Cemetery Perpetual Care Trust Investments
 6 Months Ended
Jun. 30, 2018
Cemetery Perpetual Care Trust Investments [Abstract]  
CEMETERY PERPETUAL CARE TRUST INVESTMENTS
CEMETERY PERPETUAL CARE TRUST INVESTMENTS
Care trusts’ corpus on our Consolidated Balance Sheets represents the corpus of those trusts plus undistributed income. The components of Care trusts’ corpus as of December 31, 2017 and June 30, 2018 were as follows (in thousands):
 
December 31, 2017
 
June 30, 2018
Trust assets, at market value
$
50,229

 
$
48,600

Obligations due from trust
(373
)
 
(446
)
Care trusts’ corpus
$
49,856

 
$
48,154


We are required by various state laws to pay a portion of the proceeds from the sale of cemetery property interment rights into perpetual care trust funds. The income earned from these perpetual care trusts offsets maintenance expenses for cemetery property and memorials. This trust fund income is recognized, as earned, in Revenues: Cemetery and is recorded in Accounts Receivable, net until received from the trust. Trust management fees charged by CSV RIA are included in revenue in the period in which they are earned. At June 30, 2018, none of our cemetery perpetual care trust investments were underfunded.
Where quoted prices are available in an active market, investments held by the trusts are classified as Level 1 investments pursuant to the three-level valuation hierarchy. Our Level 1 investments include cash and common stock. Where quoted market prices are not available for the specific security, then fair values are estimated by using quoted prices of similar securities in active markets or other inputs other than quoted prices that can corroborate observable market data. These investments are fixed income securities, including foreign debt, corporate debt, preferred stock, mortgage-backed securities and fixed income mutual funds, all of which are classified within Level 2 of the valuation hierarchy. We review and update our fair value hierarchy classifications quarterly. There were no transfers between Levels 1 and 2 in the three and six months ended June 30, 2018. There are no Level 3 investments in the cemetery perpetual care trust investment portfolio. See Note 8 to the Consolidated Financial Statements included herein for further information of the fair value measurement and the three-level valuation hierarchy.
The following table reflects the cost and fair market values associated with the trust investments held in perpetual care trust funds at June 30, 2018 (in thousands, except percentages):
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts
1
 
$
4,936

 
$
—

 
$
—

 
$
4,936

Fixed income securities:
 
 
 
 
 
 
 
 
 
Foreign debt
2
 
3,395

 
83

 
(183
)
 
3,295

Corporate debt
2
 
12,403

 
363

 
(564
)
 
12,202

Preferred stock
2
 
8,392

 
51

 
(393
)
 
8,050

Mortgage-backed securities
2
 
575

 
203

 
(9
)
 
769

Common stock
1
 
17,384

 
2,835

 
(2,152
)
 
18,067

Mutual funds:
 
 
 
 
 
 
 
 
 
Fixed Income
2
 
926

 
17

 
(49
)
 
894

Trust securities
 
 
$
48,011

 
$
3,552

 
$
(3,350
)
 
$
48,213

Accrued investment income
 
 
$
387

 
 
 
 
 
$
387

Cemetery perpetual care investments
 
 
 
 
 
 
 
 
$
48,600

Market value as a percentage of cost
 
 
 
 
 
 
 
 
100.4
%

The estimated maturities of the fixed income securities included above are as follows (in thousands):
Due in one year or less
$
11

Due in one to five years
2,460

Due in five to ten years
2,995

Thereafter
18,850

 
$
24,316


The following table reflects the cost and fair market values associated with the trust investments held in perpetual care trust funds at December 31, 2017 (in thousands, except percentages):
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts
1
 
$
1,906

 
$
—

 
$
—

 
$
1,906

Fixed income securities:
 
 
 
 
 
 
 
 
 
Foreign debt
2
 
3,580

 
227

 
(134
)
 
3,673

Corporate debt
2
 
12,557

 
805

 
(187
)
 
13,175

Preferred stock
2
 
11,545

 
364

 
(411
)
 
11,498

Mortgage-backed securities
2
 
621

 
152

 
(15
)
 
758

Common stock
1
 
16,326

 
3,116

 
(1,595
)
 
17,847

Mutual funds:
 
 
 
 
 
 
 
 
 
Fixed income
2
 
913

 
42

 
(10
)
 
945

Trust securities
 
 
$
47,448

 
$
4,706

 
$
(2,352
)
 
$
49,802

Accrued investment income
 
 
$
427

 
 
 
 
 
$
427

Cemetery perpetual care investments
 
 
 
 
 
 
 
 
$
50,229

Market value as a percentage of cost
 
 
 
 
 
 
 
