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Cemetery Perpetual Care Trusts (Notes) (Cemetery Perpetual Care [Member])
 3 Months Ended
Mar. 31, 2014
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,
 
2014
 
2013
 
(In thousands)
Deposits
$
11,837

 
$
8,228

Withdrawals
5,885

 
9,569

Purchases of available-for-sale securities
38,895

 
35,052

Sales of available-for-sale securities
30,072

 
27,490

Realized gains from sales of available-for-sale securities
5,045

 
3,782

Realized losses from sales of available-for-sale securities
(337
)
 
(322
)

The components of Cemetery perpetual care trust investments in our unaudited condensed consolidated balance sheet at March 31, 2014 and December 31, 2013 are as follows:
 
March 31, 2014
 
December 31, 2013
 
(In thousands)
Trust investments, at fair value
$
1,373,613

 
$
1,352,539

Cash and cash equivalents
81,773

 
78,509

Assets associated with businesses held for sale
(112,797
)
 
(83,426
)
Cemetery perpetual care trust investments
$
1,342,589

 
$
1,347,622


The cost and fair values associated with our cemetery perpetual care trust investments recorded at fair value at March 31, 2014 and December 31, 2013 are detailed below. Cost reflects the investment (net of redemptions) of control holders in common trust funds, mutual funds, and private equity investments. Fair value represents the value of the underlying securities or cash held by the common trust funds, mutual funds at published values, and the estimated fair value of private equity investments.
 
March 31, 2014
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
 
 
 
 
 
(In thousands)
 
 
Fixed income securities:
 
 
 
 
 
 
 
 
 
U.S. Treasury
2
 
$
1,675

 
$
18

 
$
(11
)
 
$
1,682

Canadian government
2
 
29,208

 
346

 
(204
)
 
29,350

Corporate
2
 
41,561

 
733

 
(309
)
 
41,985

Residential mortgage-backed
2
 
4,280

 
34

 
(15
)
 
4,299

Asset-backed
2
 
3,001

 
67

 
(4
)
 
3,064

Equity securities:
 
 
 
 
 
 
 
 
 
Preferred stock
2
 
26,495

 
1,431

 
(62
)
 
27,864

Common stock:
 
 
 
 
 
 
 
 
 
United States
1
 
232,619

 
54,271

 
(2,301
)
 
284,589

Canada
1
 
8,446

 
2,389

 
(579
)
 
10,256

Other international
1
 
21,341

 
1,863

 
(166
)
 
23,038

Mutual funds:
 
 
 
 
 
 
 
 
 
Equity
1
 
40,452

 
7,385

 
(27
)
 
47,810

Fixed income
1
 
822,406

 
45,882

 
(1,130
)
 
867,158

Private equity
3
 
29,074

 
485

 
(8,753
)
 
20,806

Other
3
 
10,571

 
1,151

 
(10
)
 
11,712

Cemetery perpetual care trust investments
 
 
$
1,271,129

 
$
116,055

 
$
(13,571
)
 
$
1,373,613


 
December 31, 2013
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
 
 
 
 
 
(In thousands)
 
 
Fixed income securities:
 
 
 
 
 
 
 
 
 
U.S. Treasury
2
 
$
1,588

 
$
9

 
$
(14
)
 
$
1,583

Canadian government
2
 
28,487

 
301

 
(459
)
 
28,329

Corporate
2
 
43,196

 
312

 
(263
)
 
43,245

Residential mortgage-backed
2
 
4,258

 
14

 
(19
)
 
4,253

Asset-backed
2
 
3,006

 
5

 
(11
)
 
3,000

Equity securities:
 
 
 
 
 
 
 
 
 
Preferred stock
2
 
25,952

 
192

 
(252
)
 
25,892

Common stock:
 
 
 
 
 
 
 
 


United States
1
 
231,156

 
53,782

 
(2,087
)
 
282,851

Canada
1
 
8,846

 
2,222

 
(623
)
 
10,445

Other international
1
 
20,676

 
1,319

 
(167
)
 
21,828

Mutual funds:
 
 
 
 
 
 
 
 
 
Equity
1
 
41,282

 
5,693

 
(35
)
 
46,940

Fixed income
1
 
819,439

 
35,963

 
(2,598
)
 
852,804

Private equity
3
 
28,309

 
472

 
(9,002
)
 
19,779

Other
3
 
10,521

 
1,153

 
(84
)
 
11,590

Cemetery perpetual care trust investments
 
 
$
1,266,716

 
$
101,437

 
$
(15,614
)
 
$
1,352,539


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. Private equity instruments are valued based on reported net asset values discounted by 0% to 20% for risk and 0% to 10% 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 Trust Services department, which reports to our Chief Financial Officer.  Additionally, valuations are reviewed by our investment 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, 2014, our unfunded commitment for our private equity and other investments was $0.7 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.
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, 2014
 
March 31, 2013
 
Private Equity
 
Other
 
Private Equity
 
Other
Fair value, beginning balance
$
19,779

 
$
11,590

 
$
11,122

 
$
7,659

Net unrealized gains included in Accumulated other comprehensive income(1)
727

 
128

 
6,069

 
2,729

Net realized losses included in Other income (expense), net(2)
(12
)
 
(6
)
 
