|
|
|
|
|
|
|
|
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 March 31, 2015, the Partnership operated 303 cemeteries in 27 states and Puerto Rico, of which 272 are owned and 31 are operated under lease, management or operating agreements. The Partnership also owned and operated 98 funeral homes in 19 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 March 31, 2015 and for the three months ended March 31, 2015 and 2014 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, 2014 condensed consolidated balance sheet data was derived from audited financial statements included in the Company’s 2014 Annual Report on Form 10-K (“2014 Form 10-K”), but does not include all disclosures required by GAAP, which are presented in the Company’s 2014 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 31 cemeteries under long-term lease, 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 15 cemeteries under long-term lease, operating or management agreements that do not qualify as acquisitions for accounting purposes, including 13 cemeteries related to the transaction with the Archdiocese of Philadelphia that closed in the second quarter of 2014. 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 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 lease, operating or management 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.
New Accounting Pronouncements
In the second quarter of 2014, the Financial Accounting Standards Board issued Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which supersedes the revenue recognition requirements in “Topic 605 - Revenue Recognition” and most industry-specific guidance. The core principle of ASU 2014-09 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. On April 29, 2015, the Financial Accounting Standards Board issued for public comment a proposed update that would defer the effective date of ASU 2014-09 by one year. The Company is currently in the process of evaluating the potential impact of this update on its financial statements.
In the first quarter of 2015, the Financial Accounting Standards Board issued Update No. 2015-02, “Consolidation (Topic 810)” (“ASU 2015-02”), which amends previous consolidation analysis guidance. ASU 2015-02 requires companies to consider revised consolidation criteria regarding limited partnerships and similar legal entities. The amendments are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. Early application is permitted. The Company is currently in the process of evaluating the impact of this update, which is not expected to have a significant impact on the Company’s financial position, results of operations, or cash flows.
In the second quarter of 2015, the Financial Accounting Standards Board issued Update No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”), which changes the presentation of debt issuance costs. ASU 2015-03 requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by ASU 2015-03. The amendments in the update are effective for annual reporting periods beginning after December 15, 2015, including interim periods within those reporting periods. Early application is permitted. The Company is currently in the process of evaluating the impact of this update, which is not expected to have a significant impact on its financial position, results of operations, or cash flows.
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 trusts and perpetual care trusts, allowance for cancellations, unit-based compensation, merchandise liability, deferred sales revenue, deferred margin, deferred merchandise trust investment earnings, deferred obtaining costs, assets and liabilities obtained via business combinations 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.
|
2. | LONG-TERM ACCOUNTS RECEIVABLE, NET OF ALLOWANCE |
Long-term accounts receivable, net, consists of the following:
As of | ||||||||
March 31, 2015 |
December 31, 2014 |
|||||||
(in thousands) | ||||||||
Customer receivables |
$ | 200,643 | $ | 194,537 | ||||
Unearned finance income |
(20,911 | ) | (20,360 | ) | ||||
Allowance for contract cancellations |
(23,215 | ) | (22,138 | ) | ||||
|
|
|
|
|||||
156,517 | 152,039 | |||||||
Less: current portion, net of allowance |
65,429 | 62,503 | ||||||
|
|
|
|
|||||
Long-term portion, net of allowance |
$ | 91,088 | $ | 89,536 | ||||
|
|
|
|
Activity in the allowance for contract cancellations is as follows:
For the three months ended March 31, | ||||||||
2015 | 2014 | |||||||
(in thousands) | ||||||||
Balance - Beginning of period |
$ | 22,138 | $ | 20,275 | ||||
Provision for cancellations |
6,072 | 5,031 | ||||||
Charge-offs - net |
(4,995 | ) | (4,057 | ) | ||||
|
|
|
|
|||||
Balance - End of period |
$ | 23,215 | $ | 21,249 | ||||
|
|
|
|
There have been no changes to the Company’s long-term accounts receivable accounting policies since the filing of the Company’s 2014 Form 10-K.
|
3. | CEMETERY PROPERTY |
Cemetery property consists of the following:
As of | ||||||||
March 31, 2015 |
December 31, 2014 |
|||||||
(in thousands) | ||||||||
Developed land |
$ | 79,134 | $ | 79,058 | ||||
Undeveloped land |
172,141 | 172,238 | ||||||
Mausoleum crypts and lawn crypts |
78,518 | 78,524 | ||||||
Other land |
10,028 | 10,028 | ||||||
|
|
|
|
|||||
Total |
$ | 339,821 | $ | 339,848 | ||||
|
|
|
|
|
4. | PROPERTY AND EQUIPMENT |
Major classes of property and equipment follow:
As of | ||||||||
March 31, 2015 |
December 31, 2014 |
|||||||
(in thousands) | ||||||||
Building and improvements |
$ | 108,615 | $ | 108,178 | ||||
Furniture and equipment |
50,019 | 49,290 | ||||||
|
|
|
|
|||||
158,634 | 157,468 | |||||||
Less: accumulated depreciation |
(59,065 | ) | (57,077 | ) | ||||
|
|
|
|
|||||
Property and equipment - net |
$ | 99,569 | $ | 100,391 | ||||
|
|
|
|
Depreciation expense was $2.4 million and $2.0 million during the three months ended March 31, 2015 and 2014, respectively.
|
5. | MERCHANDISE TRUSTS |
At March 31, 2015, 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 primarily in securities that are currently paying dividends or distributions. These investments include Master Limited Partnerships and global equity securities; |
• | Fixed maturity debt securities issued by various corporate entities; 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 $8.4 million and $8.3 million of investments held in trust by the West Virginia Funeral Directors Association at March 31, 2015 and December 31, 2014, 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 their fair value.
The cost and market value associated with the assets held in the merchandise trusts at March 31, 2015 and December 31, 2014 were as follows:
As of March 31, 2015 |
Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
||||||||||||
(in thousands) | ||||||||||||||||
Short-term investments |
$ | 31,591 | $ | — | $ | — | $ | 31,591 | ||||||||
Fixed maturities: |
||||||||||||||||
U.S. State and local government agency |
65 | 15 | — | 80 | ||||||||||||
Corporate debt securities |
12,566 | 67 | (376 | ) | 12,257 | |||||||||||
Other debt securities |
7,182 | — | (8 | ) | 7,174 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed maturities |
19,813 | 82 | (384 | ) | 19,511 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Mutual funds - debt securities |
246,768 | 978 | (9,047 | ) | 238,699 | |||||||||||
Mutual funds - equity securities |
129,452 | 2,772 | (1,578 | ) | 130,646 | |||||||||||
Equity securities |
54,888 | 3,500 | (4,336 | ) | 54,052 | |||||||||||
Other invested assets |
5,469 | — | (343 | ) | 5,126 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total managed investments |
$ | 487,981 | $ | 7,332 | $ | (15,688 | ) | $ | 479,625 | |||||||
|
|
|
|
|
|
|
|
|||||||||
West Virginia Trust Receivable |
8,382 | — | — | 8,382 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 496,363 | $ | 7,332 | $ | (15,688 | ) | $ | 488,007 | |||||||
|
|
|
|
|
|
|
|
As of December 31, 2014 |
Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
||||||||||||
(in thousands) | ||||||||||||||||
Short-term investments |
$ | 52,521 | $ | — | $ | — | $ | 52,521 | ||||||||
Fixed maturities: |
||||||||||||||||
U.S. State and local government agency |
270 | — | (1 | ) | 269 | |||||||||||
Corporate debt securities |
9,400 | 23 | (447 | ) | 8,976 | |||||||||||
Other debt securities |
7,157 | — | (18 | ) | 7,139 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed maturities |
16,827 | 23 | (466 | ) | 16,384 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Mutual funds - debt securities |
150,477 | 869 | (8,666 | ) | 142,680 | |||||||||||
Mutual funds - equity securities |
167,353 | 12,568 | (463 | ) | 179,458 | |||||||||||
Equity securities |
81,639 | 4,167 | (5,507 | ) | 80,299 | |||||||||||
Other invested assets |
5,400 | — | (241 | ) | 5,159 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total managed investments |
$ | 474,217 | $ | 17,627 | $ | (15,343 | ) | $ | 476,501 | |||||||
|
|
|
|
|
|
|
|
|||||||||
West Virginia Trust Receivable |
8,319 | — | — | 8,319 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 482,536 | $ | 17,627 | $ | (15,343 | ) | $ | 484,820 | |||||||
|
|
|
|
|
|
|
|
The contractual maturities of debt securities as of March 31, 2015 are presented below:
As of March 31, 2015 |
Less than 1 year |
1 year through 5 years |
6 years through 10 years |
More than 10 years |
||||||||||||
(in thousands) | ||||||||||||||||
U.S. State and local government agency |
$ | — | $ | 18 | $ | 60 | $ | 2 | ||||||||
Corporate debt securities |
— | 7,052 | 5,205 | — | ||||||||||||
Other debt securities |
891 | 6,283 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed maturities |
$ | 891 | $ | 13,353 | $ | 5,265 | $ | 2 | ||||||||
|
|
|
|
|
|
|
|
Temporary Declines in Fair Value
The Company evaluates declines in fair value below cost of each individual asset held in the merchandise trusts on a quarterly basis.
