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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 September 30, 2012, the Partnership operated 276 cemeteries, 258 of which are owned, in 26 states and Puerto Rico and owned and operated 85 funeral homes in 18 states and Puerto Rico.
Basis of Presentation
The unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All interim financial data is unaudited. However, in the opinion of management, the interim financial data as of September 30, 2012 and for the three and nine months ended September 30, 2012 and 2011 includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. The results of operations for interim periods are not necessarily indicative of the results of operations to be expected for a full year. The December 31, 2011 condensed consolidated balance sheet data was derived from audited financial statements included in the Company’s 2011 Annual Report on Form 10-K (“2011 Form 10-K”) and has been adjusted to include the effects of retrospective adjustments resulting from the Company’s 2011 acquisitions, but does not include all disclosures required by GAAP, which are presented in the Company’s 2011 Form 10-K.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of each of the Company’s subsidiaries. These statements also include the accounts of the merchandise and perpetual care trusts in which the Company has a variable interest and is the primary beneficiary. The Company operates 18 cemeteries under long-term operating or management contracts. The operations of 16 of these managed cemeteries have been consolidated in accordance with the provisions of Accounting Standards Codification (ASC) 810.
The Company operates 2 cemeteries under long-term operating agreements that do not qualify as acquisitions for accounting purposes. As a result, the Company did not consolidate all of the existing assets and liabilities related to these cemeteries. The Company has consolidated the existing assets and liabilities of each of these cemeteries’ merchandise and perpetual care trusts as variable interest entities since the Company controls and receives the benefits and absorbs any losses from operating these trusts. Under these long-term operating agreements, which are subject to certain termination provisions, the Company is the exclusive operator of these cemeteries. The Company earns revenues related to sales of merchandise, services, and interment rights and incurs expenses related to such sales and the maintenance and upkeep of these cemeteries. Upon termination of these contracts, the Company will retain all of the benefits and related contractual obligations incurred from sales generated during the contract period. The Company has also recognized the existing merchandise liabilities that it assumed as part of these agreements.
Use of Estimates
Preparation of these unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expense during the reporting periods. As a result, actual results could differ from those estimates. The most significant estimates in the unaudited condensed consolidated financial statements are the valuation of assets in the merchandise trust and perpetual care trust, allowance for cancellations, unit-based compensation, merchandise liability, deferred sales revenue, deferred margin, deferred merchandise trust investment earnings, deferred obtaining costs and income taxes. Deferred sales revenue, deferred margin and deferred merchandise trust investment earnings are included in deferred cemetery revenues, net, on the unaudited condensed consolidated balance sheet.
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2. | LONG-TERM ACCOUNTS RECEIVABLE, NET OF ALLOWANCE |
Long-term accounts receivable, net, consist of the following:
As of | ||||||||
September 30, 2012 |
December 31, 2011 |
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(in thousands) | ||||||||
Customer receivables |
$ | 156,224 | $ | 151,517 | ||||
Unearned finance income |
(18,017 | ) | (16,679 | ) | ||||
Allowance for contract cancellations |
(20,467 | ) | (17,582 | ) | ||||
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117,740 | 117,256 | |||||||
Less: current portion, net of allowance |
48,109 | 48,837 | ||||||
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Long-term portion, net of allowance |
$ | 69,631 | $ | 68,419 | ||||
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Activity in the allowance for contract cancellations is as follows:
For the nine months ended September 30, | ||||||||
2012 | 2011 | |||||||
(in thousands) | ||||||||
Balance - Beginning of period |
$ | 17,582 | $ | 15,832 | ||||
Provision for cancellations |
14,858 | 13,799 | ||||||
Charge-offs - net |
(11,973 | ) | (10,315 | ) | ||||
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Balance - End of period |
$ | 20,467 | $ | 19,316 | ||||
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3. | CEMETERY PROPERTY |
Cemetery property consists of the following:
As of | ||||||||
September 30, 2012 |
December 31, 2011 |
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(in thousands) | ||||||||
Developed land |
$ | 71,128 | $ | 64,266 | ||||
Undeveloped land |
168,724 | 164,723 | ||||||
Mausoleum crypts and lawn crypts |
69,488 | 69,949 | ||||||
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Total |
$ | 309,340 | $ | 298,938 | ||||
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4. | PROPERTY AND EQUIPMENT |
Major classes of property and equipment follow:
As of | ||||||||
September 30, 2012 |
December 31, 2011 |
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(in thousands) | ||||||||
Building and improvements |
$ | 82,565 | $ | 75,076 | ||||
Furniture and equipment |
40,180 | 36,863 | ||||||
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122,745 | 111,939 | |||||||
Less: accumulated depreciation |
(43,178 | ) | (38,162 | ) | ||||
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Property and equipment - net |
$ | 79,567 | $ | 73,777 | ||||
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Depreciation expense was $1.7 million and $5.2 million for the three and nine months ended September 30, 2012, respectively, as compared to $1.4 million and $4.3 million during the same periods last year.
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5. | MERCHANDISE TRUSTS |
At September 30, 2012, the Company’s merchandise trusts consisted of the following types of assets:
• |
Money Market Funds that invest in low risk short term securities; |
• |
Publicly traded mutual funds that invest in underlying debt securities; |
• |
Publicly traded mutual funds that invest in underlying equity securities; |
• |
Equity investments that are currently paying dividends or distributions. These investments include Real Estate Investment Trusts (“REIT’s”), Master Limited Partnerships and global equity securities; |
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Fixed maturity debt securities issued by various corporate entities; |
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Fixed maturity debt securities issued by the U.S. Government and U.S. Government agencies; and |
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Fixed maturity debt securities issued by U.S. states and local government agencies. |
All of these investments are classified as Available for Sale as defined by the Investments in Debt and Equity topic of the ASC. Accordingly, all of the assets are carried at fair value. All of these investments are considered to be either Level 1 or Level 2 assets as defined by the Fair Value Measurements and Disclosures topic of the ASC. See Note 15 for further details. There were no Level 3 assets.
The merchandise trusts are variable interest entities (VIE) for which the Company is the primary beneficiary. The assets held in the merchandise trusts are required to be used to purchase the merchandise to which they relate. If the value of these assets falls below the cost of purchasing such merchandise, the Company may be required to fund this shortfall.
The Company has included $7.4 million and $6.9 million of investments held in trust by the West Virginia Funeral Directors Association at September 30, 2012 and December 31, 2011, respectively, in its merchandise trust assets. As required by law, the Company deposits a portion of certain funeral merchandise sales in West Virginia into a trust that is held by the West Virginia Funeral Directors Association. These trusts are recorded at their account value, which approximates fair value.
The cost and market value associated with the assets held in merchandise trusts at September 30, 2012 and December 31, 2011 were as follows:
As of September 30, 2012 |
Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
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(in thousands) | ||||||||||||||||
Short-term investments |
$ | 48,722 | $ | — | $ | — | $ | 48,722 | ||||||||
Fixed maturities: |
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U.S. Government and federal agency |
— | — | — | — | ||||||||||||
U.S. State and local government agency |
23 | — | — | 23 | ||||||||||||
Corporate debt securities |
8,673 | 195 | (127 | ) | 8,741 | |||||||||||
Other debt securities |
4,320 | — | (7 | ) | 4,313 | |||||||||||
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Total fixed maturities |
13,016 | 195 | (134 | ) | 13,077 | |||||||||||
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Mutual funds - debt securities |
97,886 | 2,699 | (500 | ) | 100,085 | |||||||||||
Mutual funds - equity securities |
128,537 | 6,099 | (3,264 | ) | 131,372 | |||||||||||
Equity securities |
65,897 | 3,100 | (3,498 | ) | 65,499 | |||||||||||
Other invested assets |
6,569 | 18 | — | 6,587 | ||||||||||||
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Total managed investments |
$ | 360,627 | $ | 12,111 | $ | (7,396 | ) | $ | 365,342 | |||||||
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West Virginia Trust Receivable |
7,433 | — | — | 7,433 | ||||||||||||
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Total |
$ | 368,060 | $ | 12,111 | $ | (7,396 | ) | $ | 372,775 | |||||||
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As of December 31, 2011 |
Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
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(in thousands) | ||||||||||||||||
Short-term investments |
$ | 38,312 | $ | — | $ | — | $ | 38,312 | ||||||||
Fixed maturities: |
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U.S. Government and federal agency |
— | — | — | — | ||||||||||||
U.S. State and local government agency |
23 | — | — | 23 | ||||||||||||
Corporate debt securities |
10,537 | 19 | (791 | ) | 9,765 | |||||||||||
Other debt securities |
1,100 | — | — | 1,100 | ||||||||||||
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Total fixed maturities |
11,660 | 19 | (791 | ) | 10,888 | |||||||||||
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Mutual funds - debt securities |
68,291 | 1,711 | (2,581 | ) | 67,421 | |||||||||||
Mutual funds - equity securities |
148,209 | 1,939 | (8,860 | ) | 141,288 | |||||||||||
Equity securities |
71,760 | 3,723 | (3,131 | ) | 72,352 | |||||||||||
Other invested assets |
7,326 | 34 | — | 7,360 | ||||||||||||
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Total managed investments |
$ | 345,558 | $ | 7,426 | $ | (15,363 | ) | $ | 337,621 | |||||||
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West Virginia Trust Receivable |
6,894 | — | — | 6,894 | ||||||||||||
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Total |
$ | 352,452 | $ | 7,426 | $ | (15,363 | ) | $ | 344,515 | |||||||
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The contractual maturities of debt securities as of September 30, 2012 are as follows:
As of September 30, 2012 |
Less than 1 year |
1 year through 5 years |
6 years through 10 years |
More than 10 years |
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(in thousands) | ||||||||||||||||
U.S. Government and federal agency |
$ | — | $ | — | $ | — | $ | — | ||||||||
U.S. State and local government agency |
23 | — | — | — | ||||||||||||
Corporate debt securities |
— | 5,866 | 2,742 | 133 | ||||||||||||
Other debt securities |
4,313 | — | — | — | ||||||||||||
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Total fixed maturities |
$ | 4,336 | $ | 5,866 | $ | 2,742 | $ | 133 | ||||||||
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An aging of unrealized losses on the Company’s investments in fixed maturities and equity securities at September 30, 2012 and December 31, 2011 is presented below:
Less than 12 months | 12 Months or more | Total | ||||||||||||||||||||||
As of September 30, 2012 |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
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(in thousands) | ||||||||||||||||||||||||
Fixed maturities: |
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U.S. Government and federal agency |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
U.S. State and local government agency |
— | — | — | — | — | — | ||||||||||||||||||
Corporate debt securities |
1,065 | 29 | 1,716 | 98 | 2,781 | 127 | ||||||||||||||||||
Other debt securities |
4,313 | 7 | — | — | 4,313 | 7 | ||||||||||||||||||
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Total fixed maturities |
5,378 | 36 | 1,716 | 98 | 7,094 | 134 | ||||||||||||||||||
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Mutual funds - debt securities |
13,885 | 128 | 4,255 | 372 | 18,140 | 500 | ||||||||||||||||||
Mutual funds - equity securities |
23,238 | 2,304 | 25,658 | 960 | 48,896 | 3,264 | ||||||||||||||||||
Equity securities |
20,562 | 1,205 | 9,330 | 2,293 | 29,892 | 3,498 | ||||||||||||||||||
Other invested assets |
— | — | — | — | — | — | ||||||||||||||||||
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Total |
$ | 63,063 | $ | 3,673 | $ | 40,959 | $ | 3,723 | $ | 104,022 | $ | 7,396 | ||||||||||||
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Less than 12 months | 12 Months or more | Total | ||||||||||||||||||||||
As of December 31, 2011 |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
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(in thousands) | ||||||||||||||||||||||||
Fixed maturities: |
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U.S. Government and federal agency |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
U.S. State and local government agency |
— | — | — | — | — | — | ||||||||||||||||||
Corporate debt securities |
4,007 | 351 | 4,459 | 440 | 8,466 | 791 | ||||||||||||||||||
Other debt securities |
— | — | — | — | — | — | ||||||||||||||||||
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Total fixed maturities |
4,007 | 351 | 4,459 | 440 | 8,466 | 791 | ||||||||||||||||||
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Mutual funds - debt securities |
19,691 | 1,109 | 31,916 | 1,472 | 51,607 | 2,581 | ||||||||||||||||||
Mutual funds - equity securities |
32,631 | 970 | 59,010 | 7,890 | 91,641 | 8,860 | ||||||||||||||||||
Equity securities |
20,349 | 1,941 | 5,775 | 1,190 | 26,124 | 3,131 | ||||||||||||||||||
Other invested assets |
— | — | — | — | — | — | ||||||||||||||||||
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Total |
$ | 76,678 | $ | 4,371 | $ | 101,160 | $ | 10,992 | $ | 177,838 | $ | 15,363 | ||||||||||||
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A reconciliation of the Company’s merchandise trust activities for the nine months ended September 30, 2012 is presented below:
Fair Value @ 12/31/2011 |
Contributions |
Distributions |
Interest/ |
Capital
Gain |
Realized |
Taxes |
Fees |
Unrealized |
Fair
Value
@ |
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(in thousands) | ||||||||||||||||||
$ 344,515 |
46,695 |
(46,816) | 12,240 | 110 | 8,750 | (3,511) | (1,860) | 12,652 | $372,775 |
The Company made net withdrawals from the trusts of approximately $0.1 million during the nine months ended September 30, 2012. During the nine months ended September 30, 2012, purchases and sales of securities available for sale included in trust investments were approximately $404.7 million and $403.5 million, respectively. Contributions include $12.0 million of assets that were acquired through acquisitions during the nine months ended September 30, 2012. Distributions include $5.8 million of assets that were divested as a result of the termination of an operating agreement during the nine months ended September 30, 2012.
Other-than-temporary Impairments of Trust Assets
During the nine months ended September 30, 2012, the Company determined that there were six securities with an aggregate cost basis of approximately $1.6 million and an aggregate fair value of approximately $0.8 million, resulting in an impairment of $0.8 million, wherein such impairment was considered to be other-than-temporary. During the three months ended September 30, 2012, the Company determined that there were no other than temporary impairments to the investment portfolio for merchandise trusts. During the nine months ended September 30, 2011, the Company determined that there was a single security with an aggregate cost basis of approximately $0.2 million and an aggregate fair value of approximately $0.1 million, resulting in an impairment of $0.1 million, wherein such impairment was considered to be other-than-temporary. During the three months ended September 30, 2011, the Company determined that there were no other than temporary impairments to the investment portfolio for merchandise trusts. 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.
