SEC Info - Stonemor Partners LP - ‘10-Q’ for 9/30/13

5.	MERCHANDISE TRUSTS

At September 30, 2013, the Company’s merchandise trusts consisted of the following types of assets:

•

Money Market Funds that invest in low risk short term securities;

•

Publicly traded mutual funds that invest in underlying debt securities;

•

Publicly traded mutual funds that invest in underlying equity securities;

•

Equity investments that are currently paying dividends or distributions. These investments include Real Estate Investment Trusts (“REIT’s”), Master Limited Partnerships and global equity securities;

•

Fixed maturity debt securities issued by various corporate entities;

•

Fixed maturity debt securities issued by the U.S. Government and U.S. Government agencies; and

•

Fixed maturity debt securities issued by U.S. states and local government agencies.

All of these investments are classified as Available for Sale as defined by the Investments in Debt and Equity topic of the ASC. Accordingly, all of the assets are carried at fair value. All of these investments are considered to be either Level 1 or Level 2 assets as defined by the Fair Value Measurements and Disclosures topic of the ASC. See Note 15 for further details. There were no Level 3 assets.

The merchandise trusts are variable interest entities (VIE) for which the Company is the primary beneficiary. The assets held in the merchandise trusts are required to be used to purchase the merchandise to which they relate. If the value of these assets falls below the cost of purchasing such merchandise, the Company may be required to fund this shortfall.

The Company has included $7.9 million and $7.6 million of investments held in trust by the West Virginia Funeral Directors Association at September 30, 2013 and December 31, 2012, respectively, in its merchandise trust assets. As required by law, the Company deposits a portion of certain funeral merchandise sales in West Virginia into a trust that is held by the West Virginia Funeral Directors Association. These trusts are recorded at their account value, which approximates their fair value.

The cost and market value associated with the assets held in merchandise trusts at September 30, 2013 and December 31, 2012 were as follows:


As of September 30, 2013	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Short-term investments	$	42,789	$	—	$	—		$	42,789
Fixed maturities:
U.S. Government and federal agency		—		—		—			—
U.S. State and local government agency		—		—		—			—
Corporate debt securities		9,154		94		(171	)		9,077
Other debt securities		5,465		—		(16	)		5,449

Total fixed maturities		14,619		94		(187	)		14,526

Mutual funds - debt securities		118,600		906		(7,611	)		111,895
Mutual funds - equity securities		144,877		11,881		(1,641	)		155,117
Equity securities		76,321		3,343		(1,292	)		78,372
Other invested assets		4,912		—		(119	)		4,793

Total managed investments	$	402,118	$	16,224	$	(10,850	)	$	407,492

West Virginia Trust Receivable		7,863		—		—			7,863

Total	$	409,981	$	16,224	$	(10,850	)	$	415,355


As of December 31, 2012	Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
	(in thousands)
Short-term investments	$	27,890	$	—	$	—		$	27,890
Fixed maturities:
U.S. Government and federal agency		—		—		—			—
U.S. State and local government agency		—		—		—			—
Corporate debt securities		8,590		165		(41	)		8,714
Other debt securities		4,320		—		(3	)		4,317

Total fixed maturities		12,910		165		(44	)		13,031

Mutual funds - debt securities		105,388		3,425		(892	)		107,921
Mutual funds - equity securities		145,538		6,229		(6,697	)		145,070
Equity securities		68,714		3,448		(4,755	)		67,407
Other invested assets		7,376		165		(444	)		7,097

Total managed investments	$	367,816	$	13,432	$	(12,832	)	$	368,416

West Virginia Trust Receivable		7,557		—		—			7,557

Total	$	375,373	$	13,432	$	(12,832	)	$	375,973

The contractual maturities of debt securities as of September 30, 2013 were as follows:


As of September 30, 2013	Less than 1 year		1 year through 5 years		6 years through 10 years		More than 10 years
	(in thousands)
U.S. Government and federal agency	$	—	$	—	$	—	$	—
U.S. State and local government agency		—		—		—		—
Corporate debt securities		—		3,867		5,210		—
Other debt securities		2,150		3,299		—		—

Total fixed maturities	$	2,150	$	7,166	$	5,210	$	—

An aging of unrealized losses on the Company’s investments in fixed maturities and equity securities at September 30, 2013 and December 31, 2012 is presented below:


