XNYS:STON Stonemor Partners LP Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2012

or

 

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             .

Commission File Number: 001-32270

 

 

STONEMOR PARTNERS L.P.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   80-0103159

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

311 Veterans Highway, Suite B

Levittown, Pennsylvania

  19056
(Address of principal executive offices)   (Zip Code)

(215) 826-2800

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   ¨    Accelerated filer   x
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of the registrant’s outstanding common units at August 1, 2012 was 19,538,051.

 

 

 


Table of Contents

Index – Form 10-Q

 

         Page  

Part I

 

Financial Information

  

Item 1.

 

Financial Statements (unaudited)

     1   

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

     27   

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

     48   

Item 4.

 

Controls and Procedures

     50   

Part II

 

Other Information

  

Item 1.

 

Legal Proceedings

     50   

Item 1A.

 

Risk Factors

     50   

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

     51   

Item 3.

 

Defaults Upon Senior Securities

     51   

Item 4.

 

Mine Safety Disclosures

     51   

Item 5.

 

Other Information

     51   

Item 6.

 

Exhibits

     52   
 

Signatures

     53   


Table of Contents

Part I – Financial Information

 

Item 1. Financial Statements

StoneMor Partners L.P.

Condensed Consolidated Balance Sheet

(in thousands)

(unaudited)

 

     June 30,
2012
     December 31,
2011
 

Assets

     

Current assets:

     

Cash and cash equivalents

   $ 7,787       $ 12,058   

Accounts receivable, net of allowance

     51,908         48,837   

Prepaid expenses

     5,899         4,266   

Other current assets

     15,990         16,670   
  

 

 

    

 

 

 

Total current assets

     81,584         81,831   

Long-term accounts receivable, net of allowance

     71,098         68,394   

Cemetery property

     302,986         298,938   

Property and equipment, net of accumulated depreciation

     72,948         73,777   

Merchandise trusts, restricted, at fair value

     345,884         344,515   

Perpetual care trusts, restricted, at fair value

     269,223         254,679   

Deferred financing costs, net of accumulated amortization

     9,667         8,817   

Deferred selling and obtaining costs

     71,921         68,542   

Deferred tax assets

     420         415   

Goodwill

     34,091         32,299   

Other assets

     13,608         16,918   
  

 

 

    

 

 

 

Total assets

   $ 1,273,430       $ 1,249,125   
  

 

 

    

 

 

 

Liabilities and partners’ capital

     

Current liabilities:

     

Accounts payable and accrued liabilities

   $ 25,663       $ 26,428   

Accrued interest

     1,654         1,632   

Current portion, long-term debt

     2,035         1,487   
  

 

 

    

 

 

 

Total current liabilities

     29,352         29,547   

Other long-term liabilities

     1,977         2,830   

Long-term debt

     211,991         193,835   

Deferred cemetery revenues, net

     462,088         441,878   

Deferred tax liabilities

     16,347         16,968   

Merchandise liability

     125,024         129,109   

Perpetual care trust corpus

     269,223         254,679   
  

 

 

    

 

 

 

Total liabilities

     1,116,002         1,068,846   
  

 

 

    

 

 

 

Commitments and contingencies

     

Partners’ capital

     

General partner

     1,288         2,192   

Common partners

     156,140         178,087   
  

 

 

    

 

 

 

Total partners’ capital

     157,428         180,279   
  

 

 

    

 

 

 

Total liabilities and partners’ capital

   $ 1,273,430       $ 1,249,125   
  

 

 

    

 

 

 

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

 

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Table of Contents

StoneMor Partners L.P.

Condensed Consolidated Statement of Operations

(in thousands, except unit data)

(unaudited)

 

     Three months ended
June 30,
    Six months ended
June 30,
 
     2012     2011     2012     2011  

Revenues:

        

Cemetery

        

Merchandise

   $ 30,337      $ 31,104      $ 57,481      $ 52,539   

Services

     11,265        11,604        23,347        22,402   

Investment and other

     12,051        10,036        23,475        19,702   

Funeral home

        

Merchandise

     3,569        2,957        7,587        6,096   

Services

     4,286        4,406        9,205        8,599   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     61,508        60,107        121,095        109,338   
  

 

 

   

 

 

   

 

 

   

 

 

 

Costs and Expenses:

        

Cost of goods sold (exclusive of depreciation shown separately below):

        

Perpetual care

     1,415        1,399        2,782        2,724   

Merchandise

     5,821        5,817        10,874        9,485   

Cemetery expense

     14,775        15,462        27,567        27,548   

Selling expense

     13,123        12,187        24,910        21,731   

General and administrative expense

     7,195        7,031        14,388        13,458   

Corporate overhead (including $210 and $191 in unit-based compensation for the three months ended June 30, 2012 and 2011, and $409 and $381 for the six months ended June 30, 2012 and 2011, respectively)

     7,756        5,986        14,359        11,944   

Depreciation and amortization

     2,230        2,042        4,560        4,488   

Funeral home expense

        

Merchandise

     1,107        1,009        2,530        2,215   

Services

     3,302        2,803        6,707        5,349   

Other

     2,206        1,886        4,134        3,443   

Acquisition related costs

     782        1,025        1,113        1,958   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost and expenses

     59,712        56,647        113,924        104,343   
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating profit

     1,796        3,460        7,171        4,995   

Expenses related to refinancing

     —          —          —          453   

Gain (loss) on termination of operating agreement

     (83     —          1,737        —     

Gain on acquisition

     122        —          122        —     

Early extinguishment of debt

     —          —          —          4,010   

Interest expense

     4,870        4,352        9,836        9,442   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net loss before income taxes

     (3,035     (892     (806     (8,910

Income tax expense (benefit)

        

State

     97        (902     242        (898

Federal

     (963     (805     (909     (1,613
  

 

 

   

 

 

   

 

 

   

 

 

 

Total income tax expense (benefit)

     (866     (1,707     (667     (2,511
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

   $ (2,169   $ 815      $ (139   $ (6,399
  

 

 

   

 

 

   

 

 

   

 

 

 

General partner’s interest in net income (loss) for the period

   $ (43   $ 16      $ (3   $ (128

Limited partners’ interest in net income (loss) for the period

   $ (2,126   $ 799      $ (136   $ (6,271

Net income (loss) per limited partner unit (basic and diluted)

   $ (.11   $ .04      $ (.01   $ (.34

Weighted average number of limited partners’ units outstanding (basic and diluted)

     19,375        19,341        19,372        18,529   

Distributions declared per unit

   $ .585      $ .585      $ 1.170      $ 1.170   

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

 

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Table of Contents

StoneMor Partners L.P.

Condensed Consolidated Statement of

Partners’ Capital

(in thousands)

(unaudited)

 

     Partners’ Capital  
     Common
Unit Holders
    General
Partner
    Total  

Balance, December 31, 2011

   $ 178,087      $ 2,192      $ 180,279   

Issuance of common units

     603        —          603   

Compensation related to UARs

     248        —          248   

Net loss

     (136     (3     (139

Cash distribution

     (22,662     (901     (23,563
  

 

 

   

 

 

   

 

 

 

Balance, June 30, 2012

   $ 156,140      $ 1,288      $ 157,428   
  

 

 

   

 

 

   

 

 

 

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

 

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Table of Contents

StoneMor Partners L.P.

