Carriage Services, Inc.
CARRIAGE SERVICES INC (Form: 10-Q, Received: 07/26/2016 16:52:41)
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, 2016
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 20, 2016 was 16,642,999 .
 


Table of Contents

CARRIAGE SERVICES, INC.
INDEX
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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Table of Contents

PART I – FINANCIAL INFORMATION
Item 1.
Financial Statements
CARRIAGE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands, except share data)
 
 
 
 
 
December 31, 2015
 
June 30, 2016
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
535

 
$
883

Accounts receivable, net of allowance for bad debts of $1,054 in 2015 and $992 in 2016
18,181

 
18,246

Inventories
5,654

 
5,792

Prepaid expenses
4,684

 
2,988

Other current assets
4,707

 
809

Total current assets
33,761

 
28,718

Preneed cemetery trust investments
63,291

 
61,775

Preneed funeral trust investments
85,553

 
83,429

Preneed receivables, net of allowance for bad debts of $2,042 in 2015 and $2,055 in 2016
27,998

 
29,152

Receivables from preneed trusts
13,544

 
12,865

Property, plant and equipment, net of accumulated depreciation of $103,306 in 2015 and $106,967 in 2016
214,874

 
228,898

Cemetery property, net of accumulated amortization of $30,289 in 2015 and $32,431 in 2016
75,597

 
75,878

Goodwill
264,416

 
265,249

Intangible and other non-current assets
10,978

 
14,307

Cemetery perpetual care trust investments
43,127

 
42,505

Total assets
$
833,139

 
$
842,776

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Current portion of long-term debt and capital lease obligations
$
12,236

 
$
12,605

Accounts payable
7,917

 
6,858

Other liabilities
524

 
2,497

Accrued liabilities
16,541

 
16,021

Total current liabilities
37,218

 
37,981

Long-term debt, net of current portion
103,495

 
139,693

Revolving credit facility
91,514

 
58,703

Convertible subordinated notes due 2021
115,227

 
117,355

Obligations under capital leases, net of current portion
2,875

 
2,757

Deferred preneed cemetery revenue
56,721

 
56,669

Deferred preneed funeral revenue
31,748

 
31,131

Deferred tax liability
39,956

 
36,816

Other long-term liabilities
5,531

 
5,813

Deferred preneed cemetery receipts held in trust
63,291

 
61,775

Deferred preneed funeral receipts held in trust
85,553

 
83,429

Care trusts’ corpus
42,416

 
42,117

Total liabilities
675,545

 
674,239

Commitments and contingencies:

 

Stockholders’ equity:
 
 

Common stock, $.01 par value; 80,000,000 shares authorized and 22,497,873 and 22,492,315 shares issued at December 31, 2015 and June 30, 2016, respectively
225

 
225

Additional paid-in capital
214,250

 
215,422

Retained earnings
3,385

 
13,156

Treasury stock, at cost; 5,849,316 shares at December 31, 2015 and June 30, 2016
(60,266
)
 
(60,266
)
Total stockholders’ equity
157,594

 
168,537

Total liabilities and stockholders’ equity
$
833,139

 
$
842,776

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

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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,
 
2015
 
2016
 
2015
 
2016
Revenues:
 
 
 
 
 
 
 
Funeral
$
44,501

 
$
46,467

 
$
94,638

 
$
95,769

Cemetery
14,760

 
15,398

 
27,876

 
29,427

 
59,261

 
61,865

 
122,514

 
125,196

Field costs and expenses:
 
 

 
 
 

Funeral
27,263

 
27,783

 
55,678

 
55,564

Cemetery
8,446

 
8,989

 
15,748

 
16,851

Depreciation and amortization
2,993

 
3,571

 
5,795

 
6,907

Regional and unallocated funeral and cemetery costs
2,311

 
2,715

 
4,836

 
5,764

 
41,013

 
43,058

 
82,057

 
85,086

Gross profit
18,248

 
18,807

 
40,457

 
40,110

Corporate costs and expenses:
 
 

 
 
 

General and administrative costs and expenses
6,886

 
5,831

 
14,056

 
15,078

Home office depreciation and amortization
372

 
386

 
892

 
784

 
7,258

 
6,217

 
14,948

 
15,862

Operating income
10,990

 
12,590

 
25,509

 
24,248

Interest expense
(2,479
)
 
(2,968
)
 
(5,148
)
 
(5,819
)
Accretion of discount on convertible subordinated notes
(851
)
 
(954
)
 
(1,678
)
 
(1,881
)
Loss on early extinguishment of debt

 

 

 
(567
)
Other income

 

 

 
305

Income before income taxes
7,660

 
8,668

 
18,683

 
16,286

Provision for income taxes
(3,103
)
 
(3,468
)
 
