StoneMor Partners L.P. Southwest IDEAS Investor Conference November 2015
Forward-Looking Statements This presentation contains forward-looking statements that involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially from those contained in the forwardlooking statements. The Partnership cautions readers that any forward-looking information is not a guarantee of future performance. Such forward-looking statements include, but are not limited to, statements about future financial and operating results, the Partnership s plans, objectives, expectations and intentions and other statements that are not historical facts. Risks, assumptions and uncertainties that could cause actual results to materially differ from the forward-looking statements include, but are not limited to, those associated with the cash flow from our pre-need and at-need sales, our trusts, and financings, which may impact our ability to meet our financial projections, our ability to service our debt and pay distributions, and our ability to increase our distributions; future revenue and revenue growth; the integration or anticipated benefits of our recent acquisitions or any future acquisitions; our ability to complete and fund additional acquisitions; the effect of economic downturns; the impact of our leverage on our operating plans; the decline in the fair value of certain equity and debt securities held in our trusts; our ability to attract, train and retain an adequate number of sales people; the volume and timing of pre-need sales of cemetery services and products; increased use of cremation; changes in the death rate; changes in the political or regulatory environments, including potential changes in tax accounting and trusting policies; 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; the financial condition of thirdparty insurance companies that fund our pre-need funeral contracts; and other risks, assumptions and uncertainties detailed from time to time in the Partnership s reports filed with the U.S. Securities and Exchange Commission, including quarterly reports on Form 10-Q, reports on Form 8-K and annual reports on Form 10-K. Forward-looking statements speak only as of the date hereof, and the Partnership assumes no obligation to update such statements, except as may be required by applicable law. 2
StoneMor At-a-Glance Second largest owner and operator of cemeteries in the U.S. 306 cemeteries / 103 funeral homes, located across 28 states and Puerto Rico Complete range of funeral merchandise and services, along with cemetery property, merchandise and services, both at the time of need and on a pre-need basis Over 15,716 acres of land, as of December 30, 2014, equivalent to a weighted average sales life of 247 years 55,500 burials performed in 2015 TTM / 15,572 funeral service calls $771.1 million in Merchandise and Perpetual Care Trusts as of September 30, 2015 We are the only deathcare company structured as a master limited partnership (MLP) 3
Our Evolution 2004 (IPO) (1) 2015 (2) Operational Data Cemeteries / Funeral Homes 132 / 7 306 / 103 Employees ~1,100 ~3,400 Annual Interments ~22,000 ~50,500 Funeral Service Calls 650 14,900 Financial Data Production-Based Revenue $89 million $391 million Adjusted EBITDA $29 million $95 million Distribution per Unit $1.85 $2.58 Market Cap $175 million $970 million (1) Represents data as of 12/31/2004 or for the twelve month period ended 12/31/2004, as applicable. (2) Represents data as of 9/30/2015 or for the twelve month period ended 9/30/2015, as applicable. 4