Condensed Consolidated Statement of Cash Flows

(in thousands)

(unaudited)

 

     For the six months ended June 30,  
     2012     2011  

Operating activities:

    

Net income (loss)

   $ (139   $ (6,399

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

    

Cost of lots sold

     3,979        3,281   

Depreciation and amortization

     4,560        4,488   

Unit-based compensation

     409        381   

Accretion of debt discounts

     723        625   

Gain on acquisition

     (122     —     

Gain on termination of operating agreement

     (1,737     —     

Write-off of deferred financing fees

     —          453   

Fees paid related to early extinguishment of debt

     —          4,010   

Changes in assets and liabilities that provided (used) cash:

    

Accounts receivable

     (8,180     (9,430

Allowance for doubtful accounts

     3,293        2,473   

Merchandise trust fund

     (1,917     (11,217

Prepaid expenses

     (1,169     (331

Other current assets

     (860     (1,505

Other assets

     139        198   

Accounts payable and accrued and other liabilities

     348        (7,549

Deferred selling and obtaining costs

     (3,380     (5,263

Deferred cemetery revenue

     23,699        25,358   

Deferred taxes (net)

     (1,000     (1,745

Merchandise liability

     (4,451     (954
  

 

 

   

 

 

 

Net cash provided by (used in) operating activities

     14,195        (3,126
  

 

 

   

 

 

 

Investing activities:

    

Cash paid for cemetery property

     (3,600     (2,270

Purchase of subsidiaries

     (3,426     (3,850

Cash paid for property and equipment

     (1,835     (3,204
  

 

 

   

 

 

 

Net cash used in investing activities

     (8,861     (9,324
  

 

 

   

 

 

 

Financing activities:

    

Cash distribution

     (23,563     (21,056

Additional borrowings on long-term debt

     29,200        12,300   

Repayments of long-term debt

     (13,422     (73,924

Proceeds from public offering

     —          103,207   

Proceeds from general partner contribution

     —          2,246   

Fees paid related to early extinguishment of debt

     —          (4,010

Cost of financing activities

     (1,820     (1,114
  

 

 

   

 

 

 

Net cash provided by (used in) financing activities

     (9,605     17,649   
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     (4,271     5,199   

Cash and cash equivalents - Beginning of period

     12,058        7,535   
  

 

 

   

 

 

 

Cash and cash equivalents - End of period

   $ 7,787      $ 12,734   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information

    

Cash paid during the period for interest

   $ 9,048      $ 9,552   

Cash paid during the period for income taxes

   $ 3,655      $ 1,710   

Non-cash investing and financing activities

    

Acquisition of assets by financing

   $ 53      $ 143   

Issuance of limited partner units for cemetery acquisition

   $ 603      $ 264   

Acquisition of asset by assumption of directly related liability

   $ 544      $ —     

See Accompanying Notes to the Unaudited Condensed Consolidated Financial Statements.

 

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Table of Contents
1. NATURE OF OPERATIONS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Operations

StoneMor Partners L.P. (“StoneMor”, the “Company” or the “Partnership”) is a provider of funeral and cemetery products and services in the death care industry in the United States. Through its subsidiaries, StoneMor offers a complete range of funeral merchandise and services, along with cemetery property, merchandise and services, both at the time of need and on a pre-need basis. As of June 30, 2012, the Partnership operated 272 cemeteries, 254 of which are owned, in 26 states and Puerto Rico and owned and operated 71 funeral homes in 18 states and Puerto Rico.

Basis of Presentation

The unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All interim financial data is unaudited. However, in the opinion of management, the interim financial data as of June 30, 2012 and for the three and six months ended June 30, 2012 and 2011 includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. The results of operations for interim periods are not necessarily indicative of the results of operations to be expected for a full year. The December 31, 2011 condensed consolidated balance sheet data was derived from audited financial statements included in the Company’s 2011 Annual Report on Form 10-K (“2011 Form 10-K”) and has been adjusted to include the effects of retrospective adjustments resulting from the Company’s 2011 acquisitions, but does not include all disclosures required by GAAP, which are presented in the Company’s 2011 Form 10-K.

Principles of Consolidation

The unaudited condensed consolidated financial statements include the accounts of each of the Company’s subsidiaries. These statements also include the accounts of the merchandise and perpetual care trusts in which the Company has a variable interest and is the primary beneficiary. The Company operates 18 cemeteries under long-term operating or management contracts. The operations of 16 of these managed cemeteries have been consolidated in accordance with the provisions of Accounting Standards Codification (ASC) 810.

The Company operates 2 cemeteries under long-term operating agreements that do not qualify as acquisitions for accounting purposes. As a result, the Company did not consolidate all of the existing assets and liabilities related to these cemeteries. The Company has consolidated the existing assets and liabilities of each of these cemeteries’ merchandise and perpetual care trusts as variable interest entities since the Company controls and receives the benefits and absorbs any losses from operating these trusts. Under these long-term operating agreements, which are subject to certain termination provisions, the Company is the exclusive operator of these cemeteries. The Company earns revenues related to sales of merchandise, services, and interment rights and incurs expenses related to such sales and the maintenance and upkeep of these cemeteries. Upon termination of these contracts, the Company will retain all of the benefits and related contractual obligations incurred from sales generated during the contract period. The Company has also recognized the existing merchandise liabilities that it assumed as part of these agreements.

Use of Estimates

Preparation of these unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expense during the reporting periods. As a result, actual results could differ from those estimates. The most significant estimates in the unaudited condensed consolidated financial statements are the valuation of assets in the merchandise trust and perpetual care trust, allowance for cancellations, unit-based compensation, merchandise liability, deferred sales revenue, deferred margin, deferred merchandise trust investment earnings, deferred obtaining costs and income taxes. Deferred sales revenue, deferred margin and deferred merchandise trust investment earnings are included in deferred cemetery revenues, net, on the unaudited condensed consolidated balance sheet.

 

5


Table of Contents
2. LONG-TERM ACCOUNTS RECEIVABLE, NET OF ALLOWANCE

Long-term accounts receivable, net, consist of the following:

 

     As of  
     June 30,
2012
    December 31,
2011
 
     (in thousands)  

Customer receivables

   $ 161,447      $ 151,540   

Unearned finance income

     (18,424     (16,727

Allowance for contract cancellations

     (20,017     (17,582
  

 

 

   

 

 

 
     123,006        117,231   

Less: current portion, net of allowance

     51,908        48,837   
  

 

 

   

 

 

 

Long-term portion, net of allowance

   $ 71,098      $ 68,394   
  

 

 

   

 

 

 

Activity in the allowance for contract cancellations is as follows:

 

     For the six months ended June 30,  
     2012     2011  
     (in thousands)  

Balance - Beginning of period

   $ 17,582      $ 15,832   

Provision for cancellations

     9,791        9,211   

Charge-offs - net

     (7,356     (6,853
  

 

 

   

 

 

 

Balance - End of period

   $ 20,017      $ 18,190   
  

 

 

   

 

 

 

 

3. CEMETERY PROPERTY

Cemetery property consists of the following:

 

     As of  
     June 30,
2012
     December 31,
2011
 
     (in thousands)  

Developed land

   $ 68,770       $ 64,266   

Undeveloped land

     166,227         164,723   

Mausoleum crypts and lawn crypts

     67,989         69,949   
  

 

 

    

 

 

 

Total

   $ 302,986       $ 298,938   
  

 

 

    

 

 

 

 

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Table of Contents
4. PROPERTY AND EQUIPMENT

Major classes of property and equipment follow:

 

     As of  
     June 30,
2012
    December 31,
2011
 
     (in thousands)  

Building and improvements

   $ 75,540      $ 75,076   

Furniture and equipment

     38,935        36,863   
  

 

 

   

 

 

 
     114,475        111,939   

Less: accumulated depreciation

     (41,527     (38,162
  

 

 

   

 

 

 

Property and equipment - net

   $ 72,948      $ 73,777   
  

 

 

   

 

 

 

Depreciation expense was $1.7 million and $3.5 million for the three and six months ended June 30, 2012, respectively, as compared to $1.5 million and $2.9 million during the same periods last year.

 

5. MERCHANDISE TRUSTS

At June 30, 2012, the Company’s merchandise trusts consisted of the following types of assets:

 

 

Money Market Funds that invest in low risk short term securities;

 

 

Publicly traded mutual funds that invest in underlying debt securities;

 

 

Publicly traded mutual funds that invest in underlying equity securities;

 

 

Equity investments that are currently paying dividends or distributions. These investments include Real Estate Investment Trusts (“REIT’s”), Master Limited Partnerships and global equity securities;

 

 

Fixed maturity debt securities issued by various corporate entities;

 

 

Fixed maturity debt securities issued by the U.S. Government and U.S. Government agencies; and

 

 

Fixed maturity debt securities issued by U.S. states and local government agencies.

All of these investments are classified as Available for Sale as defined by the Investments in Debt and Equity topic of the ASC. Accordingly, all of the assets are carried at fair value. All of these investments are considered to be either Level 1 or Level 2 assets as defined by the Fair Value Measurements and Disclosures topic of the ASC. See Note 15 for further details. There were no Level 3 assets.

The merchandise trusts are variable interest entities (VIE) for which the Company is the primary beneficiary. The assets held in the merchandise trusts are required to be used to purchase the merchandise to which they relate. If the value of these assets falls below the cost of purchasing such merchandise, the Company may be required to fund this shortfall.

