UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~March 31,~~September 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission File Number: 001-32270

STONEMOR PARTNERS L.P.

(Exact name of registrant as specified in its charter)

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)

(Registrant’s telephone number, including area code): (215) 826-2800

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common units	STON	NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐

~~Securities registered pursuant to Section 12(b) of the Act:~~


~~Title of each class~~	~~Trading Symbol(s)~~	~~Name of each exchange on which registered~~
~~Common units~~	~~STON~~	~~NYSE~~

The number of the registrant’s outstanding common units at ~~May~~November 6, 2019 was ~~38,288,857.~~42,636,311.

FORM 10-Q OF STONEMOR PARTNERS L.P.

TABLE OF CONTENTS


PART I	Financial Information

Item 1.	Financial Statements (Unaudited)	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3642

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4857

Item 4.	Controls and Procedures	4958


PART II	Other Information

Item 1.	Legal Proceedings	5160

Item 1A.	Risk Factors	5160

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5165

Item 3.	Defaults upon Senior Securities	5265

Item 4.	Mine Safety Disclosures	5265

Item 5.	Other Information	5265

Item 6.	Exhibits	5266

	Signatures	5368

Table of Contents

PART 1 – FINANCIAL INFORMATION

ITEM 1.

~~ITEM 1.~~ FINANCIAL STATEMENTS

STONEMOR PARTNERS L.P.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)

	March 31,			December 31,			September 30,			December 31,
	2019			2018			2019			2018
Assets
Current assets:
Cash and cash equivalents	$	24,448		$	18,147
Cash and cash equivalents, excluding restricted cash							$	43,515		$	18,147
Restricted cash								20,580			—
Accounts receivable, net of allowance		58,398			57,928			61,470			57,928
Prepaid expenses		9,398			4,475			5,630			4,475
Assets held for sale		757			757
Other current assets		17,136			17,009			18,148			17,766
Total current assets		110,137			98,316			149,343			98,316

Long-term accounts receivable, net of allowance		83,578			87,148			78,138			87,148
Cemetery property		330,968			330,841			328,612			330,841
Property and equipment, net of accumulated depreciation		112,142			112,716			108,992			112,716
Merchandise trusts, restricted, at fair value		515,065			488,248			519,529			488,248
Perpetual care trusts, restricted, at fair value		344,825			330,562			343,028			330,562
Deferred selling and obtaining costs		112,643			112,660			113,601			112,660
Deferred tax assets		86			86			55			86
Goodwill		24,862			24,862			—			24,862
Intangible assets		59,950			61,421			56,562			61,421
Other assets		33,223			22,241			32,663			22,241
Total assets	$	1,727,479		$	1,669,101		$	1,730,523		$	1,669,101

Liabilities and Partners’ Deficit
Liabilities, Redeemable Convertible Preferred Units and Partners’ Deficit
Current liabilities:
Accounts payable and accrued liabilities	$	57,921		$	59,035		$	64,585		$	59,035
Accrued interest		7,751			1,967			—			1,967
Current portion, long-term debt		953			798			503			798
Total current liabilities		66,625			61,800			65,088			61,800

Long-term debt, net of deferred financing costs		345,933			320,248			362,173			320,248
Deferred revenues		941,040			914,286			943,555			914,286
Deferred tax liabilities		6,675			6,675			11,264			6,675
Perpetual care trust corpus		344,825			330,562			343,028			330,562
Other long-term liabilities		51,216			42,108			51,940			42,108
Total liabilities		1,756,314			1,675,679			1,777,048			1,675,679
Commitments and contingencies

Redeemable convertible preferred units:
Series A								57,500			—
Total redeemable convertible preferred units								57,500			—
Partners’ deficit :
General partner interest		(4,242	)		(4,008	)		(5,026	)		(4,008	)
Common limited partners’ interest		(24,593	)		(2,570	)		(98,999	)		(2,570	)
Total partners’ deficit		(28,835	)		(6,578	)		(104,025	)		(6,578	)
Total liabilities and partners’ deficit	$	1,727,479		$	1,669,101
Total liabilities, redeemable convertible preferred units and partners’ deficit							$	1,730,523		$	1,669,101

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

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STONEMOR PARTNERS L.P.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(in thousands, except per unit data)

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018			2019			2018
Revenues:
Cemetery:
Interments	$	15,944		$	19,625		$	15,605		$	17,716		$	52,544		$	58,130
Merchandise		16,541			16,627			18,014			18,023			51,870			51,766
Services		15,967			16,491			17,068			16,419			50,400			50,647
Investment and other		9,458			9,500			10,063			9,247			29,474			30,785
Funeral home:
Merchandise		6,275			7,429			5,572			5,581			17,920			19,532
Services		7,284			8,273			6,829			6,199			20,907			21,841
Total revenues		71,469			77,945			73,151			73,185			223,115			232,701
Costs and Expenses:
Cost of goods sold		9,743			13,435			10,677			12,866			31,263			39,387
Cemetery expense		17,247			17,414			18,362			19,407			57,245			57,828
Selling expense		14,733			16,256			14,609			14,251			44,839			47,673
General and administrative expense		11,439			10,958			11,033			10,916			33,430			32,037
Corporate overhead		13,413			11,827			11,595			12,876			38,145			39,868
Depreciation and amortization		2,757			3,045			2,647			2,737			8,120			8,853
Funeral home expenses:
Merchandise		2,317			2,478			1,896			1,341			5,227			4,927
Services		5,553			5,518			5,351			5,493			16,363			16,593
Other		3,630			5,040			3,422			3,314			11,046			12,315
Total costs and expenses		80,832			85,971			79,592			83,201			245,678			259,481

Other losses		—			(5,205	)
Other gains (losses), net								(129	)		702			(3,558	)		(4,503	)
Operating loss		(9,363	)		(13,231	)		(6,570	)		(9,314	)		(26,121	)		(31,283	)
Interest expense		(13,171	)		(7,113	)		(12,765	)		(7,638	)		(35,282	)		(22,858	)
Loss on debt extinguishment								—			—			(8,478	)		—
Loss on impairment of goodwill								(24,862	)		—			(24,862	)		—
Loss from operations before income taxes		(22,534	)		(20,344	)		(44,197	)		(16,952	)		(94,743	)		(54,141	)
Income tax benefit		—			2,421
Income tax benefit (expense)								1,545			(273	)		(4,841	)		1,976
Net loss	$	(22,534	)	$	(17,923	)	$	(42,652	)	$	(17,225	)	$	(99,584	)	$	(52,165	)
General partner’s interest	$	(234	)	$	(187	)	$	(426	)	$	(179	)	$	(1,018	)	$	(543	)
Limited partners’ interest	$	(22,300	)	$	(17,736	)	$	(42,226	)	$	(17,046	)	$	(98,566	)	$	(51,622	)
Net loss per limited partner unit (basic and diluted)	$	(0.59	)	$	(0.47	)	$	(1.09	)	$	(0.45	)	$	(2.56	)	$	(1.36	)
Weighted average number of limited partners’ units outstanding (basic and diluted)		38,031			37,959			38,916			37,959			38,438			37,959

~~See~~

Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

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STONEMOR PARTNERS L.P.

CONDENSED CONSOLIDATED STATEMENTS OF PREFERRED UNITS ANDPARTNERS’ ~~DEFICIT~~EARNINGS (DEFICIT) (UNAUDITED)

(dollars in thousands, except units)

												Redeemable Convertible Preferred Unit				Partners’ Deficit
	Partners’ Deficit											Series A
	Outstanding Common Units		Common Limited Partners			General Partner			Total			Number of Outstanding Preferred Units		Value of Outstanding Preferred Units		Outstanding Common Units			Common Limited Partners			General Partner			Total
Three Months Ended March 31, 2019
December 31, 2018		37,958,645	$	(2,570	)	$	(4,008	)	$	(6,578	)		—	$	—		37,958,645		$	(2,570	)	$	(4,008	)	$	(6,578	)
Common unit awards under incentive plans		301,826		277			—			277			—		—		301,826			277			—			277
Net loss		—		(22,300	)		(234	)		(22,534	)		—		—		—			(22,300	)		(234	)		(22,534	)
March 31, 2019		38,260,471	$	(24,593	)	$	(4,242	)	$	(28,835	)		—	$	—		38,260,471		$	(24,593	)	$	(4,242	)	$	(28,835	)
												.
Three Months Ended March 31, 2018
December 31, 2017		37,957,936	$	94,655		$	(2,959	)	$	91,696
Cumulative effect of accounting change		—		(27,805	)		(292	)		(28,097	)
January 1, 2018		37,957,936	$	66,850		$	(3,251	)	$	63,599
Three Months Ended June 30, 2019
March 31, 2019													—	$	—		38,260,471		$	(24,593	)	$	(4,242	)	$	(28,835	)
Common unit awards under incentive plans		709		158			—			158			—		—		1,273,376			2,287			2			2,289
Issuance of Series A convertible preferred units, net of issuance													52,083,333		57,500		—			—			—			57,500
Net loss		—		(17,736	)		(187	)		(17,923	)		—		—		—			(34,041	)		(357	)		(34,398	)
March 31, 2018		37,958,645	$	49,272		$	(3,438	)	$	45,834
June 30, 2019													52,083,333	$	57,500		39,533,847		$	(56,347	)	$	(4,597	)	$	(3,444	)
												.
Three Months Ended September 30, 2019
June 30, 2019													52,083,333	$	57,500		39,533,847		$	(56,347	)	$	(4,597	)	$	(3,444	)
Common unit awards under incentive plans													—		—		31,983			250			(2	)		248
Units repurchased and retired related to unit-based compensation													—		—		(376	)		(677	)		—			(677	)
Net loss													—		—		—			(42,225	)		(427	)		(42,652	)
September 30, 2019													52,083,333	$	57,500		39,565,454		$	(98,999	)	$	(5,026	)	$	(46,525	)

Table of Contents

	Redeemable Convertible Preferred Unit				Partners’ Earnings (Deficit)
	Series A
	Number of Outstanding Preferred Units		Value of Outstanding Preferred Units		Outstanding Common Units		Common Limited Partners			General Partner			Total
Three Months Ended March 31, 2018
December 31, 2017		—	$	—		37,957,936	$	94,655		$	(2,959	)	$	91,696
Cumulative effect of accounting change		—		—		—		(27,805	)		(292	)		(28,097	)
January 1, 2018		—	$	—		37,957,936	$	66,850		$	(3,251	)	$	63,599
Common unit awards under incentive plans		—		—		709		158			—			158
Net loss		—		—		—		(17,736	)		(187	)		(17,923	)
March 31, 2018		—	$	—		37,958,645	$	49,272		$	(3,438	)	$	45,834

Three Months Ended June 30, 2018
March 31, 2018		—	$	—		37,958,645	$	49,272		$	(3,438	)	$	45,834
Common unit awards under incentive plans		—		—		—		1,755			—			1,755
Net loss		—		—		—		(16,840	)		(177	)		(17,017	)
June 30, 2018		—	$	—		37,958,645	$	34,187		$	(3,615	)	$	30,572

Three Months Ended September 30, 2018
June 30, 2018		—	$	—		37,958,645	$	34,187		$	(3,615	)	$	30,572
Common unit awards under incentive plans		—		—		—		113			—			113
Net loss		—		—		—		(17,046	)		(179	)		(17,225	)
September 30, 2018		—		—		37,958,645	$	17,254		$	(3,794	)	$	13,460

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

Table of Contents

STONEMOR PARTNERS L.P.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)

	Three Months Ended March 31,						Nine Months Ended September 30,
	2019			2018			2019			2018
Cash Flows From Operating Activities:
Net loss	$	(22,534	)	$	(17,923	)	$	(99,584	)	$	(52,165	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Cost of lots sold		1,522			1,830			5,339			5,850
Depreciation and amortization		2,757			3,045			8,120			8,853
Provision for bad debt		2,042			600			5,380			3,776
Non-cash compensation expense		277			158			2,814			2,026
Loss on debt extinguishment								8,478			—
Loss on impairment of goodwill								24,862			—
Non-cash interest expense		4,429			1,167			12,435			4,576
Other losses, net		—			5,205
Non-cash impairment charge and other losses, net								3,558			4,503
Changes in assets and liabilities:
Accounts receivable, net of allowance		(1,965	)		(3,668	)		(14,305	)		5,574
Merchandise trust fund		(5,990	)		(3,818	)		(11,137	)		(6,917	)
Other assets		(4,382	)		(3,055	)		(1,339	)		(2,047	)
Deferred selling and obtaining costs		17			(1,866	)		(1,850	)		(4,780	)
Deferred revenues		8,584			15,791			23,860			40,361
Deferred taxes, net		—			(2,596	)		4,620			(2,545	)
Payables and other liabilities		2,140			11,280			1,994			12,346
Net cash (used in) provided by operating activities		(13,103	)		6,150			(26,755	)		19,411
Cash Flows From Investing Activities:
Cash paid for capital expenditures		(1,903	)		(4,369	)		(5,743	)		(10,164	)
Cash paid for acquisitions		—			(833	)		—			(1,667	)
Proceeds from divestitures								1,250			—
Proceeds from asset sales								—			954
Net cash used in investing activities		(1,903	)		(5,202	)		(4,493	)		(10,877	)
Cash Flows From Financing Activities:
Proceeds from issuance of redeemable convertible preferred units, net								57,500			—
Proceeds from borrowings		24,562			14,380			406,087			23,880
Repayments of debt		(253	)		(11,530	)		(366,644	)		(27,924	)
Principal payment on finance leases		(366	)		—			(1,098	)		—
Cost of financing activities		(2,636	)		(207	)		(17,972	)		(3,268	)
Net cash provided by financing activities		21,307			2,643
Units repurchased and retired related to unit-based compensation								(677	)		—
Net cash provided by (used in) financing activities								77,196			(7,312	)
Net increase in cash, cash equivalents and restricted cash		6,301			3,591			45,948			1,222
Cash, cash equivalents and restricted cash—Beginning of period		18,147			6,821			18,147			6,821
Cash, cash equivalents and restricted cash—End of period	$	24,448		$	10,412		$	64,095		$	8,043
Supplemental disclosure of cash flow information:
Cash paid during the period for interest	$	2,842		$	2,478		$	24,444		$	15,809
Cash paid during the period for income taxes		41			39			1,470			1,517
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	932		$	—		$	2,759		$	—
Operating cash flows from finance leases		116			—			370			—
Financing cash flows from finance leases								1,098			—
Non-cash investing and financing activities:
Acquisition of assets by financing	$	1,314		$	278		$	2,234		$	1,620
Classification of assets as held for sale		—			283			—			543

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

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STONEMOR PARTNERS L.P.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

GENERAL

Nature of Operations

StoneMor Partners L.P. (the "Partnership") is a provider of funeral and cemetery products and services in the death care industry in the United States. As of ~~March 31,~~September 30, 2019, the Partnership operated ~~322~~321 cemeteries in 27 states and Puerto Rico, of which 291 were owned and 3130 were operated under lease, management or operating agreements. The Partnership also owned and operated 9089 funeral homes, including 42 located on the grounds of cemetery properties that the Partnership owns, in 17 states and Puerto Rico.

The Partnership’s cemeteries provide cemetery property interment rights, such as burial lots, lawn and mausoleum crypts, and cremation niches. Cemetery merchandise is comprised of burial vaults, caskets, grave markers and memorials and cemetery services, which include the installation of this merchandise and other service items. The Partnership sells these products and services both at the time of death, which is referred to as at-need, and prior to the time of death, which is referred to as pre-need.

The Partnership’s funeral home services include family consultation, the removal and preparation of remains, insurance products and the use of funeral home facilities for visitation and memorial services.

Basis of Presentation

The accompanying condensed consolidated financial statements, which are unaudited ~~except for the balance sheet at December 31, 2018, which has been derived from audited financial statements,~~ have been prepared in accordance with the requirements of the Quarterly Report on 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 Annual Reports on 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~~The balance sheet at December 31, 2018 has been derived from the audited consolidated financial statement as of December 31, 2018, as presented in the Partnership’s Amendment No. 1 to Annual Report on Form 10-K for the year ended December 31, 2018, which was filed with Securities and Exchange Commission ("SEC") on August 28, 2019 (the “Amended Annual Report”). The interim unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the related notes thereto presented in the ~~Partnership’s~~Amended Annual ~~Report on Form 10-K for the year ended December 31, 2018.~~Report. The results of operations for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 may not necessarily be indicative of the results of operations for the full year ended December 31, 2019.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of each of the Partnership’s 100% owned subsidiaries. These statements also include the accounts of the merchandise and perpetual care trusts in which the Partnership has a variable interest and is the primary beneficiary. The Partnership operates 3130 cemeteries under long-term ~~lease,~~leases, operating oragreements and management agreements. The operations of 16 of these managed cemeteries have been ~~consolidated.~~consolidated. On May 10, 2019, the Partnership terminated one of the management agreements and recorded a $2.1 million loss upon the termination, which is included in Other losses, net in the accompanying unaudited condensed consolidated statements of operations for the nine months ended September 30, 2019.

The Partnership operates 1514 cemeteries under long-term leases and other agreements that do not qualify as acquisitions for accounting purposes. As a result, the Partnership did not consolidate all of the existing assets and liabilities related to these cemeteries. The Partnership has consolidated the existing assets and liabilities of the merchandise and perpetual care trusts associated with these cemeteries as variable interest entities, since the Partnership controls and receives the benefits and absorbs any losses from operating these trusts. Under the long-term leases, and other agreements associated with these properties, which are subject to certain termination provisions, the Partnership is the exclusive operator of these cemeteries and earns revenues related to sales of merchandise, services and interment rights and incurs expenses related to such sales, including the maintenance and upkeep of these cemeteries. Upon termination of these agreements, the Partnership will retain all of the benefits and related contractual obligations incurred from sales generated during the agreement period. The Partnership has also recognized the existing customer contract-related performance obligations that it assumed as part of these agreements.

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Recapitalization Transactions

Series A Preferred Offering

On June 27, 2019, funds and accounts affiliated with Axar Capital, a related party and the largest holder of the Partnership’s outstanding common units of record, and certain other investors (individually a “Purchaser” and collectively the “Purchasers”) and the Partnership entered into the Series A Preferred Unit Purchase Agreement (the “Series A Purchase Agreement” and the transactions contemplated thereby, the “Preferred Offering”) pursuant to which the Partnership sold to the Purchasers an aggregate of 52,083,333 of the Partnership’s Series A Preferred Units (the “preferred units”) representing limited partner interests in the Partnership with certain rights, preferences and privileges as are set forth in the Partnership’s Third Amended and Restated Agreement of Limited Partnership dated as of June 27, 2019 (the “Third Amended Partnership Agreement”). The purchase price for the preferred units sold pursuant to the Series A Purchase Agreement was $1.1040 per preferred unit, reflecting an 8% discount to the liquidation preference of each preferred unit, for an aggregate purchase price of $57.5 million.

Senior Secured Notes

Concurrently with the closing of the Preferred Offering, discussed above, the Partnership completed a private placement of $385.0 million of 9.875%/11.500% Senior Secured PIK Toggle Notes due 2024 (the “Senior Secured Notes”) of the Partnership to certain financial institutions (the “Notes Offering,” and collectively with the Preferred Offering, the “Recapitalization Transactions”) pursuant to the terms of an indenture dated June 27, 2019 by and among the Partnership, Cornerstone Family Services of West Virginia Subsidiary, Inc. (“Cornerstone” and, collectively with the Partnership, the “Issuers”), certain direct and indirect subsidiaries of the Partnership (the “Guarantors”), the initial purchasers party thereto and Wilmington Trust, National Association, as trustee (the “Indenture”). The net proceeds of the Recapitalization Transactions were used to fully repay the then-outstanding senior notes due in June 2021, retire the Partnership’s revolving credit facility due in May 2020 and pay the associated transaction expenses, with the remaining balance reserved for general corporate purposes. The Partnership is to pay quarterly interest at either a fixed rate of 9.875% per annum in cash or, at their periodic option through January 30, 2022, a fixed rate of 7.50% per annum in cash plus a fixed rate of 4.00% per annum payable in kind. The Senior Secured Notes will require cash interest payments at 9.875% for all interest periods after January 30, 2022.

Proposed ~~Merger and Reorganization~~

C-Corporation Conversion

On September 27, 2018, ~~the Partnership,~~ StoneMor GP LLC (the “general partner”) and the Partnership publicly announced a ~~Delaware~~plan to convert from a master limited ~~liability company and~~partnership structure to a more traditional C-Corporation structure. Accordingly, the general partner ofand the Partnership ~~(“GP”~~entered into a Merger and Reorganization Agreement (as amended to date, the “Merger Agreement”), with StoneMor GP Holdings ~~LLC, a Delaware limited liability company and the sole member of GP (“GP Holdings”),~~ and Hans Merger Sub, LLC, a Delaware limited liability company and wholly-owned subsidiary of ~~GP (“Merger Sub”), entered into~~the general partner, providing for a ~~Merger~~series of transactions and ~~Reorganization Agreement (the “Merger Agreement”) pursuant to which, among other things, GP will convert from a Delaware limited liability company~~resulting in (i) the general partner converting into a Delaware corporation to be named “StoneMor Inc.” and (ii) Hans Merger Sub merging with and into the Partnership (the “Merger”) with the Partnership surviving and with StoneMor Inc. ~~(the “Company” when referring~~as its sole general partner, in each case, pursuant to StoneMor Inc. subsequent to such conversion), the Partnership will become a wholly owned subsidiary of the Company and the unitholders of the Partnership will become stockholders in the Company. The Merger remains subject to unitholder approval.

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~~Per~~ the terms of the Merger Agreement ~~each Party shall bear its own expenses, costs and fees (including attorneys’, auditors’ and financing fees, if any) in connection with~~(collectively, the ~~preparation and delivery~~“C-Corporation Conversion”). At the consummation of the Merger, Agreement and compliance therewith, whether or not the transactions contemplated by the Merger Agreement are effected. The Partnership has incurred $2.5 million in legal and other expenses for the transactions contemplated by the Merger Agreement through March 31, 2019, of which ~~$2.2 million was incurred through December 31, 2018 and $0.3 million was incurred in the three months ended March 31, 2019.~~

~~January 2019 Restructuring~~

On January 31, 2019, the Partnership announced a restructuring initiative implemented as part of its ongoing organizational review. This restructuring was intended to further integrate, streamline and optimize the Partnership’s operations.

As part of this restructuring, the Partnership undertook certain cost reduction initiatives, including a reduction of approximately 45 positions of its workforce, primarily related to corporate functions in Trevose, a streamlining of general and administrative expenses and an optimization of location spend. The Partnership expects to incur cash charges of $0.6 million of employee separation and other benefit-related costs in connection with the January 2019 restructuring initiative. Substantially all of these cash payments areis anticipated to be ~~made by~~no later than the end of the fourth quarter of 2019, ~~and~~ the ~~Partnership anticipates that substantially all of the actions associated with this restructuring~~general partner will ~~be completed by the end of 2019. Under this restructuring, separation costs are expensed over the requisite service period, if any.~~complete its transition to a new publicly traded Delaware corporation, StoneMor Inc.

Going Concern andUses and Sources of Liquidity

The Partnership’s primary sources of liquidity are cash generated from operations and ~~borrowings under its revolving credit facility.~~the remaining balance of the proceeds from the sale of the Senior Secured Notes. As a master limited partnership (“MLP”), the Partnership's primary cash requirements, in addition to normal operating expenses, are for capital expenditures, net contributions to the merchandise and perpetual care trust funds, debt service and cash distributions. In general, as part of its operating strategy, the Partnership expects to fund:

working capital deficits through available cash, including the remaining balance of the proceeds from the sale of the Senior Secured Notes, cash generated from operations ~~additional borrowings,~~ and ~~sales~~divestitures of ~~underperforming properties;~~non-core assets;

expansion capital expenditures, net contributions to the merchandise and perpetual care trust funds and debt service obligations through available cash, cash generated from operations ~~additional borrowings~~ or asset sales. Amounts contributed to the merchandise trust funds will be withdrawn at the time of the delivery of the product or service sold to which the contribution relates (see "Summary of Significant Accounting Policies" section below regarding revenue recognition), which will reduce the amount of additional borrowings or asset sales needed; and

any cash distributions the Partnership is permitted and determines to pay in accordance with its partnership agreement and maintenance capital expenditures through available cash and cash flows from operating activities.

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While the Partnership relies heavily on its available cash and cash flows from operating activities ~~and borrowings under its credit facility~~ to execute its operational strategy and meet its financial commitments and other short-term financial needs, the Partnership cannot be certain that sufficient capital will be generated through operations or be available to the Partnership to the extent required and on acceptable terms. ~~Moreover, although the Partnership's cash flows from operating activities have been positive, the~~The Partnership has experienced negative financial trends, including use of cash in operating activities, which, when considered in the aggregate, raise substantial doubt about the Partnership’s ability to continue as a going concern. These negative financial trends include:

the Partnership has continued to incur net losses for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and has an accumulated deficit and negative cash flows from operating activities as of ~~March 31,~~September 30, 2019, due to an increased competitive environment, increased expenses due to the proposed ~~conversion of the Partnership to a C-corporation~~C-Corporation Conversion and increases in professional fees and compliance costs; and

a decline in billings coupled with the increase in professional, compliance and consulting expenses tightened the Partnership's liquidity position and increased reliance on long-term financial obligations, which, in turn, eliminated the Partnership's ability to pay ~~distributions;~~

•

the Partnership's failure to comply with certain debt covenants required by the Partnership’s credit facility due to the Partnership's inability to complete a timely filing of its Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, as well as exceeding of the maximum consolidated leverage ratio financial covenant for the quarters ended December 31, 2017 and March 31, 2018, exceeding the maximum consolidated secured net leverage ratio financial covenant for the periods ended June 30, 2018, September 30, 2018 and December 31, 2018 and not being able to achieve the minimum consolidated fixed charge coverage ratio for the periods ended June 30, 2018, September 30,

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~~2018 and December 31, 2018. As further disclosed in the credit facility subsection in Note 9 Long-Term Debt, these failures constituted defaults that the Partnership's lenders agreed to waive; and~~

the provision for ticking fees assessed on the amount of outstanding loans made under the Tranche A Revolving Credit Facility (the “Tranche A Revolving Loans”) and payable to the Tranche A Revolving Lenders (i) in-kind, by increasing the outstanding principal amount of such Lender’s Tranche A Revolving Loans (“PIK”) or (ii) in cash in the following amounts and on the following dates:distributions.

~~3.00% on July 1, 2019, of which (x) 2.00% shall PIK and (y) 1.00% shall be payable in cash, unless Required Lenders agree to PIK;~~

~~1.00% on August 1, 2019, payable in cash, unless the Required Lenders agree to PIK;~~

~~1.00% on September 1, 2019, payable in cash, unless the Required Lenders agree to PIK; and~~

~~1.00% on October 1, 2019, PIK.~~

During 2018 and 2019, the Partnership implemented (and will continue to implement) various actions to improve profitability and cash flows to fund operations. A summary of these actions is as follows:

sold an aggregate of 52,083,333 of the Partnership’s preferred units, representing limited partner interests in the Partnership, for an aggregate purchase price of $57.5 million and completed a private placement of $385.0 million of the Senior Secured Notes. The net proceeds of both transactions were used to fully repay the then-outstanding senior notes due in June 2021 and retire the Partnership’s revolving credit facility due in May 2020;

continue to manage recurring operating expenses and seek to limit non-recurring operating expenses over the next twelve-month period;

the Partnership engaged a financial advisor to advise the Partnership in the arrangement of the refinancing in full of the obligations with respect to the Tranche A Revolving Credit Facility including debt and equity financing vehicles, however, at this time the Partnership has no commitments to obtain any additional funds, and there can be no assurance that such funds will be available on acceptable terms or at all;

~~complete sales of certain assets and businesses to provide supplemental liquidity;~~ and

~~for the reasons disclosed above, the Partnership was not in compliance with certain~~identify and complete sales of ~~its amended credit facility covenants as of December 31, 2017, March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018. These failures constituted defaults that the lenders agreed~~select assets to waive pursuant to the Sixth Amendment and Waiver, the Seventh Amendment and Waiver and the Eighth Amendment and Waiver to the Partnership's credit facility on June 12, 2018, July 13, 2018 and February 4, 2019, respectively, as disclosed in the credit facility subsection in Note 9 Long-Term Debt. Moreover, basedprovide supplemental liquidity.

Based on the Partnership's forecasted operating performance, planned actions to improve profitability, cash flows and projected plans to file financial statements on a timely basis consistent with the debt covenants, the Partnership does not believe it is probable that the Partnership will ~~further~~ breach the covenants under ~~its amended credit facility~~the Indenture for the next twelve-month period. However, there is no certainty that the Partnership's actual operating performance and cash flows will not be substantially different from forecasted results and no certainty the Partnership will not need ~~further~~ amendments to ~~its credit facility~~the Indenture in the ~~future.~~future and such amendments will be granted. Factors that could impact the significant assumptions used by the Partnership in assessing its ability to satisfy its financial covenants include the following:

operating performance not meeting reasonably expected forecasts;

failing to generate profitable sales;

failing to achieve cost reduction targets;

inability to achieve and capitalize on its divestiture strategy;

investments in the Partnership's trust funds experiencing significant declines due to factors outside its control;

~~being unable~~inability to compete successfully with other cemeteries and funeral homes in the Partnership's markets;

the number of deaths in the Partnership's markets declining; and

the mix of funeral and cemetery revenues between burials and cremations.

If the Partnership's planned, implemented and not yet implemented actions are not completed or implemented and cash savings are not realized, ~~and~~or the Partnership fails to improve its operating performance and cash flows or the Partnership is not able to comply with the covenants under ~~its amended credit facility,~~the Indenture, the Partnership may be forced to limit its business activities, limit its ability to implement further modifications to its operations ~~further~~or limit the effectiveness of some actions that are included in its forecasts, amend its ~~credit facility~~Indenture and/or seek other sources of capital, and the Partnership may be unable to continue

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as a going concern. Additionally, a failure to generate additional liquidity could negatively impact the Partnership's access to inventory or services that are important to the operation of the Partnership's business. Given the Partnership's level of cash and cash equivalents, to preserve capital resources and liquidity, the Board of Directors of the General Partner concluded that it was not in the best interest of unitholders to pay distributions to unitholders after the first quarter of 2017. In addition, the ~~Partnership's revolving credit facility~~Indenture effectively prohibits the Partnership from making distributions to unitholders. Any of these events may have a material adverse effect on the Partnership's results of operations and financial condition. The ability of the Partnership to ~~meet its obligations at March 31, 2019, and to~~ continue as a going concern is dependent upon achieving the action plans noted above. The unaudited condensed consolidated financial statements for the

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three and nine months ended ~~March 31,~~September 30, 2019, were prepared on the basis of a going concern, which contemplates that the Partnership will be able to realize assets and discharge liabilities in the normal course of business. Accordingly, they do not give effect to adjustments, if any, that would be necessary should the Partnership be required to liquidate its assets. The ability of the Partnership to meet its obligations at March 31, 2019, and to continue as a going concern is dependent upon the availability of a refinancing in full of the obligations with respect to the Tranche A Revolving Credit Facility, continued ability to manage expenses and increased sales. As such, the unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q do not include any adjustments that might result from the outcome of these uncertainties.

Summary of Significant Accounting Policies

Refer to Note 1 to the Partnership’s audited consolidated financial statements included in Item 8 of its Amended Annual Report ~~on Form 10-K for the year ended December 31, 2018, which was filed with~~ ~~Securities and Exchange Commission ("SEC") on April 3, 2019,~~ for the complete summary of significant accounting policies.

Use of Estimates

The preparation of the Partnership’s unaudited condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions as described in its Amended Annual ~~Report on Form 10-k for the year ended December 31, 2018.~~Report. These estimates and assumptions may affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods. As a result, actual results could differ from those estimates.

Cash and Cash Equivalents

The Partnership considers all highly liquid investments purchased with an original maturity of three months or less from the time they are acquired to be cash equivalents. Cash and Cash Equivalents ~~of $24.4~~was $43.5 million and $18.1 million as of ~~March 31,~~September 30, 2019 and December 31, 2018, ~~respectively, includes $4.5 million and $0, respectively, of restricted cash.~~ respectively.

Restricted Cash

Cash that is restricted from withdrawal or use under the terms of certain contractual agreement is recorded as restricted cash. Restricted cash was $20.6 million as of September 30, 2019, primarily related to cash collateralization of the Partnership’s letters of credit and ~~included~~surety bonds. There was no restricted cash as of December 31, 2018.

Revenues

The Partnership's revenues are derived from contracts with customers through sale and delivery of death care products and services. Primary sources of revenue are derived from (1) cemetery and funeral home operations generated both at the time of death (“at-need”) and prior to the time of death (“pre-need”), which are classified on the unaudited condensed consolidated statements of operations as Interments, Merchandise and Services, (2) investment income, which includes income earned on assets maintained in perpetual care and merchandise trusts related to sales of cemetery and funeral home merchandise and services occurring prior to the time of death that are required to be maintained in the trust by state law and (3) interest earned on pre-need installment contracts. Investment income is presented within Investment and other for Cemetery revenue and Services for Funeral home revenue. Revenue is measured based on the consideration specified in a contract with a customer and is net of any sales incentives and amounts collected on behalf of third parties. Pre-need contracts are price guaranteed, providing for future merchandise and services at prices prevailing when the agreements are signed. The Partnership recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. Sales taxes assessed by a governmental authority are excluded from revenue.

Deferred Revenues

Revenues from the sale of services and merchandise as well as any investment income from the merchandise trusts is deferred until such time that the services are performed or the merchandise is delivered. In addition, for amounts deferred on new contracts and investment income and unrealized gains on our merchandise trusts, deferred revenues include deferred revenues from pre-need sales that were entered into by entities prior to the Partnership’s acquisition of those entities or the assets of those entities. The Partnership provides for a profit margin for these deferred revenues to account for the projected future costs of delivering products and providing services on pre-need contracts that the Partnership acquired through acquisition. These revenues and their associated costs are recognized when the related merchandise is delivered or services are performed and are presented on a gross basis on the unaudited condensed consolidated statements of operations.

