Service Corporation International · NYSE:SCI
Service Corporation International — Debt Investor Presentation (June 2013)
32 slides from Service Corporation International's debt investor presentation, Jun 17, 2013
Slide 1: Forward-Looking Statements
Forward-Looking Statements This presentation is not a prospectus and is not an offer to sell securities. The securities described herein are not being registered under the US Securities Act of 1933, as amended (the "Act"), and are being offered only to Qualified Institutional Buyers as defined in Ru
Slide 2: Speakers
Speakers Service Corporation International - Tom Ryan, President, Chief Executive Officer and Director - Eric Tanzberger, Senior Vice President, Chief Financial Officer and Treasurer - Aaron Foley, Managing Director and Assistant Treasurer These materials are not to be printed, downloaded or distrib
Slide 3: Agenda
Agenda - Financing overview - Acquisition highlights - Company overview - Financial overview - Appendix These materials are not to be printed, downloaded or distributed. These materials are only available to QIBs and non-]US persons. 4
Slide 4: Financing overview
Service Corporation International Financing overview These materials are not to be printed, downloaded or distributed. These materials are only available to QIBs and non-]US persons. NYSE: SCI North America's largest provider of funeral, cemetery and cremation services
Slide 5: Summary of terms and conditions
Summary of terms and conditions Senior Unsecured Notes Issuer: Service Corp. International (the "Company") Principal Amount: $425 million Issue: Senior unsecured notes Distribution: 144A with registration rights Security: None Guarantors: None Use of Proceeds: Finance the Acquisition, refinance cert
Slide 6: Transaction timeline
Transaction timeline June 2013 July 2013 S M T W T F S S M T W T F S 1 1 2 3 4 5 6 2 3 4 5 6 7 8 7 8 9 10 11 12 13 9 10 11 12 13 14 15 14 15 16 17 18 19 20 16 17 18 19 20 21 22 21 22 23 24 25 26 27 23 24 25 26 27 28 29 28 29 30 31 30 Execution event Market holiday Date Event June 17th - Announce not
Slide 7: Sources & uses and combined capitalization
Sources & uses and combined capitalization Sources Amount ($mm) Uses Amount ($mm) SCI cash $104 Merger purchase price $1,166 Stewart cash 150 Refinance Stewart Convertible Notes2 132 New Term Loan A1 550 Other Needs Expenses fees3 133 Sources & uses A Funding Needs, Expenses, and Estimated fees Revo
Slide 8: Combined debt maturity profile
Combined debt maturity profile Existing debt maturity profile ($mm) $1,000 Senior notes Letters of credit Credit facility borrowings Credit facility availability $ $382 $300 $400 $500 $600 $700 $800 $900 7.500% 8.000% Senior S i 4.500% Senior 7.000% Senior N t 7.625% Senior Notes 7.000% Senior Notes
Slide 9: Acquisition highlights
Service Corporation International Acquisition highlights These materials are not to be printed, downloaded or distributed. These materials are only available to QIBs and non-US persons. NYSE: SCI North America's largest provider of funeral, cemetery and cremation services
Slide 10: Transaction overview
Transaction overview - On May 29, 2013, Service Corporation International ("SCI" or the "Company") announced a definitive agreement to acquire all of the outstanding shares of Class A and Class B common stock Enterprises of Stewart Enterprises, Inc. ("Stewart") for $13.25 in cash, per share - Acquis
Slide 11: Strategic rationale
Strategic rationale - Complementary geographic fit in a highly fragmented industry and established platform in attractive metropolitan markets - Further promotes our operational and preneed sales initiatives at a time when we believe the Baby Boomer impact is beginning to take effect - Stewart has l
Slide 12: A look at the combined company
A look at the combined company SCI Stewart Post Synergy LTM LTM Combined Estimated Combined 3/31/13 1/31/13 Company Synergies Company1 -------------------------------------------------------------------------- Revenues (in millions) $2,459 $527 $2,986 Operating Income (in millions) $427 $87 $514 Ope
Slide 13: Significant synergies
Significant synergies We expect to realize approximately $60 million in annual cost savings from the combined company within 24 months of closing - Synergy opportunities are significant - Reduced back-office systems and infrastructure costs - Elimination of duplicative public company and management
Slide 14: Company overview
Service Corporation International Company overview These materials are not to be printed, downloaded or distributed. These materials are only available to QIBs and non-]US persons. NYSE: SCI North America's largest provider of funeral, cemetery and cremation services
Slide 15: SCI at a glance
SCI at a glance - Founded in 1962, we are the largest company in the North American funeral and cemetery industry with more than 1,800 locations - NYSE: SCI with a market cap of ~$3.8 billion - LTM Mar-13 revenues of $2.5 billion or ~13% share of industry revenues - Backlog of future revenues of $7.
