Death and Taxes: Can Investors Profit From These Two Certainties?

• On 3:18 pm EDT, Tuesday September 15, 2009

67 WALL STREET, New York - September 15, 2009 - The Wall Street Transcript has just published its Funeral Services and Tax Preparation Report offering a timely review of the sector to serious investors and industry executives. This 57 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Estate Tax Planning -- Death and Taxes -- Tax Accounting Services -- IRS Audit Targets -- Cremation Market - Funeral Service Providers - Increasing Competition - Imported Chinese Caskets - Traditional Funeral Service - Membership Retention Rate - Funeral Trends - Potential of the Publicly Traded Companies - Public Funerals - Pet Funerals

Companies include: Intuit (INTU); Jackson Hewitt (JTX); H and R Block, Service (HRB); Gilman Ciocia (GTAX); Corporation International (SCI); Carriage Services (CSV); Keystone North America (KNA:TSX); Stewart Enterprises (STEI); Hillenbrand (HI); StoneMor (STON); Matthews International Corp. (MATW); Aurora Casket Company.

In the following brief excerpt from just one of the 10 interviews in the 57 page report, an industry expert discusses the outlook for the sector and for investors.

Robert M. "Bob" Fells, Esq. has served as General Counsel of the International Cemetery, Cremation and Funeral Association since 1983 and worked on behalf of the cemetery and funeral services industry since 1975. In 2000, he was appointed as the association's External COO. In addition to these duties, Mr. Fells serves as President and General Counsel of the ICCFA Service Bureau, Inc., a for-profit subsidiary of the association that administers the Credit Exchange Plan. Mr. Fells serves as Executive Director of the recently formed ICCFA Educational Foundation, a tax-exempt charitable organization. He is a graduate of Iona College and holds a Juris Doctor degree from George Mason University School of Law. He is a licensed attorney in Virginia and the U.S. Supreme Court Bar.

TWST: How has the cremation rate grown and changed in the past few years in the US?

Mr. Fells: There is no question that the cremation rate is going up. Back in 1987, the number of cremations as a percentage of deaths where remains were cremated was 15%; by 1997 it was 23%; by 2000 it was 26%, almost 27%; in 2006 it was 33.5%; in 2007 it was a little over 35%. It seems to be going up about a percentage point a year. Now that's total across the country. When you break it down state by state, Hawaii has a cremation rate of about 66%, and some of that is because of the Hawaiian culture as well as just the preferences of people. North Dakota has about a 10% or 11% rate. A lot of states are up in the 50% range - Colorado is 55%, California is 52% and Florida is 48%. There are two areas of the country that are particularly interesting. One is in the Deep South, or the so-called Bible Belt - their cremation rate is less than average. For example, Alabama's rate is 9.5% and Mississippi's rate is 9.6%. However, when you go up to states in the Northwest, which is popularly called "unchurched," where many people don't have strong religious beliefs, the cremation rate there is much higher - Washington state's rate is 64% and Oregon's is 63%. They have noticed in polling data that in the more deeply religious areas, the cremation rates are lower; in the more non-churched or unchurched areas, the cremation rate is higher.

TWST: How have cremation trends affected funeral homes' and cemeteries' bottom lines?

Mr. Fells: Historically, the funeral profession got started on the wrong foot with cremation. Years ago, when a family would come in and say they wanted a cremation, they tended to be written off by the funeral home. It took a while, and actually I think it was the cemetery people who started asking questions like "Okay, cremation is fine, but what are you going to do with the cremated remains?" People would ask, "What do you mean by Odo with them'?" Cremation is a process and not a final disposition. You have to decide if you are going to bury them, scatter them, put them in a niche or just take them home. This opened up a whole new group of options for people, and this is where we started realizing just because people opt for cremation, it doesn't mean they don't want funeral services, and it doesn't mean they don't want to inter the cremated remains or have a memorial. People within death care were making these assumptions, and we were wrong, we shouldn't have done that. Right now, when done properly, cremation is an educational process. When people say, "We've decided on cremation," those in the business typically say, "That's fine. Now are you aware of all the options?" For example, many people do not know that cremated remains can be divided up. Many people don't know that cremated remains can be made into jewelry, jewelry accessories or other types of keepsakes. This will appeal to some people; other people will say no, they're not interested, and that's fine, too. Some people say they want a cremation to save money, but then they'll purchase a one-of-a-kind urn they'll spend a fortune on. You might ask whether this isn't a contradiction. Like with anything else, people are willing to spend money on things that have value to them. I think there is an assumption that everybody wants to spend as little on the funeral as possible. I think this is a false assumption, and I hear this sometimes when I get calls from those in the mainstream news media. So, what do people want? Based on experiences our members have out in the field, it's estimated that about 25% of funeral consumers are what is called price-driven. In other words, all they care about is how much the funeral is going to cost them. The other approximately 75% are what we call value-driven. There are certain aspects to the funeral, maybe only one aspect, maybe more than one, that has real value, real significance, and these people are willing to pay for what they want. I didn't say they want to be overcharged or taken advantage of, but it's almost like buying a car. If you say to somebody, "I can put you in a new car for only $12,000," many people, because they know a lot more about cars than they know about funerals, will say, "You probably could put me in a new car for $12,000, but I probably wouldn't want to drive it." People understand that if there are certain things in a car that they want, they're willing to pay for them; nobody wants to be overcharged, but you're willing to pay for what you want to get something that has value to you. People approach funerals the same way. If a funeral has no value to a person, they are part of that price-driven group. As I said, the person who opts for cremation may want a fancy urn, or they may not want a fancy urn, but they want a special service. Or they want a special monument or perhaps a family mausoleum with white columns and the family's name engraved across the top of it for everyone to see. As an industry, we are realizing that our job is not to sell people things they don't want to buy, but to let people know what all their options are. That is what the more progressive people in this business do, and I'm pleased to say the people who have joined our association tend to be the more progressive ones in the industry.

The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 57 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .

The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.

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