Accounts Receivable, Net of Allowance

The Partnership sells pre-need cemetery contracts whereby the customer enters into arrangements for future merchandise and services prior to the time of need. These sales are usually made using interest-bearing installment contracts not to exceed 60 months. The interest income is recorded as revenue when the interest amount is considered realizable and collectible, which

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typically coincides with cash payment. Interest income is not recognized until payments are collected in accordance with the contract. At the time of a pre-need sale, the Partnership records an account receivable in an amount equal to the total contract value less unearned finance income and any cash ~~equivalents.~~deposit paid, net of an estimated allowance for customer cancellations. The Partnership recognizes an allowance for cancellation of these receivables based upon its historical experience, which is recorded as a reduction in accounts receivable and a corresponding offset to deferred revenues. The Partnership recognizes an allowance for cancellation of receivables related to recognized contracts as an offset to revenue. Management evaluates customer receivables for impairment based upon its historical experience, including the age of the receivables and the customers’ payment histories

Leases

The Partnership leases a variety of assets throughout ~~the~~its organization, such as office space, funeral homes, warehouses and equipment. The Partnership has both operating and finance leases. The Partnership’s operating leases primarily include office space, funeral homes and equipment. The Partnership’s finance leases primarily consist of vehicles and certain IT equipment. The Partnership determines whether an arrangement is or contains a lease at the inception of the arrangement based on the facts and circumstances in each contract. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the Partnership recognizes lease expense for these leases on a straight-line basis over the lease term. For ~~leases~~lease agreements with an initial term in excess of 12 months, the Partnership records the lease liability and Right of Use (“ROU”) asset at commencement date based upon the present value of the sum of the remaining minimum rental payments, which exclude executory costs. Certain adjustments to the ROU asset may be required for items such as initial direct costs paid or incentives received.

Certain leases provide the Partnership with the option to renew for additional periods, with renewal terms that can extend the lease term for periods ranging from 1 to 30 years. Where leases contain escalation clauses, rent abatements and/or concessions, the Partnership applies them in the determination of lease expense. The exercise of lease renewal options is at the Partnership’s sole discretion, and the Partnership is only including the renewal option in the lease term when the Partnership can be reasonably certain that the Partnership will exercise the additional options.

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As most of the Partnership’s leases do not provide an implicit rate, the Partnership uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The Partnership evaluates the term of the lease, type of asset and ~~our~~its weighted average cost of capital to determine ~~our~~its incremental borrowing rate used to measure the ROU asset and lease liability.

The Partnership calculates operating lease expense ratably over the lease term plus any reasonably assured renewal periods. ~~We consider~~The Partnership considers reasonably assured renewal options, fixed escalation provisions and residual value guarantees in ~~our~~its calculation. Leasehold improvements are amortized over the shorter of the lease term or asset life, which may include renewal periods where the renewal is reasonably assured, and are included in the determination of straight-line rent expense. The depreciable life of assets and leasehold improvements are generally limited by the expected lease term.

The Partnership’s leases also typically have lease and non-lease components, which are generally accounted for separately and not included in the measurement of the ROU asset and lease liability.

Net Loss per Common Unit

Basic net loss attributable to common limited partners per unit is computed by dividing net loss attributable to common limited partners, which is determined after the deduction of the general partner’s interest, by the weighted average number of common limited partner units outstanding during the period. Net loss attributable to common limited partners is determined by deducting net loss attributable to participating securities, if applicable, and net loss attributable to the general partner’s units. The general partner’s interest in net loss is calculated on a quarterly basis based upon its units 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 loss allocated with respect to the general partner’s and limited partners’ ownership interests.

The Partnership presents net loss per unit under the two-class method for ~~MLPs,~~MLP, which considers whether the incentive distributions of an MLP represent a participating security when considered in the calculation of earnings per unit under the two-class method. The two-class method considers whether the partnership agreement contains any contractual limitations concerning distributions to the incentive distribution rights that would impact the amount of earnings to allocate to the incentive distribution rights for each reporting period. If distributions are contractually limited to the incentive distribution rights’ share of currently designated available cash for distributions, as defined under the partnership agreement, undistributed earnings in excess of available cash should not be allocated to the incentive distribution rights. Under the two-class method, ~~management~~

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management believes the partnership agreement contractually limits cash distributions to available cash; therefore, undistributed earnings in excess of available cash are not allocated to the incentive distribution rights.

The following is a reconciliation of net loss allocated to the common limited partners for purposes of calculating net loss attributable to common limited partners per unit (in thousands):

	Three Months Ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018			2019			2018
Net loss	$	(22,534	)	$	(17,923	)	$	(42,652	)	$	(17,225	)	$	(99,584	)	$	(52,165	)
Less: Incentive distribution right (“IDR”) payments to general partner		—			—			—			—			—			—
Net loss to allocate to general and limited partners		(22,534	)		(17,923	)		(42,652	)		(17,225	)		(99,584	)		(52,165	)
General partner’s interest excluding IDRs		(234	)		(187	)		(426	)		(179	)		(1,018	)		(543	)
Net loss attributable to common limited partners	$	(22,300	)	$	(17,736	)	$	(42,226	)	$	(17,046	)	$	(98,566	)	$	(51,622	)

Diluted net loss attributable to common limited partners per unit is calculated by dividing net loss attributable to common limited partners, less income allocable to participating securities, by the sum of the weighted average number of common limited partner units outstanding and the dilutive effect of unit awards, as calculated by the treasury stock or if converted methods, as applicable. These awards consist of common units that are contingently issuable upon the satisfaction of certain vesting conditions and common units issuable upon the exercise of certain unit appreciation rights awards under the terms of the Partnership’s long-term incentive plans.

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The following table sets forth the reconciliation of the Partnership’s weighted average number of common limited partner units used to compute basic net loss attributable to common limited partners per unit with those used to compute diluted net loss attributable to common limited partners per unit (in thousands):

	Three Months Ended March 31,				Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018		2019		2018
Weighted average number of common limited partner units—basic		38,031		37,959		38,916		37,959		38,438		37,959
Add effect of dilutive incentive awards (1)		—		—
Effect of dilutive incentive awards⁽¹⁾						—		—		—		—
Weighted average number of common limited partner units—diluted		38,031		37,959		38,916		37,959		38,438		37,959

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~~The~~For the three and nine months ended September 30, 2019, the diluted weighted average number of limited ~~partners’~~partner units outstanding presented on the unaudited condensed consolidated statement of operations does not include ~~977,166~~563,183 units (747,142 time-based employee phantom units and 230,024 director phantom units) and 452,558 units (175,211 time-based phantom employee units and 277,347 director phantom units) for the three months ended March 31, 2019 and 2018, respectively, as their effects would be anti-dilutive. In addition, all outstanding Preferred Units are exempt for purposes of calculating the diluted weighted average number of common limited partner units, as their conversion is not based on meeting a contingency derived from the Partnership’s unit price. The Preferred Units are convertible upon the completion of the Rights Offering (defined herein), which occurred early in the fourth quarter of 2019. For further detail on the Rights Offering, see Note 17 Subsequent Events. For the three and nine months ended ~~March 31, 2019 and~~September 30, 2018, ~~anti-dilutive~~the diluted weighted average number of limited partner units ~~excludes 46,734 and 126,768~~outstanding presented on the unaudited condensed consolidated statement of operations does not include 560,839 units, respectively that are contingently issuable for which the contingency has not been met. See Note 17 Subsequent Events, for further detail of unit grants under the Partnership’s Amended and Restated 2019 Long-Term Incentive Plan.as their effects would be anti-dilutive.

Recently ~~Issued~~Adopted Accounting ~~Standard Updates - Adopted in the Current Period~~Standards

Leases

The Partnership adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), and subsequently-issued related ASUs, using the modified retrospective approach, as of January 1, 2019. 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 or disclosure of key information about leasing arrangements. In addition, the new standard offers specific accounting guidance for a lessee, a lessor and sale and leaseback transactions. Lessees and lessors are required to disclose qualitative and quantitative information about leasing arrangements to enable a user of the financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.

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ASU 2016-02 provides for certain practical expedients when adopting the guidance. The Partnership elected the package of practical expedients allowing the Partnership to not reassess whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases or initial direct costs for any expired or existing leases. The Partnership did not apply the hindsight practical expedient. The Partnership applied the land easements practical expedient allowing the Partnership to not assess whether any expired or existing land easements are or contain leases, if they were not previously accounted for as leases under the existing leasing guidance. Instead, the Partnership will continue to apply its existing accounting policies to historical land easements. The Partnership elected to apply the short-term lease exception; therefore, the Partnership did not record a ~~right-of-use~~ROU asset or corresponding lease liability for leases with a term of twelve months or less and instead recognized a single lease cost allocated over the lease term, generally on a straight-line basis. The Partnership is separating lease components from non-lease components, as it did not elect the applicable practical expedient. The Partnership has excluded maintenance, taxes and insurance costs from the calculation of the initial lease liability in the transition. Non-lease components are accounted for separately from the lease, ~~and~~ recorded as maintenance, taxes and insurance and ~~expense~~expensed as incurred.

The Partnership adopted the new guidance on January 1, 2019 and as a result of the adoption, the Partnership recorded:

a $1.1 million reclassification from Intangible assets to Other assets for below market lease ~~intangibles,~~intangibles;

a $0.1 million and $0.2 million reclassification from Accounts payable and accrued liabilities and Other long-term liabilities, respectively, to Other assets for a deferred gain on a sale leaseback ~~transaction,~~transaction;

a $0.3 million and $3.5 million reclassification from Accounts payable and accrued liabilities and Other long-term liabilities, respectively, to Other assets for a rent ~~incentive,~~incentive;

a $15.3 million increase to Other assets for operating lease right-of-use ~~assets,~~assets; and

a $2.2 million and $13.1 million increase to Accounts payable and accrued liabilities and Other long-term liabilities, respectively, for operating lease liabilities.

The foregoing adjustments resulted in the creation of a net ~~right-of-use~~ROU asset of $12.3 million and operating lease liability of $15.3 million as of the adoption date.

In connection with the adoption of these new lease standards, the Partnership implemented internal controls to ensure that its contracts are properly evaluated to determine applicability under ASU 2016-02 and that the Partnership properly applies ASU 2016-02 in accounting for and reporting on all its qualifying leases.

12Stock Compensation

~~Table~~In June 2018, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2018-07, Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, to simplify the accounting for share-based payments to nonemployees by aligning it with the accounting for share-based payments to employees. This amendment was effective for fiscal years and interim periods within fiscal years beginning after December 15, 2018. The Partnership adopted this standard effective January 1, 2019. The adoption of ~~Contents~~this standard did not have an impact on the Partnership’s unaudited condensed consolidated financial statements, as the Partnership has only issued units to employees or nonemployee directors and has previously recognized its nonemployee directors unit-based payments in line with its recognition of unit-based payments to employees, using the grant-date fair value of the equity instruments issued, amortized over the requisite service period.

Presentation

In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of partners’ deficit for interim financial statements. Under the amendments, an analysis of changes in each caption of shareholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. The final rule was effective on November 5, 2018; as such, the Partnership used the new presentation of a condensed consolidated statement of Partners' deficit within its interim financial statements in this Quarterly Report on Form 10-Q for the ~~quarter~~nine months ended ~~March 31,~~September 30, 2019.

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Recently Issued Accounting Standard Updates - Not Yet Effective

Credit Losses

In ~~the second quarter of~~June 2016, ~~the~~ FASB issued ~~Update~~ASU 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~~In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses (“ASU 2018-09”), which clarified that receivables arising from operating leases are not within the scope of Accounting Standards Codification (“ASC”) 326-20, Financial Instruments-Credit Losses-Measured at Amortized Cost, and should be accounted for in accordance with ASC 842. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments (“ASU 2019-04”), which include clarifications to the amendments issued in ASU 2016-13. In May 2019, the FASB issued ASU No. 2019-05, Financial Instruments-Credit Losses (Topic 326), which provides entities that have certain instruments within the scope of ASC 326-20 with an option to irrevocably elect the fair value option in ASC 825, Financial Instruments, upon adoption of ASU 2016-13. Each of these amendments are effective for ~~annual reporting periods~~fiscal years beginning after December 15, ~~2019.~~2022. Early ~~application~~adoption is permitted. The Partnership plans to adopt the requirements of ~~ASU 2016-13~~these amendments upon ~~its~~their effective date of January 1, ~~2020,~~2023, using the modified-retrospective method, and is evaluating the potential impact of the adoption on its financial position, results of operations and related disclosures.

Variable Interest Entities

2.	~~ACQUISITIONS~~

~~On January 19,~~In October 2018, the ~~Partnership acquired six cemetery properties~~FASB issued ASU No. 2018-17, Consolidation (Topic 810): Targeted Improvements to Related Party Guidance for Variable Interest Entities (“ASU 2018-17”). The core principle of ASU 2018-17 is that indirect interests held through related parties in ~~Wisconsin~~common control arrangements should be considered on a proportional basis for determining whether fees paid to decision makers and ~~their related assets, net of certain assumed liabilities,~~service providers are variable interests. ASU 2018-17 is effective for ~~cash consideration of $2.5 million, of which $0.8 million was paid at closing. These properties had been managed by the Partnership since August 2016.~~fiscal years beginning after December 15, 2019. The Partnership ~~has accounted for~~plans to adopt the ~~purchase~~requirements of these ~~properties, which were~~amendments upon their effective date of January 1, 2020 retrospectively and is evaluating the potential impact of the adoption on its financial position, results of operations and related disclosures.

Fair Value Measurement

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). This standard removed, modified and added disclosure requirements from ASC 820, Fair Value Measurements. The Partnership plans to adopt the requirements of this amendment upon its effective date of January 1, 2020 prospectively and does not ~~material individually~~expect the adoption of this standard to have a significant impact on its consolidated financial statements, as this standard primarily addresses disclosure requirements for Level 3 fair value measurements, and it has no Level 3 fair value instruments.

Internal-Use Software

In August 2018, the FASB issued ASU No. 2018-15, Intangibles - Goodwill and Other - Internal-Use Software: Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement that is a Service Contract. The amendments in this standard aligned the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Partnership plans to adopt the requirements of this amendment upon its effective date of January 1, 2020 prospectively and does not expect the adoption of this standard to have a significant impact on its consolidated financial statements.

2.IMPAIRMENT & OTHER LOSSES

Goodwill Impairment Assessment

Due to a decline in the ~~aggregate, under~~market value of the ~~acquisition method of accounting.~~ ~~The Partnership did not complete any acquisitions~~Partnership’s unit values and the Partnership’s significant under-performance relative to historical or projected future operating results noted during the ~~three~~nine months ended ~~March 31,~~September 30, 2019, management conducted an interim goodwill impairment assessment as of September 30, 2019.

3.	~~IMPAIRMENT & OTHER LOSSES~~

~~Inventory~~

Merchandise is sold to both at-need and pre-need customers. Merchandise allocated to service pre-need contractual obligations is recorded at cost and managed and stored by the Partnership until the Partnership services the underlying customer contract.

Merchandise stored at certain locations may be exposed to changes in weather conditions. Primarily due to weather related deterioration over a number of years, the Partnership recorded inventory impairment charges of approximately $1.9 million for the three months ended March 31, 2018. This impairment loss related to damaged and excess inventory and is included in cost of goods sold for the three months ended March 31, 2018 in the accompanying consolidated statements of operations as this merchandise was utilized to fulfill the Partnership’s contractual obligations to at-need and pre-need customers.

Due to enhanced inventory control procedures implemented in late 2018, the Partnership determined that certain merchandise inventory allocated to pre-need customers had been damaged due to weather related deterioration occurring over a number of years or had otherwise been deemed impractical for use by management asAs a result of ~~past operating practices relating to inventory. For~~such assessment, management concluded on November 4, 2019 that the ~~three months ended March 31, 2018,~~carrying value of its Cemetery Operations reporting unit exceeded its fair value, and the Partnership’s goodwill was fully impaired as of September 30, 2019. The Partnership ~~recorded an estimated impairment loss of approximately $5.0~~recognized a $24.9 million related to this damaged and unusable merchandise. The impairment loss is included in other losses in the accompanying consolidated statement of operations for three months ended March 31, 2018. The loss recorded represents management’s best estimate. This impairment was based on estimates and assumptions that have been deemed reasonable by management and included percentages of merchandise deemed unusable. Management’s assessment process relied on estimates and assumptions that are inherently uncertain, and unanticipated events or circumstances may occur that might cause the Partnership to change those estimates and assumptions.

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impairment charge included in Loss on impairment of goodwill in the accompanying unaudited condensed consolidated statement of operations during the three and nine months ended September 30, 2019.

Impairment of Long-Lived Assets

The Partnership recorded an impairment of cemetery property due to circumstances that indicated the assets’ carrying value may not be recovered. The Partnership recorded a $1.5 million impairment charge included in Other losses, net on the accompanying unaudited condensed consolidated statement of operations during the nine months ended September 30, 2019, as the sum of future undiscounted cash flows was less than the carrying value of the assets.

Termination of Management Agreement

The Partnership operates certain of its cemeteries under long-term leases, operating agreements and management agreements. On May 10, 2019, the Partnership terminated one of the management agreements and recorded a $2.1 million loss, which is included in Other losses, net on the unaudited condensed consolidated statement of operations for the nine months ended September 30, 2019.

4.3.	ACCOUNTS RECEIVABLE, NET OF ALLOWANCE

Long-term accounts receivable, net, consisted of the following at the dates indicated (in thousands):

	March 31, 2019			December 31, 2018
							September 30, 2019			December 31, 2018
Customer receivables	$	163,533		$	167,017		$	162,967		$	167,017
Unearned finance income		(16,650	)		(17,000	)		(17,254	)		(17,000	)
Allowance for bad debt		(4,907	)		(4,941	)		(6,105	)		(4,941	)
Accounts receivable, net of allowance		141,976			145,076			139,608			145,076
Less: Current portion, net of allowance		58,398			57,928			61,470			57,928
Long-term portion, net of allowance	$	83,578		$	87,148		$	78,138		$	87,148

Activity in the allowance for bad debt was as follows (in thousands):

	Three months ended March 31,
	2019			2018			September 30, 2019			December 31, 2018
Balance, beginning of period	$	4,941		$	19,795		$	4,941		$	19,795
Cumulative effect of accounting changes		—			(12,876	)		—			(12,876	)
Provision for bad debt		2,043			600			5,380			7,358
Charge-offs, net		(2,077	)		(1,309	)		(4,216	)		(9,336	)
Balance, end of period	$	4,907		$	6,210		$	6,105		$	4,941

Management evaluates customer receivables for impairment based upon its historical experience, including the age of the receivables and the customers’ payment histories.

5.4.	CEMETERY PROPERTY

Cemetery property consisted of the following at the dates indicated (in thousands):

	March 31, 2019		December 31, 2018
					September 30, 2019		December 31, 2018
Cemetery land	$	256,163	$	255,708	$	255,624	$	255,708
Mausoleum crypts and lawn crypts		74,805		75,133		72,988		75,133
Cemetery property	$	330,968	$	330,841
Cemetery property⁽¹⁾					$	328,612	$	330,841

⁽¹⁾ The Partnership recorded an impairment of cemetery property during the nine months ended September 30, 2019. For further details see Note 2 Impairment & Other Losses.

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6.5.	PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at the dates indicated (in thousands):

	March 31, 2019			December 31, 2018
							September 30, 2019			December 31, 2018
Buildings and improvements	$	130,384		$	129,971		$	130,181		$	129,971
Furniture and equipment		59,841			58,706			59,883			58,706
Funeral home land		14,185			14,185			14,185			14,185
Property and equipment, gross		204,410			202,862			204,249			202,862
Less: Accumulated depreciation		(92,268	)		(90,146	)		(95,257	)		(90,146	)
Property and equipment, net of accumulated depreciation	$	112,142		$	112,716		$	108,992		$	112,716

Depreciation expense was ~~$2.4 million and $2.6~~$2.3 million for the three months ended ~~March 31,~~September 30, 2019 and 2018 and $7.1 million and $7.5 million for the nine months ended September 30, 2019 and 2018, respectively.

7.6.	MERCHANDISE TRUSTS

At ~~March 31,~~September 30, 2019 and December 31, 2018, the Partnership’s merchandise trusts consisted of investments in debt and equity marketable securities and cash equivalents, both directly ~~as well as~~and through mutual and investment funds. All of these investments are carried at fair value. All of these investments are subject to the fair value hierarchy ~~are~~and considered either Level 1 or

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Level 2 assets pursuant to the three-level hierarchy described in Note 13 Fair Value of Financial Instruments. There were no Level 3 assets. When the Partnership receives a payment from a pre-need customer, the Partnership deposits the amount required by law into the merchandise trusts that may be subject to cancellation on demand by the pre-need customer. The Partnership’s merchandise trusts related to states in which pre-need customers may cancel contracts with the Partnership comprises ~~53.4%~~53.6% of the total merchandise trust as of ~~March 31,~~September 30, 2019. The merchandise trusts are variable interest entities (“VIE”) of which the Partnership is deemed 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.

The Partnership included ~~$9.1~~$9.3 million and $8.7 million of investments held in trust as required by law by the West Virginia Funeral Directors Association at ~~March 31,~~September 30, 2019 and December 31, 2018 respectively, in its merchandise trust assets. These trusts are recognized at their account value, which approximates fair value.

A reconciliation of the Partnership’s merchandise trust activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018 is presented below (in thousands):

	Three months ended March 31,						Nine months ended September 30,
	2019			2018			2019			2018
Balance—beginning of period	$	488,248		$	515,456		$	488,248		$	515,456
Contributions		13,883			17,109			40,440			49,762
Distributions		(13,639	)		(14,652	)		(45,256	)		(53,321	)
Interest and dividends		7,325			6,247			22,537			20,486
Capital gain distributions		99			64			363			405
Realized gains and losses, net		(281	)		(464	)		2,063			(258	)
Other than temporary impairment		(2,314	)		(11,153	)		(2,816	)		(11,977	)
Taxes		4			283			(655	)		(337	)
Fees		(873	)		(1,351	)		(3,206	)		(3,049	)
Unrealized change in fair value		22,613			(2,853	)		17,811			2,860
Balance—end of period	$	515,065		$	508,686		$	519,529		$	520,027

During the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, purchases of available for sale securities were approximately ~~$21.3~~$42.2 million and ~~$32.5~~$78.3 million, respectively. During the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, sales, maturities and paydowns of available for sale securities were approximately ~~$9.1~~$30.7 million and ~~$24.9~~$66.6 million, respectively. Cash flows from pre-need contracts are presented as operating cash flows in the Partnership’s unaudited condensed consolidated statement of cash flows.

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The cost and market value associated with the assets held in the merchandise trusts as of ~~March 31,~~September 30, 2019 and December 31, 2018 were as follows (in thousands):

March 31, 2019	Fair Value Hierarchy Level		Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2019												Fair Value Hierarchy Level	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Short-term investments		1	$	10,761	$	—	$	—		$	10,761	1	$	182,560	$	—	$	—		$	182,560
Fixed maturities:
U.S. governmental securities		2		416		—		(147	)		269	2		488		10		(95	)		403
Corporate debt securities		2		1,250		16		(316	)		950	2		816		13		(116	)		713
Total fixed maturities				1,666		16		(463	)		1,219			1,304		23		(211	)		1,116
Mutual funds—debt securities		1		188,195		4,295		(602	)		191,888	1		117,566		4,937		(79	)		122,424
Mutual funds—equity securities		1		45,045		6,506		—			51,551	1		47,346		3,035		(1	)		50,380
Other investment funds (1)				220,198		2,001		(1,982	)		220,217			130,952		2,410		(2,524	)		130,838
Equity securities		1		18,178		3,955		(146	)		21,987	1		13,293		1,175		(4	)		14,464
Other invested assets		2		8,322		—		—			8,322	2		8,403		16		—			8,419
Total investments			$	492,365	$	16,773	$	(3,193	)	$	505,945		$	501,424	$	11,596	$	(2,819	)	$	510,201
West Virginia Trust Receivable				9,120		—		—			9,120			9,328		—		—			9,328
Total			$	501,485	$	16,773	$	(3,193	)	$	515,065		$	510,752	$	11,596	$	(2,819	)	$	519,529

⁽¹⁾

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funds, which have lockup periods of one to seven years with three potential one year extensions at the discretion of the funds’ general partners. As of ~~March 31,~~September 30, 2019, there were ~~$60.0~~$63.3 million in unfunded investment commitments to the private credit funds, which are callable at any time.

December 31, 2018	Fair Value Hierarchy Level		Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Fair Value Hierarchy Level	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Short-term investments		1	$	16,903	$	—	$	—		$	16,903	1	$	16,903	$	—	$	—		$	16,903
Fixed maturities:
U.S. governmental securities		2		392		—		(147	)		245	2		392		—		(147	)		245
Corporate debt securities		2		1,311		29		(328	)		1,012	2		1,311		29		(328	)		1,012
Total fixed maturities				1,703		29		(475	)		1,257			1,703		29		(475	)		1,257
Mutual funds—debt securities		1		187,840		262		(2,645	)		185,457	1		187,840		262		(2,645	)		185,457
Mutual funds—equity securities		1		45,023		110		(18	)		45,115	1		45,023		110		(18	)		45,115
Other investment funds (1)				210,655		388		(7,784	)		203,259			210,655		388		(7,784	)		203,259
Equity securities		1		18,097		1,327		(213	)		19,211	1		18,097		1,327		(213	)		19,211
Other invested assets		2		8,398		2		(17	)		8,383	2		8,398		2		(17	)		8,383
Total investments			$	488,619	$	2,118	$	(11,152	)	$	479,585		$	488,619	$	2,118	$	(11,152	)	$	479,585
West Virginia Trust Receivable				8,663		—		—			8,663			8,663		—		—			8,663
Total			$	497,282	$	2,118	$	(11,152	)	$	488,248		$	497,282	$	2,118	$	(11,152	)	$	488,248

⁽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 1 to 30 days, and private credit funds, which have lockup periods of two to seven years with three potential one year extensions at the discretion of the funds’ general partners. As of December 31, 2018, there were $71.0 million in unfunded investment commitments to the private credit funds, which are callable at any time.

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The contractual maturities of debt securities as of ~~March 31,~~September 30, 2019 and December 31, 2018 were as follows below (in thousands):

March 31, 2019	Less than 1 year		1 year through 5 years		6 years through 10 years		More than 10 years
September 30, 2019									Less than 1 year		1 year through 5 years		6 years through 10 years		More than 10 years
U.S. governmental securities	$	—	$	32	$	238	$	—	$	112	$	30	$	246	$	16
Corporate debt securities		78		816		37		16		96		598		18		—
Total fixed maturities	$	78	$	848	$	275	$	16	$	208	$	628	$	264	$	16

December 31, 2018	Less than 1 year		1 year through 5 years		6 years through 10 years		More than 10 years
U.S. governmental securities	$	—	$	137	$	108	$	—
Corporate debt securities		68		873		55		16
Total fixed maturities	$	68	$	1,010	$	163	$	16

Temporary Declines in Fair Value The Partnership evaluates declines in fair value below cost for each asset held in the merchandise trusts on a quarterly basis.

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An aging of unrealized losses on the Partnership’s investments in debt and equity securities within the merchandise trusts as of ~~March 31,~~September 30, 2019 and December 31, 2018 is presented below (in thousands):

	Less than 12 months				12 months or more				Total				Less than 12 months				12 months or more				Total
March 31, 2019	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
September 30, 2019													Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Fixed maturities:
U.S. governmental securities	$	—	$	—	$	267	$	147	$	267	$	147	$	110	$	—	$	397	$	95	$	507	$	95
Corporate debt securities		50		—		557		316		607		316		75		6		424		110		499		116
Total fixed maturities		50		—		824		463		874		463		185		6		821		205		1,006		211
Mutual funds—debt securities		155		5		1,231		597		1,386		602		15,178		79		—		—		15,178		79
Mutual funds—equity securities		—		—		—		—		—		—		242		1		—		—		242		1
Other investment funds		83,779		1,982		—		—		83,779		1,982		69,464		2,524		—		—		69,464		2,524
Equity securities		—		—		555		146		555		146		5		4		—		—		5		4
Other invested assets		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	83,984	$	1,987	$	2,610	$	1,206	$	86,594	$	3,193	$	85,074	$	2,614	$	821	$	205	$	85,895	$	2,819

	Less than 12 months				12 months or more				Total
December 31, 2018	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Fixed maturities:
U.S. governmental securities	$	—	$	—	$	243	$	147	$	243	$	147
Corporate debt securities		103		2		549		326		652		328
Total fixed maturities		103		2		792		473		895		475
Mutual funds—debt securities		46,005		2,011		1,195		634		47,200		2,645
Mutual funds—equity securities		131		18		—		—		131		18
Other investment funds		169,929		7,784		—		—		169,929		7,784
Equity securities		—		—		597		213		597		213
Other invested assets		—		4		790		13		790		17
Total	$	216,168	$	9,819	$	3,374	$	1,333	$	219,542	$	11,152

For all securities in an unrealized loss position, the Partnership evaluated the severity of the impairment and length of time that a security has been in a loss position and concluded the decline in fair value below the asset’s cost was temporary in nature. In addition, the Partnership is not aware of any circumstances that would prevent the future market value recovery for these securities.

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Other-Than-Temporary Impairment of Trust Assets

The Partnership assesses its merchandise trust assets for other-than-temporary declines in fair value on a quarterly basis. During the three months ended ~~March 31,~~September 30, 2019, the Partnership determined, based on its review, that there were 62 securities with an aggregate cost basis of approximately $4.8 million and an aggregate fair value of approximately $4.3 million, resulting in an impairment of $0.5 million, with such impairment considered to be other-than-temporary. During the three months ended September 30, 2018, the Partnership determined, based on its review, that there were 37 securities with an aggregate cost basis of approximately $62.1 million and an aggregate fair value of approximately $61.3 million, resulting in an impairment of $0.8 million, with such impairment considered to be other-than-temporary. During the nine months ended September 30, 2019, the Partnership determined, based on its review, that there were 8987 securities with an aggregate cost basis of approximately ~~$91.9~~$96.7 million and an aggregate fair value of ~~approximately $89.6~~approximately $93.9 million, resulting in an impairment of ~~$2.3~~$2.8 million, with such impairment considered to be ~~other-than-temporary due to credit indicators.~~other-than-temporary. During the ~~three~~nine months ended ~~March 31,~~September 30, 2018, the Partnership determined, based on its review, that there were 94122 securities with an aggregate cost basis of approximately ~~$165.8~~$227.9 million and an aggregate fair value of approximately ~~$154.6~~$215.9 million, resulting in an impairment of ~~$11.2~~$12.0 million, with such impairment considered to be other-than-temporary due to credit indicators. Accordingly, the Partnership adjusted the cost basis of these assets to their current value and offset these changes against deferred merchandise trust revenue. These adjustments to deferred revenue will be reflected within the Partnership’s unaudited condensed consolidated ~~statement~~statements of operations in future periods as the underlying merchandise is delivered or the underlying service is performed.

87.	PERPETUAL CARE TRUSTS

At ~~March 31,~~September 30, 2019 and December 31, 2018, the Partnership’s perpetual care trusts consisted of investments in debt and equity marketable securities and cash equivalents, both directly as well as through mutual and investment funds.

All of these investments are carried at fair value. All of the investments subject to the fair value hierarchy are considered either Level 1 or Level 2 assets pursuant to the three-level hierarchy described in Note 1314 Fair Value of Financial Instruments. There were no Level 3 assets. The perpetual care trusts are VIEs for which the Partnership is the primary beneficiary.

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A reconciliation of the Partnership’s perpetual care trust activities for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018 is presented below (in thousands):

	Three months ended March 31,						Nine months ended September 30,
	2019			2018			2019			2018
Balance—beginning of period	$	330,562		$	339,928		$	330,562		$	339,928
Contributions		1,983			5,504			5,520			10,795
Distributions		(4,403	)		(4,189	)		(16,709	)		(13,790	)
Interest and dividends		5,148			5,894			15,621			17,416
Capital gain distributions		114			124			1,134			612
Realized gains and losses, net		977			57			2,303			353
Other than temporary impairment		(713	)		(6,834	)		(1,297	)		(7,449	)
Taxes		4			8			(634	)		(292	)
Fees		(704	)		(2,441	)		(2,388	)		(4,087	)
Unrealized change in fair value		11,857			(1,804	)		8,916			1,536
Balance—end of period	$	344,825		$	336,247		$	343,028		$	345,022

During the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, purchases of available for sale securities were approximately ~~$35.3~~$42.5 million and ~~$20.7~~$56.4 million, respectively. During the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, sales, maturities and paydowns of available for sale securities were approximately ~~$31.9~~$28.1 million and ~~$18.2~~$49.4 million, respectively. Cash flows from perpetual care trust related contracts are presented as operating cash flows in Partnership’s unaudited condensed consolidated ~~statement~~statements of cash flows.

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The cost and market value associated with the assets held in the perpetual care trusts as of ~~March 31,~~September 30, 2019 and December 31, 2018 were as follows (in thousands):

March 31, 2019	Fair Value Hierarchy Level	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2019											Fair Value Hierarchy Level	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Short-term investments	1	$	11,671	$	—	$	—		$	11,671	1	$	87,453	$	—	$	—		$	87,453
Fixed maturities:
U.S. governmental securities	2		957		4		(92	)		869	2		1,081		44		(54	)		1,071
Corporate debt securities	2		3,165		23		(265	)		2,923	2		2,025		21		(145	)		1,901
Total fixed maturities			4,122		27		(357	)		3,792			3,106		65		(199	)		2,972
Mutual funds—debt securities	1		107,649		2,386		(187	)		109,848	1		70,425		2,730		(59	)		73,096
Mutual funds—equity securities	1		14,396		2,174		(2	)		16,568	1		16,685		1,528		(18	)		18,195
Other investment funds (1)			176,600		6,719		(4,096	)		179,223			143,050		7,143		(5,024	)		145,169
Equity securities	1		20,122		3,678		(77	)		23,723	1		14,968		1,177		(18	)		16,127
Other invested assets	2		—		—		—			-	2		16		—		—			16
Total investments		$	334,560	$	14,984	$	(4,719	)	$	344,825		$	335,703	$	12,643	$	(5,318	)	$	343,028

⁽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 1 to 30 days, and private credit funds, which have lockup periods ranging from one to ~~eight~~seven years with three potential one year extensions at the discretion of the funds’ general partners. As of ~~March 31,~~September 30, 2019 there were ~~$82.0~~$41.2 million in unfunded investment commitments to the private credit funds, which are callable at any time.

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December 31, 2018	Fair Value Hierarchy Level	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value		Fair Value Hierarchy Level	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Short-term investments	1	$	12,835	$	—	$	—		$	12,835	1	$	12,835	$	—	$	—		$	12,835
Fixed maturities:
U.S. governmental securities	2		960		4		(121	)		843	2		960		4		(121	)		843
Corporate debt securities	2		4,883		161		(321	)		4,723	2		4,883		161		(321	)		4,723
Total fixed maturities			5,843		165		(442	)		5,566			5,843		165		(442	)		5,566
Mutual funds—debt securities	1		108,451		227		(837	)		107,841	1		108,451		227		(837	)		107,841
Mutual funds—equity securities	1		19,660		304		(142	)		19,822	1		19,660		304		(142	)		19,822
Other investment funds (1)			165,284		3,039		(4,607	)		163,716			165,284		3,039		(4,607	)		163,716
Equity securities	1		20,025		826		(145	)		20,706	1		20,025		826		(145	)		20,706
Other invested assets	2		56		20		—			76	2		56		20		—			76
Total investments		$	332,154	$	4,581	$	(6,173	)	$	330,562		$	332,154	$	4,581	$	(6,173	)	$	330,562

⁽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 1 to 30 days, and private credit funds, which have lockup periods ranging from two to eight years with three potential one year extensions at the discretion of the funds’ general partners. As of December 31, 2018 there were $94.5 million in unfunded investment commitments to the private credit funds, which are callable at any time.

