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Analyst / Investor Day November 18, 2013

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November Investor Day

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Page 1: November Investor Day

Analyst / Investor Day

November 18, 2013

Page 2: November Investor Day

Confidential

2

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.

Page 3: November Investor Day

3

Presenters

StoneMor Partners L.P.

Name Title

Lawrence Miller Chairman, President and Chief Executive Officer

Timothy Yost Chief Financial Officer

William R. Shane Vice-Chairman

Raymond Smith Vice-President Marketing

John C. McNamara Director of Investor Relations

David Spungen CEO Hillview Capital Advisors

Page 4: November Investor Day

Lawrence Miller

President & CEO

Company Overview

Page 5: November Investor Day

StoneMor Partners L.P.

5

StoneMor is the second largest owner and operator of cemeteries in

the US

• 277 cemeteries and 90 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

Page 6: November Investor Day

6

Pre-need At- need

Burial Lots

Mausoleums

Burial Vaults and Crypts

Grave Markers

Grave Opening and Closing Fees

Caskets

(Funeral Homes only)

Cemetery Revenues – Major Products Sold

Page 7: November Investor Day

Diverse Geographic Exposure

7

As of November 1,

2013

277 Cemeteries

+ 90 Funeral Homes

= 367 Total Locations

WA

OR

CACO

KS

IA

IL

MO

AR

IN

MI

OH

PA

WV

KY

TN

VA

NC

SC

GAALMS

FL

Washington

3 Cemeteries

2 Funeral Homes

Oregon

6 Cemeteries

12 Funeral Homes

California

6 Cemeteries

10 Funeral Homes

Colorado

2 Cemeteries

Kansas

3 Cemeteries

2 Funeral Homes

Hawaii

1 Cemeteries

Iowa

1 Cemeteries

Illinois

8 Cemeteries

22Funeral Homes

Indiana

11 Cemeteries

5 Funeral Homes Michigan

13 Cemeteries

Kentucky

2 Cemeteries

Ohio

14 Cemeteries

2 Funeral HomesRhode Island

2 Cemeteries

Pennsylvania

52 Cemeteries

8 Funeral Homes

New Jersey

6 Cemeteries

Delaware

1 Cemeteries

Maryland

10 Cemeteries

1 Funeral Homes

West Virginia

33 Cemeteries

2 Funeral Homes

Virginia

31 Cemeteries

2 Funeral Homes

North Carolina

16 CemeteriesSouth 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 Homes

Arkansas

2 Funeral Homes

Missouri

6 Cemeteries

5 Funeral Homes

Page 8: November Investor Day

Investment Highlights

10%* yield superior to most MLPs**

Strong historical performance

Proven acquisition record

Favorable demographic trends

High barriers to entry

Experienced management

8 *Source: Barrons

**As of November 11, 2013

Page 9: November Investor Day

9

Attractive Yield

10% Yield vs. 6% Average MLP Yield*

Has increased 30% since 2004 IPO

37 consecutive quarterly distributions

Distribution Per Unit

$2.16

$2.22$2.25

$2.33$2.36

$2.39

$2.00

$2.05

$2.10

$2.15

$2.20

$2.25

$2.30

$2.35

$2.40

$2.45

2008 2009 2010 2011 2012 2013TTM

*Source: Barrons

Page 10: November Investor Day

Historical Performance

10

($ in millions)($ in millions)

REVENUE OPERATING PROFIT

$183 $181 $197

$228 $243 $243

$209 $218

$247

$281 $296

$314

$-

$50

$100

$150

$200

$250

$300

$350

2008 2009 2010 2011 2012 2013TTM

GAAP Accrual

$17 $13

$3

$10 $14

$6

$32 $36

$38

$49

$54 $58

$-

$10

$20

$30

$40

$50

$60

$70

2008 2009 2010 2011 2012 2013 TTM

GAAP Accrual

Page 11: November Investor Day

Diversified Revenue Streams

11

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

Pre-need Sales, 40.0%

At-need Sales, 30.8%

Investment Income, 9.9%

Interest Income, 2.8%

Funeral Home Revenues,

14.7%

Other Cemetery Revenues,

1.8%

Page 12: November Investor Day

Proven Growth and Acquisition Strategy

StoneMor has demonstrated a consistent track record of growth and

financial performance

• 145 cemeteries and 85 funeral homes acquired since 2004 IPO

• Revenue (GAAP) has increased from $145 million in 2007 to $243 million in 2013

(TTM)