(7,708
)
 
(6,515
)
Net income
$
4,557

 
$
5,200

 
$
10,975

 
$
9,771

 
 
 
 
 
 
 
 
Basic earnings per common share:
$
0.25

 
$
0.31

 
$
0.59

 
$
0.59

Diluted earnings per common share:
$
0.24

 
$
0.30

 
$
0.57

 
$
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
18,268

 
16,516

 
18,238

 
16,488

Diluted
18,880

 
17,075

 
18,844

 
16,862

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

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CARRIAGE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
 
For the Six Months Ended June 30,
 
2015
 
2016
Cash flows from operating activities:
 
 
 
Net income
$
10,975

 
$
9,771

Adjustments to reconcile net income to net cash provided by operating activities:
 
 

Depreciation and amortization
6,687

 
7,691

Provision for losses on accounts receivable
833

 
1,052

Stock-based compensation expense
2,376

 
2,303

Deferred income tax expense
1,452

 
1,116

Amortization of deferred financing costs
460

 
420

Accretion of discount on convertible subordinated notes
1,678

 
1,881

Loss on early extinguishment of debt

 
567

Net gain on sale and disposal of assets

 
(67
)
 
 
 
 
Changes in operating assets and liabilities that provided (required) cash:
 
 

Accounts and preneed receivables
1,358

 
(2,271
)
Inventories and other current assets
4,062

 
1,303

Intangible and other non-current assets
117

 
300

Preneed funeral and cemetery trust investments
1,603

 
4,941

Accounts payable
167

 
(1,148
)
Accrued and other liabilities
(953
)
 
1,207

Deferred preneed funeral and cemetery revenue
(814
)
 
(669
)
Deferred preneed funeral and cemetery receipts held in trust
(1,671
)
 
(3,939
)
Net cash provided by operating activities
28,330

 
24,458

 
 
 

Cash flows from investing activities:
 
 

Acquisitions and land for new construction
(4,250
)
 
(9,406
)
Purchase of land and buildings previously leased
(6,080
)
 
(6,258
)
Net proceeds from the sale of other assets

 
555

Capital expenditures
(15,285
)
 
(7,830
)
Net cash used in investing activities
(25,615
)
 
(22,939
)
 
 
 

Cash flows from financing activities:
 
 

Borrowings from the revolving credit facility
24,500

 
27,100

Payments against the revolving credit facility
(18,600
)
 
(59,700
)
Borrowings from the term loan

 
39,063

Payments against the term loan
(4,688
)
 
(5,625
)
Payments on other long-term debt and obligations under capital leases
(401
)
 
(689
)
Proceeds from the exercise of stock options and employee stock purchase plan contributions
410

 
457

Dividends on common stock
(925
)
 
(831
)
Payment of loan origination costs related to the credit facility
(13
)
 
(717
)
Purchase of treasury stock
(3,082
)
 

Excess tax benefit (deficiency) of equity compensation
229

 
(229
)
Net cash used in financing activities
(2,570
)
 
(1,171
)
 
 
 


Net increase in cash and cash equivalents
145

 
348

Cash and cash equivalents at beginning of period
413

 
535

Cash and cash equivalents at end of period
$
558

 
$
883

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

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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, 2016 , we operated 169 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 consolidated financial statements include the Company and its subsidiaries. All intercompany balances and transactions have been eliminated. Our interim 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 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, 2015 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.
Cash and Cash Equivalents
We consider all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.
Use of Estimates
The preparation of our Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. On an ongoing basis, we evaluate our estimates and judgments, including those related to revenue recognition, realization of accounts receivable, goodwill, intangible assets, property and equipment and deferred tax assets and liabilities. We base our estimates on historical experience, third-party data and assumptions that we believe to be reasonable under the circumstances. The results of these considerations form the basis for making judgments about the amount and timing of revenues and expenses, the carrying value of assets and the recorded amounts of liabilities. Actual results may differ from these estimates and such estimates may change if the underlying conditions or assumptions change. Historical performance should not be viewed as indicative of future performance, as there can be no assurance that our results of operations will be consistent from year to year.
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. We recorded amortization expense for cemetery property of approximately $0.9 million and $1.1 million for the three months ended June 30, 2015 and 2016 , respectively, and $1.6 million and $2.1 million for the six months ended June 30, 2015 and 2016 , respectively. 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. 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

