2. RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

Subsequent to the issuance of the Partnership’s Form 10-Q for the period ended June 30, 2016, the Partnership determined that material adjustments were needed to correct certain accounting errors. Accordingly, the accompanying consolidated financial statements of the Partnership as of June 30, 2016 and December 31, 2015 and for each of the three and six months ended June 30, 2016 and 2015, and the related notes hereto, have been restated to correct these accounting errors (the “Restatement”). A summary of these accounting errors, and their effect on the Partnership’s consolidated financial statements is, as follows:

The Partnership allocates net loss to the General Partner and its limited partners for the purposes of determining the General Partner’s and limited partners’ capital accounts within “Partners’ capital”, and to calculate net loss per limited partner unit (basic and diluted). However, the historical allocation of the Partnership’s net losses did not appropriately consider available cash that had been (or will be) distributed to the separate class of nonvoting limited partner interest (the incentive distribution rights) held by the General Partner. While this misallocation had no impact on the Partnership’s consolidated net loss for both the three and six months ended June 30, 2016 and 2015, the revised calculation to correctly allocate net losses increased the limited partners’ historical share of allocated net loss and decreased the General Partner’s historical share of allocated net loss. As a result, the accompanying consolidated statement of operations and consolidated statement of partners’ capital have been restated to increase the limited partners’ share of allocated net loss and decrease the General Partner’s share of allocated net loss by approximately $1.2 million and $1.0 million for the three months ended June 30, 2016 and 2015, respectively, and $2.4 million and $1.8 million for the six months ended June 30, 2016 and 2015. Accordingly, the accompanying consolidated statement of partner’s capital has also been restated to decrease the limited partners’ share of partners’ capital, and increase the General Partner’s share of partners’ capital by approximately $12.5 million and $10.2 million as of June 30, 2016 and December 31, 2015, respectively.

The Partnership had historically presented the cost component of its performance obligations as a liability referred to as “Merchandise liability” and the offset for these liabilities was recognized as a reduction in “Deferred cemetery revenues, net” in the Partnership’s consolidated balance sheet. However, subsequent to the issuance of the Partnership’s Form 10-Q for the period ended June 30, 2016, the Partnership determined that the correct presentation of these obligations is “Deferred revenues”, rather than a separate “Merchandise liability”. Accordingly, the accompanying consolidated balance sheet as of June 30, 2016 and December 31, 2015, has been restated to reclassify merchandise liabilities of approximately $170.0 million and $173.1 million as of June 30, 2016 and December 31, 2015, respectively, from “Merchandise liability” to “Deferred revenue”. The Partnership restated its financial statement line item presentation of “Deferred cemetery revenues, net” to “Deferred revenues”. Accordingly, the accompanying consolidated balance sheet as of June 30, 2016 and December 31, 2015 has been restated to reclassify approximately $695.1 million and $637.5 million as of June 30, 2016 and December 31, 2015, respectively, from “Deferred cemetery revenue, net” to “Deferred revenue”.

The Partnership had historically presented revenue related to assumed obligations from acquisitions on a net basis in the Partnership’s consolidated statement of operations. However, subsequent to the issuance of the Partnership’s Form 10-Q for the period ended June 30, 2016, the Partnership determined that the correct presentation of this revenue was on a gross basis. Accordingly, the accompanying consolidated statement of operations has been restated to present such revenue on a gross basis. This classification resulted in an increase in “Cemetery merchandise revenues” of approximately $0.8 million and $1.3 million for the three months ended June 30, 2016 and 2015, respectively, and $1.6 million and $2.5 million for the six months ended June 30, 2016 and 2015, respectively, an increase in “Cemetery services revenue” of approximately $0.3 million and $0.2 million for the three months ended June 30, 2016 and 2015, respectively, and $0.5 million and $0.3 million for the six months ended June 30, 2016 and 2015, respectively, and an increase “Cost of goods sold” of approximately $1.0 million and $1.5 million for the three months ended June 30, 2016 and 2015, respectively, and $2.0 million and $2.8 million for the six months ended June 30, 2016 and 2015, respectively.

