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Service Corporation International Announces Third Quarter 2007 Financial Results

- Conference call on Thursday, November 8, 2007, at 9:00 a.m. Central Standard Time.

HOUSTON, Nov. 7 /PRNewswire-FirstCall/ -- Service Corporation International (NYSE: SCI), which owns and operates funeral service locations and cemeteries, today reported results for the third 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  Nine Months Ended
    (In millions, except for per share      September 30,      September 30,
     amounts)                            ------------------  -----------------
                                          2007     2006      2007      2006
                                         ------   ------  --------  --------
    Revenues                             $539.3   $400.4  $1,712.4  $1,273.8
    Operating income                       75.3     21.3     256.2     143.9
    Net income                             28.1      3.4      80.9      55.7
    Net income from continuing operations
     excluding special items               28.7     24.9     112.8      83.8
    Diluted earnings per share              .10      .01       .27       .19
    Diluted earnings per share excluding
     special items                          .10      .08       .38       .28
    Net cash provided by operating
     activities                           137.0    113.7     328.6     265.3


2007 Highlights

  • In the third quarter of 2007, net income from continuing operations excluding special items was $28.7 million, or $.10 per diluted share compared to $24.9 million, or $0.08 per diluted share in the third quarter of 2006. In the first nine months of 2007, net income from continuing operations excluding special items was $112.8 million, or $.38 per diluted share compared to $83.8 million, or $0.28 per diluted share in the first nine months of 2006. The nine months ended September 30, 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. Net income from continuing operations excluding special items is a non-GAAP financial measure because this calculation excludes certain 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".
  • Consolidated revenues increased 34.4% to approximately $1.7 billion in the first nine months of 2007 compared to 2006 primarily due to the acquisition of Alderwoods.
  • Alderwoods operations are accretive and synergies are being realized as expected.
  • Although impacted by divestitures and the $7.9 million of endowment care trust fund income recognized in 2006, consolidated gross profit margins for the first nine months of 2007 grew to 20.3% compared to 19.3% in 2006.
  • Cash flow from operating activities increased $63.3 million in the first nine months of 2007 to $328.6 million compared to $265.3 million in the first nine months of 2006.

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

"Our employees did an outstanding job of staying focused on the business and continuing the work of integrating Alderwoods into the SCI operations, delivering a solid operating performance in the third quarter, " said Tom Ryan, President and Chief Executive Officer. "We are especially pleased by the performance in our cemetery segment during the quarter where comparable cemetery gross margins increased more than 68% compared to the third quarter of last year."

Consolidated Results of Operations

The following table represents consolidated results from our operations, 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  Nine Months Ended
     preneed funeral contracts)            September 30,      September 30,
                                         ------------------  -----------------
                                            2007     2006      2007     2006
                                         --------  --------  -------  --------
    Funeral
    Funeral atneed revenue                $234.7   $171.8    $771.6   $547.0
    Funeral recognized preneed revenue     104.1     80.0     337.4    262.9
    General agency revenue(1)               14.2      9.5      36.8     29.2
    Germany revenue                          1.9      1.6       5.1      4.8
    Kenyon revenue(2)                        0.8      1.0       3.6      2.9
                                         --------  --------  -------  --------
       Total funeral revenues             $355.7   $263.9  $1,154.5   $846.8

    Gross profit                           $63.6    $53.5    $236.5   $173.5
    Gross margin percentage                 17.9%    20.3%     20.5%    20.5%

    Funeral services performed:
       Preneed                            21,712   17,503    72,699   57,986
       Atneed                             46,644   34,676   156,329  113,933
                                         --------  --------  -------  --------
       Total                              68,356   52,179   229,028  171,919

    Average revenue per funeral service:
       Preneed                            $4,798   $4,573    $4,641   $4,534
       Atneed                             $5,034   $4,954    $4,936   $4,801
       Total                              $4,959   $4,826    $4,842   $4,711

    Preneed funeral production:
       Sales                              $111.6    $79.4    $335.8   $240.1
       Total preneed funeral contracts
        sold                              20,110   16,024    62,599   49,994
       Average revenue per contract       $5,549   $4,955    $5,364   $4,803

