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Service Corporation International Announces Second Quarter 2007 Financial Results
- Conference call on Wednesday August 8, 2007, at 9:00 a.m. Central Standard Time.
HOUSTON, Aug 07, 2007 /PRNewswire-FirstCall via COMTEX News Network/ -- Service Corporation International (NYSE: SCI), which owns and operates funeral service locations and cemeteries, today reported results for the second quarter 2007. Our consolidated financial statements can be found at the end of this press release. The table below summarizes our key GAAP financial results:

                                        Three Months Ended   Six Months Ended
    (In millions, except for per share       June 30,           June 30,
     amounts)                              2007     2006      2007      2006
    Revenues                             $565.5   $431.4  $1,173.0    $873.4
    Operating income                       82.8     60.4     180.9     122.6
    Net income                             15.1     25.5      52.8      52.4
    Diluted earnings per share              .05      .09       .18       .18
    Net cash provided by operating
     activities                            63.7     71.4     191.6     151.6


     2007 Highlights

      *  In the second quarter of 2007, earnings from continuing operations
         excluding special items were $32.4 million, or $.11 per diluted share
         compared to $28.4 million, or $0.10 per diluted share in the second
         quarter of 2006.  In the first six months of 2007, earnings from
         continuing operations excluding special items were $84.1 million, or
         $.28 per diluted share compared to $58.9 million, or $0.20 per
         diluted share in the first six months of 2006.  Both periods of 2006
         include the receipt and recognition of $7.9 million of cemetery
         endowment care trust fund income as a result of the resolution of
         disputes over ownership rights to the funds. Earnings from continuing
         operations excluding special items is a non-GAAP financial measure
         because this calculation excludes certain non-recurring items.  A
         reconciliation of this non-GAAP financial measure to net income
         computed in accordance with GAAP is set forth below under the heading
         "Non-GAAP Financial Measures".
      *  Alderwoods operations are accretive to earnings and cash flow and
         improvement synergies are being realized as expected.
      *  Consolidated revenues increased  34.3% to approximately $1.2 billion
         in the first six months of 2007 compared to 2006.
      *  Although impacted by divestitures and the $7.9 million of previously
         disputed endowment care income recognized in 2006, consolidated gross
         profit margins for the first six months of 2007 grew to 20.8%
         compared to 19.8% in 2006.
      *  In the first six months of 2007, consolidated North America average
         revenue per funeral service increased 2.8% to $4,793 compared to
         $4,661 in the same period of 2006.
      *  Cash flow from operating activities increased $40.0 million in the
         first six months of 2007 to $191.6 million compared to $151.6 million
         in the first six months of 2006.

Tom Ryan, the Company's President and Chief Executive Officer, commented on the second quarter of 2007:

"We delivered another good quarter, with earnings and cash flow on target despite facing difficult volume comparisons and the negative impact from divestitures," said Tom Ryan, President and Chief Executive Officer.

"Our performance is a credit to the commitment and execution of our entire organization. We continue to make great strides in our key focus areas of integrating Alderwoods, realigning our pricing, and implementing standardized operating metrics. I am confident that we will continue to produce solid results as we move forward through 2007."

Consolidated Results of Operations - North America

The following table represents consolidated results from our operations in North America, including the properties acquired in the Alderwoods transaction.

    (In millions, except funeral
     services performed, average
     revenue per funeral service or
     per contract sold and total         Three Months Ended  Six Months Ended
     preneed funeral contracts)                June 30,          June 30,
                                            2007     2006      2007     2006
    Funeral
    Funeral atneed revenue                $251.0   $180.8    $536.9   $375.2
    Funeral recognized preneed revenue     109.2     86.5     233.3    182.9
    General agency revenue (1)              12.4     10.2      22.6     19.7
    Kenyon revenue (2)                       1.6      0.6       2.8      1.9
       Total funeral revenues             $374.2   $278.1    $795.6   $579.7

    Gross profit                           $70.7    $53.3    $172.9   $119.6
    Gross margin percentage                18.9%    19.2%     21.7%    20.6%

    Funeral services performed:
       Preneed                            23,510   19,167    50,987   40,483
       Atneed                             51,075   37,312   109,685   79,257
       Total                              74,585   56,479   160,672  119,740

    Average revenue per funeral
     service:
       Preneed                            $4,647   $4,512    $4,574   $4,517
       Atneed                             $4,914   $4,846    $4,895   $4,735
       Total                              $4,830   $4,733    $4,793   $4,661