The Partnership had historically recorded funeral home land from acquisitions within “Cemetery property”. However, subsequent to the issuance of the Partnership’s Form 10-Q for the period ended June 30, 2016, the Partnership determined that such Funeral home land should be recorded within “Property and equipment”. This adjustment resulted in a decrease of $11.7 million and $11.8 million in “Cemetery property” as of June 30, 2016 and December 31, 2015, respectively, and a corresponding increase in “Property and equipment”. Additionally, the Partnership had historically recorded deferred cemetery property within “Deferred cemetery revenues, net”. However, subsequent to the issuance of the Partnership’s Form 10-Q for the period ended June 30, 2016, the Partnership determined that such amounts should have been recorded within “Cemetery property”. This adjustment resulted in an increase in “Cemetery property” in the amount of $3.7 million and $3.6 million as of June 30, 2016 and December 31, 2015, respectively.

The Partnership had historically recorded the obligation for certain of the Partnership’s outstanding phantom unit awards as liabilities. However, subsequent to the issuance of the Partnership’s Form 10-Q for the period ended June 30, 2016, the Partnership determined that these awards are equity awards and should be classified as equity. Accordingly, the accompanying consolidated balance sheet as of June 30, 2016 and December 31, 2015, has been restated to adjust the awards as equity award, resulting in a $1.9 million increase to “Common limited partners’ interest” and a decrease for the same amount to “Accounts payable and accrued liabilities” as of June 30, 2016 and December 31, 2015.

The Partnership had historically recognized incorrect amounts of investment revenues and expenses related to its merchandise and perpetual care trusts on its consolidated statement of operations and was incorrectly tracking its perpetual care-trusting obligations on its consolidated balance sheets. Accordingly, the accompanying consolidated financial statements as of June 30, 2016 and 2015 and for both the three and six months ended June 30, 2016 and 2015 have been restated for these adjustments. The adjustments resulted in an increase in “Deferred revenues” of approximately $18.5 million and $17.9 million, a decrease in “Partners’ Capital” of approximately $26.5 million and $25.4 million, and an increase in “Other long-term liabilities” of approximately $8.0 million and $7.5 million as of June 30, 2016 and December 31, 2015, respectively. In addition, the correction of these accounting errors resulted in an increase in “Investment and other” revenues of $0.3 million in the three months ended June 30, 2016 and $0.2 million in the six months ended June 30, 2016, and an increase in “Cost of goods sold” of $0.7 million and $0.4 million for the three months ended June 30, 2016 and 2015, respectively, and $1.3 million and $0.7 million for the six months ended June 30, 2016 and 2015, respectively.

The Partnership had historically recognized incorrect amounts of revenue from deferred pre-acquisition contracts in its consolidated statement of operations based on inaccurate system inputs. Subsequent to the issuance of the Partnership’s Form 10-Q for the period ended June 30, 2016, the Partnership determined that revenue recognition on such pre-acquisition revenue was understated. Accordingly, the accompanying consolidated financial statements for the three and six months ended June 30, 2016 and 2015 have been restated to reflect the correction of the system inputs. The adjustments resulted in a decrease in “Deferred revenues” and an increase in “Partners’ Capital” of $16.5 million as of June 30, 2016 and December 31, 2015 and an increase in “Cemetery merchandise revenues” of $0.4 million and $0.8 million for the three and six months ended June 30, 2015 and an increase in “Cemetery services revenues” of $0.1 million in the three and six months ended June 30, 2015.

Remaining adjustments principally relate to the recognition, accuracy and/or classification of certain amounts in “Deferred cemetery revenues, net”, “Merchandise liabilities”, and “Other current assets”, determined subsequent to the issuance of the Partnership’s Form 10-Q for the period ended June 30, 2016. Accordingly, the accompanying consolidated financial statements as of June 30, 2016 and December 31, 2015, and for the three and six months ended June 30, 2016 and 2015 have been restated for these adjustments. The adjustments resulted in a decrease of $3.6 million and a decrease of $1.9 million in “Deferred revenues” as of June 30, 2016 and December 31, 2015, respectively. The adjustments also resulted in an increase in “Cemetery merchandise revenues” of $1.0 million and $1.2 million, an increase in “Cemetery services revenues” of $0.4 million and $0.6 million, and an increase in “Cost of goods sold” of $0.6 million and $1.6 million in the three months ended June 30, 2016, and 2015, respectively. The adjustments resulted in an increase in “Cemetery merchandise revenues” of $2.0 million and $2.2 million, an increase in “Cemetery services revenues” of $0.9 million and $1.0 million, and an increase in “Cost of goods sold” of $1.1 million and $2.9 million in the six months ended June 30, 2016, and 2015, respectively.

