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Private and ConfidentialNAPTP PresentationMay 2013
Private and Confidential2Today’s ParticipantsLawrence MillerChief Executive Officer, President and ChairmanTimothy YostChi...
Private and Confidential3ConfidentialThis presentation contains certain statements that may be deemed to be forward-lookin...
Private and Confidential44StoneMor Partners L.P. StoneMor is the second largest owner and operator of cemeteries in the U...
Private and Confidential5Business StrategyEnhanceexistingcemeteryoperationsOptimize realestate portfolioActively managetru...
Private and Confidential6Investment Highlights 8.6% yield superior to most MLPs Pre-need sales expertise generates signi...
Private and Confidential7Attractive Yield 8.6% Yield vs. 6% Average MLP Yield* Has increased 28% since 2004 IPODistribut...
Private and Confidential8Value Enhancing Strategy in the Cemetery Business We are experts at operating and growing a ceme...
Private and Confidential9Cemetery Revenues – How Are Pre-Need Sales Generated? Leads are generated and appointments made–...
Private and Confidential102012 Growth Events Completed in July 2012– Purchased 8 funeral homes, 4 cemeteries and 2 cremat...
Private and Confidential112013 Growth Events Completed in February 2013– Purchased 6 funeral homes and 2 cremation relate...
Private and Confidential12Historical Performance($ in millions) ($ in millions)REVENUE OPERATING PROFIT Solid performance...
Private and Confidential13Sustained Business Growth While Maintaining Stable Credit Profile Over the past 5 years, the as...
Private and Confidential14Diversified Revenue StreamsSTONEMOR BUSINESS MIX BY REVENUE – TWELVE MONTHS ENDED DECEMBER 31, 2...
Private and Confidential15Highly Fragmented Industry…Cemeteries,9,600FuneralHomes,22,000$11 billion$6 billion_____________...
Private and Confidential1616CemeteriesFuneralHomes RatioSCI 374 1,437 1:3.8StoneMor 276 92 3:1Stewart 141 217 1:1.5Carriag...
Private and Confidential171,000,0001,500,0002,000,0002,500,0003,000,0003,500,0004,000,0004,500,000193019311932193319341935...
Private and Confidential05,00010,00015,00020,00025,00030,00035,00040,00045,00050,00018Favorable DemographicsSharply increa...
Private and Confidential2,000,0002,200,0002,400,0002,600,0002,800,0003,000,0003,200,0003,400,00019Favorable DemographicsSt...
Private and Confidential2020Diverse Geographic Exposureas of March 15, 2013
Private and Confidential2121Proven Acquisition Track Record Growth primarily driven by acquisitions Never-break-the-mode...
Private and Confidential22Substantial Industry and Financial Barriers to Entry Scarcity and cost of real estate near dens...
Private and ConfidentialStrong Balance Sheet & Recovery Profile23 Balance sheet with low-risk, marketable assets providin...
Private and Confidential24Significant Underlying Trust Assets Perpetual Care Trust– Approximately $302 MM as of March 31,...
Private and Confidential25Appendix
Private and Confidential26Cemetery Accounting – GAAP vs. Accrual GAAP requires that cemetery product revenue be deferred ...
Private and Confidential27Cemetery Revenue – Accounting Recognition There are significant timing differences for cemetery...
