XML 78 R14.htm IDEA: XBRL DOCUMENT v2.4.0.8
Cemetery Perpetual Care Trusts (Notes) (Cemetery Perpetual Care)
 9 Months Ended
Sep. 30, 2014
Cemetery Perpetual Care
  
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 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
 
Nine Months Ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
 
(In thousands)
Deposits
$
9,202

 
$
6,139

 
$
29,439

 
$
19,789

Withdrawals
8,680

 
9,388

 
23,879

 
26,009

Purchases of available-for-sale securities
169,973

 
23,050

 
233,795

 
113,497

Sales of available-for-sale securities
172,646

 
25,805

 
251,719

 
82,556

Realized gains from sales of available-for-sale securities
7,034

 
4,871

 
21,903

 
13,772

Realized losses from sales of available-for-sale securities
(935
)
 
(966
)
 
(1,599
)
 
(1,728
)

The components of Cemetery perpetual care trust investments in our unaudited condensed consolidated balance sheet at September 30, 2014 and December 31, 2013 are as follows:
 
September 30, 2014
 
December 31, 2013
 
(In thousands)
Trust investments, at fair value
$
1,301,272

 
$
1,348,059

Cash and cash equivalents
102,421

 
78,509

Assets associated with businesses held for sale
(22,144
)
 
(86,726
)
Cemetery perpetual care trust investments
$
1,381,549

 
$
1,339,842


Our cemetery perpetual care trust investments are recorded at fair value. The cost and fair values at September 30, 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.
 
September 30, 2014
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
 
 
 
 
 
(In thousands)
 
 
Fixed income securities:
 
 
 
 
 
 
 
 
 
U.S. Treasury
2
 
$
806

 
$
24

 
$
(3
)
 
$
827

Canadian government
2
 
28,385

 
380

 
(275
)
 
28,490

Corporate
2
 
19,656

 
406

 
(289
)
 
19,773

Residential mortgage-backed
2
 
1,057

 
15

 
(12
)
 
1,060

Asset-backed
2
 
823

 
17

 
—

 
840

Equity securities:
 
 
 
 
 
 
 
 
 
Preferred stock
2
 
6,763

 
237

 
(1
)
 
6,999

Common stock:
 
 
 
 
 
 
 
 
 
United States
1
 
178,667

 
51,080

 
(107
)
 
229,640

Canada
1
 
7,698

 
3,203

 
(296
)
 
10,605

Other international
1
 
6,131

 
1,545

 
—

 
7,676

Mutual funds:
 
 
 
 
 
 
 
 
 
Equity
1
 
55,475

 
6,406

 
(15
)
 
61,866

Fixed income
1
 
853,113

 
41,722

 
(110
)
 
894,725

Private equity
3
 
36,778

 
433

 
(10,429
)
 
26,782

Other
3
 
12,357

 
1,444

 
(1,812
)
 
11,989

Cemetery perpetual care trust investments
 
 
$
1,207,709

 
$
106,912

 
$
(13,349
)
 
$
1,301,272


 
December 31, 2013
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair
Value
 
 
 
 
 
(In thousands)
 
 
Fixed income securities:
 
 
 
 
 
 
 
 
 
U.S. Treasury
2
 
$
1,583

 
$
9

 
$
(14
)
 
$
1,578

Canadian government
2
 
28,487

 
301

 
(459
)
 
28,329

Corporate
2
 
43,107

 
311

 
(263
)
 
43,155

Residential mortgage-backed
2
 
4,242

 
14

 
(19
)
 
4,237

Asset-backed
2
 
2,996

 
4

 
(11
)
 
2,989

Equity securities:
 
 
 
 
 
 
 
 
 
Preferred stock
2
 
25,860

 
192

 
(252
)
 
25,800

Common stock:
 
 
 
 
 
 
 
 
 
United States
1
 
230,174

 
53,782

 
(2,087
)
 
281,869

Canada
1
 
8,843

 
2,222

 
(623
)
 
10,442

Other international
1
 
20,598

 
1,320

 
(167
)
 
21,751

Mutual funds:
 
 
 
 
 
 
 
 
 
Equity
1
 
41,114

 
5,693

 
(35
)
 
46,772

Fixed income
1
 
816,405

 
35,964

 
(2,598
)
 
849,771

Private equity
3
 
28,309

 
472

 
(9,002
)
 
19,779

Other
3
 
10,518

 
1,153

 
(84
)
 
11,587

Cemetery perpetual care trust investments
 
 
$
1,262,236

 
$
101,437

 
$
(15,614
)
 
$
1,348,059


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 the investment committee of the Board of Directors 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 September 30, 2014, our unfunded commitment for our private equity and other investments was $10.1 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, due to the nature of the investments in this category, 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:
 
Three Months Ended
 
September 30, 2014
 
September 30, 2013
 
Private Equity
 
Other
 
Private Equity
 
Other
 
(In thousands)
Fair value, beginning balance
$
21,274

 
$
11,983

 
$
18,649

 
$
10,815

Net unrealized (losses) gains included in Accumulated other comprehensive income(1)
(206
)

23


1,315


492

Net realized losses included in Other (expense) income, net(2)
(13
)

(17
)

(5
)

(3
)
Contributions
9,058

 
—

 
—

 
—

Distributions and other
(3,331
)
 
—

 
(122
)
 