Our Footprint Today Significantly enhanced geographic scale and diversity Oregon 7 Cemeteries 11 Funeral Homes California 7 Cemeteries 8 Funeral Homes OR CA WA Washington 3 Cemeteries 2 Funeral Homes Kansas 3 Cemeteries 2 Funeral Homes CO Iowa 1 Cemetery Illinois 11 Cemeteries 4Funeral Homes KS Indiana 11 Cemeteries 5 Funeral Homes IA MO AR IL Michigan 13 Cemeteries MS Kentucky 2 Cemeteries MI IN TN KY AL OH Ohio 14 Cemeteries 2 Funeral Homes WV GA PA SC VA NC Rhode Island 2 Cemeteries Pennsylvania 68 Cemeteries 10 Funeral Homes New Jersey 6 Cemeteries Delaware 1 Cemetery Maryland 10 Cemeteries 1 Funeral Home Virginia 34 Cemeteries 2 Funeral Homes South Carolina 8 Cemeteries 2 Funeral Homes West Virginia 33 Cemeteries 2 Funeral Homes North Carolina 19 Cemeteries 2 Funeral Homes Hawaii 1 Cemetery 306 Cemeteries + 103 Funeral Homes = 409 Total Locations As of September 30, 2015 Colorado 2 Cemeteries Missouri 6 Cemeteries 5 Funeral Homes 5 Arkansas 2 Funeral Homes Mississippi 2 Cemeteries 1 Funeral Home Alabama 9 Cemeteries 6 Funeral Homes FL Tennessee 11 Cemeteries 5 Funeral Homes Georgia 7 Cemeteries Florida 8 Cemeteries 26 Funeral Homes Puerto Rico 7 Cemeteries 5 Funeral Homes
Diversified Revenue Streams 2015 YTD BUSINESS MIX GENERATES STABLE AND PREDICTABLE REVENUE STREAMS Other Cemetery Revenues, 1.4% Funeral Home Revenues, 16.8% Pre-need Sales, 41.0% Interest Income, 2.2% Investment Income, 12.2% At-need Sales, 26.3% > 50% of revenues generated through at-need and other highly predictable sources 6
Mission-Driven Strategy Mission To help families memorialize every life with dignity. Vision To be the preferred operator of deathcare facilities and preferred provider of deathcare services. Strategy To use an aggressive, yet conservatively financed acquisition strategy to build market share. Leverage these positions to expand service offerings. 7
Industry Snapshot We are an industry leader with great opportunity Favorable Demographics Aging population driving both at-need and preneed demand Large and Growing Market $20 billion industry Healthy historical and projected growth Fragmented Ownership 80% of properties* are owned by independents Only a few scale players Substantial Barriers to Entry No new supply Significant financial and operating regulations *Cemeteries and funeral homes combined 8
Demographic Tailwinds Aging Baby Boom Generation will: 1. Accelerate the death rate 2. Expand our target pre-need market (55 to 65 age range) More financially stable and resilient to economic downturns Beginning to think of legacy ANNUAL BIRTHS IN THE U.S. (1930-1960) PROJECTED U.S. POPULATION OVER 55 (in millions) (in millions) 4.5 130 4.0 3.5 87 98 106 112 118 3.0 2.5 2.0 1.5 2015 2020 2025 2030 2035 2040 Source: Department of Health and Human Services. Source: U.S. Department of Commerce Census Bureau. 9
Large and Growing Industry Industry growth driven by demographics and supported by everpresent demand for memorialization and celebrations of life DEATHCARE MARKET SIZE CONTINUED GROWTH $20 Billion Market Cemeteries Deaths in the U.S. (millions) 3.3 $4 billion 2.6 2.4 $16 billion 2.1 Funeral Homes & Crematories 1990 2000 2010 2030P Source: National Funeral Directors Association; IBIS World Market Research Source: National Funeral Directors Association; U.S. Census Bureau. 10
Cremation: Friend (not Foe) Cremation projected to rise to ~50% of total deaths in the U.S. by 2020 However, number of non-cremation deaths will remain steady in the future RISE IN CREMATION 4,000 # of Deaths (1) % Cremation (2) 80% 3,500 70% 3,000 60% 2,500 2,000 1,500 37% 40% 42% 45% 48% Cremation 51% 53% 55% 57% 50% 40% 30% 1,000 500 Non-Cremation 20% 10% 0 2005 2010 2015 2020 2025 2030 2035 2040 0% (1) Total anticipated deaths per U.S. Census Bureau 2009 projections (2) Source: National Funeral Directors Association (NFDA) 11
Cremation: Friend (not Foe) Represents a key component of our growth strategy Just 15% of current cremations utilize some form of memorialization Western society still memorializes life regardless of the method of disposition CREATES OPPORTUNITY Stronger linkage between cremation and memorialization options Cremation gardens Cremation-related products and services Increased land utilization Higher profit margins 12
