Carriage Services, Inc.
CARRIAGE SERVICES INC (Form: 10-Q, Received: 08/04/2015 16:36:02)
Table of Contents

 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2015
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to             
Commission File Number: 1-11961
CARRIAGE SERVICES, INC.
(Exact name of registrant as specified in its charter)
 
DELAWARE
76-0423828
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
 
 
3040 Post Oak Boulevard, Suite 300
Houston, Texas, 77056
(Address of principal executive offices)
(713) 332-8400
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x     No   o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   x     No   o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange Act of 1934.
Large accelerated filer
o
Accelerated filer
x
Non-accelerated filer
o   (Do not check if a smaller reporting company)
Smaller reporting company
o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   o     No   x
The number of shares of the registrant’s Common Stock, $.01 par value per share, outstanding as of July 31, 2015 was 18,399,326 .
 


Table of Contents

CARRIAGE SERVICES, INC.
INDEX
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

- 2 -

Table of Contents

PART I – FINANCIAL INFORMATION
Item 1.
Financial Statements
CARRIAGE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
 
 
 
(unaudited)
 
December 31, 2014
 
June 30, 2015
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
413

 
$
558

Accounts receivable, net of allowance for bad debts of $1,127 in 2014 and $902 in 2015
19,264

 
16,909

Inventories
5,294

 
5,502

Prepaid expenses
4,590

 
3,451

Other current assets
7,144

 
2,539

Total current assets
36,705

 
28,959

Preneed cemetery trust investments
71,972

 
71,894

Preneed funeral trust investments
97,607

 
96,002

Preneed receivables, net of allowance for bad debts of $2,339 in 2014 and $1,915 in 2015
26,284

 
26,448

Receivables from preneed trusts, net of allowance for contract cancellations of $396 in 2014 and $400 in 2015
12,809

 
12,939

Property, plant and equipment, net of accumulated depreciation of $95,249 in 2014 and $98,730 in 2015
186,211

 
205,332

Cemetery property, net of accumulated amortization of $26,875 in 2014 and $28,500 in 2015
75,564

 
75,516

Goodwill
257,442

 
261,291

Deferred charges and other non-current assets
14,264

 
14,899

Cemetery perpetual care trust investments
48,670

 
48,620

Total assets
$
827,528

 
$
841,900

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt and capital lease obligations
$
9,838

 
$
10,705

Accounts payable
6,472

 
6,639

Other liabilities
1,437

 
3,698

Accrued liabilities
15,203

 
12,942

Total current liabilities
32,950

 
33,984

Long-term debt, net of current portion
111,887

 
110,571

Revolving credit facility
40,500

 
46,400

Convertible subordinated notes due 2021
114,542

 
116,220

Obligations under capital leases, net of current portion
3,098

 
2,989

Deferred preneed cemetery revenue
56,875

 
56,298

Deferred preneed funeral revenue
31,265

 
31,028

Deferred tax liability
36,414

 
36,353

Other long-term liabilities
2,401

 
3,601

Deferred preneed cemetery receipts held in trust
71,972

 
71,894

Deferred preneed funeral receipts held in trust
97,607

 
96,002

Care trusts’ corpus
48,142

 
48,154

Total liabilities
647,653

 
653,494

Commitments and contingencies:

 

Stockholders’ equity:
 
 
 
Common stock, $.01 par value; 80,000,000 shares authorized and 22,434,000 and 22,449,000 shares issued at December 31, 2014 and June 30, 2015, respectively
224

 
224

Additional paid-in capital
212,386

 
213,024

Accumulated deficit
(17,468
)
 
(6,493
)
Treasury stock, at cost; 3,922,000 and 4,047,000 shares at December 31, 2014 and June 30, 2015, respectively
(15,267
)
 
(18,349
)
Total stockholders’ equity
179,875

 
188,406

Total liabilities and stockholders’ equity
$
827,528

 
$
841,900

The accompanying condensed notes are an integral part of these Consolidated Financial Statements.

- 3 -


CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share data)
 
For the Three Months Ended
 June 30,
 
For the Six Months Ended June 30,
 
2014
 
2015
 
2014
 
2015
Revenues:
 
 
 
 
 
 
 
Funeral
$
42,192

 
$
44,501

 
$
86,157

 
$
94,638

Cemetery
14,312

 
14,760

 
26,000

 
27,876

 
56,504

 
59,261

 
112,157

 
122,514

Field costs and expenses:
 
 
 
 
 
 
 
Funeral
26,093

 
27,263

 
51,976

 
55,678

Cemetery
8,054

 
8,446

 
15,013

 
15,748

Depreciation and amortization
2,675

 
2,993

 
5,090

 
5,795

Regional and unallocated funeral and cemetery costs
1,693

 
2,311

 
4,073

 
4,836

 
38,515

 
41,013

 
76,152

 
82,057

Gross profit
17,989

 
18,248

 
36,005

 
40,457

Corporate costs and expenses:
 
 
 
 
 
 
 
General and administrative costs and expenses
6,847

 
6,886

 
16,182

 
14,056

Home office depreciation and amortization
354

 
372

 
695

 
892

 
7,201

 
7,258

 
16,877

 
14,948

Operating income
10,788

 
10,990

 
19,128

 
25,509

Interest expense
(2,686
)
 
(2,479
)
 
(5,531
)
 
(5,148
)
Accretion of discount on convertible subordinated notes
(694
)
 