The contractual maturities of debt securities as of ~~March 31,~~September 30, 2019 and December 31, 2018, were as follows below (in thousands):

March 31, 2019	Less than 1 year		1 year through 5 years		6 years through 10 years		More than 10 years
September 30, 2019									Less than 1 year		1 year through 5 years		6 years through 10 years		More than 10 years
U.S. governmental securities	$	—	$	45	$	793	$	32	$	60	$	70	$	821	$	119
Corporate debt securities		213		2,513		147		51		203		1,536		163		—
Total fixed maturities	$	213	$	2,558	$	940	$	83	$	263	$	1,606	$	984	$	119

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December 31, 2018	Less than 1 year		1 year through 5 years		6 years through 10 years		More than 10 years
U.S. governmental securities	$	—	$	416	$	395	$	32
Corporate debt securities		705		3,702		265		51
Total fixed maturities	$	705	$	4,118	$	660	$	83

Temporary Declines in Fair Value

The Partnership evaluates declines in fair value below cost of each individual asset held in the perpetual care trusts on a quarterly basis.

An aging of unrealized losses on the Partnership’s investments in debt and equity securities within the perpetual care trusts as of ~~March 31,~~September 30, 2019 and December 31, 2018 is presented below (in thousands):

	Less than 12 months				12 months or more				Total				Less than 12 months				12 months or more				Total
March 31, 2019	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
September 30, 2019													Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Fixed maturities:
U.S. governmental securities	$	—	$	—	$	818	$	92	$	818	$	92	$	—	$	—	$	1,021	$	54	$	1,021	$	54
Corporate debt securities		—		—		2,530		265		2,530		265		76		45		1,889		100		1,965		145
Total fixed maturities		—		—		3,348		357		3,348		357		76		45		2,910		154		2,986		199
Mutual funds—debt securities		223		9		2,969		178		3,192		187		11,348		59		3		—		11,351		59
Mutual funds—equity securities		207		2		—		—		207		2		505		18		—		—		505		18
Other investment funds		59,569		4,096		—		—		59,569		4,096		67,147		5,024		—		—		67,147		5,024
Equity securities		201		10		642		67		843		77		176		18		—		—		176		18
Total	$	60,200	$	4,117	$	6,959	$	602	$	67,159	$	4,719	$	79,252	$	5,164	$	2,913	$	154	$	82,165	$	5,318

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	Less than 12 months				12 months or more				Total
December 31, 2018	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Fixed maturities:
U.S. governmental securities	$	—	$	—	$	790	$	121	$	790	$	121
Corporate debt securities		405		15		2,902		306		3,307		321
Total fixed maturities		405		15		3,692		427		4,097		442
Mutual funds—debt securities		21,867		591		2,814		246		24,681		837
Mutual funds—equity securities		1,382		141		—		1		1,382		142
Other investment funds		101,536		4,607		—		—		101,536		4,607
Equity securities		241		16		583		129		824		145
Total	$	125,431	$	5,370	$	7,089	$	803	$	132,520	$	6,173

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Other-Than-Temporary Impairment of Trust Assets

The Partnership assesses its perpetual care trust assets for other-than-temporary declines in fair value on a quarterly basis. During the three months ended ~~March 31,~~September 30, 2019, the Partnership determined that there were 6649 securities with an aggregate cost basis of approximately ~~$29.2~~$6.6 million and an aggregate fair value of approximately ~~$28.5~~$6.0 million, resulting in an impairment of ~~$0.7~~$0.6 million, with such impairment considered to be other-than-temporary. During the three months ended September 30, 2018, t the Partnership determined that there were 49 securities with an aggregate cost basis of approximately $40.0 million and an aggregate fair value of approximately $39.4 million, resulting in an impairment of $0.6 million, with such impairment considered to be other-than-temporary. During the ~~three~~nine months ended ~~March 31, 2018,~~September 30, 2019, the Partnership determined that there were ~~105~~68 securities with an aggregate cost basis of approximately ~~$118.0~~$35.8 million and an aggregate fair value of approximately ~~$111.2~~$34.5 million, resulting in an impairment of ~~$6.8~~$1.3 million, with such impairment considered to be other-than-temporary. During the nine months ended September 30, 2018, the Partnership determined that there were 116 securities with an aggregate cost basis of approximately $158.0 million and an aggregate fair value of approximately $150.6 million, resulting in an impairment of $7.4 million, with such impairment considered to be other-than-temporary.Accordingly, the Partnership adjusted the cost basis of these assets to their current value ~~and~~with the offset ~~these changes~~going against the liability for perpetual care trust corpus.

9.8.	LONG-TERM DEBT

Total debt consisted of the following at the dates indicated (in thousands):

	March 31, 2019			December 31, 2018			September 30, 2019			December 31, 2018

9.875%/11.500% Senior Secured PIK Toggle Notes, due June 2024								376,166		$	—
7.875% Senior Notes, due June 2021								—			173,613
Credit facility	$	180,132		$	155,739			—			155,739
7.875% Senior Notes, due June 2021		173,748			173,613
Notes payable—acquisition debt		37			92			—			92
Notes payable—acquisition non-competes		-			-
Insurance and vehicle financing		1,366			1,294			790			1,294
Less deferred financing costs, net of accumulated amortization		(8,397	)		(9,692	)		(14,280	)		(9,692	)
Total debt		346,886			321,046			362,676			321,046
Less current maturities		(953	)		(798	)		(503	)		(798	)
Total long-term debt	$	345,933		$	320,248		$	362,173		$	320,248

~~Credit Agreements~~ Senior Secured Notes

On ~~August 4, 2016,~~ ~~our 100% owned subsidiary,~~June 27, 2019, StoneMor ~~Operating LLC~~Partners L.P. (the ~~“Operating Company”~~“Partnership”), Cornerstone Family Services of West Virginia Subsidiary, Inc. (“Cornerstone” and, collectively with the Partnership, the “Issuers”), certain direct and indirect subsidiaries of the Partnership (the “Guarantors”), the initial purchasers party thereto (the “Initial Purchasers”) and Wilmington Trust, National Association, as trustee (in such capacity, the “Trustee”) and as collateral agent (in such capacity, the “Collateral Agent”) entered into ~~a Credit Agreement~~an indenture (the ~~“Original Credit Agreement”~~“Indenture”) ~~among each~~with respect to the 9.875%/11.500% Senior Secured PIK Toggle Notes due 2024.

Pursuant to the terms of the ~~Subsidiaries~~Indenture, the Initial Purchasers purchased Senior Secured Notes in the aggregate principal amount of $385.0 million in a private placement exempt from the registration requirements of the ~~Operating Company (together with~~Securities Act of 1933, as amended (the “Securities Act”) pursuant to Section 4(a)(2) thereof. The gross proceeds from the ~~Operating Company, “Borrowers”)~~sale of the Senior Secured Notes was $371.5 million, less advisor fees (including a placement agent fee of approximately $7.0 million), legal fees, mortgage costs and other closing expenses, as well as cash funds for collateralization of existing letters of credit and credit card needs under the Lenders identified therein, Capital One, National Association (“Capital One”), as Administrative Agent, Issuing Bank and Swingline Lender, Citizens Bank N.A., as Syndication Agent, and TD Bank, N.A. and Raymond James Bank, N.A., as Co-Documentation Agents. In addition,former credit facility.

The Issuers can elect to pay interest at either a fixed rate of 9.875% per annum in cash or, at their option through January 30, 2022, a fixed rate of 7.50% per annum in cash plus a fixed rate of 4.00% per annum payable in kind by increasing the principal amount of the Senior Secured Notes or by issuing additional Senior Secured Notes. The Senior Secured Notes will require cash interest payments at 9.875% for all interest periods after January 30, 2022. Interest is payable quarterly in arrears on the ~~same date,~~30th day of each March, June, September and December, commencing September 30, 2019. The Partnership elected the cash plus payable in kind option to pay its September 30, 2019 interest payment, resulting in a $4.0 million increase in the outstanding principal amount of the Senior Secured Notes. The Senior Secured Notes mature on June 30, 2024.

The Senior Secured Notes are senior secured obligations of the Issuers. The Issuers’ joint and several obligations under the Senior Secured Notes and the Indenture are jointly and severally guaranteed (the “Note Guarantees”) by each subsidiary of the Partnership (other than Cornerstone) that the ~~Borrowers and Capital One, as Administrative Agent, entered into~~Partnership has caused or will cause to become a Guarantor pursuant to the ~~Guaranty and Collateral Agreement (the “Guaranty Agreement,” and together with the Credit Agreement, “New Agreements”). Capitalized~~ terms ~~which are not defined in the following description of the New Agreements shall have the meaning assigned to such terms in the New Agreements, as amended~~.

2023

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~~On March 15, 2017, the Borrowers, Capital One, as Administrative Agent and acting in accordance with the written consent~~ of the ~~Required Lenders, entered into~~Indenture. In addition, the ~~First Amendment to Credit Agreement. Those parties subsequently~~Issuers, the Guarantors and the Collateral Agent entered into a ~~Second Amendment and Limited Waiver on July 26, 2017, a Third Amendment and Limited Waiver effective as of August 15, 2017, a Fourth Amendment to Credit~~Collateral Agreement ~~dated September 29, 2017, a Fifth Amendment to Credit Agreement dated as of December 22, 2017 but effective as of September 29, 2017, a Sixth Amendment and Waiver to Credit Agreement dated June 12, 2018, a Seventh Amendment and Waiver~~(the “Collateral Agreement”). Pursuant to the ~~Credit Agreement dated July 13, 2018~~Indenture and the ~~Eighth Amendment and Waiver to Credit~~Collateral Agreement, ~~(the “Eighth Amendment”) dated February 4, 2019~~. ~~We refer to~~ the ~~Original Credit Agreement, as so amended, as the “Original Amended Agreement.”~~

~~Prior to the Eighth Amendment, the Amended Credit Agreement provided for up to $175.0 million initial aggregate amount of Revolving Commitments, which were subject to borrowing base limitations.~~

The Eighth Amendment added to the Amended Credit Agreement a separate last out revolving credit facility (the “Tranche B Revolving Credit Facility”) in the aggregate amount of $35.0 million to be provided by certain affiliates of Axar Capital Management as the initial lenders under the Tranche B Revolving Credit Facility (the “Tranche B Revolving Lenders”) on the following terms (as further detailed in the Eighth Amendment):

the aggregate amount of the Tranche B Revolving Commitments is $35.0 million; such Commitments were utilized in the amount of $25.0 million, which was reduced by a $0.7 million Original Issue Discount on the effective date of the Eighth Amendment (the “Eighth Amendment Effective Date”). The borrowings were subject to a fairness opinion, which has been received, in accordance with provisions of the Tranche B conditions of such borrowings. The remaining $10 million in commitments may be utilized in the amount of $5.0 million (or any integral multiple thereof) from time to time until April 30, 2019;

~~Tranche B Revolving Credit Facility Maturity Date is one business day after the maturity date of the original revolving credit facility (the “Tranche A Revolving Credit Facility”);~~

~~the interest rate applicable to the loans made under the Tranche B Revolving Credit Facility is 8.00% per annum, payable quarterly in arrears;~~

~~borrowings under the Tranche B Revolving Credit Facility on the Eighth Amendment Effective Date were subject to an original issue discount in the amount of $0.7 million; and~~

~~upon the repayment or prepayment of the Tranche B Revolving Credit Facility in full, the Tranche B Revolving Lenders will receive additional interest in the amount of $0.7 million.~~

~~The Eighth Amendment also amended certain terms of the Original Amended Agreement to:~~

~~reduce the Tranche A Revolving Credit Availability Period to end on the Eighth Amendment Effective Date, which precludes borrowings under the Tranche A Revolving Credit Facility after such date;~~

reduce the amount of the Letter of Credit Sublimit from $15.0 million to $9.4 million, plus the principal amount of loans under the Tranche A Revolving Credit Facility that become subject to optional prepayment after the Eighth Amendment Effective Date, and permit the issuance of letters of credit under the Tranche A Revolving Credit Facility after the Eight Amendment Effective Date;

modify the Tranche A Revolving Credit Facility Maturity Date to be the earlier of (i) May 1, 2020 and (ii) the date that is six months prior to the earliest scheduled maturity date of any outstanding Permitted Unsecured Indebtedness;

redetermine the Applicable Rate to be 4.50% for Eurodollar Rate Loans and 3.50% for Base Rate Loans from the Eighth Amendment Effective Date to February 28, 2019; 4.75% and 3.75%, respectively, from March 1, 2019 to March 31, 2019; 5.50% and 4.50%, respectively, from April 1, 2019 to April 30, 2019; 5.75% and 4.75%, respectively, from May 1, 2019 to May 31, 2019; and 6.00% and 5.00%, respectively, from June 1, 2019;

~~discontinue the accrual of the commitment fee after the Eighth Amendment Effective Date;~~

•

provide for ticking fees assessed on the amount of outstanding loans made under the Tranche A Revolving Credit Facility (the “Tranche A Revolving Loans”) and payable to the Tranche A Revolving Lenders (i) in-kind, by

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~~increasing the outstanding principal amount of such Lender’s Tranche A Revolving Loans (“PIK”) or (ii) in cash, in the following amounts and on the following dates:~~

~~3.00% on July 1, 2019, of which (x) 2.00% shall PIK and (y) 1.00% shall be payable in cash, unless the Required Lenders agree to PIK;~~

~~1.00% on August 1, 2019, payable in cash, unless the Required Lenders agree to PIK;~~

~~1.00% on September 1, 2019, payable in cash, unless the Required Lenders agree to PIK; and~~

~~1.00% on October 1, 2019, PIK;~~

amend the definition of “Consolidated Net Income” for purposes of calculating the Consolidated EBITDA to exclude, for the time period from January 1, 2018 to January 1, 2019, (i) any non-recurring charges for adjustments made to cost of goods sold for merchandise inventory impairment related to excess and damaged inventory of the Partnership or a subsidiary of the Partnership (and any reversal thereof) incurred during the fiscal year ended December 31, 2018 in an aggregate amount not to exceed $5.0 million and (ii) any non-recurring charges for the establishment of liability reserves required for future obligations of the Partnership or a Subsidiary of the Partnership to deliver allocated merchandise to customers (and any reversal thereof) incurred during the Fiscal Year ended December 2018 in an aggregate amount not to exceed $15.0 million;

amend the definition of “Consolidated EBITDA” for purposes of calculating the financial covenant to (i) adjust the limit on add backs for non-recurring cash expenses, losses, costs and charges to $17.0 million for each Measurement Period ended on or after April 1, 2018 and (ii) remove a separate add back for non-recurring cash expenses, costs and charges relating to “non-ordinary course of business” legal matters;

remove the Consolidated Secured Net Leverage Ratio and Consolidated Fixed Charge Coverage Ratio and replace them with a covenant requiring the Partnership to ensure that its Consolidated EBITDA is not less than the following amounts for the four quarters ending on the following dates: (i) $18.0 million for the period ended March 31, 2018; (ii) $13.0 million for the period ended June 30, 2018; (iii) $2.5 million for the period ended September 30, 2018; (iv) ($3.0 million) for the period ended December 31, 2018; (v) $1.0 million for the period ending March 31, 2019; (vi) $3.5 million for the period ending June 30, 2019; (vii) $8.0 million for the period ending September 30, 2019; (viii) $8.25 million for the period ending December 31, 2019; and (ix) $9.25 million for the period ending March 31, 2020;

provide for mandatory prepayments in an amount equal to 100% of the net cash proceeds from (i) sale/leaseback transactions and certain other permitted dispositions of assets and (ii) incurrence of certain indebtedness (including any indebtedness not permitted under the Amended Credit Agreement) in an amount exceeding $5.0 million;

extend the deadline for filing the Partnership’s Form 10-Q for the period ended March 31, 2018 to the later of February 6, 2019 and the date that is two Business Days following the Eighth Amendment Effective Date and for the periods ended June 30, 2018 and September 30, 2018 to February 15, 2019;

add a covenant requiring the Partnership and the Administrative Borrower to use their reasonable best efforts to consummate the transactions contemplated under the Merger Agreement (as defined below) by May 15, 2019 (the “C-Corporation Conversion”); modify the definition of “Change in Control” and several covenants, including but not limited to reporting covenants and covenants restricting fundamental changes, dispositions, investments, acquisitions and transactions with affiliates to permit the C-Corporation Conversion and to permit the Partnership to be a wholly-owned subsidiary of StoneMor Inc. (as defined below);

add a covenant requiring the Administrative Borrower to engage Houlihan Lokey or any other acceptable financial advisor by no later than the second business day after the Eighth Amendment Effective Date to advise it in the arrangement of the refinancing in full of the obligations with respect to the Tranche A Revolving Credit Facility (such refinancing, the “Refinancing”);

add a covenant requiring the Administrative Borrower to retain Carl Marks & Co. or another acceptable consultant of recognized national standing on or prior to the Eighth Amendment Effective Date, who shall (i) assist the Administrative Borrower in further developing its financial planning and analysis function; (ii) prepare a detailed analysis of G&A expenses and other overhead and develop cost savings initiatives and (iii) present a monthly written update to the Administrative Agent and the Lenders on progress; and

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~~amend other provisions of the agreement in connection with the foregoing.~~

In addition, in the Eighth Amendment, the Administrative Agent and Lenders party thereto waived existing defaults under the Original Amended Agreement as a result of the Partnership’s failure to (i) deliver the financial statements for the periods ended March 31, 2018, June 30, 2018 and September 30, 2018 and the related compliance certificates; (ii) comply with the facility’s maximum Consolidated Secured Net Leverage Ratio for each period ended June 30, 2018, September 30, 2018 and December 31, 2018 (iii) comply with the facility’s minimum Fixed Charge Coverage Ratio for each period ended June 30, 2018, September 30, 2018 and December 31, 2018; and (iv) inaccuracies in representations and warranties resulting from such defaults. The effectiveness of the Eighth Amendment was subject to the satisfaction of certain conditions, including the payment to the Tranche A Revolving Lenders of a fee in the aggregate amount of $0.8 million.

Additional covenants include customary limitations, subject to certain exceptions, on, among others: (i) the incurrence of Indebtedness; (ii) granting of Liens; (iii) fundamental changes and dispositions; (iv) investments, loans, advances, guarantees and acquisitions; (v) swap agreements; (vi) transactions with Affiliates; (vii) Restricted Payments; (viii) restrictive agreements; (ix) amendments to organizational documents and indebtedness; (x) prepayment of indebtedness; and (xi) Sale and Leaseback Transactions. The Original Amended Agreement also prohibited distributions to the Partnership’s partners unless the Consolidated Leverage Ratio (determined based on Consolidated EBITDA calculated giving effect to amendments under the Sixth Amendment) was not greater than 7.50:1.00 and the Revolving Credit Availability was at least $25.0 million.

~~The Borrowers’~~Issuers’ obligations under the ~~Original Amended Agreement are guaranteed by the Partnership~~Indenture and the ~~Borrowers. Pursuant to~~Senior Secured Notes and the ~~Guaranty Agreement, the Borrowers’ obligations under the Original Amended Agreement~~Guarantors’ Note Guarantees are secured by a first priority lien and security interest (subject to permitted liens and security interests) in substantially all of the ~~Partnership’s~~Issuers’ and ~~Borrowers’~~the Guarantors’ assets, whether ~~then~~now owned or ~~thereafter~~hereafter acquired, excluding certain ~~excluded~~ assets which include, among others: ~~(i) Trust Accounts, certain proceeds~~(a) trust and other fiduciary accounts and amounts required ~~by law~~ to be ~~placed into such Trust Accounts~~deposited or held therein and ~~funds held in such Trust Accounts; and (ii) Excluded Real Property, including~~(b) unless encumbered by a mortgage existing on the date of the Indenture, owned and leased real property that (i) may not be pledged as a matter of ~~law.~~law or without governmental approvals, (ii) is not operated or intended to be operated as a cemetery, crematory or funeral home or (iii) is the subject of specified immaterial leases.

The Issuers may redeem the Senior Secured Notes at their option, in whole or in part, at any time for a redemption price equal to the principal balance thereof, accrued and unpaid interest thereon and, if applicable, a premium (the “Applicable Premium”) calculated as follows:

If redeemed before June 27, 2021, the sum of 4% of the principal amount so redeemed plus the excess of (i) the interest that would have accrued on the principal amount of the redeemed Senior Secured Notes from the redemption date through June 27, 2021 assuming an interest rate of 11.500% per annum over (ii) the interest that would have accrued on the principal amount of the redeemed Senior Secured Notes from the redemption date through June 27, 2021 at an interest rate equal to the then-applicable rate on United States Treasury securities for the period most nearly equaling that time period plus 0.50%;

If redeemed on or after June 27, 2021 and before June 27, 2022, 4% of the principal amount so redeemed;

If redeemed on or after June 27, 2022 and before June 27, 2023, 2% of the principal amount so redeemed; and

If redeemed on or after June 27, 2023, no premium will be payable.

The Issuers are obligated to redeem the Senior Secured Notes with the net cash proceeds of certain dispositions described in the Indenture, tax refunds, insurance or condemnation proceeds and certain other extraordinary receipts. The redemption price for such redemptions is the principal balance of the Senior Secured Notes being redeemed, all accrued and unpaid interest thereon plus, with respect to redemptions from asset dispositions with net proceeds in excess of $55.0 million, an Applicable Premium of 2% of the principal amount so redeemed.

The Issuers are also obligated to use 75% of any Excess Cash Flow, less any amount paid in any voluntary redemption of the Senior Secured Notes during the applicable period or subsequent thereto and prior to the applicable redemption date, to redeem the Senior Secured Notes at a redemption price equal to the principal balance thereof and all accrued and unpaid interest thereon.

All interest payable in connection with the redemption of any the Senior Secured Notes is payable in cash.

The Indenture requires the Issuers and the Guarantors, as applicable, to comply with various affirmative covenants regarding, among other matters, delivery to the Trustee of financial statements and certain other information or reports filed with the SEC and the maintenance and investment of trust funds and trust accounts into which certain sales proceeds are required by law to be deposited.

The Indenture includes financial covenants pursuant to which the Issuers will not permit:

the Operating Cash Flow Amount for the six months ending December 31, 2019 to be less than $20.0 million;

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the ratio of the sum of the Operating Cash Flow Amount plus Cash Interest Expense to Cash Interest Expense, or the Consolidated Interest Coverage Ratio, for the nine months ended March 31, 2020 and the twelve months ending as of each date from June 30, 2020 onwards, as set forth below, to be less than:

~~As of March 31, 2019,~~

March 31, 2020		0.40x
June 30, 2020		0.75x
September 30, 2020		1.00x
December 31, 2020		1.15x
March 31, 2021		1.25x
June 30, 2021		1.30x
September 30, 2021		1.35x
December 31, 2021		1.45x
March 31, 2022 and each quarter end thereafter		1.50x

the ~~outstanding~~aggregate amount of ~~borrowings under~~Capital Expenditures for the ~~Original Amended Agreement was~~ ~~$180.7 million, which was used~~prior four fiscal quarters as of the last day of any fiscal quarter beginning with the fiscal quarter ended September 30, 2019 to ~~pay down outstanding obligations under~~ be more than $20.0 million;

the ~~Partnership’s prior credit agreement, to pay fees, costs~~average daily balance of Unrestricted Cash and ~~expenses related to the New Agreements and to fund working capital needs.~~

Each Borrowing under the Original Amended Credit Agreement is comprised of Base Rate Loans or Eurodollar Loans. The Loans comprising each Base Rate Borrowing (including each Swingline Loan) bear interest at the Base Rate plus the Applicable Rate, and the Loans comprising each Eurodollar Borrowing bear interest at the Eurodollar Rate plus the Applicable Rate.

~~Prior to the Sixth Amendment and Waiver, the Applicable Rate was determined based on the Consolidated Leverage Ratio~~unrestricted Permitted Investments of the Partnership and its ~~Subsidiaries~~subsidiaries as of the end of any day for any 10-business day period to be less than $20.0 million during the quarter ended September 30, 2019, $15.0 million during the quarter ending December 31, 2019 and ~~ranged~~$12.5 million during any subsequent quarter; or

the ratio of the (a) the sum of Unrestricted Cash, accounts receivable and merchandise trust account balances to (b) the aggregate principal or face amount of Consolidated Funded Indebtedness, or Asset Coverage Test, for the applicable measurement period as of the last day of any fiscal quarter beginning with the fiscal quarter ended September 30, 2019, to be less than 1.60:1.00.

The Indenture requires the Issuers and the Guarantors, as applicable, to comply with certain other covenants including, but not limited to, covenants that, subject to certain exceptions, limit the Issuers’ and the Guarantors’ ability to: (i) incur additional indebtedness; (ii) grant liens; (iii) engage in certain sale/leaseback, merger, consolidation or asset sale transactions; (iv) make certain investments; (v) pay dividends or make distributions; (vi) engage in affiliate transactions and (vii) amend its organizational documents.

The Indenture provides for certain events of default, the occurrence and continuation of which could, subject to certain conditions, cause all amounts owing under the Senior Secured Notes to become due and payable, including but not limited to the following:

failure by the Issuers to pay any interest on any Senior Secured Note when it becomes due and payable that remains uncured for five business days;

failure by the Issuers to pay the principal on any of the Senior Secured Notes when it becomes due and payable, whether at the due date thereof, at a date fixed for redemption, by acceleration or otherwise;

failure by the Issuers to comply with the agreement and covenants relating to maintenance of its legal existence, providing notice of any default or event of default or use of proceeds from ~~1.75%~~the sale of the Senior Secured Notes or any of the negative covenants in the Indenture;

failure by the Issuers to ~~3.75%~~comply with any other agreement or covenant contained in the Indenture, the Collateral Agreement or any other Note Document that remains uncured for ~~Eurodollar Rate Loans~~a period of 15 days after the earlier of written notice and ~~0.75%~~request for cure from the Trustee or holders of at least 25% of the aggregate principal amount of the Senior Secured Notes;

the acceleration of or the failure to ~~2.75%~~pay at final maturity indebtedness (other than the Senior Secured Notes) in a principal amount exceeding $5.0 million;

the occurrence of a Change in Control;

certain bankruptcy or insolvency proceedings involving an Issuer or any subsidiary;

the C-Corporation Conversion shall not have occurred on or before March 31, 2020 and such default remains uncured for ~~Base Rate Loans~~a period of five business days; and ~~between 0.30%~~

•

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Partnership’s and its Subsidiaries’ consolidated revenue and (ii) $30.0 million, and such breach is not cured within 30 days.

At the option of holders holding a majority of the outstanding principal amount of the Senior Secured Notes (and automatically upon any default for failure to pay principal of the Senior Secured Notes when due and ~~0.50% for unused commitment fee. The Sixth Amendment and Waiver redetermined~~payable or certain bankruptcy or insolvency proceedings involving an Issuer), the ~~Applicable Rate based~~interest rate on the ~~Consolidated~~Senior Secured ~~Net Leverage Ratio~~Notes will increase to 13.50% per annum, payable in cash.

Registration Rights Agreement

In connection with the sale of the Senior Secured Notes, on June 27, 2019, the Issuers, the Guarantors party thereto and the Initial Purchasers entered into a Registration Rights Agreement (the “Notes Registration Rights Agreement”), pursuant to which the Issuers and the Guarantors agreed, for the benefit of the holders of the Notes, to use their commercially reasonable efforts to file a registration statement with the SEC with respect to a registered offer to exchange the Senior Secured Notes for new “exchange” notes having terms substantially identical in all material respects to the Senior Secured Notes, with certain exceptions (the “Exchange Offer”). The Issuers have agreed to use their commercially reasonable efforts (i) to consummate the Exchange Offer on or before July 14, 2020 (the “Exchange Date”) and (ii) upon the occurrence of certain events described in the Notes Registration Rights Agreement which result in the inability to consummate the Exchange Offer, to cause a shelf registration statement covering resales of the Notes to be declared effective.

If the Issuers fail to comply with their obligations under the Notes Registration Rights Agreement, additional interest will accrue on the Notes at a rate of 0.25% per annum (increasing by an additional 0.25% per annum with respect to each subsequent 90-day period that occurs after the date on which such default occurs, up to a maximum additional interest rate of 1.00%) from and including the date on which any such default shall occur to but excluding the earlier of (x) the date on which all such defaults have been cured and (y) the date on which the Notes are freely tradeable by persons other than affiliates of the Issuers pursuant to Rule 144 under the Securities Act.

Deferred Financing Costs

In connection with the Tranche B revolving credit facility established in February 2019, the Partnership incurred debt issuance costs and fees of approximately $3.0 million during the three months ended March 31, 2019, which was being amortized over the life of the Tranche B revolving credit facility, using the straight-line method. In connection with the issuance of its Senior Secured Notes, the Partnership incurred debt issuance costs and fees of approximately $14.3 million during nine months ended September 30, 2019, which have been deferred and are being amortized over the life of the Senior Secured Notes, using the effective interest method. No debt issuance costs or fees were incurred during the three months ended September 30, 2019.

In connection with the retirement of its revolving credit facilities and its ~~Subsidiaries and increased~~$175.0 million, 7.875% senior notes due 2021, the ~~minimum and maximum Applicable Rate by 0.50% to be~~Partnership wrote-off unamortized deferred financing fees of $6.9 million, during the nine months ended September 30, 2019, which is presented in loss on debt extinguishment in the ~~range between 2.25%~~accompanying unaudited condensed consolidated statement of operations.

9.	REDEEMABLE CONVERTIBLE PREFERRED UNITS AND PARTNERS’ DEFICIT

Redeemable Convertible Preferred Units

On June 27, 2019, funds and accounts affiliated with Axar Capital Management LP (“Axar”) and certain other investors (individually a “Purchaser” and collectively the “Purchasers”) and the Partnership entered into the Series A Preferred Unit Purchase Agreement (the “Series A Purchase Agreement”) pursuant to ~~4.25%~~which the Partnership sold to the Purchasers an aggregate of 52,083,333 of the Partnership’s Series A Preferred Units (the “Preferred Units”) representing limited partner interests in the Partnership with certain rights, preferences and privileges as are set forth in the Partnership’s Third Amended and Restated Agreement of Limited Partnership dated as of June 27, 2019 (the “Third Amended Partnership Agreement”). The purchase price for ~~Eurodollar Rate Loans~~the Preferred Units sold pursuant to the Series A Purchase Agreement (the “Purchased Units”) was $1.1040 per Purchased Unit, reflecting an 8% discount to the liquidation preference of each Preferred Unit, for an aggregate purchase price of $57.5 million.

Pursuant to the Series A Purchase Agreement, the Partnership agreed to file a registration statement on Form S-1 with the SEC as promptly as practicable to effect a $40.2 million rights offering of common units representing limited partnership interests in the Partnership (“Common Units”) to all holders of Common Units (other than the Purchasers, American Infrastructure Funds LP and ~~1.25%~~their respective affiliates) with a purchase price of $1.20 per Common Unit (the “Rights Offering”), and agreed to ~~3.75%~~use its reasonable best efforts to complete the Rights Offering within 100 days after the Closing Date. The Rights Offering

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occurred early in the fourth quarter of 2019, and the proceeds from the Rights Offering were used to redeem certain of the Preferred Units as described below. For further detail on the Rights Offering and the related redemption of certain Preferred Units, see Note 17 Subsequent Events.

Under the Series A Purchase Agreement, the Partnership also granted the Purchasers a preemptive right to purchase a pro rata share of any subsequent issuance of Common Units or shares of common stock of the corporation (“Common Stock”) into which the General Partner is converted in the C-Corporation Conversion or rights to acquire any such securities, for ~~Base Rate Loans (but in no event less that~~so long as the ~~Applicable Rate that would be in effect if calculated~~Purchaser continues to hold any Preferred Units, any Common Units or Common Stock issued upon conversion thereof.

The Preferred Units have the following rights, preferences and privileges, among others as set forth in the ~~Original~~Third Amended ~~Agreement not giving effect~~Partnership Agreement:

Conversion: The Preferred Units are convertible at the option of the holders thereof at any time beginning 10 days after completion of the Rights Offering and shall automatically be converted upon consummation of the C-Corporation Conversion, in each case at an initial conversion rate of one Common Unit or one share of Common Stock, as applicable, for each Preferred Unit. Subject to customary exceptions, the conversion rate for each Preferred Unit is subject to adjustment (a) proportionately, in the event of distributions made in the form of interests in the Partnership, any split, combination or similar recapitalization of Common Units and certain other specified transactions with respect to interests in the Partnership, (b) upon any issuance or deemed issuance by the Partnership prior to consummation of the Rights Offering of Common Units for a price per Common Unit less than the Series A Liquidation Preference (as defined below), to the ~~Sixth Amendment~~rate determined by dividing the Series A Liquidation Preference by the price per Common Unit in such issuance or deemed issuance and ~~Waiver~~(c) upon any issuance or deemed issuance by the Partnership after consummation of the Rights Offering of Common Units for a price per Common Unit less than the Series A Liquidation Preference, to a rate determined on a weighted average anti-dilution adjustment basis.

Voting: The holder of a Preferred Unit is entitled to one vote for each Common Unit into which such Preferred Unit is convertible (whether or not such right to convert is exercisable at such time). The holders of Preferred Units are entitled to vote as a single class with the holders of Common Units on all matters submitted to the limited partners for a vote. In addition, the affirmative vote of the holders of at least 60% of the outstanding Preferred Units is required to:

Amend the Third Amended Partnership Agreement or the Partnership’s Certificate of Limited Partnership if such amendment would be adverse (other than in a de minimus manner) to any of the rights, preferences or privileges of the Preferred Units;

Pay any distribution from Capital Surplus (as defined in the Third Amended Partnership Agreement); or

Issue any class or series of interest in the Partnership that, with respect to distributions, is senior to or pari passu with the Preferred Units, or modify the terms of any existing class or series of interest in the Partnership to so provide.

Distributions: Holders of Preferred Units are entitled to participate in any distributions made to holders of Common Units on an as-converted basis (whether or not such right to convert is exercisable at such time), and any such distributions with respect to Preferred Units shall be excluded in calculating the distributions or allocations of income or gain to holders of incentive distribution rights under the Third Amended Partnership Agreement.

Redemption: Upon completion of the Rights Offering, the Partnership is obligated to use 100% of the net proceeds thereof to redeem up to 33,487,904 Preferred Units held by Axar and the ~~Seventh Amendment and Waiver). As~~other Purchasers at a redemption price of ~~March 31, 2019,~~$1.20 per Preferred Unit.

Liquidation: Upon any liquidation, dissolution or winding up of the ~~Applicable Rate for Eurodollar Rate Loans was 4.75% and for Base Rate Loans was 3.75%. Prior~~Partnership, holders of Preferred Units are entitled to receive a payment of $1.20 per Preferred Unit (the “Series A Liquidation Preference”) before payments are made to any other class or series of interest in the Partnership ranking junior to the ~~Eighth Amendment,~~Preferred Units, including Common Units.