The Partnership calculated the effect on income taxes associated with the foregoing accounting errors and, as such, “Income tax benefit (expense)” within consolidated statement of operations was restated by $0.1 million for the three and six months ended June 30, 2015 and the “Deferred tax liability” within the consolidated balance sheets are restated by approximately $0.1 million as of June 30, 2016 and December 31, 2015.

The effect of these adjustments on the Partnership’s consolidated balance sheets, statements of operations, partners’ capital and cash flows for each of the three and six months ended June 30, 2016 and 2015, and as of June 30, 2016 and December 31, 2015 is summarized below for each affected caption:


			As of June 30,									As of December 31,
			2016									2015
			As			Restatement			As			As			Restatement			As
	Reference		Filed			Adjustments			Restated			Filed			Adjustments			Restated
			(in thousands)

Other current assets		H	$	19,126		$	2,697		$	21,823		$	18,863		$	3,378		$	22,241
Total current assets				109,830			2,697			112,527			107,798			3,378			111,176
Cemetery property		D		341,825			(7,966	)		333,859			342,639			(8,182	)		334,457
Property and equipment, net of accumulated depreciation		D		103,083			11,707			114,790			104,330			11,797			116,127
Deferred tax assets		I		40			141			181			40			141			181
Other assets		H		17,243			1,098			18,341			15,069			1,098			16,167
Total assets				1,738,518			7,677			1,746,195			1,686,125			8,232			1,694,357
Accounts payable and accrued liabilities		E		35,546			(1,886	)		33,660			31,875			(1,886	)		29,989
Total current liabilities				42,392			(1,886	)		40,506			35,818			(1,886	)		33,932
Deferred cemetery revenues, net		B		695,092			(695,092	)		—			637,536			(637,536	)		—
Merchandise liability		B		169,974			(169,974	)		—			173,097			(173,097	)		—
Deferred revenues		B, D, F, G, H		—			868,194			868,194			—			815,421			815,421
Deferred tax liabilities		I		17,914			(86	)		17,828			17,833			(86	)		17,747
Other long-term liabilities		F		16,168			8,041			24,209			13,960			7,548			21,508
Total liabilities				1,541,094			9,197			1,550,291			1,502,447			10,364			1,512,811
General partner interest		A, F, G, H, I		(13,054	)		12,422			(632	)		(10,038	)		10,053			15
Common limited partners’ interest		A, E, F, G, H, I		210,478			(13,942	)		196,536			193,716			(12,185	)		181,531
Total partners’ capital				197,424			(1,520	)		195,904			183,678			(2,132	)		181,546
Total liabilities and partners’ capital			$	1,738,518		$	7,677		$	1,746,195		$	1,686,125		$	8,232		$	1,694,357


		Three months ended June 30,
		2016									2015
		As			Restatement			As			As			Restatement			As
	Reference	Filed			Adjustments			Restated			Filed			Adjustments			Restated
		(in thousands, except per unit data)
Cemetery revenues:
Merchandise	C, G, H	$	36,105		$	1,750		$	37,855		$	36,042		$	2,957		$	38,999
Services	C, G, H		12,984			692			13,676			14,591			776			15,367
Investment and other	F		11,721			291			12,012			16,698			(45	)		16,653
Total revenues			75,549			2,733			78,282			80,825			3,688			84,513
Cost of goods sold	C, F, H		9,737			2,305			12,042			9,807			3,526			13,333
Total cost and expenses			78,230			2,305			80,535			79,569			3,526			83,095
Operating income (loss)			(2,681	)		428			(2,253	)		1,256			162			1,418
Loss before income taxes			(8,579	)		428			(8,151	)		(4,514	)		162			(4,352	)
Income tax benefit (expense)	I		(500	)		—			(500	)		(334	)		42			(292	)
Net loss			(9,079	)		428			(8,651	)		(4,848	)		204			(4,644	)
General partner’s interest for the period	A, F, G, H, I		(103	)		1,188			1,085			(65	)		964			899
Limited partners’ interest for the period	A, F, G, H, I		(8,976	)		(760	)		(9,736	)		(4,783	)		(760	)		(5,543	)
Net loss per limited partner unit (basic and diluted)	A, F, G, H, I	$	(0.26	)	$	(0.02	)	$	(0.28	)	$	(0.16	)	$	(0.03	)	$	(0.19	)