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6. | PERPETUAL CARE TRUSTS |
At September 30, 2012, the Company’s perpetual care trusts consisted of the following types of assets:
• |
Money Market Funds that invest in low risk short term securities; |
• |
Publicly traded mutual funds that invest in underlying debt securities; |
• |
Publicly traded mutual funds that invest in underlying equity securities; |
• |
Equity investments that are currently paying dividends or distributions. These investments include REIT’s, Master Limited Partnerships and global equity securities; |
• |
Fixed maturity debt securities issued by various corporate entities; |
• |
Fixed maturity debt securities issued by the U.S. Government and U.S. Government agencies; and |
• |
Fixed maturity debt securities issued by U.S. states and local 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 perpetual care trusts at September 30, 2012 and December 31, 2011 were as follows:
As of September 30, 2012 |
Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
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(in thousands) | ||||||||||||||||
Short-term investments |
$ | 20,912 | $ | — | $ | — | $ | 20,912 | ||||||||
Fixed maturities: |
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U.S. Government and federal agency |
408 | 105 | — | 513 | ||||||||||||
U.S. State and local government agency |
66 | 81 | — | 147 | ||||||||||||
Corporate debt securities |
23,441 | 784 | (327 | ) | 23,898 | |||||||||||
Other debt securities |
371 | — | — | 371 | ||||||||||||
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Total fixed maturities |
24,286 | 970 | (327 | ) | 24,929 | |||||||||||
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Mutual funds - debt securities |
104,648 | 3,822 | (537 | ) | 107,933 | |||||||||||
Mutual funds - equity securities |
93,917 | 6,138 | (2,329 | ) | 97,726 | |||||||||||
Equity Securities |
23,346 | 8,201 | (396 | ) | 31,151 | |||||||||||
Other invested assets |
— | — | — | — | ||||||||||||
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Total |
$ | 267,109 | $ | 19,131 | $ | (3,589 | ) | $ | 282,651 | |||||||
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As of December 31, 2011 |
Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
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(in thousands) | ||||||||||||||||
Short-term investments |
$ | 22,607 | $ | — | $ | — | $ | 22,607 | ||||||||
Fixed maturities: |
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U.S. Government and federal agency |
408 | 105 | — | 513 | ||||||||||||
U.S. State and local government agency |
66 | 81 | — | 147 | ||||||||||||
Corporate debt securities |
23,359 | 229 | (1,434 | ) | 22,154 | |||||||||||
Other debt securities |
371 | — | — | 371 | ||||||||||||
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Total fixed maturities |
24,204 | 415 | (1,434 | ) | 23,185 | |||||||||||
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Mutual funds - debt securities |
61,700 | 185 | (1,079 | ) | 60,806 | |||||||||||
Mutual funds - equity securities |
104,824 | 4,295 | (9,621 | ) | 99,498 | |||||||||||
Equity Securities |
39,199 | 9,326 | (112 | ) | 48,413 | |||||||||||
Other invested assets |
327 | 156 | (313 | ) | 170 | |||||||||||
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Total |
$ | 252,861 | $ | 14,377 | $ | (12,559 | ) | $ | 254,679 | |||||||
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The contractual maturities of debt securities as of September 30, 2012 are as follows:
As of September 30, 2012 |
Less than 1 year |
1 year through 5 years |
6 years through 10 years |
More than 10 years |
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(in thousands) | ||||||||||||||||
U.S. Government and federal agency |
$ | 129 | $ | 384 | $ | — | $ | — | ||||||||
U.S. State and local government agency |
147 | — | — | — | ||||||||||||
Corporate debt securities |
50 | 16,127 | 7,295 | 426 | ||||||||||||
Other debt securities |
371 | — | — | — | ||||||||||||
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Total fixed maturities |
$ | 697 | $ | 16,511 | $ | 7,295 | $ | 426 | ||||||||
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An aging of unrealized losses on the Company’s investments in fixed maturities and equity securities at September 30, 2012 and December 31, 2011 held in perpetual care trusts is presented below:
Less than 12 months | 12 Months or more | Total | ||||||||||||||||||||||
As of September 30, 2012 |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
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(in thousands) | ||||||||||||||||||||||||
Fixed maturities: |
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U.S. Government and federal agency |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
U.S. State and local government agency |
— | — | — | — | — | — | ||||||||||||||||||
Corporate debt securities |
3,074 | 82 | 4,397 | 245 | 7,471 | 327 | ||||||||||||||||||
Other debt securities |
— | — | — | — | — | — | ||||||||||||||||||
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Total fixed maturities |
3,074 | 82 | 4,397 | 245 | 7,471 | 327 | ||||||||||||||||||
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Mutual funds - debt securities |
5,229 | 228 | 1,033 | 309 | 6,262 | 537 | ||||||||||||||||||
Mutual funds - equity securities |
— | — | 7,904 | 2,329 | 7,904 | 2,329 | ||||||||||||||||||
Equity securities |
3,135 | 396 | — | — | 3,135 | 396 | ||||||||||||||||||
Other invested assets |
— | — | — | — | — | — | ||||||||||||||||||
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Total |
$ | 11,438 | $ | 706 | $ | 13,334 | $ | 2,883 | $ | 24,772 | $ | 3,589 | ||||||||||||
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|
|
|
|
|
|
|
|
|
Less than 12 months | 12 Months or more | Total | ||||||||||||||||||||||
As of December 31, 2011 |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value | Unrealized Losses |
||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Fixed maturities: |
||||||||||||||||||||||||
U.S. Government and federal agency |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
U.S. State and local government agency |
— | — | — | — | — | — | ||||||||||||||||||
Corporate debt securities |
7,967 | 727 | 8,471 | 707 | 16,438 | 1,434 | ||||||||||||||||||
Other debt securities |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total fixed maturities |
7,967 | 727 | 8,471 | 707 | 16,438 | 1,434 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Mutual funds - debt securities |
37,956 | 772 | 1,675 | 307 | 39,631 | 1,079 | ||||||||||||||||||
Mutual funds - equity securities |
21,483 | 3,023 | 44,416 | 6,598 | 65,899 | 9,621 | ||||||||||||||||||
Equity securities |
2,978 | 106 | 351 | 6 | 3,329 | 112 | ||||||||||||||||||
Other invested assets |
170 | 313 | — | — | 170 | 313 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 70,554 | $ | 4,941 | $ | 54,913 | $ | 7,618 | $ | 125,467 | $ | 12,559 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of the Company’s perpetual care trust activities for the nine months ended September 30, 2012 is presented below:
Fair Value @ 12/31/2011 |
Contributions |
Distributions |
Interest/ |
Capital
Gain |
Realized |
Taxes |
Fees |
Unrealized |
Fair
Value
@ |
|||||||||
(in thousands) | ||||||||||||||||||
$ 254,679 |
13,715 | (10,954) | 12,310 | 13 | 1,213 | (681) | (1,368) | 13,724 | $282,651 |
The Company made net contributions to the trusts of approximately $2.8 million during the nine months ended September 30, 2012. During the nine months ended September 30, 2012, purchases and sales of securities available for sale included in trust investments were approximately $250.6 million and $247.3 million, respectively. Contributions include $5.0 million of assets that were acquired through acquisitions during the nine months ended September 30, 2012.
Other-than-temporary Impairments of Trust Assets
During the three and nine months ended September 30, 2012, the Company determined that there were no other than temporary impairments to the investment portfolio in the perpetual care trusts.
During the nine months ended September 30, 2011, the Company determined that there was a single security with an aggregate cost basis of less than $0.1 million which was substantially impaired, and such impairment was considered to be other-than-temporary. Accordingly, the Company adjusted the cost basis of this asset to its current value and offset this change against the liability for perpetual care trust corpus. During the three months ended September 30, 2011, the Company determined that there were no other than temporary impairments to the investment portfolio for perpetual care trusts.
|
7. | GOODWILL AND INTANGIBLE ASSETS |
Goodwill
Goodwill represents the excess of the purchase price over the fair value of identifiable net assets acquired in acquisitions.
A rollforward of goodwill by reportable segment is as follows:
Cemeteries | Funeral Homes |
Total | ||||||||||||||||||
Southeast | Northeast | West | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Balance as of December 31, 2011 |
$ | 5,662 | $ | — | $ | 11,948 | $ | 14,297 | $ | 31,907 | ||||||||||
Goodwill resulting from acquisitions during the nine months ended September 30, 2012 |
532 | — | — | 7,954 | 8,486 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance as of September 30, 2012 |
$ | 6,194 | $ | — | $ | 11,948 | $ | 22,251 | $ | 40,393 | ||||||||||
|
|
|
|
|
|
|
|
|
|
During the second quarter of 2012, the Company became aware that it will receive a payment of $3.8 million in a legal settlement related to its fourth quarter 2011 acquisition of cemeteries and funeral homes in Tennessee. In addition, there were other adjustments of $0.3 million related to an increase in merchandise trust assets and a small increase in accounts receivable. These amounts have been recorded retrospectively as a purchase price adjustment for this acquisition resulting in a decrease to goodwill of $4.1 million. Also, during the third quarter of 2012, the Company obtained additional information about its third quarter 2011 acquisition in Puerto Rico which resulted in a reduction of goodwill of $0.4 million. See Note 13 for further details. These adjustments have been reflected in the balance as of December 31, 2011 in the table above.
Other Acquired Intangible Assets
The Company has other acquired intangible assets, most of which have been recognized as a result of acquisitions and long-term operating agreements. These amounts are included within other assets on the condensed consolidated balance sheet. All of the intangible assets are subject to amortization. The major classes of intangible assets are as follows:
As of September 30, 2012 |
Net |
As of December 31, 2011 |
Net | |||||||||||||||||||||
Gross Carrying Amount |
Accumulated Amortization |
Intangible Asset |
Gross Carrying Amount |
Accumulated Amortization |
Intangible Asset |
|||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Amortized Intangible Assets: |
||||||||||||||||||||||||
Underlying contract value |
$ | 6,239 | $ | (503 | ) | $ | 5,736 | $ | 8,484 | $ | (546 | ) | $ | 7,938 | ||||||||||
Non-compete agreements |
5,415 | (2,136 | ) | 3,279 | 3,820 | (1,413 | ) | 2,407 | ||||||||||||||||
Other intangible assets |
269 | (77 | ) | 192 | 205 | (67 | ) | 138 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Intangible Assets |
$ | 11,923 | $ | (2,716 | ) | $ | 9,207 | $ | 12,509 | $ | (2,026 | ) | $ | 10,483 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in the underlying contract value is mostly the result of the Company entering into an amended operating agreement with Kingwood Memorial Park Association in January of 2012. See Note 13 for further details.
The increase in non-compete agreements was the result of acquisitions consummated in the second and third quarters of 2012. See Note 13 for further details.
|
8. | LONG-TERM DEBT |
The Company had the following outstanding debt:
As of | ||||||||
September 30, 2012 |
December 31, 2011 |
|||||||
(in thousands) | ||||||||
Insurance premium financing |
$ | 504 | $ | 211 | ||||
Vehicle financing |
953 | 1,147 | ||||||
Acquisition Credit Facility, due January 2017 |
— | 10,750 | ||||||
Revolving Credit Facility, due January 2017 |
84,700 | 33,000 | ||||||
Note Payable - Greenlawn acquisition |
1,214 | 1,321 | ||||||
Note Payable - Nelms acquisition (net of discount) |
363 | 623 | ||||||
Notes Payable - acquisition non-competes (net of discounts) |
3,062 | 1,490 | ||||||
10.25% senior notes, due 2017 |
150,000 | 150,000 | ||||||
|
|
|
|
|||||
Total |
240,796 | 198,542 | ||||||
Less current portion |
1,770 | 1,487 | ||||||
Less unamortized bond discount |
2,908 | 3,220 | ||||||
|
|
|
|
|||||
Long-term portion |
$ | 236,118 | $ | 193,835 | ||||
|
|
|
|
This note includes a summary of material terms of the Company’s senior notes, senior secured notes, credit facilities and other debt obligations. For a more detailed description of the Company’s long-term debt agreements, see the Company’s 2011 Form 10-K.
10.25% Senior Notes due 2017
The Company has outstanding a $150.0 million aggregate principal amount of 10.25% Senior Notes due 2017 (the “Senior Notes”), with an original issue discount of approximately $4.0 million. The Company pays 10.25% interest per annum on the principal amount of the Senior Notes, payable in cash semi-annually in arrears on June 1 and December 1 of each year. The Senior Notes mature on December 1, 2017. The Company’s Senior Notes are considered to be a Level 2 liability as defined by the Fair Value Measurements and Disclosures topic of the ASC. Based on trades made at the end of the quarter, the Company has estimated the fair value of its Senior Notes to be in excess of par and trading at a premium of 1.54%.
Credit Facility
On January 19, 2012, the Company entered into the Third Amended and Restated Credit Agreement (the “Credit Agreement”). The terms of the Credit Agreement are substantially the same as the terms of the prior agreement. Capitalized terms which are not defined in the following description shall have the meaning assigned to such terms in the Credit Agreement.
The Credit Agreement provides for a total Revolving Credit Facility of $130.0 million (the “Credit Facility”). Previously, the agreement had an Acquisition Credit Facility and a Revolving Credit Facility with different borrowing limits. The proceeds of the Credit Facility may be used to finance working capital requirements, Permitted Acquisitions and the purchase and construction of mausoleums. The maturity date of the Credit Facility is January 19, 2017.
At September 30, 2012, amounts outstanding under the Credit Facility bear interest at rates between 3.7% and 4.2%. Amounts borrowed may be either Base Rate Loans or Eurodollar Rate Loans and amounts repaid or prepaid during the term may be reborrowed. Depending on the type of loan, borrowings bear interest at the Base Rate or Eurodollar Rate, plus applicable margins ranging from 1.25% to 2.75% and 2.25% to 3.75%, respectively, depending on the Company’s Consolidated Leverage Ratio. The Base Rate is the highest of the Prime Rate, the Federal Funds Rate plus 0.50%, or the Eurodollar Rate plus 1.0%. The Eurodollar rate is the British Bankers Association LIBOR Rate. Amounts outstanding under the Revolving Credit Facility approximate their fair value.
The Credit Agreement requires the Company to pay an unused Commitment Fee, which is calculated based on the amount by which the commitments under the Credit Agreement exceed outstanding amounts under the Credit Facility. The Commitment Fee Rate under the Credit Agreement ranges from 0.375% to 0.75% depending on the Company’s Consolidated Leverage Ratio.
The Credit Agreement contains restrictive covenants that, among other things, prohibit distributions upon defined events of default, restrict investments and sales of assets and require the Company to maintain certain financial covenants, including specified financial ratios. A material decrease in revenues could cause the Company to breach certain of its financial covenants. Any such breach could allow the Lenders to accelerate the Company’s debt which would have a material adverse effect on the Company’s business, financial condition or results of operations. The Company’s covenants include a Consolidated Leverage Ratio and a Consolidated Debt Service Coverage Ratio. As of September 30, 2012, the Company was in compliance with all applicable financial covenants.
|
9. | INCOME TAXES |
As of September 30, 2012, the Company’s taxable corporate subsidiaries had federal net operating loss carryforwards of approximately $152.8 million, which will begin to expire in 2019 and $184.1 million in state net operating losses, a portion of which expires annually.
