Service
Corporation
International
Acquisition of
Combining the Two Premier Funeral and Cemetery
Services Providers in North America
April 3, 2006
Agenda
Tom Ryan
Transaction Summary
V.
Senior Vice President & Chief
Financial Officer - SCI
Jeff Curtiss
Financial Review
IV.
Executive Vice President and
Chief Operating Officer – SCI
Mike Webb
Review of Potential Synergies
III.
Tom Ryan
Transaction Overview
II.
President & Chief Executive
Officer - Alderwoods
Paul Houston
President & Chief Executive
Officer – SCI
Tom Ryan
Opening Remarks
I.
2
Cautionary Statement on Forward-Looking
Statements
Forward-Looking Statements
Information set forth in this presentation contains forward-looking statements, which involve a number of risks and uncertainties. Service
Corporation International (“SCI”) and Alderwoods Group, Inc. (“Alderwoods”) caution readers that any forward-looking information is not a
guarantee of future performance and that actual results could differ materially from those contained in the forward-looking information.
Such forward-looking statements include, but are not limited to, statements about the benefits of the business combination transaction
involving SCI and Alderwoods, including future financial and operating results, the combined company's plans, objectives, expectations and
intentions and other statements that are not historical facts.
The following factors, among others, could cause actual results to differ from those set forth in the forward-looking statements: the ability
to obtain regulatory approvals of the transaction on the proposed terms and schedule; the failure of Alderwoods stockholders to approve
the transaction; the risk that the businesses will not be integrated successfully; the risk that the cost savings and any other synergies from
the transaction may not be fully realized or may take longer to realize than expected; disruption from the transaction making it more
difficult to maintain relationships with customers, employees or suppliers. Additional factors that may affect future results are contained in
SCI’s and Alderwoods’s filings with the SEC, which are available at the SEC's web site http://www.sec.gov. SCI and Alderwoods disclaim any
obligation to update and revise statements contained in these materials based on new information or otherwise.
Additional Information About this Transaction
In connection with the proposed merger, Alderwoods will file a definitive proxy statement. Alderwoods will mail the definitive proxy
statement to its stockholders. Investors and security holders are urged to read the definitive proxy statement regarding the proposed
merger when it becomes available because it will contain important information. You may obtain a free copy of the definitive proxy
statement (when available) and other related documents filed by SCI and Alderwoods with the SEC at the SEC's website at www.sec.gov.
Participants in the Solicitation
The directors and executive officers of Alderwoods and SCI and other persons may be deemed to be participants in the solicitation of
proxies in respect of the proposed transaction. Information regarding Alderwoods' directors and executive officers is available in its annual
proxy statement filed with the SEC on April 5, 2005. Information regarding SCI's directors and executive officers is available in its
annual proxy statement filed with the SEC on April 18, 2005. Other information regarding the participants in the proxy solicitation and a
description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement and other
relevant materials to be filed with the SEC when they become available. Investors should read the proxy statement carefully when it
becomes available before making any voting or investment decisions.
3
Compelling Transaction Rationale
Combines the two premier funeral and cemetery services providers in North America
2,332 total locations of which 243 are combination facilities
Industry remains fragmented; combined company will have approximately 15% of total
estimated industry revenue
Timing is right for consolidation and opportunity is consistent with SCI’s strategy to create
shareholder value
Easily identifiable cost-saving synergies
Accretive to operating cash flow(1)
Accretive to earnings per share within 12 to 24 months(1)
Investment returns meaningfully exceed SCI’s weighted average cost of capital
Systems and infrastructure are compatible for ease of integration
Long-term business vision confirms focus on scale and customer-oriented strategy
1 Excluding one-time implementation costs
4
Transaction Overview
$20.00 per share
Equity value: $856 million
Enterprise value: $1,230 million
All cash
Purchase Price &
Consideration
Sources of Funding
Timing
Conditions
Current cash on hand of $470 million
JPMorgan has committed to provide an $850
million bridge facility
Permanent financing may include bank debt, bonds
and/or other securities
Expected close by year end 2006
Standard regulatory approvals including Hart-
Scott-Rodino
AWGI shareholder approval
No financing condition
5
Timing is Right for SCI to Pursue a Strategic
Acquisition
SCI debt has been reduced by $3 billion since 1999
Current balance sheet cash of $470 million
Net debt-to-total net capital of 32%
Healthy Balance Sheet
Operational Efficiency
Infrastructure Capability
Infrastructure (point of sale systems, accounting
and management systems) overhaul is complete and
positioned for expansion
Improved internal control structure and corporate
governance standards
Moved to single-line management model in
November 2003
6
Alderwoods Represents the Most Complementary
Acquisition Opportunity for SCI
Consistently conservative accounting policies
Disciplined approach to property divestitures and
acquisitions
Significantly improved processes and systems
Conservatively Managed
Operations
Healthy Cash Flow
Characteristics
Complementary Network
Strong operating cash flow generation
Debt pay down of over $460 million since 2001
Outstanding facilities in key markets
Offers SCI entry into new markets
Rose Hills - premier combination facility in the U.S.