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is no longer subject to refund, which is typically one year after the policy is issued. Preneed selling costs consist of sales commissions that we pay our sales counselors and other direct related cost of originating preneed sales contracts. These costs are expensed when incurred.
Trust management fees are earned by us for investment management and advisory services that are provided by our wholly-owned registered investment advisor (“CSV RIA”). As of June 30, 2016 , CSV RIA provided these services to two institutions, which have custody of 77% of our trust assets, for a fee based on the market value of trust assets. Under state trust laws, we are allowed to charge the trust a fee for advising on the investment of the trust assets and these fees are recognized as income in the period in which services are provided.
Accounts receivable included approximately $8.2 million and $7.2 million of funeral receivables at December 31, 2015 and June 30, 2016 , respectively and $9.7 million and $10.6 million of cemetery receivables at December 31, 2015 and June 30, 2016 , respectively. For 2015 and 2016, 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 $7.3 million and $7.2 million of funeral receivables at December 31, 2015 and June 30, 2016 , respectively, and $20.7 million and $22.0 million of cemetery receivables at December 31, 2015 and June 30, 2016 , respectively. Bad debt expense totaled approximately $0.4 million and $0.5 million for the three months ended June 30, 2015 and 2016 , respectively, and $0.8 million and $1.0 million for the six months ended June 30, 2015 and 2016 , respectively.
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, 2015 and June 30, 2016 :
 
December 31, 2015
 
June 30, 2016
 
(in thousands)
Land
$
65,433

 
$
74,561

Buildings and improvements
180,804

 
186,919

Furniture, equipment and automobiles
71,943

 
74,385

Property, plant and equipment, at cost
318,180

 
335,865

Less: accumulated depreciation
(103,306
)
 
(106,967
)
Property, plant and equipment, net
$
214,874

 
$
228,898

We recorded depreciation expense of approximately $2.5 million and $2.8 million for the three months ended June 30, 2015 and 2016 , respectively, and $5.1 million and $5.5 million for the six months ended June 30, 2015 and 2016 , respectively. During the first quarter of 2016 , we acquired real estate for $2.7 million for funeral home expansion projects. During the second quarter of 2016 , we purchased land and buildings at four funeral homes that were previously leased for approximately $6.3 million . We also acquired $5.7 million of property, plant and equipment in connection with two funeral home businesses acquired in May 2016, as further discussed in Note 3 to the Consolidated Financial Statements included herein.
Goodwill
The excess of the purchase price over the fair value of identifiable net assets of businesses acquired and liabilities assumed is recorded as goodwill. Goodwill has primarily been recorded in connection with the acquisition of funeral businesses and relates primarily to the heritage built by former owners and staff. Goodwill is tested for impairment by assessing the fair value of each of our reporting units. The funeral segment reporting units consist of our East, Central and West regions in the United States, and we perform our annual impairment test of goodwill using information as of August 31 of each year. In addition, we assess the impairment of goodwill whenever events or changes in circumstances indicate that the carrying value may be greater than fair value. Factors that could trigger an interim impairment review include, but are not limited to, significant adverse changes in the business climate which may be indicated by a decline in our market capitalization or decline in operating results. There were no such events during the six months ended June 30, 2016 .
Our methodology for goodwill impairment testing is described in more detail in Notes 1 and 4 to the Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2015 and further discussion of current period activity in Note 4 to the Consolidated Financial Statements included herein.

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Presentation of Debt Issuance Costs
Effective January 1, 2016, we adopted the Financial Accounting Standards Board's (“FASB”) new guidance on simplifying the presentation of debt issuance costs. In April 2015, the FASB issued Accounting Standards Update (“ASU”), Imputation of Interest (Subtopic 835-30) , which requires 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 resulted in debt issuance costs being presented in the same way debt discounts have historically been addressed. Debt issuances costs of $4.2 million and $3.9 million have been presented as a deduction from the carrying value of the related liabilities in our Consolidated Balance Sheets as of December 31, 2015 and June 30, 2016 , respectively.
Business Combinations
Effective January 1, 2016, we adopted the FASB new guidance on simplifying the accounting for measurement-period adjustments for Business Combinations. In September 2015, the FASB issued ASU, Business Combinations (Topic 805) , which requires that an acquirer recognize adjustments to provisional amounts that are identified during the measurement period in the reporting period in which the adjustment amounts are determined. These include the effect on earnings of changes in depreciation, amortization, or other income effects as if the accounting had been completed at the acquisition date. The entity is required to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in the current period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisition date. Our adoption of this ASU did not have a material effect on our financial statements.
During the second quarter of 2016 , we acquired two funeral home businesses in Houston, Texas. The pro forma impact of the acquisition on prior periods is not presented, as the impact is not material to our reported results. See Note 3 to the Consolidated Financial Statements included herein for further information concerning these acquisitions.
Extraordinary and Unusual Items
Effective January 1, 2016, we adopted the FASB new guidance on extraordinary and unusual items. In January 2015, the FASB issued ASU, Extraordinary and Unusual Items (Subtopic 225-20) . This ASU eliminates the concept of reporting extraordinary items. Preparers will not have to assess whether a particular event or transaction is extraordinary. 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. Our adoption of this ASU did not have a material effect on our financial statements.
Subsequent Events
Management evaluated events and transactions during the period subsequent to June 30, 2016 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
Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued ASU, Financial Instruments—Credit Losses (Topic 326). This ASU applies to all entities holding financial assets and net investment in leases that are not accounted for at fair value through net income. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash that issue share-based payment awards to their employees. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with earlier application permitted for all entities. An entity will apply the amendments in this ASU through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). A prospective transition approach is required for debt securities for which an other-than-temporary impairment had been recognized before the effective date. We plan to adopt the provisions of this ASU for our fiscal year beginning January 1, 2020 and are currently evaluating the impact the adoption of this new accounting standard will have on our Consolidated Financial Statements.

