89089--3/1/2007--SERVICE_CORPORATION

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{regulation, government, change}

{acquisition, growth, future}

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{financial, litigation, operation}

{tax, income, asset}

{product, market, service}

{condition, economic, financial}

{cost, regulation, environmental}

Our ability to execute our business plan depends on many factors, many of which are beyond our control. We may fail to realize the anticipated benefits of the acquisition of Alderwoods. The integration of Alderwoods may prove disruptive and could result in the combined business failing to meet our expectations. Our credit agreements and debt securities contain covenants that may prevent us from engaging in certain transactions. If we lost the ability to use surety bonding to support our preneed funeral and preneed cemetery activities, we could have to make material cash payments to fund certain trust funds. The funeral home and cemetery industry continues to be increasingly competitive. Our affiliated funeral and cemetery trust funds own investments in equity securities, fixed income securities and mutual funds, which are affected by financial market conditions that are beyond our control. Increasing death benefits related to preneed funeral contracts funded through life insurance or annuity contracts may not cover future increases in the cost of providing a price guaranteed funeral service. Unfavorable results of litigation could have a material adverse impact on our financial statements. If the number of deaths in our markets declines, our cash flows and revenues may decrease. The continuing upward trend in the number of cremations performed in North America could result in lower revenue and gross profit dollars. The funeral home and cemetery businesses are high fixed-cost businesses. Regulation and compliance could have a material adverse impact on our financial results.

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89089--3/1/2007--SERVICE_CORPORATION_INTERNATIONAL