o 10.8% ’07-’12 CAGR

• Adjusted operating profits have increased from $27 million in 2007 to $58.0 million

in 2013 (TTM)

o 15.1% ’07-’12 CAGR

12

Page 13: November Investor Day

Favorable Demographics

Aging of the Baby Boom Generation will accelerate the death rate

and expand our target pre-need market

13

Source: Department of Health and Human Services.

ANNUAL BIRTHS IN THE UNITED STATES 1930-1960

Page 14: November Investor Day

Favorable Demographics

Sharply increasing population in our target pre-need market

14

Pro

jecte

d U

.S. P

op

ula

tion

(in thousands)

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

Page 15: November Investor Day

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

15

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

Page 16: November Investor Day

16

Highly Fragmented Industry

Cemeteries, 9,600, 30%

Funeral Homes,

22,000, 70%

$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

Owned by Consolidators

20%

Independent Operators,

80%

(1)

Economies of scale and consolidation opportunities provide competitive advantages

Page 17: November Investor Day

Cemeteries

Funeral Homes Ratio

SCI 374 1,431 1:3.8

StoneMor 277 90 3:1

Stewart 141 217 1:1.5

Carriage 32 167 1:5.2

17

Municipal, Military,

Religious, Non-Profit, 13,000, 58%

For Profit, 9,600, 42%

22,600 U.S. Cemeteries Largest For-Profit Cemetery Operators

StoneMor has a unique focus on

ownership and operation of cemetery

assets

Unique Cemetery Focus

(1)

(2)

(3)

(4)

(1)From page 38 of SCI’s 9/30/13 10-Q

(2) From page 5 of StoneMor’s 9/30/13 10-Q

(3) From page10 of Stewart’s 7/31/13 10-Q

(4) From page 9 of Carriage’s 9/30/13 10-Q

Page 18: November Investor Day

Experienced Management Team

18

StoneMor Partners L.P.

Name Title Years of Industry Experience

Lawrence MillerChairman, President and Chief

Executive Officer40

Timothy Yost Chief Financial Officer 22(1)

Michael StacheSenior Vice President and Chief

Operating Officer24

Ken LeeVice President of Funeral Home

Operations32

Frank MillesVice President Administration,

Trust & Due Diligence35

Gregg StromSenior Vice President of Business

Development25

(1) Reflects total experience.

Page 19: November Investor Day

19

Total Return

Indexed Total Return of StoneMor Units vs. NYSE Index

Page 20: November Investor Day

Tim Yost

Chief Financial Officer

Financial Overview

Page 21: November Investor Day

2013 Highlights

Acquired Florida based Seawind Funeral Homes

• Paid $15 million in cash, units and debt

• 6 homes, 2 with cremation facilities

Increased distribution to $0.60 per unit

Raised approximately $40 million through 1.61 million unit offering

Cash tender for outstanding 10.25% Senior Notes due 2017

Priced $175 million in senior notes due 2021 at 7.875%

Acquired Forest Lawn Cemetery in Richmond, Virginia

• Paid $5 Million

• More than 500 interments per year

Operating Agreement with Archdiocese of Philadelphia

21

Page 22: November Investor Day

2013 9-Month Operational Performance Highlights

Increased Distributable Free Cash Flow 34.3%

Increased Production Based Revenue by 7.8%

Increased Value of Pre-Need Contracts by 6.0%

Increased Funeral Home Revenues by 36.4%

Increased Adjusted Operating Profits by 11.1%

22

Page 23: November Investor Day

StoneMor’s Master Limited Partnership Structure

StoneMor makes distributions to its unitholders on

a quarterly basis

• Paid from available cash after debt service and other

expenses

MLP structure is predominantly tax free

At least 90% of gross income must be “qualifying

income”