An aging of unrealized losses on the Company’s investments in fixed maturities and equity securities at March 31, 2015 and December 31, 2014 is presented below:
Less than 12 months | 12 Months or more | Total | Number of Securities in Loss Position |
|||||||||||||||||||||||||
As of March 31, 2015 |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
||||||||||||||||||||||
(in thousands, except number of securities data) | ||||||||||||||||||||||||||||
Fixed maturities: |
||||||||||||||||||||||||||||
Corporate debt securities |
$ | 6,070 | $ | 214 | $ | 2,539 | $ | 162 | $ | 8,609 | $ | 376 | 46 | |||||||||||||||
Other debt securities |
2,384 | 2 | 4,790 | 6 | 7,174 | 8 | 13 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total fixed maturities |
8,454 | 216 | 7,329 | 168 | 15,783 | 384 | 59 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Mutual funds - debt securities |
87,042 | 617 | 132,090 | 8,430 | 219,132 | 9,047 | 28 | |||||||||||||||||||||
Mutual funds - equity securities |
49,100 | 1,578 | — | — | 49,100 | 1,578 | 4 | |||||||||||||||||||||
Equity securities |
26,285 | 3,671 | 3,511 | 665 | 29,796 | 4,336 | 56 | |||||||||||||||||||||
Other invested assets |
— | — | 4,918 | 343 | 4,918 | 343 | 1 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 170,881 | $ | 6,082 | $ | 147,848 | $ | 9,606 | $ | 318,729 | $ | 15,688 | 148 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months | 12 Months or more | Total | Number of Securities in Loss Position |
|||||||||||||||||||||||||
As of December 31, 2014 |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
||||||||||||||||||||||
(in thousands, except number of securities data) | ||||||||||||||||||||||||||||
Fixed maturities: |
||||||||||||||||||||||||||||
U.S. State and local government agency |
$ | 143 | $ | 1 | $ | — | $ | — | $ | 143 | $ | 1 | 3 | |||||||||||||||
Corporate debt securities |
5,905 | 342 | 1,506 | 105 | 7,411 | 447 | 58 | |||||||||||||||||||||
Other debt securities |
2,370 | 8 | 4,769 | 10 | 7,139 | 18 | 13 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total fixed maturities |
8,418 | 351 | 6,275 | 115 | 14,693 | 466 | 74 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Mutual funds - debt securities |
32,072 | 1,039 | 95,629 | 7,627 | 127,701 | 8,666 | 34 | |||||||||||||||||||||
Mutual funds - equity securities |
4,147 | 463 | — | — | 4,147 | 463 | 2 | |||||||||||||||||||||
Equity securities |
44,563 | 4,641 | 3,909 | 866 | 48,472 | 5,507 | 60 | |||||||||||||||||||||
Other invested assets |
— | — | 4,881 | 241 | 4,881 | 241 | 1 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 89,200 | $ | 6,494 | $ | 110,694 | $ | 8,849 | $ | 199,894 | $ | 15,343 | 171 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were 148 and 171 securities in an unrealized loss position in merchandise trusts as of March 31, 2015 and December 31, 2014, respectively, of which 38 and 39, respectively, were in an unrealized loss position for more than twelve months. For all securities in an unrealized loss position, the Company evaluated the severity of the impairment and length of time that a security has been in a loss position and has concluded the decline in fair value below the asset’s cost was temporary in nature. In addition, the Company is not aware of any circumstances that would prevent the future market value recovery for these securities.
Other-Than-Temporary Impairment of Trust Assets
During the three months ended March 31, 2015, the Company determined that there were two securities with an aggregate cost basis of approximately $0.6 million and an aggregate fair value of approximately $0.4 million, resulting in an impairment of $0.2 million, wherein such impairment was considered to be other-than-temporary. Accordingly, the Company adjusted the cost 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.
During the three months ended March 31, 2014, the Company determined that there were no other than temporary impairments to the investment portfolio in the merchandise trusts.
A reconciliation of the Company’s merchandise trust activities for the three months ended March 31, 2015 is presented below:
Fair Value at |
Contributions |
Distributions |
Interest/ |
Capital Gain |
Realized Loss (1) |
Taxes |
Fees |
Unrealized |
Fair Value at |
|||||||||
(in thousands) | ||||||||||||||||||
$484,820 |
16,540 | (11,537) | 3,874 | — | 5,702 | (15) | (737) | (10,640) | $488,007 |
(1) | Includes $3.9 million representing the net effect of other-than-temporary impairment charges and the release of previously realized impairment charges, as a result of sales and maturities of impaired securities. |
The Company made net contributions into the trusts of approximately $5.0 million during the three months ended March 31, 2015. During the three months ended March 31, 2015, purchases and sales of securities available for sale included in trust investments were approximately $239.0 million and $239.1 million, respectively.
|
6. | PERPETUAL CARE TRUSTS |
At March 31, 2015, 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 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 cost and market value associated with the assets held in the perpetual care trusts at March 31, 2015 and December 31, 2014 were as follows:
As of March 31, 2015 |
Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
||||||||||||
(in thousands) | ||||||||||||||||
Short-term investments |
$ | 30,012 | $ | — | $ | — | $ | 30,012 | ||||||||
Fixed maturities: |
||||||||||||||||
U.S. Government and federal agency |
100 | 15 | — | 115 | ||||||||||||
U.S. State and local government agency |
27 | 1 | — | 28 | ||||||||||||
Corporate debt securities |
24,774 | 224 | (782 | ) | 24,216 | |||||||||||
Other debt securities |
371 | — | — | 371 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed maturities |
25,272 | 240 | (782 | ) | 24,730 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Mutual funds - debt securities |
202,419 | 414 | (4,777 | ) | 198,056 | |||||||||||
Mutual funds - equity securities |
77,034 | 12,763 | (40 | ) | 89,757 | |||||||||||
Equity securities |
2,167 | 489 | (35 | ) | 2,621 | |||||||||||
Other invested assets |
7 | — | — | 7 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 336,911 | $ | 13,906 | $ | (5,634 | ) | $ | 345,183 | |||||||
|
|
|
|
|
|
|
|
As of December 31, 2014 |
Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value | ||||||||||||
(in thousands) | ||||||||||||||||
Short-term investments |
$ | 26,644 | $ | — | $ | — | $ | 26,644 | ||||||||
Fixed maturities: |
||||||||||||||||
U.S. Government and federal agency |
100 | 16 | — | 116 | ||||||||||||
U.S. State and local government agency |
78 | 1 | — | 79 | ||||||||||||
Corporate debt securities |
24,275 | 104 | (913 | ) | 23,466 | |||||||||||
Other debt securities |
371 | — | — | 371 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed maturities |
24,824 | 121 | (913 | ) | 24,032 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Mutual funds - debt securities |
128,735 | 379 | (5,220 | ) | 123,894 | |||||||||||
Mutual funds - equity securities |
103,701 | 23,003 | (1,268 | ) | 125,436 | |||||||||||
Equity securities |
30,617 | 14,704 | (247 | ) | 45,074 | |||||||||||
Other invested assets |
25 | — | — | 25 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 314,546 | $ | 38,207 | $ | (7,648 | ) | $ | 345,105 | |||||||
|
|
|
|
|
|
|
|
The contractual maturities of debt securities as of March 31, 2015 were as follows:
As of March 31, 2015 |
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 |
$ | — | $ | 115 | $ | — | $ | — | ||||||||
U.S. State and local government agency |
28 | — | — | — | ||||||||||||
Corporate debt securities |
455 | 14,723 | 9,018 | 20 | ||||||||||||
Other debt securities |
371 | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed maturities |
$ | 854 | $ | 14,838 | $ | 9,018 | $ | 20 | ||||||||
|
|
|
|
|
|
|
|
Temporary Declines in Fair Value
The Company evaluates declines in fair value below cost of each individual asset held in the perpetual care trusts on a quarterly basis.
An aging of unrealized losses on the Company’s investments in fixed maturities and equity securities at March 31, 2015 and December 31, 2014 is presented below:
Less than 12 months | 12 Months or more | Total |
Number of Securities in Loss Position |
|||||||||||||||||||||||||
As of March 31, 2015 |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
||||||||||||||||||||||
(in thousands, except number of securities data) | ||||||||||||||||||||||||||||
Fixed maturities: |
||||||||||||||||||||||||||||
Corporate debt securities |
$ | 10,571 | $ | 516 | $ | 3,861 | $ | 266 | $ | 14,432 | $ | 782 | 55 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total fixed maturities |
10,571 | 516 | 3,861 | 266 | 14,432 | 782 | 55 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Mutual funds - debt securities |
18,437 | 529 | 119,177 | 4,248 | 137,614 | 4,777 | 30 | |||||||||||||||||||||
Mutual funds - equity securities |
3,458 | 40 | — | — | 3,458 | 40 | 2 | |||||||||||||||||||||
Equity securities |
237 | 32 | 619 | 3 | 856 | 35 | 25 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 32,703 | $ | 1,117 | $ | 123,657 | $ | 4,517 | $ | 156,360 | $ | 5,634 | 112 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months | 12 Months or more | Total | Number
of Securities in Loss Position |
|||||||||||||||||||||||||
As of December 31, 2014 |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
||||||||||||||||||||||
(in thousands, except number of securities data) | ||||||||||||||||||||||||||||
Fixed maturities: |
||||||||||||||||||||||||||||
Corporate debt securities |
$ | 14,434 | $ | 798 | $ | 2,519 | $ | 115 | $ | 16,953 | $ | 913 | 83 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total fixed maturities |
14,434 | 798 | 2,519 | 115 | 16,953 | 913 | 83 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Mutual funds - debt securities |
30,345 | 768 | 86,814 | 4,452 | 117,159 | 5,220 | 31 | |||||||||||||||||||||
Mutual funds - equity securities |
13,035 | 1,268 | — | — | 13,035 | 1,268 | 5 | |||||||||||||||||||||
Equity securities |
3,866 | 245 | 620 | 2 | 4,486 | 247 | 29 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 61,680 | $ | 3,079 | $ | 89,953 | $ | 4,569 | $ | 151,633 | $ | 7,648 | 148 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
There were 112 and 148 securities in an unrealized loss position in perpetual care trusts as of March 31, 2015 and December 31, 2014, respectively, of which 22 and 20, respectively, were in an unrealized loss position for more than twelve months. For all securities in an unrealized loss position, the Company evaluated the severity of the impairment and length of time that a security has been in a loss position and has concluded the decline in fair value below the asset’s cost was temporary in nature. In addition, the Company is not aware of any circumstances that would prevent the future market value recovery for these securities.
Other-Than-Temporary Impairment of Trust Assets
During the three months ended March 31, 2015 and 2014, the Company determined that there were no other than temporary impairments to the investment portfolio in the perpetual care trusts.
A reconciliation of the Company’s perpetual care trust activities for the three months ended March 31, 2015 is presented below:
Fair |
Contributions | Distributions | Interest/ Dividends |
Capital Gain Distributions |
Realized Gain/ Loss (1) |
Taxes | Fees | Unrealized Change in Fair Value |
Fair Value at 3/31/2015 |
|||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||||||
$345,105 |
6,478 | (2,793 | ) | 3,649 | — | 15,699 | (134 | ) | (534 | ) | (22,287 | ) | $ | 345,183 |
(1) | Includes $12.0 million representing the net effect of other-than-temporary impairment charges and the release of previously realized impairment charges, as a result of sales and maturities of impaired securities. |
The Company made net contributions into the trusts of approximately $3.7 million during the three months ended March 31, 2015. During the three months ended March 31, 2015, purchases and sales of securities available for sale included in trust investments were approximately $233.9 million and $230.7 million, respectively.
|
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.
