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Cemetery Perpetual Care Trusts Level 1 (Notes) (Cemetery Perpetual Care [Member])
 12 Months Ended
Dec. 31, 2011
Cemetery Perpetual Care [Member]
  
Cemetery Perpetual Care Trusts Text Block
Cemetery Perpetual Care Trusts
We are required by state and provincial law to pay into cemetery perpetual care trusts a portion of the proceeds from the sale of cemetery property interment rights. Our cemetery perpetual care 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 merchandise and service trust investments detailed in Notes 4 and 5 are also accounted for as variable interest entities. We consolidate our cemetery perpetual care trust investments with a corresponding amount recorded as Care trusts’ corpus. Cash flows from cemetery perpetual care contracts are presented as operating cash flows in our consolidated statement of cash flows.
The table below sets forth certain investment-related activities associated with our cemetery perpetual care trusts for the years ended December 31:
 
2011
 
2010
 
2009
 
(In thousands)
Deposits
$
23,785

 
$
22,828

 
$
22,336

Withdrawals
34,737

 
41,418

 
31,196

Purchases of available-for-sale securities
444,616

 
442,219

 
369,536

Sales of available-for-sale securities
410,175

 
365,017

 
285,370

Realized gains from sales of available-for-sale securities
34,275

 
11,753

 
11,288

Realized losses from sales of available-for-sale securities
(16,310
)
 
(9,792
)
 
(20,512
)

The components of Cemetery perpetual care trust investments in our consolidated balance sheet at December 31 were as follows:
 
2011
 
2010
 
(In thousands)
Trust investments, at market
$
952,573

 
$
922,228

Cash and cash equivalents
63,933

 
64,791

Cemetery perpetual care trust investments
$
1,016,506

 
$
987,019


The cost and market values associated with our cemetery perpetual care 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 or cash 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
$
981

 
$
39

 
$
—

 
$
1,020

Canadian government
29,015

 
686

 
(43
)
 
29,658

Corporate
21,197

 
528

 
(134
)
 
21,591

Residential mortgage-backed
1,662

 
53

 
(13
)
 
1,702

Asset-backed
83

 
2

 
(1
)
 
84

Equity securities:
 

 
 

 
 

 
 

Preferred stock
6,475

 
18

 
(1,146
)
 
5,347

Common stock:
 

 
 

 
 

 
 

United States
141,880

 
14,443

 
(9,113
)
 
147,210

Canada
13,374

 
1,483

 
(1,423
)
 
13,434

Other international
16,836

 
1,314

 
(1,421
)
 
16,729

Mutual funds:
 

 
 

 
 

 
 

Equity
21,801

 
1,598

 
(579
)
 
22,820

Fixed income
654,883

 
29,758

 
(9,402
)
 
675,239

Private equity
23,212

 
374

 
(12,737
)
 
10,849

Other
8,018

 
850

 
(1,978
)
 
6,890

Cemetery perpetual care trust investments
$
939,417

 
$
51,146

 
$
(37,990
)
 
$
952,573


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

 
 

 
 

 
 

U.S. Treasury
$
5,651

 
$
863

 
$
(31
)
 
$
6,483

Canadian government
26,702

 
642

 
(7
)
 
27,337

Corporate
48,278

 
5,219

 
(249
)
 
53,248

Residential mortgage-backed
1,764

 
55

 
(6
)
 
1,813

Asset-backed
363

 
5

 
—

 
368

Equity securities:
 

 
 

 
 

 
 

Preferred stock
7,789

 
1,385

 
(112
)
 
9,062

Common stock:
 

 
 

 
 

 
 

United States
116,799

 
16,916

 
(6,640
)
 
127,075

Canada
11,510

 
2,510

 
(758
)
 
13,262

Other international
16,004

 
2,175

 
(1,845
)
 
16,334

Mutual funds:
 

 
 

 
 

 
 

Equity
65,114

 
6,964

 
(7,239
)
 
64,839

Fixed income
562,879

 
24,773

 
(2,334
)
 
585,318

Private equity
23,428

 
351

 
(13,344
)
 
10,435

Other
8,475

 
836

 
(2,657
)
 
6,654

Cemetery perpetual care trust investments
$
894,756

 
$
62,694

 
$
(35,222
)
 
$
922,228


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.
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 perpetual care 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
$
875,432

 
$
59,402

 
$
17,739

 
$
952,573

Trust investments at December 31, 2010
$
806,828

 
$
98,311

 
$
17,089

 
$
922,228


The change in our market-based cemetery perpetual care 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
$
17,089

 
$
14,943

 
$
48,276

Net unrealized gains (losses) included in Accumulated other comprehensive income(1)
7,400

 
7,018

 
(27,920
)
Net realized losses included in Other (expense) income, net(2)
(310
)
 
(2,613
)
 
(121
)
Sales
(44
)
 
(155
)
 
—

Contributions
118

 
11,140

 
4,263

Distributions and other
(6,514
)
 
(13,244
)
 
