investor day 2014 final
TRANSCRIPT
Investor and Analyst Day November 12, 2014
Forward-Looking Statements
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 Partnership’s 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. When considering forward-looking statements, the reader should
keep in mind the risk factors and other cautionary statements set forth in StoneMor’s Annual Report
on Form 10-K and Quarterly Reports filed with the Securities and Exchange Commission. Except as
required under applicable law, StoneMor assumes no obligation to update or revise any forward-
looking statements made herein or any other forward-looking statements made by StoneMor,
whether as a result of new information, future events, or otherwise.
2
Management Team Representatives
3
Name Title
Larry Miller Chairman, President and Chief Executive Officer
Tim Yost Chief Financial Officer
John McNamara Director of Investor Relations
Agenda
4
Topic Presenter
Who We Are Larry Miller
Industry Dynamics Larry Miller
Growth Strategy Larry Miller
Financial Strategy Tim Yost
Financial Performance Tim Yost
Q&A
Who We Are
Larry Miller President & CEO
StoneMor At-a-Glance
6
Second largest owner and operator of cemeteries in the U.S.
303 cemeteries / 98 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 12,490 acres of land, as of December 30, 2013, equivalent to a weighted average sales life of 240 years
45,470 burials performed in 2013
$841 million in Merchandise and Perpetual Care Trusts as of September 30, 2014
We are the only deathcare company structured as a master limited partnership (MLP)
Business Overview
7
A full suite of memorialization products and services
– 100,000+ pre-need and at-need contracts written in 2013
• Average contract value of $2,600
– 12,500+ funeral “calls” in 2013
• Average per call value of $4,000
Burial Lots Funeral Services
Grave Opening & Closing Cremation
Mausoleums Burial Vaults
Caskets Grave Markers
Lawn Crypts Memorials
Our Evolution
8
Metric 2004 (IPO)(1) 2014(2)
Operational Data
Cemeteries / Funeral Homes 132 / 7 303 / 98
Employees ~1,100 ~3,400
Annual Interments ~22,000 ~45,000
Funeral Service Calls 650 12,535
Financial Data
Production-Based Revenue $89 million $350 million
Adj. Operating Profit $29 million $71 million
Distribution per Unit $1.85 $2.43
Market Cap $175 million $761 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 9/30/2014 or for the twelve month period ended 9/30/2014, as applicable.
Our Footprint in 2004
9
WA
OR
CA CO
KS
IA
IL
MO
AR
IN
MI
OH
PA
WV
KY
TN
VA
NC
SC
GA AL MS
FL
Ohio 2 Cemeteries 1 Funeral Home
Rhode Island 2 Cemeteries
Pennsylvania 44 Cemeteries 2 Funeral Homes
New Jersey 6 Cemeteries
Delaware 1 Cemetery
Maryland 10 Cemeteries 1 Funeral Home
West Virginia 32 Cemeteries
Virginia 29 Cemeteries 2 Funeral Homes
Georgia 1 Cemetery
Tennessee 3 Cemeteries
Alabama 1 Cemetery 1 Funeral Home
GA AL
TN
VA WV
PA
OH
132 Cemeteries
+ 7 Funeral Homes
= 139 Total Locations
As of December 31, 2004
Strong regional presence at the time of our IPO
Our Footprint Today
10
Significantly enhanced geographic scale and diversity
303 Cemeteries
+98 Funeral Homes
= 401 Total Locations
WA
OR
CA CO
KS
IA
IL
MO
AR
IN
MI
OH
PA
WV
KY
TN
VA
NC
SC
GA AL MS
FL
Washington 3 Cemeteries 2 Funeral Homes
Oregon 6 Cemeteries 12 Funeral Homes
California 6 Cemeteries 9 Funeral Homes
Colorado 2 Cemeteries
Kansas 3 Cemeteries 2 Funeral Homes
Hawaii 1 Cemetery
Iowa 1 Cemetery
Illinois 8 Cemeteries 22Funeral Homes
Indiana 11 Cemeteries 5 Funeral Homes Michigan
13 Cemeteries
Kentucky 2 Cemeteries
Ohio 14 Cemeteries 2 Funeral Homes
Rhode Island
2 Cemeteries
Pennsylvania 52 Cemeteries 8 Funeral Homes
New Jersey 6 Cemeteries
Delaware 1 Cemetery
Maryland 10 Cemeteries 1 Funeral Home
West Virginia 33 Cemeteries 2 Funeral Homes
Virginia 31 Cemeteries 2 Funeral Homes
North Carolina 16 Cemeteries South Carolina
8 Cemeteries 3 Funeral Homes
Puerto Rico 7 Cemeteries 5 Funeral Homes
Georgia 7 Cemeteries
Florida 4 Cemeteries 17 Funeral Homes
Tennessee 11 Cemeteries 5 Funeral Homes
