UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORTPURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: (Date of earliest event reported): December 14, 2016
StoneMor Partners L.P.(Exact name of Registrant as Specified in Its Charter)
Delaware 001-32270 80-0103159
(State or other jurisdictionof incorporation)
(Commissionfile number)
(I.R.S. EmployerIdentification No.)
3600 Horizon Boulevard Trevose, PA 19053(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code (215) 826-2800
Not Applicable(Former name or former address, if changed since last report)
ChecktheappropriateboxbelowiftheForm8-Kfilingisintendedtosimultaneouslysatisfythefilingobligationoftheregistrantunderanyofthefollowingprovisions:
☐ WrittencommunicationspursuanttoRule425undertheSecuritiesAct(17CFR230.425)
☐ SolicitingmaterialpursuanttoRule14a-12undertheExchangeAct(17CFR240.14a-12)
☐ Pre-commencementcommunicationspursuanttoRule14d-2(b)undertheExchangeAct(17CFR240.14d-2(b))
☐ Pre-commencementcommunicationspursuanttoRule13e-4(c)undertheExchangeAct(17CFR240.13e-4(c))
Item 7.01. Regulation FD Disclosure
RepresentativesofStoneMorPartnersL.P.(the“Company”)willparticipateinmeetingswithinvestorsonDecember14,2016.PresentationslideswillbemadeavailableintheInvestorssectionoftheCompany’swebsiteatwww.stonemor.com.AcopyofthepresentationslidestobeusedisattachedheretoasExhibit99.1.
TheinformationfurnishedpursuanttothisItem7.01,includingExhibit99.1,shallnotbedeemedtobe“filed”forpurposesofSection18oftheSecuritiesExchangeActof1934,asamended(the“ExchangeAct”),orotherwisesubjecttotheliabilitiesofthatsection,norshallitbedeemedtobeincorporatedbyreferenceintoanyfilingundertheSecuritiesActof1933,asamended,ortheExchangeAct.TheCompanyisnotundertakingtoupdatethispresentation.Thisreportshouldnotbedeemedanadmissionastothematerialityofanyinformationcontainedintheinvestorpresentation.
Item 9.01. Financial Statements and Exhibits
(d) Exhibits.
Thefollowingexhibitisfurnishedwiththisreport.Exhibitnumber Description
99.1 InvestorPresentationdatedDecember14,2016.
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SIGNATURES
PursuanttotherequirementsoftheSecuritiesExchangeActof1934,theregistranthasdulycausedthisreporttobesignedonitsbehalfbytheundersignedhereuntodulyauthorized.Date:December14,2016 STONEMOR PARTNERS L.P.
By: StoneMorGPLLC itsgeneralpartner
By: /s/SeanP.McGrath Name: Sean P. McGrath Title: Chief Financial Officer
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ForwardLookingStatements2Thispresentationcontainsforward-lookingstatementsthatinvolveanumberofassumptions,risksanduncertaintiesthatcouldcauseactualresultstodiffermateriallyfromthosecontainedintheforward-lookingstatements.ThePartnershipcautionsreadersthatanyforward-lookinginformationisnotaguaranteeoffutureperformance.Suchforward-lookingstatementsinclude,butarenotlimitedto,statementsaboutfuturefinancialandoperatingresults,thePartnership’splans,objectives,expectationsandintentionsandotherstatementsthatarenothistoricalfacts.Risks,assumptionsanduncertaintiesthatcouldcauseactualresultstomateriallydifferfromtheforward-lookingstatementsinclude,butarenotlimitedto,thoseassociatedwiththecashflowfromourpreneedandat-needsales,ourtrusts,andfinancings,whichmayimpactourabilitytomeetourfinancialprojections,ourabilitytoserviceourdebtandpaydistributions,andourabilitytoincreaseourdistributions;futurerevenueandrevenuegrowth;theintegrationoranticipatedbenefitsofourrecentacquisitionsoranyfutureacquisitions;ourabilitytocompleteandfundadditionalacquisitions;theeffectofeconomicdownturns;theimpactofourleverageonouroperatingplans;thedeclineinthefairvalueofcertainequityanddebtsecuritiesheldinourtrusts;ourabilitytoattract,trainandretainanadequatenumberofsalespeople;thevolumeandtimingofpre-needsalesofcemeteryservicesandproducts;increaseduseofcremation;changesinthedeathrate;changesinthepoliticalorregulatoryenvironments,includingpotentialchangesintaxaccountingandtrustingpolicies;litigationorlegalproceedingsthatcouldexposeustosignificantliabilitiesanddamageourreputation;theeffectsofcybersecurityattacksduetooursignificantrelianceoninformationtechnology;thefinancialconditionofthird-partyinsurancecompaniesthatfundourpre-needfuneralcontracts;andotherrisks,assumptionsanduncertaintiesdetailedfromtimetotimeinthePartnership’sreportsfiledwiththeU.S.SecuritiesandExchangeCommission,includingquarterlyreportsonForm10-Q,reportsonForm8-KandannualreportsonForm10-K.Forward-lookingstatementsspeakonlyasofthedatehereof,andthePartnershipassumesnoobligationtoupdatesuchstatements,exceptasmayberequiredbyapplicablelaw.
