Alderwoods Group, Inc.
NASDAQ : AWGI

Alderwoods Group, Inc.

November 15, 2006 17:19 ET

Alderwoods Group Reports Third Quarter Results

CINCINNATI, OHIO--(CCNMatthews - Nov. 15, 2006) - Alderwoods Group, Inc. (NASDAQ:AWGI) today announced its third quarter and year-to-date results, representing the 16 weeks and 40 weeks ended October 7, 2006.

For the 16 weeks ended October 7, 2006, the Company reported total net income of $803,000, or $0.02 basic and diluted earnings per share, on revenues of $227.4 million, compared with total net income of $6.9 million, or $0.17 basic and $0.16 diluted earnings per share, on revenues of $214.8 million, for the 16 weeks ended October 8, 2005.

Net income was lower in the 16 weeks ended October 7, 2006, primarily due to expenses related to the proposed merger with Service Corporation International as well as higher litigation costs. Additionally, the Company recorded a favorable non-cash resolution of an outstanding tax liability of $12.6 million in the 16 weeks ended October 8, 2005.



Highlights of the Third Quarter

- Revenue increased 5.9% to $227.4 million
- Number of same site funeral services performed declined 0.3% to 31,788
- Same site average revenue per funeral increased 5.5% to $4,329
- Funeral revenue increased 4.7% to $139.4 million
- Cemetery revenue increased 6.2% to $55.8 million
- Insurance revenue increased 10.9% to $32.3 million
- Net income decreased to $803,000
- Basic and diluted earnings per share decreased to $0.02
- Pre-need funeral contracts written decreased 0.7% to $59.3 million
- Pre-need cemetery contracts written was flat at $28.9 million
- Total debt increased by $6.2 million in the quarter


For the 40 weeks ended October 7, 2006, the Company reported total net income of $5.5 million, or $0.13 basic and diluted earnings per share, on revenues of $581.7 million, compared with total net income of $32.1 million, or $0.79 basic and $0.77 diluted earnings per share, on revenues of $575.4 million, for the 40 weeks ended October 8, 2005.



Highlights of the Year-to-Date Operations

- Revenue increased 1.1% to $581.7 million
- Number of same site funeral services performed declined 2.4% to 84,857
- Same site average revenue per funeral increased 4.4% to $4,306
- Funeral revenue increased 0.1% to $368.0 million
- Cemetery revenue increased 0.3% to $135.1 million
- Insurance revenue increased 7.6% to $78.6 million
- Net income decreased to $5.5 million
- Basic and diluted earnings per share decreased to $0.13
- Pre-need funeral contracts written decreased 3.5% to $144.8 million
- Pre-need cemetery contracts written decreased 0.8% to $74.0 million
- Total debt decreased by $8.9 million in the year-to-date


Update on Proposed Transaction with SCI

On April 3, 2006, Service Corporation International (NYSE: SCI) and Alderwoods Group announced that the Boards of Directors of both companies have approved a definitive agreement under which SCI will acquire all of the outstanding shares of Alderwoods for $20.00 per share in cash and assumption of debt. Alderwoods stockholders voted on May 31, 2006 to approve this agreement.

"We look forward to the pending merger of Alderwoods Group and SCI, which will create a large and diversified organization that will offer many benefits to our employees," said Mr. Paul Houston, President and CEO of Alderwoods Group. "We continue to expect the transaction will close by the end of 2006 and perhaps even as early as the latter half of November."

Company Overview

Alderwoods is the second largest operator of funeral homes and cemeteries in North America, based upon total revenue and number of locations. As of October 7, 2006, Alderwoods operated 578 funeral homes, 70 cemeteries and 63 combination funeral home and cemetery locations throughout North America. Alderwoods provides funeral and cemetery services and products on both an at-need and pre-need basis. In support of the pre-need business, Alderwoods operates an insurance subsidiary that provides customers with a funding mechanism for the pre-arrangement of funerals. For more information about Alderwoods, please visit our website at http://www.alderwoods.com.

For more information about the Company's results, readers are directed to the Company's Form 10-Q for the quarter ended October 7, 2006, which will be filed with the United States Securities and Exchange Commission (SEC) on November 15, 2006, and will be available in PDF format through the Company's website (www.alderwoods.com).

