Stock Profile: Arbor Memorial Services Symbol: ABO.A, ABO.B(TSE)

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Stats for ABO.B as of 8/24/01

• H/L Ratio: 2.46 • RS: 72.2 • Shares: 89,574,181 • P/E: 5.36 • Price: $11.10

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Arbor Memorial is one of only two Canadian companies in the funeral services business that is publicly traded in Canada. And the shares of the other, Loewen Group have been suspended pending resolution of bankruptcy procedures. Arbor is the largest funeral services company in Canada with 40 cemeteries, 27 crematoria and 95 funeral homes. Loewen is a larger company in terms of assets with 350 cemeteries and 970 funeral homes, but operates mostly in the United States.

The difference between the two marks the difference between why one has prospered and the other is, you'll pardon the pun, dying. Arbor has grown through modest acquisitions and internal growth and stayed in Canada. It has quietly grown revenues and profits. Loewen became extremely aggressive and expanded into the U.S. on borrowed money. Eventually Loewen's blooming debt and some unfortunate lawsuits that resulted forced it into seeking court protection. Loewen's shares plunged from a high of $55.50 to its current frozen price of $0.17.

Arbor was founded in 1947 and operates in every province except Newfoundland and P.E.I. Cemetery properties range from 25 to 180 acres in size. The company is non-sectarian and serves people of all faiths and ethnic origins.

The company has been recommended since February 1999 by Patrick McKeough in The Successful Investor. Pat notes that the stock had traded as high as $35 in 1997 but was dragged down by the Loewen debacle. At the time he recommended it, Arbor traded at $16. Unfortunately, the timing proved to be too soon and Arbor continued to fall as did Loewen hitting a low of $4.75 in November 2000. Since then the stock has risen steadily to its current $11.10. The quarterly report to July 30, 2001 showed solid earnings growth.

An added bonus is the possibility of a takeover down the road. The giant American company, Services Corporation International (SCI) owns 38% of class A voting shares and 65% of class B non-voting shares in the company. In August 2000, SCI sought a court order to wind up Arbor and divided its assets between the two principal shareholders. This application was withdrawn in December 2000. SCI is Arbor's largest competitor and may someday launch a formal takeover bid at a premium.

Although we will be following the class B shares (because they are more widely traded), Pat McKeough recommends the class A shares if you can get them for less than a 10% premium over the B shares.

Quarterly Earnings per Share

Annual Earnings per Share

Earnings in 1999 exclude extraordinary items relating to tax liabilities, a loss on disposition of assets and an accounting charge to reflect a drop in property values.