Today’sAgenda3TopicSpeakerIntroduction&HistoryBobHellman,ChairmanoftheGPDeathcareIndustryTrendsLarryMiller,CEOHowStoneMorMakesMoneySeanMcGrath,CFOWhatWentWrongBobHellman,ChairmanoftheGPActionPlansLarryMiller,CEONextSteps/ProgressVisibilityBobHellman,ChairmanoftheGPQ&A
AnswersFirst…4StoneMorhasbeenoperatingforoveradozenyearsasamasterlimitedpartnership,pursuingoneconsistentstrategyandoperationalmodelDistributioncutdrivenbyself-inducedoperatingchallengeswhichmanifestedoverthepastfewquartersNotanindustryproblem–industryhasterrifictailwindsNotabusinessmodelproblemOperatingchallengesareknown,solutionsidentifiedandprogressunderwayAsprogressmanifestsitselfinincreasecashflow,weexpectthatdistributionswillbeincreasedoverthenext12-24months
DiscussionTopicsTopicsThisPresentationWillAddress5StoneMorhistoryDeathcareindustrytrendsHowStoneMormakesmoneyWhatwentwrong?SustainabilityofcurrentdistributionActionplansNextsteps/progressvisibility
WhoWeAre6317cemeteries/105funeralhomesacross28statesandPuertoRicoCompleterangeoffuneralmerchandiseandservices,soldbothatthetimeofneedandonapre-needbasis$840millionoftrustinvestments~53,500/16,800funeralservicecallsperformedinthelasttwelvemonthsStructuredasamasterlimitedpartnership(MLP)tooptimizetaxefficiencyNote:AsofSeptember30,2016.SecondLargestOwnerAndOperatorOfCemeteriesInTheU.S.
NationalFootprint7317Cemeteries+105FuneralHomes=422TotalLocationsWAORCACOKSIAILMOINMIOHPAWVKYTNVANCSCMSALGAFLWICurrentStates2004IPOStatesNote:AsofNovember30,2016.NJMDDERIHIPR
22459110010312213914414517117518561943454551647783919898050100150200250300200520062007200820092010201120122013201420152016CemeteriesFuneralHomes8LongHistoryofSteadyGrowth185cemeteriesand98funeralhomesacquiredsince2004IPO(1)Acquisitionshavebeenmadeatmultiplesof4x–6xEBITDACumulativePropertiesAcquiredSinceIPO(1)(1)Netofsales,divestituresandconsolidations.
