Preneed Trust Investments

9 Months Ended

Sep. 30, 2011

Preneed Trust Investments [Abstract]

5. PRENEED TRUST INVESTMENTS

Preneed Cemetery Trust Investments

Preneed cemetery trust investments represent trust fund assets that the Company will withdraw when the merchandise or services are provided. The components of preneed cemetery trust investments in our Consolidated Balance Sheets at December 31, 2010 and September 30, 2011 are as follows (in thousands):


	December 31, 2010			September 30, 2011
Preneed cemetery trust investments	$	81,771		$	64,580
Less: allowance for contract cancellation		(2,080	)		(2,258	)

	$	79,691		$	62,322

Upon cancellation of a preneed cemetery contract, a customer is generally entitled to receive a refund of the corpus and some or all of the earnings held in trust. In certain jurisdictions, the Company is obligated to fund any shortfall if the amounts deposited by the customer exceed the funds in trust, including some or all investment income. As a result, when realized or unrealized losses of a trust result in the trust being under-funded, the Company assesses whether it is responsible for replenishing the corpus of the trust, in which case a loss provision would be recorded.

The cost and fair market values associated with preneed cemetery trust investments at September 30, 2011 are detailed below (in thousands). The Company determines whether or not the assets in the preneed cemetery trusts have an other-than-temporary impairment on a security-by-security basis. This assessment is made based upon a number of criteria, including the length of time a security has been in a loss position, changes in market conditions and concerns related to the specific issuer. If a loss is considered to be other-than-temporary, the cost basis of the security is adjusted downward to its fair market value. Any reduction in the cost basis due to an other-than-temporary impairment is recorded in Deferred preneed cemetery receipts held in trust. There will be no impact on earnings unless and until such time that this asset is withdrawn from the trust in accordance with state regulations at an amount that is less than its original basis.


			Unrealized		Unrealized
	Cost		Gains		Losses			Fair Market Value
Cash and money market accounts	$	1,139	$	—	$	—		$	1,139
Fixed income securities:
Corporate debt		39,016		405		(3,264	)		36,157
Other		2		—		—			2
Common stock		31,326		49		(8,808	)		22,567
Mutual funds:
Equity		3,769		33		—			3,802

Trust securities	$	75,252	$	487	$	(12,072	)	$	63,667


Accrued investment income	$	913						$	913


Preneed cemetery trust investments								$	64,580


Fair market value as a percentage of cost									84.6	%

The estimated maturities of the fixed income securities included above are as follows (in thousands):


Due in one year or less	$	—
Due in one to five years		2,576
Due in five to ten years		12,273
Thereafter		21,310

	$	36,159

Preneed cemetery trust investment security transactions recorded in Interest income and other, net in the Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2010 and 2011 are as follows (in thousands):


	For the three months						For the nine months
	ended September 30,						ended September 30,
	2010			2011			2010			2011
Investment income	$	844		$	840		$	2,423		$	2,704
Realized gains		3,182			3,779			8,938			13,871
Realized losses		(27	)		(597	)		(733	)		(1,143	)
Expenses and taxes		(130	)		(252	)		(449	)		(1,105	)
Increase in deferred preneed cemetery receipts held in trust		(3,869	)		(3,770	)		(10,179	)		(14,327	)

	$	—		$	—		$	—		$	—

Purchases and sales of investments in the preneed cemetery trusts were as follows (in thousands):


	For the three months						For the nine months
	ended September 30,						ended September 30,
	2010			2011			2010			2011
Purchases	$	(10,449	)	$	(42,832	)	$	(42,818	)	$	(87,897	)
Sales		10,028			51,730			41,214			97,406

Preneed Funeral Trust Investments

Preneed funeral trust investments represent trust fund assets that the Company expects to withdraw when the services and merchandise are provided. Preneed funeral contracts are secured by funds paid by the customer to the Company. Preneed funeral trust investments are reduced by the trust earnings the Company has been allowed to withdraw prior to performance by the Company and amounts received from customers that are not required to be deposited into trust, pursuant to various state laws. The components of preneed funeral trust investments in our Consolidated Balance Sheets at December 31, 2010 and September 30, 2011 are as follows (in thousands):


	December 31, 2010			September 30, 2011
Preneed funeral trust investments	$	83,324		$	73,245
Less: allowance for contract cancellation		(2,181	)		(2,447	)

	$	81,143		$	70,798

Upon cancellation of a preneed funeral contract, a customer is generally entitled to receive a refund of the corpus and some or all of the earnings held in trust. In certain jurisdictions, the Company is obligated to fund any shortfall if the amounts deposited by the customer exceed the funds in trust, including some or all investment income. As a result, when realized or unrealized losses of a trust result in the trust being under-funded, the Company assesses whether it is responsible for replenishing the corpus of the trust, in which case a loss provision would be recorded.

The cost and fair market values associated with preneed funeral trust investments at September 30, 2011 are detailed below (in thousands). The Company determines whether or not the assets in the preneed funeral trusts have an other-than-temporary impairment on a security-by-security basis. This assessment is made based upon a number of criteria including the length of time a security has been in a loss position, changes in market conditions and concerns related to the specific issuer. If a loss is considered to be other-than-temporary, the cost basis of the security is adjusted downward to its fair market value. Any reduction in the cost basis due to an other-than-temporary impairment is recorded as a reduction to Deferred preneed funeral receipts held in trust. There will be no impact on earnings unless and until such time that this asset is withdrawn from the trust in accordance with state regulations at an amount that is less than its original basis.


			Unrealized		Unrealized			Fair Market
	Cost		Gains		Losses			Value
Cash and money market accounts	$	10,173	$	—	$	—		$	10,173
Fixed income securities:
U.S. Treasury debt		5,657		127		(36	)		5,748
Mortgage backed securities		540		16		(3	)		553
Corporate debt		26,291		464		(1,886	)		24,869
Common stock		22,908		116		(6,079	)		16,945
Mutual funds:
Equity		9,301		—		(1,681	)		7,620
Fixed income		4,405		151		(88	)		4,468
Other investments		2,268		—		—			2,268

Trust securities	$	81,543	$	874	$	(9,773	)	$	72,644


Accrued investment income	$	601						$	601


Preneed funeral trust investments								$	73,245


Fair market value as a percentage of cost									89.1	%

The estimated maturities of the fixed income securities included above are as follows (in thousands):


Due in one year or less	$	1,402
Due in one to five years		4,636
Due in five to ten years		10,071
Thereafter		15,061

	$	31,170

Preneed funeral trust investment security transactions recorded in Interest income and other, net in the Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, 2010 and 2011 are as follows (in thousands):


	For the three months						For the nine months
	ended September 30,						ended September 30,
	2010			2011			2010			2011
Investment income	$	845		$	625		$	2,425		$	2,177
Realized gains		4,469			2,241			9,645			10,611
Realized losses		(20	)		(608	)		(496	)		(1,096	)
Expenses and taxes		(154	)		(259	)		(662	)		(987	)
Increase in deferred preneed funeral receipts held in trust		(5,140	)		(1,999	)		(10,912	)		(10,705	)

	$	—		$	—		$	—		$	—

Purchases and sales of investments in the preneed funeral trusts were as follows (in thousands):


	For the three months						For the nine months
	ended September 30,						ended September 30,
	2010			2011			2010			2011
Purchases	$	(1,520	)	$	(26,857	)	$	(3,972	)	$	(71,560	)
Sales		17			25,867			2,791			68,404