(851
)
 
(865
)
 
(1,678
)
Loss on early extinguishment of debt
(1,042
)
 

 
(1,042
)
 

Loss on redemption of convertible junior subordinated debentures

 

 
(3,779
)
 

Other income

 

 
1,130

 

Income from continuing operations before income taxes
6,366

 
7,660

 
9,041

 
18,683

Provision for income taxes
(2,483
)
 
(3,103
)
 
(3,526
)
 
(7,708
)
Net income from continuing operations
3,883

 
4,557

 
5,515

 
10,975

Loss from discontinued operations, net of tax
(637
)
 

 
(51
)
 

Net income available to common stockholders
$
3,246

 
$
4,557

 
$
5,464

 
$
10,975

 
 
 
 
 


 
 
Basic earnings (loss) per common share:
 
 
 
 


 
 
Continuing operations
$
0.21

 
$
0.25

 
$
0.30

 
$
0.59

Discontinued operations
(0.03
)
 

 

 

Basic earnings per common share
$
0.18

 
$
0.25

 
$
0.30

 
$
0.59

 
 
 
 
 
 
 
 
Diluted earnings (loss) per common share:
 
 
 
 
 
 
 
Continuing operations
$
0.21

 
$
0.24

 
$
0.30

 
$
0.57

Discontinued operations
(0.04
)
 

 
(0.01
)
 

Diluted earnings per common share
$
0.17

 
$
0.24

 
$
0.29

 
$
0.57

 
 
 
 
 
 
 
 
Dividends declared per common share
$
0.025

 
$
0.025

 
$
0.050

 
$
0.050

 
 
 
 
 
 
 
 
Weighted average number of common and common equivalent shares outstanding:
 
 
 
 
 
 
 
Basic
18,123

 
18,268

 
18,054

 
18,238

Diluted
18,247

 
18,880

 
18,195

 
18,844

The accompanying condensed notes are an integral part of these Consolidated Financial Statements.

- 4 -


CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
 
For the Six Months Ended June 30,
 
2014
 
2015
Cash flows from operating activities:
 
 
 
Net income
$
5,464

 
$
10,975

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Gain on sale of businesses and purchase of other assets
(2,039
)
 

Impairment of goodwill
1,180

 

Loss on early extinguishment of debt
1,042

 

Depreciation and amortization
5,801

 
6,687

Amortization of deferred financing costs
456

 
460

Accretion of discount on convertible subordinated notes
865

 
1,678

Provision for losses on accounts receivable
1,338

 
833

Stock-based compensation expense
2,782

 
2,376

Deferred income tax (benefit) expense
(1,884
)
 
1,452

Loss on redemption of convertible junior subordinated debentures
2,932

 

Other
(8
)
 

Changes in operating assets and liabilities that provided (required) cash:
 
 
 
Accounts and preneed receivables
(1,783
)
 
1,358

Inventories and other current assets
818

 
4,062

Deferred charges and other
(174
)
 
117

Preneed funeral and cemetery trust investments
(10,057
)
 
1,603

Accounts payable
(871
)
 
167

Accrued and other liabilities
(2,117
)
 
(953
)
Deferred preneed funeral and cemetery revenue
345

 
(814
)
Deferred preneed funeral and cemetery receipts held in trust
9,229

 
(1,671
)
Net cash provided by operating activities
13,319

 
28,330

 
 
 
 
Cash flows from investing activities:
 
 
 
Acquisitions and land for new construction
(54,850
)
 
(4,250
)
Purchase of land and buildings previously leased
(4,100
)
 
(6,080
)
Net proceeds from the sale of businesses and other assets
200

 

Capital expenditures
(5,593
)
 
(15,285
)
Net cash used in investing activities
(64,343
)
 
(25,615
)
 
 
 
 
Cash flows from financing activities:
 
 
 
Net borrowings on the revolving credit facility
5,500

 
5,900

Net borrowings (payments) on the term loan
8,000

 
(4,688
)
Proceeds from the issuance of convertible subordinated notes
143,750

 

Payment of debt issuance costs related to the convertible subordinated notes
(4,650
)
 

Payments on other long-term debt and obligations under capital leases
(542
)
 
(401
)
Redemption of convertible junior subordinated debentures
(89,748
)
 

Payments for performance-based stock awards
(16,150
)
 

Proceeds from the exercise of stock options and employee stock purchase plan contributions
863

 
410

Dividends on common stock
(917
)
 
(925
)
Payment of loan origination costs related to the credit facility
(797
)
 
(13
)
Purchase of treasury stock

 
(3,082
)
Excess tax benefit of equity compensation
5,069

 
229

Net cash provided by (used in) financing activities
50,378

 
(2,570
)
 
 
 
 
Net (decrease) increase in cash and cash equivalents
(646
)
 
145

Cash and cash equivalents at beginning of period
1,377

 
413

Cash and cash equivalents at end of period
$
731

 
$
558

 
 
 
 
The accompanying condensed notes are an integral part of these Consolidated Financial Statements.

