Exhibit 99.2
1
1
Forward-Looking Statements
The statements in this presentation 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 that convey the
uncertainty of future events or outcomes. These statements are based on assumptions that the
Company believes are reasonable; however, many important factors could cause the Company’s
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, or on behalf of, the Company. For
further information on these risks and uncertainties, see the Company’s Securities and
Exchange Commission filings, including the Company’s 2003 Annual Report on Form 10-K. The
Company assumes no obligation to publicly update or revise any forward-looking statements
made herein or any other forward-looking statements made by the Company, whether as a result
of new information, future events or otherwise.
Merrill Lynch Health Services Conference
November 30, 2004
2
Tom Ryan
President and Chief Operating Officer
3
SCI is the Market Leader in North America
Revenues of $1.7 billion
Free cash flow of approximately $200 million *
1,200+ funeral homes (plus 170 franchised affiliates)
400+ cemeteries
Market coverage exceeds 70%
Interact with approximately 630,000 customers on an annual
basis
20,000 employees
Please refer to the disclosures concerning free cash flow at the end of this presentation.
4
Public Company Landscape
120
7
0.0%
115
6
17
80
Stone-
More
0.9
1.1
1.2
1.6
4.1
0.9
1.1
SCI to
Peers
339
1,575
1,209
3,238
5,260
Backlog of Preneed Revs
1.0%
3.0%
5.3%
9.2%
11.0%
Funeral Market Share
8
30
7
51
211
Free Cash Flow
448
1,175
314
1,486
Peer
Group
406
1,239
298
1,706
SCI-N.A.
30
148
150
Cemeteries
139
299
730
Funeral Homes
39
120
138
Gross Profit
Properties:
151
522
733
Revenues
Carriage
Stewart
Alder-
woods
SCI estimates based on fiscal 2003 data and excluding disclosed unusual items. Please refer to
SCI’s definition of free cash flow at the end of this presentation.
(Dollars in millions)
5
SCI Strengths and Investment Considerations
Competitive advantage due to size, unparalleled network &
national branding strategy
Stable and predictable revenues and cash flows on an annual
basis
Backlog of future revenues in North America exceeds $5 billion
Favorable demographics over the long term
Meaningful progress has been made in putting major litigation
issues behind us
Significant opportunities to grow shareholder value due to
strong cash flows and liquidity, and modest debt maturities
6
Business Challenges
No near-term expansion in the number of deaths
Baby boomers do not reach age 65 until 2011
Increasing pressure on pricing
Growing cremation trend - SCI cremation mix currently 40% and
increasing 100 to 150 basis points per year
Competitive retail environment for products (caskets, vaults, markers)
Regulatory and litigation exposure
Constant move toward stricter regulation
Increasing litigation environment
Sarbanes-Oxley legislation
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The Path to Growth
Improving the Infrastructure
Building the Brand
Growing our Revenues
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Improving the Infrastructure
Conforming sales approach to emerging customer preferences
Outsourcing programs
Payroll, accounts payable, trust administration, cemetery
collections, IT support
New information systems
HMIS replaces 3 separate in-house systems
New management structure
Single-line management based on major and middle market
concept
Improved corporate support system (market support centers)
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SCI Vision Statement
Our Purpose… “Who We Are”
A company that is dedicated to compassionately supporting
families at difficult times, celebrating the significance of lives
that have been lived, and preserving memories that transcend
generations, with dignity and honor.
Our Values… “What We Stand For”
*Integrity *Respect *Service Excellence *Enduring Relationships
Our Vision… “Where We Are Going”
Celebrating life with dedication, excellence and innovation.
