StoneMor Inc.
Q4 2015 Earnings Call Transcript

Published: 29 Feb 2016

[Operator:]

Ladies and gentlemen, thank you for standing by. Welcome to the 2015 Fourth Quarter Financial Results Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct a question-and-answer session. [Operator Instructions] As a reminder, this conference is being recorded Monday, February 29, 2016. I would now like to turn the conference over to Director of Investor Relations, John McNamara. Please go ahead.

[John McNamara:]

Thank you. Good morning, everyone, and thank you all for joining us to discuss our 2015 fourth quarter full year financial results. You should have all seen a copy of the press release we issued this morning. If anyone has not, the full earnings release can be found on our Web site at www.stonemor.com. Along with the earnings release, investors can also find an earnings supplement document where we provide some additional color on the quarter and the full year financial data. Joining us on the call this morning are Larry Miller, President and Chief Executive Officer; and Sean McGrath, Chief Financial Officer. Before we begin, our comments on the financial results, we ask that you all take note of the cautionary language regarding forward-looking statements contained in the press release. That same language applies to comments made on this morning's conference call. Any forward-looking statements made on this call are not guarantees of future performance, and we disclaim any obligation to update such factors or to announce publicly the results of revisions to any of the forward-looking statements to reflect future events or developments. In addition, given the provisions of the SEC's Regulation G, which limits our ability to provide non-GAAP financial information, we are only going to discuss that non-GAAP financial information, which is provided in the press in the earnings releases, and is therefore reconciled to comparable GAAP financial information. With that, I will now turn the call over to Larry Miller, who will take it from here.

[Larry Miller:]

Thank you, John, and good morning everyone. Thank you for joining us for our fourth quarter earnings call. As we reported earlier this morning, we completed another successful year, generating record revenues and increasing our adjusted EBITDA close to 8% year-over-year. Also, we recently declared and paid our 45th consecutive quarterly distribution, and our backlog increased $66 million to $609 million as of 12/31. Before I do turn it over to Sean to go through the numbers, I do want to talk a little bit about pre-need sales and the impact it had on our fourth quarter. As I'm sure you're aware, wage and hour issues are becoming more difficult to manage through. The distinction between classifications for a manager who might be exempt from hourly wage and a [indiscernible] who would then be paid salary, and a non-exempt employee who must be paid hourly is quite confusing. As you know, earlier this year, we settled a wage and hour lawsuit involving overtime pay for a 100% commission sales people for $3 million. This obviously is unacceptable. As a result, we began to take a look at our commission sales force and decided that it was no longer tolerable to accept the industry norm of very high turnover. When we looked at our turnover, we realized that we were replacing almost half of our sales force each year. As a matter of fact, I think almost 70% of our pre-need volume is generated by 20% -- our top 20% of our sales force. So you can see the magnitude. While it's true many of these sales people did generate some sales, the ever-increasing cost, which include benefits, payroll taxes, and now being obligated to pay a commission sales person minimum wage and overtime, caused us to make some strategic changes. We hired a nationally recognized compensation firm to help us modify our compensation programs, and as importantly, to create performance measures that would help us enhance the overall quality of our sales force. Additionally, we agree to provide more resources to our HR department, so that our hiring and recruiting would be crisper. We also substantially increased our budget for training, so we can bring these people along quicker. Hopefully, these changes will lead to fewer, but more professional and permanent sales people to add to our existing outstanding performers. We implemented this program October 1, and as predicted, a number of sales people who would have left us over the next several months resigned immediately, and as a result, our pre-need sales for October and November were significantly below plan. As things calm down, and the top half of our sales force understood that their compensation was not changing, things returned to normal, and we were back on plan for December. We are committed to this program and fully expect it to help us upgrade our overall sales team and help us minimize future issues dealing with minimum wage and overtime. Also, as you know, we periodically sell some of our undeveloped property. Since we now have almost 16,000 acres undeveloped to 28 states, we thought it prudent to enter into a national contract with Cushman & Wakefield to help us determine the best use for this acreage. Working with our local teams, they will be evaluating our property and recommending highest and best use for the future development or sale. And finally, I am happy to report that our acquisition pipeline is extremely robust, and we hope to close a number of deals in the very near future. With that, I'll turn it over to Sean to probe deeper into the numbers.