Cremation: Friend (not Foe) Cremation Gardens Glass Enclosed Niches 13
Our Acquisition Approach Philosophy Disciplined target selection never break the model Strategic locations to create and / or enhance market clusters Target Criteria Accretive from day one IRR > cost of capital Cemetery 25+ year sales life 200+ annual interments Funeral 150+ Annual Calls Strong legacy Integration Seasoned, professional management Consolidate office functions into home office Institute pre-need sales program Leverage buying power to reduce product costs Professional trust fund management 14
Proven Acquisition Track Record 178 cemeteries and 105 funeral homes acquired since 2004 IPO (1) Target acquisition multiples of 4x 6x EBITDA Acquisition pipeline remains robust ACQUISITIONS SINCE IPO (CUMULATIVE PURCHASE PRICE) ($ in millions) $500 $400 $300 $200 $109mm of acquisitions in 2014; Historical average of $27mm annually since IPO $115 $117 $124 $173 $14mm $189 $224 $247 $354 $360 $100 $0 $16 $33 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 # Cemeteries: # Funeral Homes: 23 6 46 20 94 50 101 52 104 52 126 57 143 68 148 85 149 91 175 100 178 (1) 105 (1) (1) Net of sales and divestitures, 174 cemeteries and 96 funeral homes acquired since 2004 IPO. 15
Archdiocese of Philadelphia Update: Closed in May 2014 with $53 million initial lease payment Key Stats 13 cemeteries leased 60-year management agreement 7,000 existing burials per year; all at-need Rationale Strengthen market position in Philadelphia backyard Introduce pre-need sales to large and growing population Upside from optimizing productivity of land Significant opportunities for other Archdioceses Update 23% increase in contracts written for 3Q15 compared with prior year 41% increase in revenue for 3Q15 compared with prior year Pre-need contracts accounted for 30% of total contracts written for 3Q15 vs. 23% for prior year 16
Organic Growth Initiatives Continuous organic growth efforts support our acquisition strategy Has grown from 310 at IPO to ~900 today Salesforce Development Commission schedule incentivizes top performers Recently implemented regional training centers Currently 29 sales people Pre-need Insurance As of Q3, has already surpassed total 2014 sales Insurance Division Final Expense Insurance Serving the growing needs of the 50% of Americans who say they don t have enough Life Insurance* Telemedicine, ID Theft, Medicare Consulting, Private Exchange * Source: LIMRA (Life Insurance Marketing Research Association) 17
Organic Growth Initiatives Continuous organic growth efforts support our acquisition strategy Expanded Product/Service Offerings Substantial growth in cremation related products and services Jewelry Memorialization keepsakes Cremation gardens Optimize Real Estate Productivity Land sales Ability to add vertical structures to property 18
Marketing & Consumer Reach A website with strong lead generation capabilities to serve as foundation for direct marketing programs Site Metrics YTD 296,373 new visitors went to BurialPlanning.com compared to 266,805 in 2014 4,735 consumers have become leads by requesting more information 932 households have purchased space or merchandise $5.8mm in revenue vs. $4.4mm in 2014 19
Keys to Our Success We have delivered steady, conservatively financed growth Growth Through Disciplined Acquisition Strategy Proven Track Record Avg. $27mm annual acquisitions ( 05-13) 2014 acquisitions ~4x average annual pace Target 4x 6x EBITDA purchase prices Recent Developments ~$14mm acquisitions YTD AOP and SCI properties operating on plan Debt/Enterprise Value Prudent Balance Sheet Management 32% 40% 36% 28% 26% Conservative leverage (3.0x debt/ Adj. EBITDA) 12/11 12/12 12/13 12/14 9/15 Deliver Reliable, Consistent Value to Unitholders $2.23 Annual Distributions/LP Unit $2.33 $2.35 $2.39 $2.43 $2.58 2010 2011 2012 2013 2014 2015 TTM 20 Distributions expected to grow by $0.01 per unit each quarter through the end of 2015 Distribution coverage conservatively managed