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Simplifying Share-Based Payment Accounting
In March 2016, the FASB issued ASU, Compensation—Stock Compensation (Topic 718). This ASU applies to all entities that issue share-based payment awards to their employees. The amendments in this ASU involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years, with earlier application permitted for all entities. Amendments related to the presentation of employee taxes paid on the statement of cash flows when an employer withholds shares to meet the minimum statutory withholding requirement should be applied retrospectively. Amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement and the practical expedient for estimating expected term should be applied prospectively. An entity may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective transition method or a retrospective transition method. We plan to adopt the provisions of this ASU for our fiscal year beginning January 1, 2017 and are currently evaluating the impact the adoption of this new accounting standard will have on our Consolidated Financial Statements.
Leases
In February 2016, the FASB issued ASU, Leases (Topic 842). This ASU addresses certain aspects of recognition, presentation, and disclosure of leases and applies to all entities that enter into a lease, with some specified scope exemptions. The amendments in this ASU aim to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years, with earlier application permitted for all entities. Both lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, which recognizes the cumulative effect of initially applying the standard as an adjustment to retained earnings at the date of initial application. We plan to adopt the provisions of this ASU for our fiscal year beginning January 1, 2019 and are currently evaluating the impact the adoption of this new accounting standard will have on our Consolidated Financial Statements.
3. ACQUISITIONS
Our growth strategy includes the execution of our Strategic Acquisition Model. We assess the strategic positioning of acquisition candidates based on certain criteria, which include volume and price trends, size of business, size of market, competitive standing, demographics, strength of brand and barriers to entry. The value of the acquisition candidates is based on the local market competitive dynamic which allows for appropriate and differentiating enterprise valuations and flexibility to customize the transactions.
On May 31, 2016, we acquired two funeral home businesses in Houston, Texas for approximately $10.2 million . The purchase price consisted of $6.7 million paid in cash at closing and $3.5 million of deferred purchase price payments. The net present value of such future deferred purchase price payments for these two funeral home businesses was $6.5 million , which is included in Long-term debt, net of current portion on our Consolidated Balance Sheets. The deferred purchase price payments are being paid in 80 equal quarterly installments of $81,250 which commenced on the closing date and then each September 1, December 1, March 1 and June 1 for the next 20 years.
The following table summarizes the breakdown of the purchase price for the two businesses described above (in thousands):
 
Purchase Price Allocation
Current assets
$
103

Property, plant & equipment
5,711

Goodwill
833

Intangible and other non-current assets
3,629

Assumed liabilities
(89
)
Purchase Price
$
10,187

The intangible and other non-current assets relate to the fair value of tradenames and prepaid agreements not-to-compete, and the assumed liabilities relate to the obligations associated with certain financed automobiles we acquired.

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4.    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, 2016 (in thousands):
 
 
Goodwill as of December 31, 2015
$
264,416

Increase in goodwill related to acquisitions
833

Goodwill as of June 30, 2016
$
265,249

The $0.8 million increase in goodwill related to acquisitions represents the goodwill recorded in connection with the two funeral home businesses acquired in May 2016 and described in Note 3 to the Consolidated Financial Statements included herein. Our purchase price allocation for this acquisition is dependent upon certain valuations, which have not progressed to a stage where there is sufficient information to make a definitive measure and allocation of goodwill and tradenames, as discussed in Note 10 to the Consolidated Financial Statements included herein. Revisions to the ongoing current estimates may be necessary when the valuation process is completed, which is expected to occur within a year after the respective acquisition closing date.
5.    PRENEED TRUST INVESTMENTS
Preneed Cemetery Trust Investments
Preneed cemetery trust investments represent trust fund assets that we are permitted to withdraw as services and merchandise are provided to customers. Preneed cemetery contracts are secured by payments from customers, less amounts not required by law to be deposited into trust. Preneed cemetery trust investments are reduced by the trust earnings we have been allowed to withdraw in certain states prior to our performance.
The components of Preneed cemetery trust investments on our Consolidated Balance Sheets at December 31, 2015 and June 30, 2016 were as follows (in thousands):
 
December 31, 2015
 
June 30, 2016
Preneed cemetery trust investments, at market value
$
65,486

 
$
63,887

Less: allowance for contract cancellation
(2,195
)
 
(2,112
)
Preneed cemetery trust investments, net
$
63,291

 
$
61,775

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, 2016 , none of our preneed cemetery trust investments were 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 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, 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 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, 2016 . There are no Level 3 investments in the preneed cemetery trust investment portfolio. See Note 9 to the Consolidated Financial Statements included herein for further information on the fair value measurement and the three-level hierarchy.