(82
)
 
(46
)
Sales
(17
)
 
—

 
—

 
—

Contributions
694

 
—

 
1

 
—

Distributions
(365
)
 
—

 
(656
)
 
—

Fair value, ending balance
$
20,806

 
$
11,712

 
$
16,454

 
$
10,342


                                                                               
(1)
All unrealized 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 losses recognized in Other income (expense), net for our cemetery perpetual care trust investments are offset by a corresponding reclassification in Other income (expense), 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 2014 to 2043. Maturities of fixed income securities at March 31, 2014 are estimated as follows:
 
Fair Value
 
(In thousands)
Due in one year or less
$
15,236

Due in one to five years
35,515

Due in five to ten years
24,753

Thereafter
4,876

 
$
80,380


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 trust fund income related to these trust investments were $13.3 million and $10.0 million for the three months ended March 31, 2014 and 2013, 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 (expense), net and a decrease to Cemetery perpetual care trust investments. These investment losses, if any, are offset by the corresponding reclassification in Other income (expense), 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, 2014 there was no impairment charge for other-than-temporary declines in fair value related to unrealized losses on certain investments. For the three months ended March 31, 2013, we recorded a $0.1 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 remaining 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 values and the duration of unrealized losses, are shown in the following tables.
 
March 31, 2014
 
In Loss Position
Less Than 12 Months
 
In Loss Position
Greater Than 12 Months
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
 
 
 
 
(In thousands)
 
 
 
 
Fixed income securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury
$
1,247

 
$
(11
)
 
$
2

 
$
—

 
$
1,249

 
$
(11
)
Canadian government
18,422

 
(146
)
 
1,818

 
(58
)
 
20,240

 
(204
)
Corporate
15,687

 
(148
)
 
3,204

 
(161
)
 
18,891

 
(309
)
Residential mortgage-backed
685

 
(14
)
 
11

 
(1
)
 
696

 
(15
)
Asset-backed
391

 
(4
)
 
15

 
—

 
406

 
(4
)
Equity securities:
 
 
 
 
 
 
 
 
 
 
 
Preferred stock
3,362

 
(57
)
 
46

 
(5
)
 
3,408

 
(62
)
Common stock:
 
 
 
 
 
 
 
 
 
 
 
United States
25,383

 
(1,519
)
 
2,755

 
(782
)
 
28,138

 
(2,301
)
Canada
1,233

 
(35
)
 
1,664

 
(544
)
 
2,897

 
(579
)
Other international
1,847

 
(21
)
 
1,020

 
(145
)
 
2,867

 
(166
)
Mutual funds:
 
 
 
 
 
 
 
 
 
 
 
Equity
397

 
(15
)
 
118

 
(12
)
 
515

 
(27
)
Fixed income
49,171

 
(893
)
 
9,632

 
(237
)
 
58,803

 
(1,130
)
Private equity
—

 
—

 
20,256

 
(8,753
)
 
20,256

 
(8,753
)
Other
14

 
(10
)
 
9,891

 
—

 
9,905

 
(10
)
Total temporarily impaired securities
$
117,839

 
$
(2,873
)
 
$
50,432

 
$
(10,698
)
 
$
168,271

 
$
(13,571
)

 
December 31, 2013
 
In Loss Position
Less Than 12 Months
 
In Loss Position
Greater Than 12 Months
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
 
 
 
 
(In thousands)
 
 
 
 
Fixed income securities:
 
 
 
 
 
 
 
 
 
 
 
U.S. Treasury
$
1,339

 
$
(14
)
 
$
20

 
$
—

 
$
1,359

 
$
(14
)
Canadian government
15,777

 
(214
)
 
5,131

 
(245
)
 
20,908

 
(459
)
Corporate
22,534

 
(129
)
 
3,299

 
(134
)
 
25,833

 
(263
)
Residential mortgage-backed
2,960

 
(18
)
 
10

 
(1
)
 
2,970

 
(19
)
Asset-backed
2,835

 
(10
)
 
15

 
(1
)
 
2,850

 
(11
)
Equity securities:
 
 
 
 
 
 
 
 
 
 
 
Preferred stock
14,650

 
(245
)
 
44

 
(7
)
 
14,694

 
(252
)
Common stock:
 
 
 
 
 
 
 
 
 
 
 
United States
23,825

 
(1,561
)
 
3,254

 
(526
)
 
27,079

 
(2,087
)
Canada
667

 
(129
)
 
1,794

 
(494
)
 
2,461

 
(623
)
Other international
1,540

 
(54
)
 
525

 
(113
)
 
2,065

 
(167
)
Mutual funds:
 
 
 
 
 
 
 
 
 
 
 
Equity
391

 
(14
)
 
163

 
(21
)
 
554

 
(35
)
Fixed income
181,701

 
(2,090
)
 
28,507

 
(508
)
 
210,208

 
(2,598
)
Private equity
—

 
—

 
19,242

 
(9,002
)
 
19,242

 
(9,002
)
Other
—

 
—

 
9,738

 
(84
)
 
9,738

 
(84
)
Total temporarily impaired securities
$
268,219

 
$
(4,478
)
 
$
71,742

 
$
(11,136
)
 
$
339,961

 
$
(15,614
)