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Products
Casket
Flowers
Grave space
Experience/Value
Celebration of Life
Estate Planning
Grief Counseling Services
Legal Services
Travel Discounts
Internet Memorialization
Private family estates
Cremation Gardens
Building the Brand
Changing Consumer Landscape
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Brand Strategy Initiatives
Internal focus: institutional excellence
External focus: national advertising and community programs
Dignity Memorial® packaged funeral and cremation plans
Value-added products and services
Dignity® cemetery plans in development
Utilizing technology & contemporary merchandising strategies
Funeral: modifications to casket selection rooms to promote the sale
of Dignity ® plans with an emphasis on personalization
Cemetery: standard pricing model and tiered-product strategy with a
focus on high-end cemetery property
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Dignity Memorial® Funeral & Cremation Plans
Selection rate for North America funeral homes
Blueprint for Success
Enhanced merchandise
displays and training in
490 locations
Over 2,200 counselors
have been certified
Targeting 550 locations
by year end
Incremental Revenue
Funeral - $2,800
Cremation - $1,900
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Growing Revenues: High Impact in 2005
New single-line management structure
Dignity® packaged plans & contemporary merchandising
strategies
Implementation and roll-out of cemetery standard pricing
model
Development and roll-out of Dignity ® Blueprint to cemeteries
Investing in sales management in order to drive preneed
sales
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Growing Revenues: Long-Term Impact
Developing access to customers through new channels -
branding, national marketing and affinity strategies
Executing on a cremation strategy focused on product
differentiation, personalization and simplicity
Becoming the preplanning experts – funded and unfunded
Developing our people through Dignity® University
Expanding through acquisition, construction or franchise
Developing a comprehensive internet strategy
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Developing our People
Comprehensive Education Strategy in an
On-line Campus Format
Focus on building a “best in class” workforce
Investing in our number one resource: our employees
Emphasis on leadership development and training
Job-focused curriculum for each position in the company
Certification requirements for each position starting with customer
contact employees (sales counselors & funeral arrangers)
Blended approach using classroom, web-based courses, virtual
classroom and on-the job training
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From Customer Satisfaction to Customer Loyalty
Customer Satisfaction
Began to track with independent surveys in 2000 (atneed funeral only)
Over 40% response rate of all families surveyed
Over 98% of respondents are likely to recommend our services
Satisfaction scores on a national basis has grown nearly 500%
Customer Loyalty
In 2005, moving to a new program with J.D. Power and Associates
New survey will combine funeral and cemetery
Satisfaction scores PLUS loyalty scores – measuring the relationship
between level of satisfaction and likelihood to use us again or to
recommend us
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Significant Financial Flexibility
Cash on hand at Sept 30, 2004 exceeded $300 million
$200 million credit facility ($127M availability after LOC usage)
Anticipated proceeds of $80 to $100 million from remaining
international asset sales (may occur over several years)
Anticipated return of cash collateral of $30 to $50 million in Q4
Debt maturities in remainder of 2004 and 2005 are less than
$140 million
Substantial free cash flow*
* Please refer to the disclosures concerning free cash flow at the end of this presentation
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Capital Allocation Considerations
Internal growth opportunities
Dignity® displays in our funeral homes
Development of high-end cemetery property
Construction or acquisition opportunities
Using a hurdle rate that is a premium to our WACC of approx 9%
Share repurchase program
Repurchased 9.5 million shares at a total cost of approximately $59.4
million ($6.25) thru October 2004
Approximately $140 million remaining under authorization
Dividend
Debt repurchases
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Managing Liquidity & Capital Decisions
5x to 7x
Net Debt/Free Cash Flow
40% to 45%
Net Debt/Total Capital
Greater than 1.5x
Free Cash Flow/Interest expense
Please refer to the disclosures concerning free cash flow, net debt and total capital at the end of this presentation
LONG-TERM TARGET RATIOS
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Eric Tanzberger
Vice President and Corporate Controller
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13% - 17%
$500 - $550
Up 1% - 3%
Flat to slightly down
20% - 24%
$1,120 - $1,170
2004 Outlook
+7.5%
-0.8%
+2.3%
-0.7%
+7.0%
+0.8%
Chg
16.2%
67.0
413.5
$4,248
191,450
20.4%
171.2
839.7
YTD
9/30/04
14.9%
62.3
416.9
$4,154
192,715
19.2%
160.0
833.0
YTD
9/30/03
Average Revenue
Case Volume
CEMETERY
FUNERAL
Gross Profit
Gross Margin
Gross Margin
Gross Profit
Revenues
Revenues
North America Operating Highlights
Comparable North America businesses only
(Dollars in millions)
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Continued Strong Free Cash Flow
(In millions)
Target
$200 to $245
at
9/30/04
14.6
Net Debt/
Free Cash Flow
51.9
8.4
6.7
4.5
LTM
Please refer to free cash flow /recurring free cash flow disclosures and reconciliations to cash flow from operating
activities at the end of this presentation.