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NAPTP Presentation, May 2013

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NAPTP Presentation, May 2013

  1. 1. Private and ConfidentialNAPTP PresentationMay 2013
  2. 2. Private and Confidential2Today’s ParticipantsLawrence MillerChief Executive Officer, President and ChairmanTimothy YostChief Financial Officer
  3. 3. Private and Confidential3ConfidentialThis presentation contains certain statements that may be deemed to be forward-lookingstatements within the meaning of the Securities Acts. All statements, other than statements ofhistorical facts, that address activities, events or developments that the Partnership expects,projects, believes or anticipates will or may occur in the future, including, without limitation, theoutlook for population growth and death rates, general industry conditions including futureoperating results of the Partnerships properties, capital expenditures, asset sales, expansion andgrowth opportunities, bank borrowings, financing activities and other such matters, are forward-looking statements. Although the Partnership believes that its expectations stated in thispresentation are based on reasonable assumptions, actual results may differ from thoseprojected in the forward-looking statements. For a more detailed discussion of risk factors,please refer to the annual Report on Form 10-K and quarterly reports on form 10-Q filed with theSEC and the prospectus and the prospectus supplement relating to this offering.In addition, the projected impact of acquisitions reflect managements projections as to possiblefuture results based on a number of assumptions that are inherently uncertain, including withoutlimitation the organic growth of the Partnership, the availability of acquisition targets, thepurchase prices for the targets, the availability of debt or equity financing from either third partiesor the targets and the Partnership’s ability to integrate and manage such acquisitions. Theassumptions involve significant elements of subjective judgment and analysis, and norepresentation is made as to their or the projections attainability.
  4. 4. Private and Confidential44StoneMor Partners L.P. StoneMor is the second largest owner and operator of cemeteries in the US– The Company currently operates 276 cemeteries and 92 funeral homes, diverselylocated across 28 states and Puerto Rico– As of 12/31/2012, over 12,300 acres of land, equivalent to an aggregate weightedaverage sales life of 246 years StoneMor has demonstrated a consistent track record of growth and financialperformance– 144 cemeteries and 85 funeral homes acquired since 2004 IPO– Revenue has increased from $145 million in 2007 to $243 million in 2013 (TTM)• 9.0% ’07-’12 CAGR– Adjusted operating profits have increased from $27 million in 2007 to $56.8 millionin 2013 (TTM)• 13.2% ’07-’12 CAGRStoneMor’s mission is to help families memorialize each life with dignity
  5. 5. Private and Confidential5Business StrategyEnhanceexistingcemeteryoperationsOptimize realestate portfolioActively managetrust fund assetsExecutedisciplinedacquisitionstrategy
  6. 6. Private and Confidential6Investment Highlights 8.6% yield superior to most MLPs Pre-need sales expertise generates significant value Favorable demographic trends Proven acquisition track record High barriers to entry Secure, stable asset profile– Diversely located properties– Merchandise trust assets exceed liabilities by more than $280 million Experienced management– Long tenure in the cemetery business Conservative financial profile– No significant near-term debt maturities– Consistent growth in cash flows– Tax free structure and minimal capital expenditures
  7. 7. Private and Confidential7Attractive Yield 8.6% Yield vs. 6% Average MLP Yield* Has increased 28% since 2004 IPODistribution Per UnitSource: Barron’s
  8. 8. Private and Confidential8Value Enhancing Strategy in the Cemetery Business We are experts at operating and growing a cemetery-focused deathcare business– Best practices in pre-need marketing– Extensive and highly driven commission-based sales force– Volume purchasing lowers costs for cemetery and funeral home merchandise– Centralized administrative functions lower operating expenses Our strategy leverages our existing asset base to drive revenues, adjusted operatingprofit and cash flow available for distributions to common unitholdersACCRUAL REVENUESADJUSTED OPERATINGPROFITDISTRIBUTION PER UNIT($ in millions)