[Sean McGrath:]

Thanks, Larry. Thanks to everyone for participating on the call this morning. Regarding our fourth quarter financial results, overall, we generated adjusted EBITDA of 26.5 million, which represents an increase of over 15% from the prior year period and 13% from sequential quarter. The increase in adjusted EBITDA from the prior year was principally related to a $6 million increase in trust investment income, a 2 million decrease in corporate overhead costs, and a 0.5 million increase in funeral home margin, partially offset by a $5 million decrease in cemetery margins; the details of which I'll discuss in a moment. These results translated into a cash distribution coverage ratio for the period of 1.5 times based upon distributable available cash and at 1.1 times basis on a LTM basis. As for the fourth quarter details, cemetery margin, which we adjusted from the prior quarter's format are now considered to be cemetery revenues less cost of goods sold and cemetery selling and G&A expenses, was approximately 13 million, which represented a 2% decrease from the prior year quarter. As Larry discussed and we mentioned in our release, we had a shortfall on pre-need sales of approximately 5 million from the prior year and 7.5 million from our internal budget due to the restructuring of our sales force and related compensation program. On a net basis after estimated commissions and cost of goods sold, it had an approximate $5 million of unfavorable impact on the quarter. In addition, the year-over-year quarter variant was impacted by a $2.3 million favorable prior year adjustment to our pre-need cancellation reserve and unfavorable true-up of cost of goods sold in the fourth quarter 2015 of 1 million. On an as-adjusted basis for these items, cemetery margin would have been approximately 90 million compared with 60 million for the prior year, representing an increase of 3 million or 19%, and adjusted EBITDA would have been 32.5 million compared to 20.5 million for the prior year, representing an increase of 12 million or approximately 60%. Regarding funeral home margin, we recognized approximately 4.6 million during the fourth quarter, which represent a 12% increase compared with the prior year fourth quarter. Our margin percentage remained consistent at 27% for both the quarterly and full year periods. The margin increase versus the prior year resulted from 15% increases in both revenues and expenses. While our overall growth is good, the focus for our 2016 internal budget has been to maximize the spread between the growth in revenues compared with the growth and expenses, and expand our margin percentage, which we expect to achieve. Funeral home calls were 4000 for the period, a 7% increase; and revenue per call was $4,250, a 7% increase. Regarding investment trust returns, approximately 14.5 million was recognized for the fourth quarter, an increase of approximately 6 million over the prior period. The increase between periods is almost entirely related to an increase in merchandised trust gains, which benefited from distributable gains associated with investments in certain mutual and other funds that were held and distributed during the fourth quarter rather than earlier in the year. Total investment return on our trust net of fees was a combined 7.6% annualized for the fourth quarter 2015 compared with 4.2% annualized for the prior year fourth quarter. For the full year 2015, investment trust gains were almost 51 million, reflecting a 6.4% return compared with almost 48 million for the prior year, or a 6.1% return. For 2016, we budgeted returns on our trust investments for 2016 to be approximately 5%, but we remain upwardly optimistic with Cambridge Advisors, one of the industry's most respected investment advisors, advising our investment decisions effective January 1, this year. Cash corporate overhead costs were 7.7 million for the fourth quarter, a decrease of 2 million from the prior year quarter due to decrease in professional fees including both legal and accounting, and reduction in other overhead cost due to our focus on maintaining a lower and more efficient cost structure. We continue to have a significant balance sheet strength as we have 643 million of assets from our merchandized trust AR and cash as of December 31, with only approximately 173 million of liabilities for merchandized contracts, leaving us with approximately 470 million of free cash to our account, more than enough to pay down our entire debt balance and fund more than a year's worth of acquisitions if we re-service those contracts in the current period. Regarding our liquidity position and leverage; at the end of December, we had 30 million of total capacity under our $180 million credit facility borrowing base along with approximately 15 million of cash on hand, giving us total liquidity of close to 45 million with a leverage ratio of 3.2 times compared with the maximum leverage ratio covenant of four times. I also want to mention that we have 45 million of equity commitment from our general partner to fund certain future acquisitions. With that, I thank you for your time, and I will return the call to Larry for closing comments.

[Larry Miller:]

Well, maybe we'll do Q&A first, Sean. Okay, operator, we can do questions.