Restrictions on Transfer: Holders of Preferred Units may not transfer such Preferred Units other than to one or more affiliates without the ~~Borrowers were also required~~approval of the Partnership.

The Series A Purchase Agreement included various representations, warranties, covenants, indemnification and other provisions which are customary for a transaction of this nature.

The Partnership offered and sold the Purchased Units in reliance upon the exemption from the registration requirements of the Securities Act pursuant to ~~pay a quarterly unused commitment fee, which accrued at~~Section 4(a)(2) thereof. The Partnership relied on this exemption from registration based in part on representations made by the ~~Applicable Rate on~~Purchasers in the amount by which the commitments under the Original Amended Agreement exceeded the usage of such commitments, and which was included within interest expense on the Partnership’s condensed consolidated statements of operations. On March 31, 2019, the weighted average interest rate on outstanding borrowings under the Original Amended Agreement was 7.66%.Series A Purchase Agreement.

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~~Senior Notes~~Contingent Beneficial Conversion Feature

On May 28, 2013, the Partnership issued $175.0 million aggregate principal amount of 7.875% Senior Notes due 2021 (the "Senior Notes"). The Partnership pays 7.875% interest per annum on the principal amount of the Senior Notes, payable in cash semi-annually in arrears on June 1 and December 1 of each year. The net proceeds from the offering of the Senior Notes were used to retire a $150.0 million aggregate principal amount of 10.25% Senior Notes due 2017 and the remaining proceeds were used for general corporate purposes. The Senior Notes were issued at 97.832% of par resulting in gross proceeds of $171.2 million with an original issue discount of approximately $3.8 million. The Partnership incurred debt issuance costs and fees of approximately $4.6 million. These costs and fees are deferred and will be amortized over the life of the Senior Notes. The Senior Notes mature on June 1, 2021.

The Partnership ~~may redeem~~accounts for potential beneficial conversion features under FASB ASC Topic 470-20, Debt – Debt with conversion and Other Options (“ASC 470-20”), which states that conversion terms of preferred units triggered by future events not controlled by the ~~Senior Notes at any time,~~issuer shall be accounted for as contingent conversion options. Accordingly, the conversion feature of the Preferred Units is not considered an embedded derivative that requires bifurcation. The Partnership determined that its commitment in ~~whole or~~connection with the sale of the Preferred Units to use its best efforts to complete the Rights Offering is analogous to an initial public offering and considered to be a contingency outside the control of the holder. The guidance in ~~part,~~ASC 470 states that a contingent beneficial conversion feature in an instrument shall not be recognized in earnings until the contingency is resolved. The beneficial conversion will be measured using the intrinsic value calculated at the ~~redemption prices (expressed as percentages of~~date the ~~principal amount) set forth below, together with accrued~~contingency is resolved using the conversion price and ~~unpaid interest, if any, to the redemption date, if redeemed during the 12-month period beginning June 1 of the years indicated:~~

Year

Percentage

2018

101.969
%
2019 and thereafter

100.000
%

Subject to certain exceptions, upon the occurrence of a Change of Control (as defined in the Indenture), each holder of the Senior Notes will have the right to require the Partnership to purchase that holder’s Senior Notes for a cash price equal to 101% of the principal amounts to be purchased, plus accrued and unpaid interest.

~~The Senior Notes are jointly and severally guaranteed by certain~~trading value of the Partnership’s ~~subsidiaries. The Indenture governing~~Common Units at the ~~Senior Notes contains covenants, including limitations~~date the Preferred Units were issued. Accordingly, the Partnership will evaluate any discounts and any beneficial conversion features upon the resolution of the Partnership’s ability to incur additional indebtedness and liens, make certain dividends, distributions, redemptions or investments, enter into certain transactions with affiliates, make certain asset sales, and engage in certain mergers, consolidations or sales of all or substantially allcontingency. The Series A Preferred is convertible upon the completion of the Rights Offering, which occurred early in the fourth quarter of 2019.

The Partnership has the obligation to redeem a portion of the Series A Preferred from the net proceeds of the Rights Offering. Upon exercise of the redemption right, any previously recognized accretion of deemed dividends will be reversed in the period of redemption and reflected as income attributable to common unitholders in the Partnership’s ~~assets, among other items. As~~consolidated statements of ~~March 31, 2019,~~operations, along with the ~~Partnership was in compliance with these covenants.~~related per unit amounts.

For further detail on the Rights Offering, see Note 17 Subsequent Events.

10.	DEFERRED REVENUES AND COSTS

The Partnership defers revenues and all direct costs associated with the sale of pre-need cemetery merchandise and services until the merchandise is delivered or the services are performed. The Partnership recognizes deferred merchandise and service revenues as ~~deferred revenues~~customer contract liabilities within long-term liabilities on its consolidated balance sheets. The Partnership recognizes deferred direct costs associated with pre-need cemetery merchandise and service revenues as deferred selling and obtaining costs within long-term assets on its consolidated balance sheets. The Partnership also defers the costs to obtain new pre-need cemetery and new prearranged funeral business as well as the investment earnings on the prearranged services and merchandise trusts. Such costs are recognized when the associated performance obligation is fulfilled based upon the net change in the customer contract liabilities. All other selling costs are expensed as incurred. Additionally, the Partnership has elected the practical expedient of not recognizing incremental costs to obtain as incurred when the amortization period otherwise would have been one year or less

Deferred revenues and related costs consisted of the following at the dates indicated (in thousands):

	March 31, 2019		December 31, 2018			September 30, 2019		December 31, 2018

Deferred contract revenues	$	833,050	$	830,602		$	830,038	$	830,602
Deferred merchandise trust revenue		94,410		92,718			104,740		92,718
Deferred merchandise trust unrealized gains (losses)		13,580		(9,034	)		8,777		(9,034	)
Deferred revenues	$	941,040	$	914,286		$	943,555	$	914,286
Deferred selling and obtaining costs	$	112,643	$	112,660		$	113,601	$	112,660

For the three and nine months ended ~~March 31,~~September 30, 2019, the Partnership recognized ~~$22.6~~$13.7 million and $54.7 million, respectively, of the ~~deferred revenue~~customer contract liabilities balance that existed at December 31, 2018 as revenue. ~~Also during~~

The components of the ~~three months ended March 31, 2019, the Partnership had no change~~customer contract liabilities, net in the ~~deferred selling~~Partnership’s consolidated balance sheets at September 30, 2019 and ~~obtaining costs~~December 31, 2018 were as ~~recognition offset deferrals of new incremental direct selling costs.~~follows (in thousands):

	September 30, 2019			December 31, 2018

Customer contract liabilities	$	972,767		$	937,708
Amounts due from customers for unfulfilled performance obligations on cancellable pre-need contracts		(29,212	)		(23,422	)
Customer contract liabilities, net	$	943,555		$	914,286

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The ~~components~~Partnership expects to service 55% of its deferred ~~revenues, net~~revenue in the ~~Partnership’s Unaudited Condensed Consolidated Balance Sheet at March 31, 2019~~first 4-5 years and ~~December 31, 2018 were as follows (in thousands):~~approximately 80% of its deferred

March 31,
2019

December 31,
2018

Deferred revenue

$
963,612

$
937,708

Amounts due from customers for unfulfilled performance obligations on cancellable pre-need contracts

(22,572
)

(23,422
)
Deferred revenue, net

$
941,040

$
914,286

revenue within 18 years. The Partnership cannot estimate the period when it expects its remaining performance obligations will be recognized, because certain performance obligations will only be satisfied at the time of death.

11. LONG-TERM INCENTIVE PLAN

On April 15, 2019, the Compensation and Nominating and Governance Committee (the “Committee”) of the Board approved the award of 1,015,047 phantom unit awards consisting of 494,421 phantom units subject to time-based vesting (“TVUs”) and 520,626 phantom units subject to performance-based vesting (“PVUs”) to certain members of the general partner’s senior management. The awards of phantom units were made under the Partnership’s Amended and Restated 2019 Long-Term Incentive Plan (“LTIP”).

The TVUs shall vest, if at all, in three equal annual installments on each April 3 (or first business day thereafter) commencing on April 3, 2020. The PVUs shall vest based on the extent, if any, to which the Committee determines that the performance conditions established by the Committee for calendar years 2019, 2020 and 2021 have been achieved or waived in writing, as follows:

if the “threshold” performance condition with respect to a calendar year has been achieved or waived but not the “target” condition, then 25% of the PVUs subject to vesting with respect to such year (rounded down to the nearest whole phantom unit) shall vest;

if the “target” performance condition with respect to a calendar year has been achieved or waived, then 50% of the PVUs subject to vesting with respect to such year shall vest; and

if the “maximum” performance condition with respect to a calendar year has been achieved or waived, then 100% of the PVUs subject to vesting with respect to such year shall vest.

Also on April 15, 2019, an additional 275,000 restricted units were awarded to an officer of the general partner pursuant to his employment agreement, which units vest in equal quarterly installments over a four year period commencing July 15, 2019, the three month anniversary of the grant date.

The Recapitalization Transactions, described in Note 1 General, resulted in a Change of Control as defined in the LTIP. The Change of Control accelerated the vesting of certain awards, resulting in the immediate vesting of 1,351,493 phantom and restricted units. These awards were net settled with 376,351 units withheld to satisfy the participants’ tax withholding obligations, resulting in a net number of 975,142 common units being issued. The Partnership ~~expects~~recognized $2.2 million in unit-based compensation expense related to ~~service 55% of its deferred revenue~~this accelerated vesting. These units were delivered in the ~~first 4-5 years~~third quarter of 2019.

An aggregate of 238,553 phantom units issued under the LTIP and ~~approximately 80%~~held in deferred compensation accounts for certain directors that either became payable as a result of ~~its deferred revenue within 18 years.~~the Recapitalization Transactions or had previously become payable were issued in the third quarter of 2019.

An aggregate of 48,924 restricted units vested in the second quarter of 2019 in accordance with the awards’ contractual vesting schedule, which were net settled with 17,629 units withheld to satisfy the participants’ tax withholding obligations, resulting in a net number of 31,295 common units being issued. In addition, 49,379 restricted units vested in the third quarter of 2019 in accordance with the awards’ contractual vesting schedule, which were net settled with 17,772 units withheld to satisfy the participants’ tax withholding obligations, resulting in a net number of 31,607 common units being issued.

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~~11.~~12.COMMITMENTS AND CONTINGENCIES

Legal

The Partnership is currently subject to class or collective actions under the Securities Exchange Act of 1934 and for related state law claims that certain of our officers and directors breached their fiduciary duty to the Partnership and its unitholders. The Partnership could also become subject to additional claims and legal proceedings relating to the factual allegations made in these actions. While management cannot reasonably estimate the potential exposure in these matters at this time, if the Partnership does not prevail in any such proceedings, the Partnership could be required to pay substantial damages or settlement costs, subject to certain insurance coverages. Management has determined that, based on the status of the claims and legal proceedings against us, the amount of the potential losses cannot be reasonably estimated at this time. These actions are summarized below.

Anderson v. StoneMor Partners, LP, et al., No. 2:16-cv-6111, filed on November 21, 2016, in the United States District Court for the Eastern District of Pennsylvania. The plaintiffs in this case (as well as Klein v. StoneMor Partners, LP, et al., No. 2:16-cv-6275, filed in the United States District Court for the Eastern District of Pennsylvania on December 2, 2016, which has been consolidated with this case) brought an action on behalf of a putative class of the holders of Partnership units and allege that the Partnership made misrepresentations to investors in violation of Section 10(b) of the Securities Exchange Act of 1934 by, among other things and in general, failing to clearly disclose the use of proceeds from debt and equity offerings by making allegedly false or misleading statements concerning (a) the Partnership’s strength or health in connection with a particular quarter’s distribution announcement, (b) the connection between operations and distributions and (c) the Partnership’s use of cash from equity offerings and its credit facility. Plaintiffs sought damages from the Partnership and certain of its officers and directors on behalf of the class of Partnership unitholders, as well as costs and attorneys' fees. Lead plaintiffs have been appointed in this case, and filed a Consolidated Amended Class Action Complaint on April 24, 2017. Defendants filed a motion to dismiss that Consolidated Amended Complaint on June 8, 2017. The motion was granted on October 31, 2017, and the court entered judgment dismissing the case on November 30, 2017. Plaintiffs filed a notice of appeal on December 29, 2017. Oral argument was held before the United States Court of Appeals for the Third Circuit on November 1, 2018. ~~The Partnership expects~~On June 20, 2019, the ~~court~~Third Circuit affirmed the dismissal of plaintiffs’ case. On July 11, 2019, the plaintiffs filed a petition to ~~render~~have the appeal reheard by the entire Third Circuit, which the Third Circuit denied on September 16, 2019. Plaintiffs have 90 days from that date to file a ~~decision in~~petition for certiorari with the ~~near future, but there can be no assurance as~~United States Supreme Court to ~~when~~seek discretionary review of the ~~court will issue its ruling.~~Third Circuit’s decision.

Bunim v. Miller, et al., No. 2:17-cv-519-ER, pending in the United States District Court for the Eastern District of Pennsylvania, and filed on February 6, 2017. The plaintiff in this case brought, derivatively on behalf of the Partnership, claims that ~~StoneMor GP’s~~the officers and directors of the Partnership’s general partner aided and abetted in breaches of ~~StoneMor GP’s~~the general partner’s purported fiduciary duties by, among other things and in general, allegedly making misrepresentations through the use of non-GAAP accounting standards in its public filings, by allegedly failing to clearly disclose the use of proceeds from debt and equity offerings, and by allegedly approving unsustainable distributions. The plaintiff also claims that these actions and misrepresentations give rise to causes of action for gross mismanagement, unjust enrichment, and (in connection with a purportedly misleading proxy statement filed in 2014) violations of Section 14(a) of the Securities Exchange Act of 1934. The derivative plaintiff seeks an award of damages, attorneys’ fees and costs in favor of the Partnership as nominal plaintiff, as well as general compliance and governance changes. This case has been stayed, by the agreement of the parties, pending final resolution of the motion to dismiss filed in the Anderson case, provided that either party may terminate the stay on 30 days' notice.

25Muth v. StoneMor G.P. LLC, et al., December Term, 2016, No. 1196 and Binder v. StoneMor G.P. LLC, et al., January Term, 2017, No. 4872, both pending in the Court of Common Pleas for Philadelphia County, Pennsylvania, and filed on December 20, 2016 and February 3, 2017, respectively. In these cases, the plaintiffs brought, derivatively on behalf of the Partnership, claims that the officers and directors of the Partnership’s general partner aided and abetted in breaches of the general partner’s purported fiduciary duties by, among other things and in general, allegedly making misrepresentations through the use of non-GAAP accounting standards in its public filings and by failing to clearly disclose the use of proceeds from debt and equity offerings, as well as approving unsustainable distributions. The plaintiffs also claim that these actions and misrepresentations give rise to a cause of action for unjust enrichment. The derivative plaintiffs seek an award of damages, attorneys’ fees and costs in favor of the Partnership as nominal plaintiff, as well as alterations to the procedures for electing members to the board of the Partnership’s general partner, and other compliance and governance changes. These cases have been consolidated and stayed, by the agreement of the parties, pending final resolution of the motion to dismiss filed in the Anderson case, provided that either party may terminate the stay on 30 days' notice.

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•

Muth v. StoneMor G.P. LLC, et al., December Term, 2016, No. 1196 and Binder v. StoneMor G.P. LLC, et al., January Term, 2017, No. 4872, both pending in the Court of Common Pleas for Philadelphia County, Pennsylvania, and filed on December 20, 2016 and February 3, 2017, respectively. In these cases, the plaintiffs brought, derivatively on behalf of the Partnership, claims that StoneMor GP’s officers and directors aided and abetted in breaches of StoneMor GP’s purported fiduciary duties by, among other things and in general, allegedly making misrepresentations through the use of non-GAAP accounting standards in its public filings and by failing to clearly disclose the use of proceeds from debt and equity offerings, as well as approving unsustainable distributions. The plaintiffs also claim that these actions and misrepresentations give rise to a cause of action for unjust enrichment. The derivative plaintiffs seek an award of damages, attorneys’ fees and costs in favor of the Partnership as nominal plaintiff, as well as alterations to the procedures for electing members to the board of StoneMor GP, and other compliance and governance changes. These cases have been consolidated and stayed, by the agreement of the parties, pending final resolution of the motion to dismiss filed in the Anderson case, provided that either party may terminate the stay on 30 days' notice.

The Philadelphia Regional Office of the ~~Securities and Exchange Commission,~~SEC, Enforcement Division, is continuing its investigation of the Partnership as to whether violations of federal securities laws have occurred. The investigation relates to, among other things, our prior restatements, financial statements, internal control over financial reporting, public disclosures, use of non-GAAP financial measures, matters pertaining to unitholder distributions and the sources of funds therefor and information relating to protection of our confidential information and our policies regarding insider trading. We are continuing to cooperate with the SEC staff.

The Partnership is party to other legal proceedings in the ordinary course of its business, but does not expect the outcome of any proceedings, individually or in the aggregate, to have a material adverse effect on its financial position, results of operations or cash flows. The Partnership carries insurance with coverage and coverage limits that it believes to be customary in the cemetery and funeral home industry. Although there can be no assurance that such insurance will be sufficient to protect the Partnership against all contingencies, management believes that the insurance protection is reasonable in view of the nature and scope of the operations.

Other

In connection with the Partnership’s 2014 lease and management agreements with the Archdiocese of Philadelphia, it has committed to pay aggregate fixed rent of $36.0 million in the following amounts:

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

The fixed rent for lease years 6 through 11, an aggregate of $6.0 million, is deferred. If prior to May 31, 2024, the Archdiocese terminates the agreements pursuant to a lease year 11 termination or the Partnership terminates the agreements as a result of a default by the Archdiocese, the Partnership is entitled to retain the deferred fixed rent. If the agreements are not terminated, the deferred fixed rent will become due and payable on or before June 30, 2024.

~~12.~~13.

LEASES

The Partnership leases a variety of assets throughout ~~the~~its organization, such as office space, funeral homes, warehouses and equipment. In addition the Partnership has a sale-leaseback related to one of its warehouses. Leases with an initial term of 12 months or less are not recorded on the consolidated balance ~~sheet~~sheets and the Partnership recognizes lease expense for these leases on a straight-line basis over the lease term. For ~~leases~~lease agreements with an initial term of more than 12 months, the Partnership measures the lease liability at the present value of the sum of the remaining minimum rental payments, which exclude executory costs.

Certain leases provide the Partnership with the option to renew for additional periods, with renewal terms that can extend the lease term for periods ranging from 1 to 30 years. The exercise of lease renewal options is at the Partnership’s sole discretion, and the Partnership is only including the renewal option in the lease term when the Partnership can be reasonably certain that weit will exercise the ~~additional~~renewal options. The Partnership does have residual value guarantees on the finance leases for its vehicles, but no residual guarantees on any of its operating leases.

Certain of the Partnership’s leases have variable payments with annual escalations based on the proportion by which the consumer price index (“CPI”) for all urban consumers increased over the CPI index for the prior comparative year.

The Partnership has the following balances recorded on ~~the~~its unaudited condensed consolidated balance sheet related to leases:

2631

Table of Contents

	March 31, 2019		September 30, 2019
Assets:
Operating	$	11,667	$	11,321
Finance		6,005		6,211
Total Leased Assets	$	17,672
Total ROU assets⁽¹⁾			$	17,532
Liabilities:
Current
Operating	$	2,016	$	2,080
Finance		1,282		1,236
Long-term
Operating		12,692		12,246
Finance		4,434		4,656
Total Lease Liabilities	$	20,424
Total lease liabilities⁽²⁾			$	20,218

⁽¹⁾	The Partnership’s ROU operating assets and finance assets are presented within Other assets and Property and equipment, net of accumulated depreciation, respectively in its unaudited condensed consolidated balance sheet.

⁽²⁾	The Partnership’s current lease liabilities and long-term are presented within Accounts payable and accrued liabilities and Other long-term liabilities, respectively in its unaudited condensed consolidated balance sheet.

As most of the Partnership’s leases do not provide an implicit rate, the Partnership uses its incremental borrowing rate, based on the information available at commencement date, in determining the present value of lease payments. The Partnership used the incremental borrowing rate on January 1, 2019 for operating leases that commenced prior to that date. The weighted average borrowing rates for ~~Operating~~operating and ~~Finance~~finance leases were 9.9% and ~~8.1%~~8.4%, respectively as of ~~March 31,~~September 30, 2019.

The components of lease expense were as follows:

		Nine months ended September 30, 2019
Lease cost	Classification
Operating lease costs	General and administrative expense	$	2,687
Finance lease costs
Amortization of leased assets	Depreciation and Amortization		899
Interest on lease liabilities	Interest expense		370
Variable lease costs	General and administrative expense		—
Short-term lease costs	General and administrative expense		—
Net Lease costs		$	3,956

⁽¹⁾	The Partnership does not have any short-term leases with lease terms greater than one month.

Three months ended March 31, 2019

Lease cost
Classification

Operating lease costs
General and administrative expense
$
920

Finance lease costs

Amortization of leased assets
Depreciation and Amortization

320

Interest on lease liabilities
Interest expense

116

Net Lease costs

$
1,356

Maturities of the Partnership’s lease labilities as of ~~March 31,~~September 30, 2019, per ASC 842, Leases, were as follows:

	Operating		Financing
Year ending December 31,					Operating		Finance
2019	$	2,576	$	1,306	$	867	$	484
2020		3,107		1,479		3,320		1,761
2021		2,616		1,627		2,830		1,922
2022		2,346		1,897		2,532		1,978
2023		2,155		519		2,279		763
Thereafter		8,469		—		8,495		43
Total	$	21,269	$	6,828	$	20,323	$	6,951
Less: Interest		6,561		1,113		5,997		1,059
Present value of lease liabilities	$	14,708	$	5,715	$	14,326	$	5,892

Minimum lease commitments remaining under the Partnership’s operating leases and capital leases, per ASC 840, Leases, as of December 31, 2018 were as follows:

Table of Contents

Year ending December 31,	Operating		Capital
2019	$	4,349	$	1,499
2020		2,765		1,196
2021		2,130		949
2022		1,539		558
2023		1,184		89
Thereafter		5,737		—
Total	$	17,704	$	4,291
Less: Interest				(875	)
Present value of lease liabilities			$	3,416

Operating and finance lease payments include ~~$3.5~~$3.3 million related to options to extend lease terms that are reasonably certain of being exercised and ~~$1.9~~$2.0 million related to residual value guarantees. The weighted average remaining lease term for operating and finance leases was ~~7.6~~7.2 years and ~~3.3~~3.0 years, respectively as of ~~March 31,~~September 30, 2019.

As of September 30, 2019, the Partnership does not have additional operating and finance leases that have not yet commenced nor any lease transactions with its related parties. In addition, as of September 30, 2019, the Partnership has not entered into any new sale-leaseback arrangements.

~~13.~~14.

FAIR VALUE OF FINANCIAL INSTRUMENTS

Management has established a hierarchy to classify the inputs used to measure the Partnership’s financial instruments at fair value, pursuant to which ~~requires it~~the Partnership is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. Observable inputs represent market data obtained from independent sources; whereas, unobservable inputs reflect the Partnership’s own market assumptions, which are used if observable inputs are not reasonably available without undue cost and effort. The hierarchy defines three levels of inputs that may be used to measure fair value:

Level 1 – Unadjusted quoted market prices in active markets for identical, unrestricted assets or liabilities that the reporting entity has the ability to access at the measurement date.

~~Table~~Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the same contractual term of ~~Contents~~the asset or liability.

•

Level 2 – Inputs other than quoted prices included within Level 1 that are observable for the asset and liability or can be corroborated with observable market data for substantially the same contractual term of the asset or liability.

Level 3 – Unobservable inputs ~~that~~based on the entity’s own assumptions about the assumptions market participants would use in the pricing of the asset or liability and are consequently not based on market activity but rather through particular valuation techniques.

The carrying value of the Partnership’s current assets and current liabilities ~~and customer receivables~~ on its ~~unaudited condensed~~ consolidated balance sheets ~~are similar to cash basis financial instruments, and~~approximated or equaled their estimated fair ~~values approximate their carrying~~ values due to their short-term nature or imputed interest rates.

Recurring Fair Value Measurement

At September 30, 2019 and ~~thus are categorized as Level 1. The Partnership’s~~December 31, 2018, the two financial instruments measured by the Partnership at fair value on a recurring basis were its merchandise and perpetual care trusts, which consist of investments in debt and equity marketable securities and cash equivalents that are carried at fair value and are ~~considered~~classified as either Level 1 or Level 2 (see Note 7 Merchandise Trusts and Note 8 Perpetual Care Trusts).

Where quoted prices are available in an active market, securities are classified as Level 1 investments pursuant to the fair value measurement hierarchy.

Where quoted market prices are not available for the specific security, fair values are estimated by using either quoted prices of securities with similar characteristics or an income approach fair value model with observable inputs that include a combination of interest rates, yield curves, credit risks, prepayment speeds, rating, and tax-exempt status. These securities are classified as Level 2 investments pursuant to the fair value measurements hierarchy. Certain investments in the merchandise and perpetual care trusts are excluded from the fair value leveling hierarchy in accordance with GAAP. 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.

~~The Partnership’s other financial instruments at March 31, 2019 and December 31, 2018 consisted~~33

Table of its Senior Notes and outstanding borrowings under its revolving credit facility (see Note 9 Long-Term Debt). The estimated fair values of the Partnership’s Senior Notes at March 31, 2019 and December 31, 2018 were $157.3 million and $162.5 million, respectively, based on trades made on those dates, compared with the carrying amounts of $173.7 million and $173.6 million, respectively. At March 31, 2019 and December 31, 2018, the carrying values of outstanding borrowings under the Partnership’s revolving credit facility (see Note 9 Long-Term Debt), which bears interest at variable interest rates with maturities of 90 days or less, approximated their estimated fair values. The Senior Notes and the credit facility are valued using Level 2 inputs.Contents

Non-Recurring Fair Value Measurement

The Partnership may be required to measure certain assets and liabilities at fair value, such as its indefinite-lived assets and long-lived assets, on a nonrecurring basis in accordance with GAAP from time to time. These adjustments to fair value usually result from impairment charges.

Other Financial Instruments

The ~~lower~~Partnership’s other financial instruments at September 30, 2019 consisted of ~~cost or~~its Senior Secured Notes (see Note 8 Long-Term Debt) and at December 31, 2018 consisted of its Senior Notes and outstanding borrowings under its revolving credit facility.

At September 30, 2019, the estimated fair value of ~~assets held for sale at March 31, 2019 and~~the Partnership’s Senior Secured Notes was $386.5 million, based on trades made on that date, compared with the carrying amount of $376.2 million.

At December 31, 2018, ~~was $0.8 million . Assets held for sale are valued at lower of cost or~~the estimated fair value of the Partnership’s Senior Notes was $162.5 million, based on ~~broker comparables and estimates at~~trades made on that date, compared with the ~~time the assets are classified as held for sale. These assets held for sale are classified as Level 3 pursuant to the fair value measurement hierarchy.~~carrying amount of $173.6 million.

~~14.~~15.

SUPPLEMENTAL CONDENSED CONSOLIDATING FINANCIAL INFORMATION

The Partnership’s Senior Secured Notes are guaranteed by ~~StoneMor Operating LLC and its~~the Partnership’s 100% owned subsidiaries, other than the co-issuer, as described ~~below.~~in Note 8 Long-Term Debt. The guarantees are full, unconditional, joint and several. The Partnership, or the "Parent," and its 100% owned subsidiary, Cornerstone Family Services of West Virginia Subsidiary Inc., are the co-issuers of the Senior Secured Notes. The Partnership’s unaudited condensed consolidated financial statements as of ~~March 31,~~September 30, 2019 and December 31, 2018 and for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018 include the accounts of cemeteries operated under long-term ~~lease,~~leases, operating oragreements and management agreements. For the purposes of this note, these entities are deemed non-guarantor subsidiaries, as they are not 100% owned by the Partnership. The Partnership’s unaudited condensed consolidated financial statements also contain merchandise and perpetual care trusts that are also non-guarantor subsidiaries for the purposes of this note.

Table of Contents

The financial information presented below reflects the Partnership’s standalone accounts, the combined accounts of the subsidiary co-issuer, the combined accounts of the guarantor subsidiaries, the combined accounts of the non-guarantor subsidiaries, the consolidating adjustments and eliminations and the Partnership’s consolidated accounts as of ~~March 31,~~September 30, 2019 and December 31, 2018 and for the three and nine months ended ~~March 31,~~September 30, 2019 and 2018. For the purpose of the following financial information, the Partnership’s investments in its subsidiaries and the guarantor subsidiaries’ investments in their respective subsidiaries are presented in accordance with the equity method of accounting (in thousands):

28CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED)

September 30, 2019	Parent			Subsidiary Issuer			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents, excluding restricted cash	$	—		$	—		$	42,066	$	1,449		$	—		$	43,515
Restricted cash		—			—			20,580		—			—			20,580
Other current assets		—			3,470			69,812		11,966			—			85,248
Total current assets		—			3,470			132,458		13,415			—			149,343
Long-term accounts receivable		—			2,906			64,918		10,314			—			78,138
Cemetery and funeral home property and equipment		—			696			404,948		31,960			—			437,604
Merchandise trusts		—			—			—		519,529			—			519,529
Perpetual care trusts		—			—			—		343,028			—			343,028
Deferred selling and obtaining costs		—			5,580			90,236		17,785			—			113,601
Intangible assets		—			—			187		56,375			—			56,562
Other assets		—			—			29,939		2,779			—			32,718
Investments in and amounts due from affiliates eliminated upon consolidation		—			—			649,920		—			(649,920	)		—
Total assets	$	—		$	12,652		$	1,372,606	$	995,185		$	(649,920	)	$	1,730,523
Liabilities, Redeemable Convertible Preferred Units and Partners’ Capital (Deficit)
Current liabilities		—			150			63,418		1,520			—			65,088
Long-term debt, net of deferred financing costs		—			—			362,173		—			—			362,173
Deferred revenues		—			32,926			797,538		113,091			—			943,555
Perpetual care trust corpus		—			—			—		343,028			—			343,028
Other long-term liabilities		—			—			46,820		16,384			—			63,204
Investments in and amounts due to affiliates eliminated upon consolidation		46,525			259,737			—		570,954			(877,216	)		—
Total liabilities		46,525			292,813			1,269,949		1,044,977			(877,216	)		1,777,048
Redeemable convertible preferred units		57,500			—			—		—			—			57,500
Partners’ capital (deficit)		(104,025	)		(280,161	)		102,657		(49,792	)		227,296			(104,025	)
Total liabilities, redeemable convertible preferred units and partners’ capital (deficit)	$	—		$	12,652		$	1,372,606	$	995,185		$	(649,920	)	$	1,730,523

Table of Contents

~~CONDENSED~~ CONSOLIDATING BALANCE ~~SHEETS (UNAUDITED)~~SHEET

March 31, 2019	Parent			Subsidiary Issuer			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated
December 31, 2018																		Parent			Subsidiary Issuer			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents and restricted cash	$	—		$	—		$	23,021	$	1,427		$	—		$	24,448
Assets held for sale		—			—			757		—			—			757
Cash and cash equivalents, excluding restricted cash																		$	—		$	—		$	16,298	$	1,849		$	—		$	18,147
Restricted cash																			—			—			—		—			—			—
Other current assets		—			3,677			68,590		12,665			—			84,932			—			3,718			64,924		11,527			—			80,169
Total current assets		—			3,677			92,368		14,092			—			110,137			—			3,718			81,222		13,376			—			98,316
Long-term accounts receivable		—			2,902			69,040		11,636			—			83,578			—			3,118			71,708		12,322			—			87,148
Cemetery and funeral home property and equipment		—			776			408,713		33,621			—			443,110			—			806			409,201		33,550			—			443,557
Merchandise trusts		—			—			—		515,065			—			515,065			—			—			—		488,248			—			488,248
Perpetual care trusts		—			—			—		344,825			—			344,825			—			—			—		330,562			—			330,562
Deferred selling and obtaining costs		—			5,476			88,843		18,324			—			112,643			—			5,511			88,705		18,444			—			112,660
Goodwill and intangible assets		—			—			24,493		60,319			—			84,812			—			—			25,676		60,607			—			86,283
Other assets		—			—			30,398		2,911			—			33,309			—			—			19,403		2,924			—			22,327
Investments in and amounts due from affiliates eliminated upon consolidation		39,671			—			570,680		—			(610,351	)		—			61,875			(586	)		539,997		—			(601,286	)		—
Total assets	$	39,671		$	12,831		$	1,284,535	$	1,000,793		$	(610,351	)	$	1,727,479		$	61,875		$	12,567		$	1,235,912	$	960,033		$	(601,286	)	$	1,669,101
Liabilities and Partners’ Capital (Deficit)
Liabilities, Redeemable Convertible Preferred Units and Partners’ Capital (Deficit)
Current liabilities	$	—		$	169		$	65,134	$	1,322		$	—		$	66,625		$	—		$	184		$	60,216	$	1,400		$	—		$	61,800
Long-term debt, net of deferred financing costs		68,506			105,242			172,185		—			—			345,933			68,453			105,160			146,635		—			—			320,248
Deferred revenues		—			32,628			793,209		115,203			—			941,040			—			32,147			770,337		111,802			—			914,286
Perpetual care trust corpus		—			—			—		344,825			—			344,825			—			—			—		330,562			—			330,562
Other long-term liabilities		—			—			42,393		15,498			—			57,891			—			—			33,553		15,230			—			48,783
Due to affiliates		—			25,979			173,748		567,399			(767,126	)		—			—			—			173,613		543,543			(717,156	)		—
Total liabilities		68,506			164,018			1,246,669		1,044,247			(767,126	)		1,756,314			68,453			137,491			1,184,354		1,002,537			(717,156	)		1,675,679
Redeemable convertible preferred units																			—			—			—		—			—			—
Partners’ capital (deficit)		(28,835	)		(151,187	)		37,866		(43,454	)		156,775			(28,835	)		(6,578	)		(124,924	)		51,556		(42,502	)		115,870			(6,578	)
Total liabilities and partners’ capital (deficit)	$	39,671		$	12,831		$	1,284,535	$	1,000,793		$	(610,351	)	$	1,727,479
Total liabilities, redeemable convertible preferred units and partners’ capital (deficit)																		$	61,875		$	12,567		$	1,235,910	$	960,035		$	(601,286	)	$	1,669,101

~~Table of Contents~~

~~CONDENSED CONSOLIDATING BALANCE SHEETS (UNAUDITED) (continued)~~

December 31, 2018

Parent

��
Subsidiary
Issuer

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Eliminations

Consolidated

Assets

Current assets:

