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Cemetery revenue decreased $26.3 million, or 9 percent, for the year ended October 31, 2001, compared to the corresponding period in 2000. The Company experienced a decrease in cemetery merchandise deliveries and reduced preneed cemetery property sales. The Company also experienced an average yield of 7.1 percent in its perpetual care trust funds, which is below the Company’s goal of 8.0 percent to 9.0 percent, compared to 8.0 percent in fiscal year 2000. Partially offsetting this decrease was a $4.9 million, or 2 percent, increase due to the implementation of SAB No. 101.
In fiscal year 2000 the Company changed the terms and conditions of its preneed sales contracts and commissions and moderated its preneed sales activities in order to enhance its cash flow. This resulted in an anticipated reduction in preneed sales, including preneed cemetery property sales mentioned above. The Company modified its preneed payment plans 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 preneed sales. Although the Company reduced or eliminated commissions available to preneed sales counselors on certain sales, the Company now provides a minimum compensation guarantee. The change in commission structure provides an incentive to preneed sales counselors to focus on selling preneed cemetery property and preneed funeral services. The Company believes that these are the sales that build and maintain market share. In addition, the change better aligned operations with changes in accounting necessitated by the adoption of SAB No. 101 because, after the implementation of SAB No. 101, preneed cemetery property sales are the only preneed sales that the Company recognizes on a current basis (after collection of 10 percent of the sales price). The Company also believes that these changes have improved the quality of preneed sales and receivables. These changes in preneed sales strategies contributed to a decline in the full-time domestic preneed sales force from approximately 2,200 counselors during the first quarter of fiscal year 2000 to 1,300 counselors by the end of fiscal year 2001. The Company believes that it has retained its best sales counselors. The Company has also reduced its selling costs by closing selected telemarketing and sales offices. The Company has not experienced, and does not expect, any significant further decline in the size of the preneed sales force.
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