The Partnership is not a taxable entity for federal and state income tax purposes; rather, the Partnership’s tax attributes (except those of its corporate subsidiaries) are to be included in the individual tax returns of its partners. Neither the Partnership’s financial reporting income, nor the cash distributions to unit-holders, can be used as a substitute for the detailed tax calculations that the Partnership must perform annually for its partners. Net income from the Partnership is not treated as “passive income” for federal income tax purposes. As a result, partners subject to the passive activity loss rules are not permitted to offset income from the Partnership with passive losses from other sources.
The Partnership’s corporate subsidiaries account for their income taxes under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The provision for income taxes for the three and nine months ended September 30, 2012 and 2011 is based upon the estimated annual effective tax rates expected to be applicable to the Company for 2012 and 2011, respectively. The Company’s effective tax rate differs from its statutory tax rate primarily because the Company’s legal entity structure includes different tax filing entities, including a significant number of partnerships that are not subject to paying tax.
The Company is not currently under examination by any federal or state jurisdictions. The federal statute of limitations and certain state statutes of limitations are open from 2008 forward. Management believes that the accrual for tax liabilities is adequate for all open years. This assessment relies on estimates and assumptions and may involve a series of complex judgments about future events. On the basis of present information, it is the opinion of the Company’s management that there are no pending assessments that will result in a material effect on the Company’s consolidated financial statements over the next twelve months.
|
10. | DEFERRED CEMETERY REVENUES, NET |
At September 30, 2012 and December 31, 2011, deferred cemetery revenues, net, consisted of the following:
As of | ||||||||
September 30, 2012 |
December 31, 2011 |
|||||||
(in thousands) | ||||||||
Deferred cemetery revenue |
$ | 333,439 | $ | 306,488 | ||||
Deferred merchandise trust revenue |
59,597 | 50,419 | ||||||
Deferred merchandise trust unrealized gains (losses) |
4,715 | (7,937 | ) | |||||
Deferred pre-acquisition margin |
133,141 | 135,043 | ||||||
Deferred cost of goods sold |
(45,951 | ) | (42,335 | ) | ||||
|
|
|
|
|||||
Deferred cemetery revenues, net |
$ | 484,941 | $ | 441,678 | ||||
|
|
|
|
|||||
Deferred selling and obtaining costs |
$ | 73,904 | $ | 68,542 |
Deferred selling and obtaining costs are carried as an asset on the unaudited condensed consolidated balance sheet in accordance with the Financial Services – Insurance topic of the ASC.
|
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 September 30, 2012, the Company was committed to operating lease payments for premises, automobiles and office equipment under various operating leases with initial terms ranging from one to ten years and options to renew at varying terms. Expenses under operating leases were $0.6 million and $1.9 million for the three and nine months ended September 30, 2012, respectively, and $0.6 million and $1.7 million for the three and nine months ended September 30 2011, respectively.
At September 30, 2012, operating leases will result in future payments in the following approximate amounts:
(in thousands) | ||||
2013 |
$ | 2,074 | ||
2014 |
1,363 | |||
2015 |
869 | |||
2016 |
801 | |||
2017 |
754 | |||
Thereafter |
1,892 | |||
|
|
|||
Total |
$ | 7,753 | ||
|
|
|
12. | PARTNERS’ CAPITAL |
Unit-Based Compensation
The Company has issued to certain key employees and management unit-based compensation in the form of unit appreciation rights and phantom partnership units.
Compensation expense recognized related to unit appreciation rights and restricted phantom unit awards for the three and nine months ended September 30, 2012 and 2011 are summarized in the table below:
Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Unit appreciation rights |
$ | 133 | $ | 119 | $ | 381 | $ | 358 | ||||||||
Restricted phantom units |
83 | 76 | 244 | 218 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total unit-based compensation expense |
$ | 216 | $ | 195 | $ | 625 | $ | 576 | ||||||||
|
|
|
|
|
|
|
|
As of September 30, 2012, there was approximately $0.8 million in non-vested unit appreciation rights outstanding. These unit appreciation rights will be expensed through the first quarter of 2014.
Other Unit Issuances
On June 6, 2012 and July 31, 2012, the Company issued 13,720 units and 128,299 units, respectively, in connection with separate acquisitions. See Note 13. On June 21, 2012 and 2011, the Company issued 9,853 units in connection with an acquisition consummated in the second quarter of 2010.
|
13. | ACQUISITIONS |
First Quarter 2012 Acquisition
In second quarter of 2009, the Company entered into a long-term operating agreement (the “Operating Agreement”) with Kingwood Memorial Park Association (“Kingwood”) wherein the Company became the exclusive operator of the cemetery. At that time, the Operating Agreement did not qualify as an acquisition for accounting purposes. However, the existing merchandise and perpetual care trusts were consolidated as variable interest entities. In addition, merchandise and other liabilities assumed by the Company were also recorded as of the initial contract date. The consideration paid for this transaction, including cash and an assumed liability, exceeded the net assets recorded as of the initial contract date and an intangible asset was recorded for this amount.
In January of 2012, the Company entered into an amended and restated operating agreement (the “Amended Operating Agreement”), that supersedes the Operating Agreement. The Amended Operating Agreement has a term of 40 years and the Company remains the exclusive operator of the cemetery. As consideration for entering into the Amended Operating Agreement, the Company paid $1.7 million in cash and was relieved of a note payable to Kingwood. In addition, the prior trustees of Kingwood have resigned in favor of new trustees appointed by the Company. As a result of the changes in the Amended Operating Agreement, for accounting purposes, the Company has gained control of Kingwood, and acquisition accounting is now applicable.
The table below reflects the Company’s preliminary assessment of the fair value of net assets acquired, the elimination of debt and other assets and the purchase price, which results in the recognition of goodwill recorded in the Company’s Cemetery Operations – Southeast segment. These amounts may be retrospectively adjusted as additional information is received.
Preliminary Assessment |
||||
(in thousands) | ||||
Net Assets Acquired: |
||||
Accounts receivable |
$ | 66 | ||
Cemetery property |
3,001 | |||
Property and equipment |
102 | |||
|
|
|||
Total net assets acquired |
3,169 | |||
|
|
|||
Assets and Liabilities divested: |
||||
Note payable to Kingwood |
519 | |||
Intangible asset representing underlying contract value |
(2,236 | ) | ||
|
|
|||
Fair value of net assets acquired and divested |
1,452 | |||
|
|
|||
Consideration paid |
1,652 | |||
|
|
|||
Goodwill from purchase |
$ | 200 | ||
|
|
Second Quarter 2012 Acquisitions
On April 10, 2012, certain subsidiaries of the Company (collectively the “Buyer”) entered into a Stock Purchase Agreement with several individuals (collectively the “Seller”) to purchase all of the stock of Bronswood Cemetery, Inc., an Illinois Corporation. Through the purchase, the Buyer acquired one cemetery in Illinois, including certain related assets, and assumed certain related liabilities. In consideration for the net assets acquired, the Buyer paid the Seller $0.9 million in cash.
The table below reflects the Company’s preliminary assessment of the fair value of net assets acquired, the purchase price and the gain on bargain purchase. These amounts may be retrospectively adjusted as additional information is received.
Preliminary Assessment |
||||
(in thousands) | ||||
Assets: |
||||
Accounts receivable |
$ | 72 | ||
Cemetery property |
842 | |||
Property and equipment |
518 | |||
Perpetual care trusts, restricted, at fair value |
2,780 | |||
Non-compete agreements |
12 | |||
|
|
|||
Total assets |
4,224 | |||
|
|
|||
Liabilities: |
||||
Perpetual care trust corpus |
2,780 | |||
Other liabilities |
24 | |||
Deferred tax liability |
374 | |||
|
|
|||
Total liabilities |
3,178 | |||
|
|
|||
Fair value of net assets acquired |
1,046 | |||
|
|
|||
Consideration paid |
924 | |||
|
|
|||
Gain on bargain purchase |
$ | 122 | ||
|
|
In addition, on June 6, 2012, certain subsidiaries of the Company (collectively the “Buyer”) entered into a Purchase Agreement with several individuals and Lodi Funeral Home, Inc. (collectively the “Seller”) to purchase certain assets and assume certain liabilities of Lodi Funeral Home, Inc., a California corporation and all of the stock of Lodi All Faiths Cremation, a California corporation. Through the purchase, the Buyer acquired two funeral homes in California including certain related assets, and assumed certain related liabilities. As part of the agreement, the building and underlying real estate of Lodi Funeral Home, Inc. is being leased from the Seller. The lease agreement is a ten year agreement that contains one five year renewal term at the Buyer’s election. In addition, at the end of the original lease or renewal term, the Buyer can elect to purchase the property for fair value less 10% of any rental amounts previously paid under the lease agreement. The Buyer also has a right of first refusal related to any potential sale of the property occurring during the lease term.
In consideration for the net assets acquired, the Buyer paid the Seller $0.85 million in cash and issued 13,720 units, which equates to $0.35 million worth of units. The Buyer will also pay an aggregate amount of $0.6 million in equal quarterly installments commencing on January 2, 2013 in exchange for non-compete agreements with the Seller.
The table below reflects the Company’s preliminary assessment of the fair value of net assets acquired. The resulting goodwill is recorded in the Company’s Funeral Homes operating segment. These amounts may be retrospectively adjusted as additional information is received.
Preliminary Assessment |
||||
(in thousands) | ||||
Assets: |
||||
Property and equipment |
$ | 48 | ||
Merchandise trusts, restricted, at fair value |
105 | |||
Underlying lease value |
64 | |||
Non-compete agreements |
40 | |||
|
|
|||
Total assets |
257 | |||
|
|
|||
Liabilities: |
||||
Merchandise liabilities |
105 | |||
|
|
|||
Total liabilities |
105 | |||
|
|
|||
Fair value of net assets acquired |
152 | |||
|
|
|||
Consideration paid - cash |
850 | |||
Consideration paid - units |
350 | |||
Fair value of debt assumed for non-compete agreements |
544 | |||
|
|
|||
Total consideration paid |
1,744 | |||
|
|
|||
Goodwill from purchase |
$ | 1,592 | ||
|
|
Third Quarter 2012 Acquisitions
On July 2, 2012, certain subsidiaries of the Company (collectively the “Buyer) entered into an Asset Purchase and Sale Agreement (the “Farnstrom Agreement”) with Farnstrom Mortuary, LLC and Farnstrom Properties, LLC, both Oregon limited liability companies, Farnstrom Family, Inc. and Care Cremation Society, Inc., both Oregon corporations and two individuals (collectively the “Seller”). Pursuant to the Agreement, the Buyer acquired five funeral homes in Oregon, including certain related assets, and assumed certain related liabilities. In consideration for the net assets acquired, the Buyer paid the Seller $2.3 million in cash. The Buyer will also pay an aggregate amount of $0.3 million in equal quarterly installments commencing on July 2, 2012 in exchange for non-compete agreements with the Seller.
The table below reflects the Company’s preliminary assessment of the fair value of net assets acquired. The resulting goodwill is recorded in the Company’s Funeral Homes operating segment. These amounts may be retrospectively adjusted as additional information is received.
Preliminary Assessment |
||||
(in thousands) | ||||
Assets: |
||||
Property and equipment |
$ | 1,296 | ||
Non-compete agreements |
170 | |||
|
|
|||
Total assets |
1,466 | |||
|
|
|||
Total liabilities |
— | |||
|
|
|||
Fair value of net assets acquired |
1,466 | |||
|
|
|||
Consideration paid - cash |
2,300 | |||
Fair value of debt assumed for non-compete agreements |
274 | |||
|
|
|||
Total consideration paid |
2,574 | |||
|
|
|||
Goodwill from purchase |
$ | 1,108 | ||
|
|
In addition, on July 31, 2012, certain subsidiaries of the Company (collectively the “Buyer”) entered into an Asset Purchase and Sale Agreement (the “Lohman Agreement”) with Certain Florida corporations, limited liability companies and four individuals (collectively the “Seller”). Pursuant to the Agreement, the Buyer acquired nine funeral homes and four cemeteries in Florida, including certain related assets, and assumed certain related liabilities.
In consideration for the net assets acquired, the Buyer paid the Seller $20.0 million in cash and issued 128,299 units, which equates to $3.5 million worth of units. The Buyer will also pay an aggregate amount of $1.5 million in five equal annual installments commencing on August 1, 2013 in exchange for a consulting and non-compete agreement with the Seller.
The table below reflects the Company’s preliminary assessment of the fair value of net assets acquired. The resulting goodwill is recorded in both the Company’s Cemetery Operations – Southeast segment and Funeral Homes operating segment. These amounts may be retrospectively adjusted as additional information is received.
Preliminary Assessment |
||||
(in thousands) | ||||
Assets: |
||||
Accounts receivable |
$ | 1,005 | ||
Cemetery property |
6,100 | |||
Property and equipment |
5,864 | |||
Merchandise trusts, restricted , at fair value |
11,884 | |||
Perpetual care trusts, restricted, at fair value |
2,232 | |||
Other assets |
122 | |||
Non-compete agreements |
1,373 | |||
|
|
|||
Total assets |
28,580 | |||
|
|
|||
Liabilities: |
||||
Deferred margin |
3,746 | |||
Merchandise liabilities |
3,458 | |||
Perpetual care trust corpus |
2,232 | |||
|
|
|||
Total liabilities |
9,436 | |||
|
|
|||
Fair value of net assets acquired |
19,144 | |||
|
|
|||
Consideration paid - cash |
20,000 | |||
Consideration paid - units |
3,500 | |||
Fair value of debt assumed for non-compete agreements |
1,230 | |||
|
|
|||
Total consideration paid |
24,730 | |||
|
|
|||
Goodwill from purchase |
$ | 5,586 | ||
|
|
First, Second and Third Quarter 2011 Acquisitions
On January 5, 2011, the Operating Company, StoneMor North Carolina LLC, a North Carolina limited liability company and StoneMor North Carolina Subsidiary LLC, a North Carolina limited liability company, each a wholly-owned subsidiary of the Company (collectively the “Buyer”), entered into an Asset Purchase and Sale Agreement (the “1st Quarter Purchase Agreement”) with Heritage Family Services, Inc., a North Carolina corporation and an individual (collectively the “Seller”). Pursuant to the 1st Quarter Purchase Agreement, the Buyer acquired three cemeteries in North Carolina, including certain related assets, and assumed certain related liabilities. In consideration for the net assets acquired, the Buyer paid the Seller $1.7 million in cash.
On June 22, 2011, the Operating Company, StoneMor Missouri LLC, a Missouri limited liability company and StoneMor Missouri Subsidiary LLC, a Missouri limited liability company, each a wholly-owned subsidiary of the Company (collectively the “Buyer”), entered into an Asset Purchase and Sale Agreement (the “2nd Quarter Purchase Agreement”) with SCI International, LLC, a Delaware limited liability company and Keystone America, Inc., a Delaware corporation (collectively the “Seller” or “SCI Missouri”). Pursuant to the 2nd Quarter Purchase Agreement, the Buyer acquired three cemeteries and four funeral homes in Missouri, including certain related assets, and assumed certain related liabilities. In consideration for the net assets acquired, the Buyer paid the Seller $2.15 million in cash.