There have been no changes in the goodwill balance during the period and a summary by reportable segment is as follows:
Cemeteries |
Funeral Homes |
|
||||||||||||||||||
Southeast | Northeast | West | Total | |||||||||||||||||
(in thousands) | ||||||||||||||||||||
Goodwill as of March 31, 2015 and December 31, 2014 |
$ | 8,950 | $ | 3,288 | $ | 11,948 | $ | 34,650 | $ | 58,836 |
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 lease, management and operating agreements. All of the intangible assets are amortized as a component of depreciation and amortization in the unaudited condensed consolidated statement of operations. The major classes of intangible assets are as follows:
As of March 31, 2015 | As of December 31, 2014 | |||||||||||||||||||||||
Gross Carrying Amount |
Accumulated Amortization |
Net Intangible Asset |
Gross Carrying Amount |
Accumulated Amortization |
Net Intangible Asset |
|||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Amortized intangible assets: |
||||||||||||||||||||||||
Lease and management agreements |
$ | 59,758 | $ | (830 | ) | $ | 58,928 | $ | 59,758 | $ | (581 | ) | $ | 59,177 | ||||||||||
Underlying contract value |
6,239 | (897 | ) | 5,342 | 6,239 | (858 | ) | 5,381 | ||||||||||||||||
Non-compete agreements |
5,250 | (2,375 | ) | 2,875 | 5,250 | (2,126 | ) | 3,124 | ||||||||||||||||
Other intangible assets |
1,439 | (143 | ) | 1,296 | 1,439 | (131 | ) | 1,308 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total intangible assets |
$ | 72,686 | $ | (4,245 | ) | $ | 68,441 | $ | 72,686 | $ | (3,696 | ) | $ | 68,990 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
See Note 7 of the Company’s 2014 Form 10-K for a discussion of the Company’s intangible assets, including its contract-based intangible asset pertaining to the lease and management agreements with the Archdiocese of Philadelphia.
|
8. | LONG-TERM DEBT |
The Company had the following outstanding debt:
As of | ||||||||
March 31, 2015 |
December 31, 2014 |
|||||||
(in thousands) | ||||||||
7.875% Senior Notes, due June 2021 |
$ | 175,000 | $ | 175,000 | ||||
Credit Facility, due December 2019: |
||||||||
Working Capital Draws |
97,902 | 85,902 | ||||||
Acquisition Draws |
25,000 | 25,000 | ||||||
Notes payable - acquisition debt |
819 | 861 | ||||||
Notes payable - acquisition non-competes |
2,396 | 2,765 | ||||||
Insurance and vehicle financing |
1,121 | 1,632 | ||||||
|
|
|
|
|||||
Total |
302,238 | 291,160 | ||||||
Less current portion |
1,664 | 2,251 | ||||||
Less unamortized bond and note payable discounts |
3,390 | 3,531 | ||||||
|
|
|
|
|||||
Long-term portion |
$ | 297,184 | $ | 285,378 | ||||
|
|
|
|
This note includes a summary of material terms of the Company’s senior notes and revolving credit facility. For a more detailed description of the Company’s long-term debt agreements, see the Company’s 2014 Form 10-K.
7.875% Senior Notes due 2021
On May 28, 2013, the Company issued $175.0 million aggregate principal amount of 7.875% Senior Notes due 2021 (the “Senior Notes”). The Company pays 7.875% 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, since December 1, 2013. The net proceeds from the offering were used to retire a $150.0 million aggregate principal amount of 10.25% Senior Notes due 2017 and the remaining proceeds were used for general corporate purposes. The Senior Notes were issued at 97.832% of par resulting in gross proceeds of $171.2 million with an original issue discount of approximately $3.8 million. The Company incurred debt issuance costs and fees of approximately $4.6 million. These costs and fees are deferred and are amortized over the life of the Senior Notes. Based on trades made on March 31, 2015, the Company has estimated the fair value of its Senior Notes to be in excess of par and trading at a premium of 4.94%, which would imply a fair value of $183.6 million at March 31, 2015. The Senior Notes are valued using Level 2 inputs as defined by the Fair Value Measurements and Disclosures topic of the ASC in Note 15. As of March 31, 2015, the Company was in compliance with all applicable covenants of the Senior Notes.
Credit Facility
On December 19, 2014, the Partnership entered into the Fourth Amended and Restated Credit Agreement (the “Credit Agreement”).
The Credit Agreement provides for a single revolving credit facility of $180.0 million (the “Credit Facility”) maturing on December 19, 2019. Additionally the Credit Agreement provides for an uncommitted ability to increase the Credit Facility by an additional $70.0 million. The summary of the material terms of the Credit Agreement is set forth below. Capitalized terms, which are not defined in the following description, shall have the meaning assigned to such terms in the Credit Agreement.
At March 31, 2015, amounts outstanding under the Credit Facility bore interest at rates of approximately 3.5%. The interest rates on the Credit Facility are calculated as follows:
• | For Eurodollar Rate Loans, the outstanding principal amount thereof bears interest for each Interest Period at a rate per annum equal to the Eurodollar Rate for the Interest Period plus the Applicable Rate for Eurodollar Rate Loans; and |
• | For Base Rate Loans and Swing Line Loans, the outstanding principal amount thereof bears interest from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate for Base Rate Loans. |
In addition, the Borrowers must pay a Letter of Credit Fee for each Letter of Credit equal to the Applicable Rate for Letter of Credit Fees times the daily amount to be drawn under such Letter of Credit. The Applicable Rate is determined based on the Consolidated Leverage Ratio of the Partnership and its Subsidiaries, and ranges from 2.25% to 4.00% for Eurodollar Rate Loans and Letter of Credit Fees, and 1.25% to 3.00% for Base Rate Loans. The current Applicable Rate for each of: (i) Eurodollar Rate Loans and Letter of Credit Fees is 3.75% and (ii) Base Rate Loans is 2.75% based on the current Consolidated Leverage Ratio. The Credit Agreement also requires the Borrowers to pay a quarterly unused commitment fee, which is calculated based on the amount by which the commitments under the Credit Agreement exceed the usage of such commitments.
The Credit Agreement contains financial covenants, pursuant to which the Borrowers and the Guarantors will not permit:
• | Consolidated EBITDA for any Measurement Period to be less than the sum of (i) $80.0 million plus (ii) 80% of the aggregate of all Consolidated EBITDA for each Permitted Acquisition completed after June 30, 2014; |
• | the Consolidated Debt Service Coverage Ratio to be less than 2.50 to 1.0 for any Measurement Period; and |
• | the Consolidated Leverage Ratio to be greater than 4.00 to 1.0 for any period. |
The covenants include, among other limitations, limitations on: (i) liens, (ii) the creation or incurrence of debt, (iii) investments and acquisitions, (iv) dispositions of property, (v) dividends, distributions and redemptions, and (vi) transactions with Affiliates.
The Credit Agreement provides that two types of draws are permitted with respect to the Credit Facility: Acquisition Draws and Working Capital Draws. The proceeds of Acquisition Draws may be utilized by the Borrowers to finance Permitted Acquisitions, the purchase and construction of mausoleums and related costs or the net amount of Merchandise Trust deposits made after the Closing Date under the Credit Agreement, irrespective of whether such amounts relate to new or existing cemeteries or funeral homes. The proceeds of Working Capital Draws, Letters of Credit and Swing Line Loans may be utilized by the Borrowers to finance working capital requirements, Capital Expenditures and for other general corporate purposes. The borrowing of Working Capital Advances is subject to a borrowing formula of 85% of Eligible Receivables. This limit was $133.0 million at March 31, 2015.
Each Acquisition Draw is subject to equal quarterly amortization of the principal amount of such draw, with annual principal payments comprised of ten percent (10%) of the related draw amount, commencing on the second anniversary of such draw, with the remaining principal due on the Maturity Date, subject to certain mandatory prepayment requirements. Working Capital Draws are due on the Maturity Date, subject to certain mandatory prepayment requirements.
As of March 31, 2015, there were $122.9 million of outstanding borrowings under the Credit Facility. The Credit Facility approximates fair value as it consists of multiple current LIBOR borrowings with maturities of 90 days or less, with amounts that can be rolled-over or reborrowed at market rates. It is valued using Level 2 inputs. As of March 31, 2015, the Company complied with all applicable financial covenants.
The Company routinely incurs debt financing costs and fees when borrowing under, or making amendments to, the Credit Facility. These costs and fees are deferred and are amortized over the life of the Credit Facility.
|
9. | INCOME TAXES |
As of March 31, 2015, the Company’s taxable corporate subsidiaries had federal net operating loss carryforwards of approximately $223.1 million, which will begin to expire in 2017 and $272.0 million in state net operating loss carryforwards, 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 bases 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 months ended March 31, 2015 and 2014 is based upon the estimated annual effective tax rates expected to be applicable to the Company for 2015 and 2014, 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 2011 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 March 31, 2015 and December 31, 2014, deferred cemetery revenues, net, consisted of the following:
As of | ||||||||
March 31, 2015 |
December 31, 2014 |
|||||||
(in thousands) | ||||||||
Deferred cemetery revenue |
$ | 477,420 | $ | 456,632 | ||||
Deferred merchandise trust revenue |
116,678 | 104,717 | ||||||
Deferred merchandise trust unrealized gains (losses) |
(8,356 | ) | 2,284 | |||||
Deferred pre-acquisition margin |
139,344 | 140,378 | ||||||
Deferred cost of goods sold |
(63,209 | ) | (60,603 | ) | ||||
|
|
|
|
|||||
Deferred cemetery revenues, net |
$ | 661,877 | $ | 643,408 | ||||
|
|
|
|
|||||
Deferred selling and obtaining costs |
$ | 102,904 | $ | 97,795 |
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.
|
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 March 31, 2015, 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 twenty five years and options to renew at varying terms. Expenses under these operating leases were $0.7 million and $0.6 million during the three months ended March 31, 2015 and 2014, respectively.
