Credit Risk and Fair Value of Financial Instruments

Fair Value Estimates

The fair value estimates of the following financial instruments have been determined using available market information and appropriate valuation methodologies. The carrying values of cash and cash equivalents, trade receivables, and trade payables approximate the fair values of those instruments due to the short-term nature of the instruments. The fair values of receivables on preneed funeral and cemetery contracts are impracticable to estimate because of the lack of a trading market and the diverse number of individual contracts with varying terms.

The fair value of our debt instruments at December 31 was as follows:



	2012		2011
	(In thousands)
7.875% Debentures due February 2013	$	4,786	$	4,971
7.375% Senior Notes due October 2014	—		196,954
6.75% Senior Notes due April 2015	150,112		150,083
6.75% Senior Notes due April 2016	222,049		216,375
7.0% Senior Notes due June 2017	341,094		323,025
7.625% Senior Notes due October 2018	298,750		276,875
7.0% Senior Notes due May 2019	276,250		262,500
4.5% Senior Notes due November 2020	204,500		—
8.0% Senior Notes due November 2021	186,000		167,550
7.5% Senior Notes due April 2027	215,500		195,750
Bank credit facility due March 2016	86,600		65,000
Mortgage notes and other debt, maturities through 2047	5,698		36,340
Total fair value of debt instruments	$	1,991,339	$	1,895,423

The fair values of our long-term, fixed rate securities were estimated using market prices for those securities, and therefore they are classified within Level 1 of the Fair Value Measurements hierarchy as required by the FVM&D Topic of the ASC. The bank credit facility and the mortgage and other debt are classified within Level 3 of the Fair Value Measurements hierarchy. The fair values of these instruments have been estimated using discounted cash flow analysis based on our incremental borrowing rate for similar borrowing arrangements.

Credit Risk Exposure

Our cash deposits, some of which exceed insured limits, are distributed among various market and national banks in the jurisdictions in which we operate. In addition, we regularly invest excess cash in financial instruments which are not insured, such as money-market funds and Eurodollar time deposits, that are offered by a variety of reputable financial institutions and commercial paper that is offered by corporations with quality credit ratings. We believe that the credit risk associated with such instruments is minimal.

We grant credit to customers in the normal course of business. The credit risk associated with our funeral, cemetery, and preneed funeral and preneed cemetery receivables due from customers is generally considered minimal because of the diversification of the customers served. Furthermore, bad debts have not been significant relative to the volume of deferred revenues. Customer payments on preneed funeral or preneed cemetery contracts that are either placed into state-regulated trusts or used to pay premiums on life insurance contracts generally do not subject us to collection risk. Insurance-funded contracts are subject to supervision by state insurance departments and are protected in the majority of states by insurance guaranty acts.