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Preneed Cemetery Activities Level 1 (Notes) (Cemetery [Member])
 12 Months Ended
Dec. 31, 2011
Cemetery [Member]
  
Preneed Cemetery Activities Text Block
Preneed Cemetery Activities
Preneed cemetery receivables, net and trust investments
Preneed cemetery receivables, net and trust investments represent trust investments, including investment earnings, and customer receivables, net of unearned finance charges, for contracts sold in advance of when the property interment rights, merchandise, or services are needed. Our cemetery merchandise and service trusts are variable interest entities as defined in the Consolidation Topic of the ASC. In accordance with this guidance, we have determined that we are the primary beneficiary of these trusts, as we absorb a majority of the losses and returns associated with these trusts. The trust investments detailed in Notes 4 and 6 are also accounted for as variable interest entities. When we receive payments from the customer, we deposit the amount required by law into the trust and reclassify the corresponding amount from Deferred preneed cemetery revenues into Deferred preneed funeral and cemetery receipts held in trust. Amounts are withdrawn from the trusts when the contract obligations are performed. Cash flows from preneed cemetery contracts are presented as operating cash flows in our consolidated statement of cash flows.
Preneed cemetery receivables, net and trust investments are reduced by the trust investment earnings (realized and unrealized) that we have been allowed to withdraw in certain states prior to maturity. These earnings are recorded in Deferred preneed cemetery revenues until the service is performed or the merchandise is delivered.
The table below sets forth certain investment-related activities associated with our preneed cemetery merchandise and service trusts for the years ended December 31:
 
2011
 
2010
 
2009
 
 
 
(In thousands)
 
 
Deposits
$
98,121

 
$
96,864

 
$
92,687

Withdrawals
109,382

 
100,474

 
104,580

Purchases of available-for-sale securities
595,683

 
638,368

 
625,248

Sales of available-for-sale securities
525,534

 
592,813

 
593,133

Realized gains from sales of available-for-sale securities
67,167

 
43,413

 
44,972

Realized losses from sales of available-for-sale securities
(46,889
)
 
(51,771
)
 
(75,254
)

The components of Preneed cemetery receivables, net and trust investments in the consolidated balance sheet at December 31 were as follows:
 
2011
 
2010
 
(In thousands)
Trust investments, at market
$
1,051,464

 
$
1,062,771

Cash and cash equivalents
104,554

 
122,866

Insurance-backed fixed income securities
5

 
9,158

Trust investments
1,156,023

 
1,194,795

Receivables from customers
517,917

 
452,296

Unearned finance charges
(33,766
)
 
(39,205
)
 
1,640,174

 
1,607,886

Allowance for cancellation
(44,234
)
 
(43,993
)
Preneed cemetery receivables and trust investments
$
1,595,940

 
$
1,563,893


The activity in Preneed cemetery receivables, net and trust investments for the years ended December 31 was as follows:
 
2011
 
2010
 
2009
 
 
 
(In thousands)
 
 
Beginning balance — Preneed cemetery receivables and trust investments
$
1,563,893

 
$
1,382,717

 
$
1,062,952

Net preneed contract sales
468,850

 
423,985

 
408,328

(Dispositions) acquisitions of businesses, net
(5,500
)
 
5,508

 
7,749

Net undistributed investment (losses) earnings (1)
(24,407
)
 
121,225

 
271,804

Cash receipts from customers, net of refunds
(403,524
)
 
(373,071
)
 
(351,459
)
Deposits to trust
98,121

 
96,864

 
92,687

Maturities, deliveries, and associated earnings
(109,382
)
 
(100,474
)
 
(104,580
)
Change in cancellation allowance
(759
)
 
(3,764
)
 
(10,141
)
Effect of foreign currency and other
8,648

 
10,903

 
5,377

Ending balance — Preneed cemetery receivables and trust investments
$
1,595,940

 
$
1,563,893

 
$
1,382,717

_________________________________
(1)
Includes both realized and unrealized investment earnings (losses).
The cost and market values associated with our cemetery merchandise and service trust investments recorded at fair market value at December 31, 2011 and 2010 are detailed below. Cost reflects the investment (net of redemptions) of control holders in common trust funds, mutual funds, and private equity investments. Fair market value represents the value of the underlying securities held by the common trust funds, mutual funds at published values, and the estimated market value of private equity investments.
 