On August 1, 2011, the Operating Company and CFS West Virginia, an affiliate of the Operating Company, (collectively the “Buyer”) entered into a Stock Purchase Agreement with three individuals (collectively the “Seller”) to purchase all of the stock of Prince George Cemetery Corporation, a Virginia corporation. Through the purchase of Prince George Cemetery Corporation, the Buyer acquired one cemetery in Virginia. In consideration for the stock acquired, the Buyer paid the Seller approximately $1.9 million in cash. The Buyer will also pay $0.3 million in cash in even quarterly installments over a five year period in exchange for non-compete agreements with the Seller.
The table below reflects the Company’s final assessment of the fair value of net assets acquired, the purchase price and the resulting goodwill from these acquisitions. For a detailed breakout of the purchase price for these acquisitions on an individual basis, see our 2011 Form 10-K.
Final Assessment |
||||
Assets: |
||||
Accounts receivable |
$ | 211 | ||
Cemetery property |
4,833 | |||
Merchandise trusts, restricted, at fair value |
4,069 | |||
Perpetual care trusts, restricted, at fair value |
2,438 | |||
Property and equipment |
2,303 | |||
Other assets |
260 | |||
|
|
|||
Total assets |
14,114 | |||
|
|
|||
Liabilities: |
||||
Deferred margin |
2,457 | |||
Merchandise liabilities |
2,719 | |||
Perpetual care trust corpus |
2,438 | |||
Deferred tax liability |
1,287 | |||
|
|
|||
Total liabilities |
8,901 | |||
|
|
|||
Fair value of net assets acquired |
5,213 | |||
|
|
|||
Consideration paid |
5,700 | |||
Fair value of debt assumed for non-compete agreements |
280 | |||
|
|
|||
Total consideration paid |
5,980 | |||
|
|
|||
Goodwill from purchase |
$ | 767 | ||
|
|
In addition to the aforementioned 2011 acquisitions, on August 17, 2011, the Operating Company, StoneMor Puerto Rico LLC, a Puerto Rico limited liability company and StoneMor Puerto Rico Subsidiary LLC, a Puerto Rico limited liability company, each a wholly-owned subsidiary of the Company (collectively the “Buyer”), entered into a Stock Purchase Agreement with Alderwoods Group, LLC, a Delaware limited liability company (the “Seller” or “SCI Puerto Rico”) to purchase all of the stock of SCI Puerto Rico Funeral and Cemetery Services, Inc., a Puerto Rico corporation. Through the purchase of SCI Puerto Rico Funeral and Cemetery Services, Inc., the Buyer acquired five cemeteries and four funeral homes in Puerto Rico. In consideration for the stock acquired, the Buyer paid the Seller $4.6 million in cash.
The table below reflects the Company’s final assessment of the fair value of net assets acquired, the purchase price and the resulting goodwill from the purchase and displays the adjustments made to the revised values reported at December 31, 2011. The Company obtained additional information in the third quarter of 2012 and has retrospectively adjusted these values as noted below.
Revised Assessment |
Adjustments | Final Assessment |
||||||||||
(in thousands) | ||||||||||||
Assets: |
||||||||||||
Accounts receivable |
$ | 4,575 | $ | 25 | $ | 4,600 | ||||||
Cemetery property |
4,666 | — | 4,666 | |||||||||
Perpetual care trusts, restricted, at fair value |
981 | — | 981 | |||||||||
Property and equipment |
4,124 | — | 4,124 | |||||||||
|
|
|
|
|
|
|||||||
Total assets |
14,346 | 25 | 14,371 | |||||||||
|
|
|
|
|
|
|||||||
Liabilities: |
||||||||||||
Deferred margin |
5,217 | (200 | ) | 5,017 | ||||||||
Merchandise liabilities |
4,799 | (167 | ) | 4,632 | ||||||||
Deferred tax liability |
766 | — | 766 | |||||||||
Perpetual care trust corpus |
981 | — | 981 | |||||||||
|
|
|
|
|
|
|||||||
Total liabilities |
11,763 | (367 | ) | 11,396 | ||||||||
|
|
|
|
|
|
|||||||
Fair value of net assets acquired |
2,583 | 392 | 2,975 | |||||||||
|
|
|
|
|
|
|||||||
Consideration paid |
4,600 | — | 4,600 | |||||||||
|
|
|
|
|
|
|||||||
Goodwill from purchase |
$ | 2,017 | $ | (392 | ) | $ | 1,625 | |||||
|
|
|
|
|
|
If the acquisitions from 2012 had been consummated on January 1, 2011, on a pro forma basis, for the three and nine months ended September 30, 2011, consolidated revenues would have been $62.5 million and $176.2 million, respectively, consolidated net income (loss) would have been $0.3 million and $(5.1) million, respectively and net income (loss) per limited partner unit (basic and diluted) would have been $0.01 and $(0.27), respectively. Further, on a pro forma basis, for the three and nine months ended September 30, 2012, consolidated revenues would have been $62.7 million and $187.7 million, respectively, consolidated net income would have been $1.1 million and $1.9 million, respectively and net income per limited partner unit (basic and diluted) would have been $0.06 and $0.10, respectively. These pro forma results are unaudited and have been prepared for comparative purposes only and include certain adjustments such as increased interest on the acquisition of debt. They do not purport to be indicative of the results of operations which actually would have resulted had the combination been in effect on January 1, 2011 or of future results of operations of the locations. Since their respective dates of acquisition, our properties acquired in 2012 have contributed $1.7 million and $2.1 million of revenue and $0.4 million and $0.5 million of operating profit for the three and nine months ended September 30, 2012, respectively.
The results of operations and pro forma results related to the acquisitions made in 2011 are not material to the unaudited condensed consolidated financial statements taken as a whole.
The Company has made retrospective adjustments to its fourth quarter 2011 acquisition in Tennessee. See Note 7 for further details.
First Quarter 2012 Contract Termination
During the third quarter of 2010, certain subsidiaries of the Company entered into a long-term operating agreement (the “Operating Agreement”) with the Archdiocese of Detroit (the “Archdiocese”) wherein the Company became the exclusive operator of certain cemeteries in Michigan owned by the Archdiocese. The Operating Agreement did not qualify as an acquisition for accounting purposes. However, the existing merchandise trust had been consolidated as a variable interest entity as the Company controlled and directly benefited from the operations of the merchandise trust. In addition, liabilities assumed were also recorded as of the contract date. As no consideration was paid in this transaction, the Company had recorded a deferred gain of approximately $3.1 million within deferred cemetery revenues, net, which represented the excess of the value of the merchandise trust over the liabilities assumed.
Effective March 31, 2012, the Company and the Archdiocese agreed to terminate the Operating Agreement. As of the termination date, the Company no longer operated these properties. All activity occurring after March 31, 2012 is the responsibility of the Archdiocese and the Company has no remaining obligation to fulfill any merchandise liabilities or responsibility to perform any obligations of the properties.
In the first and second quarters of 2012, the Company received payments of approximately $2.0 million from the Archdiocese as a result of the termination. Consequently, the Company recognized a gain of $1.7 million during the nine months ended September 30, 2012, which is the amount by which the payments from the Archdiocese exceeded the value of the net assets transferred to the Archdiocese.
|
14. | SEGMENT INFORMATION |
The Company is organized into five distinct reportable segments which are classified as Cemetery Operations – Southeast, Cemetery Operations – Northeast, Cemetery Operations – West, Funeral Homes, and Corporate.
The Company has chosen this level of organization of reportable segments due to the fact that a) each reportable segment has unique characteristics that set it apart from other segments; b) the Company has organized its management personnel at these operational levels; and c) it is the level at which the Company’s chief decision makers and other senior management evaluate performance.
The cemetery operations segments sell interment rights, caskets, burial vaults, cremation niches, markers and other cemetery related merchandise. The nature of the Company’s customers differs in each of our regionally based cemetery operating segments. Cremation rates in the West region are substantially higher than they are in the Southeast region. Rates in the Northeast region tend to be somewhere between the two. Statistics indicate that customers who select cremation services have certain attributes that differ from customers who select other methods of interment. The disaggregation of cemetery operations into the three distinct regional segments is primarily due to these differences in customer attributes along with the previously mentioned management structure and senior management analysis methodologies.
The Company’s Funeral Homes segment offers a range of funeral-related services such as family consultation, the removal of and preparation of remains and the use of funeral home facilities for visitation. These services are distinctly different than the cemetery merchandise and services sold and provided by the cemetery operations segments.
The Company’s Corporate segment includes various home office selling and administrative expenses that are not allocable to the other operating segments.
Segment information as of and for the three and nine months ended September 30, 2012 and 2011 is as follows:
As of and for the three months ended September 30, 2012:
Cemeteries | Funeral Homes |
Corporate | Adjustment | Total | ||||||||||||||||||||||||
Southeast | Northeast | West | ||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||
Sales |
$ | 24,723 | $ | 8,087 | $ | 9,420 | $ | — | $ | — | $ | (8,107 | ) | $ | 34,123 | |||||||||||||
Service and other |
9,084 | 6,108 | 8,045 | — | — | (3,989 | ) | 19,248 | ||||||||||||||||||||
Funeral home |
— | — | — | 9,603 | — | (777 | ) | 8,826 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues |
33,807 | 14,195 | 17,465 | 9,603 | — | (12,873 | ) | 62,197 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Costs and expenses |
||||||||||||||||||||||||||||
Cost of sales |
5,208 | 2,156 | 1,628 | — | 52 | (1,398 | ) | 7,646 | ||||||||||||||||||||
Cemetery |
6,635 | 3,574 | 4,042 | — | 1 | — | 14,252 | |||||||||||||||||||||
Selling |
7,356 | 2,762 | 2,875 | — | 163 | (1,866 | ) | 11,290 | ||||||||||||||||||||
General and administrative |
3,694 | 1,486 | 1,828 | — | 7 | — | 7,015 | |||||||||||||||||||||
Corporate overhead |
— | — | — | — | 6,546 | — | 6,546 | |||||||||||||||||||||
Depreciation and amortization |
513 | 220 | 551 | 529 | 386 | — | 2,199 | |||||||||||||||||||||
Funeral home |
— | — | — | 7,161 | — | (65 | ) | 7,096 | ||||||||||||||||||||
Acquisition related costs |
— | — | — | — | 1,085 | — | 1,085 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total costs and expenses |
23,406 | 10,198 | 10,924 | 7,690 | 8,240 | (3,329 | ) | 57,129 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Operating profit |
$ | 10,401 | $ | 3,997 | $ | 6,541 | $ | 1,913 | $ | (8,240 | ) | $ | (9,544 | ) | $ | 5,068 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total assets |
$ | 512,446 | $ | 297,736 | $ | 393,685 | $ | 104,914 | $ | 21,156 | $ | — | $ | 1,329,937 | ||||||||||||||
Amortization of cemetery property |
$ | 1,396 | $ | 526 | $ | 275 | $ | — | $ | — | $ | 108 | $ | 2,305 | ||||||||||||||
Long lived asset additions |
$ | 6,641 | $ | 1,133 | $ | 684 | $ | 8,023 | $ | 64 | $ | — | $ | 16,545 | ||||||||||||||
Goodwill |
$ | 6,194 | $ | — | $ | 11,948 | $ | 22,251 | $ | — | $ | — | $ | 40,393 |
As of and for the nine months ended September 30, 2012:
Cemeteries | Funeral Homes |
Corporate | Adjustment | Total | ||||||||||||||||||||||||
Southeast | Northeast | West | ||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||
Sales |
$ | 69,415 | $ | 26,090 | $ | 29,743 | $ | — | $ | — | $ | (25,988 | ) | $ | 99,260 | |||||||||||||
Service and other |
27,867 | 19,820 | 22,940 | — | — | (12,213 | ) | 58,414 | ||||||||||||||||||||
Funeral home |
— | — | — | 27,065 | — | (1,447 | ) | 25,618 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues |
97,282 | 45,910 | 52,683 | 27,065 | — | (39,648 | ) | 183,292 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Costs and expenses |
||||||||||||||||||||||||||||
Cost of sales |
14,471 | 5,857 | 5,031 | — | 104 | (4,161 | ) | 21,302 | ||||||||||||||||||||
Cemetery |
19,085 | 10,453 | 12,280 | — | 1 | — | 41,819 | |||||||||||||||||||||
Selling |
22,072 | 9,220 | 9,482 | — | 995 | (5,569 | ) | 36,200 | ||||||||||||||||||||
General and administrative |
11,130 | 4,499 | 5,751 | — | 23 | — | 21,403 | |||||||||||||||||||||
Corporate overhead |
— | — | — | — | 20,905 | — | 20,905 | |||||||||||||||||||||
Depreciation and amortization |
1,559 | 660 | 1,666 | 1,667 | 1,207 | — | 6,759 | |||||||||||||||||||||
Funeral home |
— | — | — | 20,648 | — | (181 | ) | 20,467 | ||||||||||||||||||||
Acquisition related costs |
— | — | — | — | 2,198 | — | 2,198 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total costs and expenses |
68,317 | 30,689 | 34,210 | 22,315 | 25,433 | (9,911 | ) | 171,053 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Operating profit |
$ | 28,965 | $ | 15,221 | $ | 18,473 | $ | 4,750 | $ | (25,433 | ) | $ | (29,737 | ) | $ | 12,239 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total assets |
$ | 512,446 | $ | 297,736 | $ | 393,685 | $ | 104,914 | $ | 21,156 | $ | — | $ | 1,329,937 | ||||||||||||||
Amortization of cemetery property |
$ | 3,397 | $ | 1,939 | $ | 844 | $ | — | $ | — | $ | 105 | $ | 6,285 | ||||||||||||||
Long lived asset additions |
$ | 11,435 | $ | 2,490 | $ | 3,889 | $ | 8,361 | $ | 670 | $ | — | $ | 26,845 | ||||||||||||||
Goodwill |
$ | 6,194 | $ | — | $ | 11,948 | $ | 22,251 | $ | — | $ | — | $ | 40,393 |
As of and for the three months ended September 30, 2011:
Cemeteries | Funeral Homes |
|||||||||||||||||||||||||||
Southeast | Northeast | West | Corporate | Adjustment | Total | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||
Sales |
$ | 19,480 | $ | 7,744 | $ | 11,939 | $ | — | $ | — | $ | (5,000 | ) | $ | 34,163 | |||||||||||||
Service and other |
7,354 | 6,007 | 7,136 | — | — | (1,834 | ) | 18,663 | ||||||||||||||||||||
Funeral home |
— | — | — | 7,705 | — | (206 | ) | 7,499 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues |
26,834 | 13,751 | 19,075 | 7,705 | — | (7,040 | ) | 60,325 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Costs and expenses |
||||||||||||||||||||||||||||
Cost of sales |
4,056 | 1,965 | 2,127 | — | — | (988 | ) | 7,160 | ||||||||||||||||||||
Cemetery |
6,009 | 3,770 | 5,533 | — | — | — | 15,312 | |||||||||||||||||||||
Selling |
6,686 | 2,693 | 3,621 | — | 130 | (938 | ) | 12,192 | ||||||||||||||||||||
General and administrative |