• Qualifying income comprised of sale of real property (burial

lots, lawn and mausoleum crypts), cremation niches, interest

and dividends

Non-qualifying income, such as caskets, markers

and funeral home sales, are operated through tax-

subject subsidiaries

23

MLP

Overview

Tax Status

Page 24: November Investor Day

24

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

CEMETERY AND FUNERAL HOME BUSINESS MIX

Cemetery focus

requires use of

accrual

accounting

Cemeteries

Funeral Homes Ratio

SCI 374 1,431 1:3.8

StoneMor 277 90 3:1

Stewart 141 217 1:1.5

Carriage 32 167 1:5.2

*

*

(*)

(*)

*See slide 17 for sources

Page 25: November Investor Day

25

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

(0 to 18 months)

Caskets When stored in a warehouse

owned by a 3rd party

(0 to 18 months)

Grave Opening (initial) When vault is installed

(0 to 18 months)

Grave Opening (final) When customer is dead & buried

(~25 years)

Cemetery Revenue –Accounting Recognition

Page 26: November Investor Day

Historical Performance

26

($ in millions)($ in millions)

REVENUE OPERATING PROFIT

$183 $181 $197

$228 $243 $243

$209 $218

$247

$281 $296

$314

$-

$50

$100

$150

$200

$250

$300

$350

2008 2009 2010 2011 2012 2013TTM

GAAP Accrual

$17 $13

$3

$10 $14

$6

$32 $36

$38

$49

$54 $58

$-

$10

$20

$30

$40

$50

$60

$70

2008 2009 2010 2011 2012 2013 TTM

GAAP Accrual

Page 27: November Investor Day

27

Conservative Financial Profile

Adjusted Operating Profits (Accrual) Exceed Distributions

Adjusted Operating Profit, or the Accrual

method, is the measure by which

management operates the business

GAAP Operating Profit

Distributions

Adj. Operating Profit / Accrual*

$-

$10

$20

$30

$40

$50

$60

20092010

20112012

2013 TTM

$13

$3

$10 $14

$6

$27

$32

$45 $47 $51

$36 $38

$49

$54 $58

GAAP Operating Profit Distributions Adj. Operating Profit / Accrual*

Page 28: November Investor Day

28

Condensed Consolidated Balance Sheet

(in thousands) September 30, December 31, 2013 2012

Assets

Cash $ 19,984 $ 7,946 Accounts Receivable 128,247 123,416 Cemetery Property 316,522 309,980 Property and Equipment 85,282 79,740 Trust Funds 718,121 658,286

Deferred Costs and Expenses 94,034 85,936 Goodwill and other 86,625 78,421

Total Assets $1,448,815 $ 1,343,725

Liabilities and Partners' Capital

Accounts Payable and Accrued Liabilities $ 39,325 $ 30,806 Long-term Debt 281,092 254,949 Deferred Revenues 557,973 497,861 Merchandise Liability 129,922 125,869

Perpetual Care Trust Corpus 302,766 282,313 Deferred Taxes and other 13,610 16,745

1,324,688 1,208,543

Partners' Capital 124,127 135,182

Total Liabilities and Partners' Capital $1,448,815 $ 1,343,725

Page 29: November Investor Day

Strong Balance Sheet & Recovery Profile

Balance sheet with low-risk, marketable assets providing full debt protection

Additional Value from Cemetery Property and Perpetual Care Trusts

• Cemetery Property

o $316.5 million book value as of September 30, 2013

o Approximately 12,300 acres, weighted average estimated sales life of over 246 years

• Perpetual Care Trusts

o Future maintenance costs are funded through perpetual trusts, with assets of $302.8 million

as of September 30, 2013

29

(1)

$564

$119

$34

$130

$281

$0

$100

$200

$300

$400

$500

$600

Cash, AR andMerchandise Trust

AP and AccruedLiabilities

MerchandiseLiability

Debt Excess Cash andAssets

Page 30: November Investor Day

Sustained Business Growth While Maintaining Stable Credit Profile

Asset base has grown while total leverage has remained steady

30

Total Assets, Debt and Partners’ Capital Total Debt / Accrual EBITDA

($ in millions)

