-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, ArDWz9JkHOehRN/90kiUjLIbelgWfGE+E3ix8H0efZqOuv0Tv9LII4tGYm6hPi/Y XYtAZWI8W6uG0PyitpnWqg== 0001275287-06-001213.txt : 20060303 0001275287-06-001213.hdr.sgml : 20060303 20060303085526 ACCESSION NUMBER: 0001275287-06-001213 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060303 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060303 DATE AS OF CHANGE: 20060303 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SERVICE CORPORATION INTERNATIONAL CENTRAL INDEX KEY: 0000089089 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PERSONAL SERVICES [7200] IRS NUMBER: 741488375 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-06402 FILM NUMBER: 06661909 BUSINESS ADDRESS: STREET 1: 1929 ALLEN PKWY STREET 2: P O BOX 130548 CITY: HOUSTON STATE: TX ZIP: 77019 BUSINESS PHONE: 7135225141 MAIL ADDRESS: STREET 1: P O BOX 130548 CITY: HOUSTON STATE: TX ZIP: 77219-0548 8-K 1 sc5002.txt FORM 8-K ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) March 3, 2006 (March 2, 2006) SERVICE CORPORATION INTERNATIONAL ------------------------------------------------------ (Exact name of registrant as specified in its charter) Texas 1-6402-1 74-1488375 ---------------------------- ------------ ------------------- (State or other jurisdiction (Commission (I.R.S. Employer of incorporation) File Number) Identification No.) 1929 Allen Parkway Houston, Texas 77019 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (713) 522-5141 -------------------------------------------------------------- (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions: [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13a-4(c)) ================================================================================ ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION On March 2, 2006, Service Corporation International issued a press release reporting its financial results for the fourth quarter and year-end of 2005. A copy of this press release is attached as Exhibit 99.1 to this report and is incorporated herein by reference. The attached Exhibit 99.1 is not filed, but is furnished to comply with Regulation FD. The information in this Current Report on Form 8-K, including the exhibit, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. ITEM 7.01 REGULATION FD DISCLOSURE On March 2, 2006, Service Corporation International issued a press release disclosing its financial outlook for 2006. A copy of this press release is attached as Exhibit 99.2 to this report and is incorporated herein by reference. The attached Exhibit 99.2 is not filed, but is furnished to comply with Regulation FD. The information in this Current Report on Form 8-K, including the exhibit, shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS (d) The following exhibits are included with this report EXHIBIT NO. DESCRIPTION ----------- ----------------------------------------------------- 99.1 Press Release, dated March 2, 2006 reporting 2005 financial results 99.2 Press Release, dated March 2, 2006 disclosing 2006 outlook SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. March 3, 2006 Service Corporation International By: /s/ Eric D. Tanzberger ----------------------------- Eric D. Tanzberger Senior Vice President and Corporate Controller EX-99.1 2 sc5002ex991.txt EXHIBIT 99.1 Exhibit 99.1 SERVICE CORPORATION INTERNATIONAL REPORTS OPERATING CASH FLOWS AHEAD OF EXPECTATIONS, A FISCAL YEAR LOSS OF $(.41) PER DILUTED SHARE, AND EARNINGS OF $.28 PER DILUTED SHARE BEFORE SPECIAL ITEMS REPORTS NO MATERIAL WEAKNESSES IN INTERNAL CONTROLS FOR 2005 - Conference Call to Be Webcast on Friday, March 3, 2006, at 10:00 a.m. Central Time HOUSTON, March 2 /PRNewswire-FirstCall/ -- Service Corporation International (NYSE: SCI), which owns and operates funeral service locations and cemeteries, today reported net income for the fourth quarter of 2005 of $24.1 million or $.08 per diluted share compared to net income of $27.2 million or $.08 per diluted share in the same period of 2004. For the year ended December 31, 2005, the Company reported a net loss of $(126.7) million or $(.41) per diluted share compared to net income of $114.1 million or $.35 per diluted share in the same period of 2004. The loss reported in 2005 primarily relates to a cumulative effect of an accounting change of $187.5 million net of tax, attributable to the Company's change in accounting in 2005 to expense direct preneed selling costs as they are incurred. The results in both 2005 and 2004 included special items such as litigation expenses, losses on dispositions, discontinued operations and cumulative effects of accounting changes. SCI's fourth quarter diluted earnings from continuing operations excluding special items were $20.9 million, or $.07 per share compared to earnings from continuing operations excluding special items of $26.4 million, or $.08 per diluted share in the fourth quarter of 2004. For the year ended December 31, 2005, SCI's earnings from continuing operations excluding special items were $86.8 million or $.28 per diluted share ($.30 including income from our discontinued Chilean operations) compared to $105.0 million or $.32 per diluted share in the prior period. Earnings from continuing operations excluding special items for the year ended December 31, 2005 were negatively impacted by $.03 per diluted share as a result of the Company's 2005 change in accounting to expense direct preneed selling costs as they are incurred. Earnings from continuing operations excluding special items is a non-GAAP financial measure. See a reconciliation of diluted earnings from continuing operations excluding special items to GAAP measures included in a separate section later in this press release. Free cash flow was $33.3 million for the fourth quarter of 2005 and $227.4 million for the year ended December 31, 2005. Free cash flow for the full year exceeded prior year results by $21.6 million. Free cash flow is a non- GAAP financial measure. See our definition and calculation of free cash flow and our reconciliation to cash flow from operations included in a separate section later in this press release. At December 31, 2005, total debt was $1.20 billion and cash on hand was $446.8 million. Total debt less cash and cash equivalents (or net debt) decreased by $230.2 million (23.5%) during 2005. Commenting on 2005 operating results, Tom Ryan, President and Chief Executive Officer said: "2005 was a year of hard work for us and we believe a significant turning point for SCI. The dedication, commitment, and execution of the entire organization has helped lead the Company to produce both strong operating and financial results. Comparable North America funeral revenue exceeded our expectations for 2005 primarily due to solid increases in volume and sales average. Our cemetery operating revenues fell within the range of our annual guidance. Both the funeral and cemetery gross margins finished within our annual guidance despite increases in energy, health care, and pension costs. The Company also saw an increase in SOX 404 costs; however, these costs have contributed to the successful remediation of all material weaknesses previously reported by the Company." "Our operating cash flow also finished the year strong and exceeded our expectations. In 2005 we generated free cash flow that exceeded the high end of our annual guidance by $7.4 million. Net debt decreased substantially in 2005 and our cash on hand at December 31, 2005 exceeded $445 million. Honoring our commitment to our shareholders, our strong financial position allowed us to increase shareholder value in 2005 by the continuation and the expansion of our share repurchase program and the initiation of quarterly dividends." North America Comparable Operating Results 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 operations that were not acquired or constructed after January 1, 2004 or divested prior to December 31, 2005. Therefore, in the following presentation, we are providing results of operations for the same funeral and cemetery locations in each of the periods presented. We believe this presentation provides greater clarity for comparison purposes of our results of operations for each of the periods presented. Effective January 1, 2005, the Company began expensing direct preneed selling costs in the period incurred. For a better comparison, comparable results of operations from 2004 are presented below on a pro forma basis as if $4.7 million of additional direct selling costs in our funeral segment and $9.5 million of additional direct selling costs in our cemetery segment were expensed during the year ended December 31, 2004.
