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Cemetery Perpetual Care Trusts Level 1 (Notes) | 12 Months Ended
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Dec. 31, 2016
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. 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. We consolidate our cemetery perpetual care trust investments with a corresponding amount recorded as Care trusts’ corpus. Cash flows from cemetery perpetual care contracts are presented as operating cash flows in our Consolidated Statement of Cash Flows. The table below sets forth certain investment-related activities associated with our cemetery perpetual care trusts for the years ended December 31:
| 2016 |  | 2015 |  | 2014
| (In thousands)
Deposits | $ | 41,450 |  |  | $ | 38,883 |  |  | $ | 42,220 |
Withdrawals | $ | 48,522 |  |  | $ | 40,447 |  |  | $ | 46,981 |
Purchases of available-for-sale securities(1) | $ | 428,635 |  |  | $ | 247,658 |  |  | $ | 1,306,314 |
Sales of available-for-sale securities(1) | $ | 374,329 |  |  | $ | 175,057 |  |  | $ | 1,396,669 |
(1) | The higher level of activity in 2014 was the result of changing the legal structure of the trust investments.
The components of Cemetery perpetual care trust investments in our Consolidated Balance Sheet at December 31 were as follows:
| 2016 |  | 2015
| (In thousands)
Trust investments, at market | $ | 1,349,073 |  |  | $ | 1,232,592 |
Cash and cash equivalents | 58,392 |  |  | 86,835 |
Cemetery perpetual care trust investments | $ | 1,407,465 |  |  | $ | 1,319,427 |
The cost and market values associated with our cemetery perpetual care trust investments recorded at fair value at December 31, 2016 and 2015 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 or cash held by the trusts.
|  | December 31, 2016
| Fair Value Hierarchy Level | Cost |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value
|  |  |  | (In thousands) |  |
Fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |
Canadian government | 2 | $ | 14,280 |  |  | $ | 88 |  |  | $ | (114 | ) |  | $ | 14,254 |
Corporate | 2 | 4,636 |  |  | 100 |  |  | (101 | ) |  | 4,635 |
Residential mortgage-backed | 2 | 304 |  |  | — |  |  | (1 | ) |  | 303 |
Asset-backed | 2 | 220 |  |  | 3 |  |  | (28 | ) |  | 195 |
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |
Preferred stock | 2 | 1,479 |  |  | 2 |  |  | (117 | ) |  | 1,364 |
Common stock: |  |  |  |  |  |  |  |  |  |  |  |
United States | 1 | 233,643 |  |  | 28,679 |  |  | (2,337 | ) |  | 259,985 |
Canada | 1 | 4,828 |  |  | 2,631 |  |  | (108 | ) |  | 7,351 |
Other international | 1 | 14,607 |  |  | 148 |  |  | (2,236 | ) |  | 12,519 |
Mutual funds: |  |  |  |  |  |  |  |  |  |  |  |
Equity | 1 | 18,909 |  |  | 4,370 |  |  | (412 | ) |  | 22,867 |
Fixed income | 1 | 688,472 |  |  | 3,324 |  |  | (28,997 | ) |  | 662,799 |
Other | 3 | 633 |  |  | 1,254 |  |  | — |  |  | 1,887 |
Trust investments, at fair value |  | 982,011 |  |  | 40,599 |  |  | (34,451 | ) |  | 988,159 |
Fixed income commingled funds |  | 277,662 |  |  | — |  |  | (9,386 | ) |  | 268,276 |
Private equity |  | 97,108 |  |  | 2,240 |  |  | (6,710 | ) |  | 92,638 |
Trust investments, at net asset value |  | 374,770 |  |  | 2,240 |  |  | (16,096 | ) |  | 360,914 |
Trust investments, at market |  | $ | 1,356,781 |  |  | $ | 42,839 |  |  | $ | (50,547 | ) |  | $ | 1,349,073 |
|  | December 31, 2015
| Fair Value Hierarchy Level | Cost |  | Unrealized Gains |  | Unrealized Losses |  | Fair Value
|  |  |  | (In thousands) |  |
Fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury | 2 | $ | 650 |  |  | $ | 20 |  |  | $ | (7 | ) |  | $ | 663 |
Canadian government | 2 | 15,412 |  |  | 321 |  |  | (162 | ) |  | 15,571 |
Corporate | 2 | 12,490 |  |  | 149 |  |  | (284 | ) |  | 12,355 |
Residential mortgage-backed | 2 | 934 |  |  | 13 |  |  | (9 | ) |  | 938 |
Asset-backed | 2 | 660 |  |  | 5 |  |  | (31 | ) |  | 634 |
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |
Preferred stock | 2 | 5,850 |  |  | 55 |  |  | (159 | ) |  | 5,746 |
Common stock: |  |  |  |  |  |  |  |  |  |  |  |
United States | 1 | 230,854 |  |  | 15,224 |  |  | (10,898 | ) |  | 235,180 |
Canada | 1 | 5,460 |  |  | 2,112 |  |  | (606 | ) |  | 6,966 |
