Statement of Financial Accounting Standards (“SFAS”) No. 133, “Accounting for Derivative Instruments and Hedging Activities,” establishes accounting and reporting standards for derivative instruments. SFAS No. 137, “Accounting for Derivative Instruments and Hedging Activities—Deferral of the Effective Date of FASB Statement No. 133,” and SFAS No. 138, “Accounting for Certain Derivative Instruments and Certain Hedging Activities,” are amendments to the accounting and reporting standards of SFAS No. 133 and must be adopted concurrently with SFAS No. 133. SFAS No. 133 is required to be implemented in the first quarter of the Company’s fiscal year 2001. The Company has begun its analysis of the impact of SFAS Nos. 133, 137 and 138 on its consolidated financial condition and results of operations, and the pronouncements are not expected to have an impact on the Company’s consolidated statement of earnings. It is estimated that the adoption of the new standards will result in an increase in shareholders’ equity of approximately $4.7 million. This estimate is based on market information and the fair value of the Company’s three-year interest rate swap as of October 31, 2000. The actual effect on the Company’s financial statements will depend on the fair value of the swap at the date of adoption.

The Company and other industry participants continue to discuss directly with the staff of the SEC the application of its recently issued SAB 101 as it relates to prearranged sales activities. SAB 101, which applies to all companies and was not directed at the death care industry, emphasizes among other matters the importance of physical delivery of a product or service to justify the recognition of revenue.

Based on currently available information, the Company believes that the implementation of SAB 101 will require a deferral of previously recorded revenue associated with prearranged sales. The amounts deferred will be recognized in future years as the products and services that have been bought and paid for are ultimately delivered.

Based on the tentative agreement with the SEC staff, the Company estimates that although there will be no negative impact on cash flow, had it adopted SAB 101 in fiscal year 2000, before adjusting for the cumulative effect, the implementation would have reduced earnings by a range of $0.09 to $0.13 per share. The Company also estimates that had SAB 101 been adopted in fiscal year 2000, it would have resulted in a nonrecurring, noncash $250.0 million to $275.0 million after-tax charge for the cumulative effect of the changes. Implementation of SAB 101 would have resulted in an additional backlog that would have produced approximately $1 billion of revenue in the future as these prepaid products and services are delivered. Based on what the Company currently knows, the implementation of SAB 101 should not cause a violation of any financial covenants in its debt agreements. The SEC and the industry have not reached a final resolution of these discussions, but the Company anticipates that they will be finalized shortly. The Company is not required to implement the new accounting guidance until the fourth fiscal quarter of 2001 but may choose to implement the guidance earlier.

Effective November 1, 1999, the Company implemented Statement of Position 98-5, “Reporting on the Costs of Start-Up Activities,” (“SOP 98-5”) which requires costs of start-up activities and organization costs to be expensed as incurred. The implementation of SOP 98-5 did not have a material impact on the Company’s financial condition or results of operations.