December 31, 2011
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
 
 
 
(In thousands)
 
 
Fixed income securities:
 

 
 

 
 

 
 

U.S. Treasury
$
51,022

 
$
6,438

 
$
(313
)
 
$
57,147

Canadian government
16,566

 
381

 
(24
)
 
16,923

Corporate
42,803

 
2,033

 
(961
)
 
43,875

Residential mortgage-backed
167

 
5

 
(2
)
 
170

Equity securities:
 

 
 

 
 

 
 

Preferred stock
3,365

 
86

 
(270
)
 
3,181

Common stock:
 

 
 

 
 

 
 

United States
408,075

 
71,138

 
(30,454
)
 
448,759

Canada
18,289

 
2,547

 
(1,780
)
 
19,056

Other international
30,501

 
1,843

 
(1,536
)
 
30,808

Mutual funds:
 

 
 

 
 

 
 

Equity
197,523

 
3,317

 
(24,911
)
 
175,929

Fixed income
248,529

 
11,670

 
(20,238
)
 
239,961

Private equity
30,783

 
53

 
(15,617
)
 
15,219

Other
306

 
130

 
—

 
436

Trust investments
$
1,047,929

 
$
99,641

 
$
(96,106
)
 
$
1,051,464

 
December 31, 2010
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
 
 
 
(In thousands)
 
 
Fixed income securities:
 

 
 

 
 

 
 

U.S. Treasury
$
50,884

 
$
2,493

 
$
(307
)
 
$
53,070

Canadian government
15,669

 
362

 
(4
)
 
16,027

Corporate
39,265

 
3,387

 
(402
)
 
42,250

Residential mortgage-backed
863

 
31

 
(1
)
 
893

Asset-backed
6,336

 
261

 
(5
)
 
6,592

Equity securities:
 

 
 

 
 

 
 

Preferred stock:
4,577

 
453

 
(124
)
 
4,906

Common stock:
 

 
 

 
 

 
 

United States
386,537

 
82,385

 
(10,821
)
 
458,101

Canada
17,279

 
3,869

 
(850
)
 
20,298

Other international
31,466

 
2,485

 
(3,645
)
 
30,306

Mutual funds:
 

 
 

 
 

 
 

Equity
202,328

 
15,173

 
(18,569
)
 
198,932

Fixed income
226,567

 
8,537

 
(9,959
)
 
225,145

Private equity
19,596

 
13

 
(13,890
)
 
5,719

Other
874

 
43

 
(385
)
 
532

Trust investments
$
1,002,241

 
$
119,492

 
$
(58,962
)
 
$
1,062,771

Where quoted prices are available in an active market, securities held by the common trust funds and mutual funds are classified as Level 1 investments pursuant to the three-level valuation hierarchy as required by the FVM&D Topic of the ASC.
Where quoted market prices are not available for the specific security, fair values are estimated by using either quoted prices of securities with similar characteristics or an income approach fair value model with observable inputs that include a combination of interest rates, yield curves, credit risks, prepayment speeds, rating, and tax-exempt status. These funds are classified as Level 2 investments pursuant to the three-level valuation hierarchy as required by the FVM&D Topic of the ASC.
The valuation of private equity and other alternative investments requires significant management judgment due to the absence of quoted market prices, inherent lack of liquidity, and the long-term nature of such assets. The fair value of these investments is estimated based on the market value of the underlying real estate and private equity investments. The underlying real estate value is determined using the most recent available appraisals. Private equity investments are valued using market appraisals or a discounted cash flow methodology, which is an income approach fair value model, depending on the nature of the underlying assets. The appraisals assess value based on a combination of replacement cost, comparative sales analysis, and discounted cash flow analysis. These funds are classified as Level 3 investments pursuant to the three-level valuation hierarchy as required by the FVM&D Topic of the ASC.
As of December 31, 2011, our unfunded commitment for our private equity and other investments was $11.8 million which, if called, would be funded by the assets of the trusts. Our private equity and other investments include several funds that invest in limited partnerships, distressed debt, real estate, and mezzanine financing. The majority of the investments can be redeemed at discount;. others can be redeemed without a discount. Generally, however, the nature of the investments in this category is that the distributions are received through the liquidation of the underlying assets of the funds. We estimate that the underlying assets will be liquidated over the next 2 to 10 years.
Our investments classified as Level 1 securities include common stock and mutual funds. Level 2 securities include U.S. Treasury, Canadian government, corporate, mortgage-backed and asset-backed fixed income securities, and preferred stock. Our private equity and other alternative investments are classified as Level 3 securities.
The inputs into the fair value of our market-based cemetery merchandise and service trust investments are categorized as follows:
 
Quoted Market
Prices in Active
Markets
(Level 1)
 
Significant Other
Observable Inputs
(Level 2)
 
Significant
Unobservable Inputs
(Level 3)
 
Fair Market Value
 
 
 
(In thousands)
 
 
Trust investments at December 31, 2011
$
914,513

 
$
121,296

 
$
15,655

 
$
1,051,464

Trust investments at December 31, 2010
$
932,782

 
$
123,738

 
$
6,251

 
$
1,062,771


The change in our market-based cemetery merchandise and service trust investments with significant unobservable inputs (Level 3) is as follows for the years ended December 31 (in thousands):
 
