal Financial Officer) 51