    Preneed funeral production:
       Sales                              $106.1    $79.4    $224.3   $160.7
       Total preneed funeral contracts
        sold                              19,785   16,433    42,489   33,970
       Average revenue per contract       $5,362    4,832    $5,279   $4,731

    Cemetery
    Cemetery atneed revenue                $72.5    $53.9    $146.6   $109.5
    Cemetery recognized preneed revenue     91.0     71.4     176.1    134.8
    Other cemetery revenue (3)              26.2     26.4      51.6     46.2
       Total cemetery revenues            $189.7   $151.7    $374.3   $290.5

    Gross profit                           $32.8    $30.7     $71.6    $52.9
    Gross margin percentage                17.3%    20.2%     19.1%    18.2%

    Preneed and atneed cemetery
     production:
       Preneed and atneed sales           $181.1   $138.5    $348.1   $271.9
       Recognition rate (4)                90.3%    90.5%     92.7%    89.8%

      (1)  General Agency (GA) revenues are commissions we receive from
           third-party insurance companies for life insurance policies or
           annuities sold to preneed customers for the purpose of funding
           preneed funeral arrangements.

      (2)  Kenyon International Emergency Services (Kenyon) is our disaster
           response subsidiary that engages in mass fatality and emergency
           response services.

      (3)  Other cemetery revenue is primarily related to endowment care trust
           fund income and interest and finance charges earned from customer
           receivables on preneed installments contracts.

      (4)  Represents the ratio of current period revenue recognition stated
           as a percentage of current period sales production.


     For the Three Months Ended June 30, 2007
     Funeral Results

Consolidated North America funeral revenue increased $96.1 million, or 34.6%, in the second quarter of 2007 compared to the second quarter of 2006. This increase is primarily a result of the addition of Alderwoods operations which contributed $101.6 million in funeral revenues in the second quarter of 2007. Alderwoods average revenue per funeral service was consistent with our expectations and Alderwoods funeral case volume was approximately 3% below our expectations. In addition, we divested of locations which contributed an incremental $8.2 million of revenue in the second quarter of 2006. Our comparable North America funeral revenues which represent locations that were owned in both periods were up $2.7 million, or 1.0%, compared to the second quarter of 2006 as detailed in the table below.

Consolidated North America funeral gross profit increased $17.3 million in the second quarter of 2007 versus the same period of 2006 primarily due to gross profit contributed from Alderwoods operations. The consolidated gross margin percentage decreased to 18.8% from 19.1% due primarily to Alderwoods operations which historically have had lower gross profit margins, partially offset by synergies achieved in the Alderwoods transaction and cost improvements in our infrastructure. In addition, we divested locations which contributed an incremental $4.8 million of gross profit in the second quarter of 2006 compared to the second quarter of 2007. Gross profit from our comparable North America funeral locations increased $2.1 million, or 4.1% as detailed in the table below primarily due to our strategic pricing initiative and more centralization and standardization in our organization. Comparable North America funeral gross margin percentage increased to 20.2% in the second quarter of 2007 compared to 19.6% in the same period of 2006.

    Other key items impacting funeral results include:
     *  The consolidated average revenue per funeral service increased 2.0%,
        or $97 per service to $4,830.  The average revenue at comparable
        locations increased $228 or 4.8% (as detailed in the table below).
        These increases reflect the continued benefits of our strategic
        pricing initiative, which places less emphasis on traditional funeral
        merchandise and more focus on service offerings.
     *  The number of consolidated funeral services performed increased
        18,106, or 32.1%, in the second quarter of 2007 compared to the second
        quarter of 2006.  This increase includes 23,065 services performed by
        locations acquired in the Alderwoods transaction.  The increase was
        partially offset by a decrease from divested locations of 2,828
        funeral services.  Additionally, SCI comparable funeral services
        decreased 2,131, or 4.0%, which we attribute to certain local business
        decisions to exit unprofitable business relationships, primarily
        related to low-priced direct cremation activities, and a decrease in
        the number of deaths in the markets in which we operate in the second
        quarter of 2007.  The local business decisions mentioned above were
        made based on our customer segmentation strategy, which focuses on
        more profitable opportunities with certain customer segments.