    Cemetery
    Cemetery atneed revenue                $65.4    $51.9    $212.0   $161.4
    Cemetery recognized preneed revenue     91.0     65.8     267.1    200.6
    Other cemetery revenue (3)              27.2     18.8      78.8     65.0
                                         --------  --------  -------  --------
       Total cemetery revenues            $183.6   $136.5    $557.9   $427.0

    Gross profit                           $38.9    $19.5    $110.5    $72.4
    Gross margin percentage                 21.2%    14.3%     19.8%    16.9%

    Preneed and atneed cemetery
     production:
       Preneed and atneed sales           $169.5   $125.9    $517.6   $397.8
       Recognition rate (4)                 92.3%    93.5%     92.6%    91.0%

     (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. We divested 70% of our Kenyon investment in the
          fourth quarter of 2007.

     (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 September 30, 2007

Funeral Results

Consolidated funeral revenues increased $91.8 million, or 34.8%, in the third quarter of 2007 compared to the third quarter of 2006. This increase is primarily a result of the addition of Alderwoods and other operations, which contributed an additional $96.8 million in funeral revenues in the third quarter of 2007. This increase was partially offset by planned divestitures, which contributed an incremental $7.3 million of revenue in the third quarter of 2006. Comparable funeral revenues, which represent locations that were owned in both periods, were up $2.3 million, or 0.9%, compared to the third quarter of 2006 as detailed in the table below.

Consolidated funeral gross profit increased $10.1 million in the third 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 17.9% from 20.3% due primarily to Alderwoods operations that historically have had lower gross profit margins. In addition, we divested locations that contributed an incremental $2.3 million of gross profit in the third quarter of 2006 compared to the third quarter of 2007. Gross profit from our comparable funeral locations decreased $6.3 million, or 11.9%, as detailed in the table below. Soft comparable revenue growth was not adequate to cover inflationary cost increases. Additionally, our corporate and field office overhead includes costs related to the addition of Alderwoods' funeral homes and cemeteries. We cannot separately identify and allocate these additional overhead costs and therefore they negatively impact our gross profit and gross margin percentage for 2007 on a comparable basis.

Other key items impacting funeral results include:

  • The consolidated average revenue per funeral service increased 2.8%, or $133 per service, to $4,959. The average revenue at comparable locations increased $187, or 3.8% (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 16,177, or 31.0%, in the third quarter of 2007 compared to the third quarter of 2006. This increase includes 20,371 services performed by locations acquired in the Alderwoods transaction. The increase was partially offset by a decrease from divested locations of 2,489 funeral services. Additionally, SCI comparable funeral services decreased 1,705, or 3.5%, which we primarily attribute to a decrease in the number of deaths in the markets in which we operate. We have also experienced an expected loss of market share in highly discounted, low-service cremation funeral services due to our decision to exit certain cremation businesses and in keeping with our customer segmentation strategy, which directs our resources and focus to more profitable customer segments.

The table below details comparable funeral results of operations for the three months ended September 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 as those owned for the entire period beginning January 1, 2006 and ending September 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 and 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)           September 30,
                                          ------------------
                                            2007     2006     Change  Change %
                                          -------   --------------------------
    Comparable revenue                    $254.4    $252.1       $2.3    0.9%
    Comparable gross profit                $46.6     $52.9      $(6.3) (11.9%)
    Comparable gross margin percentage      18.3%     20.1%

    Comparable funeral services performed:
       Preneed                            16,466    16,652       (186)  (1.1%)
       Atneed                             31,247    32,766     (1,519)  (4.6%)
                                          ------    ------     -------  ------
       Total                              47,713    49,418     (1,705)  (3.5%)

    Comparable average revenue per
     funeral service                      $5,051    $4,864       $187    3.8%

Cemetery Results

Consolidated cemetery revenues increased $47.1 million, or 34.5%, in the third quarter of 2007 compared to the same period of 2006 reflecting a $39.0 million revenue contribution from operations acquired from Alderwoods. This increase was partially offset by a $5.8 million decline in revenue from divested locations. Our comparable cemetery revenues of $144.1 million in the third quarter of 2007 increased $13.9 million, or 10.6% compared to the same period of 2006, due to increases associated with constructed cemetery property and increased trust fund income in the third quarter of 2007.