Cash and cash equivalents

$
—

$
—

$
16,298

$
1,849

$
—

$
18,147

Assets held for sale

—

—

757

—

—

757

Other current assets

—

3,718

64,167

11,527

—

79,412

Total current assets

—

3,718

81,222

13,376

—

98,316

Long-term accounts receivable

—

3,118

71,708

12,322

—

87,148

Cemetery and funeral home property and
equipment

—

806

409,201

33,550

—

443,557

Merchandise trusts

—

—

—

488,248

—

488,248

Perpetual care trusts

—

—

—

330,562

—

330,562

Deferred selling and obtaining costs

—

5,511

88,705

18,444

—

112,660

Goodwill and intangible assets

—

—

25,676

60,607

—

86,283

Other assets

—

—

19,403

2,924

—

22,327

Investments in and amounts due from affiliates
eliminated upon consolidation

61,875

(586
)

539,997

—

(601,286
)

-

Total assets

$
61,875

$
12,567

$
1,235,912

$
960,033

$
(601,286
)

$
1,669,101

Liabilities and Partners’ Capital (Deficit)

Current liabilities

$
—

$
184

$
60,216

$
1,400

$
—

$
61,800

Long-term debt, net of deferred financing costs

68,453

105,160

146,635

—

—

320,248

Deferred revenues

—

32,147

770,337

111,802

—

914,286

Perpetual care trust corpus

—

—

—

330,562

—

330,562

Other long-term liabilities

—

—

33,553

15,230

—

48,783

Due to affiliates

—

—

173,613

543,543

(717,156
)

-

Total liabilities

68,453

137,491

1,184,354

1,002,537

(717,156
)

1,675,679

Partners’ capital (deficit)

(6,578
)

(124,924
)

51,556

(42,502
)

115,870

(6,578
)
Total liabilities and partners’ capital (deficit)

$
61,875

$
12,567

$
1,235,910

$
960,035

$
(601,286
)

$
1,669,101

3036

Table of Contents

CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS (UNAUDITED)

Three Months Ended March 31, 2019	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Three Months Ended September 30, 2019																			Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Total revenues	$	—		$	1,564		$	59,752		$	11,132		$	(979	)	$	71,469		$	—		$	1,257		$	61,520		$	12,154		$	(1,780	)	$	73,151
Total costs and expenses		—			(4,520	)		(65,935	)		(11,356	)		979			(80,832	)		—			(3,336	)		(64,596	)		(13,440	)		1,780			(79,592	)
Other loss		—			—			—			—			—			—			—			—			(129	)		—			—			(129	)
Net loss from equity investment in subsidiaries		(21,176	)		(18,925	)		—			—			40,101			—			(42,652	)		(33,050	)		—		.				75,702			—
Interest expense		(1,358	)		(2,087	)		(9,456	)		(270	)		—			(13,171	)		—			—			(12,486	)		(279	)		—			(12,765	)
Loss on debt extinguishment																				—			—			—			—			—			—
Loss on impairment of goodwill																				—			—			(24,206	)		(656	)		—			(24,862	)
Income (loss) from continuing operations before income taxes		(22,534	)		(23,968	)		(15,639	)		(494	)		40,101			(22,534	)		(42,652	)		(35,129	)		(39,897	)		(2,221	)		75,702			(44,197	)
Income tax benefit		—			—			—			—			—			—			—			—			1,545			—			—			1,545
Net income (loss)	$	(22,534	)	$	(23,968	)	$	(15,639	)	$	(494	)	$	40,101		$	(22,534	)	$	(42,652	)	$	(35,129	)	$	(38,352	)	$	(2,221	)	$	75,702		$	(42,652	)

Three Months Ended September 30, 2018																			Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Total revenues																			$	—		$	1,513		$	61,254		$	12,116		$	(1,698	)		73,185
Total costs and expenses																				—			(3,192	)		(68,979	)		(12,728	)		1,698			(83,201	)
Other income																				—			—			702			—			—			702
Net loss from equity investment in subsidiaries																				(15,867	)		(13,280	)		—			—			29,147			—
Interest expense																				(1,358	)		(2,087	)		(3,935	)		(258	)					(7,638	)
Income (loss) from continuing operations before income taxes																				(17,225	)		(17,046	)		(10,958	)		(870	)		29,147			(16,952	)
Income tax expense																				—			—			(273	)		—			—			(273	)
Net income (loss)																			$	(17,225	)	$	(17,046	)	$	(11,231	)	$	(870	)	$	29,147		$	(17,225	)

Three Months Ended March 31, 2018

Parent

Subsidiary
Issuer

Guarantor
Subsidiaries

Non-
Guarantor
Subsidiaries

Eliminations

Consolidated

Total revenues

$
—

$
1,625

$
65,789

$
12,860

$
(2,329
)

$
77,945

Total costs and expenses

—

(3,310
)

(70,913
)

(14,077
)

2,329

(85,971
)
Other loss

—

—

(5,205
)

—

—

(5,205
)
Net loss from equity investment in
subsidiaries

(16,565
)

(14,793
)

—

—

31,358

—

Interest expense

(1,358
)

(2,087
)

(3,416
)

(252
)

—

$
(7,113
)
Income (loss) from continuing operations
before income taxes

(17,923
)

(18,565
)

(13,745
)

(1,469
)

31,358

(20,344
)
Income tax benefit

—

—

2,421

—

—

2,421

Net income (loss)

$
(17,923
)

$
(18,565
)

$
(11,324
)

$
(1,469
)

$
31,358

$
(17,923
)

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Nine Months Ended September 30, 2019	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Total revenues	$	—		$	4,260		$	187,021		$	36,354		$	(4,520	)	$	223,115
Total costs and expenses		—			(11,894	)		(197,511	)		(40,793	)		4,520			(245,678	)
Other loss		—			—			(1,475	)		(2,083	)		—			(3,558	)
Net loss from equity investment in subsidiaries		(94,405	)		(74,333	)		—			—			168,738			—
Interest expense		(4,241	)		(5,909	)		(24,311	)		(821	)		—			(35,282	)
Loss on debt extinguishment		(938	)		(1,441	)		(6,099	)		—			—			(8,478	)
Loss on impairment of goodwill		—			—			(24,206	)		(656	)		—			(24,862	)
Income (loss) from continuing operations before income taxes		(99,584	)		(89,317	)		(66,581	)		(7,999	)		168,738			(94,743	)
Income tax expense		—			—			(4,841	)		—			—			(4,841	)
Net income (loss)	$	(99,584	)	$	(89,317	)	$	(71,422	)	$	(7,999	)	$	168,738		$	(99,584	)

Nine Months Ended September 30, 2018	Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Total revenues	$	—		$	4,563		$	196,638		$	38,390		$	(6,890	)	$	232,701
Total costs and expenses		—			(10,278	)		(214,804	)		(41,289	)		6,890			(259,481	)
Other loss		—			—			(4,503	)		—			—			(4,503	)
Net loss from equity investment in subsidiaries		(48,090	)		(40,382	)		—			—			88,472			—
Interest expense		(4,075	)		(6,261	)		(11,755	)		(767	)		—			(22,858	)
Income (loss) from continuing operations before income taxes		(52,165	)		(52,358	)		(34,424	)		(3,666	)		88,472			(54,141	)
Income tax benefit		—			—			1,976			—			—			1,976
Net income (loss)	$	(52,165	)	$	(52,358	)	$	(32,448	)	$	(3,666	)	$	88,472		$	(52,165	)

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CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months Ended March 31, 2019	Parent		Subsidiary Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by operating activities	$	—	$	119		$	(9,509	)	$	(268	)	$	(3,445	)	$	(13,103	)
Nine Months Ended September 30, 2019																		Parent			Subsidiary Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash used in (provided by) operating activities																		$	—		$	212		$	(16,712	)	$	(105	)	$	(10,150	)	$	(26,755	)
Cash Flows From Investing Activities:
Cash paid for acquisitions and capital expenditures, net of proceeds from divestitures and asset sales		—		(106	)		(1,717	)		(80	)		—			(1,903	)		—			(188	)		(4,158	)		(147	)		—			(4,493	)
Payments to affiliates																			(57,500	)		—			—			—			57,500			—
Net cash used in investing activities		—		(106	)		(1,717	)		(80	)		—			(1,903	)		(57,500	)		(188	)		(4,158	)		(147	)		57,500			(4,493	)
Cash Flows From Financing Activities:
Cash distributions		—		—			—			—			—			—			—			—			—			—			—			—
Payments to affiliates		—		—			(3,445	)		—			3,445			—
Payments from affiliates																			—			—			47,350			—			(47,350	)		—
Proceeds from issuance of redeemable convertible preferred units, net																			57,500			—			—			—			—			57,500
Net borrowings and repayments of debt		—		(13	)		24,030			(74	)		—			23,943			—			(24	)		38,517			(148	)		—			38,345
Other financing activities		—		—			(2,636	)		—			—			(2,636	)		—			—			(18,649	)		—			—			(18,649	)
Net cash used in financing activities		—		(13	)		17,949			(74	)		3,445			21,307
Net cash provided by (used in) financing activities																			57,500			(24	)		67,218			(148	)		(47,350	)		77,196
Net increase (decrease) in cash and cash equivalents and restricted cash		—		—			6,723			(422	)		—			6,301			—			—			46,348			(400	)		—			45,948
Cash and cash equivalents and restricted cash—Beginning of period		—		—			16,298			1,849			—			18,147
Cash and cash equivalents and restricted cash—End of period	$	—	$	—		$	23,021		$	1,427		$	—		$	24,448
Cash and cash equivalents and restricted cash— Beginning of period																			—			—			16,298			1,849			—			18,147
Cash and cash equivalents and restricted cash— End of period																		$	—		$	—		$	62,646		$	1,449		$	—		$	64,095

Three Months Ended March 31, 2018	Parent		Subsidiary Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by operating activities	$	—	$	145		$	10,340		$	(890	)	$	(3,445	)	$	6,150
Nine Months Ended September 30, 2018																		Parent		Subsidiary Issuer			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated
Net cash provided by (used in) operating activities																		$	—	$	363		$	29,462		$	(78	)	$	(10,336	)	$	19,411
Cash Flows From Investing Activities:
Cash paid for acquisitions and capital expenditures, net of proceeds from divestitures and asset sales		—		(145	)		(4,952	)		(105	)		—			(5,202	)		—		(363	)		(9,888	)		(626	)		—			(10,877	)
Net cash used in investing activities		—		(145	)		(4,952	)		(105	)		—			(5,202	)		—		(363	)		(9,888	)		(626	)		—			(10,877	)
Cash Flows From Financing Activities:
Cash distributions		—		—			—			—			—			—			—		—			—			—			—			—
Payments to affiliates		—		—			(3,445	)		—			3,445			—			—		—			(10,336	)		—			10,336			—
Proceeds from issuance of redeemable convertible preferred units, net																			—		—			—			—			—			—
Net borrowings and repayments of debt		—		—			2,850			—			—			2,850			—		—			(4,044	)		—			—			(4,044	)
Other financing activities		—		—			(207	)		—			—			(207	)		—		—			(3,268	)		—			—			(3,268	)
Net cash used in financing activities		—		—			(802	)		—			3,445			2,643
Net decrease in cash and cash equivalents		—		—			4,586			(995	)		—			3,591
Cash and cash equivalents—Beginning of period		—		—			4,216			2,605			—			6,821
Cash and cash equivalents—End of period	$	—	$	—		$	8,802		$	1,610		$	—		$	10,412
Net cash (used in) provided by financing activities																			—		—			(17,648	)		—			10,336			(7,312	)
Net increase (decrease) in cash and cash equivalents and restricted cash																			—		—			1,926			(704	)		—			1,222
Cash and cash equivalents and restricted cash—Beginning of period																			—		—			4,216			2,605			—			6,821
Cash and cash equivalents and restricted cash—End of period																		$	—	$	—		$	6,142		$	1,901		$	—		$	8,043

~~Table of Contents~~

~~15.~~16.

SEGMENT INFORMATION

~~The~~Management operates the Partnership’s ~~operations include~~in two reportable operating ~~segments,~~segments: Cemetery Operations and Funeral Home Operations. These operating segments reflect the way the Partnership manages its operations and makes business ~~decisions~~decisions. Management evaluates the performance of these operating segments based on interments performed, interment rights sold, pre-

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need cemetery and at-need cemetery contracts written, revenue and segment profit (loss). As a percentage of revenue and assets, the Partnership’s major operations consist of its cemetery operations.

The following tables present financial information with respect to the Partnership’s segments (in thousands). Corporate costs represent those not directly associated with an operating segment, such as corporate overhead, interest expense and income taxes. Corporate assets primarily consist of ~~March 31, 2019. Operating segment data for the periods indicated was as follows (in thousands):~~cash and cash equivalents and restricted cash.

	Three months ended March 31,						Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018			2019			2018
STATEMENT OF OPERATIONS DATA:
Cemetery Operations:
Revenues	$	57,910		$	62,243		$	60,750		$	61,405		$	184,288		$	191,328
Operating costs and expenses		(53,162	)		(58,063	)		(54,681	)		(57,440	)		(166,777	)		(176,925	)
Depreciation and amortization	$	(1,962	)		(2,074	)		(1,853	)		(1,858	)		(5,735	)		(6,043	)
Segment income	$	2,786		$	2,106
Segment operating profit							$	4,216		$	2,107		$	11,776		$	8,360
Funeral Home Operations:
Revenues	$	13,559		$	15,702			12,401			11,780			38,827			41,373
Operating costs and expenses		(11,500	)		(13,036	)		(10,669	)		(10,148	)		(32,636	)		(33,835	)
Depreciation and amortization		(588	)		(713	)		(602	)		(652	)		(1,788	)		(2,066	)
Segment income	$	1,471		$	1,953
Reconciliation of segment income to net loss:
Segment operating profit							$	1,130		$	980		$	4,403		$	5,472
Reconciliation of segment operating profit to net loss:
Cemetery Operations	$	2,786		$	2,106			4,216			2,107			11,776			8,360
Funeral Home Operations		1,471			1,953			1,130			980			4,403			5,472
Total segment income		4,257			4,059
Total segment profit								5,346			3,087			16,179			13,832
Corporate overhead		(13,413	)		(11,827	)		(11,595	)		(12,876	)		(38,145	)		(39,868	)
Corporate depreciation and amortization		(207	)		(258	)		(192	)		(227	)		(597	)		(744	)
Other losses, net		—			(5,205	)
Other gains (losses), net								(129	)		702			(3,558	)		(4,503	)
Loss on debt extinguishment								—			—			(8,478	)		—
Loss on impairment of goodwill								(24,862	)		—			(24,862	)
Interest expense		(13,171	)		(7,113	)		(12,765	)		(7,638	)		(35,282	)		(22,858	)
Income tax benefit (expense)		—			2,421			1,545			(273	)		(4,841	)		1,976
Net loss	$	(22,534	)	$	(17,923	)	$	(42,652	)	$	(17,225	)	$	(99,584	)	$	(52,165	)

CASH FLOW DATA:
Capital expenditures:
Cemetery Operations	$	890		$	4,299		$	411		$	2,105		$	4,222		$	9,378
Funeral Home Operations		976			44			465			246			1,447			465
Corporate		37			26			29			187			74			321
Total capital expenditures	$	1,903		$	4,369		$	905		$	2,538		$	5,743		$	10,164

	March 31, 2019		December 31, 2018
					September 30, 2019		December 31, 2018
BALANCE SHEET DATA:
Assets:
Cemetery Operations	$	1,545,620	$	1,508,667	$	1,507,873	$	1,508,667
Funeral Home Operations		143,420		136,064		146,708		136,064
Corporate		38,439		24,370		75,942		24,370
Total assets	$	1,727,479	$	1,669,101	$	1,730,523	$	1,669,101
Goodwill:
Cemetery Operations	$	24,862	$	24,862	$	—	$	24,862

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~~16.~~17.

SUPPLEMENTAL CONSOLIDATED CASH FLOW INFORMATION

The tables presented below provide supplemental information to the unaudited condensed consolidated statements of cash flows regarding contract origination and maturity activity included in the pertinent captions on the Partnership’s unaudited condensed consolidated statements of cash flows (in thousands):

	Three months ended March 31,						Nine months ended September 30,
	2019			2018			2019			2018
Accounts Receivable
Pre-need/at-need contract originations (sales on credit)	$	(27,587	)	$	(35,987	)		(88,296	)	$	(95,267	)
Cash receipts from sales on credit (post-origination)		25,622			32,319			73,991			100,841
Changes in Accounts receivable, net of allowance	$	(1,965	)	$	(3,668	)
Changes in accounts receivable, net of allowance							$	(14,305	)	$	5,574
Customer Contract Liabilities
Deferrals:
Cash receipts from customer deposits at origination, net of refunds	$	34,205		$	36,416		$	107,847		$	114,132
Withdrawals of realized income from merchandise trusts during the period		2,124			2,101			6,699			13,815
Pre-need/at-need contract originations (sales on credit)		27,587			35,987			88,296			95,267
Undistributed merchandise trust investment earnings, net		3,610			2,393			8,367			357
Recognition:
Merchandise trust investment income, net withdrawn as of end of period		(2,255	)		(1,769	)		(6,985	)		(7,211	)
Recognized maturities of customer contracts collected as of end of period		(46,131	)		(45,900	)		(155,915	)		(137,265	)
Recognized maturities of customer contracts uncollected as of end of period		(10,556	)		(13,437	)		(24,449	)		(38,734	)
Changes in Deferred revenues	$	8,584		$	15,791
Changes in customer contract liabilities							$	23,860		$	40,361

~~17.~~18.

SUBSEQUENT EVENTS

~~Appointment of Senior Vice President and Chief Financial Officer~~

Rights Offering

On ~~April 15,~~September 25, 2019, the Partnership ~~announced~~commenced its Rights Offering that entitled each unitholder of record (the “unitholder”) on September 26, 2019 (the “Record Date”) one non-transferable subscription right for each common unit held by the ~~appointment~~unitholder on the Record Date. Each subscription right entitled the unitholder to purchase 1.24 common units for each common unit held by the unitholder at a subscription price of ~~Garry P. Herdler as Senior Vice President and Chief Financial Officer~~$1.20 per common unit. Through the Rights Offering, which expired on October 25, 2019, 3,039,380 common units were purchased for a total of ~~StoneMor GP LLC,~~$3.6 million. The gross proceeds from the ~~general partner~~Rights Offering were used to redeem 3,039,380 of the ~~Partnership (“StoneMor GP”), and the retirement~~Partnership’s outstanding Preferred Units on October 25, 2019 at a price of ~~Mark L. Miller as Chief Financial Officer and Senior Vice President~~$1.20 per Preferred Unit.

Divestitures

As part of ~~StoneMor GP, effective on April 15, 2019.~~

~~Awards of Phantom Units~~

~~On April 15, 2019, an aggregate of 494,421 phantom units subject to time-based vesting and an aggregate of 520,626 phantom units subject to performance-based vesting were awarded under~~ the Partnership’s ~~Amended and Restated 2019 Long-Term Incentive Plan. Also on April 15, 2019, an additional 275,000 restricted units were awarded to an officer~~recently launched asset sale program in the fourth quarter of ~~the General Partner pursuant to his employment agreement, which units vest in equal quarterly installments over a four year period commencing three months after the grant date.~~

~~Existing Loan Agreement with a Related Party~~

In accordance with the Eighth Amendment to the Credit Agreement and under the provisions of the Tranche B Revolving Credit Facility, the Partnership was able to increase borrowings under Tranche B until April 30, 2019 under the existing documentation. On April 26, 2019, the Partnership ~~had drawn down~~signed a non-binding letter of intent on one of its properties in October 2019 and received a $5.0 million refundable deposit. This asset sale is expected to be consummated in the ~~remaining $10.0 million under the Tranche B Revolving Credit Facility to fully utilize the $35.0 million commitment.~~first quarter of 2020.

~~First Amendment to Merger and Reorganization Agreement~~

As previously disclosed, on September 27, 2018, StoneMor Partners L.P., a Delaware limited partnership (the “Partnership”), StoneMor GP LLC, a Delaware limited liability company and the general partner of the Partnership (“GP”), StoneMor GP Holdings LLC, a Delaware limited liability company and the sole member of GP (“GP Holdings”), and Hans Merger Sub, LLC, a Delaware limited liability company and wholly owned subsidiary of GP (“Merger Sub”), entered into a Merger and Reorganization Agreement (the “Merger Agreement”) pursuant to which, among other things, GP will convert from a Delaware limited liability company into a Delaware corporation to be named StoneMor Inc. (the “Company”) and Merger Sub will merge with and into the Partnership (the “Merger”) with the Partnership surviving and with the Company as its sole general partner.

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

On April 30, 2019, the parties to the Merger Agreement executed that certain First Amendment to Merger and Reorganization Agreement (the “First Amendment to Merger Agreement”) to extend the Termination Date (as defined in the Merger Agreement) to October 1, 2019.

~~Second Amendment to Voting and Support Agreement~~

As previously disclosed, and in connection with the execution and delivery of the Merger Agreement, on September 27, 2018, the Partnership, GP, GP Holdings, Robert B. Hellman, Jr., in his capacity as trustee under the Voting and Investment Trust Agreement for the benefit of American Cemeteries Infrastructure Investors, LLC (“ACII” and together with GP Holdings, the “ACII Entities”), Axar Capital Management, LP, a Delaware limited partnership (“Axar”), Axar GP, LLC, a Delaware limited liability company (“Axar GP”) and Axar Master Fund, Ltd., a Cayman Islands exempted limited partnership (the “Axar Funds,” and together with Axar and Axar GP, the “Axar Entities”) entered into a voting and support agreement (the “Original Voting and Support Agreement”), pursuant to which, among other things, the Axar Entities were restricted from owning or acquiring more than 19.99% in aggregate of the outstanding common units representing limited partner interests in the Partnership (the “Common Units”) prior to the closing of the Merger. The Original Voting and Support Agreement was subsequently amended on February 4, 2019 (such amendment, the “First Amendment to Voting and Support Agreement”) to permit the Axar Entities to acquire up to 27.49% in the aggregate of the outstanding Common Units prior to the closing of the Merger.

On April 30, 2019, and in connection with the execution of the First Amendment to Merger Agreement, the parties to the Original Voting and Support Agreement and First Amendment to Voting and Support Agreement executed that certain Second Amendment to Voting and Support Agreement (the “Second Amendment to Voting and Support Agreement”) to extend the termination date set forth therein to October 1, 2019.

~~Table of Contents~~

~~ITEM 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF~~ ~~FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~

~~The management’s~~Management’s discussion and analysis presented below provides information to assist in understanding the Partnership’s financial condition and results of operations and should be read in conjunction with the Partnership’s unaudited condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. 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.

Certain statements contained in this Quarterly Report on Form 10-Q, including, but not limited to, information regarding our operating activities, the plans and objectives of our management and assumptions regarding our future performance and plans are forward-looking statements. When used in this Quarterly Report on Form 10-Q, the words “believes,” “anticipates,” “expects” and similar expressions are intended to identify forward-looking statements. Forward-looking statements are based on management’s expectations and estimates. These statements are neither promises nor guarantees and are made subject to certain risks and uncertainties that could cause actual results to differ materially from the results stated or implied in this Quarterly Report on Form 10-Q. We believe the assumptions underlying the unaudited condensed consolidated financial statements are reasonable.

Our major risks are related to our substantial secured and unsecured indebtedness, our ability to refinance our secured indebtedness in the near term, uncertainties associated with the cash flow from pre-need and at-need sales, trusts and financings, which may impact our ability to meet our financial projections, service our debt and pay distributions at previous or any different amounts, as well as with our ability to maintain an effective system of internal control over financial reporting and disclosure controls and procedures.

Our additional risks and uncertainties include, but are not limited to, the following: uncertainties associated with future revenue and revenue growth; uncertainties associated with the integration or anticipated benefits of recent acquisitions or any future acquisitions; our ability to complete and fund additional acquisitions; the effect of economic downturns; the impact of our significant leverage on our operating plans; uncertainty of our ability to generate sufficient cash to service all of our indebtedness; the decline in the fair value of certain equity and debt securities held in trusts; our ability to attract, train and retain an adequate number of sales people; uncertainties associated with the volume and timing of pre-need sales of cemetery services and products; increased use of cremation; changes in religious beliefs, changes in the death rate; changes in the political or regulatory environments, including potential changes in tax accounting and trusting policies; our ability to successfully implement a strategic plan relating to achieving operating improvements, strong cash flows and further deleveraging; our ability to successfully compete in the cemetery and funeral home industry; litigation or legal proceedings that could expose us to significant liabilities and damage our reputation; the effects of cyber security attacks due to our significant reliance on information technology; our ability to negotiate bonding arrangements with third-party insurance companies; uncertainties relating to the financial condition of third-party insurance companies that fund our pre-need funeral contracts; and various other uncertainties associated with the death care industry and our operations in particular.

Our risks and uncertainties are more particularly described in Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2018. Readers are cautioned not to place undue reliance on forward-looking statements included in this Form 10-Q, which speak only as of the date the statements were made. Except as required by applicable laws, we undertake no obligation to update or revise forward-looking statements, whether as a result of new information, future events or otherwise.

BUSINESS OVERVIEW

We are a publicly-traded Delaware master-limited partnership ("MLP") and provider of funeral and cemetery products and services in the death care industry in the United States. As of ~~March 31,~~September 30, 2019, we operated ~~322~~321 cemeteries in 27 states and Puerto Rico, of which 291 were owned and 3130 were operated under ~~lease,~~leases, operating agreements or management ~~or operating~~ agreements. We also owned, operated or managed 9089 funeral homes in 17 states and Puerto Rico. We are proposing to convert to a “C” Corporation which, if approved, ~~will~~is expected to be effective ~~during~~at the end of 2019. See Part 1, 1. Item 1. Financial Statements (Unaudited)—Notes to the Unaudited Condensed Consolidated Financial Statements—Note 1 General ~~to the unaudited condensed consolidated financial statements~~ of this Quarterly Report on Form 10-Q for further information related to the Merger and Reorganization Agreement.

Our revenue is derived from our Cemetery Operations and Funeral Home ~~Operations.~~Operations segments. Our Cemetery ~~Operation~~Operations segment principally generates revenue from sales of interment rights, cemetery merchandise, which includes markers, bases, vaults, caskets and cremation niches and our cemetery services, ~~including~~which include opening and closing (“O&C”), services, cremation services and fees for the installation of cemetery merchandise. Our Funeral Home Operations segment principally generates revenue from sales of funeral home merchandise, which includes caskets and other funeral related items and service revenues, ~~including~~which include services such as family consultation, the removal of 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. Our ~~funeral home operations~~Funeral Home Operations segment also include revenues related to the sale of term and whole life insurance on an agency basis, in which we earn a commission from the sales of these insurance policies.

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The pre-need sales enhance our financial position by providing a backlog of future revenue from both trust and insurance-funded pre-need funeral and cemetery sales. We believe pre-need sales add to the stability and predictability of our revenues and cash flows. Pre-need sales are typically sold on an installment plan. While revenue on the majority of pre-need funeral sales is deferred until the time of need, sales of pre-need cemetery property interment rights provide opportunities for full current revenue recognition when the property is available for use by the customer.

We also earn investment income on certain payments received from ~~the customer~~customers on pre-need contracts, which are required by law to be deposited into the merchandise and service trusts. Amounts are withdrawn from the merchandise and service trusts when the Partnership fulfills the performance obligations. Earnings on these trust funds, which are specifically identifiable for each performance obligation, are also included in the total transaction price. For sales of interment rights, a portion of the cash proceeds received are required to be deposited into a perpetual care trust. While the principal balance of the perpetual care trust must remain in the trust in perpetuity, we recognize investment income on such assets as revenue, excluding realized gains and losses from the sale of trust assets. Pre-need contracts are subject to financing arrangements on an installment basis, with a contractual term not to exceed 60 months. Interest income is recognized utilizing the effective interest method. For those contracts that do not bear a market rate of interest, the Partnership imputes such interest based upon the prime rate at the time of origination plus 150 basis points in order to segregate the principal and interest components of the total contract value.

Our revenue depends upon the demand for funeral and cemetery services and merchandise, which can be influenced by a variety of factors, some of which are beyond our control ~~including:~~including demographic trends, ~~including~~such as population growth, average age, death rates and number of deaths. Our operating results and cash flows could also be influenced by our ability to remain relevant to the ~~customer.~~customers. We provide a variety of unique product and service offerings to meet the needs of our ~~customer’s~~ customers’

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families. The mix of services could influence operating results, as it influences the average revenue per contract. Expense management, ~~including~~which includes controlling salaries, merchandise costs, corporate overhead and other expense categories, could also impact operating results and cash flows. Lastly, economic conditions, legislative and regulatory changes and tax law changes, all of which are beyond our control, could impact our operating results ~~including~~and cash ~~flow.~~flows.

For further discussion of our key operating metrics, see our Results of Operations and Liquidity and Capital Resources sections below.

RECENT EVENTS

The following are key events and transactions that occurred during 2019 through the date of issuance of the ~~attached~~unaudited condensed consolidated financial statements contained in Part I, Item 1 of this Quarterly Report on Form 10-Q:

Recapitalization Transactions. On June 27, 2019, we closed a $447.5 million recapitalization transaction, consisting of (i) a private placement (the “Preferred Offering”) of $62.5 million of liquidation value of Series A Convertible Preferred Units of the Partnership (“Preferred Units”) and (ii) a concurrent private placement of $385.0 million of 9.875%/11.500% Senior Secured PIK Toggle Notes due 2024 (the “Senior Secured Notes”) of the Partnership to certain financial institutions (the “Notes Offering” and together with the Preferred Offering, the “Recapitalization Transactions”). The net proceeds of the Recapitalization Transactions were used to fully repay our outstanding senior notes due in June 2021 and retire the revolving credit facility due in May 2020, as well as for associated transaction expenses, cash collateralization of existing letters of credit and other needs under the former credit facility, with the balance available for general corporate purposes;

Board Reconstitution. In connection with the closing of the Recapitalization Transactions, the board of directors of our general partner was reconstituted. Directors Martin R. Lautman, Ph.D., Leo J. Pound, Robert A Sick and Fenton R. Talbott resigned as directors and the authorized number of directors was reduced to seven. Andrew Axelrod, David Miller and Spencer Goldenberg were elected to the board of directors of the General Partner to fill the vacancies created by the resignations. The reconstituted board of directors is comprised of Messrs. Axelrod, Miller and Goldenberg, Robert B. Hellman, Jr., Stephen Negrotti, Patricia Wellenbach and Joseph M. Redling. Mr. Axelrod serves as the chairman of the board of directors of our general partner;

On June 27, 2019, also in connection with the closing of the Recapitalization Transactions, the general partner, StoneMor GP Holdings LLC, a Delaware limited liability company and formerly the sole member of GP (“GP Holdings”) and Axar Special Member LLC, a wholly-owned subsidiary of Axar (“Axar Special Member”), entered into the Third Amended and Restated Limited Liability Company Agreement of the General Partner, pursuant to which the Axar Special Member was admitted as a member with the right to designate three-sevenths of the board of directors of the general partner and through such interest holds a number of control rights;

Change in Chief Financial Officer. On September 19, 2019, Jeffrey DiGiovanni became our Senior Vice President and Chief Financial Officer, replacing Garry P. Herdler;

Reduction in Workforce. OnJanuary 31, 2019, we announced a profit improvement initiative as part of our ongoing organizational review. This profit improvement initiative is intended to further integrate, streamline and optimize our operations. As part of this profit improvement initiative, during the nine months ended September 30, 2019, we have undertaken certain cost reduction initiatives, including a reduction of approximately 216 positions of our workforce, related to corporate functions in Trevose, Pennsylvania as well as our field operations, a streamlining of general and administrative expenses and an optimization of location spend; and

Lease accounting standard. Effective January 1, 2019, we adopted the new lease accounting standard as further discussed in ~~further detail~~Part 1. Item 1. Financial Statements (Unaudited)—Notes to the Unaudited Condensed Consolidated Financial Statements—Note 1 General of this Quarterly Report on Form 10-Q which resulted in ~~Results~~an increase in other assets of ~~Operations sections~~$15.3 million and increases of ~~Management’s Discussion~~$2.2 million and ~~Analysis:~~$13.1 million in accounts payable and accrued liabilities and other long-term liabilities, respectively, in the unaudited condensed consolidated balance sheet. The adoption did not have a material impact on our results of operations or cash flows.

Rights offering.On September 25, 2019, we commenced our Rights Offering that entitled each unitholder of record (the “unitholder”) on September 26, 2019 (the “Record Date”) to one non-transferable subscription right for each common unit held by the unitholder on the Record Date. Each subscription right entitled the unitholder to purchase 1.24 common units for each common unit held by the unitholder at a subscription price of $1.20 per common unit. Through the Rights Offering, which expired on October 25, 2019, 3,039,380 common units were purchased for a total of $3.6 million. The gross proceeds from the Rights Offering were used to redeem 3,039,380 of our outstanding Preferred Units on October 25, 2019 at a price of $1.20 per Preferred Unit.

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•	~~Garry P. Herdler became our Senior Vice President and Chief Financial Officer on April 15, 2019.~~
•	On February 4, 2019, we amended and restated our existing Credit Agreement, which had been previously amended in June and July 2018, to modify its covenants to provide us with greater financial and operating flexibility.
•	~~On February 4, 2019, a~~sDivestitures.As part of the recent amendment to our credit facility, we have added a “last out” senior secured credit facility with Axar Capital Management, a related party, for up to $35.0 million. The proceeds of the facility will be used to finance the working capital needs and for other general corporate purposes to drive improvements in sales. We borrowed $15.0 million under this facility on February 4, 2019, and any borrowings resultingPartnership’s recently launched asset sale program in the ~~outstanding balance~~fourth quarter of ~~this last-out facility exceeding $25.0 million was subject to receipt of a fairness opinion with respect to the last-out facility, which was obtained prior to such borrowings. On March 29,~~ 2019, the Partnership ~~had an additional borrowing~~signed a non-binding letter of ~~$10~~intent on one of its properties in October 2019 and received a $5.0 million ~~and on April 26, 2019,~~refundable deposit. This asset sale is expected to be consummated in the ~~Partnership drew down the $10 million remaining capacity under the Tranche B Revolving Credit Facility.~~first quarter of 2020.

GENERAL TRENDS AND OUTLOOK

We expect our business to be affected by key trends in the death care industry, based upon assumptions made by us and information currently available. Death care industry factors affecting our financial position and results of operations include, but are not limited to, demographic trends in terms of population growth, average age, death rates and cremation trends. In addition, we are subject to fluctuations in the fair value of equity and fixed-maturity debt securities held in our trusts. These values can be negatively impacted by contractions in the credit market and overall downturns in economic activity. Our ability to make payments on our debt depends on our success at managing operations with respect to these industry trends. To the extent our underlying assumptions about or interpretations of available information prove to be incorrect, our actual results may vary materially from our expected results.