The table below details comparable funeral results of operations for the three months ended June 30, 2007 and 2006. We regard comparable results of operations as analogous to our "same store" results of operations. For purposes of the following presentation, we consider comparable operations to be those owned for the entire period beginning January 1, 2006 and ending June 30, 2007. Therefore, in the following presentation, we are providing results of operations for the same funeral and cemetery locations in each of the periods presented, which means that our Alderwoods operations are excluded. We believe this presentation provides greater clarity for comparison purposes of our results of operations for each of the periods presented.


    (In millions, except funeral
     services performed, average                  Three months ended
     revenue per funeral service)                      June 30,

                                           2007      2006     Change  Change %
    Comparable revenue                    $265.9    $263.2     $2.7     1.0%
    Comparable gross profit                 53.8      51.7      2.1     4.1%
    Comparable gross margin percentage     20.2%     19.6%

    Comparable funeral services
     performed:
       Preneed                            17,402    18,105     (703)   (3.9%)
       Atneed                             33,451    34,879   (1,428)   (4.1%)
       Total                              50,853    52,984   (2,131)   (4.0%)

    Comparable average revenue per
     funeral service                      $4,997    $4,769     $228     4.8%


Our comparable operations gross profit and gross margin percentage in 2007 above also include new planned field and home office overhead that is needed as a result of the addition of over 600 funeral homes and 100 cemeteries acquired in the Alderwoods transaction.

Cemetery Results

Consolidated cemetery revenues increased $38.0 million, or 25.0%, in the second quarter of 2007 compared to the same period of 2006 reflecting a $41.0 million revenue contribution from operations acquired from Alderwoods. This increase was partially offset by a $3.9 million decline in revenue from divested locations. Our comparable cemetery revenues increased $0.9 million in the second quarter of 2007 compared to the same period of 2006 as increased preneed production in the second quarter of 2007 was partially offset by the receipt and recognition of $7.9 million of endowment care income in the second quarter of 2006 as a result of the resolution of disputes over ownership rights to the funds.

Consolidated cemetery gross profit increased $2.1 million in the second quarter of 2007 compared to the second quarter of 2006 reflecting the addition of gross profit from Alderwoods operations of $4.5 million. We also divested locations with negative gross profits of $(0.5) million in 2006. Our comparable cemetery gross margins decreased $1.9 million in the second quarter of 2007 compared to the second quarter of 2006 and our comparable cemetery gross margin percentage decreased to 19.6% compared to 21.1% in the same period of 2006. This was due to the revenue growth in 2007 being offset by the receipt and recognition of $7.9 million of endowment care income described above in the second quarter of 2006. We estimate that this income positively impacted our comparable cemetery gross margin percentage for the second quarter of 2006 by approximately 450 basis points.

    Other Results
    *  General and administrative expenses were $30.3 million in the second
       quarter of 2007 compared to $20.9 million in the second quarter of
       2006.  General and administrative costs increased $9.4 million
       primarily due to $5.6 million of one-time transition and other expenses
       related to our acquisition of Alderwoods.  Additionally, salary expense
       increased $1.9 million compared to prior year as a result of Alderwoods
       corporate expenses that are expected to wind down throughout 2007.
    *  Interest expense increased to $36.2 million in the second quarter of
       2007 compared to $26.6 million in the second quarter of 2006. The
       increase of $9.6 million resulted from increased borrowings to finance
       the Alderwoods acquisition in the fourth quarter of 2006.
    *  Interest income decreased $4.3 million in the second quarter of 2007 to
       $2.5 million as expected due to decreases in our average cash balances.
    *  Other income, net for the second quarter of 2007 includes income of
       $5.6 million from our equity investment in operations in France for
       which no comparable amounts were received in 2006.

     For the Six Months Ended June 30, 2007
     Funeral Results

Consolidated North America funeral revenue increased $215.9 million, or 37.2%, in the first six months of 2007 compared to the first six months of 2006. This increase is primarily a result of the addition of Alderwoods operations which contributed $217.1 million in funeral revenues in the first six months of 2007. Alderwoods average revenue per funeral service was consistent with our expectations and Alderwoods funeral case volume was approximately 3% below our expectations, which we believe is generally consistent with death trends in North America in the first half of 2007. In addition, we divested locations which contributed $5.1 million of incremental revenue in the first half of 2006. Our comparable North America funeral revenues were up $3.9 million, or 0.7%, compared to the first half of 2006 as detailed in the table below.