Consolidated cemetery gross profit increased $19.4 million in the third quarter of 2007 compared to the third quarter of 2006 reflecting the addition of gross profit from Alderwoods operations. Our comparable cemetery gross profit of $33.2 million in the third quarter of 2007 increased $13.5 million, or 68.3% compared to the third quarter of 2006 and our comparable cemetery gross margin percentage increased to 23.0% compared to 15.1% in the same period of 2006 driven by the revenue growth in 2007 coupled with good cost management.

Other Results

  • General and administrative expenses were $32.1 million in the third quarter of 2007 compared to $21.0 million in the third quarter of 2006. General and administrative costs increased $11.1 million primarily due to $5.1 million of costs incurred to settle our SCI Cash Balance Defined Benefit Plan and $3.3 million of one-time transition and other expenses related to our acquisition of Alderwoods.
  • Interest expense increased to $38.1 million in the third quarter of 2007 compared to $33.3 million in the third quarter of 2006 as a result of increased borrowings to finance the Alderwoods acquisition.
  • Interest income decreased $4.0 million in the third quarter of 2007 to $4.3 million as expected due to decreases in our average cash balance.
  • Other income, net, decreased $11.2 million in the third quarter of 2007 compared to the same period of 2006 primarily due to investment income of $10.9 million received and recognized in the third quarter of 2006 related to our equity investment in operations in France.

For the Nine Months Ended September 30, 2007

Funeral Results

Consolidated funeral revenues increased $307.7 million, or 36.3%, in the first nine months of 2007 compared to the first nine months of 2006. This increase is primarily a result of the addition of Alderwoods and other operations, which contributed $304.4 million in funeral revenues in the first nine months of 2007. Alderwoods average revenue per funeral service was approximately 2% above our expectations and Alderwoods funeral case volume was approximately 2% below our expectations, which we believe is generally consistent with death trends in North America in the first nine months of 2007. In addition, we divested locations that contributed $3.5 million of incremental revenue in the first nine months of 2006. Our comparable funeral revenues were up $6.8 million, or 0.8%, compared to the first nine months of 2006 as detailed in the table below.

Consolidated funeral gross profit increased $63.0 million in the first nine months of 2007 versus the same period of 2006 primarily due to additional gross profit contributed from Alderwoods and other operations of $67.2 million. We divested locations that contributed an incremental $2.9 million of gross profit in the first nine months of 2006 compared to the first nine months of 2007. The consolidated gross margin percentage of 20.5% was flat compared to the prior year. Gross profit from our comparable funeral locations decreased $1.3 million or 0.8%, and our gross margin percentage decreased to 20.7% from 21.1%. Comparable gross profits before allocation of corporate and field overhead costs increased $11.7 million, or 5.3%. Our corporate and field office overhead includes costs related to the addition of Alderwoods' funeral homes and cemeteries. We cannot separately identify and allocate these additional overhead costs and therefore they negatively impact our gross profit and gross margin percentage for 2007 on a comparable basis.

Other key items impacting funeral results include:

  • The consolidated average revenue per funeral service increased 2.8%, or $131 per service, to $4,842. The average revenue at comparable locations increased $233, or 4.9% (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 57,109, or 33.2%, in the first nine months of 2007 compared to the same period of 2006. This increase includes 72,030 services performed by locations acquired in the Alderwoods transaction. The increase was partially offset by a decrease from divested locations of 8,061 funeral services. Additionally, SCI comparable funeral services performed decreased 6,860, or 4.3%, which we attribute to certain local business decisions to exit unprofitable business relationships, primarily related to highly-discounted, low-service cremation funeral activities, and a decrease in the number of deaths in our markets in the first nine months 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 nine months ended September 30, 2007 and 2006.



    (In millions, except funeral
     services performed, average
     revenue per funeral service)         Nine months ended
                                            September 30,
                                          -----------------
                                            2007     2006     Change  Change %
                                          -------  ---------------------------
    Comparable revenue                    $807.9    $801.1       $6.8    0.8%
    Comparable gross profit                167.5     168.8       (1.3)  (0.8%)
    Comparable gross margin percentage      20.7%     21.1%

    Comparable funeral services performed:
       Preneed                            53,219    54,755     (1,536)  (2.8%)
       Atneed                            101,132   106,456     (5,324)  (5.0%)
                                         -------   -------     -------  ------
       Total                             154,351   161,211     (6,860)  (4.3%)

