Private and Confidential
NAPTP Presentation
May 2013
Private and Confidential
2
Today’s Participants
Lawrence Miller
Chief Executive Officer, President and Chairman
Timothy Yo...
Private and Confidential
3
Confidential
This presentation contains certain statements that may be deemed to be forward-loo...
Private and Confidential
44
StoneMor Partners L.P.
 StoneMor is the second largest owner and operator of cemeteries in th...
Private and Confidential
5
Business Strategy
Enhance
existing
cemetery
operations
Optimize real
estate portfolio
Actively ...
Private and Confidential
6
Investment Highlights
 8.6% yield superior to most MLPs
 Pre-need sales expertise generates s...
Private and Confidential
7
Attractive Yield
 8.6% Yield vs. 6% Average MLP Yield*
 Has increased 28% since 2004 IPO
Dist...
Private and Confidential
8
Value Enhancing Strategy in the Cemetery Business
 We are experts at operating and growing a c...
Private and Confidential
9
Cemetery Revenues – How Are Pre-Need Sales Generated?
 Leads are generated and appointments ma...
Private and Confidential
10
2012 Growth Events
 Completed in July 2012
– Purchased 8 funeral homes, 4 cemeteries and 2 cr...
Private and Confidential
11
2013 Growth Events
 Completed in February 2013
– Purchased 6 funeral homes and 2 cremation re...
Private and Confidential
12
Historical Performance
($ in millions) ($ in millions)
REVENUE OPERATING PROFIT
 Solid perfor...
Private and Confidential
13
Sustained Business Growth While Maintaining Stable Credit Profile
 Over the past 5 years, the...
Private and Confidential
14
Diversified Revenue Streams
STONEMOR BUSINESS MIX BY REVENUE – TWELVE MONTHS ENDED DECEMBER 31...
Private and Confidential
15
Highly Fragmented Industry…
Cemeteries,
9,600
Funeral
Homes,
22,000
$11 billion
$6 billion
___...
Private and Confidential
1616
Cemeteries
Funeral
Homes Ratio
SCI 374 1,437 1:3.8
StoneMor 276 92 3:1
Stewart 141 217 1:1.5...
Private and Confidential
17
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
4,000,000
4,500,000
1930
1931
1932...
Private and Confidential
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
18
Favorable Demographics
...
Private and Confidential
2,000,000
2,200,000
2,400,000
2,600,000
2,800,000
3,000,000
3,200,000
3,400,000
19
Favorable Demo...
Private and Confidential
2020
Diverse Geographic Exposure
as of March 15, 2013
Private and Confidential
2121
Proven Acquisition Track Record
 Growth primarily driven by acquisitions
 Never-break-the-...
Private and Confidential
22
Substantial Industry and Financial Barriers to Entry
 Scarcity and cost of real estate near d...
Private and Confidential
Strong Balance Sheet & Recovery Profile
23
 Balance sheet with low-risk, marketable assets provi...
Private and Confidential
24
Significant Underlying Trust Assets
 Perpetual Care Trust
– Approximately $302 MM as of March...
Private and Confidential
25
Appendix
Private and Confidential
26
Cemetery Accounting – GAAP vs. Accrual
 GAAP requires that cemetery product revenue be deferr...
Private and Confidential
27
Cemetery Revenue – Accounting Recognition
 There are significant timing differences for cemet...
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NAPTP Presentation - May 2013

  1. 1. Private and Confidential NAPTP Presentation May 2013
  2. 2. Private and Confidential 2 Today’s Participants Lawrence Miller Chief Executive Officer, President and Chairman Timothy Yost Chief Financial Officer
  3. 3. Private and Confidential 3 Confidential This presentation contains certain statements that may be deemed to be forward-looking statements within the meaning of the Securities Acts. All statements, other than statements of historical 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, the outlook for population growth and death rates, general industry conditions including future operating results of the Partnerships properties, capital expenditures, asset sales, expansion and growth opportunities, bank borrowings, financing activities and other such matters, are forward- looking statements. Although the Partnership believes that its expectations stated in this presentation are based on reasonable assumptions, actual results may differ from those projected 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 the SEC and the prospectus and the prospectus supplement relating to this offering. In addition, the projected impact of acquisitions reflect managements projections as to possible future results based on a number of assumptions that are inherently uncertain, including without limitation the organic growth of the Partnership, the availability of acquisition targets, the purchase prices for the targets, the availability of debt or equity financing from either third parties or the targets and the Partnership’s ability to integrate and manage such acquisitions. The assumptions involve significant elements of subjective judgment and analysis, and no representation is made as to their or the projections attainability.
