Bellerive Forever Cemetery, located in St. Louis, Missouri, encompasses approximately 46 acres, with over 15 acres undeveloped for future use. This property includes a new office building with approximately 3,100 square feet and a 1,000 crypt white marble mausoleum/chapel facility. Hollywood Forever Cemetery, located in Los Angeles, California, is approximately 65 acres, with three community mausoleums totaling about 40,000 square feet. An additional 4,600 crypts of inventory are currently being planned and
developed. This facility also includes 7,500 square feet of funeral home, chapel and flower shop, 10,000 square feet of office space, and 6,000 square feet of studio production and editing space for the Forever Memorial biography and internet businesses. Mount Washington Forever Cemetery, located in Kansas City, Missouri, is a combination cemetery/funeral home property with 229 acres, of which 100 are developed for current use, including a garden mausoleum. We are also in the beginning stages of development of a 1,000 crypt white marble mausoleum/chapel. This property also includes 8,500 square feet of office and funeral home, with construction of over 2,000 additional feet of funeral home space in progress. Each property also has maintenance facilities on site.
The following should be read in conjunction with our consolidated financial statements and related notes, and other financial information included elsewhere in this report.
Our revenues from the cemetery and memorialization business are principally derived from products and services sold in connection with funerals and burials and revenues derived from biographies sold at our three properties and our website, www.forevernetwork.com. Larger contributors to cemetery ---------------------- revenues include interment rights (grave, entombment, and inurnment spaces), grave markers and monuments, services related to visitation and burial, burial containers (caskets and burial vaults), and biography services. Our new properties' revenues are expected to ramp up to sustainable profitability levels, and to grow at more normal levels within six-12 months of operations.
Our life insurance subsidiaries primarily write policies sold by our affiliate, National Prearranged Services, in connection with National Prearranged Services' sale of prearranged funeral contracts. During 2000, 1999 and 1998, we derived revenues primarily from premiums on insurance policies generated by National Prearranged Services. Looking forward, we expect net premium revenues to decrease due to the reinsurance transactions noted earlier.
Although investment income and realized investment gains have contributed significantly to total revenues in the past, we expect those components to have a reduced impact on our financial results in the future due to decreased holdings of investments.
Our insurance subsidiaries are subject to a high degree of regulation from various state insurance administrators. Such regulation governs (among other things): investment policies; financial reporting; capital adequacy; terms of policies; and the ability of our subsidiaries to pay dividends and management fees to us. In addition, National Prearranged Services' activities in selling prearranged funeral contracts are highly regulated in the states in which National Prearranged Services does business. These regulatory aspects and future changes therein could materially affect our financial condition and results of operations. See "Business--Regulatory Factors."
acquisitions after completion, including preserving customer relationships. There can be no assurance that we will successfully execute our strategy.
Cemetery revenues increased approximately $5.0 million, or 178%, in the year ended December 31, 2000 compared to 1999. The increase was largely attributable to Forever Network's acquisition of an additional 45% interest in Hollywood Forever in December 1999, which brought our total ownership to 90%. Revenues for 2000 at each location also increased compared to the corresponding period in 1999 due to more effective marketing and increased sales of certain cemetery and memorialization products and services. Significant sales of Forever Memorial biography products and services sold through Mount Washington Forever, which is 50% owned by Forever, as compared with 1999 also contributed to the positive variance.
Selling, general and administrative expenses increased $4.0 million, or 137% from $2.9 million for the year ended December 31, 1999, to $7.0 million, in 2000 due to increased variable selling expenses (as a result of increased sales) and additional administrative expenses associated with the acquisition of an additional 45% interest in Hollywood Forever. As a percentage of revenues, selling, general and administrative costs declined to 89.5% for the year ended December 31, 2000, from 105.1% for the year ended December 31, 1999 due to more efficient employment of company resources and certain economies of scale.
Total assets decreased from $20.0 million at December 31, 1999 to $16.1 million at December 31, 2000 due largely to the exclusion of Mount Washington assets which were included at December 31, 1999, but are now accounted for on the equity method.
Our benefit expenses decreased approximately $1.4 million, or 6.8%, in the year ended December 31, 2000 compared to 1999. This decrease was due primarily to the reinsurance agreements entered into during 2000.
Operating loss increased $5.4 million in the year ended December 31, 2000, compared to 1999. The change in operating performance was due primarily to investment losses realized during 2000 and the impairment of assets of approximately $2.6 million.
Operating losses increased approximately $1.0 million, or 38.5% in the year ended December 31, 2000 compared to 1999 due to expenses incurred in connection with the acquisition of Forever Network, Inc. and related investment banking services. Additionally, interest expense for the year increased to $407,000 in 2000 compared with $203,000 for 1999 due to the acquisition of the additional interest in Hollywood Forever.
Cost of sales decreased approximately $80,000, or 11.2%, from $712,000 at December 31, 1998 to $632,000 at December 31, 1999, due primarily to increased percentage of property sales, which was largely a result of the Hollywood acquisition. Cost of sales as a percentage of revenues decreased to 22.6% for the year ended December 31, 1999 compared to 33.1% for the previous year due to a higher percentage of memorialization products and services relative to property sales.