    Comparable average revenue per
     funeral service                      $4,981    $4,748       $233    4.9%

Cemetery Results

Consolidated cemetery revenues increased $130.9 million, or 30.7%, in the first nine months of 2007 compared to the same period of 2006 reflecting a $129.4 million increase from operations acquired from Alderwoods. This increase was offset by a $10.8 million decline in revenue from divested locations. Our comparable cemetery revenues of $419.3 million in the first nine months of 2007 increased $12.3 million, or 3.0% compared to the same period of 2006 as increases associated with constructed cemetery property and higher trust fund income was partially offset by the receipt and recognition of $7.9 million of endowment care trust fund income in the first nine months of 2006.

Consolidated cemetery gross profit increased $38.1 million in the first nine months of 2007 compared to the first nine months of 2006 reflecting the addition of gross profit from Alderwoods operations of $25.8 million, partially offset by divested locations with incremental gross profits in 2007 compared to 2006 of $0.4 million. Consolidated cemetery gross margin percentage grew to 19.8% in the first nine months of 2007 compared to 16.9% in the same period of 2006. Our comparable cemetery gross profit of $86.5 million in the first nine months of 2007 increased $12.7 million, or 17.1% compared to the first nine months of 2006 as increased revenue was offset by the receipt and recognition of $7.9 million of endowment care trust fund income in the first nine months of 2006. Comparable cemetery margin percentage was 20.6% in the first nine months of 2007 compared to 18.1% in the first nine months of 2006.

Other Results

  • General and administrative expenses were $97.8 million in the first nine months of 2007 compared to $63.9 million in the first nine months of 2006. General and administrative costs increased $33.9 million primarily due to $18.9 million of one-time transition and other expenses related to our acquisition of Alderwoods. Additionally, salary expense increased $5.9 million compared to prior year as a result of Alderwoods corporate expenses that are expected to wind down throughout 2007 and $5.1 million of costs incurred to settle our SCI Cash Balance Defined Benefit Plan in 2007.
  • Interest expense increased to $111.9 million in the first nine months of 2007 compared to $86.7 million in the first nine months of 2006 as a result of increased borrowings to finance the Alderwoods acquisition.
  • Interest income decreased $12.7 million in the first nine months of 2007 to $8.3 million as expected due to decreases in our average cash balance.
  • Equity in earnings of unconsolidated subsidiaries, which relates to our equity investment in operations in France, increased $7.4 million to $8.7 million in the first nine months of 2007 compared to $1.3 million the same period in 2006.
  • Other income, net, for the first nine months of 2007 decreased $15.2 million due to investment income of $10.9 million received and recognized in 2006 related to our equity investment in operations in France.

Cash Flow & Capital Expenditures

Cash flows from operating activities in the first nine months of 2007 were $328.6 million compared to $265.3 million in the first nine months of 2006. Included in the first nine months of 2007 are one-time transition costs of $24.7 million related to the Alderwoods acquisition and integration and $11.4 million of premiums paid on the early extinguishment of debt. In the first nine months of 2007, the receipt of $26.1 million in trust proceeds arising from our recent reconciliations of the preneed funeral and cemetery trust fund backlogs of Alderwoods, and $31.5 million from our internal working capital improvement initiatives were essentially offset by other operating and working capital declines. These declines included $20.7 million in additional interest payments resulting from increased borrowings to finance the Alderwoods acquisition, $17.2 million in additional cash tax payments, a $12.7 million decrease in cash interest received. In addition, cash flows in the first nine months of 2006 were positively impacted by $7.9 million of endowment care trust. After taking into account the above items, the remaining increase in cash flows from operations in the first nine months 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
                                                  ----------------------------
                                                        Nine Months Ended
                                                  ----------------------------
                                                  September 30,  September 30,
                                                        2007         2006
                                                  -------------  -------------
    Capital improvements at existing locations          59.3         38.2
    Development of cemetery property                    41.5         21.9
    Construction of new funeral home facilities and
     other growth capital                               12.8          3.1
                                                  -------------  -------------
    Total capital expenditures                        $113.6        $63.2
                                                  -------------  -------------



Other investing and financing activities in the first nine months of 2007 include:

  • The receipt of $314.3 million from divestitures (including the Mayflower Life Insurance Company) and sales of property and equipment and
  • Payments of $211.1 million for the repurchase of 16.9 million shares of our common stock.

