Funeral revenue increased $6.0 million, or 1 percent, for the year ended October 31, 2000, compared to the corresponding period in 1999. The Company experienced a $12.6 million, or 3 percent, decrease in revenue from Existing Operations as a result of several factors. First, the Company experienced a 6.2 percent increase in the average revenue per domestic funeral service performed by Existing Operations (6.8 percent increase worldwide, excluding the effect of foreign currency translation). The increase in average revenue per funeral service was due in part to enhanced funeral arranger training, improved merchandising and personalization of services and product offerings based on findings of the Company’s extensive consumer market study.

Offsetting the increase in average revenue per funeral service was a $15.0 million reduction in prearranged funeral merchandise sales, a $6.6 million reduction in revenue from changes in foreign currency exchange rates (principally the Euro) and a 1.8 percent decrease (1,300 events) in the number of domestic funeral services performed by Existing Operations (3.5 percent decrease (4,548 events) worldwide). However, included in the 1,300 events were over 600 low-end direct cremation events that the Company elected not to sell at prices its competitors were charging. Additionally, discount services provided in the ordinary course of business in the industry on behalf of other funeral homes or institutions declined by approximately 400 events as a result of the Company’s decision to decrease its level of discounted services. When these low-end and discounted events are taken out of the calculation, the number of domestic funeral services performed by Existing Operations decreased by approximately 250 events, which translates to less than one event per domestic core funeral home. These low-end and discounted events were price-sensitive and generally not profitable.

Changes in the Company’s preneed sales strategies during fiscal year 2000 had the effect of considerably reducing all preneed sales. The Company modified its preneed sales strategies early in fiscal year 2000 by increasing finance charges, requiring larger down payments and shortening installment payment terms. Effective the first day of the fourth quarter of fiscal year 2000, the Company also substantially reduced the commissions paid on sales of preneed cemetery services and preneed funeral and cemetery merchandise, which the Company believes had the largest impact on its preneed sales. These changes were implemented in an effort to improve cash flow. The Company believes sales of preneed cemetery services and preneed funeral and cemetery merchandise will not be recognized as revenue under SAB 101 until delivery. While SAB 101 has not yet been implemented, the changes to the Company’s preneed sales strategies reflect the likely effects of SAB 101. Although the Company has experienced a reduction in all preneed sales, greater emphasis has been placed on increasing prearranged funeral service sales and preneed cemetery property sales. The Company believes that these are the sales that build and maintain market share. The change will also better align the operations of the Company with anticipated changes in accounting the Company believes will be necessitated by the adoption of SAB 101.

Funeral profit margin from Existing Operations decreased from 28.8 percent in 1999 to 26.6 percent in 2000 due primarily to the reduction in sales of prearranged funeral merchandise as described above.

The increase in revenue and costs from Acquired/Opened Operations resulted primarily from the Company’s acquisition and construction of funeral homes from November 1998 through October 2000 which were not owned for the entirety of both periods being presented.

Historically, one of the Company’s goals has been to achieve 5 to 7 percent increases annually in the average revenue per funeral service performed by Existing Operations through a combination of price increases and improvements in merchandising. For the year ended October 31, 1999, the average revenue per funeral service performed by existing funeral homes increased 0.7 percent domestically and 3.1 percent worldwide, excluding the effect of foreign currency translation, which was below this objective. Because of intense and growing competition from low-cost funeral service and merchandise providers in certain key markets in fiscal year 1999, the Company lowered its goals for increases in the average revenue per funeral service performed to 2 to 3 percent annually. For the year ended October 31, 2000, the average revenue per funeral service performed by existing funeral homes increased 6.2 percent domestically and 6.8 percent worldwide, excluding the effect of foreign currency translation. Although these results exceeded the Company’s goals, the Company is maintaining its goal of increases in average revenue per funeral service performed of 2 to 3 percent going forward, as it is too soon to determine if these results are indicative of a trend. See “Forward-Looking Statements” below.