37Business Strategies

~~Table~~We believe the Recapitalization Transactions demonstrate both strong underlying values of ~~Contents~~our asset base, as well as confidence in our ability to execute our turnaround plan. We believe the recapitalization of our balance sheet has reset our financial footing and helps position us to execute the following business strategies:

~~Effective January 1,~~Execute on Financial Strategy. The Recapitalization Transactions have significantly extended our debt capital structure with a five-year maturity, which provides us with a meaningful liquidity improvement to execute our turnaround strategy, including the next phase of our performance improvement plans. In April 2019, we announced a turnaround strategy focused on four key goals: cash flow and liquidity, capital structure, strategic balance sheet/portfolio review, and performance improvement from cost reductions and revenue enhancement;

Implementation of New Strategic Initiatives. We view our substantial and diverse asset base as a strength, but we have prioritized the ~~Partnership adopted~~ways in which we view our assets. We believe that by tiering operating units by class and contribution, identifying and initiating a divestiture plan for select assets and prioritizing certain assets over others, we will be able to optimize results in our top tier properties and more efficiently manage our assets. From a portfolio review perspective, we continue to focus our resources on improving our “top tier” assets as we believe they possess the ~~Lease standard as further discussed in Part 1, Item 1, Footnote 1, “General”, which resulted in an increase in Other Assets~~greatest potential for improved profitability. We are also minimizing costs and resources on our “lower-tier” assets to reduce the impact these assets have on profitability of ~~$15.3 million and increases of $2.2 million and $13.1 million in accounts payable and accrued liabilities and other long-term liabilities, respectively,~~the portfolio.

Improve Operating Efficiencies. We believe we have identified significant expense reduction opportunities in the ~~Unaudited Condensed Consolidated Balance Sheet as~~next phase of ~~March 31, 2019. The adoption did not have a material impact to Partnership’s results of operations.~~

~~Due to enhanced inventory control procedures implemented in late 2018,~~this operational turnaround strategy with additional “4-wall level” operational savings, identified projects and industry benchmarking. In addition, we ~~recorded inventory impairment charges related to damaged~~are focused on improving performance through cost reductions and ~~excess inventory~~revenue enhancement and ~~to certain excess inventory allocated to pre-need customers that had been damaged due to weather related deterioration or had otherwise been deemed impractical for use by management.~~ ~~These impairments resulted in an increase of $1.9 million to cost of goods sold~~executing on other long and ~~$5.0 million charge included in other losses for the three months ended March 31, 2018.~~

On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the "Tax Act") was signed into law. The Tax Act makes broad and complex changes to the U.S. tax code by, among other things, reducing the federal corporate income tax rate, creating a new limitation on deductible interest expense, creating bonus depreciationshort-term turnaround strategies that will allow us to meet our primary objectives on a continuing basis. The next phase of cost reduction and operational performance improvement opportunities have now been identified with a focus on prioritizing identified opportunities in procurement, sourcing, product hierarchy, field labor efficiencies, shared services and outsourcing. We believe that the execution of these initiatives will result in improved profitability and cash flow across the asset base. In terms of revenue enhancements, we believe we have identified the primary drivers of our sales productivity and pre-need sales issues and, while it is in the early stages, we remain focused on improving retention of sales personnel and optimizing staffing levels across our asset base; and

Complete C-Corporation Conversion. The Recapitalization Transactions, together with our cost structure and performance improvement efforts and the contemplated C-Corporation Conversion, are important steps to revitalizing our business and positioning us for ~~full expensing on qualified property, changing the lives of post-2017 net operating loss carryovers and imposing limitations on deductibility of certain executive compensation.~~future success.

RESULTS OF OPERATIONS

We have two distinct reportable segments, Cemetery Operations and Funeral Home Operations, which are supported by corporate costs and expenses.

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Cemetery Operations

Overview

We are currently the second largest owner and operator of cemeteries in the United States of America. As of ~~March 31,~~September 30, 2019, we operated ~~322~~321 cemeteries in 27 states and Puerto Rico. We own 291 of these cemeteries, and we manage or operate the remaining 3130 under ~~lease,~~leases, operating agreements or management agreements. Revenues from our Cemetery Operations segment accounted for approximately ~~81%~~83% of our total revenues ~~during~~for the ~~quarter~~three and nine months ended ~~March 31,~~September 30, 2019.

~~Operating Results~~

~~The following table presents operating results for our Cemetery Operations for the respective reporting periods (in thousands):~~

Three Months Ended March 31,

2019

2018

Interments

$
15,944

$
19,625

Merchandise

16,541

16,627

Services

15,967

16,491

Interest income

1,822

2,135

Investment and other

7,636

7,365

Total revenues

57,910

62,243

Cost of goods sold

9,743

13,435

Cemetery expense

17,247

17,414

Selling expense

14,733

16,256

General and administrative expense

11,439

10,958

Depreciation and amortization

1,962

2,074

Total costs and expenses

55,124

60,137

Segment income

$
2,786

$
2,106

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~~The following table presents supplemental operating data for the periods presented (in thousands):~~

Three Months Ended March 31,

SUPPLEMENTAL DATA:

2019

2018

Interments performed

12,995

14,572

Net interment rights sold ⁽¹⁾

Lots

4,485

6,536

Mausoleum crypts (including pre-construction)

215

546

Niches

338

429

Total net interment rights sold ⁽¹⁾

5,038

7,511

Number of pre-need cemetery contracts written

8,434

10,162

Number of at-need cemetery contracts written

13,249

14,727

Number of cemetery contracts written

21,683

24,889

⁽¹⁾

~~Net of cancellations. Sales of double-depth burial lots are counted as two sales.~~

Cemetery interments revenues were $15.9 million for the quarter ended March 31, 2019, a decrease of $3.7 million from $19.6 million for the quarter ended March 31, 2018. The decrease was primarily due to declines in pre-need lot, mausoleum and crypt revenues of $2.1 million, $0.8 million and $0.6 million, respectively, and a net decrease in revenue from various other products totaling $0.2 million.

Cemetery merchandise revenues were $16.5 million for the quarter ended March 31, 2019, a decrease of $0.1 million from $16.6 million for the quarter ended March 31, 2018. The decrease was primarily due to declines in pre-need markers and caskets of $0.9 million and $0.3 million, respectively, ~~and a net decrease in revenues from~~ various other products totaling $0.2 million. Substantially offsetting these decreases were increases in contracts serviced that were acquired through acquisitions in prior years of $0.5 million, at-need marker revenues of $0.5 million and pre-need vault revenues of $0.3 million.

Cemetery services revenues were $16.0 million for the quarter ended March 31, 2019, a decrease of $0.5 million from $16.5 million for the quarter ended March 31, 2018. The decrease was primarily due to a decrease in at-need opening and closing revenues of $1.0 million and a net decrease in revenues from various other products totaling $0.3 million. ~~Partially offsetting these decreases were increases in pre-need opening and closing revenues of $0.6 million and at-need marker installations of $0.2 million.~~

~~Interest income was $1.8 million for the quarter ended March 31, 2019, a decrease of $0.3 million from $2.1 million for the quarter ended March 31, 2018.~~ ~~The decrease was due to a decrease in payments and a corresponding deceleration of interest received.~~

Investment and other income was $7.6 million for the quarter ended March 31, 2019, an increase of $0.3 million from $7.4 million for quarter ended March 31, 2018. The increase was primarily due to an increase in investment income, partially offset by decreases in various other sources of income.

~~Cost of goods sold was $9.7 million for the quarter ended March 31, 2019, a decrease of $3.7 million from $13.4 million for the quarter ended March 31, 2018.~~ The decrease was primarily the result of the decline in revenues, combined with vault inventory adjustments and impairments of $1.9 million recorded in the prior period that did not recur in the current period, and decreases in the cost of markers and merchandise associated with older contracts that were acquired through acquisitions.

~~Cemetery expenses were $17.2 million for the quarter ended March 31, 2019, a decrease of $0.2 million from $17.4 million for the quarter ended March 31, 2018. The decrease was primarily due to~~ a decrease in payroll of $0.7 million associated with the implementation of a general manager operating model, and a decrease in landscaping costs of $0.2 million. These decreases were partially offset by increases in repairs and maintenance of $0.3 million, employee benefits of $0.2 million and ~~various other expenses totaling $0.2 million.~~

Selling expenses were $14.7 million for the quarter ended March 31, 2019, a decrease of $1.5 million from $16.3 million for the quarter ended March 31, 2018. The decrease was due to a reduction in compensation to sales personnel of $1.2 million resulting from the decline in sales and number of sales employees.

General and administrative expenses were $11.4 million for the quarter ended March 31, 2019, an increase of $0.5 million from $11.0 million for the quarter ended March 31, 2018. The increase was primarily due to an increase in payroll of $0.9 million associated with the implementation of a general manager operating model, partially offset by a net decrease in various other expenses of $0.4 million.

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~~Depreciation and amortization expenses were $2.0 million for the quarter ended March 31, 2019, a decrease of $0.1 million from $2.1 million for the quarter ended March 31, 2018.~~ ~~The decrease was due to normal depreciation and amortization of the associated asset base.~~

~~Funeral Home Operations~~

~~Overview~~

As of March 31, 2019, we owned, operated or managed 90 funeral homes. These properties are located in 17 states and Puerto Rico. Revenues from Funeral Home Operations accounted for approximately 19% of our total revenues during the quarter ended March 31, 2019.

Operating Results

Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

The following table presents operating results for our Cemetery Operations segment for the three months ended September 30, 2019 and 2018 (in thousands):

	Three Months Ended September 30,
					Variance
	2019		2018		$			%
Interments	$	15,605	$	17,716	$	(2,111	)		(12	%)
Merchandise		18,014		18,023		(9	)		(0	%)
Services		17,068		16,419		649			4	%
Interest income		2,040		2,119		(79	)		(4	%)
Investment and other		8,023		7,128		895			13	%
Total revenues		60,750		61,405		(655	)		(1	%)
Cost of goods sold		10,677		12,866		(2,189	)		(17	%)
Cemetery expense		18,362		19,407		(1,045	)		(5	%)
Selling expense		14,609		14,251		358			3	%
General and administrative expense		11,033		10,916		117			1	%
Depreciation and amortization		1,853		1,858		(5	)		(0	%)
Total costs and expenses		56,534		59,298		(2,764	)		(5	%)
Segment operating profit	$	4,216	$	2,107	$	2,109			100	%

The following table presents supplemental operating data for the three months ended September 30, 2019 and 2018:

	Three Months Ended September 30,
					Variance
SUPPLEMENTAL DATA:	2019		2018		#			%
Interments performed		12,510		12,876		(366	)		(3	%)
Net interment rights sold ⁽¹⁾
Lots		5,614		4,787		827			17	%
Mausoleum crypts (including pre-construction)		347		235		112			48	%
Niches		379		336		43			13	%
Total net interment rights sold ⁽¹⁾		6,340		5,358		982			18	%
Number of pre-need cemetery contracts written		8,836		9,067		(231	)		(3	%)
Number of at-need cemetery contracts written		13,191		13,892		(701	)		(5	%)
Number of cemetery contracts written		22,027		22,959		(932	)		(4	%)

⁽¹⁾

Net of cancellations. Sales of double-depth burial lots are counted as two sales.

Cemetery interments revenues were $15.6 million for the three months ended September 30, 2019, a decrease of $2.1 million and 12% from $17.7 million for the three months ended September 30, 2018. The change was due to a decrease in pre-need lawn crypt sales of $1.9 million and a decrease in pre-need mausoleum revenue of $1.4 million, primarily driven by a reduction in the completion of construction projects of private estates and mausoleums. These decreases were partially offset by an increase in all at-need revenues totaling $0.6 million and a decrease in the cancellation reserve of $0.6 million.

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Cemetery service revenues were $17.1 million for the three months ended September 30, 2019, an increase of $0.6 million and4% from $16.4 million for the three months ended September 30, 2018. The change was due to an increase in pre-need grave openings.

Investment and other income was $8.0 million for the three months ended September 30, 2019, an increase of $0.9 million and 13% from $7.1 million for the three months ended September 30, 2018. The change was due to an increase in investment income of $1.2 million, partially offset by a net decrease of $0.3 million in various other sources of other income.

Cost of goods sold was $10.7 million for the three months ended September 30, 2019, a decrease of $2.2 million and 17% from $12.9 million for the three months ended September 30, 2018. The change was due to a decrease in costs primarily related to markers, lots and mausoleums with an impact of $1.4 million, combined with lower revenue activity with an impact of $0.8 million.

Cemetery expenses were $18.4 million for the three months ended September 30, 2019, a decrease of $1.0 million and 5% from $19.4 million for the three months ended September 30, 2018. The change was due to a decrease in payroll and related taxes of $0.8 million, a decrease in landscaping and lawncare of $0.6 million and a decrease in employee benefits of $0.4 million. These decreases were partially offset by increases in real estate taxes of $0.2 million, repairs and maintenance of $0.2 million, and various other expenses of $0.4 million.

Selling expenses were $14.6 million for the three months ended September 30, 2019, an increase of $0.4 million and 3% from $14.3 million for the three months ended September 30, 2018. The change was primarily due to an increase in marketing and advertising expenses of $0.9 million and an increase in regional overhead salaries and wages of $0.2 million. These increases were partially offset by a decrease in sales incentive compensation of $0.3 million as a result of a decrease in contracts written, a decrease in employee benefits of $0.3 million and a net decrease in various other expenses of $0.1 million.

Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

The following table presents operating results for our Cemetery Operations segment for the nine months ended September 30, 2019 and 2018 (in thousands):

	Nine Months Ended September 30,
					Variance
	2019		2018		$			%
Interments	$	52,544	$	58,130	$	(5,586	)		(10	%)
Merchandise		51,870		51,766		104			0	%
Services		50,400		50,647		(247	)		(0	%)
Interest income		5,815		6,671		(856	)		(13	%)
Investment and other		23,659		24,114		(455	)		(2	%)
Total revenues		184,288		191,328		(7,040	)		(4	%)
Cost of goods sold		31,263		39,387		(8,124	)		(21	%)
Cemetery expense		57,245		57,828		(583	)		(1	%)
Selling expense		44,839		47,673		(2,834	)		(6	%)
General and administrative expense		33,430		32,037		1,393			4	%
Depreciation and amortization		5,735		6,043		(308	)		(5	%)
Total costs and expenses		172,512		182,968		(10,456	)		(6	%)
Segment operating profit	$	11,776	$	8,360	$	3,416			41	%

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The following table presents supplemental operating data for the nine months ended September 30, 2019 and 2018:

	Nine Months Ended September 30,
					Variance
	2019		2018		#			%
SUPPLEMENTAL DATA:
Interments performed		39,048		41,550		(2,502	)		(6	%)
Net interment rights sold ⁽¹⁾
Lots		17,295		20,264		(2,969	)		(15	%)
Mausoleum crypts (including pre-construction)		904		1,082		(178	)		(16	%)
Niches		1,269		1,195		74			6	%
Total net interment rights sold (1)		19,468		22,541		(3,073	)		(14	%)
Number of pre-need cemetery contracts written		27,336		30,776		(3,440	)		(11	%)
Number of at-need cemetery contracts written		41,063		43,895		(2,832	)		(6	%)
Number of cemetery contracts written		68,399		74,671		(6,272	)		(8	%)

⁽¹⁾

Net of cancellations. Sales of double-depth burial lots are counted as two sales.

Cemetery interments revenues were $52.5 million for the nine months ended September 30, 2019, a decrease of $5.6 million and 10% from $58.1 million for the nine months ended September 30, 2018. The change was due to a decrease in pre-need lot sales of $2.5 million, a decrease in pre-need lawn crypt sales of $2.4 million and a decrease in pre-need mausoleum revenue of $1.3 million, primarily driven by a reduction in the completion of pre-construction projects of private estates and mausoleums. These decreases were partially offset by a net increase in various other interment revenues of $0.6 million.

Cemetery services revenues were $50.4 million for the nine months ended September 30, 2019, a decrease of $0.2 million from $50.6 million for the nine months ended September 30, 2018. The change was due to a decrease in at-need openings and closings of $1.5 million and a decrease in non-opening and closing pre-need services of $0.5 million. These decreases were partially offset by an increase in pre-need openings and closings of $1.2 million and an increase in revenues from non-opening and closing at-need services of $0.6 million.

Interest income was $5.8 million for the nine months ended September 30, 2019, a decrease of $0.9 million and 13% from $6.7 million for the nine months ended September 30, 2018. The change was primarily due to a decrease in accounts receivable outstanding driven by the accelerated collection of pre-need receivables in 2018.

Investment and other income was $23.7 million for the nine months ended September 30, 2019, a decrease of $0.5 million and 2% from $24.1 million for the nine months ended September 30, 2018. The change was due to land sales of $0.5 million in the prior period that did not recur in the current period, combined with a net decrease of $1.0 million in various other sources of other income. These decreases were partially offset by an increase in investment income of $1.0 million.

Cost of goods sold was $31.3 million the nine months ended September 30, 2019, a decrease of $8.1 million and 21% from $39.4 million for the nine months ended September 30, 2018. The change was due to a decrease of $2.9 million related to lower revenue activity and a $3.3 million decrease in costs primarily related to markers, caskets, lots and the servicing of contacts acquired through acquisition. These decreases were combined with $1.9 million of vault inventory adjustments and impairments that were recorded in the first quarter of 2018, but which did not recur in 2019.

Cemetery expenses were $57.2 million for the nine months ended September 30, 2019, a decrease of $0.6 million and 1% from $57.8 million for the nine months ended September 30, 2018. The change was due to decreases in payroll and related taxes of $2.3 million, employee benefits of $0.2 million and various other expenses of $0.1 million. These decreases were partially offset by an increase in repairs and maintenance of $0.9 million, an increase in landscaping and lawncare expense of $0.6 million, and an increase in real estate taxes of $0.5 million.

Selling expenses were $44.8 million for the nine months ended September 30, 2019, a decrease of $2.8 million and 6% from $47.7 million for the nine months ended September 30, 2018. The change was due to a decrease in sales incentive compensation of $2.6 million related to a decrease in contracts written in the current period and the elimination of an annual sales trip bonus, a decrease in other payroll of $0.5 million partially due to elimination of a telemarketing group, a decrease in related payroll taxes and benefits of $0.6 million and a decrease in various other expenses of $0.4 million. These decreases were partially offset by an increase in marketing and advertising expense of $1.3 million.

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General and administrative expenses were $33.4 million for the nine months ended September 30, 2019, an increase of $1.4 million and 4% from $32.0 million for the nine months ended September 30, 2018. The change was due to an increase in payroll and related taxes of $3.6 million associated with the implementation of a general manager operating model, combined with an increase in the cost of surety bonds of $0.5 million. These increases were partially offset by decreases in insurance expense of $0.8 million, legal fees of $0.7 million, non-general manager related payroll of $0.5 million, employee benefits of $0.4 million and a net decrease in various other expenses of $0.3 million.

Depreciation and amortization expenses were $5.7 million for the nine months ended September 30, 2019, a decrease of $0.3 million and 5% from $6.0 million for the nine months ended September 30, 2018. The change was due to routine depreciation and amortization of the associated asset base.

Funeral Home Operations

Overview

As of September 30, 2019, we owned, operated or managed 89 funeral homes. These properties are located in 17 states and Puerto Rico. Revenues from Funeral Home Operations accounted for approximately 17% of our total revenues for the three and nine months ended September 30, 2019.

Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

The following table presents operating results for our Funeral Home Operations for the ~~respective reporting periods~~three months ended September 30, 2019 and 2018 (in thousands):

					Three Months Ended September 30,
	Three Months Ended March 31,								Variance
	2019		2018		2019		2018		$			%
Merchandise	$	6,275	$	7,429	$	5,572	$	5,581	$	(9	)		(0	%)
Services		7,284		8,273		6,829		6,199		630			10	%
Total revenues		13,559		15,702		12,401		11,780		621			5	%
Merchandise		2,317		2,478		1,896		1,341		555			41	%
Services		5,553		5,518		5,351		5,493		(142	)		(3	%)
Depreciation and amortization		588		713		602		652		(50	)		(8	%)
Other		3,630		5,040		3,422		3,314		108			3	%
Total expenses		12,088		13,749		11,271		10,800		471			4	%
Segment income	$	1,471	$	1,953
Segment operating profit					$	1,130	$	980	$	150			15	%

Funeral home services revenues were $6.8 million for the three months ended September 30, 2019, an increase of $0.6 million and 10% from $6.2 million for the three months ended September 30, 2018. The change was due to an increase in at-need service revenues of $0.4 million combined with a net increase in various other funeral home service revenues of $0.2 million.

Funeral home expenses were $11.3 million for the three months ended September 30, 2019, an increase of $0.5 million and 4% from $10.8 million for the three months ended September 30, 2018. The change was due to an increase in casket costs of $0.5 million, a gain on the disposal of assets of $0.2 million in 2018 that did not recur in 2019, and a net increase in various other expenses of $0.2 million. These increases were offset by a $0.4 million decrease in expenses driven by divestitures in 2018.

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Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

The following table presents operating results for our Funeral Home Operations for the nine months ended September 30, 2019 and 2018 (in thousands):

	Nine Months Ended September 30,
					Variance
	2019		2018		$			%
Merchandise	$	17,920	$	19,532	$	(1,612	)		(8	%)
Services		20,907		21,841		(934	)		(4	%)
Total revenues		38,827		41,373		(2,546	)		(6	%)
Merchandise		5,227		4,927		300			6	%
Services		16,363		16,593		(230	)		(1	%)
Depreciation and amortization		1,788		2,066		(278	)		(13	%)
Other		11,046		12,315		(1,269	)		(10	%)
Total expenses		34,424		35,901		(1,477	)		(4	%)
Segment operating profit	$	4,403	$	5,472	$	(1,069	)		(20	%)

Funeral home merchandise revenues were ~~$6.3~~$17.9 million for the ~~quarter~~nine months ended ~~March 31,~~September 30, 2019, a decrease of ~~$1.2~~$1.6 million and 8% from ~~$7.4~~$19.5 million for the ~~quarter~~nine months ended ~~March 31,~~September 30, 2018. The ~~decrease~~change was ~~primarily~~ due to ~~decreases~~a decrease in revenues from the maturing of pre-need ~~casket~~contracts with an impact of $1.0 million, a net decrease in revenues ~~at-need casket revenues and~~from various other ~~product~~products of $0.4 million and a $0.2 million decrease in revenues driven by divestitures in 2018.

Funeral home services revenues were $20.9 million for the nine months ended September 30, 2019, a decrease of $0.9 million and 4% from $21.8 million for the nine months ended September 30, 2018. The change was due to a decrease in insurance commission revenue of $0.3 million, a decrease in revenues from the maturing of pre-need contracts with an impact of $0.2 million, a net decrease in at-need services of $0.2 million, and a net decrease in revenues from various other products and divestitures of $0.2 million.

Funeral home expenses were $34.4 million for the nine months ended September 30, 2019, a decrease of $1.5 million and 4% from $35.9 million for the nine months ended September 30, 2018. The change was due to savings of $1.8 million achieved with the elimination of the insurance sales group and a decrease in depreciation and amortization of $0.3 million related to routine depreciation and amortization of the associated asset base. In addition, there was a $0.4 million ~~respectively, combined with~~decrease in funeral home expenses related to divestitures in 2018. Partially offsetting these decreases was an increase in casket costs of $0.7 million, a gain on the ~~impact~~disposal of ~~properties divested since~~assets of $0.2 million in 2018 that did not recur in 2019 and a net increase in various other expenses of $0.1 million.

Corporate

Operating Results

Three Months Ended September 30, 2019 Compared to Three Months Ended September 30, 2018

Corporate Overhead

We categorize corporate overhead as the following:

payroll related to employees operating at the corporate headquarters;

professional fees primarily consisting of legal fees, auditing and accounting fees, and fees for other third party service providers;

information technology;

stock compensation; and

expenses to operate the corporate headquarters.

In the current and prior ~~period~~year we incurred a number of expenses that are likely to not recur. They primarily consisted of severance from corporate reductions in force, C-Corporation conversion fees, ASC 606 implementation costs, financial advisory fees, executive placement fees and retention incentives, and are summarized in the following table:

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	Three Months Ended September 30,
					Variance
	2019		2018		$			%
Corporate overhead	$	11,595	$	12,876	$	(1,281	)		(10	%)
Non-recurring adjustments
Severance		457		434		23			5	%
C-Corporation Conversion fees		614		982		(368	)		(37	%)
Other professional fees and other		1,124		1,741		(617	)		(35	%)
Total non-recurring adjustments		2,195		3,157		(962	)		(30	%)
Corporate overhead, adjusted	$	9,400	$	9,719	$	(319	)		(3	%)

Corporate overhead expense was $11.6 million for the three months ended September 30, 2019, a decrease of $1.3 million and 10% from $12.9 million for the three months ended September 30, 2018. The change was due to the following:

savings in payroll and benefits of $0.6 million resulting primarily from a reduction in workforce earlier in the year;

a reduction in professional fees of $0.9 million primarily resulting from completion of the ASC 606 implementation project and C-Corporation conversion fees; and

an increase in payroll of $0.2 million due to severance and bonuses

Other Gains (Losses), Net

Other gains (losses), net was a loss of $0.1 million for the three months ended September 30, 2019, an increase of $0.8 million and ~~a return~~118% compared to a ~~normal level~~gain of ~~cancellations~~$0.7 million for the three months ended September 30, 2018. The change was due to a gain from the sale of ~~$0.1 million~~ ~~as there was~~ a ~~reversal of the cancellation reserve~~funeral home and an unused cemetery building in the prior year that did not recur in the current ~~period~~.

Funeral home services revenues were $7.3 million for the quarter ended March 31, 2019, a decrease of $1.0 million from $8.3 million for the quarter ended March 31, 2018. The decrease was primarily due to a decrease in at-need services of $0.4 million, a decrease in insurance commission revenues of $0.3 million resulting from selling fewer insurance contracts, the impact of properties divested since the prior period of $0.1 million, a return to a normal level of cancellations of $0.1 million ~~as there was a reversal of the cancellation reserve in the prior year that did not recur in the current period~~ ~~and a net decrease of $0.1 million in revenues from various other services.~~

Funeral home expenses were $12.1 million for the quarter ended March 31, 2019, a decrease of $1.7 million from $13.7 million for the quarter ended March 31, 2018. The decrease was primarily due to savings of $1.0 million from elimination of the insurance sales group, a decrease in legal fees of $0.2 million, the impact of properties divested since the prior period of $0.2 million ~~and~~ ~~a net decrease of $0.3 million in various other expenses.~~

~~Corporate Overhead~~

Corporate overhead expense was $13.4 million for the quarter ended March 31, 2019, an increase of $1.6 million from $11.8 million for the quarter ended March 31, 2018. The increase was primarily due to increases in professional fees of $1.9 million largely attributable due to increased costs associated with consulting and professional fees arising from the potential C-Corp conversion, debt refinancing, various employee severance and other ongoing management initiatives. This increase was partially offset by a decrease in salaries and benefits of $0.3 million.

~~Corporate Depreciation and Amortization~~

~~Depreciation and amortization expense was $0.2 million for the quarter ended March 31, 2019, a decrease of $0.1 million from $0.3 million for the quarter ended March 31, 2018.~~ ~~The decrease was primarily due to normal depreciation and amortization of the associated asset base.~~

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~~Gains and Losses~~

For the quarter ended March 31, 2019, there were no other gains or losses. For the quarter ended March 31, 2018, other losses were $5.2 million and consisted primarily of losses related to damaged merchandise of approximately $5.0 million which represented the probable amount of the loss which was recognized during the quarter. Additionally, there were other losses recognized on a property impairment. period.

Interest Expense

Interest expense was ~~$13.2~~$12.8 million for the ~~quarter~~three months ended ~~March 31,~~September 30, 2019, an increase of ~~$6.1~~$5.1 million and 67% from ~~$7.1~~$7.6 million for the three months ended September 30, 2018. The change was due to the following:

an increase of $8.2 million related to a higher interest rate and principal on the Senior Secured Notes compared to the interest rate and principal under the prior revolving credit facility;

a decrease of $2.8 million resulting from the payoff of the revolving credit facility in the second quarter ~~ended March 31, 2018.~~ ~~The increase was principally~~of 2019; and

a decrease of $0.3 million due to a ~~write-off of $2.4 million in~~longer amortization period for deferred financing ~~costs associated with amending our debt agreement in the first quarter~~fees.

Loss on Impairment of ~~2019, combined with an increase~~Goodwill

Loss on impairment of ~~$1.9~~goodwill was $24.9 million related to the ticking fee under the Tranche A Revolving Credit Facility. Additionally the Partnership had a higher weighted average interest rate and higher weighted average line of credit balance outstanding for the three months ended September 30, 2019. During the current ~~year compared to~~quarter, management conducted an interim goodwill impairment assessment. As a result of such assessment, management concluded on November 4, 2019 that the ~~prior year~~carrying value of our Cemetery Operations reporting unit exceeded its fair value, and our goodwill was fully impaired as of September 30, 2019, resulting in a $24.9 million impairment charge. This impairment charge will not result in any current or future cash expenditures. There was no goodwill impairment .for the three months ended September 30, 2018.

Income Tax Benefit (Expense)

~~There was no~~ Income tax benefit orwas $1.5 million for the three months ended September 30, 2019 compared to $0.3 million of income tax expense for the three months ended September 30, 2018. The income tax benefit in the three months ended September 30, 2019 was due to our ability to use our net operating loss carryovers to offset deferred tax liabilities recorded in the second quarter of 2019. The income tax expense for the quarter ended March 31, 2019 compared to $2.4 million income tax benefit for the quarter ended March 31, 2018. The lack of benefit for the quarter ended March 31, 2019 was driven by the fact that the statutory maximum in reductions to deferred tax liabilities had been already achieved in the fourth quarter of 2018. The benefit for the quarter ended March 31,September 30, 2018 was primarily driven by changes in the 2017 Tax Act, ~~with~~which allowed ~~the Partnership~~us to use post December 31, 2017 net operating losses against ~~long life~~long-life deferred tax liabilities. Our effective tax rate differs from our statutory tax rate primarily, because our legal entity structure includes different tax filing entities, including partnerships with significant income that are not subject to entity level income taxes.

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Nine Months Ended September 30, 2019 Compared to Nine Months Ended September 30, 2018

Corporate Overhead

The following table summarizes our corporate overhead by expense category for the nine months ended September 30, 2019 and 2018 (in thousands):

	Nine Months Ended September 30,
					Variance
	2019		2018		$			%
Corporate overhead	$	38,145	$	39,868	$	(1,723	)		(4	%)
Non-recurring adjustments
Severance		1,433		1,023		410			40	%
C-Corporation Conversion fees		1,671		1,670		1			0	%
Other professional fees and other		4,842		5,185		(343	)		(7	%)
Total non-recurring adjustments		7,946		7,878		68			1	%
Corporate overhead, adjusted	$	30,199	$	31,990	$	(1,791	)		(6	%)

Corporate overhead expense was $38.1 million for the nine months ended September 30, 2019, a decrease of $1.7 million and 4% from $39.9 million for the nine months ended September 30, 2018. The change was due to the following:

savings in payroll and benefits of $3.0 million resulting from a reduction in workforce earlier in the year;

a decrease in accounting fees of $1.2 million primarily related to accounting consulting and completion of the ASC 606 implementation project;

a decrease of $1.2 million in various other expenses, with the largest being recruiting with an impact of $0.5 million;

an increase in stock compensation expense of $0.8 million;

an increase in legal settlements of $0.9 million;

an increase in payroll of $1.0 million due to severance and bonuses; and

an increase of $1.0 million in other professional fees primarily resulting from fees paid to a financial advisor and fees paid to consultants; partially offset by fees paid to an interim executive in the prior year that were not incurred in the current period.

Corporate Depreciation and Amortization

Depreciation and amortization expense was $0.6 million for the nine months ended September 30, 20199, a decrease of $0.1 million and 20% from $0.7 million for the nine months ended September 30, 2018. The change was due to routine depreciation and amortization of the associated asset base.

Other Losses, Net

Other losses, net was $3.6 million for the nine months ended September 30, 2019, a decrease of $0.9 million and 21% from $4.5 million for the nine months ended September 30, 2018. Other losses, net for the nine months ended September 30, 2019 consisted primarily of a $2.1 loss on the termination of a management agreement and a $1.3 million impairment of cemetery property, both of which occurred in the second quarter of 2019. Other losses, net for the nine months ended September 30, 2018 consisted primarily of losses related to damaged merchandise of approximately $5.0 million, partially offset by a gain of $0.7 million from the sale of a funeral home and an unused cemetery building.

Interest Expense

Interest expense was $35.3 million for the nine months ended September 30, 2019, an increase of $12.4 million and 54% from $22.9 million for the nine months ended September 30, 2018. The change was due to the following:

an increase of $8.8 million related to a higher interest rate and principal on the Senior Secured Notes compared to the interest rate and principal under the prior revolving credit facility;

an increase of $3.4 million due to the write-off and amortization of deferred financing fees; and

an increase of $0.2 million related to higher interest and increased borrowings on the revolving credit facilities in the first half of 2019.

Loss on Debt Extinguishment

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Loss on debt extinguishment was $8.5 million for the nine months ended September 30, 2019. This related to the write-off of deferred financing fees of $6.9 million and original issue discounts of $1.6 million associated with the refinancing of the senior notes and revolving credit facilities. For the nine months ended September 30, 2018 there was no loss on debt extinguishment.

Loss on Impairment of Goodwill

Loss on impairment of goodwill was $24.9 million for the nine months ended September 30, 2019. During the current quarter management conducted an interim goodwill impairment assessment. As a result of such assessment, management concluded on November 4, 2019 that the carrying value of our Cemetery Operations reporting unit exceeded its fair value, and our goodwill was fully impaired as of September 30, 2019, resulting in a $24.9 million impairment charge. This impairment charge will not result in any current or future cash expenditures. There was no goodwill impairment for the nine months ended September 30, 2018.

Income Tax Expense

Income tax expense was $4.8 million for the nine months ended September 30, 2019 compared to $2.0 million income tax benefit for nine months ended September 30, 2018. The income tax expense in the nine months ended September 30, 2019 was primarily due to IRC Section 382 limitations created by the Preferred Offering on our ability to use our net operating loss carryovers to offset existing deferred tax liabilities. The income tax benefit for the nine months ended September 30, 2018 was primarily driven by changes in the 2017 Tax Act with allowed us to use post December 31, 2017 net operating losses against long-life deferred tax liabilities. Our effective tax rate differs from our statutory tax rate primarily, because our legal entity structure includes different tax filing entities, including partnerships with significant income that are not subject to entity level income taxes.