3,279 | 1,535 | 2,297 | — | — | — | 7,111 | |||||||||||||||||||||
Corporate overhead |
— | — | — | — | 5,628 | — | 5,628 | |||||||||||||||||||||
Depreciation and amortization |
425 | 219 | 444 | 391 | 407 | — | 1,886 | |||||||||||||||||||||
Funeral home |
— | — | — | 5,868 | — | — | 5,868 | |||||||||||||||||||||
Acquisition related costs |
— | — | — | — | 1,189 | — | 1,189 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total costs and expenses |
20,455 | 10,182 | 14,022 | 6,259 | 7,354 | (1,926 | ) | 56,346 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Operating profit |
$ | 6,379 | $ | 3,569 | $ | 5,053 | $ | 1,446 | $ | (7,354 | ) | $ | (5,114 | ) | $ | 3,979 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total assets |
$ | 438,032 | $ | 275,081 | $ | 365,985 | $ | 54,895 | $ | 35,865 | $ | — | $ | 1,169,858 | ||||||||||||||
Amortization of cemetery property |
$ | 839 | $ | 442 | $ | 441 | $ | — | $ | — | $ | (268 | ) | $ | 1,454 | |||||||||||||
Long lived asset additions |
$ | 7,013 | $ | 436 | $ | 1,841 | $ | 5,133 | $ | 236 | $ | — | $ | 14,659 | ||||||||||||||
Goodwill |
$ | 2,700 | $ | — | $ | 11,949 | $ | 5,897 | $ | — | $ | — | $ | 20,546 |
As of and for the nine months ended September 30, 2011:
Cemeteries | Funeral Homes |
|||||||||||||||||||||||||||
Southeast | Northeast | West | Corporate | Adjustment | Total | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||
Sales |
$ | 59,448 | $ | 24,277 | $ | 34,960 | $ | — | $ | 5 | $ | (25,203 | ) | $ | 93,487 | |||||||||||||
Service and other |
23,533 | 17,586 | 22,207 | — | — | (9,344 | ) | 53,982 | ||||||||||||||||||||
Funeral home |
— | — | — | 22,749 | — | (555 | ) | 22,194 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues |
82,981 | 41,863 | 57,167 | 22,749 | 5 | (35,102 | ) | 169,663 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Costs and expenses |
||||||||||||||||||||||||||||
Cost of sales |
12,128 | 5,281 | 5,743 | — | — | (3,783 | ) | 19,369 | ||||||||||||||||||||
Cemetery |
17,036 | 10,739 | 15,085 | — | — | — | 42,860 | |||||||||||||||||||||
Selling |
20,292 | 8,464 | 10,336 | — | 807 | (5,976 | ) | 33,923 | ||||||||||||||||||||
General and administrative |
9,547 | 4,555 | 6,469 | — | (2 | ) | — | 20,569 | ||||||||||||||||||||
Corporate overhead |
— | — | — | — | 17,572 | — | 17,572 | |||||||||||||||||||||
Depreciation and amortization |
1,183 | 663 | 1,686 | 1,118 | 1,724 | — | 6,374 | |||||||||||||||||||||
Funeral home |
— | — | — | 16,875 | — | — | 16,875 | |||||||||||||||||||||
Acquisition related costs |
— | — | — | — | 3,147 | — | 3,147 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total costs and expenses |
60,186 | 29,702 | 39,319 | 17,993 | 23,248 | (9,759 | ) | 160,689 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Operating profit |
$ | 22,795 | $ | 12,161 | $ | 17,848 | $ | 4,756 | $ | (23,243 | ) | $ | (25,343 | ) | $ | 8,974 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total assets |
$ | 438,032 | $ | 275,081 | $ | 365,985 | $ | 54,895 | $ | 35,865 | $ | — | $ | 1,169,858 | ||||||||||||||
Amortization of cemetery property |
$ | 2,592 | $ | 1,582 | $ | 835 | $ | — | $ | — | $ | (597 | ) | $ | 4,412 | |||||||||||||
Long lived asset additions |
$ | 10,900 | $ | 1,239 | $ | 5,062 | $ | 7,269 | $ | 540 | $ | — | $ | 25,010 | ||||||||||||||
Goodwill |
$ | 2,700 | $ | — | $ | 11,949 | $ | 5,897 | $ | — | $ | — | $ | 20,546 |
Results of individual business units are presented based on our management accounting practices and management structure. There is no comprehensive, authoritative body of guidance for management accounting equivalent to accounting principles generally accepted in the United States of America; therefore, the financial results of individual business units are not necessarily comparable with similar information for any other company. The management accounting process uses assumptions and allocations to measure performance of the business units. Methodologies are refined from time to time as management accounting practices are enhanced and businesses change. Revenues and associated expenses are not deferred in accordance with SAB No. 104 therefore, the deferral of these revenues and expenses is provided in the adjustment column to reconcile the Company’s managerial financial statements to those prepared in accordance with GAAP. Pre-need sales revenues included within the sales category consist primarily of the sale of burial lots, burial vaults, mausoleum crypts, grave markers and memorials, and caskets. Management accounting practices included in the Southeast, Northeast, and Western Regions reflect these pre-need sales when contracts are signed by the customer and accepted by the Company. Pre-need sales reflected in the consolidated financial statements, prepared in accordance with GAAP, recognize revenues for the sale of burial lots and mausoleum crypts when the product is constructed and at least 10% of the sales price is collected. With respect to the other products, the consolidated financial statements prepared under GAAP recognize sales revenues when the criteria for delivery under SAB No. 104 are met. These criteria include, among other things, purchase of the product, delivery and installation of the product in the ground, and transfer of title to the customer. In each case, costs are accrued in connection with the recognition of revenues; therefore, the consolidated financial statements reflect Deferred Cemetery Revenue, Net and Deferred Selling and Obtaining Costs on the balance sheet, whereas the Company’s management accounting practices exclude these items.
|
15. | FAIR VALUE MEASUREMENTS |
The Fair Value Measurements and Disclosures topic of the ASC defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. This topic also establishes a fair value hierarchy that gives the highest priority to observable inputs and the lowest priority to unobservable inputs. The three levels of the fair value hierarchy defined by this topic are described below.
Level 1: Quoted market prices available in active markets for identical assets or liabilities. The Company includes short-term investments, consisting primarily of money market funds, U.S. Government debt securities and publicly traded equity securities and mutual funds in its level 1 investments.
Level 2: Quoted prices in active markets for similar assets; quoted prices in non-active markets for identical or similar assets; inputs other than quoted prices that are observable. The Company includes U.S. state and municipal, corporate and other fixed income debt securities in its level 2 investments.
Level 3: Any and all pricing inputs that are generally unobservable and not corroborated by market data.
The following table allocates the Company’s assets measured at fair value as of September 30, 2012 and December 31, 2011.
As of September 30, 2012
Merchandise Trust
Description |
Level 1 | Level 2 | Total | |||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Short-term investments |
$ | 48,722 | $ | — | $ | 48,722 | ||||||
Fixed maturities: |
||||||||||||
U.S. government and federal agency |
— | — | — | |||||||||
U.S. state and local government agency |
— | 23 | 23 | |||||||||
Corporate debt securities |
— | 8,741 | 8,741 | |||||||||
Other debt securities |
— | 4,313 | 4,313 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturity investments |
— | 13,077 | 13,077 | |||||||||
|
|
|
|
|
|
|||||||
Mutual funds - debt securities |
100,085 | — | 100,085 | |||||||||
Mutual funds - equity securities - real estate sector |
43,432 | — | 43,432 | |||||||||
Mutual funds - equity securities - energy sector |
5,767 | — | 5,767 | |||||||||
Mutual funds - equity securities - MLP’s |
28,476 | — | 28,476 | |||||||||
Mutual funds - equity securities - other |
53,697 | — | 53,697 | |||||||||
Equity securities |
||||||||||||
Preferred REIT’s |
1,638 | — | 1,638 | |||||||||
Master limited partnerships |
41,378 | — | 41,378 | |||||||||
Global equity securities |
22,483 | — | 22,483 | |||||||||
Other invested assets |
— | 6,587 | 6,587 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 345,678 | $ | 19,664 | $ | 365,342 | ||||||
|
|
|
|
|
|
Perpetual Care Trust
Description |
Level 1 | Level 2 | Total | |||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Short-term investments |
$ | 20,912 | $ | — | $ | 20,912 | ||||||
Fixed maturities: |
||||||||||||
U.S. government and federal agency |
513 | — | 513 | |||||||||
U.S. state and local government agency |
— | 147 | 147 | |||||||||
Corporate debt securities |
— | 23,898 | 23,898 | |||||||||
Other debt securities |
— | 371 | 371 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturity investments |
513 | 24,416 | 24,929 | |||||||||
|
|
|
|
|
|
|||||||
Mutual funds - debt securities |
107,933 | — | 107,933 | |||||||||
Mutual funds - equity securities - real estate sector |
39,083 | — | 39,083 | |||||||||
Mutual funds - equity securities - energy sector |
12,911 | — | 12,911 | |||||||||
Mutual funds - equity securities - MLP’s |
36,583 | — | 36,583 | |||||||||
Mutual funds - equity securities - other |
9,149 | — | 9,149 | |||||||||
Equity securities |
||||||||||||
Preferred REIT’s |
953 | — | 953 | |||||||||
Master limited partnerships |
29,453 | — | 29,453 | |||||||||
Global equity securities |
745 | — | 745 | |||||||||
Other invested assets |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 258,235 | $ | 24,416 | $ | 282,651 | ||||||
|
|
|
|
|
|
As of December 31, 2011
Merchandise Trust
Description |
Level 1 | Level 2 | Total | |||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Short-term investments |
$ | 38,312 | $ | — | $ | 38,312 | ||||||
Fixed maturities: |
||||||||||||
U.S. government and federal agency |
— | — | — | |||||||||
U.S. state and local government agency |
— | 23 | 23 | |||||||||
Corporate debt securities |
— | 9,765 | 9,765 | |||||||||
Other debt securities |
— | 1,100 | 1,100 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturity investments |
— | 10,888 | 10,888 | |||||||||
|
|
|
|
|
|
|||||||
Mutual funds - debt securities |
67,421 | — | 67,421 | |||||||||
Mutual funds - equity securities - real estate sector |
22,847 | — | 22,847 | |||||||||
Mutual funds - equity securities - energy sector |
28,057 | — | 28,057 | |||||||||
Mutual funds - equity securities - MLP’s |
20,308 | — | 20,308 | |||||||||
Mutual funds - equity securities - other |
70,076 | — | 70,076 | |||||||||
Equity securities |
||||||||||||
Preferred REIT’s |
9,001 | — | 9,001 | |||||||||
Master limited partnerships |
41,469 | — | 41,469 | |||||||||
Global equity securities |
21,882 | — | 21,882 | |||||||||
Other invested assets |
— | 7,360 | 7,360 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 319,373 | $ | 18,248 | $ | 337,621 | ||||||
|
|
|
|
|
|
Perpetual Care Trust
Description |
Level 1 | Level 2 | Total | |||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Short-term investments |
$ | 22,607 | $ | — | $ | 22,607 | ||||||
Fixed maturities: |
||||||||||||
U.S. government and federal agency |
513 | — | 513 | |||||||||
U.S. state and local government agency |
— | 147 | 147 | |||||||||
Corporate debt securities |
— | 22,154 | 22,154 | |||||||||
Other debt securities |
— | 371 | 371 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturity investments |
513 | 22,672 | 23,185 | |||||||||
|
|
|
|
|
|
|||||||
Mutual funds - debt securities |
60,806 | — | 60,806 | |||||||||
Mutual funds - equity securities - real estate sector |
24,580 | — | 24,580 | |||||||||
Mutual funds - equity securities - energy sector |
20,069 | — | 20,069 | |||||||||
Mutual funds - equity securities - MLP’s |
13,515 | — | 13,515 | |||||||||
Mutual funds - equity securities - other |
41,334 | — | 41,334 | |||||||||
Equity securities |
||||||||||||
Preferred REIT’s |
19,720 | — | 19,720 | |||||||||
Master limited partnerships |
27,998 | — | 27,998 | |||||||||
Global equity securities |
695 | — | 695 | |||||||||
Other invested assets |
— | 170 | 170 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 231,837 | $ | 22,842 | $ | 254,679 | ||||||
|
|
|
|
|
|
All level 2 assets are priced utilizing independent pricing services. 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 September 30, 2012, the Partnership operated 276 cemeteries, 258 of which are owned, in 26 states and Puerto Rico and owned and operated 85 funeral homes in 18 states and Puerto Rico.
Basis of Presentation
The unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). All interim financial data is unaudited. However, in the opinion of management, the interim financial data as of September 30, 2012 and for the three and nine months ended September 30, 2012 and 2011 includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. The results of operations for interim periods are not necessarily indicative of the results of operations to be expected for a full year. The December 31, 2011 condensed consolidated balance sheet data was derived from audited financial statements included in the Company’s 2011 Annual Report on Form 10-K (“2011 Form 10-K”) and has been adjusted to include the effects of retrospective adjustments resulting from the Company’s 2011 acquisitions, but does not include all disclosures required by GAAP, which are presented in the Company’s 2011 Form 10-K.
Principles of Consolidation
The unaudited condensed consolidated financial statements include the accounts of each of the Company’s subsidiaries. These statements also include the accounts of the merchandise and perpetual care trusts in which the Company has a variable interest and is the primary beneficiary. The Company operates 18 cemeteries under long-term operating or management contracts. The operations of 16 of these managed cemeteries have been consolidated in accordance with the provisions of Accounting Standards Codification (ASC) 810.
The Company operates 2 cemeteries under long-term operating agreements that do not qualify as acquisitions for accounting purposes. As a result, the Company did not consolidate all of the existing assets and liabilities related to these cemeteries. The Company has consolidated the existing assets and liabilities of each of these cemeteries’ merchandise and perpetual care trusts as variable interest entities since the Company controls and receives the benefits and absorbs any losses from operating these trusts. Under these long-term operating agreements, which are subject to certain termination provisions, the Company is the exclusive operator of these cemeteries. The Company earns revenues related to sales of merchandise, services, and interment rights and incurs expenses related to such sales and the maintenance and upkeep of these cemeteries. Upon termination of these contracts, the Company will retain all of the benefits and related contractual obligations incurred from sales generated during the contract period. The Company has also recognized the existing merchandise liabilities that it assumed as part of these agreements.