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(94.5)
Unusual tax refund
-3.1%
-8.7%
Chg
$200 - $245
($65 - $70)
$270 - $310
2004 Outlook
$172.1
(62.1)
234.2
25.1
$303.6
YTD
9/30/03
$166.8
(47.1)
213.9
31.4
(0.7)
$183.2
YTD
9/30/04
Settlement of significant legal matters,
net of insurance recoveries
Free Cash Flow
Capital improvements to maintain
existing facilities
Pension contribution/repayment of
policy loan on retirement plan
Adj Cash flows from operations
Cash flows from operations
Free Cash Flow Highlights
(Dollars in millions)
Please refer to additional disclosures concerning free cash flow at the end of this presentation
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Net Debt
(Total Debt Less Cash)
Significant Debt Reduction
(In millions)
34%
Net Debt/
Total Capital
49%
57%
64%
62%
53%
Credit ratings:
“BB” with S&P
“Ba3” with
Moody's and
highest liquidity
rating of SGL-1
Please refer to the disclosures and reconciliations concerning net debt at the end of this presentation
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Debt Maturity Profile
SCI has reduced its near term debt maturity profile to levels comfortably
within expected levels of on-going recurring free cash flow.
As of September 30, 2004
(In millions)
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Sarbanes-Oxley
Dedicating a significant amount of resources and time to
compliance efforts
Expect total costs in 2004 associated with SOX 404 to be $5-$7
million
As a result of testing, we have become aware of deficiencies in
our internal controls
Actively working to remediate identified deficiencies
Finalizing our assessment of the effectiveness of our internal
controls
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Building Shareholder Value
Continued strong free cash flow, liquidity and improved capital
structure gives us significant financial flexibility
Streamlined infrastructure and new management structure
establishes solid platform for growth
We have unique opportunities for long-term growth with
strategies centered on Dignity Memorial®
We are investing in our people and our businesses to drive
revenue growth and customer satisfaction
We continue to focus on achieving excellence in all aspects of
the organization to increase our effectiveness
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Free Cash Flow
Free cash flow is a non-GAAP financial measure. We define free cash flow as cash flows from
operating activities (adjusted for certain unusual items described below) less capital
improvements deemed reasonably necessary to maintain our existing facilities in a condition
consistent with company standards and to extend their useful lives. We believe that free cash
flow provides useful information to investors regarding our financial condition and liquidity as
well as our ability to generate cash for purposes such as reducing debt, expanding through
strategic investments and repurchasing stock or paying dividends. Free cash flow is not
reduced by 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 inventory or the construction of funeral home
facilities on SCI-owned cemeteries.
While we believe free cash flow, as defined, is helpful in managing our business and provides
useful information to investors, certain events may arise, financial or otherwise, which could
require the use of free cash flow so that it would not be available for the purposes described
above, as more fully described in our public filings with the Securities and Exchange
Commission. Furthermore, free cash flow should be reviewed in addition to, but not as a
substitute for, the data provided in our consolidated statement of cash flows.
Further information can be found on our website in the press release dated November 8, 2004 and in
the Form 8-K furnished to the SEC on November 8, 2004.
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Free Cash Flow Reconciliation to GAAP
27.1
---------
Add: Settlement of significant legal matters, net of insurance recoveries
(86.7)
(72.9)
Less: Capital improvements to maintain existing facilities
2003
2002
Free Cash Flow
$212.1
285.0
(67.2)
$352.2
$220.0
306.7
(94.5)
$374.1
Adjusted cash flows from operations
Less: Unusual tax refunds/escrow receipt
Free Cash Flow
Cash flows from operations
(Dollars in millions)
170.5
62.0
Recurring Operating Free Cash Flow
34.6
------
Add: Payments to pension plan & other nonrecurring items
(116.3)
------
Less: Unusual tax refund
------
32.8
Add: Effect of swap terminations
22.8
46.7
Add: Payments on restructuring charges
$383.3
$223.6
Cash flows from operating activities
(79.8)
(157.7)
Less: Special trust receipts
2001
2000
Recurring Operating Free Cash Flow
83.4
145.4
74.1
244.6
Less: Capital improvements to maintain existing facilities
Adjusted cash flows from operations
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Net Debt & Total Capital
Net debt and total capital are non-GAAP financial measures. We define net
debt as total debt less cash and cash equivalents. We define total capital as
net debt (as defined previously) plus total stockholders’ equity.
2,853.5
2,999.2
3,110.9
3,938.2
5,196.0
7,497.5
Total Capital
1,876.8
1,527.0
1,326.7
1,432.9
1,975.8
3,495.3
Total Stockholders’ Equity
976.7
1,472.2
1,784.2
2,505.3
3,220.2
4,002.2
Net Debt
1,294.7
1,711.6
1,984.8
2,534.6
3,268.1
4,060.0
Total Debt
318.0
239.4
200.6
29.3
47.9
57.8
Less: Cash
Sept 2004
2003
2002
2001
2000
1999
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