(2,343
)
Transfers out of Level 3
—

 
—

 
(7,212
)
Fair market value, ending balance
$
17,739

 
$
17,089

 
$
14,943


(1)
All unrealized gains (losses) recognized in Accumulated other comprehensive income for our cemetery perpetual care trust investments are offset by a corresponding reclassification in Accumulated other comprehensive income to Care trusts’ corpus. See Note 7 for further information related to our Care trusts’ corpus.
(2)
All losses recognized in Other (expense) income, net for our cemetery perpetual care trust investments are offset by a corresponding reclassification in Other (expense) income, net to Care trusts’ corpus. See Note 7 for further information related to our Care trusts’ corpus.
Maturity dates of our fixed income securities range from 2011 to 2041. Maturities of fixed income securities at December 31, 2011 are estimated as follows:
 
Fair Market Value
 
(In thousands)
Due in one year or less
$
7,850

Due in one to five years
23,325

Due in five to ten years
21,622

Thereafter
1,258

 
$
54,055


Distributable earnings from these cemetery perpetual care trust investments are recognized in current cemetery revenues to the extent we incur qualifying cemetery maintenance costs. Fees charged by our wholly-owned registered investment advisor are also included in current revenues in the period in which they are earned. Recognized earnings related to these cemetery perpetual care trust investments were $43.0 million, $38.6 million, and $37.6 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 Cemetery perpetual care trust investments. These investment losses, if any, are offset by the corresponding reclassification in Other (expense) income, net, which reduces Care trusts’ corpus. See Note 7 for further information related to our Care trusts’ corpus. For the years ended December 31, 2011, 2010, and 2009, we recorded a $0.7 million, a $7.8 million, and a $13.1 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 perpetual care 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 perpetual care 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 table:
 
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:
 

 
 

 
 

 
 

 
 

 
 

Canadian government
$
7,057

 
$
(43
)
 
$
—

 
$
—

 
$
7,057

 
$
(43
)
Corporate
3,854

 
(73
)
 
1,456

 
(61
)
 
5,310

 
(134
)
Residential mortgage-backed
58

 
(1
)
 
127

 
(12
)
 
185

 
(13
)
  Asset-backed
51

 
(1
)
 
—

 
—

 
51

 
(1
)
Equity securities:
 

 
 

 
 

 
 

 
 

 
 

Preferred stock
4,393

 
(1,116
)
 
21

 
(30
)
 
4,414

 
(1,146
)
Common stock:
 

 
 

 
 

 
 

 
 

 
 

United States
39,716

 
(5,459
)
 
9,055

 
(3,654
)
 
48,771

 
(9,113
)
Canada
4,402

 
(772
)
 
565

 
(651
)
 
4,967

 
(1,423
)
Other international
5,738

 
(1,226
)
 
104

 
(195
)
 
5,842

 
(1,421
)
Mutual funds:
 

 
 

 
 

 
 

 
 

 
 

Equity
9,852

 
(564
)
 
2,717

 
(15
)
 
12,569

 
(579
)
Fixed income
144,350

 
(5,498
)
 
51,301

 
(3,904
)
 
195,651

 
(9,402
)
Private equity
254

 
(324
)
 
10,189

 
(12,413
)
 
10,443

 
(12,737
)
Other
140

 
(181
)
 
5,660

 
(1,797
)
 
5,800

 
(1,978
)
Total temporarily impaired securities
$
219,865

 
$
(15,258
)
 
$
81,195

 
$
(22,732
)
 
$
301,060

 
$
(37,990
)

 
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
$
1,669

 
$
(31
)
 
$
—

 
$
—

 
$
1,669

 
$
(31
)
Canadian government
4,966

 
(7
)
 
—

 
—

 
4,966

 
(7
)
Corporate
9,181

 
(221
)
 
675

 
(28
)
 
9,856

 
(249
)
Residential mortgage-backed
137

 
(2
)
 
92

 
(4
)
 
229

 
(6
)
Equity securities:
 

 
 

 
 

 
 

 
 
 
 
Preferred stock
1,561

 
(90
)
 
29

 
(22
)
 
1,590

 
(112
)
Common stock:
 

 
 

 
 

 
 

 
 
 
 
United States
15,419

 
(1,464
)
 
16,419

 
(5,176
)
 
31,838

 
(6,640
)
Canada
1,545

 
(82
)
 
1,454

 
(676
)
 
2,999

 
(758
)
Other international
3,175

 
(242
)
 
2,383

 
(1,603
)
 
5,558

 
(1,845
)
Mutual funds:
 

 
 

 
 

 
 

 
 
 
 
Equity
866

 
(10
)
 
29,974

 
(7,229
)
 
30,840

 
(7,239
)
Fixed income
18,166

 
(134
)
 
53,553

 
(2,200
)
 
71,719

 
(2,334
)
Private equity
1

 
(1
)
 
10,060

 
(13,343
)
 
10,061

 
(13,344
)
Other
1

 
(2
)
 
5,568

 
(2,655
)
 
5,569

 
(2,657
)
Total temporarily impaired securities
$
56,687

 
$
(2,286
)
 
$
120,207

 
$
(32,936
)
 
$
176,894

 
$
(35,222
)