Alabama 9 Cemeteries 6 Funeral Homes
Mississippi 2 Cemeteries 1 Funeral Home
Arkansas 2 Funeral Homes
Missouri 6 Cemeteries 5 Funeral Homes
As of September 30, 2014
Diversified Revenue Streams
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• More than 60% of revenues generated through highly predictable and at-need business
• StoneMor’s 800+ person sales team creates an unparalleled advantage in pre-need sales
Pre-need Sales, 37.0%
At-need Sales, 30.6%
Investment Income, 9.9%
Interest Income, 2.8%
Funeral Home Revenues,
18.2%
Other Cemetery
Revenues, 1.5%
Year ended December 31, 2013
BUSINESS MIX BY REVENUE STREAM
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Pennsylvania 12.7%
California 8.8%
Ohio 8.1%
Virginia 6.7%
New Jersey 6.3%
Michigan 6.2%
Maryland 5.7%
West Virginia 5.1%
North Carolina 4.8%
Florida 4.3%
Alabama 3.8%
Puerto Rico 3.1%
Oregon 2.9%
Indiana 2.7%
Other States 18.8%
• Only one state represents more than 10% of sales
Geographic Diversity by State
Year ended December 31, 2013
REVENUE BY STATE
Mission-Driven Strategy
13
Mission
Vision
Strategy
To help families memorialize every life with dignity.
To be the preferred operator of deathcare facilities and preferred provider of deathcare services.
To use an aggressive, yet conservatively financed acquisition strategy to build market share. Leverage these positions to expand service offerings.
A Transformational 2014 for StoneMor
14
February May June July August October
Priced $53mm equity offering
Proceeds used to de-lever Transaction upsized due to strong
investor demand
$130mm equity commitment from private investment firm, American Infrastructure MLP Funds ("AIM“)
Capitalization of general partner ~$50mm available for future
acquisition opportunities Priced $67mm equity offering
Proceeds used to fund SCI acquisition and de-lever
Closing of AOP Transaction ($53mm)
Financed with four-year non-cash common units issued to AIM
Opportunities for other Archdioceses
Closing of SCI Acquisition ($54mm)
Immediately accretive Financed with proceeds from May
equity offering
Increased Distribution to $0.61/unit
$0.01 increase from $0.60 Announced intention to increase quarterly
distributions by at least $0.01/unit each quarter through 2015
Announced 2Q 2014 Results
Reaffirmed intent to increase quarterly distribution at least $0.01/unit through the end of 2015
Increased Distribution to $0.62/unit
$0.01 increase from $0.61 2nd consecutive quarterly distribution
increase
1
2
3
4
5
6
7
8
A number of strategic transactions in 2014 mark an exciting inflection point in our growth
15
Stable and Growing Cash Flow
Key Attributes of High-Performing MLPs StoneMor?
Long-lived, Secure Assets
Defensible Competitive Advantage
Attractive Industry Fundamentals
Conservative Financial Profile
StoneMor features the key attributes of high-performing MLPs as well as an attractive total return profile
StoneMor Value Proposition in Context
Industry Dynamics
Larry Miller President & CEO
Industry Snapshot
17
We are a leader in an industry with great opportunity
Aging population driving both at-need and pre-need demand
$22 billion industry
Healthy historical and projected growth
80% of properties are owned by independents
Only a few scale players
No new supply
Significant financial and operating regulations
Favorable Demographics
Large and Growing Market
Fragmented Ownership
Substantial Barriers to Entry
Demographic Tailwinds
18
Source: Department of Health and Human Services.
ANNUAL BIRTHS IN THE U.S. (1930-1960)
Aging of the Baby Boom Generation will:
1. Accelerate the death rate at-need sales
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
Source: U.S. Department of Commerce Census Bureau.
PROJECTED U.S. POPULATION OVER 55
87
98 106
112 118
130
2015 2020 2025 2030 2035 2040
(in millions)
1.5
2.0
2.5
3.0
3.5
4.0
4.5
(in millions)
Cemeteries, 10,500, 27%
Funeral Homes &
Crematories 22,000,
73%
$16 billion
$6 billion
Source: National Funeral Directors Association. Source: National Funeral Directors Association; U.S. Census Bureau.