- 5 -


CARRIAGE SERVICES, INC.
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company
Carriage Services, Inc. (“Carriage”, the “Company”, “we”, “us” or “our”) is a leading provider of deathcare services and merchandise in the United States. As of June 30, 2015 , we operated 166 funeral homes in 27 states and 32 cemeteries in 11 states.
Our operations are reported in two business segments: Funeral Home Operations and Cemetery Operations. Funeral homes are principally service businesses that provide funeral services (traditional burial and cremation) and sell related merchandise, such as caskets and urns. Cemeteries are primarily sales businesses that provide interment rights (grave sites and mausoleums) and related merchandise, such as markers and memorials.
Principles of Consolidation and Interim Condensed Disclosures
Our unaudited condensed consolidated financial statements include the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated. Our interim condensed consolidated financial statements are unaudited but include all adjustments which consist of normal, recurring accruals that are necessary for a fair presentation of our financial position and results of operations as of and for the interim periods presented. Our unaudited condensed consolidated financial statements have been prepared in a manner consistent with the accounting principles described in our Annual Report on Form 10-K for the year ended December 31, 2014 unless otherwise disclosed herein, and should be read in conjunction therewith.
Reclassifications
Certain reclassifications have been made to prior period amounts to conform to the current period financial statement presentation with no effect on our previously reported results of operations, consolidated financial position, or cash flows.
Funeral and Cemetery Operations
We record the revenue from sales of funeral and cemetery merchandise and services when the merchandise is delivered or the service is performed. Sales of cemetery interment rights are recorded as revenue in accordance with the retail land sales provisions for accounting for sales of real estate. This method provides for the recognition of revenue in the period in which the customer’s cumulative payments exceed 10% of the contract price related to the interment right. Costs related to the sales of interment rights, which include real property and other costs related to cemetery development activities, are charged to operations using the specific identification method in the period in which the sale of the interment right is recognized as revenue. Sales taxes collected are recognized on a net basis in our Consolidated Financial Statements.
Allowances for bad debts and customer cancellations are provided at the date that the sale is recognized as revenue and are based on our historical experience and the current economic environment. We also monitor changes in delinquency rates and provide additional bad debt and cancellation reserves when warranted. When preneed sales of funeral services and merchandise are funded through third-party insurance policies, we earn a commission on the sale of the policies. Insurance commissions are recognized as revenues at the point at which the commission is no longer subject to refund, which is typically one year after the policy is issued.
Accounts receivable included approximately $10.0 million and $7.3 million of funeral receivables at December 31, 2014 and June 30, 2015 , respectively, and $9.1 million and $9.4 million of cemetery receivables at December 31, 2014 and June 30, 2015 , respectively. For 2014 and 2015, accounts receivable also included minor amounts of other receivables. Non-current preneed receivables represented the payments expected to be received beyond one year from the balance sheet date. Non-current preneed receivables consisted of approximately $7.4 million and $7.2 million of funeral receivables at December 31, 2014 and June 30, 2015 , respectively, and $18.9 million and $19.3 million of cemetery receivables at December 31, 2014 and June 30, 2015 , respectively. Bad debt expense totaled approximately $0.3 million and $0.4 million for the three months ended June 30, 2014 and 2015 , respectively, and $0.8 million for the six months ended June 30, 2014 and 2015 .

- 6 -


Property, Plant and Equipment
Property, plant and equipment (including equipment under capital leases) are stated at cost. The costs of ordinary maintenance and repairs are charged to operations as incurred, while renewals and betterments are capitalized. Depreciation of property, plant and equipment (including equipment under capital leases) is computed based on the straight-line method.
Property, plant and equipment was comprised of the following at December 31, 2014 and June 30, 2015 :
 
December 31, 2014
 
June 30, 2015
 
(in thousands)
Land
$
66,957

 
$
71,256

Buildings and improvements
148,483

 
164,705

Furniture, equipment and automobiles
66,020

 
68,101

Property, plant and equipment, at cost
281,460

 
304,062

Less: accumulated depreciation
(95,249
)
 
(98,730
)
Property, plant and equipment, net
$
186,211

 
$
205,332

We recorded depreciation expense of approximately $2.3 million and $2.5 million for the three months ended June 30, 2014 and 2015 , respectively, and $4.5 million and $5.1 million for the six months ended June 30, 2014 and 2015 , respectively. During the second quarter of 2015, we completed the construction of a new funeral home in College Station, Texas. This funeral home began operating in May 2015. Additionally, during the second quarter of 2015, we purchased two of our funeral homes which we had previously leased for approximately $5.5 million .
Discontinued Operations
Effective January 1, 2015, we adopted the Financial Accounting Standards Board's (“FASB”) new guidance for reporting discontinued operations. In April 2014, the FASB amended the definition of “discontinued operations” to include only disposals or held-for-sale classifications for components or groups of components of an entity that represent a strategic shift that either has or will have a major effect on the entity's operations or financial results. Examples of a strategic shift that has or will have a major effect on an entity's operations and financial results include a disposal of a major geographical area, line of business, equity method of investment or other parts of an entity. The new guidance also requires the disclosure of pre-tax income of disposals that do not qualify as discontinued operations. We continually review locations to optimize the sustainable earning power and return on our invested capital. These reviews could entail selling certain non-strategic businesses. During the three and six months ended June 30, 2015 , there were no divestitures of our funeral or cemetery businesses.
Subsequent Events
Management evaluated events and transactions during the period subsequent to June 30, 2015 through the date the financial statements were issued for potential recognition or disclosure in the accompanying financial statements covered by this report.
2. RECENTLY ISSUED ACCOUNTING STANDARDS
Presentation of Debt Issuance Costs
In April 2015, the FASB issued Accounting Standards Update (“ASU”), Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs . To simplify the presentation of debt issuance costs, the amendments in this ASU require that entities that have historically presented debt issuance costs as an asset, related to a recognized debt liability, will be required to present those costs as a direct deduction from the carrying value of the related debt liability. This presentation will result in debt issuance costs being presented in the same way debt discounts have historically been handled. This ASU does not change the recognition, measurement or subsequent measurement guidance for debt issuance costs. This ASU is effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption of this ASU is permitted for financial statements that have not been previously issued. The new guidance should be applied on a retrospective basis, wherein the balance sheet of each individual period presented should be adjusted to reflect the period-specific effects of applying the new guidance. Upon transition, an entity is required to comply with the applicable disclosures for a change in an accounting principle. These disclosures include the nature and reason for the change in accounting principle, the transition method, a description of the prior-period information that has been retrospectively adjusted, and the effect of the change on debt issuance costs asset and the debt liability. Our adoption of this ASU is not expected to have a material effect on our financial statements. We plan to adopt the provisions of this ASU for our fiscal year beginning January 1, 2016.