DeathcareIndustryOverview10$20billionindustryConcentratedindependents/non-economicownershipFewscaleplayerstoactasindustryconsolidatorsSubstantialBarrierstoEntryStableDeathRateFavorableDemographicsVirtuallynogrowthincemeterysupplySignificantfinancialandoperatingregulations(stateandfederal)OveralldeathrateremainsstableAgingpopulationdrivingat-needandpre-needdemandPre-needpenetrationonly17%ofpopulationCremationcreatesopportunityformemorializationLargeandHighlyFragmentedIndustry
CemeteriesFuneralHomes&Crematories$16billion$4billionCemeteries&FuneralHomesLargeandHighlyFragmentedIndustry11$20BillionDeathcareIndustryHighlyFragmentedOwnership86%offuneralhomesarefamilyownedorsmallbusinesses;14%ownedbylargecorporationsSources:NationalFuneralDirectorsAssociation;IBIS,Industryresearch70%30%ForProfit7,500Municipal,Military,Religious,Non-Profit,17,500HospiceCarerevenue–$25billionin2016growing7%AssistedLiving–$79billionin2016growing6%CemeteriesOnly
12SubstantialBarrierstoEntryScarcityandcostofrealestateneardenselypopulatedareasZoningrestrictionsInitialcapitalrequirementsAdministrativelycomplexbusinessfornewentrantsCemeteries(SocialInfrastructure)FuneralHomes(SpecialtyRetail)LicensingrequirementsFuneralhomesarepartofthecommunityStrengthoffamilytraditionandheritageBarrierstoentrydrivenbyheritage
StableDeathRate13Industrygrowthdrivenbydemographicsandsupportedbyever-presentdemandformemorializationandcelebrationsoflife2.12.32.42.52.62.73.31990199520002005201020152030PU.S.DeathRate(mm)Sources:NationalFuneralDirectorsAssociation;U.S.CensusBureau;NCHS.
FavorableDemographics14PopulationOver55(mm)Pre-NeedPenetrationAgingbabyboomerscausinggrowthintargetmarketforpre-needsalesTotalPopulation(1)%Over-55(1)(1)Sources:U.S.CensusBureau2014nationalpopulationprojections;industryresearch.(2)Industryresearch.3213353473593703803890%10%20%30%40%50%60%70%80%90%100%0501001502002503003504004505002015202020252030203520402045TotalPopulation%TotalPopulationPre-needpenetrationappearstobelowerintheU.S.thanothercertaindevelopedcountries%Penetration(2)2%17%50%60%0%10%20%30%40%50%60%70%80%90%100%U.K.U.S.CanadaSpain
CremationCreatesOpportunity15CremationNon-Cremation#ofDeaths(mm)(1))(1)TotalanticipateddeathsperU.S.CensusBureau2009projections.TraditionalBurialCosts:~$8,000•Traditionalspace•Vault•Opening/closing•Bronzemarker/granitebaseSampleCremationCosts:~$5,000-$7,000•IndoorNicheorGroundSpace•Cremationvault•Opening/closing•Bronzemarker/plate/granitebaseMarginsupto90%Marginsupto60%Note:Pricesandpackagesvarybylocation.0.00.51.01.52.02.53.03.54.020052010201520202025203020352040Non-CremationRiseofCremationMarginforCremationvs.BurialCremationprofitmarginopportunityasgreatastraditionalburialGrowingdeathrateexpectedtooffset
DeathcareIndustryContext16Deathcareindustrycontinuestogrow,drivenbydemographictailwindsFragmentedownershipandlackofindustryconsolidatorsresultsinsubstantialconsolidationopportunityCremationasmuchofanopportunityasathreatBarrierstoentryserveasthebasisforcompanystability
HowStoneMorMakesMoney18IncomegeneratedfromtrustfundinvestmentsAt-NeedSalesPre-NeedSalesSaleofproductsandservicesattimeofdeathSaleofproductsandservicesinadvanceofneedTrustFundRevenueThreeSourcesofOperatingProfitability
TrustFundRevenue19CemeteriesarerequiredbystatelawtodepositaportionofsalespriceintotrustsFundsinvestedacrossadiversifiedportfoliooffixedincomeandequityinvestmentsActivelymanagedbyCambridgeAssociatesasinvestmentadvisor$376$432$485$465$505$282$312$345$308$335$658$743$830$772$840$0$100$200$300$400$500$600$700$800$900$1,00012/1212/1312/1412/159/16MerchandiseTrustPerpetualCareTrustHistoricalTrustAssets($mm)RealizedProfit($mm)$33$34$37$40$40$9$20$15$14$4-$5$5$15$25$35$45$55$652012201320142015LTMMDSERealizedGains&LossesTotalInterestandDividendsTrendline(InterestandDividends)
At-NeedSales20CloselycorrelatedtodeathrateMarketsharebasedonheritageandrelativelystablePerformancelargelybasedoncostcontrol,servicequalityanddeathrateExpectedtoincreaseinnearfutureasbaby-boomersageU.S.DeathRate(mm)Source:NationalFuneralDirectorsAssociation;U.S.CensusBureau;NCHS.2.12.32.42.52.62.73.31990199520002005201020152030P
Pre-NeedSales21Requiresactivemanagementof:–Salesforceproductivity–CashcycleandtrustfunddepositsPre-needrationale:–ExpandsStonemormarketshare–Extendscustomerlifetimevalueandbuildsvalueintrusts$2,722$2,794$2,997$3,041$3,257$1,615$1,634$1,678$1,685$1,700$0$1,000$2,000$3,000$4,0002012201320142015TTMPre-NeedAt-NeedAverageSalesContractSource:Companyinformation.