- 10 -


The cost and fair market values associated with preneed cemetery trust investments at June 30, 2016 are detailed below (in thousands):
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts
1
 
$
2,976

 
$

 
$

 
$
2,976

Fixed income securities:
 
 
 
 
 
 
 
 
 
Municipal bonds
2
 
604

 

 
(99
)
 
505

Foreign debt
2
 
8,548

 
134

 
(837
)
 
7,845

Corporate debt
2
 
27,676

 
1,337

 
(2,348
)
 
26,665

Preferred stock
2
 
16,272

 
8

 
(1,308
)
 
14,972

Common stock
1
 
13,119

 
143

 
(4,465
)
 
8,797

Mutual funds:
 
 
 
 
 
 
 
 
 
Fixed Income
2
 
1,221

 
74

 

 
1,295

Trust securities
 
 
$
70,416

 
$
1,696

 
$
(9,057
)
 
$
63,055

Accrued investment income
 
 
$
832

 
 
 
 
 
$
832

Preneed cemetery trust investments
 
 
 
 
 
 
 
 
$
63,887

Market value as a percentage of cost
 
 
 
 
 
 
 
 
89.5
%
The estimated maturities of the fixed income securities included above are as follows (in thousands):
Due in one year or less
$
135

Due in one to five years
9,870

Due in five to ten years
6,816

Thereafter
33,166

Total
$
49,987

The cost and fair market values associated with preneed cemetery trust investments at December 31, 2015 are detailed below (in thousands):
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts
1
 
$
8,296

 
$

 
$

 
$
8,296

Fixed income securities:
 
 
 
 
 
 
 
 
 
Municipal bonds
2
 
458

 

 
(63
)
 
395

Foreign debt
2
 
4,803

 

 
(695
)
 
4,108

Corporate debt
2
 
22,968

 
85

 
(4,279
)
 
18,774

Preferred stock
2
 
16,236

 
29

 
(885
)
 
15,380

Common stock
1
 
20,387

 
682

 
(3,161
)
 
17,908

Trust securities
 
 
$
73,148

 
$
796

 
$
(9,083
)
 
$
64,861

Accrued investment income
 
 
$
625

 
 
 
 
 
$
625

Preneed cemetery trust investments
 
 
 
 
 
 
 
 
$
65,486

Market value as a percentage of cost
 
 
 
 
 
 
 
 
88.7
%
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 $0.7 million impairment in the first quarter of 2015 and 2016 for other-than-temporary declines in the fair value related to unrealized losses on certain investments. There were no other impairments recorded in the six months ended June 30, 2015 and 2016 . There is no impact on earnings until such time that the

- 11 -


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, 2016 , 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.
Our cemetery merchandise and service trust investment unrealized losses, their associated fair market values, and the duration of unrealized losses as of June 30, 2016 and December 31, 2015 , are shown in the following tables (in thousands):
 
June 30, 2016
 
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
$
141

 
$
(4
)
 
$
363

 
$
(95
)
 
$
504

 
$
(99
)
Foreign debt
3,149

 
(213
)
 
2,401

 
(624
)
 
5,550

 
(837
)
Corporate debt
3,494

 
(382
)
 
9,097

 
(1,966
)
 
12,591

 
(2,348
)
Preferred stock
381

 
(9
)
 
14,142

 
(1,299
)
 
14,523

 
(1,308
)
Common stock
5,665

 
(2,968
)
 
2,038

 
(1,497
)
 
7,703

 
(4,465
)
Total temporary impaired securities
$
12,830

 
$
(3,576
)
 
$
28,041

 
$
(5,481
)
 
$
40,871

 
$
(9,057
)
 
December 31, 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
$
395

 
$
(63
)
 
$

 
$

 
$
395

 
$
(63
)
Foreign debt
3,680

 
(384
)
 
406

 
(312
)
 
4,086

 
(696
)
Corporate debt
14,468

 
(2,992
)
 
3,056

 
(1,287
)
 
17,524

 
(4,279
)
Preferred stock
10,285

 
(436
)
 
5,168

 
(448
)
 