The Company has included $7.3 million and $6.9 million of investments held in trust by the West Virginia Funeral Directors Association at June 30, 2012 and December 31, 2011, respectively, in its merchandise trust assets. As required by law, the Company deposits a portion of certain funeral merchandise sales in West Virginia into a trust that is held by the West Virginia Funeral Directors Association. These trusts are recorded at their account value, which approximates fair value.

 

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Table of Contents

The cost and market value associated with the assets held in merchandise trusts at June 30, 2012 and December 31, 2011 were as follows:

 

As of June 30, 2012

   Cost      Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair
Value
 
     (in thousands)  

Short-term investments

   $ 30,910       $ —         $ —        $ 30,910   

Fixed maturities:

          

U.S. Government and federal agency

     —           —           —          —     

U.S. State and local government agency

     23         —           —          23   

Corporate debt securities

     8,107         66         (250     7,923   

Other debt securities

     —           —           —          —     
  

 

 

    

 

 

    

 

 

   

 

 

 

Total fixed maturities

     8,130         66         (250     7,946   
  

 

 

    

 

 

    

 

 

   

 

 

 

Mutual funds - debt securities

     90,331         2,066         (1,993     90,404   

Mutual funds - equity securities

     139,826         3,818         (6,724     136,920   

Equity securities

     67,369         1,370         (4,833     63,906   

Other invested assets

     8,413         86         —          8,499   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total managed investments

   $ 344,979       $ 7,406       $ (13,800   $ 338,585   
  

 

 

    

 

 

    

 

 

   

 

 

 

West Virginia Trust Receivable

     7,299         —           —          7,299   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 352,278       $ 7,406       $ (13,800   $ 345,884   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

As of December 31, 2011

   Cost      Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair
Value
 
     (in thousands)  

Short-term investments

   $ 38,312       $ —         $ —        $ 38,312   

Fixed maturities:

          

U.S. Government and federal agency

     —           —           —          —     

U.S. State and local government agency

     23         —           —          23   

Corporate debt securities

     10,537         19         (791     9,765   

Other debt securities

     1,100         —           —          1,100   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total fixed maturities

     11,660         19         (791     10,888   
  

 

 

    

 

 

    

 

 

   

 

 

 

Mutual funds - debt securities

     68,291         1,711         (2,581     67,421   

Mutual funds - equity securities

     148,209         1,939         (8,860     141,288   

Equity securities

     71,760         3,723         (3,131     72,352   

Other invested assets

     7,326         34         —          7,360   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total managed investments

   $ 345,558       $ 7,426       $ (15,363   $ 337,621   
  

 

 

    

 

 

    

 

 

   

 

 

 

West Virginia Trust Receivable

     6,894         —           —          6,894   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 352,452       $ 7,426       $ (15,363   $ 344,515   
  

 

 

    

 

 

    

 

 

   

 

 

 

The contractual maturities of debt securities as of June 30, 2012 are as follows:

 

As of June 30, 2012

   Less than
1 year
     1 year through
5 years
     6 years through
10 years
     More than
10 years
 
     (in thousands)  

U.S. Government and federal agency

   $ —         $ —         $ —         $ —     

U.S. State and local government agency

     23         —           —           —     

Corporate debt securities

     —           6,010         1,785         128   

Other debt securities

     —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed maturities

   $ 23       $ 6,010       $ 1,785       $ 128   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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An aging of unrealized losses on the Company’s investments in fixed maturities and equity securities at June 30, 2012 and December 31, 2011 is presented below:

 

     Less than 12 months      12 Months or more      Total  

As of June 30, 2012

   Fair
Value
     Unrealized
Losses
     Fair
Value
     Unrealized
Losses
     Fair
Value
     Unrealized
Losses
 
     (in thousands)  

Fixed maturities:

                 

U.S. Government and federal agency

   $ —         $ —         $ —         $ —         $ —         $ —     

U.S. State and local government agency

     —           —           —           —           —           —     

Corporate debt securities

     2,253         61         2,747         189         5,000         250   

Other debt securities

     —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed maturities

     2,253         61         2,747         189         5,000         250   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mutual funds - debt securities

     40,167         370         27,859         1,623         68,026         1,993   

Mutual funds - equity securities

     6,961         569         58,311         6,155         65,272         6,724   

Equity securities

     26,007         2,017         13,532         2,816         39,539         4,833   

Other invested assets

     —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 75,388       $ 3,017       $ 102,449       $ 10,783       $ 177,837       $ 13,800   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Less than 12 months      12 Months or more      Total  

As of December 31, 2011

   Fair
Value
     Unrealized
Losses
     Fair
Value
     Unrealized
Losses
     Fair
Value
     Unrealized
Losses
 
     (in thousands)  

Fixed maturities:

                 

U.S. Government and federal agency

   $ —         $ —         $ —         $ —         $ —         $ —     

U.S. State and local government agency

     —           —           —           —           —           —     

Corporate debt securities

     4,007         351         4,459         440         8,466         791   

Other debt securities

     —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed maturities

     4,007         351         4,459         440         8,466         791   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mutual funds - debt securities

     19,691         1,109         31,916         1,472         51,607         2,581   

Mutual funds - equity securities

     32,631         970         59,010         7,890         91,641         8,860   

Equity securities

     20,349         1,941         5,775         1,190         26,124         3,131   

Other invested assets

     —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 76,678       $ 4,371       $ 101,160       $ 10,992       $ 177,838       $ 15,363   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

A reconciliation of the Company’s merchandise trust activities for the six months ended June 30, 2012 is presented below:

 

Fair
Value @
12/31/2011

     Contributions      Distributions     Interest/
Dividends
     Capital
Gain
Distributions
     Realized
Gain/
Loss
     Taxes     Fees     Unrealized
Change in
Fair Value
     Fair
Value  @
6/30/2012
 
(in thousands)  
$ 344,515         26,702         (36,545     8,426         105         5,622         (3,309     (1,175     1,543       $ 345,884   

The Company made net distributions from the trusts of approximately $9.8 million during the six months ended June 30, 2012. During the six months ended June 30, 2012, purchases and sales of securities available for sale included in trust investments were approximately $207.3 million and $218.3 million, respectively. Distributions include $5.8 million of assets that were divested as a result of the termination of an operating agreement during the six months ended June 30, 2012.

Other-than-temporary Impairments of Trust Assets

During the three and six months ended June 30, 2012, the Company determined that there were six securities with an aggregate cost basis of approximately $1.6 million and an aggregate fair value of approximately $0.8 million, resulting in an impairment of $0.8 million, wherein such impairment was considered to be other-than-temporary. During the three and six months ended June 30, 2011, the Company determined that there was a single security with an aggregate cost basis of approximately $0.2 million and an aggregate fair value of approximately $0.1 million, resulting in an impairment of $0.1 million, wherein such impairment was considered to be other-than-temporary. Accordingly, the Company adjusted the cost

 

9


Table of Contents

basis of these assets to their current value and offset this change against deferred revenue. This reduction in deferred revenue will be reflected in earnings in future periods as the underlying merchandise is delivered or the underlying service is performed.

 

6. PERPETUAL CARE TRUSTS

At June 30, 2012, the Company’s perpetual care trusts consisted of the following types of assets:

 

 

Money Market Funds that invest in low risk short term securities;

 

 

Publicly traded mutual funds that invest in underlying debt securities;

 

 

Publicly traded mutual funds that invest in underlying equity securities;

 

 

Equity investments that are currently paying dividends or distributions. These investments include REIT’s, Master Limited Partnerships and global equity securities;

 

 

Fixed maturity debt securities issued by various corporate entities;

 

 

Fixed maturity debt securities issued by the U.S. Government and U.S. Government agencies;

 

 

Fixed maturity debt securities issued by U.S. states and local agencies; and

 

 

Assets acquired related to the second quarter 2012 acquisition of one cemetery in Illinois (see Note 13). According to the terms of the agreement, the seller was required to liquidate the holdings of the related trusts upon closing and forward the proceeds to the Company as soon as practicable. As of June 30, 2012, the Company had not received these amounts. Accordingly, these assets are shown in a single line item in the disclosures below as “Assets acquired via acquisition” and the cost basis and fair value of such assets are based upon preliminary estimates that the Company is required to make in accordance with Accounting Topic 805.