2011
 
2010
 
2009
Fair market value, beginning balance at January 1,
$
6,251

 
$
4,341

 
$
31,837

Net unrealized gains (losses) included in Accumulated other comprehensive income(1)
286

 
(4,304
)
 
(14,039
)
Net realized losses included in Other (expense) income, net(2)
(101
)
 
(529
)
 
(27
)
Sales
—

 
(48
)
 
—

Contributions
10,795

 
7,508

 
2,672

Distributions and other
(1,576
)
 
(717
)
 
(510
)
Transfers out of Level 3
—

 
—

 
(15,592
)
Fair market value, ending balance at December 31
$
15,655

 
$
6,251

 
$
4,341

_________________________________
(1)
All unrealized gains (losses) recognized in Accumulated other comprehensive income for our cemetery merchandise and service trust investments are attributable to our preneed customers and are offset by a corresponding reclassification in Accumulated other comprehensive income to Deferred preneed funeral and cemetery receipts held in trust. See Note 7 for further information related to our Deferred preneed funeral and cemetery receipts held in trust.
(2)
All losses recognized in Other (expense) income, net for our cemetery merchandise and service trust investments are attributable to our preneed customers and are offset by a corresponding reclassification in Other (expense) income, net to Deferred preneed funeral and cemetery receipts held in trust. See Note 7 for further information related to our Deferred preneed funeral and cemetery receipts held in trust.
Maturity dates of our fixed income securities range from 2011 to 2041. Maturities of fixed income securities (excluding mutual funds) at December 31, 2011 are estimated as follows:
 
Fair Market Value
 
(In thousands)
Due in one year or less
$
9,841

Due in one to five years
45,470

Due in five to ten years
34,622

Thereafter
28,182

 
$
118,115


Earnings from all our cemetery merchandise and service trust investments are recognized in cemetery revenues when a service is performed or merchandise is delivered. Fees charged by our wholly-owned registered investment advisor are also included in current revenues in the period in which they are earned. In addition, we are entitled to retain, in certain jurisdictions, a portion of collected customer payments when a customer cancels a preneed contract; these amounts are also recognized in current revenues. Recognized earnings (realized and unrealized) related to our cemetery merchandise and service trust investments were $20.7 million, $15.1 million, and $8.6 million for the years ended December 31, 2011, 2010, and 2009, respectively.
We assess our trust investments for other-than-temporary declines in fair value on a quarterly basis. Impairment charges resulting from this assessment are recognized as investment losses in Other (expense) income, net and a decrease to Preneed cemetery receivables, net and trust investments. These investment losses, if any, are offset by the corresponding reclassification in Other (expense) income, net, which reduces Deferred preneed cemetery receipts held in trust. See Note 7 for further information related to our Deferred preneed cemetery receipts held in trust. For the years ended December 31, 2011, 2010, and 2009, we recorded a $28.7 million, a $5.7 million, and a $41.2 million impairment charge for other-than-temporary declines in fair value related to unrealized losses on certain investments.
We have determined that the remaining unrealized losses in our cemetery merchandise and service trust investments are considered temporary in nature, as the unrealized losses were due to temporary fluctuations in interest rates and equity prices. The investments are diversified across multiple industry segments using a balanced allocation strategy to minimize long-term risk. We believe that none of the securities are other-than-temporarily impaired based on our analysis of the investments. Our analysis included a review of the portfolio holdings and discussions with the individual money managers as to the sector exposures, credit ratings, and the severity and duration of the unrealized losses. Our cemetery merchandise and service trust investment unrealized losses, their associated fair market values, and the duration of unrealized losses for the years ended December 31, 2011 and 2010, are shown in the following tables:
 
December 31, 2011
 
In Loss Position
Less Than 12 Months
 
In Loss Position
Greater Than 12 Months
 
Total
 
Fair Market
Value
 
Unrealized
Losses
 
Fair Market
Value
 
Unrealized
Losses
 
Fair Market
Value
 
Unrealized
Losses
 
 
 
 
 
(In thousands)
 
 
 
 
Fixed income securities:
 

 
 

 
 

 
 

 
 

 
 

U.S. Treasury
$
1,736

 
$
(51
)
 
$
3,038

 
$
(262
)
 
$
4,774

 
$
(313
)
Canadian government
4,024

 
(24
)
 
—

 
—

 
4,024

 
(24
)
Corporate
15,044

 
(850
)
 
1,747

 
(111
)
 
16,791

 
(961
)
Residential mortgage-backed
2

 
(1
)
 
15

 
(1
)
 
17

 
(2
)
Equity securities:
 

 
 

 
 

 
 

 
 

 
 

Preferred stock:
1,583

 
(270
)
 
—

 
—

 
1,583

 
(270
)
Common stock:
 

