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Service Corporation International Reports Net Income up 15% and EPS up 13% for Second Quarter

HOUSTON, July 23 /PRNewswire/ -- Service Corporation International (NYSE: SRV) ("SCI"), the world's largest funeral and cemetery company, today reported record second quarter revenues and earnings. For the three months ended June 30, 1998, the company reported revenues of $671.9 million, net income of $90.9 million and diluted earnings per share of $.35 ($.36 basic). This represents a 11.8 percent increase in revenues, a 15.4 percent increase in net income and a 12.9 percent increase in diluted earnings per share (9.1 percent basic) when compared to the second quarter of 1997.

"Strong North American cemetery results contributed impressively to our quarterly earnings growth, more than offsetting the effect on the funeral segment of lower than expected North American mortality rates. Funeral volumes improved in June after experiencing unusually weak volumes in April and May," said R.L. Waltrip, SCI's Chairman and Chief Executive Officer. Waltrip added, "We continue to be pleased with our progress overseas. Our international expansion continues at a tremendous pace and new opportunities are appearing almost daily."

Commenting on the results, L. William Heiligbrodt, SCI's President and Chief Operating Officer said, "Fluctuations in mortality rates present operational challenges over certain time periods; however, the fundamentals of the funeral service industry remain strong. Our properties include many of the premier funeral businesses in major metropolitan markets around the world, providing excellent opportunities for growth. Our newly formed financial services group and its acquisition of American Memorial Life Insurance Company will increase our prearranged funeral marketing efforts, providing for future funeral volume to maintain our consistent performance."

For the six months ended June 30, 1998, the company reported revenues of $1.35 billion, net income of $199.7 million and diluted earnings per share of $.77 ($.78 basic), representing an increase in revenues of 9.3 percent, an increase in net income of 18.1 percent and a 16.7 percent increase in diluted earnings per share (11.4 percent increase in basic) excluding non-recurring items. The non-recurring items recognized in the first quarter of 1997 were the gain on sale of the Company's investment in Equity Corporation International and the loss from the early extinguishment of debt which, when combined, resulted in a $1.7 million net gain, or $.01 diluted and basic earnings per share.

Acquisition Activity

As of June 30, 1998, SCI had acquired, or received signed letters of intent to acquire, 271 funeral service locations, 39 cemeteries and 12 crematoria for an aggregate purchase price of $562 million. These businesses are expected to produce approximately $230 million in annualized revenues, including $89 million from North American operations and $141 million from operations outside North America.

1998 Second Quarter Highlights:

Revenues from existing business clusters of funeral homes and cemeteries in North America, Europe and the Pacific Rim owned for both periods increased 9.2 percent to $643.9 million, contributing $183.8 million to existing cluster operating profit, a 13.6 percent increase over last year's second quarter.

Compared to the second quarter of 1997, funeral segment revenues increased 7.4 percent to $450.5 million. During the second quarter of 1998, SCI operations performed approximately 135,000 funeral services worldwide, 63,000 in North America, 65,000 in Europe and 7,000 on the Pacific Rim. Funeral segment profits increased slightly to $94.6 million. Funeral segment margins declined to 21.0%, compared to 22.5% in 1997.

During the second quarter of 1998, sales of prearranged funeral contracts were approximately $138.9 million, which expanded the backlog of prearranged funeral contracts to be serviced in future periods to approximately $3.3 billion. Revenues and associated investment earnings from such contracts are deferred, and will be recognized during the periods in which the funeral services are actually performed.

Compared to second quarter of 1997, cemetery segment revenues increased 21.7 percent to $216.4 million. Cemetery segment profits rose $23.9 million to $90.7 million, an increase of 35.7 percent, reflecting improvements at existing North American cemeteries, the strong results of recently acquired cemeteries and increased investment returns associated with cemetery trust funds. Cemetery segment margins expanded to 41.9 percent, compared to 37.6 percent for second quarter of 1997.

As of June 30, 1998, SCI affiliates operated 3,292 funeral service locations, 422 cemeteries and 174 crematoria. SCI provides funeral and cemetery services in 18 countries on five continents.

Other Service Corporation International information and press releases are available through Company News On-Call by fax, (800) 758-5804, extension 104532, or at http://www.prnewswire.com or SCI's homepage: http://www.sci-corp.com.

