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Cemetery Perpetual Care Trusts (Notes) (Cemetery Perpetual Care) | 3 Months Ended
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Mar. 31, 2015
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" accounting standard. In accordance with this standard, 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
| March 31,
| 2015 | 2014
| (In thousands)
Deposits | $ | 9,253 |  | $ | 11,837 |
Withdrawals | $ | 13,158 |  | $ | 5,885 |
Purchases of available-for-sale securities | $ | 101,660 |  | $ | 38,895 |
Sales of available-for-sale securities | $ | 53,765 |  | $ | 30,072 |
Realized gains from sales of available-for-sale securities | $ | 398 |  | $ | 5,045 |
Realized losses from sales of available-for-sale securities | $ | (129 | ) | $ | (337 | )
The components of Cemetery perpetual care trust investments in our unaudited condensed consolidated balance sheet at March 31, 2015 and December 31, 2014 are as follows:
| March 31, 2015 |  | December 31, 2014
| (In thousands)
Trust investments, at fair value | $ | 1,253,601 |  |  | $ | 1,192,966 |
Cash and cash equivalents | 103,800 |  |  | 148,410 |
Cemetery perpetual care trust investments | $ | 1,357,401 |  |  | $ | 1,341,376 |
The cost and market values associated with our cemetery perpetual care trust investments recorded at fair value at March 31, 2015 and December 31, 2014 are detailed below. Cost reflects the investment (net of redemptions) of control holders in the trusts. Fair value represents the value of the underlying securities held by the trusts.
| March 31, 2015
| Fair Value Hierarchy Level |  | Cost |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value
|  |  |  |  | (In thousands) |  |
Fixed income securities: |  |  |  |  |  |  |  |  |
U.S. Treasury | 2 |  | $ | 788 |  |  | $ | 38 |  |  | $ | (4 | ) |  | $ | 822 |
Canadian government | 2 |  | 28,631 |  |  | 965 |  |  | (199 | ) |  | 29,397 |
Corporate | 2 |  | 14,003 |  |  | 372 |  |  | (139 | ) |  | 14,236 |
Residential mortgage-backed | 2 |  | 970 |  |  | 18 |  |  | (6 | ) |  | 982 |
Asset-backed | 2 |  | 666 |  |  | 10 |  |  | (8 | ) |  | 668 |
Equity securities: |  |  |  |  |  |  |  |  |
Preferred stock | 2 |  | 5,329 |  |  | 65 |  |  | (164 | ) |  | 5,230 |
Common stock: |  |  |  |  |  |  |  |  |
United States | 1 |  | 233,757 |  |  | 12,144 |  |  | (8,864 | ) |  | 237,037 |
Canada | 1 |  | 7,148 |  |  | 2,773 |  |  | (457 | ) |  | 9,464 |
Other international | 1 |  | 12,581 |  |  | 219 |  |  | (1,063 | ) |  | 11,737 |
Mutual funds: |  |  |  |  |  |  |  |  |
Equity | 1 |  | 17,658 |  |  | 3,211 |  |  | (267 | ) |  | 20,602 |
Fixed income | 1 |  | 884,376 |  |  | 7,121 |  |  | (10,102 | ) |  | 881,395 |
Private equity | 3 |  | 34,024 |  |  | 1,439 |  |  | (7,240 | ) |  | 28,223 |
Other | 3 |  | 13,188 |  |  | 1,539 |  |  | (919 | ) |  | 13,808 |
Cemetery perpetual care trust investments |  |  | $ | 1,253,119 |  |  | $ | 29,914 |  |  | $ | (29,432 | ) |  | $ | 1,253,601 |
| December 31, 2014
| Fair Value Hierarchy Level |  | Cost |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value
|  |  |  |  | (In thousands) |  |
Fixed income securities: |  |  |  |  |  |  |  |  |
U.S. Treasury | 2 |  | $ | 794 |  |  | $ | 40 |  |  | $ | (4 | ) |  | $ | 830 |
Canadian government | 2 |  | 31,993 |  |  | 442 |  |  | (233 | ) |  | 32,202 |