NON-GAAP FINANCIAL MEASURES

Net income from Continuing Operations Excluding Special Items

Net income 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 net income 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.



    (In millions, except                    Three Months Ended
     diluted EPS)          -------------------------------------------------
                              September 30, 2007       September 30, 2006
                           ------------------------  -----------------------
                           Net Income   Diluted EPS  Net Income  Diluted EPS
                           ------------------------  -----------------------
    Net income reported      $28.1         $.10         $3.3         $.01

    After-tax reconciling
     items:
     (Gains) losses on
      dispositions and
      other non-recurring
      income taxes            (5.1)        (.02)        22.2          .07
     Loss on early
      extinguishment of debt     -            -            -            -
     Pension termination
      costs                    3.1          .01            -            -
     Alderwoods transition
      costs                    1.9          .01            -            -
     Discontinued operations   0.7            -         (0.6)           -
                           ------------------------  -----------------------
    Net income from
      continuing operations
      excluding special
      items                  $28.7         $.10        $24.9         $.08
                           ========================  =======================
    Diluted weighted average
     shares outstanding
     (in thousands)                     289,597                   295,918



    (In millions, except                    Nine Months Ended
     diluted EPS)          -------------------------------------------------
                              September 30, 2007       September 30, 2006
                           ------------------------  -----------------------
                           Net Income   Diluted EPS  Net Income  Diluted EPS
                           ------------------------  -----------------------
    Net income reported      $80.9         $.27        $55.7         $.19

    After-tax reconciling
     items:
     (Gains) losses on
      dispositions and
      other non-recurring
      income taxes            13.2          .04         28.9          .09
     Loss on early
      extinguishment of debt   8.4          .03            -            -
     Pension termination
      costs                    3.1          .01            -            -
     Alderwoods transition
      costs                   11.6          .04            -            -
     Discontinued operations  (4.4)        (.01)        (0.8)           -
                           ------------------------  -----------------------
    Net income from
     continuing operations
     excluding special
     items                  $112.8         $.38        $83.8        $ .28
                           ========================  =======================
    Diluted weighted average
     shares outstanding
     (in thousands)                     294,848                   297,353


Conference Call and Webcast

We will host a conference call on Thursday, November 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) 597-5396 with the passcode of 19355040. The conference call will also be broadcast live via the Internet and can be accessed through our website at http://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 November 22, 2007 and can be accessed at (617) 801-6888 with the confirmation code of 13481996. 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 press release 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 pending Internal Revenue Service audits. 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 September 30, 2007, we owned and operated more than 1,400 funeral homes and 400 cemeteries (of which over 210 are combination locations) in 44 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: Lisa Marshall - Managing Director, Corporate Communications
(713) 525-3066


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

                            Three months ended        Nine months ended
                               September 30,            September 30,
                          ----------------------  ------------------------
                             2007         2006        2007          2006
                          ---------   ----------  -----------  -----------
    Revenues              $539,334     $400,389   $1,712,381   $1,273,790
    Costs and expenses    (436,814)    (327,341)  (1,365,346)  (1,027,860)
                          ---------   ----------  -----------  -----------
    Gross profit           102,520       73,048      347,035      245,930
    General and
     administrative
     expenses              (32,074)     (20,956)     (97,754)     (63,885)
    Gains (losses) on
     dispositions and
     impairment charges,
     net                     4,886      (30,750)       6,949      (38,141)
                          ---------   ----------  -----------  -----------
    Operating income        75,332       21,342      256,230      143,904
    Interest expense       (38,090)     (33,330)    (111,852)     (86,667)
    Loss on early
     extinguishment of debt      -            -      (14,480)           -
    Interest income          4,254        8,259        8,324       21,022
    Equity in earnings of
     unconsolidated
     subsidiaries            2,460        1,214        8,730        1,351
    Other income, net       (1,049)      10,118       (3,981)      11,176
                          ---------   ----------  -----------  -----------
    Income from continuing
     operations before
     income taxes           42,907        7,603      142,971       90,786
    Provision for income
     taxes                 (14,062)      (4,797)     (66,500)     (35,846)
                          ---------   ----------  -----------  -----------
    Income from continuing
     operations             28,845        2,806       76,471       54,940
    Income from
     discontinued operations
     (net of income tax
     provision (benefit)
     of $2,223,($201),
     $4,183 and ($118),
     respectively)            (675)         559        4,459          801
                          ---------   ----------  -----------  -----------
       Net income          $28,170       $3,365      $80,930      $55,741
                          =========   ==========  ===========  ===========
    Basic earnings per
     share:
      Income from continuing
       operations             $.10         $.01         $.26         $.19
      Income from discontinued
       operations, net of tax    -            -          .02            -
                          ---------   ----------  -----------  -----------
       Net income             $.10         $.01         $.28         $.19
                          =========   ==========  ===========  ===========
    Diluted earnings per share:
      Income from continuing
       operations             $.10         $.01         $.26         $.19
      Income from discontinued
       operations, net of tax    -            -          .01            -
                          ---------   ----------  -----------  -----------
       Net income             $.10         $.01         $.27         $.19
                          =========   ==========  ===========  ===========
    Basic weighted average
     number of shares      284,511      291,662      289,437      293,117
                          =========   ==========  ===========  ===========
    Diluted weighted
     average number of
     shares                289,597      295,918      294,848      297,353
                          =========   ==========  ===========  ===========
    Dividends declared
     per share               $.030        $.025        $0.90        $.075
                          =========   ==========  ===========  ===========