15,453

 
(884
)
Common stock
12,029

 
(1,989
)
 
3,564

 
(1,172
)
 
15,593

 
(3,161
)
Total temporary impaired securities
$
40,857

 
$
(5,864
)
 
$
12,194

 
$
(3,219
)
 
$
53,051

 
$
(9,083
)
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, 2015 and 2016 were as follows (in thousands):
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2015
 
2016
 
2015
 
2016
Investment income
$
774

 
$
677

 
$
1,291

 
$
968

Realized gains
1,316

 
181

 
1,674

 
289

Realized losses
(92
)
 
(928
)
 
(890
)
 
(3,408
)
Expenses and taxes
(775
)
 
(350
)
 
(1,094
)
 
(693
)
Decrease (increase) in deferred preneed cemetery receipts held in trust
(1,223
)
 
420

 
(981
)
 
2,844

 
$

 
$

 
$

 
$


- 12 -

Table of Contents

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,
 
2015
 
2016
 
2015
 
2016
Purchases
$
(5,848
)
 
$
(7,215
)
 
$
(12,855
)
 
$
(18,106
)
Sales
$
7,441

 
$
4,676

 
$
10,193

 
$
12,030

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 payments from customers, less amounts not required by law to be deposited into trust. Preneed funeral trust investments are reduced by the trust earnings we have been allowed to withdraw in certain states prior to our performance.
The components of Preneed funeral trust investments on our Consolidated Balance Sheets at December 31, 2015 and June 30, 2016 were as follows (in thousands):
 
December 31, 2015
 
June 30, 2016
Preneed funeral trust investments, at market value
$
88,444

 
$
86,213

Less: allowance for contract cancellation
(2,891
)
 
(2,784
)
Preneed funeral trust investments, net
$
85,553

 
$
83,429

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, 2016 , none of our preneed funeral trust investments were 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 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, U.S. treasury debt 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 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, 2016 . There are no Level 3 investments in the preneed funeral trust investment portfolio. See Note 9 to the Consolidated Financial Statements included herein for further information on the fair value measurement and the three-level hierarchy.

- 13 -

Table of Contents

The cost and fair market values associated with preneed funeral trust investments at June 30, 2016 are detailed below (in thousands):
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts
1
 
$
16,966

 
$

 
$

 
$
16,966

Fixed income securities:
 
 
 
 
 
 
 
 
 
U.S treasury debt
1
 
1,491

 
61

 

 
1,552

Municipal bonds
2
 
553

 

 
(100
)
 
453

Foreign debt
2
 
8,688

 
135

 
(855
)
 
7,968

Corporate debt
2
 
28,748

 
1,394

 
(2,423
)
 
27,719

Preferred stock
2
 
16,933

 
76

 
(1,330
)
 
15,679

Mortgage backed securities
2
 
263

 
4

 
(5
)
 
262

Common stock
1
 
13,473

 
127

 
(4,614
)
 
8,986

Mutual funds:
 
 
 
 
 
 
 
 
 
Fixed income
2
 
2,183

 
81

 
(23
)
 
2,241

Other investments
2
 
3,492

 

 
(2
)
 
3,490

Trust securities
 
 
$
92,790

 
$
1,878

 
$
(9,352
)
 
$
85,316

Accrued investment income
 
 
$
897

 
 
 
 
 
$
897

Preneed funeral trust investments
 
 
 
 
 
 
 
 
$
86,213

Market value as a percentage of cost
 
 
 
 
 
 
 
 
91.9
%
The estimated maturities of the fixed income securities included above are as follows (in thousands):
Due in one year or less
$
143

Due in one to five years
9,968

Due in five to ten years
8,545

Thereafter
34,977

Total
$
53,633



- 14 -

Table of Contents

The cost and fair market values associated with preneed funeral trust investments at December 31, 2015 are detailed below (in thousands):
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts
1
 
$
21,458

 
$

 
$

 
$
21,458

Fixed income securities:
 
 
 
 
 
 
 
 
 
U.S. treasury debt
1
 
1,492

 
24

 
(12
)
 
1,504

Municipal bonds
2
 
478

 

 
(66
)
 
412

Foreign debt
2
 
4,938

 

 
(711
)
 
4,227

Corporate debt
2
 
24,787

 
133

 
(4,711
)
 
20,209

Preferred stock
2
 
17,496

 
158

 
(914
)
 
16,740

Mortgage backed securities
2
 
273

 
4

 
(4
)
 
273

Common stock
1
 
20,864

 
738

 
(3,114
)
 
18,488

Mutual funds:
 
 
 
 
 
 
 
 
 
Fixed income
2
 
959

 

 
(82
)
 
877

Other investments
2
 
3,598

 

 
(30
)
 
3,568

Trust securities
 
 
$
96,343

 
$
1,057

 
$
(9,644
)
 
$
87,756

Accrued investment income
 
 
$
688

 
 
 
 
 
$
688

Preneed funeral trust investments
 
 
 
 
 
 
 
 
$
88,444

Market value as a percentage of cost
 
 
 
 
 
 
 
 
91.1
%
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 $0.6 million impairment in the first quarter of 2015 and a $0.8 million impairment in the first quarter of 2016 . There were no other impairments recorded in the six months ended June 30, 2015 and 2016 . 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, 2016 , 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.