[Operator:]

[Operator Instructions] Our first question comes from the line of John Ransom. Please go ahead.

[John Ransom:]

Hey, good morning. Wanted to dig into the quarter a little bit; sequentially, your borrowings went up about $28 million and you issued about $7 million of equity under that commitment, so $35 million of financing cash in the quarter. Was that -- we didn't see the same seasonal pattern last year. It's a little complex to try to dig through your cash flow to figure what's going on there, but can you walk us through why there was so much need for external financing this quarter?

[Larry Miller:]

Yes, I think overall, John, we closed an acquisition during the fourth quarter that I think total purchase price was about $6 million for the acquisition. In addition, we had additional investments in the trust related to certain amounts of the pre-need sales that we put in. So I think overall during the period that basically reconciles the components of the two. I don't expect, and we are still seeing increases in the AOP business. Those pre-need sales increased while the decrease in pre-need was really coming from other same-store properties, and so, we did see an increase from that amount, just from that acquisition. That's why it looks a little skewed.

[John Ransom:]

Well, I'm looking at your merchandise trust. Sequentially, it only went up $5 million and then you spent $6 million on the acquisition, so that's -- let's call it $11 million. What about the other $20 million-ish? What was the need for financing -- what drove the need for financing? I'm just looking at the sequential change in the assets.

[Sean McGrath:]

Yes, we had CapEx during the period. We had -- I think it was approximately $5 million in CapEx during the period as well. I am trying to just pull up the pieces.

[John Ransom:]

Yes, I know you had distributions obviously on your LP [ph], but yes, the sequential change in debt was a bit more than we were looking for and it's not clear from the way the numbers are presented what drove that.

[Sean McGrath:]

Now, let me -- I'll work with you offline on that. I think between the acquisitions, I might have the total acquisition price wrong, but that was the…

[John Ransom:]

It's 5.7 -- it was 5.7 million in the cash flow statement. So you're right. It's about 6 million, but okay.

[Sean McGrath:]

That plus the CapEx, plus the additions in the trust, and I think we had some true-up adjustments in the trust balance during the period which is probably skewing that, so -- but that's really the key components to it.

[John Ransom:]

Okay. Again, it's a complex exercise going through your numbers. Looking at the -- we can calculate backlog a number of different ways, but we just look at, for example, deferred revenue less deferred obtaining costs as a simple way to look at it. So, September of '14, or middle of '14, that number was running about $540 million to $545 million; actually it was $560 million in the beginning of the year. It's now $526 million. So the way we calculate this number, it's down about 4% year-over-year just the way we are looking at this backlog number. Is that related more to the trust fund performance or is it just the lack of pre-need selling that you referenced in the quarter?

[Sean McGrath:]

No, I think the trust fund performance is really -- I mean we had a -- obviously with the market being down, we saw a decrease in it. We have suffered losses just like everybody else. I think we are pretty optimistic. I think we were investing in a lot of securities that with Cambridge coming in, it's kind of opening up new doors to us that how we can invest this funds, get a higher return. So I think it's really just a combination when you are doing that backlog, I think the trust funds were down. Merchandized liability, we did have a true-up during the fourth quarter as well related to opening balances sheets for acquisitions. So that was about, I would say, between and $15 and $20 million during the period. And so, when you're looking at the combination, you are seeing the decrease in the way you calculate backlog. Those are really the components which are driving that.

[John Ransom:]

So just to be clear, your trust funds you said had a positive return in the fourth quarter? Or is it just positive in terms of the gains you were able to take out?

[Sean McGrath:]

Well, it's between interest dividends and some of the gains that we were able to take out. That's where the $40 million in the quarter is coming is from. But we did have unrealized losses just because the securities were down during the period. It's in fact the way the backlog is calculated.

[John Ransom:]

So how much -- I guess that's the question then. Year-over-year, how much did the unrealized losses grow year-over-year?

[Sean McGrath:]

Year-over-year, I mean they were approximately 65 million at the end of December. I am trying to pull up what the prior year number is. Yes, I would say it's -- I think we probably had $9 million in the merchandize trust, and for the perpetual care we probably had -- just trying to pull up, it is in the K, so -- yes, so it was probably flat, there was probably no realized losses or gains -- unrealized losses or gains there. So they did grow approximately, I would say, 60 million somewhere in that range year-over-year.