                        SERVICE CORPORATION INTERNATIONAL
                            CONSOLIDATED BALANCE SHEET
      (In thousands, except share amounts and shares in common stock below)

                                                  September 30, December 31,
                                                      2007           2006
    ------------------------------------------------------------------------
    Assets
    Current assets:
      Cash and cash equivalents                     $287,738        $39,880
      Receivables, net                               104,054        107,194
      Inventories                                     37,898         39,535
      Current assets of discontinued operations            -          2,236
      Current assets held for sale                     5,404          6,330
      Other                                           34,578         43,162
                                                  ----------     ----------
       Total current assets                          469,672        238,337
                                                  ----------     ----------
    Preneed funeral receivables and trust
     investments                                   1,518,187      1,516,676
    Preneed cemetery receivables and trust
     investments                                   1,465,881      1,522,584
    Cemetery property, at cost                     1,446,213      1,495,248
    Property and equipment, net                    1,577,514      1,641,353
    Goodwill                                       1,268,493      1,264,272
    Non-current assets of discontinued operations          -        371,132
    Non-current assets held for sale                 350,066        349,311
    Deferred charges and other assets                396,138        436,545
    Cemetery perpetual care trust investments        916,629        893,931
                                                  ----------     ----------
                                                  $9,408,793     $9,729,389
                                                  ==========     ==========
    Liabilities & Stockholders' Equity
    Current liabilities:
      Accounts payable and accrued liabilities      $340,965       $341,173
      Current maturities of long-term debt           156,466         46,176
      Current liabilities of discontinued operations       -          2,351
      Current liabilities held for sale                  199            419
      Income taxes                                    45,192         17,828
                                                  ----------     ----------
       Total current liabilities                     542,822        407,947
                                                  ----------     ----------
    Long-term debt                                 1,779,830      1,912,696
    Deferred preneed funeral revenues                548,261        537,792
    Deferred preneed cemetery revenues               697,120        754,193
    Deferred income taxes                             73,166        177,341
    Non-current liabilities of discontinued operations     -        311,498
    Non-current liabilities held for sale            270,048        239,800
    Other liabilities                                479,987        357,418
    Non-controlling interest in funeral and
     cemetery trusts                               2,527,809      2,548,743
    Non-controlling interest in cemetery
     perpetual care trusts                           913,445        887,186

    Stockholders' equity:
      Common stock, $1 per share par value,
       500,000,000 shares authorized, 280,158,739 and
       293,222,114, issued and outstanding
       (net of 16,805,762 and 10,000 treasury shares,
       at par, respectively)                         280,159        293,222
      Capital in excess of par value               2,000,324      2,135,649
      Accumulated deficit                           (865,496)      (906,394)
      Accumulated other comprehensive income         161,318         72,298
                                                  ----------     ----------
       Total stockholders' equity                  1,576,305      1,594,775
                                                  ----------     ----------
                                                  $9,408,793     $9,729,389
                                                  ==========     ==========


