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Funeral Industry
From Minyanville.com
Services Corporation International(NYSE:SCI) is a major player in the so-called "death care" sector. The $3 billion market cap firm owns more funeral homes, cemeteries, and crematories than any other company in North America. Since its acquisitions of Alderwoods and Keystone North America, it boasts holdings of 1,712 funeral homes and 490 cemeteries. The company sells "cemetery property internment rights" for mausoleum spaces, lots, and crypts. It handles burial openings and closings, and also manufactures caskets, vaults, and urns.
Stewart Enterprises (NASDAQ:STEI), the second largest death care provider in the US, is known for how efficiently it manages funerals and burials. One source said the average funeral home performs 110 to 150 burials per year while Stewart performs about 265 to 320 burials per year per location. The $699.3 million market cap company owns 218 funeral homes and 141 cemeteries (48% with funeral home onsite). The company is not only efficient in death care, but in document retention. As a direct result of Hurricane Katrina -- during which tens of thousands of documents at the company's New Orleans Records Management Center were submerged for over a week, costing the company $1.5 million in recovery and restoration expenses -- the company began digitizing its records. To quote a Stewart Enterprises support manager discussing the project, "With cemetery records, record-keeping is literally eternal."
StoneMor Partners (NYSE:STON) is the second largest cemetery provider and third largest death care provider in the US. According to its most recent SEC filing, it owned or operated 272 cemeteries, and 71 funeral homes. However, the same day as this SEC filing, the company announced it had completed an acquisition that appeared to add eight funeral homes, four cemeteries, and two cremation facilities to its portfolio. StoneMor is the only publicly traded death care company structured as a master limited partnership, or MLP. (For more information on MLPs, see Mastering the MLP Domain.) In another distinction, it switched its listing from the NASDAQ to the NYSE last December. Interestingly, five of the $467.35 million market cap company's senior managers all worked for the Loewen Group, another company in the funeral space, which filed for bankruptcy in June 1999 and has the dubious distinction of being a case study in bad management taught at the NYU Stern School of Business. (Loewen's assets were acquired by Alderwoods Group, which in turn was acquired by Services Corporation International.)
Carriage Services (NYSE:CSV) operates 163 funeral homes and 32 cemeteries in the US. The $185.25 million market cap company is a major provider of pre-paid funerals and burials, allowing customers to choose their grave site, casket, and level of service at funerals. According to the Carriage Services website, the company's theme for 2012 is "A New Beginning." It has acquired 13 funeral homes and one cemetery in the last 12 months.
UK-based Dignity (LON:DTY) operates 616 funeral locations throughout the UK and 35 crematoria in the UK and Scotland. This company is not affiliated with the "Dignity Memorial Network" of 16,000 funeral, cremation, and cemetery providers in the US and Canada. In September, Franklin Templeton Investments, a division of Franklin Resources (NYSE:BEN), acquired sufficient shares of the $825.13 million market cap firm to become a beneficial owner, with 5.40% of the company's voting rights. Dignity is in the Franklin World Perspectives Fund and was cited in a letter to investors as one of the funds' two best UK contributors.
Hillenbrand (NYSE:HI) sells 45% of the caskets in the United States, some 800,000 per year, through its wholly owned subsidiary Batesville Casket Co. In addition, the company sells cremation urns. Hillenbrand has diversified significantly beyond its core business of casket-making in recent years. Its Process Equipment Group runs K-Tron, Rotex, and TerraSource Global, which are all companies making or servicing industrial products. When its acquisition of Germany's Coperion Capital, a privately-owned industrial products company, closes at the end of this year, the business done by the Process Equipment Group will make up about two-thirds of the company's revenue. Hillenbrand has $1.31 billion in market cap.
Matthews International (NASDAQ:MATW) makes the bronze plaques that go on caskets, urns, and headstones. The $841.64 million market cap firm's specialty is laser engraving images on headstones. In addition to its specialized laser work, the company has been innovative -- and environmentally conscious -- regarding the disposal of bodies. In August, it won approval to be the first "alkaline hydrolysis unit" in the state of California. The process, dubbed Bio Cremation, uses 95% water and 5% alkali instead of direct flame and fossil fuel to "reduce human remains" and destroy "pathogenic microorganisms found in human remains." Interestingly, the idea came from Scotland, which does not allow Bio Cremation, but Florida does. Matthews International provided the equipment to the Anderson-McQueen funeral home in Florida, which was the first home to offer the service. According to Florida's Sun Sentinel, "The departed is placed in a container that looks like a cross between a washing machine and a bank vault. Cranked up to 350 degrees, the mix dissolves the bodily remains. The cycle is completed in the time it takes to watch a long movie. The bones are removed and ground before being placed in an urn."
[Editor's note: Together, Services Corporation, Stewart Enterprises, StoneMor, and Carriage Services provide only 20% of the death care market share, according to S&P. The rest of the industry is composed of small, local competitors, typically family-owned funeral homes where the funeral director is also the embalmer.]
Body Parts
Bone and connective tissue product manufacturer Osteotech was acquired by Medtronic(NYSE:MDT) in 2010, making the parent company an even larger player in the "regenerative biologics" business. Body parts of the recently deceased including skin, bones, and tendons are frequently used as transplants for living patients. According to one estimate, the sum of a cadaver's parts can be worth over $200,000. One body can save the lives of up to eight people and enhance the lives of more than 50 people, estimates the Red Cross.
Interestingly, until 2005, the Red Cross was one of the nation's largest organizations that specialized in tissue gathering and distribution of bones, skins, and veins. That year, assets of the American Red Cross Tissue Services Unit were sold to the Musculoskeletal Transplant Foundation (MFT), which was then and still is the nation's largest tissue bank. Heart valves (mitral, aortic, pulmonary, and tricuspid) gathered by organizations such as the MFT often find their way to the heart valve experts at Edwards Lifesciences (NYSE:EW), which in turn distribute them to hospitals treating patients with cardiovascular disease.