LIQUIDITY AND CAPITAL RESOURCES

General

Our primary sources of liquidity are cash generated from operations and ~~borrowings under our revolving credit facility.~~the remaining balance of the proceeds from the sale of the Senior Secured Notes. As ana MLP, our primary cash requirements, in addition to normal operating expenses, are for capital expenditures, net contributions to the merchandise and perpetual care trust funds, debt service and cash distributions. In general, as part of our operating strategy, we expect to fund:

working capital deficits through available cash, including the remaining balance of the proceeds from the sale of the Senior Secured Notes, cash generated from operations ~~additional borrowings~~and ~~sales~~divestitures of ~~underperforming properties~~non-core assets;

expansion capital expenditures, net contributions to the merchandise and perpetual care trust funds and debt service obligations through available cash, cash generated from operations ~~additional borrowings~~ or asset sales. Amounts contributed to the merchandise trust funds will be withdrawn at the time of the delivery of the product or service sold to which the contribution, ~~relates,~~ which will reduce the amount of additional ~~borrowings;~~borrowings or asset sales needed; and

any cash distributions we are permitted and determine to pay in accordance with our partnership agreement and maintenance capital expenditures through available cash and cash flows from operating activities.

While ~~the Partnership relies~~we rely heavily on ~~its~~our available cash and cash flows from operating activities ~~and borrowings under its credit facility~~ to execute ~~its~~our operational strategy and meet ~~its~~our financial commitments and other short-term financial needs, ~~the Partnership~~we cannot be certain that sufficient capital will be generated through operations or be available to ~~the Partnership~~us to the extent required and on acceptable terms. ~~Moreover, although the Partnership's cash flows from operating activities~~We have ~~been positive, the Partnership has~~ experienced negative financial trends, including use of cash in operating activities, which, when considered in the aggregate, raise substantial doubt about the Partnership’s ability to continue as a going concern. These negative financial trends include:

~~the Partnership has~~we have continued to incur net losses for the three and nine months ended ~~March 31,~~September 30, 2019 and ~~has~~have an accumulated deficit and negative cash flows from operating activities as of ~~March 31,~~September 30, 2019, due to an increased competitive environment, increased expenses due to the proposed ~~conversion of the Partnership to a C-corporation~~C-Corporation Conversion and increases in professional fees and compliance ~~costs.~~costs; and

a decline in billings coupled with the increase in professional, compliance and consulting expenses tightened ~~the Partnership's~~our liquidity position and increased reliance on long-term financial obligations, which, in turn, eliminated ~~the Partnership's~~our ability to pay ~~distributions;~~distributions.

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our failure to comply with certain covenants of our Credit Agreement (as defined below), as amended due to our prior inability to complete timely filings of our Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q, exceeding the maximum consolidated leverage ratio financial covenant for the periods ended December 31, 2017 and March 31, 2018, exceeding the maximum consolidated secured net leverage ratio financial covenant for the periods ended June 30, 2018, September 30, 2018 and December 31, 2018 and not being able to achieve the minimum consolidated fixed charge coverage ratio for the periods ended June 30, 2018, September 30, 2018 and December 31, 2018. As disclosed in the credit facility subsection in ~~Part I, Item 1. Financial Statements (Unaudited)Note 1 General and Note 9 Long-Term Debt, these failures constituted defaults that our lenders have waived; and~~

~~3.00% on July 1, 2019, of which (x) 2.00% shall PIK and (y) 1.00% shall be payable in cash, unless Required Lenders agree to PIK;~~

~~1.00% on August 1, 2019, payable in cash, unless the Required Lenders agree to PIK;~~

~~1.00% on September 1, 2019, payable in cash, unless the Required Lenders agree to PIK; and~~

~~1.00% on October 1, 2019, PIK;~~

During 2018 and 2019, ~~the Partnership~~we implemented (and will continue to implement) various actions to improve profitability and cash flows to fund operations. A summary of these actions is as follows:

continue to manage recurring operating expenses and seek to limit non-recurring operating expenses over the next twelve-month ~~period, which includes the January 2019 Restructuring actions discussed above;~~

~~complete sales of certain assets and/or businesses to provide supplemental liquidity;~~period; and

~~for the reasons disclosed above, the Partnership was not in compliance with certain~~identify and complete sales of ~~its amended credit facility covenants as of December 31, 2017, March 31, 2018, June 30, 2018, September 30, 2018 and December 31, 2018. These failures constituted defaults that the lenders agreed~~select assets to ~~waive pursuant to the Sixth Amendment and Waiver, the Seventh Amendment and Waiver and the Eighth Amendment and Waiver to the Partnership's credit facility~~provide supplemental liquidity.

Based on ~~June 12, 2018, July 13, 2018 and February 4, 2019, respectively, as disclosed in the credit facility subsection in Note 9 Long-Term Debt. Moreover, based on the Partnership's~~our forecasted operating performance, planned actions to improve profitability, cash flows and projected plans to file financial statements on a timely basis consistent with the debt covenants, ~~the Partnership does~~we do not believe it is probable that ~~the Partnership~~we will ~~further~~ breach the covenants under ~~its amended credit facility~~the Indenture for the next twelve-month period. However, there is no certainty that ~~the Partnership's~~our actual operating performance and cash flows will not be substantially different from forecasted results, and no certainty ~~the Partnership~~we will not need ~~further~~ amendments to ~~its credit facility~~the Indenture in the future. Factors that could impact the significant assumptions used by ~~the Partnership~~us in assessing ~~its~~our ability to satisfy its financial covenants include the following:

operating performance not meeting reasonably expected forecasts;

failing to generate profitable sales;

failing to achieve cost reduction targets;

inability to achieve and capitalize on its divestiture strategy;

investments in the Partnership's trust funds experiencing significant declines due to factors outside its control;

~~being unable~~inability to compete successfully with other cemeteries and funeral homes in the Partnership's markets;

the number of deaths in the Partnership's markets declining; and

the mix of funeral and cemetery revenues between burials and cremations.

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If ~~the Partnership's~~our planned, implemented and not yet implemented actions are not completed or implemented and cash savings are not realized, ~~and the Partnership fails~~or we fail to improve ~~its~~our operating performance and cash flows or ~~the Partnership is~~we are not able to comply with the covenants under ~~its amended credit facility,~~ the ~~Partnership~~Indenture, we may be forced to limit ~~its~~our business activities, limit our ability to implement further modifications to ~~its~~our operations ~~further~~or limit the effectiveness of some actions that are included in our forecasts, amend ~~its credit facility~~the Indenture and/or seek other sources of capital, and ~~the Partnership~~we may be unable to continue as a going concern. Additionally, a failure to generate additional liquidity could negatively impact ~~the Partnership's~~our access to inventory or services that are important to the operation of ~~the Partnership's~~our business. Given ~~the Partnership's~~our level of cash and cash equivalents, to preserve capital resources and liquidity, the Board of Directors of the General Partner concluded that it was not in the best interest of unitholders to pay distributions to unitholders after the first quarter of 2017. In addition, the ~~Partnership's revolving credit facility~~Indenture effectively prohibits the Partnership from making distributions to unitholders. Any of these events may have a material adverse effect on ~~the Partnership's~~our results of operations and financial condition. ~~The~~Our ability ~~of the Partnership~~ to ~~meets its~~meet our obligations at ~~March 31,~~September 30, 2019, and to continue as a going concern, is dependent upon achieving the action plans noted above. The unaudited condensed consolidated financial statements for the ~~quarter~~three and nine months ended ~~March 31,~~September 30, 2019 were prepared on the basis of a going concern, which contemplates that ~~the Partnership~~we will be able to realize assets and discharge liabilities in the normal course of business. Accordingly, they do not give effect to adjustments, if any, that would be necessary should ~~the Partnership~~we be required to liquidate its assets.

Goodwill

The ~~ability~~Partnership’s goodwill balance was $24.9 million at September 30, 2019 and December 31, 2018. Due to a decline in the market value of the ~~Partnership~~Partnership’s unit values and the Partnership’s significant under-performance relative to ~~meet~~historical or projected future operating results noted during the nine months ended September 30, 2019, management conducted an interim goodwill impairment assessment as of September 30, 2019. This impairment charge will not result in any current or future cash expenditures. As a result of such assessment, management concluded on November 3, 2019 that the carrying value of the Partnership’s Cemetery Operations reporting unit exceeded its ~~obligations at March 31,~~fair value, and the Partnership’s goodwill was fully impaired as of September 30, 2019. We recognized a $24.9 million impairment charge included in Other losses, net in the accompanying unaudited condensed consolidated statement of operations during the three and nine months ended September 30, 2019.

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Cash Flows

The following table summarizes our unaudited condensed consolidated statements of cash flows by class of activities in thousands:

	Nine Months Ended September 30,

	2019			2018
Net cash provided by (used in) operating activities	$	(26,755	)	$	19,411
Net cash used in investing activities		(4,493	)		(10,877	)
Net cash provided by (used in) financing activities		77,196			(7,312	)

Significant sources and uses of cash during the Nine Months Ended September 30, 2019 and to continue as a going concern is dependent upon the availability of a refinancing in full of the obligations with respect to the Tranche A Revolving Credit Facility, continued ability to manage expenses and increase sales. As such, the unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q do not include any adjustments that might result from the outcome of these uncertainties.2018

~~Cash Flows~~Operating Activities

Net cash used in ~~operating activities~~operations was ~~$13.1~~$26.8 million ~~during~~for the ~~quarter~~nine months ended ~~March 31,~~September 30, 2019 ~~a change~~compared to $19.4 million of ~~$19.3 million from $6.2 million in~~ net cash provided by ~~operating activities~~operations during the ~~quarter~~nine months ended ~~March 31,~~September 30, 2018. The ~~$19.3 million unfavorable movement resulted~~following attributed to the decrease in cash outflows of $46.2 million:

Change in cash from ~~$13.7 million net cash outflow to fund changes in working capital~~accounts payable and ~~a $5.6 million increase in net loss excluding non-cash items. The increase in net working capital was primarily the result of managing~~accrued liabilities – $10.4 million: We aggressively managed our working capital ~~through~~in 2018 to maximize cash flows. Upon completion of the Recapitalization Transaction, we made a significant paydown on our payables.

Cash interest – $8.6 million: Cash interest paid during the nine months ended September 30, 2019 increased by $8.6 million as compared to the prior period, as we incurred more debt under the amended credit facility, which had higher debt service costs during the first half of 2018. In addition, our Senior Secured Notes, which we used to refinance our prior revolving credit facility at the end of the second quarter of 2018 have a higher interest rate and principal as compared to the prior revolving credit facility.

Impact of early payoff – $13.6 million: In order to improve the liquidity profile of the business in 2018, we ran an ~~increased focus on collection~~early payoff program. The early payoff program offered customers with outstanding pre-need receivable contracts the opportunity to pre-pay their outstanding balance at a 15% discount. This resulted in $13.6 million of ~~accounts receivable. The increase~~net cash flow in ~~net loss excluding non-cash items~~the nine months ended September 30, 2018. This early payoff program was ~~due to a decrease in revenues coupled with increased general and administrative expense due to increased consulting and professional fees resulting from~~not run during the ~~potential C-Corp conversion and due to various changes~~nine months ended September 30, 2019.

Merchandise trust distributions – $10.9 million: Distribution of excess income in our ~~senior management.~~merchandise trusts during the nine months ended September 30, 2019 was $0.8 million as compared to $11.7 million during the prior period.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2019 was ~~$1.9~~$4.5 million ~~during~~as compared to $10.9 million in the ~~quarter~~comparable 2018 period. The cash used in investing activities for the nine months ended ~~March 31,~~September 30, 2019 ~~a decrease~~was primarily attributable to capital expenditures of ~~$3.3~~$5.7 million for both purchases and maintenance of property, plant and equipment, offset by proceeds from ~~$5.2 million during~~ the ~~quarter ended March 31, 2018.~~termination of one of our management agreements of $1.3 million. Net cash used in investing activities during ~~2019~~the nine months ended September 30, 2018 consisted of ~~$1.9~~$10.2 million used for capital ~~expenditures. The decrease was primarily attributable to a $2.5~~expenditures and $1.7 million ~~decrease in capital expenditures compared to the quarter ended March 31, 2018, which included $1.4~~used for acquisitions, partially offset by $1.0 million ~~related to the construction~~ of ~~a funeral home on an existing cemetery location. In addition the prior year had a use of cash of $0.8 million related to acquisitions.~~proceeds from asset sales.

Financing Activities

Net cash provided by financing activities ~~was $21.3~~for the nine months ended September 30, 2019 increased $84.5 million from the nine months ended September 30, 2018 to $77.2 million, primarily due to net proceeds of $410.1 million and $57.5 million from the issuance of the Senior Secured Notes and the Preferred Offering, respectively, which were both related to our comprehensive recapitalization, as described in Note 8 Long-Term Debt and Note 9 Redeemable Convertible Preferred Units and Partners’ Deficit of the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q. These investing proceeds were offset by the repayment in full of the prior senior notes and revolving credit facilities of $366.6 million, the payment of $18.0 million in financing costs related to the debt refinancing and debt amendments and principal payments of $1.0 million for ~~the quarter ended March 31, 2019, an increase of $18.7 million from $2.6 million for the quarter ended March 31, 2018.~~our finance leases. Net cash provided by financing activities during ~~2019 was driven by~~the nine months ended September 30, 2018 consisted primarily of $4.0 million of net proceeds from ~~long-term debt of~~borrowings, partially offset by $3.3 million of financing ~~costs incurred~~costs.

Table of ~~$2.6 million.~~Contents

~~Capital Expenditures~~

~~Our capital requirements consist primarily of:~~

~~Expansion capital expenditures – we consider expansion capital expenditures to be capital expenditures that expand the capacity of our existing operations; and~~

Maintenance capital expenditures – we consider maintenance capital expenditures to be any capital expenditures that are not expansion capital expenditures – generally, this will include furniture, fixtures, equipment and major facility improvements that are capitalized in accordance with generally accepted accounting principles.

The following table summarizes maintenance and expansion capital expenditures, excluding amounts paid for acquisitions, for the periods presented (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Maintenance capital expenditures	$	553	$	1,797	$	1,646	$	3,954
Expansion capital expenditures		352		741		4,097		6,210
Total capital expenditures	$	905	$	2,538	$	5,743	$	10,164

Contractual Obligations

In the normal course of business, we enter into various contractual and contingent obligations that impact or could impact our liquidity. The table below contains the significant changes from the Contractual Obligations disclosed in our 2018 Annual Report on Form 10-K filed on April 3, 2019 (the “Annual Report”). The changes are reflective of the refinancing of our senior notes and the issuance of our Senior Secured Notes (in thousands):

Three Months Ended March 31,

2019

2018

Maintenance capital expenditures

$
1,012

$
1,044

Expansion capital expenditures

891

3,325

Total capital expenditures

$
1,903

$
4,369

	Total		2019		2020-2022		2023-2025		2026+
Contractual Obligations:
Debt⁽¹⁾	$	714,744	$	22,994	$	145,538	$	546,212	$	—
Total	$	714,744	$	22,994	$	145,538	$	546,212	$	—

⁽¹⁾

Represents the interest payable and par value of our Senior Secured Notes (as defined herein) due and does not include the unamortized debt discounts of at September 30, 2019. This table assumes that we pay the fixed rate of 7.50% per annum in cash plus the fixed rate of 4.00% per annum payable in kind through January 30, 2022 and that current principal amounts outstanding under the Senior Secured Notes are not repaid until the maturity date of June 30, 2024.

43Long-Term Debt and Redeemable Convertible Preferred Units

~~Table of Contents~~Senior Secured Notes

On June 27, 2019, StoneMor Partners L.P., Cornerstone Family Services of West Virginia Subsidiary, Inc. and, collectively with the Partnership, certain direct and indirect subsidiaries of the Partnership, the initial purchasers party thereto and Wilmington Trust, National Association, as trustee and as collateral agent, entered into an indenture with respect to the 9.875%/11.500% Senior Secured PIK Toggle Notes due 2024.

For further detail on our Senior Secured PIK Toggle Notes due 2024, see Note 8 Long-Term Debt of Part I, Item 1. Financial Statements (Unaudited) of this Quarterly Report on Form 10-Q.

~~Credit Facility~~Redeemable Convertible Preferred Units

On ~~August 4, 2016, StoneMor Operating LLC (the “Operating Company”),~~June 27, 2019, funds and accounts affiliated with Axar Capital Management LP and certain other investors (individually a ~~100% owned subsidiary of~~“Purchaser” and collectively the “Purchasers”) and the Partnership entered into the ~~Credit~~Series A Preferred Unit Purchase Agreement (the ~~“Credit~~“Series A Purchase Agreement”) among each of the Subsidiaries of the Operating Company (together with the Operating Company, “Borrowers”), the Lenders identified therein, Capital One, National Association (“Capital One”), as Administrative Agent, Issuing Bank and Swingline Lender, Citizens Bank N.A., as Syndication Agent, and TD Bank, N.A. and Raymond James Bank, N.A., as Co-Documentation Agents. In addition, on the same date, the Partnership, the Borrowers and Capital One, as Administrative Agent, entered into the Guaranty and Collateral Agreement (the “Guaranty Agreement,” and together with the Credit Agreement, “New Agreements”). Capitalized terms which are not defined in the following description of the New Agreements shall have the meaning assigned to such terms in the New Agreements, as amended.

On March 15, 2017, the Borrowers, Capital One, as Administrative Agent and acting in accordance with the written consent of the Required Lenders, entered into the First Amendment to Credit Agreement. Those parties subsequently entered into a Second Amendment and Limited waiver on July 26, 2017, a Third Amendment and Limited Waiver effective as of August 15, 2017, a Fourth Amendment to Credit Agreement dated September 29, 2017, a Fifth Amendment to Credit Agreement dated as of December 22, 2017 but effective as of September 29, 2017, a Sixth Amendment and Waiver dated as of June 12, 2018, a Seventh Amendment and Waiver dated as of July 13, 2018 and an Eighth Amendment and Wavier dated as of February 4, 2019. We refer to the Credit Agreement, as so amended, as the “Amended Credit Agreement.”

Prior to the Eighth Amendment, the Amended Credit Agreement provided for up to $175.0 million initial aggregate amount of Revolving Commitments, which were subject to borrowing base limitations. Under the Eighth Amendment, the Partnership can no longer draw on Revolving Commitments under the Tranche A Revolving Credit Facility but had availability of $10 million under the Tranche B Revolving Credit Facility (in addition to amounts drawn on February 4, 2019 and March 29, 2019), which may be utilized in the amount of $5.0 million (or integral multiple thereof) from time to time until April 30, 2019, provided that borrowings on the last $10 million required the Partnership to receive a fairness opinion with respect to the Tranche B Revolving Credit Facility, which was obtained. On April 26, 2019, the Partnership had drawn down the remaining $10.0 million under the Tranche B Revolving Credit Facility and fully utilized the $35.0 million in commitments under the Tranche B Revolving Credit Facility, which was before the last remaining draw date of April 30, 2019 in accordance with the terms under the Eighth Amendment. The Operating Company may also request the issuance of Letters of Credit for up to $9.4 million (plus an amount equal to the principal amount of Tranche A Revolving Loans subject to the optional prepayment after the Eighth Amendment Effective Date) in the aggregate, of which there were $9.4 million outstanding at March 31, 2019 and December 31, 2018. The Maturity Date under the Amended Credit Agreement is the earlier of (i) May 1, 2020 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).

As of March 31, 2019, the outstanding amount of borrowings under the Amended Credit Agreement was $180.7 million, which was used to pay down outstanding obligations under the Partnership’s prior credit agreement, to pay fees, costs and expenses related to the New Agreements and to fund working capital needs. Generally, proceeds of the Loans made under the Tranche A Revolving Credit Facility under the Amended Credit Agreement could be used to finance the working capital needs and for other general corporate purposes of the Borrowers and Guarantors, including acquisitions and distributions permitted under the Amended Credit Agreement. Proceeds of the Loans made under the Tranche B Revolving Credit Facility under the Amended Credit Agreement can be used to finance the working capital needs and for other general corporate purposes of the Borrowers and Guarantors, and to pay fees and expenses related to the Tranche B Revolving Credit Facility. On the Eighth Amendment Effective Date, no part of the proceeds of loans made under the Tranche B Revolving Credit Facility may be used to make any payment of principal on the Tranche A Revolving Loans.

Each Borrowing under the Tranche A Revolving Credit Facility is comprised of Base Rate Loans or Eurodollar Loans. The Loans comprising each Base Rate Borrowing (including each Swingline Loan) bear interest at the Base Rate plus the Applicable Rate, and the Loans comprising each Eurodollar Borrowing bear interest at the Eurodollar Rate plus the Applicable Rate.

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Prior to June 12, 2018, the Applicable Rate was determined based on the Consolidated Leverage Ratio of the Partnership and its Subsidiaries and ranged from 1.75% to 3.75% for Eurodollar Rate Loans, 0.75% to 2.75% for Base Rate Loans and between 0.30% and 0.50% for unused commitment fee. The Sixth Amendment increased the minimum and maximum Applicable Rate by 0.50% and redetermined the Applicable Rate based on the Consolidated Secured Net Leverage Ratio of the Partnership and its Subsidiaries to be in the range between 2.25% to 4.25% for Eurodollar Rate Loans and 1.25% to 3.25% for Base Rate Loans (but in no event less that the Applicable Rate that would be in effect if calculated as set forth in the Original Amended Agreement not giving effect to the Sixth Amendment and Waiver and the Seventh Amendment and Waiver). As a result of the Eighth Amendment, the Applicable Rate is as follows: 4.50% for Eurodollar Rate Loans and 3.50% for Base Rate Loans from February 4, 2019 to February 28, 2019; 4.75% and 3.75%, respectively, from March 1, 2019 to March 31, 2019; 5.50% and 4.50%, respectively, from April 1, 2019 to April 30, 2019; 5.75% and 4.75%, respectively, from May 1, 2019 to May 31, 2019 and 6.00% and 5.00%, respectively, from June 1, 2019. As of March 31, 2019, the Applicable Rate for Eurodollar Rate Loans was 4.75% and for Base Rate Loans was 3.75%. On March 31, 2019, the weighted average interest rate on outstanding borrowings under the Amended Credit Agreement was 7.66%.

~~The Amended Credit Agreement contains a financial covenant,~~ pursuant to which the Partnership could or will not permit its Consolidated EBITDA to be less than the following amounts for the four consecutive fiscal quarters ending on the following dates: (i) $18.0 million for the period ended March 31, 2018; (ii) $13.0 million for the period ended June 30, 2018 (iii) $2.5 million for the period ended September 30, 2018, (iv) ($3.0 million) for the period ended December 31, 2018, (v) $1.0 million for the period ending March 31, 2019, (vi) $3.5 million for the period ending June 30, 2019; (vii) $8.0 million for the period ending September 30, 2019, (viii) $8.25 million for the period ending December 31, 2019; and (ix) $9.25 million for the period ending March 31, 2020.

~~The Borrowers’ obligations under the Amended Credit Agreement are guaranteed by the Partnership and the Borrowers. Pursuant~~sold to the Guaranty Agreement, the Borrowers’ obligations under the Amended Credit Agreement are secured by a first priority lien and security interest (subject to permitted liens and security interests) in substantially allPurchasers an aggregate of 52,083,333 of the Partnership’s Series A Preferred Units (the “Preferred Units”) representing limited partner interests in the Partnership with certain rights, preferences and ~~Borrowers’ assets, whether then owned or thereafter acquired, excluding certain excluded assets, which include, among others: (i) Trust Accounts, certain proceeds required by law~~privileges as are set forth in the Partnership’s Third Amended and Restated Agreement of Limited Partnership dated as of June 27, 2019. The purchase price for the Preferred Units sold pursuant to ~~be placed into such Trust Accounts and funds held in such Trust Accounts; and (ii) Excluded Real Property, including owned and leased real property that may not be pledged as a matter~~the Series A Purchase Agreement (the “Purchased Units”) was $1.1040 per Purchased Unit, reflecting an 8% discount to the liquidation preference of ~~law.~~

~~Senior Notes~~

~~On May 28, 2013, we issued $175.0 million~~each Preferred Unit, for an aggregate ~~principal amount~~purchase price of ~~7.875% Senior Notes due 2021 (the "Senior Notes"). We pay 7.875% interest per annum on the principal amount~~$57.5 million. The terms of the Senior Notes, payable in cash semi-annually in arrears on June 1 and December 1 of each year. The net proceeds from the offering were used to retire a $150.0 million aggregate principal amount of 10.25% Senior Notes due 2017 and the remaining proceeds were used for general corporate purposes. The Senior Notes were issued at 97.832% of par resulting in gross proceeds of $171.2 million with an original issue discount of approximately $3.8 million. We incurred debt issuance costs and fees of approximately $4.6 million. These costs and fees are deferred and will be amortized over the life of these notes. The Senior Notes mature on June 1, 2021.

~~We may redeem the Senior Notes at any time, in whole or in part, at the redemption prices (expressed as percentages~~sale of the ~~principal amount) set forth below, together with accrued and unpaid interest, if any, to the redemption date, if redeemed during the 12-month period beginning June 1 of the years indicated:~~

Year

Percentage

2018

101.969
%
2019 and thereafter

100.000
%

Subject to certain exceptions, upon the occurrence of a Change of Control (as defined in the indenture governing the Senior Notes), each holder of the Senior Notes will have the right to require us to purchase that holder’s Senior Notes for a cash price equal to 101% of the principal amounts to be purchased, plus accrued and unpaid interest.

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The Senior Notes are jointly and severally guaranteed by certain of our subsidiaries. The indenture governing the Senior Notes contains covenants, including limitations of our ability to incur certain additional indebtedness and liens, make certain dividends, distributions, redemptions or investments, enter into certain transactions with affiliates, make certain asset sales, and engage in certain mergers, consolidations or sales of all or substantially all of our assets, among other items. As of March 31, 2019, wePurchased Units were ~~in compliance with these covenants.~~

~~Cash Distribution Policy~~

Our partnership agreement requires that we distribute 100% of available cash to our common unitholders and general partner within 45 days following the end of each calendar quarter in accordance with their respective percentage interests. Available cash consists generally of all of our cash receipts, less cash disbursements. Our general partner is granted discretion under the partnership agreement to establish, maintain and adjust reserves for future operating expenses, debt service, maintenance capital expenditures and distributions for the next four quarters. These reserves are not restricted by magnitude, but only by type of future cash requirements with which they can be associated.

Available cash is distributed to the common limited partners and the general partner in accordance with their ownership interests, subject to the general partner’s incentive distribution rights if quarterly cash distributions per limited partner unit exceed specified targets. Incentive distribution rights are generally defined as all cash distributions paid to our general partner that are in excess of its general partner ownership interest. The incentive distribution rights will entitle our general partner to receive the following increasing percentage of cash distributed by us as it reaches certain target distribution levels:

~~13.0% of all cash distributed in any quarter after each common unit has received $0.5125 for that quarter;~~

~~23.0% of all cash distributed in any quarter after each common unit has received $0.5875 for that quarter; and~~

~~48.0% of all cash distributed in any quarter after each common unit has received $0.7125 for that quarter.~~

~~Given the Partnership’s level of cash and cash equivalents, to preserve capital resources and liquidity, the Board of Directors of~~determined based on arms-length negotiations between the General Partner concluded that it was not in the best interest of unitholders to pay distributions to unitholders after the first quarter of 2017. In addition, our revolving credit facility effectively prohibits us from making distributions to unitholders.

~~We anticipate that we will use any cash generated from borrowings or asset sales for working capital~~ and ~~capital expenditures and provide a reserve to enhance our financial condition relative to the financial covenants in the Amended Credit Agreement.~~

~~Agreements with the Archdiocese of Philadelphia~~

~~In accordance with the lease and management agreements with the Archdiocese of Philadelphia, we have agreed to pay to the Archdiocese aggregate fixed rent of $36.0 million in the following amounts:~~Axar.

~~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~~

~~The fixed rent for lease years 6 through 11, an aggregate~~For further detail on our Redeemable Convertible Preferred Units, see Note 9 Redeemable Convertible Preferred Stock of $6.0 million is deferred. If, prior to May 31, 2024, the Archdiocese terminates the agreements pursuant to its right to do so in its sole discretion during lease year 11 or we terminate the agreements as a result Part I, Item 1. Financial Statements (Unaudited) of ~~a default by the Archdiocese, we are entitled to retain the deferred fixed rent. If the agreements are not terminated, the deferred fixed rent will become due and payable~~this Quarterly Report on ~~or before June 30, 2024.~~Form 10-Q.

Surety Bonds

We have entered into arrangements with certain surety companies, whereby such companies agree to issue surety bonds on our behalf as financial assurance and/or as required by existing state and local regulations. The surety bonds are used for various business purposes; however, the majority of the surety bonds issued and outstanding have been used to support our ~~preneed~~pre-need sales activities.

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When selling ~~preneed~~pre-need contracts, we may post surety bonds where allowed by state law. We post the surety bonds in lieu of trusting a certain amount of funds received from the customer. If we were not able to renew or replace any such surety bond, we would be required to fund the trust only for the portion of the applicable ~~preneed~~pre-need contracts for which we have received payments from the customers, less any applicable retainage, in accordance with state law. We have provided cash collateral to

~~Table of Contents~~

secure these surety bond obligations and may be required to provide additional cash collateral in the future under certain circumstances.

For the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018, we had ~~$88.7~~$91.4 million and ~~$91.4~~$90.8 million, respectively, of cash receipts from sales attributable to related ~~bonded~~bond contracts. These amounts do not consider reductions associated with taxes, obtaining costs or other costs.

Surety bond premiums are paid annually and the bonds are automatically renewable until maturity of the underlying ~~preneed~~pre-need contracts, unless we are given prior notice of cancellation. Except for cemetery pre-construction bonds (which are irrevocable), the surety companies generally have the right to cancel the surety bonds at any time with appropriate notice. In the event a surety company were to cancel the surety bond, we are required to obtain replacement surety assurance from another surety company or fund a trust for an amount generally less than the posted bond amount. ~~Management does~~We do not expect that we will be required to fund material future amounts related to these surety bonds due to a lack of surety capacity or surety company non-performance.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of our unaudited condensed consolidated financial statements and related notes included within Part I, Item 1. Financial Statements (unaudited) in conformity with GAAP requires ~~making~~us to make estimates and assumptions that affect the reported amounts of assets, ~~and~~ liabilities, revenue, expenses and disclosure of contingent assets and liabilities ~~at the date of the financial statements and the reported amounts of actual revenue and expenses~~that arose during the reporting ~~period.~~period and through the date our financial statements are filed with the SEC. Although we base our estimates on historical experience and various other assumptions ~~that~~ we believe to be reasonable, ~~under the circumstances,~~ actual results may differ from ~~the estimates on which our financial statements are prepared at any given point~~these estimates.

A critical accounting estimate or policy is one that requires a high level of ~~time. Changes in these estimates~~subjective judgement by management and could ~~materially affect~~have a material impact to our financial position, results of operations or cash ~~flows. Significant items that are subject~~flows if actuals vary significantly from our estimates.

There have been no significant changes to such estimates and assumptions include revenue and expense accruals, depreciation and amortization, merchandise trust and perpetual care trust asset valuation, allowance for cancellations, unit-based compensation, deferred revenues, deferred merchandise trust investment earnings, deferred selling and obtaining costs, assets and liabilities obtained through business combinations, income taxes, hurricane-related losses and goodwill including any interim assessment for impairment. A discussion of our significantthe critical accounting policies ~~we have adopted~~ and ~~followed in the preparation of our unaudited condensed consolidated financial statements was included~~estimates identified in our Annual Report, ~~on Form 10-K for the year ended December 31, 2018.~~

~~There were no significant changes to our accounting policies that have occurred subsequent to December 31, 2018, except~~ as described in Part 1,II, Item 1.7. Management’s Discussion and Analysis of Financial ~~Statements, Note 1, "Recently Issued Accounting Updates-Adopted~~Condition and Results of Operations in ~~the Current Period."~~that report.

4756

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ITEM 3.

~~ITEM 3.~~ QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The primary objective of the following information is to provide forward-looking quantitative and qualitative information about our potential exposure to market risks. The term "market" risk refers to the risk of gains or losses arising from changes in interest rates and prices of marketable securities. The disclosures are not meant to be precise indicators of expected future gains or losses, but rather indicators of reasonably possible gains or losses. This forward-looking information provides indicators of how we view and manage our ongoing market risk exposures. All of our market risk-sensitive instruments were entered into for purposes other than trading.

The trusts are invested in assets with the primary objective of maximizing income and distributable cash flow for trust distributions, while maintaining an acceptable level of risk. Certain asset classes in which the Partnership invests in for the purpose of maximizing yield are subject to an increased market risk. This increased market risk will create volatility in the unrealized gains and losses of the trust assets from period to period.

INTEREST-BEARING INVESTMENTS

Our fixed-income securities subject to market risk consist primarily of certain investments in our merchandise trusts and perpetual care trusts. As of ~~March 31,~~September 30, 2019, the fair value of fixed-income securities in our merchandise trusts and perpetual care trusts represented 0.2% and ~~1.1%~~0.9%, of the fair value of total trust assets, respectively. The aggregate of the quoted fair value of these fixed-income securities was ~~$1.2~~$1.1 million and ~~$3.8~~$3.0 million in the merchandise trusts and perpetual care trusts, respectively, as of ~~March 31,~~September 30, 2019. 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 both our merchandise trusts and perpetual care trusts by less than $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 ~~March 31,~~September 30, 2019, the fair value of money market and short-term investments in our merchandise trusts and perpetual care trusts represented ~~2.1%~~35.1% and ~~3.4%~~25.5%, 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 ~~$10.8~~$182.6 million and ~~$11.7~~$87.5 million in the merchandise trusts and perpetual care trusts, respectively, as of ~~March 31,~~September 30, 2019. 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 ~~both~~ our merchandise trusts and perpetual care trusts by approximately ~~$0.1,~~$1.8 million and $0.9 million, respectively, based on discounted expected future cash flows.

MARKETABLE EQUITY SECURITIES

Our marketable equity securities subject to market risk consist primarily of certain investments held in our merchandise trusts and perpetual care trusts. These assets consist of investments in both individual equity securities as well as closed and open-ended mutual funds. As of ~~March 31,~~September 30, 2019, the fair value of marketable equity securities in our merchandise trusts and perpetual care trusts represented ~~4.3%~~2.8% and ~~6.9%~~4.7%, of the fair value of total trust assets, respectively. The aggregate of the quoted fair market value of these individual equity securities was ~~$22.0~~$14.5 million and ~~$23.7~~$16.1 million in our merchandise trusts and perpetual care trusts, respectively, as of ~~March 31,~~September 30, 2019, based on final quoted sales prices. Holding all other variables constant, a hypothetical 10% change in variable interest rates of the equity securities would change the fair market value of the assets in our merchandise trusts and perpetual care trusts by approximately ~~$2.2~~$1.4 million and ~~$2.4~~$1.6 million, respectively, based on discounted expected future cash flows. As of ~~March 31,~~September 30, 2019, the fair value of marketable closed and open-ended mutual funds in our merchandise trusts represented ~~47.3%~~33.3% of the fair value of total merchandise trust assets, ~~78.8%~~70.8% of which pertained to fixed-income mutual funds. As of ~~March 31,~~September 30, 2019, the fair value of marketable closed and open-ended mutual funds in our perpetual care trusts represented ~~36.7%~~26.6% of total perpetual care trust assets, ~~86.9%~~80.1% 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 ~~$243.4~~$172.8 million and ~~$126.4~~$91.3 million in the merchandise trusts and perpetual care trusts, respectively, as of ~~March 31,~~September 30, 2019, based on final quoted sales prices, of which ~~$191.9~~$122.4 million and ~~$109.8~~$73.1 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 ~~$24.3~~$17.3 million and ~~$12.6~~$9.1 million, respectively, based on discounted expected future cash flows.