  9. 9. Private and Confidential9Cemetery Revenues – How Are Pre-Need Sales Generated? Leads are generated and appointments made– 40% of leads result in a presentation 20-25% of all presentations result in a sale Pre-need sale is usually financed on terms averaging 35 months– 23% of all sales are cash at the time of the sale Customers make monthly payments, including interest, on financed sales– Down payments average 12.4%– Finance charges range from 7% to 12%
  10. 10. Private and Confidential102012 Growth Events Completed in July 2012– Purchased 8 funeral homes, 4 cemeteries and 2 cremation related facilities– Paid $25 million in cash and equity– One of the largest family owned funeral and cemetery operators in Florida– Provides foothold in vital Florida market Completed in December 2012– Purchased one funeral home in central Florida– Natural fit with recent Florida purchasesFloridaIllinoisCalifornia Completed in April 2012 Purchased one cemetery - $0.9 million in cash Completed in June 2012 Acquired two funeral homes for $1.7 million in cash and equity
  11. 11. Private and Confidential112013 Growth Events Completed in February 2013– Purchased 6 funeral homes and 2 cremation related facilities– Provides another key presence foothold in vital Florida market Completed in February 2012– Amended Credit Agreement• Increased credit facility by $10 million to $140 million Completed in March– Raised $38.4 million via secondary offering of units– Repaid $150 million existing 10.25% senior unsecured notes– Issued $175 million senior unsecured notes at 7.825%FloridaCorporate
  12. 12. Private and Confidential12Historical Performance($ in millions) ($ in millions)REVENUE OPERATING PROFIT Solid performance amid challenging economic conditions
  13. 13. Private and Confidential13Sustained Business Growth While Maintaining Stable Credit Profile Over the past 5 years, the asset base has grown and total leverage has remainedsteadyTotal Assets, Debt and Partners’ Capital Total Debt / EBITDA($ in millions)
  14. 14. Private and Confidential14Diversified Revenue StreamsSTONEMOR BUSINESS MIX BY REVENUE – TWELVE MONTHS ENDED DECEMBER 31, 2012StoneMor’s +800 person sales team creates an unparalleled advantagein pre-need sales performance~60% of StoneMor’srevenue is generatedthrough highlypredictable at-needbusiness
  15. 15. Private and Confidential15Highly Fragmented Industry…Cemeteries,9,600FuneralHomes,22,000$11 billion$6 billion___________________________Source: National Directory of Morticians; Public Filings.___________________________Source: ABN Amro Research; Public Filings.(1) Includes StoneMor, SCI, Stewart, Carriage and Loewen.$17 Billion MarketLARGE DEATH CARE INDUSTRY HIGHLY FRAGMENTED INDUSTRY REVENUEIndependentOperators80%Owned byConsolidators20%(1)
  16. 16. Private and Confidential1616CemeteriesFuneralHomes RatioSCI 374 1,437 1:3.8StoneMor 276 92 3:1Stewart 141 217 1:1.5Carriage 33 167 1:5…Creates Significant Competitive AdvantagesFor Profit,9,600Municipal,Military,Religious,Non-Profit,13,00022,600 U.S. CEMETERIES LARGEST FOR-PROFIT CEMETERY OPERATORSStoneMor has a unique focus onownership and operation of cemeteryassets
  17. 17. Private and Confidential171,000,0001,500,0002,000,0002,500,0003,000,0003,500,0004,000,0004,500,0001930193119321933193419351936193719381939194019411942194319441945194619471948194919501951195219531954195519561957195819591960Favorable DemographicsAging of the Baby Boom Generation will accelerate the death rate and expandour target pre-need market___________________________Source: Department of Health and Human Services.ANNUAL BIRTHS IN THE UNITED STATES 1930-1960
  18. 18. Private and Confidential05,00010,00015,00020,00025,00030,00035,00040,00045,00050,00018Favorable DemographicsSharply increasing population in our target pre-need marketProjectedU.S.Population(inthousands)___________________________Source: U.S. Department of Commerce Census Bureau.PROJECTED U.S. POPULATION IN 55-65 YEAR OLD CATEGORYTarget MarketMore Resilient toEconomicDownturns Target 55 to 65 age range Near retirement – low unemployment risk Mortgage paid-off (or almost) – minimal debt obligations Adult children – no tuition costs
  19. 19. Private and Confidential2,000,0002,200,0002,400,0002,600,0002,800,0003,000,0003,200,0003,400,00019Favorable DemographicsSteady increase in projected mortality rate in the U.S. over the next 20 yearsPROJECTED ANNUAL DEATHS IN THE UNITED STATES___________________________Source: U.S. Department of Commerce Census Bureau.