	Less than 12 months				12 Months or more				Total
As of September 30, 2013	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
Fixed maturities:
U.S. Government and federal agency	$	—	$	—	$	—	$	—	$	—	$	—
U.S. State and local government agency		—		—		—		—		—		—
Corporate debt securities		4,381		135		701		36		5,082		171
Other debt securities		3,753		12		1,246		4		4,999		16

Total fixed maturities		8,134		147		1,947		40		10,081		187

Mutual funds - debt securites		91,057		6,631		6,950		980		98,007		7,611
Mutual funds - equity securites		31,352		1,257		4,196		384		35,548		1,641
Equity securities		22,605		1,092		3,303		200		25,908		1,292
Other invested assets		1,921		119		—		—		1,921		119

Total	$	155,069	$	9,246	$	16,396	$	1,604	$	171,465	$	10,850


	Less than 12 months				12 Months or more				Total
As of December 31, 2012	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(in thousands)
Fixed maturities:
U.S. Government and federal agency	$	—	$	—	$	—	$	—	$	—	$	—
U.S. State and local government agency		—		—		—		—		—		—
Corporate debt securities		2,140		20		297		21		2,437		41
Other debt securities		4,317		3		—		—		4,317		3

Total fixed maturities		6,457		23		297		21		6,754		44

Mutual funds - debt securites		6,388		463		4,198		429		10,586		892
Mutual funds - equity securites		48,255		5,500		19,655		1,197		67,910		6,697
Equity securities		17,932		1,527		15,538		3,228		33,470		4,755
Other invested assets		2,558		444		—		—		2,558		444

Total	$	81,590	$	7,957	$	39,688	$	4,875	$	121,278	$	12,832

A reconciliation of the Company’s merchandise trust activities for the nine months ended September 30, 2013 is presented below:


Fair Value at 12/31/2012	Contributions		Distributions			Interest/ Dividends		Capital Gain Distributions		Realized Gain/ Loss		Taxes			Fees			Unrealized Change in Fair Value		Fair Value at 9/30/2013
(in thousands)
$375,973		52,906		(39,081	)		12,198		—		13,581		(2,787	)		(2,209	)		4,774	$	415,355

The Company made net contributions into the trusts of approximately $13.8 million during the nine months ended September 30, 2013. During the nine months ended September 30, 2013, purchases and sales of securities available for sale included in trust investments were approximately $399.0 million and $411.0 million, respectively. Contributions include $10.3 million of assets that were acquired through acquisitions during the nine months ended September 30, 2013.

Other-Than-Temporary Impairments of Trust Assets

During the three months ended September 30, 2013, the Company determined that there were 3 securities with an aggregate cost basis of approximately $1.2 million and an aggregate fair value of approximately $0.9 million, resulting in an impairment of $0.3 million, wherein such impairment was considered to be other-than-temporary. During the nine months ended September 30, 2013, the Company determined that there were 7 securities with an aggregate cost basis of approximately $2.6 million and an aggregate fair value of approximately $1.6 million, resulting in an impairment of $1.0 million, wherein such impairment was considered to be other-than-temporary. During the nine months ended September 30, 2012, the Company determined that there were six securities with an aggregate cost basis of approximately $1.6 million and an aggregate fair value of approximately $0.8 million, resulting in an impairment of $0.8 million, wherein such impairment was considered to be other-than-temporary. Accordingly, the Company adjusted the cost basis of these assets to their current value and offset this change against deferred revenue. This reduction in deferred revenue will be reflected in earnings in future periods as the underlying merchandise is delivered or the underlying service is performed.

During the three months ended September 30, 2012, the Company determined that there were no other than temporary impairments to the investment portfolio for merchandise trusts.

This ‘10-Q’ Filing	Date	Other Filings

Filed on:	11/7/13	8-K
For Period end:	9/30/13
	12/31/12	10-K
	9/30/12	10-Q
		List all Filings

Stonemor Partners LP – ‘10-Q’ for 9/30/13 – ‘R11’

On: Thursday, 11/7/13, at 1:56pm ET · For: 9/30/13 · Accession #: 1193125-13-432439 · File #: 1-32270

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Quarterly Report — Form 10-Q — Sect. 13 / 15(d) – SEA’34
Filing Table of Contents

‘R11’ — Merchandise Trusts

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