Selling, general and administrative expenses increased $1.1 million, or 60.7%, from $1.8 million for the year ended December 31, 1998, to $2.9 million at December 31, 1999 due to increased variable selling expenses (as a result of increased sales) and additional administrative expenses associated with the acquisition of an additional 45% interest in Hollywood Forever and the acquisition of Mount Washington Forever. As a percentage of revenues, selling, general and administrative costs increased to 105.1% for the year ended December 31, 1999 from 85.0% for the year ended December 31, 1998 due to the acquisition of Hollywood and the acquisition of Mount Washington in late 1999.
Our net investment income and realized gains decreased approximately $1.8 million, or 14.6%, in the year ended December 31, 1999 versus the previous year. Losses of approximately $3.2 million were incurred for the year ended December 31, 1999 reflecting management's recognition of a decline in market value associated with our investment in Autobond Acceptance Corporation. Management believed that the decline was other than temporary and due to reasons other than market fluctuations and recognized losses sufficient to reduce the investment in Autobond to approximately $98,000 as of December 31, 1999.
Our benefit expenses increased approximately $709,000, or 3.6%, in the year ended December 31, 1999 compared to 1998. The increase in 1999 was due primarily to an increase in death claims.
Total assets increased $26.3 million from $163.1 million at December 31, 1998 to $189.4 million at December 31, 1999, due primarily to the acquisition of a block of life insurance and annuity policies from Funeral Securities Life Insurance Company in October 1999.
Operating losses decreased approximately $845,000, or 24.5% in the year ended December 31, 1999, compared to the prior year due to more efficient employment of company resources and certain economies of scale.
We expect to secure capital required for additional new cemetery properties and technology developments related to the digital biographies and the Internet through debt and/or equity financing. With new cemetery properties, the initial capital required for the purchase and working capital is anticipated to be sufficient to
allow the property to achieve positive cash flow within 12-18 months. Our cemetery property in St. Louis, Missouri currently generates significant positive cash flow from operations and represents the type of relative financial performance expected on our current and future properties. Our cemetery properties in Kansas City, Missouri and Los Angeles produced several months of positive cash performance in 2000 as expected and we anticipate both properties being able to sustain positive cash flow and contribute to earnings in 2001. We believe that any operating cash requirements for our cemetery properties will be funded through working capital cash on hand or lines of credit.
On October 12, 2000 we entered into a letter of intent to purchase a group of ten cemetery properties in two large mid-western metropolitan areas. The purchase price and working capital, if agreeable terms are secured, are expected to be funded largely through owner financing with the balance to be funded through additional debt arrangements with an outside lender and/or additional equity forming.
Our cash requirements for 2001 and in the future will depend upon mortality experience, acquisitions, timing of expansion plans and capital expenditures. Our insurance subsidiaries generally generate sufficient cash receipts from premium collections and investment income to satisfy their obligations. We believe that the diversity of the investment portfolio of our insurance subsidiaries provides sufficient liquidity to meet their operating cash requirements. We believe that anticipated revenue from operations should be adequate for the working capital requirements of our existing businesses over the next twelve months.
In the event that our plans or assumptions change, or if the resources available to meet unanticipated changes in business conditions prove to be insufficient to fund operations, we could be required to seek additional financing prior to that time, or to curtail certain proposed activities.
Policyholder loans declined approximately $21.0 million from $22.7 million at December 31, 1999 to $1.7 million at December 31, 2000 due to the sale of blocks of business to North America Life Insurance.
Due premiums increased $4.2 million from $1.9 million at December 31, 1999 to $6.1 million at December 31, 2000 due to increases in the amount of in-force life insurance policies.
Assets with a fair value of approximately $6.4 million at December 31, 2000 were on deposit with various state regulatory authorities.
Total cash and investments decreased approximately $59.8 million from $150.3 million at December 31, 1999 to $90.5 million at December 31, 2000, primarily due to investments sold in connection with the reinsurance transactions previously discussed.
Future policy benefits increased approximately $14.0 million from $125.3 million at December 31, 1999 to $139.3 million at December 31, 2000. This increase was due to the growth of our in-force business.
Policyholder deposits decreased approximately $5.0 million from $57.5 million at December 31, 1999 to $52.5 million at December 31, 2000. The decrease was due to withdrawals and surrenders of existing annuity policies and the absence of the issuance of new annuity policies. Policyholder deposits are comprised primarily of annuities acquired with the block of business from Woodmen Accident & Life, World Insurance Company, and Funeral Security Life Insurance Company.
Deferred tax assets decreased approximately $2.2 million from $7.4 million at December 31, 1999 to $5.2 million at December 31, 2000 due primarily to the effects of our reinsurance agreements, increase in valuation allowance, and to deferred taxes on unrealized losses on fixed maturity and equity securities.
In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. Statement of Financial Accounting Standards No. 133 requires that an entity recognize all derivatives as either assets or liabilities in the statement of financial position and measure those instruments at fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designed as part of a hedge transaction, and if it is, the type of hedge transaction. Statement of Financial Accounting Standards No. 133 is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. We are assessing the impact that the adoption of Statement of Financial Accounting Statement No. 133 had on our consolidated financial statements, but do not expect such implementation to have a material adverse effect on our financial position, results of operations or cash flows.