~~Table of Contents~~

OTHER INVESTMENT FUNDS

Other investment funds are measured at fair value using the net asset value per share practical expedient. This asset class is composed of fixed income funds and equity funds, which have a redemption period ranging from 1 to 30 days, and private credit funds, which have lockup periods ranging from one to eight years with three potential one year extensions at the discretion of the funds’ general partners. This asset class has an inherent valuation risk as the values provided by investment fund managers may not represent the liquidation values obtained by the trusts upon redemption or liquidation of the fund assets. As of ~~March 31,~~September 30, 2019, the fair value of other investment funds in our merchandise trusts and perpetual care trusts represented ~~42.8%~~25.2% and ~~52.0%~~42.3%, respectively, of the fair value of total trust assets. The fair market value of the holdings in these funds was ~~$220.2~~$130.8 million and ~~$179.2~~$145.2 million in our merchandise trusts and perpetual care trusts, respectively, as of ~~March 31,~~September 30, 2019, based on net asset value quotes.

~~DEBT INSTRUMENTS~~57

Certain borrowings under our Amended Credit Facility bear 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. AsTable of March 31, 2019, we had $180.7 million of borrowings outstanding under our 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 three months ended March 31, 2019, by approximately $0.4 million.Contents

ITEM 4.
~~ITEM 4.~~	CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The Partnership maintains disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in ~~SEC~~the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.

Our management, including the CEO and CFO, evaluated the design and operation of our disclosure controls and procedures pursuant to Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of ~~March 31,~~September 30, 2019. Based on such evaluation, our CEO and CFO concluded the disclosure controls and procedures were not effective due to the material weaknesses in internal control over financial reporting described below.

Material Weaknesses in Internal Control over Financial Reporting

A material weakness (as defined in Rule 12b-2 under the Exchange Act) is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement in our annual or interim financial statements will not be prevented or detected on a timely basis. The deficiencies noted below could result in a material misstatement in our financial statements; therefore, they represent material weaknesses in our internal control over financial reporting.

We previously identified and reported material weaknesses in internal control over financial reporting as of December 31, 2018 in our Annual Report ~~on Form 10-K~~ related to the following:

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Control environment, control activities and monitoring:

The Partnership did not design and maintain effective internal ~~control~~controls over financial reporting related to control environment, control activities and monitoring based on the criteria established in the ~~COSO~~Committee of Sponsoring Organization Internal Control Integrated Framework including more specifically:

Management did not implement effective oversight to support deployment of control activities due to (a) failure to establish clear accountability for the performance of internal control over financial reporting responsibilities in certain areas important to financial reporting and (b) failure to prioritize and implement related corrective actions in a timely manner.

Management did not maintain effective controls over sales contract origination occurring at its site locations. Specifically, there was no subsequent review of contract entry and no approved master pricing listing. In addition, there was no oversight monitoring at its corporate office related to cancelations and timely and accurate servicing for correct revenue recognition.

Management did not maintain effective controls over the accuracy and valuation of its merchandise inventory allocated to pre-need contracts. Specifically, the Partnership did not have effective controls over the assessment of condition and impairment of allocated and un-allocated merchandise inventory due to excessive or deterioration damage.

Establishment and review of certain accounting policies:

The Partnership’s controls applicable to establishment, periodic review for ongoing relevance and consistent application of material accounting policies in conformity with ~~GAAP~~generally accepted accounting principles (“GAAP”) including (i) revenue recognition and (ii) insurance-related assets and liabilities were not designed appropriately and thus failed to operate effectively. More specifically:

Management did not have effective segregation of duties, review and monitoring controls over revenue recognition with respect to the ~~ASC~~Accounting Standards Codification 606,Revenues from Contracts with Customers, transition adjustment and subsequent calculations at a sufficient level of precision to timely detect misstatements in the related income statement and balance sheet account.

~~Management did not maintain effective completeness and accuracy controls at a level~~58

Table of ~~precision to timely detect misstatements related to the insurance related assets and liabilities.~~Contents

•

Management did not maintain effective completeness and accuracy controls at a level of precision to timely detect misstatements related to the insurance related assets and liabilities.

Reconciliation of certain general ledger accounts to supporting details:

The Partnership’s controls over the reconciliation of amounts recorded in the general ledger to relevant supporting detail for "Cemetery property" and "Deferred revenues" on the consolidated balance sheets were not designed appropriately and thus failed to operate effectively. Management has identified that the specified general ledger account balances were not always reconciled to supporting documentation.

Accurate and timely relief of deferred revenues and corresponding recognition of income statement impacts:

The Partnership’s internal controls designed to prevent a material misstatement in the recognized amount of "Deferred revenues" as of the balance sheet date were not designed appropriately. Specifically, the Partnership concluded that it did not design effective controls that would lead to a timely identification of a material error in "Deferred revenues" due to failure to accurately and timely relieve the liability when the service was performed or merchandise was delivered. Further, the Partnership’s review controls designed to detect such errors did not operate at the appropriate level of precision to identify such error. More specifically:

Management did not have effective segregation of duties over the preparation and subsequent review of its deferred revenue reconciliation process at a sufficient level of precision to timely detect potential misstatements of the related income statement and balance sheet accounts.

Management did not have effective review and monitoring controls over the revenue, cost of goods sold and deferred balances of pre-acquisition contracts at a sufficient level of precision to timely detect potential misstatements of the related income statement and balance sheet accounts.

~~Table~~Management did not have effective review and monitoring controls over the results of ~~Contents~~ongoing deferred revenue testing at a sufficient level of precision to detect potential misstatements of the related balance sheet accounts.

•

Management did not have effective review and monitoring controls over the results of ongoing deferred revenue testing at a sufficient level of precision to detect potential misstatements of the related balance sheet accounts.

Notwithstanding these material weaknesses, based on the additional analysis and other post-closing procedures performed, management believes that the financial statements included in this 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”).~~GAAP.

STATUS OF REMEDIATION OF MATERIAL WEAKNESSES

While we continue to make improvements to our internal control over financial reporting related to the material weaknesses described above, material weaknesses continue to exist, and we believe that the material weaknesses referenced above accurately reflect the material weaknesses in our internal control over financial reporting as of ~~March 31,~~September 30, 2019. Management, with oversight from our Audit Committee, has identified and ~~begun executing~~planned actions that we believe will remediate the material weaknesses described above once fully implemented and operating for a sufficient period of time, and we will continue to devote significant time and attention, including internal and external resources, to these remedial efforts.

We will test the ongoing operating effectiveness of the new remedial controls subsequent to implementation and consider the material weaknesses remediated after the applicable remedial controls operate effectively for a sufficient period of time.

Refer to ~~our~~the Annual Report ~~on Form 10-K as of December 31, 2018~~ for further details on the remediation efforts.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

During the fiscal quarter ended ~~March 31,~~September 30, 2019, we continued to make improvements to our internal control over financial reporting with respect to material weaknesses that had been ~~identified~~present at that time, and those remediation efforts remain ongoing. Other than as described above and in greater detail in our Annual Report, ~~on Form 10-K for the fiscal year ended December 31, 2018,~~ there were no changes in our internal control over financial reporting as defined in Rules 13a-15(d) and 15d-15(d) of the Exchange Act during the three months ended ~~March 31,~~September 30, 2019 that materially affected, or are reasonably likely to materially affect, our internal control over financial ~~reporting~~reporting.

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PART II- OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

For information regarding our significant pending administrative and judicial proceedings involving regulatory, operating, transactional, environmental, and other matters, see Part 1,1. Item 1. Financial Statements (Unaudited)—Notes to the Unaudited Condensed Consolidated Financial Statements—Note 11 Commitments and Contingencies of this Quarterly Report on Form 10-Q.

We and certain of our subsidiaries are parties to legal proceedings that have arisen in the ordinary course of business. We do not expect such matters to have a material adverse effect on our unaudited condensed consolidated financial position, results of operations or cash flows. We carry insurance with coverage and coverage limits that we believe to be customary in the cemetery and funeral home industry. Although there can be no assurance that such insurance will be sufficient to protect us against such contingencies, we believe that our insurance protection is reasonable in view of the nature and scope of our operations.

ITEM 1A.

RISK FACTORS

~~Not applicable.~~In addition to the risk factors set forth below, we remain subject to the risk factors disclosed in Part I, Item 1A. Risk Factors of our Annual Report, which are incorporated by reference herein.

Our turnaround strategy may cause a disruption in operations and may not be successful.

In April 2019, we outlined and began implementing a turnaround strategy to return to profitability, which is focused on four key goals: cash flow and liquidity, capital structure, strategic balance sheet/portfolio review and performance improvement from cost reductions and revenue enhancement. The turnaround strategy may negatively impact our operations, which could include disruptions from the realignment of operational functions within the home office, sales of selected properties, changes in the administrative reporting structure and changes in our product assortments or marketing strategies. These changes could adversely affect our business operations and financial results. The impact of these disruptions may be material. These changes could also decrease the cash we have available to fund ongoing liquidity and working capital requirements, and we may experience periods of limited liquidity. In addition, we are currently not generating sufficient cash flow to cover the interest payments on our debt and meet our operating liquidity needs. If our turnaround strategy is not successful, takes longer than initially projected or is not executed effectively, our business operations, financial results, liquidity and cash flow will be adversely affected. Furthermore, no assurances can be given that our turnaround strategy, even if implemented properly, will result in a return to profitability.

We are under leadership of a new Board of Directors, who collectively have a limited operating history with the Partnership.

In connection with the Recapitalization Transactions, the Board of Directors of StoneMor GP LLC (the “general partner”) was reconstituted. Directors Martin R. Lautman, Ph.D., Leo J. Pound, Robert A Sick and Fenton R. Talbott resigned as directors and, pursuant to the Amended and Restated Limited Liability Company Agreement of the general partner, the authorized number of directors was reduced to seven. Andrew Axelrod, David Miller and Spencer Goldenberg were elected to the board of directors of the general partner to fill the vacancies created by the resignations. The reconstituted board of directors is comprised of Messrs. Axelrod, Miller and Goldenberg, Robert Hellman, Stephen Negrotti, Patricia Wellenbach and Joe Redling. Certain of our new board members have limited experience with our management team and our business. The ability of our new directors to quickly understand our business plans, operations and turnaround strategies will be critical to their ability to make informed and effective decisions about our strategy and operations, particularly given the competitive environment in which our businesses operate.

Our level of indebtedness could adversely affect our financial condition and prevent us from fulfilling our debt obligations.

Our indebtedness requires significant interest and principal payments. As of September 30, 2019, we had $390.0 million of total debt (excluding debt issuance costs, debt discounts and capital lease obligations), consisting of $389.0 million of Senior Secured PIK Toggle Notes (the “Senior Secured Notes”) and $0.8 million of financed vehicles. The Issuers are to pay quarterly interest at either a fixed rate of 9.875% per annum in cash or, at their periodic option through January 30, 2022, a fixed rate of 7.50% per annum in cash plus a fixed rate of 4.00% per annum payable in kind. The Senior Secured Notes will require cash interest payments at 9.875% for all interest periods after January 30, 2022. We elected the cash plus payable in kind option to pay our September 30, 2019 interest payment, resulting in a $4.0 million increase in the outstanding principal amount of the Senior Secured Notes.

Our and our subsidiaries’ level of indebtedness could have important consequences to us, including:

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continuing to require us and certain of our subsidiaries to dedicate a substantial portion of our cash flow from operations to the payment of our indebtedness, thereby reducing the funds available for operations and any future business opportunities;

limiting flexibility in planning for, or reacting to, changes in our business or the industry in which we operate;

placing us at a competitive disadvantage compared to our competitors that have less indebtedness;

increasing our vulnerability to adverse general economic or industry conditions; and

limiting our ability to obtain additional financing to fund working capital, capital expenditures, acquisitions or other general corporate requirements and increasing our cost of borrowing.

In addition, the indenture governing the Senior Secured Notes (the “Indenture”) prohibits us from incurring additional debt or liens for working capital expenditures, acquisitions or other purposes (subject to very limited exceptions), requires us to maintain a minimum liquidity level on a rolling ten business day basis and requires us to meet minimum interest and asset coverage ratios as of the end of each fiscal quarter. Our ability to make payments on and to refinance our indebtedness will depend on our ability to generate cash in the future from operations, financings or asset sales. Our ability to repay our indebtedness and comply with the restrictive and financial maintenance covenants will be dependent on, among other things, the successful execution of our turnaround strategy. If we require additional capacity under the restrictive covenants to successfully execute our turnaround strategy or if we are unable to comply with the financial maintenance covenants, we will need to seek an amendment from a majority of the holders of the Senior Secured Notes. No assurances can be given that we will be successful in obtaining such an amendment and any failure to obtain such an amendment will have a material adverse effect on our business operations and our financial results.

Our ability to generate cash is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We may not generate sufficient funds to service our debt and meet our business needs, such as funding working capital or the expansion of our operations. If we are not able to repay or refinance our debt as it becomes due, we may be forced to take certain actions, including reducing spending on day-to-day operations, reducing future financing for working capital, capital expenditures and general corporate purposes, selling assets or dedicating an unsustainable level of our cash flow from operations to the payment of principal and interest on our indebtedness. In addition, our ability to withstand competitive pressures and to react to changes in our industry could be impaired. The trustee or holders of our debt could also accelerate amounts due in the event that we default, which could potentially trigger a default or acceleration of the maturity of our other debt, including the notes.

Additionally, our leverage could put us at a competitive disadvantage compared to our competitors that are less leveraged. These competitors could have greater financial flexibility to pursue strategic acquisitions and secure additional financing for their operations. Our leverage could also impede our ability to withstand downturns in our industry or the economy in general.

We have a history of operating losses and may not achieve or maintain profitability and positive cash flow.

We have incurred negative cash flows from operations and net losses for several years and have an accumulated deficit as of September 30, 2019, due to an increased competitive environment, increased expenses due to the proposed C-Corporation Conversion and increases in professional fees and compliance costs. To the extent that we continue to have negative operating cash flow in future periods, we may not have sufficient liquidity and we may not be able to successfully implement our turnaround strategy. We cannot predict if or when we will operate profitably and generate positive cash flows.

The prohibition on incurring additional debt in the Indenture, as well as future operating results, may require us to issue additional equity securities to finance our working capital and capital expenditure needs. Any such equity issuance may be at a price less than the then-current market price, which would result in dilution to your interest in the Partnership.

The Indenture prohibits us from incurring additional debt, including to fund working capital and capital expenditures, subject to very limited exceptions. This prohibition may require us to issue additional equity securities, which may be in the form of additional preferred units or common units, in order to provide us with sufficient cash to fund our working capital, liquidity and capital expenditure needs. There can be no assurance as to the price and terms on which such equity securities may be issued, and your equity interest in the Partnership may be materially diluted. Furthermore, there can be no assurances that we will be able to issue additional equity on any terms, in which case we may not have sufficient cash to fund our working capital, liquidity and capital expenditure needs and we may be unable to comply with one or more of the financial maintenance covenants in the Indenture.

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Restrictions in the Indenture prohibit us from making distributions to you.

The Indenture prohibits us from making distributions to you. As a result, a return on any common units an investor may purchase may only be achieved if our common units trade at a premium to the price paid to acquire such common units.

We must comply with covenants in the Indenture. Failure to comply with these covenants, which may result from events that are not within our control, may result in an Event of Default under the Indenture, which would have a material adverse effect on the business and financial condition of the Partnership and on the trading price of our common units.

The operating and financial restrictions and covenants in the Indenture restrict our ability to finance future operations or capital needs, including working capital and other liquidity, or to expand or pursue our business activities. For example, the Indenture requires us to comply with various affirmative covenants regarding, among other matters, maintenance and investment of trust funds and trust accounts into which certain sales proceeds are required by law to be deposited, minimum liquidity and other covenants. The Indenture also includes other restrictive and financial maintenance covenants including, but not limited to:

covenants that, subject to certain exceptions, limit our ability to:

▪

incur additional indebtedness, including entering into a working capital facility;

▪

grant liens;

▪

engage in certain sale/leaseback, merger, consolidation or asset sale transactions;

▪

make certain investments;

▪

pay dividends or make distributions;

▪

engage in affiliate transactions;

▪

amend our organizational documents;

▪

make capital expenditures; and

covenants that require us to maintain:

▪

a minimum liquidity level on a rolling ten business day basis;

▪

a minimum interest coverage ratio on a trailing twelve month basis as of each fiscal quarter end; and

▪

a minimum asset coverage ratio as of each fiscal quarter end.

The Indenture also provides for certain events of default, the occurrence and continuation of which could, subject to certain conditions, cause all amounts owing under the Senior Secured Notes to become due and payable, including but not limited to the following:

our failure to pay any interest on any senior secured note when it becomes due and payable that remains uncured for five business days;

our failure to pay the principal on any of the senior secured notes when it becomes due and payable, whether at the due date thereof, at a date fixed for redemption, by acceleration or otherwise;

our failure to comply with the agreements and covenants relating to maintenance of our legal existence, providing notice of any default or event of default or use of proceeds from the sale of the Senior Secured Notes or any of the restrictive or financial maintenance covenants in the Indenture;

our failure to comply with any other agreements or covenants contained in the Indenture or certain other agreements executed in connection with the Indenture that remains uncured for a period of 15 days after the earlier of written notice and request for cure from the Trustee or holders of at least 25% of the aggregate principal amount of the Senior Secured Notes;

the acceleration of, or the failure, to pay at final maturity indebtedness (other than the Senior Secured Notes) in a principal amount exceeding $5.0 million;

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the occurrence of a Change in Control (as defined in the Indenture);

certain bankruptcy or insolvency proceedings involving an Issuer or any subsidiary;

the C-Corporation Conversion shall not have occurred on or before March 31, 2020 and such default remains uncured for a period of five business days; and

failure by the Partnership or any subsidiary to maintain one or more licenses, permits or similar approvals for the conduct of its business where the sum of the revenue associated therewith represents the lesser of (i) 15% of the Partnership’s and its subsidiaries’ consolidated revenue and (ii) $30.0 million, and such breach is not cured within 30 days.

At the option of holders holding a majority of the outstanding principal amount of the Senior Secured Notes (and automatically upon any default for failure to pay principal of the Senior Secured Notes when due and payable or certain bankruptcy or insolvency proceedings involving an Issuer), the interest rate on the senior secured notes will increase to 13.50% per annum, payable in cash.

Our ability to comply with the covenants and restrictions contained in the Indenture may be affected by events beyond our control, including prevailing economic, financial and industry conditions. As a result of changes in market or other economic conditions, our ability to comply with these covenants may be impaired.

If we violate any of the restrictions, covenants, ratios or tests in our Indenture, or fail to pay amounts thereunder when due, the trustee or the holders of at least 25% of the outstanding principal amount of our Senior Secured Notes will be able to accelerate the maturity of all amounts due under the Senior Secured Notes, cause cross-default and demand repayment of amounts outstanding. We might not have, or be able to obtain, sufficient funds to make these accelerated payments, and the failure to make such payments would have a material adverse effect on our business operations and our financial results. Additionally, any subsequent replacement of our debt obligations or any new indebtedness could have similar or greater restrictions.

We may not be able to generate sufficient cash to service all of our indebtedness, and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on, or to refinance, our debt obligations depends, in part, on our financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business, commodity risks and other factors beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness. If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay investment decisions and capital expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness. Our ability to restructure or refinance our debt will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of existing or future debt instruments may restrict us from adopting some of these alternatives. In addition, any failure to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness. In the absence of such operating results and resources, we could face substantial liquidity problems and might be required to dispose of material assets or operations to meet our debt service and other obligations. The Indenture restricts our ability to dispose of assets and use the proceeds from the disposition. We may not be able to consummate those dispositions or to obtain the proceeds that we could realize from them and these proceeds may not be adequate to meet any debt service obligations then due. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. If we breach our covenants under our senior credit facilities and seek a waiver, we may not be able to obtain a waiver from the required lenders. If this occurs, we would be in default under our senior credit facilities, and the lenders could exercise their rights and we could be forced into bankruptcy or liquidation.

Our merchandise and perpetual care trust funds own investments in equity securities, fixed income securities and mutual funds, which are affected by financial market conditions that are beyond our control.

Pursuant to state law, a portion of the proceeds from pre-need sales of merchandise and services is put into merchandise trusts until such time that the Partnership meets the requirements for releasing trust principal, which is generally delivery of merchandise or performance of services. In addition, the Indenture also provides certain limitations on how the assets in the merchandise trusts may be invested. Generally, a majority of the investment earnings generated by the assets in the merchandise trusts, including realized gains and losses, are deferred until the associated merchandise is delivered or the services are performed.

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Also, pursuant to state law, a portion of the proceeds from the sale of cemetery property is required to be paid into perpetual care trusts. The perpetual care trust principal does not belong to the Partnership and must remain in this trust in perpetuity while interest and dividends may be released and used to defray cemetery maintenance costs.

We have hired an outside managers to manage these trust’s assets. There is no guarantee these managers will achieve their objectives and deliver adequate returns, and their investment choices may result in losses. In addition our returns on these investments are affected by financial market conditions that are beyond our control. If the investments in our trust funds experience significant declines, there could be insufficient funds in the trusts to cover the costs of delivering services and merchandise. Pursuant to state law, we may be required to cover any such shortfall in merchandise trusts with cash flows from operations, which could have a material adverse effect on our financial condition, results of operations or cash flows.

If the fair market value of these trusts, plus any other amount due to us upon delivery of the associated contracts, were to decline below the estimated costs to deliver the underlying products and services, we would record a charge to earnings to record a liability for the expected losses on the delivery of the associated contracts.

Our ability to use our Net Operating Losses and other Tax Assets is uncertain.

As of December 31, 2018, our corporate subsidiaries had net operating loss (“NOL”) carryforwards of approximately $396.6 million for U.S. federal income tax purposes and substantial similar tax assets at the federal and state levels. However, on June 27, 2019, we closed the Recapitalization Transactions. Along with other previous transfers of our interests, we believe the Recapitalization Transactions caused an “ownership change” for income tax purposes with respect to our corporate subsidiaries, which may significantly limit the corporate subsidiaries’ ability to use NOLs and certain other tax assets to offset future taxable income, possibly reducing the amount of cash available to our corporate subsidiaries and us to satisfy our obligations.

We are involved in Legal Proceedings.

We are involved in the disputes and legal proceedings as discussed in Part 1. Item 1. Financial Information—Notes to the Unaudited Condensed Consolidated Financial Statements—Note 11 Commitments and Contingencies of this Quarterly Report on Form 10-Q. Although Anderson v. StoneMor Partners, LP, et al., No. 2:16-cv-6111 was dismissed by the District Court of Pennsylvania, and that dismissal was affirmed by the Third Circuit on June 20, 2019, which also denied a petition for rehearing on September 16, 2019. Plaintiffs have 90 days from that date to file a petition for certiorari with the United States Supreme Court seeking discretionary review of the Third Circuit’s decision. We remain a party to other ongoing litigation against us. In addition, as a public company, we are also potentially susceptible to litigation, such as claims asserting violations of securities laws. Any such claims, with or without merit, if not resolved, could be time-consuming and result in costly litigation. There can be no assurance that an adverse result in any future proceeding would not have a potentially material adverse on our business, results of operations or financial condition.

Economic, financial and stock market fluctuations could affect future potential earnings and cash flows and could result in future intangible assets and long-lived asset impairments.

In addition to an annual review, we assess the impairment of goodwill, intangible assets and other long-lived assets whenever events or changes in circumstances indicate that the carrying value may be greater than fair value. Factors that could trigger an interim impairment review include, but are not limited to, a significant decline in the market value of our stock or debt values, significant under-performance relative to historical or projected future operating results, and significant negative industry or economic trends. If these factors occur, we may have a triggering event, which could result in an impairment of our goodwill. Throughout 2019, we determined there were triggering factors that required us to perform interim impairment assessments of our goodwill and long-lived assets. Based on the results of our interim goodwill impairment assessment for the third quarter of 2019, we concluded our goodwill was fully impaired as of September 30, 2019. Based on the results of our interim impairment tests of our long-lived assets throughout 2019, we concluded our long-lived assets were impaired by $1.5 million during the nine months ended September 30, 2019.

Our ability to generate preneed sales depends on a number of factors, including sales incentives and local and general economic conditions.

Significant declines in preneed sales would reduce our backlog and revenue and could reduce our future market share. On the other hand, a significant increase in preneed sales can have a negative impact on cash flow as a result of commissions and other costs incurred initially without corresponding revenue.

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We are continuing to refine the mix of service and product offerings in both our funeral and cemetery segments, including changes in our sales commission and incentive structure. These changes could cause us to experience declines in preneed sales in the short-run. In addition, economic conditions at the local or national level could cause declines in preneed sales either as a result of less discretionary income or lower consumer confidence. Declines in preneed cemetery property sales reduces current revenue, and declines in other preneed sales would reduce our backlog and future revenue and could reduce future market share.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

~~None.~~Purchases of Equity Securities

Issuer Purchases of Equity Securities

Period	(a) Total Number of Units Purchased⁽¹⁾		(b) Average Price Paid per Unit⁽²⁾		(c) Total Number of Units Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Units that May Yet Be Purchased Under the Plans or Programs
July 1, 2019 - July 18, 2019		17,438	$	1.97		—	$	—
August 1, 2019		376,351		1.80		—		—
September 1, 2019		167		1.10		—		—
Total		393,956	$	1.81		—	$	—

(1) All of these units represent units that were withheld upon the vesting of awards under the StoneMor Amended and Restated 2019 Long-Term Incentive Plan to satisfy certain tax obligations of the recipients of such awards arising from the vesting thereof and thus may be deemed to have been repurchased by the Partnership.

~~Table~~(1) The value of ~~Contents~~

the units withheld was the closing price of the Partnership’s common units on the last trading day before the date on which such units were withheld.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

~~None.~~On November 5, 2019, the Board of Directors of the general partner (the “Board’), based on the recommendation of its Compensation, Nominating and Governance Committee, approved a change effective January 1, 2020 in the compensation for the services of non-employee directors. The annual retainer was increased from $80,000 to $100,000 and all separate fees for attending meetings of the Board or any committee thereof were eliminated. The chair of the Board’s Audit Committee will receive an annual retainer of $25,000, and the chairs of the Board’s other standing committees will receive retainers of $10,000. Directors not affiliated with Axar Capital Management or American Infrastructure Funds will continue to defer $20,000 of their annual retainer in the form of restricted phantom units credited to a deferred compensation account under the Partnership’s Amended and Restated 2019 Long-Term Incentive Plan. Directors affiliated with Axar Capital Management or American Infrastructure Funds will receive their annual retainer in cash.

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ITEM 6.

~~EXHIBITS~~EXHIBIT INDEX

The documents listed in the Exhibit Index of this Quarterly Report on Form 10-Q are incorporated by reference or are filed with this Quarterly Report on Form 10-Q, in each case as indicated therein (numbered in accordance with Item 601 of Regulation S-K).

			Incorporated by Reference
Exhibit Number	Description	Filed/ Furnished Herewith	Form	Exhibit	Filing Date

10.1	Director Restricted Phantom Unit Agreement under StoneMor Amended and Restated 2019 Long-Term Incentive Plan by and among StoneMor GP LLC and Andrew M. Axelrod†	*	8-K	10.5	July 22, 2019

10.2	Director Restricted Phantom Unit Agreement under StoneMor Amended and Restated 2019 Long-Term Incentive Plan by and among StoneMor GP LLC and Spencer E. Goldenberg†	*	8-K	10.6	July 22, 2019

10.3	Director Restricted Phantom Unit Agreement under StoneMor Amended and Restated 2019 Long-Term Incentive Plan by and among StoneMor GP LLC and David Miller†	*	8-K	10.7	July 22, 2019

10.4	Indemnification Agreement by and among StoneMor GP LLC and Andrew M. Axelrod†	*	8-K	10.8	July 22, 2019

10.5	Indemnification Agreement by and among StoneMor GP LLC and Spencer E. Goldenberg†	*	8-K	10.9	July 22, 2019

10.6	Indemnification Agreement by and among StoneMor GP LLC and David Miller†	*	8-K	10.10	July 22, 2019

10.7	Consulting Agreement by and among StoneMor GP LLC and ORE Management LLC†	*	8-K	10.1	September 19, 2019

10.8	Severance Agreement and General Release and Waiver of Claims by and among StoneMor GP LLC and Garry P. Herdler†	*	8-K	10.2	September 19, 2019

10.9	Employment Agreement by and among StoneMor GP LLC and Jeffrey DiGiovanni†	*	8-K	10.3	September 19, 2019

10.10	Separation Agreement by and among StoneMor GP LLC and James Ford†	*	8-K	10.4	September 19, 2019

31.1	Certification pursuant to Exchange Act Rule 13a-14(a) of Joseph M. Redling, President and Chief Executive Officer

31.2	Certification pursuant to Exchange Act Rule 13a-14(a) of Jeffrey DiGiovanni, Chief Financial Officer and Senior Vice President

32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350) and Exchange Act Rule 13a-14(b) of Joseph M. Redling, President and Chief Executive Officer	**

32.2	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350) and Exchange Act Rule 13a-14(b) of Jeffrey DiGiovanni, Chief Financial Officer and Senior Vice President	**

99.1	Third Amended and Restated Limited Liability Company Agreement of StoneMor GP LLC dated as of June 27, 2019		8-K	99.2	June 28, 2019

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~~Exhibit~~ ~~Number~~		~~Description~~


10.1*		First Amendment to Voting and Support Agreement, dated February 4, 2019, by and among StoneMor Partners L.P., StoneMor GP LLC, and the unitholders of StoneMor Partners L.P. named therein (incorporated by reference to exhibit 10.1 of Registrant’s Current Report on Form 8-K filed on February 4, 2019).

10.2*		Eighth Amendment and Waiver to Credit Agreement, effective as of February 4, 2019, by and among StoneMor Partners L.P., StoneMor Operating LLC, the other Borrowers party thereto, Capital One, National Association, as Administrative Agent, and the Required Lenders party thereto (incorporated by reference to Exhibit 10.2 of Registrant’s Current Report on Form 8-K filed on February 4, 2019).

~~10.3*†~~		~~StoneMor Amended and Restated 2019 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.1 of Registrant’s Current Report on Form 8-k filed on April 2, 2019).~~

~~31.1~~		~~Certification pursuant to Exchange Act Rule 13a-14(a) of Joseph M. Redling, President and Chief Executive Officer.~~

~~31.2~~		~~Certification pursuant to Exchange Act Rule 13a-14(a) of Garry P. Herdler, Chief Financial Officer and Senior Vice President.~~

~~32.1~~		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350) and Exchange Act Rule 13a-14(b) of Joseph M. Redling, President and Chief Executive Officer (furnished herewith).

~~32.2~~		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. § 1350) and Exchange Act Rule 13a-14(b) of Garry P. Herdler, Chief Financial Officer and Senior Vice President (furnished herewith).

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 ~~March 31,~~September 30, 2019, and December 31, 2018; (ii) Unaudited Condensed Consolidated Statements of Operations for the ~~three~~nine months ended ~~March 31,~~September 30, 2019, 2019 and 2018; (iii) Unaudited Condensed Consolidated Statements of Partners’ (Deficit) Capital; (iv) Unaudited Condensed Consolidated Statements of Cash Flows for the ~~three~~nine months ended ~~March 31,~~September 30, 2019 and 2018; and (v) Notes to the Unaudited Condensed Consolidated Financial Statements. Users of this data are advised pursuant to Rule 401 of Regulation S-T 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.

*	Incorporated by reference, as indicated

**	Furnished herewith

†	Management contract, compensatory plan or arrangement

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Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	STONEMOR PARTNERS L.P.

	By:	StoneMor GP LLC, its General Partner

Date: ~~May 9,~~November 8, 2019		By:	/s/ Joseph M. Redling
			Joseph M. Redling
			President and Chief Executive Officer


Date: ~~May 9,~~November 8, 2019		By:	/s/ ~~Garry P. Herdler~~Jeffrey DiGiovanni
			~~Garry P. Herdler~~Jeffrey DiGiovanni
			Chief Financial Officer and Senior Vice President ~~(Principle Financial Officer)~~

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	March 31, 2019			December 31, 2018

Deferred revenue	$	963,612		$	937,708
Amounts due from customers for unfulfilled performance obligations on cancellable pre-need contracts		(22,572	)		(23,422	)
Deferred revenue, net	$	941,040		$	914,286

December 31, 2018	Parent			��	Subsidiary Issuer			Guarantor Subsidiaries		Non- Guarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets:
Cash and cash equivalents	$	—			$	—		$	16,298	$	1,849		$	—		$	18,147
Assets held for sale		—				—			757		—			—			757
Other current assets		—				3,718			64,167		11,527			—			79,412
Total current assets		—				3,718			81,222		13,376			—			98,316
Long-term accounts receivable		—				3,118			71,708		12,322			—			87,148
Cemetery and funeral home property and equipment		—				806			409,201		33,550			—			443,557
Merchandise trusts		—				—			—		488,248			—			488,248
Perpetual care trusts		—				—			—		330,562			—			330,562
Deferred selling and obtaining costs		—				5,511			88,705		18,444			—			112,660
Goodwill and intangible assets		—				—			25,676		60,607			—			86,283
Other assets		—				—			19,403		2,924			—			22,327
Investments in and amounts due from affiliates eliminated upon consolidation		61,875				(586	)		539,997		—			(601,286	)		-
Total assets	$	61,875			$	12,567		$	1,235,912	$	960,033		$	(601,286	)	$	1,669,101
Liabilities and Partners’ Capital (Deficit)
Current liabilities	$	—			$	184		$	60,216	$	1,400		$	—		$	61,800
Long-term debt, net of deferred financing costs		68,453				105,160			146,635		—			—			320,248
Deferred revenues		—				32,147			770,337		111,802			—			914,286
Perpetual care trust corpus		—				—			—		330,562			—			330,562
Other long-term liabilities		—				—			33,553		15,230			—			48,783
Due to affiliates		—				—			173,613		543,543			(717,156	)		-
Total liabilities		68,453				137,491			1,184,354		1,002,537			(717,156	)		1,675,679
Partners’ capital (deficit)		(6,578	)			(124,924	)		51,556		(42,502	)		115,870			(6,578	)
Total liabilities and partners’ capital (deficit)	$	61,875			$	12,567		$	1,235,910	$	960,035		$	(601,286	)	$	1,669,101