(139
)
Fair value, ending balance
$
26,782

 
$
11,989

 
$
19,837

 
$
11,165



 
Nine Months Ended
 
September 30, 2014
 
September 30, 2013
 
Private Equity
 
Other
 
Private Equity
 
Other
 
(In thousands)
Fair market value, beginning balance
$
19,779

 
$
11,587

 
$
11,122

 
$
7,659

Net unrealized gains included in Accumulated other comprehensive income(1)
1,091


704


7,404


3,926

Net realized losses included in Other (expense) income, net(2)
(37
)
 
(29
)
 
(100
)
 
(56
)
Sales
(17
)
 
—

 
—

 
—

Contributions
10,461

 
—

 
2,317

 
—

Distributions and other
(4,495
)
 
(273
)
 
(906
)
 
(364
)
Fair market value, ending balance
$
26,782

 
$
11,989

 
$
19,837

 
$
11,165

                                                                               
(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 gains (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 2014 to 2043. Maturities of fixed income securities at September 30, 2014 are estimated as follows:
 
Fair Value
 
(In thousands)
Due in one year or less
$
14,290

Due in one to five years
26,786

Due in five to ten years
9,086

Thereafter
828

 
$
50,990


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. Recognized trust fund income related to these trust investments was $10.9 million and $9.5 million for the three months ended September 30, 2014 and 2013, respectively. Recognized trust fund income related to these trust investments was $39.9 million and $31.2 million for the nine months ended September 30, 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 (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 three months ended September 30, 2014 and 2013, we recorded a $8.0 million and $0.0 million impairment charge, respectively, for other-than-temporary declines in fair value related to unrealized losses on certain investments. For the nine months ended September 30, 2014 and 2013, we recorded a $8.1 million and $0.2 million impairment charge, respectively, for other-than-temporary declines in fair value related to unrealized losses on certain investments. The third quarter 2014 impairment charges were recorded in anticipation of a strategic change in the management of our trust assets requiring the liquidation of a majority of our US trust assets subsequent to quarter end. This change does not impact our asset allocation, but does change the underlying legal structure housing the assets. These impairment charges reflect the unrealized loss positions on these liquidated assets as of September 30, 2014.
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.
 
September 30, 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
$
494

 
$
(3
)
 
$
—

 
$
—

 
$
494

 
$
(3
)
Canadian government
7,820

 
(137
)
 
4,145

 
(138
)
 
11,965

 
(275
)
Corporate
5,238

 
(107
)
 
4,069

 
(182
)
 
9,307

 
(289
)
Residential mortgage-backed
197

 
(3
)
 
240

 
(9
)
 
437

 
(12
)
Equity securities:
 
 
 
 
 
 
 
 
 
 
 
Preferred stock
1,861

 
(1
)
 
—

 
—

 
1,861

 
(1
)
Common stock:
 
 
 
 
 
 
 
 
 
 
 
United States
32,475

 
(107
)
 
—

 
—

 
32,475

 
(107
)
Canada
1,113

 
(83
)
 
1,237

 
(213
)
 
2,350

 
(296
)
Mutual funds:
 
 
 
 
 
 
 
 
 
 
 
Equity
32,624

 
(15
)
 
—

 
—

 
32,624

 
(15
)
Fixed income
321,197


(110
)

—


—


321,197


(110
)
Private equity
10,428

 
(462
)
 
15,886

 
(9,967
)
 
26,314

 
(10,429
)
Other
4,085

 
(191
)
 
6,183

 
(1,621
)
 
10,268

 
(1,812
)
Total temporarily impaired securities
$
417,532

 
$
(1,219
)
 
$
31,760

 
$
(12,130
)
 
$
449,292

 
$
(13,349
)

 
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
$
1,334

 
$
(14
)
 
$
—

 
$
—

 
$
1,334

 
$
(14
)
Canadian government
15,777

 
(214
)
 
5,131

 
(245
)
 
20,908

 
(459
)
Corporate
22,482

 
(129
)
 
3,298

 
(134
)
 
25,780

 
(263
)
Residential mortgage-backed
2,950

 
(18
)
 
10

 
(1
)
 
2,960

 
(19
)
Asset-backed
2,826

 
(10
)
 
15

 
(1
)
 
2,841

 
(11
)
Equity securities:
 
 
 
 
 
 
 
 
 
 
 
Preferred stock
14,602

 
(245
)
 
43

 
(7
)
 
14,645


(252
)
Common stock:
 
 
 
 
 
 
 
 
 
 
 
United States
23,747

 
(1,561
)
 
3,234

 
(526
)
 
26,981

 
(2,087
)
Canada
667

 
(129
)
 
1,794

 
(494
)
 
2,461

 
(623
)
Other international
1,535

 
(54
)
 
521

 
(113
)
 
2,056

 
(167
)
Mutual funds:
 
 
 
 
 
 
 
 
 
 
 
Equity
389

 
(14
)
 
162

 
(21
)
 
551

 
(35
)
Fixed income
181,104

 
(2,090
)
 
28,304

 
(508
)
 
209,408

 
(2,598
)
Private equity
—

 
—

 
19,242

 
(9,002
)
 
19,242

 
(9,002
)
Other
—

 
—

 
9,739

 
(84
)
 
9,739

 
(84
)
Total temporarily impaired securities
$
267,413

 
$
(4,478
)
 
$
71,493

 
$
(11,136
)
 
$
338,906

 
$
(15,614
)