- 7 -


Extraordinary and Unusual Items
In January 2015, the FASB issued an amendment to ASC Subtopic 225-20, Income Statement - Extraordinary and Unusual Items. This amendment eliminates the concept of reporting extraordinary items. Extraordinary items are events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence. Preparers will not have to assess whether a particular event or transaction is extraordinary and likewise, auditors and regulators no longer need to evaluate whether a preparer treated an unusual and/or infrequent item appropriately. The presentation and disclosure guidance for items that are unusual in nature or occur infrequently will be retained and will be expanded to include such items. The amendment is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendment prospectively. A reporting entity may also apply the amendment retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. Our adoption of this amendment is not expected to have a material effect on our financial statements. We plan to adopt these provisions for our fiscal year beginning January 1, 2016.
Revenue from Contracts with Customers
In May 2014, the FASB created ASC Topic 606, Revenue from Contracts with Customers. ASC Topic 606 supersedes the revenue recognition requirements under ASC Topic 605, Revenue Recognition , and most industry-specific guidance throughout the Industry Topics of the ASC. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. Under the new guidance, an entity is required to perform the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The new guidance will significantly enhance comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets. Additionally, the guidance requires improved disclosures as to the nature, amount, timing and uncertainty of revenue that is recognized. The guidance was effective for the annual reporting period beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. On July 9, 2015, the FASB deferred the effective date by one year to annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Entities can still adopt the amendments as of the original effective date. We are currently evaluating the impact the adoption of this new accounting standard will have on our Consolidated Financial Statements.
3.    GOODWILL
Many of the former owners and staff of acquired funeral homes have provided high quality service to families for generations. The resulting loyalty often represents a substantial portion of the value of a business. The excess of the purchase price over the fair value of net identifiable assets acquired and liabilities assumed, as determined by management in business acquisition transactions accounted for as purchases, is recorded as goodwill.
The following table presents the changes in goodwill on our Consolidated Balance Sheets during the six months ended June 30, 2015 (in thousands):
 
 
Goodwill as of December 31, 2014
$
257,442

Increase in goodwill related to acquisitions
3,849

Goodwill as of June 30, 2015
$
261,291

The $3.8 million increase in goodwill related to acquisitions represents the goodwill recorded in connection with the funeral home acquired in February 2015.

- 8 -


4.    PRENEED TRUST INVESTMENT
Preneed Cemetery Trust Investments
Preneed cemetery trust investments represent trust fund assets that we are generally permitted to withdraw when the merchandise or services are provided. The components of Preneed cemetery trust investments on our Consolidated Balance Sheets at December 31, 2014 and June 30, 2015 were as follows (in thousands):
 
December 31, 2014
 
June 30, 2015
Preneed cemetery trust investments, at fair value
$
74,198

 
$
74,144

Less: allowance for contract cancellation
(2,226
)
 
(2,250
)
Preneed cemetery trust investments, net
$
71,972

 
$
71,894

Upon cancellation of a preneed cemetery contract, a customer is generally entitled to receive a refund of the corpus, and in some cases, some or all of the earnings held in trust. In certain jurisdictions, we may be obligated to fund any shortfall if the amounts deposited by the customer exceed the funds in trust, including some or all investment income. As a result, when realized or unrealized losses of a trust result in the trust being under funded, we assess whether we are responsible for replenishing the corpus of the trust, in which case a loss provision is recorded. At June 30, 2015 , our preneed cemetery trust investments were not under-funded.
Earnings from our preneed cemetery trust investments are recognized in revenue when a service is performed or merchandise is delivered. Trust management fees charged by our wholly-owned registered investment advisor are included in revenue in the period in which they are earned.
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, 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 municipal bonds, foreign debt, corporate debt, preferred stocks and mortgage backed securities, 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, 2015 . There are no Level 3 investments in the preneed cemetery trust investment portfolio. See Note 8 for further information of the fair value measurement and the three-level hierarchy.
The cost and fair market values associated with preneed cemetery trust investments at June 30, 2015 are detailed below (in thousands):
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts
1
 
$
7,339

 
$

 
$

 
$
7,339

Fixed income securities:
 
 
 
 
 
 
 
 
 
Municipal bonds
2
 
474

 

 
(93
)
 
381

Foreign debt
2
 
5,609

 
19

 
(270
)
 