The operating leases will result in future payments in the following approximate amounts from March 31, 2015 and beyond:
(in thousands) | ||||
2015 |
$ | 2,000 | ||
2016 |
2,444 | |||
2017 |
2,305 | |||
2018 |
1,912 | |||
2019 |
1,726 | |||
2020 |
613 | |||
Thereafter |
1,744 | |||
|
|
|||
Total |
$ | 12,744 | ||
|
|
Other
See Note 13 of the Company’s 2014 Form 10-K for a discussion of the Company’s future commitments related to its agreements with the Archdiocese of Philadelphia.
|
12. | PARTNERS’ CAPITAL |
The table below reflects the activity relating to the number of common units outstanding for the three months ended March 31, 2015:
Three months ended March 31, 2015 |
||||
Outstanding, beginning of period |
29,203,595 | |||
Unit distributions |
54,622 | |||
Unit-based compensation |
1,148 | |||
|
|
|||
Outstanding, end of period |
29,259,365 | |||
|
|
Unit-Based Compensation
The Company has issued to certain key employees, management, and directors unit-based compensation in the form of unit appreciation rights and restricted phantom partnership units.
Compensation expense recognized related to unit appreciation rights and restricted phantom unit awards for the three months ended March 31, 2015 and 2014 are summarized in the table below:
Three months ended March 31, |
||||||||
2015 | 2014 | |||||||
(in thousands) | ||||||||
Unit appreciation rights |
$ | 21 | $ | 19 | ||||
Restricted phantom units |
251 | 252 | ||||||
|
|
|
|
|||||
Total unit-based compensation expense |
$ | 272 | $ | 271 | ||||
|
|
|
|
As of March 31, 2015, there was approximately $0.1 million in non-vested unit appreciation rights expense outstanding. These unit appreciation rights will be expensed through 2018.
The diluted weighted average number of limited partners’ units outstanding presented on the unaudited condensed consolidated statement of operations does not include 185,194 units for the three months ended March 31, 2015, as their effects would be anti-dilutive.
During the three months ended March 31, 2015, 1,148 common units were issued under the StoneMor Partners L.P. Long-Term Incentive Plans. See Note 11 of the Company’s 2014 Form 10-K for a description of the Company’s Long-Term Incentive Plans.
Other Unit Issuances
Pursuant to a Common Unit Purchase Agreement, dated May 19, 2014, by and between the Company and American Cemeteries Infrastructure Investors, LLC, a Delaware limited liability company (“ACII”), the Company issued 54,622 common units to ACII in lieu of a cash distribution of approximately $1.4 million on February 16, 2015. Refer to the Company’s 2014 Form 10-K, Note 17, for a detailed discussion of the Common Unit Purchase Agreement.
|
13. | ACQUISITIONS |
First Quarter 2014 Acquisition
On January 16, 2014, certain subsidiaries of the Company (collectively the “Buyer”) entered into an Asset Purchase and Sale Agreement with Carriage Cemetery Services, Inc. (the “Seller”). Pursuant to the Agreement, the Buyer acquired one cemetery in Florida, including certain related assets, and assumed certain related liabilities. In consideration for the net assets acquired, the Buyer paid the Seller $0.2 million in cash.
The table below reflects the Company’s final assessment of the fair value of net assets acquired and the resulting gain on bargain purchase.
Final Assessment |
||||
(in thousands) | ||||
Assets: |
||||
Accounts receivable |
$ | 47 | ||
Cemetery property |
470 | |||
Property and equipment |
140 | |||
Merchandise trusts, restricted, at fair value |
2,607 | |||
Perpetual care trusts, restricted, at fair value |
691 | |||
|
|
|||
Total assets |
3,955 | |||
|
|
|||
Liabilities: |
||||
Deferred margin |
1,035 | |||
Merchandise liabilities |
956 | |||
Deferred tax liability |
641 | |||
Perpetual care trust corpus |
691 | |||
Other liabilities |
20 | |||
|
|
|||
Total liabilities |
3,343 | |||
|
|
|||
Fair value of net assets acquired |
612 | |||
|
|
|||
Consideration paid |
200 | |||
|
|
|||
Gain on bargain purchase |
$ | 412 | ||
|
|
If the acquisition noted above had been consummated at the beginning of the comparable prior annual reporting period, on a pro forma basis, for the three months ended March 31, 2015 and 2014, consolidated revenues, consolidated net income (loss), and net income (loss) per limited partner unit (basic and diluted) would have been as follows:
Three months ended March 31, | ||||||||
2015 | 2014 | |||||||
(in thousands, except per unit data) | ||||||||
Revenue |
$ | 67,417 | $ | 64,398 | ||||
Net income (loss) |
(8,883 | ) | (2 | ) | ||||
Net income (loss) per limited partner unit (basic and diluted) |
$ | (.30 | ) | $ | — |
These pro forma results are unaudited, have been prepared for comparative purposes only, and may include certain adjustments such as increased interest on the acquisition of debt, changes in the timing of financing events and the recognition of gains on acquisitions. They do not purport to be indicative of the results of operations which actually would have resulted had this acquisition been in effect at the beginning of the comparable prior annual reporting period or of future results of operations of the location.
The property acquired in the first quarter of 2014 has contributed less than $0.1 million of revenue and operating profit for both the three months ended March 31, 2015 and the three months ended March 31, 2014.
Other 2014 Acquisitions and Agreements
See Note 13 of the Company’s 2014 Form 10-K for a discussion of the Company’s other 2014 acquisitions and its agreements with the Archdiocese of Philadelphia. There have been no changes during the period to assessments of the fair value of net assets acquired in the other 2014 acquisitions. Those amounts may be retrospectively adjusted as additional information is received.
|
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.
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 its 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 is as follows:
As of and for the three months ended March 31, 2015:
Cemeteries | Funeral Homes |
|||||||||||||||||||||||||||
Southeast | Northeast | West | Corporate | Adjustment | Total | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||
Sales |
$ | 24,290 | $ | 12,485 | $ | 10,695 | $ | — | $ | — | $ | (17,526 | ) | $ | 29,944 | |||||||||||||
Service and other |
11,886 | 8,759 | 9,000 | — | — | (7,432 | ) | 22,213 | ||||||||||||||||||||
Funeral home |
— | — | — | 17,415 | — | (2,155 | ) | 15,260 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues |
36,176 | 21,244 | 19,695 | 17,415 | — | (27,113 | ) | 67,417 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Costs and expenses |
||||||||||||||||||||||||||||
Cost of sales |
5,268 | 2,329 | 2,140 | — | — | (2,654 | ) | 7,083 | ||||||||||||||||||||
Cemetery |
6,834 | 5,853 | 3,578 | — | — | — | 16,265 | |||||||||||||||||||||
Selling |
9,147 | 5,005 | 4,152 | — | 200 | (4,594 | ) | 13,910 | ||||||||||||||||||||
General and administrative |
4,670 | 2,540 | 2,119 | — | — | — | 9,329 | |||||||||||||||||||||
Corporate overhead |
— | — | — | — | 8,734 | — | 8,734 | |||||||||||||||||||||
Depreciation and amortization |
800 | 607 | 499 | 799 | 247 | — | 2,952 | |||||||||||||||||||||
Funeral home |
— | — | — | 12,611 | — | (461 | ) | 12,150 | ||||||||||||||||||||
Acquisition related costs, net of recoveries |
— | — | — | — | 349 | — | 349 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total costs and expenses |
26,719 | 16,334 | 12,488 | 13,410 | 9,530 | (7,709 | ) | 70,772 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Operating profit (loss) |
$ | 9,457 | $ | 4,910 | $ | 7,207 | $ | 4,005 | $ | (9,530 | ) | $ | (19,404 | ) | $ | (3,355 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total assets |
$ | 645,407 | $ | 428,673 | $ | 444,411 | $ | 165,828 | $ | 21,034 | $ | — | $ | 1,705,353 | ||||||||||||||
Amortization of cemetery property |
$ | 1,130 | $ | 485 | $ | 390 | $ | — | $ | — | $ | (417 | ) | $ | 1,588 | |||||||||||||
Long lived asset additions |
$ | 1,505 | $ | 746 | $ | 497 | $ | 218 | $ | 84 | $ | — | $ | 3,050 | ||||||||||||||
Goodwill |
$ | 8,950 | $ | 3,288 | $ | 11,948 | $ | 34,650 | $ | — | $ | — | $ | 58,836 |
As of and for the three months ended March 31, 2014:
Cemeteries | Funeral Homes |
|||||||||||||||||||||||||||
Southeast | Northeast | West | Corporate | Adjustment | Total | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||
Sales |
$ | 22,101 | $ | 7,410 | $ | 9,821 | $ | — | $ | — | $ | (10,458 | ) | $ | 28,874 | |||||||||||||
Service and other |
11,626 | 10,604 | 10,923 | — | — | (9,387 | ) | 23,766 | ||||||||||||||||||||
Funeral home |
— | — | — | 13,254 | — | (1,507 | ) | 11,747 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues |
33,727 | 18,014 | 20,744 | 13,254 | — | (21,352 | ) | 64,387 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Costs and expenses |
||||||||||||||||||||||||||||
Cost of sales |
4,792 | 1,678 | 2,777 | — | — | (1,743 | ) | 7,504 | ||||||||||||||||||||
Cemetery |
6,395 | 3,235 | 3,699 | — | — | — | 13,329 | |||||||||||||||||||||
Selling |
7,248 | 2,802 | 3,234 | — | 545 | (2,640 | ) | 11,189 | ||||||||||||||||||||
General and administrative |
4,096 | 1,492 | 2,057 | — | — | — | 7,645 | |||||||||||||||||||||
Corporate overhead |
— | — | — | — | 7,456 | — | 7,456 | |||||||||||||||||||||
Depreciation and amortization |
633 | 236 | 521 | 736 | 242 | — | 2,368 | |||||||||||||||||||||
Funeral home |
— | — | — | 9,504 | — | (218 | ) | 9,286 | ||||||||||||||||||||
Acquisition related costs, net of recoveries |
— | — | — | — | 349 | — | 349 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total costs and expenses |
23,164 | 9,443 | 12,288 | 10,240 | 8,592 | (4,601 | ) | 59,126 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Operating profit (loss) |
$ | 10,563 | $ | 8,571 | $ | 8,456 | $ | 3,014 | $ | (8,592 | ) | $ | (16,751 | ) | $ | 5,261 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total assets |
$ | 580,359 | $ | 318,937 | $ | 434,562 | $ | 135,819 | $ | 23,290 | $ | — | $ | 1,492,967 | ||||||||||||||
Amortization of cemetery property |
$ | 1,251 | $ | 583 | $ | 1,223 | $ | — | $ | — | $ | (334 | ) | $ | 2,723 | |||||||||||||
Long lived asset additions |
$ | 1,564 | $ | 442 | $ | 1,041 | $ | 57 | $ | 52 | $ | — | $ | 3,156 | ||||||||||||||
Goodwill |
$ | 6,174 | $ | — | $ | 11,948 | $ | 30,615 | $ | — | $ | — | $ | 48,737 |
Results of individual operating segments are presented based on our management accounting practices and management structure. There is no comprehensive, authoritative body of guidance for management accounting equivalent to GAAP; therefore, the financial results of individual operating segments are not necessarily comparable with similar information for any other company. The management accounting process uses assumptions and allocations to measure performance of the operating segments. 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 unaudited condensed 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 unaudited condensed 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 unaudited condensed consolidated financial statements reflect Deferred Cemetery Revenue, Net, and Deferred Selling and Obtaining Costs on the unaudited condensed consolidated 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.