WhatWentWrongDropinsalespersonnelandpre-needsalesresultedinearningsshortfall:23Programinitiatedayearagoafterextensiveanalysisfromnationalconsultingfirm–FocusedonimprovingproductivityandqualityInitiativesfailedandresultedinlossofnearly200salespeopleCashCycleManagementLackofvigilanceonlong-standingcashmanagementpracticesresultedinlowerquarterlycashflowSalesforceManagementCashflowwasfurtherdepressedbyoperationalmiscues:
SalesforceAttrition24SevereattritioninlowerperformingtiersTotalUniqueProducingSalespeoplePerQuarter916957788824640690740790840890940990Mar-15Jun-15Sep-15Dec-15Mar-16Jun-16Sep-16
TrustFundCashCycleManagement“Tookeyeofftheball”–Trustdepositshaveballoonedinrecentyears–Losttouchwithbestdemonstratedoperationalpractices25CurrentCashonBalanceSheetRecurringCashAOPvaults$7.9$4.0Othervaults$7.9$6.0Markers$3.3$1.0Total$19.1$11.0TrustFund“StrandedCash”($mm)
AOPTransactionSignificantcashdragfromdevelopmentofpre-needsalesforAOPproperties26Pre-NeedBillings($mm)WorkingCapitalNeeds($mm)$8$12$20$0$5$10$15$20$25CumulativeSinceInceptionA/RBuild-upTrustBuild-up$40$40$0$5$10$15$20$25$30$35$40$45$50CumulativeSinceInceptionPre-NeedBillingsBudgetPre-NeedBillingsActual
ActionStepsUndertaken28IncreasedinvestmentinhiringandtrainingactivitiesCashCycleManagementCostReductionsVaultinstallationMarkerpre-orderprogramImplementedimmediateandrecurringcostreductionsSalesforceManagement
CostReductions29Abletoachieverealcashsavingsofover$6mmCurrentlyimplementing$5mmofadditionalsavings(completedbyyearend)Byyearend,StoneMorwillhaveimplementedover$11mmofcostsavingsthatwilldirectlyaffect2017cashflowInaddition,StoneMorisevaluatingoptionofusinglifeinsurancecontractstoreplacefuturepre-needtrustdepositsforMerchandiseTrustfund
CashCycleManagement30CostsRequiredExpectedResultsSpecificActionItemsOnlythelossoffuturetrustearningsfromredeemedtrustdepositsInstallingbacklogofuninstalledvaultsAutomatingmarkerordersChangingcontractingandcompensationsystemtobettermanagecashcycleoftrustfunddepositsRecaptureover$20mmofstrandedcapitalImplementationwellunderwayMaterialimprovementinongoingcashflowefficiency
CashCycleManagement31CurrentUnitsonBalanceSheetRecurringUnitsAOPvaults~3,700~1,900Othervaults~7,100~6,000Markers~1,900~600Total~12,700~8,500TrustFund“StrandedUnits”ReverttoprioroperationalefficienciesOpportunitywillresultinsignificantcashinfluxfromtrust
SalesforceManagement32CostsRequiredExpectedResultsSpecificActionItemsHiredNationalSalesManagerHirednationalsalesforcerecruitingfirm,XelerateHired3additionaltrainers(8total)Salesforcerebuildingcosts,including:–Trainerandnewsalescounselorpayroll–TravelexpensesIncreasedsalesforceheadcounttotargetlevelsIncreasedsalesforceretentionInitiativethatwilltake6to9monthstocomplete