 
 

 
 

 
 

 
 

 
 

United States
123,849

 
(26,401
)
 
17,085

 
(4,053
)
 
140,934

 
(30,454
)
Canada
7,694

 
(1,260
)
 
366

 
(520
)
 
8,060

 
(1,780
)
Other international
8,654

 
(629
)
 
3,772

 
(907
)
 
12,426

 
(1,536
)
Mutual funds:
 

 
 

 
 

 
 

 
 

 
 

Equity
115,725

 
(11,222
)
 
36,398

 
(13,689
)
 
152,123

 
(24,911
)
Fixed income
48,950

 
(7,686
)
 
9,367

 
(12,552
)
 
58,317

 
(20,238
)
Private equity
466

 
(254
)
 
14,213

 
(15,363
)
 
14,679

 
(15,617
)
Total temporarily impaired securities
$
327,727

 
$
(48,648
)
 
$
86,001

 
$
(47,458
)
 
$
413,728

 
$
(96,106
)
 
December 31, 2010
 
In Loss Position
Less Than 12 Months
 
In Loss Position
Greater Than 12 Months
 
Total
 
Fair Market
Value
 
Unrealized
Losses
 
Fair Market
Value
 
Unrealized
Losses
 
Fair Market
Value
 
Unrealized
Losses
 
 
 
 
 
(In thousands)
 
 
 
 
Fixed income securities:
 

 
 

 
 

 
 

 
 

 
 

U.S. Treasury
$
6,057

 
$
(295
)
 
$
315

 
$
(12
)
 
$
6,372

 
$
(307
)
Canadian government
2,908

 
(4
)
 
—

 
—

 
2,908

 
(4
)
Corporate
8,577

 
(402
)
 
—

 
—

 
8,577

 
(402
)
Residential mortgage-backed
—

 
—

 
20

 
(1
)
 
20

 
(1
)
Asset-backed
766

 
(4
)
 
56

 
(1
)
 
822

 
(5
)
Equity securities:
 

 
 

 
 

 
 

 
 

 
 

Preferred stock:
1,749

 
(124
)
 
—

 
—

 
1,749

 
(124
)
Common stock:
 

 
 

 
 

 
 

 
 

 
 

United States
63,027

 
(4,450
)
 
31,108

 
(6,371
)
 
94,135

 
(10,821
)
Canada
3,131

 
(181
)
 
1,475

 
(669
)
 
4,606

 
(850
)
Other international
8,542

 
(1,403
)
 
5,259

 
(2,242
)
 
13,801

 
(3,645
)
Mutual funds:
 

 
 

 
 

 
 

 
 

 
 

Equity
5,107

 
(112
)
 
92,630

 
(18,457
)
 
97,737

 
(18,569
)
Fixed income
25,887

 
(354
)
 
14,600

 
(9,605
)
 
40,487

 
(9,959
)
Private equity
—

 
—

 
5,557

 
(13,890
)
 
5,557

 
(13,890
)
Other
7

 
(1
)
 
303

 
(384
)
 
310

 
(385
)
Total temporarily impaired securities
$
125,758

 
$
(7,330
)
 
$
151,323

 
$
(51,632
)
 
$
277,081

 
$
(58,962
)

Deferred Preneed Cemetery Revenues
At December 31, 2011 and 2010, Deferred preneed cemetery revenues, net of allowance for cancellation, represent future cemetery revenues, including distributed trust investment earnings associated with unperformed trust-funded preneed cemetery contracts that are not held in trust accounts. Deferred preneed cemetery revenues are recognized in current cemetery revenues when the service is performed or merchandise is delivered. Future cemetery revenues and net trust investment earnings that are held in trust accounts are included in Deferred preneed cemetery receipts held in trust.
The following table summarizes the activity in Deferred preneed cemetery revenues for the years ended December 31:
 
2011
 
2010
 
2009
 
(In thousands)
Beginning balance — Deferred preneed cemetery revenues
$
813,493

 
$
817,543

 
$
771,117

Net preneed and atneed deferred sales
363,523

 
349,786

 
342,984

(Dispositions) acquisitions of businesses, net
(10,861
)
 
1,090

 
5,461

Net investment (losses) earnings(1)
(26,431
)
 
117,331

 
242,483

Recognized deferred preneed revenues
(350,356
)
 
(347,996
)
 
(325,036
)
Change in cancellation allowance
802

 
(2,457
)
 
10,855

Change in deferred preneed cemetery receipts held in trust
37,173

 
(125,974
)
 
(235,031
)
Effect of foreign currency and other
5,960

 
4,170

 
4,710

Ending balance — Deferred preneed cemetery revenues
$
833,303

 
$
813,493

 
$
817,543

_________________________________
(1)
Includes both realized and unrealized investment earnings (losses).