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.
On the Company’s unaudited condensed consolidated balance sheet, current assets, long-term accounts receivable and current liabilities are recorded at amounts that approximate fair value.
The following table displays the Company’s assets measured at fair value as of March 31, 2015 and December 31, 2014.
As of March 31, 2015
Merchandise Trust
Level 1 | Level 2 | Total | ||||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Short-term investments |
$ | 31,591 | $ | — | $ | 31,591 | ||||||
Fixed maturities: |
||||||||||||
U.S. state and local government agency |
— | 80 | 80 | |||||||||
Corporate debt securities |
— | 12,257 | 12,257 | |||||||||
Other debt securities |
— | 7,174 | 7,174 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturity investments |
— | 19,511 | 19,511 | |||||||||
|
|
|
|
|
|
|||||||
Mutual funds - debt securities |
238,699 | — | 238,699 | |||||||||
Mutual funds - equity securities - real estate sector |
19,133 | — | 19,133 | |||||||||
Mutual funds - equity securities - energy sector |
12,815 | — | 12,815 | |||||||||
Mutual funds - equity securities - MLP’s |
21,308 | — | 21,308 | |||||||||
Mutual funds - equity securities - other |
77,390 | — | 77,390 | |||||||||
Equity securities: |
||||||||||||
Master limited partnerships |
25,224 | — | 25,224 | |||||||||
Global equity securities |
28,828 | — | 28,828 | |||||||||
Other invested assets |
— | 5,126 | 5,126 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 454,988 | $ | 24,637 | $ | 479,625 | ||||||
|
|
|
|
|
|
Perpetual Care Trust
Level 1 | Level 2 | Total | ||||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Short-term investments |
$ | 30,012 | $ | — | $ | 30,012 | ||||||
Fixed maturities: |
||||||||||||
U.S. government and federal agency |
115 | — | 115 | |||||||||
U.S. state and local government agency |
— | 28 | 28 | |||||||||
Corporate debt securities |
— | 24,216 | 24,216 | |||||||||
Other debt securities |
— | 371 | 371 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturity investments |
115 | 24,615 | 24,730 | |||||||||
|
|
|
|
|
|
|||||||
Mutual funds - debt securities |
198,056 | — | 198,056 | |||||||||
Mutual funds - equity securities - real estate sector |
17,052 | — | 17,052 | |||||||||
Mutual funds - equity securities - energy sector |
20,424 | — | 20,424 | |||||||||
Mutual funds - equity securities - MLP’s |
40,474 | — | 40,474 | |||||||||
Mutual funds - equity securities - other |
11,807 | — | 11,807 | |||||||||
Equity securities: |
||||||||||||
Master limited partnerships |
988 | — | 988 | |||||||||
Global equity securities |
1,633 | — | 1,633 | |||||||||
Other invested assets |
— | 7 | 7 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 320,561 | $ | 24,622 | $ | 345,183 | ||||||
|
|
|
|
|
|
As of December 31, 2014
Merchandise Trust
Level 1 | Level 2 | Total | ||||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Short-term investments |
$ | 52,521 | $ | — | $ | 52,521 | ||||||
Fixed maturities: |
||||||||||||
U.S. state and local government agency |
— | 269 | 269 | |||||||||
Corporate debt securities |
— | 8,976 | 8,976 | |||||||||
Other debt securities |
— | 7,139 | 7,139 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturity investments |
— | 16,384 | 16,384 | |||||||||
|
|
|
|
|
|
|||||||
Mutual funds - debt securities |
142,680 | — | 142,680 | |||||||||
Mutual funds - equity securities - real estate sector |
58,672 | — | 58,672 | |||||||||
Mutual funds - equity securities - energy sector |
7,733 | — | 7,733 | |||||||||
Mutual funds - equity securities - MLP’s |
22,927 | — | 22,927 | |||||||||
Mutual funds - equity securities - other |
90,126 | — | 90,126 | |||||||||
Equity securities: |
||||||||||||
Master limited partnerships |
50,091 | — | 50,091 | |||||||||
Global equity securities |
30,208 | — | 30,208 | |||||||||
Other invested assets |
— | 5,159 | 5,159 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 454,958 | $ | 21,543 | $ | 476,501 | ||||||
|
|
|
|
|
|
Perpetual Care Trust
Level 1 | Level 2 | Total | ||||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Short-term investments |
$ | 26,644 | $ | — | $ | 26,644 | ||||||
Fixed maturities: |
||||||||||||
U.S. government and federal agency |
116 | — | 116 | |||||||||
U.S. state and local government agency |
— | 79 | 79 | |||||||||
Corporate debt securities |
— | 23,466 | 23,466 | |||||||||
Other debt securities |
— | 371 | 371 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturity investments |
116 | 23,916 | 24,032 | |||||||||
|
|
|
|
|
|
|||||||
Mutual funds - debt securities |
123,894 | — | 123,894 | |||||||||
Mutual funds - equity securities - real estate sector |
41,753 | — | 41,753 | |||||||||
Mutual funds - equity securities - energy sector |
14,829 | — | 14,829 | |||||||||
Mutual funds - equity securities - MLP’s |
43,596 | — | 43,596 | |||||||||
Mutual funds - equity securities - other |
25,258 | — | 25,258 | |||||||||
Equity securities: |
||||||||||||
Master limited partnerships |
43,207 | — | 43,207 | |||||||||
Global equity securities |
1,867 | — | 1,867 | |||||||||
Other invested assets |
— | 25 | 25 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 321,164 | $ | 23,941 | $ | 345,105 | ||||||
|
|
|
|
|
|
Level 1 securities primarily consist of actively publicly traded money market funds, mutual funds and equity securities.
Level 2 securities primarily consist of corporate and other fixed income debt securities. The Company obtains pricing information for these securities from an independent pricing vendor. The pricing vendor uses various pricing models for each asset class that are consistent with what other market participants would use. The inputs and assumptions to the pricing vendor’s model are derived from market observable sources including benchmark yields, reported trades, broker/dealer quotes, issuer spreads, benchmark securities, bids, offers, and other market-related data. Since many fixed income securities do not trade on a daily basis, the pricing vendor uses available information as applicable such as benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. Thus, certain securities may not be priced using quoted prices, but rather determined from market observable information. These investments are included in Level 2. The Company reviews the information provided by the pricing vendor on a regular basis. In addition, the pricing vendor has an established process in place for the identification and resolution of potentially erroneous prices.
There were no level 3 assets.
|
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 March 31, 2015, the Partnership operated 303 cemeteries in 27 states and Puerto Rico, of which 272 are owned and 31 are operated under lease, management or operating agreements. The Partnership also owned and operated 98 funeral homes in 19 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 March 31, 2015 and for the three months ended March 31, 2015 and 2014 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, 2014 condensed consolidated balance sheet data was derived from audited financial statements included in the Company’s 2014 Annual Report on Form 10-K (“2014 Form 10-K”), but does not include all disclosures required by GAAP, which are presented in the Company’s 2014 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 31 cemeteries under long-term lease, 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 15 cemeteries under long-term lease, operating or management agreements that do not qualify as acquisitions for accounting purposes, including 13 cemeteries related to the transaction with the Archdiocese of Philadelphia that closed in the second quarter of 2014. 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 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 lease, operating or management 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.
New Accounting Pronouncements
In the second quarter of 2014, the Financial Accounting Standards Board issued Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”), which supersedes the revenue recognition requirements in “Topic 605 - Revenue Recognition” and most industry-specific guidance. The core principle of ASU 2014-09 is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. On April 29, 2015, the Financial Accounting Standards Board issued for public comment a proposed update that would defer the effective date of ASU 2014-09 by one year. The Company is currently in the process of evaluating the potential impact of this update on its financial statements.
In the first quarter of 2015, the Financial Accounting Standards Board issued Update No. 2015-02, “Consolidation (Topic 810)” (“ASU 2015-02”), which amends previous consolidation analysis guidance. ASU 2015-02 requires companies to consider revised consolidation criteria regarding limited partnerships and similar legal entities. The amendments are effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. Early application is permitted. The Company is currently in the process of evaluating the impact of this update, which is not expected to have a significant impact on the Company’s financial position, results of operations, or cash flows.
In the second quarter of 2015, the Financial Accounting Standards Board issued Update No. 2015-03, “Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs” (“ASU 2015-03”), which changes the presentation of debt issuance costs. ASU 2015-03 requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the related debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by ASU 2015-03. The amendments in the update are effective for annual reporting periods beginning after December 15, 2015, including interim periods within those reporting periods. Early application is permitted. The Company is currently in the process of evaluating the impact of this update, which is not expected to have a significant impact on its financial position, results of operations, or cash flows.