All of these investments are classified as Available for Sale as defined by the Investments in Debt and Equity topic of the ASC. Accordingly, all of the assets are carried at fair value. All of these investments are considered to be either Level 1 or Level 2 assets as defined by the Fair Value Measurements and Disclosures topic of the ASC. See Note 15 for further details. There were no Level 3 assets.

 

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Table of Contents

The cost and market value associated with the assets held in perpetual care trusts at June 30, 2012 and December 31, 2011 were as follows:

 

As of June 30, 2012

   Cost      Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair
Value
 
     (in thousands)  

Short-term investment

   $ 15,831       $ —         $ —        $ 15,831   

Fixed maturities:

          

U.S. Government and federal agency

     408         104         —          512   

U.S. State and local government agency

     66         81         —          147   

Corporate debt securities

     23,378         443         (640     23,181   

Other debt securities

     371         —           —          371   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total fixed maturities

     24,223         628         (640     24,211   
  

 

 

    

 

 

    

 

 

   

 

 

 

Mutual funds - debt securities

     104,118         1,451         (360     105,209   

Mutual funds - equity securities

     92,254         3,485         (2,675     93,064   

Equity Securities

     23,141         5,300         (313     28,128   

Other invested assets

     —           —           —          —     
  

 

 

    

 

 

    

 

 

   

 

 

 

Total managed investments

   $ 259,567       $ 10,864       $ (3,988   $ 266,443   
  

 

 

    

 

 

    

 

 

   

 

 

 

Assets acquired via acquisition

     2,780         —           —          2,780   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 262,347       $ 10,864       $ (3,988   $ 269,223   
  

 

 

    

 

 

    

 

 

   

 

 

 

 

As of December 31, 2011

   Cost      Gross
Unrealized
Gains
     Gross
Unrealized
Losses
    Fair
Value
 
     (in thousands)  

Short-term investment

   $ 22,607       $ —         $ —        $ 22,607   

Fixed maturities:

          

U.S. Government and federal agency

     408         105         —          513   

U.S. State and local government agency

     66         81         —          147   

Corporate debt securities

     23,359         229         (1,434     22,154   

Other debt securities

     371         —           —          371   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total fixed maturities

     24,204         415         (1,434     23,185   
  

 

 

    

 

 

    

 

 

   

 

 

 

Mutual funds - debt securities

     61,700         185         (1,079     60,806   

Mutual funds - equity securities

     104,824         4,295         (9,621     99,498   

Equity Securities

     39,199         9,326         (112     48,413   

Other invested assets

     327         156         (313     170   
  

 

 

    

 

 

    

 

 

   

 

 

 

Total

   $ 252,861       $ 14,377       $ (12,559   $ 254,679   
  

 

 

    

 

 

    

 

 

   

 

 

 

The contractual maturities of debt securities as of June 30, 2012 are as follows:

 

As of June 30, 2012

   Less than
1 year
     1 year through
5 years
     6 years through
10 years
     More than
10 years
 
     (in thousands)  

U.S. Government and federal agency

   $ —         $ 512       $ —         $ —     

U.S. State and local government agency

     147         —           —           —     

Corporate debt securities

     51         17,789         4,928         413   

Other debt securities

     371         —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed maturities

   $ 569       $ 18,301       $ 4,928       $ 413   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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An aging of unrealized losses on the Company’s investments in fixed maturities and equity securities at June 30, 2012 and December 31, 2011 held in perpetual care trusts is presented below:

 

     Less than 12 months      12 Months or more      Total  

As of June 30, 2012

   Fair
Value
     Unrealized
Losses
     Fair
Value
     Unrealized
Losses
     Fair
Value
     Unrealized
Losses
 
     (in thousands)  

Fixed maturities:

                 

U.S. Government and federal agency

   $ —         $ —         $ —         $ —         $ —         $ —     

U.S. State and local government agency

     —           —           —           —           —           —     

Corporate debt securities

     4,437         155         7,803         485         12,240         640   

Other debt securities

     —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed maturities

     4,437         155         7,803         485         12,240         640   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mutual funds - debt securities

     328         18         1,074         342         1,402         360   

Mutual funds - equity securities

     4,178         200         7,704         2,475         11,882         2,675   

Equity securities

     4,298         313         —           —           4,298         313   

Other invested assets

     —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 13,241       $ 686       $ 16,581       $ 3,302       $ 29,822       $ 3,988   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

     Less than 12 months      12 Months or more      Total  

As of December 31, 2011

   Fair
Value
     Unrealized
Losses
     Fair
Value
     Unrealized
Losses
     Fair
Value
     Unrealized
Losses
 
     (in thousands)  

Fixed maturities:

                 

U.S. Government and federal agency

   $ —         $ —         $ —         $ —         $ —         $ —     

U.S. State and local government agency

     —           —           —           —           —           —     

Corporate debt securities

     7,967         727         8,471         707         16,438         1,434   

Other debt securities

     —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total fixed maturities

     7,967         727         8,471         707         16,438         1,434   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Mutual funds - debt securities

     37,956         772         1,675         307         39,631         1,079   

Mutual funds - equity securities

     21,483         3,023         44,416         6,598         65,899         9,621   

Equity securities

     2,978         106         351         6         3,329         112   

Other invested assets

     170         313         —           —           170         313   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 70,554       $ 4,941       $ 54,913       $ 7,618       $ 125,467       $ 12,559   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

A reconciliation of the Company’s perpetual care trust activities for the six months ended June 30, 2012 is presented below:

 

Fair
Value @
12/31/2011

     Contributions      Distributions     Interest/
Dividends
     Capital
Gain
Distributions
     Realized
Gain/
Loss
     Taxes     Fees     Unrealized
Change in
Fair Value
     Fair
Value  @
6/30/2012
 
(in thousands)  
$ 254,679         8,749         (7,414     8,292         13         1,150         (413     (891     5,058       $ 269,223   

The Company made net contributions to the trusts of approximately $1.3 million during the six months ended June 30, 2012. During the six months ended June 30, 2012, purchases and sales of securities available for sale included in trust investments were approximately $220.4 million and $221.7 million, respectively. Contributions include $2.8 million of assets that were acquired through an acquisition during the six months ended June 30, 2012.

Other-than-temporary Impairments of Trust Assets

During the three and six months ended June 30, 2012, the Company determined that there were no other than temporary impairments to the investment portfolio in the perpetual care trusts.

 

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Table of Contents

During the three and six months ended June 30, 2011, the Company determined that there was a single security with an aggregate cost basis of less than $0.1 million which was substantially impaired, and such impairment was considered to be other-than-temporary. Accordingly, the Company adjusted the cost basis of this asset to its current value and offset this change against the liability for perpetual care trust corpus.

 

7. GOODWILL AND INTANGIBLE ASSETS

Goodwill

Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in acquisitions.

A rollforward of goodwill by reportable segment is as follows:

 

     Cemeteries      Funeral         
     Southeast      Northeast      West      Homes      Total  
     (in thousands)  

Balance as of December 31, 2011

   $ 6,054       $ —         $ 11,948       $ 14,297       $ 32,299   

Goodwill resulting from acquisitions during the six months ended June 30, 2012

     200         —           —           1,592         1,792   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Balance as of June 30, 2012

   $ 6,254       $ —         $ 11,948       $ 15,889       $ 34,091   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

During the second quarter of 2012, the Company became aware that it will receive a payment of $3.8 million in a legal settlement related to its fourth quarter 2011 acquisition of cemeteries and funeral homes in Tennessee. In addition, there were other adjustments of $0.3 million related to an increase in merchandise trust assets and a small increase in accounts receivable. These amounts have been recorded retrospectively as a purchase price adjustment for this acquisition resulting in a decrease to goodwill of $4.1 million. This adjustment has been reflected in the table above.