3.6x

3.8x

3.1x

2.8x

3.4x

3.6x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

2008 2009 2010 2011 2012 TTM Q3

$738

$859

$1,147

$1,249

$1,344

$1,448

$161 $183 $220 $195

$255 $281

$119 $112 $128 $180 $135 $124

$0

$300

$600

$900

$1,200

$1,500

2008 2009 2010 2011 2012 3Q '13

Total Assets Total Debt Total Partners' Capital

Page 31: November Investor Day

31

Financial Summary

Accounting not representative of current sales activity

Continuing operational performance and growth

Strong balance sheet with solid assets

Cash and investments far in excess of all liabilities

Uniquely positioned to take advantage of rising interest rate

environment

Page 32: November Investor Day

William R. Shane

Vice-Chairman

Growth Through Acquisitions

Page 33: November Investor Day

33

Acquisitions have contributed to strong corporate growth

Discipline in selecting target -- “Never break the model”

Focus on acquisitions that generate incremental cash flow in

excess of financing costs

Accretive from day one

Disciplined Acquisition Philosophy

Page 34: November Investor Day

Acquisition Track Record

34

Since Our IPO in September 2004

Assets Cemeteries Funeral Homes Purchase Price(1)(2)

2005 Purchases 23 6 $16.0

2006 Purchases 23 14 17.0

2007 Purchases 48 30 81.9

2008 Purchases 7 2 2.1

2009 Purchases 3 0 7.3

2010 Purchases 22 5 49.4

2011 Purchases 17 11 16.2

2012 Purchases 5 17 34.9

2013 Purchases (YTD) 1 6 22.8

149 91 $247.6

(1) Includes transaction costs(2) In millions

Page 35: November Investor Day

Acquisition Contributions

36

Acquisitions Contribute to Overall Corporate Growth

Selected Information 2004 (000’s) 2012 (000’s) % Increase

Cemetery Property $151,215 $309,980 106%

Trust Funds $242,474 $658,286 171%

Total Assets $494,467 $1,343,725 172%

Total Revenues (GAAP) $89,248 $242,606 172%

# Cemeteries 132 276 109%

# Funeral Homes 7 86 1,129%

Page 36: November Investor Day

Funeral Home Growth

2004 2012

Funeral Homes 7 86

Revenues $1,953 $35,679

Expense $1,712 $28,725

Operating Profit $241 $6,954

Funeral home revenue increased from 2% to 15% of total

GAAP revenue

Funeral homes generally generate positive cash flow

without the need to fund capital growth

36

Page 37: November Investor Day

37

Acquisition Criteria

Internal rate of return greater than cost of capital

• 10 year discounted cash flow

• Terminal value equal to 5 times year-10 cash flow

Positive cash flow after repaying acquisition price over a 10 year

period

Generate cash flow toward an increased distribution

Cemetery property must have minimum of 25 years sales life at

projected rate

Reasonably be able to fit within the companies debt leverage

calculation

Page 38: November Investor Day

38

Large trust funds

Significant available inventory for sale

Proximity to metropolitan market areas

Historical interments in excess of 200 annually

Significant at-need historical volume

Properties that meet the preceding criteria generally have:

Page 39: November Investor Day

Major Improvements Post Acquisition

Institute pre-need sales program

Seasoned, professional management

Significantly reduce product costs

Consolidate office functions into home office

Professional trust fund management which improves trust fund

returns

Price increases do not support purchase price

39

Page 40: November Investor Day

Working Capital Borrowings

Cemetery Acquisitions generally require working capital

borrowings to finance growth as indicated by:

• Build in Accounts Receivable

• Deposits into Merchandise Trust Funds

• Construction of lawn crypts, mausoleums & niches

Borrowing requirement greatest in years 1 & 2 after acquisition

Borrowing needs are generally eliminated after year 4

Acquisition criteria require all borrowings to be repaid by year-10

Borrowings represent deferred acquisition price

40

Page 41: November Investor Day

41

Acquisitions

Acquisition philosophy has helped company to:

Increase distribution from $1.85 per unit in 2004 to $2.40 per unit in 2013

Increase assets over $800 million while increasing long term debt only

$172 million

Page 42: November Investor Day

Thank You