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 trusts and perpetual care trusts, allowance for cancellations, unit-based compensation, merchandise liability, deferred sales revenue, deferred margin, deferred merchandise trust investment earnings, deferred obtaining costs, assets and liabilities obtained via business combinations 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.
|
Long-term accounts receivable, net, consists of the following:
As of | ||||||||
March 31, 2015 |
December 31, 2014 |
|||||||
(in thousands) | ||||||||
Customer receivables |
$ | 200,643 | $ | 194,537 | ||||
Unearned finance income |
(20,911 | ) | (20,360 | ) | ||||
Allowance for contract cancellations |
(23,215 | ) | (22,138 | ) | ||||
|
|
|
|
|||||
156,517 | 152,039 | |||||||
Less: current portion, net of allowance |
65,429 | 62,503 | ||||||
|
|
|
|
|||||
Long-term portion, net of allowance |
$ | 91,088 | $ | 89,536 | ||||
|
|
|
|
Activity in the allowance for contract cancellations is as follows:
For the three months ended March 31, | ||||||||
2015 | 2014 | |||||||
(in thousands) | ||||||||
Balance - Beginning of period |
$ | 22,138 | $ | 20,275 | ||||
Provision for cancellations |
6,072 | 5,031 | ||||||
Charge-offs - net |
(4,995 | ) | (4,057 | ) | ||||
|
|
|
|
|||||
Balance - End of period |
$ | 23,215 | $ | 21,249 | ||||
|
|
|
|
|
Major classes of property and equipment follow:
As of | ||||||||
March 31, 2015 |
December 31, 2014 |
|||||||
(in thousands) | ||||||||
Building and improvements |
$ | 108,615 | $ | 108,178 | ||||
Furniture and equipment |
50,019 | 49,290 | ||||||
|
|
|
|
|||||
158,634 | 157,468 | |||||||
Less: accumulated depreciation |
(59,065 | ) | (57,077 | ) | ||||
|
|
|
|
|||||
Property and equipment - net |
$ | 99,569 | $ | 100,391 | ||||
|
|
|
|
Cemetery property consists of the following:
As of | ||||||||
March 31, 2015 |
December 31, 2014 |
|||||||
(in thousands) | ||||||||
Developed land |
$ | 79,134 | $ | 79,058 | ||||
Undeveloped land |
172,141 | 172,238 | ||||||
Mausoleum crypts and lawn crypts |
78,518 | 78,524 | ||||||
Other land |
10,028 | 10,028 | ||||||
|
|
|
|
|||||
Total |
$ | 339,821 | $ | 339,848 | ||||
|
|
|
|
|
The cost and market value associated with the assets held in the merchandise trusts at March 31, 2015 and December 31, 2014 were as follows:
As of March 31, 2015 |
Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
||||||||||||
(in thousands) | ||||||||||||||||
Short-term investments |
$ | 31,591 | $ | — | $ | — | $ | 31,591 | ||||||||
Fixed maturities: |
||||||||||||||||
U.S. State and local government agency |
65 | 15 | — | 80 | ||||||||||||
Corporate debt securities |
12,566 | 67 | (376 | ) | 12,257 | |||||||||||
Other debt securities |
7,182 | — | (8 | ) | 7,174 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed maturities |
19,813 | 82 | (384 | ) | 19,511 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Mutual funds - debt securities |
246,768 | 978 | (9,047 | ) | 238,699 | |||||||||||
Mutual funds - equity securities |
129,452 | 2,772 | (1,578 | ) | 130,646 | |||||||||||
Equity securities |
54,888 | 3,500 | (4,336 | ) | 54,052 | |||||||||||
Other invested assets |
5,469 | — | (343 | ) | 5,126 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total managed investments |
$ | 487,981 | $ | 7,332 | $ | (15,688 | ) | $ | 479,625 | |||||||
|
|
|
|
|
|
|
|
|||||||||
West Virginia Trust Receivable |
8,382 | — | — | 8,382 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 496,363 | $ | 7,332 | $ | (15,688 | ) | $ | 488,007 | |||||||
|
|
|
|
|
|
|
|
As of December 31, 2014 |
Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
||||||||||||
(in thousands) | ||||||||||||||||
Short-term investments |
$ | 52,521 | $ | — | $ | — | $ | 52,521 | ||||||||
Fixed maturities: |
||||||||||||||||
U.S. State and local government agency |
270 | — | (1 | ) | 269 | |||||||||||
Corporate debt securities |
9,400 | 23 | (447 | ) | 8,976 | |||||||||||
Other debt securities |
7,157 | — | (18 | ) | 7,139 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed maturities |
16,827 | 23 | (466 | ) | 16,384 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Mutual funds - debt securities |
150,477 | 869 | (8,666 | ) | 142,680 | |||||||||||
Mutual funds - equity securities |
167,353 | 12,568 | (463 | ) | 179,458 | |||||||||||
Equity securities |
81,639 | 4,167 | (5,507 | ) | 80,299 | |||||||||||
Other invested assets |
5,400 | — | (241 | ) | 5,159 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total managed investments |
$ | 474,217 | $ | 17,627 | $ | (15,343 | ) | $ | 476,501 | |||||||
|
|
|
|
|
|
|
|
|||||||||
West Virginia Trust Receivable |
8,319 | — | — | 8,319 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 482,536 | $ | 17,627 | $ | (15,343 | ) | $ | 484,820 | |||||||
|
|
|
|
|
|
|
|
The contractual maturities of debt securities as of March 31, 2015 are presented below:
As of March 31, 2015 |
Less than 1 year |
1 year through 5 years |
6 years through 10 years |
More than 10 years |
||||||||||||
(in thousands) | ||||||||||||||||
U.S. State and local government agency |
$ | — | $ | 18 | $ | 60 | $ | 2 | ||||||||
Corporate debt securities |
— | 7,052 | 5,205 | — | ||||||||||||
Other debt securities |
891 | 6,283 | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed maturities |
$ | 891 | $ | 13,353 | $ | 5,265 | $ | 2 | ||||||||
|
|
|
|
|
|
|
|
An aging of unrealized losses on the Company’s investments in fixed maturities and equity securities at March 31, 2015 and December 31, 2014 is presented below:
Less than 12 months | 12 Months or more | Total | Number of Securities in Loss Position |
|||||||||||||||||||||||||
As of March 31, 2015 |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
||||||||||||||||||||||
(in thousands, except number of securities data) | ||||||||||||||||||||||||||||
Fixed maturities: |
||||||||||||||||||||||||||||
Corporate debt securities |
$ | 6,070 | $ | 214 | $ | 2,539 | $ | 162 | $ | 8,609 | $ | 376 | 46 | |||||||||||||||
Other debt securities |
2,384 | 2 | 4,790 | 6 | 7,174 | 8 | 13 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total fixed maturities |
8,454 | 216 | 7,329 | 168 | 15,783 | 384 | 59 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Mutual funds - debt securities |
87,042 | 617 | 132,090 | 8,430 | 219,132 | 9,047 | 28 | |||||||||||||||||||||
Mutual funds - equity securities |
49,100 | 1,578 | — | — | 49,100 | 1,578 | 4 | |||||||||||||||||||||
Equity securities |
26,285 | 3,671 | 3,511 | 665 | 29,796 | 4,336 | 56 | |||||||||||||||||||||
Other invested assets |
— | — | 4,918 | 343 | 4,918 | 343 | 1 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 170,881 | $ | 6,082 | $ | 147,848 | $ | 9,606 | $ | 318,729 | $ | 15,688 | 148 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months | 12 Months or more | Total | Number of Securities in Loss Position |
|||||||||||||||||||||||||
As of December 31, 2014 |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
||||||||||||||||||||||
(in thousands, except number of securities data) | ||||||||||||||||||||||||||||
Fixed maturities: |
||||||||||||||||||||||||||||
U.S. State and local government agency |
$ | 143 | $ | 1 | $ | — | $ | — | $ | 143 | $ | 1 | 3 | |||||||||||||||
Corporate debt securities |
5,905 | 342 | 1,506 | 105 | 7,411 | 447 | 58 | |||||||||||||||||||||
Other debt securities |
2,370 | 8 | 4,769 | 10 | 7,139 | 18 | 13 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total fixed maturities |
8,418 | 351 | 6,275 | 115 | 14,693 | 466 | 74 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Mutual funds - debt securities |
32,072 | 1,039 | 95,629 | 7,627 | 127,701 | 8,666 | 34 | |||||||||||||||||||||
Mutual funds - equity securities |
4,147 | 463 | — | — | 4,147 | 463 | 2 | |||||||||||||||||||||
Equity securities |
44,563 | 4,641 | 3,909 | 866 | 48,472 | 5,507 | 60 | |||||||||||||||||||||
Other invested assets |
— | — | 4,881 | 241 | 4,881 | 241 | 1 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 89,200 | $ | 6,494 | $ | 110,694 | $ | 8,849 | $ | 199,894 | $ | 15,343 | 171 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of the Company’s merchandise trust activities for the three months ended March 31, 2015 is presented below:
Fair Value at |
Contributions |
Distributions |
Interest/ |
Capital Gain |
Realized Loss (1) |
Taxes |
Fees |
Unrealized |
Fair Value at |
|||||||||
(in thousands) | ||||||||||||||||||
$484,820 |
16,540 | (11,537) | 3,874 | — | 5,702 | (15) | (737) | (10,640) | $488,007 |
(1) | Includes $3.9 million representing the net effect of other-than-temporary impairment charges and the release of previously realized impairment charges, as a result of sales and maturities of impaired securities. |
The cost and market value associated with the assets held in the perpetual care trusts at March 31, 2015 and December 31, 2014 were as follows:
As of March 31, 2015 |
Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
||||||||||||
(in thousands) | ||||||||||||||||
Short-term investments |
$ | 30,012 | $ | — | $ | — | $ | 30,012 | ||||||||
Fixed maturities: |
||||||||||||||||
U.S. Government and federal agency |
100 | 15 | — | 115 | ||||||||||||
U.S. State and local government agency |
27 | 1 | — | 28 | ||||||||||||
Corporate debt securities |
24,774 | 224 | (782 | ) | 24,216 | |||||||||||
Other debt securities |
371 | — | — | 371 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed maturities |
25,272 | 240 | (782 | ) | 24,730 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Mutual funds - debt securities |
202,419 | 414 | (4,777 | ) | 198,056 | |||||||||||