Consolidated North America funeral gross profit increased $53.3 million in the first half of 2007 versus the same period of 2006 primarily due to gross profit contributed from Alderwoods operations of $50.6 million. The consolidated gross margin percentage increased to 21.7% from 20.6% due primarily to synergies achieved in the Alderwoods transaction and cost improvements in our infrastructure, partially offset by a decrease in funeral gross profit contributed from locations that were divested in the second quarter of 2007. We divested locations which contributed an incremental $2.5 million of gross profit in the first half of 2006 compared to the first half of 2007. Gross profit from our comparable North America funeral locations increased $5.3 million or 4.6% as detailed in the table below primarily due to more centralization and standardization in our organization. Comparable North America funeral gross margin percentage increased to 21.9% in the first half of 2007 compared to 21.1% in the same period of 2006.

    Other key items impacting funeral results include:
    *  The consolidated average revenue per funeral service increased 2.8%, or
       $132 per service to $4,793.  The average revenue at comparable
       locations increased $252 or 5.4% (as detailed in the table below).
       These increases reflect the continued benefits of our strategic pricing
       initiative, which places less emphasis on traditional funeral
       merchandise and more focus on service offerings.
    *  The number of consolidated funeral services performed increased 40,932,
       or 34.2%, in the first half of 2007 compared to the same period of
       2006.  This increase includes 51,659 services performed by locations
       acquired in the Alderwoods transaction.  The increase was partially
       offset by a decrease from divested locations of 5,430 funeral services.
       Additionally, SCI comparable funeral services performed decreased
       5,297, or 4.7%, which we attribute to certain local business decisions
       to exit unprofitable business relationships, primarily related to
       low-priced direct cremation activities, and a decrease in the number of
       deaths in our markets in the first half of 2007.  The local business
       decisions mentioned above were made based on our customer segmentation
       strategy, which focuses on more profitable opportunities with certain
       customer segments.

The table below details comparable funeral results of operations for the six months ended June 30, 2007 and 2006.


    (In millions, except funeral
     services performed, average                  Six months ended
     revenue per funeral service)                      June 30,
                                            2007      2006    Change  Change %
    Comparable revenue                    $552.0    $548.1     $3.9     0.7%
    Comparable gross profit                121.0     115.7      5.3     4.6%
    Comparable gross margin percentage     21.9%     21.1%

    Comparable funeral services
     performed:
       Preneed                            36,803    38,209   (1,406)   (3.7%)
       Atneed                             70,128    74,019   (3,891)   (5.3%)
       Total                             106,931   112,228   (5,297)   (4.7%)

    Comparable average revenue per
     funeral service                      $4,951    $4,699     $252     5.4%


Our comparable operations gross profit and gross margin percentage in 2007 above also include new planned field and home office overhead that is needed as a result of the addition of over 600 funeral homes and 100 cemeteries acquired in the Alderwoods transaction.

Cemetery Results

Consolidated cemetery revenues increased $83.8 million, or 28.8%, in the first half of 2007 compared to the same period of 2006 reflecting a $90.5 million increase from operations acquired from Alderwoods. This increase was offset by a $5.2 million decline in revenue from divested locations. Our comparable cemetery revenues decreased $1.5 million in the first half of 2007 compared to the same period of 2006 as increased preneed production was more than offset by the receipt and recognition of $7.9 million of previously disputed endowment care income in the second quarter of 2006 described earlier.

Consolidated cemetery gross profit increased $18.7 million in the first half of 2007 compared to the first half of 2006 reflecting the addition of gross profit from Alderwoods operations of $18.8 million. Consolidated cemetery gross margin percentage was 19.1% in the first half of 2007 compared to 18.2% in the same period of 2006. We also divested locations with incremental gross profits in 2007 compared to 2006 of $0.6 million. Our comparable cemetery gross margins decreased $0.7 million in the first half of 2007 compared to the first half of 2006 as increased revenue was offset by the receipt and recognition of $7.9 million of previously disputed endowment care income in the second quarter of 2006. We estimate that this income positively impacted our comparable cemetery gross margin percentage for the first half of 2006 by approximately 240 basis points. Comparable North America cemetery margin percentage was 19.3% in the first half of 2007 compared to 19.5% in the first half of 2006.