Use of Estimates
Preparation of these unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expense during the reporting periods. As a result, actual results could differ from those estimates. The most significant estimates in the unaudited condensed consolidated financial statements are the valuation of assets in the merchandise trust and perpetual care trust, allowance for cancellations, unit-based compensation, merchandise liability, deferred sales revenue, deferred margin, deferred merchandise trust investment earnings, deferred obtaining costs and income taxes. Deferred sales revenue, deferred margin and deferred merchandise trust investment earnings are included in deferred cemetery revenues, net, on the unaudited condensed consolidated balance sheet.
|
Long-term accounts receivable, net, consist of the following:
As of | ||||||||
September 30, 2012 |
December 31, 2011 |
|||||||
(in thousands) | ||||||||
Customer receivables |
$ | 156,224 | $ | 151,517 | ||||
Unearned finance income |
(18,017 | ) | (16,679 | ) | ||||
Allowance for contract cancellations |
(20,467 | ) | (17,582 | ) | ||||
|
|
|
|
|||||
117,740 | 117,256 | |||||||
Less: current portion, net of allowance |
48,109 | 48,837 | ||||||
|
|
|
|
|||||
Long-term portion, net of allowance |
$ | 69,631 | $ | 68,419 | ||||
|
|
|
|
Activity in the allowance for contract cancellations is as follows:
For the nine months ended September 30, | ||||||||
2012 | 2011 | |||||||
(in thousands) | ||||||||
Balance - Beginning of period |
$ | 17,582 | $ | 15,832 | ||||
Provision for cancellations |
14,858 | 13,799 | ||||||
Charge-offs - net |
(11,973 | ) | (10,315 | ) | ||||
|
|
|
|
|||||
Balance - End of period |
$ | 20,467 | $ | 19,316 | ||||
|
|
|
|
|
Major classes of property and equipment follow:
As of | ||||||||
September 30, 2012 |
December 31, 2011 |
|||||||
(in thousands) | ||||||||
Building and improvements |
$ | 82,565 | $ | 75,076 | ||||
Furniture and equipment |
40,180 | 36,863 | ||||||
|
|
|
|
|||||
122,745 | 111,939 | |||||||
Less: accumulated depreciation |
(43,178 | ) | (38,162 | ) | ||||
|
|
|
|
|||||
Property and equipment - net |
$ | 79,567 | $ | 73,777 | ||||
|
|
|
|
Cemetery property consists of the following:
As of | ||||||||
September 30, 2012 |
December 31, 2011 |
|||||||
(in thousands) | ||||||||
Developed land |
$ | 71,128 | $ | 64,266 | ||||
Undeveloped land |
168,724 | 164,723 | ||||||
Mausoleum crypts and lawn crypts |
69,488 | 69,949 | ||||||
|
|
|
|
|||||
Total |
$ | 309,340 | $ | 298,938 | ||||
|
|
|
|
|
The cost and market value associated with the assets held in merchandise trusts at September 30, 2012 and December 31, 2011 were as follows:
As of September 30, 2012 |
Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
||||||||||||
(in thousands) | ||||||||||||||||
Short-term investments |
$ | 48,722 | $ | — | $ | — | $ | 48,722 | ||||||||
Fixed maturities: |
||||||||||||||||
U.S. Government and federal agency |
— | — | — | — | ||||||||||||
U.S. State and local government agency |
23 | — | — | 23 | ||||||||||||
Corporate debt securities |
8,673 | 195 | (127 | ) | 8,741 | |||||||||||
Other debt securities |
4,320 | — | (7 | ) | 4,313 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed maturities |
13,016 | 195 | (134 | ) | 13,077 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Mutual funds - debt securities |
97,886 | 2,699 | (500 | ) | 100,085 | |||||||||||
Mutual funds - equity securities |
128,537 | 6,099 | (3,264 | ) | 131,372 | |||||||||||
Equity securities |
65,897 | 3,100 | (3,498 | ) | 65,499 | |||||||||||
Other invested assets |
6,569 | 18 | — | 6,587 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total managed investments |
$ | 360,627 | $ | 12,111 | $ | (7,396 | ) | $ | 365,342 | |||||||
|
|
|
|
|
|
|
|
|||||||||
West Virginia Trust Receivable |
7,433 | — | — | 7,433 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 368,060 | $ | 12,111 | $ | (7,396 | ) | $ | 372,775 | |||||||
|
|
|
|
|
|
|
|
As of December 31, 2011 |
Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
||||||||||||
(in thousands) | ||||||||||||||||
Short-term investments |
$ | 38,312 | $ | — | $ | — | $ | 38,312 | ||||||||
Fixed maturities: |
||||||||||||||||
U.S. Government and federal agency |
— | — | — | — | ||||||||||||
U.S. State and local government agency |
23 | — | — | 23 | ||||||||||||
Corporate debt securities |
10,537 | 19 | (791 | ) | 9,765 | |||||||||||
Other debt securities |
1,100 | — | — | 1,100 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed maturities |
11,660 | 19 | (791 | ) | 10,888 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Mutual funds - debt securities |
68,291 | 1,711 | (2,581 | ) | 67,421 | |||||||||||
Mutual funds - equity securities |
148,209 | 1,939 | (8,860 | ) | 141,288 | |||||||||||
Equity securities |
71,760 | 3,723 | (3,131 | ) | 72,352 | |||||||||||
Other invested assets |
7,326 | 34 | — | 7,360 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total managed investments |
$ | 345,558 | $ | 7,426 | $ | (15,363 | ) | $ | 337,621 | |||||||
|
|
|
|
|
|
|
|
|||||||||
West Virginia Trust Receivable |
6,894 | — | — | 6,894 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 352,452 | $ | 7,426 | $ | (15,363 | ) | $ | 344,515 | |||||||
|
|
|
|
|
|
|
|
The contractual maturities of debt securities as of September 30, 2012 are as follows:
As of September 30, 2012 |
Less than 1 year |
1 year through 5 years |
6 years through 10 years |
More than 10 years |
||||||||||||
(in thousands) | ||||||||||||||||
U.S. Government and federal agency |
$ | — | $ | — | $ | — | $ | — | ||||||||
U.S. State and local government agency |
23 | — | — | — | ||||||||||||
Corporate debt securities |
— | 5,866 | 2,742 | 133 | ||||||||||||
Other debt securities |
4,313 | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed maturities |
$ | 4,336 | $ | 5,866 | $ | 2,742 | $ | 133 | ||||||||
|
|
|
|
|
|
|
|
An aging of unrealized losses on the Company’s investments in fixed maturities and equity securities at September 30, 2012 and December 31, 2011 is presented below:
Less than 12 months | 12 Months or more | Total | ||||||||||||||||||||||
As of September 30, 2012 |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Fixed maturities: |
||||||||||||||||||||||||
U.S. Government and federal agency |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
U.S. State and local government agency |
— | — | — | — | — | — | ||||||||||||||||||
Corporate debt securities |
1,065 | 29 | 1,716 | 98 | 2,781 | 127 | ||||||||||||||||||
Other debt securities |
4,313 | 7 | — | — | 4,313 | 7 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total fixed maturities |
5,378 | 36 | 1,716 | 98 | 7,094 | 134 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Mutual funds - debt securities |
13,885 | 128 | 4,255 | 372 | 18,140 | 500 | ||||||||||||||||||
Mutual funds - equity securities |
23,238 | 2,304 | 25,658 | 960 | 48,896 | 3,264 | ||||||||||||||||||
Equity securities |
20,562 | 1,205 | 9,330 | 2,293 | 29,892 | 3,498 | ||||||||||||||||||
Other invested assets |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 63,063 | $ | 3,673 | $ | 40,959 | $ | 3,723 | $ | 104,022 | $ | 7,396 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months | 12 Months or more | Total | ||||||||||||||||||||||
As of December 31, 2011 |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Fixed maturities: |
||||||||||||||||||||||||
U.S. Government and federal agency |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
U.S. State and local government agency |
— | — | — | — | — | — | ||||||||||||||||||
Corporate debt securities |
4,007 | 351 | 4,459 | 440 | 8,466 | 791 | ||||||||||||||||||
Other debt securities |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total fixed maturities |
4,007 | 351 | 4,459 | 440 | 8,466 | 791 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Mutual funds - debt securities |
19,691 | 1,109 | 31,916 | 1,472 | 51,607 | 2,581 | ||||||||||||||||||
Mutual funds - equity securities |
32,631 | 970 | 59,010 | 7,890 | 91,641 | 8,860 | ||||||||||||||||||
Equity securities |
20,349 | 1,941 | 5,775 | 1,190 | 26,124 | 3,131 | ||||||||||||||||||
Other invested assets |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 76,678 | $ | 4,371 | $ | 101,160 | $ | 10,992 | $ | 177,838 | $ | 15,363 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of the Company’s merchandise trust activities for the nine months ended September 30, 2012 is presented below:
Fair Value @ 12/31/2011 |
Contributions |
Distributions |
Interest/ |
Capital
Gain |
Realized |
Taxes |
Fees |
Unrealized |
Fair
Value
@ |
|||||||||
(in thousands) | ||||||||||||||||||
$ 344,515 |
46,695 |
(46,816) | 12,240 | 110 | 8,750 | (3,511) | (1,860) | 12,652 | $372,775 |
The cost and market value associated with the assets held in perpetual care trusts at September 30, 2012 and December 31, 2011 were as follows:
As of September 30, 2012 |
Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
||||||||||||
(in thousands) | ||||||||||||||||
Short-term investments |
$ | 20,912 | $ | — | $ | — | $ | 20,912 | ||||||||
Fixed maturities: |
||||||||||||||||
U.S. Government and federal agency |
408 | 105 | — | 513 | ||||||||||||
U.S. State and local government agency |
66 | 81 | — | 147 | ||||||||||||
Corporate debt securities |
23,441 | 784 | (327 | ) | 23,898 | |||||||||||
Other debt securities |
371 | — | — | 371 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed maturities |
24,286 | 970 | (327 | ) | 24,929 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Mutual funds - debt securities |
104,648 | 3,822 | (537 | ) | 107,933 | |||||||||||
Mutual funds - equity securities |
93,917 | 6,138 | (2,329 | ) | 97,726 | |||||||||||
Equity Securities |
23,346 | 8,201 | (396 | ) | 31,151 | |||||||||||
Other invested assets |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 267,109 | $ | 19,131 | $ | (3,589 | ) | $ | 282,651 | |||||||
|
|
|
|
|
|
|
|
As of December 31, 2011 |
Cost | Gross Unrealized Gains |
Gross Unrealized Losses |
Fair Value |
||||||||||||
(in thousands) | ||||||||||||||||
Short-term investments |
$ | 22,607 | $ | — | $ | — | $ | 22,607 | ||||||||
Fixed maturities: |
||||||||||||||||
U.S. Government and federal agency |
408 | 105 | — | 513 | ||||||||||||
U.S. State and local government agency |
66 | 81 | — | 147 | ||||||||||||
Corporate debt securities |
23,359 | 229 | (1,434 | ) | 22,154 | |||||||||||
Other debt securities |
371 | — | — | 371 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed maturities |
24,204 | 415 | (1,434 | ) | 23,185 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Mutual funds - debt securities |
61,700 | 185 | (1,079 | ) | 60,806 | |||||||||||
Mutual funds - equity securities |
104,824 | 4,295 | (9,621 | ) | 99,498 | |||||||||||
Equity Securities |
39,199 | 9,326 | (112 | ) | 48,413 | |||||||||||
Other invested assets |
327 | 156 | (313 | ) | 170 | |||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 252,861 | $ | 14,377 | $ | (12,559 | ) | $ | 254,679 | |||||||
|
|
|
|
|
|
|
|
The contractual maturities of debt securities as of September 30, 2012 are as follows:
As of September 30, 2012 |
Less than 1 year |
1 year through 5 years |
6 years through 10 years |
More than 10 years |
||||||||||||
(in thousands) | ||||||||||||||||
U.S. Government and federal agency |
$ | 129 | $ | 384 | $ | — | $ | — | ||||||||
U.S. State and local government agency |
147 | — | — | — | ||||||||||||
Corporate debt securities |
50 | 16,127 | 7,295 | 426 | ||||||||||||
Other debt securities |
371 | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total fixed maturities |
$ | 697 | $ | 16,511 | $ | 7,295 | $ | 426 | ||||||||
|
|
|
|
|
|
|
|
An aging of unrealized losses on the Company’s investments in fixed maturities and equity securities at September 30, 2012 and December 31, 2011 held in perpetual care trusts is presented below:
Less than 12 months | 12 Months or more | Total | ||||||||||||||||||||||
As of September 30, 2012 |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Fixed maturities: |
||||||||||||||||||||||||
U.S. Government and federal agency |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
U.S. State and local government agency |
— | — | — | — | — | — | ||||||||||||||||||
Corporate debt securities |
3,074 | 82 | 4,397 | 245 | 7,471 | 327 | ||||||||||||||||||
Other debt securities |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total fixed maturities |
3,074 | 82 | 4,397 | 245 | 7,471 | 327 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Mutual funds - debt securities |
