Management's Discussion and Analysis of Financial Condition and Results of Operations

Year Ended October 31, 1998 Compared to Year Ended October 31, 1997
Cemetery Segment


Cemetery revenue increased $28.4 million, or 12 percent, in fiscal year 1998, as compared to fiscal year 1997. The Company experienced a $15.2 million, or 6 percent, increase in revenue from Existing Operations. The increase in revenue from Existing Operations resulted principally from an increase in cemetery sales, including burial site openings and closings, coupled with an increase in the revenue realized from the Company's cemetery trust funds and escrow accounts. The revenue from the cemetery trust funds and escrow accounts increased $1.0 million, or 4 percent, to $25.7 million due to a 13 percent growth in the average balance in the funds, resulting primarily from current year customer payments deposited into the funds, along with funds added through acquisitions, offset by a decrease in the yield on the funds, which yield remained in line with the Company's goal of 8.5 percent to 9.0 percent.

Cemetery profit margin from Existing Operations increased from 28.1 percent in 1997 to 29.3 percent in 1998. This improvement was attributable principally to the increase in cemetery sales discussed above, the implementation of certain cost control measures, including the centralization and standardization of certain financial and administrative functions at the Shared Services Center, and the increase in burial site openings and closings.

The increase in revenues and costs associated with Acquired Operations resulted from the acquisition or construction of cemeteries during fiscal year 1998 which is not reflected in the 1997 period presented above.