Strong and Stable Results CONTRACTS WRITTEN ADJUSTED EBITDA DISTRIBUTABLE AVAILABLE CASH (in thousands) ($ in millions) ($ in millions) 125 122 $100 $110 120 115 110 105 100 95 98 102 111 $95 $90 $85 $80 $75 $75 $87 $91 $95 $100 $90 $80 $70 $79 $80 $96 90 $70 $62 85 $65 $60 80 2012 2013 2014 2015 TTM $60 2012 2013 2014 2015 TTM $50 2012 2013 2014 2015 TTM 21
Sustained and Stable Cash Flows DISTRIBUTABLE AVAILABLE CASH AND DISTRIBUTIONS ($ in millions) $120 $110 $100 $96 $90 $80 $79 $80 $74 $70 $60 $50 $62 $47 $52 $63 $40 $30 $20 2012 2013 2014 2015 TTM Distributable Available Cash Distributions 22
Strong and Growing Asset Base Asset base has grown while leverage has remained steady TOTAL ASSETS AND DEBT ($ in millions) $1,800 $1,699 $1,681 $1,600 $1,474 $1,400 $1,200 $1,146 $1,249 $1,344 $1,000 $800 $600 $400 $200 $220 $195 $255 $292 $287 $291 $0 2010 2011 2012 2013 2014 2015 YTD Total Assets Total Debt 23
Significant Asset Value Conservative balance sheet: $138mm of net liquid assets (detail below) at 9/30/15 Significant additional value from long-term, profit-generating assets of the business NET LIQUID ASSETS Marketable assets provide debt protection and $138mm of excess value FUTURE VALUE-GENERATING ASSETS Assets underlying $91mm of Adjusted EBITDA in 2014 & $95mm 2015 TTM ($ in millions) $700 $600 $500 $42 $159 Cemetery Property: $345mm book value Approximately 15,716 acres Weighted average sales life of 247 years $400 $300 $630 $291 Property and Equipment: $102.7mm book value, net $200 Perpetual Care Trusts: $100 $0 Cash, AR and Merchandise Trust AP and Accrued Liabilities Merchandise Liability Debt $138 Excess Cash and Assets $312mm under management Fund future maintenance costs 24
Trust Management Merchandise Trust and Perpetual Care Trust $459 million (Merchandise Trust) All principal, interest and dividends accrue to StoneMor over time $312 Million (Perpetual Care) Principal remains in trust in perpetuity Interest and dividends accrue to StoneMor Governed by investment guidelines adopted by Trust and Compliance Committee of B.O.D. Investment Management Balanced approach to preservation of capital Variety of intermediate-term, investment-grade, fixed-income securities, high-yield securities, REITS, MLPs, other equities and cash Measured Performance* 6% Merchandise Trust 8% 7% 9% 8% 7% Perpetual Care Trust 6% 6% 5% 4% 12/10 12/11 12/12 12/13 12/14 12/10 12/11 12/12 12/13 12/14 *Past performance is not indicative of future performance 25
Total Return STON TEN-YEAR AVERAGE ANNUAL TOTAL RETURN vs. BENCHMARK ASSET CLASSES 16% 14% 12% 10% 13.4% 12.1% 10.3% 8% 8.0% 7.7% 7.6% 6% 4% 2% 0% StoneMor NASDAQ 100 Alerian MLP Index DJ Utility Index S&P 500 Russell 2000 Source: Bloomberg and Index monthly reports. Market data as of 09-30-2015 26
Recap StoneMor Investment Thesis StoneMor features the key attributes of the most stable MLPs as well as an attractive total return profile Key Attributes of the Most Stable MLPs StoneMor? StoneMor Investment Thesis Stable and Growing Cash Flow Long-lived, Secure Assets Defensible Competitive Advantage Attractive Industry Fundamentals Highly predictable, non-cyclical business model 43 consecutive quarterly distributions Proven track record of accretive acquisitions $345mm+ of cemetery property (book value) 15,700 acres of land; avg. sales life of 247 years $771mm+ in perpetual & merchandise trusts Scale to create leveraged market positions Cemetery / pre-need expertise drives organic growth MLP facilitates acquisition growth Demographic tailwinds Large, growing and fragmented market Prohibitive barriers to entry Conservative Financial Profile Significant, growing asset base with modest leverage Discipline in returning capital to unitholders 27
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