Acquisition Level 1 (Notes)

12 Months Ended

Dec. 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.

We incurred acquisition costs of $39.7 million of which $28.4 million is included in General and administrative expenses and $11.3 million is included in Interest expense for the year ended December 31, 2013.

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	$	11,119
Other current assets	190,518
Cemetery property	287,449
Property and equipment, net	330,125
Preneed funeral and cemetery receivables and trust investments	645,440
Finite-lived intangible assets	75,444
Indefinite-lived intangible assets	79,400
Acquired assets held for sale	520,023
Deferred charges and other assets	278,631
Goodwill	573,808
Total assets acquired	2,991,957
Current liabilities	219,373
Long-term debt	270,668
Deferred preneed funeral and cemetery revenues and deferred receipts held in trusts	740,441
Assumed liabilities held for sale	242,835
Deferred income taxes	58,493
Other liabilities	294,674
Total liabilities assumed	1,826,484
Noncontrolling interest	118
Net assets acquired	$	1,165,355

The gross amount of accounts receivable is $14.0 million, of which $2.9 million is not expected to be collected. Included in preneed funeral and cemetery receivables and trust investments are receivables under preneed contracts with a fair value of $140.0 million. The gross amount due under the contracts is $170.3 million, of which $30.3 million is not expected to be collected.

We have completed our purchase price allocation. During the twelve months of 2014, we made the following adjustments to our estimates of the fair value of assets and liabilities and revised the consolidated balance sheet as of December 31, 2013 included in this filing to reflect these adjustments:

	(In thousands)
Decrease in the fair value of accounts receivable and other current assets	$	(10,900	)
Increase in the fair value of cemetery property	2,674
Decrease in property and equipment, net	(10,331		)
Decrease in the fair value of preneed funeral and cemetery receivables and trust investments	(9,570		)
Decrease in the fair value of finite-lived intangible assets	(30,834		)
Increase in the fair value of acquired assets held for sale	85,775
Increase in the fair value of deferred charges and other assets	311
Decrease in the fair value of deferred preneed funeral and cemetery revenues and deferred receipts held in trust	42,417
Change in the fair value of acquired assets and liabilities held for sale	(89,198		)
Decrease in the fair value of deferred income taxes	41,676
Other	(17,250		)
Total adjustment to goodwill	$	4,770

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. Of the $573.8 million in goodwill recognized, $258.2 million was allocated to our cemetery segment and $315.6 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	20,502
Selling and management agreements	10	40	5,900
Covenants-not-to-compete	5	15	5,480
Operating leases	26	34	5,912
Tradenames	5	5	9,150
Tradenames		Indefinite	77,900
Licenses and permits		Indefinite	1,500
Total intangible assets			$	154,844

Included in our results of operations for the twelve months ended December 31, 2013 is revenue of $11.4 million and net income of $0.8 million for the period from the acquisition date (December 23, 2013) through December 31, 2013. The following unaudited pro forma summary presents financial information as if the acquisition had occurred on January 1, 2012:

	2013		2012
	(In thousands)
	(unaudited)
Revenue	$	2,919,278	$	2,848,451
Net income	$	203,916	$	135,010

SCI Direct

During 2013, we acquired an additional 20% of the outstanding shares of The Neptune Society Inc (Neptune) increasing our ownership from 70% to 90%. During 2014 we acquired the remaining 10% of the outstanding shares. Neptune is the nation's largest direct cremation organization with a network of 30 locations in nine states at the time of our original acquisition. Neptune operates under the brand names Neptune Society, National Cremation Service, and Trident Society. With this acquisition we expanded our footprint into a sector of the market that will continue to grow and that was not targeted through our traditional funeral service and cemetery network. We have completed our evaluation of purchase price allocation. As a result of this acquisition, we recognized $37.6 million of intangible assets and $37.3 million of goodwill.