Basis of Presentation

The Company's financial results discussed in this media release are presented in U.S. dollars, and all accounting information is presented on the basis of United States generally accepted accounting principles unless otherwise indicated. The Company's fiscal year ends on the Saturday nearest to the last day of December in each year (whether before or after such date). During 2006, the Company's first, second and fourth fiscal quarters each consist of 12 weeks and the third fiscal quarter consists of 16 weeks. The third fiscal quarter of 2006 ended on October 7, 2006.

Forward-Looking Statements

Certain statements contained in this press release, including, but not limited to, information regarding the status and progress of the Company's operating activities, the plans and objectives of the Company's management, assumptions regarding the Company's future performance and plans, the expected closing of the transaction with SCI, and any financial guidance provided, as well as certain information in other filings with the SEC and elsewhere are forward-looking statements within the meaning of Section 27A(i) of the Securities Act of 1933 and Section 21E(i) of the Securities Exchange Act of 1934. The words "believe," "may," "will," "estimate," "continues," "anticipate," "intend," "expect" and similar expressions identify these forward-looking statements. These forward-looking statements are made subject to certain risks and uncertainties that could cause actual results to differ materially from those stated, including the following: the ability to obtain regulatory approvals of the transaction with SCI on the proposed terms and schedule; disruption from the SCI transaction making it more difficult to maintain relationships with employees and various other uncertainties associated with the funeral service industry and the Company's operations in particular, which are referred to in the Company's periodic reports filed with the SEC, especially under the headings "Forward-Looking Statements" and "Risk Factors". The Company undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.



ALDERWOODS GROUP, INC.

Consolidated Statements of Operations (Unaudited)
Expressed in thousands of dollars except per share amounts and
number of shares

16 Weeks Ended 40 Weeks Ended
---------------------------------------------------
October 7, October 8, October 7, October 8,
2006 2005 2006 2005
---------------------------------------------------
Revenue
Funeral $ 139,367 $ 133,158 $ 368,020 $ 367,672
Cemetery 55,769 52,519 135,105 134,737
Insurance 32,287 29,105 78,559 73,036
---------------------------------------------------
227,423 214,782 581,684 575,445
---------------------------------------------------
Costs and expenses
Funeral 113,854 116,927 296,637 301,457
Cemetery 48,226 47,202 116,665 117,026
Insurance 30,428 27,752 74,618 69,570
---------------------------------------------------
192,508 191,881 487,920 488,053
---------------------------------------------------

34,915 22,901 93,764 87,392
General and
administrative expenses 24,831 19,192 57,388 31,539
Provision for asset
impairment 588 254 588 (1,373)
---------------------------------------------------
Income from operations 9,496 3,455 35,788 57,226

Interest on long-term debt 8,554 8,967 21,503 23,495
Other expense
(income), net (347) (68) (221) (5,910)
---------------------------------------------------
Income (loss) before
income taxes 1,289 (5,444) 14,506 39,641
Income tax expense
(recovery) 486 (12,349) 7,804 5,844
---------------------------------------------------
Income from continuing
operations 803 6,905 6,702 33,797

Loss from discontinued
operations - - - (1,678)
---------------------------------------------------
Income before
cumulative effect
of change in
accounting principle 803 6,905 6,702 32,119

Cumulative effect of
change in accounting
principle - - (1,242) -
---------------------------------------------------
Net income $ 803 $ 6,905 $ 5,460 $ 32,119
---------------------------------------------------
---------------------------------------------------

Basic earnings per
Common share:
Income from continuing
operations $ 0.02 $ 0.17 $ 0.16 $ 0.83
Loss from discontinued
operations - - - (0.04)
Cumulative effect of
change in accounting
principle - - (0.03) -
---------------------------------------------------
Net income $ 0.02 $ 0.17 $ 0.13 $ 0.79
---------------------------------------------------
---------------------------------------------------
Diluted earnings per
Common share:
Income from continuing
operations $ 0.02 $ 0.16 $ 0.16 $ 0.81
Loss from discontinued
operations - - - (0.04)
Cumulative effect of
change in accounting
principle - - (0.03) -
---------------------------------------------------
Net income $ 0.02 $ 0.16 $ 0.13 $ 0.77
---------------------------------------------------
---------------------------------------------------

Basic weighted average
number of shares
outstanding
(thousands) 40,678 40,456 40,606 40,456
---------------------------------------------------
---------------------------------------------------
Diluted weighted
average number
of shares outstanding
(thousands) 42,789 42,051 42,575 41,721
---------------------------------------------------
---------------------------------------------------


ALDERWOODS GROUP, INC.