5,358

Corporate debt
2
 
27,123

 
211

 
(1,746
)
 
25,588

Preferred stock
2
 
16,771

 
47

 
(576
)
 
16,242

Common stock
1
 
17,700

 
2,262

 
(1,436
)
 
18,526

Trust securities
 
 
$
75,016

 
$
2,539

 
$
(4,121
)
 
$
73,434

Accrued investment income
 
 
$
710

 
 
 
 
 
$
710

Preneed cemetery trust investments
 
 
 
 
 
 
 
 
$
74,144

Market value as a percentage of cost
 
 
 
 
 
 
 
 
97.9
%

- 9 -


The estimated maturities of the fixed income securities included above are as follows (in thousands):
Due in one year or less
$
147

Due in one to five years
6,607

Due in five to ten years
5,725

Thereafter
35,090

Total
$
47,569

The cost and fair market values associated with preneed cemetery trust investments at December 31, 2014 are detailed below (in thousands):
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts
1
 
$
5,591

 
$

 
$

 
$
5,591

Fixed income securities:
 
 
 
 
 
 
 
 
 
Municipal bonds
2
 
347

 
9

 

 
356

Foreign debt
2
 
5,874

 

 
(237
)
 
5,637

Corporate debt
2
 
30,108

 
362

 
(2,167
)
 
28,303

Preferred stock
2
 
19,154

 
199

 
(325
)
 
19,028

Mortgage backed securities
2
 
1

 

 

 
1

Common stock
1
 
13,128

 
2,357

 
(966
)
 
14,519

Trust securities
 
 
$
74,203

 
$
2,927

 
$
(3,695
)
 
$
73,435

Accrued investment income
 
 
$
763

 
 
 
 
 
$
763

Preneed cemetery trust investments
 
 
 
 
 
 
 
 
$
74,198

Market value as a percentage of cost
 
 
 
 
 
 
 
 
99.0
%
We determine whether or not the assets in the preneed cemetery trust investments 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 of the investment due to an other-than-temporary impairment is likewise recorded as a reduction in Deferred preneed cemetery receipts held in trust on our Consolidated Balance Sheets. We recorded a $0.2 million impairment in the three and six months ended June 30, 2014 for other-than-temporary declines in the fair value related to unrealized losses on certain investments. We recorded a $0.7 million impairment in the three and six months ended June 30, 2015 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 the 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, 2015 , we had certain investments within our preneed cemetery 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.

- 10 -


Our cemetery merchandise and service trust investment unrealized losses, their associated fair market values, and the duration of unrealized losses as of June 30, 2015 and December 31, 2014 , are shown in the following tables (in thousands):
 
June 30, 2015
 
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:
 
 
 
 
 
 
 
 
 
 
 
Municipal bonds
$
381

 
$
(93
)
 
$

 
$

 
$
381

 
$
(93
)
Foreign debt
3,258

 
(270
)
 

 

 
3,258

 
(270
)
Corporate debt
16,980

 
(948
)
 
4,968

 
(798
)
 
21,948

 
(1,746
)
Preferred stock
10,992

 
(393
)
 
4,362

 
(183
)
 
15,354

 
(576
)
Common stock
6,273

 
(1,193
)
 
784

 
(243
)
 
7,057

 
(1,436
)
Total temporary impaired securities
$
37,884

 
$
(2,897
)
 
$
10,114

 
$
(1,224
)
 
$
47,998

 
$
(4,121
)
 
December 31, 2014
 
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
$
5,629

 
$
(237
)
 
$

 
$

 
$
5,629

 
$
(237
)
Corporate debt
18,051

 
(778
)
 
2,016

 
(1,389
)
 
20,067

 
(2,167
)
Preferred stock
10,342

 
(289
)
 
3,236

 
(36
)
 
13,578

 
(325
)
Common stock
6,904

 
(911
)
 
65

 
(55
)
 
6,969

 
(966
)
Total temporary impaired securities
$
40,926

 
$
(2,215
)
 
$
5,317

 
$
(1,480
)
 
$
46,243

 
$
(3,695
)
Preneed cemetery trust investment security transactions recorded in Interest expense on our Consolidated Statements of Operations for the three and six months ended June 30, 2014 and 2015 were as follows (in thousands):
 
For the Three Months Ended June 30,
 
For the Six Months
Ended June 30,
 
2014
 
2015
 
2014
 
2015
Investment income
$
889

 
$
774

 
$
1,432

 
$
1,291

Realized gains
1,161

 
1,316

 
1,700

 
1,674

Realized losses
(640
)
 
(92
)
 
(828
)
 
(890
)
Expenses and taxes
(384
)
 
(775
)
 
(942
)
 
(1,094
)
Increase in deferred preneed cemetery receipts held in trust
(1,026
)
 
(1,223
)
 
(1,362
)
 
(981
)
 
$

 
$

 
$

 
$

Purchases and sales of investments in the preneed cemetery trusts were as follows (in thousands):
 
For the Three Months Ended June 30,
 
For the Six Months
Ended June 30,
 
2014
 
2015
 
2014
 
2015
Purchases
$
(13,498
)
 
$
(5,848
)
 
$
(21,658
)
 