    Other Results
    *  General and administrative expenses were $65.7 million in the first
       half of 2007 compared to $42.9 million in the first half of 2006.
       General and administrative costs increased $22.8 million primarily due
       to $16.9 million of one-time transition and other expenses related to
       our acquisition of Alderwoods.  Additionally, salary expense increased
       $4.8 million compared to prior year as a result of Alderwoods corporate
       expenses that are expected to wind down throughout 2007.
    *  Interest expense increased to $73.8 million in the first half of 2007
       compared to $53.3 million in the first half of 2006. The increase of
       $20.5 million resulted from increased borrowings to finance the
       Alderwoods acquisition in the fourth quarter of 2006.
    *  Interest income decreased $8.7 million in the first half of 2007 to
       $4.1 million as expected due to decreases in our average cash balances.
    *  Other income net for the first half of 2007 includes income of
       $6.3 million from our equity investment in operations in France for
       which no comparable amounts were received in 2006..

Cash Flow & Capital Expenditures

Cash flows from operating activities in the first six months of 2007 were $191.6 million compared to $151.6 million in the first six months of 2006. Included in the first six months of 2007 are one-time transition costs related to the Alderwoods acquisition and integration of $19.5 million and $11.4 million of premiums paid on the early extinguishment of debt. Excluding the above items, cash flow from operations increased approximately $70.9 million. The receipt of $20.6 million in trust proceeds arising from our recent reconciliations of the preneed funeral and cemetery trust fund backlog of Alderwoods, and $14 million from our internal working capital improvement initiatives were essentially offset by other operating and working capital declines. These declines included $21.0 million in additional interest payments resulting from increased borrowings to finance the Alderwoods acquisition, $12 million in additional cash tax payments, and $7.9 million of previously disputed endowment care funds received in the first half of 2006 for which no comparable amounts were received in 2007. After taking into account the above items, the remaining increase in cash flows from operations in the first half of 2007 was primarily driven by operating cash flows generated as a result of adding the Alderwoods locations to our company.

    A summary of our capital expenditures is set forth below:


    (In millions)                                      Capital Expenditures
                                                         Six Months Ended
                                                         June 30,     June 30,
                                                           2007         2006
    Capital improvements at existing locations             41.6         23.8
    Development of cemetery property                       22.4         14.7
    Construction of new funeral home facilities and
    other growth capital                                    1.4          2.0
    Total capital expenditures                            $65.4        $40.5



     NON-GAAP FINANCIAL MEASURES
     Earnings from Continuing Operations Excluding Special Items

Earnings from continuing operations excluding special items is a non-GAAP financial measure. We believe this non-GAAP financial measure provides a consistent basis for comparison between quarters and enhances the understanding of the performance of our core operations, as it is not influenced by certain income and expense items not affecting continuing operations. We also believe this measure helps facilitate comparisons to our competitors' operating results.

Set forth below is a reconciliation of Earnings from continuing operations excluding special items to our reported net income. We do not intend for this information to be considered in isolation or as a substitute for other measures of performance prepared in accordance with GAAP.


                            Three Months Ended          Six Months Ended
    (In millions, except   June 30,     June 30,     June 30,      June 30,
     diluted EPS)            2007         2006         2007          2006

                        Net  Diluted  Net  Diluted  Net  Diluted  Net  Diluted
                      Income   EPS   Income  EPS  Income   EPS   Income  EPS
    Net income
     reported          $15.1  $.05   $25.5  $.09  $52.8   $.18   $52.4   $.18

    After-tax
     reconciling
     items:
       (Gains) losses
        on dispositions
        and impairment
        charges, net     9.7   .03     3.0   .01   18.3    .06     6.7    .02
       Loss on early
        extinguishment
        of debt          7.0   .03      --    --    8.4    .03      --     --
       Alderwoods
        transition
        costs            2.8   .01      --    --    9.7    .03      --     --
       Discontinued
        operations      (2.2) (.01)   (0.1)   --   (5.1)  (.02)   (0.2)    --
    Earnings from
     continuing
     operations
     excluding special
     items             $32.4  $.11   $28.4  $.10  $84.1   $.28   $58.9   $.20
    Diluted weighted
     average shares
     outstanding (in
     thousands)            296,124       297,501       297,480        297,784


Conference Call and Webcast

We will host a conference call on Wednesday, August 8, 2007, at 9:00 a.m. Central Standard Time. A question and answer session will follow a brief presentation made by management. The conference call dial-in number is (617) 614-3453 with the passcode of 11878005. The conference call will also be broadcast live via the Internet and can be accessed through our website at www.sci-corp.com and can be accessed by clicking on "Webcasts and Presentations" in the Investors section of the website. A replay of the conference call will be available through August 22, 2007 and can be accessed at (617) 801-6888 with the confirmation code of 18151155. Additionally, a replay of the conference call will be available on our website for at least ninety days and can be accessed by clicking on "Webcasts and Presentations" in the Investors section of the website.