[John Ransom:]

Okay. Okay, and what would you look for this year in terms of -- do you look for pre-need sales to grow this year or is this still going to be down like it was in the quarter just given the transition in the sales force?

[Larry Miller:]

No, John, we are pretty optimistic that the sales will grow and be back where they are supposed to be. We have been thinking -- the turnover has been an issue when David Myers came in as COO last year, and he looked at overall corporate turnover; it is fairly high. Our industry obviously is high, but the sales is the biggest portion. I mean you see 67% of your business is coming from 20% of your sales force and with this -- I mean having to pay minimum wage and overtime to 100% commission sales people, it's just an odd thing for me, and we decided -- we just ought to come up with an overall enhancements of the quality of the team, stop hanging on to the people that were just modest producers because the costs were outweighing the benefit. So, now we're through all that. As we said, we saw a nice bounce back in December, and I see nothing right now other than few weather issues early in year to say that the sales force isn't performing where it's supposed to be. So yes, we expect a nice increase.

[John Ransom:]

Okay. And it's been over a year since you bought the SCI deal. How is that -- are you through the process of building that backlog on the pre-need side or is there still work to do and has that asset performed in line with what you thought it would do?

[Larry Miller:]

Yes, I think both the Archdiocese and the SCI deals are performing at or above where we expect them to be. I think they are pretty mature now as far as what we would expect for them. We haven't really pushed the pre-need insurance funeral side of those businesses, and that's yet to be dealt with, but for the cemeteries themselves I think they are right where they are supposed to be, actually even better.

[John Ransom:]

Right. I'm sorry. I had a long list of questions this morning; just a couple more. Looking at your excess land, do you have any early thoughts about what that might -- what kind of cash you are looking to realize and how many -- what percent of that acreage is sellable and at what price?

[Larry Miller:]

Well, that's -- we really are early. We just signed the contract with Cushman, and the fellow that used to kind of oversee that for us, you might have run into him, Alan Fisher, passed away early this year. We're in a gathering data right now. I mean Cushman & Wakefield was sufficiently interested when they looked at very broad data. But now, we got to get into the nitty-gritty. So they're sending teams out to all of our properties, particularly the ones that we've kind of teed up is having the highest probability at least in the near-term, and we will see what happens. We'll keep everybody apprised. I don't have anything right now. I mean there is a lot of acreage; there is a lot of different ways whether we sell, whether we develop, whether we look for smaller uses like cell towers and billboards stuff. I don't know it's really early, but hopefully, four to five months from now, we will be in a better position to really see what the next few years should be.

[John Ransom:]

Okay. I think that's it from me. Thanks very much.

[Larry Miller:]

All right. Thanks, John.

[Operator:]

Thank you. Our next question comes from the line of Alex Oxenham. Please go ahead.

[Alex Oxenham:]

Hi, good morning guys. Can you talk a little bit about the decision to do an ATM versus a spot secondary? I noticed you started ramping that up in the fourth quarter. Thank you.

[Sean McGrath:]

Yes, sure. The ATM programs versus standalone offer, I mean with standalone offering, you're generally going to pay a higher fitting between the re-offer to the public as well as the underwriting fee. You could generally arrange between 8% to 10%. The ATM program will cost us less than 2% on each of the sales that we do. We can also issue them in very small amounts and in most cases we don't need to do a large offering. A lot of times it's just small amounts here and there depending upon where our liquidity is. We could make sure that we can stay ahead of it. So it gives us a nice tool. It doesn't mean we won't ever do a standalone offering again. It just means that during certain time periods it can be helpful with the kind of pull out and do equity in small amounts. So we don't anticipate doing ton of ATM equity, I think if we do a large acquisition I think we'll go out -- we're going to go financial with an equity offering, we would go out and do a standalone, but I think from that point it just gives another tool in the bag to kind of manage where we want to go in terms of liquidity and leverage.

[Alex Oxenham:]

Yes, great. And as an unrelated question, the switch to Cambridge, have they already started to make recommendations as far as changes to the asset allocations in the trust and what kind of changes do you expect them to make?