Consolidated Balance Sheets
Expressed in thousands of dollars

October 7, December 31,
2006 2005
----------------------------
(unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 8,616 $ 7,455
Receivables, net of allowances 56,796 52,862
Inventories 14,583 15,784
Other 7,631 6,885
----------------------------
87,626 82,986

Pre-need funeral receivables and trust
investments 329,462 334,427
Pre-need cemetery receivables and trust
investments 322,200 307,322
Cemetery property 117,193 116,467
Property and equipment 544,343 542,901
Insurance invested assets 322,154 294,598
Deferred income tax assets 16,563 13,057
Goodwill 296,211 295,890
Cemetery perpetual care trust investments 248,919 243,805
Other assets 42,509 42,850
----------------------------
$ 2,327,180 $ 2,274,303
----------------------------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 118,012 $ 119,734
Current maturities of long-term debt 2,185 2,435
----------------------------
120,197 122,169
----------------------------

Long-term debt 362,282 371,040
Deferred pre-need funeral and cemetery
contract revenue 70,730 91,618
Non-controlling interest in funeral and
cemetery trusts 575,634 548,497
Insurance policy liabilities 302,298 266,729
Deferred income tax liabilities 12,436 10,552
Other liabilities 29,232 21,983
----------------------------
1,472,809 1,432,588
----------------------------

Non-controlling interest in perpetual
care trusts 248,980 243,962

Stockholders' equity
Common stock 407 405
Capital in excess of par value 746,799 743,126
Accumulated deficit (166,945) (172,405)
Accumulated other comprehensive income 25,130 26,627
----------------------------

605,391 597,753
----------------------------

$ 2,327,180 $ 2,274,303
----------------------------


ALDERWOODS GROUP, INC.

Consolidated Statements of Cash Flows (Unaudited)
Expressed in thousands of dollars


16 Weeks Ended 40 Weeks Ended
-------------------------------------------------
October 7, October 8, October 7, October 8,
2006 2005 2006 2005
-------------------------------------------------

CASH PROVIDED BY
(APPLIED TO)
Operations
Net income $ 803 $ 6,905 $ 5,460 $ 32,119
Loss from discontinued
operations, net of tax - - - 1,678
Cumulative effect of
change in accounting
principle - - 1,242 -
Items not affecting cash
Depreciation and
amortization 13,956 13,778 33,221 34,873
Amortization of debt
issue costs 518 915 1,426 2,565
Stock-based compensation 1,068 - 2,664 -
Insurance policy benefit
reserves 16,850 15,957 36,850 38,609
Provision for asset
impairment 588 254 588 (1,373)
Gain on disposal of assets (448) (165) (1,406) (6,068)
Deferred income taxes (511) (1,699) (767) 11,050
Premium on long-term debt
repurchase - - - 282
Other, including net
changes in other non-cash
balances (10,690) 9,903 (16,822) 3,054
-------------------------------------------------
Net cash provided by
continuing operations 22,134 45,848 62,456 116,789
Net cash used in
discontinued
operations - - - (601)
-------------------------------------------------
22,134 45,848 62,456 116,188
-------------------------------------------------

Investing
Proceeds on disposition
of business assets 841 3,759 3,748 14,916
Purchase of property
and equipment (14,363) (15,507) (23,835) (31,823)
Purchase of insurance
invested assets (25,059) (24,794) (68,694) (90,025)
Proceeds on disposition
and maturities of
insurance invested
assets 10,421 6,702 35,697 54,193
-------------------------------------------------
Net cash used in
continuing operations (28,160) (29,842) (53,084) (52,739)
Net cash provided by
discontinued operations - - - 7,906
-------------------------------------------------
(28,160) (29,842) (53,084) (44,833)
-------------------------------------------------

Financing
Increase in long-term
debt 20,900 47 20,900 5,199
Repayment of long-term
debt (14,662) (23,111) (29,909) (82,320)
Issuance of Common Stock 4 1,401 798 2,777
-------------------------------------------------
Net cash provided by
(used in) continuing
operations 6,242 (21,663) (8,211) (74,344)
Net cash used in
discontinued operations - - - (57)
-------------------------------------------------
6,242 (21,663) (8,211) (74,401)
-------------------------------------------------

Increase (decrease) in
cash and cash equivalents 216 (5,657) 1,161 (3,046)
Cash and cash equivalents,
beginning of period 8,400 11,990 7,455 9,379
-------------------------------------------------
Cash and cash equivalents,
end of period $ 8,616 $ 6,333 $ 8,616 $ 6,333
-------------------------------------------------



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