$
(12,855
)
Sales
$
14,383

 
$
7,441

 
$
22,921

 
$
10,193


- 11 -

Table of Contents

Preneed Funeral Trust Investments
Preneed funeral trust investments represent trust fund assets that we are permitted to withdraw as services and merchandise are provided to customers. Preneed funeral contracts are secured by funds paid by the customer to us. Preneed funeral trust investments are reduced by the trust earnings we have been allowed to withdraw prior to our performance and amounts received from customers that are not required to be deposited into trust, pursuant to various state laws. The components of Preneed funeral trust investments on our Consolidated Balance Sheets at December 31, 2014 and June 30, 2015 were as follows (in thousands):
 
December 31, 2014
 
June 30, 2015
Preneed funeral trust investments, at market value
$
100,579

 
$
98,972

Less: allowance for contract cancellation
(2,972
)
 
(2,970
)
Preneed funeral trust investments, net
$
97,607

 
$
96,002

Upon cancellation of a preneed funeral contract, a customer is generally entitled to receive a refund of the corpus and some or all of the earnings held in trust. In certain jurisdictions, we may be obligated to fund any shortfall if the amounts deposited by the customer exceed the funds in trust, including some or all investment income. As a result, when realized or unrealized losses of a trust result in the trust being under-funded, we assess whether we are responsible for replenishing the corpus of the trust, in which case a loss provision is recorded. At June 30, 2015 , our preneed funeral trust investments were not under-funded.
Earnings from our preneed funeral trust investments are recognized in revenue when a service is performed or merchandise is delivered. Trust management fees charged by our wholly-owned registered investment advisor are included in revenue in the period in which they are earned.
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, U.S. treasury debt, common stock and equity mutual funds. 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 U.S. agency obligations, municipal bonds, foreign debt, corporate debt, preferred stocks, mortgage backed securities and fixed income mutual funds and other investments, 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 for the three and six months ended June 30, 2015 . There are no Level 3 investments in the preneed funeral trust investment portfolio. See Note 8 for further information of the fair value measurement and the three-level hierarchy.

- 12 -

Table of Contents

The cost and fair market values associated with preneed funeral trust investments at June 30, 2015 are detailed below (in thousands):
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts
1
 
$
20,586

 
$

 
$

 
$
20,586

Fixed income securities:
 
 
 
 
 
 
 
 
 
U.S treasury debt
1
 
2,035

 
34

 
(14
)
 
2,055

Municipal bonds
2
 
453

 

 
(89
)
 
364

Foreign debt
2
 
5,302

 
18

 
(252
)
 
5,068

Corporate debt
2
 
26,321

 
263

 
(1,663
)
 
24,921

Preferred stock
2
 
16,679

 
129

 
(547
)
 
16,261

Mortgage backed securities
2
 
284

 
5

 
(2
)
 
287

Common stock
1
 
16,479

 
2,198

 
(1,308
)
 
17,369

Mutual funds:
 
 
 
 
 
 
 
 
 
Equity
1
 
4,926

 
635

 
(42
)
 
5,519

Fixed income
2
 
2,281

 
13

 
(91
)
 
2,203

Other investments
2
 
3,654

 

 
(31
)
 
3,623

Trust securities
 
 
$
99,000

 
$
3,295

 
$
(4,039
)
 
$
98,256

Accrued investment income
 
 
$
716

 
 
 
 
 
$
716

Preneed funeral trust investments
 
 
 
 
 
 
 
 
$
98,972

Market value as a percentage of cost
 
 
 
 
 
 
 
 
99.2
%

The estimated maturities of the fixed income securities included above are as follows (in thousands):
Due in one year or less
$
693

Due in one to five years
7,006

Due in five to ten years
6,170

Thereafter
35,087

Total
$
48,956



- 13 -

Table of Contents

The cost and fair market values associated with preneed funeral trust investments at December 31, 2014 are detailed below (in thousands):
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts
1
 
$
17,501

 
$

 
$

 
$
17,501

Fixed income securities:
 
 
 
 
 
 
 
 
 
U.S. treasury debt
1
 
2,037

 
32

 
(15
)
 
2,054

U.S. agency obligations
2
 
30

 

 

 
30

Foreign debt
2
 
4,653

 

 
(188
)
 
4,465

Corporate debt
2
 
24,761

 
469

 
(1,718
)
 
23,512

Preferred stock
2
 
16,166

 
256

 
(261
)
 
16,161

Mortgage backed securities
2
 
309

 
8

 
(3
)
 
314

Common stock
1
 
10,544

 
1,926

 
(783
)
 
11,687

Mutual funds:
 
 
 
 
 
 
 
 
 
Equity
1
 
14,126

 
1,370

 
(181
)
 
15,315

Fixed income
2
 
5,351

 
115

 
(72
)
 
5,394

Other investments
2
 
3,560

 

 
(29
)
 
3,531

Trust securities
 
 
$
99,038

 
$
4,176

 
$
(3,250
)
 
$
99,964

Accrued investment income
 
 
$
615

 
 
 
 
 
$
615

Preneed funeral trust investments
 
 
 
 
 
 
 
 
$
100,579

Market value as a percentage of cost
 
 
 
 
 
 
 
 
100.9
%
We determine whether or not the assets in the preneed funeral trust investments have other-than-temporary impairments 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 of the investment due to an other-than-temporary impairment is likewise recorded as a reduction to Deferred preneed funeral receipts held in trust on our Consolidated Balance Sheets. We recorded a $0.1 million impairment in the three and six months ended June 30, 2014 for other-than-temporary declines in the fair value related to unrealized losses on certain investments. We recorded a $0.6 million impairment in the three and six months ended June 30, 2015 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, 2015 , we had certain investments within our preneed funeral 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.

