Funeral revenue increased $80.3 million, or 22 percent, for the year ended October 31, 1999, compared to the corresponding period in 1998. The Company experienced an $11.8 million, or 4 percent, increase in revenue from Existing Operations as a result of an increase in sales of certain prearranged funeral merchandise, coupled with a 0.7 percent increase in the average revenue per domestic funeral service performed by Existing Operations (3.1 percent increase worldwide, excluding the effect of foreign currency translation), primarily due to price increases and improved merchandising. Partially offsetting this increase was a 2.2 percent (1,306 events) decrease in the number of domestic funeral services performed by Existing Operations (2.5 percent (2,358 events) decrease worldwide).

Funeral profit margin from Existing Operations increased from 31.5 percent in 1998 to 32.3 percent in 1999. This improvement resulted primarily from the increase in funeral revenue from Existing Operations discussed above, coupled with increased cost control measures, including contract negotiations with certain vendors and the Company’s centralization and standardization of certain financial and administrative functions through its Shared Services Center.

The increase in revenue and costs from Acquired/Opened Operations resulted primarily from the Company’s acquisition and construction of funeral homes from November 1997 through October 1999 which were not owned for the entirety of both periods being presented.

The Company believes that at-need funeral revenues in some key markets were negatively affected in fiscal year 1999 by (1) intense and growing price competition from low-cost funeral providers and casket stores in some markets, (2) the continuing and accelerating trend toward cremation, and (3) a shift by customers to lower-priced services and merchandise.