Cautionary Statement on Forward-Looking Statements

The statements in this Form 10-Q that are not historical facts are forward-looking statements made in reliance on the "safe harbor" protections provided under the Private Securities Litigation Reform Act of 1995. These statements may be accompanied by words such as "believe," "estimate," "project," "expect," "anticipate," or "predict," that convey the uncertainty of future events or outcomes. These statements are based on assumptions that we believe are reasonable; however, many important factors could cause our actual results in the future to differ materially from the forward-looking statements made herein and in any other documents or oral presentations made by us or on our behalf. Important factors, which could cause actual results to differ materially from those in forward-looking statements include, among others, the following:

     *  Changes in general economic conditions, both domestically and
        internationally, impacting financial markets (e.g., marketable
        security values, as well as currency and interest rate fluctuations)
        that could negatively affect us, particularly, but not limited to,
        levels of trust fund income, interest expense, pension expense, and
        negative currency translation effects.
     *  Our ability to successfully integrate Alderwoods or to fully realize
        the anticipated benefits of the acquisition.
     *  The outcomes of pending lawsuits, proceedings, and claims against us
        and the possibility that insurance coverage is deemed not to apply to
        these matters or that an insurance carrier is unable to pay any
        covered amounts to us.
     *  Allegations regarding compliance with laws, regulations, industry
        standards, and customs regarding burial procedures and practices.
     *  The amounts payable by us with respect to our outstanding legal
        matters exceed our established reserves.
     *  The outcome of a pending Internal Revenue Service audit. We maintain
        accruals for tax liabilities that relate to uncertain tax matters. If
        these tax matters are unfavorably resolved, we will make any required
        payments to tax authorities. If these tax matters are favorably
        resolved, the accruals maintained by us will no longer be required,
        and these amounts will be reversed through the tax provision at the
        time of resolution.
     *  Our ability to manage changes in consumer demand and/or pricing for
        our products and services due to several factors, such as changes in
        numbers of deaths, cremation rates, competitive pressures, and local
        economic conditions.
     *  Changes in domestic and international political and/or regulatory
        environments in which we operate, including potential changes in tax,
        accounting, and trusting policies.
     *  Changes in credit relationships impacting the availability of credit
        and the general availability of credit in the marketplace.
     *  Our ability to successfully access surety and insurance markets at a
        reasonable cost.
     *  Our ability to successfully leverage our substantial purchasing power
        with certain of our vendors.
     *  The effectiveness of our internal control over financial reporting,
        and our ability to certify the effectiveness of the internal controls
        and to obtain an unqualified attestation report of our auditors
        regarding the effectiveness of our internal control over financial
        reporting.
     *  Our credit agreement and privately placed debt securities that may
        prevent us from engaging in certain transactions.
     *  Our ability to buy our common stock under our share repurchase
        programs which could be impacted by, among others, restrictive
        covenants in our bank agreements, unfavorable market conditions, the
        market price of our common stock, the nature of other investment
        opportunities presented to us from time to time, and the availability
        of funds necessary to continue purchasing common stock.

For further information on these and other risks and uncertainties, see our Securities and Exchange Commission filings, including our 2006 Annual Report on Form 10-K. Copies of this document as well as other SEC filings can be obtained from our website at www.sci-corp.com. We assume no obligation to publicly update or revise any forward-looking statements made herein or any other forward-looking statements made by us, whether as a result of new information, future events or otherwise.

About Service Corporation International

Service Corporation International (NYSE: SCI), headquartered in Houston, Texas, is North America's leading provider of deathcare products and services. At June 30, 2007, we owned and operated more than 1,500 funeral homes and 400 cemeteries (of which over 230 are combination locations) in 45 states, eight Canadian provinces, the District of Columbia and Puerto Rico. Through our businesses, we market the Dignity Memorial(R) brand which offers assurance of quality, value, caring service, and exceptional customer satisfaction. For more information about Service Corporation International, please visit our website at www.sci-corp.com. For more information about Dignity Memorial(R), please visit www.dignitymemorial.com.