- 14 -

Table of Contents

Our preneed funeral trust investment unrealized losses, their associated fair market values, and the duration of unrealized losses as of June 30, 2015 and December 31, 2014 are shown in the following tables (in thousands):
 
June 30, 2015
 
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:
 
 
 
 
 
 
 
 
 
 
 
U.S. debt
$
1

 
$

 
$
836

 
$
(14
)
 
$
837

 
$
(14
)
Municipal bonds
364

 
(89
)
 

 

 
364

 
(89
)
Foreign debt
3,066

 
(252
)
 

 

 
3,066

 
(252
)
Corporate debt
15,896

 
(863
)
 
4,970

 
(801
)
 
20,866

 
(1,664
)
Preferred stock
10,243

 
(365
)
 
4,329

 
(182
)
 
14,572

 
(547
)
Mortgage backed securities
104

 
(1
)
 
18

 
(1
)
 
122

 
(2
)
Mutual funds:
 
 
 
 
 
 
 
 
 
 
 
Equity
5,545

 
(1,051
)
 
809

 
(257
)
 
6,354

 
(1,308
)
Equity and other
1,154

 
(40
)
 
33

 
(1
)
 
1,187

 
(41
)
Fixed income
484

 
(10
)
 
937

 
(81
)
 
1,421

 
(91
)
Other investments

 

 
11

 
(31
)
 
11

 
(31
)
Total temporary impaired securities
$
36,857

 
$
(2,671
)
 
$
11,943

 
$
(1,368
)
 
$
48,800

 
$
(4,039
)
 
December 31, 2014
 
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:
 
 
 
 
 
 
 
 
 
 
 
U.S. debt
$
500

 
$

 
$
836

 
$
(15
)
 
$
1,336

 
$
(15
)
Foreign debt
4,471

 
(188
)
 

 

 
4,471

 
(188
)
Corporate debt
14,310

 
(617
)
 
1,598

 
(1,101
)
 
15,908

 
(1,718
)
Preferred stock
8,300

 
(232
)
 
2,597

 
(29
)
 
10,897

 
(261
)
Mortgage backed securities

 

 
51

 
(3
)
 
51

 
(3
)
Mutual funds:
 
 
 
 
 
 
 
 
 
 
 
Equity
5,594

 
(739
)
 
53

 
(44
)
 
5,647

 
(783
)
Equity and other
4,204

 
(180
)
 
6

 
(1
)
 
4,210

 
(181
)
Fixed income
888

 
(19
)
 
1,026

 
(53
)
 
1,914

 
(72
)
Other investments

 

 
42

 
(29
)
 
42

 
(29
)
Total temporary impaired securities
$
38,267

 
$
(1,975
)
 
$
6,209

 
$
(1,275
)
 
$
44,476

 
$
(3,250
)

- 15 -

Table of Contents

Preneed funeral trust investment security transactions recorded in Interest expense on the Consolidated Statements of Operations for the three and six months ended June 30, 2014 and 2015 were as follows (in thousands):
 
For the Three Months Ended June 30,
 
For the Six Months
Ended June 30,
 
2014
 
2015
 
2014
 
2015
Investment income
$
846

 
$
872

 
$
1,491

 
$
1,428

Realized gains
2,937

 
2,279

 
3,431

 
2,573

Realized losses
(538
)
 
(245
)
 
(736
)
 
(870
)
Expenses and taxes
(493
)
 
(574
)
 
(898
)
 
(834
)
Increase in deferred preneed funeral receipts held in trust
(2,752
)
 
(2,332
)
 
(3,288
)
 
(2,297
)
 
$

 
$

 
$

 
$

Purchases and sales of investments in the preneed funeral trusts were as follows (in thousands):
 
For the Three Months Ended June 30,
 
For the Six Months
Ended June 30,
 
2014
 
2015
 
2014
 
2015
Purchases
$
(22,526
)
 
$
(5,856
)
 
$
(29,517
)
 
$
(11,345
)
Sales
$
22,612

 
$
20,435

 
$
30,149

 
$
22,738

5.    PRENEED CEMETERY RECEIVABLES
Preneed sales of cemetery interment rights and related products and services are usually financed through interest-bearing installment sales contracts, generally with terms of up to five years with such interest income reflected as Preneed cemetery finance charges . In substantially all cases, we receive an initial down payment at the time the contract is signed. At June 30, 2015 , the balances of preneed receivables for cemetery interment rights and for merchandise and services were $24.8 million and $9.3 million , respectively, of which $10.7 million is presented in Accounts receivable and $23.4 million is presented in Preneed receivables . The unearned finance charges associated with these receivables were $4.6 million and $4.7 million at December 31, 2014 and June 30, 2015 , respectively.
We determine an allowance for customer cancellations and refunds on contracts in which revenue has been recognized on sales of cemetery interment rights. We have a collections policy where past due notifications are sent to the customer beginning at 15 days past due and periodically thereafter until the contract is cancelled or payment is received. We reserve 100% of the receivables on contracts in which the revenue has been recognized and payments are 90 days past due or more, which was approximately 4.7% of the total receivables on recognized sales at June 30, 2015 . An allowance is recorded at the date that the contract is executed and periodically adjusted thereafter based upon actual collection experience at the business level. For the six months ended June 30, 2015 , the change in the allowance for contract cancellations was as follows (in thousands):
 