Three Months Ended For the Year Ended (In millions, except funeral December 31, December 31, services performed, average revenue ---------------------- ---------------------- per funeral service and gross Pro forma Pro forma margin percentage) 2005 2004 2005 2004 - ------------------------------------ -------- ---------- -------- ---------- Funeral Funeral atneed revenue $ 180.6 $ 170.8 $ 709.9 $ 682.1 Funeral recognized preneed revenue 90.2 82.9 343.2 334.3 General agency revenue (A) 6.9 5.5 27.6 27.8 Kenyon revenue (B) 4.8 0.4 23.9 3.4 -------- ---------- -------- ---------- Total funeral revenues $ 282.5 $ 259.6 $1,104.6 $ 1,047.6 Gross profits $ 52.7 $ 42.5 $ 213.3 $ 201.7 Gross margin percentage 18.7% 16.4% 19.3% 19.3% Total funeral services performed 59,614 58,552 238,813 235,467 Average revenue per funeral service (C) $ 4,542 $ 4,333 $ 4,410 $ 4,316 Cemetery Cemetery atneed revenue $ 51.9 $ 42.5 $ 203.4 $ 170.9 Cemetery recognized preneed revenue 71.6 79.6 273.5 301.6 Other revenue (D) 16.4 20.9 71.1 77.8 -------- ---------- -------- ---------- Total cemetery revenues $ 139.9 $ 143.0 $ 548.0 $ 550.3 Gross profits $ 19.9 $ 33.2 $ 83.6 $ 93.5 Gross margin percentage 14.2% 23.2% 15.3% 17.0%
(A) General Agency ("GA") revenue represents commissions we receive from third-party insurance companies when customers purchase insurance contracts from such third-party insurance companies to fund funeral services and merchandise at a future date. (B) Kenyon International Emergency Services ("Kenyon") is our disaster response subsidiary that engages in mass fatality and emergency response services. Revenues and gross profits associated with Kenyon are subject to significant variation due to the nature of their operations. (C) GA revenue and Kenyon revenue are excluded from the calculation of average revenue to avoid distorting our averages of normal funeral services performed. (D) Other cemetery revenue is primarily related to merchandise, service, and endowment care trust fund income and interest and finance charges earned from customer receivables on preneed installments contracts. For the Three Months Ended December 31, 2005 * Funeral -- Funeral revenues grew $22.9 million primarily due to increases in comparable funeral volume and sales average. Included in the $22.9 million is an increase in Kenyon revenues of $4.4 million over the prior year quarter due to its involvement in the hurricane disasters along the gulf coast region. -- The average revenue per funeral service increased $209 (4.8%) over the prior year quarter due in part to a price increase consistent with inflation; favorable results from the Company's initiative to strategically realign pricing from products to service offerings; and higher trust fund income. -- The number of funeral services performed increased 1,062 (1.8%) over the prior year period. -- Funeral gross profit increased $10.2 million (24.0%) over the prior year period. The increase in funeral revenues described above was partially offset by higher salaries and fringes resulting from inflationary increases and higher health and pension costs; higher professional fees associated with Sarbanes- Oxley compliance; and higher incentive compensation. Kenyon's gross loss increased by $1.0 million in the fourth quarter of 2005 compared to 2004. -- The cremation rate increased 190 basis points to 40.9% in the fourth quarter of 2005 compared to 2004. The first, second and third quarter of 2005 had cremation rate increases of 60, 80, and 140 basis points, respectively, over prior year periods. * Cemetery -- Cemetery revenue decreased $3.1 million from the fourth quarter of 2004 primarily due to a decrease in legacy revenues associated with constructed cemetery property of $6.7 million. The decrease in legacy revenues was partially offset by higher atneed revenues coupled with a favorable sales production shift to developed cemetery property resulting from our initiative to shorten the time between when the property is sold and when it is constructed. -- Cemetery gross profits decreased $13.3 million from the fourth quarter of 2004. The decrease in revenues described above was coupled with higher salary and fringe expenses (primarily health and pension costs); costs related to hurricane damage in the latter part of the year; and higher professional fees associated with Sarbanes-Oxley compliance. Other Consolidated Results * General and administrative expenses were $22.8 million in the three months ended December 31, 2005 compared to $30.5 million in the same period of 2004. -- In the fourth quarter of 2004, we recognized $12.8 million in legal expense (net of insurance recoveries) associated with the settlement of outstanding litigation matters. -- Excluding the $12.8 million of 2004 litigation expense, general and administrative expenses were $22.8 million in the fourth quarter of 2005 compared to $17.7 million in the same period of 2004. This increase is primarily related to higher incentive compensation (resulting from strong quarterly operating and cash flow results); an increase in salary and fringes (primarily health and pension costs); and increased professional fees associated with Sarbanes-Oxley compliance, external audit fees, and other various professional fees. During 2005, we incurred significant expenses to improve internal controls to comply with Section 404 of the Sarbanes-Oxley Act. We believe that these improvements have measurably increased the effectiveness of the organization. * Interest income on notes receivable and commercial paper was $5.5 million and $3.8 million in the fourth quarter of 2005 and 2004, respectively. The increase in 2005 was due to an increase in our cash balance and higher interest rates. * Other income (expense), net was $2.2 million in the fourth quarter of 2005 compared to $6.1 million in the same period of 2004. The components of other income for the periods presented were as follows: -- Cash overrides received from a