Alderwoods Company Analysis

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Company Report – Alderwoods Group, Inc.

Introduction

The funeral industry is comprised of thousands of independent operators and a few large corporations that each own and manage hundreds of funeral homes, cemeteries and crematoriums. Alderwoods Group, Inc. is a company that came into the funeral service industry in 2002 after the restructuring of the now bankrupt Loewen Group, Inc. (Financial Post). The price earnings ratio as of October, 2005 is seventeen times its earnings per share (Yahoo! Finance). In the next ten years both revenues and market cap is expected to increase at Alderwoods due to the aging baby boom generation and the fact that Alderwoods has aggressively been disposing of its debt by selling off many of its assets (which include cemeteries and funeral homes).

Funeral homes, cemeteries and crematories are businesses that service the post-life activities for families. The industry covers everything from casket manufacturers and lab equipment makers (suppliers), funeral homes (providers) to the ultimate final resting place in a cemetery (plots, vaults, headstones, internment vaults, mausoleums) or in the case of cremation, ovens, loaders and ultimately, urns. Within the industry there are four major competitors on a national scale: Service Corporation International (SCI), Alderwoods Group, Inc., Carriage Services, Inc. and, Stewart Enterprises, Inc. They are all public companies that manage funeral homes, cemeteries and crematoriums throughout North America.

As of January 1, 2005, the Alderwoods Group "employs approximately 8,500 people at 648 funeral homes, 79 cemeteries and 63 combinations funeral home and cemeteries throughout North America (Alderwoods 2004 Annual Report)." These totals are significantly down from the 1990's when Loewen's tried to capture market share and aggressively bought up hundreds of independent funeral homes and cemeteries. By overextending itself, and having to settle a $500 million breach of contract lawsuit, the Loewen Group filed for bankruptcy and sold many of its assets before reorganizing as Alderwoods (Financial Post). The Alderwoods Group had to continue to take drastic action to insure its survival and its return on investment. Consequently, management continued to sell off its assets and reduced its debt from $2,342,916,000 at the end of 2002 to $1,307,043,000 (Alderwoods Annual Reports, 2002 & 2004). As of January of 2003, Alderwoods downsized from 802 funeral homes and 185 cemeteries to where they are today (Alderwoods 2002 Annual Report). Adlerwoods stock performance has outpaced the S & P 500 over the previous two years (Yahoo! Finance).

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