Other Acquired Intangible Assets

The Company has other acquired intangible assets, most of which have been recognized as a result of acquisitions and long-term operating agreements. These amounts are included within other assets on the condensed consolidated balance sheet. All of the intangible assets are subject to amortization. The major classes of intangible assets are as follows:

 

    

As of

June 30, 2012

    Net     

As of

December 31, 2011

    Net  
     Gross Carrying
Amount
     Accumulated
Amortization
    Intangible
Asset
     Gross Carrying
Amount
     Accumulated
Amortization
    Intangible
Asset
 
     (in thousands)  

Amortized Intangible Assets:

               

Underlying contract value

   $ 6,239       $ (463   $ 5,776       $ 8,484       $ (546   $ 7,938   

Non-compete agreements

     3,872         (1,898     1,974         3,820         (1,413     2,407   

Other intangible assets

     269         (73     196         205         (67     138   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

Total Intangible Assets

   $ 10,380       $ (2,434   $ 7,946       $ 12,509       $ (2,026   $ 10,483   
  

 

 

    

 

 

   

 

 

    

 

 

    

 

 

   

 

 

 

The decrease in the underlying contract value is mostly the result of the Company entering into an amended operating agreement with Kingwood Memorial Park Association. See Note 13 for further details.

 

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Table of Contents
8. LONG-TERM DEBT

The Company had the following outstanding debt:

 

     As of  
     June 30,
2012
     December 31,
2011
 
     (in thousands)  

Insurance premium financing

   $ 818       $ 211   

Vehicle Financing

     934         1,147   

Acquisition Credit Facility, due January 2017

     —           10,750   

Revolving Credit Facility, due January 2017

     61,950         33,000   

Note Payable - Greenlawn acquisition

     1,250         1,321   

Note Payable - Nelms acquisition (net of discount)

     427         623   

Note Payable - acquisition non-competes (net of discounts)

     1,662         1,490   

10.25% senior notes, due 2017

     150,000         150,000   
  

 

 

    

 

 

 

Total

     217,041         198,542   

Less current portion

     2,035         1,487   

Less unamortized bond discount

     3,015         3,220   
  

 

 

    

 

 

 

Long-term portion

   $ 211,991       $ 193,835   
  

 

 

    

 

 

 

This note includes a summary of material terms of the Company’s senior notes, senior secured notes, credit facilities and other debt obligations. For a more detailed description of the Company’s long-term debt agreements, see the Company’s 2011 Form 10-K.

10.25% Senior Notes due 2017

The Company has outstanding a $150.0 million aggregate principal amount of 10.25% Senior Notes due 2017 (the “Senior Notes”), with an original issue discount of approximately $4.0 million. The Company pays 10.25% interest per annum on the principal amount of the Senior Notes, payable in cash semi-annually in arrears on June 1 and December 1 of each year. The Senior Notes mature on December 1, 2017.

Credit Facility

On January 19, 2012, the Company entered into the Third Amended and Restated Credit Agreement (the “Credit Agreement”). The terms of the Credit Agreement are substantially the same as the terms of the prior agreement. Capitalized terms which are not defined in the following description shall have the meaning assigned to such terms in the Credit Agreement.

The Credit Agreement provides for a total Revolving Credit Facility of $130.0 million (the “Credit Facility”). Previously, the agreement had an Acquisition Credit Facility and a Revolving Credit Facility with different borrowing limits. The proceeds of the Credit Facility may be used to finance working capital requirements, Permitted Acquisitions and the purchase and construction of mausoleums. The maturity date of the Credit Facility is January 19, 2017.

At June 30, 2012, amounts outstanding under the Credit Facility bear interest at a rate of 3.7%. Amounts borrowed may be either Base Rate Loans or Eurodollar Rate Loans and amounts repaid or prepaid during the term may be reborrowed. Depending on the type of loan, borrowings bear interest at the Base Rate or Eurodollar Rate, plus applicable margins ranging from 1.25% to 2.75% and 2.25% to 3.75%, respectively, depending on the Company’s Consolidated Leverage Ratio. The Base Rate is the highest of the Prime Rate, the Federal Funds Rate plus 0.50%, or the Eurodollar Rate plus 1.0%. The Eurodollar rate is the British Bankers Association LIBOR Rate.

The Credit Agreement requires the Company to pay an unused Commitment Fee, which is calculated based on the amount by which the commitments under the Credit Agreement exceed the outstanding amounts under the Credit Facility. The Commitment Fee Rate under the Credit Agreement ranges from 0.375% to 0.75% depending on the Company’s Consolidated Leverage Ratio.

The Credit Agreement contains restrictive covenants that, among other things, prohibit distributions upon defined events of default, restrict investments and sales of assets and require the Company to maintain certain financial covenants, including specified financial ratios. A material decrease in revenues could cause the Company to breach certain of its financial covenants. Any such breach could allow the Lenders to accelerate the Company’s debt which would have a material adverse effect on the Company’s business, financial condition or results of operations. The Company’s covenants include a Consolidated Leverage Ratio and a Consolidated Debt Service Coverage Ratio. As of June 30, 2012, the Company was in compliance with all applicable financial covenants.

 

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Table of Contents
9. INCOME TAXES

As of June 30, 2012, the Company’s taxable corporate subsidiaries had federal net operating loss carryforwards of approximately $152.8 million, which will begin to expire in 2019 and $184.1 million in state net operating losses, a portion of which expires annually.

The Partnership is not a taxable entity for federal and state income tax purposes; rather, the Partnership’s tax attributes (except those of its corporate subsidiaries) are to be included in the individual tax returns of its partners. Neither the Partnership’s financial reporting income, nor the cash distributions to unit-holders, can be used as a substitute for the detailed tax calculations that the Partnership must perform annually for its partners. Net income from the Partnership is not treated as “passive income” for federal income tax purposes. As a result, partners subject to the passive activity loss rules are not permitted to offset income from the Partnership with passive losses from other sources.

The Partnership’s corporate subsidiaries account for their income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

The provision for income taxes for the three and six months ended June 30, 2012 and 2011 is based upon the estimated annual effective tax rates expected to be applicable to the Company for 2012 and 2011, respectively. The Company’s effective tax rate differs from its statutory tax rate primarily because the Company’s legal entity structure includes different tax filing entities, including a significant number of partnerships that are not subject to paying tax.

The Company is not currently under examination by any federal or state jurisdictions. The federal statute of limitations and certain state statutes of limitations are open from 2008 forward. Management believes that the accrual for tax liabilities is adequate for all open years. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. On the basis of present information, it is the opinion of the Company’s management that there are no pending assessments that will result in a material effect on the Company’s consolidated financial statements over the next twelve months.

 

10. DEFERRED CEMETERY REVENUES, NET

At June 30, 2012 and December 31, 2011, deferred cemetery revenues, net, consisted of the following:

 

     As of  
     June 30,
2012
    December 31,
2011
 
     (in thousands)  

Deferred cemetery revenue

   $ 323,688      $ 306,488   

Deferred merchandise trust revenue

     59,099        50,419   

Deferred merchandise trust unrealized gains (losses)

     (6,394     (7,937

Deferred pre-acquisition margin

     130,289        135,243   

Deferred cost of goods sold

     (44,594     (42,335
  

 

 

   

 

 

 

Deferred cemetery revenues, net

   $ 462,088      $ 441,878   
  

 

 

   

 

 

 

Deferred selling and obtaining costs

   $ 71,921      $ 68,542   

Deferred selling and obtaining costs are carried as an asset on the unaudited condensed consolidated balance sheet in accordance with the Financial Services – Insurance topic of the ASC.

 

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11. COMMITMENTS AND CONTINGENCIES

Legal

The Company is party to legal proceedings in the ordinary course of its business but does not expect the outcome of any proceedings, individually or in the aggregate, to have a material effect on the Company’s financial position, results of operations or liquidity.

Leases

At June 30, 2012, the Company was committed to operating lease payments for premises, automobiles and office equipment under various operating leases with initial terms ranging from one to ten years and options to renew at varying terms. Expenses under operating leases were $0.7 million and $1.3 million for the three and six months ended June 30, 2012, respectively, and $0.5 million and $1.1 million for the three and six months ended June 30, 2011, respectively.

At June 30, 2012, operating leases will result in future payments in the following approximate amounts:

 

     (in thousands)  

2013

   $ 2,039   

2014

     1,359   

2015

     866   

2016

     799   

2017

     753   

Thereafter

     1,892   
  

 

 

 

Total

   $ 7,708   
  

 

 

 

 

12. PARTNERS’ CAPITAL

Unit-Based Compensation

The Company has issued to certain key employees and management unit-based compensation in the form of unit appreciation rights and phantom partnership units.