- 15 -

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, 2016 and December 31, 2015 are shown in the following tables (in thousands):
 
June 30, 2016
 
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
$
80

 
$
(2
)
 
$
373

 
$
(98
)
 
$
453

 
$
(100
)
Foreign debt
3,276

 
(220
)
 
2,433

 
(635
)
 
5,709

 
(855
)
Corporate debt
3,478

 
(397
)
 
9,343

 
(2,026
)
 
12,821

 
(2,423
)
Preferred stock
379

 
(8
)
 
14,381

 
(1,322
)
 
14,760

 
(1,330
)
Mortgage backed securities
100

 
(4
)
 
13

 
(1
)
 
113

 
(5
)
Mutual funds:
 
 
 
 
 
 
 
 
 
 
 
Equity
5,963

 
(3,138
)
 
1,982

 
(1,476
)
 
7,945

 
(4,614
)
Fixed income

 

 
853

 
(23
)
 
853

 
(23
)
Other investments

 

 

 
(2
)
 

 
(2
)
Total temporary impaired securities
$
13,276

 
$
(3,769
)
 
$
29,378

 
$
(5,583
)
 
$
42,654

 
$
(9,352
)
 
December 31, 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
$

 
$

 
$
1,504

 
$
(12
)
 
$
1,504

 
$
(12
)
Municipal bonds
413

 
(66
)
 

 

 
413

 
(66
)
Foreign debt
3,763

 
(392
)
 
416

 
(319
)
 
4,179

 
(711
)
Corporate debt
15,929

 
(3,294
)
 
3,364

 
(1,417
)
 
19,293

 
(4,711
)
Preferred stock
10,623

 
(451
)
 
5,338

 
(463
)
 
15,961

 
(914
)
Mortgage backed securities

 

 
272

 
(4
)
 
272

 
(4
)
Mutual funds:
 
 
 
 
 
 
 
 
 
 
 
Equity
11,848

 
(1,959
)
 
3,510

 
(1,154
)
 
15,358

 
(3,113
)
Fixed income
1

 

 
876

 
(82
)
 
877

 
(82
)
Other investments

 

 
42

 
(31
)
 
42

 
(31
)
Total temporary impaired securities
$
42,577

 
$
(6,162
)
 
$
15,322

 
$
(3,482
)
 
$
57,899

 
$
(9,644
)

- 16 -

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, 2015 and 2016 were as follows (in thousands):
 
For the Three Months Ended June 30,
 
For the Six Months Ended June 30,
 
2015
 
2016
 
2015
 
2016
Investment income
$
872

 
$
703

 
$
1,428

 
$
1,043

Realized gains
2,279

 
250

 
2,573

 
394

Realized losses
(245
)
 
(978
)
 
(870
)
 
(3,374
)
Expenses and taxes
(574
)
 
(446
)
 
(834
)
 
(693
)
Decrease (increase) in deferred preneed funeral receipts held in trust
(2,332
)
 
471

 
(2,297
)
 
2,630

 
$

 
$

 
$

 
$

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,
 
2015
 
2016
 
2015
 
2016
Purchases
$
(5,856
)
 
$
(7,024
)
 
$
(11,345
)
 
$
(18,431
)
Sales
$
20,435

 
$
5,211

 
$
22,738

 
$
12,669

6.    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, 2016 , our total financed preneed receivables was $38.3 million , of which $28.0 million and $10.3 million were for cemetery interment rights and for merchandise and services respectively. These amounts are presented on our consolidated balance sheet as $11.4 million within Accounts receivable and $26.9 million within Preneed receivables . The unearned finance charges associated with these receivables were $5.2 million and $5.6 million at December 31, 2015 and June 30, 2016 , 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 4.6% of the total receivables on recognized sales at June 30, 2016 . 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, 2016 , the change in the allowance for contract cancellations was as follows (in thousands):
 
June 30, 2016
Beginning balance
$
1,765

Write-offs and cancellations
(664
)
Provision
692

Ending balance
$
1,793

The aging of past due financing receivables as of June 30, 2016 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
$
746

