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The following discussion compares the Company’s financial results for fiscal year 2000 and fiscal year 1999, both as reported. These results do not reflect the implementation of SAB No. 101. The accounting methods used in both periods were the same; therefore, the results for these two periods are comparable.
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). This 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 removed from 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. These changes are described above in the discussion of results of operations for the cemetery segment for fiscal year 2001.
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.
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