June 30, 2015
Beginning balance
$
2,140

Write-offs and cancellations
(994
)
Provision
481

Ending balance
$
1,627

The aging of past due financing receivables as of June 30, 2015 was as follows (in thousands):
 
31-60
Past Due
 
61-90
Past Due
 
91-120
Past Due
 
>120
Past Due
 
Total Past
Due
 
Current
 
Total Financing
Receivables
Recognized revenue
$
737

 
$
312

 
$
249

 
$
911

 
$
2,209

 
$
22,299

 
$
24,508

Deferred revenue
332

 
161

 
93

 
306

 
892

 
8,664

 
9,556

Total contracts
$
1,069

 
$
473

 
$
342

 
$
1,217

 
$
3,101

 
$
30,963

 
$
34,064


- 16 -

Table of Contents

6.    RECEIVABLES FROM PRENEED TRUSTS
The receivables from preneed trusts represent assets in trusts which are controlled and operated by third parties in which we do not have a controlling financial interest ( less than 50% ) in the trust assets. We account for these investments at cost. As of December 31, 2014 and June 30, 2015 , receivables from preneed trusts were as follows (in thousands):
 
December 31, 2014
 
June 30, 2015
Preneed trust funds, at cost
$
13,205

 
$
13,339

Less: allowance for contract cancellation
(396
)
 
(400
)
Receivables from preneed trusts, net
$
12,809

 
$
12,939


The following summary reflects the composition of the assets held in trust and controlled by third parties to satisfy our future obligations under preneed arrangements related to the preceding contracts at June 30, 2015 . The cost basis includes reinvested interest and dividends that have been earned on the trust assets. Fair value includes the unrealized gains and losses on trust assets.
 
Historical
Cost Basis
 
Fair Value
 
(in thousands)
As of June 30, 2015
 
 
 
Cash and cash equivalents
$
2,716

 
$
2,716

Fixed income investments
8,023

 
8,040

Mutual funds and common stocks
2,584

 
2,689

Annuities
16

 
16

Total
$
13,339

 
$
13,461

 
 
Historical
Cost Basis
 
Fair Value
 
(in thousands)
As of December 31, 2014
 
 
 
Cash and cash equivalents
$
2,834

 
$
2,834

Fixed income investments
7,880

 
7,893

Mutual funds and common stocks
2,467

 
2,586

Annuities
24

 
24

Total
$
13,205

 
$
13,337

7. CEMETERY PERPETUAL CARE TRUST INVESTMENTS
Care trusts’ corpus on our Consolidated Balance Sheets represent the corpus of those trusts plus undistributed income. The components of Care trusts’ corpus as of December 31, 2014 and June 30, 2015 were as follows (in thousands):
 
December 31, 2014
 
June 30, 2015
Trust assets, at fair value
$
48,670

 
$
48,620

Obligations due from trust
(528
)
 
(466
)
Care trusts’ corpus
$
48,142

 
$
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 Cemetery revenues . Trust management fees charged by our wholly-owned registered investment advisor, CSV RIA, are included in revenue in the period in which they are earned.
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 municipal bonds, foreign debt, corporate debt and preferred stocks, 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

- 17 -

Table of Contents

and six months ended June 30, 2015 . There are no Level 3 investments in the cemetery perpetual care trust investment portfolio. See Note 8 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, 2015 (in thousands):
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts
1
 
$
4,285

 
$

 
$

 
$
4,285

Fixed income securities:
 
 
 
 
 
 
 
 
 
Municipal bonds
2
 
334

 

 
(66
)
 
268

Foreign debt
2
 
3,756

 
12

 
(189
)
 
3,579

Corporate debt
2
 
19,184

 
134

 
(1,301
)
 
18,017

Preferred stock
2
 
11,597

 
34

 
(397
)
 
11,234

Common stock
1
 
10,465

 
1,288

 
(941
)
 
10,812

Trust securities
 
 
$
49,621

 
$
1,468

 
$
(2,894
)
 
$
48,195

Accrued investment income
 
 
$
425

 
 
 
 
 
$
425

Cemetery perpetual care trust investments
 
 
 
 
 
 
 
 
$
48,620

Market value as a percentage of cost
 
 
 
 
 
 
 
 
97.1
%
The estimated maturities of the fixed income securities included above are as follows (in thousands):
Due in one year or less
$
87

Due in one to five years
4,670

Due in five to ten years
4,065

Thereafter
24,276

 
$
33,098

The following table reflects the cost and fair market values associated with the trust investments held in perpetual care trust funds at December 31, 2014 (in thousands):
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts
1
 
$
3,206

 
$

 
$

 
$
3,206

Fixed income securities:
 
 
 
 
 
 
 
 
 
Municipal bonds
2
 
229

 
5

 

 
234

Foreign debt
2
 
3,871

 

 
(156
)
 
3,715

Corporate debt
2
 
19,911

 
248

 
(1,428
)
 
18,731

Preferred stock
2
 
12,694

 
137

 
(214
)
 
12,617

Common stock
1
 
8,747

 
1,568

 
(653
)
 
9,662

Trust securities
 
 
$
48,658

 
$
1,958

 
$
(2,451
)
 
$
48,165

Accrued investment income