    For additional information contact:

    Investors:    Debbie Young - Director / Investor Relations  (713) 525-9088

    Media: Robyn Sadowsky - Director / Corporate Communications (713) 525-7795


                      SERVICE CORPORATION INTERNATIONAL
                     CONSOLIDATED STATEMENT OF OPERATIONS
                   (In thousands, except per share amounts)

                                Three months ended      Six months ended
                                     June 30,               June 30,
                                 2007       2006       2007        2006
    Revenues                   $565,492   $431,400  $1,173,047   $873,401
    Costs and expenses         (462,131)  (347,212)   (928,532)  (700,519)
    Gross profit                103,361     84,188     244,515    172,882
    General and administrative
     expenses                   (30,281)   (20,922)    (65,680)   (42,929)
    Gains (losses) on
     dispositions and
     impairment charges, net      9,743     (2,881)      2,063     (7,391)
    Operating income             82,823     60,385     180,898    122,562
    Interest expense            (36,165)   (26,609)    (73,762)   (53,337)
    Loss on early
     extinguishment of debt     (12,122)        --     (14,480)        --
    Interest income               2,478      6,782       4,070     12,763
    Other income, net             4,836        203       3,338      1,195
    Income from continuing
     operations before
     income taxes                41,850     40,761     100,064     83,183
    Provision for income
     taxes                      (28,941)   (15,404)    (52,438)   (31,049)
    Income from continuing
     operations                  12,909     25,357      47,626     52,134
    Income from discontinued
     operations (net of income
     tax provision (benefit)
     of $1,223, ($13), $1,960
     and $83, respectively)       2,209         93       5,134        242
    Net income                  $15,118    $25,450     $52,760    $52,376
    Basic earnings per share:
    Income from continuing
     operations                    $.04       $.09        $.16       $.18
    Income from discontinued
     operations, net of tax         .01         --         .02         --
    Net income                     $.05       $.09        $.18       $.18
    Diluted earnings per share:
    Income from continuing
     operations                    $.04       $.09        $.16       $.18
    Income from discontinued
     operations, net of tax         .01         --         .02         --
    Net income                     $.05       $.09        $.18       $.18
    Basic weighted average
     number of shares           290,577    293,409     291,941    293,580
    Diluted weighted average
     number of shares           296,124    297,501     297,480    297,784
    Dividends declared per share  $.030      $.025       $0.60      $.050


                      SERVICE CORPORATION INTERNATIONAL
                          CONSOLIDATED BALANCE SHEET
                     (In thousands, except share amounts)

                                                    June 30,    December 31,
                                                      2007           2006

    Assets
    Current assets:
     Cash and cash equivalents                      $222,785        $39,880
     Receivables, net                                102,107        107,194
     Inventories                                      39,017         39,535
     Current assets of discontinued operations         2,480          2,236
     Current assets held for sale                      3,033          6,330
     Other                                            37,363         43,162
      Total current assets                           406,785        238,337
    Preneed funeral receivables and trust
     investments                                   1,546,224      1,516,676
    Preneed cemetery receivables and trust
     investments                                   1,550,552      1,522,584
    Cemetery property, at cost                     1,465,152      1,495,248
    Property and equipment, net                    1,605,899      1,641,353
    Goodwill                                       1,260,587      1,264,272
    Non-current assets of discontinued operations    380,579        371,132
    Non-current assets held for sale                 169,407        349,311
    Deferred charges and other assets                396,861        436,545
    Cemetery perpetual care trust investments        958,947        893,931
                                                  $9,740,993     $9,729,389
    Liabilities & Stockholders' Equity
    Current liabilities:
     Accounts payable and accrued liabilities       $305,374       $341,173
     Current maturities of long-term debt            103,837         46,176
     Current liabilities of discontinued operations    3,071          2,351
     Current liabilities held for sale                   157            419
     Income taxes                                     22,498         17,828
      Total current liabilities                      434,937        407,947
    Long-term debt                                 1,837,318      1,912,696
    Deferred preneed funeral revenues                541,472        537,792
    Deferred preneed cemetery revenues               735,098        754,193
    Deferred income taxes                             99,866        177,341
    Non-current liabilities of discontinued
     operations                                      324,383        311,498
    Non-current liabilities held for sale            116,161        239,800