5,229 | 228 | 1,033 | 309 | 6,262 | 537 | ||||||||||||||||||
Mutual funds - equity securities |
— | — | 7,904 | 2,329 | 7,904 | 2,329 | ||||||||||||||||||
Equity securities |
3,135 | 396 | — | — | 3,135 | 396 | ||||||||||||||||||
Other invested assets |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 11,438 | $ | 706 | $ | 13,334 | $ | 2,883 | $ | 24,772 | $ | 3,589 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Less than 12 months | 12 Months or more | Total | ||||||||||||||||||||||
As of December 31, 2011 |
Fair Value |
Unrealized Losses |
Fair Value |
Unrealized Losses |
Fair Value | Unrealized Losses |
||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Fixed maturities: |
||||||||||||||||||||||||
U.S. Government and federal agency |
$ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
U.S. State and local government agency |
— | — | — | — | — | — | ||||||||||||||||||
Corporate debt securities |
7,967 | 727 | 8,471 | 707 | 16,438 | 1,434 | ||||||||||||||||||
Other debt securities |
— | — | — | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total fixed maturities |
7,967 | 727 | 8,471 | 707 | 16,438 | 1,434 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Mutual funds - debt securities |
37,956 | 772 | 1,675 | 307 | 39,631 | 1,079 | ||||||||||||||||||
Mutual funds - equity securities |
21,483 | 3,023 | 44,416 | 6,598 | 65,899 | 9,621 | ||||||||||||||||||
Equity securities |
2,978 | 106 | 351 | 6 | 3,329 | 112 | ||||||||||||||||||
Other invested assets |
170 | 313 | — | — | 170 | 313 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 70,554 | $ | 4,941 | $ | 54,913 | $ | 7,618 | $ | 125,467 | $ | 12,559 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of the Company’s perpetual care trust activities for the nine months ended September 30, 2012 is presented below:
Fair Value @ 12/31/2011 |
Contributions |
Distributions |
Interest/ |
Capital
Gain |
Realized |
Taxes |
Fees |
Unrealized |
Fair
Value
@ |
|||||||||
(in thousands) | ||||||||||||||||||
$ 254,679 |
13,715 | (10,954) | 12,310 | 13 | 1,213 | (681) | (1,368) | 13,724 | $282,651 |
|
A rollforward of goodwill by reportable segment is as follows:
Cemeteries | Funeral Homes |
Total | ||||||||||||||||||
Southeast | Northeast | West | ||||||||||||||||||
(in thousands) | ||||||||||||||||||||
Balance as of December 31, 2011 |
$ | 5,662 | $ | — | $ | 11,948 | $ | 14,297 | $ | 31,907 | ||||||||||
Goodwill resulting from acquisitions during the nine months ended September 30, 2012 |
532 | — | — | 7,954 | 8,486 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Balance as of September 30, 2012 |
$ | 6,194 | $ | — | $ | 11,948 | $ | 22,251 | $ | 40,393 | ||||||||||
|
|
|
|
|
|
|
|
|
|
All of the intangible assets are subject to amortization. The major classes of intangible assets are as follows:
As of September 30, 2012 |
Net |
As of December 31, 2011 |
Net | |||||||||||||||||||||
Gross Carrying Amount |
Accumulated Amortization |
Intangible Asset |
Gross Carrying Amount |
Accumulated Amortization |
Intangible Asset |
|||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||
Amortized Intangible Assets: |
||||||||||||||||||||||||
Underlying contract value |
$ | 6,239 | $ | (503 | ) | $ | 5,736 | $ | 8,484 | $ | (546 | ) | $ | 7,938 | ||||||||||
Non-compete agreements |
5,415 | (2,136 | ) | 3,279 | 3,820 | (1,413 | ) | 2,407 | ||||||||||||||||
Other intangible assets |
269 | (77 | ) | 192 | 205 | (67 | ) | 138 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Intangible Assets |
$ | 11,923 | $ | (2,716 | ) | $ | 9,207 | $ | 12,509 | $ | (2,026 | ) | $ | 10,483 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company had the following outstanding debt:
As of | ||||||||
September 30, 2012 |
December 31, 2011 |
|||||||
(in thousands) | ||||||||
Insurance premium financing |
$ | 504 | $ | 211 | ||||
Vehicle financing |
953 | 1,147 | ||||||
Acquisition Credit Facility, due January 2017 |
— | 10,750 | ||||||
Revolving Credit Facility, due January 2017 |
84,700 | 33,000 | ||||||
Note Payable - Greenlawn acquisition |
1,214 | 1,321 | ||||||
Note Payable - Nelms acquisition (net of discount) |
363 | 623 | ||||||
Notes Payable - acquisition non-competes (net of discounts) |
3,062 | 1,490 | ||||||
10.25% senior notes, due 2017 |
150,000 | 150,000 | ||||||
|
|
|
|
|||||
Total |
240,796 | 198,542 | ||||||
Less current portion |
1,770 | 1,487 | ||||||
Less unamortized bond discount |
2,908 | 3,220 | ||||||
|
|
|
|
|||||
Long-term portion |
$ | 236,118 | $ | 193,835 | ||||
|
|
|
|
|
At September 30, 2012 and December 31, 2011, deferred cemetery revenues, net, consisted of the following:
As of | ||||||||
September 30, 2012 |
December 31, 2011 |
|||||||
(in thousands) | ||||||||
Deferred cemetery revenue |
$ | 333,439 | $ | 306,488 | ||||
Deferred merchandise trust revenue |
59,597 | 50,419 | ||||||
Deferred merchandise trust unrealized gains (losses) |
4,715 | (7,937 | ) | |||||
Deferred pre-acquisition margin |
133,141 | 135,043 | ||||||
Deferred cost of goods sold |
(45,951 | ) | (42,335 | ) | ||||
|
|
|
|
|||||
Deferred cemetery revenues, net |
$ | 484,941 | $ | 441,678 | ||||
|
|
|
|
|||||
Deferred selling and obtaining costs |
$ | 73,904 | $ | 68,542 |
|
At September 30, 2012, operating leases will result in future payments in the following approximate amounts:
(in thousands) | ||||
2013 |
$ | 2,074 | ||
2014 |
1,363 | |||
2015 |
869 | |||
2016 |
801 | |||
2017 |
754 | |||
Thereafter |
1,892 | |||
|
|
|||
Total |
$ | 7,753 | ||
|
|
|
Compensation expense recognized related to unit appreciation rights and restricted phantom unit awards for the three and nine months ended September 30, 2012 and 2011 are summarized in the table below:
Three months ended September 30, |
Nine months ended September 30, |
|||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Unit appreciation rights |
$ | 133 | $ | 119 | $ | 381 | $ | 358 | ||||||||
Restricted phantom units |
83 | 76 | 244 | 218 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total unit-based compensation expense |
$ | 216 | $ | 195 | $ | 625 | $ | 576 | ||||||||
|
|
|
|
|
|
|
|
|
The table below reflects the Company’s preliminary assessment of the fair value of net assets acquired, the elimination of debt and other assets and the purchase price, which results in the recognition of goodwill recorded in the Company’s Cemetery Operations – Southeast segment. These amounts may be retrospectively adjusted as additional information is received.
Preliminary Assessment |
||||
(in thousands) | ||||
Net Assets Acquired: |
||||
Accounts receivable |
$ | 66 | ||
Cemetery property |
3,001 | |||
Property and equipment |
102 | |||
|
|
|||
Total net assets acquired |
3,169 | |||
|
|
|||
Assets and Liabilities divested: |
||||
Note payable to Kingwood |
519 | |||
Intangible asset representing underlying contract value |
(2,236 | ) | ||
|
|
|||
Fair value of net assets acquired and divested |
1,452 | |||
|
|
|||
Consideration paid |
1,652 | |||
|
|
|||
Goodwill from purchase |
$ | 200 | ||
|
|
The table below reflects the Company’s final assessment of the fair value of net assets acquired, the purchase price and the resulting goodwill from the purchase and displays the adjustments made to the revised values reported at December 31, 2011. The Company obtained additional information in the third quarter of 2012 and has retrospectively adjusted these values as noted below.
Revised Assessment |
Adjustments | Final Assessment |
||||||||||
(in thousands) | ||||||||||||
Assets: |
||||||||||||
Accounts receivable |
$ | 4,575 | $ | 25 | $ | 4,600 | ||||||
Cemetery property |
4,666 | — | 4,666 | |||||||||
Perpetual care trusts, restricted, at fair value |
981 | — | 981 | |||||||||
Property and equipment |
4,124 | — | 4,124 | |||||||||
|
|
|
|
|
|
|||||||
Total assets |
14,346 | 25 | 14,371 | |||||||||
|
|
|
|
|
|
|||||||
Liabilities: |
||||||||||||
Deferred margin |
5,217 | (200 | ) | 5,017 | ||||||||
Merchandise liabilities |
4,799 | (167 | ) | 4,632 | ||||||||
Deferred tax liability |
766 | — | 766 | |||||||||
Perpetual care trust corpus |
981 | — | 981 | |||||||||
|
|
|
|
|
|
|||||||
Total liabilities |
11,763 | (367 | ) | 11,396 | ||||||||
|
|
|
|
|
|
|||||||
Fair value of net assets acquired |
2,583 | 392 | 2,975 | |||||||||
|
|
|
|
|
|
|||||||
Consideration paid |
4,600 | — | 4,600 | |||||||||
|
|
|
|
|
|
|||||||
Goodwill from purchase |
$ | 2,017 | $ | (392 | ) | $ | 1,625 | |||||
|
|
|
|
|
|
The table below reflects the Company’s final assessment of the fair value of net assets acquired, the purchase price and the resulting goodwill from these acquisitions. For a detailed breakout of the purchase price for these acquisitions on an individual basis, see our 2011 Form 10-K.
Final Assessment |
||||
Assets: |
||||
Accounts receivable |
$ | 211 | ||
Cemetery property |
4,833 | |||
Merchandise trusts, restricted, at fair value |
4,069 | |||
Perpetual care trusts, restricted, at fair value |
2,438 | |||
Property and equipment |
2,303 | |||
Other assets |
260 | |||
|
|
|||
Total assets |
14,114 | |||
|
|
|||
Liabilities: |
||||
Deferred margin |
2,457 | |||
Merchandise liabilities |
2,719 | |||
Perpetual care trust corpus |
2,438 | |||
Deferred tax liability |
1,287 | |||
|
|
|||
Total liabilities |
8,901 | |||
|
|
|||
Fair value of net assets acquired |
5,213 | |||
|
|
|||
Consideration paid |
5,700 | |||
Fair value of debt assumed for non-compete agreements |
280 | |||
|
|
|||
Total consideration paid |
5,980 | |||
|
|
|||
Goodwill from purchase |
$ | 767 | ||
|
|
The table below reflects the Company’s preliminary assessment of the fair value of net assets acquired. The resulting goodwill is recorded in the Company’s Funeral Homes operating segment. These amounts may be retrospectively adjusted as additional information is received.
Preliminary Assessment |
||||
(in thousands) | ||||
Assets: |
||||
Property and equipment |
$ | 1,296 | ||
Non-compete agreements |
170 | |||
|
|
|||
Total assets |
1,466 | |||
|
|
|||
Total liabilities |
— | |||
|
|
|||
Fair value of net assets acquired |
1,466 | |||
|
|
|||
Consideration paid - cash |
2,300 | |||
Fair value of debt assumed for non-compete agreements |
274 | |||
|
|
|||
Total consideration paid |
2,574 | |||
|
|
|||
Goodwill from purchase |
$ | 1,108 | ||
|
|
The table below reflects the Company’s preliminary assessment of the fair value of net assets acquired. The resulting goodwill is recorded in both the Company’s Cemetery Operations – Southeast segment and Funeral Homes operating segment. These amounts may be retrospectively adjusted as additional information is received.
Preliminary Assessment |
||||
(in thousands) | ||||
Assets: |
||||
Accounts receivable |
$ | 1,005 | ||
Cemetery property |
6,100 | |||
Property and equipment |
5,864 | |||
Merchandise trusts, restricted , at fair value |
11,884 | |||
Perpetual care trusts, restricted, at fair value |
2,232 | |||
Other assets |
122 | |||
Non-compete agreements |
1,373 | |||
|
|
|||
Total assets |
28,580 | |||
|
|
|||
Liabilities: |
||||
Deferred margin |
3,746 | |||
Merchandise liabilities |
3,458 | |||
Perpetual care trust corpus |
2,232 | |||
|
|
|||
Total liabilities |
9,436 | |||
|
|
|||
Fair value of net assets acquired |
19,144 | |||
|
|
|||
Consideration paid - cash |
20,000 | |||
Consideration paid - units |
3,500 | |||
Fair value of debt assumed for non-compete agreements |
1,230 | |||
|
|
|||
Total consideration paid |
24,730 | |||
|
|
|||
Goodwill from purchase |
$ | 5,586 | ||
|
|
The table below reflects the Company’s preliminary assessment of the fair value of net assets acquired, the purchase price and the gain on bargain purchase. These amounts may be retrospectively adjusted as additional information is received.
Preliminary Assessment |
||||
(in thousands) | ||||
Assets: |
||||
Accounts receivable |
$ | 72 | ||
Cemetery property |
842 | |||
Property and equipment |
518 | |||
Perpetual care trusts, restricted, at fair value |
2,780 | |||
Non-compete agreements |
12 | |||
|
|
|||
Total assets |
4,224 | |||
|
|
|||
Liabilities: |
||||
Perpetual care trust corpus |
2,780 | |||
Other liabilities |
24 | |||
Deferred tax liability |
374 | |||
|
|
|||
Total liabilities |
3,178 | |||
|
|
|||
Fair value of net assets acquired |
1,046 | |||
|
|
|||
Consideration paid |
924 | |||
|
|
|||
Gain on bargain purchase |
$ | 122 | ||
|
|
The table below reflects the Company’s preliminary assessment of the fair value of net assets acquired. The resulting goodwill is recorded in the Company’s Funeral Homes operating segment. These amounts may be retrospectively adjusted as additional information is received.