[Sean McGrath:]

Yes, I mean I think what they've done is laid out a program for us over the next three to five years where they're giving us a lot more of options where we can invest our funds and get a much higher return. The movement of those assets will probably happen over periods of time. There is certain amounts that we will invest great way. There's other amounts that we'll invest over time period. Some of these funds that we have the opportunity to invest in now it might take some time to put those funds to work, and so we're trying to make sure that we get a longer -- a higher return on our funds invested, but we also don't want to have gaps where we have idle cash that's not really generating cash to our benefit and to our unitholder's benefit.

[Alex Oxenham:]

Have any changes been made yet or they are still in the evaluation phase?

[Sean McGrath:]

I think we're just finished through the evaluation phase. I think we're really at a point where we're looking to implement the changes. So that will be happening through the course of the year.

[Alex Oxenham:]

Okay, great. Thank you.

[Sean McGrath:]

No problem.

[Operator:]

Thank you. Our next question comes from the line of Liam Burke. Please go ahead.

[Liam Burke:]

Yes, thank you. Oh, good morning, Larry.

[Larry Miller:]

Hi.

[Liam Burke:]

Larry, casketed burials from quarter to quarter can be variable. Last quarter, they were probably down. This quarter, they were down as well. How have you been able to pick up the slack on the cremation side in terms of niches on cemetery and then some of the activities you do in the funeral home?

[Larry Miller:]

Well, I think we probably -- you know, as we indicated, maybe past 12 to 18 months, the cremation side of the business wasn't a real strong focus for the company. But we did enter into a partnership with one of the large suppliers of granite marble material and have been developing nice cremation gardens that give the consumer multiple options to include scattering up through placing the cremains in mausoleums. We start to really see some value there. And then on the funeral home side, our funeral homes -- we've hired a couple of people that are really experts in merchandising through cremation, and we're beginning to -- what we've found, and I'm sure you read the literature you find out with all the consolidators when they first really got into cremation, a lot of their business was more geared towards the direct disposal; people just not realizing how much you know why it's really no different than a casket, it's just a different form of disposition. And when you lay out all the options and people realize jeez, I could still have viewings and we can have the celebrations and all, we're finding that our average revenue per cremation event is starting to increase, and we'll continue to work both on the funeral and cemetery side.

[Liam Burke:]

Okay. And then just to go back on the sales force, it sounds like you've got the sales force refreshed and trained and ready to go into '16?

[Larry Miller:]

That's correct. And we did -- as part of that program back in October -- a lot of the ones that were hanging on kind of left me, because they can't meet the performance standards and you just don't gel and hire a lot of people in December. So, right now, HR has got their hands full in building out the sales force. We're not going to go with these many people as we had previously, but we think if we were a little more hiring and we give them a little better training we'll end up seeing the benefits throughout the year.

[Liam Burke:]

Great. Thank you, Larry.

[Larry Miller:]

Thank you.

[Operator:]

Thank you. Our next question comes from the line of Greg Taxin [ph]. Please go ahead.

[Unidentified Analyst:]

Hi, thank you gentlemen. 2015 feels like it was a lot worse than 2014 in the business, and I was hoping you might just comment on the year-on-year change. On a GAAP basis, and I know you guys don't like to point to GAAP, but on a GAAP basis, revenue was down -- oh, sorry -- revenue was up $17 million, but expenses were up much more than that, up $30 million. So, operating income was lower. You like to point to the future and the merchandise trust and the backlog and such, but the merchandise trust was down 4% year-over-year despite all the pre-need selling. Your merchandise liability was up 15% over the same period, and debt is up 13%, units are up 9% through the year. So smaller merchandise trust, more liabilities associated with it, more debt to service, more units out there. And by your own math, in your press release, the distributable available cash, as you call it, decreased from $3.01 in 2014 to $2.72 in 2015. So down 10% by your own math on distributable cash, and yet your distributions were up 6% to equity holders after you guys went out and raised $70 some odd million in the sale of new units. So what I want to understand is why was '15 worthy of a 10% increase in distributions when performance by GAAP measures, by balance sheet measures, by your own distributable cash measures all look worse in 2015 than they do in 2014, but for the fact that the GP gets 25% of all those distributions, would you be distributing that amount of cash, more cash in a down year but for the fact that that's the way, Larry, you get paid?