  4. 4. Private and Confidential 44 StoneMor 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, diversely located across 28 states and Puerto Rico – As of 12/31/2012, over 12,300 acres of land, equivalent to an aggregate weighted average sales life of 246 years  StoneMor has demonstrated a consistent track record of growth and financial performance – 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 million in 2013 (TTM) • 13.2% ’07-’12 CAGR StoneMor’s mission is to help families memorialize each life with dignity
  5. 5. Private and Confidential 5 Business Strategy Enhance existing cemetery operations Optimize real estate portfolio Actively manage trust fund assets Execute disciplined acquisition strategy
  6. 6. Private and Confidential 6 Investment 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 $280 million  Experienced management – Long tenure in the cemetery business  Conservative financial profile – No significant near-term debt maturities – Consistent growth in cash flows – Tax free structure and minimal capital expenditures
  7. 7. Private and Confidential 7 Attractive Yield  8.6% Yield vs. 6% Average MLP Yield*  Has increased 28% since 2004 IPO Distribution Per Unit Source: Barron’s
  8. 8. Private and Confidential 8 Value Enhancing Strategy in the Cemetery Business  We are experts at operating and growing a cemetery-focused deathcare business – Best practices in pre-need marketing – Extensive and highly driven commission-based sales force – Volume purchasing lowers costs for cemetery and funeral home merchandise – Centralized administrative functions lower operating expenses  Our strategy leverages our existing asset base to drive revenues, adjusted operating profit and cash flow available for distributions to common unitholders ACCRUAL REVENUES ADJUSTED OPERATING PROFIT DISTRIBUTION PER UNIT ($ in millions)
  9. 9. Private and Confidential 9 Cemetery 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 Confidential 10 2012 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 purchases Florida Illinois California  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 Confidential 11 2013 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 $175 million senior unsecured notes at 7.825% Florida Corporate
  12. 12. Private and Confidential 12 Historical Performance ($ in millions) ($ in millions) REVENUE OPERATING PROFIT  Solid performance amid challenging economic conditions
  13. 13. Private and Confidential 13 Sustained Business Growth While Maintaining Stable Credit Profile  Over the past 5 years, the asset base has grown and total leverage has remained steady Total Assets, Debt and Partners’ Capital Total Debt / EBITDA ($ in millions)
  14. 14. Private and Confidential 14 Diversified Revenue Streams STONEMOR BUSINESS MIX BY REVENUE – TWELVE MONTHS ENDED DECEMBER 31, 2012 StoneMor’s +800 person sales team creates an unparalleled advantage in pre-need sales performance ~60% of StoneMor’s revenue is generated through highly predictable at-need business
  15. 15. Private and Confidential 15 Highly Fragmented Industry… Cemeteries, 9,600 Funeral Homes, 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 Market LARGE DEATH CARE INDUSTRY HIGHLY FRAGMENTED INDUSTRY REVENUE Independent Operators 80% Owned by Consolidators 20% (1)
  16. 16. Private and Confidential 1616 Cemeteries Funeral Homes Ratio SCI 374 1,437 1:3.8 StoneMor 276 92 3:1 Stewart 141 217 1:1.5 Carriage 33 167 1:5 …Creates Significant Competitive Advantages For Profit, 9,600 Municipal, Military, Religious, Non-Profit, 13,000 22,600 U.S. CEMETERIES LARGEST FOR-PROFIT CEMETERY OPERATORS StoneMor has a unique focus on ownership and operation of cemetery assets
  17. 17. Private and Confidential 17 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000 4,000,000 4,500,000 1930 1931 1932 1933 1934 1935 1936 1937 1938 1939 1940 1941 1942 1943 1944 1945 1946 1947 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 Favorable Demographics Aging of the Baby Boom Generation will accelerate the death rate and expand our target pre-need market ___________________________ Source: Department of Health and Human Services. ANNUAL BIRTHS IN THE UNITED STATES 1930-1960
  18. 18. Private and Confidential 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 18 Favorable Demographics Sharply increasing population in our target pre-need market ProjectedU.S.Population (inthousands) ___________________________ Source: U.S. Department of Commerce Census Bureau. PROJECTED U.S. POPULATION IN 55-65 YEAR OLD CATEGORY Target Market More Resilient to Economic Downturns  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 Confidential 2,000,000 2,200,000 2,400,000 2,600,000 2,800,000 3,000,000 3,200,000 3,400,000 19 Favorable Demographics Steady increase in projected mortality rate in the U.S. over the next 20 years PROJECTED ANNUAL DEATHS IN THE UNITED STATES ___________________________ Source: U.S. Department of Commerce Census Bureau.
  20. 20. Private and Confidential 2020 Diverse Geographic Exposure as of March 15, 2013
  21. 21. Private and Confidential 2121 Proven 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 of financing costs  Accretive from day one DISIPLINED ACQUISITION PHILOSOPHY PROVEN 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 Confidential 22 Substantial 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 acquisitions unattractive to “C-corps” valued on EPS and EBITDA, keeping consolidators out of the market BARRIERS TO ENTRY Because of the barriers to entry, there are few new cemeteries built. The only way to enter the industry is to buy an existing cemetery
  23. 23. Private and Confidential Strong Balance Sheet & Recovery Profile 23  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 $302.3 million 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 Confidential 24 Significant 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 received and 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 fund all merchandise liabilities  $41.8 million in perpetual and merchandise trust earnings for the trailing twelve months ended March 31, 2013
  25. 25. Private and Confidential 25 Appendix
  26. 26. Private and Confidential 26 Cemetery Accounting – GAAP vs. Accrual  GAAP requires that cemetery product revenue be deferred until (i) the product is purchased, (ii) the product is specifically identified to the customer, and (iii) title is transferred  Management uses “accrual” accounting to monitor its performance, recognizing revenue at the time a contract is finalized  The timing differences between GAAP criteria for recognition and the time sales are made create significant disparities in financial results across the two methods  Cemetery operations are particularly affected due to the high level of pre-need sales  SEC now requires the Company to show both accrual and GAAP-based MD&A in its filings
  27. 27. Private and Confidential 27 Cemetery Revenue – Accounting Recognition  There are significant timing differences for cemetery product revenue recognition between GAAP and accrual accounting Cemetery Product GAAP Revenue Recognition Accrual Revenue Recognition Burial Lots 10% of selling price collected  Recognized when the customer and StoneMor finalize a contract for a particular product or service  Revenue is recorded less a 10% bad debt reserve (historically 8.8%)  Expenses are accrued  Receivables are booked Mausoleums (Pre-Constructed) % of completion basis, once 10% of selling price collected Mausoleums (Existing) 10% of selling price collected Burial Vaults and Crypts When installed in the ground (0 to 18 months) Grave Markers When stored in a warehouse owned by a 3rd party (~18 months) Caskets When stored in a warehouse owned 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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