Preliminary Assessment |
||||
(in thousands) | ||||
Assets: |
||||
Property and equipment |
$ | 48 | ||
Merchandise trusts, restricted, at fair value |
105 | |||
Underlying lease value |
64 | |||
Non-compete agreements |
40 | |||
|
|
|||
Total assets |
257 | |||
|
|
|||
Liabilities: |
||||
Merchandise liabilities |
105 | |||
|
|
|||
Total liabilities |
105 | |||
|
|
|||
Fair value of net assets acquired |
152 | |||
|
|
|||
Consideration paid - cash |
850 | |||
Consideration paid - units |
350 | |||
Fair value of debt assumed for non-compete agreements |
544 | |||
|
|
|||
Total consideration paid |
1,744 | |||
|
|
|||
Goodwill from purchase |
$ | 1,592 | ||
|
|
|
Segment information as of and for the three and nine months ended September 30, 2012 and 2011 is as follows:
As of and for the three months ended September 30, 2012:
Cemeteries | Funeral Homes |
Corporate | Adjustment | Total | ||||||||||||||||||||||||
Southeast | Northeast | West | ||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||
Sales |
$ | 24,723 | $ | 8,087 | $ | 9,420 | $ | — | $ | — | $ | (8,107 | ) | $ | 34,123 | |||||||||||||
Service and other |
9,084 | 6,108 | 8,045 | — | — | (3,989 | ) | 19,248 | ||||||||||||||||||||
Funeral home |
— | — | — | 9,603 | — | (777 | ) | 8,826 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues |
33,807 | 14,195 | 17,465 | 9,603 | — | (12,873 | ) | 62,197 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Costs and expenses |
||||||||||||||||||||||||||||
Cost of sales |
5,208 | 2,156 | 1,628 | — | 52 | (1,398 | ) | 7,646 | ||||||||||||||||||||
Cemetery |
6,635 | 3,574 | 4,042 | — | 1 | — | 14,252 | |||||||||||||||||||||
Selling |
7,356 | 2,762 | 2,875 | — | 163 | (1,866 | ) | 11,290 | ||||||||||||||||||||
General and administrative |
3,694 | 1,486 | 1,828 | — | 7 | — | 7,015 | |||||||||||||||||||||
Corporate overhead |
— | — | — | — | 6,546 | — | 6,546 | |||||||||||||||||||||
Depreciation and amortization |
513 | 220 | 551 | 529 | 386 | — | 2,199 | |||||||||||||||||||||
Funeral home |
— | — | — | 7,161 | — | (65 | ) | 7,096 | ||||||||||||||||||||
Acquisition related costs |
— | — | — | — | 1,085 | — | 1,085 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total costs and expenses |
23,406 | 10,198 | 10,924 | 7,690 | 8,240 | (3,329 | ) | 57,129 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Operating profit |
$ | 10,401 | $ | 3,997 | $ | 6,541 | $ | 1,913 | $ | (8,240 | ) | $ | (9,544 | ) | $ | 5,068 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total assets |
$ | 512,446 | $ | 297,736 | $ | 393,685 | $ | 104,914 | $ | 21,156 | $ | — | $ | 1,329,937 | ||||||||||||||
Amortization of cemetery property |
$ | 1,396 | $ | 526 | $ | 275 | $ | — | $ | — | $ | 108 | $ | 2,305 | ||||||||||||||
Long lived asset additions |
$ | 6,641 | $ | 1,133 | $ | 684 | $ | 8,023 | $ | 64 | $ | — | $ | 16,545 | ||||||||||||||
Goodwill |
$ | 6,194 | $ | — | $ | 11,948 | $ | 22,251 | $ | — | $ | — | $ | 40,393 |
As of and for the nine months ended September 30, 2012:
Cemeteries | Funeral Homes |
Corporate | Adjustment | Total | ||||||||||||||||||||||||
Southeast | Northeast | West | ||||||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||
Sales |
$ | 69,415 | $ | 26,090 | $ | 29,743 | $ | — | $ | — | $ | (25,988 | ) | $ | 99,260 | |||||||||||||
Service and other |
27,867 | 19,820 | 22,940 | — | — | (12,213 | ) | 58,414 | ||||||||||||||||||||
Funeral home |
— | — | — | 27,065 | — | (1,447 | ) | 25,618 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues |
97,282 | 45,910 | 52,683 | 27,065 | — | (39,648 | ) | 183,292 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Costs and expenses |
||||||||||||||||||||||||||||
Cost of sales |
14,471 | 5,857 | 5,031 | — | 104 | (4,161 | ) | 21,302 | ||||||||||||||||||||
Cemetery |
19,085 | 10,453 | 12,280 | — | 1 | — | 41,819 | |||||||||||||||||||||
Selling |
22,072 | 9,220 | 9,482 | — | 995 | (5,569 | ) | 36,200 | ||||||||||||||||||||
General and administrative |
11,130 | 4,499 | 5,751 | — | 23 | — | 21,403 | |||||||||||||||||||||
Corporate overhead |
— | — | — | — | 20,905 | — | 20,905 | |||||||||||||||||||||
Depreciation and amortization |
1,559 | 660 | 1,666 | 1,667 | 1,207 | — | 6,759 | |||||||||||||||||||||
Funeral home |
— | — | — | 20,648 | — | (181 | ) | 20,467 | ||||||||||||||||||||
Acquisition related costs |
— | — | — | — | 2,198 | — | 2,198 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total costs and expenses |
68,317 | 30,689 | 34,210 | 22,315 | 25,433 | (9,911 | ) | 171,053 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Operating profit |
$ | 28,965 | $ | 15,221 | $ | 18,473 | $ | 4,750 | $ | (25,433 | ) | $ | (29,737 | ) | $ | 12,239 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total assets |
$ | 512,446 | $ | 297,736 | $ | 393,685 | $ | 104,914 | $ | 21,156 | $ | — | $ | 1,329,937 | ||||||||||||||
Amortization of cemetery property |
$ | 3,397 | $ | 1,939 | $ | 844 | $ | — | $ | — | $ | 105 | $ | 6,285 | ||||||||||||||
Long lived asset additions |
$ | 11,435 | $ | 2,490 | $ | 3,889 | $ | 8,361 | $ | 670 | $ | — | $ | 26,845 | ||||||||||||||
Goodwill |
$ | 6,194 | $ | — | $ | 11,948 | $ | 22,251 | $ | — | $ | — | $ | 40,393 |
As of and for the three months ended September 30, 2011:
Cemeteries | Funeral Homes |
|||||||||||||||||||||||||||
Southeast | Northeast | West | Corporate | Adjustment | Total | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||
Sales |
$ | 19,480 | $ | 7,744 | $ | 11,939 | $ | — | $ | — | $ | (5,000 | ) | $ | 34,163 | |||||||||||||
Service and other |
7,354 | 6,007 | 7,136 | — | — | (1,834 | ) | 18,663 | ||||||||||||||||||||
Funeral home |
— | — | — | 7,705 | — | (206 | ) | 7,499 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues |
26,834 | 13,751 | 19,075 | 7,705 | — | (7,040 | ) | 60,325 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Costs and expenses |
||||||||||||||||||||||||||||
Cost of sales |
4,056 | 1,965 | 2,127 | — | — | (988 | ) | 7,160 | ||||||||||||||||||||
Cemetery |
6,009 | 3,770 | 5,533 | — | — | — | 15,312 | |||||||||||||||||||||
Selling |
6,686 | 2,693 | 3,621 | — | 130 | (938 | ) | 12,192 | ||||||||||||||||||||
General and administrative |
3,279 | 1,535 | 2,297 | — | — | — | 7,111 | |||||||||||||||||||||
Corporate overhead |
— | — | — | — | 5,628 | — | 5,628 | |||||||||||||||||||||
Depreciation and amortization |
425 | 219 | 444 | 391 | 407 | — | 1,886 | |||||||||||||||||||||
Funeral home |
— | — | — | 5,868 | — | — | 5,868 | |||||||||||||||||||||
Acquisition related costs |
— | — | — | — | 1,189 | — | 1,189 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total costs and expenses |
20,455 | 10,182 | 14,022 | 6,259 | 7,354 | (1,926 | ) | 56,346 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Operating profit |
$ | 6,379 | $ | 3,569 | $ | 5,053 | $ | 1,446 | $ | (7,354 | ) | $ | (5,114 | ) | $ | 3,979 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total assets |
$ | 438,032 | $ | 275,081 | $ | 365,985 | $ | 54,895 | $ | 35,865 | $ | — | $ | 1,169,858 | ||||||||||||||
Amortization of cemetery property |
$ | 839 | $ | 442 | $ | 441 | $ | — | $ | — | $ | (268 | ) | $ | 1,454 | |||||||||||||
Long lived asset additions |
$ | 7,013 | $ | 436 | $ | 1,841 | $ | 5,133 | $ | 236 | $ | — | $ | 14,659 | ||||||||||||||
Goodwill |
$ | 2,700 | $ | — | $ | 11,949 | $ | 5,897 | $ | — | $ | — | $ | 20,546 |
As of and for the nine months ended September 30, 2011:
Cemeteries | Funeral Homes |
|||||||||||||||||||||||||||
Southeast | Northeast | West | Corporate | Adjustment | Total | |||||||||||||||||||||||
(in thousands) | ||||||||||||||||||||||||||||
Revenues |
||||||||||||||||||||||||||||
Sales |
$ | 59,448 | $ | 24,277 | $ | 34,960 | $ | — | $ | 5 | $ | (25,203 | ) | $ | 93,487 | |||||||||||||
Service and other |
23,533 | 17,586 | 22,207 | — | — | (9,344 | ) | 53,982 | ||||||||||||||||||||
Funeral home |
— | — | — | 22,749 | — | (555 | ) | 22,194 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total revenues |
82,981 | 41,863 | 57,167 | 22,749 | 5 | (35,102 | ) | 169,663 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Costs and expenses |
||||||||||||||||||||||||||||
Cost of sales |
12,128 | 5,281 | 5,743 | — | — | (3,783 | ) | 19,369 | ||||||||||||||||||||
Cemetery |
17,036 | 10,739 | 15,085 | — | — | — | 42,860 | |||||||||||||||||||||
Selling |
20,292 | 8,464 | 10,336 | — | 807 | (5,976 | ) | 33,923 | ||||||||||||||||||||
General and administrative |
9,547 | 4,555 | 6,469 | — | (2 | ) | — | 20,569 | ||||||||||||||||||||
Corporate overhead |
— | — | — | — | 17,572 | — | 17,572 | |||||||||||||||||||||
Depreciation and amortization |
1,183 | 663 | 1,686 | 1,118 | 1,724 | — | 6,374 | |||||||||||||||||||||
Funeral home |
— | — | — | 16,875 | — | — | 16,875 | |||||||||||||||||||||
Acquisition related costs |
— | — | — | — | 3,147 | — | 3,147 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total costs and expenses |
60,186 | 29,702 | 39,319 | 17,993 | 23,248 | (9,759 | ) | 160,689 | ||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Operating profit |
$ | 22,795 | $ | 12,161 | $ | 17,848 | $ | 4,756 | $ | (23,243 | ) | $ | (25,343 | ) | $ | 8,974 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Total assets |
$ | 438,032 | $ | 275,081 | $ | 365,985 | $ | 54,895 | $ | 35,865 | $ | — | $ | 1,169,858 | ||||||||||||||
Amortization of cemetery property |
$ | 2,592 | $ | 1,582 | $ | 835 | $ | — | $ | — | $ | (597 | ) | $ | 4,412 | |||||||||||||
Long lived asset additions |
$ | 10,900 | $ | 1,239 | $ | 5,062 | $ | 7,269 | $ | 540 | $ | — | $ | 25,010 | ||||||||||||||
Goodwill |
$ | 2,700 | $ | — | $ | 11,949 | $ | 5,897 | $ | — | $ | — | $ | 20,546 |
|
The following table allocates the Company’s assets measured at fair value as of September 30, 2012 and December 31, 2011.
As of September 30, 2012
Merchandise Trust
Description |
Level 1 | Level 2 | Total | |||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Short-term investments |
$ | 48,722 | $ | — | $ | 48,722 | ||||||
Fixed maturities: |
||||||||||||
U.S. government and federal agency |
— | — | — | |||||||||
U.S. state and local government agency |
— | 23 | 23 | |||||||||
Corporate debt securities |
— | 8,741 | 8,741 | |||||||||
Other debt securities |
— | 4,313 | 4,313 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturity investments |
— | 13,077 | 13,077 | |||||||||
|
|
|
|
|
|
|||||||
Mutual funds - debt securities |
100,085 | — | 100,085 | |||||||||
Mutual funds - equity securities - real estate sector |
43,432 | — | 43,432 | |||||||||
Mutual funds - equity securities - energy sector |
5,767 | — | 5,767 | |||||||||
Mutual funds - equity securities - MLP’s |
28,476 | — | 28,476 | |||||||||
Mutual funds - equity securities - other |
53,697 | — | 53,697 | |||||||||
Equity securities |
||||||||||||
Preferred REIT’s |
1,638 | — | 1,638 | |||||||||
Master limited partnerships |
41,378 | — | 41,378 | |||||||||
Global equity securities |
22,483 | — | 22,483 | |||||||||
Other invested assets |
— | 6,587 | 6,587 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 345,678 | $ | 19,664 | $ | 365,342 | ||||||
|
|
|
|
|
|
Perpetual Care Trust
Description |
Level 1 | Level 2 | Total | |||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Short-term investments |
$ | 20,912 | $ | — | $ | 20,912 | ||||||
Fixed maturities: |
||||||||||||
U.S. government and federal agency |
513 | — | 513 | |||||||||
U.S. state and local government agency |
— | 147 | 147 | |||||||||
Corporate debt securities |
— | 23,898 | 23,898 | |||||||||
Other debt securities |
— | 371 | 371 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturity investments |
513 | 24,416 | 24,929 | |||||||||
|
|
|
|
|
|
|||||||
Mutual funds - debt securities |
107,933 | — | 107,933 | |||||||||
Mutual funds - equity securities - real estate sector |
39,083 | — | 39,083 | |||||||||
Mutual funds - equity securities - energy sector |
12,911 | — | 12,911 | |||||||||
Mutual funds - equity securities - MLP’s |
36,583 | — | 36,583 | |||||||||
Mutual funds - equity securities - other |
9,149 | — | 9,149 | |||||||||
Equity securities |
||||||||||||
Preferred REIT’s |
953 | — | 953 | |||||||||
Master limited partnerships |
29,453 | — | 29,453 | |||||||||
Global equity securities |
745 | — | 745 | |||||||||
Other invested assets |
— | — | — | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 258,235 | $ | 24,416 | $ | 282,651 | ||||||
|
|
|
|
|
|
As of December 31, 2011
Merchandise Trust
Description |
Level 1 | Level 2 | Total | |||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Short-term investments |
$ | 38,312 | $ | — | $ | 38,312 | ||||||
Fixed maturities: |
||||||||||||
U.S. government and federal agency |
— | — | — | |||||||||
U.S. state and local government agency |
— | 23 | 23 | |||||||||
Corporate debt securities |
— | 9,765 | 9,765 | |||||||||
Other debt securities |
— | 1,100 | 1,100 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturity investments |
— | 10,888 | 10,888 | |||||||||
|
|
|
|
|
|
|||||||
Mutual funds - debt securities |
67,421 | — | 67,421 | |||||||||
Mutual funds - equity securities - real estate sector |
22,847 | — | 22,847 | |||||||||
Mutual funds - equity securities - energy sector |
28,057 | — | 28,057 | |||||||||
Mutual funds - equity securities - MLP’s |
20,308 | — | 20,308 | |||||||||
Mutual funds - equity securities - other |
70,076 | — | 70,076 | |||||||||
Equity securities |
||||||||||||
Preferred REIT’s |
9,001 | — | 9,001 | |||||||||
Master limited partnerships |
41,469 | — | 41,469 | |||||||||
Global equity securities |
21,882 | — | 21,882 | |||||||||
Other invested assets |
— | 7,360 | 7,360 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 319,373 | $ | 18,248 | $ | 337,621 | ||||||
|
|
|
|
|
|
Perpetual Care Trust
Description |
Level 1 | Level 2 | Total | |||||||||
(in thousands) | ||||||||||||
Assets |
||||||||||||
Short-term investments |
$ | 22,607 | $ | — | $ | 22,607 | ||||||
Fixed maturities: |
||||||||||||
U.S. government and federal agency |
513 | — | 513 | |||||||||
U.S. state and local government agency |
— | 147 | 147 | |||||||||
Corporate debt securities |
— | 22,154 | 22,154 | |||||||||
Other debt securities |
— | 371 | 371 | |||||||||
|
|
|
|
|
|
|||||||
Total fixed maturity investments |
513 | 22,672 | 23,185 | |||||||||
|
|
|
|
|
|
|||||||
Mutual funds - debt securities |
60,806 | — | 60,806 | |||||||||
Mutual funds - equity securities - real estate sector |
24,580 | — | 24,580 | |||||||||
Mutual funds - equity securities - energy sector |
20,069 | — | 20,069 | |||||||||
Mutual funds - equity securities - MLP’s |
13,515 | — | 13,515 | |||||||||
Mutual funds - equity securities - other |
41,334 | — | 41,334 | |||||||||
Equity securities |
||||||||||||
Preferred REIT’s |
19,720 | — | 19,720 | |||||||||
Master limited partnerships |
27,998 | — | 27,998 | |||||||||
Global equity securities |
695 | — | 695 | |||||||||
Other invested assets |
— | 170 | 170 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 231,837 | $ | 22,842 | $ | 254,679 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|