$22 Billion Market
DEATH CARE MARKET SIZE
19
Large and Growing Industry
CONTINUED GROWTH
2.1
2.4
2.6
3.3
1990 2000 2010 2030P
Deaths in the U.S. (millions)
Industry growth driven by demographics and supported by ever-
present demand for memorialization and celebrations of life
20
Cremation projected to rise to >50% of total deaths in the U.S. by 2020
– Well established trend presents a slight headwind for traditional cemetery burials
However, also represents a key component of our growth strategy
– Western society still memorializes life regardless of the method of disposition
0%
10%
20%
30%
40%
50%
60%
70%
80%
1995 2000 2005 2010 2015 2020 2025
Cremation as a Percentage of Total Deaths
RISE IN CREMATION…
Stronger linkage between cremation and
memorialization options
− Cremation gardens
− Cremation related products and services
Increased land utilization
Higher profit margins
Cremation: Friend (not Foe)
Source: National Funeral Directors Association.
…CREATES OPPORTUNITY
21
Highly Fragmented Ownership
LARGEST PUBLIC CEMETERY OPERATORS
As the only cemetery-focused scale player, we are uniquely well-positioned to execute
on our consolidation strategy
Source: SEC company filings; National Funeral Directors Association. Source: Raymond James Research & National Association of Funeral Directors. (1) Includes non-public consolidators.
OWNERSHIP BREAKDOWN
Owned by Consolidators,
20% (1)
Independent
Operators, 80%
Ownership of deathcare facilities is highly fragmented
− Majority of cemetery owners are non-economic in nature (e.g. religious or municipal)
Cemeteries Funeral Homes Ratio
SCI 489 1,614 1 : 3.3
StoneMor 303 98 3 : 1
Carriage 32 167 1 : 5
22
Substantial 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
CEMETERY BARRIERS
FUNERAL HOME BARRIERS
Licensing requirements
Funeral homes are part of the community
Strength of family tradition and heritage
Only an experienced, well-capitalized acquirer like StoneMor can gain share in this industry
Growth Strategy
Larry Miller President & CEO
Our Acquisition Approach
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Disciplined target selection – “never break the model”
Strategic locations to create and / or enhance market clusters
Cemetery
− 25+ year sales life
− 200+ annual interments
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
Philosophy
Target Criteria
Integration
Funeral
− 150+ Annual Calls
− Strong legacy
Accretive from day one
IRR > cost of capital
Proven Acquisition Track Record
25
175 cemeteries and 100 funeral homes acquired since 2004 IPO(1)
– Record year in 2014
Target acquisition multiples of 4x – 6x EBITDA – Every cemetery acquisition has met or exceeded plan
$16 $33
$115 $117 $124
$173 $189
$224 $247
$354
$0
$100
$200
$300
$400
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 YTD
ACQUISITIONS SINCE IPO (CUMULATIVE PURCHASE PRICE)
# Cemeteries: # Funeral Homes:
($ in millions)
23 6
46 20
94 50
101 52
104 52
126 57
143 68
148 85
149 91
175 100
(1) Net of sales and divestitures, 171 cemeteries and 92 funeral homes acquired since 2004 IPO.
$107mm of acquisitions YTD; Historical average of $27mm annually since IPO
Key Stats 13 cemeteries leased
60-year management agreement
7,000 existing burials per year
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
2014 Acquisition Highlights: Archdiocese of Philadelphia
Closed in May 2014 with $53 million initial lease payment
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Key Stats 12 cemeteries, 9 funeral homes
1,140 acres of land; FL, NC, PA, VA
3,500 annual interments
1,900 annual funeral home calls
Rationale Improve footprint in attractive markets
Upside from implementation of pre-need sales
Significant administrative synergies
$54 million acquisition closed in June 2014
2014 Acquisition Highlights: Service Corporation International
27
2014 acquisitions have fortified our position across the entire metro area
2014 Acquisition Highlights: Philadelphia Market Penetration
Source: Google Maps.