Other international | 1 | 14,793 |  |  | 160 |  |  | (2,390 | ) |  | 12,563 |
Mutual funds: |  |  |  |  |  |  |  |  |  |  |  |
Equity | 1 | 21,783 |  |  | 3,138 |  |  | (1,850 | ) |  | 23,071 |
Fixed income | 1 | 890,025 |  |  | 530 |  |  | (63,913 | ) |  | 826,642 |
Other | 3 | 645 |  |  | 1,257 |  |  | — |  |  | 1,902 |
Trust investments, at fair value |  | 1,199,556 |  |  | 22,984 |  |  | (80,309 | ) |  | 1,142,231 |
Fixed income commingled funds |  | 20,616 |  |  | — |  |  | (178 | ) |  | 20,438 |
Private equity |  | 75,613 |  |  | 2,406 |  |  | (8,096 | ) |  | 69,923 |
Trust investments, at net asset value |  | 96,229 |  |  | 2,406 |  |  | (8,274 | ) |  | 90,361 |
Trust investments, at market |  | $ | 1,295,785 |  |  | $ | 25,390 |  |  | $ | (88,583 | ) |  | $ | 1,232,592 |
Valuation policies and procedures are determined by our Trust Services department, which reports to our Chief Financial Officer. Additionally, valuations are reviewed quarterly by the Investment Committee of the Board of Directors. Where quoted prices are available in an active market, securities held by the trusts 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, ratings, and tax-exempt status. These securities are classified as Level 2 investments pursuant to the fair value measurements hierarchy. The valuation of other investments requires management judgment due to the absence of quoted market prices, inherent lack of liquidity, and the long-term nature of such assets. These securities are classified as Level 3 investments pursuant to the fair value measurements hierarchy. Fixed income commingled funds and private equity investments are measured at net asset value. Fixed income commingled funds are redeemable for net asset value with two weeks' notice. Our private equity 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. As of December 31, 2016, our unfunded commitment for our private equity and other investments was $31.0 million which, if called, would be funded by the assets of the trusts. The change in our market-based cemetery perpetual care trust investments with significant unobservable inputs (Level 3) is as follows for the years ended December 31 :
|  | 2016 |  | 2015 |  | 2014
|  | (In thousands)
Fair value, beginning balance at January 1 |  | $ | 1,902 |  |  | $ | 1,556 |  |  | $ | 1,599 |
Net unrealized (losses) gains included in Accumulated other comprehensive income(1) |  | (15 | ) |  | 346 |  |  | (26 | )
Sales |  | — |  |  | — |  |  | (17 | )
Fair value, ending balance at December 31 |  | $ | 1,887 |  |  | $ | 1,902 |  |  | $ | 1,556 |
(1) | All unrealized (losses) 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 6 for further information related to our Care trusts’ corpus.
Maturity dates of our fixed income securities range from 2017 to 2040. Maturities of fixed income securities at December 31, 2016 are estimated as follows:
| Fair Value
| (In thousands)
Due in one year or less | $ | 1,834 |
Due in one to five years | 17,283 |
Due in five to ten years | 69 |
Thereafter | 201 |
| $ | 19,387 |
Distributable earnings from these cemetery perpetual care trust investments are recognized in current cemetery revenue to the extent we incur qualifying cemetery maintenance costs. Fees charged by our wholly-owned registered investment advisor are also included in current revenue in the period in which they are earned. Recognized earnings related to these cemetery perpetual care trust investments were $67.6 million, $59.6 million, and $72.4 million for the years ended December 31, 2016, 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 6 for further information related to our Care trusts’ corpus. 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 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 for the years ended December 31, 2016 and 2015, are shown in the following table:
| December 31, 2016
| In Loss Position Less Than 12 Months |  | In Loss Position Greater Than 12 Months |  | Total
| Fair Market Value |  | Unrealized Losses |  | Fair Market Value |  | Unrealized Losses |  | Fair Market Value |  | Unrealized Losses
|  |  |  |  | (In thousands) |  |  |  |
Fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Canadian government | $ | 66 |  |  | $ | (1 | ) |  | $ | 1,961 |  |  | $ | (113 | ) |  | $ | 2,027 |  |  | $ | (114 | )
Corporate | 397 |  |  | (7 | ) |  | 1,866 |  |  | (94 | ) |  | 2,263 |  |  | (101 | )
Residential mortgage-backed | 303 |  |  | (1 | ) |  | — |  |  | — |  |  | 303 |  |  | (1 | )
Asset-backed | 28 |  |  | (22 | ) |  | 101 |  |  | (6 | ) |  | 129 |  |  | (28 | )
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Preferred stock | 846 |  |  | (36 | ) |  | 417 |  |  | (81 | ) |  | 1,263 |  |  | (117 | )
Common stock: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
United States | 34,844 |  |  | (1,339 | ) |  | 12,974 |  |  | (998 | ) |  | 47,818 |  |  | (2,337 | )
Canada | 78 |  |  | (47 | ) |  | 558 |  |  | (61 | ) |  | 636 |  |  | (108 | )
Other international | 4,177 |  |  | (508 | ) |  | 5,715 |  |  | (1,728 | ) |  | 9,892 |  |  | (2,236 | )
Mutual funds: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity | 877 |  |  | (17 | ) |  | 2,899 |  |  | (395 | ) |  | 3,776 |  |  | (412 | )
Fixed income | 263,231 |  |  | (4,678 | ) |  | 348,623 |  |  | (24,319 | ) |  | 611,854 |  |  | (28,997 | )
Trust investments, at fair value | 304,847 |  |  | (6,656 | ) |  | 375,114 |  |  | (27,795 | ) |  | 679,961 |  |  | (34,451 | )
Fixed income commingled funds | 265,345 |  |  | (9,346 | ) |  | 2,931 |  |  | (40 | ) |  | 268,276 |  |  | (9,386 | )
Private equity | 21,426 |  |  | (268 | ) |  | 33,519 |  |  | (6,442 | ) |  | 54,945 |  |  | (6,710 | )
Trust investments, at net asset value | 286,771 |  |  | (9,614 | ) |  | 36,450 |  |  | (6,482 | ) |  | 323,221 |  |  | (16,096 | )
Total temporarily impaired securities | $ | 591,618 |  |  | $ | (16,270 | ) |  | $ | 411,564 |  |  | $ | (34,277 | ) |  | $ | 1,003,182 |  |  | $ | (50,547 | )
| December 31, 2015
| In Loss Position Less Than 12 Months |  | In Loss Position Greater Than 12 Months |  | Total
| Fair Market Value |  | Unrealized Losses |  | Fair Market Value |  | Unrealized Losses |  | Fair Market Value |  | Unrealized Losses
|  |  |  |  | (In thousands) |  |  |  |
Fixed income securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
U.S. Treasury | $ | 364 |  |  | $ | (6 | ) |  | $ | 35 |  |  | $ | (1 | ) |  | $ | 399 |  |  | $ | (7 | )
Canadian government | 1,569 |  |  | (60 | ) |  | 1,371 |  |  | (102 | ) |  | 2,940 |  |  | (162 | )
Corporate | 4,693 |  |  | (134 | ) |  | 4,147 |  |  | (150 | ) |  | 8,840 |  |  | (284 | )
Residential mortgage-backed | 303 |  |  | (3 | ) |  | 117 |  |  | (6 | ) |  | 420 |  |  | (9 | )
Asset-backed | 146 |  |  | (12 | ) |  | 360 |  |  | (19 | ) |  | 506 |  |  | (31 | )
Equity securities: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Preferred stock | 4,029 |  |  | (159 | ) |  | — |  |  | — |  |  | 4,029 |  |  | (159 | )
Common stock: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
United States | 81,564 |  |  | (7,793 | ) |  | 14,900 |  |  | (3,105 | ) |  | 96,464 |  |  | (10,898 | )
Canada | 622 |  |  | (31 | ) |  | 1,026 |  |  | (575 | ) |  | 1,648 |  |  | (606 | )
Other international | 8,735 |  |  | (941 | ) |  | 2,347 |  |  | (1,449 | ) |  | 11,082 |  |  | (2,390 | )
Mutual funds: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Equity | 4,580 |  |  | (606 | ) |  | 1,258 |  |  | (1,244 | ) |  | 5,838 |  |  | (1,850 | )
Fixed income | 519,993 |  |  | (18,205 | ) |  | 294,309 |  |  | (45,708 | ) |  | 814,302 |  |  | (63,913 | )
Trust investments, at fair value | 626,598 |  |  | (27,950 | ) |  | 319,870 |  |  | (52,359 | ) |  | 946,468 |  |  | (80,309 | )
Fixed income commingled funds | 20,438 |  |  | (178 | ) |  | — |  |  | — |  |  | 20,438 |  |  | (178 | )
Private equity | 13,139 |  |  | (75 | ) |  | 30,438 |  |  | (8,021 | ) |  | 43,577 |  |  | (8,096 | )
Trust investments, at net asset value | 33,577 |  |  | (253 | ) |  | 30,438 |  |  | (8,021 | ) |  | 64,015 |  |  | (8,274 | )
Total temporarily impaired securities | $ | 660,175 |  |  | $ | (28,203 | ) |  | $ | 350,308 |  |  | $ | (60,380 | ) |  | $ | 1,010,483 |  |  | $ | (88,583 | )

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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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