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Cemetery Perpetual Care Trusts Level 1 (Notes) (Cemetery Perpetual Care [Member])
 3 Months Ended
Mar. 31, 2012
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 trusts are presented as operating cash flows in our unaudited condensed consolidated statement of cash flows.
The table below sets forth certain investment-related activities associated with our cemetery perpetual care trusts:
 
Three Months Ended
 
March 31,
 
2012
 
2011
 
(In thousands)
Deposits
$
6,544

 
$
5,789

Withdrawals
8,252

 
8,387

Purchases of available-for-sale securities
70,127

 
203,086

Sales of available-for-sale securities
52,886

 
267,666

Realized gains from sales of available-for-sale securities
2,162

 
21,241

Realized losses from sales of available-for-sale securities
(2,215
)
 
(10,661
)

The components of Cemetery perpetual care trust investments in our unaudited condensed consolidated balance sheet at March 31, 2012 and December 31, 2011 are as follows:
 
March 31, 2012
 
December 31, 2011
 
(In thousands)
Trust investments, at market
$
999,259

 
$
952,573

Cash and cash equivalents
50,822

 
63,933

Cemetery perpetual care trust investments
$
1,050,081

 
$
1,016,506


The cost and market values associated with our cemetery perpetual care trust investments recorded at fair market value at March 31, 2012 and December 31, 2011 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.
 
March 31, 2012
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
 
 
 
(In thousands)
 
 
Fixed income securities:
 
 
 
 
 
 
 
U.S. Treasury
$
927

 
$
31

 
$
(1
)
 
$
957

Canadian government
29,612

 
634

 
(15
)
 
30,231

Corporate
21,406

 
544

 
(68
)
 
21,882

Residential mortgage-backed
1,654

 
49

 
(1
)
 
1,702

Asset-backed
98

 
6

 
—

 
104

Equity securities:
 
 
 
 
 
 
 
Preferred stock
5,440

 
65

 
(404
)
 
5,101

Common stock:
 
 
 
 
 
 
 
United States
151,786

 
21,538

 
(4,024
)
 
169,300

Canada
13,853

 
1,666

 
(1,595
)
 
13,924

Other international
18,489

 
1,099

 
(699
)
 
18,889

Mutual funds:
 
 
 
 
 
 
 
Equity
17,795

 
2,534

 
(141
)
 
20,188

Fixed income
664,339

 
37,041

 
(3,650
)
 
697,730

Private equity
25,340

 
371

 
(13,734
)
 
11,977

Other
8,133

 
1,083

 
(1,942
)
 
7,274

Cemetery perpetual care trust investments
$
958,872

 
$
66,661

 
$
(26,274
)
 
$
999,259


 
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


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 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. As of March 31, 2012, private equity instruments are valued based on reported net asset values discounted by 0% to 60% for risk and 0% to 25% for liquidity. A significant increase (decrease) in the discounts results in a directionally opposite change in the fair value of the instruments.Valuation policies and procedures are determined by our Treasury department, which reports to our Chief Financial Officer.  Additionally, valuations are reviewed by our audit committee quarterly. 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 March 31, 2012, our unfunded commitment for our private equity and other investments was $7.0 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. These investments can never be redeemed by the funds. Instead, 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 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 March 31, 2012
$
920,031

 
$
59,977

 
$
19,251

 
$
999,259

Trust investments at December 31, 2011
$
875,432

 
$
59,402

 
$
17,739

 
$
952,573


The change in our market-based cemetery perpetual care trust investments with significant unobservable inputs (Level 3) is as follows (in thousands):
 
Three Months Ended
 
March 31,
 
2012
 
2011
Fair market value, beginning balance
$
17,739

 
$
17,089

Net unrealized (losses) gains included in Accumulated other comprehensive income(1)
839

 
6,111

Net realized gains (losses) included in Other income, net(2)
(57
)
 
(27
)
Sales
(26
)
 
(44
)
Contributions
1,390

 
1

Distributions and other
(634
)
 
(2,871
)
Fair market value, ending balance
$
19,251

 
$
20,259


                                                                               
(1)
All unrealized (losses) gains 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 gains (losses) recognized in Other income, net for our cemetery perpetual care trust investments are offset by a corresponding reclassification in Other 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 2012 to 2042. Maturities of fixed income securities at March 31, 2012 are estimated as follows:
 
Fair Market Value
 
(In thousands)
Due in one year or less
$
5,684

Due in one to five years
23,190

Due in five to ten years
24,729

Thereafter
1,273

 
$
54,876


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 trust investments were $9.0 million and $9.2 million for the three months ended March 31, 2012 and 2011, 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 income, net and a decrease to Cemetery perpetual care trust investments. These investment losses, if any, are offset by the corresponding reclassification in Other income, net, which reduces Care trusts’ corpus. See Note 7 for further information related to our Care trusts’ corpus. For the three months ended March 31, 2012 and 2011, we recorded a $0.0 million and a $0.3 million impairment charge for other-than-temporary declines in fair value related to unrealized losses on certain investments, respectively.
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, are shown in the following tables.
 
March 31, 2012
 
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
$
342

 
$
(1
)
 
$
—

 
$
—

 
$
342

 
$
(1
)
Canadian government
4,758

 
(15
)
 
—

 
—

 
4,758

 
(15
)
Corporate
5,960

 
(57
)
 
68

 
(11
)
 
6,028

 
(68
)
Residential mortgage-backed
222

 
(1
)
 
—

 
—

 
222

 
(1
)
Equity securities:
 
 
 
 
 
 
 
 
 
 
 
Preferred stock
2,937

 
(260
)
 
434

 
(144
)
 
3,371

 
(404
)
Common stock:
 
 
 
 
 
 
 
 
 
 
 
United States
22,965

 
(1,768
)
 
8,142

 
(2,256
)
 
31,107

 
(4,024
)
Canada
4,568

 
(1,001
)
 
643

 
(594
)
 
5,211

 
(1,595
)
Other international
9,843

 
(682
)
 
262

 
(17
)
 
10,105

 
(699
)
Mutual funds:
 
 
 
 
 
 
 
 
 
 
 
Equity
827

 
(28
)
 
2,267

 
(113
)
 
3,094

 
(141
)
Fixed income
84,277

 
(1,628
)
 
45,962

 
(2,022
)
 
130,239

 
(3,650
)
Private equity
281

 
(349
)
 
11,293

 
(13,385
)
 
11,574

 
(13,734
)
Other
144

 
(179
)
 
5,807

 
(1,763
)
 
5,951

 
(1,942
)
Total temporarily impaired securities
$
137,124

 
$
(5,969
)
 
$
74,878

 
$
(20,305
)
 
$
212,002

 
$
(26,274
)

 
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
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

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
)