Compensation expense recognized related to unit appreciation rights and restricted phantom unit awards for the three and six months ended June 30, 2012 and 2011 are summarized in the table below:

 

     Three months ended
June 30,
     Six months ended
June 30,
 
     2012      2011      2012      2011  
     (in thousands)      (in thousands)  

Unit appreciation rights

   $ 129       $ 119       $ 248       $ 239   

Restricted phantom units

     81         72         161         142   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total unit-based compensation expense

   $ 210       $ 191       $ 409       $ 381   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of June 30, 2012, there was approximately $0.9 million in non-vested unit appreciation rights outstanding. These unit appreciation rights will be expensed through the first quarter of 2014.

Other Unit Issuances

On June 6, 2012, the Company issued 13,720 units in connection with an acquisition. See Note 13. On June 21, 2012 and 2011, the Company issued 9,853 units in connection with an acquisition consummated in the second quarter of 2010.

 

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13. ACQUISITIONS

First Quarter 2012 Acquisition

In second quarter of 2009, the Company entered into a long-term operating agreement (the “Operating Agreement”) with Kingwood Memorial Park Association (“Kingwood”) wherein the Company became the exclusive operator of the cemetery. At that time, the Operating Agreement did not qualify as an acquisition for accounting purposes. However, the existing merchandise and perpetual care trusts were consolidated as variable interest entities. In addition, merchandise and other liabilities assumed by the Company were also recorded as of the initial contract date. The consideration paid for this transaction, including cash and an assumed liability, exceeded the net assets recorded as of the initial contract date and an intangible asset was recorded for this amount.

In January of 2012, the Company entered into an amended and restated operating agreement (the “Amended Operating Agreement”), that supersedes the Operating Agreement. The Amended Operating Agreement has a term of 40 years and the Company remains the exclusive operator of the cemetery. As consideration for entering into the Amended Operating Agreement, the Company paid $1.7 million in cash and was relieved of a note payable to Kingwood. In addition, the prior trustees of Kingwood have resigned in favor of new trustees appointed by the Company. As a result of the changes in the Amended Operating Agreement, for accounting purposes, the Company has gained control of Kingwood, and acquisition accounting is now applicable.

The table below reflects the Company’s preliminary assessment of the fair value of net assets acquired, the elimination of debt and other assets and the purchase price, which results in the recognition of goodwill recorded in our Cemetery Operations – Southeast segment. These amounts may be retrospectively adjusted as additional information is received.

 

     Preliminary
Assessment
 
     (in thousands)  

Net Assets Acquired:

  

Accounts receivable

   $ 66   

Cemetery property

     3,001   

Property and equipment

     102   
  

 

 

 

Total net assets acquired

     3,169   
  

 

 

 

Assets and Liabilities divested:

  

Note payable to Kingwood

     519   

Intangible asset representing underlying contract value

     (2,236
  

 

 

 

Fair value of net assets acquired and divested

     1,452   
  

 

 

 

Consideration paid

     1,652   
  

 

 

 

Goodwill from purchase

   $ 200   
  

 

 

 

Second Quarter 2012 Acquisitions

On April 10, 2012, certain subsidiaries of the Company (collectively the “Buyer”) entered into a Stock Purchase Agreement with several individuals (collectively the “Seller”) to purchase all of the stock of Bronswood Cemetery, Inc., an Illinois Corporation. Through the purchase, the Buyer acquired one cemetery in Illinois, including certain related assets, and assumed certain related liabilities. In consideration for the net assets acquired, the Buyer paid the Seller $0.9 million in cash.

The table below reflects the Company’s preliminary assessment of the fair value of net assets acquired, the purchase price and the gain on bargain purchase. These amounts may be retrospectively adjusted as additional information is received.

 

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     Preliminary
Assessment
 
     (in thousands)  

Assets:

  

Accounts receivable

   $ 72   

Cemetery property

     842   

Property and equipment

     518   

Perpetual care trusts, restricted, at fair value

     2,780   

Non-compete agreements

     12   
  

 

 

 

Total assets

     4,224   
  

 

 

 

Liabilities:

  

Perpetual care trust corpus

     2,780   

Other liabilities

     24   

Deferred tax liability

     374   
  

 

 

 

Total liabilities

     3,178   
  

 

 

 

Fair value of net assets acquired

     1,046   
  

 

 

 

Consideration paid

     924   
  

 

 

 

Gain on bargain purchase

   $ 122   
  

 

 

 

In addition, on June 6, 2012, certain subsidiaries of the Company (collectively the “Buyer”) entered into a Purchase Agreement with several individuals and Lodi Funeral Home, Inc. (collectively the “Seller”) to purchase certain assets and assume certain liabilities of Lodi Funeral Home, Inc., a California corporation and all of the stock of Lodi All Faiths Cremation, a California corporation. Through the purchase, the Buyer acquired two funeral homes in California including certain related assets, and assumed certain related liabilities. As part of the agreement, the building and underlying real estate of Lodi Funeral Home, Inc. is being leased from the Seller. The lease agreement is a ten year agreement that contains one five year renewal term at the Buyer’s election. In addition, at the end of the original lease or renewal term, the Buyer can elect to purchase the property for fair value less 10% of any rental amounts previously paid under the lease agreement. The Buyer also has a right of first refusal related to any potential sale of the property occurring during the lease term.

In consideration for the net assets acquired, the Buyer paid the Seller $0.85 million in cash and issued 13,720 units, which equates to $0.35 million worth of units. The Buyer will also pay an aggregate amount of $0.6 million in equal quarterly installments commencing on January 2, 2013 in exchange for non-compete agreements with the Seller.

The table below reflects the Company’s preliminary assessment of the fair value of net assets acquired, the purchase price and the resulting goodwill recorded in our Funeral Homes operating segment. These amounts may be retrospectively adjusted as additional information is received.

 

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     Preliminary
Assessment
 
     (in thousands)  

Assets:

  

Property and equipment

   $ 48   

Merchandise trusts, restricted, at fair value

     105   

Underlying lease value

     64   

Non-compete agreements

     40   
  

 

 

 

Total assets

     257   
  

 

 

 

Liabilities:

  

Merchandise liabilities

     105   
  

 

 

 

Total liabilities

     105   
  

 

 

 

Fair value of net assets acquired

     152   
  

 

 

 

Consideration paid - cash

     850   

Consideration paid - units

     350   

Fair value of debt assumed for non-compete agreements

     544   
  

 

 

 

Total consideration paid

     1,744   
  
  

 

 

 

Goodwill from purchase

   $ 1,592   
  

 

 

 

First and Second Quarter 2011 Acquisitions

On January 5, 2011, the Operating Company, StoneMor North Carolina LLC, a North Carolina limited liability company and StoneMor North Carolina Subsidiary LLC, a North Carolina limited liability company, each a wholly-owned subsidiary of the Company (collectively the “Buyer”), entered into an Asset Purchase and Sale Agreement (the “1st Quarter Purchase Agreement”) with Heritage Family Services, Inc., a North Carolina corporation and an individual (collectively the “Seller”). Pursuant to the 1st Quarter Purchase Agreement, the Buyer acquired three cemeteries in North Carolina, including certain related assets, and assumed certain related liabilities. In consideration for the net assets acquired, the Buyer paid the Seller $1.7 million in cash.

On June 22, 2011, the Operating Company, StoneMor Missouri LLC, a Missouri limited liability company and StoneMor Missouri Subsidiary LLC, a Missouri limited liability company, each a wholly-owned subsidiary of the Company (collectively the “Buyer”), entered into an Asset Purchase and Sale Agreement (the “2nd Quarter Purchase Agreement”) with SCI International, LLC, a Delaware limited liability company and Keystone America, Inc., a Delaware corporation (collectively the “Seller” or “SCI Missouri”). Pursuant to the 2nd Quarter Purchase Agreement, the Buyer acquired three cemeteries and four funeral homes in Missouri, including certain related assets, and assumed certain related liabilities. In consideration for the net assets acquired, the Buyer paid the Seller $2.15 million in cash.

The table below reflects the Company’s final assessment of the fair value of net assets acquired, the purchase price and the resulting goodwill from these acquisitions. For a detailed breakout of the purchase price for these acquisitions on an individual basis, see our 2011 Form 10-K.