Mutual funds - equity securities |
77,034 | 12,763 | (40 | ) | 89,757 | |||||||||||
Equity securities |
2,167 | 489 | (35 | ) | 2,621 | |||||||||||
Other invested assets |
7 | — | — | 7 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 336,911 | $ | 13,906 | $ | (5,634 | ) | $ | 345,183 | |||||||
|
|
|
|
|
|
|
|
As of December 31, 2014 |
Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value | ||||||||||||
(in thousands) | ||||||||||||||||
Short-term investments |
$ | 26,644 | $ | — | $ | — | $ | 26,644 | ||||||||
Fixed maturities: |
||||||||||||||||
U.S. Government and federal agency |
100 | 16 | — | 116 | ||||||||||||
U.S. State and local government agency |
78 | 1 | — | 79 | ||||||||||||
Corporate debt securities |
24,275 | 104 | (913 | ) | 23,466 | |||||||||||
Other debt securities |
371 | — | — | 371 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed maturities |
24,824 | 121 | (913 | ) | 24,032 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Mutual funds - debt securities |
128,735 | 379 | (5,220 | ) | 123,894 | |||||||||||
Mutual funds - equity securities |
103,701 | 23,003 | (1,268 | ) | 125,436 | |||||||||||
Equity securities |
30,617 | 14,704 | (247 | ) | 45,074 | |||||||||||
Other invested assets |
25 | — | — | 25 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 314,546 | $ | 38,207 | $ | (7,648 | ) | $ | 345,105 | |||||||
|
|
|
|
|
|
|
|
The contractual maturities of debt securities as of March 31, 2015 were as follows:
As of March 31, 2015 |
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 |
$ | — | $ | 115 | $ | — | $ | — | ||||||||
U.S. State and local government agency |
28 | — | — | — | ||||||||||||
Corporate debt securities |
455 | 14,723 | 9,018 | 20 | ||||||||||||
Other debt securities |
371 | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed maturities |
$ | 854 | $ | 14,838 | $ | 9,018 | $ | 20 | ||||||||
|
|
|
|
|
|
|
|
An aging of unrealized losses on the Company’s investments in fixed maturities and equity securities at March 31, 2015 and December 31, 2014 is presented below:
Less than 12 months | 12 Months or more | Total |
Number of Securities in Loss Position |
|||||||||||||||||||||||||
As of March 31, 2015 |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
||||||||||||||||||||||
(in thousands, except number of securities data) | ||||||||||||||||||||||||||||
Fixed maturities: |
||||||||||||||||||||||||||||
Corporate debt securities |
$ | 10,571 | $ | 516 | $ | 3,861 | $ | 266 | $ | 14,432 | $ | 782 | 55 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total fixed maturities |
10,571 | 516 | 3,861 | 266 | 14,432 | 782 | 55 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Mutual funds - debt securities |
18,437 | 529 | 119,177 | 4,248 | 137,614 | 4,777 | 30 | |||||||||||||||||||||
Mutual funds - equity securities |
3,458 | 40 | — | — | 3,458 | 40 | 2 | |||||||||||||||||||||
Equity securities |
237 | 32 | 619 | 3 | 856 | 35 | 25 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 32,703 | $ | 1,117 | $ | 123,657 | $ | 4,517 | $ | 156,360 | $ | 5,634 | 112 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months | 12 Months or more | Total | Number
of Securities in Loss Position |
|||||||||||||||||||||||||
As of December 31, 2014 |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
||||||||||||||||||||||
(in thousands, except number of securities data) | ||||||||||||||||||||||||||||
Fixed maturities: |
||||||||||||||||||||||||||||
Corporate debt securities |
$ | 14,434 | $ | 798 | $ | 2,519 | $ | 115 | $ | 16,953 | $ | 913 | 83 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total fixed maturities |
14,434 | 798 | 2,519 | 115 | 16,953 | 913 | 83 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Mutual funds - debt securities |
30,345 | 768 | 86,814 | 4,452 | 117,159 | 5,220 | 31 | |||||||||||||||||||||
Mutual funds - equity securities |
13,035 | 1,268 | — | — | 13,035 | 1,268 | 5 | |||||||||||||||||||||
Equity securities |
3,866 | 245 | 620 | 2 | 4,486 | 247 | 29 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 61,680 | $ | 3,079 | $ | 89,953 | $ | 4,569 | $ | 151,633 | $ | 7,648 | 148 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of the Company’s perpetual care trust activities for the three months ended March 31, 2015 is presented below:
Fair |
Contributions | Distributions | Interest/ Dividends |
Capital Gain Distributions |
Realized Gain/ Loss (1) |
Taxes | Fees | Unrealized Change in Fair Value |
Fair Value at 3/31/2015 |
|||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||||||||||
$345,105 |
6,478 | (2,793 | ) | 3,649 | — | 15,699 | (134 | ) | (534 | ) | (22,287 | ) | $ | 345,183 |
(1) | Includes $12.0 million representing the net effect of other-than-temporary impairment charges and the release of previously realized impairment charges, as a result of sales and maturities of impaired securities. |
|
There have been no changes in the goodwill balance during the period and a summary by reportable segment is as follows:
Cemeteries |
Funeral Homes |
|
||||||||||||||||||
Southeast | Northeast | West | Total | |||||||||||||||||
(in thousands) | ||||||||||||||||||||
Goodwill as of March 31, 2015 and December 31, 2014 |
$ | 8,950 | $ | 3,288 | $ | 11,948 | $ | 34,650 | $ | 58,836 |
The major classes of intangible assets are as follows:
As of March 31, 2015 | As of December 31, 2014 | |||||||||||||||||||||||
Gross Carrying Amount |
Accumulated Amortization |
Net Intangible Asset |
Gross Carrying Amount |
Accumulated Amortization |
Net Intangible Asset |
|||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Amortized intangible assets: |
||||||||||||||||||||||||
Lease and management agreements |
$ | 59,758 | $ | (830 | ) | $ | 58,928 | $ | 59,758 | $ | (581 | ) | $ | 59,177 | ||||||||||
Underlying contract value |
6,239 | (897 | ) | 5,342 | 6,239 | (858 | ) | 5,381 | ||||||||||||||||
Non-compete agreements |
5,250 | (2,375 | ) | 2,875 | 5,250 | (2,126 | ) | 3,124 | ||||||||||||||||
Other intangible assets |
1,439 | (143 | ) | 1,296 | 1,439 | (131 | ) | 1,308 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total intangible assets |
$ | 72,686 | $ | (4,245 | ) | $ | 68,441 | $ | 72,686 | $ | (3,696 | ) | $ | 68,990 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company had the following outstanding debt:
As of | ||||||||
March 31, 2015 |
December 31, 2014 |
|||||||
(in thousands) | ||||||||
7.875% Senior Notes, due June 2021 |
$ | 175,000 | $ | 175,000 | ||||
Credit Facility, due December 2019: |
||||||||
Working Capital Draws |
97,902 | 85,902 | ||||||
Acquisition Draws |
25,000 | 25,000 | ||||||
Notes payable - acquisition debt |
819 | 861 | ||||||
Notes payable - acquisition non-competes |
2,396 | 2,765 | ||||||
Insurance and vehicle financing |
1,121 | 1,632 | ||||||
|
|
|
|
|||||
Total |
302,238 | 291,160 | ||||||
Less current portion |
1,664 | 2,251 | ||||||
Less unamortized bond and note payable discounts |
3,390 | 3,531 | ||||||
|
|
|
|
|||||
Long-term portion |
$ | 297,184 | $ | 285,378 | ||||
|
|
|
|
|
At March 31, 2015 and December 31, 2014, deferred cemetery revenues, net, consisted of the following:
As of | ||||||||
March 31, 2015 |
December 31, 2014 |
|||||||
(in thousands) | ||||||||
Deferred cemetery revenue |
$ | 477,420 | $ | 456,632 | ||||
Deferred merchandise trust revenue |
116,678 | 104,717 | ||||||
Deferred merchandise trust unrealized gains (losses) |
(8,356 | ) | 2,284 | |||||
Deferred pre-acquisition margin |
139,344 | 140,378 | ||||||
Deferred cost of goods sold |
(63,209 | ) | (60,603 | ) | ||||
|
|
|
|
|||||
Deferred cemetery revenues, net |
$ | 661,877 | $ | 643,408 | ||||
|
|
|
|
|||||
Deferred selling and obtaining costs |
$ | 102,904 | $ | 97,795 |
|
The operating leases will result in future payments in the following approximate amounts from March 31, 2015 and beyond:
(in thousands) | ||||
2015 |
$ | 2,000 | ||
2016 |
2,444 | |||
2017 |
2,305 | |||
2018 |
1,912 | |||
2019 |
1,726 | |||
2020 |
613 | |||
Thereafter |
1,744 | |||
|
|
|||
Total |
$ | 12,744 | ||
|
|
|
The table below reflects the activity relating to the number of common units outstanding for the three months ended March 31, 2015:
Three months ended March 31, 2015 |
||||
Outstanding, beginning of period |
29,203,595 | |||
Unit distributions |
54,622 | |||
Unit-based compensation |
1,148 | |||
|
|
|||
Outstanding, end of period |
29,259,365 | |||
|
|
Compensation expense recognized related to unit appreciation rights and restricted phantom unit awards for the three months ended March 31, 2015 and 2014 are summarized in the table below:
Three months ended March 31, |
||||||||
2015 | 2014 | |||||||
(in thousands) | ||||||||
Unit appreciation rights |
$ | 21 | $ | 19 | ||||
Restricted phantom units |
251 | 252 | ||||||
|
|
|
|
|||||
Total unit-based compensation expense |
$ | 272 | $ | 271 | ||||
|
|
|
|
|
If the acquisition noted above had been consummated at the beginning of the comparable prior annual reporting period, on a pro forma basis, for the three months ended March 31, 2015 and 2014, consolidated revenues, consolidated net income (loss), and net income (loss) per limited partner unit (basic and diluted) would have been as follows:
Three months ended March 31, | ||||||||
2015 | 2014 | |||||||
(in thousands, except per unit data) | ||||||||
Revenue |
$ | 67,417 | $ | 64,398 | ||||
Net income (loss) |
(8,883 | ) | (2 | ) | ||||
Net income (loss) per limited partner unit (basic and diluted) |
$ | (.30 | ) | $ | — |
The table below reflects the Company’s final assessment of the fair value of net assets acquired and the resulting gain on bargain purchase.