 
105.0
%

We determine whether or not the assets in the cemetery perpetual care trusts have an other-than-temporary impairment on a security-by-security basis. This assessment is made based upon a number of criteria including the length of time a security has been in a loss position, changes in market conditions and concerns related to the specific issuer. If a loss is considered to be other-than-temporary, the cost basis of the security is adjusted downward to its fair market value. Any reduction in the cost basis due to an other-than-temporary impairment is also recorded as a reduction to Care trusts’ corpus. In the three and six months ended June 30, 2017 and 2018, we did not record any impairments for other-than-temporary declines in the fair value related to unrealized losses on certain investments. There is no impact on earnings until such time that the loss is realized in the trusts, allocated to preneed contracts and the services are performed or the merchandise is delivered, causing the contract to be withdrawn from the trust in accordance with state regulations.
At June 30, 2018, we had certain investments within our perpetual care trust investments that had tax lots in loss positions for more than one year. Based on our analyses of these securities, the companies’ businesses and current market conditions, we determined that these investment losses were temporary in nature.
Our perpetual care trust investment unrealized losses, their associated fair market values, and the duration of unrealized losses for the periods ended June 30, 2018 are shown in the following table (in thousands):
 
June 30, 2018
 
In Loss Position Less than 12 months
 
In Loss Position Greater than 12 months
 
Total
 
Fair Market Value
 
Unrealized Losses
 
Fair Market Value
 
Unrealized Losses
 
Fair Market Value
 
Unrealized Losses
Fixed income securities:
 
 
 
 
 
 
 
 
 
 
 
Foreign debt
$
1,426

 
$
(78
)
 
$
722

 
$
(105
)
 
$
2,148

 
$
(183
)
Corporate debt
6,204

 
(417
)
 
709

 
(147
)
 
6,913

 
(564
)
Preferred stock
3,662

 
(103
)
 
3,438

 
(290
)
 
7,100

 
(393
)
Mortgage-backed securities
—

 
—

 
42

 
(9
)
 
42

 
(9
)
Common stock
5,987

 
(901
)
 
1,939

 
(1,251
)
 
7,926

 
(2,152
)
Mutual Funds:
 
 
 
 
 
 
 
 
 
 
 
Fixed Income
633

 
(49
)
 
—

 
—

 
633

 
(49
)
Total temporary impaired securities
$
17,912

 
$
(1,548
)
 
$
6,850

 
$
(1,802
)
 
$
24,762

 
$
(3,350
)
Our perpetual care trust investment unrealized losses, their associated fair market values, and the duration of unrealized losses for the periods ended December 31, 2017 are shown in the following table (in thousands):
 
December 31, 2017
 
In Loss Position Less than 12 months
 
In Loss Position Greater than 12 months
 
Total
 
Fair Market Value
 
Unrealized Losses
 
Fair Market Value
 
Unrealized Losses
 
Fair Market Value
 
Unrealized Losses
Fixed income securities:
 
 
 
 
 
 
 
 
 
 
 
Foreign debt
$
92

 
$
(3
)
 
$
1,128

 
$
(131
)
 
$
1,220

 
$
(134
)
Corporate debt
2,621

 
(59
)
 
555

 
(128
)
 
3,176

 
(187
)
Preferred stock
29

 
—

 
5,492

 
(411
)
 
5,521

 
(411
)
Mortgage-backed securities
76

 
(10
)
 
16

 
(5
)
 
92

 
(15
)
Common stock
5,119

 
(991
)
 
1,108

 
(604
)
 
6,227

 
(1,595
)
Mutual funds:
 
 
 
 
 
 
 
 
 
 
 
Fixed income
433

 
(10
)
 
—

 
—

 
433

 
(10
)
Total temporary impaired securities
$
8,370

 
$
(1,073
)
 
$
8,299

 
$
(1,279
)
 
$
16,669

 
$
(2,352
)

Perpetual care trust investment security transactions recorded in Other, net on our Consolidated Statements of Operations for the three and six months ended June 30, 2017 and 2018 were as follows (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2018
 
2017
 
2018
Realized gains
$
644

 
$
22

 
$
925

 
$
304

Realized losses
(481
)
 
(312
)
 
(630
)
 
(526
)
Net change in care trusts’ corpus
(163
)
 
290

 
(295
)
 
222

Total
$
—

 
$
—

 
$
—

 
$
—


Perpetual care trust investment security transactions recorded in Revenues: Cemetery for the three and six months ended June 30, 2017 and 2018 were as follows (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2018
 
2017
 
2018
Investment income
$
1,586

 
$
1,463

 
$
3,292

 
$
2,996

Realized gain, net
(108
)
 
(398
)
 
(608
)
 
(715
)
Total
$
1,478

 
$
1,065

 
$
2,684

 
$
2,281


Purchases and sales of investments in the perpetual care trusts for the three and six months ended June 30, 2017 and 2018 were as follows (in thousands):
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2017
 
2018
 
2017
 
2018
Purchases
$
(6,861
)
 
$
(4,742
)
 
$
(11,874
)
 
$
(6,670
)
Sales
4,503

 
4,431

 
8,390

 
9,397