 

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Table of Contents
     Final
Assessment
 

Assets:

  

Accounts receivable

   $ 191   

Cemetery property

     2,590   

Merchandise trusts, restricted, at fair value

     3,507   

Perpetual care trusts, restricted, at fair value

     1,534   

Property and equipment

     2,144   

Other assets

     100   
  

 

 

 

Total assets

     10,066   
  

 

 

 

Liabilities:

  

Deferred margin

     2,097   

Merchandise liabilities

     2,382   

Perpetual care trust corpus

     1,534   

Deferred tax liability

     525   
  

 

 

 

Total liabilities

     6,538   
  

 

 

 

Fair value of net assets acquired

     3,528   
  

 

 

 

Consideration paid

     3,850   
  

 

 

 

Goodwill from purchase

   $ 322   
  

 

 

 

The results of operations and pro forma results related to the acquisitions made in 2012 and 2011 are not material to the unaudited condensed consolidated financial statements taken as a whole.

The Company has made retrospective adjustments to its fourth quarter 2011 acquisition in Tennessee. See Note 7 for further details.

First Quarter 2012 Contract Termination

During the third quarter of 2010, certain subsidiaries of the Company entered into a long-term operating agreement (the “Operating Agreement”) with the Archdiocese of Detroit (the “Archdiocese”) wherein the Company became the exclusive operator of certain cemeteries in Michigan owned by the Archdiocese. The Operating Agreement did not qualify as an acquisition for accounting purposes. However, the existing merchandise trust had been consolidated as a variable interest entity as the Company controlled and directly benefited from the operations of the merchandise trust. In addition, liabilities assumed were also recorded as of the contract date. As no consideration was paid in this transaction, the Company had recorded a deferred gain of approximately $3.1 million within deferred cemetery revenues, net, which represented the excess of the value of the merchandise trust over the liabilities assumed.

Effective March 31, 2012, the Company and the Archdiocese agreed to terminate the Operating Agreement. As of the termination date, the Company no longer operated these properties. All activity occurring after March 31, 2012 is the responsibility of the Archdiocese and the Company has no remaining obligation to fulfill any merchandise liabilities or responsibility to perform any obligations of the properties.

In the first and second quarters of 2012, the Company received payments of approximately $2.0 million from the Archdiocese as a result of the termination. Consequently, the Company recognized a gain of $1.7 million during the six months ended June 30, 2012, which is the amount by which the payments from the Archdiocese exceeded the value of the net assets transferred to the Archdiocese.

 

14. SEGMENT INFORMATION

The Company is organized into five distinct reportable segments which are classified as Cemetery Operations – Southeast, Cemetery Operations – Northeast, Cemetery Operations – West, Funeral Homes, and Corporate.

The Company has chosen this level of organization of reportable segments due to the fact that a) each reportable segment has unique characteristics that set it apart from other segments; b) the Company has organized its management personnel at these operational levels; and c) it is the level at which the Company’s chief decision makers and other senior management evaluate performance.

 

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Table of Contents

The cemetery operations segments sell interment rights, caskets, burial vaults, cremation niches, markers and other cemetery related merchandise. The nature of the Company’s customers differs in each of our regionally based cemetery operating segments. Cremation rates in the West region are substantially higher than they are in the Southeast region. Rates in the Northeast region tend to be somewhere between the two. Statistics indicate that customers who select cremation services have certain attributes that differ from customers who select other methods of interment. The disaggregation of cemetery operations into the three distinct regional segments is primarily due to these differences in customer attributes along with the previously mentioned management structure and senior management analysis methodologies.

The Company’s Funeral Homes segment offers a range of funeral-related services such as family consultation, the removal of and preparation of remains and the use of funeral home facilities for visitation. These services are distinctly different than the cemetery merchandise and services sold and provided by the cemetery operations segments.

The Company’s Corporate segment includes various home office selling and administrative expenses that are not allocable to the other operating segments.

Segment information as of and for the three and six months ended June 30, 2012 and 2011 is as follows:

As of and for the three months ended June 30, 2012:

 

     Cemeteries      Funeral                     
     Southeast      Northeast      West      Homes      Corporate     Adjustment     Total  
     (in thousands)  

Revenues

                  

Sales

   $ 23,812       $ 9,545       $ 10,292       $ —         $ —        $ (9,535   $ 34,114   

Service and other

     9,255         7,138         7,373         —           —          (4,227     19,539   

Funeral home

     —           —           —           8,189         —          (334     7,855   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total revenues

     33,067         16,683         17,665         8,189         —          (14,096     61,508   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Costs and expenses

                  

Cost of sales

     4,972         2,028         1,739         —           49        (1,552     7,236   

Cemetery

     6,746         3,814         4,215         —           —          —          14,775   

Selling

     7,691         3,322         3,395         —           370        (1,655     13,123   

General and administrative

     3,813         1,487         1,883         —           12        —          7,195   

Corporate overhead

     —           —           —           —           7,756        —          7,756   

Depreciation and amortization

     510         215         547         518         440        —          2,230   

Funeral home

     —           —           —           6,688         —          (73     6,615   

Acquisition related costs

     —           —           —           —           782        —          782   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total costs and expenses

     23,732         10,866         11,779         7,206         9,409        (3,280     59,712   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Operating profit

   $ 9,335       $ 5,817       $ 5,886       $ 983       $ (9,409   $ (10,816   $ 1,796   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total assets

   $ 491,103       $ 291,245       $ 384,949       $ 79,938       $ 26,195      $ —        $ 1,273,430   

Amortization of cemetery property

   $ 1,022       $ 853       $ 275       $ —         $ —        $ (21   $ 2,129   

Long lived asset additions

   $ 802       $ 825       $ 2,630       $ 401       $ 194      $ —        $ 4,852   

Goodwill

   $ 6,254       $ —         $ 11,948       $ 15,889       $ —        $ —        $ 34,091   

 

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As of and for the six months ended June 30, 2012:

 

     Cemeteries      Funeral                     
     Southeast      Northeast      West      Homes      Corporate     Adjustment     Total  
     (in thousands)  

Revenues

                  

Sales

   $ 44,692       $ 18,003       $ 20,324       $ —         $ —        $ (17,882   $ 65,137   

Service and other

     18,783         13,713         14,894         —           —          (8,224     39,166   

Funeral home

     —           —           —           17,462         —          (670     16,792   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total revenues

     63,475         31,716         35,218         17,462         —          (26,776     121,095   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Costs and expenses

                  

Cost of sales

     9,263         3,701         3,403         —           52        (2,763     13,656   

Cemetery

     12,451         6,879         8,237         —           —          —          27,567   

Selling

     14,716         6,458         6,607         —           831        (3,702     24,910   

General and administrative

     7,436         3,013         3,923         —           16        —          14,388   

Corporate overhead

     —           —           —           —           14,359        —          14,359   

Depreciation and amortization

     1,046         440         1,114         1,138         822        —          4,560   

Funeral home

     —           —           —           13,487         —          (116     13,371   

Acquisition related costs

     —           —           —           —           1,113        —          1,113   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total costs and expenses

     44,912         20,491         23,284         14,625         17,193        (6,581     113,924   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Operating profit

   $ 18,563       $ 11,225       $ 11,934       $ 2,837       $ (17,193   $ (20,195   $ 7,171   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total assets

   $ 491,103       $ 291,245       $ 384,949       $ 79,938       $ 26,195      $ —        $ 1,273,430   

Amortization of cemetery property

   $ 2,001       $ 1,413       $ 569       $ —         $ —        $ (3   $ 3,980   

Long lived asset additions

   $ 4,765       $ 1,374       $ 3,100       $ 460       $ 606      $ —        $ 10,305   

Goodwill

   $ 6,254       $ —         $ 11,948       $ 15,889       $ —        $ —        $ 34,091   

As of and for the three months ended June 30, 2011:

 

     Cemeteries      Funeral                     
     Southeast      Northeast      West      Homes      Corporate     Adjustment     Total  
     (in thousands)  

Revenues

                  

Sales

   $ 21,223       $ 8,565       $ 12,931       $ —         $ 1      $ (7,926   $ 34,794   

Service and other

     7,820         5,618         6,256         —           —          (1,744     17,950   

Funeral home

     —           —           —           7,563         —          (200     7,363   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total revenues

     29,043         14,183         19,187         7,563         1        (9,870     60,107   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Costs and expenses

                  

Cost of sales

     4,354         1,715         2,062         —           —          (915     7,216   

Cemetery

     6,076         3,899         5,487         —           —          —          15,462   