Salesforce“Efficiency”Consequences33RecentlossesinheadcountpartiallyoffsetbyimprovementsinproductivityHistoricaldatashowthataveragesalespersonproductivityimprovedevenduringperiodsofgrowingheadcount$38$55$0$10$20$30$40$50$60Avg.MonthlySalesPerPerson($000s)SalesforceRecruiting—Headcount68972269776476801002003004005006007008009007/168/169/1610/1611/16Top300SalespeopleBasedon2014StaticCohort
SalesforceROI34RecruitingandTrainingCostsAvg.LTMBillingsBySalespersonNeartermrecruitingandtraininginvestmentswillresultinhiringandretentionofqualitysalespeopleSalespersonTierAverageLTMBillings($000s)1-100$946101-200$503201-500$253Note:LTMasofQ3’16.Annualrecruitingcosts:$350,000•$250,000fornationalrecruitingfirm,Xelerate•$100,000forinternalrecruitingstaffAnnualtrainingcosts:$3,100,000•$2,100,000forsalesforcetrainingsalaries•$1,000,000forinternaltrainingstaff+otherTotalannualrunratecosts:$3,450,000Total2015costs:$1,500,000Hiringof100“Tier3”salespeoplewouldresultin3.1xROIonannualrecruitingandtrainingcosts(1)(1)Assumes~30%cashmarginbasedonYear1+2cashflow.
WhereWeAreNowBusinessisstabilized–Recentsales,headcountandothermetricsreflectpositivemomentum36AnnualizedYTDSeptYTDSept20162016GAAPOperatingCashFlow$18.5$24.7ActionsundertakentoimpactGAAPOperatingCashFlowin2017:-Recurringtrustfundcashduetoimprovedpractices$10.6-Implementedrecurringcostsavings$11.0EvenAtToday’sReducedRevenuesCurrentDistributionIsSustainable3rdQuarter2016CashDistributionAnnualizedis$44.4
WhatToLookForEvidenceofExecutionofCorrectiveStrategiesSalesForceInitiative–Monthlyoperatingreleasewillgiveprogresstransparency–Expect100-150additionalsalespeoplewilladdedsoon100+peoplealreadyhired&intrainingCostReductionInitiative–Detailedoutlineofthesecoststrategiesin4Q16earningscallCostreductionsnearlycompleteTrustCashManagementInitiative–ExpectstatisticsonthisprojecttobeaddedtomonthlyreleasesRecentvaultinstallationrun-ratehasbeenat25K/yr(vs.6K/y)–Totalstrandedcashexpectedtoberecoveredin6-9months37
PathToDistributionGrowthThetrustfundcashmanagementandcostsinitiativesarewellunderwayWearenowsingularlyfocusedonthesalesrecoveryeffortThereisadirectcorrelationbetweensalesheadcountandoperatingresultsHowever,successofthisinitiativeinitiallyshowsupinnon-GAAPoperatingresultsVisibilityofthecashflowimpactofthisiscomplicatedbySECfocusonnon-GAAPreportingTherefore,asthesalesforcerecovers,weexpecttobeginmodestlyincreasingdistributionsHowever,thebulkoftheincreaseinourDCFwillinitiallybeutilizedtoincreaseourcoverageratioWeexpecttheoperatingrecoverytobecompletebyYE2017,withGAAPoperatingcashflowdemonstratingthisin2018.38
StoneMorPartnersL.P.3600HorizonBlvd.,Suite100Trevose,PA1905340Contact:JohnMcNamara,Director–InvestorRelationsPhone:(215)826-2945E-mail:[email protected]