                        SERVICE CORPORATION INTERNATIONAL
                         CONSOLIDATED STATEMENT OF INCOME

                                   Three Months Ended         Six Months Ended
    (Thousands, except per               June 30,                 June 30,
    share amounts)                   1998       1997          1998       1997

    Revenues:
      Funeral                    $450,493   $419,284      $922,621   $876,355
      Cemetery                    216,366    177,739       422,307    355,529
      Financial services            5,045      4,118         9,660      7,706
                                  671,904    601,141     1,354,588  1,239,590

    Cost and expenses:
      Funeral                     355,847    324,787       695,283    662,155
      Cemetery                    125,639    110,889       250,327    221,886
      Financial services            2,728      2,282         5,160      4,214
                                  484,214    437,958       950,770    888,255
                                  187,690    163,183       403,818    351,335

    General and administrative
     expense                      (17,251)   (15,812)      (34,259)   (32,440)

    Income from operations        170,439    147,371       369,559    318,895

    Interest expense              (40,464)   (33,093)      (78,174)   (67,631)
    Dividends on preferred
     securities of SCI
     Finance LLC                      ---     (1,753)          ---     (4,382)
    Other income                   10,528      8,765        17,179     11,855
    Gain on sale of investment        ---        ---           ---     68,077
                                  (29,936)   (26,081)      (60,995)     7,919
    Income before income taxes
     and extraordinary loss       140,503    121,290       308,564    326,814
    Provision for income taxes     49,555     42,489       108,830    116,866
    Net income before
     extraordinary loss            90,948     78,801       199,734    209,948
    Extraordinary loss on early
     extinguishment of debt
     (net of $23,383
     income taxes)                    ---        ---           ---    (40,802)
    Net income.................   $90,948    $78,801      $199,734   $169,146

    Earnings per share:
    Basic:
      Income before
       extraordinary loss           $0.36      $0.33         $0.78      $0.88
      Extraordinary loss on early
       extinguishment of debt         ---        ---           ---      (0.17)
      Net income                    $0.36      $0.33         $0.78      $0.71

    Diluted:
      Income before
       extraordinary loss           $0.35      $0.31         $0.77      $0.83
      Extraordinary loss on early
       extinguishment of debt         ---        ---           ---      (0.16)
      Net income                     $0.35      $0.31         $0.77      $0.67

    Basic weighted average
     number of shares              255,004    240,872       254,820    239,068
    Diluted weighted average
     number of shares              261,740    257,695       261,754    256,616

                  Geographic segment information was as follows:
                              (Dollars in thousands)

                                United                 Other        Other
                                States     France     European     Foreign
    Revenues:
    Three months ended June 30:
      1998                    $422,863   $140,679      $62,762     $45,600
      1997                     390,477    119,433       50,039      41,192
      Change from prior year  $ 32,386   $ 21,246      $12,723     $ 4,408
      Percentage change from
       prior year                  8.3%      17.8%        25.4%       10.7%

    Six months ended June 30:
      1998                    $875,509   $263,607     $126,476     $88,996
      1997                     793,155    253,047      111,352      82,036
      Change from prior year  $ 82,354   $ 10,560     $ 15,124     $ 6,960
      Percentage change from
       prior year                 10.4%       4.2%        13.6%        8.5%


    Income from operations:
    Three months ended June 30:
      1998                    $132,265   $ 18,426     $  9,443     $10,305
      1997                     115,627     12,907        7,957      10,880
      Change from prior year  $ 16,638   $  5,519     $  1,486     $  (575)
      Percentage change from
       prior year                 14.4%      42.8%        18.7%       (5.3)%

    Six months ended June 30:
      1998                    $294,379   $ 30,882     $ 23,205     $21,093
      1997                     242,082     28,400       24,655      23,758
      Change from prior year  $ 52,297   $  2,482     $ (1,450)    $(2,665)
      Percentage change from
       prior year                 21.6%       8.7%        (5.9)%     (11.2)%

    Operating income margin:
    Three months ended June 30:
      1998                        31.3%      13.1%        15.0%       22.6%
      1997                        29.6%      10.8%        15.9%       26.4%

    Six months ended June 30:
      1998                        33.6%      11.7%        18.3%       23.7%
      1997                        30.5%      11.2%        22.1%       29.0%


    Funeral services performed:
    Three months ended June 30:
      1998                      57,030     37,321       28,206      12,849
      1997                      56,271     34,899       22,987      12,238
      Percentage change from
      prior year                   1.3%       6.9%        22.7%        5.0%

    Six months ended June 30:
      1998                     123,099     76,097       57,536      26,149
      1997                     118,235     76,486       52,759      24,478
      Percentage change from
       prior year                  4.1%      (0.5)%        9.1%        6.8%

    Number of locations
     at June 30:
      1998                       1,638      1,163          780         307
      1997                       1,514      1,087          658         274

SOURCE Service Corporation International
Web site: http: //www.sci-corp.com
Company News On-Call: http: //www.prnewswire.com or fax, 800-758-5804, ext. 104532
CONTACT: George R. Champagne, Senior Vice President, Chief Financial Officer, 713-525-5238, or Rita Vanelli, Investor Relations, 713-525-9072, both of Service Corporation International