AOP
AOP AOP
AOP
AOP
AOP
AOP
AOP
AOP
AOP
AOP
AOP
AOP
SCI SCI
SCI
28
Organic Growth Initiatives
29
Continuous organic growth efforts support our acquisition strategy
SALES FORCE GROWTH
Effective sales force management
Thorough training in consultative pre-need sales
EXPANDED PRODUCT/SERVICE OFFERINGS
MARKETING AND CONSUMER REACH
OPTIMIZE REAL ESTATE PRODUCTIVITY
Building up
310
834
2004 2013
Commissioned Salespeople
Cremation gardens
Financial Strategy
Tim Yost CFO
31
We Are The Only Deathcare MLP
MLP Overview
Qualification Parameters
We use MLP status to conservatively unlock value
Our Competitive Advantage
We make distributions to unitholders on a quarterly basis
Qualifying income generated primarily from the sale of real property
− Non-qualifying activities operated through taxable subsidiaries
MLP status reviewed by IRS and confirmed in recent audit
Category Qualifying Non-Qualifying
Interment Rights Burial lots Lawn and mausoleum crypts Cremation niches Perpetual care rights
N/A
Merchandise Burial Vaults Caskets Grave markers
Services / Other Vault installation Casket and other installations
Other Interest and dividends Funeral home sales
Patent pending for the application of the MLP structure to the
cemetery business
32
MLP Rationale
Highly secure assets generating reliable, predictable cash flow
OPERATIONAL ASSETS FINANCIAL ASSETS
Perfect match of long-term operating and financial assets
Long-lived operating real estate assets
Over $341 mm of cemetery property (book value)
12,000 acres of land; average sales life of 240 years
Long-lived capital market assets
Over $840mm in perpetual and merchandise trusts
3rd party mgmt, income/preservation of capital
$349
$492
$0
$100
$200
$300
$400
$500
$600
Perpetual Trusts Merchandise Trusts
Trust Fund Assets ($ in millions)
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Growth Through
Disciplined Acquisition
Underwriting
Prudent Balance Sheet Management
Deliver Reliable,
Consistent Value to
Unitholders
We have delivered steady, conservatively financed growth
Transformational 2014 is an inflection point toward future growth
Avg. $27mm annual acquisitions (’05-’13)
Target 4x – 6x EBITDA purchase prices
Every cemetery acquisition has met or exceeded plan
$1.90 $1.93 $2.03 $2.12 $2.22 $2.23 $2.33 $2.35 $2.39 $2.43
2005 2006 2007 2008 2009 2010 2011 2012 2013 TTM
Distributions / LP Unit
Proven Track Record
Keys to Our Success
Recent Developments
56%
43% 33% 32%
40% 36% 27%
12/08 12/09 12/10 12/11 12/12 12/13 9/14
Debt / Enterprise Value
2014 acquisitions ~4x average annual pace
AOP and SCI properties operating on plan
Well capitalized GP with AIM’s investment
2 equity raises ($120mm) to de-lever
Refinance senior notes to lower cost of debt
Distributions expected to grow by $0.01 per unit each quarter through the end of 2015
Coverage has consistently been >1.2x
34
Transformative Event – AIM Investment
$130 million equity commitment from American Infrastructure MLP Funds (AIM)
– $55 million used for purchase of Archdiocese of Philadelphia properties
• Four-year non-cash common units (matches property cash flow)
– Acquisition of an indirect majority interest in our general partner
– ~$50 million available for future acquisition opportunities
Capitalization of general partner facilitates growth
– Aligns us with well-capitalized MLP sector expert
– Provides capital base at the GP to access nascent assets (e.g. AOP) that have working capital needs
• Acquisitions can later be dropped down to the MLP
Financial Performance
Tim Yost CFO
36
Strong Recent Results
PRODUCTION-BASED REVENUE
($ in millions)
ADJUSTED OPERATING PROFIT
($ in millions)
DISTRIBUTABLE FCF
($ in millions)
We deliver reliable, predictable yield with accelerating growth
We focus on three financial metrics – Production-Based Revenue: total value of contracts written, investment and other income
– Adjusted Operating Profit: normalizes timing-related differences between GAAP and accrual