third party insurance provider related to the sale of insurance funded preneed funeral contracts were $1.4 million in the fourth quarter of 2005 and 2004. -- Surety bond premium costs were $0.6 million in the fourth quarter of 2005 and 2004. -- The remaining income of $1.4 million in the fourth quarter of 2005 and $5.3 million in the fourth quarter of 2004 is primarily related to net gains from foreign currency transactions. * The consolidated effective tax rate in the fourth quarter of 2005 was a provision of 26.5% compared to a benefit of 5.2% in the fourth quarter of 2004. The tax rate in the fourth quarter of 2005 was favorably impacted by the recognition of state net operating losses partially offset by higher tax provisions on permanent differences between book and tax bases of North America asset dispositions. The 2004 tax rate was favorably impacted by state net operating losses and tax benefits realized from certain international dispositions. For the Year Ended December 31, 2005 * Funeral -- Funeral revenues increased $57.0 million due to stronger funeral volume and a higher average revenue per funeral service. Included in the $57.0 million is an increase in Kenyon revenues of $20.5 million in 2005 compared to 2004 due to its involvement in the hurricane disasters along the gulf coast region and the tsunami in southeast Asia. -- The number of funeral services performed in 2005 increased 3,346 (1.4%) compared to 2004. -- The average revenue per funeral service in 2005 was up $94 (2.2%) over the prior year period. Increases resulting from price increases consistent with inflation and our strategic pricing realignment initiative in the last half of the year were partially offset by higher than expected discounts during the first three quarter of 2005. -- Funeral gross profits increased $11.6 million (5.7%) over the prior year. The increase in funeral gross profits was a result of increases in the revenues described above and reductions in overhead expenses. Kenyon had a lower gross loss during 2005 of $1.6 million. These increases in funeral gross profits were partially offset by inflationary increases in merchandise costs; higher salary and fringe expenses (primarily health care and pension costs); higher incentive compensation expense; increases related to our trust reconciliation project; and increased Sarbanes-Oxley expenses. -- The cremation rate increased 130 basis points to 40.2% in for the year ended December 31, 2005 compared to the same period of 2004. * Cemetery -- Cemetery revenue decreased $2.3 million from 2004 primarily due to a decrease in legacy revenues associated with constructed cemetery property; lower interest on trade receivables; partially off set by an increase in atneed revenues. -- Cemetery gross profits decreased $9.9 million from the prior year, partially due to the decrease in revenues described above. Also decreasing gross margins were higher salary and fringe expenses (primarily health care and pension costs); increases in vehicle and utility costs (primarily resulting from higher fuel prices); and increases in administrative costs resulting from our preneed verification projects and Sarbanes-Oxley compliance. Other Consolidated Results * General and administrative expenses were $84.8 million in the year ended December 31, 2005 compared to $130.9 million in the same period of 2004. -- In 2004, we recognized $61.1 million in expense associated with the settlement of outstanding litigation matters. -- Excluding the $61.1 million of 2004 litigation expense, general and administrative expenses were $84.8 million in 2005 compared to $69.8 million in the same period of 2004. This increase is primarily related to increased professional fees associated with Sarbanes-Oxley compliance and external audit fees; higher incentive compensation (resulting from strong operating and cash flow results); costs associated with our funeral and cemetery preneed verification projects and higher than expected health and pension costs. During 2005, we incurred significant expenses to improve internal controls to comply with Section 404 of the Sarbanes-Oxley Act. We believe that these improvements have measurably increased the effectiveness of the organization. * Gains and impairment (losses) on dispositions, net was a net loss of $26.1 million in 2005 compared to a net gain of $25.8 million in the same period of 2004. The net loss in 2005 is primarily associated with losses on the dispositions of underperforming funeral and cemetery businesses in North America. Also included in 2005 was a gain of approximately $15.6 million resulting from the release of indemnification liabilities related to the sales of our former operations in France and the United Kingdom. The 2004 net gain includes a gain on the sale of our equity and debt holdings in the United Kingdom and a gain on the sale of our funeral operations in France partially offset by net losses associated with various dispositions in North America. * Interest expense was $15.6 million lower for the year ended December 31, 2005 compared to the same period of 2004 primarily due to the continued reduction of debt during 2005. * Interest income increased $3.2 million to $16.7 million in 2005 compared to 2004 due to increases in our cash balance and higher interest rates during 2005. * Other income (expense), net decreased by $6.9 million of income in 2005 compared to the same period of 2004. The components of other income for the periods presented were as follows: -- Cash overrides received from a third party insurance provider related to the sale of insurance funded preneed funeral contracts were $6.0 million in 2005 compared to $6.3 million in 2004. -- Surety bond premium costs were $3.6 million in 2005 compared to $4.0 million in 2004. -- The remaining income of $0.4 million in 2005 and income of $7.4 million in 2004 is primarily related to net gains from foreign currency transactions. * The consolidated effective