Selling

     7,189         2,952         3,784         —           97        (1,835     12,187   

General and administrative

     3,292         1,493         2,246         —           —          —          7,031   

Corporate overhead

     —           —           —           —           5,986        —          5,986   

Depreciation and amortization

     427         230         733         169         483        —          2,042   

Funeral home

     —           —           —           5,698         —          —          5,698   

Acquisition related costs

     —           —           —           —           1,025        —          1,025   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total costs and expenses

     21,338         10,289         14,312         5,867         7,591        (2,750     56,647   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Operating profit

   $ 7,705       $ 3,894       $ 4,875       $ 1,696       $ (7,590   $ (7,120   $ 3,460   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total assets

   $ 435,391       $ 287,396       $ 382,551       $ 51,521       $ 32,089      $ —        $ 1,188,948   

Amortization of cemetery property

   $ 1,000       $ 591       $ 215       $ —         $ —        $ (231   $ 1,575   

Long lived asset additions

   $ 932       $ 488       $ 1,946       $ 2,092       $ 192      $ —        $ 5,650   

Goodwill

   $ 629       $ —         $ 11,949       $ 5,897       $ —        $ —        $ 18,475   

 

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Table of Contents

As of and for the six months ended June 30, 2011:

 

     Cemeteries      Funeral                     
     Southeast      Northeast      West      Homes      Corporate     Adjustment     Total  
     (in thousands)  

Revenues

                  

Sales

   $ 39,967       $ 16,533       $ 23,022       $ —         $ 5      $ (20,203   $ 59,324   

Service and other

     16,179         11,579         15,071         —           —          (7,510     35,319   

Funeral home

     —           —           —           15,044         —          (349     14,695   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total revenues

     56,146         28,112         38,093         15,044         5        (28,062     109,338   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Costs and expenses

                  

Cost of sales

     8,071         3,316         3,616         —           —          (2,794     12,209   

Cemetery

     11,027         6,969         9,552         —           —          —          27,548   

Selling

     13,605         5,770         6,716         —           678        (5,038     21,731   

General and administrative

     6,269         3,020         4,172         —           (3     —          13,458   

Corporate overhead

     —           —           —           —           11,944        —          11,944   

Depreciation and amortization

     758         444         1,241         567         1,478        —          4,488   

Funeral home

     —           —           —           11,007         —          —          11,007   

Acquisition related costs

     —           —           —           —           1,958        —          1,958   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total costs and expenses

     39,730         19,519         25,297         11,574         16,055        (7,832     104,343   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Operating profit

   $ 16,416       $ 8,593       $ 12,796       $ 3,470       $ (16,050   $ (20,230   $ 4,995   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Total assets

   $ 435,391       $ 287,396       $ 382,551       $ 51,521       $ 32,089      $ —        $ 1,188,948   

Amortization of cemetery property

   $ 1,753       $ 1,140       $ 394       $ —         $ —        $ (329   $ 2,958   

Long lived asset additions

   $ 3,871       $ 752       $ 3,277       $ 2,040       $ 304      $ —        $ 10,244   

Goodwill

   $ 629       $ —         $ 11,949       $ 5,897       $ —        $ —        $ 18,475   

Results of individual business units are presented based on our management accounting practices and management structure. There is no comprehensive, authoritative body of guidance for management accounting equivalent to accounting principles generally accepted in the United States of America; therefore, the financial results of individual business units are not necessarily comparable with similar information for any other company. The management accounting process uses assumptions and allocations to measure performance of the business units. Methodologies are refined from time to time as management accounting practices are enhanced and businesses change. Revenues and associated expenses are not deferred in accordance with SAB No. 104 therefore, the deferral of these revenues and expenses is provided in the adjustment column to reconcile the Company’s managerial financial statements to those prepared in accordance with GAAP. Pre-need sales revenues included within the sales category consist primarily of the sale of burial lots, burial vaults, mausoleum crypts, grave markers and memorials, and caskets. Management accounting practices included in the Southeast, Northeast, and Western Regions reflect these pre-need sales when contracts are signed by the customer and accepted by the Company. Pre-need sales reflected in the consolidated financial statements, prepared in accordance with GAAP, recognize revenues for the sale of burial lots and mausoleum crypts when the product is constructed and at least 10% of the sales price is collected. With respect to the other products, the consolidated financial statements prepared under GAAP recognize sales revenues when the criteria for delivery under SAB No. 104 are met. These criteria include, among other things, purchase of the product, delivery and installation of the product in the ground, and transfer of title to the customer. In each case, costs are accrued in connection with the recognition of revenues; therefore, the consolidated financial statements reflect Deferred Cemetery Revenue, Net and Deferred Selling and Obtaining Costs on the balance sheet, whereas the Company’s management accounting practices exclude these items.

 

15. FAIR VALUE MEASUREMENTS

The Fair Value Measurements and Disclosures topic of the ASC defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. This topic also establishes a fair value hierarchy that gives the highest priority to observable inputs and the lowest priority to unobservable inputs. The three levels of the fair value hierarchy defined by this topic are described below.

Level 1: Quoted market prices available in active markets for identical assets or liabilities. The Company includes short-term investments, consisting primarily of money market funds, U.S. Government debt securities and publicly traded equity securities and mutual funds in its level 1 investments.

 

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Level 2: Quoted prices in active markets for similar assets; quoted prices in non-active markets for identical or similar assets; inputs other than quoted prices that are observable. The Company includes U.S. state and municipal, corporate and other fixed income debt securities in its level 2 investments.

Level 3: Any and all pricing inputs that are generally unobservable and not corroborated by market data.

The following table allocates the Company’s assets measured at fair value as of June 30, 2012 and December 31, 2011.

 

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As of June 30, 2012

Merchandise Trust

 

Description

   Level 1      Level 2      Total  
     (in thousands)  

Assets

        

Short-term investments

   $ 30,910       $ —         $ 30,910   

Fixed maturities:

        

U.S. government and federal agency

     —           —           —     

U.S. state and local government agency

     —           23         23   

Corporate debt securities

     —           7,923         7,923   

Other debt securities

     —           —           —     
  

 

 

    

 

 

    

 

 

 

Total fixed maturity investments

     —           7,946         7,946   
  

 

 

    

 

 

    

 

 

 

Mutual funds - debt securities

     90,404         —           90,404   

Mutual funds - equity securities - real estate sector

     35,451         —           35,451   

Mutual funds - equity securities - energy sector

     5,361         —           5,361   

Mutual funds - equity securities - MLP’s

     26,866         —           26,866   

Mutual funds - equity securities - other

     69,242         —           69,242   

Equity securities

        

Preferred REIT’s

     1,763         —           1,763   

Master limited partnerships

     39,719         —           39,719   

Global equity securities

     22,424         —           22,424   

Other invested assets

     —           8,499         8,499   
  

 

 

    

 

 

    

 

 

 

Total

   $ 322,140       $ 16,445       $ 338,585   
  

 

 

    

 

 

    

 

 

 

Perpetual Care Trust

 

Description

   Level 1      Level 2      Total  
     (in thousands)  

Assets

        

Short-term investments

   $ 15,831       $ —         $ 15,831   

Fixed maturities:

        

U.S. government and federal agency

     512         —           512   

U.S. state and local government agency

     —           147         147   

Corporate debt securities

     —           23,181         23,181   

Other debt securities

     —           371         371   
  

 

 

    

 

 

    

 

 

 

Total fixed maturity investments

     512         23,699         24,211   
  

 

 

    

 

 

    

 

 

 

Mutual funds - debt securities

     105,209         —           105,209   

Mutual funds - equity securities - real estate sector

     38,085         —           38,085   

Mutual funds - equity securities - energy sector

     11,956         —           11,956   

Mutual funds - equity securities - MLP’s

     29,964         —           29,964   

Mutual funds - equity securities - other

     13,059         —           13,059   

Equity securities

        

Preferred REIT’s

     778         —           778   

Master limited partnerships

     26,649         —           26,649   

Global equity securities

     701         —           701   

Other invested assets

     —           —           —     
  

 

 

    

 

 

    

 

 

 

Total

   $ 242,744       $ 23,699       $ 266,443   
  

 

 

    

 

 

    

 

 

 

 

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As of December 31, 2011

Merchandise Trust

 

Description

   Level 1      Level 2      Total  
     (in thousands)  

Assets