Slide 16: Investment highlights
Investment highlights - Predominant player in stable funeral and cemetery industry - Unparalleled network and scale - Significant and consistent cash flows - Strong liquidity, financial flexibility and favorable debt maturity profile - Disciplined and focused capital allocation strategy - Differenti
Slide 17: Our competitive strengths
Our competitive strengths - Unparalleled network - 1,437 funeral homes & 374 cemeteries (57% combos*) - 43 states and 8 Canadian provinces - Multi-]brand portfolio: key brand called Dignity Memorial(R) - Ability to leverage scale - Sharing of personnel, vehicles and other resources - Centralized or
Slide 18: Deathcare Industry landscape
Deathcare Industry landscape All data as based on most recent trailing 12 months SCI $2,459 Revenues (In millions) Public Consolidators = 18% Independent = 82% Stewart $527 StoneMor $194 Carriage $204 Properties SCI $1,811 - Cemeteries - Funeral homes Stewart $357 StoneMor $368 Carriage $200 Free Ca
Slide 19: Favorable demographic trends
Favorable demographic trends In 2011, the 60+ population was 18.5% and is projected to exceed 25% by 2030 25.7% 100,000 30% Population in Thousands % of total population 20.8% 23.1% 24.9% 75,000 25% Age 60 and over First "Baby Boomers" reached age 60 in 2006 15.7% 16.8% 15.7% 18.5% 15% 20% 25,000 50
Slide 20: Preneed cemetery sales production is the primary driver of growth
Preneed cemetery sales production is the primary driver of growth over the near term We anticipate growth in the mid to high single digit % range for 2013 Preneed Production Cemetery Growth1 6.0% 2010 12.3% 2011 10.2% 2012 6.7% Q1 13 1 Preneed cemetery production growth is based on same stores as re
Slide 21: Funeral side: mitigating soft volumes with average sale and backlog
On the funeral side, we are mitigating soft volumes by increasing the average sale and by growing backlog Change in Funeral Volume/Sales Average1 Volume Average 1.0% 1.8% 2.2% 4.3% 1.1% (1.9%) (2.5%) (2.0%) 2010 2011 2012 Q1 13 Preneed Funeral Production Growth 8.4% 7.0% 3.6% 5.2% 2010 2011 2012 Q1
Slide 22: Financial overview
Service Corporation International Financial overview NYSE: SCI North America's largest provider of funeral, cemetery and cremation services These materials are not to be printed, downloaded or distributed. These materials are only available to QIBs and non-US persons.
Slide 23: SCI historical financial overview
SCI historical financial overview Revenue ($mm) $2,156 $2,054 $2,191 $2,316 $2,410 $ 1,800 $ 2,000 $ 2,200 $ 2,400 $ 2,600 2008A 2009A 2010A 2011A 2012A Adjusted EBITDA ($mm) $509 $505 $539 $576 $618 $0 200 $400 $600 $800 2008A 2009A 2010A 2011A 2012A Adjusted EBITDA less capex ($mm) $355 $421 $441
Slide 24: Stewart historical financial overview
Stewart historical financial overview Revenue ($mm) $526 $486 $500 $513 $516 $460 $480 $500 $520 $540 2008A 2009A 2010A 2011A 2012A Adjusted EBITDA ($mm) $111 $90 $98 $103 $110 $0 $40 $80 $120 2008A 2009A 2010A 2011A 2012A Adjusted EBITDA less capex ($mm) $100 $80 $60 $40 $20 $0 $84 $69 $82 $76 $89
Slide 25: SCI has a track record of successful synergy realization
SCI has a track record of successful synergy realization KEY SYNERGIES ($ millions) Category Stand-alone costs1 Est. synergies Est. savings2 % of LTM sales3 Alderwoods Transaction Administration and Facilities 5.5 3.3 0.4% Asset management/Corp Dev. $1.2 $0.6 50% 0.1% Executive and bonuses $12.5 $10
Slide 26: Immediate de-leveraging post Alderwoods transaction
Immediate de-leveraging post Alderwoods transaction Net Debt PF LTM EBITDA Compliance Net Leverage Alderwoods acquisition closed in November 2006 $ in millions $2,012 $1,881 $1,800 $1,738 $1,776 4.2x Q3 2006 leverage impacted by larger than usual cash balance 3.6x 3.5x 3 4 SCI cash: $637 earmarked f
Slide 27: Financial policy - returning to targeted leverage ratios
Financial policy - we anticipate quickly returning to targeted leverage ratios - We anticipate our leverage to increase to approximately 4.0x on a net debt/EBITDA basis. But, similar to the Alderwoods transaction, we anticipate returning to targeted leverage ratios between 3.0x - 3.5x using strong c
Slide 28: Questions and Answers
Service Corporation International Questions and Answers NYSE: SCI North America's largest provider of funeral, cemetery and cremation services These materials are not to be printed, downloaded or distributed. These materials are only available to QIBs and non-US persons.
Slide 29: Appendix
Service Corporation International Appendix NYSE: SCI North America's largest provider of funeral, cemetery and cremation services These materials are not to be printed, downloaded or distributed. These materials are only available to QIBs and non-US persons.
Slide 30: EBITDA & Adjusted EBITDA
EBITDA & Adjusted EBITDA - We use EBITDA as an underlying operational performance measure of the continuing operations of the business and to have a basis to compare underlying operating results to prior and future periods - To calculate EBITDA we make adjustments EBITDA, to net income (a GAAP measu
Slide 31: EBITDA and Adjusted EBITDA reconciliation
EBITDA and Adjusted EBITDA reconciliation (in millions) SCI LTM at March 31, 2013 STEWART LTM at January 31, 2013 2012 Q1 12 Q1 13 LTM 2012 Q1 12 Q1 13 LTM Net income $152.5 $48.0 $57.6 $162.1 $35.9 $8.5 $15.5 $42.9 Provision for income taxes 91.5 23.1 35.3 103.7 18.0 4.5 5.1 18.6 Interest expense 1
Slide 32: EBITDA & Adjusted EBITDA reconciliation
EBITDA & Adjusted EBITDA reconciliation (in millions) scl UTM at March 31, 2013 STEWART UTM at January 31, 2013 Net income Provision for income taxes Interest expense Depreciation & amortization EBITDA Loss on early extinguishment of debt Non-cash stock compensation expenses Acquisition, restructuri
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