tax rate in 2005 was a provision of 37.6% compared to a benefit of 7.3% in 2004. The tax rate in 2005 was negatively impacted by permanent differences between book and tax bases of North America asset dispositions partially offset by the recognition of state net operating losses. The tax rate in 2004 was favorably impacted by state net operating losses and non-cash tax benefits realized from certain international dispositions. Free Cash Flow Free cash flow is a non-GAAP financial measure, which we used in 2005 and 2004 to manage our business, including our financial condition and liquidity. Free cash flow should be reviewed in addition to, but not as a substitute for, the information provided in our consolidated statement of cash flows. In 2005 and 2004, we define free cash flow as cash flows from operating activities (excluding certain special items such as payments associated with the settlement of litigation matters, tax refunds, premiums paid on early extinguishments of debt, or contributions to our frozen cash balance pension plan) less capital improvements at our existing facilities. The Company defines capital improvements at our existing facilities as capital improvements deemed reasonably necessary to maintain our existing facilities in a condition consistent with Company standards and to extend their useful lives. Free cash flow is not reduced by mandatory debt service requirements or by growth-oriented capital expenditures. In 2005 and 2004, the Company defines growth-oriented capital expenditures as capital expenditures intended to grow revenues and profits such as the acquisition of funeral service locations or cemeteries in large or strategic North America markets, construction of high-end cemetery property (such as private family estates) or the construction of funeral home facilities on Company-owned cemeteries, and the investment in contemporary merchandising displays in our funeral homes. The following table provides a reconciliation between cash flows from operating activities and free cash flow, as defined.
Three Months Ended For the Year Ended December 31, December 31, ------------------- -------------------- (In millions) 2005 2004 2005 2004 - ------------------------------------ -------- -------- -------- -------- Cash Flows from Operating Activities $ 54.3 $ (75.4) $ 312.7 $ 94.0 Less: Unusual Tax Refund --- --- (29.0) --- Add: Legal Settlements --- 131.8 --- 131.1 Add: Cash Balance Pension Plan Contribution --- --- --- 20.0 Add: Premiums Paid on Early Extinguishment of Debt --- --- 12.2 13.8 Add: Repayment of an Insurance Policy Loan and Other --- --- --- 11.4 -------- -------- -------- -------- Adjusted Cash Flows from Operating Activities $ 54.3 $ 56.4 $ 295.9 $ 270.3 Less: Capital Improvements to Maintain Existing Facilities 21.0 17.4 68.5 64.5 -------- -------- -------- -------- Free Cash Flow $ 33.3 $ 39.0 $ 227.4 $ 205.8 ======== ======== ======== ========
As detailed in the table above, adjusted cash flows from operating activities increased by $25.6 million in 2005 compared to 2004. Adjusted cash flows from operating activities increased primarily as a result of improvements in our comparable operating results; one less cash payroll and lower bonus payments in 2005; an increase in net trust withdrawals; and a decrease in cash interest paid resulting from reductions in debt. These improvements to cash flow, which totaled approximately $46.0 million, were partially offset by a decrease of $18.3 million in 2005 as a result of the sale of our French operations in March 2004; cash outflows of approximately $16 million associated with the funding of the Company's 401(k) match with cash (rather than funding through the use of Company stock in 2004); and increased professional fee payments. For the years ended December 31, 2005 and 2004, the Company reported total capital expenditures of $99.4 million and $95.6 million respectively. Included in total capital expenditures were capital improvements deemed reasonably necessary to maintain our existing facilities of $68.5 million and $64.5 million for 2005 and 2004, respectively. The remaining capital expenditures of $30.9 million in 2005 and $31.1 million in 2004 were related to growth-oriented capital expenditures. Included in the $30.9 million of growth-oriented capital expenditures incurred in 2005 was $11.5 million related to new construction of funeral home facilities, $16.4 million of construction of new high-end cemetery property, and $3.0 million associated with Dignity Memorial(R) merchandising displays. Share Repurchase Program As of December 31, 2005, the Company had total authorization to repurchase $400 million of our common stock. As of December 31, 2005, we had repurchased 47.7 million shares at a total cost of $335.4 million under these programs. The remaining dollar value of shares that may be purchased under our currently authorized share repurchase programs was $64.6 million at December 31, 2005. Our total shares outstanding were approximately 294.8 million as of December 31, 2005. We have made and intend to make share repurchases from time to time in the open market or through privately negotiated transactions, subject to acceptable market conditions and normal trading restrictions. There can be no assurance that we will buy our common stock under our share repurchase programs. Important factors that could cause us not to repurchase our shares include, among others, 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. 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 better reflects the performance of our core operations, as it is not influenced by certain income and expenses not affecting continuing operations. We also believe this measure helps facilitate comparisons to competitors' operating results. Set forth below is a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures. We do not intend for the information to be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.