– Distributable Free Cash Flow: indicator of our ability to pay distributions to our unitholders
$296
$327
$240
$264
$0
$50
$100
$150
$200
$250
$300
$350
2012 2013 Q3'13YTD
Q3'14YTD
$54
$67
$47 $50
$0
$10
$20
$30
$40
$50
$60
$70
$80
2012 2013 Q3'13YTD
Q3'14YTD
$53
$76
$57
$50
$0
$10
$20
$30
$40
$50
$60
$70
$80
2012 2013 Q3'13YTD*
Q3'14YTD
*Includes $11.9 million one-time gain from legal settlement
($ in millions) ($ in millions)
REVENUE OPERATING PROFIT
37
Historical Performance
Steady growth as we have built the business through acquisitions and
pre-need sales efforts
GAAP results not indicative of true financial performance
$13
$3
$10
$14
$6
$13
$36 $38
$49
$54
$67 $71
2009 2010 2011 2012 2013 Q3'14TTM
GAAP Old GAAP
$181 $197
$228 $243 $246
$277
$218
$247
$281 $296
$327
$350
2009 2010 2011 2012 2013 Q3'14TTM
GAAP Old GAAP
38
Strong and Growing Asset Base
Asset base has grown while leverage has remained steady
TOTAL ASSETS AND DEBT
($ in millions)
$738
$855
$1,146
$1,249 $1,344
$1,474
$1,709
$161 $183 $220 $195
$255 $292 $270
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
2008 2009 2010 2011 2012 2013 Q3'14
Total Assets Total Debt
Low-Risk Balance Sheet
39
$656
$191
$41
$154
$270
$0
$100
$200
$300
$400
$500
$600
$700
Cash, AR andMerchandise Trust
AP and AccruedLiabilities
Merchandise Liability Debt Excess Cash and Assets
NET LIQUID ASSETS
($ in millions)
Marketable assets provide full debt protection
Significant additional value from long-term assets
− Cemetery Property
• Approximately 12,490 acres, weighted average sales life of over 240 years
• $341 million book value as of September 30, 2014
− Perpetual Care Trusts
• Fund future maintenance costs
• Assets of $349 million as of September 30, 2014
40
Substantial Distribution Coverage
History of sustained distributions and significant coverage
($ in millions)
ADJUSTED OPERATING PROFIT AND DISTRIBUTIONS
$36 $38
$49
$54
$67 $71
$27
$32
$45 $47
$51
$59
$13
$3
$10 $14
$6
$13
$0
$10
$20
$30
$40
$50
$60
$70
$80
2009 2010 2011 2012 2013 Q3'14 TTM
Adjusted Operating Profit Distributions GAAP Operating Profit
Average distribution coverage = 1.23x
41
Continued Growth
3 distribution increases in the last 2 years (including last two quarters)
2-year distribution growth in line with other MLP sectors
– Per Company guidance, distributions are expected to grow by $0.01 per quarter
through 2015
$1.90 $1.93
$2.03 $2.12
$2.22 $2.23 $2.33 $2.35 $2.39
$2.52
$2.68
$1.00
$1.20
$1.40
$1.60
$1.80
$2.00
$2.20
$2.40
$2.60
$2.80
2005 2006 2007 2008 2009 2010 2011 2012 2013 Q4'14EAnn.
Q4'15EAnn.
DISTRIBUTIONS PER LP UNIT
STONEMOR YIELD vs. BENCHMARK ASSET CLASSES
42
Compelling Investment Characteristics
Transformational 2014 has reduced risk in our business
− Well-capitalized general partner, an enhanced growth profile and reduced leverage
However, STON units still offer an attractive yield relative to the broader MLP index and other asset classes
9.6%
5.6%
3.7% 3.4%
2.3% 2.0%
0%
2%
4%
6%
8%
10%
StoneMor Alerian MLP Index MSCI US REITIndex
PHLX Utility SectorIndex
US 10-YearTreasury
S&P 500
Source: Bloomberg and Index monthly reports. Market data as of 11/7/2014.
Yield Spread: 4.0% 5.9% 6.2% 7.3% 7.6%
Current Yield (%)
Recap – StoneMor Investment Thesis
43
Key Attributes of High-Performing MLPs
StoneMor?
StoneMor Investment Thesis
StoneMor features the key attributes of high-performing MLPs as well as an attractive total return profile
Conservative Financial
Profile
Attractive Industry
Fundamentals
Defensible Competitive Advantage
Long-lived, Secure Assets
Stable and Growing
Cash Flow
Highly predictable, non-cyclical business model
40 consecutive quarterly distributions
Proven track record of accretive acquisitions
$340mm+ of cemetery property (book value)
12,000 acres of land; avg. sales life of 240 years
$841mm+ 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
Significant, growing asset base with modest leverage
Well-capitalized general partner
Discipline in returning capital to unitholders
Thank You