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

                                                        Nine months ended
                                                          September 30,
                                                     -----------------------
                                                       2007           2006
                                                     ---------      --------
    Cash flows from operating activities:
     Net income                                      $80,930        $55,741
     Adjustments to reconcile net income to net
      cash provided by operating activities:
      Net income from discontinued operations,
       net of tax                                     (4,459)          (801)
      Loss on early extinguishment of debt            14,480              -
      Premiums paid on early extinguishment of debt  (11,368)             -
      Depreciation and amortization                   99,308         69,601
      Amortization of cemetery property               24,983         18,589
      Amortization of loan cost                        5,202         13,902
      Provision for doubtful accounts                  7,753          6,688
      Provision for deferred income taxes             20,798         23,486
      (Gains) losses on dispositions and impairment
       charges, net                                   (6,949)        38,141
      Share-based compensation                         7,898          5,487
      Excess tax benefits from share-based awards     (5,159)             -
      Equity in earnings of unconsolidated
       subsidiaries                                   (8,730)        (1,351)
     Change in assets and liabilities, net of effects
      from acquisitions and dispositions:
      (Increase) decrease in receivables              (7,027)        18,515
      Increase in other assets                        (1,418)       (19,247)
      Increase (decrease) in payables and other
       liabilities                                    33,436         (7,482)
      Effect of preneed funeral production and
       maturities:
       Decrease in preneed funeral receivables
        and trust investments                         27,236         24,565
       Increase in deferred preneed funeral revenue   41,938          2,655
       Decrease in funeral non-controlling interest  (50,013)       (20,959)
      Effect of cemetery production and deliveries:
       Decrease in preneed cemetery receivables and
        trust investments                             41,811         20,904
       Increase in deferred preneed cemetery revenue  36,347         (8,930)
       (Decrease) increase in cemetery
        non-controlling interest                     (36,228)        25,079
      Other                                              578             51
                                                     ---------      --------
    Net cash provided by operating activities from
     continuing operations                           311,347        264,634
    Net cash provided by operating activities from
     discontinued operations                          17,279            698
                                                     ---------      --------
    Net cash provided by operating activities        328,626        265,332
    Cash flows from investing activities:
       Capital expenditures                         (113,607)       (63,199)
       Proceeds from divestitures and sales
        of property and equipment                    314,255         54,766
       Acquisitions                                   (3,308)       (14,637)
       Net withdrawals of restricted funds and other    (236)        10,435
                                                     ---------      --------
    Net cash provided by (used in) investing
     activities from continuing operations           197,104        (12,635)
    Net cash (used in) provided by investing
     activities from discontinued operations          (8,546)        11,328
                                                     ---------      --------
    Net cash provided by (used in) investing
     activities                                      188,558         (1,307)
    Cash flows from financing activities:
    Proceeds from long-term debt issued              398,996              -
    Debt issuance costs                               (6,443)             -
    Payments of debt                                  (3,043)       (14,287)
    Principal payments on capital leases             (22,060)       (15,968)
    Early extinguishment of debt                    (422,545)             -
    Proceeds from exercise of stock options           19,373          3,614
    Purchase of Company common stock                (211,082)       (27,870)
    Excess tax benefits from share-based awards        5,159              -
    Payments of dividends                            (26,265)       (22,113)
    Bank overdrafts                                     (829)             -
                                                     ---------      --------
    Net cash used in financing activities from
     continuing operations                          (268,739)       (76,624)
    Net cash used in financing activities from
     discontinued operations                          (2,113)             -
                                                     ---------      --------
    Net cash used in financing activities           (270,852)       (76,624)
    Effect of foreign currency                         1,526          2,450
                                                     ---------      --------
    Net increase in cash and cash equivalents        247,858        189,851
    Cash and cash equivalents at beginning of period  39,880        446,782
    Cash and cash equivalents at end of period      $287,738       $636,633
                                                    ==========     =========


SOURCE: Service Corporation International
CONTACT:
Investors:
Debbie Young
Director, Investor Relations
+1-713-525-9088
or
Media:
Lisa Marshall
Managing Director, Corporate Communications
+1-713-525-3066
(both of Service Corporation International)

Web site: http://www.sci-corp.com
(SCI)