Three Months Ended ---------------------------------------------------- December 31, 2005 December 31, 2004 ------------------------ ------------------------ Net Diluted Net Diluted (In millions, except diluted EPS) Income EPS Income EPS - ------------------------------------ ---------- ---------- ---------- ---------- Net income reported $ 24.1 $ .08 $ 27.2 $ .08 Hurricane insurance deductible expense 1.5 .01 --- --- Settlement of significant legal matters --- --- 7.8 .02 (Gains) and impairment losses on dispositions, net 7.4 .02 5.9 .02 Income tax benefit from the recognition of state net operating losses (11.8) (.04) (7.9) (.02) Discontinued operations (0.3) --- (6.6) (.02) ---------- ---------- ---------- ---------- Earnings from continuing operations excluding special items $ 20.9 $ .07 $ 26.4 $ .08 ========== ========== ========== ========== Diluted weighted average shares outstanding (in thousands) 300,601 332,366
For the Year Ended ---------------------------------------------------- December 31, 2005 December 31, 2004 ------------------------ ------------------------ Net (Loss) Diluted Net Diluted (In millions, except diluted EPS) Income EPS Income EPS - ------------------------------------ ---------- ---------- ---------- ---------- Net (loss) income reported $ (126.7) $ (.41) $ 114.1 $ .35 Hurricane insurance deductible expense 1.5 .01 --- --- Settlement of significant legal matters --- --- 38.7 .11 (Gains) and impairment losses on dispositions, net 31.1 .10 (53.7) (.16) Loss on early extinguishment of debt 9.3 .03 10.5 .03 Other income/expense, net Interest income - United Kingdom note receivable --- --- (2.7) (.01) Income tax benefit from the recognition of state net operating losses (11.8) (.04) (7.9) (.02) Discontinued operations (4.1) (.02) (41.6) (.12) Cumulative effect of accounting changes 187.5 .61 47.6 .14 ---------- ---------- ---------- ---------- Earnings from continuing operations excluding special items $ 86.8 $ .28 $ 105.0 $ .32 ========== ========== ========== ========== Diluted weighted average shares outstanding (in thousands) 306,745 344,675 Interest add back $ --- $ 6.4
For the Year Ended ----------------------- December 31, 2005 ----------------------- Net (Loss) Diluted (In millions, except diluted EPS) Income EPS - ---------------------------------------------------- ---------- ---------- Earnings from continuing operations excluding special items $ 86.8 $ .28 Income from discontinued operations 4.1 .02 ---------- ---------- Earnings from continuing operations excluding special items and income from discontinued options $ 90.9 $ .30 ========== ========== Conference Call and Webcast We will host a conference call on Friday, March 3, 2006, at 10:00 a.m. central time. A question and answer session will follow a brief presentation made by management. The conference call dial-in number is (719) 457-2641. The conference call will also be broadcast live via the Internet and can be accessed through our website at http://www.sci-corp.com . A replay of the conference call will be available through March 17, 2006 and can be accessed at (719) 457-0820 with the confirmation code of 5641657. Additionally, a replay of the conference call will be available on our website for approximately ninety days on the Investors page under the subheading "Conference Calls" at http://www.sci-corp.com/ConfCalls.html . This earnings release will also be available on our website on the Investor Relations page under the subheading "News" at http://www.sci-corp.com/InvestorsMenu.html . 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. * The outcomes of pending lawsuits and proceedings 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. * Amounts payable by us with respect to our outstanding legal matters exceeding our established reserves. * Maintenance of accruals for tax liabilities which 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 primarily reversed through the tax provision at the time of resolution. The resolution of these matters is pending the outcome of an Internal Revenue Service audit and other various tax audits. * Our ability to successfully implement our strategic plan related to producing operating improvements and strong cash flows. * 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 demographic or 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 exploit our substantial purchasing power with certain of our vendors. For further information on these and other risks and uncertainties, see our Securities and Exchange Commission filings, including our 2005 Annual Report on Form 10-K, which we expect to file in the coming days. Copies of this document as well as other SEC filings can be obtained from our website at http://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. Service Corporation International, headquartered in Houston, Texas, owns and operates funeral service locations and cemeteries. We have an extensive network of businesses including 1,058 funeral service locations and 358 cemeteries in North America as of December 31, 2005. For more information about Service Corporation International, please visit our website at http://www.sci-corp.com . For additional information contact: Investors: Debbie Young - Director / Investor Relations (713) 525-9088 Media: Greg Bolton - Director / Corporate Communications (713) 525-5235 SERVICE CORPORATION INTERNATIONAL CONSOLIDATED STATEMENT OF OPERATIONS (In thousands, except per share amounts)
Three months ended For the year ended December 31, December 31, ---------------------------- ---------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ Revenues: Funeral $ 288,652 $ 279,105 $ 1,155,225 $ 1,259,821 Cemetery 141,432 147,523 560,380 571,404 ------------ ------------ ------------ ------------ 430,084 426,628 1,715,605 1,831,225 Gross profit: Funeral 51,133 44,823 216,376 226,407 Cemetery 19,849 29,393 82,451 102,122 ------------ ------------ ------------ ------------ 70,982 74,216 298,827 328,529 General and administrative expenses (22,849) (30,549) (84,812) (130,896) Gains and impairment (losses) on dispositions, net 2,566 (7,224) (26,093) 25,797 ------------ ------------ ------------ ------------ Operating income 50,699 36,443 187,922 223,430 Interest expense (25,985) (26,800) (102,337) (117,910) Interest income 5,488 3,835 16,706 13,453 Loss on early extinguishment of debt --- --- (14,258) (16,770) Other income, net 2,236 6,056 2,774 9,703 ------------ ------------ ------------ ------------ (18,261) (16,909) (97,115) (111,524) ------------ ------------ ------------ ------------ Income from continuing operations before income taxes and cumulative effects of accounting changes 32,438 19,534 90,807 111,906 Provision (benefit) for income taxes 8,591 (1,017) 34,122 (8,194) ------------ ------------ ------------ ------------ Income from continuing operations before cumulative effects of accounting changes 23,847 20,551 56,685 120,100 Income from discontinued operations (net of income tax provision (benefit) of $177, $(1,673), $4,764, and $(49,175), respectively) 298 6,613 4,123 41,584 Cumulative effects of accounting changes (net of income tax benefit of $117,428 and $20,983, respectively) --- --- (187,538) (47,556) ------------ ------------ ------------ ------------ Net income (loss) $ 24,145 $ 27,164 $ (126,730) $ 114,128 ============ ============ ============ ============ Basic earnings (loss) per share: Income from continuing operations before cumulative effects of accounting changes $ .08 $ .06 $ .19 $ .38 Income from discontinued operations, net of tax .00 .02 .01 .13 Cumulative effects of accounting changes, net of tax --- --- (.62) (.15) ------------ ------------ ------------ ------------ Net income (loss) $ .08 $ .08 $ (.42) $ .36 ============ ============ ============ ============ Diluted earnings (loss) per share: Income from continuing operations before cumulative effects of accounting changes $ .08 $ .06 $ .19 $ .37 Income from discontinued operations, net of tax .00 .02 .01 .12 Cumulative effects of accounting changes, net of tax --- --- (.61) (.14) ------------ ------------ ------------ ------------ Net income (loss) $ .08 $ .08 $ (.41) $ .35 ============ ============ ============ ============ Basic weighted average number of shares 295,826 328,342 302,213 318,737 ============ ============ ============ ============ Diluted weighted average number of shares 300,601 332,366 306,745 344,675 ============ ============ ============ ============ Dividends declared per share $ .025 --- $ .10 --- ============ ============ ============ ============
SERVICE CORPORATION INTERNATIONAL CONSOLIDATED BALANCE SHEET (In thousands, except share amounts)
December 31, December 31, 2005 2004 ------------ ------------ Assets Current assets: Cash and cash equivalents $ 446,782 $ 287,785 Receivables, net 97,747 102,622 Inventories 68,327 81,526 Current assets of discontinued operations --- 11,085 Other 37,527 53,820 ------------ ------------ Total current assets 650,383 536,838 ------------ ------------ Preneed funeral receivables and trust investments 1,226,192 1,267,784 Preneed cemetery receivables and trust investments 1,288,515 1,399,778 Cemetery property, at cost 1,355,654 1,509,599 Property and equipment, at cost, net 942,229 970,547 Non-current assets of discontinued operations --- 4,367 Deferred charges and other assets 249,449 631,839 Goodwill 1,123,888 1,169,040 Cemetery perpetual care trust investments 700,382 729,048 ------------ ------------ $ 7,536,692 $ 8,218,840 ============ ============ Liabilities & Stockholders' Equity Current liabilities: Accounts payable and accrued liabilities $ 214,679 $ 221,877 Current maturities of long-term debt 20,468 77,950 Current liabilities of discontinued operations --- 7,111 Income taxes 20,359 7,850 ------------ ------------ Total current liabilities 255,506 314,788 ------------ ------------ Long-term debt 1,175,463 1,189,163 Deferred preneed funeral revenues 535,384 498,571 Deferred preneed cemetery revenues 792,485 803,144 Deferred income taxes 141,676 276,572 Non-current liabilities of discontinued operations --- 58,225 Other liabilities 337,262 431,917 Non-controlling interest in funeral and cemetery trusts 2,015,811 2,092,881 Non-controlling interest in perpetual care trusts 694,619 704,912 Stockholders' equity: Common stock, $1 per share par value, 500,000,000 shares authorized, 294,808,872 and 323,225,352, issued and outstanding (net of 48,962,063 and 18,502,478 treasury shares, at par) 294,809 323,225 Capital in excess of par value 2,182,745 2,395,057 Unearned compensation (3,593) (2,022) Accumulated deficit (955,974) (829,244) Accumulated other comprehensive income (loss) 70,499 (38,349) ------------ ------------ Total stockholders' equity 1,588,486 1,848,667 ------------ ------------ $ 7,536,692 $ 8,218,840 ============ ============
SERVICE CORPORATION INTERNATIONAL CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands)
For the year ended December 31, ---------------------------- 2005 2004 ------------ ------------ Cash flows from operating activities: Net (loss) income $ (126,730) $ 114,128 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Income from discontinued operations (4,123) (41,584) Loss on early extinguishments of debt, net of tax 14,258 16,770 Premiums paid on early extinguishment of debt (12,186) (13,817) Cumulative effects of accounting changes, net of tax 187,538 47,556 Depreciation and amortization 87,449 144,766 Provision for deferred income taxes 26,080 17,739 (Gains) and impairment losses on dispositions, net 26,093 (25,797) Payments on restructuring charges (10,723) (14,000) Litigation payments (3,126) (164,566) Change in assets and liabilities, net of effects from acquisitions and dispositions: Decrease in receivables 18,915 45,983 Decrease in other assets 43,991 5,946 Increase in litigation accrual 370 60,800 (Increase) decrease in payables and other liabilities 11,953 (53,941) Net effect of preneed funeral production and maturities 5,176 (20,989) Net effect of cemetery production and deliveries 52,981 (28,691) Other 86 (1,971) ------------ ------------ Net cash provided by operating activities from continuing operations 318,002 88,332 Net cash (used in) provided by operating activities from discontinued operations (5,344) 5,656 ------------ ------------ Net cash provided by operating activities 312,658 93,988 Cash flows from investing activities: Capital expenditures (99,416) (95,619) Proceeds from divestitures and sales of property and equipment 111,722 57,749 Proceeds from dispositions of foreign operations, net of cash retained 151,692 330,829 Payment of contingent obligations to former owners of acquired businesses --- (48,749) Indemnity payments related to the sale of former funeral operations in France (2,105) (2,401) Net withdrawals of restricted funds and other 9,334 51,378 ------------ ------------ Net cash provided by investing activities from continuing operations 171,227 293,187 Net cash used in investing activities from discontinued operations (212) (3,663) ------------ ------------ Net cash provided by investing activities 171,015 289,524 Cash flows from financing activities: Proceeds from issuance of long-term debt 291,503 241,444 Payments of debt (85,618) (177,648) Early extinguishments of debt (291,277) (299,961) Proceeds from exercise of stock options 7,834 10,605 Purchase of Company common stock (225,152) (110,258) Payments of dividends (22,637) --- Other (844) --- ------------ ------------ Net cash used in financing activities from continuing operations (326,191) (335,818) Effect of foreign currency 1,515 660 ------------ ------------ Net increase in cash and cash equivalents 158,997 48,354 Cash and cash equivalents at beginning of period 287,785 239,431 ------------ ------------ Cash and cash equivalents at end of period $ 446,782 $ 287,785 ============ ============