Final Assessment |
||||
(in thousands) | ||||
Assets: |
||||
Accounts receivable |
$ | 47 | ||
Cemetery property |
470 | |||
Property and equipment |
140 | |||
Merchandise trusts, restricted, at fair value |
2,607 | |||
Perpetual care trusts, restricted, at fair value |
691 | |||
|
|
|||
Total assets |
3,955 | |||
|
|
|||
Liabilities: |
||||
Deferred margin |
1,035 | |||
Merchandise liabilities |
956 | |||
Deferred tax liability |
641 | |||
Perpetual care trust corpus |
691 | |||
Other liabilities |
20 | |||
|
|
|||
Total liabilities |
3,343 | |||
|
|
|||
Fair value of net assets acquired |
612 | |||
|
|
|||
Consideration paid |
200 | |||
|
|
|||
Gain on bargain purchase |
$ | 412 | ||
|
|
|
Segment information is as follows:
As of and for the three months ended March 31, 2015:
Cemeteries | Funeral Homes |
|||||||||||||||||||||||||||
Southeast | Northeast | West | Corporate | Adjustment | Total | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||
Sales |
$ | 24,290 | $ | 12,485 | $ | 10,695 | $ | — | $ | — | $ | (17,526 | ) | $ | 29,944 | |||||||||||||
Service and other |
11,886 | 8,759 | 9,000 | — | — | (7,432 | ) | 22,213 | ||||||||||||||||||||
Funeral home |
— | — | — | 17,415 | — | (2,155 | ) | 15,260 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues |
36,176 | 21,244 | 19,695 | 17,415 | — | (27,113 | ) | 67,417 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Costs and expenses |
||||||||||||||||||||||||||||
Cost of sales |
5,268 | 2,329 | 2,140 | — | — | (2,654 | ) | 7,083 | ||||||||||||||||||||
Cemetery |
6,834 | 5,853 | 3,578 | — | — | — | 16,265 | |||||||||||||||||||||
Selling |
9,147 | 5,005 | 4,152 | — | 200 | (4,594 | ) | 13,910 | ||||||||||||||||||||
General and administrative |
4,670 | 2,540 | 2,119 | — | — | — | 9,329 | |||||||||||||||||||||
Corporate overhead |
— | — | — | — | 8,734 | — | 8,734 | |||||||||||||||||||||
Depreciation and amortization |
800 | 607 | 499 | 799 | 247 | — | 2,952 | |||||||||||||||||||||
Funeral home |
— | — | — | 12,611 | — | (461 | ) | 12,150 | ||||||||||||||||||||
Acquisition related costs, net of recoveries |
— | — | — | — | 349 | — | 349 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total costs and expenses |
26,719 | 16,334 | 12,488 | 13,410 | 9,530 | (7,709 | ) | 70,772 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Operating profit (loss) |
$ | 9,457 | $ | 4,910 | $ | 7,207 | $ | 4,005 | $ | (9,530 | ) | $ | (19,404 | ) | $ | (3,355 | ) | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total assets |
$ | 645,407 | $ | 428,673 | $ | 444,411 | $ | 165,828 | $ | 21,034 | $ | — | $ | 1,705,353 | ||||||||||||||
Amortization of cemetery property |
$ | 1,130 | $ | 485 | $ | 390 | $ | — | $ | — | $ | (417 | ) | $ | 1,588 | |||||||||||||
Long lived asset additions |
$ | 1,505 | $ | 746 | $ | 497 | $ | 218 | $ | 84 | $ | — | $ | 3,050 | ||||||||||||||
Goodwill |
$ | 8,950 | $ | 3,288 | $ | 11,948 | $ | 34,650 | $ | — | $ | — | $ | 58,836 |
As of and for the three months ended March 31, 2014:
Cemeteries | Funeral Homes |
|||||||||||||||||||||||||||
Southeast | Northeast | West | Corporate | Adjustment | Total | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||
Sales |
$ | 22,101 | $ | 7,410 | $ | 9,821 | $ | — | $ | — | $ | (10,458 | ) | $ | 28,874 | |||||||||||||
Service and other |
11,626 | 10,604 | 10,923 | — | — | (9,387 | ) | 23,766 | ||||||||||||||||||||
Funeral home |
— | — | — | 13,254 | — | (1,507 | ) | 11,747 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues |
33,727 | 18,014 | 20,744 | 13,254 | — | (21,352 | ) | 64,387 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Costs and expenses |
||||||||||||||||||||||||||||
Cost of sales |
4,792 | 1,678 | 2,777 | — | — | (1,743 | ) | 7,504 | ||||||||||||||||||||
Cemetery |
6,395 | 3,235 | 3,699 | — | — | — | 13,329 | |||||||||||||||||||||
Selling |
7,248 | 2,802 | 3,234 | — | 545 | (2,640 | ) | 11,189 | ||||||||||||||||||||
General and administrative |
4,096 | 1,492 | 2,057 | — | — | — | 7,645 | |||||||||||||||||||||
Corporate overhead |
— | — | — | — | 7,456 | — | 7,456 | |||||||||||||||||||||
Depreciation and amortization |
633 | 236 | 521 | 736 | 242 | — | 2,368 | |||||||||||||||||||||
Funeral home |
— | — | — | 9,504 | — | (218 | ) | 9,286 | ||||||||||||||||||||
Acquisition related costs, net of recoveries |
— | — | — | — | 349 | — | 349 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total costs and expenses |
23,164 | 9,443 | 12,288 | 10,240 | 8,592 | (4,601 | ) | 59,126 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Operating profit (loss) |
$ | 10,563 | $ | 8,571 | $ | 8,456 | $ | 3,014 | $ | (8,592 | ) | $ | (16,751 | ) | $ | 5,261 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total assets |
$ | 580,359 | $ | 318,937 | $ | 434,562 | $ | 135,819 | $ | 23,290 | $ | — | $ | 1,492,967 | ||||||||||||||
Amortization of cemetery property |
$ | 1,251 | $ | 583 | $ | 1,223 | $ | — | $ | — | $ | (334 | ) | $ | 2,723 | |||||||||||||
Long lived asset additions |
$ | 1,564 | $ | 442 | $ | 1,041 | $ | 57 | $ | 52 | $ | — | $ | 3,156 | ||||||||||||||
Goodwill |
$ | 6,174 | $ | — | $ | 11,948 | $ | 30,615 | $ | — | $ | — | $ | 48,737 |
|
The following table displays the Company’s assets measured at fair value as of March 31, 2015 and December 31, 2014.
As of March 31, 2015
Merchandise Trust
Level 1 | Level 2 | Total | ||||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Short-term investments |
$ | 31,591 | $ | — | $ | 31,591 | ||||||
Fixed maturities: |
||||||||||||
U.S. state and local government agency |
— | 80 | 80 | |||||||||
Corporate debt securities |
— | 12,257 | 12,257 | |||||||||
Other debt securities |
— | 7,174 | 7,174 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturity investments |
— | 19,511 | 19,511 | |||||||||
|
|
|
|
|
|
|||||||
Mutual funds - debt securities |
238,699 | — | 238,699 | |||||||||
Mutual funds - equity securities - real estate sector |
19,133 | — | 19,133 | |||||||||
Mutual funds - equity securities - energy sector |
12,815 | — | 12,815 | |||||||||
Mutual funds - equity securities - MLP’s |
21,308 | — | 21,308 | |||||||||
Mutual funds - equity securities - other |
77,390 | — | 77,390 | |||||||||
Equity securities: |
||||||||||||
Master limited partnerships |
25,224 | — | 25,224 | |||||||||
Global equity securities |
28,828 | — | 28,828 | |||||||||
Other invested assets |
— | 5,126 | 5,126 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 454,988 | $ | 24,637 | $ | 479,625 | ||||||
|
|
|
|
|
|
Perpetual Care Trust
Level 1 | Level 2 | Total | ||||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Short-term investments |
$ | 30,012 | $ | — | $ | 30,012 | ||||||
Fixed maturities: |
||||||||||||
U.S. government and federal agency |
115 | — | 115 | |||||||||
U.S. state and local government agency |
— | 28 | 28 | |||||||||
Corporate debt securities |
— | 24,216 | 24,216 | |||||||||
Other debt securities |
— | 371 | 371 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturity investments |
115 | 24,615 | 24,730 | |||||||||
|
|
|
|
|
|
|||||||
Mutual funds - debt securities |
198,056 | — | 198,056 | |||||||||
Mutual funds - equity securities - real estate sector |
17,052 | — | 17,052 | |||||||||
Mutual funds - equity securities - energy sector |
20,424 | — | 20,424 | |||||||||
Mutual funds - equity securities - MLP’s |
40,474 | — | 40,474 | |||||||||
Mutual funds - equity securities - other |
11,807 | — | 11,807 | |||||||||
Equity securities: |
||||||||||||
Master limited partnerships |
988 | — | 988 | |||||||||
Global equity securities |
1,633 | — | 1,633 | |||||||||
Other invested assets |
— | 7 | 7 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 320,561 | $ | 24,622 | $ | 345,183 | ||||||
|
|
|
|
|
|
As of December 31, 2014
Merchandise Trust
Level 1 | Level 2 | Total | ||||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Short-term investments |
$ | 52,521 | $ | — | $ | 52,521 | ||||||
Fixed maturities: |
||||||||||||
U.S. state and local government agency |
— | 269 | 269 | |||||||||
Corporate debt securities |
— | 8,976 | 8,976 | |||||||||
Other debt securities |
— | 7,139 | 7,139 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturity investments |
— | 16,384 | 16,384 | |||||||||
|
|
|
|
|
|
|||||||
Mutual funds - debt securities |
142,680 | — | 142,680 | |||||||||
Mutual funds - equity securities - real estate sector |
58,672 | — | 58,672 | |||||||||
Mutual funds - equity securities - energy sector |
7,733 | — | 7,733 | |||||||||
Mutual funds - equity securities - MLP’s |
22,927 | — | 22,927 | |||||||||
Mutual funds - equity securities - other |
90,126 | — | 90,126 | |||||||||
Equity securities: |
||||||||||||
Master limited partnerships |
50,091 | — | 50,091 | |||||||||
Global equity securities |
30,208 | — | 30,208 | |||||||||
Other invested assets |
— | 5,159 | 5,159 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 454,958 | $ | 21,543 | $ | 476,501 | ||||||
|
|
|
|
|
|
Perpetual Care Trust
Level 1 | Level 2 | Total | ||||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Short-term investments |
$ | 26,644 | $ | — | $ | 26,644 | ||||||
Fixed maturities: |
||||||||||||
U.S. government and federal agency |
116 | — | 116 | |||||||||
U.S. state and local government agency |
— | 79 | 79 | |||||||||
Corporate debt securities |
— | 23,466 | 23,466 | |||||||||
Other debt securities |
— | 371 | 371 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturity investments |
116 | 23,916 | 24,032 | |||||||||
|
|
|
|
|
|
|||||||
Mutual funds - debt securities |
123,894 | — | 123,894 | |||||||||
Mutual funds - equity securities - real estate sector |
41,753 | — | 41,753 | |||||||||
Mutual funds - equity securities - energy sector |
14,829 | — | 14,829 | |||||||||
Mutual funds - equity securities - MLP’s |
43,596 | — | 43,596 | |||||||||
Mutual funds - equity securities - other |
25,258 | — | 25,258 | |||||||||
Equity securities: |
||||||||||||
Master limited partnerships |
43,207 | — | 43,207 | |||||||||
Global equity securities |
1,867 | — | 1,867 | |||||||||
Other invested assets |
— | 25 | 25 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 321,164 | $ | 23,941 | $ | 345,105 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|