Corporate | 2 |  | 16,762 |  |  | 344 |  |  | (210 | ) |  | 16,896 |
Residential mortgage-backed | 2 |  | 910 |  |  | 15 |  |  | (6 | ) |  | 919 |
Asset-backed | 2 |  | 661 |  |  | 10 |  |  | (4 | ) |  | 667 |
Equity securities: |  |  |  |  |  |  |  |  |
Preferred stock | 2 |  | 4,439 |  |  | 60 |  |  | (12 | ) |  | 4,487 |
Common stock: |  |  |  |  |  |  |  |  |
United States | 1 |  | 225,129 |  |  | 9,340 |  |  | (4,881 | ) |  | 229,588 |
Canada | 1 |  | 7,419 |  |  | 2,737 |  |  | (596 | ) |  | 9,560 |
Other international | 1 |  | 8,102 |  |  | 90 |  |  | (399 | ) |  | 7,793 |
Mutual funds: |  |  |  |  |  |  |  |  |
Equity | 1 |  | 17,310 |  |  | 3,264 |  |  | (93 | ) |  | 20,481 |
Fixed income | 1 |  | 846,230 |  |  | 1,580 |  |  | (14,263 | ) |  | 833,547 |
Private equity | 3 |  | 34,288 |  |  | 408 |  |  | (10,788 | ) |  | 23,908 |
Other | 3 |  | 13,526 |  |  | 1,094 |  |  | (2,532 | ) |  | 12,088 |
Cemetery perpetual care trust investments |  |  | $ | 1,207,563 |  |  | $ | 19,424 |  |  | $ | (34,021 | ) |  | $ | 1,192,966 |
Where quoted prices are available in an active market, securities are classified as Level 1 investments pursuant to the fair value measurements hierarchy. 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 fair value measurements hierarchy. 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. 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 fair value measurements hierarchy. As of March 31, 2015, the cemetery perpetual care trusts' unfunded commitment for private equity and other investments was $8.9 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
| March 31, 2015 |  | March 31, 2014
| Private Equity |  | Other |  | Private Equity |  | Other
| (In thousands)
Fair value, beginning balance | $ | 23,908 |  |  | $ | 12,088 |  |  | $ | 19,779 |  |  | $ | 11,590 |
Net unrealized gains included in Accumulated other comprehensive income(1) | 3,917 |  |  | 1,195 |  |  | 727 |  |  | 128 |
Net realized losses included in Other (expense) income, net(2) | (12 | ) |  | (15 | ) |  | (12 | ) |  | (6 | )
Sales | — |  |  | — |  |  | (17 | ) |  | — |
Contributions | 495 |  |  | 648 |  |  | 694 |  |  | — |
Distributions | (85 | ) |  | (108 | ) |  | (365 | ) |  | — |
Fair value, ending balance | $ | 28,223 |  |  | $ | 13,808 |  |  | $ | 20,806 |  |  | $ | 11,712 |
__________________________________________
(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 (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 2015 to 2045. Maturities of fixed income securities, excluding mutual funds, at March 31, 2015 are estimated as follows:
| Fair Value
| (In thousands)
Due in one year or less | $ | 18,620 |
Due in one to five years | 19,101 |
Due in five to ten years | 7,488 |
Thereafter | 896 |
| $ | 46,105 |
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 $13.4 million and $13.3 million for the three months ended March 31, 2015 and 2014, 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 March 31, 2015, we recorded a $0.5 million impairment charge for other-than-temporary declines in fair value related to unrealized losses on certain investments. For the three months ended March 31, 2014 was no 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, 2015
| 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 | $ | 436 |  |  | $ | (3 | ) |  | $ | 68 |  |  | $ | (1 | ) |  | $ | 504 |  |  | $ | (4 | )