SOURCE Service Corporation International -0- 03/02/2006 /CONTACT: investors, Debbie Young, Director - Investor Relations, +1-713-525-9088, or media, Greg Bolton, Director - Corporate Communications, +1-713-525-5235, both of Service Corporation International/ /Web site: http://www.sci-corp.com http://www.sci-corp.com/ConfCalls.html http://www.sci-corp.com/InvestorsMenu.html / EX-99.2 3 sc5002ex992.txt EXHIBIT 99.2 Exhibit 99.2 SERVICE CORPORATION INTERNATIONAL PROVIDES FINANCIAL OUTLOOK FOR FISCAL YEAR 2006 HOUSTON, March 2 /PRNewswire-FirstCall/ -- Service Corporation International (NYSE: SCI) today provided its fiscal year 2006 outlook for anticipated financial results from continuing operations. Highlights of our outlook for 2006 include the following: In millions, except earnings per share and gross margin percentage - ------------------------------------------ Funeral revenues $1,100 to $1,130 Funeral gross margin percentage 18% to 22% Cemetery revenues $545 to $575 Cemetery gross margin percentage 13% to 18% General and administrative expenses $79 to $83 Other income $20 to $25 Interest expense $98 to $102 Depreciation and amortization expense $110 to $115 Diluted earnings per share from continuing operations excluding special items (A) $.30 to $.34 Cash flows from operations $290 to $315 (A) Diluted earnings per share from continuing operations excluding special items is a non-GAAP financial measure. We normally reconcile this financial measure to diluted earnings per share from continuing operations; however, diluted earnings per share from continuing operations calculated in accordance with GAAP is not currently accessible on a forward-looking basis. For a summary of information that is unavailable, see the discussion under "Assumptions" below. SUMMARY In 2006, we expect to grow revenues in both the funeral and cemetery segments. Funeral revenue growth will primarily come from expected increases in the average revenue per funeral as a result of price increases consistent with inflation implemented in late 2005 and continued implementation of our strategic pricing realignment initiative from product offerings to service offerings. This will help offset expectations that funeral volume will be flat to slightly lower and Kenyon revenues will decline as disaster management services performed in 2005 are not anticipated in 2006. Cemetery revenue growth will be driven by expected increases in cemetery sales production (both atneed and preneed), which will be partially offset by lower legacy revenues associated with constructed cemetery property recognized in 2006. Funeral and cemetery gross margins are expected to increase in 2006. We are beginning to develop operating standards that will help us to be more productive and to better utilize our scale and resources. Due to the expected reductions in costs associated with this initiative coupled with increases in revenue, we believe we will be able to overcome significant increases in healthcare costs and inflationary increases in other fixed costs. In 2006, we will begin to expense stock options, which will have an estimated non-cash cost of approximately $4 million. We also expect to spend $3 to $5 million to further develop our marketing and long-term strategies. However, general and administrative expenses are expected to decline in 2006 mostly due to reduced costs associated with Sarbanes-Oxley compliance as our internal controls have improved significantly. ASSUMPTIONS Revenue, gross margin percentage, average revenue per funeral service and number of funeral services performed in our 2006 outlook are intended to be reflective of comparable or "same store" results. For purposes of our 2006 guidance, we consider comparable operations as businesses that were owned during the entire period beginning January 1, 2005 and ending December 31, 2005. The outlook for 2006 above provides ranges for certain items on the income statement that could be used to calculate a broad range of diluted earnings per share from continuing operations excluding special items. However, we believe it is more appropriate to use the more likely range of diluted earnings per share provided by us above. The guidance range for diluted earnings from continuing operations excluding special items in 2006 assumes an effective tax rate of 35% and assumes the fully diluted weighted average shares outstanding will be approximately 300 million. We have made and intend to make stock repurchases from time to time in the open market or through privately negotiated transactions, subject to acceptable market conditions and normal trading restrictions. There can be no assurance that we will buy our common stock under our share repurchase programs. Important factors that could cause us not to repurchase our shares include, among others, 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. Our outlook for 2006 excludes, but is not limited to, the following because this information is not currently available: * Effects from potential acquisitions or dispositions, including gains or losses associated with asset dispositions; * Any potential costs associated with settlements of litigation or the recognition of receivables for insurance recoveries associated with litigation; * Gains or losses associated with the early extinguishment of debt, changes in the capital structure, or foreign currency transactions; * Unusual income or losses associated with the Company's merchandise, service or endowment care trust funds; * Any potential tax adjustments to reserves, payments, credits or refunds resulting from the Company's pending Internal Revenue Service audit; * Any potential cash contributions to our frozen cash balance pension plan; and * Any impact from potential accounting changes. CASH FLOW Cash Flows From Operating Activities Historically, we have provided guidance on free cash flow as a non-GAAP financial measure. Beginning in 2006, we will provide detailed information related to cash flow from operating activities as a financial measure. We believe that providing guidance and analysis on cash flows from operating, investing, and financing activities, as defined by GAAP, will increase the clarity and transparency of the Company's financial condition and liquidity. As described below, our cash flow guidance includes detailed information related to cash flows from investing and financing activities. This additional information will provide investors with the necessary information to calculate free cash flow if they should choose to do so. For the year ended December 31, 2005, we generated cash flows from operating activities of $312.7 million. Included in 2005 was a receipt of a federal income tax refund of $29.0 million and premiums paid on the early extinguishment of debt of $12.2 million. Excluding these special items, cash flow from operating activities was $295.9 million in 2005. In 2006, we expect cash flows from operating activities to range from $290 to $315 million, which is flat to slightly above prior year excluding the special items described above. In order to eliminate the variable