 
$
388

 
$
197

 
$
1,068

 
$
2,399

 
$
25,259

 
$
27,658

Deferred revenue
285

 
137

 
81

 
319

 
822

 
9,776

 
10,598

Total contracts
$
1,031

 
$
525

 
$
278

 
$
1,387

 
$
3,221

 
$
35,035

 
$
38,256


- 17 -

Table of Contents

7.    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, 2015 and June 30, 2016 , receivables from preneed trusts were as follows (in thousands):
 
December 31, 2015
 
June 30, 2016
Preneed trust funds, at cost
$
13,963

 
$
13,263

Less: allowance for contract cancellation
(419
)
 
(398
)
Receivables from preneed trusts, net
$
13,544

 
$
12,865

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, 2016 and December 31, 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, 2016
 
 
 
Cash and cash equivalents
$
2,924

 
$
2,924

Fixed income investments
7,911

 
7,911

Mutual funds and common stocks
2,412

 
2,476

Annuities
16

 
16

Total
$
13,263

 
$
13,327

 
 
Historical
Cost Basis
 
Fair Value
 
(in thousands)
As of December 31, 2015
 
 
 
Cash and cash equivalents
$
2,898

 
$
2,898

Fixed income investments
8,423

 
8,426

Mutual funds and common stocks
2,626

 
2,625

Annuities
16

 
16

Total
$
13,963

 
$
13,965

8. 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, 2015 and June 30, 2016 were as follows (in thousands):
 
December 31, 2015
 
June 30, 2016
Trust assets, at market value
$
43,127

 
$
42,505

Obligations due from trust
(711
)
 
(388
)
Care trusts’ corpus
$
42,416

 
$
42,117

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 from cemetery operations . Trust management fees charged by CSV RIA are included in revenue in the period in which they are earned. At June 30, 2016 , none of our cemetery perpetual care trust investments were under-funded.
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, preferred stock 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

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Levels 1 and 2 in the three and six months ended June 30, 2016 . There are no Level 3 investments in the cemetery perpetual care trust investment portfolio. See Note 9 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, 2016 (in thousands):
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts
1
 
$
1,537

 
$

 
$

 
$
1,537

Fixed income securities:
 
 
 
 
 
 
 
 
 
Municipal bonds
2
 
447

 

 
(72
)
 
375

Foreign debt
2
 
5,755

 
85

 
(571
)
 
5,269

Corporate debt
2
 
18,646

 
795

 
(1,702
)
 
17,739

Preferred stock
2
 
11,450

 
5

 
(924
)
 
10,531

Common stock
1
 
8,228

 
131

 
(2,729
)
 
5,630

Mutual funds:
 
 
 
 
 
 
 
 
 
Fixed Income
2
 
866

 
52

 

 
918

Trust securities
 
 
$
46,929

 
$
1,068

 
$
(5,998
)
 
$
41,999

Accrued investment income
 
 
$
506

 
 
 
 
 
$
506

Cemetery perpetual care investments
 
 
 
 
 
 
 
 
$
42,505

Market value as a percentage of cost
 
 
 
 
 
 
 
 
89.5
%
The estimated maturities of the fixed income securities included above are as follows (in thousands):
Due in one year or less
$
82

Due in one to five years
6,285

Due in five to ten years
4,815

Thereafter
22,732

 
$
33,914

The following table reflects the cost and fair market values associated with the trust investments held in perpetual care trust funds at December 31, 2015 (in thousands):
 
Fair Value Hierarchy Level
 
Cost
 
Unrealized
Gains
 
Unrealized
Losses
 
Fair Market
Value
Cash and money market accounts
1
 
$
5,472

 
$

 
$

 
$
5,472

Fixed income securities:
 
 
 
 
 
 
 
 
 
Municipal bonds
2
 
325

 

 
(45
)
 
280

Foreign debt
2
 
3,232

 

 
(480
)
 
2,752

Corporate debt
2
 
16,216

 
57

 
(3,094
)
 
13,179

Preferred stock
2
 
11,263

 
20

 
(611
)
 
10,672

Common stock
1
 
11,945

 
393

 
(1,939
)
 
10,399

Trust securities
 
 
$
48,453

 
$
470

 
$
(6,169
)
 
$
42,754

Accrued investment income
 
 
$
373

 
 
 
 
 
$
373

Cemetery perpetual care investments
 
 
 
 
 
 
 
 
$
43,127

Market value as a percentage of cost
 
 
 
 
 
 
 
 
88.2
%
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 . We recorded a $0.5 million impairment

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in the first quarter of 2015 and a $0.4 million impairment in the first quarter of 2016 for other-than-temporary declines in the fair value related to unrealized losses on certain investments. There were no other impairments recorded in the six months ended June 30, 2015 and 2016 .
At June 30, 2016 , 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, 2016 and December 31, 2015 are shown in the following tables (in thousands):