    Other liabilities                                479,506        357,418
    Non-controlling interest in funeral and
     cemetery trusts                               2,609,718      2,548,743
    Non-controlling interest in cemetery
     perpetual care trusts                           955,358        887,186

    Stockholders' equity:
     Common stock, $1 per share par value,
      500,000,000 shares authorized,
      288,103,566 and 293,222,114, issued and
      outstanding (net of 7,975,808 and
      10,000 treasury shares, at par,
      respectively)                                  288,104        293,222
     Capital in excess of par value                2,046,825      2,135,649
     Accumulated deficit                            (841,647)      (906,394)
     Accumulated other comprehensive income          113,894         72,298
      Total stockholders' equity                   1,607,176      1,594,775
                                                  $9,740,993     $9,729,389


                      SERVICE CORPORATION INTERNATIONAL
                CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                (In thousands)

                                                       Six months ended
                                                           June 30,
                                                      2007           2006
    Cash flows from operating activities:
     Net income                                      $52,760        $52,376
     Adjustments to reconcile net income to net
      cash provided by operating activities:
      Net income from discontinued operations,
       net of tax                                     (5,134)          (242)
      Loss on early extinguishment of debt            14,480             --
      Premiums paid on early extinguishment
       of debt                                       (11,368)            --
      Depreciation and amortization                   66,876         45,670
      Amortization of cemetery property               17,800         12,743
      Amortization of loan cost                        3,617          5,070
      Provision for doubtful accounts                  6,688          4,718
      Provision for deferred income taxes             38,024         24,966
      (Gains) losses on dispositions and
       impairment charges, net                        (2,063)         7,391
      Share-based compensation                         5,980          3,856
      Excess tax benefits from share based awards     (4,123)            --
      Equity in earnings of unconsolidated
       subsidiaries                                   (6,270)          (137)
     Change in assets and liabilities, net of
      effects from acquisitions and dispositions:
      (Increase) decrease in receivables              (5,222)        18,001
      Increase in other assets                       (10,112)       (16,431)
      Decrease in payables and other liabilities     (40,626)       (39,150)
      Net effect of preneed funeral production
       and maturities                                 14,651          4,421
      Net effect of cemetery production and
       deliveries                                     38,647         27,866
      Other                                             (329)          (264)
    Net cash provided by operating activities
     from continuing operations                      174,276        150,854
    Net cash provided by operating activities
     from discontinued operations                     17,279            749
    Net cash provided by operating activities        191,555        151,603
    Cash flows from investing activities:
      Capital expenditures                           (65,392)       (40,533)
      Proceeds from divestitures and sales of
       property and equipment                        214,494         26,744
      Acquisitions                                      (212)       (14,677)
      Net (deposits) withdrawals of restricted
       funds and other                                  (238)        10,613
    Net cash provided by (used in) investing
     activities from continuing operations           148,652        (17,853)
    Net cash (used in) provided by investing
     activities from discontinued operations          (8,546)        11,155
    Net cash provided by (used in) investing
     activities                                      140,106         (6,698)
    Cash flows from financing activities:
      Proceeds from long-term debt issued            398,996             --
      Debt issuance costs                             (6,443)            --
      Payments of debt                                (2,152)       (13,713)
      Principal payments on capital leases           (13,807)       (10,701)
      Early extinguishment of debt                  (422,641)            --
      Proceeds from exercise of stock options         13,189          2,402
      Purchase of Company common stock              (103,598)       (27,870)
      Excess tax benefits from share based awards      4,123             --
      Payments of dividends                          (17,645)       (14,719)
      Bank overdrafts and other                        2,211             --
    Net cash used in financing activities from
     continuing operations                          (147,767)       (64,601)
    Net cash used in financing activities from
     discontinued operations                          (2,113)            --
    Net cash used in financing activities           (149,880)       (64,601)
    Effect of foreign currency                         1,124          2,085
    Net increase in cash and cash equivalents        182,905         82,389
    Cash and cash equivalents at beginning
     of period                                        39,880        446,782
    Cash and cash equivalents at end of period      $222,785       $529,171


SOURCE Service Corporation International

Investors, Debbie Young, Director, Investor Relations, +1-713- 525-9088, or Media,
Robyn Sadowsky, Director, Corporate Communications, +1- 713-525-7795, both of Service
Corporation International

http://www.sci-corp.com/

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding Service Corporation International's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.