Canadian government | 2,103 |  |  | (6 | ) |  | 4,952 |  |  | (193 | ) |  | 7,055 |  |  | (199 | )
Corporate | 1,013 |  |  | (22 | ) |  | 5,360 |  |  | (117 | ) |  | 6,373 |  |  | (139 | )
Residential mortgage-backed | 160 |  |  | (1 | ) |  | 213 |  |  | (5 | ) |  | 373 |  |  | (6 | )
Asset-backed | 371 |  |  | (8 | ) |  | — |  |  | — |  |  | 371 |  |  | (8 | )
Equity securities: |  |  |  |  |  |  |  |  |  |  |
Preferred stock | 3,234 |  |  | (164 | ) |  | 54 |  |  | — |  |  | 3,288 |  |  | (164 | )
Common stock: |  |  |  |  |  |  |  |  |  |  |
United States | 134,139 |  |  | (8,864 | ) |  | 152 |  |  | — |  |  | 134,291 |  |  | (8,864 | )
Canada | 1,175 |  |  | (160 | ) |  | 701 |  |  | (297 | ) |  | 1,876 |  |  | (457 | )
Other international | 8,550 |  |  | (1,063 | ) |  | — |  |  | — |  |  | 8,550 |  |  | (1,063 | )
Mutual funds: |  |  |  |  |  |  |  |  |  |  |
Equity | 2,649 |  |  | (253 | ) |  | 185 |  |  | (14 | ) |  | 2,834 |  |  | (267 | )
Fixed income | 345,809 |  |  | (10,054 | ) |  | 2,045 |  |  | (48 | ) |  | 347,854 |  |  | (10,102 | )
Private equity | — |  |  | — |  |  | 10,092 |  |  | (7,240 | ) |  | 10,092 |  |  | (7,240 | )
Other | — |  |  | — |  |  | 4,380 |  |  | (919 | ) |  | 4,380 |  |  | (919 | )
Total temporarily impaired securities | $ | 499,639 |  |  | $ | (20,598 | ) |  | $ | 28,202 |  |  | $ | (8,834 | ) |  | $ | 527,841 |  |  | $ | (29,432 | )
| December 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 | $ | 497 |  |  | $ | (4 | ) |  | $ | — |  |  | $ | — |  |  | $ | 497 |  |  | $ | (4 | )
Canadian government | — |  |  | — |  |  | 7,825 |  |  | (233 | ) |  | 7,825 |  |  | (233 | )
Corporate | 4,656 |  |  | (108 | ) |  | 3,198 |  |  | (102 | ) |  | 7,854 |  |  | (210 | )
Residential mortgage-backed | 256 |  |  | (5 | ) |  | 69 |  |  | (1 | ) |  | 325 |  |  | (6 | )
Asset-backed | 373 |  |  | (4 | ) |  | — |  |  | — |  |  | 373 |  |  | (4 | )
Equity securities: |  |  |  |  |  |  |  |  |  |  |
Preferred stock | 2,224 |  |  | (11 | ) |  | 49 |  |  | (1 | ) |  | 2,273 |  |  | (12 | )
Common stock: |  |  |  |  |  |  |  |  |  |  |
United States | 100,370 |  |  | (4,803 | ) |  | 419 |  |  | (78 | ) |  | 100,789 |  |  | (4,881 | )
Canada | 2,418 |  |  | (244 | ) |  | 757 |  |  | (352 | ) |  | 3,175 |  |  | (596 | )
Other international | 4,444 |  |  | (399 | ) |  | — |  |  | — |  |  | 4,444 |  |  | (399 | )
Mutual funds: |  |  |  |  |  |  |  |  |  |  |
Equity | 2,601 |  |  | (85 | ) |  | 153 |  |  | (8 | ) |  | 2,754 |  |  | (93 | )
Fixed income | 576,890 |  |  | (14,177 | ) |  | 2,581 |  |  | (86 | ) |  | 579,471 |  |  | (14,263 | )
Private equity | 9,213 |  |  | (798 | ) |  | 14,254 |  |  | (9,990 | ) |  | 23,467 |  |  | (10,788 | )
Other | 4,069 |  |  | (352 | ) |  | 6,276 |  |  | (2,180 | ) |  | 10,345 |  |  | (2,532 | )
Total temporarily impaired securities | $ | 708,011 |  |  | $ | (20,990 | ) |  | $ | 35,581 |  |  | $ | (13,031 | ) |  | $ | 743,592 |  |  | $ | (34,021 | )

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- Definition This note represents disclosures relating to cemetery perpetual care activity and major accounts which also include: (1) fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments; (2) variable interest entities; and (3)all other required (as defined) and desired information. + References No definition available. + Details
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