5,000 funerals and 9,000 interments per year
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Combining the Two Premier Funeral and Cemetery Services
Providers in North America
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FYE 2005
1 Includes 183 combinations facilities at SCI and 60 at Alderwoods
(Dollars in millions except per funeral amounts)
SCI
AWGI
Revenue
$1,716
$749
Gross profit
$299
$115
Margin
17%
15%
Comparable same site:
Funeral volume
238,813
113,300
Revenue per funeral
$4,410
$4,152
Backlog of preneed revenue
$5,303
$1,612
# of Funeral homes
1,058
654
# of Cemeteries
358
132
Total operating locations
(1)
1,416
786
Employees - North America
15,400
8,300
Significant Synergy Opportunities
We expect to realize approximately $60 - $70 million of annual synergies
Duplicate Systems and Infrastructure
Full IT systems and infrastructure
Duplicate accounting, finance, legal and other systems
Management Structure Duplication
Overlapping market management
Management span of control efficiencies
Senior Executive and Public Company Costs
Two senior management teams
Two Boards of Directors
Two auditors and fees
9
Alderwoods Meets SCI’s Financial Criteria for
Evaluating Acquisitions
Financial objectives
Purchase price discipline
Investment returns in excess
of weighted average cost of
capital
Increase operating cash flow
Prudent capital structure
management
SCI/AWGI combination
IRR estimated to be 250-300
basis points in excess of SCI’s
weighted average cost of
capital estimates
Immediately accretive to
operating cash flow, excluding
one-time implementation
costs
10
Estimated Purchase Price Multiples
Alderwoods 2005 EBITDA
Pre-tax income(1)
Interest expense
Depreciation &
amortization
Alderwoods EBITDA
Estimated run rate of
synergies
Adjusted EBITDA
$30
30
45
105
65
$170
Purchase price
Cost of equity
Enterprise value
Pre-synergy purchase
price multiple
Post-synergy purchase
price multiple
Current SCI trading
multiple
$856
$1,230
11.7x
7.2x
10.5x
($ millions)
($ millions)
1 Excludes one-time $11 million add-back to SG&A related to the recovery of a corporate receivable previously fully
reserved against
2005 EBITDA Multiples
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Selected Pro Forma Financial Information
The combined company would have revenues of approximately $2.5
billion (based on 2005 financial results)
The combined company would have approximately $470 million of EBITDA
(based on 2005 financial results), which includes $65 million of pre-tax
cost savings to be achieved within 12 - 18 months of closing(1)
With full realization of synergies, the Company expects to generate
annualized cash flow from operations of approximately $400 million
(excluding one-time implementation costs)
1 Excludes one-time implementation costs
12
Target Financial Ratios
Ratio
2.0x
>1.5x
Operating cash flow less certain
capex/Interest Expense
6.2x
5x to 7x
Net Debt/Operating cash flow less
certain capex
45%
40% to 45%
Net Debt/Total Net Capital
Target Ratios
2008E
13
Transaction Funding
Current SCI cash balance of approximately $470 million
$850 million committed bridge financing from JPMorgan
Optimal mix of permanent financing to be evaluated to ensure appropriate
liquidity and minimize financing costs
On-going dialogue with rating agencies regarding capital structure
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Transaction Summary
Compelling strategic fit
Scale and scope generating substantial operating
synergies and cost savings
Accretive to operating cash flow and earnings
Customer focus and enhanced service
SCI and Alderwoods together = Creating Shareholder
Value
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