interest rate risk in our operating margins and improve transparency in our financial statements, we amended certain of our transportation lease agreements in January 2006. Accordingly, these leases have been converted from operating leases to capital leases for accounting purposes beginning January 1, 2006. As a result, our balance sheet will reflect an increase of assets and related debt of over $80 million. We do not expect the change in lease accounting to have a material impact on our consolidated statement of operations. In 2006, depreciation expense will increase over $20 million; interest expense will increase by approximately $5 million; both of which will be offset by a reduction in operating lease expense of over $25 million compared to 2005. Cash flows from operating activities will increase in 2006 over $20 million compared to 2005 as a result of our change in lease accounting, and will be offset by an increase of the same amount in cash flows from financing activities. This increase to cash flow from operating activities will be partially offset by an increase of approximately $16 million of unusually large long-term incentive compensation payments related to a 2003 award program. Additionally, we do not anticipate paying significant federal or state income taxes in 2006 due to U.S. Federal and state tax loss carry forwards. Operationally, in 2006 we expect to see improvements in cash flows from operating activities of over $20 million generated by our North America comparable funeral and cemetery operations. In 2005, we experienced improvements in working capital which helped to increase our cash flows from operating activities over prior years. These positive trends primarily resulted from improved collections of receivables due from customers and due from our preneed trust funds. In 2006, we expect to see a deceleration of these working capital improvements, which will decrease cash flows from operating activities by an estimated $20 million in 2006. As a result of the items described above and their related impact on operating cash flows, we expect cash flows from operating activities to be flat year over year. Cash Flows From Investing Activities We believe that the Company's total capital expenditures in 2006 will range from $105 - $120 million, compared to just under $100 million in 2005. To provide greater transparency about our capital investments, we will begin in 2006 to separately identify cemetery development capital expenditures (as shown in the Proforma table below). Previously, a portion of cemetery development capital expenditures was categorized as growth-oriented capital expenditures in our previous calculation of free cash flow. In 2006, we intend to increase our investments in cemetery development, particularly private family estates, which we believe will help us to grow cemetery revenues and profits. In 2006, we also expect to increase our investment for the construction of new funeral home facilities. Our capital spending outlook for 2006 does not include any amounts for possible acquisitions. We intend to pursue acquisition opportunities, but only if they can be made on favorable terms. The following table provides a detail of the Company's 2005 capital spending and outlook for 2006: As Reported Proforma Outlook (In millions) 2005 2005 2006 - ----------------------------------- ----------- ----------- ------------ Capital improvements at existing facilities $ 68.5 $ 53.0 $50 to $55 Capital expenditures to develop cemetery property 16.4 31.9 $40 to $45 Construction of new funeral home facilities 11.5 11.5 $15 to $20 Other 3.0 3.0 ----------- ----------- ------------ Total capital expenditures $ 99.4 $ 99.4 $105 to $120 ----------- ----------- ------------ Cash Flows From Financing Activities During 2006, we expect to pay scheduled debt maturities of approximately $20 million, and capital lease payments of over $20 million as described above. Additionally, we believe that we will pay at least $30 million in cash dividends to shareholders. While we intend to pay regular quarterly dividends for the foreseeable future, all dividends are subject to final determination by the Board of Directors of SCI each quarter after its review of our operating and financial performance. Capital Allocations We believe the most efficient use of our excess cash is to re-invest in our existing businesses. These capital investments may include the development of high-end cemetery property or the construction of new funeral home facilities. We also believe that the acquisition of additional deathcare operations can leverage our scale and capabilities if the expected returns exceed our cost of capital. To the extent these investment opportunities are not available on favorable terms, we intend to return cash to shareholders through stock repurchases and dividends. 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. * The outcomes of pending lawsuits and proceedings 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. * Amounts payable by us with respect to our outstanding legal matters exceeding our established reserves. * Maintenance of accruals for tax liabilities which 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 primarily reversed through the tax provision at the time of resolution. The resolution of these matters is pending the outcome of an Internal Revenue Service audit and other various audits. * Our ability to successfully implement our strategic plan related to producing operating improvements and strong cash flows. * 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 demographic or 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 exploit our substantial purchasing power with certain of our vendors. For further information on these and other risks and uncertainties, see our Securities and Exchange Commission filings, including our 2005 Annual Report on Form 10-K, which will be filed in the coming days. Copies of this document as well as other SEC filings can be obtained from our website at http://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. Service Corporation International, headquartered in Houston, Texas, is the leading provider of funeral and cemetery services in the world. We have an extensive network of businesses including 1,058 funeral service locations and 358 cemeteries in North America as of December 31, 2005. For more information about Service Corporation International, please visit our website at http://www.sci-corp.com . For additional information contact: Investors: Debbie Young - Director / Investor Relations (713) 525-9088 Media: Greg Bolton - Director / Corporate Communications (713) 525-5235 SOURCE Service Corporation International -0- 03/02/2006 /CONTACT: investors, Debbie Young, Director of Investor Relations, +1-713-525-9088, or media, Greg Bolton, Director of Corporate Communications, +1-713-525-5235, both of Service Corporation International/ /Web site: http://www.sci-corp.com / -----END PRIVACY-ENHANCED MESSAGE-----