  20. 20. Private and Confidential2020Diverse Geographic Exposureas of March 15, 2013
  21. 21. Private and Confidential2121Proven Acquisition Track Record Growth primarily driven by acquisitions Never-break-the-model discipline in selecting acquisition targets Focus on acquisitions that generate incremental cash flow in excess offinancing costs Accretive from day oneDISIPLINED ACQUISITION PHILOSOPHYPROVEN TRACK RECORD Acquired 144 cemeteries and 85 funeral homes since 2004 IPO Leading sector consolidator– Public competitors have largely curtailed cemetery acquisitions since 1999– Post-acquisition, improved operating performance through:• Centralization of many functions• Purchasing leverage• Professional maintenance techniques• Employment of sophisticated pre-need sales program
  22. 22. Private and Confidential22Substantial Industry and Financial Barriers to Entry Scarcity and cost of real estate near densely populated areas Zoning restrictions Initial capital requirements Strength of family tradition and heritage Administratively complex business for new entrants Deferred revenue accounting (SAB 101) makes cemetery acquisitionsunattractive to “C-corps” valued on EPS and EBITDA, keeping consolidatorsout of the marketBARRIERS TO ENTRYBecause of the barriers to entry, there are few new cemeteries built. The only way to enterthe industry is to buy an existing cemetery
  23. 23. Private and ConfidentialStrong Balance Sheet & Recovery Profile23 Balance sheet with low-risk, marketable assets providing full debt protection Additional Value from Cemetery Land and Perpetual Care Trust– Cemetery Land– $313.4 million book value as of March 31, 2013– Approximately 12,300 acres, weighted average estimated sales life of over 246 years– Perpetual Care Trust– Future maintenance costs are funded through perpetual trust, with assets of $302.3million as of March 31, 2013(1) Consists of cash balance of $8.5 million, accounts receivable of $127.1 million and merchandise trust assets of $410.0 million as of March 31, 2013(1)
  24. 24. Private and Confidential24Significant Underlying Trust Assets Perpetual Care Trust– Approximately $302 MM as of March 31, 2012– 10% to 20% of the lot selling price is deposited into a perpetual care fund– Gains and losses stay in fund – no impact on earnings– Income from Perpetual Care Trust used to offset cemetery maintenance costs Merchandise Trust– Approximately $410 MM as of March 31, 2012– Various percentages of merchandise selling price deposited into trust as cash is receivedand redeemed once merchandise is delivered– Gains and losses and income to Company– Includes approximately $280 MM in assets in excess of the amount required to fundall merchandise liabilities $41.8 million in perpetual and merchandise trust earnings for the trailingtwelve months ended March 31, 2013
  25. 25. Private and Confidential25Appendix
  26. 26. Private and Confidential26Cemetery Accounting – GAAP vs. Accrual GAAP requires that cemetery product revenue be deferred until (i) the product ispurchased, (ii) the product is specifically identified to the customer, and (iii) title istransferred Management uses “accrual” accounting to monitor its performance, recognizingrevenue at the time a contract is finalized The timing differences between GAAP criteria for recognition and the time sales aremade create significant disparities in financial results across the two methods Cemetery operations are particularly affected due to the high level of pre-needsales SEC now requires the Company to show both accrual and GAAP-based MD&A inits filings
  27. 27. Private and Confidential27Cemetery Revenue – Accounting Recognition There are significant timing differences for cemetery product revenue recognitionbetween GAAP and accrual accountingCemetery Product GAAP Revenue Recognition Accrual Revenue RecognitionBurial Lots 10% of selling price collected Recognized when thecustomer and StoneMorfinalize a contract for aparticular product orservice Revenue is recorded lessa 10% bad debt reserve(historically 8.8%) Expenses are accrued Receivables are bookedMausoleums(Pre-Constructed)% of completion basis, once 10%of selling price collectedMausoleums(Existing)10% of selling price collectedBurial Vaults andCryptsWhen installed in the ground(0 to 18 months)Grave Markers When stored in a warehouseowned by a 3rd party(~18 months)Caskets When stored in a warehouseowned by a 3rd party(~18 months)Grave Opening (initial) When vault is installed(0 to 18 months)Grave Opening (final) When customer is dead & buried(~25 years)

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