Finance

Park Lawn executives comment on 3rd Quarter

Last week Park Lawn Corporation CEO Andrew Clark and CFO James Leeder commented on the company’s 3rd quarter results and also took questions from analysts about the company’s performance.  You can read the transcript here.  I have, however, taken the liberty to pull out some of the comments that we thought would be of the most interest to our readers and have made them available.  These questions and answers deal with the purchase of 10 properties from The Journey Group, a decrease of sales numbers in the company’s headquarters community, the performance of the company’s Michigan properties, and the merger and acquisition environment at this time.

Q. Can you provide a little bit of just high-level commentary on the announced Texas acquisitions? I believe you have a small presence there already. Is that a geography you guys envision, I guess, a much bigger footprint over time?

A. by Andrew Clark, Park Lawn Corporation – Chairman of the Board & CEO

Yes. I mean, look, it’s in our backyard from our Houston headquarters. These operations were attractively priced. And so they were — and we had a great opportunity with some well-known players to — like team staff to our U.S. leadership team and our operating leadership team to go in and run those properties for us. So it was just a confluence of events that made it an attractive opportunity. But absolutely, I mean, Texas is a market that we, as an organization, know play well and would be drawn to continuing to invest in

Q. So I would like to start just on Canada. You’ve had sales down in Canada 18% year-over-year against a very strong comparable. I guess first of all, could you remind us why Q3 2018 was so strong? And then was there anything sort of unusual this quarter that sort of magnified the impact year-over-year?

A. by Andrew Clark, Park Lawn Corporation – Chairman of the Board & CEO

Well, the death rate was the biggest factor on the Canadian side in this year. I mean, if you look at our Canadian operations, the at-need business, the funeral side of the business was down sort of basically across the board. In terms of — that was driven largely by our Canadian cemetery businesses in Toronto, which suffered. We’ve got a tough competitive market right now in Toronto. We are, as you know, in the midst of constructing an on-site visitation center at Westminster. All of our competitors have visitation centers in the market. So — and in an at-need family situation, we don’t have an offering at this moment that is as competitive as all of our others. So in terms of the comparable over last year, I’m going to let Joe handle that one.

A. by James Joseph Leeder, Park Lawn Corporation – CFO & Director

Yes, Paul, I don’t have the exact details, but my recollection is that we had opened some projects that we were constructing. And I believe that it was principally in the New Jersey markets from, as I said, construction projects, and when they open is when we then recognize the revenue because we’re able to deliver the product at that point.

So it does tend to be lumpy like that, just as Andrew explained, we believe we have a couple of projects in the fourth quarter of this year in the U.S. that will also deliver some outsized growth as we close those projects and recognize the revenue. So that’s — I believe that, that’s my recollection of the work.

A. by Andrew Clark, Park Lawn Corporation – Chairman of the Board & CEO

That certainly is a comparable, yes. On the Canadian side, I will stress that it is driven — the 18% down year-over-year is driven by the — principally, the at-need business and principally at the Westminster location in Toronto.

Q. It’s now been about 9 months since you’ve had a new manager in your Michigan market. Maybe not quite 9 months but it’s been a decent chunk of time, and so wondering how your experience has gone there? And basically, just for an update on that portfolio.

A. by Andrew Clark, Park Lawn Corporation – Chairman of the Board & CEO

Portfolio is doing very well. This should be an opportunity to commend Mat Forastiere on — and the team on the work he’s done there. It’s been — in this quarter, it was one of the better performing — Michigan was one of the better performing businesses in the overall portfolio. It had significant organic revenue growth. So we’re really happy with where things are at the moment relative to where our expectations were. Does not mean that we’re — we think we’re “out of the woods” if you will, or that there’s not further work to do in that market. But Mat and his team have done — in addition, with the support of the group in Houston have done excellent work on getting that business to where it is right now. So we’re quite happy with where things are in Michigan.

Q. And then final question just on the M&A landscape and competitive landscape, if you could provide us an update with some — those 2 things — on those 2 things, it would be really great.

A. by Andrew Clark, Park Lawn Corporation – Chairman of the Board & CEO

Sure. So the M&A — the pipeline and — we’re continually surprised by the amount of opportunities that come up in our pipeline and are presented to us. And I think you’ll see that — to your first question, you’ll see a bit of the effort in exploring those M&A opportunities and the acquisition costs. So — but we are continually and regularly surprised by just the sheer volume of deals that are out there.

We don’t, obviously, do deep dives on all of them but we screen all of them and do a considerable amount of work on many of them.

So the M&A pipeline, I would say, remains robust from our standpoint. In terms of a broader market, I’m not sure whether there’s significantly — I wouldn’t say there’s a whole lot of change in terms of the number of players that are out there, I think some of the names and faces have changed and in terms of who is active in the market. But generally speaking, it is a fairly competitive market, certainly for scale assets and assets of quality. So we have seen all of our — well, most of our public peers show their face at a number of these opportunities. And we expect that to continue to happen if not to increase. And then the privately-owned, whether it’s family office or pension fund backed or what have you, private equity backed, those folks continue to show up a deal. So we’re trying to be, not to say, we weren’t being selective beforehand, but we’re trying to be very focused on deals that we believe are attractive and well-suited and well-fit to our portfolio. But it’s busy on both fronts right now in terms of competition for assets and in terms of assets available.

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