[Sean McGrath:]

Well -- this is Sean McGrath. You're making a lot of points there. So let's try to address them one-by-one. I think you started off with in terms of the GAAP results, and I think what you have to remember is that because of GAAP all our pre-need sales are deferred as soon as we make them. So when you're looking at a 17% increase in revenue, but expenses increased at a much higher page you got to remember all of the -- I would say the majority of our expenses in terms of cemetery expense, G&A expense, corporate overhead, or period costs, we have to expense as they incur. So 17% increase in GAAP revenue while the expenses grow at a faster pace is purely because of the way the GAAP treats us. So we'd look at it in terms of the fact that we are growing our business significantly. Our GAAP results don't reflect it because we're deferring a 100% of every pre-need sale that we make once because we will not deliver the merchandise. In terms of the cash distribution, I think when you're looking at -- oh I'm sorry, the trust funds that you mentioned, a lot of it was the fact that there was a -- obviously the market has come back down and we've seen a decrease particularly in the energy markets and our investments there, and so a lot of the securities are still turning out the distributions and dividends and interest, but the market value of the securities have gone down. And so -- we believe that there is upside to where we're at. That being said, we're planning that there won't be any upset in this point. We budgeted this year just the distribution and income that's coming from those investments. So we did not budget any capital gains we're getting from -- that we potentially may get there. So we blew this upside with the new investments that's going to be getting from, but I think when you look at the cash distributions, and I don't want to speak for Larry, Larry can chime in, but I think when we looked at where we were in the previous year with regard to covering distribution, we believe that we were managing our cash distribution probably little conservatively versus where it could be managed. I think we saw a significant increase in distribution this year. I think for the upcoming year, we're trying to be contemplative about where we see distributions going. And so, I think we believe that the business will grow at very good pace this year organically from our budgeting process, and we are managing to that number, but we want very contemplative in terms of where we are going to take distributions from this point going forward. But I think organically if it doesn't grow at high space and I think the acquisition market is still fertile for us to do a lot more deals.

[Operator:]

Thank you. Our next question comes from the line of Mike Jerry [ph]. Please go ahead.

[Unidentified Analyst:]

Yes. Can you guys talk a little bit about your acquisition strategy maybe going into 2016 compared to where you were probably this time last year? And I guess your anticipation for how you would finance?

[Sean McGrath:]

Yes. So for acquisition, I think our strategy has been to manage it very conservatively. I think there's ample opportunity out there. We're targeting multiples in the four to six times range. We've been able to achieve that at a very good pace. All of our deals are accretive to the bottom line based upon our financing assumptions. We generally try to make sure that we're using a financing assumption that reflects either bonds being tacked on or equity at the kind of the current rate. And so, we're not diluting ourselves with financing -- using an assumption borrowing into the credit facility at lower interest rate. We're trying to make sure that we are stress testing each deal to make sure that it's accretive using the higher cost to capital from those two sources. So I think we are pretty excited about the upcoming year, and I think there is I would say way in excess of a $100 million of deals in the pipeline right now that we're still going through the process and seeing where we are at. But, we also want to make sure that we're attacking on deals that are going to be moving in the right direction. We want to make sure each of these deals can continue to grow at 3% to 5% on an annual basis, so that it's not just accretive year one, it's going to be accretive in each of the years going forward as we increase distributions on the equity that we assume is issued in any of these deals.

[Unidentified Analyst:]

Okay. And then maybe a follow-up; have you thought about doing more archdiocese deals? Or I guess what's the strategy there versus third-party deals?

[Sean McGrath:]

Well, both. We kind of lump archdiocese type deals to municipal cemeteries that's still I think a lot of fertile ground for us, but there's a lot longer lead time. But we are in contact with a number of the archdiocese. There is nothing right now that's on the front burner. So, I don't want to suggest that we have one there. But we continue to participate now in Catholic conferences, where we are advertising in their magazines. And we still hope for some more Archdiocese deals to come. And in the municipal market we are gearing that backup again, you see all the struggles that municipalities have and these are wonderful assets that they could outsource and be good for them and certainly good for us. So, we keep chugging away, and hopefully, one day we will -- it will become a bigger part of our business.

[Unidentified Analyst:]

Right. Thanks.

