Acquisition Level 1 (Notes)
 12 Months Ended
Dec. 31, 2011
Acquisition [Abstract]  
Business Combination Disclosure [Text Block]
Acquisition
In March 2010, pursuant to a tender offer, we acquired Keystone North America, Inc. (Keystone) for C$8.07 per share in cash, resulting in a purchase price of $288.9 million, which includes the refinancing of $80.7 million of Keystone’s debt.
We incurred acquisition costs of $7.1 million of which $3.7 million is included in General and Administrative Expenses for the year ended December 31, 2010, respectively, and the remainder was incurred in prior periods.
The primary reasons for the merger and the principal factors that contributed to the recognition of goodwill in this acquisition were:
•
the acquisition of Keystone enhances our network footprint, enabling us to serve a number of new, complementary areas;
•
combining the two companies’ operations provides synergies and related cost savings through the elimination of duplicate home office functions and economies of scale; and
•
the acquisition of Keystone’s preneed backlog of deferred revenues enhances our long-term stability.
The following table summarizes the adjusted fair values of the assets acquired and liabilities assumed as of March 26, 2010, for various purchase price allocation adjustments made subsequent to our first quarter results:
 
(In thousands)
Accounts receivable
$
6,131

Other current assets
20,200

Cemetery property
19,949

Property and equipment, net
105,888

Preneed funeral and cemetery receivables and trust investments
66,395

Finite-lived intangible assets
34,312

Indefinite-lived intangible assets
33,700

Deferred charges and other assets
6,533

Goodwill
108,643

Total assets acquired
401,751

Current liabilities
11,719

Long-term debt
2,548

Deferred preneed funeral and cemetery revenues and deferred receipts held in trusts
69,336

Deferred tax liability
20,939

Other liabilities
8,347

Total liabilities assumed
112,889

Net assets acquired
$
288,862


The gross amount of accounts receivable is $8.2 million, of which $2.1 million is not expected to be collected. Included in Preneed funeral and cemetery receivables and trust investments are receivables under preneed contracts with a fair value of $5.2 million. The gross amount due under the contracts is $5.5 million, of which $0.3 million is not expected to be collected.
We have finalized our assessment of the fair values. Goodwill, land, and certain identifiable intangible assets recorded in the acquisition are not subject to amortization; however, the goodwill and intangible assets will be tested periodically for impairment as required by the Intangible Assets Topic of the ASC. Of the $108.6 million in goodwill recognized, $4.3 million was allocated to our cemetery segment and $104.3 million was allocated to our funeral segment. As a result of the carryover of Keystone’s tax basis, $26.0 million of this goodwill is deductible for tax purposes. The identified intangible assets are comprised of the following:
 
Useful life
 
 
 
Minimum
 
Maximum
 
Fair Value
 
(Years)
 
(In thousands)
Preneed customer relationships related to insurance claims
10
 
10
 
$
15,200

Other preneed customer relationships
10

14
 
1,740

Covenants-not-to-compete
5

15
 
13,332

Operating leases
5

15
 
440

Tradenames
5
 
5
 
3,600

Tradenames
 
 
Indefinite
 
33,200

Licenses and permits
 
 
Indefinite
 
500

Total intangible assets

 
 
 
$
68,012


Included in our results of operations for the twelve months ended December 31, 2010 is revenue of $83.7 million and net income of $16.7 million for the period from the acquisition date (March 26, 2010) through December 31, 2010. The following unaudited pro forma summary presents financial information as if the acquisition had occurred at the beginning of the year presented for the consolidated company:
 
 
 
2010
 
 
 
(In thousands)
Revenue
 
 
$
2,220,204

Net income
 
 
$
129,970



Neptune
The Company acquired 70% of the outstanding shares of The Neptune Society, Inc. (Neptune) on June 3, 2011 for $44 million. Neptune is the nation's largest direct cremation organization with a network of 30 locations in nine states. Neptune operates under the brand names Neptune Society, Neptune Cremation Service, and Trident Society. With this acquisition we will be expanding the footprint into a sector of the market that will continue to grow and that we do not currently target through our traditional funeral service and cemetery network. We have not completed our purchase price allocation as we are still reviewing the underlying accounting records. As a result of this acquisition, we recognized $37.6 million of intangible assets and $37.3 million of goodwill.