Acquisition (Notes)

3 Months Ended

Mar. 31, 2014

Business Combinations [Abstract]

Business Combination Disclosure [Text Block]

Acquisition

Stewart

On December 23, 2013, pursuant to a tender offer, we acquired Stewart Enterprises, Inc. (Stewart) for 13.25 per share in cash, resulting in a purchase price of $1.5 billion, which includes the assumption of $331.5 million of Stewart’s debt.

The primary reasons for the merger and the principal factors that contributed to the recognition of goodwill in this acquisition were:

• the acquisition of Stewart enhances our network footprint, enabling us to serve a number of new, complementary areas;

• combining the two companies’ operations provides synergies and related cost savings through the elimination of duplicate home office functions and economies of scale; and

• the acquisition of Stewart’s preneed backlog of deferred revenues enhances our long-term stability.

The following table summarizes the adjusted fair values of the assets acquired and liabilities assumed as of December 23, 2013:

	(In thousands)
Accounts receivable	$	14,638
Other current assets	198,760
Cemetery property	282,524
Property and equipment, net	338,363
Preneed funeral and cemetery receivables and trust investments	654,805
Finite-lived intangible assets	77,134
Indefinite-lived intangible assets	79,400
Acquired assets held for sale	443,169
Deferred charges and other assets	278,319
Goodwill	625,295
Total assets acquired	2,992,407
Current liabilities	217,175
Long-term debt	270,668
Deferred preneed funeral and cemetery revenues and deferred receipts held in trusts	834,320
Assumed liabilities held for sale	162,668
Deferred income taxes	62,409
Other liabilities	279,694
Total liabilities assumed	1,826,934
Noncontrolling interest	118
Net assets acquired	$	1,165,355

We have not finalized our assessment of the fair values as there has been insufficient time between the acquisition date and the issuance of these financial statements to complete our review and final determination of fair value. We made the following adjustments to our estimates of the fair value of assets and liabilities in the first quarter of 2014 and revised the consolidated balance sheet for the year-ended December 31, 2013 included in this filing to reflect these adjustments:

	(In thousands)
Decrease in the fair value of cemetery property	1,942
Decrease in the fair value of property and equipment, net	2,093
Decrease in the fair value of finite-lived intangible assets	29,146
Increase in the fair value of deferred preneed funeral and cemetery revenues and deferred receipts held in trust	51,463
Decrease in the fair value of deferred income taxes	(37,760	)
Other	(751	)
Total adjustment to goodwill	46,133

Goodwill, land, and certain identifiable intangible assets recorded in the acquisition are not subject to amortization; however, the goodwill and intangible assets will be tested periodically for impairment as required by the Intangible Assets Topic of the ASC. Of the $625.3 million in goodwill recognized, $281.4 million was allocated to our cemetery segment and $343.9 million was allocated to our funeral segment. As a result of the carryover of Stewart’s tax basis, $3.0 million of this goodwill is deductible for tax purposes. The identified intangible assets comprise the following:

	Useful life
	Minimum	Maximum	Fair Value
	(Years)		(In thousands)
Preneed customer relationships related to insurance claims	10	20	$	28,500
Other preneed customer relationships	10	14	21,960
Selling and management agreements	20	40	5,900
Covenants-not-to-compete	5	15	5,480
Operating leases	26	34	6,144
Tradenames	5	5	9,150
Tradenames		Indefinite	77,900
Licenses and permits		Indefinite	1,500
Total intangible assets			$	156,534

The condensed statement of operations for the three months ended March 31, 2014 includes the results of operations of Stewart. For the three months ended March 31, 2013, the following unaudited pro forma information presents information as if the merger occurred on January 1, 2013:

	2013
	(In thousands)
	(unaudited)
Revenue	$	750,105
Net income	$	64,218

SCI Direct

During 2013, we acquired an additional 20% of the outstanding shares of The Neptune Society, Inc. increasing our ownership from 70% to 90%. On January 1, 2014 The Neptune Society, Inc. changed its legal name to SCI Direct, Inc. During 2014, the Company acquired the remaining 10% of the outstanding shares of SCI Direct (formerly The Neptune Society, Inc.). SCI Direct is our direct cremation business and manages operations under various brand names, including Neptune Society, National Cremation Service, Trident Society, and Cremation Society of Virginia. This activity expands our footprint into a sector of the market that will continue to grow and that we do not currently target through our traditional funeral service and cemetery network.