		Six months ended June 30,
		2016									2015
		As			Restatement			As			As			Restatement			As
	Reference	Filed			Adjustments			Restated			Filed			Adjustments			Restated
		(in thousands, except per unit data)
Cemetery revenues:
Merchandise	C, G, H	$	67,080		$	3,543		$	70,623		$	62,979		$	5,423		$	68,402
Services	C, G, H		25,816			1,323			27,139			28,501			1,423			29,924
Investment and other	F		26,173			214			26,387			28,008			(82	)		27,926
Total revenues			150,131			5,080			155,211			148,242			6,764			155,006
Cost of goods sold	C, F, H		18,294			4,468			22,762			16,890			6,272			23,162
Total cost and expenses			153,539			4,468			158,007			150,341			6,272			156,613
Operating income (loss)			(3,408	)		612			(2,796	)		(2,099	)		492			(1,607	)
Loss before income taxes			(15,978	)		612			(15,366	)		(13,332	)		492			(12,840	)
Income tax benefit (expense)	I		(760	)		—			(760	)		(399	)		85			(314	)
Net loss			(16,738	)		612			(16,126	)		(13,731	)		577			(13,154	)
General partner’s interest for the period	A, F, G, H, I		(196	)		2,369			2,173			(185	)		1,769			1,584
Limited partners’ interest for the period	A, F, G, H, I		(16,542	)		(1,757	)		(18,299	)		(13,546	)		(1,192	)		(14,738	)
Net loss per limited partner unit (basic and diluted)	A, F, G, H, I	$	(0.49	)	$	(0.05	)	$	(0.54	)	$	(0.46	)	$	(0.04	)	$	(0.50	)


		Common Limited Partners			General Partner			Total			Common Limited Partners			General Partner		Total			Common Limited Partners			General Partner			Total
	Reference	As Filed									Restatement Adjustments								As Restated
		(in thousands)
Capital Balance at December 31, 2015	A, E, F, G, H, I	$	193,716		$	(10,038	)	$	183,678		$	(12,185	)	$	10,053	$	(2,132	)	$	181,531		$	15		$	181,546
Net loss	A, F, G, H		(16,542	)		(196	)		(16,738	)		(1,757	)		2,369		612			(18,299	)		2,173			(16,126	)
Capital Balance at June 30, 2016	A, E, F, G, H, I	$	210,478		$	(13,054	)	$	197,424		$	(13,942	)	$	12,422	$	(1,520	)	$	196,536		$	(632	)	$	195,904


		Six months ended June 30,
		2016									2015
		As			Restatement			As			As			Restatement			As
	Reference	Filed			Adjustments			Restated			Filed			Adjustments			Restated
		(in thousands)
Net loss	F, G, H, I	$	(16,738	)	$	612		$	(16,126	)	$	(13,731	)	$	577		$	(13,154	)
Changes in assets and liabilities:
Other assets	D, H		(4,295	)		555			(3,740	)		(9,162	)		4,810			(4,352	)
Deferred revenues	B, D, F, G, H		37,755			(5,239	)		32,516			45,307			(1,552	)		43,755
Deferred taxes (net)	I		—			—			—			(44	)		(85	)		(129	)
Payables and other liabilities	F		818			4,072			4,890			9,208			(3,750	)		5,458
Net cash provided by operating activities .		$	8,459		$	—		$	8,459		$	3,975		$	—		$	3,975

The Restatement adjustments affecting the consolidated statement of cash flows for the periods noted are included in the Partnership’s net loss from operations and offset by changes in operating assets and liabilities. There were no adjustments related to cash provided by (used in) investing and financing activities.