[Operator:]

Thank you. [Operator Instructions] Our next question comes from the line of David Rothschild [ph]. Please go ahead.

[Unidentified Analyst:]

Thank you for taking my question.

[Larry Miller:]

Hey, David.

[Unidentified Analyst:]

I just have three questions. I'm a retail broker. Just checking to see K-1 timeframe? Clients are starting to ask about that, so wondering when you are going to have that out. Second question is, here, I think it was end of '14, you guys had given out the dividend projection, you were going to raise it a penny every quarter. Do you intend on doing something like that for '16? And then just the third question is a little update on this new -- I think it was an insurance division you started or was planning on starting, just see how that's going?

[Sean McGrath:]

So, on the K-1 -- Sean McGrath, on the K-1 it should be coming out this week. Actually I just on Friday approved the final draft of them. So I would think they would be coming out this week I would say versus lot of the MLPs were probably I would generally a week ahead. A lot of them move into the second week, but we should have them out by the end of this week. Turn to Larry.

[Larry Miller:]

Dividend.

[Sean McGrath:]

Oh, dividend. On the cash distribution guidance, I think last year as I mentioned earlier we were really conservatively managing the distribution. Obviously, we increased it at a very high pace this year. In think this year we just want to be a little more contemplative in terms of future increases. I think our internal budget just on a same-store basis organically we expect the business to grow at a pretty good clip plus we have a number of acquisitions in the pipeline. I think we are just going to wait and see in terms of how we are able to grow it each quarter and then make decision based on that at that point. But, we do feel pretty good about where the business is going, and so how it's going to increase both organically as well as through acquisitions.

[Larry Miller:]

And David, on the insurance, we are where we expect it to be. We've got our infrastructure completely in place. We have the products that we want to offer. We like to expand that product offering to other things to kind of relate to what we're selling, but now we are in the process of just hiring the license insurance sales people to really start moving up. And fortunately we're getting lot of calls from funeral homes around the country that have heard that we're committed to offering these products, and we're starting to sign up a number of funeral homes that want us to represent them. So that's going to increase our footprint, and again, hopefully by the end of this year that whole division will really be very visible, and we'll be able to report some good numbers.

[Unidentified Analyst:]

Okay, thank you.

[Operator:]

Thank you. Our next question comes from the line of Richard Richard Verdi. Please go ahead.

[Richard Verdi:]

Hi, good morning guys, and thanks for taking my call. Just some follow-up questions to the last inquiry. On that insurance business, Larry or maybe Sean, what do you guys think will -- what's the long-term potential of that business?

[Larry Miller:]

Well, I think Rich, I know I've said this before, this is nothing new for us as if -- there certainly is an executive team organizationally, overall career, it's -- the pre-need selling of these funerals, what we would call a pre-need funeral where you specify products and services, or in states where that's not something we can do, we sell a final expense product. We did that a long time, we just didn't do it StonMor and now that we're gearing up, I think it's -- I'm not going to give you [technical difficulty], but as I said, I think that over the next three years it's impact on particularly the cash flow for the company will be very meaningful, and it's -- the thing that's so attractive about it is to expand our cemetery footprint you have to use expensive capital. I have to buy the cemetery. Once we get through our own properties and begin to support our own properties, we can grow at anywhere in any community, because it's all variable cost. We don't need to go buy something to set up a brokerage firm or agency. So I really -- I have a lot of hopes and expectations. We have a very conservative model for the next year or two, because a lot of the value -- you don't get any GAAP value with the pre-need funeral because you have to defer it. So you won't see a slowing there, but so much of the cash and earnings contribution comes from the renewal commissions. So it takes a few years for those renewal commissions to start. Year one begins to pay out; year two, three, four -- year two begins to pay out; year three, four, five and what have you. So, over time, it should become very visible.

[Richard Verdi:]

Okay. Thank you very much guys. That's it from me.

[Larry Miller:]

Yes, thanks, Rich.

[Sean McGrath:]

Thanks, Rich.

[Operator:]

Thank you. There are no further questions at this time.

[Larry Miller:]

Okay, operator and everyone who stayed on the call, we allowed more questions today and I hope we gave you the good answers, and we thank everyone and thank all of our employees for completing a successful 2015, and look forward to talking to you in the next couple of months. Thank you everyone.

[Operator:]

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your line.